As filed with the Securities and Exchange Commission on August 4, 2010
Securities Act Registration No. 333-
Investment Company Act File No. 811-8777
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-2
(Check appropriate box or boxes)
x REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
o Pre-Effective Amendment No.
o Post-Effective Amendment No.
and/or
x REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
x Amendment No. 3
Credit Suisse High Yield Bond Fund
(Exact name of Registrant as Specified in Charter)
Eleven Madison Avenue, New York, New York 10010
(Address of Principal Executive Offices)
212-325-2000
(Registrants telephone number, including area code)
John G. Popp
Credit Suisse High Yield Bond Fund
Eleven Madison Avenue
New York, New York 10010
(Name and Address of Agent for Service)
Copies to:
Rose F. DiMartino, Esq. |
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James G. Silk, Esq. |
Approximate Date of Proposed Public Offering: As soon as practicable after the effective date of this Registration Statement.
If any securities being registered on this form will be offered on a delayed or continuous basis in reliance on Rule 415 under the Securities Act of 1933, other than securities offered in connection with a dividend reinvestment plan, check the following box. o
It is proposed that this filing will become effective (if appropriate, check box)
o |
when declared effective pursuant to section 8(c). |
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
Title of Securities Being Registered |
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Amount Being |
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Proposed |
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Proposed |
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Amount of |
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Common Shares of Beneficial Interest, $0.001 par value per share |
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100,000 |
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$ |
3.07 |
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$ |
307,000 |
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$ |
21.89 |
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(1) Estimated solely for the purpose of calculating the registration fee as required by Rule 457(c) under the Securities Act, based upon the average of the high and low sales prices reported on the New York Stock Exchange Amex consolidated reporting system of $3.07 on July 30, 2010.
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act, or until the Registration Statement shall become effective on such dates as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
The information in this prospectus is not complete and may be changed. The Fund may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED AUGUST 4, 2010
PRELIMINARY PROSPECTUS
CREDIT SUISSE HIGH YIELD BOND FUND
[ ]
Common Shares of Beneficial Interest
Issuable Upon Exercise of
Rights to Subscribe for Such Shares
Credit Suisse High Yield Bond Fund (the Fund) is issuing transferable rights (the Rights) to its shareholders of record as of [ ], 2010 (the Record Date). These Rights will allow shareholders and other persons who obtain Rights from shareholders (such shareholders and other persons together, Rightholders) to subscribe for new common shares of beneficial interest of the Fund (Shares) in an aggregate amount of approximately [ ] Shares (the Offer). In certain circumstances, the Fund may increase the number of common shares of beneficial interest of the Fund subject to subscription by up to [ ]%. You will receive one Right for each whole Share you own on the Record Date. You may buy one new Share of the Fund for every [ ] Rights that you receive (1-for-[ ]). If you receive less than [ ] Rights in total, you will be entitled to buy one new Share. Rightholders who [are shareholders as of the Record Date and] fully exercise their Rights may purchase additional common shares of beneficial interest, subject to the limitations and the allotment as described in this prospectus (the Over-Subscription Privilege).
The Rights are transferable and will be listed for trading on the New York Stock Exchange Amex (the NYSE Amex) under the symbol [ ] during the course of the Offer.
The Funds Shares are listed, and the Shares issued in this Offer will be listed, on the NYSE Amex under the symbol DHY. As of [ ], 2010, the last reported net asset value per Share was $[ ] and on that date the last reported sales price of a Share on the NYSE Amex was $[ ].
The subscription price per Share will be [ %] [of the average weighted Share price on the NYSE Amex on [ ], 2010] (the Expiration Date) [and the [ ] preceding business days] (the Subscription Price).
The Offer will expire at 5:00 p.m., Eastern time, on [ ], 2010, unless extended as described in this prospectus. Rightholders who choose to exercise their Rights will not know the Subscription Price at the time they exercise their Rights.
If you do not exercise your Rights, you will, upon the completion of the Offer, own a smaller proportional interest in the Fund than you do now. In addition, because the Subscription Price per Share may be less than the then current net asset value per Share, the completion of the Offer may result in an immediate dilution of the net asset value per Share for all existing shareholders. Such dilution could be substantial. If such dilution occurs, shareholders will experience a decrease in the net asset value per Share held by them, irrespective of whether they exercise all or any portion of their Rights. The distribution to shareholders of transferable Rights, which may themselves have intrinsic value, will afford such shareholders the potential of receiving cash payment upon the sale of the Rights, receipt of which may be viewed as partial compensation for the potential economic dilution of their interests. The Fund cannot state precisely the extent of this dilution because the Fund does not know what the net asset value will be when the Offer expires, how many Rights will be exercised or the exact expenses of the Offer. Volatility in the market price of Shares of the Fund may increase or decrease during the Offer. No assurance can be given that a market for the Rights will develop, or as to the value, if any, that the Rights will have. For further information on the effects of dilution, see Special Considerations and Risk Factors on page [ ] of the prospectus.
The Fund is a non-diversified, closed-end management investment company with a leveraged capital structure. The Funds primary investment objective is to seek high current income. The Fund will also seek capital appreciation as a secondary objective to the extent consistent with its objective of seeking high current income. Under normal market conditions, the Fund invests at least 80% of its total assets in fixed income securities of U.S. issuers rated below investment grade quality (lower than Baa by Moodys Investors Services, Inc. or lower than
BBB by Standard & Poors, a subsidiary of The McGraw-Hill Companies, Inc.), or in unrated income securities that Credit Suisse Asset Management, LLC, the Funds investment adviser, determines to be of comparable quality. There can be no assurance that the Fund will achieve its investment objectives.
Exercising your Rights and investing in the Funds Shares involves a high degree of risk and may be considered speculative. Before exercising your Rights and investing in the Funds Shares, you should read the discussion of the material risks of investing in the Fund, including the risks of leverage and of investing in below investment grade/high yield securities, in Special Considerations and Risk Factors beginning on page [ ] of the prospectus. Certain of these risks are summarized in Prospectus Summary Special Considerations and Risk Factors beginning on page [ ] of the prospectus.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
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Estimated Price |
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Estimated |
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Estimated Proceeds |
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Per Share |
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$ |
[ |
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None |
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$ |
[ |
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Total(3) |
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$ |
[ |
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None |
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$ |
[ |
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(1) The estimated Subscription Price to the public is based upon [ %] of the Funds net asset value per Share as of [recent date], 2010.
(2) Before deduction of expenses related to the Offer incurred by the Fund, which are estimated at approximately $[ ].
(3) Assumes all Rights offered are exercised at the estimated Subscription Price. If the Fund increases the number of shares subject to subscription by [ ]%, the Estimated Price to the Public, Estimated Sales Load and Estimated Proceeds to the Fund will be $[ ], $0 and $[ ], respectively.
Please read this prospectus carefully before investing and keep it for future reference. It contains important information that a prospective investor ought to know before investing in the Fund. A Statement of Additional Information (SAI), dated [ ], 2010, containing additional information about the Fund has been filed with the Securities and Exchange Commission (SEC) and is incorporated by reference in its entirety into this prospectus. A Table of Contents for the SAI is set forth on page [ ] of this prospectus. A copy of the SAI can be obtained without charge by writing to the Fund at c/o Credit Suisse Asset Management, LLC, Eleven Madison Avenue, New York, New York 10010, by calling 1-800-293-1232, or from the SECs website at http://www.sec.gov. Copies of the Funds Annual Report and Semi-Annual Report and other information about the Fund may be obtained upon request by writing to the Fund, by calling 1-800-293-1232, or by visiting the Funds website at www.credit-suisse.com/us. All questions and inquiries relating to the Offer should be directed to the Information Agent, The Altman Group, Inc., [Address], at [Telephone Number].
The date of this prospectus is [ ].
CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus and the SAI contain forward-looking statements. Forward-looking statements can be identified by the words may, will, intend, expect, estimate, continue, plan, anticipate, and similar terms and the negative of such terms. By their nature, all forward-looking statements involve risks and uncertainties, and actual results could differ materially from those contemplated by the forward-looking statements. Several factors that could materially affect the Funds actual results are the performance of the portfolio of securities the Fund holds, the conditions in the U.S. and international financial and other markets, the price at which the Funds Shares will trade in the public markets and other factors discussed in the Funds periodic filings with the SEC.
Actual results could differ materially from those projected or assumed in the forward-looking statements. The Funds future financial condition and results of operations, as well as any forward-looking statements, are subject to change and are subject to inherent risks and uncertainties, such as those disclosed in the Special Considerations and Risk Factors section of this prospectus. All forward-looking statements contained or incorporated by reference in this prospectus are made as of the date of this prospectus. Except for the Funds ongoing obligations under the federal securities laws, the Fund does not intend, and it undertakes no obligation, to update any forward-looking statement.
Currently known risk factors that could cause actual results to differ materially from the Funds expectations include, but are not limited to, the factors described in the Special Considerations and Risk Factors section of this prospectus. You are urged to review carefully that section for a more complete discussion of the risks of an investment in the Funds Shares.
TABLE OF CONTENTS
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Page |
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Prospectus Summary |
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Fees and Expenses |
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Financial Highlights |
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The Offer |
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Use of Proceeds |
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The Fund |
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Investment Objectives and Policies |
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Special Considerations and Risk Factors |
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Management of the Fund |
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Expenses |
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Net Asset Value |
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Dividends and Distributions; Automatic Dividend Reinvestment Plan |
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Federal Income Taxation |
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Repurchase of Shares |
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Description of Shares |
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Closed-End Fund Structure |
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Custodian, Transfer Agent and Dividend-Paying Agent |
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Legal Matters |
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Legal Proceedings |
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Reports to Shareholders |
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Additional Information |
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Table of Contents of Statement of Additional Information |
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The information contained in this prospectus speaks only as of the date of this prospectus unless the information specifically indicates that another date applies. No dealer, salesperson or other person has been authorized to give any information or to make any representations other than those contained in this prospectus in connection with the offer contained herein and, if given or made, such information or representations must not be relied upon as having been authorized by the Fund.
PROSPECTUS SUMMARY
This summary highlights some information that is described more fully elsewhere in this prospectus. It may not contain all of the information that is important to you. To understand the Offer fully, you should read the entire document carefully, including the Special Considerations and Risk Factors section.
The Fund |
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Credit Suisse High Yield Bond Fund (the Fund) is a non-diversified, closed-end management investment company. The Fund commenced operations on July 28, 1998, following its initial public offering. See The Fund. |
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The Offer |
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The
Fund is issuing to its common shareholders of record, as of the close of
business on [ ],
2010 (the Record Date), transferable rights (Rights) to subscribe for an
aggregate of approximately [ ] common shares of
beneficial interest of the Fund (Shares), $0.001 par value per Share (the
Offer). In certain circumstances described below under Over-Subscription
Privilege, the Fund may increase the number of common shares of beneficial
interest subject to subscription by up to [ ]%. Each
shareholder will receive one Right for each whole Share held by the
shareholder as of the Record Date. Such shareholders may transfer Rights to
other persons. Existing shareholders of the Fund who retain all or part of
their Rights and persons acquiring Rights from such shareholders are together
referred to as Rightholders. A Rightholder may subscribe for one new Share
of the Fund for every [ ] Rights that are
held by the Rightholder (1-for-[ ]). No
fractional Shares will be issued. If a shareholder receives less than
[ ] Rights in total, that
shareholder will be entitled to subscribe for one new Share. The right to
acquire Shares during the Subscription Period (defined below) is referred to
as the Primary Subscription and the Shares issued through the Primary
Subscription are referred to as the Primary Subscription Shares. |
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Purpose of the Offer |
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[The Board of Trustees of the Fund (the Board) and Credit Suisse Asset Management, LLC, the Funds investment adviser (Credit Suisse or the Investment Adviser), have determined that it would be in the best interests of the Fund and its shareholders to increase the assets of the Fund in order to more fully take advantage of current and prospective investment opportunities. The Board and the Investment Adviser believe the current market environment offers the Fund opportunities to deploy additional capital to take advantage of attractive investment opportunities and seek to enhance the Funds future risk-adjusted returns. The Board and the Investment Adviser have determined that the Offer is currently the most effective way to raise additional assets for |
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the
Fund while providing shareholders with certain other potential benefits as
discussed below. |
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Subscription Price |
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The subscription price per Share will be [ %] [of the average weighted Share price on the NYSE Amex on [ ], 2010] (the Expiration Date) [and the [ ] preceding business days] (the Subscription Price). See The Offer The Subscription Price. |
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Subscription Period |
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Rights may be exercised at any time during the subscription period (the Subscription Period), which starts on [ ], 2010 and ends at 5:00 p.m., Eastern time, on [ ], 2010. See The Offer Terms of the Offer. |
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Over-Subscription Privilege |
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If
a Rightholder [is a Record Date Shareholder and] fully exercises all Rights
initially issued to it, the Rightholder may subscribe for the Primary
Subscription Shares which were not otherwise subscribed for by other
Rightholders through the Primary Subscription, as well as, in certain instances,
Additional Shares (as defined below) (the Over-Subscription Privilege). If
enough Primary Subscription Shares are available, all such over-subscription
requests will be honored in full. If the over-subscription requests for
Primary Subscription Shares exceed the Primary Subscription Shares available,
the available Primary Subscription Shares will be allocated pro rata among
those fully exercising Record Date Shareholders who over-subscribe based on
the number of Rights originally issued to them by the Fund. |
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Costs of the Offer |
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The costs of the Offer, which are estimated to be $[ ], will be borne by the Fund. |
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Notice of NAV Decline |
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The Fund will suspend the Offer until it amends this prospectus if, after the effective date of this prospectus, the Funds net asset value (NAV) declines more than 10% from its NAV as of the effective date. In such event, the Fund will notify Rightholders of any such decline and permit Rightholders to cancel the exercise of their Rights. Rightholders will have their payment for additional Shares returned to them if they opt to cancel the exercise of their Rights. See The Offer Notice of NAV Decline. |
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How to Obtain Subscription |
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You may obtain subscription information in one of two ways: |
Information |
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· Contact your broker, banker or trust company.
· Contact The Altman Group, Inc. (the Information Agent) at [ ]. |
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How to Subscribe |
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Except
as described under Foreign Restrictions, you may subscribe in one of two
ways: · Complete and sign the subscription certificate (Subscription Certificate). Mail it in the envelope provided or deliver the completed and signed Subscription Certificate by the Expiration Date to Computershare Trust Company, N.A. (Computershare or the Subscription Agent).
· Contact your broker, banker or trust company, which can arrange, on your behalf, to guarantee delivery of a properly completed and executed Subscription Certificate, pursuant to a notice of guaranteed delivery (Notice of Guaranteed Delivery), to the Subscription Agent by the Expiration Date. See The Offer Exercise of Rights and The Offer Payment for Shares. |
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Federal Income Tax Consequences |
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For federal income tax purposes, neither the receipt nor the exercise of the Rights will result in taxable income to Rightholders. You will not recognize a taxable loss if your Rights expire without being exercised. However, a sale of the Rights (or of Shares obtained by exercising the Rights) generally will result in the recognition of taxable income or loss. See The Offer Certain Federal Income Tax Consequences of the Offer. |
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Use of Proceeds |
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The net proceeds of the Offer, assuming all Primary Subscription Shares are sold, is estimated to be $[ ] (approximately $[ ] if the Fund issues and sells all of the Additional Shares). The Fund will invest the proceeds of the Offer in accordance with the Funds investment objective and policies. Credit Suisse Asset Management, LLC, the Funds investment adviser (Credit Suisse or the Investment Adviser), anticipates that investment of the proceeds will occur shortly after their receipt by the Fund, depending on market conditions and the availability of appropriate investments. To the extent there is any delay in investing the proceeds of the Offer, the Fund may invest in U.S. government securities or high-quality, short-term money market instruments, cash or cash equivalents, pending investment of the proceeds. Following the completion of the Offer, the Fund may increase the amount of leverage outstanding. See Use of Proceeds. |
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Transferability of Rights |
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The Rights are transferable and will be listed for trading on the NYSE Amex under the symbol [ ] during the course of the Offer. The Funds outstanding Shares are listed, and the Shares issued in this Offer will be listed, on the NYSE Amex under the symbol DHY. |
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Foreign Restrictions |
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Subscription Certificates will not be mailed to shareholders whose record addresses are outside the United States. Foreign shareholders will receive written notice of the Offer as set forth in this prospectus. See The Offer Foreign Restrictions. |
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Important Dates To |
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Record Date |
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[ ], 2010 |
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Subscription Period* |
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[ ], 2010 to [ ], 2010 |
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Expiration Date |
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[ ], 2010 |
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Subscription Certificates and Payment for Shares due** |
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[ ], 2010 |
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Notice of Guaranteed Delivery due |
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[ ], 2010 |
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Payment for Guarantees of Delivery due |
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[ ], 2010 |
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Confirmation mailed to participant |
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[ ], 2010 |
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Final payment for Shares*** |
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[ ], 2010 |
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* Unless the Offer is extended.
** A Rightholder exercising Rights must deliver the (i) a Subscription Certificate or (ii) a Notice of Guaranteed Delivery by the Expiration Date.
*** Additional amount due (in the event the Subscription Price exceeds the Estimated Subscription Price). |
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Investment Objectives and Policies |
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The Funds primary investment objective is to seek high current income. The Fund will also seek capital appreciation as a secondary objective, to the extent consistent with its objective of seeking high current income. The Fund is designed for investors willing to assume additional risk in return for the potential for high current income and capital appreciation. The Fund is not intended to be a complete investment program and there can be no assurance that the Fund will achieve its objectives.
Under normal market conditions, the Fund will invest at least 80% of its total assets in fixed income securities of U.S. issuers rated below investment grade quality (lower than Baa by Moodys Investors Services, Inc. (Moodys) or lower than BBB by Standard & Poors, a subsidiary of The McGraw-Hill Companies, Inc. (S&P) or comparably rated by another nationally recognized rating agency), or in unrated income securities that Credit Suisse determines to be of comparable quality. Securities rated lower than Baa by Moodys and lower than BBB by S&P are commonly known as junk bonds. The Fund will generally not invest in securities rated at the time of investment in the lowest rating categories (Ca or below for Moodys and CC or below for S&P) but may continue to hold securities which are subsequently downgraded. However, it has authority to invest in securities rated as low as C and D by Moodys and S&P, respectively.
As a component of the Funds investment in junk bonds, the Fund may also invest up to 20% of its total assets in securities of issuers that are the subject of bankruptcy proceedings or in securities otherwise in default or in significant risk of being in default (Distressed Securities). The Fund may invest up to 30% of its total assets in securities of issuers domiciled outside the United States or that are denominated in various foreign currencies or multinational currency units. The Fund may invest up to 20% of its assets in credit default swap agreements.
In selecting investments for the Funds portfolio, the Funds portfolio managers:
· continually analyze individual companies, including their financial condition, cash flow and borrowing requirements, value of assets in relation to cost, strength of management, responsiveness to business conditions, credit standing and anticipated results of operations;
· analyze business conditions affecting investments, including:
· changes in economic activity and interest rates;
· availability of new investment opportunities;
· economic outlook for specific industries;
· seek to moderate risk by investing among a variety of industry sectors and issuers.
The portfolio managers may sell securities for a variety of reasons, such as to realize profits, limit losses or take advantage of better investment opportunities.
The Fund currently utilizes and in the future expects to continue to utilize leverage through borrowings, including the issuance of debt securities, or through other transactions, such as reverse repurchase agreements, which have the effect of leverage. The Fund may use leverage up to 33 1/3% of its total assets (including the amount obtained through leverage). The Fund generally will not utilize leverage if it anticipates that the Funds leveraged capital structure would result in a lower return to shareholders |
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than that obtainable over time with an unleveraged capital structure. Use of leverage creates an opportunity for increased income and capital appreciation for shareholders but, at the same time, creates special risks, and there can be no assurance that a leveraging strategy will be successful during any period in which it is employed. See Use of Leverage.
The Fund will seek its secondary objective of capital appreciation by investing in securities that Credit Suisse expects may appreciate in value as a result of favorable developments affecting the business or prospects of the issuer, which may improve the issuers financial condition and credit rating, or as a result of declines in long-term interest rates.
The Fund may implement various temporary defensive strategies at times when Credit Suisse determines that conditions in the markets make pursuing the Funds basic investment strategy inconsistent with the best interests of shareholders. These strategies may include investing less than 80% of its total assets in lower grade income securities by investing in higher quality debt and/or money market instruments. See Investment Objectives and Policies. |
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Use of Leverage |
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As provided in the Investment Company Act of 1940, as amended (the 1940 Act) and subject to certain exceptions, the Fund may issue debt with the condition that immediately after issuance the value of its total assets, less ordinary course liabilities, exceeds 300% of the amount of the debt outstanding.
Thus, as noted above, the Fund may use leverage in the form of borrowings in an amount up to 33 1/3% of the Funds total assets (including the proceeds of such leverage). The total leverage of the Fund is currently expected to range between 25% and 30% of the Funds total assets. The Fund seeks a leverage ratio, based on a variety of factors including market conditions and the Investment Advisers market outlook, where the rate of return, net of applicable Fund expenses, on the Funds investment portfolio investments purchased with leverage exceeds the costs associated with such leverage.
The Fund, as of [ ], is leveraged through borrowings from a credit facility in the amount of $[ ] or [ ]% of the Funds total assets (including the proceeds of such leverage). The Funds asset coverage ratio as of [ ] was [ ]%. See Special Considerations and Risk Factors Leverage Risk for a brief description of the Funds credit agreement with State Street Bank and Trust Company (State Street).
Following the completion of the Offer, the Fund intends to increase the amount of leverage outstanding. The Fund may engage in additional borrowings in order to maintain the Funds desired leverage ratio. Leverage creates a greater risk of loss, as well as a potential for more gain, for the common shares than if leverage were not used. Interest on borrowings may be at a fixed or floating rate and generally will be based on short-term rates. The costs associated with the Funds use of leverage, including the issuance of such leverage and the payment of dividends or interest on such leverage, will be borne entirely by the holders of common shares. As long as the rate of return, net of applicable Fund expenses, on the Funds investment portfolio investments purchased with leverage exceeds the costs associated with such leverage, the Fund will generate more return or income than will be needed to pay such costs. In this event, the excess will be available to pay higher dividends to holders of common shares. Conversely, if the Funds return on such assets is less than the cost of leverage and other Fund expenses, the return to the holders of the common shares will diminish. To the extent that the Fund uses leverage, the net asset value and market price of the common shares and the yield to holders of common shares will be more volatile. The Funds leveraging strategy may not be successful. See Use of Leverage and Special Considerations and Risk Factors Leverage Risk. |
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Information |
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Credit Suisse, the Funds investment adviser, is part of the asset management business of |
Regarding the Investment Adviser |
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Credit Suisse Group AG, one of the worlds leading banks. Credit Suisse serves as the Funds investment adviser with respect to all investments and is responsible for making all investment decisions. Credit Suisse receives from the Fund, as compensation for its advisory services, an annual fee, payable monthly, in an amount equal to 1% of the first $250 million of the average weekly value of the Funds total assets minus the sum of liabilities (other than the aggregate indebtedness constituting leverage) (the Managed Assets) and 0.75% of the average weekly value of the Managed Assets greater than $250 million. Credit Suisse may voluntarily waive a portion of its fees from time to time and temporarily limit the expenses to be borne by the Fund. Effective January 1, 2007, Credit Suisse agreed to waive 0.15% of the fees payable under the Investment Advisory Agreement. During periods in which the Fund is utilizing leverage, the advisory fee will be higher than if the Fund did not utilize a leveraged capital structure because the fee is calculated as a percentage of the Managed Assets including those purchased with leverage. The Fund is currently utilizing leverage. The Investment Adviser is located at Eleven Madison Avenue, New York, New York 10010. See Management of the Fund Investment Adviser.
Potential Conflicts of Interest. Because the Investment Adviser receives a fee based on assets, it will benefit from the increase in assets that will result from the Offer. It is not possible to state precisely the amount of additional compensation that the Investment Adviser might receive as a result of the Offer because it is not known how many Shares will be subscribed for and because the proceeds of the Offer will be invested in additional portfolio securities, which will fluctuate in value. However, assuming (i) all Rights are exercised, (ii) the Funds average weekly net asset value during [ ] is $[ ] per Share (the net asset value per Share on [ ]), (iii) the Subscription Price is $[ ] per Share ([ %] of the last reported sale price of the Funds Shares on [ ]), and (iv) assuming, for purposes of this example, the Fund increases the amount of leverage outstanding while maintaining approximately the same percentage of total assets attributable to leverage (after giving effect to offering expenses), the Investment Adviser would receive additional advisory fees of approximately $[ ] million for the calendar year [ ] and would continue to receive additional advisory fees as a result of the Offer, based on the Funds average weekly Managed Assets attributable to the Shares issued in the Offer, thereafter. |
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Dividends and Distributions |
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The Fund declares and pays dividends on a monthly basis. Distributions of net realized capital gains, if any, are declared and paid at least annually. See Dividends and Distributions; Automatic Dividend Reinvestment Plan. |
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Automatic Dividend Reinvestment Plan |
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Under the Funds automatic dividend reinvestment plan, all dividend and capital gain distributions are automatically reinvested in additional Shares of the Fund either purchased on the open market, or issued by the Fund if the Shares are trading at or above their net asset value, unless in either case the shareholder elects to receive cash. A shareholder whose Shares are held through a broker or nominee should contact such broker or nominee to confirm that they are able to participate in the plan. See Dividends and Distributions; Automatic Dividend Reinvestment Plan. |
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Repurchase of Shares |
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The Fund may, from time to time, take action to attempt to reduce or eliminate any market value discount from NAV. The Board, in consultation with Credit Suisse, will periodically review the possibility of open market repurchases or tender offers for Shares of the Fund. There can be no assurance that the Board will, in fact, decide to undertake either of these actions or, if undertaken, that such repurchases or tender offers will result in the Shares trading at a price which is equal to or close to NAV. The Fund may borrow to finance such repurchases or tenders. See Repurchase of Shares. |
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Custodian and Transfer Agent |
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State Street Bank and Trust Company acts as the Funds custodian pursuant to a custody agreement.
Computershare acts as the Funds transfer agent and dividend-paying agent. |
Special Considerations and Risk Factors |
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The following summarizes some of the matters and risks that you should consider before investing in connection with this Offer.
Risks of the Offer
Potential Dilution. If you do not exercise your Rights, you will, upon the completion of the Offer, own a smaller proportional interest in the Fund than you do now and you may incur dilution of ownership and voting, as well as dilution of your share of any distributions made by the Fund, as a result of the Offer. In addition, if you do not submit a subscription request pursuant to the Over-Subscription Privilege and the Fund issues Additional Shares, you may experience further dilution of ownership and voting, as well as further dilution of your share of any distributions made by the Fund. Also, because the Subscription Price per Share may be less than the then current NAV per Share, the completion of the Offer may result in an immediate dilution of the net asset value per Share for all existing shareholders. Such dilution could be substantial. If such dilution occurs, shareholders will experience a decrease in the net asset value per Share held by them, irrespective of whether they exercise all or any portion of their Rights. The Fund cannot state precisely the extent of this dilution because the Fund does not know what the NAV will be when the Offer expires, how many Rights will be exercised or the exact expenses of the Offer. See Special Considerations and Risk Factors Potential Dilution.
Potential Yield Reduction. The Offer is expected to present the opportunity to invest in high yielding securities. This expectation is based on the current market environment for high yield debt securities, which could change in response to interest rate levels, general economic conditions, specific industry conditions and other factors. If the market environment for high yield debt securities changes in a manner that adversely affects the yield of such securities, the Offer could cause the Fund to invest in securities that are lower yielding than those in which it is currently invested. In addition, even if the market for high yield debt securities continues to present attractive investment opportunities, there is no assurance that the Fund will be able to invest the proceeds of the Offer in high yielding securities or that other potential benefits of the Offer will be realized. The Offer could reduce the Funds current dividend yield if the Fund is unable to invest the proceeds of the Offer in securities that provide a yield at least equal to the current dividend yield. See Special Considerations and Risk Factors Potential Yield Reduction.
Increase in Share Price Volatility; Decrease in Share Price. The Offer may result in an increase in trading of the Shares, which may increase volatility in the market price of the Shares. The Offer may result in an increase in the number of shareholders wishing to sell their Shares, which would exert downward price pressure on the price of Shares. See Special Considerations and Risk Factors Increase in Share Price Volatility; Decrease in Share Price.
Under-Subscription. It is possible that the Offer will not be fully subscribed. Under-subscription of the Offer could have an impact on the net proceeds of the Offer and whether the Fund achieves the benefits described under The Offer Purpose of the Offer. See Special Considerations and Risk Factors Under-Subscription.
Risks of Investing in the Fund
Investment and Market Risk. An investment in the Funds Shares is subject to investment risk, including the possible loss of the entire principal amount that you invest. Your investment in Shares represents an indirect investment in the securities owned by the Fund. The value of these securities, like other market investments, may move up or down, sometimes rapidly and unpredictably, and these fluctuations are likely to have a greater impact on the value of the Shares during periods in which the Fund utilizes a leveraged capital structure. If the current global economic downturn continues into a prolonged recession or deteriorates further, the ability of issuers of the corporate fixed-income |
|
|
securities and other securities in which the Fund invests to service their obligations could be materially and adversely affected. The value of the securities in which the Fund invests will affect the value of the Shares. Your 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. See Special Considerations and Risk Factors Investment and Market Risk.
Lower Grade Securities Risk. Lower grade securities are regarded as being predominantly speculative as to the issuers ability to make payments of principal and interest. Investment in such securities involves substantial risk. Issuers of lower grade securities may be highly leveraged and may not have available to them more traditional methods of financing. Therefore, the risks associated with acquiring the securities of such issuers generally are greater than is the case with higher-rated securities. For example, during an economic downturn or a sustained period of rising interest rates, issuers of lower grade securities may be more likely to experience financial stress, especially if such issuers are highly leveraged. During periods of economic downturn, such issuers may not have sufficient revenues to meet their interest payment obligations. The issuers ability to service its debt obligations also may be adversely affected by specific issuer developments, the issuers inability to meet specific projected business forecasts or the unavailability of additional financing. The risk of loss due to default by the issuer is significantly greater for the holders of lower grade securities because such securities may be unsecured and may be subordinate to other creditors of the issuer. Other than with respect to Distressed Securities, discussed below, the lower grade securities in which the Fund may invest do not include instruments which, at the time of investment, are in default or the issuers of which are in bankruptcy. However, there can be no assurance that such events will not occur after the Fund purchases a particular security, in which case the Fund may experience losses and incur costs. See Special Considerations and Risk Factors Lower Grade Securities Risk.
Distressed Securities Risk. As a component of the Funds investment in junk bonds, the Fund may invest up to 20% of its total assets in Distressed Securities. Such securities are the subject of bankruptcy proceedings or otherwise in default as to the repayment of principal and/or payment of interest at the time of acquisition by the Fund or are rated in the lower rating categories (Ca or lower by Moodys and CC or lower by S&P) or which, if unrated, are in the judgment of Credit Suisse of equivalent quality. Investment in Distressed Securities is speculative and involves significant risk. Distressed Securities frequently do not produce income while they are outstanding and may require the Fund to bear certain extraordinary expenses in order to protect and recover its investment. Therefore, to the extent the Fund pursues its secondary objective of capital appreciation through investment in Distressed Securities, the Funds ability to achieve current income for shareholders may be diminished. See Special Considerations and Risk Factors Distressed Securities.
Credit Risk. Credit risk is the risk that one or more of the Funds investments in debt securities or other instruments will decline in price, or fail to pay interest, liquidation value or principal when due, because the issuer of the obligation or the issuer of a reference security experiences an actual or perceived decline in its financial status. In addition to the credit risks associated with high yield securities, the Fund could also lose money if the issuer of other debt obligations, or the counterparty to a derivatives contract, repurchase agreement, loan of portfolio securities or other obligation, is, or is perceived to be, unable or unwilling to make timely principal and/or interest payments, or to otherwise honor its obligations. The downgrade of a security may further decrease its value. See Special Considerations and Risk Factors Credit Risk.
Interest Rate Risk. Generally, when market interest rates rise, the prices of debt obligations fall, and vice versa. Interest rate risk is the risk that debt obligations and other instruments in the Funds portfolio will decline in value because of increases in market interest rates. This risk may be particularly acute because market interest rates are |
|
|
currently at historically low levels. The prices of long-term debt obligations generally fluctuate more than prices of short-term debt obligations as interest rates change. During periods of rising interest rates, the average life of certain types of securities may be extended due to slower than expected payments. This may lock in a below market yield, increase the securitys duration and reduce the securitys value. The Funds use of leverage will tend to increase interest rate risk.
Investments in floating rate debt instruments, although generally less sensitive to interest rate changes than longer duration fixed rate instruments, may nevertheless decline in value in response to rising interest rates if, for example, the rates at which they pay interest do not rise as much, or as quickly, as market interest rates in general. Conversely, floating rate instruments will not generally increase in value if interest rates decline. Inverse floating rate debt securities may also exhibit greater price volatility than a fixed rate debt obligation with similar credit quality. To the extent the Fund holds floating rate instruments, a decrease (or, in the case of inverse floating rate securities, an increase) in market interest rates will adversely affect the income received from such securities and the net asset value of the Funds common shares. See Special Considerations and Risk Factors Interest Rate Risk.
Leverage Risk. The Fund currently leverages through borrowings from a credit facility. The use of leverage, which can be described as exposure to changes in price at a ratio greater than the amount of equity invested, through borrowings or other forms of market exposure, magnifies both the favorable and unfavorable effects of price movements in the investments made by the Fund. Insofar as the Fund continues to employ leverage in its investment operations, the Fund will be subject to substantial risks of loss.
Therefore, if the market value of the Funds investment portfolio declines, any leverage will result in a greater decrease in net asset value to common shareholders than if the Fund were not leveraged. Such greater net asset value decrease will also tend to cause a greater decline in the market price for the common shares. Further, if at any time while the Fund has leverage outstanding it does not meet applicable asset coverage requirements (as discussed below), it may be required to suspend distributions to common shareholders until the requisite asset coverage is restored. Any such suspension might impair the ability of the Fund to meet the regulated investment company (RIC) distribution requirements and to avoid Fund-level U.S. federal income and/or excise taxes.
As noted above, the Fund currently leverages through borrowings from a credit facility. The Fund has entered into a revolving credit agreement (the Credit Agreement) with State Street to borrow up to the least of: (a) $75,000,000; (b) an amount that is no greater than 30% of the Funds total assets minus the sum of liabilities (other than aggregate indebtedness constituting leverage); and (c) the Borrowing Base as defined in the Credit Agreement. Such borrowings constitute financial leverage. The Credit Agreement contains customary covenant, negative covenant and default provisions, including covenants that limit the Funds ability to incur additional debt or consolidate or merge into or with any person, other than as permitted, or sell, lease or otherwise transfer, directly or indirectly, all or substantially all of its assets. In addition, the Fund agreed not to purchase assets not contemplated by the investment policies and restrictions in effect when the Credit Agreement became effective. Furthermore, the Fund may not incur additional debt from any other party, except for in limited circumstances (e.g., in the ordinary course of business). Such restrictions shall apply only so long as the Credit Agreement remains in effect.
Indebtedness issued under the Credit Agreement is not convertible into any other securities of the Fund. Outstanding amounts would be payable at maturity or such earlier times as required by the Credit Agreement. The Fund may be required to prepay outstanding amounts under the Credit Agreement in the event of the occurrence of certain events of default. The Fund is expected to indemnify the lenders under the Credit |
|
|
Agreement against certain liabilities they may incur in connection with the Credit Agreement. The Fund is required to pay commitment fees under the terms of the Credit Agreement. With the use of borrowings, there is a risk that the interest rates paid by the Fund on the amount it borrows will be higher than the return on the Funds investments. The credit facility with State Street may in the future be replaced or refinanced by one or more credit facilities having substantially different terms, or the Fund may be unable to renew or replace its credit facility upon the termination of the current facility, possibly requiring it to sell portfolio securities at times or prices that are disadvantageous. Any of these situations could adversely impact income or total return to shareholders.
The Fund must comply with investment quality, diversification and other guidelines established by the credit facility. The Fund does not anticipate that such guidelines will have a material adverse effect on the Funds common shareholders or its ability to achieve its investment objectives. See Use of Leverage and Special Considerations and Risk Factors Leverage Risk.
Foreign Securities Risk. Investing in securities of foreign entities and securities denominated in foreign currencies involves certain risks not involved in domestic investments, including, but not limited to, fluctuations in foreign exchange rates, future foreign political and economic developments, different legal and accounting systems and the possible imposition of exchange controls or other foreign governmental laws or restrictions. Securities prices in different countries are subject to different economic, financial, political and social factors. Since the Fund may invest in securities denominated or quoted in currencies other than the U.S. dollar, changes in foreign currency exchange rates may affect the value of securities in the Fund and the unrealized appreciation or depreciation of investments. Currencies of certain countries may be volatile and therefore may affect the value of securities denominated in such currencies. The Fund may, but is not obligated to, engage in certain transactions to hedge the currency-related risks of investing in non-U.S. dollar denominated securities. In addition, with respect to certain foreign countries, there is the possibility of expropriation of assets, confiscatory taxation, difficulty in obtaining or enforcing a court judgment, economic, political or social instability or diplomatic developments that could affect investments in those countries. Moreover, individual foreign economies may differ favorably or unfavorably from the U.S. economy in such respects as growth of gross domestic product, rates of inflation, capital reinvestment, resources, self-sufficiency and balance of payments position. Certain foreign investments also may be subject to foreign withholding taxes. These risks often are heightened for investments in smaller, emerging capital markets. See Special Considerations and Risk Factors Foreign Securities Risk.
Credit Default Swaps Risk. The Fund may enter into credit default swap agreements, which may have as reference obligations one or more debt securities or an index of such securities. In a credit default swap, one party (the protection buyer) is obligated to pay the other party (the protection seller) a stream of payments over the term of the contract, provided that no credit event, such as a default or, in some instances, a downgrade in credit rating, occurs on the reference obligation. If a credit event occurs, the protection seller must generally pay the protection buyer the par value (the agreed-upon notional value) of the referenced debt obligation in exchange for an equal face amount of deliverable reference obligations.
The Fund may be either the protection buyer or protection seller in a credit default swap. If the Fund is a protection buyer, the Fund would pay the counterparty a periodic stream of payments over the term of the contract and would not recover any of those payments if no credit event were to occur. However, if a credit event occurs, the Fund as a protection buyer has the right to deliver the referenced debt obligations or a specified amount of cash, depending upon the terms of the swap, and receive the par value of such debt obligations from the counterparty protection seller. As a protection seller, the Fund would receive fixed payments throughout the term of the contract if no credit event occurs. If a |
|
|
credit event occurs, however, the value of the obligation received by the Fund (e.g., bonds which defaulted), plus the periodic payments previously received, may be less than the par value of the obligation, or cash received, resulting in a loss to the protection seller. Furthermore, the Fund as a protection seller would effectively add leverage to its portfolio because it will have investment exposure to the notional amount of the swap.
Credit default swap agreements are subject to greater risk than a direct investment in the reference obligation. Like all swap agreements, credit default swaps are subject to liquidity, credit and counterparty risks. In addition, collateral posting requirements are individually negotiated and there is no regulatory requirement that a counterparty post collateral to secure its obligations under a credit default swap. Furthermore, there is no requirement that a party be informed in advance when a credit default swap agreement is sold. Accordingly, the Fund may have difficulty identifying the party responsible for payment of its claims. The notional value of credit default swaps with respect to a particular investment is often larger than the total par value of such investment outstanding and, in event of a default, there may be difficulties in making the required deliveries of the reference investments, possibly delaying payments.
The market for credit default swaps has become more volatile recently as the creditworthiness of certain counterparties has been questioned and/or downgraded. If a counterpartys credit becomes significantly impaired, multiple requests for collateral posting in a short period of time could increase the risk that the Fund may not receive adequate collateral. Credit default swaps are not currently traded on any securities exchange. The Fund generally may exit its obligations under a credit default swap only by terminating the contract and paying applicable breakage fees, or by entering into an offsetting credit default swap position, which may cause the Fund to incur more losses. See Special Considerations and Risk Factors Credit Default Swaps Risk.
Counterparty Risk. The Fund will be subject to credit risk with respect to the counterparties to the derivative contracts purchased or sold by the Fund. Recently, several broker-dealers and other financial institutions have experienced extreme financial difficulty, sometimes resulting in bankruptcy of the institution. Although the Investment Adviser monitors the creditworthiness of the Funds counterparties, there can be no assurance that the Funds counterparties will not experience similar difficulties, possibly resulting in losses to the Fund. If a counterparty becomes bankrupt, or otherwise fails to perform its obligations under a derivative contract due to financial difficulties, the Fund may experience significant delays in obtaining any recovery under the derivative contract in a bankruptcy or other reorganization proceeding. The Fund may obtain only a limited recovery or may obtain no recovery in such circumstances. See Special Considerations and Risk Factors Counterparty Risk.
Illiquid Securities Risk. The Fund may invest in securities for which no readily available market exists or are otherwise considered illiquid. The Fund may not be able readily to dispose of such securities at prices that approximate those at which the Fund could sell such securities if they were more widely traded and, as result of such illiquidity, the Fund may have to sell other investments or engage in borrowing transactions if necessary to raise cash to meet its obligations. Illiquid securities generally trade at a discount. See Special Considerations and Risk Factors Illiquid Securities Risk.
Prepayment Risk. If interest rates fall, the principal on bonds and loans held by the Fund may be paid earlier than expected. If this happens, the proceeds from a prepaid security may be reinvested by the Fund in securities bearing lower interest rates, resulting in a possible decline in the Funds income and distributions to shareholders. See Special Considerations and Risk Factors Prepayment Risk.
Non-Diversified Status. The Fund is classified as a non-diversified management investment company under the 1940 Act, which means that the Fund may invest a greater portion of its assets in a limited number of issuers than would be the case if the Fund were classified as a diversified management investment company. Accordingly, the |
|
|
Fund may be subject to greater risk with respect to its portfolio securities than a management investment company that is diversified because changes in the financial condition or market assessment of a single issuer may cause greater fluctuations in the net asset value of the Shares. See Special Considerations and Risk Factors Non-Diversified Status.
Market Price, Discount and Net Asset Value of Shares. As with any stock, the price of the Funds Shares fluctuate with market conditions and other factors. Although the Shares have recently traded on the NYSE Amex at a premium to their net asset value, the Shares have in the past traded at a discount to their net asset value. There can also be no assurance that the Shares will trade at a premium in the future or that the present premium is sustainable. Since 2005, the Shares have traded at discounts of as much as [ ]%.
Shares of closed-end investment companies frequently trade at a discount from their net asset values. This characteristic is a risk separate and distinct from the risk that the Funds net asset value could decrease as a result of its investment activities and may be greater for investors expecting to sell their Shares in a relatively short period of time following completion of the Offer. The net asset value of the Shares will be reduced immediately following the Offer as a result of the payment of certain offering costs. Although the value of the Funds net assets is generally considered by market participants in determining whether to purchase or sell Shares, whether investors will realize gains or losses upon the sale of the Shares will depend entirely upon whether the market price of the Shares at the time of sale is above or below the investors purchase price for the Shares. Because the market price of the Shares will be determined by factors such as net asset value, dividend and distribution levels and their stability (which will in turn be affected by levels of dividend and interest payments by the Funds portfolio holdings, the timing and success of the Funds investment strategies, regulations affecting the timing and character of Fund distributions, Fund expenses and other factors), supply of and demand for the Shares, trading volume of the Shares, general market, interest rate and economic conditions and other factors beyond the control of the Fund, the Fund cannot predict whether the Shares will trade at, below or above net asset value or at, below or above the Subscription Price. See Special Considerations and Risk Factors Market Price, Discount and Net Asset Value of Shares.
Anti-Takeover Provisions. The Funds Agreement and Declaration of Trust (the Declaration of Trust) contains provisions limiting (i) the ability of other entities or persons to acquire control of the Fund, (ii) the Funds freedom to engage in certain transactions, and (iii) the ability of the Board or shareholders to amend the Declaration of Trust. These provisions of the Declaration of Trust may be regarded as anti-takeover provisions. These provisions could have the effect of depriving the shareholders of opportunities to sell their Shares at a premium over prevailing market prices by discouraging a third party from seeking to obtain control of the Fund in a tender offer or similar transaction. See Special Considerations and Risk Factors Anti-Takeover Provisions and Description of Shares.
For a discussion of these and other risks, see Special Considerations And Risk Factors. |
FEES AND EXPENSES
Shareholder Transaction Expenses |
|
|
|
Sales Load (as a percentage of Subscription Price)(1) |
|
None |
|
Offering Expenses Borne by Common Shares |
|
[ ] |
%(2) |
Dividend Reinvestment Plan Fees |
|
[ ] |
%(3) |
|
|
|
|
Annual Fund Operating Expenses (as a percentage of net assets) |
|
|
|
Management Fees |
|
[ ] |
% |
Interest Payments on Borrowed Funds(4) |
|
[ ] |
% |
Other Expenses(5) |
|
[ ] |
% |
Total Annual Expenses(6) |
|
[ ] |
% |
(1) No sales load will be charged by the Fund in connection with this Offer. However, Rightholders that choose to exercise their Rights through broker-dealers, banks or other nominees may incur a servicing fee charged by such broker-dealer, bank or nominee.
(2) The fees and expenses of the Offer will be borne by the Fund and indirectly by all of its common shareholders, including those who do not exercise their Rights.
(3) Participants in the Funds automatic dividend reinvestment plan pay only transaction-based charges. Actual costs will vary for each participant depending on the nature and number of transactions made. See Dividends and Distributions; Automatic Dividend Reinvestment Plan.
(4) The Fund may use leverage through borrowings. The Fund currently borrows under a credit facility.
(5) Amounts are based on estimated amounts for the Funds current fiscal year after giving effect to anticipated net proceeds of the Offer, assuming that all of the Rights are exercised (not taking into account the Additional Shares).
(6) The [ ]% expense ratio assumes that the Offer is fully subscribed (not taking into account the Additional Shares), yielding estimated net proceeds of $[ ] (assuming a Subscription Price of $[ ] per Share) and that, as a result of the Offer (based on the Funds net assets attributable to shareholders on [ ], 2010 of $[ ], the net assets attributable to shareholders would be $[ ]. If the subscription rate of the Offer is 50%, Other Expenses would be [ ]% (a difference of [ ] basis points) and Total Annual Expenses would be [ ]% (a difference of [ ] basis points).
Example:
An investor would directly or indirectly pay the following expenses on a $1,000 investment, assuming a 5% annual return throughout the period.
|
|
1 Year |
|
3 Years |
|
5 Years |
|
10 Years |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Total Expenses Incurred |
|
$ |
[ ] |
|
$ |
[ ] |
|
$ |
[ ] |
|
$ |
[ ] |
|
The foregoing fee table and example are intended to assist investors in understanding the costs and expenses that an investor in the Fund will bear directly or indirectly.
The example set forth above assumes reinvestment of all dividends and distributions at NAV, and an annual expense ratio of [ ]%. The table above and the assumption in the example of a 5% annual return are required by the SEC regulations applicable to all management investment companies. The example and fee table should not be considered a representation of past or future expenses or annual rates of return. Actual expenses or annual rates of return may be greater or lesser than those assumed for purposes of the example and fee table. In addition, while the example assumes reinvestment of all dividends and distributions at NAV, participants in the Funds automatic dividend reinvestment plan may receive Shares purchased or issued at a price or value different from NAV. See Dividends and Distributions; Automatic Dividend Reinvestment Plan.
FINANCIAL HIGHLIGHTS
The following financial highlights table is intended to help you understand the Funds financial performance. Certain information reflects financial results from a single Fund share. The information in the financial highlights for each of the years presented (except for the fiscal year ended October 31, 2000) has been audited by [ ], independent registered public accounting firm, whose report appears in the Funds Annual Report to Shareholders. The information in the financial highlights for the fiscal year ended October 31, 2000 has been audited by [ ], independent registered public accounting firm. The Funds financial statements are included in the Funds Annual and Semi-Annual Reports and are incorporated by reference into the SAI. The Annual and Semi-Annual Reports may be obtained without charge by calling 1-800-293-1232 or visiting the Funds website, www.credit-suisse.com/us.
|
|
For the Year Ended |
|
|||||||||||||
Per share operating performance |
|
10/31/09 |
|
10/31/08 |
|
10/31/07 |
|
10/31/06 |
|
10/31/05 |
|
|||||
Net asset value, beginning of year |
|
$ |
2.09 |
|
$ |
4.10 |
|
$ |
4.18 |
|
$ |
4.12 |
|
$ |
4.53 |
|
INVESTMENT OPERATIONS |
|
|
|
|
|
|
|
|
|
|
|
|||||
Net investment income |
|
0.28 |
|
0.40 |
(1) |
0.40 |
(1) |
0.40 |
|
0.47 |
|
|||||
Net gain (loss) on investments, swap contracts and foreign currency related items (both realized and unrealized) |
|
0.68 |
|
(2.00 |
) |
(0.08 |
) |
0.11 |
|
(0.35 |
) |
|||||
Total from investment activities |
|
0.96 |
|
(1.60 |
) |
0.32 |
|
0.51 |
|
0.12 |
|
|||||
LESS DIVIDENDS AND DISTRIBUTIONS |
|
|
|
|
|
|
|
|
|
|
|
|||||
Dividends from net investment income |
|
(0.33 |
) |
(0.41 |
) |
(0.40 |
) |
(0.42 |
) |
(0.51 |
) |
|||||
Return of capital |
|
(0.01 |
) |
|
|
|
|
(0.03 |
) |
(0.02 |
) |
|||||
Total dividends and distributions |
|
(0.34 |
) |
(0.41 |
) |
(0.40 |
) |
(0.45 |
) |
(0.53 |
) |
|||||
Net asset value, end of year |
|
$ |
2.71 |
|
$ |
2.09 |
|
$ |
4.10 |
|
$ |
4.18 |
|
$ |
4.12 |
|
Per share market value, end of year |
|
$ |
2.62 |
|
$ |
1.97 |
|
$ |
3.65 |
|
$ |
4.50 |
|
$ |
4.77 |
|
TOTAL INVESTMENT RETURN (2) |
|
|
|
|
|
|
|
|
|
|
|
|||||
Net asset value |
|
53.12 |
% |
(42.45 |
)% |
7.65 |
% |
13.13 |
% |
2.62 |
% |
|||||
Market value |
|
59.92 |
% |
(38.20 |
)% |
(10.72 |
)% |
5.23 |
% |
2.71 |
% |
|||||
RATIOS AND SUPPLEMENTAL DATA |
|
|
|
|
|
|
|
|
|
|
|
|||||
Net assets, end of year (000s omitted) |
|
$ |
151,546 |
|
$ |
116,492 |
|
$ |
228,724 |
|
$ |
231,765 |
|
$ |
255,760 |
|
Average debt per share |
|
$ |
0.58 |
|
$ |
1.69 |
|
$ |
1.98 |
|
$ |
1.96 |
|
$ |
2.05 |
|
Ratio of expenses to average net assets |
|
2.67 |
% |
3.76 |
% |
4.11 |
% |
4.20 |
% |
3.27 |
% |
|||||
Ratio of expenses to average net assets excluding interest expense |
|
1.80 |
% |
1.50 |
% |
1.37 |
% |
1.65 |
% |
1.68 |
% |
|||||
Ratio of net investment income to average net assets |
|
13.32 |
% |
11.68 |
% |
9.48 |
% |
9.67 |
% |
10.72 |
% |
|||||
Decrease reflected in above operating expense ratios due to waivers/reimbursements |
|
0.15 |
% |
0.15 |
% |
0.15 |
% |
|
|
|
|
|||||
Portfolio turnover rate |
|
49.00 |
% |
32.01 |
% |
49.18 |
% |
61.91 |
% |
31.05 |
% |
(1) Per share information is calculated using the average shares outstanding method.
(2) Total investment return at net asset value is based on changes in the net asset value of fund shares and assumes reinvestment of dividends and distributions, if any. Total investment return at market value is based on changes in the market price at which the funds shares traded on the stock exchange during the period and assumes reinvestment of dividends and distributions, if any, at actual prices pursuant to the funds dividend reinvestment program. Because the funds shares trade in the stock market based on investor demand, the fund may trade at a price higher or lower than its net asset value. Therefore, returns are calculated based on share price and net asset value.
(3) Unaudited.
Per share operating performance |
|
10/31/04 |
|
10/31/03 |
|
10/31/02 |
|
10/31/01 |
|
10/31/00 |
|
|||||
Net asset value, beginning of year |
|
$ |
4.34 |
|
$ |
3.53 |
|
$ |
4.49 |
|
$ |
6.16 |
|
$ |
7.98 |
|
INVESTMENT OPERATIONS |
|
|
|
|
|
|
|
|
|
|
|
|||||
Net investment income |
|
0.53 |
|
0.55 |
|
0.65 |
(1) |
0.84 |
|
0.96 |
(1) |
|||||
Net gain (loss) on investments, swap contracts and foreign currency related items (both realized and unrealized) |
|
0.24 |
|
0.87 |
|
(0.80 |
) |
(1.63 |
) |
(1.80 |
) |
|||||
Total from investment activities |
|
0.77 |
|
1.42 |
|
(0.15 |
) |
(0.79 |
) |
(0.84 |
) |
|||||
LESS DIVIDENDS AND DISTRIBUTIONS |
|
|
|
|
|
|
|
|
|
|
|
|||||
Dividends from net investment income |
|
(0.58 |
) |
(0.61 |
) |
(0.71 |
) |
(0.86 |
) |
(0.98 |
) |
|||||
Return of capital |
|
|
|
|
|
(0.10 |
) |
(0.02 |
) |
|
|
|||||
Total dividends and distributions |
|
(0.58 |
) |
(0.61 |
) |
(0.81 |
) |
(0.88 |
) |
(0.98 |
) |
|||||
Net asset value, end of year |
|
$ |
4.53 |
|
$ |
4.34 |
|
$ |
3.53 |
|
$ |
4.49 |
|
$ |
6.16 |
|
Per share market value, end of year |
|
$ |
5.24 |
|
$ |
4.76 |
|
$ |
4.10 |
|
$ |
5.07 |
|
$ |
6.19 |
|
TOTAL INVESTMENT RETURN (2) |
|
|
|
|
|
|
|
|
|
|
|
|||||
Net asset value |
|
18.98 |
%(3) |
43.04 |
%(3) |
(4.99 |
)%(3) |
(13.90 |
)%(3) |
(11.64 |
)%(3) |
|||||
Market value |
|
25.49 |
% |
35.07 |
% |
(2.15 |
)% |
(3.21 |
)% |
(12.15 |
)% |
|||||
RATIOS AND SUPPLEMENTAL DATA |
|
|
|
|
|
|
|
|
|
|
|
|||||
Net assets, end of year (000s omitted) |
|
$ |
244,523 |
|
$ |
229,255 |
|
$ |
180,889 |
|
$ |
219,440 |
|
$ |
286,838 |
|
Average debt per share |
|
$ |
2.05 |
|
$ |
1.81 |
|
$ |
1.99 |
|
$ |
2.49 |
|
$ |
3.47 |
|
Ratio of expenses to average net assets |
|
2.51 |
% |
2.57 |
% |
2.91 |
% |
4.29 |
% |
4.81 |
% |
|||||
Ratio of expenses to average net assets excluding interest expense |
|
1.70 |
% |
1.73 |
% |
1.78 |
% |
1.73 |
% |
1.61 |
% |
|||||
Ratio of net investment income to average net assets |
|
11.99 |
% |
13.85 |
% |
15.17 |
% |
15.22 |
% |
12.90 |
% |
|||||
Decrease reflected in above operating expense ratios due to waivers/reimbursements |
|
|
|
|
|
|
|
|
|
|
|
|||||
Portfolio turnover rate |
|
12.10 |
% |
15.96 |
% |
33.22 |
% |
46.11 |
% |
31.29 |
% |
(1) Per share information is calculated using the average shares outstanding method.
(2) Total investment return at net asset value is based on changes in the net asset value of fund shares and assumes reinvestment of dividends and distributions, if any. Total investment return at market value is based on changes in the market price at which the funds shares traded on the stock exchange during the period and assumes reinvestment of dividends and distributions, if any, at actual prices pursuant to the funds dividend reinvestment program. Because the funds shares trade in the stock market based on investor demand, the fund may trade at a price higher or lower than its net asset value. Therefore, returns are calculated based on share price and net asset value.
(3) Unaudited.
The following table sets forth additional information regarding the Funds credit facility for each of the fiscal years shown:
Fiscal Year Ended |
|
Total Amount Outstanding |
|
Asset Coverage Per $1000 of Indebtedness |
|
||
10/31/2009 |
|
$ |
42,000,000 |
|
$ |
4,703 |
|
10/31/2008 |
|
$ |
58,610,000 |
|
$ |
3,024 |
|
10/31/2007 |
|
$ |
107,500,000 |
|
$ |
3,156 |
|
10/31/2006 |
|
$ |
108,000,000 |
|
$ |
3,187 |
|
10/31/2005 |
|
$ |
110,000,000 |
|
$ |
3,060 |
|
10/31/2004 |
|
$ |
113,000,000 |
|
$ |
3,187 |
|
10/31/2003 |
|
$ |
105,500,000 |
|
$ |
3,247 |
|
10/31/2002 |
|
$ |
85,250,000 |
|
$ |
3,129 |
|
10/31/2001 |
|
$ |
101,500,000 |
|
$ |
3,169 |
|
10/31/2000 |
|
$ |
130,500,000 |
|
$ |
3,208 |
|
Trading and Net Asset Value Information
In the past, the Funds common shares have traded at both a premium and at a discount in relation to NAV. Shares of closed-end investment companies such as the Fund frequently trade at a discount from NAV. See Closed-End Fund Structure.
The Funds Shares are listed and traded on the NYSE Amex. The average weekly trading volume of the Shares on the NYSE Amex during the twelve months ended [ ], 2010 was [ ] shares. The following table shows for the quarters indicated: (1) the high and low sale price of the Shares at the close of trading on the NYSE
Amex; (2) the high and low NAV per Share; and (3) the high and low premium or discount to NAV at which the Funds Shares were trading at the close of trading (as a percentage of NAV).
|
|
Price |
|
Net Asset Value |
|
Premium/(Discount) To |
|
||||||||||
Fiscal Quarter Ended |
|
High |
|
Low |
|
High |
|
Low |
|
High |
|
Low |
|
||||
January 31, 2008 |
|
$ |
3.62 |
|
$ |
3.21 |
|
$ |
4.07 |
|
$ |
3.50 |
|
-11.06 |
% |
-8.29 |
% |
April 30, 2008 |
|
$ |
3.57 |
|
$ |
3.06 |
|
$ |
3.64 |
|
$ |
3.39 |
|
-1.92 |
% |
-9.73 |
% |
July 31, 2008 |
|
$ |
3.58 |
|
$ |
2.86 |
|
$ |
3.65 |
|
$ |
3.29 |
|
-1.92 |
% |
-13.07 |
% |
October 31, 2008 |
|
$ |
3.00 |
|
$ |
1.39 |
|
$ |
3.30 |
|
$ |
2.27 |
|
-9.09 |
% |
-38.77 |
% |
January 31, 2009 |
|
$ |
1.97 |
|
$ |
1.06 |
|
$ |
2.10 |
|
$ |
1.74 |
|
-6.19 |
% |
-39.08 |
% |
April 30, 2009 |
|
$ |
1.86 |
|
$ |
1.23 |
|
$ |
1.85 |
|
$ |
1.62 |
|
0.54 |
% |
-24.07 |
% |
July 31, 2009 |
|
$ |
2.47 |
|
$ |
1.87 |
|
$ |
2.31 |
|
$ |
2.03 |
|
6.93 |
% |
-7.88 |
% |
October 31, 2009 |
|
$ |
2.81 |
|
$ |
2.44 |
|
$ |
2.68 |
|
$ |
2.50 |
|
4.85 |
% |
-2.40 |
% |
January 31, 2010 |
|
$ |
3.23 |
|
$ |
2.64 |
|
$ |
2.89 |
|
$ |
2.71 |
|
11.76 |
% |
-2.58 |
% |
April 30, 2010 |
|
$ |
3.09 |
|
$ |
2.80 |
|
$ |
2.84 |
|
$ |
2.78 |
|
8.80 |
% |
0.72 |
% |
July 31, 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Immediately prior to the Funds announcement of the Offer on [ ], 2010, the last reported sale price of a Share on the NYSE Amex was $[ ]. The Funds NAV per Share on [ ], 2010 was $[ ].
THE OFFER
Terms of the Offer
The Fund is issuing to its common shareholders of record, as of the close of business on the Record Date, Rights to subscribe for an aggregate of approximately [ ] Shares of the Fund. In certain circumstances described below under Over-Subscription Privilege, the Fund may increase the number of common shares of beneficial interest of the Fund subject to subscription by up to [ ]%. Each shareholder will receive one Right for each whole Share held by the shareholder as of the Record Date. Such shareholders may transfer Rights to other persons. Existing shareholders of the Fund who retain all or part of their Rights and persons acquiring Rights from such shareholders are together referred to as Rightholders. A Rightholder may subscribe for one new Share of the Fund for every [ ] Rights that are held by the Rightholder (1-for-[ ]). No fractional Shares will be issued. If a shareholder receives less than [ ] Rights in total, that shareholder will be entitled to subscribe for one new Share.
If a Rightholder [is a Record Date Shareholder and] exercises all of the Rights it received in the Primary Subscription, that Rightholder also may subscribe for additional common shares of beneficial interest of the Fund pursuant to the Over-Subscription Privilege.
In the case of Shares held of record by a depository or nominee, additional Rights to be received by beneficial owners for whom such depository or nominee is the holder of record will be issued to such depository or nominee only if such depository or nominee provides to the Fund on or before the close of business on [ ], 2010, a written representation as to the number of additional Rights required for such issuance.
The Rights are transferable and will be admitted for trading on the NYSE Amex. Assuming a market for the Rights exists, the Rights may be purchased and sold through usual brokerage channels until [ ], 2010 (or, if the Offer is extended, until a comparable number of business days before the final Expiration Date). In such case, a Rightholder will need to instruct his or her broker to sell any unexercised Rights in time for the broker to execute the transaction by the close of trading on [ ], 2010, or provide instructions to the Subscription Agent by 4 p.m. on [ ], 2010 to sell any unexercised Rights. [Rights that are sold will not confer any right to acquire any common shares of beneficial interest of the Fund pursuant to the Over-Subscription Privilege, and any Record Date
Shareholder who sells any Rights will not be eligible to participate in the Over-Subscription Privilege.] The method by which the Rights may be transferred is set forth below in Sale of Rights.
Rights may be exercised at any time during the Subscription Period, which commences on [ ], 2010 and ends at 5:00 p.m., Eastern time, on the Expiration Date, unless extended by the Fund. The Rights are evidenced by a Subscription Certificate that will be mailed to shareholders, except as discussed below under Foreign Restrictions. The methods by which Rights may be exercised and payments may be made for Shares are set forth below in Exercise of Rights and Payment for Shares.
Any [Record Date Shareholder] who fully exercises all Rights initially issued to it is entitled to subscribe for Primary Subscription Shares that were not subscribed for by other Rightholders in the Primary Subscription. In addition, in the event that the Funds per share net asset value is at or below the Subscription Price, the Fund may issue Additional Shares to satisfy over-subscription requests in excess of the available Primary Subscription Shares. [Rightholders who are not Record Date Shareholders may not participate in the Over-Subscription Privilege.]
Exercising Rightholders, including both Rightholders purchasing Shares in the Primary Subscription and those who purchase Shares pursuant to the Over-Subscription Privilege (collectively, Exercising Rightholders), will not know the actual Subscription Price when they make their investment decision because the Expiration Date and the date upon which the price of the Rights will be determined will be the same date.
If the market price of the Funds shares is below the Subscription Price, it may not be in your interest to participate in the Offer. Once you subscribe for Shares and the Fund receives payment or a guarantee of payment (as described under Payment for Shares), you will not be able to change your decision, except under the circumstances described under Notice of NAV Decline.
The Fund believes that issuance of transferable Rights to shareholders as of the Record Date, which themselves may have realizable value, will afford non-exercising shareholders the potential to receive a cash payment upon sale of such Rights. Shareholders who do not exercise their Rights in full will suffer a greater level of dilution of their interest in the Fund than shareholders who do. See Special Considerations and Risk Factors.
Purpose of the Offer
[The Board of Trustees of the Fund (the Board) and Credit Suisse Asset Management, LLC, the Funds investment adviser (Credit Suisse or the Investment Adviser), have determined that it would be in the best interests of the Fund and its shareholders to increase the assets of the Fund in order to more fully take advantage of current and prospective investment opportunities. The Board and the Investment Adviser believe the current market environment offers the Fund opportunities to deploy additional capital to take advantage of attractive investment opportunities and seek to enhance the Funds future risk-adjusted returns. The Board and the Investment Adviser have determined that the Offer is currently the most effective way to raise additional assets for the Fund, while providing shareholders with certain other potential benefits as discussed below.
In connection with the Boards decision to approve this Offer, the Board considered the recommendations of Credit Suisse, [ ], an independent consultant recognized as an expert in the field of closed-end investment companies, and [ ], an investment banking firm with expertise in the field of closed-end investment companies. Prior to reaching its conclusion to approve the Offer, the Board considered, among other things, the following factors:]
[ ]
Over-Subscription Privilege
If Rightholders do not exercise all of the Rights held by them in the Primary Subscription, any Primary Subscription Shares for which subscriptions have not been received will be offered, by means of the Over-Subscription Privilege, to [Record Date Shareholders] who have exercised all the Rights initially issued to them and who wish to acquire more than the number of Shares for which the Rights held by them are exercisable. [Record Date Shareholders] who exercise all the Rights initially issued to them will be asked to indicate on their Subscription Certificates how many Shares they are willing to acquire pursuant to the Over-Subscription Privilege. If sufficient Primary Subscription Shares remain as a result of unexercised Rights, all over-subscription requests will be honored in full. If sufficient Primary Subscription Shares are not available to honor all over-subscription requests, the available Primary Subscription Shares will be allocated among those [Record Date Shareholders] who over-subscribe based on the number of Rights originally issued to them by the Fund.
[In addition, the Board [has established a Pricing Committee which] is authorized, in the event that the Subscription Price on the Expiration Date is equal to or above the Funds per share net asset value, to direct the Fund to issue Additional Shares to satisfy over-subscription requests in excess of the available Primary Subscription Shares. Should the [Board] [Pricing Committee] determine to issue some or all of these Additional Shares, they will be allocated only among [Record Date Shareholders] that submitted over-subscription requests. Additional Shares will be allocated pro rata among those fully exercising [Record Date Shareholders] who over-subscribe based on the number of Rights originally issued to them by the Fund. Any Additional Shares issued by the Fund, collectively with any Primary Subscription Shares not subscribed for through the Primary Subscription, will be referred to in this Prospectus as the Excess Shares. Rightholders who are not Record Date Shareholders may not participate in the Over-Subscription Privilege.]
The percentage of Excess Shares each over-subscribing [Record Date Shareholder] may acquire may be rounded up or down to result in delivery of whole common shares of beneficial interest; provided, however, that if a pro rata allocation results in any holder being allocated a greater number of Excess Shares than the holder subscribed for pursuant to the exercise of such holders Over-Subscription Privilege, then such holder will be allocated only such number of Excess Shares as such holder subscribed for and the remaining Excess Shares will be allocated among all other holders then entitled to receive Excess Shares whose over-subscription requests have not been fully honored. The allocation process may involve a series of allocations in order to assure that the total number of Excess Shares is distributed on a pro rata basis. Each Rightholder is required to purchase all allocated Excess Shares requested on the Subscription Certificate.
The Fund will not otherwise offer or sell any Shares that are not subscribed for pursuant to the Primary Subscription or the Over-Subscription Privilege pursuant to the Offer.
Banks, broker-dealers, trustees and other nominee holders of rights will be required to certify to the Subscription Agent, before any Over-Subscription Privilege may be exercised with respect to any particular beneficial owner, as to the aggregate number of Rights exercised pursuant to the Primary Subscription and the number of Shares subscribed for pursuant to the Over-Subscription Privilege by such beneficial owner and that such beneficial owners Primary Subscription was exercised in full. For more information on how to exercise the Over-Subscription Privilege, see Exercise of Rights below.
The Subscription Price
The Subscription Price per Share will be [ %] [of the average weighted share price on the NYSE AMEX on their Expiration Date [and the [ ] preceding business days].
The Fund announced the Offer after the close of trading on the NYSE Amex on [ ], 2010. The NAV per Share at the close of business on [ ], 2010 and [ ], 2010 was $[ ] and $[ ], respectively, and the last reported sale price of a Share on the NYSE Amex on those dates was $[ ] and $[ ], respectively. Because the Offer expires before the actual Subscription Price is determined, Rightholders who decide to acquire Shares in the Primary Subscription or pursuant to the Over-Subscription Privilege will not know the purchase price of such Shares when they make such decision. Information about the Funds NAV may be obtained by calling 1-800-293-1232.
Notice of NAV Decline
The Fund will suspend the Offer until it amends this prospectus if, after the effective date of this prospectus, the Funds NAV declines more than 10% from its NAV as of the effective date. In such event, the Fund will notify Rightholders of any such decline and permit Rightholders to cancel the exercise of their Rights. Rightholders will have their payment for additional Shares returned to them if they opt to cancel the exercise of their Rights.
Expiration of the Offer
The Offer will expire at 5:00 p.m., Eastern time, on the Expiration Date. The Rights will expire on the Expiration Date and thereafter may not be exercised. Any extension of the Offer will be followed as promptly as practicable by an announcement thereof. Such announcement will be issued no later than 9:00 a.m., Eastern time, on the next business day following the previously scheduled Expiration Date. Without limiting the manner in which the Fund may choose to make such announcement, the Fund will not, unless otherwise obligated by law, have any obligation to publish, advertise, or otherwise communicate any such announcement other than by making a release to [ ] or such other means of announcement as the Fund deems appropriate.
Subscription Agent
The Subscription Agent is Computershare. The Subscription Agent will receive for its administrative, processing, invoicing and other services, a fee estimated to be $[ ], which includes reimbursement for all out-of-pocket expenses related to the Offer. Questions regarding the Subscription Certificates should be directed to the Information Agent at [ ].
Completed Subscription Certificates must be sent together with proper payment of the Estimated Subscription Price for all Shares subscribed for in the Primary Subscription and pursuant to the Over-Subscription Privilege to the Subscription Agent by one of the methods described below.
Alternatively, Notice of Guaranteed Delivery may be sent by facsimile to Computershare to be received by the Subscription Agent prior to 5:00 p.m., Eastern time, on the Expiration Date. The Fund will accept only properly completed and executed Subscription Certificates actually received at any of the addresses listed below, prior to 5:00 p.m., Eastern time, on the Expiration Date or by the close of business on the [third] business day after the Expiration Date following timely receipt of a Notice of Guaranteed Delivery. See Payment for Shares below.
Subscription Certificate Delivery Method |
|
Address |
|
|
|
By First-Class Mail |
|
[ ] |
|
|
|
By Overnight Courier or Express Mail |
|
[ ] |
|
|
|
By Broker-Dealer or other Nominee (Notice of Guaranteed Delivery) |
|
Shareholder whose Shares are held in a (Notice of Guaranteed Delivery) brokerage bank or trust account may contact their broker or other nominee and instruct them to submit a Notice of Guaranteed Delivery and Payment on their behalf. |
Delivery to an address other than those listed above does not constitute a valid delivery.
Information Agent
Any questions or requests for assistance may be directed to the Information Agent at its telephone number and address listed below:
[ ]
The Information Agent will receive a fee estimated to be $[ ] and reimbursement for out-of-pocket expenses related to the Offer.
Shareholders may also contact their brokers or nominees for information with respect to the Offer.
Exercise of Rights
Rights may be exercised by filling in and signing the Subscription Certificate and mailing it in the envelope provided, or otherwise delivering the completed and signed Subscription Certificate to the Subscription Agent, together with payment for the Shares as described below under Payment for Shares. Rightholders may also exercise Rights by contacting a broker, bank or trust company which can arrange, on behalf of the Rightholder, to guarantee delivery of payment and of a properly completed and executed Subscription Certificate. A fee may be charged for this service. Completed Subscription Certificates, along with the payment or guarantee of payment described below under Payment for Shares, must be received by the Subscription Agent prior to 5:00 p.m., Eastern time on the Expiration Date at one of the offices of the Subscription Agent at the addresses set forth above.
Nominees who hold shares for the account of others should notify the respective beneficial owners of such shares as soon as possible to ascertain such beneficial owners intentions and to obtain instructions with respect to the Rights. If the beneficial owner so instructs, the nominee should complete the Subscription Certificate and submit it to the Subscription Agent with the proper payment as described under Payment for Shares below. In addition, such beneficial owners should contact the nominee and request the nominee to effect transactions in accordance with the beneficial owners instructions. See Subscription Agent.
Shareholders who are registered holders can choose between either option set forth under Payment for Shares below.
Payment for Shares
Exercising Rightholders who acquire Shares in the Primary Subscription or pursuant to the Over-Subscription Privilege may choose between the following methods of payment:
1. An Exercising Rightholder may send the Subscription Certificate, together with payment for the Shares acquired in the Primary Subscription and for any Excess Shares subscribed for pursuant to the Over-Subscription Privilege, to the Subscription Agent, calculating the total payment on the basis of the estimated Subscription Price of $[ ] per Share. To be accepted, such payment, together with the properly completed and executed Subscription Certificate, must be received by the Subscription Agent at one of the Subscription Agents offices at the addresses set forth above, prior to 5:00 p.m., Eastern time, on the Expiration Date. Exercise of the Rights by this method is subject to actual collection of checks by 5:00 p.m. on the [ ] business day after the Expiration Date. The Subscription Agent will deposit all Share purchase checks and any orders received by it prior to the Final Payment Date (as defined in Confirmation of Subscription and Full Payment for Shares below) into a segregated [interest bearing] account pending proration and distribution of Shares or return of funds. [All interest earned on such funds will accrue to the benefit of the Fund.] A payment pursuant to this method must be in U.S. dollars by money order or check drawn on a bank or branch located in the United States, must be payable to Credit Suisse High Yield Bond Fund and must accompany a properly completed and executed Subscription Certificate for such Subscription Certificate to be accepted.
The method of delivery of Subscription Certificates and payment of the Subscription Price to the Fund will be at the election and risk of the Exercising Rightholders, but if sent by mail it is recommended that such Certificates and payments be sent by registered mail, properly insured, with return receipt requested, and that a sufficient number of days be allowed to ensure delivery to the Subscription Agent prior to 5:00 p.m., Eastern Time, on the Expiration Date and clearance of payment prior to 5:00 p.m., Eastern Time, on the [ ] business day after the Expiration Date. Because uncertified personal checks may take at least five business days to clear, Rightholders are strongly urged to pay, or arrange for payment, by means of a certified or cashiers check or money order.
For an exercise of Rights to be valid under this method, the Exercising Rightholder must submit to the Subscription Agent any additional amount due for the Shares to be purchased by the Final Payment Date, as set forth in Confirmation of Subscription and Full Payment for Shares below.
2. Alternatively, a subscription will be accepted by the Subscription Agent if, prior to 5:00 p.m., Eastern time, on the Expiration Date, the Subscription Agent has received a Notice of Guaranteed Delivery by facsimile (telecopy) or otherwise from an NYSE member, a bank, a trust company, or other financial institution that is a member of the Securities Transfer Agents Medallion Program, the Stock Exchange Medallion Program or the NYSE Medallion Signature Program, guaranteeing delivery of (i) payment of the full Subscription Price for the Shares subscribed for in the Primary Subscription and any Excess Shares subscribed for pursuant to the Over-Subscription Privilege, and (ii) a properly completed and executed Subscription Certificate, and, if applicable, a Nominee Holder Over-Subscription Form. For an exercise of Rights to be valid under this method, the Exercising Rightholder must submit to the Subscription Agent the full payment for the Shares to be purchased by the Final Payment Date, as set forth in Confirmation of Subscription and Full Payment for Shares below.
Confirmation of Subscription and Full Payment for Shares
On or before the third business day after the Expiration Date (the Confirmation Date), the Subscription Agent will send to each Exercising Rightholder (or, if Shares are held by a depository or nominee, to such depository or nominee), a confirmation showing: (i) the number of Shares purchased pursuant to the Primary Subscription and, if applicable, the Over-Subscription Privilege; (ii) the per Share and total purchase price for the Shares; (iii) any excess to be refunded by the Fund to such Rightholder as a result of payment for Shares pursuant to the Over-Subscription Privilege that the Rightholder is not acquiring; and (iv) any additional amount payable by such Rightholder to the Fund or any excess to be refunded by the Fund to such Rightholder, in each case, based on the actual Subscription Price as determined on the Expiration Date. Any additional payment required from Rightholders must be received by the Subscription Agent within ten business days after the Confirmation Date (the Final Payment Date). Any excess payment to be refunded by the Fund to a Rightholder will be mailed by the Subscription Agent as promptly as practicable. An Exercising Rightholder will have no right to rescind a purchase after the Subscription Agent has received payment, either by means of a Notice of Guaranteed Delivery or a check, except under the circumstances described under Notice of NAV Decline. See Delivery of Share Certificates below.
Whichever of the two methods of payment described above is used, issuance of the Shares purchased is subject to collection of checks and actual full payment by the Final Payment Date. If a Rightholder who subscribes for Shares pursuant to the Primary Subscription or Over-Subscription Privilege does not make payment of any amounts due by the Final Payment Date, the Subscription Agent reserves the right to take any or all of the following actions: (i) find other Rightholders for such subscribed and unpaid for Shares; (ii) apply any payment actually received by it toward the purchase of the greatest whole number of Shares which could be acquired by such Rightholder upon exercise of the Primary Subscription and/or Over-Subscription Privilege; and/or (iii) exercise any and all other rights or remedies to which it may be entitled, including, without limitation, the right to set off against payments actually received by it with respect to such subscribed Shares.
All questions concerning the timeliness, validity, form and eligibility of any exercise of Rights will be determined by the Subscription Agent, whose determinations will be final and binding. The Subscription Agent, in its sole discretion, may waive any defect or irregularity, or permit a defect or irregularity to be corrected within such time as it may determine, or reject the purported exercise of any Right. Subscriptions will not be deemed to have been received or accepted until all irregularities have been waived or cured within such time as the Subscription Agent determines in its sole discretion. The Subscription Agent will not be under any duty to give notification of any defect or irregularity in connection with the submission of Subscription Certificates or incur any liability for failure to give such notification.
Delivery of Share Certificates
Certificates representing Shares acquired in the Primary Subscription and representing Shares acquired pursuant to the Over-Subscription Privilege will be mailed promptly after the expiration of the Offer once full payment for such Shares has been received and cleared. Participants in the Funds automatic dividend reinvestment plan will have any Shares acquired in the Primary Subscription and pursuant to the Over-Subscription Privilege credited to their shareholder dividend reinvestment accounts in the plan. Participants in the automatic dividend reinvestment plan wishing to exercise Rights for the Shares held in their accounts in the plan must exercise such Rights in accordance with the procedures set forth above. Shareholders whose Shares are held of record by a depository or nominee on their behalf or their broker-dealers behalf will have any Shares acquired in the Primary Subscription credited to the account of such depository or nominee. Shares acquired pursuant to the Over-Subscription Privilege will be certificated and certificates representing such shares will be sent directly to such depository or nominee. Share certificates will not be issued for Shares credited to automatic dividend reinvestment plan accounts.
Sale of Rights
Sales through Subscription Agent. Rightholders who do not wish to exercise any or all of their Rights may instruct the Subscription Agent to sell any unexercised Rights. Subscription Certificates representing the Rights to be sold by the Subscription Agent must be received by the Subscription Agent by 4:00 p.m. Eastern Time [ ], 2010, [ ] business day[s] prior to the Expiration Date (or if the Offer is extended, until [ ] business day[s] prior to the final Expiration Date), due to normal settlement procedures. Rights that are sold will not confer any right to acquire any common shares of beneficial interest pursuant to the Over-Subscription Privilege, and any Record Date shareholder who sells any Rights will not be eligible to participate in the Over-Subscription Privilege. Upon the timely receipt by the Subscription Agent of appropriate instructions to sell Rights, the Subscription Agent will use its reasonable best efforts to complete the sale; and the Subscription Agent will remit the proceeds of sale, net of any commissions, to the Rightholders. No brokerage commissions will be charged to holders who elect to direct the Subscription Agent to sell their Rights, and the Fund will pay to the Subscription Agent a one-time fee of $[ ] for a shareholder to sell any or all of his Rights. If the Rights can be sold, sales of such Rights will be deemed to have been effected at the weighted-average price received by the Subscription Agent on the day such Rights are sold. The Subscription Agent will also attempt to sell all Rights which remain unclaimed as a result of Subscription Certificates being returned by the postal authorities to the Subscription Agent as undeliverable as of the [ ] business day prior to the Expiration Date. Such sales will be made net of commissions on behalf of the nonclaiming Rightholders. The Subscription Agent will hold the proceeds from those sales for the benefit of such nonclaiming Rightholders until such proceeds are either claimed or become subject to escheat. There can be no assurance that the Subscription Agent will be able to complete the sale of any such Rights, and neither the Fund nor the Subscription Agent has guaranteed any minimum sales price for the Rights. All such Rights will be sold at the market price, if any, on the NYSE Amex.
Other Transfers. The Rights are transferable and will be admitted for trading on the NYSE Amex. Assuming a market for the Rights develops, the Rights may be purchased and sold through usual brokerage channels until the Expiration Date. In such case, you will need to instruct your broker to sell any unexercised Rights in time for the broker to execute the transaction by the close of trading on the Expiration Date.
The Rights evidenced by a single Subscription Certificate may be transferred in whole or in part by delivering to the Subscription Agent a Subscription Certificate properly endorsed for transfer, with instructions to register such portion of the Rights evidenced thereby in the name of the transferee and to issue a new Subscription Certificate to the transferee evidencing such transferred Rights. In such event, a new Subscription Certificate evidencing the balance of the Rights will be issued to the transferring Rightholder or, if the transferring Rightholder so instructs, to an additional transferee.
Except for the one-time $[ ] fee charged by the Subscription Agent per shareholder related to sales through the Subscription Agent (which will be paid by the Fund as described above), all commissions, fees and other expenses (including brokerage commissions and transfer taxes) incurred in connection with the purchase, sale or exercise of Rights will be for the account of the transferor of the Rights and none of such commissions, fees or expenses will be paid by the Fund or the Subscription Agent. Neither the Fund nor the Subscription Agent shall have any liability to a transferee or transferor of Rights if Subscription Certificates are not received in time for exercise or sale prior to the Expiration Date.
The Fund anticipates that the Rights will be eligible for transfer through, and that the exercise of the Primary Subscription and the Over-Subscription Privilege may be effected through, the facilities of The Depository Trust Company.
[Banks, broker-dealers, trustees and other nominee holders of rights are advised to notify those persons that purchase Rights in the secondary market that such Rights may not participate in the Over-Subscription Privilege.]
Considerations for Certain Tax-Deferral Arrangements and Employee Plan
Special considerations apply with respect to shareholders of the Fund that are tax-deferral arrangements such as plans qualified under Section 401(a) of the Internal Revenue Code of 1986, as amended (Code) (including retirement and 401(k) plans and Keogh plans of self-employed individuals), individual retirement accounts under Section 408(a) of the Code (IRAs), Roth IRAs under section 408A of the Code, and custodial accounts under Section 403(b) of the Code (collectively, Plans). For example, additional contributions to a Plan (other than permitted rollover contributions or trustee-to-trustee transfers from other Plans) in order to exercise Rights, when taken together with other contributions made to the Plan, may exceed limits under the Code, resulting in (among other things) excise taxes for excess or nondeductible contributions or the Plans loss of its tax-favored status.
Due to the complexity of the foregoing rules and the taxes, penalties, and potential liability for noncompliance, shareholders which are Plans should consult with their counsel and other advisors before their exercise or transfer of Rights.
Certain Federal Income Tax Consequences of the Offer
The following discussion summarizes the principal federal income tax consequences of the Offer to a Rightholder that receives a Right in the Offering or purchases a Right from another Rightholder. It is based upon the Code, U.S. Treasury regulations, Internal Revenue Service rulings and judicial decisions in effect on the date of this prospectus, all of which may be subject to change or differing interpretation, possibly with retroactive effect. This discussion does not address all federal income tax aspects of the Offer that may be relevant to a particular Rightholder in light of his or her individual circumstances or to Rightholders subject to special treatment under the Code (such as insurance companies, financial institutions, tax-exempt entities, dealers in securities or traders electing mark-to-market treatment, partnerships and other entities treated as pass-through entities for federal income tax purposes, real estate investment trusts, regulated investment companies, Rightholders with functional currencies other than the U.S. Dollar, S corporations, Rightholders subject to the alternative minimum tax, governments and their agencies and instrumentalities, foreign corporations, and persons who are not citizens or residents of the United States), and it does not address any state, local or foreign tax consequences. Accordingly, each Rightholder should consult his or her own tax advisor as to the specific tax consequences of the Offer for him or her. Each Rightholder should also review the discussion of certain tax considerations affecting the Fund and its shareholders set forth under Federal Income Taxation below and under Tax Status in the SAI.
The principal U.S. federal income tax consequences to holders of Shares with respect to the Offer will be as follows:
1. |
The distribution of Rights to shareholders on the Record Date will not result in the recognition of taxable income to such shareholders nor will such shareholders recognize taxable income as a result of the exercise of the Rights. |
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2. |
The basis of a Right will be (a) to a holder of Shares to whom it is issued and who exercises or sells the Right (i) if the fair market value of the Right immediately after issuance is less than 15% of the fair market value of the Shares with regard to which it is issued, zero (in which case the holders basis in the applicable Shares will not change), unless the shareholder irrevocably elects, by filing a statement with his or her timely filed federal income tax return for the year in which the Rights are received, to allocate the basis of the Shares between the Right and the Shares based on their respective fair market values immediately after the Right is issued, or (ii) if the fair market value of the Right immediately after issuance is 15% or more of the fair market value of the Shares with respect to which it is issued or the election referred to in the preceding clause (i) is made, a portion of the basis in the Shares based upon the respective fair market values of the applicable Shares and the Right immediately after the Right is issued (in which case the holders basis in those Shares will be correspondingly reduced); (b) to a holder of Shares to whom it is issued and who allows the Right to expire, zero (in which case the basis in the applicable Shares will not change); or (c) to anyone who purchases the Right from a Rightholder, the purchase price for the Right. |
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3. |
The holding period of a Right received by a shareholder on the Record Date includes the holding period of the Shares with regard to which the Right is issued. The holding period of a Right purchased from a Rightholder will begin on the date of such purchase. |
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4. |
Any gain or loss on the sale of a Right will be treated as a capital gain or loss if the Right is a capital asset in the hands of the seller. Such a capital gain or loss will be long-term capital gain or loss if the holding period of the Right, determined in accordance with paragraph 3 above, is greater than one year, and otherwise will be short-term capital gain or loss. A Right issued with regard to Shares will be a capital asset in the hands of the person to whom it is issued if the Shares were a capital asset in the hands of that person. If a Right is allowed to expire, there will be no loss realized unless the Right had been acquired by purchase, in which case there will be a loss equal to the basis of the Right. |
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5. |
If the Right is exercised, the exercising Rightholders basis in the Shares received will include the Rightholders basis in the Right and the amount paid upon exercise of the Right. |
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6. |
If the Right is exercised, the holding period of the Shares acquired by the exercising Rightholder begins on the date the Right is exercised, and does not include the holding period of the Shares with respect to which the Right is issued. |
The foregoing is a general summary of the principal federal income tax consequences of the Offer and exercising Rightholders under federal income tax laws presently in effect, and does not cover any state, local, foreign, or non-income tax consequences of the Offer. Shareholders should consult their own tax advisors concerning the tax consequences of this transaction. See Federal Income Taxation.
Foreign Restrictions
Subscription Certificates will not be mailed to shareholders whose record addresses are outside the United States (the term United States includes the states, the District of Columbia, and the territories and possessions of the United States). However, foreign shareholders will receive written notice of the Offer. The Rights to which such Subscription Certificates relate will be held by the Subscription Agent for such foreign shareholders accounts until instructions are received to exercise the Rights. If no instructions have been received by Computershare, Eastern time, [ ] business days prior to the Expiration Date regarding the Rights of those foreign shareholders, the Subscription Agent will use its reasonable best efforts to sell the Rights of those foreign shareholder on the NYSE Amex. The net proceeds, if any, from the sale of those Rights will be remitted to the foreign shareholder.
USE OF PROCEEDS
Assuming all Primary Subscription Shares offered hereby are sold at the estimated Subscription Price of $[ ] per Share, the net proceeds of the Offer will be approximately $[ ]. Assuming all Additional Shares offered hereby are sold in addition to all of the Primary Subscription Shares at the estimated Subscription Price of $[ ] per Share, the net proceeds of the Offer will be approximately $[ ]. The net proceeds of the Offer will be invested in accordance with the Funds investment objective and policies. Credit Suisse anticipates that investment of the net proceeds will occur shortly after their receipt by the Fund, depending on market conditions and the availability of appropriate investments. To the extent there is any delay in investing the proceeds, the proceeds may be invested in U.S. government securities or high-quality, short-term money market instruments, cash or cash equivalents, pending investments of the proceeds. Following the completion of the Offer, the Fund may increase the amount of leverage outstanding. See Investment Objectives and Policies and Use of Leverage.
THE FUND
The Fund was organized as a trust under the laws of the State of Delaware on April 24, 1998, and it is registered under the 1940 Act. The Fund has been engaged in business as a non-diversified, closed-end management investment company since July 28, 1998, when it completed an initial public offering of 40,000,000 common shares of beneficial interest, par value $0.001 per share. Thereafter, the Fund issued 2,500,000 common shares of beneficial interest pursuant to an over-allotment option. The Funds common shares are traded on the NYSE Amex under the symbol DHY. As of [ ], 2010, the Funds NAV per Share was $[ ] and the Funds last reported sale price per Share was $[ ].
The Funds principal office is located at Eleven Madison Avenue, New York, New York, 10010 and its telephone number is 1-800-293-1232.
The following provides information about the Funds outstanding shares as of July 30, 2010:
Amount Outstanding
Title of Class |
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Amount Authorized |
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Amount Held by the |
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Exclusive of Amount |
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Common Shares |
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Unlimited |
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0 |
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56,155,173 |
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INVESTMENT OBJECTIVES AND POLICIES
Investment Objectives
The Funds primary investment objective is to seek high current income. The Fund will also seek capital appreciation as a secondary objective to the extent consistent with its objective of seeking high current income. The Fund is designed for investors willing to assume additional risk in return primarily for the potential for high current income and secondarily capital appreciation. The Fund is not intended to be a complete investment program and there can be no assurance that the Fund will achieve its objectives.
Investment Policies
Under normal market conditions, the Fund will invest at least 80% of its total assets in fixed income securities of U.S. issuers rated below investment grade quality (lower than Baa by Moodys or lower than BBB by S&P or comparably rated by another nationally recognized rating agency) or in unrated income securities that Credit Suisse determines to be of comparable quality. Securities rated lower than Baa by Moodys and lower than BBB by S&P are commonly known as junk bonds. The Fund will generally not invest in securities rated at the time of investment in the lowest rating categories (Ca or below for Moodys and CC or below for S&P) but may continue to hold securities which are subsequently downgraded. However, it has authority to invest in securities rated as low as C and D by Moodys and S&P, respectively.
As a component of the Funds investment in junk bonds, the Fund may also invest up to 20% of its total assets in Distressed Securities. The Fund may invest up to 30% of its total assets in securities of issuers domiciled outside the United States or that are denominated in various foreign currencies and multinational currency units. The Fund may invest up to 20% of its assets in credit default swap agreements.
In selecting investments for the Funds portfolio, the Funds portfolio managers:
· continually analyze individual companies, including their financial condition, cash flow and borrowing requirements, value of assets in relation to cost, strength of management, responsiveness to business conditions, credit standing and anticipated results of operations;
· analyze business conditions affecting investments, including:
· changes in economic activity and interest rates;
· availability of new investment opportunities;
· economic outlook for specific industries;
· seek to moderate risk by investing among a variety of industry sectors and issuers.
The portfolio managers may sell securities for a variety of reasons, such as to realize profits, limit losses or take advantage of better investment opportunities.
The Fund currently utilizes and in the future expects to continue to utilize leverage through borrowings, including the issuance of debt securities, or through other transactions, such as reverse repurchase agreements, which have the effect of leverage. The Fund may use leverage up to 33 1/3% of its total assets (including the amount obtained through leverage). The Fund generally will not utilize leverage if it anticipates that the Funds leveraged capital structure would result in a lower return to shareholders than that obtained over time with an unleveraged capital structure. Use of leverage creates an opportunity for increased income and capital appreciation for shareholders but also creates special risks. There can be no assurance that a leveraging strategy will be successful during any period in which it is employed. See Use of Leverage.
The Fund will seek its secondary objective of capital appreciation by investing in securities that Credit Suisse expects may appreciate in value as a result of favorable developments affecting the business or prospects of the issuer which may improve the issuers financial condition and credit rating or as a result of declines in long-term interest rates.
The Fund may implement various temporary defensive strategies at times when Credit Suisse determines that conditions in the markets make pursuing the Funds basic investment strategy inconsistent with the best interests of shareholders. These strategies may include investing less than 80% of its total assets in lower grade income securities by investing in higher quality debt and/or money market instruments.
There can be no assurance the Funds strategies will be successful.
The Fund invests primarily in bonds, debentures, notes, other debt instruments, convertible bonds and preferred stocks. The Funds portfolio securities may have fixed or variable rates of interest and may include zero coupon securities, payment-in-kind securities or other deferred payment securities, preferred stock, convertible debt obligations and convertible preferred stock, units consisting of debt or preferred stock with warrants or other equity features, participation interests in, or assignments of, commercial loans, government securities, stripped securities, commercial paper and other short-term debt obligations. The issuers of the Funds portfolio securities may include domestic and foreign corporations, partnerships, trusts or similar entities, and governmental entities or their political subdivisions, agencies or instrumentalities. The Fund may invest in companies in, or governments of, developing countries. In connection with its investments in corporate debt securities, or restructuring of investments owned by the Fund, the Fund may receive warrants or other non-income producing equity securities. The Fund may retain such securities, including equity shares received upon conversion of convertible securities, until Credit Suisse determines it is appropriate in light of current market conditions to dispose of such securities.
Portfolio Securities
Lower Grade Securities. Lower grade securities are securities rated below investment grade quality (lower than Baa by Moodys or lower than BBB by S&P or comparably rated by another rating agency). Such securities are considered to have speculative elements, with higher vulnerability to default than corporate securities with higher ratings. See Appendix A Description of Ratings in the SAI for additional information concerning rating categories of Moodys and S&P. Subsequent to its purchase by the Fund, an issue of securities may cease to be rated or its rating may be reduced below the minimum required for purchase by the Fund. Neither event will require sale of such securities by the Fund, although Credit Suisse will consider such event in its determination of whether the Fund should continue to hold the securities.
Lower grade securities, though high yielding, are characterized by high risk. See Special Considerations and Risk Factors Lower Grade Securities Risk.
Bond prices generally are inversely related to interest rate changes; however, bond price volatility also is inversely related to coupon. Accordingly, lower grade securities may be relatively less sensitive to interest rate changes than higher quality securities of comparable maturity, because of their higher coupon. This higher coupon is what the investor receives in return for bearing greater credit risk. The higher credit risk associated with lower grade securities potentially will have a greater effect on the value of such securities than may be the case with higher quality issues of comparable maturity, and will be a substantial factor in the Funds relative Share price volatility.
The ratings of Moodys, S&P and the other rating agencies represent their opinions as to the quality of the obligations which they undertake to rate. Ratings are relative and subjective and, although ratings may be useful in evaluating the safety of interest and principal payments, they do not evaluate the market value risk of such obligations. Although these ratings may be an initial criterion for selection of portfolio investments, Credit Suisse also will evaluate these securities and the ability of the issuers of such securities to pay interest and principal. To the extent that the Fund invests in lower grade securities that have not been rated by a rating agency, the Funds ability to achieve its investment objectives will be more dependent on Credit Suisses credit analysis than would be the case when the Fund invests in rated securities.
The Fund may also invest in zero coupon, pay-in-kind or deferred payment lower grade securities. Zero coupon securities are securities that are sold at a discount to par value and on which interest payments are not made during the life of the security. Upon maturity, the holder is entitled to receive the par value of the security. While interest payments are not made on such securities, holders of such securities are deemed annually to have received phantom income. Because the Fund will distribute this phantom income to shareholders, to the extent that shareholders elect to receive dividends in cash rather than reinvesting such dividends in additional Shares, the Fund will have fewer assets with which to purchase income-producing securities. The Fund accrues income with respect to these securities prior to the receipt of cash payments. Pay-in-kind securities are securities that have interest payable by delivery of additional securities. Upon maturity, the holder is entitled to receive the aggregate par value of the securities. Deferred payment securities are securities that remain zero coupon securities until a predetermined date, at which time the stated coupon rate becomes effective and interest becomes payable at regular intervals. Zero coupon, pay-in-kind and deferred payment securities are subject to greater fluctuation in value and may have less liquidity in the event of adverse market conditions than comparably rated securities paying cash interest at regular interest payment periods.
Convertible Securities. Convertible securities may be converted at either a stated price or stated rate into underlying shares of common stock. Convertible securities have characteristics similar to both fixed-income and equity securities. Convertible securities generally are subordinated to other similar but non-convertible securities of the same issuer, although convertible bonds, as corporate debt obligations, enjoy seniority in right of payment to all equity securities, and convertible preferred stock is senior to shares of common stock of the same issuer. Because of the subordination feature, however, convertible securities typically have lower ratings than similar non-convertible securities.
Although to a lesser extent than with fixed-income securities, the market value of convertible securities tends to decline as interest rates increase and, conversely, tends to increase as interest rates decline. In addition, because of the conversion feature, the market value of convertible securities tends to vary with fluctuations in the market value of the underlying common stock. As the market price of the underlying common stock declines, convertible securities tend to trade increasingly on a yield basis, and so may not experience market value declines to the same extent as the underlying common stock. When the market price of the underlying common stock increases, the prices of the convertible securities tend to rise as a reflection of the value of the underlying common stock. While no securities investments are without risk, investments in convertible securities generally entail less risk than investments in common stock of the same issuer.
Convertible securities provide for a stable stream of income with generally higher yields than common stock and offer the potential for capital appreciation through the conversion feature, which enables the holder to benefit from increases in the market price of the underlying common stock. In return, however, convertible securities generally offer lower interest or dividend yields than non-convertible securities of similar quality.
Preferred Stock. Preferred stock represents a share of ownership in a company. Generally, preferred stock has a specified dividend and ranks after bonds but before common stock on its claim on a companys income for
dividend payments and on a companys assets should the companys assets be liquidated. While most preferred stocks pay a dividend, the Fund may purchase preferred stock where the issuer has failed to pay, or is in danger of failing to pay, the dividends on such preferred stock, or may purchase preferred stock that pays a dividend in kind.
Participation Interests. The Fund may invest in corporate obligations denominated in U.S. and foreign currencies that are originated, negotiated and structured by a syndicate of lenders (Co-Lenders) consisting of commercial banks, thrift institutions, insurance companies, financial companies or other financial institutions one or more of which administer the security on behalf of the syndicate (the Agent Bank). Co-Lenders may sell such securities to third parties called Participants. The Fund may invest in such securities either by participating as a Co-Lender at origination or by acquiring an interest in the security from a Co-Lender or a Participant (collectively, participation interests). Co-Lenders and Participants interposed between the Fund and the corporate borrower (the Borrower), together with Agent Banks, are referred to herein as Intermediate Participants. The Fund also may purchase a participation interest in a portion of the rights of an Intermediate Participant, which would not establish any direct relationship between the Fund and the Borrower. In such cases, the Fund would be required to rely on the Intermediate Participant that sold the participation interest not only for the enforcement of the Funds rights against the Borrower but also for the receipt and processing of payments due to the Fund under the security. Because it may be necessary to assert through an Intermediate Participant such rights as may exist against the Borrower, in the event the Borrower fails to pay principal and interest when due, 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 the Intermediate Participant (rather than of the Borrower), so that the Fund may also be subject to the risk that the Intermediate Participant may become insolvent. Similar risks may arise with respect to the Agent Bank if, for example, assets held by the Agent Bank for the benefit of the Fund were determined by the appropriate regulatory authority or court to be subject to the claims of the Agent Banks creditors. In such case, the Fund might incur certain costs and delays in realizing payment in connection with the participation interest or suffer a loss of principal and/or interest. 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 Bank or Intermediate Participant.
Credit Default Swap Agreements. The Fund may enter into credit default swap agreements either as a buyer or a seller. The Fund may buy a credit default swap to attempt to mitigate the risk of default or credit quality deterioration in one or more individual holdings or in a segment of the fixed income securities market. The Fund may sell a credit default swap in an attempt to gain exposure to an underlying issuers credit quality characteristics without investing directly in that issuer.
The buyer in a credit default swap is obligated to pay the seller an upfront payment or a periodic stream of payments over the term of the agreement, provided that no credit event on an underlying reference obligation has occurred. If a credit event occurs, the seller must pay the buyer the full notional value, or par value, of the reference obligation in exchange for the reference obligation. As a result of counterparty risk, certain credit default swap agreements may involve greater risks than if the Fund had invested in the reference obligation directly.
If the Fund is a buyer and no credit event occurs, the cost to the Fund is the premium paid with respect to the agreement. If a credit event occurs, however, the Fund may elect to receive the full notional value of the swap in exchange for an equal face amount of deliverable obligations of the reference entity that may have little or no value. On the other hand, the value of any deliverable obligations paid by the Fund to the seller, coupled with the up front or periodic payments previously received by the seller, may be less than the full notional value the seller pays to the Fund, resulting in a loss of value to the Fund.
If the Fund is a seller and no credit event occurs, the Fund would generally receive an up front payment or a fixed rate of income throughout the term of the swap, which typically is between six months and three years. If a credit event occurs, however, generally the Fund would have to pay the buyer the full notional value of the swap in exchange for an equal face amount of deliverable obligations of the reference entity that may have little or no value. When the Fund acts as a seller of a credit default swap agreement it is exposed to speculative exposure risk since, if a credit event occurs, the Fund may be required to pay the buyer the full notional value of the contract net of any amounts owed by the buyer related to its delivery of deliverable obligations of the reference entity. As a result, the Fund bears the entire risk of loss due to a decline in value of a referenced security on a credit default swap it has sold if there is a credit event with respect to the security. The Fund bears the same risk as a buyer of fixed income
securities directly. The Fund will sell a credit derivative only with respect to securities in which it would be authorized to invest.
Certain credit default swap agreements may not have liquidity beyond the counterparty to the agreement and may be considered illiquid. Other credit default swap agreements, however, may be considered liquid. Moreover, the Fund bears the risk of loss of the amount expected to be received under a credit default swap agreement in the event of the default or bankruptcy of the counterparty. The Fund will enter into swap agreements as a buyer only with counterparties that meet certain standards of creditworthiness (generally, such counterparties would have to be eligible counterparties under the terms of the Funds repurchase agreement guidelines). Credit default swap agreements are generally valued at a price at which the counterparty to such agreement would terminate the agreement. As the seller of a credit default swap the Fund would be subject to investment exposure on the notional amount of the swap. Accordingly, the Fund will segregate liquid investments in an amount equal to the aggregate market value of the of the credit default swaps of which it is the seller, marked to market on a daily basis.
When the Fund buys or sells a credit derivative, the underlying issuer(s) or obligor(s) as well as the counterparty to the transaction will be treated as an issuer for purposes of complying with the Funds issuer diversification and industry concentration policies, absent regulatory guidance to the contrary. The notional amount of the credit exposure to which the Fund is subject when it sells credit protection, plus the market value of the Funds investments in credit derivatives and/or premiums paid therefor as a buyer of credit derivatives, will not in the aggregate exceed 20% of the Funds total assets. The Fund may, but is not required to, use credit swaps or any other credit derivative. There is no assurance that credit derivatives will be available at any time or, if used, that the derivatives will be used successfully.
Variable and Floating Rate Securities. Variable and floating rate securities provide for a periodic adjustment in the interest rate paid on the obligations. The terms of such obligations must provide that interest rates are adjusted periodically based upon an interest rate adjustment index as provided in the respective obligations. The adjustment intervals may be regular, and range from daily up to annually, or may be event based, such as based on a change in the prime rate.
The Fund may invest in floating rate debt instruments (floaters). The interest rate on a floater is a variable rate which is tied to another interest rate, such as a money-market index or Treasury Bill rate. The interest rate on a floater resets periodically, typically every six months. Because of the interest rate reset feature, floaters provide the Fund with a certain degree of protection against rises in interest rates, although the Fund will participate in any declines in interest rates as well. The Fund also may invest in inverse floating rate debt instruments (inverse floaters). The interest rate on an inverse floater resets in the opposite direction from the market rate of interest to which the inverse floater is indexed or inversely to a multiple of the applicable index. An inverse floating rate security may exhibit greater price volatility than a fixed rate obligation of similar credit quality.
Senior Loans. Senior Loans are loans and loan participations (collectively, Loans) that are senior secured floating rate Loans. Senior Loans are made to corporations and other non-governmental entities and issuers. Senior Loans typically hold the most senior position in the capital structure of the issuing entity, are typically secured with specific collateral and typically have a claim on the assets and/or stock of the borrower that is senior to that held by subordinated debt holders and stockholders of the borrower. The proceeds of Senior Loans primarily are used to finance leveraged buyouts, recapitalizations, mergers, acquisitions, stock repurchases, dividends, and, to a lesser extent, to finance internal growth and for other corporate purposes. Senior Loans typically have rates of interest that are determined daily, monthly, quarterly or semi-annually by reference to a base lending rate, plus a premium or credit spread. Base lending rates in common usage today are primarily the London-Interbank Offered Rate (LIBOR), and secondarily the prime rate offered by one or more major U.S. banks (the Prime Rate) and the certificate of deposit (CD) rate or other base lending rates used by commercial lenders.
Second Lien And Other Secured Loans. Second Lien Loans are second lien secured floating rate Loans made by public and private corporations and other non-governmental entities and issuers for a variety of purposes. Second Lien Loans are second in right of payment to one or more Senior Loans of the related borrower. Second Lien Loans typically are secured by a second priority security interest or lien to or on specified collateral securing the borrowers obligation under the Loan and typically have similar protections and rights as Senior Loans. Second Lien Loans are not (and by their terms cannot become) subordinated in right of payment to any obligation of the related borrower other than Senior Loans of such borrower. Second Lien Loans, like Senior Loans, typically have adjustable floating rate interest payments. Because Second Lien Loans are second to Senior Loans, they present a greater degree of investment risk but often pay interest at higher rates reflecting this additional risk.
The Fund may also invest in secured Loans other than Senior Loans and Second Lien Loans. Such secured Loans are made by public and private corporations and other non-governmental entities and issuers for a variety of purposes, and may rank lower in right of payment to one or more Senior Loans and Second Lien Loans of the borrower. Such secured Loans typically are secured by a lower priority security interest or lien to or on specified collateral securing the borrowers obligation under the Loan, and typically have more subordinated protections and rights than Senior Loans and Second Lien Loans. Secured Loans may become subordinated in right of payment to more senior obligations of the borrower issued in the future. Such secured Loans may have fixed or adjustable floating rate interest payments. Because other secured Loans rank in payment order behind Senior Loans and Second Lien Loans, they present a greater degree of investment risk but often pay interest at higher rates reflecting this additional risk.
Second Lien Loans and other secured Loans generally are of below investment grade quality. Other than their subordinated status, Second Lien Loans and other secured Loans have many characteristics similar to Senior Loans discussed above. As in the case of Senior Loans, the Fund may purchase interests in Second Lien Loans and other secured Loans through assignments or participations.
Money Market Instruments. The Fund may invest in the following types of money market instruments:
Repurchase Agreements. In a repurchase agreement, the Fund buys, and the seller agrees to repurchase, a security at a mutually agreed upon time and price (usually within seven days). The repurchase agreement thereby determines the yield during the purchasers holding period, while the sellers obligation to repurchase is secured by the value of the underlying security. Repurchase agreements could involve risks in the event of a default or insolvency of the other party to the agreement, including possible delays or restrictions upon the Funds ability to dispose of the underlying securities. The Fund may enter into repurchase agreements with certain banks or non-bank dealers.
Bank Obligations. The Fund may purchase certificates of deposit, time deposits, bankers acceptances and other short-term obligations issued by domestic banks, foreign subsidiaries or foreign branches of domestic banks, domestic and foreign branches of foreign banks, domestic savings and loan associations and other banking institutions. With respect to such securities issued by foreign subsidiaries or foreign branches of domestic banks, and domestic and foreign branches of foreign banks, the Fund may be subject to additional investment risks.
Certificates of deposit are negotiable certificates evidencing the obligation of a bank to repay funds deposited with it for a specified period of time.
Time deposits are non-negotiable deposits maintained in a banking institution for a specified period of time (in no event longer than seven days) at a stated interest rate.
Bankers acceptances are credit instruments evidencing the obligation of a bank to pay a draft drawn on it by a customer. These instruments reflect the obligation both of the bank and the drawer to pay the face amount of the instrument upon maturity. The other short-term obligations may include uninsured, direct obligations bearing fixed, floating or variable interest rates.
Commercial Paper. Commercial paper consists of short-term, unsecured promissory notes issued to finance short-term credit needs. The commercial paper purchased by the Fund will consist only of direct obligations which, at the time of their purchase, are (a) rated not lower than Prime-1 by Moodys or A-1 by S&P, (b) issued by companies having an outstanding unsecured debt issue currently rated at least A3 by Moodys or A- by S&P, or (c) if unrated, determined by Credit Suisse to be of comparable quality to those rated obligations which may be purchased by the Fund.
Other Short-Term Corporate Obligations. These instruments include variable amount master demand notes, which are obligations that permit the Fund to invest fluctuating amounts at varying rates of interest pursuant to direct arrangements between the Fund, as lender, and the borrower. These notes permit daily changes in the amounts borrowed. Because these obligations are direct lending arrangements between the lender and borrower, it is not contemplated that such instruments generally will be traded, and there generally is no established secondary market for these obligations, although they are redeemable at face value, plus accrued interest, at any time. Accordingly, where these obligations are not secured by letters of credit or other credit support arrangements, the Funds right to redeem is dependent on the ability of the borrower to pay principal and interest on demand. Such obligations frequently are not rated by credit rating agencies, and the Fund may invest in them only if at the time of
an investment Credit Suisse determines that such investment is of comparable quality to those rated obligations which may be purchased by the Fund.
USE OF LEVERAGE
As provided in the 1940 Act and subject to certain exceptions, the Fund may issue debt with the condition that immediately after issuance the value of its total assets, less certain ordinary course liabilities, exceeds 300% of the amount of the debt outstanding.
Thus, as noted above, the Fund may use leverage in the form of borrowings in an amount up to 33 1/3% of the Funds total assets (including the proceeds of such leverage). The total leverage of the Fund is currently expected to range between 25% and 30% of the Funds total assets. The Fund seeks a leverage ratio, based on a variety of factors including market conditions and the Investment Advisers market outlook, for which the rate of return, net of applicable Fund expenses, on the Funds investment portfolio investments purchased with leverage exceeds the costs associated with such leverage.
At October 31, 2009, the Fund had loans outstanding under the Funds credit agreement with State Street Bank and Trust Company of $42,000,000. During the year ended October 31, 2009, the Fund had borrowings under the credit agreement and a predecessor line of credit agreement as follows:
Average Daily Loan Balance |
|
Weighted Average Interest Rate % |
|
Maximum Daily Loan Outstanding |
|
||
|
|
|
|
|
|
||
$ |
34,610,521 |
|
1.828 |
% |
$ |
58,610,000 |
|
The Funds borrowings under its credit facility at October 31, 2009 equal approximately 21% of the Funds total assets (including the proceeds of such leverage). The Funds asset coverage ratio as of October 31, 2009 was 470%. See Special Considerations and Risk FactorsLeverage Risk for a brief description of the Funds credit agreement with State Street Bank and Trust Company.
Assuming the utilization of leverage in the amount of [ ]% of the Funds total assets and an annual interest rate of [ ]% payable on such leverage based on market rates as of the date of this prospectus, the additional income that the Fund must earn (net of expenses) in order to cover such leverage is [ ]%. Actual costs of leverage may be higher or lower than that assumed in the previous example.
Following the completion of the Offer, the Fund intends to increase the amount of leverage outstanding. The Fund may engage in additional borrowings in order to maintain the Funds desired leverage ratio. Leverage creates a greater risk of loss, as well as a potential for more gain, for the common shares than if leverage were not used. Interest on borrowings may be at a fixed or floating rate and generally will be based on short-term rates. The costs associated with the Funds use of leverage, including the issuance of such leverage and the payment of dividends or interest on such leverage, will be borne entirely by the holders of common shares. As long as the rate of return, net of applicable Fund expenses, on the Funds investment portfolio investments purchased with leverage exceeds the costs associated with such leverage, the Fund will generate more return or income than will be needed to pay such costs. In this event, the excess will be available to pay higher dividends to holders of common shares. Conversely, if the Funds return on such assets is less than the cost of leverage and other Fund expenses, the return to the holders of the common shares will diminish. To the extent that the Fund uses leverage, the net asset value and market price of the common shares and the yield to holders of common shares will be more volatile. The Funds leveraging strategy may not be successful. See Special Considerations and Risk FactorsLeverage Risk.
The following table is designed to illustrate the effect on the return to a holder of the Funds common shares of leverage in the amount of approximately [ ]% of the Funds total assets, assuming hypothetical annual returns of the Funds investment portfolio of minus 10% to plus 10%. As the table shows, leverage generally increases the return to holders of common shares when portfolio return is positive and greater than the cost of leverage and decreases the return when the portfolio return is negative or less than the cost of leverage. The figures appearing in the table are hypothetical and actual returns may be greater or less than those appearing in the table.
Assumed Portfolio Return |
|
(10.00 |
)% |
(5.00 |
)% |
0.00 |
% |
5.00 |
% |
10.00 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Corresponding Common Share Total Return |
|
|
|
|
|
|
|
|
|
|
|
SPECIAL CONSIDERATIONS AND RISK FACTORS
An investment in the Shares of the Fund involves a high degree of risk. You should carefully consider the following risk factors in addition to the other information set forth in this Prospectus. For additional information about the risks that may be associated with an investment in the Fund, see Investment Policies and Techniques in the SAI.
Risks of the Offer
Potential Dilution
If you do not exercise your Rights, you will, upon the completion of the Offer, own a smaller proportional interest in the Fund than you do now and you may incur dilution of ownership and voting, as well as dilution of your share of any distributions made by the Fund, as a result of the Offer. In addition, if you do not submit a subscription request pursuant to the Over-Subscription Privilege and the Fund issues Additional Shares, you may experience further dilution of ownership and voting, as well as further dilution of your share of any distributions made by the Fund. Also, because the Subscription Price per Share may be less than the then current NAV per Share, the completion of the Offer may result in an immediate dilution of the net asset value per Share for all existing shareholders. Such dilution could be substantial. If such dilution occurs, shareholders will experience a decrease in the net asset value per Share held by them, irrespective of whether they exercise all or any portion of their Rights. The Fund cannot state precisely the extent of this dilution because the Fund does not know what the NAV will be when the Offer expires, how many Rights will be exercised or the exact expenses of the Offer.
Potential Yield Reduction
The Offer is expected to present the opportunity to invest in high yielding securities. This expectation is based on the current market environment for high yield debt securities, which could change in response to interest rate levels, general economic conditions, specific industry conditions and other factors. If the market environment for high yield debt securities changes in a manner that adversely affects the yield of such securities, the Offer could cause the Fund to invest in securities that are lower yielding than those in which it is currently invested. In addition, even if the market for high yield debt securities continues to present attractive investment opportunities, there is no assurance that the Fund will be able to invest the proceeds of the Offer in high yielding securities or that other potential benefits of the Offer will be realized. The Offer could reduce the Funds current dividend yield if the Fund is unable to invest the proceeds of the Offer in securities that provide a yield at least equal to the current dividend yield.
Increase in Share Price Volatility; Decrease in Share Price
The Offer may result in an increase in trading of the Shares, which may increase volatility in the market price of the Shares. The Offer may result in an increase in the number of shareholders wishing to sell their Shares, which would exert downward price pressure on the price of Shares.
Under-Subscription
It is possible that the Offer will not be fully subscribed. Under-subscription of the Offer could have an impact on the net proceeds of the Offer and whether the Fund achieves the benefits described under The Offer Purpose of the Offer.
Risks of Investing in the Fund
Investment and Market Risk
An investment in Shares is subject to investment risk, including the possible loss of the entire principal amount that you invest. Your investment in Shares represents an indirect investment in the securities owned by the Fund. The value of these securities, like other market investments, may move up or down, sometimes rapidly and unpredictably, and these fluctuations are likely to have a greater impact on the value of the Shares during periods in which the Fund utilizes a leveraged capital structure. If the current global economic downturn continues into a prolonged recession or deteriorates further, the ability of issuers of the corporate fixed-income securities and other securities in which the Fund invests to service their obligations could be materially and adversely affected. The
value of the securities in which the Fund invests will affect the value of the Shares. Your 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.
Recent Market Events. Beginning in 2007, the fixed income markets experienced a period of extreme volatility, which has negatively impacted market liquidity conditions. Fixed income instruments have experienced liquidity issues, increased price volatility, credit downgrades and increased likelihood of default, although markets stabilized and, in some cases, rallied in 2009. Securities that are less liquid are more difficult to value and may be hard to dispose of. Domestic and international equity markets have also been experiencing heightened volatility and turmoil, with issuers that have exposure to the real estate, mortgage and credit markets particularly affected. During times of market turmoil, investors tend to look to the safety of securities issued or backed by the U.S. Treasury, causing the prices of these securities to rise and the yield to decline. Although markets have improved since 2008, the events of 2007 and 2008 and any continuing market upheavals may have an adverse effect on the Fund.
Lower Grade Securities Risk
Lower grade securities are regarded as being predominantly speculative as to the issuers ability to make payments of principal and interest. Investment in such securities involves substantial risk. Lower grade securities are commonly referred to as junk bonds. Issuers of lower grade securities may be highly leveraged and may not have available to them more traditional methods of financing. Therefore, the risks associated with acquiring the securities of such issuers generally are greater than is the case with higher-rated securities. For example, during an economic downturn or a sustained period of rising interest rates, issuers of lower grade securities may be more likely to experience financial stress, especially if such issuers are highly leveraged. During periods of economic downturn, such issuers may not have sufficient revenues to meet their interest payment obligations. The issuers ability to service its debt obligations also may be adversely affected by specific issuer developments, the issuers inability to meet specific projected business forecasts or the unavailability of additional financing. Therefore, there can be no assurance that in the future there will not exist a higher default rate relative to the rates currently existing in the market for lower grade securities. The risk of loss due to default by the issuer is significantly greater for the holders of lower grade securities because such securities may be unsecured and may be subordinate to other creditors of the issuer. Other than with respect to Distressed Securities, discussed below, the lower grade securities in which the Fund may invest do not include instruments which, at the time of investment, are in default or the issuers of which are in bankruptcy. However, there can be no assurance that such events will not occur after the Fund purchases a particular security, in which case the Fund may experience losses and incur costs.
Lower grade securities frequently have call or redemption features that would permit an issuer to repurchase the security from the Fund. If a call were exercised by the issuer during a period of declining interest rates, the Fund is likely to have to replace such called security with a lower yielding security, thus decreasing the net investment income to the Fund and dividends to shareholders.
Lower grade securities have been in the past, and may again in the future be, more volatile than higher-rated fixed-income securities, so that adverse economic events may have a greater impact on the prices of lower grade securities than on higher-rated fixed income securities. Factors adversely affecting the market value of such securities are likely to affect adversely the Funds net asset value. Recently, demand for lower grade securities has increased significantly and the difference between the yields paid by lower grade securities and investment grade bonds (i.e., the spread) has narrowed. To the extent this differential increases, the value of lower grade securities in the Funds portfolio could be adversely affected.
Like higher-rated fixed-income securities, lower grade securities generally are purchased and sold through dealers who make a market in such securities for their own accounts. However, there are fewer dealers in the lower grade securities market, which market may be less liquid than the market for higher-rated fixed-income securities, even under normal economic conditions. Also, there may be significant disparities in the prices quoted for lower grade securities by various dealers. As a result, during periods of high demand in the lower grade securities market, it may be difficult to acquire lower grade securities appropriate for investment by the Fund. Adverse economic conditions and investor perceptions thereof (whether or not based on economic reality) may impair liquidity in the lower grade securities market and may cause the prices the Fund receives for its lower grade securities to be reduced. In addition, the Fund may experience difficulty in liquidating a portion of its portfolio when necessary to meet the Funds liquidity needs or in response to a specific economic event such as deterioration in the creditworthiness of the issuers. Under such conditions, judgment may play a greater role in valuing certain of the Funds portfolio instruments than in the case of instruments trading in a more liquid market. In addition, the Fund
may incur additional expense to the extent that it is required to seek recovery upon a default on a portfolio holding or to participate in the restructuring of the obligation.
Distressed Securities. Investment in Distressed Securities is speculative and involves significant risk. Distressed Securities frequently do not produce income while they are outstanding and may require the Fund to bear certain extraordinary expenses in order to protect and recover its investment. Therefore, to the extent the Fund pursues its secondary objective of capital appreciation through investment in Distressed Securities, the Funds ability to achieve current income for shareholders may be diminished. The Fund also will be subject to significant uncertainty as to when and in what manner and for what value the obligations evidenced by the Distressed Securities will eventually be satisfied (e.g., through a liquidation of the obligors assets, an exchange offer or plan of reorganization involving the Distressed Securities or a payment of some amount in satisfaction of the obligation). In addition, even if an exchange offer is made or plan of reorganization is adopted with respect to Distressed Securities held by the Fund, there can be no assurance that the securities or other assets received by the Fund in connection with such 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. Moreover, any securities received by the Fund upon completion of an exchange offer or plan of reorganization may be restricted as to resale. As a result of the Funds participation in negotiations with respect to any exchange offer or plan of reorganization with respect to an issuer of Distressed Securities, the Fund may be restricted from disposing of such securities.
Credit Rating Agency Risk. Credit ratings are determined by credit rating agencies such as S&P and Moodys. Any shortcomings or inefficiencies in credit rating agencies processes for determining credit ratings may adversely affect the credit ratings of securities held by the Fund and, as a result, may adversely affect those securities perceived or actual credit risk.
Credit Risk
Credit risk is the risk that one or more of the Funds investments in debt securities or other instruments will decline in price, or fail to pay interest, liquidation value or principal when due, because the issuer of the obligation or the issuer of a reference security experiences an actual or perceived decline in its financial status. In addition to the credit risks associated with high yield securities, the Fund could also lose money if the issuer of other debt obligations, or the counterparty to a derivatives contract, repurchase agreement, loan of portfolio securities or other obligation, is, or is perceived to be, unable or unwilling to make timely principal and/or interest payments, or to otherwise honor its obligations. The downgrade of a security may further decrease its value.
Interest Rate Risk
Generally, when market interest rates rise, the prices of debt obligations fall, and vice versa. Interest rate risk is the risk that debt obligations and other instruments in the Funds portfolio will decline in value because of increases in market interest rates. This risk may be particularly acute because market interest rates are currently at historically low levels. The prices of long-term debt obligations generally fluctuate more than prices of short-term debt obligations as interest rates change. During periods of rising interest rates, the average life of certain types of securities may be extended due to slower than expected payments. This may lock in a below market yield, increase the securitys duration and reduce the securitys value. The Funds use of leverage will tend to increase interest rate risk.
Investments in floating rate debt instruments, although generally less sensitive to interest rate changes than longer duration fixed rate instruments, may nevertheless decline in value in response to rising interest rates if, for example, the rates at which they pay interest do not rise as much, or as quickly, as market interest rates in general. Conversely, floating rate instruments will not generally increase in value if interest rates decline. Inverse floating rate debt securities may also exhibit greater price volatility than a fixed rate debt obligation with similar credit quality. To the extent the Fund holds floating rate instruments, a decrease (or, in the case of inverse floating rate securities, an increase) in market interest rates will adversely affect the income received from such securities and the net asset value of the Funds common shares.
Leverage Risk
The Fund currently leverages through borrowings from a credit facility. The use of leverage, which can be described as exposure to changes in price at a ratio greater than the amount of equity invested, through borrowings or other forms of market exposure, magnifies both the favorable and unfavorable effects of price movements in the
investments made by the Fund. Insofar as the Fund continues to employ leverage in its investment operations, the Fund will be subject to substantial risks of loss.
Therefore, if the market value of the Funds investment portfolio declines, any leverage will result in a greater decrease in net asset value to common shareholders than if the Fund were not leveraged. Such greater net asset value decrease will also tend to cause a greater decline in the market price for the common shares. Further, if at any time while the Fund has leverage outstanding it does not meet applicable asset coverage requirements (as discussed below), it may be required to suspend distributions to common shareholders until the requisite asset coverage is restored. Any such suspension might impair the ability of the Fund to meet the RIC distribution requirements and to avoid Fund-level U.S. federal income and/or excise taxes.
As noted above, the Fund currently leverages through borrowings from a credit facility. The Fund has entered into a Credit Agreement with State Street to borrow up to the least of: (a) $75,000,000; (b) an amount that is no greater than 30% of the Funds total assets minus the sum of liabilities (other than aggregate indebtedness constituting leverage); and (c) the Borrowing Base as defined in the Credit Agreement. Such borrowings constitute financial leverage. The Credit Agreement contains customary covenant, negative covenant and default provisions, including covenants that limit the Funds ability to incur additional debt or consolidate or merge into or with any person, other than as permitted, or sell, lease or otherwise transfer, directly or indirectly, all or substantially all of its assets. In addition, the Fund agreed not to purchase assets not contemplated by the investment policies and restrictions in effect when the Credit Agreement became effective. Furthermore, the Fund may not incur additional debt from any other party, except for in limited circumstances (e.g., in the ordinary course of business). Such restrictions shall apply only so long as the Credit Agreement remains in effect.
Indebtedness issued under the Credit Agreement is not convertible into any other securities of the Fund. Outstanding amounts would be payable at maturity or such earlier times as required by the Credit Agreement. The Fund may be required to prepay outstanding amounts under the Credit Agreement in the event of the occurrence of certain events of default. The Fund is expected to indemnify the lenders under the Credit Agreement against certain liabilities they may incur in connection with the Credit Agreement. The Fund is required to pay commitment fees under the terms of the Credit Agreement. With the use of borrowings, there is a risk that the interest rates paid by the Fund on the amount it borrows will be higher than the return on the Funds investments. The credit facility with State Street may in the future be replaced or refinanced by one or more credit facilities having substantially different terms, or the Fund may be unable to renew or replace its credit facility upon the termination of the current facility, possibly requiring it to sell portfolio securities at times or prices that are disadvantageous. Any of these situations could adversely impact income or total return to shareholders.
The Fund must comply with investment quality, diversification and other guidelines established by the credit facility. The Fund does not anticipate that such guidelines will have a material adverse effect on the Funds common shareholders or its ability to achieve its investment objectives.
Successful use of a leveraging strategy may depend on the Investment Advisers ability to predict correctly interest rates and market movements, and there is no assurance that a leveraging strategy will be successful during any period in which it is employed.
Foreign Securities Risk
Investing in securities of foreign entities and securities denominated in foreign currencies involves certain risks not involved in domestic investments, including, but not limited to, fluctuations in foreign exchange rates, future foreign political and economic developments, different legal and accounting systems and the possible imposition of exchange controls or other foreign governmental laws or restrictions. Securities prices in different countries are subject to different economic, financial, political and social factors.
Foreign securities markets generally are not as developed or efficient as those in the United States. Securities of some foreign issuers 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.
Because evidences of ownership of such securities usually are held outside the United States, the Fund will be subject to additional risks 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 securities to investors located outside the country of the issuer, whether from currency blockage or otherwise.
Developing countries have economic structures that are generally less diverse and mature, and political systems that are less stable, than those of developed countries. The markets of developing countries may be more volatile than the markets of more mature economies; however, such markets may provide higher rates of return to investors. Many developing countries providing investment opportunities for the Fund have experienced substantial, and in some periods extremely high, rates of inflation for many years. Inflation and rapid fluctuations in inflation rates have had and may continue to have adverse effects on the economies and securities markets of certain of these countries.
Since the Fund may invest in securities denominated or quoted in currencies other than the U.S. dollar, changes in foreign currency exchange rates may affect the value of securities in the Fund and the unrealized appreciation or depreciation of investments. Currencies of certain countries may be volatile and therefore may affect the value of securities denominated in such currencies. The Fund may, but is not obligated to, engage in certain transactions to hedge the currency-related risks of investing in non-U.S. dollar denominated securities. In addition, with respect to certain foreign countries, there is the possibility of expropriation of assets, confiscatory taxation, difficulty in obtaining or enforcing a court judgment, economic, political or social instability or diplomatic developments that could affect investments in those countries. Moreover, individual foreign economies may differ favorably or unfavorably from the U.S. economy in such respects as growth of gross domestic product, capital reinvestment, resources, self-sufficiency and balance of payments position. Certain foreign investments also may be subject to foreign withholding taxes. These risks often are heightened for investments in smaller, emerging capital markets.
As a result of these potential risks, Credit Suisse may determine that, notwithstanding otherwise favorable investment criteria, it may not be practicable or appropriate to invest in a particular country. The Fund may invest in countries in which foreign investors, including Credit Suisse, have had no or limited prior experience.
Credit Default Swaps Risk
The Fund may enter into credit default swap agreements, which may have as reference obligations one or more debt securities or an index of such securities. In a credit default swap, one party (the protection buyer) is obligated to pay the other party (the protection seller) a stream of payments over the term of the contract, provided that no credit event, such as a default or, in some instances, a downgrade in credit rating, occurs on the reference obligation. If a credit event occurs, the protection seller must generally pay the protection buyer the par value (the agreed-upon notional value) of the referenced debt obligation in exchange for an equal face amount of deliverable reference obligations.
The Fund may be either the protection buyer or protection seller in a credit default swap. If the Fund is a protection buyer, the Fund would pay the counterparty a periodic stream of payments over the term of the contract and would not recover any of those payments if no credit event were to occur. However, if a credit event occurs, the Fund as a protection buyer has the right to deliver the referenced debt obligations or a specified amount of cash, depending upon the terms of the swap, and receive the par value of such debt obligations from the counterparty protection seller. As a protection seller, the Fund would receive fixed payments throughout the term of the contract if no credit event occurs. If a credit event occurs, however, the value of the obligation received by the Fund (e.g., bonds which defaulted), plus the periodic payments previously received, may be less than the par value of the obligation, or cash received, resulting in a loss to the protection seller. Furthermore, the Fund as a protection seller would effectively add leverage to its portfolio because it will have investment exposure to the notional amount of the swap.
Credit default swap agreements are subject to greater risk than a direct investment in the reference obligation. Like all swap agreements, credit default swaps are subject to liquidity, credit and counterparty risks. In addition, collateral posting requirements are individually negotiated and there is no regulatory requirement that a counterparty post collateral to secure its obligations under a credit default swap. Furthermore, there is no requirement that a party be informed in advance when a credit default swap agreement is sold. Accordingly, the Fund may have difficulty identifying the party responsible for payment of its claims. The notional value of credit default swaps with respect to a particular investment is often larger than the total par value of such investment outstanding and, in event of a default, there may be difficulties in making the required deliveries of the reference investments, possibly delaying payments.
The market for credit default swaps has become more volatile recently as the creditworthiness of certain counterparties has been questioned and/or downgraded. If a counterpartys credit becomes significantly impaired, multiple requests for collateral posting in a short period of time could increase the risk that the Fund may not receive adequate collateral. Credit default swaps are not currently traded on any securities exchange. The Fund generally may exit its obligations under a credit default swap only by terminating the contract and paying applicable breakage fees, or by entering into an offsetting credit default swap position, which may cause the Fund to incur more losses.
Counterparty Risk
The Fund will be subject to credit risk with respect to the counterparties to the derivative contracts purchased or sold by the Fund. Recently, several broker-dealers and other financial institutions have experienced extreme financial difficulty, sometimes resulting in bankruptcy of the institution. Although the Investment Adviser monitors the creditworthiness of the Funds counterparties, there can be no assurance that the Funds counterparties will not experience similar difficulties, possibly resulting in losses to the Fund. If a counterparty becomes bankrupt, or otherwise fails to perform its obligations under a derivative contract due to financial difficulties, the Fund may experience significant delays in obtaining any recovery under the derivative contract in a bankruptcy or other reorganization proceeding. The Fund may obtain only a limited recovery or may obtain no recovery in such circumstances.
Illiquid Securities Risk
The Fund may invest in securities for which no readily available market exists or are otherwise considered illiquid. The Fund may not be able readily to dispose of such securities at prices that approximate those at which the Fund could sell such securities if they were more widely traded and, as a result of such illiquidity, the Fund may have to sell other investments or engage in borrowing transactions if necessary to raise cash to meet its obligations.
Prepayment Risk
If interest rates fall, the principal on bonds and loans held by the Fund may be paid earlier than expected. If this happens, the proceeds from a prepaid security may be reinvested by the Fund in securities bearing lower interest rates, resulting in a possible decline in the Funds income and distributions to shareholders.
Preferred Stock Risk
Preferred stocks are unique securities that combine some of the characteristics of both common stocks and bonds. Preferred stocks generally pay a fixed rate of return and are sold on the basis of current yield, like bonds. However, because they are equity securities, preferred stocks provide equity ownership of a company, and the income is paid in the form of dividends. Preferred stocks typically have a yield advantage over common stocks as well as comparably-rated fixed-income investments. Preferred stocks are typically subordinated to bonds and other debt instruments in a companys capital structure, in terms of priority to corporate income, and therefore will be subject to greater credit risk than those debt instruments. Unlike interest payments on debt securities, preferred stock dividends are payable only if declared by the issuers board of directors. Preferred stock also may be subject to optional or mandatory redemption provisions.
Senior Loans Risk
The risks associated with Senior Loans of below investment grade quality are similar to the risks of bonds rated below investment grade, although Senior Loans are typically senior and secured in contrast to bonds rated below investment grade, which are generally subordinated and unsecured. Senior Loans higher standing has historically resulted in generally higher recoveries in the event of a corporate reorganization. In addition, because their interest payments are adjusted for changes in short-term interest rates, investments in Senior Loans generally have less interest rate risk than below-investment-grade rated bonds. The Funds investments in Senior Loans are expected to typically be below investment grade, which are considered speculative because of the credit risk of their issuers. Such companies are more likely to default on their payments of interest and principal owed to the Fund, and such defaults could reduce the Funds net asset value and income distributions. An economic downturn generally leads to a higher non-payment rate, and a debt obligation may lose significant value before a default occurs. Moreover, any specific collateral used to secure a Loan may decline in value or become illiquid, which would adversely affect the Loans value.
Like other debt instruments, Senior Loans are subject to the risk of non-payment of scheduled interest or principal. Such non-payment would result in a reduction of income to the Fund, a reduction in the value of the
investment and a potential decrease in the net asset value per share of the Fund. There can be no assurance that the liquidation of any collateral securing a Loan would satisfy the borrowers obligation in the event of non-payment of scheduled interest or principal payments, or that such collateral could be readily liquidated. In the event of bankruptcy 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 Loan. The collateral securing a Senior Loan may lose all or substantially all of its value in the event of bankruptcy of a borrower. Some Senior Loans are subject to the risk that a court, pursuant to fraudulent conveyance or other similar laws, could subordinate such Senior Loans to presently existing or future indebtedness of the borrower or take other action detrimental to the holders of Senior Loans including, in certain circumstances, invalidating such Senior Loans or causing interest previously paid to be refunded to the borrower. If interest were required to be refunded, it could negatively affect the Funds performance.
The Fund may purchase and retain in its portfolio Senior Loans where the borrowers have experienced, or may be perceived to be likely to experience, credit problems, including default, involvement in or recent emergence from bankruptcy reorganization proceedings or other forms of debt restructuring. At times, in connection with the restructuring of a Senior Loan either outside of bankruptcy court or in the context of bankruptcy court proceedings, the Fund may determine or be required to accept equity securities or junior debt securities in exchange for all or a portion of a Senior Loan.
Senior Loans in which the Fund will invest may not be rated by a nationally recognized statistical ratings organization (NRSRO), may not be registered with the SEC or any state securities commission, and may not be listed on any national securities exchange. The amount of public information available with respect to Senior Loans may be less extensive than available for registered or exchange-listed securities. In evaluating the creditworthiness of borrowers, Credit Suisse will consider, and may rely in part, on analyses performed by others.
Borrowers may have outstanding debt obligations that are rated below investment grade by a NRSRO. Most of the Senior Loans held by the Fund will have been assigned ratings below investment grade by a NRSRO. In the event Senior Loans are not rated, they are likely to be the equivalent of below investment grade quality. The Fund will rely on the judgment, analysis and experience of Credit Suisse in evaluating the creditworthiness of a borrower. In this evaluation, Credit Suisse will take into consideration, among other things, the borrowers financial resources, its sensitivity to economic conditions and trends, its operating history, the quality of the borrowers management and regulatory matters.
No active trading market may exist for some Senior Loans and some Senior Loans may be subject to restrictions on resale. Secondary markets may be subject to irregular trading activity, wide bid/ask spreads and extended trade settlement periods, which may impair the ability to realize full value and thus cause a decline in the Funds net asset value. During periods of limited demand and liquidity for Senior Loans, the Funds net asset value may be adversely affected.
Although changes in prevailing interest rates can be expected to cause some fluctuations in the value of Senior Loans (due to the fact that floating rates on Senior Loans only reset periodically), the value of Senior Loans tends to be substantially less sensitive to changes in market interest rates than fixed-rate instruments. Nevertheless, a sudden and significant increase in market interest rates may cause a decline in the value of these investments and an associated decline in the Funds net asset value.
Other factors (including, but not limited to, rating downgrades, credit deterioration, a large downward movement in stock prices, a disparity in supply and demand of certain investments or market conditions that reduce liquidity) can reduce the value of Senior Loans and other debt obligations, impairing the Funds net asset value.
The Fund may purchase Senior Loans by assignment from a participant in the original syndicate of lenders or from subsequent assignees of such interests, or can buy a participation in a loan. The Fund may also purchase participations in the original syndicate making Senior Loans. Loan participations typically represent indirect participations in a loan to a corporate borrower, and generally are offered by banks or other financial institutions or lending syndicates. When purchasing loan participations, the Fund assumes the credit risk associated with the corporate borrower and may assume the credit risk associated with an interposed bank or other financial intermediary. The Fund will acquire participations only if the lender interpositioned between the Fund and the borrower is determined by Credit Suisse to be creditworthy.
Credit Suisse will seek to use an independent pricing service approved by the Board to value most Senior Loans held. Credit Suisse may use the fair value method to value Senior Loans if market quotations for them are not
readily available or are deemed unreliable, or if events occurring after the close of a securities market and before the Fund values its assets would materially affect net asset value.
Economic and other events (whether real or perceived) can reduce the demand for certain Senior Loans or Senior Loans generally, which may reduce market prices and cause the Funds net asset value per share to fall. The frequency and magnitude of such changes cannot be predicted.
Loans and other debt instruments are also subject to the risk of price declines due to increases in prevailing interest rates, although floating-rate debt instruments are less exposed to this risk than fixed-rate debt instruments. Interest rate changes may also increase prepayments of debt obligations and require the Fund to invest assets at lower yields. No active trading market may exist for certain Loans, which may impair the ability of the Fund to realize full value in the event of the need to liquidate such assets.
Adverse market conditions may impair the liquidity of some actively traded Loans.
Second Lien And Other Secured Loans Risk
Second Lien Loans and other secured Loans are subject to the same risks associated with investment in Senior Loans and bonds rated below investment grade. However, because Second Lien Loans are second in right of payment to one or more Senior Loans of the related borrower, and other secured Loans rank lower in right of payment to Second Lien Loans, they are subject to the additional risk that the cash flow of the borrower and any property securing the Loan may be insufficient to meet scheduled payments after giving effect to the more 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. Second Lien Loans and other secured Loans are also expected to have greater price volatility than Senior Loans and may be less liquid. There is also a possibility that originators will not be able to sell participations in Second Lien Loans and other secured Loans, which would create greater credit risk exposure.
Valuation Risk
Unlike publicly traded common stock which trades on national exchanges, there is no central place or exchange for bond trading. Bonds generally trade on an over-the-counter market which may be anywhere in the world where buyer and seller can settle on a price. Due to the lack of centralized information and trading, the valuation of bonds 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. As a result, the Fund may be subject to the risk that when a security is sold in the market, the amount received by the Fund is less than the value of such security carried on the Funds books.
Non-Diversified Status
The Fund is classified as a non-diversified management investment company under the 1940 Act, which means that the Fund may invest a greater portion of its assets in a limited number of issuers than would be the case if the Fund were classified as a diversified management investment company. Accordingly, the Fund may be subject to greater risk with respect to its portfolio securities than a management investment company that is diversified because changes in the financial condition or market assessment of a single issuer may cause greater fluctuations in the net asset value of the Shares.
Market Price, Discount and Net Asset Value of Shares
As with any stock, the price of the Funds Shares fluctuate with market conditions and other factors. Although the Shares have recently traded on the NYSE Amex at a premium to their net asset value, the Shares have in the past traded at a discount to their net asset value. There can also be no assurance that the Shares will trade at a premium in the future or that the present premium is sustainable. Since 2005, the Shares have traded at discounts of as much as [ ]%.
Shares of closed-end investment companies frequently trade at a discount from their net asset values. This characteristic is a risk separate and distinct from the risk that the Funds net asset value could decrease as a result of its investment activities and may be greater for investors expecting to sell their Shares in a relatively short period of time following completion of this Offer. The net asset value of the Shares will be reduced immediately following this Offer as a result of the payment of certain offering costs. Although the value of the Funds net assets is generally considered by market participants in determining whether to purchase or sell Shares, whether investors will realize gains or losses upon the sale of the Shares will depend entirely upon whether the market price of the
Shares at the time of sale is above or below the investors purchase price for the Shares. Because the market price of the Shares will be determined by factors such as net asset value, dividend and distribution levels and their stability (which will in turn be affected by levels of dividend and interest payments by the Funds portfolio holdings, the timing and success of the Funds investment strategies, regulations affecting the timing and character of Fund distributions, Fund expenses and other factors), supply of and demand for the Shares, trading volume of the Shares, general market, interest rate and economic conditions and other factors beyond the control of the Fund, the Fund cannot predict whether the Shares will trade at, below or above net asset value or at, below or above the Subscription Price.
Anti-Takeover Provisions
The Funds Declaration of Trust contains provisions limiting (i) the ability of other entities or persons to acquire control of the Fund, (ii) the Funds freedom to engage in certain transactions, and (iii) the ability of the Board or shareholders to amend the Declaration of Trust. These provisions of the Declaration of Trust may be regarded as anti-takeover provisions. These provisions could have the effect of depriving the shareholders of opportunities to sell their Shares at a premium over prevailing market prices by discouraging a third party from seeking to obtain control of the Fund in a tender offer or similar transaction.
MANAGEMENT OF THE FUND
Board of Trustees
The business and affairs of the Fund are managed by or under the direction of the Board of Trustees of the Fund. Background information regarding the Trustees and officers of the Fund is contained in the SAI under Trustees and Officers.
Investment Adviser
Credit Suisse serves as the Funds investment adviser with respect to all investments and makes all investment decisions for the Fund. Credit Suisse is part of the asset management business of Credit Suisse Group AG, one of the worlds leading banks. Credit Suisse Group AG provides its clients with investment banking, private banking and asset management services worldwide. The asset management business of Credit Suisse Group AG is comprised of a number of legal entities around the world that are subject to distinct regulatory requirements. Credit Suisses address is Eleven Madison Avenue, New York, New York 10010. As of June 30, 2010, Credit Suisse managed over $11 billion in the U.S. and, together with its global affiliates, managed assets of over $405 billion in 19 countries.
Advisory Agreement
Under the Funds Investment Advisory Agreement with Credit Suisse, Credit Suisse receives as compensation for its advisory services from the Fund an annual fee, payable monthly, calculated at an annual rate of: (i) 1.00% of the first $250 million of the average weekly value of the Funds total assets minus the sum of liabilities (other than aggregate indebtedness constituting leverage) (the Managed Assets); and (ii) 0.75% of the average weekly value of the Managed Assets greater than $250 million. Credit Suisse may voluntarily waive a portion of its fees from time to time and temporarily limit the expenses to be borne by the Fund. Effective January 1, 2007, Credit Suisse agreed to waive 0.15% of the fees payable under the Investment Advisory Agreement. During the period in which the Fund is utilizing leverage, the advisory fee payable to Credit Suisse will be higher than if the Fund did not utilize a leveraged capital structure because the fees are calculated as a percentage of the Managed Assets, including those purchased with leverage. The Fund is currently utilizing leverage.
Potential Conflicts of Interest. Because the Investment Adviser receives a fee based on assets, it will benefit from the increase in assets that will result from the Offer. It is not possible to state precisely the amount of additional compensation that the Investment Adviser might receive as a result of the Offer because it is not known how many Shares will be subscribed for and because the proceeds of the Offer will be invested in additional portfolio securities, which will fluctuate in value. However, assuming (i) all Rights are exercised, (ii) the Funds average weekly net asset value during [ ] is $[ ] per Share (the net asset value per Share on [ ]), (iii) the Subscription Price is $[ ] per Share ([ %] of the last reported sale price of the Funds Shares on [ ]), and (iv) assuming, for purposes of this example, the Fund increases the amount of leverage outstanding while maintaining approximately the same percentage of total assets attributable to leverage (after giving effect to offering expenses), the Investment Adviser would receive additional advisory fees of approximately $[ ] million for the calendar year [ ] and would continue to receive additional advisory fees as a result of the Offer, based on the Funds average weekly Managed Assets attributable to the Shares issued in the Offer, thereafter.
A discussion regarding the basis for the Boards approval of the Investment Advisory Agreement is available in the Funds 2010 Semi-Annual Report to shareholders.
Administrator
State Street serves as the Funds administrator. The Fund pays State Street, for administrative services, a fee, exclusive of out-of-pocket expenses, calculated in total for all the funds advised by Credit Suisse that are administered or co-administered by State Street and allocated based upon the relative average net assets of each fund, subject to an annual minimum fee.
Portfolio Management
The Credit Suisse US High Yield Management Team is responsible for the day-to-day portfolio management of the Fund. The current team members are Thomas J. Flannery and Wing Chan. Thomas J. Flannery is the lead manager for the Fund and oversees the Funds overall industry, credit, duration, yield curve positioning and security selection. Wing Chan focuses on the funds industry and issuer allocations.
Thomas J. Flannery, a Managing Director of Credit Suisse, is the Head of the US High Yield Management Team. Mr. Flannery joined Credit Suisse in June 2010. He is a portfolio manager for the Performing Credit Strategies Group (PCS) within the Asset Management business of Credit Suisse Group AG with responsibility for originating and analyzing investment opportunities. Mr. Flannery is also a member of the PCS Investment Committee and is currently a high yield bond portfolio manager and trader for PCS. Mr. Flannery joined Credit Suisse Group AG in 2000 from First Dominion Capital, LLC where he was an Associate. Mr. Flannery began his career with Houlihan Lokey Howard & Zukin, Inc. Mr. Flannery holds a B.S. in Finance from Georgetown University.
Wing Chan, a Director of Credit Suisse, has been a member of the US High Yield Management Team since 2005. Ms. Chan joined Credit Suisse in 2005 from Invesco where she was an Associate Portfolio Manager in the High Yield group. Prior to joining Invesco in 2002, Ms. Chan began her career in 1999 at JP Morgan Fleming Asset Management where she shared responsibility for the management of Structured and Long Duration products. Ms. Chan earned a double B.S. in Economics and Finance from the Massachusetts Institute of Technology and is a CFA Charterholder.
The SAI provides additional information about the portfolio managers compensation, other accounts managed by the portfolio managers and the portfolio managers ownership of securities in the Fund.
EXPENSES
Credit Suisse and State Street are each obligated to pay expenses associated with providing the services contemplated by the agreements to which they are parties, including compensation of and office space for their respective officers and employees connected with investment and economic research, trading and investment management and administration of the Fund, as well as the fees of all Trustees of the Fund who are affiliated with those companies or any of their affiliates, if any. The Fund pays all other expenses incurred in the operation of the Fund including, among other things, expenses for legal and independent registered public accounting firms services, costs of printing proxies, stock certificates and shareholder reports, charges of the custodian, any sub-custodians and the transfer and dividend-paying agent, expenses in connection with the automatic dividend reinvestment plan (see Dividends and Distributions; Automatic Dividend Reinvestment Plan), SEC fees, fees and expenses of Independent Trustees, accounting and pricing costs, membership fees in trade associations, fidelity bond coverage for the Funds officers and employees, directors and officers errors and omissions insurance coverage, interest, brokerage costs and stock exchange fees, stock exchange listing fees and expenses, expenses of qualifying the Funds shares for sale in various states, litigation and other extraordinary or non-recurring expenses, and other expenses properly payable by the Fund.
NET ASSET VALUE
The Funds investments are valued after the close of regular trading on the New York Stock Exchange, LLC (the NYSE) on the last business day of each week. For purposes of determining the net asset value, the value of the securities held by the Fund plus any cash or other assets (including interest accrued but not yet received) minus all liabilities (including accrued expenses) is divided by the total number of Shares outstanding at such time. The Fund determines and makes available for publication the net asset value of its Shares daily.
The following is a description of the procedures used by the Fund in valuing its assets.
Equity securities listed on an exchange or traded in an over-the-counter market will be valued at the closing price on the exchange or market on which the security is primarily traded (the Primary Market) at the time of valuation (the Valuation Time). If the security did not trade on the Primary Market, the security will be valued at the closing price on another exchange where it trades at the Valuation Time. If there are no such sales prices, the security will be valued at the most recent bid quotation as of the Valuation Time or at the lowest asked quotation in the case of a short sale of securities. Debt securities with a remaining maturity greater than 60 days shall be valued in accordance with the price supplied by an independent pricing service approved by the Board (Pricing Service).
If there are no such quotations, the security will be valued at its fair value as determined in good faith by or under the direction of the Board of Trustees.
Prices for debt securities supplied by a Pricing Service may use a matrix, formula or other objective method that takes into consideration market indexes, matrices, yield curves or other specific adjustments. The procedures of Pricing Services are reviewed periodically by the officers of the Fund under the general supervision and responsibility of the Board, which may replace a Pricing Service at any time.
If a Pricing Service is not able to supply closing prices and bid/asked quotations for an equity security or a price for a debt security, and there are two or more dealers, brokers or market makers in the security, the security will be valued at the mean between the highest bid and the lowest asked quotations from at least two dealers, brokers or market makers. If such dealers, brokers or market makers only provide bid quotations, the value shall be the mean between the highest and the lowest bid quotations provided. If a Pricing Service is not able to supply closing prices and bid/asked quotations for an equity security or a price for a debt security, and there is only one dealer, broker or market maker in the security, the security will be valued at the mean between the bid and the asked quotations provided, unless the dealer, broker or market maker can only provide a bid quotation, in which case the security will be valued at such bid quotation. Options contracts will be valued similarly. Futures contracts will be valued at the most recent settlement price as provided by a Pricing Service at the time of valuation.
Short-term obligations with maturities of 60 days or less are valued at amortized cost, which constitutes fair value as determined by or under the direction of the Board of the Fund. Amortized cost involves valuing a portfolio instrument at its initial cost and thereafter assuming a constant amortization to maturity of any discount or premium, regardless of the impact of fluctuating interest rates on the market value of the instrument. The amortized cost method of valuation may also be used with respect to other debt obligations with 60 days or less remaining to maturity.
Swap contracts are generally valued at a price at which the counterparty to such contract would repurchase the instrument or terminate the contract.
Foreign securities traded in the local market will be valued at the closing prices, which may not be the last sale price, on the Primary Market (at the Valuation Time with respect to the Fund). If the security did not trade on the Primary Market, it will be valued at the closing price of the local shares (at the Valuation Time with respect to the Fund). If there is no such closing price, the value will be the most recent bid quotation of the local shares (at the Valuation Time with respect to the Fund).
Investments in mutual funds are valued at the mutual funds closing net asset value per share on the day of valuation.
Securities, options, futures contracts and other assets (including swap contracts) which cannot be valued pursuant to the foregoing will be valued at their fair value as determined in good faith by or under the direction of the Board of the Fund. In addition, the Board of the Fund or its delegates may value a security at fair value if it determines that such securitys value determined by the methodology set forth above does not reflect its fair value. If the value of a security has been materially affected by events occurring after the relevant market closes, but before the Fund calculates its net asset value, the Fund may price those securities at fair value as determined in good faith in accordance with procedures approved by the Board. When fair value pricing is employed, the prices of securities used by a fund to calculate its net asset value may differ from quoted or published prices for the same securities.
Trading in securities in certain foreign countries is completed at various times prior to the close of business on each business day in New York (i.e., a day on which the NYSE is open for trading). In addition, securities trading in a particular country or countries may not take place on all business days in New York. Furthermore, trading takes place in various foreign markets on days that are not business days in New York and days on which the Funds net asset value is not calculated. As a result, calculation of the Funds net asset value may not take place contemporaneously with the determination of the prices of certain foreign portfolio securities used in such calculation. All assets and liabilities initially expressed in foreign currency values will be converted into U.S. dollar values at the prevailing rate as quoted by a Pricing Service at the close of the London Stock Exchange. If such quotations are not available, the rate of exchange will be determined in good faith by or under the direction of the Board.
DIVIDENDS AND DISTRIBUTIONS; AUTOMATIC DIVIDEND REINVESTMENT PLAN
The Fund declares and pays dividends on a monthly basis. Distributions of net realized capital gains, if any, are declared and paid at least annually. The Funds dividend policy is to distribute substantially all of its net investment income to its shareholders on a monthly basis. However, in order to provide shareholders with a more consistent yield to the current trading price of shares of beneficial interest of the Fund, the Fund may at times pay out less than the entire amount of net investment income earned in any particular month and may at times in any month pay out such accumulated but undistributed income in addition to net investment income earned in that month. As a result, the dividends paid by the Fund for any particular month may be more or less than the amount of net investment income earned by the Fund during such month.
Pursuant to the Funds automatic dividend reinvestment plan (the Plan), unless a shareholder otherwise elects, all dividends and capital gain distributions will be automatically reinvested by Computershare as agent for shareholders in administering the Plan (the Plan Agent), in additional Shares of the Fund. Shareholders who elect not to participate in the Plan will receive all dividends and other distributions in cash paid by check mailed directly to the shareholder of record (or, if the Shares are held in street or other nominee name, then to such nominee) by Computershare as the Dividend-Paying Agent. Such participants may elect not to participate in the Plan and to receive all dividends and capital gain distributions in cash by sending written instructions to Computershare, as the Dividend-Paying Agent, at the address set forth below. Participation in the Plan is completely voluntary and may be terminated or resumed at any time without penalty by written notice if received by the Plan Agent not less than ten days prior to any dividend record date; otherwise such termination will be effective with respect to any subsequently declared dividend or other distribution.
Whenever the Fund declares an income dividend or a capital gain distribution (collectively referred to as dividends) payable either in Shares or in cash, non-participants in the Plan will receive cash and participants in the Plan will receive the equivalent in Shares. The Shares will be acquired by the Plan Agent for the participants accounts, depending upon the circumstances described below, either (i) through receipt of additional unissued but authorized Shares from the Fund (newly issued Shares) or (ii) by purchase of outstanding Shares on the open market (open-market purchases) on the NYSE Amex or elsewhere. If on the payment date for the dividend, the net asset value per Share is equal to or less than the market price per Share plus estimated brokerage commissions (such condition being referred to herein as market premium), the Plan Agent will invest the dividend amount in newly issued Shares on behalf of the participants. The number of newly issued Shares to be credited to each participants account will be determined by dividing the dollar amount of the dividend by the net asset value per Share on the date the Shares are issued. If on the dividend payment date the net asset value per Share is greater than the market value (such condition being referred to herein as market discount), the Plan Agent will invest the dividend amount in Shares acquired on behalf of the participants in open-market purchases.
In the event of a market discount on the dividend payment date, the Plan Agent will have until the last business day before the next date on which the Shares trade on an ex-dividend basis or in no event more than 30 days after the dividend payment date (the last purchase date) to invest the dividend amount in Shares acquired in open-market purchases. It is contemplated that the Fund will pay monthly income dividends. Therefore, the period during which open-market purchases can be made will exist only from the payment date of the dividend through the date before the next ex-dividend date which typically will be approximately ten days. If, before the Plan Agent has completed its open-market purchases, the market price of a Share exceeds the net asset value per Share, the average per Share purchase price paid by the Plan Agent may exceed the net asset value of the Shares, resulting in the acquisition of fewer Shares than if the dividend had been paid in newly issued Shares on the dividend record date. Because of the foregoing difficulty with respect to open market purchases, the Plan provides that if the Plan Agent is unable to invest the full dividend amount in open market purchases during the purchase period or if the market discount shifts to a market premium during the purchase period, the Plan Agent may cease making open-market purchases and may invest the uninvested portion of the dividend amount in newly issued Shares at the net asset value per Share at the close of business on the last purchase date.
The Plan Agent maintains all shareholders accounts in the Plan and furnishes written confirmation of all transactions in the accounts, including information needed by shareholders for tax records. Shares in the account of each Plan participant will be held by the Plan Agent on behalf of the Plan participant, and each shareholder proxy will include those Shares purchased or received pursuant to the Plan. The Plan Agent will forward all proxy solicitation materials to participants and vote proxies for Shares held pursuant to the Plan in accordance with the instructions of the participants.
In the case of shareholders such as banks, brokers or nominees that hold Shares for others who are the beneficial owners, the Plan Agent will administer the Plan on the basis of the number of Shares certified from time to time by the record shareholder and held for the account of beneficial owners who participate in the Plan.
There will be no brokerage charges with respect to Shares issued directly by the Fund as a result of dividends or capital gains distributions payable either in Shares or in cash. However, each participant will pay a pro rata share of brokerage commissions incurred with respect to the Plan Agents open-market purchases in connection with the reinvestment of dividends.
The automatic reinvestment of dividends will not relieve participants of any Federal, state or local income tax that may be payable (or required to be withheld) on such dividends. See Taxation. Shareholders participating in the Plan may receive benefits not available to Shareholders not participating in the Plan. If the market price (plus commissions) of the Shares is above their net asset value, participants in the Plan will receive Shares of the Fund at less than they could otherwise purchase them and will have Shares with a cash value greater than the value of any cash distribution they would have received on their Shares. If the market price plus commissions is below the net asset value, participants will receive distributions in Shares with a net asset value greater than the value of any cash distribution they would have received on their Shares. However, there may be insufficient Shares available in the market to make distributions in Shares at prices below the net asset value. Also, since the Fund does not redeem Shares, the price on resale may be more or less than the net asset value.
Experience under the Plan may indicate that changes are desirable. Accordingly, the Fund reserves the right to amend or terminate the Plan. There is no direct service charge to participants in the Plan; however, the Fund reserves the right to amend the Plan to include a service charge payable by the participants.
All correspondence concerning the Plan should be directed to the Plan Agent at [address, telephone number].
FEDERAL INCOME TAXATION
The Fund is treated as a separate entity for U.S. federal income tax purposes. The Fund has elected to be treated, and has qualified and intends to continue to qualify each year, as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended (the Code), so that it will not pay U.S. federal income tax on income and capital gains distributed to shareholders. In order to qualify as a regulated investment company under Subchapter M of the Code, the Fund must, among other things, (i) derive at least 90% of its gross income for each taxable year from dividends, interest, payments with respect to certain securities loans, gains from the sale or other disposition of stock, securities or foreign currencies, or other income (including gains from options, futures, and forward contracts) derived with respect to its business of investing in such stock, securities or currencies, and net income derived from an interest in a qualified publicly traded partnership (as defined in Section 851(h) of the Code) (the 90% income test) and (ii) diversify its holdings so that, at the end of each quarter of each taxable year: (a) at least 50% of the value of the Funds total assets is represented by (1) cash and cash items, U.S. government securities, securities of other regulated investment companies, and (2) other securities, with such other securities limited, in respect of any one issuer, to an amount not greater than 5% of the value of the Funds total assets and to not more than 10% of the outstanding voting securities of such issuer and (b) not more than 25% of the value of the Funds total assets is invested in (1) the securities (other than U.S. government securities and securities of other regulated investment companies) of any one issuer, (2) the securities (other than securities of other regulated investment companies) of two or more issuers that the Fund controls and that are engaged in the same, similar, or related trades or businesses, or (3) the securities of one or more qualified publicly traded partnerships.
Although in general the passive loss rules of the Code do not apply to regulated investment companies, such rules do apply to a regulated investment company with respect to items attributable to an interest in a qualified publicly traded partnership. Fund investments in partnerships, including in qualified publicly traded partnerships, may result in the funds being subject to state, local or foreign income, franchise or withholding tax liabilities.
If the Fund qualifies as a regulated investment company and properly distributes to its shareholders each taxable year an amount equal to or exceeding the sum of (i) 90% of its investment company taxable income as that term is defined in the Code (which includes, among other things, dividends, taxable interest, and the excess of any net short-term capital gains over net long-term capital losses, as reduced by certain deductible expenses) without regard to the deduction for dividends paid and (ii) 90% of the excess of its gross tax-exempt interest income, if any, over certain disallowed deductions, the Fund generally will not be subject to U.S. federal income tax on any income
of the Fund, including net capital gain (the excess of net long-term capital gain over net short-term capital loss), distributed to shareholders. However, if the Fund meets such distribution requirements, but chooses to retain some portion of its taxable income or gains, it generally will be subject to U.S. federal income tax at regular corporate rates on the amount retained. The Fund may designate certain amounts retained as undistributed net capital gain in a notice to its shareholders, who (i) will be required to include in income for U.S. federal income tax purposes, as long-term capital gain, their proportionate shares of the undistributed amount so designated, (ii) will be entitled to credit their proportionate shares of the income tax paid by the Fund on that undistributed amount against their federal income tax liabilities and to claim refunds to the extent such credits exceed their liabilities and (iii) will be entitled to increase their tax basis, for federal income tax purposes, in their shares by an amount equal to the excess of the amount of undistributed net capital gain included in their respective income over their respective income tax credits. The Fund intends to distribute at least annually all or substantially all of its investment company taxable income (computed without regard to the dividends-paid deduction), net tax-exempt interest income, and net capital gain.
If, for any taxable year, the Fund does not qualify as a regulated investment company or does not satisfy the 90% distribution requirement, it will be treated as a U.S. corporation subject to U.S. federal income tax, thereby subjecting any income earned by the Fund to tax at the corporate level and to a further tax at the shareholder level when such income is distributed.
The Code imposes a 4% nondeductible excise tax on the Fund to the extent it does not distribute by the end of any calendar year at least the sum of (i) 98% of its taxable ordinary income for that year and (ii) 98% of its capital gain net income (both long-term and short-term) for the one-year period ending, as a general rule, on October 31 of that year. For this purpose, however, any ordinary income or capital gain net income retained by the Fund that is subject to corporate income tax will be considered to have been distributed by year-end. In addition, the minimum amounts that must be distributed in any year to avoid the excise tax will be increased or decreased to reflect any underdistribution or overdistribution, as the case may be, from the previous year. The Fund anticipates that it will pay such dividends and will make such distributions as are necessary in order to avoid the application of this excise tax.
The IRS has taken the position that if a regulated investment company has two or more classes of shares, it must designate distributions made to each class in any year as consisting of no more than such classs proportionate share of particular types of income, including tax-exempt interest, net capital gains, and other income subject to federal income tax. A classs proportionate share of a particular type of income is determined according to the percentage of total dividends paid by the regulated investment company to such class.
Existing authorities do not specifically address whether dividends that are paid following the close of a taxable year, but that are treated for tax purposes as derived from the income of such prior taxable year, are treated as dividends paid during such prior taxable year for purposes of determining each classs proportionate share of a particular type of income. The Fund currently intends to treat such dividends as having been paid in the prior taxable year for purposes of determining each classs proportionate share of a particular type of income with respect to such prior taxable year. Existing authorities also do not specifically address the allocation of taxable income among the dividends paid to holders of a class of shares during or with respect to a taxable year. It is possible that the IRS could disagree with the Funds position concerning the treatment of dividends paid after the close of a taxable year, in which case the IRS could attempt to recharacterize a portion of the dividends paid and designated by the Fund as exempt-interest dividends as consisting instead of capital gains or other taxable income. If the IRS were to prevail with respect to any such attempted recharacterization, holders of that class of shares could be subject to tax on amounts so recharacterized and the Fund could be subject to federal income and excise tax.
The Fund declares a dividend from net investment income (excluding capital gains) each month. Dividends are normally paid on the last business day of the month or shortly thereafter. The Fund distributes any net short-term and long-term capital gains in November. Dividends from income and/or capital gains may also be paid at such other times as may be necessary for the Fund to avoid U.S. federal income or excise tax.
Unless a shareholder specifies otherwise, all distributions from the Fund to that shareholder will be automatically reinvested in additional full and fractional shares of the Fund. For U.S. federal income tax purposes, all dividends from the Fund generally are taxable whether a shareholder takes them in cash or reinvests them in additional shares of the Fund. In general, assuming that the Fund has sufficient earnings and profits, dividends from net investment income and from net short-term capital gains are taxable as ordinary income.
Recently enacted legislation imposes a 3.8% excise tax on net investment income, including dividends, interest and net capital gains, of individuals with annual income of $200,000 or more ($250,000 if married, filing jointly) beginning in 2013.
Distributions by the Fund in excess of the Funds current and accumulated earnings and profits will be treated as a return of capital to the extent of (and in reduction of) the shareholders tax basis in its shares and any such amount in excess of that basis will be treated as gain from the sale of shares, as discussed below.
Distributions from net capital gains, if any, that are designated as capital gain dividends by the Fund are taxable as long-term capital gains for U.S. federal income tax purposes without regard to the length of time the shareholder has held shares of the Fund. Capital gain dividends distributed by the Fund to individual and certain other noncorporate shareholders generally will qualify for reduced U.S. federal income tax rates (currently, a maximum rate of 15%, with lower rates applying to taxpayers in the 10% and 15% rate brackets) on long-term capital gains, subject to certain limited exceptions. A shareholder should also be aware that the benefits of the favorable tax rate applicable to long-term capital gains and qualified dividend income may be affected by the application of the alternative minimum tax to individual shareholders. Under current law, the reduced maximum 15% U.S. federal income tax rate on qualified dividend income and long-term capital gains will not apply in taxable years beginning after December 31, 2010.
The U.S. federal income tax status of all distributions will be reported to shareholders annually.
Although dividends generally will be treated as distributed when paid, any dividend declared by the Fund in October, November or December and payable to shareholders of record in such a month that is paid during the following January will be treated for U.S. federal income tax purposes as received by shareholders on December 31 of the calendar year in which it was declared. In addition, certain other distributions made after the close of a taxable year of the Fund may be spilled back and treated for certain purposes as paid by the Fund during such taxable year. In such case, shareholders generally will be treated as having received such dividends in the taxable year in which the distributions were actually made. For purposes of calculating the amount of a regulated investment companys undistributed income and gain subject to the 4% excise tax described above, such spilled back dividends are treated as paid by the regulated investment company when they are actually paid.
For U.S. federal income tax purposes, the Fund is permitted to carry forward a net capital loss for any year to offset its capital gains, if any, for up to eight years following the year of the loss. To the extent subsequent capital gains are offset by such losses, they would not result in U.S. federal income tax liability to the Fund and may not be distributed as such to shareholders. The Fund may not carry forward any losses other than net capital losses.
At the time of an investors purchase of fund shares, a portion of the purchase price may be attributable to realized or unrealized appreciation in the Funds portfolio or to undistributed capital gains of the Fund. Consequently, subsequent distributions by the Fund with respect to these shares from such appreciation or gains may be taxable to such investor even if the net asset value of the investors shares is, as a result of the distributions, reduced below the investors cost for such shares and the distributions economically represent a return of a portion of the investment.
Sales and exchanges generally are taxable events for shareholders that are subject to tax. Shareholders should consult their own tax advisers with reference to their individual circumstances to determine whether any particular transaction in fund shares is properly treated as a sale for tax purposes, as the following discussion assumes, and the tax treatment of any gains or losses recognized in such transactions. In general, if fund shares are sold, the shareholder will recognize gain or loss equal to the difference between the amount realized on the sale and the shareholders adjusted basis in the shares. Such gain or loss generally will be treated as long-term capital gain or loss if the shares were held for more than one year and otherwise generally will be treated as short-term capital gain or loss.
Losses on sales or other dispositions of shares may be disallowed under wash sale rules in the event of other investments in the Fund (including those made pursuant to reinvestment of dividends and/or capital gain distributions) within a period of 61 days beginning 30 days before and ending 30 days after a sale or other disposition of shares. In such a case, the disallowed portion of any loss generally would be included in the U.S. federal tax basis of the shares acquired in the other investments.
Under Treasury regulations, if a shareholder recognizes a loss with respect to fund shares of $2 million or more for an individual shareholder, or $10 million or more for a corporate shareholder, in any single taxable year (or
of certain greater amounts over a combination of years), the shareholder must file with the IRS a disclosure statement on Form 8886. Shareholders who own portfolio securities directly are in many cases excepted from this reporting requirement but, under current guidance, shareholders of regulated investment companies are not excepted. A shareholder who fails to make the required disclosure to the IRS may be subject to substantial penalties. The fact that a loss is reportable under these regulations does not affect the legal determination of whether or not the taxpayers treatment of the loss is proper. Shareholders should consult with their tax advisers to determine the applicability of these regulations in light of their individual circumstances.
Shareholders that are exempt from U.S. federal income tax, such as retirement plans that are qualified under Section 401 of the Code, generally are not subject to U.S. federal income tax on otherwise-taxable fund dividends or distributions, or on sales or exchanges of fund shares unless the Fund shares are debt-financed property within the meaning of the Code. However, in the case of fund shares held through a non-qualified deferred compensation plan, fund dividends and distributions received by the plan and sales and exchanges of fund shares by the plan generally are taxable to the employer sponsoring such plan in accordance with the U.S. federal income tax laws that are generally applicable to shareholders receiving such dividends or distributions from regulated investment companies such as the Fund.
A plan participant whose retirement plan invests in the Fund, whether such plan is qualified or not, generally is not taxed on any fund dividends or distributions received by the plan or on sales or exchanges of fund shares by the plan for U.S. federal income tax purposes. However, distributions to plan participants from a retirement plan account generally are taxable as ordinary income, and different tax treatment, including penalties on certain excess contributions and deferrals, certain pre-retirement and post-retirement distributions and certain prohibited transactions, is accorded to accounts maintained as qualified retirement plans. Shareholders should consult their tax advisers for more information.
The Fund may invest to a significant extent in debt obligations that are in the lowest rating categories or that are unrated, including debt obligations of issuers not currently paying interest or that are in default. Investments in debt obligations that are at risk of or in default present special tax issues for the Fund. Federal income tax rules are not entirely clear about issues such as when the Fund may cease to accrue interest, original issue discount or market discount, when and to what extent deductions may be taken for bad debts or worthless securities, how payments received on obligations in default should be allocated between principal and interest and whether certain exchanges of debt obligations in a workout context are taxable. These and other issues will be addressed by the Fund, in the event it invests in or holds such securities, in order to seek to ensure that it distributes sufficient income to preserve its status as a regulated investment company and does not become subject to U.S. federal income or excise tax.
If the Fund invests in certain pay-in-kind securities, zero coupon securities, deferred interest securities or, in general, any other securities with original issue discount (or with market discount if the Fund elects to include market discount in income currently), the Fund generally must accrue income on such investments for each taxable year, which generally will be prior to the receipt of the corresponding cash payments. However, the Fund must distribute to its shareholders, at least annually, all or substantially all of its investment company taxable income (determined without regard to the deduction for dividends paid) and net tax-exempt income, including such accrued income, to qualify to be treated as a regulated investment company under the Code and avoid U.S. federal income and excise taxes. Therefore, the Fund may have to dispose of its portfolio securities, potentially under disadvantageous circumstances, to generate cash, or may have to borrow the cash, to satisfy distribution requirements. Such a disposition of securities may potentially result in additional taxable gain or loss to the Fund.
Options written or purchased and futures contracts entered into by the Fund on certain securities, indices and foreign currencies, as well as certain forward foreign currency contracts, may cause the Fund to recognize gains or losses from marking-to-market even though such options may not have lapsed or been closed out or exercised, or such futures or forward contracts may not have been performed or closed out. The tax rules applicable to these contracts may affect the characterization of some capital gains and losses realized by the Fund as long-term or short-term. Certain options, futures and forward contracts relating to foreign currency may be subject to Section 988 of the Code, and accordingly may produce ordinary income or loss. Additionally, the Fund may be required to recognize gain if an option, futures contract, forward contract, short sale or other transaction that is not subject to the mark-to-market rules is treated as a constructive sale of an appreciated financial position held by the Fund under Section 1259 of the Code. Any net mark-to-market gains and/or gains from constructive sales may also have to be distributed to satisfy the distribution requirements referred to above even though the Fund may receive no
corresponding cash amounts, possibly requiring the disposition of portfolio securities or borrowing to obtain the necessary cash. Such a disposition of securities may potentially result in additional taxable gain or loss to the Fund. Losses on certain options, futures or forward contracts and/or offsetting positions (portfolio securities or other positions with respect to which the Funds risk of loss is substantially diminished by one or more options, futures or forward contracts) may also be deferred under the tax straddle rules of the Code, which may also affect the characterization of capital gains or losses from straddle positions and certain successor positions as long-term or short-term. Certain tax elections may be available that would enable the Fund to ameliorate some adverse effects of the tax rules described in this paragraph. The tax rules applicable to options, futures, forward contracts and straddles may affect the amount, timing and character of the Funds income and gains or losses and hence of its distributions to shareholders.
As a result of entering into swap contracts, the Fund may make or receive periodic net payments. The Fund may also make or receive a payment when a swap is terminated prior to maturity through an assignment of the swap or other closing transaction. Periodic net payments will generally constitute ordinary income or deductions, while termination of a swap will generally result in capital gain or loss (which will be a long-term capital gain or loss if the fund has been a party to the swap for more than one year). With respect to certain types of swaps, the Fund may be required to currently recognize income or loss with respect to future payments on such swaps or may elect under certain circumstances to mark such swaps to market annually for tax purposes as ordinary income or loss. The tax treatment of many types of credit default swaps is uncertain.
The Fund may be subject to withholding and other taxes imposed by foreign countries, including taxes on interest, dividends and capital gains with respect to its investments in those countries. Any such taxes would, if imposed, reduce the yield on or return from those investments. Tax conventions between certain countries and the U.S. may reduce or eliminate such taxes in some cases. The Fund does not expect to satisfy the requirements for passing through to its shareholders any share of foreign taxes paid by the Fund, with the result that shareholders will not include such taxes in their gross incomes and will not be entitled to a tax deduction or credit for such taxes on their own tax returns.
The Fund is required to withhold (as backup withholding) a certain percentage of reportable payments, including dividends, capital gain distributions and the proceeds of redemptions or repurchases of fund shares paid to shareholders who have not complied with certain IRS regulations. In order to avoid this withholding requirement, shareholders, other than certain exempt entities, must certify on their Account Applications, or on separate IRS Forms W-9, that the Social Security Number or other Taxpayer Identification Number they provide is their correct number and that they are not currently subject to backup withholding, or that they are exempt from backup withholding. The Fund may nevertheless be required to backup withhold if it receives notice from the IRS or a broker that the number provided is incorrect or backup withholding is applicable as a result of previous underreporting of interest or dividend income.
The description of certain federal tax provisions above relates only to U.S. federal income tax consequences for shareholders who are U.S. persons, i.e., generally, U.S. citizens or residents or U.S. corporations, partnerships, trusts or estates, and who are subject to U.S. federal income tax and hold their shares as capital assets. Except as otherwise provided, this description does not address the special tax rules that may be applicable to particular types of investors, such as financial institutions, insurance companies, securities dealers, other regulated investment companies, or tax-exempt or tax-deferred plans, accounts or entities. Investors other than U.S. persons may be subject to different U.S. federal income tax treatment, including a non-resident alien U.S. withholding tax at the rate of 30% or any lower applicable treaty rate on amounts treated as ordinary dividends from the Fund (other than, for the taxable year of the Fund beginning on November 1, 2009, certain dividends designated by the Fund as (i) interest-related dividends, to the extent such dividends are derived from the Funds qualified net interest income, or (ii) short-term capital gain dividends, to the extent such dividends are derived from the Funds qualified short-term gain) or, in certain circumstances, unless an effective IRS Form W-8BEN or other authorized withholding certificate is on file, to backup withholding at the rate of 28% on certain other payments from the Fund. Qualified net interest income is the Funds net income derived from U.S.-source interest and original issue discount, subject to certain exceptions and limitations. Qualified short-term gain generally means the excess of the net short-term capital gain of the Fund for the taxable year over its net long-term capital loss, if any. Backup withholding will not be applied to payments that have been subject to the 30% (or lower applicable treaty rate) withholding tax on shareholders who are neither citizens nor residents of the United States. Shareholders should consult their own tax advisers on these matters and on state, local, foreign and other applicable tax laws.
If, as anticipated, the Fund qualifies as a regulated investment company under the Code, it will not be required to pay any Massachusetts income, corporate excise or franchise taxes or any Delaware corporation income tax.
A state income (and possibly local income and/or intangible property) tax exemption is generally available to the extent the Funds distributions are derived from interest on (or, in the case of intangible property taxes, the value of its assets is attributable to) certain U.S. government obligations, provided in some states that certain thresholds for holdings of such obligations and/or reporting requirements are satisfied. The Fund will not seek to satisfy any threshold or reporting requirements that may apply in particular taxing jurisdictions, although the Fund may in its sole discretion provide relevant information to shareholders.
REPURCHASE OF SHARES
Shares of closed-end management investment companies often trade at a discount to their net asset values, and the Shares may likewise trade at a discount to their net asset value, although it is possible that they may trade at a premium above net asset value. The market price of the Shares will be determined by such factors as relative demand for and supply of such Shares in the market, the Funds net asset value, general market and economic conditions and other factors beyond the control of the Fund. See Determination of Net Asset Value. Although the shareholders will not have the right to redeem their Shares, the Fund may take action to repurchase Shares in the open market or make tender offers for Shares at their net asset value. This may have the effect of reducing any market discount from net asset value.
There is no assurance that if action is undertaken to repurchase or tender for Shares, such action will result in the Shares trading at a price which approximates their net asset value. Although Share repurchases and tenders could have a favorable effect on the market price of the Shares, it should be recognized that the acquisition of Shares by the Fund will decrease the total assets of the Fund and, therefore, have the effect of increasing the Funds expense ratio. Any Share repurchases or tender offers will be made in accordance with requirements of the Securities Exchange Act of 1934, as amended, and the 1940 Act.
DESCRIPTION OF SHARES
General
The Fund is authorized to issue an unlimited number of Shares. Each Share has one vote and, when issued and paid for in accordance with the terms of the offer, will be fully paid and non-assessable. Shares are of one class and have equal rights as to dividends and in liquidation. Shares have no preemptive, subscription or conversion rights and are freely transferable. The Fund will send annual and semi-annual financial statements to all its Shareholders.
The Fund has no present intention of offering additional Shares, except as described herein and under the Funds dividend reinvestment and cash purchase plan, as it may be amended from time to time. See Dividends and Other Distributions; Dividend Reinvestment and Cash Purchase Plan. Other offerings of Shares, if made, will require approval of the Board. The Board is authorized, however, to classify and reclassify any unissued shares into one or more additional or other classes or series as may be established from time to time by setting or changing in any one or more respects the designations, preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications or terms or conditions of redemption of such shares and pursuant to such classification or reclassification to increase or decrease the number of authorized shares of any existing class or series. The Fund may reclassify and offer unissued shares as preferred stock subject to the limitations of the 1940
Act. Any additional offering will not be made at a price per Share below the then current net asset value (exclusive of underwriting discounts and commissions) except in connection with an offering to existing shareholders or with the consent of a majority of the Funds outstanding Shares.
Common Shares
The Funds common shares of beneficial interest are publicly held and are listed and traded on the NYSE Amex under the symbol DHY.
As of [recent date], 2010, the net asset value per Share of the Fund was $[ ] and on that date the closing price per Share on the NYSE Amex was $[ ], meaning the Funds Shares were trading at a [ ]% premium to the Funds net asset value per Share.
Although the Funds Shares have recently traded at a premium to their net asset value, the Funds Shares have in the past traded at a discount to their net asset value. The Fund cannot determine the reasons why the Funds Shares trade at a premium to or discount from net asset value, nor can the Fund predict whether its Shares will trade in the future at a premium to or discount from net asset value, or the level of any premium or discount. Shares of closed-end investment companies frequently trade at a discount from net asset value.
Anti-Takeover Provisions in the Declaration of Trust
The Funds Declaration of Trust includes provisions that could have the effect of limiting the ability of other entities or persons to acquire control of the Fund or to change the composition of its Board, and could have the effect of depriving shareholders of an opportunity to sell their Shares at a premium over prevailing market prices by discouraging a third party from seeking to obtain control of the Fund. These provisions may have the effect of discouraging attempts to acquire control of the Fund, which attempts could have the effect of increasing the expenses of the Fund and interfering with the normal operation of the Fund.
The Board is divided into three classes, with the terms of one class expiring at each annual meeting of shareholders. At each annual meeting, one class of Trustees is elected to a three-year term. This provision could delay for up to two years the replacement of a majority of the Board. A Trustee may be removed from office for any reason or for no reason by a written instrument signed by at least two-thirds of the remaining Trustees or by a vote of the holders of at least two-thirds of the Shares.
In addition, the Declaration of Trust requires the favorable vote of the holders of at least 80% of the outstanding Shares of each class of the Fund, voting as a class, then entitled to vote to approve, adopt or authorize certain transactions with 5%-or-greater holders of a class of Shares and their associates, unless the Board shall by resolution have approved a memorandum of understanding with such holders, in which case normal voting requirements would be in effect. For purposes of these provisions, a 5%-or-greater holder of a class of Shares (a Principal Shareholder) refers to any person who, whether directly or indirectly and whether alone or together with its affiliates and associates, beneficially owns 5% or more of the outstanding shares of any class of beneficial interest of the Fund. The transactions subject to these special approval requirements are: (i) the merger or consolidation of the Fund or any subsidiary of the Fund with or into any Principal Shareholder; (ii) the issuance of any securities of the Fund to any Principal Shareholder for cash (except pursuant to the Funds dividend reinvestment and cash purchase plan); (iii) the sale, lease or exchange of all or any substantial part of the assets of the Fund to any Principal Shareholder (except assets having an aggregate fair market value of less than $1,000,000, aggregating for the purpose of such computation all assets sold, leased or exchanged in any series of similar transactions within a twelve-month period); or (iv) the sale, lease or exchange to the Fund or any subsidiary thereof, in exchange for securities of the Fund, of any assets of any Principal Shareholder (except assets having an aggregate fair market value of less than $1,000,000, aggregating for the purposes of such computation all assets sold, leased or exchanged in any series of similar transactions within a twelve-month period).
The Board has determined that provisions with respect to the Board and the 80% voting requirements described above which voting requirements are greater than the minimum requirements under Delaware law or the 1940 Act, are in the best interests of shareholders generally. Reference should be made to the Declaration of Trust on file with the SEC for the full text of these provisions.
CLOSED-END FUND STRUCTURE
Closed-end funds differ from open-end investment companies (commonly referred to as mutual funds) in that closed-end funds generally list their shares for trading on a securities exchange and do not redeem their shares at the option of the shareholder. By comparison, mutual funds issue securities redeemable at NAV at the option of the shareholder and typically engage in a continuous offering of their shares. Mutual funds are subject to continuous asset in-flows and out-flows that can complicate portfolio management, whereas closed-end funds generally can stay more fully invested in securities consistent with the closed-end funds investment objective and policies. In addition, in comparison to open-end funds, closed-end funds have greater flexibility in their ability to make certain types of investments, including investments in illiquid securities.
However, shares of closed-end investment companies listed for trading on a securities exchange frequently trade at a discount from NAV, although in some cases they may trade at a premium. The market price may be affected by trading volume of the shares, general market and economic conditions and other factors beyond the control of the closed-end fund. The foregoing factors may result in the market price of the shares being greater than, less than or equal to NAV. The Board of Trustees has reviewed the structure of the Fund in light of its investment objective and policies and has determined that the closed-end structure is in the best interests of the shareholders. As described above, however, the Board of Trustees will review periodically the trading range and activity of the Funds common shares with respect to its NAV and the Board may take certain actions to seek to reduce or eliminate any such discount. Such actions may include open market repurchases or tender offers for the common shares at net asset value or the possible conversion of the Fund to an open-end investment company. There can be no assurance that the Board will decide to undertake any of these actions or that, if undertaken, such actions would result in the common shares trading at a price equal to or close to net asset value per share.
CUSTODIAN, TRANSFER AGENT AND DIVIDEND-PAYING AGENT
State Street serves as the Funds custodian pursuant to a custody agreement. Under the custody agreement, the Custodian holds the Funds assets in compliance with the 1940 Act. State Street is located at One Lincoln Street, Boston, Massachusetts 02111.
Computershare Trust Company, N.A. acts as the Funds transfer agent and dividend-paying agent under the Funds automatic dividend reinvestment plan. Computershare Trust Company, N.A. is located at P.O. Box 43078, Providence, Rhode Island, 02940.
LEGAL MATTERS
Certain legal matters with respect to the Offer will be passed upon by Willkie Farr & Gallagher LLP, New York, New York.
LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Fund or the Investment Adviser is a party.
REPORTS TO SHAREHOLDERS
The Fund will send unaudited semi-annual and audited annual reports to shareholders, including a list of the portfolio investments held by the Fund.
ADDITIONAL INFORMATION
We have filed with the SEC a registration statement on Form N-2 together with all amendments and related exhibits under the Securities Act. The registration statement contains additional information about us and the securities being offered by this prospectus.
We file annual and semi-annual reports, proxy statements and other information with the SEC. You can inspect any materials we file with the SEC, without charge, at the SECs Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the Public Reference Room. The information we file with the SEC is available free of charge by contacting us at Credit Suisse
Asset Management, LLC, Eleven Madison Avenue, New York, New York 10010 or by telephone at 1-800-293-1232 or on our website at www.credit -suisse.com/us. The SEC also maintains a website that contains reports, proxy statements and other information regarding registrants, including us, that file such information electronically with the SEC. The address of the SECs web site is www.sec.gov. Unless specifically incorporated into this prospectus, documents contained on our website or on the SECs web site about us is not incorporated into this prospectus and should not be considered or on the SECs website to be part of this prospectus.
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
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Fund History |
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Other Investment Practices |
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Investment Restrictions |
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Trustees and Officers |
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Investment Adviser |
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Administrator |
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Custodian, Transfer Agent and Dividend-Paying Agent |
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Independent Registered Public Accounting Firm |
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Portfolio Management |
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Portfolio Transactions |
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Tax Status |
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Financial Statements |
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Principal Holders of Securities |
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Appendix A: Description of Ratings |
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A-1 |
Appendix B: Proxy Voting Policies and Procedures |
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B-1 |
The information in this Statement of Additional Information is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This Statement of Additional Information is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
CREDIT SUISSE HIGH YIELD BOND FUND
Eleven Madison Avenue
New York, New York 10010
Statement of Additional Information
Subject to Completion, Dated August 4, 2010
This Statement of Additional Information (SAI) for Credit Suisse High Yield Bond Fund (the Fund) is not a prospectus. It should be read in conjunction with the Funds prospectus, dated [ ], 2010. A copy of the prospectus can be obtained free of charge by calling Credit Suisse Asset Management, LLC at 800-293-1232 or by written request to the Fund at Eleven Madison Avenue, New York, New York 10010. You can also obtain a copy of the prospectus from our website at: www.credit-suisse.com/us. The Funds financial statements for the fiscal year ended October 31, 2009, including the independent registered public accounting firms report thereon, are incorporated into this SAI by reference.
TABLE OF CONTENTS
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Page |
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Fund History |
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Other Investment Practices |
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Investment Restrictions |
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Trustees and Officers |
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Investment Adviser |
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Administrator |
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Custodian, Transfer Agent and Dividend-Paying Agent |
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Independent Registered Public Accounting Firm |
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Portfolio Management |
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Portfolio Transactions |
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Tax Status |
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Financial Statements |
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Principal Holders of Securities |
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Appendix A: Description of Ratings |
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A-1 |
Appendix B: Proxy Voting Policies and Procedures |
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B-1 |
FUND HISTORY
The Fund is a non-diversified, closed-end management investment company organized as a trust under the laws of the State of Delaware on April 24, 1998. Credit Suisse Asset Management, LLC (Credit Suisse) is the Funds investment adviser.
OTHER INVESTMENT PRACTICES
The prospectus presents the investment objectives and the principal investment policies and risks of the Fund. This section supplements the disclosure in the Funds prospectus and provides additional information on the Funds other investment practices.
The Fund may utilize other investment practices and portfolio management techniques as set forth below.
U.S. Government Securities. The obligations issued or guaranteed by the U.S. government in which the Fund may invest include direct obligations of the U.S. Treasury and obligations issued by U.S. government agencies and instrumentalities. Included among direct obligations of the United States are Treasury Bills, Treasury Notes and Treasury Bonds, which differ in terms of their interest rates, maturities and dates of issuance. Treasury Bills have maturities of less than one year, Treasury Notes have maturities of one to 10 years and Treasury Bonds generally have maturities of greater than 10 years at the date of issuance. Included among the obligations issued by agencies and instrumentalities and government-sponsored enterprises of the United States are: instruments that are supported by the full faith and credit of the United States (such as certificates issued by the Government National Mortgage Association (GNMA)); instruments that are supported by the right of the issuer to borrow from the U.S. Treasury (such as securities of Federal Home Loan Banks); and instruments that are supported by the credit of the instrumentality (such as Fannie Mae and Freddie Mac bonds).
Until recently, Fannie Mae and Freddie Mac were government-sponsored corporations owned entirely by private stockholders. Both issue mortgage-related securities that contain guarantees as to timely payment of interest and principal but that are not backed by the full faith and credit of the U.S. government. The value of the companies securities fell sharply in 2008 due to concerns that the companies did not have sufficient capital to offset losses. In mid-2008, the U.S. Treasury was authorized to increase the size of home loans that Fannie Mae and Freddie Mac could purchase in certain residential areas and, until 2009, to lend Fannie Mae and Freddie Mac emergency funds and to purchase the companies stock. In September 2008, the U.S. Treasury announced that Fannie Mae and Freddie Mac had been placed in conservatorship by the Federal Housing Finance Agency (FHFA), a newly created independent regulator. The U.S. government also took steps to provide additional financial support to such entities. No assurance can be given that the U.S. Treasury initiatives discussed above with respect to the debt and mortgage-backed securities issued by Fannie Mae and Freddie Mac will be successful or that they will continue.
Other U.S. government securities in which the Fund may invest include securities issued or guaranteed by the Federal Housing Administration, Farmers Home Loan Administration, Export-Import Bank of the United States, Small Business Administration, GNMA, General Services Administration, Central Bank for Cooperatives, Federal Farm Credit Banks, Federal Home Loan Banks, Freddie Mac, Federal Intermediate Credit Banks, Federal Land Banks, Fannie Mae, Maritime Administration, Tennessee Valley Authority, District of Columbia Armory Board and Student Loan Marketing Association. The Fund may invest in instruments that are supported by the right of the issuer to borrow from the U.S. Treasury and instruments that are supported solely by the credit of the instrumentality or enterprise. Because the U.S. government is not obligated by law to provide support to an instrumentality it sponsors, the Fund will invest in obligations issued by such an instrumentality only if Credit Suisse determines that the credit risk with respect to the instrumentality does not make its securities unsuitable for investment by the Fund.
Foreign Government Obligations; Securities of Supranational Entities. The Fund may invest in obligations issued or guaranteed by one or more foreign governments or any of their political subdivisions, agencies or instrumentalities that are determined by Credit Suisse to be of comparable quality to the other obligations in which the Fund may invest. Supranational entities include international organizations designated or supported by governmental entities to promote economic reconstruction or development and international banking institutions and related government agencies.
Stripped Securities. The Fund may invest in zero coupon U.S. Treasury securities, which are Treasury Notes and Treasury Bonds that have been stripped of their unmatured interest coupons, the coupons themselves and receipts or certificates representing interests in such stripped debt obligations and coupons. Such stripped securities also are issued by corporations and financial institutions which constitute a proportionate ownership of the issuers pool of underlying securities. A stripped security pays no interest to its holder during its life and is sold at a discount to its face value at maturity. The market prices of such securities generally are more volatile than the market prices of securities that pay interest periodically and are likely to respond to a greater degree to changes in interest rates than coupon securities having similar maturities and credit qualities.
Short Selling. In these transactions, the Fund sells a security it does not own in anticipation of a decline in the market value of the security. To complete the transaction, the Fund must borrow the security to make delivery to the buyer. The Fund is obligated to replace the security borrowed by purchasing it subsequently at the market price at the time of replacement. The price at such time may be more or less than the price at which the security was sold by the Fund, which would result in a loss or gain, respectively.
Securities will not be sold short if, after effect is given to any such short sale, the total market value of all securities sold short would exceed 25% of the value of the Funds net assets. The Fund may not make a short sale which results in the Fund having sold short in the aggregate more than 10% of the outstanding securities of any class of an issuer.
The Fund also may make short sales against the box in which the Fund enters into a short sale of a security it owns.
Until the Fund closes out its short position or replaces the borrowed security, it will: (a) maintain a segregated account, containing permissible liquid assets, at such a level that the amount deposited in the account plus the amount deposited with the broker as collateral always equals the current value of the security sold short; or (b) otherwise cover its short position.
Lending of Portfolio Securities. The Fund may lend securities from its portfolio to brokers, dealers and other financial institutions needing to borrow securities to complete certain transactions. The Fund continues to be entitled to payments in amounts equal to the interest, dividends or other distributions payable on the loaned securities, which affords the Fund an opportunity to earn interest on the amount of the loan and on the loaned securities collateral. Loans of portfolio securities may not exceed 33-1/3% of the value of the Funds total assets, and the Securities and Exchange Commission (SEC) currently requires the Fund to receive collateral consisting of cash, U.S. Government securities or irrevocable letters of credit which will be maintained at all times in an amount equal to at least 100% of the current market value of the loaned securities. According to the SEC, such loans currently must be terminable by the Fund at any time upon specified notice. The Fund might experience risk of loss if the institution with which it has engaged in a portfolio loan transaction breaches its agreement with the Fund. In connection with its securities lending transactions, the Fund may return to the borrower or a third party which is acting as a placing broker, a part of the interest earned from the investment of collateral received for securities loaned.
Generally, the SEC currently requires that the following conditions must be met whenever portfolio securities are loaned: (1) the Fund must receive at least 100% cash or equivalent collateral from the borrower; (2) the borrower must increase such collateral whenever the market value of the securities rises above the level of such collateral; (3) the Fund must be able to terminate the loan at any time; (4) the Fund must receive reasonable interest on the loan, as well as any dividends, interest or other distributions payable on the loaned securities, and any increase in market value; (5) the Fund may pay only reasonable custodian fees in connection with the loan; and (6) while voting rights on the loaned securities may pass to the borrower, the Board of Trustees of the Fund (the Board) must terminate the loan and regain the right to vote the securities if a material event adversely affecting the investment occurs. If the regulatory requirements pertaining to portfolio securities lending were to change, the Fund would comply with such changes as required.
Illiquid Securities. The Fund may purchase securities subject to legal or contractual restriction, or that are otherwise illiquid, without limitation. When purchasing securities that have not been registered under the Securities Act of 1933, as amended, and are not readily marketable, the Fund will endeavor, to the extent practicable, to obtain the right to registration at the expense of the issuer. Generally, there will be a lapse of time between the Funds decision to sell any such security and the registration of the security permitting sale. During any such period, the price of the securities will be subject to market fluctuations. However, where a substantial market of qualified
institutional buyers has developed for certain unregistered securities purchased by the Fund pursuant to Rule 144A under the Securities Act of 1933, as amended, the Fund intends to treat such securities as liquid securities in accordance with procedures approved by the Board. Because it is not possible to predict with assurance how the market for specific restricted securities sold pursuant to Rule 144A will develop, the Board has directed Credit Suisse to monitor carefully the Funds investments in such securities with particular regard to trading activity, availability of reliable price information and other relevant information. To the extent that, for a period of time, qualified institutional buyers cease purchasing restricted securities pursuant to Rule 144A, the Funds investing in such securities may have the effect of increasing the level of illiquidity in its investment portfolio during such period. Substantial illiquid positions in the Fund could adversely impact its ability to convert to open-end status.
Reverse Repurchase Agreements. The Fund may enter into reverse repurchase agreements with respect to its portfolio investments subject to the investment restrictions set forth herein. Reverse repurchase agreements involve the sale of securities held by the Fund with an agreement by the Fund to repurchase the securities at an agreed upon price, date and interest payment. The use by the Fund of reverse repurchase agreements involves many of the same risks of leverage described under Special Considerations and Risk FactorsLeverage Risk and Use of Leverage in the prospectus since the proceeds derived from such reverse repurchase agreements may be invested in additional securities. At the time the Fund enters into a reverse repurchase agreement, it may establish and maintain a segregated account with the custodian containing liquid instruments having a value not less than the repurchase price (including accrued interest). If the Fund establishes and maintains such a segregated account, a reverse repurchase agreement will not be considered a borrowing by the Fund; however, under circumstances in which the Fund does not establish and maintain such a segregated account, such reverse repurchase agreement will be considered a borrowing for the purpose of the Funds limitation on borrowings. Reverse repurchase agreements involve the risk that the market value of the securities acquired in connection with the reverse repurchase agreement may decline below the price of the securities the Fund has sold but is obligated to repurchase. Also, reverse repurchase agreements involve the risk that the market value of the securities retained in lieu of sale by the Fund in connection with the reverse repurchase agreement may decline in price.
If the buyer of securities under a reverse repurchase agreement files for bankruptcy or becomes insolvent, such buyer or its trustee or receiver may receive an extension of time to determine whether to enforce the Funds obligation to repurchase the securities, and the Funds use of the proceeds of the reverse repurchase agreement may effectively be restricted pending such decision. Also, the Fund would bear the risk of loss to the extent that the proceeds of the reverse repurchase agreement are less than the value of the securities subject to such agreement.
Securities of Other Investment Companies. The Fund may invest in securities of other investment companies to the extent permitted under the Investment Company Act of 1940, as amended (1940 Act), or pursuant to an SEC order. Presently, under the 1940 Act, the Fund may hold securities of another investment company in amounts which (a) do not exceed 3% of the total outstanding voting stock of such company, (b) do not exceed 5% of the value of the Funds total assets and (iii) when added to all other investment company securities held by the Fund, do not exceed 10% of the value of the Funds total assets. As a shareholder of another investment company, each Fund would bear, along with other shareholders, its pro rata portion of the other investment companys expenses, including advisory fees. These expenses would be in addition to the advisory and other expenses that a Fund bears directly in connection with its own operations.
Derivatives. The Fund may invest in, or use, derivatives (Derivatives), including as specified above, credit default swaps. These are financial instruments that derive their performance, at least in part, from the performance of an underlying asset, index or interest rate. The Derivatives the Fund may use include options, futures contracts, forward contracts, securities and swaps. The Fund may invest in, or enter into, Derivatives for a variety of reasons, including to hedge certain market risks, to provide a substitute for purchasing or selling particular securities or to increase potential income gain. Derivatives may provide a cheaper, quicker or more specifically focused way for the Fund to invest than traditional securities would.
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 purchasing or selling specific securities.
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 Funds performance.
If the Fund invests in Derivatives at inopportune times or judges market conditions incorrectly, such investments may lower the Funds return or result in a loss. The Fund also could experience losses if its Derivatives were poorly correlated with its 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.
Derivatives may be purchased on established exchanges or through privately negotiated transactions referred to as over-the-counter Derivatives. Exchange-traded Derivatives generally are guaranteed by the clearing agency that is the issuer or counterparty to such Derivatives. This guarantee usually is supported by a daily payment system (i.e., variation margin requirements) operated by the clearing agency in order to reduce overall credit risk. As a result, unless the clearing agency defaults, there is relatively little counterparty credit risk associated with Derivatives purchased on an exchange. By contrast, no clearing agency guarantees over-the-counter Derivatives. Therefore, each party to an over-the-counter Derivative bears the risk that the counterparty will default. Accordingly, Credit Suisse will consider the creditworthiness of counterparties to over-the-counter Derivatives in the same manner as it would review the credit quality of a security to be purchased by the Fund. Over-the-counter 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.
Futures and Options on Futures Transactions.
In General. The Fund may enter into futures contracts and options on futures contracts in U.S. domestic markets, such as the Chicago Board of Trade and the International Monetary Market of the Chicago Mercantile Exchange or on exchanges located outside the United States, such as the London International Financial Futures Exchange and the Sydney Futures Exchange Limited. Foreign markets may offer advantages such as trading opportunities or arbitrage possibilities not available in the United States. Foreign markets, however, may have greater risk potential than domestic markets. For example, some foreign exchanges are principal markets so that no common clearing facility exists and an investor may look only to the broker for performance of the contract. In addition, any profits that the Fund might realize in trading could be eliminated by adverse changes in the exchange rate, or the Fund could incur losses as a result of those changes. Transactions on foreign exchanges may include both commodities which are traded on domestic exchanges and those that are not. Unlike trading on domestic commodity exchanges, trading on foreign commodity exchanges is not regulated by the Commodity Futures Trading Commission (CFTC).
Engaging in these transactions involves risk of loss to the Fund that could adversely affect the value of the Funds net assets. Although the Fund intends to purchase or sell futures contracts and options thereon only if there is an active market for such contracts, no assurance can be given that a liquid market will exist for any particular contract at any particular time. Many futures exchanges and boards of trade limit the amount of fluctuation permitted in futures contract or option prices during a single trading day. Once the daily limit has been reached in a particular contract, no trades may be made that day at a price beyond that limit or trading may be suspended for specified periods during the trading day. Futures contract or option prices could move to the limit for several consecutive trading days with little or no trading, thereby preventing prompt liquidation of futures or option positions and potentially subjecting the Fund to substantial losses. Successful use of futures and options on futures by the Fund also is subject to the ability of Credit Suisse to predict correctly movements in the direction of the relevant market and, to the extent the transaction is entered into for hedging purposes, to ascertain the appropriate correlation between the transaction being hedged and the price movements of the futures contract or option thereon. For example, if the Fund uses futures to hedge against the possibility of a decline in the market value of securities held in its portfolio and the prices of such securities instead increase, the Fund will lose part or all of the benefit of the increased value of securities that it has hedged because it will have offsetting losses in its futures positions. Furthermore, if in such circumstances the Fund has insufficient cash, it may have to sell securities to meet daily variation margin requirements. The Fund may have to sell such securities at a time when it may be disadvantageous to do so.
Pursuant to regulations and/or published positions of the SEC, the Fund may be required to segregate cash or other liquid assets in connection with its futures and options on futures transactions in an amount generally equal to the value of the underlying commodity. The segregation of such assets will have the effect of limiting the Funds ability otherwise to invest those assets.
To the extent that the Fund enters into futures contracts, options on futures contracts and options on foreign currencies traded on a CFTC-regulated exchange, that are not for bona fide hedging purposes (as defined by the
CFTC), the aggregate initial margin and premiums required to establish these positions (excluding the amount by which options are in-the-money at the time of purchase) may not exceed 5% of the liquidation value of the Funds portfolio, after taking into account unrealized profits and unrealized losses on any contracts the Fund has entered into. (In general, a call option on a futures contract is in-the-money if the value of the underlying futures contract exceeds the exercise (strike) price of the call; a put option on a futures contract is in-the-money if the value of the underlying futures contract is exceeded by the strike price of the put). This policy does not limit to 5% the percentage of the Funds assets that are at risk in futures contracts, options on futures contracts and currency options.
Specific Futures Transactions. The Fund may purchase and sell interest rate futures contracts. An interest rate future obligates the Fund to purchase or sell an amount of a specific debt security at a future date at a specific price.
The Fund may purchase and sell currency futures. A foreign currency future obligates the Fund to purchase or sell an amount of a specific currency at a future date at a specific price. The Fund may purchase and sell stock index and debt futures contracts. An index future obligates the Fund to pay or receive an amount of cash equal to a fixed dollar amount specified in the futures contract multiplied by the difference between the settlement price of the contract on the contracts last trading day and the value of the index based on the prices of the securities that comprise it at the opening of trading in such securities on the next business day.
The Fund may also purchase and sell options on interest rate, currency and index futures. When the Fund writes an option on a futures contract, it becomes obligated, in return for the premium paid, to assume a position in the futures contract at a specified exercise price at any time during the terms of the option. If the Fund writes a call, it assumes a short futures position. If it writes a put, it assumes a long futures position. When the Fund purchases an option on a futures contract, it acquires the right, in return for the premium it pays, to assume a position in the futures contract (a long position if the option is a call and a short position if the option is a put).
Forward Currency Contracts. The Fund may enter into forward currency contracts to purchase or sell foreign currencies for a fixed amount of U.S. dollars or another foreign currency. A forward currency contract involves an obligation to purchase or sell a specific currency at a future date, which may be any fixed number of days (term) from the date of the forward currency contract agreed upon by the parties, at a price set at the time the forward currency contract is entered into. Forward currency contracts are traded directly between currency traders (usually large commercial banks) and their customers.
The Fund may purchase a forward currency contract to lock in the U.S. dollar price of a security denominated in a foreign currency that the Fund intends to acquire. The Fund may sell a forward currency contract to lock in the U.S. dollar equivalent of the proceeds from the anticipated sale of a security or a dividend or interest payment denominated in a foreign currency. The Fund may also use forward currency contracts to shift the Funds exposure to foreign currency exchange rate changes from one currency to another. For example, if the Fund owns securities denominated in a foreign currency and Credit Suisse believes that currency will decline relative to another currency, it might enter into a forward currency contract to sell the appropriate amount of the first foreign currency with payment to be made in the second currency. The Fund may also purchase forward currency contracts to enhance income when Credit Suisse anticipates that the foreign currency will appreciate in value but securities denominated in that currency do not present attractive investment opportunities.
The Fund may also use forward currency contracts to hedge against a decline in the value of existing investments denominated in foreign currency. Such a hedge would tend to offset both positive and negative currency fluctuations, but would not offset changes in security values caused by other factors. The Fund could also hedge the position by entering into a forward currency contract to sell another currency expected to perform similarly to the currency in which the Funds existing investments are denominated. This type of hedge could offer advantages in terms of cost, yield or efficiency, but may not hedge currency exposure as effectively as a simple hedge into U.S. dollars. This type of hedge may result in losses if the currency used to hedge does not perform similarly to the currency in which the hedged securities are denominated.
The Fund may also use forward currency contracts in one currency or a basket of currencies to attempt to hedge against fluctuations in the value of securities denominated in a different currency if Credit Suisse anticipates that there will be a correlation between the two currencies.
The cost to the Fund of engaging in forward currency contracts varies with factors such as the currency involved, the length of the contract period and the market conditions then prevailing. Because forward currency
contracts are usually entered into on a principal basis, no fees or commissions are involved. When the Fund enters into a forward currency contract, it relies on the counterparty to make or take delivery of the underlying currency at the maturity of the contract. Failure by the counterparty to do so would result in the loss of some or all of any expected benefit of the transaction.
Secondary markets generally do not exist for forward currency contracts, with the result that closing transactions generally can be made for forward currency contracts only by negotiating directly with the counterparty. Thus, there can be no assurance that the Fund will in fact be able to close out a forward currency contract at a favorable price prior to maturity. In addition, in the event of insolvency of the counterparty, the Fund might be unable to close out a forward currency contract. In either event, the Fund would continue to be subject to market risk with respect to the position, and would continue to be required to maintain a position in securities denominated in the foreign currency or to maintain cash or liquid assets in a segregated account.
The precise matching of forward currency contract amounts and the value of the securities involved generally will not be possible because the value of such securities, measured in the foreign currency, will change after the forward currency contract has been established. Thus, the Fund might need to purchase or sell foreign currencies in the spot (cash) market to the extent such foreign currencies are not covered by forward currency contracts. The projection of short-term currency market movements is extremely difficult, and the successful execution of a short-term hedging strategy is highly uncertain.
Interest Rate Swaps. Interest rate swaps involve the exchange by the Fund with another party of their respective commitments to pay or receive interest (for example, an exchange of floating rate payments for fixed rate payments). The exchange commitments can involve payments to be made in the same currency or in different currencies. The use of interest rate swaps is a highly specialized activity that involves investment techniques and risks different from those associated with ordinary portfolio security transactions. If Credit Suisse is incorrect in its forecasts of market values, interest rates and other applicable factors, the investment performance of the Fund would diminish compared with what it would have been if these investment techniques were not used. Moreover, even if Credit Suisse is correct in its forecasts, there is a risk that the swap position may correlate imperfectly with the price of the asset or liability being hedged. There is no limit on the amount of interest rate swap transactions that may be entered into by the Fund. These transactions do not involve the delivery of securities or other underlying assets or principal. Accordingly, the risk of loss with respect to interest rate swaps is limited to the net amount of interest payments that the Fund is contractually obligated to make. If the other party to an interest rate swap defaults, the Funds risk of loss consists of the net amount of interest payments that the Fund contractually is entitled to receive.
Credit Derivatives. The Fund may, but is not obligated to, engage in credit derivative transactions. There are two broad categories of credit derivatives: default price risk derivatives and market spread derivatives. Default price risk derivatives are linked to the price of reference securities or loans after a default by the issuer or borrower, respectively. Market spread derivatives are based on the risk that changes in market factors, such as credit spreads, can cause a decline in the value of a security, loan or index. There are three basic transactional forms for credit derivatives: swaps, options and structured instruments. 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 Credit Suisse 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 Credit Suisse is correct in its forecasts, there is a risk that a credit derivative position, may correlate imperfectly with the price of the asset or liability being hedged. There is no limit on the amount of credit derivative transactions that may be entered into by the Fund. The Funds risk of loss in a credit derivative transaction varies with the form of the transaction. For example, if the Fund purchases a default option on a security, and if no default occurs with respect to the security, the Funds loss is limited to the premium it paid for the default option. In contrast, if there is a default by the grantor of a default option, the Funds loss will include both the premium that it paid for the option and the decline in value of the underlying security that the default option hedged.
OptionsIn General. The Fund may purchase and write (i.e., sell) call or put options with respect to specific securities. A call option gives the purchaser of the option the right to buy, and obligates the writer to sell, the underlying security or securities at the exercise price at any time during the option period, or at a specific date. Conversely, a put option gives the purchaser of the option the right to sell, and obligates the writer to buy, the underlying security or securities at the exercise price at any time during the option period, or at a specific date.
A covered call option written by the Fund is a call option with respect to which the Fund owns the underlying security or otherwise covers the transaction by segregating cash or other liquid assets. A put option
written by the Fund is covered when, among other things, cash or liquid assets having a value equal to or greater than the exercise price of the option are placed in a segregated account with the Funds custodian to fulfill the obligation undertaken. The principal reason for writing covered call and put options is to realize, through the receipt of premiums, a greater return than would be realized on the underlying securities alone. The Fund receives a premium from writing covered call or put options which it retains whether or not the option is exercised.
There is no assurance that sufficient trading interest to create a liquid secondary market on a securities exchange will exist for any particular option or at any particular time, and for some options no such secondary market may exist. A liquid secondary market in an option may cease to exist for a variety of reasons. In the past, for example, higher than anticipated trading activity or order flow, or other unforeseen events, at times have rendered certain of the clearing facilities inadequate and resulted in the institution of special procedures, such as trading rotations, restrictions on certain types of orders or trading halts or suspensions in one or more options. There can be no assurance that similar events, or events that may otherwise interfere with the timely execution of customers orders, will not recur. In such event, it might not be possible to effect closing transactions in particular options. If, as a covered call option writer, the Fund is unable to effect a closing purchase transaction in a secondary market, it will not be able to sell the underlying security until the option expires or it delivers the underlying security upon exercise or it otherwise covers its position.
Specific Options Transactions. The Fund may purchase and sell call and put options on foreign currency. These options convey the right to buy or sell the underlying currency at a price which is expected to be lower or higher than the spot price of the currency at the time the option is exercised or expires.
The Fund may purchase and sell call and put options in respect of specific securities (or groups or baskets of specific securities) or indices listed on national securities exchanges or traded in the over-the-counter market. An option on an index is similar to an option in respect of specific securities, except that settlement does not occur by delivery of the securities comprising he index. Instead, the option holder receives an amount of cash if the closing level of the index upon which the option is based is greater than, in the case of a call, or less than, in the case of a put, the exercise price of the option. Thus, the effectiveness of purchasing or writing index options will depend upon price movements in the level of the index rather than the price of a particular security.
The Fund also may purchase cash-settled options on swaps in pursuit of its investment objectives. A cash settled option on a swap gives the purchaser the right, but not the obligation, in return for the premium paid, to receive an amount of cash equal to the value of the underlying swap as of the exercise date. These options typically are purchased in privately negotiated transactions from financial institutions, including securities brokerage firms.
Successful use by the Fund of options will be subject to the ability of Credit Suisse to predict correctly movements in the prices of individual securities, the securities markets generally, foreign currencies, or interest rates. To the extent such predictions are incorrect, the Fund may incur losses.
Future Developments. The Fund may take advantage of opportunities in the area of options and futures contracts and options on futures contracts and any other Derivatives that are not presently contemplated for use by the Fund or that are not currently available but that may be developed, to the extent such opportunities are both consistent with the Funds investment objectives and legally permissible for the Fund.
Forward Commitments; When-Issued Securities. The Fund may purchase securities on a forward commitment or when-issued basis, which means that delivery and payment take place a number of days after the date of the commitment to purchase. The payment obligation and the interest rate receivable on a forward commitment or when-issued security are fixed when the Fund enters into the commitment, but the Fund does not make payment until it receives delivery from the counterparty. The Fund will commit to purchase such securities only with the intention of actually acquiring the securities, but the Fund may sell these securities before the settlement date if it is deemed advisable. The Fund will set aside in a segregated account of the Fund permissible liquid assets at least equal at all times to the amount of the commitments.
Securities purchased on a forward commitment or when-issued basis are subject to changes in value (generally changing in the same way, i.e., appreciating when interest rates decline and depreciating when interest rates rise) based upon the publics perception of the creditworthiness of the issuer and changes, real or anticipated, in the level of interest rates. Securities purchased on a forward commitment or when-issued basis may expose the Fund to risks because they may experience such fluctuations prior to their actual delivery. Purchasing securities on a when-issued basis can involve the additional risk that the yield available in the market when the delivery takes place actually may be higher than that obtained in the transaction itself. Purchasing securities on a forward commitment or
when-issued basis when the Fund is fully or almost fully invested may result in greater potential fluctuation in the value of the Funds net assets and its net asset value per Share.
INVESTMENT RESTRICTIONS
In addition to its investment objectives, the Fund has adopted investment restrictions numbered 1 through 6 as fundamental policies, which cannot be changed without approval by the holders of a majority (as defined in the 1940 Act) of the Funds outstanding voting shares. Unless expressly designated as fundamental, all other policies of the Fund may be changed by the Board without shareholder approval. The percentage restrictions set forth below, as well as those contained elsewhere in this prospectus, apply at the time a transaction is effected, and a subsequent change in a percentage resulting from market fluctuations or any other cause other than an action by the Fund will not require the Fund to dispose of portfolio securities or take other action to satisfy the percentage restriction. The Fund may not:
1. Invest more than 25% of the value of its total assets in the securities of issuers in a single industry, provided that there shall be no limitation on the purchase of obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities.
2. Invest in commodities or commodity contracts, except that the Fund may purchase and sell commodities to the maximum extent permitted by regulations of the CFTC (or any successor) that would not require registration of the Fund as a commodity pool.
3. Purchase, hold or deal in real estate, or oil, gas or other mineral leases or exploration or development programs, but the Fund may purchase and sell securities that are secured by real estate or issued by companies that invest or deal in real estate or real estate investment trusts. If real estate is delivered as a result of foreclosure, the Fund may hold such property until it can dispose of it in an orderly manner at a reasonable price.
4. Issue senior securities or borrow money except as permitted by the 1940 Act.
5. Make loans to others, except through the purchase of debt obligations and the entry into repurchase agreements. However, the Fund may lend its portfolio securities in an amount not to exceed 33-1/3% of the value of its total assets. Any loans of portfolio securities will be made according to guidelines established by the SEC and the Board.
6. Act as an underwriter of securities of other issuers, except to the extent the Fund may be deemed an underwriter under the Securities Act of 1933, as amended, by virtue of disposing of portfolio securities.
7. Invest in the securities of a company for the purpose of exercising management or control, but the Fund will vote the securities it owns in its portfolio as a shareholder in accordance with its views.
8. Pledge, mortgage or hypothecate its assets, except to the extent necessary to secure permitted borrowings or leverage and to the extent necessary related to the purchase of securities on a when-issued or forward commitment basis, the deposit of assets in escrow in connection with writing covered options, and collateral and initial or variation margin or similar arrangements with respect to options, forward contracts, futures contracts, options on futures contracts, swaps, caps, collars, floors and other derivative instruments.
TRUSTEES AND OFFICERS
The Funds business and affairs are managed under the direction of the Funds Board of Trustees, including the supervision of duties performed for the Fund under the investment advisory agreement with Credit Suisse (the Investment Advisory Agreement). The Trustees set broad policies for the Fund and choose its officers, who serve at the Boards discretion. The Board currently consists of five Trustees, all of which are not interested persons as defined in Section 2(a)(19) of the 1940 Act (Independent Trustees). The Board of Trustees is divided into three classes, each having a term of three years. Each year the term of office of one class expires and the successor or successors elected to such class will serve for a three-year term. Shareholders who wish to send communications to the Board should send them to the address of the Fund (Eleven Madison Avenue, New York, New York 10010) and to the attention of the Board c/o the Secretary of the Fund. All such communications will be directed to the Trustees attention.
Trustees
The following table includes information regarding the Funds Trustees, their principal occupations and other affiliations during the past five years, the number of portfolios in the Fund Complex that they oversee, and other information about them. The Fund Complex includes those registered investment companies that share Credit Suisse as investment adviser and that hold themselves out to the public as related companies for purposes of investment and investor services.
Name, Address |
|
Position(s) |
|
Term |
|
Principal Occupation(s) |
|
Number |
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Other Directorships |
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|
|
|
|
|
|
|
|
Independent Trustees |
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
Enrique
Arzac |
|
Chairman of the Board of Trustees; Audit Committee Member and Nominating Committee Chairman |
|
Chairman since 2005 and Trustee since 2001; current term ends at the 2011 annual meeting |
|
Professor
of Finance and Economics, Graduate School of Business, |
|
13 |
|
Director of Epoch Holding Corporation (an investment management and investment advisory services company); Director of The Adams Express Company, Petroleum and Resources Corporation, Aberdeen Chile Fund, Inc., Aberdeen Indonesia Fund, Inc., Aberdeen Israel Fund, Inc., Aberdeen Latin America Equity Fund, Inc. and Aberdeen Emerging Markets Telecommunications Fund, Inc. (each a closed-end investment company); Director of Starcomms PLC (telecommunications company) |
|
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|
|
|
|
|
|
|
|
Terry
F. Bovarnick |
|
Trustee; Audit and Nominating Committee Member |
|
Since 2006; current term ends at the 2011 annual meeting |
|
Currently retired. Consultant to Chartwell Investment Partners from March 2002 to March 2003. |
|
2 |
|
None |
|
|
|
|
|
|
|
|
|
|
|
James
J. Cattano |
|
Trustee; Audit Committee Chairman and Nominating Committee Member |
|
Since 2006; current term ends at the 2012 annual meeting |
|
President, Primary Resources, Inc. (an international trading and manufacturing company specializing in the sale of agricultural commodities throughout Latin American markets) since October 1996. |
|
2 |
|
Director of Aberdeen Chile Fund, Inc., Aberdeen Indonesia Fund, Inc., Aberdeen Israel Fund, Inc., Aberdeen Latin America Equity Fund, Inc. and Aberdeen Emerging Markets Telecommunications Fund, Inc. (each a closed-end investment company) |
|
|
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|
|
|
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Lawrence
J. Fox |
|
Trustee and Nominating Committee Member |
|
Since 2001; current term ends at the 2013 annual meeting |
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Partner of Drinker Biddle & Reath (law firm) since 1972. |
|
2 |
|
Director of Aberdeen Chile Fund, Inc., Aberdeen Indonesia Fund, Inc., Aberdeen Israel Fund, Inc. and Aberdeen Latin America Equity Fund, Inc. (each a closed-end investment company) |
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Steven
N. Rappaport |
|
Trustee; Audit and Nominating Committee Member |
|
Since 2005; current term ends at the 2012 annual meeting |
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Partner of Lehigh Court, LLC and RZ Capital (private investment firms) from July 2002 to present. |
|
13 |
|
Director of iCAD, Inc. (surgical and medical instruments and apparatus company); Director of Presstek, Inc. (digital imaging technologies company); Director of Wood Resources, LLC. (plywood manufacturing company); Director of Aberdeen Chile Fund, Inc., |
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Aberdeen Indonesia Fund, Inc., Aberdeen Israel Fund, Inc., Aberdeen Latin America Equity Fund, Inc. and Aberdeen Emerging Markets Telecommunications Fund, Inc. (each a closed-end investment company); Director of Prism Medical (medical devices) from 2004 to 2005 |
As of [ ], 2010, none of the Trustees or their immediate family members owned beneficially or of record any class of securities in Credit Suisse or in a person (other than a registered investment company) directly or indirectly controlling, controlled by or under common control with Credit Suisse.
Officers
The following tables set forth certain information regarding the officers of the Fund. The current terms of office of the Funds officers will end at the Boards meeting following the Funds next annual meeting of shareholders.
|
|
|
|
Term of Office and |
|
|
Name, Address |
|
Position(s) Held |
|
Length of Time |
|
Principal Occupation During |
(Year of Birth) |
|
with Fund |
|
Served |
|
Past 5 Years |
|
|
|
|
|
|
|
John G. Popp Credit Suisse Asset Management, LLC Eleven Madison Avenue New York, New York 10010 (1956) |
|
Chief Executive Officer and President |
|
Since 2010 |
|
Managing Director of Credit Suisse; Group Manager and Senior Portfolio Manager for Performing Credit Strategies; Associated with Credit Suisse since 1997; Officer of other Credit Suisse Funds. |
|
|
|
|
|
|
|
Thomas J. Flannery Credit Suisse Asset Management, LLC Eleven Madison Avenue New York, New York 10010 (1974) |
|
Chief Investment Officer |
|
Since 2010 |
|
Managing Director of Credit Suisse; Associated with Credit Suisse Group AG since 2000; Officer of other Credit Suisse Funds. |
|
|
|
|
|
|
|
Emidio Morizio Credit Suisse Asset Management, LLC Eleven Madison Avenue New York, New York 10010 (1966) |
|
Chief Compliance Officer |
|
Since 2004 |
|
Managing Director and Global Head of Compliance of Credit Suisse; Associated with Credit Suisse since July 2000; Officer of other Credit Suisse Funds. |
|
|
|
|
|
|
|
Michael A. Pignataro Credit Suisse Asset Management, LLC Eleven Madison Avenue New York, New York 10010 (1959) |
|
Chief Financial Officer |
|
Since 1999 |
|
Director and Director of Fund Administration of Credit Suisse; Associated with Credit Suisse or its predecessor since 1984; Officer of other Credit Suisse Funds. |
|
|
|
|
|
|
|
[ ] Credit Suisse Asset Management, LLC Eleven Madison Avenue New York, New York 10010 ([ ]) |
|
Chief Legal Officer |
|
Since 2010 |
|
[ ] |
|
|
|
|
|
|
|
Cecilia Chan Credit Suisse Asset Management, LLC Eleven Madison Avenue New York, New York 10010 (1973) |
|
Treasurer |
|
Since 2008 |
|
Vice President of Credit Suisse since 2009; Assistant Vice President of Credit Suisse from June 2007 to December 2008; Associated with Alliance Bernstein L.P. from January 2007 to May 2007; Associated with Credit Suisse from August 2000 to December 2006; Officer of other Credit Suisse Funds. |
[ ] Credit Suisse Asset Management, LLC Eleven Madison Avenue New York, New York 10010 ([ ]) |
|
Secretary |
|
Since 2010 |
|
[ } |
Board Meetings
During the fiscal year ended October 31, 2009, the Board convened ten times. Each Trustee attended at least seventy-five percent of the aggregate number of meetings of the Board and any committees on which he or she served during the period for which he or she was a Trustee.
Audit Committee
All of the Trustees, except for Lawrence Fox, constitute the Funds Audit Committee, which is composed of Trustees who are not interested persons of the Fund and who are independent (as such term is defined by the listing standards of the New York Stock Exchange Amex (NYSE Amex)). The Audit Committee convened four times during the fiscal year ended October 31, 2009. The Audit Committee advises the full Board with respect to accounting, auditing and financial matters affecting the Fund. Pursuant to the Audit Committee Charter adopted by the Funds Board (a copy of which was included as Appendix B to the Funds proxy statement dated December 28, 2007), the Audit Committee is responsible for conferring with the Funds independent registered public accounting firm, reviewing annual financial statements, approving the selection of the Funds independent registered public accounting firm and overseeing the Funds internal controls. The Funds Audit Committee Charter also contains provisions relating to the pre-approval by the Audit Committee of certain non-audit services to be provided by the Funds independent registered public accounting firm to the Fund and to Credit Suisse and certain of its affiliates.
Nominating Committee
All of the Trustees constitute the Funds Nominating Committee, which is composed of Trustees who are not interested persons of the Fund and who are independent (as such term is defined by the listing standards of NYSE Amex). The Nominating Committee met three times during the fiscal year ended October 31, 2009. The Nominating Committee selects and nominates new Trustees. The Board has adopted a Nominating Committee Charter (a copy of which was included as Appendix A to the Funds proxy statement dated December 28, 2007). In nominating candidates, the Nominating Committee will take into consideration such factors as it deems appropriate. These factors may include judgment, skill, diversity, experience with investment companies and other organizations of comparable purpose, complexity, size and subject to similar legal restrictions and oversight, the interplay of the candidates experience with the experience of other Board members, and the extent to which the candidate would be a desirable addition to the Board and any committees thereof. With respect to diversity, the Nominating Committee considers whether a candidates background, experience and skills will contribute to the diversity of the Board.
The Nominating Committee will consider candidates submitted by shareholders or from other sources it deems appropriate. Any recommendation should be submitted to the Secretary of the Fund, c/o Credit Suisse Asset Management, LLC, Eleven Madison Avenue, New York, New York 10010. Any submission should include at a minimum the following information: As to each individual proposed for election or re-election as Trustee, the name, age, business address, residence address and principal occupation or employment of such individual, the class, series and number of Shares of the Fund that are beneficially owned by such individual, the date such shares were acquired and the investment intent of such acquisition, whether such shareholder believes such individual is, or is not, an interested person of the Fund (as defined in the 1940 Act), and information regarding such individual that is sufficient, in the discretion of the Nominating Committee, to make such determination, and all other information relating to such individual that is required to be disclosed in solicitation of proxies for election of Trustees in an election contest (even if an election contest is not involved) or is otherwise required, in each case pursuant to Regulation 14A (or any successor provision) under the Securities Exchange Act of 1934 (1934 Act), and the rules thereunder (including such individuals written consent to being named in the proxy statement as a nominee and to serving as a Trustee (if elected)). In the case of the Fund holding a meeting of shareholders, any such submission, in order to be considered for inclusion in the Funds proxy statement, should be submitted by a date not later than the 120th calendar day before the date the Funds proxy statement was released to security holders in connection with the Funds previous years annual meeting or, if the Fund has changed the meeting date by more than 30 days or if no meeting was held the previous year, within a reasonable time before the Fund begins to print and mail its proxy
statement. Any such submission must also be submitted by such date and contain such information as may be specified in the Funds By-laws, or as required by any relevant stock exchange listing standards.
The Fund does not have a Compensation Committee.
Qualification of Board of Trustees
The Board believes that each Trustees experience, qualifications, attributes or skills on an individual basis and in combination with those of the other Trustees lead to the conclusion that each Trustee should serve in such capacity. Among the attributes common to all Trustees are their ability to review critically, evaluate, question and discuss information provided to them, to interact effectively with the other Trustees, Credit Suisse, other service providers, counsel and the independent registered public accounting firm, and to exercise effective business judgment in the performance of their duties as Trustees. A Trustees ability to perform his or her duties effectively may have been attained through the Trustees business, consulting, public service and/or academic positions; experience from service as a board member of the Fund and the other funds in the Fund Complex, other investment funds, public companies, or non-profit entities or other organizations; educational background or professional training; and/or other life experiences. In addition to these shared characteristics, set forth below is a brief discussion of the specific experience, qualifications, attributes or skills of each Trustee that support the conclusion that each person should serve as a Trustee.
Enrique R. Arzac. Mr. Arzac has been a Trustee since 2001, Chairman of the Board of Trustees since 2005, and Chairman of the Nominating Committee since 2003. In addition, he has over 30 years of business and consulting experience in the areas of finance, trade and economics and academic experience as a professor of finance and economics. Mr. Arzac also currently serves on the boards of directors of other funds, including funds in the Fund Complex, and on the board of directors of an investment management and investment advisory services company.
Terry F. Bovarnick. Ms. Bovarnick has been a Trustee since 2006. In addition, she has over 30 years of executive and business experience in the investment industry. Ms. Bovarnick also serves on the board of directors of another closed-end fund in the Fund Complex.
James J. Cattano. Mr. Cattano has been a Trustee since 2006, and Chairman of the Audit Committee since 2009. In addition, he has 40 years of executive and business and academic experience in the international trading and manufacturing industry. Mr. Cattano also currently serves on the boards of directors of other closed-end funds, including a closed-end fund in the Fund Complex.
Lawrence J. Fox. Mr. Fox has been a Trustee since 2001. In addition, he has close to 40 years of experience as an attorney. Mr. Fox also currently serves on the boards of directors of other closed-end funds, including a closed-end fund in the Fund Complex.
Steven N. Rappaport. Mr. Rappaport has been a Trustee since 2005. In addition, he has 40 years of business experience in the financial services industry. Mr. Rappaport also serves on the boards of directors of other funds, including funds in the Fund Complex.
Specific details regarding each Trustees principal occupations during the past five years are included in the table above.
Leadership Structure and Oversight Responsibilities
Overall responsibility for oversight of the Fund rests with the Board. The Fund has engaged Credit Suisse to manage the Fund on a day-to-day basis. The Board is responsible for overseeing Credit Suisse and other service providers in the operations of the Fund in accordance with the provisions of the 1940 Act, applicable provisions of state and other laws and the Funds charter. The Board is currently composed of five members, each of whom is an Independent Trustee. The Board meets in-person at regularly scheduled quarterly meetings each year. In addition, the Board may hold special in-person or telephonic meetings or informal conference calls to discuss specific matters that may arise or require action between regular meetings. As described below, the Board has established a Nominating Committee and an Audit Committee, and may establish ad hoc committees or working groups from time to time, to assist the Board in fulfilling its oversight responsibilities. The Independent Trustees have also engaged independent legal counsel to assist them in performing their oversight responsibilities.
The Board has appointed Enrique Arzac, an Independent Trustee, to serve in the role of Chairman. The Chairmans role is to preside at all meetings of the Board and to act as a liaison with Credit Suisse, other service
providers, counsel and other Trustees generally between meetings. The Chairman serves as a key point person for dealings between management and the Trustees. The Chairman may also perform such other functions as may be delegated by the Board from time to time. The Board reviews matters related to its leadership structure annually. The Board has determined that the Boards leadership structure is appropriate because it allows the Board to exercise informed and independent judgment over the matters under its purview and it allocates areas of responsibility among committees of Trustees and the full Board in a manner that enhances effective oversight.
The Fund is subject to a number of risks, including investment, compliance, operational and valuation risks, among others. Risk oversight forms part of the Boards general oversight of the Fund and is addressed as part of various Board and committee activities. Day-to-day risk management functions are subsumed within the responsibilities of Credit Suisse and other service providers (depending on the nature of the risk), which carry out the Funds investment management and business affairs. Credit Suisse and other service providers employ a variety of processes, procedures and controls to identify various events or circumstances that give rise to risks, to lessen the probability of their occurrence and/or to mitigate the effects of such events or circumstances if they do occur. Each of Credit Suisse and other service providers have their own independent interest in risk management, and their policies and methods of risk management will depend on their functions and business models. The Board recognizes that it is not possible to identify all of the risks that may affect the Fund or to develop processes and controls to eliminate or mitigate their occurrence or effects. As part of its regular oversight of the Fund, the Board interacts with and reviews reports from, among others, Credit Suisse, the Funds Chief Compliance Officer, the Funds independent registered public accounting firm and counsel, as appropriate, regarding risks faced by the Fund and applicable risk controls. The Board may, at any time and in its discretion, change the manner in which it conducts risk oversight.
Ownership of the Fund by Trustees
The following table provides information concerning the number and dollar range of equity securities owned beneficially by each Trustee as of [ ], 2010:
|
|
|
|
Aggregate Dollar Range of |
|
|
|
|
Equity Securities in All Funds |
|
|
Dollar Range of |
|
Overseen by Trustees |
|
|
Equity Securities in |
|
in Credit Suisse Family |
Name of Trustee |
|
the Fund*(1) |
|
of Investment Companies*(1)(2) |
|
|
|
|
|
Enrique Arzac |
|
[ ] |
|
[ ] |
Terry F. Bovarnick |
|
[ ] |
|
[ ] |
James J. Cattano |
|
[ ] |
|
[ ] |
Lawrence J. Fox |
|
[ ] |
|
[ ] |
Steven N. Rappaport |
|
[ ] |
|
[ ] |
* |
|
Key to Dollar Ranges: |
A. |
|
None |
B. |
|
$1 - $10,000 |
C. |
|
$10,001 - $50,000 |
D. |
|
$50,001 - $100,000 |
E. |
|
over $100,000 |
(1) Beneficial Ownership is determined in accordance with Rule 16a-1(a)(2) promulgated under the 1934 Act.
(2) Credit Suisse Family of Investment Companies means those registered investment companies that share Credit Suisse as their investment adviser and that hold themselves out to investors as related companies for purposes of investment and investor services.
As of [ ], 2010, the Funds Trustees and officers, in the aggregate, own less than 1% of the Funds outstanding equity securities.
Trustee Compensation
During the fiscal year ended October 31, 2009, each Trustee who was not a director, officer, partner, co-partner or employee of Credit Suisse, State Street or any affiliate thereof, received an annual fee as set out below and $1,000 for each meeting of the Board attended by him or her and was reimbursed for expenses incurred in connection with his or her attendance at the Funds Board meetings. The annual fee rate was $14,300. The total remuneration paid or accrued by the Fund during the fiscal year ended October 31, 2009 to all Trustees was $113,525. The Independent Chairman receives an additional annual fee of $5,000 and the Audit Committee Chairman receives an additional annual fee of $2,000. The Trustees have approved a compensation plan that permits
each Trustee entitled to receive a fee from the Fund to elect to receive up to one hundred percent of his or her annual fee in the form of Fund shares issued by the Fund.
The following table shows certain compensation information for the current Trustees of the Fund for the fiscal year ended October 31, 2009. All officers of the Fund are employees of and are compensated by Credit Suisse. None of the Funds executive officers received any compensation from the Fund for such period. The Fund does not have any bonus, profit sharing, pension or retirement plans.
Director |
|
Aggregate |
|
Total Compensation from the Fund |
|
||
Enrique R. Arzac |
|
$ |
26,300 |
|
$ |
125,410 |
|
Terry F. Bovarnick |
|
$ |
21,285 |
|
$ |
40,571 |
|
James J. Cattano |
|
$ |
22,366 |
|
$ |
42,731 |
|
Lawrence J. Fox |
|
$ |
22,274 |
|
$ |
44,548 |
|
Steven N. Rappaport |
|
$ |
21,300 |
|
$ |
136,318 |
|
Code of Ethics
The Fund and Credit Suisse have each adopted a code of ethics, as required by federal securities laws. Under these codes of ethics, employees who are designated as access persons may engage in personal securities transactions, including transactions involving securities that are being considered for the Funds portfolio or that are currently held by the Fund, subject to certain general restrictions and procedures. The personal securities transactions of the Funds access persons and those of Credit Suisse will be governed by the applicable code of ethics.
Credit Suisse and its affiliates manage other investment companies and accounts. Credit Suisse may give advice and take action with respect to any of the other funds it manages, or for its own account, that may differ from action taken by Credit Suisse on behalf of the Fund. Similarly, with respect to the Funds portfolio, Credit Suisse is not obligated to recommend, buy or sell, or to refrain from recommending, buying or selling any security that Credit Suisse and its access persons, as defined by applicable federal securities laws, may buy or sell for its or their own account or for the accounts of any other fund. Credit Suisse is not obligated to refrain from investing in securities held by the Fund or for any other funds it manages.
These codes of ethics can be reviewed and copied at the SECs Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling the SEC at (202) 551-8090. Copies of these codes of ethics are also available on the EDGAR Database on the SECs Internet site at http://www.sec.gov, and copies of these codes of ethics may be obtained, after paying a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov, or by writing the SECs Public Reference Section, Washington, D.C. 20549-0102.
Proxy Voting Policies and Procedures
The Fund has adopted Credit Suisses policies and procedures with respect to the voting of proxies related to portfolio securities. A copy of the Funds proxy voting policies and procedures is attached as Appendix B.
Information regarding how the Fund voted proxies related to its portfolio securities during the most recent 12-month period ended June 30 is available without charge:
· by calling 1-800-293-1232
· on the Funds website, www.credit-suisse.com/us
· on the SECs website, www.sec.gov.
INVESTMENT ADVISER
Credit Suisse serves as the Funds investment adviser with respect to all investments and makes all investment decisions for the Fund. Under the Investment Advisory Agreement, Credit Suisse receives as compensation for its advisory services from the Fund an annual fee, payable monthly, calculated at an annual rate of: (i) 1.00% of the first $250 million of the average weekly value of the Funds total assets minus the sum of liabilities (other than aggregate indebtedness constituting leverage) (the Managed Assets); and (ii) 0.75% of the average weekly value of the Managed Assets greater than $250 million. Credit Suisse may voluntarily waive a
portion of its fees from time to time and temporarily limit the expenses to be borne by the Fund. Effective January 1, 2007, Credit Suisse agreed to waive 0.15% of the fees payable under the Investment Advisory Agreement. During the period in which the Fund is utilizing leverage, the advisory fee payable to Credit Suisse will be higher than if the Fund did not utilize a leveraged capital structure because the fees are calculated as a percentage of the Managed Assets, including those purchased with leverage. The Fund is currently utilizing leverage.
For the fiscal years ended October 31, 2007, 2008 and 2009, the Fund paid Credit Suisse advisory fees, and Credit Suisse waived fees and/or reimbursed expenses of the Fund under the Advisory Agreement as follows:
October 31, 2009
Fees Paid |
|
Waivers |
|
Reimbursements |
|
||
|
|
|
|
|
|
|
|
$ |
1,295,306 |
|
$ |
204,133 |
|
|
|
October 31, 2008
Fees Paid |
|
Waivers |
|
Reimbursements |
|
||
|
|
|
|
|
|
|
|
$ |
2,331,139 |
|
$ |
269,869 |
|
|
|
October 31, 2007
Fees Paid |
|
Waivers |
|
Reimbursements |
|
||
|
|
|
|
|
|
|
|
$ |
2,791,152 |
|
$ |
349,504 |
|
|
|
Credit Suisse is part of the asset management business of Credit Suisse Group AG, one of the worlds leading banks. Credit Suisse Group AG provides its clients with investment banking, private banking and asset management services worldwide. The asset management business of Credit Suisse Group AG is comprised of a number of legal entities around the world that are subject to distinct regulatory requirements. Credit Suisse is an indirect, wholly owned subsidiary of Credit Suisse Group AG, a leading global financial services organization headquartered in Zurich. No one person or any entity possesses a controlling interest in Credit Suisse Group AG. Credit Suisse is registered as an investment adviser under the Investment Advisers Act of 1940, as amended. Credit Suisses address is Eleven Madison Avenue, New York, New York 10010. As of June 30, 2010, Credit Suisse managed over $11 billion in the U.S. and, together with its global affiliates, managed assets of over $405 billion in 19 countries.
The Investment Advisory Agreement provides that Credit Suisse will not be liable for any error of judgment or mistake of law or for any loss suffered by the Fund in connection with matters to which the Investment Advisory Agreement relates, except liability resulting from willful misfeasance, bad faith or gross negligence on Credit Suisses part in the performance of its duties or from reckless disregard of its obligations and duties under the Investment Advisory Agreement.
The Investment Advisory Agreement will remain in effect from year to year if approved annually (1) by the Board of Trustees of the Fund or by the holders of a majority (as defined in the 1940 Act) of the Funds outstanding voting securities and (2) by a majority of the Trustees who are not parties to the Investment Advisory Agreement, or interested persons (as defined in the 1940 Act) of the Fund or the Investment Adviser. The Board of Trustees last approved the Investment Advisory Agreement at meetings held on November 16-17, 2009 and December 17, 2009.
The Investment Advisory Agreement terminates on its assignment by any party. The Investment Advisory Agreement is terminable, without penalty, on 60 days written notice by the Board of Trustees or by the vote of holders of a majority (as defined in the 1940 Act) of the Funds outstanding voting securities or upon 90 days written notice by Credit Suisse.
The services of Credit Suisse are not deemed to be exclusive, and nothing in the Investment Advisory Agreement will present it or its affiliates from providing similar services to other investment companies and other clients (whether or not their investment objectives and policies are similar to those of the Fund) or from engaging in other activities.
ADMINISTRATOR
State Street serves as the Funds administrator. As administrator, State Street provides certain administrative services to the Fund, including but not limited to preparing and maintaining books, records, and tax and financial reports, and monitoring compliance with regulatory requirements. State Street is located at One Lincoln Street, Boston, Massachusetts 02111. The Fund pays State Street, for administrative services, a fee, exclusive of out-of-pocket expenses, calculated in total for all the funds advised by Credit Suisse that are administered or co-administered by State Street and allocated based upon the relative average net assets of each fund, subject to an annual minimum fee. The services of State Street are not deemed to be exclusive, and nothing in the agreement between the Fund and State Street (the Administration Agreement) will prevent State Street or its affiliates from providing similar services to other investment companies and other clients (whether or not their investment objectives and policies are similar to those of the Fund) or from engaging in other activities. The Administration Agreement is terminable upon 60 days notice by either party.
For the fiscal years ended October 31, 2007, 2008 and 2009, the Fund paid State Street $110,597, $126,062 and $105,578, respectively in administrative fees.
CUSTODIAN, TRANSFER AGENT AND DIVIDEND-PAYING AGENT
State Street serves as the Funds custodian and may employ sub-custodians outside the U.S. in accordance with regulations of the SEC. State Street is located at One Lincoln Street, Boston, Massachusetts 02111. The custodians responsibilities include safekeeping and controlling the Funds cash and securities, handling the receipt and delivery of securities, and collecting interest and dividends on the Funds investments.
Computershare Trust Company, N.A. acts as the Funds transfer agent and dividend-paying agent under the Funds automatic dividend reinvestment plan. Computershare Trust Company, N.A. is located at P.O. Box 43078, Providence, Rhode Island, 02940.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
[ ], acts as the Funds independent registered public accounting firm and provides audit and tax services to the Fund. [ ]s address is [ ].
PORTFOLIO MANAGEMENT
Additional information regarding the Funds portfolio managers is provided below.
Registered Investment Companies, Pooled Investment Vehicles and Other Accounts Managed
As reported to the Fund, the information in the following table reflects the number of registered investment companies, pooled investment vehicles and other accounts managed by each portfolio manager of the Fund and the total assets managed within each category as of May 31, 2010.
|
|
Registered Investment |
|
Other Pooled Investment |
|
Other Accounts |
|
|||||||||
Name |
|
Number of |
|
Total Assets |
|
Number of |
|
Total Assets |
|
Number of |
|
Total Assets |
|
|||
Thomas J. Flannery |
|
4 |
|
$ |
461 million |
|
25 |
|
$ |
10.189 billion |
|
10 |
|
$ |
1,323 million |
|
Wing Chan |
|
4 |
|
$ |
461 million |
|
25 |
|
$ |
10.189 billion |
|
10 |
|
$ |
1,323 million |
|
No advisory fee is paid based on performance for any of the accounts listed above.
Potential Conflicts of Interest
It is possible that conflicts of interest may arise in connection with the portfolio managers management of the Funds investments on the one hand and the investments of other accounts on the other. For example, the portfolio managers may have conflicts of interest in allocating management time, resources and investment opportunities among the Fund and other accounts they advise. In addition due to differences in the investment strategies or restrictions between the Fund and the other accounts, the portfolio managers may take action with respect to another account that differs from the action taken with respect to the Fund. Credit Suisse has adopted policies and procedures that are designed to minimize the effects of these conflicts.
If Credit Suisse believes that the purchase or sale of a security is in the best interest of more than one client, it may (but is not obligated to) aggregate the orders to be sold or purchased to seek favorable execution or lower brokerage commissions, to the extent permitted by applicable laws and regulations. Credit Suisse may aggregate orders if all participating client accounts benefit equally (i.e., all receive an average price of the aggregated orders). In the event Credit Suisse aggregates an order for participating accounts, the method of allocation will generally be determined prior to the trade execution. Although no specific method of allocation of transactions (as well as expenses incurred in the transactions) is expected to be used, allocations will be designed to ensure that over time all clients receive fair treatment consistent with Credit Suisses fiduciary duty to its clients (including its duty to seek to obtain best execution of client trades). The accounts aggregated may include registered and unregistered investment companies managed by Credit Suisses affiliates and accounts in which Credit Suisses officers, directors, agents, employees or affiliates own interests. Applicant may not be able to aggregate securities transactions for clients who direct the use of a particular broker-dealer, and the client also may not benefit from any improved execution or lower commissions that may be available for such transactions.
Portfolio Manager Compensation
Thomas J. Flannery and Wing Chan are compensated for their services by Credit Suisse. Their compensation consists of a fixed base salary and a discretionary bonus that is not tied by formula to the performance of any fund or account. The factors taken into account in determining each of their bonuses includes the Funds performance, assets held in the Fund and other accounts managed by each of them, business growth, team work, management, corporate citizenship, etc.
A portion of the bonus may be paid in phantom shares of Credit Suisse Group AG stock as deferred compensation. Phantom shares are shares representing an unsecured right to receive on a particular date a specified number of registered shares subject to certain terms and conditions. A portion of the bonus will receive the notional return of the fund(s) the portfolio manager manages and a portion of the bonus will receive the notional return of a basket of other Credit Suisse funds along the product line of the portfolio manager.
Like all employees of Credit Suisse, portfolio managers participate in Credit Suisse Group AGs profit sharing and 401(k) plans.
Portfolio Manager Ownership of Shares
As reported to the Fund, the information in the following table reflects beneficial ownership by the portfolio managers of Shares as of December 31, 2009:
Name of Portfolio Manager |
|
Dollar Range of Equity Securities in the Fund*(1) |
|
|
|
Thomas J. Flannery |
|
A |
|
|
|
Wing Chan |
|
A |
* |
|
Key to Dollar Ranges: |
A. |
|
None |
B. |
|
$1 - $10,000 |
C. |
|
$10,001 - $50,000 |
D. |
|
$50,001 - $100,000 |
E. |
|
over $100,000 |
(1) |
|
Beneficial Ownership is determined in accordance with Rule 16a-1(a)(2) promulgated under the 1934 Act. |
PORTFOLIO TRANSACTIONS
Credit Suisse is responsible for establishing, reviewing and, where necessary, modifying the Funds investment program to achieve its investment objectives. Purchases and sales of newly issued portfolio securities are usually principal transactions without brokerage commissions effected directly with the issuer or with an underwriter acting as principal. Other purchases and sales may be effected on a securities exchange or over-the-counter, depending on where it appears that the best price or execution will be obtained. The purchase price paid by the Fund to underwriters of newly issued securities usually includes a concession paid by the issuer to the underwriter, and purchases of securities from dealers, acting as either principals or agents in the after market, are normally executed at a price between the bid and asked price, which includes a dealers mark-up or mark-down. Transactions on U.S. stock exchanges and some foreign stock exchanges involve the payment of negotiated brokerage commissions. On exchanges on which commissions are negotiated, the cost of transactions may vary among different brokers. On most foreign exchanges, commissions are generally fixed. There is generally no stated commission in the case of securities traded in domestic or foreign over-the-counter markets, but the price of securities traded in over-the-counter markets includes an undisclosed commission or mark-up. U.S. government securities are generally purchased from underwriters or dealers, although certain newly issued U.S. government securities may be purchased directly from the U.S. Treasury or from the issuing agency or instrumentality. No brokerage commissions are typically paid on purchases and sales of U.S. government securities. For the 2009, 2008 and 2007 fiscal years, the Fund paid $363, $1,073 and $241, respectively, in brokerage commissions.
Credit Suisse will select portfolio investments and effect transactions for the Fund. In selecting broker-dealers, Credit Suisse does business exclusively with those broker-dealers that, in Credit Suisses judgment, can be expected to provide the best service. The service has two main aspects: the execution of buy and sell orders and the provision of research. In negotiating commissions with broker-dealers, Credit Suisse will pay no more for execution and research services than it considers either, or both together, to be worth. The worth of execution service depends on the ability of the broker-dealer to minimize costs of securities purchased and to maximize prices obtained for securities sold. The worth of research depends on its usefulness in optimizing portfolio composition and its changes over time. Commissions for the combination of execution and research services that meet Credit Suisses standards may be higher than for execution services alone or for services that fall below Credit Suisses standards. Credit Suisse believes that these arrangements may benefit all clients and not necessarily only the accounts in which the particular investment transactions occur that are so executed. Further, Credit Suisse will receive only brokerage or research services in connection with securities transactions that are consistent with the safe harbor provisions of Section 28(e) of the 1934 Act when paying such higher commissions. Research services may include research on specific industries or companies, macroeconomic analyses, analyses of national and international events and trends, evaluations of thinly traded securities, computerized trading screening techniques and securities ranking services, and general research services. Research received from brokers or dealers is supplemental to Credit Suisses own research program. For the fiscal year ended October 31, 2009, the Fund paid no brokerage commissions to brokers and dealers who provided such research services.
All orders for transactions in securities or options on behalf of the Fund are placed by the Investment Adviser with broker-dealers that it selects, including Credit Suisse Asset Management Securities, Inc. (CSAMSI), Credit Suisse Securities (USA) LLC, and other affiliates of Credit Suisse Group AG. The Fund may utilize CSAMSI or other affiliates of Credit Suisse Group AG in connection with a purchase or sale of securities when the Investment Adviser believes that the charge for the transaction does not exceed usual and customary levels and when doing so is consistent with guidelines adopted by the Board. The Fund did not pay any commissions to affiliated broker-dealers during the fiscal years ended October 31, 2007, 2008 and 2009, respectively.
Investment decisions for the Fund concerning specific portfolio securities are made independently from those for other clients advised by Credit Suisse. Such other investment clients may invest in the same securities as the Fund. When purchases or sales of the same security are made at substantially the same time on behalf of such other clients, transactions are averaged as to price and available investments allocated as to amount, in a manner which Credit Suisse believes to be equitable to each client, including the Fund. In some instances, this investment procedure may adversely affect the price paid or received by the Fund or the size of the position obtained or sold for the Fund. To the extent permitted by law, Credit Suisse may aggregate the securities to be sold or purchased for the Fund with those to be sold or purchased for such other investment clients in order to obtain best execution.
Transactions for the Fund may be effected on foreign securities exchanges. In transactions for securities not actively traded on a foreign securities exchange, the Fund will deal directly with the dealers who make a market in the securities involved, except in those circumstances where better prices and execution are available elsewhere. Such dealers usually are acting as principal for their own account. On occasion, securities may be purchased
directly from the issuer. Such portfolio securities are generally traded on a net basis and do not normally involve brokerage commissions. Securities firms may receive brokerage commissions on certain portfolio transactions, including options, futures and options on futures transactions and the purchase and sale of underlying securities upon exercise of options.
The Fund may participate, if and when practicable, in bidding for the purchase of securities for the Funds portfolio directly from an issuer in order to take advantage of the lower purchase price available to members of such a group. The Fund will engage in this practice, however, only when Credit Suisse, in its sole discretion, believe such practice to be otherwise in the Funds interest.
In no instance will portfolio securities be purchased from or sold to Credit Suisse, CSAMSI or Credit Suisse Securities (USA) LLC or any affiliated person of such companies except as permitted by SEC exemptive order or by applicable law. In addition, the Fund will not give preference to any institutions with whom the Fund enters into distribution or shareholder servicing agreements concerning the provision of distribution services or support services.
TAX STATUS
The Fund is treated as a separate entity for U.S. federal income tax purposes. The Fund has elected to be treated, and has qualified and intends to continue to qualify each year, as a regulated investment company under Subchapter M of the Code, so that it will not pay U.S. federal income tax on income and capital gains distributed to shareholders. In order to qualify as a regulated investment company under Subchapter M of the Code, the Fund must, among other things, (i) derive at least 90% of its gross income for each taxable year from dividends, interest, payments with respect to certain securities loans, gains from the sale or other disposition of stock, securities or foreign currencies, or other income (including gains from options, futures, and forward contracts) derived with respect to its business of investing in such stock, securities or currencies, and net income derived from an interest in a qualified publicly traded partnership (as defined in Section 851(h) of the Code) (the 90% income test) and (ii) diversify its holdings so that, at the end of each quarter of each taxable year: (a) at least 50% of the value of the Funds total assets is represented by (1) cash and cash items, U.S. government securities, securities of other regulated investment companies, and (2) other securities, with such other securities limited, in respect of any one issuer, to an amount not greater than 5% of the value of the Funds total assets and to not more than 10% of the outstanding voting securities of such issuer and (b) not more than 25% of the value of the Funds total assets is invested in (1) the securities (other than U.S. government securities and securities of other regulated investment companies) of any one issuer, (2) the securities (other than securities of other regulated investment companies) of two or more issuers that the Fund controls and that are engaged in the same, similar, or related trades or businesses, or (3) the securities of one or more qualified publicly traded partnerships.
Although in general the passive loss rules of the Code do not apply to regulated investment companies, such rules do apply to a regulated investment company with respect to items attributable to an interest in a qualified publicly traded partnership. Fund investments in partnerships, including in qualified publicly traded partnerships, may result in the funds being subject to state, local or foreign income, franchise or withholding tax liabilities.
If the Fund qualifies as a regulated investment company and properly distributes to its shareholders each taxable year an amount equal to or exceeding the sum of (i) 90% of its investment company taxable income as that term is defined in the Code (which includes, among other things, dividends, taxable interest, and the excess of any net short-term capital gains over net long-term capital losses, as reduced by certain deductible expenses) without regard to the deduction for dividends paid and (ii) 90% of the excess of its gross tax-exempt interest income, if any, over certain disallowed deductions, the Fund generally will not be subject to U.S. federal income tax on any income of the Fund, including net capital gain (the excess of net long-term capital gain over net short-term capital loss), distributed to shareholders. However, if the Fund meets such distribution requirements, but chooses to retain some portion of its taxable income or gains, it generally will be subject to U.S. federal income tax at regular corporate rates on the amount retained. The Fund may designate certain amounts retained as undistributed net capital gain in a notice to its shareholders, who (i) will be required to include in income for U.S. federal income tax purposes, as long-term capital gain, their proportionate shares of the undistributed amount so designated, (ii) will be entitled to credit their proportionate shares of the income tax paid by the Fund on that undistributed amount against their federal income tax liabilities and to claim refunds to the extent such credits exceed their liabilities and (iii) will be entitled to increase their tax basis, for federal income tax purposes, in their shares by an amount equal to the excess of the amount of undistributed net capital gain included in their respective income over their respective income tax
credits. The Fund intends to distribute at least annually all or substantially all of its investment company taxable income (computed without regard to the dividends-paid deduction), net tax-exempt interest income, and net capital gain.
If, for any taxable year, the Fund does not qualify as a regulated investment company or does not satisfy the 90% distribution requirement, it will be treated as a U.S. corporation subject to U.S. federal income tax, thereby subjecting any income earned by the Fund to tax at the corporate level and to a further tax at the shareholder level when such income is distributed.
The Code imposes a 4% nondeductible excise tax on the Fund to the extent it does not distribute by the end of any calendar year at least the sum of (i) 98% of its taxable ordinary income for that year and (ii) 98% of its capital gain net income (both long-term and short-term) for the one-year period ending, as a general rule, on October 31 of that year. For this purpose, however, any ordinary income or capital gain net income retained by the Fund that is subject to corporate income tax will be considered to have been distributed by year-end. In addition, the minimum amounts that must be distributed in any year to avoid the excise tax will be increased or decreased to reflect any underdistribution or overdistribution, as the case may be, from the previous year. The Fund anticipates that it will pay such dividends and will make such distributions as are necessary in order to avoid the application of this excise tax.
The IRS has taken the position that if a regulated investment company has two or more classes of shares, it must designate distributions made to each class in any year as consisting of no more than such classs proportionate share of particular types of income, including tax-exempt interest, net capital gains, and other income subject to federal income tax. A classs proportionate share of a particular type of income is determined according to the percentage of total dividends paid by the regulated investment company to such class.
Existing authorities do not specifically address whether dividends that are paid following the close of a taxable year, but that are treated for tax purposes as derived from the income of such prior taxable year, are treated as dividends paid during such prior taxable year for purposes of determining each classs proportionate share of a particular type of income. The Fund currently intends to treat such dividends as having been paid in the prior taxable year for purposes of determining each classs proportionate share of a particular type of income with respect to such prior taxable year. Existing authorities also do not specifically address the allocation of taxable income among the dividends paid to holders of a class of shares during or with respect to a taxable year. It is possible that the IRS could disagree with the Funds position concerning the treatment of dividends paid after the close of a taxable year, in which case the IRS could attempt to recharacterize a portion of the dividends paid and designated by the Fund as exempt-interest dividends as consisting instead of capital gains or other taxable income. If the IRS were to prevail with respect to any such attempted recharacterization, holders of that class of shares could be subject to tax on amounts so recharacterized and the Fund could be subject to federal income and excise tax.
The Fund declares a dividend from net investment income (excluding capital gains) each month. Dividends are normally paid on the last business day of the month or shortly thereafter. The Fund normally distributes any net short-term and long-term capital gains in December. Dividends from income and/or capital gains may also be paid at such other times as may be necessary for the Fund to avoid U.S. federal income or excise tax.
Unless a shareholder specifies otherwise, all distributions from the Fund to that shareholder will be automatically reinvested in additional full and fractional shares of the Fund. For U.S. federal income tax purposes, all dividends from the Fund generally are taxable whether a shareholder takes them in cash or reinvests them in additional shares of the Fund. In general, assuming that the Fund has sufficient earnings and profits, dividends from net investment income that is not tax exempt and from net short-term capital gains are taxable as ordinary income.
Recently enacted legislation imposes a 3.8% excise tax on net investment income, including dividends, interest and net capital gains, of individuals with annual income of $200,000 or more ($250,000 if married, filing jointly) beginning in 2013.
Distributions by the Fund in excess of the Funds current and accumulated earnings and profits will be treated as a return of capital to the extent of (and in reduction of) the shareholders tax basis in its shares and any such amount in excess of that basis will be treated as gain from the sale of shares, as discussed below.
Distributions from net capital gains, if any, that are designated as capital gain dividends by the Fund are taxable as long-term capital gains for U.S. federal income tax purposes without regard to the length of time the shareholder has held shares of the Fund. Capital gain dividends distributed by the Fund to individual and certain other noncorporate shareholders generally will qualify for reduced U.S. federal income tax rates (currently, a maximum rate of 15%, with lower rates applying to taxpayers in the 10% and 15% rate brackets) on long-term capital gains, subject to certain limited exceptions. A shareholder should also be aware that the benefits of the favorable tax rate applicable to long-term capital gains and qualified dividend income may be affected by the application of the alternative minimum tax to individual shareholders. Under current law, the reduced maximum 15% U.S. federal income tax rate on qualified dividend income and long-term capital gains will not apply in taxable years beginning after December 31, 2010.
The U.S. federal income tax status of all distributions will be reported to shareholders annually.
Although dividends generally will be treated as distributed when paid, any dividend declared by the Fund in October, November or December and payable to shareholders of record in such a month that is paid during the following January will be treated for U.S. federal income tax purposes as received by shareholders on December 31 of the calendar year in which it was declared. In addition, certain other distributions made after the close of a taxable year of the Fund may be spilled back and treated for certain purposes as paid by the Fund during such taxable year. In such case, shareholders generally will be treated as having received such dividends in the taxable year in which the distributions were actually made. For purposes of calculating the amount of a regulated investment companys undistributed income and gain subject to the 4% excise tax described above, such spilled back dividends are treated as paid by the regulated investment company when they are actually paid.
For U.S. federal income tax purposes, the Fund is permitted to carry forward a net capital loss for any year to offset its capital gains, if any, for up to eight years following the year of the loss. To the extent subsequent capital gains are offset by such losses, they would not result in U.S. federal income tax liability to the Fund and may not be distributed as such to shareholders. The Fund may not carry forward any losses other than net capital losses.
At the time of an investors purchase of fund shares, a portion of the purchase price may be attributable to realized or unrealized appreciation in the Funds portfolio or to undistributed capital gains of the Fund.
Consequently, subsequent distributions by the Fund with respect to these shares from such appreciation or gains may be taxable to such investor even if the net asset value of the investors shares is, as a result of the distributions, reduced below the investors cost for such shares and the distributions economically represent a return of a portion of the investment.
Sales and exchanges generally are taxable events for shareholders that are subject to tax. Shareholders should consult their own tax advisers with reference to their individual circumstances to determine whether any particular transaction in fund shares is properly treated as a sale for tax purposes, as the following discussion assumes, and the tax treatment of any gains or losses recognized in such transactions. In general, if fund shares are sold, the shareholder will recognize gain or loss equal to the difference between the amount realized on the sale and the shareholders adjusted basis in the shares. Such gain or loss generally will be treated as long-term capital gain or loss if the shares were held for more than one year and otherwise generally will be treated as short-term capital gain or loss.
Losses on sales or other dispositions of shares may be disallowed under wash sale rules in the event of other investments in the Fund (including those made pursuant to reinvestment of dividends and/or capital gain distributions) within a period of 61 days beginning 30 days before and ending 30 days after a sale or other disposition of shares. In such a case, the disallowed portion of any loss generally would be included in the U.S. federal tax basis of the shares acquired in the other investments.
Under Treasury regulations, if a shareholder recognizes a loss with respect to fund shares of $2 million or more for an individual shareholder, or $10 million or more for a corporate shareholder, in any single taxable year (or of certain greater amounts over a combination of years), the shareholder must file with the IRS a disclosure statement on Form 8886. Shareholders who own portfolio securities directly are in many cases excepted from this reporting requirement but, under current guidance, shareholders of regulated investment companies are not excepted. A shareholder who fails to make the required disclosure to the IRS may be subject to substantial penalties. The fact that a loss is reportable under these regulations does not affect the legal determination of whether or not the taxpayers treatment of the loss is proper. Shareholders should consult with their tax advisers to determine the applicability of these regulations in light of their individual circumstances.
Shareholders that are exempt from U.S. federal income tax, such as retirement plans that are qualified under Section 401 of the Code, generally are not subject to U.S. federal income tax on otherwise-taxable fund dividends or distributions, or on sales or exchanges of fund shares unless the Fund shares are debt-financed property within the meaning of the Code. However, in the case of fund shares held through a non-qualified deferred compensation plan, fund dividends and distributions other than exempt-interest dividends received by the plan and sales and exchanges of fund shares by the plan generally are taxable to the employer sponsoring such plan in accordance with the U.S. federal income tax laws that are generally applicable to shareholders receiving such dividends or distributions from regulated investment companies such as the Fund.
A plan participant whose retirement plan invests in the Fund, whether such plan is qualified or not, generally is not taxed on any fund dividends or distributions received by the plan or on sales or exchanges of fund shares by the plan for U.S. federal income tax purposes. However, distributions to plan participants from a retirement plan account generally are taxable as ordinary income, and different tax treatment, including penalties on certain excess contributions and deferrals, certain pre-retirement and post-retirement distributions and certain prohibited transactions, is accorded to accounts maintained as qualified retirement plans. Shareholders should consult their tax advisers for more information.
The Fund may invest to a significant extent in debt obligations that are in the lowest rating categories or that are unrated, including debt obligations of issuers not currently paying interest or that are in default. Investments in debt obligations that are at risk of or in default present special tax issues for the Fund. Federal income tax rules are not entirely clear about issues such as when the Fund may cease to accrue interest, original issue discount or market discount, when and to what extent deductions may be taken for bad debts or worthless securities, how payments received on obligations in default should be allocated between principal and interest and whether certain exchanges of debt obligations in a workout context are taxable. These and other issues will be addressed by the Fund, in the event it invests in or holds such securities, in order to seek to ensure that it distributes sufficient income to preserve its status as a regulated investment company and does not become subject to U.S. federal income or excise tax.
If the Fund invests in certain pay-in-kind securities, zero coupon securities, deferred interest securities or, in general, any other securities with original issue discount (or with market discount if the Fund elects to include market discount in income currently), the Fund generally must accrue income on such investments for each taxable year, which generally will be prior to the receipt of the corresponding cash payments. However, the Fund must distribute to its shareholders, at least annually, all or substantially all of its investment company taxable income (determined without regard to the deduction for dividends paid) and net tax-exempt income, including such accrued income, to qualify to be treated as a regulated investment company under the Code and avoid U.S. federal income and excise taxes. Therefore, the Fund may have to dispose of its portfolio securities, potentially under disadvantageous circumstances, to generate cash, or may have to borrow the cash, to satisfy distribution requirements. Such a disposition of securities may potentially result in additional taxable gain or loss to the Fund.
Options written or purchased and futures contracts entered into by the Fund on certain securities, indices and foreign currencies, as well as certain forward foreign currency contracts, may cause the Fund to recognize gains or losses from marking-to-market even though such options may not have lapsed or been closed out or exercised, or such futures or forward contracts may not have been performed or closed out. The tax rules applicable to these contracts may affect the characterization of some capital gains and losses realized by the Fund as long-term or short-term. Certain options, futures and forward contracts relating to foreign currency may be subject to Section 988 of the Code, and accordingly may produce ordinary income or loss. Additionally, the Fund may be required to recognize gain if an option, futures contract, forward contract, short sale or other transaction that is not subject to the mark-to-market rules is treated as a constructive sale of an appreciated financial position held by the Fund under Section 1259 of the Code. Any net mark-to-market gains and/or gains from constructive sales may also have to be distributed to satisfy the distribution requirements referred to above even though the Fund may receive no corresponding cash amounts, possibly requiring the disposition of portfolio securities or borrowing to obtain the necessary cash. Such a disposition of securities may potentially result in additional taxable gain or loss to the Fund. Losses on certain options, futures or forward contracts and/or offsetting positions (portfolio securities or other positions with respect to which the Funds risk of loss is substantially diminished by one or more options, futures or forward contracts) may also be deferred under the tax straddle rules of the Code, which may also affect the characterization of capital gains or losses from straddle positions and certain successor positions as long-term or short-term. Certain tax elections may be available that would enable the Fund to ameliorate some adverse effects of the tax rules described in this paragraph. The tax rules applicable to options, futures, forward contracts and straddles may affect the amount, timing and character of the Funds income and gains or losses and hence of its distributions to shareholders.
As a result of entering into swap contracts, the Fund may make or receive periodic net payments. The Fund may also make or receive a payment when a swap is terminated prior to maturity through an assignment of the swap or other closing transaction. Periodic net payments will generally constitute ordinary income or deductions, while termination of a swap will generally result in capital gain or loss (which will be a long-term capital gain or loss if the fund has been a party to the swap for more than one year). With respect to certain types of swaps, the Fund may be required to currently recognize income or loss with respect to future payments on such swaps or may elect under certain circumstances to mark such swaps to market annually for tax purposes as ordinary income or loss. The tax treatment of many types of credit default swaps is uncertain.
The Fund may be subject to withholding and other taxes imposed by foreign countries, including taxes on interest, dividends and capital gains with respect to its investments in those countries. Any such taxes would, if imposed, reduce the yield on or return from those investments. Tax conventions between certain countries and the U.S. may reduce or eliminate such taxes in some cases. The Fund does not expect to satisfy the requirements for passing through to its shareholders any share of foreign taxes paid by the Fund, with the result that shareholders will not include such taxes in their gross incomes and will not be entitled to a tax deduction or credit for such taxes on their own tax returns.
The Fund is required to withhold (as backup withholding) a certain percentage of reportable payments, including dividends, capital gain distributions and the proceeds of redemptions or repurchases of fund shares paid to shareholders who have not complied with certain IRS regulations. In order to avoid this withholding requirement, shareholders, other than certain exempt entities, must certify on their Account Applications, or on separate IRS Forms W-9, that the Social Security Number or other Taxpayer Identification Number they provide is their correct number and that they are not currently subject to backup withholding, or that they are exempt from backup withholding. The Fund may nevertheless be required to backup withhold if it receives notice from the IRS or a
broker that the number provided is incorrect or backup withholding is applicable as a result of previous underreporting of interest or dividend income.
The description of certain federal tax provisions above relates only to U.S. federal income tax consequences for shareholders who are U.S. persons, i.e., generally, U.S. citizens or residents or U.S. corporations, partnerships, trusts or estates, and who are subject to U.S. federal income tax and hold their shares as capital assets. Except as otherwise provided, this description does not address the special tax rules that may be applicable to particular types of investors, such as financial institutions, insurance companies, securities dealers, other regulated investment companies, or tax-exempt or tax-deferred plans, accounts or entities. Investors other than U.S. persons may be subject to different U.S. federal income tax treatment, including a non-resident alien U.S. withholding tax at the rate of 30% or any lower applicable treaty rate on amounts treated as ordinary dividends from the Fund (other than, for taxable years of the Fund beginning on or before December 31, 2009, certain dividends designated by the Fund as (i) interest-related dividends, to the extent such dividends are derived from the Funds qualified net interest income, or (ii) short-term capital gain dividends, to the extent such dividends are derived from the Funds qualified short-term gain) or, in certain circumstances, unless an effective IRS Form W-8BEN or other authorized withholding certificate is on file, to backup withholding at the rate of 28% on certain other payments from the Fund. Qualified net interest income is the Funds net income derived from U.S.-source interest and original issue discount, subject to certain exceptions and limitations. Qualified short-term gain generally means the excess of the net short-term capital gain of the Fund for the taxable year over its net long-term capital loss, if any. Backup withholding will not be applied to payments that have been subject to the 30% (or lower applicable treaty rate) withholding tax on shareholders who are neither citizens nor residents of the United States. Shareholders should consult their own tax advisers on these matters and on state, local, foreign and other applicable tax laws.
If, as anticipated, the Fund qualifies as a regulated investment company under the Code, it will not be required to pay any Massachusetts income, corporate excise or franchise taxes or any Delaware corporation income tax.
The exemption of exempt-interest dividends for U.S. federal income tax purposes does not necessarily result in exemption under the tax laws of any state or local taxing authority, since those laws vary with respect to the taxation of such income. Many states exempt from tax that portion of an exempt-interest dividend which represents interest received by the Fund on that states securities, subject in some cases to compliance with concentration and/or reporting requirements, which the Fund makes no commitment to seek to satisfy. However, the Fund will report annually to its shareholders the percentage of interest income received by the Fund during the preceding year on federally tax-exempt obligations indicating, on a state-by-state basis only, the source of such income. Each shareholder is advised to consult his own tax adviser regarding the exemption, if any, of exempt-interest dividends under the state and local tax laws applicable to the shareholder.
A state income (and possibly local income and/or intangible property) tax exemption is generally available to the extent the Funds distributions are derived from interest on (or, in the case of intangible property taxes, the value of its assets is attributable to) certain U.S. government obligations, provided in some states that certain thresholds for holdings of such obligations and/or reporting requirements are satisfied. The Fund will not seek to satisfy any threshold or reporting requirements that may apply in particular taxing jurisdictions, although the Fund may in its sole discretion provide relevant information to shareholders.
FINANCIAL STATEMENTS
The audited financial statements for the year ended October 31, 2009 and the report of the independent registered public accounting firm are included in the Funds 2009 Annual Report and are incorporated by reference into this prospectus. The Funds 2009 Annual Report was filed on Form N-CSR with the SEC on January 4, 2010 and is available on the SECs website at http://www.sec.gov. Copies of the Funds 2009 Annual Report may also be obtained without charge upon written or oral request from the Funds information agent at [ ].
The financial statements of the Fund that are incorporated herein by reference (except for the financial statements for the Funds fiscal year ended October 31, 2000) and certain of the information appearing under the caption Financial Highlights included in the prospectus and appearing elsewhere herein and in the prospectus (except for the information relating to the Funds fiscal year ended October 31, 2000) have been audited by [ ], independent registered public accounting firm, as set forth in their report that is incorporated herein by reference, and are included in reliance upon such report given upon the authority of such firm as experts in accounting and auditing.
PRINCIPAL HOLDERS OF SECURITIES
The following table sets forth the beneficial ownership of shares of the Fund, as of [recent date], 2010, by each person (including any group) known to the Fund to be deemed to be the beneficial owner of more than 5% of the outstanding shares of the Fund:
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APPENDIX A
DESCRIPTION OF RATINGS
Commercial Paper Ratings
Commercial paper rated A-1 by Standard & Poors, a subsidiary of The McGraw-Hill Companies, Inc. (S&P) indicates that the degree of safety regarding timely payment is strong. Those issues determined to possess extremely strong safety characteristics are denoted with a plus sign designation. Capacity for timely payment on commercial paper rated A-2 is satisfactory, but the relative degree of safety is not as high as for issues designated A-1.
The rating Prime-1 is the highest commercial paper rating assigned by Moodys Investors Service, Inc. (Moodys). Issuers rated Prime-1 (or related supporting institutions) are considered to have a superior capacity for repayment of short-term promissory obligations. Issuers rated Prime-2 (or related supporting institutions) are considered to have a strong capacity for repayment of short-term promissory obligations. This will normally be evidenced by many of the characteristics of issuers rated Prime-1 but to a lesser degree. Earnings trends and coverage ratios, while sound, will be more subject to variation. Capitalization characteristics, while still appropriate, may be more affected by external conditions. Ample alternative liquidity is maintained.
Corporate Bond Ratings
The following summarizes the ratings used by S&P for corporate bonds:
AAA - This is the highest rating assigned by S&P to a debt obligation and indicates an extremely strong capacity to pay interest and repay principal.
AA - Debt rated AA has a very strong capacity to pay interest and repay principal and differs from AAA issues only in small degree.
A - Debt rated A has a strong capacity to pay interest and repay principal although they are somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than debt in higher-rated categories.
BBB - This is the lowest investment grade. Debt rated BBB has an adequate capacity to pay interest and repay principal. Although it normally exhibits adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for bonds in this category than for bonds in higher rated categories.
BB, B, CCC, CC, C - Debt rated BB, B, CCC, CC and C is regarded, on balance, as predominately speculative with respect to capacity to pay interest and repay principal in accordance with the terms of the obligation. BB represents a lower degree of speculation than B and C the highest degree of speculation. While such bonds will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major risk exposures to adverse conditions.
BB - Debt rated BB has less near-term vulnerability to default than other speculative issues. However, they face major ongoing uncertainties or exposure to adverse business, financial, or economic conditions, which could lead to inadequate capacity to meet timely interest and principal payments. The BB rating category is also used for debt subordinated to senior debt that is assigned an actual or implied BBB rating.
B - Debt rated B has a greater vulnerability to default but currently has the capacity to meet interest payments and principal repayments. Adverse business, financial, or economic conditions will likely impair capacity or willingness to pay interest and repay principal. The B rating category is also used for debt subordinated to senior debt that is assigned an actual or implied BB or BB- rating.
CCC - Debt rated CCC has a currently identifiable vulnerability to default and is dependent upon favorable business, financial and economic conditions to meet timely payment of interest and repayment of principal. In the event of adverse business, financial or economic conditions, it is not likely to have the capacity to pay interest and repay principal. The CCC rating category is also used for debt subordinated to senior debt that is assigned an actual or implied B or B- rating.
CC - This rating is typically applied to debt subordinated to senior debt that is assigned an actual or implied CCC rating.
C - This rating is typically applied to debt subordinated to senior debt which is assigned an actual or implied CCC- debt rating. The C rating may be used to cover a situation where a bankruptcy petition has been filed, but debt service payments are continued.
Additionally, the rating CI is reserved for income bonds on which no interest is being paid. Such debt is rated between debt rated C and debt rated D.
To provide more detailed indications of credit quality, the ratings from AA to CCC may be modified by the addition of a plus or minus sign to show relative standing within this major rating category.
D - Debt rated D is in payment default. The D rating category is used when interest payments or principal payments are not made on the date due even if the applicable grace period has not expired, unless S&P believes that such payments will be made during such grace period. The D rating also will be used upon the filing of a bankruptcy petition if debt service payments are jeopardized.
The following summarizes the ratings used by Moodys for corporate bonds:
Aaa - Bonds that are rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as gilt edged. Interest payments are protected by a large or exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues.
Aa - Bonds that are rated Aa are judged to be of high quality by all standards. Together with the Aaa group they comprise what are generally known as high grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risks appear somewhat larger than in Aaa securities.
A - Bonds which are rated A possess many favorable investment attributes and are to be considered as upper-medium-grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest a susceptibility to impairment sometime in the future.
Baa - Bonds which are rated Baa are considered as medium-grade obligations, i.e., they are neither highly protected nor poorly secured. Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well.
Ba - Bonds which are rated Ba are judged to have speculative elements; their future cannot be considered as well assured. Often the protection of interest and principal payments may be very moderate and thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of desirable investments. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small.
Moodys applies numerical modifiers (1, 2 and 3) with respect to the bonds rated Aa through B. The modifier 1 indicates that the bond being rated ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates that the bond ranks in the lower end of its generic rating category.
Caa - Bonds that are rated Caa are of poor standing. These issues may be in default or present elements of danger may exist with respect to principal or interest.
Ca - Bonds which are rated Ca represent obligations which are speculative in a high degree. Such issues are often in default or have other marked shortcomings.
C - Bonds which are rated C are the lowest rated class of bonds, and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing.
Short-Term Note Ratings
The following summarizes the two highest ratings used by S&P for short-term notes:
SP-1 - Loans bearing this designation evidence a very strong or strong capacity to pay principal and interest. Those issues determined to possess overwhelming safety characteristics will be given a plus sign designation.
SP-2 - Loans bearing this designation evidence a satisfactory capacity to pay principal and interest.
The following summarizes the two highest ratings used by Moodys for short-term notes and variable rate demand obligations:
MIG-1/VMIG-1 - Obligations bearing these designations are of the best quality, enjoying strong protection from established cash flows of funds for their servicing or from established and broad-based access to the market for refinancing, or both.
MIG-2/VMIG-2 - Obligations bearing these designations are of high quality with margins of protection ample although not so large as in the preceding group.
Municipal Obligations Ratings
The following summarizes the ratings used by S&P for Municipal Obligations:
AAA - This is the highest rating assigned by S&P to a debt obligation and indicates an extremely strong capacity to pay interest and repay principal.
AA - Debt rated AA has a very strong capacity to pay interest and repay principal and differs from AAA issues only in small degree.
A - Debt rated A has a strong capacity to pay interest and repay principal although they are somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than debt in higher-rated categories.
BBB - This is the lowest investment grade. Debt rated BBB has an adequate capacity to pay interest and repay principal. Although adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for debt in this category than in higher rated categories.
BB, B, CCC, CC, C - Debt rated BB, B, CCC, CC and C is regarded, on balance, as predominately speculative with respect to capacity to pay interest and repay principal in accordance with the terms of the obligation. BB represents a lower degree of speculation than B and C the highest degree of speculation. While such
bonds will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major risk exposures to adverse conditions.
BB - Bonds rated BB have less near-term vulnerability to default than other speculative issues. However, they face major ongoing uncertainties or exposure to adverse business, financial, or economic conditions, which could lead to inadequate capacity to meet timely interest and principal payments. The BB rating category is also used for debt subordinated to senior debt that is assigned an actual or implied BBB rating.
B - Bonds rated B have a greater vulnerability to default but currently have the capacity to meet interest payments and principal repayments. Adverse business, financial, or economic conditions will likely impair capacity or willingness to pay interest and repay principal. The B rating category is also used for debt subordinated to senior debt that is assigned an actual or implied BB or BB- rating.
CCC - Debt rated CCC has a currently identifiable vulnerability to default and is dependent upon favorable business, financial and economic conditions to meet timely payment of interest and repayment of principal. In the event of adverse business, financial or economic conditions, it is not likely to have the capacity to pay interest and repay principal. The CCC rating category is also used for debt subordinated to senior debt that is assigned an actual or implied B or B- rating.
CC - This rating is typically applied to debt subordinated to senior debt that is assigned an actual or implied CCC rating.
C - This rating is typically applied to debt subordinated to senior debt which is assigned an actual or implied CCC- debt rating. The C rating may be used to cover a situation where a bankruptcy petition has been filed, but debt service payments are continued.
Additionally, the rating CI is reserved for income bonds on which no interest is being paid. Such debt is rated between debt rated C and debt rated D.
To provide more detailed indications of credit quality, the ratings from AA to CCC may be modified by the addition of a plus or minus sign to show relative standing within this major rating category.
D - Debt rated D is in payment default. The D rating category is used when interest payments or principal payments are not made on the date due even if the applicable grace period has not expired, unless S&P believes that such payments will be made during such grace period. The D rating also will be used upon the filing of a bankruptcy petition if debt service payments are jeopardized.
The following summarizes the highest four municipal ratings used by Moodys:
Aaa - Bonds which are rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as gilt edge. Interest payments are protected by a large or exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues.
Aa - Bonds which are rated as Aa are judged to be of high quality by all standards. Together with the Aaa group they comprise what are generally known as high-grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risks appear somewhat larger than in Aaa securities.
A - Bonds which are rated A possess many favorable investment attributes and are to be considered as upper-medium-grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest a susceptibility to impairment sometime in the future.
Baa - Bonds which are rated Baa are considered as medium-grade obligations, i.e., they are neither highly protected nor poorly secured. Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well.
Ba - Bonds which are rated Ba are judged to have speculative elements; their future cannot be considered as well assured. Often the protection of interest and principal payments may be very moderate and thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of desirable investments. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small.
Note: Those bonds in the Aa, A, Baa, Ba and B groups which Moodys believes possess the strongest investment attributes are designated by the symbols Aa1, A1, Baa1, Ba1, and B1.
Caa - Bonds that are rated Caa are of poor standing. These issues may be in default or present elements of danger may exist with respect to principal or interest.
Ca - Bonds which are rated Ca represent obligations which are speculative in a high degree. Such issues are often in default or have other marked shortcomings.
C - Bonds which are rated C are the lowest rated class of bonds, and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing.
APPENDIX B
CREDIT SUISSE ASSET MANAGEMENT, LLC
CREDIT SUISSE FUNDS
CREDIT SUISSE CLOSED-END FUNDS
PROXY VOTING POLICY AND PROCEDURES
INTRODUCTION
Credit Suisse Asset Management, LLC (Credit Suisse) is a fiduciary that owes each of its clients duties of care and loyalty with respect to proxy voting. The duty of care requires Credit Suisse to monitor corporate events and to vote proxies. To satisfy its duty of loyalty, Credit Suisse must cast proxy votes in the best interests of each of its clients.
The Credit Suisse Funds and Credit Suisse Closed-End Funds (the Funds), which have engaged Credit Suisse Asset Management, LLC as their investment adviser, are of the belief that the proxy voting process is a means of addressing corporate governance issues and encouraging corporate actions both of which can enhance shareholder value.
POLICY
The Proxy Voting Policy (the Policy) set forth below is designed to ensure that proxies are voted in the best interests of Credit Suisses clients. The Policy addresses particular issues and gives a general indication of how Credit Suisse will vote proxies. The Policy is not exhaustive and does not include all potential issues.
PROXY VOTING COMMITTEE
The Proxy Voting Committee will consist of a member of the Portfolio Management Department, a member of the Legal and Compliance Department, and a member of the Operations Department (or their designees). The purpose of the Proxy Voting Committee is to administer the voting of all clients proxies in accordance with the Policy. The Proxy Voting Committee will review the Policy annually to ensure that it is designed to promote the best interests of Credit Suisses clients.
For the reasons disclosed below under Conflicts, the Proxy Voting Committee has engaged the services of an independent third party (initially, Risk Metrics Groups ISS Governance Services Unit (ISS)) to assist in issue analysis and vote recommendation for proxy proposals. Proxy proposals addressed by the Policy will be voted in accordance with the Policy. Proxy proposals addressed by the Policy that require a case-by-case analysis will be voted in accordance with the vote recommendation of ISS. Proxy proposals not addressed by the Policy will also be voted in accordance with the vote recommendation of ISS. To the extent that the Proxy Voting Committee proposes to deviate from the Policy or the ISS vote recommendation, the Committee shall obtain client consent as described below.
Credit Suisse investment professionals may submit a written recommendation to the Proxy Voting Committee to vote in a manner inconsistent with the Policy and/or the recommendation of ISS. Such recommendation will set forth its basis and rationale. In addition, the investment professional must confirm in writing that he/she is not aware of any conflicts of interest concerning the proxy matter or provide a full and complete description of the conflict.
CONFLICTS
Credit Suisse is the part of the asset management business of Credit Suisse, one of the worlds leading banks. As part of a global, full service investment-bank, broker-dealer, and asset-management organization, Credit Suisse and its affiliates and personnel may have multiple advisory, transactional, financial, and other interests in securities, instruments, and companies that may be purchased or sold by Credit Suisse for its clients accounts.
The interests of Credit Suisse and/or its affiliates and personnel may conflict with the interests of Credit Suisses clients in connection with any proxy issue. In addition, Credit Suisse may not be able to identify all of the conflicts of interest relating to any proxy matter.
CONSENT
In each and every instance in which the Proxy Voting Committee favors voting in a manner that is inconsistent with the Policy or the vote recommendation of ISS (including proxy proposals addressed and not addressed by the Policy), it shall disclose to the client conflicts of interest information and obtain client consent to vote. Where the client is a Fund, disclosure shall be made to any one director who is not an interested person, as that term is defined under the Investment Company Act of 1940, as amended, of the Fund.
RECORDKEEPING
Credit Suisse is required to maintain in an easily accessible place for six years all records relating to proxy voting.
These records include the following:
· a copy of the Policy;
· a copy of each proxy statement received on behalf of Credit Suisse clients;
· a record of each vote cast on behalf of Credit Suisse clients;
· a copy of all documents created by Credit Suisse personnel that were material to making a decision on a vote or that memorializes the basis for the decision; and
· a copy of each written request by a client for information on how Credit Suisse voted proxies, as well as a copy of any written response.
Credit Suisse reserves the right to maintain certain required proxy records with ISS in accordance with all applicable regulations.
Disclosure
Credit Suisse will describe the Policy to each client. Upon request, Credit Suisse will provide any client with a copy of the Policy. Credit Suisse will also disclose to its clients how they can obtain information on their proxy votes.
ISS will capture data necessary for Funds to file Form N-PX on an annual basis concerning their proxy voting record in accordance with applicable law.
Procedures
The Proxy Voting Committee will administer the voting of all client proxies. Credit Suisse has engaged ISS as an independent third party proxy voting service to assist in the voting of client proxies. ISS will coordinate with each clients custodian to ensure that proxy materials reviewed by the custodians are processed in a timely fashion. ISS will provide Credit Suisse with an analysis of proxy issues and a vote recommendation for proxy proposals. ISS will refer proxies to the Proxy Voting Committee for instructions when the application of the Policy is not clear. The Proxy Voting Committee will notify ISS of any changes to the Policy or deviating thereof.
PROXY VOTING POLICY
Operational Items
Adjourn Meeting
Proposals to provide management with the authority to adjourn an annual or special meeting will be determined on a case-by-case basis.
Amend Quorum Requirements
Proposals to reduce quorum requirements for shareholder meetings below a majority of the shares outstanding will be determined on a case-by-case basis.
Amend Minor Bylaws
Generally vote for bylaw or charter changes that are of a housekeeping nature.
Change Date, Time, or Location of Annual Meeting
Generally vote for management proposals to change the date/time/location of the annual meeting unless the proposed change is unreasonable. Generally vote against shareholder proposals to change the date/time/location of the annual meeting unless the current scheduling or location is unreasonable.
Ratify Auditors
Generally vote for proposals to ratify auditors unless: (1) an auditor has a financial interest in or association with the company, and is therefore not independent; (2) fees for non-audit services are excessive, or (3) there is reason to believe that the independent auditor has rendered an opinion, which is neither accurate nor indicative of the companys financial position. Generally vote on a case-by-case basis on shareholder proposals asking companies to prohibit their auditors from engaging in non-audit services (or capping the level of non-audit services). Generally vote on a case-by-case basis on auditor rotation proposals taking into consideration: (1) tenure of audit firm; (2) establishment and disclosure of a renewal process whereby the auditor is regularly evaluated for both audit quality and competitive price; (3) length of the rotation period advocated in the proposal, and (4) significant audit related issues.
Board of Directors
Voting on Director Nominees in Uncontested Elections
Generally votes on director nominees on a case-by-case basis. Votes may be withheld: (1) from directors who attended less than 75% of the board and committee meetings without a valid reason for the absences; (2) implemented or renewed a dead-hand poison pill; (3) ignored a shareholder proposal that was approved by a majority of the votes cast for two consecutive years; (4) ignored a shareholder proposal approved by a majority of the shares outstanding; (5) have failed to act on takeover offers where the majority of the shareholders have tendered their shares; (6) are inside directors or affiliated outside directors and sit on the audit, compensation, or nominating committee; (7) are inside directors or affiliated outside directors and the full board serves as the audit, compensation, or nominating committee or the company does not have one of these committees; or (8) are audit committee members and the non-audit fees paid to the auditor are excessive
Cumulative Voting
Proposals to eliminate cumulative voting will be determined on a case-by-case basis. Proposals to restore or provide for cumulative voting in the absence of sufficient good governance provisions and/or poor relative shareholder returns will be determined on a case-by-case basis.
Director and Officer Indemnification and Liability Protection
Proposals on director and officer indemnification and liability protection generally evaluated on a case-by-case basis. Generally vote against proposals that would: (1) eliminate entirely directors and officers
liability for monetary damages for violating the duty of care; or (2) expand coverage beyond just legal expenses to acts, such as negligence, that are more serious violations of fiduciary obligation than mere carelessness. Generally vote for only those proposals providing such expanded coverage in cases when a directors or officers legal defense was unsuccessful if: (1) the director was found to have acted in good faith and in a manner that he reasonably believed was in the best interests of the company, and (2) only if the directors legal expenses would be covered.
Filling Vacancies/Removal of Directors
Generally vote against proposals that provide that directors may be removed only for cause. Generally vote for proposals to restore shareholder ability to remove directors with or without cause. Proposals that provide that only continuing directors may elect replacements to fill board vacancies will be determined on a case-by-case basis. Generally vote for proposals that permit shareholders to elect directors to fill board vacancies.
Independent Chairman (Separate Chairman/CEO)
Generally vote for shareholder proposals requiring the position of chairman be filled by an independent director unless there are compelling reasons to recommend against the proposal, including: (1) designated lead director, elected by and from the independent board members with clearly delineated duties; (2) 2/3 independent board; (3) all independent key committees; or (4) established governance guidelines.
Majority of Independent Directors
Generally vote for shareholder proposals requiring that the board consist of a majority or substantial majority (two-thirds) of independent directors unless the board composition already meets the adequate threshold. Generally vote for shareholder proposals requiring the board audit, compensation, and/or nominating committees be composed exclusively of independent directors if they currently do not meet that standard. Generally withhold votes from insiders and affiliated outsiders sitting on the audit, compensation, or nominating committees. Generally withhold votes from insiders and affiliated outsiders on boards that are lacking any of these three panels. Generally withhold votes from insiders and affiliated outsiders on boards that are not at least majority independent.
Term Limits
Generally vote against shareholder proposals to limit the tenure of outside directors.
Proxy Contests
Voting on Director Nominees in Contested Elections
Votes in a contested election of directors should be decided on a case-by-case basis, with shareholders determining which directors are best suited to add value for shareholders. The major decision factors are: (1) company performance relative to its peers; (2) strategy of the incumbents versus the dissidents; (3) independence of directors/nominees; (4) experience and skills of board candidates; (5) governance profile of the company; (6) evidence of management entrenchment; (7) responsiveness to shareholders; or (8) whether takeover offer has been rebuffed.
Amend Bylaws without Shareholder Consent
Proposals giving the board exclusive authority to amend the bylaws will be determined on a case-by-case basis. Proposals giving the board the ability to amend the bylaws in addition to shareholders will be determined on a case-by-case basis.
Confidential Voting
Generally vote for shareholder proposals requesting that corporations adopt confidential voting, use independent vote tabulators and use independent inspectors of election, as long as the proposal includes a provision for proxy contests as follows: In the case of a contested election, management should be permitted to request that the dissident group honor its confidential voting policy. If the dissidents agree, the policy may remain in place. If the dissidents will not agree, the confidential voting policy may be waived. Generally vote for management proposals to adopt confidential voting.
Cumulative Voting
Proposals to eliminate cumulative voting will be determined on a case-by-case basis. Proposals to restore or provide for cumulative voting in the absence of sufficient good governance provisions and/or poor relative shareholder returns will be determined on a case-by-case basis.
Antitakeover Defenses and Voting Related Issues
Advance Notice Requirements for Shareholder Proposals/Nominations
Votes on advance notice proposals are determined on a case-by-case basis.
Amend Bylaws without Shareholder Consent
Proposals giving the board exclusive authority to amend the bylaws will be determined on a case-by-case basis. Generally vote for proposals giving the board the ability to amend the bylaws in addition to shareholders.
Poison Pills (Shareholder Rights Plans)
Generally vote for shareholder proposals requesting that the company submit its poison pill to a shareholder vote or redeem it. Votes regarding management proposals to ratify a poison pill should be determined on a case-by-case basis. Plans should embody the following attributes: (1) 20% or higher flip-in or flip-over; (2) two to three year sunset provision; (3) no dead-hand or no-hand features; or (4) shareholder redemption feature
Shareholders Ability to Act by Written Consent
Generally vote against proposals to restrict or prohibit shareholders ability to take action by written consent. Generally vote for proposals to allow or make easier shareholder action by written consent.
Shareholders Ability to Call Special Meetings
Proposals to restrict or prohibit shareholders ability to call special meetings or that remove restrictions on the right of shareholders to act independently of management will be determined on a case-by-case basis.
Supermajority Vote Requirements
Proposals to require a supermajority shareholder vote will be determined on a case-by-case basis Proposals to lower supermajority vote requirements will be determined on a case-by-case basis.
Merger and Corporate Restructuring
Appraisal Rights
Generally vote for proposals to restore, or provide shareholders with, rights of appraisal.
Asset Purchases
Generally vote case-by-case on asset purchase proposals, taking into account: (1) purchase price, including earnout and contingent payments; (2) fairness opinion; (3) financial and strategic benefits; (4) how the deal was negotiated; (5) conflicts of interest; (6) other alternatives for the business; or (7) noncompletion risk (companys going concern prospects, possible bankruptcy).
Asset Sales
Votes on asset sales should be determined on a case-by-case basis after considering: (1) impact on the balance sheet/working capital; (2) potential elimination of diseconomies; (3) anticipated financial and operating benefits; (4) anticipated use of funds; (5) value received for the asset; fairness opinion (if any); (6) how the deal was negotiated; or (6) Conflicts of interest
Conversion of Securities
Votes on proposals regarding conversion of securities are determined on a case-by-case basis. When evaluating these proposals, should review (1) dilution to existing shareholders position; (2) conversion price relative to market value; (3) financial issues: companys financial situation and degree of need for capital; effect of the transaction on the companys cost of capital; (4) control issues: change in management; change in control; standstill provisions and voting agreements; guaranteed contractual board and committee seats for investor; veto power over certain corporate actions; (5) termination penalties; (6) conflict of interest: arms length transactions, managerial incentives. Generally vote for the conversion if it is expected that the company will be subject to onerous penalties or will be forced to file for bankruptcy if the transaction is not approved.
Corporate Reorganization
Votes on proposals to increase common and/or preferred shares and to issue shares as part of a debt restructuring plan are determined on a case-by-case basis, after evaluating: (1) dilution to existing shareholders position; (2) terms of the offer; (3) financial issues; (4) managements efforts to pursue other alternatives; (5) control issues; (6) conflict of interest. Generally vote for the debt restructuring if it is expected that the company will file for bankruptcy if the transaction is not approved.
Reverse Leveraged Buyouts
Votes on proposals to increase common and/or preferred shares and to issue shares as part of a debt restructuring plan are determined on a case-by-case basis, after evaluating: (1) dilution to existing shareholders position; (2) terms of the offer; (3) financial issues; (4) managements efforts to pursue other alternatives; (5) control issues; (6) conflict of interest. Generally vote for the debt restructuring if it is expected that the company will file for bankruptcy if the transaction is not approved.
Formation of Holding Company
Votes on proposals regarding the formation of a holding company should be determined on a case-by-case basis taking into consideration: (1) the reasons for the change; (2) any financial or tax benefits; (3) regulatory benefits; (4) increases in capital structure; (5) changes to the articles of incorporation or bylaws of the company. Absent compelling financial reasons to recommend the transaction, generally vote against the formation of a holding company if the transaction would include either of the following: (1) increases in common or preferred stock in excess of the allowable maximum as calculated a model capital structure; (2) adverse changes in shareholder rights; (3) going private transactions; (4) votes going private transactions on a case-by-case basis, taking into account: (a) offer price/premium; (b) fairness opinion; (c) how the deal was negotiated; (d) conflicts of interest; (e) other alternatives/offers considered; (f) noncompletion risk.
Joint Ventures
Vote on a case-by-case basis on proposals to form joint ventures, taking into account: (1) percentage of assets/business contributed; (2) percentage ownership; (3) financial and strategic benefits; (4) governance structure; (5) conflicts of interest; (6) other alternatives; (7) noncompletion risk; (8) liquidations. Votes on liquidations should be determined on a case-by-case basis after reviewing: (1) managements efforts to pursue other alternatives such as mergers; (2) appraisal value of the assets (including any fairness opinions); (3) compensation plan for executives managing the liquidation. Generally vote for the liquidation if the company will file for bankruptcy if the proposal is not approved.
Mergers and Acquisitions
Votes on mergers and acquisitions should be considered on a case-by-case basis, determining whether the transaction enhances shareholder value by giving consideration to: (1) prospects of the combined companies; (2) anticipated financial and operating benefits; (3) offer price; (4) fairness opinion; (5) how the deal was negotiated; (6) changes in corporate governance and their impact on shareholder rights; (7) change in the capital structure; (8) conflicts of interest.
Private Placements
Votes on proposals regarding private placements should be determined on a case-by-case basis. When evaluating these proposals, should review: (1) dilution to existing shareholders position; (2) terms of the offer; (3) financial issues; (4) managements efforts to pursue alternatives such as mergers; (5) control issues; (6) conflict of interest. Generally vote for the private placement if it is expected that the company will file for bankruptcy if the transaction is not approved.
Prepackaged Bankruptcy Plans
Votes on proposals to increase common and/or preferred shares and to issue shares as part of a debt restructuring plan are determined on a case-by-case basis, after evaluating: (1) dilution to existing shareholders position; (2) terms of the offer; (3) financial issues; (4) managements efforts to pursue other alternatives; (5) control issues; (6) conflict of interest. Generally vote for the debt restructuring if it is expected that the company will file for bankruptcy if the transaction is not approved.
Recapitalization
Votes case-by-case on recapitalizations (reclassifications of securities), taking into account: (1) more simplified capital structure; (2) enhanced liquidity; (3) fairness of conversion terms, including fairness opinion; (4) impact on voting power and dividends; (5) reasons for the reclassification; (6) conflicts of interest; (7) other alternatives considered.
Reverse Stock Splits
Generally vote for management proposals to implement a reverse stock split when the number of authorized shares will be proportionately reduced. Generally vote for management proposals to implement a reverse stock split to avoid delisting. Votes on proposals to implement a reverse stock split that do not proportionately reduce the number of shares authorized for issue should be determined on a case-by-case basis.
Spinoffs
Votes on spinoffs should be considered on a case-by-case basis depending on: (1) tax and regulatory advantages; (2) planned use of the sale proceeds; (3) valuation of spinoff; fairness opinion; (3) benefits that the spinoff may have on the parent company including improved market focus; (4) conflicts of interest; managerial incentives; (5) any changes in corporate governance and their impact on shareholder rights; (6) change in the capital structure
Value Maximization Proposals
Vote case-by-case on shareholder proposals seeking to maximize shareholder value.
Capital Structure
Adjustments to Par Value of Common Stock
Generally vote for management proposals to reduce the par value of common stock unless the action is being taken to facilitate an antitakeover device or some other negative corporate governance action. Generally vote for management proposals to eliminate par value.
Common Stock Authorization
Votes on proposals to increase the number of shares of common stock authorized for issuance are determined on a case-by-case basis. Generally vote against proposals at companies with dual-class capital structures to increase the number of authorized shares of the class of stock that has superior voting rights. Generally vote for proposals to approve increases beyond the allowable increase when a companys shares are in danger of being delisted or if a companys ability to continue to operate as a going concern is uncertain.
Dual-class Stock
Generally vote against proposals to create a new class of common stock with superior voting rights. Generally vote for proposals to create a new class of nonvoting or subvoting common stock if: (1) it is intended for financing purposes with minimal or no dilution to current shareholders; (2) it is not designed to preserve the voting power of an insider or significant shareholder.
Issue Stock for Use with Rights Plan
Generally vote against proposals that increase authorized common stock for the explicit purpose of implementing a shareholder rights plan.
Preemptive Rights
Votes regarding shareholder proposals seeking preemptive rights should be determined on a case-by-case basis after evaluating: (1) the size of the company; (2) the shareholder base; (3) the liquidity of the stock
Preferred Stock
Generally vote against proposals authorizing the creation of new classes of preferred stock with unspecified voting, conversion, dividend distribution, and other rights (blank check preferred stock). Generally vote for proposals to create declawed blank check preferred stock (stock that cannot be used as a takeover defense). Generally vote for proposals to authorize preferred stock in cases where the company specifies the voting, dividend, conversion, and other rights of such stock and the terms of the preferred stock appear reasonable. Generally vote against proposals to increase the number of blank check preferred stock authorized for issuance when no shares have been issued or reserved for a specific purpose. Generally vote case-by-case on proposals to increase the number of blank check preferred shares after analyzing the number of preferred shares available for issue given a companys industry and performance in terms of shareholder returns.
Recapitalization
Vote case-by-case on recapitalizations (reclassifications of securities), taking into account: (1) more simplified capital structure; (2) enhanced liquidity; (3) fairness of conversion terms, including fairness
opinion; (4) impact on voting power and dividends; (5) reasons for the reclassification; (6) conflicts of interest; (7) other alternatives considered.
Reverse Stock Splits
Generally vote for management proposals to implement a reverse stock split when the number of authorized shares will be proportionately reduced. Generally vote for management proposals to implement a reverse stock split to avoid delisting. Votes on proposals to implement a reverse stock split that do not proportionately reduce the number of shares authorized for issue should be determined on a case-by-case basis.
Share Repurchase Programs
Generally vote for management proposals to institute open-market share repurchase plans in which all shareholders may participate on equal terms.
Stock Distributions: Splits and Dividends
Generally vote for management proposals to increase the common share authorization for a stock split or share dividend, provided that the increase in authorized shares would not result in an excessive number of shares available for issuance.
Tracking Stock
Votes on the creation of tracking stock are determined on a case-by-case basis, weighing the strategic value of the transaction against such factors as: (1) adverse governance changes; (2) excessive increases in authorized capital stock; (3) unfair method of distribution; (4) diminution of voting rights; (5) adverse conversion features; (6) negative impact on stock option plans; (7) other alternatives such as a spinoff.
Executive and Director Compensation
Executive and Director Compensation
Votes on compensation plans for directors are determined on a case-by-case basis.
Stock Plans in Lieu of Cash
Votes for plans which provide participants with the option of taking all or a portion of their cash compensation in the form of stock are determined on a case-by-case basis. Generally vote for plans which provide a dollar-for-dollar cash for stock exchange. Votes for plans which do not provide a dollar-for-dollar cash for stock exchange should be determined on a case-by-case basis.
Director Retirement Plans
Generally vote against retirement plans for nonemployee directors. Generally vote for shareholder proposals to eliminate retirement plans for nonemployee directors.
Management Proposals Seeking Approval to Reprice Options
Votes on management proposals seeking approval to reprice options are evaluated on a case-by-case basis giving consideration to the following: (1) historic trading patterns; (2) rationale for the repricing; (3) value-for-value exchange; (4) option vesting; (5) term of the option; (6) exercise price; (7) participants; (8) employee stock purchase plans. Votes on employee stock purchase plans should be determined on a case-by-case basis. Generally vote for employee stock purchase plans where: (1) purchase price is at least 85 percent of fair market value; (2) offering period is 27 months or less, and (3) potential voting power
dilution (VPD) is ten percent or less. Generally vote against employee stock purchase plans where either: (1) purchase price is less than 85 percent of fair market value; (2) Offering period is greater than 27 months, or (3) VPD is greater than ten percent
Incentive Bonus Plans and Tax Deductibility Proposals
Generally vote for proposals that simply amend shareholder-approved compensation plans to include administrative features or place a cap on the annual grants any one participant may receive. Generally vote for proposals to add performance goals to existing compensation plans. Votes to amend existing plans to increase shares reserved and to qualify for favorable tax treatment considered on a case-by-case basis. Generally vote for cash or cash and stock bonus plans that are submitted to shareholders for the purpose of exempting compensation from taxes if no increase in shares is requested.
Employee Stock Ownership Plans (ESOPs)
Generally vote for proposals to implement an ESOP or increase authorized shares for existing ESOPs, unless the number of shares allocated to the ESOP is excessive (more than five percent of outstanding shares.)
401(k) Employee Benefit Plans
Generally vote for proposals to implement a 401(k) savings plan for employees.
Shareholder Proposals Regarding Executive and Director Pay
Generally vote for shareholder proposals seeking additional disclosure of executive and director pay information, provided the information requested is relevant to shareholders needs, would not put the company at a competitive disadvantage relative to its industry, and is not unduly burdensome to the company. Generally vote against shareholder proposals seeking to set absolute levels on compensation or otherwise dictate the amount or form of compensation. Generally vote against shareholder proposals requiring director fees be paid in stock only. Generally vote for shareholder proposals to put option repricings to a shareholder vote. Vote for shareholders proposals to exclude pension fund income in the calculation of earnings used in determining executive bonuses/compensation. Vote on a case-by-case basis for all other shareholder proposals regarding executive and director pay, taking into account company performance, pay level versus peers, pay level versus industry, and long term corporate outlook.
Performance-Based Option Proposals
Generally vote for shareholder proposals advocating the use of performance-based equity awards (indexed, premium-priced, and performance-vested options), unless: (1) the proposal is overly restrictive; or (2) the company demonstrates that it is using a substantial portion of performance-based awards for its top executives.
Stock Option Expensing
Generally vote for shareholder proposals asking the company to expense stock options unless the company has already publicly committed to start expensing by a specific date.
Golden and Tin Parachutes
Generally vote for shareholder proposals to require golden and tin parachutes to be submitted for shareholder ratification, unless the proposal requires shareholder approval prior to entering into employment contracts. Vote on a case-by-case basis on proposals to ratify or cancel golden or tin parachutes.
May 3, 2010
Part C
Other Information
Item 25. Financial Statements and Exhibits
1. Financial Statements
Part A Financial Highlights.
Part B Unaudited financial statements for the period ended April 30, 2010 are incorporated by reference herein to the Funds semi-annual report for the period ended April 30, 2010. Audited financial statements for the period ended October 31, 2009 are incorporated by reference herein to the Funds annual report for the period ended October 31, 2009.
2. Exhibits
(a)(1) |
|
Agreement and Declaration of Trust(1) |
|
|
|
(a)(2) |
|
Certificate of Amendment to Agreement and Declaration of Trust, dated February 6, 2001, filed herewith. |
|
|
|
(a)(3) |
|
Certificate of Amendment to Agreement and Declaration of Trust, dated May 31, 2001, filed herewith. |
|
|
|
(a)(4) |
|
Certificate of Amendment to Agreement and Declaration of Trust, dated April 10, 2002, filed herewith. |
|
|
|
(a)(5) |
|
Certificate of Amendment to Agreement and Declaration of Trust, dated August 16, 2007, filed herewith. |
|
|
|
(b)(1) |
|
Bylaws(1) |
|
|
|
(b)(2) |
|
Amendment to Bylaws, dated May 31, 2001, filed herewith. |
|
|
|
(c) |
|
Not applicable |
|
|
|
(d)(1) |
|
Provisions of instruments defining the rights of holders of securities are contained in the Registrants Agreement and Declaration of Trust and Bylaws, each as amended. |
|
|
|
(d)(2) |
|
Form of Subscription Certificate, to be filed by amendment. |
|
|
|
(e) |
|
Dividend Reinvestment and Cash Purchase Plan, filed herewith. |
|
|
|
(f) |
|
Not applicable |
|
|
|
(g) |
|
Amended and Restated Investment Advisory Agreement with Credit Suisse Asset Management, LLC dated December 1, 2006, filed herewith. |
|
|
|
(h) |
|
Not applicable |
|
|
|
(i) |
|
Not applicable |
|
|
|
(j) |
|
Custodian Agreement with State Street Bank and Trust Company dated October 20, 2000.(2) |
|
|
|
(k)(1) |
|
Registrar, Transfer Agency and Services Agreement with EquiServe, Inc. dated August 1, 2003, filed herewith. |
(k)(2) |
|
Administration Agreement with State Street Bank and Trust Company dated June 7, 2002, filed herewith. |
|
|
|
(k)(3) |
|
Credit Agreement with State Street Bank and Trust Company dated December 12, 2008, filed herewith. |
|
|
|
(k)(4) |
|
Amendment No. 1 to Credit Agreement dated December 11, 2009, filed herewith. |
|
|
|
(k)(5) |
|
Security Agreement with State Street Bank and Trust Company dated December 12, 2008, filed herewith. |
|
|
|
(l) |
|
Opinion and Consent of Counsel, to be filed by amendment |
|
|
|
(m) |
|
Not applicable |
|
|
|
(n)(1) |
|
Consent of Independent Registered Public Accounting Firm, to be filed by amendment |
|
|
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(n)(2) |
|
Consent of Thomas J. Herzfeld Advisors, Inc., to be filed by amendment |
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(n)(3) |
|
Consent of Chatsworth Securities LLC, to be filed by amendment |
|
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(o) |
|
Not applicable |
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|
|
(p) |
|
Initial Capital Agreement(1) |
|
|
|
(q) |
|
Not applicable |
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|
|
(r)(1) |
|
Credit Suisse Global Policy Employee Personal Account Trading Policy(3) |
|
|
|
(r)(2) |
|
Code of Ethics of the Investment Adviser, filed herewith. |
|
|
|
(s) |
|
Power of Attorney, filed herewith. |
(1) |
|
Incorporated by reference to Pre-Effective Amendment No. 2 to the Trusts Registration Statement on Form N-2, filed on July 24, 1998 (File No. 333-52373). |
|
|
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(2) |
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Incorporated by reference to Post-Effective Amendment No. 14 to the Registration Statement on Form N-1A of Credit Suisse Trust, filed on November 22, 2000 (Securities Act File No. 33-58125). |
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|
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(3) |
|
Incorporated by reference to Post-Effective Amendment No. 32 to the Registration Statement on Form N-1A of Credit Suisse Trust, filed on April 27, 2010 (Securities Act File No. 33-58125). |
Item 26. Marketing Arrangements
Not applicable.
Item 27. Other Expenses of Issuance and Distribution
The following table sets forth the estimated expenses to be incurred in connection with the offer described in this Registration Statement:
Legal |
|
$ |
* |
|
Subscription Agent |
|
* |
|
|
Information Agent |
|
* |
|
|
Printing and Mailing |
|
* |
|
|
NYSE Listing Fee |
|
* |
|
|
SEC Registration Fee |
|
* |
|
|
FINRA Fee |
|
* |
|
|
Other |
|
* |
|
|
|
|
|
|
|
Total |
|
$ |
* |
|
Note: All amounts are estimates.
* To be filed by amendment.
Item 28. Persons Controlled by or Under Common Control with the Registrant
From time to time, Credit Suisse Asset Management, LLC (Credit Suisse) may be deemed to control the Trust and other registered investment companies it advises through its beneficial ownership of more than 25% of the relevant funds shares on behalf of discretionary advisory clients.
Item 29. Number of Holders of Shares
As of July 30, 2010, there are the following number of Record Holders:
|
|
Number of |
|
Title of Class |
|
Record Holders |
|
Common Shares of Beneficial Interest |
|
223 |
|
Item 30. Indemnification
Pursuant to the Agreement and Declaration of Trust of the Registrant, the Registrant has agreed to indemnify its trustees and officers against any liabilities and expenses, including amounts paid in satisfaction of judgments, in compromise or as fines and penalties, and reasonable counsel fees reasonably incurred by such indemnitee in connection with the defense or disposition of any action, suit or other proceeding, whether civil or criminal, before any court or administrative or investigative body in which he may be or may have been involved as a party or otherwise or with which he may be or may have been threatened, while acting his capacity as officer or trustee of the Registrant by reason of his having acted in any such capacity, except with respect to any matter as to which he shall not have acted in good faith in the reasonable belief that his action was in the best interest of the Registrant or, in the case of any criminal proceeding, as to which he shall have had reasonable cause to believe that the conduct was unlawful, provided, however, that no indemnitee shall be indemnified thereunder against any liability to any person or any expense of such indemnitee arising by reason of (i) willful misfeasance, (ii) bad faith, (iii) gross negligence, or (iv) reckless disregard of the duties involved in the conduct of his position.
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to trustees, officers and controlling persons of the Registrant, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a trustee, officer, or controlling person of the Registrant in connection with the successful defense of any action, suit or proceeding) is asserted by such trustee, officer or controlling person of the Registrant in connection with the Shares being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
Item 31. Business and Other Connections of Investment Adviser
Credit Suisse acts as investment adviser to the Registrant. Credit Suisse renders investment advice to a wide variety of individual and institutional clients. The list required by this Item 31 of officers and Trustees of Credit Suisse, together with information as to their other business, profession, vocation or employment of a substantial nature during the past two years, is incorporated by reference to Schedules A and D of Form ADV filed by Credit Suisse (SEC File No. 801-37170).
Item 32. Location of Accounts and Records
(1) Credit Suisse High Yield Bond Fund
Eleven Madison Avenue
New York, New York 10010
(Funds Agreement and Declaration of Trust, Bylaws and minute books)
(2) Credit Suisse Asset Management, LLC
Eleven Madison Avenue
New York, New York 10010
(records relating to its functions as investment adviser)
(3) State Street Bank and Trust Company
One Lincoln Street
Boston, Massachusetts 02111
(records relating to its functions as administrator, custodian and accounting
agent)
(4) Computershare Trust Company, N.A.
P.O. Box 43078
Providence, Rhode Island 02940
(records relating to its functions as shareholder servicing agent)
Item 33. Management Services
Not Applicable.
Item 34. Undertakings
(1) The Registrant hereby undertakes to suspend the offering of its shares until it amends its prospectus if (a) subsequent to the effective date of its Registration Statement, the net asset value declines more than 10 percent from its net asset value as of the effective date of the Registration Statement or (b) the net asset value increases to an amount greater than its net proceeds as stated in the prospectus.
(2) Not applicable.
(3) Not applicable.
(4) Not applicable.
(5)(a) For the purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of a registration statement in reliance upon Rule 430A and contained in the form of prospectus filed by the Registrant under Rule 497(h) under the Securities Act of 1933 shall be deemed to be part of the Registration Statement as of the time it was declared effective.
(b) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of the securities at that time shall be deemed to be the initial bona fide offering thereof.
(6) The Registrant undertakes to send by first class mail or other means designed to ensure equally prompt delivery within two business days of receipt of a written or oral request, any Statement of Additional Information.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, and the Investment Company Act of 1940, as amended, the Registrant certifies that it has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York and the State of New York, on the 3rd day of August, 2010.
|
CREDIT SUISSE HIGH YIELD |
|
|
BOND FUND |
|
|
|
|
|
By: |
/s/John G. Popp |
|
|
John G. Popp |
|
|
Chief Executive Officer and President |
Pursuant to the requirements of the Securities Act of 1933, as amended this Registration Statement has been signed below by the following persons in the capacities and on the date indicated:
SIGNATURE |
|
TITLE |
|
DATE |
|
|
|
|
|
/s/John G. Popp |
|
Chief Executive Officer and President |
|
August 3, 2010 |
John G. Popp |
|
|
|
|
|
|
|
|
|
/s/Michael A. Pignataro |
|
Chief Financial Officer |
|
August 3, 2010 |
Michael A. Pignataro |
|
|
|
|
|
|
|
|
|
/s/Enrique Arzac |
|
Chairman of the Board and Trustee |
|
July 30, 2010 |
Enrique Arzac |
|
|
|
|
|
|
|
|
|
/s/Terry F. Bovarnick |
|
Trustee |
|
July 22, 2010 |
Terry F. Bovarnick |
|
|
|
|
|
|
|
|
|
/s/James J. Cattano |
|
Trustee |
|
July 28, 2010 |
James J. Cattano |
|
|
|
|
|
|
|
|
|
/s/Lawrence J. Fox |
|
Trustee |
|
July 21, 2010 |
Lawrence J. Fox |
|
|
|
|
|
|
|
|
|
/s/Steven N. Rappaport |
|
Trustee |
|
July 21, 2010 |
Steven N. Rappaport |
|
|
|
|
EXHIBIT INDEX
EXHIBIT |
|
|
|
NUMBER |
|
DESCRIPTION |
|
|
|
|
|
(a)(2) |
|
|
Certificate of Amendment to Agreement and Declaration of Trust, dated February 6, 2001 |
|
|
|
|
(a)(3) |
|
|
Certificate of Amendment to Agreement and Declaration of Trust, dated May 31, 2001 |
|
|
|
|
(a)(4) |
|
|
Certificate of Amendment to Agreement and Declaration of Trust, dated April 10, 2002 |
|
|
|
|
(a)(5) |
|
|
Certificate of Amendment to Agreement and Declaration of Trust, dated August 16, 2007 |
|
|
|
|
(b)(2) |
|
|
Amendment to Bylaws, dated May 31, 2001 |
|
|
|
|
(d)(e) |
|
|
Dividend Reinvestment and Cash Purchase Plan |
|
|
|
|
(d)(g) |
|
|
Amended and Restated Investment Advisory Agreement with Credit Suisse Asset Management, LLC dated December 1, 2006 |
|
|
|
|
(k)(1) |
|
|
Registrar, Transfer Agency and Services Agreement with EquiServe, Inc. dated August 1, 2003 |
|
|
|
|
(k)(2) |
|
|
Administration Agreement with State Street Bank and Trust Company dated June 7, 2002 |
|
|
|
|
(k)(3) |
|
|
Credit Agreement with State Street Bank and Trust Company dated December 12, 2008 |
|
|
|
|
(k)(4) |
|
|
Amendment No. 1 to Credit Agreement dated December 11, 2009 |
|
|
|
|
(k)(5) |
|
|
Security Agreement with State Street Bank and Trust Company dated December 12, 2008 |
|
|
|
|
(r)(2) |
|
|
Code of Ethics of the Investment Adviser |
|
|
|
|
(s) |
|
|
Power of Attorney |
Exhibit 99.(a)(2)
Certificate of Amendment
to the
Certificate of Trust
of
DLJ High Yield Bond Fund
and
Certificate of the Secretary
The undersigned Secretary of DLJ High Yield Bond Fund (the Fund), a Delaware business trust governed by a written Agreement and Declaration of Trust (the Declaration of Trust) dated April 24, 1998 that was duly executed and filed with the office of the Secretary of State of Delaware on April 24, 1998, DOES HEREBY CERTIFY THAT:
FIRST: On February 1, 2001, the Trustees of the Trust, pursuant to Section 11.3 of the Declaration of Trust, duly adopted an amendment to the Funds Declaration of Trust whereby Section 2.1 was amended, in its entirety, to read:
2.1 Number and Qualification. Prior to a public offering of Shares, there may be a sole Trustee and thereafter, the number of Trustees shall be no less than three or more than fifteen, provided, however, that the number of trustees may be increased or decreased by a written instrument signed by a majority of the Trustees then in office. No reduction in the number of Trustees shall have the effect of removing any Trustee from office prior to the expiration of his term. An individual nominated as a Trustee shall be at least 21 years of age at the time of nomination and not under any legal disability. Trustees need not own Shares and may succeed themselves in office;
and
SECOND: That the amendment to the Funds Declaration of Trust will not be effective until the filing date with the State of Delaware of this Certificate of Amendment.
|
|
STATE OF DELAWARE |
|
|
SECRETARY OF STATE |
|
|
DIVISION OF CORPORATIONS |
|
|
FILED 02:30 PM 02/07/2001 |
|
|
010062994 - 2888496 |
IN WITNESS WHEREOF the undersigned has executed this certificate on this 6th day of February, 2001.
|
|
/s/ Martin Jaffe |
|
|
|
Martin Jaffe |
|
|
|
Secretary |
|
|
|
|
|
|
|
|
|
STATE OF NEW YORK |
) |
|
|
ss: |
|
|
|
COUNTY OF NEW YORK |
) |
|
|
On this 6th day of February 2001 before me personally came Martin Jaffe to me known, who being duly sworn by me, did depose and say that he is Secretary of DLJ High Yield Bond Fund, a trust organized under the laws of the State of Delaware, the trust described in the foregoing instrument; that he knows the seal of said trust; that the seal affixed to said instrument is such trust seal; that it was so affixed by order of the trustees of said trust, and that he signed his name thereto by order.
|
|
/s/ Bonnie S. Melamed |
|
|
Notary Public |
|
|
|
|
|
|
|
|
Bonnie S. Melamed |
|
|
Notary Public, State of New York |
|
|
No 01ME6052465 |
|
|
Qualified in New York County |
|
|
Commission Expires Dec. 18, 2002 |
Exhibit 99.(a)(3)
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF TRUST
OF
DLJ HIGH YIELD BOND FUND
This Amendment to the Certificate of Trust is filed in accordance with the provisions of the Delaware Business Trust Act (12 Del. C. Section 3810) and sets forth the following:
· First: The name of the trust is DLJ High Yield Bond Fund.
· Second: Article One of the Certificate of Trust is amended as follows:
The name of the Trust is Credit Suisse High Yield Bond Fund.
· Third: This certificate shall be effective upon filing.
|
|
BY: |
/s/James P. McCaughan |
|
|
|
as Trustee, and not individually |
|
|
|
|
|
NAME: James P. McCaughan |
||
|
|
|
|
STATE OF DELAWARE |
|
|
SECRETARY OF STATE |
|
|
DIVISION OF CORPORATIONS |
|
|
FILED 03:30 PM 05/31/2001 |
|
|
010261205 - 2888496 |
Exhibit 99.(a)(4)
Certificate of Amendment
to the
Agreement and Declaration of Trust
of
DLJ High Yield Bond Fund
The undersigned, being the (majority of the) Trustees of DLJ High Yield Bond Fund (the Trust), a Delaware business trust governed by a written Agreement and Declaration of Trust (the Declaration of Trust) dated April 24, 1998 that was duly executed, DO HEREBY CERTIFY that:
1. On May 31, 2001, the Trustees of the Trust, pursuant to Section 11.3 of the Declaration of Trust, duly adopted an amendment to the Funds Declaration of Trust whereby the first sentence of Section 1.1 of the Agreement and Declaration of Trust was amended to read as follows:
1.1 Name. This Trust shall be known as Credit Suisse High Yield Bond Fund and the Trustees shall conduct the business of the Trust under that name or any other name or names as they may from time to time determine;
2. On February 1, 2001, the Trustees of the Trust, pursuant to the Section 11.3 of the Declaration of Trust, duly adopted an amendment to the Funds Declaration of Trust whereby Section 2.1 was amended, in its entirety, to read:
2.1 Number and Qualification. Prior to a public offering of Shares, there may be a sole Trustee and thereafter, the number of Trustees shall be no less than three or more than fifteen, provided, however, that the number of trustees may be increased or decreased by a written instrument signed by a majority of the Trustees then in office. No reduction in the number of Trustees shall have the effect of removing any Trustee from office prior to the expiration of his term. An individual nominated as a Trustee shall be at least 21 years of age at the time of nomination and not under any legal disability. Trustees need not own shares and may succeed themselves in office.
The undersigned have executed this certificate as of the date set forth below.
/s/ Enrique R. Arzac |
|
April 10, 2002 |
|
Enrique R. Arzac |
|
|
|
|
|
|
|
|
|
|
|
/s/ Lawrence J. Fox |
|
April 10, 2002 |
|
Lawrence J. Fox |
|
|
|
|
|
|
|
|
|
|
|
/s/ James S. Pasman, Jr. |
|
April 10, 2002 |
|
James S. Pasman, Jr. |
|
|
Exhibit 99.(a)(5)
Certificate of Amendment
to the
Agreement and Declaration of Trust
of
Credit Suisse High Yield Bond Fund
Pursuant to Section 11.3 of the Agreement and Declaration of Trust of Credit Suisse High Yield Bond Fund (the Trust), Section 2.1 is hereby amended and restated in its entirety to read as follows:
Number and Qualification. The number of Trustees shall be no less than three or more than fifteen, provided, however, that the number of trustees may be increased or decreased by a written instrument signed by a majority of the Trustees then in office. No reduction in the number of Trustees shall have the effect of removing any Trustee from office prior to the expiration of his term. An individual nominated as a Trustee shall be at least 21 years of age at the time of nomination and not under any legal disability. A Trustee shall be deemed to resign and retire as a Trustee on the date he/she reaches the age of 72 years. The Trustees who are not interested persons of the Trust (as defined in the 1940 Act) and who are not being considered for the waiver (Independent Trustees) may by a majority vote waive this application of the normal retirement age to a Trustee based on the particular facts and circumstances. A determination to waive the mandatory retirement age for an individual Trustee shall be reviewed on an annual basis by the Independent Trustees. Trustees need not own shares and may succeed themselves in office.
Exhibit 99.(b)(2)
Amendment to the By-Laws
of
DLJ High Yield Bond Fund
Pursuant to Article VIII of the By-Laws of DLJ High Yield Bond Fund, the name has been changed to
Credit Suisse High Yield Bond Fund.
Dated the 31st day of May, 2001
Exhibit 99.(e)
DIVIDEND REINVESTMENT AND
CASH PURCHASE PLAN
for
CREDIT SUISSE HIGH YIELD
BOND FUND
DIVIDEND REINVESTMENT AND
CASH PURCHASE PLAN
for
Credit Suisse High Yield Bond Fund
1. What is the Dividend Reinvestment and Cash Purchase Plan?
The Dividend Reinvestment and Cash Purchase Plan (the Plan) offers common stockholders of Credit Suisse High Yield Bond Fund (the Fund) a prompt and simple way to reinvest net investment income dividends and capital gains and other periodic distributions in shares of the Funds common stock. It is the Funds present policy, which may be changed by the Board of Trustees, to make dividend distributions on a monthly basis. In addition, the Funds final distribution for each calendar year will include any remaining net investment income undistributed during the year, as well as any undistributed net realized capital gain.
The Plan also allows you to make optional cash investments in shares of the Funds common stock through the Plan Agent and to deposit certificates representing your Fund shares with the Plan Agent for safekeeping. Computershare Trust Company, N.A. (Computershare) acts as Plan Agent for stockholders in administering the Plan. The complete terms and conditions of the Plan accompany this outline.
2. Who can participate in the Plan?
If your shares of common stock of the Fund are registered in your own name, you will automatically participate in the Plan, unless you have indicated that you do not wish to participate and instead wish to receive dividends and capital gains distributions in cash.
3. What does the Plan offer?
The Plan has two components: reinvestment of dividends and distributions, and an optional cash purchase feature.
· Reinvestment of dividends and distributions. By participating in the Plan, your dividends and distributions will be promptly paid to you in additional shares of common stock of the Fund, thereby increasing your holdings in the Fund. If the Fund declares a dividend or distribution, and you are enrolled in the Plan, you will automatically receive shares of the Funds common stock.
The number of shares to be issued to you will be determined by dividing the total amount of the distribution payable to you by the greater of (i) the net asset value per share (NAV) of the Funds common stock on the payment date, or (ii) 95% of the market price per share of the Funds common stock on the payment date. However, if the NAV of the Funds common stock is greater than the market price (plus estimated brokerage commissions) on the payment date, then Computershare (or a broker-dealer selected by Computershare) shall endeavor to apply the amount of such distribution on your shares to purchase shares of Fund common stock in the open market.
· Voluntary cash purchase. Plan participants have the option of making investments in shares of the Funds common stock through the Plan Agent. You may invest $100 or more monthly, with a maximum of $100,000 in any annual period. The Plan Agent will purchase shares for you in the open market on the principal national securities exchange upon which the Funds shares trade, in the over-the-counter market or in negotiated transactions on the 25th of each month or the next trading day if the 25th is not a trading day. Please send your check drawn on a U.S. bank,
made payable in U.S. Dollars to Computershare- Credit Suisse High Yield Bond Fund, to the address set forth below.
The Plan Agent will not accept cash, travelers checks, money orders, or third party checks for voluntary cash purchases.
You may also make voluntary cash payments by accessing your account online at www.computershare.com/equiserve and making a one-time online bank debit. One-time online optional cash payment funds will be held by the Plan Agent for three (3) banking business days before they are invested on the first investment date thereafter. Please refer to the online confirmation for your account debit date and investment date.
If you wish to make regular monthly optional cash payments, you can authorize an automatic monthly deduction from your checking or savings account at a U.S. bank or other U.S. financial institution. This feature enables you to make ongoing investments without writing a check. To initiate automatic monthly deductions, you may enroll by accessing your account online at www.computershare.com/equiserve.
Alternatively, you must complete and sign an Authorization Form for Automatic Deductions and return it to the Plan Agent together with a voided blank check or savings account deposit slip, from the bank or other institution from which the funds are to be withdrawn. Your Authorization Form for automatic deductions will be processed and will become effective as promptly as practicable. However, you should allow at least four to six weeks for your first investment to be initiated.
Once automatic deductions are initiated, funds will be drawn from your specified account on the 20th of each month, or the next banking business day if the 20th is not a banking business day. Automatic monthly deductions will continue until
you notify the Plan Agent in writing to the contrary. You may change or discontinue automatic monthly deductions by accessing your account online at www.computershare.com/equiserve or by completing and submitting to the Plan Agent a new Authorization Form. When you transfer Shares or otherwise establish a new account, a new Authorization Form must be completed. To be effective with respect to a particular monthly purchase, the Plan Agent must receive the new Authorization Form at least seven (7) business days preceding the monthly purchase date.
Your cash (which does not earn interest) will be held by the Plan Agent until the next purchase date on the 25th of the month, but in no event more than 30 days after such date. You may withdraw a voluntary cash payment by written notice if the notice is received by the Plan Agent not less than forty-eight hours before the investment date.
Shares purchased with cash deposit investments will be acquired by the Plan Agent for the participants accounts by purchases of outstanding shares on the open-market on the principal national securities exchange upon which the Funds shares trade, in the over-the-counter market or by negotiated transactions, irrespective of whether the shares are trading at a market premium or a market discount.
4. How does the custody of shares work?
All shares that are issued to you in payment of dividends or distributions or that are purchased by you through voluntary cash purchases are held in the name of the Plan Agent or its nominee and the shares are added to your balance in the Plan. The Plan Agent will send a confirmation statement to you shortly after any activity in your account.
Unless requested, the Plan Agent will not issue certificates for shares of the Funds Common Stock purchased under the Plan. The number of shares
purchased for your Plan account, as well as the number of shares you deposit, will be shown on your Plan account statement. Keeping shares in book-entry form rather than in certificated form protects against loss, theft, and destruction of stock certificates.
You may request that the Plan Agent issue physical certificates to you at any time by visiting the Plan Agents web site at www.computershare.com/equiserve, by calling Plan Agent at (800) 730-6001 or by written notice to the Plan Agent. In response to your request, certificates for any number of whole shares credited to your Plan account will be issued to you. A certificate for a fraction of a share cannot be issued.
5. Is there a cost to participate?
There is no service fee payable by Plan participants for dividend reinvestment. For purchases from voluntary cash payments by check, one-time online bank debit or by recurring automatic investments, Plan participants must pay a service fee of $5.00 per transaction. Plan participants will also be charged a pro rata share of the brokerage commissions for all open market purchases (currently $0.03 per share as of October 2006). These charges will be deducted from amounts to be invested.
Participants will also be charged a service fee of $5.00 for each sale and brokerage commissions of $0.03 per share (as of October 2006).
6. Can I deposit shares into my Plan account for safekeeping?
As a Plan participant, you can deposit your Fund certificate(s) into your Plan account. To deposit your shares, you should send the certificate(s) to Computershare, at the address set for below, by registered or certified mail, with return receipt requested, or some other form of traceable mail, and properly insured. You should not sign the certificate(s) or complete the assignment section.
When submitting certificate(s) for deposit into your Plan account, be sure to include a written request to have the certificate(s) deposited. Shares that you deposit will be credited in book-entry form to your Plan account. The advantages of holding shares in book-entry form in the Plan are protection against certificate loss, theft, and damage.
7. May I withdraw from the Plan?
You may withdraw from the Plan without penalty at any time by requesting a certificate or a sale of your Plan shares. Your withdrawal will be effective immediately if your notice is received by Computershare prior to any dividend or distribution record date; otherwise such termination will be effective only with respect to any subsequent dividend or distribution.
You may request that the Plan Agent issue physical certificates to you at any time by visiting the Plan Agents web site at www.computershare.com/equiserve, by calling Plan Agent directly at (800)730-8001 or by written notice to the Plan Agent. In response to your written request, certificates for any number of whole shares credited to your Plan account will be issued to you. A certificate for a fraction of a share cannot be issued.
You can sell all or a portion of the shares from your Plan account by visiting the Plan Agents web site at www.computershare.com/equiserve, by calling the Plan Agent directly at (800) 730-6001 or by written notice to the Plan Agent. The Plan Agent will sell the shares for you in your Plan account through a broker selected by it and send you the proceeds, less a service fee of $5.00 per sale and less brokerage commissions of $0.03 per share (as of October 2006). The Plan Agent will send the sale proceeds, less applicable fees, to you by check to your address of record after your sale transaction has settled. If you request all your Plan shares sold, any fractional shares you own will be sold at the current market price and included in the proceeds.
Your dividend participation option will remain
the same unless you withdraw all of your whole and fractional Plan shares, in which case your participation in the Plan will be terminated and you will receive subsequent dividends and capital gains distributions in cash instead of shares.
All sales requests having an anticipated market value of $100,000 or more should be submitted in written form. In addition, all sale requests within thirty (30) days of an address change to your account should be submitted in written form.
If you have withdrawn or sold all of your shares and you wish to re-enroll in the Plan, simply send written instructions signed by all registered owners to the Plan Agent.
8. How do participating stockholders benefit?
· You will build holdings in the Fund easily and automatically, at no brokerage cost for the distributions in Fund shares (when shares of the Funds common stock is trading at a premium to its NAV).
· You will receive a detailed account statement from the Plan Agent, showing total dividends and distributions, additional cash payments, date of investment, shares acquired and price per share, and total shares of record held by you and by the Plan Agent for you. You will be able to vote all shares held for you by the Plan Agent at stockholder meetings.
9. Whom should I contact for additional information?
Please address all notices, correspondence, questions or other communications regarding the Plan by registered or certified mail, return receipt requested to:
By mail: |
Credit Suisse High Yield Bond Fund |
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c/o Computershare |
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P.O. Box 43010 |
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Providence, RI 02940-3010 |
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By phone: |
(800) 730-6001 (U.S. and Canada) |
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(781) 575-3100 (Outside U.S. and Canada) |
Customer service associates are available from 9:00 a.m. and 5:00 p.m. Eastern time, Monday through Friday.
By Internet: |
www.computershare.com/equiserve |
The Fund may amend or terminate the Plan. Participants will be sent written notice at least 30 days before the effective date of any amendment. In case of termination, participants will be sent written notice of the termination at least 30 days before the record date of any dividend or capital gains distribution by the Fund.
TERMS AND CONDITIONS
Credit Suisse High Yield Bond Fund, a Delaware statutory trust (the Fund), hereby adopts the following plan (the Plan) with respect to net investment income dividends and capital gains and other periodic distributions declared by its Board of Trustees on shares of its Common Stock and to voluntary cash purchases of shares of its Common Stock:
1. Unless a stockholder specifically elects to receive cash as set forth below, all net investment income dividends and all capital gains and other periodic distributions hereafter declared by the Board of Trustees shall be payable in shares of the Common Stock of the Fund.
2. Such dividends and distributions shall be payable on such date or dates as may be fixed from time to time by the Board of Trustees to stockholders of record at the close of business on the record date(s) established by the Board of Trustees for the dividend and/or distribution involved. Unless a stockholder specifically elects otherwise, such stockholder will receive all dividends and/or distributions in full and fractional shares of the Funds Common Stock, and no action shall be required on such stockholders part to receive a distribution in stock.
3. A stockholder may, however, elect to receive his or its dividends and distributions in cash. To exercise this option, such stockholder shall notify Computershare Trust Company, N.A., the Plan Agent, (Computershare) so that such notice is received by Computershare prior to the record date fixed by the Board of Trustees for the dividend and/or distribution involved.
4. Computershare will set up an account for shares acquired pursuant to the Plan for each
participating stockholder (Participant). Computershare may hold each Participants shares, together with the shares of other Participants, in noncertificated form in Computershares name or that of its nominee.
5. Whenever a Fund declares an income dividend or a capital gain distribution (collectively referred to as dividends) payable either in shares or in cash, non-participants in the Plan will receive cash and participants in the Plan will receive the equivalent in shares. The method used by the Plan Agent to acquire shares will vary based on whether shares are acquired through dividend reinvestments or with cash deposit investments. Shares purchased through dividend reinvestments will be acquired by the Plan Agent for the participants accounts, depending upon the circumstances described below, either (i) through receipt of additional unissued but authorized shares from a Fund (newly issued shares) or (ii) by purchase of outstanding shares in the open market (open-market purchases) on the principal national securities exchange upon which such Funds shares trade, in the over-the-counter market or in negotiated transactions. If on the payment date for the dividend, the net asset value per share is equal to or less than the market price per share plus estimated brokerage commissions (such condition being referred to herein as market premium), the Plan Agent will invest the dividend amount in newly issued shares on behalf of the participants. The number of newly issued shares to be credited to each participants account will be determined by dividing the dollar amount of the dividend by the net asset value per share on the payment date; provided that, if the net asset value is less than or equal to 95% of the closing market value on the payment date, the dollar amount of the dividend will be divided by 95% of the closing market price per share on the payment date. If, on the payment date for any dividend,
the net asset value per share is greater than the closing market value plus estimated brokerage commissions (such condition being referred to herein as market discount), the Plan Agent will invest the dividend amount in shares acquired on behalf of the participants in open-market purchases.
If the Plan Agent is unable to invest the full dividend amount in open market purchases during the purchase period or if the market discount shifts to a market premium during the purchase period, the Plan Agent may cease making open-market purchases and may invest the uninvested portion of the dividend amount in newly issued shares at net asset value per share at the close of business on the last payment date; provided that, if the net asset value is less than or equal to 95% of the then current market price per common share, the dollar amount of the dividend will be divided by 95% of the market price on the payment date.
Shares purchased with cash deposit investments will be acquired by the Plan Agent for the participants accounts by purchases of outstanding shares on the open-market on the principal national securities exchange upon which the Funds shares trade, in the over-the-counter market or in negotiated transactions.
For purposes of the Plan: (a) the market price of the Common Stock on a particular date shall be the last sales price on the American Stock Exchange on that date, or, if there is no sale on such Exchange on such date, then the average between the closing bid and asked quotation for such shares on such Exchange on such date and (b) the NAV per share of Common Stock on a particular date shall be as determined by or on behalf of the Fund.
6. A Participant has the option of sending additional funds to Computershare, in any
amount of at least $100 with a maximum of $100,000, for the purchase in the open market of shares of the Funds Common Stock for his or its account. Such voluntary payments will be so invested by Computershare on the 25th of each month or the next trading day if the 25th is not a trading day, and in no event more than 30 days after such date, except where necessary to comply with provisions of Federal securities law. Funds received less than 2 business days prior to an investment date will be held by Computershare until the next investment date. A Participant may withdraw his entire voluntary cash payment by written notice received by Computershare not less than 48 hours before such payment is to be invested.
Participants may authorize an automatic monthly deduction from their checking or savings account at a U.S. bank or other U.S. financial institution. To initiate automatic monthly deductions, participants must enroll through the Plan Agents Internet site or complete and sign enrollment forms and return them to the Plan Agent together with a voided blank check or savings account deposit slip, from the bank or other institution from which the funds are to be withdrawn. Enrollment will become effective as promptly as practicable. Once automatic deductions are initiated, funds will be drawn from the specified account on the 20th of each month, or the next banking business day if the 20th is not a banking business day. Automatic monthly deductions will continue until participants notify the Plan Agent in writing to the contrary. Participants may change or discontinue automatic monthly deductions by following the Plan Agents procedures. When participants transfer Shares or otherwise establish a new account, participants must re-enroll. To be effective with respect to a particular monthly purchase, the Plan Agent must receive the necessary material at least seven (7) business days preceding the monthly purchase date.
In the event that any check, draft or electronics funds transfer participants may tender or order as payment to the Plan Agent to purchase Shares is dishonored, refused or returned, participants agree that the purchased Shares when credited to their account may be sold, on the Plan Agents order without the participants consent or approval, to satisfy the amount owing on the purchase. The amount owing will include the purchase price paid, any purchase and sale transaction fees, any brokerage commissions and the Plan Agents returned check or failed electronic payment fee. If the sale proceeds of purchased Shares are insufficient to satisfy the amount owing, participants authorize the Plan Agent to sell additional Shares then credited to a participants account as necessary to cover the amount owing, without the participants further consent or authorization. Computershare may sell Shares to cover an amount owing as a result of a participants order in any manner consistent with applicable securities laws and the Funds organizational documents. Any sale for that purpose in a national securities market would be commercially reasonable. Participants grant the Computershare a security interest in all Shares credited to their account including Shares subsequently acquired and held or tendered for deposit, for purposes of securing any amount owing as described in this paragraph.
7. Investments of voluntary cash payments may be made by Computershare on any securities exchange where shares of the Funds Common Stock are traded, in the over-the-counter market or in negotiated transactions and may be on such terms as to price, delivery and otherwise as Computershare shall determine. Participant funds held by Computershare uninvested will not bear interest, and Computershare shall have no liability in connection with any inability to purchase
shares within 30 days after receipt of funds or with the timing of any purchases affected. Computershare shall have no responsibility as to the value of the shares of the Funds Common Stock acquired for any Participants account and may commingle funds of Participants for the purpose of cash investments.
The price of all shares purchased by Computershare on the open market pursuant to the Plan shall be the weighted average price per share obtained by Computershares broker for each aggregate order placed by Computershare. The price of all shares sold by Computershare pursuant to sell orders shall be the weighted average price per share obtained by Computershares broker for each aggregate order place by Computershare. All sales instructions received by Computershare will be processed promptly thereafter and in no event later than five business days after the date on which the order is received. All sale requests having an anticipated market value of $100,000 or more shall be submitted in written form. In addition, all sale requests received by Computershare within thirty (30) days of an address change shall be submitted in written form.
For purchases and sales made in the open market, no one will have any authority or power to direct the time or price at which shares for the Plan are purchased or sold, and no one other than Computershare will select the broker(s) or dealer(s) through or from whom purchases or sales are to be made.
8. Computershare will confirm to each Participant each acquisition made pursuant to the Plan as soon as practicable but not later than 10 business days after the date thereof. Dividends and distributions on fractional shares will be credited to each Participants account. In the event of termination of a Participants account under the Plan, Computershare will adjust for
any such undivided fractional interest in cash at the market value of the Funds shares at the time of termination.
9. Participants agree that in the event they choose to send share certificates to Computershare for deposit into their Plan account they should send their certificate(s) by certified or registered mail or private carrier, properly insured, with return receipt requested to Computershare at P.O. Box 43010, Providence, RI 02940, and will not endorse the certificate(s) or complete the assignment section.
10. Computershare will forward to each Participant any Fund related proxy solicitation materials and each Fund report or other communication to stockholders, and will vote any shares held by it under the Plan in accordance with the instructions set forth on proxies returned by Participants to the Fund.
11. In the event that the Fund makes available to its Common Stockholders rights to purchase additional shares or other securities, the shares held by Computershare for each Participant under the plan will be added to any other shares held by the Participant in calculating the number of rights to be issued to the Participant. Any stock dividend or shares resulting from stock splits with respect to the shares of the Fund, both full and fractional, which participants hold in their Plan accounts and with respect to all shares registered in their names will be automatically credited to their accounts in book-entry form.
12. Computershares service fee for the reinvestment of dividends will be paid for by the Fund. Participants will be charged a service fee of $5.00 per transaction for all voluntary cash investments plus brokerage commissions of $0.03 per share on all open market purchases (as of October 2006).
13. Each Participant may terminate his or its account under the Plan by so notifying Computershare in writing, by telephone or through the Internet. Such termination will be effective immediately if the Participants notice is received by Computershare prior to any dividend or distribution record date; otherwise, such termination will be effective only with respect to any subsequent dividend or distribution. If a participant requests a certificate for all shares credited to his or her Plan account, a certificate will be issued for all the whole shares and a cash payment, less any applicable fees and commissions, will be made for any remaining fractional share credited to his or her Plan account. In that instance, the amount of the check, if any, will be based upon the sale price obtained for any shares sold by Computershare on the day the certificate is issued or, if there is no market sale that day for Computershare, the closing price on the day before. Computershare will send the Participant a certificate and a check to the address of record on the Participants Plan account. If a Participant elects by his notice to Computershare in advance of termination to have Computershare sell part or all of his or its shares and remit the proceeds to the Participant, Computershare is authorized to deduct a $5.00 service fee plus brokerage commission (currently $0.03 per share as of October 2006) from the proceeds. The Plan may be terminated by the Fund or by Computershare upon notice in writing mailed to each Participant at least 30 days prior to any record date for the payment of any dividend or distribution by the Fund.
14. These terms and conditions may be amended or supplemented by Computershare or the Fund at any time but, except when necessary or appropriate to comply with applicable law or the rules or policies of the Securities and Exchange Commission or any other regulatory authority, only by mailing to each Participant appropriate written notice at least 30 days prior
to the effective date thereof. The amendment or supplement shall be deemed to be accepted by each Participant unless, prior to the effective date thereof, Computershare receives written notice of the termination of his or its account under the plan. Any such amendment may include an appointment by Computershare in its place and stead of a successor agent under these terms and conditions, with full power and authority to perform all or any of the acts to be performed by Computershare under these terms and conditions. Upon any such appointment of any agent for the purpose of receiving dividends and distributions, the Fund will be authorized to pay to such successor agent, for each Participants account, all dividends and distributions payable on shares of the Fund held in the Participants name or under the Plan for retention or application by such successor agent as provided in these terms and conditions.
15. Computershare will at all times act in good faith and use its best efforts within reasonable limits to ensure its full and timely performance of all services to be performed by it under this Plan and to comply with applicable law, but assumes no responsibility and shall not be liable for loss or damage due to errors unless such error is caused by Computershares negligence, bad faith or willful misconduct or that of its employees or agents.
16. These terms and conditions shall be governed by the laws of the State of New York.
THE CHILE FUND, INC.
THE FIRST ISRAEL FUND, INC.
THE LATIN AMERICA EQUITY FUND, INC.
THE EMERGING MARKETS TELECOMMUNICATIONS FUND, INC.
CREDIT SUISSE ASSET MANAGEMENT INCOME FUND, INC.
THE INDONESIA FUND, INC.
IMPORTANT NOTICE
AMENDMENT TO THE DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN (the Plan)
Effective November 15, 2007, the Plan for each of the above funds is amended as follows:
· Credit Suisse Funds will hold shares via the Direct Registration System (DRS)
· Credit Suisse Funds will discontinue the issuance of physical certificates. All previously issued certificates will remain outstanding and negotiable until presented to the Transfer Agent and/or cancelled.
DRS permits shareholders to have their shares registered without the necessity of a physical stock certificate. Non-certificated shares afford you the same rights and privileges as shares held in certificate form. You will receive all corporate communications and have the added convenience of electronic share transactions (such as ownership transfers, sales and moving shares to or from a broker).
Contact Information
If you have any questions, please contact the Plan Administrator, Computershare Trust Company, N.A.
By Telephone: |
1-800-730-6001 (U.S. and Canada) |
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1-781-575-3100 (Outside U.S. and Canada) |
Customer Service Associates are available from 9:00 a.m. to 5:00 p.m. Eastern time, Monday to Friday. |
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By Mail: |
P.O. Box 43078 |
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Providence, RI 02940-3078 |
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By Internet: |
www.computershare.com |
Exhibit 99.(g)
AMENDED AND RESTATED
INVESTMENT ADVISORY AGREEMENT
March 23, 2001 as Amended and Restated May 3, 2004,
February 14, 2005 and December 1, 2006
CREDIT SUISSE CAPITAL FUNDS
CREDIT SUISSE OPPORTUNITY FUNDS
CREDIT SUISSE HIGH YIELD BOND FUND
Credit Suisse Asset Management, LLC
466 Lexington Avenue
New York, New York 10017-3140
Dear Sirs:
Each of the Credit Suisse Capital Funds, a Massachusetts business trust, the Credit Suisse Opportunity Funds, a Delaware business trust, (collectively, the Series Funds), for and on behalf of each of their respective series listed on Annex I hereto, which may be amended from time to time, (each, a Series and, collectively, the Series), and the Credit Suisse High Yield Bond Fund (the High Yield Bond Fund), a Delaware business trust (each, a Fund, and collectively, the Funds), herewith confirms its agreement with Credit Suisse Asset Management, LLC (the Adviser) as follows:
1. Investment Description; Appointment
Each of the Series Funds, on behalf of their respective Series, and the High Yield Bond Fund desires to employ the capital of such Series or Fund by investing and reinvesting in investments of the kind and in accordance with the limitations specified in its Agreement and Declaration of Trust, as may be amended from time to time, and in the Funds Prospectus(es) and Statement(s) of Additional Information, if any, as from time to time in effect (the Prospectus and SAI, respectively), and in such manner and to such extent as may from time to time be approved by the Board of Trustees of each Series or Fund. Copies of the Funds Prospectuses and SAIs have been or will be submitted to the Adviser. The Funds desire to employ and hereby appoint the Adviser to act as investment adviser to each of the Series or Funds. The Adviser accepts the appointment and agrees to furnish the services for the compensation set forth below.
2. Services as Investment Adviser
Subject to the supervision and direction of the Board of Trustees of each Series and Fund, the Adviser will (a) act in strict conformity with the Funds Agreements and Declarations of Trust, the Investment Company Act of 1940 (the 1940 Act) and the Investment Advisers Act of 1940, as the same may from time to time be amended, (b) manage such Series or Funds
assets in accordance with such Series or Funds investment objective and policies as stated in the Funds Prospectuses and SAIs, (c) make investment decisions for such Series or Fund, (d) place purchase and sale orders for securities on behalf of such Series or Fund, (e) exercise voting rights in respect of portfolio securities and other investments for such Series or Fund, and (f) monitor and evaluate the services provided by such Series or Funds investment sub-adviser(s), if any, under the terms of the applicable investment sub-advisory agreement(s). In providing those services, the Adviser will provide investment research and supervision of such Series or Funds investments and conduct a continual program of investment, evaluation and, if appropriate, sale and reinvestment of such Series or Funds assets. In addition, the Adviser will furnish each Series and Fund with whatever statistical information such Series or Fund may reasonably request with respect to the securities that such Series or Fund may hold or contemplate purchasing.
Subject to the approval of the Board of Trustees of each of the Series Funds and where required, such Series Funds shareholders, the Adviser may engage an investment sub-adviser or sub-advisers to provide advisory services in respect of such Series and may delegate to such investment sub-adviser(s) the responsibilities described in subparagraphs (b), (c), (d) and (e) above. In the event that an investment sub-advisers engagement has been terminated, the Adviser shall be responsible for furnishing such Series with the services required to be performed by such investment sub-adviser(s) under the applicable investment sub-advisory agreements or arranging for a successor investment sub-adviser(s) to provide such services on terms and conditions acceptable to such Series and the Series Board of Trustees and subject to the requirements of the 1940 Act.
3. Brokerage
In executing transactions for each Series and Fund, selecting brokers or dealers and negotiating any brokerage commission rates, the Adviser will use its best efforts to seek the best overall terms available. In assessing the best overall terms available for any portfolio transaction, the Adviser will consider all factors it deems relevant including, but not limited to, breadth of the market in the security, the price of the security, the financial condition and execution capability of the broker or dealer and the reasonableness of any commission for the specific transaction and for transactions executed through the broker or dealer in the aggregate. In selecting brokers or dealers to execute a particular transaction and in evaluating the best overall terms available, the Adviser may consider the brokerage and research services (as those terms are defined in Section 28(e) of the Securities Exchange Act of 1934, as the same may from time to time be amended) provided to each Series and Fund and/or other accounts over which the Adviser or an affiliate exercises investment discretion.
4. Information Provided to the Fund
The Adviser will keep each Series and Fund informed of developments materially affecting such Series or Fund, and will, on its own initiative, furnish such Series or Fund from time to time with whatever information the Adviser believes is appropriate for this purpose.
5. Standard of Care
The Adviser shall exercise its best judgment in rendering the services listed in paragraphs 2, 3 and 4 above. The Adviser shall not be liable for any error of judgment or mistake of law or for any loss suffered by any Series or Fund in connection with the matters to which this Agreement relates, provided that nothing herein shall be deemed to protect or purport to protect the Adviser against any liability to each Fund and Series or to shareholders of such Series or Fund to which the Adviser would otherwise be subject by reason of willful misfeasance, bad faith or gross negligence on its part in the performance of its duties or by reason of the Advisers reckless disregard of its obligations and duties under this Agreement.
6. Compensation
In consideration of the services rendered pursuant to this Agreement, each Series and Fund will pay the Adviser the annual fee applicable to such Series or Fund calculated at an annual rate set forth on Annex I hereto of such Series or Funds average daily net assets.
The fee for the period from the date of this Agreement to the end of the year shall be prorated according to the proportion that such period bears to the full yearly period. Upon any termination of this Agreement before the end of a year, the fee for such part of that year shall be prorated according to the proportion that such period bears to the full yearly period and shall be payable upon the date of termination of this Agreement. For the purpose of determining fees payable to the Adviser, the value of each Series and Funds net assets shall be computed at the times and in the manner specified in such Series or Funds Prospectus or SAI.
With respect to the Credit Suisse Capital Funds, such fee shall be accrued daily and be payable in arrears on the last day of each calendar month for services performed hereunder during such month. With respect to the Credit Suisse Opportunity Funds , such fee shall be calculated and payable monthly. The fee for the Credit Suisse High Yield Bond Fund shall be computed and payable monthly, at the annual rate set forth for the DLJ High Yield Bond Fund on Annex I hereto, of the average weekly value of such Funds total assets minus the sum of accrued liabilities (other than aggregate indebtedness constituting leverage).
7. Expenses
The Adviser will bear all expenses in connection with the performance of its services under this Agreement, including the fees payable to any investment sub-adviser engaged pursuant to paragraph 2 of this Agreement. Each Series and Fund will bear its proportionate share of certain other expenses to be incurred in its operation, including: investment advisory and administration fees; taxes, interest, brokerage fees and commissions, if any; fees of Trustees of such Series or Fund who are not officers, directors, or employees of the Adviser, any sub-adviser or any of their affiliates; fees of any pricing service employed to value shares of the Series or Fund; Securities and Exchange Commission fees and state blue sky qualification fees; charges of custodians and transfer and dividend disbursing agents; such Series or Funds proportionate share of insurance premiums; outside auditing and legal expenses; costs of maintenance of such Series or Funds existence; costs attributable to investor services, including, without limitation, telephone and personnel expenses; costs of preparing and printing
prospectuses and statements of additional information for regulatory purposes and for distribution to existing shareholders; costs of shareholders reports and meetings of the shareholders of such Series or Fund and of the officers or Board of Trustees of such Series or Fund; and any extraordinary expenses.
Each Series and Fund will be responsible for nonrecurring expenses which may arise, including costs of litigation to which such Series or Fund is a party and of indemnifying officers and Trustees of such Series or Fund with respect to such litigation and other expenses as determined by the Trustees.
8. Services to Other Companies or Accounts
Each Fund and Series understands that the Adviser now acts, will continue to act and may act in the future as investment adviser to fiduciary and other managed accounts and to one or more other investment companies or series of investment companies, and such Series or Fund has no objection to the Adviser so acting, provided that whenever such Series or Fund and one or more other accounts or investment companies or portfolios advised by the Adviser have available funds for investment, investments suitable and appropriate for each will be allocated in accordance with a formula believed to be equitable to each entity. Each Series and Fund recognizes that in some cases this procedure may adversely affect the size of the position obtainable for such Series or Fund. In addition, each Series and Fund understands that the persons employed by the Adviser to assist in the performance of the Advisers duties hereunder will not devote their full time to such service and nothing contained herein shall be deemed to limit or restrict the right of the Adviser or any affiliate of the Adviser to engage in and devote time and attention to other businesses or to render services of whatever kind or nature, provided that doing so does not adversely affect the ability of the Adviser to perform its services under this Agreement.
9. Term of Agreement
This Agreement shall continue for an initial two-year period commencing on the date first written above, and thereafter shall continue automatically for successive annual periods, provided such continuance is specifically approved at least annually by (a) (i) in the case of a Series, the Board of Trustees of the Fund of which such Series is a part or (ii) in the case of the High Yield Bond Fund, the Board of Trustees of the Fund or (b) a vote of a majority (as defined in the 1940 Act) of each Series and Funds outstanding voting securities, provided that in either event the continuance is also approved by a majority of the Board of Trustees of the applicable Fund, who are not interested persons (as defined in said Act) of any party to this Agreement, by vote cast in person at a meeting called for the purpose of voting on such approval. This Agreement is terminable with respect to a Series or Fund, without penalty, on 60 days written notice, by the Board of Trustees of such Series and Fund or by vote of holders of a majority of such Series or Funds shares, or upon 90 days written notice, by the Adviser. This Agreement will also terminate automatically in the event of its assignment (as defined in said Act).
10. Representation by the Fund
The Funds represent that copies of their Agreements and Declarations of Trust, together with all amendments thereto, are on file in such state where such Fund is registered.
11. Use of Names
The Funds recognize that directors, officers and employees of the Adviser may from time to time serve as directors, trustees, officers and employees of corporations and business trusts (including other investment companies) and that such other corporations and trusts may include the name CS or Credit Suisse as part of their names, and that the Adviser or its affiliates may enter into advisory or other agreements with such other corporations and trusts. If the Adviser ceases to act as the investment adviser of a Series or Fund, such Series or Fund agrees that, at the Advisers request, such Series or Funds license to use the words CS or Credit Suisse will terminate and that such Series or Fund will take all necessary action to change the name of such Series or Fund to names not including the words CS or Credit Suisse.
12. Miscellaneous
Notice is hereby given that this Agreement is entered into on behalf of a Fund by an officer of such Fund in his capacity as an officer and not individually. It is understood and expressly stipulated that none of the Trustees or shareholders of any Fund shall be personally liable hereunder. Neither the Trustees, officers, agents nor shareholders of any Fund assume any personal liability for obligations entered into on behalf of a Fund. All persons dealing with a Fund must look solely to the property of such Fund for the enforcement of any claims against such Fund.
Please confirm that the foregoing is in accordance with your understanding by indicating your acceptance hereof at the place below indicated, whereupon it shall become a binding agreement between us.
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Very truly yours, |
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CREDIT SUISSE CAPITAL FUNDS |
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CREDIT SUISSE OPPORTUNITY FUNDS |
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CREDIT SUISSE HIGH YIELD BOND FUND |
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By: |
/s/J. Kevin Gao |
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Name: J. Kevin Gao |
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Title: Vice President and Secretary |
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Accepted: |
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CREDIT SUISSE ASSET MANAGEMENT, LLC |
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By: |
/s/Steven B. Plump |
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Name: Steven B. Plump |
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Title: Managing Director |
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ANNEX I
TO INVESTMENT ADVISORY AGREEMENT
Series or Fund |
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Annual Fee Rate |
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Credit Suisse Large Cap Value Fund (a series of the Credit Suisse Capital Funds) |
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0.50% of the Funds average daily net assets |
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Credit Suisse Small Cap Core Fund (a series of the Credit Suisse Capital Funds) (formerly Small Cap Value Fund) |
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the lower of (A) 0.70% of the Funds average daily net assets or (B) 0.875% of the Funds average daily net assets for the first $100 million, 0.75% of the Funds average daily net assets for the next $100 million, and 0.50% of the Funds average daily net assets above $200 million |
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Credit Suisse High Income Fund (a series of the Credit Suisse Opportunity Funds) |
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0.70 of 1% of the first $100,000,000; 0.50 of 1% over $100,000,000 |
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Credit Suisse High Yield Bond Fund |
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1% of the first $250,000,000(1) and 0.75 of 1.00% over $250,000,000 |
(1) The fee is computed at the annual rate of 1% of the average weekly value of the funds total assets minus the sum of accrued liabilities (other than aggregate indebtedness constituting leverage).
Exhibit-99.(k)(1)
AMENDMENT TO THE
FEE AND SERVICE SCHEDULE
FOR STOCK TRANSFER SERVICES
between
CREDIT SUISSE HIGH YIELD BOND FUND, INC.
and
EQUISERVE TRUST COMPANY, N.A.
and
EQUISERVE, INC.
AMENDMENT TO THE
FEE AND SERVICE SCHEDULE
FOR STOCK TRANSFER SERVICES
between
CREDIT SUISSE HIGH YIELD BOND FUND, INC.
and
EQUISERVE, INC.
and
EQUISERVE TRUST COMPANY, N.A.
This is an Amendment to the Fee and Service Schedule between EquiServe Trust Company, N.A. and EquiServe, Inc. (collectively, the Transfer Agent) and Credit Suisse High Yield Bond Fund, Inc. (hereinafter referred to as the Fund), dated March 1, 2003, whereby the Transfer Agent and the Fund agree to the changes in the following sections of the Fee and Service Schedule:
Direct Stock Purchase Plan (DSPP Services)
This section is now deleted from the Fee and Service Schedule.
Dividend Reinvestment Plan (DRP) Services
This section is now added to the Fee and Service Schedule.
· Quarterly reinvestment and monthly cash investment transactions to DRP participant accounts
· Preparing and mailing a dividend reinvestment detailed statement with an additional enclosure to each DRP participant
· Processing automatic monthly investments via ACH
· Preparing and mailing a cash investment detailed statement with an additional enclosure to each DRP participant
· Maintaining DRP accounts and establishing new participant accounts
· Processing termination and withdrawal requests
· Supplying summary reports for each reinvestment/investment to the Fund
· Certificate depository
· Handling stockholder and Fund inquiries concerning the DRP
· Preparing and mailing Form 1099 to participants, including DRP participants and related filings with the IRS
· Certificate depository for safekeeping of certificates
· Provide Form 1099-B with each sale check to participant
IN WITNESS WHEREOF, the Transfer Agent and the Fund hereto have caused this Amendment to be executed in their names and on their behalf by and through their duly authorized officers, as of this 30th day of September, 2003.
EquiServe, Inc. |
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EquiServe Trust Company, N.A. |
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The Credit Suisse High Yield Bond Fund, Inc. |
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On Behalf of Both Entities: |
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By: |
/s/ Dennis V. Moccia |
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By: |
/s/ Michael A. Pignataro |
Name: |
Dennis V. Moccia |
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Name: |
Michael A. Pignataro |
Title: |
Managing Director |
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Title: |
Chief Financial Officer |
AGREEMENT
for
STOCK TRANSFER AGENT SERVICES
CREDIT SUISSE HIGH YIELD BOND FUND, INC.
and
EQUISERVE TRUST COMPANY, N.A.
and
EQUISERVE, INC.
Table of Contents
Article 1. |
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Terms of Appointment; Duties of EquiServe |
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3 |
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Article 2. |
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Fees and Expenses |
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5 |
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Article 3. |
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Representations and Warranties of EquiServe |
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6 |
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Article 4. |
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Representations and Warranties of the Fund |
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7 |
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Article 5. |
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Data Access and Proprietary Information |
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8 |
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Article 6. |
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Indemnification |
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9 |
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Article 7. |
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Standard of Care |
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11 |
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Article 8. |
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Covenants of the Fund and EquiServe |
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11 |
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Article 9. |
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Termination of Agreement |
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13 |
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Article 10. |
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Assignment |
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13 |
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Article 11. |
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Amendment |
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Article 12. |
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Massachusetts Law to Apply |
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13 |
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Article 13. |
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Force Majeure |
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13 |
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Article 14. |
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Consequential Damages |
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14 |
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Article 15. |
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Merger of Agreement |
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Article 16. |
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Survival |
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Article 17. |
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Severability |
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14 |
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Article 18. |
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Counterparts |
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14 |
REGISTRAR, TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the 1st day of August, 2003, between Credit Suisse High Yield Bond Fund, Inc., having a principal office and place of business at 466 Lexington Avenue, 17th Floor, New York, NY 10017, (the Fund), and EquiServe, Inc., a Delaware corporation, and its fully owned subsidiary EquiServe Trust Company, N.A., a federally chartered trust company doing business at 150 Royall Street, Canton, Massachusetts 02021 (collectively, EquiServe or individually EQI and the Trust Company, respectively).
WHEREAS, the Fund desires to appoint EquiServe as its registrar, transfer agent, dividend disbursing agent and agent in connection with certain other activities and EquiServe desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein contained, the parties hereto agree as follows:
Article 1 Terms of Appointment; Duties of EquiServe
1.01 Subject to the terms and conditions set forth in this Agreement, the Fund hereby employs and appoints EquiServe to act as, and EquiServe accepts such appointment and agrees to act as registrar and transfer agent for the Funds authorized and issued shares of common stock or shares of beneficial interest, as the case may be (Shares), and dividend disbursing agent and agent in connection with any dividend reinvestment plan as set out in the Funds Annual Report to Shareholders.
1.02 EquiServe agrees that it will perform the following services:
(a) In accordance with procedures established from time to time by agreement between the Fund and EquiServe, EquiServe shall:
(i) Issue and record the appropriate number of Shares as authorized and hold such
Shares in the appropriate shareholder account;
(ii) Effect transfers of Shares by the registered owners thereof upon receipt of appropriate documentation;
(iii) Prepare and transmit payments for dividends and distributions declared by the Fund;
(iv) Act as agent for Shareholders pursuant to the dividend reinvestment and cash purchase plan of the Fund as amended from time to time;
(v) Issue replacement certificates for those certificates alleged to have been lost, stolen or destroyed upon receipt by EquiServe of indemnification satisfactory to EquiServe and protecting EquiServe and the Fund, and EquiServe at its option, may issue replacement certificates in place of mutilated stock certificates upon presentation thereof and without such indemnity.
(b) In addition to and neither in lieu nor in contravention of the services set forth in the above paragraph (a), EquiServe shall: (i) perform all of the customary services of a registrar, transfer agent, dividend disbursing agent and agent of the dividend reinvestment and cash purchase plan as described in Article 1 consistent with those requirements in effect as of the date of this Agreement and (ii) perform the functions more fully described in the Fee and Service Schedule for Stock Transfer Services annexed hereto and incorporated herein. The detailed definition, frequency, limitations and associated costs (if any) set out in the attached Fee and Service Schedule, includes, but are not limited to: maintaining all Shareholder accounts, preparing Shareholder meeting lists, mailing proxies, and mailing
Shareholder reports to current Shareholders, withholding taxes on U.S. resident and non-resident alien accounts where applicable, preparing and filing U.S. Treasury Department Forms 1099 and other appropriate forms required with respect to dividends and distributions by federal authorities for all registered Shareholders.
(c) EquiServe shall provide additional services on behalf of the Fund (i.e., escheatment services) which may be agreed upon in writing between the Fund and EquiServe.
Article 2 Fees and Expenses
2.01 For the performance by EquiServe pursuant to this Agreement, the Fund agrees to pay EquiServe an annual maintenance fee as set out in the initial fee schedule attached hereto. Such fees and out-of-pocket expenses and advances identified under Section 2.02 below may be changed from time to time subject to mutual written agreement between the Fund and EquiServe.
2.02 In addition to the fee paid under Section 2.01 above, the Fund agrees to reimburse EquiServe for out-of-pocket expenses, including but not limited to confirmation production, postage, forms, telephone, microfilm, microfiche, tabulating proxies, records storage, or advances incurred by EquiServe for the items set out in the fee schedule attached hereto. In addition, any other expenses incurred by EquiServe at the request or with the consent of the Fund will be reimbursed by the Fund. Unspecified out-of-pocket expenses shall be limited to those out-of-pocket expenses reasonably incurred by EquiServe in the performance of its obligations hereunder.
2.03 The Fund agrees to pay all fees and reimbursable expenses within thirty (30) days following the receipt of the respective billing notice. Postage and the cost of materials for mailing of dividends, proxies, Fund reports and other mailings to all Shareholder accounts shall be advanced to EquiServe by the Fund at least seven (7) days prior to the mailing date of such materials.
Article 3 Representations and Warranties of EquiServe
EquiServe represents and warrants to the Fund that:
3.01 Governance. The Trust Company is a federally chartered limited purpose national bank duly organized under the laws of the United States and EQI is a corporation validly existing and in good standing under the laws of the State of Delaware and each has full corporate power, authority and legal right to execute, deliver and perform this Agreement. The execution, delivery and performance of this Agreement by EquiServe has been duly authorized by all necessary corporate action and constitutes the legal valid and binding obligation of EquiServe enforceable against EquiServe in accordance with its terms.
3.02 Compliance. The execution, delivery and performance of the Agreement by EquiServe will not violate, conflict with or result in the breach of any material term, condition or provision of, or require the consent of any other party to, (i) any existing law, ordinance, or governmental rule or regulation to which EquiServe is subject, (ii) any judgement, order, writ, injunction, decree or award of any court, arbitrator or governmental or regulatory official, body or authority which is applicable to EquiServe, (iii) the incorporation documents or By-Laws of, or any material agreement to which EquiServe is a party. EquiServe will comply with all applicable laws and regulations.
3.03 Facilities. EquiServe has and will continue to have access to the necessary facilities, equipment and personnel to perform its duties and obligations under this Agreement.
3.04 Computer Services
DATA ACCESS SERVICE AND ALL COMPUTER PROGRAMS AND SOFTWARE SPECIFICATIONS USED IN CONNECTION THEREWITH ARE PROVIDED ON AN
AS IS, AS AVAILABLE BASIS. EQUISERVE EXPRESSLY DISCLAIMS ALL WARRANTIES EXCEPT THOSE EXPRESSLY STATED HEREIN INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. CUSTOMER HEREBY ACKNOWLEDGES THAT THE DATA ACCESS SERVICE MAY NOT BE OR BECOME AVAILABLE DUE TO ANY NUMBER OF FACTORS INCLUDING WITHOUT LIMITATION PERIODIC SYSTEM MAINTENANCE, SCHEDULED OR UNSCHEDULED, ACTS OF GOD, TECHNICAL FAILURE, TELECOMMUICATIONS INFRASTRUCTURE OR DELAY OR DISRUPTION ATTRIBUTATLE TO VIRUSES, DENIAL OF SERVICE ATTACKS, INCREASED OR FLUCTUATING DEMAND, AND ACTIONS AND OMISSIONS OF THIRD PARTIES. THEREFORE EQUISERVE EXPRESSLY DISCLAIMS ANY EXPRESS OR IMPLIED WARRANTY REGARDING SYSTEM AND/OR DATA ACCESS SERVICE AVAILABILITY, ACCESSABILITY, OR PERFORMANCE.
Article 4 Representations and Warranties of the Fund
The Fund represents and warrants to EquiServe that:
4.01 It is a corporation or business trust duly organized and existing and in good standing under the laws of states of Maryland or Delaware.
4.02 It is empowered under applicable laws and by its Articles of Incorporation or Declaration of Trust, as the case may be, and By Laws to enter into and perform this Agreement.
4.03 All corporate proceedings required by said Articles of Incorporation or Declaration of Trust, as the case may be, and By Laws have been taken to authorize it to enter into and perform this Agreement.
4.04 It is a closed-end, investment company registered under the Investment Company Act of 1940 (1940 Act).
4.05 To the extent required by federal securities laws, a registration statement under the Securities Act of 1933, as amended is currently or will be effective and, to the extent required, appropriate state securities law filings have been made with respect to all Shares of the Fund being offered for sale by the Fund. Information to the contrary will result in immediate notification to EquiServe.
Article 5 Data Access and Proprietary Information
5.01 The Fund acknowledges that the data bases, computer programs, screen formats, report formats; interactive design techniques, and other proprietary information furnished to the Fund by EquiServe are provided solely in connection with the services rendered under this Agreement and constitute copyrighted trade secrets or proprietary information of substantial value to EquiServe. Such databases, programs, formats, designs and techniques are collectively referred to below as Proprietary Information. The Fund agrees that it shall treat all Proprietary Information as proprietary to EquiServe and further agrees that it shall not divulge any Proprietary Information to any person or organization except as expressly permitted hereunder. The Fund agrees for itself and its employees and agents:
(a) to use such programs and databases (i) solely on the computers of the Fund, and/or the investment adviser and/or sub-adviser to the Fund, or (ii) solely from equipment at the locations agreed to between the Fund and EquiServe and (iii) in accordance with EquiServes applicable user documentation;
(b) to refrain from copying or duplicating in any way (other than in the normal course of performing processing on the computers of the Fund, and/or the investment adviser and/or sub-adviser to the Fund) any part of any Proprietary information;
(c) to refrain from obtaining unauthorized access to any programs, data or other information not owned by the Fund, and if such access is accidentally obtained, to respect and safeguard the same Proprietary Information;
(d) to refrain from causing or allowing proprietary information transmitted from EquiServes computer to the terminal of the Fund, and/or the investment adviser and/or sub-adviser to the Fund to be retransmitted to any other computer terminal or other device except as expressly permitted by EquiServe, (such permission not to be unreasonably withheld);
(e) that the Fund and/or the Funds investment adviser and/or sub-adviser shall have access only to those authorized transactions as agreed to between the Fund and EquiServe; and
(f) to honor reasonable written requests made by EquiServe to protect at EquiServes expense the rights of EquiServe in Proprietary Information at common law and under applicable statutes.
5.02 If the transactions available to the Fund include the ability to originate electronic instructions to EquiServe in order to (i) effect the transfer or movement of cash or Shares or (ii) transmit Shareholder information or other information, then in such event EquiServe shall be entitled to rely on the validity and authenticity of such instruction without undertaking any further inquiry as long as such instruction is undertaken in conformity with security procedures established by EquiServe from time to time.
Article 6 Indemnification
6.01 EquiServe shall not be responsible for, and the Fund shall indemnify and hold EquiServe harmless from and against, any and all losses, damages, costs, charges, payments, expenses, including reasonable attorneys fees, and liability arising out of or attributable to:
(a) All actions of EquiServe or its agents or subcontractors required to be taken pursuant to this
Agreement, provided that such actions are taken in good faith and without negligence or willful misconduct.
(b) The Funds lack of good faith, negligence or willful misconduct which arises out of the breach of any representation or warranty of the Fund hereunder.
(c) The reliance on or use by EquiServe or its agents or subcontractors of information, records, documents or services which (i) are received by EquiServe or its agents or subcontractors, and (ii) have been prepared, maintained or performed by the Fund or any other person or firm on behalf of the Fund including but not limited to any previous transfer agent or registrar
(d) The reliance on, or the carrying out by EquiServe or its agents or subcontractors of any instructions or requests of the Fund; provided, however, that such instructions or requests shall be from a person reasonably believed by EquiServe to be (i) an authorized officer of the Fund or (ii) any person, whether or not such person is an officer or employee of the Fund, duly authorized to give instructions on behalf of the Fund as indicated in writing to EquiServe from time to time.
(e) The offer or sale of Shares in violation of any federal or state securities laws requiring that such shares be registered or in violation of any stop order or other determination or ruling by any federal or state agency with respect to the offer or sale of such Shares; and
6.02 At any time EquiServe may apply to any officer of the Fund for instructions, and may, with permission from the Fund, consult with legal counsel for the Fund with respect to any matter arising in connection with the services to be performed by EquiServe under this Agreement, and EquiServe and its agents or subcontractors shall not be liable and shall be indemnified by the Fund for any action taken or omitted by it in reliance upon such instructions or on the opinion of Funds counsel. EquiServe, its agents and subcontractors shall be protected and indemnified in acting upon any paper or document furnished by or on behalf of the Fund, reasonably believed to be genuine and to have been signed by the proper person or persons, or upon any instruction, information, data, records or documents provided EquiServe or its agents or
subcontractors by telephone, in person, machine readable input, telex, CRT data entry or other similar means authorized by the Fund, and shall not be held to have notice of any change of authority of any person, until receipt of written notice thereof from the Fund. EquiServe, its agents and subcontractors shall also be protected and indemnified in recognizing stock certificates which are reasonably believed to bear the proper manual or facsimile signatures of the officers of the Fund, and the proper countersignature of any former transfer agent or former registrar, or of a co-transfer agent or co-registrar.
6.03 In order that the indemnification provisions contained in this Article 6 shall apply, upon the assertion of a claim for which the Fund may be required to indemnify EquiServe, EquiServe shall promptly notify the Fund of such assertion, and shall keep the Fund advised with respect to all developments concerning such claim. The Fund shall have the option to participate with EquiServe in the defense of such claim or to defend against said claim in its own name or in the name of EquiServe. EquiServe shall in no case confess any claim or make any compromise in any case in which the Fund may be required to indemnify EquiServe except with the Funds prior written consent.
Article 7 Standard of Care
7.01 EquiServe shall at all times act in good faith and agrees to use its best efforts within reasonable limits to insure the accuracy of all services performed under this Agreement, but assumes no responsibility and shall not be liable for loss or damage due to errors unless said errors are caused by its negligence, bad faith, or willful misconduct or that of its employees.
Article 8 Covenants of the Fund and EquiServe
8.01 The Fund shall promptly furnish to EquiServe the following:
(a) A certified copy of the resolution of the Board of Directors, or Trustees, as the case may be, of the Fund authorizing the appointment of EquiServe and the execution and delivery of this Agreement.
(b) A copy of the Articles of Incorporation or Declaration of Trust, as the case may be, and By Laws of the Fund and all amendments thereto.
8.02 EquiServe hereby agrees to establish and maintain facilities and procedures reasonably acceptable to the Fund for safekeeping of stock certificates, check forms and facsimile signature imprinting devices, if any; and for the preparation or use, and for keeping account of, such certificates, forms and devices. EquiServe will comply with all applicable laws and regulations.
8.03 EquiServe shall keep records relating to the services to be performed hereunder, in the form and manner as it may deem advisable. To the extent required by Section 31 of the 1940 Act, as amended, and the Rules thereunder, EquiServe agrees that all such records prepared or maintained by EquiServe relating to the services to be performed by EquiServe hereunder are the property of the Fund and will be preserved, maintained and made available in accordance with such Section and Rules, and will be surrendered promptly to the Fund on and in accordance with its request.
8.04 EquiServe and the Fund agree that all books, records, information and data pertaining to the business of the other party which are exchanged or received pursuant to the negotiation or the carrying out of this Agreement shall remain confidential, and shall not be voluntarily disclosed to any other person, except as may be required by law.
8.05 In cases of any requests or demands for the inspection of the Shareholder records of the Fund, EquiServe will endeavor to notify the Fund and to secure instructions from an authorized officer of the Fund as to such inspection. EquiServe reserves the right, however, to exhibit the Shareholder records to any person whenever it is advised by its counsel that it may be held liable for the failure to exhibit the Shareholder records to such person.
Article 9 Termination of Agreement
9.01 This Agreement may be terminated by either party upon ninety (90) days written notice to the other.
9.02 Should the Fund exercise its right to terminate, all out-of-pocket expenses associated with the movement of records and material will be borne by the Fund, along with a de-conversion fee equivalent to the average of three months fees (excludes out-of-pocket expenses listed on invoices).
Article 10 Assignment
10.01 Except as provided in Section 10.03 below, neither this Agreement nor any rights or obligations hereunder may be assigned by either party without the written consent of the other party
10.02 This Agreement shall inure to the benefit of and be binding upon the parties and their respective permitted successors and assigns.
Article 11 Amendment
11.01 This Agreement maybe amended or modified by a written agreement executed by both parties and authorized or approved by a resolution of the Board of Directors or Trustees, as the case may be, of the Fund.
Article 12 Massachusetts Law to Apply
12.01 This Agreement shall be construed and the provisions thereof interpreted under and in accordance with the laws of the Commonwealth of Massachusetts.
Article 13 Force Majeure
13.01 In the event either party is unable to perform its obligations under the terms of this Agreement because of acts of God, strikes, equipment or transmission failure or damage reasonably beyond its control, or other causes reasonably beyond its control, such party shall not be liable for damages to the other for any
damages resulting from such failure to perform or otherwise from such causes. In any such event, the non-performing party shall be excused from any further performance and observance of the obligations so affected only for so long as such circumstances prevail and such party continues to use commercially reasonable efforts to recommence performance or observance as soon as possible.
Article 14 Consequential Damages
14.01 Neither party to this Agreement shall be liable to the other party for consequential damages under any provision of this Agreement or for any consequential damages arising out of any act or failure to act hereunder.
Article 15 Merger of Agreement
15.01 This Agreement constitutes the entire agreement between the parties hereto and supersedes any prior agreement with respect to the subject hereof whether oral or written.
Article 16 Survival
16.01 All provisions regarding indemnification, warranty, liability and limits thereon, and confidentiality and/or protection of proprietary rights and trade secrets shall survive the termination
Article 17 Severability
17.01 If any provision or provisions of this Agreement shall be held to be invalid, unlawful, or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired.
Article 18 Counterparts
18.01 This Agreement may be executed by the parties hereto on any number of counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in their names and on their behalf by and through their duly authorized officers, as of the day and year first above written.
Credit Suisse High Yield Bond Fund, Inc.
By: |
/s/ Michael A. Pignataro |
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Name: |
Michael A. Pignataro |
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Title: |
Chief Financial Officer |
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EquiServe, Inc. |
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EquiServe Trust Company, N.A. |
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(on behalf of both entities) |
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By: |
/s/ Dennis V. Moccia |
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Name: |
Dennis V. Moccia |
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Title: |
Managing Director |
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FEE AND SERVICE SCHEDULE
FOR STOCK TRANSFER SERVICES
between
CREDIT SUISSE HIGH YIELD BOND FUND, INC.
and
EQUISERVE TRUST COMPANY, N.A
and
EQUISERVE, INC.
TERM
This Fee and Service Schedule is by and between, Credit Suisse High Yield Bond Fund, Inc., (the Fund) and EquiServe, Inc., and EquiServe Trust Company, N.A. (collectively, EquiServe, or individually EQI and the Trust Company, respectively) whereby EquiServe will perform the following services with respect to the Common Stock or shares of beneficial interest, as the case may be, of the Fund.
The term of this Fee and Service Schedule shall be for a period of three (3) years, commencing from August 1, 2003, the effective date of this Fee and Service Schedule (the Initial Term).
This Agreement shall be self renewing, and providing that service mix and volumes remain constant, and no other Credit Suisse Fund is merged into the Fund, the final years fees listed under the Fees for Standard Services section shall be increased by the accumulated change in the National Employment Cost Index for Service Producing Industries (Finance, Insurance, Real Estate) for the preceding years of the contract, as published by the Bureau of Labor Statistics of the United States Department of Labor. Fees will be increased on this basis every three years.
FEES AND SERVICES
Transfer Agent and Registrar Fee
$19,000.00 Annual Stock Transfer/Registrar Administrative Fee
Includes the standard Transfer Agent and Registrar services as stated in the following sections, per Fund:
Administrative Services
· Annual administrative services as Transfer Agent and Registrar for the Common Stock or Shares of Beneficial Interest, as the case may be, of the Fund
· Assignment of Account Manager
· Remote inquiry access to the Fund records via PC or terminal with telecommunication software
Account Maintenance
· Maintaining record shareholder accounts to include the following services:
· Processing of new shareholder accounts
· Posting and acknowledging address changes
· Processing other routine file maintenance adjustments
· Posting all transactions, including debit and credit certificates to the stockholder file
· Researching and responding to all registered shareholder inquiries
· Responding to requests for audit confirmations
Routine Certificate Issuance
· Issuance, cancellation and registration of certificates to include the following services:
· Production and mailing of daily transfer reports
· Processing of all legal transfers including New York window and mail items
· Combining certificates into large and/or smaller denominations
· Replacing lost certificates and indemnity bonds
· Placing, maintaining and removing stop-transfer notations
Annual Meeting Services
· Preparing a full stockholder list as of the Annual Meeting Record Date
· Addressing proxy cards for all registered shareholders
· Enclosing and mailing proxy card, proxy statement, return envelope and Annual Report to all registered shareholders
· Receiving, opening and examining returned proxies
· Writing in connection with unsigned or improperly executed proxies
· Tabulating returned proxies
· Provide on-line access to proxy vote status
· Attending Annual Meeting as Inspector of Election (Travel expenses billed as incurred)
· Preparing a final Annual Meeting List reflecting how each account has voted on each proposal
· Interface with outside proxy solicitor
· Proxy proof, one (1) per annum
Mailing, Reporting and Miscellaneous Services
· Mailing of address change confirmation cards to shareholders old address
· Coding multiple accounts at a single household to suppress duplicate mailings of reports
· Providing EquiServes toll free number for Shareholder Services
· Mailing of Fund Fact Sheet, quarterly
· Addressing and enclosing Semi-Annual Reports, two (2) per annum for registered shareholders
· Preparing a full Statistical Report to reflect shareholder base by geographic residence code, class code, and share group, one (1) per annum (in addition to the stockholder lists covered under the Annual Meeting Services section)
Due Diligence Mailing and Direct Filing of Abandoned Property Services
· Preparing and mailing Due Diligence notices to all qualifying shareholder accounts as defined by the State Filing Matrix
· Processing returned Due Diligence notices and remitting property to shareholders prior to escheatment
· Preparing and filing Preliminary and Final Abandoned Property Reports
· Preparing and filing checks for each state covering unclaimed funds per state requirements
· Issuing and filing stock certificate(s) registered to the applicable state(s) representing returned (RPO) certificates and underlying share certificates.
· Manual input for states requiring electronic reporting via diskette
$ 5.00 |
Per Escheated Account, per annum, in Excess of 100 |
$ 3.00 |
Per account, per annum, for Due Diligence Mailing and Respondent Processing |
$ 1.00 |
Per account, per annum, for Electronic Reporting (Via Diskette) |
Dividend Services
As Dividend Disbursing Agent and Paying Agent, EquiServe, will perform the dividend related services indicated below, pursuant to the following terms and conditions:
· Checks to be drawn on Fleet National Bank and all funds must be received before or on mailing date 11:00 a.m., Eastern Time via Federal Funds Wire, ACH or Fleet National Bank Demand Deposit Account debit
· Preparing and mailing quarterly dividends with an additional enclosure with each dividend check
· Preparing a hard copy dividend list as of each dividend record date
· Preparing and filing Federal Information Returns (Form 1099) of dividends paid in a year and mailing a statement to each stockholder
· Preparing and filing State Information Returns of dividends paid in a year to stockholders resident within such state
· Preparing and filing annual withholding return (Form 1042) and payments to the government of income taxes withheld from Non-Resident Aliens
· Replacing lost dividend checks
· Providing photocopies of cancelled checks when requested
· Reconciling paid and outstanding checks
· Coding undeliverable accounts to suppress mailing dividend checks to same
· Processing and recordkeeping of accumulated uncashed dividends
· Furnishing requested dividend information to stockholders
· Performing the following duties as required by the Interest and Dividend Tax Compliance Act of 1983:
· Withholding tax from shareholder accounts not in compliance with the provisions of the Act
· Reconciling and reporting taxes withheld, including additional 1099 reporting requirements, to the Internal Revenue Service
· Responding to shareholder inquiries regarding the Regulations
· Mailing to new accounts who have had taxes withheld, to inform them of procedures to be followed to curtail subsequent back-up withholding
· Annual mailing to pre-1984 accounts which have not yet been certified
· Performing shareholder file adjustments to reflect certification of accounts
· Automated Clearing House crediting of dividends
Direct Stock Purchase Plan (DSPP) Services
· Reinvestment and/or cash investment transactions of DSPP participant accounts
· Preparing and mailing a dividend reinvestment detailed statement (as applicable) with an additional enclosure to each DSPP participant
· Preparing and mailing a cash investment detailed statement (as applicable) with an additional enclosure to each DSPP participant
· Maintaining DSPP accounts and establishing new participant accounts
· Processing sale and termination requests
· Processing withdrawal requests
· Supplying quarterly summary reports for reinvestment/investment to Customer
· Certificate depository for safekeeping of certificates
· Handling shareholder inquiries concerning the DSPP
· Provide form 1099-B with each sale check to participant
· Provide Internet presentation of DSPP materials and Internet fulfillment
· Provide telephonic fulfillment of DSPP materials
ITEMS NOT COVERED
Additional Services
Items not included in the fees and services set forth in this Fee and Service Schedule including, but not limited to, services associated with the payment of a stock dividend, stock split, corporate reorganization, or any services associated with a special project, are to be billed separately, on an appraisal basis.
Services required by legislation or regulatory fiat which become effective after the date of acceptance of this Fee and Service Schedule shall not be a part of the Standard Services and shall be billed by appraisal. All additional services not specifically covered under this Fee and Service Schedule will be billed by appraisal, as applicable.
Billing Definition of Number of Accounts
For billing purposes, the number of accounts will be based on open accounts on file at the beginning of each billing period, plus any new accounts added during that period.
ACCEPTANCE
In witness whereof, the parties hereto have caused this Fee and Service Schedule to be executed by their respective officers, hereunto duly agreed and authorized, as of the effective date of this Fee and Service Schedule.
EquiServe, Inc. |
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Credit Suisse High Yield Bond Fund, Inc. |
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EquiServe Trust Company, N.A. |
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(on behalf of both entities) |
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By: |
/s/ Dennis V. Moccia |
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By: |
/s/ Michael A. Pignataro |
Name: |
Dennis V. Moccia |
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Name: |
Michael A. Pignataro |
Title: |
Managing Director |
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Title: |
Chief Financial Officer |
This Fee and Service Schedule shall serve as an attachment to the Registrar, Transfer Agency and Service Agreement dated August 1, 2003.
Exhibit A
Out of Pocket Expenses
Out of pocket expenses associated with, but not limited to, the following are not included in the fees quoted in this Fee and Service Schedule and are billable as incurred.
Postage (Outgoing and Business Reply)
Envelopes
Labels
Forms and Stationery and Proxy Cards
Fulfillment
Proxy Proof Set-up
Record Retention
Insurance Premiums (Mailing certificates)
Delivery and Freight charges (including overnight delivery; Airborne Express, FedEx, etc.)
Typesetting (proxy cards, due diligence mailings, etc.)
Printing (proxy cards, etc.)
Destruction of excess/obsolete material
DTC trade transaction expenses (Treasury buybacks, etc.)
Custody Settlement charges
Telephone usage and line expenses
Lost Shareholder Program database search
Please Note:
Good funds to cover postage expenses in excess of $10,000 for shareholder mailings must be received in full by 12:00 p.m. Eastern Time on the scheduled mailing date. Postage expenses less than $10,000 will be billed as incurred.
SKU numbers are required on all material received for mailing. A special handling fee of $10.00 per box will be assessed for all material not marked with a SKU number. Such material includes, but is not limited to: proxy statements, annual and quarterly reports, and news releases. Overtime charges will be assessed in the event of services are required to be performed after-business hours due to late delivery of material for mailings to shareholders by the Fund unless the mail date is rescheduled. Exhibit B provides the Specifications for packing and shipping materials to EquiServe.
Exhibit B
SPECIFICATIONS FOR PACKING AND SHIPPING
MATERIALS TO EQUISERVE
Revised 1/16/2001
Please follow these packing and shipping guidelines to help us handle your materials most efficiently. For specifics concerning your companys mailing, please contact your client services team.
· Delivery timing:
Please ship your materials to arrive according to the schedule listed below. Some larger mailings will require more time. If more time is needed, our client service team will work with you to schedule the appropriate amount of time for processing your mailing.
1 10,000 |
Noon 2 business days prior to the mail date |
10,000 25,000 |
By 5 p.m. 3 business days prior to the mail date |
25,000 50,000 |
By 5 p.m. 4 business days prior to the mail date |
50,001 + |
Acct. Manager will establish delivery schedule with Client and Output Services |
· Shipping addresses:
EquiServe: Raritan Center,
118 Fernwood Avenue, Edison NJ 08837-3857
Output Technology Solutions: Eastern
Region, 46 Harvard Street, Westwood MA 02090-2398
Output Technology Solutions: Hartford
Region, 125 Ellington Road, So. Windsor CT 06074-4112
CIC: 130 Commerce Road,
CarlstadtNJ 07072
Standard Register: Parker
Warehouse, 21 Parker Drive, Avon, MA 02322
· Receiving hours:
Monday through Friday, 8:00 a.m. to 4:00 p.m.
With advance notice, we offer extended dock hours during proxy season. To arrange extended hours (After 4:00 p.m. and weekends) please contact your client services team.
· Documentation:
Every shipment, including courier deliveries, needs proper documentation.
A delivery receipt and a packing list. Both should include the following information:
1. Name of client
2. Description of material
3. SKU or Form number (see attached)
4. Total number of boxes/packages delivered
5. Quantity per box/package
6. Total number of pieces delivered/volume
7. Identification of partial shipment
8. Purchase order number if available
Each box must be marked with the Client Name, Material Description, SKU #, Quantity per box, Box # and Total # of boxes.
*You can prepare one document and make copies to use for both purposes. Attach the packing list to the outside of one box in an envelope or plastic pouch.
Packing Pointers:
Do not shrink-wrap materials individually or in bundles. This includes Annual Reports.
Use only paper bands if sending banded material. Please do not use string, strapping or rubber bands.
When bundling or grouping material, please make sure that all pieces in the bundle or group face in the same direction.
Box or package each type of enclosure separately. Do not mix enclosures in cartons.
Label cartons to show the type of material and number of pieces.
Attach a sample of the material to the outside of each carton.
Maximum weight per carton should not exceed 50 lbs.
· Quarterly Reports, Folded Proxy Statements and Newsletters:
Folded material must be C fold or Barrel fold. DO NOT have any enclosure Z folded.
Paper-band material in groups of 50 to 100.
Use paper bands that are at least 2½ to 3 inches wide.
Place cardboard sheets between each layer.
To eliminate the need for cardboard, you can crisscross the groups of reports or statements.
· Annual Reports and flat Proxy Statements:
Layer in groups of 50 Annual Reports.
Do not shrink-wrap individual pieces or groups of pieces.
Place cardboard sheets between each layer.
To eliminate the need for cardboard, you can crisscross the groups of reports or statements.
Do not place layers of paper or cardboard between individual reports.
· Using Skids:
Place only one type of material on each skid. If you load cartons on a skid, each carton should contain the same number of pieces.
Maximum skid size: 40 x 48
Maximum height: 54 including
pallet
Maximum weight: 3,000 lbs.
Pallet must be forklift
accessible on the 40 side.
Pallet should be stretch-wrapped to prevent spillage of contents.
· Using skid packs or Power packs:
Most printers are able to wrap material neatly and securely on skids without using cartons. We strongly recommend this packing method, especially for clients with shareholder bases of more than 40,000. Please do not shrink-wrap material in bundles.
Skid packs, also known as Power packs or Gaylords, cut expenses and processing time. Unnecessary cartons cost money, delay processing and must be disposed of for recycling. Skid packs can be used
Exhibit 99.(k)(2)
EXECUTION COPY
ADMINISTRATION AGREEMENT
Agreement dated as of June 7, 2002, by and between State Street Bank and Trust Company, a Massachusetts trust company (the Administrator), and Credit Suisse High Yield Bond Fund (the Fund),
WHEREAS, the Fund is registered as a closed-end management investment company under the Investment Company Act of 1940, as amended (the 1940 Act); and
WHEREAS, the Fund desires to retain the Administrator to furnish certain administrative services to the Fund, and the Administrator is willing to furnish such services, on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, the parties hereto agree as follows:
1. APPOINTMENT OF ADMINISTRATOR
The Fund hereby appoints the Administrator to act as administrator with respect to the Fund for purposes of providing certain administrative services for the period and on the terms set forth in this Agreement. The Administrator accepts such appointment and agrees to render the services stated herein.
2. DELIVERY OF DOCUMENTS
The Fund will promptly deliver to the Administrator copies of each of the following documents and all future amendments and supplements, if any:
a. The Funds Declaration of Trust (charter) and by-laws;
b. Certified copies of the resolutions of the Board of Trustees of the Fund (the Board) authorizing (1) the Fund to enter into this Agreement and (2) certain individuals on behalf of the Fund to (a) give instructions to the Administrator pursuant to this Agreement and (b) sign checks and pay expenses;
c. A copy of the investment advisory agreement between the Fund and its investment adviser; and
d. Such other certificates, documents or opinions which the Administrator may, in its reasonable discretion, deem necessary or appropriate in the proper performance of its duties.
3. REPRESENTATIONS AND WARRANTIES OF THE ADMINISTRATOR
The Administrator represents and warrants to the Fund that:
a. It is a Massachusetts trust company, duly organized and existing under the laws of the Commonwealth of Massachusetts;
b. It has the corporate power and authority to carry on its business in The Commonwealth of Massachusetts; it has all necessary licenses and approvals in order to enter into and perform this Agreement and will maintain such in effect for the duration of this Agreement;
c. All requisite corporate proceedings have been taken to authorize it to enter into and perform this Agreement;
d. No legal or administrative proceedings have been instituted or threatened which would impair the Administrators ability to perform its duties and obligations under this Agreement; and
e. Its entrance into this Agreement shall not cause a material breach or be in material conflict with its declaration of trust or by-laws or any other agreement or obligation of the Administrator or any law or regulation applicable to it.
4. REPRESENTATIONS AND WARRANTIES OF THE FUND
The Fund represents and warrants to the Administrator that:
a. It is a trust, duly organized and existing under the laws of the state of its organization;
b. It has the power and authority under applicable laws and by its charter and by-laws to enter into and perform this Agreement;
c. All requisite proceedings have been taken to authorize it to enter into and perform this Agreement;
d. It is an investment company registered under the 1940 Act;
e. A registration statement under the 1940 Act has been filed with the Securities and Exchange Commission (SEC);
f. No legal or administrative proceedings have been instituted or threatened which would impair the Funds ability to perform its duties and obligations under this Agreement; and
g. Its entrance into this Agreement will not cause a material breach or be in material conflict with any other agreement or obligation of the Fund or any law or regulation applicable to it.
5. ADMINISTRATIVE SERVICES
The Administrator shall provide the following services, in each case, subject to the control, supervision and direction of the Fund and the review and comment by such Funds auditors and legal counsel and in accordance with procedures which may be established from time to time between the Fund and the Administrator:
a. Oversee the maintenance by the Funds custodian of certain books and records of the Fund as required under Rule 31a-1(b) of the 1940 Act;
b. Prepare the Funds federal, state and local income tax returns for review by the Funds independent accountants and filing by the Funds treasurer;
c. Review the calculation, submit for approval by officers of the Fund and arrange for payment of the Funds expenses, calculate expense ratios and recommend expense adjustments;
d. Prepare for review and approval by officers of the Fund financial information for the Funds semi-annual and annual reports, proxy statements, prospectuses and statements of additional information (if any), and other communications required or otherwise to be sent to Fund shareholders, and arrange for the printing and dissemination of such reports and communications to shareholders;
e. Prepare for review by an officer of and legal counsel for the Fund the Funds periodic reports required to be filed with SEC on Form N-SAR and such other reports, forms or filings as may be routinely required of closed-end funds by law, rule or regulation;
f. Prepare reports relating to the business and affairs of the Fund as may be mutually agreed upon and not otherwise prepared by the Funds investment adviser, custodian, legal counsel or independent accountants;
g. Make such reports and recommendations to the Board concerning the performance of the independent accountants as the Board may reasonably request;
h. Oversee and review calculations of fees paid by the Fund (or out of the advisory fee) to the Funds investment adviser, any sub-adviser, co-administrator, distributor and/or principal underwriter where applicable, custodian, Transfer Agent, and other service providers;
i. Consult with the Funds officers, independent accountants, legal counsel, custodian and Transfer Agent in establishing the accounting policies of the Fund;
j. Refer to the Funds officers or Transfer Agent, shareholder inquiries relating to the Fund;
k. Provide monthly testing of portfolios to assist the Fund in complying with Internal Revenue Code mandatory qualification requirements, and daily testing of portfolios to assist the Fund in complying with the requirements of the 1940 Act and Fund prospectus/statement of additional information limitations;
l. Review and provide assistance on shareholder communications, and release Fund information, including press releases, to news wires services;
m. File shareholder reports and notices with the appropriate regulatory agencies and any exchange on which the Funds shares may be listed; review text of letters to shareholders and Managements Discussion of Fund Performance (which shall also be subject to review by the Funds legal counsel);
n. Prepare and furnish the Fund (at the Funds request) with portfolio turnover rate and performance information (including total return information), including such information on an after-tax basis, calculated in accordance with applicable U.S. securities laws and reporting to external databases such information as may reasonably be requested;
o. Maintain continuing awareness of significant emerging regulatory and legislative developments which may affect the Fund, update the Board and the investment adviser on those developments and provide related planning assistance where requested or appropriate;
p. Develop or assist in developing guidelines and procedures to improve overall compliance by the Fund and its various agents;
q. Counsel and assist the Fund in the handling of routine regulatory examinations and work closely with the Funds legal counsel in response to any non-routine regulatory matters;
r. Attend Board meetings at the request of Fund officers;
s. Review implementation of any stock tender, rights offering, purchase, repurchase or dividend reinvestment programs (or other similar types of programs) authorized by the Board;
t. Prepare quarterly broker security transactions summaries;
u. Compute the amount of dividends and distributions to be paid by the Fund;
v. Provide reports to lender(s) to the Fund as required by loan agreement(s), and provide testing to assist the Fund in complying with such agreement(s); and
w. Provide such services ancillary to the above as are typically provided by administrators to closed-end investment companies which are agreed to by all parties hereto.
The Administrator shall provide the office facilities and the personnel required by it to perform the services contemplated herein.
6. FEES; EXPENSES; EXPENSE REIMBURSEMENT
The Administrator shall receive from the Fund such compensation for the Administrators services provided pursuant to this Agreement as may be agreed to from time to time in a written fee schedule approved by the parties and initially set forth in the Fee Schedule set forth in Schedule A to this Agreement. The fees are accrued daily and billed monthly and shall be due and payable upon receipt of the invoice. Upon the termination of this Agreement before the end of any month, the fee for the part of the month before such termination shall be prorated according to the proportion which such part bears to the full monthly period and shall be payable upon the date of termination of this Agreement. In addition, the Fund shall reimburse the Administrator for its reasonable out-of-pocket costs listed on Schedule A incurred in connection with this Agreement.
The Fund agrees promptly to reimburse the Administrator for any equipment and supplies specially ordered by or for the Fund through the Administrator and for any other expenses not contemplated by this Agreement that the Administrator may incur on the Funds behalf at the Funds request or with the Funds consent.
The Fund will bear all expenses that are incurred in its operation and not specifically assumed by the Administrator. Expenses to be borne by the Fund, include, but are not limited to: organizational expenses; cost of services of independent accountants and outside legal and tax counsel (including such counsels review of the Funds registration statement, proxy materials, federal and state tax qualification as a regulated investment company and other reports and materials prepared by the Administrator under this Agreement); cost of any services contracted for by the Fund directly from parties other than the Administrator; cost of trading operations and brokerage fees, commissions and transfer taxes in connection with the purchase and sale of securities for the Fund; investment advisory fees; taxes, insurance premiums and other fees and expenses applicable to its operation; costs incidental to any meetings of shareholders including, but not limited to, legal and accounting fees, proxy filing fees and the costs of preparation, printing and mailing of any proxy materials; costs incidental to Board meetings, including fees and expenses of Board members; the salary and expenses of any officer, director, trustee or employee of the Fund;
costs incidental to the preparation, printing and distribution of the Funds registration statements and any amendments thereto and shareholder reports; cost of preparation and filing of the Funds tax returns, Form N-2 and Form N-SAR, and all notices, registrations and amendments associated with applicable federal and state tax and securities laws; all applicable registration fees and filing fees required under federal and state securities laws; fidelity bond and directors and officers liability insurance; and cost of independent pricing services used in computing each Funds net asset value.
The Administrator is authorized to and may employ or associate with such person or persons as the Administrator may deem desirable to assist it in performing its duties under this Agreement; provided, however, that the compensation of such person or persons shall be paid by the Administrator and that the Administrator shall be as fully responsible to the Fund for the acts and omissions of any such person or persons as it is for its own acts and omissions.
7. INSTRUCTIONS AND ADVICE
The Administrator shall not rely on oral instructions from the Fund, but if such oral instructions are delivered, the Administrator shall require such instructions to be confirmed in writing by telecopy or by e-mail immediately on the same day as the oral instructions are delivered. At any time, the Administrator my apply to any officer of the Fund for further written instructions and may consult with its own legal counsel or outside counsel for the Fund or the independent accountants for the Fund at the expense of the Fund, with prior approval of the Fund, with respect to any matter arising in connection with the services to be performed by the Administrator under this Agreement. The Administrator shall not be liable, and shall be indemnified by the Fund, for any action taken or omitted by it in good faith in reliance upon any such written instructions or advice reasonably believed by it to be genuine and to have been signed by, or transmitted from, the proper person or persons. The Administrator shall not be held to have notice of any change of authority of any person until receipt of written notice thereof from the Fund. Nothing in this paragraph shall be construed as imposing upon the Administrator any obligation to seek such instructions or advice, or to act in accordance with such advice when received.
8. STANDARD OF CARE AND INDEMNIFICATION
The Administrator shall be responsible for the performance of only such duties as are set forth in this Agreement and, except as otherwise provided under Section 6, shall have no responsibility for the actions or activities of any other party, including other service providers. The Administrator shall have no liability in respect of any loss, damage or expense suffered by the Fund insofar as such loss, damage or expense arises solely from the performance of the Administrators duties hereunder in reasonable reliance upon records that were maintained for the Fund by entities other than the Administrator prior to the Administrators appointment as administrator for the Fund. For the avoidance of doubt, it shall be reasonable for the Administrator to rely on prior tax elections, prior total returns, and such schedules as are typically prepared by administrators, such as prior paid schedules and other amortization schedules that are provided to the Administrator and not prepared by the Administrator. The Administrator shall have no liability for any error of judgment or mistake of law or for any loss or
damage resulting from the performance or nonperformance of its duties hereunder unless caused by or resulting from the negligence or willful misconduct of the Administrator, its officers or employees. The Administrator shall not be liable for any special, indirect, incidental, or consequential damages of any kind whatsoever (including, without limitation, attorneys fees) under any provision of this Agreement or for any such damages arising out of any act or failure to act hereunder. In any event, however, notwithstanding the foregoing, the Administrators cumulative liability for any calendar year, regardless of the form of action or legal theory, shall be limited to such amounts as may be agreed upon from time to time between the parties hereto.
The Administrator shall not be responsible or liable for any failure or delay in performance of its obligations under this Agreement arising out of or caused, directly or indirectly, by circumstances beyond its control, including without limitation, work stoppage, power or other mechanical failure, computer virus, natural disaster, governmental action or communication disruption, as long as the Administrator maintains back-up systems and disaster recovery plans appropriate to its activities.
The Fund shall indemnify and hold the Administrator harmless from all loss, cost, damage and expense, including reasonable fees and expenses for counsel, incurred by the Administrator resulting from any claim, demand, action or suit in connection with the Administrators acceptance of this Agreement, any action or omission by it in the performance of its duties hereunder, or as a result of acting upon any written instructions reasonably believed by it to have been duly authorized by the Fund, provided that this indemnification shall not apply to actions or omissions of the Administrator, its officers or employees in cases of its or their own negligence or willful misconduct.
The indemnification contained herein shall survive the termination of this Agreement.
9. CONFIDENTIALITY
The Administrator agrees that, except as otherwise required by law or in connection with any required disclosure to a banking or other regulatory authority, it will keep confidential all records and information in its possession or to which it has access relating to the Fund, its shareholders and shareholder accounts and will not disclose the same to any person except at the request of or with the written consent of the Fund. This provision shall survive any termination of this Agreement.
10. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS; RECORDS; OTHER
The Fund assumes full responsibility for complying with all securities, tax, commodities and other laws, rules and regulations applicable to it.
In compliance with the requirements of Rule 31a-3 under the 1940 Act, the Administrator agrees that all records which it maintains for the Fund shall at all times remain the property of the Fund, shall be readily accessible during normal business hours, and shall be
promptly surrendered upon the termination of the Agreement or otherwise on written request. The Administrator further agrees that all records which it maintains for the Fund pursuant to Rule 31a-1 under the 1940 Act will be preserved for the periods prescribed by Rule 31a-2 under the 1940 Act unless any such records are earlier surrendered as provided above. Records shall be surrendered in usable machine-readable form.
The Administrator has and will maintain in effect for the term of this Agreement insurance coverage covering its activities as administrator of investment funds in such amounts as is reasonable under the circumstances.
The Administrator has and will maintain during the term of this Agreement back-up systems and disaster recovery plans appropriate for its activities as administrator of the Fund.
11. SERVICES NOT EXCLUSIVE
The services of the Administrator to the Fund are not to be deemed exclusive, and the Administrator shall be free to render similar services to others. The Administrator shall be deemed to be an independent contractor and shall, unless otherwise expressly provided herein or authorized by the Fund from time to time, have no authority to act or represent the Fund in any way or otherwise be deemed an agent of the Fund.
12. TERM, TERMINATION AND AMENDMENT
(a) This Agreement shall become effective on the date of its execution and shall remain in full force and effect for a period of one year from the effective date (the Initial Term) and shall automatically renew year to year thereafter (each a Renewal Term), unless either party terminates this Agreement by written notice to the other party at least sixty (60) days prior to the expiration of the Initial Term or any Renewal Term.
(b) Notwithstanding any provision to the contrary herein, after a period of three years from the effective date of the Agreement, either party may terminate this Agreement at any time upon at least ninety (90) days prior written notice to the other party.
(c) Upon termination of this Agreement, the Fund shall pay to the Administrator such compensation and any reimbursable expenses as may be due under the terms hereof as of the date of such termination, including reasonable out-of-pocket expenses associated with such termination.
(d) This Agreement may be modified or amended from time to time by mutual written agreement of the parties hereto.
13. NOTICES
Any notice or other communication authorized or required by this Agreement to be given to either party shall be in writing and deemed to have been given when delivered in person or by confirmed facsimile, or posted by certified mail, return receipt requested, to the following address (or such other address as a party may specify by written notice to the other): if to the Fund: c/o Credit Suisse Asset Management, LLC, 466 Lexington Avenue, New York, New York 10017, Attn: Hal Liebes, General Counsel, (212) 875-3779, fax: (212) 646) 658-0817; if to the Administrator: State Street Bank and Trust Company, One Federal Street, 9th Floor, Boston, Massachusetts 02206-5049, Attn: Fund Administration Legal Department, fax: 617-662-3805.
14. NON-ASSIGNABILITY
This Agreement shall not be assigned by either party hereto without the prior consent in writing of the other party, except that the Administrator may, upon at least ninety (90) days prior notice to the Fund, assign this Agreement to a successor of all or a substantial portion of its business, or to a party controlling, controlled by or under common control with the Administrator.
15. SUCCESSORS
This Agreement shall be binding on and shall inure to the benefit of the Fund and the Administrator and their respective successors and permitted assigns.
16. ENTIRE AGREEMENT
This Agreement contains the entire understanding between the parties hereto with respect to the subject matter hereof and supersedes all previous representations, warranties or commitments regarding the services to be performed hereunder whether oral or in writing.
17. WAIVER
The failure of a party to insist upon strict adherence to any term of this agreement on any occasion shall not be considered a waiver nor shall it deprive such party of the right thereafter to insist upon strict adherence to that term or any term of this Agreement. Any waiver must be in writing signed by the waiving party.
18. SEVERABILITY
If any provision of this Agreement is invalid or unenforceable, the balance of the Agreement shall remain in effect, and if any provision is inapplicable to any person or circumstance it shall nevertheless remain applicable to all other persons and circumstances.
19. GOVERNING LAW
This Agreement shall be construed and the provisions thereof interpreted under and in accordance with the laws of The Commonwealth of Massachusetts.
20. REPRODUCTION OF DOCUMENTS
This Agreement and all schedules, exhibits, attachments and amendments hereto may be reproduced by any photographic, photostatic, microfilm, micro-card, miniature photographic or other similar process. The parties hereto all/each agree that any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding, whether or not the original is in existence and whether or not such reproduction was made by a party in the regular course of business, and that any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their officers designated below as of the date first written above.
CREDIT SUISSE HIGH YIELD BOND FUND |
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By: |
/s/ Hal Liebes |
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Name: Hal Liebes |
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Title: Senior Vice President |
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STATE STREET BANK AND TRUST COMPANY |
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By: |
/s/ Alan D. Greene |
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Name: Alan D. Greene |
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Title: Executive Vice President |
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Exhibit 99.(k)(3)
EXECUTION COPY
CREDIT AGREEMENT
dated as of December 12, 2008
among
CREDIT SUISSE HIGH YIELD BOND FUND,
STATE STREET BANK AND TRUST COMPANY,
and the other lending institutions party hereto
and
STATE STREET BANK AND TRUST COMPANY,
in its capacity as Agent
TABLE OF CONTENTS
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Page |
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ARTICLE I. DEFINITIONS |
1 |
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SECTION 1.01. |
Definitions |
1 |
SECTION 1.02. |
Accounting Terms and Determination |
15 |
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ARTICLE II. THE CREDIT |
15 |
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SECTION 2.01. |
Commitments to Lend |
15 |
SECTION 2.02. |
Notice of Borrowings |
16 |
SECTION 2.03. |
Notice to Banks; Funding of Loans |
17 |
SECTION 2.04. |
Loan Accounts; Notes; Records |
17 |
SECTION 2.05. |
Mandatory Payments; Optional Prepayments |
18 |
SECTION 2.06. |
Interest Rates |
19 |
SECTION 2.07. |
Fees |
20 |
SECTION 2.08. |
Termination and Reduction of Commitments |
20 |
SECTION 2.09. |
General Provisions as to Payments |
21 |
SECTION 2.10. |
Computation of Interest and Fees |
22 |
SECTION 2.11. |
Withholding Tax Exemption |
22 |
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ARTICLE III. CONDITIONS |
23 |
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SECTION 3.01. |
Effectiveness |
23 |
SECTION 3.02. |
All Borrowings |
25 |
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ARTICLE IV. REPRESENTATIONS AND WARRANTIES |
26 |
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SECTION 4.01. |
Existence and Power; Investment Company |
26 |
SECTION 4.02. |
Authorization; Execution and Delivery, Etc. |
26 |
SECTION 4.03. |
Noncontravention |
26 |
SECTION 4.04. |
Governmental Authorizations; Private Authorization |
27 |
SECTION 4.05. |
Regulations T, U and X |
27 |
SECTION 4.06. |
Non-Affiliation with Banks |
27 |
SECTION 4.07. |
Subsidiaries |
27 |
SECTION 4.08. |
Financial Information |
27 |
SECTION 4.09. |
Litigation |
28 |
SECTION 4.10. |
ERISA |
28 |
SECTION 4.11. |
Taxes |
28 |
TABLE OF CONTENTS
(continued)
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SECTION 4.12. |
Compliance |
28 |
SECTION 4.13. |
Fiscal Year |
29 |
SECTION 4.14. |
Full Disclosure |
29 |
SECTION 4.15. |
Offering Documents |
29 |
SECTION 4.16. |
Foreign Assets, Control Regulations, Etc. |
29 |
SECTION 4.17. |
Title to Assets |
29 |
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ARTICLE V. COVENANTS |
30 |
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SECTION 5.01. |
Information |
30 |
SECTION 5.02. |
Payment of Obligations |
31 |
SECTION 5.03. |
Maintenance of Insurance |
31 |
SECTION 5.04. |
Conduct of Business and Maintenance of Existence |
31 |
SECTION 5.05. |
Compliance with Laws |
32 |
SECTION 5.06. |
Inspection of Property, Books and Records |
32 |
SECTION 5.07. |
Indebtedness |
32 |
SECTION 5.08. |
Liens |
33 |
SECTION 5.09. |
Consolidations, Mergers and Sales of Assets |
33 |
SECTION 5.10. |
Use of Proceeds |
33 |
SECTION 5.11. |
Compliance with Investment Policies and Restrictions |
34 |
SECTION 5.12. |
Non-Affiliation with Banks |
34 |
SECTION 5.13. |
Regulated Investment Company |
34 |
SECTION 5.14. |
No Subsidiary |
34 |
SECTION 5.15. |
ERISA |
34 |
SECTION 5.16. |
Fiscal Year |
34 |
SECTION 5.17. |
Regulation U |
34 |
SECTION 5.18. |
Custodian |
34 |
SECTION 5.19. |
Asset Coverage |
34 |
SECTION 5.20. |
Maximum Amount |
34 |
SECTION 5.21. |
Asset Liquidation |
34 |
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ARTICLE VI. DEFAULTS |
35 |
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SECTION 6.01. |
Events of Default |
35 |
TABLE OF CONTENTS
(continued)
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SECTION 6.02. |
Remedies |
37 |
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ARTICLE VII. THE AGENT |
37 |
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SECTION 7.01. |
Appointment and Authorization |
37 |
SECTION 7.02. |
Action by Agent |
37 |
SECTION 7.03. |
Consultation with Experts |
37 |
SECTION 7.04. |
Liability of Agent |
37 |
SECTION 7.05. |
Indemnification |
38 |
SECTION 7.06. |
Credit Decision |
38 |
SECTION 7.07. |
Successor Agent |
38 |
SECTION 7.08. |
Agent as Bank |
39 |
SECTION 7.09. |
Distribution by Agent |
39 |
SECTION 7.10. |
Delinquent Banks |
39 |
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ARTICLE VIII. CHANGE IN CIRCUMSTANCES |
40 |
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SECTION 8.01. |
Additional Costs; Capital Adequacy |
40 |
SECTION 8.02. |
Basis for Determining Interest Rate Inadequate or Unfair |
41 |
SECTION 8.03. |
Illegality |
42 |
SECTION 8.04. |
Base Rate Loans Substituted for Affected LIBOR Loans |
42 |
SECTION 8.05. |
Indemnity |
43 |
SECTION 8.06. |
Replacement Banks |
43 |
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ARTICLE IX. MISCELLANEOUS |
43 |
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SECTION 9.01. |
Notices |
43 |
SECTION 9.02. |
No Waivers |
45 |
SECTION 9.03. |
Expenses; Documentary Taxes; Indemnification |
45 |
SECTION 9.04. |
Set Off |
45 |
SECTION 9.05. |
Amendments and Waivers |
46 |
SECTION 9.06. |
Successors and Assigns |
46 |
SECTION 9.07. |
Governing Law; Submission to Jurisdiction |
48 |
SECTION 9.08. |
WAIVER OF JURY TRIAL |
49 |
SECTION 9.09. |
Confidential Material |
49 |
SECTION 9.10. |
USA Patriot Act |
50 |
TABLE OF CONTENTS
(continued)
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SECTION 9.11. |
Interest Rate Limitation |
50 |
SECTION 9.12. |
Survival |
50 |
SECTION 9.13. |
Miscellaneous |
50 |
Exhibits:
Exhibit A - Form of Note
Exhibit B - Form of Notice of Borrowing
Exhibit C - Form of Notice of Conversion
Exhibit D - Form of Borrowing Base Report
Exhibit E - Form of Assignment and Acceptance
Exhibit F - Form of Statutory Coverage Ratio Certificate
Exhibit G - Form of Compliance Certificate
Exhibit H - Form of Notice of Repayment
Schedules:
Schedule 1 - Addresses for Notices, Lending Offices, Commitment Amounts and Commitment Percentages
Schedule 2 - Pricing Procedures
Schedule 3 - Schedule of Exceptions to Financial Bring-down
CREDIT AGREEMENT
CREDIT AGREEMENT, dated as of December 12, 2008 by and among Credit Suisse High Yield Bond Fund, a Delaware statutory trust (the Borrower), the Banks (as hereinafter defined) party hereto from time to time, and STATE STREET BANK AND TRUST COMPANY, as agent for the Banks (in such capacity, the Agent).
The parties hereto hereby agree as follows:
ARTICLE I.
DEFINITIONS
SECTION 1.01. Definitions. The following terms, as used herein, have the following meanings:
Adjusted Net Assets means, as at any date of determination, an amount equal to (a) the Asset Value of the Total Assets minus (b) the Total Liabilities that are not Senior Securities Representing Indebtedness. For purposes of calculating the Adjusted Net Assets, the amount of any liability included in Total Liabilities shall be equal to the greater of (i) the outstanding amount of such liability and (ii) the fair market value of all assets pledged or otherwise segregated to secure such liability.
Adjusted LIBOR Offered Rate applicable to any Interest Period means a rate per annum equal to the quotient obtained (rounded upward, if necessary, to the next higher 1/100 of 1%) by dividing (i) the applicable LIBOR Offered Rate by (ii) 1.00 minus the LIBOR Reserve Percentage. The Adjusted LIBOR Offered Rate shall be adjusted automatically on and as of the effective date of any change in the LIBOR Reserve Percentage.
Adverse Claim means any Lien or other right, claim, encumbrance or any other type of preferential arrangement in, of or on any Persons assets or properties (including the segregation thereof or the deposit thereof to satisfy margin or other requirements) in favor of any other Person other than, in the case of the Borrower, Liens permitted under Section 5.08(a), (b) or (c).
Affiliate has the meaning ascribed to the term Affiliated Person in the Investment Company Act.
Aggregate Commitment Amount means, as of any date, the aggregate of all Commitment Amounts as of such date. On the Effective Date, the Aggregate Commitment Amount is $75,000,000.
Agent has the meaning set forth in the preamble to this Agreement.
Applicable Law means, with respect to any Person, any Law of any Authority, including, without limitation, all Federal and state banking or securities laws, to which such Person is subject or by which it or any of its property is bound.
Applicable Lending Office means, with respect to any Bank, (a) in the case of its Base Rate Loans, its Domestic Lending Office, and (b) in the case of its LIBOR Loans, its LIBOR Lending Office.
Applicable Rate means, at all times from and after the Effective Date and during the applicable periods set forth below, (a) with respect to each Base Rate Loan and each LIBOR Loan, the percentage set forth below under the heading Loan Rate, and (b) with respect to the facility fee payable pursuant to Section 2.07(a), the percentage set forth below under the heading Fee Rate:
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Loan Rate |
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Whenever the Statutory Coverage Ratio is greater than or equal to 5.00:1.00 |
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0.20 |
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All other times |
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0.30 |
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Changes in the Applicable Rate resulting from a change in the Statutory Coverage Ratio shall be based upon the Statutory Coverage Ratio Certificate most recently delivered pursuant to Section 2.02 or Section 5.01(d), and shall become effective one Domestic Business Day after the delivery thereof. Notwithstanding anything to the contrary in this definition, if the Borrower shall fail to deliver to the Agent any Statutory Coverage Ratio Certificate on or prior to any date required hereby, the Statutory Coverage Ratio for purposes of this defined term only shall be deemed to be less than 5.00:1.00 from and including the first Domestic Business Day after such date to but excluding the first Business Day following the date of delivery to the Agent of a Statutory Coverage Ratio Certificate pursuant hereto.
Approved Borrowing Amount means (a) $1,000,000 or an integral multiple of $100,000 in excess thereof, or (b) such lesser amount as shall be equal to the excess of the Aggregate Commitment Amount over the aggregate outstanding principal balance of all Loans.
Asset Value means, as of any day of determination in respect of any asset of the Borrower, the Value of such asset computed in the manner such Value is required to be computed by the Borrower in accordance with the Pricing Procedures and Applicable Law, including, without limitation, the Investment Company Act; provided that:
(a) the Asset Value of any asset shall be net of the Borrowers liabilities relating thereto, including without limitation all of the Borrowers obligations to pay any unpaid portion of the purchase price thereof, and
(b) when calculating the Asset Value of any asset, the Borrower shall calculate such value in good faith in accordance with the Pricing Procedures; provided, further, that (i) with respect to any asset that is not valued daily, the Asset Value of such asset shall be deemed zero for purposes of this definition, (ii) with respect to any asset the value of which is not based primarily upon the closing price thereof on an exchange, or the market price therefor determined by one or more pricing services or broker-dealers (other than a pricing service or broker-dealer that is an Affiliate of the Borrower or the Borrowers investment adviser, or that is otherwise not independent), the Asset Value of such asset shall be deemed zero for purposes of this definition, and (iii) with respect to any asset that is valued higher than either of the following
(the Base Price): (x) the closing price thereof on an exchange, or (y) the market price therefor determined by one or more pricing services or broker-dealers (other than a pricing service or broker-dealer that is an Affiliate of the Borrower or the Borrowers investment adviser, or that is otherwise not independent), the Asset Value of such asset shall be deemed to be the Base Price for purposes of this definition.
Assignee has the meaning set forth in Section 9.06(c) hereof.
Assignment and Acceptance has the meaning set forth in Section 9.06(c) hereof.
Authority means any governmental or quasi-governmental authority (including the Financial Industry Regulatory Authority, stock exchanges, the SEC and any accounting board or authority (whether or not a part of government) which is responsible for the establishment or interpretation of national or international accounting principles, in each case whether foreign or domestic), whether executive, legislative, judicial, administrative or other, or any combination thereof, including, without limitation, any Federal, state, territorial, county, municipal or other government or governmental or quasi-governmental agency, arbitrator, board, body, branch, bureau, commission, corporation, court, department, instrumentality, master, mediator, panel, referee, system or other political unit or subdivision or other entity of any of the foregoing, whether domestic or foreign.
Authorized Signatory means any duly authorized officer or other authorized Person of the Borrower, provided that the Agent shall have received a manually signed certificate of an officer of the Borrower bearing a manual specimen signature of such officer or other Person and such officer or other Person shall be reasonably satisfactory to the Agent.
Bank means each of State Street, each lender named on the signature pages hereof, each Assignee which becomes a Bank pursuant to Section 9.06(c) hereof, and their respective successors.
Base Rate means, as of any day, the highest of (a) the annual rate of interest announced from time to time by State Street Bank and Trust Company at its head office in Boston, Massachusetts, as its prime rate, as in effect on that day, (b) the Applicable Rate plus the Federal Funds Rate as in effect on that day, and (c) the Applicable Rate plus the Overnight LIBOR Rate as in effect on that day.
Base Rate Loans means Loans bearing interest calculated by reference to the Base Rate.
Benefit Arrangement means at any time an employee benefit plan within the meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer Plan and which is maintained or otherwise contributed to by any member of the ERISA Group.
Borrower has the meaning set forth in the preamble to this Agreement.
Borrowing Base means, at the relevant time of reference thereto, an amount equal to the sum of the following items to the extent that they are classified as assets on the balance sheet of the Borrower in accordance with Generally Accepted Accounting Principles:
(i) 90% of the aggregate Asset Value of all Eligible Government Securities;
(ii) 80% of the aggregate Asset Value of all Eligible Commercial Paper;
(iii) 70% of the aggregate Asset Value of all Tier 1 Corporate Debt Securities;
(iv) 60% of the aggregate Asset Value of all Tier 2 Corporate Debt Securities;
(v) 50% of the aggregate Asset Value of all Tier 3 Corporate Debt Securities; and
(vi) 10% of the aggregate Asset Value of all Tier 4 Corporate Debt Securities;
provided, however, that
(1) if, but for this clause (1), in excess of 20% of the Borrowing Base value of all Eligible Commercial Paper and Tier 1 Corporate Debt Securities would be attributable to a single issuer, the amount of such excess shall not be included in the calculation of the Borrowing Base;
(2) if, but for this clause (2), in excess of 10% of the Borrowing Base value of all Tier 2 Corporate Debt Securities and Tier 3 Corporate Debt Securities would be attributable to a single issuer, the amount of such excess shall not be included in the calculation of the Borrowing Base;
(3) if, but for this clause (3), in excess of 5% of the Borrowing Base value of all Tier 4 Corporate Debt Securities would be attributable to a single issuer, the amount of such excess shall not be included in the calculation of the Borrowing Base;
(4) if, but for this clause (4), in excess of 5% of the Borrowing Base value would be attributable to a single Foreign Issuer, the amount of such excess shall not be included in the calculation of the Borrowing Base; and
(5) if, but for this clause (5), in excess of 15% of the Borrowing Base value would be attributable to Foreign Issuers, the amount of such excess shall not be included in the calculation of the Borrowing Base.
Borrowing Base Report means a Borrowing Base Report for the Borrower signed by an Authorized Signatory of the Borrower and in substantially the form of Exhibit D attached hereto.
Borrowing Date means the Domestic Business Day or LIBOR Business Day, as the case may be, on which Loans are advanced hereunder as specified in a Notice of Borrowing delivered pursuant to Section 2.02(a) hereof.
Calculation Date has the meaning set forth in Section 5.01(e) hereof.
Charter Documents means, collectively, the Borrowers Declaration of Trust and By-laws and all other organizational or governing documents of the Borrower, in each case as amended, supplemented or otherwise modified from time to time.
Commitment means the agreement of each Bank, subject to the terms and conditions of this Agreement, to make Loans to the Borrower hereunder.
Commitment Amount means, with respect to each Bank, the amount set forth opposite the name of such Bank on Schedule 1 attached hereto, as such amount may be reduced from time to time pursuant to Section 2.08 or 9.06(c) hereof or increased from time to time pursuant to Section 9.06(c) hereof.
Commitment Percentage means, with respect to each Bank, the percentage set forth opposite the name of such Bank on Schedule 1 attached hereto (as the same may be amended pursuant to Section 9.06(h)) as such Banks percentage of the Aggregate Commitment Amount of all of the Banks.
Confidential Material has the meaning set forth in Section 9.09(a) hereof.
Covered Person has the meaning set forth in Section 9.03(b) hereof.
Custodian means State Street Bank and Trust Company.
Custody Agreement means that certain Custodian Agreement, dated as of October 20, 2000, among the Custodian and the various investment companies party thereto, as the same may be amended, restated, supplemented or otherwise modified from time to time.
Debt of any Person means at any date, without duplication, (a) all obligations of such Person for borrowed money or extensions of credit, (b) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (c) all obligations of such Person to pay the deferred purchase price of property or services, except trade accounts payable arising in the ordinary course of business and payable in accordance with customary practices, (d) all obligations of such Person as lessee which are or should be capitalized in accordance with Generally Accepted Accounting Principles, (e) all Indebtedness of others secured by a Lien on any asset of such Person, whether or not such Indebtedness is assumed or Guaranteed by such Person, (f) all obligations of such Person under Guarantees, (g) all obligations to reimburse the issuer in respect of letters of credit or under performance or surety bonds, and other similar obligations, (h) all obligations of such Person in respect of judgments, (i) all obligations of such Person in respect of bankers acceptances and under reverse repurchase agreements, (j) all obligations of such Person in respect of Financial Contracts, and (k) all obligations that are Senior Securities Representing Indebtedness of such Person.
Default means any condition or event which constitutes an Event of Default or which with the giving of notice or lapse of time or both would, unless cured or waived, become an Event of Default.
Delinquent Bank has the meaning set forth in Section 7.10(a) hereof.
Dollars or $ means dollars in lawful currency of the United States of America.
Domestic Business Day means any day (other than a Saturday or Sunday) on which (a) commercial banks are open for the purpose of transacting business in Boston, Massachusetts and New York, New York and (b) the New York Stock Exchange is open.
Domestic Lending Office means, initially, the office of each Bank designated as such on Schedule 1 attached hereto; thereafter such other office of such Bank, if any, located in the United States that shall be making or maintaining Base Rate Loans.
Effective Date means the date this Agreement becomes effective in accordance with Section 3.01 hereof.
Electronic Platform means an electronic system for the delivery of information (including, without limitation, documents), such as IntraLinks On-Demand Workspaces, that may or may not be provided or administered by the Agent or an Affiliate thereof.
Eligible Commercial Paper means a note (a) constituting an Eligible Debt Security, (b) of an Eligible Corporate Issuer, (c) having a maturity of 270 days or less, (d) rated A1 or better by S&P and P1 or better by Moodys, (e) denominated in an Eligible Currency, and (f) with respect to which there are recognized broker-dealers located in one or more Eligible OECD Member Nations that make a market in such note.
Eligible Corporate Issuer means an issuer of debt securities domiciled in, and having its principal place of business in, an Eligible OECD Member Nation.
Eligible Corporate Debt Securities means Eligible Debt Securities (a) issued by an Eligible Corporate Issuer, (b) denominated in an Eligible Currency, and (c) with respect to which there are recognized broker-dealers located in one or more Eligible OECD Member Nations that make a market in such Eligible Debt Securities.
Eligible Currency means the legal tender of any Eligible OECD Member Nation.
Eligible Debt Securities means Eligible Securities that are debt securities, including, without limitation, corporate bond obligations; provided that Eligible Debt Securities shall not include any asset that is a direct or indirect participation or subparticipation interest in or assignment or novation of a loan or other extension of credit that is not a corporate bond obligation.
Eligible Government Securities means Eligible Debt Securities (a) issued by, and backed by the full faith and credit of, the French Republic, the Federal Republic of Germany, Japan, the Netherlands, the United Kingdom, or the United States of America, and (b) issued by any GSE.
Eligible OECD Member Nation means any OECD Member Nation having a sovereign long-term debt rating in a non-local currency of not less than B3 by Moodys or B- by S&P.
Eligible Securities means securities (a) that are publicly traded, (b) that are unrestricted as to sale, (c) that are free and clear of any Adverse Claim, (d) in which the Agent has, for the benefit of the Agent and the Banks, a first priority perfected security interest pursuant to the Security Documents, (e) that are not the subject of a reverse repurchase agreement, dollar roll, securities lending transaction or otherwise segregated to satisfy any obligations with respect thereto, and (f) that are permitted to be purchased or held by the Borrower in accordance with the Prospectus and/or the Investment Policies and Restrictions.
ERISA means the Employee Retirement Income Security Act of 1974, as amended, or any successor statute.
ERISA Group means, with respect to the Borrower, the Borrower and all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with the Borrower, are treated as a single employer under Section 414 of the Internal Revenue Code.
Events of Default has the meaning set forth in Section 6.01 hereof.
Exchange Act means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC thereunder, as modified or interpreted by orders of the SEC, or other interpretative releases or letters issued by the SEC or its staff, all as from time to time in effect, or any successor law, rules or regulations, and any reference to any statutory or regulatory provision shall be deemed to be a reference to any successor statutory or regulatory provision.
Executive Order has the meaning set forth in Section 4.16.
Failure has the meaning set forth in Section 7.10(b).
Federal Funds Rate means, for any day, a rate per annum equal to the rate appearing on Bloomberg page BTMM as quoted by Garvin Guy Butler as of 9:30 a.m. (Boston time) as the Federal Funds Ask Rate (or, if such page is unavailable, on any successor or substitute page of such service, or any successor to or substitute for such service, providing rate quotations comparable to those currently provided on such page of such service), as determined by the Agent from time to time for purposes of providing quotations or, if such rate is not so published, an interest rate per annum equal to the quotation received by the Agent at approximately 9:30 a.m. (Boston time) on such date from a Federal funds broker of recognized standing selected by the Agent in its sole discretion on overnight Federal funds transactions.
Financial Contract Liability means, at any time, the net amount of the liability, if any, that a Person has under each Financial Contract to which such Person is a party, in each case determined on a mark-to-market basis in accordance with Generally Accepted Accounting Principles.
Financial Contracts means option contracts, options on futures contracts, futures contracts, forward contracts, options on foreign currencies, repurchase agreements, securities lending agreements, when-issued securities, swap, swaption, floor, cap, or collar agreements, other similar arrangements and other obligations that would be, but for the segregation of assets thereof, Senior Securities.
Foreign Assets Control Regulations has the meaning set forth in Section 4.16.
Foreign Bank means any Bank that is organized under the laws of a jurisdiction other than that in which the Borrower is resident for tax purposes. For purposes of this definition, the United States, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction.
Foreign Issuer means an issuer of securities that is organized under the laws of a jurisdiction other than the United States, any State thereof, or the District of Columbia.
Generally Accepted Accounting Principles has the meaning set forth in Section 1.02 hereof.
Government means, with respect to any sovereignty, the government or any agency or instrumentality thereof.
Governmental Authorizations means all franchises, permits, licenses, approvals, consents and other authorizations of all Authorities.
Governmental Filings means all filings, including franchise and similar tax filings, and the payment of all fees, assessments, interests and penalties associated with such filing, with all Authorities.
GSE means the Government National Mortgage Association, the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation.
Guarantee by any Person means any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Indebtedness of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness(whether arising by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise) or (b) entered into for the purpose of assuring in any other manner the obligee of such Indebtedness of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part), provided that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business. The term Guarantee used as a verb has a corresponding meaning.
Indebtedness of any Person means at any date, without duplication, (a) all Debt of such Person, and (b) all Senior Securities issued by such Person.
Interest Period means, with respect to each LIBOR borrowing, initially the period commencing on the date of such borrowing and ending one week, or one, two, three or six months, thereafter, as the Borrower may elect in the applicable Notice of Borrowing, and thereafter, each period commencing on the last day of the next preceding Interest Period applicable to such borrowing and ending on the last day of one of the periods set forth above, as the Borrower may elect in the applicable Notice of Conversion, provided that:
(a) any Interest Period which would otherwise end on a day which is not a LIBOR Business Day shall be extended to the next succeeding LIBOR Business Day unless (except in the case of one week Interest Periods) such LIBOR Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding LIBOR Business Day;
(b) any Interest Period (other than a one week Interest Period) which begins on the last LIBOR Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last LIBOR Business Day of a calendar month; and
(c) any Interest Period which would otherwise end after the Termination Date shall instead end on the Termination Date.
Internal Revenue Code means the Internal Revenue Code of 1986, as amended, or any successor statute.
Investment Adviser means Credit Suisse Asset Management, LLC, a limited liability company organized under the laws of Delaware.
Investment Company Act means the Investment Company Act of 1940, as amended, and the rules and regulations of the SEC thereunder, as modified or interpreted by orders of the SEC, or other interpretative releases or letters issued by the SEC or its staff, all as from time to time in effect, or any successor law, rules or regulations, and any reference to any statutory or regulatory provision shall be deemed to include a reference to any successor statutory or regulatory provision.
Investment Policies and Restrictions means, with respect to the Borrower, the material provisions of the Prospectus (as delivered to the Banks on the Effective Date), and other documents dealing with the Borrowers investment objectives, investment policies and strategies, and investment restrictions, as such objectives, policies, strategies and restrictions may be further amended, supplemented or otherwise modified in accordance with Applicable Law, including without limitation, the Securities Act and the Investment Company Act.
Law means any action, code, consent decree, constitution, decree, directive, enactment, finding, guideline, law, injunction, interpretation, judgment, order, ordinance, policy statement, proclamation, promulgation, regulation, requirement, rule, rule of law, rule of public policy, settlement agreement, statute, or writ, of any Authority, or any particular section, part or provision thereof.
Liabilities has the meaning set forth in Section 7.05.
LIBOR Business Day means any Domestic Business Day on which commercial banks are open for international business (including dealings in Dollar deposits) in London.
LIBOR Lending Office means, initially, the office of each Bank designated as such in Schedule 1 hereto; and thereafter such other office of such Bank, if any, that shall be making or maintaining one or more LIBOR Loans.
LIBOR Loans means Loans bearing interest calculated by reference to the LIBOR Offered Rate.
LIBOR Offered Rate applicable to any Interest Period means the British Bankers Association official LIBOR fixing for Dollars, for a period to maturity as near as possible to such Interest Period, two LIBOR Business Days before the first day of such Interest Period. If such rate is then unavailable, then LIBOR Offered Rate shall mean, for such Interest Period, the rate of interest per annum quoted by the Agent to leading banks in the London interbank market as the rate at which the Agent is offering Dollar deposits in an amount equal to $1,000,000 with a maturity comparable to such Interest Period at approximately 11:00 a.m. (Boston time), two LIBOR Business Days prior to the commencement of such Interest Period.
LIBOR Reserve Percentage means for any day that percentage (expressed as a decimal) which is in effect on such day, at which any lender subject thereto would be required to maintain reserves under Regulation D of the Board of Governors of the Federal Reserve System (or any successor or similar regulations relating to such reserve requirements) against Eurocurrency Liabilities (as that term is used in Regulation D), if such liabilities were outstanding.
Lien means, with respect to any asset, any mortgage, lien, pledge, charge, security interest (statutory or other) or encumbrance of any kind in respect of such asset, or any preference, priority or other security or preferential arrangement of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement or any financing lease having substantially the same economic effect as any of the foregoing) with respect to such asset, including any agreement (other than this Agreement) preventing a Person from encumbering such asset.
Loans means loans made or to be made to the Borrower by the Banks pursuant to Section 2.01 hereof.
Loan Documents means, collectively, this Agreement, the Notes, the Security Documents, the fee agreement (if any) described in Section 2.07(b) hereof and any and all other documents and instruments required to be delivered pursuant to this Agreement, in each case as amended, restated, supplemented or otherwise modified from time to time.
Margin Stock has the meaning assigned to such term in Regulation U.
Material Adverse Effect means (a) a material adverse effect on the ability of the Borrower to fully perform its obligations under this Agreement or any of the other Loan Documents, (b) a material adverse effect on the Agents right, title and interest, on behalf of itself and the Banks, in the collateral pledged to it pursuant to the Security Documents, or on the rights and remedies of the Agent or any Bank under this Agreement or under any of the other Loan Documents, (c) a material adverse effect on the validity or enforceability of this Agreement or any of the other Loan Documents, or (d) a material adverse effect on the business, financial position, operations, assets or properties of the Borrower or the Investment Adviser.
Maximum Amount means, as at any date of determination, an amount equal to the least of:
(a) the maximum amount of Debt that the Borrower would be permitted to incur pursuant to Applicable Law, including the Investment Company Act,
(b) the maximum amount of Debt that the Borrower would be permitted to incur pursuant to the limitations on borrowings in its Prospectus and the Investment Policies and Restrictions,
(c) in the event that the Borrower shall have entered into any agreement(s) with any Authority limiting the amount of Debt that the Borrower may create, incur, assume or suffer to exist, the maximum amount of Debt that the Borrower would be permitted to create, incur, assume or suffer to exist pursuant to such agreements,
(d) the maximum amount of Debt that the Borrower would be permitted to incur without violating Section 5.19 hereof, and
(e) the amount of Senior Securities Representing Indebtedness that would cause the Statutory Coverage Ratio to be 4.00:1.00.
in each case, as in effect at such date of determination.
Moodys means Moodys Investors Services, Inc., or any successor acceptable to all of the Banks and performing substantially the same function.
Multiemployer Plan means at any time an employee pension benefit plan within the meaning of Section 4001(a)(3) of ERISA to which any member of the ERISA Group is then making or accruing an obligation to make contributions or has within the preceding five plan years made contributions, including for these purposes any Person which ceased to be a member of the ERISA Group during such five year period.
Note(s) has the meaning set forth in Section 2.04(b) hereof.
Notice of Borrowing has the meaning set forth in Section 2.02(a) hereof.
Notice of Conversion has the meaning set forth in Section 2.02(b) hereof.
Obligations means all indebtedness, obligations and liabilities of the Borrower to the Banks and the Agent, existing on the date of this Agreement or arising thereafter, direct or indirect, absolute or contingent, matured or unmatured, liquidated or unliquidated, secured or unsecured, arising or incurred under this Agreement or any of the other Loan Documents or in respect of any of the Loans to the Borrower or any of the Notes or other instruments at any time evidencing any thereof.
OECD Member Nation means a member nation of the Organization for Economic Co-operation and Development.
Overnight LIBOR Rate means the LIBOR fixing for Dollars, for a period to maturity of one LIBOR Business Day, as reported by Bloomberg as the ask rate on the BTMM Page, and if such rate is then unavailable on Bloomberg, then Overnight LIBOR Rate shall mean the LIBOR
fixing for Dollars, for a period to maturity of one LIBOR Business Day as reported by Reuters as the ask or offered rate on the LIBOR01 Page, and if such rate is then unavailable, then Overnight LIBOR Rate shall mean the rate of interest per annum quoted by the Agent to leading banks in the London interbank market as the rate at which the Agent is offering Dollar deposits in an amount equal to $1,000,000 with a maturity of one LIBOR Business Day.
Participant has the meaning set forth in Section 9.06(b) hereof.
Patriot Act has the meaning set forth in Section 9.10 hereof.
Person means an individual, a corporation, a partnership, a limited liability company, an association, a trust (or series thereof) or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.
Plan means at any time an employee pension benefit plan (other than a Multiemployer Plan) which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Internal Revenue Code and either (a) is maintained, or contributed to, by any member of the ERISA Group for employees of any member of the ERISA Group or (b) has at any time within the preceding five years been maintained, or contributed to, by any Person which was at such time a member of the ERISA Group for employees of any Person which was at such time a member of the ERISA Group.
Pricing Procedures means the Borrowers pricing procedures set forth on Schedule 2 hereto, as such pricing procedures may be amended, restated, supplemented or otherwise modified in accordance with Section 5.04 hereof.
Private Authorizations means all franchises, permits, licenses, approvals, consents and other authorizations of all Persons (other than any Authority) including, without limitation, those of shareholders and creditors and those with respect to trademarks, service marks, trade names, copyrights, computer software programs, technical and other know-how.
Prospectus means, with respect to the Borrower, the prospectus dated July 28, 1998, and filed with the SEC as part of the Borrowers registration statement on Form N-2, as amended (or any successor SEC form), and shall include, without limitation, the related statement of additional information included in such registration statement, and all amendments, restatements, supplements and other modifications thereto as of the Effective Date and as the same may be further amended, restated, supplemented or otherwise modified in accordance with Applicable Law, including without limitation, the Securities Act and the Investment Company Act and in accordance with the terms of this Agreement.
Register has the meaning set forth in Section 9.06(g) hereof.
Regulation T means Regulation T of the Board of Governors of the Federal Reserve System, as in effect from time to time, and all official rulings and interpretations thereunder and thereof.
Regulation U means Regulation U of the Board of Governors of the Federal Reserve System, as in effect from time to time, and all official rulings and interpretations thereunder and thereof.
Regulation X means Regulation X of the Board of Governors of the Federal Reserve System, as in effect from time to time, and all official rulings and interpretations thereunder and thereof.
Replacement Bank has the meaning set forth in Section 8.06 hereof.
Representatives has the meaning set forth in Section 9.09(a) hereof.
Required Banks means, at any time, Banks holding at least a majority of the aggregate unpaid principal amount of the Loans at such time or, if no Loans are then outstanding, having at least a majority of the aggregate Commitment Amounts then in effect; provided that at any time that there are two or fewer Banks, Required Banks means all of the Banks, provided further that for purposes of determining Required Banks, each Delinquent Bank (including, without limitation, its Commitment Amount and Loans) shall be disregarded for so long as such Bank remains a Delinquent Bank.
Revolving Credit Period means the period from and including the Effective Date to but excluding the Termination Date.
S&P means Standard & Poors, a division of The McGraw Hill Companies, Inc., or any successor acceptable to all the Banks and performing substantially the same function.
SEC means the Securities and Exchange Commission or any other governmental authority of the United States of America at the time administering the Securities Act, the Investment Company Act or the Exchange Act.
Securities Act means the Securities Act of 1933, as amended, and the rules and regulations of the SEC thereunder, as modified or interpreted by orders of the SEC, or other interpretative releases or letters issued by the SEC or its staff, all as from time to time in effect, or any successor law, rules or regulations, and any reference to any statutory or regulatory provision shall be deemed to be a reference to any successor statutory or regulatory provision.
Security Agreement means that certain Security Agreement, dated as of the date hereof, among the Borrower, the Custodian and the Agent, on behalf of itself and the Banks, as the same may be amended, restated, supplemented or otherwise modified from time to time.
Security Documents means, collectively, the Security Agreement and all other instruments and documents, including, without limitation, Uniform Commercial Code financing statements, required to be executed or delivered pursuant to the Security Agreement or under Applicable Law.
Senior Security has the meaning set forth in the first sentence of Section 18(g) of the Investment Company Act.
Senior Securities Representing Indebtedness has the meaning set forth in the first sentence of Section 18(g) of the Investment Company Act.
Specified Materials means, collectively, all materials or information provided by or on behalf of the Borrower, as well as documents and other written materials relating to the Borrower or any of its Subsidiaries or Affiliates or any other materials or matters relating to the Loan Documents (including, without limitation, any amendment, restatement, supplement or other modification thereto).
State Street means State Street Bank and Trust Company in its capacity as a Bank hereunder.
Statutory Coverage Ratio means, with respect to the Borrower at any time, the Asset Coverage (as defined in Section 18(h) of the Investment Company Act).
Statutory Coverage Ratio Certificate means a Statutory Coverage Ratio Certificate for the Borrower signed by an Authorized Signatory of the Borrower and in substantially the form of Exhibit F attached hereto.
Subsidiary means, with respect to a Person, any corporation or other entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by such Person.
Taxes has the meaning set forth in Section 2.09(c) hereof.
Termination Date means December 11, 2009, or such earlier date on which the Commitments terminate or are terminated pursuant to the terms hereof.
Threshold Amount means, as of any date, the lesser of (i) 1.0% of the aggregate net asset value of the Borrower, and (ii) $2,000,000 (or the equivalent amount thereof in any other currency).
Tier 1 Corporate Debt Securities means Eligible Corporate Debt Securities which are rated BBB- or better by S&P and Baa3 or better by Moodys.
Tier 2 Corporate Debt Securities means Eligible Corporate Debt Securities which (1) are rated BB- or better by S&P and Ba3 or better by Moodys, and (2) are not Tier 1 Corporate Debt Securities.
Tier 3 Corporate Debt Securities means Eligible Corporate Debt Securities which (1) are rated B- or better by S&P and B3 or better by Moodys, and (2) are not Tier 1 Corporate Debt Securities or Tier 2 Corporate Debt Securities.
Tier 4 Corporate Debt Securities means Eligible Corporate Debt Securities which (1) are rated CCC- or better by S&P and Caa3 or better by Moodys, and (2) are not Tier 1 Corporate Debt Securities, Tier 2 Corporate Debt Securities or Tier 3 Corporate Debt Securities.
Total Assets means, at any date, all assets of the Borrower which in accordance with Generally Accepted Accounting Principles would be classified as assets upon a balance sheet of the Borrower prepared as of such date, valued in accordance with the Pricing Procedures, provided, however, that Total Assets shall not include (a) equipment, (b) securities owned by the Borrower which are in default (except to the extent that the Borrower is required or permitted to attribute a value thereto pursuant to the Investment Company Act, the Prospectus and the Investment Policies and Restrictions) or determined to be worthless pursuant to any policy of the Borrowers board of directors, and (c) deferred organizational and offering expenses.
Total Liabilities means, at any date, the sum of all liabilities of the Borrower which in accordance with Generally Accepted Accounting Principles would be classified as liabilities upon a balance sheet of the Borrower prepared as of such date, plus, without duplication, the aggregate amount of the Borrowers Debt and Financial Contract Liability, provided, however, that Total Liabilities shall not include any liquidation preference of any preferred security issued by the Borrower.
Trading with the Enemy Act has the meaning set forth in Section 4.16 hereof.
Valuation Report means a report by the Borrower, as of the close of business on a particular date, listing each security and other investment of the Borrower and the value thereof.
Value has the meaning assigned to such term in Section 2(a)(41) of the Investment Company Act.
SECTION 1.02. Accounting Terms and Determination. Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made and all financial statements required to be delivered hereunder shall be prepared in accordance with Generally Accepted Accounting Principles as in effect from time to time in the United States of America (Generally Accepted Accounting Principles), applied on a basis consistent (except for changes concurred in by the Borrowers independent public accountants) with the most recent audited financial statements of the Borrower delivered to the Banks hereunder.
ARTICLE II.
THE CREDIT
SECTION 2.01. Commitments to Lend. Subject to the terms and conditions set forth in this Agreement, each of the Banks severally agrees to make Loans to the Borrower, from time to time during the Revolving Credit Period up to a maximum aggregate principal amount outstanding at any one time equal to such Banks Commitment Amount, provided that the aggregate principal amount of all Loans outstanding (i) shall not exceed at any time the lesser of (a) the Borrowing Base and (b) the Aggregate Commitment Amount; and (ii) shall not cause the Borrower to have an aggregate amount of Debt outstanding that is in excess of the Maximum Amount, in each case in effect at such time. Each borrowing under this Section shall be in an aggregate principal amount equal to an Approved Borrowing Amount, and shall be made from the several Banks pro rata in accordance with each Banks Commitment Percentage. Each Loan shall mature and become due and payable as provided in Section 2.05 hereof.
SECTION 2.02. Notice of Borrowings.
(a) The Borrower shall give the Agent (X) a notice substantially in the form of Exhibit B attached hereto (a Notice of Borrowing) not later than 1:00 p.m. (Boston time) (or telephonic notice not later than 1:00 p.m. (Boston time) confirmed in writing substantially in the form of Exhibit B attached hereto not later than 2:00 p.m. (Boston time)) (i) on the Domestic Business Day of each proposed borrowing of a Base Rate Loan and (ii) on the third LIBOR Business Day before each proposed borrowing of a LIBOR Loan, in each case specifying (1) the date of such borrowing, which shall be a Domestic Business Day in the case of a Base Rate Loan or a LIBOR Business Day in the case of a LIBOR Loan, (2) whether such borrowing shall be of a Base Rate Loan or a LIBOR Loan, (3) the aggregate principal amount of such borrowing, and (4) in the case of a LIBOR Loan, the Interest Period therefor (which shall comply with Section 2.02(c) hereof), and (Y) a duly completed Borrowing Base Report and a duly completed Statutory Coverage Ratio Certificate, in each case not later than 2:00 p.m. (Boston time) on the date of the proposed borrowing of the requested Loan, prepared as of the close of business on the Domestic Business Day immediately preceding such date. Each Notice of Borrowing shall constitute a representation and warranty by the Borrower that the conditions set forth in Section 3.02(c), (d) and (e) have been satisfied on the date of such notice and will be satisfied on the date of such borrowing.
(b) The Borrower may elect from time to time to convert any outstanding Base Rate Loan or LIBOR Loan to a Loan of the other type, or to roll over any outstanding LIBOR Loan upon the expiration of an Interest Period with respect thereto, by giving (X) a notice to the Agent substantially in the form of Exhibit C attached hereto (a Notice of Conversion) (or telephonic notice confirmed in a writing substantially in the form of Exhibit C attached hereto), provided that (i) with respect to any conversion into or rollover of a LIBOR Loan, the Notice of Conversion shall be given within the time period for the giving of a Notice of Borrowing for a LIBOR Loan as set forth in Section 2.02(a), (ii) no Loan may be converted into or rolled over as a LIBOR Loan (1) except in compliance with Section 2.02(c) hereof, or (2) if an Event of Default has occurred and is continuing (in which case such Loan shall automatically become a Base Rate Loan on the last day of the first Interest Period relating thereto ending during the continuance of any Event of Default), (iii) a LIBOR Loan may be converted into a Base Rate Loan or rolled over as a LIBOR Loan only on the last day of the Interest Period applicable thereto, and (iv) if the Borrower fails to give a timely Notice of Conversion for a LIBOR Loan, the Borrower shall be deemed to have elected to continue such Loan as a LIBOR Loan having a one month Interest Period from the last day of the Interest Period applicable thereto, and (Y) the Agent a duly completed Statutory Coverage Ratio Certificate not later than 2:00 p.m. (Boston time) on the date of the proposed conversion or roll over, prepared as of the close of business on the Domestic Business Day immediately preceding such date. Conversions to and from LIBOR Loans, and all roll overs, shall be in such amounts and pursuant to such elections so that, after giving effect thereto, the aggregate principal amount of all LIBOR Loans having the same Interest Period shall not be less than the Approved Borrowing Amount.
(c) The Borrower may not elect an Interest Period for a new LIBOR Loan, or continue or convert a Loan as a LIBOR Loan, if immediately after giving effect thereto there would be more than five different Interest Periods.
SECTION 2.03. Notice to Banks; Funding of Loans.
(a) Upon receipt of a Notice of Borrowing or an oral request for a borrowing in accordance with Section 2.02(a), the Agent shall promptly notify each Bank of the contents thereof and of such Banks ratable share (based on Commitment Percentages) of such borrowing. Such Notice of Borrowing or oral request shall not thereafter be revocable by the Borrower and shall obligate the Borrower to accept the Loans requested from the Banks on the date of such borrowing.
(b) Not later than 2:00 p.m. (Boston time) on the Borrowing Date of each borrowing, each Bank shall make available its share of such borrowing, in Federal or other funds immediately available in Boston, to the Agent at its address referred to in Section 9.01. Unless the Agent determines that any applicable condition specified in ARTICLE III has not been satisfied or waived, the Agent will make its share of such borrowing and the funds so received from the other Banks available to the Borrower at the Agents aforesaid address, on the date of the borrowing. The failure or refusal of any Bank to make available to the Agent as provided herein its share of any borrowing shall not relieve any other Bank from its several obligations hereunder.
(c) If any Bank makes a new Loan hereunder on a day on which the Borrower is to repay the principal amount of an outstanding Loan to such Bank, the Bank shall apply the proceeds of its new Loan to make such repayment and only an amount equal to the difference (if any) between the amount being borrowed and the amount being repaid shall be made available by the Agent as provided in clause (a) or remitted by the Borrower to the Agent for the account of such Bank as provided in Section 2.09 hereof, as the case may be.
(d) Unless the Agent shall have received notice from a Bank prior to any date of a borrowing that such Bank will not make available to the Agent such Banks share of such borrowing, the Agent may assume that such Bank has made such share available to the Agent on such date in accordance with clause (b) of this Section and the Agent may (but it shall not be required to), in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent that such Bank shall not have so made such share available to the Agent, such Bank and the Borrower severally agree to repay to the Agent, within three days after demand by the Agent, such amount together with interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Agent, at (i) in the case of the Borrower, a rate per annum equal to the interest rate applicable thereto pursuant to Section 2.06 hereof and (ii) in the case of such Bank, the Federal Funds Rate. If such Bank shall repay to the Agent such amount, such amount so repaid shall constitute such Banks Loan included in such borrowing for purposes of this Agreement. The provisions of this Section 2.03(d) shall not relieve any such Bank from any liability to the Borrower.
SECTION 2.04. Loan Accounts; Notes; Records.
(a) The Loans made by each Bank to the Borrower shall be evidenced by one or more loan accounts or records maintained by such Bank in the ordinary course of business. The Borrower irrevocably authorizes each Bank to make or cause to be made, at or about the date of
each Loan or at the time of receipt of any payment of principal of each Loan, an appropriate notation on its loan accounts or records, including computer records, reflecting the making of such Loan or (as the case may be) the receipt of such payment. The outstanding amount of the Loans set forth in any such loan accounts or records, including any computer records, maintained by a Bank with respect to the Loans made by it shall be prima facie evidence of the principal amount thereof owing and unpaid to such Bank, but the failure to record, or any error in so recording, any such amount on any such loan account or record shall not limit or otherwise affect the obligation of the Borrower hereunder or under the other Loan Documents to make payments of principal of and interest on the Loans when due.
(b) The Borrower hereby agrees that if, in the opinion of any Bank, a promissory note or other evidence of debt is required, appropriate or desirable to reflect or enforce the obligations of the Borrower resulting from the Loans made, or to be made, by such Bank, then, upon request of such Bank, the Borrower shall promptly execute and deliver to such Bank, a promissory note (each, a Note and, collectively, the Notes) substantially in the form of Exhibit A attached hereto, payable to such Bank in an amount equal to such Banks Commitment Amount or, if less, the aggregate unpaid principal amount of such Banks Loans, plus interest thereon as provided below, provided, that as a condition to issuing any Note in replacement of a previously issued Note that has been lost, the Borrower may require an indemnity with respect to lost instruments from such Bank, in form and substance reasonably satisfactory to the Borrower.
(c) The Agents records with respect to the Loans, the interest rates applicable thereto, each payment by the Borrower of principal and interest on the Loans and fees, expenses and any other amounts due and payable in connection with this Agreement and the other Loan Documents shall be prima facie evidence of the amount of the Loans and the amount of principal and interest paid by the Borrower in respect of the Loans and as to the other information relating to the Loans and amounts paid and payable by the Borrower hereunder and under the other Loan Documents.
SECTION 2.05. Mandatory Payments; Optional Prepayments.
(a) Each Loan shall mature, and the principal amount thereof shall be due and payable, on the Termination Date. The Borrower promises to pay on the Termination Date, and there shall become absolutely due and payable on the Termination Date, all of the Loans outstanding on such date, together with all accrued and unpaid interest thereon and other amounts outstanding hereunder.
(b) If at any time the aggregate principal amount of Loans outstanding exceeds the Borrowing Base, the Borrower shall within four (4) Domestic Business Days (i) prepay such principal amount of one or more Loans (together with accrued interest thereon and, in the case of LIBOR Loans, the amount, if any, payable pursuant to Section 8.05), (ii) take such other action, or (iii) both, as may be necessary so that the aggregate outstanding principal balance of the Loans no longer exceeds the Borrowing Base.
(c) If at any time the aggregate principal amount of all outstanding Debt of the Borrower exceeds the Maximum Amount, the Borrower shall within four (4) Domestic
Business Days prepay such principal amount of one or more Loans (together with accrued interest thereon and, in the case of LIBOR Loans, the amount, if any, payable pursuant to Section 8.05) and, thereafter, such principal amount of other Debt, as may be necessary so that immediately after such prepayment the aggregate outstanding principal amount of all such Debt does not exceed the Maximum Amount.
(d) If at any time the aggregate principal amount of Loans exceeds the Aggregate Commitment Amount, the Borrower shall immediately prepay such principal amount of one or more Loans (together with accrued interest thereon and, in the case of LIBOR Loans, the amount, if any, payable pursuant to Section 8.05) as may be necessary to eliminate such excess.
(e) The Borrower may, with notice to the Agent no later than 11:30 a.m. (Boston time) on the Domestic Business Day of such payment, prepay any Loans in whole at any time, or from time to time in part in an aggregate principal amount not less than $1,000,000 or in larger integral multiples of $100,000, by paying the principal amount to be prepaid (together with accrued interest thereon to the date of prepayment and, in the case of LIBOR Loans, the amount, if any, payable pursuant to Section 8.05). Each such optional prepayment shall be applied to prepay ratably the Loans of the several Banks included in such borrowing.
(f) If the Borrower prepays all or any portion of the principal amount of any LIBOR Loan on any day other than the last day of the Interest Period relating thereto, such prepayment shall include the amounts, if any, payable pursuant to Section 8.05.
(g) The Borrower shall give the Agent a notice substantially in the form of Exhibit H attached hereto (a Notice of Repayment) on the date of, but prior to, each repayment or prepayment of all or any portion of any Loan, in each case specifying (1) the date of such repayment or prepayment, (2) whether such repayment or prepayment is of a Base Rate Loan or a LIBOR Loan (and, if a LIBOR Loan, the applicable Interest Period), (3) the aggregate principal amount of such prepayment, and (4) the other information required by such Exhibit. Upon receipt of each Notice of Repayment, the Agent shall promptly notify each Bank of the contents thereof and of such Banks ratable share of such prepayment.
(h) Subject to the satisfaction of the conditions set forth in Section 3.02, Loans prepaid prior to the Termination Date may be reborrowed prior to the Termination Date.
SECTION 2.06. Interest Rates.
(a) Subject to Section 2.06(c), each Base Rate Loan shall bear interest on the outstanding principal amount thereof, for the period commencing with the date such Loan is made up to but not including the date such Loan is repaid in full, at a rate per annum equal to the Base Rate as in effect from time to time. Accrued and unpaid interest on each Base Rate Loan shall be payable in arrears on the first day of each calendar month and on the Termination Date.
(b) Subject to Section 2.06(c) and ARTICLE VIII, each LIBOR Loan shall bear interest on the outstanding principal amount thereof, for the period commencing with the date such LIBOR Loan is made or continued through but excluding the last day of the Interest Period applicable thereto, at a rate per annum equal to the sum of the Applicable Rate plus the
applicable Adjusted LIBOR Offered Rate. Interest on each LIBOR Loan shall be payable (i) except as otherwise expressly provided in clause (ii) below, on the last day of the Interest Period in effect with respect thereto, in the event such Interest Period shall exceed three months, on the last day of each three month interval during such Interest Period, and on the Termination Date, or (ii) in the case of LIBOR Loans having a 7 day Interest Period, on the first day of each calendar month and on the Termination Date.
(c) All overdue amounts payable under the Loan Documents (including, without limitation, any overdue principal of the Loans (whether at stated maturity, by acceleration or otherwise), any overdue interest on the Loans and any overdue fees) shall bear interest, payable on demand, for each day from and including the date payment thereof was due to but not including the date of actual payment, at a rate per annum equal to the sum of 2.00% above the Base Rate until such amount shall be paid in full (after as well as before judgment). Notwithstanding anything to the contrary in this Section 2.06, upon either (A) notice by the Agent to the Borrower during the continuance of an Event of Default, or (B) the occurrence of an Event of Default under Section 6.01(g) or (h), the outstanding principal balance of the Loans shall bear interest at a rate per annum equal to the greater of (i) 2.00% above the rate of interest otherwise applicable to such Loans pursuant to this Section 2.06 or (ii) 2.00% above the Base Rate.
(d) The Agent shall determine the interest rate applicable to the Loans hereunder and its determination thereof shall be conclusive and binding for all purposes in the absence of manifest error.
SECTION 2.07. Fees.
(a) During the Revolving Credit Period, the Borrower shall pay to the Agent for the account of each Bank a facility fee at a rate per annum equal to the Applicable Rate multiplied by such Banks Commitment Amount. Such facility fee shall accrue from and including the Effective Date to but excluding the Termination Date. Accrued facility fees payable hereunder shall be payable quarterly in arrears on the last day of each March, June, September and December, commencing on the first such day after the Effective Date, and on the Termination Date.
(b) On the Effective Date and thereafter on a per annum basis, the Borrower shall pay to the Agent, for its own account, an administrative agent fee as may have been agreed upon separately between the Borrower and the Agent.
SECTION 2.08. Termination and Reduction of Commitments. (a) Each Banks Commitment Amount permanently shall reduce to $0 and each Banks Commitment shall terminate on the Termination Date.
(b) Subject to Section 2.05(d) hereof, during the Revolving Credit Period, the Borrower may, upon at least three (3) Domestic Business Days prior written notice to the Agent, (i) terminate the Commitments at any time, or (ii) reduce from time to time the Aggregate Commitment Amount by an aggregate amount of $5,000,000 or integral multiples of $1,000,000 in excess thereof (provided that immediately after giving effect to any such termination and each
such reduction, the aggregate outstanding principal balance of the Loans would not exceed the Aggregate Commitment Amount), whereupon the Commitment Amounts of each of the Banks shall be reduced pro rata in accordance with their Commitment Percentage of the amount specified in such notice or, as the case may be, each Banks Commitment shall be terminated. Promptly after receiving any notice of the Borrower delivered pursuant to this Section, the Agent will notify the Banks of the substance thereof. Upon the effective date of any such reduction or termination, the Borrower shall pay to the Agent for the respective accounts of the Banks the full amount of any facility fee then accrued on the amount of the reduction. No reduction in the Commitment Amounts or termination of the Commitments may be reinstated.
SECTION 2.09. General Provisions as to Payments.
(a) The Borrower shall make each payment of principal and interest on the Loans and of fees hereunder and all other amounts due hereunder not later than (i) in the event that there is only one Bank (which is also the Agent), 3:00 p.m. (Boston time), and (ii) in all other events, 12:00 Noon (Boston time)), on the date when due, in Dollars and in Federal or other funds immediately available, to, except as otherwise expressly provided herein, the Agent at its address referred to in Section 9.01. The Agent shall promptly distribute to each Bank its appropriate share of each such payment received by the Agent for the account of the Banks. Whenever any payment of principal of, or interest on, Base Rate Loans or of fees shall be due on a day which is not a Domestic Business Day, the date for payment thereof shall be extended to the next succeeding Domestic Business Day and interest shall accrue during such extension. If the date for any payment of principal is extended by operation of law or otherwise, interest thereon shall be payable for such extended time.
(b) Unless the Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Banks hereunder that the Borrower will not make such payment in full, the Agent may assume that the Borrower has made such payment in full to the Agent on such date and the Agent may (but it shall not be required to), in reliance upon such assumption, cause to be distributed to each Bank on such due date an amount equal to the amount then due to such Bank. If and to the extent that the Borrower shall not have so made such payment, each Bank shall repay to the Agent forthwith on demand such amount distributed to such Bank together with interest thereon, for each day from the date such amount is distributed to such Bank until the date such Bank repays such amount to the Agent, at the Federal Funds Rate.
(c) All payments by the Borrower hereunder and under any of the other Loan Documents shall be made in Dollars without setoff or counterclaim and free and clear of and without deduction for any taxes, levies, imposts, duties, charges, fees, deductions, withholdings, compulsory loans, restrictions or conditions of any nature now or hereafter imposed or levied by any jurisdiction or any political subdivision thereof or taxing or other authority therein except for (i) any tax on, or changes in the rate of tax on, the overall net income of, or franchise taxes payable by, such Bank imposed by the jurisdiction in which such Banks principal executive office is located or any political subdivision thereof or taxing or other authority therein, (ii) any branch profits taxes, (iii) any taxes imposed as a result of a present or former connection between such Bank and the jurisdiction imposing such tax or any political subdivision thereof or taxing or other authority therein, other than any such connection arising solely from such Bank having
executed, delivered or performed its obligations or received a payment under this Agreement or any other Loan Document, (iv) any taxes on amounts payable to a Bank at the time such Person becomes a party to this Agreement (such non-excluded taxes, levies, imposts, duties, charges, fees, deductions, withholdings, compulsory loans, restrictions or conditions are hereinafter collectively referred to as Taxes) unless the Borrower is compelled by law to make such deduction or withholding. If any obligation to deduct or withhold Taxes is imposed upon the Borrower with respect to any amount payable by it hereunder or under any of the other Loan Documents, the Borrower will pay to the Agent, for the account of the Banks or (as the case may be) the Agent, on the date on which such amount is due and payable hereunder or under such other Loan Document, such additional amount in Dollars as shall be necessary to enable the Banks or the Agent to receive the same net amount which the Banks or the Agent would have received on such due date had no such obligation been imposed upon the Borrower. The Borrower will deliver promptly to the Agent certificates or other valid vouchers for all Taxes deducted from or paid with respect to payments made by the Borrower hereunder or under such other Loan Document.
(d) Notwithstanding anything to the contrary contained in clause (c) of this Section 2.09, the Borrower will not be required to make any additional payment to or for the account of any Bank under clause (c) by reason of (i) a breach by such Bank of any certification or representation set forth in any form furnished to the Borrower under Section 2.11 or (ii) such Banks failure or inability to furnish under Section 2.11 an original or an extension or renewal of any form required under Section 2.11, unless such Bank is exempt from furnishing such form pursuant to Section 2.11.
SECTION 2.10. Computation of Interest and Fees. All interest and fees hereunder shall be computed on the basis of a year of 360 days and paid for the actual number of days elapsed.
SECTION 2.11. Withholding Tax Exemption. Any Foreign Bank that is entitled to an exemption from or reduction of withholding tax under the law of the jurisdiction in which the Borrower is resident for tax purposes, or any treaty to which such jurisdiction is a party, with respect to payments hereunder or under any other Loan Document shall deliver to the Borrower (with a copy to the Agent), at the time or times prescribed by Applicable Law or reasonably requested by the Borrower or the Agent, such properly completed and executed documentation prescribed by Applicable Law as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, each Bank, if requested by the Borrower or the Agent, shall deliver such other documentation prescribed by Applicable Law or reasonably requested by the Borrower or the Agent as will enable the Borrower or the Agent to determine whether or not such Bank is subject to backup withholding or information reporting requirements. Without limiting the generality of the foregoing, in the event that the Borrower is resident for tax purposes in the United States:
(a) each Foreign Bank shall deliver to the Borrower and the Agent (in such number of copies as shall be reasonably requested by the recipient) on or prior to the date on which such Foreign Bank becomes a Bank under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Agent, but only if such Foreign Bank is legally entitled to do so), whichever of the following is applicable:
(i) duly completed copies of Internal Revenue Service Form W-8BEN claiming eligibility for benefits of an income tax treaty to which the United States is a party;
(ii) duly completed copies of Internal Revenue Service Form W-8ECI;
(iii) in the case of a Foreign Bank claiming the benefits of the exemption for portfolio interest under section 881(c) of the Internal Revenue Code, (x) a certificate to the effect that such Foreign Bank is not (A) a bank within the meaning of section 881(c)(3)(A) of the Internal Revenue Code, (B) a 10 percent shareholder of the Borrower within the meaning of section 881(c)(3)(B) of the Internal Revenue Code, or (C) a controlled foreign corporation described in section 881(c)(3)(C) of the Internal Revenue Code and (y) duly completed copies of Internal Revenue Service Form W-8BEN; or
(iv) any other form prescribed by Applicable Law as a basis for claiming exemption from or a reduction in United States Federal withholding tax duly completed together with such supplementary documentation as may be prescribed by Applicable Law to permit the Borrower to determine the withholding or deduction required to be made; and
(b) each Bank that is not a Foreign Bank shall deliver to the Borrower and the Agent (in such number of copies as shall be reasonably requested by the recipient) on or prior to the date on which such Bank becomes a Bank under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Agent, but only if such Bank is legally entitled to do so), duly completed copies of Internal Revenue Service Form W-9 or successor form.
ARTICLE III.
CONDITIONS
SECTION 3.01. Effectiveness. This Agreement shall become effective on the date that each of the following conditions shall have been satisfied (or waived in accordance with Section 9.05 hereof):
(a) receipt by the Agent of counterparts hereof signed by each of the parties hereto;
(b) receipt by the Agent for the account of each Bank, if requested by such Bank, of a duly executed Note dated on or before the Effective Date complying with the provisions of Section 2.04;
(c) receipt by the Agent of (1) the Security Agreement signed by the Borrower, and (2) (i) a perfection certificate from the Borrower in form and substance reasonably satisfactory to the Agent, (ii) copies of the results of current UCC lien searches (or the equivalent in the applicable jurisdictions), such results to be in form and substance reasonably satisfactory to the Agent; (iii) authorizations to file UCC financing statements (or the equivalent in the applicable jurisdictions), with such financing statements to be in form and substance reasonably satisfactory to the Agent, and (iv) such other documents, instruments and/or agreements the Agent may reasonably require to perfect its security interest in the Collateral (as defined in the Security Agreement) in the relevant jurisdictions;
(d) receipt by the Banks of the legal opinions of Willkie Farr & Gallagher LLP, and Richards, Layton & Finger, counsel for the Borrower, covering such matters relating to the transactions contemplated hereby as the Banks may reasonably request;
(e) receipt by the Agent of a certificate manually signed by an officer of the Borrower which is satisfactory to the Agent to the effect set forth in clause (e) and, if the Borrower is submitting a Notice of Borrowing on the Effective Date, clauses (c) and (d), of Section 3.02, such certificate to be dated the Effective Date and to be in form and substance reasonably satisfactory to the Agent;
(f) receipt by the Agent of a manually signed certificate from the Secretary or Assistant Secretary of the Borrower in form and substance reasonably satisfactory to the Agent and dated the Effective Date as to the incumbency of, and bearing manual specimen signatures of, the Authorized Signatories who are authorized to execute and take actions under the Loan Documents for and on behalf of the Borrower, and certifying and attaching copies of (i) all Charter Documents (other than those delivered pursuant to Section 3.01(h)), with all amendments, restatements, supplements or other modifications thereto, (ii) the resolutions of the Borrowers Board of Trustees authorizing the transactions contemplated hereby, (iii) the Prospectus and such material as accurately and completely sets forth all Investment Policies and Restrictions not reflected in the Prospectus, (iv) the investment management agreement between the Borrower and the Investment Adviser as then in effect, along with any other investment management or submanagement agreements to which the Borrower is a party as then in effect, (v) the Custody Agreement and (vi) the Borrowers Annual Report to Shareholders for the fiscal year ended October 31, 2007 and the Borrowers Semi-Annual Report to Shareholders for the two fiscal quarters ended April 30, 2008;
(g) receipt by the Agent of a legal existence and good standing certificate for the Borrower from the Secretary of State of Delaware, dated as of a recent date;
(h) receipt by the Agent of a copy of the declaration of trust of the Borrower, with all amendments, restatements, supplements or other modifications thereto, certified by the Secretary of State of the State of Delaware;
(i) the Agent shall have completed its due diligence review, and the results of any such due diligence review are satisfactory in form and substance to the Agent;
(j) receipt by the Agent of all documents, opinions and instruments it may reasonably request prior to the execution of this Agreement relating to compliance with applicable rules and regulations promulgated by the Federal Reserve Board and other governmental and regulatory authorities, the existence of the Borrower, the authority for and the validity and enforceability of this Agreement and the Notes, if any, and any other matters relevant hereto, all in form and substance reasonably satisfactory to the Agent;
(k) receipt by the Agent of evidence satisfactory to it that all commitments in favor of the Borrower under, all of the principal, interest, fees and other sums owing by the Borrower under, and all Liens securing the obligations of the Borrower in connection with, the Second Amended and Restated Credit Agreement, dated as of April 12, 2002 (as from time to
time amended) among the Borrower, CHARTA, LLC, Citibank, N.A. and Citicorp North America, Inc., as agent, shall have been terminated and satisfied in full, as the case may be; and
(l) receipt by the Agent of payment of all (i) reasonable out-of-pocket expenses (including reasonable fees and disbursements of special counsel for the Agent) then payable hereunder, and (ii) fees then payable hereunder or under a separate fee letter, if any;
provided that this Agreement shall not become effective or be binding on any party hereto unless all of the foregoing conditions are satisfied not later than December 31, 2008. The Agent shall promptly notify the Borrower and the Banks of the Effective Date, and such notice shall be conclusive and binding on all parties hereto.
SECTION 3.02. All Borrowings. The obligation of each Bank to make a Loan on the occasion of any borrowing is subject to the satisfaction of the conditions precedent set forth in Section 3.01 (or such conditions being waived in accordance with Section 9.05) and the satisfaction of the following conditions:
(a) receipt by the Agent of a Notice of Borrowing as required by Section 2.02(a)(X), along with all documents and information it may reasonably request to establish compliance with applicable rules and regulations promulgated by the Federal Reserve Board, and receipt by such Bank of all such documents and instruments from the Agent;
(b) receipt by the Agent of (i) a Borrowing Base Report as required by Section 2.02(a)(Y) and (ii) a Statutory Coverage Ratio Certificate as required by Section 2.02(a)(Z);
(c) the fact that, immediately after such borrowing, the aggregate outstanding principal amount of the Loans (i) will not exceed the lesser of (A) the Borrowing Base and (B) the Aggregate Commitment Amount as in effect on such date; and (ii) will not cause the aggregate amount of the Borrowers outstanding Debt to exceed the Maximum Amount;
(d) the fact that, immediately before and after such borrowing, no Default shall have occurred and be continuing;
(e) the fact that the representations and warranties of the Borrower contained in this Agreement and the other Loan Documents shall be true on and as of the date of such borrowing and with the same force and effect as if made on and as of such date (or, if any such representation or warranty is expressly stated to have been made as of a specific date, as of such specific date); and
(f) with respect to that particular Bank only, no change shall have occurred after the date hereof in any law or regulation thereunder or interpretation thereof (other than a Failure) that in the reasonable opinion of that Bank would make it illegal for that Bank to make such Loan.
Each borrowing hereunder shall be deemed to be a representation and warranty by the Borrower on the date of such borrowing as to the facts specified in clauses (c), (d) and (e) of this Section.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants that:
SECTION 4.01. Existence and Power; Investment Company.
(a) The Borrower is a statutory trust under the laws of the State of Delaware. The Borrower is duly organized, validly existing and in good standing under the laws of the State of Delaware and has all statutory trust powers and all authorizations and approvals required to carry on its business as now conducted. The Borrower is duly qualified to do business and is in good standing in each jurisdiction in which the nature of its business, assets, and properties, including without limitation, the performance of the Borrowers Obligations, requires such qualification, except where the failure to do so is not reasonably likely to result in a Material Adverse Effect.
(b) The Borrower is a closed-end management investment company registered as such under the Investment Company Act, and the outstanding shares of each class of its stock (i) have been legally issued and are fully paid and non-assessable, (ii) have been duly registered under the Securities Act to the extent required, and (iii) have been sold only in states or other jurisdictions in which all filings required to be made under applicable state securities laws have been made.
SECTION 4.02. Authorization; Execution and Delivery, Etc. The execution and delivery by the Borrower of, and the performance by the Borrower of its obligations under, this Agreement, each of the other Loan Documents to which it is a party, and the other instruments, certificates and agreements contemplated hereby and thereby, are within its statutory trust powers, and have been duly authorized by all requisite action by the Borrower. This Agreement and each of the other Loan Documents to which the Borrower is a party, and the other instruments, certificates and agreements contemplated hereby and thereby, have been duly executed and delivered by the Borrower, and constitute the legal, valid and binding obligations of the Borrower enforceable against the Borrower in accordance with their respective terms, except as enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or similar laws affecting the enforcement of creditors rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law).
SECTION 4.03. Noncontravention. Neither the execution and delivery by the Borrower of this Agreement, any other Loan Document to which it is a party, or any instrument, certificate or agreement referred to herein or therein, or contemplated hereby or thereby, nor the consummation of the transactions herein or therein contemplated, nor compliance with the terms, conditions and provisions hereof or thereof by the Borrower will (a) conflict with, or result in a breach or violation of, or constitute a default under any of the Charter Documents, (b) conflict with or contravene (i) any Applicable Law, (ii) any contractual restriction binding on or affecting the Borrower or any of its assets, or (iii) any order, writ, judgment, award, injunction or decree binding on or affecting the Borrower or any of its assets, (c) result in a breach or violation of, or constitute a default under, or permit the acceleration of any obligation or liability in, or but for any requirement for the giving of notice or the passage of time (or both) that would constitute
such a conflict with, breach or violation of, default under, or permit any such acceleration in, any contractual obligation or any agreement or document to which the Borrower is a party or by which it or any of its properties is bound (or to which any such obligation, agreement or document relates), or (d) result in any Adverse Claim upon any asset of the Borrower.
SECTION 4.04. Governmental Authorizations; Private Authorization. Other than the filing of the financing statement in the form attached to the Security Agreement in the office indicated on such financing statement, the Borrower has obtained all necessary Governmental Authorizations and Private Authorizations, and made all Governmental Filings necessary for the execution and delivery by the Borrower of, and the performance by the Borrower of its obligations under, this Agreement and each of the other Loan Documents to which it is a party and the agreements, certificates and instruments contemplated hereby or thereby, and no Governmental Authorization, Private Authorization or Governmental Filing which has not been obtained or made, is required to be obtained or made by the Borrower in connection with the execution and delivery by the Borrower of, or the performance of its obligations under, this Agreement or any of the other Loan Documents.
SECTION 4.05. Regulations T, U and X. The execution, delivery and performance by the Borrower of this Agreement, the Notes and the other Loan Documents to which it is a party and the transactions contemplated hereunder and thereunder will not (assuming all Federal Reserve Forms referred to in Article III shall have been executed and delivered by the Borrower and the appropriate Bank for retention in the files of such Bank) violate or be inconsistent with any provision of Regulation T, Regulation U or Regulation X.
SECTION 4.06. Non-Affiliation with Banks. So far as appears from the records of the Borrower, neither any Bank nor any Affiliate of any Bank known to the Borrower is an Affiliate of the Borrower, and none of the Borrower or any Affiliate of the Borrower is an Affiliate of any Bank or any Affiliate thereof known to the Borrower.
SECTION 4.07. Subsidiaries. The Borrower has no Subsidiaries.
SECTION 4.08. Financial Information.
(a) The statement of assets and liabilities of the Borrower as of October 31, 2007, and the related Statements of Operations and Changes in Net Assets for the fiscal year ended on such date, reported on by PricewaterhouseCoopers LLP and set forth in the Annual Report for the fiscal year ended on such date, together with the notes and schedules thereto, and each financial statement delivered by the Borrower to the Banks in accordance with Section 5.01, and the Borrowers Semi-Annual Report to Shareholders for the two fiscal quarters ended April 30, 2008, in each case present and will present fairly, in all material respects, in conformity with Generally Accepted Accounting Principles, the financial position of the Borrower as of such date.
(b) Except as set forth on Schedule 3, since October 31, 2007, there has been no material adverse change in the business, financial position, or results of operations of the Borrower.
(c) Each of the financial statements of the Borrower (whether audited or unaudited) delivered to the Banks under the terms of this Agreement fairly presents all material contingent liabilities in accordance with Generally Accepted Accounting Principles.
SECTION 4.09. Litigation. There is no action, suit, proceeding or investigation of any kind pending against, or to the knowledge of the Borrower, threatened against or affecting, the Borrower before any court or arbitrator or any Authority which (a) would reasonably be expected to have a Material Adverse Effect, (b) calls into question the validity or enforceability of, or otherwise seek to invalidate, any Loan Document, or (c) might, individually or in the aggregate, materially adversely affect any Loan Document.
SECTION 4.10. ERISA.
(a) The Borrower is not a member of an ERISA Group and has no liability in respect of any Benefit Arrangement, Plan or Multiemployer Plan subject to ERISA.
(b) No Loan will constitute a prohibited transaction within the meaning of Section 406 of ERISA or Section 4975 of the Internal Revenue Code for which an exemption is not available.
SECTION 4.11. Taxes. The Borrower has elected to be treated and qualifies as a regulated investment company within the meaning of the Internal Revenue Code. The Borrower has timely filed all material United States Federal income tax returns and all other tax returns which are required to be filed by it, if any, and has paid all material taxes due pursuant to such returns, if any, or pursuant to any assessment received by the Borrower, except for any taxes or assessments (i) which are being contested in good faith by appropriate proceedings, with respect to which adequate reserves have been established in accordance with Generally Accepted Accounting Principles consistently applied and (ii) the non-payment of which could not have a Material Adverse Effect, and, in each case, the charges, accruals and reserves on the books of the Borrower in respect of taxes or other governmental charges, if any, are, in the opinion of the Borrower, adequate.
SECTION 4.12. Compliance.
(a) The Borrower is in compliance with the Investment Company Act and the Securities Act except where (i) noncompliance therewith would not reasonably be expected to have a Material Adverse Effect, (ii) the necessity of compliance therewith is being contested in good faith by appropriate proceedings, or (iii) exemptive relief or no-action relief has been obtained therefrom and remains in effect. The Borrower is in compliance with all other Applicable Laws, all applicable ordinances, decrees, requirements, orders and judgments of, and all of the terms of any applicable licenses and permits issued by, any Authority except where the necessity of compliance therewith is being contested in good faith by appropriate proceedings or exemptive relief has been obtained therefrom and remains in effect or where non-compliance therewith would not reasonably be expected to have a Material Adverse Effect. The Borrower is in compliance with all agreements and instruments to which it is a party or may be subject or to which any of its properties may be bound, in each case where the non-compliance therewith
would not reasonably be expected to have a Material Adverse Effect. The Borrower is in compliance in all material respects with all of its Investment Policies and Restrictions.
(b) No Default has occurred and is continuing.
(c) The Borrower is not subject to any Applicable Law (other than the Investment Company Act) which limits its ability to incur indebtedness. The Borrower has not entered into any agreement with any Authority limiting its ability to incur indebtedness.
SECTION 4.13. Fiscal Year. The Borrower has a fiscal year which is twelve calendar months and, as of the Effective Date, ends on October 31 of each year.
SECTION 4.14. Full Disclosure. All information heretofore furnished by the Borrower to the Agent and the Banks for purposes of or in connection with this Agreement or any of the other Loan Documents or any transaction contemplated hereby or thereby is, and all such information hereafter furnished by the Borrower to the Agent or the Banks will be, taken as a whole, true and accurate in all material respects on the date as of which such information is stated or certified, and no such information contains, or will (taken as a whole) contain any material misrepresentation or any omission to state therein matters necessary to make the statements made therein not misleading in any material respect.
SECTION 4.15. Offering Documents. The information set forth in the Prospectus and each report to stockholders of the Borrower, was, on the date thereof, true, accurate and complete in all material respects and does not contain any untrue statement of material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in any material respect.
SECTION 4.16. Foreign Assets, Control Regulations, Etc. None of the requesting or borrowing of the Loans or the use of the proceeds of any thereof will violate the Trading With the Enemy Act (50 U.S.C. § 1 et seq., as amended) (the Trading With the Enemy Act), any of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) (the Foreign Assets Control Regulations) or any enabling legislation or executive order relating thereto (which for the avoidance of doubt shall include, but shall not be limited to (a) Executive Order 13224 of September 21, 2001 Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)) (the Executive Order) and (b) the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Public Law 107-56)). Furthermore, the Borrower (i) is not and will not become a blocked person as described in the Executive Order, the Trading With the Enemy Act or the Foreign Assets Control Regulations and (ii) does not engage and will not engage in any dealings or transactions, or be otherwise associated, with any Person that it knows to be (or which it reasonably suspects is) a blocked person.
SECTION 4.17. Title to Assets. The Borrower has good and, subject to any Lien permitted under Section 5.08 hereof, marketable title to, or a valid leasehold in, all its assets and other property, except where failure to have such title would not reasonably be expected to have a Material Adverse Effect.
ARTICLE V.
COVENANTS
The Borrower agrees that, so long as any Bank has any Commitment hereunder or any amount payable under the Loan Documents remains unpaid:
SECTION 5.01. Information. The Borrower will deliver to the Agent and each Bank:
(a) as soon as available and in any event within 90 days after the end of each fiscal year of the Borrower, a statement of assets and liabilities of the Borrower, including the portfolio of investments, as of the end of such fiscal year, and the related statements of operations and changes in net assets of the Borrower for such fiscal year, together with an audit report thereon issued by PricewaterhouseCoopers LLP or other independent public accountants of nationally recognized standing;
(b) as soon as available and in any event within 70 days after the end of the first semi-annual period of each fiscal year of the Borrower, a statement of assets and liabilities of the Borrower, including the portfolio of investments, as of the end of such period, and the related statements of operations and changes in net assets of the Borrower for such period, all in reasonable detail, prepared in accordance with Generally Accepted Accounting Principles, consistently applied, and certified (subject to the absence of footnotes and normal year-end adjustments) as to fairness of presentation, Generally Accepted Accounting Principles and consistency by an Authorized Signatory of the Borrower or accompanied by an audit report thereon issued by PricewaterhouseCoopers LLP or other independent public accountants of nationally recognized standing;
(c) if, as of the close of business on the last Domestic Business Day of each calendar month (each a Calculation Date) there shall be any Loans outstanding, then as soon as available and in any event not later the third Domestic Business Day thereafter, a Borrowing Base Report and a Valuation Report, in each case as at the close of business on such Calculation Date;
(d) as soon as available, and in any event no later than the second Domestic Business Day of each calendar week, a Statutory Coverage Ratio Certificate, as of the last Domestic Business Day of the immediately preceding calendar week;
(e) simultaneously with the delivery of each set of financial statements referred to in clauses (a) and (b) above and, without duplication, each Borrowing Base Report and each Valuation Report delivered pursuant to clause (c) above, a certificate substantially in the form of Exhibit G attached hereto of an Authorized Signatory reasonably acceptable to the Banks stating whether any Default exists on the date of such certificate and, if any Default then exists, setting forth the details thereof and the action which the Borrower is taking or proposes to take with respect thereto;
(f) promptly and in any event within (i) one (1) Domestic Business Day after any officer of the Borrower obtains knowledge of any Default, if such Default is then continuing, a certificate of an Authorized Signatory setting forth the details thereof, and (ii) three (3)
Domestic Business Day after such officer obtains knowledge of such Default, a certificate of an Authorized Signatory either (x) advising that such Default no longer exists, or (y) setting forth the action which the Borrower is taking or proposes to take with respect thereto;
(g) promptly after the filing thereof with the SEC or the mailing thereof to stockholders of the Borrower, copies of all reports to shareholders, amendments and supplements to the Borrowers registration statement, the Prospectus, proxy statements, financial statements and other materials of a financial or otherwise material nature;
(h) promptly upon any officer of the Borrower becoming aware of any action, suit or proceeding of the type described in Section 4.09, notice and a description thereof and copies of any filed complaint relating thereto; and
(i) from time to time such additional information regarding the financial position or business of the Borrower, including without limitation, listing reports and Valuation Reports, as the Agent, at the request of any Bank, may reasonably request.
SECTION 5.02. Payment of Obligations. The Borrower will duly and punctually pay or cause to be paid the principal and interest on the Loans and all other amounts provided for in this Agreement and the other Loan Documents. The Borrower will pay and discharge, at or before maturity, all of the Borrowers lawful obligations and liabilities that, if unpaid, would reasonably be expected to have a Material Adverse Effect, including, without limitation, tax liabilities, except where the same may be contested in good faith by appropriate proceedings, and will maintain, in accordance with Generally Accepted Accounting Principles, appropriate reserves for the accrual of any of the same.
SECTION 5.03. Maintenance of Insurance. The Borrower will maintain with financially sound and reputable insurance companies, policies with respect to its assets and property and business of the Borrower against at least such risks and contingencies (and with no greater risk retentions) and in at least such amounts as are required by the Investment Company Act and, in addition, as are customary in the case of registered closed-end investment companies; and will furnish to the Banks, upon request, information presented in reasonable detail as to the insurance so carried.
SECTION 5.04. Conduct of Business and Maintenance of Existence.
(a) The Borrower will continue to engage in business of the same general type as now conducted by it as described in its Prospectus and as provided pursuant to the Investment Policies and Restrictions as in effect on the Effective Date.
(b) The Borrower will preserve, renew and keep in full force and effect its existence as a Delaware statutory trust and its rights, privileges and franchises necessary in the normal conduct of its business. The Borrower will maintain in full force and effect its registration as a closed-end management company under the Investment Company Act.
(c) The Borrower will not amend, restate, supplement or otherwise modify any of the Charter Documents or the Pricing Procedures if such amendment, termination, supplement or modification would reasonably be expected to have a Material Adverse Effect.
The Borrower will provide copies to the Agent of all amendments, restatements, supplements, and other modifications of the Pricing Procedures or any of the Charter Documents, in each case prior to the effective date of any such amendment, restatement, supplement, or other modification or, if not practicable, as soon as practicable (and in any event within two (2) weeks) thereafter. The Borrower will comply in all material respects with the Pricing Procedures and the Charter Documents.
(d) The Borrower will at all times place and maintain the Collateral (as defined in the Security Agreement) in the custody of the Custodian.
SECTION 5.05. Compliance with Laws. The Borrower will comply in all respects with the Investment Company Act, all other Applicable Laws and the requirements of any Authority with respect thereto except where (i) non-compliance therewith would not reasonably be expected to have a Material Adverse Effect, (ii) the necessity of compliance therewith is contested in good faith by appropriate proceedings, or (iii) exemptive relief or no-action relief has been obtained therefrom and remains in effect. The Borrower will file all material federal and other material tax returns, reports and declarations required by all relevant jurisdictions on or before the due dates for such returns, reports and declarations and will pay all taxes the non-payment of which could have a Material Adverse Effect and other governmental assessments and charges as and when they become due (except those that are being contested in good faith by the Borrower and as to which the Borrower has established appropriate reserves on its books and records).
SECTION 5.06. Inspection of Property, Books and Records. The Borrower will, or will cause the Custodian (on the Borrowers behalf) to, keep proper books of account and record in which full, true and correct entries shall be made of all dealings and transactions in relation to its business and activities in accordance with Applicable Law, including the Investment Company Act, and will permit representatives of any Bank, at such Banks expense, to visit and inspect any of its offices, to examine and make abstracts from any of its books and records and to discuss its affairs, finances and accounts with its officers, employees and independent public accountants, all at such reasonable times and as often as may reasonably be desired.
SECTION 5.07. Indebtedness. The Borrower will not create, assume or suffer to exist any Indebtedness other than:
(a) Debt arising under this Agreement, the Notes and the other Loan Documents;
(b) Debt in favor of the Custodian incurred for purposes of clearing and settling purchases and sales of securities or consisting of overnight extensions of credit from the Custodian in the ordinary course of business;
(c) Debt in respect of judgments or awards that have been in force for less than the applicable period for taking an appeal so long as such judgments and awards do not constitute an Event of Default and so long as execution is not levied thereunder and in respect of which the Borrower (i) shall at the time in good faith be prosecuting an appeal or proceedings for
review and in respect of which a stay of execution shall have been obtained pending such appeal or review or (ii) shall have obtained an unsecured performance bond, and Debt in respect of such unsecured performance bond; and
(d) Debt (other than Debt for borrowed money) arising in connection with portfolio investments and investment techniques arising in the ordinary course of the Borrowers business to the extent that such Debt is permissible under the Investment Company Act and consistent with the Borrowers Investment Policies and Restrictions;
provided that in no event shall the Borrower (i) enter into or utilize Financial Contracts other than in the ordinary course of business for hedging or investment purposes in accordance with its Investment Policies and Restrictions, or (ii) borrow money or create leverage under any arrangement other than (A) from the Banks hereunder, or (B) from the Custodian to the extent provided in clause (d) hereof.
SECTION 5.08. Liens. The Borrower will not create, assume, incur or suffer to exist any Lien on any of its assets (including the income and profits thereof) or segregate any of its assets (including the income and profits thereon) to cover any of its obligations, in each case whether such asset is now owned or hereafter acquired, except (a) Liens of the Agent, on behalf of itself and the Banks, created by or pursuant to any of the Security Documents or any of the other Loan Documents; (b) Liens (other than non-possessory Liens which pursuant to Applicable Law are, or may be, entitled to take priority (in whole or in part) over prior, perfected, liens and security interests) for judgments or decrees, taxes, assessments or other governmental charges or levies the payment of which is not at the time required or is being contested in good faith, (c) Liens in favor of the Custodian granted pursuant to the Custody Agreement to secure obligations arising thereunder, and (d) Liens created in connection with the Borrowers portfolio investments, securities lending and investment techniques (and not for the primary purpose of borrowing money) to the extent permitted by the provisions of the Prospectus and the Investment Policies and Restrictions, provided that (i) the aggregate value of all of the Borrowers assets subject to any Lien permitted by this clause (d) does not at any time exceed 33-1/3% of the Total Assets, and (ii) the aggregate value of all of the Borrowers assets (other than assets of the Borrower subject to any Lien securing the Borrowers obligations under its securities lending program) subject to any Lien permitted by this clause (d) does not at any time exceed 10% of the Total Assets.
SECTION 5.09. Consolidations, Mergers and Sales of Assets. The Borrower will not consolidate or merge with or into any other Person or reorganize its assets into a non-series corporation or entity, nor will the Borrower sell, lease or otherwise transfer, directly or indirectly, all or any substantial part of its assets to any other Person (in each case, whether in one transaction or a series of related transactions), except that the Borrower may sell its assets in the ordinary course of business as described in its Prospectus. The Borrower will not invest all of its investable assets in any other management investment company or otherwise employ a master-feeder or fund of funds investment structure or any other multiple investment company structure.
SECTION 5.10. Use of Proceeds. The Borrower shall use the proceeds of each Loan for its general business purposes, including, without limitation the purchase of investment
securities and temporary or emergency purposes, provided that in no event shall the proceeds of any Loan be used for purposes which would violate any provision of any applicable statute, rule, regulation, order or restriction applicable to the Borrower or Regulation U.
SECTION 5.11. Compliance with Investment Policies and Restrictions. The Borrower will at all times comply with the Investment Policies and Restrictions, and will not make any investment, loan, advance or extension of credit inconsistent with the Investment Policies and Restrictions.
SECTION 5.12. Non-Affiliation with Banks. The Borrower will not at any time become an Affiliate of any Bank or any Affiliate thereof known to the Borrower, and the Borrower will use its best efforts to ensure that none of its Affiliates is or becomes an Affiliate of any Bank or any Affiliate thereof known to the Borrower to be such.
SECTION 5.13. Regulated Investment Company. The Borrower will maintain its status as a regulated investment company under the Internal Revenue Code at all times and will make sufficient distributions to qualify to be taxed as a regulated investment company pursuant to subchapter M of the Internal Revenue Code.
SECTION 5.14. No Subsidiary. The Borrower will not have at any time any Subsidiary.
SECTION 5.15. ERISA. The Borrower will not become a member of any ERISA Group and will not have any liability in respect of any Benefit Arrangement, Plan or Multiemployer Plan subject to ERISA.
SECTION 5.16. Fiscal Year. The Borrower will not change its fiscal year from that set forth in Section 4.13 hereof without prior written notice to the Banks.
SECTION 5.17. Regulation U. The Borrower will not permit more than 25% of the value (as determined by any reasonable method) of the Borrowers assets to be represented by margin stock (as defined under Regulation U) at any time.
SECTION 5.18. Custodian. The Borrower will not change the Custodian without the prior written consent of the Required Banks.
SECTION 5.19. Asset Coverage. The Borrower will not at any time permit the aggregate amount of Total Liabilities that are Senior Securities Representing Indebtedness to exceed 33-1/3% of Adjusted Net Assets.
SECTION 5.20. Maximum Amount. The Borrower will not at any time permit the aggregate amount of its outstanding Debt to exceed the Maximum Amount.
SECTION 5.21. Asset Liquidation. If at any time either (a) the aggregate principal amount of Loans outstanding exceeds the Borrowing Base, or (b) the aggregate principal amount of all outstanding Debt of the Borrower exceeds the Maximum Amount, the Borrower shall within one (1) Domestic Business Day (the Trade Date) execute selling trades on such of its portfolio assets as shall yield, on or before the third Domestic Business Day following such
Trade Date (the Settlement Date), cash settlement proceeds of such trades in an amount not less than the aggregate amount of the prepayment of the Loans required to be made by the Borrower on such Settlement Date pursuant to Sections 2.05(b) and 2.05(c).
ARTICLE VI.
DEFAULTS
SECTION 6.01. Events of Default. If one or more of the following events (Events of Default) shall have occurred and be continuing:
(a) the Borrower shall fail to pay when due (whether at maturity or any accelerated date of maturity or any other date fixed for payment or prepayment) (i) any interest on any Loan or any fees or any other amount payable hereunder or under any of the other Loan Documents within five (5) days of the due date therefor, or (ii) any principal of any Loan; or
(b) the Borrower shall fail to observe or perform any covenant contained in Sections 2.05(b), 2.05(c), 5.01(d), 5.04(b), 5.05, 5.07, 5.08, 5.09, 5.10, 5.13, 5.14, 5.17, 5.18, or 5.21; or
(c) the Borrower shall fail to observe or perform any covenant or agreement contained in (i) Section 5.01(a), (b) or (e) and such failure shall continue unremedied for a period of ten (10) Domestic Business Days, (ii) Section 5.01(c), Section 5.19 or Section 5.20 and such failure shall continue unremedied for a period of four (4) Domestic Business Days, or (iii) this Agreement or any Loan Document (other than those covered by clauses (a), (b), (c)(i) or (c)(ii) above) and such failure shall continue unremedied for a period of fifteen (15) Domestic Business Days; or
(d) any representation, warranty, certification or statement made (or deemed made) by the Borrower in this Agreement or any other Loan Document or in any certificate, financial statement or other document delivered pursuant to this Agreement or any other Loan Document shall prove to have been incorrect in any material respect when made (or deemed made); or
(e) the Borrower shall fail to make any payment in respect of any Debt in an aggregate principal amount in excess of the Threshold Amount when due or within any applicable grace period; or
(f) any default or other similar event shall occur with respect to Debt of the Borrower in excess of the Threshold Amount which (i) results in the acceleration of the maturity of such Debt, (ii) enables the holder of such Debt or any Person acting on such holders behalf to accelerate the maturity thereof, or (iii) in the case of Debt arising under a Financial Contract, enables the other party thereto to terminate such Financial Contract;
(g) the Borrower shall seek the appointment of a trustee, receiver, liquidator, custodian or other similar official for it or any substantial part of its property, or shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or any of its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator or other similar
official for it or any substantial part of its property, or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or the Borrower shall make a general assignment for the benefit of creditors, or shall fail generally (or admit in writing its inability) to pay its debts as they become due, or shall take any action to authorize any of the foregoing; or
(h) an involuntary case or other proceeding shall be commenced against the Borrower seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of sixty (60) days; or an order for relief shall be entered against the Borrower under the federal bankruptcy laws as now or hereafter in effect; or
(i) a judgment or order for the payment of money in excess of the Threshold Amount shall be rendered against the Borrower and such judgment or order shall continue unsatisfied or unstayed for a period of thirty (30) days; or
(j) any investment advisory agreement or management agreement which is in effect on the Effective Date for the Borrower shall terminate, or the Investment Adviser shall cease to be the investment adviser to the Borrower unless the successor thereto is an Affiliate of Credit Suisse Asset Management, LLC; or
(k) the investment adviser of the Borrower shall (i) consolidate with or merge into any other Person, unless it is the survivor or such other Person is an Affiliate of Credit Suisse Asset Management, LLC, or (ii) sell or otherwise dispose of all or substantially all of its assets; or
(l) the Agent for any reason (other than its own gross negligence or willful misconduct) shall cease to have a valid and perfected first priority security interest in the Collateral (as defined in the Security Agreement), free and clear of all Adverse Claims; or
(m) the Borrowers shares of common stock shall not be listed on the American Stock Exchange or any other major domestic securities exchange, or shall be suspended from trading on any such exchange for more than three (3) consecutive days upon which trading in such shares generally occurs on such exchange; or
(n) any of the Investment Policies and Restrictions that may not be changed without the approval of stockholders of the Borrower are changed;
then, and in every such event, the Agent shall (i) if requested by Banks constituting Required Banks by notice to the Borrower terminate the Commitments, and they shall thereupon terminate, and (ii) if requested by Banks constituting Required Banks by notice to the Borrower declare the Loans (together with accrued interest thereon) to be, and the Loans (together with accrued interest thereon and all other sums owing under the Loan Documents) shall thereupon become, immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower; provided that in the case of any of the Events of Default specified in clause (g) or (h) above with respect to the Borrower, automatically
without any notice to the Borrower or any other act by the Agent or any Bank, the Commitments shall thereupon terminate and the Loans (together with accrued interest thereon and all other sums owing under the Loan Documents) shall become immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower.
SECTION 6.02. Remedies. No remedy herein conferred upon the Banks is intended to be exclusive of any other remedy and each and every remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute or any other provision of law.
ARTICLE VII.
THE AGENT
SECTION 7.01. Appointment and Authorization. Each Bank irrevocably appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under this Agreement, the Notes and the other Loan Documents as are delegated to the Agent by the terms hereof or thereof, together with all such powers as are reasonably incidental thereto. Any reference to an agent for the Banks in, or in connection with, any Loan Document shall be a reference to the Agent.
SECTION 7.02. Action by Agent. The duties and responsibilities of the Agent hereunder are only those expressly set forth herein. The relationship between the Agent and the Banks is and shall be that of agent and principal only, and nothing contained in this Agreement or any of the other Loan Documents shall be construed to constitute the Agent as a trustee for any Bank. Without limiting the generality of the foregoing, the Agent shall not be required to take any action with respect to any Default except as expressly provided in Article VI. The Agent shall be deemed not to have knowledge of any Default unless and until notice describing such Default is given to the Agent by the Borrower or a Bank.
SECTION 7.03. Consultation with Experts. The Agent may consult with legal counsel, independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken by it in good faith in accordance with the advice of such counsel, accountants or experts. The Agent may perform any and all of its duties and exercise its rights and powers hereunder or under any other Loan Document by or through any one or more sub-agents appointed by the Agent. The Agent and any such sub-agent may perform any and all of its duties and exercise its rights and powers by or through their respective Covered Persons. The exculpatory provisions of this Article shall apply to any such sub- agent and to the Covered Persons of the Agent and any such sub-agent, and shall apply to their respective activities in connection with the credit facilities provided for herein as well as activities as Agent.
SECTION 7.04. Liability of Agent. Neither the Agent nor any of its directors, officers, agents or employees shall be liable to a Bank for any action taken or not taken by it in connection herewith (i) with the consent or at the request of the Required Banks or (ii) in the absence of its own gross negligence or willful misconduct. Neither the Agent nor any of its directors, officers, agents or employees shall be responsible for or have any duty to ascertain,
inquire into or verify (a) any statement, warranty or representation made in connection with this Agreement or any borrowing hereunder; (b) the performance or observance of any of the covenants or agreements of the Borrower; (c) the satisfaction of any condition specified in Article III, except receipt of items required to be delivered to it; or (d) the validity, enforceability, effectiveness or genuineness of this Agreement, the Notes, the other Loan Documents or any other instrument or writing furnished in connection herewith or therewith. The Agent shall not incur any liability by acting in reliance upon any notice, consent, certificate, statement or other writing (including any electronic message, Internet or intranet website posting or other distribution) believed by it to be genuine or to be signed by the proper party or parties. In determining compliance with any condition hereunder to the making of a Loan that by its terms must be fulfilled to the satisfaction of the Banks, the Agent may presume that such condition is satisfactory to the Banks unless the Agent shall have received notice to the contrary from a Bank within a reasonable period of time prior to the making of such Loan.
SECTION 7.05. Indemnification. Each Bank shall, ratably in accordance with its Commitment Percentage (or, if the Commitments shall have expired or terminated, its Commitment Percentage as in effect immediately prior to such expiration or termination), indemnify the Agent and its affiliates, officers, directors and employees (to the extent not reimbursed by the Borrower) for all claims, liabilities, losses, damages, costs, penalties, actions, judgments and expenses and disbursements of any kind or nature whatsoever, including, without limitation, the reasonable fees and disbursements of counsel (collectively, the Liabilities) that such Person may suffer or incur in connection with this Agreement or any of the other Loan Documents or any action taken or omitted by such Person hereunder or thereunder, provided that no Bank shall have any obligation to indemnify any such Person against any Liabilities that are determined in a final, nonappealable judgment by a court of competent jurisdiction to have resulted from such Persons gross negligence or willful misconduct, provided, however , that no action taken or not taken in accordance with the directions of the Required Banks shall be deemed to constitute gross negligence or willful misconduct for purposes of this Section.
SECTION 7.06. Credit Decision. Each Bank acknowledges that it has, independently and without reliance upon the Agent or any other Bank, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Bank also acknowledges that it will, independently and without reliance upon the Agent or any other Bank, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking any action under this Agreement.
SECTION 7.07. Successor Agent. The Agent may resign at any time by giving written notice thereof to the Banks and the Borrower. Upon any resignation of the Agent, the Required Banks shall have the right to appoint a successor Agent with, if no Event of Default has occurred and is continuing, the prior written consent of the Borrower, which consent shall not be unreasonably withheld or delayed. If no successor Agent shall have been so appointed by the Required Banks within 30 days after the retiring Agent gives notice of resignation, then the retiring Agent may, on behalf of the Banks, appoint a successor Agent, which shall be a commercial bank organized or licensed under the laws of the United States of America or of any State thereof and having a combined capital and surplus of at least $50,000,000. Upon the acceptance of its appointment as Agent hereunder by a successor Agent, such successor Agent
shall thereupon succeed to and become vested with all the rights and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder. After any retiring Agents resignation hereunder as Agent, the provisions of this Article shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent.
SECTION 7.08. Agent as Bank. In its individual capacity, State Street and any other Bank that serves as a successor Agent hereunder shall have the same obligations and the same rights, powers and privileges in respect of its Commitment and the Loans made by it as it would have were it not also the Agent.
SECTION 7.09. Distribution by Agent. If in the opinion of the Agent the distribution of any amount received by it in such capacity hereunder, under the Notes or under any of the other Loan Documents might involve it in liability, it may refrain from making such distribution until its right to make such distribution shall have been adjudicated by a court of competent jurisdiction. If a court of competent jurisdiction shall adjudge that any amount received and distributed by the Agent is to be repaid, each Person to whom any such distribution shall have been made shall either repay to the Agent its proportionate share of the amount so adjudged to be repaid or shall pay over the same in such manner and to such Persons as shall be determined by such court.
SECTION 7.10. Delinquent Banks.
(a) Notwithstanding anything to the contrary contained in this Agreement or any of the other Loan Documents, any Bank that (i) willfully does not or (ii) does not as a result of a Failure (as defined below) (A) make available to the Agent its pro rata share of any Loan, or (B) comply with the provisions of Section 9.04 with respect to making dispositions and arrangements with the other Banks, where such Banks share of any payment received, whether by setoff or otherwise, is in excess of its pro rata share of such payments due and payable to all of the Banks, in each case as, when and to the full extent required by the provisions of this Agreement, shall be deemed delinquent (a Delinquent Bank ) and shall be deemed a Delinquent Bank until such time as such delinquency is satisfied. A Delinquent Bank shall be deemed to have assigned any and all payments due to it from the Borrower, whether on account of outstanding Loans, interest, fees or otherwise, to the remaining nondelinquent Banks for application to, and reduction of, their respective pro rata shares of all outstanding Loans, interest, fees and other amounts. The Delinquent Bank hereby authorizes the Agent to distribute such payments to the nondelinquent Banks in proportion to their respective pro rata shares of all outstanding Loans. A Delinquent Bank shall be deemed to have satisfied in full a delinquency when and if, as a result of application of the assigned payments to all outstanding Loans of the nondelinquent Banks, the Banks respective pro rata shares of all outstanding Loans have returned to those in effect immediately prior to such delinquency and without giving effect to the nonpayment causing such delinquency. The provisions of this Section 7.10 shall not affect the rights of the Borrower against any such Delinquent Bank.
(b) For purposes of this Section 7.10, a Failure of a Bank shall mean (i) it shall seek the appointment of a trustee, receiver, liquidator, custodian or other similar official for it or any substantial part of its property, or shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator or other similar official for it or any substantial part of its property, or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or (ii) it makes a general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due, or shall take any corporate action to authorize any of the foregoing, or (iii) an involuntary case or other proceeding shall be commenced against it seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it, or (iv) an order for relief shall be entered against it under the bankruptcy laws as now or hereafter in effect.
ARTICLE VIII.
CHANGE IN CIRCUMSTANCES
SECTION 8.01. Additional Costs; Capital Adequacy.
(a) If any new law, rule or regulation, or any change (other than any change by way of imposition or increase of reserve requirements reflected in the Adjusted LIBOR Offered Rate) after the date hereof in the interpretation or administration of any Applicable Law, rule or regulation by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Bank or its Applicable Lending Office with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency in connection therewith issued, promulgated or enacted after the date hereof shall:
(i) subject any Bank (or its Applicable Lending Office) to any tax or increased Taxes (without duplication of any amounts due under Section 2.09 of this Agreement); or
(ii) impose, modify or deem applicable any reserve (including, without limitation, any such requirement imposed by the Board of Governors of the Federal Reserve System), special deposit, insurance assessment or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Bank (or its Applicable Lending Office) or shall impose on any Bank (or its Applicable Lending Office) any other condition affecting its Loans, its Note or its Commitment; or
(iii) impose on any Bank any other conditions or requirements with respect to this Agreement, the other Loan Documents, the Loans or such Banks Commitment;
and the result of any of the foregoing is to increase the cost to such Bank (or its Applicable Lending Office) of making, funding, issuing, renewing, extending or maintaining any Loan or such Banks Commitment, or to reduce the amount of any sum received or receivable by such Bank (or its Applicable Lending Office) under this Agreement or under its Note with respect thereto, by an amount deemed by such Bank to be material, then, promptly upon demand by such Bank (and in any event within thirty (30) days after demand by such Bank) and delivery to the Borrower of the certificate required by clause (c) hereof (with a copy to the Agent), the Borrower
shall pay to such Bank the additional amount or amounts as will compensate such Bank for such increased cost or reduction.
(b) If any Bank shall determine that any change after the date hereof in any existing Applicable Law, rule or regulation or any new law, rule or regulation regarding capital adequacy, or any change therein, or any change after the date hereof in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or any new request or directive of general applicability regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency issued, promulgated or enacted after the date hereof, has or would have the effect of reducing the rate of return on capital of such Bank (or its parent corporation) as a consequence of such Banks Loans or obligations hereunder to a level below that which such Bank (or its parent corporation) could have achieved but for such law, change, request or directive (taking into consideration its policies with respect to capital adequacy) by an amount deemed by such Bank to be material, then from time to time, promptly upon demand by such Bank (with a copy to the Agent) (and in any event within thirty (30) days after demand by such Bank) the Borrower shall pay to such Bank such additional amount or amounts as will compensate such Bank (or its parent corporation) for such reduction.
(c) Each Bank will promptly notify the Borrower and the Agent of any event of which it has knowledge, occurring after the date hereof, which will entitle such Bank to compensation pursuant to this Section and will designate a different Applicable Lending Office if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the judgment of such Bank, be otherwise disadvantageous to such Bank; provided, that the Borrower will not be required to compensate a Bank for any such increased costs or reductions to the extent the Bank notifies the Borrower of such increased costs or reductions and of such Banks intention to claim compensation therefor more than ninety (90) days after such Bank becomes aware of such right to additional compensation hereunder. A certificate of any Bank claiming compensation under this Section and setting forth in reasonable detail the additional amount or amounts to be paid to it hereunder and the calculations used in determining such additional amount or amounts shall be conclusive in the absence of manifest error. In determining such amount, such Bank may use any reasonable averaging and attribution methods.
SECTION 8.02. Basis for Determining Interest Rate Inadequate or Unfair.
If, on or prior to the first day of any Interest Period for any borrowing of LIBOR Loans, the Agent shall determine or be notified by the Required Banks that:
(a) adequate and reasonable methods do not exist for ascertaining the interest rate applicable for such Interest Period on the basis provided for in the definition of LIBOR Offered Rate, or
(b) the Adjusted LIBOR Offered Rate as determined by the Agent will not adequately and fairly reflect the cost to Banks of funding their LIBOR Loans for such Interest Period,
the Agent shall forthwith give notice of such determination (which shall be conclusive and binding on the Borrower and the Banks) to the Borrower and the Banks. In such event, until the
Agent notifies the Borrower and the Banks that the circumstances giving rise to such suspension no longer exist, (i) any Notice of Borrowing or Notice of Conversion with respect to LIBOR Loans shall be automatically withdrawn and shall be deemed to be a request for a Base Rate Loan, (ii) each LIBOR Loan will automatically, on the last day of the then current Interest Period relating thereto, become a Base Rate Loan, and (iii) the obligations of the Banks to make LIBOR Loans shall be suspended until the Agent or the Required Banks determine that the circumstances giving rise to such suspension no longer exist, whereupon the Agent or, as the case may be, the Agent at the instruction of the Required Banks, shall so notify the Borrower and the Banks.
SECTION 8.03. Illegality. If any future Applicable Law, rule, regulation, treaty or directive, or any change in any present or future Applicable Law, rule, regulation, treaty or directive, or any change in the interpretation or administration of any present or future Applicable Law, rule, regulation, treaty or directive by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Bank (or its LIBOR Lending Office) with any new directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall make it unlawful or impossible for any Bank (or its LIBOR Lending Office) to make, maintain or fund its LIBOR Loans and such Bank shall so notify the Agent, the Agent shall forthwith give notice thereof to the Banks and the Borrower, whereupon until such Bank notifies the Borrower and the Agent that the circumstances giving rise to such suspension no longer exist, (a) the commitment of such Bank to make LIBOR Loans or convert Base Rate Loans to LIBOR Loans shall forthwith be suspended, and (b) such Banks Loans then outstanding as LIBOR Loans, if any, shall be converted automatically to Base Rate Loans on the last day of the Interest Period applicable to such LIBOR Loans or within such earlier period as may be required by law. Before giving any notice to the Agent pursuant to this Section, such Bank shall designate a different LIBOR Lending Office if such designation will avoid the need for giving such notice and will not, in the judgment of such Bank, be otherwise disadvantageous to such Bank. If such Bank shall determine that it may not lawfully continue to maintain and fund any of its outstanding LIBOR Loans to maturity and shall so specify in such notice, the Borrower shall immediately prepay in full the then outstanding principal amount of each such LIBOR Loan, together with accrued interest thereon and any amount payable by the Borrower pursuant to Section 8.05. Concurrently with prepaying each such LIBOR Loan, the Borrower shall borrow a Base Rate Loan in an equal principal amount from such Bank (on which interest and principal shall be payable contemporaneously with the related LIBOR Loans of the other Banks), and such Bank shall make such Base Rate Loan.
SECTION 8.04. Base Rate Loans Substituted for Affected LIBOR Loans. If (i) the obligation of any Bank to make LIBOR Loans has been suspended pursuant to Section 8.03 or (ii) any Bank has demanded compensation under Section 8.01(a) with respect to LIBOR Loans and the Borrower shall, by at least two LIBOR Business Days prior notice to such Bank through the Agent, have elected that the provisions of this Section shall apply to such Bank, then, unless and until such Bank notifies the Borrower that the circumstances giving rise to such suspension or demand for compensation no longer apply:
(a) all Loans which would otherwise be made by such Bank as LIBOR Loans shall be made instead as Base Rate Loans, and
(b) after each of its LIBOR Loans has been repaid, all payments of principal which would otherwise be applied to repay such LIBOR Loans shall be applied to repay its Base Rate Loans instead.
SECTION 8.05. Indemnity. The Borrower agrees to indemnify each Bank and to hold each Bank harmless from and against any loss, cost or expense (excluding loss of anticipated profits) that such Bank may sustain or incur as a consequence of (a) default by the Borrower in payment of the principal amount of or any interest on any LIBOR Loans as and when due and payable, including any such loss or expense arising from interest or fees payable by such Bank to lenders of funds obtained by it in order to maintain its LIBOR Loans, (b) default by the Borrower in making a borrowing or conversion after the Borrower has given (or is deemed to have given) a Notice of Borrowing or a Notice of Conversion relating thereto in accordance with Section 2.02 or (c) the making of any payment of a LIBOR Loan or the making of any conversion of any such Loan to a Base Rate Loan on a day that is not the last day of the applicable Interest Period with respect thereto, including interest or fees payable by such Bank to lenders of funds obtained by it in order to maintain any such Loans.
SECTION 8.06. Replacement Banks. Upon the election of any Bank to request reimbursement by the Borrower for amounts due under Section 8.01 or upon the suspension of any Banks obligation to make, convert to or continue LIBOR Loans, the Borrower may find a replacement Bank which shall be reasonably satisfactory to the Agent and the Borrower (a Replacement Bank). Each Bank agrees that, should it be identified for replacement pursuant to this Section 8.06, it will promptly execute and deliver (against payment to such Bank of all sums owing to it under the Loan Documents, whether or not then due) all documents and instruments reasonably required by the Borrower to assign such Banks Loans and Commitment to the applicable Replacement Bank.
ARTICLE IX.
MISCELLANEOUS
SECTION 9.01. Notices.
(a) All notices, requests, consents and other communications to any party hereunder shall be in writing (including facsimile transmission or similar writing) and shall be given to such party at its address or facsimile number set forth on Schedule 1 attached hereto or by approved electronic communication in accordance with Section 9.01(b). Any party hereto may change its address, telecopy number or email address for notices and other communications hereunder by notice to the other parties hereto. All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt, provided that (i) notices delivered through electronic communications to the extent provided by Section 9.01(b) shall be effective as provided therein, and (ii) unless otherwise agreed to, or established, by the Agent pursuant to Section 9.01(b) hereof, only the items referred to in Sections 5.01(a), (b), (c), (d), (e) and (g) hereof may be communicated by the Borrower to the Agent and the Banks via e-mail.
(b) Except with respect to notices and other communications under ARTICLE II, each Bank agrees that notices and other communications to it hereunder may be
delivered or furnished by electronic communication (including e-mail and internet or intranet websites) pursuant to procedures approved by the Agent. In furtherance of the foregoing, each Bank hereby agrees to notify the Agent in writing, on or before the date such Bank becomes a party to this Agreement, of such Banks e-mail address to which a notice may be sent (and from time to time thereafter to ensure that Agent has on record an effective e-mail address for such Bank). Each of the Agent and the Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by means of electronic communication pursuant to procedures approved by it, provided that approval of such procedures may be limited to particular notices or communications.
Unless the Agent otherwise prescribes: (i) notices and other communications sent to an e-mail address shall be deemed received upon the senders receipt of an acknowledgement from the intended recipient (such as by the return receipt requested function, as available, return e-mail or other written acknowledgement); provided that, if such notice or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next business day for the recipient; and (ii) notices or communications posted to an internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address as described in the foregoing clause (i) of notification that such notice or communication is available and identifying the website address therefor.
The Borrower hereby acknowledges that: (i) the Agent may make available to the Banks Specified Materials by posting some or all of the Specified Materials on an Electronic Platform; (ii) the distribution of materials and information through an electronic medium is not necessarily secure and that there are confidentiality and other risks associated with any such distribution, (iii) the Electronic Platform is provided and used on an As Is, As Available basis; and (iv) neither the Agent nor any of its Affiliates warrants the accuracy, completeness, timeliness, sufficiency or sequencing of the Specified Materials posted on the Electronic Platform. The Agent, on behalf of itself and its Affiliates, expressly and specifically disclaims, with respect to the Electronic Platform, delays in posting or delivery, or problems accessing the specified materials posted on the electronic platform, and any liability for any losses, costs, expenses or liabilities that may be suffered or incurred in connection with the Electronic Platform. No warranty of any kind, express, implied or statutory, including any warranty of merchantability, fitness for a particular purpose, non-infringement of third party rights or freedom from viruses or other code defects, is made by Agent or any of its Affiliates in connection with the Electronic Platform.
Each Bank hereby agrees that notice to it in accordance with this Section 9.01(b) specifying that any Specified Materials have been posted to the Electronic Platform shall, for purposes of this Agreement, constitute effective delivery to such Bank of such Specified Materials.
Each Bank: (i) acknowledges that the Specified Materials, including information furnished to it by the Borrower or the Agent pursuant to, or in the course of administering, the Loan Documents, may include material, non-public information concerning the Borrower or its securities; and (ii) confirms that: (a) it has developed compliance procedures regarding the use of material, non-public information; and (b) it will handle such material, non-public information in accordance with such procedures and Applicable Laws, include federal and state securities laws.
SECTION 9.02. No Waivers. No failure or delay by the Agent or any Bank in exercising any right, power or privilege hereunder or under any Notes shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.
SECTION 9.03. Expenses; Documentary Taxes; Indemnification.
(a) The Borrower shall promptly pay (i) all reasonable out-of-pocket expenses of the Agent, including reasonable fees and disbursements of special counsel for the Agent, in connection with the preparation, negotiation and closing of this Agreement and the Loan Documents, the syndication of and the administration of the facility established hereby, any waiver or consent hereunder or any amendment hereof or thereof or any waiver of any Default or alleged Default, and any termination hereof or thereof and (ii) if a Default occurs, all reasonable out-of-pocket expenses incurred by the Agent and each Bank, including reasonable fees and disbursements of counsel (including reasonable allocated costs of in-house counsel), in connection with such Default and collection, bankruptcy, insolvency and other enforcement proceedings resulting therefrom. The Borrower shall indemnify each Bank against any transfer taxes, documentary taxes, assessments or charges made by any governmental authority by reason of the execution and delivery of this Agreement or the Notes.
(b) The Borrower agrees to indemnify the Agent, each Bank, and each of their affiliates, officers, directors and employees (each, a Covered Person) and hold each Covered Person harmless from and against any and all Liabilities which may be incurred by or asserted or awarded against such Covered Person, in each case arising out of or in connection with any investigative, administrative or judicial proceeding (whether or not such Covered Person shall be designated a party thereto) relating to or arising out of this Agreement or the Loan Documents or any actual or proposed use of proceeds of Loans hereunder, provided that no Covered Person shall have the right to be indemnified hereunder for Liabilities that are determined in a final, nonappealable judgment by a court of competent jurisdiction to have resulted from such Covered Persons gross negligence or willful misconduct.
SECTION 9.04. Set Off. During the continuance of any Event of Default, any deposits or other sums credited by or due from any of the Banks to the Borrower and any Collateral (as defined in the Security Agreement) in the possession of any such Bank may be applied to or set off by such Bank against the payment of the Obligations. Each of the Banks agrees with each other Bank that if such Bank shall receive from the Borrower whether by voluntary payment, exercise of the right of set off, counterclaim, cross action, or enforcement of a claim based on the Obligations owing to such Bank by proceedings against the Borrower at law or in equity or by proof thereof in bankruptcy, reorganization, liquidation, receivership or similar proceedings, or otherwise, and shall retain and apply to the payment of the Obligations owing to such Bank any amount in excess of its ratable portion of the payments received by all of the Banks with respect to the Obligations owed to all of the Banks, such Bank will make such disposition and arrangements with the other Banks with respect to such excess, either by way of distribution, pro tanto assignment of claims, subrogation or otherwise as shall result in each Bank receiving in respect of the Obligations owing to it its proportionate payment thereof as contemplated by this Agreement; provided that if all or any part of such excess payment is
thereafter recovered from such Bank, such disposition and arrangements shall be rescinded and the amount restored to the extent of such recovery, but without interest.
SECTION 9.05. Amendments and Waivers. Any provision of this Agreement or any of the other Loan Documents may be amended, waived, supplemented or otherwise modified if, but only if, contained in a written agreement signed by the Borrower and the Required Banks (and, if the rights or duties of the Agent are affected thereby, by the Agent); provided that no such agreement shall (i) increase the Commitment Amount of any Bank without the written consent of such Bank, (ii) reduce the principal amount of any Loan, or reduce the rate of any interest, or reduce any fees, payable under the Loan Documents, without the written consent of each Bank affected thereby thereof, (iii) postpone the Termination Date or the date of any payment for any Loan or any interest or any fees payable under the Loan Documents, or reduce the amount of, waive or excuse any such payment, or postpone the stated termination or expiration of the Aggregate Commitment Amount, without the written consent of each Bank affected thereby, (iv) change any provision hereof in a manner that would alter the pro rata sharing of payments required hereby or the pro rata reduction of Commitment Amounts required hereby, without the written consent of each Bank affected thereby, (v) change any of the provisions of this Section or the definition of the term Required Banks or any other provision hereof specifying the number or percentage of Banks required to waive, amend, supplement or otherwise modify any rights hereunder, (vi) change the currency in which Loans are to be made or payment under the Loan Documents is to be made, or add additional borrowers, in each case without the written consent of each Bank, or (vii) release all or substantially all of the Collateral (as defined in the Security Agreement) from the liens thereunder (except as may be expressly provided in the applicable Security Document), with out the consent of each Lender, and provided further that no such agreement shall amend, modify or otherwise affect the rights or duties of the Agent without the prior written consent of the Agent. No delay or omission on the part of any Bank or any holder hereof in exercising any right hereunder shall operate as a waiver of such right or of any other rights of such Bank or such holder, nor shall any delay, omission or waiver on any one occasion be deemed a bar or waiver of the same or any other right on any further occasion.
SECTION 9.06. Successors and Assigns.
(a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that the Borrower may not assign or otherwise transfer any of its rights under this Agreement without the prior written consent of all of the Banks (and any attempted assignment or transfer by the Borrower without such consent shall be null and void).
(b) Any Bank may at any time grant to one or more commercial banks (each a Participant) participating interests in its Commitment or all of its Loans. In the event of any such grant by a Bank of a participating interest to a Participant, whether or not upon notice to the Borrower and the Agent, such Bank shall remain responsible for the performance of its obligations hereunder, and the Borrower and the Agent shall continue to deal solely and directly with such Bank in connection with such Banks rights and obligations under this Agreement. Any agreement pursuant to which any Bank may grant such a participating interest shall provide that such Bank shall retain the sole right and responsibility to enforce the obligations of the
Borrower hereunder, including, without limitation, the right to approve any amendment, restatement, supplement or other modification or waiver of any provision of this Agreement; provided that such participation agreement may provide that such Bank will not agree to any amendment, restatement, supplement or other modification or waiver of this Agreement described in clauses (i), (ii), (iii), (iv), (v), (vi) and (vii) of Section 9.05 without the consent of the Participant. The Borrower agrees that each Participant shall, to the extent provided in its participation agreement, be entitled to the benefits of Article VIII with respect to its participating interest; provided that no Participant shall be entitled to receive an amount greater than its pro rata share of any amount the selling Bank would have received hereunder had no participation been sold. An assignment or other transfer which is not permitted by clause (c) or (d) below shall be given effect for purposes of this Agreement only to the extent of a participating interest granted in accordance with this clause (b).
(c) Subject to clause (f) below, any Bank may at any time assign to one or more banks (each an Assignee ) all, or a proportionate amount of at least $5,000,000 of all, of its rights and obligations under this Agreement and the Notes, and such Assignee shall assume such rights and obligations, pursuant to an Assignment and Acceptance (each an Assignment and Acceptance) in substantially the form of Exhibit E attached hereto executed by such Assignee and such transferor Bank, with, if no Default has occurred and is continuing, the written consent of the Borrower, which consent shall not be unreasonably withheld or delayed, and of the Agent, which consent shall not be unreasonably withheld or delayed; provided that no such consent of the Borrower or the Agent shall be required if the Assignee is an Affiliate of the transferor Bank. Upon acceptance and recording of an Assignment and Acceptance pursuant to Section 9.06(h), from and after the effective date specified therein, (A) the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Acceptance, have the rights and obligations of a Bank under this Agreement and (B) the assigning Bank thereunder shall, to the extent of the interest assigned by such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Banks rights and obligations under this Agreement, such Bank shall cease to be a party hereto but shall continue to be entitled to the benefits of Section 8.01 and Section 9.03 hereof, as well as to any fees accrued for its account and not yet paid). Upon the consummation of any assignment pursuant to this clause (b), the transferor Bank, the Agent and the Borrower shall make appropriate arrangements so that, if required, new Notes are issued to the Assignor and the Assignee. In connection with each such assignment, the transferor Bank shall pay to the Agent an administrative fee for processing such assignment in the amount of $3,500. If the Assignee is not incorporated under the laws of the United States of America or a state thereof, it shall, prior to the first date on which interest or fees are payable hereunder for its account, deliver to the Borrower and the Agent the tax forms required by Section 2.11.
(d) Without notice to or consent of any Person, any Bank may at any time assign all or any portion of its rights under this Agreement, its Note, and the other Loan Documents to a Federal Reserve Bank. No such assignment shall release the transferor Bank from its obligations hereunder.
(e) No Assignee, Participant or other transferee of any Banks rights shall be entitled to receive any greater payment under Section 8.01 than such Bank would have been
entitled to receive with respect to the rights transferred, unless such transfer is made with the Borrowers prior written consent.
(f) No Person may become a Participant pursuant to clause (b) above or an Assignee pursuant to clause (c) above unless such Person constitutes a bank (as such term is used in Section 18(f)(1) of the Investment Company Act) in the reasonable judgment of the Borrower and the Agent. No Person may become an Assignee pursuant to clause (c) above if that Person is an Affiliate of the Borrower.
(g) The Agent, acting solely for this purpose as an agent of the Borrower, shall maintain at one of its offices in Boston, Massachusetts a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Banks, and the Commitment Amounts of, and principal amounts of the Loans owing to, each Bank pursuant to the terms hereof from time to time (the Register). The entries in the Register shall be conclusive, and the Borrower, the Agent and the Banks may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Bank hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrower and any Bank at any reasonable time and from time to time upon reasonable prior notice.
(h) Upon its receipt of a duly completed Assignment and Acceptance executed by an assigning Bank and an assignee, an administrative questionnaire (in such form as supplied by the Agent) completed in respect of the assignee (unless the assignee shall already be a Bank hereunder), the administrative fee referred to in Section 9.06(c) and, if required, the written consent of the Borrower and the Agent to such assignment and any applicable tax forms, the Agent shall (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register, and (iii) revise Schedule 1 to reflect such Assignment and Acceptance and circulate such revised Schedule 1 to the Banks and the Borrower, which revised Schedule 1 shall be deemed to be a part hereof and shall be incorporated by reference herein. No assignment shall be effective unless it has been recorded in the Register as provided in this Section 9.06(h).
SECTION 9.07. Governing Law; Submission to Jurisdiction. This Agreement and each of the other loan documents are contracts under the laws of the Commonwealth of Massachusetts and shall for all purposes be construed in accordance with and governed by the laws of Commonwealth of Massachusetts, without regard to conflict of laws principles that would require the application of the laws of another jurisdiction. Each of the Borrower, the Banks and the Agent agrees that any suit for the enforcement of this agreement or any of the other Loan Documents or any other action brought by such person arising hereunder or in any way related to this agreement or any of the other Loan Documents whether sounding in contract, tort, equity or otherwise, shall be brought in the courts of the Commonwealth of Massachusetts or a federal court sitting therein, and consents to the exclusive jurisdiction of such court and the service of process in any suit being made upon such person by mail at the address specified in Section 9 ..01. Each of the Borrower, the Banks and the Agent hereby waives any objection that it may now or hereafter have to the venue of any suit brought in Boston, Massachusetts or any court sitting therein or that a suit brought therein is brought in an inconvenient court.
SECTION 9.08. WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE AGENT AND THE BANKS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. Except to the extent prohibited by law, the Borrower hereby waives any right it may have to claim or recover in any litigation referred to in the preceding sentence any special, exemplary, punitive or consequential damages or any damages other than, or in addition to, actual damages. The Borrower (a) certifies that no representative, agent or attorney of any Bank or the Agent has represented, expressly or otherwise, that such Bank or the Agent would not, in the event of litigation, seek to enforce the foregoing waivers and (b) acknowledges that the Agent and the Banks have been induced to enter into this Credit Agreement and the other Loan Documents to which it is a party by, among other things, the waivers and certifications contained herein.
SECTION 9.09. Confidential Material.
(a) Each Bank agrees to keep confidential any information, documentation or materials provided by the Borrower or the Borrowers Affiliates, employees, agents or representatives (Representatives) regarding the portfolio holdings of the Borrower or any other non-public information with regard to the Borrower or the Investment Adviser (Confidential Material), whether before or after the date of this Agreement. Such Confidential Material shall be treated confidentially, using the same degree of care that such Bank uses to protect its own similar material.
(b) Confidential Material may be disclosed to Representatives of each Bank in connection with the transactions contemplated herein or in connection with managing the relationship of such Bank or its Affiliates with the Borrower but shall not be disclosed to any third party and may not be used for purposes of buying or selling securities, including shares issued by the Borrower or for any other purpose except in connection with this facility; provided, however, that the Banks may disclose Confidential Material to (i) the Federal Reserve Board pursuant to applicable rules and regulations promulgated by the Federal Reserve Board (which, as of the Effective Date, require a filing of a list of all Margin Stock which directly or indirectly secures a Loan), (ii) the extent required by statute, rule, regulation or judicial process, (iii) counsel for any of the Banks or the Agent in connection with this Agreement or any of the other Loan Documents, (iv) bank examiners, auditors and accountants, or (v) any Assignee or Participant (or prospective Assignee or Participant) as long as such Assignee or Participant (or prospective Assignee or Participant) first agrees to be bound by the provisions of this Section 9.09. Notwithstanding anything to the contrary contained in this Section, any information that would, but for this sentence, constitute Confidential Material shall cease to be Confidential Material after the second anniversary of the date such information was first received by the Agent or any Bank.
Each Bank agrees to promptly provide such information as is reasonably requested by the Borrower in order for the Borrower to monitor (as required by Applicable Law) whether the Banks use of Confidential Material complies with this Section 9.09.
SECTION 9.10. USA Patriot Act. Each Bank that is subject to the Patriot Act (as hereinafter defined) and the Agent (for itself and not on behalf of any Bank) hereby notifies the Borrower that pursuant to the requirements of the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the Patriot Act), it is required to obtain, verify and record information that identifies the Borrower, which information includes the name and address of the Borrower and other information that will allow such Bank or the Agent, as applicable, to identify the Borrower in accordance with the Patriot Act.
SECTION 9.11. Interest Rate Limitation. Notwithstanding anything herein to the contrary, if at any time the interest rate applicable to any Loan, together with all fees, charges and other amounts that are treated as interest on such Loan under Applicable Law (collectively the charges), shall exceed the maximum lawful rate (the maximum rate) that may be contracted for, charged, taken, received or reserved by the Bank holding such Loan in accordance with Applicable Law, the rate of interest payable in respect of such Loan hereunder, together with all of the charges payable in respect thereof, shall be limited to the maximum rate and, to the extent lawful, the interest and the charges that would have been payable in respect of such Loan but were not payable as a result of the operation of this Section shall be cumulated, and the interest and the charges payable to such Lender in respect of other Loans or periods shall be increased (but not above the maximum rate therefor) until such cumulated amount, together with interest thereon at the Federal Funds Rate to the date of repayment, shall have been received by such Bank.
SECTION 9.12. Survival. The provisions of Sections 7.05, 9.03 and 9.09 and ARTICLE VIII shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loans, the expiration or other termination of the Commitments or the termination of any Loan Document or any provision thereof.
SECTION 9.13. Miscellaneous. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement and each of the other Loan Documents constitute the entire agreement and understanding among the parties hereto and supersede any and all prior agreements and understandings, oral or written, relating to the subject matter hereof. The provisions of this Agreement are severable and if any one clause or provision hereof shall be held invalid or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect only such clause or provision, or part thereof, in such jurisdiction, and shall not in any manner affect such clause or provision in any other jurisdiction, or any other clause or provision of this Agreement in any jurisdiction.
[Signature page follows.]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.
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CREDIT SUISSE HIGH YIELD BOND FUND |
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By: |
/s/ Michael A. Pignataro |
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Name: Michael A. Pignataro |
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Title: CFO |
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STATE STREET BANK AND TRUST |
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By: |
/s/ Paul J. Koobatian |
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Name: Paul J. Koobatian |
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Title: Vice President |
[Signature Page to Credit Agreement]
SCHEDULE 1
Addresses for Notices, Lending Offices, Commitment Amounts and Commitment Percentages
BORROWER:
CREDIT SUISSE HIGH YIELD BOND FUND
Address for Notices:
Credit Suisse High Yield Bond Fund
Eleven Madison Avenue
New York, New York 10010
Attn: Chief Financial Officer
Tel: 212 325-2000
Fax: 212-325-4120
with a copy to:
Credit Suisse High Yield Bond Fund
Eleven Madison Avenue
New York, New York 10010
Attn: Secretary
Tel: 212 325-2000
Fax: 212-538-0422
with a copy to:
Willkie Farr & Gallagher
787 Seventh Avenue
New York, NY 10019
Attn: William Dye
Tel: 212 728 8219
Fax: 212 728 9219
E-mail: Wdye@willkie.com
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COMMITMENT |
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COMMITMENT |
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BANKS: |
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AMOUNT |
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PERCENTAGE |
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STATE STREET BANK AND TRUST COMPANY |
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75,000,000 |
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100 |
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Domestic Lending Office, LIBOR Lending Office and Office for Notices to the Agent for Borrowings and Payments:
(a) if by overnight courier:
State Street Bank and Trust Company
Customer Service Unit
4 Copley Place, 5th Floor
Boston, MA 02116
Attn: Voy Pearson
Tel: (617) 937-8810
with a copy to:
Attn: Robyn Shepard
Tel: (617) 937-8806
(b) in all other cases:
State Street Bank and Trust Company
Customer Service Unit
Copley Place Tower, Box 5303
Boston, MA 02206
Attn: Voy Pearson
Tel: (617) 937-8810
Fax: (617) 988-6677
with a copy to:
Attn: Robyn Shepard
Tel: (617) 937-8806
Fax: (617) 988-6677
Office for all Other Notices:
(a) if by overnight courier:
State Street Bank and Trust Company
Mutual Fund Lending Department
4 Copley Place, 5th Floor
Boston, MA 02116
Attn: Paul J. Koobatian,
Vice President
Tel: (617) 937-8830
(b) in all other cases:
State Street Bank and Trust Company
Mutual Fund Lending Department
Copley Place Tower, Box 5303
Boston, MA 02206
Attn: Paul J. Koobatian,
Vice President
Tel: (617) 937-8830
Fax: (617) 937-8889
pjkoobatian@statestreet.com
May 2008
CREDIT SUISSE ASSET MANAGEMENT, LLC
CREDIT SUISSE FUNDS
CREDIT SUISSE CLOSED END FUNDS
CREDIT SUISSE INSTITUTIONAL FUNDS
POLICY AND PROCEDURES FOR THE VALUATION OF PORTFOLIO SECURITIES
INTRODUCTION
Credit Suisse Asset Management, LLC (Credit Suisse) is a registered investment adviser subject to the Investment Advisers Act of 1940. Credit Suisse serves as an adviser to its clients through separate accounts, registered investment companies (directly and as sub-adviser), private investment partnerships, and other pooled investment vehicles.
Credit Suisse has developed this Policy and Procedures for the Valuation of Portfolio Securities (the Policy). The Investment Company Act of 1940 (the Investment Company Act) requires, in general, that registered investment companies value portfolio securities for which market quotations are readily available at current market valuations and other securities at fair valuations as determined in good faith by or under the direction of the Board of Directors (the Board)(1) of such registered investment companies. Credit Suisse views the requirements of the Investment Company Act as the most comprehensive in the investment management industry. This Policy is designed to adhere to those requirements and to incorporate certain principles set forth in relevant pronouncements of the U.S. Securities and Exchange Commission and its staff in determining the valuation of portfolio securities.
This Policy describes the process employed by (i) the funds listed on Exhibit A hereto (the Funds), as amended from time to time, through the external accounting agents system used by the Funds (Fund Pricing), with respect to the pricing of portfolio securities for such Funds and (ii) Credit Suisse, through its internal accounting system (Credit Suisse Pricing), with respect to the pricing of portfolio securities for advisory clients other than the Funds (Non-Fund Clients) for which it is required to provide valuation. The Board of each of the Funds has adopted this Policy for valuing portfolio securities at the time prescribed in the prospectus of the Funds (the Valuation Time).(2) Each Funds accounting agent or administrator shall determine the value of the Funds portfolio securities in accordance with this Policy. Fair market valuations shall be determined by Credit Suisse pursuant to Section 2 of these Procedures. Credit Suisse, through its pricing committee (the Pricing Committee), has also adopted this Policy for valuing portfolio securities of Non-Fund Clients.
The Pricing Committees mandate is to ensure that the valuations assigned to clients portfolio securities (Funds and Non-Fund Clients) are in accordance with this Policy.
(1) Or Trustees, as the case may be.
(2) Usually as of the close of regular trading on the New York Stock Exchange (NYSE) each day the NYSE is open for business.
SUMMARY
Credit Suisse values clients portfolio securities (Funds and Non -Fund Clients) by using market quotations when they are readily available. When market quotations are not readily available, clients portfolio securities shall be fair valued in good faith.
When an exchange or market on which a security trades does not open or closes early, and no other market price is available, market quotations for that security, in general, are no longer considered readily available. Even if an exchange or market is open for trading, a careful consideration of the validity and reliability of such market quotations and whether they represent a current market price at which the securities could be sold (i.e., whether the quotations are valid and reliable) should be performed. The automatic use of market quotations, without first verifying that the market quotations are valid and reliable, may result in inaccurate valuations.
Credit Suisse determines whether market quotations are valid and reliable by reviewing various factors, including whether a security is thinly traded, sales have been infrequent, or other data that may call into question the validity and reliability of a market quotation. In addition, a significant event (an event that affects the value of a clients portfolio security) that occurs after the market closes might also cause market quotations not to be readily available. Credit Suisse continuously monitors for significant events. Credit Suisse also exercises reasonable diligence to obtain market quotations for a security before concluding that market quotations are not readily available.
When market quotations are not readily available, a security must be priced according to its fair value. There is no single standard for determining fair value. As a general principle, the fair value of a security is the amount that the owner might reasonably expect to receive upon its current sale. Methods that are in accord with this principle may, for example, be based on a multiple of earnings, a discount from market of a similar freely traded security, yield to maturity with respect to debt issues, or a combination of these and other methods (a more complete list is set forth in Exhibit B attached hereto). The determination that market quotations are not readily available does not preclude the conclusion that the most recent closing price represents fair value. The most recent closing price should be considered, along with other appropriate factors, in determining fair value.
Credit Suisse regularly evaluates whether its fair value pricing results in valuations that the owner of a security might reasonably expect to receive upon its current sale. Fair value prices determined in accordance with the Procedures might be different from the next-day opening or the actual sales price of a security. Such discrepancies do not necessarily indicate that a fair value price is inappropriate.
Credit Suisse may utilize a service provided by an independent third party and approved by the Board of a Fund to assist in the fair valuation of certain Fund portfolio securities. When fair value pricing is employed, the prices used by a fund to calculate its net asset value may differ from quoted or published prices for the same securities.
1. PUBLICLY-TRADED SECURITIES
1.1 Equity Securities
Fund Pricing
Equity securities (including securities held long or short) shall be valued at the closing price, which may not be the last sale price, on the exchange or market on which the security is primarily traded (the Primary Market) at the Valuation Time. If the security did not trade on the Primary Market, it shall be valued at the closing price on another exchange or market where it trades at the Valuation Time. If there is no such closing price, the value shall be the most recent bid quotation
as of the Valuation Time in the case of a long position or the most recent asked quotation in the case of a short position.
Closing prices and bid/asked quotations indicated above shall generally be supplied by one or more independent pricing services approved by the Board (a Board Pricing Service). If a Board Pricing Service is not able to provide such closing price or bid/asked quotations, the value shall be determined by taking the mean between the bid and the asked quotations provided by a single broker or dealer, unless the broker or dealer can only provide a bid quotation, in which case the value shall be such bid quotation for long positions and such asked quotation for short positions.
Credit Suisse Pricing
Equity securities (including securities held long or short) shall be valued at the closing price, which may not be the last sale price, on the Primary Market. If the security did not trade on the Primary Market, it shall be valued at the closing price on another exchange or market where it trades. If available, U.S. traded securities shall be valued at the Composite Price (The Composite Price is the last trade occurring from the Consolidated Tape System participants broadcast at 4:15 p.m.). If there is no such closing price, the value shall be the most recent bid quotation in the case of both long and short positions.
Closing prices and bid quotations indicated above shall be supplied by one or more independent pricing services approved by the Pricing Committee (a Credit Suisse Pricing Service). If a Credit Suisse Pricing Service is not able to provide such closing price or bid/asked quotations, the value shall be determined by taking the mean between the bid and the asked quotations provided by a single broker or dealer, unless the broker or dealer can only provide a bid quotation, in which case the value shall be such bid quotation.
If it is not possible to value a particular equity security pursuant to this Section 1.1 or such value is not considered valid or reliable, the fair value shall be determined in accordance with Section 2.
1.2 Debt Securities
Fund Pricing
Debt securities with a remaining maturity greater than sixty (60) days shall be valued at the price supplied by a Board Pricing Service at the Valuation Time. Prices supplied by a Board Pricing Service may use a matrix, formula or other objective method that takes into consideration market indices, yield curves or other specific adjustments. If a Board Pricing Service is not able to provide such a price, the value shall be determined by taking the mean between the bid and the asked quotations provided by a single broker or dealer, unless the broker or dealer can only provide a bid quotation, in which case the value shall be such bid quotation.
Debt securities with a remaining maturity of sixty (60) days or less as of the Valuation Time shall generally be valued by the amortized cost method (i.e., valuation at acquisition cost increased or decreased each day by an amount equal to the daily accretion of the discount or amortization of premium, respectively). Amortized costs will be compared to the market generally on a periodic basis. The creditworthiness of the issuer and the likelihood of full repayment at maturity will be among the factors considered in determining whether to utilize the amortized cost method.
Credit Suisse Pricing
Debt securities shall be valued at the price supplied by a Credit Suisse Pricing Service. Prices supplied by a Credit Suisse Pricing Service may use a matrix, formula or other objective method
that takes into consideration market indices, yield curves or other specific adjustments. If a Credit Suisse Pricing Service is not able to provide such a price, the value shall be determined by taking the mean between the bid and the asked quotations provided by a single broker or dealer, unless the broker or dealer can only provide a bid quotation, in which case the value shall be such bid quotation.
If it is not possible to value a particular debt security pursuant to this Section 1.2 or such value is not considered valid or reliable, the fair value shall be determined in accordance with Section 2.
1.3 Foreign Market Securities
Foreign Market Securities are part of a countrys internal market, representing the mechanism for issuing and trading securities by entities domiciled outside that country. Certain stock exchanges prohibit foreign investors from purchasing local shares. Companies set aside a specific amount of shares available to foreign investors for ownership. Foreign Market Securities are available for trading on the local stock market.
Foreign Market Securities traded in the local market shall be valued at the closing price, which may or may not be the last sale price, on the Primary Market (at the Valuation Time with respect to Funds). If the security did not trade on the Primary Market, it shall be valued at the closing price of the local shares (at the Valuation Time with respect to Funds). If there is no such closing price, the value shall be the most recent bid quotation of the local shares (at the Valuation Time with respect to Funds).
If it is not possible to value a particular Foreign Market Security pursuant to this Section 1.3 or such value is not considered valid or reliable, the fair value shall be determined in accordance with Section 2.
1.4 Options
Except as provided below, option contracts on securities, currencies, indices, futures contracts, commodities and other instruments shall be valued at the last sale price on the exchange or market that is the Primary Market (at the Valuation Time with respect to Funds). If a contract did not trade on the Primary Market, it shall be valued at the last sale price on another exchange or market where it did trade (at the Valuation Time with respect to Funds). If there is no such sale price, the value shall be the most recent bid quotation (at the Valuation Time with respect to Funds). Sale prices and bid quotations shall be supplied by a Board Pricing Service or a Credit Suisse Pricing Service, as applicable. If a Board Pricing Service or Credit Suisse Pricing Service is not able to provide such sale prices or bid quotations, the value shall be determined by taking the mean between the bid and the asked quotations provided by a single broker or dealer, unless the broker or dealer can only provide a bid quotation, in which case the value shall be such bid quotation.
OTC currency options are valued by uploading the applicable implied volatility rates from Reuters or Bloomberg. Other inputs are either uploaded (interest rates, spots) or are specified when the ticker symbols are set up (expiration date, strike price). OTC currency options are then priced by using the Garman- Kohlhagen modified Black-Scholes formula, which adjusts for a constant yield versus a fixed dividend.
OTC equity/index options are priced according to the contract specifications (days to expiration, current spot index level, interest rates, dividends, strike price) using the Black-Scholes pricing
model, modified for dividends. The volatility input assumption is interpolated from the previous days price.
If it is not possible to value a particular option pursuant to this Section 1.4 or such value is not considered valid or reliable, the fair value shall be determined in accordance with Section 2.
1.5 Futures
Futures contracts shall be valued at the most recent settlement price as provided by a Board Pricing Service or a Credit Suisse Pricing Service, as applicable (at the Valuation Time with respect to Funds).
If it is not possible to value a particular futures contract pursuant to this Section 1.5 or such value is not considered valid or reliable, the fair value shall be determined in accordance with Section 2.
1.6 Forward Contracts
A Board Pricing Service or a Credit Suisse Pricing Service, as applicable, shall obtain the WM Reuters London Close (or if not available, Bloomberg) closing spot rates and the WM Reuters London Close (or if not available, Bloomberg) forward point rates on a daily basis. The currency forward contract pricing model derives the differential in point rates to the expiration date of the forward and calculates its present value. The forward is valued at the net of the present value and the spot rate.
If it is not possible to value a particular forward contract pursuant to this Section 1.6 or such value is not considered valid or reliable, the fair value shall be determined in accordance with Section 2.
1.7 Warrants, Rights and Similar Instruments
If there is a trading market for such instruments, these shall be valued in accordance with the procedures for equity securities listed above, as applicable. If there is no market, the valuation shall be determined in accordance with the Black-Scholes pricing model. If it is not possible to value the securities in accordance with the Black-Scholes pricing model, the valuation shall be determined by the intrinsic value (i.e., the market value of the underlying security minus the costs to acquire the security).
If it is not possible to value a particular warrant, right or similar instrument pursuant to this Section 1.7 or such value is not considered valid or reliable, the fair value shall be determined in accordance with Section 2.
1.8 Swaps and Other Derivatives
Swaps and other similar derivative or contractual type instruments shall be valued in accordance with Section 1.1 if such instruments trade on an exchange or market, as applicable. If such instruments do not trade on an exchange or market, such instruments shall be valued at a price provided by a single broker or dealer that is not the counterparty and, if no such price is available, at a price at which the counterparty to such contract would repurchase the instrument or terminate the contract.
If it is not possible to value a particular swap or other derivative instrument pursuant to this Section 1.8 or such value is not considered valid or reliable, the fair value shall be determined in accordance with Section 2.
1.9 Investments in Mutual Funds
Investments in mutual funds are valued at the mutual funds closing net asset value per share on the day of valuation.
1.10 Escrow Securities
Most escrow securities are created by DTC as a means for tracking the parties that were affected by a corporate action plan of reorganization. This is performed to ensure that, in the case of a future distribution, the appropriate parties will be notified. Due to the uncertainty of any future distribution regarding these securities, a zero value may be assigned. If it is determined that the plan of reorganization addresses the creation of a specific escrow security, then a fair value for the security will be assigned.
If it is not possible to value an escrow security pursuant to this Section 1.10 or such value is not considered valid or reliable, the fair value shall be determined in accordance with Section 2.
1.11 Exchange Rates
For securities in which the market quotation used is expressed in other than the accounts base currency, the value shall be converted into the accounts base currency at the prevailing exchange rates as quoted by WM Reuters London Close (or if not available, Bloomberg) (at the Valuation Time with respect to the Funds).
If it is not possible to obtain an exchange rate pursuant to this Section 1.11 or such rate is not considered valid or reliable, the fair rate shall be determined in accordance with Section 2.
1.12 Approved Pricing Services
Fund Pricing
Each Fund will use a Board Pricing Service(s) that has been approved by its Board upon Credit Suisses recommendation. The listing of such services shall be maintained by the Funds and communicated to the relevant Funds accounting agent or administrator.
Credit Suisse Pricing
Credit Suisses accounting systems will use a Credit Suisse Pricing Service(s) that has been approved by the Pricing Committee. The listing of such services shall be maintained by the Pricing Committee.
1.13 Monitoring for Significant Events
Credit Suisse may determine that prices obtained in accordance with the procedures in Section 1.1 through 1.10 are deemed not considered readily available (or valid or reliable) because of a significant event(s) that occurred after closing market prices are reported but before the time set for the calculation of the Funds NAV or the valuation of another Credit Suisse client account.
A significant event is that which could affect the value of a portfolio security. Such an event may relate to a single issuer, to a particular market sector, or to an entire market, and may include noteworthy fluctuations in domestic and/or foreign markets. Significant events may also be evidenced by trading volumes on markets, exchanges, or among dealers or changes in interest rates, both domestic and foreign. Milestones may also signal the occurrence of a significant event, such as a certain percentage rise or fall in the value of a basket of domestic or foreign securities or a certain percentage change in domestic or foreign futures index. Significant events may also stem from occurrences not tied directly to the securities markets, such as natural disasters, armed conflicts, terrorist acts, domestic or foreign governmental/political actions or pronouncements, observations from institutions and companies, and other news events. This list does not preclude the consideration of other factors and is not intended to be a comprehensive list of all types of significant events.
. Credit Suisse shall utilize a variety of sources and methods to continuously monitor for significant events, including but not limited to: newswires, pricing services, custodians and sub-custodians and general and specific market indices.
When Credit Suisse determines that an adjustment to a securitys value may be appropriate because of an event that it deems to be a significant intervening event, the Pricing Committee shall initiate fair value procedures under Section 2. Credit Suisse may utilize a service provided by an independent third party, which, in the case of the Fund, has been approved by the relevant Funds Board, to fair value certain Fund portfolio securities.
On the next business day Credit Suisse will review the opening price(s) of the security(ies) as a means of assessing whether the appropriate value was used in determining the prior nights NAV or client account value or whether adjustment to the valuation methodology or practices in the future may be appropriate.
2. FAIR VALUATION DETERMINATIONS
The Board of each of the Funds has delegated to Credit Suisse (via the Pricing Committee) the responsibility to determine the fair value of securities in any of the cases mentioned below. Credit Suisse shall also fair value securities in any of the cases mentioned below for its Non-Fund Clients. Unless otherwise specified, Credit Suisse shall value a security at the amount that it might reasonably expect to realize upon current disposition of the security. The estimate of fair value assumes a willing buyer and a willing seller neither acting under a compulsion to buy or sell. Credit Suisse shall consider all relevant factors, including but not limited to the ones described in Exhibit B. Credit Suisse may obtain (at the Funds expense) and take into consideration any advice from third-parties that it considers relevant, but shall not be required to obtain such advice or follow it, if obtained.
2.1 Nonpublicly -Traded Securities (with no readily available current market value)
Except as otherwise provided in this Section 2.1, Credit Suisse may initially value nonpublicly-traded securities (for which a current market value is not readily available) at their acquisition cost less related expenses, where identifiable, and may continue to utilize such value unless and until Credit Suisse determines that such value does not represent fair value.
Private Placements
Private placements shall be valued according to the procedures described in Appendix 1.
2.2 Restricted Securities
Credit Suisse may initially value restricted securities (which have legal or contractual restrictions on resale) at their acquisition cost less related expenses, where identifiable, and may continue to utilize such value unless and until Credit Suisse determines that such value does not represent fair value.
Furthermore, specific rules shall apply in the following cases:
Rule 144A Securities
If a Rule 144A security is deemed to be liquid, (3) such 144A security may be valued pursuant to the appropriate provisions in Section 1, as applicable, unless and until Credit Suisse determines that such value does not represent fair value.
Other Restrictions
Shares of a publicly traded company in which the Funds or Non-Fund Clients own shares and whose sole restriction on resale is that it is subject to a lockup period will generally be valued at a 20% discount to the price of the publicly traded stock if the lockup is for more than 60 days and a 10% discount for shares subject to a 60 day or less lockup, subject to review by the Pricing Committee of the liquidity and volatility of the companys unrestricted shares, unless and until Credit Suisse determines that such value does not represent fair value.
2.3 Unchanged Prices
If the price of a security (sale price, mean, bid or asked quotation, as applicable) is unchanged from the prior days price, the relevant Funds accounting agent or administrator or Credit Suisse for other Non-Fund Clients portfolios may utilize the previous value (determined at the previous Valuation Time in the case of the Funds) as the price for a maximum of five (5) consecutive business days unless and until Credit Suisse determines that such value does not represent fair value.
At least weekly, the relevant Funds accounting agent or administrator will provide Credit Suisse with a list of the securities with unchanged prices. For each security, Credit Suisse shall determine whether the price continues to represent fair value. In making this determination, Credit Suisse shall consider any event or developments that could have a material impact on the value of the security. In such a case, Credit Suisse shall determine if a fair valuation is required under the circumstances. If it is determined that the unchanged price does not represent fair value, then such security(ies) shall be valued in accordance with this Section 2. The Pricing Committee shall document its meetings as appropriate.
(3) Rule 144A security is deemed to be liquid if (i) in Credit Suisses judgment, considering the factors described in Appendix 2, it may be disposed of within seven (7) days at approximately the value as determined in accordance with Section 1; or (ii) two or more dealers are currently willing to purchase the security at such value.
2.4 Delisting or Suspension of Trading of Securities
In the event of a delisting or suspension of trading of a security, Credit Suisse shall determine the fair value of the security.
2.5 Discretionary Determination of Credit Suisse
In the event that Credit Suisses Pricing Committee is of the view that the value of a security as determined pursuant to this Policy does not represent the fair market value, subject to Section 4.1 below, Credit Suisse shall determine the fair value.
3. DOCUMENTATION AND REVIEW OF FAIR VALUATION
At least weekly, the relevant the Funds accounting agent or administrator will send Credit Suisse a report listing the fair valued securities as indicated from its accounting system(s). Credit Suisse will confirm or modify, as appropriate, the fair value price. Credit Suisse will report fair valuation changes to the relevant Funds accounting agent or administrator.
Credit Suisse shall provide the Pricing Committee a report listing the fair valued securities for Non-Fund Clients portfolios on a monthly basis. The Pricing Committee shall review such list for which a fair valuation has not been received on a rolling three-month basis.
3.1 Initial Fair Valuation
Each initial fair value pricing of a portfolio security must be documented in a written memorandum prepared on the date of such pricing action (e.g., at the time of purchase, suspension of trading, etc.). Exhibit C sets forth the form of the memorandum.
3.2 Daily Review
Credit Suisse shall review daily a portfolios fair valued securities. The factors identified as having influenced the fair valuation of each security shall be reviewed to determine if there has been any change, which would require consideration of a change in the fair valuation of the security.
Credit Suisse shall document its daily review as appropriate.
3.3 Quarterly Review
Fund Pricing
At each regular Board meeting (at least every quarter), Credit Suisse shall deliver a written report (the Quarterly Report) to the Board regarding any recommendations of fair valuation during the past quarter, including fair valuations that have not changed.
The Quarterly Report shall be substantially in the form set forth as Exhibit C and shall include:
· a list of all such securities and their valuation as determined by Credit Suisse;
· the reason for using fair valuation methods;
· documentation of the manner in which the securities were valued, including factors considered in the determination;
· an indication, when possible, of the accuracy of the valuation by disclosing the next available reliable public price quotation or the disposition price of such securities;
· any additional information that the Board and/or Valuation Committee deem necessary;
· a representation by Credit Suisse that these valuation procedures were complied with during the prior quarter;
· any 144A securities which in Credit Suisses judgment, applying the factors described in Appendix 3, are deemed to be illiquid, including the factors considered by Credit Suisse in such determination; and
· any action or approval taken by the Valuation Committee or Pricing Committee during the quarter.
The Board and/or Valuation Committee shall request any other additional information it deems necessary.
Credit Suisse Pricing
The Pricing Committee will review all fair valued securities on a quarterly basis.
4. COMPOSITION, FUNCTIONS AND RESPONSIBILITIES
4.1 The Pricing Committee of Credit Suisse
The Pricing Committee shall generally consist of the following representatives:
· a member of the legal/compliance department;
· a member of the fund administration department;
· a member of the investment operations group;
· if appropriate, a portfolio manager, assistant portfolio manager or research analyst; and
· any other persons as deemed appropriate by Credit Suisse.
The Pricing Committee shall generally meet at least weekly and otherwise as necessary to perform its responsibilities hereunder. The Pricing Committee values portfolio securities that are valued at fair value in accordance with Section 2 of this Policy by ensuring that the valuations assigned to such portfolio securities are in accordance with this Policy. Such meetings shall be documented and the records shall be retained by Credit Suisse. The prior approval of the Valuation Committee, as defined herein below in Section 4.3, shall be required for any fair valuations which individually or in the aggregate would change a Funds NAV on a single day by greater than 1%.
Exhibit C sets forth the suggested form of the memorandum.
4.2 The Fund Boards
The Fund Boards shall review the Quarterly Report and the minutes of the Valuation Committee and discuss and ratify, as necessary, the valuation methods and the valuations of the fair valued securities.
4.3 The Valuation Committee of the Boards
The Valuation Committee of each Board consists of at least two Directors, at least one of whom is not an interested person of the Fund as defined in the Investment Company Act.
The Valuation Committee shall review and approve the valuation of all fair valued securities whose fair valuations individually change a Funds NAV by greater than 1% on a single day. This review shall include a review and discussion of an updated fair valuation summary with appropriate representatives of Credit Suisse.
5. REVIEW OF THE POLICY AND RECORDKEEPING
5.1 Review of the Policy
Credit Suisse shall review and approve the Policy at least annually. The Board, including a majority of the Directors who are not interested persons of the relevant Fund as defined in the Investment Company Act, shall also review and approve the Policy at least annually.
5.2 Recordkeeping
Credit Suisse shall retain a copy of the materials reviewed in determining the valuation of portfolio securities and shall also maintain a copy with the records of each Fund, as applicable.
Any document mentioned in Section 4 shall be maintained and preserved for a period of at least six (6) years from the end of the fiscal year during which any covered valuation occurs, the first two (2) years in an easily accessible place.
Appendix 1
Private Placements
A fair valuation memorandum will be prepared for each private placement generally quarterly and on an as needed basis. The memorandum will sent to the Pricing Committee for its review. After review and approval, the Pricing Committee shall send the valuation to the Fund Administration group of Credit Suisse. The Fund Administration group will send the new valuation to the third -party fund accounting agent (as applicable) and the Credit Suisse Investment Operations Department in order for the price to be updated.
Appendix 2
144A Securities
In reaching liquidity decisions with respect to 144A securities, the following factors, along with other factors deemed relevant, may be considered:
(1) the unregistered nature of the security;
(2) the frequency of trades and quotes for the security;
(3) the number of dealers wishing to purchase or sell the security and the number of other potential purchasers;
(4) dealer undertakings to make a market in the security; and
(5) the nature of the security and the nature of the marketplace trades (e.g., the time needed to dispose of the security, the method of soliciting offers and the mechanics of the transfer).
Exhibit A
Open-End Funds:
Credit Suisse Global High Yield Fund
Credit Suisse Large Cap Blend Fund
Credit Suisse Short Duration Bond Fund
Credit Suisse Large Cap Growth Fund
Credit Suisse Capital Funds
Credit Suisse Large Cap Value Fund
Credit Suisse Small Cap Core Fund
Credit Suisse Asia Bond Fund
Credit Suisse Absolute Return Fund
Credit Suisse Commodity Return Strategy Fund
Credit Suisse Mid-Cap Core Fund
Credit Suisse Global Fixed Income Fund
Credit Suisse Global Small Cap Fund
Credit Suisse Institutional Fund
Asia Bond Portfolio
International Focus Portfolio
Credit Suisse International Focus Fund
Credit Suisse Opportunity Funds
Credit Suisse High Income Fund
Credit Suisse Trust
Blue Chip Portfolio
Commodity Return Strategy Portfolio
Emerging Markets Portfolio
Global Small Cap Portfolio
International Focus Portfolio
Large Cap Value Portfolio
Mid-Cap Core Portfolio
Small Cap Core I Portfolio
Closed - End Funds:
Credit Suisse High Yield Bond Fund
Credit Suisse Asset Management Income Fund, Inc.
The Chile Fund, Inc.
The Emerging Markets Telecommunications Fund, Inc.
The First Israel Fund, Inc.
The Indonesia Fund, Inc.
The Latin America Equity Fund, Inc.
Exhibit B
Fair Valuation Factors
Methods for fair valuation may, for example, be based on a multiple of earnings, or a discount from market of a similar freely traded security, or yield to maturity with respect to debt issues, or a combination of these and other methods.
General Factors:
· the fundamental analytical data relating to the investment;
· the nature and duration of restrictions in the market in which they are traded (including the time needed to dispose of the security, methods of soliciting offers and mechanics of transfer);
· the evaluation of the forces which influence the market in which these securities may be purchased or sold, including the economic outlook and the condition of the industry in which the issuer participates.
Specific Factors:
· the type of security;
· the cost at the date of acquisition;
· size of the portfolios holding, including the size of the holding compared to other securities of the same type or class, as applicable;
· the liquidity, including but not limited to, the nature and frequency of trades and quotes for the security;
· the number of dealers willing to purchase or sell the security and the number of other potential purchasers or any information as to any transactions or offers with respect to the security;
· special reports prepared by analysts and/or reports published in the financial press;
· the registered nature of the security and the nature and duration of any restrictions on disposition;
· the existence of a shelf registration or registration rights for unregistered securities;
· the market price of comparable securities (of the issuer or a related issuer or of comparable companies in the same industry having similar financial and credit characteristics);
· the discount from market value of unrestricted securities of the same class at time of purchase;
· the financial condition and prospects of the issuer, as indicated by financial statements, considering any recent management or capital structure changes or other recent events that may impact the price of the security, including but not limited to the existence of merger proposals or tender offers affecting the securities;
· the earning capacity and dividend-paying capacity of the issuer;
· maturity, coupon, creditworthiness and current yields for the security, including the value of any collateral;
· Public Security Association prepayment rates;
· currency exchange ratios and their fluctuation;
· currency restrictions and investment repatriation restrictions;
· a countrys or geographic regions political and economic environment;
· a countrys liquidity and settlement issues;
· the value of other financial instruments, including derivative securities traded on other markets or among dealers;
· trading volumes on markets, exchanges, or among dealers;
· values of baskets of securities traded on other markets, exchanges, or among dealers;
· changes in interest rates;
· observations from financial institutions;
· government (domestic or foreign) actions or pronouncements, and other news events; and
· foreign securities traded on other foreign markets, ADR trading, closed-end fund trading, foreign currency exchange activity, and the trading prices of financial products that are tied to baskets of securities, such as SPDRS and WEBS.
Exhibit C
To: Pricing Committee or Valuation Committee or Board of Directors/Trustees
From:
Subject: Fair Value Pricing
Date:
Please be advised that the following fair value pricing action requires the approval of the Pricing Committee or Valuation Committee or Board of Directors/Trustees:
1. Security Name:
2. Company Description:
3. Company Strategy:
4. How/when was Security Acquired:
5. Industry Overview:
6. Proposed Valuation:
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7. Basis for Current Valuation Proposal:
Historical Operating Performance:
Capitalization:
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8. Historical Investment Information:
9. Reason for using Fair Value Pricing Method:
10. Impact of changes in foreign currency rates:
11. Valuation history (include last third party price and date, if any and fair valuation history, prices and dates):
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This valuation was prepared in accordance with the Credit Suisse Policy for Valuation of Portfolio Securities.
SCHEDULE 3
Schedule of Exceptions to Financial Bring-down
As of October 31, 2008, the Net Asset Value of the Borrower decreased by 27.93% from its Net Asset Value as of September 30, 2008.
EXHIBIT A
FORM OF NOTE
U.S. $75,000,000 |
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FOR VALUE RECEIVED, Credit Suisse High Yield Bond Fund, a Delaware statutory trust (the Borrower), hereby promises to pay to STATE STREET BANK AND TRUST COMPANY (the Bank) at the office of the Agent (as defined below) at 100 Huntington Avenue, Boston, Massachusetts 02116:
(a) prior to or on the Termination Date (as defined in the Credit Agreement referred to below) the principal amount of Seventy-Five Million dollars (U.S. $75,000,000) or, if less, the aggregate unpaid principal amount of Loans advanced by the Bank to the Borrower pursuant to the Credit Agreement, dated as of December 12, 2008 (as amended, restated, supplemented or otherwise modified from time to time, the Credit Agreement), among the Borrower, the Bank, other lending institutions party thereto and State Street Bank and Trust Company, as agent (the Agent);
(b) without duplication, the principal outstanding hereunder from time to time at the times provided in the Credit Agreement; and
(c) interest on the principal balance hereof from time to time outstanding at the times and at the rates provided in the Credit Agreement.
This Note evidences borrowings under and has been issued by the Borrower in accordance with the terms of the Credit Agreement. The Bank and any holder hereof are entitled to the benefits of the Credit Agreement and the other Loan Documents, and may enforce the agreements of the Borrower contained therein, and any holder hereof may exercise the respective remedies provided for thereby or otherwise available in respect thereof, all in accordance with the respective terms thereof. All capitalized terms used in this Note and not otherwise defined herein shall have the same meanings herein as in the Credit Agreement.
The Borrower irrevocably authorizes the Bank to make or cause to be made, at or about the date of each Loan or at the time of receipt of each payment of principal of this Note, an appropriate notation on the grid attached to this Note, or the continuation of such grid, or any other similar record, including computer records, reflecting the making of such Loan or (as the case may be) the receipt of such payment. The outstanding amount of the Loans set forth on the grid attached to this Note, or the continuation of such grid, or any other similar record, including computer records, maintained by the Bank with respect to any Loans shall be prima facie evidence of the principal amount thereof owing and unpaid to the Bank, but the failure to record, or any error in so recording, any such amount on any such grid, continuation or other record shall not limit or otherwise affect the obligation of the Borrower hereunder or under the Credit Agreement to make payments of principal of and interest on this Note when due.
The Borrower has the right in certain circumstances and the obligation under certain other circumstances to prepay the whole or part of the principal of this Note on the terms and conditions specified in the Credit Agreement.
If any one or more Events of Default shall occur and be continuing, the entire unpaid principal amount of this Note and all of the unpaid interest accrued thereon may become or be declared due and payable in the manner and with the effect provided in the Credit Agreement.
No delay or omission on the part of the Bank or any holder hereof in exercising any right hereunder shall operate as a waiver of such right or of any other rights of the Bank or such holder, nor shall any delay, omission or waiver on any one occasion be deemed a bar or waiver of the same or any other right on any further occasion.
The Borrower and every endorser and guarantor of this Note or the obligation represented hereby waives presentment, demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this Note, and assents to any extension or postponement of the time of payment or any other indulgence, to any substitution, exchange or release of collateral and to the addition or release of any other party or person primarily or secondarily liable.
This Note is a contract under the laws of the Commonwealth of Massachusetts and shall for all purposes be construed in accordance with and governed by the laws of Commonwealth of Massachusetts, without regard to conflict of laws principles that would require the application of the laws of another jurisdiction. Each the Borrower and the Bank agrees that any suit for the enforcement of this Note or any other action brought by such person arising hereunder or in any way related to this Note whether sounding in contract, tort, equity or otherwise, shall be brought in the courts of the Commonwealth of Massachusetts or a federal court sitting therein, and consents to the exclusive jurisdiction of such court and the service of process in any suit being made upon such person by mail at the address specified in Section 9.01 of the Credit Agreement. Each of the Borrower and the Bank hereby waives any objection that it may now or hereafter have to the venue of any suit brought in Boston, Massachusetts or any court sitting therein or that a suit brought therein is brought in an inconvenient court.
IN WITNESS WHEREOF, the undersigned has caused this Note to be signed as a document under seal in its name by its duly authorized officer as of the day and year first above written.
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CREDIT SUISSE HIGH YIELD BOND FUND |
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By: |
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Title: |
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Amount of |
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Balance of |
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Amount |
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Notation |
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of Loan |
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of Loan |
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or Prepaid |
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Unpaid |
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Made By |
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EXHIBIT B
FORM OF
NOTICE OF BORROWING
DATE:[Insert Date] (the Notice Date)
TO: STATE STREET BANK AND TRUST COMPANY, as Agent
[Insert proper address(es) per the Credit Agreement]
FROM: CREDIT SUISSE HIGH YIELD BOND FUND
Reference is hereby made to that certain Credit Agreement, dated as of December 12, 2008 (as amended, restated, supplemented or otherwise modified from time to time, the Credit Agreement), among Credit Suisse High Yield Bond Fund, a Delaware statutory trust (the Borrower), the Banks and other lending institutions party thereto, and State Street Bank and Trust Company, as Agent. Capitalized terms which are used herein without definition and which are defined in the Credit Agreement shall have the same meanings herein as in the Credit Agreement.
Pursuant to Section 2.02(a) of the Credit Agreement, the Borrower hereby requests the Loan described below:
Type of Loan: |
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[Base Rate][LIBOR] |
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If LIBOR: |
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[Interest Period] |
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[Domestic][LIBOR] Business Day of proposed borrowing: |
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[Insert Date] (the Proposed Borrowing Date) |
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Amount of Loan requested hereby: |
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$ |
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The undersigned hereby certifies as follows: |
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(a) |
the Aggregate Commitment Amount (after giving effect to each reduction thereof that has been requested by the Borrower, if any, but which remains pending as of 2:00 p.m. (Boston, Massachusetts time) on the Notice Date (the Notice Time)) (the Applicable Aggregate Commitment Amount) is |
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(b) |
as of the close of business on the Domestic Business Day immediately preceding the Notice Date (the Measurement Time), the Maximum Amount (per Annex 1 hereto) (the Applicable Maximum Amount) is |
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(c) |
the Pro-forma Outstanding Amount (as set defined on Annex 1 hereto) is less than the Applicable Aggregate Commitment Amount; |
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(d) |
the Applicable Total Debt (as defined on Annex 1 hereto) does not exceed the Applicable Maximum Amount; |
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(e) |
on the Proposed Borrowing Date (immediately after giving effect to all proposed Loans referred to in B and C on Annex 1 hereto), the sum of the outstanding principal balance of all Loans plus all other Debt of the Borrower will not exceed the Maximum Amount then in effect; |
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(f) |
each of the representations and warranties of the Borrower set out in the Loan Documents remains true and accurate as of the Notice Time (or, if any such representation or warranty is expressly stated to have been made as of a specific date, as of such specific date) and will be true and accurate on the Proposed Borrowing Date immediately after giving effect to the borrowing of the Loan(s) requested hereby; |
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(g) |
no Default has occurred and is continuing; and |
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(h) |
immediately after giving effect to the borrowing herein requested on the Proposed Borrowing Date, no Default shall exist. |
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CREDIT SUISSE HIGH YIELD BOND FUND |
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By: |
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Name: |
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Title: |
Annex 1
to
Notice of Borrowing
A. |
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The aggregate outstanding principal balance of all Loans as of the Notice Time |
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$ |
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B. |
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The amount of the Loan requested hereby |
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$ |
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C. |
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The amount of all Loans (without duplication of B immediately above) requested the disbursement of which is pending as of the Notice Time |
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$ |
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D. |
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A + B + C (the Pro-forma Outstanding Amount) |
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$ |
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E. |
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All other Debt |
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$ |
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F. |
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Sum of D and E (Applicable Total Debt) |
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$ |
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G. |
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The maximum amount of Debt that the Borrower would be permitted to incur pursuant to Applicable Law (as defined in the Credit Agreement), including the Investment Company Act (as defined in the Credit Agreement) |
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$ |
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H. |
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The maximum amount of Debt that the Borrower would be permitted to incur pursuant to the limitations on borrowings in its Prospectus (as defined in the Credit Agreement) and the Investment Policies and Restrictions (as defined in the Credit Agreement) |
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$ |
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I. |
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In the event that the Borrower shall have entered into any agreement(s) with any Authority (as defined in the Credit Agreement) limiting the amount of Debt that the Borrower may create, incur, assume or suffer to exist,(1) the maximum amount of Debt that the Borrower would be permitted to create, incur, assume or suffer to exist pursuant to such agreements |
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$ |
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J. |
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The maximum amount of Debt that the Borrower would be permitted to incur without violating Section 5.07 or Section 5.19 of the Credit Agreement |
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$ |
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K. |
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The least of G, H, I and J (the Applicable Maximum Amount)(2) |
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$ |
(1) If there are no such agreements, enter N/A
(2) If I is completed as N/A, ignore it for purposes of these calculations.
EXHIBIT C
FORM OF NOTICE OF CONVERSION
DATE:
TO: |
STATE STREET BANK AND TRUST COMPANY, as Agent |
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[Insert proper address(es) per the Credit Agreement] |
FROM: CREDIT SUISSE HIGH YIELD BOND FUND
Reference is hereby made to that certain Credit Agreement, dated as of December 12, 2008 (as amended, restated, supplemented or otherwise modified from time to time, the Credit Agreement), among Credit Suisse High Yield Bond Fund, a Delaware statutory trust, the Banks and other lending institutions party thereto, and State Street Bank and Trust Company, as Agent. Capitalized terms which are used herein without definition and which are defined in the Credit Agreement shall have the same meanings herein as in the Credit Agreement.
Pursuant to Section 2.02(b) of the Credit Agreement, please convert or continue the following Loan as set forth below:
Existing Loan
Type |
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Amount |
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LIBOR |
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$ |
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Base Rate |
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$ |
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If LIBOR, last day of current Interest Period is:
New Loan
Continue As |
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Interest |
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/Convert to |
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Amount |
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Date* |
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Period |
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LIBOR |
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$ |
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Base Rate |
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$ |
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N/A |
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The undersigned hereby certifies that no Event of Default has occurred and is continuing or would occur immediately after giving effect to the conversion or continuation of the Loan(s) herein requested.
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CREDIT SUISSE HIGH YIELD BOND FUND |
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By: |
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Name: |
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Title: |
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*Must be a Domestic Business Day or a LIBOR Business Day, as applicable.
EXHIBIT D
FORM OF BORROWING BASE REPORT
Date
STATE STREET BANK AND TRUST COMPANY
[Address(es) (a Borrowing Base Report that accompanies a Notice of Borrowing need only be sent to the Agent, while periodic Borrowing Base Reports need to be sent to the Agent and each Bank)] |
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Attention:
Ladies and Gentlemen:
Reference is hereby made to the Credit Agreement, dated as of December 12, 2008 (as amended, restated, supplemented or otherwise modified from time to time, the Credit Agreement), by and among Credit Suisse High Yield Bond Fund, a Delaware statutory trust (the Borrower), the Banks and other lending institutions party thereto and State Street Bank and Trust Company, as Agent for the Banks. Capitalized terms used herein and not otherwise defined shall have the meanings assigned to such terms in the Credit Agreement.
This Borrowing Base Report is delivered to you pursuant to [Section 2.02(a) or Section 5.01(c)] of the Credit Agreement. The undersigned hereby certifies to you as follows:
(a) as of the close of business on [Date](1) (the Notice Time), the Borrowing Base was $ (the Applicable Borrowing Base),
(b) Annex 1 attached hereto is a true and accurate detailed calculation of the Borrowing Base as of the Notice Time,
(c) the aggregate outstanding principal balance of the Loans [[immediately AFTER giving effect to the making of the Loans requested in the Notice of Borrowing dated (2)] or [at the Notice Time(3)]]: $ (the Applicable Loan Amount), and
(1) For a Borrowing Base Report delivered pursuant to Section 2.02(a) of the Credit Agreement, this date should be the Domestic Business Day immediately preceding the proposed borrowing date related thereto. For a Borrowing Base Report delivered pursuant to Section 5.01(c) of the Credit Agreement, this date should be the last Domestic Business Day of the immediately preceding calendar week.
(2) For use when borrowing.
(3) For periodic reporting.
(d) the Applicable Borrowing Base [is less than][equals][exceeds] the Applicable Loan Amount.
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CREDIT SUISSE HIGH YIELD BOND FUND |
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By: |
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Name: |
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Title: |
Annex 1
to
Borrowing Base Report
[TO FOLLOW]
EXHIBIT E
FORM OF
ASSIGNMENT AND ACCEPTANCE
Date
Reference is made to the Credit Agreement, dated as of December 12, 2008 (as amended, restated, supplemented or otherwise modified from time to time, the Credit Agreement), by and among Credit Suisse High Yield Bond Fund, a Delaware statutory trust (the Borrower), the Banks and other lending institutions party thereto and State Street Bank and Trust Company, as Agent. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement.
(the Assignor) and (the Assignee) hereby agree as follows:
§1. Assignors. Subject to the terms and conditions of this Assignment and Acceptance, the Assignor hereby sells and assigns to the Assignee, and the Assignee hereby purchases and assumes without recourse to the Assignor, a [$ ] interest in and to the rights, benefits, indemnities and obligations of the Assignor under the Credit Agreement equal to [ %] in respect of the Assignors Commitment Amount immediately prior to the Effective Date (as hereinafter defined).
§2. Assignors Representations. The Assignor (a) represents and warrants that (i) it is legally authorized to enter into this Assignment and Acceptance, (ii) as of the date hereof, its Commitment Amount is [$ ], its Commitment Percentage is [ %], the aggregate outstanding principal balance of its Loans equals [$ ] , (in each case before giving effect to the assignment contemplated hereby and without giving effect to any contemplated assignments which have not yet become effective), and (iii) immediately after giving effect to all assignments which have not yet become effective, the Assignors Commitment Percentage will be sufficient to give effect to this Assignment and Acceptance, (b) makes no representation or warranty, express or implied, and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Credit Agreement or any of the other Loan Documents or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement, any of the other Loan Documents or any other instrument or document furnished pursuant thereto or the attachment, perfection or priority of any security interest or mortgage, other than that it is the legal and beneficial owner of the interest being assigned by it hereunder free and clear of any claim or encumbrance; (c) makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower or any other Person primarily or secondarily liable in respect of any of the Loans, or the performance or observance by the Borrower or any other Person primarily or secondarily liable in respect of any of the Loans of any of its obligations under the Credit Agreement or any of the other Loan Documents or any other instrument or document delivered or executed pursuant thereto; and (d) attaches hereto the Note delivered to it under the Credit Agreement.
The Assignor requests that the Borrower exchange the Assignors Note for new Notes payable to the Assignor and the Assignee as follows:
Notes Payable to |
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Amount of Note |
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Assignor |
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$ |
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Assignee |
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$ |
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§3. Assignees Representations. The Assignee (a) represents and warrants that (i) it is duly and legally authorized to enter into this Assignment and Acceptance, (ii) the execution, delivery and performance of this Assignment and Acceptance do not conflict with any provision of law or of the charter or by-laws of the Assignee, or of any agreement binding on the Assignee, (iii) all acts, conditions and things required to be done and performed and to have occurred prior to the execution, delivery and performance of this Assignment and Acceptance, and to render the same the legal, valid and binding obligation of the Assignee, enforceable against it in accordance with its terms, have been done and performed and have occurred in due and strict compliance with all applicable laws; (b) confirms that it has received a copy of the Credit Agreement, together with copies of the most recent financial statements delivered pursuant to Section 5.01 thereof and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance; (c) agrees that it will, independently and without reliance upon the Assignor, the Agent, or any Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement; (d) appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under the Credit Agreement and the other Loan Documents as are delegated to the Agent by the terms thereof, together with such powers as are reasonably incidental thereto; [and] (e) agrees that it will perform in accordance with their terms all the obligations which by the terms of the Credit Agreement are required to be performed by it as a Bank[ ; and (f) attaches hereto the forms required to be delivered by it pursuant to Section 2.11 of the Credit Agreement].
§4. Effective Date. The effective date for this Assignment and Acceptance shall be [ ] [such date to be no earlier than the third Domestic Business Day after the date that a fully signed copy hereof shall have been delivered to the Agent] (the Effective Date). Following the execution of this Assignment and Acceptance each party hereto shall deliver its duly executed counterpart hereof to the Agent for consent by the Agent (and the Borrower, if required by the Credit Agreement) and recording in the Register.
§5. Rights Under Credit Agreement. Upon such recording in the Register, from and after the Effective Date, (a) the Assignee shall be a party to the Credit Agreement and, to the extent provided in this Assignment and Acceptance, have the rights and obligations of a Bank thereunder, and (b) the Assignor shall, with respect to that portion of its interest under the Credit Agreement assigned hereunder, relinquish its rights and be released from its obligations under the Credit Agreement other than its obligations, if any, under Section 9.09 thereof; provided, however, that the Assignor shall retain its rights to be indemnified pursuant to Section 9.03 of the Credit Agreement with respect to any claims or actions arising prior to the Effective Date.
§6. Payments. Upon such recording in the Register, from and after the Effective Date, the Agent shall make all payments in respect of the rights and interests assigned hereby (including payments of principal, interest, fees and other amounts) to the Assignee. The Assignor and the Assignee shall make any appropriate adjustments in payments for periods prior to the Effective Date by the Agent or with respect to the making of this assignment directly between themselves.
§7. Governing Law. This Agreement is a contract under the laws of the Commonwealth of Massachusetts and shall for all purposes be construed in accordance with and governed by the laws of Commonwealth of Massachusetts, without regard to conflict of laws principles that would require the application of the laws of another jurisdiction.
§8. Counterparts. This Assignment and Acceptance may be executed in any number of counterparts which shall together constitute but one and the same agreement.
[Signature page follows.]
IN WITNESS WHEREOF, intending to be legally bound, each of the undersigned has caused this Assignment and Acceptance to be executed on its behalf by its officer thereunto duly authorized, as of the date first above written.
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[ASSIGNOR] |
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By: |
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Name: |
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Title: |
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[ASSIGNEE] |
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By: |
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Name: |
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Title: |
[CONSENTED TO:]
[NAME OF BORROWER]
[By: |
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Name: |
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Title:] |
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[STATE STREET BANK AND TRUST COMPANY, as Agent |
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By: |
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Name: |
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Title:] |
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EXHIBIT F
FORM OF STATUTORY COVERAGE RATIO CERTIFICATE
Date
STATE STREET BANK AND TRUST COMPANY
[Address(es) (Statutory Coverage Ratio Certificates delivered pursuant to Section 2.02 of the Credit Agreement need only be sent to the Agent, while Statutory Coverage Ratio Certificates delivered pursuant to Section 5.01(d) need to be sent to the Agent and each Bank)] |
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Attention:
Ladies and Gentlemen:
Reference is hereby made to the Credit Agreement, dated as of December 12, 2008 (as amended, restated, supplemented or otherwise modified from time to time, the Credit Agreement), by and among Credit Suisse High Yield Bond Fund, a Delaware statutory trust (the Borrower), the Banks and other lending institutions party thereto and State Street Bank and Trust Company, as Agent for the Banks. Capitalized terms used herein and not otherwise defined shall have the meanings assigned to such terms in the Credit Agreement.
This Statutory Coverage Ratio Certificate is delivered to you pursuant to [Section 2.02 or Section 5.01(d)] of the Credit Agreement. The undersigned hereby certifies to you as follows:
(a) as of the close of business on [Date](1) (the Notice Time), the Statutory Coverage Ratio was : ,
(b) the following is a true and accurate calculation of the Statutory Coverage Ratio as of the Notice Time:
A |
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Asset Value of Total Assets |
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$ |
[ ] |
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B |
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Total Liabilities that are not Senior Securities Representing Indebtedness |
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$ |
[ ] |
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C |
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Senior Securities Representing Indebtedness |
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$ |
[ ] |
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Statutory |
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Coverage Ratio(2) |
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(A-B)/C |
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[ ]:1.00 |
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(1) The last Domestic Business Day of the immediately preceding calendar week.
EXHIBIT G
FORM OF COMPLIANCE CERTIFICATE
Reference is hereby made to that certain Credit Agreement, dated as of December 12, 2008 (as amended, restated, supplemented or otherwise modified from time to time, the Credit Agreement), among Credit Suisse High Yield Bond Fund, a Delaware statutory trust (the Borrower), the Banks and other lending institutions party thereto, and State Street Bank and Trust Company, as Agent. Capitalized terms which are used herein without definition and which are defined in the Credit Agreement shall have the same meanings herein as in the Credit Agreement.
This Compliance Certificate is delivered to you pursuant to Section 5.01(e) of the Credit Agreement. The undersigned hereby certifies to you that, as of [fill in the appropriate fiscal year-end, semi-annual period or monthly Calculation Date], [no Default has occurred and is continuing] or [the following Default[s] [has/have] occurred and [is/are] continuing: and the Borrower [has taken/is taking] the following actions with respect thereto: ].
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CREDIT SUISSE HIGH YIELD BOND FUND |
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By: |
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Name: |
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Title: |
EXHIBIT H
FORM OF
NOTICE OF REPAYMENT
DATE:[Insert Date] (the Notice Date)
TO: |
STATE STREET BANK AND TRUST COMPANY, as Agent |
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[Insert proper address(es) per the Credit Agreement] |
FROM: CREDIT SUISSE HIGH YIELD BOND FUND
Reference is hereby made to that certain Credit Agreement, dated as of December 12, 2008 (as amended, restated, supplemented or otherwise modified from time to time, the Credit Agreement), among Credit Suisse High Yield Bond Fund, a Delaware statutory trust (the Borrower), the Banks and other lending institutions party thereto, and State Street Bank and Trust Company, as Agent. Capitalized terms which are used herein without definition and which are defined in the Credit Agreement shall have the same meanings herein as in the Credit Agreement.
Pursuant to Section 2.05(g) of the Credit Agreement, the Borrower hereby notifies the Agent of the following Loan repayment/prepayment:
Type of Loan: |
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[Base Rate][LIBOR] |
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If LIBOR: |
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[Interest Period] |
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[Domestic][LIBOR] Business Day of proposed repayment/prepayment: |
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[Insert Date] (the Proposed Repayment Date) |
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Amount of repayment/prepayment: |
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$ |
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(the Repayment Amount) |
The Agent is hereby authorized and directed to debit the following DDA account on the Proposed Repayment Date in the amount of the Repayment Amount and apply the proceeds thereof repay/prepay the outstanding principal balance of such Loan: DDA Acct No.:
[The balance of this Notice only needs to be completed if, after giving effect to the repayment/prepayment contemplated hereby, all or any portion of any Loan would remain outstanding]
The undersigned hereby certifies as follows:
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(a) |
the Aggregate Commitment Amount (after giving effect to each reduction thereof that has been requested by the Borrower, if any, but which remains pending as of 2:00 p.m. |
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(Boston, Massachusetts time) on the Notice Date (the Notice Time)) (the Applicable Aggregate Commitment Amount) is |
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$ |
; |
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(b) |
as of the close of business on the Domestic Business Day immediately preceding the Notice Date (the Measurement Time), the Maximum Amount (per Annex 1 hereto) (the Applicable Maximum Amount) is |
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$ |
; |
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(c) |
the Pro-forma Outstanding Amount (as set defined on Annex 1 hereto) is less than the Applicable Aggregate Commitment Amount; |
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(d) |
the Applicable Total Debt (as defined on Annex 1 hereto) does not exceed the Applicable Maximum Amount; and |
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(e) |
on the Proposed Repayment Date (immediately after giving effect to the repayment/prepayment of the Payment Amount), the sum of the outstanding principal balance of all Loans plus all other Debt of the Borrower will not exceed the Maximum Amount then in effect. |
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CREDIT SUISSE HIGH YIELD BOND FUND |
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By: |
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Name: |
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Title: |
Annex 1
to
Notice of Repayment
A. |
The aggregate outstanding principal balance of all Loans as of the Notice Time |
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$ |
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B. |
The Repayment Amount |
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$ |
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C. |
A - B (the Pro-forma Outstanding Amount) |
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$ |
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D. |
All other Debt |
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$ |
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E. |
Sum of C and D (Applicable Total Debt) |
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$ |
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F. |
The maximum amount of Debt that the Borrower would be permitted to incur pursuant to Applicable Law (as defined in the Credit Agreement), including the Investment Company Act (as defined in the Credit Agreement) |
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$ |
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G. |
The maximum amount of Debt that the Borrower would be permitted to incur pursuant to the limitations on borrowings in its Prospectus (as defined in the Credit Agreement) and the Investment Policies and Restrictions (as defined in the Credit Agreement) |
|
$ |
|
H. |
In the event that the Borrower shall have entered into any agreement(s) with any Authority (as defined in the Credit Agreement) limiting the amount of Debt that the Borrower may create, incur, assume or suffer to exist,(1) the maximum amount of Debt that the Borrower would be permitted to create, incur, assume or suffer to exist pursuant to such agreements |
|
$ |
|
I. |
The maximum amount of Debt that the Borrower would be permitted to incur without violating Section 5.07 or Section 5.19 of the Credit Agreement |
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$ |
|
J. |
The least of F, G, H, and I (the Applicable Maximum Amount)(2) |
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$ |
|
(1) If there are no such agreements, enter N/A
(2) If I is completed as N/A, ignore it for purposes of these calculations.
Exhibit 99.(k)(4)
EXECUTION COPY
AMENDMENT NO. 1 TO CREDIT AGREEMENT
AMENDMENT NO. 1 (this Amendment), dated as of December 11, 2009, to the Credit Agreement, dated as of December 12, 2008 (as the same may be further amended, supplemented or otherwise modified from time to time, the Credit Agreement), by and among Credit Suisse High Yield Bond Fund, a Delaware statutory trust (the Borrower), the Banks party thereto, and State Street Bank and Trust Company, as agent for the Banks (in such capacity, the Agent).
RECITALS
I. Capitalized terms used in this agreement and not herein defined shall have the meanings set forth in the Credit Agreement.
II. The Borrower desires to amend the Credit Agreement upon the terms and conditions set forth herein, and all of the Banks and the Agent are willing to do so on the terms and conditions set forth herein.
Accordingly, in consideration of the Recitals and the covenants, conditions and agreements hereinafter set forth, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows:
1. The table within the defined term Applicable Rate contained in SECTION 1.01 of the Credit Agreement is hereby amended and restated in its entirety as follows:
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Loan Rate |
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Fee Rate |
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Whenever the Statutory Coverage Ratio is greater than or equal to 5.00:1.00 |
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1.00 |
% |
0.15 |
% |
All other times |
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1.25 |
% |
0.25 |
% |
2. Clause (e) of the defined term Maximum Amount contained in SECTION 1.01 of the Credit Agreement is hereby amended and restated in its entirety as follows:
(e) the amount of Senior Securities Representing Indebtedness that would cause the Statutory Coverage Ratio to be 3.33:1.00.
3. The defined term Termination Date contained in SECTION 1.01 of the Credit Agreement is hereby amended and restated in its entirety as follows:
Termination Date means December 10, 2010, or such earlier date on which the Commitments terminate or are terminated pursuant to the terms hereof.
4. Paragraphs 1 through 3 of this Amendment shall not be effective until each of the following conditions are satisfied (the date, if any, on which such conditions shall have first been satisfied being referred to herein as the Amendment Effective Date):
(a) the Agent shall have received from the Borrower and each Bank either (i) a counterpart of this Amendment executed on behalf of such party, or (ii) written evidence satisfactory to the Agent (which may include telecopy transmission of a signed signature page of this Amendment) that each such party has executed a counterpart of this Amendment;
(b) the Agent shall have received from the Borrower a manually signed certificate from the Secretary of the Borrower, in all respects satisfactory to the Agent, (i) certifying as to the incumbency of authorized persons of the Borrower executing this Amendment, (ii) attaching true, complete and correct copies of the resolutions duly adopted by the board of trustees of the Borrower approving this Amendment and the transactions contemplated hereby, all of which are in full force and effect on the date hereof, and (iii) certifying that the Borrowers Charter Documents, Prospectus, statement of additional information, registration statement, investment management agreement between the Borrower and the Investment Adviser, Custody Agreement, and Pricing Procedures have not been amended, supplemented or otherwise modified since December 12, 2008 or, if so, attaching true, complete and correct copies of each such amendment, supplement or modification;
(c) the Agent and the Banks shall have received written opinion(s) from counsel to the Borrower in form and substance reasonably acceptable to the Agent; and
(d) the Borrower shall have paid all out-of-pocket fees and expenses incurred by the Agent (including, without limitation, reasonable legal fees and disbursements of counsel to the Agent) in connection herewith.
5. The Borrower (a) reaffirms and admits the validity and enforceability of each Loan Document and all of its obligations thereunder, (b) agrees and admits that it has no defense to or offset against any such obligation, and (c) represents and warrants that, as of the date of execution and delivery hereof by the Borrower, no Default has occurred and is continuing.
6. In all other respects, the Loan Documents shall remain in full force and effect, and no amendment in respect of any term or condition of any Loan Document shall be deemed to be an amendment in respect of any other term or condition contained in any Loan Document.
7. This Amendment may be executed in any number of counterparts, each of which shall constitute an original but all of which when taken together shall constitute a single contract. It shall not be necessary in making proof of this Amendment to produce or account for more than one counterpart signed by the party to be charged.
8. THIS AMENDMENT SHALL BE CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE COMMONWEALTH OF MASSACHUSETTS, WITHOUT REGARD TO
CONFLICT OF LAWS PRINCIPLES THAT WOULD REQUIRE THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.
[Remainder of page intentionally left blank.]
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1 to the Credit Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written.
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CREDIT SUISSE HIGH YIELD BOND FUND |
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|
|
|
|
|
|
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By: |
/s/ Michael A. Pignataro |
|
Name: |
Michael A. Pignataro |
|
Title: |
Chief Financial Officer |
[Amendment No. 1 to Credit Agreement]
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STATE STREET BANK AND TRUST COMPANY, as a Bank and as the Agent |
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|
|
|
|
|
|
|
By: |
/s/ Paul J. Koobatian |
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Name: |
Paul J. Koobatian |
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Title: |
Vice President |
[Amendment No. 1 to Credit Agreement]
Exhibit 99.(k)(5)
EXECUTION COPY
SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of December 12, 2008, among (a) CREDIT SUISSE HIGH YIELD BOND FUND (the Borrower), (b) STATE STREET BANK AND TRUST COMPANY, as agent (hereinafter, in such capacity and only such capacity, the Agent) for itself and the other lending institutions (hereinafter, collectively, the Banks) which are or may become parties to a Credit Agreement dated as of the date hereof (as amended, supplemented or otherwise modified from time to time, the Credit Agreement), among the Borrower, the Banks and the Agent; and (c) STATE STREET BANK AND TRUST COMPANY, in its capacity as Custodian (as defined in the Credit Agreement) (in such capacity and only such capacity, the Custodian).
WHEREAS, it is a condition precedent to the Banks committing to extend credit and making loans or other extensions of credit to the Borrower under the Credit Agreement that the Borrower execute and deliver to the Agent, for the benefit of the Banks and the Agent, a security agreement in substantially the form hereof;
WHEREAS, the Borrower wishes to grant a security interest in favor of the Agent, for the benefit of the Banks and the Agent, as herein provided; and
WHEREAS, the Borrower and the Custodian are parties to that certain Custodian Agreement, dated as of October 20, 2000 by and between the Custodian and each of the companies listed and described on Exhibit 1 thereto (as the same may be amended, supplemented or otherwise modified, the Custody Agreement);
NOW, THEREFORE, in consideration of the promises contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1. Definitions; Rules of Construction.
1.1. The term Commercial Tort Claims shall have the meaning provided in the Uniform Commercial Code except it shall refer only to such claims that have been asserted in judicial proceedings.
1.2. The term Excluded Collateral means any right, title or interest of the Borrower in, to or under any lease, license, permit or other contract or agreement constituting a general intangible, but only to the extent that the granting of a security interest therein or an assignment thereof, in either case hereunder, would violate any applicable law or any enforceable provision of any such lease, license or other contract or agreement, as applicable (each a Select General Intangible), provided that to the extent such security interest or assignment hereunder shall at any time hereafter no longer violate such applicable law or enforceable provision, or such provision shall no longer be enforceable, as the case may be, such Select General Intangible shall automatically and without any further action cease to be Excluded Collateral, and the Borrower shall be deemed to have granted automatically and without any further action a security interest in
such Select General Intangible as if such applicable law had never existed or such provision had never been enforceable, as the case may be.
1.3. The term Instructions means (a) with respect to deposit accounts, instructions within the meaning of Section 9-104(a)(2) of the Uniform Commercial Code, (b) with respect to any security entitlement, any entitlement order within the meaning of Section 8-106(d)(2) of the Uniform Commercial Code, (c) with respect to any commodity contract, any directions as to the application of any value distributed on account of such commodity contract within the meaning of Section 9-106(a)(2), and (d) with respect to any uncertificated security, instructions within the meaning of Section 8-106(c)(2) of the Uniform Commercial Code.
1.4. The term Liquid Collateral means any Collateral of the type described in Section 9-611(d) of the Uniform Commercial Code.
1.5. The term Permitted Liens means Liens permitted pursuant to Section 5.08 of the Credit Agreement.
1.6. The term Permitted Prior Liens means Liens permitted pursuant to clause (c) and clause (d) of Section 5.08 of the Credit Agreement.
1.7. The term Uniform Commercial Code means the Uniform Commercial Code of the State.
1.8. The term State, as used herein, means The Commonwealth of Massachusetts, and all capitalized terms used herein without definitions shall have the respective meanings provided therefor in the Credit Agreement. All other terms used herein that are defined in the Uniform Commercial Code shall have the same definitions herein as specified therein, provided that if any such term is defined in Article 9 of the Uniform Commercial Code differently than in another Article of the Uniform Commercial Code, the term shall have the meaning specified in such Article 9.
1.9. The Agent, the Borrower and the Custodian acknowledge that the Agent and the Custodian are the same legal entity and that any assets of the Borrower delivered to the Agent hereunder are deemed to have been delivered to the Custodian to be held pursuant to the terms of the Custody Agreement, subject to the rights of the Agent hereunder.
2. Grant of Security Interest.
2.1. Grant; Collateral Description. The Borrower hereby grants to the Agent, for the benefit of the Banks and the Agent, to secure the payment and performance in full of all of the Obligations, a security interest in and pledges and assigns to the Agent, for the benefit of the Banks and the Agent, the following properties, assets and rights of the Borrower, wherever located, whether now owned or hereafter acquired or arising, and all proceeds and products thereof (all of the same being hereinafter called the Collateral): all personal and fixture property of every kind and nature including all goods (including inventory, equipment and any accessions thereto), instruments
(including promissory notes), documents (including, if applicable, electronic documents), accounts (including health-care-insurance receivables), chattel paper (whether tangible or electronic), deposit accounts, letter-of-credit rights (whether or not the letter of credit is evidenced by a writing), Commercial Tort Claims, securities and all other investment property, supporting obligations, any other contract rights or rights to the payment of money, insurance claims and proceeds, and all general intangibles (including all payment intangibles), but excluding Excluded Collateral.
2.2. Commercial Tort Claims. The Agent acknowledges that the attachment of its security interest in any Commercial Tort Claim as original collateral is subject to the Borrowers compliance with §4.7.
3. Authorization to File Financing Statements. The Borrower hereby irrevocably authorizes the Agent at any time and from time to time to file in any filing offices in any Uniform Commercial Code jurisdictions any financing statements and amendments thereto that (a) indicate the Collateral (i) as all assets of the Borrower or words of similar effect, regardless of whether any particular asset comprised in the Collateral falls within the scope of Article 9 of the Uniform Commercial Code of the State or such jurisdiction, or (ii) as being of an equal or lesser scope or with greater detail, and (b) provide any other information required by part 5 of Article 9 of the Uniform Commercial Code of the State or such other jurisdiction for the sufficiency or filing office acceptance of any financing statement or amendment, including (i) whether the Borrower is an organization, the type of organization and any organizational identification number issued to the Borrower, and (ii) in the case of a financing statement filed as a fixture filing or indicating Collateral as as-extracted collateral or timber to be cut, a sufficient description of real property to which the Collateral relates. The Borrower agrees to furnish any such information to the Agent promptly upon request. The Borrower also ratifies its authorization for the Agent to have filed in any Uniform Commercial Code jurisdiction any like financing statements or amendments thereto if filed prior to the date hereof.
4. Other Actions. Further to insure the attachment, perfection and, subject to Prior Permitted Liens, first priority of, and the ability of the Agent to enforce, the Agents security interest in the Collateral, the Borrower agrees, in each case at the Borrowers expense, to take the following actions with respect to the following Collateral and without limitation on the Borrowers other obligations contained in this Agreement:
4.1. Promissory Notes and Tangible Chattel Paper. If the Borrower shall, now or at any time hereafter, hold or acquire any promissory notes or tangible chattel paper, the Borrower shall forthwith endorse, assign and deliver the same to the Agent, accompanied by such instruments of transfer or assignment duly executed in blank as the Agent may from time to time specify.
4.2. Deposit Accounts. For each deposit account that the Borrower, now or at any time hereafter, opens or maintains, the Borrower shall, at the Agents request and option, pursuant to an agreement in form and substance satisfactory to the Agent, either (a) cause the depositary bank therefor to agree to comply, without further consent of the Borrower, at all times with Instructions from the Agent to such depositary bank directing the disposition of funds from time to time credited to such deposit account, or (b) arrange
for the Agent to become the customer of such depositary bank with respect to such deposit account, with the Borrower being permitted, only with the consent of the Agent, to exercise rights to withdraw funds from such deposit account. The Agent agrees with the Borrower that the Agent shall not give any such Instructions or withhold any withdrawal rights from the Borrower, unless (i) an Event of Default has occurred and is continuing, or (ii) an Event of Default would occur if effect were given to any such withdrawal.
4.3. Investment Property. If the Borrower shall, now or at any time hereafter, hold or acquire any certificated securities, the Borrower shall forthwith endorse, assign and deliver the same to the Agent, accompanied by such instruments of transfer or assignment duly executed in blank as the Agent may from time to time specify. If any securities now or hereafter acquired by the Borrower are uncertificated and are issued to the Borrower or its nominee directly by the issuer thereof, the Borrower shall immediately notify the Agent thereof and, at the Agents request and option, pursuant to an agreement in form and substance satisfactory to the Agent, either (a) cause the issuer to agree to comply without further consent of the Borrower or such nominee, at any time with Instructions from the Agent as to such securities, or (b) arrange for the Agent to become the registered owner of the securities. If any securities, whether certificated or uncertificated, or any direct or indirect interest therein or in other investment property now or hereafter acquired by the Borrower are held by the Borrower or its nominee through a securities intermediary or commodity intermediary, the Borrower shall immediately notify the Agent thereof and, at the Agents request and option, pursuant to an agreement in form and substance satisfactory to the Agent, either (i) cause such securities intermediary or (as the case may be) commodity intermediary to agree to comply, in each case without further consent of the Borrower or such nominee, at any time with Instructions from the Agent, or (ii) in the case of financial assets or other investment property held through a securities intermediary, arrange for the Agent to become the entitlement holder with respect to such investment property, with the Borrower being permitted, only with the consent of the Agent, to exercise rights to withdraw or otherwise deal with such investment property. The Agent agrees with the Borrower that the Agent shall not give any such Instructions to any such issuer, securities intermediary or commodity intermediary, and shall not withhold its consent to the exercise of any withdrawal or dealing rights by the Borrower, unless an Event of Default has occurred and is continuing, or, after giving effect to any such Instruction or withdrawal rights, would occur.
4.4. Collateral in the Possession of a Bailee. If any Collateral is, now or at any time hereafter, in the possession of a bailee, the Borrower shall promptly notify the Agent thereof and, at the Agents request and option, shall promptly obtain an acknowledgement from the bailee, in form and substance satisfactory to the Agent, that the bailee holds such Collateral for the benefit of the Agent and such bailees agreement to comply, without further consent of the Borrower, at any time with instructions of the Agent as to such Collateral.
4.5. Electronic Chattel Paper, Electronic Documents and Transferable Records. If the Borrower, now or at any time hereafter, holds or acquires an interest in
any electronic chattel paper, any electronic document or any transferable record, as that term is defined in Section 201 of the federal Electronic Signatures in Global and National Commerce Act, or in §16 of the Uniform Electronic Transactions Act as in effect in any relevant jurisdiction, the Borrower shall promptly notify the Agent thereof and, at the request and option of the Agent, shall take such action as the Agent may reasonably request to vest in the Agent control, under §9-105 of the Uniform Commercial Code of the State or any other relevant jurisdiction, of such electronic chattel paper, control, under §7-106 of the Uniform Commercial Code of the State or any other relevant jurisdiction, of such electronic document or control, under Section 201 of the federal Electronic Signatures in Global and National Commerce Act or, as the case may be, §16 of the Uniform Electronic Transactions Act, as so in effect in such jurisdiction, of such transferable record. The Agent agrees with the Borrower that the Agent will arrange, pursuant to procedures satisfactory to the Agent and so long as such procedures will not result in the Agents loss of control, for the Borrower to make alterations to the electronic chattel paper, electronic document or transferable record permitted under Uniform Commercial Code §9-105, Uniform Commercial Code §7-106, or, as the case may be, Section 201 of the federal Electronic Signatures in Global and National Commerce Act or §16 of the Uniform Electronic Transactions Act for a party in control to make without loss of control, unless an Event of Default has occurred and is continuing or would occur after taking into account any action by the Borrower with respect to such electronic chattel paper, electronic document or transferable record. The provisions of this §4.5 relating to electronic documents and control under Uniform Commercial Code §7-106 apply in the event that the 2003 revisions to Article 7, with amendments to Article 9, of the Uniform Commercial Code, in substantially the form approved by the American Law Institute and the National Conference of Commissioners on Uniform State Laws, are now or hereafter adopted and become effective in the State or in any other relevant jurisdiction.
4.6. Letter-of-Credit Rights. If the Borrower is, now or at any time hereafter, a beneficiary under a letter of credit now or hereafter, the Borrower shall promptly notify the Agent thereof and, at the request and option of the Agent, the Borrower shall, pursuant to an agreement in form and substance satisfactory to the Agent, either (a) arrange for the issuer and any confirmer of such letter of credit to consent to an assignment to the Agent of the proceeds of the letter of credit or (b) arrange for the Agent to become the transferee beneficiary of the letter of credit, with the Agent agreeing, in each case, that the proceeds of the letter of credit are to be applied as provided in the Credit Agreement.
4.7. Commercial Tort Claims. If the Borrower shall, now or at any time hereafter, hold or acquire a Commercial Tort Claim, the Borrower shall immediately notify the Agent in a writing signed by the Borrower of the particulars thereof and grant to the Agent, for the benefit of the Banks and the Agent, in such writing a security interest therein and in the proceeds thereof, all upon the terms of this Agreement, with such writing to be in form and substance satisfactory to the Agent.
4.8. Other Actions as to any and all Collateral. The Borrower further agrees, upon the request of the Agent and at the Agents option, to take any and all other
actions as the Agent may determine to be necessary or useful for the attachment, perfection and, subject to Permitted Prior Liens, first priority of, and the ability of the Agent to enforce, the Agents security interest in any and all of the Collateral, including (a) executing (to the extent, if any, that the Borrowers signature thereon is required therefor), delivering and, where appropriate, filing financing statements and amendments relating thereto under the Uniform Commercial Code of any relevant jurisdiction, to the extent, if any, that the Borrowers signature thereon is required therefor, (b) causing the Agents name to be noted as secured party on any certificate of title for a titled good if such notation is a condition to attachment, perfection or priority of, or ability of the Agent to enforce, the Agents security interest in such Collateral, (c) complying with any provision of any statute, regulation or treaty of the United States as to any Collateral if compliance with such provision is a condition to attachment, perfection or priority of, or ability of the Agent to enforce, the Agents security interest in such Collateral, (d) obtaining governmental and other third party waivers, consents and approvals, in form and substance satisfactory to the Agent, including any consent of any licensor, lessor or other person obligated on Collateral, and any party or parties whose consent is required for the security interest of the Agent to attach under §2.2, (e) obtaining waivers from mortgagees and landlords in form and substance satisfactory to the Agent and (f) taking all actions under any other law, as reasonably determined by the Agent to be applicable in any relevant jurisdiction, including any foreign jurisdiction.
4.9. Custodian as Securities Intermediary and as Bank. The parties hereto hereby acknowledge and agree that until the Custodian has received Instructions from the Agent to the contrary, the Borrower shall be entitled to continue to give the Custodian instructions as to the securities and deposit accounts of the Borrower maintained with the Custodian pursuant to the Custody Agreement (the Accounts), all of the securities and other financial assets from time to time in the Accounts, any cash balances in or credited to the Accounts and in any and all proceeds of any thereof, whether now or hereafter existing or arising (collectively, the Account Collateral), provided, however, that the Borrower agrees that it shall not instruct the Custodian to, and the Custodian agrees that it shall not, close the Accounts, in each case without the Agents prior written consent and, provided, further, that the Agent hereby agrees that it will not instruct the Custodian to the contrary unless an Event of Default has occurred and is continuing. The Agent shall be entitled, for purposes of this Agreement, to give the Custodian Instructions as to the disposition, investment or withdrawal of any of the Account Collateral, or as to any other matters relating to the Accounts or any of the Account Collateral, without the Borrowers further consent. The Agent agrees with the Borrower that the Agent shall not give any such Instructions (a) unless an Event of Default has occurred and is continuing, or (b) except as otherwise expressly provided herein. The Custodian hereby agrees to comply with any such Instructions from the Agent, without any further consent from the Borrower. The Custodian shall be fully entitled to rely upon such Instructions from the Agent even if such Instructions are contrary to any instructions or demands that the Borrower may give to the Custodian. The Custodian shall have no duty to inquire or determine whether the Borrowers obligations to the Agent or the Banks are in default or whether the Agent is entitled, under this Agreement or any separate agreement between the Borrower and the Agent, to give any such Instructions. For the avoidance of doubt, the Custodian shall have no responsibility for determining or maintaining any Collateral
or Borrowing Base requirement under the Credit Agreement. The Borrower further agrees to be responsible for the Custodians customary charges and to indemnify the Custodian from and to hold the Custodian harmless against any loss, cost or expense that the Custodian may sustain or incur in acting upon instructions from the Agent or the Borrower hereunder which the Custodian believes in good faith to be instructions from the Agent or the Borrower, as the case may be. The Custodian represents and warrants to the Agent that the Custody Agreement between the Borrower and the Custodian relating to the establishment and general operation of the Accounts is governed by the laws of the State. In addition, the Borrower covenants with the Agent that the Borrower will not, without the Agents prior written consent, agree to amend the Custody Agreement so that it is governed by the law of another jurisdiction. The parties agree that for purposes of Sections 8-110, 9-304 and 9-305 of the Uniform Commercial Code, the Commonwealth of Massachusetts shall be the Custodians jurisdiction.
5. Representations and Warranties Concerning Borrowers Legal Status. The Borrower has previously delivered to the Agent a certificate signed by the Borrower and entitled Perfection Certificate (the Perfection Certificate). The Borrower represents and warrants to the Banks and the Agent as follows: (a) the Borrowers exact legal name is that indicated on the Perfection Certificate and on the signature page hereof, (b) the Borrower is an organization of the type, and is organized in the jurisdiction, set forth in the Perfection Certificate, (c) the Perfection Certificate accurately sets forth the Borrowers organizational identification number or accurately states that the Borrower has none, (d) the Perfection Certificate accurately sets forth the Borrowers place of business or, if more than one, its chief executive office, as well as the Borrowers mailing address, if different, (e) all other information set forth on the Perfection Certificate pertaining to the Borrower is accurate and complete, and (f) there has been no change in any of such information since the date on which the Perfection Certificate was signed by the Borrower.
6. Covenants Concerning Borrowers Legal Status. The Borrower covenants with the Banks and the Agent as follows: (a) without providing at least thirty (30) days prior written notice to the Agent, the Borrower will not change its name, (b) if the Borrower does not have an organizational identification number and later obtains one, the Borrower will forthwith notify the Agent of such organizational identification number, and (c) the Borrower will not change its type of organization, jurisdiction of organization or other legal structure.
7. Representations and Warranties Concerning Collateral, Etc. The Borrower represents and warrants to the Banks and the Agent as follows: (a) the Borrower is the owner of or has other rights in or power to transfer the Collateral, free from any right or claim of any Person or any Lien, except for the security interest created by this Agreement and other Permitted Liens, (b) all information set forth on the Perfection Certificate pertaining to the Collateral is accurate and complete, and (c) there has been no change in any of such information since the date on which the Perfection Certificate was signed by the Borrower. On and after the date hereof, (i) this Security Agreement creates a continuing enforceable security interest in the Collateral in favor of the Agent, for the benefit of the Agent and the Banks, (ii) there are no Liens upon the Collateral other than Permitted Liens, if any, and (iii) assuming (1) with respect to the Collateral constituting certificated securities, the Custodian performs all of its obligations under this Security Agreement, such security interest in such Collateral shall be perfected, which
security interest is, other than with respect to Permitted Prior Liens, prior to all other Liens and, assuming the Agent and the Banks have no notice of any adverse claim, free of any such adverse claim, and (2) with respect to all other Collateral, the presentation for filing of the financing statement, a copy of which is attached as Annex A hereto, at the governmental office listed thereon together with the appropriate filing fees therefor, the Bank shall have a perfected security interest in such Collateral, which Security Interest is prior to all Liens other than Permitted Prior Liens.
8. Covenants Concerning Collateral, Etc. The Borrower further covenants with the Banks and the Agent as follows: (a) the Collateral, to the extent not delivered to the Agent pursuant to §4, will be kept at those locations listed on the Perfection Certificate and the Borrower will not remove the Collateral from such locations, without providing at least thirty (30) days prior written notice to the Agent, (b) except for Permitted Liens, the Borrower shall be the owner of the Collateral free from any right or claim of any other Person or any Lien, and the Borrower shall defend the same against all claims and demands of all Persons at any time claiming the same or any interests therein adverse to the Agent or any of the Banks, (c) the Borrower shall not pledge, mortgage or create, or suffer to exist any right of any Person in or claim by any person to the Collateral, or any lien in the Collateral in favor of any Person, or become bound (as provided in Section 9-203 (d) of the Uniform Commercial Code of the State or any other relevant jurisdiction or otherwise) by a security agreement in favor of any Person as secured party, other than the Agent for the benefit of the Banks and the Agent, except for Permitted Liens, (d) the Borrower will keep the Collateral in good order and repair and will not use the same in violation of law or any policy of insurance thereon, (e) as provided in the Credit Agreement, the Borrower will permit the Agent, or its designee, to inspect the Collateral at any reasonable time, wherever located, (f) the Borrower will pay promptly when due all taxes, assessments, governmental charges and levies upon the Collateral or incurred in connection with the use or operation of the Collateral or incurred in connection with this Agreement, (g) the Borrower will not sell or otherwise dispose, or offer to sell or otherwise dispose, of the Collateral or any interest therein except for sales of Collateral in the ordinary course of business and dispositions permitted by the Loan Documents, and (h) the Borrower will exercise any and all voting and/or other consensual rights and powers inuring to an owner of the Collateral owned or held by it or on its behalf, or any part thereof, for a purpose consistent with the terms of this Agreement and the other Loan Documents; provided, however, that the Borrower will not exercise any such right if the result thereof would (x) materially and adversely affect the rights inuring to a holder of the Collateral or the rights and remedies of the Agent or the Banks under this Agreement or any other Loan Document or the ability of the Agent or the Banks to exercise the same, and (y) be inconsistent with Borrowers usual and customary proxy voting procedures in effect at such time.
9. Collateral Protection Expenses; Preservation of Collateral.
9.1. Expenses Incurred by Agent. In the Agents discretion, the Agent may discharge taxes and other encumbrances at any time levied or placed on any of the Collateral, maintain any of the Collateral, make repairs thereto and pay any necessary filing fees or insurance premiums, in each case if the Borrower fails to do so. The Borrower agrees to reimburse the Agent on demand for all expenditures so made. The
Agent shall have no obligation to the Borrower to make any such expenditures, nor shall the making thereof be construed as a waiver or cure of any Default.
9.2. Agents Obligations and Duties. Anything herein to the contrary notwithstanding, the Borrower shall remain obligated and liable under each contract or agreement comprised in the Collateral to be observed or performed by the Borrower thereunder. Neither the Agent nor any Bank shall have any obligation or liability under any such contract or agreement by reason of or arising out of this Agreement or the receipt by the Agent or any Bank of any payment relating to any of the Collateral, nor shall the Agent or any Bank be obligated in any manner to perform any of the obligations of the Borrower under or pursuant to any such contract or agreement, to make inquiry as to the nature or sufficiency of any payment received by the Agent or any Bank in respect of the Collateral or as to the sufficiency of any performance by any party under any such contract or agreement, to present or file any claim, to take any action to enforce any performance or to collect the payment of any amounts which may have been assigned to the Agent or to which the Agent or any Bank may be entitled at any time or times. The Agents sole duty with respect to the custody, safe keeping and physical preservation of the Collateral in its possession, under §9-207 of the Uniform Commercial Code of the State or otherwise, shall be to deal with such Collateral in the same manner as the Agent deals with similar property for its own account. The Agent will not create a security interest in the Collateral in its possession or control for the benefit of Agents secured parties.
10. Securities and Deposits. The Agent may at any time following and during the continuance of a Default, at its option, transfer to itself or any nominee any securities constituting Collateral, receive any income thereon and hold such income as additional Collateral or apply it to the Obligations. Whether or not any Obligations are due, the Agent may following and during the continuance of an Event of Default demand, sue for, collect, or make any settlement or compromise which it deems desirable with respect to the Collateral. Regardless of the adequacy of Collateral or any other security for the Obligations, during the occurrence and continuation of any Event of Default, any deposits or other sums at any time credited by or due from the Agent or any Bank to the Borrower may at any time be applied to or set off against any of the Obligations.
11. Notification to Account Debtors and Other Persons Obligated on Collateral. If an Event of Default shall have occurred and be continuing, the Borrower shall, at the request and option of the Agent, notify account debtors and other Persons obligated on any of the Collateral of the security interest of the Agent in any account, chattel paper, general intangible, instrument or other Collateral and that payment thereon is to be made directly to the Agent or to any financial institution designated by the Agent as the Agents agent therefor, and the Agent may itself, if a Default shall have occurred and be continuing, without notice to or demand upon the Borrower, so notify account debtors and other Persons obligated on Collateral. After the making of such a request or the giving of any such notification, the Borrower shall hold any proceeds of collection of accounts, chattel paper, general intangibles, instruments and other Collateral received by the Borrower as trustee for the Agent, for the benefit of the Banks and the Agent, without commingling the same with other funds of the Borrower and shall turn the same over to the Agent in the identical form received, together with any necessary endorsements or
assignments. The Agent shall apply the proceeds of collection of accounts, chattel paper, general intangibles, instruments and other Collateral received by the Agent to the Obligations, such proceeds to be immediately credited after final payment in cash or other immediately available funds of the items giving rise to them.
12. Power of Attorney.
12.1. Appointment and Powers of Agent. The Borrower hereby irrevocably constitutes and appoints the Agent and any officer or agent (for purposes hereof) thereof, with full power of substitution, as its true and lawful attorneys-in-fact with full irrevocable power and authority in the place and stead of the Borrower or in the Agents own name, for the purpose of carrying out the terms of this Agreement, to take any and all appropriate action and to execute any and all documents and instruments that may be necessary or useful to accomplish the purposes of this Agreement and, without limiting the generality of the foregoing, hereby gives said attorneys the power and right, on behalf of the Borrower, without notice to or assent by the Borrower, to do the following:
(a) generally to sell, transfer, pledge, make any agreement with respect to or otherwise dispose of or deal with any of the Collateral in such manner as is consistent with the Uniform Commercial Code of the State or any other relevant jurisdiction and as fully and completely as though the Agent were the absolute owner thereof for all purposes, and to do, at the Borrowers expense, at any time, or from time to time, all acts and things which the Agent deems necessary or useful to protect, preserve or realize upon the Collateral and the Agents security interest therein or in order to effect the intent of this Agreement, all no less fully and effectively as the Borrower might do, including (i) upon written notice to the Borrower, the exercise of voting rights with respect to voting securities, which rights may be exercised, if the Agent so elects, with a view to causing the liquidation of assets of the issuer of any such securities and (ii) the execution, delivery and recording, in connection with any sale or other disposition of any Collateral, of the endorsements, assignments or other instruments of conveyance or transfer with respect to such Collateral; and
(b) to the extent that the Borrowers authorization given in §3 is not sufficient, to file such financing statements with respect hereto, with or without the Borrowers signature, or a photocopy of this Agreement in substitution for a financing statement, as the Agent may deem appropriate and to execute in the Borrowers name such financing statements and amendments thereto and continuation statements which may require the Borrowers signature.
12.2. Ratification by Borrower. To the extent permitted by law, the Borrower hereby ratifies all that said attorneys shall lawfully do or cause to be done by virtue hereof. This power of attorney is a power coupled with an interest and is irrevocable.
12.3. No Duty on Agent. The powers conferred on the Agent hereunder are solely to protect the interests of the Agent and the Banks in the Collateral and shall not impose any duty upon the Agent to exercise any such powers. The Agent shall be
accountable only for the amounts that it actually receives as a result of the exercise of such powers, and neither it nor any of its officers, directors, employees or agents shall be responsible to the Borrower for any act or failure to act, except for the Agents own gross negligence or willful misconduct. The Agent agrees with the Borrower that it shall not exercise any power confirmed by §12(a) unless an Event of Default has occurred and is continuing.
13. Rights and Remedies.
13.1. General. If an Event of Default shall have occurred and be continuing, the Agent, without any other notice to or demand upon the Borrower, shall have in any jurisdiction in which enforcement hereof is sought, in addition to all other rights and remedies, the rights and remedies of a secured party under the Uniform Commercial Code of the State or any other relevant jurisdiction and any additional rights and remedies as may be provided to a secured party in any jurisdiction in which Collateral is located, including the right to take possession of the Collateral, and for that purpose the Agent may, so far as the Borrower can give authority therefor, enter upon any premises on which the Collateral may be situated and remove the same therefrom. The Agent may in its discretion require the Borrower to assemble all or any part of the Collateral at such location or locations within the jurisdiction(s) of the Borrowers principal office(s) or at such other locations as the Agent may reasonably designate. Unless the Collateral is perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market, the Agent shall give to the Borrower at least ten (10) days prior written notice of the time and place of any public sale of Collateral or of the time after which any private sale or any other intended disposition is to be made. The Borrower hereby acknowledges that ten (10) days prior written notice of such sale or sales shall be reasonable notice. The Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. In addition, the Borrower waives any and all rights that it may have to a judicial hearing in advance of the enforcement of any of the Agents rights and remedies hereunder, including its right following a Default to take immediate possession of the Collateral and to exercise its rights and remedies with respect thereto. To the extent permitted by applicable law, the Borrower hereby expressly waives and covenants not to assert any appraisement, valuation, stay, extension, redemption or similar laws, now or at any time hereafter in force, which might delay, prevent or otherwise impede the performance or enforcement of this Agreement.
13.2. Assets with Custodian. Subject to the terms of this Agreement, it is hereby agreed that the Custodian shall act subject to the Instructions of the Agent and not subject to the instructions of the Borrower in respect of the Credit Agreement and this Agreement. It is also hereby agreed between the parties that each of the Agent and the Custodian may, upon the occurrence and continuance of an Event of Default, enforce all of the Agents rights and remedies under this Agreement and the other Loan Documents and applicable law, including, without limitation, right of set-off with respect to the Obligations. At such time as all of the Obligations have been indefeasibly repaid in full in cash and all commitments under the Loan Documents have been terminated, the rights
and obligations of the Custodian and the Borrower with respect to the assets of the Borrower shall be as set forth in the Custody Agreement. In addition, the Borrower authorizes the Agent and the Custodian to charge and/or set off against any deposit account or other account maintained with either the Agent or the Custodian on behalf of the Borrower and, in the case of the Agent, apply the proceeds thereof against repayment of any unpaid Obligations, or, in the case of the Custodian, remit the proceeds thereof to the Agent to be applied against repayment of any unpaid Obligations. The Custodian is hereby directed by the Borrower, with the consent of the Agent (which is hereby granted), upon and after receipt by the Custodian from the Agent of notice that an Event of Default has occurred and is continuing (a) to dispose of all Liquid Collateral as directed by the Investment Adviser (which direction shall be deemed to be pursuant to proper instructions as defined in the Custody Agreement) to the Custodian, provided that the Custodian shall cease to comply with any directions by the Investment Adviser upon notice from the Agent to cease to comply with any directions by the Investment Adviser, (b) to dispose of all Liquid Collateral as directed by the Agent by notice to the Custodian, and (c) to dispose of all other Collateral as directed by the Agent promptly after receipt by the Custodian of a notice from the Agent; provided that the Agent agrees it shall not provide such notice to the Custodian until it has provided the Borrower with notice of the disposition of such other Collateral that satisfies all applicable notice requirements therefor under the Uniform Commercial Code. The foregoing shall be deemed to be continuing and irrevocable proper instructions to the Custodian for all purposes under the Custody Agreement. The foregoing shall be in addition to any other rights or remedies the Agent and the Custodian may have against the Borrower following the occurrence of an Event of Default and shall not in any way be construed to limit the generality of §13.1 hereof or otherwise in any manner limit the rights and remedies of the Agent hereunder, under any other Loan Document or under applicable law, including, without limitation, the Agents rights as a secured creditor under the Uniform Commercial Code of the State. The Custodian accepts and agrees to honor and comply with the foregoing directions. Notwithstanding the foregoing, nothing in this Agreement shall affect the Custodians rights and remedies under the Custody Agreement.
13.3. Voting Rights. Upon an occurrence of and during the continuance of an Event of Default, to the extent not prohibited under the applicable law, all rights of the Borrower to exercise the voting and consensual rights and powers it is entitled to exercise pursuant to and in accordance with §8(g) shall cease, and all such rights shall thereupon become vested in the Agent, which shall have the sole and exclusive right and authority to exercise such voting and consensual rights and powers, provided that the Agent shall have the right from time to time following and during the continuance of an Event of Default to permit the Borrower to exercise such rights, provided further that until the Agent shall have notified the Borrower that the Agent is exercising its rights hereunder, the Borrower may continue to exercise all such voting and consensual rights and powers in accordance herewith. After all Events of Default have been either cured (and the Borrower shall have given written notice thereof to the Agent) or waived in accordance with the terms of the Loan Documents, the Borrower will have the right to exercise the voting and consensual rights and powers that it would otherwise be entitled to exercise pursuant to and in accordance with the terms of §8(g).
13.4. Securities Laws. In view of the position of the Borrower in relation to the Collateral, or because of other current or future circumstances, a question may arise under the Securities Act of 1933, as amended, as now or hereafter in effect, or any similar applicable law of any other Authority analogous in purpose or effect (such Act and any such similar law as from time to time in effect being called the Securities Laws) with respect to any disposition of the Collateral permitted hereunder. The Borrower understands that compliance with the Securities Laws might very strictly limit the course of conduct of the Agent if the Agent were to attempt to dispose of all or any part of the Collateral, and might also limit the extent to which or the manner in which any subsequent transferee of any Collateral could dispose of the same. Similarly, there may be other legal restrictions or limitations affecting the Agent in any attempt to dispose of all or part of the Collateral under applicable blue sky or other state securities laws or similar laws analogous in purpose or effect. The Borrower recognizes that in light of such restrictions and limitations the Agent may, with respect to any sale of Collateral to which such restrictions or limitations may (in the reasonable judgment of the Agent) apply, limit the purchasers to those who will agree, among other things, to acquire such Collateral for their own account, for investment, and not with a view to the distribution or resale thereof. The Borrower acknowledges and agrees that in light of such restrictions and limitations, the Agent, in its sole and absolute discretion, (i) may proceed to make such a sale whether or not a registration statement for the purpose of registering such Collateral, or any part thereof, shall have been filed under the Securities Laws and (ii) may approach and negotiate with a single potential purchaser to effect such sale. The Borrower acknowledges and agrees that any such sale might result in prices and other terms less favorable to the seller than if such sale were a public sale without such restrictions. In the event of any such sale, the Agent shall incur no responsibility or liability for selling all or any part of the Collateral at a price that the Agent may in good faith deem reasonable under the circumstances, notwithstanding the possibility that a substantially higher price might have been realized if the sale were deferred until after registration as aforesaid or if more than a single purchaser were approached. The provisions of this §13.4 will apply notwithstanding the existence of a public or private market upon which the quotations or sales prices may exceed substantially the price at which the Agent sells any such Collateral.
14. Standards for Exercising Rights and Remedies. To the extent that applicable law imposes duties on the Agent to exercise remedies in a commercially reasonable manner, the Borrower acknowledges and agrees that it is not commercially unreasonable for the Agent (a) to fail to incur expenses reasonably deemed significant by the Agent to prepare Collateral for disposition or otherwise to fail to complete raw material or work in process into finished goods or other finished products for disposition, (b) to fail to obtain third party consents for access to Collateral to be disposed of, or to obtain or, if not required by other law, to fail to obtain governmental or third party consents for the collection or disposition of Collateral to be collected or disposed of, (c) to fail to exercise collection remedies against account debtors or other Persons obligated on Collateral or to fail to remove Liens on or any adverse claims against Collateral, (d) to exercise collection remedies against account debtors and other Persons obligated on Collateral directly or through the use of collection agencies and other collection specialists, (e) to advertise dispositions of Collateral through publications or media of general circulation, whether or not the Collateral is of a specialized nature, (f) to contact other Persons, whether or not in the same
business as the Borrower, for expressions of interest in acquiring all or any portion of the Collateral, (g) to hire one or more professional auctioneers to assist in the disposition of Collateral, whether or not the collateral is of a specialized nature, (h) to dispose of Collateral by utilizing Internet sites that provide for the auction of assets of the types included in the Collateral or that have the reasonable capability of doing so, or that match buyers and sellers of assets, (i) to dispose of assets in wholesale rather than retail markets, (j) to disclaim disposition warranties, (k) to purchase insurance or credit enhancements to insure the Agent against risks of loss, collection or disposition of Collateral or to provide to the Agent a guaranteed return from the collection or disposition of Collateral, or (l) to the extent deemed appropriate by the Agent, to obtain the services of brokers, investment bankers, consultants and other professionals to assist the Agent in the collection or disposition of any of the Collateral. The Borrower acknowledges that the purpose of this §14 is to provide non-exhaustive indications of what actions or omissions by the Agent would fulfill the Agents duties under the Uniform Commercial Code of the State or any other relevant jurisdiction in the Agents exercise of remedies against the Collateral and that other actions or omissions by the Agent shall not be deemed to fail to fulfill such duties solely on account of not being indicated in this §14. Without limitation upon the foregoing, nothing contained in this §14 shall be construed to grant any rights to the Borrower or to impose any duties on the Agent that would not have been granted or imposed by this Agreement or by applicable law in the absence of this §14.
15. No Waiver by Agent, etc. The Agent shall not be deemed to have waived any of its rights and remedies in respect of the Obligations or the Collateral unless such waiver shall be in writing and signed by the Agent, and in compliance with Section 9.05 of the Credit Agreement. No delay or omission on the part of the Agent in exercising any right or remedy shall operate as a waiver of such right or remedy or any other right or remedy. A waiver on any one occasion shall not be construed as a bar to or waiver of any right or remedy on any future occasion. All rights and remedies of the Agent with respect to the Obligations or the Collateral, whether evidenced hereby or by any other instrument or papers, shall be cumulative and may be exercised singularly, alternatively, successively or concurrently at such time or at such times as the Agent deems expedient.
16. Suretyship Waivers by Borrower. The Borrower waives demand, notice, protest, notice of acceptance of this Agreement, notice of loans made, credit extended, Collateral received or delivered or other action taken in reliance hereon and all other demands and notices of any description other than those specifically set forth in this Agreement. With respect to both the Obligations and the Collateral, the Borrower assents to any extension or postponement of the time of payment or any other indulgence, to any substitution, exchange or release of or failure to perfect any security interest in any Collateral, to the addition or release of any party or Person primarily or secondarily liable, to the acceptance of partial payment thereon and the settlement, compromising or adjusting of any thereof, all in such manner and at such time or times as the Agent may deem advisable. The Agent shall have no duty as to the collection or protection of the Collateral or any income therefrom, the preservation of rights against prior parties, or the preservation of any rights pertaining thereto beyond the safe custody thereof as set forth in §9.2. The Borrower further waives any and all other suretyship defenses.
17. Marshaling. Neither the Agent nor any Bank shall be required to marshal any present or future collateral security (including but not limited to the Collateral) for, or other
assurances of payment of, the Obligations or any of them or to resort to such collateral security or other assurances of payment in any particular order, and all of the rights and remedies of the Agent or any Bank hereunder and of the Agent or any Bank in respect of such collateral security and other assurances of payment shall be cumulative and in addition to all other rights and remedies, however existing or arising. To the extent that it lawfully may, the Borrower hereby agrees that it will not invoke any law relating to the marshaling of collateral which might cause delay in or impede the enforcement of the Agents rights and remedies under this Agreement or under any other instrument creating or evidencing any of the Obligations or under which any of the Obligations is outstanding or by which any of the Obligations is secured or payment thereof is otherwise assured, and, to the extent that it lawfully may, the Borrower hereby irrevocably waives the benefits of all such laws.
18. Proceeds of Dispositions; Expenses. The Borrower shall pay to the Agent on demand any and all expenses, including reasonable attorneys fees and disbursements, incurred or paid by the Agent in protecting, preserving or enforcing the Agents rights and remedies under or in respect of any of the Obligations or any of the Collateral. After deducting all of said expenses, the residue of any proceeds of collection or sale or other disposition of Collateral shall, to the extent actually received in cash, be applied to the payment of the Obligations in such order or preference as is provided in the Credit Agreement, proper allowance and provision being made for any Obligations not then due. Upon the final payment and satisfaction in full of all of the Obligations and after making any payments required by Sections 9-608(a)(1)(C) or 9-615(a)(3) of the Uniform Commercial Code of the State, any excess shall be returned to the Borrower. In the absence of final payment and satisfaction in full of all of the Obligations, the Borrower shall remain liable for any deficiency.
19. Overdue Amounts. Until paid, all amounts due and payable by the Borrower hereunder shall be a debt secured by the Collateral and shall bear, whether before or after judgment, interest at the rate of interest for overdue principal set forth in the Credit Agreement.
20. Governing Law; Consent to Jurisdiction. THIS AGREEMENT IS INTENDED TO TAKE EFFECT AS A SEALED INSTRUMENT AND SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE. The Borrower agrees that any action or claim arising out of any dispute in connection with this Agreement, any rights or obligations hereunder or the performance or enforcement of such rights or obligations may be brought in the courts of the State or any federal court sitting therein and consents to the non-exclusive jurisdiction of such court and to service of process in any such suit being made upon the Borrower by mail at the address specified in Section 9.01 of the Credit Agreement. The Borrower hereby waives any objection that it may now or hereafter have to the venue of any such suit or any such court or that such suit is brought in an inconvenient court.
21. Waiver of Jury Trial. THE PARTIES HERETO WAIVE THEIR RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THE PERFORMANCE OR ENFORCEMENT OF ANY SUCH RIGHTS OR OBLIGATIONS. Except as prohibited by law, the Borrower waives any right which it may have to claim or recover in any litigation referred to in the preceding sentence
any special, exemplary, punitive or consequential damages or any damages other than, or in addition to, actual damages. The Borrower (a) certifies that neither the Agent nor any Bank nor any representative, agent or attorney of the Agent or any Bank has represented, expressly or otherwise, that the Agent or any Bank would not, in the event of litigation, seek to enforce the foregoing waivers or other waivers contained in this Agreement and (b) acknowledges that, in entering into the Credit Agreement and the other Loan Documents to which the Agent or any Bank is a party, the Agent and the Banks are relying upon, among other things, the waivers and certifications contained in this §21.
22. Notices. All notices and other communications provided for herein shall be in writing and shall be delivered (i) in the case of a notice to the Borrower or the Agent, in the manner and at the address as set forth in the Credit Agreement and (ii) in the case of the Custodian, as provided in the Custody Agreement. All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt.
23. Waivers and Amendments. Subject to the terms of the Credit Agreement, neither this Agreement nor any provision hereof may be amended, waived or modified except pursuant to an agreement or agreements in writing entered into by the Borrower, the Agent and the Custodian.
24. Relationship to Credit Agreement. This Agreement is the Security Agreement under, and as such term is defined in, the Credit Agreement, and is subject to, and shall be construed in accordance with, the provisions thereof applicable hereto.
25. Release of Collateral. The Borrower and the Agent hereby agree between themselves as follows:
25.1. Permitted Disposition. In the event that the Borrower shall sell, transfer or otherwise dispose of all or any portion of the Collateral (each a Transfer), then provided that immediately before and after giving effect thereto no Default shall or would exist, (i) the Agents security interest created hereby in the Collateral subject to such Transfer shall automatically be released (provided that such security interest shall attach to the proceeds of such Transfer), and (ii) promptly after the request by the Borrower, the Agent shall, at the sole cost and expense of the Borrower, deliver to the Borrower such instruments, Uniform Commercial Code termination statements and other documents, and provide for the delivery of such instructions to the Custodian, in each case as the Borrower may reasonably request for the purpose of releasing (in fact and as a matter of record) the security interest in the collateral subject to such Transfer.
25.2. Designated Property. The Borrower may at any time and from time to time by written notice to the Agent request that certain goods identified (with such specificity as shall be reasonably satisfactory to the Agent) by the Borrower in such notice be designated hereunder as designated property. Promptly after each such request by the Borrower, the Agent shall, at the sole cost and expense of the Borrower, deliver to the Borrower such Uniform Commercial Code termination statements and other documents as the Borrower may reasonably request for the purpose of releasing (in
fact and as a matter of record) the security interest in such goods, provided that (a) immediately before and after giving effect to each such designation, no Default shall or would exist, and (b) immediately after giving effect to each such designation, the book value (determined in accordance with GAAP) of all such designated property of the Borrower would not exceed the lesser of (i) $1,000,000 or (ii) 1.0% of the Total Assets of the Borrower.
26. Miscellaneous. The headings of each section of this Agreement are for convenience only and shall not define or limit the provisions thereof. This Agreement and all rights and obligations hereunder shall be binding upon the Borrower and its successors and assigns, and shall inure to the benefit of the Agent, the Banks and their respective successors and assigns. If any term of this Agreement shall be held to be invalid, illegal or unenforceable, the validity of all other terms hereof shall in no way be affected thereby, and this Agreement shall be construed and be enforceable as if such invalid, illegal or unenforceable term had not been included herein. The Borrower acknowledges receipt of a copy of this Agreement. This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which, when taken together, shall constitute but one contract. This Agreement constitutes the entire contract among the parties relating to the subject matter hereof and supersedes any and all previous agreements and understandings, oral or written, relating to the subject matter hereof.
IN WITNESS WHEREOF, intending to be legally bound, the Borrower has caused this Agreement to he duly executed as of the date first above written.
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CREDIT SUISSE HIGH YIELD BOND FUND |
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By: |
/s/ Michael A. Pignataro |
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Title: |
CFO |
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Accepted: |
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STATE STREET BANK AND |
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By: |
/s/ Paul J. Koobatian |
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Title: |
Vice President |
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STATE STREET BANK AND |
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By: |
/s/ Joseph C. Antonellis |
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Title: |
Vice Chairman |
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Name: |
Joseph C. Antonellis |
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[Signature Page to Security Agreement]
UCC FINANCING STATEMENT
FOLLOW INSTRUCTIONS (front and back) CAREFULLY
A. NAME & PHONE OF CONTACT AT FILER [optional]
B. SEND ACKNOWLEDGMENT TO: (Name and Address)
Corporation Service Company
2711 Centerville Road, Suite 400
Wilmington, DE 19808
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THE ABOVE SPACE IS FOR FILING OFFICE USE ONLY |
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1. DEBTORS EXACT FULL LEGAL NAME: insert only one (1a or 1b) do not abbreviate or combine names |
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1a. ORGANIZATIONS NAME |
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OR |
CREDIT SUISSE HIGH YIELD BOND FUND |
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1b. INDIVIDUALS LAST NAME |
FIRST NAME |
MIDDLE NAME |
SUFFIX |
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1c. MAILING ADDRESS |
CITY |
STATE |
POSTAL CODE |
COUNTRY |
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Eleven Madison Avenue |
New York |
NY |
10010 |
USA |
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1d. SEE INSTRUCTIONS |
ADDL INFO |
1e. TYPE OF ORGANIZATION |
1f. JURISDICTION OF ORGANIZATION |
1g. ORGANIZATIONAL ID #, if any |
o NONE |
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2. ADDITIONAL DEBTORS EXACT FULL LEGAL NAME - insert only one debtor name (2a or 2b) - do not abbreviate or combine names |
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2a. ORGANIZATIONS NAME |
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OR |
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2b. INDIVIDUALS LAST NAME |
FIRST NAME |
MIDDLE NAME |
SUFFIX |
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2c. MAILING ADDRESS |
CITY |
STATE |
POSTAL CODE |
COUNTRY |
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2d. SEE INSTRUCTIONS |
ADDL INFO REORGANIZATION DEBTOR |
2e. TYPE OF ORGANIZATION |
2f. JURISDICTION OF ORGANIZATION |
2g. ORGANIZATIONAL ID #, if any |
o NONE |
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3. SECURED PARTYS NAME (or NAME of TOTAL ASSIGNEE of ASSIGNOR S/P) - insert only one secured party name (3a or 3b) |
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3a. ORGANIZATIONS NAME |
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OR |
STATE STREET BANK AND TRUST COMPANY, AS AGENT |
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3b. INDIVIDUALS LAST NAME |
FIRST NAME |
MIDDLE NAME |
SUFFIX |
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3c. MAILING ADDRESS |
CITY |
STATE |
POSTAL CODE |
COUNTRY |
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4 COPLEY PLACE, 5TH FLOOR |
Boston |
MA |
02206 |
USA |
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4. This FINANCING STATEMENT covers the following collateral: |
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All Assets |
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5. ALTERNATIVE DESIGNATION [if applicable] o LESSEE/LESSOR o CONSIGNEE/CONSIGNOR o BAILEE/BAILOR o SELLER/BUYER o AG. LIEN o NON-UCC FILING |
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6. o This FINANCING STATEMENT is to be filed [for record] (or recorded) in the REAL ESTATE RECORDS Attach Addendum [if applicable] |
7. Check to REQUEST
SEARCH REPORT(S) on Debtor(s) |
o All Debtors |
o Debtor 1 |
o Debtor 2 |
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8. OPTIONAL FILER REFERENCE DATA |
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DE- Secretary of State |
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FILING OFFICE COPY UCC FINANCING STATEMENT (FROM UCC1) (REV. 05/22/02) |
Corporation Service Company 2711 Centerville Rd, Ste. 400 |
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Exhibit 99.(r)(2)
CREDIT SUISSE ASSET MANAGEMENT, LLC
CREDIT SUISSE ASSET MANAGEMENT SECURITIES, INC.
CREDIT SUISSE FUNDS
CREDIT SUISSE CLOSED-END FUNDS
CODE OF ETHICS
I. Applicability
This Code of Ethics (this Code) establishes rules of conduct for Access Persons (as defined below) of Credit Suisse Asset Management, LLC and Credit Suisse Asset Management Securities, Inc. (collectively referred to as Credit Suisse) and each U.S. registered investment company that adopts this Code (Covered Fund). (Credit Suisse and the Covered Funds are collectively referred to as the Covered Companies.) For purposes of this Code, Access Person shall mean:
· any Advisory Person - (i) any employee of any company in a control relationship to a Covered Company who, in connection with his or her regular functions or duties, makes, participates in, or obtains information regarding the purchase or sale of securities by a Covered Fund, or whose functions relate to the making of any recommendations with respect to the purchases or sales of a Covered Fund; or (ii) any natural person in a control relationship to a Covered Company who obtains information concerning recommendations made to a Covered Fund with regard to the purchase or sale of securities by the Covered Fund; provided that Advisory Person excludes persons covered by the Global Policy (as defined below); and
· any non-employee director or trustee of a Covered Fund (each, an Outside Director).
For purposes of this Code:
· Credit Suisse client shall include all advisory clients of Credit Suisse.
· Global Policy means the Global Personal Trading Policy applicable to all Credit Suisse employees, a copy of which will be provided to all Advisory Persons.
· Local LCD shall have the meaning ascribed thereto in the Global Policy. Where Advisory Persons bound by this Code are subject to the Global Policy, references in the Global Policy to the Local LCD shall be deemed to refer to a Designated Supervisory Person.
· purchase and sale of a security shall include, among other things, the writing of an option to purchase or sell a security.
· security shall include any security, including a security issued by any collective investment vehicle or fund, as well as an option to purchase or sell any security that is
convertible or exchangeable and any other derivative interest relating to the security; security shall exclude commodities and foreign currency exchange contracts.
· all other terms shall have the same meanings as under the Investment Company Act of 1940, as amended (1940 Act), unless indicated otherwise.
II. Statement of General Principles
In conducting personal investment activities, all Access Persons are required to comply with all applicable laws and regulations and the following general fiduciary principles:
· the interests of the Covered Funds must always be placed first;
· all personal securities transactions must be conducted in such a manner as to avoid any actual, potential or perceived conflict of interest or any abuse of an individuals position of trust and responsibility; and
· Access Persons must not take inappropriate advantage of their positions or information that they have received or to which they have access.
Credit Suisse has separate policies and procedures designed to detect and prevent insider trading, which should be read together with this Code and, if applicable, the Global Policy. Nothing contained in this Code should be interpreted as relieving any Access Person from the obligation to act in accordance with any applicable law, rule or regulation or any other statement of policy or procedure adopted by any Covered Company or Credit Suisse to the extent applicable to the Access Persons.
III. Provisions Applicable to Advisory Persons
A. Prohibitions.
General Prohibitions Applicable to Advisory Persons. All Advisory Persons shall be bound by the provisions set forth in Sections VI and VII of the Global Policy as applied only to Covered Funds and not all Credit Suisse clients.
B. Pre-Clearance and Exemptions
1. Advisory Persons are subject to the provisions set forth in Sections III, IV and V of the Global Policy.
2. Purchases and sales of securities (except those that are exempt from the Pre-Clearance requirement in Section V of the Global Policy) are subject to the Trading Prohibitions in Section VII of the Global Policy as applied only to Covered Funds and not all Credit Suisse clients. All purchases and sales of securities are subject to the Short-Term Trading Prohibition in Section VII.A. of the Global Policy and the reporting requirements in Section III.C. below.
C. Reporting and Compliance Procedures
1. Initial Certification. Within 10 days after the commencement of his or her affiliation with a Covered Company, each Advisory Person shall submit to a Designated Supervisory Person an initial certification to certify that:
· he or she has read and understood this Code and recognizes that he or she is subject to its requirements;
· he or she has read and understood the Global Policy and recognizes that he or she is subject to certain of its requirements, as delineated herein;
· he or she has disclosed or reported all personal securities holdings in which he or she has any direct or indirect Beneficial Ownership (as defined in Exhibit 1) and all accounts in which any securities are held for his or her direct or indirect benefit; and
· he or she has reported the name(s) of each person or institution managing any account (or portion thereof) for which the Advisory Person has no direct or indirect influence or control over the investment or trading in the account.
2. Annual Certification. In addition, each Advisory Person shall submit to a Designated Supervisory Person an annual certification to certify that:
· he or she has read and understood this Code and recognizes that he or she is subject to its requirements;
· he or she has read and understood the Global Policy and recognizes that he or she is subject to certain of its requirements, as delineated herein;
· he or she has complied with all requirements of this Code and the applicable requirements of the Global Policy; and
· he or she has disclosed or reported (a) all personal securities transactions for the previous year, (b) all personal securities holdings in which he or she has any direct or indirect Beneficial Ownership and accounts in which any securities are held for his or her direct or indirect benefit and (c) the name(s) of each person or institution managing any account in which the Advisory Person has any direct or indirect Beneficial Ownership (or portion thereof) for which the Advisory Person has no direct or indirect influence or control over the investment or trading in the account, in each case as of a date no more than 30 days before the annual certification is submitted.
Advisory Persons may comply with the initial and annual reporting requirements by submitting, electronically or otherwise, account statements to a Designated Supervisory Person within the prescribed periods.
3. Quarterly Reporting. All Advisory Persons shall also supply a Designated Supervisory Person, on a timely basis, with duplicate copies of confirmations of all personal securities transactions and copies of periodic statements for all securities accounts, including confirmations and statements for transactions and accounts that are exempt from the Trading Prohibitions and Pre-clearance Requirements in the Global Policy. Additionally, if not included in the periodic statements, all Advisory Persons shall also file a transaction report for all securities that were acquired or disposed of through gift or acquired through inheritance. If an account in which an Advisory Person has any direct or indirect Beneficial Ownership was first established during the quarter, then the Advisory Person should report to an Designated Supervisory Person the following information, if not included in the periodic statements: (1) name of broker-dealer, (ii) date on which the account was established, and (iii) if the Advisory Person has no direct or indirect influence or control over the investment or trading in the account, the name(s) of each person or institution managing the account (or portion thereof). This information must be supplied, electronically or otherwise, at least once per calendar quarter, within 10 days after the end of the calendar quarter.
IV. Provisions Applicable to Outside Directors
A. Prohibition. No Outside Director may purchase or sell (directly or indirectly) any security for which there is a buy or sell order pending for a Covered Fund. However, this restriction only applies if the Outside Director knows, or in the ordinary course of fulfilling official duties with a Covered Fund should know, that there is a buy or sell order pending with respect to such security for a Covered Fund or that the security is being considered for purchase or sale by or for any Covered Fund.
B. Reporting Requirements. An Outside Director is required to comply with the quarterly reporting requirements described above if he or she knew (or in the ordinary course of fulfilling his or her official duties as a Fund director/trustee should have known) that during the 15-day period immediately before or after the date of the directors/trustees transaction in a security, the Covered Fund purchased or sold such security or such Covered Fund or its investment adviser considered purchasing or selling such security for a Covered Fund.
V. Compliance Monitoring and Supervisory Review
A. A Designated Supervisory Person will periodically review reports submitted by Access Persons and confirmations from brokers to assure that all transactions effected by Access Persons for accounts in which they have Beneficial Ownership are in compliance with this Code and Rule 17j-1 under the 1940 Act.
B. Material violations of this Code and of the Global Policy (insofar as they relate to employees, officers and directors of Credit Suisse Asset Management, LLC (the Adviser) and Credit Suisse Asset Management Securities, Inc. (the Underwriter)) and any sanctions imposed
shall be reported not less frequently than quarterly to the Board of Directors/Trustees of each relevant Covered Fund and to the senior management of Credit Suisse. At least annually, each Covered Company shall prepare a written report to the Board of Directors/Trustees of each Covered Fund, and to the senior management of Credit Suisse, that:
· describes issues that have arisen under the Code and under the Global Policy (insofar as they relate to employees, officers and directors of the Adviser or the Underwriter) since the last report, including, but not limited to, material violations of the Code or the Global Policy, as relevant, or procedures that implement the Code or the Global Policy, as relevant, and any sanctions imposed in response to those violations; and
· certifies that each Covered Company has adopted procedures reasonably necessary to prevent Access Persons from violating the Code and to prevent employees, officers and directors of the Adviser and the Underwriter from violating the Global Policy.
C. Material changes to this Code and to the Global Policy (insofar as they relate to employees, officers and directors of the Adviser or the Underwriter) must be approved by the Board of Directors/Trustees of each Covered Fund no later than six months after the change is adopted. That approval must be based on a determination that the changes are reasonably necessary, as applicable, to prevent Access Persons from engaging in any conduct prohibited by the Code and Rule 17j-1 under the 1940 Act or to prevent employees, officers and directors of the Adviser or the Underwriter from engaging in any conduct prohibited by the Global Policy and Rule 17j-1 under the 1940 Act. Board approval must include a separate vote of a majority of the Outside Directors.
VI. Sanctions
Upon discovering that an Access Person has not complied with the requirements of this Code, the senior management of the relevant Covered Company may impose on that person whatever sanctions are deemed appropriate, including censure; fine; reversal of transactions and disgorgement of profits; suspension; or termination of employment.
VII. Confidentiality
All information obtained from any Access Person under this Code shall be kept in strict confidence, except that reports of transactions will be made available to the Securities and Exchange Commission or any other regulatory or self-regulatory organization to the extent required by law or regulation. The Adviser or the Underwriter may also make such information with regard to an Advisory Person available to (i) any other business unit or legal department of the Credit Suisse Group, including any of its domestic or foreign subsidiaries or branches, (ii) such Advisory Persons manager and (iii) the local or global Executive Committee (or equivalent bodies and their appointees), to the extent permissible under applicable laws and regulations, to review the Advisory Persons personal trading information.
VIII. Further Information
All Advisory Persons must report any violations of the Code promptly to the Chief Compliance Officer, Emidio Morizio. The Designated Supervisory Persons are J. Kevin Gao and Emidio Morizio and their designees in Credit Suisses Legal and Compliance Department. Any questions regarding the Code of Ethics should be directed to a Designated Supervisory Person.
Dated: May 3, 2010
EXHIBIT 1
CREDIT SUISSE ASSET MANAGEMENT, LLC
CREDIT SUISSE ASSET MANAGEMENT SECURITIES, INC.
CREDIT SUISSE FUNDS, CREDIT SUISSE CLOSED-END FUNDS
CODE OF ETHICS
Definition of Beneficial Ownership
The term Beneficial Ownership as used in the attached Code of Ethics is to be interpreted by reference to Rule 16a-1(a)(2) under the Securities Exchange Act of 1934 (Rule). Under the Rule, a person is generally deemed to have Beneficial Ownership of securities if the person (directly or indirectly), through any contract, arrangement, understanding, relationship or otherwise, has or shares a direct or indirect pecuniary interest in the securities.
The term pecuniary interest is generally defined in the Rule to mean the opportunity (directly or indirectly) to profit or share in any profit derived from a transaction in the securities. A person is deemed to have an indirect pecuniary interest within the meaning of the Rule:
· in any securities held by members of the persons immediate family sharing the same household; the term immediate family includes any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law, as well as adoptive relationships;
· a general partners proportionate interest in the portfolio securities held by a general or limited partnership;
· a persons right to dividends that is separated or separable from the underlying securities;
· a persons interest in certain trusts; and
· a persons right to acquire equity securities through the exercise or conversion of any derivative security, whether or not presently exercisable.(1)
(1) For purposes of the Rule, a person who is a shareholder of a corporation or similar entity is not deemed to have a pecuniary interest in portfolio securities held by the corporation or entity, so long as the shareholder is not a controlling shareholder of the corporation or the entity and does not have or share investment control over the corporations or the entitys portfolio. The term control means the power to exercise a controlling influence over management or policies, unless the power is solely the result of an official position with the company.
Exhibit 99.(s)
CREDIT SUISSE HIGH YIELD BOND FUND
(A registered investment company)
POWER OF ATTORNEY
Each of the undersigned hereby authorizes Michael A. Pignataro and John G. Popp, each with full power to act without the other, as attorney-in-fact to sign on his or her behalf in the capacities indicated, and to file (or have filed) with all exhibits thereto a registration statement on Form N-2 (including amendments thereto) with respect to Credit Suisse High Yield Bond Fund (the Fund).
This power shall be valid as to each of the undersigned until superseded by a subsequent power of attorney or revoked by written notice delivered to the President or Secretary of the Fund, such subsequent power or revocation to be effective for each signatory on an individual basis.
IN WITNESS WHEREOF, each of the undersigned has executed this instrument on the date shown.
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By: |
/s/ Enrique R. Arzac |
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7/30/2010 |
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Enrique R. Arzac |
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Date |
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Trustee and Chairman of the Board |
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By: |
/s/ Terry F. Bovarnick |
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7/22/2010 |
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Terry F. Bovarnick |
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Date |
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Trustee |
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By: |
/s/ James Cattano |
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7/28/2010 |
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James Cattano |
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Date |
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Trustee |
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By: |
/s/ Lawrence J. Fox |
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7/21/2010 |
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Lawrence J. Fox |
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Date |
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Trustee |
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By: |
/s/ Steven N. Rappaport |
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7/21/2010 |
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Steven N. Rappaport |
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Date |
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Trustee |
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787 Seventh Avenue |
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New York, NY 10019-6099 |
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Tel: 212 728 8000 |
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Fax: 212 728 8111 |
August 4, 2010
VIA EDGAR
Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
Re: |
Credit Suisse High Yield Bond Fund |
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Investment Company Act File No. 811-8777 |
Ladies and Gentlemen:
On behalf of the above-captioned registered, closed-end investment company (the Fund), and in accordance with the requirements of the Securities Act of 1933, as amended (the 1933 Act), and the Investment Company Act of 1940, as amended (the 1940 Act), electronically transmitted herewith is the Funds Registration Statement on Form N-2 (the Registration Statement) with respect to the proposed offering by the Fund of additional common shares of beneficial interest, par value $.001 per share (the Shares), issuable upon the exercise of transferable rights to subscribe for such Shares. The Fund is currently registering 100,000 Shares but may increase the number of Shares registered, and pay the additional registration fee in connection therewith, in a pre-effective amendment to the Registration Statement.
In accordance with Rule 111 under the 1933 Act, the Fund has sent by wire transfer to the Securities and Exchange Commissions (the Commission) account at U.S. Bank the amount of $21.89 in payment of the required registration fee.
The Fund expects to submit in writing at the appropriate time to the Staff of the Commission a request for the acceleration of effectiveness of the Registration Statement.
We request that the Staff review the Registration Statement as promptly as possible and transmit comments, if any, at its earliest possible convenience. At such time as the Fund responds to comments, it will file the remaining exhibits required by Form N-2, to the extent not filed as part of this filing.
Should members of the Staff have any questions or comments concerning the Registration Statement, please call the undersigned at (212) 728-8138.
Sincerely,
NEW YORK WASHINGTON PARIS LONDON MILAN ROME FRANKFURT BRUSSELS
in alliance with Dickson Minto W.S., London and Edinburgh