[Federal Register Volume 78, Number 8 (Friday, January 11, 2013)]
[Notices]
[Pages 2453-2456]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-00434]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. IC-30342; 812-14015]
Credit Suisse Opportunity Funds, et al.; Notice of Application
January 7, 2013.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of an application for an order under section 12(d)(1)(J)
of the Investment Company Act of 1940 (``Act'') for an exemption from
sections 12(d)(1)(A) and (B) of the Act, and under sections 6(c) and
17(b) of the Act for an exemption from section 17(a) of the Act.
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SUMMARY: Summary of Application: The order would permit certain
registered closed-end management investment
[[Page 2454]]
companies to acquire shares of registered open-end management
investment companies that are within the same group of investment
companies.
Applicants: Credit Suisse Opportunity Funds (``Opportunity
Funds''), Credit Suisse Commodity Strategy Funds (``Commodity Strategy
Funds''), Credit Suisse High Yield Bond Fund (``High Yield Bond
Fund''), Credit Suisse Asset Management Income Fund, Inc. (``Income
Fund''); Credit Suisse Asset Management, LLC (``Adviser''), and Credit
Suisse Securities (USA) LLC (``CSSU'').\1\
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\1\ Each Fund (as defined below) that currently intends to rely
on the requested order is named as an applicant. Any Fund that
relies on the order in the future will do so only in accordance with
the terms and conditions contained in the application, as amended.
DATES: Filing Dates: The application was filed on March 15, 2012, and
amended on August 23, 2012, December 14, 2012, January 3, 2013, and
January 4, 2013.
Hearing or Notification of Hearing: An order granting the
application will be issued unless the Commission orders a hearing.
Interested persons may request a hearing by writing to the Commission's
Secretary and serving applicants with a copy of the request, personally
or by mail. Hearing requests should be received by the Commission by
5:30 p.m. on February 1, 2013 and should be accompanied by proof of
service on applicants, in the form of an affidavit, or for lawyers, a
certificate of service. Hearing requests should state the nature of the
writer's interest, the reason for the request, and the issues
contested. Persons who wish to be notified of a hearing may request
notification by writing to the Commission's Secretary.
ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F
Street NE., Washington DC 20549-1090; Applicants, c/o Joanne Doldo,
Esq., Credit Suisse Asset Management, LLC, One Madison Avenue, New
York, NY 10010.
FOR FURTHER INFORMATION CONTACT: Courtney S. Thornton, Senior Counsel,
at (202) 551-6812 or David P. Bartels, Branch Chief, at (202) 551-6821
(Division of Investment Management, Office of Investment Company
Regulation).
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained via the
Commission's Web site by searching for the file number, or for an
applicant using the Company name box, at http://www.sec.gov/search/search.htm, or by calling (202) 551-8090.
Applicants' Representations
1. Opportunity Funds and Commodity Strategy Funds are organized as
Delaware statutory trusts. Each is an open-end management investment
company registered under the Act and is comprised of separate series
that pursue distinct investment objectives and strategies.
2. The High Yield Bond Fund is organized as a Delaware statutory
trust. The Income Fund (together with the High Yield Bond Fund, the
``Applicant Investing Funds'') is organized as a Maryland corporation.
Each Applicant Investing Fund is registered under the Act as a closed-
end management investment company. The Applicant Investing Funds invest
or will invest in a variety of debt and/or equity securities or other
financial instruments in accordance with their respective investment
objectives and policies.
3. The Adviser, a Delaware limited liability company, is registered
as an investment adviser under the Investment Advisers Act of 1940, and
serves as the investment adviser to each of the existing Funds (as
defined below). The Adviser is a wholly owned subsidiary of CSAM
Americas Holding Corp., a holding company that is ultimately wholly
owned by Credit Suisse Group. CSSU, a Delaware limited liability
company, is a broker-dealer registered under the Securities Exchange
Act of 1934. CSSU serves as principal underwriter and distributor for
the shares of the Underlying Funds. CSSU is a wholly owned subsidiary
of Credit Suisse (USA), Inc., a holding company that is ultimately
wholly owned by Credit Suisse Group.
4. Applicants state that each of the Investing Funds (as defined
below) would like the flexibility to invest, subject to and consistent
with its investment objectives, policies, and restrictions, in the
Underlying Funds in excess of the limits set out in sections
12(d)(1)(A) and (B) of the Act. Accordingly, Applicants seek an order
of the Commission pursuant to Section 12(d)(1)(J) of the Act, granting
an exemption from Sections 12(d)(1)(A) and (B) of the Act, and under
Sections 6(c) and 17(b) of the Act, granting an exemption from Section
17(a) of the Act, to the extent necessary to permit (a) each of the
Applicant Investing Funds to purchase shares of Opportunity Funds or
Commodity Strategies Funds or their series (the ``Underlying Funds'')
and (b) the Underlying Funds to sell their shares to, and redeem their
shares from, the Applicant Investing Funds.
5. Applicants request that the relief also apply to any future
registered closed-end management investment company advised by the
Adviser or any entity controlling, controlled by, or under common
control with the Adviser (together with the Applicant Investing Funds,
the ``Investing Funds'') that wishes to invest in a registered open-end
management investment company, or series thereof, that (a) is advised
by the Adviser or any entity controlling, controlled by, or under
common control with the Adviser, and (b) is part of the same ``group of
investment companies,'' as defined in section 12(d)(1)(G)(ii) as the
Investing Funds (included in the term ``Underlying Funds''). The
Investing Funds and the Underlying Funds are referred to herein as the
``Funds.''
6. The Adviser believes that it may, from time to time, be more
efficient for the Investing Funds to gain exposure to particular
investment styles and/or asset classes by investing in one or more
Underlying Funds. In particular, applicants note that if the total
amount of an Investing Fund's desired exposure to a particular
investment style or asset class is small, an investment in an
Underlying Fund may enable an Investing Fund to obtain such exposure on
a significantly more diversified basis than would be possible through a
direct investment in such securities.
7. An Underlying Fund may invest up to 25% of its assets in a
wholly-owned and controlled subsidiary of the Underlying Fund,
organized under the laws of the Cayman Islands or another non-U.S.
jurisdiction (a ``Cayman Subsidiary'') in order to invest in commodity-
related instruments and certain other instruments. The Adviser will
serve as the investment adviser to both such Underlying Fund and Cayman
Subsidiary. The Cayman Subsidiary is created for the purpose of
assuring that the Underlying Fund continues to qualify as a regulated
investment company for U.S. federal income tax purposes.
Applicants' Legal Analysis
A. Section 12(d)(1) of the Act
1. Section 12(d)(1)(A) provides that no registered investment
company may acquire securities of another investment company if such
securities represent more than 3% of the acquired company's outstanding
voting stock, more than 5% of the acquiring company's total assets, or
if such securities, together with the securities of other investment
companies, represent more than 10% of the acquiring company's total
assets. Section
[[Page 2455]]
12(d)(1)(B) provides that no registered open-end investment company,
its principal underwriter or any broker or dealer may sell the
company's securities to another investment company if the sale will
cause the acquiring company to own more than 3% of the acquired
company's voting stock or cause more than 10% of the acquired company's
voting stock to be owned by investment companies.
2. Section 12(d)(1)(G) of the Act provides, in relevant part, that
section 12(d)(1) will not apply to the securities of a registered open-
end investment company purchased by another registered open-end
investment company, if: (a) The acquiring company and the acquired
company are part of the same group of investment companies; (b) the
acquiring company holds only securities of acquired companies that are
part of the same group of investment companies, government securities
and short-term paper; (c) the aggregate sales loads and distribution-
related fees of the acquiring company and the acquired company are not
excessive under rules adopted pursuant to section 22(b) or section
22(c) of the Act by a securities association registered under section
15A of the Exchange Act or by the Commission; and (d) the acquired
company has a policy that prohibits it from acquiring securities of
registered open-end management investment companies or registered unit
investment trusts in reliance on section 12(d)(1)(F) or (G) of the Act.
Section 12(d)(1)(G)(ii) defines a ``group of investment companies'' as
``any 2 or more registered investment companies that hold themselves
out to investors as related for purposes of investment and investor
services.'' Applicants state that they may not rely on section
12(d)(1)(G) because the Investing Funds are closed-end management
investment companies.
3. Section 12(d)(1)(J) of the Act provides that the Commission may
exempt any person, security, or transaction from any provision of
section 12(d)(1), if the exemption is consistent with the public
interest and the protection of investors. Applicants seek an exemption
under section 12(d)(1)(J) to permit the Investing Funds to acquire
shares of Underlying Funds, and Underlying Funds to sell their shares
to the Investing Funds, beyond the limits in sections 12(d)(1)(A) and
(B).
4. Applicants state that the proposed arrangement will not raise
the policy concerns underlying sections 12(d)(1)(A) and (B), including
undue influence by a fund of funds over underlying funds, excessive
layering of fees, and overly complex fund structures. Accordingly,
applicants believe that the requested exemption is consistent with the
public interest and the protection of investors.
5. Applicants contend that the proposed arrangement will not result
in undue influence by an Investing Fund over an Underlying Fund because
the Investing Fund and the Underlying Fund will be advised by the
Adviser or an entity controlling, controlled by, or under common
control with the Adviser, and will be part of the same group of
investment companies. Applicants state that the Commission, and
Congress in the enactment of section 12(d)(1)(G), have recognized that
fund of funds arrangements that involve funds in the same group of
investment companies may not present the same concerns regarding
control of one fund by another.\2\
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\2\ Applicants assert that the omission of closed-end funds from
section 12(d)(1)(G) does not represent a determination by Congress
that similar relief should not be provided to closed-end funds.
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6. Applicants do not believe that the proposed arrangement will
involve excessive layering of fees. With respect to investment advisory
fees, applicants state that, before approving any investment advisory
contract under section 15 of the Act, the board of trustees or
directors of each Investing Fund, including a majority of the trustees
who are not ``interested persons'' (as defined in section 2(a)(19) of
the Act) of the Investing Fund, will find that advisory fees, if any,
charged under the advisory contract are based on services provided that
are in addition to, rather than duplicative of, services provided
pursuant to any Underlying Fund's advisory contract.
7. In addition, applicants state that any sales charges and/or
service fees charged with respect to shares of an Investing Fund will
not exceed the limits applicable to a fund of funds set forth in NASD
Conduct Rule 2830.\3\ Applicants state that, although investors may
incur brokerage commissions in connection with market purchases of the
Investing Funds' shares, these commissions will not differ from
commissions otherwise incurred in connection with the purchase or sale
of comparable securities.
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\3\ Any references to NASD Conduct Rule 2830 include any
successor or replacement FINRA Rule to NASD Conduct Rule 2830.
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8. Applicants contend that the proposed arrangement will not create
an overly complex fund structure. Applicants state that no Underlying
Fund will acquire securities of any investment company or company
relying on section 3(c)(1) or 3(c)(7) of the Act in excess of the
limits of section 12(d)(1)(A), except to the extent that such
Underlying Fund receives securities of another investment company as a
dividend or as a result of a plan or reorganization of a company (other
than a plan devised for the purpose of evading section 12(d)(1) of the
Act), acquires, or is deemed to have acquired, the securities pursuant
to exemptive relief from the Commission permitting such Underlying Fund
to (a) acquire securities of one or more affiliated investment
companies or companies relying on section 3(c)(1) or 3(c)(7) for short-
term cash management purposes, or (b) engage in interfund borrowing and
lending transactions, or invests in a Cayman Subsidiary that is a
wholly-owned and controlled subsidiary of the Underlying Fund. Further,
no Cayman Subsidiary will acquire securities of any other investment
company or company relying on section 3(c)(1) or 3(c)(7) of the Act
other than money market funds that comply with rule 2a-7 for short-term
cash management purposes.
9. Applicants state that investments by an Underlying Fund in a
Cayman Subsidiary also do not raise concerns about undue influence,
layering of fees, and complex structures. Applicants represent that:
(a) The Underlying Fund will be the sole and legal beneficial owner of
its Cayman Subsidiary, which addresses concerns regarding pyramiding of
voting control as a means of undue influence; (b) the Adviser will
manage the investments of both the Underlying Fund and its Cayman
Subsidiary, which addresses concerns over undue influence by the
Adviser; and (c) there will be no inappropriate layering of fees and
expenses as a result of an Underlying Fund investing in a Cayman
Subsidiary. Applicants further represent that the financial statements
of the Cayman Subsidiary will be consolidated with those of the
Underlying Fund, if permitted by the applicable accounting standards.
In addition, in assessing compliance with the asset coverage
requirements under section 18(f) of the Act, an Underlying Fund will
deem the assets, liabilities, and indebtedness of a Cayman Subsidiary
in which the Underlying Fund invests as its own. Finally, the expenses
of the Cayman Subsidiary will be included in the total annual fund
operating expenses in the prospectus of the Underlying Fund.
B. Section 17(a) of the Act
1. Section 17(a) of the Act generally prohibits purchases and sales
of securities, on a principal basis, between
[[Page 2456]]
a registered investment company and any affiliated person of the
company, and affiliated persons of such persons. Section 2(a)(3) of the
Act defines an ``affiliated person'' of another person to include,
among other things, any person directly or indirectly owning,
controlling or holding with power to vote 5% or more of the other's
outstanding voting securities; any person 5% or more of whose
outstanding voting securities are directly or indirectly owned,
controlled, or held with power to vote by the other person; any person
directly or indirectly controlling, controlled by, or under common
control with the other person; and any investment adviser to an
investment company. Applicants state that an Underlying Fund might be
deemed to be an affiliated person of an Investing Fund if the Investing
Fund acquires 5% or more of the Underlying Fund's outstanding voting
securities. Applicants also state that, because the Investing Funds and
Underlying Funds will be advised by the Adviser, or a control affiliate
of the Adviser, and may have the same officers and/or board of
trustees, they may be deemed to be under common control and, therefore,
affiliated persons of each other. Accordingly, section 17(a) could
prevent an Underlying Fund from selling shares to, and redeeming shares
from, an Investing Fund.
2. Section 17(b) of the Act authorizes the Commission to grant an
order permitting a transaction otherwise prohibited by section 17(a) if
it finds that (a) the terms of the proposed transaction, including the
consideration to be paid or received, are fair and reasonable and do
not involve overreaching on the part of any person concerned, (b) the
proposed transaction is consistent with the policies of each registered
investment company involved, and (c) the proposed transaction is
consistent with the general purposes of the Act. Section 6(c) of the
Act permits the Commission to exempt any person or transaction, or any
class or classes of persons or transactions from any provision of the
Act if such exemption is necessary or appropriate in the public
interest and consistent with the protection of investors and the
purposes fairly intended by the policy and provisions of the Act.
3. Applicants seek an exemption under sections 6(c) and 17(b) to
allow the proposed transactions. Applicants state that the transactions
satisfy the standards for relief under sections 6(c) and 17(b).
Specifically, applicants state that the terms of the transactions are
fair and reasonable and do not involve overreaching. Applicants note
that sales and redemptions of shares of the Underlying Funds will be at
the net asset values of such Underlying Funds. In addition, applicants
represent that the proposed transactions will be consistent with the
policies of each Fund involved and the general purposes of the Act.
Applicants' Conditions
Applicants agree that any order granting the requested relief will
be subject to the following conditions:
1. Any sales charges and/or service fees charged with respect to
shares of an Investing Fund will not exceed the limits applicable to a
fund of funds as set forth in NASD Conduct Rule 2830.
2. Before approving any advisory contract under section 15 of the
Act, the board of directors or trustees of an Investing Fund, including
a majority of the trustees who are not interested persons, as defined
in section 2(a)(19) of the Act, of the Investing Fund, will find that
advisory fees, if any, charged under the contract are based on services
provided that are in addition to, rather than duplicative of, services
provided pursuant to any Underlying Fund's advisory contract. Such
finding, and the basis upon which it was made, will be recorded fully
in the minute books of the Investing Fund.
3. Each Investing Fund and each Underlying Fund will be part of the
same ``group of investment companies,'' as defined in section
12(d)(1)(G)(ii) of the Act.
4. No Underlying Fund will acquire securities of any investment
company or company relying on section 3(c)(1) or 3(c)(7) of the Act in
excess of the limits contained in section 12(d)(1)(A) of the Act,
except to the extent that such Underlying Fund: (a) Receives securities
of another investment company as a dividend or as a result of a plan of
reorganization of a company (other than a plan devised for the purpose
of evading section 12(d)(1) of the Act); (b) acquires (or is deemed to
have acquired) securities of another investment company pursuant to
exemptive relief from the Commission permitting such Underlying Fund
to: (i) Acquire securities of one or more investment companies for
short-term cash management purposes, or (ii) engage in interfund
borrowing and lending transactions; or (c) invests in a Cayman
Subsidiary that is a wholly-owned and controlled subsidiary of the
Underlying Fund as described in the application. Further, no Cayman
Subsidiary will acquire securities of any other investment company or
company relying on section 3(c)(1) or 3(c)(7) of the Act other than
money market funds that comply with rule 2a-7 for short-term cash
management.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-00434 Filed 1-10-13; 8:45 am]
BILLING CODE 8011-01-P