[Federal Register Volume 67, Number 213 (Monday, November 4, 2002)]
[Notices]
[Pages 67220-67226]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-27915]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 25789; 812-12224]


Credit Suisse Asset Management, LLC, et al.; Notice of 
Application

October 29, 2002.
AGENCY: Securities and Exchange Commission (``Commission'')

ACTION: Notice of application under section 12(d)(1)(J) of the 
Investment Company Act of 1940 (``Act'') for an exemption from section 
12(d)(1) of the Act, under sections 6(c) and 17(b) of the Act for an 
exemption from section 17(a) of the Act, under section 6(c) of the Act 
for an exemption from section 17(e) of the Act, and under section 17(d) 
of the Act and rule 17d-1 under the Act to permit certain joint 
transactions.

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SUMMARY OF APPLICATION: Applicants request an order to permit (a) 
Certain investment companies and other institutional investors to use 
cash collateral from securities lending transactions (``Cash 
Collateral'') and uninvested cash (``Uninvested Cash,'' and together 
with the Cash Collateral, the ``Cash Balances'') to purchase shares of 
certain registered open-end management investment companies 
(``Registered Investment Funds'') and unregistered investment companies 
(``Unregistered Investment Funds,'' and together with the Registered 
Investment Funds, the ``Investment Funds''); (b) Credit Suisse First 
Boston (New York Branch) (``CSFB'') to accept fees from certain 
registered investment companies for acting as securities lending agent; 
(c) CSFB, Credit Suisse First Boston Corporation (``CSFB Corp.''), 
Credit Suisse Asset Management Securities, Inc. (``CSAMSI'') and any 
broker-dealer that may be controlling, controlled by or under common 
control with CSFB, CSFB Corp. or CSAMSI (each, an ``Affiliated Broker-
Dealer'') to borrow portfolio securities from certain registered 
investment companies and to receive brokerage commissions from, and to 
engage in principal securities transactions with, registered investment 
companies that are affiliated persons solely because they hold 5% or 
more of the outstanding voting securities of an Investment Fund; and 
(d) certain investment companies, other institutional investors and the 
Investment Funds to engage in certain purchase and sale transactions 
with each other.

APPLICANTS: Credit Suisse European Equity Fund, Inc., Credit Suisse 
Select Equity Fund, Inc., Credit Suisse Global Technology Fund, Inc., 
Credit Suisse Municipal Bond Fund, Inc., Credit Suisse Institutional 
U.S. Core Equity Fund, Inc., Credit Suisse Institutional Fixed Income 
Fund, Inc., Credit Suisse Institutional High Yield Fund, Inc., Credit 
Suisse Capital Appreciation Fund, Credit Suisse Capital Funds, Credit 
Suisse Emerging Growth Fund, Inc., Credit Suisse Emerging Markets Fund, 
Inc., Credit Suisse Fixed Income Fund, Credit Suisse Global Fixed 
Income Fund, Inc., Credit Suisse Global Health Sciences Fund, Inc., 
Credit Suisse Global Post-Venture Capital Fund, Inc., Credit Suisse 
Global Financial Services Fund, Inc., Credit Suisse Institutional Fund, 
Inc., Credit Suisse Investment Grade Bond Fund, Inc., Credit Suisse 
Institutional International Fund, Inc, Credit Suisse Japan Growth Fund, 
Inc., Credit Suisse International Focus Fund, Inc., Credit Suisse New 
York Municipal Fund, Credit Suisse Opportunity Funds, Credit Suisse 
Short Duration Bond Fund, Credit Suisse Small Cap Growth Fund, Inc., 
Credit Suisse Strategic Small Cap Fund, Inc., Credit Suisse Strategic 
Value

[[Page 67221]]

Fund, Inc., Credit Suisse Cash Reserve Fund, Inc., Credit Suisse 
Institutional Money Market Fund, Inc., Credit Suisse New York Tax 
Exempt Fund, Inc., Credit Suisse Trust and Credit Suisse Global New 
Technologies Fund, Inc. (each, a ``Registered Affiliated Fund''), 
Credit Suisse Asset Management, LLC (``CSAM''), CSFB, CSFB Corp. and 
CSAMSI (``Applicants'').

FILING DATES: The application was filed on August 16, 2000 and amended 
on January 7, 2002, May 22, 2002 and August 21, 2002. Applicants have 
agreed to file an amendment during the notice period, the substance of 
which is reflected in this notice.

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 November 21, 2002, and should be accompanied by proof or 
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 may request notification of a hearing by writing to 
the Commission's Secretary.

ADDRESSES: Secretary, Commission, 450 Fifth Street, NW., Washington, DC 
20549-0609. Applicants, c/o Credit Suisse Asset Management, LLC, 466 
Lexington Avenue, New York, New York, 10017, Attn: Hal Liebes.

FOR FORTHER INFORMATION CONTACT: John L. Sullivan, Senior Counsel, at 
(202) 942-0681, or Nadya B. Roytblat, Assistant Director, at (202) 942-
0578 (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 for a fee at the 
Commission's Public Reference Branch, 450 Fifth Street, NW., 
Washington, DC 20549-0102 (tel. 202-942-8090).

Applicants' Representations

    1. Each of the Registered Affiliated Funds is either an open-end or 
closed-end management investment company registered under the Act and 
advised or subadvised by CSAM or an entity controlling, controlled by 
or under common control with CSAM (each, including CSAM, a ``CS 
Entity''). Each such CS Entity is or will be registered as an 
investment adviser under the Investment Advisers Act of 1940 or exempt 
from such registration. Applicants requests that the order also apply 
to any other existing or subsequently created registered open-and 
closed-end management investment companies (and each series thereof) 
that are advised or subadvised by a CS Entity (included in the term 
``Registered Affiliated Funds'').\1\
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    \1\ All existing Registered Affiliated Funds that currently 
intend to rely on the relief requested in the application have been 
named as Applicants. Any existing and future entity may rely on the 
requested order only in accordance with the terms and conditions in 
the application.
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    2. CSFB is a Zurich-based bank. CSFB's New York branch will serve 
as the lending agent in a securities lending program (``Program'') for 
the Registered Affiliated Funds and certain other registered management 
investment companies (and series thereof) of which CSFB is not an 
affiliated person, as defined in section 2(a)(3) of the Act, or an 
affiliated person of an affiliated person (``Second-Tier Affiliate'') 
(each, an ``Other Fund,'' and together with the Registered Affiliated 
Funds, the ``Funds''). Other participants in the Program include 
certain investment companies exempt from registration under sections 
3(c)(1) and 3(c)(7) of the Act (``Unregistered Funds''), including 
those advised by a CS Entity (``Unregistered Affiliated Funds''); 
certain managed accounts advised or sub-advised by a CS Entity 
(``Managed Accounts''); and certain corporations, partnerships or other 
entities (i) in which a Registered Affiliated Fund or an Unregistered 
Affiliated Fund directly or indirectly owns, controls or holds with 
power to vote 5% or more of the outstanding voting securities or (ii) 
which may be deemed to be controlled by or under common control with a 
Registered Affiliated Fund or Unregistered Affiliated Fund (``Portfolio 
Companies,'' and together with the Managed Accounts, the ``Other 
Institutional Investors,'' and together with the Funds and Unregistered 
Funds, the ``Participants'').\2\ The Other Institutional Investors also 
include other corporations, partnerships and other entities that are 
not owned or controlled by a CS Entity. The Managed Accounts are not 
pooled investment vehicles, and the Other Institutional Investors are 
not investment companies as defined in the Act.
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    \2\ If a Portfolio Company is relying on section 3(c)(1) or 
3(c)(7) of the Act, it will be treated as an Unregistered Fund for 
purposes of the requested relief.
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    3. Each of the Investment Funds is or will be advised by a CS 
Entity. The Registered Investment Funds are or will be open-end 
management investment companies registered under the Act. Certain of 
the Registered Investment Funds are or will be taxable or tax-exempt 
money market funds operating pursuant to rule 2a-7 under the Act or 
short-term bond funds that seek current income consistent with the 
preservation of capital by investing in fixed-income securities and 
maintaining a dollar-weighted average maturity of three years or less. 
The Registered Investment Funds are, or will be, designed specifically 
for use in connection with the investment of Cash Balances. The 
Unregistered Funds will be investment companies exempt from 
registration under sections 3(c)(1) or 3(c)(7) of the Act. Each 
Unregistered Investment Fund will comply with rule 2a-7 under the Act.
    4. CSFB Corp. and CSAMSI are broker-dealers registered under the 
Securities Exchange Act of 1934 and are (together with CSAM) indirect 
wholly owned subsidiaries of the Credit Suisse Group, an international 
financial services firm.
    5. Under the Program, CSFB and each Fund will enter into a 
securities lending agreement (``Securities Lending Agreement'') that 
authorizes CSFB to enter into a borrowing agreement (``Borrow 
Agreement'') with certain entities (``Borrowers'') approved by a Fund 
from a list of Borrowers maintained by CSFB. The Securities Lending 
Agreement authorizes CSFB to lend portfolio securities of the Fund to 
Borrowers in exchange for Cash Collateral or other types of collateral, 
as indicated in the Securities Lending Agreement and Borrowing 
Agreement. CSFB invests any Cash Collateral on behalf of the Fund in 
accordance with specific guidelines provided by the Fund. These 
guidelines identify the particular Investment Funds and other 
investments, if any, in which Cash Collateral may be invested, as well 
as the amounts that may be invested.
    6. When a securities loan is collateralized with Cash Collateral, 
CSFB will receive a portion of the return earned on the investment of 
the Cash Collateral. Depending on the arrangement negotiated with the 
Borrower by CSFB, the Fund may pay the Borrower a rate of interest for 
use of the Cash Collateral. When the collateral is not Cash Collateral, 
CSFB will negotiate a lending fee to be paid by the Borrower to the 
Fund. For its services to the Funds, if the requested order is granted, 
CSFB will receive fees based on a share of the revenue generated from 
the securities lending transactions.
    7. The personnel who will provide day-to-day lending agency 
services to

[[Page 67222]]

the Funds do not provide investment advisory services to the Funds or 
participate in any way in the selection of portfolio securities or 
other aspects of the management of the Funds.
    8. The Registered Affiliated Funds and the Unregistered Affiliated 
Funds may have Uninvested Cash that comes from a variety of sources, 
including dividend or interest payments, unsettled securities 
transactions, reserves held for investment strategy purposes, scheduled 
maturity of investments, liquidation of portfolio securities to meet 
anticipated redemption and dividend payments, as well as monies 
received from investors. Other Institutional Investors, including the 
Managed Accounts and the Portfolio Companies, also may have Uninvested 
Cash.
    9. Applicants request an order to permit (a) the Participants to 
use Cash Balances to purchase shares of the Investment Funds; (b) (CSFB 
to accept fees from the Funds for acting as securities lending agent; 
(c) the Affiliated Broker-Dealers to borrow portfolio securities from 
the Registered Affiliated Funds and to receive brokerage commissions 
from, and to engage in principal securities transactions with, the 
Other Funds that are affiliated persons solely because they hold 5% or 
more of the outstanding voting securities of an Investment Fund; and 
(d) the Participants and the Investment Funds to engage in certain 
purchase and sale transactions with each other.\3\

Applicants' Legal Analysis

A. Investment of Cash Balances by the Participants in the Investment 
Funds
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    \3\ No relief is requested from the provisions of section 
12(d)(1)(A) and (B) with respect to any investment of Uninvested 
Cash in a Registered Investment Fund by any Unregistered Fund that 
is not an Unregistered Affiliated Fund or by any Other Fund.
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    1. Section 12(d)(1)(A) of the Act prohibits an investment company 
or any company controlled by the investment company from acquiring 
shares of a registered investment company if the securities represent 
more than 3% of the total outstanding voting stock of the acquired 
company, more than 5% of the total assets of the acquiring company, or, 
together with the securities of any other investment companies, more 
than 10% of the total assets of the acquiring company. Section 
12(d)(1)(B) of the Act prohibits a registered open-end investment 
company from selling its shares 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 if the sale will cause more than 
10% of the acquired company's voting stock to be owned by investment 
companies generally. Section 12(d)(1)(J) of the Act provides that the 
Commission may exempt any person, security or transaction, or any class 
or classes of persons, securities or transactions, from any provision 
of section 12(d)(1) if such exemption is consist with the public 
interest and the protection of investors.
    2. Applicants seek an order under section 12(d)(1)(J) of the Act 
exempting them from the provisions of section 12(d)(1) of the Act to 
permit the Funds, Unregistered Funds and Portfolio Companies to 
purchase, and the Registered Investment Funds to sell, securities in 
excess of the limits of sections 12(d)(1)(A) and 12(d)(1)(B) in 
connection with the investment of Cash Balances in a Registered 
Investment Funds.
    3. Applicants state that the proposed arrangement will not give 
rise to the policy concerns underlying sections 12(d)(1)(A) and (B). 
Applicants note that shares of the Investment Funds will be sold 
without a sales load, redemption fee, asset-based distribution fee or 
service fee (as defined in rule 2830(b)(9) of the Conduct Rules of the 
National Association of Securities Dealers, Inc.). In addition, before 
approving any advisory contract, the board of directors (``Board'') of 
a Registered Affiliated Fund; including a majority of the directors/
trustees who are not interested persons within the meaning of section 
2(a)(19) of the Act (``Independent Directors/Trustees''), will consider 
the extent to which the advisory fees charged to a Registered 
Affiliated Fund by a CS Entity should be reduced to account for reduced 
services provided to the Registered Affiliated Fund by such CS Entity 
as a result of Uninvested Cash being invested in the Investment Funds. 
Applicants also note that an Investment Fund will not acquire 
securities of any investment company in excess of the limits contained 
in section 12(d)(1)(A) of the Act.
    4. Sections 17(a)(1) and (2) of the Act make it unlawful for any 
affiliated person of a registered investment company, or any Second-
tier Affiliate, acting as principal, to sell any security to, or 
purchase any security from, the registered investment company. Section 
2(a)(3) of the Act defines an ``affiliated person'' of another person 
to include, among others, any person directly or indirectly owning, 
controlling or holding with power to vote 5% or more of the outstanding 
voting securities of such other person; 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, in the case of an investment 
company, its investment adviser.
    5. As investment adviser to each of the Registered Affiliated Funds 
and the Investment Funds, CSAM could be deemed to control both the 
Registered Affiliated Funds and the Investment Funds. Accordingly, the 
Registered Affiliated Funds and the Investment Funds could be deemed to 
be under common control and affiliated persons of each other. In 
addition, if an Other Fund acquires 5% or more of the outstanding 
voting securities of an Investment Fund, the Investment Fund could be 
deemed an affiliated person of the Other Fund. As a result, section 
17(a) would prohibit an Investment Fund from selling its shares to, and 
redeeming its shares from, certain Funds.
    6. Section 17(b) of the Act authorizes the Commission to exempt a 
transaction from section 17(a) if the terms of the proposed 
transaction, including the consideration to be paid or received, are 
reasonable and fair and do not involve overreaching on the part of any 
person concerned, and if the proposed transaction is consistent with 
the policy of each registered investment company concerned and with the 
general purposes of the Act. Section 6(c) of the Act provides that the 
Commission may exempt any person or transaction from any provision of 
the Act if the 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.
    7. Applicants request an order under sections 6(c) and 17(B) of the 
Act to permit the funds to purchase shares of the Investment Funds and 
the Investment Funds to redeem their shares from the Funds. Applicants 
submit that the terms of the proposed transactions, including the 
consideration to be paid or received, are reasonable and fair and 
consistent with the general purposes of the Act, as well as with the 
policies of the respective Funds. Applicants state that the Funds will 
be treated like any other shareholders in an Investment Fund, and the 
Funds will purchase and redeem shares of an Investment Fund on the same 
terms and basis as such shares are purchased and redeemed by all other 
shareholders of an Investment Fund. Applicants state that a Fund will 
only be permitted to invest Cash Balances in an Investment Fund if that

[[Page 67223]]

Investment Fund has been approved for investment by the Fund and if the 
Investment Fund invests in instruments that the Fund has previously 
determined are an acceptable medium for the investment of Cash 
Balances. A Fund that complies with rule 2a-7 under the Act will not 
invest its Cash Balances in an Investment Fund that does not comply 
with rule 2a-7. For these reasons, Applicants believe that their 
requested relief meets the standards of sections 6(c) and 17(b) of the 
Act.
    8. Section 17(d) of the Act and rule 17d-1 under the Act prohibit 
any affiliated person of a registered investment company or any Second-
tier Affiliate, acting as principal, from effecting any transaction in 
connection with any joint enterprise or joint arrangement in which the 
investment company participates, unless an application regarding the 
joint arrangement has been filed with the Commission and granted by 
order. Under rule 17d-1, in passing on applications for orders under 
section 17(d), the Commission considers whether the participation of 
the registered investment company is consistent with the provisions, 
policies, and purposes of the Act and the extent to which the 
participation is on a basis different from or less advantageous than 
that of other participants.
    9. Applicants state that the Participants (by purchasing and 
redeeming shares of an Investment Fund), the Investment Funds (by 
selling shares of an Investment Fund to and redeeming them for the 
Participants), a CS Entity (by managing the portfolio securities of the 
Registered Affiliated Funds, the Unregistered Affiliated Funds, the 
Managed Accounts and the Investment Funds at the same time that the 
Registered Affiliated Funds, Unregistered Affiliated Funds and Managed 
Accounts' Cash Balances are invested in shares of an Investment Fund) 
and CSFB (by acting as lending agent, investing Cash Collateral in 
shares of an Investment Fund and receiving a portion of the revenue 
generated by securities lending transactions) could be considered 
participants in a joint enterprise or arrangement. Applicants request 
an order in accordance with section 17(d) and rule 17d-1 to permit 
certain transactions incident to investment of Cash Balances in the 
Investment Funds.
    10. Applicants state that the Registered Affiliated Funds and the 
other Participants will invest in the Investment Funds on the same 
basis as any other shareholder in the Investment Funds. Accordingly, 
Applicants believe that the proposed investment in Investment Funds 
meets the standards of section 17(d) and rule 17d-1.

B. Interfund Transactions

    1. Applicants state that certain Participants and certain 
Investment Funds currently rely on rule 17a-7 to engage in purchase and 
sale transactions in securities (``Interfund Transactions''). Rule 17a-
7 excepts from the prohibitions of section 17(a) the purchase or sale 
of certain securities between registered investment companies that are 
affiliated persons or Second-tier Affiliates of each other or between a 
registered investment company and a person that is an affiliated person 
or Second-tier Affiliate of such company solely by reason of having a 
common investment adviser or affiliated investment advisers, common 
officers, and/or common directors. If at any time a Participant were to 
own 5% or more of the voting securities of an Investment Fund, then 
such Participant would be an affiliated person of such Investment Fund, 
and such Investment Fund would be an affiliated person of such 
Participant, by reason of such ownership of voting securities, and not 
solely by reason of such Participant and such Investment Fund having a 
common investment adviser, common officers and/or common directors.
    2. Applicants request an order under sections 6(c) and 17(b) to 
permit the Interfund Transactions. Applicants state that the 
Participants and the Investment Funds will comply with rule 17a-7 under 
the Act, other than the requirement that the participants be affiliated 
solely by reason of having a common investment adviser or affiliated 
investment advisers, common officers, and/or common directors. 
Applicants state that the affiliation created by the proposed 
transaction does not affect the other protections provided by rule 17a-
7 or the policies underlying the rule.

C. Payment of Fees by the Funds to CSFB

    1. Applicants state that the lending agent arrangement between each 
Fund and CSFB, under which CSFB is to receive compensation based on a 
share of the revenue generated from the securities lending 
transactions, may be deemed a joint enterprise or other joint 
arrangement requiring an order under section 17(d) of the Act and rule 
17d-1 under the Act. Consequently, Applicants request an order in 
accordance with section 17(d) and rule 17d-1 to the extent necessary to 
permit each Fund to pay, and CSFB to accept, fees in connection with 
CSFB's acting as lending agent in the manner and subject to the 
conditions and procedures described in the application.
    2. Applicants submit that to safeguard each Registered Affiliated 
Fund's shareholders, Applicants will adopt the following procedures to 
ensure that the proposed fee arrangement and other terms governing the 
relationship with CSFB, as lending agent, will meet the standards of 
rule 17d-1:
    (a) In connection with the approval of CSFB as lending agent for a 
Registered Affiliated Fund and implementation of the proposed fee 
arrangement, a majority of the Board (including a majority of the 
Independent Directors/Trustees) will determine that (i) the contract 
with CSFB is in the best interests of the Registered Affiliated Fund 
and its shareholders, (ii) the services to be performed by CSFB are 
appropriate for the Registered Affiliated Fund, (iii) the nature and 
quality of the services provided by CSFB are at least equal to those 
offered and provided by others, and (iv) the fees for CSFB's services 
are fair and reasonable in light of the usual and customary charges 
imposed by other lending agents for services of the same nature and 
quality.
    (b) Each Registered Affiliated Fund's contract with CSFB for 
lending agent services will be reviewed annually and will be approved 
for continuation only if a majority of the Board (including a majority 
of the Independent Directors/Trustees) makes the findings referred to 
in paragraph (a) above.
    (c) In connection with the initial implementation of an arrangement 
whereby CSFB will be compensated as lending agent based on a percentage 
of the revenue generated by a Registered Affiliated Fund's 
participation in the Program, the Board shall obtain competing quotes 
with respect to lending agent fees from at least three independent 
lending agents to assist the Board in making the findings referred to 
in paragraph (a) above.
    (d) The Board of the Registered Affiliated Fund, including a 
majority of the Independent Directors/Trustees, will (i) determine at 
each regular quarterly meeting that the loan transactions during the 
prior quarter were conducted in compliance with the conditions and 
procedures set forth in the application and (ii) review no less 
frequently than annually the conditions and procedures set forth in the 
application for continuing appropriateness.
    (e) Each Registered Affiliated Fund will (i) maintain and preserve 
permanently in an easily accessible place a written copy of the 
procedures and conditions (and modifications thereto) described in the 
application and (ii) maintain and preserve for a

[[Page 67224]]

period not less than six years from the end of the fiscal year in which 
any loan transaction pursuant to the Program occurred, the first two 
years in an easily accessible place, a written record of each loan 
transaction setting forth a description of the security loaned, the 
identity of the person on the other side of the loan transaction, the 
terms of the loan transaction, and the information or materials upon 
which the determination was made that each loan was made in accordance 
with the procedures set forth above and the conditions to the 
application.
    3. With respect to the Other Funds, Applicants state that the 
nature of the affiliation between the Other Funds and CSFB is only 
technical. Applicants state that CSFB would not have any influence over 
the decisions made by any Other Fund and that any fee arrangements 
between the Other Funds and CSFB will be the product of arms-length 
bargaining.

D. Loans by Registered Affiliated Funds to Affiliated Broker-Dealers

    1. Section 17(a)(3) of the Act makes it unlawful for any affiliated 
person of a registered investment company, or any Second-tier 
Affiliate, acting as principal, to borrow money or other property from 
a registered investment company. Under section 2(a)(3)(E) of the Act, 
CSFB Corp. is an affiliated person of those Registered Affiliated Funds 
for which it acts as investment adviser and, under section 2(a)(3)(C), 
a Second-tier Affiliate of those Registered Affiliated Funds for which 
CSAM acts as an investment adviser, since CSFB Corp. and CSAM may be 
deemed to be under common control. Further, the other Affiliated 
Broker-Dealers may be deemed to be under common control with CSAM and 
Second-tier Affiliates of the Registered Affiliated Funds. Accordingly, 
under section 17(a)(3) of the Act, CSFB Corp. and the other Affiliated 
Broker-Dealers would be prohibited from borrowing securities from the 
Registered Affiliated Funds.
    2. The Applicants request relief under sections 6(c) and 17(b) of 
the Act exempting them from Section 17(a)(3) of the Act, and under 
section 17(d) of the Act and rule 17d-1 under the Act to permit the 
Registered Affiliated Funds to lend portfolio securities to the 
Affiliated Broker-Dealers.
    3. Applicants state that each loan to an Affiliated Broker-Dealer 
by a Registered Affiliated Fund will be made with a spread that is no 
lower than that applied to comparable loans to unaffiliated 
Borrowers.\4\ In this regard, Applicants state that at least 50% of the 
loans made by the Registered Affiliated Funds, on an aggregate basis, 
will be made to unaffiliated Borrowers. Moreover, all loans will be 
made with spreads that are no lower than those set forth in a schedule 
of spreads (``Schedule of Spreads'') established by the Board of each 
Registered Affiliated Fund, including a majority of the Independent 
Directors/Trustees.
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    \4\ A ``spread'' is the compensation earned by a Registered 
Affiliated Fund, as lender, from a securities loan, which 
compensation is in the form either of a lending fee payable by the 
Borrower to the Registered Affiliated Fund (where non-Cash 
Collateral is posted) or of the excess, retained by the Registered 
Affiliated Fund, over a rebate rate payable by the Registered 
Affiliated Fund to the Borrower (where Cash Collateral is posted and 
then invested by the Registered Affiliated Fund).
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E. Transactions by the Other Funds With the Affiliated Broker-Dealers

    1. As noted above, sections 17(a)(1), (2) and (3) of the Act 
prohibit certain principal transactions between a registered investment 
company and its affiliates. The Affiliated Broker-Dealers and the 
Investment Funds could be deemed to be under common control and thus 
affiliated persons of one another. Therefore, an Affiliated Broker-
Dealer could be deemed a Second-tier Affiliate of an Other Fund that 
purchases 5% or more of the outstanding voting securities of an 
Investment Fund. Applicants request relief under sections 6(c) and 
17(b) from section 17(a) to permit principal transactions between the 
Other Funds and the Affiliated Broker-Dealer where the affiliation 
between the parties arises solely as a result of an investment by an 
Other Fund of Cash Balances in an Investment Fund.
    2. Applicants state that there will be no element of self-dealing 
because the Affiliated Broker-Dealers have no influence over the 
decisions made by any Other Fund. Applicants state that each 
transaction between an Affiliated Broker-Dealer and an Other Fund would 
be the product of arms-length bargaining.
    3. Section 17(e)(2) of the Act makes it unlawful for any affiliated 
person of a registered investment company, or any Second-tier 
Affiliate, acting as broker in connection with the sale of securities 
to or by that registered investment company, to receive from any source 
a commission for effecting the transaction that exceeds (a) the usual 
and customary broker's commission if the sale is effect on a securities 
exchange, (b) 2 percent of the sales price if the sale is effected in 
connection with a secondary distribution of the securities, or (c) 1 
percent of the purchase or sale price of such securities if the sale is 
otherwise effected.
    4. Applicants request relief under section 6(c) from section 
17(e)(2) as it may apply to transactions by Other Funds that are 
brokered by an Affiliated Broker-Dealer. Applicants believe that each 
transaction between an Other Fund and an Affiliated Broker-Dealer would 
be the product of arms-length bargaining.

Applicant's Conditions

    Applicants agree that any order of the Commission granting the 
requested relief will be subject to the following conditions:

A. General

    1. The Securities Lending Program of each Fund will comply with all 
present and future applicable Commission and staff positions regarding 
securities lending arrangements.
    2. The approval of the Registered Affiliated Fund's Board, 
including a majority of the Independent Directors/Trustees, shall be 
required for the initial and subsequent approvals of CSFB's service as 
lending agent for the Registered Affiliated Fund pursuant to the 
Securities Lending Program, for the institution of all procedures 
relating to the Securities Lending Program as it relates to the 
Registered Affiliated Fund, and for any periodic review of loan 
transactions for which CSFB acted as lending agent pursuant to the 
Securities Lending Program.
    3. No Fund will purchase shares of any Investment Fund unless 
participation in the Securities Lending Program has been approved by a 
majority of the Independent Directors/Trustees of the Fund. The 
Independent Directors/Trustees also will evaluate the Securities 
Lending Program no less frequently than annually and determine that 
investing Cash Collateral in the Investment Funds is in the best 
interests of the shareholders of the Fund. Further, the Independent 
Directors/Trustees of the Registered Affiliated Funds will initially 
and at least annually thereafter determine that investing Uninvested 
Cash in the Investment Funds is in the best interests of the 
shareholders of the Registered Affiliated Funds.
    4. Each of the Registered Affiliated Funds will invest Uninvested 
Cash in, and hold shares of, the Investment Funds only to the extent 
that the Registered Affiliated Fund's aggregate investment of 
Uninvested Cash in the Investment Funds does not exceed 25% of the 
Registered Affiliated Fund's total assets. For purposes of this 
limitation, each Registered Affiliated Fund or series

[[Page 67225]]

thereof will be treated as a separate investment company.
    5. The Registered Affiliated Funds, Unregistered Affiliated Funds, 
and any Investment Fund will be advised by a CS Entity or will have a 
CS Entity as its general partner or managing member. A Registered 
Affiliated Fund that is subadvised, but not advised, by a CS Entity may 
rely on the order provided that the CS Entity manages the Cash Balances 
and that any relief granted from the provision of section 12(d)(1)(A) 
and (B) of the Act shall be available only if the Registered Affiliated 
Fund is in the same group of investment companies (as defined in 
Section 12(d)(1)(G) of the Act) as the Registered Investment Fund in 
which the Registered Affiliated Fund invests Cash Balances.

B. Loans to Affiliated Broker-Dealers

    1. The Registered Affiliated Funds, on an aggregate basis, will 
make at least 50% of their portfolio securities loans to unaffiliated 
Borrowers.
    2. The total value of securities loaned to any one broker-dealer on 
the approved list will be in accordance with a schedule by the 
Registered Affiliated Fund's Board, but in no event will the total 
value of securities lent to any one Affiliated Broker-Dealer exceed 10% 
of the net assets of the Registered Affiliated Fund, computed at 
market.
    3. A Registered Affiliated Fund will not make any loan to an 
Affiliated Broker-Dealer unless the income attributable to such loan 
fully covers the transaction cost incurred in making such loan.
    4. (a) All loans will be made with spreads no lower than those set 
forth in a Schedule of Spreads which will be established and may be 
modified from time to time by each Registered Affiliated Fund's Board 
and by a majority of the Independent Directors/Trustees.
    (b) The Schedule of Spreads will set forth rates of compensation to 
each Registered Affiliated Fund that are reasonable and fair and that 
are determined in light of those considerations set forth in the 
application.
    (c) The Schedule of Spreads will be uniformly applied to all 
Borrowers of the Registered Affiliated Funds' portfolio securities , 
and will specify the lowest allowable spread with respect to a loan of 
securities to any Borrower.
    (d) If a security is loaned to an unaffiliated Borrower with a 
spread higher than the minimum set forth in the Schedule of Spreads, 
all comparable loans to an Affiliated Broker-Dealer will be made at no 
less than the higher spread.
    (e) The Registered Affiliated Funds' portfolio securities lending 
program will be monitored on a daily basis by an officer of each 
Registered Affiliated Fund who is subject to section 36(a) of the Act. 
This officer will review the terms of each loan to an Affiliated 
Broker-Dealer for comparability with loans to unaffiliated Borrowers 
and conformity with the Schedule of Spreads, and will periodically, and 
at least quarterly, report his or her findings to each Registered 
Affiliated Fund's Board, including a majority of the Interested 
Directors/Trustees.
    5. Each Registered Affiliated Fund's Board, including a majority of 
the Independent Directors/Trustees: (a) will determine no less 
frequently than quarterly that all transactions with Affiliated Broker-
Dealers effected during the preceding quarter were effected in 
compliance with the requirements of the procedures adopted by the Board 
and the conditions of this order if granted and that such transactions 
were conducted on terms which were reasonable and fair; and (b) will 
review no less frequently than annually such requirements and 
conditions for their continuing appropriateness.
    6. Each Registered Affiliated Fund's Board, including a majority of 
the Independent Directors/Trustees: (a) will determine no less 
frequently than quarterly that all transactions with Affiliated Broker-
Dealers effected during the preceding quarter were effected in 
compliance with the requirements of the procedures adopted by the Board 
and the conditions of this order if granted and that such transactions 
were conducted on terms which were reasonable and fair; and (b) will 
review no less frequently than annually such requirements and 
conditions for their continuing appropriateness.

C. Investment of Cash Balances in an Investment Fund

    1. Investment in shares of an Investment Fund by a particular Fund 
will be in accordance with the guidelines regarding the investment of 
securities lending Cash Collateral specified by the Fund in the 
Securities Lending Agreement. A Fund's Cash Balances will be invested 
in a particular Investment Fund only if that Investment Fund has been 
approved for investment by the Fund and if that Investment Fund invests 
solely in the types of instruments that the Fund has authorized for the 
investment of its Cash Balances.
    2. An Investment Fund will not acquire securities of any investment 
company in excess of the limits contained section 12(d)(1)(A) of the 
Act.
    3. Each Fund will purchase and redeem shares of any Unregistered 
Investment Fund on the same basis as of the same time and at the same 
price, and will receive dividends and bear its proportionate share of 
expenses on the same basis, as other shareholders investing in the same 
series of the Unregistered Investment Fund. A separate account will be 
established in the shareholder records of the Unregistered Investment 
Fund for the account of each Fund for the account of each Fund that 
invests in such Unregistered Investment Fund.
    4. Each Unregistered Investment Fund will comply with rule 2a-7 
under the Act. A CS Entity as the investment adviser to such 
Unregistered Investment Fund will adopt and monitor the procedures 
described in rule 2a-7(c)(7) under the Act and will take such other 
actions as are required to be taken pursuant to such procedures. A Fund 
may only purchase shares of such Unregistered Investment Fund if the 
relevant CS Entity determines on an ongoing basis that the Unregistered 
Investment Fund is in compliance with rule 2a-7. Such CS Entity will 
preserve for a period not less than six years from the date of 
determination, the first two years in an easily accessible place, a 
record of such determination and the basis upon which such 
determination was made. The record will be subject to examination by 
the Commission and the staff.
    5. Each Unregistered Investment Fund will comply with the 
requirements of sections 17(a), (d) and (e) and 18 of the Act as if it 
were a registered open-end investment company. With respect to all 
redemption requests made by a Fund, each Unregistered Investment Fund 
will comply with section 22(e) of the Act. Any CS Entity that serves as 
investment adviser to an Unregistered Investment Fund will adopt 
procedures designed to ensure that the Unregistered Investment Fund 
complies with section 17(a), (d) and (e), 18 and 22(e) of the Act. Any 
such CS Entity will also periodically review and update as appropriate 
such procedures and will maintain books and records describing such 
procedures, and maintain the records required by rules 31(a)-1(b)(1), 
31a-1(b)(2)(ii) and 31a-1(b)(9) under the Act. All books and records 
required to be made pursuant to this condition will be maintained and 
preserved for a period of not less than six years from the end of the 
fiscal year in which any transaction occurred, the first two years in 
an easily accessible place, and will be subject to

[[Page 67226]]

examination by the Commission and the staff.
    6. The net asset value per share with respect to shares of an 
Unregistered Investment Fund will be determined separately for each 
Unregistered Investment Fund by dividing the value of the assets 
belonging to that Unregistered Investment Fund, less the liabilities of 
that Unregistered Investment Fund, by the number of shares outstanding 
with respect to that Unregistered Investment Fund.
    7. If a CS Entity collects a fee from an Investment Fund for acting 
as its investment adviser with respect to Uninvested Cash invested by a 
Registered Affiliated Fund, before the next meeting of the Board of a 
Registered Affiliated Fund that invests in the Investment Funds is held 
for the purpose of voting on an advisory contract pursuant to section 
15 of the Act, that CS Entity will provide the Board with specific 
information regarding the approximate cost to the CS Entity for, or 
portion of the advisory fee under the existing advisory fee 
attributable to, managing the Uninvested Cash of the Registered 
Affiliated Fund that can be expected to be invested in the Investment 
Funds. Before approving any advisory contract pursuant to Section 15 of 
the Act, the Board of the Registered Affiliated Fund, including a 
majority of the Independent Directors/Trustees, shall consider to what 
extent, if any, the advisory fees charged to the Registered Affiliated 
Fund by a CS Entity should be reduced to account for the reduced 
services provided to the Registered Affiliated Fund by such CS Entity 
as a result of Uninvested Cash being invested in the Investment Funds. 
The minute books of the Registered Affiliated Fund will record fully 
the Board's consideration in approving the advisory contract, including 
the considerations relating to fees referred to above.
    8. Investment in shares of an Investment Fund by a particular Fund 
will be consistent with such Fund's investment objectives and policies. 
A Fund that complies with rule 2a-7 under the Act will not invest its 
Cash Balances in an Investment Fund that does not comply with rule 2a-
7.
    9. The shares of an Investment Fund will not be subject to a sales 
load, redemption fee, any asset-based distribution fee or service fee 
(as defined in rule 2830(b)(9) of the Conduct rules of the NASD).
D. Interfund Transactions
    1. To engage in Interfund Transactions, the Participants and the 
Investment Funds will comply with rule 17a-7 under the Act in all 
respects other than the requirement that the parties to the transaction 
be affiliated persons (or Second-tier Affiliates) of each other solely 
by reason of having a common investment adviser or investments advisers 
which are affiliated persons of each other, common officers, and/or 
common directors, solely because a Participant and an Investment Fund 
might become affiliated persons within the meaning of Section 
2(a)(3)(A) and (B) of the Act.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-27915 Filed 11-01-02; 8:45 am]
BILLING CODE 8010-01-M