As filed with the Securities and Exchange Commission on August 22, 2013
Securities Act File No. 333-189957
Investment Company Act File No. 811-21318
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 | ||
Pre-Effective Amendment No. 1 | x | |
Post-Effective Amendment No. | ¨ | |
(Check appropriate box or boxes) |
BLACKROCK CORPORATE HIGH YIELD FUND VI, INC.
(Exact Name of Registrant as Specified in Charter)
100 BELLEVUE PARKWAY WILMINGTON, DELAWARE 19809
(Address of Principal Executive Offices: Number, Street, City, State, Zip Code)
(800) 882-0052
(Area Code and Telephone Number)
John M. Perlowski
President and Chief Executive Officer
BlackRock Corporate High Yield Fund VI, Inc.
55 East 52nd Street
New York, New York 10055
(Name and Address of Agent for Service)
With copies to:
Thomas A. DeCapo, Esq. Skadden, Arps, Slate, Meagher & Flom LLP One Beacon Street Boston, Massachusetts 02108 |
Janey Ahn, Esq. BlackRock Advisors, LLC 40 East 52nd Street New York, New York 10022 |
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT
(Approximate Date of Proposed Public Offering)
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
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Title of Securities Being Registered |
Amount Being
Registered(1) |
Proposed
Maximum
Offering Price
Per Unit(2) |
Proposed
Maximum
Aggregate Offering Price(1) |
Amount of
Registration Fee(3) |
||||
Common Shares $0.10 par value |
110,000,000 |
$12.66 |
$1,392,600,000.00 |
$189,950.64 |
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|
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|
(1) | Estimated solely for the purpose of calculating the filing registration fee, pursuant to Rule 457(o) under the Securities Act of 1933. |
(2) | Net asset value per common share on August 16, 2013. |
(3) | $136.40 previously paid in connection with the registration of $1,000,000 worth of common shares on July 15, 2013. The amount stated represents the $136.40 previously paid with respect to the registration of $1,000,000 worth of common shares on July 15, 2013, plus $136.40 per million with respect to the $1,391,600,000.00 worth of common shares registered hereby. |
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 of 1933 or until this registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
EXPLANATORY NOTE
This Registration Statement is organized as follows:
a. | Letter to Shareholders of BlackRock High Yield Trust (BHY), BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE), BlackRock High Income Shares (HIS), BlackRock Corporate High Yield Fund V, Inc. (HYV) and BlackRock Corporate High Yield Fund VI, Inc. (HYT). |
b. | Questions and Answers to Shareholders of BHY, COY, CYE, HIS, HYV and HYT. |
c. | Notice of Joint Special Meeting of Shareholders of BHY, COY, CYE, HIS, HYV and HYT. |
d. | Joint Proxy Statement/Prospectus for BHY, COY, CYE, HIS, HYV and HYT. |
e. | Statement of Additional Information regarding the proposed Reorganizations of BHY, COY, CYE, HIS, HYV and HYT. |
f. | Part C: Other Information. |
g. | Exhibits. |
BLACKROCK HIGH YIELD TRUST
BLACKROCK CORPORATE HIGH YIELD FUND, INC.
BLACKROCK CORPORATE HIGH YIELD FUND III, INC.
BLACKROCK HIGH INCOME SHARES
BLACKROCK CORPORATE HIGH YIELD FUND V, INC.
BLACKROCK CORPORATE HIGH YIELD FUND VI, INC.
100 Bellevue Parkway
Wilmington, Delaware 19809
(800) 882-0052
August 22, 2013
Dear Shareholder:
You are cordially invited to attend a joint special shareholder meeting (the Special Meeting) of BlackRock High Yield Trust (BHY), BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE), BlackRock High Income Shares (HIS), BlackRock Corporate High Yield Fund V, Inc. (HYV) and BlackRock Corporate High Yield Fund VI, Inc. (HYT and together with BHY, COY, CYE, HIS and HYV, the Funds, and each, a Fund) to be held at the offices of BlackRock Advisors, LLC, 1 University Square Drive, Princeton, NJ 08540-6455, on October 11, 2013 at 9:00 a.m. (Eastern time). Before the Special Meeting, I would like to provide you with additional background information and ask for your vote on important proposals affecting the Funds, which are described in the enclosed Joint Proxy Statement/Prospectus.
Shareholders of BHY, COY, CYE, HIS and HYV will be asked to consider the following proposal, which is described in the enclosed Joint Proxy Statement/Prospectus, at the Special Meeting: the reorganization of their Fund into HYT, a fund with the same or substantially similar (but not identical) investment objectives and investment policies.
Shareholders of HYT will be asked to consider the following proposal, which is described in the enclosed Joint Proxy Statement/Prospectus, at the Special Meeting: the reorganization of each of BHY, COY, CYE, HIS and HYV into HYT, where each Fund has the same or substantially similar (but not identical) investment objectives and investment policies, including the issuance of additional common shares of HYT in connection with each such reorganization.
The Board of Directors/Trustees of each Fund believes the proposal applicable to its respective Fund is in the best interests of that Fund and its shareholders and unanimously recommends that you vote FOR such proposal.
The enclosed materials explain these proposals in more detail, and I encourage you to review them carefully. As a shareholder, your vote is important, and we hope that you will respond today to ensure that your shares will be represented at the Special Meeting. You may vote using one of the methods below by following the instructions on your proxy card:
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By touch-tone telephone; |
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By internet; |
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By returning the enclosed proxy card in the postage-paid envelope; or |
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In person at the Special Meeting. |
If you do not vote using one of these methods described above, you may be contacted by Georgeson Inc., our proxy solicitor, to vote your shares over the telephone.
As always, we appreciate your support.
Sincerely,
J OHN M. P ERLOWSKI
President and Chief Executive Officer of the Funds
Please vote now . Your vote is important. |
To avoid the wasteful and unnecessary expense of further solicitation(s), we urge you to indicate your voting instructions on the enclosed proxy card, date and sign it and return it promptly in the postage-paid envelope provided, or record your voting instructions by telephone or via the internet, no matter how large or small your holdings may be. If you submit a properly executed proxy but do not indicate how you wish your shares to be voted, your shares will be voted FOR each proposal, as applicable. If your shares are held through a broker, you must provide voting instructions to your broker about how to vote your shares in order for your broker to vote your shares as you instruct at the Special Meeting. |
August 22, 2013
IMPORTANT NOTICE
TO SHAREHOLDERS OF
BLACKROCK HIGH YIELD TRUST
BLACKROCK CORPORATE HIGH YIELD FUND, INC.
BLACKROCK CORPORATE HIGH YIELD FUND III, INC.
BLACKROCK HIGH INCOME SHARES
BLACKROCK CORPORATE HIGH YIELD FUND V, INC.
BLACKROCK CORPORATE HIGH YIELD FUND VI, INC.
QUESTIONS & ANSWERS
Although we urge you to read the entire Joint Proxy Statement/Prospectus, we have provided for your convenience a brief overview of some of the important questions concerning the issues to be voted on.
Q: | Why is a shareholder meeting being held? |
A: | Shareholders of BlackRock High Yield Trust (BHY), BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE), BlackRock High Income Shares (HIS) and BlackRock Corporate High Yield Fund V, Inc. (HYV): You are being asked to vote on the reorganization (each, a Reorganization) of each of BHY, COY, CYE, HIS and HYV, respectively (each such fund being referred to herein as a Target Fund) into BlackRock Corporate High Yield Fund VI, Inc. (HYT or the Acquiring Fund and, together with the Target Funds, each, a Fund), a fund that pursues investment objectives and has investment policies that are either the same or substantially similar (but not identical) to those of each of the Target Funds and has the same investment adviser, BlackRock Advisors, LLC (the Investment Advisor), and the same sub-advisor, BlackRock Financial Management, Inc. (the Sub-Advisor, and together with the Investment Advisor, the Advisors), as the Target Funds. The term Combined Fund will refer to HYT as the surviving Fund after the Reorganizations. |
Shareholders of BHY, COY, CYE, HIS and HYV are being asked to consider the following proposal, which is described in the enclosed Joint Proxy Statement/Prospectus, at the Special Meeting: the reorganization of their fund with HYT, a fund with the same or substantially similar (but not identical) investment objectives and investment policies.
Shareholders of BlackRock Corporate High Yield Fund VI, Inc. (HYT): You are being asked to consider the following proposal, which is described in the enclosed Joint Proxy Statement/Prospectus, at the Special Meeting: reorganizing each of BHY, COY, CYE, HIS and HYV into HYT where each Fund has the same or substantially similar (but not identical) investment objectives and investment policies, including the issuance of additional common shares of HYT in connection with each such reorganization.
A Reorganization will be consummated if a Target Funds shareholders approve the Reorganization with respect to that Target Fund, and the Acquiring Funds shareholders approve the Reorganization with respect to that Target Fund. A Reorganization is not contingent upon the approval of any other Reorganization. If any Reorganization is not consummated, then the Target Fund for which such Reorganization was not consummated would continue to exist and operate on a stand-alone basis.
In the event a Reorganization is consummated, shareholders of the Combined Fund, including former shareholders of the applicable Target Fund, would be subject to the investment policies of the Acquiring Fund following the Reorganization. See Comparison of the Funds in the Joint Proxy Statement/Prospectus for a comparison of the Funds investment objectives and significant investment strategies and operating policies.
Q: | Why are the Reorganizations being recommended? |
A: | The Board of Directors or Board of Trustees of each Fund, as applicable (each, a Board and collectively, the Boards), anticipates that the Reorganizations will benefit the shareholders of each Target Fund and the Acquiring Fund by providing the potential for: |
i. | a lower operating expense ratio than each of the Funds prior to the Reorganizations, except with respect to COY, which is expected to increase by 0.09% (see How will the Reorganizations affect the fees and expenses of the Funds? below for additional information); |
ii. | comparable ( i.e. , the same or slightly lower or higher) earnings, which is expected to allow each Funds shareholders to maintain a distribution yield on net asset value (NAV) comparable to the distribution yield on NAV for each of the Funds prior to the Reorganizations; |
iii. | greater secondary market liquidity for the Combined Funds common shares, which may result in tighter bid-ask spreads; |
iv. | better trade execution for the Combined Funds shareholders when purchasing or selling the Combined Funds common shares; |
v. | improved premium/discount levels for the Combined Funds common shares; |
vi. | operating and administrative efficiencies for the Combined Fund, including greater investment flexibility and investment options, greater diversification of portfolio investments, the ability to trade in larger positions, additional sources of leverage or more competitive leverage terms and more favorable transaction terms; |
vii. | benefits from having fewer closed-end funds in the market, including an increased focus by investors on the remaining funds in the market (including the Combined Fund) and additional research coverage; and |
viii. | benefits from having fewer similar funds in the same fund complex, including a simplified operational model and a reduction in risk of operational, legal and financial errors. |
Because the shareholders of each Fund will vote separately on its respective Reorganization(s), there are multiple potential combinations of Reorganizations. The Board of each Fund and the Investment Advisor believe that the most likely result of the potential combinations of Reorganizations is the combination of all the Funds. To the extent that one or more of the Reorganizations are not completed, but the other Reorganization(s) are completed, any expected expense savings by the Combined Fund, or other potential benefits resulting from the Reorganizations, may be reduced.
If the Reorganization of any Target Fund is not approved, the Investment Advisor may, in connection with ongoing management of that Target Fund and its product line, recommend alternative proposals to the Board of that Target Fund.
Q: | How will the Reorganizations affect the fees and expenses of the Funds? |
A: | For the fiscal year ended August 31, 2012, BHYs, HISs, HYVs and HYTs Total Expense Ratio was 2.01%, 1.54%, 1.42% and 1.51%, respectively. For the 12-month period ended February 28, 2013, the Total Expense Ratios of BHY, HIS, HYV and HYT were 2.25%, 1.59%, 1.45% and 1.52%, respectively. For the fiscal year ended February 28, 2013, the Total Expense Ratios of COY and CYE were 1.25% and 1.42%, respectively. |
When we use the term Total Expenses, we mean a Funds total annual operating expenses (including interest expenses). When we use the term Total Expense Ratio, we mean a Funds Total Expenses expressed as a percentage of its average net assets attributable to its common shares.
The Funds estimate that the completion of all of the Reorganizations would result in a Total Expense Ratio for the Combined Fund of 1.34% on a historical and pro forma basis for the 12-month period ended
ii
February 28, 2013, representing a reduction in the Total Expense Ratio for the shareholders of BHY, CYE, HIS, HYV and HYT of 0.91%, 0.08%, 0.25%, 0.11% and 0.18%, respectively, and an increase in the Total Expense Ratio for the shareholders of COY of 0.09%. In addition, the level of expense savings (or increases) will vary depending on the combination of the Funds in the proposed Reorganizations, and furthermore, there can be no assurance that future expenses will not increase or that any expense savings for any Fund will be realized.
The Board of each Fund, anticipates that the Reorganizations will benefit the shareholders of each Target Fund and the Acquiring Fund by providing for the potential benefits discussed in Why are the Reorganizations being recommended? on the previous page. These potential benefits include the potential for higher earnings yield (as a percentage of NAV) on a pro forma basis for the Combined Fund compared to COY. In addition, the Investment Advisor will bear all of the reorganization costs of COY, CYE and HYV.
The contractual management fee rate of the Combined Fund will be 0.60%, which is the same or lower than the current contractual management fee rate of any individual Fund, except COY. The Combined Fund will not be subject to any separate administration fee payable to the Investment Advisor. The current combined advisory and administration fees payable to the Investment Advisor for each Fund is as follows: 1.00% (including administration fee of 0.10%) for BHY, 0.75% for HIS (of the first $200 million and 0.50% thereafter), 0.50% for COY, 0.60% for CYE, 0.60% for HYV and 0.70% for HYT. No Fund, other than BHY, is subject to a separate administration fee. While the contractual management fee of the Combined Fund would be 10 basis points higher than the contractual management fee of COY (0.50%), the Combined Fund would still be competitively priced relative to peers and below the median contractual management fee for Lipper peers.
Q: | What happens if shareholders of one Target Fund do not approve its Reorganization but shareholders of the other Target Funds approve their Reorganizations? |
A: | An unfavorable vote on a proposed Reorganization by the shareholders of one Target Fund will not affect the implementation of the Reorganizations of the other Target Funds if the other Reorganizations are approved by the shareholders of each of the Acquiring Fund and the other Target Funds. |
If the Reorganization of any Target Fund is not approved, the Investment Advisor may, in connection with ongoing management of that Target Fund and its product line, recommend alternative proposals to the Board of that Target Fund.
Q: | What happens if shareholders of the Acquiring Fund do not approve the Reorganization of one Target Fund but approve the Reorganizations of the other Target Funds? |
A: | An unfavorable vote by shareholders of the Acquiring Fund on the Reorganization of one Target Fund will not affect the implementation of the Reorganizations by the other Target Funds, if the other Reorganizations are approved by the shareholders of the Acquiring Fund and the shareholders of the other Target Funds. If the Reorganization of a Target Fund is not approved, however, the Investment Advisor may, in connection with ongoing management of that Target Fund and its product line, recommend alternative proposals to the Board of that Target Fund. |
Q: | How similar are the Funds? |
A: | The Funds have the same investment adviser, the same portfolio managers, the same board members and either the same or substantially similar (but not identical) investment objectives, investment policies, strategies, risks and restrictions. Each Funds common shares are listed on the New York Stock Exchange. |
Each Funds investment objectives are fundamental policies and may not be changed without shareholder approval.
The primary investment objective of HYT is to provide common shareholders with current income. The secondary investment objective of HYT is to provide common shareholders with capital appreciation.
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The primary investment objective of BHY is to provide common shareholders with high current income. The secondary investment objective of BHY is to provide common shareholders with capital appreciation.
The primary investment objective of COY is to provide shareholders with current income by investing primarily in a diversified portfolio of fixed income securities, which are rated in the lower rating categories of the established rating services (BB or lower by Standard & Poors Ratings Services (Standard & Poors) or Ba or lower by Moodys Investor Services (Moodys)) or are unrated securities considered by the Funds investment adviser to be of comparable quality. The secondary investment objective of COY is to provide common shareholders with capital appreciation.
The primary investment objective of CYE is to provide current income by investing primarily in fixed-income securities, which are rated in the lower rating categories of the established rating services (BBB or lower by Standard & Poors or Baa or lower by Moodys) or are unrated securities of comparable quality. The secondary investment objective of CYE is to provide common shareholders with capital appreciation.
The primary investment objective of HIS is to provide the highest current income attainable consistent with reasonable risk as determined by HISs investment adviser, through investment in a professionally managed, diversified portfolio of high yield, high risk fixed income securities. The secondary investment objective of HIS is to provide common shareholders with capital appreciation, but only when consistent with its primary objective.
The primary investment objective of HYV is to provide shareholders with current income by investing primarily in a diversified portfolio of fixed income securities that are rated in the lower rating categories of the established rating services (BB or lower by Standard & Poors or Ba or lower by Moodys) or in unrated securities considered by HYVs investment adviser to be of comparable quality. The secondary investment objective of HYV is to provide common shareholders with capital appreciation.
Under normal market conditions, each Fund invests at least 80% of its assets in high yield securities. See Comparison of the Funds in the Joint Proxy Statement/prospectus for a comparison of the Funds investment objectives and significant investment strategies and operating policies.
Each of COY, CYE, HYV and HYT is organized as a Maryland corporation and each is a diversified, closed-end management investment company registered under the Investment Company Act of 1940, as amended (the 1940 Act). HIS is organized as a Massachusetts business trust and is a diversified, closed-end management investment company registered under the 1940 Act. BHY is organized as a Delaware statutory trust and is a diversified, closed-end management investment company registered under the 1940 Act.
Because the Acquiring Fund is organized as a Maryland corporation, shareholders of BHY and HIS will become shareholders of a Maryland corporation rather than shareholders of a Delaware statutory trust or a Massachusetts business trust, respectively, if each of BHYs and HISs Reorganization is completed. A more detailed description of the differences between Delaware statutory trust law, Massachusetts business trust law and Maryland corporate law is contained in the Joint Proxy Statement/Prospectus under the heading Governing Law.
Q: | How will the Reorganizations be effected? |
A: | Assuming Target Fund shareholders approve the Reorganizations of the Target Funds and Acquiring Fund shareholders approve the Reorganizations of the Acquiring Fund, each Target Fund will merge with and into the Acquiring Fund or a new direct, wholly-owned subsidiary of the Acquiring Fund (the HYT Merger Subsidiary). Each Target Fund, except HIS, will merge directly with and into the Acquiring Fund. HIS will merge with and into the HYT Merger Subsidiary which will then merge directly with and into the Acquiring Fund. Each Target Fund will terminate its registration under the 1940 Act after the completion of its Reorganization. |
Shareholders of the Target Funds: You will become shareholders of the Acquiring Fund. You will receive newly issued common shares of the Acquiring Fund, par value $0.10 per share, the aggregate NAV (not the
iv
market value) of which will equal the aggregate NAV (not the market value) of the common shares of the particular Target Fund you held immediately prior to such Reorganization, less the applicable costs of the Reorganization (though you may receive cash for fractional shares).
Shareholders of the Acquiring Fund: You will remain shareholders of HYT, which will have additional common shares outstanding after the Reorganizations.
Q: | Have common shares of the Target Funds and the Acquiring Fund historically traded at a premium or discount? |
A: | The common shares of each Fund have historically fluctuated between a discount and a premium. As of May 31, 2013, each Fund, except BHY, traded at a discount to its respective NAV. As of May 31, 2013, BHY traded at a premium to its NAV. |
To the extent a Target Fund is trading at a wider discount (or a narrower premium) than the Acquiring Fund at the time of the Reorganizations, such Target Fund shareholders would have the potential for an economic benefit by the narrowing of the discount/premium. To the extent a Target Fund is trading at a narrower discount (or wider premium) than the Acquiring Fund at the time of the Reorganizations, such Target Fund shareholders may be negatively impacted if the Reorganizations are consummated. The Acquiring Fund shareholders would only benefit from a discount perspective to the extent the post-Reorganization discount (or premium) improves. There can be no assurance that, after the Reorganizations, common shares of the Combined Fund will trade at, above or below NAV. In the Reorganizations, shareholders of each Target Fund will receive common shares of the Acquiring Fund based on the relative net asset values (not the market values) of each respective Funds common shares. The market value of the common shares of the Combined Fund may be less than the market value of the common shares of your Fund prior to the Reorganizations.
Q: | Will I have to pay any sales load, commission or other similar fees in connection with the Reorganizations? |
A: | You will pay no sales loads or commissions in connection with the Reorganizations. Regardless of whether the Reorganizations are completed, however, the costs associated with these proposed Reorganizations, including the costs associated with the shareholder meeting, will be borne directly by each of the respective Funds incurring the expense or will otherwise be allocated among the Funds proportionately or on another reasonable basis, except that the Investment Advisor will bear all of the reorganization costs of COY, CYE and HYV as discussed more fully in the Joint Proxy Statement/Prospectus. Because of the expected expense savings and other benefits for each of BHY, HIS and HYT, the Investment Advisor recommended and the Boards of such Funds have approved that BHY, HIS and HYT be responsible for their own Reorganization expenses. See Reasons for the Reorganizations in the attached Joint Proxy Statement/Prospectus. The expenses of the Reorganizations (assuming all of the Reorganizations are consummated) are estimated to be $270,000 for BHY, $350,000 for HIS, and $370,000 for HYT. |
Neither the Funds nor the Investment Advisor will pay any expenses of shareholders arising out of or in connection with the Reorganizations (e.g., expenses incurred by the shareholder as a result of attending the shareholder meeting, voting on the Reorganizations or other action taken by the shareholder in connection with the Reorganizations). The actual costs associated with the proposed Reorganizations may be more or less than the estimated costs discussed herein.
Q: | Will I have to pay any U.S. federal taxes as a result of the Reorganizations? |
A: |
Each of the Reorganizations is intended to qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the Code). If a Reorganization so qualifies, in general, shareholders of a Target Fund will recognize no gain or loss for U.S. federal income tax purposes upon the exchange of their Target Fund common shares for Acquiring Fund common shares pursuant to the Reorganization (except with respect to cash received in lieu of fractional shares). Additionally, the Target Fund will recognize no gain or loss for U.S. federal income tax purposes by reason |
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of the Reorganization. Neither the Acquiring Fund nor its shareholders will recognize any gain or loss for U.S. federal income tax purposes pursuant to any Reorganization. |
On or prior to the closing date of the Reorganizations (the Closing Date), each of the Target Funds will declare a distribution to its shareholders that, together with all previous distributions, will have the effect of distributing to each respective Target Funds shareholders all of its investment company taxable income (computed without regard to the deduction for dividends paid), if any, through the Closing Date, all of its net capital gains, if any, through the Closing Date, and all of its net tax-exempt interest income, if any, through the Closing Date. Such a distribution will be taxable to each Target Funds shareholders for U.S. federal income tax purposes.
The Funds shareholders should consult their own tax advisers regarding the U.S. federal income tax consequences of the Reorganizations as well as the effects of state, local and non-U.S. tax laws, including possible changes in tax laws.
Q: | Why is the vote of shareholders of the Acquiring Fund being solicited in connection with the Reorganizations? |
A: | Although the Acquiring Fund will continue its legal existence and operations after the Reorganizations, the Acquiring Funds charter requires the Acquiring Funds shareholders to approve each of the Acquiring Funds reorganizations. In addition, the rules of the New York Stock Exchange (on which the Acquiring Funds common shares are listed) require the Acquiring Funds shareholders to approve the issuance of additional common shares in connection with the Reorganizations. If a Reorganization of the Acquiring Fund is not approved, then such Reorganization will not occur. |
Q: | How does the Board of my Fund suggest that I vote? |
A: | After careful consideration, the Board of your Fund unanimously recommends that you vote FOR each of the items proposed for your Fund. |
Q: | How do I vote my proxy? |
A: | You may cast your vote by mail, phone, internet or in person at the Special Meeting. To vote by mail, please mark your vote on the enclosed proxy card and sign, date and return the card in the postage-paid envelope provided. If you choose to vote by phone or internet, please refer to the instructions found on the proxy card accompanying this Joint Proxy Statement/Prospectus. To vote by phone or internet, you will need the control number that appears on the proxy card. |
Q: | Whom do I contact for further information? |
A: | You may contact your financial advisor for further information. You may also call Georgeson Inc., the Funds proxy solicitor, at 1-888-654-1722. |
Please vote now . Your vote is important. |
To avoid the wasteful and unnecessary expense of further solicitation(s), we urge you to indicate your voting instructions on the enclosed proxy card, date and sign it and return it promptly in the postage-paid envelope provided, or record your voting instructions by telephone or via the internet, no matter how large or small your holdings may be. If you submit a properly executed proxy but do not indicate how you wish your shares to be voted, your shares will be voted FOR each proposal, as applicable. If your shares are held through a broker, you must provide voting instructions to your broker about how to vote your shares in order for your broker to vote your shares as you instruct at the Special Meeting. |
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BLACKROCK HIGH YIELD TRUST
BLACKROCK CORPORATE HIGH YIELD FUND, INC.
BLACKROCK CORPORATE HIGH YIELD FUND III, INC.
BLACKROCK HIGH INCOME SHARES
BLACKROCK CORPORATE HIGH YIELD FUND V, INC.
BLACKROCK CORPORATE HIGH YIELD FUND VI, INC.
100 Bellevue Parkway
Wilmington, Delaware 19809
(800) 882-0052
NOTICE OF JOINT SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON OCTOBER 11, 2013
Notice is hereby given that a joint special meeting of shareholders (the Special Meeting) of BlackRock High Yield Trust (BHY), BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE), BlackRock High Income Shares (HIS), BlackRock Corporate High Yield Fund V, Inc. (HYV and collectively with BHY, COY, CYE and HIS, the Target Funds) and BlackRock Corporate High Yield Fund VI, Inc. (HYT and collectively with the Target Funds, the Funds) will be held at the offices of BlackRock Advisors, LLC, 1 University Square Drive, Princeton, New Jersey 08540-6455, on October 11, 2013 at 9:00 a.m. (Eastern time) for the following purposes:
1. | The Reorganizations of the Target Funds |
Shareholders of BlackRock High Yield Trust (BHY):
Proposal 1(A): The shareholders of BHY are being asked to approve an Agreement and Plan of Reorganization between BHY and HYT (the BHY Reorganization Agreement) and the termination of BHYs registration under the Investment Company Act of 1940 (the 1940 Act).
Shareholders of BlackRock Corporate High Yield Fund, Inc. (COY):
Proposal 1(B): The shareholders of COY are being asked to approve an Agreement and Plan of Reorganization between COY and HYT (the COY Reorganization Agreement) and the termination of COYs registration under the 1940 Act.
Shareholders of BlackRock Corporate High Yield Fund III, Inc. (CYE):
Proposal 1(C): The shareholders of CYE are being asked to approve an Agreement and Plan of Reorganization between CYE and HYT (the CYE Reorganization Agreement) and the termination of CYEs registration under the 1940 Act.
Shareholders of BlackRock High Income Shares (HIS):
Proposal 1(D): The shareholders of HIS are being asked to approve an Agreement and Plan of Reorganization among HIS, HYT and a new direct, wholly-owned subsidiary of HYT (the HIS Reorganization Agreement) and the termination of HISs registration under the 1940 Act.
BlackRock Corporate High Yield Fund V, Inc. (HYV):
Proposal 1(E): The shareholders of HYV are being asked to approve an Agreement and Plan of Reorganization between HYV and HYT (the HYV Reorganization Agreement) and the termination of HYVs registration under the 1940 Act.
2. | The Reorganizations of the Acquiring Fund and the Issuance of the Acquiring Funds Common Shares |
Shareholders of BlackRock Corporate High Yield Fund VI, Inc. (HYT):
Proposal 2(A): The shareholders of HYT are being asked to approve the BHY Reorganization Agreement, including the issuance of additional common shares of HYT in connection with the BHY Reorganization Agreement.
Proposal 2(B): The shareholders of HYT are being asked to approve the COY Reorganization Agreement, including the issuance of additional common shares of HYT in connection with the COY Reorganization Agreement.
Proposal 2(C): The shareholders of HYT are being asked to approve the CYE Reorganization Agreement, including the issuance of additional common shares of HYT in connection with the CYE Reorganization Agreement.
Proposal 2(D): The shareholders of HYT are being asked to approve the HIS Reorganization Agreement, including the issuance of additional common shares of HYT in connection with the HIS Reorganization Agreement.
Proposal 2(E): The shareholders of HYT are being asked to approve the HYV Reorganization Agreement, including the issuance of additional common shares of HYT in connection with the HYV Reorganization Agreement.
Shareholders of record as of the close of business on August 14, 2013 are entitled to vote at the Special Meeting or any adjournment or postponement thereof.
THE BOARD OF DIRECTORS OR BOARD OF TRUSTEES, AS APPLICABLE, (EACH, A BOARD) OF EACH OF THE FUNDS REQUESTS THAT YOU VOTE YOUR SHARES BY INDICATING YOUR VOTING INSTRUCTIONS ON THE ENCLOSED PROXY CARD, DATING AND SIGNING SUCH PROXY CARD AND RETURNING IT IN THE ENVELOPE PROVIDED, WHICH IS ADDRESSED FOR YOUR CONVENIENCE AND NEEDS NO POSTAGE IF MAILED IN THE UNITED STATES, OR BY RECORDING YOUR VOTING INSTRUCTIONS BY TELEPHONE OR VIA THE INTERNET.
THE BOARD OF EACH TARGET FUND UNANIMOUSLY RECOMMENDS THAT YOU CAST YOUR VOTE:
- | FOR THE REORGANIZATION OF YOUR TARGET FUND PURSUANT TO YOUR TARGET FUNDS REORGANIZATION AGREEMENT AS DESCRIBED IN THE JOINT PROXY STATEMENT/PROSPECTUS, AND THE TERMINATION OF YOUR TARGET FUNDS REGISTRATION UNDER THE 1940 ACT. |
THE BOARD OF HYT UNANIMOUSLY RECOMMENDS THAT YOU CAST YOUR VOTE:
- | FOR THE REORGANIZATION OF HYT PURSUANT TO EACH REORGANIZATION AGREEMENT BETWEEN HYT AND A TARGET FUND, INCLUDING THE ISSUANCE OF ADDITIONAL COMMON SHARES OF HYT IN CONNECTION WITH EACH SUCH REORGANIZATION AGREEMENT. |
IN ORDER TO AVOID THE ADDITIONAL EXPENSE OF FURTHER SOLICITATION, WE ASK THAT YOU MAIL YOUR PROXY CARD OR RECORD YOUR VOTING INSTRUCTIONS BY TELEPHONE OR VIA THE INTERNET PROMPTLY.
For the Board of Directors/Trustees of the Funds
J OHN M. P ERLOWSKI
President and Chief Executive Officer of the Funds
August 22, 2013
YOUR VOTE IS IMPORTANT.
PLEASE VOTE PROMPTLY BY SIGNING AND RETURNING THE
ENCLOSED PROXY CARD OR BY RECORDING YOUR VOTING INSTRUCTIONS BY TELEPHONE OR VIA THE INTERNET, NO MATTER HOW MANY SHARES YOU OWN.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR
THE SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON OCTOBER 11, 2013.
THE PROXY STATEMENT FOR THIS MEETING IS AVAILABLE AT:
HTTPS://WWW.PROXY-DIRECT.COM/BLK-24874
THE INFORMATION IN THIS JOINT PROXY STATEMENT/PROSPECTUS 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 PROSPECTUS 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.
SUBJECT TO COMPLETION, DATED AUGUST 22, 2013
JOINT PROXY STATEMENT/PROSPECTUS
BLACKROCK HIGH YIELD TRUST
BLACKROCK CORPORATE HIGH YIELD FUND, INC.
BLACKROCK CORPORATE HIGH YIELD FUND III, INC.
BLACKROCK HIGH INCOME SHARES
BLACKROCK CORPORATE HIGH YIELD FUND V, INC.
BLACKROCK CORPORATE HIGH YIELD FUND VI, INC.
100 Bellevue Parkway
Wilmington, Delaware 19809
(800) 882-0052
JOINT SPECIAL MEETING OF SHAREHOLDERS
OCTOBER 11, 2013
This Joint Proxy Statement/Prospectus is furnished to you as a shareholder of (i) BlackRock High Yield Trust (BHY), (ii) BlackRock Corporate High Yield Fund, Inc. (COY), (iii) BlackRock Corporate High Yield Fund III, Inc. (CYE), (iv) BlackRock High Income Shares (HIS), (v) BlackRock Corporate High Yield Fund V, Inc. (HYV) and/or (vi) BlackRock Corporate High Yield Fund VI, Inc. (HYT). BHY is a diversified registered investment company and statutory trust organized under the laws of the State of Delaware and registered under the Investment Company Act of 1940, as amended (the 1940 Act); whereas each of COY, CYE, HYV and HYT is a diversified registered investment company and corporation organized under the laws of the State of Maryland and registered under the 1940 Act, and HIS is a diversified registered investment company and a business trust organized under the laws of the Commonwealth of Massachusetts and registered under the 1940 Act. A joint special meeting (the Special Meeting) of shareholders of BHY, COY, CYE, HIS, HYV and HYT (each, a Fund) will be held at the offices of BlackRock Advisors, LLC (the Investment Advisor), 1 University Square Drive, Princeton, New Jersey 08540-6455, on October 11, 2013 at 9:00 a.m. (Eastern time) to consider the items listed below and discussed in greater detail elsewhere in this Joint Proxy Statement/Prospectus. If you are unable to attend the Special Meeting or any adjournment or postponement thereof, the Board of Directors or Board of Trustees, as applicable, of each Fund (each, a Board) requests that you vote your common shares of beneficial interests or shares of common stock (common shares) by completing and returning the enclosed proxy card or by recording your voting instructions by telephone or via the Internet. The approximate mailing date of this Joint Proxy Statement/Prospectus and accompanying form of proxy is September 4, 2013.
The purposes of the Special Meeting are:
1. | The Reorganizations of the Target Funds |
Shareholders of BlackRock High Yield Trust. (BHY):
Proposal 1(A): The shareholders of BHY are being asked to approve an Agreement and Plan of Reorganization between BHY and HYT (the BHY Reorganization Agreement) and the termination of BHYs registration under the 1940 Act.
Shareholders of BlackRock Corporate High Yield Fund, Inc. (COY):
Proposal 1(B): The shareholders of COY are being asked to approve an Agreement and Plan of Reorganization between COY and HYT (the COY Reorganization Agreement) and the termination of COYs registration under the 1940 Act.
Shareholders of BlackRock Corporate High Yield Fund III, Inc. (CYE):
Proposal 1(C): The shareholders of CYE are being asked to approve an Agreement and Plan of Reorganization between CYE and HYT (the CYE Reorganization Agreement) and the termination of CYEs registration under the 1940 Act.
Shareholders of BlackRock High Income Shares (HIS):
Proposal 1(D): The shareholders of HIS are being asked to approve an Agreement and Plan of Reorganization among HIS, HYT and a new direct, wholly-owned subsidiary of HYT (the HIS Reorganization Agreement) and the termination of HISs registration under the 1940 Act.
Shareholders of BlackRock Corporate High Yield Fund V, Inc. (HYV):
Proposal 1(E): The shareholders of HYV are being asked to approve an Agreement and Plan of Reorganization between HYV and HYT (the HYV Reorganization Agreement) and the termination of HYVs registration under the 1940 Act.
2. | The Reorganizations of the Acquiring Fund and the Issuance of the Acquiring Funds Common Shares |
Shareholders of BlackRock Corporate High Yield Fund VI, Inc. (HYT):
Proposal 2(A): The shareholders of HYT are being asked to approve the BHY Reorganization Agreement, including the issuance of additional common shares of HYT in connection with the BHY Reorganization Agreement.
Proposal 2(B): The shareholders of HYT are being asked to approve the COY Reorganization Agreement, including the issuance of additional common shares of HYT in connection with the COY Reorganization Agreement.
Proposal 2(C): The shareholders of HYT are being asked to approve the CYE Reorganization Agreement, including the issuance of additional common shares of HYT in connection with the CYE Reorganization Agreement.
Proposal 2(D): The shareholders of HYT are being asked to approve the HIS Reorganization Agreement, including the issuance of additional common shares of HYT in connection with the HIS Reorganization Agreement.
Proposal 2(E): The shareholders of HYT are being asked to approve the HYV Reorganization Agreement, including the issuance of additional common shares of HYT in connection with the HYV Reorganization Agreement.
BHY, COY, CYE, HIS and HYV are sometimes referred to herein as the Target Funds, and HYT is sometimes referred to herein as the Acquiring Fund. Each Reorganization Agreement that Target Fund shareholders and Acquiring Fund Shareholders are being asked to consider involves transactions that will be referred to in this Joint Proxy Statement/Prospectus as a Reorganization. The Fund surviving any or all Reorganizations is referred to herein as the Combined Fund. The BHY Reorganization Agreement, the COY Reorganization Agreement, the CYE Reorganization Agreement, the HIS Reorganization Agreement and the HYV Reorganization Agreement are referred to herein as the Reorganization Agreements.
The Reorganizations seek to combine six funds that have either the same or substantially similar (but not identical) investment objectives and investment policies to achieve certain economies of scale and other operational efficiencies. Each Target Fund will merge with and into the Acquiring Fund or a new direct, wholly-owned subsidiary of the Acquiring Fund that will be organized as a Massachusetts limited liability company (the HYT Merger Subsidiary). Each Target Fund, except HIS, will merge directly with and into the Acquiring Fund. HIS will merge with and into the HYT Merger Subsidiary for purposes of consummating a merger of a Massachusetts business trust under the laws of the Commonwealth of Massachusetts and the HYT Merger Subsidiary will then merge directly with and into the Acquiring Fund. Each Target Fund will terminate its registration under the 1940 Act after the completion of its Reorganization. The Acquiring Fund will continue to operate after the Reorganization as a registered, diversified, closed-end management investment company with the investment objectives and policies described in this Joint Proxy Statement/Prospectus.
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In each Reorganization, the outstanding common shares of the Target Fund will be exchanged for newly-issued common shares of the Acquiring Fund, par value $0.10 per share (Acquiring Fund Shares) in the form of book entry interests. The aggregate net asset value (not the market value) of the Acquiring Fund Shares received by the Target Fund shareholders in each Reorganization will equal the aggregate net asset value (not the market value) of the Target Fund common shares held by such shareholders immediately prior to such Reorganization, less the applicable costs of such Reorganization (although Target Fund shareholders may receive cash for their fractional common shares). In the Reorganizations, shareholders of each Target Fund will receive common shares of the Acquiring Fund based on the relative net asset value, not the market value, of each respective Funds common shares. The market value of the common shares of the Combined Fund may be less than the market value of the common shares of a Target Fund prior to the Reorganizations.
In connection with each Reorganization, the shareholders of the Acquiring Fund are being asked to approve such Reorganization, including the issuance of additional Acquiring Fund Shares.
The Board of each Fund has determined that including these proposals in one Joint Proxy Statement/Prospectus will reduce costs and is in the best interests of each Funds shareholders.
In the event that shareholders of a Target Fund do not approve its Reorganization, such Target Fund would continue to exist and operate on a stand-alone basis. In the event the Acquiring Fund shareholders do not approve a Reorganization, then the affected Target Fund would continue to exist and operate on a stand-alone basis. However, if the Reorganization of a Target Fund is not approved, the Investment Advisor may, in connection with the ongoing management of that Target Fund and its product line, recommend alternative proposals to the Board of that Target Fund. An unfavorable vote by one of the Target Funds or the Acquiring Fund with respect to one of the Reorganizations will not affect the implementation of the Reorganizations by the other Target Funds.
This Joint Proxy Statement/Prospectus sets forth concisely the information that shareholders of each Fund should know before voting on the proposals for their Fund and constitutes an offering of Acquiring Fund Shares. Please read it carefully and retain it for future reference. A Statement of Additional Information, dated August 22, 2013, relating to this Joint Proxy Statement/Prospectus (the Statement of Additional Information) has been filed with the United States Securities and Exchange Commission (the SEC) and is incorporated herein by reference. Copies of each Funds most recent annual report and semi-annual report can be obtained on a website maintained by BlackRock, Inc. (BlackRock) at www.blackrock.com . In addition, each Fund will furnish, without charge, a copy of the Statement of Additional Information, or its most recent annual report or semi-annual report to any shareholder upon request. Any such request should be directed to BlackRock by calling (800) 882-0052 or by writing to the respective Fund at 100 Bellevue Parkway, Wilmington, Delaware 19809. The Statement of Additional Information and the annual and semi-annual reports of each Fund are available on the EDGAR Database on the SECs website at www.sec.gov . The address of the principal executive offices of the Funds is 100 Bellevue Parkway, Wilmington, Delaware 19809, and the telephone number is (800) 882-0052.
The Funds are subject to the informational requirements of the Securities Exchange Act of 1934 and, in accordance therewith, file reports, proxy statements, proxy materials and other information with the SEC. Materials filed with the SEC can be reviewed and copied at the SECs Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549 or downloaded from the SECs website at www.sec.gov . Information on the operation of the SECs Public Reference Room may be obtained by calling the SEC at (202) 551-8090. You may also request copies of these materials, upon payment at the prescribed rates of a duplicating fee, by electronic request to the SECs e-mail address (publicinfo@sec.gov) or by writing the Public Reference Branch, Office of Consumer Affairs and Information Services, Securities and Exchange Commission, Washington, DC 20549-0102.
BlackRock updates performance information for the Funds, as well as certain other information for the Funds, on a monthly basis on its website in the Closed-End Funds section of www.blackrock.com . Shareholders are advised to periodically check the website for updated performance information and other information about the Funds.
iii
Please note that only one copy of shareholder documents, including annual or semi-annual reports and proxy materials, may be delivered to two or more shareholders of the Funds who share an address, unless the Funds have received instructions to the contrary. This practice is commonly called householding and it is intended to reduce expenses and eliminate duplicate mailings of shareholder documents. Mailings of your shareholder documents may be householded indefinitely unless you instruct us otherwise. To request a separate copy of any shareholder document or for instructions as to how to request a separate copy of these documents or as to how to request a single copy if multiple copies of these documents are received, shareholders should contact the Fund at the address and phone number set forth above.
The common shares of BlackRock Corporate High Yield Fund VI, Inc. are listed on the New York Stock Exchange (NYSE) under the ticker symbol HYT and will continue to be so listed after the completion of the Reorganizations. The common shares of BlackRock High Yield Trust are listed on the NYSE under the ticker symbol BHY. The common shares of BlackRock Corporate High Yield Fund, Inc. are listed on the NYSE under the ticker symbol COY. The common shares of BlackRock Corporate High Yield Fund III, Inc. are listed on the NYSE under the ticker symbol CYE. The common shares of BlackRock High Income Shares are listed on the NYSE under the ticker symbol HIS. The common shares of BlackRock Corporate High Yield Fund V, Inc. are listed on the NYSE under the ticker symbol HYV. Reports, proxy statements and other information concerning the Funds may be inspected at the offices of the NYSE, 20 Broad Street, New York, New York 10005.
This Joint Proxy Statement/Prospectus serves as a prospectus of the Acquiring Fund in connection with the issuance of Acquiring Fund Shares in each of the Reorganizations. No person has been authorized to give any information or make any representation not contained in this Joint Proxy Statement/Prospectus and, if so given or made, such information or representation must not be relied upon as having been authorized. This Joint Proxy Statement/Prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities in any jurisdiction in which, or to any person to whom, it is unlawful to make such offer or solicitation.
Photographic identification and proof of ownership will be required for admission to the meeting. For directions to the meeting, please contact Georgeson Inc., the firm assisting us in the solicitation of proxies, at 1-888-654-1722.
THE SEC HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS JOINT PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Joint Proxy Statement/Prospectus is August 22, 2013
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The following is a summary of certain information contained elsewhere in this Joint Proxy Statement/Prospectus and is qualified in its entirety by reference to the more complete information contained in this Joint Proxy Statement/Prospectus and in the Statement of Additional Information. Shareholders should read the entire Joint Proxy Statement/Prospectus carefully.
PROPOSAL 1: THE REORGANIZATIONS OF THE TARGET FUNDS
The Proposed Reorganizations
The Board of each Fund, including the directors or trustees, as applicable (the Board Members), who are not interested persons of each Fund (as defined in the 1940 Act) (the Independent Board Members), has unanimously approved its Reorganization(s), including its respective Reorganization Agreement. Assuming each Target Funds shareholders approve its Reorganization and the Acquiring Funds shareholders approve the Reorganizations of the Acquiring Fund, each Target Fund will merge directly with and into the Acquiring Fund or a new direct, wholly-owned subsidiary of the Acquiring Fund that will be organized as a Massachusetts limited liability company (the HYT Merger Subsidiary). Each Target Fund, except HIS, will merge directly with and into the Acquiring Fund. HIS will merge with and into the HYT Merger Subsidiary for purposes of consummating a merger of a Massachusetts business trust under the laws of the Commonwealth of Massachusetts, and the HYT Merger Subsidiary will then merge directly with and into the Acquiring Fund. Each Target Fund will terminate its registration under the 1940 Act after the completion of its Reorganization.
In each Reorganization, the outstanding common shares of the Target Fund will be exchanged for newly-issued Acquiring Fund Shares in the form of book entry interests. The aggregate net asset value (not the market value) of the Acquiring Fund Shares received by the Target Fund shareholders in each Reorganization will equal the aggregate net asset value (not the market value) of the Target Fund common shares held by such shareholders immediately prior to such Reorganization, less the applicable costs of such Reorganization (although Target Fund shareholders may receive cash for their fractional common shares). In the Reorganizations, shareholders of each Target Fund will receive common shares of the Acquiring Fund based on the relative net asset value, not the market value, of each respective Funds common shares. The market value of the common shares of the Combined Fund may be less than the market value of the common shares of a Target Fund prior to the Reorganizations.
Background and Reasons for the Proposed Reorganizations
The Reorganizations seek to combine six funds that have either the same or substantially similar (but not identical) investment objectives and investment policies to achieve certain economies of scale and other operational efficiencies. Each Target Fund, except HIS, will merge directly with and into HYT, which will continue to exist after the merger as the Combined Fund. The Board of each Target Fund (each, a Target Fund Board), based upon its evaluation of all relevant information, anticipates that the Reorganization would benefit shareholders of its Target Fund. The Board of the Acquiring Fund (the Acquiring Fund Board), based upon its evaluation of all relevant information, anticipates that the Reorganizations would benefit shareholders of the Acquiring Fund. Because shareholders of each Fund will vote separately on their Funds respective Reorganization(s), there are multiple potential combinations of Reorganizations.
Based on the considerations below, the Board of each Fund, including the Independent Board Members, has determined that each Reorganization would be in the best interests of the applicable Fund and that the interests of the existing shareholders of the applicable Fund would not be diluted with respect to net asset value as a result of the Reorganization. The Board of each Fund approved its respective Reorganization(s), and the Board of each Fund recommends that shareholders of such Fund approve its respective Reorganization(s).
1
The Board of each Fund considered its respective Reorganization over a series of meetings. In preparation for meetings of the Board of each Fund held on June 4-5, 2013 and July 30, 2013 (collectively, the Meeting) at which the Reorganizations were approved, the Investment Advisor provided each Board with information regarding the proposed Reorganizations, including the rationale therefor and alternatives considered to the Reorganizations. The Board of each Fund considered a number of factors, presented either at the time of the Meeting or at a prior meeting, in reaching their determinations, including, but not limited to, the following:
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potential for improved economies of scale and a lower Total Expense Ratio with respect to each Fund, except COY; |
¡ |
The Funds estimate that the completion of all of the Reorganizations would result in a Total Expense Ratio for the Combined Fund of 1.34% on a historical and pro forma basis for the 12-month period ended February 28, 2013, representing a reduction in the Total Expense Ratio for the shareholders of BHY, CYE, HIS, HYV and HYT of 0.91%, 0.08%, 0.25%, 0.11% and 0.18%, respectively, and an increase in the Total Expense Ratio for the shareholders of COY of 0.09%. |
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The Board of COY believes that the potential benefits of the Reorganizations make the Reorganizations in the best interest of COY shareholders. These potential benefits includes potential for (i) higher earnings yield for the Combined Fund (as a percentage of net asset value) on a pro forma basis compared to COY, (ii) greater secondary market liquidity for the Combined Funds common shares, which may result in tighter bid-ask spreads; (iii) better trade execution for each Funds shareholders when purchasing or selling Combined Fund common shares; (iv) improved premium/discount levels for the Combined Funds common shares; (v) operating and administrative efficiencies for the Combined Fund, including greater investment flexibility and investment options, greater diversification of portfolio investments, the ability to trade in larger positions, additional sources of leverage or more competitive leverage terms and more favorable transaction terms; (vi) benefits from having fewer closed-end funds in the market, including an increased focus by investors on the remaining funds in the market (including the Combined Fund) and additional research coverage; and (vii) benefits from having fewer similar funds in the same fund complex, including a simplified operational model and a reduction in risk of operational, legal and financial errors. See Reasons for the Reorganizations. In addition, the Investment Advisor will bear all of the reorganization costs of COY, CYE and HYV. |
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There can be no assurance that future expenses will not increase or that any expense savings will be realized. Moreover, the level of expense savings (or increases) will vary depending on the combination of the proposed Reorganizations. |
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alternatives to the Reorganizations for each Fund; |
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the potential effects of the Reorganizations on the earnings and distributions of each Fund; |
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The Combined Funds earnings yield is expected to be slightly lower than HYVs current earnings yield; thus, assuming the Acquiring Funds distribution policy remains in place after the Reorganizations, shareholders of HYV may experience a decrease in their distribution yield after the Reorganizations. |
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The Board of HYV believes that the potential benefits of the Reorganizations make the Reorganizations in the best interest of HYV shareholders. These potential benefits include the potential for (i) a lower Total Expense Ratio, (ii) greater secondary market liquidity for the Combined Funds common shares, which may result in tighter bid-ask spreads; (iii) better trade execution for each Funds shareholders when purchasing or selling Combined Fund common shares; (iv) improved premium/discount levels for the Combined Funds common shares; (v) operating and administrative efficiencies for the Combined Fund, including greater investment flexibility and investment options, greater diversification of portfolio investments, the ability to trade in larger positions, additional sources of leverage or more competitive leverage terms and more favorable transaction terms; (vi) benefits from having fewer closed-end funds in the market, |
2
including an increased focus by investors on the remaining funds in the market (including the Combined Fund) and additional research coverage; and (vii) benefits from having fewer similar funds in the same fund complex, including a simplified operational model and a reduction in risk of operational, legal and financial errors. In addition, the Investment Advisor will bear all of the reorganization costs of HYV. |
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A Funds earnings and net investment income are variables, which depend on many factors, including its asset mix, portfolio turnover level, the amount of leverage utilized by the Fund, the costs of such leverage, the movement of interest rates and general market conditions. There can be no assurance that the future earnings of a Fund, including the Combined Fund after the Reorganizations, will remain constant. In addition, the Combined Funds future earnings will vary depending on the combination of the proposed Reorganizations. |
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the potential effects of the Reorganizations on each Funds premium/discount to NAV; |
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the compatibility of the Funds investment objectives, policies and related risks; |
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consistency of portfolio management and portfolio composition; |
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the potential for improved secondary market trading; |
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the potential for operating and administrative efficiencies; |
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the anticipated tax-free nature of the Reorganization; |
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the potential effects on the Funds capital loss carryforwards; |
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the effects on each Funds undistributed net investment income; |
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the expected costs of the Reorganization; |
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the terms of the Reorganizations and whether the Reorganizations would dilute the interests of shareholders of the Funds; |
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the effect of the Reorganizations on shareholder rights; and |
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any potential benefits of the Reorganizations to the Investment Advisor and its affiliates. |
The Board of each Fund, including the Independent Board Members, approved its respective Reorganization, concluding that such Reorganization is in the best interests of its Fund and that the interests of existing shareholders of its Fund will not be diluted as a result of its respective Reorganization. This determination was made on the basis of each Board Members business judgment after consideration of all of the factors taken as a whole with respect to its Fund and shareholders, although individual Board Members may have placed different weight on various factors and assigned different degrees of materiality to various factors.
If a Reorganization is not approved by a Target Funds shareholders, such Target Fund will continue to operate for the time being as a stand-alone Maryland corporation, Delaware statutory trust, or Massachusetts business trust, as the case may be, and will continue to be advised by the Investment Advisor. However, if the Reorganization of a Target Fund is not approved, the Investment Advisor may, in connection with ongoing management of the Funds and its product line, recommend alternative proposals to the Board of such Target Fund. An unfavorable vote by the shareholders of one of the Target Funds or the Acquiring Fund with respect to one of the Reorganizations will not affect the implementation of the other Reorganizations.
Expenses
The Board of each Fund, except COY, believes that the completion of the Reorganizations would result in a reduced Total Expense Ratio for the shareholders of its Fund because certain fixed administrative costs would be spread across the Combined Funds larger asset base.
3
For the fiscal year ended August 31, 2012, BHYs, HISs, HYVs and HYTs Total Expense Ratio was 2.01%, 1.54%, 1.42% and 1.51%, respectively. For the 12-month period ended February 28, 2013, the Total Expense Ratios of BHY, HIS, HYV and HYT were 2.25%, 1.59%, 1.45% and 1.52%, respectively. For the fiscal year ended February 28, 2013, the Total Expense Ratios of COY and CYE were 1.25% and 1.42%, respectively.
The Funds estimate that the completion of all of the Reorganizations would result in a Total Expense Ratio for the Combined Fund of 1.34% on a historical and pro forma basis for the 12-month period ended February 28, 2013, representing a reduction in the Total Expense Ratio for the shareholders of BHY, CYE, HIS, HYV and HYT of 0.91%, 0.08%, 0.25%, 0.11% and 0.18%, respectively, and an increase in the Total Expense Ratio for the shareholders of COY of 0.09%. There can be no assurance that future expenses will not increase, or that any expense savings will be realized. Moreover, the level of expense savings (or increases) will vary depending upon the combination of the proposed Reorganizations.
The Board of COY believes that the potential benefits of the Reorganizations make the Reorganizations in the best interest of COY shareholders. These potential benefits include the potential for (i) higher earnings yield for the Combined Fund (as a percentage of net asset value) on a pro forma basis compared to COY, (ii) greater secondary market liquidity for the Combined Funds common shares, which may result in tighter bid-ask spreads; (iii) better trade execution for each Funds shareholders when purchasing or selling Combined Fund common shares; (iv) improved premium/discount levels for the Combined Funds common shares; (v) operating and administrative efficiencies for the Combined Fund, including greater investment flexibility and investment options, greater diversification of portfolio investments, the ability to trade in larger positions, additional sources of leverage or more competitive leverage terms and more favorable transaction terms; (vi) benefits from having fewer closed-end funds in the market, including an increased focus by investors on the remaining funds in the market (including the Combined Fund) and additional research coverage; and (vii) benefits from having fewer similar funds in the same fund complex, including a simplified operational model and a reduction in risk of operational, legal and financial errors. See Reasons for the Reorganizations. In addition, the Investment Advisor will bear all of the reorganization costs of COY, CYE and HYV.
Appraisal Rights
The shareholders of each of the Funds do not have appraisal rights for their common shares in their respective Fund.
Comparison of the Funds
The Funds have the same or substantially similar (but not identical), investment objectives and investment strategies. The investment objectives, investment strategies and significant operating policies of the Combined Fund will be those of the Acquiring Fund.
Summary of Significant Differences in the Funds Investment Objectives and Policies
Investment Objectives . The primary investment objective of each of BHY and HIS is to provide high current income to shareholders. The primary investment objective of each of COY, CYE, HYV and HYT is to provide current income to shareholders. The secondary investment objective of each Fund is to provide shareholders with capital appreciation.
Corporate Loans . HYT, HYV, CYE and COY may invest up to 15% of its total assets in corporate loans. BHY may invest up to 25% of its total assets in corporate loans. HIS does not have any limitations with respect to corporate loans.
Distressed Securities . HYT, HYV, CYE, COY and BHY may invest up to 10% of its total assets in high yield securities which are the subject of bankruptcy proceedings or otherwise in default. HIS may not purchase securities rated D by Standard & Poors.
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Preferred Shares . HYT may invest up to 15% of its total assets in preferred shares. HIS may invest up to 10% of its assets in preferred shares. HYV, CYE, COY and BHY do not have any limitations with respect to preferred shares.
Convertible Debt Securities . HYT may invest up to 15% of its total assets in convertible debt securities. None of the Target Funds have any limitations with respect to convertible debt securities.
Common Stock . HYT, HYV, CYE and COY do not have any limitations on investments in common stock. BHY may invest up to 20% of its total assets in common stock. HIS may not acquire common stock, except when (i) attached to or included in, or in connection with or incidental to, the Funds investment in a unit with income-generating securities that otherwise would be attractive to the Fund (including equity interests, or the substantial equivalent of equity interests, which are acquired through a follow-on offering for interests in an issuer that HIS previously acquired in connection with its investment in such income-generating securities); (ii) acquired through the exercise of equity features accompanying convertible securities held by the Fund, such as conversion or exchange of privileges or warrants for the acquisition of stock or equity interests of the same issuer or a different issuer; or (iii) in the case of an exchange offering whereby the equity security would be acquired with the intention of exchanging it for a debt security issued on a when-issued basis.
Non-U.S. Securities . HYT, HYV, CYE and COY may invest, without limitation, in non-U.S. securities or securities denominated in foreign currencies and multinational currency units. BHY may invest up to 35% of its total assets in debt securities of issuers domiciled outside of the United States or that are denominated in foreign currencies and multinational currency units; provided, however, that BHY may not invest more than 10% of the Funds net assets in emerging market issuers. HIS may invest up to 20% of its total assets in fixed-income securities issued by foreign governments and other foreign issuers and up to 5% of its total assets in foreign currency issues of foreign and domestic issuers. In addition, HIS may invest up to 5% of its total assets in Eurodollar certificates of deposit which are the obligations of foreign branches of U.S. banks and may invest without limitation in Canadian issuers whose securities are payable in U.S. dollars.
Mezzanine Investments, Collateralized Bond Obligations, CMBS and Zero-Coupon Securities . BHY may invest up to 15% of its total assets in securities known as Mezzanine Investments (generally subordinated, privately placed debt securities issued with attached equity securities), collateralized bond obligations and commercial mortgage backed securities. BHY may also invest up to 30% of its total assets in stripped and zero-coupon securities, pay-in-kind securities and deferred payment securities. None of the other Funds have any limitation on investments in the foregoing securities.
Options . HYT may purchase call options, write (i.e., sell) covered or uncovered call options, purchase put options and uncovered put options, write (i.e., sell) covered put options and write uncovered put options on securities that HYT does not currently have a corresponding short position or has not deposited cash equal to the exercise value of the put option with the broker dealer through which it made the uncovered put option as collateral. BHY, COY, CYE and HYV have substantially the same policies as HYT with respect to options, except they may not write uncovered call or put options. HIS may only purchase and sell options on financial futures contracts, and hold puts that relate to equity securities acquired by the Fund when such puts are attached to or included with such equity securities.
5
Comparison Table
A more detailed comparison of the Funds investment objectives and significant investment strategies and operating policies is set forth in the table below.
HYT |
HYV |
CYE |
COY |
BHY |
HIS |
|||||
Investment
Objectives |
Investment
Objectives |
Investment
Objectives |
Investment
Objectives |
Investment
Objectives |
Investment
Objectives |
|||||
HYTs primary investment objective is to provide shareholders with current income. HYTs secondary investment objective is to provide shareholders with capital appreciation. |
HYVs investment objective is to provide shareholders with current income by investing primarily in a diversified portfolio of fixed income securities that are rated in the lower rating categories of the established rating services (BB or lower by Standard & Poors or Ba or lower by Moodys) or in unrated securities considered by the Funds investment adviser to be of comparable quality. HYV also seeks to provide shareholders with capital appreciation. | CYEs primary investment objective is to provide current income by investing primarily in fixed-income securities, which are rated in the lower rating categories of the established rating services (BBB or lower by Standard & Poors or Baa or lower by Moodys) or are unrated securities of comparable quality. CYEs secondary investment objective is to provide capital appreciation. | COYs investment objective is to provide shareholders with current income by investing primarily in a diversified portfolio of fixed income securities, which are rated in the lower rating categories of the established rating services (BB or lower by Standard & Poors or Ba or lower by Moodys) or are unrated securities considered by the Funds investment adviser to be of comparable quality. As a secondary objective, COY also seeks to provide shareholders with capital appreciation. | BHYs primary investment objective is to provide high current income. BHYs secondary investment objective is to provide capital appreciation. | HISs primary investment objective is to provide the highest current income attainable consistent with reasonable risk as determined by the Funds investment adviser, through investment in a professionally managed, diversified portfolio of high yield, high risk fixed income securities. HISs secondary objective is to provide capital appreciation, but only when consistent with its primary objective. |
6
HYT |
HYV |
CYE |
COY |
BHY |
HIS |
|||||
Credit-Related
Securities |
Credit-Related
Securities |
Credit-Related Securities | Credit-Related Securities | Credit-Related Securities | Credit-Related Securities | |||||
Under normal market conditions, the Fund invests at least 80% of its net assets (including assets acquired from the sale of preferred stock), plus the amount of any borrowings for investment purposes, in high yield securities, including high yield bonds, corporate loans, convertible debt securities and preferred securities. High yield securities include high yield bonds, corporate loans, convertible debt securities and preferred securities, which are rated below investment grade or, if unrated, are considered by the Investment Advisor to be of comparable quality. | Under normal market conditions, the Fund invests at least 80% of its total assets in high yield debt instruments. High yield debt instruments include junk bonds and corporate loans rated in the lower rating categories (Ba or lower by Moodys and BB or lower by Standard & Poors) or are unrated debt investments considered by the Investment Advisor to be of comparable quality. | Under normal circumstances, the Fund invests at least 80% of its total assets in high-yield corporate debt instruments which are rated in the lower rating categories of the established rating services (Baa or lower by Moodys and BBB or lower by Standard & Poors), or in unrated securities considered by the Investment Advisor to be of comparable quality. | Under normal market conditions, the Fund invests at least 80% of its assets in high yield debt instruments, including junk bonds and Corporate Loans rated in the lower rating categories (Ba or lower by Moodys and BB or lower by Standard & Poors), or in similar unrated instruments considered by the Investment Advisor to be of comparable quality. | Under normal market conditions, the Fund invests at least 80% of its total assets in high-risk, high yield securities. High-risk, high yield securities are generally income securities which, if rated at the time of purchase, are rated lower than Baa by Moodys, lower than BBB by Standard & Poors or similarly rated by other nationally recognized securities rating organization. Such securities may include securities that are not rated by any Rating Agency but which BlackRock believes to be comparable to such securities. | Under normal market conditions, the Fund invests at least 80% of its total assets in high- yield, high risk debt instruments rated in the medium to lower categories by nationally recognized rating services (Baa or lower by Moodys or BBB or lower by Standard & Poors or non-rated securities which, in the Investment Advisors opinion, are of comparable quality. | |||||
Corporate/Bank
Loans |
Corporate/Bank
Loans |
Corporate/Bank Loans | Corporate/Bank Loans | Corporate/Bank Loans | Corporate/Bank Loans | |||||
The Fund may invest up to 15% of its total assets in corporate loans extended to borrowers by commercial banks or other financial institutions. | Same as HYT | Same as HYT | Same as HYT | The Fund may invest up to 25% of its total assets in loans extended to corporate borrowers by commercial banks or other financial institutions. | No Stated Policy |
7
HYT |
HYV |
CYE |
COY |
BHY |
HIS |
|||||
Distressed
Securities |
Distressed
Securities |
Distressed Securities | Distressed Securities | Distressed Securities | Distressed Securities | |||||
The Fund may invest up to 10% of its total assets in high yield securities which 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 lowest rating categories (Ca or lower by Moodys, CC or lower by Standard & Poors or CC or lower by Fitch) or, if unrated, are considered by the Investment Advisor to be of comparable quality. | Same as HYT | Same as HYT | Same as HYT | The Fund may invest up to 10% of its total assets in securities that are the subject of bankruptcy proceedings or otherwise in default or in significant risk of being in default. | The Fund may not purchase securities rated D by Standard & Poors. | |||||
Preferred
Stock |
Preferred
Stock |
Preferred
Stock |
Preferred
Stock |
Preferred
Stock |
Preferred
Stock |
|||||
The Fund may invest up to 15% of its total assets in preferred securities, including preferred securities that may be converted into common stock or other securities of the same or a different issuer, and non-convertible preferred securities. | No Stated Policy | No Stated Policy | No Stated Policy | No Stated Policy | Under normal circumstances, the Fund will not invest more than 10% of its assets in preferred stock. |
8
HYT |
HYV |
CYE |
COY |
BHY |
HIS |
|||||
Convertible
Securities |
Convertible
Securities |
Convertible
Securities |
Convertible
Securities |
Convertible
Securities |
Convertible
Securities |
|||||
The Fund may invest up to 15% of its total assets in convertible debt securities. | No Stated Policy | No Stated Policy | No Stated Policy | No Stated Policy | No Stated Policy | |||||
Common Stock |
Common Stock | Common Stock | Common Stock | Common Stock | Common Stock | |||||
No Stated Policy | No Stated Policy | No Stated Policy | No Stated Policy | Up to 20% of the Funds total assets may be invested in equity securities other than preferred stocks. |
The Fund may not acquire common stock, except when (i) attached to or included in, or in connection with or incidental to, the Funds investment in a unit with income-generating securities that otherwise would be attractive to the Fund (including equity interests, or the substantial equivalent of equity interests, which are acquired through a follow-on offering for interests in an issuer that HIS previously acquired in connection with its investment in such income-generating securities); (ii) acquired through the exercise of equity features accompanying convertible securities held by the Fund, such as conversion or exchange of privileges or warrants for the acquisition of stock or equity interests of the same issuer or a different issuer; or (iii) in the case of an exchange offering whereby the equity security would be acquired with the intention of exchanging it for a debt security issued on a when-issued basis. |
9
HYT |
HYV |
CYE |
COY |
BHY |
HIS |
|||||
Non-U.S.
Securities |
Non-U.S.
Securities |
Non-U.S.
Securities |
Non-U.S.
Securities |
Non-U.S.
Securities |
Non-U.S.
Securities |
|||||
The Fund may invest without limitation in securities of issuers domiciled outside the United States or that are denominated in various foreign currencies and multinational currency units. | Same as HYT | Same as HYT | Same as HYT | The Fund may invest up to 35% of its total assets in debt securities of issuers domiciled outside of the United States or that are denominated in various foreign currencies and multinational currency units. Typically, the Fund will not hold any foreign securities of emerging market issuers, and in any case such securities will not comprise more than 10% of the Funds net assets. |
The Fund may invest up to 20% of its total assets in fixed-income securities issued by foreign governments and other foreign issuers and in foreign currency issues of domestic issuers, but no more than 5% of its total assets in such securities, whether issued by a foreign or domestic issuer, which are denominated in foreign currencies.
In addition to its authorization to invest in foreign securities, the Fund may invest up to 5% of its total assets in Eurodollar certificates of deposit which are the obligations of foreign branches of U.S. banks and may invest without limitation in Canadian issuers whose securities are payable in U.S. dollars. |
10
HYT |
HYV |
CYE |
COY |
BHY |
HIS |
|||||
Illiquid
Securities |
Illiquid
Securities |
Illiquid
Securities |
Illiquid
Securities |
Illiquid
Securities |
Illiquid
Securities |
|||||
The Fund has no limitation on the amount of its investments that are not readily marketable or are subject to restrictions on resale. | Same as HYT | Same as HYT | Same as HYT | No Stated Policy | The Fund may invest up to 20% of its total assets in private placements. Except for this restriction that up to 20% of total assets may be invested in private placements, the Fund has no specific restrictions on investing in illiquid securities. For purposes of this restriction, securities eligible for resale under Rule 144A of the 1933 Act with registration rights are excluded from private placements and are not considered illiquid. | |||||
The Fund may not invest in securities which are subject to legal or contractual restrictions on resale if, as a result thereof, more than 20% of the total assets of the Fund taken at market value, would be invested in such securities. Securities eligible for resale under Rule 144A of the 1933 Act with registration rights are excluded from this investment restriction. |
11
HYT |
HYV |
CYE |
COY |
BHY |
HIS |
|||||
Defensive
Measures |
Defensive
Measures |
Defensive
Measures |
Defensive
Measures |
Defensive
Measures |
Defensive
Measures |
|||||
Under unusual market or economic conditions or for temporary defensive purposes, the Fund may invest up to 100% of its total assets in securities issued or guaranteed by the U.S. Government or its instrumentalities or agencies, certificates of deposit, bankers acceptances and other bank obligations, commercial paper rated in the highest category by an established Rating Agency, or other fixed income securities deemed by the Investment Advisor to be consistent with a defensive posture, or may hold investments in cash. | Same as HYT | Same as HYT | Same as HYT |
In addition, the Fund may implement various temporary defensive strategies at times when BlackRock determines that conditions in the markets make pursuing the Funds basic investment strategy inconsistent with the best interests of its shareholders.
These strategies may include investing all or a portion of the Funds assets in higher-quality debt securities including short-term securities. |
The Fund may invest without limitation in short-term high quality money market instruments (including variable and floating rate instruments and demand instruments) such as certificates of deposit, commercial paper, bankers acceptances, short-term U.S. Government securities and repurchase agreements, pending investment in portfolio securities, or for temporary defensive purposes or to meet anticipated short-term cash needs such as dividend payments. |
12
HYT |
HYV |
CYE |
COY |
BHY |
HIS |
|||||
Leverage |
Leverage | Leverage | Leverage | Leverage | Leverage | |||||
The Fund is permitted to issue senior securities representing indebtedness up to 33 1/3% of its total managed assets (net assets plus the proceeds of any outstanding borrowings). The Fund voluntarily limits its aggregate economic leverage to 50% of its total managed assets. | Same as HYT | Same as HYT | Same as HYT | Same as HYT | Same as HYT | |||||
Mezzanine
Investments |
Mezzanine
Investments |
Mezzanine Investments | Mezzanine Investments | Mezzanine Investments | Mezzanine Investments | |||||
No Stated Policy | No Stated Policy | No Stated Policy | No Stated Policy | The Fund may invest up to 15% of its total assets in securities known as Mezzanine Investments, which are generally subordinated, privately placed debt securities issued with attached equity securities. | No Stated Policy | |||||
Collateralized
Bond Obligations |
Collateralized
Bond Obligations |
Collateralized
Bond Obligations |
Collateralized
Bond Obligations |
Collateralized
Bond Obligations |
Collateralized
Bond Obligations |
|||||
No Stated Policy | No Stated Policy | No Stated Policy | No Stated Policy | The Fund may invest up to 15% of its total assets in collateralized bond obligations which are structured securities backed by a pool of income securities. | No Stated Policy |
13
HYT |
HYV |
CYE |
COY |
BHY |
HIS |
|||||
Mortgage-
Backed Securities |
Mortgage-
Backed Securities |
Mortgage-
Backed Securities |
Mortgage-
Backed Securities |
Mortgage-
Backed Securities |
Mortgage-
Backed Securities |
|||||
No Stated Policy |
No Stated Policy |
No Stated Policy | No Stated Policy | The Fund will not invest more than 15% of its total assets in CMBS. | No Stated Policy | |||||
Zero Coupon,
PIK and Deferred |
Zero Coupon,
PIK and Deferred |
Zero Coupon,
PIK and Deferred |
Zero Coupon,
PIK and Deferred |
Zero Coupon,
PIK and Deferred |
Zero Coupon,
PIK and Deferred |
|||||
Payment
Securities |
Payment
Securities |
Payment
Securities |
Payment
Securities |
Payment
Securities |
Payment
Securities |
|||||
No Stated Policy | No Stated Policy | No Stated Policy | No Stated Policy | The Fund may invest up to 30% of its total assets in stripped and Zero-Coupon Securities, Pay-In-Kind Securities and Deferred Payment Securities. | No Stated Policy | |||||
Options | Options | Options | Options | Options | Options | |||||
Call Options :
The Fund may purchase call options on any of the types of securities in which it may invest. The Fund may also purchase and sell call options on indices. |
Same as HYT, except no expressed authority to write uncovered call or put options. | Same as HYV | Same as HYV |
Call Options :
In order to enhance income or reduce fluctuations in net asset value, the Fund may sell or purchase call options (calls) on securities and indices based upon the prices of debt securities that are traded on U.S. securities exchanges and on the over-the- counter markets. |
The Fund may not invest in puts, calls or any combinations thereof, except that the Fund may purchase and sell options on financial futures contracts and may acquire and hold puts which relate to equity securities acquired by the Fund when such puts are attached to or included in a unit with such equity securities. |
14
HYT |
HYV |
CYE |
COY |
BHY |
HIS |
|||||
The Fund also is authorized to write (i.e., sell) covered call options on the securities in which it invests and to enter into closing purchase transactions with respect to certain of such options. | All such calls sold by the Fund must be covered as long as the call is outstanding. | |||||||||
The Fund also is authorized to write (i.e., sell) uncovered call options on securities in which it may invest but that are not currently held by the Fund. | Calls on futures contracts on securities written by the Fund must also be covered by assets or instruments acceptable under applicable segregation and coverage requirements. | |||||||||
Put Options : | Put Options : | |||||||||
The Fund is authorized to purchase put options to seek to hedge against a decline in the value of its securities or to seek to enhance its return. The Fund also may purchase uncovered put options. | As with calls, the Fund may purchase put options (puts) on Securities (whether or not it holds such securities in its portfolio). | |||||||||
The Fund also has authority to write (i.e., sell) put options on the types of securities that may be held by the Fund, provided that such put options are covered. The | For the same purposes, the Fund may also sell puts on securities financial indices and puts on futures contracts on securities if the Funds |
15
HYT |
HYV |
CYE |
COY |
BHY |
HIS |
|||||
Fund will not sell puts if, as a result, more than 50% of the Funds assets would be required to cover its potential obligations under its hedging and other investment transactions.
The Fund is also authorized to write (i.e., sell) uncovered put options on securities in which it may invest but that the Fund does not currently have a corresponding short position or has not deposited cash equal to the exercise value of the put option with the broker dealer through which it made the uncovered put option as collateral. |
contingent obligations on such puts are secured by segregated assets consisting of cash or liquid high grade debt securities having a value not less than the exercise price.
The Fund will not sell puts if, as a result, more than 50% of the Funds assets would be required to cover its potential obligation under its hedging and other investment transactions. |
|||||||||
Interest Rate Transactions | Interest Rate Transactions | Interest Rate Transactions | Interest Rate Transactions | Interest Rate Transactions | Interest Rate Transactions | |||||
In order to seek to hedge the value of the Funds portfolio against interest rate fluctuations or to seek to enhance the Funds return, the Fund may enter into various interest rate transactions such as interest rate | Same as HYT | Same as HYT | Same as HYT | The Fund may enter into interest rate swaps and the purchase or sale of interest rate caps and floors. The Fund expects to enter into these transactions primarily to preserve a return or spread on a | No Stated Policy |
16
HYT |
HYV |
CYE |
COY |
BHY |
HIS |
|||||
swaps and the purchase or sale of interest rate caps and floors.
The Fund will not enter into any interest rate swap, cap or floor transaction unless the unsecured senior debt or the claims-paying ability of the other party thereto is rated investment grade quality by at least one nationally recognized statistical rating organization at the time of entering into such transaction or whose creditworthiness is believed by the Investment Advisor to be equivalent to such rating. |
particular investment or portion of its portfolio as a duration management technique or to protect against any increase in the price of securities the Fund anticipates purchasing at a later date. The Fund intends to use these transactions for hedging and risk management purposes and not as a speculative investment. The Fund will not sell interest rate caps or floors that it does not own.
The Fund will not enter into any interest rate swap, cap or floor transaction unless the unsecured senior debt or the claims-paying ability of the other party thereto is rated in the highest rating category of at least one nationally recognized rating organization at the time of entering into such transaction. |
17
HYT |
HYV |
CYE |
COY |
BHY |
HIS |
|||||
Credit
Derivatives |
Credit
Derivatives |
Credit
Derivatives |
Credit
Derivatives |
Credit
Derivatives |
Credit
Derivatives |
|||||
The Fund may enter into credit default swap agreements for hedging purposes or to enhance its returns. The Fund will enter into credit default swap agreements only with counterparties who are rated investment grade quality by at least one nationally recognized statistical rating organization at the time of entering into such transaction or whose creditworthiness is believed by the Investment Advisor to be equivalent to such rating. | Same as HYT | Same as HYT | Same as HYT | The Fund may engage in credit derivative transactions. There is no limit on the amount of credit derivative transactions that may be entered into by the Fund. | No Stated Policy | |||||
Futures |
Futures |
Futures |
Futures |
Futures |
Futures |
|||||
The Fund is authorized to engage in transactions in financial futures contracts (futures contracts) and related options on such futures contracts either as a hedge against adverse changes in the market value of its portfolio securities or to | Same as HYT | Same as HYT | Same as HYT | In connection with its hedging and other risk management strategies, the Fund may enter into contracts for the purchase or sale for future delivery (futures contracts) of debt securities, aggregates of debt securities, financial indices, and U.S. Government debt | The Fund will only enter into financial futures contracts or purchase options thereon for the purpose of hedging either long-term debt securities in its portfolio or the value of debt securities which the Fund intends to purchase. |
18
HYT |
HYV |
CYE |
COY |
BHY |
HIS |
|||||
seek to enhance the Funds income.
The Fund also has authority to purchase and write call and put options on futures contracts.
The Fund may engage in options and futures transactions on exchanges and options in the over-the-counter markets.
The Fund will engage in transactions in OTC options only with banks or dealers which have capital of at least $50 million or whose obligations are guaranteed by an entity having capital of at least $50 million. |
securities or options on the foregoing to hedge the value of its portfolio securities that might result from a change in interest rates or market movements.
The Fund will engage in such transactions only for bona fide hedging, risk management and other appropriate portfolio management purposes. |
The Fund will not enter into futures contracts and options on futures contracts to hedge more than 50% of its portfolio. | ||||||||
Securities
Lending |
Securities
Lending |
Securities
Lending |
Securities
Lending |
Securities
Lending |
Securities
Lending |
|||||
The Fund from time to time may lend securities from its portfolio, with a value not exceeding 33 1/3% of its total assets or the limit prescribed by applicable law to banks, brokers and other financial institutions. In | The Fund from time to time may lend securities from its portfolio, with a value not exceeding 33 1/3% of its total assets, to banks, brokers and other financial institutions and receive collateral in cash or | Same as HYV | Same as HYV | The Fund will not lend portfolio securities if, as a result, the aggregate of such loans exceeds 33 1/3% of the value of the Funds total assets (including such loans). | The Fund may lend its portfolio securities (principally to broker-dealers) to the extent of 20% of its total assets. |
19
HYT |
HYV |
CYE |
COY |
BHY |
HIS |
|||||
return, the Fund receives collateral in cash or securities issued or guaranteed by the U.S. Government, which will be maintained at all times in an amount equal to at least 100% of the current market value of the loaned securities. | securities issued or guaranteed by the U.S. Government, its agencies or instrumentalities that will be maintained at all times in an amount equal to at least 100% of the current market value of the loaned securities. | |||||||||
Short Sales |
Short Sales |
Short Sales |
Short Sales |
Short Sales |
Short Sales |
|||||
The Fund may make short sales of securities, provided the market value of all securities sold short does not exceed 10% of its total assets. The Fund may make short sales both as a form of hedging to offset potential declines in long positions in similar securities and in order to seek to enhance return.
The Funds obligation to replace the borrowed security will be secured by collateral deposited with the broker dealer, usually cash, U.S. government securities or other liquid securities similar to those borrowed. The |
Same as HYT | Same as HYT | Same as HYT | No Stated Policy | The Fund may not make short sales of securities or maintain short positions (other than in connection with futures contracts or options thereon) unless, at all times when a short position is open, the Fund owns at least an equal amount of the securities sold short or owns securities convertible into or exchangeable for at least an equal amount of such securities sold short, without the payment of further consideration. |
20
HYT |
HYV |
CYE |
COY |
BHY |
HIS |
|||||
Fund also will be required to segregate similar collateral with its custodian to the extent, if any, necessary so that the value of both collateral amounts in the aggregate is at all times equal to at least 100% of the current market value of the security sold short. | ||||||||||
The Fund also may make short sales against the box. Short Sales against the box are not subject to the foregoing 10% limitation. |
Further Information Regarding the Reorganization
Each Target Fund Board has determined that its Reorganization is in the best interests of its Target Fund and the shareholders of such Target Fund, and that the interests of such shareholders will not be diluted as a result of such Target Funds Reorganization. Similarly, the Acquiring Fund Board has determined that each Reorganization is in the best interests of the Acquiring Fund and its shareholders and that the interests of such shareholders will not be diluted as a result of each Reorganization. As a result of the Reorganizations, however, shareholders of each Fund will hold a reduced percentage of ownership in the larger Combined Fund than they did in any of the individual Funds.
Each Reorganization is intended to qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the Code). If a Reorganization so qualifies, in general, shareholders of a Target Fund will recognize no gain or loss for U.S. federal income tax purposes upon the exchange of their Target Fund common shares for Acquiring Fund Shares pursuant to the Reorganization (except with respect to cash received in lieu of fractional shares). Additionally, the Target Funds will recognize no gain or loss for U.S. federal income tax purposes by reason of the Reorganizations. Neither the Acquiring Fund nor its shareholders will recognize any gain or loss for U.S. federal income tax purposes pursuant to each Reorganization. It is a condition to the closing of each Reorganization that the respective Target Fund and the Acquiring Fund receive an opinion from Skadden, Arps, Slate, Meagher & Flom LLP (Skadden Arps), dated as of the closing date of such Reorganization (the Closing Date), regarding the characterization of the Reorganization as a reorganization within the meaning of Section 368(a) of the Code.
The Board of each Target Fund requests that shareholders of such Target Fund approve their proposed Reorganization at the Special Meeting to be held on October 11, 2013.
21
Shareholder approval of the BHY, COY, CYE and HYV Reorganizations requires the affirmative vote of the holders of a majority of the outstanding common shares of BHY, COY, CYE and HYV, respectively.
Shareholder approval of HISs Reorganization requires the affirmative vote by HIS shareholders, voting as a single class, of a majority of the outstanding voting securities as defined under the 1940 Act (such a majority referred to herein as a 1940 Act Majority). A 1940 Act Majority means the affirmative vote of either (i) 66 2/3% or more of the voting securities present at the Special Meeting, if the holders of more than 50% of the outstanding voting securities of the Fund are present or represented by proxy or (ii) more than 50% of the outstanding voting securities of the Fund, whichever is less. For additional information regarding voting requirements, see Voting Information and Requirements.
Subject to the requisite approval of the shareholders of each Target Fund with regard to each Reorganization, it is expected that the Closing Date will be sometime during the fourth quarter 2013, but it may be at a different time as described herein.
Investing in the Combined Fund following a Reorganization involves risks. For additional information, see Risk Factors and Special Considerations.
The BHY Board recommends that shareholders of BHY vote FOR BHYs proposed Reorganization.
The COY Board recommends that shareholders of COY vote FOR COYs proposed Reorganization.
The CYE Board recommends that shareholders of CYE vote FOR CYEs proposed Reorganization.
The HIS Board recommends that shareholders of HIS vote FOR HISs proposed Reorganization.
The HYV Board recommends that shareholders of HYV vote FOR HYVs proposed Reorganization.
PROPOSAL 2: THE REORGANIZATIONS OF THE ACQUIRING FUND
In connection with each proposed Reorganization described under Proposal 1: The Reorganizations of the Target Funds, each Target Fund will either merge with and into the Acquiring Fund or a new direct, wholly-owned subsidiary of the Acquiring Fund, and the Acquiring Fund will issue additional Acquiring Fund Shares in connection with such reorganization and list such common shares on the NYSE. The Reorganizations are not expected to result in any reduction of the net asset value of the Acquiring Fund Shares, other than to reflect the applicable costs of the Reorganizations, including, but not limited to, the issuance of additional Acquiring Fund Shares in connection with each of the Reorganizations (the Issuances).
No gain or loss for U.S. federal income tax purposes will be recognized by the Acquiring Fund or its shareholders pursuant to the Reorganizations. The Acquiring Fund Board, based upon its evaluation of all relevant information, anticipates that the Reorganizations will benefit shareholders of the Acquiring Fund. In particular, the Acquiring Fund Board reviewed data presented by the Investment Advisor showing that the Acquiring Fund will experience a reduced management fee and a reduced Total Expense Ratio as a result of the proposed Reorganizations.
The Acquiring Fund pays the Investment Advisor a monthly management fee at an annual rate of 0.70% based on an aggregate of (i) the Funds average daily Net Assets and (ii) the proceeds of any outstanding debt securities or borrowings used for leverage. Net Assets means the total assets of the Fund minus the sum of the accrued liabilities. The liquidation preference of any outstanding preferred stock (other than accumulated dividends) is not considered a liability in determining the Funds net asset value. If any of the Reorganizations are approved and consummated, the Combined Fund will pay the Investment Advisor a monthly management fee at an annual rate of 0.60% based on an aggregate of (i) the Funds average daily Net Assets and (ii) the proceeds of any outstanding debt securities or borrowings used for leverage.
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For the fiscal year ended August 31, 2012, the Acquiring Funds Total Expense Ratio was 1.51%. For the 12-month period ended February 28, 2013, the Total Expense Ratio of the Acquiring Fund was 1.52%. The Acquiring Fund estimates that the completion of all of the Reorganizations would result in a Total Expense Ratio for the Combined Fund of 1.34% on a historical and pro forma basis for the 12-month period ended February 28, 2013, representing a reduction in the Total Expense Ratio for the shareholders of the Acquiring Fund of 0.18%.
The Acquiring Fund Board also believes the Reorganizations may provide other potential benefits, including the potential for (i) higher earnings yield for the Combined Fund (as a percentage of net asset value) on a pro forma basis compared to the Acquiring Fund; (ii) greater secondary market liquidity for the Combined Funds common shares, which may result in tighter bid-ask spreads; (iii) better trade execution for each Funds shareholders when purchasing or selling Combined Fund common shares; (iv) improved premium/discount levels for the Combined Funds common shares; (v) operating and administrative efficiencies for the Combined Fund, including greater investment flexibility and investment options, greater diversification of portfolio investments, the ability to trade in larger positions, additional sources of leverage or more competitive leverage terms and more favorable transaction terms; (vi) benefits from having fewer closed-end funds in the market, including an increased focus by investors on the remaining funds in the market (including the Combined Fund) and additional research coverage; and (vii) benefits from having fewer similar funds in the same fund complex, including a simplified operational model and a reduction in risk of operational, legal and financial errors. See Reasons for the Reorganization for additional information.
The Acquiring Fund Board recommends that shareholders of the Acquiring Fund approve the Reorganizations, including the Issuances, at the Special Meeting to be held on October 11, 2013 at 9:00 a.m. (Eastern time).
Shareholder approval of each of HYTs proposed Reorganizations with each of BHY, COY, CYE, HIS and HYV requires the affirmative vote of the holders of a majority of the outstanding common shares of HYT. For additional information regarding voting requirements, see Voting Information and Requirements.
Subject to the requisite approval of the shareholders of each Fund with regard to its Reorganization, it is expected that the Closing Date will be sometime during the fourth quarter of 2013, but it may be at a different time as described herein.
Investing in the Combined Fund, following the Reorganizations, involves certain risks. For additional information, see Risk Factors and Special Considerations.
The Acquiring Fund Board recommends that shareholders of the Acquiring Fund vote FOR each of HYTs proposed Reorganizations with each of BHY, COY, CYE, HIS and HYV.
RISK FACTORS AND SPECIAL CONSIDERATIONS
Comparison of Risks
Because the Funds have either the same or substantially similar (but not identical) investment objectives and principal investment strategies, the Funds generally are subject to substantially similar investment risks. The Combined Fund will be managed in accordance with the same investment objectives and investment policies, and subject to the same risks, as the Acquiring Fund. Many of the investment risks associated with an investment in the Acquiring Fund are substantially similar to those associated with an investment in the Target Funds. Risks that predominately affect common shares include credit risk, interest rate risk, high yield security risk, leverage risk, derivatives risk, liquidity and market price risk, issuer risk, market risk and non-U.S. securities risk. In addition, as exchange-traded closed-end funds, the Funds are subject to the risk that the Funds common shares may trade at a discount from the Funds net asset value. Accordingly, the Funds are primarily designed for long-term investors and should not be considered a vehicle for trading purposes.
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The Acquiring Fund may invest up to 10% of its total assets in high yield securities which 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 lowest rating categories (Ca or lower by Moodys, CC or lower by Standard & Poors or CC or lower by Fitch) or, if unrated, are considered by the Investment Advisor to be of comparable quality. HIS may not purchase securities rated D by Standard & Poors; thus, shareholders of HIS may be subject to the risks associated with an investment in such distressed securities as a shareholder of the Combined Fund.
The Acquiring Fund may invest up to 15% of its total assets in preferred shares. HIS may invest up to 10% of its assets in preferred shares; thus, shareholders of HIS may be subject to additional risks associated with an investment in preferred shares as a shareholder of the Combined Fund.
The Acquiring Fund does not have any limitation on investments in common stock. BHY may invest up to 20% of its total assets in common stock. HIS may not acquire common stock, except when (i) attached to or included in, or in connection with or incidental to, the Funds investment in a unit with income-generating securities that otherwise would be attractive to the Fund (including equity interests, or the substantial equivalent of equity interests, which are acquired through a follow-on offering for interests in an issuer that HIS previously acquired in connection with its investment in such income-generating securities); (ii) acquired through the exercise of equity features accompanying convertible securities held by the Fund, such as conversion or exchange of privileges or warrants for the acquisition of stock or equity interests of the same issuer or a different issuer; or (iii) in the case of an exchange offering whereby the equity security would be acquired with the intention of exchanging it for a debt security issued on a when-issued basis. Shareholders of BHY and HIS may be subject to additional risks associated with an investment in common stock as a shareholder of the Combined Fund.
The Acquiring Fund may invest, without limitation, in non-U.S. securities or securities denominated in foreign currencies and multinational currency units. BHY may invest up to 35% of its total assets in debt securities of issuers domiciled outside of the United States or that are denominated in foreign currencies and multinational currency units; provided, however, that BHY may not invest more than 10% of the Funds net assets in emerging market issuers. HIS may invest up to 20% of its total assets in fixed-income securities issued by foreign governments and other foreign issuers and up to 5% of its total assets in foreign currency issues of foreign and domestic issuers. In addition, HIS may invest up to 5% of its total assets in Eurodollar certificates of deposit which are the obligations of foreign branches of U.S. banks and may invest without limitation in Canadian issuers whose securities are payable in U.S. dollars. Shareholders of BHY and HIS may be subject to additional risks associated with an investment in non-U.S. securities as a shareholder of the Combined Fund.
BHY may invest up to 15% of its total assets in securities known as Mezzanine Investments (generally subordinated, privately placed debt securities issued with attached equity securities), collateralized bond obligations and commercial mortgage backed securities. BHY may also invest up to 30% of its total assets in stripped and zero-coupon securities, pay-in-kind securities and deferred payment securities. The Acquiring Fund does not have any limitation on investments in the foregoing securities; therefore, shareholders of BHY may be subject to additional risks associated with an investment in the foregoing securities as a shareholder of the Combined Fund.
The Acquiring Fund may purchase call options, write (i.e., sell) covered or uncovered call options, purchase put options and uncovered put options, write (i.e., sell) covered put options and write uncovered put options on securities that the Acquiring Fund does not currently have a corresponding short position or has not deposited cash equal to the exercise value of the put option with the broker dealer through which it made the uncovered put option as collateral. BHY, COY, CYE and HYV may not write uncovered call or put options. HIS may only purchase and sell options on financial futures contracts, and hold puts that relate to equity securities acquired by the Fund when such puts are attached to or included with such equity securities. The Acquiring Fund has more flexibility with respect to option transactions than any of the Target Funds; thus, shareholders of each Target Fund may be subject to additional risks associated option transactions, such as the selling of uncovered options, as a shareholder of the Combined Fund.
The Acquiring Fund may lend securities from its portfolio, with a value not exceeding 33 1/3% of its total assets or the limit prescribed by applicable law to banks, brokers and other financial institutions. HIS may lend
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its portfolio securities to the extent of 20% of its total assets; thus, shareholders of HIS may be subject to additional risks associated with securities lending as a shareholder of the Combined Fund.
See Comparison of the Funds in this Joint Proxy Statement/Prospectus for a more detailed description of the salient differences among the Funds.
Risks Related to the Reorganizations
Expenses.
While the Funds currently estimate that the Reorganizations will result in reduced aggregate expenses of the Combined Fund by approximately $1,953,954 per year if all the Reorganizations are completed (which represents the most likely combination of the Reorganizations and the combination of the Reorganizations resulting in the lowest Total Expense Ratio) and approximately $990,384 if only the Reorganization between BHY and HYT is completed (which represents the combination of the Reorganizations resulting in the highest Total Expense Ratio), the realization of these reduced expenses will not affect holders of the Funds proportionately, and may take longer than expected to be realized or may not be realized at all.
After the Reorganizations, the Combined Fund is expected to incur lower Total Expenses on a per common share basis than is currently incurred by the Acquiring Fund. In addition, no matter which Funds complete their Reorganizations, the Combined Fund may incur higher Total Expenses for a period after the completion of the Reorganizations due to expenses associated with the Reorganizations prior to experiencing such savings or may never experience such savings if its fixed costs were to increase or the value of its assets were to decrease.
For the fiscal year ended August 31, 2012, BHYs, HISs, HYVs and HYTs Total Expense Ratio was 2.01%, 1.54%, 1.42% and 1.51%, respectively. As of February 28, 2013, the historical and pro forma total annual gross expense ratios applicable to the Reorganizations are as follows:
BHY |
COY |
CYE |
HIS |
HYV |
HYT |
Pro Forma
(BHY into HYT) |
Pro
Forma
(All Target
|
|||||||
2.25% |
1.25% | 1.42% | 1.59% | 1.45% | 1.52% | 1.39% | 1.34% |
There can be no assurance that future expenses will not increase or that any expense savings will be realized. Moreover, the level of expense savings (or increases) will vary depending on the combination of the proposed Reorganizations.
The most likely combination is the Reorganizations of all of the Funds, which is also expected to result in the lowest Total Expense Ratio. The Reorganization of just BHY into the Acquiring Fund is expected to result in the highest Total Expense Ratio of any of the possible combinations of Reorganizations.
Any combination other than the Reorganization of just BHY and the Acquiring Fund or the Reorganization of all the Funds is expected to result in a Total Expense Ratio that is lower than the Total Expense Ratio that is expected to result from the Reorganization of just BHY and the Acquiring Fund and higher than the Total Expense Ratio that is expected to result from the Reorganization of all the Funds.
The Board of each of BHY, CYE, HIS, HYV and HYT believes that its respective Funds shareholders should realize lower Total Expense Ratios after the Reorganizations than they would realize if the Reorganizations did not occur after the expenses associated with the Reorganizations have been paid. The Board of COY believes that its shareholders should expect to realize a higher Total Expense Ratio after the Reorganization than they would realize if the Reorganizations did not occur after the expenses associated with
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the Reorganizations have been paid. The Funds estimate that the completion of all of the Reorganizations would result in a Total Expense Ratio for the Combined Fund of 1.34% on a historical and pro forma basis for the 12-month period ended February 28, 2013, representing a reduction in the Total Expense Ratio for the shareholders of BHY, CYE, HIS, HYV and HYT of 0.91%, 0.08%, 0.25%, 0.11% and 0.18%, respectively, and an increase in the Total Expense Ratio for the shareholders of COY of 0.09%.
The Board of COY believes that the potential benefits of the Reorganizations make the Reorganizations in the best interest of COY shareholders. These potential benefits include the potential for (i) higher earnings yield for the Combined Fund (as a percentage of net asset value) on a pro forma basis compared to COY, (ii) greater secondary market liquidity for the Combined Funds common shares, which may result in tighter bid-ask spreads; (iii) better trade execution for each Funds shareholders when purchasing or selling Combined Fund common shares; (iv) improved premium/discount levels for the Combined Funds common shares; (v) operating and administrative efficiencies for the Combined Fund, including greater investment flexibility and investment options, greater diversification of portfolio investments, the ability to trade in larger positions, additional sources of leverage or more competitive leverage terms and more favorable transaction terms; (vi) benefits from having fewer closed-end funds in the market, including an increased focus by investors on the remaining funds in the market (including the Combined Fund) and additional research coverage; and (vii) benefits from having fewer similar funds in the same fund complex, including a simplified operational model and a reduction in risk of operational, legal and financial errors. See Reasons for the Reorganizations. In addition, the Investment Advisor will bear all of the reorganization costs of COY, CYE and HYV.
BHY, HIS and the Acquiring Fund will bear expenses incurred in connection with the Reorganizations, including, but not limited to, costs related to the preparation and distribution of materials distributed to each Funds Board, expenses incurred in connection with the preparation of the Reorganization Agreements and the registration statement on Form N-14, the printing and distribution of this Joint Proxy Statement/Prospectus and any other materials required to be distributed to shareholders, SEC and state securities commission filing fees, legal and audit fees in connection with the Reorganizations, including legal fees incurred preparing each Funds Board materials, attending each Funds Board meetings and preparing the minutes and auditing fees associated with each Funds financial statements, stock exchange fees, transfer agency fees, portfolio transfer taxes (if any) and any similar expenses incurred in connection with the Reorganizations, which will be borne directly by the respective Fund incurring the expense or allocated among the Funds proportionately or on another reasonable basis, as appropriate. The Investment Advisor will bear the costs of the Reorganizations for COY, CYE and HYV because the shareholders of these Target Funds are not expected to experience the same level of economic benefits from the Reorganizations as the shareholders of BHY, HIS and HYT. Therefore, the costs associated with the Reorganizations of COY, CYE and HYV will not be directly borne by COY, CYE and HYV. Because BHY, HIS and the Acquiring Fund have already incurred expenses solely and directly attributable to the Reorganizations and because BHY, HIS and the Acquiring Fund (and not the Investment Advisor) are responsible for paying those expenses, if BHY, HIS or the Acquiring Funds respective shareholders do not approve their Funds respective Reorganization, such Fund will continue to be responsible for the expenses arising from its proposed Reorganization even though its proposed Reorganization will not occur and those expenses may be material.
Neither the Funds nor the Investment Advisor will pay any expenses of shareholders arising out of or in connection with the Reorganizations ( e.g. , expenses incurred by the shareholder as a result of attending the shareholder meeting, voting on the Reorganizations or other action taken by the shareholder in connection with the Reorganizations). See Reasons for the Reorganizations.
Earnings and Distribution Yield.
The Combined Funds earnings and distribution yield on NAV are expected to be comparable (i.e., the same or slightly lower or higher) when compared with that of each Fund prior to the Reorganizations; however, the Combined Funds earnings and distribution yield on NAV may change over time, and depending on market conditions, may be significantly higher or lower than each Funds earnings and distribution yield prior to the Reorganizations.
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The Combined Funds earnings yield is expected to be slightly lower than HYVs current earnings yield; thus, assuming the Acquiring Funds distribution policy remains in place after the Reorganizations, shareholders of HYV may experience a decrease in their distribution yield after the Reorganizations. Although the Combined Funds earnings yield is expected to be slightly lower than HYVs current earnings yield, shareholders of HYV are expected to benefit from a reduction in HYVs Total Expense Ratio of approximately 0.11%. It is also anticipated that shareholders of HYV may benefit from other potential benefits associated with the Reorganizations (including as a result of the Combined Funds larger size) as more fully discussed herein. See Reasons for the Reorganizations. In addition, the Investment Advisor will bear all of the reorganization costs of HYV.
A Funds earnings and net investment income are variables, which depend on many factors, including its asset mix, portfolio turnover level, the amount of leverage utilized by the Fund, the costs of such leverage, the movement of interest rates and general market conditions. There can be no assurance that the future earnings of a Fund, including the Combined Fund after the Reorganizations, will remain constant. In addition, the Combined Funds future earnings will vary depending on the combination of the proposed Reorganizations.
Premium/Discount to NAV.
As with any capital stock, the price of each Funds common shares will fluctuate based on market conditions and other factors. If shares are sold, the price received may be more or less than the original investment. Each Funds common shares are designed for long-term investors and should not be treated as trading vehicles. Shares of closed-end management investment companies frequently trade at a discount from their net asset value. This risk may be greater for investors who sell their shares in a relatively short period of time after completion of the Reorganizations.
The common shares of each Fund have historically fluctuated between a discount and a premium. As of May 31, 2013, each Fund, except BHY, traded at a discount to its respective NAV. As of May 31, 2013, BHY traded at a premium to its NAV. To the extent that a Target Fund is trading at a wider discount (or a narrower premium) than the Acquiring Fund at the time of its Reorganization, such Target Funds shareholders would have the potential for an economic benefit. To the extent that a Target Fund is trading at a narrower discount (or wider premium) than the Acquiring Fund at the time of its Reorganization, such Target Funds shareholders may be negatively impacted if the Reorganizations are consummated. The Acquiring Funds shareholders would only benefit from a discount perspective to the extent the post-Reorganization discount (or premium) improves.
There can be no assurance that, after the Reorganizations, common shares of the Combined Fund will trade at, above or below net asset value. Upon consummation of the Reorganizations, the Acquiring Fund Shares may trade at a price that is less than the Acquiring Funds current trading market price. In the Reorganizations, shareholders of each Target Fund will receive common shares of the Acquiring Fund based on the relative net asset values (not the market values) of each respective Funds common shares. The market value of the common shares of the Combined Fund may be less than the market value of the common shares of your Fund prior to the Reorganizations.
Tax Considerations.
See Material Federal Income Tax Consequences of the Reorganizations for a summary of certain U.S. federal income tax consequences of the Reorganizations.
General Risks of Investing in the Funds
Investment Risk. An investment in each Funds common shares is subject to investment risk, including the possible loss of the entire principal amount that you invest. An investment in each Funds common shares represents an indirect investment in the securities owned by such Fund. The value of these securities, like other
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market investments, may move up or down, sometimes rapidly and unpredictably. Although the Funds can sell securities of an issuer upon the occurrence of certain events or for tax planning, the Funds generally will not sell securities of issuers solely due to changes in market price. Each Funds common shares at any point in time may be worth less than a shareholders original investment, even after taking into account the reinvestment of the Funds dividends and distributions.
Investment Strategy Risk. The types of investments that are selected through application of the Funds investment strategy can be expected to change over time. In pursuing their investment strategy, the Funds may incur adverse tax or brokerage consequences. Particular risks may be elevated during periods in which the Funds investment strategy dictates higher levels of investment in particular types of investments.
Decision-Making Authority . Investors have no authority to make decisions or to exercise business discretion on behalf of the Funds, except as set forth in the Funds governing documents. The authority for all such decisions is generally delegated to the Board, who in turn, has delegated the day-to-day management of each Funds investment activities to the Advisors, subject to oversight by the Board.
Issuer Risk; Market Risk; and Selection Risk . Issuer risk is the risk that the value of the Funds debt securities may decline for a number of reasons which directly relate to the issuer or borrower, such as a real or perceived management performance, financial leverage and reduced demand for the issuers or borrowers goods and services.
Market risk is the risk that the market values of securities owned by a Fund will decline. There is a risk that the markets in which a Fund invests will go down in value, including the possibility that the market will go down sharply and unpredictably. The prices of debt securities tend to fall as interest rates rise, and such declines tend to be greater among debt securities with longer maturities. Market risk is often greater among certain types of debt securities, such as zero coupon bonds which do not make regular interest payments but are instead bought at a discount to their face values and paid in full upon maturity. As interest rates change, these securities often fluctuate more in price than securities that make regular interest payments and therefore subject a Fund to greater market risk than a fund that does not own these types of securities. When-issued and delayed delivery transactions are subject to changes in market conditions from the time of the commitment until settlement. This may adversely affect the prices or yields of the securities being purchased. The greater a Funds outstanding commitments for these securities, the greater the Funds exposure to market price fluctuations.
Selection risk is the risk that the securities that a Funds management selects will underperform the markets in which the Fund invests, the market relevant indices, or other funds with similar investment objectives and investment strategies.
Fixed Income Securities Risk. Fixed income securities in which each Fund may invest are generally subject to the following risks:
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Issuer Risk. The value of fixed income securities may decline for a number of reasons which directly relate to the issuer, such as management performance, financial leverage, reduced demand for the issuers goods and services, historical and prospective earnings of the issuer and the value of the assets of the issuer. |
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Credit Risk. Credit risk is the risk that one or more fixed income securities in a Funds portfolio will decline in price or fail to pay interest or principal when due because the issuer of the security experiences a decline in its financial status. Credit risk is increased when a portfolio security is downgraded or the perceived creditworthiness of the issuer deteriorates. To the extent a Fund invests in below investment grade securities, it will be exposed to a greater amount of credit risk than a fund which only invests in investment grade securities. In addition, to the extent a Fund uses credit derivatives, such use will expose it to additional risk in the event that the bonds underlying the derivatives default. |
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Interest Rate Risk. The value of certain fixed income securities in a Funds portfolio could be affected by interest rate fluctuations. Generally, when market interest rates fall, fixed rate securities prices rise, and vice versa. Interest rate risk is the risk that the securities in a Funds portfolio will decline in value because of increases in market interest rates. The prices of longer-term securities fluctuate more than prices of shorter-term securities as interest rates change. These risks may be greater in the current market environment because certain interest rates are near historic low levels. Because a Fund may invest primarily in long-term securities, the net asset value and market price per share of the common shares will fluctuate more in response to changes in market interest rates than if such Fund invested primarily in shorter-term securities. A Funds use of leverage will tend to increase common share interest rate risk. A Fund may utilize certain strategies, including taking positions in futures or interest rate swaps, for the purpose of reducing the interest rate sensitivity of fixed income securities held by the Fund and decreasing the Funds exposure to interest rate risk. The Funds are not required to hedge its exposure to interest rate risk and may choose not to do so. In addition, there is no assurance that any attempts by a Fund to reduce interest rate risk will be successful or that any hedges that the Fund may establish will perfectly correlate with movements in interest rates. |
Each Fund may invest in variable and floating rate debt instruments, which generally are less sensitive to interest rate changes than longer duration fixed rate instruments, but may 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, variable and floating rate instruments generally will not increase in value if interest rates decline. A Fund also may invest in inverse floating rate debt securities, which may decrease in value if interest rates increase, and which also may exhibit greater price volatility than fixed rate debt obligations with similar credit quality. To the extent a Fund holds variable or 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, which may adversely affect the net asset value of the Funds common shares.
Prepayment Risk. During periods of declining interest rates, borrowers may exercise their option to prepay principal earlier than scheduled. For fixed rate securities, such payments often occur during periods of declining interest rates, which can force a Fund to reinvest in lower yielding securities, resulting in a possible decline in the Funds income and distributions to shareholders. This is known as prepayment or call risk. Below investment grade securities frequently have call features that allow the issuer to redeem the security at dates prior to its stated maturity at a specified price (typically greater than par) only if certain prescribed conditions are met (call protection). For premium bonds (bonds acquired at prices that exceed their par or principal value) purchased by a Fund, prepayment risk may be enhanced.
Reinvestment Risk. Reinvestment risk is the risk that income from a Funds portfolio will decline if the Fund invests the proceeds from matured, traded or called fixed income securities at market interest rates that are below the Fund portfolios current earnings rate.
Duration and Maturity Risk. The Funds have no set policy regarding portfolio maturity or duration. The Advisors may seek to adjust the portfolios duration or maturity based on their assessment of current and projected market conditions and all factors that the Advisors deem relevant. Any decisions as to the targeted duration or maturity of any particular category of investments or of a Funds portfolio generally will be made based on all pertinent market factors at any given time. A Fund may incur costs in seeking to adjust the portfolio average duration or maturity. There can be no assurance, however, that the Advisors assessment of current and projected market conditions will be correct or that any strategy to adjust the portfolios duration or maturity will be successful at any given time. Generally speaking, the longer the duration of the Funds portfolio, the more exposure the Fund will have to the interest rate risks described above.
Below Investment Grade Securities Risk . Each Fund invests primarily in a portfolio of below investment grade, high yield securities, which are commonly referred to as junk bonds and are regarded as predominantly speculative with respect to the issuers capacity to pay interest and repay principal. The value of high yield, lower
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quality bonds is affected by the creditworthiness of the issuers of the securities and by general economic and specific industry conditions. Issuers of high yield bonds are not perceived to be as strong financially as those with higher credit ratings. These issuers are more vulnerable to financial setbacks and recession than more creditworthy issuers, which may impair their ability to make interest and principal payments. Lower grade securities may be particularly susceptible to economic downturns. It is likely that an economic recession could disrupt severely the market for such securities and may have an adverse impact on the value of such securities. In addition, it is likely that any such economic downturn could adversely affect the ability of the issuers of such securities to repay principal and pay interest thereon and increase the incidence of default for such securities. See Risk Factors and Special ConsiderationsGeneral Risks of Investing in the FundsRisk Associated with Recent Market Events.
Lower grade securities, though high yielding, are characterized by high risk. They may be subject to certain risks with respect to the issuing entity and to greater market fluctuations than certain lower yielding, higher rated securities. The secondary market for lower grade securities may be less liquid than that for higher rated securities. Adverse conditions could make it difficult at times for a Fund to sell certain securities or could result in lower prices than those used in calculating the Funds net asset value. Because of the substantial risks associated with investments in lower grade securities, you could lose money on your investment in common shares of a Fund, both in the short-term and the long-term.
The prices of fixed income securities generally are inversely related to interest rate changes; however, below investment grade securities historically have been somewhat less sensitive to interest rate changes than higher quality securities of comparable maturity because credit quality is also a significant factor in the valuation of lower grade securities. On the other hand, an increased rate environment results in increased borrowing costs generally, which may impair the credit quality of low-grade issuers and thus have a more significant effect on the value of some lower grade securities. In addition, the current extraordinary low rate environment has expanded the historic universe of buyers of lower grade securities as traditional investment grade oriented investors have been forced to accept more risk in order to maintain income. As rates rise, these recent entrants to the low-grade securities market may exit the market and reduce demand for lower grade securities, potentially resulting in greater price volatility.
The ratings of Moodys, Standard & Poors, Fitch and 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, the Advisors will also independently evaluate these securities and the ability of the issuers of such securities to pay interest and principal. To the extent that a 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 the Advisors credit analysis than would be the case if the Fund were to invest in rated securities.
Each Fund may invest in securities rated in the lower rating categories (rated Caa1/CCC+ or below, or unrated but judged to be of comparable quality by the Advisors). For these securities, the risks associated with below investment grade instruments are more pronounced. A Fund may purchase stressed or distressed securities, including securities that are in default or the issuers of which are in bankruptcy, except HIS may not purchase securities rated D by Standard & Poors, which involve heightened risks. See Risk Factors and Special ConsiderationsGeneral Risks of Investing in the FundsDistressed and Defaulted Securities Risk.
Distressed and Defaulted Securities Risk . An investment in the securities of financially distressed issuers can involve substantial risks. These securities may present a substantial risk of default or may be in default at the time of investment. A Fund may incur additional expenses to the extent it is required to seek recovery upon a default in the payment of principal or interest on its portfolio holdings. In any reorganization or liquidation proceeding relating to a portfolio company, a Fund may lose its entire investment or may be required to accept cash or securities with a value less than its original investment. Among the risks inherent in investments in a
30
troubled entity is the fact that it frequently may be difficult to obtain information as to the true financial condition of such issuer. The Advisors judgment about the credit quality of the issuer and the relative value and liquidity of its securities may prove to be wrong.
Unrated Securities Risk. Because a Fund may purchase securities that are not rated by any rating organization, the Advisors may, after assessing their credit quality, internally assign ratings to certain of those securities in categories similar to those of rating organizations. Some unrated securities may not have an active trading market or may be difficult to value, which means a Fund might have difficulty selling them promptly at an acceptable price. To the extent that a Fund invests in unrated securities, the Funds ability to achieve its investment objectives will be more dependent on the Advisors credit analysis than would be the case when the Fund invests in rated securities.
Corporate Bonds Risk. The market value of a corporate bond generally may be expected to rise and fall inversely with interest rates. The market value of intermediate and longer term corporate bonds is generally more sensitive to changes in interest rates than is the market value of shorter term corporate bonds. The market value of a corporate bond also may be affected by factors directly related to the issuer, such as investors perceptions of the creditworthiness of the issuer, the issuers financial performance, perceptions of the issuer in the market place, performance of management of the issuer, the issuers capital structure and use of financial leverage and demand for the issuers goods and services. Certain risks associated with investments in corporate bonds are described elsewhere herein in further detail, including under Fixed Income Securities Risk, Prepayment Risk, Event Risk and Reinvestment Risk. There is a risk that the issuers of corporate bonds may not be able to meet their obligations on interest or principal payments at the time called for by an instrument. Corporate bonds of below investment grade quality are often high risk and have speculative characteristics and may be particularly susceptible to adverse issuer-specific developments. Corporate bonds of below investment grade quality are subject to the risks described herein under Below Investment Grade Securities Risk.
Corporate Loans . As in the case of below investment grade securities, the corporate loans in which each Fund may invest may be rated below investment grade by established rating services (Ba or lower by Moodys, BB or lower by Standard & Poors or BB or lower by Fitch) or, if unrated, are considered by the Investment Advisor to be of comparable quality. Corporate loans can be expected to provide higher yields than investment grade fixed income securities, but may be subject to a greater risk of loss of principal and income. Corporate loan obligations are frequently secured by pledges of liens and security interests in the assets of the borrower, and the holders of corporate loans are frequently the beneficiaries of debt service subordination provisions imposed on the borrowers bondholders. Such security and subordination arrangements are designed to give corporate loan investors preferential treatment over high yield bond investors in the event of a deterioration in the credit quality or default of the issuer. Even when these arrangements exist, however, there can be no assurance that the principal and interest owed on the corporate loan will be repaid in full. Corporate loans generally bear interest at rates set at a margin above a generally recognized base lending rate that may fluctuate on a day-to-day basis, in the case of the prime rate of a U.S. bank, or which may be adjusted periodically, typically 30 days but generally not more than one year, in the case of the London Interbank Offered Rate. Consequently, the value of corporate loans held by a Fund may be expected to fluctuate less than the value of other fixed rate high yield securities as a result of changes in the interest rate environment. On the other hand, the secondary dealer market for certain corporate loans may not be as well developed as the secondary dealer market for high yield bonds, and therefore, present increased market risk relating to liquidity and pricing concerns.
Event Risk . Event risk is the risk that corporate issuers may undergo restructurings, such as mergers, leveraged buyouts, takeovers, or similar events financed by increased debt. As a result of the added debt, the credit quality and market value of a companys bonds and/or other debt securities may decline significantly.
Convertible Securities Risk. Convertible securities generally offer lower interest or dividend yields than non-convertible securities of similar quality. As with all fixed income securities, the market values of convertible securities tend to decline as interest rates increase and, conversely, to increase as interest rates decline. However,
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when the market price of the common stock underlying a convertible security exceeds the conversion price, the convertible security tends to reflect the market price of the underlying common stock. As the market price of the underlying common stock declines, the convertible security tends to trade increasingly on a yield basis and thus may not decline in price to the same extent as the underlying common stock. Convertible securities rank senior to common stock in an issuers capital structure and consequently entail less risk than the issuers common stock.
A Fund may invest in synthetic convertible securities, which are created through a combination of separate securities that possess the two principal characteristics of a traditional convertible security. A holder of a synthetic convertible security faces the risk of a decline in the price of the security or the level of the index involved in the convertible component, causing a decline in the value of the security or instrument, such as a call option or warrant, purchased to create the synthetic convertible security. Should the price of the stock fall below the exercise price and remain there throughout the exercise period, the entire amount paid for the call option or warrant would be lost. Because a synthetic convertible security includes the income-producing component as well, the holder of a synthetic convertible security also faces the risk that interest rates will rise, causing a decline in the value of the income-producing instrument. Synthetic convertible securities are also subject to the risks associated with derivatives.
Special Risks Related To Preferred Securities . Each Fund is exposed to risks associated with its investments in preferred securities. There are special risks associated with investing in preferred securities, including:
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Deferral . Preferred securities may include provisions that permit the issuer, at its discretion, to defer distributions for a stated period without any adverse consequences to the issuer. If a Fund owns a preferred security that is deferring its distributions, such Fund may be required to report income for tax purposes although it has not yet received such income. |
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Subordination . Preferred securities are subordinated to bonds and other debt instruments in a companys capital structure in terms of having priority to corporate income and liquidation payments, and therefore will be subject to greater credit risk than more senior debt instruments. |
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Liquidity . Preferred securities may be substantially less liquid than many other securities, such as common stocks or U.S. Government securities. |
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Limited Voting Rights . Generally, preferred security holders (such as a Fund) have no voting rights with respect to the issuing company unless preferred dividends have been in arrears for a specified number of periods, at which time the preferred security holders may elect a number of directors to the issuers board. Generally, once all the arrearages have been paid, the preferred security holders no longer have voting rights. In the case of trust preferred securities, holders generally have no voting rights, except if (i) the issuer fails to pay dividends for a specified period of time or (ii) a declaration of default occurs and is continuing. |
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Special Redemption Rights . In certain varying circumstances, an issuer of preferred securities may redeem the securities prior to a specified date. For instance, for certain types of preferred securities, a redemption may be triggered by certain changes in Federal income tax or securities laws. As with call provisions, a special redemption by the issuer may negatively impact the return of the security held by a Fund. |
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New Types of Securities . From time to time, preferred securities, including hybrid-preferred securities, have been, and may in the future be, offered having features other than those described herein. Each Fund reserves the right to invest in these securities if the Advisors believe that doing so would be consistent with the Funds investment objective and policies. Since the market for these instruments would be new, a Fund may have difficulty disposing of them at a suitable price and time. In addition to limited liquidity, these instruments may present other risks, such as high price volatility. |
Mortgage and Asset-Backed Securities . Each Fund may invest in a variety of mortgage related and other asset-backed securities, including both commercial and residential mortgage securities and other mortgage
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backed instruments issued on a public or private basis. Mortgage backed securities represent the right to receive a portion of principal and/or interest payments made on a pool of residential or commercial mortgage loans. When interest rates fall, borrowers may refinance or otherwise repay principal on their mortgages earlier than scheduled. When this happens, certain types of mortgage backed securities will be paid off more quickly than originally anticipated and each Fund will have to invest the proceeds in securities with lower yields. This risk is known as prepayment risk. When interest rates rise, certain types of mortgage backed securities will be paid off more slowly than originally anticipated and the value of these securities will fall. This risk is known as extension risk.
Because of prepayment risk and extension risk, mortgage backed securities react differently to changes in interest rates than other fixed income securities. Small movements in interest rates (both increases and decreases) may quickly and significantly reduce the value of certain mortgage backed securities.
Like more traditional fixed income securities, the value of asset-backed securities typically increases when interest rates fall and decreases when interest rates rise. Certain asset-backed securities may also be subject to the risk of prepayment. In a period of declining interest rates, borrowers may pay what they owe on the underlying assets more quickly than anticipated. Prepayment reduces the yield to maturity and the average life of the asset-backed securities. In addition, when a Fund reinvests the proceeds of a prepayment it may receive a lower interest rate than the rate on the security that was prepaid. In a period of rising interest rates, prepayments may occur at a slower rate than expected. As a result, the average maturity of a Funds portfolio may increase. The value of longer term securities generally changes more widely in response to changes in interest rates than shorter term securities.
Non-U.S. Securities Risk . Each Fund may invest in non-U.S. securities. Investments in non-U.S. securities involve certain risks not involved in domestic investments, including, but not limited to, (i) fluctuations in foreign exchange rates; (ii) future foreign economic, financial, political and social developments; (iii) different legal systems; (iv) the possible imposition of exchange controls or other foreign governmental laws or restrictions, including expropriation; (v) lower trading volume; (vi) much greater price volatility and illiquidity of certain non-U.S. securities markets; (vii) different trading and settlement practices; (viii) less governmental supervision; (ix) changes in currency exchange rates; (x) high and volatile rates of inflation; (xi) fluctuating interest rates; (xii) less publicly available information; and (xiii) different accounting, auditing and financial recordkeeping standards and requirements.
Securities markets in foreign countries often are not as developed, efficient or liquid as securities markets in the United States, and therefore, the prices of non-U.S. securities can be more volatile. Certain foreign countries may impose restrictions on the ability of issuers of non-U.S. securities to make payments of principal and interest to investors located outside the country. In addition, a Fund will be subject to risks associated with adverse political and economic developments in foreign countries, which could cause the Fund to lose money on its investments in non-U.S. securities. Because evidences of ownership of such securities usually are held outside the United States, a Fund will be subject to additional risks if it invests in non-U.S. securities, which include 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 non-U.S. securities to investors located outside the country of the issuer, whether from currency blockage or otherwise. non-U.S. securities may trade on days when the Funds common shares are not priced.
The ability of a foreign sovereign issuer, especially an emerging market country, to make timely payments on its debt obligations will also be strongly influenced by the sovereign issuers balance of payments, including export performance, its access to international credit facilities and investments, fluctuations of interest rates and the extent of its foreign reserves. Generally, the cost of servicing external debt will be adversely affected by rising international interest rates, as many external debt obligations bear interest at rates which are adjusted based upon international interest rates.
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Certain countries in which the Funds may invest, especially emerging market countries, historically have experienced, and may continue to experience, high rates of inflation, high interest rates, exchange rate fluctuations, large amounts of external debt, balance of payments and trade difficulties and extreme poverty and unemployment. Many of these countries are also characterized by political uncertainty and instability. In addition, with respect to certain foreign countries, there is a risk of: (i) the possibility of expropriation or nationalization of assets; (ii) confiscatory taxation; (iii) difficulty in obtaining or enforcing a court judgment; (iv) economic, political or social instability; and (v) diplomatic developments that could affect investments in those countries.
Because a 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, which means that the Funds net asset value or current income could decline as a result of changes in the exchange rates between foreign currencies and the U.S. dollar. Certain investments in non-U.S. securities also may be subject to foreign withholding taxes. Dividend income from non-U.S. corporations may not be eligible for the reduced rate for qualified dividend income. These risks often are heightened for investments in smaller, emerging capital markets. In addition, individual foreign economies may differ favorably or unfavorably from the U.S. economy in such respects as: (i) growth of gross domestic product; (ii) rates of inflation; (iii) capital reinvestment; (iv) resources; (v) self-sufficiency; and (vi) balance of payments position.
As a result of these potential risks, the Advisors may determine that, notwithstanding otherwise favorable investment criteria, it may not be practicable or appropriate to invest in a particular country. The Funds may invest in countries in which foreign investors, including the Advisors, have had no or limited prior experience.
Emerging Markets Risk . Each Fund may invest in issuers in so-called emerging markets (or lesser developed countries). Such investments are particularly speculative and entail all of the risks of investing in non-U.S. securities but to a heightened degree. Emerging market countries generally include every nation in the world except developed countries, that is, the United States, Canada, Japan, Australia, New Zealand and most countries located in Western Europe. These heightened risks include (i) greater risks of expropriation, confiscatory taxation, nationalization and less social, political and economic stability; (ii) the smaller size of the market for such securities and a lower volume of trading, resulting in lack of liquidity and an increase in price volatility; and (iii) certain national policies that may restrict a Fund investment opportunities including restrictions on investing in issuers or industries deemed sensitive to relevant national interests. Foreign investment in certain emerging market countries may be restricted or controlled to varying degrees. These restrictions or controls may at times limit or preclude foreign investment in certain emerging market issuers and increase the costs and expenses of a Fund. Certain emerging market countries require governmental approval prior to investments by foreign persons in a particular issuer, limit the amount of investment by foreign persons in a particular issuer, limit the investment by foreign persons only to a specific class of securities of an issuer that may have less advantageous rights than the classes available for purchase by domiciliaries of the countries and/or impose additional taxes on foreign investors.
U.S. Government Securities Risk . U.S. Government debt securities generally involve lower levels of credit risk than other types of fixed income securities of similar maturities, although, as a result, the yields available from U.S. Government debt securities are generally lower than the yields available from such other securities. Like other fixed income securities, the values of U.S. Government securities change as interest rates fluctuate. On August 5, 2011, Standard & Poors lowered its long-term sovereign credit rating on U.S. government debt to AA+ from AAA with a negative outlook. As of July 1, 2013, the Standard & Poors rating is AA+ with a stable outlook. Moodys affirmed the Aaa long-term sovereign credit rating of U.S. government debt on November 21, 2011 while maintaining its negative outlook, and this rating and outlook also remain unchanged as of July 1, 2013. Fitch continues to rate U.S. government debt AAA as of July 1, 2013, however it also maintains a negative outlook as of July 1, 2013. The downgrade by Standard & Poors and any
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future downgrades by other rating agencies could increase volatility in both stock and bond markets, result in higher interest rates and higher Treasury yields and increase borrowing costs generally. These events could have significant adverse effects on the economy generally and could result in significant adverse impacts on securities issuers and the Funds. The Advisors cannot predict the effects of these or similar events in the future on the U.S. economy and securities markets or on the Funds portfolios.
Foreign Currency Risk . Because a 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, which means that a Funds net asset value could decline as a result of changes in the exchange rates between foreign currencies and the U.S. dollar. The Advisors may, but are not required to, elect for a Fund to seek to protect itself from changes in currency exchange rates through hedging transactions depending on market conditions. In addition, a Fund may enter into foreign currency transactions in an attempt to enhance total return, which may further expose the Fund to the risks of foreign currency movements and other risks. In addition, certain countries, particularly emerging market countries, may impose foreign currency exchange controls or other restrictions on the transferability, repatriation or convertibility of currency.
Sovereign Government and Supranational Debt Risk . Investments in sovereign debt involve special risks. Foreign governmental issuers of debt or the governmental authorities that control the repayment of the debt may be unable or unwilling to repay principal or pay interest when due. In the event of default, there may be limited or no legal recourse in that, generally, remedies for defaults must be pursued in the courts of the defaulting party. Political conditions, especially a sovereign entitys willingness to meet the terms of its debt obligations, are of considerable significance. The ability of a foreign sovereign issuer, especially an emerging market country, to make timely payments on its debt obligations will also be strongly influenced by the sovereign issuers balance of payments, including export performance, its access to international credit facilities and investments, fluctuations of interest rates and the extent of its foreign reserves. The cost of servicing external debt will also generally be adversely affected by rising international interest rates, as many external debt obligations bear interest at rates which are adjusted based upon international interest rates. Also, there can be no assurance that the holders of commercial bank loans to the same sovereign entity may not contest payments to the holders of sovereign debt in the event of default under commercial bank loan agreements. In addition, there is no bankruptcy proceeding with respect to sovereign debt on which a sovereign has defaulted and a Fund may be unable to collect all or any part of its investment in a particular issue. Foreign investment in certain sovereign debt is restricted or controlled to varying degrees, including requiring governmental approval for the repatriation of income, capital or proceeds of sales by foreign investors. These restrictions or controls may at times limit or preclude foreign investment in certain sovereign debt and increase the costs and expenses of a Fund.
Leverage Risk . Each Fund may leverage through borrowings, the issuance of debt securities, the issuance of shares of preferred stock or a combination thereof. Each Fund may borrow money and issue debt securities in amounts up to 33 1/3%, and may issue shares of preferred stock in amounts up to 50%, of the value of its total assets to finance additional investments. Although the use of leverage by a Fund may create an opportunity for increased net income and capital appreciation for the common shares, it also results in additional risks and can magnify the effect of any losses. If the income and gains earned on securities purchased with leverage proceeds are greater than the cost of leverage, a Funds return will be greater than if leverage had not been used.
Conversely, if the income or gains from the securities purchased with such proceeds does not cover the cost of leverage, the return to the Fund will be less than if leverage had not been used. There is no assurance that a leveraging strategy will be successful. Leverage involves risks and special considerations for shareholders of a Fund including:
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the likelihood of greater volatility of net asset value and market price of and dividends on the shares than a comparable portfolio without leverage; |
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the risk that fluctuations in interest rates on borrowings and short-term debt or in the dividend rates on any preferred shares that the Fund must pay will reduce the return to the shareholders; |
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the effect of leverage in a market experiencing rising interest rates, which is likely to cause a greater decline in the net asset value of the shares than if the Fund were not leveraged, which may result in a greater decline in the market price of the shares; |
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when the Fund uses leverage, the fees payable to the Advisors for advisory and sub-advisory services will be higher than if the Fund did not use leverage; and |
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leverage may increase operating costs, which may reduce the Funds total return. |
Any requirement that the Fund sell assets at a loss in order to redeem or pay off any leverage or for any other reason would potentially reduce the Funds net asset value and also make it difficult for the net asset value to recover. The Advisor in its best judgment nevertheless may determine to continue to use leverage if it expects that the benefits to the Funds shareholders of maintaining the leveraged position will outweigh the current reduced return.
Each Fund may utilize leverage by borrowing through a credit facility or through entering into reverse repurchase agreements. As of May 31, 2013, the Funds had aggregate economic leverage from reverse repurchase agreements and/or borrowings through a credit facility as a percentage of their total managed assets (Economic Leverage Ratio) as follows:
Ticker |
Economic
Leverage Ratio |
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BHY |
27.72 | % | ||
COY |
28.68 | % | ||
CYE |
29.68 | % | ||
HIS |
26.87 | % | ||
HYV |
30.70 | % | ||
HYT |
30.20 | % |
The Combined Funds Economic Leverage Ratio is expected to be substantially similar to the Acquiring Funds current Economic Leverage Ratio.
Each Fund is currently a party to a senior committed secured, 360-day rolling credit facility (the Credit Facility) with State Street Bank and Trust Company (State Street). Each Fund has granted a security interest in substantially all of its assets to State Street in connection with the Credit Facility.
The Credit Facility currently allows for the following maximum commitment amounts:
Ticker |
Commitment
Amounts |
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BHY |
$ | 24,000,000 | ||
COY |
$ | 132,000,000 | ||
CYE |
$ | 144,000,000 | ||
HIS |
$ | 63,000,000 | ||
HYV |
$ | 213,000,000 | ||
HYT |
$ | 222,000,000 |
In connection with the Reorganizations, the Combined Fund expects to amend the Credit Facility to increase the maximum commitment amount to maintain an Economic Leverage Ratio substantially similar to the Acquiring Funds current Economic Leverage Ratio. If all of the Reorganizations are consummated, the Combined Fund expects to increase the maximum commitment amount under the Credit Facility to
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$798,000,000. However, there can be no assurance the Combined Fund will increase the maximum commitment amount under the Credit Facility. If the Combined Fund does not increase the maximum commitment amount under the Credit Facility, then the Combined Fund may be required to either utilize other forms of leverage, which may include reverse repurchase agreements, in order to maintain an Economic Leverage Ratio that is substantially similar to the Acquiring Funds current Economic Leverage Ratio or reduce the Combined Funds economic leverage. In either case, the Combined Fund may not be able to maintain the current earnings and distribution yields of the Acquiring Fund, which may negatively affect the market price and net asset value of the Combined Fund. In addition, if the Combined Fund is required to reduce its economic leverage, then it may be required to sell a portion of its assets, which may negatively affect the Combined Funds portfolio holdings, portfolio allocation, portfolio diversification and investment strategy.
Equity Securities Risk. Although common stocks have historically generated higher average total returns than fixed income securities over the long-term, common stocks also have experienced significantly more volatility in those returns and, in certain periods, have significantly under-performed relative to fixed income securities. An adverse event, such as an unfavorable earnings report, may depress the value of a particular common stock held by a Fund. Also, the price of common stocks is sensitive to general movements in the stock market and a drop in the stock market may depress the price of common stocks to which a Fund has exposure. Common stock prices fluctuate for several reasons, including changes in investors perceptions of the financial condition of an issuer or the general condition of the relevant stock market, or when political or economic events affecting the issuers occur. In addition, common stock prices may be particularly sensitive to rising interest rates, as the cost of capital rises and borrowing costs increase.
Investments in ADRs, EDRs and GDRs are generally subject to risks associated with equity securities and investments in non-U.S. securities. Unsponsored ADR, EDR and GDR programs are organized independently and without the cooperation of the issuer of the underlying securities. As a result, available information concerning the issuer may not be as current as for sponsored ADRs, EDRs and GDRs, and the prices of unsponsored ADRs, EDRs and GDRs may be more volatile than if such instruments were sponsored by the issuer.
Restricted and Illiquid Securities Risk. Each Fund may invest without limitation in securities for which there is no readily available trading market or which are otherwise illiquid. A Fund may not be able to readily 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, a Fund may have to sell other investments or engage in borrowing transactions if necessary to raise cash to meet its obligations. Limited liquidity can also affect the market price of securities, thereby adversely affecting the Funds net asset value and ability to make dividend distributions. The financial markets in general, and certain segments of the mortgage related securities markets in particular, have in recent years experienced periods of extreme secondary market supply and demand imbalance, resulting in a loss of liquidity during which market prices were suddenly and substantially below traditional measures of intrinsic value. During such periods, some securities could be sold only at arbitrary prices and with substantial losses. Periods of such market dislocation may occur again at any time.
Restricted securities are securities that may not be sold to the public without an effective registration statement under the Securities Act of 1933, or that may be sold only in a privately negotiated transaction or pursuant to an exemption from registration. When registration is required to sell a security, a Fund may be obligated to pay all or part of the registration expenses and considerable time may pass before the Fund is permitted to sell a security under an effective registration statement. If adverse market conditions develop during this period, a Fund might obtain a less favorable price than the price that prevailed when the Fund decided to sell. A Fund may be unable to sell restricted and other illiquid securities at the opportune times or prices.
Inverse Floater and Related Securities Risk. Investments in inverse floaters, residual interest tender option bonds and similar instruments expose a Fund to the same risks as investments in fixed income securities and derivatives, as well as other risks, including those associated with leverage and increased volatility. An investment in these securities typically will involve greater risk than an investment in a fixed rate security.
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Distributions on inverse floaters, residual interest tender option bonds and similar instruments will typically bear an inverse relationship to short term interest rates and typically will be reduced or, potentially, eliminated as interest rates rise. Inverse floaters, residual interest tender option bonds and similar instruments will underperform the market for fixed rate securities in a rising interest rate environment. Inverse floaters may be considered to be leveraged to the extent that their interest rates vary by a magnitude that exceeds the magnitude of the change in a reference rate of interest (typically a short term interest rate). The leverage inherent in inverse floaters is associated with greater volatility in their market values. Investments in inverse floaters, residual interest tender option bonds and similar instruments that have fixed income securities underlying them will expose a Fund to the risks associated with those fixed income securities and the values of those investments may be especially sensitive to changes in prepayment rates on the underlying fixed income securities.
Strategic Transactions and Derivatives Risk. A Fund may engage in various transactions for duration management and other risk management purposes, including to attempt to protect against possible changes in the market value of the Funds portfolio resulting from trends in the fixed income securities markets and changes in interest rates or to protect the Funds unrealized gains in the value of its portfolio securities, to facilitate the sale of portfolio securities for investment purposes or to establish a position in the securities markets as a temporary substitute for purchasing particular securities or to enhance income or gain (Strategic Transactions). Derivatives are financial contracts or instruments whose value depends on, or is derived from, the value of an underlying asset, reference rate or index (or relationship between two indices). A Fund may invest in a variety of derivative instruments for investment purposes, hedging purposes, duration or other risk management purposes or to seek to increase income or gains, such as options, futures contracts and swap agreements. A Fund may use derivatives as a substitute for taking a position in an underlying security or other asset and/or as part of a strategy designed to reduce exposure to other risks, such as interest rate risk. A Fund also may use derivatives to add leverage to the portfolio and/or to hedge against increases in the Funds costs associated with its leverage strategy. The use of Strategic Transactions to enhance current income may be particularly speculative.
Strategic Transactions involve risks. The risks associated with derivatives transactions include (i) the imperfect correlation between the value of such instruments and the underlying assets, (ii) the possible default of the counterparty to the transaction, (iii) illiquidity of the derivative instruments, and (iv) high volatility losses caused by unanticipated market movements, which are potentially unlimited. Although both over-the-counter and exchange-traded derivatives markets may experience the lack of liquidity, over-the-counter non-standardized derivative transactions are generally less liquid than exchange-traded instruments. Furthermore, a Funds ability to successfully use Strategic Transactions depends on the Advisors ability to predict pertinent securities prices, interest rates, currency exchange rates and other economic factors, which cannot be assured. The use of Strategic Transactions may result in losses greater than if they had not been used, may require a Fund to sell or purchase portfolio securities at inopportune times or for prices other than current market values, may limit the amount of appreciation the Fund can realize on an investment or may cause the Fund to hold a security that it might otherwise sell. Additionally, segregated liquid assets, amounts paid by a Fund as premiums and cash or other assets held in margin accounts with respect to Strategic Transactions are not otherwise available to the Fund for investment purposes.
While hedging can reduce or eliminate losses, it can also reduce or eliminate gains. Hedges are sometimes subject to imperfect matching between the derivative and the underlying security, and there can be no assurance that a Funds hedging transactions will be effective.
Counterparty Risk. A Fund will be subject to credit risk with respect to the counterparties to the derivative contracts purchased by the Fund. If a counterparty becomes bankrupt or otherwise fails to perform its obligations due to financial difficulties, the Fund may experience significant delays in obtaining any recovery in bankruptcy or other reorganization proceedings. The Fund may obtain only a limited recovery, or may obtain no recovery, in such circumstances. The counterparty risk for cleared derivatives is generally lower than for uncleared over-the-counter derivative transactions since generally a clearing organization becomes substituted for each counterparty to a cleared derivative contract and, in effect, guarantees the parties performance under the contract as each party to a trade looks
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only to the clearing organization for performance of financial obligations under the derivative contract. However, there can be no assurance that a clearing organization, or its members, will satisfy its obligations to a Fund.
Swaps. Swap agreements are types of derivatives. In order to seek to hedge the value of the Funds portfolio, to hedge against increases in the Funds cost associated with the interest payments on its outstanding borrowings or to seek to increase the Funds return, a Fund may enter into interest rate or credit default swap transactions. In interest rate swap transactions, there is a risk that yields will move in the direction opposite of the direction anticipated by a Fund, which would cause the Fund to make payments to its counterparty in the transaction that could adversely affect Fund performance. In addition to the risks applicable to swaps generally, credit default swap transactions involve special risks because they are difficult to value, are highly susceptible to liquidity and credit risk, and generally pay a return to the party that has paid the premium only in the event of an actual default by the issuer of the underlying obligation (as opposed to a credit downgrade or other indication of financial difficulty). A Fund is not required to enter into interest rate or credit default swap transactions for hedging purposes or to enhance its return, and may choose not to do so.
Investment Companies and ETFs Risk. Subject to the limitations set forth in the 1940 Act, a Funds governing documents or investment policies, or as otherwise permitted by the SEC, a Fund may acquire shares in other investment companies and in ETFs, some of which may be investment companies. The market value of the shares of other investment companies and ETFs may differ from their net asset value. As an investor in investment companies and ETFs, a Fund would bear its ratable share of that entitys expenses, including its investment advisory and administration fees, while continuing to pay its own advisory and administration fees and other expenses. As a result, shareholders will be absorbing duplicate levels of fees with respect to investments in other investment companies and ETFs.
The securities of other investment companies and ETFs in which a Fund may invest may be leveraged. As a result, the Fund may be indirectly exposed to leverage through an investment in such securities. An investment in securities of other investment companies and ETFs that use leverage may expose the Fund to higher volatility in the market value of such securities and the possibility that the Funds long-term returns on such securities (and, indirectly, the long-term returns of a Funds common shares) will be diminished.
Repurchase Agreements Risk. Subject to its investment objectives and policies, a Fund may invest in repurchase agreements for leverage or investment purposes. Repurchase agreements typically involve the acquisition by a Fund of fixed income securities from a selling financial institution such as a bank, savings and loan association or broker-dealer. The agreement provides that the Fund will sell the securities back to the institution at a fixed time in the future. The Fund does not bear the risk of a decline in the value of the underlying security unless the seller defaults under its repurchase obligation. In the event of the bankruptcy or other default of a seller of a repurchase agreement, a Fund could experience both delays in liquidating the underlying securities and losses, including possible decline in the value of the underlying security during the period in which the Fund seeks to enforce its rights thereto; possible lack of access to income on the underlying security during this period; and expenses of enforcing its rights. While repurchase agreements involve certain risks not associated with direct investments in fixed income securities, a Fund follows procedures approved by the Board that are designed to minimize such risks. In addition, the value of the collateral underlying the repurchase agreement will be at least equal to the repurchase price, including any accrued interest earned on the repurchase agreement. In the event of a default or bankruptcy by a selling financial institution, a Fund generally will seek to liquidate such collateral. However, the exercise of a Funds right to liquidate such collateral could involve certain costs or delays and, to the extent that proceeds from any sale upon a default of the obligation to repurchase were less than the repurchase price, the Fund could suffer a loss.
Reverse Repurchase Agreements Risk. Reverse repurchase agreements involve the risks that the interest income earned on the investment of the proceeds will be less than the interest expense of a Fund, that the market value of the securities sold by the Fund may decline below the price at which the Fund is obligated to repurchase the securities and that the securities may not be returned to the Fund. There is no assurance that reverse repurchase agreements can be successfully employed.
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Dollar Roll Transactions Risk. Dollar roll transactions involve the risk that the market value of the securities a Fund is required to purchase may decline below the agreed upon repurchase price of those securities. If the broker/dealer to whom a Fund sells securities becomes insolvent, the Funds right to purchase or repurchase securities may be restricted. Successful use of dollar rolls may depend upon the Advisors ability to predict correctly interest rates and prepayments. There is no assurance that dollar rolls can be successfully employed.
When-Issued and Delayed Delivery Transactions Risk. When-issued and delayed delivery transactions occur when securities are purchased or sold by a Fund with payment and delivery taking place in the future to secure an advantageous yield or price. Securities purchased on a when-issued or delayed delivery basis may expose a Fund to counterparty risk of default as well as the risk that securities may experience fluctuations in value prior to their actual delivery. A Fund will not accrue income with respect to a when-issued or delayed delivery security prior to its stated delivery date. Purchasing securities on a when-issued or delayed delivery basis can involve the additional risk that the price or yield available in the market when the delivery takes place may not be as favorable as that obtained in the transaction itself.
Securities Lending Risk. A Fund may lend its portfolio securities to banks or dealers which meet the creditworthiness standards established by the Board. Securities lending is subject to the risk that loaned securities may not be available to the Fund on a timely basis and the Fund may therefore lose the opportunity to sell the securities at a desirable price. Any loss in the market price of securities loaned by a Fund that occurs during the term of the loan would be borne by the Fund and would adversely affect the Funds performance. Also, there may be delays in recovery, or no recovery, of securities loaned or even a loss of rights in the collateral should the borrower of the securities fail financially while the loan is outstanding.
Short Sales Risk. Short selling involves selling securities that may or may not be owned and borrowing the same securities for delivery to the purchaser, with an obligation to replace the borrowed securities at a later date. Short selling allows the short seller to profit from declines in market prices to the extent such declines exceed the transaction costs and the costs of borrowing the securities. A short sale creates the risk of an unlimited loss in that the price of the underlying security could theoretically increase without limit, thus increasing the cost of buying those securities to cover the short position. There can be no assurance that the securities necessary to cover a short position will be available for purchase. Purchasing securities to close out the short position can itself cause the price of the securities to rise further, thereby exacerbating the loss.
Valuation Risk . The Advisors may use an independent pricing service or prices provided by dealers to value certain fixed income securities at their market value. Because the secondary markets for certain investments may be limited, they may be difficult to value. When market quotations are not readily available or are deemed to be unreliable, each Fund values its investments at fair value as determined in good faith pursuant to policies and procedures approved by the Board. Fair value pricing may require subjective determinations about the value of a security or other asset. As a result, there can be no assurance that fair value pricing will result in adjustments to the prices of securities or other assets, or that fair value pricing will reflect actual market value, and it is possible that the fair value determined for a security or other asset will be materially different from quoted or published prices, from the prices used by others for the same security or other asset and/or from the value that actually could be or is realized upon the sale of that security or other asset. Where market quotations are not readily available, valuation may require more research than for more liquid investments. In addition, elements of judgment may play a greater role in valuation in such cases than for investments with a more active secondary market because there is less reliable objective data available.
Systemic Risk . Credit risk may arise through a default by one of several large institutions that are dependent on one another to meet their liquidity or operational needs, so that a default by one institution causes a series of defaults by the other institutions. This is sometimes referred to as a systemic risk and may adversely affect financial intermediaries, such as clearing agencies, clearing houses, securities firms and exchanges, with which the Funds interact on a daily basis.
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Risk Associated with Recent Market Events . The debt and equity capital markets in the United States have been negatively impacted by significant write-offs in the financial services sector relating to sub-prime mortgages and the repricing of credit risk in the broadly syndicated market, among other things. These events, along with the downgrade to the United States credit rating, deterioration of the housing market, the failure of major financial institutions and the resulting United States federal government actions have led to worsening general economic conditions, which have materially and adversely impacted the broader financial and credit markets and have reduced the availability of debt and equity capital for the market as a whole and financial firms in particular. These events have been adversely affecting the willingness of some lenders to extend credit in general, which may make it more difficult for issuers of fixed income securities to obtain financings or refinancings for their investment or lending activities or operations. There is a risk that such issuers will be unable to successfully complete such financings or refinancings. In particular, because of the current conditions in the credit markets, issuers of fixed income securities may be subject to increased cost for debt, tightening underwriting standards and reduced liquidity for loans they make, securities they purchase and securities they issue. These events may increase the volatility of the value of securities owned by a Fund and/or result in sudden and significant valuation increases or declines in its portfolio. These events also may make it more difficult for a Fund to accurately value its securities or to sell its securities on a timely basis. In addition, illiquidity and volatility in the credit markets may directly and adversely affect the setting of dividend rates on the common shares. These events have adversely affected the broader economy and may continue to do so, which may adversely affect the ability of issuers of securities owned by a Fund to make payments of principal and interest when due, lead to lower credit ratings and increase defaults. There is also a risk that developments in sectors of the credit markets in which a Fund does not invest may adversely affect the liquidity and the value of securities in sectors of the credit markets in which the Fund does invest, including securities owned by the Fund.
While the extreme volatility and disruption that U.S. and global markets experienced for an extended period of time beginning in 2007 and 2008 has generally subsided, uncertainty and periods of volatility remain, and risks to a robust resumption of growth persist. In 2010, several European Union (EU) countries, including Greece, Ireland, Italy, Spain and Portugal, began to face budget issues, some of which may have negative long-term effects for the economies of those countries and other EU countries. There is continued concern about national-level support for the Euro and the accompanying coordination of fiscal and wage policy among European Economic and Monetary Union (EMU) member countries. Moreover, recent downgrades to the credit ratings of major banks could result in increased borrowing costs for such banks and negatively affect the broader economy. A return to unfavorable economic conditions could impair a Funds ability to achieve its investment objectives.
General market uncertainty and consequent repricing of risk have led to market imbalances of sellers and buyers, which in turn have resulted in significant valuation uncertainties in a variety of fixed income securities and significant and rapid value decline in certain instances. These conditions resulted in, and in many cases continue to result in, greater price volatility, less liquidity, widening credit spreads and a lack of price transparency, with many fixed income securities remaining illiquid and of uncertain value. Such market conditions may make valuation of some of a Funds securities uncertain and/or result in sudden and significant valuation increases or declines in its holdings. If there is a significant decline in the value of a Funds portfolio, this may impact the asset coverage levels for the Funds outstanding leverage.
EMU and Redenomination Risk . As the European debt crisis has progressed the possibility of one or more Eurozone countries exiting the EMU, or even the collapse of the Euro as a common currency, has arisen, creating significant volatility at times in currency and financial markets generally. The effects of the collapse of the Euro, or of the exit of one or more countries from the EMU, on the U.S. and global economy and securities markets are impossible to predict and any such events could have a significant adverse impact on the value and risk profile of a Funds portfolio. Any partial or complete dissolution of the EMU could have significant adverse effects on currency and financial markets, and on the values of a Funds portfolio investments. If one or more EMU countries were to stop using the Euro as its primary currency, a Funds investments in such countries may be redenominated into a different or newly adopted currency. As a result, the value of those investments could
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decline significantly and unpredictably. In addition, securities or other investments that are redenominated may be subject to foreign currency risk, liquidity risk and valuation risk to a greater extent than similar investments currently denominated in Euros. To the extent a currency used for redenomination purposes is not specified in respect of certain EMU-related investments, or should the Euro cease to be used entirely, the currency in which such investments are denominated may be unclear, making such investments particularly difficult to value or dispose of. A Fund may incur additional expenses to the extent it is required to seek judicial or other clarification of the denomination or value of such securities.
Market Disruption and Geopolitical Risk . The aftermath of the war in Iraq, instability in Afghanistan, Pakistan, Egypt, Libya, Syria and the Middle East, possible terrorist attacks in the United States and around the world, growing social and political discord in the United States, the European debt crisis, further downgrades of U.S. Government securities and other similar events may result in market volatility, may have long-term effects on the U.S. and worldwide financial markets and may cause further economic uncertainties in the United States and worldwide. The Funds do not know how long the securities markets may be affected by these events and cannot predict the effects of these events or similar events in the future on the U.S. economy and securities markets. Non-investment grade securities tend to be more volatile than investment grade fixed income securities; therefore these events and other market disruptions may have a greater impact on the prices and volatility of non-investment grade securities than on investment grade fixed income securities. There can be no assurance that these events and other market disruptions will not have other material and adverse implications.
Regulation and Government Intervention Risk . The recent instability in the financial markets discussed above has led the U.S. Government and certain foreign governments to take a number of unprecedented actions designed to support certain financial institutions and segments of the financial markets that have experienced extreme volatility, and in some cases a lack of liquidity, including through direct purchases of equity and debt securities. Federal, state, and other governments, their regulatory agencies or self-regulatory organizations may take actions that affect the regulation of the issuers in which a Fund invests in ways that are unforeseeable. Legislation or regulation may also change the way in which a Fund is regulated. Such legislation or regulation could limit or preclude a Funds ability to achieve its investment objectives.
Congress has enacted sweeping financial legislation, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the Dodd-Frank Act), signed into law by President Obama on July 21, 2010, regarding the operation of banks, private fund managers and other financial institutions, which includes provisions regarding the regulation of derivatives. Many provisions of the Dodd-Frank Act will be implemented through regulatory rulemakings and similar processes over a period of time. The impact of the Dodd-Frank Act, and of follow-on regulation, on trading strategies and operations is impossible to predict, and may be adverse. Practices and areas of operation subject to significant change based on the impact, direct or indirect, of the Dodd-Frank Act and follow-on regulation, may change in manners that are unforeseeable, with uncertain effects. By way of example and not limitation, direct and indirect changes from the Dodd-Frank Act and follow-on regulation may occur to a significant degree with regard to, among other areas, financial consumer protection, bank ownership of and involvement with private funds, proprietary trading, registration of investment advisers, and the trading and use of many derivative instruments, including swaps. There can be no assurance that such legislation or regulation will not have a material adverse effect on a Fund. In addition, Congress may address tax policy, which also could have uncertain direct and indirect impact on trading and operations, as well as, potentially, operations and structure of a Fund.
Further, the Dodd-Frank Act created the Financial Stability Oversight Council (FSOC), an interagency body charged with identifying and monitoring systemic risks to financial markets. The FSOC has the authority to require that non-bank financial companies that are predominantly engaged in financial activities, such as a Fund and the Advisors, whose failure it determines would pose systemic risk, be placed under the supervision of the Board of Governors of the Federal Reserve System (Federal Reserve). The FSOC has the authority to recommend that the Federal Reserve adopt more stringent prudential standards and reporting and disclosure requirements for non-bank financial companies supervised by the Federal Reserve. The FSOC also has the
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authority to make recommendations to the Federal Reserve on various other matters that may affect a Fund, including requiring financial firms to submit resolution plans, mandating credit exposure reports, establishing concentration limits and limiting short-term debt. The FSOC may also recommend that other federal financial regulators impose more stringent regulation upon, or ban altogether, financial activities of any financial firm that poses what it determines are significant risks to the financial system. In the event that the FSOC designates a Fund as a systemic risk to be placed under the Federal Reserves supervision, the Fund could face stricter prudential standards, including risk-based capital requirements, leverage limits, liquidity requirements, concentration requirements and overall risk management requirements, among other restrictions. Such requirements could hinder a Funds ability to meet its investment objectives and may place the Fund at a disadvantage with respect to its competitors.
Additionally, BlackRock is, for purposes of the Bank Holding Company Act of 1956, as amended, and any rules or regulations promulgated thereunder from time to time, currently considered a subsidiary of The PNC Financial Services Group, Inc. (PNC), which is subject to regulation and supervision as a financial holding company by the Federal Reserve. The Volcker Rule contained in Section 619 of the Dodd-Frank Act will limit the ability of banking entities, which would include BlackRock by virtue of its relationship with PNC, to sponsor, invest in or serve as investment manager of certain private investment funds. On October 11 and 12, 2011, U.S. financial regulators issued a proposed rule (the Volcker Proposed Rule) to implement the statutory mandate of the Volcker Rule. Pursuant to the Dodd-Frank Act, the Volcker Rules effective date was July 21, 2012. Following the effective date of the Volcker Rule, banking entities subject to the Volcker Rule, such as BlackRock, will have at least a two-year period to come into compliance with the provisions of the Volcker Rule. The Volcker Rule could have a significant negative impact on BlackRock and the Advisors. BlackRock may attempt to take certain actions to lessen the impact of the Volcker Rule, although no assurance can be given that such actions would be successful and no assurance can be given that such actions would not have a significant negative impact on a Fund. Upon the effectiveness of the Volcker Rule, BlackRocks relationship with PNC may require BlackRock to curtail some or all of a Funds activities with respect to PNC (if any). While the U.S. financial regulators have issued the Volcker Proposed Rule, the Advisor cannot predict the extent to which the Volcker Rule will be subject to modification by rule prior to its effective date or the issuance of final rules implementing the Volcker Rule, or the impact any such modifications may have on BlackRock, the Funds or the Advisors.
The continuing implementation of the Dodd-Frank Act could also adversely affect the Advisors and a Fund by increasing transaction and/or regulatory compliance costs. In addition, greater regulatory scrutiny and the implementation of enhanced and new regulatory requirements may increase the Advisors and a Funds exposure to potential liabilities, and in particular liabilities arising from violating any such enhanced and/or new regulatory requirements. Increased regulatory oversight could also impose administrative burdens on the Advisors and a Fund, including, without limitation, responding to investigations and implementing new policies and procedures. The ultimate impact of the Dodd-Frank Act, and any resulting regulation, is not yet certain and the Advisors and a Fund may be affected by the new legislation and regulation in ways that are currently unforeseeable.
In connection with an ongoing review by the SEC and its staff of the regulation of investment companies use of derivatives, on August 31, 2011, the SEC issued a concept release to seek public comment on a wide range of issues raised by the use of derivatives by investment companies. The SEC noted that it intends to consider the comments to help determine whether regulatory initiatives or guidance are needed to improve the current regulatory regime for investment companies and, if so, the nature of any such initiatives or guidance. While the nature of any such regulations is uncertain at this time, it is possible that such regulations could limit the implementation of a Funds use of derivatives, which could have an adverse impact on the Fund. The Advisors cannot predict the effects of these regulations on a Funds portfolio. The Advisors intend to monitor developments and seek to manage a Funds portfolio in a manner consistent with achieving the Funds investment objectives, but there can be no assurance that they will be successful in doing so.
Certain lawmakers support an increase in federal revenue as a component of a plan to address the growing federal budget deficit. Also, comprehensive federal tax reform is the subject of political attention.
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In the aftermath of the recent financial crisis, there appears to be a renewed popular, political and judicial focus on finance related consumer protection. Financial institution practices are also subject to greater scrutiny and criticism generally. In the case of transactions between financial institutions and the general public, there may be a greater tendency toward strict interpretation of terms and legal rights in favor of the consuming public, particularly where there is a real or perceived disparity in risk allocation and/or where consumers are perceived as not having had an opportunity to exercise informed consent to the transaction. In the event of conflicting interests between retail investors holding common shares of a closed-end investment company such as a Fund and a large financial institution, a court may similarly seek to strictly interpret terms and legal rights in favor of retail investors.
LIBOR Risk . According to various reports, certain financial institutions, commencing as early as 2005 and throughout the global financial crisis, routinely made artificially low submissions in the LIBOR rate setting process. In June 2012, one such financial institution was fined a significant amount by various financial regulators in connection with allegations of manipulation of LIBOR rates. Other financial institutions in various countries are being investigated for similar actions. These developments may have adversely affected the interest rates on securities whose interest payments were determined by reference to LIBOR. Any future similar developments could, in turn, reduce the value of such securities owned by a Fund.
Investment Company Act Regulations. Each Fund is a registered closed-end investment company and as such is subject to regulations under the 1940 Act. Generally speaking, any contract or provision thereof that is made, or where performance involves a violation of the 1940 Act or any rule or regulation thereunder is unenforceable by either party unless a court finds otherwise.
Legislation Risk. At any time after the date of this Joint Proxy Statement/Prospectus, legislation may be enacted that could negatively affect the assets of a Fund. Legislation or regulation may change the way in which a Fund itself is regulated. The Advisors cannot predict the effects of any new governmental regulation that may be implemented and there can be no assurance that any new governmental regulation will not adversely affect a Funds ability to achieve its investment objectives.
Potential Conflicts of Interest of the Advisors and Others. BlackRock and BlackRocks affiliates (Affiliates) are involved worldwide with a broad spectrum of financial services and asset management activities and may engage in the ordinary course of business in activities in which their interests or the interests of their clients may conflict with those of a Fund. BlackRock and its Affiliates may provide investment management services to other funds and discretionary managed accounts that follow an investment program similar to that of a Fund. Subject to the requirements of the 1940 Act, BlackRock and its Affiliates intend to engage in such activities and may receive compensation from third parties for their services. Neither BlackRock nor its Affiliates are under any obligation to share any investment opportunity, idea or strategy with a Fund. As a result, BlackRock and its Affiliates may compete with a Fund for appropriate investment opportunities. The results of a Funds investment activities, therefore, may differ from those of an Affiliate or another account managed by an Affiliate and it is possible that a Fund could sustain losses during periods in which one or more Affiliates and other accounts achieve profits on their trading for proprietary or other accounts. The 1940 Act imposes limitations on certain transactions between a registered investment company and affiliated persons of the investment company, as well as affiliated persons of such affiliated persons. Among others, affiliated persons of an investment company include its investment adviser; officers; directors/trustees; any person who directly or indirectly controls, is controlled by or is under common control with such investment company; any person directly or indirectly owning, controlling or holding with power to vote, five percent or more of the outstanding voting securities of such investment company; and any person five percent or more of whose outstanding voting securities are directly or indirectly owned, controlled or held with power to vote by such investment company. BlackRock has adopted policies and procedures designed to address potential conflicts of interests. For additional information about potential conflicts of interest and the way in which BlackRock addresses such conflicts, please see Conflicts of Interest and Fund ManagementPortfolio ManagementPotential Material Conflicts of Interest in the Statement of Additional Information.
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Allocation Risk . Each Funds ability to achieve its investment objective depends upon the Advisors skill in determining the Funds strategic asset class allocation and in selecting the best mix of investments. There is a risk that the Advisors evaluations and assumptions regarding asset classes or investments may be incorrect in view of actual market conditions.
Each Funds allocation of its investments across various segments of the securities markets and various countries, regions, asset classes and sectors may vary significantly over time based on the Advisors analysis and judgment. As a result, the particular risks most relevant to an investment in a particular Fund, as well as the overall risk profile of the Funds portfolio, may vary over time. The Advisors employ an active approach to the Funds investment allocations, but there is no guarantee that the Advisors allocation strategy will produce the desired results. The percentage of the Funds total assets allocated to any category of investment may at any given time be significantly less than the maximum percentage permitted pursuant to the Funds investment policies. It is possible that the Fund will focus on an investment that performs poorly or underperforms other investments under various market conditions.
Portfolio Turnover Risk . A Funds annual portfolio turnover rate may vary greatly from year to year. Portfolio turnover rate is not considered a limiting factor in the execution of investment decisions for a Fund. A higher portfolio turnover rate results in correspondingly greater brokerage commissions and other transactional expenses that are borne by a Fund. High portfolio turnover may result in an increased realization of net short-term capital gains by a Fund which, when distributed to shareholders, will be taxable as ordinary income. Additionally, in a declining market, portfolio turnover may create realized capital losses.
Antitakeover Provisions . The charter, agreement and declaration of trust or declaration of trust, as applicable, and bylaws of each Fund and Maryland law with respect to COY, CYE, HYV and the Acquiring Fund include provisions that could limit the ability of other entities or persons to acquire control of such Fund or to change the composition of its Board. Such provisions could limit the ability of shareholders to sell their shares at a premium over prevailing market prices by discouraging a third party from seeking to obtain control of such Fund. See Certain Provisions of the Charter.
EXPENSE TABLE FOR SHAREHOLDERS
Total Expenses Table for Shareholders of the Funds as of February 28, 2013
The following tables illustrate the anticipated reduction or increases in the Total Expense Ratio for the shareholders of each Fund expected as a result of the Reorganizations. The table sets forth (i) the Total Expense Ratio for each Fund for the 12-month period ended February 28, 2013; (ii) the pro forma Total Expense Ratio for the Combined Fund, assuming all of the Reorganizations had taken place on February 28, 2013, which represents the most likely combination of the Reorganizations and the combination of the Reorganizations resulting in the lowest Total Expense Ratio; and (iii) the pro forma Total Expense Ratio for the Combined Fund, assuming only the Reorganization of BHY into HYT had taken place on February 28, 2013, which represents the combination of the Reorganizations resulting in the highest Total Expense Ratio.
The level of expense savings (or increase) will vary depending on the combination of the proposed Reorganizations. Because each of the Reorganizations may occur whether or not the other Reorganizations are approved, several combinations are possible and the pro forma effects on operating expenses for all possible combinations are not illustrated in the table below. The scenarios presented below, however, capture the high and low range of possible pro forma outcomes.
The Board of each Fund believes that the completion of the Reorganizations would result in a reduced Total Expense Ratio for the shareholders of each Fund, except COY, because certain fixed administrative costs would be spread across the Combined Funds larger asset base. The Board of COY believes that the completion of the Reorganizations would result in a higher Total Expense Ratio for the shareholders of COY.
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For the fiscal year ended August 31, 2012, BHYs, HISs, HYVs and HYTs Total Expense Ratio was 2.01%, 1.54%, 1.42% and 1.51%, respectively. For the 12-month period ended February 28, 2013, the Total Expense Ratios of BHY, HIS, HYV and HYT were 2.25%, 1.59%, 1.45% and 1.52%, respectively. For the fiscal year ended February 28, 2013, the Total Expense Ratios of COY and CYE were 1.25% and 1.42%, respectively.
The Funds estimate that the completion of all of the Reorganizations would result in a Total Expense Ratio for the Combined Fund of 1.34% on a historical and pro forma basis for the 12-month period ended February 28, 2013, representing a reduction in the Total Expense Ratio for the shareholders of BHY, CYE, HIS, HYV and HYT of 0.91%, 0.08%, 0.25%, 0.11% and 0.18%, respectively, and an increase in the Total Expense Ratio for the shareholders of COY of 0.09%. There can be no assurance that future expenses will not increase or that any expense savings will be realized. Moreover, the level of expense savings (or increases) will vary depending on the combination of the proposed Reorganizations.
The Board of COY believes that the potential benefits of the Reorganizations make the Reorganizations in the best interest of COY shareholders. These potential benefits include the potential for (i) higher earnings yield for the Combined Fund (as a percentage of net asset value) on a pro forma basis compared to COY, (ii) greater secondary market liquidity for the Combined Funds common shares, which may result in tighter bid-ask spreads; (iii) better trade execution for each Funds shareholders when purchasing or selling Combined Fund common shares; (iv) improved premium/discount levels for the Combined Funds common shares; (v) operating and administrative efficiencies for the Combined Fund, including greater investment flexibility and investment options, greater diversification of portfolio investments, the ability to trade in larger positions, additional sources of leverage or more competitive leverage terms and more favorable transaction terms; (vi) benefits from having fewer closed-end funds in the market, including an increased focus by investors on the remaining funds in the market (including the Combined Fund) and additional research coverage; and (vii) benefits from having fewer similar funds in the same fund complex, including a simplified operational model and a reduction in risk of operational, legal and financial errors. See Reasons for the Reorganizations. In addition, the Investment Advisor will bear all of the reorganization costs of COY, CYE and HYV.
BHY | COY | CYE | HIS | HYV | HYT |
Pro Forma
Combined Fund (BHY into HYT) (a) |
Pro Forma
Combined Fund (All Target Funds into HYT) (a) |
|||||||||||||||||||||||||
Shareholder Transaction Expenses |
||||||||||||||||||||||||||||||||
Maximum Sales Load (as a percentage of the offering price) imposed on purchases of common shares (b) |
None | None | None | None | None | None | None | None | ||||||||||||||||||||||||
Dividend Reinvestment and Cash Purchase Plan Fees |
None | None | None | None | None | None | None | None | ||||||||||||||||||||||||
Annual Total Expenses (as a percentage of average net assets attributable to common shares) |
||||||||||||||||||||||||||||||||
Investment Management Fees |
1.21 | % | 0.68 | % | 0.83 | % | 0.97 | % | 0.84 | % | 0.97 | % | 0.83 | % | 0.83 | % | ||||||||||||||||
Other Expenses |
0.71 | % | 0.24 | % | 0.23 | % | 0.34 | % | 0.23 | % | 0.18 | % | 0.19 | % | 0.16 | % | ||||||||||||||||
Interest Expense |
0.33 | % | 0.33 | % | 0.36 | % | 0.28 | % | 0.38 | % | 0.37 | % | 0.37 | % | 0.35 | % | ||||||||||||||||
Total Annual Fund Operating Expenses (Including Interest Expense) (c)(d) |
2.25 | % | 1.25 | % | 1.42 | % | 1.59 | % | 1.45 | % | 1.52 | % | 1.39 | % | 1.34 | % |
(a) | Assumes the Reorganizations had taken place on February 28, 2013. |
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(b) | No sales load will be charged in connection with the issuance of the Acquiring Fund Shares as part of the Reorganizations. Common Shares are not available for purchase from the Funds but may be purchased on the NYSE through a broker-dealer subject to individually negotiated commission rates. Common Shares purchased in the secondary market may be subject to brokerage commissions or other charges. |
(c) | The Total Annual Fund Operating Expense (excluding interest expense) for the Funds are as follows: |
BHY |
COY |
CYE |
HIS |
HYV |
HYT |
Pro Forma
|
Pro Forma
(All Target
|
|||||||
1.92% |
0.92% | 1.06% | 1.31% | 1.07% | 1.15% | 1.02% | 0.99% |
(d) | For the fiscal year ended August 31, 2012, the Total Expense Ratio of BHY, HIS, HYV, and HYT were 2.01%, 1.54%, 1.42% and 1.51%, respectively. |
The following example is intended to help you compare the costs of investing in the common shares of the Combined Fund pro forma if the Reorganization is completed with the costs of investing in BHY, COY, CYE, HIS, HYV and the Acquiring Fund without the Reorganization. An investor in common shares would pay the following expenses on a $1,000 investment, assuming (1) the Total Expense Ratio (Including Interest Expenses) for each Fund set forth in the total expenses table above and (2) a 5% annual return throughout the period:
1 Year | 3 Years | 5 Years | 10 Years | |||||||||||||
BHY |
$ | 23 | $ | 70 | $ | 120 | $ | 258 | ||||||||
COY |
$ | 13 | $ | 40 | $ | 69 | $ | 151 | ||||||||
CYE |
$ | 14 | $ | 45 | $ | 78 | $ | 170 | ||||||||
HIS |
$ | 16 | $ | 50 | $ | 87 | $ | 189 | ||||||||
HYV |
$ | 15 | $ | 46 | $ | 79 | $ | 174 | ||||||||
HYT |
$ | 15 | $ | 48 | $ | 83 | $ | 181 | ||||||||
Pro Forma Combined Fund (All Target Funds into HYT) |
$ | 14 | $ | 42 | $ | 73 | $ | 161 | ||||||||
Pro Forma Combined Fund (BHY into HYT) |
$ | 14 | $ | 44 | $ | 76 | $ | 167 |
The examples set forth above assume common shares of each Fund were owned as of the completion of the Reorganizations and the reinvestment of all dividends and distributions and uses a 5% annual rate of return as mandated by SEC regulations. The examples 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 more or less than those assumed for purposes of the examples.
Each of BHY, HIS and the Acquiring Fund will bear expenses incurred in connection with the Reorganizations that are not reflected in Other Expenses, including, but not limited to, costs related to the preparation and distribution of materials distributed to each Funds Board, expenses incurred in connection with the preparation of the Reorganization Agreements and the registration statement on Form N-14, the printing and distribution of this Joint Proxy Statement/Prospectus and any other materials required to be distributed to shareholders, SEC and state securities commission filing fees, legal and audit fees in connection with the Reorganizations, including legal fees incurred preparing each Funds Board materials, attending each Funds Board meetings and preparing the minutes, auditing fees associated with each Funds financial statements, stock exchange fees, transfer agency fees, portfolio transfer taxes (if any) and any similar expenses incurred in connection with the Reorganizations, which will be borne directly by the respective Fund incurring the expense or allocated among the Funds proportionately or on another reasonable basis, as appropriate.
Because each of BHY, HIS and the Acquiring Fund have already incurred expenses solely and directly attributable to the Reorganizations and because BHY, HIS and the Acquiring Fund (and not the Investment Advisor) are responsible for paying those expenses, if BHY, HIS or the Acquiring Funds respective shareholders do not approve their Funds respective Reorganization, such Fund will continue to be responsible for the expenses arising from its proposed Reorganization even though its proposed Reorganization will not occur and those expenses may be material.
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The expenses of the Reorganizations (assuming all of the Reorganizations are consummated) are estimated to be $270,000 for BHY, $350,000 for HIS, and $370,000 for HYT. The actual costs associated with the proposed Reorganizations may be more or less than the estimated costs discussed herein. The Investment Advisor will bear the costs of the Reorganizations for COY, CYE and HYV because the shareholders of these Target Funds are not expected to experience the same level of economic benefits from the Reorganizations as the shareholders of BHY, HIS and HYT. Therefore, the costs associated with the Reorganizations of COY, CYE and HYV will not be directly borne by COY, CYE and HYV, respectively. Neither the Funds nor the Investment Advisor will pay any expenses of shareholders arising out of or in connection with the Reorganizations (e.g., expenses incurred by the shareholder as a result of attending the shareholder meeting, voting on the Reorganizations or other action taken by the shareholder in connection with the Reorganizations).
REASONS FOR THE REORGANIZATIONS
Based on the considerations below, the Board of each Fund, including the Independent Board Members, has determined that its Reorganization would be in the best interests of such Fund and that the interests of its existing shareholders would not be diluted with respect to net asset value as a result of the Reorganization. The Board of each Fund approved its Reorganization(s) and the Board of each Fund recommends that shareholders of such Fund approve its Reorganization(s).
The Board of each Fund considered its Reorganization(s) over a series of meetings. In preparation for meetings of each Board held on June 4-5, 2013 and July 30, 2013 (collectively, the Meeting) at which the Reorganizations were approved, the Investment Advisor provided each Board with information regarding the proposed Reorganizations, including the rationale therefor and alternatives considered to the Reorganizations. Each Board considered a number of factors presented at the time of the Meeting or prior meetings in reaching their determinations, including, but not limited to, the following:
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potential for improved economies of scale and a lower Total Expense Ratio with respect to each Fund, except COY; |
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The Funds estimate that the completion of all of the Reorganizations would result in a Total Expense Ratio for the Combined Fund of 1.34% on a historical and pro forma basis for the 12-month period ended February 28, 2013, representing a reduction in the Total Expense Ratio for the shareholders of BHY, CYE, HIS, HYV and HYT of 0.91%, 0.08%, 0.25%, 0.11% and 0.18%, respectively, and an increase in the Total Expense Ratio for the shareholders of COY of 0.09%. |
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The Board of COY believes that the potential benefits of the Reorganizations make the Reorganizations in the best interest of COY shareholders. These potential benefits include the potential for (i) higher earnings yield for the Combined Fund (as a percentage of net asset value) on a pro forma basis compared to COY; (ii) greater secondary market liquidity for the Combined Funds common shares, which may result in tighter bid-ask spreads; (iii) better trade execution for each Funds shareholders when purchasing or selling Combined Fund common shares; (iv) improved premium/discount levels for the Combined Funds common shares; (v) operating and administrative efficiencies for the Combined Fund, including greater investment flexibility and investment options, greater diversification of portfolio investments, the ability to trade in larger positions, additional sources of leverage or more competitive leverage terms and more favorable transaction terms; (vi) benefits from having fewer closed-end funds in the market, including an increased focus by investors on the remaining funds in the market (including the Combined Fund) and additional research coverage; and (vii) benefits from having fewer similar funds in the same fund complex, including a simplified operational model and a reduction in risk of operational, legal and financial errors. See Reasons for the Reorganizations. In addition, the Investment Advisor will bear all of the reorganization costs of COY, CYE and HYV. |
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There can be no assurance that future expenses will not increase or that any expense savings will be realized. Moreover, the level of expense savings (or increases) will vary depending on the combination of the proposed Reorganizations. |
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alternatives to the Reorganizations for each Fund; |
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the potential effects of the Reorganizations on the earnings and distributions of each Fund; |
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The Combined Funds earnings yield is expected to be slightly lower than HYVs current earnings yield; thus, assuming the Acquiring Funds distribution policy remains in place after the Reorganizations, shareholders of HYV may experience a decrease in their distribution yield after the Reorganizations. |
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The Board of HYV believes that the potential benefits of the Reorganizations make the Reorganizations in the best interest of HYV shareholders. These potential benefits include the potential for (i) a lower Total Expense Ratio, (ii) greater secondary market liquidity for the Combined Funds common shares, which may result in tighter bid-ask spreads; (iii) better trade execution for each Funds shareholders when purchasing or selling Combined Fund common shares; (iv) improved premium/discount levels for the Combined Funds common shares; (v) operating and administrative efficiencies for the Combined Fund, including greater investment flexibility and investment options, greater diversification of portfolio investments, the ability to trade in larger positions, additional sources of leverage or more competitive leverage terms and more favorable transaction terms; (vi) benefits from having fewer closed-end funds in the market, including an increased focus by investors on the remaining funds in the market (including the Combined Fund) and additional research coverage; and (vii) benefits from having fewer similar funds in the same fund complex, including a simplified operational model and a reduction in risk of operational, legal and financial errors. In addition, the Investment Advisor will bear all of the reorganization costs of HYV. |
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A Funds earnings and net investment income are variables, which depend on many factors, including its asset mix, portfolio turnover level, the amount of leverage utilized by the Fund, the costs of such leverage, the movement of interest rates and general market conditions. There can be no assurance that the future earnings of a Fund, including the Combined Fund after the Reorganizations, will remain constant. In addition, the Combined Funds future earnings will vary depending on the combination of the proposed Reorganizations. |
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the potential effects of the Reorganizations on each Funds premium/discount to NAV; |
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the compatibility of the Funds investment objectives, policies and related risks; |
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consistency of portfolio management and portfolio composition; |
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the potential for improved secondary market trading; |
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the potential for operating and administrative efficiencies; |
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the anticipated tax-free nature of the Reorganization; |
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the potential effects on the Funds capital loss carryforwards; |
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the effects on each Funds undistributed net investment income; |
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the expected costs of the Reorganization; |
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the terms of the Reorganizations and whether the Reorganizations would dilute the interests of shareholders of the Funds; |
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the effect of the Reorganizations on shareholder rights; and |
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any potential benefits of the Reorganizations to the Investment Advisor and its affiliates. |
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Potential for Improved Economies of Scale and Potential for a Lower Expense Ratio . Each Board considered the fees and Total Expense Ratio of its Fund (including estimated expenses of the Combined Fund after the Reorganizations). The contractual management fee rate of the Combined Fund will be 0.60%, which is the same or lower than the current contractual management fee rate of any individual Fund, except COY. The Combined Fund is not subject to any separate administration fee payable to the Investment Advisor. The current combined advisory and administration fees payable to the Investment Advisor for each Fund is as follows: 1.00% (including administration fee of 0.10%) for BHY, 0.75% (of the first $200 million and 0.50% thereafter) for HIS, 0.50% for COY, 0.60% for CYE, 0.60% for HYV and 0.70% for HYT. No Fund, other than BHY, is subject to a separate administration fee. While the contractual management fee of the Combined Fund would be 10 basis points higher than the contractual management fee of COY (0.50%), the Combined Fund would still be competitively priced relative to peers and below the median contractual management fee for Lipper peers.
The Funds estimate that the completion of all of the Reorganizations would result in a Total Expense Ratio for the Combined Fund of 1.34% on a historical and pro forma basis for the 12-month period ended February 28, 2013, representing a reduction in the Total Expense Ratio for the shareholders of BHY, CYE, HIS, HYV and HYT of 0.91%, 0.08%, 0.25%, 0.11% and 0.18%, respectively, and an increase in the Total Expense Ratio for the shareholders of COY of 0.09%. There can be no assurance that future expenses will not increase or that any expense savings will be realized. Moreover, the level of expense savings (or increases) will vary depending on the combination of the proposed Reorganizations.
The Board of COY believes that the potential benefits of the Reorganizations make the Reorganizations in the best interest of COY shareholders. These potential benefits include the potential for (i) higher earnings yield for the Combined Fund (as a percentage of net asset value) on a pro forma basis compared to COY, (ii) greater secondary market liquidity for the Combined Funds common shares, which may result in tighter bid-ask spreads; (iii) better trade execution for each Funds shareholders when purchasing or selling Combined Fund common shares; (iv) improved premium/discount levels for the Combined Funds common shares; (v) operating and administrative efficiencies for the Combined Fund, including greater investment flexibility and investment options, greater diversification of portfolio investments, the ability to trade in larger positions, additional sources of leverage or more competitive leverage terms and more favorable transaction terms; (vi) benefits from having fewer closed-end funds in the market, including an increased focus by investors on the remaining funds in the market (including the Combined Fund) and additional research coverage; and (vii) benefits from having fewer similar funds in the same fund complex, including a simplified operational model and a reduction in risk of operational, legal and financial errors. In addition, the Investment Advisor will bear all of the reorganization costs of each of COY, CYE and HYV.
Alternatives to the Reorganizations . In reaching its decision to approve each Funds respective Reorganization, the Board of such Fund considered various alternatives, including continuing to operate such Fund as a separate Fund, and other reorganization combinations involving such Fund.
Potential Effects of the Reorganizations on Earnings and Distributions . Each Board noted that the Combined Funds earnings are expected to be comparable ( i.e. , the same or slightly lower or higher) when compared with that of its Fund prior to the Reorganizations. Consequently, the Combined Fund is expected to allow each Funds shareholders to maintain a distribution yield on NAV that is expected to be comparable to (i.e., the same or slightly lower or higher) than the distribution yield for each of the Funds prior to the Reorganization, while offering such shareholders a comparable investment experience.
The Combined Funds earnings yield is expected to be slightly lower than HYVs current earnings yield; thus, assuming the Acquiring Funds distribution policy remains in place after the Reorganizations, shareholders of HYV may experience a decrease in their distribution yield after the Reorganizations. Although the Combined Funds earnings yield is expected to be slightly lower than HYVs current earnings yield, shareholders of HYV are expected to benefit from a reduction in HYVs Total Expense Ratio of approximately 0.11%. The Board of HYV believes that the anticipated reduction in HYVs Total Expense Ratio and the other potential benefits of the Reorganizations make the Reorganizations in the best interest of the HYVs shareholders. In addition, the Investment Advisor will bear all of the reorganization costs of HYV.
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A Funds earnings and net investment income are variables, which depend on many factors, including its asset mix, portfolio turnover level, the amount of leverage utilized by the Fund, the costs of such leverage, the movement of interest rates and general market conditions. There can be no assurance that the future earnings of a Fund, including the Combined Fund after the Reorganizations, will remain constant. In addition, the Combined Funds future earnings will vary depending on the combination of the proposed Reorganizations.
Potential Effects of the Reorganizations on Premium/Discount to NAV. Each Board noted that the common shares of its Fund have historically fluctuated between a discount and a premium. Each Target Fund Board noted that to the extent its Target Fund is trading at a wider discount (or a narrower premium) than the Acquiring Fund at the time of the Reorganizations, the Target Funds shareholders would have the potential for an economic benefit by the narrowing of the discount or widening of the premium. Each Board also noted that to the extent its Target Fund is trading at a narrower discount (or wider premium) than the Acquiring Fund at the time of the Reorganizations, the Target Funds shareholders may be negatively impacted if the Reorganizations are consummated. The Board of the Acquiring Fund noted that Acquiring Fund shareholders would only benefit from a premium/discount perspective to the extent the post-Reorganization discount (or premium) improves.
Compatibility of the Investment Objectives, Policies and Related Risks. Each Board noted that its Funds shareholders will remain invested in a NYSE-listed, closed-end management investment company that will have substantially greater net assets and substantially similar (but not identical) investment objectives and investment policies, and as a result, the style and risk/return profile of the Acquiring Fund will remain comparable to those of its Target Fund shareholders current investments, subject to the differences described in Comparison of the Funds.
Consistency of Portfolio Management and Portfolio Composition. Each Board noted that its Fund has the same investment adviser, sub-adviser and portfolio managers and that its Funds shareholders will benefit from the continuing experience and expertise of the portfolio management team. Each Board considered the portfolio composition of its Fund and the impact of the Reorganizations on the Funds portfolio. Each Board noted that it is not anticipated that there will be any significant disposition of the holdings in its Target Fund as a result of the Reorganizations because of the similarities among the portfolio guidelines of the Funds.
Potential for Improved Secondary Market Trading. While it is not possible to predict trading levels at the time the Reorganizations close, each Board considered that the Combined Fund may provide greater secondary market liquidity for its common shares as it would be larger than any of the Funds, which may result in tighter bid-ask spreads, better trade execution for the Combined Funds shareholders when purchasing or selling Combined Fund shares and potential for improved premium/discount levels for the Combined Funds common shares.
Potential for Operating and Administrative Efficiencies. Each Board noted that the Combined Fund may achieve certain operating and administrative efficiencies from its larger net asset size, including greater investment flexibility and investment options, greater diversification of portfolio investments, the ability to trade in larger positions, additional sources of leverage or more competitive leverage terms, more favorable transaction terms and better trade execution.
Each Board also noted that the Combined Fund may experience potential benefits from having fewer closed-end funds in the market, including an increased focus by investors on the remaining funds in the market (including the Combined Fund) and additional research coverage.
Each Board also noted that the Combined Fund may experience potential benefits from having fewer similar funds in the same fund complex, including a simplified operational model and a reduction in risk of operational, legal and financial errors.
Anticipated Tax-Free Reorganization. Each Board noted that it is anticipated that shareholders of its Fund will recognize no gain or loss for U.S. federal income tax purposes as a result of the Reorganizations (except with
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respect to cash received in lieu of fractional shares), as each Reorganization is intended to qualify as a reorganization within the meaning of Section 368(a) of the United States Internal Revenue Code of 1986, as amended.
Capital Loss Carryforwards Considerations. Each Board considered that capital loss carryforwards of the Combined Fund attributable to each Target Fund that participates in a Reorganization (and, depending on which of the Reorganizations are consummated, potentially to the Acquiring Fund) will be subject to tax loss limitation rules by reason of such Fund undergoing an ownership change in the Reorganization. Each Board also considered that the ability of its Fund to fully utilize its existing capital loss carryforwards and that the actual effect of the loss limitation rules depends on many variables and assumptions, including projected performance, and is, therefore, highly uncertain.
Effects of the Reorganizations on Undistributed Net Investment Income. Each Board noted that all of the undistributed net investment income (UNII), if any, of its Fund is expected to be distributed to such Funds respective shareholders prior to the Reorganizations if such Funds Reorganization is approved by shareholders. Each Board also noted that although the Combined Fund will not have the benefit of a positive UNII balance immediately after the completion of the Reorganizations, the Combined Funds future distributions are expected to be aligned with sustainable earnings.
Expected Costs of the Reorganization. Each Board considered the terms and conditions of its Reorganization(s), including the estimated costs associated with such Reorganization and the allocation of such costs among the Funds. Each Board noted, however, that the Investment Advisor anticipated that the projected costs of a consummated Reorganization may be recovered over time. The Board of each of COY, CYE and HYV noted that the Investment Advisor will bear the costs of the Reorganizations for COY, CYE and HYV because the shareholders of these Target Funds are not expected to experience the same level of economic benefits from the Reorganizations as the shareholders of BHY, HIS and HYT.
Terms of the Reorganization and Impact on Shareholders. Each Board noted that the aggregate net asset value (not the market value) of the shares of the Combined Fund that Target Fund shareholders will receive in the Reorganizations is expected to equal the aggregate net asset value (not the market value) of the Target Fund shares that Target Fund shareholders owned immediately prior to the Reorganizations, and the net asset value of Target Fund shares will not be diluted as a result of the Reorganizations. No fractional common shares of the Acquiring Fund will be issued to shareholders in connection with the Reorganizations, and Target Fund shareholders will receive cash in lieu of such fractional shares.
Effect on Shareholder Rights. Each Board noted that the Acquiring Fund, COY, CYE and HYV are each organized as a Maryland corporation, that BHY is organized as a Delaware statutory trust, and HIS is organized as a Massachusetts business trust. Each Board also noted that the common shareholders of each Fund have substantially similar voting rights and rights with respect to the payment of dividends and distribution of assets upon liquidation of their respective Fund and have no preemptive, conversion or exchange rights.
Potential Benefits to the Investment Advisor and its Affiliates. Each Board recognized that the Reorganizations may result in some benefits and economies of scale for the Investment Advisor and its affiliates. These may include, for example, administrative and operational efficiencies or a reduction in certain operational expenses as a result of the elimination of a Target Fund as a separate fund in the BlackRock closed-end fund complex. Each Board noted that the contractual management fee rate of the Combined Fund will be 0.60%, which is the same or lower than the current contractual management fee rate of any individual Fund, except COY. The Board of each of COY, CYE and HYV also noted that the Investment Advisor would bear all of its Funds costs associated with its Reorganization.
Conclusion. Each Board, including the Independent Board Members, approved its Reorganization(s), concluding that such Reorganization is in the best interests of its Fund and that the interests of existing
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shareholders of its Fund will not be diluted as a result of such Reorganization. This determination was made on the basis of each Board Members business judgment after consideration of all of the factors taken as a whole with respect to each Fund and its shareholders, although individual Board Members may have placed different weight on various factors and assigned different degrees of materiality to various factors.
PROPOSAL 1: THE REORGANIZATIONS OF THE TARGET FUNDS
The Reorganizations seek to combine six funds that have the same investment adviser, the same portfolio managers, the same Board Members and either the same or substantially similar (but not identical) investment objectives, investment policies, strategies, risks and restrictions. See Comparison of the Funds.
The Board of each Fund, including the Independent Board Members, has unanimously approved its Reorganization, including its respective Reorganization Agreement. Assuming each Target Funds shareholders approve the Reorganizations of the applicable Target Fund and the Acquiring Funds shareholders approve the Reorganizations of the Acquiring Fund, each Target Fund will merge directly with and into the Acquiring Fund or the HYT Merger Subsidiary. Each Target Fund, except HIS, will merge directly with and into the Acquiring Fund. HIS will merge with and into the HYT Merger Subsidiary for purposes of consummating a merger of a Massachusetts business trust under the laws of the Commonwealth of Massachusetts, and the HYT Merger Subsidiary will then merge directly with and into the Acquiring Fund. Following their respective mergers, each Target Fund will terminate its registration under the 1940 Act. The Acquiring Fund will continue to operate after the Reorganization as a registered, diversified, closed-end management investment company with the investment objectives and policies described in this Joint Proxy Statement/Prospectus.
In each Reorganization, the outstanding common shares of the Target Fund will be exchanged for newly-issued Acquiring Fund Shares in the form of book entry interests. The aggregate net asset value (not the market value) of the Acquiring Fund Shares received by the Target Fund shareholders in each Reorganization will equal the aggregate net asset value (not the market value) of the Target Fund common shares held by such shareholders immediately prior to such Reorganization, less the applicable costs of such Reorganization (although Target Fund shareholders may receive cash for their fractional common shares). In the Reorganizations, shareholders of each Target Fund will receive common shares of the Acquiring Fund based on the relative net asset value (not the market value), of each respective Funds common shares. The market value of the common shares of the Combined Fund may be less than the market value of the common shares of a Target Fund prior to the Reorganizations.
Each Board has reviewed data presented by the Investment Advisor and believes that the Reorganizations generally would result in a reduced Total Expense Ratio for the shareholders of the Funds, except COY, as certain fixed administrative costs would be spread across the Combined Funds larger asset base. However, the level of expense savings (or increases) will vary depending on the combination of the proposed Reorganizations. To the extent that one or more of the Reorganizations is not completed, but the other Reorganization(s) are completed, any expected expense savings by the Combined Fund or other potential benefits resulting from the Reorganizations may be reduced.
The Acquiring Fund pays the Investment Advisor a monthly management fee at an annual rate of 0.70% based on an aggregate of (i) the Funds average daily Net Assets and (ii) the proceeds of any outstanding debt securities or borrowings used for leverage. The liquidation preference of any outstanding preferred stock (other than accumulated dividends) is not considered a liability in determining the Funds net asset value.
If any of the Reorganizations are approved and consummated, the Combined Fund will pay the Investment Advisor a monthly management fee at an annual rate of 0.60% based on an aggregate of (i) the Funds average daily Net Assets and (ii) the proceeds of any outstanding debt securities or borrowings used for leverage.
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For the fiscal year ended August 31, 2012, BHYs, HISs, HYVs and HYTs Total Expense Ratio was 2.01%, 1.54%, 1.42% and 1.51%, respectively. For the 12-month period ended February 28, 2013, the Total Expense Ratios of BHY, HIS, HYV and HYT were 2.25%, 1.59%, 1.45% and 1.52%, respectively. For the fiscal year ended February 28, 2013, the Total Expense Ratios of COY and CYE were 1.25% and 1.42%, respectively.
The Funds estimate that the completion of all of the Reorganizations would result in a Total Expense Ratio for the Combined Fund of 1.34% on a historical and pro forma basis for the 12-month period ended February 28, 2013, representing a reduction in the Total Expense Ratio for the shareholders of BHY, CYE, HIS, HYV and HYT of 0.91%, 0.08%, 0.25%, 0.11% and 0.18%, respectively, and an increase in the Total Expense Ratio for the shareholders of COY of 0.09%. There can be no assurance that future expenses will not increase or that any expense savings will be realized. Moreover, the level of expense savings (or increases) will vary depending on the combination of the proposed Reorganizations.
The Board of COY believes that the potential benefits of the Reorganizations make the Reorganizations in the best interest of COY shareholders. These potential benefits include the potential for (i) higher earnings yield for the Combined Fund (as a percentage of net asset value) on a pro forma basis compared to COY, (ii) greater secondary market liquidity for the Combined Funds common shares, which may result in tighter bid-ask spreads; (iii) better trade execution for each Funds shareholders when purchasing or selling Combined Fund common shares; (iv) improved premium/discount levels for the Combined Funds common shares; (v) operating and administrative efficiencies for the Combined Fund, including greater investment flexibility and investment options, greater diversification of portfolio investments, the ability to trade in larger positions, additional sources of leverage or more competitive leverage terms and more favorable transaction terms; (vi) benefits from having fewer closed-end funds in the market, including an increased focus by investors on the remaining funds in the market (including the Combined Fund) and additional research coverage; and (vii) benefits from having fewer similar funds in the same fund complex, including a simplified operational model and a reduction in risk of operational, legal and financial errors. See Reasons for the Reorganization. In addition, the Investment Advisor will bear all of the reorganization costs of each of COY, CYE and HYV.
The table below shows the Total Expense Ratios on a historical and pro forma basis for (i) the Combined Fund, assuming all of the Reorganizations had taken place on February 28, 2013, which represents the most likely combination of the Reorganizations and the combination of the Reorganizations resulting in the lowest Total Expense Ratio; and (ii) the Combined Fund, assuming only the Reorganization of BHY into HYT had taken place on February 28, 2013, which represents the combination of the Reorganizations resulting in the highest Total Expense Ratio. The table below also shows the projected reduction or increase in the Total Expense Ratio experienced by the shareholders of each Fund in connection with each combination of the Reorganizations.
Pro Forma
Combined Fund (All Target Funds into HYT) |
Pro Forma
Combined Fund (BHY into HYT) |
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Total Expense Ratios |
1.34% | 1.39% | ||
Change in BHY Total Expense Ratio |
(0.91)% | (0.86)% | ||
Change in COY Total Expense Ratio |
0.09% | | ||
Change in CYE Total Expense Ratio |
(0.08)% | | ||
Change in HIS Total Expense Ratio |
(0.25)% | | ||
Change in HYV Total Expense Ratio |
(0.11)% | | ||
Change in HYT Total Expense Ratio |
(0.18)% | (0.13)% |
In approving the proposed Reorganizations, the Board of each Fund, including the Independent Board Members, determined that participation in the Reorganizations is in the best interests of its Fund and its shareholders and that the interests of its shareholders will not be diluted with respect to the net asset value of such Fund as a result of its Reorganization. Before reaching these conclusions, the Board of each Fund, including the Independent Board Members, engaged in a thorough review process relating to its proposed Reorganization(s).
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The Board of each Fund also received a memorandum outlining, among other things, the legal standards and certain other considerations relevant to the Boards deliberations. The Board of each Fund, including all of the Independent Board Members, approved its Reorganization at meetings held on June 4-5, 2013 and July 30, 2013.
Considering these and other reasons, each Target Fund Board unanimously concluded that completion of its Reorganization is in the best interests of its Target Fund and its shareholders and that the interests of the shareholders of its Target Fund will not be diluted as a result of its Reorganization. Similarly, the Acquiring Fund Board has determined that each Reorganization is in the best interests of the Acquiring Fund and its shareholders and that the interests of such shareholders will not be diluted as a result of each Reorganization. As a result of the Reorganizations, however, shareholders of each Fund will hold a reduced percentage of ownership in the larger Combined Fund than they did in any of the individual Funds. This determination was made on the basis of each Board Members business judgment after consideration of all of the factors taken as a whole with respect to each Fund and its shareholders, although individual Board Members may have placed different weight and assigned different degrees of materiality to various factors. See Reasons for the Reorganization.
If a Reorganization is not approved by a Target Funds shareholders, such Target Fund will continue to operate, for the time being, as either a stand-alone Maryland corporation, a stand-alone Delaware statutory trust or a stand-alone Massachusetts business trust, as the case may be, and will continue to be advised by the Investment Advisor. If, however, the Reorganization of a Target Fund is not approved, the Investment Advisor may, in connection with ongoing management of that Target Fund and its product line, recommend alternative proposals to the Board of such Target Fund. In the event the Acquiring Fund shareholders do not approve the Reorganization, then the affected Target Fund would continue to exist and operate on a stand-alone basis. An unfavorable vote by one of the Target Funds or the Acquiring Fund with respect to one of the Reorganizations will not affect the implementation of the Reorganizations by the other Funds.
Each Reorganization is intended to qualify as a reorganization within the meaning of Section 368(a) of the Code. If a Reorganization so qualifies, in general, shareholders of a Target Fund will recognize no gain or loss for U.S. federal income tax purposes upon the exchange of their Target Fund common shares for Acquiring Fund Shares pursuant to the Reorganization (except with respect to cash received in lieu of fractional shares). Additionally, the Target Funds will recognize no gain or loss for U.S. federal income tax purposes by reason of the Reorganization. Neither the Acquiring Fund nor its shareholders will recognize any gain or loss for U.S. federal income tax purposes pursuant to each Reorganization. It is a condition to the closing of each Reorganization that the respective Target Fund and the Acquiring Fund receive an opinion from Skadden, Arps, Slate, Meagher & Flom LLP, dated as of the Closing Date, regarding the characterization of the Reorganization as a reorganization within the meaning of Section 368(a) of the Code.
Each Target Fund Board requests that shareholders of its Target Fund approve such Target Funds proposed Reorganization at the Special Meeting to be held on October 11, 2013 at 9:00 a.m. (Eastern time).
Shareholder approval of each of BHY, COY, CYE and HYV Reorganizations require the affirmative vote of a majority of the outstanding shares entitled to vote of each of BHY, COY, CYE and HYV, respectively.
Shareholder approval of the HIS Reorganization requires the affirmative vote by HIS shareholders of a majority of the outstanding voting securities as defined under the 1940 Act (such a majority referred to herein as a 1940 Act Majority), which means the affirmative vote of either (i) 66 2/3% or more of the voting securities present at the Special Meeting, if the holders of more than 50% of the outstanding voting securities of the Fund are present or represented by proxy or (ii) more than 50% of the outstanding voting securities of the Fund, whichever is less. For additional information regarding voting requirements, see Voting Information and Requirements.
Subject to the requisite approval of the shareholders of each Target Fund with respect to each Reorganization, it is expected that the Closing Date will be sometime during the fourth quarter of 2013, but it may be at a different time as described herein.
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Investing in the Combined Fund following the Reorganization involves risks. For additional information, see Risk Factors and Special Considerations.
The BHY Board recommends that shareholders of BHY vote FOR BHYs proposed Reorganization.
The COY Board recommends that shareholders of COY vote FOR COYs proposed Reorganization.
The CYE Board recommends that shareholders of CYE vote FOR CYEs proposed Reorganization.
The HIS Board recommends that shareholders of HIS vote FOR HISs proposed Reorganization.
The HYV Board recommends that shareholders of HYV vote FOR HYVs proposed Reorganization.
INVESTMENT OBJECTIVES AND POLICIES OF THE ACQUIRING FUND
Investment Objectives
The Acquiring Funds primary investment objective is to provide shareholders with current income. The Acquiring Funds secondary investment objective is to provide shareholders with capital appreciation.
The Acquiring Funds investment objectives are fundamental, and may not be changed without the approval of the holders of a majority of the Funds outstanding common shares (which for this purpose and under the 1940 Act means the lesser of (i) 66 2/3% of the common shares represented at a meeting at which more than 50% of the outstanding common shares are represented or (ii) more than 50% of the outstanding shares).
Investment Policies
The Acquiring Fund seeks to achieve its objectives by investing primarily in a diversified portfolio of fixed income securities which are rated below investment grade by the established rating services (Ba or lower by Moodys Investors Service, Inc. (Moodys), BB or lower by Standard & Poors Ratings Services (Standard & Poors) or BB or lower by Fitch, Inc. (Fitch)) or, if unrated, are considered by the Investment Advisor to be of comparable quality. Under normal market conditions, the Acquiring Fund invests at least 80% of its net assets (including assets acquired from the sale of preferred stock), plus the amount of any borrowings for investment purposes, in high yield securities, including high yield bonds, corporate loans, convertible debt securities and preferred securities. This is a non-fundamental policy and may be changed by the Board of Directors of the Acquiring Fund provided that stockholders are provided with at least 60 days prior written notice of any change as required by the rules under the 1940 Act. High yield securities include high yield bonds (commonly referred to as junk bonds), corporate loans, convertible debt securities and preferred securities, which are rated below investment grade or, if unrated, are considered by the Investment Advisor to be of comparable quality. Such investments generally involve greater volatility of price and risks to principal and income than securities in the higher rating categories. There can be no assurance that the Acquiring Funds investment objectives will be realized.
The Acquiring Fund may invest, without limitation, in securities of issuers domiciled outside the United States or that are denominated in various foreign currencies and multinational currency units.
The Acquiring Fund may invest up to 15% of its total assets in corporate loans extended to borrowers by commercial banks or other financial institutions (Corporate Loans). The Corporate Loans in which the Acquiring Fund may invest may be rated below investment grade (Ba or lower by Moodys, BB or lower by Standard & Poors or BB or lower by Fitch) or, if unrated, are considered by the Investment Advisor to be of comparable quality. The Acquiring Fund may invest up to 10% of its total assets in high yield securities which are the subject of bankruptcy proceedings or otherwise in default as to the repayment of principal and/or payment
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of interest at the time of acquisition by the Acquiring Fund or are rated in the lowest rating categories (Ca or lower by Moodys, CC or lower by Standard & Poors or CC or lower by Fitch) or, if unrated, are considered by the Investment Advisor to be of comparable quality (Distressed Securities).
Securities rated below investment grade include securities that are rated Ba or lower by Moodys and BB or lower by Standard & Poors or Fitch or securities comparably rated by other rating agencies or in unrated securities determined by the Advisors to be of comparable quality. Securities rated Ba by Moodys are judged to have speculative elements, their future cannot be considered as well assured and often the protection of interest and principal payments may be very moderate. Securities rated BB by Standard & Poors or Fitch are regarded as having predominantly speculative characteristics and, while such obligations have less near-term vulnerability to default than other speculative grade debt, they face major ongoing uncertainties or exposure to adverse business, financial or economic conditions that could lead to inadequate capacity to meet timely interest and principal payments. Securities rated C are generally regarded as having extremely poor prospects of ever attaining any real investment standing. Securities rated D are in default and the payment of interest and/or repayment of principal is in arrears. All references to securities ratings by Moodys, Standard & Poors and Fitch in this Joint Proxy Statement/Prospectus shall, unless otherwise indicated, include all securities within each such rating category (i.e., Ba1, Ba2 and Ba3 in the case of Moodys, BB+ and BB- in the case of Standard & Poors and BB+ and BB- in the case of Fitch). All percentage and ratings limitations on securities in which the Acquiring Fund may invest apply at the time of making an investment and shall not be considered violated if an investment rating is subsequently downgraded to a rating that would have precluded the Acquiring Funds initial investment in such security. In the event that the Acquiring Fund disposes of a portfolio security subsequent to its being downgraded, the Acquiring Fund may experience a greater loss than if such security had been sold prior to such downgrade.
The Acquiring Fund may invest up to 15% of its total assets in convertible debt securities and up to 15% of its total assets in preferred securities, including preferred securities that may be converted into common stock or other securities of the same or a different issuer, and non-convertible preferred securities. The convertible debt securities and preferred securities in which the Acquiring Fund may invest may be rated below investment grade by the established rating services (Ba or lower by Moodys, BB or lower by Standard & Poors or BB or lower by Fitch) or, if unrated, are considered by the Investment Advisor to be of comparable quality.
An investment in the Acquiring Fund may be speculative in that it involves a high degree of risk and should not constitute a complete investment program. See Risk Factors and Special Considerations.
When changing economic conditions and other factors cause the yield difference between lower rated and higher rated securities to narrow, the Acquiring Fund may purchase higher rated securities if the Investment Advisor believes that the risk of loss of income and principal may be reduced substantially with only a relatively small reduction in yield. In addition, under unusual market or economic conditions or for temporary defensive purposes, the Acquiring Fund may invest up to 100% of its total assets in securities issued or guaranteed by the U.S. Government or its instrumentalities or agencies, certificates of deposit, bankers acceptances and other bank obligations, commercial paper rated in the highest category by an established Rating Agency, or other fixed income securities deemed by the Investment Advisor to be consistent with a defensive posture, or may hold investments in cash. The yield on such securities may be lower than the yield on lower rated fixed income securities. Although the Acquiring Fund will invest primarily in below investment grade securities, other than with respect to Distressed Securities, it will not invest in securities in the lowest rating categories (Ca or lower by Moodys, CC or lower by Standard & Poors or CC or lower by Fitch) unless the Investment Advisor believes that the financial condition of the issuer or the protection afforded to the particular securities is stronger than would otherwise be indicated by such low ratings.
Investment in the common stock of the Acquiring Fund offers the individual investor several potential benefits. The Acquiring Fund offers investors the opportunity to receive current income by investing in a professionally managed portfolio comprised primarily of high yield securities, some of which are a type of
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investment typically not offered to individual investors. The Investment Advisor provides professional management, which includes the extensive credit analysis needed to invest in junk bonds, Corporate Loans, non-U.S. securities, Distressed Securities, convertible debt securities and preferred securities. In addition to using the credit rating provided by independent rating agencies, the Investment Advisor independently evaluates the creditworthiness of the portfolio securities held by the Acquiring Fund. The Acquiring Fund also relieves the investor of the burdensome administrative details involved in managing a portfolio of such investments. These benefits are at least partially offset by the expenses involved in running an investment company. Such expenses primarily consist of advisory fees and operational costs. Additionally, the Investment Advisor may seek to enhance the yield of the Acquiring Funds common stock by leveraging the Acquiring Funds capital structure through the borrowing of money or the issuance of short term debt securities or shares of preferred stock. The use of leverage also involves certain expenses and risk considerations. See Risk Factors and Special ConsiderationsLeverage and Additional Investment PoliciesLeverage.
The Acquiring Fund may engage in various portfolio strategies to seek to enhance its return and to hedge its portfolio against movements in interest rates through the use of derivatives, such as indexed and inverse securities, options, futures, options on futures, interest rate transactions, credit default swaps and short selling. Each of these portfolio strategies is described below. There can be no assurance that the Acquiring Fund will employ these strategies or that, if employed, they will be effective.
The Acquiring Fund may invest in, among other things, the types of instruments described below:
High Yield Securities
Under normal market conditions, and after the initial investment period following this offering, the Acquiring Fund will invest at least 80% of its net assets, plus the amount of any borrowings for investment purposes, in high yield securities, including high yield bonds (commonly referred to as junk bonds), Corporate Loans, convertible debt securities and preferred securities, as described below, which are rated below investment grade by the established rating services (Ba or lower by Moodys, BB or lower by Standard & Poors or BB or lower by Fitch) or, if unrated, are considered by the Investment Advisor to be of comparable quality. The Acquiring Fund may invest in securities of any maturity.
Selection and supervision of high yield securities, by the Investment Advisor, involves continuous analysis of individual issuers, general business conditions and other factors which may be too time-consuming or too costly for the average investor. The furnishing of these services does not, of course, guarantee successful results. The Investment Advisors analysis of issuers includes, among other things, historic and current financial conditions, current and anticipated cash flow and borrowing requirements, value of assets in relation to historical costs, strength of management, responsiveness to business conditions, credit standing, and current and anticipated results of operations. Analysis of general conditions and other factors may include anticipated changes in economic activity and interest rates, the availability of new investment opportunities and the economic outlook for specific industries.
The ratings of Moodys, Standard & Poors 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. While the Investment Advisor considers as one factor in its credit analysis the ratings assigned by the rating services, the Investment Advisor performs its own independent credit analysis of issuers and, consequently, the Acquiring Fund may invest, without limit, in unrated securities. As a result, the Acquiring Funds ability to achieve its investment objectives may depend to a greater extent on the Investment Advisors own credit analysis than investment companies which invest in investment grade securities. Although the Acquiring Fund will invest primarily in below investment grade securities, other than with respect to Distressed Securities (which are discussed below), it will not invest in securities in the lowest rating categories (Ca or below for Moodys, CC or below for Standard & Poors or CC or below for Fitch) unless the Investment Advisor
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believes that the financial condition of the issuer or the protection afforded to the particular securities is stronger than would otherwise be indicated by such ratings. The Acquiring Fund may continue to hold securities that are downgraded after the Acquiring Fund purchases them and will sell such securities only if, in the Investment Advisors judgment, it is advantageous to sell such securities.
Investments in high yield securities generally provide greater income and increased opportunity for capital appreciation than investments in investment grade fixed income securities, but they also typically entail greater price volatility and principal and income risk, including the possibility of issuer default and bankruptcy. High yield securities are regarded as being predominantly speculative as to the issuers ability to make repayments of principal and payments of interest. Investment in such securities involves substantial risk. Issuers of high yield 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 investment grade securities. For example, during an economic downturn or a sustained period of rising interest rates, issuers of high yield 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, or 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 high yield market. If an issuer of high yield securities defaults, in addition to risking non-payment of all or a portion of interest and principal, the Acquiring Fund may incur additional expenses to seek recovery. The market prices of high yield securities structured as zero-coupon, step-up or payment-in-kind securities will normally be affected to a greater extent by interest rate changes, and therefore tend to be more volatile than the prices of securities that pay interest currently and in cash. Other than with respect to Distressed Securities (which are discussed below), the high yield securities in which the Acquiring Fund may invest do not include securities 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 Acquiring Fund purchases a particular security, in which case the Acquiring Fund may experience losses and incur costs.
High yield securities tend to be more volatile than investment grade fixed income securities, so that adverse events may have a greater impact on the prices of high yield securities than on investment grade fixed income securities. Factors adversely affecting the market value of such securities are likely to affect adversely the Acquiring Funds net asset value.
Like investment grade fixed income securities, high yield securities are generally purchased and sold through dealers who make a market in such securities for their own accounts. There are fewer dealers, however, in the high yield market, and thus the market may be less liquid than the market for investment grade fixed income securities, even under normal economic conditions. In addition, there may be significant disparities in the prices quoted for high yield securities by various dealers and the spread between the bid and asked price is generally much larger than for investment grade securities. As a result, the Acquiring Fund may experience difficulty acquiring appropriate high yield securities for investment.
Adverse conditions and investor perceptions thereof (whether or not based on economic fundamentals) may impair liquidity in the high yield market and may cause the prices the Acquiring Fund receives for its high yield securities to be reduced. In addition, the Acquiring Fund may experience difficulty in liquidating a portion of its portfolio when necessary to meet the Acquiring Funds liquidity needs or in response to a specific economic event such as a deterioration in the creditworthiness of the issuer. Under such conditions, judgment may play a greater role in valuing certain of the Acquiring Funds portfolio securities than in the case of securities trading in a more liquid market. In addition, the Acquiring Fund may incur additional expenses if it is forced to seek recovery upon a default of a portfolio holding or if it participates in the restructuring of the obligation.
The risk of loss due to default by an issuer is significantly greater for the holders of junk bonds because such securities are often unsecured and subordinated to other creditors of the issuer. In addition, junk bonds may have
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call or redemption features that permit an issuer to repurchase the securities from the Acquiring Fund. If a call were to be exercised by an issuer during a period of declining interest rates, the Acquiring Fund would likely have to replace such called securities with lower yielding securities, thereby decreasing the net investment income to the Acquiring Fund and dividends to stockholders.
The high yield securities in which the Acquiring Fund invests may include credit linked notes, structured notes or other instruments evidencing interests in special purpose vehicles or trusts that hold interests in high yield securities.
Structured notes and other related instruments are privately negotiated debt obligations in which the principal and/or interest is determined by reference to the performance of a benchmark asset, market or interest rate (an embedded index), such as selected securities, an index of securities or specified interest rates, or the differential performance of two assets or markets. Structured instruments may be issued by corporations, including banks, as well as by governmental agencies. Structured instruments frequently are assembled in the form of medium-term notes, but a variety of forms are available and may be used in particular circumstances. The terms of such structured instruments normally provide that their principal and/or interest payments are to be adjusted upwards or downwards (but ordinarily not below zero) to reflect changes in the embedded index while the structured instruments are outstanding. As a result, the interest and/or principal payments that may be made on a structured product may vary widely, depending on a variety of factors, including the volatility of the embedded index and the effect of changes in the embedded index on principal and/or interest payments. The rate of return on structured notes may be determined by applying a multiplier to the performance or differential performance of the referenced index(es) or other asset(s). Application of a multiplier involves leverage that will serve to magnify the potential for gain and the risk of loss.
Structured instruments may be less liquid than other fixed income securities and the price of structured instruments may be more volatile. In some cases, depending on the terms of the embedded index, a structured instrument may provide that the principal and/or interest payments may be adjusted below zero. Structured instruments also may involve significant credit risk and risk of default by the counterparty. Structured instruments may also be illiquid. Like other sophisticated strategies, the Acquiring Funds use of structured instruments may not work as intended.
The Acquiring Fund may receive warrants or other non-income producing equity securities in connection with its investments in high yield securities, including in unit offerings, in an exchange offer, upon the conversion of a convertible security, or upon the restructuring or bankruptcy of investments owned by the Acquiring Fund. The Acquiring Fund may continue to hold such securities until, in the Investment Advisors judgment in light of current market conditions, it is advantageous to effect a disposition of such securities.
Warrants are privileges issued by corporations enabling the owners to subscribe to and purchase a specified number of shares of the corporation at a specified price during a specified period of time. Subscription rights normally have a short life span to expiration. The purchase of warrants involves the risk that the Acquiring Fund could lose the purchase value of a right or warrant if the right to subscribe to additional shares is not exercised prior to the warrants expiration. Also, the purchase of warrants involves the risk that the effective price paid for the warrant added to the subscription price of the related security may exceed the value of the subscribed securitys market price such as when there is no movement in the level of the underlying security.
Corporate Loans
The Acquiring Fund may invest up to 15% of its total assets in Corporate Loans. The Acquiring Fund considers Corporate Loans that are rated below investment grade by the established rating services to be high yield securities, and includes such Corporate Loans (along with high yield bonds and below investment grade convertible debt securities and preferred securities, as described below) in determining whether at least 80% of its net assets, plus the amounts of any borrowings for investment purposes, are invested in high yield securities.
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The Corporate Loans in which the Acquiring Fund invests primarily consist of direct obligations of a borrower and may include debtor in possession financings pursuant to Chapter 11 of the U.S. Bankruptcy Code, obligations of a borrower issued in connection with a restructuring pursuant to Chapter 11 of the U.S. Bankruptcy Code, leveraged buy-out loans, leveraged recapitalization loans, receivables purchase facilities, and privately placed notes. The Acquiring Fund may invest in a Corporate Loan at origination as a co-lender or by acquiring in the secondary market participations in, assignments of or novations of a Corporate Loan. By purchasing a participation, the Acquiring Fund acquires some or all of the interest of a bank or other lending institution in a loan to a borrower. The participations typically will result in the Acquiring Fund having a contractual relationship only with the lender, not the borrower. The Acquiring Fund will have the right to receive payments of principal, interest and any fees to which it is entitled only from the lender selling the participation and only upon receipt by the lender of the payments from the borrower. Loan participations, therefore, involve a risk of insolvency of the lending bank or other financial intermediary. Many Corporate Loans are secured, although some may be unsecured. Corporate Loans that are fully secured offer the Acquiring Fund more protection than an unsecured loan or high yield bond in the event of non-payment of scheduled interest or principal. However, there is no assurance that the liquidation of collateral from a secured loan would satisfy the borrowers obligation, or that the collateral can be liquidated. The markets in loans are not regulated by federal securities laws or the SEC.
As in the case of junk bonds, such Corporate Loans may be rated below investment grade or, if unrated, are considered by the Investment Advisor to be of comparable quality. As in the case of junk bonds, such Corporate Loans can be expected to provide higher yields than lower yielding, investment grade fixed income securities, but may be subject to greater risk of loss of principal and income. There are, however, some significant differences between Corporate Loans and junk bonds. Corporate Loan obligations are frequently secured by pledges of liens and security interests in the assets of the borrower, and the holders of Corporate Loans are frequently the beneficiaries of debt service subordination provisions imposed on the borrowers bondholders. Such security and subordination arrangements are designed to give Corporate Loan investors preferential treatment over high yield bond investors in the event of a deterioration in the credit quality of the issuer. Even when these arrangements exist, however, there can be no assurance that the principal and interest owed on the Corporate Loan will be repaid in full. Corporate Loans generally bear interest at rates set at a margin above a generally recognized base lending rate that may fluctuate on a day-to-day basis, in the case of the prime rate of a U.S. bank, or which may be adjusted periodically, typically 30 days but generally not more than one year, in the case of the London Interbank Offered Rate. Consequently, the value of Corporate Loans held by the Acquiring Fund may be expected to fluctuate less than the value of other fixed rate high yield instruments as a result of changes in the interest rate environment. On the other hand, the secondary dealer market for certain Corporate Loans may not be as well developed as the secondary dealer market for high yield bonds, and therefore, positively correlate with increased market risk relating to liquidity and pricing concerns.
Convertible Debt Securities and Preferred Securities
The Acquiring Fund may invest up to 15% of its total assets in convertible debt securities. A convertible debt security is a bond, debenture or note that may be converted into or exchanged for a prescribed amount of common stock or other securities of the same or a different issuer within a particular period of time at a specified price or formula. A convertible debt security entitles the holder to receive interest generally paid or accrued on debt until the convertible security matures or is redeemed, converted or exchanged. Convertible securities, including convertible preferred securities, have several unique investment characteristics such as (i) higher yields than common stocks, but lower yields than comparable nonconvertible securities, (ii) a lesser degree of fluctuation in value than the underlying stock since they have fixed income characteristics, and (iii) the potential for capital appreciation if the market price of the underlying common stock increases. Holders of convertible securities have a claim on the assets of the issuer prior to the common stockholders, but may be subordinated to similar non-convertible securities of the same issuer. A convertible security might be subject to redemption at the option of the issuer at a price established in the convertible securitys governing instrument. If a convertible security held by the Acquiring Fund is called for redemption, the Acquiring Fund may be required to permit the issuer to redeem the security, convert it into the underlying common stock or other securities or sell it to a third party.
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The Acquiring Fund may invest up to 15% of its total assets in preferred securities, including preferred securities that may be converted into common stock or other securities of the same or a different issuer, and non-convertible preferred securities. Generally, preferred securities receive dividends in priority to distributions on common stock and usually have a priority of claim over common stockholders if the issuer of the stock is liquidated. Preferred securities have certain characteristics of both debt and equity securities. Like debt securities, preferred securities rate of income is generally contractually fixed. Like equity securities, preferred securities do not have rights to precipitate bankruptcy filings or collection activities in the event of missed payments. Furthermore, preferred securities are generally in a subordinated position in an issuers capital structure and their value are heavily dependent on the profitability of the issuer rather than on any legal claims to specific assets or cash flows.
There are two basic types of preferred securities. The first type, sometimes referred to as traditional preferred securities, consists of preferred stock issued by an entity taxable as a corporation. The second type, sometimes referred to as trust preferred securities, are usually issued by a trust or limited partnership and represent preferred interests in deeply subordinated debt instruments issued by the corporation for whose benefit the trust or partnership was established.
Traditional preferred securities generally pay fixed or adjustable rate dividends to investors and generally have a preference over common stock in the payment of dividends and the liquidation of a companys assets. This means that a company must pay dividends on preferred stock before paying any dividends on its common stock. In order to be payable, distributions on such preferred securities must be declared by the issuers board of directors. Income payments on typical preferred securities currently outstanding are cumulative, causing dividends and distributions to accumulate even if not declared by the board of directors or otherwise made payable. In such a case all accumulated dividends must be paid before any dividend on the common stock can be paid. However, some traditional preferred stocks are non-cumulative, in which case dividends do not accumulate and need not ever be paid. A portion of the portfolio may include investments in non-cumulative preferred securities, whereby the issuer does not have an obligation to make up any arrearages to its shareholders. Should an issuer of a non-cumulative preferred stock held by the Acquiring Fund determine not to pay dividends on such stock, the amount of dividends the Acquiring Fund pays may be adversely affected. There is no assurance that dividends or distributions on the traditional preferred securities in which the Acquiring Fund invests will be declared or otherwise made payable.
Preferred stockholders usually have no right to vote for corporate directors or on other matters. Shares of traditional preferred securities have a liquidation value that generally equals the original purchase price at the date of issuance. The market value of preferred securities may be affected by favorable and unfavorable changes impacting companies in the utilities and financial services sectors, which are prominent issuers of preferred securities, and by actual and anticipated changes in tax laws, such as changes in corporate income tax rates or the Dividends Received Deduction. Because the claim on an issuers earnings represented by traditional preferred securities may become onerous when interest rates fall below the rate payable on such securities, the issuer may redeem the securities. Thus, in declining interest rate environments in particular, the Acquiring Funds holdings of higher rate-paying fixed rate preferred securities may be reduced and the Acquiring Fund may be unable to acquire securities of comparable credit quality paying comparable rates with the redemption proceeds.
Trust preferred securities are a comparatively new asset class. Trust preferred securities are typically issued by corporations, generally in the form of interest-bearing notes with preferred security characteristics, or by an affiliated business trust of a corporation, generally in the form of beneficial interests in subordinated debentures or similarly structured securities. The trust preferred securities market consists of both fixed and adjustable coupon rate securities that are either perpetual in nature or have stated maturity dates. Trust preferred securities are typically junior and fully subordinated liabilities of an issuer or the beneficiary of a guarantee that is junior and fully subordinated to the other liabilities of the guarantor. In addition, trust preferred securities typically permit an issuer to defer the payment of income for eighteen months or more without triggering an event of default. Generally, the deferral period is five years or more. Because of their subordinated position in the capital
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structure of an issuer, the ability to defer payments for extended periods of time without default consequences to the issuer, and certain other features (such as restrictions on common dividend payments by the issuer or ultimate guarantor when full cumulative payments on the trust preferred securities have not been made), these trust preferred securities are often treated as close substitutes for traditional preferred securities, both by issuers and investors. Trust preferred securities have many of the key characteristics of equity due to their subordinated position in an issuers capital structure and because their quality and value are heavily dependent on the profitability of the issuer rather than on any legal claims to specific assets or cash flows.
The Acquiring Fund considers below investment grade convertible debt securities and preferred securities to be high yield securities, and includes such convertible debt securities and preferred securities (along with high yield bonds and Corporate Loans that are rated below investment grade, as described above) in determining whether at least 80% of its net assets, plus the amount of any borrowings for investment purposes, are invested in high yield securities.
Distressed Securities
The Acquiring Fund may invest up to 10% of its total assets in Distressed Securities, which 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 Acquiring Fund or are rated in the lowest rating categories (Ca or lower by Moodys, CC or lower by Standard & Poors or CC or lower by Fitch) or, if unrated, are considered by the Investment Advisor to be of comparable 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 Acquiring Fund to bear certain extraordinary expenses in order to protect and recover its investment. Therefore, to the extent the Acquiring Fund seeks its secondary objective of capital appreciation through investment in Distressed Securities, the Acquiring Funds ability to achieve current income for its stockholders may be diminished. The Acquiring 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 a plan of reorganization is adopted with respect to Distressed Securities held by the Acquiring Fund, there can be no assurance that the securities or other assets received by the Acquiring 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 Acquiring Fund upon completion of an exchange offer or plan of reorganization may be restricted as to resale. As a result of the Acquiring Funds participation in negotiations with respect to any exchange offer or plan of reorganization with respect to an issuer of Distressed Securities, the Acquiring Fund may be restricted from disposing of such securities.
Illiquid Securities
The Acquiring Fund may invest in junk bonds, Corporate Loans, convertible debt securities, preferred securities and other securities that lack a secondary trading market or are otherwise considered illiquid. Liquidity of a security relates to the ability to easily dispose of the security and the price to be obtained upon disposition of the security, which may be less than would be obtained for a comparable more liquid security. The Acquiring Fund has no limitation on the amount of its investments that are not readily marketable or are subject to restrictions on resale. Illiquid securities may be subject to wide fluctuations in market value. The Acquiring Fund may be subject to significant delays in disposing of certain high yield securities. As a result, the Acquiring Fund may be forced to sell these securities at less than fair market value or may not be able to sell them when the Investment Advisor believes that it is desirable to do so. Illiquid securities also may entail registration expenses and other transaction costs that are higher than those for liquid securities. Such investments may affect the Acquiring Funds ability to realize the net asset value in the event of a voluntary or involuntary liquidation of its assets.
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Additional Investment Policies
The Acquiring Fund has adopted certain policies as set forth below:
Leverage
The Acquiring Fund may utilize leverage through borrowings or the issuance of short term debt securities or shares of preferred stock. The Acquiring Fund has the ability to utilize leverage through borrowing or the issuance of short term debt securities in an amount up to 33 1/3% of the value of its total assets (including the amount obtained from such borrowings or debt issuance). The Acquiring Fund also has the ability to utilize leverage through the issuance of shares of preferred stock in an amount up to 50% of the value of its total assets (including the amount obtained from such issuance). There can be no assurance, however, that the Acquiring Fund will borrow in order to leverage its assets or if it does what percentage of the Acquiring Funds assets such borrowings will represent. Although the Acquiring Fund has the ability to issue preferred stock, it does not currently anticipate issuing any preferred stock.
The Acquiring Fund may utilize leverage by borrowing through the Credit Facility or through entering into reverse repurchase agreements. As of May 31, 2013, the Acquiring Fund had an Economic Leverage Ratio of 30.20% from reverse repurchase agreements and/or borrowings through the Credit Facility. The Combined Funds Economic Leverage Ratio is expected to be substantially similar to the Acquiring Funds current Economic Leverage Ratio.
The Acquiring Fund is currently a party to a senior committed secured, 360-day rolling credit facility with State Street. The Acquiring Fund has granted a security interest in substantially all of its assets to State Street in connection with the Credit Facility. The Credit Facility currently allows for a maximum commitment amount of $222,000,000. Advances are made by State Street to the Acquiring Fund, at the Acquiring Funds option of (a) the higher of (i) 0.80% above the Fed Funds rate and (ii) 0.80% above the Overnight LIBOR or (b) 0.80% above 7-day, 30-day, 60-day or 90-day LIBOR. In addition, the Acquiring Fund pays a facility fee and utilization fee (based on the daily unused portion of the commitments). The commitment fees are waived if the Acquiring Fund meets certain conditions. The Acquiring Fund may not declare dividends or make other distributions on shares or purchase any such shares if, at the time of the declaration, distribution or purchase, asset coverage with respect to the outstanding short-term borrowings is less than 300%. For the twelve-month period ended August 31, 2012 and for the six-month period ended February 28, 2013, the daily weighted average interest rate for the Acquiring Fund under the Credit Facility was approximately 0.94%. As of May 31, 2013, the effective interest rate for the Acquiring Fund under the Credit Facility was approximately 0.93%.
In connection with the Reorganizations, the Combined Fund expects to amend the Credit Facility to increase the maximum commitment amount to maintain an Economic Leverage Ratio substantially similar to the Acquiring Funds current Economic Leverage Ratio. If all of the Reorganizations are consummated, the Combined Fund expects to increase the maximum commitment amount under the Credit Facility to $798,000,000. However, there can be no assurance the Combined Fund will increase the maximum commitment amount under the Credit Facility. If the Combined Fund does not increase the maximum commitment amount under the Credit Facility, then the Combined Fund may be required to either utilize other forms of leverage, which may include reverse repurchase agreements, in order to maintain an Economic Leverage Ratio that is substantially similar to the Acquiring Funds current Economic Leverage Ratio or reduce the Combined Funds economic leverage. In either case, the Combined Fund may not be able to maintain the current earnings and distribution yields of the Acquiring Fund, which may negatively affect the market price and net asset value of the Combined Fund. In addition, if the Combined Fund is required to reduce its economic leverage, then it may be required to sell a portion of its assets, which may negatively affect the Combined Funds portfolio holdings, portfolio allocation, portfolio diversification and investment strategy.
The Acquiring Fund generally will not utilize leverage if it anticipates that the Acquiring Funds leveraged capital structure would result in a lower return to common stockholders than that obtainable if the common stock
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were to be unleveraged for any significant amount of time. The Acquiring Fund also may borrow money as a temporary measure for extraordinary or emergency purposes, including the payment of dividends and the settlement of securities transactions which otherwise might require untimely dispositions of Acquiring Fund securities. When the Acquiring Fund is utilizing leverage, the fees paid to the Investment Advisor for investment advisory and management services will be higher than if the Acquiring Fund did not utilize leverage because the fees paid will be calculated based on the Acquiring Funds net assets plus the proceeds of any outstanding borrowings used for leverage and the issuance of preferred stock.
The Acquiring Funds use of leverage is premised upon the expectation that the cost of the leverage used to purchase additional assets will be lower than the return the Acquiring Fund achieves on its investments with the proceeds of the borrowings or the issuance of preferred stock. Such differences in return may result from the short term nature of the Acquiring Funds borrowing compared to the long term nature of its investments. Because the total assets of the Acquiring Fund (including the assets obtained from leverage) will be invested in higher yielding portfolio investments, the holders of common stock will be the beneficiaries of the incremental return. Should the differential between the underlying assets and cost of leverage narrow, the incremental return pick up will be reduced. Furthermore, if long term rates rise, the common stock net asset value will reflect the decline in the value of portfolio holdings resulting therefrom.
Leverage creates risks for holders of common stock, including the likelihood of greater volatility of net asset value and market price of common shares or fluctuations in dividends paid on common stock, the risk that fluctuations in interest rates on borrowings and short term debt or in the dividend rates on any preferred stock may affect the return to the holders of common stock and increased operating costs which may reduce the Acquiring Funds total return. To the extent the income or capital appreciation derived from securities purchased with funds received from leverage exceeds the cost of leverage, the Acquiring Funds return will be greater than if leverage had not been used. Conversely, if the income or capital appreciation from the securities purchased with such funds is not sufficient to cover the cost of leverage, the return of the Acquiring Fund will be less than if leverage had not been used, and therefore the amount available for distribution to stockholders as dividends and other distributions will be reduced. In the latter case, the Investment Advisor in its best judgment nevertheless may determine to maintain the Acquiring Funds leveraged position if it expects that the benefits to the Acquiring Funds stockholders of maintaining the leveraged position will outweigh the current reduced return. Capital raised through leverage will be subject to interest costs or dividend payments that may or may not exceed the income and appreciation on the assets purchased. The Acquiring Fund also may be required to maintain minimum average balances in connection with borrowings or to pay a commitment or other fee to maintain a line of credit; either of these requirements will increase the cost of borrowing over the stated interest rate. The issuance of additional classes of preferred stock involves offering expenses and other costs and may limit the Acquiring Funds freedom to pay dividends on common shares or to engage in other activities. Borrowings and the issuance of a class of preferred stock each create an opportunity for greater return per share of common stock, but at the same time such leveraging is a speculative technique in that it will increase the Acquiring Funds exposure to capital risk. Unless the income and appreciation, if any, on assets acquired with borrowed funds or offering proceeds exceed the cost of borrowing or issuing additional classes of securities, the use of leverage will diminish the investment performance of the Acquiring Fund compared with what it would have been without leverage.
Certain types of borrowings may result in the Acquiring Fund being subject to covenants in credit agreements, including those relating to asset coverage, borrowing base and portfolio composition requirements and additional covenants that may affect the Acquiring Funds ability to pay dividends and distributions on the common stock in certain instances. The Acquiring Fund may also be required to pledge its assets to the lenders in connection with certain types of borrowing. The Investment Advisor does not anticipate that these covenants or restrictions will adversely affect its ability to manage the Acquiring Funds portfolio in accordance with the Acquiring Funds investment objectives and policies. Due to these covenants or restrictions, however, the Acquiring Fund may be forced to liquidate investments at times and at prices that are not favorable to the Acquiring Fund, or the Acquiring Fund may be forced to forgo investments that the Investment Advisor otherwise views as favorable. The Acquiring Fund may be subject to certain restrictions on investments imposed
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by guidelines of one or more nationally recognized rating organizations which may issue ratings for the short term debt instruments or preferred stock issued by the Acquiring Fund. These guidelines may impose asset coverage or portfolio composition requirements that are more stringent than those imposed by the 1940 Act. It is not anticipated that these covenants or guidelines will impede the Investment Advisor from managing the Acquiring Funds portfolio in accordance with the Acquiring Funds investment objectives and policies.
Under the 1940 Act, the Acquiring Fund is not permitted to issue senior securities if, immediately after the issuance of such leverage, the Acquiring Fund would have an asset coverage ratio (as defined in the 1940 Act) of less than 300% with respect to indebtedness or less than 200% with respect to preferred stock. The 1940 Act also provides that the Acquiring Fund may not declare distributions or purchase its stock (including through tender offers), if immediately after doing so it will have an asset coverage ratio of less than 300% or 200%, as applicable. Under the 1940 Act, certain short-term borrowings (such as for cash management purposes) are not subject to these limitations if (i) repaid within 60 days, (ii) not extended or renewed and (iii) not in excess of 5% of the total assets of the Acquiring Fund.
The Acquiring Funds willingness to borrow money and issue preferred stock for investment purposes, and the amount it will borrow or issue, will depend on many factors, the most important of which are investment outlook, market conditions and interest rates. Successful use of a leveraging strategy depends on the Investment Advisors ability to correctly predict 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.
Assuming the utilization of leverage by borrowings in the amount of approximately 30% of the Acquiring Funds total assets, and an annual interest rate of 0.95% payable on such leverage based on market rates as of the date of this Joint Proxy Statement/Prospectus, the annual return that the Acquiring Funds portfolio must experience (net of expenses) in order to cover such interest payments would be 0.29%
The following table is designed to illustrate the effect, on the return to a holder of common stock, of the leverage obtained by borrowings in the amount of approximately 30% of the Acquiring Funds total assets, assuming hypothetical annual returns on the Acquiring Funds portfolio of minus 10% to plus 10%. As the table shows, leverage generally increases the return to stockholders when portfolio return is positive and greater than the cost of leverage and decreases the return when 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 (net of expenses) |
(10 | )% | (5 | )% | 0 | % | 5 | % | 10 | % | ||||||||||
Corresponding Common Stock Return |
(14.69 | )% | (7.55 | )% | (0.41 | )% | 6.74 | % | 13.88 | % |
Indexed and Inverse Floating Obligations
The Acquiring Fund may invest in securities whose potential returns are directly related to changes in an underlying index or interest rate, known as indexed securities. The return on indexed securities will rise when the underlying index or interest rate rises and fall when the index or interest rate falls. The Acquiring Fund also may invest in securities whose return is inversely related to changes in an interest rate (inverse floaters). In general, inverse floaters change in value in a manner that is opposite to most bondsthat is, interest rates on inverse floaters will decrease when short term rates increase and increase when short term rates decrease. Changes in interest rates generally, or the interest rate of the other security or index, inversely affect the interest rate paid on the inverse floater, with the result that the inverse floaters price will be considerably more volatile than that of a fixed rate bond. Inverse floaters are typically create by depositing an income-producing instrument in a trust. The trust in turn issues a variable rate security and inverse floaters. The interest rate for the variable rate security is typically determined by an index or an auction process, while the inverse floater holder receives the balance of the income from the underlying income-producing instrument less an auction fee. The market prices of inverse floaters may be highly sensitive to changes in interest rates and prepayment rates on the underlying securities, and may decrease significantly when interest rates increase or prepayment rates change.
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Investments in indexed securities and inverse floaters may subject the Acquiring Fund to the risk of reduced or eliminated interest payments. Investments in indexed securities also may subject the Acquiring Fund to loss of principal. In addition, certain indexed securities and inverse floaters may increase or decrease in value at a greater rate than the underlying interest rate, which effectively leverages the Acquiring Funds investment. As a result, the market value of such securities will generally be more volatile than that of fixed rate securities. Both indexed securities and inverse floaters can be derivative securities and can be considered speculative.
Interest Rate Transactions
In order to seek to hedge the value of the Acquiring Funds portfolio against interest rate fluctuations or to seek to enhance the Acquiring Funds return, the Acquiring Fund may enter into various interest rate transactions such as interest rate swaps and the purchase or sale of interest rate caps and floors. The Acquiring Fund may enter into these transactions to preserve a return or spread on a particular investment or portion of its portfolio, to protect against any increase in the price of securities the Acquiring Fund anticipates purchasing at a later date or to seek to enhance its return. However, the Acquiring Fund also may invest in interest rate swaps to seek to enhance income or increase the Acquiring Funds yield, for example, during periods of steep interest rate yield curves (i.e., wide differences between short term and long term interest rates). The Acquiring Fund is not required to pursue these portfolio strategies and may choose not to do so. The Acquiring Fund cannot guarantee that any strategies it uses will work.
In an interest rate swap, the Acquiring Fund exchanges with another party their respective commitments to pay or receive interest (e.g., an exchange of fixed rate payments for floating rate payments). For example, if the Acquiring Fund holds a debt instrument with an interest rate that is reset only once each year, it may swap the right to receive interest at this fixed rate for the right to receive interest at a rate that is reset every week. This would enable the Acquiring Fund to offset a decline in the value of the debt instrument due to rising interest rates but would also limit its ability to benefit from falling interest rates. Conversely, if the Acquiring Fund holds a debt instrument with an interest rate that is reset every week and it would like to lock in what it believes to be a high interest rate for one year, it may swap the right to receive interest at this variable weekly rate for the right to receive interest at a rate that is fixed for one year. Such a swap would protect the Acquiring Fund from a reduction in yield due to falling interest rates and may permit the Acquiring Fund to seek to enhance its income through the positive differential between one week and one year interest rates, but would preclude it from taking full advantage of rising interest rates.
The Acquiring Fund usually will enter into interest rate swaps on a net basis (i.e., the two payment streams are netted out with the Acquiring Fund receiving or paying, as the case may be, only the net amount of the two payments). The net amount of the excess, if any, of the Acquiring Funds obligations over its entitlements with respect to each interest rate swap will be accrued on a daily basis, and an amount of cash or liquid instruments having an aggregate net asset value at least equal to the accrued excess will be segregated by the Acquiring Funds custodian. If the interest rate swap transaction is entered into on other than a net basis, the full amount of the Acquiring Funds obligations will be accrued on a daily basis, and the full amount of the Acquiring Funds obligations will be segregated by the Acquiring Funds custodian.
The Acquiring Fund also may engage in interest rate transactions in the form of purchasing or selling interest rate caps or floors. The purchase of an interest rate cap entitles the purchaser, to the extent that a specified index exceeds a predetermined interest rate, to receive payments of interest equal to the difference of the index and the predetermined rate on a notional principal amount (i.e., the reference amount with respect to which interest obligations are determined although no actual exchange of principal occurs) from the party selling such interest rate cap. The purchase of an interest rate floor entitles the purchaser, to the extent that a specified index falls below a predetermined interest rate, to receive payments of interest at the difference of the index and the predetermined rate on a notional principal amount from the party selling such interest rate floor. The Acquiring Fund will not enter into caps or floors if, on a net basis, the aggregate notional principal amount with respect to such agreements exceeds the net assets of the Acquiring Fund.
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Typically, the parties with which the Acquiring Fund will enter into interest rate transactions will be broker-dealers and other financial institutions. The Acquiring Fund will not enter into any interest rate swap, cap or floor transaction unless the unsecured senior debt or the claims-paying ability of the other party thereto is rated investment grade quality by at least one nationally recognized statistical rating organization at the time of entering into such transaction or whose creditworthiness is believed by the Investment Advisor to be equivalent to such rating. If there is a default by the other party to an uncleared interest rate swap transaction, generally the Acquiring Fund will have contractual remedies pursuant to the agreements related to the transaction. With respect to interest rate swap transactions cleared through a central clearing counterparty, a clearing organization will be substituted for each party and will guaranty the parties performance under the swap agreement. However, there can be no assurance that the clearing organization will satisfy its obligation to the Acquiring Fund. Certain Federal income tax requirements may limit the Acquiring Funds ability to engage in interest rate swaps. Payments from transactions in interest rate swaps generally will be taxable as ordinary income to stockholders.
Credit Default Swap Agreements
The Acquiring Fund may enter into credit default swap agreements for hedging purposes or to enhance its returns. The credit default swap agreement may have as reference obligations one or more securities that are not currently held by the Acquiring Fund. The protection buyer in a credit default contract may be obligated to pay the protection seller an upfront or a periodic stream of payments over the term of the contract provided that no credit event on a reference obligation has occurred. If a credit event occurs, the seller generally must pay the buyer the par value (full notional value) of the swap in exchange for an equal face amount of deliverable obligations of the reference entity described in the swap, or the seller may be required to deliver the related net cash amount, if the swap is cash settled. The Acquiring Fund may be either the buyer or seller in the transaction. If the Acquiring Fund is a buyer and no credit event occurs, the Acquiring Fund may recover nothing if the swap is held through its termination date. However, if a credit event occurs, the buyer generally 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. As a seller, the Acquiring Fund generally receives an upfront payment or a fixed rate of income throughout the term of the swap, which typically is between six months and three years, provided that there is no credit event. If a credit event occurs, generally the seller must 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. As the seller, the Acquiring Fund would effectively add leverage to its portfolio because, in addition to its total assets, the Acquiring Fund would be subject to investment exposure on the notional amount of the swap.
Credit default swap agreements generally involve greater risks than if the Acquiring Fund were to have invested in the reference obligation directly since in addition to general market risks, credit default swaps are also subject to illiquidity risk, counterparty risk and credit risks. The Acquiring Fund will enter into credit default swap agreements only with counterparties who are rated investment grade quality by at least one nationally recognized statistical rating organization at the time of entering into such transaction or whose creditworthiness is believed by the Investment Advisor to be equivalent to such rating. A buyer generally also will lose its investment and recover nothing should no credit event occur and the swap is held to its termination date. If a credit event were to occur, the value of any deliverable obligation received by the seller, coupled with the upfront or periodic payments previously received, may be less than the full notional value it pays to the buyer, resulting in a loss of value to the seller. The Acquiring Funds obligations under a credit default swap agreement will be accrued daily (offset against any amounts owing to the Acquiring Fund). The Acquiring Fund will, at all times, segregate with its custodian in connection with each such transaction unencumbered liquid securities or cash with a value at least equal to the Acquiring Funds exposure (any accrued but unpaid net amounts owed by the Acquiring Fund to any counterparty), on a marked-to-market basis (as calculated pursuant to requirements of the SEC). Such segregation will ensure that the Acquiring Fund has assets available to satisfy its obligations with respect to the transaction and will avoid any potential leveraging of the Acquiring Funds portfolio. Such segregation will not limit the Acquiring Funds exposure to loss.
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Options
Call Options . The Acquiring Fund may purchase call options on any of the types of securities in which it may invest. A purchased call option gives the Acquiring Fund the right to buy, and obligates the seller to sell, the underlying security at the exercise price at any time during the option period. The Acquiring Fund may also purchase and sell call options on indices. Index options are similar to options on securities except that, rather than taking or making delivery of securities underlying the option at a specified price upon exercise, an index option gives the holder the right to receive cash upon exercise of the option if the level of the index upon which the option is based is greater than the exercise price of the option.
The Acquiring Fund also is authorized to write (i.e., sell) covered call options on the securities in which it invests and to enter into closing purchase transactions with respect to certain of such options. A covered call option is an option in which the Acquiring Fund, in return for a premium, gives another party a right to buy specified securities owned by the Acquiring Fund at a specified future date and price set at the time of the contract. The principal reason for writing call options is the attempt to realize, through the receipt of premiums, a greater return than would be realized on the securities alone. By writing covered call options, the Acquiring Fund gives up the opportunity, while the option is in effect, to profit from any price increase in the underlying security above the option exercise price. In addition, the Acquiring Funds ability to sell the underlying security will be limited while the option is in effect unless the Acquiring Fund enters into a closing purchase transaction. A closing purchase transaction cancels out the Acquiring Funds position as the writer of an option by means of an offsetting purchase of an identical option prior to the expiration of the option it has written. Covered call options also serve as a partial hedge to the extent of the premium received against the price of the underlying security declining.
The Acquiring Fund also is authorized to write (i.e., sell) uncovered call options on securities in which it may invest but that are not currently held by the Acquiring Fund. The principal reason for writing uncovered call options is to realize income without committing capital to the ownership of the underlying securities. When writing uncovered call options, the Acquiring Fund must deposit and maintain sufficient margin with the broker dealer through which it made the uncovered call option as collateral to ensure that the securities can be purchased for delivery if and when the option is exercised. In addition, the Acquiring Fund will segregate with its custodian in connection with each such transaction unencumbered liquid securities or cash with a value at least equal to the Acquiring Funds exposure (the difference between the unpaid amounts owed by the Acquiring Fund on such transaction minus any collateral deposited with the broker dealer), on a marked-to-market basis (as calculated pursuant to requirements of the SEC). Such segregation will ensure that the Acquiring Fund has assets available to satisfy its obligations with respect to the transaction and will avoid any potential leveraging of the Acquiring Funds portfolio. Such segregation will not limit the Acquiring Funds exposure to loss. During periods of declining securities prices or when prices are stable, writing uncovered calls can be a profitable strategy to increase the Acquiring Funds income with minimal capital risk. Uncovered calls are riskier than covered calls because there is no underlying security held by the Acquiring Fund that can act as a partial hedge. Uncovered calls have speculative characteristics and the potential for loss is unlimited. When an uncovered call is exercised, the Acquiring Fund must purchase the underlying security to meet its call obligation. There is also a risk, especially with less liquid preferred and debt securities, that the securities may not be available for purchase. If the purchase price exceeds the exercise price, the Acquiring Fund will lose the difference.
Put Options . The Acquiring Fund is authorized to purchase put options to seek to hedge against a decline in the value of its securities or to seek to enhance its return. By buying a put option, the Acquiring Fund acquires a right to sell the underlying security at the exercise price, thus limiting the Acquiring Funds risk of loss through a decline in the market value of the security until the put option expires. The amount of any appreciation in the value of the underlying security will be partially offset by the amount of the premium paid for the put option and any related transaction costs. Prior to its expiration, a put option may be sold in a closing sale transaction and profit or loss from the sale will depend on whether the amount received is more or less than the premium paid for the put option plus the related transaction costs. A closing sale transaction cancels out the Acquiring Funds position as the purchaser of an option by means of an offsetting sale of an identical option prior to the expiration of the option it has purchased. The Acquiring Fund also may purchase uncovered put options.
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The Acquiring Fund also has authority to write (i.e., sell) put options on the types of securities that may be held by the Acquiring Fund, provided that such put options are covered, meaning that such options are secured by segregated, liquid instruments. The Acquiring Fund will receive a premium for writing a put option, which increases the Acquiring Funds return. The Acquiring Fund will not sell puts if, as a result, more than 50% of the Acquiring Funds assets would be required to cover its potential obligations under its hedging and other investment transactions.
The Acquiring Fund is also authorized to write (i.e., sell) uncovered put options on securities in which it may invest but that the Acquiring Fund does not currently have a corresponding short position or has not deposited cash equal to the exercise value of the put option with the broker dealer through which it made the uncovered put option as collateral. The principal reason for writing uncovered put options is to receive premium income and to acquire a security at a net cost below the current market value. The Acquiring Fund has the obligation to buy the securities at an agreed upon price if the securities decrease below the exercise price. If the securities price increases during the option period, the option will expire worthless and the Acquiring Fund will retain the premium and will not have to purchase the securities at the exercise price. The Acquiring Fund will segregate with its custodian in connection with such transaction unencumbered liquid securities or cash with a value at least equal to the Acquiring Funds exposure, on a marked-to-market basis (as calculated pursuant to requirements of the SEC). Such segregation will ensure that the Acquiring Fund has assets available to satisfy its obligations with respect to the transaction and will avoid any potential leveraging of the Acquiring Funds portfolio. Such segregation will not limit the Acquiring Funds exposure to loss.
Financial Futures and Options Thereon
The Acquiring Fund is authorized to engage in transactions in financial futures contracts (futures contracts) and related options on such futures contracts either as a hedge against adverse changes in the market value of its portfolio securities or to seek to enhance the Acquiring Funds income. A futures contract is an agreement between two parties which obligates the purchaser of the futures contract, to buy and the seller of a futures contract to sell a security for a set price on a future date or, in the case of an index futures contract, to make and accept a cash settlement based upon the difference in value of the index between the time the contract was entered into and the time of its settlement. A majority of transactions in futures contracts, however, do not result in the actual delivery of the underlying instrument or cash settlement, but are settled through liquidation (i.e., by entering into an offsetting transaction). Futures contracts have been designed by boards of trade which have been designated contract markets by the Commodities Futures Trading Commission (the CFTC). Transactions by the Acquiring Fund in futures contracts and financial futures are subject to limitations as described under Restrictions on the Use of Futures Transactions.
The Acquiring Fund may sell financial futures contracts in anticipation of an increase in the general level of interest rates. Generally, as interest rates rise, the market values of securities that may be held by the Acquiring Fund will fall, thus reducing the net asset value of the Acquiring Fund. However, as interest rates rise, the value of the Acquiring Funds short position in the futures contract also will tend to increase, thus offsetting all or a portion of the depreciation in the market value of the Acquiring Funds investments which are being hedged. While the Acquiring Fund will incur commission expenses in selling and closing out futures positions, these commissions are generally less than the transaction expenses which the Acquiring Fund would have incurred had the Acquiring Fund sold portfolio securities in order to reduce its exposure to increases in interest rates. The Acquiring Fund also may purchase financial futures contracts in anticipation of a decline in interest rates when it is not fully invested in a particular market in which it intends to make investments to gain market exposure that may in part or entirely offset an increase in the cost of securities it intends to purchase. It is anticipated that, in a substantial majority of these transactions, the Acquiring Fund will purchase securities upon termination of the futures contract.
The Acquiring Fund also has authority to purchase and write call and put options on futures contracts. Generally, these strategies are utilized under the same market and market sector conditions (i.e., conditions
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relating to specific types of investments) in which the Acquiring Fund enters into futures transactions. The Acquiring Fund may purchase put options or write call options on futures contracts rather than selling the underlying futures contract in anticipation of a decrease in the market value of securities or an increase in interest rates. Similarly, the Acquiring Fund may purchase call options, or write put options on futures contracts, as a substitute for the purchase of such futures to hedge against the increased cost resulting from an increase in the market value or a decline in interest rates of securities which the Acquiring Fund intends to purchase.
The Acquiring Fund may engage in options and futures transactions on exchanges and options in the over-the-counter markets (OTC options). In general, exchange-traded contracts are third-party contracts (i.e., performance of the parties obligation is guaranteed by an exchange or clearing corporation) with standardized strike prices and expiration dates. OTC options transactions are two-party contracts with price and terms negotiated by the buyer and seller. See Restrictions on OTC Options below for information as to restrictions on the use of OTC options.
Restrictions on the Use of Futures Transactions . Under regulations of the CFTC, the futures trading activity described herein will not result in the Acquiring Fund being deemed a commodity pool, as defined under such regulations, provided that the Acquiring Fund adheres to certain restrictions. In particular, the Acquiring Fund may purchase and sell futures contracts and options thereon (i) for bona fide hedging purposes and (ii) for non-hedging purposes, if the aggregate initial margin and premiums required to establish positions in such contracts and options does not exceed 5% of the liquidation value of the Acquiring Funds portfolio, after taking into account unrealized profits and unrealized losses on any such contracts and options. Margin deposits may consist of cash or securities acceptable to the broker and the relevant contract market.
When the Acquiring Fund purchases a futures contract or writes a put option or purchases a call option thereon, an amount of cash or liquid instruments will be segregated with the Acquiring Funds custodian so that the amount so segregated, plus the amount of variation margin held in the account of its broker, equals the market value of the futures contract, thereby ensuring that the use of such futures is unleveraged.
Restrictions on OTC Options . The Acquiring Fund will engage in transactions in OTC options only with banks or dealers which have capital of at least $50 million or whose obligations are guaranteed by an entity having capital of at least $50 million. OTC options and assets used to cover OTC options written by the Acquiring Fund are considered by the staff of the SEC to be illiquid. The illiquidity of such options or assets may prevent a successful sale of such options or assets, result in a delay of sale, or reduce the amount of proceeds that might otherwise be realized.
Risk Factors in Interest Rate Transactions, Options and Futures Transactions
The use of interest rate transactions is a highly specialized activity that involves investment techniques and risks different from those associated with ordinary portfolio securities transactions. Interest rate transactions involve the risk of an imperfect correlation between the index used in the hedging transaction and that pertaining to the securities that are the subject of such transaction. If the Investment Advisor is incorrect in its forecasts of market values, interest rates and other applicable factors, the investment performance of the Acquiring Fund would diminish compared with what it would have been if these investment techniques were not used. In addition, interest rate transactions that may be entered into by the Acquiring Fund 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 Acquiring Fund is contractually obligated to make. If the security underlying an interest rate swap is prepaid and the Acquiring Fund continues to be obligated to make payments to the other party to the swap, the Acquiring Fund would have to make such payments from another source. If the other party to an interest rate swap defaults, the Acquiring Funds risk of loss consists of the net amount of interest payments that the Acquiring Fund contractually is entitled to receive. In the case of a purchase by the Acquiring Fund of an interest rate cap or floor, the amount of loss is limited to the fee paid. Since interest
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rate transactions are individually negotiated, the Investment Advisor expects to achieve an acceptable degree of correlation between the Acquiring Funds rights to receive interest on securities and its rights and obligations to receive and pay interest pursuant to interest rate swaps.
Use of options and futures transactions to hedge the portfolio involves the risk of imperfect correlation in movements in the price of options and futures and movements in the prices of the securities that are the subject of the hedge. If the price of the options or futures moves more or less than the price of the subject of the hedge, the Acquiring Fund will experience a gain or loss which will not be completely offset by movements in the price of the subject of the hedge. The risk particularly applies to the Acquiring Funds use of futures and options thereon when it uses such instruments as a so-called cross-hedge, which means that the security that is the subject of the futures contract is different from the security being hedged by the contract. Use of options and futures and options thereon through uncovered call options and uncovered put options are highly speculative strategies. If the price of the uncovered option moves in the direction not anticipated by the Acquiring Fund, the Acquiring Funds losses will not be limited.
Prior to exercise or expiration, an exchange-traded option position can only be terminated by entering into a closing purchase or sale transaction, which requires a secondary market on an exchange for call or put options of the same series. The Acquiring Fund intends to enter into options and futures transactions, on an exchange or in the over-the-counter market, only if there appears to be a liquid secondary market for such options and futures. There can be no assurance, however, that a liquid secondary market will exist at any specific time. Thus, it may not be possible to close an options or futures position. The inability to close options and futures positions also could have an adverse impact on the Acquiring Funds ability to effectively hedge its portfolio. There is also the risk of loss, by the Acquiring Fund, of margin deposits or collateral in the event of the bankruptcy of a broker with whom the Acquiring Fund has an open position in an option, a futures contract or an option related to a futures contract.
Short Sales
The Acquiring Fund may make short sales of securities, provided that the market value of all securities sold short does not exceed 10% of its total assets. A short sale is a transaction in which the Acquiring Fund sells a security it does not own in anticipation that the market price of that security will decline. The Acquiring Fund may make short sales both as a form of hedging to offset potential declines in long positions in similar securities and in order to seek to enhance return.
When the Acquiring Fund makes a short sale, it must borrow the security sold short and deliver collateral to the broker dealer through which it made the short sale to cover its obligation to deliver the security upon conclusion of the sale. The Acquiring Fund may have to pay a fee to borrow particular securities and is often obligated to pay over any payments received on such borrowed securities.
The Acquiring Funds obligation to replace the borrowed security will be secured by collateral deposited with the broker dealer, usually cash, U.S. government securities or other liquid securities similar to those borrowed. The Acquiring Fund will also be required to segregate similar collateral with its custodian to the extent, if any, necessary so that the value of both collateral amounts in the aggregate is at all times equal to at least 100% of the current market value of the security sold short. Depending on arrangements made with the broker dealer from which it borrowed the security regarding payment over of any payments received by the Acquiring Fund on such security, the Acquiring Fund may not receive any payments (including interest) on its collateral deposited with such broker dealer.
If the price of the security sold short increases between the time of the short sale and the time the Acquiring Fund replaces the borrowed security, the Acquiring Fund will incur a loss. Conversely, if the price declines, the Acquiring Fund will realize a gain. Any gain will be decreased, and any loss increased, by the transaction costs described above. Although the Acquiring Funds gain is limited to the price at which it sold the security short, its potential loss is theoretically unlimited.
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The Acquiring Fund also may make short sales against the box. Short sales against the box are not subject to the foregoing 10% limitation. These transactions will involve either short sales of securities retained in the Acquiring Funds portfolio or securities which it has the right to acquire without the payment of further consideration.
Investments in non-U.S. Securities
The Acquiring Fund may invest without limitation in securities of issuers domiciled outside of the United States or that are denominated in various foreign currencies and multinational foreign currency units. Investment in such securities involves certain risks not involved in domestic investments.
Public Information . Many of the non-U.S. securities held by the Acquiring Fund will not be registered with the SEC nor will the issuers thereof be subject to the reporting requirements of such agency. Accordingly, there may be less publicly available information about the foreign issuer of such securities than about a U.S. issuer, and such foreign issuers may not be subject to accounting, auditing and financial reporting standards and requirements comparable to those of U.S. issuers. Traditional investment measurements, such as price/earnings ratios, as used in the United States, may not be applicable to such securities, particularly those issued in certain smaller, emerging foreign capital markets. Foreign issuers, and issuers in smaller, emerging capital markets in particular, generally are not subject to uniform accounting, auditing and financial reporting standards or to practices and requirements comparable to those applicable to domestic issuers.
Trading Volume, Clearance and Settlement . Foreign financial markets, while often growing in trading volume have, for the most part, substantially less volume than U.S. markets, and securities of many foreign companies are less liquid and their prices may be more volatile than securities of comparable domestic companies. Foreign markets also have different clearance and settlement procedures, and in certain markets there have been times when settlements have failed to keep pace with the volume of securities transactions, making it difficult to conduct such transactions. Further, satisfactory custodial services for investment securities may not be available in some countries having smaller, emerging capital markets, which may result in the Acquiring Fund incurring additional costs and delays in transporting and custodying such securities outside such countries. Delays in settlement could result in periods when assets of the Acquiring Fund are uninvested and no return is earned thereon. The inability of the Acquiring Fund to make intended security purchases due to settlement problems or the risk of intermediary counterparty failures could cause the Acquiring Fund to miss attractive investment opportunities. The inability to dispose of a portfolio security due to settlement problems could result either in losses to the Acquiring Fund due to subsequent declines in the value of such portfolio security, or if the Acquiring Fund has entered into a contract to sell the security, could result in possible liability to the purchaser.
Government Supervision and Regulation . There generally is less governmental supervision and regulation of exchanges, brokers and issuers in foreign countries than there is in the United States. For example, there may be no comparable provisions under certain foreign laws to insider trading and similar investor protection securities laws that apply with respect to securities transactions consummated in the United States. Further, brokerage commissions and other transaction costs on non-U.S. securities exchanges generally are higher than in the United States.
Restrictions on Foreign Investment . Some countries prohibit or impose substantial restrictions on investments in their capital markets, particularly their equity markets, by foreign entities such as the Acquiring Fund. As illustrations, certain countries require governmental approval prior to investments by foreign persons, or limit the amount of investment by foreign persons in a particular company, or limit the investment by foreign persons in a company to only a specific class of securities that may have less advantageous terms than securities of the company available for purchase by nationals. Certain countries may restrict investment opportunities in issuers or industries deemed important to national interests.
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A number of countries have authorized the formation of closed-end investment companies to facilitate indirect foreign investment in their capital markets. In accordance with the 1940 Act, the Acquiring Fund may invest up to 10% of its total assets in securities of closed-end investment companies, not more than 5% of which may be invested in any one such company. This restriction on investments in securities of closed-end investment companies may limit opportunities for the Acquiring Fund to invest indirectly in certain smaller capital markets. Shares of certain closed-end investment companies may at times be acquired only at market prices representing premiums to their net asset values. If the Acquiring Fund acquires shares in closed-end investment companies, stockholders would bear both their proportionate share of the Acquiring Funds expenses (including investment advisory fees) and, indirectly, the expenses of such closed-end investment companies. The Acquiring Fund also may seek, at its own cost, to create its own investment entities under the laws of certain countries.
In some countries, banks or other financial institutions may constitute a substantial number of the leading companies or companies with the most actively traded securities. The 1940 Act limits the Acquiring Funds ability to invest in any security of an issuer which, in its most recent fiscal year, derived more than 15% of its revenues from securities related activities, as defined by the rules thereunder. These provisions may also restrict the Acquiring Funds investments in certain foreign banks and other financial institutions.
Foreign Sub-Custodians and Securities Depositories . Rules adopted under the 1940 Act permit the Acquiring Fund to maintain its non-U.S. securities and cash in the custody of certain eligible non-U.S. banks and securities depositories. Certain banks in foreign countries may not be eligible sub-custodians for the Acquiring Fund, in which event the Acquiring Fund may be precluded from purchasing securities in certain foreign countries in which it otherwise would invest or the Acquiring Fund may incur additional costs and delays in providing transportation and custody services for such securities outside of such countries. The Acquiring Fund may encounter difficulties in effecting on a timely basis portfolio transactions with respect to any securities of issuers held outside their countries. Other banks that are eligible foreign sub-custodians may be recently organized or otherwise lack extensive operating experience. In addition, in certain countries there may be legal restrictions or limitations on the ability of the Acquiring Fund to recover assets held in custody by foreign sub-custodians in the event of the bankruptcy of the sub-custodian.
Other Investment Strategies
Repurchase Agreements and Purchase and Sale Contracts
The Acquiring Fund may invest in securities pursuant to repurchase agreements and purchase and sale contracts. Repurchase agreements and purchase and sale contracts may be entered into only with a member bank of the Federal Reserve System or primary dealer in U.S. Government securities. Under such agreements, the bank or primary dealer agrees, upon entering into the contract, to repurchase the security at a mutually agreed upon time and price, thereby determining the yield during the term of the agreement. This results in a fixed rate of return insulated from market fluctuations during such period. In the case of repurchase agreements, the prices at which the trades are conducted do not reflect accrued interest on the underlying obligations; whereas, in the case of purchase and sale contracts, the prices take into account accrued interest. Such agreements usually cover short periods, such as under one week. Repurchase agreements may be construed to be collateralized loans by the purchaser to the seller secured by the securities transferred to the purchaser. In the case of a repurchase agreement, the Acquiring Fund will require the seller to provide additional collateral if the market value of the securities falls below the repurchase price at any time during the term of the repurchase agreement; the Acquiring Fund does not have the right to seek additional collateral in the case of purchase and sale contracts. In the event of default by the seller under a repurchase agreement construed to be a collateralized loan, the underlying securities are not owned by the Acquiring Fund but only constitute collateral for the sellers obligation to pay the repurchase price. Therefore, the Acquiring Fund may suffer time delays and incur costs or possible losses in connection with the disposition of the collateral. A purchase and sale contract differs from a repurchase agreement in that the contract arrangements stipulate that the securities are owned by the Acquiring Fund. In the event of a default under such a repurchase agreement or a purchase and sale contract, instead of the contractual
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fixed rate of return, the rate of return to the Acquiring Fund shall be dependent upon intervening fluctuations of the market value of such security and the accrued interest on the security. In such event, the Acquiring Fund would have rights against the seller for breach of contract with respect to any losses arising from market fluctuations following the failure of the seller to perform.
Reverse Repurchase Agreements
The Acquiring 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 Acquiring Fund with an agreement by the Acquiring Fund to repurchase the securities at an agreed upon price, date and interest payment. The use by the Acquiring Fund of reverse repurchase agreements involves many of the same risks of leverage described under Risk Factors and Special ConsiderationsLeverage and Additional Investment PoliciesLeverage above since the proceeds derived from such reverse repurchase agreements may be invested in additional securities. At the time the Acquiring Fund enters into a reverse repurchase agreement, it may segregate with the custodian liquid instruments having a value not less than the repurchase price (including accrued interest). If the Acquiring Fund segregates such liquid instruments, a reverse repurchase agreement will not be considered a senior security under the 1940 Act and therefore will not be considered a borrowing by the Acquiring Fund, however, under circumstances in which the Acquiring Fund does not segregate such liquid instruments, such reverse repurchase agreement will be considered a borrowing for the purpose of the Acquiring 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 Acquiring 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 Acquiring Fund in connection with the reverse repurchase agreement may decline in price. In the event 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 Acquiring Funds obligation to repurchase the securities, and the Acquiring Funds use of the proceeds of the reverse repurchase agreement may effectively be restricted pending such decision. In addition, to the extent that the proceeds of the reverse purchase agreement are less than the value of the securities subject to such an agreement, the Acquiring Fund would hear the risk of loss.
Lending of Portfolio Securities
The Acquiring Fund may lend securities with a value not exceeding 33 1/3% of its total assets or the limit prescribed by applicable law to banks, brokers and other financial institutions. In return, the Acquiring Fund receives collateral in cash or securities issued or guaranteed by the U.S. Government, which will be maintained at all times in an amount equal to at least 100% of the current market value of the loaned securities.
The Acquiring Fund maintains the ability to obtain the right to vote or consent on proxy proposals involving material events affecting securities loaned. The Acquiring Fund receives the income on the loaned securities. Where the Acquiring Fund receives securities as collateral, the Acquiring Fund receives a fee for its loans from the borrower and does not receive the income on the collateral. Where the Acquiring Fund receives cash collateral, it may invest such collateral and retain the amount earned, net of any amount rebated to the borrower. As a result, the Acquiring Funds yield may increase. Loans of securities are terminable at any time and the borrower, after notice, is required to return borrowed securities within the standard time period for settlement of securities transactions. The Acquiring Fund is obligated to return the collateral to the borrower at the termination of the loan. The Acquiring Fund could suffer a loss in the event the Acquiring Fund must return the cash collateral and there are losses on investments made with the cash collateral. In the event the borrower defaults on any of its obligations with respect to a securities loan, the Acquiring Fund could suffer a loss where there are losses on investments made with the cash collateral or, where the value of the securities collateral falls below the market value of the borrowed securities. The Acquiring Fund could also experience delays and costs in gaining access to the collateral. The Acquiring Fund may pay reasonable finders, lending agent, administrative and
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custodial fees in connection with its loans. The Acquiring Fund will lend securities through an affiliate of the Advisors pursuant to the terms of an exemptive order under the 1940 Act, according to which the affiliate will receive compensation at market rates.
When-Issued and Forward Commitment Securities
The Acquiring Fund may purchase securities on a when-issued basis, and may purchase or sell securities on a forward commitment basis. When such transactions are negotiated, the price, which generally is expressed in yield terms, is fixed at the time the commitment is made, but delivery and payment for the securities take place at a later date. When-issued securities and forward commitments may be sold prior to the settlement date, but the Acquiring Fund will enter into when-issued and forward commitment transactions only with the intention of actually receiving or delivering the securities, as the case may be. If the Acquiring Fund disposes of the right to acquire a when-issued security prior to its acquisition or disposes of its right to deliver or receive against a forward commitment, it can incur a gain or loss. At the time the Acquiring Fund enters into a transaction on a when-issued or forward commitment basis, it will segregate with the custodian cash or other liquid instruments with a value not less than the value of the when-issued or forward commitment securities. The value of these assets will be monitored daily to ensure that their marked to market value at all times will exceed the corresponding obligations of the Acquiring Fund. There is always a risk that the securities may not be delivered, and the Acquiring Fund may incur a loss. Settlements in the ordinary course, which may take substantially more than five business days for mortgage-related securities, are not treated by the Acquiring Fund as when-issued or forward commitment transactions, and accordingly are not subject to the foregoing restrictions.
Standby Commitment Agreements
The Acquiring Fund from time to time may enter into standby commitment agreements. Such agreements commit the Acquiring Fund, for a stated period of time, to purchase a stated amount of a fixed income security that may be issued and sold to the Acquiring Fund at the option of the issuer. The price and coupon of the security is fixed at the time of the commitment. At the time of entering into the agreement the Acquiring Fund may be paid a commitment fee, regardless of whether or not the security ultimately is issued. The Acquiring Fund will enter into such agreements only for the purpose of investing in the security underlying the commitment at a yield and price which is considered advantageous to the Acquiring Fund. The Acquiring Fund at all times will segregate with the custodian cash or other liquid instruments with a value equal to the purchase price of the securities underlying the commitment.
There can be no assurance that securities subject to a standby commitment will be issued, and the value of the security, if issued, on the delivery date may be more or less than its purchase price. Since the issuance of the security underlying the commitment is at the option of the issuer, the Acquiring Fund may bear the risk of decline in the value of such security and may not benefit from an appreciation in the value of the security during the commitment period.
The purchase of a security subject to a standby commitment agreement and the related commitment fee will be recorded on the date on which the security reasonably can be expected to be issued and the value of the security thereafter will be reflected in the calculation of the Acquiring Funds net asset value. The cost basis of the security will be adjusted by the amount of the commitment fee. In the event the security is not issued, the commitment fee will be recorded as income on the expiration date of the standby commitment.
The Acquiring Fund may in the future employ new or additional investment strategies and hedging instruments if those strategies and instruments are consistent with the Acquiring Funds investment objectives and are permissible under applicable regulations governing the Acquiring Fund.
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Investment Restrictions
The following are fundamental investment restrictions of the Acquiring Fund and may not be changed without the approval of the holders of a majority of the Acquiring Funds outstanding common shares (which for this purpose and under the 1940 Act means the lesser of (i) 66 2/3% of the common shares represented at a meeting at which more than 50% of the outstanding common shares are represented or (ii) more than 50% of the outstanding common shares). The Acquiring Fund may not:
1. Make any investment inconsistent with the Acquiring Funds classification as a diversified company under the 1940 Act.
2. Make investments for the purpose of exercising control or management.
3. Purchase or sell real estate, commodities or commodity contracts, except that, to the extent permitted by applicable law, the Acquiring Fund may invest in securities directly or indirectly secured by real estate or interests therein or issued by entities that invest in real estate or interests therein, and the Acquiring Fund may purchase and sell financial futures contracts and options thereon.
4. Issue senior securities or borrow money except as permitted by Section 18 of the 1940 Act or as otherwise permitted by applicable law.
5. Underwrite securities of other issuers, except insofar as the Acquiring Fund may be deemed an underwriter under the Securities Act of 1933, as amended, in selling portfolio securities.
6. Make loans to other persons, except (i) the Acquiring Fund shall not be deemed to be making a loan to the extent that the Acquiring Fund purchases Corporate Loans or other debt instruments or enters into repurchase agreements or any similar instruments and (ii) the Acquiring Fund may lend its portfolio securities in an amount not in excess of 33 1/3% of its total assets, taken at market value, provided that such loans shall be made in accordance with the guidelines set forth in this Joint Proxy Statement/Prospectus.
7. Invest more than 25% of its total assets (taken at market value at the time of each investment) in the securities of issuers in any one industry; provided that this limitation shall not apply with respect to obligations issued or guaranteed by the U.S. Government or by its agencies or instrumentalities.
Additional investment restrictions adopted by the Acquiring Fund, which may be changed by the Board of Directors without stockholder approval, provide that the Acquiring Fund may not:
a. Purchase securities of other investment companies, except to the extent that such purchases are permitted by applicable law.
b. Mortgage, pledge, hypothecate or in any manner transfer, as security for indebtedness, any securities owned or held by the Acquiring Fund except as may be necessary in connection with borrowings mentioned in investment restriction (4) above or except as may be necessary in connection with transactions described under Investment Objectives and Policies of the Acquiring FundOther Investment Policies above.
c. Purchase any securities on margin, except that the Acquiring Fund may obtain such short term credit as may be necessary for the clearance of purchases and sales of portfolio securities (the deposit or payment by the Fund of initial or variation margin in connection with financial futures contracts and options thereon is not considered the purchase of a security on margin).
d. Change its policy of investing, under normal circumstances, at least 80% of the value of its assets in high yield securities, unless the Acquiring Fund provides its stockholders with at least 60 days prior written notice of such change. For these purposes, assets means net assets, including assets acquired from the sale of preferred stock, plus the amount of any borrowings for investment purposes.
If a percentage restriction on investment policies or the investment or use of assets set forth above is adhered to at the time a transaction is effected, later changes in percentage resulting from changing values will not be considered a violation.
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The Funds have substantially similar (but not identical) investment objectives, investment strategies and restrictions. The investment objectives, significant investment strategies and operating policies, and investment restrictions of the Combined Fund will be those of the Acquiring Fund.
Summary of Significant Differences in the Funds Investment Objectives and Policies
Investment Objectives . The primary investment objective of each of BHY and HIS is to provide high current income to shareholders. The primary investment objective of each of COY, CYE, HYV and HYT is to provide current income to shareholders. The secondary investment objective of each Fund is to provide shareholders with capital appreciation.
Corporate Loans . HYT, HYV, CYE and COY may invest up to 15% of its total assets in corporate loans. BHY may invest up to 25% of its total assets in corporate loans. HIS does not have any limitations with respect to corporate loans.
Distressed Securities . HYT, HYV, CYE, COY and BHY may invest up to 10% of its total assets in high yield securities which are the subject of bankruptcy proceedings or otherwise in default. HIS may not purchase securities rated D by Standard & Poors.
Preferred Shares . HYT may invest up to 15% of its total assets in preferred shares. HIS may invest up to 10% of its assets in preferred shares. HYV, CYE, COY and BHY do not have any limitations with respect to preferred shares.
Convertible Debt Securities . HYT may invest up to 15% of its total assets in convertible debt securities. None of the Target Funds have any limitations with respect to convertible debt securities.
Common Stock . HYT, HYV, CYE and COY do not have any limitations on investments in common stock. BHY may invest up to 20% of its total assets in common stock. HIS may not acquire common stock, except when (i) attached to or included in, or in connection with or incidental to, the Funds investment in a unit with income-generating securities that otherwise would be attractive to the Fund (including equity interests, or the substantial equivalent of equity interests, which are acquired through a follow-on offering for interests in an issuer that HIS previously acquired in connection with its investment in such income-generating securities); (ii) acquired through the exercise of equity features accompanying convertible securities held by the Fund, such as conversion or exchange of privileges or warrants for the acquisition of stock or equity interests of the same issuer or a different issuer; or (iii) in the case of an exchange offering whereby the equity security would be acquired with the intention of exchanging it for a debt security issued on a when-issued basis.
Non-U.S. Securities . HYT, HYV, CYE and COY may invest, without limitation, in non-U.S. securities or securities denominated in foreign currencies and multinational currency units. BHY may invest up to 35% of its total assets in debt securities of issuers domiciled outside of the United States or that are denominated in foreign currencies and multinational currency units; provided, however, that BHY may not invest more than 10% of the Funds net assets in emerging market issuers. HIS may invest up to 20% of its total assets in fixed-income securities issued by foreign governments and other foreign issuers and up to 5% of its total assets in foreign currency issues of foreign and domestic issuers. In addition, HIS may invest up to 5% of its total assets in Eurodollar certificates of deposit which are the obligations of foreign branches of U.S. banks and may invest without limitation in Canadian issuers whose securities are payable in U.S. dollars.
Mezzanine Investments, Collateralized Bond Obligations, CMBS and Zero-Coupon Securities . BHY may invest up to 15% of its total assets in securities known as Mezzanine Investments (generally subordinated, privately placed debt securities issued with attached equity securities), collateralized bond obligations and commercial mortgage backed securities. BHY may also invest up to 30% of its total assets in stripped and zero-coupon securities, pay-in-kind securities and deferred payment securities. None of the other Funds have any limitation on investments in the foregoing securities.
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Options . HYT may purchase call options, write (i.e., sell) covered or uncovered call options, purchase put options and uncovered put options, write (i.e., sell) covered put options and write uncovered put options on securities that HYT does not currently have a corresponding short position or has not deposited cash equal to the exercise value of the put option with the broker dealer through which it made the uncovered put option as collateral. BHY, COY, CYE and HYV have substantially the same policies as HYT with respect to options, except they may not write uncovered call or put options. HIS may only purchase and sell options on financial futures contracts, and hold puts that relate to equity securities acquired by the Fund when such puts are attached to or included with such equity securities.
Comparison Table
A more detailed comparison of the Funds investment objectives, significant investment strategies and operating policies, and investment restrictions is set forth in the table below.
HYT |
HYV |
CYE |
COY |
BHY |
HIS |
|||||
Investment Objectives |
Investment Objectives |
Investment Objectives |
Investment Objectives |
Investment Objectives |
Investment Objectives |
|||||
HYTs primary investment objective is to provide shareholders with current income. HYTs secondary investment objective is to provide shareholders with capital appreciation. | HYVs investment objective is to provide shareholders with current income by investing primarily in a diversified portfolio of fixed income securities that are rated in the lower rating categories of the established rating services (BB or lower by Standard & Poors or Ba or lower by Moodys) or in unrated securities considered by the Funds investment adviser to be of comparable quality. HYV also seeks to provide shareholders with capital appreciation. | CYEs primary investment objective is to provide current income by investing primarily in fixed-income securities, which are rated in the lower rating categories of the established rating services (BBB or lower by Standard & Poors or Baa or lower by Moodys) or are unrated securities of comparable quality. CYEs secondary investment objective is to provide capital appreciation. | COYs investment objective is to provide shareholders with current income by investing primarily in a diversified portfolio of fixed income securities, which are rated in the lower rating categories of the established rating services (BB or lower by Standard & Poors or Ba or lower by Moodys) or are unrated securities considered by the Funds investment adviser to be of comparable quality. As a secondary objective, COY also seeks to provide shareholders with capital appreciation. | BHYs primary investment objective is to provide high current income. BHYs secondary investment objective is to provide capital appreciation. | HISs primary investment objective is to provide the highest current income attainable consistent with reasonable risk as determined by the Funds investment adviser, through investment in a professionally managed, diversified portfolio of high yield, high risk fixed income securities. HISs secondary objective is to provide capital appreciation, but only when consistent with its primary objective. |
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HYT |
HYV |
CYE |
COY |
BHY |
HIS |
|||||
Credit-Related Securities |
Credit-Related Securities |
Credit-Related Securities |
Credit-Related Securities |
Credit-Related Securities |
Credit-Related Securities |
|||||
Under normal market conditions, the Fund invests at least 80% of its net assets (including assets acquired from the sale of preferred stock), plus the amount of any borrowings for investment purposes, in high yield securities, including high yield bonds, corporate loans, convertible debt securities and preferred securities. High yield securities include high yield bonds, corporate loans, convertible debt securities and preferred securities, which are rated below investment grade or, if unrated, are considered by the Investment Advisor to be of comparable quality. |
Under normal market conditions, the Fund invests at least 80% of its total assets in high yield debt instruments. High yield debt instruments include junk bonds and corporate loans rated in the lower rating categories (Ba or lower by Moodys and BB or lower by Standard & Poors) or are unrated debt investments considered by the Investment Advisor to be of comparable quality. | Under normal circumstances, the Fund invests at least 80% of its total assets in high-yield corporate debt instruments which are rated in the lower rating categories of the established rating services (Baa or lower by Moodys and BBB or lower by Standard & Poors), or in unrated securities considered by the Investment Advisor to be of comparable quality. | Under normal market conditions, the Fund invests at least 80% of its assets in high yield debt instruments, including junk bonds and Corporate Loans rated in the lower rating categories (Ba or lower by Moodys and BB or lower by Standard & Poors), or in similar unrated instruments considered by the Investment Advisor to be of comparable quality. | Under normal market conditions, the Fund invests at least 80% of its total assets in high-risk, high yield securities. High-risk, high yield securities are generally income securities which, if rated at the time of purchase, are rated lower than Baa by Moodys, lower than BBB by Standard & Poors or similarly rated by other nationally recognized securities rating organization. Such securities may include securities that are not rated by any Rating Agency but which BlackRock believes to be comparable to such securities. | Under normal market conditions,the Fund invests at least 80% of its total assets in high-yield, high risk debt instruments rated in the medium to lower categories by nationally recognized rating services (Baa or lower by Moodys or BBB or lower by Standard & Poors or non-rated securities which, in the Investment Advisors opinion, are of comparable quality. | |||||
Corporate/
Bank Loans |
Corporate/
Bank Loans |
Corporate/
Bank Loans |
Corporate/
Bank Loans |
Corporate/
Bank Loans |
Corporate/
Bank Loans |
|||||
The Fund may invest up to 15% of its total assets in corporate loans extended to borrowers by commercial banks or other financial institutions. |
Same as HYT |
Same as HYT |
Same as HYT |
The Fund may invest up to 25% of its total assets in loans extended to corporate borrowers by commercial banks or other financial institutions. |
No Stated Policy |
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HYT |
HYV |
CYE |
COY |
BHY |
HIS |
|||||
Distressed Securities |
Distressed Securities | Distressed Securities | Distressed Securities | Distressed Securities | Distressed Securities | |||||
The Fund may invest up to 10% of its total assets in high yield securities which 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 lowest rating categories (Ca or lower by Moodys, CC or lower by Standard & Poors or CC or lower by Fitch) or, if unrated, are considered by the Investment Advisor to be of comparable quality. |
Same as HYT |
Same as HYT |
Same as HYT |
The Fund may invest up to 10% of its total assets in securities that are the subject of bankruptcy proceedings or otherwise in default or in significant risk of being in default. |
The Fund may not purchase securities rated D by Standard & Poors. |
|||||
Preferred Stock |
Preferred Stock | Preferred Stock | Preferred Stock | Preferred Stock | Preferred Stock | |||||
The Fund may invest up to 15% of its total assets in preferred securities, including preferred securities that may be converted into common stock or other securities of the same or a different issuer, and non-convertible preferred securities. | No Stated Policy | No Stated Policy | No Stated Policy | No Stated Policy | Under normal circumstances, the Fund will not invest more than 10% of its assets in preferred stock. |
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HYT |
HYV |
CYE |
COY |
BHY |
HIS |
|||||
Convertible Securities | Convertible Securities | Convertible Securities | Convertible Securities | Convertible Securities | Convertible Securities | |||||
The Fund may invest up to 15% of its total assets in convertible debt securities. | No Stated Policy | No Stated Policy | No Stated Policy | No Stated Policy | No Stated Policy | |||||
Common Stock |
Common Stock | Common Stock | Common Stock | Common Stock | Common Stock | |||||
No Stated Policy | No Stated Policy | No Stated Policy | No Stated Policy | Up to 20% of the Funds total assets may be invested in equity securities other than preferred stocks. |
The Fund may not acquire common stock, except when (i) attached to or included in, or in connection with or incidental to, the Funds investment in a unit with income-generating securities that otherwise would be attractive to the Fund (including equity interests, or the substantial equivalent of equity interests, which are acquired through a follow-on offering for interests in an issuer that HIS previously acquired in connection with its investment in such income-generating securities); (ii) acquired through the exercise of equity features accompanying convertible securities held by the Fund, such as conversion or exchange of privileges or warrants for the acquisition of stock or equity |
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HYT |
HYV |
CYE |
COY |
BHY |
HIS |
|||||
interests of the same issuer or a different issuer; or (iii) in the case of an exchange offering whereby the equity security would be acquired with the intention of exchanging it for a debt security issued on a when-issued basis. | ||||||||||
Non-U.S.
Securities |
Non-U.S.
Securities |
Non-U.S.
Securities |
Non-U.S.
Securities |
Non-U.S.
Securities |
Non-U.S.
Securities |
|||||
The Fund may invest without limitation in securities of issuers domiciled outside the United States or that are denominated in various foreign currencies and multinational currency units. | Same as HYT | Same as HYT | Same as HYT | The Fund may invest up to 35% of its total assets in debt securities of issuers domiciled outside of the United States or that are denominated in various foreign currencies and multinational currency units. Typically, the Fund will not hold any foreign securities of emerging market issuers, and in any case such securities will not comprise more than 10% of the Funds net assets. |
The Fund may invest up to 20% of its total assets in fixed-income securities issued by foreign governments and other foreign issuers and in foreign currency issues of domestic issuers, but no more than 5% of its total assets in such securities, whether issued by a foreign or domestic issuer, which are denominated in foreign currencies.
In addition to its authorization to invest in foreign securities, the Fund may invest up to 5% of its total assets in Eurodollar certificates of deposit which are the obligations of foreign branches of U.S. banks and may invest without limitation in Canadian issuers whose securities are payable in U.S. dollars. |
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HYT |
HYV |
CYE |
COY |
BHY |
HIS |
|||||
Illiquid
Securities |
Illiquid
Securities |
Illiquid
Securities |
Illiquid
Securities |
Illiquid
Securities |
Illiquid
Securities |
|||||
The Fund has no limitation on the amount of its investments that are not readily marketable or are subject to restrictions on resale. |
Same as HYT | Same as HYT | Same as HYT | No Stated Policy |
The Fund may invest up to 20% of its total assets in private placements. Except for this restriction that up to 20% of total assets may be invested in private placements, the Fund has no specific restrictions on investing in illiquid securities. For purposes of this restriction, securities eligible for resale under Rule 144A of the 1933 Act with registration rights are excluded from private placements and are not considered illiquid.
The Fund may not invest in securities which are subject to legal or contractual restrictions on resale if, as a result thereof, more than 20% of the total assets of the Fund taken at market value, would be invested in such securities. Securities eligible for resale under Rule 144A of the 1933 Act with registration rights are excluded from this investment restriction. |
84
HYT |
HYV |
CYE |
COY |
BHY |
HIS |
|||||
Defensive
Measures |
Defensive
Measures |
Defensive
Measures |
Defensive
Measures |
Defensive
Measures |
Defensive
Measures |
|||||
Under unusual market or economic conditions or for temporary defensive purposes, the Fund may invest up to 100% of its total assets in securities issued or guaranteed by the U.S. Government or its instrumentalities or agencies, certificates of deposit, bankers acceptances and other bank obligations, commercial paper rated in the highest category by an established Rating Agency, or other fixed income securities deemed by the Investment Advisor to be consistent with a defensive posture, or may hold investments in cash. | Same as HYT | Same as HYT | Same as HYT |
In addition, the Fund may implement various temporary defensive strategies at times when BlackRock determines that conditions in the markets make pursuing the Funds basic investment strategy inconsistent with the best interests of its shareholders.
These strategies may include investing all or a portion of the Funds assets in higher-quality debt securities including short-term securities. |
The Fund may invest without limitation in short-term high quality money market instruments (including variable and floating rate instruments and demand instruments) such as certificates of deposit, commercial paper, bankers acceptances, short-term U.S. Government securities and repurchase agreements, pending investment in portfolio securities, or for temporary defensive purposes or to meet anticipated short-term cash needs such as dividend payments. | |||||
Leverage | Leverage | Leverage | Leverage | Leverage | Leverage | |||||
The Fund is permitted to issue senior securities representing indebtedness up to 33 1/3% of its total managed assets (net assets plus the proceeds of any outstanding | Same as HYT | Same as HYT | Same as HYT | Same as HYT | Same as HYT |
85
HYT |
HYV | CYE | COY |
BHY |
HIS |
|||||
borrowings). The Fund voluntarily limits its aggregate economic leverage to 50% of its total managed assets. | ||||||||||
Mezzanine Investments |
Mezzanine
Investments |
Mezzanine
Investments |
Mezzanine
Investments |
Mezzanine Investments |
Mezzanine Investments |
|||||
No Stated Policy | No Stated Policy | No Stated Policy | No Stated Policy | The Fund may invest up to 15% of its total assets in securities known as Mezzanine Investments, which are generally subordinated, privately placed debt securities issued with attached equity securities. | No Stated Policy | |||||
Collateralized
Obligations |
Collateralized
Bond Obligations |
Collateralized
Bond Obligations |
Collateralized
Bond Obligations |
Collateralized
Bond Obligations |
Collateralized Bond
Obligations |
|||||
No Stated Policy | No Stated Policy | No Stated Policy | No Stated Policy | The Fund may invest up to 15% of its total assets in collateralized bond obligations which are structured securities backed by a pool of income securities. | No Stated Policy | |||||
Mortgage-
Securities |
Mortgage-
Backed Securities |
Mortgage-
Backed Securities |
Mortgage-
Backed Securities |
Mortgage-
Securities |
Mortgage-Backed Securities |
|||||
No Stated Policy | No Stated Policy | No Stated Policy | No Stated Policy | The Fund will not invest more than 15% of its total assets in CMBS. | No Stated Policy | |||||
Zero Coupon,
Payment
|
Zero Coupon,
PIK and Deferred
Payment
|
Zero Coupon,
PIK and Deferred
Payment
|
Zero Coupon,
PIK and Deferred
Payment
|
Zero Coupon,
Payment
|
Zero Coupon, PIK and Deferred Payment Securities |
|||||
No Stated Policy | No Stated Policy | No Stated Policy | No Stated Policy | The Fund may invest up to 30% of its total assets in stripped and Zero-Coupon Securities, Pay-In-Kind Securities and Deferred Payment Securities. | No Stated Policy |
86
87
HYT |
HYV |
CYE |
COY |
BHY |
HIS |
|||||
return. The Fund also may purchase uncovered put options.
The Fund also has authority to write (i.e., sell) put options on the types of securities that may be held by the Fund, provided that such put options are covered. The Fund will not sell puts if, as a result, more than 50% of the Funds assets would be required to cover its potential obligations under its hedging and other investment transactions.
The Fund is also authorized to write (i.e., sell) uncovered put options on securities in which it may invest but that the Fund does not currently have a corresponding short position or has not deposited cash equal to the exercise value of the put option with the broker dealer through which it made the uncovered put option as collateral. |
For the same purposes, the Fund may also sell puts on securities financial indices and puts on futures contracts on securities if the Funds contingent obligations on such puts are secured by segregated assets consisting of cash or liquid high grade debt securities having a value not less than the exercise price.
The Fund will not sell puts if, as a result, more than 50% of the Funds assets would be required to cover its potential obligation under its hedging and other investment transactions. |
88
HYT |
HYV |
CYE | COY |
BHY |
HIS |
|||||
Interest Rate Transactions | Interest Rate Transactions |
Interest Rate
Transactions |
Interest Rate
Transactions |
Interest Rate Transactions | Interest Rate Transactions | |||||
In order to seek to hedge the value of the Funds portfolio against interest rate fluctuations or to seek to enhance the Funds return, the Fund may enter into various interest rate transactions such as interest rate swaps and the purchase or sale of interest rate caps and floors.
The Fund will not enter into any interest rate swap, cap or floor transaction unless the unsecured senior debt or the claims-paying ability of the other party thereto is rated investment grade quality by at least one nationally recognized statistical rating organization at the time of entering into such transaction or whose creditworthiness is believed by the Investment Advisor to be equivalent to such rating. |
Same as HYT | Same as HYT | Same as HYT |
The Fund may enter into interest rate swaps and the purchase or sale of interest rate caps and floors. The Fund expects to enter into these transactions primarily to preserve a return or spread on a particular investment or portion of its portfolio as a duration management technique or to protect against any increase in the price of securities the Fund anticipates purchasing at a later date. The Fund intends to use these transactions for hedging and risk management purposes and not as a speculative investment. The Fund will not sell interest rate caps or floors that it does not own.
The Fund will not enter into any interest rate swap, cap or floor transaction unless the unsecured senior debt or the |
No Stated Policy |
89
HYT |
HYV |
CYE | COY |
BHY |
HIS |
|||||
claims-paying ability of the other party thereto is rated in the highest rating category of at least one nationally recognized rating organization at the time of entering into such transaction | ||||||||||
Credit
Derivatives |
Credit
Derivatives |
Credit
Derivatives |
Credit
Derivatives |
Credit
Derivatives |
Credit
Derivatives |
|||||
The Fund may enter into credit default swap agreements for hedging purposes or to enhance its returns.
The Fund will enter into credit default swap agreements only with counterparties who are rated investment grade quality by at least one nationally recognized statistical rating organization at the time of entering into such transaction or whose creditworthiness is believed by the Investment Advisor to be equivalent to such rating. |
Same as HYT | Same as HYT | Same as HYT | The Fund may engage in credit derivative transactions. There is no limit on the amount of credit derivative transactions that may be entered into by the Fund. | No Stated Policy |
90
HYT |
HYV |
CYE |
COY |
BHY |
HIS |
|||||
Futures | Futures | Futures | Futures | Futures | Futures | |||||
The Fund is authorized to engage in transactions in financial futures contracts (futures contracts) and related options on such futures contracts either as a hedge against adverse changes in the market value of its portfolio securities or to seek to enhance the Funds income.
The Fund also has authority to purchase and write call and put options on futures contracts.
The Fund may engage in options and futures transactions on exchanges and options in the over-the-counter markets.
The Fund will engage in transactions in OTC options only with banks or dealers which have capital of at least $50 million or whose obligations are guaranteed by an entity having capital of at least $50 million. |
Same as HYT | Same as HYT | Same as HYT |
In connection with its hedging and other risk management strategies, the Fund may enter into contracts for the purchase or sale for future delivery (futures contracts) of debt securities, aggregates of debt securities, financial indices, and U.S. Government debt securities or options on the foregoing to hedge the value of its portfolio securities that might result from a change in interest rates or market movements.
The Fund will engage in such transactions only for bona fide hedging, risk management and other appropriate portfolio management purposes. |
The Fund will only enter into financial futures contracts or purchase options thereon for the purpose of hedging either long-term debt securities in its portfolio or the value of debt securities which the Fund intends to purchase.
The Fund will not enter into futures contracts and options on futures contracts to hedge more than 50% of its portfolio. |
91
HYT |
HYV |
CYE |
COY |
BHY |
HIS |
|||||
Securities Lending | Securities Lending | Securities Lending | Securities Lending | Securities Lending | Securities Lending | |||||
The Fund from time to time may lend securities from its portfolio, with a value not exceeding 33 1/3% of its total assets or the limit prescribed by applicable law to banks, brokers and other financial institutions. In return, the Fund receives collateral in cash or securities issued or guaranteed by the U.S. Government, which will be maintained at all times in an amount equal to at least 100% of the current market value of the loaned securities. |
The Fund from time to time may lend securities from its portfolio, with a value not exceeding 33 1/3% of its total assets, to banks, brokers and other financial institutions and receive collateral in cash or securities issued or guaranteed by the U.S. Government, its agencies or instrumentalities that will be maintained at all times in an amount equal to at least 100% of the current market value of the loaned securities. |
Same as HYV |
Same as HYV |
The Fund will not lend portfolio securities if, as a result, the aggregate of such loans exceeds 33 1/3% of the value of the Funds total assets (including such loans). |
The Fund may lend its portfolio securities (principally to broker-dealers) to the extent of 20% of its total assets. |
|||||
Short Sales |
Short Sales | Short Sales | Short Sales | Short Sales | Short Sales | |||||
The Fund may make short sales of securities, provided the market value of all securities sold short does not exceed 10% of its total assets. The Fund may make short sales both as a form of hedging to offset potential declines in long positions in similar securities |
Same as HYT |
Same as HYT |
Same as HYT |
No Stated Policy |
The Fund may not make short sales of securities or maintain short positions (other than in connection with futures contracts or options thereon) unless, at all times when a short position is open, the Fund owns at least an equal amount of |
92
HYT |
HYV |
CYE |
COY |
BHY |
HIS |
|||||
and in order to seek to enhance return.
The Funds obligation to replace the borrowed security will be secured by collateral deposited with the broker dealer, usually cash, U.S. government securities or other liquid securities similar to those borrowed. The Fund also will be required to segregate similar collateral with its custodian to the extent, if any, necessary so that the value of both collateral amounts in the aggregate is at all times equal to at least 100% of the current market value of the security sold short.
The Fund also may make short sales against the box. Short Sales against the box are not subject to the foregoing 10% limitation. |
the securities sold short or owns securities convertible into or exchangeable for at least an equal amount of such securities sold short, without the payment of further consideration. |
93
Leverage
Each Fund may utilize leverage by borrowing through the Credit Facility or through entering into reverse repurchase agreements. As of May 31, 2013, the Funds had an Economic Leverage Ratio from reverse repurchase agreements and/or borrowings through the Credit Facility as follows:
Ticker |
Economic
Leverage Ratio |
|||
BHY |
27.72 | % | ||
COY |
28.68 | % | ||
CYE |
29.68 | % | ||
HIS |
26.87 | % | ||
HYV |
30.70 | % | ||
HYT |
30.20 | % |
The Combined Funds Economic Leverage Ratio is expected to be substantially similar to the Acquiring Funds current Economic Leverage Ratio.
Each Fund is currently a party to a senior committed secured, 360-day rolling credit facility with State Street. Each Fund has granted a security interest in substantially all of its assets to State Street in connection with the Credit Facility.
The Credit Facility currently allows for the following maximum commitment amounts:
Ticker |
Commitment
Amounts |
|||
BHY |
$ | 24,000,000 | ||
COY |
$ | 132,000,000 | ||
CYE |
$ | 144,000,000 | ||
HIS |
$ | 63,000,000 | ||
HYV |
$ | 213,000,000 | ||
HYT |
$ | 222,000,000 |
Advances are made by State Street to a Fund, at the Funds option of (a) the higher of (i) 0.80% above the Fed Funds rate and (ii) 0.80% above the Overnight LIBOR or (b) 0.80% above 7-day, 30-day, 60-day or 90-day LIBOR. In addition, each Fund pays a facility fee and utilization fee (based on the daily unused portion of the commitments). The commitment fees are waived with respect to a Fund if such Fund meets certain conditions. A Fund may not declare dividends or make other distributions on shares or purchase any such shares if, at the time of the declaration, distribution or purchase, asset coverage with respect to the outstanding short-term borrowings is less than 300%.
For the twelve-month period ended February 28, 2013, the daily weighted average interest rate for COY and CYE under the Credit Facility was approximately 0.94%. For the twelve-month period ended August 31, 2012 and for the six-month period ended February 28, 2013, the daily weighted average interest rate for BHY, HIS, HYV and HYT under the Credit Facility was approximately 0.94%. As of May 31, 2013, the effective interest rate for each Fund under the Credit Facility was approximately 0.93%.
In connection with the Reorganizations, the Combined Fund expects to amend the Credit Facility to increase the maximum commitment amount to maintain an Economic Leverage Ratio substantially similar to the Acquiring Funds current Economic Leverage Ratio. If all of the Reorganizations are consummated, the Combined Fund expects to increase the maximum commitment amount under the Credit Facility to $798,000,000. There can be no assurance, however, the Combined Fund will increase the maximum commitment amount under the Credit Facility. If the Combined Fund does not increase the maximum commitment amount
94
under the Credit Facility, then the Combined Fund may be required to either utilize other forms of leverage, which may include reverse repurchase agreements, in order to maintain an Economic Leverage Ratio that is substantially similar to the Acquiring Funds current Economic Leverage Ratio or reduce the Combined Funds economic leverage. In either case, the Combined Fund may not be able to maintain the current earnings and distribution yields of the Acquiring Fund, which may negatively affect the market price and net asset value of the Combined Fund. In addition, if the Combined Fund is required to reduce its economic leverage, then it may be required to sell a portion of its assets, which may negatively affect the Combined Funds portfolio holdings, portfolio allocation, portfolio diversification and investment strategy.
Investment Restrictions
The Funds have the similar (but not identical) investment restrictions. A comparison of the Funds investment restrictions is set forth in the table below. The investment restrictions of the Combined Fund will be those of the Acquiring Fund.
HYT |
HYV |
CYE |
COY |
BHY |
HIS |
|||||
Diversification |
Diversification |
Diversification |
Diversification |
Diversification |
Diversification |
|||||
The Fund may not make any investment inconsistent with the Funds classification as a diversified company under the 1940 Act.* | Same as HYT | Same as HYT | No Stated Policy | No Stated Policy | The Fund may not invest more than 5% of the market value of its total assets in the securities of any one issuer, other than obligations of or guaranteed by the U.S. Government or any of its agencies or instrumentalities. With respect to repurchase agreements, the Fund shall look to the underlying securities of the repurchase agreements to determine compliance with this restriction. |
* | A fundamental investment restriction. |
95
HYT |
HYV |
CYE |
COY |
BHY |
HIS |
|||||
Control or Management | Control or Management | Control or Management | Control or Management | Control or Management | Control or Management | |||||
The Fund may not make investments for the purpose of exercising control or management.* | Same as HYT | Same as HYT | Same as HYT | The Fund may not 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 or otherwise exercise its rights in accordance with the terms of the securities in accordance with its views.* | The Fund may not purchase more than 10% of the outstanding voting securities of any issuer, or invest for the purpose of exercising control or management.* | |||||
Commodities
and Real Estate |
Commodities and Real Estate | Commodities and Real Estate | Commodities and Real Estate | Commodities and Real Estate | Commodities and Real Estate | |||||
The Fund may not purchase or sell real estate, commodities or commodity contracts, except that, to the extent permitted by applicable law, the Fund may invest in securities directly or indirectly secured by real estate or interests therein or issued by entities that invest in real estate or interests therein, and the Fund may purchase and sell | Same as HYT | Same as HYT | Same as HYT | The Fund may not purchase commodities or commodity contracts, except that the Fund may purchase and sell options, futures contracts and options thereon and may engage in interest rate and foreign currency transactions.* |
The Fund may not purchase or sell commodities or commodity contracts, other than financial futures contracts and options thereon.*
The Fund may not purchase or sell real estate or interests |
* | A fundamental investment restriction. |
96
HYT |
HYV |
CYE |
COY |
BHY |
HIS |
|||||
financial futures contracts and options thereon.* |
The Fund may not purchase, hold or deal in real estate, or oil, gas or other mineral leases or exploration or development programs, except that the Fund may purchase and sell securities that are secured by, or issued by companies that invest or deal in, real estate, oil, gas or other minerals, or interests therein.* |
therein or oil, gas or mineral exploration or development programs, but the Fund may purchase and sell (a) securities which are secured by real estate, and (b) the securities of companies which invest or deal in real estate or interests therein, including real estate investment trusts, or in oil, gas or mineral exploration or development programs.* | ||||||||
Senior Securities and Borrowings |
Senior Securities and Borrowings | Senior Securities and Borrowings | Senior Securities and Borrowings | Senior Securities and Borrowings | Senior Securities and Borrowings | |||||
The Fund may not issue senior securities or borrow money except as permitted by Section 18 of the 1940 Act or as otherwise permitted by applicable law.* |
Same as HYT |
Same as HYT |
The Fund may not issue senior securities (including borrowing money) in excess of the limits set forth in the 1940 Act; or pledge its assets other than to secure issuances or in connection with hedging |
Same as HYT |
The Fund may not borrow money or mortgage, pledge, or hypothecate its assets, except that the Fund may enter into financial futures contracts, and borrow from banks or other lenders in an |
* | A fundamental investment restriction. |
97
HYT |
HYV |
CYE |
COY |
BHY |
HIS |
|||||
transactions, when-issued and forward commitment transactions and similar investment strategies. The Funds obligations under interest rate swaps are not treated as senior securities.* | amount not exceeding one-third of the value of its total assets (including proceeds of such borrowings) and may mortgage, pledge or hypothecate its assets to secure permitted borrowings. For the purpose of this restriction, collateral arrangements with respect to margin for financial futures contracts are not deemed to be pledges of assets.* | |||||||||
Underwriting | Underwriting | Underwriting | Underwriting | Underwriting | Underwriting | |||||
The Fund may not underwrite securities of other issuers, except insofar as the Fund may be deemed an underwriter under the Securities Act of 1933, as amended, in selling portfolio securities.* | Same as HYT | Same as HYT | Same as HYT | The Fund may not act as an underwriter of securities of other issuers, except to the extent the Fund may be deemed an underwriter under the Securities Act, by virtue of its purchase or sale of portfolio securities.* | The Fund may not act as a securities underwriter, except to the extent that the Fund may invest up to 20% of its assets in restricted securities and, in connection with the disposition of such securities, the Fund may be deemed to be an underwriter under the 1933 Act.* |
* | A fundamental investment restriction. |
98
HYT |
HYV |
CYE |
COY |
BHY |
HIS |
|||||
Lending | Lending | Lending | Lending | Lending | Lending | |||||
The Fund may not make loans to other persons, except (i) the Fund shall not be deemed to be making a loan to the extent that the Fund purchases Corporate Loans or other debt instruments or enters into repurchase agreements or any similar instruments and (ii) the Fund may lend its portfolio securities in an amount not in excess of 33 1 / 3 % of its total assets, taken at market value, provided that such loans shall be made in accordance with the guidelines set forth in this prospectus.* | Same as HYT | Same as HYT | Same as HYT | The Fund may not make loans to others, except through the purchase of debt obligations (including Bank Loans) 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 Funds Board of Trustees.* | The Fund may not make loans to other persons, except that the Fund may lend its portfolio securities to the extent of 20% of its total assets and may enter into repurchase agreements. For the purpose of this restriction, the purchase of debt instruments in accordance with the Funds policies and objectives shall not be deemed to be a loan.* | |||||
Industry Concentration | Industry Concentration | Industry Concentration | Industry Concentration | Industry Concentration | Industry Concentration | |||||
The Fund may not invest more than 25% of its total assets (taken at market value at the time of each investment) in the securities of issuers in any one industry; provided that this limitation shall not apply with respect to obligations issued or guaranteed by | Same as HYT | Same as HYT | Same as HYT | The Fund may not purchase any security if as a result 25% or more of the total assets of the Fund would be invested in the securities of issuers having their principal business activities in the same industry, provided that | The Fund may not concentrate 25% or more of the value of its total assets in the securities of issuers which conduct their principal business activities in the same industry; for purposes of this restriction, gas, electric, |
* | A fundamental investment restriction. |
99
HYT |
HYV |
CYE |
COY |
BHY |
HIS |
|||||
the U.S. Government or by its agencies or instrumentalities.* | there shall be no such limitation on the purchase of obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities.* | water and telephone companies will be considered to be in separate industries, and banks, savings and loan institutions, finance companies and insurance companies will be considered to be in separate industries.* | ||||||||
Investments in Investment Companies | Investments in Investment Companies | Investments in Investment Companies | Investments in Investment Companies | Investments in Investment Companies | Investments in Investment Companies | |||||
The Fund may not purchase securities of other investment companies, except to the extent that such purchases are permitted by applicable law. | Same as HYT | Same as HYT | The Fund may not purchase securities of other investment companies, except (i) in connection with a merger, consolidation, acquisition or reorganization, (ii) by purchase of shares of money market funds advised by the Investment Advisor or its affiliates (as defined in the 1940 Act) to the extent permitted by an exemptive order issued to the Fund by the Securities and Exchange Commission, or | Same as HYT, except its a fundamental policy. | The Fund may not purchase the securities of any other investment company, except in connection with a merger, consolidation, reorganization or acquisition of assets and except for the investment in such securities of funds representing compensation otherwise payable to Trustees of the Fund pursuant to a deferred compensation plan existing at any time between the Fund and one or |
* | A fundamental investment restriction. |
100
HYT |
HYV |
CYE |
COY |
BHY |
HIS |
|||||
(iii) by purchase in the open market of securities of closed-end investment companies where no underwriters or dealers commission or profit, other than customary brokers commission, is involved and only if immediately thereafter not more than 10% of the Funds total assets would be invested in such securities.* | more of its Trustees.* | |||||||||
Mortgage,
|
Mortgage,
Pledge, Hypothecate Property |
Mortgage,
Pledge, Hypothecate Property |
Mortgage,
Pledge, Hypothecate Property |
Mortgage,
Pledge, Hypothecate Property |
Mortgage,
Pledge, Hypothecate Property |
|||||
The Fund may not mortgage, pledge, hypothecate or in any manner transfer, as security for indebtedness, any securities owned or held by the Fund except as may be necessary in connection with borrowings permitted by Section 18 of the 1940 Act or applicable law, or except as may be necessary in connection with transactions described under | Same as HYT | Same as HYT | No Stated Policy | The Fund may not pledge, mortgage or hypothecate its assets, except to the extent necessary to secure permitted borrowings and to the extent related to the purchase of securities on a when-issued or forward commitment basis and the deposit of assets in escrow in connection with writing covered put and call | The Fund may not borrow money or mortgage, pledge, or hypothecate its assets, except that the Fund may enter into financial futures contracts, and borrow from banks or other lenders in an amount not exceeding one-third of the value of its total assets (including proceeds of such borrowings) and may mortgage, |
* | A fundamental investment restriction. |
101
HYT |
HYV |
CYE |
COY |
BHY |
HIS |
|||||
Investment Objectives and Policies of the Acquiring FundOther Investment Policies above. | options and collateral and initial or variation margin arrangements with respect to options, forward contracts, futures contracts, options on futures contracts, swaps, caps, collars and floors.* | pledge or hypothecate its assets to secure permitted borrowings. For the purpose of this restriction, collateral arrangements with respect to margin for financial futures contracts are not deemed to be pledges of assets.* | ||||||||
Margin |
Margin |
Margin |
Margin |
Margin |
Margin |
|||||
The Fund may not purchase any securities on margin, except that the Fund may obtain such short term credit as may be necessary for the clearance of purchases and sales of portfolio securities (the deposit or payment by the Fund of initial or variation margin in connection with financial futures contracts and options thereon is not considered the purchase of a security on margin). | Same as HYT | Same as HYT | Same as HYT | No Stated Policy | The Fund may not purchase securities on margin, except that the Fund may obtain such short-term credits as may be necessary for the clearance of purchases and sales of securities and may make margin payments in connection with transactions in financial futures contracts and options thereon.* |
* | A fundamental investment restriction. |
102
HYT |
HYV |
CYE |
COY |
BHY |
HIS |
|||||
Short Sales |
Short Sales | Short Sales | Short Sales | Short Sales | Short Sales | |||||
The Fund may make short sales of securities. The Fund may make short sales both as a form of hedging to offset potential declines in long positions in similar securities and in order to seek to enhance return.
The Funds obligation to replace the borrowed security will be secured by collateral deposited with the broker dealer, usually cash, U.S. government securities or other liquid securities similar to those borrowed. The Fund also will be required to segregate similar collateral with its custodian to the extent, if any, necessary so that the value of both collateral amounts in the aggregate is at all times equal to at least 100% of the current market value of the security sold short.
The Fund also may make short sales against the box. |
The Fund may make short sales, subject to approval by the Board, and provided the market value of all securities sold short does not exceed 10% of its total assets. | Same as HYV | Same as HYV | No Stated Policy | The Fund may not make short sales of securities or maintain short positions (other than in connection with futures contracts or options thereon) unless, at all times when a short position is open, the Fund owns at least an equal amount of the securities sold short or owns securities convertible into or exchangeable for at least an equal amount of such securities sold short, without the payment of further consideration.* |
* | A fundamental investment restriction. |
103
HYT |
HYV |
CYE |
COY |
BHY |
HIS |
|||||
Calls and Puts |
Calls and Puts | Calls and Puts | Calls and Puts | Calls and Puts | Calls and Puts | |||||
No Stated Policy | No Stated Policy | No Stated Policy | No Stated Policy | No Stated Policy | The Fund may not invest in puts, calls or any combinations thereof, except that the Fund may purchase and sell options on financial futures contracts and may acquire and hold puts which relate to equity securities acquired by the Fund when such puts are attached to or included in a unit with such equity securities.* | |||||
Restricted Securities | Restricted Securities | Restricted Securities | Restricted Securities | Restricted Securities | Restricted Securities | |||||
No Stated Policy | No Stated Policy | No Stated Policy | No Stated Policy | No Stated Policy | The Fund may not invest in securities which are subject to legal or contractual restrictions on resale if, as a result thereof, more than 20% of the total assets of the Fund taken at market value, would be invested in such securities. Securities eligible for resale under Rule 144A of the 1933 Act with registration rights are excluded from this investment restriction.* |
* | A fundamental investment restriction. |
104
The Board
The Board of each Fund is responsible for the overall supervision of the operations of its respective Fund and performs the various duties imposed on the directors of investment companies by the 1940 Act and under applicable state law. A list of the Board Members, a brief biography for each Board Member and additional information relating to the Board are included in the Statement of Additional Information.
The Advisors
BlackRock Advisors, LLC acts as the Investment Advisor for each Fund.
BHY and HIS pay the Investment Advisor a monthly management fee at an annual rate of 0.90% and 0.75% (of the first $200 million and 0.50% thereafter), respectively, based on the applicable Funds average weekly Managed Assets. Managed Assets means the total assets of the Fund minus the sum of the accrued liabilities (other than the aggregate indebtedness constituting financial leverage).
BHY also pays the Investment Advisor a monthly administration fee at an annual rate of 0.10% based on the Funds average weekly Managed Assets.
COY, CYE, HYV and HYT pay the Investment Advisor a monthly management fee at an annual rate of 0.50%, 0.60%, 0.60% and 0.70%, respectively, based on an aggregate of (i) the Funds average daily Net Assets and (ii) the proceeds of any outstanding debt securities or borrowings used for leverage. The liquidation preference of any outstanding preferred stock (other than accumulated dividends) is not considered a liability in determining the Funds net asset value.
If any of the Reorganizations are approved and consummated, the Combined Fund will pay the Investment Advisor a monthly management fee at an annual rate of 0.60% of the aggregate of (i) the Combined Funds average daily Net Assets and (ii) the proceeds of any outstanding debt securities or borrowings used for leverage. The liquidation preference of any outstanding preferred stock (other than accumulated dividends) is not considered a liability in determining the Combined Funds net asset value.
BlackRock Financial Management, Inc. (the Sub-Advisor) acts as the sub-advisor for each Fund (the Sub-Advisor together with the Investment Advisor, the Advisors). The Investment Advisor and each of the Funds have entered into separate sub-advisory agreements under which the Investment Advisor pays the Sub-Advisor for services it provides a monthly fee that is a percentage of the investment advisory fees paid by each Fund to the Investment Advisor.
A discussion regarding the basis for the approval of the Investment Management Agreement and the Sub-Investment Advisory Agreement by the Board of each Fund is provided in such Funds Form N-CSR for such Funds most recent fiscal year end available at www.sec.gov or by visiting www.blackrock.com.
The Investment Advisor is located at 100 Bellevue Parkway, Wilmington, Delaware 19809, and the Sub-Advisor is located at 55 East 52nd Street, New York, New York 10055 and each are wholly owned subsidiaries of BlackRock. BlackRock is one of the worlds largest publicly-traded investment management firms and has over 20 years of experience managing closed-end products. As of March 31, 2013, BlackRocks assets under management were approximately $3.936 trillion including approximately $47.8 billion in exchange-listed active funds and approximately $269.8 million in non-exchange-listed closed-end funds.
BlackRock helps clients meet their goals and overcome challenges with a range of products that include separate accounts, mutual funds, iShares ® (exchange-traded funds), and other pooled investment vehicles.
105
BlackRock also offers risk management, advisory and enterprise investment system services to a broad base of institutional investors through BlackRock Solutions ® . Headquartered in New York City, as of March 31, 2013, the firm has approximately 10,600 employees in 30 countries and a major presence in key global markets, including North and South America, Europe, Asia, Australia and the Middle East and Africa.
Portfolio Management
The Investment Advisor serves as the investment adviser for each of the Funds and is expected to continue to serve as investment adviser for the Combined Fund. Each Fund is managed by a team of investment professionals comprised of James E. Keenan, Managing Director at BlackRock, Mitchell S. Garfin, Managing Director at BlackRock, and Derek Schoenhofen, Director at BlackRock. Each is a member of Americas Fixed Income Group within BlackRocks Alpha Strategies portfolio management group. Each is jointly responsible for the day-to-day management of each Funds portfolio, which includes setting each Funds overall investment strategy, overseeing the management of each Fund and/or selection of its investments. Mr. Keenan has been a member of each Funds management team since 2006, and Messrs. Garfin and Schoenhofen have been members of each Funds management team since 2009.
Portfolio Manager |
Biography |
|
James E. Keenan |
Managing Director of BlackRock since 2008 and Head of the Leveraged Finance Portfolio team; Director of BlackRock from 2006 to 2007. | |
Mitchell Garfin |
Managing Director of BlackRock since 2009; Director of BlackRock from 2005 to 2008. | |
Derek Schoenhofen |
Director of BlackRock since 2006; Vice President of BlackRock from 2000 to 2005. |
The Statement of Additional Information provides additional information about the portfolio managers compensation, other accounts managed by the portfolio managers, and the portfolio managers ownership of securities in each Fund.
Portfolio Transactions with Affiliates
The Advisors may place portfolio transactions, to the extent permitted by law, with brokerage firms affiliated with the Funds and the Advisors, if they reasonably believe that the quality of execution and the commission are comparable to that available from other qualified brokerage firms. None of the Funds paid brokerage commissions to affiliated broker-dealers during their three most recent fiscal years.
Other Service Providers
The professional service providers for the Funds are as follows:
Service |
Service Providers to the Funds |
|
Investment Advisor |
BlackRock Advisors, LLC | |
Sub-Advisor |
BlackRock Financial Management, Inc. | |
Custodian* |
State Street Bank and Trust Company, and JP Morgan Chase Bank | |
Transfer Agent, Dividend Disbursing Agent and Registrar |
Computershare Trust Company N.A. | |
Accounting Services Provider |
State Street Bank and Trust Company | |
Independent Registered Public Accounting Firm |
Deloitte & Touche LLP | |
Fund Counsel |
Skadden, Arps, Slate, Meagher & Flom LLP | |
Counsel to the Independent Board Members |
Debevoise & Plimpton LLP |
* | State Street Bank and Trust Company is custodian to each Fund except COY. JP Morgan Chase Bank is custodian to COY. |
106
All securities owned by each of BHY, CYE, HIS, HYV and HYT, and all cash including proceeds from the sale of securities in each Funds investment portfolio, are held by State Street Bank and Trust Company, 1 Lincoln Street, Boston, Massachusetts 02111, as custodian. All securities owned by COY, and all cash, including proceeds from the sale of securities in COYs investment portfolio, are held by JP Morgan Chase Bank, 270 Park Avenue, New York, New York 10017, as custodian. Computershare Trust Company N.A., 250 Royall Street, Canton, Massachusetts 02021 serves as each Funds transfer agent with respect to each Funds common shares.
It is not anticipated that the Reorganizations will result in any change in the organizations providing services to the Acquiring Fund as set forth above. As a result of the Reorganizations, the service providers to the Acquiring Fund are anticipated to be the service providers to the Combined Fund.
Capitalization
The Board of each Fund may authorize separate classes of shares together with such designation of preferences, rights, voting powers, restrictions, limitations, qualifications or terms as may be determined from time to time by the Board of such Fund. The tables below set forth the capitalization of the Funds as of February 28, 2013, the pro forma capitalization of the Combined Fund as if the proposed Reorganizations of all of the Funds had occurred on February 28, 2013, which represents the most likely combination of the Reorganizations and the combination of the Reorganizations resulting in the lowest Total Expense Ratio, and the pro forma capitalization of the Combined Fund as if only the proposed Reorganization of BHY and the Acquiring Fund had occurred on February 28, 2013, which represents the combination of the Reorganizations resulting in the highest Total Expense Ratio.
Capitalization as of February 28, 2013 (Unaudited)
Reorganization of All the Funds (The Most Likely Combination and the Combination with Lowest Total Expense Ratio)
HYT | COY | CYE | HYV | BHY | HIS | Adjustments |
Pro
Forma
Combined Fund (All Target Funds into HYT) |
|||||||||||||||||||||||||
Net assets(a) |
$ | 455,148,203 | $ | 271,616,989 | $ | 296,007,710 | $ | 435,228,398 | $ | 48,934,885 | $ | 126,879,103 | $ | (990,000 | )(b) | $ | 1,632,825,288 | |||||||||||||||
Common Shares outstanding |
35,414,156 | 35,004,366 | 37,542,561 | 33,015,111 | 6,430,618 | 54,824,195 | (75,080,821 | )(c) | 127,150,186 | |||||||||||||||||||||||
Net asset value |
$ | 12.85 | $ | 7.76 | $ | 7.88 | $ | 13.18 | $ | 7.61 | $ | 2.31 | $ | 12.84 |
(a) | Based on the number of outstanding common shares listed in Outstanding Common Shares as of May 31, 2013 table below. |
(b) | Reflects non-recurring aggregate estimated reorganization expenses of $990,000 of which $370,000 was attributable to HYT, $270,000 was attributable to BHY, and $350,000 was attributable to HIS. Because of the expected benefits outlined above for each Fund, and because, over time, the savings attributable to each Funds participation in each Reorganization outweigh the costs associated with such Reorganization, the Investment Advisor recommended, and the Boards have approved, that BHY, HIS and HYT be responsible for its own Reorganization expenses. See Reasons for the Reorganizations. The actual costs associated with the proposed Reorganizations may be more or less than the estimated costs discussed herein. |
(c) | Reflects adjustments of (13,853,223) for COY common shares, (14,492,067) for CYE common shares, 876,683 for HYV common shares, (2,641,023) for BHY common shares and (44,971,191) for HIS common shares due to differences in per share NAV. |
Reorganization of only BHY into HYT (The Combination with Highest Total Expense Ratio)
HYT | BHY | Adjustments |
Pro
Forma
Combined Fund (BHY into HYT) |
|||||||||||||
Net assets(a) |
$ | 455,148,203 | $ | 48,934,885 | $ | (640,000 | )(b) | $ | 503,443,088 | |||||||
Common Shares outstanding |
35,414,156 | 6,430,618 | (2,641,023 | )(c) | 39,203,751 | |||||||||||
Net asset value |
$ | 12.85 | $ | 7.61 | $ | 12.84 |
107
(a) | Based on the number of outstanding common shares listed in Outstanding Common Shares as of May 31, 2013 table below. |
(b) | Reflects non-recurring aggregate estimated reorganization expenses of $640,000 of which $370,000 was attributable to HYT and $270,000 was attributable to BHY, respectively. Because of the expected benefits outlined above for each Fund, and because, over time, the savings attributable to each Funds participation in the Reorganization outweigh the costs associated with the Reorganization, the Investment Advisor recommended, and the Boards have approved, that BHY and HYT be responsible for its own Reorganization expenses. See Reasons for the Reorganizations. The actual costs associated with the proposed Reorganization may be more or less than the estimated costs discussed herein. |
(c) | Reflects adjustments due to differences in per share NAV. |
ADDITIONAL INFORMATION ABOUT THE COMMON SHARES OF THE FUNDS
General
Shareholders of each Fund are entitled to share equally in dividends declared by such Funds Board as payable to holders of the Funds common shares and in the net assets of the Fund available for distribution to holders of the common shares. Shareholders do not have preemptive or conversion rights and each Funds common shares are not redeemable. The outstanding common shares of each Fund are fully paid and nonassessable, except as provided under such Funds charter.
Purchase and Sale
Purchase and sale procedures for the common shares of each of the Funds are identical. Investors typically purchase and sell common shares of the Funds through a registered broker-dealer on the NYSE, thereby incurring a brokerage commission set by the broker-dealer. Alternatively, investors may purchase or sell common shares of each of the Funds through privately negotiated transactions with existing shareholders.
Outstanding Common Shares as of May 31, 2013
Fund |
Title of Class |
Amount
Authorized |
Amount Held by
Fund for its Own Account |
Amount
Outstanding Exclusive of Amount Shown in Previous Column |
||||||
BHY |
Common Shares | Unlimited | None | 6,431,296 | ||||||
COY |
Common Shares | 200,000,000 | None | 35,027,459 | ||||||
CYE |
Common Shares | 200,000,000 | None | 37,552,995 | ||||||
HIS |
Common Shares | Unlimited | None | 54,848,390 | ||||||
HYV |
Common Shares | 200,000,000 | None | 33,015,111 | ||||||
HYT |
Common Shares | 200,000,000 | None | 35,418,240 |
Share Price Data
The following tables set forth the high and low market prices for common shares of each Fund on the NYSE, for each full quarterly period within each Funds two most recent fiscal years and each full quarter since the beginning of each Funds current fiscal year, along with the net asset value and discount or premium to net asset value for each quotation.
BHY |
Market Price | Net Asset Value |
Premium/(Discount)
to Net Asset Value |
|||||||||||||||||||||
Period Ended |
High | Low | High | Low | High | Low | ||||||||||||||||||
May 31, 2013 |
$ | 8.35 | $ | 7.76 | $ | 7.90 | $ | 7.62 | 7.09% | 1.17% | ||||||||||||||
February 28, 2013 |
$ | 8.47 | $ | 7.36 | $ | 7.66 | $ | 7.41 | 11.74% | -1.60% | ||||||||||||||
November 30, 2012 |
$ | 8.09 | $ | 7.01 | $ | 7.45 | $ | 7.26 | 9.99% | -3.44% |
108
BHY |
Market Price | Net Asset Value |
Premium/(Discount)
to Net Asset Value |
|||||||||||||||||||||
Period Ended |
High | Low | High | Low | High | Low | ||||||||||||||||||
August 31, 2012 |
$ | 8.07 | $ | 7.08 | $ | 7.30 | $ | 6.90 | 11.77% | 2.61% | ||||||||||||||
May 31, 2012 |
$ | 7.57 | $ | 7.02 | $ | 7.23 | $ | 6.97 | 4.85% | -0.99% | ||||||||||||||
February 28, 2012 |
$ | 7.24 | $ | 6.59 | $ | 7.20 | $ | 6.70 | 2.53% | -1.64% | ||||||||||||||
November 30, 2011 |
$ | 6.79 | $ | 5.94 | $ | 6.88 | $ | 6.36 | -0.75% | -6.60% | ||||||||||||||
August 31, 2011 |
$ | 6.96 | $ | 6.30 | $ | 7.26 | $ | 6.66 | -1.50% | -7.27% | ||||||||||||||
May 31, 2011 |
$ | 7.00 | $ | 6.66 | $ | 7.33 | $ | 7.17 | -3.45% | -7.70% | ||||||||||||||
February 28, 2011 |
$ | 6.75 | $ | 6.21 | $ | 7.28 | $ | 6.95 | -4.73% | -10.90% | ||||||||||||||
November 30, 2010 |
$ | 6.74 | $ | 6.41 | $ | 7.12 | $ | 6.70 | -1.63% | -8.30% | ||||||||||||||
August 31, 2010 |
$ | 6.66 | $ | 6.13 | $ | 6.79 | $ | 6.49 | -1.48% | -6.13% | ||||||||||||||
May 31, 2010 |
$ | 6.77 | $ | 5.94 | $ | 6.85 | $ | 6.50 | -1.17% | -9.73% | ||||||||||||||
February 28, 2010 |
$ | 6.35 | $ | 5.93 | $ | 6.65 | $ | 6.34 | -3.93% | -7.93% |
COY |
Market Price | Net Asset Value |
Premium/(Discount)
to Net Asset Value |
|||||||||||||||||||||
Period Ended |
High | Low | High | Low | High | Low | ||||||||||||||||||
May 31, 2013 |
$ | 8.31 | $ | 7.71 | $ | 8.07 | $ | 7.77 | 5.99% | -2.16% | ||||||||||||||
February 28, 2013 |
$ | 8.18 | $ | 7.61 | $ | 7.81 | $ | 7.55 | 4.74% | -0.13% | ||||||||||||||
November 30, 2012 |
$ | 8.06 | $ | 7.00 | $ | 7.57 | $ | 7.38 | 8.19% | -5.15% | ||||||||||||||
August 31, 2012 |
$ | 8.00 | $ | 7.31 | $ | 7.41 | $ | 7.00 | 8.69% | 4.26% | ||||||||||||||
May 31, 2012 |
$ | 7.84 | $ | 7.15 | $ | 7.30 | $ | 7.07 | 8.44% | 0.56% | ||||||||||||||
February 28, 2012 |
$ | 7.76 | $ | 7.10 | $ | 7.29 | $ | 6.76 | 9.44% | 2.30% | ||||||||||||||
November 30, 2011 |
$ | 7.28 | $ | 6.18 | $ | 6.95 | $ | 6.45 | 7.85% | -4.19% | ||||||||||||||
August 31, 2011 |
$ | 7.52 | $ | 6.27 | $ | 7.47 | $ | 6.79 | 3.18% | -11.19% | ||||||||||||||
May 31, 2011 |
$ | 7.49 | $ | 7.03 | $ | 7.56 | $ | 7.31 | 0.40% | -4.80% | ||||||||||||||
February 28, 2011 |
$ | 7.22 | $ | 6.59 | $ | 7.44 | $ | 7.10 | -0.99% | -7.70% | ||||||||||||||
November 30, 2010 |
$ | 7.22 | $ | 6.73 | $ | 7.28 | $ | 6.87 | 2.90% | -5.61% | ||||||||||||||
August 31, 2010 |
$ | 7.07 | $ | 6.40 | $ | 6.97 | $ | 6.60 | 2.03% | -4.33% | ||||||||||||||
May 31, 2010 |
$ | 6.95 | $ | 6.13 | $ | 7.02 | $ | 6.61 | 4.20% | -9.57% | ||||||||||||||
February 28, 2010 |
$ | 7.07 | $ | 6.52 | $ | 6.74 | $ | 6.45 | 6.56% | 0.00% |
CYE |
Market Price | Net Asset Value |
Premium/(Discount)
to Net Asset Value |
|||||||||||||||||||||
Period Ended |
High | Low | High | Low | High | Low | ||||||||||||||||||
May 31, 2013 |
$ | 8.07 | $ | 7.65 | $ | 8.20 | $ | 7.89 | 0.88% | -4.49% | ||||||||||||||
February 28, 2013 |
$ | 8.18 | $ | 7.48 | $ | 7.93 | $ | 7.69 | 3.41% | -2.98% | ||||||||||||||
November 30, 2012 |
$ | 8.13 | $ | 7.26 | $ | 7.71 | $ | 7.52 | 7.26% | -3.46% | ||||||||||||||
August 31, 2012 |
$ | 8.11 | $ | 7.40 | $ | 7.54 | $ | 7.11 | 7.62% | 2.05% | ||||||||||||||
May 31, 2012 |
$ | 7.90 | $ | 7.15 | $ | 7.42 | $ | 7.18 | 7.05% | -0.97% | ||||||||||||||
February 28, 2012 |
$ | 7.75 | $ | 6.94 | $ | 7.41 | $ | 6.88 | 4.59% | 0.00% | ||||||||||||||
November 30, 2011 |
$ | 7.12 | $ | 6.24 | $ | 7.06 | $ | 6.54 | 3.50% | -4.59% | ||||||||||||||
August 31, 2011 |
$ | 7.47 | $ | 6.23 | $ | 7.61 | $ | 6.89 | 0.14% | -13.11% | ||||||||||||||
May 31, 2011 |
$ | 7.50 | $ | 6.97 | $ | 7.70 | $ | 7.44 | -1.57% | -7.16% | ||||||||||||||
February 28, 2011 |
$ | 7.21 | $ | 6.63 | $ | 7.58 | $ | 7.20 | -3.06% | -8.68% | ||||||||||||||
November 30, 2010 |
$ | 7.16 | $ | 6.73 | $ | 7.38 | $ | 6.93 | 1.29% | -6.79% | ||||||||||||||
August 31, 2010 |
$ | 7.12 | $ | 6.29 | $ | 7.04 | $ | 6.66 | 1.28% | -6.54% | ||||||||||||||
May 31, 2010 |
$ | 7.02 | $ | 6.12 | $ | 7.13 | $ | 6.67 | 0.74% | -9.47% | ||||||||||||||
February 28, 2010 |
$ | 6.77 | $ | 6.20 | $ | 6.78 | $ | 6.43 | 1.50% | -4.89% |
109
HIS |
Market Price | Net Asset Value |
Premium/(Discount)
to Net Asset Value |
|||||||||||||||||||||
Period Ended |
High | Low | High | Low | High | Low | ||||||||||||||||||
May 31, 2013 |
$ | 2.47 | $ | 2.23 | $ | 2.40 | $ | 2.32 | 6.01% | -4.29% | ||||||||||||||
February 28, 2013 |
$ | 2.44 | $ | 2.27 | $ | 2.34 | $ | 2.28 | 4.76% | -1.73% | ||||||||||||||
November 30, 2012 |
$ | 2.47 | $ | 2.13 | $ | 2.30 | $ | 2.25 | 8.81% | -5.33% | ||||||||||||||
August 31, 2012 |
$ | 2.40 | $ | 2.20 | $ | 2.26 | $ | 2.16 | 8.11% | 0.92% | ||||||||||||||
May 31, 2012 |
$ | 2.38 | $ | 2.18 | $ | 2.24 | $ | 2.18 | 6.76% | -0.46% | ||||||||||||||
February 28, 2012 |
$ | 2.35 | $ | 2.02 | $ | 2.24 | $ | 2.12 | 5.86% | -5.61% | ||||||||||||||
November 30, 2011 |
$ | 2.08 | $ | 1.85 | $ | 2.20 | $ | 2.04 | -3.27% | -9.31% | ||||||||||||||
August 31, 2011 |
$ | 2.24 | $ | 1.95 | $ | 2.34 | $ | 2.14 | -2.79% | -11.76% | ||||||||||||||
May 31, 2011 |
$ | 2.25 | $ | 2.08 | $ | 2.36 | $ | 2.30 | -3.85% | -9.57% | ||||||||||||||
February 28, 2011 |
$ | 2.16 | $ | 2.01 | $ | 2.34 | $ | 2.25 | -6.14% | -11.84% | ||||||||||||||
November 30, 2010 |
$ | 2.22 | $ | 2.05 | $ | 2.33 | $ | 2.20 | -3.49% | -10.09% | ||||||||||||||
August 31, 2010 |
$ | 2.13 | $ | 1.90 | $ | 2.23 | $ | 2.12 | -3.18% | -11.21% | ||||||||||||||
May 31, 2010 |
$ | 2.14 | $ | 1.85 | $ | 2.24 | $ | 2.12 | -4.46% | -13.55% | ||||||||||||||
February 28, 2010 |
$ | 1.94 | $ | 1.78 | $ | 2.15 | $ | 2.06 | -9.05% | -14.01% |
HYV |
Market Price | Net Asset Value |
Premium/(Discount)
to Net Asset Value |
|||||||||||||||||||||
Period Ended |
High | Low | High | Low | High | Low | ||||||||||||||||||
May 31, 2013 |
$ | 13.59 | $ | 12.94 | $ | 13.72 | $ | 13.20 | 1.28% | -3.28% | ||||||||||||||
February 28, 2013 |
$ | 13.22 | $ | 12.47 | $ | 13.26 | $ | 12.89 | 0.76% | -3.91% | ||||||||||||||
November 30, 2012 |
$ | 13.47 | $ | 11.93 | $ | 12.92 | $ | 12.60 | 6.57% | -5.32% | ||||||||||||||
August 31, 2012 |
$ | 13.57 | $ | 12.31 | $ | 12.63 | $ | 11.92 | 7.70% | 2.58% | ||||||||||||||
May 31, 2012 |
$ | 13.05 | $ | 12.02 | $ | 12.43 | $ | 12.04 | 5.78% | -0.66% | ||||||||||||||
February 28, 2012 |
$ | 12.97 | $ | 11.45 | $ | 12.41 | $ | 11.47 | 5.02% | -0.35% | ||||||||||||||
November 30, 2011 |
$ | 11.80 | $ | 10.26 | $ | 11.80 | $ | 10.91 | 2.88% | -5.96% | ||||||||||||||
August 31, 2011 |
$ | 12.58 | $ | 10.25 | $ | 12.73 | $ | 11.52 | 0.08% | -14.58% | ||||||||||||||
May 31, 2011 |
$ | 12.47 | $ | 11.58 | $ | 12.87 | $ | 12.43 | -1.81% | -6.84% | ||||||||||||||
February 28, 2011 |
$ | 11.88 | $ | 11.23 | $ | 12.69 | $ | 12.11 | -4.05% | -8.20% | ||||||||||||||
November 30, 2010 |
$ | 11.89 | $ | 11.04 | $ | 12.41 | $ | 11.65 | -0.51% | -9.06% | ||||||||||||||
August 31, 2010 |
$ | 11.74 | $ | 10.55 | $ | 11.82 | $ | 11.18 | 0.34% | -6.88% | ||||||||||||||
May 31, 2010 |
$ | 11.73 | $ | 10.08 | $ | 11.95 | $ | 11.19 | -1.59% | -11.19% | ||||||||||||||
February 28, 2010 |
$ | 10.86 | $ | 10.19 | $ | 11.36 | $ | 10.78 | -2.54% | -7.86% |
HYT |
Market Price | Net Asset Value |
Premium/(Discount)
to Net Asset Value |
|||||||||||||||||||||
Period Ended |
High | Low | High | Low | High | Low | ||||||||||||||||||
May 31, 2013 |
$ | 13.28 | $ | 12.57 | $ | 13.37 | $ | 12.86 | 2.15% | -3.68% | ||||||||||||||
February 28, 2013 |
$ | 13.14 | $ | 12.32 | $ | 12.94 | $ | 12.56 | 2.10% | -2.91% | ||||||||||||||
November 30, 2012 |
$ | 13.31 | $ | 11.80 | $ | 12.60 | $ | 12.28 | 6.58% | -3.91% | ||||||||||||||
August 31, 2012 |
$ | 13.02 | $ | 11.97 | $ | 12.33 | $ | 11.64 | 7.11% | 2.05% | ||||||||||||||
May 31, 2012 |
$ | 12.67 | $ | 11.79 | $ | 12.15 | $ | 11.75 | 5.41% | -0.34% | ||||||||||||||
February 28, 2012 |
$ | 12.58 | $ | 11.33 | $ | 12.13 | $ | 11.26 | 4.34% | -0.35% | ||||||||||||||
November 30, 2011 |
$ | 11.68 | $ | 10.16 | $ | 11.58 | $ | 10.72 | 3.29% | -6.15% | ||||||||||||||
August 31, 2011 |
$ | 12.15 | $ | 10.18 | $ | 12.46 | $ | 11.31 | -0.75% | -13.36% | ||||||||||||||
May 31, 2011 |
$ | 12.15 | $ | 11.50 | $ | 12.60 | $ | 12.18 | -2.49% | -6.29% | ||||||||||||||
February 28, 2011 |
$ | 11.90 | $ | 11.00 | $ | 12.39 | $ | 11.82 | -2.51% | -8.10% | ||||||||||||||
November 30, 2010 |
$ | 11.70 | $ | 10.82 | $ | 12.11 | $ | 11.42 | 0.17% | -8.77% | ||||||||||||||
August 31, 2010 |
$ | 11.70 | $ | 10.34 | $ | 11.58 | $ | 10.98 | 1.21% | -6.93% | ||||||||||||||
May 31, 2010 |
$ | 11.51 | $ | 9.91 | $ | 11.67 | $ | 10.97 | -1.20% | -10.96% | ||||||||||||||
February 28, 2010 |
$ | 11.02 | $ | 10.21 | $ | 11.19 | $ | 10.68 | -0.64% | -7.10% |
110
As of May 31, 2013, the net asset value per common share of HYT was $13.05 and the market price per common share was $12.57, representing a discount to net asset value of -3.68%, the net asset value per common share of BHY was $7.71 and the market price per common share was $7.82, representing a premium to net asset value of 1.43%, the net asset value per common share of COY was $7.88 and the market price per common share was $7.71, representing a discount to net asset value of -2.16%, the net asset value per common share of CYE was $8.01 and the market price per common share was $7.65, representing a discount to net asset value of -4.49%, the net asset value per common share of HIS was $2.33 and the market price per common share was $2.23, representing a discount to net asset value of -4.29%, and the net asset value per common share of HYV was $13.40 and the market price per common share was $12.96, representing a discount to net asset value of -3.28%.
For the periods shown in the tables above, the common shares of each Fund have traded at both a premium and discount to net asset value.
Performance Information
The performance table below illustrates the past performance of an investment in common shares of each Fund by setting forth the average total returns for the Funds for the periods indicated. A Funds past performance does not necessarily indicate how its common shares will perform in the future.
Average Annual Total Returns as of May 31, 2013 |
||||||||||||||
Fund |
Trailing
12-month Distribution Yield based on May 31, 2013 NAV |
One Year
ended May 31, 2013 based on NAV |
One Year
ended May 31, 2013 based on Market Price |
Since Inception
ended May 31, 2013 based on NAV |
Since Inception
ended May 31, 2013 based on Market Price |
Inception
Date |
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BHY |
6.93% | 18.50% | 16.51% | 5.46% | 5.56% | 12/23/98 | ||||||||
COY |
7.77% | 20.59% | 12.89% | 8.39% | 7.97% | 06/25/93 | ||||||||
CYE |
7.87% | 21.56% | 10.85% | 7.31% | 6.99% | 01/30/98 | ||||||||
HIS |
7.83% | 16.36% | 7.90% | 1.80% | 1.30% | 08/10/88 | ||||||||
HYV |
8.06% | 21.71% | 14.76% | 11.37% | 10.61% | 11/30/01 | ||||||||
HYT |
8.05% | 21.17% | 12.97% | 10.35% | 9.44% | 05/30/03 |
The dividend and distribution policy of the Acquiring Fund will be the dividend and distribution policy for the Combined Fund. The dividend and distribution policies of the Target Funds are substantially the same as those of the Acquiring Fund. The Acquiring Fund intends to make regular monthly cash distributions of all or a portion of its net investment income to holders of the Acquiring Funds common shares. The Acquiring Funds net investment income consists of all interest income accrued on portfolio assets less all expenses of the Acquiring Fund. The Acquiring Fund is required to allocate net capital gains and other taxable income, if any, received by the Fund among its stockholders on a pro rata basis in the year for which such capital gains and other income are realized.
The tax treatment and characterization of the Acquiring Funds distributions may vary significantly from time to time because of the varied nature of the Acquiring Funds investments. The Acquiring Fund will indicate the proportion of its capital gains distributions that constitute long-term and short-term gains annually. The ultimate tax characterization of the Acquiring Funds distributions made in a calendar or fiscal year cannot finally be determined until after the end of that fiscal year. As a result, there is a possibility that the Acquiring Fund may make total distributions during a calendar or fiscal year in an amount that exceeds the Acquiring Funds earnings and profits (as determined for U.S. federal income tax purposes), if any, for the relevant fiscal year and its previously undistributed earnings and profits from prior years, if any. In such situations, the amount
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by which the Acquiring Funds total distributions exceed its earnings and profits generally will be treated as a tax-free return of capital reducing the amount of a shareholders tax basis in such shareholders shares, with any amounts exceeding such basis treated as gain from the sale of shares.
Various factors will affect the level of the Acquiring Funds net investment income, such as its asset mix, its level of retained earnings, the amount of leverage utilized by the Acquiring Fund and the effects thereof and the movement of interest rates for debt securities. These factors, among others, may result in the Combined Funds level of net investment income being different from the level of net investment income for any of the Target Funds or the Acquiring Fund if the Reorganizations were not completed. To permit the Acquiring Fund to maintain more stable monthly distributions and to the extent consistent with the distribution requirements imposed on regulated investment companies by the Code, the Acquiring Fund may from time to time distribute less than the entire amount earned in a particular period. The income would be available to supplement future distributions. As a result, the distributions paid by the Acquiring Fund for any particular month may be more or less than the amount actually earned by the Acquiring Fund during that month. Undistributed earnings will increase the Acquiring Funds net asset value and, correspondingly, distributions from undistributed earnings and from capital, if any, will reduce the Acquiring Funds net asset value. Holders of the Acquiring Funds common shares will automatically have all dividends and distributions reinvested in common shares issued by the Acquiring Fund or common shares of the Acquiring Fund purchased in the open market in accordance with the Acquiring Funds Automatic Dividend Reinvestment Plan, unless an election is made to receive cash. For information concerning the manner in which dividends and distributions to holders of the Acquiring Funds common shares may be reinvested automatically in the Acquiring Funds common shares, see Automatic Dividend Reinvestment Plan as follows.
AUTOMATIC DIVIDEND REINVESTMENT PLAN
Unless the registered owner of common shares elects to receive cash by contacting Computershare Trust Company, N.A. (the Reinvestment Plan Agent), all dividends or other distributions (together, a dividend) declared for your common shares of the Acquiring Fund will be automatically reinvested by the Reinvestment Plan Agent, as agent for shareholders in administering the Acquiring Funds dividend reinvestment plan (the Reinvestment Plan), in additional common shares of the Acquiring Fund. Shareholders who elect not to participate in the Reinvestment Plan will receive all dividends in cash paid by check mailed directly to the shareholder of record (or, if the common shares are held in street or other nominee name, then to such nominee) by Computershare Trust Company, N.A., as dividend disbursing agent. You may elect not to participate in the Reinvestment Plan and to receive all dividends in cash by contacting Computershare Trust Company, N.A., as Reinvestment Plan Agent, at the address provided on the following page. Participation in the Reinvestment Plan is completely voluntary and may be terminated or resumed at any time without penalty by written notice if received and processed by the Reinvestment Plan Agent prior to the dividend record date. Additionally, the Reinvestment Plan Agent seeks to process notices received after the record date but prior to the payable date and such notices often will become effective by the payable date. Where late notices are not processed by the applicable payable date, such termination or resumption will be effective with respect to any subsequently declared dividend.
Some brokers may automatically elect to receive cash on your behalf and may re-invest that cash in additional common shares of the Acquiring Fund for you. If you wish for all dividends declared on your common shares of the Acquiring Fund to be automatically reinvested pursuant to the Reinvestment Plan, please contact your broker.
The Reinvestment Plan Agent will open an account for each common shareholder under the Reinvestment Plan in the same name in which such common shareholders common shares are registered. Whenever the Acquiring Fund declares a dividend payable in cash, non-participants in the Reinvestment Plan will receive cash and participants in the Reinvestment Plan will receive the equivalent in common shares. The common shares will
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be acquired by the Reinvestment Plan Agent for the participants accounts, depending upon the circumstances described below, either (i) through receipt of additional unissued but authorized common shares from the Acquiring Fund (newly issued common shares) or (ii) by purchase of outstanding common shares on the open market (open-market purchases). If, on the dividend payment date, the net asset value per share (NAV) is equal to or less than the market price per share plus estimated brokerage commissions (such condition often referred to as a market premium), the Reinvestment Plan Agent will invest the dividend amount in newly issued common shares on behalf of the participants. The number of newly issued common shares to be credited to each participants account will be determined by dividing the dollar amount of the dividend by the NAV on the dividend payment date. However, if the NAV is less than 95% of the market price on the dividend payment date, the dollar amount of the dividend will be divided by 95% of the market price on the dividend payment date. If, on the dividend payment date, the NAV is greater than the market price per share plus estimated brokerage commissions (such condition often referred to as a market discount), the Reinvestment Plan Agent will invest the dividend amount in common shares acquired on behalf of the participants in open-market purchases. In the event of a market discount on the dividend payment date, the Reinvestment Plan Agent will have until the last business day before the next date on which the common shares trade on an ex-dividend basis or 30 days after the dividend payment date, whichever is sooner (the last purchase date), to invest the dividend amount in common shares acquired in open-market purchases. It is contemplated that the Acquiring Fund will pay monthly income dividends. If, before the Reinvestment Plan Agent has completed its open-market purchases, the market price per common share exceeds the NAV per common share, the average per common share purchase price paid by the Reinvestment Plan Agent may exceed the NAV of the common shares, resulting in the acquisition of fewer common shares than if the dividend had been paid in newly issued common shares on the dividend payment date. Because of the foregoing difficulty with respect to open-market purchases, the Reinvestment Plan provides that if the Reinvestment Plan Agent is unable to invest the full dividend amount in open-market purchases, or if the market discount shifts to a market premium during the purchase period, the Reinvestment Plan Agent may cease making open-market purchases and may invest any uninvested portion in newly issued shares. Investments in newly issued shares made in this manner would be made pursuant to the same process described above and the date of issue for such newly issued shares will substitute for the dividend payment date.
The Reinvestment Plan Agent maintains all shareholders accounts in the Reinvestment Plan and furnishes written confirmation of all transactions in the accounts, including information needed by shareholders for tax records. Common shares in the account of each Reinvestment Plan participant will be held by the Reinvestment Plan Agent on behalf of the Reinvestment Plan participant, and each shareholder proxy will include those shares purchased or received pursuant to the Reinvestment Plan. The Reinvestment Plan Agent will forward all proxy solicitation materials to participants and vote proxies for shares held under the Reinvestment Plan in accordance with the instructions of the participants.
In the case of shareholders such as banks, brokers or nominees, which hold shares for others who are the beneficial owners, the Reinvestment Plan Agent will administer the Reinvestment Plan on the basis of the number of common shares certified from time to time by the record shareholders name and held for the account of beneficial owners who participate in the Reinvestment Plan.
The Reinvestment Plan Agents fees for the handling of the reinvestment of dividends will be paid by the Acquiring Fund; however, each participant will pay a $0.02 per share fee incurred in connection with open-market purchases, which will be deducted from the value of the dividend. The automatic reinvestment of dividends will not relieve participants of any U.S. federal, state or local income tax that may be payable (or required to be withheld) on such dividends.
Participants that request a sale of shares through the Reinvestment Plan Agent are subject to a $2.50 sales fee and a $0.15 per share fee. Per share fees include any applicable brokerage commissions the Reinvestment Plan Agent is required to pay.
The Acquiring Fund reserves the right to amend or terminate the Reinvestment Plan. There is no direct service charge to participants with regard to purchases in the Reinvestment Plan; however, the Acquiring
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Fund reserves the right to amend the Reinvestment Plan to include a service charge payable by the participants. Notice of amendments to the Reinvestment Plan will be sent to participants.
All correspondence concerning the Reinvestment Plan, including any questions about the Reinvestment Plan, should be directed to the Reinvestment Plan Agent at Computershare Trust Company, N.A., through the internet at www.computershare.com/blackrock, by calling 1-800-699-1236 or in writing to Computershare Trust Company, N.A., P.O. Box 43078, Providence, Rhode Island 02940-3078.
All overnight correspondence should be directed to the Reinvestment Plan Agent at 250 Royall Street, Canton, Massachusetts 02021.
CERTAIN PROVISIONS OF THE CHARTER
Each Funds charter or 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. This 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 over the Fund. Such attempts could have the effect of increasing the expenses of the Fund and disrupting the normal operation of the Fund.
The Board of each of BHY and HIS 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 of each of BHY and HIS. The Board of each of COY, CYE, HYV and HYT are not classified. With respect to each Fund, a director may be removed from office with or without cause by vote of the holders of 66 2 / 3 % of the votes entitled to be voted on the matter.
The charters of COY, CYE, HYV and HYT require the favorable vote of the holders of 66 2 / 3 % of the outstanding shares of capital stock of each Fund entitled to be voted on the matter, unless such action has been approved, adopted or authorized by the affirmative vote of at least two-thirds of the total number of directors fixed in accordance with the bylaws, in which case the affirmative vote of the holders of a majority of all of the outstanding shares entitled to vote on the matter is required to approve, adopt or authorize the following:
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a merger or consolidation or statutory share exchange of the Fund with any other corporation or entity, |
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a sale of all or substantially all of the Funds assets (other than in the regular course of the Funds investment activities), or |
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a liquidation or dissolution of the Fund. |
In respect of the foregoing matters, the agreement and declaration of trust of BHY require the affirmative vote of a majority of the outstanding shares entitled to vote on the matters, and the declaration of trust of HIS requires the favorable vote of a 1940 Act Majority, to approve, adopt or authorize the foregoing matters.
Subtitle 8 of Title 3 of the Maryland General Corporate Law permits a Maryland corporation with a class of equity securities registered under the Securities and Exchange Act of 1934 and at least three independent directors to elect to be subject, by provision in its charter or bylaws or a resolution of its board of directors and notwithstanding any contrary provision in the charter or bylaws, to a provision requiring that a vacancy on the board be filled only by the remaining directors and for the remainder of the full term of the directorship in which the vacancy occurred. Pursuant to Subtitle 8 and by amendment to the bylaws, the Board of each of COY, CYE, HYV and HYT elected to provide that vacancies on the Board be filled only by the remaining directors and for the remainder of the full term of the directorship in which the vacancy occurred.
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The Board of each Fund has determined that the voting requirements described above, which are, in the case of BHY, COY, CYE, HYV and HYT, greater than the minimum requirements under the 1940 Act or, in certain circumstances with respect to COY, CYE, HYV and HYT, greater than the minimum requirements under Maryland law, are in the best interests of shareholders generally. Reference should be made to the charter or the declaration of trust, as applicable, of each Fund on file with the SEC for the full text of these provisions.
BHY is organized as a Delaware statutory trust pursuant to its Agreement and Declaration of Trust governed by the laws of the State of Delaware. BHY was organized on August 10, 1998 and commenced operations on December 23, 1998.
HIS is organized as a Massachusetts business trust pursuant to its Declaration of Trust governed by the laws of the Commonwealth of Massachusetts. HIS was organized on October 27, 1987 and commenced operations on August 10, 1988.
Each of COY, CYE, HYV and HYT is incorporated as a Maryland corporation pursuant to its Articles of Incorporation governed by the laws of the State of Maryland. COY was incorporated on April 15, 1993 and commenced operations on June 25, 1993. CYE was incorporated on October 31, 1997 and commenced operations on January 30, 1998. HYV was incorporated on October 2, 2001 and commenced operations on November 30, 2001. HYT was incorporated on March 13, 2003 and commenced operations on May 30, 2003.
In general, a Delaware statutory trust and a Massachusetts business trust provide greater flexibility with respect to procedural matters and a corporation provides greater certainty with respect to limitation of personal liability. Under the Delaware Statutory Trust Act, shareholders of a Delaware statutory trust are entitled to the same limitation of personal liability as is extended to shareholders of a private corporation organized for profit under the General Corporation Law of the State of Delaware. However, there is a remote possibility that shareholders of a Delaware statutory trust could, under certain circumstances be held liable for the Delaware statutory trusts liabilities to the extent the courts of another state refused to recognize such limited liability in a controversy involving a Delaware statutory trusts obligations. BHYs and HISs governing document disclaims shareholder liability for acts or obligations of such Fund. Thus, a Delaware statutory trust shareholders risk of incurring financial loss due to shareholder liability is limited to circumstances in which a court refuses to recognize the Delaware Statutory Trust Act and the complaining party is held not bound by the Delaware statutory trusts disclaimer regarding shareholder liability. Massachusetts business trust laws (MA Statute) do not provide explicitly that the shareholders and trustees of a Massachusetts business trust are not liable for obligations of the trust to the same extent as under corporate law, and shareholders and trustees of a Massachusetts business trust could potentially be liable for trust obligations. Even if the governing document of a Massachusetts business trust contains an express disclaimer of liability of shareholders, certain Massachusetts judicial decisions have determined that shareholders of a Massachusetts business trust may, in certain circumstances, be assessed or held personally liable as partners for the obligations of a Massachusetts business trust. As noted above, a Maryland corporation provides greater certainty with respect to limitation of personal liability. Shareholders of a Maryland corporation currently have no personal liability for the corporations acts or obligations, except that a shareholder may be liable to the extent that (i) the shareholder knowingly accepted a distribution in violation of such Maryland corporations charter or the Maryland General Corporation Law or (ii) the subscription price or other agreed upon consideration for stock subscribed for has not been paid.
In contrast to the Maryland General Corporation Law, the Delaware Statutory Trust Act and Massachusetts business trust law allows the parties to define their business relationships. The Delaware Statutory Trust Act provide rules only in situations where the parties have failed to agree and the Delaware Statutory Trust Act gives maximum effect to the principle of freedom of contract and to the enforceability of a statutory trusts governing instrument. However, the MA Statute is silent on many of the salient features of a Massachusetts business trust
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whereas the DE Statute provides guidance and offers a significant amount of operational flexibility to Delaware statutory trusts. Both the MA Statute and the DE Statute permit a trusts governing instrument to contain provisions relating to shareholder rights and removal of trustees, and provide trusts with the ability to amend or restate the trusts governing instruments. The DE Statute also authorizes the trustees to take various actions without requiring shareholder approval if permitted by a Funds governing instruments. For example, trustees of a Delaware statutory trust may have the power to amend the trusts governing instrument, merge or consolidate a Fund with another entity, and to change the Delaware statutory trusts domicile, in each case without a shareholder vote.
Other differences between Maryland and Delaware law relate to the authorized shares of a Fund. Consistent with Maryland law, COY, CYE, HYV and HYT have authorized a specific number of shares; however, the Board of HYT has the authority to amend its charter to increase the number of authorized shares without shareholder approval. BHY, consistent with Delaware law, has authorized the issuance of an unlimited number of shares. HIS has also authorized the issuance of an unlimited number of shares.
The foregoing is only a summary of certain differences between COY, CYE, HYV and HYT under Maryland law, HIS under Massachusetts law and BHY under Delaware law. It is not intended to be a complete list of differences and shareholders should refer to the provisions of each Funds applicable organizational documents for a more thorough comparison. Such documents are filed as part of each Funds registration statement with the SEC, and shareholders may obtain copies of such documents as described on page iii of this Joint Proxy Statement/Prospectus.
To convert any Fund to an open-end investment company, each Funds charter or declaration of trust, as applicable, requires the affirmative vote of the holders of at least 66 2 / 3 % of such Funds respective outstanding shares entitled to be voted on the matter (or a majority of such shares if the amendment was previously approved, adopted or authorized by the affirmative vote of at least two-thirds of the total number of directors fixed in accordance with the bylaws).
The foregoing votes would satisfy a separate requirement in the 1940 Act that any conversion of a Fund to an open-end investment company be approved by the shareholders. If approved in the foregoing manners, we anticipate conversion of a Fund to an open-end investment company might not occur until 90 days after the shareholders meeting at which such conversion was approved and would also require at least 10 days prior notice to all shareholders. Following any such conversion, it is possible that certain of the Funds investment policies and strategies would have to be modified to assure sufficient portfolio liquidity. In the event of conversion, the Funds common shares would cease to be listed on the NYSE. Shareholders of an open-end investment company may require the company to redeem their shares at any time, except in certain circumstances as authorized by or under the 1940 Act, at their net asset value, less such redemption charge, if any, as might be in effect at the time of redemption. An open-end investment company expects to pay all such redemption requests in cash, but reserves the right to pay redemption requests in a combination of cash and securities. If such partial payment in securities were made, investors may incur brokerage costs in converting such securities to cash. If a Fund were converted to an open-end investment company, it is likely that new shares would be sold at net asset value plus a sales load. Each Board believes, however, that its Funds closed-end structure is desirable in light of the Funds investment objectives and policies. Therefore, shareholders should assume that it is not likely that its Board would vote to convert its Fund to an open-end fund.
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Voting rights are identical for the shareholders of each Fund. The shareholders of each Fund are entitled to one vote for each share held by them. The shareholders of each Fund do not have any preemptive or preferential right to purchase or subscribe to any shares of such Fund.
Each Funds common shares do not have cumulative voting rights, which means that the holders of more than 50% of a Funds common shares voting for the election of directors can elect all of the directors standing for election by such holders, and, in such event, the holders of the Funds remaining common shares will not be able to elect any directors.
Shareholders of BHY do not have appraisal rights for their common shares because BHY is organized as Delaware statutory trust and its governing documents do not provide for appraisal rights. Shareholders of HIS do not have appraisal rights for their common shares because HIS is organized as Massachusetts business trust and its governing documents do not provide for appraisal rights. Shareholders of COY, CYE, HYV and HYT do not have appraisal rights because under Maryland law, shareholders of an investment company whose shares are traded publicly on a national securities exchange are not entitled to demand the fair value of their shares in connection with a reorganization.
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Blackrock High Yield Trust (BHY)
The Financial Highlights table is intended to help you understand BHYs financial performance for the periods shown. Certain information reflects the financial results for a single Fund share. The total returns in the table represent the rate an investor would have earned or lost on an investment in BHY (assuming reinvestment of all dividends and/or distributions, if applicable). The information for the six months ended February 28, 2013 is unaudited. The information for the remaining periods shown has been audited by Deloitte & Touche LLP, BHYs independent registered public accounting firm. Financial statements for the fiscal year ended August 31, 2012 and the Report of the Independent Registered Public Accounting Firm thereon appear in BHYs Annual Report for the fiscal year ended August 31, 2012, which is available upon request.
BlackRock High Yield
Trust (BHY) |
Six Months
Ended February 28, 2013 (Unaudited) |
Year Ended August 31, |
For the
Period November 1, 2007 to August 31, 2008 |
Year Ended October 31, | ||||||||||||||||||||||||||||||||||||||||||||
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Per Share Operating Performance |
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Net asset value, beginning of period |
$ | 7.29 | $ | 6.79 | $ | 6.69 | $ | 5.78 | $ | 6.84 | $ | 7.91 | $ | 7.85 | $ | 7.48 | $ | 7.95 | $ | 6.96 | $ | 6.13 | $ | 7.20 | ||||||||||||||||||||||||
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Net investment income |
0.27 | 1 | 0.53 | 1 | 0.51 | 1 | 0.51 | 1 | 0.51 | 1 | 0.50 | 1 | 0.63 | 0.66 | 0.68 | 0.92 | 1.06 | 1.20 | ||||||||||||||||||||||||||||||
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Net realized and unrealized gain (loss) |
0.32 | 0.50 | 0.11 | 0.92 | (1.00 | ) | (1.06 | ) | 0.04 | 0.36 | (0.36 | ) | 1.02 | 0.89 | (0.98 | ) | ||||||||||||||||||||||||||||||||
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Net increase (decrease) from investment operations |
0.59 | 1.03 | 0.62 | 1.43 | (0.49 | ) | (0.56 | ) | 0.67 | 1.02 | 0.32 | 1.94 | 1.95 | 0.22 | ||||||||||||||||||||||||||||||||||
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Dividends and distributions from: |
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Net investment income |
(0.27 | ) | (0.53 | ) 2 | (0.51 | ) 2 | (0.50 | ) 2 | (0.55 | ) 2 | (0.51 | ) 2 | (0.61 | ) 2 | (0.65 | ) 2 | (0.79 | ) 2 | (0.92 | ) 2 | (1.07 | ) 2 | (1.20 | ) 2 | ||||||||||||||||||||||||
Net realized gain |
| | (0.01 | ) 2 | (0.02 | ) 2 | (0.02 | ) 2 | | | | | (0.03 | ) 2 | (0.05 | ) 2 | (0.09 | ) 2 | ||||||||||||||||||||||||||||||
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Total dividends and distributions |
(0.27 | ) | (0.53 | ) | (0.52 | ) | (0.52 | ) | (0.57 | ) | (0.51 | ) | (0.61 | ) | (0.65 | ) | (0.79 | ) | (0.95 | ) | (1.12 | ) | (1.29 | ) | ||||||||||||||||||||||||
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Net asset value, end of period |
$ | 7.61 | $ | 7.29 | $ | 6.79 | $ | 6.69 | $ | 5.78 | $ | 6.84 | $ | 7.91 | $ | 7.85 | $ | 7.48 | $ | 7.95 | $ | 6.96 | $ | 6.13 | ||||||||||||||||||||||||
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Market price, end of period |
$ | 8.08 | $ | 8.04 | $ | 6.60 | $ | 6.44 | $ | 5.84 | $ | 5.96 | $ | 6.92 | $ | 7.77 | $ | 7.36 | $ | 9.30 | $ | 10.25 | $ | 8.68 | ||||||||||||||||||||||||
Total Investment Return 3 |
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Based on net asset value |
8.14 | % 4 | 15.70 | % | 9.66 | % | 25.70 | % | (5.30 | )% | (6.47 | )% 4 | 9.03 | % | 14.25 | % | 2.85 | % | 26.24 | % | 27.75 | % | 2.78 | % | ||||||||||||||||||||||||
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Based on market price |
4.11 | % 4 | 31.27 | % | 10.73 | % | 19.76 | % | 9.81 | % | (6.85 | )% 4 | (3.63 | )% | 14.93 | % | (13.49 | )% | 0.28 | % | 32.87 | % | 7.97 | % | ||||||||||||||||||||||||
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Total expenses |
2.19 | % 5 | 2.01 | % | 2.04 | % | 2.10 | % | 2.61 | % | 2.61 | % 5 | 4.16 | % | 4.50 | % | 3.52 | % | 2.69 | % | 3.07 | % | 3.45 | % | ||||||||||||||||||||||||
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Total expenses after fees waived and paid indirectly |
2.19 | % 5 | 2.01 | % | 2.04 | % | 2.10 | % | 2.61 | % | 2.61 | % 5 | 4.14 | % | 4.49 | % | 3.51 | % | 2.68 | % | 3.07 | % | 2.20 | % | ||||||||||||||||||||||||
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Total expenses after fees waived and paid indirectly and excluding interest expense and income tax |
1.84 | % 5,6 | 1.79 | % 6 | 1.85 | % | 1.91 | % | 2.16 | % | 1.77 | % 5 | 2.10 | % | 2.19 | % | 2.10 | % | 1.96 | % | 2.22 | % | 2.20 | % | ||||||||||||||||||||||||
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Net investment income |
7.32 | % 5 | 7.59 | % | 7.18 | % | 7.89 | % | 10.22 | % | 8.34 | % 5 | 7.84 | % | 8.74 | % | 8.71 | % | 12.16 | % | 16.37 | % | 16.29 | % | ||||||||||||||||||||||||
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118
BlackRock High Yield
Trust (BHY) |
Six Months
Ended February 28, 2013 (Unaudited) |
Year Ended August 31, |
For the
Period November 1, 2007 to August 31, 2008 |
Year Ended October 31, | ||||||||||||||||||||||||||||||||||||||||||||
2012 | 2011 | 2010 | 2009 | 2007 | 2006 | 2005 | 2004 | 2003 | 2002 | |||||||||||||||||||||||||||||||||||||||
Supplemental Data |
||||||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (000) |
$ | 48,935 | $ | 46,876 | $ | 43,644 | $ | 42,980 | $ | 37,137 | $ | 43,897 | $ | 50,782 | $ | 50,385 | $ | 47,924 | $ | 50,914 | $ | 44,438 | $ | 38,953 | ||||||||||||||||||||||||
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Borrowings outstanding, end of period (000) |
$ | 18,000 | $ | 19,000 | $ | 6,000 | $ | 8,000 | $ | 4,000 | $ | 6,250 | $ | 9,250 | $ | 20,250 | $ | 20,750 | $ | 19,250 | $ | 19,250 | $ | 19,250 | ||||||||||||||||||||||||
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Average borrowings outstanding, during the period (000) |
$ | 17,657 | $ | 10,615 | $ | 7,427 | $ | 6,427 | $ | 5,223 | $ | 7,443 | $ | 17,710 | $ | 20,621 | $ | 20,425 | $ | 19,250 | $ | 19,250 | $ | 19,250 | ||||||||||||||||||||||||
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Portfolio turnover |
40% | 59% | 81% | 80% | 54% | 34% | 69% | 85% | 102% | 156% | 30% | 147% | ||||||||||||||||||||||||||||||||||||
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Asset coverage, end of period per $1,000 |
$ | 3,719 | $ | 3,467 | $ | 8,274 | $ | 6,373 | $ | 10,284 | $ | 8,023 | $ | 6,490 | $ | 3,488 | $ | 3,310 | $ | 3,645 | $ | 3,308 | $ | 3,024 | ||||||||||||||||||||||||
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1 |
Based on average shares outstanding. |
2 |
Dividends and distributions are determined in accordance with federal income tax regulations. |
3 |
Total investment returns based on market price, which can be significantly greater or lesser than the net asset value, may result in substantially different returns. Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions. |
4 |
Aggregate total investment return. |
5 |
Annualized. |
6 |
For the six months ended February 28, 2013 and the year ended August 31, 2012, the total expense ratio after fees waived and paid indirectly and excluding interest expense and borrowing costs were 1.80% and 1.69%, respectively. |
119
Blackrock Corporate High Yield Fund, Inc. (COY)
The Financial Highlights table is intended to help you understand COYs financial performance for the periods shown. Certain information reflects the financial results for a single COY common share. The total returns in the table represent the rate an investor would have earned or lost on an investment in COY (assuming reinvestment of all dividends and/or distributions, if applicable). The information for the periods shown has been audited by Deloitte & Touche LLP, COYs independent registered public accounting firm. Financial statements for the fiscal year ended February 28, 2013 and the Report of the Independent Registered Public Accounting Firm thereon appear in COYs Annual Report for the fiscal year ended February 28, 2013, which is available upon request.
BlackRock Corporate
High Yield Fund, Inc. (COY) |
Year Ended
February 28, 2013 1 |
Year Ended
February 29, 2012 1 |
Year Ended
February 28, |
Period
June 1, 2008 to February 28, 2009 |
Year Ended May 31, | |||||||||||||||||||||||||||||||||||||||
2011 | 2010 | 2008 | 2007 | 2006 | 2005 | 2004 | 2003 | |||||||||||||||||||||||||||||||||||||
Per Share Operating Performance |
||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period |
$ | 7.29 | $ | 7.42 | $ | 6.64 | $ | 4.19 | $ | 7.74 | $ | 9.07 | $ | 8.52 | $ | 8.53 | $ | 8.48 | $ | 8.01 | $ | 7.85 | ||||||||||||||||||||||
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Net investment income 2 |
0.63 | 0.62 | 0.65 | 0.65 | 0.50 | 0.75 | 0.73 | 0.74 | 0.87 | 0.91 | 0.93 | |||||||||||||||||||||||||||||||||
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Net realized and unrealized gain (loss) |
0.45 | (0.14 | ) | 0.74 | 2.53 | (3.50 | ) | (1.32 | ) | 0.49 | 0.02 | 0.07 | 0.56 | 0.16 | ||||||||||||||||||||||||||||||
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Net increase (decrease) from investment operations |
1.08 | 0.48 | 1.39 | 3.18 | (3.00 | ) | (0.57 | ) | 1.22 | 0.76 | 0.94 | 1.47 | 1.09 | |||||||||||||||||||||||||||||||
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Dividends from net investment income 3 |
(0.61 | ) | (0.61 | ) | (0.61 | ) | (0.73 | ) | (0.55 | ) | (0.76 | ) | (0.67 | ) | (0.77 | ) | (0.89 | ) | (1.00 | ) | (0.93 | ) | ||||||||||||||||||||||
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Net asset value, end of period |
$ | 7.76 | $ | 7.29 | $ | 7.42 | $ | 6.64 | $ | 4.19 | $ | 7.74 | $ | 9.07 | $ | 8.52 | $ | 8.53 | $ | 8.48 | $ | 8.01 | ||||||||||||||||||||||
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Market price, end of period |
$ | 8.04 | $ | 7.76 | $ | 7.03 | $ | 6.88 | $ | 3.91 | $ | 7.28 | $ | 8.47 | $ | 7.42 | $ | 8.46 | $ | 8.23 | $ | 8.64 | ||||||||||||||||||||||
Total Investment Return 4 |
||||||||||||||||||||||||||||||||||||||||||||
Based on net asset value |
15.53 | % | 7.15 | % | 22.11 | % | 79.91 | % | (38.98 | )% 5 | (5.49 | )% | 15.60 | % | 9.75 | % | 11.31 | % | 18.65 | % | 16.17 | % | ||||||||||||||||||||||
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Based on market price |
12.44 | % | 20.39 | % | 11.66 | % | 99.76 | % | (39.46 | )% 5 | (4.81 | )% | 23.96 | % | (3.63 | )% | 13.75 | % | 6.75 | % | 17.66 | % | ||||||||||||||||||||||
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Ratios to Average Net Assets |
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Total expenses |
1.25 | % | 1.15 | % | 1.18 | % | 1.18 | % | 2.29 | % 6 | 2.33 | % | 3.25 | % | 2.39 | % | 1.69 | % | 1.39 | % | 1.56 | % | ||||||||||||||||||||||
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Total expenses after fees waived and paid indirectly |
1.25 | % | 1.15 | % | 1.18 | % | 1.18 | % | 2.29 | % 6 | 2.33 | % | 3.25 | % | 2.39 | % | 1.69 | % | 1.39 | % | 1.01 | % | ||||||||||||||||||||||
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Total expenses after fees waived and paid indirectly and excluding interest expense and income tax |
0.92 | % 7 | 0.90 | % | 0.89 | % | 0.92 | % | 1.17 | % 6 | 0.83 | % | 0.91 | % | 0.90 | % | 0.87 | % | 0.91 | % | 0.92 | % | ||||||||||||||||||||||
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Net investment income |
8.48 | % | 8.67 | % | 9.28 | % | 11.36 | % | 11.45 | % 6 | 9.15 | % | 8.36 | % | 8.55 | % | 9.85 | % | 10.72 | % | 13.32 | % | ||||||||||||||||||||||
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120
BlackRock Corporate
High Yield Fund, Inc. (COY) |
Year Ended
February 28, 2013 1 |
Year Ended
February 29, 2012 1 |
Year Ended
February 28, |
Period
June 1, 2008 to February 28, 2009 |
Year Ended May 31, | |||||||||||||||||||||||||||||||||||||||
2011 | 2010 | 2008 | 2007 | 2006 | 2005 | 2004 | 2003 | |||||||||||||||||||||||||||||||||||||
Supplemental Data |
||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (000) |
$ | 271,617 | $ | 254,176 | $ | 257,909 | $ | 230,593 | $ | 144,800 | $ | 267,698 | $ | 313,821 | $ | 294,759 | $ | 294,218 | $ | 291,654 | $ | 272,645 | ||||||||||||||||||||||
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Borrowings outstanding, end of period (000) |
$ | 98,000 | $ | 67,000 | $ | 63,000 | $ | 72,000 | $ | 38,700 | $ | 64,700 | $ | 126,200 | $ | 127,700 | $ | 100,600 | $ | 100,400 | $ | 95,900 | ||||||||||||||||||||||
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Average borrowings outstanding, during the period (000) |
$ | 91,655 | $ | 63,281 | $ | 55,304 | $ | 42,184 | $ | 59,553 | $ | 81,598 | $ | 125,974 | $ | 101,539 | $ | 104,938 | $ | 101,764 | $ | 54,606 | ||||||||||||||||||||||
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Portfolio turnover |
74 | % | 71 | % | 83 | % | 85 | % | 37 | % | 38 | % | 62 | % | 57 | % | 57 | % | 83 | % | 79 | % | ||||||||||||||||||||||
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Asset coverage, end of period per $1,000 |
$ | 3,772 | $ | 4,794 | $ | 5,094 | $ | 4,203 | $ | 4,742 | $ | 5,138 | $ | 3,487 | $ | 3,308 | $ | 3,925 | $ | 3,905 | $ | 3,843 | ||||||||||||||||||||||
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1 |
Consolidated Financial Highlights. |
2 |
Based on average shares outstanding. |
3 |
Dividends are determined in accordance with federal income tax regulations. |
4 |
Total investment returns based on market price, which can be significantly greater or lesser than the net asset value, may result in substantially different returns. Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions. |
5 |
Aggregate total investment return. |
6 |
Annualized. |
7 |
For the year ended February 28, 2013, the total expense ratio after fees waived and paid indirectly and excluding interest expense, borrowing costs and income tax was 0.86%. |
121
Blackrock Corporate High Yield Fund III, Inc. (CYE)
The Financial Highlights table is intended to help you understand CYEs financial performance for the periods shown. Certain information reflects the financial results for a CYE common share. The total returns in the table represent the rate an investor would have earned or lost on an investment in CYE (assuming reinvestment of all dividends and/or distributions, if applicable). The information for the periods shown has been audited by Deloitte & Touche LLP, CYEs independent registered public accounting firm. Financial statements for the fiscal year ended February 28, 2013 and the Report of the Independent Registered Public Accounting Firm thereon appear in CYEs Annual Report for the fiscal year ended February 28, 2013, which is available upon request.
BlackRock Corporate
High Yield Fund III, Inc. (CYE) |
Year Ended
February 28, 2013 1 |
Year Ended
February 29, 2012 1 |
Year Ended
February 28, |
Period
June 1, 2008 to February 28, 2009 |
Year Ended May 31, | |||||||||||||||||||||||||||||||||||||||
2011 | 2010 | 2008 | 2007 | 2006 | 2005 | 2004 | 2003 | |||||||||||||||||||||||||||||||||||||
Per Share Operating Performance |
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Net asset value, beginning of period |
$ | 7.41 | $ | 7.56 | $ | 6.69 | $ | 4.05 | $ | 7.62 | $ | 8.99 | $ | 8.46 | $ | 8.46 | $ | 8.43 | $ | 7.86 | $ | 7.68 | ||||||||||||||||||||||
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Net investment income 2 |
0.64 | 0.63 | 0.65 | 0.64 | 0.50 | 0.73 | 0.71 | 0.72 | 0.85 | 0.88 | 0.92 | |||||||||||||||||||||||||||||||||
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Net realized and unrealized gain (loss) |
0.50 | (0.15 | ) | 0.83 | 2.68 | (3.51 | ) | (1.33 | ) | 0.49 | 0.02 | 0.07 | 0.58 | 0.17 | ||||||||||||||||||||||||||||||
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Net increase (decrease) from investment operations |
1.14 | 0.48 | 1.48 | 3.32 | (3.01 | ) | (0.60 | ) | 1.20 | 0.74 | 0.92 | 1.46 | 1.09 | |||||||||||||||||||||||||||||||
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Dividends from net investment income 3 |
(0.67 | ) | (0.63 | ) | (0.61 | ) | (0.68 | ) | (0.56 | ) | (0.77 | ) | (0.67 | ) | (0.74 | ) | (0.89 | ) | (0.89 | ) | (0.91 | ) | ||||||||||||||||||||||
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Capital charges with respect to the issuance of Common shares |
| | | | | | | | | | 4 | | ||||||||||||||||||||||||||||||||
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Net asset value, end of period |
$ | 7.88 | $ | 7.41 | $ | 7.56 | $ | 6.69 | $ | 4.05 | $ | 7.62 | $ | 8.99 | $ | 8.46 | $ | 8.46 | $ | 8.43 | $ | 7.86 | ||||||||||||||||||||||
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Market price, end of period |
$ | 7.89 | $ | 7.75 | $ | 7.14 | $ | 6.67 | $ | 3.57 | $ | 7.03 | $ | 8.53 | $ | 7.36 | $ | 8.38 | $ | 7.97 | $ | 8.36 | ||||||||||||||||||||||
Total Investment Return 5 |
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Based on net asset value |
16.16 | % | 7.11 | % | 23.50 | % | 86.65 | % | (39.69 | )% 6 | (5.69 | )% | 15.51 | % | 9.78 | % | 11.24 | % | 19.33 | % | 16.46 | % | ||||||||||||||||||||||
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Based on market price |
11.20 | % | 18.62 | % | 16.99 | % | 111.12 | % | (42.38 | )% 6 | (8.30 | )% | 25.98 | % | (3.59 | )% | 16.55 | % | 6.07 | % | 15.73 | % | ||||||||||||||||||||||
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Ratios to Average Net Assets |
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Total expenses |
1.42 | % | 1.38 | % | 1.37 | % | 1.34 | % | 2.45 | % 7 | 2.47 | % | 3.38 | % | 2.49 | % | 1.81 | % | 1.51 | % | 1.59 | % | ||||||||||||||||||||||
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Total expenses after fees waived and paid indirectly |
1.42 | % | 1.38 | % | 1.37 | % | 1.33 | % | 2.45 | % 7 | 2.47 | % | 3.38 | % | 2.49 | % | 1.81 | % | 1.51 | % | 1.59 | % | ||||||||||||||||||||||
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Total expenses after fees waived and paid indirectly and excluding interest expense and income tax |
1.06 | %8 | 1.08 | % | 1.03 | % | 1.04 | % | 1.29 | % 7 | 0.96 | % | 1.04 | % | 1.01 | % | 0.99 | % | 1.01 | % | 1.04 | % | ||||||||||||||||||||||
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Net investment income |
8.54 | % | 8.76 | % | 9.15 | % | 11.35 | % | 11.80 | % | 9.01 | % | 8.25 | % | 8.45 | % | 9.71 | % | 10.48 | % | 13.35 | % | ||||||||||||||||||||||
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122
BlackRock Corporate
High Yield Fund III, Inc. (CYE) |
Year Ended
February 28, 2013 1 |
Year Ended
February 29, 2012 1 |
Year Ended
February 28, |
Period
June 1, 2008 to February 28, 2009 |
Year Ended May 31, | |||||||||||||||||||||||||||||||||||||||
2011 | 2010 | 2008 | 2007 | 2006 | 2005 | 2004 | 2003 | |||||||||||||||||||||||||||||||||||||
Supplemental Data |
||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (000) |
$ | 296,008 | $ | 277,187 | $ | 282,259 | $ | 249,721 | $ | 151,261 | $ | 284,361 | $ | 335,479 | $ | 315,699 | $ | 315,626 | $ | 313,583 | $ | 289,820 | ||||||||||||||||||||||
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Borrowings outstanding, end of period (000) |
$ | 117,000 | $ | 86,000 | $ | 91,000 | $ | 76,000 | $ | 44,200 | $ | 71,700 | $ | 129,700 | $ | 141,000 | $ | 107,800 | $ | 109,600 | $ | 98,800 | ||||||||||||||||||||||
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Average borrowings outstanding, during the period (000) |
$ | 109,436 | $ | 83,997 | $ | 69,937 | $ | 49,196 | $ | 65,500 | $ | 88,466 | $ | 134,704 | $ | 109,144 | $ | 112,501 | $ | 112,297 | $ | 75,558 | ||||||||||||||||||||||
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Portfolio turnover |
74 | % | 70 | % | 89 | % | 89 | % | 37 | % | 38 | % | 62 | % | 56 | % | 55 | % | 83 | % | 77 | % | ||||||||||||||||||||||
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Asset coverage, end of period per $1,000 |
$ | 3,530 | $ | 4,223 | $ | 4,102 | $ | 4,286 | $ | 4,422 | $ | 4,966 | $ | 3,587 | $ | 3,239 | $ | 3,928 | $ | 3,861 | $ | 3,933 | ||||||||||||||||||||||
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1 |
Consolidated Financial Highlights. |
2 |
Based on average shares outstanding. |
3 |
Dividends are determined in accordance with federal income tax regulations. |
4 |
Amount is less than $0.01 per share. |
5 |
Total investment returns based on market price, which can be significantly greater or lesser than the net asset value, may result in substantially different returns. Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions. |
6 |
Aggregate total investment return. |
7 |
Annualized. |
8 |
For the year ended February 28, 2013, the total expense ratio after fees waived and paid indirectly and excluding interest expense, borrowing costs and income tax was 1.00%. |
123
BlackRock High Income Shares (HIS)
The Financial Highlights table is intended to help you understand HISs financial performance for the periods shown. Certain information reflects the financial results for a single HIS common share. The total returns in the table represent the rate an investor would have earned or lost on an investment in HIS (assuming reinvestment of all dividends and/or distributions, if applicable). The information for the six months ended February 28, 2013 is unaudited. The information for the remaining periods shown has been audited by Deloitte & Touche LLP, HISs independent registered public accounting firm. Financial statements for the fiscal year ended August 31, 2012 and the Report of the Independent Registered Public Accounting Firm thereon appear in HISs Annual Report for the fiscal year ended August 31, 2012, which is available upon request.
BlackRock
High Income Shares (HIS) |
Six
Months
Ended February 28, 2013 (Unaudited) |
Year Ended August 31, |
For
the
Period January 1, 2008 to August 31, 2008 |
Year Ended December 31, | ||||||||||||||||||||||||||||||||||||||||||||
2012 | 2011 | 2010 | 2009 | 2007 | 2006 | 2005 | 2004 1 | 2003 1 | 2002 1 | |||||||||||||||||||||||||||||||||||||||
Per Share Operating Performance |
||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period |
$ | 2.26 | $ | 2.18 | $ | 2.19 | $ | 1.85 | $ | 2.23 | $ | 2.47 | $ | 2.68 | $ | 2.61 | $ | 2.87 | $ | 2.86 | $ | 2.42 | $ | 3.05 | ||||||||||||||||||||||||
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Net investment income |
0.09 | 2 | 0.20 | 2 | 0.20 | 2 | 0.20 | 2 | 0.19 | 2 | 0.15 | 2 | 0.24 | 0.22 | 0.24 | 0.28 | 3 | 0.32 | 3 | 0.36 | 3 | |||||||||||||||||||||||||||
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Net realized and unrealized gain (loss) |
0.06 | 0.08 | | 0.31 | (0.36 | ) | (0.26 | ) | (0.21 | ) | 0.08 | (0.23 | ) | 0.03 | 0.40 | (0.62 | ) | |||||||||||||||||||||||||||||||
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Net increase (decrease) from investment operations |
0.15 | 0.28 | 0.20 | 0.51 | (0.17 | ) | (0.11 | ) | 0.03 | 0.30 | 0.01 | 0.31 | 0.72 | (0.26 | ) | |||||||||||||||||||||||||||||||||
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Dividends and distributions from: |
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Net invest
|
(0.10 | ) | (0.20 | ) 4 | (0.21 | ) 4 | (0.17 | ) 4 | (0.21 | ) 4 | (0.13 | ) 4 | (0.24 | ) 4 | (0.23 | ) 4 | (0.27 | ) 4 | (0.30 | ) 4 | (0.28 | ) 4 | (0.29 | ) 4 | ||||||||||||||||||||||||
Distributions from capital |
| | | | | | | | | | | (0.08 | ) 4 | |||||||||||||||||||||||||||||||||||
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Total dividends and distributions |
(0.10 | ) | (0.20 | ) | (0.21 | ) | (0.17 | ) | (0.21 | ) | (0.13 | ) | (0.24 | ) | (0.23 | ) | (0.27 | ) | (0.30 | ) | (0.28 | ) | (0.37 | ) | ||||||||||||||||||||||||
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Net asset value, end of period |
$ | 2.31 | $ | 2.26 | $ | 2.18 | $ | 2.19 | $ | 1.85 | $ | 2.23 | $ | 2.47 | $ | 2.68 | $ | 2.61 | $ | 2.87 | $ | 2.86 | $ | 2.42 | ||||||||||||||||||||||||
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Market price, end of period |
$ | 2.42 | $ | 2.40 | $ | 2.10 | $ | 2.09 | $ | 1.68 | $ | 1.88 | $ | 2.14 | $ | 2.55 | $ | 2.33 | $ | 2.90 | $ | 2.87 | $ | 2.32 | ||||||||||||||||||||||||
Total Investment Return 5 |
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Based on net asset value |
6.92 | % 6 | 13.91 | % | 9.56 | % | 28.95 | % | (3.01 | )% | (4.00 | )% 6 | 1.58 | % | 12.32 | % | 0.43 | % | 11.46 | % | 31.10 | % | 9.49 | % | ||||||||||||||||||||||||
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Based on market price |
5.48 | % 6 | 25.58 | % | 10.59 | % | 35.52 | % | 4.47 | % | (6.59 | )% 6 | (7.51 | )% | 19.70 | % | (11.28 | )% | 12.24 | % | 37.23 | % | (21.23 | )% | ||||||||||||||||||||||||
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124
BlackRock
High Income Shares (HIS) |
Six
Months
Ended February 28, 2013 (Unaudited) |
Year Ended August 31, |
For
the
Period January 1, 2008 to August 31, 2008 |
Year Ended December 31, | ||||||||||||||||||||||||||||||||||||||||||||
2012 | 2011 | 2010 | 2009 | 2007 | 2006 | 2005 | 2004 1 | 2003 1 | 2002 1 | |||||||||||||||||||||||||||||||||||||||
Ratios to Average Net Assets |
||||||||||||||||||||||||||||||||||||||||||||||||
Total expenses |
1.58 | % 7 | 1.54 | % | 1.49 | % | 1.49 | % | 2.01 | % | 1.98 | % 7 | 3.56 | % | 3.78 | % | 3.04 | % | 2.23 | % | 2.21 | % | 2.53 | % | ||||||||||||||||||||||||
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Total expenses after fees waived and paid indirectly |
1.58 | % 7 | 1.54 | % | 1.49 | % | 1.49 | % | 2.01 | % | 1.98 | % 7 | 3.55 | % | 3.77 | % | 3.04 | % | 2.23 | % | 2.21 | % | 2.53 | % | ||||||||||||||||||||||||
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Total expenses after fees waived and paid indirectly and excluding interest expense |
1.28 | % 7,8 | 1.29 | % 8 | 1.25 | % | 1.27 | % | 1.41 | % | 1.05 | % 7 | 1.27 | % | 1.34 | % | 1.37 | % | 1.39 | % | 1.46 | % | 1.49 | % | ||||||||||||||||||||||||
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Net invest
|
7.97 | % 7 | 9.19 | % | 8.66 | % | 9.34 | % | 12.06 | % | 9.52 | % 7 | 8.89 | % | 8.42 | % | 8.82 | % | 9.70 | % | 11.99 | % | 13.29 | % | ||||||||||||||||||||||||
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Supplemental Data |
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Net assets, end of period (000) |
$ | 126,879 | $ | 123,745 | $ | 118,809 | $ | 119,642 | $ | 100,921 | $ | 121,808 | $ | 135,098 | $ | 146,538 | $ | 142,457 | $ | 155,298 | $ | 154,298 | $ | 129,538 | ||||||||||||||||||||||||
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Borrowings outstanding, end of period (000) |
$ | 44,000 | $ | 42,000 | $ | 29,000 | $ | 25,000 | $ | 18,000 | $ | 27,000 | $ | 46,000 | $ | 62,000 | $ | 66,000 | $ | 69,000 | $ | 68,000 | $ | 51,000 | ||||||||||||||||||||||||
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Average borrow
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$ | 38,862 | $ | 30,746 | $ | 26,729 | $ | 21,027 | $ | 21,220 | $ | 27,069 | $ | 55,868 | $ | 62,838 | $ | 65,992 | $ | 64,081 | $ | 60,604 | $ | 3,540 | ||||||||||||||||||||||||
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Portfolio turnover |
41 | % | 63 | % | 90 | % | 85 | % | 55 | % | 25 | % | 69 | % | 83 | % | 115 | % | 56 | % | 93 | % | 134 | % | ||||||||||||||||||||||||
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Asset coverage, end of period per $1,000 |
$ | 3,884 | $ | 3,946 | $ | 5,097 | $ | 5,786 | $ | 6,607 | $ | 5,512 | $ | 3,937 | $ | 3,364 | $ | 3,158 | $ | 3,251 | $ | 3,269 | $ | 68,577 | ||||||||||||||||||||||||
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1 |
Audited by other Independent Registered Public Accounting Firm. |
2 |
Based on average shares outstanding. |
3 |
Net investment income per share has been recalculated in accordance with Securities and Exchange Commission requirements, with the exception that end-of-the-year accumulated undistributed/(overdistributed) net investment income has not been adjusted to reflect current-year permanent differences between financial and tax accounting. |
4 |
Dividends and distributions are determined in accordance with federal income tax regulations. |
5 |
Total investment returns based on market price, which can be significantly greater or lesser than the net asset value, may result in substantially different returns. Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions. |
6 |
Aggregate total investment return. |
7 |
Annualized. |
8 |
For the six months ended February 28, 2013 and the year ended August 31, 2012, the total expense ratio after fees waived and paid indirectly and excluding interest expense and borrowing costs were 1.22% and 1.19%, respectively. |
125
BlackRock Corporate High Yield Fund V, Inc. (HYV)
The Financial Highlights table is intended to help you understand HYVs financial performance for the periods shown. Certain information reflects the financial results for a single HYV common share. The total returns in the table represent the rate an investor would have earned or lost on an investment in HYV (assuming reinvestment of all dividends and/or distributions, if applicable). The information for the six months ended February 28, 2013 is unaudited. The information for the remaining periods shown has been audited by Deloitte & Touche LLP, HYVs independent registered public accounting firm. Financial statements for the fiscal year ended August 31, 2012 and the Report of the Independent Registered Public Accounting Firm thereon appear in HYVs Annual Report for the fiscal year ended August 31, 2012, which is available upon request.
BlackRock Corporate
High Yield Fund V, Inc. (HYV) |
Six Months
Ended February 28, 2013 1 (Unaudited) |
Year Ended August 31, | ||||||||||||||||||||||||||||||||||||||||||
2012 1 | 2011 | 2010 | 2009 | 2008 | 2007 | 2006 | 2005 | 2004 | 2003 | |||||||||||||||||||||||||||||||||||
Per Share Operating Performance |
||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period |
$ | 12.63 | $ | 11.71 | $ | 11.61 | $ | 9.71 | $ | 11.94 | $ | 13.83 | $ | 14.10 | $ | 15.19 | $ | 16.15 | $ | 14.90 | $ | 12.54 | ||||||||||||||||||||||
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Net investment income |
0.54 | 2 | 1.08 | 2 | 1.09 | 2 | 1.06 | 2 | 1.07 | 2 | 1.18 | 2 | 1.20 | 2 | 1.22 | 2 | 1.47 | 2 | 1.67 | 2 | 1.68 | |||||||||||||||||||||||
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Net realized and unrealized gain (loss) |
0.65 | 0.91 | 0.07 | 1.86 | (2.10 | ) | (1.85 | ) | (0.33 | ) | (0.50 | ) | 0.19 | 1.27 | 2.37 | |||||||||||||||||||||||||||||
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Net increase (decrease) from investment operations |
1.19 | 1.99 | 1.16 | 2.92 | (1.03 | ) | (0.67 | ) | 0.87 | 0.72 | 1.66 | 2.94 | 4.05 | |||||||||||||||||||||||||||||||
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Dividends and distributions from: |
||||||||||||||||||||||||||||||||||||||||||||
Net investment income |
(0.64 | ) | (1.07 | ) 3 | (1.06 | ) 3 | (1.02 | ) 3 | (1.20 | ) 3 | (1.17 | ) 3 | (1.14 | ) 3 | (1.25 | ) 3 | (1.64 | ) 3 | (1.63 | ) 3 | (1.69 | ) 3 | ||||||||||||||||||||||
Net realized gain |
| | | | | (0.05 | ) 3 | | (0.56 | ) 3 | (0.98 | ) 3 | (0.06 | ) 3 | | |||||||||||||||||||||||||||||
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Total dividends and distributions |
(0.64 | ) | (1.07 | ) | (1.06 | ) | (1.02 | ) | (1.20 | ) | (1.22 | ) | (1.14 | ) | (1.81 | ) | (2.62 | ) | (1.69 | ) | (1.69 | ) | ||||||||||||||||||||||
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Capital charges with respect to the issuance of Common shares |
| | | | | | | | | | | 4 | ||||||||||||||||||||||||||||||||
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Net asset value, end of period |
$ | 13.18 | $ | 12.63 | $ | 11.71 | $ | 11.61 | $ | 9.71 | $ | 11.94 | $ | 13.83 | $ | 14.10 | $ | 15.19 | $ | 16.15 | $ | 14.90 | ||||||||||||||||||||||
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Market price, end of period |
$ | 13.09 | $ | 13.51 | $ | 11.55 | $ | 11.40 | $ | 9.32 | $ | 10.15 | $ | 12.24 | $ | 12.81 | $ | 15.04 | $ | 15.44 | $ | 14.47 | ||||||||||||||||||||||
Total Investment Return 5 |
||||||||||||||||||||||||||||||||||||||||||||
Based on net asset value |
9.62 | % 6 | 17.92 | % | 10.29 | % | 31.40 | % | (3.83 | )% | (3.99 | )% | 6.76 | % | 6.37 | % | 11.03 | % | 20.92 | % 7 | 34.62 | % | ||||||||||||||||||||||
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Based on market price |
1.78 | % 6 | 27.88 | % | 10.79 | % | 34.42 | % | 8.59 | % | (7.78 | )% | 4.00 | % | (2.40 | )% | 14.99 | % | 19.04 | % | 31.16 | % | ||||||||||||||||||||||
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Ratios to Average Net Assets |
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Total expenses |
1.41 | % 8 | 1.42 | % | 1.34 | % | 1.26 | % | 1.84 | % | 2.11 | % | 3.20 | % | 2.87 | % | 1.99 | % | 1.46 | % | 1.52 | % | ||||||||||||||||||||||
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Total expenses after fees waived and paid indirectly |
1.41 | % 8 | 1.42 | % | 1.34 | % | 1.26 | % | 1.84 | % | 2.11 | % | 3.20 | % | 2.87 | % | 1.99 | % | 1.46 | % | 1.52 | % | ||||||||||||||||||||||
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Total expenses after fees waived and paid indirectly and excluding interest expense and income tax |
1.03 | % 8,9 | 1.08 | % 10 | 1.02 | % | 0.99 | % | 1.16 | % | 0.97 | % | 0.99 | % | 0.98 | % | 0.97 | % | 0.97 | % | 1.05 | % | ||||||||||||||||||||||
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Net investment income |
8.35 | % 8 | 8.96 | % | 8.82 | % | 9.52 | % | 13.00 | % | 9.16 | % | 8.23 | % | 8.49 | % | 9.38 | % | 10.52 | % | 12.22 | % | ||||||||||||||||||||||
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126
BlackRock Corporate
High Yield Fund V, Inc. (HYV) |
Six Months
Ended February 28, 2013 1 (Unaudited) |
Year Ended August 31, | ||||||||||||||||||||||||||||||||||||||||||
2012 1 | 2011 | 2010 | 2009 | 2008 | 2007 | 2006 | 2005 | 2004 | 2003 | |||||||||||||||||||||||||||||||||||
Supplemental Data |
||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (000) |
$ | 435,228 | $ | 416,701 | $ | 385,687 | $ | 382,603 | $ | 320,045 | $ | 393,389 | $ | 455,710 | $ | 464,453 | $ | 500,303 | $ | 528,498 | $ | 487,545 | ||||||||||||||||||||||
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Borrowings outstanding, end of period (000) |
$ | 174,000 | $ | 175,000 | $ | 129,000 | $ | 92,000 | $ | 54,000 | $ | 94,700 | $ | 127,700 | $ | 200,100 | $ | 188,500 | $ | 199,700 | $ | 170,700 | ||||||||||||||||||||||
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Average borrowings outstanding, during the period (000) |
$ | 173,282 | $ | 140,036 | $ | 119,652 | $ | 79,427 | $ | 65,403 | $ | 106,140 | $ | 188,373 | $ | 183,484 | $ | 184,650 | $ | 180,502 | $ | 93,361 | ||||||||||||||||||||||
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Portfolio turnover |
40 | % | 61 | % | 87 | % | 90 | % | 65 | % | 46 | % | 51 | % | 64 | % | 48 | % | 82 | % | 84 | % | ||||||||||||||||||||||
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Asset coverage, end of period per $1,000 |
$ | 3,501 | $ | 3,381 | $ | 3,990 | $ | 5,159 | $ | 6,927 | $ | 5,154 | $ | 4,569 | $ | 3,321 | $ | 3,654 | $ | 3,646 | $ | 3,856 | ||||||||||||||||||||||
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1 |
Consolidated Financial Highlights. |
2 |
Based on average shares outstanding. |
3 |
Dividends and distributions are determined in accordance with federal income tax regulations. |
4 |
Amount is less than $0.01 per share. |
5 |
Total investment returns based on market price, which can be significantly greater or lesser than the net asset value, may result in substantially different returns. Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions. |
6 |
Aggregate total investment return. |
7 |
The previous investment advisor reimbursed the Fund for the difference in value of unregistered securities sold by the Fund and the same security of the issuer that had been registered for resale, which had no impact on the total investment return. |
8 |
Annualized. |
9 |
For the six months ended February 28, 2013, the total expense ratio after fees waived and paid indirectly and excluding interest expense, borrowing costs and income tax was 0.98%. |
10 |
For the year ended August 31, 2012, the total expense ratio after fees waived and paid indirectly and excluding interest expense and borrowing costs was 0.99%. |
127
BlackRock Corporate High Yield Fund VI, Inc. (HYT)
The Financial Highlights table is intended to help you understand HYTs financial performance for the periods shown. Certain information reflects the financial results for a single HYT common share. The total returns in the table represent the rate an investor would have earned or lost on an investment in HYT (assuming reinvestment of all dividends and/or distributions, if applicable). The information for the six months ended February 28, 2013 is unaudited. The information for the remaining periods shown has been audited by Deloitte & Touche LLP, HYTs independent registered public accounting firm. Financial statements for the fiscal year ended August 31, 2012 and the Report of the Independent Registered Public Accounting Firm thereon appear in HYTs Annual Report for the fiscal year ended August 31, 2012, which is available upon request.
BlackRock Corporate
High Yield Fund VI, Inc. (HYT) |
Six
Months
Ended February 28, 2013 1 (Unaudited) |
Year Ended August 31, |
For
the
Period May 30, 2003 2 to August 31, 2003 |
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2012 1 | 2011 | 2010 | 2009 | 2008 | 2007 | 2006 | 2005 | 2004 | ||||||||||||||||||||||||||||||||||||
Per Share Operating Performance |
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Net asset value, beginning of period |
$ | 12.32 | $ | 11.49 | $ | 11.38 | $ | 9.68 | $ | 11.89 | $ | 13.81 | $ | 14.12 | $ | 15.08 | $ | 15.71 | $ | 14.39 | $ | 14.33 | ||||||||||||||||||||||
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Net investment income |
0.51 | 3 | 1.04 | 3 | 1.06 | 3 | 1.05 | 3 | 1.05 | 3 | 1.16 | 3 | 1.18 | 3 | 1.16 | 3 | 1.37 | 3 | 1.50 | 0.30 | ||||||||||||||||||||||||
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Net realized and unrealized gain (loss) |
0.62 | 0.83 | 0.05 | 1.67 | (2.07 | ) | (1.87 | ) | (0.39 | ) | (0.49 | ) | 0.19 | 1.27 | (0.03 | ) | ||||||||||||||||||||||||||||
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Net increase (decrease) from investment operations |
1.13 | 1.87 | 1.11 | 2.72 | (1.02 | ) | (0.71 | ) | 0.79 | 0.67 | 1.56 | 2.77 | 0.27 | |||||||||||||||||||||||||||||||
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Dividends and distributions from: |
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Net investment income |
(0.60 | ) | (1.04 | ) 4 | (1.00 | ) 4 | (1.02 | ) 4 | (1.19 | ) 4 | (1.21 | ) 4 | (1.10 | ) 4 | (1.17 | ) 4 | (1.49 | ) 4 | (1.43 | ) 4 | (0.20 | ) 4 | ||||||||||||||||||||||
Net realized gain |
| | | | | | | (0.46 | ) 4 | (0.70 | ) 4 | (0.02 | ) 4 | | ||||||||||||||||||||||||||||||
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Total dividends and distributions |
(0.60 | ) | (1.04 | ) | (1.00 | ) | (1.02 | ) | (1.19 | ) | (1.21 | ) | (1.10 | ) | (1.63 | ) | (2.19 | ) | (1.45 | ) | (0.20 | ) | ||||||||||||||||||||||
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Capital charges with respect to the issuance of Common shares |
| | | | | | | | | | (0.01 | ) | ||||||||||||||||||||||||||||||||
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Net asset value, end of period |
$ | 12.85 | $ | 12.32 | $ | 11.49 | $ | 11.38 | $ | 9.68 | $ | 11.89 | $ | 13.81 | $ | 14.12 | $ | 15.08 | $ | 15.71 | $ | 14.39 | ||||||||||||||||||||||
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Market price, end of period |
$ | 12.72 | $ | 12.96 | $ | 11.21 | $ | 11.19 | $ | 9.47 | $ | 10.14 | $ | 12.15 | $ | 12.48 | $ | 14.32 | $ | 14.52 | $ | 13.61 | ||||||||||||||||||||||
Total Investment Return 5 |
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Based on net asset value |
9.31 | % 6 | 17.14 | % | 9.95 | % | 29.26 | % | (4.03 | )% | (4.30 | )% | 6.29 | % | 6.29 | % | 11.28 | % | 20.70 | % | 1.91 | % 6 | ||||||||||||||||||||||
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Based on market price |
2.86 | % 6 | 26.30 | % | 9.09 | % | 29.92 | % | 10.09 | % | (7.24 | )% | 5.80 | % | (1.07 | )% | 14.34 | % | 17.95 | % | (7.92 | )% 6 | ||||||||||||||||||||||
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Ratios to Average Net Assets |
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Total expenses |
1.54 | % 7 | 1.51 | % | 1.41 | % | 1.34 | % | 2.01 | % | 2.24 | % | 3.35 | % | 2.89 | % | 2.09 | % | 1.57 | % | 0.91 | % 7 | ||||||||||||||||||||||
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Total expenses after fees waived and paid indirectly |
1.54 | % 7 | 1.51 | % | 1.41 | % | 1.34 | % | 2.01 | % | 2.24 | % | 3.35 | % | 2.89 | % | 2.09 | % | 1.56 | % | 0.52 | % 7 | ||||||||||||||||||||||
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Total expenses after fees waived and paid indirectly and excluding interest expense |
1.17 | % 7,8 | 1.19 | % 9 | 1.12 | % | 1.09 | % | 1.28 | % | 1.10 | % | 1.12 | % | 1.11 | % | 1.11 | % | 1.09 | % | 0.45 | % 7 | ||||||||||||||||||||||
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Net investment income |
8.22 | % 7 | 8.84 | % | 8.80 | % | 9.52 | % | 12.82 | % | 9.02 | % | 8.03 | % | 8.11 | % | 8.91 | % | 9.76 | % | 8.22 | % 7 | ||||||||||||||||||||||
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128
BlackRock Corporate
High Yield Fund VI, Inc. (HYT) |
Six
Months
Ended February 28, 2013 1 (Unaudited) |
Year Ended August 31, |
For
the
Period May 30, 2003 2 to August 31, 2003 |
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2012 1 | 2011 | 2010 | 2009 | 2008 | 2007 | 2006 | 2005 | 2004 | ||||||||||||||||||||||||||||||||||||
Supplemental Data |
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Net assets, end of period (000) |
$ | 455,148 | $ | 435,955 | $ | 405,697 | $ | 401,760 | $ | 341,415 | $ | 419,502 | $ | 487,251 | $ | 498,096 | $ | 532,031 | $ | 554,390 | $ | 507,588 | ||||||||||||||||||||||
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Borrowings outstanding, end of period (000) |
$ | 178,000 | $ | 181,000 | $ | 130,000 | $ | 89,000 | $ | 58,000 | $ | 110,900 | $ | 135,900 | $ | 216,200 | $ | 185,200 | $ | 207,100 | $ | 113,300 | ||||||||||||||||||||||
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Average borrowings outstanding, during the period (000) |
$ | 178,282 | $ | 142,342 | $ | 115,512 | $ | 76,356 | $ | 73,784 | $ | 113,996 | $ | 202,705 | $ | 184,700 | $ | 188,044 | $ | 178,605 | $ | 24,585 | ||||||||||||||||||||||
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Portfolio turnover |
41 | % | 61 | % | 87 | % | 85 | % | 60 | % | 45 | % | 51 | % | 62 | % | 48 | % | 81 | % | 60 | % | ||||||||||||||||||||||
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Asset coverage, end of period per $1,000 |
$ | 3,557 | $ | 3,409 | $ | 4,121 | $ | 5,514 | $ | 6,886 | $ | 4,783 | $ | 4,585 | $ | 3,304 | $ | 3,873 | $ | 3,677 | $ | 5,480 | ||||||||||||||||||||||
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1 |
Consolidated Financial Highlights. |
2 |
Commencement of operations. |
3 |
Based on average shares outstanding. |
4 |
Dividends and distributions are determined in accordance with federal income tax regulations. |
5 |
Total investment returns based on market price, which can be significantly greater or lesser than the net asset value, may result in substantially different returns. Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions. |
6 |
Aggregate total investment return. |
7 |
Annualized. |
8 |
For the six months ended February 28, 2013, the total expense ratio after fees waived and paid indirectly and excluding interest expense, borrowing costs and income tax was 1.12%. |
9 |
For the year ended August 31, 2012, the total expense ratio after fees waived and paid indirectly and excluding interest expense and borrowing costs was 1.09%. |
129
INFORMATION ABOUT THE REORGANIZATIONS
Under the Reorganization Agreements (a form of which is attached as Appendix A to the Statement of Additional Information), each Target Fund will merge directly with and into the Acquiring Fund or the HYT Merger Subsidiary. Each Target Fund, except HIS, will merge directly with and into the Acquiring Fund. HIS will merge with and into the HYT Merger Subsidiary for purposes of consummating a merger of a Massachusetts business trust under the laws of the Commonwealth of Massachusetts, and the HYT Merger Subsidiary will then merge directly with and into the Acquiring Fund. As soon as practicable after the Closing Date for the Reorganizations, the Target Funds will deregister as investment companies under the 1940 Act and the HYT Merger Subsidiary will merge with and into the Acquiring Fund. In each Reorganization, the outstanding common shares of the Target Fund will be exchanged for newly-issued Acquiring Fund Shares in the form of book entry interests.
Acquiring Fund Shares will be distributed pro rata to the holders of record of each of the Target Funds common shares, as applicable. Such distribution of Acquiring Fund Shares to each Target Funds shareholders will be accomplished by opening new accounts on the books of Acquiring Fund in the names of the shareholders of the Target Funds and transferring to those shareholder accounts Acquiring Fund Shares. Each newly-opened account on the books of the Acquiring Fund for the former shareholders of the Target Funds will represent the respective pro rata number of Acquiring Fund Shares (rounded down, in the case of fractional common shares held other than in a Plan account, to the next largest number of whole common shares) due such shareholder. No fractional Acquiring Fund Shares will be issued (except for common shares held in a Plan account). In the event there are fractional common shares in an account other than a Plan account, the Acquiring Funds transfer agent will aggregate all such fractional Acquiring Fund Shares and sell the resulting whole common shares on the NYSE, for the account of all holders of such fractional interests, and each such holder will be entitled to the pro rata share of the proceeds from such sale upon surrender of Target Fund common share certificates. See Terms of the Reorganization AgreementSurrender and Exchange of Share Certificates for a description of the procedures to be followed by the Target Funds shareholders to obtain their Acquiring Fund Shares (and cash in lieu of fractional common shares, if any).
As a result of the Reorganizations, each shareholder of a Target Fund will own Acquiring Fund Shares that (except for cash payments received in lieu of fractional common shares) will have an aggregate net asset value (not the market value) immediately after the Closing Date equal to the aggregate net asset value (not the market value) of that shareholders Target Fund common shares immediately prior to the Closing Date. Since the Acquiring Fund Shares will be issued at net asset value in exchange for the common shares of each Target Fund having a value equal to the aggregate net asset value (not the market value) of those Acquiring Fund Shares, the net asset value per share of Acquiring Fund Shares should remain virtually unchanged by the Reorganizations except for its share of the applicable costs of the Reorganizations. Thus, the Reorganizations will result in no dilution of the net asset value of the Acquiring Fund Shares, other than to reflect the applicable costs of the Reorganization. However, as a result of the Reorganizations, a shareholder of any of the Funds will hold a reduced percentage of ownership in the Combined Fund than he or she did in any of the Target Funds. No sales charge or fee of any kind will be charged to shareholders of the Target Funds in connection with their receipt of Acquiring Fund Shares in the Reorganizations.
Each of COY, CYE, HYV and HYT have established the following wholly-owned subsidiaries: BLK COY (Luxembourg) Investments, S.a.r.l., BLK CYE (Luxembourg) Investments, S.a.r.l., BLK HYV (Luxembourg) Investments, S.a.r.l. and BLK HYT (Luxembourg) Investments, S.a.r.l., respectively (the Luxembourg Subsidiaries). The Luxembourg Subsidiaries hold shares of private Canadian companies. In connection with the Reorganizations, the Luxembourg Subsidiary of each Target Fund that consummate its merger with the Acquiring Fund would become a wholly-owned subsidiary of the Acquiring Fund. After the Reorganizations, the Acquiring Fund may consolidate and merge all of the Luxembourg Subsidiaries that are wholly-owned subsidiaries of the Acquiring Fund into one Luxembourg Subsidiary.
130
TERMS OF THE REORGANIZATION AGREEMENTS
The following is a summary of the significant terms of the Reorganization Agreements. This summary is qualified in its entirety by reference to the Form of Reorganization Agreement attached as Appendix A to the Statement of Additional Information.
Valuation of Assets and Liabilities
The respective assets of each of the Funds will be valued on the business day prior to the Closing Date (the Valuation Time). The valuation procedures are the same for each Fund: the net asset value per common share of each Fund will be determined after the close of business on the NYSE (generally, 4:00 p.m., Eastern time) at the Valuation Time. For the purpose of determining the net asset value of a common share of each Fund, the value of the securities held by the such Fund plus any cash or other assets (including interest accrued but not yet received) minus all liabilities (including accrued expenses) of such Fund is divided by the total number of common shares of such Fund outstanding at such time. Daily expenses, including the fees payable to the Investment Advisor, will accrue at the Valuation Time.
Amendments and Conditions
The Reorganization Agreements may be amended at any time prior to the Closing Date with respect to any of the terms therein upon mutual agreement. However, after adoption of the Reorganization Agreements and approval of the Reorganizations, no amendment or modification may be made which by law requires further approval by such shareholders without such further approval. The obligations of each Fund pursuant to the applicable Reorganization Agreements are subject to various conditions, including a registration statement on Form N-14 being declared effective by the SEC, approval of the Reorganization Agreements by the shareholders of the respective Target Funds, approval of the Reorganizations by the shareholders of the Acquiring Fund, receipt of an opinion of counsel as to tax matters, receipt of an opinion of counsel as to corporate and securities matters and the continuing accuracy of various representations and warranties of the Funds being confirmed by the respective parties.
Postponement; Termination
Under the Reorganization Agreements, the Board of any Fund (or the HYT Merger Subsidiary with respect to the HIS Reorganization Agreement) may cause a Reorganization to be postponed or abandoned under certain circumstances should such Board determine that it is in the best interests of the shareholders of its respective Fund to do so. The Reorganization Agreements may be terminated, and the Reorganizations abandoned at any time (whether before or after adoption thereof by the shareholders of either of the Funds) prior to the Closing Date, or the Closing Date may be postponed: (i) by mutual consent of the Boards of the Funds and (ii) by the Board of any Fund (or the Board of the HYT Merger Subsidiary with respect to the HIS Reorganization Agreement) if any condition to that Funds obligations (or the HYT Merger Subsidiarys obligations with respect to the HIS Reorganization Agreement) set forth in the pertinent Reorganization Agreement has not been fulfilled or waived by such Board.
Surrender and Exchange of Share Certificates
The Acquiring Fund will issue to Target Fund shareholders book entry interests for the Acquiring Fund Shares registered in the name of on the basis of each holders proportionate interest in the aggregate net asset value (not the market value) of Target Fund common shares. With respect to any Target Fund shareholder holding certificates evidencing ownership of Target Fund shares as of the Closing Date, and subject to the Acquiring Fund being informed thereof in writing by the Target Fund, the Acquiring Fund will not permit such shareholder to receive new book entry interests of the Acquiring Fund Shares, until notified by the Target Fund or its agent that such shareholder has surrendered his or her outstanding certificates evidencing ownership of
131
Target Fund shares or, in the event of lost certificates, posted adequate bond. The Target Fund, at its own expense, will request its shareholders to surrender their outstanding certificates evidencing ownership of Target Fund shares or post adequate bond.
Please do not send in any share certificates at this time. Upon consummation of the Reorganizations, shareholders of the Target Funds will be furnished with instructions for exchanging their share certificates for book entry interests representing Acquiring Fund Shares, and if applicable, cash in lieu of fractional common shares.
From and after the Closing Date, there will be no transfers on the stock transfer books of the Target Funds. If, after the Closing Date, certificates representing common shares of the Target Funds are presented to the Acquiring Fund, they will be cancelled and exchanged for book entry interests representing Acquiring Fund Shares and cash in lieu of fractional common shares, if applicable, distributable with respect to the Target Funds common shares in the Reorganization.
Expenses of the Reorganization
Each of BHY, HIS, and the Acquiring Fund will bear expenses incurred in connection with the Reorganizations. The Investment Advisor will bear the costs of the Reorganizations for COY, CYE and HYV. The expenses incurred in connection with the Reorganizations, include, but are not limited to, costs related to the preparation and distribution of materials distributed to each Funds Board, expenses incurred in connection with the preparation of the Reorganization Agreements and the registration statement on Form N-14, the printing and distribution of this Joint Proxy Statement/Prospectus and any other materials required to be distributed to shareholders, SEC and state securities commission filing fees, legal and audit fees in connection with the Reorganizations, including legal fees incurred preparing each Funds Board materials, attending each Funds Board meetings and preparing the minutes, auditing fees associated with each Funds financial statements, stock exchange fees, transfer agency fees, Rating Agency fees, portfolio transfer taxes (if any) and any similar expenses incurred in connection with the Reorganizations, which will be borne directly by the respective Fund incurring the expense or allocated among the Funds proportionately or on another reasonable basis, as appropriate. The expenses of the Reorganizations (assuming all of the Reorganizations are consummated) are estimated to be $270,000 for BHY, $350,000 for HIS, and $370,000 for HYT. The Investment Advisor will bear the costs of the Reorganizations for COY, CYE and HYV because the shareholders of these Target Funds are not expected to experience the same level of economic benefits from the Reorganizations as the shareholders of BHY, HIS and HYT. Therefore, the costs associated with the Reorganizations of COY, CYE and HYV will not be directly borne by COY, CYE and HYV. Neither the Funds nor the Advisors will pay any expenses of shareholders arising out of or in connection with the Reorganization (e.g., expenses incurred by the shareholder as a result of attending the shareholder meeting, voting on the Reorganizations or other action taken by the shareholder in connection with the Reorganizations). The actual costs associated with the proposed Reorganizations may be more or less than the estimated costs discussed herein.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF THE REORGANIZATIONS
The following is a summary of certain U.S. federal income tax consequences of the Reorganizations. The discussion is based upon the Code, Treasury regulations, court decisions, published positions of the Internal Revenue Service (IRS) and other applicable authorities, all as in effect on the date hereof and all of which are subject to change or differing interpretations (possibly with retroactive effect). The discussion is limited to U.S. persons who hold common shares of a Target Fund as capital assets for U.S. federal income tax purposes (generally, assets held for investment). This summary does not address all of the U.S. federal income tax consequences that may be relevant to a particular shareholder or to shareholders who may be subject to special treatment under U.S. federal income tax laws. No ruling has been or will be obtained from the IRS regarding any matter relating to the Reorganizations. No assurance can be given that the IRS would not assert, or that a court
132
would not sustain, a position contrary to any of the tax aspects described below. This summary of U.S. federal income tax consequences is for general information only. The Funds shareholders should consult their own tax advisers regarding the U.S. federal income tax consequences of the Reorganizations, as well as the effects of state, local and non-U.S. tax laws, including possible changes in tax law.
It is a condition to the closing of each Reorganization that the respective Target Fund and the Acquiring Fund each receive an opinion from Skadden, Arps, Slate, Meagher & Flom LLP dated as of the Closing Date, regarding the characterization of the Reorganization as a reorganization within the meaning of Section 368(a) of the Code. The opinion of Skadden, Arps, Slate, Meagher & Flom LLP will be based on U.S. federal income tax law in effect on the Closing Date. In rendering its opinion, Skadden, Arps, Slate, Meagher & Flom LLP will also rely upon certain representations of the management of the respective Target Fund and the Acquiring Fund and assume, among other things, that the Reorganization will be consummated in accordance with the applicable Reorganization Agreement and other operative documents and as described herein. An opinion of counsel is not binding on the IRS or any court.
As a reorganization, the U.S. federal income tax consequences of each Reorganization can be summarized as follows:
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No gain or loss will be recognized by a Target Fund or the Acquiring Fund by reason of the Reorganization. |
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No gain or loss will be recognized by a shareholder of a Target Fund who exchanges all of its Target Fund stock solely for Acquiring Fund Shares pursuant to the Reorganization (except with respect to cash received in lieu of a fractional Acquiring Fund Share, as discussed below). |
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The aggregate tax basis of Acquiring Fund Shares received by a shareholder of a Target Fund pursuant to the Reorganization will be the same as the aggregate tax basis of the shareholders Target Fund common shares surrendered in exchange therefor (reduced by any amount of tax basis allocable to a fractional Acquiring Fund common share for which cash is received). |
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The holding period of Acquiring Fund Shares received by a shareholder of a Target Fund pursuant to the Reorganization will include the holding period of the shareholders Target Fund common shares surrendered in exchange therefor. |
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A shareholder of a Target Fund that receives cash in lieu of a fractional Acquiring Fund common share in connection with the Reorganization will be treated as having received cash in redemption of such fractional Acquiring Fund common share. A Target Fund shareholder that receives cash in lieu of a fractional Acquiring Fund common share will recognize capital gain or loss equal to the difference between the amount of cash deemed received for the fractional Acquiring Fund common share and the Target Fund shareholders tax basis in Target Fund common shares allocable to the fractional Acquiring Fund common share. The capital gain or loss will be a long-term capital gain or loss if the Target Fund shareholders holding period for Target Fund common shares is more than one year as of the date the Reorganization is consummated. |
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The Acquiring Funds tax basis in a Target Funds assets received by the Acquiring Fund pursuant to the Reorganization will, in each instance, equal the tax basis of such assets in the hands of such Target Fund immediately prior to the Reorganization, and the Acquiring Funds holding period for such assets will, in each instance, include the period during which the assets were held by a Target Fund |
The Acquiring Fund intends to continue to be taxed under the rules applicable to regulated investment companies as defined in Section 851 of the Code, which are the same rules currently applicable to each Fund and its shareholders.
None of the Funds intend to sell any assets in connection with the Reorganizations other than in the ordinary course of business. If, however, assets of the Target Funds were to be sold in connection with the Reorganization,
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or if such assets were required to be marked to market as a result of the termination of the Target Funds taxable year or as a result of the transfer of certain assets in the Reorganization, the tax impact of any such sales (or deemed sales) would depend on the difference between the price at which such portfolio assets are sold and the Target Funds basis in such assets. Any capital gains recognized in these sales (or deemed sales) on a net basis will be distributed to the Target Fund shareholders as capital gain dividends (to the extent of net realized long-term capital gains) and/or ordinary dividends (to the extent of net realized short-term capital gains) during or with respect to the year of sale (or deemed sale) and prior to or on the date of the Reorganization, and such distributions will be taxable to shareholders of the Target Fund.
Prior to the Closing Date, each Target Fund will declare and pay a distribution to its shareholders, which together with all previous distributions, will have the effect of distributing to the shareholders of such Target Fund all of such Target Funds investment company taxable income (computed without regard to the deduction for dividends paid), if any, through the Closing Date, net capital gains, if any, through the Closing Date, and all of its net tax-exempt interest income through Closing Date. Such distribution will be taxable to shareholders for U.S. federal income tax purposes.
The Acquiring Fund will succeed to capital loss carryforwards (and certain unrealized built-in losses, if any) of each of the acquired Target Funds, which will be subject to the tax loss limitation rules described below because each Target Fund will undergo an ownership change for U.S. federal income tax purposes, and such limitations might be significant. Depending on which of the Reorganizations are consummated, the Acquiring Funds own capital loss carryforwards (and certain unrealized built-in losses, if any) may also be subject to the tax loss limitation rules described below because the Acquiring Fund may also undergo an ownership change for U.S. federal income tax purposes, and such limitation might be significant. For each Fund that undergoes an ownership change, the Code generally limits the amount of pre-ownership change losses that may be used to offset post-ownership change gains to a specific annual loss limitation amount (generally the product of (i) the fair market value of the stock of such Fund, with certain adjustments, immediately prior to the Reorganization and (ii) a rate established by the IRS). Subject to certain limitations, any unused portion of these losses may be available in subsequent years, subject to the remaining portion of any applicable capital loss carryforward limit, as measured from the date of recognition.
Although the capital loss carryforwards of the Combined Fund attributable to each Target Fund that participates in a Reorganization (and to the Acquiring Fund, if it undergoes an ownership change as a result of the Reorganizations) are subject to tax loss limitation rules (as outlined above), it is currently expected that such tax loss limitation rules should not have a material adverse effect on the Combined Funds utilization of each such Funds capital loss carryforward as compared with what each such Funds utilization of its own capital loss carryforward would be without the Reorganization. The ability of each Fund (and the Combined Fund) to utilize any capital loss carryforwards now or in the future depends on many variables and assumptions, including but not limited to, projected performance of a Fund, the unrealized gain/loss position of a Fund, the types of securities held by a Fund, the current and future market environment (including the level of interest rates), portfolio turnover and applicable law (including the requirement that capital loss carryforwards without expiration dates be utilized before capital loss carryforwards that have expiration dates), and is, therefore, highly uncertain. Information with respect to the Funds capital loss carryforwards as of February 28, 2013 is set forth below:
Capital Loss Amount*
Expiration |
COY | CYE | ||||||
2/28/2017 |
14,106,195 | 12,258,925 | ||||||
2/28/2018 |
36,323,237 | 33,834,777 | ||||||
|
|
|
|
|||||
Total |
50,429,432 | 46,093,702 | ||||||
|
|
|
|
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Capital Loss Amount*
Expiration |
HYT | HYV | HIS | BHY | ||||||||||||
8/31/2014 |
| | 7,043,976 | 1,250,639 | ||||||||||||
8/31/2015 |
| | | 2,467,772 | ||||||||||||
8/31/2016 |
| | 10,829,322 | 2,039,760 | ||||||||||||
8/31/2017 |
23,221,595 | 14,918,762 | 3,140,056 | 916,541 | ||||||||||||
8/31/2018 |
54,927,764 | 45,786,653 | 15,169,557 | 5,191,260 | ||||||||||||
8/31/2019 |
| | | 737,843 | ||||||||||||
No Expiration |
| | 778,769 | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
78,149,359 | 60,705,415 | 36,961,680 | 12,603,815 | ||||||||||||
|
|
|
|
|
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* | The Funds anticipate that approximately $40 million of capital loss carryforwards will be lost/forfeited as a result of the tax loss limitation rules described above. No assurances can be given, however, that this estimate will be correct and the actual amount of forfeited capital loss carryforwards could be higher or lower than such estimate, depending on the circumstances. The Funds believe that the potential loss of capital loss carryforwards as a result of the Reorganizations is not a material factor in evaluating the Reorganizations in light of several factors, including (1) the difficulty of projecting the likelihood of utilization of some or all of the capital loss carryforwards prior to their expiration, and (2) the potentially limited opportunity for capital gains in light of the Funds investment policy of investing primarily in debt securities and instruments. |
Due to the operation of these tax loss limitation rules, it is possible that shareholders of the Target Funds and shareholders of the Acquiring Fund would receive taxable distributions of short-term and long-term capital gains earlier than they would have in the absence of the Reorganizations. Such taxable distributions will be treated either as ordinary income (and not as favorably taxed qualified dividend income) if such capital gains are short term or as favorably taxed capital gain dividends if such capital gains are long term. The actual financial effect of the loss limitation rules on a shareholder of a Fund whose losses are subject to the loss limitation rules would depend on many variables, including such Funds expected growth rate if the relevant Reorganization were not to occur (i.e., whether, in the absence of the Reorganization, the Fund would generate sufficient capital gains against which to utilize its capital loss carryforwards prior to their expiration (and certain realized built-in losses), in excess of what would have been the annual loss limitation amount had the relevant Reorganization occurred), the timing and amount of future capital gains recognized by the Combined Fund if the relevant Reorganization were to occur, and the timing of a historic Fund shareholders disposition of its shares (the tax basis of which might, depending on the facts, reflect that shareholders share of such Funds capital losses). Shareholders of all of the Funds should consult their own tax advisors in this regard.
In addition, for five years beginning on the Closing Date of a Reorganization, the Combined Fund will not be allowed to offset certain pre-Reorganization built-in gains attributable to a Fund that is a gain corporation with capital loss carryforwards (and certain built-in losses) attributable to another Fund.
PROPOSAL 2: THE REORGANIZATIONS OF THE ACQUIRING FUND
Pursuant to the Reorganization Agreements, which are described more fully under Proposal 1: The Reorganizations of the Target Funds above, each Target Fund will either merge with and into the Acquiring Fund or a new direct, wholly-owned subsidiary of the Acquiring Fund, and the Acquiring Fund will issue additional Acquiring Fund Shares in connection with such Reorganization and list them for trading on the NYSE. The Acquiring Fund will issue to the Target Funds common shareholders book entry interests for the Acquiring Fund Shares registered in the name of such shareholder. Each Target Fund will then terminate its registration under the 1940 Act. The Acquiring Fund Board, based upon its evaluation of all relevant information, anticipates that each Reorganization will benefit the Acquiring Fund shareholders.
The aggregate net asset value (not the market value) of Acquiring Fund Shares issued in each Reorganization will equal the aggregate net asset value (not the market value) of the Target Funds common shares held immediately prior to the Reorganization, less the applicable costs of the Reorganization (although
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shareholders may receive cash for their fractional common shares). The Reorganizations will result in no reduction of the net asset value of the Acquiring Fund Shares, other than to reflect the costs of each Reorganization, as applicable. No gain or loss for U.S. federal income tax purposes will be recognized by the Acquiring Fund or its shareholders in connection with any Reorganization. The Acquiring Fund will continue to operate as a registered, diversified, closed-end investment company with the investment objectives and policies described in this Joint Proxy Statement/Prospectus.
The Acquiring Fund pays the Investment Advisor a monthly management fee at an annual rate of 0.70% based on an aggregate of (i) the Funds average daily Net Assets and (ii) the proceeds of any outstanding debt securities or borrowings used for leverage. The liquidation preference of any outstanding preferred stock (other than accumulated dividends) is not considered a liability in determining the Funds net asset value. If any of the Reorganizations are approved and consummated, the Combined Fund will pay the Investment Advisor a monthly management fee at an annual rate of 0.60% based on an aggregate of (i) the Funds average daily Net Assets and (ii) the proceeds of any outstanding debt securities or borrowings used for leverage.
For the fiscal year ended August 31, 2012, the Acquiring Funds Total Expense Ratio was 1.51%. For the 12-month period ended February 28, 2013, the Total Expense Ratio of the Acquiring Fund was 1.52%. The Acquiring Fund estimates that the completion of all of the Reorganizations would result in a Total Expense Ratio for the Combined Fund of 1.34% on a historical and pro forma basis for the 12-month period ended February 28, 2013, representing a reduction in the Total Expense Ratio for the shareholders of the Acquiring Fund of 0.18%.
The Acquiring Fund Board recommends that shareholders of the Acquiring Fund approve the Reorganizations, including the Issuances, at the Special Meeting to be held on October 11, 2013 at 9:00 a.m. (Eastern time).
Shareholder approval of each of HYTs proposed Reorganizations with each of BHY, COY, CYE, HIS and HYV requires the affirmative vote of the holders of a majority of the outstanding common shares of HYT. Subject to the requisite approval of the shareholders of each Fund with regard to its Reorganization, it is expected that the Closing Date will be sometime during the fourth quarter of 2013, but it may be at a different time as described herein. For additional information regarding voting requirements, see Voting Information and Requirements.
Investing in the Combined Fund following the Reorganizations involves risks. For additional information, see Risk Factors and Special Considerations.
The Acquiring Fund Board recommends that shareholders of the Acquiring Fund vote FOR each of HYTs proposed Reorganizations with each of BHY, COY, CYE, HIS and HYV, including the Issuances.
VOTING INFORMATION AND REQUIREMENTS
General
A list of the Funds shareholders of record as of the Record Date will be available at the shareholder meeting.
Record Date
The Funds have fixed the close of business on August 14, 2013 as the record date (the Record Date) for the determination of shareholders entitled to notice of, and to vote at, the Special Meeting or any adjournment thereof. Shareholders on the Record Date will be entitled to one vote for each share held, with no shares having cumulative voting rights.
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As of the Record Date, the Funds had the following number of common shares outstanding:
Title of Class |
BHY | COY | CYE | HIS | HYT | HYV | ||||||
Common Shares |
6,431,296 | 35,027,459 | 37,552,995 | 54,848,390 | 35,418,240 | 33,015,111 |
Proxies
Shareholders may vote by appearing in person at the Special Meeting, by returning the enclosed proxy card or by casting their vote via telephone or the Internet using the instructions provided on the enclosed proxy card (described in greater detail below). Shareholders of each Fund have the opportunity to submit their voting instructions via the Internet or by touch-tone telephone voting. The giving of such a proxy will not affect your right to vote in person should you decide to attend the Special Meeting. To use the Internet, please access the Internet address found on your proxy card. To record your voting instructions by automated telephone, please call the toll-free number listed on your proxy card. The Internet and automated telephone voting instructions are designed to authenticate shareholder identities, to allow shareholders to give their voting instructions, and to confirm that shareholders instructions have been recorded properly. Shareholders submitting their voting instructions via the Internet should understand that there may be costs associated with Internet access, such as usage charges from Internet access providers and telephone companies that must be borne by the shareholders. Any person giving a proxy may revoke it at any time prior to its exercise by giving written notice of the revocation to the Secretary of the Fund at the address indicated above, by delivering a duly executed proxy bearing a later date, by recording later-dated voting instructions via the Internet or automated telephone or by attending the Special Meeting and voting in person. The giving of a proxy will not affect your right to vote in person if you attend the Special Meeting and wish to do so.
Votes cast by proxy or in person at the Special Meeting will be tabulated by the inspectors of election appointed for the Special Meeting. For COY, CYE, HYV and HYT, the holders of at least one-third of the shares entitled to vote on the proposal must be present in person or by proxy to have a quorum to conduct business at the Special Meeting. For BHY and HIS, the holders of a majority of the shares entitled to vote on the proposal must be present in person or by proxy to have a quorum to conduct business at the Special Meeting. The inspectors of election, who may be employees of BlackRock, will determine whether or not a quorum is present at the Special Meeting. The inspectors of election will generally treat abstentions and broker non-votes (i.e., shares held by brokers or nominees, typically in street name, as to which proxies have been returned but (a) instructions have not been received from the beneficial owners or persons entitled to vote and (b) the broker or nominee does not have discretionary voting power or elects not to exercise discretion on a particular matter) as present for purposes of determining a quorum, subject to any applicable rules of the stock exchange on which a Funds shares are listed.
If you hold your shares directly (not through a broker-dealer, bank or other financial institution) and if you return a properly executed proxy card that does not specify how you wish to vote on a proposal, your shares will be voted FOR each Proposal on which you are entitled to vote.
Broker-dealer firms holding shares of a Fund in street name for the benefit of their customers and clients will request the instructions of such customers and clients on how to vote their shares on Proposals 1-2 before the Special Meeting. Proposals 1-2 are not routine matters and shareholder instructions are required for broker-dealers to vote a beneficial owners shares.
If you hold shares of a Fund through a bank or other financial institution or intermediary (called a service agent) that has entered into a service agreement with the Fund or a distributor of the Fund, the service agent may be the record holder of your shares. At the Special Meeting, a service agent will vote shares for which it receives instructions from its customers in accordance with those instructions. A properly executed proxy card or other authorization by a shareholder that does not specify how the shareholders shares should be voted on a proposal may be deemed to authorize a service provider to vote such shares in favor of the proposal. Depending
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on its policies, applicable law or contractual or other restrictions, a service agent may be permitted to vote shares with respect to which it has not received specific voting instructions from its customers. In those cases, the service agent may, but may not be required to, vote such shares in the same proportion as those shares for which the service agent has received voting instructions. This practice is commonly referred to as echo voting.
All properly executed proxies received prior to the Special Meeting will be voted in accordance with the instructions marked thereon or otherwise as provided therein. Unless instructions to the contrary are marked, proxies will be voted FOR the approval of each proposal. Abstentions and broker non-votes are not treated as votes FOR a proposal.
With respect to each proposal, abstentions and broker non-votes will have the same effect as votes AGAINST such proposal.
As used herein, a 1940 Act Majority means the affirmative vote of either (i) 66 2/3% or more of the voting securities present at the Special Meeting, if the holders of more than 50% of the outstanding voting securities of the Fund are present or represented by proxy or (ii) more than 50% of the outstanding voting securities of the Fund, whichever is less.
Voting Requirement for Proposal 1: The Reorganizations of the Target Funds
Target Funds |
Proposals |
Required Approval of Target Fund Shareholders |
||
BHY |
Proposal 1(A): The shareholders of BHY are being asked to approve the Agreement and Plan of Reorganization between BHY and HYT and the termination of BHYs registration under the 1940 Act. | A majority of the outstanding shares entitled to vote. | ||
COY |
Proposal 1(B): The shareholders of COY are being asked to approve the Agreement and Plan of Reorganization between COY and HYT and the termination of COYs registration under the 1940 Act. | A majority of the outstanding shares entitled to vote. | ||
CYE |
Proposal 1(C): The shareholders of CYE are being asked to approve the Agreement and Plan of Reorganization between CYE and HYT and the termination of CYEs registration under the 1940 Act. | A majority of the outstanding shares entitled to vote. |
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Target Funds |
Proposals |
Required Approval of Target Fund Shareholders |
||
HIS |
Proposal 1(D): The shareholders of HIS are being asked to approve the Agreement and Plan of Reorganization among HIS, the HYT Merger Subsidiary and HYT and the termination of HISs registration under the 1940 Act. | A 1940 Act Majority | ||
HYV |
Proposal 1(E): The shareholders of HYV are being asked to approve the Agreement and Plan of Reorganization between HYV and HYT and the termination of HYVs registration under the 1940 Act. | A majority of the outstanding shares entitled to vote. |
Voting Requirement for Proposal 2: The Reorganizations of the Acquiring Fund
Target Funds |
Proposals |
Required Approval of
Acquiring Fund Shareholders |
||
BHY |
Proposal 2(A): The shareholders of HYT are being asked to approve the Agreement and Plan of Reorganization between BHY and HYT, including the issuance of additional common shares of HYT in connection therewith. |
A majority of the
outstanding shares entitled to vote. |
||
COY |
Proposal 2(B): The shareholders of HYT are being asked to approve the Agreement and Plan of Reorganization between COY and HYT, including the issuance of additional common shares of HYT in connection therewith. |
A majority of the
outstanding shares entitled to vote. |
||
CYE |
Proposal 2(C): The shareholders of HYT are being asked to approve the Agreement and Plan of Reorganization between CYE and HYT, including the issuance of additional common shares of HYT in connection therewith. |
A majority of the
outstanding shares entitled to vote. |
||
HIS |
Proposal 2(D): The shareholders of HYT are being asked to approve the Agreement and Plan of Reorganization among HIS, the HYT Merger Subsidiary and HYT, including the issuance of additional common shares of HYT in connection therewith. |
A majority of the
outstanding shares entitled to vote. |
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Target Funds |
Proposals |
Required Approval
of
Acquiring Fund Shareholders |
||
HYV |
Proposal 2(E): The shareholders of HYT are being asked to approve the Agreement and Plan of Reorganization between HYV and HYT, including the issuance of additional common shares of HYT in connection therewith. |
A majority of the
outstanding shares entitled to vote. |
As of May 31, 2013, the officers and directors of each Fund, as a group, beneficially owned less than 1% of the outstanding common shares of each such Fund. Unless otherwise indicated, the information set forth below is as of May 31, 2013. To each Funds knowledge, no person beneficially owned more than 5% of the Funds respective outstanding common shares, except as set forth below.
Title of Share Class |
Name and Address of
|
Amount and
Nature of Beneficial Ownership |
Percentage
of Share Class |
|||||||
BHY |
||||||||||
Common shares |
NONE | Not Applicable | Not Applicable | |||||||
COY |
||||||||||
Common shares |
First Trust Portfolios L.P. (1) 120 East Liberty Dr, Suite 400 Wheaton, Illinois 60187 |
6,413,371 | 18.40 | % | ||||||
First Trust Advisors L.P. (1) 120 East Liberty Dr, Suite 400 Wheaton, Illinois 60187 |
| | ||||||||
The Charger Corporation (1) 120 East Liberty Dr, Suite 400 Wheaton, Illinois 60187 |
| | ||||||||
CYE |
||||||||||
Common shares |
First Trust Portfolios L.P. (1) 120 East Liberty Dr, Suite 400 Wheaton, Illinois 60187 |
8,052,152 | 21.52 | % | ||||||
First Trust Advisors L.P. (1) 120 East Liberty Dr, Suite 400 Wheaton, Illinois 60187 |
| | ||||||||
The Charger Corporation (1) 120 East Liberty Dr, Suite 400 Wheaton, Illinois 60187 |
| | ||||||||
HIS |
||||||||||
Common shares |
First Trust Portfolios L.P. (1) 120 East Liberty Dr, Suite 400 Wheaton, Illinois 60187 |
10,651,783 | 19.48 | % | ||||||
First Trust Advisors L.P. (1) 120 East Liberty Dr, Suite 400 Wheaton, Illinois 60187 |
| |
140
Title of Share Class |
Name and Address of
|
Amount and
Nature of Beneficial Ownership |
Percentage
of Share Class |
|||||||
The Charger Corporation (1) 120 East Liberty Dr, Suite 400 Wheaton, Illinois 60187 |
| | ||||||||
Advisors Asset Management, Inc. 18925 Base Camp Road
Monument, CO 80132 |
2,992,388 | 5.49 | % | |||||||
HYV |
||||||||||
Common shares |
First Trust Portfolios L.P.
(1)
120 East Liberty Dr, Suite 400 Wheaton, Illinois 60187 |
7,481,991 | 22.69 | % | ||||||
First Trust Advisors L.P.
(1)
120 East Liberty Dr, Suite 400 Wheaton, Illinois 60187 |
| | ||||||||
The Charger Corporation
(1)
120 East Liberty Dr, Suite 400 Wheaton, Illinois 60187 |
| | ||||||||
HYT |
||||||||||
Common shares |
First Trust Portfolios L.P.
(1)
120 East Liberty Dr, Suite 400 Wheaton, Illinois 60187 |
7,696,029 | 21.78 | % | ||||||
First Trust Advisors L.P.
(1)
120 East Liberty Dr, Suite 400 Wheaton, Illinois 60187 |
| | ||||||||
The Charger Corporation
(1)
120 East Liberty Dr, Suite 400 Wheaton, Illinois 60187 |
| |
(1) |
First Trust Portfolios L.P., First Trust Advisors L.P. and The Charger Corporation filed their Schedule 13G jointly and did not differentiate holdings as to each entity. |
To be considered for presentation at a shareholders meeting, rules promulgated by the SEC generally require that, among other things, a shareholders proposal must be received at the offices of the relevant Fund a reasonable time before solicitation is made. In addition, each Funds bylaws provide for advance notice provisions, which require shareholders to give timely notice in proper written form to the Secretary of the Fund. Shareholders should review each Funds bylaws for additional information regarding the Funds advance notice provisions. The bylaws of BHY and HIS were filed with the SEC on October 29, 2010 as part of such Funds Form 8-Ks and the bylaws of COY, CYE, HYV and HYT were filed with the SEC on September 21, 2010 as part of such Funds Form 8-Ks, and shareholders may obtain copies of such documents as described on page ii of this Joint Proxy Statement/Prospectus.
The timely submission of a proposal does not necessarily mean that such proposal will be included. Any shareholder who wishes to submit a proposal for consideration at a meeting of such shareholders Fund should send such proposal to the relevant Fund at 40 East 52nd Street, New York, New York 10022 to the attention of the Secretary.
141
Solicitation of proxies is being made primarily by the mailing of this Notice and Joint Proxy Statement/Prospectus with its enclosures on or about September 4, 2013. Shareholders of the Funds whose shares are held by nominees such as brokers can vote their proxies by contacting their respective nominee. In addition to the solicitation of proxies by mail, employees of the Advisors and their affiliates as well as dealers or their representatives may solicit proxies in person or by mail, telephone, fax or the internet. The Funds and the Advisors have retained Georgeson Inc. (Georgeson), 480 Washington Blvd., 26th Floor, Jersey City, New Jersey 07310, a proxy solicitation firm, to assist with the solicitation of proxies. The cost of Georgesons services in connection with the proxy is anticipated to be approximately $7,000, $17,500, $15,500, $14,000, $20,000 and $21,000 for BHY, COY, CYE, HIS, HYV and HYT, respectively. The Investment Advisor will bear all of the solicitation costs of COY, CYE and HYV.
Certain legal matters concerning the U.S. federal income tax consequences of the Reorganization will be passed upon by Skadden, Arps, Slate, Meagher & Flom LLP, which serves as special counsel to the Funds. Certain legal matters concerning the issuance of Acquiring Fund Shares will be passed upon by Miles & Stockbridge P.C., which serves as special Maryland counsel to the Acquiring Fund.
OTHER MATTERS WITH RESPECT TO THE MEETING
A representative of the Independent Registered Public Accounting Firm may attend the Special Meeting, will have the opportunity to make a statement if he or she desires to do so and will be available to answer appropriate questions.
A list of each Funds shareholders of record as of the Record Date will be available for inspection at the shareholder meeting. For BHY, a list of shareholders of record as of the Record Date will be available at the offices of BHY, 1 University Square Drive, Princeton, NJ 08540, for inspection by BHYs shareholders during regular business hours beginning ten days prior to the date of the meeting.
Shareholders who want to communicate with the Board or any individual director should write the Fund to the attention of the Secretary, 40 East 52nd Street, New York, New York 10022. Shareholders may communicate with the Board electronically by sending an email to closedendfundsbod@blackrock.com. The communication should indicate that you are a Fund shareholder. If the communication is intended for a specific director and so indicates, it will be sent only to that director. If a communication does not indicate a specific director, it will be sent to the Chair of the Governance and Nominating Committee and the outside counsel to the Independent Board Members for further distribution as deemed appropriate by such persons.
Additionally, shareholders with complaints or concerns regarding accounting matters may address letters to the Funds Chief Compliance Officer, 100 Bellevue Parkway, Wilmington, Delaware 19809. Shareholders who are uncomfortable submitting complaints to the Chief Compliance Officer may address letters directly to the Chair of the Audit Committee of the Board. Such letters may be submitted on an anonymous basis.
PRIVACY PRINCIPLES OF THE FUNDS
The Funds are committed to maintaining the privacy of their current and former shareholders and to safeguarding their non-public personal information. The following information is provided to help you understand what personal information the Funds collect, how the Funds protect that information and why, in certain cases, the Funds may share such information with select parties.
142
The Funds obtain or verify personal non-public information from and about you from different sources, including the following: (i) information the Funds receive from you or, if applicable, your financial intermediary, on applications, forms or other documents; (ii) information about your transactions with the Funds, their affiliates or others; (iii) information the Funds receive from a consumer reporting agency; and (iv) from visits to the Funds or their affiliates websites.
The Funds do not sell or disclose to non-affiliated third parties any non-public personal information about their current and former shareholders, except as permitted by law or as is necessary to respond to regulatory requests or to service shareholder accounts. These non-affiliated third parties are required to protect the confidentiality and security of this information and to use it only for its intended purpose.
The Funds may share information with their affiliates to service your account or to provide you with information about other BlackRock products or services that may be of interest to you. In addition, the Funds restrict access to non-public personal information about their current and former shareholders to those BlackRock employees with a legitimate business need for the information. The Funds maintain physical, electronic and procedural safeguards that are designed to protect the non-public personal information of their current and former shareholders, including procedures relating to the proper storage and disposal of such information.
If you are located in a jurisdiction where specific laws, rules or regulations require a Fund to provide you with additional or different privacy-related rights beyond what is set forth above, then the Fund will comply with those specific laws, rules or regulations.
BlackRock is independent in ownership and governance, with no single majority stockholder and a majority of independent directors. PNC is BlackRocks largest stockholder and is an affiliate of BlackRock for 1940 Act purposes.
If you cannot be present in person at the Special Meeting, please fill in, sign and return the enclosed proxy card or please record your voting instructions by telephone or via the Internet promptly. No postage is necessary if the enclosed proxy card is mailed in the United States.
John M. Perlowski
President and Chief Executive Officer
BlackRock High Yield Trust
BlackRock Corporate High Yield Fund, Inc.
BlackRock Corporate High Yield Fund III, Inc.
BlackRock High Income Shares
BlackRock Corporate High Yield Fund V, Inc.
BlackRock Corporate High Yield Fund VI, Inc.
August 22, 2013
143
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. THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS.
SUBJECT TO COMPLETION, DATED AUGUST 22, 2013
STATEMENT OF ADDITIONAL INFORMATION
RELATING TO THE REORGANIZATIONS OF
BLACKROCK HIGH YIELD TRUST
BLACKROCK CORPORATE HIGH YIELD FUND, INC.
BLACKROCK CORPORATE HIGH YIELD FUND III, INC.
BLACKROCK HIGH INCOME SHARES
BLACKROCK CORPORATE HIGH YIELD FUND V, INC.
BLACKROCK CORPORATE HIGH YIELD FUND VI, INC.
Dated August 22, 2013
This Statement of Additional Information is available to the shareholders of (i) BlackRock High Yield Trust (BHY), (ii) BlackRock Corporate High Yield Fund, Inc. (COY), (iii) BlackRock Corporate High Yield Fund III, Inc. (CYE), (iv) BlackRock High Income Shares (HIS), (v) BlackRock Corporate High Yield Fund V, Inc. (HYV) (each a Target Fund and, collectively, the Target Funds) and (vi) BlackRock Corporate High Yield Fund VI, Inc. (HYT or the Acquiring Fund, and together with the Target Funds, the Funds) in connection with the proposed reorganizations (each a Reorganization and, collectively, the Reorganizations) whereby each Target Fund will merge with and into the Acquiring Fund or a new direct, wholly-owned subsidiary of the Acquiring Fund that will be organized as a Massachusetts limited liability company (the HYT Merger Subsidiary). Each Fund, except HIS, will merge directly with the Acquiring Fund. HIS will merge with and into the HYT Merger Subsidiary for purposes of consummating a merger of a Massachusetts business under the laws of the Commonwealth of Massachusetts, and the HYT Merger Subsidiary will then merge directly with and into the Acquiring Fund. Each Target Fund will then terminate its registration under the Investment Company Act of 1940 (the 1940 Act). In each Reorganization, the outstanding common shares of each Target Fund will be exchanged for newly-issued common shares of the Acquiring Fund, par value $0.10 per share (Acquiring Fund Shares). The aggregate net asset value (not the market value) of Acquiring Fund Shares received by the shareholders of the Target Fund in each Reorganization will equal the aggregate net asset value (not the market value) of the Target Fund Common Shares held by such shareholders immediately prior to such Reorganization, less the applicable costs of such Reorganization (though shareholders may receive cash for their fractional common shares). A copy of a form of the Agreement and Plan of Reorganization between each Target Fund and the Acquiring Fund is attached hereto as Appendix A. Unless otherwise defined herein, capitalized terms have the meanings given to them in the Joint Proxy Statement/Prospectus.
This Statement of Additional Information is not a prospectus and should be read in conjunction with the Joint Proxy Statement/Prospectus dated August 22, 2013 relating to the proposed Reorganizations. A copy of the Joint Proxy Statement/Prospectus may be obtained, without charge, by writing to the Funds at 1 University Square Drive Princeton, New Jersey 08540-6455, or by calling (800) 882-0052.
The Acquiring Fund will provide, without charge, upon the written or oral request of any person to whom this Statement of Additional Information is delivered, a copy of any and all documents that have been incorporated by reference in the registration statement of which this Statement of Additional Information is a part.
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APPENDIX B PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS |
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APPENDIX C PROXY VOTING POLICIES FOR THE BLACKROCK-ADVISED FUNDS DECEMBER, 2009 |
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RISK FACTORS AND SPECIAL CONSIDERATIONS
The following information supplements the discussion of the Funds risk factors that are described in the Joint Proxy Statement/Prospectus and the preceding discussion of the Funds investment objective, policies and techniques.
Legal, Tax and Regulatory Risks . Legal, tax and regulatory changes could occur that may materially adversely affect a Fund. For example, the regulatory and tax environment for derivative instruments in which a Fund may participate is evolving, and changes in the regulation or taxation of derivative instruments may materially adversely affect the value of derivative instruments held by the Fund and the ability of the Fund to pursue its investment strategies.
To qualify for the favorable U.S. federal income tax treatment generally accorded to RICs, a Fund must, among other things, derive in each taxable year at least 90% of its gross income from certain prescribed sources and distribute for each taxable year at least 90% of its investment company taxable income (generally, ordinary income plus the excess, if any, of net short-term capital gain over net long-term capital loss). If for any taxable year a Fund does not qualify as a RIC, all of its taxable income for that year (including its net capital gain) would be subject to tax at regular corporate rates without any deduction for distributions to shareholders, and such distributions would be taxable as ordinary dividends to the extent of the Funds current and accumulated earnings and profits.
Inflation Risk . Inflation risk is the risk that the value of assets or income from investment will be worth less in the future as inflation decreases the value of money. As inflation increases, the real value of the common shares and distributions on those shares can decline. In addition, during any periods of rising inflation, interest rates on borrowings would likely increase, which would tend to further reduce returns to the holders of common shares.
Deflation Risk . Deflation risk is the risk that prices throughout the economy decline over time, which may have an adverse effect on the market valuation of companies, their assets and revenues. In addition, deflation may have an adverse effect on the creditworthiness of issuers and may make issuer default more likely, which may result in a decline in the value of a Funds portfolio.
Management Risk . Each Fund is subject to management risk because each is an actively managed investment portfolio. The Advisors and the individual portfolio managers will apply investment techniques and risk analyses in making investment decisions for the Funds, but there can be no guarantee that these will produce the desired results. A Fund may be subject to a relatively high level of management risk because the Fund may invest in derivative instruments, which may be highly specialized instruments that require investment techniques and risk analyses different from those associated with bonds.
Reliance on the Advisors . Each Fund is dependent upon services and resources provided by the Advisors, and therefore the Advisors parent, BlackRock. The Advisors are not required to devote their full time to the business of a Fund and there is no guarantee or requirement that any investment professional or other employee of the Advisors will allocate a substantial portion of his or her time to the Fund. The loss of one or more individuals involved with the Advisors could have a material adverse effect on the performance or the continued operation of a Fund. For additional information on BlackRock Advisors and BlackRock, see Fund ManagementInvestment Advisor and Sub-Advisor.
Reliance on Service Providers . Each Fund relies upon the performance of service providers to perform various functions. In particular, the Advisors and the Funds Custodian, accounting agent and transfer agent, and their respective delegates, if any, will perform services that are integral to the Funds operations and financial performance. Failure by any service provider to carry out its obligations to a Fund in accordance with the terms of its appointment, to exercise due care and skill, or to perform its obligations to the Fund at all as a result of
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insolvency, bankruptcy or other causes could have a material adverse effect on the Funds performance and returns to shareholders. The termination of a Funds relationship with any service provider, or any delay in appointing a replacement for such service provider, could materially disrupt the business of the Fund and could have a material adverse effect on the Funds performance and returns to shareholders.
Information Technology Systems . Each Fund is dependent on the Advisors for certain management services as well as back-office functions. The Advisors depend on information technology systems in order to assess investment opportunities, strategies and markets and to monitor and control risks for the Funds. It is possible that a failure of some kind which causes disruptions to these information technology systems could materially limit the Advisors ability to adequately assess and adjust investments, formulate strategies and provide adequate risk control. Any such information technology-related difficulty could harm the performance of a Fund. Further, failure of the back-office functions of the Advisors to process trades in a timely fashion could prejudice the investment performance of a Fund. Further, failure of the back-office functions of the Advisors to process trades in a timely fashion could prejudice the investment performance of a Fund.
Misconduct of Employees and of Service Providers . Misconduct or misrepresentations by employees of the Advisors or a Funds service providers could cause significant losses to the Fund. Employee misconduct may include binding a Fund to transactions that exceed authorized limits or present unacceptable risks and unauthorized trading activities or concealing unsuccessful trading activities (which, in any case, may result in unknown and unmanaged risks or losses) or making misrepresentations regarding any of the foregoing. Losses could also result from actions by a Funds service providers, including, without limitation, failing to recognize trades and misappropriating assets. In addition, employees and service providers may improperly use or disclose confidential information, which could result in litigation or serious financial harm, including limiting a Funds business prospects or future marketing activities. Despite the Advisors due diligence efforts, misconduct and intentional misrepresentations may be undetected or not fully comprehended, thereby potentially undermining the Advisors due diligence efforts. As a result, no assurances can be given that the due diligence performed by the Advisors will identify or prevent any such misconduct.
DIRECTORS/TRUSTEES AND OFFICERS
The Board Members
The Board of each Fund currently consists of 11 individuals (each, a Board Member), nine of whom are not interested persons of the Funds as defined in the 1940 Act (the Independent Board Members). The registered investment companies advised by the Advisors or their affiliates (the BlackRock-Advised Funds) are organized into one complex of closed-end funds (the Closed-End Complex), two complexes of open-end funds (the Equity-Liquidity Complex and the Equity-Bond Complex) and one complex of exchange-traded funds (the Exchange-Traded Complex; each such complex a BlackRock Fund Complex). The Funds are each included in the Closed-End Complex. The Board Members also oversee as Board members the operations of the other closed-end registered investment companies included in the Closed-End Complex. See Board Leadership Structure and Oversight for additional information.
Biographical Information
Certain biographical and other information relating to the Board Members and officers of the Funds is set forth below, including their year of birth, their principal occupation for at least the last five years, the length of time served, the total number of investment companies overseen in the BlackRock Fund Complexes and any public directorships or trusteeships. Board Members serve until their resignation, removal or death, or until December 31 of the year in which they turn 72. The maximum age limitation may be waived as to any Board Member by action of a majority of the Board Members upon a finding of good cause therefore. In 2013, the Board approved the extension of the mandatory retirement age for James T. Flynn and Kate F. Feldstein by one
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additional year, until December 31 of the year in which James T. Flynn turns 75 and Kate F. Feldstein turns 73, which the Board believes is in the best interest of shareholders. The officers of the Funds serve at the pleasure of the Board Members or until their successors have been duly elected and qualified.
Please refer to the below table which identifies the Board Members which sets forth certain biographical information about the Board Members, for all of the Funds.
Name, Address
|
Position(s)
|
Length of
|
Principal Occupation(s)
|
Number of
|
Other Public
|
|||||
Independent Directors |
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Richard E. Cavanagh 55 East 52nd Street New York, NY 10055
1946 |
Chairman of the Boards | Since 2007 | Trustee, Aircraft Finance Trust from 1999 to 2009; Director, The Guardian Life Insurance Company of America since 1998; Trustee, Educational Testing Service from 1997 to 2009 and Chairman thereof from 2005 to 2009; Senior Advisor, The Fremont Group since 2008 and Director thereof since 1996; Faculty Member/Adjunct Lecturer, Harvard University since 2007; President and Chief Executive Officer, The Conference Board, Inc. (global business research organization) from 1995 to 2007. |
94 RICs consisting of 90 Portfolios |
Arch Chemical (chemical and allied products) from 1999 to 2011 | |||||
Karen P. Robards 55 East 52nd Street New York, NY 10055
1950 |
Vice Chairperson of the Boards and Chairperson of the Audit Committee | Since 2007 | Partner of Robards & Company, LLC (financial advisory firm) since 1987; Co-founder and Director of the Cooke Center for Learning and Development (a not-for-profit organization) since 1987; Director of Care Investment Trust, Inc. (health care real estate investment trust) from 2007 to 2010; Investment Banker at Morgan Stanley from 1976 to 1987. |
94 RICs consisting of 90 Portfolios |
AtriCure, Inc. (medical devices) since 2000; Greenhill & Co., Inc. since 2013 |
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Name, Address
|
Position(s)
|
Length of
|
Principal Occupation(s)
|
Number of
|
Other Public
|
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Michael J. Castellano 55 East 52nd Street New York, NY 10055
1946 |
Board Member and Member of the Audit Committee | Since 2011 | Chief Financial Officer of Lazard Group LLC from 2001 to 2011; Chief Financial Officer of Lazard Ltd from 2004 to 2011; Director, Support Our Aging Religious (non-profit) since 2009; Director, National Advisory Board of Church Management at Villanova University since 2010; Trustee, Domestic Church Media Foundation since 2012. |
94 RICs consisting of 90 Portfolios |
None | |||||
Frank J. Fabozzi 55 East 52nd Street New York, NY 10055
1948 |
Board Member and Member of the Audit Committee | Since 2007 | Editor of and Consultant for The Journal of Portfolio Management since 2006; Professor of Finance, EDHEC Business School since 2011; Professor in the Practice of Finance and Becton Fellow, Yale University School of Management from 2006 to 2011; Adjunct Professor of Finance and Becton Fellow, Yale University from 1994 to 2006. |
94 RICs consisting of 90 Portfolios |
None | |||||
Kathleen F. Feldstein 55 East 52nd Street New York, NY 10055
1941 |
Board Member | Since 2007 | President of Economics Studies, Inc. (private economic consulting firm) since 1987; Chair, Board of Trustees, McLean Hospital from 2000 to 2008 and Trustee Emeritus thereof since 2008; Member of the Board of Partners Community Healthcare, Inc. from 2005 to 2009; Member of the Corporation of Partners HealthCare since 1995; Trustee, Museum of Fine Arts, Boston since 1992; Member of the Visiting Committee to the Harvard University Art Museum since 2003; Director, Catholic Charities of Boston since 2009. |
94 RICs consisting of 90 Portfolios |
The McClatchy Company (publishing) since 2006 |
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Name, Address
|
Position(s)
|
Length of
|
Principal Occupation(s)
|
Number of
|
Other Public
|
|||||
James T. Flynn 55 East 52nd Street New York, NY 10055
1939 |
Board Member and Member of the Audit Committee | Since 2007 | Chief Financial Officer of JPMorgan & Co., Inc. from 1990 to 1995. | 94 RICs consisting of 90 Portfolios | None | |||||
Jerrold B. Harris 55 East 52nd Street New York, NY 10055
1942 |
Board Member | Since 2007 | Trustee, Ursinus College since 2000; Director, Troemner LLC (scientific equipment) since 2000; Director of Delta Waterfowl Foundation from 2010 to 2012; President and Chief Executive Officer, VWR Scientific Products Corporation from 1990 to 1999. |
94 RICs consisting of 90 Portfolios |
BlackRock Kelso Capital Corp. (business development company) since 2004 | |||||
R. Glenn Hubbard 55 East 52nd Street New York, NY 10055
1958 |
Board Member | Since 2007 | Dean, Columbia Business School since 2004; Faculty Member, Columbia Business School since 1988. |
94 RICs consisting of 90 Portfolios |
ADP (data and information services) since 2004; KKR Financial Corporation (finance) since 2004; Metropolitan Life Insurance Company (insurance) since 2007 | |||||
W. Carl Kester 55 East 52nd Street New York, NY 10055
1951 |
Board Member and Member of the Audit Committee | Since 2007 | George Fisher Baker Jr. Professor of Business Administration, Harvard Business School, since 2008; Deputy Dean for Academic Affairs from 2006 to 2010; Chairman of the Finance Unit from 2005 to 2006; Senior Associate Dean and Chairman of the MBA Program, from 1999 to 2005; Member of the faculty of Harvard Business School since 1981. |
94 RICs consisting of 90 Portfolios |
None |
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Name, Address
|
Position(s)
|
Length of
|
Principal Occupation(s)
|
Number of
|
Other Public
|
|||||
Interested Board Members |
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Henry Gabbay 55 East 52nd Street New York, NY 10055
1947 |
Board Member | Since 2007 | Consultant, BlackRock from 2007 to 2008; Managing Director, BlackRock from 1989 to 2007; Chief Administrative Officer, BlackRock Advisors, LLC from 1998 to 2007; President of BlackRock Funds and BlackRock Bond Allocation Target Shares from 2005 to 2007; Treasurer of certain closed-end funds in the Closed-End Complex from 1989 to 2006. |
155 RICs consisting of 282 Portfolios |
None | |||||
Paul L. Audet 55 East 52nd Street New York, NY 10055
1953 |
Board Member | Since 2011 | Senior Managing Director of BlackRock and Head of U.S. Mutual Funds since 2011; Chair of the U.S. Mutual Funds Committee reporting to the Global Executive Committee since 2011; Head of BlackRocks Real Estate business from 2008 to 2011; Member of BlackRocks Global Operating and Corporate Risk Management Committees and of the BlackRock Alternative Investors Executive Committee and Investment Committee for the Private Equity Fund of Funds business since 2008; Head of BlackRocks Global Cash Management business from 2005 to 2010; Acting Chief Financial Officer of BlackRock from 2007 to 2008; Chief Financial Officer of BlackRock from 1998 to 2005. |
155 RICs consisting of 282 Portfolios |
None |
* | Board Members serve until their resignation, removal or death, or until December 31 of the year in which they turn 72. The maximum age limitation may be waived as to any Board Member by action of a majority of the Board Members upon a finding of good cause therefore. In 2013, the Board approved the extension of the mandatory retirement age for James T. Flynn and Kate F. Feldstein by one additional year, until December 31 of the year in which James T. Flynn turns 75 and Kate F. Feldstein turns 73, which the Board believes is in the best interest of shareholders. |
** | For purposes of this chart, RICs refers to registered investment companies and Portfolios refers to the investment programs of the BlackRock-Advised Funds. |
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*** | Directorships disclosed under this column do not include directorships disclosed under the column Principal Occupation(s) During Past Five Years. |
| Messrs. Gabbay and Audet are interested persons (as defined in the 1940 Act) of the Funds by virtue of their current or former positions with the Advisors, each a wholly owned subsidiary of BlackRock, Inc., and/or their ownership of BlackRock, Inc. and/or The PNC Financial Services Group, Inc. securities. |
Experience, Qualifications and Skills
The Independent Board Members have adopted a statement of policy that describes the experience, qualifications, skills and attributes that are necessary and desirable for potential Independent Board Member candidates (the Statement of Policy). The Board believes that each Independent Board Member satisfied, at the time he or she was initially elected or appointed a Board Member, and continues to satisfy, the standards contemplated by the Statement of Policy. Furthermore, in determining that a particular Board Member was and continues to be qualified to serve as a Board Member, the Board has considered a variety of criteria, none of which, in isolation, was controlling. The Board believes that, collectively, the Board Members have balanced and diverse experience, skills, attributes and qualifications, which allow the Board to operate effectively in governing the Funds and protecting the interests of stockholders. Among the attributes common to all Board Members is their ability to review critically, evaluate, question and discuss information provided to them, to interact effectively with the Funds investment advisor, sub-advisor, other service providers, counsel and independent registered public accounting firm, and to exercise effective business judgment in the performance of their duties as Board Members. Each Board Members ability to perform his or her duties effectively is evidenced by his or her educational background or professional training; business, consulting, public service or academic positions; experience from service as a board member of the Funds or the other funds in the BlackRock fund complexes (and any predecessor funds), other investment funds, public companies, or non-profit entities or other organizations; ongoing commitment and participation in Board and committee meetings, as well as their leadership of standing and ad hoc committees throughout the years; or other relevant life experiences. The table below discusses some of the experiences, qualifications and skills of each of our Board Members that support the conclusion that they should serve (or continue to serve) on the Board.
Board Member |
Experience, Qualifications and Skills |
|
Richard E. Cavanagh |
Mr. Cavanagh brings to the Board a wealth of practical business knowledge and leadership as an experienced director/trustee of various public and private companies. In particular, because Mr. Cavanagh served for over a decade as President and Chief Executive Officer of The Conference Board, Inc., a global business research organization, he is able to provide the Board with expertise about business and economic trends and governance practices. Mr. Cavanagh created the blue ribbon Commission on Public Trust and Private Enterprise in 2002, which recommended corporate governance enhancements. Mr. Cavanaghs service as a director of The Guardian Life Insurance Company of America and as a senior advisor and director of The Fremont Group provides added insight into investment trends and conditions. Mr. Cavanaghs long-standing service on the boards of the Closed-End Complex also provides him with a specific understanding of the Funds, their operations, and the business and regulatory issues facing the Funds. Mr. Cavanaghs independence from the Funds and the Funds investment advisor enhances his service as Chair of the Boards, Chair of the Leverage Committee, Chair of the Executive Committee and as a member of the Governance and Nominating Committee, Compliance Committee and Performance Oversight Committee. |
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Board Member |
Experience, Qualifications and Skills |
|
Karen P. Robards |
The Board benefits from Ms. Robardss many years of experience in investment banking and the financial advisory industry where she obtained extensive knowledge of the capital markets and advised clients on corporate finance transactions, including mergers and acquisitions and the issuance of debt and equity securities. Ms. Robardss prior position as an investment banker at Morgan Stanley provides useful oversight of the Funds investment decisions and investment valuation processes. Additionally, Ms. Robardss experience derived from serving as a director of Care Investment Trust, Inc., a health care real estate investment trust, provides the Board with the benefit of her experience with the management practices of other financial companies. Ms. Robardss long-standing service on the boards of the Closed-End Complex also provides her with a specific understanding of the Funds, their operations, and the business and regulatory issues facing the Funds. Ms. Robardss knowledge of financial and accounting matters qualifies her to serve as Vice Chair of the Boards and as the Chair of each Funds Audit Committee. Ms. Robardss independence from the Funds and the Funds investment advisor enhances her service as a member of the Performance Oversight Committee, Executive Committee, Governance and Nominating Committee and Leverage Committee. | |
Michael J. Castellano |
The Board benefits from Mr. Castellanos career in accounting, which spans over forty years. Mr. Castellano has served as Chief Financial Officer of Lazard Ltd. and as a Managing Director and Chief Financial Officer of Lazard Group. Prior to joining Lazard, Mr. Castellano held various senior management positions at Merrill Lynch & Co., including Senior Vice PresidentChief Control Officer for Merrill Lynchs capital markets businesses, Chairman of Merrill Lynch International Bank and Senior Vice PresidentCorporate Controller. Prior to joining Merrill Lynch & Co., Mr. Castellano was a partner with Deloitte & Touche where he served a number of investment banking clients over the course of his 24 years with the firm. Mr. Castellanos knowledge of financial and accounting matters qualifies him to serve as a member of each Funds Audit Committee. Mr. Castellano is a Board Member and his independence from the Funds and the Funds investment advisor enhances his service as a member of the Audit Committee, Governance and Nominating Committee and Performance Oversight Committee. | |
Frank J. Fabozzi |
Dr. Fabozzi holds the designations of Chartered Financial Analyst and Certified Public Accountant. Dr. Fabozzi was inducted into the Fixed Income Analysts Societys Hall of Fame and is the 2007 recipient of the C. Stewart Sheppard Award given by the CFA Institute. The Board benefits from Dr. Fabozzis experiences as a professor and author in the field of finance. Dr. Fabozzis experience as a Professor of Finance at EDHEC Business School, as a Professor in the Practice of Finance and Becton Fellow at the Yale University School of Management and as editor of the Journal of Portfolio Management demonstrate his wealth of expertise in the investment management and structured finance areas. Dr. Fabozzi has authored and edited numerous books and research papers on topics in investment management and financial econometrics, and his writings have focused on fixed income securities and portfolio management, many of which are considered standard references in the investment management industry. Dr. Fabozzis long-standing service on the boards of the Closed-End Complex also provides him with a specific understanding of the Funds, their operations and the business and regulatory issues facing the Funds. Moreover, Dr. Fabozzis knowledge of financial and accounting matters qualifies him to serve as a member of the Funds Audit Committee. Dr. Fabozzis independence from the Funds and the Funds investment advisor enhances his service as Chair of the Performance Oversight Committee and as a member of the Governance and Nominating Committee and Leverage Committee. |
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Board Member |
Experience, Qualifications and Skills |
|
Kathleen F. Feldstein |
Dr. Feldstein, who served as President of Economics Studies, Inc., an economic consulting firm, benefits the Board by providing business leadership and experience and knowledge of economics. The Board benefits from Dr. Feldsteins experience as a director/trustee of publicly traded and private companies, including financial services, technology and telecommunications companies. Dr. Feldsteins long-standing service on the boards of the Closed-End Complex also provides her with a specific understanding of the Funds, their operations, and the business and regulatory issues facing the Funds. In addition, Dr. Feldsteins independence from the Funds and the Funds investment advisor enhances her service as a member of the Compliance Committee, Governance and Nominating Committee and Performance Oversight Committee. | |
James T. Flynn |
Mr. Flynn brings to the Board a broad and diverse knowledge of business and capital markets as a result of his many years of experience in the banking and financial industry. Mr. Flynns five years as the Chief Financial Officer of JP Morgan & Co. provide the Board with experience on financial reporting obligations and oversight of investments. Mr. Flynns long-standing service on the boards of the Closed-End Complex also provides him with a specific understanding of the Funds, their operations, and the business and regulatory issues facing the Funds. Mr. Flynns knowledge of financial and accounting matters qualifies him to serve as a member of each Funds Audit Committee. Mr. Flynns independence from the Funds and the Funds investment advisor enhances his service as a member of the Governance and Nominating Committee and Performance Oversight Committee. | |
Jerrold B. Harris |
Mr. Harriss time as President and Chief Executive Officer of VWR Scientific Products Corporation brings to the Board business leadership and experience and knowledge of the chemicals industry and national and international product distribution. Mr. Harriss position as a director of BlackRock Kelso Capital Corporation brings to the Board the benefit of his experience as a director of a business development company governed by the 1940 Act and allows him to provide the Board with added insight into the management practices of other financial companies. Mr. Harriss long-standing service on the boards of the Closed-End Complex also provides him with a specific understanding of the Funds, their operations and the business and regulatory issues facing the Funds. Mr. Harriss independence from the Funds and the Funds investment advisor enhances his role as Chair of the Compliance Committee and as a member of the Governance and Nominating Committee and Performance Oversight Committee. | |
R. Glenn Hubbard |
Dr. Hubbard has served in numerous roles in the field of economics, including as the Chairman of the U.S. Council of Economic Advisers of the President of the United States. Dr. Hubbard serves as the Dean of Columbia Business School, has served as a member of the Columbia Faculty and as a Visiting Professor at the John F. Kennedy School of Government at Harvard University, the Harvard Business School and the University of Chicago. Dr. Hubbards experience as an advisor to the President of the United States adds a dimension of balance to the Funds governance and provides perspective on economic issues. Dr. Hubbards service on the boards of KKR Financial Corporation, ADP and Metropolitan Life Insurance Company provides the Board with the benefit of his experience with the management practices of other financial companies. Dr. Hubbards long-standing service on the boards of the Closed-End Complex also provides him with a specific understanding of the Funds, their operations, and the business and regulatory issues facing the Funds. Dr. Hubbards independence from the Funds and the Funds investment advisor enhances his service as the Chair of the Governance and Nominating Committee and a member of the Compliance Committee and Performance Oversight Committee. |
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Board Member |
Experience, Qualifications and Skills |
|
W. Carl Kester |
The Board benefits from Dr. Kesters experiences as a professor and author in finance, and his experience as the George Fisher Baker Jr. Professor of Business Administration at Harvard Business School and as Deputy Dean of Academic Affairs at Harvard Business School adds to the Board a wealth of expertise in corporate finance and corporate governance. Dr. Kester has authored and edited numerous books and research papers on both subject matters, including co-editing a leading volume of finance case studies used worldwide. Dr. Kesters long-standing service on the boards of the Closed-End Complex also provides him with a specific understanding of the Funds, their operations, and the business and regulatory issues facing the Funds. Dr. Kesters knowledge of financial and accounting matters qualifies him to serve as a member of each Funds Audit Committee. In addition, Dr. Kesters independence from the Funds and the Funds investment advisor enhances his service as a member of the Governance and Nominating Committee, Performance Oversight Committee and Leverage Committee. | |
Henry Gabbay |
The Board benefits from Dr. Gabbays many years of experience in administration, finance and financial services operations. Dr. Gabbays experience as a Managing Director of BlackRock, Chief Administrative Officer of BlackRock Advisors, LLC and President of BlackRock Funds provides the Board with insight into investment company operational, financial and investment matters. Dr. Gabbays former positions as Chief Administrative Officer of BlackRock Advisors, LLC and as Treasurer of certain closed-end funds in the Closed-End Complex provide the Board with direct knowledge of the operations of the Funds and their investment advisor. Dr. Gabbays long-standing service on the boards of the Closed-End Complex also provides him with a specific understanding of the Funds, their operations, and the business and regulatory issues facing the Funds. Dr. Gabbay serves as a member of the Leverage Committee. | |
Paul L. Audet |
Mr. Audet has a wealth of experience in the investment management industry, including more than 13 years with BlackRock and over 20 years in finance and asset management. He also has expertise in finance, as demonstrated by his positions as Chief Financial Officer of BlackRock and head of BlackRocks Global Cash Management business. Mr. Audet currently is a member of BlackRocks Global Operating and Corporate Risk Management Committees, the BlackRock Alternative Investors Executive Committee and the Investment Committee for the Private Equity Fund of Funds. Prior to joining BlackRock, Mr. Audet was the Senior Vice President of Finance at PNC Bank Corp. and Chief Financial Officer of the investment management and mutual fund processing businesses and head of PNCs Mergers & Acquisitions Unit. Mr. Audet serves as a member of the Executive Committee. |
Board Leadership Structure and Oversight
The Board has overall responsibility for the oversight of the Funds. The Chair of the Board and the Chief Executive Officer are two different people. Not only is the Chair of the Board an Independent Board Member, but also the Chair of each Board committee (each, a Committee) is an Independent Board Member. The Board has six standing Committees: an Audit Committee, a Governance and Nominating Committee, a Compliance Committee, a Performance Oversight Committee, an Executive Committee and a Leverage Committee. The role of the Chair of the Board is to preside at all meetings of the Board and to act as a liaison with service providers, officers, attorneys, and other Board Members between meetings. The Chair of each Committee performs a similar role with respect to such Committee. The Chair of the Board or Committees may also perform such other functions as may be delegated by the Board or the Committees from time to time. The Independent Board Members meet regularly outside the presence of the Funds management, in executive session or with other
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service providers to the Funds. The Board has regular meetings five times a year, including a meeting to consider the approval of the Funds Advisory Agreements, and may hold special meetings if required before their next regular meeting. During the fiscal year ended February 28, 2013 for COY and CYE and August 31, 2012 for HYT, HYV, HIS and BHY the Board held five regular meetings and two special meetings. Each Committee meets regularly to conduct the oversight functions delegated to that Committee by the Board and reports its findings to the Board. The Board and each standing Committee conduct annual assessments of their oversight function and structure. The Board has determined that the Boards leadership structure is appropriate because it allows the Board to exercise independent judgment over management and to allocate areas of responsibility among Committees and the Board to enhance effective oversight.
The Board decided to separate the roles of Chair and Chief Executive Officer because it believes that an independent Chair:
|
Increases the independent oversight of the Funds and enhances the Boards objective evaluation of the Chief Executive Officer |
|
Allows the Chief Executive Officer to focus on the Funds operations instead of Board administration |
|
Provides greater opportunities for direct and independent communication between shareholders and the Board |
|
Provides an independent spokesman for the Funds |
The Board has engaged the Advisors to manage the Funds on a day-to day basis. The Board is responsible for overseeing the Advisors, other service providers, the operations of the Funds and associated risks in accordance with the provisions of the 1940 Act, state law, other applicable laws, the Funds charters, and the Funds investment objective(s) and strategies. The Board reviews, on an ongoing basis, the Funds performance, operations, and investment strategies and techniques. The Board also conducts reviews of the Advisors and their role in running the operations of the Funds.
Day-to-day risk management with respect to the Funds is the responsibility of the Advisors or other service providers (depending on the nature of the risk), subject to the supervision of the Advisor. The Funds are subject to a number of risks, including investment, compliance, operational and valuation risks, among others. While there are a number of risk management functions performed by the Advisors or other service providers, as applicable, it is not possible to eliminate all of the risks applicable to the Funds. Risk oversight is part of the Boards general oversight of the Funds and is addressed as part of various Board and Committee activities. The Board, directly or through Committees, also review reports from, among others, management, the independent registered public accounting firm for the Funds, the Advisors, and internal auditors for the Advisors or their affiliates, as appropriate, regarding risks faced by the Funds and managements or the service providers risk functions. The Committee system facilitates the timely and efficient consideration of matters by the Board Members and facilitates effective oversight of compliance with legal and regulatory requirements and of the Funds activities and associated risks. The Board has appointed a Chief Compliance Officer, who oversees the implementation and testing of the Funds compliance program and reports regularly to the Board regarding compliance matters for the Funds and their service providers. The Independent Board Members have engaged independent legal counsel to assist them in performing their oversight responsibilities.
Audit Committee. The Board has a standing Audit Committee composed of Karen P. Robards (Chair), Michael J. Castellano, Frank J. Fabozzi, James T. Flynn and W. Carl Kester, all of whom are Independent Board Members. The principal responsibilities of the Audit Committee are to assist the Board in fulfilling its oversight responsibilities relating to the accounting and financial reporting policies and practices of the Funds. The Audit Committees responsibilities include, without limitation: (i) approving the selection, retention, termination and compensation of the Funds independent registered public accounting firm and evaluating the independence and objectivity of the independent auditors; (ii) approving all audit engagement terms and fees for the Funds; (iii) reviewing the conduct and results of each audit; (iv) reviewing any issues raised by the Funds independent
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registered public accounting firm or management regarding the accounting or financial reporting policies and practices of the Funds, their internal controls, and, as appropriate, the internal controls of certain service providers and managements response to any such issues; (v) reviewing and discussing the Funds audited and unaudited financial statements and disclosure in the Funds shareholder reports relating to the Funds performance; (vi) assisting the Board in considering the performance of the Funds internal audit function provided by its investment advisor, administrator, pricing agent or other service provider; and (vii) resolving any disagreements between the Funds management and the Funds independent registered public accounting firm regarding financial reporting. During the fiscal year ended February 28, 2013 for COY and CYE and August 31, 2012 for HYT, HYV, HIS and BHY, the Audit Committee held fourteen and eleven meetings, respectively. A copy of the Audit Committee Charter for the Funds can be found in the Corporate Governance section of the BlackRock Closed-End Fund website at www.blackrock.com .
Governance and Nominating Committee. The Board has a standing Governance and Nominating Committee composed of R. Glenn Hubbard (Chair), Richard E. Cavanagh, Michael J. Castellano, Frank J. Fabozzi, Kathleen F. Feldstein, James T. Flynn, Jerrold B. Harris, W. Carl Kester and Karen P. Robards, all of whom are Independent Board Members. The principal responsibilities of the Governance and Nominating Committee are: (i) identifying individuals qualified to serve as Independent Board Members and recommending Independent Board Member nominees for election by shareholders or appointment by the Board; (ii) advising the Board with respect to Board composition, procedures and committees (other than the Audit Committee); (iii) overseeing periodic self-assessments of the Board and committees of the Board (other than the Audit Committee); (iv) reviewing and making recommendations in respect of Independent Board Member compensation; (v) monitoring corporate governance matters and making recommendations in respect thereof to the Board; and (vi) acting as the administrative committee with respect to Board policies and procedures, committee policies and procedures (other than the Audit Committee) and codes of ethics as they relate to the Independent Board Members. During the fiscal year ended February 28, 2013 for COY and CYE and August 31, 2012 for HYT, HYV, HIS and BHY, the Governance and Nominating Committee held six meetings.
The Governance and Nominating Committee of the Board seeks to identify individuals to serve on the Board who have a diverse range of viewpoints, qualifications, experiences, backgrounds and skill sets so that the Board will be better suited to fulfill its responsibility of overseeing the Funds activities. In so doing, the Governance and Nominating Committee reviews the size of the Board, the ages of the current Board Members and their tenure on the Board, and the skills, background and experiences of the Board Members in light of the issues facing the Funds in determining whether one or more new directors should be added to the Board. The Board as a group strives to achieve diversity in terms of gender, race and geographic location. The Governance and Nominating Committee believes that the Board Members as a group possess the array of skills, experiences and backgrounds necessary to guide the Funds. The Board Members biographies included above highlight the diversity and breadth of skills, qualifications and expertise that the Board Members bring to the Funds.
The Governance and Nominating Committee may consider nominations for Board Members made by the Funds shareholders as it deems appropriate. Under the Funds By-laws, shareholders must follow certain procedures to nominate a person for election as a director at a shareholder meeting, or to introduce an item of business at a shareholder meeting. Under these advance notice procedures, shareholders must submit the proposed nominee or item of business by delivering a notice to the Secretary of the Funds at their principal executive offices. Each Fund must receive notice of a shareholders intention to introduce a nomination or proposed item of business for a shareholder meeting called for the purpose of electing directors not later than the close of business on the fifth day following the day on which notice of the date of the special meeting was mailed or public disclosure of the date of the special meeting was made, whichever first occurs.
Each Funds By-laws provide that notice of a proposed nomination must include certain information about the shareholder and the nominee, as well as a written consent of the proposed nominee to serve if elected. A notice of a proposed item of business must include a description of and the reasons for bringing the proposed business to the meeting, any material interest of the shareholder in the business, and certain other information about the shareholder.
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Further, the Funds have adopted Board Member qualification requirements which can be found in the Funds By-laws and are applicable to all Board Members that may be nominated, elected, appointed, qualified or seated to serve as Board Members. Reference is made to the Funds By-laws for more details.
A copy of the Governance and Nominating Committee Charter for the Funds can be found in the Corporate Governance section of the BlackRock Closed-End Fund website at www.blackrock.com .
Compliance Committee. The Board has a Compliance Committee composed of Jerrold B. Harris (Chair), Richard E. Cavanagh, Kathleen F. Feldstein and R. Glenn Hubbard, each of whom are Independent Board Members. The Compliance Committees purpose is to assist the Board in fulfilling its responsibility with respect to the oversight of regulatory and fiduciary compliance matters involving the Funds, the fund-related activities of BlackRock, and any sub-advisors and the Funds other third party service providers. The Compliance Committees responsibilities include, without limitation: (i) overseeing the compliance policies and procedures of the Funds and their service providers; (ii) reviewing information on and, where appropriate, recommending policies concerning the Funds compliance with applicable law; (iii) reviewing information on any significant correspondence with or other actions by regulators or governmental agencies with respect to the Funds and any employee complaints or published reports that raise concerns regarding compliance matters; and (iv) reviewing reports from and making certain recommendations in respect of the Funds Chief Compliance Officer, including, without limitation, determining the amount and structure of the Chief Compliance Officers compensation. The Board has adopted a written charter for the Compliance Committee. During the fiscal year ended February 28, 2013 for COY and CYE and August 31, 2012 for HYT, HYV, HIS and BHY, the Compliance Committee held five and six meetings, respectively.
Performance Oversight Committee. The Board has a Performance Oversight Committee composed of Frank J. Fabozzi (Chair), Richard E. Cavanagh, Michael J. Castellano, Kathleen F. Feldstein, James T. Flynn, Jerrold B. Harris, R. Glenn Hubbard, W. Carl Kester and Karen P. Robards, all of whom are Independent Board Members. The Performance Oversight Committees purpose is to assist the Board in fulfilling its responsibility to oversee the Funds investment performance relative to the Funds investment objectives, policies and practices. The Performance Oversight Committees responsibilities include, without limitation: (i) reviewing the Funds investment objectives, policies and practices; (ii) recommending to the Board any required action in respect of changes in fundamental and non-fundamental investment restrictions; (iii) reviewing information on appropriate benchmarks and competitive universes; (iv) reviewing the Funds investment performance relative to such benchmarks; (v) reviewing information on unusual or exceptional investment matters; (vi) reviewing whether the Funds have complied with their investment policies and restrictions; and (vii) overseeing policies, procedures and controls regarding valuation of the Funds investments. The Board has adopted a written charter for the Performance Oversight Committee. During the fiscal year ended February 28, 2013 for COY and CYE and August 31, 2012 for HYT, HYV, HIS and BHY, the Performance Oversight Committee held four meetings.
Leverage Committee. The Board has a Leverage Committee composed of Richard E. Cavanagh (Chair), Karen P. Robards, Frank J. Fabozzi, Henry Gabbay and W. Carl Kester. The Leverage Committees responsibilities include, without limitation: (i) to support the Independent Board Members in pursuing the best interests of the Funds and its shareholders; (ii) to oversee the Funds usage of leverage, including the Funds incurrence, refinancing and maintenance of leverage and, to the extent necessary or appropriate, authorize or approve the execution of documentation in respect thereto, (iii) to oversee and authorize actions in respect of refinancing and redeeming forms of leverage; and (iv) to receive reports with respect to the foregoing matters. The Board has adopted a written charter for the Leverage Committee. During the fiscal year ended February 28, 2013 for COY and CYE and August 31, 2012 for HYT, HYV, HIS and BHY, the Leverage Committee held ten and two meetings, respectively.
Executive Committee. The Board has an Executive Committee composed of Richard E. Cavanagh and Karen P. Robards, both of whom are Independent Board Members, and Paul L. Audet, who serves as an interested Board Member. The principal responsibilities of the Executive Committee include, without limitation:
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(i) acting on routine matters between meetings of the Board; (ii) acting on such matters as may require urgent action between meetings of the Board; and (iii) exercising such other authority as may from time to time be delegated to the Executive Committee by the Board. The Board has adopted a written charter for the Executive Committee. During the fiscal year ended February 28, 2013 for COY and CYE and August 31, 2012 for HYT, HYV, HIS and BHY, the Executive Committee held one meeting.
Information about the specific experience, skills, attributes and qualifications of each Board Member, which in each case led to the Boards conclusion that the Board Member should serve (or continue to serve) as a Board Member of the Funds, is provided in above, in Biographical Information Pertaining to Board Members.
Share Ownership
Information relating to each directors share ownership in each Fund and in the other funds in the Closed-End Complex that are overseen by the respective director (Supervised Funds) as of May 31, 2013 is set forth in the chart below:
Name of Board Member |
Aggregate
Dollar Range of Equity Securities in BHY |
Aggregate
Dollar Range of Equity Securities in COY |
Aggregate
Dollar Range of Equity Securities in CYE |
Aggregate
Dollar Range of Equity Securities in HIS |
Aggregate
Dollar Range of Equity Securities in HYT |
Aggregate
Dollar Range of Equity Securities in HYV |
Aggregate
Dollar Range of Equity Securities in Supervised Funds |
|||||||
Paul L. Audet |
None | None | None | None | None | None | Over $100,000 | |||||||
Michael J. Castellano |
None | $10,001-$50,000 | None | None | $10,001-$50,000 | None | Over $100,000 | |||||||
Richard E. Cavanagh |
$1-$10,000 | $1-$10,000 | $1-$10,000 | $1-$10,000 | $1-$10,000 | $1-$10,000 | Over $100,000 | |||||||
Frank J. Fabozzi |
$1-$10,000 | $1-$10,000 | $1-$10,000 | $1-$10,000 | None | $1-$10,000 | $50,001-$100,000 | |||||||
Kathleen F. Feldstein |
$1-$10,000 | None | None | $1-$10,000 | None | None | $50,001-$100,000 | |||||||
James T. Flynn |
None | None | None | None | None | None | $50,001-$100,000 | |||||||
Henry Gabbay |
$1-$10,000 | $1-$10,000 | $1-$10,000 | $1-$10,000 | $1-$10,000 | $1-$10,000 | Over $100,000 | |||||||
Jerrold B. Harris |
$1-$10,000 | $1-$10,000 | $1-$10,000 | $1-$10,000 | $1-$10,000 | $1-$10,000 | Over $100,000 | |||||||
R. Glenn Hubbard |
$1-$10,000 | None | None | $1-$10,000 | None | None | Over $100,000 | |||||||
W. Carl Kester |
$1-$10,000 | $1-$10,000 | $1-$10,000 | $1-$10,000 | None | $1-$10,000 | Over $100,000 | |||||||
Karen P. Robards |
None | None | None | None | None | None | Over $100,000 |
Name of Board Member |
Aggregate
Dollar Range of Share Equivalents in BHY |
Aggregate
Dollar Range of Share Equivalents in COY |
Aggregate
Dollar Range of Share Equivalents in CYE |
Aggregate
Dollar Range of Share Equivalents in HIS |
Aggregate
Dollar Range of Share Equivalents in HYT |
Aggregate
Dollar Range of Share Equivalents in HYV |
Aggregate
Dollar Range of Equity Securities and Share Equivalents in Supervised Funds |
|||||||
Paul L. Audet |
None | None | None | None | None | None | Over $100,000 | |||||||
Michael J. Castellano |
None | None | None | None | $10,001-$50,000 | None | Over $100,000 | |||||||
Richard E. Cavanagh |
None | None | None | None | Over $100,000 | None | Over $100,000 | |||||||
Frank J. Fabozzi |
None | None | None | None | Over $100,000 | None | Over $100,000 | |||||||
Kathleen F. Feldstein |
None | None | None | None | Over $100,000 | None | Over $100,000 | |||||||
James T. Flynn |
None | None | None | None | Over $100,000 | None | Over $100,000 | |||||||
Henry Gabbay |
None | None | None | None | None | None | Over $100,000 | |||||||
Jerrold B. Harris |
None | None | None | None | Over $100,000 | None | Over $100,000 | |||||||
R. Glenn Hubbard |
None | None | None | None | Over $100,000 | None | Over $100,000 | |||||||
W. Carl Kester |
None | None | None | None | $50,001-$100,000 | None | Over $100,000 | |||||||
Karen P. Robards |
None | None | None | None | $50,001-$100,000 | None | Over $100,000 |
As of May 31, 2013, the officers and Board Members as a group owned an aggregate of less than 1% of the outstanding shares of any Supervised Fund. As of May 31, 2013, none of the Independent Board Members of the Funds or their immediate family members owned beneficially or of record any securities of BlackRock or any affiliate of BlackRock or underwriter or any person controlling, controlled by or under common control with any
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such entities nor did any Independent Board Member of the Funds or their immediate family member have any material interest in any transaction, or series of similar transactions, during the most recently completed two calendar years involving the Funds, BlackRock or any affiliate of BlackRock or underwriter or any person controlling, controlled by or under common control with any such entities.
Compensation of Board Members
Each Independent Board Member is paid an annual retainer of $250,000 per year for his or her services as a Board Member of all BlackRock-advised closed-end funds (the Closed-End Complex) that are overseen by the respective director/trustee and each Board Member may also receive a $10,000 board meeting fee for special unscheduled meetings or meetings in excess of six Board meetings held in a calendar year, together with out-of-pocket expenses in accordance with a Board policy on travel and other business expenses relating to attendance at meetings. In addition, the Chair and Vice-Chair of the Board are paid an additional annual retainer of $120,000 and $40,000, respectively. The Chairs of the Audit Committee, Compliance Committee, Governance and Nominating Committee, and Performance Oversight Committee are paid an additional annual retainer of $35,000, $20,000, $10,000, and $20,000, respectively. Each Audit Committee and Leverage Committee member is paid an additional annual retainer of $25,000 for his or her service on such committee. For the year ended December 31, 2012, the Closed-End Complex reimbursed Independent Board Member expenses in an aggregate amount of $32,393. Each Fund pays a pro rata portion quarterly (based on relative net assets) of the foregoing Board Member fees paid by the funds in the Closed-End Complex.
Dr. Gabbay is an interested person of the Funds and serves as an interested Board Member of three groups of BlackRock-Advised Fundsthe Closed-End Complex and two complexes of open-end funds (the Equity-Liquidity Complex and the Equity-Bond Complex; each such complex, a BlackRock Fund Complex). Dr. Gabbay receives for his services as a Board Member of such BlackRock Fund Complexes (i) an annual retainer of $550,000 allocated to the funds in these three BlackRock Fund Complexes, based on their relative net assets and (ii) with respect to each of the two open-end BlackRock Fund Complexes, a Board meeting fee of $3,750 (with respect to meetings of the Equity-Liquidity Complex) and $18,750 (with respect to meetings of the Equity-Bond Complex) to be paid for attendance at each Board meeting up to five Board meetings held in a calendar year by each such complex (compensation for meetings in excess of this number to be determined on a case-by-case basis). Dr. Gabbay is also reimbursed for out-of-pocket expenses in accordance with a Board policy on travel and other business expenses relating to attendance at meetings. Dr. Gabbays compensation for serving on the boards of the funds in these BlackRock Fund Complexes (including the Funds) is equal to 75% of each Board Member retainer and, as applicable, of each Board meeting fee (without regard to additional fees paid to Board and Committee chairs) received by the Independent Board Members serving on such boards, as well as the full Leverage Committee member retainer. The Board of the Funds or of any other fund in a BlackRock Fund Complex may modify the Board Members compensation from time to time depending on market conditions and accordingly Dr. Gabbays compensation would be impacted by those modifications. The Independent Board Members have agreed that a maximum of 50% of each Independent Board Members total compensation paid by funds in the Closed-End Complex may be deferred pursuant to the Closed-End Complexs deferred compensation plan. Under the deferred compensation plan, deferred amounts earn a return for the Independent Board Members as though equivalent dollar amounts had been invested in common shares of certain funds in the Closed-End Complex selected by the Independent Board Members. This has approximately the same economic effect for the Independent Board Members as if they had invested the deferred amounts in such funds in the Closed-End Complex. The deferred compensation plan is not funded and obligations thereunder represent general unsecured claims against the general assets of a fund and are recorded as a liability for accounting purposes.
The following table sets forth the compensation that each of the Board Members earned from the Funds as of its most recent fiscal year end and the aggregate compensation paid to them by all funds in the Closed-End Complex for the calendar year ended December 31, 2012, which includes deferred compensation amounts paid to
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each Independent Board Member and Dr. Gabbay by the Funds. Mr. Audet serves without compensation from the Funds because of his affiliation with BlackRock, Inc. and the Advisors.
Aggregate
Compensation from HIS (1) |
Aggregate
Compensation from BHY (1) |
Aggregate
Compensation from COY (1) |
Aggregate
Compensation from CYE (1) |
Aggregate
Compensation from HYT (1) |
Aggregate
Compensation from HYV (1) |
Total
Compensation from Closed-End Complex (13) |
Number of
Registered Investment Companies in Closed-End Complex Overseen by Board Member |
|||||||||||||||||||||||||
Michael J. Castellano (11) |
$ | 448 | $ | 170 | $ | 2,205 | $ | 2,405 | $ | 1,570 | $ | 1,499 | $ | 275,000 | 94 | |||||||||||||||||
Richard E. Cavanagh (2)(12) |
$ | 1,475 | $ | 550 | $ | 3,050 | $ | 3,327 | $ | 5,095 | $ | 4,857 | $ | 395,000 | 94 | |||||||||||||||||
Frank J. Fabozzi (3)(12) |
$ | 1,179 | $ | 440 | $ | 2,499 | $ | 2,725 | $ | 4,074 | $ | 3,883 | $ | 320,000 | 94 | |||||||||||||||||
Kathleen F. Feldstein (4) |
$ | 986 | $ | 368 | $ | 2,005 | $ | 2,186 | $ | 3,404 | $ | 3,245 | $ | 250,000 | 94 | |||||||||||||||||
R. Glenn Hubbard (5) |
$ | 1,025 | $ | 383 | $ | 2,085 | $ | 2,274 | $ | 3,541 | $ | 3,375 | $ | 260,000 | 94 | |||||||||||||||||
James T. Flynn (6) |
$ | 1,084 | $ | 405 | $ | 2,205 | $ | 2,405 | $ | 3,745 | $ | 3,569 | $ | 275,000 | 94 | |||||||||||||||||
Jerrold B. Harris (7) |
$ | 1,065 | $ | 397 | $ | 2,165 | $ | 2,361 | $ | 3,677 | $ | 3,504 | $ | 270,000 | 94 | |||||||||||||||||
W. Carl Kester (8)(12) |
$ | 1,101 | $ | 411 | $ | 2,338 | $ | 2,550 | $ | 3,802 | $ | 3,624 | $ | 300,000 | 94 | |||||||||||||||||
Karen P. Robards (9)(12) |
$ | 1,396 | $ | 521 | $ | 2,939 | $ | 3,206 | $ | 4,823 | $ | 4,597 | $ | 375,000 | 94 | |||||||||||||||||
Henry Gabbay (10)(12) |
$ | 802 | $ | 301 | $ | 1,683 | $ | 1,836 | $ | 2,788 | $ | 2,661 | $ | 206,250 | 94 |
(1) | Information is for the Funds most recent fiscal year. |
(2) | Total amount of deferred compensation payable by the Closed-End Complex to Board Member is $599,111 as of 12/31/12. |
(3) | Total amount of deferred compensation payable by the Closed-End Complex to Board Member is $545,068 as of 12/31/12. |
(4) | Total amount of deferred compensation payable by the Closed-End Complex to Board Member is $633,776 as of 12/31/12. |
(5) | Total amount of deferred compensation payable by the Closed-End Complex to Board Member is $931,806 as of 12/31/12. |
(6) | Total amount of deferred compensation payable by the Closed-End Complex to Board Member is $930,159 as of 12/31/12. |
(7) | Total amount of deferred compensation payable by the Closed-End Complex to Board Member is $867,683 as of 12/31/12. |
(8) | Total amount of deferred compensation payable by the Closed-End Complex to Board Member is $507,359 as of 12/31/12. |
(9) | Total amount of deferred compensation payable by the Closed-End Complex to Board Member is $481,779 as of 12/31/12. |
(10) | As of December 31, 2012 the Board Member did not participate in the deferred compensation plan. |
(11) | Total amount of deferred compensation payable by the Closed-End Complex to Board Member is $135,875 as of 12/31/12. |
(12) | Each Leverage Committee member was paid a retainer of $25,000 for the year ended December 31, 2012. |
(13) | Represents the aggregate compensation earned by such persons from the Closed-End Complex during the calendar year ended December 31, 2012. Of this amount, Mr. Cavanagh, Dr. Fabozzi, Dr. Feldstein, Dr. Hubbard, Mr. Flynn, Mr. Harris, Dr. Kester, Ms. Robards and Mr. Castellano deferred $37,000, $29,500, $75,000, $130,000, $137,500, $135,000, $75,000, $70,000 and $82,500, respectively. |
Independent Board Member Ownership of Securities
As of May 31, 2013, the Independent Board Members (and their respective immediate family members) did not beneficially own securities of the Advisors, or an entity controlling, controlled by or under common control with the Advisors (not including registered investment companies).
Information Pertaining to the Officers
The executive officers of the Funds, their year of birth and their principal occupations during the past five years (their titles may have varied during that period) are shown in the table below. The address of each officer is c/o BlackRock, Inc., Park Avenue Plaza, 55 East 52nd Street, New York, New York 10055. With the exception
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of the CCO, executive officers receive no compensation from the Funds. The Funds compensate the CCO for his services as their CCO. Each executive officer is an interested person of the Funds by virtue of that individuals position with BlackRock or its affiliates described in the table below.
Name, Address and Year of Birth |
Position(s) Held
|
Term of Office
|
Principal Occupations(s)
|
|||
John M. Perlowski 55 East 52nd Street New York, NY 10055
1964 |
President and Chief Executive Officer | Annual: Since 2011 | Managing Director of BlackRock, Inc. since 2009; Global Head of BlackRock Fund Administration since 2009; Managing Director and Chief Operating Officer of the Global Product Group at Goldman Sachs Asset Management, L.P. from 2003 to 2009; Treasurer of Goldman Sachs Mutual Funds from 2003 to 2009 and Senior Vice President thereof from 2007; Director of Goldman Sachs Offshore Funds from 2002 to 2009; Director of Family Resource Network (charitable foundation) since 2009. | |||
Anne F. Ackerley 55 East 52nd Street New York, NY 10055
1962 |
Vice President | Annual: Since 2007 | Managing Director of BlackRock, Inc. since 2000; Chief Marketing Officer of BlackRock, Inc. since 2012; President and Chief Executive Officer of the BlackRock-advised funds from 2009 to 2011; Vice President of the BlackRock-advised funds from 2007 to 2009; Chief Operating Officer of BlackRocks Global Client Group from 2009 to 2012; Chief Operating Officer of BlackRocks U.S. Retail Group from 2006 to 2009; Head of BlackRocks Mutual Fund Group from 2000 to 2006. | |||
Robert W. Crothers 55 East 52nd Street New York, NY 10055
1981 |
Vice President | Annual: Since 2012 | Director of BlackRock, Inc. since 2011; Vice President of BlackRock, Inc. from 2008 to 2010; Associate of BlackRock, Inc. from 2006 to 2008. | |||
Brendan Kyne 55 East 52nd Street New York, NY 10055
1977 |
Vice President | Annual: Since 2009 | Managing Director of BlackRock, Inc. since 2010; Director of BlackRock, Inc. from 2008 to 2009; Head of Product Development and Management for BlackRocks U.S. Retail Group since 2009; Co-head of Product Development and Management for BlackRocks U.S. Retail Group from 2007 to 2009; Vice President of BlackRock, Inc. from 2005 to 2008. | |||
Neal J. Andrews 55 East 52nd Street New York, NY 10055
1966 |
Chief Financial Officer | Annual: Since 2007 | Managing Director of BlackRock, Inc. since 2006; Senior Vice President and Line of Business Head of Fund Accounting and Administration at PNC Global Investment Servicing (US) Inc. from 1992 to 2006. |
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Name, Address and Year of Birth |
Position(s) Held
|
Term of Office
|
Principal Occupations(s)
|
|||
Jay M. Fife 55 East 52nd Street New York, NY 10055
1970 |
Treasurer | Annual: Since 2007 | Managing Director of BlackRock, Inc. since 2007; Director of BlackRock, Inc. in 2006; Assistant Treasurer of the MLIM and Fund Asset Management L.P. advised Funds from 2005 to 2006; Director of MLIM Fund Services Group from 2001 to 2006. | |||
Brian P. Kindelan 55 East 52nd Street New York, NY 10055
1959 |
Chief Compliance Officer (CCO) and Anti-Money Laundering Officer | Annual: Since 2007 | Chief Compliance Officer of the BlackRock-advised funds since 2007; Managing Director and Senior Counsel of BlackRock, Inc. since 2005. | |||
Janey Ahn 55 East 52nd Street New York, NY 10055
1975 |
Secretary | Annual: Since 2012 | Director of BlackRock, Inc. since 2009; Vice President of BlackRock, Inc. from 2008 to 2009; Assistant Secretary of the Funds from 2008 to 2012; Associate at Willkie Farr & Gallagher LLP from 2006 to 2008. |
Indemnification of Board Members and Officers
The governing documents of each Fund generally provide that, to the extent permitted by applicable law, the Fund will indemnify its Board Members and officers against liabilities and expenses incurred in connection with litigation in which they may be involved because of their offices with the Fund unless, as to liability to the Fund or its investors, it is finally adjudicated that they engaged in willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in their offices. In addition, the Fund will not indemnify Board Members with respect to any matter as to which directors did not act in good faith in the reasonable belief that his or her action was in the best interest of the Fund or, in the case of any criminal proceeding, as to which Board Members had reasonable cause to believe that the conduct was unlawful. Indemnification provisions contained in a Funds governing documents are subject to any limitations imposed by applicable law.
The Funds in the Closed-End Complex have also entered into a separate indemnification agreement with the Board Members of each Board (the Indemnification Agreement). The Indemnification Agreement (i) extends the indemnification provisions contained in a Funds governing documents to Board Members who leave that Funds Board and serve on an advisory board of a different fund in the Closed-End Complex; (ii) sets in place the terms of the indemnification provisions of a Funds governing documents once a director retires from a Board; and (iii) in the case of Board Members who left the Board of a Fund in connection with or prior to the board consolidation that occurred in 2007 as a result of the merger of BlackRock and Merrill Lynch & Co., Inc.s investment management business, clarifies that such Fund continues to indemnify the director for claims arising out of his or her past service to that Fund.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the Funds Board Members, executive officers, persons who own more than ten percent of a registered class of a Funds equity securities, BlackRock Advisors and certain officers of BlackRock Advisors (including in some cases former Section 16 insiders for a period of up to 6 months), to file reports on holdings of, and transactions in, Fund shares with the SEC and to furnish the Funds with copies of all such reports. Based solely on a review of copies of such reports furnished to
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the relevant Funds and representations from these reporting persons, each Fund believes that its Board Members, executive officers, ten percent holders, BlackRock Advisors and certain officers of BlackRock Advisors met all such applicable SEC filing requirements for the Funds most recently concluded fiscal year, except for any late filings disclosed in previous proxy statements and certain inadvertent late filings by each of the Independent Board Members in connection with their participation in the Closed-End Complexs deferred compensation plan. For each Independent Board Member, there were two late Form 4 filings, each relating to one transaction, for BlackRock Corporate High Yield Fund VI, Inc. (HYT). Such late filings were due to administrative errors and no fault of the Independent Board Members whatsoever.
INVESTMENT MANAGEMENT AGREEMENTS
Investment Management Agreement
The investment management agreement between each Fund and the Investment Advisor was approved by the respective Funds Boards, including a majority of the Independent Board Members. Certain administrative services are also provided to the Funds by the Investment Advisor pursuant to the investment management agreement or administration agreement, as applicable, between each Fund and the Investment Advisor. The Investment Advisor and its affiliates provide each Fund with services such as: preparing shareholder reports and communications, including annual and semi-annual financial statements and the Funds websites; communications with analysts to support secondary market trading; assisting with daily accounting and pricing; preparing periodic filings with regulators and stock exchanges; overseeing and coordinating the activities of other service providers; administering and organizing Board meetings and preparing the Board materials for such meetings; providing legal and compliance support (such as helping to prepare proxy statements and responding to regulatory inquiries); and performing other Fund administrative tasks necessary for the operation of the respective Fund (such as tax reporting and fulfilling regulatory filing requirements).
BHY and HIS pay the Investment Advisor a monthly management fee at an annual rate of 0.90% and 0.75% (of the first $200 million and 0.50% thereafter), respectively, based on the applicable Funds average weekly Managed Assets. Managed Assets means the total assets of the Fund minus the sum of the accrued liabilities (other than the aggregate indebtedness constituting financial leverage).
BHY also pays the Investment Advisor a monthly administration fee at an annual rate of 0.10% based on the Funds average weekly Managed Assets.
COY, CYE, HYV and HYT pay the Investment Advisor a monthly management fee at an annual rate of 0.50%, 0.60%, 0.60% and 0.70%, respectively, based on an aggregate of (i) the applicable Funds average daily Net Assets and (ii) the proceeds of any outstanding debt securities or borrowings used for leverage. Net Assets means the total assets of the Fund minus the sum of the accrued liabilities. The liquidation preference of any outstanding preferred stock (other than accumulated dividends) is not considered a liability in determining the Funds net asset value.
If any of the Reorganizations are approved, the Combined Fund will pay the Investment Advisor a monthly management fee at an annual rate of 0.60% of the aggregate of (i) the Combined Funds average daily Net Assets and (ii) the proceeds of any outstanding debt securities or borrowings used for leverage.
The investment management agreements continue in effect for a period of two years from their respective effective dates, and if not terminated earlier, continue in effect for successive periods of 12 months thereafter, provided that each continuance is specifically approved at least annually by both (1) the vote of a majority of the applicable Funds Board or the vote of a majority of the securities of the applicable Fund at the time outstanding and entitled to vote (as such term is defined in the 1940 Act) and (2) by the vote of a majority of the Independent Board Members of the applicable Fund, cast in person at a meeting called for the purpose of voting on such
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approval. The agreements may be terminated at any time, without the payment of any penalty, by each Fund (upon the vote of a majority of the applicable Funds Board or a majority of the outstanding voting securities of the applicable Fund) or by the Investment Advisor, upon 60 days written notice by either party to the other which can be waived by the non-terminating party. The agreements will terminate automatically in the event of their assignment (as such term is defined in the 1940 Act and the rules thereunder).
The investment management agreements provide that the Investment Advisor will not be liable for any error of judgment or mistake of law or for any loss suffered by a Fund in connection with the performance of the investment management agreements, except a loss resulting from a breach of fiduciary duty with respect to the receipt of compensation for services or a loss resulting from willful misfeasance, bad faith or gross negligence on the Investment Advisors part in the performance of its duties or from reckless disregard by the Investment Advisor of its duties under the investment management agreement. The investment management agreements also provide for indemnification by each Fund of the Investment Advisor, its directors, officers, employees, agents and control persons for liabilities incurred by them in connection with their services to each Fund, subject to certain limitations and conditions.
The Investment Advisor will devote such time and effort to the business of each Fund as is reasonably necessary to perform its duties to each Fund. However, the services of the Investment Advisor are not exclusive, and the Investment Advisor provides similar services to other investment companies and other clients and may engage in other activities.
The tables below set forth information about the total advisory fees paid by the Funds to the Investment Advisor and any amounts waived by the Investment Advisor.
Advisory Fees Paid to the Investment Advisor
Paid to the Investment Advisor | ||||||||
For the Fiscal Year Ended |
COY |
CYE |
||||||
February 28, 2013 |
$ | 1,750,891 | $ | 2,349,156 | ||||
February 28, 2012 |
$ | 1,552,052 | $ | 2,123,183 | ||||
February 28, 2011 |
$ | 1,491,017 | $ | 2,005,126 |
Waived by the Investment Advisor | ||||||||
For the Fiscal Year Ended |
COY |
CYE |
||||||
February 28, 2013 |
$ | 1,331 | $ | 518 | ||||
February 28, 2012 |
$ | 1,262 | $ | 677 | ||||
February 28, 2011 |
$ | 1,970 | $ | 1,439 |
Paid to the Investment Advisor | ||||||||||||||||
For the Fiscal Year Ended |
BHY |
HIS |
HYV |
HYT |
||||||||||||
August 31, 2012 |
$ | 498,163 | $ | 1,127,906 | $ | 3,211,029 | $ | 3,897,072 | ||||||||
August 31, 2011 |
$ | 537,737 | $ | 1,138,755 | $ | 3,156,080 | $ | 3,789,466 | ||||||||
August 31, 2010 |
$ | 506,315 | $ | 1,024,332 | $ | 2,681,548 | $ | 3,249,917 |
Waived by the Investment Advisor | ||||||||||||||||
For the Fiscal Year Ended |
BHY |
HIS |
HYV |
HYT |
||||||||||||
August 31, 2012 |
$ | 274 | $ | 358 | $ | 560 | $ | 605 | ||||||||
August 31, 2011 |
$ | 987 | $ | 1,130 | $ | 1,407 | $ | 1,411 | ||||||||
August 31, 2010 |
$ | 1,241 | $ | 1,309 | $ | 1,917 | $ | 2,111 |
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The tables below set forth information about the total administration fees paid by BHY to the Investment Advisor.
Administration Fees Paid to the Investment Advisor
Administration Fees | ||||
For the Fiscal Year Ended |
BHY |
|||
August 31, 2012 |
$ | 55,351 | ||
August 31, 2011 |
$ | 52,966 | ||
August 31, 2010 |
$ | 48,221 |
Sub-Investment Advisory Agreements
BlackRock Financial Management, Inc. (the Sub-Advisor) acts as the sub-advisor for each Fund. The Investment Advisor and each Fund has entered into a separate sub-advisory agreement with each Sub-Advisor under which the Investment Advisor pays the Sub-Advisor for services it provides, a monthly fee that is a percentage of the investment advisory fees paid by each Fund to the Investment Advisor. The Investment Advisor, and not any of the Funds, would be responsible for paying the Sub-Advisor from its advisory compensation.
The sub-investment advisory agreements continue in effect for a period of two years from their effective dates, and if not terminated earlier, will continue in effect for successive periods of 12 months thereafter, provided that each continuance is specifically approved at least annually by both (1) the vote of a majority of a Funds Board or the vote of a majority of the outstanding voting securities of a Fund at the time outstanding and entitled to vote (as defined in the 1940 Act) and (2) by the vote of a majority of the Independent Board Members, cast in person at a meeting called for the purpose of voting on such approval. The agreements may be terminated at any time, without the payment of any penalty, by a Fund or the Investment Advisor (upon the vote of a majority of a Funds Board or a majority of the outstanding voting securities of a Fund) or by the Sub-Advisor, upon 60 days written notice by either party to the other, which notice can be waived by the non-terminating party. The agreements will terminate automatically in the event of their assignment (as such term is defined in the 1940 Act and the rules thereunder).
The sub-investment advisory agreements provide that the Sub-Advisor will not be liable for any error of judgment or mistake of law or for any loss suffered by a Fund in connection with the performance of the investment management agreements, except a loss resulting from a breach of fiduciary duty with respect to the receipt of compensation for services or a loss resulting from willful misfeasance, bad faith or gross negligence on the Sub-Advisors part in the performance of its duties or from reckless disregard by the Sub-Advisor of its duties under the sub-investment advisory agreement. The sub-investment advisory agreements also provide for indemnification by each Fund of the sub-investment advisor, its directors, officers, employees, agents and control persons for liabilities incurred by them in connection with their services to each Fund, subject to certain limitations and conditions.
The Sub-Advisor will devote such time and effort to the business of each Fund as is reasonably necessary to perform its duties to each Fund. However, the services of the Sub-Advisor are not exclusive, and the Sub-Advisor provides similar services to other investment companies and other clients and may engage in other activities.
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The following table sets forth the sub-advisory fees paid by the Investment Advisor to the Sub-Advisor.
Advisory Fees Paid to BlackRock Financial Management, Inc.
Paid to the Sub-Advisor | ||||||||
For the Fiscal Year Ended |
COY |
CYE |
||||||
February 28, 2013 |
$ | 785,991 | $ | 1,050,265 | ||||
February 28, 2012 |
$ | | $ | | ||||
February 28, 2011 |
$ | | $ | |
Paid to the Sub-Advisor | ||||||||||||||||
For the Fiscal Year Ended |
BHY |
HIS |
HYV |
HYT |
||||||||||||
August 31, 2012 |
$ | 107,174 | $ | 439,314 | $ | 506,352 | $ | 614,889 | ||||||||
August 31, 2011 |
$ | 73,014 | $ | 432,447 | $ | | $ | | ||||||||
August 31, 2010 |
$ | 68,982 | $ | 388,203 | $ | | $ | |
Fund Accounting Agreement
Fund accounting services are provided to the Funds by State Street Bank and Trust Company (the Accounting Services Provider) pursuant to a fund accounting agreement that was entered into by the Funds and State Street Bank and Trust Company. The table below shows the amounts paid by the Funds to the Accounting Services Provider and to the Investment Advisor for such services for the periods indicated:
Accounting Services |
BHY | |||||||
For the Fiscal Year |
Paid to State Street |
Paid to the
Investment Advisor |
||||||
August 31, 2012 |
$ | 44,620 | | |||||
August 31, 2011 |
$ | 10,785 | | |||||
August 31, 2010 |
$ | 14,662 | |
Accounting Services |
COY | |||||||
For the Fiscal Year |
Paid to State Street |
Paid to the
Investment Advisor |
||||||
February 28, 2013 |
$ | 91,205 | | |||||
February 28, 2012 |
$ | 82,329 | | |||||
February 28, 2011 |
$ | 50,738 | $ | 4,766 |
Accounting Services |
CYE | |||||||
For the Fiscal Year |
Paid to State Street |
Paid to the
Investment Advisor |
||||||
February 28, 2013 |
$ | 96,867 | | |||||
February 28, 2012 |
$ | 89,201 | | |||||
February 28, 2011 |
$ | 52,601 | $ | 5,288 |
Accounting Services |
HIS | |||||||
For the Fiscal Year |
Paid to State Street |
Paid to the
Investment Advisor |
||||||
August 31, 2012 |
$ | 61,370 | | |||||
August 31, 2011 |
$ | 41,369 | $ | 947 | ||||
August 31, 2010 |
$ | 25,833 | $ | 2,684 |
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Accounting Services |
HYV | |||||||
For the Fiscal Year |
Paid to State Street |
Paid to the
Investment Advisor |
||||||
August 31, 2012 |
$ | 129,713 | | |||||
August 31, 2011 |
$ | 74,637 | $ | 3,216 | ||||
August 31, 2010 |
$ | 93,259 | $ | 8,683 |
Accounting Services |
HYT | |||||||
For the Fiscal Year |
Paid to State Street |
Paid to the
Investment Advisor |
||||||
August 31, 2012 |
$ | 130,214 | | |||||
August 31, 2011 |
$ | 76,509 | $ | 3,311 | ||||
August 31, 2010 |
$ | 96,916 | $ | 8,999 |
Other Accounts Managed by the Portfolio Managers
For BHY, as of August 31, 2012:
Number of Other Accounts Managed
and Assets by Account Type |
Number of Other Accounts and Assets for
Which Advisory Fee is Performance-Based |
|||||||||||
Name of Portfolio
|
Other
Registered Investment Companies |
Other Pooled
Investment Vehicles |
Other
Accounts |
Other
Registered Investment Companies |
Other Pooled
Investment Vehicles |
Other
Accounts |
||||||
James E. Keenan |
16 | 12 | 29 | 0 | 8 | 4 | ||||||
$13.46 Billion | $8.2 Billion | $7.12 Billion | $0 | $2.14 Billion | $571.2 Million | |||||||
Mitchell Garfin |
17 | 2 | 25 | 0 | 0 | 4 | ||||||
$13.57 Billion | $5.34 Billion | $7.12 Billion | $0 | $0 | $571.2 Million | |||||||
Derek Schoenhofen |
10 | 4 | 30 | 0 | 1 | 4 | ||||||
$11.49 Billion | $5.97 Billion | $7.76 Billion | $0 | $417.7 Million | $571.2 Million |
For COY, as of February 28, 2013:
Number of Other Accounts Managed
and Assets by Account Type |
Number of Other Accounts and Assets for
Which Advisory Fee is Performance-Based |
|||||||||||
Name of Portfolio
|
Other
Registered Investment Companies |
Other Pooled
Investment Vehicles |
Other
Accounts |
Other
Registered Investment Companies |
Other Pooled
Investment Vehicles |
Other
Accounts |
||||||
James E. Keenan |
19 | 20 | 27 | 0 | 7 | 4 | ||||||
$16.28 Billion | $10.57 Billion | $6.7 Billion | $0 | $1.52 Billion | $571.8 Million | |||||||
Mitchell Garfin |
13 | 4 | 24 | 0 | 0 | 4 | ||||||
$15.19 Billion | $6.64 Billion | $7.6 Billion | $0 | $0 | $571.8 Million | |||||||
Derek Schoenhofen |
11 | 7 | 32 | 0 | 1 | 4 | ||||||
$13.36 Billion | $8.19 Billion | $7.83 Billion | $0 | $422.3 Million | $571.8 Million |
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For CYE, as of February 28, 2013:
Number of Other Accounts Managed
and Assets by Account Type |
Number of Other Accounts and Assets for
Which Advisory Fee is Performance-Based |
|||||||||||
Name of Portfolio
|
Other
Registered Investment Companies |
Other Pooled
Investment Vehicles |
Other
Accounts |
Other
Registered Investment Companies |
Other Pooled
Investment Vehicles |
Other
Accounts |
||||||
James E. Keenan |
19 | 20 | 27 | 0 | 7 | 4 | ||||||
$16.25 Billion | $10.57 Billion | $6.7 Billion | $0 | $1.52 Billion | $571.8 Million | |||||||
Mitchell Garfin |
13 | 4 | 24 | 0 | 0 | 4 | ||||||
$15.16 Billion | $6.64 Billion | $7.6 Billion | $0 | $0 | $571.8 Million | |||||||
Derek Schoenhofen |
11 | 7 | 32 | 0 | 1 | 4 | ||||||
$13.34 Billion | $8.19 Billion | $7.83 Billion | $0 | $422.3 Million | $571.8 Million |
For HIS, as of August 31, 2012:
Number of Other Accounts Managed
and Assets by Account Type |
Number of Other Accounts and Assets for
Which Advisory Fee is Performance-Based |
|||||||||||
Name of Portfolio
|
Other
Registered Investment Companies |
Other Pooled
Investment Vehicles |
Other
Accounts |
Other
Registered Investment Companies |
Other Pooled
Investment Vehicles |
Other
Accounts |
||||||
James E. Keenan |
16 | 12 | 29 | 0 | 8 | 4 | ||||||
$13.38 Billion | $8.2 Billion | $7.12 Billion | $0 | $2.14 Billion | $571.2 Million | |||||||
Mitchell Garfin |
16 | 2 | 25 | 0 | 0 | 4 | ||||||
$13.5 Billion | $5.34 Billion | $7.12 Billion | $0 | $0 | $571.2 Million | |||||||
Derek Schoenhofen |
10 | 4 | 30 | 0 | 1 | 4 | ||||||
$11.41 Billion | $5.97 Billion | $7.76 Billion | $0 | $417.8 Million | $571.2 Million |
For HYV, as of August 31, 2012:
Number of Other Accounts Managed
and Assets by Account Type |
Number of Other Accounts and Assets
for
Which Advisory Fee is Performance-Based |
|||||||||||
Name of Portfolio
|
Other
Registered Investment Companies |
Other Pooled
Investment Vehicles |
Other
Accounts |
Other
Registered Investment Companies |
Other Pooled
Investment Vehicles |
Other
Accounts |
||||||
James E. Keenan |
16 | 12 | 0 | 0 | 8 | 4 | ||||||
$13.09 Billion | $8.2 Billion | $0 | $0 | $2.14 Billion | $571.2 Million | |||||||
Mitchell Garfin |
16 | 2 | 25 | 0 | 0 | 4 | ||||||
$13.2 Billion | $5.34 Billion | $7.12 Billion | $0 | $0 | $571.2 Million | |||||||
Derek Schoenhofen |
10 | 4 | 30 | 0 | 1 | 4 | ||||||
$11.12 Billion | $5.97 Billion | $7.76 Billion | $0 | $417.8 Million | $571.2 Million |
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For HYT, as of August 31, 2012:
Number of Other Accounts Managed
and Assets by Account Type |
Number of Other Accounts and Assets
for
Which Advisory Fee is Performance-Based |
|||||||||||
Name of Portfolio
|
Other
Registered Investment Companies |
Other Pooled
Investment Vehicles |
Other
Accounts |
Other
Registered Investment Companies |
Other Pooled
Investment Vehicles |
Other
Accounts |
||||||
James E. Keenan |
16 | 12 | 29 | 0 | 8 | 4 | ||||||
$13.07 Billion | $8.2 Billion | $7.12 Billion | $0 | $2.14 Billion | $571.2 Million | |||||||
Mitchell Garfin |
16 | 2 | 25 | 0 | 0 | 4 | ||||||
$13.18 Billion | $5.34 Billion | $7.12 Billion | $0 | $0 | $571.2 Million | |||||||
Derek Schoenhofen |
10 | 4 | 30 | 0 | 1 | 4 | ||||||
$11.1 Billion | $5.97 Billion | $7.76 Billion | $0 | $417.8 Million | $571.2 Million |
Potential Material Conflicts of Interest
BlackRock has built a professional working environment, firm-wide compliance culture and compliance procedures and systems designed to protect against potential incentives that may favor one account over another. BlackRock has adopted policies and procedures that address the allocation of investment opportunities, execution of portfolio transactions, personal trading by employees and other potential conflicts of interest that are designed to ensure that all client accounts are treated equitably over time. Nevertheless, BlackRock furnishes investment management and advisory services to numerous clients in addition to the Fund, and BlackRock may, consistent with applicable law, make investment recommendations to other clients or accounts (including accounts which are hedge funds or have performance or higher fees paid to BlackRock, or in which portfolio managers have a personal interest in the receipt of such fees), which may be the same as or different from those made to the Fund. In addition, BlackRock, its affiliates and significant shareholders and any officer, director, shareholder or employee may or may not have an interest in the securities whose purchase and sale BlackRock recommends to the Fund. BlackRock, or any of its affiliates or significant shareholders, or any officer, director, shareholder, employee or any member of their families may take different actions than those recommended to the Fund by BlackRock with respect to the same securities. Moreover, BlackRock may refrain from rendering any advice or services concerning securities of companies of which any of BlackRocks (or its affiliates or significant shareholders) officers, directors or employees are directors or officers, or companies as to which BlackRock or any of its affiliates or significant shareholders or the officers, directors and employees of any of them has any substantial economic interest or possesses material non-public information. Certain portfolio managers also may manage accounts whose investment strategies may at times be opposed to the strategy utilized for a fund. It should also be noted that Messrs. Keenan and Schoenhofen may be managing hedge fund and/or long only accounts, or may be part of a team managing hedge fund and/or long only accounts, subject to incentive fees. Messrs. Keenan and Schoenhofen may therefore be entitled to receive a portion of any incentive fees earned on such accounts.
As a fiduciary, BlackRock owes a duty of loyalty to its clients and must treat each client fairly. When BlackRock purchases or sells securities for more than one account, the trades must be allocated in a manner consistent with its fiduciary duties. BlackRock attempts to allocate investments in a fair and equitable manner among client accounts, with no account receiving preferential treatment. To this end, BlackRock has adopted policies that are intended to ensure reasonable efficiency in client transactions and provide BlackRock with sufficient flexibility to allocate investments in a manner that is consistent with the particular investment discipline and client base, as appropriate.
Portfolio Manager Compensation Overview
BlackRocks financial arrangements with its portfolio managers, its competitive compensation and its career path emphasis at all levels reflect the value senior management places on key resources. Compensation may
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include a variety of components and may vary from year to year based on a number of factors. The principal components of compensation include a base salary, a performance-based discretionary bonus, participation in various benefits programs and one or more of the incentive compensation programs established by BlackRock. The Combined Fund will maintain the portfolio manager compensation of HYT.
Base compensation
Generally, portfolio managers receive base compensation based on their position with the firm.
Discretionary Incentive Compensation
Discretionary incentive compensation is a function of several components: the performance of BlackRock, Inc., the performance of the portfolio managers group within BlackRock, the investment performance, including risk-adjusted returns, of the firms assets under management or supervision by that portfolio manager relative to predetermined benchmarks, and the individuals performance and contribution to the overall performance of these portfolios and BlackRock. In most cases, these benchmarks are the same as the benchmark or benchmarks against which the performance of the Fund or other accounts managed by the portfolio managers are measured. Among other things, BlackRocks Chief Investment Officers make a subjective determination with respect to each portfolio managers compensation based on the performance of the Fund and other accounts managed by each portfolio manager relative to the various benchmarks. Performance of fixed income funds is measured on a pre-tax and/or after-tax basis over various time periods including 1-, 3- and 5- year periods, as applicable. With respect to these portfolio managers, such benchmarks for the Fund and other accounts are a combination of market-based indices (e.g., The Barclays Capital U.S. Corporate High Yield 2% Issuer Cap Index), certain customized indices and certain Fund industry peer groups.
Distribution of Discretionary Incentive Compensation
Discretionary incentive compensation is distributed to portfolio managers in a combination of cash and BlackRock, Inc. restricted stock units which vest ratably over a number of years. For some portfolio managers, discretionary incentive compensation is also distributed in deferred cash awards that notionally track the returns of select BlackRock investment products they manage and that vest ratably over a number of years. The BlackRock, Inc. restricted stock units, upon vesting, will be settled in BlackRock, Inc. common stock. Typically, the cash portion of the discretionary incentive compensation, when combined with base salary, represents more than 60% of total compensation for the portfolio managers. Paying a portion of discretionary incentive compensation in BlackRock stock puts compensation earned by a portfolio manager for a given year at risk based on BlackRocks ability to sustain and improve its performance over future periods. Providing a portion of discretionary incentive compensation in deferred cash awards that notionally track the BlackRock investment products they manage provides direct alignment with investment product results.
Long-Term Incentive Plan Awards From time to time long-term incentive equity awards are granted to certain key employees to aid in retention, align their interests with long-term shareholder interests and motivate performance. Equity awards are generally granted in the form of BlackRock, Inc. restricted stock units that, once vested, settle in BlackRock, Inc. common stock. Mr. Keenan has unvested long-term incentive awards.
Deferred Compensation Program A portion of the compensation paid to eligible United States-based BlackRock employees may be voluntarily deferred at their election for defined periods of time into an account that tracks the performance of certain of the firms investment products. All of the eligible portfolio managers have participated in the deferred compensation program.
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Other compensation benefits
In addition to base compensation and discretionary incentive compensation, portfolio managers may be eligible to receive or participate in one or more of the following:
Incentive Savings Plans BlackRock, Inc. has created a variety of incentive savings plans in which BlackRock, Inc. employees are eligible to participate, including a 401(k) plan, the BlackRock Retirement Savings Plan (RSP), and the BlackRock Employee Stock Purchase Plan (ESPP). The employer contribution components of the RSP include a company match equal to 50% of the first 8% of eligible pay contributed to the plan capped at $5,000 per year, and a company retirement contribution equal to 3-5% of eligible compensation up to the IRS limit ($255,000 for 2013). The RSP offers a range of investment options, including registered investment companies and collective investment funds managed by the firm. BlackRock, Inc. contributions follow the investment direction set by participants for their own contributions or, absent participant investment direction, are invested into a target date fund that corresponds to, or is closest to, the year in which the participant attains age 65. The ESPP allows for investment in BlackRock, Inc. common stock at a 5% discount on the fair market value of the stock on the purchase date. Annual participation in the ESPP is limited to the purchase of 1,000 common shares or a dollar value of $25,000 based on its fair market value on the purchase date. All of the eligible portfolio managers are eligible to participate in these plans.
Securities Ownership of Portfolio Managers
BHY, HIS, HYV and HYT, as of August 31, 2012
Dollar Range of Equity Securities of the Fund Beneficially Owned |
||||||||
Portfolio Manager |
BHY |
HIS | HYV | HYT | ||||
James E. Keenan |
None | $10,001-$50,000 | None | None | ||||
Mitchell Garfin |
None | None | None | None | ||||
Derek Schoenhofen |
None | None | $100,001-$500,000 | None |
COY and CYE, as of February 28, 2013
Dollar Range of Equity Securities of the Fund Beneficially Owned |
||||
Portfolio Manager |
COY |
CYE |
||
James E. Keenan |
None | $500,001-$1,000,000 | ||
Mitchell Garfin |
None | None | ||
Derek Schoenhofen |
None | $10,001-$50,000 |
Portfolio Transactions and Brokerage Allocation
The Advisors are responsible for decisions to buy and sell securities for the Funds, the selection of brokers and dealers to effect the transactions and the negotiation of prices and any brokerage commissions. The securities in which the Funds invest are traded principally in the over-the-counter market. In the over-the-counter market, securities are generally traded on a net basis with dealers acting as principal for their own accounts without a stated commission, although the price of such securities usually includes a markup to the dealer. Securities purchased in underwritten offerings generally include, in the price, a fixed amount of compensation for the manager(s), underwriter(s) and dealer(s). The Funds may also purchase certain money market instruments directly from an issuer, in which case no commissions or discounts are paid. Purchases and sales of bonds on a stock exchange are effected through brokers who charge a commission for their services.
The Advisors are responsible for effecting securities transactions of the Funds and will do so in a manner deemed fair and reasonable to shareholders of the Funds and not according to any formula. The Advisors primary considerations in selecting the manner of executing securities transactions for the Funds will be prompt
S-29
execution of orders, the size and breadth of the market for the security, the reliability, integrity and financial condition and execution capability of the firm, the difficulty in executing the order, and the best net price. There are many instances when, in the judgment of the Advisors, more than one firm can offer comparable execution services. In selecting among such firms, consideration is given to those firms which supply research and other services in addition to execution services. Consideration may also be given to the sale of shares of the Funds. However, it is not the policy of BlackRock, absent special circumstances, to pay higher commissions to a firm because it has supplied such research or other services.
The Advisors are able to fulfill their obligation to furnish a continuous investment program to the Funds without receiving research or other information from brokers; however, each considers access to such information to be an important element of financial management. Although such information is considered useful, its value is not determinable, as it must be reviewed and assimilated by the Advisors, and does not reduce the Advisors normal research activities in rendering investment advice under the investment management agreement or the sub-investment advisory agreement. It is possible that the Advisors expenses could be materially increased if it attempted to purchase this type of information or generate it through its own staff.
One or more of the other investment companies or accounts which the Advisors manage may own from time to time some of the same investments as the Funds. Investment decisions for the Funds are made independently from those of such other investment companies or accounts; however, from time to time, the same investment decision may be made for more than one company or account. When two or more companies or accounts seek to purchase or sell the same securities, the securities actually purchased or sold will be allocated among the companies and accounts on a good faith equitable basis by the Advisors in their discretion in accordance with the accounts various investment objectives. In some cases, this system may adversely affect the price or size of the position obtainable for the Funds. In other cases, however, the ability of the Funds to participate in volume transactions may produce better execution for the Funds. It is the opinion of the Funds Boards that this advantage, when combined with the other benefits available due to the Advisors organization, outweighs any disadvantages that may be said to exist from exposure to simultaneous transactions.
It is not the Funds policy to engage in transactions with the objective of seeking profits from short-term trading. However, the annual portfolio turnover rate of the Funds may be greater than 100%. Because it is difficult to predict accurately portfolio turnover rates, actual turnover may be higher or lower. Higher portfolio turnover results in increased Fund costs, including brokerage commissions, dealer mark-ups and other transaction costs on the sale of securities and on the reinvestment in other securities.
Information about the brokerage commissions paid by the Funds is set forth in the following tables:
Aggregate Brokerage
Commissions |
||||||||
For the Fiscal Year Ended |
COY | CYE | ||||||
February 28, 2013 |
$ | 83,168 | $ | 88,305 | ||||
February 28, 2012 |
$ | 127,685 | $ | 143,694 | ||||
February 28, 2011 |
$ | 49,708 | $ | 56,856 |
Aggregate Broker Commissions | ||||||||||||||||
For the Fiscal Year Ended |
BHY | HIS | HYV | HYT | ||||||||||||
August 31, 2012 |
$ | 2,910 | $ | 29,025 | $ | 133,093 | $ | 137,110 | ||||||||
August 31, 2011 |
$ | 822 | $ | 15,681 | $ | 185,115 | $ | 183,745 | ||||||||
August 31, 2010 |
$ | 2,215 | $ | 1,101 | $ | 87,550 | $ | 50,656 |
Each of the Funds paid no commissions to affiliates during its previous three fiscal years.
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The PNC Financial Services Group, Inc. (PNC) has a significant economic interest in BlackRock, Inc., the parent of the Advisors. PNC is considered to be an affiliate of BlackRock, Inc. under the 1940 Act. Certain activities of the Advisors, BlackRock, Inc. and their affiliates (collectively, BlackRock) and PNC and its affiliates (collectively, PNC and together with BlackRock, Affiliates), with respect to each Fund and/or other accounts managed by BlackRock or PNC, may give rise to actual or perceived conflicts of interest such as those described below.
BlackRock is one of the worlds largest asset management firms. PNC is a diversified financial services organization spanning the retail, business and corporate markets. BlackRock and PNC are affiliates of one another under the 1940 Act. BlackRock, PNC, and their respective affiliates (including, for these purposes, their directors, partners, directors, managing members, officers and employees), including the entities and personnel who may be involved in the investment activities and business operations of each Fund, are engaged worldwide in businesses, including equity, fixed income, cash management and alternative investments, and have interests other than that of managing each Fund. These are considerations of which investors in each Fund should be aware, and which may cause conflicts of interest that could disadvantage each Fund and its shareholders. These activities and interests include potential multiple advisory, transactional, financial and other interests in securities and other instruments, and companies that may be purchased or sold by each Fund.
BlackRock and its Affiliates have proprietary interests in, and may manage or advise with respect to, accounts or funds (including separate accounts and other funds and collective investment vehicles) that have investment objectives similar to those of each Fund and/or that engage in transactions in the same types of securities, currencies and instruments as each Fund. One or more Affiliates are also major participants in the global currency, equities, swap and fixed income markets, in each case both on a proprietary basis and for the accounts of customers. As such, one or more Affiliates are or may be actively engaged in transactions in the same securities, currencies, and instruments in which each Fund may invest. Such activities could affect the prices and availability of the securities, currencies and instruments in which a Fund invests, which could have an adverse impact on such Funds performance. Such transactions, particularly in respect of most proprietary accounts or customer accounts, will be executed independently of a Funds transactions and thus at prices or rates that may be more or less favorable than those obtained by such Fund.
When BlackRock and its Affiliates seek to purchase or sell the same assets for their managed accounts, the assets actually purchased or sold may be allocated among the accounts on a basis determined in their good faith discretion to be equitable. In some cases, this system may adversely affect the size or price of the assets purchased or sold for each Fund. In addition, transactions in investments by one or more other accounts managed by BlackRock or its Affiliates may have the effect of diluting or otherwise disadvantaging the values, prices or investment strategies of each Fund, particularly, but not limited to, with respect to small capitalization, emerging market or less liquid strategies. This may occur when investment decisions regarding a Fund are based on research or other information that is also used to support decisions for other accounts. When BlackRock or its Affiliates implements a portfolio decision or strategy on behalf of another account ahead of, or contemporaneously with, similar decisions or strategies for a Fund, market impact, liquidity constraints, or other factors could result in such Fund receiving less favorable trading results and the costs of implementing such decisions or strategies could be increased or such Fund could otherwise be disadvantaged. BlackRock or its Affiliates may, in certain cases, elect to implement internal policies and procedures designed to limit such consequences, which may cause a Fund to be unable to engage in certain activities, including purchasing or disposing of securities, when it might otherwise be desirable for it to do so.
Conflicts may also arise because portfolio decisions regarding a Fund may benefit other accounts managed by BlackRock or its Affiliates. For example, the sale of a long position or establishment of a short position by a Fund may impair the price of the same security sold short by (and therefore benefit) one or more Affiliates or their other accounts, and the purchase of a security or covering of a short position in a security by such Fund may increase the price of the same security held by (and therefore benefit) one or more Affiliates or their other accounts.
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BlackRock and its Affiliates and their clients may pursue or enforce rights with respect to an issuer in which a Fund has invested, and those activities may have an adverse effect on such Fund. As a result, prices, availability, liquidity and terms of each Funds investments may be negatively impacted by the activities of BlackRock or its Affiliates or their clients, and transactions for each Fund may be impaired or effected at prices or terms that may be less favorable than would otherwise have been the case.
The results of each Funds investment activities may differ significantly from the results achieved by BlackRock and its Affiliates for their proprietary accounts or other accounts (including investment companies or collective investment vehicles) managed or advised by them. It is possible that one or more Affiliate-managed accounts and such other accounts will achieve investment results that are substantially more or less favorable than the results achieved by each Fund. Moreover, it is possible that each Fund will sustain losses during periods in which one or more Affiliate-managed accounts achieve significant profits on their trading for proprietary or other accounts. The opposite result is also possible. The investment activities of one or more Affiliates for their proprietary accounts and accounts under their management may also limit the investment opportunities for each Fund in certain emerging and other markets in which limitations are imposed upon the amount of investment, in the aggregate or in individual issuers, by affiliated foreign investors.
From time to time, each Funds activities may also be restricted because of regulatory restrictions applicable to one or more Affiliates, and/or their internal policies designed to comply with such restrictions. As a result, there may be periods, for example, when BlackRock, and/or one or more Affiliates, will not initiate or recommend certain types of transactions in certain securities or instruments with respect to which BlackRock and/or one or more Affiliates are performing services or when position limits have been reached.
In connection with its management of each Fund, BlackRock may have access to certain fundamental analysis and proprietary technical models developed by one or more Affiliates. BlackRock will not be under any obligation, however, to effect transactions on behalf of any Fund in accordance with such analysis and models. In addition, neither BlackRock nor any of its Affiliates will have any obligation to make available any information regarding their proprietary activities or strategies, or the activities or strategies used for other accounts managed by them, for the benefit of the management of each Fund and it is not anticipated that BlackRock will have access to such information for the purpose of managing each Fund. The proprietary activities or portfolio strategies of BlackRock and its Affiliates, or the activities or strategies used for accounts managed by them or other customer accounts could conflict with the transactions and strategies employed by BlackRock in managing each Fund.
In addition, certain principals and certain employees of BlackRock are also principals or employees of BlackRock or another Affiliate. As a result, the performance by these principals and employees of their obligations to such other entities may be a consideration of which investors in each Fund should be aware.
BlackRock may enter into transactions and invest in securities, instruments and currencies on behalf of each Fund in which customers of BlackRock or its Affiliates, or, to the extent permitted by the SEC, BlackRock or another Affiliate, serves as the counterparty, principal or issuer. In such cases, such partys interests in the transaction will be adverse to the interests of a Fund, and such party may have no incentive to assure that such Fund obtains the best possible prices or terms in connection with the transactions. In addition, the purchase, holding and sale of such investments by a Fund may enhance the profitability of BlackRock or its Affiliates. One or more Affiliates may also create, write or issue derivatives for their customers, the underlying securities, currencies or instruments of which may be those in which a Fund invests or which may be based on the performance of a Fund. The Fund may, subject to applicable law, purchase investments that are the subject of an underwriting or other distribution by one or more Affiliates and may also enter into transactions with other clients of an Affiliate where such other clients have interests adverse to those of each Fund.
At times, these activities may cause departments of BlackRock or its Affiliates or to give advice to clients that may cause these clients to take actions adverse to the interests of each Fund. To the extent affiliated
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transactions are permitted, each Fund will deal with BlackRock and its Affiliates on an arms-length basis. BlackRock or its Affiliates may also have an ownership interest in certain trading or information systems used by each Fund. The Funds use of such trading or information systems may enhance the profitability of BlackRock and its Affiliates.
One or more Affiliates may act as broker, dealer, agent, lender or adviser or in other commercial capacities for each Fund. It is anticipated that the commissions, mark-ups, mark-downs, financial advisory fees, underwriting and placement fees, sales fees, financing and commitment fees, brokerage fees, other fees, compensation or profits, rates, terms and conditions charged by an Affiliate will be in its view commercially reasonable, although each Affiliate, including its sales personnel, will have an interest in obtaining fees and other amounts that are favorable to the Affiliate and such sales personnel.
Subject to applicable law, the Affiliates (and their personnel and other distributors) will be entitled to retain fees and other amounts that they receive in connection with their service to each Fund as broker, dealer, agent, lender, adviser or in other commercial capacities and no accounting to each Fund or its shareholders will be required, and no fees or other compensation payable by each Fund or its shareholders will be reduced by reason of receipt by an Affiliate of any such fees or other amounts.
When an Affiliate acts as broker, dealer, agent, adviser or in other commercial capacities in relation to each Fund, the Affiliate may take commercial steps in its own interests, which may have an adverse effect on each Fund. The Fund will be required to establish business relationships with its counterparties based on each Funds own credit standing. Neither BlackRock nor any of the Affiliates will have any obligation to allow their credit to be used in connection with each Funds establishment of its business relationships, nor is it expected that each Funds counterparties will rely on the credit of BlackRock or any of the Affiliates in evaluating each Funds creditworthiness.
Under a securities lending program approved by each Funds Board, each Fund has retained an Affiliate of BlackRock to serve as the securities lending agent for each Fund to the extent that such Fund participates in the securities lending program. For these services, the lending agent may receive a fee from such Fund, including a fee based on the returns earned on such Funds investment of the cash received as collateral for the loaned securities. In addition, one or more Affiliates may be among the entities to which a Fund may lend its portfolio securities under the securities lending program.
Purchases and sales of securities for each Fund may be bunched or aggregated with orders for other BlackRock client accounts. BlackRock and its Affiliates, however, are not required to bunch or aggregate orders if portfolio management decisions for different accounts are made separately, or if they determine that bunching or aggregating is not practicable, required or concern cases involving client direction.
Prevailing trading activity frequently may make impossible the receipt of the same price or execution on the entire volume of securities purchased or sold. When this occurs, the various prices may be averaged, and each Fund will be charged or credited with the average price. Thus, the effect of the aggregation may operate on some occasions to the disadvantage of each Fund. In addition, under certain circumstances, each Fund will not be charged the same commission or commission equivalent rates in connection with a bunched or aggregated order.
BlackRock may select brokers (including, without limitation, Affiliates) that furnish BlackRock, each Fund, other BlackRock client accounts or other Affiliates or personnel, directly or through correspondent relationships, with research or other appropriate services which provide, in BlackRocks view, appropriate assistance to BlackRock in the investment decision-making process (including with respect to futures, fixed price offerings and over-the-counter transactions). Such research or other services may include, to the extent permitted by law, research reports on companies, industries and securities; economic and financial data; financial publications; proxy analysis; trade industry seminars; computer data bases; research-oriented software and other services and products.
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Research or other services obtained in this manner may be used in servicing each Fund and other BlackRock client accounts, including in connection with BlackRock client accounts other than those that pay commissions to the broker relating to the research or other service arrangements. Such products and services may disproportionately benefit other BlackRock client accounts relative to a Fund based on the amount of brokerage commissions paid by such Fund and such other BlackRock client accounts. For example, research or other services that are paid for through one clients commissions may not be used in managing that clients account. In addition, other BlackRock client accounts may receive the benefit, including disproportionate benefits, of economies of scale or price discounts in connection with products and services that may be provided to each Fund and to such other BlackRock client accounts. To the extent that BlackRock uses soft dollars, it will not have to pay for those products and services itself.
BlackRock may receive research that is bundled with the trade execution, clearing, and/or settlement services provided by a particular broker-dealer. To the extent that BlackRock receives research on this basis, many of the same conflicts related to traditional soft dollars may exist. For example, the research effectively will be paid by client commissions that also will be used to pay for the execution, clearing, and settlement services provided by the broker-dealer and will not be paid by BlackRock.
BlackRock may endeavor to execute trades through brokers who, pursuant to such arrangements, provide research or other services in order to ensure the continued receipt of research or other services BlackRock believes are useful in its investment decision-making process. BlackRock may from time to time choose not to engage in the above described arrangements to varying degrees. BlackRock may also enter into commission sharing arrangements under which BlackRock may execute transactions through a broker-dealer, including, where permitted, an Affiliate, and request that the broker-dealer allocate a portion of the commissions or commission credits to another firm that provides research to BlackRock. To the extent that BlackRock engages in commission sharing arrangements, many of the same conflicts related to traditional soft dollars may exist.
BlackRock may utilize certain electronic crossing networks (ECNs) in executing client securities transactions for certain types of securities. These ECNs may charge fees for their services, including access fees and transaction fees. The transaction fees, which are similar to commissions or markups/markdowns, will generally be charged to clients and, like commissions and markups/markdowns, would generally be included in the cost of the securities purchased. Access fees may be paid by BlackRock even though incurred in connection with executing transactions on behalf of clients, including each Fund. In certain circumstances, ECNs may offer volume discounts that will reduce the access fees typically paid by BlackRock. This would have the effect of reducing the access fees paid by BlackRock. BlackRock will only utilize ECNs consistent with its obligation to seek to obtain best execution in client transactions.
BlackRock has adopted policies and procedures designed to prevent conflicts of interest from influencing proxy voting decisions that it makes on behalf of advisory clients, including each Fund, and to help ensure that such decisions are made in accordance with BlackRocks fiduciary obligations to its clients. Nevertheless, notwithstanding such proxy voting policies and procedures, actual proxy voting decisions of BlackRock may have the effect of favoring the interests of other clients or businesses of other divisions or units of BlackRock and/or its Affiliates, provided that BlackRock believes such voting decisions to be in accordance with its fiduciary obligations. For a more detailed discussion of these policies and procedures, see Other InformationProxy Voting Policies.
It is also possible that, from time to time, BlackRock or its Affiliates may, although they are not required to, purchase and hold shares of a Fund. Increasing such Funds assets may enhance investment flexibility and diversification and may contribute to economies of scale that tend to reduce such Funds expense ratio.
It is possible that each Fund may invest in securities of companies with which an Affiliate has or is trying to develop investment banking relationships as well as securities of entities in which BlackRock or its Affiliates has significant debt or equity investments or in which an Affiliate makes a market. Each Fund also may invest in
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securities of companies to which an Affiliate provides or may someday provide research coverage. Such investments could cause conflicts between the interests of a Fund and the interests of other clients of BlackRock or its Affiliates. In making investment decisions for each Fund, BlackRock is not permitted to obtain or use material non-public information acquired by any division, department or Affiliate of BlackRock in the course of these activities. In addition, from time to time, the activities of an Affiliate may limit a Funds flexibility in purchases and sales of securities. When an Affiliate is engaged in an underwriting or other distribution of securities of an entity, BlackRock may be prohibited from purchasing or recommending the purchase of certain securities of that entity for each Fund.
BlackRock and its Affiliates, their personnel and other financial service providers have interests in promoting sales of each Fund. With respect to BlackRock and its Affiliates and their personnel, the remuneration and profitability relating to services to and sales of each Fund or other products may be greater than remuneration and profitability relating to services to and sales of certain funds or other products that might be provided or offered. BlackRock and its Affiliates and their sales personnel may directly or indirectly receive a portion of the fees and commissions charged to each Fund or their shareholders. BlackRock and its advisory or other personnel may also benefit from increased amounts of assets under management. Fees and commissions may also be higher than for other products or services, and the remuneration and profitability to BlackRock or its Affiliates and such personnel resulting from transactions on behalf of or management of a Fund may be greater than the remuneration and profitability resulting from other funds or products.
BlackRock and its Affiliates and their personnel may receive greater compensation or greater profit in connection with an account for which BlackRock serves as an adviser than with an account advised by an unaffiliated investment adviser. Differentials in compensation may be related to the fact that BlackRock may pay a portion of its advisory fee to its Affiliate, or relate to compensation arrangements, including for portfolio management, brokerage transactions or account servicing. Any differential in compensation may create a financial incentive on the part of BlackRock or its Affiliates and their personnel to recommend BlackRock over unaffiliated investment advisers or to effect transactions differently in one account over another.
BlackRock and its Affiliates may provide valuation assistance to certain clients with respect to certain securities or other investments and the valuation recommendations made for their clients accounts may differ from the valuations for the same securities or investments assigned by a Funds pricing vendors, especially if such valuations are based on broker-dealer quotes or other data sources unavailable to such Funds pricing vendors. While BlackRock will generally communicate its valuation information or determinations to each Funds pricing vendors and/or fund accountants, there may be instances where a Funds pricing vendors or fund accountants assign a different valuation to a security or other investment than the valuation for such security or investment determined or recommended by BlackRock.
When market quotations of direct investments are not readily available or are believed by BlackRock to be unreliable, each Funds investments may be valued at fair value by BlackRock, pursuant to procedures adopted by the Board. When determining an assets fair value, BlackRock seeks to determine the price that each Fund might reasonably expect to receive from the current sale of that asset in an arms-length transaction. The price generally may not be determined based on what each Fund might reasonably expect to receive for selling an asset at a later time or if it holds the asset to maturity. While fair value determinations will be based upon all available factors that BlackRock deems relevant at the time of the determination, and may be based on analytical values determined by BlackRock using proprietary or third-party valuation models, fair value represents only a good faith approximation of the value of a security. The fair value of one or more securities may not, in retrospect, be the price at which those assets could have been sold during the period in which the particular fair values were used in determining each Funds NAV. As a result, each Funds sale or repurchase of its shares at NAV, at a time when a holding or holdings are valued by BlackRock (pursuant to Board-adopted procedures) at fair value, may have the effect of diluting or increasing the economic interest of existing shareholders.
To the extent permitted by applicable law, each Fund may invest all or some of its short-term cash investments in any money market fund or similarly-managed private fund or exchange-traded fund advised or
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managed by BlackRock. In connection with any such investments, a Fund, to the extent permitted by the 1940 Act, may pay its share of expenses of a money market fund in which it invests, which may result in such Fund bearing some additional expenses.
BlackRock and its Affiliates and their directors, officers and employees, may buy and sell securities or other investments for their own accounts, and may have conflicts of interest with respect to investments made on behalf of each Fund. As a result of differing trading and investment strategies or constraints, positions may be taken by directors, officers, employees and Affiliates of BlackRock that are the same, different from or made at different times than positions taken for each Fund. To lessen the possibility that any Fund will be adversely affected by this personal trading, each Fund and BlackRock each have adopted a Code of Ethics in compliance with Section 17(j) of the 1940 Act that restricts securities trading in the personal accounts of investment professionals and others who normally come into possession of information regarding each Funds portfolio transactions.
BlackRock and its Affiliates will not purchase securities or other property from, or sell securities or other property to, any Fund, except that each Fund may in accordance with rules adopted under the 1940 Act engage in transactions with accounts that are affiliated with a Fund as a result of common officers, directors, or investment advisers or pursuant to exemptive orders granted to each Fund and/or BlackRock by the Securities and Exchange Commission. These transactions would be affected in circumstances in which BlackRock determined that it would be appropriate for a Fund to purchase and another client of BlackRock to sell, or such Fund, to sell and another client of BlackRock to purchase, the same security or instrument on the same day. From time to time, the activities of each Fund may be restricted because of regulatory requirements applicable to BlackRock or its Affiliates and/or BlackRocks internal policies designed to comply with, limit the applicability of, or otherwise relate to such requirements. A client not advised by BlackRock would not be subject to some of those considerations. There may be periods when BlackRock may not initiate or recommend certain types of transactions, or may otherwise restrict or limit their advice in certain securities or instruments issued by or related to companies for which an Affiliate is performing investment banking, market making or other services or has proprietary positions. For example, when an Affiliate is engaged in an underwriting or other distribution of securities of, or advisory services for, a company, a Fund may be prohibited from or limited in purchasing or selling securities of that company. Similar situations could arise if personnel of BlackRock or its Affiliates serve as directors of companies the securities of which a Fund wishes to purchase or sell. However, if permitted by applicable law, each Fund may purchase securities or instruments that are issued by such companies or are the subject of an underwriting, distribution, or advisory assignment by an Affiliate, or in cases in which personnel of BlackRock or its Affiliates are directors or officers of the issuer. The investment activities of one or more Affiliates for their proprietary accounts and for client accounts may also limit the investment strategies and rights of each Fund. For example, in regulated industries, in certain emerging or international markets, in corporate and regulatory ownership definitions, and in certain futures and derivative transactions, and to comply with certain provisions of the 1940 Act that prohibit affiliated transactions, there may be limits on the aggregate amount of investment by affiliated investors that may not be exceeded without the grant of a license or other regulatory or corporate consent or, if exceeded, may cause BlackRock, each Fund or other client accounts to suffer disadvantages or business restrictions. These limitations may cause a Fund to invest in different portfolios than other BlackRock funds which may result in such Fund investing on less advantageous terms than such other funds or in different types of securities, such as non-voting securities, in order to comply with regulatory requirements.
BlackRock and its Affiliates may maintain securities indices as part of their product offerings. Index based funds seek to track the performance of securities indices and may use the name of the index in the fund name. Index providers, including BlackRock and its Affiliates may be paid licensing fees for use of their index or index name. BlackRock and its Affiliates will not be obligated to license their indices to BlackRock, and BlackRock cannot be assured that the terms of any index licensing agreement with BlackRock and its Affiliates will be as favorable as those terms offered to other index licensees.
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BlackRock and its Affiliates may serve as Authorized Participants in the creation and redemption of exchange traded funds, including funds advised by affiliates of BlackRock. BlackRock and its Affiliates may therefore be deemed to be participants in a distribution of such exchange traded funds, which could render them statutory underwriters.
Custody arrangements may lead to potential conflicts of interest with BlackRock where BlackRock has agreed to waive fees and/or reimburse ordinary operating expenses in order to cap expenses of a fund. This is because the custody arrangements with such funds custodian may have the effect of reducing custody fees when the fund leave cash balances uninvested. When a funds actual operating expense ratio exceeds a stated cap, a reduction in custody fees reduces the amount of waivers and/or reimbursements BlackRock would be required to make to the fund. This could be viewed as having the potential to provide BlackRock an incentive to keep high positive cash balances for funds with expense caps in order to offset fund custody fees that BlackRock might otherwise reimburse. However, BlackRocks portfolio managers do not intentionally keep uninvested balances high, but rather make investment decisions that they anticipate will be beneficial to fund performance.
Present and future activities of BlackRock and its Affiliates, including the Investment Advisor, in addition to those described in this section, may give rise to additional conflicts of interest.
Custody of Assets
All securities owned by BHY, CYE, HIS, HYV and HYT, and all cash, including proceeds from the sale of securities in each Funds investment portfolio, are held by State Street Bank and Trust Company (State Street), 1 Lincoln Street, Boston, Massachusetts 02111, as custodian. With respect to BHY, CYE, HIS, HYV and HYT, State Street is responsible for holding all securities for, other investments and cash, receiving and paying for securities purchased, delivering against payment securities sold, receiving and collecting income from investments, making all payments covering expenses and performing other administrative duties, all as directed by authorized persons. State Street does not exercise any supervisory function in such matters as purchase and sale of portfolio securities, payment of dividends or payment of expenses.
All securities owned by COY, and all cash, including proceeds from the sale of securities in each Funds investment portfolio, are held by JP Morgan Chase Bank, N.A. (JP Morgan), 270 Park Avenue, New York, New York 10017, as custodian. With respect to COY, JP Morgan is responsible for holding all securities for, other investments and cash, receiving and paying for securities purchased, delivering against payment securities sold, receiving and collecting income from investments, making all payments covering expenses and performing other administrative duties, all as directed by authorized persons. JP Morgan does not exercise any supervisory function in such matters as purchase and sale of portfolio securities, payment of dividends or payment of expenses.
Transfer Agent, Dividend Disbursing Agent and Registrar
Computershare Trust Company, N.A., 250 Royall Street, Canton, Massachusetts 02021 serves as each Funds transfer agent with respect to the Funds common shares.
Code of Ethics
Each of the Funds, the Advisor and the Sub-Advisor has adopted a code of ethics (the Code of Ethics) in compliance with Section 17(j) of the 1940 Act and Rule 17j-1 thereunder. Each Code of Ethics establishes procedures for personal investing and restricts certain transactions. Employees subject to a Code of Ethics may invest in securities for their personal investment accounts, including making investments in securities that may be
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purchased or held by the Fund. The Codes of Ethics are available on the EDGAR Database on the SECs website at www.sec.gov . In addition, the 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 1-202-551-8090. Copies of the 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, DC 20549-0102.
Proxy Voting Policy
The Board of each Fund has delegated the voting of proxies for each Funds securities to the Investment Advisor pursuant to the Investment Advisors proxy voting guidelines. Under these guidelines, the Investment Advisor will vote proxies related to Fund securities in the best interests of the Fund and its shareholders. From time to time, a vote may present a conflict between the interests of the Funds shareholders, on the one hand, and those of the Investment Advisor, or any affiliated person of the Fund or the Investment Advisor, on the other. In such event, provided that the Investment Advisors Equity Investment Policy Oversight Committee, or a sub-committee thereof (the Committee) is aware of the real or potential conflict, if the matter to be voted on represents a material, non-routine matter and if the Committee does not reasonably believe it is able to follow its general voting guidelines (or if the particular proxy matter is not addressed in the guidelines) and vote impartially, the Committee may retain an independent fiduciary to advise the Committee on how to vote or to cast votes on behalf of the Investment Advisors clients. If the Investment Advisor determines not to retain an independent fiduciary, or does not desire to follow the advice of such independent fiduciary, the Committee shall determine how to vote the proxy after consulting with the Investment Advisors Portfolio Management Group and/or the Investment Advisors Legal and Compliance Department and concluding that the vote cast is in its clients best interest notwithstanding the conflict. A copy of the Funds Proxy Voting Policy and Procedures is included as Appendix C to this Statement of Additional Information. Information on how each Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available without charge, (i) at www.blackrock.com and (ii) on the SECs website at http://www.sec.gov .
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The independent registered public accounting firm for the Funds performs an annual audit of each Funds financial statements. Each Funds Board has appointed Deloitte & Touche LLP to be each Funds independent registered public accounting firm. Deloitte & Touche LLP is located at 200 Berkeley Street, Boston, Massachusetts 02116.
The financial statements of BHY for the fiscal year ended August 31, 2012 are incorporated by reference herein to BHYs annual report filed on Form N-CSR on November 5, 2012. The financial statements of BHY for the semi-annual period ended February 28, 2013 are incorporated by reference herein to BHYs semi-annual report filed on Form N-CSRS on May 1, 2013.
The financial statements of COY for the fiscal year ended February 28, 2013 are incorporated by reference herein to COYs annual report filed on Form N-CSR on May 1, 2013.
The financial statements of CYE for the fiscal year ended February 28, 2013 are incorporated by reference herein to CYEs annual report filed on Form N-CSR on May 1, 2013.
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The financial statements of HIS for the fiscal year ended August 31, 2012 are incorporated by reference herein to HISs annual report filed on Form N-CSR on November 5, 2012. The financial statements of HIS for the semi-annual period ended February 28, 2013 are incorporated by reference herein to HISs semi-annual report filed on Form N-CSRS on May 1, 2013.
The financial statements of HYV for the fiscal year ended August 31, 2012 are incorporated by reference herein to HYVs annual report filed on Form N-CSR on November 5, 2012. The financial statements of HYV for the semi-annual period ended February 28, 2013 are incorporated by reference herein to HYVs semi-annual report filed on Form N-CSRS on May 1, 2013.
The financial statements of HYT for the fiscal year ended August 31, 2012 are incorporated by reference herein to HYTs annual report filed on Form N-CSR on November 5, 2012. The financial statements of HYT for the semi-annual period ended February 28, 2013 are incorporated by reference herein to HYTs semi-annual report filed on Form N-CSRS on May 1, 2013.
PRO FORMA FINANCIAL STATEMENTS
Set forth in Appendix B hereto are unaudited pro forma financial statements of the Combined Fund giving effect to the Reorganizations of the Target Funds with the Acquiring Fund which include: (i) Pro Forma Condensed Combined Schedule of Investments as of February 28, 2013; (ii) Pro Forma Condensed Combined Statement of Assets and Liabilities as of February 28, 2013; (iii) Pro Forma Condensed Combined Statement of Operations for the 12-month period ended February 28, 2013; and (iv) Notes to Pro Forma Condensed Combined Financial Statements.
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FORM OF AGREEMENT AND PLAN OF REORGANIZATION 1
[DATE]
In order to consummate the reorganization contemplated herein (the Reorganization ) and in consideration of the promises and the covenants and agreements hereinafter set forth, and intending to be legally bound, [TARGET FUND NAME], a registered diversified closed-end investment company, File No. 811-[], (the Target Fund ), and BlackRock Corporate High Yield Fund VI, Inc., a registered diversified closed-end investment company, File No. 811-21318 (the Acquiring Fund )[, and [], a Massachusetts limited liability company and a direct, wholly-owned subsidiary of the Acquiring Fund (the Merger Subsidiary , and, together with the Acquiring Fund, the Acquiring Fund Parties ]; the Acquiring Fund [Parties] and the Target Fund are collectively referred to as the Funds ), each hereby agree as follows:
1. REPRESENTATIONS AND WARRANTIES OF THE ACQUIRING FUND [PARTIES].
[The/Each of the] Acquiring Fund [and the Merger Subsidiary (but only with respect to itself and not the Acquiring Fund)] represents and warrants to, and agrees with, the Target Fund that:
(a) The Acquiring Fund is a corporation, duly organized, validly existing and in good standing in conformity with the laws of the State of Maryland, and has the power to own all of its assets and to carry out this Agreement. The Acquiring Fund has all necessary federal, state and local authorizations to carry on its business as it is now being conducted and to carry out this Agreement.
(b) [The Merger Subsidiary is a limited liability company, duly organized, validly existing and in good standing in conformity with the laws of the Commonwealth of Massachusetts, and has the power to own all of its assets and to carry out this Agreement. The Merger Subsidiary has all necessary federal, state and local authorizations to carry on its business as it is now being conducted and to carry out this Agreement.]
(c) The Acquiring Fund is duly registered under the Investment Company Act of 1940, as amended (the 1940 Act ) as a diversified, closed-end management investment company and such registration has not been revoked or rescinded and is in full force and effect.
(d) [The/Each of the] Acquiring Fund [and the Merger Subsidiary] has full power and authority to enter into and perform its obligations under this Agreement subject, in the case of consummation of the Reorganization to the approval and adoption of this Agreement and the Reorganization by the shareholders of the Acquiring Fund (the Acquiring Fund Shareholders ) as described in Section 9(a) hereof. The execution, delivery and performance of this Agreement have been duly authorized by all necessary action of the Acquiring Funds Board of Directors [and the Merger Subsidiarys manager or managing member, as applicable (the Manager )], and this Agreement constitutes a valid and binding contract of the Acquiring Fund [Parties] enforceable against the Acquiring Fund [Parties] in accordance with its terms, subject to the effects of bankruptcy, insolvency, moratorium, fraudulent conveyance and similar laws relating to or affecting creditors rights generally and court decisions with respect thereto.
(e) The Acquiring Fund has provided or made available (including by electronic format) to the Target Fund the most recent audited annual financial statements of the Acquiring Fund, which have been prepared in accordance with generally accepted accounting principles in the United States of America ( US GAAP )
1 | This Form of Agreement and Plan of Reorganization includes provisions for use in connection with a direct merger for the reorganizations of BHY, COY, CYE and HYV into HYT and an indirect merger with a merger subsidiary for the reorganization of HIS into HYT. Provisions relevant to only the HIS reorganization are in brackets. |
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consistently applied and have been audited by Deloitte & Touche LLP, each Funds independent registered public accounting firm, and such statements fairly present the financial condition and the results of operations of the Acquiring Fund as of the respective dates indicated and the results of operations and changes in net assets for the periods indicated, and there are no liabilities of the Acquiring Fund whether actual or contingent and whether or not determined or determinable as of such date that are required to be disclosed but are not disclosed in such statements.
(f) An unaudited statement of assets, capital and liabilities of the Acquiring Fund and an unaudited schedule of investments of the Acquiring Fund, each as of the Valuation Time (as defined in Section 3(g) herein) (together, the Acquiring Fund Closing Financial Statements ), will be provided or made available (including by electronic format) to the Target Fund, at or prior to the Closing Date (as defined in Section 7(a) herein), for the purpose of determining the number of Acquiring Fund Common Shares (as defined in Section 1(o) herein) to be issued to the Target Fund shareholders (the Target Fund Shareholders ) pursuant to Section 3 of this Agreement; the Acquiring Fund Closing Financial Statements will fairly present the financial position of the Acquiring Fund as of the Valuation Time in conformity US GAAP consistently applied.
(g) There are no material legal, administrative or other proceedings pending or, to the knowledge of [either of] the Acquiring Fund [Parties], threatened against [it/either of the Acquiring Fund Parties] which assert liability on the part of [either of] the Acquiring Fund [Parties] or which materially affect [its/either Acquiring Fund [Parties] financial condition or [its/their] ability to consummate the Reorganization. The Acquiring Fund [Parties] [is/are] not charged with or, to the best of [its/their] knowledge, threatened with any violation or investigation of any possible violation of any provisions of any federal, state or local law or regulation or administrative ruling relating to any aspect of [its/their] business.
(h) There are no material contracts outstanding to which [either of] the Acquiring Fund [Parties] is a party that have not been disclosed in the N-14 Registration Statement (as defined in subsection (l) below) or that will not otherwise be disclosed to the Target Fund prior to the Valuation Time.
(i) The Acquiring Fund is not obligated under any provision of its charter or bylaws, each as amended to the date hereof, and is not a party to any contract or other commitment or obligation, and is not subject to any order or decree, which would be violated by its execution of or performance under this Agreement, except insofar as the Funds have mutually agreed to amend such contract or other commitment or obligation to cure any potential violation as a condition precedent to the Reorganization.
(j) [The Merger Subsidiary is not obligated under any provision of its operating agreement, each as amended to the date hereof, and is not a party to any contract or other commitment or obligation, and is not subject to any order or decree, which would be violated by its execution of or performance under this Agreement, except insofar as the Funds have mutually agreed to amend such contract or other commitment or obligation to cure any potential violation as a condition precedent to the Reorganization.]
(k) The Acquiring Fund has no known liabilities of a material amount, contingent or otherwise, other than those shown on the Acquiring Funds Annual Report for the year ended [FISCAL YEAR END DATE], those incurred since the date thereof in the ordinary course of its business as an investment company, and those incurred in connection with the Reorganization. As of the Valuation Time, the Acquiring Fund will advise the Target Fund of all known liabilities, contingent or otherwise, whether or not incurred in the ordinary course of business, existing or accrued as of such time, except to the extent disclosed in the Acquiring Fund Closing Financial Statements or to the extent already known by the Target Fund.
(l) No consent, approval, authorization or order of any court or government authority is required for the consummation by the Acquiring Fund [Parties] of the Reorganization, except such as may be required under the Securities Act of 1933, as amended (the 1933 Act ), the Securities Exchange Act of 1934, as amended (the 1934 Act ) and the 1940 Act or state securities laws (which term as used herein shall include the laws of the District of Columbia and Puerto Rico) or the rules of the New York Stock Exchange, each of which will have been obtained on or prior to the Closing Date.
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(m) The registration statement filed by the Acquiring Fund on Form N-14, which includes the proxy statement of the Target Fund and the Acquiring Fund with respect to the transactions contemplated herein (the Joint Proxy Statement/Prospectus ), and any supplement or amendment thereto or to the documents included or incorporated by reference therein (collectively, as so amended or supplemented, the N-14 Registration Statement ), on its effective date, at the time of the shareholder meeting called to vote on this Agreement and on the Closing Date, insofar as it relates to the Acquiring Fund, (i) complied or will comply in all material respects with the provisions of the 1933 Act, the 1934 Act and the 1940 Act and the rules and regulations thereunder and (ii) did not or will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein in light of the circumstances under which they were made, not misleading; and the Joint Proxy Statement/Prospectus included therein did not or will not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided , however , that the representations and warranties in this subsection only shall apply to statements in or omissions from the N-14 Registration Statement made in reliance upon and in conformity with information furnished by the Acquiring Fund for use in the N-14 Registration Statement.
(n) The Acquiring Fund has filed, or intends to file, or has obtained extensions to file, all federal, state and local tax returns which are required to be filed by it, and has paid or has obtained extensions to pay, all federal, state and local taxes shown on said returns to be due and owing and all assessments received by it, up to and including the taxable year in which the Closing Date occurs. All tax liabilities of the Acquiring Fund have been adequately provided for on its books, and no tax deficiency or liability of the Acquiring Fund has been asserted and no question with respect thereto has been raised by the Internal Revenue Service or by any state or local tax authority for taxes in excess of those already paid, up to and including the taxable year in which the Closing Date occurs.
(o) The Acquiring Fund is authorized to issue 200,000,000 shares of common stock, par value $0.10 per share (the Acquiring Fund Common Shares ). Each outstanding Acquiring Fund Common Share is fully paid and nonassessable and has full voting rights (except as provided by the Acquiring Funds charter or applicable law).
(p) The books and records of the Acquiring Fund [Parties] made available to the Target Fund and/or its counsel are substantially true and correct and contain no material misstatements or omissions with respect to the operations of the Acquiring Fund [Parties].
(q) The Acquiring Fund Common Shares to be issued to the Target Fund Shareholders pursuant to this Agreement will have been duly authorized and, when issued and delivered pursuant to this Agreement, will be legally and validly issued and will be fully paid and nonassessable and will have full voting rights (except as provided by the Acquiring Funds charter or applicable law), and no Acquiring Fund Shareholder will have any preemptive right of subscription or purchase in respect thereof.
(r) At or prior to the Closing Date, the Acquiring Fund Common Shares to be issued to the Target Fund Shareholders on the Closing Date will be duly qualified for offering to the public in all states of the United States in which the sale of common shares of the Funds presently are qualified, and there will be a sufficient number of such Acquiring Fund Common Shares registered under the 1933 Act and, as may be necessary, with each pertinent state securities commission to permit the transfers contemplated by this Agreement to be consummated.
(s) At or prior to the Closing Date, the Acquiring Fund will have obtained any and all regulatory, Board and shareholder approvals necessary to issue the Acquiring Fund Common Shares to the Target Fund Shareholders.
(t) The Acquiring Fund has elected to qualify and has qualified as a regulated investment company ( RIC ) within the meaning of Section 851 of the Internal Revenue Code of 1986, as amended (the Code ) for
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each of its taxable years since its inception, and the Acquiring Fund has satisfied the distribution requirements imposed by Section 852 of the Code to maintain RIC status for each of its taxable years.
(u) [The Merger Subsidiary has not elected, and will not elect, to be treated as a corporation for U.S. federal income tax purposes. The Merger Subsidiary is a wholly owned subsidiary of the Acquiring Fund. The Merger Subsidiary is a disregarded entity for U.S. federal income tax purposes.]
2. REPRESENTATIONS AND WARRANTIES OF THE TARGET FUND.
The Target Fund represents and warrants to, and agrees with, the Acquiring Fund [Parties] that:
(a) The Target Fund is a [statutory trust/corporation/business trust] [duly organized, validly existing and in good standing] in conformity with the laws of the [State of Delaware]/[State of Maryland]/[Commonwealth of Massachusetts], and has the power to own all of its assets and to carry out this Agreement. The Target Fund has all necessary federal, state and local authorizations to carry on its business as it is now being conducted and to carry out this Agreement.
(b) The Target Fund is duly registered under the 1940 Act as a diversified, closed-end management investment company, and such registration has not been revoked or rescinded and is in full force and effect.
(c) The Target Fund has full power and authority to enter into and perform its obligations under this Agreement subject, in the case of consummation of the Reorganization to the approval and adoption of this Agreement and the Reorganization by the Target Fund Shareholders as described in Section 8(a) hereof. The execution, delivery and performance of this Agreement have been duly authorized by all necessary action of the Target Funds Board of [Directors/Trustees] and this Agreement constitutes a valid and binding contract of the Target Fund enforceable against the Target Fund in accordance with its terms, subject to the effects of bankruptcy, insolvency, moratorium, fraudulent conveyance and similar laws relating to or affecting creditors rights generally and court decisions with respect thereto.
(d) The Target Fund has provided or made available (including by electronic format) to the Acquiring Fund [Parties] the most recent audited annual financial statements of the Target Fund which have been prepared in accordance with US GAAP consistently applied and have been audited by Deloitte & Touche LLP, and such statements fairly present the financial condition and the results of operations of the Target Fund as of the respective dates indicated and the results of operations and changes in net assets for the periods indicated, and there are no liabilities of the Target Fund whether actual or contingent and whether or not determined or determinable as of such date that are required to be disclosed but are not disclosed in such statements.
(e) An unaudited statement of assets, capital and liabilities of the Target Fund and an unaudited schedule of investments of the Target Fund, each as of the Valuation Time (as defined in Section 3(g) herein) (together, the Target Fund Closing Financial Statements ), will be provided or made available (including by electronic format) to the Acquiring Fund [Parties] at or prior to the Closing Date, for the purpose of determining the number of Acquiring Fund Common Shares to be issued to the Target Fund Shareholders pursuant to Section 3 of this Agreement; the Target Fund Closing Financial Statements will fairly present the financial position of the Target Fund as of the Valuation Time in conformity with US GAAP consistently applied.
(f) There are no material legal, administrative or other proceedings pending or, to the knowledge of the Target Fund, threatened against it which assert liability on the part of the Target Fund or which materially affect its financial condition or its ability to consummate the Reorganization. The Target Fund is not charged with or, to the best of its knowledge, threatened with any violation or investigation of any possible violation of any provisions of any federal, state or local law or regulation or administrative ruling relating to any aspect of its business.
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(g) There are no material contracts outstanding to which the Target Fund is a party that have not been disclosed in the N-14 Registration Statement or will not otherwise be disclosed to the Acquiring Fund [Parties] prior to the Valuation Time.
(h) The Target Fund is not obligated under any provision of its [charter/agreement and declaration of trust/declaration of trust] or by-laws, each as amended to the date hereof, or a party to any contract or other commitment or obligation, and is not subject to any order or decree, which would be violated by its execution of or performance under this Agreement, except insofar as the Funds have mutually agreed to amend such contract or other commitment or obligation to cure any potential violation as a condition precedent to the Reorganization.
(i) The Target Fund has no known liabilities of a material amount, contingent or otherwise, other than those shown on the Target Funds Annual Report for the year ended [FISCAL YEAR END DATE], those incurred since the date thereof in the ordinary course of its business as an investment company and those incurred in connection with the Reorganization. As of the Valuation Time, the Target Fund will advise the Acquiring Fund [Parties] of all known liabilities, contingent or otherwise, whether or not incurred in the ordinary course of business, existing or accrued as of such time, except to the extent disclosed in the Target Fund Closing Financial Statements or to the extent already known by the Acquiring Fund [Parties].
(j) No consent, approval, authorization or order of any court or governmental authority is required for the consummation by the Target Fund of the Reorganization, except such as may be required under the 1933 Act, the 1934 Act and the 1940 Act or state securities laws (which term as used herein shall include the laws of the District of Columbia and Puerto Rico) or the rules of the New York Stock Exchange, each of which will have been obtained on or prior to the Closing Date.
(k) The N-14 Registration Statement, on its effective date, at the time of the Target Fund Shareholders meeting called to vote on this Agreement and on the Closing Date, insofar as it relates to the Target Fund (i) complied or will comply in all material respects with the provisions of the 1933 Act, the 1934 Act and the 1940 Act and the rules and regulations thereunder and (ii) did not or will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein in light of the circumstances under which they were made, not misleading; and the Joint Proxy Statement/Prospectus included therein did not or will not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided , however , that the representations and warranties in this subsection shall apply only to statements in or omissions from the N-14 Registration Statement made in reliance upon and in conformity with information furnished by the Target Fund for use in the N-14 Registration Statement.
(l) The Target Fund has filed, or intends to file, or has obtained extensions to file, all federal, state and local tax returns which are required to be filed by it, and has paid or has obtained extensions to pay, all federal, state and local taxes shown on said returns to be due and owing and all assessments received by it, up to and including the taxable year in which the Closing Date occurs. All tax liabilities of the Target Fund have been adequately provided for on its books, and no tax deficiency or liability of the Target Fund has been asserted and no question with respect thereto has been raised by the Internal Revenue Service or by any state or local tax authority for taxes in excess of those already paid, up to and including the taxable year in which the Closing Date occurs.
(m) The Target Fund is authorized to issue [an unlimited number of/[]] [shares of common stock/common shares], par value $[] per share (the Target Fund Common Shares ). Each outstanding Target Fund Common Share is fully paid and nonassessable and has full voting rights (except as provided by the Target Funds [charter/agreement and declaration of trust/declaration of trust] or applicable law).
(n) All of the issued and outstanding Target Fund Common Shares were offered for sale and sold in conformity with all applicable federal and state securities laws.
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(o) The books and records of the Target Fund made available to the Acquiring Fund [Parties] and/or [its/their] counsel are substantially true and correct and contain no material misstatements or omissions with respect to the operations of the Target Fund.
(p) The Target Fund has elected to qualify and has qualified as a RIC within the meaning of Section 851 of the Code for each of its taxable years since its inception, and the Target Fund has satisfied the distribution requirements imposed by Section 852 of the Code to maintain RIC status for each of its taxable years.
3. THE REORGANIZATION.
(a) Subject to receiving the requisite approvals of the Target Fund Shareholders and the Acquiring Fund Shareholders, and to the other terms and conditions contained herein, and in accordance with applicable law, at the Effective Time (as defined in Section 3(d)), the Target Fund shall be merged with and into the [Acquiring Fund/Merger Subsidiary,] [and the Merger Subsidiary shall be merged with and into the Acquiring Fund], the separate existence of the Target Fund as a [statutory trust/corporation/business trust] and registered investment company shall cease and the Acquiring Fund shall continue as the surviving entity following the Reorganization (sometimes referred to herein as the Surviving Fund ). The existence of the Acquiring Fund shall continue unaffected and unimpaired by the Reorganization and, as the Surviving Fund, it shall be governed by the Maryland General Corporation Law.
(b) If the investment adviser determines that the portfolios of the Target Fund and the Acquiring Fund, when aggregated, would contain investments exceeding certain percentage limitations imposed upon the Acquiring Fund with respect to such investments or that the disposition of certain assets is necessary to ensure that the resulting portfolio will meet the Acquiring Funds investment objective, policies and restrictions, as set forth in the Joint Proxy Statement/Prospectus, a copy of which has been delivered (including by electronic format) to the Target Fund, the Target Fund, if requested by the Acquiring Fund, will dispose of a sufficient amount of such investments as may be necessary to avoid violating such limitations as of the Closing Date. Notwithstanding the foregoing, nothing herein will require the Target Fund to dispose of any portion of its assets if, in the reasonable judgment of the Target Funds Board of [Directors / Trustees] or investment adviser, such disposition would create more than an insignificant risk that the Reorganization would not be treated as a reorganization described in Section 368(a) of the Code or would otherwise not be in the best interests of the Target Fund.
(c) Prior to the Closing Date, the Target Fund shall declare a dividend or dividends which, together with all such previous dividends, shall have the effect of distributing to its Target Fund Shareholders (i) all of its investment company taxable income to and including the Closing Date, if any (computed without regard to any deduction for dividends paid), (ii) all of its net capital gain, if any, recognized to and including the Closing Date and (iii) the excess of its interest income excludable from gross income under Section 103(a) of the Code, if any, over its deductions disallowed under Sections 265 and 171(a)(2) of the Code for the period to and including the Closing Date.
(d) Upon the terms and subject to the conditions of this Agreement, on the Closing Date, the parties shall cause the Reorganization to be consummated by filing an articles or certificate of merger (the Articles of Merger ) with each Funds state of organization in accordance with applicable law. The Reorganization shall become effective at such time as the Articles of Merger is duly filed with each Funds state or organization, or at such subsequent date or time as the Acquiring Fund [Parties] and the Target Fund shall agree and specify in the Articles of Merger (the Effective Time ).
(e) At the Effective Time, the effect of the Reorganization with respect to a Fund shall be as provided in the applicable provisions of the applicable laws of such Funds state of organization. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, except as otherwise provided herein, all the property, rights, privileges, powers and franchises of the Target Fund and the Acquiring Fund [Parties] shall
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vest in the Surviving Fund, and all debts, liabilities, obligations, restrictions, disabilities and duties of the Target Fund and the Acquiring Fund [Parties] shall become the debts, liabilities, obligations, restrictions, disabilities and duties of the Surviving Fund.
(f) Pursuant to this Agreement, as soon as practicable, and in no event more than 48 hours, exclusive of Sundays and holidays, after the Effective Time, the Acquiring Fund will issue Acquiring Fund Common Shares to the Target Fund Shareholders for their Target Fund Common Shares. Such distributions shall be accomplished by the opening of shareholder accounts on the share ledger records of the Acquiring Fund in the names of and in the amounts due to the Target Fund Shareholders based on their respective holdings in the Target Fund as of the Valuation Time.
(g) The Valuation Time shall be at the close of business of the New York Stock Exchange on the business day immediately preceding the Closing Date, or such earlier or later day and time as may be mutually agreed upon in writing by the Funds (the Valuation Time ).
(h) At the Effective Time, the charter of the Acquiring Fund in effect immediately prior to the Effective Time shall continue to be the charter of the Surviving Fund, until thereafter amended in accordance with their respective terms and applicable law.
(i) From and after the Effective Time, the directors and officers of the Acquiring Fund shall be the directors and officers of the Surviving Fund, and such directors and officers shall serve until their successors have been duly elected or appointed and qualified or until their death, resignation or removal in accordance with the operating agreement of the Surviving Fund.
(j) For U.S. federal income tax purposes, the parties to this Agreement intend that (i) the Reorganization qualify as a reorganization within the meaning of Section 368(a) of the Code, (ii) this Agreement constitutes a plan of reorganization within the meaning of U.S. Treasury Regulations Section 1.368-2(g), and (iii) the parties to this Agreement will each be a party to such reorganization within the meaning of Section 368(b) of the Code.
(k) Each of the Acquiring Fund and Target Fund may, in its sole discretion, merge or consolidate its wholly-owned subsidiaries at any time prior to, on, or after, the Effective Date, without the consent of the other Fund[s].
(l) The Acquiring Fund may amend the Amended and Restated Credit Agreement, dated as of March 3, 2011, by and among the Acquiring Fund, as borrower, the lenders party thereto and State Street Bank and Trust Company (as amended by the Amendment Agreement No. 1 to Amended and Restated Credit Agreement, dated as of March 2, 2012 and the Amendment Agreement No. 2 to Amended and Restated Credit Agreement, dated as of March 1, 2013), on or prior to the Closing Date to effect such changes as may be necessary or desirable in connection with the Reorganization.
4. ISSUANCE AND VALUATION OF ACQUIRING FUND COMMON SHARES IN THE REORGANIZATION.
(a) At the Effective Time, the Target Fund Common Shares outstanding immediately prior to the Effective Time shall be converted into the right to receive Acquiring Fund Common Shares with an aggregate net asset value of the Target Fund Common Shares outstanding immediately prior to the Effective Time. The aggregate net asset value of such shares shall be determined as set forth below.
(b) The net asset value of the Acquiring Fund and the Target Fund shall be determined as of the Valuation Time in accordance with the regular procedures of the investment adviser, and no formula will be used to adjust the net asset value so determined of any Fund to take into account differences in realized and unrealized gains and losses.
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(c) Such valuation and determination shall be made by the Acquiring Fund in cooperation with the Target Fund and shall be confirmed in writing by the Acquiring Fund to the Target Fund. The net asset value per share of the Acquiring Fund Common Shares shall be determined in accordance with such procedures and the Acquiring Fund shall certify the computations involved. For purposes of determining the net asset value per share of Target Fund Common Shares and the Acquiring Fund Common Shares, the value of the securities held by the applicable Fund plus any cash or other assets (including interest accrued but not yet received) minus all liabilities (including accrued expenses) shall be divided by the total number of Target Fund Common Shares or Acquiring Fund Common Shares, as the case may be, outstanding at such time.
The Acquiring Fund shall issue to the Target Fund Shareholders book entry interests for the Acquiring Fund Common Shares registered in the name of such Target Fund Shareholders on the basis of each shareholders proportionate interest in the aggregate net asset value of the Target Fund Common Shares. With respect to any Target Fund Shareholders holding certificates evidencing ownership of Target Fund Common Shares as of the Closing Date, and subject to the Acquiring Fund being informed thereof in writing by the Target Fund, the Acquiring Fund will not permit such Target Fund Shareholder to receive new book entry interests of the Acquiring Fund Common Shares, until such Target Fund Shareholder has surrendered his or her outstanding certificates evidencing ownership of Target Fund Common Shares or, in the event of lost certificates, posted adequate bond. The Target Fund, at its own expense, will request its Target Fund Shareholders to surrender their outstanding certificates evidencing ownership of Target Fund Common Shares or post adequate bond therefor.
(d) No fractional shares of Acquiring Fund Common Shares will be issued to holders of Target Fund Common Shares unless such shares are held in a Dividend Reinvestment Plan account. In lieu thereof, the Acquiring Funds transfer agent will aggregate all fractional Acquiring Fund Common Shares to be issued in connection with the Reorganization (other than those issued to a Dividend Reinvestment Plan account) and sell the resulting full shares on the New York Stock Exchange at the current market price for Acquiring Fund Common Shares for the account of all holders of such fractional interests, and each such holder will receive such holders pro rata share of the proceeds of such sale upon surrender of such holders certificates representing Acquiring Fund Common Shares.
5. PAYMENT OF EXPENSES.
(a) The Target Fund and the Acquiring Fund [Parties] and any other closed-end investment company that merges with and into the [Acquiring Fund/Merger Subsidiary] on or about the Closing Date (for purposes of this Section 5(a) only, a Fund ) will bear expenses incurred in connection with the Reorganization, including but not limited to, costs related to the preparation and distribution of materials distributed to each Funds Board of Directors or Board of Trustees, as applicable (the Board ), expenses incurred in connection with the preparation of the Agreement and Plan of Reorganization, the preparation and filing of any documents required by such Funds state of organization, the preparation and filing of the N-14 Registration Statement with the U.S. Securities and Exchange Commission ( SEC ), the printing and distribution of the Joint Proxy Statement/Prospectus and any other materials required to be distributed to shareholders, the SEC, state securities commission and secretary of state filing fees and legal and audit fees in connection with the Reorganization, legal fees incurred preparing each Funds Board materials, attending each Funds Board meetings and preparing the minutes, audit fees associated with each Funds financial statements, stock exchange fees, transfer agency fees, rating agency fees, portfolio transfer taxes (if any) and any similar expenses incurred in connection with the Reorganization, which will be borne directly by the respective Fund incurring the expense or allocated among the Funds based upon any reasonable methodology approved by the Boards of the Funds. Neither the Funds nor the investment adviser will pay any expenses of shareholders arising out of or in connection with the Reorganization.
(b) If for any reason the Reorganization is not consummated, no party shall be liable to any other party for any damages resulting therefrom, including, without limitation, consequential damages, and each Fund shall be responsible, on a proportionate total assets basis, for all expenses incurred in connection with the Reorganization.
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6. COVENANTS OF THE FUNDS.
(a) COVENANTS OF EACH FUND.
(i) Each Fund covenants to operate its business as presently conducted between the date hereof and the Closing Date.
(ii) Each of the Funds agrees that by the Closing Date all of its U.S. federal and other tax returns and reports required to be filed on or before such date shall have been filed and all taxes shown as due on said returns either have been paid or adequate liability reserves have been provided for the payment of such taxes.
The intention of the parties is that the transaction contemplated by this Agreement will qualify as a reorganization within the meaning of Section 368(a) of the Code. Neither the Acquiring Fund [Parties] nor the Target Fund shall take any action or cause any action to be taken (including, without limitation, the filing of any tax return) that is inconsistent with such treatment or results in the failure of the transaction to qualify as a reorganization within the meaning of Section 368(a) of the Code. At or prior to the Closing Date, the Acquiring Fund [Parties] and the Target Fund will take such action, or cause such action to be taken, as is reasonably necessary to enable Skadden, Arps, Slate, Meagher & Flom LLP ( Skadden ), special counsel to the Funds, to render the tax opinion required herein (including, without limitation, each partys execution of representations reasonably requested by and addressed to Skadden).
In connection with this covenant, the Funds agree to cooperate with each other in filing any tax return, amended return or claim for refund, determining a liability for taxes or a right to a refund of taxes or participating in or conducting any audit or other proceeding in respect of taxes. The Acquiring Fund [Parties] [agrees/agree] to retain for a period of ten (10) years following the Closing Date all returns, schedules and work papers and all material records or other documents relating to tax matters of the Target Fund for each of such Funds taxable periods ending on or before the Closing Date.
(b) COVENANTS OF THE ACQUIRING FUND [PARTIES].
(i) The Acquiring Fund will file the N-14 Registration Statement with the SEC and will use its best efforts to provide that the N-14 Registration Statement becomes effective as promptly as practicable. Each Fund agrees to cooperate fully with the other, and each will furnish to the other the information relating to itself to be set forth in the N-14 Registration Statement as required by the 1933 Act, the 1934 Act and the 1940 Act, and the rules and regulations thereunder and the state securities laws.
(ii) The Acquiring Fund has no plan or intention to sell or otherwise dispose of the Target Funds portfolio investments, except for dispositions made in the ordinary course of business.
(iii) Following the consummation of the Reorganization, the Acquiring Fund will continue its business as a diversified, closed-end management investment company registered under the 1940 Act.
(iv) The Acquiring Fund shall use its reasonable efforts to cause the Acquiring Fund Common Shares to be issued in the Reorganization to be approved for listing on the New York Stock Exchange prior to the Closing Date.
(v) The Acquiring Fund agrees to mail to the Acquiring Fund Shareholders of record entitled to vote at the special meeting of the Acquiring Fund Shareholders at which action is to be considered regarding this Agreement, in sufficient time to comply with requirements as to notice thereof, a combined proxy statement and prospectus which complies in all material respects with the applicable provisions of Section 14(a) of the 1934 Act and Section 20(a) of the 1940 Act, and the rules and regulations, respectively, thereunder.
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(c) COVENANTS OF THE TARGET FUND.
(i) The Target Fund undertakes that if the Reorganization is consummated, it will file an application pursuant to Section 8(f) of the 1940 Act for an order declaring that the Target Fund has ceased to be a registered investment company.
(ii) The Target Fund agrees to mail to the Target Fund Shareholders of record entitled to vote at the special meeting of the Target Fund Shareholders at which action is to be considered regarding this Agreement, in sufficient time to comply with requirements as to notice thereof, a combined proxy statement and prospectus which complies in all material respects with the applicable provisions of Section 14(a) of the 1934 Act and Section 20(a) of the 1940 Act, and the rules and regulations, respectively, thereunder.
(iii) After the Closing Date, the Target Fund shall prepare, or cause its agents to prepare, any U.S. federal, state or local tax returns required to be filed by such Target Fund with respect to its final taxable year ending with its complete liquidation and dissolution and for any prior periods or taxable years and further shall cause such tax returns to be duly filed with the appropriate taxing authorities. Notwithstanding the aforementioned provisions of this subsection, any expenses incurred by the Target Fund (other than for payment of taxes) in connection with the preparation and filing of said tax returns after the Closing Date shall be borne by such Target Fund to the extent such expenses have been accrued by such Target Fund in the ordinary course without regard to the Reorganization; any excess expenses shall be paid from a liability reserve established to provide for the payment of such expenses.
(iv) The Target Fund shall use its reasonable efforts to terminate the Amended and Restated Credit Agreement, dated as of March 3, 2011, by and among the Target Fund, as borrower, the lenders party thereto and State Street Bank and Trust Company (as amended by the Amendment Agreement No. 1 to Amended and Restated Credit Agreement, dated as of March 2, 2012 and the Amendment Agreement No. 2 to Amended and Restated Credit Agreement, dated as of March 1, 2013) on or prior to the Closing Date.
7. CLOSING DATE.
(a) The closing of the Reorganization (the Closing ) shall occur at [TIME] at the offices of Skadden, Four Times Square, New York, New York 10036, or at such other time or location as may be mutually agreed by the Funds, on the next full business day following the Valuation Time to occur after the satisfaction or waiver of all of the conditions set forth in Sections 8 and 9 of this Agreement (other than the conditions that relate to actions to be taken, or documents to be delivered at the Closing, it being understood that the occurrence of the Closing shall remain subject to the satisfaction or waiver of such conditions at Closing), or at such other time and date as may be mutually agreed to by the Funds (such date, the Closing Date ).
(b) The Target Fund will deliver to the Acquiring Fund on the Closing Date confirmation or other adequate evidence as to the tax basis of the Target Funds portfolio securities.
(c) As soon as practicable after the close of business on the Closing Date, the Target Fund shall deliver or make available to (including by electronic format) the Acquiring Fund a list of the names and addresses of all of the Target Fund Shareholders of record on the Closing Date and the number of Target Fund Common Shares owned by each such Target Fund Shareholder, certified to the best of its knowledge and belief by the transfer agent for the Target Fund or by the Target Funds Chief Executive Officer, President, any Vice President, Chief Financial Officer, Treasurer or any Assistant Treasurer, or Secretary or any Assistant Secretary.
8. CONDITIONS OF THE TARGET FUND.
The obligations of the Target Fund hereunder shall be subject to the following conditions:
(a) That this Agreement shall have been adopted, and the Reorganization shall have been approved, by the affirmative vote of [two-thirds]/[majority] of the members of the Board of the Target Fund and by an affirmative vote of the Target Fund Shareholders representing [either (i) 67% or more of the shares present at the
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meeting, if the holders of more than 50% of the outstanding shares are present or represented by proxy or (ii) more than 50% of the outstanding shares, whichever is less]/[a majority of the outstanding shares entitled to vote on the Reorganization]; and that [each of] the Acquiring Fund [Parties] shall have delivered (including in electronic format) to the Target Fund a copy of the resolutions approving this Agreement adopted by the Board of the Acquiring Fund [and the Manager of the Merger Subsidiary], and a certificate setting forth the vote of the Acquiring Fund Shareholders approving the Reorganization, including the issuance of additional Acquiring Fund Common Shares in connection therewith, and certified by the Acquiring Funds Secretary.
(b) That the Acquiring Fund shall have provided or made available (including by electronic format) to the Target Fund the Acquiring Fund Closing Financial Statements, together with a schedule of the Acquiring Funds investments, all as of the Valuation Time, certified on the Acquiring Funds behalf by its Chief Executive Officer, President, any Vice President, Chief Financial Officer, Treasurer or any Assistant Treasurer, and a certificate signed by the Acquiring Funds Chief Executive Officer, President, any Vice President, Chief Financial Officer, Treasurer or any Assistant Treasurer, dated as of the Closing Date, certifying that as of the Valuation Time and as of the Closing Date there has been no material adverse change in the financial position of the Acquiring Fund since the date of the Acquiring Funds most recent Annual or Semi-Annual Report, as applicable, other than changes in its portfolio securities since that date or changes in the market value of its portfolio securities.
(c) That the Acquiring Fund shall have furnished to the Target Fund a certificate signed by the Acquiring Funds Chief Executive Officer, President, any Vice President, Chief Financial Officer, Treasurer or any Assistant Treasurer, dated as of the Closing Date, certifying that, as of the Valuation Time and as of the Closing Date, all representations and warranties of the Acquiring Fund [Parties] made in this Agreement are true and correct in all material respects with the same effect as if made at and as of such dates, and that the Acquiring Fund [Parties] [has/have] complied with all of the agreements and satisfied all of the conditions on its part to be performed or satisfied at or prior to each of such dates.
(d) That there shall not be any material litigation pending with respect to the matters contemplated by this Agreement.
(e) That the Target Fund shall have received the opinion of Skadden[, and/or local Maryland counsel, as applicable, each acting as] special counsel for [each of] the Acquiring Fund [Parties], dated as of the Closing Date, addressed to the Target Fund, substantially in the form and to the effect that:
(i) based solely on its review of a certificate, and a bringdown verification thereof, issued by the Secretary of State of the State of Maryland with respect to the Acquiring Funds existence and good standing in the State of Maryland, the Acquiring Fund is validly existing and in good standing under the Maryland General Corporations Law ( MGCL );
(ii) [based solely on its review of a certificate, and a bringdown verification thereof, issued by the Secretary of the Commonwealth of Massachusetts with respect to the Merger Subsidiarys existence and good standing in the Commonwealth of Massachusetts, the Merger Subsidiary is validly existing and in good standing under the Massachusetts Limited Liability Company Act ( MLLCA );]
(iii) the Acquiring Fund is registered as a diversified closed-end management investment company under the 1940 Act;
(iv) the Acquiring Fund has the corporate power and authority to execute, deliver and perform all of its obligations under this Agreement under the MGCL;
(v) [the Merger Subsidiary has the power and authority to execute, deliver and perform all of its obligations under this Agreement under the MLLCA;]
(vi) this Agreement constitutes a valid and binding obligation of the Acquiring Fund, enforceable against the Acquiring Fund in accordance with its terms under the laws of the State of New York;
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(vii) [this Agreement constitutes a valid and binding obligation of the Merger Subsidiary, enforceable against the Merger Subsidiary in accordance with its terms under the laws of the State of New York;]
(viii) Neither the execution and delivery by the Acquiring Fund of this Agreement nor the performance by the Acquiring Fund of its obligations under this Agreement (i) conflicts with the charter or by-laws of the Acquiring Fund; (ii) constitutes a violation of, or default under any material contract, agreement, instrument or other document pertaining to, or material to the business or financial condition of, the Acquiring Fund; (iii) contravenes any material judgment, order or decree of courts or other governmental authorities or arbitrators that are material to the business or financial condition of the Acquiring Fund; or (iv) violates any law, rule or regulation of the State of New York, the State of Maryland or the United States of America;
(ix) [Neither the execution and delivery by the Merger Subsidiary of this Agreement nor the performance by the Merger Subsidiary of its obligations under this Agreement (i) conflicts with the operating agreement of Merger Subsidiary; (ii) constitutes a violation of, or default under any material contract, agreement, instrument or other document pertaining to, or material to the business or financial condition of, the Merger Subsidiary; (iii) contravenes any material judgment, order or decree of courts or other governmental authorities or arbitrators that are material to the business or financial condition of the Merger Subsidiary; or (iv) violates any law, rule or regulation of the State of New York, the Commonwealth of Massachusetts or the United States of America;]
(x) neither the execution and delivery by the Acquiring Fund of this Agreement nor the enforceability of this Agreement against the Acquiring Fund requires the consent, approval, licensing or authorization of, or any filing, recording or registration with, any governmental authority under any law, rule or regulation of the State of New York or the United States of America except for those consents, approvals, licenses and authorizations already obtained and those filings, recordings and registrations already made; and
(xi) [neither the execution and delivery by the Merger Subsidiary of this Agreement nor the enforceability of this Agreement against the Merger Subsidiary requires the consent, approval, licensing or authorization of, or any filing, recording or registration with, any governmental authority under any law, rule or regulation of the State of New York or the United States of America except for those consents, approvals, licenses and authorizations already obtained and those filings, recordings and registrations already made; and]
(xii) the Acquiring Fund Common Shares have been duly authorized by all requisite corporate action on the part of the Acquiring Fund under the MGCL and when the issuance and sale thereof are duly recorded in the share record books of the Acquiring Fund and when the securities are delivered to and paid for by the Target Fund in accordance with the terms of this Agreement will be validly issued, fully paid and nonassessable (except as provided for in Acquiring Funds charter or applicable law) and free and clear of any preemptive rights or any similar rights arising under the MGCL.
(f) That the Target Fund shall have obtained an opinion from Skadden, special counsel for the Acquiring Fund [Parties], dated as of the Closing Date, addressed to the Target Fund, that the consummation of the transactions set forth in this Agreement complies with the requirements of a reorganization as described in Section 368(a) of the Code.
(g) That all proceedings taken by the Acquiring Fund [Parties] and [its/their] counsel in connection with the Reorganization and all documents incidental thereto shall be satisfactory in form and substance to the Target Fund.
(h) That the N-14 Registration Statement shall have become effective under the 1933 Act, and no stop order suspending such effectiveness shall have been instituted or, to the knowledge of the Acquiring Fund [Parties], be contemplated by the SEC.
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9. CONDITIONS OF THE ACQUIRING FUND [PARTIES].
The obligations of the Acquiring Fund [Parties] hereunder shall be subject to the following conditions:
(a) That this Agreement shall have been adopted, and the Reorganization shall have been approved, by the affirmative vote of two-thirds of the members of the Board of the Acquiring Fund and by an affirmative vote of the Acquiring Fund Shareholders representing a majority of the outstanding shares entitled to vote on the Reorganization; and that the Target Fund shall have delivered (including in electronic format) to the Acquiring Fund a copy of the resolutions approving this Agreement adopted by the Board of the Target Fund, and a certificate setting forth the vote of the Target Fund Shareholders approving the Reorganization and certified by its Secretary.
(b) [That this Agreement shall have been adopted, and the Reorganization shall have been approved, by the Manager of the Merger Subsidiary and by the Acquiring Fund as the sole member of the Merger Subsidiary.]
(c) That the Target Fund shall have provided or made available (including by electronic format) to the Acquiring Fund [Parties] the Target Fund Closing Financial Statements, together with a schedule of the Target Funds investments with their respective dates of acquisition and tax costs, all as of the Valuation Time, certified on the Target Funds behalf by its Chief Executive Officer, President, any Vice President, Chief Financial Officer, Treasurer or any Assistant Treasurer, and a certificate signed by Target Funds Chief Executive Officer, President, any Vice President, Chief Financial Officer, Treasurer or any Assistant Treasurer, dated as of the Closing Date, certifying that as of the Valuation Time and as of the Closing Date there has been no material adverse change in the financial position of the Target Fund since the date of the Target Funds most recent Annual Report or Semi-Annual Report, as applicable, other than changes in the its portfolio securities since that date or changes in the market value of the its portfolio securities.
(d) That the Target Fund shall have furnished to the Acquiring Fund [Parties] a certificate signed by the Target Funds Chief Executive Officer, President, any Vice President, Chief Financial Officer, Treasurer or any Assistant Treasurer, dated as of the Closing Date, certifying that as of the Valuation Time and as of the Closing Date all representations and warranties of the Target Fund made in this Agreement are true and correct in all material respects with the same effect as if made at and as of such dates and the Target Fund has complied with all of the agreements and satisfied all of the conditions on its part to be performed or satisfied at or prior to such dates.
(e) That there shall not be any material litigation pending with respect to the matters contemplated by this Agreement.
(f) That the Acquiring Fund [Parties] shall have received the opinion of Skadden [or local Maryland counsel, as applicable], [each] acting as, special counsel for the Target Fund, dated as of the Closing Date, addressed to the Acquiring Fund [Parties], substantially in the form and to the effect that:
(i) based solely on its review of a certificate, and a bringdown verification thereof, issued by the Secretary of [State of the State of Delaware/State of the State of Maryland/the Commonwealth of Massachusetts] with respect to the Target Funds [existence and good standing in the State of Delaware/existence and good standing in the State of Maryland/legal existence with the office of the Secretary of the Commonwealth of Massachusetts], the Target Fund [is validly existing and in good standing under the Delaware Statutory Trust Act ( DSTA )/is validly existing and in good standing under the MGCL/has legal existence under the laws of the Commonwealth of Massachusetts as a voluntary association with transferable shares of beneficial interest];
(ii) the Target Fund is registered as a diversified closed-end management investment company under the 1940 Act;
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(iii) the Target Fund has the [statutory trust/corporate] power and authority [as a Massachusetts business trust] to execute, deliver and perform all of its obligations under this Agreement under the [DSTA/MGCL/laws of the Commonwealth of Massachusetts];
(iv) this Agreement has been duly authorized, executed and delivered by all requisite [statutory trust/corporate] action on the part of the Target Fund under the [DSTA/MGCL /laws of the Commonwealth of Massachusetts];
(v) this Agreement constitutes a valid and binding obligation of the Target Fund, enforceable against the Target Fund in accordance with its terms under the laws of the State of New York;
(vi) neither the execution and delivery by the Target Fund of this Agreement nor the performance by the Target Fund of its obligations under this Agreement (i) conflicts with the [charter/agreement and declaration of trust/declaration of trust] or by-laws of the Target Fund; (ii) constitutes a violation of, or default under any material contract, agreement, instrument or other document pertaining to, or material to the business or financial condition of, the Target Fund; (iii) contravenes any material judgment, order or decree of courts or other governmental authorities or arbitrators that are material to the business or financial condition of the Target Fund; or (iv) violates [the DSTA/MGCL or] any law rule or regulation of [the Commonwealth of Massachusetts,] State of New York or the United States of America; and
(vii) neither the execution and delivery by the Target Fund of this Agreement nor the enforceability of this Agreement against the Target Fund requires the consent, approval, licensing or authorization of, or any filing, recording or registration with, any governmental authority under any law, rule or regulation of the State of New York or the United States of America except for those consents, approvals, licenses and authorizations already obtained and those filings, recordings and registrations already made.
(g) That the Acquiring Fund [Parties] shall have obtained an opinion from Skadden, special counsel for the Target Fund, dated as of the Closing Date, addressed to the Acquiring Fund [Parties], that the consummation of the transactions set forth in this Agreement complies with the requirements of a reorganization as described in Section 368(a) of the Code.
(h) That all proceedings taken by the Target Fund and its counsel in connection with the Reorganization and all documents incidental thereto shall be satisfactory in form and substance to the Acquiring Fund [Parties].
(i) That the N-14 Registration Statement shall have become effective under the 1933 Act and no stop order suspending such effectiveness shall have been instituted or, to the knowledge of the Target Fund, be contemplated by the SEC.
(j) That prior to the Closing Date, the Target Fund shall have declared a dividend or dividends which, together with all such previous dividends, shall have the effect of distributing to its shareholders all of its net investment company taxable income for the period to and including the Closing Date, if any (computed without regard to any deduction for dividends paid), (ii) all of its net capital gain, if any, recognized to and including the Closing Date and (iii) the excess of its interest income excludable from gross income under Section 103(a) of the Code, if any, over its deductions disallowed under Sections 265 and 171(a)(2) of the Code for the period to and including the Closing Date.
10. TERMINATION, POSTPONEMENT AND WAIVERS.
(a) Notwithstanding anything contained in this Agreement to the contrary, this Agreement may be terminated and the Reorganization abandoned at any time (whether before or after adoption thereof by the shareholders of the Target Fund and the Acquiring Fund) prior to the Closing Date, or the Closing Date may be postponed, (i) by mutual consent of the Boards of the Acquiring Fund and the Target Fund; (ii) by the Board of the Target Fund if any condition of Target Funds obligations set forth in Section 8 of this Agreement has not
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been fulfilled or waived by such Board; and (iii) by the Board of the Acquiring Fund if any condition of the Acquiring Funds obligations set forth in Section 9 of this Agreement has not been fulfilled or waived by such Board.
(b) If the transactions contemplated by this Agreement have not been consummated by [], this Agreement automatically shall terminate on that date, unless a later date is mutually agreed to by the Boards of the Acquiring Fund and the Target Fund [and the Manager of the Merger Subsidiary].
(c) In the event of termination of this Agreement pursuant to the provisions hereof, the same shall become void and have no further effect, and there shall not be any liability on the part of any Fund or its respective directors, trustees, [managers, members,] officers, agents or shareholders in respect of this Agreement other than with respect to Section 11 and payment by each Fund of its respective expenses incurred in connection with the Reorganization.
(d) At any time prior to the Closing Date, any of the terms or conditions of this Agreement may be waived by the Board of the Acquiring Fund or the Target Fund (whichever is entitled to the benefit thereof), if, in the judgment of such Board after consultation with its counsel, such action or waiver will not have a material adverse effect on the benefits intended under this Agreement to the shareholders of their respective Fund, on behalf of which such action is taken.
(e) The respective representations and warranties contained in Sections 1 and 2 of this Agreement shall expire with, and be terminated by, the consummation of the Reorganization, and neither the Funds, nor any of their respective officers, directors, trustees, agents, shareholders, [managers or members] shall have any liability with respect to such representations or warranties after the Closing Date. This provision shall not protect any officer, director, trustee, agent, shareholder, [manager or member] of the Funds against any liability to the entity for which that officer, director, trustee, agent, shareholder, [manager or member] so acts or to its shareholders or members, to which that officer, director, trustee, agent, shareholders, [manager or member] otherwise would be subject by reason of willful misfeasance, bad faith, gross negligence, or reckless disregard of his or her duties in the conduct of such office.
(f) If any order or orders of the SEC with respect to this Agreement shall be issued prior to the Closing Date and shall impose any terms or conditions which are determined by action of the Board of the Acquiring Fund and the Target Fund to be acceptable, such terms and conditions shall be binding as if a part of this Agreement without further vote or approval of the Target Fund Shareholders and the Acquiring Fund Shareholders unless such terms and conditions shall result in a change in the method of computing the number of Acquiring Fund Common Shares to be issued to the Target Fund Shareholders, in which event, unless such terms and conditions shall have been included in the proxy solicitation materials furnished to the Target Fund Shareholders prior to the meeting at which the Reorganization shall have been approved, this Agreement shall not be consummated and shall terminate unless the Target Fund promptly shall call a special meeting of the Target Fund Shareholders at which such conditions so imposed shall be submitted for approval.
11. INDEMNIFICATION.
(a) Each party (an Indemnitor ) shall indemnify and hold the other and its officers, directors, trustees, [managers,] agents and persons controlled by or controlling any of them (each an Indemnified Party ) harmless from and against any and all losses, damages, liabilities, claims, demands, judgments, settlements, deficiencies, taxes, assessments, charges, costs and expenses of any nature whatsoever (including reasonable attorneys fees) including amounts paid in satisfaction of judgments, in compromise or as fines and penalties, and counsel fees reasonably incurred by such Indemnified Party in connection with the defense or disposition of any claim, action, suit or other proceeding, whether civil or criminal, before any court or administrative or investigative body in which such Indemnified Party may be or may have been involved as a party or otherwise or with which such Indemnified Party may be or may have been threatened (collectively, the Losses ) arising out of or related to
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any claim of a breach of any representation, warranty or covenant made herein by the Indemnitor; provided , however , that no Indemnified Party shall be indemnified hereunder against any Losses arising directly from such Indemnified Partys (i) willful misfeasance, (ii) bad faith, (iii) gross negligence or (iv) reckless disregard of the duties involved in the conduct of such Indemnified Partys position.
(b) The Indemnified Party shall use its best efforts to minimize any liabilities, damages, deficiencies, claims, judgments, assessments, costs and expenses in respect of which indemnity may be sought hereunder. The Indemnified Party shall give written notice to Indemnitor within the earlier of ten (10) days of receipt of written notice to the Indemnified Party or thirty (30) days from discovery by the Indemnified Party of any matters which may give rise to a claim for indemnification or reimbursement under this Agreement. The failure to give such notice shall not affect the right of the Indemnified Party to indemnity hereunder unless such failure has materially and adversely affected the rights of the Indemnitor. At any time after ten (10) days from the giving of such notice, the Indemnified Party may, at its option, resist, settle or otherwise compromise, or pay such claim unless it shall have received notice from the Indemnitor that the Indemnitor intends, at the Indemnitors sole cost and expense, to assume the defense of any such matter, in which case the Indemnified Party shall have the right, at no cost or expense to the Indemnitor, to participate in such defense. If the Indemnitor does not assume the defense of such matter, and in any event until the Indemnitor states in writing that it will assume the defense, the Indemnitor shall pay all costs of the Indemnified Party arising out of the defense until the defense is assumed; provided , however , that the Indemnified Party shall consult with the Indemnitor and obtain indemnitors prior written consent to any payment or settlement of any such claim. The Indemnitor shall keep the Indemnified Party fully apprised at all times as to the status of the defense. If the Indemnitor does not assume the defense, the Indemnified Party shall keep the Indemnitor apprised at all times as to the status of the defense. Following indemnification as provided for hereunder, the Indemnitor shall be subrogated to all rights of the Indemnified Party with respect to all third parties, firms or corporations relating to the matter for which indemnification has been made.
12. OTHER MATTERS.
(a) All covenants, agreements, representations and warranties made under this Agreement and any certificates delivered pursuant to this Agreement shall be deemed to have been material and relied upon by each of the parties, notwithstanding any investigation made by them or on their behalf.
(b) All notices hereunder shall be sufficiently given for all purposes hereunder if in writing and delivered personally or sent by registered mail or certified mail, postage prepaid. Notice to the Target Fund shall be addressed to [NAME OF TARGET FUND] c/o BlackRock Advisors, LLC, 40 East 52nd Street, New York, New York 10022, Attention: Janey Ahn, Secretary of the Target Fund, or at such other address as the Target Fund may designate by written notice to the Acquiring Fund [Parties]. Notice to the Acquiring Fund [Parties] shall be addressed to BlackRock Corporate High Yield Fund VI, Inc. c/o BlackRock Advisors, LLC, 40 East 52nd Street New York, New York 10022, Attention: Janey Ahn, Secretary of the Acquiring Fund, or at such other address and to the attention of such other person as the Acquiring Fund [Parties] may designate by written notice to the Target Fund. Any notice shall be deemed to have been served or given as of the date such notice is delivered personally or mailed.
(c) This Agreement supersedes all previous correspondence and oral communications between the Funds regarding the Reorganization, constitutes the only understanding with respect to the Reorganization, may not be changed except by a letter of agreement signed by each Fund and shall be governed by and construed in accordance with the laws of the State of New York applicable to agreements made and to be performed in said state.
(d) This Agreement may be amended or modified by the parties hereto prior to the Closing Date, by action taken or authorized by their respective Boards[ or Manager, as applicable], at any time before or after adoption of this Agreement and approval of the Reorganization by the Target Fund Shareholders or Acquiring
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Fund Shareholders, but, after any such adoption and approval, no amendment or modification shall be made which by law requires further approval by such shareholders without such further approval. This Agreement may not be amended or modified except by an instrument in writing signed on behalf of each of the Funds.
(e) This Agreement is not intended to confer upon any person other than the parties hereto (or their respective successors and assigns) any rights, remedies, obligations or liabilities hereunder. If any provision of this Agreement shall be held or made invalid by statute rule, regulation, decision of a tribunal or otherwise, the remainder of this Agreement shall not be affected thereby and, to such extent, the provisions of this Agreement shall be deemed severable provided that this Agreement shall be deemed modified to give effect to the fullest extent permitted under applicable law to the intentions of the party as reflected by this Agreement prior to the invalidity of such provision.
(f) It is expressly agreed that the obligations of the Funds hereunder shall not be binding upon any of their respective directors, trustees, [managers, members,] shareholders, nominees, officers, agents, or employees personally, but shall bind only the property of the respective Fund. The execution and delivery of this Agreement has been authorized by the Boards of the Acquiring Fund and the Target Fund [and the Manager of the Merger Subsidiary] and signed by an authorized officer of each of the Acquiring Fund and the Target Fund [and by an authorized officer of the Manager of the Merger Subsidiary], acting as such, and neither such authorization by such Board [or the Manager, as applicable], nor such execution and delivery by such officer shall be deemed to have been made by any of them individually or to impose any liability on any of them personally, but shall bind only the trust property of each Fund.
(g) This Agreement may be executed in any number of counterparts, each of which, when executed and delivered, shall be deemed to be an original but all such counterparts together shall constitute but one instrument.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the parties have hereunto caused this Agreement to be executed and delivered by their duly authorized officers as of the day and year first written above.
BlackRock Corporate High Yield Fund VI, Inc. | ||||
By: | ||||
Name: | ||||
Title: |
[Merger Subsidiary] | ||||
[By: | ] | |||
[Name:] | ||||
[Title:] |
[Target Fund] | ||
By: | ||
Name: | ||
Title: |
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PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
B-1
Pro Forma Condensed Combined Schedule of Investments for
BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE),
BlackRock Corporate High Yield Fund V, Inc. (HYV), BlackRock High Yield Trust (BHY),
BlackRock High Income Shares (HIS) and BlackRock Corporate High Yield Fund VI, Inc. (HYT)
As of February 28, 2013 (Unaudited)
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
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Common Stocks | Shares | Value | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Auto Components - 0.6% |
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Dana Holding Corp. |
109,649 | 59,109 | 91,707 | 10,286 | | 178,397 | 449,148 | $ | 1,834,428 | $ | 988,893 | $ | 1,534,258 | $ | 172,085 | | $ | 2,984,582 | $ | 7,514,246 | ||||||||||||||||||||||||||||||||||||
Delphi Automotive Plc (a) |
8,200 | 8,900 | 13,100 | 1,500 | | 13,700 | 45,400 | 340,518 | 369,587 | 543,998 | 62,290 | | 568,610 | 1,885,003 | ||||||||||||||||||||||||||||||||||||||||||
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2,174,946 | 1,358,480 | 2,078,256 | 234,375 | | 3,553,192 | 9,399,249 | ||||||||||||||||||||||||||||||||||||||||||||||||||
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Biotechnology - 0.0% |
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Ironwood Pharmaceuticals, Inc. (a) |
6,540 | 7,130 | 10,590 | 1,210 | | 11,018 | 36,488 | 97,642 | 106,451 | 158,109 | 18,065 | | 164,499 | 544,766 | ||||||||||||||||||||||||||||||||||||||||||
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Capital Markets - 1.6% |
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American Capital Ltd. (a) |
257,408 | 281,903 | 412,530 | 46,052 | | 433,202 | 1,431,095 | 3,598,564 | 3,941,004 | 5,767,169 | 643,807 | | 6,056,164 | 20,006,708 | ||||||||||||||||||||||||||||||||||||||||||
E*Trade Financial Corp. (a) |
68,100 | 74,600 | 109,400 | 4,900 | | 116,200 | 373,200 | 729,351 | 798,966 | 1,171,674 | 52,479 | | 1,244,502 | 3,996,972 | ||||||||||||||||||||||||||||||||||||||||||
Uranium Participation Corp. (a) |
33,680 | 35,440 | 53,140 | | | 54,600 | 176,860 | 174,401 | 183,515 | 275,169 | | | 282,729 | 915,814 | ||||||||||||||||||||||||||||||||||||||||||
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4,502,316 | 4,923,485 | 7,214,012 | 696,286 | | 7,583,395 | 24,919,494 | ||||||||||||||||||||||||||||||||||||||||||||||||||
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Chemicals - 0.4% |
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ADA-ES, Inc. (a) |
1,670 | 1,820 | 2,690 | 300 | | 2,810 | 9,290 | 44,372 | 48,357 | 71,473 | 7,971 | | 74,662 | 246,835 | ||||||||||||||||||||||||||||||||||||||||||
CF Industries Holdings, Inc. |
3,200 | 3,600 | 5,300 | 500 | | 5,500 | 18,100 | 642,656 | 722,988 | 1,064,399 | 100,415 | | 1,104,565 | 3,635,023 | ||||||||||||||||||||||||||||||||||||||||||
Huntsman Corp. |
31,600 | 34,500 | 51,100 | 5,600 | | 53,600 | 176,400 | 544,468 | 594,435 | 880,453 | 96,488 | | 923,528 | 3,039,372 | ||||||||||||||||||||||||||||||||||||||||||
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1,231,496 | 1,365,780 | 2,016,325 | 204,874 | | 2,102,755 | 6,921,230 | ||||||||||||||||||||||||||||||||||||||||||||||||||
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Commercial Banks - 0.5% |
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CIT Group, Inc. (a) |
36,681 | 39,377 | 57,665 | 5,216 | | 60,104 | 199,043 | 1,535,467 | 1,648,321 | 2,413,857 | 218,342 | | 2,515,953 | 8,331,940 | ||||||||||||||||||||||||||||||||||||||||||
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Communications Equipment - 0.2% |
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Loral Space & Communications Ltd. |
11,463 | 12,778 | 19,132 | | | 21,531 | 64,904 | 667,605 | 744,191 | 1,114,248 | | | 1,253,965 | 3,780,009 | ||||||||||||||||||||||||||||||||||||||||||
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Containers & Packaging - 0.0% |
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Smurfit Kappa Plc |
3,634 | | | | | | 3,634 | 56,360 | | | | | | 56,360 | ||||||||||||||||||||||||||||||||||||||||||
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See Notes to Pro Forma Condensed Combined Financial Statements.
B-2
Pro Forma Condensed Combined Schedule of Investments for
BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE),
BlackRock Corporate High Yield Fund V, Inc. (HYV), BlackRock High Yield Trust (BHY),
BlackRock High Income Shares (HIS) and BlackRock Corporate High Yield Fund VI, Inc. (HYT)
As of February 28, 2013 (Unaudited)
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
|||||||||||||||||||||||||||||||||||||||||||
Common Stocks | Shares | Value | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Diversified Financial Services - 0.7% |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Bank of America Corp. |
22,100 | 24,100 | 35,400 | 4,000 | | 37,100 | 122,700 | $ | 248,183 | $ | 270,643 | $ | 397,542 | $ | 44,920 | | $ | 416,633 | $ | 1,377,921 | ||||||||||||||||||||||||||||||||||||
Kcad Holdings I Ltd. |
269,089,036 | 281,902,800 | 422,854,200 | | 128,137,634 | 461,295,490 | 1,563,279,160 | 1,816,351 | 1,902,844 | 2,854,266 | | $ | 864,929 | 3,113,744 | 10,552,134 | |||||||||||||||||||||||||||||||||||||||||
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2,064,534 | 2,173,487 | 3,251,808 | 44,920 | 864,929 | 3,530,377 | 11,930,055 | ||||||||||||||||||||||||||||||||||||||||||||||||||
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Diversified Telecommunication Services - 0.2% |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Broadview Networks Holdings, Inc. (a) |
32,500 | 33,638 | 49,725 | 6,337 | 15,600 | 54,600 | 192,400 | 217,425 | 225,035 | 332,660 | 42,394 | 104,364 | 365,274 | 1,287,152 | ||||||||||||||||||||||||||||||||||||||||||
Level 3 Communications, Inc. (a) |
20,920 | 22,280 | 33,620 | 4,300 | | 34,800 | 115,920 | 417,981 | 445,154 | 671,728 | 85,914 | | 695,304 | 2,316,081 | ||||||||||||||||||||||||||||||||||||||||||
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635,406 | 670,189 | 1,004,388 | 128,308 | 104,364 | 1,060,578 | 3,603,233 | ||||||||||||||||||||||||||||||||||||||||||||||||||
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Electrical Equipment - 0.0% |
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Medis Technologies Ltd. (a) |
67,974 | 70,784 | 109,685 | | | 116,910 | 365,353 | 1 | 1 | 1 | | | 1 | 4 | ||||||||||||||||||||||||||||||||||||||||||
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Energy Equipment & Services - 0.8% |
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Laricina Energy Ltd. (a) |
35,294 | 35,294 | 70,588 | | | 70,588 | 211,764 | 1,197,857 | 1,197,857 | 2,395,714 | | | 2,395,714 | 7,187,142 | ||||||||||||||||||||||||||||||||||||||||||
Osum Oil Sands Corp. (a) |
74,000 | 82,000 | 120,000 | | | 124,000 | 400,000 | 977,697 | 1,083,394 | 1,585,454 | | | 1,638,303 | 5,284,848 | ||||||||||||||||||||||||||||||||||||||||||
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2,175,554 | 2,281,251 | 3,981,168 | | | 4,034,017 | 12,471,990 | ||||||||||||||||||||||||||||||||||||||||||||||||||
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See Notes to Pro Forma Condensed Combined Financial Statements.
B-3
Pro Forma Condensed Combined Schedule of Investments for
BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE),
BlackRock Corporate High Yield Fund V, Inc. (HYV), BlackRock High Yield Trust (BHY),
BlackRock High Income Shares (HIS) and BlackRock Corporate High Yield Fund VI, Inc. (HYT)
As of February 28, 2013 (Unaudited)
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
|||||||||||||||||||||||||||||||||||||||||||
Common Stocks | Shares | Value | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Hotels, Restaurants & Leisure - 0.2% |
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Caesars Entertainment Corp. (a) |
39,748 | 39,748 | 59,623 | 6,704 | | 59,623 | 205,446 | $ | 496,850 | $ | 496,850 | $ | 745,288 | $ | 83,800 | | $ | 745,288 | $ | 2,568,076 | ||||||||||||||||||||||||||||||||||||
Travelport LLC (a) |
70,685 | 76,940 | 113,632 | 12,460 | 35,081 | 118,935 | 427,733 | 707 | 769 | 1,136 | 125 | $ | 351 | 1,189 | 4,277 | |||||||||||||||||||||||||||||||||||||||||
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497,557 | 497,619 | 746,424 | 83,925 | 351 | 746,477 | 2,572,353 | ||||||||||||||||||||||||||||||||||||||||||||||||||
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Insurance - 1.0% |
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American International Group, Inc. (a) |
76,001 | 79,040 | 117,041 | 11,116 | | 122,977 | 406,175 | 2,888,798 | 3,004,310 | 4,448,728 | 422,519 | | 4,674,356 | 15,438,711 | ||||||||||||||||||||||||||||||||||||||||||
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Media - 1.2% |
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Belo Corp., Class A |
20,724 | 23,782 | 32,921 | | | 36,341 | 113,768 | 179,055 | 205,477 | 284,438 | | | 313,986 | 982,956 | ||||||||||||||||||||||||||||||||||||||||||
Charter Communications, Inc., Class A (a) |
38,669 | 42,179 | 63,429 | 4,631 | | 65,587 | 214,495 | 3,340,615 | 3,643,844 | 5,479,631 | 400,072 | | 5,666,061 | 18,530,223 | ||||||||||||||||||||||||||||||||||||||||||
Clear Channel Outdoor Holdings, Inc., Class A (a) |
8,934 | 9,964 | 14,202 | | | 14,553 | 47,653 | 67,899 | 75,726 | 107,935 | | | 110,603 | 362,163 | ||||||||||||||||||||||||||||||||||||||||||
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3,587,569 | 3,925,047 | 5,872,004 | 400,072 | | 6,090,650 | 19,875,342 | ||||||||||||||||||||||||||||||||||||||||||||||||||
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Metals & Mining - 0.1% |
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African Minerals Ltd. (a) |
40,400 | 47,050 | 65,551 | | | 72,301 | 225,302 | 172,616 | 201,030 | 280,079 | | | 308,919 | 962,644 | ||||||||||||||||||||||||||||||||||||||||||
Peninsula Energy Ltd. (a) |
6,975,317 | 7,628,138 | 11,250,902 | | | 11,756,996 | 37,611,353 | 233,057 | 254,868 | 375,911 | | | 392,821 | 1,256,657 | ||||||||||||||||||||||||||||||||||||||||||
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405,673 | 455,898 | 655,990 | | | 701,740 | 2,219,301 | ||||||||||||||||||||||||||||||||||||||||||||||||||
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Oil, Gas & Consumable Fuels - 0.0% |
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African Petroleum Corp. Ltd. (a) |
180,300 | 196,300 | 294,600 | 17,200 | | 307,100 | 995,500 | 34,992 | 38,097 | 57,175 | 3,338 | | 59,601 | 193,203 | ||||||||||||||||||||||||||||||||||||||||||
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See Notes to Pro Forma Condensed Combined Financial Statements.
B-4
Pro Forma Condensed Combined Schedule of Investments for
BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE),
BlackRock Corporate High Yield Fund V, Inc. (HYV), BlackRock High Yield Trust (BHY),
BlackRock High Income Shares (HIS) and BlackRock Corporate High Yield Fund VI, Inc. (HYT)
As of February 28, 2013 (Unaudited)
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
|||||||||||||||||||||||||||||||||||||||||||
Common Stocks | Shares | Value | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Paper & Forest Products - 0.9% |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ainsworth Lumber Co. Ltd. (a) |
146,558 | 489,913 | 728,451 | 8,875 | | 773,706 | 2,147,503 | $ | 464,722 | $ | 1,553,470 | $ | 2,309,852 | $ | 28,142 | | $ | 2,453,351 | $ | 6,809,537 | ||||||||||||||||||||||||||||||||||||
Ainsworth Lumber Co. Ltd. (a)(b) |
41,686 | 140,415 | 208,741 | 2,507 | | 221,591 | 614,940 | 131,778 | 443,882 | 659,875 | 7,925 | | 700,496 | 1,943,956 | ||||||||||||||||||||||||||||||||||||||||||
NewPage Corp. (a) |
7,740 | 8,280 | 12,520 | 1,460 | 3,980 | 13,400 | 47,380 | 657,900 | 703,800 | 1,064,200 | 124,100 | $ | 338,300 | 1,139,000 | 4,027,300 | |||||||||||||||||||||||||||||||||||||||||
Western Forest Products, Inc. (a) |
147,968 | 158,023 | 74,889 | | | | 380,880 | 188,659 | 201,479 | 95,483 | | | | 485,621 | ||||||||||||||||||||||||||||||||||||||||||
Western Forest Products, Inc. (a) |
41,528 | 45,762 | 74,936 | | | 78,039 | 240,265 | 50,337 | 55,469 | 90,831 | | | 94,593 | 291,230 | ||||||||||||||||||||||||||||||||||||||||||
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1,493,396 | 2,958,100 | 4,220,241 | 160,167 | 338,300 | 4,387,440 | 13,557,644 | ||||||||||||||||||||||||||||||||||||||||||||||||||
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Semiconductors & Semiconductor Equipment - 0.3% |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Freescale Semiconductor Ltd. (a) |
3,716 | 4,464 | 6,695 | 747 | | 6,695 | 22,317 | 57,338 | 68,879 | 103,304 | 11,526 | | 103,304 | 344,351 | ||||||||||||||||||||||||||||||||||||||||||
NXP Semiconductors NV (a) |
8,710 | 9,532 | 14,053 | 1,568 | | 14,683 | 48,546 | 281,507 | 308,074 | 454,193 | 50,678 | | 474,555 | 1,569,007 | ||||||||||||||||||||||||||||||||||||||||||
Spansion, Inc., Class A (a) |
37,172 | 39,567 | 58,263 | | | 63,578 | 198,580 | 437,143 | 465,308 | 685,173 | | | 747,677 | 2,335,301 | ||||||||||||||||||||||||||||||||||||||||||
SunPower Corp. (a) |
123 | 271 | 200 | | | 431 | 1,025 | 1,444 | 3,182 | 2,348 | | | 5,060 | 12,034 | ||||||||||||||||||||||||||||||||||||||||||
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|||||||||||||||||||||||||||||||||||||||||||
777,432 | 845,443 | 1,245,018 | 62,204 | | 1,330,596 | 4,260,693 | ||||||||||||||||||||||||||||||||||||||||||||||||||
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Software - 0.1% |
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Bankruptcy Management Solutions, Inc. (a) |
468 | 501 | 737 | 91 | 251 | 787 | 2,835 | 4 | 5 | 7 | 1 | 3 | 8 | 28 | ||||||||||||||||||||||||||||||||||||||||||
HMH Holdings/EduMedia (a) |
19,102 | 20,718 | 30,127 | 3,231 | 9,409 | 31,742 | 114,329 | 350,202 | 379,821 | 552,312 | 59,237 | 172,491 | 581,930 | 2,095,993 | ||||||||||||||||||||||||||||||||||||||||||
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350,206 | 379,826 | 552,319 | 59,238 | 172,494 | 581,938 | 2,096,021 | ||||||||||||||||||||||||||||||||||||||||||||||||||
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Total Common Stocks - 8.8% |
25,176,950 | 27,375,976 | 41,030,071 | 2,736,633 | 1,480,438 | 44,371,530 | 142,171,598 | |||||||||||||||||||||||||||||||||||||||||||||||||
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See Notes to Pro Forma Condensed Combined Financial Statements.
B-5
Pro Forma Condensed Combined Schedule of Investments for
BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE),
BlackRock Corporate High Yield Fund V, Inc. (HYV), BlackRock High Yield Trust (BHY),
BlackRock High Income Shares (HIS) and BlackRock Corporate High Yield Fund VI, Inc. (HYT)
As of February 28, 2013 (Unaudited)
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
|||||||||||||||||||||||||||||||||||||||||||||||
Corporate Bonds | Par (000) | Value | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Aerospace & Defense - 1.0% |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Bombardier, Inc., 4.25%, 01/15/16 (b) |
USD | 560 | 610 | 900 | 100 | 265 | 940 | 3,375 | $ | 581,000 | $ | 632,875 | $ | 933,750 | $ | 103,750 | $ | 274,938 | $ | 975,250 | $ | 3,501,563 | ||||||||||||||||||||||||||||||||||||||
Huntington Ingalls Industries, Inc., 6.88%, 03/15/18 |
USD | 145 | 160 | 240 | 110 | 100 | 260 | 1,015 | 157,958 | 174,300 | 261,450 | 119,831 | 108,938 | 283,238 | 1,105,715 | |||||||||||||||||||||||||||||||||||||||||||||
Huntington Ingalls Industries, Inc., 7.13%, 03/15/21 |
USD | 235 | 260 | 375 | | 125 | 410 | 1,405 | 256,150 | 283,400 | 408,750 | | 136,250 | 446,900 | 1,531,450 | |||||||||||||||||||||||||||||||||||||||||||||
Kratos Defense & Security Solutions, Inc., 10.00%, 06/01/17 |
USD | 796 | 846 | 1,244 | 210 | 398 | 1,274 | 4,768 | 878,585 | 933,772 | 1,373,065 | 231,788 | 439,292 | 1,406,177 | 5,262,679 | |||||||||||||||||||||||||||||||||||||||||||||
Meccanica Holdings USA, Inc., 6.25%, 07/15/19 (b) |
USD | 405 | 535 | 690 | | | 690 | 2,320 | 416,170 | 549,755 | 709,030 | | | 709,030 | 2,383,985 | |||||||||||||||||||||||||||||||||||||||||||||
Spirit Aerosystems, Inc., 7.50%, 10/01/17 |
USD | 309 | 337 | 498 | | 147 | 521 | 1,812 | 327,540 | 357,220 | 527,880 | | 155,820 | 552,260 | 1,920,720 | |||||||||||||||||||||||||||||||||||||||||||||
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2,617,403 | 2,931,322 | 4,213,925 | 455,369 | 1,115,238 | 4,372,855 | 15,706,112 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Air Freight & Logistics - 0.3% |
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National Air Cargo Group, Inc., Series 1, 12.38%, 09/02/15 |
USD | 510 | 554 | 822 | 92 | 257 | | 2,235 | 513,043 | 557,335 | 826,775 | 92,274 | 258,367 | | 2,247,794 | |||||||||||||||||||||||||||||||||||||||||||||
National Air Cargo Group, Inc., Series 2, 12.38%, 08/16/15 |
USD | 517 | 561 | 833 | 93 | 260 | | 2,264 | 519,451 | 564,296 | 837,101 | 93,427 | 261,594 | | 2,275,869 | |||||||||||||||||||||||||||||||||||||||||||||
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1,032,494 | 1,121,631 | 1,663,876 | 185,701 | 519,961 | | 4,523,663 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Airlines - 1.7% |
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American Airlines Pass-Through Trust, Series 2011-2, Class A 8.63%, 04/15/23 |
USD | 623 | 672 | 999 | 185 | 309 | 1,047 | 3,835 | 648,240 | 699,082 | 1,039,334 | 192,614 | 321,675 | 1,089,199 | 3,990,144 | |||||||||||||||||||||||||||||||||||||||||||||
Continental Airlines, Inc. Pass-Through Trust, Series 1997-4, Class B 6.90%, 07/02/18 |
USD | 181 | 188 | 34 | | | 538 | 941 | 183,540 | 190,338 | 33,989 | | | 543,821 | 951,688 |
See Notes to Pro Forma Condensed Combined Financial Statements.
B-6
Pro Forma Condensed Combined Schedule of Investments for
BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE),
BlackRock Corporate High Yield Fund V, Inc. (HYV), BlackRock High Yield Trust (BHY),
BlackRock High Income Shares (HIS) and BlackRock Corporate High Yield Fund VI, Inc. (HYT)
As of February 28, 2013 (Unaudited)
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
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Corporate Bonds | Par (000) | Value | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Airlines (continued) |
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Continental Airlines Pass-Through Trust, Series 2010-1, Class B 6.00%, 07/12/20 |
USD | 326 | 408 | 571 | 82 | 163 | 571 | 2,121 | $ | 336,142 | $ | 420,177 | $ | 588,248 | $ | 84,035 | $ | 168,071 | $ | 588,248 | $ | 2,184,921 | ||||||||||||||||||||||||||||||||||||||
Continental Airlines Pass-Through Trust, Series 2012-3, Class C, 6.13%, 04/29/18 |
USD | 850 | 930 | 1,370 | 155 | 405 | 1,435 | 5,145 | 847,875 | 927,675 | 1,366,575 | 154,613 | 403,987 | 1,431,412 | 5,132,137 | |||||||||||||||||||||||||||||||||||||||||||||
Delta Air Lines Pass-Through Trust, Series 2002-1, Class G-1 6.72%, 07/02/24 |
USD | 531 | 585 | 867 | 100 | 261 | 904 | 3,248 | 587,797 | 647,495 | 959,763 | 110,212 | 289,307 | 1,001,092 | 3,595,666 | |||||||||||||||||||||||||||||||||||||||||||||
Delta Air Lines Pass-Through Trust, Series 2009-1, Class B 9.75%, 06/17/18 |
USD | 167 | 185 | 257 | | 90 | 272 | 971 | 185,363 | 205,325 | 285,173 | | 99,811 | 302,284 | 1,077,956 | |||||||||||||||||||||||||||||||||||||||||||||
Delta Air Lines Pass-Through Trust, Series 2010-1, Class B 6.38%, 07/02/17 |
USD | 447 | 500 | 800 | | | 900 | 2,647 | 465,997 | 521,250 | 834,000 | | | 938,250 | 2,759,497 | |||||||||||||||||||||||||||||||||||||||||||||
US Airways Pass-Through Trust, Series 2011-1, Class C 10.88%, 10/22/14 |
USD | 517 | 566 | 837 | 90 | 254 | 878 | 3,142 | 545,386 | 597,328 | 883,006 | 95,226 | 268,365 | 926,291 | 3,315,602 | |||||||||||||||||||||||||||||||||||||||||||||
US Airways Pass-Through Trust, Series 2012-1, Class C 9.13%, 10/01/15 |
USD | 390 | 418 | 622 | 74 | 186 | 650 | 2,340 | 417,300 | 447,260 | 665,540 | 79,180 | 199,020 | 695,500 | 2,503,800 | |||||||||||||||||||||||||||||||||||||||||||||
US Airways Pass-Through Trust, Series 2012-2, Class B 6.75%, 12/03/22 |
USD | 300 | 300 | 600 | 60 | 150 | 600 | 2,010 | 313,500 | 313,500 | 627,000 | 62,700 | 156,750 | 627,000 | 2,100,450 | |||||||||||||||||||||||||||||||||||||||||||||
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4,531,140 | 4,969,430 | 7,282,628 | 778,580 | 1,906,986 | 8,143,097 | 27,611,861 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Auto Components - 2.0% |
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Continental Rubber of America Corp., 4.50%, 09/15/19 (b) |
USD | 150 | 150 | 300 | | | 300 | 900 | 153,000 | 153,000 | 306,000 | | | 306,000 | 918,000 | |||||||||||||||||||||||||||||||||||||||||||||
Dana Holding Corp., 6.75%, 02/15/21 |
USD | 410 | 450 | 660 | 180 | 200 | 700 | 2,600 | 446,388 | 489,937 | 718,575 | 195,975 | 217,750 | 762,125 | 2,830,750 | |||||||||||||||||||||||||||||||||||||||||||||
Delphi Corp., 6.13%, 05/15/21 |
USD | 65 | 75 | 115 | 15 | 35 | 115 | 420 | 70,850 | 81,750 | 125,350 | 16,350 | 38,150 | 125,350 | 457,800 | |||||||||||||||||||||||||||||||||||||||||||||
Delphi Corp., 5.00%, 02/15/23 |
USD | 140 | 150 | 225 | 25 | 65 | 235 | 840 | 145,775 | 156,188 | 234,281 | 26,031 | 67,681 | 244,694 | 874,650 | |||||||||||||||||||||||||||||||||||||||||||||
Icahn Enterprises LP, 4.00%, 08/15/13 (b)(c)(d) |
USD | | 255 | | | | | 255 | | 255,638 | | | | | 255,638 |
See Notes to Pro Forma Condensed Combined Financial Statements.
B-7
Pro Forma Condensed Combined Schedule of Investments for
BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE),
BlackRock Corporate High Yield Fund V, Inc. (HYV), BlackRock High Yield Trust (BHY),
BlackRock High Income Shares (HIS) and BlackRock Corporate High Yield Fund VI, Inc. (HYT)
As of February 28, 2013 (Unaudited)
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
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Corporate Bonds | Par (000) | Value | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Auto Components (continued) |
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Icahn Enterprises LP, 8.00%, 01/15/18 |
USD | 2,775 | 2,805 | 4,455 | 650 | 1,510 | 4,690 | 16,885 | $ | 2,972,719 | $ | 3,004,856 | $ | 4,772,419 | $ | 696,312 | $ | 1,617,588 | $ | 5,024,162 | $ | 18,088,056 | ||||||||||||||||||||||||||||||||||||||
IDQ Holdings, Inc., 11.50%, 04/01/17 (b) |
USD | 355 | 380 | 585 | 85 | 155 | 595 | 2,155 | 388,725 | 416,100 | 640,575 | 93,075 | 169,725 | 651,525 | 2,359,725 | |||||||||||||||||||||||||||||||||||||||||||||
Jaguar Land Rover Automotive Plc (FKA Jaguar Land Rover Plc), 8.25%, 03/15/20 |
GBP | 439 | 482 | 712 | 100 | | 745 | 2,478 | 746,702 | 819,842 | 1,211,053 | 170,092 | | 1,267,183 | 4,214,872 | |||||||||||||||||||||||||||||||||||||||||||||
Titan International, Inc., 7.88%, 10/01/17 |
USD | 430 | 465 | 685 | | 190 | 720 | 2,490 | 461,175 | 498,712 | 734,662 | | 203,775 | 772,200 | 2,670,524 | |||||||||||||||||||||||||||||||||||||||||||||
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5,385,334 | 5,876,023 | 8,742,915 | 1,197,835 | 2,314,669 | 9,153,239 | 32,670,015 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Beverages - 0.1% |
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Crown European Holdings SA, 7.13%, 08/15/18 (b) |
EUR | 174 | 198 | 230 | | 114 | 244 | 960 | 245,907 | 279,825 | 325,049 | | 161,111 | 344,835 | 1,356,727 | |||||||||||||||||||||||||||||||||||||||||||||
Crown European Holdings SA, 7.13%, 08/15/18 |
EUR | 71 | 88 | 91 | 92 | 50 | 52 | 444 | 100,341 | 124,367 | 128,607 | 130,020 | 70,663 | 73,489 | 627,487 | |||||||||||||||||||||||||||||||||||||||||||||
Refresco Group BV, 7.38%, 05/15/18 |
EUR | | | 107 | | | 212 | 319 | | | 146,022 | | | 289,315 | 435,337 | |||||||||||||||||||||||||||||||||||||||||||||
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346,248 | 404,192 | 599,678 | 130,020 | 231,774 | 707,639 | 2,419,551 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Building Products - 0.9% |
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Building Materials Corp. of America, 7.00%, 02/15/20 (b) |
USD | 500 | 530 | 810 | 20 | 430 | 840 | 3,130 | 541,250 | 573,725 | 876,825 | 21,650 | 465,475 | 909,300 | 3,388,225 | |||||||||||||||||||||||||||||||||||||||||||||
Building Materials Corp. of America, 6.75%, 05/01/21 (b) |
USD | 710 | 790 | 1,170 | 160 | 350 | 1,220 | 4,400 | 762,363 | 848,262 | 1,256,288 | 171,800 | 375,812 | 1,309,975 | 4,724,500 | |||||||||||||||||||||||||||||||||||||||||||||
Grohe Holding GmbH, 8.75%, 12/15/17 (d) |
EUR | 100 | 100 | 100 | | | 100 | 400 | 136,756 | 136,756 | 136,756 | | | 136,756 | 547,024 |
See Notes to Pro Forma Condensed Combined Financial Statements.
B-8
Pro Forma Condensed Combined Schedule of Investments for
BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE),
BlackRock Corporate High Yield Fund V, Inc. (HYV), BlackRock High Yield Trust (BHY),
BlackRock High Income Shares (HIS) and BlackRock Corporate High Yield Fund VI, Inc. (HYT)
As of February 28, 2013 (Unaudited)
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
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Corporate Bonds | Par (000) | Value | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Building Products (continued) |
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Momentive Performance Materials, Inc., 8.88%, 10/15/20 |
USD | 320 | 350 | 515 | 60 | 155 | 540 | 1,940 | $ | 328,400 | $ | 359,188 | $ | 528,519 | $ | 61,575 | $ | 159,069 | $ | 554,175 | $ | 1,990,926 | ||||||||||||||||||||||||||||||||||||||
USG Corp., 9.75%, 01/15/18 |
USD | 645 | 715 | 1,045 | 115 | 315 | 1,100 | 3,935 | 758,681 | 841,019 | 1,229,181 | 135,269 | 370,519 | 1,293,875 | 4,628,544 | |||||||||||||||||||||||||||||||||||||||||||||
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2,527,450 | 2,758,950 | 4,027,569 | 390,294 | 1,370,875 | 4,204,081 | 15,279,219 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Capital Markets - 0.4% |
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E*Trade Financial Corp., 0.00%, 08/31/19 (b)(c)(e) |
USD | 226 | 244 | 356 | | | 380 | 1,206 | 236,311 | 255,133 | 372,242 | | | 397,338 | 1,261,024 | |||||||||||||||||||||||||||||||||||||||||||||
E*Trade Financial Corp., Series A 0.00%, 08/31/19 (c)(e) |
USD | | 7 | | 71 | 295 | | 373 | | 7,319 | | 74,239 | 308,460 | | 390,018 | |||||||||||||||||||||||||||||||||||||||||||||
KKR Group Finance Co. LLC, 6.38%, 09/29/20 (b) |
USD | 400 | 450 | 670 | 85 | 200 | 695 | 2,500 | 470,391 | 529,189 | 787,904 | 99,958 | 235,195 | 817,303 | 2,939,940 | |||||||||||||||||||||||||||||||||||||||||||||
Nuveen Investments, Inc., 9.13%, 10/15/17 (b) |
USD | 435 | 473 | 699 | 47 | 209 | 729 | 2,592 | 437,175 | 475,365 | 702,495 | 47,235 | 210,045 | 732,645 | 2,604,960 | |||||||||||||||||||||||||||||||||||||||||||||
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1,143,877 | 1,267,006 | 1,862,641 | 221,432 | 753,700 | 1,947,286 | 7,195,942 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Chemicals - 3.5% |
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Axiall Corp., 4.88%, 05/15/23 (b) |
USD | 162 | 177 | 260 | 29 | 76 | 272 | 976 | 164,430 | 179,655 | 263,900 | 29,435 | 77,140 | 276,080 | 990,640 | |||||||||||||||||||||||||||||||||||||||||||||
Basell Finance Co. BV, 8.10%, 03/15/27 (b) |
USD | 380 | 420 | 610 | 60 | | 645 | 2,115 | 501,600 | 554,400 | 805,200 | 79,200 | | 851,400 | 2,791,800 | |||||||||||||||||||||||||||||||||||||||||||||
Celanese US Holdings LLC, 5.88%, 06/15/21 |
USD | 1,187 | 1,292 | 1,905 | 234 | 632 | 2,015 | 7,265 | 1,296,797 | 1,411,510 | 2,081,212 | 255,645 | 690,460 | 2,201,387 | 7,937,011 | |||||||||||||||||||||||||||||||||||||||||||||
Ciech Group Financing AB, 9.50%, 11/30/19 |
EUR | 140 | 160 | 137 | | | 137 | 574 | 199,227 | 227,688 | 194,958 | | | 194,958 | 816,831 | |||||||||||||||||||||||||||||||||||||||||||||
Eagle Spinco, Inc., 4.63%, 02/15/21 (b) |
USD | 343 | 375 | 552 | 64 | 163 | 576 | 2,073 | 348,574 | 381,094 | 560,970 | 65,040 | 165,649 | 585,360 | 2,106,687 | |||||||||||||||||||||||||||||||||||||||||||||
Huntsman International LLC, 8.63%, 03/15/21 |
USD | 155 | 170 | 250 | 25 | 80 | 265 | 945 | 175,150 | 192,100 | 282,500 | 28,250 | 90,400 | 299,450 | 1,067,850 |
See Notes to Pro Forma Condensed Combined Financial Statements.
B-9
Pro Forma Condensed Combined Schedule of Investments for
BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE),
BlackRock Corporate High Yield Fund V, Inc. (HYV), BlackRock High Yield Trust (BHY),
BlackRock High Income Shares (HIS) and BlackRock Corporate High Yield Fund VI, Inc. (HYT)
As of February 28, 2013 (Unaudited)
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
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Corporate Bonds | Par (000) | Value | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Chemicals (continued) |
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INEOS Finance Plc, 7.50%, 05/01/20 (b) |
USD | 405 | 370 | 570 | 75 | 195 | 590 | 2,205 | $ | 436,387 | $ | 398,675 | $ | 614,175 | $ | 80,812 | $ | 210,112 | $ | 635,725 | $ | 2,375,886 | ||||||||||||||||||||||||||||||||||||||
INEOS Finance Plc, 8.38%, 02/15/19 (b) |
USD | | | | 100 | | | 100 | | | | 109,500 | | | 109,500 | |||||||||||||||||||||||||||||||||||||||||||||
Kraton Polymers LLC, 6.75%, 03/01/19 |
USD | 115 | 125 | 185 | 20 | 55 | 195 | 695 | 119,600 | 130,000 | 192,400 | 20,800 | 57,200 | 202,800 | 722,800 | |||||||||||||||||||||||||||||||||||||||||||||
LyondellBasell Industries NV, 5.75%, 04/15/24 |
USD | 2,390 | 2,610 | 3,870 | 485 | 1,210 | 4,050 | 14,615 | 2,778,375 | 3,034,125 | 4,498,875 | 563,812 | 1,406,625 | 4,708,125 | 16,989,937 | |||||||||||||||||||||||||||||||||||||||||||||
Nexeo Solutions LLC, 8.38%, 03/01/18 |
USD | 85 | 90 | 135 | 15 | 40 | 145 | 510 | 83,088 | 87,975 | 131,962 | 14,663 | 39,100 | 141,738 | 498,526 | |||||||||||||||||||||||||||||||||||||||||||||
Nufarm Australia Ltd., 6.38%, 10/15/19 (b) |
USD | 205 | 225 | 335 | 35 | 100 | 350 | 1,250 | 217,300 | 238,500 | 355,100 | 37,100 | 106,000 | 371,000 | 1,325,000 | |||||||||||||||||||||||||||||||||||||||||||||
Orion Engineered Carbons Bondco GmbH (FKA Kinove German Bondco GmbH), 10.00%, 06/15/18 |
EUR | 315 | 342 | 505 | | 148 | 532 | 1,842 | 456,485 | 495,613 | 731,681 | | 213,896 | 770,808 | 2,668,483 | |||||||||||||||||||||||||||||||||||||||||||||
Orion Engineered Carbons Bondco GmbH, 9.63%, 06/15/18 (b) |
USD | | | | 200 | | | 200 | | | | 220,000 | | | 220,000 | |||||||||||||||||||||||||||||||||||||||||||||
OXEA Finance/Cy SCA, 9.63%, 07/15/17 (b) |
USD | 330 | | | | | | 330 | 471,888 | | | | | | 471,888 | |||||||||||||||||||||||||||||||||||||||||||||
PolyOne Corp., 7.38%, 09/15/20 |
USD | 200 | 215 | 320 | 35 | 100 | 335 | 1,205 | 221,500 | 238,112 | 354,400 | 38,763 | 110,750 | 371,013 | 1,334,538 | |||||||||||||||||||||||||||||||||||||||||||||
Rockwood Specialties Group, Inc., 4.63%, 10/15/20 |
USD | 685 | 745 | 1,095 | 125 | 325 | 1,140 | 4,115 | 708,975 | 771,075 | 1,133,325 | 129,375 | 336,375 | 1,179,900 | 4,259,025 | |||||||||||||||||||||||||||||||||||||||||||||
Tronox Finance LLC, 6.38%, 08/15/20 (b) |
USD | 1,241 | 1,357 | 1,997 | 158 | 644 | 2,094 | 7,491 | 1,233,244 | 1,348,519 | 1,984,519 | 157,012 | 639,975 | 2,080,912 | 7,444,181 | |||||||||||||||||||||||||||||||||||||||||||||
US Coatings Acquisition, Inc./Flash Dutch 2 BV, 5.75%, 02/01/21 |
EUR | 100 | 200 | 100 | | | 100 | 500 | 133,166 | 266,332 | 133,166 | | | 133,166 | 665,830 |
See Notes to Pro Forma Condensed Combined Financial Statements.
B-10
Pro Forma Condensed Combined Schedule of Investments for
BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE),
BlackRock Corporate High Yield Fund V, Inc. (HYV), BlackRock High Yield Trust (BHY),
BlackRock High Income Shares (HIS) and BlackRock Corporate High Yield Fund VI, Inc. (HYT)
As of February 28, 2013 (Unaudited)
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
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Corporate Bonds | Par (000) | Value | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Chemicals (continued) |
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US Coatings Acquisition, Inc./Flash Dutch 2 BV, 7.38%, 05/01/21 (b) |
USD | 328 | 357 | 525 | | | 550 | 1,760 | $ | 339,480 | $ | 369,495 | $ | 543,375 | | | $ | 569,250 | $ | 1,821,600 | ||||||||||||||||||||||||||||||||||||||||
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9,885,266 | 10,324,868 | 14,861,718 | $ | 1,829,407 | $ | 4,143,682 | 15,573,072 | 56,618,013 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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Commercial Banks - 1.0% |
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CIT Group, Inc., 5.25%, 03/15/18 |
USD | 510 | 550 | 830 | 130 | 1,440 | 860 | 4,320 | 548,250 | 591,250 | 892,250 | 139,750 | 1,548,000 | 924,500 | 4,644,000 | |||||||||||||||||||||||||||||||||||||||||||||
CIT Group, Inc., 6.63%, 04/01/18 (b) |
USD | 285 | 310 | 455 | 50 | 285 | 475 | 1,860 | 323,475 | 351,850 | 516,425 | 56,750 | 323,475 | 539,125 | 2,111,100 | |||||||||||||||||||||||||||||||||||||||||||||
CIT Group, Inc., 5.50%, 02/15/19 (b) |
USD | 490 | 530 | 790 | 80 | 240 | 840 | 2,970 | 532,875 | 576,375 | 859,125 | 87,000 | 261,000 | 913,500 | 3,229,875 | |||||||||||||||||||||||||||||||||||||||||||||
CIT Group, Inc., 5.00%, 08/15/22 |
USD | 430 | 480 | 710 | 70 | 210 | 740 | 2,640 | 460,100 | 513,600 | 759,700 | 74,900 | 224,700 | 791,800 | 2,824,800 | |||||||||||||||||||||||||||||||||||||||||||||
CIT Group, Inc., 6.00%, 04/01/36 |
USD | 500 | 550 | 810 | 90 | | 850 | 2,800 | 489,815 | 538,796 | 793,500 | 88,167 | | 832,686 | 2,742,964 | |||||||||||||||||||||||||||||||||||||||||||||
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2,354,515 | 2,571,871 | 3,821,000 | 446,567 | 2,357,175 | 4,001,611 | 15,552,739 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Commercial Services & Supplies - 2.2% |
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ADS Waste Holdings, Inc., 8.25%, 10/01/20 (b) |
USD | 256 | 279 | 412 | 46 | 122 | 431 | 1,546 | 275,200 | 299,925 | 442,900 | 49,450 | 131,150 | 463,325 | 1,661,950 | |||||||||||||||||||||||||||||||||||||||||||||
ARAMARK Holdings Corp., 8.63%, 05/01/16 (b)(g) |
USD | 405 | 440 | 650 | 70 | 190 | 680 | 2,435 | 413,104 | 448,804 | 663,006 | 71,401 | 193,802 | 693,607 | 2,483,724 | |||||||||||||||||||||||||||||||||||||||||||||
ARAMARK Holdings Corp., 5.75%, 03/15/20 (b)(f) |
USD | 596 | 655 | 962 | 108 | 282 | 1,005 | 3,608 | 607,920 | 668,100 | 981,240 | 110,160 | 287,640 | 1,025,100 | 3,680,160 | |||||||||||||||||||||||||||||||||||||||||||||
Aviation Capital Group Corp., 6.75%, 04/06/21 (b) |
USD | 500 | 540 | 800 | 92 | 230 | 840 | 3,002 | 541,171 | 584,465 | 865,874 | 99,576 | 248,939 | 909,168 | 3,249,193 |
See Notes to Pro Forma Condensed Combined Financial Statements.
B-11
Pro Forma Condensed Combined Schedule of Investments for
BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE),
BlackRock Corporate High Yield Fund V, Inc. (HYV), BlackRock High Yield Trust (BHY),
BlackRock High Income Shares (HIS) and BlackRock Corporate High Yield Fund VI, Inc. (HYT)
As of February 28, 2013 (Unaudited)
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
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Corporate Bonds | Par (000) | Value | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial Services & Supplies (continued) |
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AWAS Aviation Capital Ltd., 7.00%, 10/17/16 (b) |
USD | | 102 | 223 | 162 | 162 | 142 | 791 | | $ | 106,898 | $ | 234,158 | $ | 169,680 | $ | 169,680 | $ | 149,318 | $ | 829,734 | |||||||||||||||||||||||||||||||||||||||
Brickman Group Holdings, Inc., 9.13%, 11/01/18 (b) |
USD | 24 | 25 | 38 | 7 | 9 | 43 | 146 | $ | 25,800 | 26,875 | 40,850 | 7,525 | 9,675 | 46,225 | 156,950 | ||||||||||||||||||||||||||||||||||||||||||||
Casella Waste Systems, Inc., 7.75%, 02/15/19 |
USD | 49 | 54 | 79 | | 25 | 83 | 290 | 46,918 | 51,705 | 75,643 | | 23,938 | 79,473 | 277,677 | |||||||||||||||||||||||||||||||||||||||||||||
Catalent Pharma Solutions, Inc., 7.88%, 10/15/18 (b) |
USD | 571 | 622 | 918 | 101 | 270 | 959 | 3,441 | 578,137 | 629,775 | 929,475 | 102,262 | 273,375 | 970,987 | 3,484,011 | |||||||||||||||||||||||||||||||||||||||||||||
Clean Harbors, Inc., 5.25%, 08/01/20 |
USD | 484 | 528 | 780 | 88 | 233 | 817 | 2,930 | 498,520 | 543,840 | 803,400 | 90,640 | 239,990 | 841,510 | 3,017,900 | |||||||||||||||||||||||||||||||||||||||||||||
Covanta Holding Corp., 6.38%, 10/01/22 |
USD | 585 | 635 | 940 | 135 | 280 | 985 | 3,560 | 634,336 | 688,553 | 1,019,275 | 146,385 | 303,614 | 1,068,070 | 3,860,233 | |||||||||||||||||||||||||||||||||||||||||||||
EC Finance Plc, 9.75%, 08/01/17 |
EUR | 451 | 503 | 621 | | | 677 | 2,252 | 640,323 | 714,152 | 881,687 | | | 961,194 | 3,197,356 | |||||||||||||||||||||||||||||||||||||||||||||
HDTFS, Inc., 5.88%, 10/15/20 (b) |
USD | 60 | 65 | 95 | 10 | 40 | 100 | 370 | 62,400 | 67,600 | 98,800 | 10,400 | 41,600 | 104,000 | 384,800 | |||||||||||||||||||||||||||||||||||||||||||||
HDTFS, Inc., 6.25%, 10/15/22 (b) |
USD | 245 | 265 | 395 | 45 | 115 | 410 | 1,475 | 263,375 | 284,875 | 424,625 | 48,375 | 123,625 | 440,750 | 1,585,625 | |||||||||||||||||||||||||||||||||||||||||||||
Mead Products LLC/ACCO Brands Corp., 6.75%, 04/30/20 (b) |
USD | 71 | 76 | 112 | 14 | 34 | 117 | 424 | 75,171 | 80,465 | 118,580 | 14,823 | 35,998 | 123,874 | 448,911 | |||||||||||||||||||||||||||||||||||||||||||||
Mobile Mini, Inc., 7.88%, 12/01/20 |
USD | 335 | 365 | 545 | 60 | 165 | 570 | 2,040 | 372,688 | 406,063 | 606,313 | 66,750 | 183,562 | 634,125 | 2,269,501 | |||||||||||||||||||||||||||||||||||||||||||||
RSC Equipment Rental, Inc., 8.25%, 02/01/21 |
USD | 429 | 468 | 686 | 77 | 210 | 718 | 2,588 | 486,379 | 530,595 | 777,752 | 87,299 | 238,087 | 814,033 | 2,934,145 | |||||||||||||||||||||||||||||||||||||||||||||
Verisure Holding AB, 8.75%, 09/01/18 |
EUR | 169 | 184 | 174 | 100 | | 275 | 902 | 238,289 | 259,439 | 245,339 | 140,999 | | 387,748 | 1,271,814 | |||||||||||||||||||||||||||||||||||||||||||||
Verisure Holding AB, 8.75%, 12/01/18 |
EUR | 100 | 100 | 134 | | | 139 | 473 | 133,166 | 133,166 | 178,443 | | | 185,101 | 629,876 | |||||||||||||||||||||||||||||||||||||||||||||
West Corp., 8.63%, 10/01/18 |
USD | 125 | 135 | 205 | 25 | 65 | 210 | 765 | 133,125 | 143,775 | 218,325 | 26,625 | 69,225 | 223,650 | 814,725 | |||||||||||||||||||||||||||||||||||||||||||||
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6,026,022 | 6,669,070 | 9,605,685 | 1,242,350 | 2,573,900 | 10,121,258 | 36,238,285 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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See Notes to Pro Forma Condensed Combined Financial Statements.
B-12
Pro Forma Condensed Combined Schedule of Investments for
BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE),
BlackRock Corporate High Yield Fund V, Inc. (HYV), BlackRock High Yield Trust (BHY),
BlackRock High Income Shares (HIS) and BlackRock Corporate High Yield Fund VI, Inc. (HYT)
As of February 28, 2013 (Unaudited)
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
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Corporate Bonds | Par (000) | Value | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Communications Equipment - 1.1% |
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Alcatel-Lucent USA, Inc., 6.50%, 01/15/28 |
USD | 55 | 60 | 85 | 10 | | 90 | 300 | $ | 42,350 | $ | 46,200 | $ | 65,450 | $ | 7,700 | | $ | 69,300 | $ | 231,000 | |||||||||||||||||||||||||||||||||||||||
Alcatel-Lucent USA, Inc., 6.45%, 03/15/29 |
USD | 169 | 185 | 279 | 32 | | 288 | 953 | 131,398 | 143,837 | 216,922 | 24,880 | | 223,920 | 740,957 | |||||||||||||||||||||||||||||||||||||||||||||
Avaya, Inc., 9.75%, 11/01/15 |
USD | 523 | 629 | 893 | 34 | 310 | 936 | 3,325 | 514,501 | 618,779 | 878,489 | 33,448 | $ | 304,962 | 920,790 | 3,270,969 | ||||||||||||||||||||||||||||||||||||||||||||
Brocade Communications Systems, Inc., 4.63%, 01/15/23 (b) |
USD | | | | | 90 | | 90 | | | | | 87,750 | | 87,750 | |||||||||||||||||||||||||||||||||||||||||||||
Zayo Group LLC/Zayo Capital, Inc., 8.13%, 01/01/20 |
USD | 870 | 950 | 1,400 | 155 | 430 | 1,480 | 5,285 | 972,225 | 1,061,625 | 1,564,500 | 173,212 | 480,525 | 1,653,900 | 5,905,987 | |||||||||||||||||||||||||||||||||||||||||||||
Zayo Group LLC/Zayo Capital, Inc., 10.13%, 07/01/20 |
USD | 1,160 | 1,270 | 1,880 | 220 | 560 | 1,960 | 7,050 | 1,360,100 | 1,489,075 | 2,204,300 | 257,950 | 656,600 | 2,298,100 | 8,266,125 | |||||||||||||||||||||||||||||||||||||||||||||
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3,020,574 | 3,359,516 | 4,929,661 | 497,190 | 1,529,837 | 5,166,010 | 18,502,788 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Computers & Peripherals - 0.2% |
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EMC Corp., Series B 1.75%, 12/01/13 (c) |
USD | 186 | 201 | 298 | 31 | 89 | 307 | 1,112 | 269,002 | 290,696 | 430,983 | 44,834 | 128,716 | 443,999 | 1,608,230 | |||||||||||||||||||||||||||||||||||||||||||||
NCR Corp., 5.00%, 07/15/22 (b) |
USD | | | | | 120 | | 120 | | | | | 119,400 | | 119,400 | |||||||||||||||||||||||||||||||||||||||||||||
SanDisk Corp., 1.50%, 08/15/17 (c) |
USD | 255 | 285 | 425 | 50 | 130 | 445 | 1,590 | 313,969 | 350,907 | 523,281 | 61,562 | 160,063 | 547,906 | 1,957,688 | |||||||||||||||||||||||||||||||||||||||||||||
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582,971 | 641,603 | 954,264 | 106,396 | 408,179 | 991,905 | 3,685,318 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Construction & Engineering - 0.3% |
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Boart Longyear Management Property Ltd., 7.00%, 04/01/21 |
USD | 175 | 200 | 275 | 35 | 90 | 300 | 1,075 | 181,563 | 207,500 | 285,312 | 36,313 | 93,375 | 311,250 | 1,115,313 | |||||||||||||||||||||||||||||||||||||||||||||
H&E Equipment Services, Inc., 7.00%, 09/01/22 (b) |
USD | 408 | 441 | 654 | 79 | 193 | 687 | 2,462 | 446,760 | 482,895 | 716,130 | 86,505 | 211,335 | 752,265 | 2,695,890 | |||||||||||||||||||||||||||||||||||||||||||||
Weekley Homes LLC, 6.00%, 02/01/23 (b) |
USD | 143 | 156 | 230 | 26 | 67 | 240 | 862 | 145,860 | 159,120 | 234,600 | 26,520 | 68,340 | 244,800 | 879,240 | |||||||||||||||||||||||||||||||||||||||||||||
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774,183 | 849,515 | 1,236,042 | 149,338 | 373,050 | 1,308,315 | 4,690,443 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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See Notes to Pro Forma Condensed Combined Financial Statements.
B-13
Pro Forma Condensed Combined Schedule of Investments for
BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE),
BlackRock Corporate High Yield Fund V, Inc. (HYV), BlackRock High Yield Trust (BHY),
BlackRock High Income Shares (HIS) and BlackRock Corporate High Yield Fund VI, Inc. (HYT)
As of February 28, 2013 (Unaudited)
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
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Corporate Bonds | Par (000) | Value | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Construction Materials - 2.1% |
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Buzzi Unicem SpA, 6.25%, 09/28/18 |
EUR | 126 | 138 | 201 | | | 213 | 678 | $ | 176,952 | $ | 193,804 | $ | 282,280 | | | $ | 299,133 | $ | 952,169 | ||||||||||||||||||||||||||||||||||||||||
HD Supply, Inc., 8.13%, 04/15/19 (b) |
USD | 1,170 | 1,265 | 1,870 | 215 | 560 | 1,970 | 7,050 | 1,317,712 | 1,424,706 | 2,106,087 | $ | 242,144 | $ | 630,700 | 2,218,712 | 7,940,061 | |||||||||||||||||||||||||||||||||||||||||||
HD Supply, Inc., 11.00%, 04/15/20 (b) |
USD | 1,215 | 1,325 | 1,945 | 215 | 590 | 2,045 | 7,335 | 1,464,075 | 1,596,625 | 2,343,725 | 259,075 | 710,950 | 2,464,225 | 8,838,675 | |||||||||||||||||||||||||||||||||||||||||||||
HD Supply, Inc., 7.50%, 07/15/20 (b) |
USD | 1,783 | 1,947 | 2,855 | 336 | 917 | 2,995 | 10,833 | 1,785,229 | 1,949,434 | 2,858,569 | 336,420 | 918,146 | 2,998,744 | 10,846,542 | |||||||||||||||||||||||||||||||||||||||||||||
HD Supply, Inc.,
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USD | 480 | 520 | 775 | 85 | 620 | 810 | 3,290 | 553,200 | 599,300 | 893,188 | 97,963 | 714,550 | 933,525 | 3,791,726 | |||||||||||||||||||||||||||||||||||||||||||||
HeidelbergCement AG, 7.50%, 04/03/20 |
EUR | 51 | 54 | 81 | | | 83 | 269 | 80,233 | 84,952 | 127,428 | | | 130,574 | 423,187 | |||||||||||||||||||||||||||||||||||||||||||||
Xefin Lux SCA, 8.00%, 06/01/18 |
USD | | | | 100 | | | 100 | | | | 140,183 | | | 140,183 | |||||||||||||||||||||||||||||||||||||||||||||
Xefin Lux SCA, 8.00%, 06/01/18 (b) |
USD | 233 | 254 | 376 | | | 393 | 1,256 | 326,627 | 356,066 | 527,090 | | | 550,921 | 1,760,704 | |||||||||||||||||||||||||||||||||||||||||||||
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5,704,028 | 6,204,887 | 9,138,367 | 1,075,785 | 2,974,346 | 9,595,834 | 34,693,247 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Consumer Finance - 0.4% |
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Credit Acceptance Corp., 9.13%, 02/01/17 |
USD | 435 | 445 | 660 | 80 | 220 | 710 | 2,550 | 474,150 | 485,050 | 719,400 | 87,200 | 239,800 | 773,900 | 2,779,500 | |||||||||||||||||||||||||||||||||||||||||||||
Ford Motor Credit Co. LLC, 12.00%, 05/15/15 |
USD | 670 | | | 120 | 330 | | 1,120 | 813,212 | | | 145,650 | 400,537 | | 1,359,399 | |||||||||||||||||||||||||||||||||||||||||||||
Ford Motor Credit Co. LLC, 6.63%, 08/15/17 |
USD | 131 | | | 230 | | | 361 | 152,982 | | | 268,594 | | | 421,576 | |||||||||||||||||||||||||||||||||||||||||||||
Ford Motor Credit Co. LLC, 5.88%, 08/02/21 |
USD | | | | 200 | | | 200 | | | | 228,108 | | | 228,108 | |||||||||||||||||||||||||||||||||||||||||||||
Ford Motor Credit Co. LLC, 8.13%, 01/15/20 |
USD | | | | | 500 | | 500 | | | | | 629,908 | | 629,908 | |||||||||||||||||||||||||||||||||||||||||||||
Springleaf Finance, 6.90%, 12/15/17 |
USD | | | 155 | | | 160 | 315 | | | 151,900 | | | 156,800 | 308,700 | |||||||||||||||||||||||||||||||||||||||||||||
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1,440,344 | 485,050 | 871,300 | 729,552 | 1,270,245 | 930,700 | 5,727,191 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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See Notes to Pro Forma Condensed Combined Financial Statements.
B-14
Pro Forma Condensed Combined Schedule of Investments for
BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE),
BlackRock Corporate High Yield Fund V, Inc. (HYV), BlackRock High Yield Trust (BHY),
BlackRock High Income Shares (HIS) and BlackRock Corporate High Yield Fund VI, Inc. (HYT)
As of February 28, 2013 (Unaudited)
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
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Corporate Bonds | Par (000) | Value | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Containers & Packaging - 2.1% |
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Ardagh Packaging Finance Plc, 7.38%, 10/15/17 |
EUR | | | 100 | | | 100 | 200 | | | $ | 141,652 | | | $ | 141,652 | $ | 283,304 | ||||||||||||||||||||||||||||||||||||||||||
Ardagh Packaging Finance Plc, 7.38%, 10/15/17 |
EUR | 200 | 200 | 200 | | | 200 | 800 | $ | 283,304 | $ | 283,304 | 283,304 | | | 283,304 | 1,133,216 | |||||||||||||||||||||||||||||||||||||||||||
Ardagh Packaging Finance Plc, 7.38%, 10/15/17 (b) |
USD | 200 | 200 | 200 | | | 200 | 800 | 217,750 | 217,750 | 217,750 | | | 217,750 | 871,000 | |||||||||||||||||||||||||||||||||||||||||||||
Ardagh Packaging Finance Plc, 7.38%, 10/15/17 (b) |
EUR | 335 | 375 | 600 | | 285 | 574 | 2,169 | 474,535 | 531,195 | 849,913 | | $ | 403,709 | 813,083 | 3,072,435 | ||||||||||||||||||||||||||||||||||||||||||||
Ardagh Packaging Finance Plc, 7.00%, 11/15/20 (b) |
USD | 441 | 480 | 912 | 200 | 200 | 945 | 3,178 | 442,102 | 481,200 | 914,280 | $ | 200,500 | 200,500 | 947,362 | 3,185,944 | ||||||||||||||||||||||||||||||||||||||||||||
Ardagh Packaging Finance Plc, 9.13%, 10/15/20 (b) |
USD | 409 | 409 | 459 | | 200 | 470 | 1,947 | 447,855 | 447,855 | 502,605 | | 219,000 | 514,650 | 2,131,965 | |||||||||||||||||||||||||||||||||||||||||||||
Ardagh Packaging Finance Plc, 9.13%, 10/15/20 (b) |
USD | 365 | 395 | 590 | 200 | 200 | 615 | 2,365 | 397,850 | 430,550 | 643,100 | 218,000 | 218,000 | 670,350 | 2,577,850 | |||||||||||||||||||||||||||||||||||||||||||||
Ardagh Packaging Finance Plc, 4.88%, 11/15/22 (b) |
USD | 200 | 200 | 218 | | 200 | 228 | 1,046 | 197,000 | 197,000 | 214,730 | | 197,000 | 224,580 | 1,030,310 | |||||||||||||||||||||||||||||||||||||||||||||
Ardagh Packaging Finance Plc, 5.00%, 11/15/22 |
EUR | 200 | 220 | 320 | | | 360 | 1,100 | 259,152 | 285,067 | 414,643 | | | 466,473 | 1,425,335 | |||||||||||||||||||||||||||||||||||||||||||||
Berry Plastics Corp., 4.18%, 09/15/14 (d) |
USD | 275 | 300 | 445 | 50 | 135 | 465 | 1,670 | 275,000 | 300,000 | 445,000 | 50,000 | 135,000 | 465,000 | 1,670,000 | |||||||||||||||||||||||||||||||||||||||||||||
Berry Plastics Corp., 8.25%, 11/15/15 |
USD | 110 | 115 | 175 | 20 | 55 | 185 | 660 | 114,642 | 119,853 | 182,385 | 20,844 | 57,321 | 192,807 | 687,852 | |||||||||||||||||||||||||||||||||||||||||||||
Berry Plastics Corp., 9.75%, 01/15/21 |
USD | 170 | 185 | 270 | 30 | 85 | 280 | 1,020 | 196,350 | 213,675 | 311,850 | 34,650 | 98,175 | 323,400 | 1,178,100 | |||||||||||||||||||||||||||||||||||||||||||||
Beverage Packaging Holdings Luxembourg II SA, 8.00%, 12/15/16 |
EUR | 617 | 706 | 867 | | | 882 | 3,072 | 807,699 | 924,207 | 1,134,968 | | | 1,154,604 | 4,021,478 | |||||||||||||||||||||||||||||||||||||||||||||
Crown Americas LLC/Crown Americas Capital Corp. III, 6.25%, 02/01/21 |
USD | 10 | 11 | 16 | 2 | 5 | 17 | 61 | 10,900 | 11,990 | 17,440 | 2,180 | 5,450 | 18,530 | 66,490 | |||||||||||||||||||||||||||||||||||||||||||||
Crown Americas LLC/Crown Americas Capital Corp. IV, 4.50%, 01/15/23 (b) |
USD | 112 | 122 | 180 | 20 | 52 | 189 | 675 | 109,480 | 119,255 | 175,950 | 19,550 | 50,830 | 184,748 | 659,813 |
See Notes to Pro Forma Condensed Combined Financial Statements.
B-15
Pro Forma Condensed Combined Schedule of Investments for
BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE),
BlackRock Corporate High Yield Fund V, Inc. (HYV), BlackRock High Yield Trust (BHY),
BlackRock High Income Shares (HIS) and BlackRock Corporate High Yield Fund VI, Inc. (HYT)
As of February 28, 2013 (Unaudited)
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
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Corporate Bonds | Par (000) | Value | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Containers & Packaging (continued) |
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GCL Holdings SCA, 9.38%, 04/15/18 (b) |
EUR | 244 | 267 | 394 | | 120 | 414 | 1,439 | $ | 345,695 | $ | 378,281 | $ | 558,212 | | $ | 170,014 | $ | 586,548 | $ | 2,038,750 | |||||||||||||||||||||||||||||||||||||||
Graphic Packaging International, Inc., 7.88%, 10/01/18 |
USD | 340 | 375 | 550 | 60 | 175 | 580 | 2,080 | 374,000 | 412,500 | 605,000 | $ | 66,000 | 192,500 | 638,000 | 2,288,000 | ||||||||||||||||||||||||||||||||||||||||||||
Pactiv LLC, 7.95%, 12/15/25 |
USD | 377 | 412 | 605 | 68 | 177 | 632 | 2,271 | 353,438 | 386,250 | 567,187 | 63,750 | 165,937 | 592,500 | 2,129,062 | |||||||||||||||||||||||||||||||||||||||||||||
Tekni-Plex, Inc., 9.75%, 06/01/19 (b) |
USD | 509 | 553 | 815 | 92 | 243 | 849 | 3,061 | 562,444 | 611,065 | 900,575 | 101,660 | 268,515 | 938,145 | 3,382,404 | |||||||||||||||||||||||||||||||||||||||||||||
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5,869,196 | 6,350,997 | 9,080,544 | 777,134 | 2,381,951 | 9,373,486 | 33,833,308 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Distributors - 0.5% |
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VWR Funding, Inc., 7.25%, 09/15/17 (b) |
USD | 1,260 | 1,374 | 2,030 | 229 | 605 | 2,126 | 7,624 | 1,326,150 | 1,446,135 | 2,136,575 | 241,023 | 636,763 | 2,237,615 | 8,024,261 | |||||||||||||||||||||||||||||||||||||||||||||
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Diversified Consumer Services - 2.0% |
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313 Group, Inc., 6.38%, 12/01/19 (b) |
USD | 903 | 987 | 1,456 | 165 | 432 | 1,527 | 5,470 | 880,425 | 962,325 | 1,419,600 | 160,875 | 421,200 | 1,488,825 | 5,333,250 | |||||||||||||||||||||||||||||||||||||||||||||
313 Group, Inc., 8.75%, 12/01/20 (b) |
USD | 547 | 597 | 882 | 98 | 261 | 924 | 3,309 | 540,163 | 589,537 | 870,975 | 96,775 | 257,738 | 912,450 | 3,267,638 | |||||||||||||||||||||||||||||||||||||||||||||
Laureate Education, Inc., 9.25%, 09/01/19 (b) |
USD | 1,145 | 1,250 | 1,845 | 205 | 550 | 1,930 | 6,925 | 1,245,187 | 1,359,375 | 2,006,437 | 222,937 | 598,125 | 2,098,875 | 7,530,936 | |||||||||||||||||||||||||||||||||||||||||||||
Service Corp. International, 7.00%, 06/15/17 |
USD | 2,590 | 2,780 | 4,095 | | | 4,425 | 13,890 | 2,929,937 | 3,144,875 | 4,632,469 | | | 5,005,781 | 15,713,062 | |||||||||||||||||||||||||||||||||||||||||||||
ServiceMaster Co., 8.00%, 02/15/20 |
USD | 175 | 190 | 280 | 35 | 85 | 295 | 1,060 | 185,500 | 201,400 | 296,800 | 37,100 | 90,100 | 312,700 | 1,123,600 | |||||||||||||||||||||||||||||||||||||||||||||
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5,781,212 | 6,257,512 | 9,226,281 | 517,687 | 1,367,163 | 9,818,631 | 32,968,486 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Diversified Financial Services - 5.2% |
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Air Lease Corp., 4.50%, 01/15/16 |
USD | 540 | 590 | 880 | 100 | 260 | 920 | 3,290 | 552,150 | 603,275 | 899,800 | 102,250 | 265,850 | 940,700 | 3,364,025 | |||||||||||||||||||||||||||||||||||||||||||||
Aircastle Ltd., 6.75%, 04/15/17 |
USD | 345 | 375 | 550 | 55 | 160 | 575 | 2,060 | 380,363 | 413,438 | 606,375 | 60,638 | 176,400 | 633,938 | 2,271,152 | |||||||||||||||||||||||||||||||||||||||||||||
Aircastle Ltd., 6.25%, 12/01/19 |
USD | 295 | 326 | 481 | 53 | 140 | 500 | 1,795 | 317,863 | 351,265 | 518,278 | 57,108 | 150,850 | 538,750 | 1,934,114 | |||||||||||||||||||||||||||||||||||||||||||||
Ally Financial, Inc., 7.50%, 12/31/13 |
USD | 350 | 280 | 460 | | 330 | 700 | 2,120 | 367,500 | 294,000 | 483,000 | | 346,500 | 735,000 | 2,226,000 | |||||||||||||||||||||||||||||||||||||||||||||
Ally Financial, Inc., 8.00%, 11/01/31 (h) |
USD | 2,784 | 3,000 | 4,534 | 672 | 1,227 | 4,745 | 16,962 | 3,497,400 | 3,768,750 | 5,695,837 | 844,200 | 1,541,419 | 5,960,906 | 21,308,512 |
See Notes to Pro Forma Condensed Combined Financial Statements.
B-16
Pro Forma Condensed Combined Schedule of Investments for
BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE),
BlackRock Corporate High Yield Fund V, Inc. (HYV), BlackRock High Yield Trust (BHY),
BlackRock High Income Shares (HIS) and BlackRock Corporate High Yield Fund VI, Inc. (HYT)
As of February 28, 2013 (Unaudited)
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
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Corporate Bonds | Par (000) | Value | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Diversified Financial Services (continued) |
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CNG Holdings, Inc., 9.38%, 05/15/20 (b) |
USD | 439 | 472 | 610 | 80 | 180 | 630 | 2,411 | $ | 432,964 | $ | 465,510 | $ | 601,613 | $ | 78,900 | $ | 177,525 | $ | 621,338 | $ | 2,377,850 | ||||||||||||||||||||||||||||||||||||||
Co-Operative Group Ltd., 6.88%, 07/08/20 (i) |
GBP | 160 | 170 | 250 | | | 370 | 950 | 254,379 | 270,278 | 397,467 | | | 588,251 | 1,510,375 | |||||||||||||||||||||||||||||||||||||||||||||
Co-Operative Group Ltd., 7.50%, 07/08/26 (i) |
GBP | 100 | 100 | 100 | | | 100 | 400 | 159,745 | 159,745 | 159,745 | | | 159,745 | 638,980 | |||||||||||||||||||||||||||||||||||||||||||||
DPL, Inc., 6.50%, 10/15/16 |
USD | 298 | 324 | 450 | 52 | 146 | 470 | 1,740 | 312,900 | 340,200 | 472,500 | 54,600 | 153,300 | 493,500 | 1,827,000 | |||||||||||||||||||||||||||||||||||||||||||||
DPL, Inc., 7.25%, 10/15/21 |
USD | 777 | 851 | 1,275 | 143 | 384 | 1,345 | 4,775 | 833,332 | 912,698 | 1,367,438 | 153,367 | 411,840 | 1,442,513 | 5,121,188 | |||||||||||||||||||||||||||||||||||||||||||||
Gala Group Finance Plc, 8.88%, 09/01/18 |
GBP | 600 | 600 | 706 | | | 802 | 2,708 | 983,048 | 983,048 | 1,156,720 | | | 1,314,008 | 4,436,824 | |||||||||||||||||||||||||||||||||||||||||||||
General Motors Financial Co., Inc., 6.75%, 06/01/18 |
USD | 270 | 300 | 460 | | 140 | 460 | 1,630 | 310,500 | 345,000 | 529,000 | | 161,000 | 529,000 | 1,874,500 | |||||||||||||||||||||||||||||||||||||||||||||
Lehman Brothers Holdings, Inc., 1.00%, 05/17/13 (a)(j) |
USD | | 620 | 915 | | | | 1,535 | | 161,200 | 237,900 | | | | 399,100 | |||||||||||||||||||||||||||||||||||||||||||||
Lehman Brothers Holdings, Inc., 5.38%, 10/17/13 (a)(j) |
EUR | | 150 | 200 | | | | 350 | | 53,364 | 71,152 | | | | 124,516 | |||||||||||||||||||||||||||||||||||||||||||||
Lehman Brothers Holdings, Inc., 1.00%, 02/05/14 (a)(j) |
EUR | | 1,600 | 2,350 | | | | 3,950 | | 558,775 | 820,701 | | | | 1,379,476 | |||||||||||||||||||||||||||||||||||||||||||||
Lehman Brothers Holdings, Inc., 4.75%, 01/16/14 (a)(j) |
EUR | | 760 | 1,130 | | | | 1,890 | | 270,379 | 402,011 | | | | 672,390 | |||||||||||||||||||||||||||||||||||||||||||||
Lehman Brothers Holdings, Inc., 1.00%, 09/22/18 (a)(j) |
USD | | 175 | 255 | | | | 430 | | 45,500 | 66,300 | | | | 111,800 | |||||||||||||||||||||||||||||||||||||||||||||
Leucadia National Corp., 8.13%, 09/15/15 |
USD | 790 | 825 | 1,148 | 140 | 378 | 1,232 | 4,513 | 892,700 | 932,250 | 1,297,240 | 158,200 | 427,140 | 1,392,160 | 5,099,690 | |||||||||||||||||||||||||||||||||||||||||||||
Reynolds Group Issuer, Inc., 7.13%, 04/15/19 |
USD | 230 | 245 | 365 | | 115 | 385 | 1,340 | 246,963 | 263,069 | 391,919 | | 123,481 | 413,394 | 1,438,826 | |||||||||||||||||||||||||||||||||||||||||||||
Reynolds Group Issuer, Inc., 9.00%, 04/15/19 |
USD | 435 | 475 | 700 | 100 | 210 | 735 | 2,655 | 461,100 | 503,500 | 742,000 | 106,000 | 222,600 | 779,100 | 2,814,300 | |||||||||||||||||||||||||||||||||||||||||||||
Reynolds Group Issuer, Inc., 7.88%, 08/15/19 |
USD | 215 | 255 | 485 | | 150 | 485 | 1,590 | 237,575 | 281,775 | 535,925 | | 165,750 | 535,925 | 1,756,950 |
See Notes to Pro Forma Condensed Combined Financial Statements.
B-17
Pro Forma Condensed Combined Schedule of Investments for
BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE),
BlackRock Corporate High Yield Fund V, Inc. (HYV), BlackRock High Yield Trust (BHY),
BlackRock High Income Shares (HIS) and BlackRock Corporate High Yield Fund VI, Inc. (HYT)
As of February 28, 2013 (Unaudited)
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
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Corporate Bonds | Par (000) | Value | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Diversified Financial Services (continued) |
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Reynolds Group Issuer, Inc., 9.88%, 08/15/19 |
USD | 515 | 580 | 910 | 175 | 580 | 940 | 3,700 | $ | 563,925 | $ | 635,100 | $ | 996,450 | $ | 191,625 | $ | 635,100 | $ | 1,029,300 | $ | 4,051,500 | ||||||||||||||||||||||||||||||||||||||
Reynolds Group Issuer, Inc., 5.75%, 10/15/20 |
USD | 1,915 | 2,085 | 3,080 | 390 | 985 | 3,225 | 11,680 | 1,977,237 | 2,152,763 | 3,180,100 | 402,675 | 1,017,012 | 3,329,812 | 12,059,598 | |||||||||||||||||||||||||||||||||||||||||||||
Reynolds Group Issuer, Inc., 6.88%, 02/15/21 |
USD | | | | 115 | | | 115 | | | | 122,762 | | | 122,762 | |||||||||||||||||||||||||||||||||||||||||||||
WMG Acquisition Corp., 11.50%, 10/01/18 |
USD | 382 | 416 | 618 | 72 | 190 | 656 | 2,334 | 443,597 | 483,080 | 717,653 | 83,610 | 220,637 | 761,780 | 2,710,357 | |||||||||||||||||||||||||||||||||||||||||||||
WMG Acquisition Corp., 6.00%, 01/15/21 (b) |
USD | 290 | 331 | 449 | 54 | 154 | 454 | 1,732 | 300,150 | 342,585 | 464,715 | 55,890 | 159,390 | 469,890 | 1,792,620 | |||||||||||||||||||||||||||||||||||||||||||||
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13,525,392 | 15,590,547 | 22,811,839 | 2,471,825 | 6,355,794 | 22,669,010 | 83,424,405 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Diversified Telecommunication Services - 2.5% |
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Broadview Networks Holdings, Inc., 10.50%, 11/15/17 |
USD | 500 | 518 | 765 | 98 | 240 | 840 | 2,961 | 488,750 | 505,856 | 747,787 | 95,306 | 234,600 | 821,100 | 2,893,399 | |||||||||||||||||||||||||||||||||||||||||||||
Cequel Communications Escrow I LLC/Cequel Communications Escrow Capital Corp., 6.38%, 09/15/20 (b) |
USD | 435 | 475 | 705 | 75 | 205 | 730 | 2,625 | 449,681 | 491,031 | 728,794 | 77,531 | 211,919 | 754,637 | 2,713,593 | |||||||||||||||||||||||||||||||||||||||||||||
Consolidated Communications Finance Co., 10.88%, 06/01/20 (b) |
USD | 320 | 345 | 515 | 55 | 150 | 530 | 1,915 | 362,400 | 390,713 | 583,237 | 62,288 | 169,875 | 600,225 | 2,168,738 | |||||||||||||||||||||||||||||||||||||||||||||
Level 3 Communications, Inc., 6.50%, 10/01/16 (c) |
USD | | | | | 125 | | 125 | | | | | 165,078 | | 165,078 | |||||||||||||||||||||||||||||||||||||||||||||
Level 3 Communications, Inc., 8.88%, 06/01/19 (b) |
USD | 295 | 315 | 475 | 55 | 145 | 495 | 1,780 | 318,600 | 340,200 | 513,000 | 59,400 | 156,600 | 534,600 | 1,922,400 |
See Notes to Pro Forma Condensed Combined Financial Statements.
B-18
Pro Forma Condensed Combined Schedule of Investments for
BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE),
BlackRock Corporate High Yield Fund V, Inc. (HYV), BlackRock High Yield Trust (BHY),
BlackRock High Income Shares (HIS) and BlackRock Corporate High Yield Fund VI, Inc. (HYT)
As of February 28, 2013 (Unaudited)
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
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Corporate Bonds | Par (000) | Value | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Diversified Telecommunication Services (continued) |
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Level 3 Financing, Inc., 8.13%, 07/01/19 |
USD | 1,084 | 1,180 | 1,736 | 355 | 813 | 1,817 | 6,985 | $ | 1,181,560 | $ | 1,286,200 | $ | 1,892,240 | $ | 386,950 | $ | 886,170 | $ | 1,980,530 | $ | 7,613,650 | ||||||||||||||||||||||||||||||||||||||
Level 3 Financing, Inc., 7.00%, 06/01/20 (b) |
USD | 395 | 434 | 639 | 75 | 192 | 660 | 2,395 | 414,750 | 455,700 | 670,950 | 78,750 | 201,600 | 693,000 | 2,514,750 | |||||||||||||||||||||||||||||||||||||||||||||
Level 3 Financing, Inc., 8.63%, 07/15/20 |
USD | 785 | 845 | 1,260 | 140 | 385 | 1,320 | 4,735 | 871,350 | 937,950 | 1,398,600 | 155,400 | 427,350 | 1,465,200 | 5,255,850 | |||||||||||||||||||||||||||||||||||||||||||||
Lynx I Corp., 5.38%, 04/15/21 (b) |
USD | 265 | 290 | 420 | | | 440 | 1,415 | 271,625 | 297,250 | 430,500 | | | 451,000 | 1,450,375 | |||||||||||||||||||||||||||||||||||||||||||||
OTE Plc, 7.25%, 02/12/15 |
EUR | 101 | 101 | 256 | | | 256 | 714 | 132,520 | 132,520 | 335,892 | | | 335,892 | 936,824 | |||||||||||||||||||||||||||||||||||||||||||||
Telenet Finance V Luxembourg SCA, 6.25%, 08/15/22 |
EUR | 237 | 250 | 431 | | | 444 | 1,362 | 317,151 | 334,547 | 576,759 | | | 594,156 | 1,822,613 | |||||||||||||||||||||||||||||||||||||||||||||
Telenet Finance V Luxembourg SCA, 6.75%, 08/15/24 |
EUR | 350 | 467 | 520 | | | 645 | 1,982 | 477,505 | 637,128 | 709,436 | | | 879,973 | 2,704,042 | |||||||||||||||||||||||||||||||||||||||||||||
tw telecom Holdings, Inc., 5.38%, 10/01/22 |
USD | 275 | 300 | 440 | 50 | 130 | 460 | 1,655 | 286,687 | 312,750 | 458,700 | 52,125 | 135,525 | 479,550 | 1,725,337 | |||||||||||||||||||||||||||||||||||||||||||||
Windstream Corp., 8.13%, 08/01/13 |
USD | 400 | 460 | 510 | 25 | 112 | 703 | 2,210 | 410,480 | 472,052 | 523,362 | 25,655 | 114,934 | 721,419 | 2,267,902 | |||||||||||||||||||||||||||||||||||||||||||||
Windstream Corp., 7.88%, 11/01/17 |
USD | 360 | 393 | 630 | 70 | 163 | 627 | 2,243 | 407,700 | 445,072 | 713,475 | 79,275 | 184,598 | 710,077 | 2,540,197 | |||||||||||||||||||||||||||||||||||||||||||||
Windstream Corp., 7.50%, 04/01/23 |
USD | 75 | 80 | 120 | 13 | 35 | 125 | 448 | 78,375 | 83,600 | 125,400 | 13,585 | 36,575 | 130,625 | 468,160 | |||||||||||||||||||||||||||||||||||||||||||||
Windstream Corp., 6.38%, 08/01/23 (b) |
USD | 75 | 80 | 120 | 12 | 35 | 125 | 447 | 73,500 | 78,400 | 117,600 | 11,760 | 34,300 | 122,500 | 438,060 | |||||||||||||||||||||||||||||||||||||||||||||
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6,542,634 | 7,200,969 | 10,525,732 | 1,098,025 | 2,959,124 | 11,274,484 | 39,600,968 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Electric Utilities - 0.7% |
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Mirant Mid Atlantic Pass-Through Trust, Series B 9.13%, 06/30/17 |
USD | 269 | 290 | 433 | 84 | 130 | 454 | 1,660 | 298,531 | 321,854 | 480,449 | 93,291 | 144,601 | 503,771 | 1,842,497 |
See Notes to Pro Forma Condensed Combined Financial Statements.
B-19
Pro Forma Condensed Combined Schedule of Investments for
BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE),
BlackRock Corporate High Yield Fund V, Inc. (HYV), BlackRock High Yield Trust (BHY),
BlackRock High Income Shares (HIS) and BlackRock Corporate High Yield Fund VI, Inc. (HYT)
As of February 28, 2013 (Unaudited)
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
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Corporate Bonds | Par (000) | Value | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Electric Utilities (continued) |
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The Tokyo Electric Power Co., Inc., 4.50%, 03/24/14 |
EUR | 1,150 | 1,300 | 1,800 | | 350 | 1,900 | 6,500 | $ | 1,533,362 | $ | 1,733,365 | $ | 2,400,044 | | $ | 466,675 | $ | 2,533,380 | $ | 8,666,826 | |||||||||||||||||||||||||||||||||||||||
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1,831,893 | 2,055,219 | 2,880,493 | $ | 93,291 | 611,276 | 3,037,151 | 10,509,323 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
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Electrical Equipment - 0.5% |
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Belden, Inc., 5.50%, 09/01/22 (b) |
USD | 340 | 370 | 550 | 60 | 160 | 570 | 2,050 | 348,500 | 379,250 | 563,750 | 61,500 | 164,000 | 584,250 | 2,101,250 | |||||||||||||||||||||||||||||||||||||||||||||
General Cable Corp., 5.75%, 10/01/22 (b) |
USD | 560 | 610 | 890 | 100 | 270 | 950 | 3,380 | 574,000 | 625,250 | 912,250 | 102,500 | 276,750 | 973,750 | 3,464,500 | |||||||||||||||||||||||||||||||||||||||||||||
Techem GmbH, 6.13%, 10/01/19 |
EUR | 300 | 300 | 633 | | | 644 | 1,877 | 416,144 | 416,144 | 878,064 | | | 893,322 | 2,603,674 | |||||||||||||||||||||||||||||||||||||||||||||
Techem GmbH, 6.13%, 10/01/19 (b) |
EUR | | | 105 | | | 105 | 210 | | | 145,650 | | | 145,651 | 291,301 | |||||||||||||||||||||||||||||||||||||||||||||
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1,338,644 | 1,420,644 | 2,499,714 | 164,000 | 440,750 | 2,596,973 | 8,460,725 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Electronic Equipment, Instruments & Components - 0.1% |
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Jabil Circuit, Inc., 8.25%, 03/15/18 |
USD | 215 | 235 | 350 | 40 | 105 | 365 | 1,310 | 258,538 | 282,588 | 420,875 | 48,100 | 126,263 | 438,913 | 1,575,277 | |||||||||||||||||||||||||||||||||||||||||||||
NXP BV/NXP Funding LLC, 9.75%, 08/01/18 (b) |
USD | 100 | 100 | 100 | | | 100 | 400 | 114,250 | 114,250 | 114,250 | | | 114,250 | 457,000 | |||||||||||||||||||||||||||||||||||||||||||||
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372,788 | 396,838 | 535,125 | 48,100 | 126,263 | 553,163 | 2,032,277 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Energy Equipment & Services - 3.8% |
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Atwood Oceanics, Inc., 6.50%, 02/01/20 |
USD | 130 | 140 | 205 | 25 | 65 | 215 | 780 | 141,375 | 152,250 | 222,937 | 27,187 | 70,688 | 233,813 | 848,250 | |||||||||||||||||||||||||||||||||||||||||||||
Calfrac Holdings LP, 7.50%, 12/01/20 (b) |
USD | 306 | 335 | 497 | 55 | 185 | 518 | 1,896 | 307,530 | 336,675 | 499,485 | 55,275 | 185,925 | 520,590 | 1,905,480 | |||||||||||||||||||||||||||||||||||||||||||||
Compagnie Générale de Géophysique, Veritas, 6.50%, 06/01/21 |
USD | 1,150 | 1,255 | 1,855 | 200 | 595 | 1,945 | 7,000 | 1,196,000 | 1,305,200 | 1,929,200 | 208,000 | 618,800 | 2,022,800 | 7,280,000 | |||||||||||||||||||||||||||||||||||||||||||||
Compagnie Générale de Géophysique, Veritas, 7.75%, 05/15/17 |
USD | 235 | 250 | 365 | 65 | 170 | 395 | 1,480 | 242,344 | 257,812 | 376,406 | 67,031 | 175,312 | 407,344 | 1,526,249 |
See Notes to Pro Forma Condensed Combined Financial Statements.
B-20
Pro Forma Condensed Combined Schedule of Investments for
BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE),
BlackRock Corporate High Yield Fund V, Inc. (HYV), BlackRock High Yield Trust (BHY),
BlackRock High Income Shares (HIS) and BlackRock Corporate High Yield Fund VI, Inc. (HYT)
As of February 28, 2013 (Unaudited)
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
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Corporate Bonds | Par (000) | Value | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Energy Equipment & Services (continued) |
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FTS International Services LLC/FTS International Bonds, Inc., 8.13%, 11/15/18 (b) |
USD | 995 | 1,083 | 1,602 | 196 | 578 | 1,686 | 6,140 | $ | 1,029,825 | $ | 1,120,905 | $ | 1,658,070 | $ | 202,860 | $ | 598,230 | $ | 1,745,010 | $ | 6,354,900 | ||||||||||||||||||||||||||||||||||||||
Genesis Energy LP/Genesi Energy Finance Corp., 5.75%, 02/15/21 (b) |
USD | 156 | 170 | 250 | 28 | 74 | 262 | 940 | 161,460 | 175,950 | 258,750 | 28,980 | 76,590 | 271,170 | 972,900 | |||||||||||||||||||||||||||||||||||||||||||||
Gulfmark Offshore, Inc., 6.38%, 03/15/22 |
USD | 145 | 155 | 230 | 25 | 70 | 245 | 870 | 149,712 | 160,038 | 237,475 | 25,813 | 72,275 | 252,962 | 898,275 | |||||||||||||||||||||||||||||||||||||||||||||
Hornbeck Offshore Services, Inc., 5.88%, 04/01/20 |
USD | 290 | 315 | 465 | 50 | 140 | 490 | 1,750 | 304,500 | 330,750 | 488,250 | 52,500 | 147,000 | 514,500 | 1,837,500 | |||||||||||||||||||||||||||||||||||||||||||||
MEG Energy Corp., 6.50%, 03/15/21 (b) |
USD | 1,250 | 1,365 | 2,025 | 230 | 455 | 2,110 | 7,435 | 1,318,750 | 1,440,075 | 2,136,375 | 242,650 | 480,025 | 2,226,050 | 7,843,925 | |||||||||||||||||||||||||||||||||||||||||||||
MEG Energy Corp., 6.38%, 01/30/23 (b) |
USD | 330 | 360 | 535 | 60 | 160 | 560 | 2,005 | 341,550 | 372,600 | 553,725 | 62,100 | 165,600 | 579,600 | 2,075,175 | |||||||||||||||||||||||||||||||||||||||||||||
Oil States International, Inc., 6.50%, 06/01/19 |
USD | 290 | 320 | 470 | 50 | 140 | 495 | 1,765 | 310,300 | 342,400 | 502,900 | 53,500 | 149,800 | 529,650 | 1,888,550 | |||||||||||||||||||||||||||||||||||||||||||||
Oil States International, Inc., 5.13%, 01/15/23 (b) |
USD | 125 | 135 | 200 | 20 | 60 | 210 | 750 | 125,000 | 135,000 | 200,000 | 20,000 | 60,000 | 210,000 | 750,000 | |||||||||||||||||||||||||||||||||||||||||||||
Peabody Energy Corp., 6.00%, 11/15/18 |
USD | 211 | 230 | 340 | 38 | | 359 | 1,178 | 224,187 | 244,375 | 361,250 | 40,375 | | 381,437 | 1,251,624 | |||||||||||||||||||||||||||||||||||||||||||||
Peabody Energy Corp., 6.25%, 11/15/21 |
USD | 1,074 | 1,175 | 1,720 | 192 | 640 | 1,811 | 6,612 | 1,116,960 | 1,222,000 | 1,788,800 | 199,680 | 665,600 | 1,883,440 | 6,876,480 | |||||||||||||||||||||||||||||||||||||||||||||
Peabody Energy Corp., 7.88%, 11/01/26 |
USD | 345 | 375 | 555 | 65 | 170 | 580 | 2,090 | 369,150 | 401,250 | 593,850 | 69,550 | 181,900 | 620,600 | 2,236,300 | |||||||||||||||||||||||||||||||||||||||||||||
Peabody Energy Corp., 4.75%, 12/15/66 (c) |
USD | 655 | 713 | 1,055 | 118 | 309 | 1,103 | 3,953 | 556,341 | 605,604 | 896,091 | 100,226 | 262,457 | 936,861 | 3,357,580 | |||||||||||||||||||||||||||||||||||||||||||||
Precision Drilling Corp., 6.63%, 11/15/20 |
USD | 70 | 75 | 115 | 10 | 35 | 120 | 425 | 74,375 | 79,688 | 122,188 | 10,625 | 37,188 | 127,500 | 451,564 | |||||||||||||||||||||||||||||||||||||||||||||
Precision Drilling Corp., 6.50%, 12/15/21 |
USD | 275 | 295 | 440 | 45 | 135 | 460 | 1,650 | 291,500 | 312,700 | 466,400 | 47,700 | 143,100 | 487,600 | 1,749,000 | |||||||||||||||||||||||||||||||||||||||||||||
Rain CII Carbon LLC/CII Carbon Corp., 8.25%, 01/15/21 (b) |
USD | 214 | 234 | 349 | | 200 | 364 | 1,361 | 224,700 | 245,700 | 366,450 | | 210,000 | 382,200 | 1,429,050 | |||||||||||||||||||||||||||||||||||||||||||||
Seadrill Ltd., 5.63%, 09/15/17 (b) |
USD | 1,254 | 1,360 | 2,009 | 410 | 305 | 2,107 | 7,445 | 1,269,675 | 1,377,000 | 2,034,112 | 415,125 | 308,812 | 2,133,337 | 7,538,061 |
See Notes to Pro Forma Condensed Combined Financial Statements.
B-21
Pro Forma Condensed Combined Schedule of Investments for
BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE),
BlackRock Corporate High Yield Fund V, Inc. (HYV), BlackRock High Yield Trust (BHY),
BlackRock High Income Shares (HIS) and BlackRock Corporate High Yield Fund VI, Inc. (HYT)
As of February 28, 2013 (Unaudited)
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
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Corporate Bonds | Par (000) | Value | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Energy Equipment & Services (continued) |
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Tervita Corp., 8.00%, 11/15/18 (b) |
USD | 342 | 372 | 549 | 61 | 159 | 575 | 2,058 | $ | 352,260 | $ | 383,160 | $ | 565,470 | $ | 62,830 | $ | 163,770 | $ | 592,250 | $ | 2,119,740 | ||||||||||||||||||||||||||||||||||||||
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10,107,494 | 11,001,132 | 16,258,184 | 1,992,007 | 4,773,072 | 17,058,714 | 61,190,603 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Food & Staples Retailing - 0.3% |
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Bakkavor Finance 2 Plc, 8.25%, 02/15/18 |
GBP | 213 | 319 | 393 | | | 502 | 1,427 | 327,979 | 491,198 | 605,144 | | | 772,982 | 2,197,303 | |||||||||||||||||||||||||||||||||||||||||||||
Rite Aid Corp., 9.25%, 03/15/20 |
USD | 345 | 375 | 555 | 60 | 165 | 580 | 2,080 | 386,400 | 420,000 | 621,600 | 67,200 | 184,800 | 649,600 | 2,329,600 | |||||||||||||||||||||||||||||||||||||||||||||
Zobele Holding SpA, 7.88%, 02/01/18 |
EUR | 100 | 100 | 140 | | | 140 | 480 | 132,513 | 132,513 | 185,518 | | | 185,519 | 636,063 | |||||||||||||||||||||||||||||||||||||||||||||
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846,892 | 1,043,711 | 1,412,262 | 67,200 | 184,800 | 1,608,101 | 5,162,966 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Food Products - 0.5% |
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Darling International, Inc., 8.50%, 12/15/18 |
USD | 105 | 115 | 170 | 20 | | 180 | 590 | 119,438 | 130,813 | 193,375 | 22,750 | | 204,750 | 671,126 | |||||||||||||||||||||||||||||||||||||||||||||
Del Monte Corp., 7.63%, 02/15/19 |
USD | 56 | 61 | 90 | 9 | 27 | 94 | 337 | 58,100 | 63,288 | 93,375 | 9,338 | 28,013 | 97,525 | 349,639 | |||||||||||||||||||||||||||||||||||||||||||||
Post Holdings, Inc., 7.38%, 02/15/22 |
USD | 530 | 520 | 840 | 110 | 255 | 875 | 3,130 | 572,400 | 561,600 | 907,200 | 118,800 | 275,400 | 945,000 | 3,380,400 | |||||||||||||||||||||||||||||||||||||||||||||
Smithfield Foods, Inc., 6.63%, 08/15/22 |
USD | 431 | 477 | 702 | 82 | 205 | 729 | 2,626 | 468,712 | 518,737 | 763,425 | 89,175 | 222,937 | 792,788 | 2,855,774 | |||||||||||||||||||||||||||||||||||||||||||||
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1,218,650 | 1,274,438 | 1,957,375 | 240,063 | 526,350 | 2,040,063 | 7,256,939 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Health Care Equipment & Supplies - 2.5% |
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Biomet, Inc., 6.50%, 08/01/20 (b) |
USD | 1,625 | 1,779 | 2,623 | 296 | 1,680 | 2,742 | 10,745 | 1,718,437 | 1,881,292 | 2,773,822 | 313,020 | 1,776,600 | 2,899,665 | 11,362,836 |
See Notes to Pro Forma Condensed Combined Financial Statements.
B-22
Pro Forma Condensed Combined Schedule of Investments for
BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE),
BlackRock Corporate High Yield Fund V, Inc. (HYV), BlackRock High Yield Trust (BHY),
BlackRock High Income Shares (HIS) and BlackRock Corporate High Yield Fund VI, Inc. (HYT)
As of February 28, 2013 (Unaudited)
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
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Corporate Bonds | Par (000) | Value | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Health Care Equipment & Supplies (continued) |
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Biomet, Inc., 6.50%, 10/01/20 (b) |
USD | 1,975 | 2,161 | 3,189 | 383 | 1,002 | 3,338 | 12,048 | $ | 2,034,250 | $ | 2,225,830 | $ | 3,284,670 | $ | 394,490 | $ | 1,032,060 | $ | 3,438,140 | $ | 12,409,440 | ||||||||||||||||||||||||||||||||||||||
DJO Finance LLC, 7.75%, 04/15/18 |
USD | 95 | 100 | 155 | 20 | 50 | 160 | 580 | 94,525 | 99,500 | 154,225 | 19,900 | 49,750 | 159,200 | 577,100 | |||||||||||||||||||||||||||||||||||||||||||||
DJO Finance LLC, 8.75%, 03/15/18 |
USD | 350 | 379 | 560 | 63 | 168 | 586 | 2,106 | 386,313 | 418,321 | 618,100 | 69,536 | 185,430 | 646,797 | 2,324,497 | |||||||||||||||||||||||||||||||||||||||||||||
DJO Finance LLC, 9.88%, 04/15/18 |
USD | 400 | 450 | 620 | 80 | 180 | 650 | 2,380 | 427,000 | 480,375 | 661,850 | 85,400 | 192,150 | 693,875 | 2,540,650 | |||||||||||||||||||||||||||||||||||||||||||||
Fresenius Medical Care US Finance II, Inc., 5.63%, 07/31/19 (b) |
USD | 192 | 208 | 308 | 204 | 48 | 324 | 1,284 | 207,840 | 225,160 | 333,410 | 220,830 | 51,960 | 350,730 | 1,389,930 | |||||||||||||||||||||||||||||||||||||||||||||
Fresenius Medical Care US Finance, Inc., 5.75%, 02/15/21 (b) |
USD | 260 | 290 | 420 | 50 | 120 | 440 | 1,580 | 283,400 | 316,100 | 457,800 | 54,500 | 130,800 | 479,600 | 1,722,200 | |||||||||||||||||||||||||||||||||||||||||||||
Fresenius US Finance II, Inc., 9.00%, 07/15/15 (b) |
USD | 500 | 540 | 800 | 80 | 505 | 850 | 3,275 | 573,750 | 619,650 | 918,000 | 91,800 | 579,487 | 975,375 | 3,758,062 | |||||||||||||||||||||||||||||||||||||||||||||
Kinetic Concepts, Inc./KCI USA, Inc., 12.50%, 11/01/19 (b) |
USD | 295 | 320 | 485 | 55 | 145 | 495 | 1,795 | 289,100 | 313,600 | 475,300 | 53,900 | 142,100 | 485,100 | 1,759,100 | |||||||||||||||||||||||||||||||||||||||||||||
Teleflex, Inc., 6.88%, 06/01/19 |
USD | 270 | 295 | 435 | 50 | 130 | 455 | 1,635 | 293,625 | 320,813 | 473,063 | 54,375 | 141,375 | 494,813 | 1,778,064 | |||||||||||||||||||||||||||||||||||||||||||||
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6,308,240 | 6,900,641 | 10,150,240 | 1,357,751 | 4,281,712 | 10,623,295 | 39,621,879 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Health Care Providers &
|
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Aviv Healthcare Properties LP, 7.75%, 02/15/19 |
USD | 520 | 570 | 845 | 95 | 255 | 880 | 3,165 | 557,700 | 611,325 | 906,262 | 101,887 | 273,488 | 943,800 | 3,394,462 | |||||||||||||||||||||||||||||||||||||||||||||
Care UK Health & Social Care Plc, 9.75%, 08/01/17 |
GBP | 65 | 130 | 130 | | | 130 | 455 | 99,348 | 198,696 | 198,696 | | | 198,696 | 695,436 |
See Notes to Pro Forma Condensed Combined Financial Statements.
B-23
Pro Forma Condensed Combined Schedule of Investments for
BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE),
BlackRock Corporate High Yield Fund V, Inc. (HYV), BlackRock High Yield Trust (BHY),
BlackRock High Income Shares (HIS) and BlackRock Corporate High Yield Fund VI, Inc. (HYT)
As of February 28, 2013 (Unaudited)
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
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Corporate Bonds | Par (000) | Value | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Health Care Providers & Services (continued) |
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CHS/Community Health Systems, Inc., 5.13%, 08/15/18 |
USD | 785 | 785 | 1,180 | 140 | 395 | 1,180 | 4,465 | $ | 825,231 | $ | 825,231 | $ | 1,240,475 | $ | 147,175 | $ | 415,244 | $ | 1,240,475 | $ | 4,693,831 | ||||||||||||||||||||||||||||||||||||||
CHS/Community Health Systems, Inc., 7.13%, 07/15/20 |
USD | 415 | 456 | 669 | 75 | 202 | 703 | 2,520 | 447,163 | 491,340 | 720,848 | 80,812 | 217,655 | 757,482 | 2,715,300 | |||||||||||||||||||||||||||||||||||||||||||||
ConvaTec Healthcare E SA, 7.38%, 12/15/17 (b) |
EUR | 400 | 494 | 694 | | 200 | 694 | 2,482 | 553,553 | 683,638 | 960,414 | | 276,776 | 960,414 | 3,434,795 | |||||||||||||||||||||||||||||||||||||||||||||
Crown Newco 3 Plc, 7.00%, 02/15/18 |
GBP | 100 | 100 | 200 | 100 | | 200 | 700 | 156,635 | 156,635 | 313,271 | 156,635 | | 313,271 | 1,096,447 | |||||||||||||||||||||||||||||||||||||||||||||
Crown Newco 3 Plc, 7.00%, 02/15/18 (b) |
GBP | 331 | 364 | 547 | | 200 | 575 | 2,017 | 518,463 | 570,153 | 856,796 | | 313,271 | 900,654 | 3,159,337 | |||||||||||||||||||||||||||||||||||||||||||||
DaVita HealthCare Partners, Inc., 5.75%, 08/15/22 |
USD | 819 | 893 | 1,319 | 148 | 393 | 1,376 | 4,948 | 853,808 | 930,953 | 1,375,057 | 154,290 | 409,702 | 1,434,480 | 5,158,290 | |||||||||||||||||||||||||||||||||||||||||||||
HCA Holdings, Inc., 6.25%, 02/15/21 |
USD | 1,010 | 1,096 | 1,619 | 183 | 540 | 1,688 | 6,136 | 1,065,550 | 1,156,280 | 1,708,045 | 193,065 | 569,700 | 1,780,840 | 6,473,480 | |||||||||||||||||||||||||||||||||||||||||||||
HCA, Inc., 8.50%, 04/15/19 |
USD | 120 | 135 | 200 | 25 | 60 | 205 | 745 | 132,900 | 149,513 | 221,500 | 27,688 | 66,450 | 227,038 | 825,089 | |||||||||||||||||||||||||||||||||||||||||||||
HCA, Inc., 7.88%, 02/15/20 |
USD | 255 | 275 | 405 | 145 | 40 | 430 | 1,550 | 282,731 | 304,906 | 449,044 | 160,769 | 44,350 | 476,762 | 1,718,562 | |||||||||||||||||||||||||||||||||||||||||||||
HCA, Inc., 6.50%, 02/15/20 (b) |
USD | 1,880 | 2,045 | 3,030 | 370 | 1,010 | 3,190 | 11,525 | 2,105,600 | 2,290,400 | 3,393,600 | 414,400 | 1,131,200 | 3,572,800 | 12,908,000 | |||||||||||||||||||||||||||||||||||||||||||||
HCA, Inc., 7.25%, 09/15/20 |
USD | 2,225 | 2,410 | 3,560 | 410 | 1,400 | 3,720 | 13,725 | 2,469,750 | 2,675,100 | 3,951,600 | 455,100 | 1,554,000 | 4,129,200 | 15,234,750 | |||||||||||||||||||||||||||||||||||||||||||||
HCA, Inc., 5.88%, 03/15/22 |
USD | 200 | 220 | 325 | 35 | | 340 | 1,120 | 215,500 | 237,050 | 350,188 | 37,713 | | 366,350 | 1,206,801 | |||||||||||||||||||||||||||||||||||||||||||||
HCA, Inc., 4.75%, 05/01/23 |
USD | 985 | 1,041 | 1,544 | 185 | 660 | 1,645 | 6,060 | 982,538 | 1,038,397 | 1,540,140 | 184,537 | 658,350 | 1,640,887 | 6,044,849 | |||||||||||||||||||||||||||||||||||||||||||||
Hologic, Inc., 6.25%, 08/01/20 (b) |
USD | 1,464 | 1,897 | 2,366 | 158 | 703 | 2,475 | 9,063 | 1,544,520 | 2,001,335 | 2,496,130 | 166,690 | 741,665 | 2,611,125 | 9,561,465 | |||||||||||||||||||||||||||||||||||||||||||||
IASIS Healthcare LLC, 8.38%, 05/15/19 |
USD | 596 | 646 | 965 | 110 | 286 | 953 | 3,556 | 613,880 | 665,380 | 993,950 | 113,300 | 294,580 | 981,590 | 3,662,680 | |||||||||||||||||||||||||||||||||||||||||||||
INC Research LLC, 11.50%, 07/15/19 (b) |
USD | 320 | 350 | 516 | 59 | 302 | 546 | 2,093 | 341,600 | 373,625 | 550,830 | 62,983 | 322,385 | 582,855 | 2,234,278 |
See Notes to Pro Forma Condensed Combined Financial Statements.
B-24
Pro Forma Condensed Combined Schedule of Investments for
BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE),
BlackRock Corporate High Yield Fund V, Inc. (HYV), BlackRock High Yield Trust (BHY),
BlackRock High Income Shares (HIS) and BlackRock Corporate High Yield Fund VI, Inc. (HYT)
As of February 28, 2013 (Unaudited)
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
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Corporate Bonds | Par (000) | Value | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Health Care Providers & Services (continued) |
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inVentiv Health, Inc., 9.00%, 01/15/18 (b) |
USD | 580 | 630 | 930 | 100 | 280 | 970 | 3,490 | $ | 604,650 | $ | 656,775 | $ | 969,525 | $ | 104,250 | $ | 291,900 | $ | 1,011,225 | $ | 3,638,325 | ||||||||||||||||||||||||||||||||||||||
inVentiv Health, Inc., 11.00%, 08/15/18 (b) |
USD | | | | 5 | | | 5 | | | | 4,338 | | | 4,338 | |||||||||||||||||||||||||||||||||||||||||||||
Omnicare, Inc., 7.75%, 06/01/20 |
USD | 905 | 1,005 | 1,460 | 160 | 450 | 1,520 | 5,500 | 1,004,550 | 1,115,550 | 1,620,600 | 177,600 | 499,500 | 1,687,200 | 6,105,000 | |||||||||||||||||||||||||||||||||||||||||||||
Omnicare, Inc., 3.75%,
|
USD | 148 | 161 | 236 | 27 | 69 | 247 | 888 | 154,290 | 167,843 | 246,030 | 28,148 | 71,933 | 257,498 | 925,742 | |||||||||||||||||||||||||||||||||||||||||||||
Symbion, Inc., 8.00%, 06/15/16 |
USD | 315 | 345 | 510 | 55 | 155 | 535 | 1,915 | 329,175 | 360,525 | 532,950 | 57,475 | 161,975 | 559,075 | 2,001,175 | |||||||||||||||||||||||||||||||||||||||||||||
Tenet Healthcare Corp., 6.25%, 11/01/18 |
USD | 979 | 1,075 | 1,579 | 177 | 474 | 1,658 | 5,942 | 1,084,242 | 1,190,562 | 1,748,742 | 196,027 | 524,955 | 1,836,235 | 6,580,763 | |||||||||||||||||||||||||||||||||||||||||||||
Tenet Healthcare Corp., 8.88%, 07/01/19 |
USD | 2,355 | 2,624 | 4,505 | 360 | 1,260 | 3,970 | 15,074 | 2,661,150 | 2,965,120 | 5,090,650 | 406,800 | 1,423,800 | 4,486,100 | 17,033,620 | |||||||||||||||||||||||||||||||||||||||||||||
Tenet Healthcare Corp., 6.75%, 02/01/20 |
USD | 480 | 525 | 775 | 90 | 230 | 810 | 2,910 | 513,600 | 561,750 | 829,250 | 96,300 | 246,100 | 866,700 | 3,113,700 | |||||||||||||||||||||||||||||||||||||||||||||
Tenet Healthcare Corp., 4.50%, 04/01/21 (b) |
USD | 661 | 722 | 1,059 | 118 | 312 | 1,108 | 3,980 | 651,911 | 712,073 | 1,044,439 | 116,377 | 307,710 | 1,092,765 | 3,925,275 | |||||||||||||||||||||||||||||||||||||||||||||
Vanguard Health Holding Co. II LLC, 8.00%, 02/01/18 |
USD | 223 | 243 | 357 | 40 | 104 | 374 | 1,341 | 237,495 | 258,795 | 380,205 | 42,600 | 110,760 | 398,310 | 1,428,165 | |||||||||||||||||||||||||||||||||||||||||||||
Vanguard Health Holding Co. II LLC, 7.75%, 02/01/19 (b) |
USD | 425 | 465 | 685 | 75 | 205 | 720 | 2,575 | 455,281 | 498,131 | 733,806 | 80,344 | 219,606 | 771,300 | 2,758,468 | |||||||||||||||||||||||||||||||||||||||||||||
Voyage Care Bondco Plc, 6.50%, 08/01/18 |
GBP | 110 | 130 | 170 | | | 180 | 590 | 169,796 | 200,668 | 262,412 | | | 277,848 | 910,724 | |||||||||||||||||||||||||||||||||||||||||||||
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21,632,610 | 24,047,749 | 35,685,455 | 3,767,303 | 11,147,055 | 36,362,975 | 132,643,147 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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See Notes to Pro Forma Condensed Combined Financial Statements.
B-25
Pro Forma Condensed Combined Schedule of Investments for
BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE),
BlackRock Corporate High Yield Fund V, Inc. (HYV), BlackRock High Yield Trust (BHY),
BlackRock High Income Shares (HIS) and BlackRock Corporate High Yield Fund VI, Inc. (HYT)
As of February 28, 2013 (Unaudited)
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
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Corporate Bonds | Par (000) | Value | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Health Care Technology - 1.0% |
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IMS Health, Inc., 12.50%,
|
USD | 2,065 | 2,225 | 3,290 | 410 | 1,125 | 3,480 | 12,595 | $ | 2,488,325 | $ | 2,681,125 | $ | 3,964,450 | $ | 494,050 | $ | 1,355,625 | $ | 4,193,400 | $ | 15,176,975 | ||||||||||||||||||||||||||||||||||||||
IMS Health, Inc., 6.00%,
|
USD | 132 | 143 | 212 | 24 | 63 | 221 | 795 | 137,280 | 148,720 | 220,480 | 24,960 | 65,520 | 229,840 | 826,800 | |||||||||||||||||||||||||||||||||||||||||||||
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2,625,605 | 2,829,845 | 4,184,930 | 519,010 | 1,421,145 | 4,423,240 | 16,003,775 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Hotels, Restaurants & Leisure - 3.3% |
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Caesars Entertainment Operating Co., Inc., 10.00%, 12/15/15 |
USD | | | | | 389 | | 389 | | | | | 353,990 | | 353,990 | |||||||||||||||||||||||||||||||||||||||||||||
Caesars Entertainment Operating Co., Inc., 10.00%, 12/15/18 |
USD | 541 | 495 | 732 | 96 | 335 | 765 | 2,964 | 357,060 | 326,700 | 483,120 | 63,360 | 221,100 | 504,900 | 1,956,240 | |||||||||||||||||||||||||||||||||||||||||||||
Caesars Entertainment Operating Co., Inc., 8.50%, 02/15/20 |
USD | 183 | 200 | 298 | 36 | 88 | 311 | 1,116 | 178,425 | 195,000 | 290,550 | 35,100 | 85,800 | 303,225 | 1,088,100 | |||||||||||||||||||||||||||||||||||||||||||||
Caesars Entertainment Operating Co., Inc., 9.00%, 02/15/20 (b) |
USD | | | | | 382 | | 382 | | | | | 377,225 | | 377,225 | |||||||||||||||||||||||||||||||||||||||||||||
Caesars Operating Escrow LLC, 9.00%, 02/15/20 (b) |
USD | 931 | 1,016 | 1,484 | 167 | 431 | 1,556 | 5,585 | 919,362 | 1,003,300 | 1,465,450 | 164,913 | 425,612 | 1,536,550 | 5,515,187 | |||||||||||||||||||||||||||||||||||||||||||||
Carlson Wagonlit BV, 6.88%, 06/15/19 (b) |
USD | 295 | 325 | 485 | | 200 | 510 | 1,815 | 308,275 | 339,625 | 506,825 | | 209,000 | 532,950 | 1,896,675 | |||||||||||||||||||||||||||||||||||||||||||||
Cirsa Funding Luxembourg SA, 8.75%, 05/15/18 |
EUR | 453 | 480 | 680 | | | 714 | 2,327 | 579,586 | 614,130 | 870,018 | | | 913,519 | 2,977,253 | |||||||||||||||||||||||||||||||||||||||||||||
Diamond Resorts Corp., 12.00%, 08/15/18 |
USD | 1,100 | 1,190 | 1,770 | 200 | 550 | 1,860 | 6,670 | 1,210,000 | 1,309,000 | 1,947,000 | 220,000 | 605,000 | 2,046,000 | 7,337,000 | |||||||||||||||||||||||||||||||||||||||||||||
El Dorado Resorts LLC, 8.63%, 06/15/19 (b) |
USD | 125 | 140 | 200 | 25 | 60 | 210 | 760 | 124,219 | 139,125 | 198,750 | 24,844 | 59,625 | 208,688 | 755,251 | |||||||||||||||||||||||||||||||||||||||||||||
Enterprise Inns Plc, 6.50%, 12/06/18 |
GBP | 296 | 324 | 477 | | | 501 | 1,598 | 441,188 | 482,923 | 710,969 | | | 746,741 | 2,381,821 | |||||||||||||||||||||||||||||||||||||||||||||
Gategroup Finance Luxembourg SA, 6.75%, 03/01/19 |
EUR | 250 | 265 | 453 | | | 455 | 1,423 | 336,179 | 356,350 | 609,156 | | | 611,846 | 1,913,531 |
See Notes to Pro Forma Condensed Combined Financial Statements.
B-26
Pro Forma Condensed Combined Schedule of Investments for
BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE),
BlackRock Corporate High Yield Fund V, Inc. (HYV), BlackRock High Yield Trust (BHY),
BlackRock High Income Shares (HIS) and BlackRock Corporate High Yield Fund VI, Inc. (HYT)
As of February 28, 2013 (Unaudited)
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
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Corporate Bonds | Par (000) | Value | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Hotels, Restaurants & Leisure (continued) |
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Little Traverse Bay Bands of Odawa Indians, 9.00%, 08/31/20 (b) |
USD | 270 | 300 | 433 | | | 441 | 1,444 | $ | 259,200 | $ | 288,000 | $ | 415,680 | | | $ | 423,360 | $ | 1,386,240 | ||||||||||||||||||||||||||||||||||||||||
MCE Finance Ltd., 5.00%, 02/15/21 (b) |
USD | 620 | 677 | 998 | 200 | | 1,044 | 3,539 | 620,000 | 677,000 | 998,000 | $ | 200,000 | | 1,044,000 | 3,539,000 | ||||||||||||||||||||||||||||||||||||||||||||
MTR Gaming Group, Inc., 11.50%, 08/01/19 (g) |
USD | 136 | 151 | 221 | 25 | 65 | 231 | 829 | 141,102 | 156,780 | 229,944 | 26,130 | $ | 67,938 | 240,396 | 862,290 | ||||||||||||||||||||||||||||||||||||||||||||
Regal Entertainment Group, 5.75%, 02/01/25 |
USD | 241 | 260 | 385 | 44 | 112 | 401 | 1,443 | 236,180 | 254,800 | 377,300 | 43,120 | 109,760 | 392,980 | 1,414,140 | |||||||||||||||||||||||||||||||||||||||||||||
Six Flags Entertainment Corp., 5.25%, 01/15/21 (b) |
USD | 547 | 600 | 882 | 100 | 200 | 918 | 3,247 | 536,060 | 588,000 | 864,360 | 98,000 | 196,000 | 899,640 | 3,182,060 | |||||||||||||||||||||||||||||||||||||||||||||
Station Casinos LLC, 3.66%, 06/18/18 |
USD | 615 | 672 | 991 | 111 | | 1,037 | 3,426 | 615,000 | 672,000 | 991,000 | 111,000 | | 1,037,000 | 3,426,000 | |||||||||||||||||||||||||||||||||||||||||||||
Station Casinos LLC, 7.50%, 03/01/21 (b)(f) |
USD | 1,080 | 1,178 | 1,730 | 194 | | 1,810 | 5,992 | 1,086,750 | 1,185,362 | 1,740,813 | 195,212 | | 1,821,312 | 6,029,449 | |||||||||||||||||||||||||||||||||||||||||||||
Travelport LLC, 4.91%, 09/01/14 (d) |
USD | 165 | 180 | 245 | 20 | 85 | 235 | 930 | 150,150 | 163,800 | 222,950 | 18,200 | 77,350 | 213,850 | 846,300 | |||||||||||||||||||||||||||||||||||||||||||||
Travelport LLC, 6.31%, 12/01/16 (b)(g) |
USD | 398 | 433 | 640 | 70 | 197 | 669 | 2,407 | 361,041 | 392,993 | 580,407 | 63,640 | 179,185 | 607,492 | 2,184,758 | |||||||||||||||||||||||||||||||||||||||||||||
Tropicana Entertainment LLC, 9.63%, 12/15/14 (a)(j) |
USD | 315 | 305 | 475 | 25 | 215 | 515 | 1,850 | | | | | | | | |||||||||||||||||||||||||||||||||||||||||||||
The Unique Pub Finance Co. Plc, Series A3 6.54%, 03/30/21 |
GBP | 100 | 100 | 200 | | | 200 | 600 | 151,326 | 151,326 | 302,652 | | | 302,652 | 907,956 | |||||||||||||||||||||||||||||||||||||||||||||
Wynn Las Vegas LLC, 5.38%, 03/15/22 |
USD | 360 | 395 | 579 | 64 | 270 | 605 | 2,273 | 378,450 | 415,244 | 608,674 | 67,280 | 283,838 | 636,006 | 2,389,492 | |||||||||||||||||||||||||||||||||||||||||||||
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8,989,553 | 9,711,458 | 14,413,618 | 1,330,799 | 3,251,423 | 15,023,107 | 52,719,958 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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See Notes to Pro Forma Condensed Combined Financial Statements.
B-27
Pro Forma Condensed Combined Schedule of Investments for
BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE),
BlackRock Corporate High Yield Fund V, Inc. (HYV), BlackRock High Yield Trust (BHY),
BlackRock High Income Shares (HIS) and BlackRock Corporate High Yield Fund VI, Inc. (HYT)
As of February 28, 2013 (Unaudited)
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
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Corporate Bonds | Par (000) | Value | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Household Durables - 2.7% |
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Algeco Scotsman Global Finance Plc, 9.00%, 10/15/18 |
EUR | 100 | 100 | 205 | | | 206 | 611 | $ | 135,777 | $ | 135,777 | $ | 278,343 | | | $ | 279,701 | $ | 829,598 | ||||||||||||||||||||||||||||||||||||||||
Ashton Woods USA LLC/Ashton Woods Finance Corp., 6.88%, 02/15/21 (b) |
USD | 210 | 228 | 336 | 38 | 98 | 352 | 1,262 | 211,050 | 229,140 | 337,680 | $ | 38,190 | $ | 98,490 | 353,760 | 1,268,310 | |||||||||||||||||||||||||||||||||||||||||||
Beazer Homes USA, Inc., 6.63%, 04/15/18 |
USD | 30 | 50 | 55 | 10 | 15 | 55 | 215 | 32,062 | 53,438 | 58,781 | 10,687 | 16,031 | 58,781 | 229,780 | |||||||||||||||||||||||||||||||||||||||||||||
Brookfield Residential Properties, Inc., 6.50%, 12/15/20 (b) |
USD | 375 | 410 | 605 | 70 | 180 | 635 | 2,275 | 397,500 | 434,600 | 641,300 | 74,200 | 190,800 | 673,100 | 2,411,500 | |||||||||||||||||||||||||||||||||||||||||||||
Jarden Corp., 8.00%, 05/01/16 |
USD | | | | 40 | | | 40 | | | | 41,950 | | | 41,950 | |||||||||||||||||||||||||||||||||||||||||||||
Jarden Corp., 7.50%, 01/15/20 |
EUR | 285 | 305 | 447 | | 140 | 455 | 1,632 | 400,918 | 429,053 | 628,808 | | 196,942 | 640,062 | 2,295,783 | |||||||||||||||||||||||||||||||||||||||||||||
K. Hovnanian Enterprises, Inc., 7.25%, 10/15/20 (b) |
USD | 870 | 950 | 1,400 | 160 | 415 | 1,465 | 5,260 | 957,000 | 1,045,000 | 1,540,000 | 176,000 | 456,500 | 1,611,500 | 5,786,000 | |||||||||||||||||||||||||||||||||||||||||||||
Libbey Glass, Inc., 6.88%, 05/15/20 |
USD | 560 | 610 | 905 | 100 | 270 | 945 | 3,390 | 600,600 | 654,225 | 970,613 | 107,250 | 289,575 | 1,013,512 | 3,635,775 | |||||||||||||||||||||||||||||||||||||||||||||
PH Holding LLC, 9.75%, 12/31/17 |
USD | 315 | 345 | 510 | 55 | 150 | 535 | 1,910 | 308,700 | 338,100 | 499,800 | 53,900 | 147,000 | 524,300 | 1,871,800 | |||||||||||||||||||||||||||||||||||||||||||||
Pulte Group, Inc., 6.38%, 05/15/33 |
USD | 175 | 190 | 280 | 30 | 85 | 290 | 1,050 | 177,625 | 192,850 | 284,200 | 30,450 | 86,275 | 294,350 | 1,065,750 | |||||||||||||||||||||||||||||||||||||||||||||
The Ryland Group, Inc., 6.63%, 05/01/20 |
USD | 315 | 340 | 500 | 60 | 160 | 525 | 1,900 | 346,500 | 374,000 | 550,000 | 66,000 | 176,000 | 577,500 | 2,090,000 | |||||||||||||||||||||||||||||||||||||||||||||
Spie BondCo 3 SCA, 11.00%, 08/15/19 |
EUR | 276 | 303 | 339 | 100 | | 264 | 1,282 | 401,770 | 441,073 | 493,478 | 145,569 | | 384,302 | 1,866,192 | |||||||||||||||||||||||||||||||||||||||||||||
Standard Pacific Corp., 10.75%, 09/15/16 |
USD | 1,185 | 1,290 | 2,050 | 300 | 890 | 2,185 | 7,900 | 1,475,325 | 1,606,050 | 2,552,250 | 373,500 | 1,108,050 | 2,720,325 | 9,835,500 | |||||||||||||||||||||||||||||||||||||||||||||
Standard Pacific Corp., 8.38%, 01/15/21 |
USD | 880 | 970 | 1,450 | 170 | 440 | 1,510 | 5,420 | 1,045,000 | 1,151,875 | 1,721,875 | 201,875 | 522,500 | 1,793,125 | 6,436,250 | |||||||||||||||||||||||||||||||||||||||||||||
United Rentals North America, Inc., 5.75%, 07/15/18 |
USD | 236 | 257 | 379 | 43 | 114 | 398 | 1,427 | 253,995 | 276,596 | 407,899 | 46,279 | 122,693 | 428,348 | 1,535,810 |
See Notes to Pro Forma Condensed Combined Financial Statements.
B-28
Pro Forma Condensed Combined Schedule of Investments for
BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE),
BlackRock Corporate High Yield Fund V, Inc. (HYV), BlackRock High Yield Trust (BHY),
BlackRock High Income Shares (HIS) and BlackRock Corporate High Yield Fund VI, Inc. (HYT)
As of February 28, 2013 (Unaudited)
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
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Corporate Bonds | Par (000) | Value | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Household Durables (continued) |
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William Lyon Homes, Inc., 8.50%, 11/15/20 (b) |
USD | 275 | 300 | 445 | | 130 | 470 | 1,620 | $ | 295,625 | $ | 322,500 | $ | 478,375 | | $ | 139,750 | $ | 505,250 | $ | 1,741,500 | |||||||||||||||||||||||||||||||||||||||
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7,039,447 | 7,684,277 | 11,443,402 | $ | 1,365,850 | 3,550,606 | 11,857,916 | 42,941,498 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
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Household Products - 0.8% |
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Ontex IV SA, 7.50%, 04/15/18 |
EUR | 100 | 100 | 100 | | | 100 | 400 | 135,777 | 135,777 | 135,777 | | | 135,777 | 543,108 | |||||||||||||||||||||||||||||||||||||||||||||
Ontex IV SA, 7.50%, 04/15/18 (b) |
EUR | 130 | 150 | 220 | 100 | 100 | 220 | 920 | 176,510 | 203,666 | 298,710 | 135,777 | 135,777 | 298,710 | 1,249,150 | |||||||||||||||||||||||||||||||||||||||||||||
Ontex IV SA, 9.00%, 04/15/19 |
EUR | 213 | 213 | 321 | | | 316 | 1,063 | 285,034 | 285,034 | 429,559 | | | 422,867 | 1,422,494 | |||||||||||||||||||||||||||||||||||||||||||||
Spectrum Brands, Inc., 9.50%, 06/15/18 |
USD | 330 | 950 | 1,395 | 160 | 430 | 1,470 | 4,735 | 374,138 | 1,077,062 | 1,581,581 | 181,400 | 487,512 | 1,666,612 | 5,368,305 | |||||||||||||||||||||||||||||||||||||||||||||
Spectrum Brands Escrow Corp., 6.38%, 11/15/20 (b) |
USD | 351 | 384 | 568 | 63 | 167 | 592 | 2,125 | 373,376 | 408,480 | 604,210 | 67,016 | 177,646 | 629,740 | 2,260,468 | |||||||||||||||||||||||||||||||||||||||||||||
Spectrum Brands Escrow Corp., 6.63%, 11/15/22 (b) |
USD | 230 | 250 | 370 | 40 | 110 | 385 | 1,385 | 247,825 | 269,375 | 398,675 | 43,100 | 118,525 | 414,838 | 1,492,338 | |||||||||||||||||||||||||||||||||||||||||||||
Spectrum Brands, Inc., 6.75%, 03/15/20 (b) |
USD | 89 | 96 | 142 | 17 | 43 | 148 | 535 | 95,898 | 103,440 | 153,005 | 18,318 | 46,333 | 159,470 | 576,464 | |||||||||||||||||||||||||||||||||||||||||||||
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1,688,558 | 2,482,834 | 3,601,517 | 445,611 | 965,793 | 3,728,014 | 12,912,327 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Independent Power Producers & Energy Traders - 3.8% |
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AES Corp., 7.38%, 07/01/21 |
USD | 250 | 275 | 405 | 45 | 125 | 425 | 1,525 | 282,500 | 310,750 | 457,650 | 50,850 | 141,250 | 480,250 | 1,723,250 | |||||||||||||||||||||||||||||||||||||||||||||
Calpine Corp., 7.25%, 10/15/17 (b) |
USD | 149 | 162 | 238 | 27 | 72 | 247 | 895 | 158,499 | 172,328 | 253,172 | 28,721 | 76,590 | 262,746 | 952,056 | |||||||||||||||||||||||||||||||||||||||||||||
Calpine Corp., 7.50%, 02/15/21 (b) |
USD | 85 | 90 | 135 | 13 | 40 | 144 | 507 | 92,438 | 97,875 | 146,812 | 14,138 | 43,500 | 156,600 | 551,363 | |||||||||||||||||||||||||||||||||||||||||||||
Calpine Corp., 7.88%, 01/15/23 (b) |
USD | 364 | 401 | 590 | 63 | 180 | 612 | 2,210 | 403,130 | 444,107 | 653,425 | 69,773 | 199,350 | 677,790 | 2,447,575 | |||||||||||||||||||||||||||||||||||||||||||||
Energy Future Intermediate Holding Co. LLC, 6.88%, 08/15/17 (b) |
USD | 690 | 755 | 1,115 | 125 | 330 | 1,170 | 4,185 | 727,950 | 796,525 | 1,176,325 | 131,875 | 348,150 | 1,234,350 | 4,415,175 |
See Notes to Pro Forma Condensed Combined Financial Statements.
B-29
Pro Forma Condensed Combined Schedule of Investments for
BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE),
BlackRock Corporate High Yield Fund V, Inc. (HYV), BlackRock High Yield Trust (BHY),
BlackRock High Income Shares (HIS) and BlackRock Corporate High Yield Fund VI, Inc. (HYT)
As of February 28, 2013 (Unaudited)
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
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Corporate Bonds | Par (000) | Value | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Independent Power Producers & Energy Traders (continued) |
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Energy Future Intermediate Holding Co. LLC, 10.00%, 12/01/20 |
USD | 2,476 | 2,391 | 3,357 | 508 | 1,936 | 3,696 | 14,364 | $ | 2,810,260 | $ | 2,713,785 | $ | 3,810,195 | $ | 576,580 | $ | 2,197,360 | $ | 4,194,960 | $ | 16,303,140 | ||||||||||||||||||||||||||||||||||||||
Energy Future Intermediate Holding Co. LLC, 10.00%, 12/01/20 (b) |
USD | 1,325 | 1,440 | 2,090 | 265 | 670 | 2,210 | 8,000 | 1,493,937 | 1,623,600 | 2,356,475 | 298,787 | 755,425 | 2,491,775 | 9,019,999 | |||||||||||||||||||||||||||||||||||||||||||||
GenOn REMA LLC, Series B 9.24%, 07/02/17 |
USD | 222 | 242 | 357 | 70 | 107 | 375 | 1,373 | 245,081 | 266,308 | 393,673 | 77,191 | 117,716 | 412,970 | 1,512,939 | |||||||||||||||||||||||||||||||||||||||||||||
GenOn REMA LLC, Series C 9.68%, 07/02/26 |
USD | 280 | 305 | 445 | | 135 | 465 | 1,630 | 305,200 | 332,450 | 485,050 | | 147,150 | 506,850 | 1,776,700 | |||||||||||||||||||||||||||||||||||||||||||||
Laredo Petroleum, Inc., 9.50%, 02/15/19 |
USD | 445 | 485 | 730 | 90 | 340 | 765 | 2,855 | 502,850 | 548,050 | 824,900 | 101,700 | 384,200 | 864,450 | 3,226,150 | |||||||||||||||||||||||||||||||||||||||||||||
Laredo Petroleum, Inc., 7.38%, 05/01/22 |
USD | 345 | 370 | 550 | 60 | 165 | 575 | 2,065 | 374,325 | 401,450 | 596,750 | 65,100 | 179,025 | 623,875 | 2,240,525 | |||||||||||||||||||||||||||||||||||||||||||||
NRG Energy, Inc., 7.63%, 01/15/18 |
USD | 1,394 | 1,526 | 2,243 | 253 | 661 | 2,345 | 8,422 | 1,597,872 | 1,749,177 | 2,571,039 | 290,001 | 757,671 | 2,687,956 | 9,653,716 | |||||||||||||||||||||||||||||||||||||||||||||
NRG Energy, Inc., 6.63%, 03/15/23 (b) |
USD | 595 | 660 | 965 | 105 | 285 | 1,010 | 3,620 | 633,675 | 702,900 | 1,027,725 | 111,825 | 303,525 | 1,075,650 | 3,855,300 | |||||||||||||||||||||||||||||||||||||||||||||
QEP Resources, Inc., 5.38%, 10/01/22 |
USD | 305 | 333 | 488 | 56 | 148 | 513 | 1,843 | 319,487 | 348,818 | 511,180 | 58,660 | 155,030 | 537,368 | 1,930,543 | |||||||||||||||||||||||||||||||||||||||||||||
QEP Resources, Inc., 5.25%, 05/01/23 |
USD | 235 | 255 | 380 | 40 | 115 | 395 | 1,420 | 243,225 | 263,925 | 393,300 | 41,400 | 119,025 | 408,825 | 1,469,700 | |||||||||||||||||||||||||||||||||||||||||||||
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10,190,429 | 10,772,048 | 15,657,671 | 1,916,601 | 5,924,967 | 16,616,415 | 61,078,131 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Industrial Conglomerates - 0.2% |
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Sequa Corp., 7.00%, 12/15/17 (b) |
USD | 525 | 580 | 850 | 100 | 250 | 890 | 3,195 | 528,938 | 584,350 | 856,375 | 100,750 | 251,875 | 896,675 | 3,218,963 | |||||||||||||||||||||||||||||||||||||||||||||
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Insurance - 0.6% |
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Alliant Holdings, 7.88%, 12/15/20 |
USD | 1,035 | 1,120 | 1,661 | 186 | 499 | 1,731 | 6,232 | 1,040,175 | 1,125,600 | 1,669,305 | 186,930 | 501,495 | 1,739,655 | 6,263,160 | |||||||||||||||||||||||||||||||||||||||||||||
CNO Financial Group, Inc., 6.38%, 10/01/20 (b) |
USD | 206 | 225 | 332 | 37 | 98 | 346 | 1,244 | 218,360 | 238,500 | 351,920 | 39,220 | 103,880 | 366,760 | 1,318,640 |
See Notes to Pro Forma Condensed Combined Financial Statements.
B-30
Pro Forma Condensed Combined Schedule of Investments for
BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE),
BlackRock Corporate High Yield Fund V, Inc. (HYV), BlackRock High Yield Trust (BHY),
BlackRock High Income Shares (HIS) and BlackRock Corporate High Yield Fund VI, Inc. (HYT)
As of February 28, 2013 (Unaudited)
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
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Corporate Bonds | Par (000) | Value | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Insurance (continued) |
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MPL 2 Acquisition Canco, Inc., 9.88%, 08/15/18 (b) |
USD | 235 | 260 | 375 | 40 | 120 | 395 | 1,425 | $ | 232,650 | $ | 257,400 | $ | 371,250 | $ | 39,600 | $ | 118,800 | $ | 391,050 | $ | 1,410,750 | ||||||||||||||||||||||||||||||||||||||
TMF Group Holding B.V., 9.88%, 12/01/19 |
EUR | 100 | 100 | 270 | | | 270 | 740 | 131,861 | 131,861 | 356,023 | | | 356,023 | 975,768 | |||||||||||||||||||||||||||||||||||||||||||||
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1,623,045 | 1,753,360 | 2,748,498 | 265,750 | 724,175 | 2,853,488 | 9,968,318 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Internet Software & Services - 0.1% |
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Cerved Technologies SpA, 6.38%, 01/15/20 |
EUR | 100 | 100 | 100 | | | 100 | 400 | 129,902 | 129,902 | 129,902 | | | 129,902 | 519,608 | |||||||||||||||||||||||||||||||||||||||||||||
Cerved Technologies SpA, 8.00%, 01/15/21 |
EUR | 100 | 100 | 100 | | | 100 | 400 | 126,965 | 126,965 | 126,965 | | | 126,965 | 507,860 | |||||||||||||||||||||||||||||||||||||||||||||
Equinix, Inc., 4.88%, 04/01/20 |
USD | 137 | 149 | 219 | 25 | 64 | 229 | 823 | 137,000 | 149,000 | 219,000 | 25,000 | 64,000 | 229,000 | 823,000 | |||||||||||||||||||||||||||||||||||||||||||||
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393,867 | 405,867 | 475,867 | 25,000 | 64,000 | 485,867 | 1,850,468 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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IT Services - 3.3% |
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Ceridian Corp., 8.88%, 07/15/19 (b) |
USD | 1,150 | 1,260 | 1,855 | 210 | 650 | 1,945 | 7,070 | 1,296,625 | 1,420,650 | 2,091,512 | 236,775 | 732,875 | 2,192,987 | 7,971,424 | |||||||||||||||||||||||||||||||||||||||||||||
Epicor Software Corp., 8.63%, 05/01/19 |
USD | 510 | 570 | 820 | 87 | 230 | 860 | 3,077 | 549,525 | 614,175 | 883,550 | 93,743 | 247,825 | 926,650 | 3,315,468 | |||||||||||||||||||||||||||||||||||||||||||||
First Data Corp., 7.38%, 06/15/19 (b) |
USD | 1,445 | 1,580 | 2,315 | 265 | 895 | 2,430 | 8,930 | 1,519,056 | 1,660,975 | 2,433,644 | 278,581 | 940,869 | 2,554,537 | 9,387,662 | |||||||||||||||||||||||||||||||||||||||||||||
First Data Corp., 6.75%, 11/01/20 (b) |
USD | 1,750 | 1,906 | 2,793 | 326 | 1,131 | 2,927 | 10,833 | 1,795,937 | 1,956,032 | 2,866,316 | 334,557 | 1,160,689 | 3,003,834 | 11,117,365 | |||||||||||||||||||||||||||||||||||||||||||||
First Data Corp., 8.88%, 08/15/20 (b) |
USD | 495 | 535 | 795 | 90 | | 830 | 2,745 | 546,975 | 591,175 | 878,475 | 99,450 | | 917,150 | 3,033,225 | |||||||||||||||||||||||||||||||||||||||||||||
First Data Corp., 8.25%, 01/15/21 (b) |
USD | 117 | 130 | 186 | 20 | 58 | 190 | 701 | 119,633 | 132,925 | 190,185 | 20,450 | 59,305 | 194,275 | 716,773 | |||||||||||||||||||||||||||||||||||||||||||||
First Data Corp., 11.25%, 01/15/21 (b) |
USD | 457 | 499 | 733 | 82 | 214 | 766 | 2,751 | 466,140 | 508,980 | 747,660 | 83,640 | 218,280 | 781,320 | 2,806,020 | |||||||||||||||||||||||||||||||||||||||||||||
First Data Corp., 12.63%, 01/15/21 |
USD | 750 | 836 | 1,170 | 181 | 365 | 1,244 | 4,546 | 799,687 | 891,385 | 1,247,512 | 192,991 | 389,181 | 1,326,415 | 4,847,171 | |||||||||||||||||||||||||||||||||||||||||||||
SunGard Data Systems, Inc., 7.38%, 11/15/18 |
USD | 500 | 550 | 810 | 150 | 250 | 840 | 3,100 | 536,875 | 590,563 | 869,738 | 161,062 | 268,437 | 901,950 | 3,328,625 | |||||||||||||||||||||||||||||||||||||||||||||
SunGard Data Systems, Inc., 6.63%, 11/01/19 (b) |
USD | 735 | 805 | 1,190 | 130 | 350 | 1,240 | 4,450 | 755,213 | 827,137 | 1,222,725 | 133,575 | 359,625 | 1,274,100 | 4,572,375 |
See Notes to Pro Forma Condensed Combined Financial Statements.
B-31
Pro Forma Condensed Combined Schedule of Investments for
BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE),
BlackRock Corporate High Yield Fund V, Inc. (HYV), BlackRock High Yield Trust (BHY),
BlackRock High Income Shares (HIS) and BlackRock Corporate High Yield Fund VI, Inc. (HYT)
As of February 28, 2013 (Unaudited)
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
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Corporate Bonds | Par (000) | Value | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
IT Services (continued) |
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WEX, Inc., 4.75%, 02/01/23 (b) |
USD | 453 | 495 | 726 | 81 | 214 | 759 | 2,728 | $ | 438,278 | $ | 478,913 | $ | 702,405 | $ | 78,368 | $ | 207,045 | $ | 734,333 | $ | 2,639,342 | ||||||||||||||||||||||||||||||||||||||
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8,823,944 | 9,672,910 | 14,133,722 | 1,713,192 | 4,584,131 | 14,807,551 | 53,735,450 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Machinery - 1.7% |
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Dematic SA, 7.75%, 12/15/20 (b) |
USD | 85 | 93 | 137 | 15 | 40 | 144 | 514 | 86,913 | 95,093 | 140,083 | 15,338 | 40,900 | 147,240 | 525,567 | |||||||||||||||||||||||||||||||||||||||||||||
Silver II Borrower/Silver II US Holdings LLC, 7.75%, 12/15/20 (b) |
USD | 258 | 282 | 417 | | 150 | 434 | 1,541 | 268,320 | 293,280 | 433,680 | | 156,000 | 451,360 | 1,602,640 | |||||||||||||||||||||||||||||||||||||||||||||
SPX Corp., 6.88%, 09/01/17 |
USD | 160 | 175 | 260 | 30 | 80 | 275 | 980 | 178,800 | 195,563 | 290,550 | 33,525 | 89,400 | 307,313 | 1,095,151 | |||||||||||||||||||||||||||||||||||||||||||||
Terex Corp., 6.00%, 05/15/21 |
USD | 430 | 475 | 700 | 75 | 205 | 730 | 2,615 | 446,125 | 492,812 | 726,250 | 77,812 | 212,687 | 757,375 | 2,713,061 | |||||||||||||||||||||||||||||||||||||||||||||
The Manitowoc Co., Inc., 5.88%, 10/15/22 |
USD | 435 | 475 | 705 | 80 | 205 | 735 | 2,635 | 445,875 | 486,875 | 722,625 | 82,000 | 210,125 | 753,375 | 2,700,875 | |||||||||||||||||||||||||||||||||||||||||||||
Trinseo Materials Operating SCA, 8.75%, 02/01/19 (b) |
USD | 378 | 413 | 606 | 67 | 178 | 634 | 2,276 | 376,582 | 411,451 | 603,727 | 66,749 | 177,333 | 631,622 | 2,267,464 | |||||||||||||||||||||||||||||||||||||||||||||
UR Merger Sub Corp., 7.38%, 05/15/20 |
USD | 405 | 440 | 655 | 75 | 195 | 675 | 2,445 | 443,475 | 481,800 | 717,225 | 82,125 | 213,525 | 739,125 | 2,677,275 | |||||||||||||||||||||||||||||||||||||||||||||
UR Merger Sub Corp., 7.63%, 04/15/22 |
USD | 1,795 | 1,997 | 2,966 | 421 | 957 | 2,939 | 11,075 | 1,987,962 | 2,211,677 | 3,284,845 | 466,257 | 1,059,877 | 3,254,942 | 12,265,560 | |||||||||||||||||||||||||||||||||||||||||||||
UR Merger Sub Corp., 6.13%, 06/15/23 |
USD | 175 | 190 | 280 | 30 | 85 | 295 | 1,055 | 183,750 | 199,500 | 294,000 | 31,500 | 89,250 | 309,750 | 1,107,750 | |||||||||||||||||||||||||||||||||||||||||||||
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4,417,802 | 4,868,051 | 7,212,985 | 855,306 | 2,249,097 | 7,352,102 | 26,955,343 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Media - 10.0% |
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Affinion Group, Inc., 7.88%, 12/15/18 |
USD | 362 | 395 | 582 | 63 | 177 | 612 | 2,191 | 275,120 | 300,200 | 442,320 | 47,880 | 134,520 | 465,120 | 1,665,160 | |||||||||||||||||||||||||||||||||||||||||||||
AMC Networks, Inc., 7.75%, 07/15/21 |
USD | 205 | 225 | 330 | 40 | 100 | 350 | 1,250 | 232,675 | 255,375 | 374,550 | 45,400 | 113,500 | 397,250 | 1,418,750 | |||||||||||||||||||||||||||||||||||||||||||||
AMC Networks, Inc., 4.75%, 12/15/22 |
USD | 328 | 359 | 529 | 59 | 156 | 552 | 1,983 | 326,770 | 357,654 | 527,016 | 58,779 | 155,415 | 549,930 | 1,975,564 | |||||||||||||||||||||||||||||||||||||||||||||
Cablevision Systems Corp., 5.88%, 09/15/22 |
USD | 490 | 560 | 820 | 95 | 250 | 855 | 3,070 | 475,300 | 543,200 | 795,400 | 92,150 | 242,500 | 829,350 | 2,977,900 | |||||||||||||||||||||||||||||||||||||||||||||
CCO Holdings LLC, 5.25%, 09/30/22 |
USD | 715 | 790 | 1,155 | 140 | 941 | 1,210 | 4,951 | 703,381 | 777,162 | 1,136,231 | 137,725 | 925,709 | 1,190,337 | 4,870,545 | |||||||||||||||||||||||||||||||||||||||||||||
CCO Holdings LLC, 5.13%, 02/15/23 |
USD | 570 | 620 | 920 | 100 | 270 | 955 | 3,435 | 555,750 | 604,500 | 897,000 | 97,500 | 263,250 | 931,125 | 3,349,125 | |||||||||||||||||||||||||||||||||||||||||||||
Cengage Learning Acquisitions, Inc., 11.50%, 04/15/20 (b) |
USD | 537 | 542 | 942 | 99 | 293 | 1,026 | 3,439 | 424,230 | 428,180 | 744,180 | 78,210 | 231,470 | 810,540 | 2,716,810 |
See Notes to Pro Forma Condensed Combined Financial Statements.
B-32
Pro Forma Condensed Combined Schedule of Investments for
BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE),
BlackRock Corporate High Yield Fund V, Inc. (HYV), BlackRock High Yield Trust (BHY),
BlackRock High Income Shares (HIS) and BlackRock Corporate High Yield Fund VI, Inc. (HYT)
As of February 28, 2013 (Unaudited)
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
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Corporate Bonds | Par (000) | Value | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Media (continued) |
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Checkout Holding Corp., 11.47%, 11/15/15 (b)(e) |
USD | 395 | 430 | 639 | 71 | 199 | 667 | 2,401 | $ | 291,806 | $ | 317,662 | $ | 472,061 | $ | 52,451 | $ | 147,011 | $ | 492,746 | $ | 1,773,737 | ||||||||||||||||||||||||||||||||||||||
Cinemark USA, Inc., 8.63%, 06/15/19 |
USD | 200 | 220 | 375 | 35 | 120 | 390 | 1,340 | 221,750 | 243,925 | 415,781 | 38,806 | 133,050 | 432,413 | 1,485,725 | |||||||||||||||||||||||||||||||||||||||||||||
Cinemark USA, Inc., 5.13%, 12/15/22 (b) |
USD | 194 | 213 | 314 | 36 | 93 | 328 | 1,178 | 194,970 | 214,065 | 315,570 | 36,180 | 93,465 | 329,640 | 1,183,890 | |||||||||||||||||||||||||||||||||||||||||||||
Clear Channel Communications, Inc., 9.00%, 03/01/21 |
USD | | | | 76 | | | 76 | | | | 68,780 | | | 68,780 | |||||||||||||||||||||||||||||||||||||||||||||
Clear Channel Communications, Inc., 9.00%, 12/15/19 (b)(f) |
USD | 684 | 748 | 1,101 | 85 | 403 | 1,153 | 4,174 | 636,120 | 695,640 | 1,023,930 | 79,050 | 374,790 | 1,072,290 | 3,881,820 | |||||||||||||||||||||||||||||||||||||||||||||
Clear Channel Worldwide Holdings, Inc., 6.50%, 11/15/22 (b) |
USD | 568 | 621 | 916 | 102 | 271 | 959 | 3,437 | 593,560 | 648,945 | 957,220 | 106,590 | 283,195 | 1,002,155 | 3,591,665 | |||||||||||||||||||||||||||||||||||||||||||||
Clear Channel Worldwide Holdings, Inc., 6.50%, 11/15/22 (b) |
USD | 1,533 | 1,679 | 2,477 | 277 | 732 | 2,589 | 9,287 | 1,613,483 | 1,767,147 | 2,607,042 | 291,542 | 770,430 | 2,724,922 | 9,774,566 | |||||||||||||||||||||||||||||||||||||||||||||
Clear Channel Worldwide Holdings, Inc., Series B 7.63%, 03/15/20 |
USD | 1,039 | 1,127 | 1,677 | 187 | 500 | 1,753 | 6,283 | 1,075,365 | 1,166,445 | 1,735,695 | 193,545 | 517,500 | 1,814,355 | 6,502,905 | |||||||||||||||||||||||||||||||||||||||||||||
DISH DBS Corp., 5.00%, 03/15/23 (b) |
USD | 620 | 680 | 1,000 | 110 | 295 | 1,045 | 3,750 | 615,350 | 674,900 | 992,500 | 109,175 | 292,788 | 1,037,163 | 3,721,876 | |||||||||||||||||||||||||||||||||||||||||||||
DISH DBS Corp., 5.88%, 07/15/22 |
USD | 600 | 1,010 | 1,505 | 250 | 450 | 1,575 | 5,390 | 633,000 | 1,065,550 | 1,587,775 | 263,750 | 474,750 | 1,661,625 | 5,686,450 | |||||||||||||||||||||||||||||||||||||||||||||
Harron Communications LP, 9.13%, 04/01/20 (b) |
USD | 300 | 320 | 470 | 60 | 140 | 500 | 1,790 | 330,000 | 352,000 | 517,000 | 66,000 | 154,000 | 550,000 | 1,969,000 | |||||||||||||||||||||||||||||||||||||||||||||
Intelsat Jackson Holdings SA, 6.63%, 12/15/22 (b) |
USD | 177 | 170 | 259 | 27 | 93 | 312 | 1,038 | 178,328 | 171,275 | 260,943 | 27,203 | 93,698 | 314,340 | 1,045,787 | |||||||||||||||||||||||||||||||||||||||||||||
Intelsat Jackson Holdings SA, 7.25%, 10/15/20 |
USD | 640 | 700 | 1,030 | 110 | 315 | 1,085 | 3,880 | 686,400 | 750,750 | 1,104,675 | 117,975 | 337,838 | 1,163,662 | 4,161,300 | |||||||||||||||||||||||||||||||||||||||||||||
Intelsat Luxembourg SA, 11.25%, 02/04/17 |
USD | 560 | 620 | 910 | 210 | 270 | 950 | 3,520 | 595,000 | 658,750 | 966,875 | 223,125 | 286,875 | 1,009,375 | 3,740,000 | |||||||||||||||||||||||||||||||||||||||||||||
Intelsat Luxembourg SA, 11.50%, 02/04/17 (g) |
USD | 2,056 | 2,245 | 3,306 | 325 | 998 | 3,480 | 12,410 | 2,186,559 | 2,388,417 | 3,517,130 | 346,102 | 1,061,750 | 3,702,329 | 13,202,287 | |||||||||||||||||||||||||||||||||||||||||||||
Interactive Data Corp., 10.25%, 08/01/18 |
USD | 1,235 | 1,345 | 1,990 | 220 | 615 | 2,080 | 7,485 | 1,400,181 | 1,524,894 | 2,256,162 | 249,425 | 697,256 | 2,358,200 | 8,486,118 | |||||||||||||||||||||||||||||||||||||||||||||
The Interpublic Group of Cos., Inc., 10.00%, 07/15/17 |
USD | 315 | 340 | 500 | 55 | 155 | 525 | 1,890 | 339,806 | 366,775 | 539,375 | 59,331 | 167,206 | 566,344 | 2,038,837 |
See Notes to Pro Forma Condensed Combined Financial Statements.
B-33
Pro Forma Condensed Combined Schedule of Investments for
BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE),
BlackRock Corporate High Yield Fund V, Inc. (HYV), BlackRock High Yield Trust (BHY),
BlackRock High Income Shares (HIS) and BlackRock Corporate High Yield Fund VI, Inc. (HYT)
As of February 28, 2013 (Unaudited)
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
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Corporate Bonds | Par (000) | Value | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Media (continued) |
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Kabel Deutschland Vertrieb und Service GmbH & Co. KG, 6.50%, 06/29/18 (b) |
EUR | 315 | 345 | 505 | | 155 | 530 | 1,850 | $ | 440,364 | $ | 482,304 | $ | 705,981 | | $ | 216,687 | $ | 740,931 | $ | 2,586,267 | |||||||||||||||||||||||||||||||||||||||
Live Nation Entertainment, Inc., 8.13%, 05/15/18 (b) |
USD | 675 | 735 | 1,130 | 125 | 335 | 1,170 | 4,170 | 732,375 | 797,475 | 1,226,050 | $ | 135,625 | 363,475 | 1,269,450 | 4,524,450 | ||||||||||||||||||||||||||||||||||||||||||||
Lynx I Corp., 6.00%, 04/15/21 |
GBP | 930 | 1,020 | 1,676 | | | 1,876 | 5,502 | 1,449,655 | 1,589,944 | 2,612,497 | | | 2,924,251 | 8,576,347 | |||||||||||||||||||||||||||||||||||||||||||||
Lynx II Corp., 6.38%, 04/15/23 (b) |
USD | 200 | 200 | 285 | | | 300 | 985 | 207,250 | 207,250 | 295,331 | | | 310,875 | 1,020,706 | |||||||||||||||||||||||||||||||||||||||||||||
The McClatchy Co., 9.00%, 12/15/22 (b) |
USD | 390 | 430 | 640 | 70 | | 670 | 2,200 | 412,425 | 454,725 | 676,800 | 74,025 | | 708,525 | 2,326,500 | |||||||||||||||||||||||||||||||||||||||||||||
NAI Entertainment Holdings LLC, 8.25%, 12/15/17 (b) |
USD | 513 | 558 | 743 | 94 | 261 | 914 | 3,083 | 559,170 | 608,220 | 809,870 | 102,460 | 284,490 | 996,260 | 3,360,470 | |||||||||||||||||||||||||||||||||||||||||||||
Nara Cable Funding Ltd., 8.88%, 12/01/18 |
EUR | 200 | 200 | 200 | | | 190 | 790 | 274,165 | 274,165 | 274,165 | | | 260,457 | 1,082,952 | |||||||||||||||||||||||||||||||||||||||||||||
Nara Cable Funding Ltd., 8.88%, 12/01/18 (b) |
USD | | | 200 | | | 200 | 400 | | | 206,500 | | | 206,500 | 413,000 | |||||||||||||||||||||||||||||||||||||||||||||
The New York Times Co., 6.63%, 12/15/16 |
USD | | | | 225 | | | 225 | | | | 245,812 | | | 245,812 | |||||||||||||||||||||||||||||||||||||||||||||
Nielsen Finance LLC, 11.63%, 02/01/14 |
USD | 45 | 117 | 91 | | 72 | 147 | 472 | 49,163 | 127,823 | 99,418 | | 78,660 | 160,598 | 515,662 | |||||||||||||||||||||||||||||||||||||||||||||
Nielsen Finance LLC, 7.75%, 10/15/18 |
USD | 1,111 | 1,143 | 1,779 | 319 | 517 | 1,825 | 6,694 | 1,230,433 | 1,265,872 | 1,970,243 | 353,292 | 572,577 | 2,021,187 | 7,413,604 | |||||||||||||||||||||||||||||||||||||||||||||
Odeon & UCI Finco Plc, 9.00%, 08/01/18 (b) |
GBP | 189 | 207 | 308 | | 100 | 324 | 1,128 | 298,191 | 326,591 | 485,942 | | 157,773 | 511,185 | 1,779,682 | |||||||||||||||||||||||||||||||||||||||||||||
ProQuest LLC, 9.00%, 10/15/18 (b) |
USD | 166 | 181 | 270 | 29 | 82 | 281 | 1,009 | 164,755 | 179,643 | 267,975 | 28,783 | 81,385 | 278,893 | 1,001,434 | |||||||||||||||||||||||||||||||||||||||||||||
ProtoStar I Ltd., 18.00%, 10/15/13 |
USD | 812 | 850 | | 414 | 1,427 | | 3,503 | 406 | 425 | | 207 | 714 | | 1,752 | |||||||||||||||||||||||||||||||||||||||||||||
Sterling Entertainment Corp., 10.00%, 12/15/19 |
USD | 800 | 875 | 1,275 | 150 | 375 | 1,335 | 4,810 | 800,000 | 875,000 | 1,275,000 | 150,000 | 375,000 | 1,335,000 | 4,810,000 | |||||||||||||||||||||||||||||||||||||||||||||
Unitymedia GmbH, 9.63%, 12/01/19 |
EUR | | | | | 100 | | 100 | | | | | 144,459 | | 144,459 | |||||||||||||||||||||||||||||||||||||||||||||
Unitymedia GmbH, 9.63%, 12/01/19 (b) |
EUR | 530 | 570 | 845 | | 245 | 900 | 3,090 | 765,633 | 823,417 | 1,220,679 | | 353,925 | 1,300,131 | 4,463,785 |
See Notes to Pro Forma Condensed Combined Financial Statements.
B-34
Pro Forma Condensed Combined Schedule of Investments for
BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE),
BlackRock Corporate High Yield Fund V, Inc. (HYV), BlackRock High Yield Trust (BHY),
BlackRock High Income Shares (HIS) and BlackRock Corporate High Yield Fund VI, Inc. (HYT)
As of February 28, 2013 (Unaudited)
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
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Corporate Bonds | Par (000) | Value | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Media (continued) |
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Unitymedia GmbH, 9.50%, 03/15/21 |
EUR | 385 | 320 | 518 | 100 | 190 | 548 | 2,061 | $ | 572,302 | $ | 475,680 | $ | 770,006 | $ | 148,650 | $ | 282,435 | $ | 814,601 | $ | 3,063,674 | ||||||||||||||||||||||||||||||||||||||
Unitymedia Hessen GmbH & Co. KG, 7.50%, 03/15/19 |
EUR | 722 | 794 | 1,249 | 112 | 304 | 1,313 | 4,494 | 1,025,085 | 1,127,309 | 1,773,312 | 159,016 | 431,615 | 1,864,178 | 6,380,515 | |||||||||||||||||||||||||||||||||||||||||||||
Unitymedia Hessen GmbH & Co. KG, 5.50%, 01/15/23 (b) |
USD | 475 | 520 | 760 | | | 795 | 2,550 | 479,750 | 525,200 | 767,600 | | | 802,950 | 2,575,500 | |||||||||||||||||||||||||||||||||||||||||||||
Univision Communications, Inc., 6.75%, 09/15/22 (b) |
USD | 412 | 438 | 652 | 78 | 55 | 694 | 2,329 | 444,960 | 473,040 | 704,160 | 84,240 | 59,400 | 749,520 | 2,515,320 | |||||||||||||||||||||||||||||||||||||||||||||
UPC Holding BV, 9.88%, 04/15/18 (b) |
USD | | | | | 200 | | 200 | | | | | 224,000 | | 224,000 | |||||||||||||||||||||||||||||||||||||||||||||
UPCB Finance II Ltd., 6.38%, 07/01/20 |
EUR | 300 | 300 | 514 | | | 514 | 1,628 | 415,165 | 415,165 | 711,316 | | | 711,316 | 2,252,962 | |||||||||||||||||||||||||||||||||||||||||||||
UPCB Finance II Ltd., 6.38%, 07/01/20 (b) |
EUR | 753 | 822 | 1,218 | | 371 | 1,273 | 4,437 | 1,042,064 | 1,137,551 | 1,685,569 | | 513,420 | 1,761,682 | 6,140,286 | |||||||||||||||||||||||||||||||||||||||||||||
WaveDivision Escrow LLC/WaveDivision Escrow Corp., 8.13%, 09/01/20 (b) |
USD | 329 | 358 | 531 | 55 | 155 | 555 | 1,983 | 345,450 | 375,900 | 557,550 | 57,750 | 162,750 | 582,750 | 2,082,150 | |||||||||||||||||||||||||||||||||||||||||||||
Ziggo Bond Co. BV, 8.00%, 05/15/18 |
EUR | | | | 65 | | | 65 | | | | 91,650 | | | 91,650 | |||||||||||||||||||||||||||||||||||||||||||||
Ziggo Bond Co. BV, 8.00%, 05/15/18 (b) |
EUR | 163 | 178 | 273 | | 85 | 280 | 979 | 229,829 | 250,979 | 384,928 | | 119,849 | 394,798 | 1,380,383 | |||||||||||||||||||||||||||||||||||||||||||||
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26,523,494 | 29,067,089 | 43,667,323 | 4,518,184 | 12,374,580 | 46,111,249 | 162,261,919 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Metals & Mining - 4.8% |
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ArcelorMittal, 9.50%, 02/15/15 |
USD | 300 | 315 | 445 | 40 | 295 | 470 | 1,865 | 338,625 | 355,556 | 502,294 | 45,150 | 332,981 | 530,512 | 2,105,118 | |||||||||||||||||||||||||||||||||||||||||||||
ArcelorMittal, 4.25%, 08/05/15 |
USD | 360 | 395 | 581 | 65 | 173 | 608 | 2,182 | 372,723 | 408,960 | 601,534 | 67,297 | 179,114 | 629,489 | 2,259,117 | |||||||||||||||||||||||||||||||||||||||||||||
ArcelorMittal, 4.25%, 03/01/16 |
USD | 125 | 125 | 175 | 25 | 50 | 200 | 700 | 128,750 | 128,750 | 180,250 | 25,750 | 51,500 | 206,000 | 721,000 | |||||||||||||||||||||||||||||||||||||||||||||
ArcelorMittal, 5.00%, 02/25/17 |
USD | 385 | 419 | 620 | 68 | 180 | 648 | 2,320 | 400,593 | 435,969 | 645,110 | 70,754 | 187,290 | 674,244 | 2,413,960 |
See Notes to Pro Forma Condensed Combined Financial Statements.
B-35
Pro Forma Condensed Combined Schedule of Investments for
BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE),
BlackRock Corporate High Yield Fund V, Inc. (HYV), BlackRock High Yield Trust (BHY),
BlackRock High Income Shares (HIS) and BlackRock Corporate High Yield Fund VI, Inc. (HYT)
As of February 28, 2013 (Unaudited)
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
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Corporate Bonds | Par (000) | Value | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Metals & Mining (continued) |
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ArcelorMittal, 6.13%, 06/01/18 |
USD | 385 | 418 | 619 | 68 | 181 | 645 | 2,316 | $ | 415,145 | $ | 450,729 | $ | 667,466 | $ | 73,324 | $ | 195,172 | $ | 695,502 | $ | 2,497,338 | ||||||||||||||||||||||||||||||||||||||
ArcelorMittal, 6.00%, 03/01/21 |
USD | 55 | 59 | 87 | 10 | 26 | 91 | 328 | 58,370 | 62,615 | 92,331 | 10,613 | 27,593 | 96,576 | 348,098 | |||||||||||||||||||||||||||||||||||||||||||||
ArcelorMittal, 6.75%, 02/25/22 |
USD | 454 | 493 | 727 | 80 | 214 | 762 | 2,730 | 499,903 | 542,846 | 800,505 | 88,089 | 235,637 | 839,044 | 3,006,024 | |||||||||||||||||||||||||||||||||||||||||||||
ArcelorMittal, 7.50%, 10/15/39 |
USD | 56 | 61 | 90 | 10 | 26 | 94 | 337 | 58,053 | 63,236 | 93,300 | 10,367 | 26,953 | 97,446 | 349,355 | |||||||||||||||||||||||||||||||||||||||||||||
ArcelorMittal, 7.25%, 03/01/41 |
USD | 213 | 232 | 342 | 38 | 99 | 357 | 1,281 | 212,468 | 231,420 | 341,145 | 37,905 | 98,753 | 356,108 | 1,277,799 | |||||||||||||||||||||||||||||||||||||||||||||
Eco-Bat Finance Plc, 7.75%, 02/15/17 |
EUR | 435 | 460 | 585 | | | 610 | 2,090 | 586,371 | 620,071 | 788,568 | | | 822,268 | 2,817,278 | |||||||||||||||||||||||||||||||||||||||||||||
FMG Resources August 2006 Property Ltd., 6.00%, 04/01/17 (b) |
USD | 443 | 480 | 709 | 75 | 208 | 746 | 2,661 | 461,827 | 500,400 | 739,132 | 78,187 | 216,840 | 777,705 | 2,774,091 | |||||||||||||||||||||||||||||||||||||||||||||
FMG Resources August 2006 Property Ltd., 6.38%, 02/01/16 (b) |
USD | 405 | 438 | 661 | 27 | 195 | 684 | 2,410 | 421,795 | 456,511 | 689,092 | 27,731 | 203,079 | 713,383 | 2,511,591 | |||||||||||||||||||||||||||||||||||||||||||||
Global Brass and Copper, Inc., 9.50%, 06/01/19 (b) |
USD | 275 | 300 | 445 | 50 | 130 | 460 | 1,660 | 299,063 | 326,250 | 483,938 | 54,375 | 141,375 | 500,250 | 1,805,251 | |||||||||||||||||||||||||||||||||||||||||||||
GoldCorp, Inc., 2.00%, 08/01/14 (c) |
USD | 970 | 1,060 | 1,575 | 85 | 460 | 1,650 | 5,800 | 1,016,075 | 1,110,350 | 1,649,812 | 89,037 | 481,850 | 1,728,375 | 6,075,499 | |||||||||||||||||||||||||||||||||||||||||||||
Kaiser Aluminum Corp., 8.25%, 06/01/20 |
USD | 205 | 225 | 330 | 35 | 100 | 345 | 1,240 | 229,088 | 251,438 | 368,775 | 39,112 | 111,750 | 385,538 | 1,385,701 | |||||||||||||||||||||||||||||||||||||||||||||
New Gold, Inc., 6.25%, 11/15/22 (b) |
USD | 275 | 300 | 445 | | | 465 | 1,485 | 289,438 | 315,750 | 468,363 | | | 489,412 | 1,562,963 | |||||||||||||||||||||||||||||||||||||||||||||
New Gold, Inc., 7.00%, 04/15/20 (b) |
USD | 140 | 150 | 225 | 25 | 65 | 235 | 840 | 151,200 | 162,000 | 243,000 | 27,000 | 70,200 | 253,800 | 907,200 | |||||||||||||||||||||||||||||||||||||||||||||
New World Resources NV, 7.88%, 01/15/21 |
EUR | 310 | 320 | 360 | | | 370 | 1,360 | 374,366 | 386,443 | 434,748 | | | 446,824 | 1,642,381 | |||||||||||||||||||||||||||||||||||||||||||||
New World Resources NV, 7.88%, 05/01/18 |
EUR | 230 | 210 | 324 | 60 | | 349 | 1,173 | 307,927 | 281,151 | 433,776 | 80,329 | | 467,246 | 1,570,429 | |||||||||||||||||||||||||||||||||||||||||||||
Newmont Mining Corp., Series A 1.25%, 07/15/14 (c) |
USD | 1,345 | 1,475 | 2,170 | 90 | 670 | 2,275 | 8,025 | 1,485,384 | 1,628,953 | 2,396,494 | 99,394 | 739,931 | 2,512,453 | 8,862,609 | |||||||||||||||||||||||||||||||||||||||||||||
Novelis, Inc., 8.75%, 12/15/20 |
USD | 2,815 | 3,065 | 4,560 | 545 | 1,525 | 4,760 | 17,270 | 3,152,800 | 3,432,800 | 5,107,200 | 610,400 | 1,708,000 | 5,331,200 | 19,342,400 | |||||||||||||||||||||||||||||||||||||||||||||
Peninsula Energy Ltd., 0.00%, 12/14/14 |
USD | 500 | 600 | 800 | | | 900 | 2,800 | 500,000 | 600,000 | 800,000 | | | 900,000 | 2,800,000 | |||||||||||||||||||||||||||||||||||||||||||||
Perstorp Holding AB, 8.75%, 05/15/17 (b) |
USD | 205 | 205 | 285 | | | 295 | 990 | 215,250 | 215,250 | 299,250 | | | 309,750 | 1,039,500 |
See Notes to Pro Forma Condensed Combined Financial Statements.
B-36
Pro Forma Condensed Combined Schedule of Investments for
BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE),
BlackRock Corporate High Yield Fund V, Inc. (HYV), BlackRock High Yield Trust (BHY),
BlackRock High Income Shares (HIS) and BlackRock Corporate High Yield Fund VI, Inc. (HYT)
As of February 28, 2013 (Unaudited)
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
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Corporate Bonds | Par (000) | Value | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Metals & Mining (continued) |
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Schmolz & Bickenbach Luxembourg SA, 9.88%, 05/15/19 |
EUR | 295 | 315 | 364 | 100 | | 383 | 1,457 | $ | 344,813 | $ | 368,190 | $ | 425,464 | $ | 116,886 | | $ | 447,673 | $ | 1,703,026 | |||||||||||||||||||||||||||||||||||||||
Steel Dynamics, Inc., 6.38%, 08/15/22 (b) |
USD | 225 | 245 | 355 | 40 | 105 | 375 | 1,345 | 240,750 | 262,150 | 379,850 | 42,800 | $ | 112,350 | 401,250 | 1,439,150 | ||||||||||||||||||||||||||||||||||||||||||||
Taseko Mines Ltd., 7.75%, 04/15/19 |
USD | 385 | 420 | 605 | 70 | 190 | 650 | 2,320 | 383,075 | 417,900 | 601,975 | 69,650 | 189,050 | 646,750 | 2,308,400 | |||||||||||||||||||||||||||||||||||||||||||||
Vedanta Resources Plc, 8.25%, 06/07/21 (b) |
USD | 245 | 270 | 415 | | 200 | 435 | 1,565 | 278,688 | 307,125 | 472,063 | | 227,500 | 494,812 | 1,780,188 | |||||||||||||||||||||||||||||||||||||||||||||
Walter Energy, Inc., 9.88%, 12/15/20 (b) |
USD | 122 | 132 | 198 | 22 | 57 | 206 | 737 | 132,675 | 143,550 | 215,325 | 23,925 | 61,988 | 224,025 | 801,488 | |||||||||||||||||||||||||||||||||||||||||||||
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13,355,215 | 14,466,363 | 20,920,760 | 1,788,075 | 5,598,906 | 21,977,635 | 78,106,954 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Multiline Retail - 0.5% |
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Dollar General Corp., 4.13%, 07/15/17 |
USD | 727 | 792 | 1,169 | 134 | 351 | 1,225 | 4,398 | 768,802 | 837,540 | 1,236,217 | 141,705 | 371,183 | 1,295,438 | 4,650,885 | |||||||||||||||||||||||||||||||||||||||||||||
Dufry Finance SCA, 5.50%, 10/15/20 (b) |
USD | 403 | 403 | 661 | 200 | 200 | 672 | 2,539 | 420,128 | 420,128 | 689,093 | 208,500 | 208,500 | 700,560 | 2,646,909 | |||||||||||||||||||||||||||||||||||||||||||||
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1,188,930 | 1,257,668 | 1,925,310 | 350,205 | 579,683 | 1,995,998 | 7,297,794 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Oil, Gas & Consumable Fuels - 9.2% |
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Access Midstream Partners LP, 4.88%, 05/15/23 |
USD | 345 | 375 | 555 | 60 | 165 | 580 | 2,080 | 341,550 | 371,250 | 549,450 | 59,400 | 163,350 | 574,200 | 2,059,200 | |||||||||||||||||||||||||||||||||||||||||||||
Access Midstream Partners LP, 6.13%, 07/15/22 |
USD | 250 | 275 | 405 | 45 | 120 | 425 | 1,520 | 268,125 | 294,937 | 434,362 | 48,263 | 128,700 | 455,812 | 1,630,199 | |||||||||||||||||||||||||||||||||||||||||||||
Alpha Appalachia Holdings, Inc., 3.25%, 08/01/15 (c) |
USD | 817 | 880 | 1,335 | 142 | 385 | 1,381 | 4,940 | 779,724 | 839,850 | 1,274,091 | 135,521 | 367,434 | 1,317,992 | 4,714,612 | |||||||||||||||||||||||||||||||||||||||||||||
Aurora USA Oil & Gas, Inc., 9.88%, 02/15/17 (b) |
USD | 610 | 680 | 990 | 115 | 100 | 1,005 | 3,500 | 655,750 | 731,000 | 1,064,250 | 123,625 | 107,500 | 1,080,375 | 3,762,500 |
See Notes to Pro Forma Condensed Combined Financial Statements.
B-37
Pro Forma Condensed Combined Schedule of Investments for
BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE),
BlackRock Corporate High Yield Fund V, Inc. (HYV), BlackRock High Yield Trust (BHY),
BlackRock High Income Shares (HIS) and BlackRock Corporate High Yield Fund VI, Inc. (HYT)
As of February 28, 2013 (Unaudited)
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
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Corporate Bonds | Par (000) | Value | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Oil, Gas & Consumable Fuels (continued) |
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BreitBurn Energy Partners LP, 7.88%, 04/15/22 |
USD | 235 | 255 | 375 | 40 | 115 | 400 | 1,420 | $ | 249,688 | $ | 270,938 | $ | 398,437 | $ | 42,500 | $ | 122,188 | $ | 425,000 | $ | 1,508,751 | ||||||||||||||||||||||||||||||||||||||
Carrizo Oil & Gas, Inc., 7.50%, 09/15/20 |
USD | 215 | 240 | 354 | 38 | 107 | 367 | 1,321 | 225,750 | 252,000 | 371,700 | 39,900 | 112,350 | 385,350 | 1,387,050 | |||||||||||||||||||||||||||||||||||||||||||||
Chaparral Energy, Inc., 7.63%, 11/15/22 |
USD | 205 | 220 | 325 | 35 | 95 | 340 | 1,220 | 222,425 | 238,700 | 352,625 | 37,975 | 103,075 | 368,900 | 1,323,700 | |||||||||||||||||||||||||||||||||||||||||||||
Chesapeake Energy Corp., 7.25%, 12/15/18 |
USD | 110 | 120 | 180 | 20 | 50 | 190 | 670 | 124,300 | 135,600 | 203,400 | 22,600 | 56,500 | 214,700 | 757,100 | |||||||||||||||||||||||||||||||||||||||||||||
Chesapeake Energy Corp., 6.63%, 08/15/20 |
USD | 165 | 180 | 260 | 30 | 80 | 270 | 985 | 180,675 | 197,100 | 284,700 | 32,850 | 87,600 | 295,650 | 1,078,575 | |||||||||||||||||||||||||||||||||||||||||||||
Chesapeake Energy Corp., 6.88%, 11/15/20 |
USD | 160 | 175 | 260 | 30 | 80 | 275 | 980 | 176,000 | 192,500 | 286,000 | 33,000 | 88,000 | 302,500 | 1,078,000 | |||||||||||||||||||||||||||||||||||||||||||||
Chesapeake Energy Corp., 6.13%, 02/15/21 |
USD | 69 | 78 | 122 | 11 | 35 | 130 | 445 | 73,140 | 82,680 | 129,320 | 11,660 | 37,100 | 137,800 | 471,700 | |||||||||||||||||||||||||||||||||||||||||||||
Concho Resources, Inc., 7.00%, 01/15/21 |
USD | 150 | 160 | 245 | 25 | 75 | 255 | 910 | 165,750 | 176,800 | 270,725 | 27,625 | 82,875 | 281,775 | 1,005,550 | |||||||||||||||||||||||||||||||||||||||||||||
Concho Resources, Inc., 5.50%, 10/01/22 |
USD | 204 | 225 | 332 | 38 | 99 | 346 | 1,244 | 212,415 | 234,281 | 345,695 | 39,568 | 103,084 | 360,273 | 1,295,316 | |||||||||||||||||||||||||||||||||||||||||||||
Concho Resources, Inc., 6.50%, 01/15/22 |
USD | 270 | 297 | 436 | 52 | 133 | 458 | 1,646 | 294,300 | 323,730 | 475,240 | 56,680 | 144,970 | 499,220 | 1,794,140 | |||||||||||||||||||||||||||||||||||||||||||||
CONSOL Energy, Inc., 8.25%, 04/01/20 |
USD | 285 | 315 | 460 | 50 | 135 | 485 | 1,730 | 314,212 | 347,287 | 507,150 | 55,125 | 148,837 | 534,712 | 1,907,323 | |||||||||||||||||||||||||||||||||||||||||||||
Continental Resources, Inc., 7.13%, 04/01/21 |
USD | 340 | 370 | 545 | 60 | 170 | 575 | 2,060 | 385,900 | 419,950 | 618,575 | 68,100 | 192,950 | 652,625 | 2,338,100 | |||||||||||||||||||||||||||||||||||||||||||||
Crosstex Energy LP, 8.88%, 02/15/18 |
USD | 140 | 150 | 225 | 25 | 65 | 235 | 840 | 150,850 | 161,625 | 242,438 | 26,938 | 70,038 | 253,213 | 905,102 | |||||||||||||||||||||||||||||||||||||||||||||
Crown Oil Partners IV LP, 15.00%, 03/07/15 |
USD | 556 | 609 | 904 | | | 948 | 3,017 | 585,003 | 639,846 | 950,629 | | | 996,332 | 3,171,810 | |||||||||||||||||||||||||||||||||||||||||||||
CVR Refining LLC/Coffeyville Finance, Inc., 6.50%, 11/01/22 (b) |
USD | 350 | 385 | 565 | 65 | 165 | 590 | 2,120 | 352,625 | 387,887 | 569,237 | 65,487 | 166,237 | 594,425 | 2,135,898 | |||||||||||||||||||||||||||||||||||||||||||||
Denbury Resources, Inc., 4.63%, 07/15/23 |
USD | 708 | 771 | 1,132 | 128 | 334 | 1,187 | 4,260 | 694,725 | 756,544 | 1,110,775 | 125,600 | 327,737 | 1,164,744 | 4,180,125 | |||||||||||||||||||||||||||||||||||||||||||||
Energy XXI Gulf Coast, Inc., 7.75%, 06/15/19 |
USD | 490 | 540 | 795 | 90 | 245 | 830 | 2,990 | 525,525 | 579,150 | 852,637 | 96,525 | 262,762 | 890,175 | 3,206,774 | |||||||||||||||||||||||||||||||||||||||||||||
Energy XXI Gulf Coast, Inc., 9.25%, 12/15/17 |
USD | 430 | 465 | 695 | 75 | 210 | 725 | 2,600 | 485,900 | 525,450 | 785,350 | 84,750 | 237,300 | 819,250 | 2,938,000 | |||||||||||||||||||||||||||||||||||||||||||||
EP Energy LLC/Everest Acquisition Finance, Inc., 6.88%, 05/01/19 |
USD | 315 | 345 | 510 | 55 | 155 | 535 | 1,915 | 343,350 | 376,050 | 555,900 | 59,950 | 168,950 | 583,150 | 2,087,350 | |||||||||||||||||||||||||||||||||||||||||||||
EP Energy LLC/Everest Acquisition Finance, Inc., 7.75%, 09/01/22 |
USD | 195 | 215 | 315 | 35 | 95 | 325 | 1,180 | 211,088 | 232,738 | 340,988 | 37,888 | 102,838 | 351,813 | 1,277,353 | |||||||||||||||||||||||||||||||||||||||||||||
EV Energy Partners LP, 8.00%, 04/15/19 |
USD | 140 | 150 | 215 | 25 | 70 | 220 | 820 | 146,650 | 157,125 | 225,213 | 26,188 | 73,325 | 230,450 | 858,951 | |||||||||||||||||||||||||||||||||||||||||||||
Halcon Resources Corp., 8.88%, 05/15/21 (b) |
USD | 384 | 415 | 616 | 72 | 179 | 645 | 2,311 | 412,800 | 446,125 | 662,200 | 77,400 | 192,425 | 693,375 | 2,484,325 | |||||||||||||||||||||||||||||||||||||||||||||
Hilcorp Energy I LP, 7.63%, 04/15/21 (b) |
USD | 243 | 260 | 392 | 45 | 124 | 408 | 1,472 | 267,908 | 286,650 | 432,180 | 49,612 | 136,710 | 449,820 | 1,622,880 | |||||||||||||||||||||||||||||||||||||||||||||
Holly Energy Partners LP, 6.50%, 03/01/20 (b) |
USD | 145 | 155 | 230 | 25 | | 245 | 800 | 155,150 | 165,850 | 246,100 | 26,750 | | 262,150 | 856,000 | |||||||||||||||||||||||||||||||||||||||||||||
Kodiak Oil & Gas Corp., 8.13%, 12/01/19 |
USD | 320 | 350 | 510 | 60 | 155 | 540 | 1,935 | 360,000 | 393,750 | 573,750 | 67,500 | 174,375 | 607,500 | 2,176,875 |
See Notes to Pro Forma Condensed Combined Financial Statements.
B-38
Pro Forma Condensed Combined Schedule of Investments for
BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE),
BlackRock Corporate High Yield Fund V, Inc. (HYV), BlackRock High Yield Trust (BHY),
BlackRock High Income Shares (HIS) and BlackRock Corporate High Yield Fund VI, Inc. (HYT)
As of February 28, 2013 (Unaudited)
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
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Corporate Bonds | Par (000) | Value | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Oil, Gas & Consumable Fuels (continued) |
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Linn Energy LLC, 6.25%, 11/01/19 (b) |
USD | 1,084 | 1,192 | 1,760 | 238 | 515 | 1,840 | 6,629 | $ | 1,105,680 | $ | 1,215,840 | $ | 1,795,200 | $ | 242,760 | $ | 525,300 | $ | 1,876,800 | $ | 6,761,580 | ||||||||||||||||||||||||||||||||||||||
Linn Energy LLC, 6.50%, 05/15/19 |
USD | 41 | 43 | 66 | 7 | 20 | 66 | 243 | 42,435 | 44,505 | 68,310 | 7,245 | 20,700 | 68,310 | 251,505 | |||||||||||||||||||||||||||||||||||||||||||||
Linn Energy LLC, 8.63%, 04/15/20 |
USD | 100 | 110 | 165 | 20 | 50 | 170 | 615 | 110,625 | 121,688 | 182,531 | 22,125 | 55,313 | 188,063 | 680,345 | |||||||||||||||||||||||||||||||||||||||||||||
Linn Energy LLC, 7.75%, 02/01/21 |
USD | 140 | 155 | 235 | 60 | 75 | 245 | 910 | 151,200 | 167,400 | 253,800 | 64,800 | 81,000 | 264,600 | 982,800 | |||||||||||||||||||||||||||||||||||||||||||||
MarkWest Energy Partners LP, 4.50%, 07/15/23 |
USD | 140 | 152 | 221 | 25 | 135 | 231 | 904 | 136,850 | 148,580 | 216,028 | 24,438 | 131,963 | 225,803 | 883,662 | |||||||||||||||||||||||||||||||||||||||||||||
MarkWest Energy Partners LP, 5.50%, 02/15/23 |
USD | 200 | 225 | 350 | 45 | 100 | 350 | 1,270 | 210,000 | 236,250 | 367,500 | 47,250 | 105,000 | 367,500 | 1,333,500 | |||||||||||||||||||||||||||||||||||||||||||||
Newfield Exploration Co., 6.88%, 02/01/20 |
USD | 715 | 780 | 1,150 | 135 | 350 | 1,205 | 4,335 | 766,837 | 836,550 | 1,233,375 | 144,787 | 375,375 | 1,292,362 | 4,649,286 | |||||||||||||||||||||||||||||||||||||||||||||
Northern Oil and Gas, Inc., 8.00%, 06/01/20 |
USD | 285 | 310 | 460 | 55 | 140 | 480 | 1,730 | 297,825 | 323,950 | 480,700 | 57,475 | 146,300 | 501,600 | 1,807,850 | |||||||||||||||||||||||||||||||||||||||||||||
Oasis Petroleum, Inc., 6.50%, 11/01/21 |
USD | 270 | 290 | 430 | 50 | 135 | 450 | 1,625 | 291,600 | 313,200 | 464,400 | 54,000 | 145,800 | 486,000 | 1,755,000 | |||||||||||||||||||||||||||||||||||||||||||||
Oasis Petroleum, Inc., 7.25%, 02/01/19 |
USD | 185 | 205 | 295 | 35 | 90 | 315 | 1,125 | 199,800 | 221,400 | 318,600 | 37,800 | 97,200 | 340,200 | 1,215,000 | |||||||||||||||||||||||||||||||||||||||||||||
Offshore Group Investments Ltd., 11.50%, 08/01/15 |
USD | 633 | 692 | 1,023 | 124 | 332 | 1,070 | 3,874 | 689,970 | 754,280 | 1,115,070 | 135,160 | 361,880 | 1,166,300 | 4,222,660 | |||||||||||||||||||||||||||||||||||||||||||||
PBF Holding Co. LLC, 8.25%, 02/15/20 (b) |
USD | 205 | 220 | 325 | 35 | 100 | 345 | 1,230 | 222,938 | 239,250 | 353,438 | 38,063 | 108,750 | 375,187 | 1,337,626 | |||||||||||||||||||||||||||||||||||||||||||||
PDC Energy, Inc., 7.75%, 10/15/22 (b) |
USD | 190 | 210 | 310 | 35 | 90 | 325 | 1,160 | 200,925 | 222,075 | 327,825 | 37,013 | 95,175 | 343,688 | 1,226,701 | |||||||||||||||||||||||||||||||||||||||||||||
PetroBakken Energy Ltd., 8.63%, 02/01/20 (b) |
USD | 564 | 610 | 906 | 112 | 296 | 949 | 3,437 | 575,280 | 622,200 | 924,120 | 114,240 | 301,920 | 967,980 | 3,505,740 | |||||||||||||||||||||||||||||||||||||||||||||
Petroleum Geo-Services ASA, 7.38%, 12/15/18 (b) |
USD | 730 | 775 | 850 | 95 | 465 | 901 | 3,816 | 803,000 | 852,500 | 935,000 | 104,500 | 511,500 | 991,100 | 4,197,600 | |||||||||||||||||||||||||||||||||||||||||||||
Plains Exploration & Production Co., 6.88%, 02/15/23 |
USD | 965 | 1,050 | 1,550 | 175 | 460 | 1,620 | 5,820 | 1,112,162 | 1,210,125 | 1,786,375 | 201,687 | 530,150 | 1,867,050 | 6,707,549 | |||||||||||||||||||||||||||||||||||||||||||||
Range Resources Corp., 5.00%, 08/15/22 |
USD | 371 | 401 | 593 | 68 | 178 | 593 | 2,204 | 379,347 | 410,022 | 606,342 | 69,530 | 182,005 | 606,342 | 2,253,588 | |||||||||||||||||||||||||||||||||||||||||||||
Range Resources Corp., 5.75%, 06/01/21 |
USD | 932 | 1,019 | 1,496 | 166 | 460 | 1,571 | 5,644 | 992,580 | 1,085,235 | 1,593,240 | 176,790 | 489,900 | 1,673,115 | 6,010,860 | |||||||||||||||||||||||||||||||||||||||||||||
Range Resources Corp., 8.00%, 05/15/19 |
USD | 345 | 345 | 515 | 20 | 170 | 600 | 1,995 | 379,500 | 379,500 | 566,500 | 22,000 | 187,000 | 660,000 | 2,194,500 | |||||||||||||||||||||||||||||||||||||||||||||
Regency Energy Partners LP, 5.50%, 04/15/23 |
USD | 618 | 652 | 964 | 115 | 287 | 1,011 | 3,647 | 651,990 | 687,860 | 1,017,020 | 121,325 | 302,785 | 1,066,605 | 3,847,585 | |||||||||||||||||||||||||||||||||||||||||||||
Regency Energy Partners LP, 6.88%, 12/01/18 |
USD | 372 | 393 | 581 | 70 | 173 | 609 | 2,198 | 401,760 | 424,440 | 627,480 | 75,600 | 186,840 | 657,720 | 2,373,840 | |||||||||||||||||||||||||||||||||||||||||||||
Sabine Pass Liquified Natural Gas LP, 7.50%, 11/30/16 |
USD | 1,395 | 1,520 | 2,245 | 205 | 665 | 2,345 | 8,375 | 1,541,475 | 1,679,600 | 2,480,725 | 226,525 | 734,825 | 2,591,225 | 9,254,375 | |||||||||||||||||||||||||||||||||||||||||||||
Sabine Pass Liquified Natural Gas LP, 6.50%, 11/01/20 (b) |
USD | 300 | 325 | 480 | 55 | 140 | 505 | 1,805 | 316,500 | 342,875 | 506,400 | 58,025 | 147,700 | 532,775 | 1,904,275 |
See Notes to Pro Forma Condensed Combined Financial Statements.
B-39
Pro Forma Condensed Combined Schedule of Investments for
BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE),
BlackRock Corporate High Yield Fund V, Inc. (HYV), BlackRock High Yield Trust (BHY),
BlackRock High Income Shares (HIS) and BlackRock Corporate High Yield Fund VI, Inc. (HYT)
As of February 28, 2013 (Unaudited)
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
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Corporate Bonds | Par (000) | Value | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Oil, Gas & Consumable Fuels (continued) |
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Sabine Pass Liquefaction LLC, 5.63%, 02/01/21 (b) |
USD | 1,490 | 1,623 | 2,388 | 270 | 699 | 2,498 | 8,968 | $ | 1,538,425 | $ | 1,675,747 | $ | 2,465,610 | $ | 278,775 | $ | 721,717 | $ | 2,579,185 | $ | 9,259,459 | ||||||||||||||||||||||||||||||||||||||
SandRidge Energy, Inc., 7.50%, 02/15/23 |
USD | 484 | 513 | 762 | 89 | 245 | 809 | 2,902 | 506,990 | 537,367 | 798,195 | 93,227 | 256,637 | 847,427 | 3,039,843 | |||||||||||||||||||||||||||||||||||||||||||||
SESI LLC, 6.38%, 05/01/19 |
USD | 300 | 325 | 480 | 55 | 145 | 505 | 1,810 | 321,750 | 348,562 | 514,800 | 58,987 | 155,512 | 541,612 | 1,941,223 | |||||||||||||||||||||||||||||||||||||||||||||
SESI LLC, 7.13%, 12/15/21 |
USD | 215 | 235 | 345 | 40 | 105 | 360 | 1,300 | 238,113 | 260,263 | 382,087 | 44,300 | 116,288 | 398,700 | 1,439,751 | |||||||||||||||||||||||||||||||||||||||||||||
SM Energy Co., 6.63%, 02/15/19 |
USD | 120 | 130 | 195 | 20 | 60 | 205 | 730 | 128,700 | 139,425 | 209,138 | 21,450 | 64,350 | 219,863 | 782,926 | |||||||||||||||||||||||||||||||||||||||||||||
SM Energy Co., 6.50%, 11/15/21 |
USD | 240 | 265 | 390 | 45 | 115 | 405 | 1,460 | 261,000 | 288,188 | 424,125 | 48,937 | 125,063 | 440,437 | 1,587,750 | |||||||||||||||||||||||||||||||||||||||||||||
SM Energy Co., 6.50%, 01/01/23 |
USD | 355 | 390 | 575 | 65 | 170 | 600 | 2,155 | 384,287 | 422,175 | 622,437 | 70,362 | 184,025 | 649,500 | 2,332,786 | |||||||||||||||||||||||||||||||||||||||||||||
Tesoro Logistics LP/Tesoro Logistics Finance Corp., 5.88%, 10/01/20 (b) |
USD | 142 | 155 | 229 | 26 | 68 | 240 | 860 | 148,035 | 161,588 | 238,733 | 27,105 | 70,890 | 250,200 | 896,551 | |||||||||||||||||||||||||||||||||||||||||||||
Vanguard Natural Resources, 7.88%, 04/01/20 |
USD | 250 | 270 | 400 | 40 | 120 | 420 | 1,500 | 262,500 | 283,500 | 420,000 | 42,000 | 126,000 | 441,000 | 1,575,000 | |||||||||||||||||||||||||||||||||||||||||||||
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24,731,357 | 26,873,533 | 39,408,221 | 4,347,261 | 11,604,073 | 41,261,530 | 148,225,975 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Paper & Forest Products - 0.7% |
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Ainsworth Lumber Co. Ltd., 7.50%, 12/15/17 (b) |
USD | 325 | 355 | 520 | 60 | 155 | 545 | 1,960 | 350,187 | 382,513 | 560,300 | 64,650 | 167,013 | 587,238 | 2,111,901 | |||||||||||||||||||||||||||||||||||||||||||||
Boise Paper Holdings LLC, 9.00%, 11/01/17 |
USD | 55 | 60 | 85 | 15 | 25 | 90 | 330 | 59,469 | 64,875 | 91,906 | 16,219 | 27,031 | 97,313 | 356,813 | |||||||||||||||||||||||||||||||||||||||||||||
Boise Paper Holdings LLC, 8.00%, 04/01/20 |
USD | 105 | 125 | 180 | 5 | 50 | 180 | 645 | 115,763 | 137,813 | 198,450 | 5,513 | 55,125 | 198,450 | 711,114 | |||||||||||||||||||||||||||||||||||||||||||||
Clearwater Paper Corp., 7.13%, 11/01/18 |
USD | 535 | 585 | 865 | 95 | 270 | 885 | 3,235 | 579,137 | 633,262 | 936,363 | 102,837 | 292,275 | 958,012 | 3,501,886 | |||||||||||||||||||||||||||||||||||||||||||||
Longview Fibre Paper & Packaging, Inc., 8.00%, 06/01/16 (b) |
USD | 315 | 345 | 505 | 55 | 155 | 535 | 1,910 | 330,750 | 362,250 | 530,250 | 57,750 | 162,750 | 561,750 | 2,005,500 |
See Notes to Pro Forma Condensed Combined Financial Statements.
B-40
Pro Forma Condensed Combined Schedule of Investments for
BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE),
BlackRock Corporate High Yield Fund V, Inc. (HYV), BlackRock High Yield Trust (BHY),
BlackRock High Income Shares (HIS) and BlackRock Corporate High Yield Fund VI, Inc. (HYT)
As of February 28, 2013 (Unaudited)
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
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Corporate Bonds | Par (000) | Value | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Paper & Forest Products (continued) |
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NewPage Corp., 11.38%, 12/31/14 (a)(j) |
USD | 1,788 | 1,913 | 2,892 | 337 | 919 | 3,095 | 10,944 | | | | | | | | |||||||||||||||||||||||||||||||||||||||||||||
Sappi Papier Holding GmbH, 6.63%, 04/15/21 (b) |
USD | 120 | 140 | | 25 | 65 | | 350 | $ | 124,200 | $ | 144,900 | | $ | 25,875 | $ | 67,275 | | $ | 362,250 | ||||||||||||||||||||||||||||||||||||||||
Sappi Papier Holding GmbH, 8.38%, 06/15/19 (b) |
USD | 200 | 200 | 200 | | 200 | 200 | 1,000 | 224,000 | 224,000 | $ | 224,000 | | 224,000 | $ | 224,000 | 1,120,000 | |||||||||||||||||||||||||||||||||||||||||||
Unifrax I LLC/Unifrax Holding Co., 7.50%, 02/15/19 (b) |
USD | 240 | 260 | 385 | 45 | | 405 | 1,335 | 243,600 | 263,900 | 390,775 | 45,675 | | 411,075 | 1,355,025 | |||||||||||||||||||||||||||||||||||||||||||||
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2,027,106 | 2,213,513 | 2,932,044 | 318,519 | 995,469 | 3,037,838 | 11,524,489 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Pharmaceuticals - 1.5% |
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Capsugel Finance Co. SCA, 9.88%, 08/01/19 |
EUR | 100 | 100 | 100 | | | 105 | 405 | 146,874 | 146,874 | 146,874 | | | 154,218 | 594,840 | |||||||||||||||||||||||||||||||||||||||||||||
Capsugel Finance Co. SCA, 9.88%, 08/01/19 (b) |
EUR | 200 | 200 | 300 | | 100 | 300 | 1,100 | 293,749 | 293,749 | 440,623 | | 146,874 | 440,623 | 1,615,618 | |||||||||||||||||||||||||||||||||||||||||||||
Elan Corp. Plc, 6.25%, 10/15/19 (b) |
USD | 424 | 643 | 756 | | | 772 | 2,595 | 486,010 | 737,039 | 866,565 | | | 884,905 | 2,974,519 | |||||||||||||||||||||||||||||||||||||||||||||
Jaguar Holding Co. II/Jaguar Merger Sub, Inc., 9.50%, 12/01/19 (b) |
USD | 370 | 414 | 632 | 68 | 174 | 663 | 2,321 | 424,575 | 475,065 | 725,220 | 78,030 | 199,665 | 760,793 | 2,663,348 | |||||||||||||||||||||||||||||||||||||||||||||
Mylan, Inc., 6.00%, 11/15/18 (b) |
USD | 100 | 120 | 160 | 20 | | 180 | 580 | 110,137 | 132,164 | 176,219 | 22,027 | | 198,246 | 638,793 | |||||||||||||||||||||||||||||||||||||||||||||
Valeant Pharmaceuticals International, 6.50%, 07/15/16 (b) |
USD | 399 | 434 | 640 | 130 | 260 | 665 | 2,528 | 419,199 | 455,971 | 672,400 | 136,581 | 273,163 | 698,666 | 2,655,980 | |||||||||||||||||||||||||||||||||||||||||||||
Valeant Pharmaceuticals International, 6.88%, 12/01/18 (b) |
USD | 708 | 762 | 1,128 | 132 | 330 | 1,174 | 4,234 | 769,065 | 827,722 | 1,225,290 | 143,385 | 358,462 | 1,275,257 | 4,599,181 | |||||||||||||||||||||||||||||||||||||||||||||
Valeant Pharmaceuticals International, 6.38%, 10/15/20 (b) |
USD | 370 | 405 | 600 | 70 | 180 | 625 | 2,250 | 398,213 | 435,881 | 645,750 | 75,338 | 193,725 | 672,656 | 2,421,563 | |||||||||||||||||||||||||||||||||||||||||||||
Valeant Pharmaceuticals International, 6.75%, 08/15/21 (b) |
USD | 445 | 490 | 725 | | 280 | 755 | 2,695 | 481,156 | 529,813 | 783,906 | | 302,750 | 816,344 | 2,913,969 | |||||||||||||||||||||||||||||||||||||||||||||
Warner Chilcott Co. LLC/Warner Chilcott Finance LLC, 7.75%, 09/15/18 |
USD | 565 | 615 | 905 | 102 | | 945 | 3,132 | 610,200 | 664,200 | 977,400 | 110,160 | | 1,020,600 | 3,382,560 | |||||||||||||||||||||||||||||||||||||||||||||
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4,139,178 | 4,698,478 | 6,660,247 | 565,521 | 1,474,639 | 6,922,308 | 24,460,371 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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See Notes to Pro Forma Condensed Combined Financial Statements.
B-41
Pro Forma Condensed Combined Schedule of Investments for
BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE),
BlackRock Corporate High Yield Fund V, Inc. (HYV), BlackRock High Yield Trust (BHY),
BlackRock High Income Shares (HIS) and BlackRock Corporate High Yield Fund VI, Inc. (HYT)
As of February 28, 2013 (Unaudited)
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
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Corporate Bonds | Par (000) | Value | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Professional Services - 0.3% |
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La Financiere Atalian SA, 7.25%, 01/15/20 |
EUR | 120 | 120 | 324 | | | 311 | 875 | $ | 156,901 | $ | 156,901 | $ | 423,633 | | | $ | 406,635 | $ | 1,144,070 | ||||||||||||||||||||||||||||||||||||||||
Truven Health Analytics, Inc., 10.63%, 06/01/20 (b) |
USD | 470 | 510 | 760 | 90 | 220 | 790 | 2,840 | 526,400 | 571,200 | 851,200 | $ | 100,800 | $ | 246,400 | 884,800 | 3,180,800 | |||||||||||||||||||||||||||||||||||||||||||
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683,301 | 728,101 | 1,274,833 | 100,800 | 246,400 | 1,291,435 | 4,324,870 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Real Estate Investment Trusts
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Cantor Commercial Real Estate Co. LP/CCRE Finance Corp., 7.75%, 02/15/18 (b) |
USD | 261 | 283 | 417 | 46 | 122 | 436 | 1,565 | 262,305 | 284,415 | 419,085 | 46,230 | 122,610 | 438,180 | 1,572,825 | |||||||||||||||||||||||||||||||||||||||||||||
Felcor Lodging LP, 6.75%, 06/01/19 |
USD | 934 | 1,023 | 1,507 | 181 | 463 | 1,578 | 5,686 | 1,003,466 | 1,099,086 | 1,619,083 | 194,462 | 497,436 | 1,695,364 | 6,108,897 | |||||||||||||||||||||||||||||||||||||||||||||
Felcor Lodging LP, 5.63%, 03/01/23 (b) |
USD | 235 | 258 | 379 | 41 | 112 | 397 | 1,422 | 236,469 | 259,612 | 381,369 | 41,256 | 112,700 | 399,481 | 1,430,887 | |||||||||||||||||||||||||||||||||||||||||||||
The Rouse Co. LP, 6.75%, 11/09/15 |
USD | 480 | 520 | 770 | 85 | 240 | 805 | 2,900 | 499,200 | 540,800 | 800,800 | 88,400 | 249,600 | 837,200 | 3,016,000 | |||||||||||||||||||||||||||||||||||||||||||||
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2,001,440 | 2,183,913 | 3,220,337 | 370,348 | 982,346 | 3,370,225 | 12,128,609 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Real Estate Management &
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CBRE Services, Inc., 6.63%, 10/15/20 |
USD | 310 | 335 | 500 | 55 | 160 | 520 | 1,880 | 334,800 | 361,800 | 540,000 | 59,400 | 172,800 | 561,600 | 2,030,400 | |||||||||||||||||||||||||||||||||||||||||||||
Country Garden Holdings Co. Ltd., 7.50%, 01/10/23 (b) |
USD | 200 | 200 | 226 | | | 237 | 863 | 207,500 | 207,500 | 234,475 | | | 245,888 | 895,363 | |||||||||||||||||||||||||||||||||||||||||||||
Crescent Resources LLC/Crescent Ventures, Inc., 10.25%, 08/15/17 (b) |
USD | 785 | 860 | 1,270 | 145 | 375 | 1,330 | 4,765 | 845,837 | 926,650 | 1,368,425 | 156,237 | 404,062 | 1,433,075 | 5,134,286 | |||||||||||||||||||||||||||||||||||||||||||||
Forest City Enterprises, Inc., 7.63%, 06/01/15 |
USD | 392 | 426 | 687 | | | 687 | 2,192 | 391,020 | 424,935 | 685,282 | | | 685,282 | 2,186,519 | |||||||||||||||||||||||||||||||||||||||||||||
IVG Immobilien AG, 0.00% (d)(k) |
EUR | | 300 | 300 | | | | 600 | | 227,166 | 227,166 | | | | 454,332 | |||||||||||||||||||||||||||||||||||||||||||||
Mattamy Group Corp., 6.50%, 11/15/20 (b) |
USD | 345 | 375 | 550 | 60 | 165 | 580 | 2,075 | 343,706 | 373,594 | 547,938 | 59,775 | 164,381 | 577,825 | 2,067,219 | |||||||||||||||||||||||||||||||||||||||||||||
Realogy Corp., 11.50%, 04/15/17 |
USD | 360 | 400 | 575 | 60 | 175 | 605 | 2,175 | 383,850 | 426,500 | 613,094 | 63,975 | 186,594 | 645,081 | 2,319,094 | |||||||||||||||||||||||||||||||||||||||||||||
Realogy Corp., 12.00%, 04/15/17 |
USD | 90 | 100 | 145 | 15 | 45 | 155 | 550 | 96,075 | 106,750 | 154,788 | 16,013 | 48,038 | 165,463 | 587,127 | |||||||||||||||||||||||||||||||||||||||||||||
Realogy Corp., 7.88%, 02/15/19 (b) |
USD | 1,895 | 2,065 | 2,995 | 345 | 560 | 3,160 | 11,020 | 2,060,812 | 2,245,687 | 3,257,062 | 375,187 | 609,000 | 3,436,500 | 11,984,248 |
See Notes to Pro Forma Condensed Combined Financial Statements.
B-42
Pro Forma Condensed Combined Schedule of Investments for
BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE),
BlackRock Corporate High Yield Fund V, Inc. (HYV), BlackRock High Yield Trust (BHY),
BlackRock High Income Shares (HIS) and BlackRock Corporate High Yield Fund VI, Inc. (HYT)
As of February 28, 2013 (Unaudited)
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
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Corporate Bonds | Par (000) | Value | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Real Estate Management & Development (continued) |
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Realogy Corp., 7.63%, 01/15/20 (b) |
USD | 465 | 505 | 750 | 120 | 220 | 785 | 2,845 | $ | 524,288 | $ | 569,387 | $ | 845,625 | $ | 135,300 | $ | 248,050 | $ | 885,087 | $ | 3,207,737 | ||||||||||||||||||||||||||||||||||||||
Realogy Corp., 9.00%, 01/15/20 (b) |
USD | 305 | 335 | 485 | 55 | 145 | 510 | 1,835 | 349,988 | 384,413 | 556,537 | 63,113 | 166,387 | 585,225 | 2,105,663 | |||||||||||||||||||||||||||||||||||||||||||||
Shea Homes LP, 8.63%, 05/15/19 |
USD | 1,290 | 1,405 | 2,005 | 230 | 635 | 2,125 | 7,690 | 1,431,900 | 1,559,550 | 2,225,550 | 255,300 | 704,850 | 2,358,750 | 8,535,900 | |||||||||||||||||||||||||||||||||||||||||||||
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6,969,776 | 7,813,932 | 11,255,942 | 1,184,300 | 2,704,162 | 11,579,776 | 41,507,888 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Road & Rail - 0.5% |
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Hertz Corp., 6.75%, 04/15/19 (b) |
USD | 265 | 290 | 430 | 50 | 130 | 450 | 1,615 | 285,538 | 312,475 | 463,325 | 53,875 | 140,075 | 484,875 | 1,740,163 | |||||||||||||||||||||||||||||||||||||||||||||
Hertz Corp., 7.50%, 10/15/18 |
USD | 505 | 550 | 820 | 130 | 360 | 855 | 3,220 | 551,712 | 600,875 | 895,850 | 142,025 | 393,300 | 934,087 | 3,517,849 | |||||||||||||||||||||||||||||||||||||||||||||
Hertz Corp., 7.38%, 01/15/21 |
USD | 400 | 440 | 645 | 170 | 450 | 675 | 2,780 | 441,000 | 485,100 | 711,112 | 187,425 | 496,125 | 744,188 | 3,064,950 | |||||||||||||||||||||||||||||||||||||||||||||
Hertz Holdings Netherlands BV, 8.50%, 07/31/15 |
EUR | 72 | 88 | 71 | | | 89 | 320 | 99,945 | 122,155 | 98,557 | | | 123,543 | 444,200 | |||||||||||||||||||||||||||||||||||||||||||||
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1,378,195 | 1,520,605 | 2,168,844 | 383,325 | 1,029,500 | 2,286,693 | 8,767,162 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Semiconductors & Semiconductor Equipment - 0.4% |
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Micron Technology, Inc., Series C
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USD | 247 | 261 | 391 | 41 | 112 | 412 | 1,464 | 274,942 | 290,526 | 435,232 | 45,638 | 124,670 | 458,608 | 1,629,616 | |||||||||||||||||||||||||||||||||||||||||||||
NXP BV/NXP Funding LLC, 5.75%, 02/15/21 (b) |
USD | 305 | 335 | 500 | 200 | 200 | 525 | 2,065 | 311,862 | 342,537 | 511,250 | 204,500 | 204,500 | 536,812 | 2,111,461 | |||||||||||||||||||||||||||||||||||||||||||||
Spansion LLC, 7.88%, 11/15/17 |
USD | 540 | 580 | 850 | 50 | 260 | 890 | 3,170 | 569,700 | 611,900 | 896,750 | 52,750 | 274,300 | 938,950 | 3,344,350 | |||||||||||||||||||||||||||||||||||||||||||||
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1,156,504 | 1,244,963 | 1,843,232 | 302,888 | 603,470 | 1,934,370 | 7,085,427 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Software - 1.2% |
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IAC/InterActiveCorp, 4.75%,
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USD | 386 | 421 | 621 | 71 | 183 | 650 | 2,332 | 377,315 | 411,527 | 607,027 | 69,403 | 178,883 | 635,375 | 2,279,530 | |||||||||||||||||||||||||||||||||||||||||||||
Igloo Holdings Corp., 8.25%,
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USD | 274 | 295 | 436 | 47 | 130 | 454 | 1,636 | 280,850 | 302,375 | 446,900 | 48,175 | 133,250 | 465,350 | 1,676,900 |
See Notes to Pro Forma Condensed Combined Financial Statements.
B-43
Pro Forma Condensed Combined Schedule of Investments for
BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE),
BlackRock Corporate High Yield Fund V, Inc. (HYV), BlackRock High Yield Trust (BHY),
BlackRock High Income Shares (HIS) and BlackRock Corporate High Yield Fund VI, Inc. (HYT)
As of February 28, 2013 (Unaudited)
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
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Corporate Bonds | Par (000) | Value | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Software (continued) |
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Infor US, Inc., 9.38%, 04/01/19 |
USD | 1,410 | 1,530 | 2,270 | 280 | 730 | 2,370 | 8,590 | $ | 1,582,725 | $ | 1,717,425 | $ | 2,548,075 | $ | 314,300 | $ | 819,425 | $ | 2,660,325 | $ | 9,642,275 | ||||||||||||||||||||||||||||||||||||||
Interface Security Systems Holdings, Inc.
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USD | 139 | 149 | 219 | 27 | 64 | 229 | 827 | 141,433 | 151,608 | 222,833 | 27,473 | 65,120 | 233,008 | 841,475 | |||||||||||||||||||||||||||||||||||||||||||||
Nuance Communications, Inc., 5.38%, 08/15/20 (b) |
USD | 465 | 500 | 740 | 85 | 225 | 775 | 2,790 | 470,812 | 506,250 | 749,250 | 86,062 | 227,812 | 784,687 | 2,824,873 | |||||||||||||||||||||||||||||||||||||||||||||
Sophia LP, 9.75%, 01/15/19 (b) |
USD | 408 | 442 | 645 | 78 | 198 | 666 | 2,437 | 451,350 | 488,962 | 713,531 | 86,287 | 219,037 | 736,762 | 2,695,929 | |||||||||||||||||||||||||||||||||||||||||||||
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3,304,485 | 3,578,147 | 5,287,616 | 631,700 | 1,643,527 | 5,515,507 | 19,960,982 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Specialty Retail - 3.0% |
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Asbury Automotive Group, Inc., 7.63%, 03/15/17 |
USD | | | | 60 | | | 60 | | | | 61,725 | | | 61,725 | |||||||||||||||||||||||||||||||||||||||||||||
Asbury Automotive Group, Inc., 8.38%, 11/15/20 |
USD | 335 | 365 | 540 | 60 | 165 | 565 | 2,030 | 373,525 | 406,975 | 602,100 | 66,900 | 183,975 | 629,975 | 2,263,450 | |||||||||||||||||||||||||||||||||||||||||||||
Claires Stores, Inc., 9.00%, 03/15/19 (b) |
USD | 797 | 869 | 1,288 | 149 | 280 | 1,348 | 4,731 | 884,670 | 964,590 | 1,429,680 | 165,390 | 310,800 | 1,496,280 | 5,251,410 | |||||||||||||||||||||||||||||||||||||||||||||
House of Fraser Funding Plc, 8.88%, 08/15/18 |
GBP | 221 | 221 | 221 | 100 | | 222 | 985 | 355,384 | 355,384 | 355,384 | 160,807 | | 356,992 | 1,583,951 | |||||||||||||||||||||||||||||||||||||||||||||
House of Fraser Funding Plc, 8.88%, 08/15/18 (b) |
GBP | 259 | 285 | 420 | | 129 | 439 | 1,532 | 416,491 | 458,301 | 675,391 | | 207,441 | 705,944 | 2,463,568 | |||||||||||||||||||||||||||||||||||||||||||||
Limited Brands, Inc., 8.50%, 06/15/19 |
USD | 745 | 785 | 1,170 | 140 | 70 | 1,255 | 4,165 | 912,625 | 961,625 | 1,433,250 | 171,500 | 85,750 | 1,537,375 | 5,102,125 | |||||||||||||||||||||||||||||||||||||||||||||
Limited Brands, Inc., 5.63%, 02/15/22 |
USD | 150 | 160 | 235 | 25 | 70 | 250 | 890 | 158,625 | 169,200 | 248,513 | 26,438 | 74,025 | 264,375 | 941,176 | |||||||||||||||||||||||||||||||||||||||||||||
Michaels Stores, Inc., 7.75%, 11/01/18 |
USD | 215 | 234 | 346 | 39 | 103 | 362 | 1,299 | 234,619 | 255,353 | 377,572 | 42,559 | 112,399 | 395,033 | 1,417,535 | |||||||||||||||||||||||||||||||||||||||||||||
New Academy Finance Co. LLC/New Academy Finance Corp., 8.00%, 06/15/18 (b)(g) |
USD | 197 | 216 | 319 | 37 | 94 | 334 | 1,197 | 203,402 | 223,020 | 329,368 | 38,203 | 97,055 | 344,855 | 1,235,903 | |||||||||||||||||||||||||||||||||||||||||||||
Party City Holdings, Inc., 8.88%, 08/01/20 (b) |
USD | 929 | 1,013 | 1,500 | 173 | 620 | 1,559 | 5,794 | 1,010,287 | 1,101,637 | 1,631,250 | 188,137 | 674,250 | 1,695,412 | 6,300,973 |
See Notes to Pro Forma Condensed Combined Financial Statements.
B-44
Pro Forma Condensed Combined Schedule of Investments for
BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE),
BlackRock Corporate High Yield Fund V, Inc. (HYV), BlackRock High Yield Trust (BHY),
BlackRock High Income Shares (HIS) and BlackRock Corporate High Yield Fund VI, Inc. (HYT)
As of February 28, 2013 (Unaudited)
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
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Corporate Bonds | Par (000) | Value | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Specialty Retail (continued) |
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Penske Automotive Group, Inc., 5.75%, 10/01/22 (b) |
USD | 1,015 | 1,110 | 1,650 | 180 | 490 | 1,725 | 6,170 | $ | 1,061,944 | $ | 1,161,337 | $ | 1,726,312 | $ | 188,325 | $ | 512,662 | $ | 1,804,781 | $ | 6,455,361 | ||||||||||||||||||||||||||||||||||||||
QVC, Inc., 7.13%, 04/15/17 (b) |
USD | 210 | 230 | 340 | 40 | 105 | 355 | 1,280 | 218,728 | 239,559 | 354,130 | 41,662 | 109,364 | 369,754 | 1,333,197 | |||||||||||||||||||||||||||||||||||||||||||||
QVC, Inc., 7.50%, 10/01/19 (b) |
USD | 565 | 625 | 920 | 100 | 285 | 970 | 3,465 | 623,586 | 689,808 | 1,015,397 | 110,369 | 314,552 | 1,070,581 | 3,824,293 | |||||||||||||||||||||||||||||||||||||||||||||
QVC, Inc., 7.38%, 10/15/20 (b) |
USD | 270 | 290 | 440 | 55 | 130 | 455 | 1,640 | 299,279 | 321,447 | 487,713 | 60,964 | 144,097 | 504,340 | 1,817,840 | |||||||||||||||||||||||||||||||||||||||||||||
QVC, Inc., 5.13%, 07/02/22 |
USD | 12 | 14 | 26 | 4 | 11 | 28 | 95 | 12,689 | 14,804 | 27,493 | 4,230 | 11,632 | 29,608 | 100,456 | |||||||||||||||||||||||||||||||||||||||||||||
Sally Holdings LLC, 6.88%, 11/15/19 |
USD | 500 | 545 | 805 | 90 | 245 | 840 | 3,025 | 557,500 | 607,675 | 897,575 | 100,350 | 273,175 | 936,600 | 3,372,875 | |||||||||||||||||||||||||||||||||||||||||||||
Sally Holdings LLC, 5.75%, 06/01/22 |
USD | 470 | 512 | 753 | 83 | 223 | 788 | 2,829 | 496,437 | 540,800 | 795,356 | 87,669 | 235,544 | 832,325 | 2,988,131 | |||||||||||||||||||||||||||||||||||||||||||||
Sonic Automotive, Inc., 9.00%, 03/15/18 |
USD | 345 | 370 | 550 | 65 | 175 | 580 | 2,085 | 379,500 | 407,000 | 605,000 | 71,500 | 192,500 | 638,000 | 2,293,500 | |||||||||||||||||||||||||||||||||||||||||||||
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8,199,291 | 8,878,515 | 12,991,484 | 1,586,728 | 3,539,221 | 13,612,230 | 48,807,469 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Textiles, Apparel & Luxury
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Levi Strauss & Co., 6.88%, 05/01/22 |
USD | 400 | 440 | 645 | 75 | 195 | 675 | 2,430 | 434,500 | 477,950 | 700,632 | 81,469 | 211,819 | 733,219 | 2,639,589 | |||||||||||||||||||||||||||||||||||||||||||||
Phillips-Van Heusen Corp., 4.50%, 12/15/22 |
USD | 233 | 253 | 373 | 41 | 111 | 390 | 1,401 | 229,796 | 249,521 | 367,871 | 40,436 | 109,474 | 384,637 | 1,381,735 | |||||||||||||||||||||||||||||||||||||||||||||
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664,296 | 727,471 | 1,068,503 | 121,905 | 321,293 | 1,117,856 | 4,021,324 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Thrifts & Mortgage Finance - 0.0% |
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Radian Group, Inc., 2.25%, 03/01/19 (c) |
USD | | 70 | 105 | | | | 175 | | 74,988 | 112,481 | | | | 187,469 | |||||||||||||||||||||||||||||||||||||||||||||
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Trading Companies &
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Ashtead Capital, Inc., 6.50%, 07/15/22 (b) |
USD | 455 | 490 | 735 | 90 | 215 | 765 | 2,750 | 490,263 | 527,975 | 791,963 | 96,975 | 231,663 | 824,288 | 2,963,127 | |||||||||||||||||||||||||||||||||||||||||||||
Doric Nimrod Air Finance Alpha Ltd., Series 2012-1, Class B 6.50%, 05/30/21 (b) |
USD | 530 | 575 | 855 | 200 | 250 | 900 | 3,310 | 560,293 | 607,865 | 903,869 | 211,431 | 264,289 | 951,441 | 3,499,188 |
See Notes to Pro Forma Condensed Combined Financial Statements.
B-45
Pro Forma Condensed Combined Schedule of Investments for
BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE),
BlackRock Corporate High Yield Fund V, Inc. (HYV), BlackRock High Yield Trust (BHY),
BlackRock High Income Shares (HIS) and BlackRock Corporate High Yield Fund VI, Inc. (HYT)
As of February 28, 2013 (Unaudited)
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
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Corporate Bonds | Par (000) | Value | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Doric Nimrod Air Finance Alpha Ltd., Series 2012-1, Class A 5.13%, 11/30/24 (b) |
USD | 550 | 635 | 1,130 | 200 | 260 | 1,200 | 3,975 | $ | 591,250 | $ | 682,625 | $ | 1,214,750 | $ | 215,000 | $ | 279,500 | $ | 1,290,000 | $ | 4,273,125 | ||||||||||||||||||||||||||||||||||||||
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1,641,806 | 1,818,465 | 2,910,582 | 523,406 | 775,452 | 3,065,729 | 10,735,440 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Transportation Infrastructure - 0.2% |
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Aguila 3 SA, 7.88%, 01/31/18 |
USD | | | | 150 | | | 150 | | | | 159,000 | | | 159,000 | |||||||||||||||||||||||||||||||||||||||||||||
Aguila 3 SA, 7.88%, 01/31/18 (b) |
USD | 398 | 431 | 632 | | 198 | 665 | 2,324 | 421,880 | 456,860 | 669,920 | | 209,880 | 704,900 | 2,463,440 | |||||||||||||||||||||||||||||||||||||||||||||
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421,880 | 456,860 | 669,920 | 159,000 | 209,880 | 704,900 | 2,622,440 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Wireless Telecommunication Services - 4.4% |
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Cricket Communications, Inc., 7.75%, 10/15/20 |
USD | 543 | 594 | 865 | 96 | 261 | 914 | 3,273 | 553,860 | 605,880 | 882,300 | 97,920 | 266,220 | 932,280 | 3,338,460 | |||||||||||||||||||||||||||||||||||||||||||||
Crown Castle International Corp., 5.25%, 01/15/23 (b) |
USD | 1,029 | 1,126 | 1,658 | 187 | 469 | 1,732 | 6,201 | 1,054,725 | 1,154,150 | 1,699,450 | 191,675 | 480,725 | 1,775,300 | 6,356,025 | |||||||||||||||||||||||||||||||||||||||||||||
Digicel Group Ltd., 8.25%, 09/01/17 (b) |
USD | 1,135 | 1,180 | 1,650 | 330 | 565 | 1,720 | 6,580 | 1,197,425 | 1,244,900 | 1,740,750 | 348,150 | 596,075 | 1,814,600 | 6,941,900 | |||||||||||||||||||||||||||||||||||||||||||||
Digicel Group Ltd., 8.25%, 09/30/20 (b) |
USD | 420 | 425 | 1,430 | 200 | 245 | 1,520 | 4,240 | 447,930 | 453,263 | 1,525,095 | 213,300 | 261,293 | 1,621,080 | 4,521,961 | |||||||||||||||||||||||||||||||||||||||||||||
Digicel Group Ltd., 6.00%, 04/15/21 (b)(f) |
USD | 1,045 | 1,100 | 850 | | 545 | 890 | 4,430 | 1,042,388 | 1,097,250 | 847,875 | | 543,637 | 887,775 | 4,418,925 | |||||||||||||||||||||||||||||||||||||||||||||
MetroPCS Wireless, Inc., 6.63%, 11/15/20 |
USD | 627 | 670 | 1,016 | 94 | 309 | 1,069 | 3,785 | 655,999 | 700,987 | 1,062,990 | 98,348 | 323,291 | 1,118,441 | 3,960,056 | |||||||||||||||||||||||||||||||||||||||||||||
NII Capital Corp., 7.63%, 04/01/21 |
USD | 324 | 341 | 517 | 35 | 152 | 539 | 1,908 | 226,800 | 238,700 | 361,900 | 24,500 | 106,400 | 377,300 | 1,335,600 | |||||||||||||||||||||||||||||||||||||||||||||
Phones4u Finance Plc, 9.50%, 04/01/18 |
GBP | 100 | 100 | 200 | 100 | | 200 | 700 | 156,635 | 156,635 | 313,271 | 156,635 | | 313,271 | 1,096,447 | |||||||||||||||||||||||||||||||||||||||||||||
Phones4u Finance Plc, 9.50%, 04/01/18 (b) |
GBP | 370 | 400 | 545 | | 130 | 570 | 2,015 | 579,551 | 626,542 | 853,663 | | 203,626 | 892,822 | 3,156,204 | |||||||||||||||||||||||||||||||||||||||||||||
Sprint Capital Corp., 6.88%, 11/15/28 |
USD | 1,566 | 1,532 | 2,273 | 263 | 718 | 2,366 | 8,718 | 1,581,660 | 1,547,320 | 2,295,730 | 265,630 | 725,180 | 2,389,660 | 8,805,180 |
See Notes to Pro Forma Condensed Combined Financial Statements.
B-46
Pro Forma Condensed Combined Schedule of Investments for
BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE),
BlackRock Corporate High Yield Fund V, Inc. (HYV), BlackRock High Yield Trust (BHY),
BlackRock High Income Shares (HIS) and BlackRock Corporate High Yield Fund VI, Inc. (HYT)
As of February 28, 2013 (Unaudited)
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
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Corporate Bonds | Par (000) | Value | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Wireless Telecommunication Services (continued) |
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Sprint Nextel Corp., 9.00%, 11/15/18 (b) |
USD | 2,165 | 2,405 | 3,574 | 456 | 2,001 | 3,728 | 14,329 | $ | 2,684,600 | $ | 2,982,200 | $ | 4,431,760 | $ | 565,440 | $ | 2,481,240 | $ | 4,622,721 | $ | 17,767,961 | ||||||||||||||||||||||||||||||||||||||
Sprint Nextel Corp., 7.00%, 03/01/20 (b) |
USD | 1,370 | 1,495 | 2,205 | 235 | 90 | 2,315 | 7,710 | 1,602,900 | 1,749,150 | 2,579,850 | 274,950 | 105,300 | 2,708,550 | 9,020,700 | |||||||||||||||||||||||||||||||||||||||||||||
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11,784,473 | 12,556,977 | 18,594,634 | 2,236,548 | 6,092,987 | 19,453,800 | 70,719,419 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Total Corporate Bonds - 104.6% |
280,565,559 | 306,346,048 | 450,611,986 | 50,297,807 | 133,398,490 | 468,754,017 | 1,689,973,907 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
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Floating Rate Loan Interests (d) |
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Airlines - 1.2% |
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Delta Air Lines, Inc., Term Loan B 4.50%, 04/20/17 |
USD | 393 | 394 | 647 | 96 | 212 | 650 | 2,392 | 396,212 | 397,397 | 652,926 | 96,710 | 213,426 | 655,396 | 2,412,067 | |||||||||||||||||||||||||||||||||||||||||||||
Northwest Airlines, Inc., Term Loan 2.32%, 03/10/17 |
USD | 662 | 722 | 1,061 | 119 | 309 | 1,110 | 3,983 | 616,322 | 672,182 | 987,791 | 110,789 | 287,679 | 1,033,136 | 3,707,899 | |||||||||||||||||||||||||||||||||||||||||||||
Northwest Airlines, Inc., Term Loan 2.32%, 03/10/17 |
USD | 1,199 | 1,307 | 1,922 | 216 | 560 | 2,009 | 7,213 | 1,116,269 | 1,216,817 | 1,789,382 | 201,096 | 521,360 | 1,870,653 | 6,715,577 | |||||||||||||||||||||||||||||||||||||||||||||
Northwest Airlines, Inc., Term Loan 1.70%, 09/10/18 |
USD | 544 | 593 | 872 | 98 | 254 | 912 | 3,273 | 485,683 | 529,431 | 778,522 | 87,494 | 226,771 | 814,234 | 2,922,135 | |||||||||||||||||||||||||||||||||||||||||||||
Northwest Airlines, Inc., Term Loan 1.70%, 09/10/18 |
USD | 540 | 588 | 865 | 97 | 252 | 904 | 3,246 | 482,112 | 524,966 | 772,272 | 86,602 | 224,986 | 807,091 | 2,898,029 | |||||||||||||||||||||||||||||||||||||||||||||
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3,096,598 | 3,340,793 | 4,980,893 | 582,691 | 1,474,222 | 5,180,510 | 18,655,707 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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See Notes to Pro Forma Condensed Combined Financial Statements.
B-47
Pro Forma Condensed Combined Schedule of Investments for
BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE),
BlackRock Corporate High Yield Fund V, Inc. (HYV), BlackRock High Yield Trust (BHY),
BlackRock High Income Shares (HIS) and BlackRock Corporate High Yield Fund VI, Inc. (HYT)
As of February 28, 2013 (Unaudited)
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
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Floating Rate Loan Interests (d) | Par (000) | Value | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Auto Components - 1.2% |
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Federal-Mogul Corp., Term Loan B 2.14%, 12/29/14 |
USD | 1,345 | 1,429 | 2,563 | | 720 | 2,534 | 8,591 | $ | 1,251,325 | $ | 1,329,865 | $ | 2,384,748 | | $ | 670,319 | $ | 2,357,271 | $ | 7,993,528 | |||||||||||||||||||||||||||||||||||||||
Federal-Mogul Corp., Term Loan C 2.14%, 12/28/15 |
USD | 675 | 723 | 1,230 | | 352 | 1,225 | 4,205 | 627,125 | 671,713 | 1,143,487 | | 327,049 | 1,139,089 | 3,908,463 | |||||||||||||||||||||||||||||||||||||||||||||
Schaeffler AG, Term Loan B2 6.00%, 01/27/17 |
USD | 1,225 | 1,345 | 2,135 | 70 | 225 | 2,225 | 7,225 | 1,224,694 | 1,344,664 | 2,134,466 | $ | 69,982 | 224,944 | 2,224,444 | 7,223,194 | ||||||||||||||||||||||||||||||||||||||||||||
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3,103,144 | 3,346,242 | 5,662,701 | 69,982 | 1,222,312 | 5,720,804 | 19,125,185 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Building Products - 0.2% |
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Wilsonart International Holdings LLC, Term Loan B 5.50%, 10/31/19 |
USD | 390 | 425 | 625 | 70 | 185 | 655 | 2,350 | 394,095 | 429,462 | 631,562 | 70,735 | 186,942 | 661,877 | 2,374,673 | |||||||||||||||||||||||||||||||||||||||||||||
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Capital Markets - 0.7% |
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American Capital Holdings, Inc., Term Loan 5.50%, 08/22/16 |
USD | 858 | 941 | 1,382 | 156 | 411 | 1,450 | 5,198 | 866,580 | 950,410 | 1,395,820 | 157,560 | 415,110 | 1,464,500 | 5,249,980 | |||||||||||||||||||||||||||||||||||||||||||||
Nuveen Investments, Inc., Incremental Term Loan 7.25%, 05/13/17 |
USD | 440 | 480 | 725 | 80 | 215 | 770 | 2,710 | 442,200 | 482,400 | 728,625 | 80,400 | 216,075 | 773,850 | 2,723,550 | |||||||||||||||||||||||||||||||||||||||||||||
Nuveen Investments, Inc., Second Lien Term Loan 8.25%, 02/28/19 |
USD | 380 | 415 | 615 | 70 | 185 | 640 | 2,305 | 387,600 | 423,300 | 627,300 | 71,400 | 188,700 | 652,800 | 2,351,100 | |||||||||||||||||||||||||||||||||||||||||||||
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1,696,380 | 1,856,110 | 2,751,745 | 309,360 | 819,885 | 2,891,150 | 10,324,630 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Chemicals - 0.4% |
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Ineos US Finance LLC, Term Loan 6.50%, 05/04/18 |
USD | 343 | 382 | 558 | 69 | 171 | 588 | 2,111 | 349,769 | 389,874 | 569,695 | 70,056 | 174,999 | 599,736 | 2,154,129 | |||||||||||||||||||||||||||||||||||||||||||||
US Coatings Acquisition, Inc., Term Loan 4.75%, 02/03/20 |
USD | 650 | 705 | 1,040 | 115 | 305 | 1,090 | 3,905 | 657,891 | 713,559 | 1,052,626 | 116,396 | 308,703 | 1,103,232 | 3,952,407 | |||||||||||||||||||||||||||||||||||||||||||||
US Coatings Acquisition, Inc., Term Loan B 5.25%, 02/03/20 |
EUR | 70 | 75 | 115 | 10 | | 115 | 385 | 92,319 | 98,913 | 151,667 | 13,188 | | 151,667 | 507,754 | |||||||||||||||||||||||||||||||||||||||||||||
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1,099,979 | 1,202,346 | 1,773,988 | 199,640 | 483,702 | 1,854,635 | 6,614,290 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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See Notes to Pro Forma Condensed Combined Financial Statements.
B-48
Pro Forma Condensed Combined Schedule of Investments for
BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE),
BlackRock Corporate High Yield Fund V, Inc. (HYV), BlackRock High Yield Trust (BHY),
BlackRock High Income Shares (HIS) and BlackRock Corporate High Yield Fund VI, Inc. (HYT)
As of February 28, 2013 (Unaudited)
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
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Floating Rate Loan Interests (d) | Par (000) | Value | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial Services &
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AWAS Finance Luxembourg Sarl, Term Loan B 5.25%, 06/10/16 |
USD | | 430 | 625 | 97 | 195 | 686 | 2,033 | | $ | 433,554 | $ | 629,881 | $ | 98,163 | $ | 196,326 | $ | 691,233 | $ | 2,049,157 | |||||||||||||||||||||||||||||||||||||||
Delos Aircraft, Inc., Term Loan 2 4.75%, 04/12/16 |
USD | | 550 | 875 | 100 | 325 | 975 | 2,825 | | 553,207 | 880,101 | 100,583 | 326,895 | 980,684 | 2,841,470 | |||||||||||||||||||||||||||||||||||||||||||||
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| 986,761 | 1,509,982 | 198,746 | 523,221 | 1,671,917 | 4,890,627 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Communications Equipment - 1.4% |
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Alcatel-Lucent, Term Loan C 7.25%, 01/31/19 |
USD | 1,290 | 1,410 | 2,080 | 235 | 955 | 2,175 | 8,145 | $ | 1,304,190 | 1,425,510 | 2,102,880 | 237,585 | 965,505 | 2,198,925 | 8,234,595 | ||||||||||||||||||||||||||||||||||||||||||||
Alcatel-Lucent, Term Loan D 7.75%, 01/31/19 |
EUR | 505 | 550 | 810 | 90 | | 845 | 2,800 | 661,043 | 719,948 | 1,060,287 | 117,810 | | 1,106,102 | 3,665,190 | |||||||||||||||||||||||||||||||||||||||||||||
Avaya, Inc., Term Loan B5 8.00%, 03/30/18 |
USD | 114 | 126 | 186 | 20 | 57 | 195 | 698 | 114,397 | 126,832 | 186,517 | 19,895 | 57,199 | 196,465 | 701,305 | |||||||||||||||||||||||||||||||||||||||||||||
Zayo Group, LLC Refinancing, Term Loan B 5.25%, 07/12/19 |
USD | 1,667 | 1,814 | 2,691 | 297 | 807 | 2,809 | 10,085 | 1,672,467 | 1,820,150 | 2,699,297 | 298,369 | 809,295 | 2,818,046 | 10,117,624 | |||||||||||||||||||||||||||||||||||||||||||||
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3,752,097 | 4,092,440 | 6,048,981 | 673,659 | 1,831,999 | 6,319,538 | 22,718,714 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Construction & Engineering - 0.6% |
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Safway Services LLC, Mezzanine Loan 9.88%, 12/16/17 |
USD | 1,750 | 2,000 | 3,000 | 250 | | 3,250 | 10,250 | 1,750,000 | 2,000,000 | 3,000,000 | 250,000 | | 3,250,000 | 10,250,000 | |||||||||||||||||||||||||||||||||||||||||||||
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Construction Materials - 0.4% |
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HD Supply, Inc., Senior Debt B 4.50%, 10/12/17 |
USD | 1,040 | 1,109 | 1,642 | 184 | 493 | 1,721 | 6,189 | 1,042,541 | 1,112,376 | 1,646,117 | 184,565 | 493,835 | 1,725,929 | 6,205,363 | |||||||||||||||||||||||||||||||||||||||||||||
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Consumer Finance - 1.3% |
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Springleaf Financial Funding Co., Term Loan 5.50%, 05/10/17 |
USD | 2,948 | 4,001 | 5,880 | 661 | 1,772 | 6,153 | 21,415 | 2,958,436 | 4,015,163 | 5,900,815 | 663,340 | 1,778,273 | 6,174,782 | 21,490,809 | |||||||||||||||||||||||||||||||||||||||||||||
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See Notes to Pro Forma Condensed Combined Financial Statements.
B-49
Pro Forma Condensed Combined Schedule of Investments for
BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE),
BlackRock Corporate High Yield Fund V, Inc. (HYV), BlackRock High Yield Trust (BHY),
BlackRock High Income Shares (HIS) and BlackRock Corporate High Yield Fund VI, Inc. (HYT)
As of February 28, 2013 (Unaudited)
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
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Floating Rate Loan Interests (d) | Par (000) | Value | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Diversified Consumer Services - 0.2% |
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Laureate Education, Inc., Extended Term Loan 5.25%, 06/18/18 |
USD | 134 | 144 | 213 | 25 | 64 | 223 | 803 | $ | 134,349 | $ | 144,301 | $ | 213,964 | $ | 24,879 | $ | 64,687 | $ | 223,916 | $ | 806,096 | ||||||||||||||||||||||||||||||||||||||
ServiceMaster Co., Term Loan 4.25%, 04/01/17 |
USD | 425 | 465 | 680 | 80 | 200 | 710 | 2,560 | 423,558 | 463,422 | 677,693 | 79,729 | 199,321 | 707,591 | 2,551,314 | |||||||||||||||||||||||||||||||||||||||||||||
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557,907 | 607,723 | 891,657 | 104,608 | 264,008 | 931,507 | 3,357,410 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Diversified Telecommunication Services - 0.8% |
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Hawaiian Telcom Communications, Inc., Term Loan B 7.00%, 02/28/17 |
USD | | | | | 404 | | 404 | | | | | 411,562 | | 411,562 | |||||||||||||||||||||||||||||||||||||||||||||
Level 3 Financing, Inc., 2016 Term Loan B 4.75%, 02/01/16 |
USD | 643 | 329 | 499 | 50 | 150 | 514 | 2,185 | 650,626 | 332,878 | 504,361 | 50,436 | 151,309 | 519,492 | 2,209,102 | |||||||||||||||||||||||||||||||||||||||||||||
Level 3 Financing, Inc., 2019 Term Loan B 5.25%, 08/01/19 |
USD | 530 | 270 | 405 | 40 | 120 | 420 | 1,785 | 535,411 | 272,757 | 409,135 | 40,408 | 121,225 | 424,288 | 1,803,224 | |||||||||||||||||||||||||||||||||||||||||||||
Level 3 Financing, Inc., Term Loan 4.75%, 08/01/19 |
USD | 900 | 1,750 | 2,500 | 250 | 800 | 2,700 | 8,900 | 907,200 | 1,764,000 | 2,520,000 | 252,000 | 806,400 | 2,721,600 | 8,971,200 | |||||||||||||||||||||||||||||||||||||||||||||
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2,093,237 | 2,369,635 | 3,433,496 | 342,844 | 1,490,496 | 3,665,380 | 13,395,088 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Energy Equipment & Services - 1.5% |
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Dynegy Midwest Generation LLC, Coal Co. Term Loan 9.25%, 08/04/16 |
USD | 1,152 | 1,722 | 2,546 | 290 | 777 | 2,667 | 9,154 | 1,188,849 | 1,777,782 | 2,627,341 | 298,919 | 802,362 | 2,753,202 | 9,448,455 | |||||||||||||||||||||||||||||||||||||||||||||
Dynegy Power LLC, Gas Co. Term Loan 9.25%, 08/04/16 |
USD | 958 | 2,780 | 4,108 | 467 | 1,255 | 4,305 | 13,873 | 996,276 | 2,890,828 | 4,272,285 | 486,068 | 1,304,710 | 4,476,946 | 14,427,113 | |||||||||||||||||||||||||||||||||||||||||||||
Tervita Corp., Incremental Term Loan 6.50%, 05/01/18 |
USD | 135 | 145 | 215 | 25 | 60 | 225 | 805 | 135,697 | 145,748 | 216,110 | 25,129 | 60,309 | 226,161 | 809,154 | |||||||||||||||||||||||||||||||||||||||||||||
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2,320,822 | 4,814,358 | 7,115,736 | 810,116 | 2,167,381 | 7,456,309 | 24,684,722 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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See Notes to Pro Forma Condensed Combined Financial Statements.
B-50
Pro Forma Condensed Combined Schedule of Investments for
BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE),
BlackRock Corporate High Yield Fund V, Inc. (HYV), BlackRock High Yield Trust (BHY),
BlackRock High Income Shares (HIS) and BlackRock Corporate High Yield Fund VI, Inc. (HYT)
As of February 28, 2013 (Unaudited)
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
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Floating Rate Loan Interests (d) | Par (000) | Value | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Food & Staples Retailing - 0.0% |
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Rite Aid Corp., Second Lien Term Loan 5.75%, 08/21/20 |
USD | 100 | 110 | 160 | 20 | 45 | 165 | 600 | $ | 102,278 | $ | 112,506 | $ | 163,645 | $ | 20,456 | $ | 46,025 | $ | 168,759 | $ | 613,669 | ||||||||||||||||||||||||||||||||||||||
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Food Products - 0.1% |
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Advance Pierre Foods, Inc., Term Loan 5.75%, 07/10/17 |
USD | 195 | 215 | 320 | 35 | 95 | 330 | 1,190 | 197,377 | 217,621 | 323,901 | 35,427 | 96,158 | 334,023 | 1,204,507 | |||||||||||||||||||||||||||||||||||||||||||||
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Health Care Equipment & Supplies - 0.5% |
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Bausch & Lomb, Inc., Term Loan B 5.25%, 05/17/19 |
USD | 353 | 383 | 567 | 50 | 174 | 592 | 2,119 | 355,618 | 385,676 | 570,996 | 50,080 | 175,310 | 596,030 | 2,133,710 | |||||||||||||||||||||||||||||||||||||||||||||
Capital Safety North America Holding, Inc., Term Loan 4.50%, 01/21/19 |
USD | | 759 | 1,112 | 129 | 347 | 1,171 | 3,518 | | 759,263 | 1,111,600 | 129,025 | 347,375 | 1,171,150 | 3,518,413 | |||||||||||||||||||||||||||||||||||||||||||||
LHP Hospital Group, Inc., Term Loan 9.00%, 07/03/18 |
USD | 259 | 284 | 413 | 45 | 124 | 433 | 1,558 | 264,521 | 289,955 | 422,216 | 45,782 | 127,173 | 442,563 | 1,592,210 | |||||||||||||||||||||||||||||||||||||||||||||
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620,139 | 1,434,894 | 2,104,812 | 224,887 | 649,858 | 2,209,743 | 7,244,333 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Health Care Providers & Services - 0.4% |
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Genesis HealthCare Corp., Term Loan B 10.00%, 10/02/17 |
USD | 173 | 190 | 278 | 33 | 85 | 294 | 1,053 | 169,697 | 185,770 | 272,487 | 32,145 | 82,980 | 288,560 | 1,031,639 | |||||||||||||||||||||||||||||||||||||||||||||
Harden Healthcare LLC, Add on Term Loan A 7.75%, 03/02/15 |
USD | 343 | 360 | 549 | 69 | 206 | 617 | 2,144 | 335,663 | 352,446 | 537,061 | 67,133 | 201,397 | 604,193 | 2,097,893 | |||||||||||||||||||||||||||||||||||||||||||||
Harden Healthcare LLC, Term Loan A 8.50%, 03/02/15 |
USD | 300 | 341 | 478 | 58 | 154 | 478 | 1,809 | 297,645 | 338,233 | 473,526 | 57,499 | 152,205 | 473,526 | 1,792,634 | |||||||||||||||||||||||||||||||||||||||||||||
inVentiv Health, Inc., Combined Term Loan 7.50%, 08/04/16 |
USD | 376 | 368 | 576 | 79 | 166 | 576 | 2,141 | 370,097 | 362,169 | 566,604 | 77,546 | 163,019 | 566,604 | 2,106,039 | |||||||||||||||||||||||||||||||||||||||||||||
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1,173,102 | 1,238,618 | 1,849,678 | 234,323 | 599,601 | 1,932,883 | 7,028,205 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Hotels, Restaurants & Leisure - 3.2% |
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Caesars Entertainment Operating Co., Inc., Term Loan B1 3.20%, 01/28/15 |
USD | 471 | 514 | 766 | 90 | 214 | 804 | 2,859 | 469,334 | 512,002 | 763,261 | 90,074 | 213,334 | 801,187 | 2,849,192 |
See Notes to Pro Forma Condensed Combined Financial Statements.
B-51
Pro Forma Condensed Combined Schedule of Investments for
BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE),
BlackRock Corporate High Yield Fund V, Inc. (HYV), BlackRock High Yield Trust (BHY),
BlackRock High Income Shares (HIS) and BlackRock Corporate High Yield Fund VI, Inc. (HYT)
As of February 28, 2013 (Unaudited)
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
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Floating Rate Loan Interests (d) | Par (000) | Value | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Hotels, Restaurants & Leisure (continued) |
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Caesars Entertainment Operating Co., Inc., Term Loan B3 3.20%, 01/28/15 |
USD | 21 | 26 | 34 | 4 | 13 | 39 | 137 | $ | 21,367 | $ | 26,096 | $ | 34,289 | $ | 4,476 | $ | 13,175 | $ | 39,018 | $ | 138,421 | ||||||||||||||||||||||||||||||||||||||
Harrahs Property Co., Mezzanine Term Loan 3.69%, 02/13/14 |
USD | 5,000 | 5,863 | 8,647 | 905 | 2,355 | 8,410 | 31,180 | 4,600,000 | 5,394,328 | 7,954,872 | 832,600 | 2,166,600 | 7,737,200 | 28,685,600 | |||||||||||||||||||||||||||||||||||||||||||||
MGM Resorts International, Term Loan B 4.25%, 12/20/19 |
USD | 1,140 | 1,250 | 1,840 | 205 | 540 | 1,925 | 6,900 | 1,153,110 | 1,264,375 | 1,861,160 | 207,358 | 546,210 | 1,947,137 | 6,979,350 | |||||||||||||||||||||||||||||||||||||||||||||
Station Casinos, Inc., Term Loan B 5.00%, 02/13/20 |
USD | 915 | 1,005 | 1,485 | 170 | 440 | 1,550 | 5,565 | 922,625 | 1,013,375 | 1,497,375 | 171,417 | 443,667 | 1,562,916 | 5,611,375 | |||||||||||||||||||||||||||||||||||||||||||||
Station Casinos, Inc., Term Loan B 5.50%, 09/27/19 |
USD | 943 | 1,032 | 1,531 | 175 | 454 | 1,596 | 5,731 | 948,133 | 1,038,431 | 1,540,089 | 175,580 | 456,508 | 1,605,305 | 5,764,046 | |||||||||||||||||||||||||||||||||||||||||||||
Travelport Holdings Ltd., Extended Tranche A Term Loan 6.40%, 12/01/16 |
USD | 183 | 199 | 294 | 32 | 91 | 308 | 1,107 | 64,686 | 70,410 | 103,988 | 11,402 | 32,104 | 108,841 | 391,431 | |||||||||||||||||||||||||||||||||||||||||||||
Travelport Holdings Ltd., Extended Tranche B Term Loan 13.80%, 12/01/16 |
USD | 613 | 667 | 985 | 108 | 304 | 1,031 | 3,708 | 57,195 | 62,257 | 91,946 | 10,082 | 28,386 | 96,237 | 346,103 | |||||||||||||||||||||||||||||||||||||||||||||
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8,236,450 | 9,381,274 | 13,846,980 | 1,502,989 | 3,899,984 | 13,897,841 | 50,765,518 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Industrial Conglomerates - 0.2% |
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Sequa Corp., Term Loan B 5.25%, 06/19/17 |
USD | 532 | 582 | 860 | 94 | 254 | 895 | 3,217 | 538,038 | 588,322 | 869,911 | 95,539 | 256,448 | 905,110 | 3,253,368 | |||||||||||||||||||||||||||||||||||||||||||||
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Insurance - 0.1% |
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Alliant Holdings I, Inc., Term Loan B 5.00%, 12/20/19 |
USD | 310 | 340 | 500 | 55 | 145 | 520 | 1,870 | 312,325 | 342,550 | 503,750 | 55,413 | 146,088 | 523,900 | 1,884,026 | |||||||||||||||||||||||||||||||||||||||||||||
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IT Services - 0.3% |
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Ceridian Corp., Extended Term Loan 5.95%, 05/09/17 |
USD | 62 | 68 | 104 | 12 | | 107 | 353 | 62,893 | 68,883 | 104,822 | 11,980 | | 107,816 | 356,394 |
See Notes to Pro Forma Condensed Combined Financial Statements.
B-52
Pro Forma Condensed Combined Schedule of Investments for
BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE),
BlackRock Corporate High Yield Fund V, Inc. (HYV), BlackRock High Yield Trust (BHY),
BlackRock High Income Shares (HIS) and BlackRock Corporate High Yield Fund VI, Inc. (HYT)
As of February 28, 2013 (Unaudited)
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
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Floating Rate Loan Interests (d) | Par (000) | Value | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
IT Services (continued) |
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First Data Corp., Extended 2018 Term Loan B 4.20%, 03/23/18 |
USD | 720 | 785 | 1,160 | 130 | 355 | 1,220 | 4,370 | $ | 710,928 | $ | 775,109 | $ | 1,145,384 | $ | 128,362 | $ | 350,527 | $ | 1,204,628 | $ | 4,314,938 | ||||||||||||||||||||||||||||||||||||||
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773,821 | 843,992 | 1,250,206 | 140,342 | 350,527 | 1,312,444 | 4,671,332 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Leisure Equipment & Products - 0.1% |
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Eastman Kodak Co., DIP Term Loan B 8.50%, 07/19/13 |
USD | 221 | 240 | 355 | 41 | 108 | 373 | 1,338 | 220,569 | 240,022 | 354,732 | 40,574 | 107,612 | 372,346 | 1,335,855 | |||||||||||||||||||||||||||||||||||||||||||||
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Life Sciences Tools & Services - 0.1% |
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Patheon, Inc., Term Loan 7.25%, 12/06/18 |
USD | 190 | 204 | 304 | 35 | 90 | 319 | 1,142 | 191,657 | 206,788 | 307,660 | 35,305 | 90,785 | 322,791 | 1,154,986 | |||||||||||||||||||||||||||||||||||||||||||||
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Machinery - 0.7% |
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Rexnord Corp., Term Loan B 4.50%, 04/02/18 |
USD | 540 | 589 | 871 | 99 | 262 | 911 | 3,272 | 542,927 | 592,737 | 876,653 | 99,620 | 263,992 | 916,501 | 3,292,430 | |||||||||||||||||||||||||||||||||||||||||||||
Silver II US Holdings LLC, Term Loan 5.00%, 12/05/19 |
USD | 1,395 | 1,550 | 2,355 | 225 | 685 | 2,400 | 8,610 | 1,395,000 | 1,550,000 | 2,355,000 | 225,000 | 685,000 | 2,400,000 | 8,610,000 | |||||||||||||||||||||||||||||||||||||||||||||
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1,937,927 | 2,142,737 | 3,231,653 | 324,620 | 948,992 | 3,316,501 | 11,902,430 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Media - 3.8% |
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Cengage Learning Acquisitions, Inc., Non-Extended Term Loan 2.71%, 07/03/14 |
USD | 292 | 322 | 480 | 59 | 139 | 495 | 1,787 | 228,427 | 251,656 | 375,549 | 46,460 | 108,406 | 387,164 | 1,397,662 | |||||||||||||||||||||||||||||||||||||||||||||
Cengage Learning Acquisitions, Inc., Tranche 1 Incremental 7.50%, 07/03/14 |
USD | 1,378 | 1,606 | 2,298 | 239 | 691 | 2,526 | 8,738 | 1,095,112 | 1,276,969 | 1,826,513 | 189,806 | 549,544 | 2,008,369 | 6,946,313 | |||||||||||||||||||||||||||||||||||||||||||||
Cequel Communications LLC, Term Loan B 4.00%, 02/14/19 |
USD | 262 | 287 | 425 | 50 | 124 | 440 | 1,588 | 263,651 | 288,337 | 427,355 | 49,748 | 124,307 | 442,392 | 1,595,790 | |||||||||||||||||||||||||||||||||||||||||||||
Clear Channel Communications, Inc., Term Loan B 3.85%, 01/29/16 |
USD | 1,217 | 1,327 | 1,968 | 229 | 599 | 2,054 | 7,394 | 1,041,194 | 1,134,895 | 1,682,959 | 196,141 | 512,255 | 1,756,554 | 6,323,998 | |||||||||||||||||||||||||||||||||||||||||||||
Clear Channel Communications, Inc., Term Loan C 3.85%, 01/29/16 |
USD | 362 | 397 | 581 | 62 | 178 | 617 | 2,197 | 305,631 | 334,970 | 490,625 | 51,970 | 150,332 | 520,938 | 1,854,466 | |||||||||||||||||||||||||||||||||||||||||||||
EMI Music Publishing Ltd., Term Loan B 5.50%, 06/29/18 |
USD | 398 | 433 | 632 | 45 | 194 | 672 | 2,374 | 402,278 | 437,478 | 638,617 | 45,256 | 196,111 | 678,845 | 2,398,585 |
See Notes to Pro Forma Condensed Combined Financial Statements.
B-53
Pro Forma Condensed Combined Schedule of Investments for
BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE),
BlackRock Corporate High Yield Fund V, Inc. (HYV), BlackRock High Yield Trust (BHY),
BlackRock High Income Shares (HIS) and BlackRock Corporate High Yield Fund VI, Inc. (HYT)
As of February 28, 2013 (Unaudited)
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
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Floating Rate Loan Interests (d) | Par (000) | Value | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Media (continued) |
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Getty Images, Inc., Term Loan B 4.75%, 10/18/19 |
USD | 379 | 412 | 607 | 68 | 180 | 635 | 2,281 | $ | 381,467 | $ | 415,218 | $ | 611,484 | $ | 68,667 | $ | 181,019 | $ | 639,883 | $ | 2,297,738 | ||||||||||||||||||||||||||||||||||||||
Intelsat Jackson Holdings SA, Term Loan B1 4.50%, 04/02/18 |
USD | 4,867 | 5,447 | 8,037 | 1,042 | 2,748 | 8,412 | 30,553 | 4,913,012 | 5,497,821 | 8,112,183 | 1,051,638 | 2,773,918 | 8,490,792 | 30,839,364 | |||||||||||||||||||||||||||||||||||||||||||||
Interactive Data Corp., Term Loan B 3.75%, 02/11/18 |
USD | 379 | 409 | 608 | 70 | 185 | 635 | 2,286 | 379,581 | 409,548 | 609,327 | 69,923 | 184,796 | 635,411 | 2,288,586 | |||||||||||||||||||||||||||||||||||||||||||||
Univision Communications, Inc., Extended Term Loan 4.45%, 03/31/17 |
USD | 248 | 268 | 400 | 44 | 120 | 416 | 1,496 | 248,064 | 268,069 | 400,103 | 44,011 | 120,031 | 416,107 | 1,496,385 | |||||||||||||||||||||||||||||||||||||||||||||
Virgin Media Investment Holdings, Term Loan B 3.50%, 02/17/20 |
USD | 695 | 760 | 1,115 | 125 | 320 | 1,170 | 4,185 | 690,851 | 755,463 | 1,108,343 | 124,254 | 318,089 | 1,163,015 | 4,160,015 | |||||||||||||||||||||||||||||||||||||||||||||
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9,949,268 | 11,070,424 | 16,283,058 | 1,937,874 | 5,218,808 | 17,139,470 | 61,598,902 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Metals & Mining - 0.9% |
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Constellium Holdco BV, Term Loan B 9.25%, 05/25/18 |
USD | 388 | 428 | 627 | 70 | 189 | 657 | 2,359 | 395,811 | 436,407 | 639,387 | 71,043 | 192,831 | 669,834 | 2,405,313 | |||||||||||||||||||||||||||||||||||||||||||||
FMG America Finance, Inc., Term Loan 5.25%, 10/18/17 |
USD | 2,075 | 2,274 | 3,307 | 394 | 938 | 3,461 | 12,449 | 2,099,656 | 2,301,546 | 3,346,327 | 398,733 | 948,883 | 3,502,792 | 12,597,937 | |||||||||||||||||||||||||||||||||||||||||||||
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2,495,467 | 2,737,953 | 3,985,714 | 469,776 | 1,141,714 | 4,172,626 | 15,003,250 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Multiline Retail - 0.3% |
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HEMA Holding BV, Mezzanine 8.62%, 07/05/17 (g) |
EUR | 1,184 | | 1,480 | | | 1,776 | 4,440 | 1,368,074 | | 1,710,092 | | | 2,052,111 | 5,130,277 | |||||||||||||||||||||||||||||||||||||||||||||
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See Notes to Pro Forma Condensed Combined Financial Statements.
B-54
Pro Forma Condensed Combined Schedule of Investments for
BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE),
BlackRock Corporate High Yield Fund V, Inc. (HYV), BlackRock High Yield Trust (BHY),
BlackRock High Income Shares (HIS) and BlackRock Corporate High Yield Fund VI, Inc. (HYT)
As of February 28, 2013 (Unaudited)
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
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Floating Rate Loan Interests (d) | Par (000) | Value | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Oil, Gas & Consumable Fuels - 1.5% |
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Chesapeake Energy Corp., Unsecured Term Loan 5.75%, 12/01/17 |
USD | 2,015 | 2,225 | 3,255 | 325 | 975 | 3,435 | 12,230 | $ | 2,056,771 | $ | 2,271,124 | $ | 3,322,476 | $ | 331,738 | $ | 995,212 | $ | 3,506,207 | $ | 12,483,528 | ||||||||||||||||||||||||||||||||||||||
Obsidian Natural Gas Trust, Term Loan 7.00%, 11/02/15 |
USD | 777 | 841 | 1,247 | 140 | 396 | 1,308 | 4,709 | 784,301 | 849,398 | 1,258,978 | 140,948 | 400,026 | 1,321,565 | 4,755,216 | |||||||||||||||||||||||||||||||||||||||||||||
Samson Investment Co., Second Lien Term Loan 6.00%, 09/25/18 |
USD | 215 | 235 | 345 | 40 | 100 | 360 | 1,295 | 217,017 | 237,205 | 348,236 | 40,375 | 100,938 | 363,377 | 1,307,148 | |||||||||||||||||||||||||||||||||||||||||||||
Vantage Drilling Co., Term Loan 6.25%, 10/26/17 |
USD | 889 | 973 | 1,437 | 163 | 425 | 1,501 | 5,388 | 893,194 | 977,551 | 1,443,996 | 163,752 | 426,748 | 1,508,505 | 5,413,746 | |||||||||||||||||||||||||||||||||||||||||||||
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3,951,283 | 4,335,278 | 6,373,686 | 676,813 | 1,922,924 | 6,699,654 | 23,959,638 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Pharmaceuticals - 0.6% |
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Aptalis Pharma, Inc., Term Loan B 5.50%, 02/10/17 |
USD | | 980 | 1,470 | | | 1,470 | 3,920 | | 981,960 | 1,472,940 | | | 1,472,940 | 3,927,840 | |||||||||||||||||||||||||||||||||||||||||||||
Par Pharmaceutical, Term Loan B 4.25%, 09/28/19 |
USD | 658 | 728 | 1,057 | 120 | 319 | 1,107 | 3,989 | 657,527 | 727,265 | 1,056,028 | 119,551 | 318,801 | 1,105,841 | 3,985,013 | |||||||||||||||||||||||||||||||||||||||||||||
Pharmaceutical Product Development, Inc., Term Loan B 4.25%, 12/05/18 |
USD | 287 | 312 | 460 | 49 | 138 | 485 | 1,731 | 288,479 | 313,343 | 462,555 | 49,741 | 139,256 | 487,432 | 1,740,806 | |||||||||||||||||||||||||||||||||||||||||||||
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946,006 | 2,022,568 | 2,991,523 | 169,292 | 458,057 | 3,066,213 | 9,653,659 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Professional Services - 0.1% |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Truven Health Analytics, Inc., Term Loan B 5.75%, 06/06/19 |
USD | 343 | 373 | 547 | 60 | 164 | 572 | 2,059 | 346,495 | 376,625 | 552,383 | 60,260 | 165,715 | 577,492 | 2,078,970 | |||||||||||||||||||||||||||||||||||||||||||||
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Real Estate Investment Trusts
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
iStar Financial, Inc., Term Loan 4.50%, 09/28/17 |
USD | 962 | 750 | 1,539 | 124 | 332 | 1,615 | 5,322 | 963,027 | 750,395 | 1,539,667 | 123,894 | 331,908 | 1,615,689 | 5,324,580 | |||||||||||||||||||||||||||||||||||||||||||||
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Real Estate Management & Development - 0.3% |
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Realogy Corp., Extended Letter of Credit Loan 4.46%, 10/10/16 |
USD | 86 | 93 | 136 | 14 | 29 | 138 | 496 | 86,467 | 93,070 | 136,303 | 14,457 | 28,913 | 138,243 | 497,453 | |||||||||||||||||||||||||||||||||||||||||||||
Realogy Corp., Extended Term Loan 4.42%, 10/10/16 |
USD | 689 | 737 | 1,084 | 123 | 245 | 1,173 | 4,051 | 688,607 | 736,330 | 1,084,047 | 122,631 | 245,263 | 1,172,668 | 4,049,546 | |||||||||||||||||||||||||||||||||||||||||||||
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775,074 | 829,400 | 1,220,350 | 137,088 | 274,176 | 1,310,911 | 4,546,999 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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See Notes to Pro Forma Condensed Combined Financial Statements.
B-55
Pro Forma Condensed Combined Schedule of Investments for
BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE),
BlackRock Corporate High Yield Fund V, Inc. (HYV), BlackRock High Yield Trust (BHY),
BlackRock High Income Shares (HIS) and BlackRock Corporate High Yield Fund VI, Inc. (HYT)
As of February 28, 2013 (Unaudited)
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
|||||||||||||||||||||||||||||||||||||||||||||||
Floating Rate Loan Interests (d) | Par (000) | Value | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Road & Rail - 0.1% |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Genesee & Wyoming, Inc., Term Loan A 2.70%, 9/29/17 |
USD | 263 | 287 | 426 | 48 | 125 | 445 | 1,594 | $ | 263,447 | $ | 287,396 | $ | 426,305 | $ | 47,899 | $ | 124,538 | $ | 445,464 | $ | 1,595,049 | ||||||||||||||||||||||||||||||||||||||
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Semiconductors & Semiconductor
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Freescale Semiconductor, Inc., Extended Term Loan B 4.45%, 12/01/16 |
USD | 275 | 300 | 440 | 50 | 130 | 455 | 1,650 | 275,000 | 300,000 | 440,000 | 50,000 | 130,000 | 455,000 | 1,650,000 | |||||||||||||||||||||||||||||||||||||||||||||
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Software - 0.6% |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
GCA Services Group, Inc., Second Lien Term Loan 9.25%, 10/22/20 |
USD | 55 | 60 | 85 | 10 | 25 | 90 | 325 | 54,450 | 59,400 | 84,150 | 9,900 | 24,750 | 89,100 | 321,750 | |||||||||||||||||||||||||||||||||||||||||||||
Infor US, Inc., Term Loan B2 5.25%, 04/05/18 |
USD | 1,124 | 1,229 | 1,811 | 204 | 542 | 1,895 | 6,805 | 1,136,534 | 1,242,141 | 1,830,524 | 206,185 | 548,151 | 1,916,015 | 6,879,550 | |||||||||||||||||||||||||||||||||||||||||||||
Kronos, Inc., Second Lien Term Loan 9.75%, 04/30/20 |
USD | 470 | 515 | 760 | 85 | 225 | 795 | 2,850 | 488,800 | 535,600 | 790,400 | 88,400 | 234,000 | 826,800 | 2,964,000 | |||||||||||||||||||||||||||||||||||||||||||||
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1,679,784 | 1,837,141 | 2,705,074 | 304,485 | 806,901 | 2,831,915 | 10,165,300 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Specialty Retail - 0.2% |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Davids Bridal, Inc., Term Loan B 5.00%, 10/11/19 |
USD | 495 | 545 | 800 | 90 | 235 | 835 | 3,000 | 500,074 | 550,586 | 808,200 | 90,922 | 237,409 | 843,559 | 3,030,750 | |||||||||||||||||||||||||||||||||||||||||||||
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Textiles, Apparel & Luxury Goods - 0.6% |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ascend Performance Materials LLC, Term Loan B 6.75%, 04/10/18 |
USD | 1,042 | 1,131 | 1,628 | 184 | 506 | 1,737 | 6,228 | 1,052,546 | 1,142,764 | 1,643,977 | 185,449 | 511,237 | 1,754,244 | 6,290,217 | |||||||||||||||||||||||||||||||||||||||||||||
Phillips-Van Heusen Corp., Term Loan B 3.25%, 12/19/19 |
USD | 405 | 440 | 650 | 75 | 190 | 680 | 2,440 | 408,248 | 443,529 | 655,213 | 75,601 | 191,524 | 685,453 | 2,459,568 | |||||||||||||||||||||||||||||||||||||||||||||
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1,460,794 | 1,586,293 | 2,299,190 | 261,050 | 702,761 | 2,439,697 | 8,749,785 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Thrifts & Mortgage Finance - 0.2% |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ocwen Financial Corp., Term Loan 5.00%, 01/22/18 |
USD | 560 | 610 | 900 | 100 | 260 | 940 | 3,370 | 566,765 | 617,369 | 910,872 | 101,208 | 263,141 | 951,355 | 3,410,710 | |||||||||||||||||||||||||||||||||||||||||||||
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See Notes to Pro Forma Condensed Combined Financial Statements.
B-56
Pro Forma Condensed Combined Schedule of Investments for
BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE),
BlackRock Corporate High Yield Fund V, Inc. (HYV), BlackRock High Yield Trust (BHY),
BlackRock High Income Shares (HIS) and BlackRock Corporate High Yield Fund VI, Inc. (HYT)
As of February 28, 2013 (Unaudited)
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
|||||||||||||||||||||||||||||||||||||||||||||||
Floating Rate Loan Interests (d) | Par (000) | Value | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Wireless Telecommunication Services - 0.9% |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Vodafone Americas Finance 2, Inc., Term Loan 6.88%, 08/11/15 (g) |
USD | | 1,938 | 3,046 | 277 | 831 | | 6,092 | | $ | 1,976,937 | $ | 3,106,615 | $ | 282,420 | $ | 847,258 | | $ | 6,213,230 | ||||||||||||||||||||||||||||||||||||||||
Vodafone Americas Finance 2, Inc., Term Loan B 6.25%, 07/11/16 (g) |
USD | | 1,341 | 1,908 | 258 | 619 | 4,022 | 8,148 | | 1,377,492 | 1,960,277 | 264,902 | 635,767 | $ | 4,132,477 | 8,370,915 | ||||||||||||||||||||||||||||||||||||||||||||
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| 3,354,429 | 5,066,892 | 547,322 | 1,483,025 | 4,132,477 | 14,584,145 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Total Floating Rate Loan Interests - 26.4% |
$ | 63,709,477 | 77,578,590 | 117,467,607 | 12,148,044 | 33,189,431 | 121,534,312 | 425,627,461 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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Other Interests (a)(l) |
Beneficial Interests (000) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Auto Components - 0.0% |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Lear Corp. Escrow, 0.00% |
USD | | 460 | 790 | | | | 1,250 | | 11,500 | 19,750 | | | | 31,250 | |||||||||||||||||||||||||||||||||||||||||||||
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Chemicals - 0.0% |
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Wellman Holdings, Inc., Litigation Trust Certificate, 0.00% (a) |
USD | 2,650 | 2,830 | 4,650 | | | 4,870 | 15,000 | 26 | 28 | 47 | | | 49 | 150 | |||||||||||||||||||||||||||||||||||||||||||||
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Hotels, Restaurants &
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Buffets, Inc., 0.00% (a) |
USD | | 575 | 970 | | | 950 | 2,495 | | 6 | 10 | | | 9 | 25 | |||||||||||||||||||||||||||||||||||||||||||||
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Media - 0.0% |
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Adelphia Escrow, 0.00% (a) |
USD | 700 | 750 | 1,250 | | | 1,300 | 4,000 | 7 | 8 | 12 | | | 13 | 40 | |||||||||||||||||||||||||||||||||||||||||||||
Adelphia Recovery Trust, 0.00% (a) |
USD | 878 | 941 | 1,568 | | | 1,630 | 5,017 | 88 | 94 | 157 | | | 163 | 502 | |||||||||||||||||||||||||||||||||||||||||||||
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95 | 102 | 169 | | | 176 | 542 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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|||||||||||||||||||||||||||||||||||||||||||||||
Total Other Interests - 0.0% |
121 | 11,636 | 19,976 | | | 234 | 31,967 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
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See Notes to Pro Forma Condensed Combined Financial Statements.
B-57
Pro Forma Condensed Combined Schedule of Investments for
BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE),
BlackRock Corporate High Yield Fund V, Inc. (HYV), BlackRock High Yield Trust (BHY),
BlackRock High Income Shares (HIS) and BlackRock Corporate High Yield Fund VI, Inc. (HYT)
As of February 28, 2013 (Unaudited)
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
|||||||||||||||||||||||||||||||||||||||||||||||
Preferred Securities | Shares | Value | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Preferred Stocks |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Auto Components - 0.7% |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dana Holding Corp., Series B 4.00% (b)(c) |
USD | 9,740 | 20,190 | 29,460 | 2,180 | 6,200 | 16,400 | 84,170 | $ | 1,381,862 | $ | 2,864,456 | $ | 4,179,637 | $ | 309,287 | $ | 879,625 | $ | 2,326,750 | $ | 11,941,617 | ||||||||||||||||||||||||||||||||||||||
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Diversified Financial
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ally Financial, Inc., 7.00% (b) |
| | | | 1,100 | | 1,100 | | | | | 1,070,266 | | 1,070,266 | ||||||||||||||||||||||||||||||||||||||||||||||
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Media - 0.0% |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Emmis Communications Corp., Series A, 6.25% |
| | | | 10,300 | | 10,300 | | | | | 94,142 | | 94,142 | ||||||||||||||||||||||||||||||||||||||||||||||
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Real Estate Investment Trusts (REITs) - 0.0% |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
MPG Office Trust, Inc., Series A, 7.63% (a) |
| 8,994 | 13,326 | | 4,171 | | 26,491 | | 204,614 | 303,167 | | 94,890 | | 602,671 | ||||||||||||||||||||||||||||||||||||||||||||||
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|||||||||||||||||||||||||||||||||||||||||||||||
Thrifts & Mortgage
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fannie Mae, Series O, Series O 0.00% (a)(d) |
| 30,000 | 40,000 | | 10,000 | 40,000 | 120,000 | | 115,500 | 154,000 | | 38,500 | 154,000 | 462,000 | ||||||||||||||||||||||||||||||||||||||||||||||
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|||||||||||||||||||||||||||||||||||||||||||||||
Total Preferred
|
1,381,863 | 3,184,569 | 4,636,804 | 309,287 | 2,177,422 | 2,480,750 | 14,170,695 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
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Trust Preferred |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Diversified Financial
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
GMAC Capital Trust I, Series 2 8.13%, 02/15/40 (d) |
117,850 | 128,310 | 190,520,000 | 19,170 | 56,340 | 198,960,000 | 389,801,670 | 3,117,100 | 3,393,764 | 5,039,201 | 521,325 | 1,490,178 | 5,262,437 | 18,824,005 | ||||||||||||||||||||||||||||||||||||||||||||||
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|||||||||||||||||||||||||||||||||||||||||||||||
Total Preferred
|
4,498,963 | 6,578,333 | 9,676,005 | 830,612 | 3,667,600 | 7,743,187 | 32,994,700 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
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See Notes to Pro Forma Condensed Combined Financial Statements.
B-58
Pro Forma Condensed Combined Schedule of Investments for
BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE),
BlackRock Corporate High Yield Fund V, Inc. (HYV), BlackRock High Yield Trust (BHY),
BlackRock High Income Shares (HIS) and BlackRock Corporate High Yield Fund VI, Inc. (HYT)
As of February 28, 2013 (Unaudited)
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
|||||||||||||||||||||||||||||||||||||||||||||||
Warrants (m) |
Shares | Value | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Containers & Packaging - 0.0% |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
MDP Acquisitions Plc, (Issued/Exercisable 12/31/02, 3 Shares for 1 Warrant, Expires 10/01/13, (Strike Price EUR 0.001) 0.00% |
USD | | 700 | 1,100 | | | | 1,800 | | $ | 56,611 | $ | 88,959 | | | | $ | 145,570 | ||||||||||||||||||||||||||||||||||||||||||
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Health Care Providers &
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
HealthSouth Corp. (Expires 1/16/14), 0.00% |
29,930 | 32,042 | 52,465 | | | 54,577 | 169,014 | | | 1 | | | $ | 1 | 2 | |||||||||||||||||||||||||||||||||||||||||||||
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Media - 0.0% |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
New Vision Holdings LLC, (Expires 9/30/14) 0.00% |
12,965 | 19,023 | 22,194 | | | 22,194 | 76,376 | $ | 23,458 | 35,187 | 41,052 | | | 41,052 | 140,749 | |||||||||||||||||||||||||||||||||||||||||||||
New Vision Holdings LLC, (Expires 9/30/14) 0.00% |
2,000 | 3,424 | 3,995 | | | 3,995 | 13,414 | 4,223 | 6,333 | 7,390 | | | 7,390 | 25,336 | ||||||||||||||||||||||||||||||||||||||||||||||
Metals & Mining - 0.0% |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Peninsula Energy, Ltd., (Expires 12/31/15) 0.00% |
3,627,165 | 3,966,632 | 5,850,469 | | | 6,113,638 | 19,557,904 | 55,575 | 60,776 | 89,639 | | | 93,672 | 299,662 |
See Notes to Pro Forma Condensed Combined Financial Statements.
B-59
Pro Forma Condensed Combined Schedule of Investments for
BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE),
BlackRock Corporate High Yield Fund V, Inc. (HYV), BlackRock High Yield Trust (BHY),
BlackRock High Income Shares (HIS) and BlackRock Corporate High Yield Fund VI, Inc. (HYT)
As of February 28, 2013 (Unaudited)
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
|||||||||||||||||||||||||||||||||||||||||||||||
Warrants (m) |
Shares | Value | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Real Estate Investment Trusts
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Pepper Residential Securities Trust, (Expires 12/31/15) 0.00% |
USD | 2,142,553,000 | 2,343,076 | 3,455,851 | | | 3,611,304 | 2,151,963,231 | $ | 31,077 | $ | 33,985 | $ | 50,126 | | | $ | 52,379 | $ | 167,567 | ||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||||||
Software - 0.0% |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Bankruptcy Management Solutions, Inc., (Expires 9/28/17) 0.00% |
312 | 334 | 491 | 61 | 167 | 525 | 1,890 | | | | | | | | ||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||||||
HMH Holdings/
|
1,070 | 1,164 | 1,736 | 176 | 513 | 1,835 | 6,494 | | | | | | | | ||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||||||
Total
|
114,333 | 192,892 | 277,167 | | | 194,494 | 778,886 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||||||
Total Long-Term Investments
|
374,065,403 | 418,083,475 | 619,082,812 | $ | 66,013,096 | $ | 171,735,959 | 642,597,774 | 2,291,578,519 | |||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Pro Forma Condensed Combined Financial Statements.
B-60
Pro Forma Condensed Combined Schedule of Investments for
BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE),
BlackRock Corporate High Yield Fund V, Inc. (HYV), BlackRock High Yield Trust (BHY),
BlackRock High Income Shares (HIS) and BlackRock Corporate High Yield Fund VI, Inc. (HYT)
As of February 28, 2013 (Unaudited)
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
COY | CYE | HYV | BHY | HIS | HYT |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
|||||||||||||||||||||||||||||||||||||||||||||
Short-Term Securities | Shares | Value | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Money Market Funds - 1.0% |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
BlackRock Liquidity Funds, TempFund, Institutional Class, 0.10% (n)(o) |
| 2,103,451 | 4,128,807 | 2,001,193 | 2,757,840 | 4,840,770 | 15,832,061 | | $ | 2,103,451 | $ | 4,128,807 | $ | 2,001,193 | $ | 2,757,840 | $ | 4,840,770 | $ | 15,832,061 | ||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||||
Total Short-Term Securities
|
| 2,103,451 | 4,128,807 | 2,001,193 | 2,757,840 | 4,840,770 | 15,832,061 | |||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||||
Options Purchased |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(Cost - $87,913) - 0.0% |
$ | 1,960 | 2,140 | 3,140 | | | 3,320 | 10,560 | ||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||||
Total Investments Before Options Written
|
374,067,363 | 420,189,066 | 623,214,759 | 68,014,289 | 174,493,799 | 647,441,864 | 2,307,421,140 | |||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||||
Options Written |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(Premiums Received - $546,750)
|
(50,555 | ) | (54,924 | ) | (81,138 | ) | (9,362 | ) | | (84,883 | ) | (280,862 | ) | |||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||||
Total Investments, Net of Options Written - 142.8 % |
374,016,808 | 420,134,142 | 623,133,621 | 68,004,927 | 174,493,799 | 647,356,981 | 2,307,140,278 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Liabilities in Excess of Other Assets -42.8 % |
(102,399,819 | ) | (124,126,432 | ) | (187,905,223 | ) | (19,070,042 | ) | (47,614,696 | ) | (192,208,778 | ) | (691,982,234 | )(p) | ||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||||
Net Assets - 100.0 % |
$ | 271,616,989 | $ | 296,007,710 | $ | 435,228,398 | $ | 48,934,885 | $ | 126,879,103 | $ | 455,148,203 | $ | 1,615,158,044 | ||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Pro Forma Condensed Combined Financial Statements.
B-61
Pro Forma Condensed Combined Schedule of Investments for
BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE), BlackRock Corporate High Yield Fund V, Inc. (HYV), BlackRock High Yield Trust (BHY), BlackRock High Income Shares (HIS), and BlackRock Corporate High Yield Fund VI, Inc. (HYT)
As of February 28, 2013 (Unaudited)
Notes to Condensed Combined Schedule of Investments
(a) | Non-income producing security. |
(b) | Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration to qualified institutional investors. |
(c) | Convertible security. |
(d) | Variable rate security. Rate shown is as of report date. |
(e) | Represents a zero-coupon bond. Rate shown reflects the current yield as of report date. |
(f) | When-issued security. Unsettled when-issued transactions were as follows: |
Counterparty |
Value |
Unrealized
Appreciation/ (Depreciation) |
||||||
Bank of America Corp |
$ | 1,069,813 | $ | 12,861 | ||||
Bank of New York Mellon Corp./SunTrust Capital |
$ | 18,360 | $ | (34 | ) | |||
Citigroup, Inc. |
$ | 5,061,555 | $ | (6,363 | ) | |||
Deutsche Bank AG |
$ | 3,063,026 | $ | 17,472 | ||||
Goldman Sachs Group, Inc. |
$ | 1,616,702 | $ | 17,973 | ||||
Pershing LLC |
$ | 1,614,339 | $ | 18,757 | ||||
Sterne, Agee & Leach, Inc |
$ | 607,920 | $ | 8,048 | ||||
Sun Trust Capital |
$ | 338,640 | $ | 4,484 |
(g) | Represents a payment-in-kind security which may pay interest/dividends in additional par/shares. |
(h) | All or a portion of security has been pledged as collateral in connection with swaps. |
(i) | Represents a step-up bond that pays an initial coupon rate for the first period and then a higher coupon rate for the following periods. Rate shown is as of report date. |
(j) | Issuer filed for bankruptcy and/or is in default of principal and/or interest payments. |
(k) | Security is perpetual in nature and has no stated maturity date. |
(l) | Other interests represent beneficial interests in liquidation trusts and other reorganization or private entities. |
(m) | Warrants entitle the Fund to purchase a predetermined number of shares of common stock and are non-income producing. The purchase price and number of shares are subject to adjustment under certain conditions until the expiration date of the warrants, if any. |
(n) | Investments in issuers considered to be an affiliate of the Fund during the twelve-month period ended February 28, 2013, for purposes of Section 2(b)(3) of the 1940 Act, were as follows: |
Affiliate |
Shares Held at
August 31, 2012 |
Net
Activity |
Shares Held at
February 28, 2013 |
Income |
Realized
Gain |
|||||||||||||||||
BlackRock Liquidity Funds, TempFund, Institutional Class | COY | 2,264,805 | (2,264,805 | ) | | $ | 2,410 | $ | | |||||||||||||
CYE | | 2,103,451 | 2,103,451 | 1,034 | | |||||||||||||||||
HYV | | 4,128,807 | 4,128,807 | 1,906 | 114 | |||||||||||||||||
BHY | 980,802 | 1,020,391 | 2,001,193 | 739 | 12 | |||||||||||||||||
HIS | 840,816 | 1,917,024 | 2,757,840 | 741 | 33 | |||||||||||||||||
HYT | | 4,840,770 | 4,840,770 | 1,803 | 110 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Pro Forma
Combined Fund |
4,086,423 | 11,745,638 | 15,832,061 | $ | 8,633 | $ | 269 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
(o) | Represents the current yield as of report date. |
(p) | Reflects pro forma adjustments for $18,657,244 of which $990,000 is due to the charge for estimated reorganization expenses of $270,000, $350,000, and $370,000 attributable to BHY, HIS and HYT, respectively, and $17,667,244 is due to the distribution of undistributed net investment income of $4,102,652, $1,542,971, $4,434,679, $200,744, $1,549,178, and $5,837,020 attributable to COY, CYE, HYV, BHY, HIS, and HYT, respectively. |
B-62
See Notes to Pro Forma Condensed Combined Financial Statements.
Pro Forma Condensed Combined Schedule of Investments for
BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE), BlackRock Corporate High Yield Fund V, Inc. (HYV), BlackRock High Yield Trust (BHY), BlackRock High Income Shares (HIS), and BlackRock Corporate High Yield Fund VI, Inc. (HYT)
As of February 28, 2013 (Unaudited)
Portfolio Abbreviations |
To simplify the listings of portfolio holdings in the Schedules of Investments, the names and descriptions of many of the securities have been abbreviated according to the following list:
AUD |
Australian Dollar | GBP | British Pound | |||
CAD |
Canadian Dollar | S&P | Standard and Poors | |||
EUR |
Euro | LIBOR | London Interbank Offered Rate | |||
DIP |
Debtor-In-Possession | USD | US Dollar | |||
FKA | Formerly Known As |
Financial futures contracts as of February 28, 2013 were as follows: |
Contracts Sold |
Issue | Exchange | Expiration |
Notional
Value |
Unrealized
Depreciation |
|||||||||||||||
COY (46) |
S&P 500 E-Mini Index | Chicago Mercantile | March, 2013 | 3,480,590 | $ | (59,470 | ) | |||||||||||||
CYE (50) |
S&P 500 E-Mini Index | Chicago Mercantile | March, 2013 | 3,783,250 | (63,559 | ) | ||||||||||||||
HYV (73) |
S&P 500 E-Mini Index | Chicago Mercantile | March, 2013 | 5,523,545 | (92,603 | ) | ||||||||||||||
BHY (8) |
S&P 500 E-Mini Index | Chicago Mercantile | March, 2013 | 605,320 | (11,294 | ) | ||||||||||||||
HIS (25) |
S&P 500 E-Mini Index | Chicago Mercantile | March, 2013 | 1,891,625 | (38,018 | ) | ||||||||||||||
HYT (77) |
S&P 500 E-Mini Index | Chicago Mercantile | March, 2013 | 5,826,205 | (98,075 | ) | ||||||||||||||
|
|
|||||||||||||||||||
Pro Forma Combined Fund |
$ | (363,019 | ) | |||||||||||||||||
|
|
Foreign currency exchange contracts as of February 28, 2013 were as follows: |
B-63
See Notes to Pro Forma Condensed Combined Financial Statements.
Pro Forma Condensed Combined Schedule of Investments for
BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE), BlackRock Corporate High Yield Fund V, Inc. (HYV), BlackRock High Yield Trust (BHY), BlackRock High Income Shares (HIS), and BlackRock Corporate High Yield Fund VI, Inc. (HYT)
As of February 28, 2013 (Unaudited)
B-64
See Notes to Pro Forma Condensed Combined Financial Statements.
Pro Forma Condensed Combined Schedule of Investments for
BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE), BlackRock Corporate High Yield Fund V, Inc. (HYV), BlackRock High Yield Trust (BHY), BlackRock High Income Shares (HIS), and BlackRock Corporate High Yield Fund VI, Inc. (HYT)
As of February 28, 2013 (Unaudited)
HYT |
|
|||||||||||||||||||||
Currency Purchased |
Currency Sold |
Counterparty |
Settlement
Date |
Unrealized
Appreciation/ (Depreciation) |
||||||||||||||||||
USD |
809,981 | AUD | 781,000 | Citigroup, Inc. | 4/17/2013 | $ | 14,889 | |||||||||||||||
USD |
6,948,175 | CAD | 6,855,000 | Deutsche Bank AG | 4/17/2013 | 307,775 | ||||||||||||||||
USD |
2,954,951 | GBP | 1,910,000 | Barclays Plc | 4/17/2013 | 58,063 | ||||||||||||||||
USD |
134,761 | GBP | 87,000 | BNP Paribas SA | 4/17/2013 | 2,808 | ||||||||||||||||
USD |
179,331 | GBP | 111,000 | BNP Paribas SA | 4/17/2013 | 10,978 | ||||||||||||||||
USD |
459,795 | GBP | 285,000 | BNP Paribas SA | 4/17/2013 | 27,537 | ||||||||||||||||
USD |
9,371,232 | GBP | 5,850,000 | Goldman Sachs Group, Inc. | 4/17/2013 | 498,563 | ||||||||||||||||
USD |
280,654 | GBP | 177,000 | Royal Bank of Scotland Group Plc | 4/17/2013 | 12,199 | ||||||||||||||||
EUR |
389,000 | USD | 521,749 | Westpac Banking Corp. | 4/23/2013 | (13,704 | ) | |||||||||||||||
USD |
67,622 | EUR | 50,000 | Citigroup, Inc. | 4/23/2013 | 2,320 | ||||||||||||||||
USD |
33,853,495 | EUR | 25,406,000 | Citigroup, Inc. | 4/23/2013 | 672,510 | ||||||||||||||||
USD |
132,419 | EUR | 99,392 | Deutsche Bank AG | 4/23/2013 | 2,610 | ||||||||||||||||
USD |
479,687 | EUR | 360,000 | Goldman Sachs Group, Inc. | 4/23/2013 | 9,517 | ||||||||||||||||
USD |
98,520 | EUR | 73,000 | Royal Bank of Scotland Group Plc | 4/23/2013 | 3,180 | ||||||||||||||||
|
|
|||||||||||||||||||||
Total |
|
$ | 1,609,245 | |||||||||||||||||||
|
|
|||||||||||||||||||||
Pro Forma Combined Fund |
|
$ | 5,280,946 | |||||||||||||||||||
|
|
Exchange-traded options purchased as of February 28, 2013 were as follows: |
Description | Put/Call | Strike Price |
Expiration
Date |
Contracts |
Market
Value |
|||||||||||||||||
COY |
Life Technologies Corp. | Call | USD 70 | 3/16/2013 | 98 | $ | 1,960 | |||||||||||||||
CYE |
Life Technologies Corp. | Call | USD 70 | 3/16/2013 | 107 | 2,140 | ||||||||||||||||
HYV |
Life Technologies Corp. | Call | USD 70 | 3/16/2013 | 157 | 3,140 | ||||||||||||||||
HYT |
Life Technologies Corp. | Call | USD 70 | 3/16/2013 | 166 | 3,320 | ||||||||||||||||
|
|
|||||||||||||||||||||
Pro Forma Combined Fund |
$ | 10,560 | ||||||||||||||||||||
|
|
Over-the-counter options purchased as of February 28, 2013 were as follows: |
Description | Counterparty | Put/Call | Strike Price |
Expiration
Date |
Contracts |
Market
Value |
||||||||||||||||||
COY |
Marsico Parent
Superholdco LLC |
Goldman Sachs
Group, Inc. |
Call | USD 942.86 | 12/14/2019 | 17 | | |||||||||||||||||
CYE |
Marsico Parent
Superholdco LLC |
Goldman Sachs
Group, Inc. |
Call | USD 942.86 | 12/14/2019 | 19 | | |||||||||||||||||
BHY |
Marsico Parent
Superholdco LLC |
Goldman Sachs
Group, Inc. |
Call | USD 942.86 | 12/14/2019 | 3 | | |||||||||||||||||
|
|
|||||||||||||||||||||||
Pro Forma Combined Fund |
| |||||||||||||||||||||||
|
|
B-65
See Notes to Pro Forma Condensed Combined Financial Statements.
Pro Forma Condensed Combined Schedule of Investments for
BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE), BlackRock Corporate High Yield Fund V, Inc. (HYV), BlackRock High Yield Trust (BHY), BlackRock High Income Shares (HIS), and BlackRock Corporate High Yield Fund VI, Inc. (HYT)
As of February 28, 2013 (Unaudited)
Over-the-counter credit default swaptions written as of February 28, 2013 were as follows: |
B-66
See Notes to Pro Forma Condensed Combined Financial Statements.
Pro Forma Condensed Combined Schedule of Investments for
BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE), BlackRock Corporate High Yield Fund V, Inc. (HYV), BlackRock High Yield Trust (BHY), BlackRock High Income Shares (HIS), and BlackRock Corporate High Yield Fund VI, Inc. (HYT)
As of February 28, 2013 (Unaudited)
Credit default swaps - buy protection outstanding as of February 28, 2013 were as follows: |
COY |
||||||||||||||||||
Issuer |
Pay
Fixed Rate |
Counterparty |
Expiration
Date |
Notional
Amount (000) |
Unrealized
Depreciation |
|||||||||||||
Israel (State of) |
1.00 | % | Deutsche Bank AG | 3/20/2017 | USD 625 | $ | (24,619 | ) | ||||||||||
Israel (State of) |
1.00 | % | Deutsche Bank AG | 3/20/2017 | USD 210 | (8,147 | ) | |||||||||||
Beazer Homes USA, Inc. |
5.00 | % | JPMorgan Chase & Co. | 12/20/2017 | USD 70 | (1,150 | ) | |||||||||||
|
|
|||||||||||||||||
Total |
$ | (33,916 | ) | |||||||||||||||
|
|
B-67
See Notes to Pro Forma Condensed Combined Financial Statements.
Pro Forma Condensed Combined Schedule of Investments for
BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE), BlackRock Corporate High Yield Fund V, Inc. (HYV), BlackRock High Yield Trust (BHY), BlackRock High Income Shares (HIS), and BlackRock Corporate High Yield Fund VI, Inc. (HYT)
As of February 28, 2013 (Unaudited)
Credit default swaps - sold protection outstanding as of February 28, 2013 were as follows: |
COY |
||||||||||||||||||||||
Issuer |
Receive
Fixed Rate |
Counterparty |
Expiration
Date |
Credit
Rating(1) |
Notional
Amount (000)(2) |
Unrealized
Appreciation (Depreciation) |
||||||||||||||||
Caesars Entertainment Operating Co., Inc. |
5.00 | % | Citigroup, Inc. | 12/20/2015 | CCC | USD 143 | $ | 18,667 | ||||||||||||||
Caesars Entertainment Operating Co., Inc. |
5.00 | % | Citigroup, Inc. | 12/20/2015 | CCC | USD 70 | 6,862 | |||||||||||||||
Caesars Entertainment Operating Co., Inc. |
5.00 | % | JPMorgan Chase & Co. | 12/20/2015 | CCC | USD 232 | 26,075 |
B-68
See Notes to Pro Forma Condensed Combined Financial Statements.
Pro Forma Condensed Combined Schedule of Investments for
BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE), BlackRock Corporate High Yield Fund V, Inc. (HYV), BlackRock High Yield Trust (BHY), BlackRock High Income Shares (HIS), and BlackRock Corporate High Yield Fund VI, Inc. (HYT)
As of February 28, 2013 (Unaudited)
COY |
||||||||||||||||||||||
Issuer |
Receive
Fixed Rate |
Counterparty |
Expiration
Date |
Credit
Rating(1) |
Notional
Amount (000)(2) |
Unrealized
Appreciation (Depreciation) |
||||||||||||||||
Caesars Entertainment Operating Co., Inc. |
5.00 | % | JPMorgan Chase & Co. | 12/20/2015 | CCC | USD 58 | $ | 7,054 | ||||||||||||||
Caesars Entertainment Operating Co., Inc. |
5.00 | % | JPMorgan Chase & Co. | 12/20/2015 | CCC | USD 250 | 42,155 | |||||||||||||||
ARAMARK Corp. |
5.00 | % | Goldman Sachs Group, Inc. | 3/20/2016 | B- | USD 500 | 40,144 | |||||||||||||||
Caesars Entertainment Operating Co., Inc. |
5.00 | % | Citigroup, Inc. | 3/20/2016 | CCC | USD 48 | 1,087 | |||||||||||||||
Caesars Entertainment Operating Co., Inc. |
5.00 | % | Goldman Sachs Group, Inc. | 3/20/2016 | CCC | USD 101 | 7,861 | |||||||||||||||
Caesars Entertainment Operating Co., Inc. |
5.00 | % | Goldman Sachs Group, Inc. | 3/20/2016 | CCC | USD 101 | 7,861 | |||||||||||||||
Caesars Entertainment Operating Co., Inc. |
5.00 | % | Goldman Sachs Group, Inc. | 3/20/2016 | CCC | USD 302 | 19,444 | |||||||||||||||
Caesars Entertainment Operating Co., Inc. |
5.00 | % | Goldman Sachs Group, Inc. | 3/20/2016 | CCC | USD 71 | 3,617 | |||||||||||||||
Caesars Entertainment Operating Co., Inc. |
5.00 | % | Goldman Sachs Group, Inc. | 3/20/2016 | CCC | USD 301 | 295 | |||||||||||||||
Caesars Entertainment Operating Co., Inc. |
5.00 | % | JPMorgan Chase & Co. | 3/20/2016 | CCC | USD 41 | 1,497 | |||||||||||||||
ARAMARK Corp. |
5.00 | % | Goldman Sachs Group, Inc. | 6/20/2016 | B- | USD 300 | 24,289 | |||||||||||||||
ARAMARK Corp. |
5.00 | % | Goldman Sachs Group, Inc. | 6/20/2016 | B- | USD 300 | 25,738 | |||||||||||||||
Caesars Entertainment Operating Co., Inc. |
5.00 | % | Goldman Sachs Group, Inc. | 6/20/2016 | CCC | USD 708 | 37,980 | |||||||||||||||
Caesars Entertainment Operating Co., Inc. |
5.00 | % | Goldman Sachs Group, Inc. | 6/20/2016 | CCC | USD 114 | 503 | |||||||||||||||
Caesars Entertainment Operating Co., Inc. |
5.00 | % | Goldman Sachs Group, Inc. | 6/20/2016 | CCC | USD 204 | 12,033 | |||||||||||||||
Caesars Entertainment Operating Co., Inc. |
5.00 | % | Goldman Sachs Group, Inc. | 6/20/2016 | CCC | USD 390 | 19,372 | |||||||||||||||
ARAMARK Corp. |
5.00 | % | Credit Suisse Group AG | 9/20/2016 | B- | USD 125 | 13,964 | |||||||||||||||
ARAMARK Corp. |
5.00 | % | Deutsche Bank AG | 3/20/2017 | B- | USD 185 | 13,543 | |||||||||||||||
Caesars Entertainment Operating Co., Inc. |
5.00 | % | Goldman Sachs Group, Inc. | 3/20/2017 | CCC | USD 222 | 6,990 | |||||||||||||||
Caesars Entertainment Operating Co., Inc. |
5.00 | % | Goldman Sachs Group, Inc. | 3/20/2017 | CCC | USD 187 | (1,422 | ) | ||||||||||||||
Caesars Entertainment Operating Co., Inc. |
5.00 | % | Goldman Sachs Group, Inc. | 3/20/2017 | CCC | USD 129 | 1,610 | |||||||||||||||
Crown Castle International Corp. |
7.25 | % | Deutsche Bank AG | 3/20/2017 | B- | USD 430 | 74,431 | |||||||||||||||
CCO Holdings LLC |
8.00 | % | Deutsche Bank AG | 9/20/2017 | BB- | USD 1,500 | 362,674 | |||||||||||||||
Level 3 Communications, Inc. |
5.00 | % | Goldman Sachs Group, Inc. | 6/20/2019 | CCC | USD 900 | 70,364 | |||||||||||||||
|
|
|||||||||||||||||||||
Total |
$ | 844,688 | ||||||||||||||||||||
|
|
B-69
See Notes to Pro Forma Condensed Combined Financial Statements.
Pro Forma Condensed Combined Schedule of Investments for
BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE), BlackRock Corporate High Yield Fund V, Inc. (HYV), BlackRock High Yield Trust (BHY), BlackRock High Income Shares (HIS), and BlackRock Corporate High Yield Fund VI, Inc. (HYT)
As of February 28, 2013 (Unaudited)
CYE |
||||||||||||||||||||||
Issuer |
Receive
Fixed Rate |
Counterparty |
Expiration
Date |
Credit
Rating(1) |
Notional
Amount (000)(2) |
Unrealized
Appreciation (Depreciation) |
||||||||||||||||
Caesars Entertainment Operating Co., Inc. |
5.00 | % | JPMorgan Chase & Co. | 12/20/2015 | CCC | USD 274 | $ | 46,107 | ||||||||||||||
Caesars Entertainment Operating Co., Inc. |
5.00 | % | JPMorgan Chase & Co. | 12/20/2015 | CCC | USD 76 | 9,233 | |||||||||||||||
Caesars Entertainment Operating Co., Inc. |
5.00 | % | JPMorgan Chase & Co. | 12/20/2015 | CCC | USD 304 | 34,127 | |||||||||||||||
ARAMARK Corp. |
5.00 | % | Goldman Sachs Group, Inc. | 3/20/2016 | B- | USD 500 | 40,144 | |||||||||||||||
Caesars Entertainment Operating Co., Inc. |
5.00 | % | Goldman Sachs Group, Inc. | 3/20/2016 | CCC | USD 110 | 8,530 | |||||||||||||||
Caesars Entertainment Operating Co., Inc. |
5.00 | % | Goldman Sachs Group, Inc. | 3/20/2016 | CCC | USD 110 | 8,530 | |||||||||||||||
Caesars Entertainment Operating Co., Inc. |
5.00 | % | Goldman Sachs Group, Inc. | 3/20/2016 | CCC | USD 324 | 20,903 | |||||||||||||||
Caesars Entertainment Operating Co., Inc. |
5.00 | % | Goldman Sachs Group, Inc. | 3/20/2016 | CCC | USD 76 | 3,858 | |||||||||||||||
Caesars Entertainment Operating Co., Inc. |
5.00 | % | Goldman Sachs Group, Inc. | 3/20/2016 | CCC | USD 367 | 360 | |||||||||||||||
Caesars Entertainment Operating Co., Inc. |
5.00 | % | JPMorgan Chase & Co. | 3/20/2016 | CCC | USD 44 | 1,596 | |||||||||||||||
ARAMARK Corp. |
5.00 | % | Goldman Sachs Group, Inc. | 6/20/2016 | B- | USD 300 | 25,738 | |||||||||||||||
ARAMARK Corp. |
5.00 | % | Goldman Sachs Group, Inc. | 6/20/2016 | B- | USD 300 | 24,289 | |||||||||||||||
Caesars Entertainment Operating Co., Inc. |
5.00 | % | Goldman Sachs Group, Inc. | 6/20/2016 | CCC | USD 225 | 13,278 | |||||||||||||||
Caesars Entertainment Operating Co., Inc. |
5.00 | % | Goldman Sachs Group, Inc. | 6/20/2016 | CCC | USD 430 | 21,359 | |||||||||||||||
Caesars Entertainment Operating Co., Inc. |
5.00 | % | Goldman Sachs Group, Inc. | 6/20/2016 | CCC | USD 767 | 41,178 | |||||||||||||||
Caesars Entertainment Operating Co., Inc. |
5.00 | % | Goldman Sachs Group, Inc. | 6/20/2016 | CCC | USD 124 | 548 | |||||||||||||||
ARAMARK Corp. |
5.00 | % | Credit Suisse AG | 9/20/2016 | B- | USD 125 | 13,964 | |||||||||||||||
ARAMARK Corp. |
5.00 | % | Deutsche Bank AG | 3/20/2017 | B- | USD 200 | 14,641 | |||||||||||||||
Caesars Entertainment Operating Co., Inc. |
5.00 | % | Goldman Sachs Group, Inc. | 3/20/2017 | CCC | USD 202 | (1,539 | ) | ||||||||||||||
Caesars Entertainment Operating Co., Inc. |
5.00 | % | Goldman Sachs Group, Inc. | 3/20/2017 | CCC | USD 242 | 7,611 | |||||||||||||||
Caesars Entertainment Operating Co., Inc. |
5.00 | % | Goldman Sachs Group, Inc. | 3/20/2017 | CCC | USD 141 | 1,753 | |||||||||||||||
Crown Castle International Corp. |
7.25 | % | Deutsche Bank AG | 3/20/2017 | B- | USD 470 | 81,354 | |||||||||||||||
CCO Holdings LLC |
8.00 | % | Deutsche Bank AG | 9/20/2017 | BB- | USD 1,600 | 386,852 | |||||||||||||||
Level 3 Communications, Inc. |
5.00 | % | Goldman Sachs Group, Inc. | 6/20/2019 | CCC | USD 1,000 | 78,182 | |||||||||||||||
|
|
|||||||||||||||||||||
Total |
$ | 882,596 | ||||||||||||||||||||
|
|
B-70
See Notes to Pro Forma Condensed Combined Financial Statements.
Pro Forma Condensed Combined Schedule of Investments for
BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE), BlackRock Corporate High Yield Fund V, Inc. (HYV), BlackRock High Yield Trust (BHY), BlackRock High Income Shares (HIS), and BlackRock Corporate High Yield Fund VI, Inc. (HYT)
As of February 28, 2013 (Unaudited)
HYV |
||||||||||||||||||||||
Issuer |
Receive
Fixed Rate |
Counterparty |
Expiration
Date |
Credit
Rating(1) |
Notional
Amount (000)(2) |
Unrealized
Appreciation (Depreciation) |
||||||||||||||||
Caesars Entertainment Operating Co., Inc. |
5.00 | % | JPMorgan Chase & Co. | 12/20/2015 | CCC | USD 112 | $ | 13,604 | ||||||||||||||
Caesars Entertainment Operating Co., Inc. |
5.00 | % | JPMorgan Chase & Co. | 12/20/2015 | CCC | USD 447 | 50,285 | |||||||||||||||
Caesars Entertainment Operating Co., Inc. |
5.00 | % | JPMorgan Chase & Co. | 12/20/2015 | CCC | USD 403 | 67,937 | |||||||||||||||
ARAMARK Corp. |
5.00 | % | Goldman Sachs Group, Inc. | 3/20/2016 | B- | USD 750 | 60,215 | |||||||||||||||
Caesars Entertainment Operating Co., Inc. |
5.00 | % | Goldman Sachs Group, Inc. | 3/20/2016 | CCC | USD 483 | 31,111 | |||||||||||||||
Caesars Entertainment Operating Co., Inc. |
5.00 | % | Goldman Sachs Group, Inc. | 3/20/2016 | CCC | USD 118 | 6,029 | |||||||||||||||
Caesars Entertainment Operating Co., Inc. |
5.00 | % | Goldman Sachs Group, Inc. | 3/20/2016 | CCC | USD 558 | 547 | |||||||||||||||
Caesars Entertainment Operating Co., Inc. |
5.00 | % | Goldman Sachs Group, Inc. | 3/20/2016 | CCC | USD 163 | 12,711 | |||||||||||||||
Caesars Entertainment Operating Co., Inc. |
5.00 | % | Goldman Sachs Group, Inc. | 3/20/2016 | CCC | USD 163 | 12,711 | |||||||||||||||
Caesars Entertainment Operating Co., Inc. |
5.00 | % | JPMorgan Chase & Co. | 3/20/2016 | CCC | USD 68 | 2,494 | |||||||||||||||
ARAMARK Corp. |
5.00 | % | Goldman Sachs Group, Inc. | 6/20/2016 | B- | USD 500 | 40,482 | |||||||||||||||
ARAMARK Corp. |
5.00 | % | Goldman Sachs Group, Inc. | 6/20/2016 | B- | USD 500 | 42,897 | |||||||||||||||
Caesars Entertainment Operating Co., Inc. |
5.00 | % | Goldman Sachs Group, Inc. | 6/20/2016 | CCC | USD 1,132 | 60,768 | |||||||||||||||
Caesars Entertainment Operating Co., Inc. |
5.00 | % | Goldman Sachs Group, Inc. | 6/20/2016 | CCC | USD 182 | 806 | |||||||||||||||
Caesars Entertainment Operating Co., Inc. |
5.00 | % | Goldman Sachs Group, Inc. | 6/20/2016 | CCC | USD 331 | 19,502 | |||||||||||||||
Caesars Entertainment Operating Co., Inc. |
5.00 | % | Goldman Sachs Group, Inc. | 6/20/2016 | CCC | USD 630 | 31,293 | |||||||||||||||
ARAMARK Corp. |
5.00 | % | Credit Suisse Group AG | 9/20/2016 | B- | USD 200 | 22,343 | |||||||||||||||
ARAMARK Corp. |
5.00 | % | Deutsche Bank AG | 3/20/2017 | B- | USD 295 | 21,596 | |||||||||||||||
Caesars Entertainment Operating Co., Inc. |
5.00 | % | Goldman Sachs Group, Inc. | 3/20/2017 | CCC | USD 355 | 11,195 | |||||||||||||||
Caesars Entertainment Operating Co., Inc. |
5.00 | % | Goldman Sachs Group, Inc. | 3/20/2017 | CCC | USD 207 | 2,579 | |||||||||||||||
Caesars Entertainment Operating Co., Inc. |
5.00 | % | Goldman Sachs Group, Inc. | 3/20/2017 | CCC | USD 299 | (2,279 | ) | ||||||||||||||
Crown Castle International Corp. |
7.25 | % | Deutsche Bank AG | 3/20/2017 | B- | USD 690 | 119,435 | |||||||||||||||
CCO Holdings LLC |
8.00 | % | Deutsche Bank AG | 9/20/2017 | BB- | USD 2,400 | 580,279 | |||||||||||||||
Level 3 Communications, Inc. |
5.00 | % | Goldman Sachs Group, Inc. | 6/20/2019 | CCC | USD 1,500 | 117,273 | |||||||||||||||
|
|
|||||||||||||||||||||
Total |
$ | 1,325,813 | ||||||||||||||||||||
|
|
B-71
See Notes to Pro Forma Condensed Combined Financial Statements.
Pro Forma Condensed Combined Schedule of Investments for
BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE), BlackRock Corporate High Yield Fund V, Inc. (HYV), BlackRock High Yield Trust (BHY), BlackRock High Income Shares (HIS), and BlackRock Corporate High Yield Fund VI, Inc. (HYT)
As of February 28, 2013 (Unaudited)
B-72
See Notes to Pro Forma Condensed Combined Financial Statements.
Pro Forma Condensed Combined Schedule of Investments for
BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE), BlackRock Corporate High Yield Fund V, Inc. (HYV), BlackRock High Yield Trust (BHY), BlackRock High Income Shares (HIS), and BlackRock Corporate High Yield Fund VI, Inc. (HYT)
As of February 28, 2013 (Unaudited)
Issuer |
Receive
Fixed Rate |
Counterparty |
Expiration
Date |
Credit
Rating(1) |
Notional
Amount (000)(2) |
Unrealized
Appreciation (Depreciation) |
||||||||||||||||
ARAMARK Corp. |
5.00 | % | Goldman Sachs Group, Inc. | 6/20/2016 | B- | USD 475 | $ | 38,458 | ||||||||||||||
ARAMARK Corp. |
5.00 | % | Goldman Sachs Group, Inc. | 6/20/2016 | B- | USD 475 | 40,752 | |||||||||||||||
Caesars Entertainment Operating Co., Inc. |
5.00 | % | Goldman Sachs Group, Inc. | 6/20/2016 | CCC | USD 1,184 | 63,566 | |||||||||||||||
Caesars Entertainment Operating Co., Inc. |
5.00 | % | Goldman Sachs Group, Inc. | 6/20/2016 | CCC | USD 190 | 843 | |||||||||||||||
Caesars Entertainment Operating Co., Inc. |
5.00 | % | Goldman Sachs Group, Inc. | 6/20/2016 | CCC | USD 345 | 20,332 | |||||||||||||||
Caesars Entertainment Operating Co., Inc. |
5.00 | % | Goldman Sachs Group, Inc. | 6/20/2016 | CCC | USD 660 | 32,783 | |||||||||||||||
ARAMARK Corp. |
5.00 | % | Credit Suisse Group AG | 9/20/2016 | B- | USD 200 | 22,343 | |||||||||||||||
ARAMARK Corp. |
5.00 | % | Deutsche Bank AG | 3/20/2017 | B- | USD 305 | 22,328 | |||||||||||||||
Caesars Entertainment Operating Co., Inc. |
5.00 | % | Goldman Sachs Group, Inc. | 3/20/2017 | CCC | USD 72 | 1,712 | |||||||||||||||
Caesars Entertainment Operating Co., Inc. |
5.00 | % | Goldman Sachs Group, Inc. | 3/20/2017 | CCC | USD 217 | 2,697 | |||||||||||||||
Caesars Entertainment Operating Co., Inc. |
5.00 | % | Goldman Sachs Group, Inc. | 3/20/2017 | CCC | USD 312 | (2,376 | ) | ||||||||||||||
Crown Castle International Corp. |
7.25 | % | Deutsche Bank AG | 3/20/2017 | B- | USD 720 | 124,628 | |||||||||||||||
CCO Holdings LLC |
8.00 | % | Deutsche Bank AG | 9/20/2017 | BB- | USD 2,400 | 580,278 | |||||||||||||||
Level 3 Communications, Inc. |
5.00 | % | Goldman Sachs Group, Inc. | 6/20/2019 | CCC | USD 1,600 | 125,091 | |||||||||||||||
|
|
|||||||||||||||||||||
Total |
$ | 1,349,409 | ||||||||||||||||||||
|
|
|||||||||||||||||||||
Pro Forma Combined Fund |
$ | 4,535,102 | ||||||||||||||||||||
|
|
1 | Using Standard & Poors (S&P) rating of the issuer or the underlying securities of the index, as applicable. |
2 | The maximum potential amount the Funds may pay should a negative credit event take place as defined under the terms of the agreement. |
B-73
See Notes to Pro Forma Condensed Combined Financial Statements.
Pro Forma Condensed Combined Statement of Assets and Liabilities for
BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE), BlackRock Corporate High Yield Fund V, Inc. (HYV), BlackRock High Yield Trust (BHY), BlackRock High Income Shares (HIS), and BlackRock Corporate High Yield Fund VI, Inc. (HYT)
As of February 28, 2013 (Unaudited)
COY(1) | CYE(1) | HYV(1) | BHY | HIS | HYT(1) | Adjustments |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
|||||||||||||||||||||||||
Assets |
||||||||||||||||||||||||||||||||
Investments at value - unaffiliated (2) |
$ | 374,067,363 | $ | 418,085,615 | $ | 619,085,952 | $ | 66,013,096 | $ | 171,735,959 | $ | 642,601,094 | | $ | 2,291,589,079 | |||||||||||||||||
Investments at value - affiliated (3) |
| 2,103,451 | 4,128,807 | 2,001,193 | 2,757,840 | 4,840,770 | | 15,832,061 | ||||||||||||||||||||||||
Foreign currency at value (4) |
9,196 | 1,908 | 5,581 | 11,231 | 31,721 | 317,411 | | 377,048 | ||||||||||||||||||||||||
Cash |
3,687,665 | 1,722,765 | | | | | | 5,410,430 | ||||||||||||||||||||||||
Cash pledged as collateral for swaps |
600,000 | 100,000 | 400,000 | | | 400,000 | | 1,500,000 | ||||||||||||||||||||||||
Cash pledged for financial futures contracts |
231,000 | 252,000 | 307,000 | 63,000 | 122,000 | 324,000 | | 1,299,000 | ||||||||||||||||||||||||
Interest receivable |
5,111,303 | 5,667,410 | 8,392,201 | 947,007 | 2,506,481 | 8,759,343 | | 31,383,745 | ||||||||||||||||||||||||
Investments sold receivable |
3,459,084 | 3,790,136 | 4,489,425 | 868,700 | 1,496,304 | 4,435,130 | | 18,538,779 | ||||||||||||||||||||||||
Unrealized appreciation on foreign currency exchange contracts |
949,539 | 1,022,011 | 1,524,216 | 65,846 | 138,583 | 1,622,949 | | 5,323,144 | ||||||||||||||||||||||||
Variation margin receivable |
5,750 | 6,250 | 9,125 | 1,000 | 3,125 | 9,625 | | 34,875 | ||||||||||||||||||||||||
Swap premiums paid |
74,335 | 77,811 | 118,134 | 19,640 | | 119,910 | | 409,830 | ||||||||||||||||||||||||
Unrealized appreciation on swaps |
846,110 | 884,135 | 1,328,092 | 132,849 | | 1,351,785 | | 4,542,971 | ||||||||||||||||||||||||
Swaps receivable |
149,019 | 166,960 | 252,044 | 28,472 | | 255,273 | | 851,768 | ||||||||||||||||||||||||
Dividends receivable |
3,952 | 2,844 | 6,488 | 40 | | 3,278 | | 16,602 | ||||||||||||||||||||||||
Prepaid expenses |
3,980 | 9,235 | 13,249 | 2,408 | 6,847 | 14,133 | | 49,852 | ||||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||
Total assets |
389,198,296 | 433,892,531 | 640,060,314 | 70,154,482 | 178,798,860 | 665,054,701 | | 2,377,159,184 | ||||||||||||||||||||||||
|
|
B-74
See Notes to Pro Forma Condensed Combined Financial Statements.
Pro Forma Condensed Combined Statement of Assets and Liabilities for
BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE), BlackRock Corporate High Yield Fund V, Inc. (HYV), BlackRock High Yield Trust (BHY), BlackRock High Income Shares (HIS), and BlackRock Corporate High Yield Fund VI, Inc. (HYT)
As of February 28, 2013 (Unaudited)
COY(1) | CYE(1) | HYV(1) | BHY | HIS | HYT(1) | Adjustments |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
|||||||||||||||||||||||||
Liabilities |
||||||||||||||||||||||||||||||||
Bank overdraft |
$ | | $ | | $ | 138,781 | $ | | $ | | $ | 307,820 | $ | | $ | 446,601 | ||||||||||||||||
Loan payable |
98,000,000 | 117,000,000 | 174,000,000 | 18,000,000 | 44,000,000 | 178,000,000 | | 629,000,000 | ||||||||||||||||||||||||
Cash received as collateral for swaps |
600,000 | 500,000 | 1,200,000 | | | 1,200,000 | | 3,500,000 | ||||||||||||||||||||||||
Investments purchased payable |
17,260,707 | 18,605,546 | 26,718,481 | 2,832,853 | 7,677,701 | 27,476,434 | | 100,571,722 | ||||||||||||||||||||||||
Options written at value (5) |
50,555 | 54,924 | 81,138 | 9,362 | | 84,883 | | 280,862 | ||||||||||||||||||||||||
Swap premiums received |
1,156,106 | 1,205,057 | 1,786,064 | 209,283 | | 1,861,346 | | 6,217,856 | ||||||||||||||||||||||||
Swaps payable |
2,337 | 2,515 | 3,619 | 858 | | 3,747 | | 13,076 | ||||||||||||||||||||||||
Investment advisory fees payable |
139,546 | 186,873 | 276,770 | 44,900 | 94,722 | 335,392 | | 1,078,203 | ||||||||||||||||||||||||
Officers and Trustees fees payable |
| | 108,692 | 13,311 | 12,765 | 112,784 | | 247,552 | ||||||||||||||||||||||||
Unrealized depreciation on swaps |
35,338 | 38,089 | 56,309 | 11,053 | | 58,957 | | 199,746 | ||||||||||||||||||||||||
Unrealized depreciation on foreign currency exchange contracts |
5,376 | | 12,470 | 2,598 | 8,050 | 13,704 | | 42,198 | ||||||||||||||||||||||||
Income dividends payable |
| | 70,432 | | | 88,498 | 17,667,244 | (9) | 17,826,174 | |||||||||||||||||||||||
Interest expense payable |
112,885 | 82,166 | 122,838 | 12,035 | 28,691 | 128,677 | | 487,292 | ||||||||||||||||||||||||
Administration fees payable |
| | | 4,992 | | | | 4,992 | ||||||||||||||||||||||||
Reorganization expenses payable |
| | | | | | 990,000 | (10) | 990,000 | |||||||||||||||||||||||
Other accrued expenses payable |
218,457 | 209,651 | 256,322 | 78,352 | 97,828 | 234,256 | | 1,094,866 | ||||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||
Total liabilities |
117,581,307 | 137,884,821 | 204,831,916 | 21,219,597 | 51,919,757 | 209,906,498 | 18,657,244 | 762,001,140 | ||||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||
Net Assets |
$ | 271,616,989 | $ | 296,007,710 | $ | 435,228,398 | $ | 48,934,885 | $ | 126,879,103 | $ | 455,148,203 | $ | (18,657,244 | ) | $ | 1,615,158,044 | |||||||||||||||
|
|
B-75
See Notes to Pro Forma Condensed Combined Financial Statements.
Pro Forma Condensed Combined Statement of Assets and Liabilities for
BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE), BlackRock Corporate High Yield Fund V, Inc. (HYV), BlackRock High Yield Trust (BHY), BlackRock High Income Shares (HIS), and BlackRock Corporate High Yield Fund VI, Inc. (HYT)
As of February 28, 2013 (Unaudited)
COY(1) | CYE(1) | HYV(1) | BHY | HIS | HYT(1) | Adjustments |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT) |
|||||||||||||||||||||||||
Net Assets Consist of |
|
|||||||||||||||||||||||||||||||
Paid-in capital (6) (7) (8) |
$ | 306,446,046 | $ | 326,291,482 | $ | 470,688,615 | $ | 58,179,449 | $ | 158,633,827 | $ | 506,565,764 | $ | (990,000 | )(10) | $ | 1,825,815,183 | |||||||||||||||
Undistributed net investment income |
4,102,652 | 1,542,971 | 4,434,679 | 200,744 | 1,549,178 | 5,837,020 | (17,667,244 | )(9) | | |||||||||||||||||||||||
Accumulated net realized loss |
(50,360,724 | ) | (45,804,963 | ) | (63,018,441 | ) | (12,691,635 | ) | (37,796,069 | ) | (80,641,018 | ) | | (290,312,850 | ) | |||||||||||||||||
Net unrealized appreciation/depreciation |
11,429,015 | 13,978,220 | 23,123,545 | 3,246,327 | 4,492,167 | 23,386,437 | | 79,655,711 | ||||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||
Net Assets |
$ | 271,616,989 | $ | 296,007,710 | $ | 435,228,398 | $ | 48,934,885 | $ | 126,879,103 | $ | 455,148,203 | $ | (18,657,244 | ) | $ | 1,615,158,044 | |||||||||||||||
|
|
|||||||||||||||||||||||||||||||
Net asset value per share |
$ | 7.76 | $ | 7.88 | $ | 13.18 | $ | 7.61 | $ | 2.31 | $ | 12.85 | $ | 12.68 | ||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||
(1) Consolidated Statements of Assets and Liabilities |
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(2) Investments at cost - unaffiliated |
$ | 364,373,360 | $ | 405,955,194 | $ | 598,717,928 | $ | 62,948,174 | $ | 167,334,601 | $ | 622,082,858 | $ | | $ | 2,221,412,115 | ||||||||||||||||
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(3) Investments at cost - affiliated |
| $ | 2,103,451 | $ | 4,128,807 | $ | 2,001,193 | $ | 2,757,840 | $ | 4,840,770 | $ | | $ | 15,832,061 | |||||||||||||||||
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(4) Foreign currency at cost |
$ | 9,375 | $ | 1,963 | $ | 5,647 | $ | 11,506 | $ | 32,595 | $ | 320,044 | $ | | $ | 381,130 | ||||||||||||||||
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(5) Premiums received |
$ | 98,415 | $ | 106,920 | $ | 157,950 | $ | 18,225 | $ | | $ | 165,240 | $ | | $ | 546,750 | ||||||||||||||||
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(6) Par value per share |
$ | 0.100 | $ | 0.100 | $ | 0.100 | $ | 0.001 | $ | | $ | 0.100 | $ | 0.100 | ||||||||||||||||||
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(7) Shares outstanding |
35,004,366 | 37,542,561 | 33,015,111 | 6,430,618 | 54,824,195 | 35,414,156 | (74,821,320 | )(11) | 127,409,712 | |||||||||||||||||||||||
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(8) Shares authorized |
200 million | 200 million | 200 million | unlimited | unlimited | 200 million | 200 million | |||||||||||||||||||||||||
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(9) | Reflects the distribution of undistributed net investment income of $17,667,244 attributable to each Fund. |
(10) | Reflects the charge for estimated reorganization expenses of $270,000, $350,000 and $370,000 attributable to BHY, HIS and HYT, respectively. |
(11) | Reflects the capitalization adjustments giving the effect of the transfer of shares of HYT, which COY, CYE, HYV, BHY and HIS shareholders will receive as if the Reorganizations had taken place on February 28, 2013. The foregoing should not be relied upon to reflect the number of shares of HYT that actually will be received on or after such date. |
B-76
See Notes to Pro Forma Condensed Combined Financial Statements.
Pro Forma Condensed Combined Statement of Operations for
BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE), BlackRock Corporate High Yield Fund V, Inc. (HYV), BlackRock High Yield Trust (BHY), BlackRock High Income Shares (HIS), and BlackRock Corporate High Yield Fund VI, Inc. (HYT)
For the Twelve Months Ended February 28, 2013 (Unaudited)
COY(1) | CYE(1) | HYV(1) | BHY | HIS | HYT(1) | Adjustments |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT)(2) |
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Investment Income |
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Interest |
$ | 24,385,970 | $ | 27,253,914 | $ | 40,528,921 | $ | 4,511,090 | $ | 12,406,803 | $ | 42,385,928 | $ | | $ | 151,472,626 | ||||||||||||||||
Dividends - unaffiliated |
773,530 | 875,132 | 1,295,084 | 45,121 | 129,923 | 1,397,574 | | 4,516,364 | ||||||||||||||||||||||||
Dividends - affiliated |
2,410 | 1,034 | 1,906 | 739 | 741 | 1,803 | | 8,633 | ||||||||||||||||||||||||
Foreign taxes withheld |
| | | | (1,000 | ) | | | (1,000 | ) | ||||||||||||||||||||||
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Total income |
25,161,910 | 28,130,080 | 41,825,911 | 4,556,950 | 12,536,467 | 43,785,305 | | 155,996,623 | ||||||||||||||||||||||||
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Expenses |
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Investment advisory |
1,750,891 | 2,349,156 | 3,489,913 | 570,306 | 1,203,330 | 4,236,854 | (673,816 | )(3) | 12,926,634 | |||||||||||||||||||||||
Administration |
| | | 63,367 | | | (63,367 | )(4) | | |||||||||||||||||||||||
Borrowing costs |
166,158 | 181,307 | 314,741 | 43,116 | 100,440 | 220,111 | 1,025,873 | |||||||||||||||||||||||||
Professional |
163,945 | 135,378 | 237,163 | 77,388 | 94,491 | 146,828 | (501,606 | )(5) | 353,587 | |||||||||||||||||||||||
Custodian |
23,763 | 71,743 | 100,364 | 30,430 | 41,428 | 89,557 | (79,097 | )(5) | 278,188 | |||||||||||||||||||||||
Accounting services |
91,205 | 96,867 | 146,658 | 53,977 | 70,116 | 122,159 | (325,191 | )(5) | 255,791 | |||||||||||||||||||||||
Transfer agent |
63,326 | 51,706 | 56,679 | 29,910 | 59,525 | 57,572 | (88,805 | )(5) | 229,913 | |||||||||||||||||||||||
Officer and Trustees |
22,654 | 23,041 | 45,540 | 7,222 | 13,420 | 51,979 | 163,856 | |||||||||||||||||||||||||
Printing |
11,234 | 13,014 | 33,699 | 10,308 | 1,313 | 25,423 | (27,145 | )(5) | 67,846 | |||||||||||||||||||||||
Registration |
22,543 | 23,718 | 11,750 | 9,013 | 19,786 | 11,021 | (73,860 | )(5) | 23,971 | |||||||||||||||||||||||
Miscellaneous |
50,807 | 43,892 | 24,872 | 5,877 | 17,592 | 55,246 | (108,377 | )(5) | 89,909 | |||||||||||||||||||||||
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Total expenses excluding interest expense and income tax |
2,366,526 | 2,989,822 | 4,461,379 | 900,914 | 1,621,441 | 5,016,750 | (1,941,264 | ) | 15,415,568 | |||||||||||||||||||||||
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Interest expense |
861,136 | 1,027,549 | 1,561,688 | 156,099 | 349,643 | 1,602,805 | | 5,558,920 | ||||||||||||||||||||||||
Income tax |
4,230 | 4,230 | 4,230 | | | 4,230 | (12,690 | )(5) | 4,230 | |||||||||||||||||||||||
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Total expenses |
3,231,892 | 4,021,601 | 6,027,297 | 1,057,013 | 1,971,084 | 6,623,785 | (1,953,954 | ) | 20,978,718 | |||||||||||||||||||||||
Less fees waived by Manager |
(1,331 | ) | (518 | ) | (820 | ) | (346 | ) | (388 | ) | (806 | ) | | (4,209 | ) | |||||||||||||||||
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Total expenses after fees waived |
3,230,561 | 4,021,083 | 6,026,477 | 1,056,667 | 1,970,696 | 6,622,979 | (1,953,954 | ) | 20,974,509 | |||||||||||||||||||||||
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Net investment income |
21,931,349 | 24,108,997 | 35,799,434 | 3,500,283 | 10,565,771 | 37,162,326 | 1,953,954 | 135,022,114 | ||||||||||||||||||||||||
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B-77
See Notes to Pro Forma Condensed Combined Financial Statements.
Pro Forma Condensed Combined Statement of Operations for
BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE), BlackRock Corporate High Yield Fund V, Inc. (HYV), BlackRock High Yield Trust (BHY), BlackRock High Income Shares (HIS), and BlackRock Corporate High Yield Fund VI, Inc. (HYT)
For the Twelve Months Ended February 28, 2013 (Unaudited)
COY(1) | CYE(1) | HYV(1) | BHY | HIS | HYT(1) | Adjustments |
Pro Forma
Combined Fund (COY, CYE, HYV, BHY and HIS into HYT)(2) |
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Realized and Unrealized Gain (Loss) |
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Net realized gain (loss) from: |
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Investments - unaffiliated |
$ | 10,645,703 | $ | 11,944,307 | $ | 17,995,774 | $ | 1,855,854 | $ | 2,011,579 | $ | 16,795,748 | | $ | 61,248,965 | |||||||||||||||||
Capital gain distributions received from affiliated investment companies |
| | 114 | 12 | 33 | 110 | | 269 | ||||||||||||||||||||||||
Foreign currency transactions |
(907,460 | ) | (908,659 | ) | (1,423,464 | ) | 664 | (207,966 | ) | (1,423,260 | ) | | (4,870,145 | ) | ||||||||||||||||||
Financial futures contracts |
(785,888 | ) | (831,838 | ) | (1,237,876 | ) | (124,633 | ) | (348,626 | ) | (1,290,827 | ) | | (4,619,688 | ) | |||||||||||||||||
Options written |
220,356 | 228,748 | 345,194 | 2,850 | 95,401 | 358,988 | | 1,251,537 | ||||||||||||||||||||||||
Swaps |
976,481 | 1,005,453 | 1,447,068 | 293,270 | 43,127 | 1,484,973 | | 5,250,372 | ||||||||||||||||||||||||
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10,149,192 | 11,438,011 | 17,126,810 | 2,028,017 | 1,593,548 | 15,925,732 | | 58,261,310 | |||||||||||||||||||||||||
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Net change in unrealized appreciation/depreciation on: |
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Investments |
3,164,868 | 4,840,563 | 7,053,048 | 554,395 | 2,089,245 | 7,477,930 | | 25,180,049 | ||||||||||||||||||||||||
Foreign currency translations |
1,833,233 | 1,940,573 | 2,933,248 | 75,756 | 410,494 | 3,078,835 | | 10,272,139 | ||||||||||||||||||||||||
Financial futures contracts |
198,467 | 195,269 | 295,343 | (11,294 | ) | 29,066 | 321,333 | | 1,028,184 | |||||||||||||||||||||||
Options written |
(13,450 | ) | (13,054 | ) | (21,531 | ) | 8,863 | (29,737 | ) | (21,727 | ) | | (90,636 | ) | ||||||||||||||||||
Swaps |
445,683 | 476,087 | 740,814 | (64,022 | ) | | 749,931 | | 2,348,493 | |||||||||||||||||||||||
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5,628,801 | 7,439,438 | 11,000,922 | 563,698 | 2,499,068 | 11,606,302 | | 38,738,229 | |||||||||||||||||||||||||
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Total realized and unrealized gain |
15,777,993 | 18,877,449 | 28,127,732 | 2,591,715 | 4,092,616 | 27,532,034 | | 96,999,539 | ||||||||||||||||||||||||
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Net Increase in Net Assets Resulting from Operations |
$ | 37,709,342 | $ | 42,986,446 | $ | 63,927,166 | $ | 6,091,998 | $ | 14,658,387 | $ | 64,694,360 | $ | 1,953,954 | $ | 232,021,653 | ||||||||||||||||
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(1) | Consolidated Statements of Assets and Liabilities. |
(2) | This Pro Forma Condensed Combined Statement of Operations excludes non-recurring aggregate estimated Reorganization expenses of $270,000, $350,000 and $370,000 attributable to BHY, HIS and HYT, respectively. |
(3) | In connection with the Reorganizations, the Investment Advisor is proposing to reduce the advisory fee payable by the Acquiring Fund (HYT) by 10 basis points, from 0.70% based on an aggregate of (i) the Funds average daily net assets and (ii) the proceeds of any outstanding debt securities of borrowings used for leverage to 0.60% based on an aggregate of (i) the Funds average daily net assets and (ii) the proceeds of any outstanding debt securities or borrowings for leverage. This reduction in fees will not decrease or modify the nature or level of the services that the Investment Advisor will provide to the Acquiring Fund relative to what the Investment Advisor currently provides to the Acquiring Fund. |
(4) | The Acquiring Fund does not have an administration agreement. |
(5) | Reflects the estimated savings as a result of the Reorganization due to fewer audits and consolidation of accounting, tax, legal, printing and other services. |
B-78
See Notes to Pro Forma Condensed Combined Financial Statements.
Notes to Pro Forma Condensed Combined Financial Statements
As of February 28, 2013 (Unaudited)
NOTE 1 Basis of Combination:
The Boards of Directors and Board of Trustees (the Boards), of BlackRock Corporate High Yield Fund, Inc. (COY), BlackRock Corporate High Yield Fund III, Inc. (CYE), BlackRock Corporate High Yield Fund V, Inc. (HYV), BlackRock High Yield Trust (BHY), and BlackRock High Income Share (HIS and together with COY, CYE, HYV and BHY, each a Target Fund and, collectively the Target Funds) and BlackRock Corporate High Yield Fund VI, Inc. (HYT or the Acquiring Fund and together with the Target Funds the Fund or the Funds) at meetings held on June 4-5, 2013 and July 30, 2013 approved five separate proposed tax-free reorganizations in which the Acquiring Fund will acquire substantially all of the assets of each Target Fund in exchange for the Acquiring Fund Shares and the assumption by the Acquiring Fund of substantially all of the liabilities of each Target Fund (the Reorganizations). Following the Reorganizations, each Target Fund will terminate its registration under the Investment Company Act of 1940.
In each Reorganization, the outstanding common shares of each Target Fund will be exchanged for newly issued common shares of the Acquiring Fund, par value $0.10 per share (Acquiring Fund Shares). The aggregate net asset value (not the market value) of Acquiring Fund Shares received by the shareholders of the Target Fund in each Reorganization will equal the aggregate net asset value (not the market value) of Target Fund common shares held by such shareholders immediately prior to such Reorganization, less the direct costs of such Reorganization, as applicable (although shareholders may receive cash for their fractional common shares).
The Reorganizations will be accounted for as a tax-free merger of investment companies. The unaudited pro forma condensed combined schedule of investments and condensed combined statement of assets and liabilities reflect the financial position of the Funds at February 28, 2013. The unaudited pro forma condensed combined statement of operations reflects the results of operations of the Funds for the twelve months ended February 28, 2013. These statements have been derived from the books and records of the Funds utilized in calculating daily net asset value at the dates indicated above in conformity with accounting principles generally accepted in the United States of America (US GAAP). As of February 28, 2013, all the securities held by the Target Funds comply with the compliance guidelines and/or investment restrictions of HYT. It is not anticipated that HYT will sell any securities of the Target Funds acquired in the reorganization other than in the ordinary course of business. The fiscal year end for HYT, HYV, BHY and HIS is August 31.The fiscal year end for COY and CYE is February 28.
The accompanying pro forma condensed combined financial statements should be read in conjunction with the historical financial statements of the Funds included or incorporated by reference in their respective Statements of Additional Information. Such pro forma condensed combined financial statements are presented for information only and may not necessarily be representative of what the actual combined financial statements would have been had the Reorganizations occurred on February 28, 2013. Following the Reorganizations, HYT will be the accounting survivor.
Regardless of whether the Reorganizations are completed, the costs associated with the proposed Reorganizations, including the costs associated with the stockholder meeting, will be borne directly by the respective Fund incurring the expense or allocated among the Funds proportionately or on another reasonable basis, as appropriate except that, BlackRock Advisors, LLC has agreed to pay COY, CYE and HYVs costs of the Reorganizations. The estimated expenses of the Reorganizations attributable to each Fund, which include the amount to be paid by BlackRock Advisors, LLC, are as follows:
Estimated Reorganization Expenses | ||||||||||
COY |
CYE |
HYV |
BHY |
HIS |
HYT |
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$375,000 | $355,000 | $400,000 | $270,000 | $350,000 | $370,000 |
B-79
NOTE 2 Basis of Consolidation:
The accompanying consolidated financial statements of COY, CYE, HYV and HYT include the accounts of BLK COY (Luxembourg) Investments, S.a.r.l., BLK CYE (Luxembourg) Investments, S.a.r.l., BLK HYV (Luxembourg) Investments, S.a.r.l. and BLK HYT (Luxembourg) Investments, S.a.r.l. (the Luxembourg Subsidiaries), which are wholly owned subsidiaries of the Funds which hold shares of private Canadian companies, Larcina Energy Ltd. and Osum Oil Sands Corp. Income earned on the investments held by the Luxembourg Subsidiaries may be taxable to such subsidiaries in Luxembourg. A tax provision for income, if any, is shown as income tax on the condensed combined statement of operations. A tax provision for income from realized and unrealized gains, if any, is included as a reduction of realized and unrealized gain (loss) on the condensed combined statement of operations. Intercompany accounts and transactions, if any, have been eliminated. The Luxembourg Subsidiaries are subject to the same investment policies and restrictions that apply to the Funds.
NOTE 3 HYT Fund Valuation:
US GAAP defines fair value as the price the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The Fund determines the fair value of its financial instruments at market value using independent dealers or pricing services under policies approved by the Board. The Global Valuation Committee is the committee formed by management to develop global pricing policies and procedures and to provide oversight of the pricing function for the Fund for all financial instruments.
The Fund values its bond investments on the basis of last available bid prices or current market quotations provided by dealers or pricing services. Floating rate loan interests are valued at the mean of the bid prices from one or more brokers or dealers as obtained from a pricing service. In determining the value of a particular investment, pricing services may use certain information with respect to transactions in such investments, quotations from dealers, pricing matrixes, market transactions in comparable investments, various relationships observed in the market between investments and calculated yield measures. Financial futures contracts traded on exchanges are valued at their last sale price. Swap agreements are valued utilizing quotes received daily by the Funds pricing service or through brokers, which are derived using daily swap curves and models that incorporate a number of market data factors, such as discounted cash flows, trades and values of the underlying reference instruments. Investments in open-end registered investment companies are valued at NAV each business day.
Equity investments traded on a recognized securities exchange or the NASDAQ Global Market System (NASDAQ) are valued at the last reported sale price that day or the NASDAQ official closing price, if applicable. For equity investments traded on more than one exchange, the last reported sale price on the exchange where the stock is primarily traded is used. Equity investments traded on a recognized exchange for which there were no sales on that day are valued at the last available bid (long positions) or ask (short positions) price. If no bid price is available, the prior days price will be used, unless it is determined that such prior days price no longer reflects the fair value of the security.
Securities and other assets and liabilities denominated in foreign currencies are translated into US dollars using exchange rates determined as of the close of business on the New York Stock Exchange (NYSE). Foreign currency exchange contracts are valued at the mean between the bid and ask prices and are determined as of the close of business on the NYSE. Interpolated values are derived when the settlement date of the contract is an interim date for which quotations are not available.
Exchange-traded options are valued at the mean between the last bid and ask prices at the close of the options market in which the options trade. An exchange-traded option for which there is no mean price is valued at the last bid (long positions) or ask (short positions) price. If no bid or ask price is available, the prior days price will be used, unless it is determined that the prior days price no longer reflects the fair value of the option.
B-80
Over-the-counter (OTC) options and swaptions are valued by an independent pricing service using a mathematical model, which incorporates a number of market data factors, such as the trades and prices of the underlying instruments.
In the event that application of these methods of valuation results in a price for an investment that is deemed not to be representative of the market value of such investment, or if a price is not available, the investment will be valued by the Global Valuation Committee, or its delegate, in accordance with a policy approved by the Board as reflecting fair value (Fair Value Assets). When determining the price for Fair Value Assets, the Global Valuation Committee, or its delegate, seeks to determine the price the Fund might reasonably expect to receive from the current sale of that asset in an arms-length transaction. Fair value determinations shall be based upon all available factors that the Global Valuation Committee, or its delegate, deem relevant consistent with the principles of fair value measurement which include the market approach, income approach and/or in the case of recent investments, the cost approach, as appropriate. A market approach generally consists of using comparable market transactions. The income approach generally is used to discount future cash flows to present value and adjusted for liquidity as appropriate. These factors include but are not limited to: (i) attributes specific to the investment or asset; (ii) the principal market for the investment or asset; (iii) the customary participants in the principal market for the investment or asset; (iv) data assumptions by market participants for the investment or asset, if reasonably available; (v) quoted prices for similar investments or assets in active markets; and (vi) other factors, such as future cash flows, interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks, recovery rates, liquidation amounts and/or default rates. Due to the inherent uncertainty of valuations of such investments, the fair values may differ from the values that would have been used had an active market existed. The Global Valuation Committee, or its delegate, employs various methods for calibrating valuation approaches for investments where an active market does not exist, including regular due diligence of the Funds pricing vendors, a regular review of key inputs and assumptions, transactional back-testing or disposition analysis to compare unrealized gains and losses to realized gains and losses, reviews of missing or stale prices and large movements in market values and reviews of any market related activity. The pricing of all Fair Value Assets is subsequently reported to the Board or a committee thereof on a quarterly basis.
Generally, trading in foreign instruments is substantially completed each day at various times prior to the close of business on the NYSE. Occasionally, events affecting the values of such instruments may occur between the foreign market close and the close of business on the NYSE that may not be reflected in the computation of the Funds net assets. If events (for example, a company announcement, market volatility or a natural disaster) occur during such periods that are expected to affect the value of such instruments materially, those instruments may be Fair Value Assets and be valued at their fair value, as determined in good faith by the Global Valuation Committee using a pricing service and/or policies approved by the Board.
NOTE 4 Capital Shares:
The pro forma net asset value per share assumes the issuance of shares of HYT that would have been issued at February 28, 2013 in connection with the proposed Reorganizations. The number of shares of each class assumed to be issued is equal to the net asset value of the shares of COY, CYE, HYV, BHY, and HIS, as of February 28, 2013, divided by the net asset value per share of the shares of HYT as of February 28, 2013. The pro forma number of common shares outstanding for the combined Fund consists of the following at February 28, 2013:
B-81
NOTE 5 Pro Forma Operating Expenses:
The pro forma condensed combined statement of operations for the twelve-month period ending February 28, 2013, as adjusted, giving effect to the Reorganizations reflect changes in expenses of HYT as if the Reorganizations were consummated on March 1, 2012. Although it is anticipated that there will be an elimination of certain duplicative expenses because of the Reorganizations, the actual amount of such expenses cannot be determined because it is not possible to predict the cost of future operations.
NOTE 6 Federal Income Taxes:
The Acquiring Fund and each Target Fund has elected to be taxed as a regulated investment company under the Internal Revenue Code of 1986, as amended (the Code). If the Reorganizations are consummated, the Acquiring Fund would seek to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the provisions available to certain investment companies, as defined in applicable sections of the Code, and to make distributions of taxable income sufficient to relieve it from all, or substantially all, U.S. federal income taxes. In addition, the Target Funds will make any required ordinary income or capital gain distributions prior to the consummation of their respective Reorganization, in accordance with provisions of the Code relating to tax-free mergers of investment companies.
The Acquiring Fund will succeed to capital loss carryforwards (and certain unrealized built-in losses, if any) of each of the acquired Target Funds, which will be subject to the tax loss limitation rules described below because each acquired Target Fund will undergo an ownership change for U.S. federal income tax purposes, and such limitation might be significant. Depending on which Reorganizations are consummated, the Acquiring Funds own capital loss carryforwards (and certain unrealized built-in losses, if any) may also be subject to the tax loss limitation rules described below because the Acquiring Fund may also undergo an ownership change for U.S. federal income tax purposes, and such limitation might be significant. For each Fund that undergoes an ownership change, the Code generally limits the amount of pre-ownership change losses that may be used to offset post-ownership change gains to a specific annual loss limitation amount (generally the product of (i) the fair market value of the stock of such Fund, with certain adjustments, immediately prior to the Reorganization and (ii) a rate established by the IRS). Subject to certain limitations, any unused portion of these losses may be available in subsequent years, subject to the remaining portion of any applicable capital loss carryforward limit, as measured from the date of recognition. Information with respect to the Funds Capital loss carryforwards as of February 28, 2013 is set forth below.
Capital Loss Amount* | ||||||||
Expiration |
COY | CYE | ||||||
2/28/2017 |
14,106,195 | 12,258,925 | ||||||
2/28/2018 |
36,323,237 | 33,834,777 | ||||||
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Total |
50,429,432 | 46,093,702 | ||||||
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Capital Loss Amount* | ||||||||||||||||
Expiration |
HYT | HYV | HIS | BHY | ||||||||||||
8/31/2014 |
| | 7,043,976 | 1,250,639 | ||||||||||||
8/31/2015 |
| | | 2,467,772 | ||||||||||||
8/31/2016 |
| | 10,829,322 | 2,039,760 | ||||||||||||
8/31/2017 |
23,221,595 | 14,918,762 | 3,140,056 | 916,541 | ||||||||||||
8/31/2018 |
54,927,764 | 45,786,653 | 15,169,557 | 5,191,260 | ||||||||||||
8/31/2019 |
| | | 737,843 | ||||||||||||
No Expiration |
| | 778,769 | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
78,149,359 | 60,705,415 | 36,961,680 | 12,603,815 | ||||||||||||
|
|
|
|
|
|
|
|
* The Funds anticipate that approximately $40 million of capital loss carryforwards will be lost/forfeited as a result of the tax loss limitation rules described above. No assurances can be given, however, that this estimate will be correct and the actual amount of forfeited capital loss
B-82
carryforwards could be higher or lower than such estimate, depending on the circumstances. The Funds believe that the potential loss of capital loss carryforwards as a result of the Reorganizations is not a material factor in evaluating the Reorganizations in light of several factors, including (1) the difficulty of projecting the likelihood of utilization of some or all of the capital loss carryforwards prior to their expiration, and (2) the potentially limited opportunity for capital gains in light of the Funds investment policy of investing primarily in debt securities and instruments.
Due to the operation of these tax loss limitation rules, it is possible that shareholders of all of the Target Funds and shareholders of the Acquiring Fund (if the Acquiring Fund undergoes an ownership change as described in the preceding paragraph) would receive taxable distributions of short-term and long-term capital gains earlier than they would have in the absence of the Reorganizations. Such taxable distributions will be treated either as ordinary income (and not as favorably taxed qualified dividend income) if such capital gains are short term or as favorably taxed capital gain dividends if such capital gains are long term. The actual financial effect of the loss limitation rules on a shareholder of a Fund whose losses are subject to the loss limitation rules would depend on many variables, including such Funds expected growth rate if the relevant Reorganization were not to occur (i.e., whether, in the absence of the Reorganization, the Fund would generate sufficient capital gains against which to utilize its capital loss carryforwards prior to their expiration (and certain realized built-in losses), in excess of what would have been the annual loss limitation amount had the relevant Reorganization occurred, the timing and amount of future capital gains recognized by the Combined Fund if the relevant Reorganization were to occur), and the timing of a historic Fund shareholders disposition of its shares (the tax basis of which might, depending on the facts, reflect that shareholders share of such Funds capital losses). Shareholders of all of the Funds should consult their own tax advisors in this regard.
In addition, for five years beginning on the Closing Date of a Reorganization, the Combined Fund will not be allowed to offset certain pre-Reorganization built-in gains attributable to a Fund that is a gain corporation with capital loss carryforwards (and certain built-in losses) attributable to another Fund.
NOTE 7 Pro Forma Calculation:
The accompanying pro forma condensed combined financial statements include pro forma calculations that are based on estimates and as such may not necessarily be representative of the actual combined fund financial statements.
NOTE 8 Subsequent Events:
Management has evaluated the impact of all subsequent events on the Funds through the date the pro forma condensed combined financial statements were issued and has determined that there were no subsequent events requiring adjustment or additional disclosure in the pro forma condensed combined financial statements.
B-83
PROXY VOTING POLICIES
FOR THE BLACKROCK-ADVISED FUNDS
DECEMBER, 2009
I. |
INTRODUCTION | C-2 | ||||||
II. |
Proxy Voting Policies | C-3 | ||||||
A. | Boards of Directors | C-3 | ||||||
B. | Auditors | C-3 | ||||||
C. | Compensation and Benefits | C-3 | ||||||
D. | Capital Structure | C-3 | ||||||
E. | Corporate Charter and Bylaws | C-3 | ||||||
F. | Environmental and Social Issues | C-3 | ||||||
III. |
CONFLICTS MANAGEMENT | C-4 | ||||||
IV. |
REPORTS TO THE BOARD | C-4 |
C-1
I. INTRODUCTION
The Trustees/Directors (Directors) of the BlackRock-Advised Funds (the Funds) have the responsibility for voting proxies relating to portfolio securities of the Funds, and have determined that it is in the best interests of the Funds and their shareholders to delegate that responsibility to BlackRock Advisors, LLC and its affiliated U.S. Registered investment advisers (BlackRock), the investment adviser to the Funds, as part of BlackRocks authority to manage, acquire and dispose of account assets. The Directors hereby direct BlackRock to vote such proxies in accordance with this Policy, and any proxy voting guidelines that the Adviser determines are appropriate and in the best interests of the Funds shareholders and which are consistent with the principles outlined in this Policy. The Directors have authorized BlackRock to utilize an unaffiliated third-party as its agent to vote portfolio proxies in accordance with this Policy and to maintain records of such portfolio proxy voting.
Rule 206(4)-6 under the Investment Advisers Act of 1940 requires, among other things, that an investment adviser that exercises voting authority over clients proxy voting adopt policies and procedures reasonably designed to ensure that the adviser votes proxies in the best interests of clients, discloses to its clients information about those policies and procedures and also discloses to clients how they may obtain information on how the adviser has voted their proxies.
BlackRock has adopted separate but substantially similar guidelines and procedures that are consistent with the principles of this Policy. BlackRocks Corporate Governance Committee (the Committee), addresses proxy voting issues on behalf of BlackRock and its clients, including the Funds. The Committee is comprised of senior members of BlackRocks Portfolio Management and Administration Groups and is advised by BlackRocks Legal and Compliance Department.
BlackRock votes (or refrains from voting) proxies for each Fund in a manner that BlackRock, in the exercise of its independent business judgment, concludes are in the best economic interests of such Fund. In some cases, BlackRock may determine that it is in the best economic interests of a Fund to refrain from exercising the Funds proxy voting rights (such as, for example, proxies on certain non-U.S. Securities that might impose costly or time-consuming in-person voting requirements). With regard to the relationship between securities lending and proxy voting, BlackRocks approach is also driven by our clients economic interests. The evaluation of the economic desirability of recalling loans involves balancing the revenue producing value of loans against the likely economic value of casting votes. Based on our evaluation of this relationship, BlackRock believes that the likely economic value of casting a vote generally is less than the securities lending income, either because the votes will not have significant economic consequences or because the outcome of the vote would not be affected by BlackRock recalling loaned securities in order to ensure they are voted. Periodically, BlackRock analyzes the process and benefits of voting proxies for securities on loan, and will consider whether any modification of its proxy voting policies or procedures are necessary in light of any regulatory changes.
BlackRock will normally vote on specific proxy issues in accordance with BlackRocks proxy voting guidelines. BlackRocks proxy voting guidelines provide detailed guidance as to how to vote proxies on certain important or commonly raised issues. BlackRock may, in the exercise of its business judgment, conclude that the proxy voting guidelines do not cover the specific matter upon which a proxy vote is requested, or that an exception to the proxy voting guidelines would be in the best economic interests of a Fund. BlackRock votes (or refrains from voting) proxies without regard to the relationship of the issuer of the proxy (or any shareholder of such issuer) to the Fund, the Funds affiliates (if any), BlackRock or BlackRocks affiliates. When voting proxies, BlackRock attempts to encourage companies to follow practices that enhance shareholder value and increase transparency and allow the market to place a proper value on their assets.
C-2
II. Proxy Voting Policies
A. Boards of Directors
The Funds generally support the boards nominees in the election of directors and generally supports proposals that strengthen the independence of boards of directors. As a general matter, the Funds believe that a companys board of directors (rather than shareholders) is most likely to have access to important, nonpublic information regarding a companys business and prospects, and is therefore best-positioned to set corporate policy and oversee management. The Funds therefore believe that the foundation of good corporate governance is the election of responsible, qualified, independent corporate directors who are likely to diligently represent the interests of shareholders and oversee management of the corporation in a manner that will seek to maximize shareholder value over time. In individual cases, consideration may be given to a director nominees history of representing shareholder interests as a director of the company issuing the proxy or other companies, or other factors to the extent deemed relevant by the Committee.
B. Auditors
These proposals concern those issues submitted to shareholders related to the selection of auditors. As a general matter, the Funds believe that corporate auditors have a responsibility to represent the interests of shareholders and provide an independent view on the propriety of financial reporting decisions of corporate management. While the Funds anticipate that BlackRock will generally defer to a corporations choice of auditor, in individual cases, consideration may be given to an auditors history of representing shareholder interests as auditor of the company issuing the proxy or other companies, to the extent deemed relevant.
C. Compensation and Benefits
These proposals concern those issues submitted to shareholders related to management compensation and employee benefits. As a general matter, the Funds favor disclosure of a companys compensation and benefit policies and oppose excessive compensation, but believe that compensation matters are normally best determined by a corporations board of directors, rather than shareholders. Proposals to micro-manage a companys compensation practices or to set arbitrary restrictions on compensation or benefits should therefore generally not be supported.
D. Capital Structure
These proposals relate to various requests, principally from management, for approval of amendments that would alter the capital structure of a company, such as an increase in authorized shares. As a general matter, the Funds expect that BlackRock will support requests that it believes enhance the rights of common shareholders and oppose requests that appear to be unreasonably dilutive.
E. Corporate Charter and Bylaws
These proposals relate to various requests for approval of amendments to a corporations charter or Bylaws. As a general matter, the Funds tend to vote against anti-takeover proposals and proposals that would create additional barriers or costs to corporate transactions that are likely to deliver a premium to shareholders.
F. Environmental and Social Issues
These are shareholder proposals addressing either corporate social and environmental policies or requesting specific reporting on these issues. The Funds generally do not support proposals on social issues that lack a demonstrable economic benefit to the issuer and the Fund investing in such issuer. BlackRock seeks to make proxy voting decisions in the manner most likely to protect and promote the long-term economic value of the securities held in client accounts. We intend to support economically advantageous corporate practices while
C-3
leaving direct oversight of company management and strategy to boards of directors. We seek to avoid micromanagement of companies, as we believe that a companys board of directors is best positioned to represent shareholders and oversee management on shareholders behalf. Issues of corporate social and environmental responsibility are evaluated on a case-by-case basis within this framework.
III. CONFLICTS MANAGEMENT
BlackRock maintains policies and procedures that are designed to prevent any relationship between the issuer of the proxy (or any shareholder of the issuer) and a Fund, a Funds affiliates (if any), BlackRock or BlackRocks affiliates, from having undue influence on BlackRocks proxy voting activity. In certain instances, BlackRock may determine to engage an independent fiduciary to vote proxies as a further safeguard against potential conflicts of interest or as otherwise required by applicable law. The independent fiduciary may either vote such proxies or provide BlackRock with instructions as to how to vote such proxies. In the latter case, BlackRock votes the proxy in accordance with the independent fiduciarys determination.
IV. REPORTS TO THE BOARD
BlackRock will report to the Directors on proxy votes it has made on behalf of the Funds at least annually.
C-4
PART C: OTHER INFORMATION
ITEM 15. Indemnification
Article V of the Registrants Articles of Incorporation, a copy of which was filed as an exhibit to the Registrants N-2 on March 14, 2003, and Article IV of the Registrants Amended and Restated Bylaws, a copy of which was filed as an exhibit to the Registrants 8-K filed on September 21, 2010, provides for indemnification, as set forth below:
Article V of the Registrants Articles of Incorporation provides as follows:
(4) Each director and each officer of the Corporation shall be indemnified and advanced expenses by the Corporation to the full extent permitted by the General Laws of the State of Maryland now or hereafter in force, including the advance of expenses under the procedures and to the full extent permitted by law subject to the requirements of the Investment Company Act. The foregoing rights of indemnification shall not be exclusive of any other rights to which those seeking indemnification may be entitled. No amendment of these Articles of Incorporation or repeal of any provision hereof shall limit or eliminate the benefits provided to directors and officers under this provision in connection with any act or omission that occurred prior to such amendment or repeal.
(5) To the fullest extent permitted by the General Laws of the State of Maryland or decisional law, as amended or interpreted, subject to the requirements of the Investment Company Act, no director or officer of the Corporation shall be personally liable to the Corporation or its security holders for money damages. No amendment of these Articles of Incorporation or repeal of any provision hereof shall limit or eliminate the benefits provided to directors and officers under this provision in connection with any act or omission that occurred prior to such amendment or repeal.
Article IV of the Registrants Amended and Restated Bylaws provides as follows:
Section 1. No Personal Liability of Directors or Officers. No Director, advisory board member or officer of the Fund shall be subject in such capacity to any personal liability whatsoever to any Person, save only liability to the Fund or its shareholders arising from bad faith, willful misfeasance, gross negligence or reckless disregard for his or her duty to such Person; and, subject to the foregoing exception, all such Persons shall look solely to the assets of the Fund for satisfaction of claims of any nature arising in connection with the affairs of the Fund. If any Director, advisory board member or officer, as such, of the Fund, is made a party to any suit or proceeding to enforce any such liability, subject to the foregoing exception, such person shall not, on account thereof, be held to any personal liability. Any repeal or modification of the Charter or this Article IV Section 1 shall not adversely affect any right or protection of a Director, advisory board member or officer of the Fund existing at the time of such repeal or modification with respect to acts or omissions occurring prior to such repeal or modification.
Section 2. Mandatory Indemnification.
(a) The Fund hereby agrees to indemnify each person who is or was a Director, advisory board member or officer of the Fund (each such person being an Indemnitee) to the full extent permitted under the Charter. In addition, the Fund may provide greater but not lesser rights to indemnification pursuant to a contract approved by at least a majority of Directors between the Fund and any Indemnitee. Notwithstanding the foregoing, no Indemnitee shall be indemnified hereunder 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 the Indemnitees position (the conduct referred to in such clauses (i) through (iv) being sometimes referred to herein as Disabling Conduct). Furthermore, with respect to any action, suit or other proceeding voluntarily prosecuted by any Indemnitee as plaintiff, indemnification shall be mandatory only if the prosecution of such action, suit or other proceeding by such Indemnitee (A) was authorized by a majority of the Directors or (B) was instituted by the Indemnitee to enforce his or her rights to indemnification hereunder in a case in which the Indemnitee is found to be entitled to such indemnification.
(b) Notwithstanding the foregoing, unless otherwise provided in any agreement relating to indemnification between an Indemnitee and the Fund, no indemnification shall be made hereunder unless there has been a determination (i) by a final decision on the merits by a court or other body of competent jurisdiction before whom the issue of entitlement to indemnification hereunder was brought that such Indemnitee is entitled to indemnification hereunder or, (ii) in the absence of such a decision, by (A) a majority vote of a quorum of those Directors who are both Independent Directors and not parties to the proceeding (Independent Non-Party Directors), that the Indemnitee is entitled to indemnification hereunder, or (B) if such quorum is not obtainable or even if obtainable, if such majority so directs, a Special Counsel in a written opinion concludes that the Indemnitee should be entitled to indemnification hereunder.
(c) Subject to any limitations provided by the 1940 Act and the Charter, the Fund shall have the power and authority to indemnify and provide for the advance payment of expenses to employees, agents and other Persons providing services to the Fund or serving in any capacity at the request of the Fund to the full extent permitted for corporations organized under the corporations laws of the state in which the Fund was formed, provided that such indemnification has been approved by a majority of the Directors.
(d) Any repeal or modification of the Charter or Section 2 of this Article IV shall not adversely affect any right or protection of a Director, advisory board member or officer of the Fund existing at the time of such repeal or modification with respect to acts or omissions occurring prior to such repeal or modification.
Section 3. Good Faith Defined; Reliance on Experts. For purposes of any determination under this Article IV, a person shall be deemed to have acted in good faith and in a manner such person reasonably believed to be in the best interests of the Fund, or, with respect to any criminal action or proceeding, to have had no reasonable cause to believe such persons conduct was unlawful, if such persons action is based on the records or books of account of the Fund, or on information supplied to such person by the officers of the Fund in the course of their duties, or on the advice of legal counsel for the Fund or on information or records given or reports made to the Fund by an independent certified public accountant or by an appraiser or other expert or agent selected with reasonable care by the Fund. The provisions of this Article IV Section 3 shall not be deemed to be exclusive or to limit in any way the circumstances in which a person may be deemed to have met the applicable standard of conduct set forth in this Article IV. Each Director and officer or employee of the Fund shall, in the performance of his or her duties, be fully and completely justified and protected with regard to any act or any failure to act resulting from reliance in good faith upon the books of account or other records of the Fund, upon an opinion of counsel selected by the Board of Directors or a committee of the Directors, or upon reports made to the Fund by any of the Funds officers or employees or by any advisor, administrator, manager, distributor, dealer, accountant, appraiser or other expert or consultant selected with reasonable care by the Board of Directors or a committee of the Directors, officers or employees of the Fund, regardless of whether such counsel or expert may also be a Director.
Section 4. Survival of Indemnification and Advancement of Expenses. The indemnification and advancement of expenses provided by, or granted pursuant to, this Article IV shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director or officer and shall inure to the benefit of the heirs, executors and administrators of such a person.
Section 5. Insurance. The Directors may maintain insurance for the protection of the Funds property, the shareholders, Directors, officers, employees and agents in such amount as the Directors shall deem adequate to cover possible tort liability, and such other insurance as the Directors in their sole judgment shall deem advisable or is required by the 1940 Act.
Section 6. Subrogation. In the event of payment by the Fund to an Indemnitee under the Charter or these Bylaws, the Fund shall be subrogated to the extent of such payment to all of the rights of recovery of the Indemnitee, who shall execute such documents and do such acts as the Fund may reasonably request to secure such rights and to enable the Fund effectively to bring suit to enforce such rights.
ITEM 16. Exhibits
Exhibit No. |
Description of Exhibit |
|
(1)(a) | Articles of Incorporation, dated March 13, 2003 (a) | |
(b) | Articles of Amendment, dated September 14, 2006** | |
(c) | Articles of Amendment, dated September 17, 2010** | |
(2) | Amended and Restated Bylaws of the Registrant, dated September 17, 2010 (b) | |
(3) | Not applicable | |
(4) | Form of Agreement and Plan of Reorganization (c) | |
(5)(a) | Selected Provisions of the Articles of Incorporation and the Amended and Restated Bylaws of the Registrant Defining the Rights of Shareholders* | |
(6)(a) | Investment Management Agreement, dated September 29, 2006** | |
(b) | Sub-Investment Advisory Agreement, dated September 29, 2006** | |
(7)(a) | Not applicable | |
(8) | Form of Second Amended and Restated Deferred Compensation Plan** | |
(9) | Custodian Agreement, dated September 21, 2001** | |
(10) | Not applicable | |
(11) | Opinion and Consent of Special Counsel for the Registrant** | |
(12) | Tax opinion of Skadden, Arps, Slate, Meagher & Flom LLP*** | |
(13)(a) | Amended and Restated Credit Agreement, dated March 3, 2011** | |
(b) | Amendment No. 1 to Amended and Restated Credit Agreement, dated March 2, 2012** | |
(c) | Amendment No. 2 to Amended and Restated Credit Agreement, dated March 1, 2013** | |
(d) | Form of Amendment No. 3 to Amended and Restated Credit Agreement** | |
(14) | Consent of the Independent Registered Public Accounting Firm for the Registrant, BlackRock High Yield Trust, BlackRock Corporate High Yield Fund, Inc., BlackRock Corporate High Yield Fund III, Inc., BlackRock High Income Shares and BlackRock Corporate High Yield Fund V, Inc.** | |
(15) | Not applicable | |
(16) | Power of Attorney* | |
(17)(a) | Form of Proxy Cards for the Funds* | |
(b) | Transfer Agency and Service Agreement, dated as of December 1, 2006** | |
(c) | Amendment No. 1 to Transfer Agency and Service Agreement, dated as of January 31, 2008** | |
(d) | Amendment No. 2 to Transfer Agency and Service Agreement, dated as of December 1, 2009** | |
(e) | Amendment No. 3 to Transfer Agency and Service Agreement, dated as of August 31, 2010** | |
(f) | Amendment No. 4 to Transfer Agency and Service Agreement, dated as of August 30, 2012** | |
(g) | Administrative Services Agreement, dated as of December 29, 2000** |
* | Filed as an exhibit to the Registrants Registration Statement on Form N-14, filed on July 15, 2013. |
** | Filed herewith. |
*** | To be filed by further amendment. |
(a) | Incorporated by reference to Exhibit (a) to the Registrants Registration Statement on Form N-2, filed on March 14, 2003. |
(b) | Incorporated by reference to Exhibit 3.1 to the Registrants Form 8-K filed on September 21, 2010. |
(c) | Incorporated by reference to Appendix A of the Statement of Additional Information. |
ITEM 17. Undertakings
(1) The undersigned Registrant agrees that prior to any public reoffering of the securities registered through use of a prospectus which is part of this Registration Statement by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c) of the Securities Act of 1933, as amended, the reoffering prospectus will contain information called for by the applicable Exchange registration form for reoffering by persons who may be deemed underwriters, in addition to the information called for by other items of the applicable form.
(2) The undersigned Registrant agrees that every prospectus that is filed under paragraph (1) above will be filed as part of an amendment to the registration statement and will not be used until the amendment is effective, and that, in determining any liability under the Securities Act of 1933, as amended, each post-effective amendment shall be deemed to be a new registration statement for the securities offered therein, and the offering of securities at that time shall be deemed to be the initial bona fide offering of them.
(3) The undersigned Registrant agrees to file, by post-effective amendment, opinions of counsel supporting the tax consequences of the Reorganizations within a reasonably prompt time after receipt of such opinions.
(4) The undersigned Registrant agrees to file, by post-effective amendment, no later than the closing date of the Reorganizations, opinions of counsel regarding the legality of the securities being offered pursuant to this Registration Statement that are not qualified by the assumption that the required shareholder approval for the issuance of such securities will be obtained.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant 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 22nd day of August, 2013.
BLACKROCK CORPORATE HIGH YIELD FUND VI, INC. | ||
BY: |
/s/ John M. Perlowski |
|
Name: |
John M. Perlowski |
|
Title: |
President and Chief Executive Officer |
As required by the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
Signature |
Title |
Date |
||
/s/ John M. Perlowski John M. Perlowski |
President and Chief Executive Officer |
August 22, 2013 |
||
/s/ Neal J. Andrews |
Chief Financial Officer | August 22, 2013 | ||
Neal J. Andrews | ||||
* |
Director | August 22, 2013 | ||
Michael J. Castellano | ||||
* |
Director | August 22, 2013 | ||
Richard E. Cavanagh | ||||
* |
Director | August 22, 2013 | ||
Frank J. Fabozzi | ||||
* |
Director | August 22, 2013 | ||
Kathleen F. Feldstein | ||||
* |
Director | August 22, 2013 | ||
James T. Flynn | ||||
* |
Director | August 22, 2013 | ||
Jerrold B. Harris | ||||
* |
Director | August 22, 2013 | ||
R. Glenn Hubbard | ||||
* |
Director | August 22, 2013 | ||
W. Carl Kester | ||||
* |
Director | August 22, 2013 | ||
Karen P. Robards | ||||
* |
Director | August 22, 2013 | ||
Paul L. Audet |
Signature |
Title |
Date |
||
* |
Director | August 22, 2013 | ||
Henry Gabbay |
*By: | /s/ John M. Perlowski | August 22, 2013 | ||
John M. Perlowski | ||||
Attorney-in-Fact |
EXHIBIT INDEX
(1)(b) | Articles of Amendment, dated September 14, 2006 | |
(1)(c) | Articles of Amendment, dated September 17, 2010 | |
(6)(a) | Investment Management Agreement, dated September 29, 2006 | |
(6)(b) | Sub-Investment Advisory Agreement, dated September 29, 2006 | |
(8) | Form of Second Amended and Restated Deferred Compensation Plan | |
(9) | Custodian Agreement, dated September 21, 2001 | |
(11) | Opinion and Consent of Special Counsel for the Registrant | |
(13)(a) | Amended and Restated Credit Agreement, dated March 3, 2011 | |
(13)(b) | Amendment No. 1 to Amended and Restated Credit Agreement, dated March 2, 2012 | |
(13)(c) | Amendment No. 2 to Amended and Restated Credit Agreement, dated March 1, 2013 | |
(13)(d) | Form of Amendment No. 3 to Amended and Restated Credit Agreement | |
(14) | Consent of the Independent Registered Public Accounting Firm for the Registrant, BlackRock High Yield Trust, BlackRock Corporate High Yield Fund, Inc., BlackRock Corporate High Yield Fund III, Inc., BlackRock High Income Shares and BlackRock Corporate High Yield Fund V, Inc. | |
(17)(b) | Transfer Agency and Service Agreement, dated as of December 1, 2006 | |
(17)(c) | Amendment No. 1 to Transfer Agency and Service Agreement, dated as of January 31, 2008 | |
(17)(d) | Amendment No. 2 to Transfer Agency and Service Agreement, dated as of December 1, 2009 | |
(17)(e) | Amendment No. 3 to Transfer Agency and Service Agreement, dated as of August 31, 2010 | |
(17)(f) | Amendment No. 4 to Transfer Agency and Service Agreement, dated as of August 30, 2012 | |
(17)(g) | Administrative Services Agreement, dated as of December 29, 2000 |
Exhibit 1(b)
BLACKROCK CORPORATE HIGH YIELD FUND VI, INC.
Articles Supplementary
BlackRock Corporate High Yield Fund VI, Inc., a Maryland corporation (the Corporation), hereby certifies to the State Department of Assessments and Taxation of the State of Maryland, that:
FIRST: Under a power contained in Title 3, Subtitle 8 of the Maryland General Corporation Law (the MGCL), the Corporation, by amendment to the bylaws of the Corporation (the Bylaw Amendment), elected to become subject to Section 3-804(c) of the MGCL.
SECOND: The Bylaw Amendment provides that the Corporation elects to be subject to the provisions of Section 3-804(c) of the MGCL, subject to applicable requirements of the Investment Company Act of 1940 and the rules and regulations promulgated thereunder and the right of the stockholders of a class or series of stock of the Corporation to elect additional directors to the board of directors of the Corporation in accordance with the charter of the Corporation, the repeal of which may be effected only by the means authorized by Section 3-802(b)(3) of the MGCL.
THIRD: The Bylaw Amendment and these Articles Supplementary have been approved by the board of directors of the Corporation in the manner and by the vote required by the MGCL.
IN WITNESS WHEREOF, the Corporation has caused these Articles Supplementary to be signed in its name and on its behalf as of the 17 th day of September, 2010, by its President who acknowledges that these Articles Supplementary are the act of the Corporation and, to the best of his knowledge, information and belief and under penalties for perjury, all matters and facts contained in these Articles Supplementary are true in all material respects.
ATTEST: | BLACKROCK CORPORATE HIGH YIELD FUND VI, INC. | |||||||||
/s/ Howard Surloff |
By: |
/s/ Anne Ackerley |
(SEAL) | |||||||
Name: | Howard Surloff | Name: | Anne Ackerley | |||||||
Title: | Secretary | Title: | President |
Exhibit 1(c)
CORPORATE HIGH YIELD FUND VI, INC.
ARTICLES OF AMENDMENT
CORPORATE HIGH YIELD FUND VI, INC., a Maryland corporation (the Corporation), docs hereby certify to the State Department of Assessments and Taxation of Maryland that:
FIRST: The name of the corporation is CORPORATE HIGH YIELD FUND VI, INC.
SECOND: The charter of the Corporation is hereby amended by deleting Article I thereof in its entirety and inserting the following in lieu thereof:
ARTICLE I
NAME
The name of the Corporation is
BLACKROCK CORPORATE HIGH YIELD FUND VI, INC.
THIRD: These Articles of Amendment have been approved by a majority of the entire Board of Directors of the Corporation and are limited to a change expressly authorized by Section 2-605 of the Maryland General Corporation Law and are therefore made without action by the stockholders.
FOURTH: The authorized capital stock of the Corporation has not been increased by these Articles of Amendment.
FIFTH: As amended hereby, the Corporations charter shall remain in full force and effect.
SIXTH: These Articles of Amendment shall be effective as of the 29th day of September, 2006.
STATE OF MARYLAND
I hereby certify that this is a true and complete copy of the 3 page document on the file in this office. DATED: 9/18/06
STATE DEPARTMENT OF ASSESSMENTS AND TAXATION
By: |
, Custodian | |||
|
||||
this stamp replaces our previous certification system. Effective: 6/95 |
IN WITNESS WHEREOF, CORPORATE HIGH YIELD FUND VI, INC. has caused these presents to be signed in its name and on its behalf by its Vice President and witnessed by its Secretary as of the14th day of September, 2006,
CORPORATE HIGH YIELD FUND VI, INC. | ||
By: | /s/ Donald C. Burke | |
Donald C. Burke, Vice President |
Witness:
THE UNDERSIGNED, Vice President of the Corporation, who executed on behalf of the Corporation the foregoing Articles or Amendment of which this certificate is made a part, hereby acknowledges in the name and on behalf of the Corporation the foregoing Articles of Amendment to be the corporate act of the Corporation and further certifies, as to all of the matters and facts required to be verified under oath, that to the best of his knowledge, information and belief, the matters and facta set forth herein are true in all material respects, under the penalties of perjury.
/s/ Donald C. Burke |
Donald C. Burke, Vicc President |
2
Exhibit 6(a)
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT, dated September 29, 2006, between BlackRock Corporate High Yield Fund VI, Inc. (the Fund), a Maryland coporation, and BlackRock Advisors, LLC (the Advisor), a Delaware limited liability company.
WHEREAS, the Advisor has agreed to furnish investment advisory services to the Fund, a closed-end management investment company registered under the Investment Company Act of 1940, as amended (the 1940 Act); and
WHEREAS, this Agreement has been approved in accordance with the provisions of the 1940 Act, and the Advisor is willing to furnish such services upon the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the mutual premises and covenants herein contained and other good and valuable consideration, the receipt of which is hereby acknowledged, it is agreed by and between the parties hereto as follows:
1. In General . The Advisor agrees, all as more fully set forth herein, to act as investment advisor to the Fund with respect to the investment of the Funds assets and to supervise and arrange for the day to day operations of the Fund and the purchase of securities for and the sale of securities held in the investment portfolio of the Fund.
2. Duties and Obligations of the Advisor with Respect to Investment of Assets of the Fund . Subject to the succeeding provisions of this section and subject to the direction and control of the Funds Board of Directors, the Advisor shall (i) act as investment advisor for and supervise and manage the investment and reinvestment of the Funds assets and in connection therewith have complete discretion in purchasing and selling securities and other assets for the Fund and in voting, exercising consents and exercising all other rights appertaining to such securities and other assets on behalf of the Fund, (ii) supervise continuously the investment program of the Fund and the composition of its investment portfolio; (iii) arrange, subject to the provisions of paragraph 4 hereof, for the purchase and sale of securities and other assets held in the investment portfolio of the Fund; and (iv) provide investment research to the Fund.
3. Duties and Obligations of Advisor with Respect to the Administration of the Fund . The Advisor also agrees to furnish office facilities and equipment and clerical, bookkeeping and administrative services (other than such services, if any, provided by the Funds Custodian, Transfer Agent and Dividend Disbursing Agent and other service providers) for the Fund. To the extent requested by the Fund, the Advisor agrees to provide the following administrative services:
(a) Oversee the determination and publication of the Funds net asset value in accordance with the Funds policy as adopted from time to time by the Board of Directors;
(b) Oversee the maintenance by the Funds Custodian and Transfer Agent and Dividend Disbursing Agent of certain books and records of the Fund as required under Rule 31a1(b)(4) of the 1940 Act and maintain (or oversee maintenance by such other persons as approved by the Board of Directors) such other books and records required by law or for the proper operation of the Fund;
(c) Oversee the preparation and filing of the Funds federal, state and local income tax returns and any other required tax returns;
(d) Review the appropriateness of and arrange for payment of the Funds expenses;
(e) Prepare for review and approval by officers of the Fund financial information for the Funds semiannual and annual reports, proxy statements and other communications with shareholders required or otherwise to be sent to Fund shareholders, and arrange for the printing and dissemination of such reports and communications to shareholders;
(f) Prepare for review by an officer of the Fund the Funds periodic financial reports required to be filed with the Securities and Exchange Commission (SEC) on Form NSAR, Form NCSR, Form NPX, Form NQ, and such other reports, forms and filings, as may be mutually agreed upon;
(g) Prepare such reports relating to the business and affairs of the Fund as may be mutually agreed upon and not otherwise appropriately prepared by the Funds custodian, counsel or auditors;
(h) Prepare such information and reports as may be required by any stock exchange or exchanges on which the Funds shares are listed;
(i) Make such reports and recommendations to the Board of Directors concerning the performance of the independent accountants as the Board of Directors may reasonably request or deems appropriate;
(j) Make such reports and recommendations to the Board of Directors concerning the performance and fees of the Funds Custodian and Transfer and Dividend Disbursing Agent as the Board of Directors may reasonably request or deems appropriate;
(k) Oversee and review calculations of fees paid to the Funds service providers;
(1) Oversee the Funds portfolio and perform necessary calculations as required under Section 18 of the 1940 Act;
(m) Consult with the Funds officers, independent accountants, legal counsel, custodian, accounting agent and transfer and dividend disbursing agent in establishing the accounting policies of the Fund and monitor financial and shareholder accounting services;
(n) Review implementation of any share purchase programs authorized by the Board of Directors;
(o) Determine the amounts available for distribution as dividends and distributions to be paid by the Fund to its shareholders, prepare and arrange for the printing of dividend notices to shareholders, and provide the Funds dividend disbursing agent and custodian with such information as is required for such parties to effect the payment of dividends and distributions and to implement the Funds dividend reinvestment plan;
(p) Prepare such information and reports as may be required by any banks from which the Fund borrows funds
(q) Provide such assistance to the Custodian and the Funds counsel and auditors as generally may be required to properly carry on the business and operations of the fund;
(r) Assist in the preparation and filing of Forms 3, 4, and 5 pursuant to Section 16 of the Securities Exchange Act of 1934, as amended, and Section 30(h) of the 1940 Act for the officers and Directors of the Fund, such filings to be based on information provided by those persons;
(s) Respond to or refer to the Funds officers or transfer agent, shareholder (including any potential shareholder) inquiries relating to the Fund;
(t) Supervise any other aspects of the Funds administration as may be agreed to by the Fund and the Advisor; and
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All services are to be furnished through the medium of any directors, officers or employees of the Advisor or its affiliates as the Advisor deems appropriate in order to fulfill its obligations hereunder.
The Fund will reimburse the Advisor or its affiliates for all out of pocket expenses incurred by them in connection with the performance of the administrative services described in this paragraph 3 The Fund will reimburse the Advisor and its affiliates for their costs in providing accounting services to the Fund.
4. Covenants . (a) In the performance of its duties under this Agreement, the Advisor shall at all times conform to, and act in accordance with, any requirements imposed by: (i) the provisions of the 1940 Act and the Investment Advisers Act of 1940, as amended, and all applicable Rules and Regulations of the Securities and Exchange Commission; (ii) any other applicable provision of law; (iii) the provisions of the Charter and By Laws of the Fund, as such documents are amended from time to time; (iv) the investment objectives and policies of the Fund as set forth in its Registration Statement on Form N-2 and/or the resolutions of the Board of Directors; and (v) any policies and determinations of the Board of Directors of the Fund and
(b) In addition, the Advisor will:
(i) place orders either directly with the issuer or with any broker or dealer. Subject to the other provisions of this paragraph, in placing orders with brokers and dealers, the Advisor will attempt to obtain the best price and the most favorable execution of its orders. In placing orders, the Advisor will consider the experience and skill of the firms securities traders as well as the firms financial responsibility and administrative efficiency. Consistent with this obligation, the Advisor may select brokers on the basis of the research, statistical and pricing services they provide to the Fund and other clients of the Advisor. Information and research received from such brokers will be in addition to, and not in lieu of, the services required to be performed by the Advisor hereunder. A commission paid to such brokers may be higher than that which another qualified broker would have charged for effecting the same transaction, provided that the Advisor determines in good faith that such commission is reasonable in terms either of the transaction or the overall responsibility of the Advisor to the Fund and its other clients and that the total commissions paid by the Fund will be reasonable in relation to the benefits to the Fund over the long term. Subject to the foregoing and the provisions of the 1940 Act, the Securities Exchange Act of 1934, as amended, and other applicable provisions of law, the Advisor may select brokers and dealers with which it or the Fund is affiliated;
(ii) maintain a policy and practice of conducting its investment advisory services hereunder independently of the commercial banking operations of its affiliates. When the Advisor makes investment recommendations for the Fund, its investment advisory personnel will not inquire or take into consideration whether the issuer of securities proposed for purchase or sale for the Funds account are customers of the commercial department of its affiliates; and
(iii) treat confidentially and as proprietary information of the Fund all records and other information relative to the Fund, and the Funds prior, current or potential shareholders, and will not use such records and information for any purpose other than performance of its responsibilities and duties hereunder, except after prior notification to and approval in writing by the Fund, which approval shall not be unreasonably withheld and may not be withheld where the Advisor may be exposed to civil or criminal contempt proceedings for failure to comply, when requested to divulge such information by duly constituted authorities, or when so requested by the Fund,
5. Services Not Exclusive . Nothing in this Agreement shall prevent the Advisor or any officer, employee or other affiliate thereof from acting as investment advisor for any other person, firm or corporation, or from engaging in any other lawful activity, and shall not in any way limit or restrict the Advisor or any of its officers, employees or agents from buying, selling or trading any securities for its or their own accounts or for the accounts of others for whom it or they may be acting; provided, however, that the Advisor will undertake no activities which, in its judgment, will adversely affect the performance of its obligations under this Agreement.
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6. Sub-Advisor s . The Advisor may from time to time, in its sole discretion to the extent permitted by applicable law, appoint one or more sub-advisors, including, without limitation, affiliates of the Advisor, to perform investment advisory services with respect to the Fund. The Advisor may terminate any or all sub-advisors in its sole discretion at any time to the extent permitted by applicable law.
7. Books and Records . In compliance with the requirements of Rule 3 la-3 under the 1940 Act, the Advisor hereby agrees that all records which it maintains for the Fund are the property of the Fund and further agrees to surrender promptly to the Fund any such records upon the Funds request. The Advisor further agrees to preserve for the periods prescribed by Rule 31 a-2 under the 1940 Act the records required to be maintained by Rule 31 a-1 under the 1940 Act.
8. Expenses . During the term of this Agreement, the Advisor will bear all costs and expenses of its employees and any overhead incurred in connection with its duties hereunder and shall bear the costs of any salaries or directors fees of any officers or directors of the Fund who are affiliated persons (as defined in the 1940 Act) of the Advisor; provided that the Board of Directors of the Fund may approve reimbursement to the Advisor of the pro rata portion of the salaries, bonuses, health insurance, retirement benefits and all similar employment costs for the time spent on Fund operations, (including, without limitation, compliance matters) (other than the provision of investment advice and administrative services required to be provided hereunder) of all personnel employed by the Advisor who devote substantial time to Fund operations or the operations of other investment companies advised by the Advisor
9. Compensation of the Advisor . (a) The Fund agrees to pay to the Advisor and the Advisor agrees to accept as full compensation for all services rendered by the Advisor as such, a monthly fee (the Investment Advisory Fee) in arrears at an annual rate equal to the amount set forth in Schedule A hereto of an aggregate of (i) the average daily value of the Funds Net Assets, and (ii) the proceeds of any outstanding debt securities or borrowings used for leverage. Net Assets means the total assets of the Fund minus the sum of the accrued liabilities. It is understood that the liquidation preference of any outstanding preferred stock (other than accumulated dividends) is not considered a liability in determining the Funds Net Asset Value. For any period less than a month during which this Agreement is in effect, the fee shall be prorated according to the proportion which such period bears to a full month of 28, 29, 30 or 31 days, as the case may be.
(b) For purposes of this Agreement, the net assets of the Funds shall be calculated pursuant to the procedures adopted by resolutions of the Directors of the Fund for calculating the value of the Funds assets or delegating such calculations to third parties.
10. Indemnity . (a) The Fund may, in the discretion of the Board of Directors of the Fund, indemnify the Advisor, and each of the Advisors directors, officers, employees, agents, associates and controlling persons and the directors, partners, members, officers, employees and agents thereof (including any individual who serves at the Advisors request as director, officer, partner, member, trustee or the like of another entity) (each such person being an Indemnitee) against any liabilities and expenses, including amounts paid in satisfaction of judgments, in compromise or as fines and penalties, and counsel fees (all as provided in accordance with applicable state law) 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 such Indemnitee may be or may have been involved as a party or otherwise or with which such Indemnitee may be or may have been threatened, while acting in any capacity set forth herein or thereafter by reason of such Indemnitee having acted in any such capacity, except with respect to any matter as to which such Indemnitee shall have been adjudicated not to have acted in good faith in the reasonable belief that such Indemnitees action was in the best interest of the Fund and furthermore, in the case of any criminal proceeding, so long as such Indemnitee had no reasonable cause to believe that the conduct was unlawful; provided, however, that (1) no Indemnitee shall be indemnified hereunder against any liability to the Fund or its shareholders 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 such Indemnitees position (the conduct referred to in such clauses (i) through (iv) being sometimes referred to herein as disabling conduct), (2) as to any matter disposed of by settlement or a compromise payment by such Indemnitee, pursuant to a consent decree or otherwise, no indemnification either for said payment or for any other expenses shall be provided unless there has been a determination that such settlement or compromise is in the best interests of the Fund and that such Indemnitee appears to have acted in good faith in the
4
reasonable belief that such Indemnitees action was in the best interest of the Fund and did not involve disabling conduct by such Indemnitee and (3) with respect to any action, suit or other proceeding voluntarily prosecuted by any Indemnitee as plaintiff, indemnification shall be mandatory only if the prosecution of such action, suit or other proceeding by such Indemnitee was authorized by a majority of the full Board of Directors of the Fund,
(b) The Fund may make advance payments in connection with the expenses of defending any action with respect to which indemnification might be sought hereunder if the Fund receives a written affirmation of the Indemnitees good faith belief that the standard of conduct necessary for indemnification has been met and a written undertaking to reimburse the Fund unless it is subsequently determined that such Indemnitee is entitled to such indemnification and if the Directors of the Fund determine that the facts then known to them would not preclude indemnification. In addition, at least one of the following conditions must be met: (A) the Indemnitee shall provide security for such Indemnitee undertaking, (B) the Fund shall be insured against losses arising by reason of any unlawful advance, or (C) a majority of a quorum consisting of Directors of the Fund who are neither interested persons of the Fund (as defined in Section 2(a)(19) of the 1940 Act) nor parties to the proceeding (Disinterested Non Party Directors) or an independent legal counsel in a written opinion, shall determine, based on a review of readily available facts (as opposed to a full trial type inquiry), that there is reason to believe that the Indemnitee ultimately will be found entitled to indemnification.
(c) All determinations with respect to the standards for indemnification hereunder shall be made (1) by a final decision on the merits by a court or other body before whom the proceeding was brought that such Indemnitee is not liable or is not liable by reason of disabling conduct, or (2) in the absence of such a decision, by (i) a majority vote of a quorum of the Disinterested Non Party Directors of the Fund, or (ii) if such a quorum is not obtainable or, even if obtainable, if a majority vote of such quorum so directs, independent legal counsel in a written opinion. All determinations that advance payments in connection with the expense of defending any proceeding shall be authorized and shall be made in accordance with the immediately preceding clause (2) above.
The rights accruing to any Indemnitee under these provisions shall not exclude any other right to which such Indemnitee may be lawfully entitled.
11 Limitation on Liability . (a) The Advisor will not be liable for any error of judgment or mistake of law or for any loss suffered by Advisor or by the Fund in connection with the performance of this Agreement, except a loss resulting from a breach of fiduciary duty with respect to the receipt of compensation for services or a loss resulting from willful misfeasance, bad faith or gross negligence on its part in the performance of its duties or from reckless disregard by it of its duties under this Agreement. As used in this Section 11(a), the term Advisor shall include any affiliates of the Advisor performing services for the Fund contemplated hereby and partners, directors, officers and employees of the Advisor and of such affiliates.
12. Duration and Termination . This Agreement shall become effective as of the date hereof and, unless sooner terminated with respect to the Fund as provided herein, shall continue in effect for a period of two years. Thereafter, if not terminated, this Agreement shall continue in effect with respect to the Fund for successive periods of 12 months, provided such continuance is specifically approved at least annually by both (a) the vote of a majority of the Funds Board of Directors or the vote of a majority of the outstanding voting securities of the Fund at the time outstanding and entitled to vote, and (b) by the vote of a majority of the Directors who are not parties to this Agreement or interested persons of any party to this Agreement, cast in person at a meeting called for the purpose of voting on such approval. Notwithstanding the foregoing, this Agreement may be terminated by the Fund at any time, without the payment of any penalty, upon giving the Advisor 60 days notice (which notice may be waived by the Advisor), provided that such termination by the Fund shall be directed or approved by the vote of a majority of the Directors of the Fund in office at the time or by the vote of the holders of a majority of the voting securities of the Fund at the time outstanding and entitled to vote, or by the Advisor on 60 days written notice (which notice may be waived by the Fund). This Agreement will also immediately terminate in the event of its assignment. (As used in this Agreement, the terms majority of the outstanding voting securities, interested person and assignment shall have the same meanings of such terms in the 1940 Act.)
13. Notice s . Any notice under this Agreement shall be in writing to the other party at such address as the other party may designate from time to time for the receipt of such notice and shall be deemed to be received on the earlier of the date actually received or on the fourth day after the postmark if such notice is mailed first class postage prepaid.
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14. Amendment of this Agreement . This Agreement may be amended by the parties only if such amendment is specifically approved by the vote of the Board of Directors of the Fund, including a majority of those Directors who are not parties to this Agreement or interested persons of any such party cast in person at a meeting called for the purpose of voting on such approval and, where required by the 1940 Act, by a vote of a majority of the outstanding voting securities of the Fund.
15. Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the State of New York for contracts to be performed entirely therein without reference to choice of law principles thereof and in accordance with the applicable provisions of the 1940 Act. To the extent that the applicable laws of the State of New York, or any of the provisions, conflict with the applicable provisions of the 1940 Act, the latter shall control.
16. Use of the Name BlackRock . The Advisor has consented to the use by the Fund of the name or identifying word BlackRock in the name of the Fund. Such consent is conditioned upon the employment of the Advisor as the investment advisor to the Fund. The name or identifying word BlackRock may be used from time to time in other connections and for other purposes by the Advisor and any of its affiliates. The Advisor may require the Fund to cease using BlackRock in the name of the Fund if the Fund ceases to employ, for any reason, the Advisor, any successor thereto or any affiliate thereof as investment advisor of the Fund.
17. Miscellaneou s. The captions in this Agreement are included for convenience of reference only and in no way define or delimit any of the provisions hereof or otherwise affect their construction or effect. If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of this Agreement shall not be affected thereby. This Agreement shall be binding on, and shall inure to the benefit of the parties hereto and their respective successors.
18. Counterparts . This Agreement may be executed in counterparts by the parties hereto, each of which shall constitute an original counterpart, and all of which, together, shall constitute one Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused the foregoing instrument to be executed by their duly authorized officers, all as of the day and the year first above written.
BLACKROCK CORPORATE HIGH YIELD FUND VI, INC. | ||
By: |
/s/ Donald C. Burke |
|
Name: Donald C. Burke | ||
Title: Vice President | ||
BLACKROCK ADVISORS, LLC | ||
By: |
/s/ Donald C. Burke |
|
Name: Donald C. Burke | ||
Title: Managing Director |
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Schedule A
Investment Advisory Fee
0.70% of an aggregate of (i) the average daily value of the Funds Net Assets, and (ii) the proceeds of any outstanding debt securities or borrowings used for leverage
Exhibit 6(b)
SUB-INVESTMENT ADVISORY AGREEMENT
AGREEMENT dated September 29, 2006, between BlackRock Advisors, LLC (the Advisor), a Delaware limited liability company, and BlackRock Financial Management, Inc, (the Sub-Advisor), a Delaware corporation.
WHEREAS, the Advisor has agreed to furnish investment advisory services to the BlackRock Corporate High Yield Fund VI, Inc., a Maryland corporation (the Fund), a closed-end management investment company registered under the Investment Company Act of 1940, as amended (the 1940 Act);
WHEREAS, the Advisor wishes to retain the Sub-Advisor to provide it with certain sub-advisory services as described below in connection with Advisors advisory activities on behalf of the Fund,
WHEREAS, the advisory agreement between the Advisor and the Fund, dated September 29, 2006 (such agreement or the most recent successor agreement between such parties relating to advisory services to the Fund is referred to herein as the Advisory Agreement) contemplates that the Advisor may sub-contract investment advisory services with respect to the Fund to a sub-advisor pursuant to a sub-advisory agreement agreeable to the Fund and approved in accordance with the provisions of the 1940 Act, and
WHEREAS, this Agreement has been approved in accordance with the provisions of the 1940 Act, and the Sub-Advisor is willing to furnish such services upon the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the mutual premises and covenants herein contained and other good and valuable consideration, the receipt of which is hereby acknowledged, it is agreed by and between the parties hereto as follows.
1. Appointment. The Advisor hereby appoints the Sub-Advisor to act as sub-advisor with respect to the Fund and the Sub-Advisor accepts such appointment and agrees to render the services herein set forth for the compensation herein provided.
2. Services of the Sub-Advisor. Subject to the succeeding provisions of this section, the oversight and supervision of the Advisor and the direction and control of the Funds Board of Directors, the Sub-Advisor will perform certain of the day-to-day operations of the Fund, which may include one or more of the following services, at the request of the Advisor: (a) acting as investment advisor for and managing the investment and reinvestment of those assets of the Fund as the Advisor may from time to time request and in connection therewith have complete discretion in purchasing and selling such securities and other assets for the Fund and in voting, exercising consents and
exercising all other rights appertaining to such securities and other assets on behalf of the Fund; (b) arranging, subject to the provisions of paragraph 3 hereof, for the purchase and sale of securities and other assets of the Fund, (c) providing investment research and credit analysis concerning the Funds investments, (d) assist the Advisor in determining what portion of the Funds assets will be invested in cash, cash equivalents and money market instruments, (e) placing orders for all purchases and sales of such investments made for the Fund, and (f) maintaining the books and records as are required to support Fund investment operations. At the request of the Advisor, the Sub-Advisor will also, subject to the oversight and supervision of the Advisor and the direction and control of the Funds Board of Directors, provide to the Advisor or the Fund any of the facilities and equipment and perform any of the services described in Section 3 of the Advisory Agreement. In addition, the Sub-Advisor will keep the Fund and the Advisor informed of developments materially affecting the Fund and shall, on its own initiative, furnish to the Fund from time to time whatever information the Sub-Advisor believes appropriate for this purpose The Sub-Advisor will periodically communicate to the Advisor, at such times as the Advisor may direct, information concerning the purchase and sale of securities for the Fund, including. (a) the name of the issuer, (b) the amount of the purchase or sale, (c) the name of the broker or dealer, if any, through which the purchase or sale is effected, (d) the CUSIP number of the instrument, if any, and (e) such other information as the Advisor may reasonably require for purposes of fulfilling its obligations to the Fund under the Advisory Agreement. The Sub-Advisor will provide the services rendered by it under this Agreement in accordance with the Funds investment objectives, policies and restrictions (as currently in effect and as they may be amended or supplemented from time to time) as stated in the Funds Prospectus and Statement of Additional Information and the resolutions of the Funds Board of Directors.
3. Covenants. (a) In the performance of its duties under this Agreement, the Sub-Advisor shall at all times conform to, and act in accordance with, any requirements imposed by: (i) the provisions of the 1940 Act and the Investment Advisers Act of 1940, as amended (the Advisers Act) and all applicable Rules and Regulations of the Securities and Exchange Commission (the SEC); (ii) any other applicable provision of law; (iii) the provisions of the Charter and By-Laws of the Fund, as such documents are amended from time to time; (iv) the investment objectives and policies of the Fund as set forth in its Registration Statement on Form N-2 and/or the resolutions of the Board of Directors; and (v) any policies and determinations of the Board of the Directors of the Fund and
(b) In addition, the Sub-Advisor will:
(i) place orders either directly with the issuer or with any broker or dealer. Subject to the other provisions of this paragraph, in placing orders with brokers and dealers, the Sub-Advisor will attempt to obtain the best
2
price and the most favorable execution of its orders. In placing orders, the Sub-Advisor will consider the experience and skill of the firms securities traders as well as the firms financial responsibility and administrative efficiency. Consistent with this obligation, the Sub-Advisor may select brokers on the basis of the research, statistical and pricing services they provide to the Fund and other clients of the Advisor or the Sub-Advisor. Information and research received from such brokers will be in addition to, and not in lieu of, the services required to be performed by the Sub-Advisor hereunder. A commission paid to such brokers may be higher than that which another qualified broker would have charged for effecting the same transaction, provided that the Sub-Advisor determines in good faith that such commission is reasonable in terms either of the transaction or the overall responsibility of the Advisor and the Sub-Advisor to the Funds and their other clients and that the total commissions paid by the Fund will be reasonable in relation to the benefits to the Fund over the long-term. Subject to the foregoing and the provisions of the 1940 Act, the Securities Exchange Act of 1934, as amended, and other applicable provisions of law, the Advisor may select brokers and dealers with which it or the Fund is affiliated;
(ii) maintain books and records with respect to the Funds securities transactions and will render to the Advisor and the Funds Board of Directors such periodic and special reports as they may request;
(iii) maintain a policy and practice of conducting its investment advisory services hereunder independently of the commercial banking operations of its affiliates. When the Sub-Advssor makes investment recommendations for the Fund, its investment advisory personnel will not inquire or take into consideration whether the issuer of securities proposed for purchase or sale for the Funds account are customers of the commercial department of its affiliates; and
(iv) treat confidentially and as proprietary information of the Fund all records and other information relative to the Fund, and the Funds prior, current or potential shareholders, and will not use such records and information for any purpose other than performance of its responsibilities and duties hereunder, except after prior notification to and approval in writing by the Fund, which approval shall not be unreasonably withheld and may not be withheld where the Sub-Advisor may be exposed to civil or criminal contempt proceedings for failure to comply, when requested to divulge such information by duly constituted authorities, or when so requested by the Fund.
4. Services Not Exclusive. Nothing in this Agreement shall prevent the Sub-Advisor or any officer, employee or other affiliate thereof from acting as investment advisor for any other person, firm or corporation, or from engaging in any other lawful activity, and shall not in any way limit or restrict the Sub-Advisor or any of its officers,
3
employees or agents from buying, selling or trading any securities for its or their own accounts or for the accounts of others for whom it or they may be acting; provided, however, that the Sub-Advisor will undertake no activities which, in its judgment, will adversely affect the performance of its obligations under this Agreement.
5. Books and Records. In compliance with the requirements of Rule 31 a-3 under the 1940 Act, the Sub-Advisor hereby agrees that all records which it maintains for the Fund are the property of the Fund and further agrees to surrender promptly to the Fund any such records upon the Funds request. The Sub-Advisor further agrees to preserve for the periods prescribed by Rule 31 a-2 under the 1940 Act the records required to be maintained by Rule 31 a-1 under the 1940 Act (to the extent such books and records are not maintained by the Advisor).
6. Expenses . During the term of this Agreement, the Sub-Advisor will bear all costs and expenses of its employees and any overhead incurred by the Sub-Advisor in connection with its duties hereunder; provided that the Board of Directors of the Fund may approve reimbursement to the Sub-Advisor of the pro-rata portion of the salaries, bonuses, health insurance, retirement benefits and all similar employment costs for the time spent on Fund operations (including, without limitation, compliance matters) (other than the provision of investment advice and administrative services required to be provided hereunder) of all personnel employed by the Sub-Advisor who devote substantial time to the Fund operations or the operations of other investment companies advised or sub-advised by the Sub-Advisor.
7. Compensation.
(a) The Advisor agrees to pay to the SubAdvisor and the Sub-Advisor agrees to accept as full compensation for all services rendered by the Sub-Advisor as such, a monthly fee in arrears at an annual rate equal to the amount set forth in Schedule A hereto. For any period less than a month during which this Agreement is in effect, the fee shall be prorated according to the proportion which such period bears to a full month of 28, 29, 30 or 31 days, as the case may be.
(b) For purposes of this Agreement, the net assets of the Fund shall be calculated pursuant to the procedures adopted by resolutions of the Directors of the Fund for calculating the value of the Funds assets or delegating such calculations to third parties.
8. Indemnity.
(a) The Fund may, in the discretion of the Board of Directors of the Fund, indemnify the Sub-Advisor, and each of the Sub-Advisorys directors, officers, employees, agents, associates and controlling persons and the directors, partners,
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members, officers, employees and agents thereof (including any individual who serves at the Sub-Advisors request as director, officer, partner, member, trustee or the like of another entity) (each such person being an Indemnitee) against any liabilities and expenses, including amounts paid in satisfaction of judgments, in compromise or as fines and penalties, and counsel fees (all as provided in accordance with applicable state law) 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 such Indemnitee may be or may have been involved as a party or otherwise or with which such Indemnitee may be or may have been threatened, while acting in any capacity set forth herein or thereafter by reason of such Indemnitee having acted in any such capacity, except with respect to any matter as to which such Indemnitee shall have been adjudicated not to have acted in good faith in the reasonable belief that such Indemnitees action was in the best interest of the Fund and furthermore, in the case of any criminal proceeding, so long as such Indemnitee had no reasonable cause to believe that the conduct was unlawful; provided, however, that (1) no Indemnitee shall be indemnified hereunder against any liability to the Fund or its shareholders 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 such Indemnitees position (the conduct referred to in such clauses (i) through (iv) being sometimes referred to herein as disabling conduct), (2) as to any matter disposed of by settlement or a compromise payment by such Indemnitee, pursuant to a consent decree or otherwise, no indemnification either for said payment or for any other expenses shall be provided unless there has been a determination that such settlement or compromise is in the best interests of the Fund and that such Indemnitee appears to have acted in good faith in the reasonable belief that such Indemnitees action was in the best interest of the Fund and did not involve disabling conduct by such Indemnitee and (3) with respect to any action, suit or other proceeding voluntarily prosecuted by any Indemnitee as plaintiff, indemnification shall be mandatory only if the prosecution of such action, suit or other proceeding by such Indemnitee was authorized by a majority of the full Board of Directors of the Fund.
(b) The Fund shall make advance payments in connection with the expenses of defending any action with respect to which indemnification might be sought hereunder if the Fund receives a written affirmation of the Indemnitees good faith belief that the standard of conduct necessary for indemnification has been met and a written undertaking to reimburse the Fund unless it is subsequently determined that such Indemnitee is entitled to such indemnification and if the Directors of the Fund determine that the facts then known to them would not preclude indemnification. In addition, at least one of the following conditions must be met: (A) the Indemnitee shall provide a security for such Indemnitee undertaking, (B) the Fund shall be insured against losses arising by reason of any unlawful advance, or (C) a majority of a quorum consisting of Directors of the Fund who are neither interested persons of the Fund (as defined in Section 2(a)(19) of the 1940 Act) nor parties to the proceeding (Disinterested Non-Party
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Directors) or an independent legal counsel in a written opinion, shall determine, based on a review of readily available facts (as opposed to a full trial-type inquiry), that there is reason to believe that the Indemnitee ultimately will be found entitled to indemnification.
(c) All determinations with respect to the standards for indemnification hereunder shall be made (1) by a final decision on the merits by a court or other body before whom the proceeding was brought that such Indemnitee is not liable by reason of disabling conduct, or (2) in the absence of such a decision, by (i) a majority vote of a quorum of the Disinterested Non-Party Directors of the Fund, or (ii) if such a quorum is not obtainable or even, if obtainable, if a majority vote of such quorum so directs, independent legal counsel in a written opinion. All determinations that advance payments in connection with the expense of defending any proceeding shall be authorized shall be made in accordance with the immediately preceding clause (2) above.
The rights accruing to any Indemnitee under these provisions shall not exclude any other right to which such Indemnitee may be lawfully entitled.
9. Limitation on Liability.
(a) The Sub-Advisor will not be liable for any error of judgment or mistake of law or for any loss suffered by the Advisor or by the Fund in connection with the performance of this Agreement, except a loss resulting from a breach of fiduciary duty with respect to the receipt of compensation for services or a loss resulting from willful misfeasance, bad faith or gross negligence on its part in the performance of its duties or from reckless disregard by it of its duties under this Agreement. As used in this Section 9(a), the term Sub-Advisor shall include any affiliates of the Sub-Advisor performing services for the Fund contemplated hereby and partners, directors, officers and employees of the Sub-Advisor and such affiliates.
10. Duration and Termination. This Agreement shall become effective as of the date hereof and, unless sooner terminated with respect to the Fund as provided herein, shall continue in effect for a period of two years. Thereafter, if not terminated, this Agreement shall continue in effect with respect to the Fund for successive periods of 12 months, provided such continuance is specifically approved at least annually by both (a) the vote of a majority of the Funds Board of Directors or a vote of a majority of the outstanding voting securities of the Fund at the time outstanding and entitled to vote and (b) by the vote of a majority of the Directors, who are not parties to this Agreement or interested persons (as such term is defined in the 1940 Act) of any such party, cast in person at a meeting called for the purpose of voting on such approval. Notwithstanding the foregoing, this Agreement may be terminated by the Fund or the Advisor at any time, without the payment of any penalty, upon giving the Sub-Advisor 60 days notice (which notice may be waived by the Sub-Advisor), provided that such termination by the Fund or the Advisor shall be directed or approved by the vote of a majority of the Directors of
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the Fund in office at the time or by the vote of the holders of a majority of the voting securities of the Fund at the time outstanding and entitled to vote, or by the Sub-Advisor on 60 days written notice (which notice may be waived by the Fund and the Advisor), and will terminate automatically upon any termination of the Advisory Agreement between the Fund and the Advisor. This Agreement will also immediately terminate in the event of its assignment. (As used in this Agreement, the terms majority of the outstanding voting securities, interested person and assignment shall have the same meanings of such terms in the 1940 Act.)
11. Notices . Any notice under this Agreement shall be in writing to the other party at such address as the other party may designate from time to time for the receipt of such notice and shall be deemed to be received on the earlier of the date actually received or on the fourth day after the postmark if such notice is mailed first class postage prepaid.
12. Amendment of this Agreement. This Agreement may be amended by the parties only if such amendment is specifically approved by the vote of the Board of Directors of the Fund, including a majority of those Directors who are not parties to this Agreement or interested persons of any such party cast in person at a meeting called for the purpose of voting on such approval and, where required by the 1940 Act, by a vote of a majority of the outstanding voting securities of the Fund.
13. Miscellaneous The captions in this Agreement are included for convenience of reference only and in no way define or delimit any of the provisions hereof or otherwise affect their construction or effect. If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of this Agreement shall not be affected thereby. This Agreement shall be binding on, and shall inure to the benefit of the parties hereto and their respective successors.
14. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York for contracts to be performed entirely therein without reference to choice of law principles thereof and in accordance with the applicable provisions of the 1940 Act, To the extent that the applicable laws of the State of New York, or any of the provisions, conflict with the applicable provisions of the 1940 Act, the latter shall control.
15 Counterparts. This Agreement may be executed in counterparts by the parties hereto, each of which shall constitute an original counterpart, and all of which, together, shall constitute one Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed by their duly authorized officers designated below as of the day and year first above written.
BLACKROCK ADVISORS, LLC | ||
By: | /s/ Donald C. Burke | |
Name: Donald C. Burke | ||
Title: Managing Director | ||
BLACKROCK FINANCIAL MANAGEMENT, INC. | ||
By: | /s/ Denis R. Mollevr | |
Name: Denis R. Mollevr | ||
Title: Managing Director |
AGREED AND ACCEPTED as of the date first set forth above |
||
BLACKROCK CORPORATE HIGH YIELD FUND VI, INC. | ||
By: | /s/ Donald C. Burke | |
Name: Donald C. Burke | ||
Title: Vice President |
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Schedule A
Sub-Investment Advisory Fee
59% of the monthly advisory fee received by the Advisor from the Fund
Exhibit 8
THE BLACKROCK CLOSED-END COMPLEX
SECOND AMENDED AND RESTATED DEFERRED COMPENSATION PLAN
The Board of the BlackRock Closed-End Complex established the BlackRock Closed-End Complex Deferred Compensation Plan, effective as of February 24, 2000. The BlackRock Closed-End Complex Deferred Compensation Plan was amended and restated effective as of September 27, 2002 and subsequently amended and restated effective as of January 1, 2008 (as amended and restated, the Plan ). The purpose of the Plan is to provide eligible directors of Participating Funds the opportunity to defer the receipt of all or a portion of the amounts payable to them as compensation for services rendered as members of the Board of the respective funds. The terms and conditions applicable to Deferred Compensation that is not Grandfathered Deferred Compensation shall be governed by the terms of Appendix A attached hereto.
1. DEFINITIONS
1.1 Definitions. Unless a different meaning is plainly implied by the context, the following terms as used in the Plan shall have the following meanings:
The term Administrator shall mean BlackRock Advisors, LLC, in its capacity as the administrator of the Plan on behalf of the Participating Funds; provided, that, BlackRock Advisors, LLC may hire consultants or other third parties to provide administrative services in connection with the Plan.
The term Advisor shall mean BlackRock Advisors, LLC and its affiliates.
The term Board shall mean the Board of Directors or Board of Directors of each respective Participating Fund.
The term Deferral Share Account shall mean a book entry account maintained to reflect the number and value of shares of Eligible Investments that the Administrator determines could have been purchased with an Eligible Trustees Deferred Compensation as provided in this Plan and any earnings thereon.
The term Eligible Investment shall mean a fund managed by the Advisor and designated by the Participating Funds from time to time as an investment medium that may be chosen by an Eligible Trustee in which such Trustees Deferred Compensation may be deemed to be invested, provided that any Eligible Investment that is also the Participating Fund from which an Eligible Trustees deferred compensation is paid, is not an Eligible Investment that may be chosen by such Trustee as an investment medium for such deferred compensation.
The term Eligible Trustee shall mean a member of the Board who is not an interested person of a Participating Fund or the Adviser, as such term is defined under Section 2(a)(19) of the Investment Company Act of 1940, as amended (the 1940 Act ).
The term Exchange shall mean the principal stock exchange on which shares of common stock of an Eligible Investment trade.
The term Fair Market Value shall mean, with respect to a date, on a per share basis, the closing price of an Eligible Investment, as reported on the consolidated tape of the Exchange on such date or, if the Exchange is closed on such date, the next succeeding date on which it is open.
The term Grandfather Deferred Compensation shall mean all Deferred Compensation amounts which were earned and vested under the Plan as of December 31, 2004.
The term Participating Funds shall mean those registered investment management companies for which the Advisor serves or will serve in the future as investment manager, whether existing at the time of adoption of the Plan or established at a later date, designated by each respective Board as a fund from which compensation may be deferred by an Eligible Trustee. Participating Funds shall be listed on Schedule A to the Plan from time to time, provided that failure to list a Participating Fund on Schedule A shall not affect its status as a Participating Fund.
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The term Valuation Date shall mean the last business day of each calendar quarter and any other day upon which the Participating Fund makes valuations of the Deferral Share Accounts.
1.2 Trustees and Directors. Where appearing in the Plan, Trustee shall also refer to Director and Board of Directors shall also refer to Board of Directors .
1.3 Separate Plan for each Participating Fund. The Plan is drafted, and shall be construed, as a separate Plan between each Eligible Trustee and each Participating Fund.
2. DEFERRALS
2.1 Deferral Elections.
(a) An Eligible Trustee that elects to participate in the Plan (a Participant ) may defer receipt of up to 50% of all annual compensation (including fees for attending meetings) earned by such Eligible Trustee for serving as a member of the Board or as a member of any committee (or subcommittee of such committee) of the Board of which such Eligible Trustee from time to time may be a member (the Deferred Compensation ). Expenses of attending meetings of the Board, committees of the Board or subcommittees of such committees or other reimbursable expenses may not be deferred.
(b) Deferred Compensation shall be withheld from each payment of compensation by the Participating Fund to the Participant based upon the percentage amount elected by the Participant under Section 2.3 hereof and pursuant to the Participants Election Form.
2.2 Manner of Election.
(a) An Eligible Trustee shall elect to participate in the Plan and defer compensation by completing, signing and filing with the Participating Funds an election to defer in such written form as may be prescribed (the Election ). The Election shall include:
(i) The percentage of compensation to be deferred;
(ii) The method of payment of Deferred Compensation (i.e., in a lump sum or the number of installments);
(iii) The time or times of payment of the Deferred Compensation; and
(iv) Any beneficiary(ies) designated by the Participant pursuant to Section 3.2 of the Plan.
(b) Each Participants receipt of compensation shall be deferred until the first to occur of any of the following events:
(i) The date which such Participant ceases to be a Trustee of the Participating Fund;
(ii) A date selected by such Participant as specified on the Participants Election;
(iii) A date on which some future event occurs which is not within the Participants control, as specified on the Participants Election;
(iv) Upon the death of the Participant;
(v) In the sole discretion of the Participating Fund, upon disability or financial hardship of the Participant;
(vi) The effective date of the sale or liquidation of the Participating Fund or to comply with applicable law; or
(vii) Upon termination of the Plan in accordance with Section 4.5 hereof.
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2.3 Period of Deferrals.
(a) Any Election by an Eligible Trustee pursuant to the Plan shall be irrevocable from and after the date on which such Election is filed with the Participating Fund and shall be effective to defer compensation of an Eligible Trustee as follows:
(i) As to any Eligible Trustee in office on the original effective date of the Plan (prior to any amendments or restatements) who files an Election no later than thirty (30) days after such effective date, such Election shall be effective to defer any compensation which is earned by the Eligible Trustee after the date of the filing of the Election, or such effective date of the Plan, if later;
(ii) As to any individual who becomes an Eligible Trustee after the original effective date of the Plan and who files an Election within thirty (30) days of becoming an Eligible Trustee, such Election shall be effective to defer any compensation which is earned by the Eligible Trustee after the date of the filing of the Election, or the effective date of the Plan, if later;
(iii) As to any other Eligible Trustee, the Election shall be effective to defer any compensation that is earned from and after the first day of the calendar year next succeeding the calendar year in which the Election is filed; and
(iv) Any Elections in effect on the date this Plan is amended and restated shall remain in effect so that a Participant need not execute new a Election.
(b) A Participant may revoke such Participants Election at any time by filing a written notice of termination with the Participating Fund. Any compensation earned by the Participant after receipt of the notice by the Participating Fund shall be paid currently and no longer deferred as provided in the Plan.
(c) A Participant who has filed a notice to terminate deferral of compensation may thereafter again file a new Election pursuant to Section 2.2(a) hereof effective for any calendar year subsequent to the calendar year in which the new Election is filed.
2.4 Valuation of Deferral Share Account.
(a) Deferred Compensation will be deferred on the date it otherwise would have been paid to a Participant (the Deferral Date ). Participating Funds from which Compensation will be deferred will establish a Deferral Share Account for each Participant that will be credited with all or a portion of the Participants Deferred Compensation from time to time in accordance with this Plan. The specific Participating Funds that maintain Deferral Share Accounts will be determined by the Administrator in its sole discretion. The amount initially credited to a Participants Deferral Share Account in connection with each Deferred Compensation amount shall be determined by reference to the number of whole shares of Eligible Investments selected by the Participant that the Deferred Compensation could have purchased at the Fair Market Value per share of such Eligible Investments on a date on or about the Deferral Date (less any brokerage fees payable upon the acquisition of shares of such in the open market). Deferred Compensation shall be credited to the Deferral Share Account as soon as reasonably practicable after the Deferral Date, as determined by the Administrator in its sole discretion. Deferred Compensation not credited to the Deferral Share Account on or about the Deferral Date ( e.g. , because the remaining amount is not sufficient to purchase an additional whole share of Eligible Investments selected by the Participant or for any other reason) shall be credited to the Deferral Share Account as soon as reasonably practicable, as determined by the Administrator in its sole discretion ( i.e. , as soon as such amount, when taken together with other uncredited amounts, is sufficient to purchase a whole share of an Eligible Investment as selected by the Participant).
(b) On each Valuation Date, each Deferral Share Account will be credited or debited with the amount of gain or loss that would have been recognized had the Deferral Share Account been invested in the Eligible Investments designated by the Participant. Each Deferral Share Account will be credited with the Fair Market Value of shares that would have been acquired through reinvestment of dividends and capital gains distributed as if the amount of Deferred Compensation represented by such Deferral Share Account had been invested and reinvested in shares of the Eligible Investments designated by the Participant. Each Participating Fund shall, from time to time, further adjust the Participants Deferral Share Account to reflect the value which would have been earned as if the amount of Deferred Compensation credited to such Deferral Share Account had been invested and reinvested in shares of the Eligible Investments designated by the Participant, as determined by the Administrator in its sole discretion in accordance with this Plan.
(c) The Deferral Share Account shall be debited to reflect any distributions as of the date such distributions are made in accordance with Section 3 of the Plan.
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2.5 Investment of Deferral Share Account.
(a) The Participating Funds shall from time to time designate one or more funds eligible for investment. A Participants deferred amounts shall be allocated equally among the Eligible Investments. If, as the result of the requirement that notional purchases of Eligible Investments be made in whole shares as set forth in Section 2.4 or for any other reason, not all of a Participants Deferred Compensation has been credited to the Deferral Share Account, the cash balance of such Deferred Compensation shall be held until the next Valuation Date on which the Administrator determines, in its sole discretion, that it is reasonably practicable to make a notional purchase (debiting the cash balance of the Participants Deferred Compensation) of one or more Eligible Investments then selected by the Participant.
(b) Participating Funds may, from time to time, remove any fund from or add any fund to the list of Eligible Investments. If the Participating Funds discontinue an Eligible Investment, the Administrator will redirect amounts deferred in the discontinued Eligible Investment to other Eligible Investments currently in effect.
3. DISTRIBUTIONS FROM DEFERRAL SHARE ACCOUNT
3.1 Distribution Election.
The aggregate value of a Participants Deferral Share Account and any Deferred Compensation held in cash and not yet credited to a Participants Deferral Share Account will be paid in a lump sum or in ten (10) or fewer annual installments, as specified in the Participants Election (or Elections). Distributions will be made as of the first business day of January of the calendar year following the calendar year in which the Participant ceases being a Trustee or on such other dates as the Participant may specify in such Election (or Elections), which shall not be earlier than six (6) months following the Election.
(a) If a Participant elects installment payments, the unpaid balance in the Participants Deferral Share Account shall continue to accrue earnings and dividend equivalents, computed in accordance with the provisions of Section 2.4, and shall be prorated and paid over the installment period. The amount of the first payment shall be a fraction of the then Fair Market Value of such Participants Deferral Share Account, the numerator of which is one, and the denominator of which is the total number of installments; provided that cash not yet credited to a Participants Deferral Share Account, if any, will be added to such amount as a part of the first payment. The amount of each subsequent payment shall be a fraction of the then Fair Market Value of the Participants Deferral Share Account remaining after the prior payment, the numerator of which is one and the denominator of which is the total number of installments elected minus the number of installments previously paid.
(b) All payments shall be in cash; provided, however, if a lump sum payment is elected, the Participant may elect to receive payment in full and fractional shares of the Eligible Investments selected by such Participant at Fair Market Value at the time of payment of the amounts credited to the Participants Deferral Share Account; provided, further, that any Deferred Compensation held in cash will be distributed in cash. Any such election shall be filed in writing by the Participant with the Participating Fund at least ten (10) business days prior to the date which such payment is to be made.
(c) A Participant may at any time, and from time to time, change any distribution election applicable to such Participants Deferral Share Account, provided that no election to change the timing of any distribution shall be effective unless it is made in writing and received by the Participating Fund at least six (6) months prior to the earlier of (i) the time at which the Participant ceases to be a Trustee or (ii) the time such distribution shall commence.
3.2 Death Prior to Complete Distribution. In the event of a Participants death prior to distribution of all amounts in such Participants Deferral Share Account, notwithstanding any Election made by the Participant and notwithstanding any other provision set forth herein, the value of such Deferral Share Account plus any Deferred Compensation held in cash shall be paid in a lump sum in accordance with the provisions of the Plan as soon as reasonably possible to the Participants designated beneficiary(ies) (the Beneficiary ) or, if such Beneficiary(ies) does not survive the Participant or no beneficiary is designated, to such Participants estate. Any Beneficiary(ies) so designated by a Participant may be changed at any time by notice in writing from such Participant to the Participating Fund. All payments under this Section 3.2 shall otherwise be paid in accordance with Section 3.1 hereof.
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3.3 Payment in Discretion of Participating Funds.
Amounts deferred hereunder, based on the then adjusted value of the Participants Deferral Share Account as of the Valuation Date next following plus any Deferred Compensation held in cash, may become payable to the Participant in the discretion of the Participating Fund:
(a) Disability. If the Participating Fund finds on the basis of medical evidence satisfactory to it that the Participant is prevented from engaging in any suitable gainful employment or occupation and that such disability will be permanent and continuous during the remainder of such Participants life, the Participating Fund shall distribute the amounts in the Participants Deferral Share Account plus any Deferred Compensation held in cash in a lump sum or in the number of installments previously selected by the Participant.
(b) Financial Hardship. If the Participant requests and if the Participant provides evidence of financial hardship, the Participating Fund may, in its sole and absolute discretion, permit a distribution of all or a portion of the Participants Deferral Share Account plus any Deferred Compensation held in cash prior to the date on which payments would have commenced under Section 3.1.
3.4 Acceleration of Payments.
(a) In the event of the liquidation, dissolution or winding up of a Participating Fund or the distribution of all or substantially all of a Participating Funds assets and property to its stockholders (for this purpose a sale, conveyance or transfer of a Participating Funds assets to a trust, partnership, association or another corporation in exchange for cash, shares or other securities with the transfer being made subject to, or with the assumption by the transferee of, the liabilities of such Participating Fund shall not be deemed a termination of such Participating Fund or such a distribution), the entire unpaid balance of the Participants Deferral Share Account plus any Deferred Compensation held in cash of such Participating Fund shall be paid in a lump sum as of the effective date thereof.
(b) The Participating Funds are empowered to accelerate the payment of deferred amounts to all Participants and Beneficiaries in the event that there is a change in law which would have the effect of adversely affecting such persons rights and benefits under the Plan if acceleration did not occur.
4. MISCELLANEOUS
4.1 Statements of Account.
The Participating Funds will furnish each Participant with a statement setting forth the value of such Participants Deferral Share Account plus any Deferred Compensation held in cash as of the end of each calendar year and all credits and debits of such Deferral Share Account or to any Deferred Compensation held in cash during such year. Such statements will be furnished no later than sixty (60) days after the end of each calendar year.
4.2 Rights in Deferral Share Account.
Credits to the Deferral Share Accounts or to any Deferred Compensation held in cash shall (i) remain part of the general assets of the Participating Funds, (ii) at all times be the sole and absolute property of the Participating Funds and (iii) in no event be deemed to constitute a fund, trust or collateral security for the payment of the Deferred Compensation to which Participants are entitled. The right of the Participant or any Beneficiary or estate to receive future payment of Deferred Compensation under the provisions of the Plan shall be an unsecured claim against the general assets of the Participating Funds, if any, available at the time of payment. A Participating Fund shall not reserve or set aside funds for the payment of its obligations hereunder by any form of trust, escrow, or similar arrangement. The arrangement described in this Plan shall be unfunded for U.S. federal income tax purposes and for purposes of the Employee Retirement Security Income Act of 1974, as amended.
4.3 Non-Assignability.
The rights and benefits of Participants under the Plan and any other person or persons to whom payments may be made pursuant to the Plan shall not be subject to alienation, assignment, pledge, transfer or other disposition, except as otherwise provided by law.
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4.4 Interpretation and Administration.
The Participating Funds shall have the general authority to interpret, construe and implement provisions of the Plan and to adopt, alter and repeal such administrative rules, guidelines and practices governing the Plan as shall be from time to time, deemed advisable. Any determination by the Participating Funds shall be final and conclusive.
4.5 Amendment and Termination.
The Participating Funds may in their sole discretion amend or terminate the Plan at any time. No amendment or termination shall adversely affect any then existing deferred amounts or rights under the Plan. Upon termination of the Plan, the remaining balance of the Participants Deferral Share Account plus any Deferred Compensation held in cash shall be paid to the Participant (or to a beneficiary, as the case may be), in a lump sum as soon as practicable but no more than thirty (30) days following termination of the Plan.
4.6 Incapacity.
If the Participating Funds shall receive satisfactory evidence that the Participant or any Beneficiary entitled to receive any benefit under the Plan is, at the time when such benefit becomes payable, a minor, or is physically or mentally incompetent to receive such benefit and to give a valid release therefor, and that another person or an institution is then maintaining or has custody of the Participant or Beneficiary and that no guardian, committee or other representative of the estate of the Participant or Beneficiary shall have been duly appointed, the Participating Funds may make payment of such benefit otherwise payable to the Participant or Beneficiary to such other person or institution and the release of such other person or institution shall be a valid and complete discharge for the payment of such benefit.
4.7 Payments Due Missing Persons.
The Participating Funds shall make a reasonable effort to locate all persons entitled to benefits under the Plan. However, notwithstanding any provisions of the Plan to the contrary, if, after a period of five (5) years from the date such benefit shall be due, any such persons entitled to benefits have not been located, their rights under the Plan shall stand suspended. Before this provision becomes operative, the Participating Funds shall send a certified letter to all such persons to their last known address advising them that their benefits under the Plan shall be suspended. Any such suspended amounts shall be held by the Participating Funds for a period of three (3) additional years (or a total of eight (8) years from the time the benefits first become payable) and thereafter, if unclaimed, such amounts shall be forfeited, subject to applicable laws in the jurisdiction in which the respective Participating Fund is organized.
4.8 Agents.
The Participating Funds may employ agents and provide for such clerical, legal, actuarial, accounting, advisory or other services as they deem necessary to perform their duties under the Plan. The Participating Funds shall bear the cost of such services and all other expenses incurred in connection with the administration of the Plan.
4.9 Governing Law.
All matters concerning the validity, construction and administration of the Plan shall be governed by the laws of the state in which the respective Participating Fund is organized.
4.10 Non-Guarantee of Status.
Nothing contained in the Plan shall be construed as a contract or guarantee of the right of the Participant to be, or remain as, a Trustee of any of the Participating Funds or to receive any, or any particular rate of, compensation from any of the Participating Funds.
4.11 Counsel.
The Participating Funds may consult with legal counsel with respect to the meaning or construction of the Plan, their obligations or duties hereunder or with respect to any action or proceeding or any question of law, and they shall be fully protected with respect to any action taken or omitted by them in good faith pursuant to the advice of legal counsel.
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4.12 Entire Plan.
The Plan contains the entire understanding between the Participating Funds and the Participant with respect to the payment of non-qualified elective deferred compensation by the Participating Funds to the Participant.
4.13 Non-liability of Administrator and Participating Funds.
Interpretations of, and determinations (including factual determinations) related to, the Plan made by the Administrator or Participating Funds in good faith, including any determinations of the amounts of the Deferral Share Accounts, shall be conclusive and binding upon all parties; and the Administrator, the Participating Funds and their officers and Trustees shall not incur any liability to the Participant for any such interpretation or determination so made or for any other action taken by it in connection with the Plan in good faith.
4.14 Successors and Assigns.
The Plan shall be binding upon, and shall inure to the benefit of, the Participating Funds and their successors and assigns and to the Participants and their heirs, executors, administrators and personal representatives.
4.15 Severability.
In the event any one or more provisions of the Plan are held to be invalid or unenforceable, such illegality or unenforceability shall not affect the validity or enforceability of the other provisions hereof and such other provisions shall remain in full force and effect unaffected by such invalidity or unenforceability.
4.16 Rule 16b-3 Compliance.
It is the intention of the Participating Funds that all transactions under the Plan be exempt from liability imposed by Section 16(b) of the Securities Exchange Act of 1934, as amended. Therefore, if any transaction under the Plan is found not to be in compliance with Section 16(b), the provision of the Plan governing such transaction shall be deemed amended so that the transaction does so comply and is so exempt, to the extent permitted by law and deemed advisable by the Participating Fund, and in all events the Plan shall be construed in favor of its meeting the requirements of an exemption.
IN WITNESS WHEREOF, each Participating Fund has caused this Plan to be executed by one of its duly authorized officers, as of this 1 st day of January 2008.
By: |
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Name: | ||
Title: |
Witness: |
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Name: | ||
Title: |
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SCHEDULE A
BLACKROCK CLOSED-END COMPLEX
DEFERRED COMPENSATION PLAN
PARTICIPATING FUNDS
Each registered closed-end investment company advised by BlackRock Advisors, LLC is a Participating Fund except as set forth below:
None
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SCHEDULE B
ELIGIBLE INVESTMENTS
1. |
BlackRock International Growth and Income Trust | BGY | ||
2. |
BlackRock Credit Allocation Income Trust IV | BTZ | ||
3. |
BlackRock Enhanced Equity Dividend Trust | BDJ | ||
4. |
BlackRock Energy and Resources Trust | BGR | ||
5. |
BlackRock Floating Rate Income Trust | BGT | ||
6. |
BlackRock Credit Allocation Income Trust II, Inc. | PSY | ||
7. |
BlackRock Limited Duration Income Trust | BLW | ||
8. |
BlackRock Corporate High Yield Fund VI, Inc. | HYT |
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BLACKROCK CLOSED-END COMPLEX
DEFERRED COMPENSATION PLAN
Deferral Election Form
The undersigned hereby elects to participate in the Deferred Compensation Plan ( Plan ) in accordance with the elections made in this Deferral Election Form. I understand that the percentage of my compensation set forth below will be deferred under the Plan and invested equally in the eight funds that are Eligible Investments.
1. Amount Deferred
I hereby elect to defer up to % (not more than 50%) of the annual compensation I earn as a Trustee of the BlackRock Closed-End Complex subsequent to the effective date of this election form.
2. Time of Payment
I hereby elect for deferred amounts to be paid as follows:
¨ |
On the first business day in January of the calendar year following the calendar year in which I cease to be a Trustee; or |
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On the following other date: |
3. Number of Payments
I hereby elect to receive payment as follows:
¨ |
Entire amount in a lump sum; or |
¨ |
In annual installments (not to exceed 10). |
I hereby relinquish and release any and all rights to receive payment of the deferred amounts except in accordance with the Plan. I hereby direct and authorize the Administrator to make payments of deferral amounts as it deems necessary or desirable to facilitate administration of the Plan; provided, that such payments shall be made in accordance with the Plan and the foregoing elections.
Executed this day of
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Trustees Signature |
Received and accepted by each of the Participating Funds:
By: |
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Date: |
10
BLACKROCK CLOSED-END COMPLEX
DEFERRED COMPENSATION PLAN
Designation of Beneficiary
The undersigned hereby designates the person or persons named below as the beneficiary(ies) of any benefits which may become due according to the terms and conditions of the BlackRock Closed-End Complex Deferred Compensation Plan (the Plan) in the event of my death.
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To my Estate: or |
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To the following beneficiaries: |
Primary:
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(Name, address and relationship) if living, or if not living at my death, to |
Secondary:
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(Name, address and relationship) if living, or if not living at my death, to my Estate. |
I hereby revoke all prior beneficiary designation(s) made under the terms of the Plan by execution of this form.
Executed this day of ,
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Trustees Signature |
11
BLACKROCK CLOSED-END FUNDS
DEFERRED COMPENSATION PLAN APPENDIX
The rules contained in this appendix (this Appendix) shall apply to any Deferred Compensation, other than Grandfathered Deferred Compensation, payable to a Participant. The provisions of the Plan, to which this Appendix is attached, are hereby incorporated by reference; however, to the extent any of the terms or provisions of this Appendix are inconsistent with the Plan, this Appendix shall govern. Terms used herein without definitions shall have the meanings ascribed to them in the Plan.
1. Definitions . Whenever used in this Appendix, the following terms shall have the respective meanings set forth below:
(a) The term Code shall mean the Internal Revenue Code of 1986, as amended.
(b) The term Disability shall mean a disability as defined in Code Section 409A(a)(2)(C) and applicable guidance thereunder.
(c) The term Unforeseeable Emergency shall mean an unforeseeable emergency as defined in Code Section 409A(a)(2)(B)(ii) and applicable guidance thereunder.
2. Manner of Election . Each Eligible Trustees receipt of Deferred Compensation that is not Grandfathered Deferred Compensation, shall be deferred until the first to occur of any of the following events:
(a) The date on which such Eligible Trustee ceases to be a Trustee of the Participating Fund;
(b) A date selected by such Eligible Trustee as specified on the Trustees Election;
(c) The date of death of the Eligible Trustee;
(d) Upon Disability of or Unforeseeable Emergency, with respect to the Eligible Trustee.
(e) Upon termination of the Plan in accordance with Section 4.5 of the Plan; provided (A) all plans of the same type sponsored by each Participating Fund are terminated, (B) no payments (other than payments that would be payable under the terms of such arrangements if the termination had not occurred) are made within twelve (12) months of the termination of the Plan, (C) all payments are made within twenty-four (24) months of the Plan termination and (D) the Participating Fund does not adopt a new arrangement of the same type within five (5) years of the Plan termination.
3. Period of Deferrals . A Participant may revoke such Participants Election at any time by filing a written notice of termination with the Participating Fund; provided that such revocation shall not become effective until January 1 of the calendar year following the calendar year in which such revocation is made. Effective as of January 1 of the calendar year following the calendar year in which such revocation is made, any compensation earned by the Participant shall be paid currently and no longer deferred as provided in the Plan.
4. Distribution Election .
(a) A Participant may, at any time on or prior to December 31, 2007 and without regard to the limitations contained in Section 3.1(c) of the Plan, modify the method of payment of such Participants Deferral Share Account; provided, that in the case of a Participant who is serving as a Trustee as of November 1, 2007, such modification to the method of payment shall only be available with respect to Deferred Compensation that is not Grandfathered Deferred Compensation (payment elections with respect to Grandfathered Deferred Compensation shall continue to be governed by Section 3.1(c) of the Plan); provided further, that all modifications to the method of payment shall: (i) only apply to Deferred Compensation not otherwise payable in 2007, (ii) not result in payment of Deferred Compensation in 2007, (iii) be made in writing and delivered to the Participating Fund, and (iv) otherwise comply with the Plan.
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(b) A Participant may change any distribution election applicable to non-Grandfathered Deferred Compensation credited to such Participants Deferral Share Account, provided that, except as provided in paragraph (a) above, no election to change the timing or form of any distribution shall be effective unless (i) it is made in writing and received by the Participating Fund at least twelve (12) months prior to the date of the first scheduled payment pursuant to the previous election (ii) the first payment pursuant to the subsequent election is deferred for a period of at least five (5) years from the date the payment would otherwise have been made pursuant to the previous election, and (iii) the subsequent election does not take effect for twelve (12) months from the date of the election.
5. Payment in Discretion of Participating Funds . Deferred Compensation governed by this Appendix, based on the then adjusted value of the Participants Deferral Share Account as of the Valuation Date next following plus any Deferred Compensation governed by this Appendix and held in cash, may become payable to the Participant as follows:
(a) Disability . If the Participating Fund finds on the basis of medical evidence satisfactory to it that the Participant is prevented from engaging in any suitable gainful employment or occupation due to a Disability, the Participating Fund shall distribute the amounts in the Participants Deferral Share Account plus any Deferred Compensation held in cash in a lump sum or in the number of installments previously selected by the Participant.
(b) Unforeseeable Emergency . If the Participant requests and if the Participant provides evidence of an Unforeseeable Emergency, the Participating Fund shall distribute all or a portion of the non-Grandfathered Deferred Compensation credited to the Participants Deferral Share Account plus any such Deferred Compensation held in cash prior to the date on which payments would have commenced under Section 3.1 of the Plan; provided such distribution is limited to the extent required by Code Section 409A and applicable guidance thereunder.
(c) Financial Hardship . Except as may be distributed in accordance with Section 5(b) of this Appendix, no non-Grandfathered Deferred Compensation shall be distributed upon the request of a Participant due to financial hardship.
6. Acceleration of Payments . Except as provided in Sections 2(c) through 2(e) of this Appendix, the Participating Funds may not accelerate the payment of non-Grandfathered Deferred Compensation, governed by this Appendix, to any Participant or Beneficiary.
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Exhibit 9
AGREEMENT BETWEEN
STATE STREET BANK AND TRUST COMPANY
AND
EACH OF THE INVESTMENT COMPANIES
LISTED ON SCHEDULE A ATTACHED HERETO
Table of Contents
ARTICLE I. DEFINED TERMS |
1 | |||||
Section 1.01. |
Account | 1 | ||||
Section 1.02. |
Affiliate | 2 | ||||
Section 1.03. |
Agreement | 2 | ||||
Section 1.04. |
Authorized Person(s) | 2 | ||||
Section 1.05. |
Bank Account | 2 | ||||
Section 1.06. |
Banking Institution | 2 | ||||
Section 1.07. |
Board | 2 | ||||
Section 1.08. |
Business Day | 2 | ||||
Section 1.09. |
Commission | 2 | ||||
Section 1.10. |
DR | 3 | ||||
Section 1.11. |
Domestic Subcustodian | 3 | ||||
Section 1.12. |
Eligible Securities Depository | 3 | ||||
Section 1.13. |
Foreign Subcustodian | 3 | ||||
Section 1.14. |
Fund | 3 | ||||
Section 1.15. |
Institutional Client | 4 | ||||
Section 1.16. |
Interest Bearing Deposits | 4 | ||||
Section 1.17. |
Investment Company Act | 4 | ||||
Section 1.18. |
Loans | 4 | ||||
Section 1.19. |
Overdraft | 4 | ||||
Section 1.20. |
Overdraft Notice | 4 | ||||
Section 1.21. |
Person | 4 | ||||
Section 1.22. |
Procedural Agreement | 4 | ||||
Section 1.23. |
Proper Instructions | 4 | ||||
Section 1.24. |
Property | 5 | ||||
Section 1.25. |
Securities System | 5 | ||||
Section 1.26. |
Segregated Account | 5 | ||||
Section 1.27. |
Series | 6 | ||||
Section 1.28. |
Shareholder Servicing Agent | 6 | ||||
Section 1.29. |
Shares | 6 | ||||
Section 1.30. |
Subcustodian | 6 | ||||
Section 1.31. |
Terminating Fund | 6 | ||||
ARTICLE II. APPOINTMENT OF CUSTODIAN |
6 | |||||
ARTICLE III. POWERS AND DUTIES OF CUSTODIAN |
7 | |||||
Section 3.01. |
Safekeeping | 7 | ||||
Section 3.02. |
Manner of Holding Securities | 7 | ||||
Section 3.03. |
Security Purchases and Sales | 9 | ||||
Section 3.04. |
Exchanges of Securities | 11 | ||||
Section 3.05. |
Depositary Receipts | 12 | ||||
Section 3.06. |
Exercise of Rights; Tender Offers | 12 | ||||
Section 3.07. |
Stock Dividends, Rights, Etc. | 13 | ||||
Section 3.08. |
Options | 13 |
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Section 3.09. |
Futures Contracts | 14 | ||||
Section 3.10. |
Borrowings | 15 | ||||
Section 3.11. |
Interest Bearing Deposits | 15 | ||||
Section 3.12. |
Foreign Exchange Transactions | 16 | ||||
Section 3.13. |
Securities Loans | 17 | ||||
Section 3.14. |
Collections | 18 | ||||
Section 3.15. |
Dividends, Distributions and Redemptions | 19 | ||||
Section 3.16. |
Proceeds from Shares Sold | 19 | ||||
Section 3.17. |
Proxies, Notices, Etc | 20 | ||||
Section 3.18. |
Bills and Other Disbursements | 20 | ||||
Section 3.19. |
Nondiscretionary Functions | 20 | ||||
Section 3.20. |
Bank Accounts | 20 | ||||
Section 3.21. |
Deposit of Fund Assets in Securities Systems | 21 | ||||
Section 3.22. |
Maintenance of Assets in Underlying Fund Systems | 23 | ||||
Section 3.23. |
Other Transfers | 24 | ||||
Section 3.24. |
Establishment of Segregated Account(s | 24 | ||||
Section 3.25. |
Custodians Books and Records | 24 | ||||
Section 3.26. |
Opinion of Funds Independent Certified Public Accountants | 26 | ||||
Section 3.27. |
Reports by Independent Certified Public Accountants | 26 | ||||
Section 3.28. |
Overdrafts | 26 | ||||
Section 3.29. |
Reimbursement for Advances | 27 | ||||
Section 3.30. |
Claims | 28 | ||||
ARTICLE IV. PROPER INSTRUCTIONS AND RELATED MATTERS |
28 | |||||
Section 4.01. |
Proper Instructions | 28 | ||||
Section 4.02. |
Authorized Persons | 29 | ||||
Section 4.03. |
Persons Having Access to Assets of the Fund or Series | 30 | ||||
Section 4.04. |
Actions of Custodian Based on Proper Instructions | 30 | ||||
ARTICLE V. SUBCUSTODIANS |
30 | |||||
Section 5.01. |
Domestic Subcustodians | 30 | ||||
Section 5.02. |
Foreign Subcustodians | 31 | ||||
Section 5.03. |
Termination of a Subcustodian | 31 | ||||
Section 5.04. |
Eligible Securities Depositories | 32 | ||||
ARTICLE VI. STANDARD OF CARE; INDEMNIFICATION |
33 | |||||
Section 6.01. |
Standard of Care | 33 | ||||
Section 6.02. |
Liability of Custodian for Actions of Other Persons | 36 | ||||
Section 6.03. |
Indemnification | 37 | ||||
Section 6.04. |
Funds Right to Proceed | 39 | ||||
ARTICLE VII. COMPENSATION |
40 | |||||
ARTICLE VIII. TERMINATION |
41 | |||||
Section 8.01. |
Termination of Agreement as to One or More Funds | 41 | ||||
Section 8.02. |
Termination as to One or More Series | 42 | ||||
ARTICLE IX. MISCELLANEOUS |
43 | |||||
Section 9.01. |
Execution of Documents, Etc. | 43 | ||||
Section 9.02. |
Representative Capacity; Nonrecourse Obligations | 43 |
ii
Section 9.03. |
Several Obligations of the Funds and the Series | 44 | ||||
Section 9.04. |
Representations and Warranties | 44 | ||||
Section 9.05. |
Entire Agreement | 45 | ||||
Section 9.06. |
Waivers and Amendments | 45 | ||||
Section 9.07. |
Interpretation | 46 | ||||
Section 9.08. |
Captions | 47 | ||||
Section 9.09. |
Governing Law | 47 | ||||
Section 9.10. |
Notices | 47 | ||||
Section 9.11. |
Assignment | 47 | ||||
Section 9.12. |
Counterparts | 48 | ||||
Section 9.13. |
Confidentiality; Survival of Obligations | 48 | ||||
Section 9.14. |
Shareholder Communications | 48 |
iii
CUSTODIAN AGREEMENT
AGREEMENT made this 21 st day of September, 2001 between each of the investment companies listed on Schedule A hereto, as the same may be amended from time to time and State Street Bank and Trust Company (the Custodian).
WITNESSETH:
WHEREAS, each Fund (as defined in Section 1.14 below) desires to appoint the Custodian as custodian on its own behalf and, if a series fund, on behalf of each of its series, in accordance with the provisions of the Investment Company Act of 1940, as amended, and the rules and regulations thereunder, under the terms and conditions set forth in this Custodian Agreement (including any Schedules or Appendices hereto), and the Custodian has agreed to act as custodian for such Fund; and
WHEREAS, the Board of Directors/Trustees of each Fund has approved the appointment of the Custodian as Foreign Custody Manager, as such term is defined in Rule 17f-5 under the Investment Company Act of 1940, as amended, of such Fund, and the Custodian has agreed to assume the responsibilities of a Foreign Custody Manager under the terms and conditions of this Agreement and the guidelines and procedures adopted by the Board of Directors/Trustees of each Fund and annexed hereto as Schedule B.
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, the parties hereto agree as follows:
ARTICLE I.
DEFINED TERMS
The following terms are defined as follows:
Section 1.01. Account shall mean an account of the Custodian established at a bank, Securities System or Subcustodian (as defined in Sections 1.25 and 1.30, respectively), which
1
shall include only Property (as defined in Section 1.24) held as custodian or otherwise for a Fund or a series of a Fund. To the extent required by law or in accord with standard industry practice in a particular market, an Account may be an omnibus account in the name of the Custodian or its nominee provided that the records of the Custodian shall indicate at all times the Fund or other customer for which Property is held in such Account and the respective interests therein.
Section 1.02. Affiliate shall mean any entity that controls, is controlled by, or is under common control with any other entity.
Section 1.03. Agreement shall mean this agreement between each of the Funds and the Custodian and all current or subsequent schedules and appendices hereto.
Section 1.04. Authorized Person(s) shall mean all persons authorized in writing by each Fund to give Proper Instructions (as defined in Section 1.23) or any other notice, request, direction, instruction, certificate or instrument on behalf of a Fund or a series thereof.
Section 1.05. Bank Account shall mean any demand deposit bank account (provided that demand may not be made by check), which will be an interest bearing bank account where permitted by law and agreed between the Custodian and a Fund, held on the books of the Custodian or a Subcustodian for the account of a Fund or a series of a Fund.
Section 1.06. Banking Institution shall mean a bank or trust company, including the Custodian, any Subcustodian or any subsidiary or Affiliate of the Custodian.
Section 1.07. Board shall mean the Board of Directors or Trustees, as applicable, of a Fund.
Section 1.08. Business Day shall mean any day on which the New York Stock Exchange or the Custodian is open for business that is not a Saturday or Sunday.
Section 1.09. Commission shall mean the U.S. Securities and Exchange Commission.
2
Section 1.10. DR shall mean an American Depositary Receipt, European Depositary Receipt, or Global Depositary Receipt or similar instrument issued by a depositary to represent the underlying securities held by the depositary.
Section 1.11. Domestic Subcustodian shall mean any bank as defined in Section 2(a)(5) of the Investment Company Act (as defined in Section 1.17) meeting the requirements of a custodian under Section 17(f) of the Investment Company Act and the rules and regulations thereunder, that acts on behalf of one or more Funds, or on behalf of the Custodian as custodian for one or more Funds, as a Subcustodian for purposes of holding cash, securities and other assets of such Funds and performing other functions of the Custodian within the United States.
Section 1.12. Eligible Securities Depository shall mean a system for the central handling of securities as defined in Rule 17f-4 under the Investment Company Act that meets the requirements of an eligible securities depository under Rule 17f-7 under the Investment Company Act, as such may be amended or interpreted from time to time by the Commission.
Section 1.13. Foreign Subcustodian shall mean (i) any bank, trust company, or other entity meeting the requirements of an eligible foreign custodian under the rules and regulations under Section 17(f) of the Investment Company Act or by order of the Commission exempted therefrom, or (ii) any bank as defined in Section 2(a)(5) of the Investment Company Act meeting the requirements of a custodian under Section 17(f) of the Investment Company Act and the rules and regulations thereunder to act on behalf of one or more Funds as a Subcustodian for purposes of holding cash, securities and other assets of such Fund(s) and performing other functions of the Custodian in countries other than the United States.
Section 1.14. Fund shall mean any registered, open-end or closed-end investment company listed on Schedule A hereto as it shall be amended from time to time. Collectively, they shall be referred to as the Funds.
3
Section 1.15. Institutional Client shall mean a major commercial bank, corporation, insurance company, or substantially similar institution that purchases or sells securities and makes substantial use of custodial services.
Section 1.16. Interest Bearing Deposits shall mean interest bearing fixed term and call deposits.
Section 1.17. Investment Company Act shall mean the Investment Company Act of 1940, as amended, and the rules and regulations thereunder.
Section 1.18. Loans shall mean corporate loans or participation interests therein, or assignments thereof.
Section 1.19. Overdraft shall mean any payment or transfer of funds on behalf of a Fund or series of a Fund for which there are, at the close of business on the date of such payment or transfer, insufficient funds held by the Custodian on behalf of such Fund or series thereof.
Section 1.20. Overdraft Notice shall mean any written notification of an Overdraft by facsimile transmission or any other such manner as a Fund and the Custodian may agree in writing.
Section 1.21. Person shall mean the Custodian or any Subcustodian or Securities System, or any Eligible Securities Depository used by any such Subcustodian, or any nominee of the Custodian or any Subcustodian.
Section 1.22. Procedural Agreement shall mean any futures margin procedural agreement among a Fund or series of a Fund, the Custodian and any futures commission merchant.
Section 1.23. Proper Instructions shall mean: (i) either a tested telex or a written (including, without limitation, facsimile transmission) request, direction, instruction or certification signed or initialed by or on behalf of the applicable Fund or series of a Fund by one
4
or more Authorized Persons; (ii) a telephonic or other oral communication by one or more Authorized Persons; or (iii) a communication effected directly between an electro-mechanical or electronic device or system (including, without limitation, computers) by or on behalf of the applicable Fund that is transmitted in compliance with the security procedures established for such communications by the Custodian and the Fund; provided , however , that communications purporting to be given by an Authorized Person shall be considered Proper Instructions only if the Custodian reasonably believes such communications to have been given by an Authorized Person with respect to the transaction involved. Proper Instructions shall include all information necessary to permit the Custodian to fulfill its duties and obligations thereunder. Proper Instructions provided by facsimile transmission or under subsection (ii) shall be subject to a commercially reasonable authentication procedure, such as call back.
Section 1.24. Property shall mean any securities or other assets of a Fund or series that are accepted by the Custodian for safekeeping, or cash accepted by the Custodian for deposit on behalf of a Fund or series of a Fund.
Section 1.25. Securities System shall mean (i) the Depository Trust Company, including its Mortgage Backed Securities Division and/or (ii) any book-entry system as provided in (1) Subpart O of Treasury Circular No. 300, 31 CFR 306, (2) Subpart B of 31 CFR Part 350, (3) the book-entry regulations of federal agencies substantially in the form of Subpart O, (4) any other domestic clearing agency registered with the Commission under Section 17A of the Securities Exchange Act of 1934, as amended, which acts as a securities depository. Each such Securities System shall be approved by each Funds Board.
Section 1.26. Segregated Account shall mean an account established for and on behalf of a Fund in which may be held Property that is maintained: (i) for the purposes set forth in Section 3.08, 3.09, and 3.10, hereof; (ii) for the purposes of compliance by the Fund with the
5
procedures required by Investment Company Act Release No. 10666, or any subsequent release or releases of the Commission relating to the maintenance of Segregated Accounts by registered investment companies, or (iii) for any other lawful purposes as may be deemed necessary by the Fund.
Section 1.27. Series shall mean the one or more series of shares into which a Fund may be organized, each of which shall represent an interest in a separate portfolio of Property and shall include all of the existing and additional Series now or hereafter listed on Schedule A.
Section 1.28. Shareholder Servicing Agent shall mean a Funds transfer agent or person performing comparable duties.
Section 1.29. Shares shall mean all classes of shares of a Fund or Series.
Section 1.30. Subcustodian shall mean any duly appointed Domestic Subcustodian or Foreign Subcustodian.
Section 1.31. Terminating Fund shall mean a Fund or Series that has terminated the Agreement with the Custodian or as to which the Custodian has terminated the Agreement, all in accordance with the provisions of Section 8.01.
ARTICLE II.
APPOINTMENT OF CUSTODIAN
Each Fund hereby appoints the Custodian as custodian and as Foreign Custody Manager for the term and subject to the provisions of this Agreement. Custodians duties and obligations as Foreign Custody Manager and with respect to Eligible Securities Depositories shall be as set forth in this Agreement, including Schedule B hereto. Each Fund shall deliver to the Custodian or a Subcustodian, or shall cause to be delivered to the Custodian or a Subcustodian, Property owned by such Fund and, where applicable, shall specify to which of its Series such Property is to be specifically allocated.
6
ARTICLE III.
POWERS AND DUTIES OF CUSTODIAN
With respect to Property of each Fund or Series, the Custodian shall have and perform the following powers and duties:
Section 3.01. Safekeeping . The Custodian shall from time to time receive delivery of Property of a Fund or Series and shall maintain, hold and, with respect to Property that is not cash, keep safely all Property of each Fund or each Series that has been delivered to and accepted by the Custodian. Custodian shall accept and maintain Property received in the form of cash as a deposit obligation of the Custodian or a Subcustodian.
Section 3.02. Manner of Holding Securities .
(a) The Custodian shall at all times hold securities of each Fund or Series (i) by physical possession of the share certificates or other instruments representing such securities in registered or bearer form, or (ii) in book-entry form by a Securities System or by a transfer agent or registrar of another investment company (an Underlying Fund System), or (iii) with respect to Loans, by possession of all documents, certificates and other such instruments, including any schedule of payments (Financing Documents) as are delivered to the Custodian.
(b) Upon receipt of Proper Instructions, the Custodian shall open an Account in the name of each Fund or Series and shall hold registered securities of each Fund or Series (i) in the name or any nominee name of the Custodian, a Subcustodian or the Fund, or (ii) in street name. In carrying out the foregoing obligation, the Custodian shall, to the extent permitted by law and, where Custodian deems it advisable based upon any legal advice Custodian has
7
obtained with respect to a particular market and upon other factors the Custodian deems appropriate, hold registered securities of each Fund or Series in a manner that is appropriate to the Funds tax domicile and that takes into consideration the best interests of the Fund with respect to regulatory matters relating to custody; and provided further that the Custodian shall, on an ongoing basis, provide accurate information to a Fund and such other persons as a Fund may designate with respect to the registration status of each Funds securities, and an accurate record of securities held by each Fund and such Funds respective interest therein.
(c) The Custodian may hold Property for all of its customers, including a Fund or Series, with any Foreign Subcustodian in an Account that is identified as belonging to the Custodian for the benefit of its customers or in a depository account, including an omnibus account, with an Eligible Securities Depository; provided , however , that (i) the records of the Custodian with respect to Property of any Fund or Series that are maintained in such Account or depository account shall identify such Property as belonging to the applicable Fund or Series and (ii) to the extent permitted and customary in the market in which the Account or depository account is maintained, the Custodian shall require that Property so held by a Foreign Subcustodian or Eligible Securities Depository be held separately from any assets of the Custodian or such Foreign Subcustodian.
(d) The Custodian shall send each Fund a written statement, advice or notification of any transfers of any Property of the Fund to or from an Account or an account at an Eligible Securities Depository (a depository account). Each such statement, advice or notification shall identify the Property transferred and the entity that has custody of the Property. Unless a Fund provides the Custodian with a written exception or objection to any such statement, advice or notification within ninety (90) days of Funds receipt thereof, the Fund shall be deemed to have approved such statement, advice or notification. To the extent permitted by law and the terms of this Agreement, the Custodian shall not be liable for the contents of any such statement, advice or notification that has been approved by a Fund.
8
Section 3.03. Security Purchases and Sales .
(a) Upon receipt of Proper Instructions, insofar as funds are available for the purpose, the Custodian shall pay for and receive securities purchased for the account of a Fund or Series, payment being made by the Custodian only: (i) upon receipt of the securities, certificates, or other acceptable evidence of ownership (1) by the Custodian, or (2) by a clearing corporation of a national securities exchange of which the Custodian is a member, (3) by a Securities System or (4) by an Underlying Fund System; or (ii) otherwise in accordance with (1) Proper Instructions, (2) applicable law, (3) generally accepted trading practices, or (4) the terms of any instrument representing the purchase. With respect to a clearing corporation or Securities System, securities may be held only with an entity approved by a Funds Board. Notwithstanding the foregoing, in the case of U.S. repurchase agreements entered into by a Fund, the Custodian may release funds to a Securities System or to a Domestic Subcustodian prior to the receipt of advice from the Securities System or Domestic Subcustodian that the securities underlying such repurchase agreement have been transferred by book entry into the Account of the Custodian maintained with such Securities System or Domestic Subcustodian, so long as such payment instructions to the Securities System or Domestic Subcustodian require that the Securities System or Domestic Subcustodian may make payment of such funds to the other party to the repurchase agreement only upon transfer by book-entry of the securities underlying the repurchase agreement into the Account. In the case of time deposits, call account deposits, currency deposits, and other deposits, contracts or options pursuant to Sections 3.08, 3.09, 3.11 and 3.12, the Custodian may not make payment therefor without receiving an instrument or other document evidencing said deposit except in accordance with standard industry practice.
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(b) Upon receipt of Proper Instructions, the Custodian shall make delivery of securities that have been sold for the account of a Fund or Series, but only: (i) against payment therefor (1) in the form of cash, by a certified check, bank cashiers check, bank credit, or bank wire transfer, (2) by credit to the Account of the Custodian with a clearing corporation of a national securities exchange of which the Custodian is a member, or (3) by credit to the Account of the Custodian with a Securities System subject to final end-of-day settlement in accordance with the rules of the applicable Securities System; or (ii) otherwise in accordance with (1) Proper Instructions, (2) applicable law, (3) generally accepted trading practices, or (4) the terms of any instrument representing the sale.
(c) In the case of the purchase or sale of securities the settlement of which occurs outside of the United States or the receipt of which and payment therefor take place in different countries, such securities shall be delivered and paid for in accordance with local custom and practice generally accepted by Institutional Clients in the applicable country or countries. In the case of securities held in physical form, if standard industry practice in the country so requires, such securities shall be delivered and paid for in accordance with street delivery custom to a broker or its clearing agent (for example, against delivery to the Custodian or a Subcustodian of a receipt for such securities) provided that the Custodian shall take reasonable steps (which shall not include the institution of legal proceedings except pursuant to Section 6.03(c)) in its discretion to seek to ensure prompt collection of the payment for, or the return of, such securities by the broker or its clearing agent, and provided further that the Custodian shall not be responsible for the selection of or the failure or inability to perform of such broker or its clearing agent.
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Section 3.04. Exchanges of Securities . Upon receipt of Proper Instructions, the Custodian shall, to the extent permitted by applicable law and in accord with standard industry practice in the relevant market, exchange securities held by the Custodian for the account of any Fund or Series for other securities in connection with any reorganization, recapitalization, stock split, change of par value, conversion or other event relating to the securities or the issuer of such securities, and to deposit any such securities in accordance with the terms of any reorganization or protective plan. With respect to tender or exchange offers, the Custodian shall transmit promptly to a Fund all written information actually received by the Corporate Actions Department or other applicable department of the Custodian, or from a Subcustodian, an Eligible Securities Depository, or a Securities System, or directly from issuers of the securities whose tender or exchange is sought and from the parties (or their agents) making the tender or exchange offer. If the Fund desires to take action with respect to any tender offer, exchange offer, or any other similar transaction, the Fund shall notify the Custodian, within a time period set by the Custodian and communicated promptly to the Fund, prior to the date on which the Custodian is to take such action. Without receiving such instructions, the Custodian may surrender securities in temporary form for definitive securities, may surrender securities for transfer into a name or nominee name as permitted in Section 3.02(b), and may surrender securities for a different number of certificates or instruments representing the same number of shares or same principal amount of indebtedness, provided that the securities to be issued will be delivered to the Custodian or nominee of the Custodian and further provided that the Custodian shall, consistent with local market practice, at the time of surrendering the securities or instruments (i) receive a receipt or other instrument or document evidencing the ownership thereof or (ii) take other reasonable steps to seek to ensure proper delivery of the securities and adequate protection of a Funds ownership interest in the securities.
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Section 3.05. Depositary Receipts . Upon receipt of Proper Instructions, the Custodian shall instruct a Subcustodian appointed pursuant to Article V hereof to surrender securities to the depositary that holds securities of an issuer that are represented by DRs for such securities against a written receipt therefor adequately describing such securities and written evidence satisfactory to the Subcustodian that the depositary has acknowledged receipt of instructions to issue DRs with respect to such securities in the name of the Custodian, or a nominee of the Custodian, for delivery to the Custodians location, or at such other place as the Custodian may from time to time designate.
Upon receipt of Proper Instructions, the Custodian shall surrender DRs to the issuer thereof against a written receipt therefor adequately describing the DRs surrendered and written evidence satisfactory to the Custodian that the issuer of the DRs has acknowledged receipt of instructions to cause its depositary to deliver the securities underlying such DRs to a Subcustodian.
Section 3.06. Exercise of Rights; Tender Offers . Upon receipt of Proper Instructions, the Custodian shall deliver to the issuer or trustee thereof, or to the agent of either, warrants, puts, calls, rights or similar securities, for the purpose of being exercised or sold, provided that the new Property, if any, acquired by such action is to be delivered to the Custodian, and, upon receipt of Proper Instructions, to deposit securities upon invitations for tenders of securities, provided that the consideration for such securities is to be paid or delivered to the Custodian, or the tendered securities are to be returned to the Custodian. Notwithstanding any provision of this Agreement to the contrary, the Custodian shall take all commercially reasonable action, unless otherwise directed to the contrary in Proper Instructions, to comply with the terms of all mandatory or compulsory exchanges, calls, tenders, redemptions, or similar rights of security ownership of which the Custodian has actual knowledge, and shall promptly notify each applicable Fund of such action in writing by facsimile transmission or in such other manner as such Fund and the Custodian may agree in writing.
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Section 3.07. Stock Dividends, Rights . Etc. The Custodian shall receive and collect all stock dividends, rights, foreign tax reclaims and other items of a like nature, and deal with the same pursuant to Proper Instructions relative thereto. Custodian duties and obligations under this Section 3.07 may from time to time be limited by written agreement between the Custodian and a Fund or Series. With respect to securities held by the Custodian in street name, Custodians duties and obligations under this Section 3.07 shall be limited to those stock dividends, foreign tax reclaims and other items of a like nature that the Custodian is able, using commercially reasonable methods (which shall not include the institution of legal proceedings except pursuant to Section 6.03(c)) in its discretion, to receive and collect from the record holders of such securities. The Custodians further duties and obligations with respect to tax reclaims shall be as set forth in Schedule C hereto.
Section 3.08. Options . Upon receipt of Proper Instructions and in accordance with the provisions of any agreement between the Custodian, any registered broker-dealer and, if necessary, a Fund on its own behalf or on behalf of any applicable Series relating to compliance with the rules of the Options Clearing Corporation or of any registered national securities exchange or similar organization(s), the Custodian shall: (i) receive and retain confirmations or other documents, if any, evidencing the purchase or writing of an option on a security or securities index by the applicable Fund or Series; (ii) deposit and maintain Property in a Segregated Account; and (iii) pay, release and/or transfer such Property in accordance with notices or other communications evidencing the expiration, termination or exercise of such options furnished by the Options Clearing Corporation, the securities or options exchange on which such options are traded, or such other organization as may be responsible for handling
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such option transactions. Each Fund or Series (severally and not jointly) and the broker-dealer shall be responsible for the sufficiency of assets held in any Segregated Account established in compliance with applicable margin maintenance requirements and the performance of other terms of any option contract, or releases of the Commission or interpretive positions of the Commission staff.
Section 3.09. Futures Contracts . Upon receipt of Proper Instructions, or pursuant to the provisions of any Procedural Agreement among a Fund, the Custodian, and any futures commission merchant regarding margin, the Custodian shall: (i) receive and retain confirmations, if any, evidencing the purchase or sale of a futures contract or an option on a futures contract by the applicable Fund; (ii) segregate and maintain in a Segregated Account Property designated as initial, maintenance or variation margin deposits intended to secure the performance by the applicable Fund or Series of its obligations under any futures contracts purchased or sold or any options on futures contracts written by the Fund, in accordance with the provisions of any Procedural Agreement designed to comply with the rules of the Commodity Futures Trading Commission and/or any commodity exchange or contract market (such as the Chicago Board of Trade), or any similar organization(s), regarding such margin deposits; and (iii) release assets from and/or transfer assets into such margin accounts only in accordance with any such Procedural Agreement. Alternatively, the Custodian may deliver assets in accordance with Proper Instructions to a futures commission merchant for purposes of the margin requirements in accordance with Rule 17f-6 under the Investment Company Act. If delivery is made in accordance with Proper Instructions, Custodian shall be deemed to have acted in accordance with Rule 17f-6. Each Fund or Series (severally and not jointly) and such futures commission merchant shall be responsible for the sufficiency of assets held in the Segregated Account in compliance with applicable margin maintenance requirements and the performance of any futures contract or option on a futures contract in accordance with its terms.
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Section 3.10. Borrowings . Upon receipt of Proper Instructions, the Custodian shall deliver securities of any Fund or Series thereof to lenders or their agents or otherwise establish a Segregated Account at the Custodian as agreed to by the applicable Fund or Series and the Custodian and, where applicable, any third-party lender, as collateral for borrowings effected by such Fund, provided that such borrowed money is payable to or upon the Custodians order as Custodian for the applicable Fund and concurrently with the delivery of such securities.
Section 3.11. Interest Bearing Deposits . Upon receipt of Proper Instructions directing the Custodian to purchase Interest Bearing Deposits for the account of a Fund or Series, the Custodian shall purchase such Interest Bearing Deposits in the name of the Custodian on behalf of the applicable Fund or Series with such Banking Institutions and in such amounts as the applicable Fund or Series may direct pursuant to Proper Instructions. Such Interest Bearing Deposits may be denominated in U.S. dollars or other currencies, as the applicable Fund or Series may determine and direct pursuant to Proper Instructions. The Custodian shall include in its records with respect to the assets of each Fund or Series appropriate notation as to the amount and currency of each such Interest Bearing Deposit, the accepting Banking Institution and all other appropriate details, and shall receive and retain such forms of advice or receipt, if any, evidencing such Interest Bearing Deposit as may be forwarded to the Custodian by the Banking Institution. The responsibilities of the Custodian to each Fund for Interest Bearing Deposits accepted on the Custodians books in the United States on behalf of a Fund or Series shall be that of an U.S. bank for a similar deposit.
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With respect to Interest Bearing Deposits other than those accepted on the Custodians books (i) the Custodian shall be responsible for the collection of income as set forth in Section 3.14 and the transmission of cash and instructions to and from such Interest Bearing Deposit; and (ii) except upon the request of a Fund and as agreed by the Custodian, the Custodian shall have no duty with respect to the selection of the Banking Institution. So long as the Custodian acts in accordance with Proper Instructions, the Custodian shall have no responsibility for the failure of such Banking Institution to pay upon demand. As mutually agreed from time to time by a Fund and the Custodian, the Custodian shall be responsible for the prudent selection and monitoring of a Banking Institution. The Custodian shall not be liable for the insolvency of any Banking Institution that is not a branch or Affiliate of the Custodian. Upon receipt of Proper Instructions, the Custodian shall take such commercially reasonable actions as the applicable Fund deems necessary or appropriate to cause each such Interest Bearing Deposit to be insured to the maximum extent possible by all applicable deposit insurers including, without limitation, the Federal Deposit Insurance Corporation (it being understood and acknowledged that such deposits are not eligible for pass-through insurance).
Section 3.12. Foreign Exchange Transactions .
(a) Foreign Exchange Transactions Other Than as Principal . Upon receipt of Proper Instructions, the Custodian shall settle foreign exchange contracts or options to purchase and sell foreign currencies for spot and future delivery on behalf of and for the account of a Fund or Series with such currency brokers or Banking Institutions as the applicable Fund or Series may determine and direct pursuant to Proper Instructions. The Custodian shall be responsible for the transmission of cash to and receipt of cash from the currency broker or Banking Institution with which the contract or option is made, the safekeeping of all certificates and other documents and agreements delivered to the Custodian or a Subcustodian evidencing or relating to such foreign exchange transactions and the maintenance of proper records as set forth in Section 3.25. Except as agreed upon in writing by the Custodian and a Fund from time to time, the Custodian
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shall have no duty under this Section 3.12(a) with respect to the selection of the currency brokers or Banking Institutions with which the Fund or a Series deals or, so long as the Custodian acts in accordance with Proper Instructions, for the failure of selected brokers or Banking Institutions to comply with the terms of any contract or option.
(b) Foreign Exchange Contracts as Principal . The Custodian shall not be obligated to enter into foreign exchange transactions as principal. However, if the Custodian has made available to a Fund its services as a principal in foreign exchange transactions, upon receipt of Proper Instructions, the Custodian shall enter as principal into foreign exchange contracts or options to purchase and sell foreign currencies for spot and future delivery on behalf of and for the account of a Fund or Series. When acting as principal, the Custodian shall be responsible for the prudent selection of the currency brokers or Banking Institutions and the failure of such currency brokers or Banking Institutions to comply with the terms of any contract or option. In cases where the Custodian, or its subsidiaries, Affiliates, or Subcustodians enter into a separate master foreign exchange contract with a Fund that covers foreign exchange transactions for an Account, the terms and conditions of that foreign exchange contract, and, to the extent not inconsistent, this Agreement, shall apply to such transactions.
Section 3.13. Securities Loans . Upon receipt of Proper Instructions, the Custodian shall deliver securities of any Fund in connection with loans of securities by such Fund, to the borrower thereof or a securities lending agent identified by the Fund, upon, or, upon Proper Instructions, prior to, the receipt of cash collateral, if any, for such borrowing. In the event U.S. Government securities are to be used as collateral, the Custodian will not release the securities to be loaned until it has received confirmation that such collateral has been delivered to the Custodian. The Custodian and each Fund understand that the timing of receipt of such confirmation will normally require that the delivery of securities to be loaned will be made one
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day after receipt of collateral in the form of U.S. Government securities. To the extent the Custodian acts as lending agent for a Fund, each partys duties and obligations with respect to that arrangement will be governed by a separate written agreement mutually agreed upon by the Fund and the Custodian.
Section 3.14. Collections . Consistent with standard industry practice in the applicable market, the Custodian shall, and shall cause any Subcustodian to, take all commercially reasonable steps (which shall not include the institution of legal proceedings except pursuant to Section 6.03(c)) at its discretion to: (i) collect amounts due and payable to each Fund or Series with respect to portfolio securities and other assets of each such Fund or Series; (ii) promptly credit to the Account of each applicable Fund or Series all income and other payments relating to portfolio securities and other assets held by the Custodian hereunder no later than upon Custodians receipt of such income or payments or as otherwise agreed in writing by the Custodian and the applicable Fund; (iii) promptly endorse and deliver any instruments required by standard industry practice in each market to effect such collections; and (iv) pursuant to Proper Instructions, promptly execute ownership and other certificates and affidavits for all federal, state and foreign tax purposes in connection with receipt of income, capital gains or other payments with respect to portfolio securities and other assets of each applicable Fund or Series, or in connection with the purchase, sale or transfer of such securities or other assets. The Custodian shall promptly notify each applicable Fund in accordance with standard operating procedures if any amount payable with respect to portfolio securities or other assets of the Fund or Series is not received by the Custodian when due. The Custodian shall not be responsible for the collection of amounts due and payable with respect to portfolio securities or other assets that are in default. With respect to amounts due and payable on portfolio securities held by the Custodian in street name, Custodians duties and obligations under this Section 3.14 shall be
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limited to the collection of amounts of which Custodian has actual knowledge and that it is able, using commercially reasonable methods, to collect from the record holder of such securities. Subject to the provisions of any separate written agreement entered into by the Custodian and a Fund pursuant to Section 3.13, income due each Fund or Series on securities loaned shall be the responsibility of such Fund or Series, provided that the Custodian shall use all commercially reasonable methods to assist the Fund or Series to collect such income.
Section 3.15. Dividends, Distributions and Redemptions . Upon receipt of Proper Instructions, the Custodian shall promptly release funds or securities to the Shareholder Servicing Agent or otherwise apply funds or securities, insofar as available, for the payment of dividends or other distributions to Fund shareholders. Upon receipt of Proper Instructions, the Custodian shall release funds or securities, insofar as available, to the Shareholder Servicing Agent or as such Shareholder Servicing Agent shall otherwise instruct for payment to Fund shareholders who have delivered to such Shareholder Servicing Agent a request for repurchase or redemption of their shares of capital stock of such Fund.
Section 3.16. Proceeds from Shares Sold . The Custodian shall receive funds representing cash payments received for Shares issued or sold from time to time by a Fund or Series and shall promptly credit such funds to the Account(s) of the applicable Fund or Series. The Custodian shall promptly notify each applicable Fund or Series of Custodians receipt of cash in payment for Shares issued by such Fund or Series by facsimile transmission or in such other manner as the Fund or Series and Custodian may agree in writing. Upon receipt of Proper Instructions, the Custodian shall: (i) deliver all federal funds received by the Custodian in payment for Shares in payment for such investments as may be set forth in such Proper Instructions and at a time agreed upon between the Custodian and the applicable Fund or Series; and (ii) make federal funds received by the Custodian available to the applicable Fund or Series as of specified times agreed upon from time to time by the applicable Fund or Series and the Custodian, in the amount received in payment for Shares which are deposited to the Accounts of each applicable Fund or Series.
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Section 3.17. Proxies, Notices, Etc . The Custodian shall provide each Fund or Series with proxy services in accordance with the terms and conditions set forth in Schedule D to this Agreement.
Section 3.18. Bills and Other Disbursements . Upon receipt of Proper Instructions, the Custodian shall pay or cause to be paid, insofar as funds are available for the purpose, bills, statements, or other obligations of each Fund or Series.
Section 3.19. Nondiscretionary Functions . The Custodian shall attend to all non-discretionary details in connection with the sale, exchange, substitution, purchase, transfer or other dealings with securities or other assets of each Fund held by the Custodian, except as otherwise directed from time to time pursuant to Proper Instructions.
Section 3.20. Bank Accounts .
(a) Accounts with the Custodian and any Subcustodians . The Custodian shall open and operate a Bank Account on the books of the Custodian or any Subcustodian or a Banking Institution other than the Custodian or any Subcustodian provided that such Bank Account(s) shall be in the name of the Custodian or a nominee of the Custodian, for the account of a Fund or Series, and shall be subject only to the draft or order of the Custodian; provided, however, that such Bank Accounts in countries other than the United States may be held in an Account of the Custodian containing only assets held by the Custodian as a fiduciary or custodian for customers, and provided further, that the records of the Custodian shall indicate at all times the Fund or other customer for which Property is held in such Account and the respective interests therein. Such Bank Accounts may be denominated in either U.S. Dollars or
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other currencies. The responsibilities of the Custodian to each applicable Fund or Series for deposits accepted on the Custodians books in the United States shall be that of a U.S. bank for a similar deposit. The responsibilities of the Custodian to each applicable Fund or Series for deposits accepted on any Subcustodians books shall be governed by the provisions of Section 6.01. ). Except upon the request of a Fund and as agreed by the Custodian, the Custodian shall have no duty with respect to the selection of a Banking Institution. As mutually agreed from time to time by a Fund and the Custodian, the Custodian shall be responsible for the prudent selection and monitoring of a Banking Institution. The Custodian shall not be liable for the insolvency of any Subcustodian or Banking Institution that is not a branch or Affiliate of the Custodian.
(b) Deposit Insurance . Upon receipt of Proper Instructions, the Custodian shall take such commercially reasonable actions as the applicable Fund deems necessary or appropriate to cause each deposit account established by the Custodian pursuant to this Section 3.20 to be insured to the maximum extent possible by all applicable government deposit insurers including, without limitation, the Federal Deposit Insurance Corporation.
Section 3.21. Deposit of Fund Assets in Securities Systems . The Custodian may deposit and/or maintain securities owned by a Fund or Series in a Securities System provided that such Funds Board has specifically approved such Securities System prior to its use. Use of a Securities System shall be in accordance with applicable Federal Reserve Board and Commission rules and regulations, if any, and Custodians duties and obligations with respect to securities deposited or maintained therein will at all times be subject to the rules and procedures of the applicable Securities System. To the extent permitted by the foregoing, use of a Securities System shall also be subject to the following provisions:
(a) The Custodian may deposit and/or maintain Fund securities, either directly or through one or more Subcustodians appointed by the Custodian (provided that any such Subcustodian shall be qualified to act as a custodian of such Fund pursuant to the Investment Company Act and the rules and regulations thereunder), in a Securities System provided that such securities are represented in an Account of the Custodian or such Subcustodian in the Securities System, which Account shall not include any assets of the Custodian or Subcustodian other than assets held as a fiduciary, custodian, or otherwise for customers and shall be so designated on the books and records of the Securities System.
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(b) The Securities System shall be obligated to comply with the directions of the Custodian or Subcustodian, as the case may be, with respect to the securities held in such Account.
(c) Each Fund or Series hereby designates the Custodian, or the Custodians or Securities Systems nominee, as the case may be, as the party in whose name or nominee name any securities deposited by the Custodian in the Account at the Securities System are to be registered.
(d) The books and records of the Custodian with respect to securities of a Fund or Series that are maintained in a Securities System shall identify by book-entry those securities belonging to the Fund or Series.
(e) Upon receipt of Proper Instructions and subject to the provisions of Section 3.03, the Custodian shall pay for securities purchased for the account of any Fund or Series upon (i) receipt of advice from the Securities System that such securities have been transferred to the Account of the Custodian, and (ii) the making of an entry on the records of the Custodian to reflect such payment and transfer for the account of such Fund or Series. The Custodian shall transfer securities sold for the account of any Fund or Series upon (i) receipt of
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an advice from the Securities System that payment for such securities has been transferred to the Account of the Custodian, and (ii) the making of an entry on the records of the Custodian to reflect such transfer and payment for the account of such Fund or Series. Copies of all advices from the Securities System of transfers of securities for the account of a Fund or Series shall identify the Fund or Series, be maintained for the Fund or Series by the Custodian or Subcustodian as referred to in Section 3.21(a), and be provided to the Fund or Series at its request. The Custodian shall furnish to each Fund or Series confirmation of each transfer to or from the account of such Fund or Series in the form of a written report or notice and shall furnish to each Fund or Series copies of daily transaction reports reflecting each days transactions in the Securities System for the account of that Fund or Series on the next succeeding Business Day. Such transaction reports shall be delivered to each applicable Fund or Series, or any Subcustodian designated by such Fund or Series, pursuant to Proper Instructions by computer or in any other manner as such Fund or Series and the Custodian may agree in writing.
(f) The Custodian shall provide each Fund with any report obtained by the Custodian or Subcustodian as referred to in Section 3.21(a) on the Securities Systems accounting system, internal accounting control and procedures for safeguarding securities deposited in the Securities System.
(g) Upon receipt of Proper Instructions, the Custodian shall terminate the use of any such Securities System on behalf of that Fund or Series as promptly as practicable and shall take all actions reasonably practicable to safeguard the securities of any Fund or Series maintained with such Securities System.
Section 3.22. Maintenance of Assets in Underlying Fund Systems . The Custodian may maintain securities owned by each Fund or Series by book-entry in an Underlying Fund System provided that the Custodians books and records identify the specific type and amount of securities so held and the Custodian reconciles those records against the book-entry records of the Underlying Fund System on a monthly basis.
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Section 3.23. Other Transfers . Upon receipt of Proper Instructions, the Custodian shall deliver securities, funds and other Property of each Fund to a Subcustodian or another custodian of such Fund; and, upon receipt of Proper Instructions, make such other disposition of securities, funds or other Property of such Fund in a manner other than, or for purposes other than, as enumerated elsewhere in this Agreement, provided that Proper Instructions relating to such disposition shall include a statement of the amount of securities to be delivered and the name of the person or persons to whom delivery is to be made.
Section 3.24. Establishment of Segregated Account(s) . Upon receipt of Proper Instructions, the Custodian shall establish and maintain on its books a Segregated Account for and on behalf of a Fund or Series in which Segregated Account may be held Property of such Fund or Series, including securities maintained by the Custodian in a Securities System pursuant to Section 3.21 hereof, said Segregated Account to be maintained: (i) for the purposes set forth in Section 3.08, 3.09, and 3.10, hereof; (ii) for the purposes of compliance by the Fund with the procedures required by Investment Company Act Release No. 10666 (pub. avail. Apr. 18, 1979), or any subsequent release or releases of the Commission relating to the maintenance of Segregated Accounts by registered investment companies, or (iii) for any other lawful purposes as may be deemed necessary by the Fund.
Section 3.25. Custodians Books and Records . The Custodian shall provide any assistance reasonably requested by a Fund in the preparation of reports to such Funds shareholders and others, audits of accounts, and other ministerial matters of like nature. The Custodian shall maintain complete and accurate records with respect to securities and other assets held for the account of each Fund or Series as required by the rules and regulations of the
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Commission applicable to investment companies registered under the Investment Company Act, including, without limitation: (i) journals or other records of original entry containing a detailed and itemized daily record of all receipts and deliveries of securities (including certificate and transaction identification numbers, if any), and all receipts and disbursements of cash; (ii) ledgers or other records reflecting (1) securities in transfer, (2) securities in physical possession, (3) securities borrowed, loaned or collateralizing obligations of each Fund, (4) monies borrowed and monies loaned (together with a record of the collateral therefor and substitutions of such collateral), (5) dividends and interest received, (6) the amount of tax withheld by any person in respect of any collection made by the Custodian or any Subcustodian, and (7) the amount of reclaims or refunds for foreign taxes paid; and (iii) canceled checks and bank records related thereto. The Custodian shall keep such other books and records of each Fund or Series as such Fund or Series shall reasonably request and Custodian shall agree, which agreement shall not be unreasonably withheld. All such books and records maintained by the Custodian shall be maintained in a form acceptable to the applicable Fund or Series and in compliance with the rules and regulations of the Commission, including, but not limited to, books and records required to be maintained by Section 31(a) of the Investment Company Act and the rules and regulations from time to time adopted thereunder. All books and records maintained by the Custodian pursuant to this Agreement shall at all times be available upon reasonable prior notice during normal business hours for inspection and use by such Fund or Series and its agents, including, without limitation, its independent certified public accountants. Notwithstanding the preceding sentence, no Fund or Series shall take any actions or cause the Custodian to take any actions that would cause the Custodian, either directly or indirectly, to violate any applicable laws, regulations or orders.
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Section 3.26. Opinion of Funds Independent Certified Public Accountants . The Custodian shall take all commercially reasonable actions as a Fund may request to obtain from year to year favorable opinions from such Funds independent certified public accountants with respect to the Custodians activities hereunder in connection with the preparation of the Funds Form N-1A and the Funds Form N-SAR or other periodic reports to the Commission and with respect to any other requirements of the Commission.
Section 3.27. Reports by Independent Certified Public Accountants . At the request of a Fund, the Custodian shall deliver to such Fund a written report prepared by the Custodians independent certified public accountants with respect to the custodial services provided by the Custodian under this Agreement, including, without limitation, the Custodians accounting system, internal accounting controls and procedures for safeguarding Property, including Property deposited and/or maintained in a Securities System or Eligible Securities Depository or with a Subcustodian. Such report shall be of sufficient scope and in sufficient detail as may reasonably be required by any Fund and as may reasonably be obtained by the Custodian. Delivery by the Custodian of its then current SAS 70 Report shall constitute compliance with this Section 3.27.
Section 3.28. Overdrafts . In the event that the Custodian is directed by Proper Instructions to make any payment or transfer of funds on behalf of a Fund for which there are, at the close of business on the date of such payment or transfer, insufficient funds held by the Custodian on behalf of such Fund, the Custodian may, in its discretion, provide an Overdraft to the applicable Fund, in an amount sufficient to allow the completion of such payment. Overdrafts may also arise by reason of the Custodians reversal of any provisional credit extended to a Fund. Any Overdraft provided hereunder (i) shall be payable on demand or at such time as shall be agreed upon by the applicable Fund and the Custodian; and (ii) shall accrue
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interest from the date of the Overdraft to the date of payment in full by the applicable Fund at a rate agreed upon in writing, from time to time, by the Custodian and the applicable Fund. The Custodian and each Fund acknowledge that the purpose of such Overdrafts is to support on a temporary basis the purchase or sale of securities for prompt delivery in accordance with the terms hereof, or to meet emergency cash needs not reasonably foreseeable by such Fund. The Custodian shall promptly provide an Overdraft Notice of any Overdraft by facsimile transmission or in such other manner as such Fund and the Custodian may agree in writing. If, pursuant to Proper Instructions, a Fund or Series requests the Custodian to take any action with respect to securities, which action involves the payment of money or which action may, in the reasonable opinion of the Custodian, result in the Custodian or its nominee assigned to the Fund or Series being liable for the payment of money or incurring liability in some other form, the Fund, or the Fund on behalf of a Series, shall, as a prerequisite to the Custodian agreeing to take such action, provide indemnity to the Custodian in an amount and form satisfactory to the Fund and the Custodian.
Section 3.29. Reimbursement for Advances . If, in carrying out Proper Instructions, the Custodian advances cash or securities or makes any payment from Custodians own funds for any purpose for the benefit of a Fund or Series, including the purchase or sale of foreign exchange or of contracts for foreign exchange, or in the event that the Custodian or its nominee shall incur or be assessed any taxes, charges, expenses, assessments, claims or liabilities in connection with the performance of this Agreement, except such as may arise from the Custodians or its nominees own negligence, fraud, willful default or willful misconduct, any Property held for the account of that Fund or Series shall be security for such advance or payment in an amount not to exceed the amount of such advance or payment. If the applicable Fund or Series fails to promptly repay the advance, the Custodian shall be entitled to use such Funds or Series available cash and to dispose of the
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Property of such Fund or Series to the extent necessary to obtain reimbursement in full for the amount of such advance or payment. The security interest granted to the Custodian under this Section 3.29 shall apply to all advances provided by the Custodian to a Fund or Series, including Overdrafts as defined in Section 1.19 and intraday overdrafts that arise and are settled during the same Business Day, for the period during which any such advance remains outstanding.
Section 3.30. Claims . The Custodian agrees that all claims upon a Fund with respect to subjects covered by the attached Schedule E shall be made in accordance with Schedule E. In the event that the Custodian needs to make a claim against a Fund pursuant to Schedule E, the Custodian must make such claim within ninety (90) Business Days of the event causing the necessary claim, or within such other period as may be mutually agreed upon from time to time by the Custodian and a Fund. Claims not covered by Schedule E shall be made within such period as may be mutually agreed upon from time to time by the Custodian and a Fund. The applicable Fund will research the cause and make payment if applicable, or forward the claim to the appropriate party.
ARTICLE IV.
PROPER INSTRUCTIONS AND RELATED MATTERS
Section 4.01. Proper Instructions .
(a) Oral Communications . Proper Instructions in the form of oral communications shall be confirmed on the same day as such instructions are given by the applicable Fund or Series by tested telex or in a writing (including a facsimile transmission) signed or initialed by or on behalf of the applicable Fund or Series by one or more Authorized Persons, but the lack of such confirmation shall in no way affect any action taken by the Custodian in reasonable reliance upon such oral instructions prior to the Custodians receipt of such confirmation. Each Fund and the Custodian are hereby authorized to record any and all telephonic or other oral instructions communicated to the Custodian.
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(b) Form of Proper Instructions . Proper Instructions may relate to specific transactions or to types or classes of transactions, and may be in the form of standing instructions. Proper Instructions may be transmitted electronically or by computer, provided that a Fund or Series has followed any relevant security procedures agreed to from time to time by the Fund and the Custodian. Each Fund shall be responsible for safeguarding any testkeys, identification codes or other security devices that the Custodian makes available to the Fund. The Custodian shall be without liability for relying on any instruction, including any instruction transmitted via facsimile, that it reasonably believes to be a Proper Instruction.
(c) Address for Proper Instructions . Proper Instructions shall be delivered to the Custodian at the address and/or telephone, telecopy or telex number, or appropriate electronic address, agreed upon from time to time by the Custodian and the applicable Fund.
Section 4.02. Authorized Persons . Concurrently with the execution of this Agreement and from time to time thereafter, as appropriate, each Fund shall deliver to the Custodian, duly certified as appropriate by a Treasurer or Secretary of such Fund, a certificate setting forth the names, titles, signatures and scope of authority of Authorized Person(s) of such Fund. Such certificate may be accepted and relied upon by the Custodian as conclusive evidence of the facts set forth therein and shall be considered to be in full force and effect until delivery to the Custodian of a similar certificate to the contrary. Upon delivery of a certificate that deletes the name(s) of a person previously authorized by a Fund to give Proper Instructions, such persons shall no longer be considered an Authorized Person or authorized to issue Proper Instructions for that Fund and the Custodian shall promptly notify the Fund of any outstanding notice, request, direction, instruction, certificate or instrument(s) signed by such person on behalf of such Fund.
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Section 4.03. Persons Having Access to Assets of the Fund or Series . Notwithstanding anything to the contrary contained in this Agreement, no Authorized Person, Director, Trustee, officer, employee or agent of any Fund or Series shall have physical access to the assets of the Fund or Series held by the Custodian nor shall the Custodian deliver any assets of such Fund or Series for delivery to an account the Custodian knows or should know to be the account of such person; provided, however, that nothing in this Section 4.03 shall prohibit (i) any Authorized Person from giving Proper Instructions so long as such action does not result in delivery of or access to assets of any Fund or Series prohibited by this Section 4.03; or (ii) each Funds independent certified public accountants from examining or reviewing the assets of the Fund or Series held by the Custodian. Each Fund or Series shall deliver to the Custodian a written certificate (duly certified by the Secretary or Treasurer of the Fund) identifying all Authorized Persons, Directors, Trustees, officers, employees and agents of such Fund or Series.
Section 4.04. Actions of Custodian Based on Proper Instructions . So long as and to the extent that the Custodian acts in accordance with (a) Proper Instructions and (b) the terms of this Agreement, the Custodian shall not be responsible for the title, validity or genuineness of any property, or evidence of title thereof, received by it or delivered by it pursuant to this Agreement.
ARTICLE V.
SUBCUSTODIANS
The Custodian may, from time to time, in accordance with the relevant provisions of this Article V, select and appoint one or more Domestic Subcustodians and/or Foreign Subcustodians to act on behalf of a Fund or Series.
Section 5.01. Domestic Subcustodians . Upon receipt of Proper Instructions and in accordance therewith, the Custodian may from time to time select and appoint one or more
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Domestic Subcustodians to hold and maintain Property of a Fund or a Series in the United States. The Custodian may also, at any time and from time to time, without instructions from a Fund or Series, appoint a Domestic Subcustodian; provided , that , the Custodian shall notify each applicable Fund in writing of the identity and qualifications of any proposed Domestic Subcustodian at least thirty (30) days prior to appointment of such Domestic Subcustodian, and such Fund may, in its sole discretion, by written notice to the Custodian executed by an Authorized Person disapprove of the appointment of such Domestic Subcustodian. If, following notice by the Custodian to each applicable Fund regarding appointment of a Domestic Subcustodian and the expiration of thirty (30) days after the date of such notice, such Fund shall have failed to notify the Custodian of its disapproval thereof, the Custodian may, in its discretion, appoint such proposed Domestic Subcustodian as its Subcustodian.
Section 5.02. Foreign Subcustodians . The Custodian may, at any time and from time to time, select and appoint a Foreign Subcustodian, subject to the provisions of the 17f-5 Procedures and Guidelines included in Schedule B attached hereto. Each Foreign Subcustodian and the countries where it may hold securities and other assets of the applicable Funds shall be listed on Schedule F attached hereto, as it may be amended from time to time in accordance with the provisions of Section 9.06 hereof. Each Fund shall be responsible for informing the Custodian sufficiently in advance of a proposed investment of the Fund or one of its Series that is to be held in a country in which no Foreign Subcustodian is authorized to act, in order that there shall be sufficient time for the Custodian (i) to effect the appropriate arrangements with a proposed foreign subcustodian or (ii) to determine in its sole discretion and timely inform the Fund that such appropriate arrangements are not available through the Custodian.
Section 5.03. Termination of a Subcustodian . The Custodian shall monitor each Domestic Subcustodian and Foreign Subcustodian on a continuing basis and shall take all
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reasonable actions to ensure that each such Subcustodian performs all of its obligations in accordance with the terms and conditions of the subcustodian agreement between the Custodian and such Subcustodian. In the event that the Custodian determines that a Subcustodian has failed to substantially perform its obligations thereunder, the Custodian shall promptly notify each applicable Fund of such failure to perform. Upon receipt of Proper Instructions, the Custodian shall terminate a Subcustodian with respect to a Fund and either (i) select and appoint in its sole discretion a replacement Subcustodian in accordance with the provisions of Section 5.01 or Section 5.02, as the case may be, or (ii) determine in its sole discretion and inform the Fund in a timely manner that appropriate alternate arrangements are not available through the Custodian. In addition to the foregoing, the Custodian may, at any time in its discretion, upon written notification to each applicable Fund, terminate any Domestic Subcustodian or Foreign Subcustodian.
Section 5.04. Eligible Securities Depositories . The Custodian or a Subcustodian may at any time and from time to time place and maintain Property of a Fund or Series with an Eligible Securities Depository subject to the provisions of this Agreement, including the 17f-7 Procedures and Guidelines included in Schedule B. Each Eligible Securities Depository through which the Custodian or any Subcustodian may hold securities and other assets of the Funds shall be listed on Schedule G attached hereto, as it may be amended from time to time. Each Fund or Series and the Custodian understand and acknowledge that a Fund or Series may maintain Property with an Eligible Securities Depository prior to the receipt of the initial risk analysis required by Schedule B and prior to its inclusion on Schedule G; provided, however, that such analysis shall be completed by the Custodian and provided to the Fund or Series as soon as practicable after such Property is placed with the Eligible Securities Depository.
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ARTICLE VI.
STANDARD OF CARE; INDEMNIFICATION
Section 6.01. Standard of Care .
(a) General Standard of Care . The Custodian shall be responsible for the performance only of those duties and obligations set forth in this Agreement, including any Schedules or Appendices hereto, and/or in Proper Instructions, and shall have no implied duties or obligations hereunder. The Custodian shall exercise reasonable care, diligence, and prudence in carrying out all of these duties and obligations. The Custodian shall be liable to each Fund or Series for all losses, damages and expenses suffered or incurred by such Fund or Series as a direct result of the failure of the Custodian to exercise such reasonable care, diligence and prudence, or as a result of the negligence, fraud, willful default or willful misconduct of the Custodian.
(b) General Limitation on Liability . The Custodian shall have no liability for any indirect, consequential, special or speculative losses, damages, or expenses incurred by a Fund or Series even if Custodian has been advised of the possibility of same and regardless of the form of action. The Custodian shall not be liable for any loss that results from (i) the general risk of investing or (ii) the risk of investing or holding assets in a particular country. The Custodian shall not be liable for the insolvency of a Securities System or Eligible Securities Depository, nor shall the Custodian be liable for the insolvency of any Subcustodian that is not a branch or Affiliate of the Custodian unless the Custodian was negligent in the appointment of such Subcustodian. The Custodian also shall not be liable for any loss, damage, cost, expense, liability or claim resulting from, or caused by, force majeure, including but not limited to, nationalization, expropriation, or other governmental actions such as currency restrictions or devaluations, strikes or work stoppages (except with respect to employees of the Custodian or a branch or affiliate of the Custodian), insurrection, revolution, acts of war or terrorism, or acts of God.
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(c) Actions Prohibited by Applicable Law, Etc . In no event shall the Custodian incur liability hereunder if any Person is prevented, forbidden or delayed from performing, or omits to perform, any act that this Agreement provides shall be performed or omitted to be performed, by reason of: (i) any provision of any present or future law or regulation or order of the United States of America, or any state thereof, or of any foreign country, or political subdivision thereof or of any court of competent jurisdiction; or (ii) any act of God or war or other similar circumstance beyond the control of the Custodian, unless and to the extent that, in each case, such delay or nonperformance is caused by (1) the negligence, fraud, willful default or willful misconduct of the applicable Person, or (2) a malfunction or failure of equipment operated or used by the applicable Person other than a malfunction or failure beyond such Persons control that could not reasonably be anticipated and/or prevented by such Person.
(d) Mitigation by Custodian . Upon the occurrence of any event that causes or that the Custodian believes or a Fund reasonably believes will imminently cause any loss, damage or expense to any Fund or Series, the Custodian (i) shall take and (ii) shall take all reasonable steps to cause any applicable Domestic Subcustodian or Foreign Subcustodian to take all commercially reasonable steps to mitigate the effects of such event and to avoid continuing harm to a Fund or Series. If the Custodian must seek Proper Instructions from a Fund or Series in order either to take such commercially reasonable steps itself or to take all reasonable steps to cause any applicable Domestic Subcustodian or Foreign Subcustodian to take all commercially reasonable steps and timely requests such Proper Instructions, but the applicable Fund or Series does not provide such Proper Instructions, the Custodian (both as to itself and with respect to any applicable Subcustodian) shall have no further obligations under this Section 6.01(d).
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(e) Advice of Counsel . The Custodian shall be entitled to receive and act upon advice of counsel on all matters. The Custodian shall be without liability for any action reasonably taken or omitted in good faith pursuant to the advice of (i) counsel for the applicable Fund or Funds, or (ii) at the expense of the Custodian, such other counsel as the Custodian may choose; provided, however, with respect to the performance of any action or omission of any action upon such advice, the Custodian shall be required to conform to the standard of care set forth in Section 6.01(a).
(f) Liability for Past Records . The Custodian shall have no liability in respect of any loss, damage or expense suffered by a Fund, insofar as such loss, damage or expense arises from the performance of the Custodians duties hereunder by reason of the Custodians reliance upon records that were maintained for such Fund by entities other than the Custodian prior to the Custodians appointment as custodian for such Fund.
(g) Authorization to Take Action . Subject to the provisions of this Agreement, each Fund or Series authorizes the Custodian to take such actions as may be necessary to fulfill Custodians duties and obligations under this Agreement notwithstanding that Custodian or any of its divisions or Affiliates may have a material interest in a transaction or circumstances are such that Custodian may have a potential conflict of duty or interest in connection with a transaction, including a conflict arising from the fact that the Custodian or any of its Affiliates may provide brokerage services to other customers, act as financial adviser to the issuer of Property, act as a lender to the issuer of Property, act as agent for more than one customer in the same transaction, have a material interest in the issuance of Property or earn profits from any of the activities set forth above.
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Section 6.02. Liability of Custodian for Actions of Other Persons .
(a) Domestic Subcustodians and Foreign Subcustodians . The Custodian shall be liable for the actions or omissions of any Domestic Subcustodian selected by the Custodian, or, subject to the provisions of the Rule 17f-5 Procedures and Guidelines included in Schedule B, any Foreign Subcustodian to the same extent as if such action or omission were performed by the Custodian itself. If a Fund directs the Custodian to appoint a specific Domestic Subcustodian, the Custodian shall, with respect to such Domestic Subcustodian, be responsible only for losses arising from its own negligence, fraud, willful default or willful misconduct. In the event of any loss, damage or expense suffered or incurred by a Fund caused by or resulting from the actions or omissions of any Domestic Subcustodian or Foreign Subcustodian for which the Custodian is liable, the Custodian shall reimburse such Fund in the amount of any such loss, damage or expense.
(b) Securities Systems . Notwithstanding the provisions of Sections 6.01 and 6.02(a) to the contrary, the Custodian shall only be liable to a Fund for any loss, damage or expense suffered or incurred by such Fund resulting from the use by the Custodian or a Subcustodian of a Securities System to the extent the Custodian or Subcustodian, as applicable, is able to recover from the Securities System, unless such loss, damage or expense is caused by, or results from, the Custodians or Subcustodians negligence, fraud, willful default or willful misconduct in its interactions with the Securities System; provided, however, that in the event of any such loss, damage or expense, the Custodian shall, or cause its Subcustodians to, take all commercially reasonable steps to enforce such rights as it may have against the Securities System to protect the interests of the Fund.
(c) Eligible Securities Depositories . With respect to Eligible Securities Depositories, the Custodian shall be responsible only for those duties and obligations set forth in
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the 17f-7 Procedures and Guidelines included in Schedule B to this Agreement pursuant to the requirements of Rule 17f-7 under the Investment Company Act. The Custodian shall exercise reasonable care, diligence and prudence in carrying out its duties and responsibilities with respect to Eligible Securities Depositories.
(d) Reimbursement of Expenses . Each Fund shall reimburse the Custodian for all reasonable out-of-pocket expenses incurred by the Custodian on behalf of such Fund in connection with the fulfillment of its obligations under this Section 6.02; provided, however, that such reimbursement shall not apply to expenses occasioned by or resulting from the negligence, fraud, willful default or willful misconduct of the Custodian.
Section 6.03. Indemnification .
(a) Indemnification Obligations . Subject to the limitations set forth in this Agreement, each Fund or Series severally and not jointly agrees to indemnify and hold harmless the Custodian and its nominees, directors, officers, agents, and employees (collectively, the Indemnitees) from all loss, damage and expense (including reasonable attorneys fees), including but not limited to those arising out of claims of negligence made by third parties, suffered or incurred by the Indemnitees arising out of or related to actions taken by the Custodian on behalf of such Fund or Series in the performance of its duties and obligations under this Agreement; provided , however , that such indemnity shall not apply to any loss, damage and expense arising out of or related to the negligence, fraud, willful default or willful misconduct of any Indemnitee or to any consequential, special, or speculative loss, damage or expense. In addition, each Fund or Series agrees severally and not jointly to indemnify any Person against any liability incurred by reason of taxes assessed to such Person, or other loss, damage or expenses incurred by such Person, resulting solely from the fact that securities and other property of such Fund or Series are registered in the name of such Person; provided, however, that in no event shall such indemnification be applicable to income, franchise or similar taxes that may be imposed or assessed against any Person.
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(b) Notice of Litigation, Right to Prosecute, Etc . No Fund or Series shall be liable for indemnification for losses or expenses arising out of litigation against an Indemnitee under this Section 6.03 if such Indemnitee shall have failed promptly to notify such Fund in writing of the commencement of any litigation or proceeding brought against such Indemnitee in respect of which indemnity may be sought under this Section 6.03 to the extent that such failure to notify shall have had a material adverse effect on such Fund or Series. With respect to claims in such litigation or proceedings for which indemnity by a Fund may be sought and subject to applicable law and the ruling of any court of competent jurisdiction, such Fund shall be entitled to participate in any such litigation or proceeding and, after written notice from such Fund to any Indemnitee, such Fund may assume the defense of such litigation or proceeding with counsel of its choice at its own expense in respect of that portion of the litigation for which such Fund may be subject to an indemnification obligation; provided, however, an Indemnitee shall be entitled to participate in (but not control) at its own cost and expense, the defense of any such litigation or proceeding if such Fund has not acknowledged in writing its obligation to indemnify the Indemnitee with respect to such litigation or proceeding. If such Fund is not permitted to participate in or control such litigation or proceeding under applicable law or by a ruling of a court of competent jurisdiction, such Indemnitee shall reasonably prosecute such litigation or proceeding. An Indemnitee shall not consent to the entry of any judgment or enter into any settlement in any such litigation or proceeding without providing each applicable Fund with adequate notice of any such settlement or judgment, and without each such Funds prior written consent, which consent shall not be unreasonably withheld. All Indemnitees shall submit written evidence to each applicable Fund with respect to any cost or expense for which they are seeking
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indemnification in such form and detail as such Fund may reasonably request. With respect to the Custodian, if a Fund has acknowledged in writing its obligation to indemnify the Custodian, the Fund shall not settle for other than monetary damages a claim that materially affects the Custodian without the Custodians prior written consent.
(c) Commencement of Litigation . The Custodian may not commence any litigation on behalf of a Fund or Series except pursuant to Proper Instructions or with the applicable Funds prior written consent. Except where the Custodian is a necessary party to the litigation, a Fund or Series shall not instruct the Custodian to commence litigation without the Custodians prior consent, which consent shall not be unreasonably withheld.
Section 6.04. Funds Right to Proceed . Notwithstanding anything to the contrary contained herein, each Fund shall have, at its election upon reasonable notice to the Custodian, the right to enforce, to the extent permitted by any applicable agreement and applicable law, the Custodians rights against any Subcustodian, Securities System, Eligible Securities Depository or other Person for loss, damage or expense caused such Fund by such Subcustodian, Securities System, Eligible Securities Depository or other Person, and shall be entitled to enforce the rights of the Custodian with respect to any claim against such Subcustodian, Securities System, Eligible Securities Depository or other Person, which the Custodian may have as a consequence of any such loss, damage or expense, if and to the extent that such Fund has not been made whole for any such loss or damage. If the Custodian makes such Fund whole for any such loss or damage, the Custodian shall retain the ability to enforce its rights directly against such Subcustodian, Securities System or other Person and the Fund shall provide the Custodian with reasonable cooperation in respect of such enforcement. Upon such Funds election to enforce any rights of the Custodian under this Section 6.04, such Fund shall reasonably prosecute all actions and proceedings directly relating to the rights of the Custodian in respect of the loss,
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damage or expense incurred by such Fund; provided that, so long as such Fund has acknowledged in writing its obligation to indemnify the Custodian under Section 6.03 hereof with respect to such claim, such Fund shall retain the right to settle, compromise and/or terminate any action or proceeding in respect of the loss, damage or expense incurred by such Fund without the Custodians consent and, provided further, that if such Fund has not made an acknowledgement of its obligation to indemnify, such Fund shall not settle, compromise or terminate any such action or proceeding without the written consent of the Custodian, which consent shall not be unreasonably withheld or delayed. The Custodian agrees to cooperate with each Fund and take all actions reasonably requested by such Fund in connection with such Funds enforcement of any rights of the Custodian. Each Fund agrees to reimburse the Custodian for all reasonable out-of-pocket expenses incurred by the Custodian on behalf of such Fund in connection with the fulfillment of its obligations under this Section 6.04; provided, however, that such reimbursement shall not apply to expenses occasioned by or resulting from the negligence, fraud, willful default or willful misconduct of the Custodian. Each Fund agrees that it shall not settle for other than monetary damages a claim that materially affects the Custodian without the Custodians prior written consent.
ARTICLE VII.
COMPENSATION
Each Fund shall compensate the Custodian in an amount, and at such times, as may be agreed upon in writing, from time to time, by the Custodian and such Fund.
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ARTICLE VIII.
TERMINATION
Section 8.01. Termination of Agreement as to One or More Funds . With respect to each Fund, this Agreement shall continue in full force and effect until the first to occur of: (i) termination by the Custodian by an instrument in writing delivered or mailed to such Fund, such termination to take effect not sooner than sixty (60) days after the date of such delivery; (ii) termination by such Fund by an instrument in writing delivered or mailed to the Custodian, such termination to take effect not sooner than sixty (60) days after the date of such delivery; or (iii) termination by such Fund by written notice delivered to the Custodian, based upon such Funds determination that there is a reasonable basis to conclude that the Custodian is insolvent or that the financial condition of the Custodian is deteriorating in any material respect, in which case termination shall take effect upon the Custodians receipt of such notice or at such later time as such Fund shall designate. In the event of termination pursuant to this Section 8.01 by any Fund, each Terminating Fund shall make payment of all accrued fees and unreimbursed expenses with respect to such Terminating Fund within a reasonable time following termination and delivery of a statement to the Terminating Fund setting forth such fees and expenses. In the event of a termination by a Fund or the Custodian, each Fund shall identify in any notice of termination or in a subsequent writing, a successor custodian or custodians to which the Property of the Terminating Fund shall, upon termination of this Agreement with respect to such Terminating Fund, be delivered. In the event that securities and other assets of such Terminating Fund remain in the possession of the Custodian after the date of termination hereof with respect to such Terminating Fund owing to failure of the Terminating Fund to appoint a successor custodian (i) the Custodian shall be entitled to compensation for its services in accordance with the fee schedule most recently in effect, for such period as the Custodian retains possession of such
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securities and other assets, and the provisions of this Agreement relating to the duties and obligations of the Custodian and the Terminating Fund shall remain in full force and effect and (ii) the Custodian may (but shall be under no obligation to), upon 30 days written notice to the Terminating Fund appoint a successor custodian provided that such successor custodian is eligible to hold the Terminating Funds assets and the Terminating Fund shall not have objected to such appointment. In the event of the appointment of a successor custodian, it is agreed that the Property owned by a Terminating Fund and held by the Custodian, any Subcustodian or nominee shall be delivered to the successor custodian; and the Custodian agrees to cooperate with such Terminating Fund in the execution of documents and performance of other actions necessary or desirable in order to substitute the successor custodian for the Custodian under this Agreement. Upon the transfer of the assets of a Terminating Fund to a successor custodian, the Custodian may deduct from such assets prior to the transfer an amount equal to the sum of any unpaid fees or expenses to which the Custodian is entitled by reason of its services as Custodian.
Section 8.02. Termination as to One or More Series . This Agreement may be terminated as to one or more Series of a Fund (but less than all Series) by delivery of an amended Schedule A deleting such Series pursuant to Section 9.06 hereof, in which case termination as to such deleted Series shall take effect thirty (30) days after the date of such delivery. The execution and delivery of an amended Schedule A which deletes one or more Series shall constitute a termination of this Agreement only with respect to such deleted Series, shall be governed by the preceding provisions of Section 8.01 as to the identification of a successor custodian and the delivery of Property of the Series so deleted, and shall not affect the obligations of the Custodian and any Fund hereunder with respect to the other Series set forth in Schedule A, as amended from time to time.
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ARTICLE IX.
MISCELLANEOUS
Section 9.01. Execution of Documents, Etc .
(a) Actions by each Fund . Upon request, each Fund shall execute and deliver to the Custodian such proxies, powers of attorney or other instruments as may be reasonable and necessary or desirable in connection with the performance by the Custodian or any Subcustodian of their respective obligations to such Fund under this Agreement or any applicable subcustodian agreement with respect to such Fund, provided that the exercise by the Custodian or any Subcustodian of any such rights shall in all events be in compliance with the terms of this Agreement.
(b) Actions by Custodian . Upon receipt of Proper Instructions, the Custodian shall execute and deliver to each applicable Fund or to such other parties as such Fund(s) may designate in such Proper Instructions, all such documents, instruments or agreements as may be reasonable and necessary or desirable in order to effectuate any of the transactions contemplated hereby.
Section 9.02. Representative Capacity; Nonrecourse Obligations . A copy of the articles of incorporation, declaration of trust or other organizational document of each Fund is on file with the secretary of the state of the Funds formation, and notice is hereby given that this Agreement is not executed on behalf of the directors or trustees of any Fund as individuals, and the obligations of this Agreement are not binding upon any of the directors, trustees, officers, shareholders or partners of any Fund individually, but are binding only upon the Property of each Fund or Series. The Custodian agrees that no shareholder, director, trustee, officer or partner of any Fund may be held personally liable or responsible for any obligations of any Fund arising out of this Agreement.
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Section 9.03. Several Obligations of the Funds and the Series . With respect to any obligations of a Fund on its own behalf or on behalf of any of its Series arising out of this Agreement, including, without limitation, the obligations arising under Sections 3.28, 6.03, 6.04 and Article VII hereof, the Custodian shall look for payment or satisfaction of any obligation solely to the assets and property of the applicable Fund or Series to which such obligation relates as though each Fund had separately contracted with the Custodian by separate written instrument on its own behalf and with respect to each of its Series.
Section 9.04. Representations and Warranties .
(a) Representations and Warranties of Each Fund . Each Fund hereby severally and not jointly represents and warrants that each of the following shall be true, correct and complete with respect to each Fund at all times during the term of this Agreement: (i) the Fund is duly organized under the laws of its jurisdiction of organization and is registered as an open-end management investment company or closed-end management investment company, as the case may be, under the Investment Company Act, and (ii) the execution, delivery and performance by the Fund of this Agreement are (1) within its power, (2) have been duly authorized by all necessary action, and (3) will not (a) contribute to or result in a breach of or default under or conflict with any existing law, order, regulation or ruling of any governmental or regulatory agency or authority, or (b) violate any provision of the Funds articles of incorporation, declaration of trust or other organizational document, or bylaws, or any amendment thereof or any provision of its most recent Prospectus or, if any, Statement of Additional Information.
(b) Representations and Warranties of the Custodian . The Custodian hereby represents and warrants to each Fund that each of the following shall be true, correct and complete at all times during the term of this Agreement: (i) the Custodian is duly organized
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under the laws of its jurisdiction of organization and qualifies to act as a custodian and foreign custody manager to open-end management investment companies or closed-end investment companies, as the case may be, under the provisions of the Investment Company Act; and (ii) the execution, delivery and performance by the Custodian of this Agreement are (1) within its power, (2) have been duly authorized by all necessary action, and (3) will not (a) contribute to or result in a breach of or default under or conflict with any existing law, order, regulation or ruling of any governmental or regulatory agency or authority, or (b) violate any provision of the Custodians corporate charter, or other organizational document, or bylaws, or any amendment thereof.
Section 9.05. Entire Agreement . This Agreement constitutes the entire understanding and agreement of each Fund, on the one hand, and the Custodian, on the other, with respect to the subject matter hereof and, accordingly, supersedes as of the effective date of this Agreement any custodian agreement heretofore in effect between each Fund and the Custodian.
Section 9.06. Waivers and Amendments . No provision of this Agreement may be waived, amended or terminated except by a statement in writing signed by the party against which enforcement of such waiver, amendment or termination is sought; provided, however: (i) Schedule A listing each Fund and each Series for which the Custodian serves as custodian may be amended from time to time to add one or more Funds or one or more Series of one or more Funds, by each applicable Funds execution and delivery to the Custodian of an amended Schedule A, and the execution of such amended Schedule A by the Custodian, in which case such amendment shall take effect immediately upon execution by the Custodian. Schedule A may also be amended from time to time to delete one or more Funds or one or more Series (but less than all of the Series) of one or more Funds, by each applicable Funds execution and delivery to the Custodian of an amended Schedule A, in which case such amendment shall take
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effect thirty (30) days after such delivery, unless otherwise agreed by the Custodian and each applicable Fund in writing; (ii) Schedule B setting forth the 17f-5/17f-7 Procedures and Guidelines may be amended only by an instrument in writing executed by each applicable Fund and the Custodian; (iii) Schedule C setting forth the Custodians duties and obligations with respect to tax services may be amended only by an instrument in writing executed by each applicable Fund and the Custodian; (iv) Schedule D setting forth the Custodians duties and obligations with respect to proxy services may be amended only by an instrument in writing executed by each applicable Fund and the Custodian; (v) Schedule E relating to claims may be amended only by an instrument in writing executed by each applicable Fund and the Custodian; and (vi) Schedule F setting forth the foreign subcustodian bank network used by each Fund or Series may be amended by the Custodian at any time upon prompt written notice to each applicable Fund.
Section 9.07. Interpretation . In connection with the operation of this Agreement, the Custodian and any Fund may agree from time to time on such provisions interpretative of or in addition to the provisions of this Agreement with respect to such Fund as may in their joint opinion be consistent with the general tenor of this Agreement. Any such interpretative or additional provisions shall be in a writing signed by both parties and shall be annexed hereto, provided that no such interpretative or additional provisions shall contravene any applicable federal or state regulations or any provision of the articles of incorporation or analogous governing document of the Fund. No interpretative or additional provisions made as provided in the preceding sentence shall be deemed to be an amendment of this Agreement or affect any other Fund.
46
Section 9.08. Captions . Headings contained in this Agreement, which are included as convenient references only, shall have no bearing upon the interpretation of the terms of the Agreement or the obligations of the parties hereto.
Section 9.09. Governing Law . Insofar as any question or dispute may arise in connection with this Agreement, the provisions of this Agreement shall be construed in accordance with and be governed by the laws of the State of New York without reference to the conflict of laws provisions of the State of New York.
Section 9.10. Notices . Except in the case of Proper Instructions, notices and other writings contemplated by this Agreement shall be delivered by hand or by facsimile transmission (provided that in the case of delivery by facsimile transmission, notice shall also be mailed postage prepaid) to the parties at the following addresses:
1. If to any Fund:
c/o Merrill Lynch Investment Managers, L.P.
800 Scudders Mill Road
Plainsboro, New Jersey 08536
Attn: Donald C. Burke
Telephone: (609) 282-7085
Telefax: (609) 282-7231
2. If to the Custodian:
State Street Bank and Trust Company
One Heritage Drive, 2 North
North Quincy, MA 02171
Attn: Linda Murphy
Telephone: (617) 985-6308
Telefax: (617) 537-5152
or to such other address as a Fund or the Custodian may have designated in writing to the other.
Section 9.11. Assignment . This Agreement shall be binding on and shall inure to the benefit of each Fund severally and the Custodian and their respective successors and assigns, provided that, subject to the provisions of Section 8.01 hereof, neither the Custodian nor any Fund may assign this Agreement or any of its rights or obligations hereunder without the prior written consent of the other party.
47
Section 9.12. Counterparts . This Agreement may be executed in any number of counterparts, each of which shall be deemed an original. With respect to each Fund, this Agreement shall become effective when an amended Schedule A including the Fund has been signed and delivered by such Fund to the Custodian.
Section 9.13. Confidentiality; Survival of Obligations . The parties hereto agree that each shall treat confidentially the terms and conditions of this Agreement and all information provided by each party to the other regarding its business and operations. All confidential information provided by a party hereto, including non-public personal information within the meaning of Securities and Exchange Commission Regulation S-P, shall be used by any other party hereto solely for the purpose of rendering services pursuant to this Agreement and, except as may be required in carrying out this Agreement, shall not be disclosed to any third party without the prior consent of such providing party. The foregoing shall not be applicable to any information that is publicly available when provided or thereafter becomes publicly available other than through a breach of this Agreement, or that is required to be disclosed by any bank examiner of the Custodian or any Subcustodian, any auditor of the parties hereto, by judicial or administrative process or otherwise by applicable law or regulation. The provisions of this Section 9.13 and Sections 9.01, 9.02, 9.03, 9.09, 3.27, 4.01(a), 4.04, 8.01, Article VI and Article VII hereof, and any other rights or obligations incurred or accrued by any party hereto prior to termination of this Agreement shall survive any termination of this Agreement.
Section 9.14. Shareholder Communications . Rule 14b-2 under the Securities Exchange Act of 1934, as amended, requires banks that hold securities for the account of customers to respond to requests by issuers of securities for the names, addresses and holdings of beneficial owners of
48
securities of that issuer held by the bank unless the beneficial owner has expressly objected to disclosure of this information. In order to comply with the rule, the Custodian needs each Fund to indicate whether the Fund authorizes the Custodian to provide the Funds name, address, and share position to requesting companies whose stock the Fund owns. If a Fund tells the Custodian no, the Custodian will not provide this information to requesting companies. If the Fund tells the Custodian yes or does not check either yes or no below, the Custodian is required by the rule to treat the Fund as consenting to disclosure of this information for all securities owned by the Fund or any funds or accounts established by the Fund. Please indicate below whether the Funds consent or object by checking one of the alternatives below
YES ¨ The Custodian is authorized to release each Funds name, address, and share positions.
NO ¨ The Custodian is not authorized to release each Funds name, address, and share positions.
SIGNATURES FOLLOW
49
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed in its name and on its behalf on the day and year first above written.
Each of the Investment Companies Listed on Schedule A Attached Hereto | State Street Bank and Trust Company | |||||||
By: |
/s/ Donald Burke |
By: |
/s/ Joseph L. Hooley |
|||||
Name: | Donald Burke | Name: | Joseph L. Hooley | |||||
Title: | Treasurer | Title: | Executive Vice President |
50
Exhibit 11
August 22, 2013
BlackRock Corporate High Yield Fund VI, Inc.
55 East 52nd Street
New York, New York 10055
Ladies and Gentlemen:
We have acted as special Maryland counsel to BlackRock Corporate High Yield Fund VI, Inc., a Maryland corporation (the Company), in connection with the Registration Statement on Form N-14 (the Registration Statement) to be filed on the date hereof with the Securities and Exchange Commission under the Securities Act of 1933, as amended (the Act), which relates to the registration of 110,000,000 shares (the Shares) of common stock, par value $0.10 per share, of the Company to be issued pursuant to (1) an Agreement and Plan of Reorganization between the Company and BlackRock High Yield Trust, (2) an Agreement and Plan of Reorganization between the Company and BlackRock Corporate High Yield Fund, Inc., (3) an Agreement and Plan of Reorganization between the Company and BlackRock Corporate High Yield Fund III, Inc., (4) an Agreement and Plan of Reorganization between the Company, BlackRock High Incomes Shares and a new direct, wholly-owned subsidiary of the Company and (5) an Agreement and Plan of Reorganization between the Company and BlackRock Corporate High Yield Fund V, Inc.
We have examined the Registration Statement and such corporate records, certificates and documents as we deemed necessary for the purpose of this opinion. We have relied as to certain factual matters on information obtained from public officials and officers of the Company. Based on that examination, we advise you that in our opinion the Shares, when approved by the stockholders of the Company and when issued under the circumstances contemplated in the Registration Statement, will be legally issued, fully paid and non-assessable.
We express no opinion with respect to the laws of, or the effect or applicability of the laws of, any jurisdiction other than, and our opinion expressed herein is limited to, the laws of the State of Maryland. The opinion expressed herein is limited to the matters expressly set forth in this letter and no other opinion should be inferred beyond the matters expressly stated.
We hereby consent to the use of our name under the heading Legal Matters in the Joint Proxy Statement/Prospectus forming a part of the Registration Statement and to the filing of this opinion as an exhibit to the Registration Statement. In giving our consent, we do not thereby admit that we are in the category of persons whose consent is required under Section 7 of the Act or the rules and regulations of the Securities and Exchange Commission thereunder.
Very truly yours,
Miles & Stockbridge P.C.
By: /s/ Christopher R. Johnson
Principal
Exhibit 13(a)
AMENDED AND RESTATED CREDIT AGREEMENT
dated as of March 3, 2011
among
BLACKROCK CORPORATE HIGH YIELD FUND VI, INC.,
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
Page | ||||||||
ARTICLE I. DEFINITIONS | 1 | |||||||
SECTION 1.01. | Definitions | 1 | ||||||
SECTION 1.02. | Accounting Terms and Determinations | 17 | ||||||
SECTION 1.03. | Other Interpretive Provisions | 17 | ||||||
ARTICLE II. THE CREDIT | 18 | |||||||
SECTION 2.01. | Commitments to Lend | 18 | ||||||
SECTION 2.02. | Notice of Borrowings | 18 | ||||||
SECTION 2.03. | Notice to Banks; Funding of Loans | 19 | ||||||
SECTION 2.04. | Loan Accounts; Notes; Records | 19 | ||||||
SECTION 2.05. | Mandatory Payments; Optional Prepayments | 20 | ||||||
SECTION 2.06. | Interest Rates | 21 | ||||||
SECTION 2.07. | Fees | 22 | ||||||
SECTION 2.08. | Termination and Reduction of Commitments | 22 | ||||||
SECTION 2.09. | Extension of Termination Date | 23 | ||||||
SECTION 2.10. | General Provisions as to Payments | 24 | ||||||
SECTION 2.11. | Computation of Interest and Fees | 24 | ||||||
SECTION 2.12. | Taxes | 25 | ||||||
ARTICLE III. CONDITIONS | 28 | |||||||
SECTION 3.01. | Effectiveness | 28 | ||||||
SECTION 3.02. | All Borrowings | 30 | ||||||
SECTION 3.03. | Security | 30 | ||||||
ARTICLE IV. REPRESENTATIONS AND WARRANTIES | 31 | |||||||
SECTION 4.01. | Existence and Power; Investment Company | 31 | ||||||
SECTION 4.02. | Authorization; Execution and Delivery, Etc. | 31 | ||||||
SECTION 4.03. | Noncontravention | 31 | ||||||
SECTION 4.04. | Governmental Authorizations; Private Authorizations | 32 | ||||||
SECTION 4.05. | Regulations T, U and X | 32 | ||||||
SECTION 4.06. | Non-Affiliation with Banks | 32 | ||||||
SECTION 4.07. | Subsidiaries | 32 | ||||||
SECTION 4.08. | Financial Information | 32 |
i
TABLE OF CONTENTS
(continued)
Page | ||||||||
SECTION 4.09. | Litigation | 32 | ||||||
SECTION 4.10. | ERISA | 33 | ||||||
SECTION 4.11. | Taxes | 33 | ||||||
SECTION 4.12. | Compliance | 33 | ||||||
SECTION 4.13. | Fiscal Year | 33 | ||||||
SECTION 4.14. | Full Disclosure | 33 | ||||||
SECTION 4.15. | Offering Document | 34 | ||||||
SECTION 4.16. | Debt | 34 | ||||||
SECTION 4.17. | Account | 34 | ||||||
SECTION 4.18. | Foreign Assets, Control Regulations | 34 | ||||||
ARTICLE V. COVENANTS | 35 | |||||||
SECTION 5.01. | Information | 35 | ||||||
SECTION 5.02. | Payment of Obligations | 36 | ||||||
SECTION 5.03. | Maintenance of Insurance | 36 | ||||||
SECTION 5.04. | Conduct of Business and Maintenance of Existence | 36 | ||||||
SECTION 5.05. | Compliance with Laws | 37 | ||||||
SECTION 5.06. | Inspection of Property, Books and Records | 37 | ||||||
SECTION 5.07. | Debt | 37 | ||||||
SECTION 5.08. | Liens | 38 | ||||||
SECTION 5.09. | Consolidations, Mergers and Sales of Assets | 38 | ||||||
SECTION 5.10. | Use of Proceeds | 39 | ||||||
SECTION 5.11. | Compliance with Prospectus | 39 | ||||||
SECTION 5.12. | Non-Affiliation with Banks | 40 | ||||||
SECTION 5.13. | Regulated Investment Company | 40 | ||||||
SECTION 5.14. | No Subsidiary | 40 | ||||||
SECTION 5.15. | ERISA | 40 | ||||||
SECTION 5.16. | Fiscal Year | 40 | ||||||
SECTION 5.17. | Regulation U | 40 | ||||||
SECTION 5.18. | Custodian | 40 | ||||||
SECTION 5.19. | Asset Coverage | 40 |
ii
TABLE OF CONTENTS
(continued)
Page | ||||||||
SECTION 5.20. | Further Assurances | 38 | ||||||
ARTICLE VI. DEFAULTS | 38 | |||||||
SECTION 6.01. | Events of Default | 38 | ||||||
SECTION 6.02. | Remedies | 40 | ||||||
ARTICLE VII. THE AGENT | 40 | |||||||
SECTION 7.01. | Appointment and Authorization | 40 | ||||||
SECTION 7.02. | Action by Agent | 40 | ||||||
SECTION 7.03. | Consultation with Experts | 40 | ||||||
SECTION 7.04. | Liability of Agent | 40 | ||||||
SECTION 7.05. | Indemnification | 41 | ||||||
SECTION 7.06. | Credit Decision | 41 | ||||||
SECTION 7.07. | Successor Agent | 41 | ||||||
SECTION 7.08. | Agent as Bank | 42 | ||||||
SECTION 7.09. | Distribution by Agent | 42 | ||||||
SECTION 7.10. | Delinquent Banks | 42 | ||||||
ARTICLE VIII. CHANGE IN CIRCUMSTANCES | 43 | |||||||
SECTION 8.01. | Additional Costs; Capital Adequacy | 43 | ||||||
SECTION 8.02. | Basis for Determining Interest Rate Inadequate or Unfair | 44 | ||||||
SECTION 8.03. | Illegality | 45 | ||||||
SECTION 8.04. | Overnight Rate Loans Substituted for Affected LIBOR Loans | 45 | ||||||
SECTION 8.05. | Replacement Banks | 46 | ||||||
SECTION 8.06. | Indemnity | 46 | ||||||
ARTICLE IX. MISCELLANEOUS | 46 | |||||||
SECTION 9.01. | Notices | 46 | ||||||
SECTION 9.02. | No Waivers | 46 | ||||||
SECTION 9.03. | Expenses; Documentary Taxes; Indemnification | 47 | ||||||
SECTION 9.04. | Set Off | 47 | ||||||
SECTION 9.05. | Amendments and Waivers | 48 | ||||||
SECTION 9.06. | Successors and Assigns | 49 |
iii
TABLE OF CONTENTS
(continued)
Page | ||||||||
SECTION 9.07. | Governing Law; Submission to Jurisdiction; Choice of Forum | 53 | ||||||
SECTION 9.08. | WAIVER OF JURY TRIAL | 53 | ||||||
SECTION 9.09. | Confidentiality | 54 | ||||||
SECTION 9.10. | USA Patriot Act | 54 | ||||||
SECTION 9.11. | Miscellaneous | 55 | ||||||
SECTION 9.12. | Transitional Arrangements | 55 |
iv
Exhibits :
|
||
Exhibit A - | Form of Note | |
Exhibit B - | Form of Notice of Borrowing | |
Exhibit C - | Form of Notice of Conversion | |
Exhibit D | Form of Assignment and Acceptance | |
Schedules : | ||
Schedule 1 - | Addresses for Notices, Lending Offices, Commitment Amounts and Commitment Percentages | |
Schedule 2 - | Pricing Service Schedule |
AMENDED AND RESTATED CREDIT AGREEMENT
AMENDED AND RESTATED CREDIT AGREEMENT , dated as of March 3, 2011 (this Agreement), by and among BLACKROCK CORPORATE HIGH YIELD FUND VI, INC. , a Maryland corporation and closed-end management investment company (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).
WHEREAS , pursuant to a Credit Agreement dated as of March 5, 2009 (as amended from time to time, the Prior Credit Agreement) by and among the Borrower, the Banks and the Agent, the Banks made financing available to the Borrower for the purposes set forth therein; and
WHEREAS , the Borrower has requested to amend and restate the Prior Credit Agreement, and the Banks and the Agent are willing to amend and restate the Prior Credit Agreement and to continue to provide financing to the Borrower on the terms and conditions set forth herein;
NOW, THEREFORE , the Borrower, the Banks and the Agent agree that on and as of the Effective Date (as hereinafter defined) the Prior Credit Agreement is hereby amended and restated in its entirety on the terms and conditions set forth herein, and shall remain in full force and effect only as expressly set forth herein.
The parties hereto hereby agree as follows:
ARTICLE I.
DEFINITIONS
SECTION 1.01. Definitions. The following terms, as used herein, have the following meanings:
Act has the meaning set forth in Section 9.10.
Account means the account that the Custodian has opened and maintains for the Borrower pursuant to the terms and conditions of the Custody Agreement.
Additional Commitment has the meaning set forth in Section 2.09(b). Additional Commitment Bank has the meaning set forth in Section 2.09(b).
Adjusted Net Asset Limit means as at any date of determination, an amount equal to thirty three and one third percent (33 1/3%) of the Adjusted Net Assets of the Borrower as of such date.
Adjusted Net Assets means as at any date of determination, an amount equal to (a) the value of the Adjusted Total Assets of the Borrower minus (b) the Total Liabilities of the
Borrower that are not Senior Securities Representing Indebtedness. For purposes of calculating the Adjusted Net Assets, the amount of any liability included in such Total Liabilities shall be equal to the greater of (i) the outstanding amount of such liability or (ii) the fair market value of all assets pledged or otherwise segregated for the benefit of the applicable creditor to secure such liability. For the avoidance of doubt, when calculating the outstanding amount of any liability in respect of any derivative contract, the liability shall be the maximum amount of any termination or loss payment required to be paid by such Person if such derivative contract were, at the time of determination, to be terminated by reason of any event of default or early termination event thereunder, whether or not such event of default or early termination event has in fact occurred.
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.
Adjusted Total Assets means, as of any date, the Borrowers Total Assets as of such date provided , that:
(1) if the securities of any one issuer constitute more than 5% of Total Assets, the amount of such excess over 5% of Total Assets shall not be included in the calculation of Adjusted Total Assets;
(2) if the securities of the issuers in a single industry constitute more than 20% of Total Assets, the amount of such excess over 20% of Total Assets shall not be included in the calculation of Adjusted Total Assets;
(3) if the securities which are not rated by either S&P or Moodys constitute more than 20% of Total Assets, the amount of such excess over 20% of Total Assets shall not be included in the calculation of Adjusted Total Assets;
(4) if the securities of Non-Investment Grade Foreign Issuers constitute more than 10% of Total Assets, the amount of such excess over 10% of Total Assets shall not be included in the calculation of Adjusted Total Assets;
(5) if the aggregate amount of bond securities rated lower than B- by S&P or B3 by Moodys constitute more than 30% of Total Assets, the amount of such excess over 30% of Total Assets shall not be included in the calculation of Adjusted Total Assets;
(6) if the aggregate amount of Eligible Loan Assets with a Value of less than 50% of par value constitute more than 20% of Total Assets, the amount of such excess over 20% of Total Assets shall not be included in the calculation of Adjusted Total Assets;
(7) if the aggregate amount of Eligible Distressed Loan Assets constitute more than 5% of Total Assets, the amount of such excess over 5% of Total Assets shall not be included in the calculation of Adjusted Total Assets;
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(8) if the Asset Value of any securities included in Total Assets is computed in the manner set forth in paragraph (b)(iv) of the definition of Asset Value, and the aggregate amount of such securities constitute more than 25% of Total Assets, the amount of such excess over 25% of Total Assets shall not be included in the calculation of Adjusted Total Assets; and
(9) no asset shall be included in the calculation of Adjusted Total Assets if it (A) constitutes an Illiquid Asset, Distressed Asset or an asset which is the subject of a reverse repurchase agreement, dollar roll, securities lending transaction or otherwise segregated to satisfy any obligations with respect thereto, (B) is not permitted to be purchased by the Borrower in accordance with the Borrowers Prospectus, or (C) is not held in or credited to the Account.
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.
Affiliate has the meaning ascribed to the term Affiliated Person in the Investment Company Act and the rules and regulations thereunder.
Affiliated Person has the meaning ascribed to that term in the Investment Company Act and the rules and regulations thereunder.
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 $213,800,000.
Agent has the meaning set forth in the preamble to this Agreement. Agreement has the meaning set forth in the preamble to this Agreement.
Applicable Law means any Law of any Authority, including, without limitation, all Federal and state banking or securities laws, to which the Person in question 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 Overnight Rate Loans, its Domestic Lending Office, and (b) in the case of its LIBOR Loans, its LIBOR Lending Office.
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 as such Value is required to be computed by the Borrower in accordance with the Prospectus 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
-3-
(b) when calculating the Asset Value of any asset, the Borrower shall calculate such value daily in good faith using one of the following procedures: (i) a quotation received from a Pricing Service, (ii) a quotation received from an independent dealer making a market in such security, (iii) the last closing price thereof established on a public trading market or (iv) solely to the extent none of the procedures set forth in any of (i), (ii) or (iii) of this paragraph (b) is readily available on the relevant date of determination, a fair valuation determination using procedures approved by the Board of Board of Directors of the Borrower; provided , that for any asset which is not valued pursuant to (i), (ii), (iii) or (iv) above, the Asset Value of such asset shall be deemed zero for purposes of this definition.
Assignee has the meaning set forth in Section 9.06(c).
Authority means the government of the United States or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union or the European Central Bank).
Authorized Signatory means any duly authorized officer of the Borrower or other Person which has been authorized by the Borrowers Board of Directors to execute this Agreement, any other Loan Document or document pertaining to this Agreement on behalf of the Borrower, provided that the Agent shall have received a manually signed certificate of such officer or other Person bearing a manual specimen signature of such officer or other Person.
Available Amount means, as of any date of determination, an amount equal to the lesser of (a) the Aggregate Commitment Amount as then in effect; (b) the Maximum Amount and (c) the Adjusted Net Asset Limit as then in effect. For the avoidance of doubt, any required repayments of Loans hereunder as a result of the Borrower exceeding the Available Amount as a result of paragraph (c) hereof shall be subject to the provisions of Section 2.05(b) below.
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), and their respective successors.
Base Rate means the higher of (a) the annual rate of interest announced from time to time by State Street at its head office in Boston, Massachusetts, as its prime rate and (b) one-half of one percent (1/2%) above the Federal Funds Rate as in effect from time to time.
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 Multi-employer 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 hereto.
Borrowing Date has the meaning set forth in Section 2.02(a).
-4-
Cash means a demand deposit of United States dollars immediately available on the day in question in an account maintained by the Custodian.
Charter Documents means, collectively, the certificate of incorporation, by-laws and other organizational or governing documents of the Borrower.
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) or increased from time to time pursuant to Section 9.06(c).
Commitment Percentage means, with respect to each Bank, the percentage set forth opposite the name of such Bank on Schedule 1 attached hereto as such Banks percentage of the Aggregate Commitment Amounts.
Confidential Material has the meaning set forth in Section 9.09.
Consent Date has the meaning set forth in Section 2.09(a).
Covered Person has the meaning set forth in Section 9.03(b).
Custodian means State Street Bank and Trust Company.
Custody Agreement means that certain Master Custody Agreement, dated as of September 21, 2001, among the Borrower, the other investment companies party thereto and the Custodian, as the same may be amended, 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 Debt of others secured by a Lien on any asset of such Person, whether or not such Debt is assumed or Guaranteed by such Person, (f) all obligations of such Person under Guarantees, all obligations to reimburse the issuer in respect of letters of credit or under performance or surety bonds, or other similar obligations, (g) all obligations of such Person in respect of judgments, (h) all obligations of such Person in respect of bankers acceptances and under reverse repurchase agreements, (i) all obligations of such Person in respect of Financial Contracts, and (j) all obligations of such Person that are senior securities for purposes of the Investment Company Act.
Default means any condition or event which with the giving of notice or lapse of time or both would, unless cured or waived, become an Event of Default.
-5-
Delinquent Bank has the meaning set forth in Section 7.10(a).
Distressed Asset means any asset if (a) the obligor thereof is subject to a bankruptcy, insolvency, liquidation or other similar action or proceeding, (b) the obligor thereof shall have failed to make any payment of principal or interest in respect of such asset when due (whether at scheduled maturity or any accelerated date of maturity or any other date fixed for payment or prepayment thereof or otherwise) beyond any period of grace provided with respect thereto, or (c) such asset is classified by the Borrower as non-performing pursuant to Generally Accepted Accounting Principles.
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 Overnight Rate Loans.
Effective Date means the date this Agreement becomes effective in accordance with Section 3.01.
Eligible Assets means Cash, Eligible Government Securities, Eligible Commercial Paper, Eligible Debt Securities, Eligible Money Market Funds, Eligible Distressed Loan Assets and Eligible Loan Assets, in each case to the extent that they are classified as assets on the balance sheet of the Borrower in accordance with Generally Accepted Accounting Principles.
Eligible Commercial Paper means a note of an issuer located in the United States or elsewhere having a maturity of 270 days or less and which is free and clear of any Adverse Claims other than Permitted Liens and in which the Agent has, for the benefit of the Agent and the Banks, a Senior Lien.
Eligible Debt Securities means debt securities of issuers located in the United States or elsewhere, including, without limitation, corporate bond obligations, which are free and clear of any Adverse Claims other than Permitted Liens and in which the Agent has, for the benefit of the Agent and the Banks, a Senior Lien, 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 Distressed Loan Assets means any asset that is (a) a direct interest in or a participation interest in or by assignment, novation or otherwise, of a corporate loan obligation or other extension of credit, which is free and clear of any Adverse Claims other than Permitted Liens and in which the Agent has, for the benefit of the Agent and the Banks, a Senior Lien, (b) not a Distressed Asset, and (c) considered a distressed asset insofar as certain defaults have occurred with respect thereto, provided no payment default has occurred with respect thereto and all payments to be made by the issuer thereunder have been made in cash on the date when such payments are due and payable.
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Eligible Government Securities means government securities (as defined in the Investment Company Act), which for the purposes hereof shall include any securities issued or guaranteed as to principal or interest by the Government of the United States, which are free and clear of any Adverse Claims other than Permitted Liens and in which the Agent has, for the benefit of the Agent and the Banks, a Senior Lien.
Eligible Loan Assets means any asset that is a direct interest in or a participation interest in or by assignment, novation or otherwise, of a corporate loan obligation or other extension of credit, which are free and clear of any Adverse Claims other than Permitted Liens and in which the Agent has, for the benefit of the Agent and the Banks, a Senior Lien.
Eligible Money Market Funds means money market funds regulated by, and subject to, the Investment Company Act, including, without limitation, Rule 2a-7 thereunder, or any money market fund or cash sweep vehicle that is not subject to the Investment Company Act but is operated in accordance with Rule 2a-7 thereunder, which are free and clear of any Adverse Claims other than Permitted Liens and in which the Agent has, for the benefit of the Agent and the Banks, a Senior Lien.
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.
Event of Default has the meaning set forth in Section 6.01.
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.
Excluded Taxes means, with respect to the Agent, any Bank or any other recipient of any payment to be made by or on account of any obligation of the Borrower hereunder, (a) Taxes imposed on or measured by its overall net income (however denominated), by the jurisdiction (or any political subdivision thereof) under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Bank, in which its Applicable Lending Office is located, (b) any branch profits Taxes imposed by the United States or any similar Tax imposed by any other jurisdiction in which the Borrower is located, (c) any backup withholding Tax that is required by the Internal Revenue Code to be withheld from amounts payable to a Bank that has failed to comply with clause (A) of Section 2.12(e)(ii), and (d) in the case of a Foreign Bank (other than an assignee pursuant to a request by the Borrower under Section 8.05), any United States withholding Tax that (i) is required to be imposed on amounts payable to such Foreign Bank pursuant to the laws in force at the time such Foreign Bank becomes a party hereto (or designates a new lending office) or (ii) is attributable to such Foreign Banks failure or inability
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(other than as a result of a change in law) to comply with clause (B) of Section 2.12(e)(ii), except to the extent that such Foreign Bank (or its assignor, if any) was entitled, at the time of designation of a new lending office (or assignment), to receive additional amounts from the Borrower with respect to such withholding Tax pursuant to Section 2.12(a)(ii) or (iii).
Executive Order has the meaning set forth in Section 4.18.
Existing Termination Date has the meaning set forth in Section 2.09(a).
Failure has the meaning set forth in Section 7.10(b).
Federal Funds Rate means, for any day, a fluctuating rate per annum equal to the rate appearing on Bloomberg page BTMM as of 9:30 a.m. (Boston, Massachusetts 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, Massachusetts 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.
Fee Letter means that certain fee letter agreement dated as of the date hereof by and between the Borrower and the Agent.
Financial Contract Liability means, at any time, the net amount, if any, that a Person would be obligated, in accordance with each Financial Contract to which such Person is a party, to pay to the relevant counterparty thereto if such Financial Contract and all transactions thereunder terminated at such time in accordance therewith on a complete no-fault basis (including, without limitation, any such amounts that would not be recorded as a liability under Generally Accepted Accounting Principles, such as fees payable upon early termination of a Financial Contract).
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 for purposes of the Investment Company Act.
Foreign Assets Control Regulations has the meaning set forth in Section 4.18.
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.
Fundamental Change has the meaning set forth in Section 5.09.
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Fundamental Policies means those Investment Policies and Restrictions which are identified as fundamental in the Borrowers Prospectus dated May 27, 2003.
Generally Accepted Accounting Principles has the meaning set forth in Section 1.02.
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.
Guarantee by any Person means any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Debt or other obligation 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 Debt or other obligation (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 Debt or other obligation 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.
Illiquid Asset means, as of any date, any asset for which (a) there is no established public or private institutional trading market, such that such asset may be reasonably expected to be sold in such market within ten (10) days in the ordinary course of business at a price approximating the Value of such asset on such date subject only to fluctuations in the market price therefor, (b) the fair market value of such asset is not readily ascertainable from recognized independent sources in the market for such assets or is not readily determinable using procedures approved by the Board of Directors of the Borrower, or (c) are otherwise categorized as illiquid securities by the Borrower or the Investment Adviser.
Indemnified Taxes means Taxes other than Excluded Taxes.
Interest Period means, with respect to each LIBOR borrowing, initially the period commencing on the date of such borrowing and ending 7, 30, 60 or 90 days 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 such LIBOR Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding LIBOR Business Day;
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(b) any 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;
(c) any Interest Period which would otherwise end after the Termination Date shall end on the Termination Date;
(d) if the Borrower fails to give notice as provided in Section 2.02(b) it shall be deemed to have requested a conversion of the affected LIBOR Loan to an Overnight Rate Loan; and
(e) all LIBOR Loans outstanding at any time shall end on no more than five different dates.
Internal Revenue Code means the Internal Revenue Code of 1986, as amended, or any successor statute.
Investment means all expenditures made and all liabilities incurred (contingently or otherwise) for the acquisition of stock, other equity interests, or Debt of, or for loans, advances, capital contributions or transfers of property to, or in respect of any guaranties (or other commitments as described under Debt), or obligations of, any Person. In determining the aggregate amount of Investments outstanding at any particular time: (a) the amount of any Investment represented by a guaranty shall be taken at not less than the principal amount of the obligations guaranteed and still outstanding; (b) there shall be included as an Investment all interest accrued with respect to Indebtedness constituting an Investment unless and until such interest is paid; (c) there shall be deducted in respect of each such Investment any amount received as a return of capital (but only by repurchase, redemption, retirement, repayment, dividend or distribution); (d) there shall not be deducted in respect of any Investment any amounts received as earnings on such Investment, except as set forth in clause (c) above, whether as dividends, interest or otherwise, except that accrued interest included as provided in the foregoing clause (b) may be deducted when paid; (e) there shall not be deducted from the aggregate amount of Investments any decrease in the market value thereof; and (f) any increase in the market value of any Investment shall not increase the aggregate amount of such Investment.
Investment Adviser means BlackRock Advisors, LLC, a limited liability company organized under the laws of the State 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 be a reference to any successor statutory or regulatory provision.
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Investment Policies and Restrictions means, with respect to the Borrower, the provisions dealing with investment objectives, investment policies, distributions, and investment restrictions, as set forth in the Prospectus, as such provisions may be supplemented, amended or modified as authorized by the Board of Directors of the Borrower and as permitted under this Agreement.
Law means, collectively, all international, foreign, federal, state and local statutes, treaties, rules, regulations, ordinances, codes and administrative or judicial precedents or authorities, including the interpretation or administration thereof by any Authority charged with the enforcement, interpretation or administration thereof, and all applicable administrative orders, guidelines, directed duties, requests, licenses, authorizations and permits of, and agreements with, any Authority, in each case whether or not having the force of law.
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 LIBOR Loans.
LIBOR Loans means Loans bearing interest calculated by reference to the LIBOR Offered Rate.
LIBOR Margin means 0.80%.
LIBOR Offered Rate applicable to any Interest Period means the rate of interest equal to (a) the rate for deposits in Dollars which appears on the Telerate Page 5 as of 12:00 noon (Boston, Massachusetts time) two LIBOR Business Days before the first day of such Interest Period, or (b) if such rate does not appear on Telerate Page 5 two LIBOR Business Days before the first day of such Interest Period, then the rate for British bankers LIBOR as quoted by Reuters or Bloomberg as of 12:00 noon (Boston, Massachusetts time) two LIBOR Business Days before the first day of such Interest Period, or (c) if such rate is not quoted by Reuters or Bloomberg, then the rate for deposits in Dollars which appeared on the Telerate Page 5 as of 12:00 noon (Boston, Massachusetts time) three LIBOR Business Days before the first day 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
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or any financing lease having substantially the same economic effect as any of the foregoing, but excluding any segregation of assets done by the Borrower so long as the Person for whose benefit such assets are segregated have no security interest, right or claim to such assets ahead of any other Person unless such other Person has expressly agreed in writing to such arrangement) with respect to such asset, including any agreement (other than the Loan Documents) preventing a Person from encumbering such asset.
Loans means the revolving credit loans made or to be made to the Borrower by the Banks pursuant to Section 2.01.
Loan Documents means, collectively, this Agreement, the Notes, the Security Documents and the Fee Letter, in each case as amended and in effect 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 by the Borrower pursuant to the Security Documents to which the Borrower is a party or is otherwise bound, 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, condition, operations, assets or properties of the Borrower.
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 adopted by the Borrower in its Prospectus or elsewhere;
(c) the maximum amount of Debt that the Borrower would be permitted to incur pursuant to any agreements with any Government Authority; or
(d) the maximum amount of Debt that the Borrower would be permitted to incur without violating Section 5.07 or any other provision of this Agreement,
in each case, as in effect at the time of determination.
Moodys means Moodys Investors Services, Inc., or any successor acceptable to all of the Banks and performing substantially the same function.
Multi-employer 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
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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.
Non-Extending Bank has the meaning set forth in Section 2.09(a).
Non-Investment Grade Foreign Issuer means an issuer which is either organized in a country which (a) is not a member of the OECD or (b) is a member of the OECD, but which country has not achieved a sovereign credit rating of investment grade by either S&P or Moodys.
Note(s) has the meaning set forth in Section 2.04(b).
Notice of Borrowing has the meaning set forth in Section 2.02(a).
Notice of Conversion has the meaning set forth in Section 2.02(b).
Obligations means all indebtedness, obligations and liabilities of the Borrower to any of the Banks and the Agent pursuant to any Loan Document, whether 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 by contract, operation of law or otherwise, 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 means the Organisation for Economic Co-operation and Development.
Other Taxes means all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made hereunder or under any other Loan Document or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement or any other Loan Document.
Overnight LIBOR Rate means the rate per annum equal to the BBA LIBOR, as published by Reuters (or other commercially available source providing quotations of BBA LIBOR as designated by the Agent from time to time) at approximately 11:00 a.m., London time, on the date of determination of the Overnight LIBOR Rate, for Dollar deposits (for delivery on such day) with a term equivalent to one day.
Overnight Rate means, for any day, the higher of (a) 0.80% above the Federal Funds Rate as in effect on that day and (b) 0.80% above the Overnight LIBOR Rate as in effect on such date.
Overnight Rate Loans means Loans bearing interest calculated by reference to the Overnight Rate.
Participant has the meaning set forth in Section 9.06(b).
Permitted Lien means any Lien permitted by Section 5.08(a), (b) or (c).
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Permitted Subsidiary means any wholly-owned Subsidiary (including, without limitation, a limited liability company) of the Borrower formed by the Borrower for the sole purpose of holding equity interests (including, if desired, convertible debt and options for equity interests) and any proceeds or income of such equity interests in Persons treated as partnerships for U.S. federal income tax purposes.
Permitted Subsidiary Investments means the aggregate amount of Investments made by the Borrower in any Permitted Subsidiary which has not guaranteed the Obligations hereunder and secured such guarantee with a first priority perfected Lien on its assets pursuant to agreements satisfactory to the Agent, provided , for purposes of calculating Permitted Subsidiary Investments, each such Investment shall be calculated as follows: (a) at the time an Investment is made, the amount of such Investment shall equal the market value of such Investment at the time such Investment is made (the Initial Valuation); (b) at the time any subsequent Investment is made, for any Investment made immediately prior to the making of the current Investment, such previously made Investment shall be valued at the lesser of (i) each such Investments Initial Valuation and (ii) the then current market value of such Investment as of the relevant date of determination as such amount is set forth in a certificate delivered to the Agent by the Borrower (the Next Valuation; provided, for each then subsequent valuation of such Investment, the Borrower shall deliver an updated certificate showing a valuation in an amount equal to the lesser of (1) the most recent valuation number calculated pursuant hereto on the certificate most recently delivered to the Agent and (2) the then current market value of such Investment; such amount being the Subsequent Valuation); (c) at the time any Investment is made, for any Investment made which had a Subsequent Valuation, the lesser of (x) such Subsequent Valuation and (y) the then current market value of such Investment as of the relevant date of determination.
Person means an individual, a corporation, a partnership, 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 Multi-employer 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 Service means the pricing service providers listed on Schedule 2 hereto with respect to each asset type, as such list may be amended or supplemented from time to time as approved by the Board of Directors of the Borrower and with the prior written consent of the Agent.
Prior Credit Agreement has the meaning set forth in the preamble hereto.
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.
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Prospectus means the prospectus dated May 27, 2003 and filed with the SEC pursuant to Rule 497 under the Securities Act and shall include, without limitation, the Statement of Additional Information included in the related registration statement on Form N-2 as amended (or any successor SEC form) as of the Effective Date.
Register has the meaning set forth in Section 9.06(g).
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 8.05.
Representative has the meaning set forth in Section 9.09(a).
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, Banks having at least a majority of the Aggregate Commitment Amounts then in effect; provided , however , that for purposes of determining Required Banks, the Commitment Amount or Loans, as the case may be, of each Delinquent Bank 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 provisions shall be deemed to be a reference to any successor statutory or regulatory provision.
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Security Agreement means that certain Amended and Restated Security Agreement, dated as of the date hereof, among the Borrower, the Agent, on behalf of itself and the Banks, and the Custodian, in each case as the same may be amended, restated, modified or supplemented 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 that creates, perfects or purports to create or perfect a Lien or Guarantee in favor of the Agent for the benefit of the Agent and the Banks.
Senior Lien means, as to any asset, a perfected security interest in favor of the Agent, for the benefit of the Agent and the Banks, under the Security Documents and which ranks senior in priority to all Liens permitted by Section 5.08 other than Liens permitted by Section 5.08(c) and is pari passu in priority with Liens permitted by Section 5.08(c).
Senior Securities Representing Indebtedness has the meaning set forth in Section 18(g) of the Investment Company Act.
State Street means State Street Bank and Trust Company in its capacity as a Bank hereunder.
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 means all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding), assessments, fees or other charges imposed by any governmental authority, including any interest, additions to tax or penalties applicable thereto.
Termination Date means March 2, 2012, or such earlier date on which the Commitments terminate or are terminated pursuant to the terms hereof, provided that the Termination Date (and some or all of the Banks Commitments to make Loans to the Borrower hereunder) may be extended in accordance with Section 2.09(c).
Total Assets means, as of 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 methods and procedures described in the Prospectus, provided , however , that Total Assets shall not include (a) equipment, (b) deferred organizational expenses, and (c) 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.
Trading with the Enemy Act has the meaning set forth in Section 4.14.
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Value has the meaning assigned to such term in Section 2(a)(41) of the Investment Company Act.
SECTION 1.02. Accounting Terms and Determinations . 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.
SECTION 1.03. Other Interpretive Provisions . With reference to this Agreement and each other Loan Document, unless otherwise specified herein or in such other Loan Document:
(a) The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words include , includes and including shall be deemed to be followed by the phrase without limitation. The word will shall be construed to have the same meaning and effect as the word shall . Unless the context requires otherwise, (i) any definition of or reference to any agreement, instrument or other document (including any Charter Document) shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein or in any other Loan Document), (ii) any reference herein to any Person shall be construed to include such Persons successors and assigns, (iii) the words herein , hereof and hereunder , and words of similar import when used in any Loan Document, shall be construed to refer to such Loan Document in its entirety and not to any particular provision thereof, (iv) all references in a Loan Document to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, the Loan Document in which such references appear, (v) any reference to any law shall include all statutory and regulatory provisions consolidating, amending, replacing or interpreting such law and any reference to any law or regulation shall, unless otherwise specified, refer to such law or regulation as amended, modified or supplemented from time to time, and (vi) the words asset and property shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.
(b) In the computation of periods of time from a specified date to a later specified date, the word from means from and including ; the words to and until each mean to but excluding ; and the word through means to and including .
(c) Section headings herein and in the other Loan Documents are included for convenience of reference only and shall not affect the interpretation of this Agreement or any other Loan Document.
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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 lend to the Borrower and the Borrower may borrow, repay and reborrow from time to time during the Revolving Credit Period, upon notice by the Borrower to the Agent given in accordance with Section 2.02(a), such sums as are requested by the Borrower up to a maximum aggregate amount outstanding (after giving effect to all amounts outstanding and all amounts requested) at any one time equal to such Banks Commitment Amount, provided that the aggregate principal amount of all Loans outstanding (after giving effect to all amounts requested) (a) shall not exceed at any time the Available Amount; and (b) 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 of $1,000,000 or any integral multiple of $100,000 in excess thereof 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.
SECTION 2.02. Notice of Borrowings. (a) The Borrower shall give the Agent a written notice substantially in the form of Exhibit B attached hereto (a Notice of Borrowing) not later than 1:00 p.m. (Boston, Massachusetts time) (i) on the Domestic Business Day of each proposed borrowing of an Overnight 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 (each such date, a Borrowing Date), which shall be a Domestic Business Day in the case of an Overnight Rate Loan or a LIBOR Business Day in the case of a LIBOR Loan, (2) whether such borrowing shall be of an Overnight Rate Loan or a LIBOR Loan, and (3) the aggregate principal amount of such borrowing. Each Notice of Borrowing shall constitute a representation and warranty by the Borrower that the conditions set forth in Section 3.02(a) through (d) (and, in the case of the initial Loan to be made hereunder, Section 3.01) 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 Overnight Rate Loan or LIBOR Loan to the Borrower to a Loan of the other type, or to roll over any outstanding LIBOR Loan to the Borrower upon the expiration of an Interest Period with respect thereto, by giving 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) if the Interest Period therefor would extend beyond the Termination Date or (2) if a Default or Event of Default has occurred and is continuing (in which case such Loan shall automatically become an Overnight Rate Loan on the last day of the first Interest Period relating thereto ending during the continuance of any Default or Event of Default of which the Agent has actual knowledge), (iii) a LIBOR Loan may be converted into an Overnight 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 Notice of Conversion for a LIBOR Loan the Borrower shall be deemed to have elected to convert such
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Loan to an Overnight Rate Loan on the last day of the Interest Period applicable thereto. Conversions to and from LIBOR Loans 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 $1,000,000.
SECTION 2.03. Notice to Banks; Funding of Loans. (a) Upon receipt of a Notice of 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 of such borrowing. Such Notice of Borrowing or telephonic notice, as the case may be, 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, Massachusetts time) on the applicable Borrowing Date, each Bank shall make available its share of such borrowing, in Federal or other funds immediately available in Boston, Massachusetts 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 Bank as provided in Section 2.10, as the case may be.
(d) Unless the Agent shall have received notice from a Bank prior to any Borrowing Date 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 2.03 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 ten (10) 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 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
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such Bank in the ordinary course of business. The Borrower irrevocably authorizes each Bank and the Agent to make or cause to be made, at or about the date of any Loan or at the time of receipt of any payment of principal of any 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 the 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 Debt 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.
(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 to the Borrower exceeds the Adjusted Net Asset Limit at such time, the Borrower shall, within five (5) 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 8.06) as may be necessary so that after such prepayment the aggregate principal amount of Loans outstanding to the Borrower does not exceed the Adjusted Net Asset Limit at such time.
(c) If at any time the aggregate principal amount of Loans outstanding to the Borrower exceeds the Maximum Amount, the Borrower immediately shall 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 8.06) as may be necessary so that after such prepayment the aggregate principal amount of Loans outstanding to the Borrower does not exceed the Maximum Amount.
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(d) If at any time the aggregate principal amount of Loans outstanding to the Borrower exceeds the Aggregate Commitment Amounts or the Commitment Amount of any Bank, 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 8.06) 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, Massachusetts time) on the Domestic Business Day of such payment in the case of Overnight Rate Loans and upon at least three (3) LIBOR Business Days notice in the case of such payment of LIBOR Loans (in either case, which notice shall not thereafter be revocable by the Borrower), 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 and in larger integral multiples of $100,000 (or such lesser amount if constituting the entire outstanding principal amount of the Loans), 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 8.06). 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 8.06.
(g) Upon receipt of a notice of prepayment pursuant to clause (e), 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 the provisions of Section 2.06(c), each Overnight 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 Overnight Rate as in effect from time to time. Interest on each Overnight Rate Loan shall be payable in arrears on the last day of each calendar month and on the Termination Date.
(b) Subject to Section 2.06(c) and Section 8.06, 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 and including the last day of the Interest Period applicable thereto, at a rate per annum equal to the sum of the LIBOR Margin plus the applicable Adjusted LIBOR Offered Rate. Interest on each LIBOR Loan shall be payable on the last day of the Interest Period in effect with respect thereto and on the Termination Date.
(c) Any overdue principal of (whether at stated maturity, by acceleration or otherwise) and (to the extent permitted by applicable law) interest on the Loans and all other
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overdue amounts payable hereunder shall bear interest, payable on demand, for each day from and including the date payment thereof was due up to but not including the date of actual payment, at a rate per annum equal to two percent (2%) above the Base Rate until such amount shall be paid in full (after as well as before judgment). During the continuance of an Event of Default the principal of the Loans to the Borrower which are not overdue shall, until such Event of Default has been cured or remedied or such Event of Default has been waived by the Banks, bear interest at a rate per annum equal to the greater of (i) two percent (2%) above the rate of interest otherwise applicable to such Loans pursuant to this Section 2.06 or (ii) the rate of interest applicable to overdue principal.
(d) The Agent shall determine the interest rate applicable to the Loans pursuant to the terms 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 the rate of 0.15% per annum on each 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, the Borrower shall pay to the Agent, for its own account, a non-refundable closing fee as 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. The Borrower promises to pay on the Termination Date, and there shall become absolutely due and payable on the Termination Date, the aggregate principal amount of all Loans outstanding on such date, together with any and all accrued and unpaid interest thereon and all other amounts outstanding hereunder.
(b) Subject to Section 2.05(d), 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 , 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 commitment fee then accrued on the amount of the reduction. No reduction in the Commitment Amounts or termination of the Commitments may be reinstated.
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SECTION 2.09. Extension of Termination Date . (a) The Borrower may, by written notice to the Agent (which shall promptly deliver a copy of such notice to each of the Banks) not less than 30 days and not more than 45 days prior to the Termination Date then in effect hereunder (the Existing Termination Date), request that the Banks extend the Termination Date for an additional 364 days from the Consent Date (as defined below). Each Bank, acting in its sole discretion, shall, by written notice to the Borrower and the Agent given on the date (and, subject to the provision below, only on the date) 15 days prior to the Existing Termination Date (provided, if such date is not a Domestic Business Day, then such notice shall be given on the next succeeding Domestic Business Day) (the Consent Date), advise the Borrower whether or not such Bank agrees to such extension; provided that each Bank that determines not to extend the Termination Date (a Non-Extending Bank) shall notify the Agent (who shall notify the Borrower) of such fact promptly after such determination (but in any event no later than the Consent Date) and any Bank that does not advise the Borrower on or before the Consent Date shall be deemed to be a Non-Extending Bank. The election of any Bank to agree to an extension of the Termination Date shall not obligate any other Bank to agree to such extension.
(b) The Borrower shall have the right on or before the Existing Termination Date to replace each Non-Extending Bank with, and otherwise add to this Agreement, one or more other commercial banks, which may include any Bank (each, prior to the Existing Termination Date, an Additional Commitment Bank) with the approval of the Agent (which approval shall not be unreasonably delayed or withheld). Each Additional Commitment Bank shall enter into an Assignment and Acceptance in substantially the form of Exhibit D attached hereto pursuant to which such Additional Commitment Bank shall, effective as of the Existing Termination Date, undertake a Commitment (an Additional Commitment). If any such Additional Commitment Bank is a Bank, its Additional Commitment shall be in addition to such Banks Commitment hereunder on such date.
(c) If (and only if) Banks with Commitment Amounts that, in the aggregate, together with the proposed Commitment Amounts of the Additional Commitment Banks that will become effective on the Existing Termination Date, aggregate at least 51% of the Aggregate Commitment Amount (not including the proposed Commitment Amounts of the Additional Commitment Banks) on the Consent Date shall have agreed to extend the Existing Termination Date, then, effective as of the Existing Termination Date, the Existing Termination Date shall be extended to the date which is 364 days after the Consent Date ( provided , if such date is not a Domestic Business Day, then such Termination Date as so extended shall be the next preceding Domestic Business Day) and each Additional Commitment Bank shall thereupon become a Bank with a Commitment for all purposes of this Agreement.
(d) Notwithstanding the foregoing, the extension of the Existing Termination Date shall not be effective with respect to any Bank unless:
(i) no Default or Event of Default shall have occurred and be continuing on the date of the notice requesting such extension, the Consent Date or the Existing Termination Date;
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(ii) each of the representations and warranties of the Borrower in Article IV hereof shall be true and correct on and as of each of the date of the notice requesting such extension, the Consent Date and the Existing Termination Date with the same force and effect as if made on and as of each 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
(iii) each Non-Extending Bank shall have been paid in full by the Borrower all amounts owing to such Bank hereunder on or before the Existing Termination Date.
If the Existing Termination Date is extended as provided in this Section 2.09, (a) the Commitment of each Non-Extending Bank shall terminate on the Existing Termination Date and (b) from and after the Existing Termination Date, the Aggregate Commitment Amount shall not include the Commitment Amounts of the Non-Extending Banks.
SECTION 2.10. 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 2:00 p.m. (Boston, Massachusetts time) on the date when due, in Dollars and in Federal or other funds immediately available in Boston, to the Agent at its address referred to in Section 9.01. The Agent shall promptly distribute to each Bank its ratable share of each such payment received by the Agent for the account of the Banks. Whenever any payment of principal of, or interest on, Overnight 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. Except as otherwise provided in the definition of Interest Period, whenever any payment of principal of, or interest on, LIBOR Loans shall be due on a day which is not a LIBOR Business Day, the date for payment thereof shall be extended to the next succeeding LIBOR Business Day unless such LIBOR Business Day falls in another calendar month, in which case the date for payment thereof shall be the next preceding LIBOR Business Day. 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 to be made by the Borrower shall be made without condition or deduction for any counterclaim, defense, recoupment or set-off.
SECTION 2.11. 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. The Agents determination of interest rates shall be conclusive and binding for all purposes, absent manifest error.
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SECTION 2.12. Taxes . (a) (i) Any and all payments by or on account of any obligation of the Borrower hereunder or under any other Loan Document shall to the extent permitted by Applicable Laws be made free and clear of and without reduction or withholding for any Taxes. If, however, Applicable Laws require the Borrower or the Agent to withhold or deduct any Tax, such Tax shall be withheld or deducted in accordance with such Laws as determined by the Borrower or the Agent, as the case may be, upon the basis of the information and documentation to be delivered pursuant to subsection (e) below.
(ii) If the Borrower or the Agent shall be required by the Internal Revenue Code to withhold or deduct any Taxes, including both United States federal backup withholding and withholding taxes, from any payment, then (A) the Agent shall withhold or make such deductions as are determined by the Agent to be required based upon the information and documentation it has received pursuant to subsection (e) below, (B) the Agent shall timely pay the full amount withheld or deducted to the relevant governmental authority in accordance with the Internal Revenue Code, and (C) to the extent that the withholding or deduction is made on account of Indemnified Taxes or, without duplication, Other Taxes, the sum payable by the Borrower shall be increased as necessary so that after any required withholding or the making of all required deductions (including deductions applicable to additional sums payable under this Section 2.11) the Agent or the Bank, as the case may be, receives an amount equal to the sum it would have received had no such withholding or deduction been made.
(b) Without limiting the provisions of subsection (a) above, the Borrower shall timely pay any Other Taxes to the relevant governmental authority in accordance with Applicable Laws.
(c) (i) Without limiting the provisions of subsection (a) or (b) above, the Borrower shall, and does hereby, indemnify the Agent and each Bank, and shall make payment in respect thereof within ten (10) days after demand therefor, for the full amount of any Indemnified Taxes or, without duplication, Other Taxes (including Indemnified Taxes or, without duplication, Other Taxes imposed or asserted on or attributable to amounts payable under this Section 2.12) withheld or deducted by the Borrower or the Agent or paid by the Agent or such Bank, as the case may be, and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or, without duplication, Other Taxes were correctly or legally imposed or asserted by the relevant governmental authority. The Borrower shall also, and does hereby, indemnify the Agent, and shall make payment in respect thereof within ten (10) days after demand therefor, for any amount which a Bank for any reason fails to pay indefeasibly to the Agent as required by clause (ii) of this subsection. A certificate as to the amount of any such payment or liability delivered to the Borrower by a Bank (with a copy to the Agent), or by the Agent on its own behalf or on behalf of a Bank, shall be conclusive absent manifest error.
(ii) Without limiting the provisions of subsection (a) or (b) above, each Bank shall, and does hereby, indemnify the Borrower and the Agent, and shall make payment in respect thereof within ten (10) days after demand therefor, against any and all Taxes and any and all
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related losses, claims, liabilities, penalties, interest and expenses (including the fees, charges and disbursements of any counsel for the Borrower or the Agent) incurred by or asserted against the Borrower or the Agent by any governmental authority as a result of the failure by such Bank to deliver, or as a result of the inaccuracy, inadequacy or deficiency of, any documentation required to be delivered by such Bank to the Borrower or the Agent pursuant to subsection (e). Each Bank hereby authorizes the Agent to set off and apply any and all amounts at any time owing to such Bank under this Agreement or any other Loan Document against any amount due to the Agent under this clause (ii). The agreements in this clause (ii) shall survive the resignation and/or replacement of the Agent, any assignment of rights by, or the replacement of, a Bank, the termination of the Aggregate Commitment Amounts and the repayment, satisfaction or discharge of all other Obligations.
(d) Upon request by the Borrower or the Agent, as the case may be, after any payment of Taxes by the Borrower or by the Agent to a governmental authority as provided in this Section 2.12, the Borrower shall deliver to the Agent or the Agent shall deliver to the Borrower, as the case may be, the original or a certified copy of a receipt issued by such governmental authority evidencing such payment, a copy of any return required by Applicable Laws to report such payment or other evidence of such payment reasonably satisfactory to the Borrower or the Agent, as the case may be.
(e) (i) Each Bank shall deliver to the Borrower and to the Agent, at the time or times prescribed by Applicable Laws or when reasonably requested by the Borrower or the Agent, such properly completed and executed documentation prescribed by Applicable Laws or by the taxing authorities of any jurisdiction and such other reasonably requested information as will permit the Borrower or the Agent, as the case may be, to determine (A) whether or not payments made hereunder or under any other Loan Document are subject to Taxes, (B) if applicable, the required rate of withholding or deduction, and (C) such Banks entitlement to any available exemption from, or reduction of, applicable Taxes in respect of all payments to be made to such Bank by the Borrower pursuant to this Agreement or otherwise to establish such Banks status for withholding tax purposes in the applicable jurisdiction.
(ii) Without limiting the generality of the foregoing, if the Borrower is resident for tax purposes in the United States,
(A) any Bank that is a United States person within the meaning of Section 7701(a)(30) of the Internal Revenue Code shall deliver to the Borrower and the Agent executed originals of Internal Revenue Service Form W-9 or such other documentation or information prescribed by Applicable Laws or reasonably requested by the Borrower or the Agent as will enable the Borrower or the Agent, as the case may be, to determine whether or not such Bank is subject to backup withholding or information reporting requirements; and
(B) each Foreign Bank that is entitled under the Internal Revenue Code or any applicable treaty to an exemption from or reduction of withholding tax with respect to payments hereunder or under any other Loan Document shall deliver to the Borrower and the Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Bank
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becomes a Bank under this Agreement (and from time to time thereafter upon the 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) executed originals 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) executed originals of Internal Revenue Service Form W-8ECI,
(III) executed originals of Internal Revenue Service Form W-8IMY and all required supporting documentation,
(IV) 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 Code, (B) a 10 percent shareholder of the Borrower within the meaning of section 881(c)(3)(B) of the Code, or (C) a controlled foreign corporation described in section 881(c)(3)(C) of the Code and (y) executed originals of Internal Revenue Service Form W-8BEN, or
(V) executed originals of any other form prescribed by Applicable Laws as a basis for claiming exemption from or a reduction in United States Federal withholding tax together with such supplementary documentation as may be prescribed by Applicable Laws to permit the Borrower or the Agent to determine the withholding or deduction required to be made.
(iii) Each Bank shall promptly (A) notify the Borrower and the Agent of any change in circumstances which would modify or render invalid any claimed exemption or reduction, and (B) take such steps as shall not be materially disadvantageous to it, in the reasonable judgment of such Bank, and as may be reasonably necessary (including the re-designation of its Applicable Lending Office) to avoid any requirement of Applicable Laws of any jurisdiction that the Borrower or the Agent make any withholding or deduction for taxes from amounts payable to such Bank.
(f) Unless required by Applicable Laws, at no time shall the Agent have any obligation to file for or otherwise pursue on behalf of a Bank, or have any obligation to pay to any Bank, any refund of Taxes withheld or deducted from funds paid for the account of such Bank. If the Agent or any Bank determines, in its sole discretion, that it has received a refund of any Taxes or, without duplication, Other Taxes as to which it has been indemnified by the Borrower or with respect to which the Borrower has paid additional amounts pursuant to this Section 2.12, it shall pay to the Borrower an amount equal to such refund (but only to the extent
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of indemnity payments made, or additional amounts paid, by the Borrower under this Section 2.12 with respect to the Taxes or, without duplication, Other Taxes giving rise to such refund), net of all out-of-pocket expenses incurred by the Agent or such Bank, as the case may be, and without interest (other than any interest paid by the relevant governmental authority with respect to such refund), provided that the Borrower, upon the request of the Agent or such Bank, agrees to repay the amount paid over to the Borrower (plus any penalties, interest or other charges imposed by the relevant governmental authority) to the Agent or such Bank in the event the Agent or such Bank is required to repay such refund to such governmental authority. This subsection shall not be construed to require the Agent or any Bank to make available its tax returns (or any other information relating to its taxes that it deems confidential) to the Borrower or any other Person.
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:
(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 (i) a perfection certificate from the Borrower in form and substance reasonably satisfactory to the Agent, (ii) copies of the results of a current Uniform Commercial Code ( UCC ) lien search in the jurisdiction in which the Borrower is organized, such results to be in form and substance satisfactory to the Agent; (iii) UCC financing statements (or the equivalent in the applicable jurisdictions) in form and substance reasonably satisfactory to the Agent, (iv) control agreements (or the equivalent in the applicable jurisdictions) to the extent applicable, and (v) 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 opinion of Skadden, Arps, Slate, Meagher & Flom LLP and Miles & Stockbridge P.C., special counsel to the Borrower, each in form and substance reasonably satisfactory to the Agent;
(e) receipt by the Agent of a certificate manually signed by an officer of the Borrower which is reasonably satisfactory to the Banks to the effect set forth in clauses (b) (if the Borrower is submitting a Notice of Borrowing on the Effective Date), (c) (provided if the Borrower is not submitting a Notice of Borrowing on the Effective Date, references to borrowings shall not be required) 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
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and dated the Effective Date as to the incumbency of, and bearing manual specimen signatures of, the Authorized Signatories who are authorized as of the date hereof to execute and take actions under the Loan Documents for and on behalf of the Borrower (provide, to the extent there are no changes to the Authorized Signatories from the list provided in the certificate delivered to the Agent pursuant to Section 3.01(f) of the Prior Credit Agreement (the Original Certificate), a certification from such officer that no changes have been made to the Authorized Signatories and the Authorized Signatories as set forth on the Original Certificate remain Authorized Signatories of the Borrower and are authorized as of the date hereof to execute and take actions under the Loan Documents for and on behalf of the Borrower), and certifying and attaching copies of (i) Charter Documents, with all amendments thereto (or a certification from such officer that no changes to the Charter Documents have been made to any such documents since such Charter Documents were delivered to the Agent with the Original Certificate), (ii) the resolutions of the Borrowers Board of Directors authorizing the transactions contemplated hereby, (iii) the current Prospectus as then in effect (or a certification from such officer that no changes to the Prospectus have been made to the Prospectus since such Prospectus was delivered to the Agent with the Original Certificate), (iv) the investment management agreement between the Borrower and the Investment Adviser as then in effect (or a certification from such officer that no changes to the investment management agreement have been made to such investment management agreement since such investment management agreement was delivered to the Agent with the Original Certificate) and (v) the Custody Agreement (or a certification from such officer that no changes to the Custody Agreement have been made to such Custody Agreement since such Custody Agreement was delivered to the Agent with the Original Certificate);
(g) a legal existence and good standing certificate for the Borrower from the Secretary of State of the State of Maryland dated as of a recent date;
(h) a copy of the certificate of incorporation of the Borrower, with all amendments, certified as of a recent date by the Secretary of State of the State of Maryland;
(i) the Banks being satisfied in their reasonable discretion that there has been no material adverse change in the business, assets or financial condition of the Borrower since August 31, 2010;
(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, and any other matters relevant hereto, all in form and substance reasonably satisfactory to the Agent; and
(k) receipt by the Agent of payment of all reasonable fees and expenses (including reasonable fees and disbursements of special counsel for the Agent) then payable hereunder;
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 March 3, 2011. 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.
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SECTION 3.02. All Borrowings. The obligation of any Bank to make a Loan on any Borrowing Date is subject to the satisfaction of the following conditions:
(a) receipt by the Agent of a Notice of Borrowing as required by Section 2.02, 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) the fact that, immediately after such borrowing, the aggregate outstanding principal amount of the Loans will not exceed the Available Amount as in effect on such date;
(c) the fact that, immediately before and after such borrowing, no Default or Event of Default shall have occurred and be continuing;
(d) 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);
(e) the fact that the Effective Date shall have occurred; and
(f) with respect to that particular Bank only, the fact that no change shall have occurred 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 (b), (c) and (d) of this Section 3.02.
SECTION 3.03. Security. (a) To secure the payment and performance in full of all of its Obligations, the Borrower shall grant to the Agent, for the benefit of itself and the Banks, a security interest in the Borrowers assets pursuant to the terms of the Security Documents.
(b) Pursuant to this Section 3.03, 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 this Agreement. It is also hereby agreed between the parties that each of the Agent, on behalf of the Banks, 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. Any Collateral held by the Custodian in excess of the Obligations shall be returned to the Borrower upon the Borrowers request provided that the Obligations owing from the Borrower have been indefeasibly repaid in full in cash prior to such return. Notwithstanding the foregoing, nothing in this Agreement shall affect the Custodians rights and remedies under the Custody Agreement.
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ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants on and as of the Effective Date and on each Borrowing Date that:
SECTION 4.01. Existence and Power; Investment Company. (a) The Borrower is a Maryland corporation. The Borrower is duly organized, validly existing and in good standing under the laws of the State of Maryland and has all corporate powers and all corporate 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 be so qualified or in good standing, as the case may be, could not reasonably be expected to have 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 duly issued and are fully paid and non-assessable, (ii) have been duly registered under the Securities Act, 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 and each of the other Loan Documents, and the other instruments, certificates and agreements contemplated hereby and thereby, are within its corporate powers, and have been duly authorized by all requisite corporate action by the Borrower. This Agreement and each of the other Loan Documents, 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. The execution, delivery and performance by the Borrower of each Loan Document do not and will not (a) contravene the terms of the Charter Documents; (b) conflict with or result in any breach or contravention of, or the creation of any Lien under, or require any payment to be made under (i) any provision of any security issued by the Borrower or of any agreement, instrument or other undertaking to which the Borrower is a party or by which it or any of its property is bound or (ii) any order, injunction, writ or decree of any Authority or any arbitral award to which the Borrower or its property is subject, unless, in the case of clauses (i) and (ii) of this paragraph (b), such conflict, breach or contravention could not reasonably be expected to have a Material Adverse Effect; (c) violate any Law except where such violation could not reasonably be expected to have a Material Adverse Effect; or (d) result in any Adverse Claim upon any asset of the Borrower other than Liens permitted under Section 5.08(a).
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SECTION 4.04. Governmental Authorizations; Private Authorization. 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 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 and the transactions contemplated hereunder and thereunder will not 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 Affiliated Person of the Borrower, and none of the Borrower or any Affiliate of the Borrower is an Affiliated Person of any Bank or any Affiliate of any Bank known to the Borrower.
SECTION 4.07. Subsidiaries. The Borrower has no Subsidiaries other than Permitted Subsidiaries.
SECTION 4.08. Financial Information. (a) The statement of assets and liabilities of the Borrower, each dated as of August 31, 2010 and the related statements of operations and changes in net assets for the period September 1, 2009 to August 31, 2010 reported on by Deloitte & Touche LLP and set forth in the most recent shareholder report prepared by the Borrower (a copy of which has been delivered to the Agent), together with the notes and schedules thereto, and each financial statement delivered by the Borrower to the Banks in accordance with Section 5.01, present fairly, in all material respects, in conformity with Generally Accepted Accounting Principles, the financial position of the Borrower as of such date.
(b) Since August 31, 2010, there has been no material adverse change in the business or financial position 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 present 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, the Borrower before any court or arbitrator or any Authority which could reasonably be expected to have a Material Adverse Effect.
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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 Multi-employer 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 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 taxes due pursuant to such returns, if any, or pursuant to any assessment received by the Borrower, except for any taxes or assessments which are being contested in good faith by appropriate proceedings and with respect thereto adequate reserves have been established in accordance with Generally Accepted Accounting Principles consistently applied and non-payment of which could not have a Material Adverse Effect, and 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 in all material respects with the Investment Company Act except where the necessity of compliance therewith is being contested in good faith by appropriate proceeding or exemptive relief has been obtained therefrom and remains in effect. The Borrower is in compliance with all other Applicable Laws, 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 proceeding or exemptive relief has been obtained therefrom and remains in effect or where, except in the case of the Borrowers asset coverage tests under the Investment Company Act, noncompliance therewith could 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 to which any of its properties is bound, in each case where the violation thereof could reasonably be expected to have a Material Adverse Effect. The Borrower is in compliance in all respects with the Investment Policies and Restrictions which constitute Fundamental Policies and in all material respects with the Investment Policies and Restrictions that are not Fundamental Policies.
(b) No Default or Event of Default has occurred and is continuing (or, if a Default or Event of Default has occurred and is continuing, a detailed description of such event and the actions the Borrower is taking with respect thereto).
(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 Government Authority limiting its ability to incur indebtedness.
SECTION 4.13. Fiscal Year. The Borrower has a fiscal year which is twelve calendar months ending on August 31 of each year.
SECTION 4.14. Full Disclosure. The Borrower has disclosed to the Agent and the Banks all agreements, instruments and corporate or other restrictions to which it is subject, and
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all other matters known to it, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. No report, financial statement, certificate or other written information furnished by or on behalf of the Borrower to the Agent or any Bank in connection with the transactions contemplated hereby and the negotiation of this Agreement or delivered hereunder or under any other Loan Document (in each case, as modified or supplemented by other written information so furnished) contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading in any material respect; provided that, with respect to projected financial information, the Borrower represents only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time and it being understood that actual results may vary from such projected financial information and such variations may be material.
SECTION 4.15. Offering Documents. The information set forth in the Prospectus as of its date, as amended or supplemented in accordance with the terms hereof by the report to shareholders of the Borrower, taken together, is 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. Debt . The Debt arising under this Agreement and the Notes ranks at least pari passu in all respects with all of the Borrowers other obligations (actual or contingent) other than those obligations which are entitled to priority under applicable law.
SECTION 4.17. Account. All assets of the Borrower that are included in the calculation of the Adjusted Net Asset Limit are held in or credited to the Account of the Borrower.
SECTION 4.18. 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 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 in any dealings or transactions, or be otherwise associated, with any such blocked person.
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ARTICLE V.
COVENANTS
The Borrower agrees that, so long as any Bank has any Commitment hereunder or any amount payable hereunder or under any Note remains unpaid:
SECTION 5.01. Information. The Borrower will deliver to the Agent (along with copies for each of the Banks):
(a) as soon as available and in any event within ninety (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 Deloitte & Touche LLP or other independent public accountants of nationally recognized standing;
(b) as soon as available and in any event within sixty (60) 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 of such period, all in reasonable detail, prepared in accordance with Generally Accepted Accounting Principles, consistently applied, and certified (subject to normal year-end adjustments) as to fairness of presentation in all material respects, Generally Accepted Accounting Principles and consistency by an Authorized Signatory of the Borrower;
(c) as soon as available and in any event not later than the fifth Domestic Business Day after the end of each calendar quarter (and also not later the second Domestic Business Day of each calendar month, commencing with the second calendar month after the initial Loan is made, when any Loan is outstanding to the Borrower on that day), a borrowing report (including, without limitation, a detailed calculation of the Borrowers Adjusted Net Assets, Adjusted Total Assets and Adjusted Net Asset Limit) and a valuation report concerning the assets of the Portfolio as at the end of the immediately preceding fiscal quarter or month, as applicable, received, in the case of the valuation report, from the Custodian;
(d) simultaneously with the delivery of each set of financial statements referred to in clauses (a) and (b) above and each borrowing report and valuation report delivered pursuant to clause (c) above, a certificate of an Authorized Signatory reasonably acceptable to the Banks stating whether any Default or Event of Default exists on the date of such certificate and, if any Default or Event of Default then exists, setting forth the details thereof and the action which the Borrower is taking or proposes to take with respect thereto;
(e) promptly (and, other than in the case of a Default or Event of Default caused by the Borrowers failure to comply with a covenant set forth in Article V hereof, in any event within five (5) Domestic Business Days) after any officer of the Borrower obtains knowledge of any Default or Event of Default, if such Default or Event of Default is then continuing, a certificate of an Authorized Signatory setting forth the details thereof and the action which the Borrower is taking or proposes to take with respect thereto;
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(f) promptly upon the filing thereof with the SEC or the mailing thereof to shareholders of the Borrower, copies of all reports to shareholders, proxy statements, financial statements and other materials of a financial or otherwise material nature;
(g) 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, unless prohibited by Law, copies of any filed complaint relating thereto; and
(h) from time to time such additional information regarding the financial position or business of the Borrower, including without limitation, listing 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 made to it 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 material obligations and liabilities, 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 reputable insurance companies which the Borrower reasonably believes to be financially sound, policies with respect to its assets and property and business 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.
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 the Investment Policies and Restrictions in effect on the Effective Date.
(b) The Borrower will preserve, renew and keep in full force and effect its existence as a corporation, and its rights and privileges 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, terminate, supplement or otherwise modify any of its Charter Documents in any material respect or if such amendment, termination, supplement or modification could reasonably be expected to have a Material Adverse Effect without the prior written consent of the Agent, which consent will not be unreasonably withheld or delayed. The Borrower will promptly provide copies to the Agent of all amendments, supplements, terminations and other modifications of any of its Charter Documents.
(d) Other than as expressly permitted by the Agreement and the Security Agreement, the Borrower will at all times place and maintain its assets in the custody of the Custodian.
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SECTION 5.05. Compliance with Laws. The Borrower will comply in all material respects with the Investment Company Act and the requirements of any Authority with respect thereto except where the necessity of compliance therewith is contested in good faith by appropriate proceedings or exemptive relief has been obtained therefrom and remains in effect. The Borrower will comply in all material respects with all other Applicable Laws except where the necessity of compliance therewith is contested in good faith by appropriate proceedings or exemptive relief has been obtained therefrom and remains in effect or where noncompliance therewith could not reasonably be expected to have a Material Adverse Effect. The Borrower will file all federal and other 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 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 and except for the payment of taxes, assessments and charges which do not exceed, in the aggregate, $50,000 and which non-payment could not reasonably be expected to have a Material Adverse Effect).
SECTION 5.06. Inspection of Property, Books and Records. The Borrower will keep proper books of record and account 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, and as often as a Bank may reasonably request, 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 during normal business hours and, so long as no Default or Event of Default has occurred and is continuing, with reasonable advance notice.
SECTION 5.07. Debt. The Borrower will not create, assume or suffer to exist any Debt other than:
(a) Debt arising under this Agreement, the Notes and the other Loan Documents;
(b) Debt in favor of the Borrowers Custodian 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;
(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; and
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(e) Debt incurred under reverse repurchase agreement or credit default swaps so long as the aggregate amount of the Debt under such agreements and swaps (calculated by reference to the notional amount of such Debt) does not exceed, in the aggregate, fifteen percent (15%) of the Borrowers Total Assets,
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, (ii) borrow money or create leverage under any arrangement other than (A) from the Banks hereunder, (B) on an overnight basis from the Custodian to the extent provided in clause (b) above or (C) in connection with reverse repurchase agreements or credit default swaps to the extent provided for in clause (e) hereof, or (iii) issue or be or remain liable for or have outstanding any senior security (as defined in the Investment Company Act), except that the Borrower may borrow from the Banks pursuant to this Agreement. The Borrower will not at any time issue or have outstanding any preferred stock.
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 taxes, assessments or other governmental charges or levies the payment of which is not at the time required or which are being contested in good faith by the Borrower and as to which the Borrower has established appropriate reserves on its books and records, provided, such Liens shall not be permitted upon the commencement of proceedings to foreclose any Lien that may have attached as security for any such taxes, assessments or other governmental charges or levies, (c) Liens in favor of the Custodian granted pursuant to the Custody Agreement to secure obligations arising under the Custody Agreement, (d) encumbrances created in connection with the Borrowers portfolio investments (and not for the primary purpose of borrowing money) to the extent permitted by the provisions of the Prospectus and Section 5.07 and Liens to secure the Debt permitted by Section 5.07(e), provided that the aggregate amount of such encumbered assets of the Borrower actually pledged to or for the benefit of the holder of the Debt permitted by Section 5.07(e) pursuant to this clause (d) does not at any time exceed 15% of the Total Assets of the Borrower, (e) Liens in respect of the Debt permitted under Section 5.07(c); and (f) Liens or segregation of assets incidental to the conduct of the Borrowers business securing the performance of fee and expense obligations to the Custodian arising in the ordinary course of the Borrowers business and which are not overdue for a period in excess of thirty (30) days.
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 (a) that the Borrower may sell its assets in the ordinary course of business as described in its Prospectus and (b) that the Borrower shall be permitted to merge with another Person (such transaction being a Fundamental Change) so
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long as (i) the Borrower is the survivor of such merger; (ii) the Borrower remains a closed-end management investment company (as such term is used in the Investment Company Act) and remains registered under the Investment Company Act; (iii) the Borrower has provided the Agent and the Banks prior written notice of such Fundamental Change not less than thirty (30) days prior to the effectiveness of such Fundamental Change; (iv) both before and immediately after giving effect to such Fundamental Change, the representations and warranties contained in Article IV hereof shall be true and accurate in all material respects; (v) no Default or Event of Default has occurred and is continuing or would result from such Fundamental Change; (vi) the Agents security interest in the Collateral remains perfected and the Borrower takes all other action as the Agent may reasonably request to perfect the Agents security interest in any newly-acquired assets; and (vii) the Borrower shall have delivered to the Agent and each of the Banks a certificate signed by an Authorized Signatory of the Borrower which is reasonably acceptable to the Agent stating that such Fundamental Change complies with the provisions of this Section 5.09(b) and that all conditions precedent herein provided and/or relating to such Fundamental Change have been satisfied. The Borrower will not invest all of its investable assets in any other closed-end 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 proceeds of each Loan made under this Agreement will be used by the Borrower for general purposes, including to create leverage.
SECTION 5.11. Compliance with Prospectus. The Borrower will at all times comply (a) with the Fundamental Policies and (b) in all material respects with the Investment Policies and Restrictions other than the Fundamental Policies, and will not make any investment, loan, advance or extension of credit inconsistent with the Investment Policies and Restrictions. The Borrower will not permit any of the Fundamental Policies or other Investment Policies and Restrictions that may not be changed without shareholder approval to be changed from those in effect on the Effective Date without the prior written consent of the Required Banks, which consent shall not be unreasonably withheld.
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SECTION 5.12. Non-Affiliation with Banks. The Borrower will not at any time become an Affiliated Person of any Bank or any Affiliate of any Bank known to the Borrower, and the Borrower will use its best efforts to ensure that none of its Affiliates is or becomes an Affiliated Person of any Bank or any Affiliate of any Bank known to the Borrower.
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 Subsidiaries. The Borrower will not at any time have any Subsidiaries other than the Permitted Subsidiaries, provided, however , that each time the Borrower makes any Investment in a Permitted Subsidiary, as of the date of making any such Investment, the aggregate amount of all Permitted Subsidiary Investments (including the amount of the Investment the Borrower is contemplating making) shall not exceed five percent (5%) of the Borrowers Total Assets, as determined as of the date of making any such Investment.
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 Multi-employer Plan subject to ERISA.
SECTION 5.16. Fiscal Year. Without thirty (30) days prior written notice to the Agent, the Borrower will not change its fiscal year from that set forth in Section 4.13.
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 Custodian will at all times be the Borrowers custodian.
SECTION 5.19. Asset Coverage. The Borrower will not at any time permit the aggregate amount of Senior Securities Representing Indebtedness to exceed 33 1/3% of its total assets, less all liabilities and indebtedness not represented by Senior Securities (as such term is defined in the Investment Company Act).
SECTION 5.20. Further Assurances. The Borrower shall execute and deliver all such documents and instruments, and take all such actions, as the Agent may from time to time reasonably request with respect to the transactions contemplated hereunder or under any of the other Loan Documents.
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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 (i) any principal of any Loan on the due date therefor (whether at maturity or any accelerated date of maturity or any other date fixed for payment or prepayment) or (ii) 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) Domestic Business Days of the due date therefor (whether at maturity or any accelerated date of maturity or any other date fixed for payment or prepayment); or
(b) the Borrower shall fail to observe or perform any covenant contained in Sections 5.01(a) through (e), 5.02 and 5.04 through 5.20; or
(c) the Borrower shall fail to observe or perform any covenant or agreement contained in this Agreement or any Loan Document (other than those covered by clauses (a) or (b) above) and such failure shall continue unremedied for a period of thirty (30) 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 of $1,000,000 or more when due or within any applicable grace period; or
(f) any event or condition shall occur which results in the acceleration of the maturity of any Debt of the Borrower in an aggregate principal amount of $1,000,000 (the Subject Debt) or more or enables the holder of such Subject Debt or any Person acting on such holders behalf to accelerate the maturity thereof or, in the case of a Financial Contract, enables the non-defaulting party to terminate the contract evidencing such Subject Debt; or
(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
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(i) a judgment or order for the payment of money in excess of $5,000,000 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) the Investment Adviser shall cease to be the investment adviser to the Borrower unless the successor thereto is an Affiliate of the Investment Adviser or another entity consented to in writing by the Agent and the Required Banks; or
(k) the Investment Adviser shall (i) sell or otherwise dispose of all or substantially all of its assets unless the Agent and the Required Banks have consented to the same in writing or (ii) consolidate with or merge into any other Person, unless it is the survivor, unless either (1) the Agent and the Required Banks have consented to the same in writing or (2) there is a consolidation or merger of the Investment Adviser into an Affiliate of BlackRock, Inc. if such consolidation or merger does not constitute a change of control within the meaning of the Investment Company Act and such consolidation or merger, as the case may be, could not reasonably be expected to have a Material Adverse Effect; or
(l) the Agent for any reason 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 other than Liens permitted under Section 5.08;
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 to the Borrower (together with accrued interest thereon) to be, and the Loans (together with accrued interest thereon) 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) 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.
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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 and the Notes 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 Loans 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 or Event of Default except as expressly provided in Article VI.
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.
SECTION 7.04. Liability of Agent. Neither the Agent nor any of its directors, officers, agents or employees shall be liable 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 (which may be a bank wire, telex or similar writing) believed by it to be genuine or to be signed by the proper party or parties.
SECTION 7.05. Indemnification. Each Bank shall, ratably in accordance with its Commitment Percentage, 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
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a court of competent jurisdiction to have resulted from such Persons gross negligence or willful misconduct, provided , however , that no action 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 $250,000,000. 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
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respect to making dispositions and arrangements with the other Banks, where such Banks share of any payment received, whether by set-off 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 pr o rata shares of all outstanding Loans. 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 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, duty or other charge with respect to its Loans, its Note or its Commitment, or shall change the
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basis of taxation of payments to any Bank (or its Applicable Lending Office) of the principal of or interest on its Loans or any other amounts due under this Agreement or its Commitment, in each case except for any tax on, or changes in the rate of tax on the overall net income of, or franchise taxes payable by, such Bank or its Applicable Lending Office imposed by the jurisdiction in which such Banks principal executive office or Applicable Lending Office is located; 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 ay 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 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 8.01 and will designate a different Applicable Lending Office if such designation will avoid the need for, or reduce the amount of, such compensation
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and will not, in the judgment of such Bank, be otherwise disadvantageous to such Bank. 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 the 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 an Overnight Rate Loan, (ii) each LIBOR Loan will automatically, on the last day of the then current Interest Period relating thereto, become an Overnight 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 or any change in any present or future Applicable Law, or any change in the interpretation or administration of any present or future Applicable Law 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 request or new directive (whether or not having the force of law) of any such Governmental 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 other 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 Overnight 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 Overnight 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 8.03, such Bank shall designate a different LIBOR Lending Office if such designation will avoid the need for
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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 2.07. Concurrently with prepaying each such LIBOR Loan, the Borrower shall borrow an Overnight 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 an Overnight Rate Loan.
SECTION 8.04. Overnight Rate Loans Substituted for Affected LIBOR Loans. If (a) the obligation of any Bank to make LIBOR Loans has been suspended pursuant to Section 8.03 or (b) 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 8.04 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 Overnight 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 Overnight Rate Loans instead.
SECTION 8.05. Replacement Banks. Upon the election of any Bank to request reimbursement by the Borrower for amounts due under Sections 8.01 or 8.03 or upon the suspension of any Banks obligation to make, convert to or continue LIBOR Loans, the Borrower may, upon prior written notice to the Agent and such Bank, request that the Agent 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 8.05, it will promptly execute and deliver all documents and instruments reasonably required by the Borrower to assign such Banks Loans and Commitment to the applicable Replacement Bank. The Agent shall cooperate with the Borrower in seeking a Replacement Bank and shall use its best efforts to identify a Replacement Bank and complete the assignment to such Replacement Bank of such Loans and Commitment within 45 days of said written notice.
SECTION 8.06. 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 Sections 2.02 or (c) the making of any payment of a LIBOR Loan or the making of any conversion of any such Loan to an Overnight 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.
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ARTICLE IX.
MISCELLANEOUS
SECTION 9.01. Notices. All notices, requests, consents and other communications to any party hereunder shall be in writing (including facsimile transmission or similar writing) and shall be delivered to such party at its address, telex number or facsimile number set forth on Schedule 1 attached hereto. Each such notice, request, consent or other communication shall be effective (a) if given by facsimile, when such facsimile is transmitted to the facsimile number specified in this Section and the appropriate confirmation is received, (b) if given by mail, 72 hours after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid or (c) if given by any other means, when delivered at the address specified in this Section 9.01; provided that notices to the Agent under Article II or Article VII shall not be effective until received.
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 agrees to promptly pay (i) all reasonable and documented 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 the facility established hereby, any waiver or consent hereunder or any amendment hereof or any waiver of any Default or Event of Default or alleged Default or Event of Default hereunder, and any amendment or termination hereof and (ii) if a Default or an Event of Default occurs, all reasonable and documented out-of-pocket expenses incurred by the Agent and each Bank, including reasonable fees and disbursements of counsel, in connection with such Default or Event of 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.
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SECTION 9.04. Set Off. (a) 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 securities or other property of the Borrower 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 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.
(b) 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 such unpaid Obligations. In addition, the Custodian is hereby directed by the Borrower to dispose of the Borrowers assets as selected by the Investment Adviser to the extent necessary to repay all amounts due to the Banks from the Borrower to the extent that the Obligations have not been paid when due or if an Event of Default has occurred and is continuing and the Obligations have been accelerated. If the Investment Adviser does not select a sufficient amount of assets of the Borrower to repay all amounts due to the Banks from the Borrower within a reasonable time, the Custodian is hereby directed by the Borrower, upon the request of the Agent and upon one days prior written notice to the Borrower and the Investment Adviser, to dispose of the Borrowers assets to the extent necessary to repay all amounts due to the Banks from the Borrower. 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 Bank and the Custodian may have against the Borrower following the occurrence of an Event of Default hereunder.
SECTION 9.05. Amendments and Waivers. Any provision of this Agreement or any of the other Loan Documents may be amended or waived if, but only if, such amendment or waiver is in writing and is signed by the Borrower and the Required Banks (and, if the rights or duties of the Agent are affected thereby, by the Agent); provided , however , that no such amendment or waiver shall:
(a) waive any condition set forth in Section 3.01 without the written consent of each Bank;
(b) extend or increase the Commitment Amount of any Bank (or reinstate any Commitment terminated pursuant to Section 6.01) without the written consent of such Bank;
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(c) postpone any date fixed by this Agreement or any other Loan Document for any payment of principal, interest, fees or other amounts due to the Banks (or any of them) hereunder or under any other Loan Document without the written consent of each Bank directly affected thereby;
(d) reduce the principal of, or the rate of interest specified herein on, any Loan, or any fees or other amounts payable hereunder or under any other Loan Document without the written consent of each Bank directly affected thereby; provided , however , that only the consent of the Required Banks shall be necessary to waive any obligation of the Borrower to pay interest at the default rate provided for in Section 2.06(c);
(e) change any provision of this Agreement in a manner that would alter the pro rata sharing of payments required by this Agreement without the prior written consent of each Bank;
(f) change any provision of this Section 9.05 or the definition of Required Banks or any other provision hereof specifying the number or percentage of Banks required to amend, waive or otherwise modify any rights hereunder or make any determination or grant any consent hereunder without the written consent of each Bank;
and, provided further , that no amendment, waiver or consent shall, unless in writing and signed by the Agent in addition to the Banks required above, affect the rights or duties of the Agent under this Agreement or any other Loan Document. 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.
(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, modification or waiver of any provision of this Agreement; provided that such participation agreement may provide that such Bank will not agree to any modification, amendment or waiver of this Agreement described in clause (a), (b), (c) or (d) of Section 9.05 without the
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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 in substantially the form of Exhibit D attached hereto executed by such Assignee and such transferor Bank, with, if no Default or Event of 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 execution and delivery of such instrument and payment by such Assignee to such transferor Bank of an amount equal to the purchase price agreed between such transferor Bank and such Assignee with respect to the interest assigned, such Assignee shall be a Bank party to this Agreement (in addition to any interest of such Bank held prior to such assignment) and shall have all the rights and obligations of a Bank with the Commitment Amount as set forth in such instrument of assumption (in addition to any interest of such Bank held prior to such assignment), and the transferor Bank shall be released from its obligations hereunder to a corresponding extent, and no further consent or action by any party shall be required. 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, and the Agent shall be authorized to revise Schedule 1 to reflect such assignment and to 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. In connection with any such assignment, the transferor Bank shall pay to the Agent an administrative fee for processing such assignment in the amount of $3,000. 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 certification as to exemption from deduction or withholding of any United States federal income taxes in accordance with Section 2.12. At the time of any assignment pursuant to this Section 9.06(c) to a Person who is not already a party hereunder, the respective Assignee shall provide to the Borrower and to the Agent the appropriate forms, certificates and other documentation described in Section 2.12(e).
(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, and its Note, 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.
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(f) No bank may become an Assignee pursuant to clause (c) above or an Additional Commitment Bank pursuant to Section 2.09(b) unless such bank 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 bank may become an Assignee pursuant to clause (c) above or an Additional Commitment Bank pursuant to Section 2.09(b) if that bank is an Affiliate of the Borrower.
(g) There shall be maintained by the Agent, acting solely in this respect as agent for the Borrower, a copy of each assignment and a register (the Register) for the recordation of the names and addresses of the Banks and each Assignee, and the obligations to and principal amount of the Loans owing to the Banks and each Assignee from time to time. The entries in the Register shall be conclusive, in the absence of manifest error, and the parties to this Agreement shall treat each Person whose name is recorded in the Register as the owner of the obligation recorded therein for the purposes of this Agreement and the Notes. The failure to make any such recordation, or any error in such recordation shall not affect the Borrowers obligations in respect of the Loans. The Register shall be available for inspection by the Borrower at any reasonable time and from time to time upon reasonable prior notice.
SECTION 9.07. Governing Law; Submission to Jurisdiction . This Agreement and each of the other Loan Documents are contracts under the laws of the State of New York and shall for all purposes be construed in accordance with and governed by the laws of said State of New York (excluding the laws applicable to conflicts of law). 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 New York State or United States Federal court in the Borough of Manhattan, The City of New York, 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 New York County, New York 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 as 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 Agreement, the other Loan Documents to which it is a party by, among other things, the waivers and certifications contained herein.
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SECTION 9.09. Confidential Information. (a) Each Bank agrees that any information, documentation or materials provided by the Borrower or the Borrowers Affiliates, employees, agents or representatives ( Representatives ) disclosing the portfolio holdings of the Borrower or disclosing other non-public information in relation to this Agreement or the Loan Documents ( Confidential Material ), whether before or after the date of this Agreement, shall be treated confidentially, using the same degree of care that such Bank uses to protect its own similar material.
(b) Such Confidential Information may be disclosed to Representatives of each Bank who need to know such information 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; 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.
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 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 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 Act.
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SECTION 9.11. 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.
SECTION 9.12. Transitional Arrangements .
(a) This Agreement shall, on the Effective Date, supersede the Prior Credit Agreement in its entirety, except as expressly provided in this Section 9.12. On the Effective Date, the rights and obligations of the parties evidenced by the Prior Credit Agreement shall be evidenced by this Agreement, and the Loans as defined in the Prior Credit Agreement shall be converted to Loans as defined herein.
(b) All interest, fees and expenses, if any, owing or accruing under or in respect of the Prior Credit Agreement through the Effective Date shall be calculated as of the Effective Date (prorated in the case of any fractional periods) and shall be paid on the date such amounts would have otherwise been required to have been paid under the Prior Credit Agreement.
[Signature page follows.]
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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.
BLACKROCK CORPORATE HIGH YIELD FUND VI, INC. |
||
By: |
|
|
Title: | CFO | |
STATE STREET BANK AND TRUST COMPANY, individually and as Agent | ||
By: |
|
|
Title: |
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.
BLACKROCK CORPORATE HIGH YIELD FUND VI, INC. |
||
By: |
|
|
Title: |
||
STATE STREET BANK AND TRUST |
||
COMPANY, individually and as Agent |
||
By: |
/s/ Karen A. Gallagher |
|
Title: |
Karen A. Gallagher Vice President |
SCHEDULE 1
BORROWER :
BLACKROCK CORPORATE HIGH YIELD FUND VI, INC.
100 Bellevue Parkway
Wilmington, DE 19809
BANKS: |
COMMITMENT
AMOUNT |
COMMITMENT
PERCENTAGE |
||||||
STATE STREET BANK AND TRUST COMPANY |
$ | 213,800,000 | 100 | % |
Domestic Lending Office:
Mutual Fund Lending Department
Copley Place, Tower 2
Boston, MA 02206
Attn. Robyn A. Shepard, Assistant Vice President - CSU Manager
Tel: (617) 937-8806
Fax: (617) 988-6677
Email: rashepard@statestreet.com
LIBOR Lending Office:
Mutual Fund Lending Department
Copley Place, Tower 2
Boston, MA 02206
Attn: Robyn A. Shepard, Assistant Vice President - CSU Manager
Tel: (617) 937-8806
Fax: (617) 937-8806
Email: rashepard@statestreet.com
For non-funding or payment notices:
Mutual Fund Lending Department
Copley Place Tower 2
Boston, MA 02206
Attn: Karen Gallagher, Vice President
Tel: (617)937-8828
Fax: (617)988-9535
Schedule 2
Pricing Service Schedule
Asset Types |
Pricing Service |
|
Domestic Equities |
Bloomberg | |
FactSet | ||
Interactive Data Pricing and Reference Data | ||
ITG | ||
Telekurs Financial | ||
Thompson Reuters Pricing Service | ||
U.S. Government, Agency, |
Barclays Index Pricing | |
and Government Sponsored |
Bloomberg | |
Enterprise (GSE) Securities |
Interactive Data Pricing and Reference Data | |
PricingDirect | ||
Standard and Poors Security Evaluations Service | ||
Thompson Reuters Pricing Service | ||
TradeWeb Markets LLC | ||
Mortgage Securities |
Bloomberg | |
Interactive Data Pricing and Reference Data | ||
PricingDirect | ||
Standard and Poors Security Evaluations Service | ||
Thompson Reuters Pricing Service | ||
TradeWeb Markets LLC | ||
Corporate Bonds |
Barclays Index Pricing | |
Bloomberg | ||
Interactive Data Pricing and Reference Data | ||
PricingDirect | ||
Standard and Poors Security Evaluations Service | ||
Thompson Reuters Pricing Service | ||
TradeWeb Markets LLC | ||
High Yield Bonds |
Bank of America High Yield Index | |
Bloomberg | ||
Interactive Data Pricing and Reference Data | ||
PricingDirect | ||
Standard and Poors Security Evaluations Service | ||
Thompson Reuters Pricing Service | ||
TradeWeb Markets LLC | ||
Municipal Bonds |
Bloomberg | |
Interactive Data Pricing and Reference Data | ||
Standard and Poors Security Evaluations Service | ||
Senior Loans |
Loan Pricing Corporation | |
LoanX (Markit Partners) | ||
Swaps/Swaptions |
PricingDirect | |
Standard and Poors Security Evaluations Service | ||
State Street Over-the-Counter Derivatives Pricing Process | ||
SuperDerivatives | ||
TradeWeb Markets LLC |
Asset Types |
Pricing Service |
|
Futures |
Bloomberg | |
Interactive Data Pricing and Reference Data | ||
Thompson Reuters Pricing Service | ||
International Equities |
Bloomberg | |
FactSet | ||
Interactive Data Pricing and Reference Data | ||
ITG | ||
Telekurs Financial | ||
Thompson Reuters Pricing Service | ||
International Bonds |
Barclays Euro Government Inflation-Linked Bond Index | |
Bloomberg | ||
IBOXX Index | ||
Interactive Data Pricing and Reference Data | ||
JPMorgan Emerging & Developed Market Index | ||
PricingDirect | ||
Standard and Poors Security Evaluations Service | ||
Thompson Reuters Pricing Service | ||
TradeWeb Markets LLC | ||
FX Rates |
Bloomberg | |
Interactive Data Pricing and Reference Data | ||
Thompson Reuters Pricing Service / WM Company | ||
Over-The-Counter Options |
Analytical / Black-Scholes | |
Interactive Data Pricing and Reference Data (Systematic Fair | ||
Value Prices) | ||
Thompson Reuters Pricing Service |
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EXHIBIT A
FORM OF NOTE
U.S. $[ ] |
, 2011 |
FOR VALUE RECEIVED, BLACKROCK CORPORATE HIGH YIELD FUND VI, INC. , a Maryland corporation (the Borrower), hereby promises to pay to [INSERT NAME OF BANK] (the Bank) at the head office of the Agent (as defined below) at Copley Place Tower 2, Boston, Massachusetts 02206:
(a) prior to or on the Termination Date (as defined in the Credit Agreement referred to below) the principal amount of [INSERT COMMITMENT AMOUNT] (U.S. $ ) or, if less, the aggregate unpaid principal amount of Loans advanced by the Bank to the Borrower pursuant to the Amended and Restated Credit Agreement, dated as of March 3, 2011 (as amended and in effect from time to time, the Credit Agreement), among the Borrower, the Bank, other banks parties thereto and State Street Bank and Trust Company, as agent (the Agent);
(b) the principal outstanding hereunder from time to time at the times and in the amounts provided in the Credit Agreement; and
(c) interest on the principal balance hereof from time to time outstanding from the Effective Date (as defined in the Credit Agreement) through and including the maturity date hereof 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 any Loan or at the time of receipt of any 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 terms of this note are subject to amendment only in the manner provided in the Credit Agreement.
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 of the Events of Default shall occur, 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, upon the conditions, 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 STATE OF NEW YORK AND SHALL FOR ALL PURPOSES BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF SAID STATE OF NEW YORK (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OF LAW). THE BORROWER AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS NOTE OR THE OBLIGATIONS OWING HEREUNDER 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 NEW YORK STATE OR UNITED STATES FEDERAL COURT IN THE BOROUGH OF MANHATTAN, THE CITY OF NEW YORK, 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. THE BORROWER WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUIT BROUGHT IN NEW YORK COUNTY, NEW YORK OR ANY COURT SITTING THEREIN OR THAT A SUIT BROUGHT THEREIN IS BROUGHT IN AN INCONVENIENT COURT.
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IN WITNESS WHEREOF , the undersigned has caused this Note to be signed as a as a document under seal in its name by its duly authorized officer as of the day and year first above written.
BLACKROCK CORPORATE HIGH YIELD FUND VI, INC. | ||
By: |
|
|
Title: |
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Date |
Amount of Loan |
Type of Loan |
Amount of Principal Paid or Prepaid |
Balance of Principal Unpaid |
Notation Made By: |
|||||
EXHIBIT B
FORM OF
NOTICE OF BORROWING
DATE:
TO: | STATE STREET BANK AND TRUST COMPANY, as Agent |
ATTN: |
Robyn A. Shepard | |
Assistant Vice President -CSU Manager | ||
Ph: (617)937-8806 | ||
Fax: (617)988-6677 | ||
Email: rashepard@statestreet.com |
FROM: | BLACKROCK CORPORATE HIGH YIELD FUND VI, INC. (the Borrower) |
Reference is hereby made to that certain Amended and Restated Credit Agreement, dated as of March 3, 2011 (such agreement, as amended and in effect from time to time, the Credit Agreement), among BlackRock Corporate High Yield Fund VI, Inc. (the Borrower), the lending institutions referred to therein as Banks, 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 gives notice of its request for the Loans described below.
[Domestic][LIBOR] Business Day of proposed borrowing: |
||
Amount of Loan requested: |
$ | |
Aggregate amount of Loans outstanding (after giving effect to the Loan requested hereby) |
$ | |
Adjusted Net Assets: |
$ | |
Maximum Loans based on Commitment Amount: |
$ | |
Maximum Loans based on Maximum Amount: |
$ | |
Maximum Loans based on Adjusted Net Asset Limit: |
$ |
Attached hereto is a borrowing report dated as of .
The undersigned hereby certifies that: (a) on the date of this notice and immediately after giving effect to the borrowing of the Loan(s) as set forth herein, the aggregate outstanding principal amount of the Loans do not and will not exceed the Available Amount, (b) each of the
representations and warranties set out in Article IV of the Agreement remains true and accurate as of the date hereof and will be true and accurate immediately after giving effect to the borrowing, of the Loan(s) as set forth herein (other than such representations and warranties that specifically relate to an earlier date), and (c) no Default or Event of Default has occurred and is continuing under the Agreement or any of the other Loan Documents or will occur under the Agreement or any of the other Loan Documents immediately after giving effect to the borrowing, as set forth herein.
|
Authorized Signatory |
Title: |
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EXHIBIT C
FORM OF NOTICE OF CONVERSION
DATE:
TO: | STATE STREET BANK AND TRUST COMPANY, as Agent |
ATTN: |
Robyn A. Shepard | |
Assistant Vice President -CSU Manager | ||
Ph: (617)937-8806 | ||
Fax: (617)988-6677 | ||
Email: rashepard@statestreet.com |
FROM: | BLACKROCK CORPORATE HIGH YIELD FUND VI, INC. (the Borrower) |
Reference is hereby made to that certain Amended and Restated Credit Agreement, dated as of March 3, 2011 (such agreement, as amended and in effect from time to time, the Credit Agreement), among BlackRock Corporate High Yield Fund VI, Inc. (the Borrower), the lending institutions referred to therein as Banks, 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, the Borrower hereby gives notice of its request to convert or continue the following Loan as set forth below
Existing Loan
|
||||
Type |
Amount | |||
LIBOR |
$ | |||
Overnight Rate |
$ | |||
If LIBOR, last day of current Interest Period is: |
New Loan
|
||||||||
Continue As /Convert to |
Amount | Date* |
Interest
Period |
|||||
LIBOR | $ | |||||||
Overnight Rate N/A | $ |
The undersigned hereby certifies that: (a) on the date of this notice and immediately after giving effect to the conversion or continuation of the Loan(s) as set forth herein, the aggregate outstanding principal amount of the Loans do not and will not exceed the Available Amount, (b) each of the representations and warranties of the Borrower set out in Article IV of the Agreement remains true and accurate as of the date hereof and will be true and accurate immediately after giving effect to the borrowing, conversion or prepayment of the Loan(s) as set forth herein, and (c) no Default or Event of Default has occurred and is continuing under the Agreement or any of the other Loan Documents or will occur under the Agreement or any of the other Loan Documents immediately after giving effect to the conversion or of the Loan(s) as set forth herein.
|
Authorized Signatory |
Title: |
* | Must be a Domestic Business Day or a LIBOR Business Day, as applicable. |
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EXHIBIT D
FORM OF
ASSIGNMENT AND ACCEPTANCE
Dated as of
Reference is made to the Amended and Restated Credit Agreement, dated as of March 3, 2011 (as from time to time amended and in effect, the Credit Agreement), by and among BlackRock Corporate High Yield Fund VI, Inc. (the Borrower), the lending institutions referred to therein as Banks (collectively, the Banks) and State Street Bank and Trust Company, as agent (in such capacity, the Agent) for the Banks. Capitalized terms used herein and not otherwise defined 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 |
Amount of | |||
the Order of: |
Note | |||
Assignor |
$ | |||
Assignee |
$ |
§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 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 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 2.12 of the Credit Agreement ] .
§4. Effective Date . The effective date for this Assignment and Acceptance shall be [ ] (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 by the Agent. Schedule 1 to the Credit Agreement shall thereupon be replaced as of the Effective Date by the Schedule 1 annexed hereto.
§5. Rights Under Credit Agreement . Upon such acceptance and recording, 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; 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.
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§6. Payments . Upon such acceptance of this Assignment and Acceptance by the Agent and such recording, 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 ASSIGNMENT AND ACCEPTANCE IS A CONTRACT UNDER THE LAWS OF THE STATE OF NEW YORK AND SHALL FOR ALL PURPOSES BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF SAID STATE OF NEW YORK (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OF LAW). EACH OF THE PARTIES HERETO AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS ASSIGNMENT AND ACCEPTANCE OR ANY OTHER ACTION BROUGHT BY SUCH PERSON ARISING HEREUNDER OR IN ANY WAY RELATED TO THIS ASSIGNMENT AND ACCEPTANCE WHETHER SOUNDING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE BROUGHT IN THE COURTS OF NEW YORK STATE OR UNITED STATES FEDERAL COURT IN THE BOROUGH OF MANHATTAN, THE CITY OF NEW YORK, 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 (IN THE CASE OF THE ASSIGNOR OR THE BORROWER) OR, IN THE CASE OF THE ASSIGNEE, AT . EACH PARTY HERETO HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUIT BROUGHT IN NEW YORK COUNTY, NEW YORK OR ANY COURT SITTING THEREIN OR THAT A SUIT BROUGHT THEREIN IS BROUGHT IN AN INCONVENIENT COURT.
§8. Counterparts . This Assignment and Acceptance may be executed in any number of counterparts which shall together constitute but one and the same agreement.
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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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BLACKROCK CORPORATE HIGH YIELD FUND VI, INC.
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STATE STREET BANK AND TRUST COMPANY,
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Exhibit 13(b)
AMENDMENT AGREEMENT NO. 1 TO AMENDED AND RESTATED CREDIT
AGREEMENT
This AMENDMENT AGREEMENT NO. 1 TO AMENDED AND RESTATED CREDIT AGREEMENT (this Amendment ) is made as of March 2, 2012, by and among BLACKROCK CORPORATE HIGH YIELD FUND VI, INC., a Maryland corporation (the Borrower ), the lending institutions listed on the signature pages hereof (collectively, the Banks ) and STATE STREET BANK AND TRUST COMPANY, as agent for itself and such other Banks (in such capacity, the Agent ),
WHEREAS, the Borrower, the Banks and the Agent are parties to that certain Amended and Restated Credit Agreement, dated as of March 3, 2011 (as amended and in effect from time to time, the Credit Agreement ); and
WHEREAS, the parties hereto wish to amend the Credit Agreement as more fully set forth herein;
NOW, THEREFORE, in consideration of these premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:
§1. Definitions . 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.
§2. Amendments to Credit Agreement .
(a) Section 1.01 of the Credit Agreement is hereby amended by deleting the definitions of Adjusted Net Assets, Available Amount, Fee Letter, LIBOR Margin, Maximum Amount, Overnight Rate, and Termination Date in their entirety and restating each such definition as follows:
Adjusted Net Assets means as at any date of determination, an amount equal to (a) the value of the Total Assets of the Borrower minus (b) the Total Liabilities of the Borrower that are not Senior Securities Representing Indebtedness. For purposes of calculating the Adjusted Net Assets, the amount of any liability included in such Total Liabilities shall be equal to the greater of (i) the outstanding amount of such liability or (ii) the fair market value of all assets pledged or otherwise segregated for the benefit of the applicable creditor to secure such liability. For the avoidance of doubt, when calculating the outstanding amount of any liability in respect of any derivative contract, the liability shall be the maximum amount of any termination or loss payment required to be paid by such Person if such derivative contract were, at the time of determination, to be terminated by reason of any event of default or early termination event thereunder, whether or not such event of default or early termination event has in fact occurred.
Available Amount means, as of any date of determination, an amount equal to the lesser of (a) the Aggregate Commitment Amount as then in effect; (b) the Adjusted Net Asset Limit as then in effect; and (c) the Borrowing Base as then in effect. For the avoidance of doubt, any required repayments of Loans hereunder as a result of the Borrower exceeding the Available Amount as a result of paragraph (c) hereof shall be subject to the provisions of Section 2.05(b) below.
Fee Letter means that certain amended and restated fee letter agreement dated as of March 2, 2012 by and between the Borrower and the Agent.
LIBOR Margin 0.75%.
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 have outstanding at any time pursuant to Applicable Law, including the Investment Company Act;
(b) the maximum amount of Debt that the Borrower would be permitted to have outstanding at any time pursuant to the limitations on borrowings adopted by the Borrower in its Prospectus or elsewhere;
(c) the maximum amount of Debt that the Borrower would be permitted to have outstanding at any time pursuant to any agreements with any Government Authority; or
(d) the maximum amount of Debt that the Borrower would be permitted to have outstanding at any time without violating Section 5.07 or any other provision of this Agreement,
in each case, as in effect at the time of determination.
Overnight Rate means, for any day, the higher of (a) 0.75% above the Federal Funds Rate as in effect on that day and (b) 0.75% above the Overnight LIBOR Rate as in effect on such date.
Termination Date means March 1, 2013, or such earlier date on which the Commitments terminate or are terminated pursuant to the terms hereof, provided that the Termination Date (and some or all of the Banks Commitments to make Loans to the Borrower hereunder) may be extended in accordance with Section 2.09(c).
(b) Section 1.01 of the Credit Agreement is further amended by inserting the following definitions in the appropriate alphabetical order:
Asset Coverage Test has the meaning set forth in Section 5.19 hereof.
Borrowing Base means, as of any date of determination, an amount equal to the product of (a) sixty five percent (65%) and (b) the fair market value of all Borrowing Base Eligible Assets of the Borrower as of such date.
Borrowing Base Eligible Assets means, as of any relevant date of determination, an amount equal to (a) the value of the Borrowers Adjusted Total Assets as of such date, minus (b) the fair market value of all assets of the Borrower which are subject to a Lien (other than a Lien in favor of the Agent for the benefit of the Agent and the Banks under the Loan Documents) or otherwise segregated for the benefit of any Person for any liability or obligation owing such Person.
First Amendment Effective Date means March 2, 2012.
(c) Section 2.05(b) of the Credit Agreement is hereby amended by deleting each reference to Adjusted Net Asset Limit which appears in Section 2.05(b) and substituting in each place thereof a reference to Borrowing Base.
(d) Section 2.05(d) of the Credit Agreement is hereby amended by deleting the words exceeds the Aggregate Commitment Amounts or the Commitment Amount of any Bank which appears on Section 2.05(d) and substituting in place thereof the words exceeds the Aggregate Commitment Amount, the Commitment Amount of any Bank or the amount set forth in clause (b) of the Asset Coverage Test.
(e) Section 2.07(a) of the Credit Agreement is hereby amended by deleting the words at the rate of 0.15% per annum which appear in Section 2.07(a) and substituting in place thereof the words at the rate of 0.05% per annum.
(f) Section 2.07(b) of the Credit Agreement is hereby amended by inserting at the end of the text of Section 2.07(b) the following: In addition, on the First Amendment Effective Date, the Borrower shall pay to the Agent, for its own account, a non-refundable fee in the amount, and in the manner, set forth in the Fee Letter.
(g) Section 4.17 of the Credit Agreement is hereby amended by deleting the words Adjusted Net Asset Limit which appear in Section 4.17 and substituting in place thereof the words Borrowing Base.
(h) Section 5.01(c) of the Credit Agreement is hereby amended by deleting the words Adjusted Total Assets and the Adjusted Net Asset Limit which appear in Section 5.01(c) and substituting in place thereof the words the Asset Coverage Test and the Borrowing Base.
(i) Section 5.19 of the Credit Agreement is hereby amended by deleting Section 5.19 in its entirety and restating it as follows:
SECTION 5.19. Asset Coverage. The Borrower will not (a) at the time of making any borrowing of any Loan hereunder permit the aggregate amount of Senior Securities Representing Indebtedness to exceed the Adjusted
Net Asset Limit or (b) at any time permit the amount of its Total Liabilities that are Senior Securities Representing Indebtedness to exceed 38% of Adjusted Net Assets (the Asset Coverage Test).
§3. Representations and Warranties . The Borrower hereby represents and warrants as follows:
(a) Representations and Warranties in Credit Agreement . The representations and warranties of the Borrower contained in the Credit Agreement are true and correct on and as of the date hereof and with the same force and effect as it 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).
(b) No Default . No Default or Event of Default has occurred and is continuing.
(c) Authority , Etc . The execution and delivery by the Borrower of this Amendment and the Borrowers performance of this Amendment and the Credit Agreement as amended hereby (as so amended, the Amended Agreement ) (i) are within the Borrowers corporate powers, (ii) have been duly authorized by all necessary corporate action on the part of the Borrower, (iii) require no Governmental Authorizations, Private Authorizations or Governmental Filings by the Borrower which have not already been obtained or made, (iv) do not contravene, or constitute a default under, any provision of (A) any Applicable Law unless the violation of such Applicable Law could not reasonably be expected to have a Material Adverse Effect, (B) the Charter Documents of the Borrower, or (C) any agreement, judgment, injunction, order, decree or other instrument binding upon the Borrower unless such contravention or violation could not reasonably be expected to have a Material Adverse Effect, and (v) do not result in the creation or imposition of any Lien on any asset of the Borrower (other than Liens in favor of the Agent to secure the Obligations and Liens permitted pursuant to Section 5.08 of the Credit Agreement).
(d) Enforceability of Obligations . This Amendment has been duly executed and delivered by the Borrower. Each of this Amendment and the Amended Agreement constitutes the valid and legally binding agreement of the Borrower, in each case enforceable in accordance with their terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors rights generally and general principles of equity (regardless of whether enforcement is sought in equity or at law).
§4. Effectiveness . This Amendment shall be effective as of the date first written above (the First Amendment Effective Date ) upon the receipt by the Agent of the following:
(a) counterparts of this Amendment duly executed and delivered by each of the Borrower, the Banks and the Agent and counterparts of the amended and restated Fee Letter, duly executed by the Agent and the Borrower;
(b) a certificate duly executed by an officer of the Borrower which is reasonably satisfactory to the Banks to the effect set forth in clauses (c) (provided if the Borrower is not submitting a Notice of Borrowing on the First Amendment Effective Date, reference to borrowings shall not be required) and (d) of Section 3.02 of the Credit Agreement, such certificate to be dated as of the First Amendment Effective Date and to be in form and substance reasonably satisfactory to the Agent;
(c) a duly executed certificate from the Secretary or Assistant Secretary of the Borrower in form and substance reasonably satisfactory to the Agent and dated as of the First Amendment Effective Date as to the incumbency of, and bearing specimen signatures of, the Authorized Signatories who are authorized as of the date hereof to execute and take actions hereunder and under the Loan Documents for and on behalf of the Borrower (or a certification that the incumbency of the Authorized Signatories set forth on that certificate delivered to the Agent pursuant to Section 3.01(f) of the Credit Agreement on the Effective Date (the Closing Date Certificate) remains true and accurate as of the date hereof); and certifying and attaching copies of (i) Charter Documents, with all amendments thereto (or a certification that the Charter Documents delivered to the Agent and referenced in the Closing Date Certificate have not been amended, supplemented or modified and are in full force and effect); (ii) the resolutions of the Borrowers Board of Directors authorizing the transactions contemplated hereby; (iii) the current Prospectus as then in effect (or a certification that the Prospectus delivered to the Agent and referenced in the Closing Date Certificate has not been amended, supplemented or modified and is currently in effect); (iv) the investment management agreement between the Borrower and the Investment Adviser as then in effect (or a certification that the investment management agreement delivered to the Agent and referenced in the Closing Date Certificate has not been amended, supplemented or modified and is in full force and effect); and (v) the Custody Agreement (or a certification that the Custody Agreement delivered to the Agent and referenced in the Closing Date Certificate has not been amended, supplemented or modified and is in full force and effect);
(d) a legal existence and good standing certificate for the Borrower from the Secretary of State of the State of Maryland dated as of a recent date;
(e) a copy of the certificate of incorporation of the Borrower, with all amendments, certified as of a recent date by the Secretary of State of the State of Maryland; and
(f) payment of all fees and expense payable hereunder and under the Fee Letter.
§5. Ratification of the Borrower . The Borrower ratifies and confirms in all respects all of its obligations to the Agents and the Banks under the Credit Agreement and the other Loan Documents and hereby affirms its absolute and unconditional promise to pay to the Banks and the Agents the Loans made to it and all other amounts due from it under the Credit Agreement as amended hereby. The Credit Agreement and this Amendment shall be read and construed as a single agreement. All references in the Credit Agreement or any related agreement or instrument to the Credit Agreement shall hereafter refer to the Credit Agreement as amended hereby.
§6. Miscellaneous . This Amendment shall be a Loan Document for all purposes under the Credit Agreement. This Amendment shall be governed by and construed in accordance with the laws of the State of New York. Except as specifically amended by this Amendment, the Credit Agreement and all other agreements and instruments executed and delivered in connection with the Credit Agreement, including, without limitation, the other Loan Documents, shall remain in full force and effect. This Amendment is limited specifically
to the matters set forth herein and does not constitute directly or by implication an amendment or waiver of any other provision of the Credit Agreement or any of the other Loan Documents. Nothing contained herein shall constitute a waiver of, impair or otherwise affect any Obligations, any other obligation of the Borrower or any rights of the Agents and the Banks consequent thereon. This Amendment may be executed in several counterparts and by each party on a separate counterpart, each of which when so executed and delivered shall be an original, and all of which together shall constitute one instrument. Delivery of an executed signature page to this Amendment by facsimile transmission or other electronic transmission shall be as effective as delivery of a manually signed counterpart of this Amendment, provided, the Borrower does agree to provide the Agent with an original manually signed counterpart of this Amendment within five (5) Business Days of the First Amendment Effective Date. In proving this Amendment it shall not be necessary to produce or account for more than one such counterpart signed by the party against whom enforcement is sought.
[Signature page follows.]
IN WITNESS WHEREOF , the parties hereto have caused this Amendment to be duly executed by their respective authorized officers as of the date first above written.
BLACKROCK CORPORATE HIGH YIELD FUND VI, INC. |
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STATE STREET BANK AND TRUST COMPANY, Individually and as Agent | ||
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IN WITNESS WHEREOF , the parties hereto have caused this Amendment to be duly executed by their respective authorized officers as of the date first above written.
BLACKROCK CORPORATE HIGH YIELD FUND VI, INC. |
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STATE STREET BANK AND TRUST COMPANY, | ||
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/s/ Karen A. Gallagher |
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Title: | Karen A. Gallagher |
Exhibit 13(c)
AMENDMENT AGREEMENT NO. 2 TO AMENDED AND RESTATED CREDIT AGREEMENT
This AMENDMENT AGREEMENT NO. 2 TO AMENDED AND RESTATED CREDIT AGREEMENT (this Amendment ) is made as of March 1, 2013, by and among BLACKROCK CORPORATE HIGH YIELD FUND VI, INC., a Maryland corporation (the Borrower ), the lending institutions listed on the signature pages hereof (collectively, the Banks ) and STATE STREET BANK AND TRUST COMPANY, as agent for itself and such other Banks (in such capacity, the Agent );
WHEREAS, the Borrower, the Banks and the Agent are parties to that certain Amended and Restated Credit Agreement, dated as of March 3, 2011 (as amended and in effect from time to time, the Credit Agreement ); and
WHEREAS, the parties hereto wish to amend the Credit Agreement as more fully set forth herein;
NOW, THEREFORE, in consideration of these premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:
§1. Definitions . 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.
§2. Amendments to Credit Agreement .
(a) Section 1.01 of the Credit Agreement is hereby amended by deleting the definitions of Aggregate Commitment Amount, LIBOR Margin, Overnight Rate, and Termination Date in their entirety and restating each such definition as follows:
Aggregate Commitment Amount means, as of any date, the aggregate of all Commitment Amounts as of such date. On the Second Amendment Effective Date, the Aggregate Commitment Amount is $222,000,000.
LIBOR Margin 0.80%.
Overnight Rate means, for any day, the higher of (a) 0.80% above the Federal Funds Rate as in effect on that day and (b) 0.80% above the Overnight LIBOR Rate as in effect on such date.
Termination Date means the Specified Termination Date on which the Commitments of those Banks still remaining in effect at such time are terminated in full pursuant to Section 2.08 hereof (without replacement pursuant to Section 2.08(d) such that the Aggregate Commitment Amount has been reduced to zero, or such earlier date on which the Commitments terminate or are terminated pursuant to the terms hereof.
(b) Section 1.01 of the Credit Agreement is further amended by inserting the following definitions in the appropriate alphabetical order:
Applicable Day has the meaning set forth in Section 2.07(a) hereof.
Joining Bank has the meaning set forth in Section 2.08(d)(i) hereof.
Reducing Bank has the meaning set forth in Section 2.08(c) hereof.
Reduction Amount has the meaning set forth in Section 2.08(c) hereof.
Reduction Notice has the meaning set forth in Section 2.08(c) hereof.
Requested Reduction Amount has the meaning set forth in Section 2.08(c) hereof.
Second Amendment Effective Date means March 1, 2013.
Specified Termination Date has the meaning set forth in Section 2.08(b) hereof.
Substitute Bank has the meaning set forth in Section 2.08(d)(i) hereof.
Terminating Bank has the meaning set forth in Section 2.08(b) hereof.
Termination Notice has the meaning set forth in Section 2.08(b) hereof.
Utilization Fee has the meaning set forth in Section 2.07(a) hereof.
(c) Section 1.01 of the Credit Agreement is further amended by deleting the definitions of Consent Date, Existing Termination Date and Non-Extending Bank in their entirety.
(d) Section 2.05(a) of the Credit Agreement is hereby amended by deleting Section 2.05(a) in its entirety and restating it as follows:
(a) Each Loan owing to any Bank shall mature, and the principal amount thereof shall be due and payable to such Bank, on the earlier of (x) such Banks Specified Termination Date and (y) the Termination Date. The Borrower promises to pay on such date, and there shall become absolutely due and payable on such date, all of the Loans outstanding to such Bank on such date, together with all accrued and unpaid interest thereon and such other amounts outstanding to such Bank hereunder.
(e) Section 2.05(h) of the Credit Agreement is hereby amended by deleting Section 2.05(h) in its entirety and restating it as follows:
(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, provided, however, that Loans of any Terminating Bank prepaid prior to such Banks Specified Termination Date may be reborrowed prior to the earlier of (x) such Banks Specified Termination Date and (y) the Termination Date.
(f) The last sentence of Section 2.06(a) of the Credit Agreement is hereby amended by deleting the last sentence of Section 2.06(a) in its entirety and restating it as follows:
Interest on each Overnight Rate Loan shall be payable in arrears on the last day of each calendar month and on the Termination Date (or, if earlier, with respect to the Loans of any Terminating Bank, on such Banks Specified Termination Date).
(g) The last sentence of Section 2.06(b) of the Credit Agreement is hereby amended by deleting the last sentence of Section 2.06(b) in its entirety and restating it as follows:
Interest on each LIBOR Loan shall be payable in arrears on the last day of the Interest Period in effect with respect thereto and on the Termination Date (or, if earlier, with respect to the Loans of any Terminating Bank, on such Banks Specified Termination Date).
(h) Section 2.07(a) of the Credit Agreement is hereby amended by deleting Section 2.07(a) in its entirety and restating it as follows:
(a) During the Revolving Credit Period, the Borrower shall pay to the Agent for the pro rata accounts of each Bank a utilization fee (the Utilization Fee) at the rate of 0.05% per annum times an amount equal to the unused portion of the Aggregate Commitment Amount on each day (each, an Applicable Day) on which the total outstanding Loans are less than fifty percent (50%) of the actual daily amount of the Aggregate Commitment Amount then in effect (calculated after taking into account any reductions in any Commitments, repayment of Loans, prepayment of Loans and borrowings made on such day in accordance with the terms hereof). Such Utilization Fee shall accrue for the pro rata account of each Bank with respect to each Applicable Day occurring from the Second Amendment Effective Date to but excluding the Termination Date (or, if earlier, with respect to any Terminating Bank, such Banks Specified Termination Date). The Utilization Fee shall be due and payable quarterly in arrears on the last day of each calendar quarter, commencing on the first such day after the Second Amendment Effective Date, and on the Termination Date (or, if earlier, with respect to any Terminating Bank, such Banks Specified Termination Date).
(i) Section 2.08 of the Credit Agreement is hereby amended by deleting Section 2.08 in its entirety and restating it as follows:
SECTION 2.08. Termination and Reduction of Commitments .
(a) Reductions and Terminations by the Borrower . Subject to Section 2.05(d), 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 in full at any time, or (ii) reduce from time to time the Aggregate Commitment Amount by an aggregate amount of at least $5,000,000 or integral multiples of $1,000,000 in excess thereof, 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 2.08(a), 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 Utilization Fee then accrued. No reduction in the Commitment Amounts or termination of the Commitments made in accordance with this Section 2.08(a) may be reinstated.
(b) Termination in Full by Bank or Banks . Each Banks Commitment Amount shall permanently reduce to $0 and each Banks Commitment shall terminate on the Termination Date. Notwithstanding anything to the contrary contained herein, each Bank shall have the right at any time from and after February 24, 2014 (or, to the extent such Bank becomes a Bank hereunder after the Second Amendment Effective Date, on the 360th day after such Bank becomes a Bank hereunder) to elect to terminate its Commitment in full upon no less than 360 days prior written notice to the Borrower and the Agent thereof (such notice being hereinafter referred to as a Termination Notice; any Bank so delivering a Termination Notice in accordance with the provisions of this Section 2.08(b) shall hereinafter be referred to as a Terminating Bank). The Commitment of such Terminating Bank shall automatically terminate in full, and the Commitment Amount of such Bank shall permanently reduce to $0, on the date (with respect to such Bank, its Specified Termination Date) which is the earlier of (x) the 360th day after the date of such Termination Notice and (y) a date selected by the Borrower by written notice to the Agent and agreed to by the Agent (such agreement not to be unreasonably withheld or delayed). In accordance with Section 2.05(a), the Borrower promises to pay each Terminating Bank on the earlier of (x) such Banks Specified Termination Date and (y) the Termination Date, and there shall become absolutely due and payable on such date, the aggregate principal amount of all Loans outstanding to such Terminating Bank on such date, together with any and all accrued and unpaid interest thereon and all other amounts outstanding hereunder (including, without limitation, the Utilization Fee owing to such Terminating Bank) and owing to such Terminating Bank as of such date.
(c) Reduction by Bank or Banks . Each Bank shall have the right at any time from and after February 24, 2014 (or, to the extent such Bank becomes a Bank hereunder after the Second Amendment Effective Date, on the 360th day after such Bank becomes a Bank hereunder) to elect to reduce its Commitment Amount in part upon no less than 360 days prior written notice to the Borrower and the Agent thereof specifying the amount of such reduction (the Requested
Reduction Amount; such a notice being hereinafter referred to as a Reduction Notice; any Bank so delivering such a Reduction Notice shall hereinafter be referred to as a Reducing Bank). The Commitment Amount of such Reducing Bank shall automatically reduce on the date (the Reduction Date) which is the earlier of (x) the 360th day from the date of such Reduction Notice and (y) a date selected by the Borrower by written notice to the Agent and agreed to by the Agent (such agreement not to be unreasonably withheld or delayed) by an amount (a Reduction Amount) equal to the greater of (i) the Requested Reduction Amount and (ii) an amount selected by the Borrower in the written notice to the Agent; it being understood that (I) the Borrower shall have the right to permanently reduce or terminate such Reducing Banks Commitment Amount in full or in part at any time after delivery of the Reduction Notice and prior to the Reduction Date and (II) nothing in this Section 2.08(c) shall limit the Borrowers right to reduce the Aggregate Commitment Amount or terminate the Commitments pursuant to and in accordance with the terms of Section 2.08(a) above. The Borrower promises to pay to each Reducing Bank on the applicable Reduction Date, and there shall become absolutely due and payable on each such date, the portion of the aggregate principal amount of all Loans outstanding to such Reducing Bank, together with any and all accrued and unpaid interest thereon, which exceeds such Reducing Banks new Commitment Amount (immediately after giving effect to the reduction by the Reduction Amount on such date); provided that if the Borrower elects to reduce the Commitment Amount of a Reducing Bank to $0 by terminating such Reducing Banks Commitment in full, the Borrower promises to pay to such Reducing Bank on the applicable Reduction Date, and there shall become absolutely due and payable on such date, the aggregate principal amount of all Loans outstanding to such Reducing Bank , together with any and all accrued and unpaid interest thereon and all other amounts outstanding hereunder and owing to such Reducing Bank as of such date.
(d) Substitute Bank . (i) To the extent any Bank delivers a Termination Notice pursuant to Section 2.08(b) above or a Reduction Notice pursuant to Section 2.08(c) above, so long as no Default or Event of Default has occurred and is continuing, the Borrower may, upon prior written notice to the Agent, such Terminating Bank or Reducing Bank, as applicable, request that one or more additional banks reasonably satisfactory to the Agent (each, a Joining Bank) and/or existing Banks (each such existing Bank or Joining Bank, a Substitute Bank) assume all or any portion of the Commitment Amount of such Terminating Bank or Reducing Bank, as applicable. Each Terminating Bank or Reducing Bank agrees that, should it be identified for replacement prior to its Specified Termination Date or Reduction Date, as applicable, pursuant to this Section 2.08(d)(i), it will promptly execute and deliver all documents and instruments reasonably required by the Borrower and/or the Agent to assign the relevant portion such Terminating Banks or Reducing Banks Loans and Commitment to the applicable Substitute Bank on the applicable Specified Termination Date or Reduction Date, as applicable. The parties hereto hereby acknowledge and agree that no existing Bank shall be obligated to assume any portion of the Commitment Amount of a Terminating Bank or Reducing Bank hereunder, and any election to do so shall be in the sole and absolute discretion of such Bank.
(ii) In the event that any Terminating Bank was not replaced pursuant to Section 2.08(d)(i) above prior to its Specified Termination Date, so long as no Default or Event of Default has occurred and is continuing, the Borrower may, at any time prior to the Termination Date, with prior written notice to the Agent, request that one or more Substitute Banks (x) in the case of Joining Banks, join this Agreement as Banks with Commitments and/or (y) in the case of existing Banks, increase their existing Commitments, in an aggregate Commitment Amount of up to the applicable Commitment Amount of such Terminating Bank immediately prior to the applicable Specified Termination Date. In the event that Commitments of any Reducing Bank equal to the applicable Reduced Amounts were not replaced with Commitments of Substitute Banks pursuant to Section 2.08(d)(i) above prior to the applicable Reduction Date, so long as no Default or Event of Default has occurred and is continuing, the Borrower may, at any time prior to the Termination Date, with prior written notice to the Agent, request that one or more Substitute Banks (x) in the case of Joining Banks, join this Agreement as Banks with Commitments and/or (y) in the case of existing Banks, increase their existing Commitments, in an aggregate Commitment Amount of up to the applicable Reduction Amounts. Each Joining Bank shall be required to execute and deliver to the Agent such joinder documents as the Agent shall reasonably require. The parties hereto hereby acknowledge and agree that no existing Bank shall be obligated to assume any portion of the Commitment Amount of a Terminating Bank or Reducing Bank hereunder, and any election to do so shall be in the sole and absolute discretion of such Bank.
(j) Section 2.09 of the Credit Agreement is hereby amended by deleting the text of Section 2.09 and substituting in place thereof the words Intentionally Omitted.
(k) Section 9.06(f) of the Credit Agreement is hereby amended by deleting such Section 9.06(f) in its entirety and restating it as follows:
No bank may become an Assignee pursuant to clause (c) above or a Substitute Bank pursuant to Section 2.08(d) unless such bank 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 bank may become an Assignee pursuant to clause (c) above or a Substitute Bank pursuant to Section 2.08(d) if that bank is an Affiliate of the Borrower.
(l) Schedule 1 to the Credit Agreement is hereby amended by deleting Schedule 1 in its entirety and replacing it with the Schedule 1 attached hereto as Exhibit A.
§3. Representations and Warranties . The Borrower hereby represents and warrants as follows:
(a) Representations and Warranties in Credit Agreement . The representations and warranties of the Borrower contained in the Credit Agreement (as amended by this Amendment) are true and correct on and as of the date hereof and with the same force and effect as it 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).
(b) No Default . No Default or Event of Default has occurred and is continuing.
(c) Authority , Etc . The execution and delivery by the Borrower of this Amendment and the Borrowers performance of this Amendment and the Credit Agreement as amended hereby (as so amended, the Amended Agreement ) (i) are within the Borrowers corporate powers, (ii) have been duly authorized by all necessary corporate action on the part of the Borrower, (iii) require no Governmental Authorizations, Private Authorizations or Governmental Filings by the Borrower which have not already been obtained or made, (iv) do not contravene, or constitute a default under, any provision of (A) any Applicable Law unless the violation of such Applicable Law could not reasonably be expected to have a Material Adverse Effect, (B) the Charter Documents of the Borrower, or (C) any agreement, judgment, injunction, order, decree or other instrument binding upon the Borrower unless such contravention or violation could not reasonably be expected to have a Material Adverse Effect, and (v) do not result in the creation or imposition of any Lien on any asset of the Borrower (other than Liens in favor of the Agent to secure the Obligations and Liens permitted pursuant to Section 5.08 of the Credit Agreement).
(d) Enforceability of Obligations . This Amendment has been duly executed and delivered by the Borrower. Each of this Amendment and the Amended Agreement constitutes the valid and legally binding agreement of the Borrower, in each case enforceable in accordance with their terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors rights generally and general principles of equity (regardless of whether enforcement is sought in equity or at law).
§4. Effectiveness . This Amendment shall be effective as of the date first written above (the Second Amendment Effective Date ) upon the receipt by the Agent of the following:
(a) counterparts of this Amendment duly executed and delivered by each of the Borrower, the Banks and the Agent and an updated Form FRU-1, duly executed by the Borrower;
(b) a certificate duly executed by an officer of the Borrower which is reasonably satisfactory to the Agent certifying that (i) the representations and warranties of the Borrower contained in the Credit Agreement (as amended by this Amendment) and the other Loan Documents shall be true on and as of the Second Amendment Effective Date and with the same force and effect as if made on and as of such date (or, if any representation or warranty is expressly stated to have been made as of a specific date, as of such specific date) and (ii) no Default or Event of Default has occurred and is continuing;
(c) a duly executed certificate from the Secretary or Assistant Secretary of the Borrower in form and substance reasonably satisfactory to the Agent and dated as of the
Second Amendment Effective Date as to the incumbency of, and bearing specimen signatures of, the Authorized Signatories who are authorized as of the date hereof to execute and take actions hereunder and under the Loan Documents for and on behalf of the Borrower (or a certification that the incumbency of the Authorized Signatories set forth on that certificate delivered to the Agent pursuant to Section 4(d) of Amendment Agreement No. 1 to Amended and Restated Credit Agreement on the First Amendment Effective Date (the Prior Certificate) remains true and accurate as of the date hereof); and certifying and attaching copies of (i) the Borrowers Charter Documents, with all amendments thereto (or a certification that the Borrowers Charter Documents previously delivered to the Agent and referenced in the Prior Certificate have not been amended, supplemented or modified and are in full force and effect); (ii) an excerpt from the Minutes of Joint Regular Meeting of the Board of Directors/Trustees of the BlackRock Closed-End Funds dated February 7, 2013, authorizing the transactions contemplated hereby; (iii) the current Prospectus as then in effect (or a certification that the Prospectus previously delivered to the Agent and referenced in the Prior Certificate has not been amended, supplemented or modified and is currently in effect); (iv) the investment management agreement between the Borrower and the Investment Adviser as then in effect (or a certification that the investment management agreement previously delivered to the Agent and referenced in the Prior Certificate has not been amended, supplemented or modified and is in full force and effect); and (v) the Custody Agreement (or a certification that the Custody Agreement previously delivered to the Agent and referenced in the Prior Certificate has not been amended, supplemented or modified and is in full force and effect);
(d) a legal existence and good standing certificate for the Borrower from the Secretary of State of the State of Maryland dated as of a recent date;
(e) a copy of the certificate of incorporation of the Borrower, with all amendments, certified as of a recent date by the Secretary of State of the State of Maryland; and
(f) the legal opinion of Skadden, Arps, Slate, Meagher & Flom LLP and Miles & Stockbridge P.C., special counsel to the Borrower, each in form and substance reasonably satisfactory to the Agent.
§5. Ratification of the Borrower . The Borrower ratifies and confirms in all respects all of its obligations to the Agents and the Banks under the Credit Agreement and the other Loan Documents and hereby affirms its absolute and unconditional promise to pay to the Banks and the Agents the Loans made to it and all other amounts due from it under the Credit Agreement as amended hereby. The Credit Agreement and this Amendment shall be read and construed as a single agreement. All references in the Credit Agreement or any related agreement or instrument to the Credit Agreement shall hereafter refer to the Credit Agreement as amended hereby.
§6. Miscellaneous . This Amendment shall be a Loan Document for all purposes under the Credit Agreement. This Amendment shall be governed by and construed in accordance with the laws of the State of New York. Except as specifically amended by this Amendment, the Credit Agreement and all other agreements and instruments executed and delivered in connection with the Credit Agreement, including, without limitation, the other Loan Documents, shall remain in full force and effect. This Amendment is limited specifically to the matters set forth herein and does not constitute directly or by implication an amendment
or waiver of any other provision of the Credit Agreement or any of the other Loan Documents. Nothing contained herein shall constitute a waiver of, impair or otherwise affect any Obligations, any other obligation of the Borrower or any rights of the Agents and the Banks consequent thereon. This Amendment may be executed in several counterparts and by each party on a separate counterpart, each of which when so executed and delivered shall be an original, and all of which together shall constitute one instrument. Delivery of an executed signature page to this Amendment by facsimile transmission or other electronic transmission shall be as effective as delivery of a manually signed counterpart of this Amendment, provided, the Borrower does agree to provide the Agent with an original manually signed counterpart of this Amendment within five (5) Business Days of the Second Amendment Effective Date. In proving this Amendment it shall not be necessary to produce or account for more than one such counterpart signed by the party against whom enforcement is sought.
[Signature page follows.]
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their respective authorized officers as of the date first above written.
BLACKROCK CORPORATE HIGH YIELD
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By: |
/s/ Neal J. Andrews |
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Name: |
Neal J. Andrews | |
Title: |
Chief Financial Officer | |
STATE STREET BANK AND TRUST COMPANY,
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By: |
/s/ Karen A. Gallagher |
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Name: |
Karen A. Gallagher | |
Title: |
Vice President |
Exhibit A
Schedule 1
BORROWER :
BLACKROCK CORPORATE HIGH YIELD FUND VI, INC.
100 Bellevue Parkway
Wilmington, DE 19809
BANKS: |
COMMITMENT
AMOUNT |
COMMITMENT
PERCENTAGE |
||||||
STATE STREET BANK AND TRUST COMPANY |
$ | 222,000,000 | 100 | % |
Domestic Lending Office:
Mutual Fund Lending Department
Copley Place, Tower 2
Boston, MA 02206
Attn. Robyn A. Shepard, Assistant Vice President - CSU Manager
Tel: (617) 662-8575
Fax: (617) 988-6677
Email: rashepard@statestreet.com
LIBOR Lending Office:
Mutual Fund Lending Department
Copley Place, Tower 2
Boston, MA 02206
Attn: Robyn A. Shepard, Assistant Vice President - CSU Manager
Tel: (617) 662-8575
Fax: (617) 988-6677
Email: rashepard@statestreet.com
For non-funding or payment notices:
Mutual Fund Lending Department
Copley Place Tower 2
Boston, MA 02206
Attn: Karen Gallagher, Vice President
Tel: (617)662-8626
Fax: (617)988-9535
Exhibit 13(d)
AMENDMENT AGREEMENT NO. 3 TO AMENDED AND RESTATED CREDIT AGREEMENT
This AMENDMENT AGREEMENT NO. 3 TO AMENDED AND RESTATED CREDIT AGREEMENT (this Amendment ) is made as of , 2013, by and among BLACKROCK CORPORATE HIGH YIELD FUND VI, INC., a Maryland corporation (the Borrower ), the lending institutions listed on the signature pages hereof (collectively, the Banks ) and STATE STREET BANK AND TRUST COMPANY, as agent for itself and such other Banks (in such capacity, the Agent );
WHEREAS, the Borrower, the Banks and the Agent are parties to that certain Amended and Restated Credit Agreement, dated as of March 3, 2011 (as amended and in effect from time to time, the Credit Agreement ); and
WHEREAS , the Borrower has informed the Agent and the Banks that the Borrower wishes to effect a reorganization pursuant to which (a) BlackRock High Income Shares, a voluntary association with transferable shares organized under the laws of the Commonwealth of Massachusetts ( HIS ) will, pursuant to the Agreement and Plan of Reorganization dated as of , 2013, by and among HIS, the Borrower and , LLC, a Massachusetts limited liability company and wholly-owned Subsidiary of the Borrower (the HIS Merger Subsidiary ) and in substantially the form attached hereto as Exhibit B-1 (the HIS Merger Agreement ), merge with and into the HIS Merger Subsidiary (the HIS Initial Merger ), with the HIS Merger Subsidiary being the surviving entity of the HIS Initial Merger and in connection with each such HIS Initial Merger, assuming all of the assets and liabilities of HIS and (b) each of (i) the Merger Subsidiary will, pursuant to the Agreement and Plan of Reorganization dated as of , 2013, by and between the Merger Subsidiary and the Borrower and in substantially the form attached hereto as Exhibit B-2 (the HISMS Merger Agreement ), (ii) The BlackRock High Yield Trust, a Delaware statutory trust ( BHY ), will, pursuant to the Agreement and Plan of Reorganization dated as of , 2013, by and between BHY and the Borrower and in substantially the form attached hereto as Exhibit B-3 (the BHY Merger Agreement ), (iii) BlackRock Corporate High Yield Fund, Inc., a Maryland corporation ( COY ) will, pursuant to the Agreement and Plan of Reorganization dated as of , 2013, by and between COY and the Borrower and in substantially the form attached hereto as Exhibit B-4 (the COY Merger Agreement ), (iv) BlackRock Corporate High Yield Fund III, Inc., a Maryland corporation ( CYE ) will, pursuant to the Agreement and Plan of Reorganization dated as of , 2013, by and between CYE and the Borrower and in substantially the form attached hereto as Exhibit B-5 (the CYE Merger Agreement ), and (v) BlackRock Corporate High Yield Fund V, Inc. ( HYV ) will, pursuant to the Agreement and Plan of Reorganization dated as of , 2013, by and between HYV and the Borrower and in substantially the form attached hereto as Exhibit B-6 (the HYV Merger Agreement and collectively with the HIS Merger Agreement, the HISMS Merger Agreement, the BHY Merger Agreement, the COY Merger Agreement and the CYE Merger Agreement, the Merger Agreements ), merge with and into the Borrower (the Mergers described in clauses (b)(i) through (v) above, the Direct Mergers and each, a Direct Merger ; the Direct Mergers collectively with the HIS Initial Merger, the Mergers and each, a Merger ), with the Borrower being the surviving entity of each Merger and in connection with each such Merger, assuming all of the assets and liabilities of each of the HIS Merger Subsidiary (including the assets and
liabilities of HIS), BHY, COY, CYE and HYV, and the stockholders of each of BHY, COY, CYE, HYV and HIS (through the HIS Initial Merger and the Direct Merger of HIS Merger Subsidiary) will, pursuant to the terms of the applicable Merger Agreement, become stockholders of the Borrower; and
WHEREAS , in connection with such reorganization (the Proposed Transaction ), the Borrower is requesting that the Agent and the Banks agree to amend certain provisions of the Credit Agreement; and
WHEREAS, the parties hereto wish to amend the Credit Agreement and make certain other agreements with respect to the Proposed Transaction as more fully set forth herein;
NOW, THEREFORE, in consideration of these premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:
§1. Definitions . 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.
§2. Amendments to Credit Agreement .
(a) Section 1.01 of the Credit Agreement is hereby amended by deleting the definitions of Account, Aggregate Commitment Amount and Prospectus in their entirety and restating each such definition as follows:
Account means the accounts that the Custodian has opened and maintains for the Borrower pursuant to the terms and conditions of the Custody Agreement, provided , that for period commencing immediately upon the consummation of each 2013 Merger in accordance with the terms of the applicable 2013 Merger Agreement until the transfer of the assets in each of the BHY Account, the COY Account, the CYE Account, the HYV Account and the HIS Account into the Account, the term Account shall be deemed to also include each of the BHY Account, the COY Account, the CYE Account, the HYV Account and the HIS Account for all purposes of this Agreement, including, without limitation, compliance with Section 4.17 hereof.
Aggregate Commitment Amounts means, as of any date, the aggregate of all Commitment Amounts as of such date. On the Second Amendment Effective Date, the Aggregate Commitment Amount is $222,000,000 and from and after the Third Amendment Effective Date, the Aggregate Commitment Amount is increased to $798,000,000.
Prospectus means .
(b) Section 1.01 of the Credit Agreement is further amended by inserting the following definitions in the appropriate alphabetical order:
2013 Merger means collectively, the mergers, to be effective on , 2013, of (a) BHY into the Borrower pursuant to the BHY Merger Agreement, (b) COY into the Borrower pursuant to the COY Merger Agreement, (c) CYE into the Borrower pursuant to the BYE Merger Agreement, (d) HYV into the Borrower pursuant to the HYV Merger Agreement, in each case with the Borrower being the surviving entity and (e) (i) HIS into the HIS Merger Subsidiary pursuant to the HIS Merger Agreement and then (ii) the HIS Merger Subsidiary into the Borrower pursuant to the HISMS Merger Agreement.
BHY means The BlackRock High Yield Trust, a Delaware statutory trust.
BHY Account means the account that the Custodian has opened and maintains for BHY pursuant to the terms and conditions of the Custody Agreement.
BHY Merger Agreement means the Agreement and Plan of Reorganization dated as of , 2013, by and between BHY and the Borrower, substantially in the form attached as Exhibit B-3 to the Third Amendment, pursuant to which, among other things, BHY merges with and into the Borrower, with the Borrower being the survivor thereof and assumes all of the assets and liabilities of BHY.
COY means BlackRock Corporate High Yield Fund, Inc., a Maryland corporation.
COY Account means the account that the Custodian has opened and maintains for COY pursuant to the terms and conditions of the Custody Agreement.
COY Merger Agreement means the Agreement and Plan of Reorganization dated as of , 2013, by and between COY and the Borrower, substantially in the form attached as Exhibit B-4 to the Third Amendment, pursuant to which, among other things, COY merges with and into the Borrower, with the Borrower being the survivor thereof and assumes all of the assets and liabilities of COY.
CYE means BlackRock Corporate High Yield Fund III, Inc., a Maryland corporation.
CYE Account means the account that the Custodian has opened and maintains for CYE pursuant to the terms and conditions of the Custody Agreement.
CYE Merger Agreement means the Agreement and Plan of Reorganization dated as of , 2013, by and between CYE and the Borrower, substantially in the form attached as Exhibit B-5 to the Third Amendment, pursuant to which, among other things, CYE merges with and into the Borrower, with the Borrower being the survivor thereof and assumes all of the assets and liabilities of CYE.
HIS means BlackRock High Income Shares, a voluntary association with transferable shares organized under the laws of the Commonwealth of Massachusetts.
HIS 2013 Merger means the merger, to be effective on , 2013, of HIS into the HIS Merger Subsidiary pursuant to the HIS Merger Agreement, with the HIS Merger Subsidiary being the surviving entity.
HIS Account means the account that the Custodian has opened and maintains for HIS pursuant to the terms and conditions of the Custody Agreement.
HIS Merger Agreement means the Agreement and Plan of Reorganization dated as of , 2013, by and among HIS, the Borrower and the HIS Merger Subsidiary, substantially in the form attached as Exhibit B-1 to the Third Amendment, pursuant to which, among other things, HIS merges with and into the HIS Merger Subsidiary, with the HIS Merger Subsidiary being the survivor thereof and assumes all of the assets and liabilities of HIS.
HIS Merger Subsidiary means , LLC, a Massachusetts limited liability company and wholly-owned Subsidiary of the Borrower which has been formed to effect the HIS 2013 Merger (and such term shall include the surviving entity of the merger consummated pursuant to the terms of the HIS Merger Agreement).
HISMS Merger Agreement means the Agreement and Plan of Reorganization dated as of , 2013, by and between the Borrower and the HIS Merger Subsidiary, substantially in the form attached as Exhibit B-2 to the Third Amendment, pursuant to which, among other things, the HIS Merger Subsidiary merges with and into the Borrower, with the Borrower being the survivor thereof and assumes all of the assets and liabilities of the HIS Merger Subsidiary.
Merger Agreements mean, collectively, the BHY Merger Agreement, the COY Merger Agreement, the CYE Merger Agreement, the HYV Merger Agreement, the HIS Merger Agreement and the HISMS Merger Agreement.
HYV means BlackRock Corporate High Yield Fund V, Inc., a Maryland corporation.
HYV Account means the account that the Custodian has opened and maintains for HYV pursuant to the terms and conditions of the Custody Agreement.
HYV Merger Agreement means the Agreement and Plan of Reorganization dated as of , 2013, by and between HYV and the Borrower, substantially in the form attached as Exhibit B-6 to the Third Amendment, pursuant to which, among other things, HYV merges with and into the Borrower, with the Borrower being the survivor thereof and assumes all of the assets and liabilities of HYV.
Third Amendment means that certain Amendment Agreement No. 3 to Amended and Restated Credit Agreement dated as of , 2013 by and among the Borrower, the Banks listed on the signature pages thereof and the Agent.
Third Amendment Effective Date means the later of (a) the Document Effective Date as defined in the Third Amendment and (b) the date on which the 2013 Merger has been consummated pursuant to the terms of the Merger Agreements.
(c) Schedule 1 to the Credit Agreement is hereby amended by deleting Schedule 1 in its entirety effective on the Third Amendment Effective Date and, on such Third Amendment Effective Date, substituting in place thereof the Schedule 1 attached hereto as Exhibit A .
§3. Representations and Warranties . The Borrower hereby represents and warrants as follows:
(a) Representations and Warranties in Credit Agreement . The representations and warranties of the Borrower contained in the Credit Agreement (as amended by this Amendment) are true and correct on and as of the date hereof and with the same force and effect as it 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).
(b) No Default . No Default or Event of Default has occurred and is continuing.
(c) Authority , Etc . The execution and delivery by the Borrower of this Amendment and the Borrowers performance of this Amendment and the Credit Agreement as amended hereby (as so amended, the Amended Agreement ) (i) are within the Borrowers corporate powers, (ii) have been duly authorized by all necessary corporate action on the part of the Borrower, (iii) require no Governmental Authorizations, Private Authorizations or Governmental Filings by the Borrower which have not already been obtained or made, (iv) do not contravene, or constitute a default under, any provision of (A) any Applicable Law unless the violation of such Applicable Law could not reasonably be expected to have a Material Adverse Effect, (B) the Charter Documents of the Borrower, or (C) any agreement, judgment, injunction, order, decree or other instrument binding upon the Borrower unless such contravention or violation could not reasonably be expected to have a Material Adverse Effect, and (v) do not result in the creation or imposition of any Lien on any asset of the Borrower (other than Liens in favor of the Agent to secure the Obligations and Liens permitted pursuant to Section 5.08 of the Credit Agreement).
(d) Enforceability of Obligations . This Amendment has been duly executed and delivered by the Borrower. Each of this Amendment and the Amended Agreement constitutes the valid and legally binding agreement of the Borrower, in each case enforceable in accordance with their terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors rights generally and general principles of equity (regardless of whether enforcement is sought in equity or at law).
§4. Effectiveness . This Amendment shall become effective on the date that each of the following conditions shall have been satisfied or waived in writing by the Agent (such date being the Document Effective Date ):
(a) counterparts of this Amendment duly executed and delivered by each of the Borrower, the Banks and the Agent;
(b) counterparts of each Notices of Termination attached hereto as Exhibit E duly executed and delivered by each of BHY, COY, CYE, HYV and HIS notifying State Street Bank and Trust Company in its capacity as agent under the Other Agreements (as hereinafter defined) of the intent to terminate its respective credit facilities under those certain Amended and Restated Credit Agreements, each dated as of March 3, 2011 by and among each of BHY, COY, CYE, HYV and HIS, as applicable, the lenders party thereto and State Street Bank and Trust Company, as agent for such lenders (each, an Other Agreement ), immediately upon the occurrence of the Merger;
(c) a certificate duly executed by an officer of the Borrower which is reasonably satisfactory to the Agent certifying that (i) the representations and warranties of the Borrower contained in the Credit Agreement (as amended by this Amendment) and the other Loan Documents shall be true on and as of the Document Effective Date 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), (ii) the Borrower will remain a closed-end management investment company (as such term is defined in the Investment Company Act) and will remain registered under the Investment Company Act after giving effect to the Proposed Transaction; (iii) no Default or Event of Default has occurred and is continuing or will result from the Proposed Transaction; and (iv) the Agents security interest in the Collateral will remain perfected upon the consummation of the Proposed Transaction;
(d) a duly executed certificate from the Secretary or Assistant Secretary of the Borrower in form and substance reasonably satisfactory to the Agent and dated as of the Document Effective Date certifying and attaching copies of (i) the Borrowers Charter Documents, with all amendments thereto (other than the Merger Agreements) (or a certification that the Charter Documents previously delivered and certified to the Agent pursuant to Section 3.01(f) of the Credit Agreement have not been amended, supplemented or modified (other than the Merger Agreements) and are in full force and effect); (ii) an excerpt from the [Minutes of Joint Regular Meeting of the Board of Directors/Trustees of the BlackRock Closed-End Funds] dated July , 2013 approving the Proposed Transaction, the Borrowers entry into this Amendment and the transactions described herein; (iii) the current Prospectus as then in effect (or a certification that the Prospectus previously delivered and certified to the Agent has not been amended, supplemented or modified and is in full force and effect); (iv) the investment management agreement between the Borrower and the Investment Adviser as then in effect (or
a certification that the investment management agreement previously delivered and certified to the Agent has not been amended, supplemented or modified and is in full force and effect); (v) the Custody Agreement (or a certification that the Custody Agreement previously delivered and certified to the Agent has not been amended, supplemented or modified and is in full force and effect) and (iv) copies of the duly executed Merger Agreements, to be attached to this Amendment as Exhibits B-1 through B-6, as contemplated herein;
(e) a legal existence and good standing certificate for the Borrower from the Secretary of State of the State of Maryland dated as of , 2013;
(f) a copy of the certificate of incorporation of the Borrower, with all amendments, certified as of a recent date (which will be prior to the date of the Merger) by the Secretary of State of the State of Maryland; and
(g) a legal opinion of each of (i) Skadden, Arps, Slate, Meagher & Flom LLP and (ii) special Maryland counsel to the Borrower reasonably acceptable to the Agent, each in form and substance reasonably satisfactory to the Agent (and the Borrower hereby requests such counsel to deliver such opinions).
§5. Conditions Subsequent . The Borrower shall deliver to the Agent, by not later than the dates specified in each clause below, the following:
(a) as soon as practicable after the consummation of the Proposed Transaction, but in any event by not later than , 2013, copies certified by the Secretary of State of the State of Maryland of each Merger Agreement; and
(b) by not later than , 2013, a duly executed updated Form FR U-1.
Any failure of the Borrower to deliver any of the items specified in this Section 5 by the applicable dates provided for herein shall constitute an immediate Event of Default under the Credit Agreement.
§6. Ratification of the Borrower . The Borrower ratifies and confirms in all respects all of its obligations to the Agents and the Banks under the Credit Agreement and the other Loan Documents and hereby affirms its absolute and unconditional promise to pay to the Banks and the Agents the Loans made to it and all other amounts due from it under the Credit Agreement as amended hereby. The Credit Agreement and this Amendment shall be read and construed as a single agreement. All references in the Credit Agreement or any related agreement or instrument to the Credit Agreement shall hereafter refer to the Credit Agreement as amended hereby.
§7. Miscellaneous . This Amendment shall be a Loan Document for all purposes under the Credit Agreement. This Amendment shall be governed by and construed in accordance with the laws of the State of New York. Except as specifically amended by this Amendment, the Credit Agreement and all other agreements and instruments executed and delivered in connection with the Credit Agreement, including, without limitation, the other Loan Documents, shall remain in full force and effect. This Amendment is limited specifically to the matters set forth herein and does not constitute directly or by implication an amendment
or waiver of any other provision of the Credit Agreement or any of the other Loan Documents. Nothing contained herein shall constitute a waiver of, impair or otherwise affect any Obligations, any other obligation of the Borrower or any rights of the Agents and the Banks consequent thereon. This Amendment may be executed in several counterparts and by each party on a separate counterpart, each of which when so executed and delivered shall be an original, and all of which together shall constitute one instrument. Delivery of an executed signature page to this Amendment by facsimile transmission or other electronic transmission shall be as effective as delivery of a manually signed counterpart of this Amendment; provided , the Borrower does agree to provide the Agent with an original manually signed counterpart of this Amendment within ten (10) Business Days of the Document Effective Date. In proving this Amendment it shall not be necessary to produce or account for more than one such counterpart signed by the party against whom enforcement is sought.
[Signature page follows.]
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their respective authorized officers as of the date first above written.
BLACKROCK CORPORATE HIGH YIELD
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By: |
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Name: | ||
Title: | ||
STATE STREET BANK AND TRUST COMPANY,
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By: |
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Title: |
Exhibit A
Schedule 1
BORROWER :
BLACKROCK CORPORATE HIGH YIELD FUND VI, INC.
100 Bellevue Parkway
Wilmington, DE 19809
BANKS: |
COMMITMENT
AMOUNT |
COMMITMENT
PERCENTAGE |
||||||
STATE STREET BANK AND TRUST COMPANY |
$ | 798,000,000 | 100 | % |
Domestic Lending Office:
Mutual Fund Lending Department
Copley Place, Tower 2
Boston, MA 02206
Attn. Robyn A. Shepard, Assistant Vice President - CSU Manager
Tel: (617) 662-8575
Fax: (617) 988-6677
Email: rashepard@statestreet.com
LIBOR Lending Office:
Mutual Fund Lending Department
Copley Place, Tower 2
Boston, MA 02206
Attn: Robyn A. Shepard, Assistant Vice President - CSU Manager
Tel: (617) 662-8575
Fax: (617) 988-6677
Email: rashepard@statestreet.com
For non-funding or payment notices:
Mutual Fund Lending Department
Copley Place Tower 2
Boston, MA 02206
Attn: Karen Gallagher, Vice President
Tel: (617)662-8626
Fax: (617)988-9535
Exhibit 14
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in this Pre-Effective Amendment No.1 to Registration Statement No. 333-189957 (the Registration Statement) on Form N-14 of our report dated October 26, 2012, relating to the financial statements and financial highlights of BlackRock High Yield Trust, BlackRock High Income Shares, BlackRock Corporate High Yield Fund V, Inc., and BlackRock Corporate High Yield Fund VI, Inc., appearing in each respective funds Annual Report on Form N-CSR for the year ended August 31, 2012. We also consent to the incorporation by reference in this Registration Statement on Form N-14 of our report dated April 26, 2013, relating to the financial statements and financial highlights of BlackRock Corporate High Yield Fund, Inc. and BlackRock Corporate High Yield Fund III, Inc., appearing in each respective funds Annual Report on Form N-CSR for the year ended February 28, 2013.
We also consent to the references to us under the headings Other Service Providers, Financial Highlights, and Other Matters with Respect to the Meeting, in the Combined Prospectus/Proxy Statement and Board Leadership Structure and Oversight, Independent Registered Public Accounting Firm, Form of Agreement and Plan of Reorganization, Article IV. Representations and Warranties, and Article V. Covenants in the Statement of Additional Information, which are part of such Registration Statement.
/s/ Deloitte & Touche LLP
Boston, Massachusetts
August 22, 2013
Exhibit 17(b)
Transfer Agency and Service Agreement
Among
Each of the BlackRock Closed-End Investment Companies
Listed Herein on Exhibit C
and
Computershare Trust Company, N.A.
and
Computershare Shareholder Services, Inc.
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Table of Contents
Section 1. Certain Definitions |
4 | |||
Section 2. Appointment of Agent |
5 | |||
Section 3. Standard Services |
6 | |||
Section 4. Dividend Disbursing Services |
7 | |||
Section 5. Fee and Expenses |
8 | |||
Section 6. Representations and Warranties of Transfer Agent |
10 | |||
Section 7. Representations and Warranties of Customer |
10 | |||
Section 8. Indemnification/Limitation of Liability |
11 | |||
Section 9. Damages |
13 | |||
Section 10. Responsibilities of the Transfer Agent |
13 | |||
Section 11. Covenants of the Customer and Transfer Agent |
14 | |||
Section 12. Confidentiality |
14 | |||
Section 13. Term and Termination |
15 | |||
Section 14. Assignment |
17 | |||
Section 15. Unaffiliated Third Parties |
17 | |||
Section 16. Miscellaneous |
17 | |||
Section 16.1. Notices |
17 | |||
Section 16.2. Successors |
18 | |||
Section 16.3. Amendments |
18 | |||
Section 16.4. Severability |
18 |
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Section 16.5. Governing Law |
18 | |||
Section 16.6. Force Majeure |
18 | |||
Section 16.7. Descriptive Headings |
18 | |||
Section 16.8. Third Party Beneficiaries |
18 | |||
Section 16.9. Survival |
19 | |||
Section 16.10. Priorities |
19 | |||
Section 16.11. Merger of Agreement |
19 | |||
Section 16.12. Counterparts |
19 |
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AGREEMENT made as of the 1st day of December, 2006, by and among each of the BlackRock closed-end investment companies listed on Exhibit C attached hereto, having a principal office and place of business at 100 Bellevue Parkway, Wilmington, Delaware 19809 (each the Customer), and Computershare Shareholder Services, Inc., a Delaware corporation, and its fully owned subsidiary Computershare Trust Company, N.A., a federally charted trust company doing business at 150 Royall Street, Canton, Massachusetts 02021 (collectively the Transfer Agent).
WHEREAS , the Customer desires to appoint the Transfer Agent as sole transfer agent, registrar, dividend disbursing agent and administrator of dividend reinvestment plans.
WHEREAS , the Board of Directors or Trustees, as applicable, of each Customer has approved appointment of the Transfer Agent and the form of this Agreement.
NOW THEREFORE , in consideration of the mutual covenants herein contained, the parties hereto agree as follows:
1. Certain Definitions.
(a) Account or Accounts shall mean the account of each Shareholder which account shall hold any full or fractional shares of stock held by such Shareholder and/or outstanding funds or tax reporting to be done.
(b) Additional Services shall mean any and all services which are not Services as set forth in the Fee and Service Schedule, but performed by Transfer Agent upon request of Customer.
(c) Agreement shall mean this agreement and any and all exhibits or schedules attached hereto and any and all amendments or modifications, which may from time to time be executed.
(d) Annual Period shall mean each twelve (12) month period commencing on the Effective Date and, thereafter, on each anniversary of the Effective Date.
(e) Board of Directors means the Board of Directors or the Board of Trustees, as the case may be, of each Customer.
(f) Closed Account shall mean an account with a zero share balance, no outstanding funds or no reportable tax information.
(g) Dividend Reinvestment Plan shall mean the services as set forth in Section 4 and in the Fee and Service Schedule.
(h) Effective Date shall mean the date first stated above.
(i) Fee and Service Schedule shall mean the fees and services set forth in the Fee and Service Schedule attached hereto.
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(j) Participant or Participants shall mean Shareholders enrolled in a Dividend Reinvestment Plan.
(k) Services shall mean any and all services as further described herein and in the Fee and Service Schedule or other schedules attached hereto.
(l) Share shall mean common units of beneficial interest or common stock, as the case may be, of each Customer authorized by the Customers respective Declaration of Trust or Articles of Incorporation, as the case may be.
(m) Shareholder shall mean the holder of record of Shares.
2. Appointment of Agent.
2.1 Appointments . The Customer hereby appoints the Transfer Agent to act as sole transfer agent and registrar for all Shares in accordance with the terms and conditions hereof, and the Transfer Agent accepts said appointment.
2.2 Documents . In connection with the appointment of Transfer Agent as the transfer agent and registrar for a Customer, the Customer will provide or has previously provided the following documents to the Transfer Agent:
(a) | Copies of Registration Statements and amendments thereto, filed with the Securities and Exchange Commission for initial public offerings; |
(b) | Specimens of all forms of stock certificates relating to outstanding Shares, in forms approved by the Board of Directors of the Customer, with a certificate of the Secretary of each Customer as to such approval; and |
(c) | Specimens of the Signatures of the officers of the Customer authorized to sign stock certificates and individuals authorized to sign written instructions and requests. |
2.3 Records . Transfer Agent may adopt as part of its records all lists of holders, records of the Customers stock, books, documents and records which have been employed by any former agent of the Customer for the maintenance of the ledgers for the Customers Shares, provided such ledger is certified by an officer of Customer or the prior transfer agent to be true, authentic and complete.
2.4 Shares . Customer shall, if applicable, inform Transfer Agent as to (i) the existence or termination of any restrictions on the transfer of Shares and in the application to or removal from any certificate of stock of any legend restricting the transfer of such Shares or the substitution for such certificate of a certificate without such legend, (ii) any authorized but unissued Shares reserved for specific purposes, (iii) any outstanding shares which are exchangeable for Shares and the basis for exchange, (iv) reserved Shares subject to option and the details of such reservation and (v) special instructions regarding dividends and information of foreign holders.
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2.5 Customers Agent . Transfer Agent represents that it is engaged in an independent business and will perform its obligations under this Agreement as an agent of Customer.
2.6 Certificates . Upon notification from Transfer Agent, Customer shall deliver to Transfer Agent an appropriate supply of stock certificates, which certificates shall provide a signature panel for use by an officer of or authorized signor for Transfer Agent to sign as transfer agent and registrar, and which shall state that such certificates are only valid after being countersigned and registered.
3. Standard Services.
3.1 Services . The Transfer Agent will perform the following services:
In accordance with the procedures established from time to time by agreement between the Customer and the Transfer Agent, the Transfer Agent shall:
(a) | issue and record the appropriate number of Shares as authorized and hold such shares in the appropriate shareholder (Shareholder) account; |
(b) | effect transfers of Shares by the registered owners thereof upon receipt of appropriate documentation; |
(c) | prepare and transmit payments for dividends and distributions declared by the Customer, provided good funds for said dividends or distributions are received by the Transfer Agent on or prior to the scheduled payable date for said dividends or distributions; |
(d) | act as agent for Shareholders pursuant to the dividend reinvestment plan, and other investment programs, if any, as amended from time to time in accordance with the terms of the agreements relating thereto to which the Transfer Agent is or will be a party; |
(e) | issue replacement certificates for those certificates alleged to have been lost, stolen or destroyed upon receipt from the respective Shareholder by the Transfer Agent of an open penalty surety bond satisfactory to it and holding it and the Customer harmless, absent notice to the Customer and the Transfer Agent that such certificates have been acquired by a bona fide purchaser. The Transfer Agent, at its option, may issue replacement certificates in place of mutilated stock certificates upon presentation thereof without such indemnity. Further, the Transfer Agent may at its sole option accept indemnification from a Customer to issue replacement certificates for those certificates alleged to have been lost, stolen or destroyed in lieu of an open penalty bond; and |
(f) | issue replacement checks and place a stop payment order on original checks based on shareholders representation that a check was not received or was lost. Such stops and replacement will be deemed to have been made at the request of Customer and Customer shall be responsible for all losses or claims resulting from such replacement. |
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3.2 Customary Services . The Transfer Agent shall perform all the customary services of a transfer agent, dividend disbursing agent, dividend reinvestment plan agent, and other investment programs as described in Section 3.1 consistent with those requirements in effect as of the date of this Agreement. The detailed services and definition, frequency, limitations and associated costs (if any) are set out in the attached fee and service schedule (Fee and Service Schedule).
3.3 Compliance with Laws . The Customer agrees the Transfer Agent is obligated to and the Transfer Agent agrees to comply with all applicable federal, state and local laws and regulations, codes, order and government rules in the performance of its duties under this Agreement.
3.4 Unclaimed Property and Lost Shareholders . The Transfer Agent shall report unclaimed property to each state in compliance with state law and Section 17Ad-17 of the Exchange Act of 1934 as amended (the Exchange Act) for lost shareholders. If the Funds are not in compliance with applicable state laws, there will be no charge for such Funds for the first two years for this service, other than a charge of $3.00 per due diligence notice mailed; provided that after the first two years, the Transfer Agent will charge Customer its then standard fee plus any out-of-pocket expenses, and such fees will be estimated and provided upon liquidation of any Customer.
3.5 Compliance with Office of Foreign Asset Control (OFAC) Regulations . The Transfer Agent shall ensure compliance with OFAC laws and regulations promulgated thereunder.
4. Dividend Disbursing Services .
4.1 Declaration of Dividends . Upon receipt of a written notice from the President, any Vice President, Secretary, Assistant Secretary, Treasurer or Assistant Treasurer of Customer declaring the payment of a dividend, Transfer Agent shall disburse such dividend payments provided that in advance of such payment, Customer furnishes Transfer Agent with sufficient funds. The payment of such funds to Transfer Agent for the purpose of being available for the payment of dividend checks from time to time is not intended by Customer to confer any rights in such funds on Fund Shareholders whether in trust or in contract or otherwise.
4.2 Stop Payments . Customer hereby authorizes Transfer Agent to stop payment of checks issued in payment of dividends, but not presented for payment, when the payees thereof allege either that they have not received the checks or that such checks have been mislaid, lost, stolen, destroyed or, through no fault of theirs, are otherwise beyond their control and cannot be produced by them for presentation and collection, and Transfer Agent shall issue and deliver duplicate checks in replacement thereof, and Customer shall indemnify Transfer Agent against any loss or damage resulting from reissuance of the checks.
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4.3 Tax Withholding . Transfer Agent is hereby authorized to deduct from all dividends declared by the Funds and disbursed by Transfer Agent, as dividend disbursing agent, the tax required to be withheld pursuant to Sections 1441, 1442 and 3406 of the Internal Revenue Code of 1986, as amended, or by any Federal or State statutes subsequently enacted, and to make the necessary return and payment of such tax in connection therewith.
4.4 Dividends and Other Distributions . For Customers that are municipal term trusts, Transfer Agent will act as the paying agent for the Customer for all dividends and distributions, but upon receipt thereof shall hold such dividends or distributions on behalf of the shareholders.
5. Fees and Expenses.
5.1 Fee and Service Schedules . Customer agrees to pay Transfer Agent fees for services performed pursuant to this Agreement as set forth in the Fee and Service Schedule attached hereto, for the Initial Term of the Agreement, as defined in Section 13.
5.2 COLA/Fee Increases . After the Initial Term of the Agreement, providing that service mix and volumes remain constant, the fees listed in the Fee and Service Schedule 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. Fees will be increased on this basis on each successive contract anniversary thereafter.
5.3 Adjustments . Notwithstanding Section 5.1 above, fees, and the out-of-pocket expenses and advances identified under Section 5.4 below, may be changed from time to time as agreed upon in writing between the Transfer Agent and the Customer.
5.4 Out-of-Pocket Expenses . In addition to the fees paid under Section 5.1 above, the Customer agrees to reimburse the Transfer Agent for out-of-pocket expenses, including but not limited to postage, forms, telephone, microfilm, microfiche, taxes, records storage, exchange and broker fees, or advances incurred by the Transfer Agent for the items set out in Exhibit A attached hereto. Out-of-pocket expenses may include the costs to Transfer Agent of administrative expenses, as indicated on Exhibit A. In addition, any other expenses incurred by the Transfer Agent at the request or with the consent of the Customer, will be reimbursed by the Customer.
5.5 Postage . Postage for mailing of dividends, proxies, Customer reports and other mailings to all shareholder accounts shall be advanced to the Transfer Agent by the Customer prior to commencement of the mailing date of such materials.
5.6 Invoices . The Customer agrees to pay all fees and reimbursable expenses within forty-five (45) days of receipt of the respective billing notice, except for any fees or expenses that are subject to good faith dispute. In the event of such a dispute, the Customer may only
8
withhold that portion of the fee or expense subject to the good faith dispute. The Customer shall notify the Transfer Agent in writing within forty-five (45) days following the receipt of each billing notice if the Customer is disputing any amounts in good faith. If the Customer does not provide such notice of dispute within the required time, the billing notice will be deemed accepted by the Customer. The Customer shall settle such disputed amounts within five (5) days of the day on which the parties agree on the amount to be paid by payment of the agreed amount. If no agreement is reached, then such disputed amounts shall be settled as may be required by law or legal process. Invoices shall be sent to each Customer, with a duplicate copy to BlackRock Financial Management, Inc.
5.7 Taxes . Customer shall pay all sales or use taxes in lieu thereof with respect to the Services (if applicable) provided by Transfer Agent under this Agreement.
5.8 Late Payments.
(a) If any undisputed amount in an invoice of the Transfer Agent (for fees or reimbursable expenses) is not paid when due, the Customer shall pay the Transfer Agent interest thereon (from the due date to the date of payment) at a per annum rate equal to one percent (1.0%) plus the Prime Rate (that is, the base rate on corporate loans posted by large domestic Transfer Agents) published by The Wall Street Journal (or, in the event such rate is not so published, a reasonably equivalent published rate selected by Customer on the first day of publication during the month when such amount was due. Notwithstanding any other provision hereof, such interest rate shall be no greater than permitted under applicable provisions of Massachusetts law.
(b) The failure by Customer to pay an invoice within 45 days after written and telephonic notice to Customer that payment is overdue or the failure by the Customer to timely pay two consecutive invoices shall constitute a material breach pursuant to Section 15.4(a) below. Transfer Agent will provide notice by writing and telephone forty-five (45) days after payment is past due. The Transfer Agent may terminate this Agreement for such material breach immediately and shall not be obligated to provide the Customer with 30 days to cure such breach.
5.9 Services Required by Legislation . Services required by legislation or regulatory mandate that become effective after the effective date of this Agreement shall not be part of the standard services, and shall be billed by appraisal.
5.10 Overtime Charges . Overtime charges will be assessed in the event of a late delivery to the Transfer Agent of Customer material for mailings to shareholders, unless the mail date is rescheduled. Such material includes, but is not limited to, proxy statements, quarterly and annual reports, dividend enclosures and news releases.
5.11 Bank Accounts . The Customer acknowledges that the Transfer Agent may receive float benefits and/or investment earnings in connection with maintaining certain bank accounts required to provide services under this Agreement (e.g., dividend disbursing accounts).
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6. Representations and Warranties of Transfer Agent .
6.1 Governance . Computershare Trust Company, N.A. is a federally chartered limited purpose national bank duly organized under the laws of the United States and Computershare Shareholder Services, Inc. is a corporation validly existing and in good standing under the laws of the State of Delaware and they have full corporate power, authority and legal right to execute, deliver and perform this Agreement. The execution, delivery and performance of this Agreement by Transfer Agent has been duly authorized by all necessary corporate action and constitutes the legal valid and binding obligation of Transfer Agent enforceable against Transfer Agent in accordance with its terms.
6.2 Compliance . The execution, delivery and performance of the Agreement by Transfer Agent 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 Transfer Agent is subject, (ii) any judgement, order, writ, injunction, decree or award of any court, arbitrator or governmental or governmental or regulatory official, body or authority which is applicable to Transfer Agent, (iii) the incorporation documents or by-laws of , or any material agreement to which Transfer Agent is a party.
6.3 Facilities . The Transfer Agent has and will continue to have access to the necessary facilities, equipment and personnel to perform its duties and obligations under this Agreement.
7. Representations and Warranties of Customer.
Each Customer severally and not jointly represents and warrants to the Transfer Agent that:
7.1 Organizations . It is a corporation duly organized and existing and in good standing under the laws of the jurisdiction of its organization;
7.2 Governance . It is empowered under applicable laws and by its charter documents to enter into and perform this Agreement. All corporate proceedings required by said charter documents and applicable law have been taken to authorize it to enter into and perform this Agreement. The execution, delivery and performance of this Agreement by each Customer has been duly authorized by all necessary corporate or trust action and constitutes the legal valid and binding obligation of each Customer enforceable against each Customer in accordance with its terms;
7.3 Securities Act of 1933 . A registration statement under the Securities Act of 1933, as amended (the 1933 Act) has been filed and is currently effective, or will be effective prior to the sale of any Shares, and will remain so effective, and all appropriate state securities law filings have been made with respect to all the Shares of each Customer outstanding or being offered for sale except for any Shares which are offered in a transaction or series of transactions which are exempt from the registration requirements of the 1933 Act and state securities laws; information to the contrary will result in immediate notification to the Transfer Agent.
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8. Indemnification/Limitation of Liability.
8.1 Standard of Care. The Transfer Agent shall at all times act in good faith and agrees to use its best efforts within reasonable time 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 as set forth and subject to the limitations set forth in Section 8.4 below.
8.2 Customer Indemnity . The Transfer Agent shall not be responsible for, and the Customer shall indemnify and hold the Transfer Agent harmless from and against, any and all losses, claims, damages, costs, charges, and counsel fees reasonably acceptable to Customer and expenses, payments, expenses and liability arising out of or attributable to:
(a) All actions of the Transfer Agent or its agents or subcontractors required to be taken pursuant to this Agreement, provided such actions are taken in good faith and without negligence or willful misconduct;
(b) The Customers bad faith, negligence or willful misconduct or the material breach of any representation or warranty of the Customer hereunder;
(c) The reliance or use by the Transfer Agent or its agents or subcontractors of information, records and documents which (i) are received by the Transfer Agent or its agents or subcontractors and furnished to it by or on behalf of the Customer, and (ii) have been prepared and /or maintained by the Customer or any other person or firm on behalf of the Customer. Such other person or firm shall include any former transfer agent or former registrar, or co-transfer agent or co-registrar or any current registrar where the Transfer Agent is not the current registrar other than State Street Bank and Trust Company in its role as prior transfer agent during the period from September 30, 1995 until the date of this Agreement;
(d) The reliance or use by the Transfer Agent or its agents or subcontractors of any paper or document reasonably believed to be genuine and to have been signed by the proper person or persons including Shareholders;
(e) The reliance on, or the carrying out by the Transfer Agent or its agents or subcontractors of any instructions or requests of the Customers representatives, provided such actions are taken in good faith and without negligence or willful misconduct;
(f) 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
(g) Any actions taken or omitted to be taken by any former agent of Customer (other than State Street Bank and Trust Company in its role as prior transfer agent during the period from September 30, 1995 until the date of this Agreement) and arising from Transfer Agents reliance on the certified list of holders.
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8.3 Instructions . At any time the Transfer Agent may apply to any officer of the Customer for instruction, and may consult with legal counsel reasonably acceptable to Customer with respect to any matter arising in connection with the services to be performed by the Transfer Agent under this Agreement, and Transfer Agent and its agents and subcontractors shall not be liable and shall be indemnified by the Customer for taking action or omitting to take action by it in reliance upon such instructions or upon the advice or opinion of such counsel provided that when the action is taken it is performed in good faith and without negligence or willful misconduct. The Transfer Agent, its agents and subcontractors shall be protected and indemnified in acting upon any paper or document 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 the Transfer Agent or its agents or subcontractors by telephone, in person, machine readable input, telex, CRT data entry or similar means authorized by the Customer or the Funds, and shall not be held to have notice of any change of authority of any person, until receipt of written notice thereof from the Customer. The Transfer Agent, 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 officers of the Customer, and the proper countersignature of any former transfer agent or former registrar, or of a co-transfer agent or co-registrar.
8.4 Transfer Agent Indemnification/Limitation of Liability . Transfer Agent shall be responsible for and shall indemnify and hold the Customer harmless from and against any and all losses, damages, costs, charges, counsel fees, payments, expenses and liability arising out of or attributable to Transfer Agents refusal or failure to comply with the terms of this Agreement, or which arise out of Transfer Agents bad faith, negligence or willful misconduct or which arise out of the breach of any representation or warranty of Transfer Agent hereunder, for which Transfer Agent is not entitled to indemnification under this Agreement; provided, however, that Transfer Agents aggregate liability during any term of this Agreement with respect to, arising from, or arising in connection with this Agreement, or as a result of any services provided or omitted to be provided under this Agreement, whether in contract, or in tort, or otherwise, is limited to, and shall not exceed, the following amounts: (a) amounts paid hereunder by the Customer to Transfer Agent as fees and charges, but not including reimbursable expenses, during the thirty-six (36) calendar months immediately preceding the event for which recovery from the Transfer Agent is being sought which arises out of the Transfer Agents negligence and (b) amounts paid hereunder by the Customer to Transfer agent as fees and charges, but not including reimbursable expenses, during the sixty (60) calendar months immediately preceding the event for which recovery is being sought which arises out of the Transfer Agents bad faith, gross negligence or willful misconduct.
8.5 Notice . In order that the indemnification provisions contained in this Section shall apply, upon the assertion of a claim for which one party may be required to indemnify the other, the party seeking indemnification shall promptly notify the other party of such assertion, and shall keep the other party advised with respect to all developments concerning such claim. The indemnifying party shall have the option to participate with the indemnified party in the defense of such claim or to defend against said claim in its own name or the name of the indemnified party. The indemnified party shall in no case confess any claim or make any compromise in any case in which the indemnifying party may be required to indemnify it except with the indemnifying partys prior written consent.
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9. Damages.
NEITHER PARTY SHALL BE LIABLE FOR ANY INCIDENTAL, INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES OF ANY NATURE WHATSOEVER, INCLUDING, BUT NOT LIMITED TO, LOSS OF ANTICIPATED PROFITS, OCCASIONED BY A BREACH OF ANY PROVISION OF THIS AGREEMENT EVEN IF APPRISED OF THE POSSIBILITY OF SUCH DAMAGES.
10. Responsibilities of the Transfer Agent.
The Transfer Agent undertakes the duties and obligations imposed by this Agreement upon the following terms and conditions, by all of which the Customer, by its acceptance hereof, shall be bound:
10.1 Whenever in the performance of its duties hereunder the Transfer Agent shall deem it necessary or desirable that any fact or matter be proved or established prior to taking or suffering any action hereunder, such fact or matter may be deemed to be conclusively proved and established by a certificate signed by the Chairman of the Board, the President, any Vice President, the Treasurer, any Assistant treasurer, the Secretary or any Assistant Secretary of the Customer or the Funds and delivered to the Transfer Agent. Such certificate shall be full authorization to the Transfer Agent for any action taken or suffered in good faith by it under the provisions of this Agreement in reliance upon such certificate provided the action taken is without negligence, bad faith or willful misconduct.
10.2 The Customer agrees that it will perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further and other acts, instruments and assurances as may reasonably be required by the Transfer Agent for the carrying out, or performing by the Transfer Agent of the provisions of this Agreement.
10.3 Transfer Agent, any of its affiliates or subsidiaries, and any stockholder, director, officer or employee of the Transfer Agent may buy, sell or deal in the securities of the Customer or the Funds or become pecuniary interested in any transaction in which the Customer may be interested, or contract with or lend money to the Customer or the Funds or otherwise act as fully and freely as though it were not appointed as agent under this Agreement. Nothing herein shall preclude the Transfer Agent from acting in any other capacity for the Customer or the Funds or for any other legal entity.
10.4 No provision of this Agreement shall require the Transfer Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of its rights if it shall believe in good faith that repayment of such funds or adequate indemnification against such risk or liability is not reasonably assured to it.
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11. Covenants of the Customer and Transfer Agent.
11.1 Customer Corporate Authority . The Customer has previously furnished or shall furnish to the Transfer Agent the following:
(a) A copy of the Articles of Incorporation and By-Laws of the Customer;
(b) Copies of all material amendments to its Articles of Incorporation or By-Laws made after the date of this Agreement, promptly after such amendments are made; and
(c) A certificate of the Customer as to the Shares authorized, issued and outstanding, as well as a description of all reserves of unissued shares relating to the exercise of options, warrants or a conversion of debentures or otherwise.
11.2 Transfer Agent Facilities . The Transfer Agent hereby agrees to establish and maintain facilities and procedures reasonably acceptable to the Customer for the safekeeping of stock certificates, check forms and facsimile signature imprinting devices, if any, and for the preparation, use, and recordkeeping of such certificates, forms and devices.
11.3 Records . The Transfer Agent shall keep records relating to the services to be performed hereunder, in the form and manner it may deem advisable and as required under the Exchange Act. The Transfer Agent agrees that all such records prepared or maintained by it relating to the services performed hereunder are the property of the Customer and will be preserved, maintained and made available in accordance with the requirements of law, and will be surrendered promptly to the Customer on and in accordance with its request.
11.4 Non-Solicitation of Transfer Agent Employees . Customer shall not attempt to hire or assist with the hiring of an employee of EquiServe or affiliated companies or encourage any employee to terminate their relationship with EquiServe or its affiliated companies.
11.5 Notification . Customer shall notify Transfer Agent as soon as possible in advance of any stock split, stock dividend or any similar event which may affect the Shares and any bankruptcy, insolvency, moratorium or other proceeding regarding Customer affecting the enforcement of creditors rights. Notwithstanding any other provision of the Agreement to the contrary, Transfer Agent will have no obligation to perform any Services under the Agreement subsequent to the commencement of any bankruptcy, insolvency, moratorium or other proceeding regarding Customer affecting the enforcement of creditor rights unless Transfer Agent receives assurance satisfactory to it that it will receive full payment for such services. Further, Customer may not assume the Agreement after the filing of a bankruptcy petition without Transfer Agents written consent.
12. Confidentiality.
12.1 Covenant . The Transfer Agent and the Customer agree that they will not, at any time during the term of this Agreement or after its termination, reveal, divulge, or make known to any person, firm, corporation or other business organization, any customers lists, trade
14
secrets, or any other secret or confidential information whatsoever identified as confidential, whether of the Transfer Agent or of the Customer, used or gained by the Transfer Agent or the Customer during performance under this Agreement. The Customer and the Transfer Agent further covenant and agree to retain all such knowledge and information acquired during and after the term of this Agreement respecting such lists, trade secrets, or any secret or confidential information whatsoever in trust for the sole benefit of the Transfer Agent or the Customer and their successors and assigns. The above prohibition of disclosure shall not apply to the extent that the Transfer Agent must disclose such data to its sub-contractor or agents for purposes of providing services under this Agreement.
12.2 Shareholder Non-Public Personal Information. The Transfer Agent agrees that it will not disclose or use any non-public personal information about a Customers Shareholders other than such uses or disclosures which are necessary to permit the Transfer Agent to carry out its duties under this Agreement, or are otherwise required by the Transfer Agent in compliance with a regulatory investigation or in response to judicial process, including as set forth in Section 12.3 below. Non-public personal information about a Shareholder shall mean (i) personally identifiable financial information; (ii) any list, description, or other grouping of consumers that is derived from using any personally identifiable information that is not publicly available; and (iii) any other information that the Transfer Agent is prohibited from using or disclosing pursuant to Regulation S-P under Section 504 of the Gramm Leach Bliley Act.
12.3 Request for Records . In the event that any requests or demands are made for the inspection of the Shareholder records, other than request for records of Shareholders pursuant to standard subpoenas from state or federal government authorities (e.g., in divorce and criminal actions), the Transfer Agent will endeavor to notify the Customer and to secure instructions from an authorized officer of the Customer as to such inspection. The Transfer Agent expressly reserves the right, however, to exhibit the Shareholder records to any person whenever it is advised by counsel that it may be held liable for the failure to exhibit the Shareholder records to such person or if required by law or court order.
13. Term and Termination.
13.1 Term. The initial term of this Agreement (the Initial Term) shall be three (3) years from the date first stated above unless terminated pursuant to the provisions of this Section 13 . Unless a terminating party gives written notice to the other party sixty (60) days before the expiration of the Initial Term this Agreement will renew automatically from year to year (Renewal Term). Sixty (60) days before the expiration of the Initial Term or a Renewal Term the parties to this Agreement will agree upon a Fee Schedule for the upcoming Renewal Term. If no new fee schedule is agreed upon, the fees will increase as set forth in Section 5.2 .
13.2 Early Termination . Notwithstanding anything contained in this Agreement to the contrary, should Customer desire to move any of its services provided by the Transfer Agent hereunder to a successor service provider prior to the expiration of the then current Initial or Renewal Term, or without the required notice period, the Transfer Agent shall make a good faith effort to facilitate the conversion on such prior date, however, there can be no guarantee that the
15
Transfer Agent will be able to facilitate a conversion of services on such prior date. In connection with the foregoing, should services be converted to a successor service provider, or if the Customer is fully liquidated other than the liquidation of a Customer which is a term trust at its scheduled liquidation time, or its assets merged or purchased or the like with another entity which does not utilize the services of the Transfer Agent, all reasonable out-of-pocket expenses or costs associated with the movement of records and material will be borne by the Customer. Additionally, the Transfer Agent reserves the right to charge for any other reasonable expenses associated with such termination and a de-conversion/transition fee in an amount equal to 20% of the aggregate fees incurred by Customer during the immediately preceding twelve (12) month period.
13.3 Expiration of Term. After the expiration of the Initial Term or Renewal Term whichever currently in effect, should either party exercise its right to terminate, all reasonable out-of-pocket expenses or costs associated with the movement of records and material will be borne by the Customer. Additionally, the Transfer Agent reserves the right to charge for any other reasonable expenses associated with such termination and a de-conversion/transition fee in an amount equal to 20% of the aggregate fees incurred by Customer during the immediately preceding twelve (12) month period.
13.4 Termination .
This Agreement may be terminated in accordance with the following:
(a) at any time by either party upon a material breach of a representation, covenant or term of this Agreement by the other which is not cured within a period not to exceed thirty (30) days after the date of written notice thereof by the other party; and
(b) by Transfer Agent, at any time, in the event that during the term if this Agreement, a bankruptcy or insolvency proceeding is filed by or against Customer or a trustee or receiver is appointed for any substantial part of Customers property (and in a case of involuntary bankruptcy, insolvency or receivership proceeding, there is entered an order for relief, or order appointing a receiver or some similar order or decree and Customer does not succeed in having such order lifted or stayed within sixty (60) days from the date of its entry), or Customer makes an assignment of all or substantially all of its property for the benefit of creditors or ceases to conduct its operations in the normal course or business.
13.5 Records . Upon receipt of written notice of termination, the parties will use commercially practicable efforts to effect an orderly termination of this Agreement. Without limiting the foregoing, Transfer Agent will deliver promptly to Customer, in machine readable form on media as reasonably requested by Customer, all stockholder and other records, files and data supplied to or compiled by Transfer Agent on behalf of Customer.
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14. Assignment.
14.1 Affiliates . The Transfer Agent may, without further consent of the Customer assign its right and obligations hereunto to any affiliated and registered transfer agent under Section 17(A)(c)(2) of the Securities and Exchange Act. The Transfer Agent will not assign its rights and obligations to any other person without consent.
14.2 Sub-contractors . Transfer Agent may, without further consent on the part of Customer, subcontract with other subcontractors for telephone and mailing services as may be required from time to time; provided, however, that the Transfer Agent shall be as fully responsible to the Customer for the acts and omissions of any subcontractor as it is for its own acts and omissions.
15. Unaffiliated Third Parties.
Nothing herein shall impose any duty upon the Transfer Agent in connection with or make the Transfer Agent liable for the actions or omissions to act of unaffiliated third parties such as, by way of example and not limitation, airborne services, the U.S. mails and telecommunication companies, provided, if the Transfer Agent selected such company, the Transfer Agent shall have exercised due care in selecting the same.
16. Miscellaneous.
16.1 Notices .
Any notice or communication by the Transfer Agent or the Customer to the other is duly given if in writing and delivered in person or mailed by first class mail, postage prepaid, telex, telecopier or overnight air courier guaranteeing next day delivery, to the others address:
If to the Customer:
c/o BlackRock Advisors Inc.
100 Bellevue Parkway
Wilmington, Delaware 19809
Attn:
If to the Transfer Agent:
Computershare Trust Company, N.A.
c/o Computershare Shareholder Services, Inc.
150 Royall Street
Canton, MA 02021
Telecopy No.: (781) 575-4210
Attn: General Counsel
The Transfer Agent and the Customer may, by notice to the other, designate additional or different addresses for subsequent notices or communications.
17
16.2 Successors .
All the covenants and provisions of this agreement by or for the benefit of the Customer or the Transfer Agent shall bind and inure to the benefit of their respective successors and assigns hereunder.
16.3 Amendments .
This Agreement may be amended or modified by a written amendment executed by both parties hereto and authorized or approved by a resolution of the Board of Directors of the Customer.
16.4 Severability .
If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provision, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated.
16.5 Governing Law .
This Agreement shall be governed by the laws of The Commonwealth of Massachusetts.
16.6 Force Majeure .
Notwithstanding anything to the contrary contained herein, Transfer Agent shall not be liable for any delays or failures in performance resulting from acts beyond its reasonable control including, without limitation, acts of God, shortage of supply, breakdowns or malfunctions, interruptions or malfunction of computer facilities, or loss of data due to power failures or mechanical difficulties with information storage or retrieval systems, labor difficulties, war, or civil unrest.
16.7 Descriptive Headings .
Descriptive headings of the several sections of this Agreement are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof.
16.8 Third Party Beneficiaries .
The provisions of this Agreement are intended to benefit only the Transfer Agent, the Customer and their respective permitted successors and assigns. No rights shall be granted to any other person by virtue of this agreement, and there are no third party beneficiaries hereof.
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16.9 Survival .
All provisions regarding indemnification, warranty, liability and limits thereon, and confidentiality and protection of proprietary rights and trade secrets shall survive the termination of this Agreement.
16.10 Priorities .
In the event of any conflict, discrepancy, or ambiguity between the terms and conditions contained in this Agreement and any schedules or attachments hereto, the terms and conditions contained in this Agreement shall take precedence.
16.11 Merger of Agreement .
This agreement constitutes the entire agreement between the parties hereto and supersedes any prior agreement with respect to the subject matter hereof, whether oral or written.
16.12 Counterparts .
This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed by one of its officers thereunto duly authorized, all as of the date first written above.
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Exhibit 17(c)
Amendment to Transfer Agency and Service Agreement
This Amendment (Amendment), effective as of January 31, 2008 (Effective Date), is to the Transfer Agency and Service Agreement (the Agreement) dated December 1, 2006, by and among Computershare Inc., formerly known as Computershare Shareholder Services, Inc., and its fully owned subsidiary Computershare Trust Company, N. A. (collectively, Transfer Agent) and each of the BlackRock Closed-End Investment Companies listed on Exhibit C attached to the Agreement (each, a Customer).
WHEREAS, each Customer and the Transfer Agent are parties to the Agreement; and
WHEREAS, each Customer and the Transfer Agent desire to amend the Agreement upon the terms and conditions set forth herein;
NOW THEREFORE, for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereby agree as follows:
1. BlackRock Defined Opportunity Credit Trust is hereby added as a party to the Agreement.
2. In order that it may become a party to the Agreement, including, without limitation, any and all schedules and exhibits thereto, BlackRock Defined Opportunity Credit Trust agrees and binds itself to the terms and conditions thereof and acknowledges that by its execution and delivery of this Amendment it shall assume all of the obligations and shall be entitled to all of the rights, duties and obligations of a Customer (as such term is defined in the Agreement), as if it were an original party thereto.
3. Exhibit C is hereby deleted in its entirety and replaced with the new Exhibit C, which reflects the addition of BlackRock Defined Opportunity Credit Trust as a party to the Agreement.
4. Limited Effect . Except as expressly modified herein, the Agreement shall continue to be and shall remain, in full force and effect and the valid and binding obligation of the parties thereto in accordance with its terms.
5. Counterparts . This Amendment may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.
6. Governing Law . This Amendment shall be governed by the laws of the Commonwealth of Massachusetts.
1
IN WITNESS WHEREOF , the parties hereto have caused this Amendment to be executed by their respective officers, hereunto duly agreed and authorized, as of the Effective Date.
BLACKROCK DEFINED OPPORTUNITY CREDIT TRUST
By: |
/s/ Neal J. Andrews |
|
Name: | Neal J. Andrews | |
Title: | Chief Financial Officer | |
Date: | January 31,2008 |
ON BEHALF OF EACH OF THE BLACKROCK CLOSED-END INVESTMENT COMPANIES LISTED ON EXHIBIT C ATTACHED TO THE AGREEMENT
By: |
/s/ Neal J. Andrews |
|
Name: | Neal J. Andrews | |
Title: | Chief Financial Officer | |
Date: | January 31. 2008 |
COMPUTERSHARE INC. and
COMPUTERSHARE TRUST COMPANY, N.A.
On behalf of both entities
By: |
/s/ Dennis V. Moccia |
|
Name: | Dennis V. Moccia | |
Title: | Managing Director | |
Date: | January 31, 2008 |
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IN WITNESS WHEREOF , the parties hereto have caused this Amendment to be executed by their respective officers, hereunto duly agreed and authorized, as of the Effective Date.
BLACKROCK DEFINED OPPORTUNITY CREDIT TRUST
By: |
/s/ Neal J. Andrews |
|
Name: | Neal J. Andrews | |
Title: | Chief Financial Officer | |
Date: | January 31,2008 |
ON BEHALF OF EACH OF THE BLACKROCK CLOSED-END INVESTMENT
COMPANIES LISTED ON EXHIBIT C ATTACHED TO THE AGREEMENT
By : |
/s/ Neal J. Andrews |
|
Name: | Neal J. Andrews | |
Title: | Chief Financial Officer | |
Date: | January 31, 2008 |
COMPUTERSHARE INC. and
COMPUTERSHARE TRUST COMPANY, N.A.
On behalf of both entities
By: |
/s/ Dennis V. Moccia |
|
Name: |
Dennis V. Moccia | |
Title: |
Managing Director | |
Date: |
January 31,2008 |
3
Exhibit 17(d)
AMENDMENT NO. 2
TO THE TRANSFER AGENCY AND SERVICE AGREEMENT
among
EACH OF THE BLACKROCK CLOSED-END INVESTMENT COMPANIES
LISTED HEREIN ON EXHIBIT C
and
COMPUTERSHARE INC.
and
COMPUTERSHARE TRUST COMPANY, N.A.
This Amendment No. 2 (Amendment), dated as of December 1, 2009 (Effective Date), is by and between each of the Blackrock Closed-End Investment Companies listed on Exhibit C attached hereto, having a principal place of business at 100 Bellevue Parkway, Wilmington, Delaware 19809 (each the Customer), and Computershare Inc. (formerly known as Computershare Shareholder Services, Inc.), a Delaware corporation, and Computershare Trust Company, N.A., a federally chartered trust company (collectively, the Transfer Agent or individually, Computershare and Trust Company, respectively).
WHEREAS, the Customer and the Transfer Agent are parties to a Transfer Agency and Service Agreement dated December 1, 2006, as amended, and currently in effect (Agreement); and
WHEREAS, the Customer and Computershare now desire to amend the Agreement;
NOW THEREFORE, in consideration of the premises and mutual agreements set forth herein, the parties hereby agree as follows:
1. Amendment to Section 3.4. Section 3.4 of the Agreement is hereby deleted in its entirety and replaced with the following:
Unclaimed Property and Lost Shareholders. The Transfer Agent shall report unclaimed property to each state in compliance with applicable law and shall comply with Rule 17 Ad-17 promulgated under the Securities Exchange Act of 1934, as amended (the Exchange Act), for lost Shareholders.
2. Amendment to Section 4.1. Section 4.1 of the Agreement is hereby deleted in its entirety and replaced with the following:
Declaration of Dividends. Upon receipt of a written notice from the President, any Vice President, Secretary, Assistant Secretary, Treasurer, Assistant Treasurer or Chief Financial Officer of Customer declaring the payment of a dividend, Transfer Agent shall disburse such dividend payments provided that in advance of such payment, Customer furnishes Transfer Agent with sufficient funds. The payment of such funds to Transfer Agent for the purpose of being available for the payment of dividend checks from time to time is not intended by Customer to confer any rights in such funds on Fund Shareholders whether in trust or in contract or otherwise.
3. Amendment to Section 5.1. Section 5.1 of the Agreement is deleted and replaced with the following:
5.1 Fee and Service Schedules . The Company agrees to pay the Transfer Agent the fees and out- of-pocket expenses for Services performed pursuant to this Agreement as set forth in the Fee and Service Schedule, for the Initial Term (as defined below) of the Agreement. No later than sixty (60) days before the expiration of the Initial Term or a Renewal Term (as defined below) whichever is applicable, the parties to this Agreement will use good faith efforts to agree upon a Fee Schedule for the upcoming Renewal Term.
4. | Amendment to Section 5.2. Section 5.2 of the Agreement is hereby deleted in its entirety. |
5. | Amendment to Section 5.8(b). Section 5.8(b) of the Agreement is hereby deleted in its entirety and replaced with the following: |
The failure by Customer to pay an invoice within 45 days after written and telephonic notice to Customer that payment is overdue or the failure by the Customer to timely pay two consecutive invoices shall constitute a material breach pursuant to Section 13.4(a) below. Transfer Agent will provide notice by writing and telephone forty-five (45) days after payment is past due. The Transfer Agent may terminate this Agreement for such material breach immediately and shall not be obligated to provide the Customer with 30 days to cure such breach.
6. | Amendment to Section 5.9. Section 5.9 of the Agreement is hereby deleted in its entirety and replaced with the following: |
Services Required by Legislation. Services required by legislation or regulatory mandate that become effective after the effective date of this Agreement shall not be part of the standard services, and shall be billed by appraisal. Transfer Agent shall provide advance notice of fees for services required by legislation or regulatory fiat. Transfer Agent fees shall be reasonable and shall comply with industry standards.
7. | Amendment to Section 5.11 . Section 5.11 of the Agreement is hereby deleted in its entirety and replaced with the following: |
Bank Accounts . The Customer acknowledges that Computershare Inc., as dividend disbursing agent and processor of all payments under this Agreement, may receive float benefits and/or investment earnings in connection with maintaining certain bank accounts required to provide Services under this Agreement (e.g., dividend disbursing accounts).
8. | Amendment to Section 8.1 . Section 8.1 of the Agreement is hereby deleted in its entirety and replaced with the following: |
Standard of Care . The Transfer Agent shall at all times act in good faith and agrees to use its best efforts within reasonable time 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 unless said loss or damage is caused by its negligence, bad faith or willful misconduct or that of its employees as set forth or the breach of any representation or warranty of the Transfer Agent hereunder and subject to the limitations set forth in Section 8.4 below.
9. | Amendment to Section 8.4. Section 8.4 of the Agreement is hereby deleted in its entirety and replaced with the following: |
Transfer Agent Indemnification/Limitation of Liability . Transfer Agent shall be responsible for and shall indemnify and hold the Customer harmless from and against any and all losses, damages, costs, charges, counsel fees, payments, expenses and liability arising out of or
attributable to Transfer Agents refusal or failure to comply with the terms of this Agreement, or which arise out of Transfer Agents bad faith, negligence or willful misconduct or which arise out of the breach of any representation or warranty of Transfer Agent hereunder, for which Transfer Agent is not entitled to indemnification under this Agreement; provided, however, that Transfer Agents aggregate liability during any term of this Agreement with respect to, arising from, or arising in connection with this Agreement, or as a result of any Services provided or omitted to be provided under this Agreement, whether in contract, or in tort, or otherwise, is limited to, and shall not exceed, the following amounts: (a) amounts paid hereunder by the Customer to Transfer Agent as fees and charges, but not including reimbursable expenses, during the thirty-six (36) calendar months immediately preceding the event for which recovery from the Transfer Agent is being sought which arises out of the Transfer Agents negligence, and (b) amounts paid hereunder by the Customer to Transfer Agent as fees and charges, but not including reimbursable expenses, during the sixty (60) calendar months immediately preceding the event for which recovery is being sought which arises out of the Transfer Agents gross negligence. For the avoidance of doubt, the Transfer Agents aggregate liability during any term of this Agreement with respect to, arising from, or arising in connection with this Agreement, or as a result of any Services provided or omitted to be provided under this Agreement, whether in contracts, or in tort, or otherwise, which arises out of the Transfer Agents bad faith of willful misconduct shall not be subject to the foregoing limitations.
10. | Amendment to Section 10.1. Section 10.1 of the Agreement is hereby deleted in its entirety and replaced with the following: |
Whenever in the performance of its duties hereunder the Transfer Agent shall deem it necessary or desirable that any fact or matter be proved or established prior to taking or suffering any action hereunder, such fact or matter may be deemed to be conclusively proved and established by a certificate signed by the Chairman of the Board, the President, any Vice President, the Treasurer, any Assistant Treasurer, the Secretary, any Assistant Secretary or Chief Financial Officer of the Customer and delivered to the Transfer Agent. Such certificate shall be full authorization to the Transfer Agent for any action taken or suffered in good faith by it under the provisions of this Agreement in reliance upon such certificate provided the action taken is without negligence, bad faith or willful misconduct.
11. | Amendment to Section 10.3. Section 10.3 of the Agreement is hereby deleted in its entirety and replaced with the following: |
Transfer Agent, any of its affiliates or subsidiaries, and any stockholder, director, officer or employee of the Transfer Agent may buy, sell or deal in the securities of the Customer or become pecuniary interested in any transaction in which the Customer may be interested, or contract with or lend money to the Customer or otherwise act as fully and freely as though it were not appointed as agent under this Agreement. Nothing herein shall preclude the Transfer Agent from acting in any other capacity for the Customer or for any other legal entity.
12. | Amendment to Section 11.4. Section 11.4 of the Agreement is hereby deleted in its entirety. |
13. | Amendment to Section 12. Section 12 of the Agreement is hereby amended as follows: |
(a) | Section 12.2 is amended to delete the definition of Non-public personal information in its entirety and replaced with the following: |
Non-public personal information about a Shareholder shall mean (i) personally identifiable financial information; (ii) any list, description, or other grouping of consumers that is derived from using any personally identifiable information that is not publicly available, and (iii) any other information that the Transfer Agent is prohibited from using or disclosing pursuant to Regulation S-P under Section 504 of the Gramm Leach Bliley Act or applicable state law.
(b) | Section 12.3 is deleted in its entirety and replaced with the following: |
Request for Records . In the event that any requests or demands are made for the inspection of Shareholder records, other than requests for records of Shareholder pursuant to standard subpoenas from state or federal government authorities (e.g., in divorce or criminal actions), the Transfer Agent will use commercially reasonable efforts to notify the Customer and to secure instructions from an authorized officer of the Customer as to such inspection, unless such notification is otherwise prohibited by law or court order. The Transfer Agent expressly reserves the right, however, to exhibit the Shareholder records to any person whenever it is advised by counsel that it may be held liable for the failure to exhibit the Shareholder records to such person or if required by law or court order.
(c) | A new Section 12.4 is inserted, as follows: |
Unauthorized Disclosure . As may be required by law and without limiting any partys rights in respect of a breach of this Section 12, each party will promptly:
(a) | notify the other party in writing of any unauthorized possession, use or disclosure of the other partys confidential information by any person or entity that may become known to such party; |
(b) | furnish to the other party full details of the unauthorized possession, use or disclosure; and |
(c) | use commercially reasonable efforts to prevent a recurrence of any such unauthorized possession, use or disclosure of Confidential Information. |
14. | Amendment to Section 13.1. Section 13.1 of the Agreement is hereby deleted in its entirety and replaced with the following: |
Term . The initial term of this Agreement (the Initial Term) shall be three (3) years from the date first stated above unless terminated pursuant to the provisions of this Section 13 . Unless a terminating party gives written notice to the other party sixty (60) days before the expiration of the Initial Term or Renewal Term (as herein defined), this Agreement will renew automatically from year to year (Renewal Term). Sixty (60) days before the expiration of the Initial Term or a Renewal Term, the parties to this Agreement will use good faith efforts to agree upon a Fee Schedule for the upcoming Renewal Term.
15. | Amendment to Section 13.2 . Section 13.2 of the Agreement is hereby deleted in its entirety and replaced with the following: |
13.2 Early Termination . Notwithstanding anything contained in this Agreement to the contrary, should Customer desire to move any of its services provided by the Transfer Agent hereunder to a successor service provider prior to the expiration of the then current Initial Term or Renewal Term, or does not provide notice of termination within the time period referenced in Section 13.1, the Transfer Agent shall make a good faith effort to facilitate the conversion on such prior date, however, there can be no guarantee that the Transfer Agent will be able to facilitate a conversion of services on such prior date. In connection with the foregoing, should services be converted to a successor service provider,or if the Customer is fully liquidated other than a liquidation of a
Customer which is a term trust at its scheduled liquidation time, or its assets merged or purchased or the like with another entity which does not utilize the services of the Transfer Agent, all reasonable out-of-pocket expenses or costs associated with the movement of records and material will be borne by the Customer.
16. | Amendment to Section 13.3 . Section 13.3 of the Agreement is hereby deleted in its entirety and replaced with the following: |
13.3 Termination Costs and Expenses . In the event of the expiration or termination of this Agreement by the Company, or by the Transfer Agent in the event that the Transfer Agent terminates pursuant to Section 13.4(a) below due to the Companys material breach, the Company agrees to pay all costs and out of pocket expenses associated with the movement of records and materials to the Company or the successor agent, including costs such as, but not limited to data files and reports, at the then set fee, and any out of pocket expenses incurred, including but not limited to freight. In the event that Company terminates pursuant to Section 13.4(a) below due to Transfer Agents material breach or the Transfer Agent terminates the Agreement for reasons other than pursuant to Section 13.4(a), the Transfer Agent agrees to pay all its costs and out of pocket expenses associated with the movement of records to a successor agent.
17. | Amendment to Section 14 . Sections 14.1 and 14.2 of the Agreement is hereby deleted in their entirety, respectively, and replaced with the following: |
14.1 Affiliates . The Transfer Agent may, without further consent of the Customer, assign its rights and obligations hereunto to any affiliated and registered transfer agent under Section 17Ac2-1 promulgated under the Securities Exchange Act of 1934, as amended. The Transfer Agent will not assign its rights and obligations to any other person without the Customers prior written consent.
14.2 Sub-contractors . Transfer Agent may, without further consent on the part of Customer, subcontract with (a) any affiliates, or (b) unaffiliated subcontractors for such services as may be required from time to time (e.g. lost shareholder searches, escheatment, telephone and mailing services); provided, however, that Transfer Agent shall be as fully responsible to Company for the acts and omissions of any subcontractor as it is for its own acts and omissions.
18. | Amendment to Section 16.1. Section 16.1 of the Agreement is hereby amended as follows: |
(a) | The Customers notice information is deleted in its entirety and replaced with the following: |
c/o BlackRock Advisors, LLC
100 Bellevue Parkway
Wilmington, Delaware 19809
Attn: General Counsel
(b) | Transfer Agents notice information is deleted in its entirety and replaced it with the following: |
Computershare Trust Company, N. A.
250 Royall Street
Canton, MA 02021
Attn: General Counsel
19. | Amendment to Section 16.3 . Section 16.3 of the Agreement is hereby deleted in its entirety and replaced with the following: |
Amendments . This Amendment may be amended or modified by a written amendment executed by both parties hereto and, to the extent required by Customer, authorized or approved by a resolution of the Board of Directors of the Customer.
20. | Amendment to Section 16.6. Section 16.6 of the Agreement is hereby deleted in its entirety and replaced with the following: |
Force Majeure . Notwithstanding anything to the contrary contained herein, Transfer Agent shall not be liable for any delays or failures in performance resulting from acts beyond its reasonable control including, without limitation, acts of God, terrorist acts, shortage of supply, breakdowns or malfunctions, interruptions or malfunction of computer facilities, or loss of data due to power failures or mechanical difficulties with information storage or retrieval systems, labor difficulties, war, or civil unrest.
21. Limited Effect. Except as expressly modified herein, the Agreement shall continue to be and shall remain, in full force and effect and the valid and binding obligation of the parties thereto in accordance with its terms.
22. Counterparts . This Amendment may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. A signature to this Amendment transmitted electronically shall have the same authority, effect, and enforceability as an original signature.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers, hereunto duly agreed and authorized, as of the Effective Date.
Computershare Inc. | BlackRock Advisors, LLC | |||||||
Computershare Trust Company, N.A. | ||||||||
On Behalf of Both Entities : | On behalf of the BlackRock Closed-End Investment Companies Listed on Exhibit C | |||||||
By: |
/s/ Martin J. McHale |
By: |
/s/ Brenda Sklar |
|||||
Name: | Martin J. McHale | Name: | Brenda Sklar | |||||
Title: | President, U.S. Equity Services | Title: | Managing Director |
EXHIBIT C
BlackRock Insured Municipal Income Investment Trust |
BlackRock Municipal Income Investment Trust |
BlackRock Municipal Bond Trust |
BlackRock Municipal Income Trust |
BlackRock Florida Municipal 2020 Term Trust |
BlackRock New York Municipal Income Trust II |
BlackRock California Municipal Income Trust |
BlackRock Floating Rate Income Trust |
BlackRock Strategic Bond Trust |
BlackRock Core Bond Trust |
BlackRock Defined Opportunity Credit Trust |
BlackRock Virginia Municipal Bond Trust |
BlackRock High Yield Trust |
BlackRock Municipal Bond Investment Trust |
BlackRock California Municipal 2018 Term Trust |
BlackRock Municipal 2020 Term Trust |
BlackRock Investment Quality Municipal Trust Inc. |
BlackRock Income Trust Inc. |
BlackRock Municipal Income Trust II |
BlackRock New York Municipal 2018 Term Trust |
BlackRock New Jersey Municipal Bond Trust |
BlackRock Limited Duration Income Trust |
BlackRock Insured Municipal Term Trust Inc. |
BlackRock Income Opportunity Trust Inc. |
BlackRock New Jersey Municipal Income Trust |
BlackRock New York Municipal Income Trust |
BlackRock Municipal 2018 Term Trust |
BlackRock Credit Allocation Income Trust III |
BlackRock Pennsylvania Strategic Municipal Trust |
BlackRock New York Municipal Bond Trust |
BlackRock Strategic Municipal Trust |
BlackRock New York Insured Municipal Income Trust |
BlackRock Long-Term Municipal Advantage Trust |
BlackRock Credit Allocation Income Trust IV |
BlackRock Insured Municipal Income Trust |
BlackRock Maryland Municipal Bond Trust |
BlackRock Corporate High Yield Fund Inc. |
BlackRock Corporate High Yield Fund III Inc. |
BlackRock Diversified Income Strategies Fund Inc. |
BlackRock Floating Rate Income Strategies Fund Inc. |
BlackRock Floating Rate Income Strategies Fund II |
BlackRock High Income Shares |
BlackRock Corporate High Yield Fund VI Inc. |
BlackRock Corporate High Yield Fund V Inc. |
BlackRock Muniyield California Insured Fund Inc. |
BlackRock Munienhanced Fund Inc. |
BlackRock Muni New York Intermediate Duration Fund |
BlackRock Muniyield Pennsylvania Insured Fund |
BlackRock Muniyield Quality Fund Inc. |
BlackRock Muniholdings Insured Fund II Inc. |
BlackRock Muni Intermediate Duration Fund Inc. |
BlackRock Muniyield Insured Fund Inc. |
BlackRock Credit Allocation Income Trust I, Inc. |
BlackRock Credit Allocation Income Trust II, Inc. |
BlackRock California Investment Quality Muni Trust |
BlackRock Investment Quality Muni Income Trust |
BlackRock New Jersey Investment Quality Muni Trust |
BlackRock New York Investment Quality Muni Trust |
Exhibit 17(e)
Third Amendment to Transfer Agency and Service Agreement
This Third Amendment (Amendment), effective as of August 31, 2010 (Effective Date), is to the Transfer Agency and Service Agreement (the Agreement) dated December 1, 2006, by and among Computershare Inc., formerly known as Computershare Shareholder Services, Inc., and its fully owned subsidiary Computershare Trust Company, N.A. (collectively, Transfer Agent) and each of the BlackRock Closed-End Investment Companies listed on Exhibit C attached to the Agreement (each, a Customer).
WHEREAS, each Customer and the Transfer Agent are parties to the Agreement; and
WHEREAS, each Customer and the Transfer Agent desire to amend the Agreement upon the terms and conditions set forth herein;
NOW THEREFORE, for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereby agree as follows:
1. BlackRock Build America Bond Trust is hereby added as a party to the Agreement.
2. In order that it may become a party to the Agreement, including, without limitation, any and all schedules and exhibits thereto, BlackRock Build America Bond Trust agrees and binds itself to the terms and conditions thereof and acknowledges that by its execution and delivery of this Amendment it shall assume all of the obligations and shall be entitled to all of the rights, duties and obligations of a Customer (as such term is defined in the Agreement), as if it were an original party thereto.
3. Exhibit C is hereby deleted in its entirety and replaced with the new Exhibit C attached hereto as Schedule 1, which reflects the addition of BlackRock Build America Bond Trust as a party to the Agreement.
4. Limited Effect. Except as expressly modified herein, the Agreement shall continue to be and shall remain, in full force and effect and the valid and binding obligation of the parties thereto in accordance with its terms.
5. Counterparts . This Amendment may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.
6. Governing Law . This Amendment shall be governed by the laws of the Commonwealth of Massachusetts.
1
I N WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers, hereunto duly agreed and authorized, as of the Effective Date.
BLACKROCK BUILD AMERICA BOND TRUST
By: |
/s/ Neal Andrews |
|
Name: | Neal Andrews | |
Title: | Chief Financial Officer | |
Date: |
BLACKROCK ADVISORS, LLC
On behalf of each of the BlackRock Closed-End Investment
Companies listed on Exhibit C attached to the Agreement
By: |
/s/ Jay Fife |
|
Name: | Jay Fife | |
Title: | Managing Director | |
Date: | 8/19/10 |
COMPUTERSHARE INC. and
COMPUTERSHARE TRUST COMPANY, N.A.
On behalf of both entities
By: |
[Illegible] |
|
Name: | ||
Title : | ||
Date: |
2
IN WITNESS WHEREOF , the parties hereto have caused this Amendment to be executed by their respective officers, hereunto duly agreed and authorized, as of the Effective Date.
BLACKROCK BUILD AMERICA BOND TRUST
By: |
/s/ Neal Andrews |
|
Name: |
Neal Andrews |
|
Title: |
Chief Financial Officer |
|
Date: |
BLACKROCK ADVISORS, LLC
On behalf of each of the BlackRock Closed-End Investment
Companies listed on Exhibit C attached to the Agreement
By: |
/s/ Jay Fife |
|
Name: |
Jay Fife |
|
Title: |
Managing Director |
|
Date: |
COMPUTERSHARE INC. and
COMPUTERSHARE TRUST COMPANY, N.A.
On behalf of both entities
By: |
/s/ Dennis V. Moccia |
|
Name: |
Dennis V. Moccia |
|
Title: |
Manager, Contract Administrator |
|
Date: |
August 17, 2010 |
3
Schedule 1
EXHIBIT C
Coy
(Legacy Co Code) |
Company Name | |||
BAF | BlackRock Insured Municipal Income Investment Trust | |||
BBF | BlackRock Municipal Income Investment Trust | |||
BBK | BlackRock Municipal Bond Trust | |||
BBN | BlackRock Build America Bond Trust | |||
BFK | BlackRock Municipal Income Trust | |||
BFO | BlackRock Florida Municipal 2020 Term Trust | |||
BFY | BlackRock New York Municipal Income Trust II | |||
BFZ | BlackRock California Municipal Income Trust | |||
BGT | BlackRock Floating Rate Income Trust | |||
BHD | BlackRock Strategic Bond Trust | |||
BHK | BlackRock Core Bond Trust | |||
BHL | BlackRock Defined Opportunity Credit Trust | |||
BHV | BlackRock Virginia Municipal Bond Trust | |||
BHY | BlackRock High Yield Trust | |||
BIE | BlackRock Municipal Bond Investment Trust | |||
BJZ | BlackRock California Municipal 2018 Term Trust | |||
BKK | BlackRock Municipal 2020 Term Trust | |||
BKN | BlackRock Investment Quality Municipal Trust Inc | |||
BKT | BlackRock Income Trust Inc | |||
BLE | BlackRock Municipal Income Trust II | |||
BLH | BlackRock New York Municipal 2018 Term Trust | |||
BLJ | BlackRock New Jersey Municipal Bond Trust | |||
BLW | BlackRock Limited Duration Income Trust | |||
BMT | BlackRock Insured Municipal Term Trust Inc | |||
BNA | BlackRock Income Opportunity Trust Inc | |||
BNJ | BlackRock New Jersey Municipal Income Trust | |||
BNY | BlackRock New York Municipal Income Trust | |||
BPK | BlackRock Municipal 2018 Term Trust | |||
BPP | BlackRock Credit Allocation Income Trust III | |||
BPS | BlackRock Pennsylvania Strategic Municipal Trust | |||
BQH | BlackRock New York Municipal Bond Trust | |||
BSD | BlackRock Strategic Municipal Trust | |||
BSE | BlackRock New York Insured Municipal Income Trust | |||
BTA | BlackRock Long-Term Municipal Advantage Trust | |||
BTZ | BlackRock Credit Allocation Income Trust IV | |||
BYM | BlackRock Insured Municipal Income Trust |
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BZM | BlackRock Maryland Municipal Bond Trust | |||
COY | BlackRock Corporate High Yield Fund Inc | |||
CYE | BlackRock Corporate High Yield Fund III Inc | |||
DVF | BlackRock Diversified Income Strategies Fund Inc | |||
FRA | BlackRock Floating Rate Income Strategies Fund Inc | |||
FRB | BlackRock Floating Rate Income Strategies Fund II | |||
HIS | BlackRock High Income Shares | |||
HYT | BlackRock Corporate High Yield Fund VI Inc | |||
HYV | BlackRock Corporate High Yield Fund V Inc | |||
MCA | BlackRock Muniyield California Insured Fund Inc | |||
MEN | BlackRock Munienhanced Fund Inc | |||
MNE | BlackRock Muni New York Intermediate Duration Fund | |||
MPA | BlackRock Muniyield Pennsylvania Insured Fund | |||
MQY | BlackRock Muniyield Quality Fund Inc | |||
MUE | BlackRock Muniholdings Insured Fund II Inc | |||
MUI | BlackRock Muni Intermediate Duration Fund Inc | |||
MYI | BlackRock Muniyield Insured Fund Inc | |||
PSW | BlackRock Credit Allocation Income Trust I, Inc. | |||
PSY | BlackRock Credit Allocation Income Trust II, Inc. | |||
RAA | BlackRock California Investment Quality Muni Trust | |||
RFA | BlackRock Investment Quality Muni Income Trust | |||
RNJ | BlackRock New Jersey Investment Quality Muni Trust | |||
RNY | BlackRock New York Investment Quality Muni Trust |
5
Exhibit 17(f)
Fourth Amendment to Transfer Agency and Service Agreement
This Fourth Amendment (Amendment), effective as of August 30, 2012 (Effective Date), is to the Transfer Agency and Service Agreement (the Agreement) dated December 1, 2006, by and among Computershare Inc., formerly known as Computershare Shareholder Services, Inc., and its fully owned subsidiary Computershare Trust Company, N.A. (collectively, Transfer Agent) and each of the BlackRock Closed-End Investment Companies listed on Exhibit C attached to the Agreement (each, a Customer).
WHEREAS, each Customer and the Transfer Agent are parties to the Agreement; and
WHEREAS, each Customer and the Transfer Agent desire to amend the Agreement upon the terms and conditions set forth herein;
NOW THEREFORE, for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereby agree as follows:
1. Amendment to Fee and Service Schedule for Stock Transfer Services . The Fee and Service Schedule Is hereby amended to extend the term to December 31, 2012.
2. BlackRock Municipal Target Term Trust is hereby added as a party to the Agreement .
3. In order that it may become a party to the Agreement, including, without limitation, any and all schedules and exhibits thereto, BlackRock Municipal Target Term Trust agrees and binds itself to the terms and conditions thereof and acknowledges that by its execution and delivery of this Amendment it shall assume all of the obligations and shall be entitled to all of the rights, duties and obligations of a Customer (as such term is defined in the Agreement), as if it were an original party thereto.
4. Exhibit C is hereby deleted in its entirety and replaced with the new Exhibit C attached hereto as Schedule 1, which reflects the addition of BlackRock Municipal Target Term Trust as a party to the Agreement.
5. Section 16.3 of the Agreement is hereby deleted in its entirety and replaced with the following:
Amendments. This Agreement may be amended or modified by a written amendment executed by both parties hereto and, to the extent required by the Customer, authorized or approved by a resolution of the Board of Directors of the Customer. Notwithstanding anything in the first sentence of this Section 16.3 of the Agreement, the parties agree that on an ongoing basis, Exhibit C of this Agreement shall be amended without the need for a formal signed amendment to the Agreement so long as each party has received an updated Exhibit C (including for these purposes, in an electronic format) and has provided written confirmation of such amendment (including for these purposes, via E-mail from any of the respective authorized signatories of the parties).
6. Limited Effect. Except as expressly modified herein, the Agreement shall continue to be and shall remain, in full force and effect and the valid and binding obligation of the parties thereto in accordance with its terms.
7. Counterparts . This Amendment may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.
8. Governing Law . This Amendment shall be governed by the Iaws of the Commonwealth of Massachusetts.
IN WITNESS WHERE OF, the parties hereto have caused this Amendment to be executed by their respective officers, hereunto duly agreed and authorized, as of the Effective Date.
BLACKROCK MUNICIPAL TARGET TERM TRUST | ||
By: |
/s/ Neal J. Andrews |
|
Name: | Neal J. Andrews | |
Title: | CFO | |
Date: | 7/18/12 |
BLACKROCK ADVISORS, LLC
On behalf of each of the BlackRock Closed-End Investment
Companies listed on Exhibit c attached to the Agreement
By: |
/s/ Neal J. Andrews |
|
Name: | Neal J. Andrews | |
Title: | NA | |
Date: | 7/18/12 |
COMPUTERSHARE INC. and
COMPUTERSHARE TRUST COMPANY, N.A.
On behalf of both entities
By: |
/s/ Martin J. McHale |
|
Name: | Martin J. McHale | |
Title: | President, US Equity Services | |
Date: | 7/13/2012 |
Schedule 1
EXHIBIT C
Coy (Legacy Co. Code) |
Company Name |
|||
BAF | BlackRock Municipal Income Investment Quality Trust | |||
BBF | BlackRock Municipal Income Investment Trust | |||
BBK | BlackRock Municipal Bond Trust | |||
BBN | BlackRock Build America Bond Trust | |||
BFK | BlackRock Municipal Income Trust | |||
BFO | BlackRock Florida Municipal 2020 Term Trust | |||
BFY | BlackRock New York Municipal income Trust II | |||
BFZ | BlackRock California Municipal Income Trust | |||
BGT | BlackRock Floating Rate income Trust | |||
BHD | BlackRock Strategic Bond Trust | |||
BHK | BlackRock Core Bond Trust | |||
BHL | BlackRock Defined Opportunity Credit Trust | |||
BHV | BlackRock Virginia Municipal Bond Trust | |||
BHY | BJackRock High Yield Trust | |||
BIE | BlackRock Municipal Bond Investment Trust | |||
BJZ | BlackRock California Municipal 2018 Term Trust | |||
BKK | BlackRock Municipal 2020 Term Trust | |||
BKN | BlackRock investment Quality Municipal Trust Inc | |||
BKT | BlackRock Income Trust Inc | |||
BLE | BlackRock Municipal Income Trust II | |||
BLH | BlackRock New York Municipal 2018 Term Trust | |||
BLJ | BlackRock New Jersey Municipal Bond Trust | |||
BLW | BlackRock Limited Duration Income Trust | |||
BNA | BlackRock Income Opportunity Trust Inc | |||
BNJ | BlackRock New Jersey Municipal Income Trust | |||
BNY | BlackRock New York Municipal Income Trust | |||
BPK | BlackRock Municipal 2018 Term Trust | |||
BPP | BlackRock Credit Allocation Income Trust III | |||
BPS | BlackRock Pennsylvania Strategic Municipal Trust | |||
BQH | BlackRock New York Municipal Bond Trust | |||
BSD | BlackRock Strategic Municipal Trust | |||
BSE | BlackRock New York Municipal Income Quality Trust | |||
BTA | BlackRock Long-Term Municipal Advantage Trust | |||
BTT | BlackRock Municipal Target Term Trust | |||
BTZ | BlackRock Credit Allocation Income Trust IV | |||
BYM | BlackRock Municipal Income Quality Trust | |||
BZM | BlackRock Maryland Municipal Bond Trust | |||
COY | BlackRock Corporate High Yield Fund Inc | |||
CYE | BlackRock Corporate High Yield Fund III Inc | |||
DVF | BlackRock Diversified Income Strategies Fund Inc | |||
FRA | BlackRock Floating Rate Income Strategies Fund Inc | |||
FRB | BlackRock Floating Rate Income Strategies Fund II | |||
HIS | BlackRock High Income Shares | |||
HYT | BlackRock Corporate High Yield Fund VI Inc |
Schedule 1
EXHIBIT C
HYV | BlackRock Corporate High Yield Fund V Inc | |||
MCA | BlackRock MuniYield Californio Quality Fund, Inc. | |||
MEN | BlackRock Munienhanced Fund Inc | |||
MNE | BlackRock Muni New York Intermediate Duration Fund | |||
MPA | BlackRock MuniYield Pennsylvania Quality Fund | |||
MQY | BlackRock Muniyield Quality Fund Inc | |||
MUE | BlackRock MuniHoldings Quality Fund II, Inc. | |||
MUI | BlackRock Muni Intermediate Duration Fund Inc | |||
MYI | BlackRock MuniYield Quality Fund III, Inc. | |||
PSW | BlackRock Credit Allocation Income Trust I, Inc. | |||
PSY | BfackRock Credit Allocation Income Trust II, Inc. |
Exhibit 17(g)
ADMINISTRATIVE SERVICES AGREEMENT
THIS AGREEMENT (the Agreement) is dated as of December 29, 2000 by and among STATE STREET BANK AND TRUST COMPANY, a Massachusetts trust company (State Street), and each entity listed on Schedule I hereto, together with any other entity which may from time to time become a party to this Agreement by execution of an Instrument of Accession substantially in the form attached as Exhibit 1 hereto (each a Fund and collectively, the Funds).
WHEREAS, each Fund is, unless otherwise noted, registered as an open-end or closed-end, management investment company under the Investment Company Act of 1940, as amended (the 1940 Act); and
WHEREAS, each Fund desires to retain State Street to furnish certain accounting and other administrative services, and State Street 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 and other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows:
1. | INTERPRETATION |
1.1 | In this Agreement: |
Agreement means this Agreement including the recitals hereto and the Schedules and Exhibits, as the same may be amended from time to time by agreement of the parties.
Authorized Person means any person authorized by a Fund to give Proper Instructions on behalf of the Fund and in respect of whom State Street has not received written notice from the Fund that such authorization has been revoked.
Authorized Price Sources means pricing sources designated by a Fund on State Streets standard form price source authorization, as the same may be amended by the Fund and State Street from time to time or as otherwise designated by the Fund or an Authorized Person, including, without limitation, the investment adviser to the Fund.
Business Day means any day on which the New York Stock Exchange is open for trading or on which banking institutions in the City of New York are open for business.
Charter Documents means a Funds Articles of Incorporation or Declaration of Trust, as the case may be, and By-Laws.
Compliance Monitoring Services means the agreed investment compliance checks as may be carried out by State Street in respect of a Fund on a daily (or other periodic) basis pursuant to the provisions of the Compliance Monitoring Services Addendum attached hereto as Exhibit 2. Constitutive Documents means, collectively, a Funds Charter Documents and Prospectus, as defined herein.
Existing Service means a Service which is described in the Service Level Agreement or which is determined by the JSC (as defined in Section 15) to be an Existing Service.
Historic Fund Records means the books, records, data files, documents and other information maintained by or on behalf of each Fund as part of the Services prior to the effective date of this Agreement and which are necessary for the provision of the Services by State Street hereunder.
MLIM means Merrill Lynch Investment Managers, L.P.
New Service means a Service other than an Existing Service.
Proper Instructions means instructions (which may be standing instructions) received by State Street from an Authorized Person, in any of the following forms:
(i) in writing signed by the Authorized Person; or
(ii) in a tested communication; or
(iii) in a communication utilizing access codes effected between electro mechanical or electronic devices as may be agreed upon by the parties in writing from time to time; or
(iv) by such other means as may be agreed upon in writing from time to time by State Street and the party giving such instruction including, without limitation, oral instructions.
Prospectus means a Funds currently effective registration statement under the Securities Act of 1933, as amended (the 1933 Act), and the 1940 Act and the Funds Prospectus(es) and Statement(s) of Additional Information relating to all portfolios and all amendments and supplements thereto as in effect from time to time.
Service Level Agreement means the Service Level Agreement of even date herewith between State Street and MLIM relating to the provision of the Services, as amended from time to time.
Services means the accounting and other administrative services described in Sections 3 and 4 hereof.
1.2 | References herein to a Fund shall be deemed to include each portfolio or class of share of such Fund, as applicable. For purposes of any liability or indemnification provision hereunder each separate portfolio of an investment company shall be considered a Fund. |
1.3 | In this Agreement references to persons shall include legal as well as natural entities, references importing the singular shall include the plural (and vice versa), use of the masculine pronoun shall include the feminine and numbered schedules, exhibits, sections or sub-sections shall (unless the contrary intention appears) be construed as references to such schedules and exhibits hereto and sections or sub-sections herein bearing those numbers. The Schedules and Exhibits are hereby incorporated herein by reference. |
2
2. | APPOINTMENT |
2.1 | Each Fund hereby retains State Street and State Street agrees to provide the Services, in each case subject to and in accordance with the terms and conditions set forth in this Agreement and subject to the control, supervision and direction of the Fund and the review and comment by the Funds auditors and legal counsel and in accordance with such procedures as may be established from time to time between the Fund and State Street. State Street confirms that it shall offer employment to substantially all of those persons employed by, and in good standing with, the Mutual Fund Accounting Department of MLIM as of the date hereof |
2.2 | In the event that a Fund establishes one or more additional series of shares with respect to which it desires to have State Street render Services under the terms hereof, it shall so notify State Street in writing and thereafter such series will be subject to the terms and conditions of this Agreement, and shall be maintained and accounted for by State Street on a discrete basis. |
2.3 | Subject to obtaining the prior written approval of each Fund, State Street may assign, delegate or otherwise transfer any or all of its rights and obligations under this Agreement to a third party, provided that State Streets liability to the Funds shall not be affected thereby. |
2.4 | It is hereby acknowledged and agreed by each Fund that this Agreement is entered into by the Fund as a principal contracting party and not as agent for any other party and nothing contained herein shall be interpreted as creating any contractual obligations on the part of State Street towards any shareholders of the Fund. |
2.5 | State Street shall not be responsible for any duties or obligations which it has not specifically undertaken pursuant to this Agreement and no such duties or obligations shall be implied or inferred. |
2.6 | This Agreement and the Services to be provided by State Street hereunder shall be revised by the parties from time to time to comply with changes in any law, rule or regulation applicable to the Funds. |
2.7 | If any literature, including, but not limited to, brochures, advertising materials, web site contents and marketing materials, issued by or on behalf of a Fund contains any reference to State Street, other than literature merely identifying State Street as providing accounting or administrative services to the Fund, or if any literature issued by State Street contains any reference to a Fund, then the Fund or State Street, as the case may be, will obtain the other partys prior written consent to such reference before its publication in any form. |
3. | ACCOUNTING SERVICES |
3.1 |
State Street shall maintain the books of account and other financial records of each Fund in accordance with applicable law, including Section 31(a) of the 1940 Act and rules thereunder, other than records maintained by the Funds custodian (as agreed among the |
3
Fund, State Street and the custodian) and shall perform the following duties in the manner prescribed by the Constitutive Documents and further in accordance with such written procedures, including, but not limited to, the Service Level Agreement, as may be established between the Fund and State Street from time to time: |
3.1.1 | Record general ledger entries; |
3.1.2 | Calculate daily net income; |
3.1.3 | Reconcile activity to the trial balance; |
3.1.4 | Calculate and publish daily net asset value; |
3.1.5 | Prepare account balances; and |
3.1.6 | Provide such other accounting services as may be required to enable each Fund to maintain its books and records in compliance with applicable law and generally accepted accounting principles. |
3.2 | Each Fund shall provide timely prior written notice to State Street of any modification in the manner in which such calculations are to be performed. For purposes of calculating the net asset value of a Fund, State Street shall value the Funds portfolio securities utilizing prices obtained from Authorized Price Sources. State Street shall not be responsible for any revisions to the methods of calculation prescribed by the Constitutive Documents or the Fund unless and until such revisions are communicated in writing to State Street. |
4. | ADMINISTRATIVE SERVICES |
4.1 | State Street shall provide the following additional administrative services to each Fund in the manner prescribed by the Constitutive Documents and further in accordance with such written procedures, including, but not limited to, the Service Level Agreement, as may be established between the Fund and State Street from time to time: |
4.1.1 | 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; |
4.1.2 | Calculate, submit for approval by officers of the Fund and arrange for payment of the Funds expenses; |
4.1.3 | Prepare for review and approval by officers of the Fund financial information for the Funds semi-annual and annual reports, proxy statements and other communications required or otherwise to be sent to Fund shareholders; |
4.1.4 | Prepare and file, following review by an officer of and legal counsel for the Fund, the Funds periodic financial reports required to be filed with the Securities and Exchange Commission (SEC) on Form N-SAR and prepare financial information required by Form N-1A, Form N-2 and other regulatory filings and such other financial reports, forms or filings as may be mutually agreed upon; |
4
4.1.5 | 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; |
4.1.6 | Make such reports and recommendations to the Board of Directors of the Fund (the Board) concerning the performance of the Funds independent accountants as the Board may reasonably request; |
4.1.7 | Make such reports and recommendations to the Board concerning the performance and fees of the Funds custodian and transfer and dividend disbursing agent (the Transfer Agent) as the Board may reasonably request or deem appropriate; |
4.1.8 | Consult with the Funds officers, independent accountants, legal counsel, custodian and Transfer Agent in establishing and following the accounting policies of the Fund; |
4.1.9 | Provide Compliance Monitoring Services to assist the Funds investment adviser in complying with Internal Revenue Code mandatory qualification requirements, the requirements of the 1940 Act and Fund prospectus limitations as may be mutually agreed upon; |
4.1.10 | 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; |
4.1.11 | Assist the Fund in the preparation of reports to the Board of Directors and with any other work of a routine or non-routine nature that requires information maintained or accessible through the Funds accounting and financial records. |
4.2 | State Street shall be responsible for the provision of the office facilities and the personnel required by it to perform the Services contemplated herein. State Street shall also provide reasonable facilities for use by the Funds auditors in connection with any periodic inspection of the books and records maintained by State Street hereunder. |
5. | SERVICE LEVEL AGREEMENT |
5.1 | In conjunction with this Agreement, State Street and MLIM shall enter into a Service Level Agreement which specifies key performance indicators and delivery benchmarks in respect of the Services and which reflects the performance goals of the parties from time to time. |
5
5.2 | Subject at all times to the terms and conditions of this Agreement, State Street shall use all reasonable endeavors to provide the Services in accordance with the Service Level Agreement. |
5.3 | Each Fund shall use all reasonable endeavors to fulfill its duties and obligations under the Service Level Agreement and to cause any third parties referenced therein to do likewise. State Street shall have no liability for any loss, liability, claim, cost or expense to the extent resulting from or caused by the failure of a Fund or any other party referenced in the Service Level Agreement to comply with the terms thereof. For avoidance of doubt, the preceding sentence shall not relieve State Street of liability to the extent any such loss or expense arises from its own negligence, bad faith, fraud, willful default or willful misconduct in the discharge of its duties hereunder. |
5.4 | The liability of State Street in respect of its obligations under the Service Level Agreement shall be governed by the terms of this Agreement. In no event shall a failure by State Street to comply with any term or condition of the Service Level Agreement constitute a breach or violation of this Agreement giving rise to financial penalties, damages or contractual or other remedies, except as set out in this Section 5. However, the fact that State Street has met the key performance indicators or delivery benchmarks of the Service Level Agreement shall not relieve State Street of any liability that it might otherwise have under this Agreement arising from or as a result of its fraud, willful default, negligence or willful misconduct in the performance of its duties hereunder. It is the intention of State Street and each Fund that the remedy for any: |
5.4.1 | failure by State Street, a Fund or any third party referenced in the Service Level Agreement to meet the performance indicators, delivery benchmarks or other aspects of the Service Level Agreement; or |
5.4.2 | consistent failure by State Street, a Fund or any third party referenced in the Service Level Agreement to fulfill its duties and obligations under the Service Level Agreement in a material respect; or |
5.4.3 | dispute relating to the Service Level Agreement, shall be referral of the matter to the JSC (as defined below) for attempted resolution or, where applicable, termination of this Agreement in accordance with Section 20.6.4. |
5.5 | The purpose of the referral to the JSC is to resolve the inability of the relevant party to meet the provisions of the Service Level Agreement. It shall be the responsibility of the JSC to develop and oversee implementation of procedural or operational changes which will enable the Service Level Agreement to be more regularly met; revise the obligations of the parties under the Service Level Agreement to more adequately meet the service requirements of the Funds; or otherwise develop a solution aimed at ensuring that the inability to meet the Service Level Agreement will be less likely to occur in the future. |
5.6 |
If a matter is referred to the JSC pursuant to Section 5.4 and despite implementation of the JSCs recommendations, a party consistently fails to meet in a material respect its |
6
obligations under the Service Level Agreement that were the subject of the referral or any revised obligations agreed as a result of the referral (other than for reasons outside the partys reasonable control), then the matter shall be referred to the senior executive of the Global Investor Services Group of State Street and the First Vice President MLIM Operations (or their equivalents following any reorganization) (together the Executive Officers) for resolution. The referral shall expressly cite this Section 5 and state that the relevant Fund(s) or State Street, as the case may be, may exercise its right to terminate this Agreement should the matter not be resolved. |
5.7 | If the Executive Officers are unable to resolve the matter within thirty (30) Business Days of the referral, and if (but only if) all relevant parties agree in writing within five (5) Business Days of the aforementioned deadline, the matter may be submitted to a mutually-acceptable Professional Mediator (as defined in Section 26.5 below) to attempt to facilitate a resolution within thirty (30) Business Days of the referral. Any such mediation shall be conducted in accordance with the provisions of Sections 26.4 through 26.6 below. |
5.8 | If either (i) following a failure by the Executive Officers to resolve the matter, the relevant Fund(s) and State Street do not agree on use of a Professional Mediator or (ii) the matter has not been resolved within thirty (30) Business Days of the conclusion of such mediation effort, then the relevant Fund(s) or State Street, as the case may be, shall be entitled to terminate this Agreement in accordance with Sections 20.4.3 and 20.6.4, respectively. |
5.9 | Nothing in this Section 5 shall limit the liability of State Street for any failure to perform the Services in accordance with the standard of care set forth in Section 11 and the terms of this Agreement as distinct from a failure by State Street to meet key performance indicators or delivery benchmarks of the Service Level Agreement. The fact that the Service Level Agreement performance metrics have been met shall not excuse State Street from liability that it would otherwise have under the terms of this Agreement. |
6. | NECESSARY INFORMATION |
6.1 | Each Fund will promptly deliver to State Street copies of each of the following documents and all future amendments and supplements thereto, if any: |
6.1.1 | The Funds Charter Documents; |
6.1.2 | The Funds Prospectus; |
6.1.3 | Certified copies of the resolutions of the Board authorizing (1) the Fund to enter into this Agreement and (2) certain individuals on behalf of the Fund to (a) give Proper Instructions to State Street pursuant to this Agreement and (b) sign checks and pay expenses; |
6.1.4 | A copy of the investment advisory agreement between the Fund and its investment adviser; and |
7
6.1.5 | Such other certificates, documents or opinions which State Street may, in its reasonable discretion, deem necessary or appropriate in the proper performance of its duties. |
6.2 | Each Fund shall provide or cause to be provided to State Street such additional data and information as State Street may reasonably require in order to discharge its duties under this Agreement, including, without limitation, the information detailed in the Service Level Agreement. State Street shall have no liability for the failure to provide, any error in the provision of, or any delay in providing, any of the Services to the extent the provision of such Services is dependent upon receipt of the aforesaid information and the same has not been provided in a materially complete, accurate and timely manner. For avoidance of doubt, the preceding sentence shall not relieve State Street of liability to the extent any such loss or expense arises from its own negligence, bad faith, fraud, willful default or willful misconduct in the discharge of its duties hereunder. |
6.3 | Each Fund shall assure that its custodian and other service providers make available to State Street such information in respect of the Fund as State Street may reasonably require for the performance of the Services. |
6.4 | Each Fund shall use all reasonable endeavors to ensure that any information provided or caused to be provided to State Street pursuant to this Agreement, including the Service Level Agreement, shall be provided in a complete, accurate and timely manner so as to enable State Street to duly render the Services. |
6.5 | In the course of discharging its duties hereunder, State Street may rely on the information provided to it by or on behalf of a Fund or by any persons authorized by a Fund including, without limitation, any other service providers to the Fund or any Authorized Price Sources. |
6.6 | Each Fund acknowledges and agrees that except as otherwise expressly set forth in the Service Level Agreement, State Street shall have no responsibility for, or duty to review, confirm or otherwise perform any investigation as to the completeness, accuracy or sufficiency of any information provided to it by the Fund, any persons authorized by the Fund or any other service providers to the Fund, including, without limitation, any Authorized Price Sources and shall be without liability for any loss, liability, claim, expense or damage suffered or incurred by any person as a result of State Street having relied upon and utilized such information in good faith. For avoidance of doubt, the preceding sentence shall not relieve State Street of liability to the extent any such loss or expense arises from its own negligence, bad faith, fraud, willful default or willful misconduct in the discharge of its duties hereunder. State Street will promptly notify a Fund in the event it becomes aware that any information received by it is incomplete, inaccurate or insufficient or in the event of a failure or delay by any party to provide information required by State Street to discharge its duties under this Agreement. |
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7. | RECONCILIATION |
7.1 | Each Fund represents and warrants to State Street that it has completed or caused to be completed a full reconciliation of the Historic Fund Records and except as otherwise disclosed in writing to State Street such records are accurate and complete in all material respects. |
7.2 | To the extent the Historic Fund Records remain unreconciled as of the effective date of this Agreement, each Fund shall ensure that the outstanding items are reconciled as soon as practicable or otherwise promptly redressed, in each case at the expense of the Fund. State Street shall provide all reasonable assistance to each Fund (at the expense of the Fund) to reconcile any outstanding items. |
7.3 | State Street shall have no liability to a Fund or any other person and shall be indemnified and held harmless by each Fund from and against any loss, liability, damage, claim, cost or expense resulting from or caused by its good faith reliance on the accuracy and completeness of the Historic Fund Records. |
8. | PROPER INSTRUCTIONS |
8.1 | Each Fund shall provide State Street with an incumbency certificate specifying the names, specimen signatures and powers of all Authorized Persons in respect of the Fund. State Street may rely upon the identity and authority of such persons until it receives written notice from the relevant Fund to the contrary. |
8.2 | Each Fund will give State Street all necessary instructions to enable State Street to fulfill its obligations under this Agreement at such times and in such form as mutually agreed upon, including, without limitation, as State Street may request. |
8.3 | State Street shall have no responsibility or liability to a Fund and shall be indemnified and held harmless by the Fund, if a subsequent written confirmation of an oral Proper Instruction fails to conform to the oral instructions received by State Street. State Street shall promptly seek written confirmation of any oral instruction received by it. |
8.4 | State Street shall have no obligation to act in accordance with purported instructions to the extent they conflict with applicable law or regulation, provided that State Street shall not be under any obligation to ensure that any instruction received by it would not contravene any such laws or regulations. |
8.5 | State Street shall not be liable for any loss resulting from a delay while it obtains clarification of any Proper Instructions which it reasonably deems to be incomplete or unclear, provided that it promptly seeks such clarification. |
8.6 | State Street shall be held harmless by a Fund in acting upon any instruction, notice, request, consent, certificate or instrument reasonably believed by it to be genuine and to be signed or otherwise given by the proper party or parties. |
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8.7 | If a Fund instructs State Street to take any action (including, without limitation, the initiation of legal proceedings) which may involve the payment of money or liability on the part of State Street, State Street may refrain from acting in accordance with such instruction until it has received indemnity, security or both reasonably satisfactory to it and sufficient to hold it harmless from and against any loss, liability or expense which State Street may incur as a result of taking such action. |
9. | PROFESSIONAL ADVICE |
When deemed necessary for the proper performance of its duties under this Agreement with respect to specific and non-routine matters involving one or more of the Funds, State Street may, with the consent of a Fund (which consent shall not be unreasonably withheld), seek legal, tax, financial, administrative or other advice of a reputable professional adviser and State Street shall be reimbursed in respect of any costs and expenses properly incurred in obtaining and receiving any such advice. State Street shall have no liability to a Fund for any loss, liability, claim, cost, expense, tax or assessment arising as a direct or indirect result of having relied on such advice in good faith.
10. | COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS |
Each Fund assumes responsibility for complying with all securities, tax, commodities and other laws, rules and regulations applicable to it in the conduct of its business.
11. | STANDARD OF CARE; LIMITATION OF LIABILITY |
11.1 | State Street shall at all times exercise reasonable care and diligence and act in good faith in the performance of its duties hereunder, provided, however, that State Street shall be without liability to any Fund or any agent thereof for any loss, liability, damage, claim, cost or expense unless caused by its own fraud, willful default, negligence or willful misconduct or that of its agents, delegates or employees. State Street shall be responsible for the performance of only such duties as are explicitly set forth in this Agreement and shall have no responsibility for the actions or activities of any other party (save its agents, delegates or employees), including other service providers to a Fund. |
11.2 | Each Fund, severally but not jointly, hereby indemnifies and secures harmless (to the maximum extent permitted by law) State Street from and against all claims, actions, costs, charges, losses, damages and expenses (including without limitation legal fees and amounts reasonably paid in settlement) which State Street may incur or sustain (other than by reason of State Streets bad faith, willful default or negligence or that of its agents, delegates or employees) in connection with the performance of its duties for that particular Fund under this Agreement or otherwise arising from any act or omission of that particular Fund or any other person (including any predecessor service provider to the Fund) prior to the effective date of this Agreement. |
11.3 | If State Street (the Indemnified Party) shall seek indemnification from a Fund (the Indemnifying Party) in respect of a claim or liability asserted by a third party, the Indemnified Party shall give written notice thereof to the Indemnifying Party promptly after it receives notice of the claim or liability being asserted, but the failure to do so shall |
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not relieve the Indemnifying Party from any liability except to the extent that it is prejudiced by the failure or delay in giving such notice. Such notice shall summarize the basis for the claim for indemnification and any claim or liability being asserted by the third party. Within 15 days after receiving such notice, the Indemnifying Party shall give written notice to the Indemnified Party stating whether it disputes the claim for indemnification and whether it will defend against the third-party claim or liability at its own cost and expense. If the Indemnifying Party fails to give notice that it disputes an indemnification claim within 15 days after receipt of notice thereof, it shall be deemed to have accepted and agreed to the claim. The Indemnifying Party shall be entitled to direct the defense against the third-party claim or liability with counsel selected by it (subject to the consent of the Indemnified Party, which consent shall not be unreasonably withheld) as long as the Indemnifying Party is conducting a good faith and diligent defense. The Indemnified Party shall at all times have the right to fully participate in the defense of a third-party claim or liability at its own expense directly or through counsel. If no such notice of intent to dispute and defend a third-party claim or liability is given by the Indemnifying Party, or if such good faith and diligent defense is not being or ceases to be conducted by the Indemnifying Party, the Indemnified Party shall have the right, at the expense of the Indemnifying Party, to undertake the defense of such claim or liability (with counsel selected by the Indemnified Party), and to compromise or settle it, exercising reasonable business judgment. Except as otherwise provided in the immediately preceding sentence, neither the Indemnified Party nor the Indemnifying Party shall settle or confess any claim or make any compromise in any case in which the Indemnifying Party will be asked to indemnify the Indemnified Party, except with the prior written consent of both parties. The Indemnified Party shall at all times make available such information and assistance as the Indemnifying Party may reasonably request and shall cooperate with the Indemnifying Party in such defense, at the expense of the Indemnifying Party. |
11.4 | In no event shall any party be liable for any loss arising by reason of the occurrence of a Force Majeure Event (as defined in Section 12) which prevents, hinders or delays it from or in performing its obligations under this Agreement. |
11.5 | State Street shall not be liable for any liabilities, damages, losses, claims, taxes, duties, costs or expenses (including, without limitation, legal fees) whatsoever incurred or suffered by a Fund at any time as a result of the failure of the Fund or any other person (other than State Street, its employees, agents or delegates) to comply with the laws or regulations of any country or jurisdiction. For avoidance of doubt, the preceding sentence shall not relieve State Street of liability to the extent such other persons failure to comply with laws or regulations is the direct result of State Streets negligence, bad faith, fraud, willful default or willful misconduct in the discharge of its duties hereunder. |
11.6 | The provisions herein regarding indemnification, liability and limits thereon shall survive following the expiration or termination of this Agreement to the extent relating to any claim or right of action arising in connection with the performance of this Agreement and each Fund and State Street shall enter into such documents as shall be necessary to ensure the survival of the same. |
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11.7 | Each Fund acknowledges that except as otherwise expressly set forth in this Agreement, State Streets duties under this Agreement do not include any obligation to monitor the compliance of the Fund or any other person whatsoever with any restriction or guideline imposed by its Constitutive Documents or by law or regulation or otherwise with regard to the investment of the assets of the Fund. In no event shall State Street have any duty to enforce compliance by the Fund or any other person whatsoever with any such restrictions or guidelines. |
11.8 | Each Fund acknowledges and agrees that State Street shall provide Compliance Monitoring Services, if any, on a contractual basis only in accordance with the terms of the Compliance Monitoring Services Addendum attached hereto as Exhibit 2. The Compliance Monitoring Services are provided by State Street as a supplement to and not in place or in lieu of a Funds own compliance program and/or that of the investment advisers of the Fund. |
11.9 | State Street shall have no liability to a Fund or otherwise for any loss or liability resulting from State Streets performance or non-performance of the Compliance Monitoring Services except as expressly set forth in the Compliance Monitoring Services Addendum. |
11.10 | In no event shall State Street or any Fund be liable for any special, indirect, incidental, punitive or consequential damages of any kind whatsoever, even if advised of the possibility of such damages. The limitation on liability imposed by this Section 11.10 shall not be construed to relieve State Street of liability to a Fund in circumstances where (i) it is otherwise liable to the Fund under the terms of this Agreement for losses resulting from an inaccurate Net Asset Value calculation and (ii) the liability of the Fund arises from its obligation to compensate shareholders for direct loss resulting from the purchase or redemption of shares at such inaccurate Net Asset Value. |
12. | FORCE MAJEURE |
12.1 | If a party is prevented, hindered or delayed from or in performing any of its obligations under this Agreement by a Force Majeure Event (as defined below) then: |
12.1.1 | that partys obligations under this Agreement shall be suspended for so long as the Force Majeure Event continues and to the extent that party is so prevented, hindered or delayed; |
12.1.2 | as soon as reasonably possible after commencement of the Force Majeure Event that party shall notify the other party in writing of the occurrence of the Force Majeure Event, the date of commencement of the Force Majeure Event and the effects of the Force Majeure Event on its ability to perform its obligations under this Agreement; and |
12.1.3 | as soon as reasonably possible after the cessation of the Force Majeure Event that party shall notify the other party in writing of the cessation of the Force Majeure Event and shall resume performance of its obligations under this Agreement. |
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12.2 | For the purposes of this Section 12 and Section 11.4, Force Majeure Event means any event beyond the reasonable control of a party including, without limitation, acts of God, war damage, enemy action, riot, civil commotion, rebellion, act of any government or any other competent authority or compliance with any law or governmental order, rule, regulation or direction. For avoidance of doubt, provided that State Street has exercised reasonable care and diligence and complied with its obligations under Section 12.3 and 13 below, a Force Majeure Event shall include any failure or malfunction of any telecommunications, computer or other electrical, mechanical or technological application, service or system to the extent any such failure is beyond State Streets reasonable control. |
12.3 | Each party hereto shall use all reasonable efforts to mitigate the effects of any Force Majeure Event. |
13. | CONTINGENCY MEASURES |
13.1 | State Street shall maintain in a separate and safe place additional copies of all records required to be maintained pursuant to this Agreement or additional tapes, disks or other sources of information necessary to reproduce all such records. |
13.2 | Within twelve (12) months of the date hereof, State Street shall establish and maintain a disaster recovery back-up facility available for its use in providing the Services required hereunder in the event circumstances beyond State Streets control result in State Street not being able to process the necessary work at its principal facility. State Street shall, from time to time, upon request from a Fund provide written evidence and details of its arrangement with respect to such back-up facility. State Street further agrees to provide each Fund from time to time on request with a copy of the disaster recovery and contingency plans of State Street and to make its staff available to discuss such plans on request. Nothing in this Section shall relieve State Street of any liability that it might otherwise have under this Agreement arising from or as a result of its fraud, willful default, negligence or willful misconduct in the performance of its duties hereunder, provided, however, that the aggregate liability of State Street to any Fund in relation to the maintenance of a disaster recovery back-up facility during the initial twelve (12) months of this Agreement shall not at any time exceed an amount equal to ten (10) per cent of the fee paid or accrued and payable by such Fund (as of the date of the liability) in respect of the accounting and administrative services provided pursuant to the Agreement. |
13.3 | State Street shall at all times employ a then current version of one of the leading commercially available virus detection software programs to test the on-site hardware and software applications utilized by it to deliver the Services to determine that such hardware and software does not contain any computer code designed to disrupt, disable, harm, or otherwise impede operation. With respect to any applications utilized on a remote basis, State Street shall use commercially reasonable efforts to obtain a similar representation or commitment from the third party provider of such application. |
13.4 |
State Street shall at its expense retain a firm of independent auditors to perform an annual audit of the internal accounting controls and procedures employed by State Street in the |
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performance of the Services and to issue a detailed report thereon and shall provide to each Fund a copy of such report within ten (10) Business Days of its issue by the independent auditors. The first such annual audit shall be carried out in the fourth quarter of 2001. State Street shall also allow each Funds independent auditors and the corresponding personnel of each Funds investment adviser reasonable access to perform their own audit of State Streets internal accounting controls, provided, however, that the frequency and scope of such audits shall be as agreed by the JSC from time to time. |
13.5 | Upon request of a Fund, State Street shall from time to time as appropriate, furnish to such Fund a letter setting forth the insurance coverage maintained by State Street, any changes in such coverage which may have occurred from the date of the last such request and any claim relating to the Fund which State Street may have made under such insurance. |
14. | FEES AND EXPENSES |
14.1 | In consideration of the provision of the Services by State Street, each Fund (or Merrill Lynch Investment Managers, L.P., for those Funds identified on Schedule 1 hereto as Funds for which its investment adviser pays accounting costs) shall pay to State Street such fees and shall reimburse State Street such expenses as may be agreed by the parties from time to time in a separate written fee schedule. |
14.2 | Each Fund will bear all expenses that are incurred in its operation and not specifically assumed by State Street. Expenses to be borne by each 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 State Street under this Agreement); cost of any services contracted for by the Fund directly from parties other than State Street; 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 independent accountants 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 typesetting and printing of prospectuses; cost of preparation and filing of the Funds tax returns, Form N-1A or N-2, 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; and fidelity bond and directors and officers liability insurance. |
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15. | JOINT SERVICES COMMITTEE |
15.1 | Following the signing of this Agreement, State Street and the Funds, in conjunction with MLIM and Princeton Administrators, L.P. (collectively, the MLIM Group) which have entered into separate Administrative Services Agreements with State Street, shall establish a Joint Services Committee (the JSC) comprised of an equal number of representatives appointed to represent State Street and the MLIM Group (the Committee Members). For purposes of this section, the MLIM Group shall be treated as one entity in terms of their ability to appoint representatives to the JSC. Except as otherwise agreed, a meeting shall not be validly constituted unless an equal number of representatives from the MLIM Group and State Street are present. The JSC shall continue in existence after termination of this Agreement until such time as all activities performed by State Street under this Agreement have been transferred to a successor service provider. All parties shall be entitled from time to time to replace any of their representatives (and shall notify one another of their intention to do so). The JSC shall monitor the progress and performance of this Agreement in relation to the Services and shall meet on a regular basis no less frequently than quarterly unless otherwise agreed. Each of State Street and the MLIM Group shall also be entitled to convene meetings of the JSC by giving notice to all members of the JSC. A representative of the Funds shall chair all meetings of the JSC. The minutes shall be kept by State Street and, subject to review of all parties, issued to the MLIM Group. The JSC shall establish its own procedures and each party shall use all reasonable endeavors to meet the actions agreed at those meetings and cooperate with the other to provide personnel, resources and actions to meet their obligations under this Agreement. |
15.2 | State Street shall provide to the JSC and the representative(s) of the MLIM Group a monthly report in such form as the Committee Members shall agree (the Key Performance Indicator Report) showing the following performance levels achieved by State Street in providing the relevant Services including, but not limited to: |
15.2.1 | the average performance in the previous 12 months; |
15.2.2 | the month with the highest and lowest performance levels in the previous 12 months; and |
15.2.3 | the performance in each month since the previous meeting. |
15.3 | The JSC shall be responsible for: |
15.3.1 | determining whether a Service is an Existing Service or a New Service and, for this purpose, a Service shall be determined to be an Existing Service if, although that Service is not described in a Service Level Agreement, it is a service which a Fund can demonstrate (to the reasonable satisfaction of State Street) has been provided or made available prior to the date of this Agreement by MLIM to one or more of the Funds. |
15.3.2 | oversight of the performance of the Services; |
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15.3.3 | oversight of the performance by State Street, each Fund and third parties of their duties under the Service Level Agreement; |
15.3.4 | determining when and where revisions need to be made to this Agreement and to the Service Level Agreement(s) to more adequately meet or address the service requirements of the Funds from time to time; and |
15.3.5 | determining changes to be made in the Services as a result of changes in any law, rule or regulation applicable to the Funds. |
16. | REPRESENTATIONS AND WARRANTIES OF STATE STREET |
16.1 | State Street represents and warrants to each Fund that: |
16.1.1 | It is a Massachusetts trust company, duly organized and existing under the laws of The Commonwealth of Massachusetts; |
16.1.2 | It has the corporate power and authority to carry on its business in The Commonwealth of Massachusetts and the State of New Jersey; |
16.1.3 | All requisite corporate proceedings have been taken to authorize it to enter into and perform this Agreement; |
16.1.4 | No legal or administrative proceedings have been instituted or threatened which would impair State Streets ability to perform its duties and obligations under this Agreement; and |
16.1.5 | Its entrance into this Agreement shall not cause a material breach or be in material conflict with any other agreement or obligation of State Street or any law or regulation applicable to it. |
17. | REPRESENTATIONS AND WARRANTIES OF THE FUNDS |
17.1 | Each Fund represents and warrants to State Street that: |
17.1.1 | It is a corporation or business trust, as the case may be, duly organized, existing and in good standing under the laws of the jurisdiction of its incorporation or establishment; |
17.1.2 | It has the requisite corporate or trust power and authority under applicable laws and by its Constitutive Documents to enter into and perform this Agreement; |
17.1.3 | All requisite proceedings have been taken to authorize it to enter into and perform this Agreement; |
17.1.4 | It is an investment company properly registered under the 1940 Act; |
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17.1.5 | A registration statement under the 1933 Act and the 1940 Act has been filed and, if the Fund is offering securities in a transaction that requires registration under the 1933 Act, will be effective and remain effective during the term of this Agreement as required by applicable law. The Fund also warrants to State Street that as of the effective date of this Agreement, all necessary filings under the securities laws of the states in which the Fund offers or sells its shares have been made; |
17.1.6 | 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 |
17.1.7 | 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. |
18. | CONFIDENTIALITY |
The parties hereto agree that each shall treat confidentially the terms and conditions of this Agreement and all information provided by each party to the other regarding its business and operations. All confidential information provided by a party hereto, including nonpublic personal information pursuant to Regulation S-P of the Securities and Exchange Commission, shall be used by any other party hereto solely for the purpose of rendering services pursuant to this Agreement and, except as may be required in carrying out this Agreement, shall not be disclosed to any third party without the prior consent of such provident party. The foregoing shall not be applicable to any information that is publicly available when provided or thereafter becomes publicly available other than through a breach of this Agreement, or that is required to be disclosed by any regulatory authority, any auditor or legal counsel of the parties hereto, by judicial or administrative process or otherwise by applicable law or regulation.
19. | RECORDS |
19.1 | State Street is authorized to maintain all accounts, registers, corporate books and other documents and information on magnetic tape or disc or in accordance with any other mechanical or electronic system provided that they are capable of being reproduced in legible form in accordance with applicable laws. |
19.2 | In compliance with the requirements of Rule 31a-3 under the 1940 Act, State Street agrees that all records which it maintains for a 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. State Street further agrees that all records which it maintains for a Fund pursuant to Rule 3la-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. State Street shall have the right to retain copies of such records subject to observance of its confidentiality obligations under this Agreement. |
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20. | TERM; TERMINATION |
20.1 | This Agreement shall become effective as of the date of its execution and delivery and shall continue in full force and effect for an initial term of five (5) years (the Initial Term) with automatic one year renewals from year to year thereafter unless otherwise terminated in accordance with this provisions of this Section 20. |
20.2 | Upon termination of this Agreement, each Fund shall pay to State Street upon demand, such fees and reimbursable costs, expenses and disbursements as may be due as of the date of such termination. |
20.3 | State Street shall be entitled to resign its appointment hereunder in respect of a Fund: |
20.3.1 | following expiration of the Initial Term, by giving not less than 270 days notice in writing to the Fund to expire at any time, provided, however, that State Street will use reasonable efforts in assisting the Fund to select a successor and if, after the expiration of the notice period, a new administrative services provider has not been appointed or is not ready to assume its duties, State Street shall continue its appointment hereunder for such additional period as may be mutually agreed between State Street and the Fund. |
20.3.2 | with immediate effect at any time prior to the expiry of the Initial Term if: |
20.3.2.1 | such Fund shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against the Fund seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, or other similar official for it or for any substantial part of its property; or the Fund shall take any corporate action to authorize any of the preceding actions, provided, however, that State Street may not resign its position on the basis that a Fund is being liquidated or reorganized for reasons other than bankruptcy or insolvency; or |
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20.5 | In the event that a Fund terminates one or more series of shares with respect to which State Street renders Services or a Fund terminates State Streets appointment pursuant to Section 20.4.2 above, it shall so notify State Street in writing. |
20.6 | Following any termination of this Agreement, State Street and each Fund agree to provide their committed cooperation to effect an orderly transition of State Streets duties and responsibilities hereunder to a new administrative services provider(s) selected by the Fund or Funds as soon as may be reasonably practicable. |
20.7 | In the event this Agreement is terminated by one or more of the Funds pursuant to Section 20.4.2.4 or by State Street pursuant to Section 20.3.2.3, State Street shall pay one-half of the direct costs and expenses incurred by State Street and the Fund(s) in connection with such termination and the conversion to a successor administrative services provider and the Fund or Funds involved shall arrange for the payment of the balance. |
21. | 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 a Fund c/o Merrill Lynch Investment Managers, L.P., 500 College Road East, Plainsboro, NJ 08536, Attn: Treasurer, fax (609) 282-7231; and if to State Street: State Street Bank and Trust Company, 500 College Road East, Plainsboro, NJ 08536, Attn: Donald DeMarco, fax: 609-282-9239.
22. | FURTHER ASSURANCE |
Each party to this Agreement shall do and execute or procure to be done and executed all necessary acts, deeds, documents and things reasonably in its power to give effect to this Agreement.
23. | NON-EXCLUSIVITY |
23.1 | The services of State Street to the Funds hereunder are not to be deemed exclusive and State Street and any affiliate shall be free to render similar services to others and to retain for its own use and benefit all fees or other monies payable thereby and neither State Street nor any affiliate shall be deemed to be affected with notice of or to be under any duty to disclose to the Funds any fact or thing which comes to the notice of State Street or that affiliate or any servant or agent of State Street or that affiliate in the course of State Street rendering similar services to others or in the course of its business in any other capacity or in any manner whatsoever otherwise than in the course of carrying out its duties hereunder. |
23.2 | Nothing herein contained shall prevent State Street or any affiliate from buying holding and dealing in any assets upon its own account or the account of others notwithstanding that similar assets may be held by State Street for the account of a Fund. |
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24. | NO PARTNERSHIP OR AGENCY |
Nothing in this Agreement shall be construed as creating a partnership between State Street and a Fund or as constituting any party the agent of another party (save as expressly set out in this Agreement) for any purpose whatsoever and no party shall have the authority or power to bind another party or to contract in the name of or create a liability against another party in any way or for any purpose.
25. | NON-WAIVER; FORBEARANCE |
The failure of a party to insist upon strict adherence to any term of this Agreement on any occasion or the failure of a party to exercise or any delay in exercising a right or remedy under this Agreement (including any right implied by law) shall not constitute a waiver of any such term, right or remedy or a waiver of any other rights or remedies and no single or partial exercise of any right or remedy under this Agreement shall prevent any further exercise of the right or remedy or the exercise of any other right or remedy.
26. | DISPUTES |
26.1 | The parties desire to prevent both disputes and unanticipated issues arising under or relating to this Agreement. The parties further desire to resolve such disputes and unanticipated issues that nevertheless do occur by use of processes that are intended to avoid and prevent delaying or impairing in any way the performance by all parties of their respective obligations under this Agreement. Therefore, the parties have agreed to utilize the processes specified below in this Section 26 to resolve certain disputes, as described below, arising under or relating to this Agreement. |
26.2 | The parties agree that any issue(s) which may arise in connection with the Agreement shall initially be referred to the JSC, which shall establish a deadline for resolution of each matter submitted to it. |
26.3 | If the JSC has not fully resolved such issue(s) by the stated deadline, then the matter shall be referred to the Executive Officers for resolution. |
26.4 | If the Executive Officers are unable to resolve the matter within thirty (30) Business Days of the referral, and if (but only if) all relevant parties agree in writing within five (5) Business Days of the aforementioned deadline, then a mutually-acceptable Professional Mediator (as defined below) may be utilized to review the open issue(s) and attempt to facilitate a resolution within thirty (30) Business Days of referral of the issue(s). The parties will mutually determine the location, date, duration, and process for any such mediation effort, which shall be in all respects advisory to, and not binding on, the parties. State Street shall pay one-half of the costs of the Professional Mediator and the Fund or Funds involved shall arrange for the payment of the balance. |
26.5 | To be considered as the Professional Mediator, an individual must have experience in the investment and/or administrative services industry/ies (preferably both). Any individual employed during the last two (2) calendar years by any party or any partys current primary legal, accounting, or consulting firm may not be utilized. |
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26.6 | In order to enable and facilitate candor and completeness during, and the optimal potential benefits of, the mediation process, both (1) the parties respective contentions, communications, documents, and/or submissions, if any, during the mediation, and (2) the analysis, comments, and/or recommendations of the Professional Mediator, if any (x) will remain confidential among the parties (to the extent permissible under applicable law, State Street and each Fund hereby acknowledging that State laws and/or regulations may require the public availability of some or all information and documents relating to this Agreement) and (y) may not be asserted, admitted, or otherwise utilized by any party as evidence against another party in any later or simultaneous mediation, binding arbitration, litigation, or otherwise. |
26.7 | If either (i) following a failure by the Executive Officers to resolve the matter, the relevant parties do not agree on use of a Professional Mediator or (ii) the open issue(s) have not been resolved within thirty (30) Business Days of the conclusion of such mediation effort, then resolution between the parties will be deemed to have failed and each party shall be free to enforce of its legal rights under this Agreement in such manner as it shall deem fit. |
27. | REMEDIES ARE CUMULATIVE |
Except as expressly provided in this Agreement, the rights and remedies contained in this Agreement are cumulative and not exclusive of any rights or remedies provided by law.
28. | 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 each agree that any such reproduction shall be admissible in evidence as the original itself, subject to any challenge on the grounds that the reproduction has been materially altered so that it does not conform to the terms of the original agreement, 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.
29. | VARIATION OF AGREEMENT |
No variation, amendment or modification of this Agreement shall be valid unless it is in writing and signed for or on behalf of each party hereto.
30. | ASSIGNABILITY |
This Agreement shall not be assigned by either State Street or a Fund without the prior consent in writing of the other party, except that State Street may 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 State Street.
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31. | SUCCESSORS |
This Agreement shall be binding on and shall inure to the benefit of the Fund and State Street and their respective successors and permitted assigns.
32. | SEVERABILITY |
In the event that any part of this Agreement shall be determined to be void or unenforceable for any reason, the remainder of this Agreement shall be unaffected thereby (unless the purpose of the agreement is substantially frustrated by such determination), and shall be enforceable in accordance with the remainder of its terms as if the void or unenforceable part were not part hereof.
33. | COUNTERPARTS |
This Agreement may be executed in any number of counterparts, each of which shall, when executed and delivered be an original, but all the counterparts taken together shall constitute one and the same agreement.
34. | LIMITATION ON LIABILITY OF TRUSTEES |
In relation to each Fund which is a business trust, this Agreement is executed and made by the Trustees of the Fund not individually, but as trustees under the Declarations of Trust of the Fund and the obligations of this Agreement are not binding upon any of such Trustees or upon any of the shareholders of the Fund individually, but bind only the trust estate of the Fund.
35. | GOVERNING LAW |
This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to the conflicts of law principles thereof.
36. | ENTIRE AGREEMENT |
This Agreement constitutes the entire agreement between State Street and each Fund on the subject matter hereof and supersedes and terminates as of the date hereof, all prior oral or written agreements, arrangements or understandings between the parties.
[Remainder of Page Intentionally Blank]
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SIGNATURE PAGE
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.
STATE STREET BANK AND TRUST COMPANY
By: |
/s/ Donald DeMarco |
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Name: Donald DeMarco Title: Senior Vice President |
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TERRY K. GLENN, | ||
President | ||
for and on behalf of the Funds listed on Schedule I hereto | ||
/s/ Terry K. Glenn |
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EXHIBIT 1
Instrument of Accession
Reference is hereby made to the Administrative Services Agreement (the Agreement) dated December 29, 2000 by and between STATE STREET BANK AND TRUST COMPANY (State Street) and each entity listed on Schedule 1 thereto or which has or shall become a signatory thereto by execution of an instrument of accession substantially in the form hereof.
In order that it may become a party to the aforesaid Agreement, including, without limitation, any and all schedules and exhibits thereto, [Fund Name] agrees and binds itself to the terms and conditions thereof and acknowledges that by its execution and delivery of this Instrument it shall assume all of the obligations and shall be entitled to all of the rights of a Fund (as such term is defined in the Agreement), as if it were an original party thereto.
This Instrument of Accession shall take effect and shall become a part of said Agreement immediately upon its execution and delivery.
Executed as of the date set forth below under the laws of the State of New York.
[NAME OF FUND]
By: |
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Name: | ||
Title: | ||
Accepted and agreed to: | ||
STATE STREET BANK AND TRUST COMPANY | ||
By: |
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Name: | ||
Title: | ||
Date: |
Exh. 1 - 1