N-2

Filed with the Securities and Exchange Commission on January 26, 2009

1933 Act File No. 33-
1940 Act File No. 811-02201

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM N-2

(Check Appropriate Box or Boxes)

þ REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

o Pre-Effective Amendment No.

o Post-Effective Amendment No.

and/or

þ REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940

þ Amendment No. 24

Rivus Bond Fund

Exact Name of Registrant as Specified in Charter

113 King Street
Armonk, NY 10504

Address of Principal Executive Officers (Number, Street, City, State, Zip code)

Registrant’s Telephone Number, Including Area Code: 914-273-4545

Clifford D. Corso
113 King Street
Armonk, NY 10504

Name and Address (Number, Street, City, State, Zip code) of Agent For Service

Copies to:

Joseph V. Del Raso, Esq.
Pepper Hamilton LLP
3000 Two Logan Square
Philadelphia, PA 19103

Approximate Date of Proposed Public Offering: As soon as practicable after the effective date of this Registration Statement.

If any securities being registered on this form will be offered on a delayed or continuous basis in reliance on Rule 415 under the Securities Act of 1933, other than securities offered in connection with a dividend reinvestment plan, check the following box. þ

It is proposed that this filing will become effective (check appropriate box)

þ when declared effective pursuant to section 8(c)

CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933

		Proposed	Proposed
Title of		Maximum	Maximum	Amount of
Securities Being	Amount Being	Offering Price Per	Aggregate Offering	Registration
Registered	Registered	Unit	Price(1)	Fee(2)
Shares of Beneficial Interest	1,635,893	$15.48	$25,323,624	$995.22

(1)	As calculated pursuant to Rule 457(c) under the Securities Act of 1933, as amended. Based on the average of the high and low sales prices reported on the New York Stock Exchange on January 22, 2009.
(2)	Estimated solely for the purpose of calculating the registration fee.

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 that specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until this Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

This Prospectus and the information contained herein are subject to completion and amendment. Under no circumstances shall this Prospectus constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the within described securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification thereof under the laws of such jurisdiction.

PRELIMINARY PROSPECTUS DATED ___, 2009

PROSPECTUS

RIVUS BOND FUND

[1,635,893] SHARES OF BENEFICIAL INTEREST

     Rivus Bond Fund (the “Fund”) is issuing transferable rights (“Rights”) to its shareholders. You will receive one Right for each outstanding share of the Fund (“Shares”) you own on                     , 2009 (the “Record Date”). Rights holders will be entitled to subscribe for new Shares of the Fund (the “Primary Subscription”). For every three Rights that you own, you may buy one new Share (the “Rights Offering”). The number of Rights issued to a shareholder on the Record Date will be rounded up to the nearest number of Rights evenly divisible by three. Shareholders on the Record Date who have fully exercised their Primary Subscription may purchase Shares not acquired by other shareholders in the Rights Offering (the “Over-Subscription Privilege”). The Rights Offering will expire at 5:00 p.m., Eastern Time on                                         , 2009 (the “Expiration Date”), unless the Rights Offering is extended as discussed in this prospectus. After the expiration of the period beginning on the Record Date and ending on the Expiration Date (the “Subscription Period”), Boenning & Scattergood, Inc. (the “Dealer Manager”) may offer Shares not subscribed for under the Rights Offering to the public at the Subscription Price or to other dealers at the Subscription Price less a selling concession, which offering together with the Rights Offering is hereinafter referred to as the “Offering.”

     The Rights are transferable and will be listed for trading on the New York Stock Exchange (“NYSE”) under the symbol “[BDF RT].” The Shares are also listed, and the Shares issued pursuant to this Offering will be listed on the NYSE under the symbol “BDF.” On                     , 2009 (the last date prior to the Shares trading ex-Rights), the last reported net asset value (“NAV”) per Share was $[___] and the last reported sales price per Share on the NYSE was $[___]. The subscription price per Share (the “Subscription Price”) will be [___]% of the NAV on the date of the expiration of the Subscription Period (the “Pricing Date”).

     Shareholders who choose to exercise their Rights will not know the Subscription Price per Share at the time they exercise such Rights since the close of the Rights Offering will be prior to the availability of the Fund’s NAV and other relevant market information on the Pricing Date. Once you subscribe for your new Shares and the Fund receives payment or guarantee of payment, you will not be able to change your investment decision. The Rights Offering will expire at 5:00 p.m., Eastern Time on                                         , 2009 (the “Expiration Date”), unless the Rights Offering is extended as discussed in this prospectus.

     The Fund is a diversified, closed-end management investment company registered under the Investment Company Act of 1940 and organized as a Delaware statutory trust. The Fund was initially organized as a Delaware corporation on June 7, 1971 and converted to a Delaware statutory trust on June 13, 2006. Its investment objective is to seek a high rate of return, primarily from interest income and trading activity, from a portfolio principally consisting of debt securities. Under normal circumstances, the Fund will invest at least 80% of its total assets in debt securities. An investment in the Fund is not appropriate for all investors. No assurances can be given that the Fund’s objective will be achieved.

     For a discussion of certain risk factors and special considerations with respect to owning Shares, see “Risk Factors and Special Considerations” on page ___of this prospectus.

     Neither the Securities and Exchange Commission (“SEC”) nor any state securities commission has approved or disapproved these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

     Shareholders who do not exercise their Rights should expect that they will, at the completion of the Offering, own a smaller proportional interest in the Fund than if they had exercised their Rights. As a result of the Offering you will experience an immediate dilution, which could be substantial, of the aggregate NAV of your Shares. This is because the Subscription Price per Share or the net proceeds to the Fund for each new Share sold (or both) will be less than the Fund’s NAV per Share on the Expiration Date. The Fund cannot

state precisely the extent of this dilution at this time because the Fund does not know what the NAV or market value per Share will be on the Expiration Date or what proportion of the Rights will be exercised.

     This prospectus sets forth concisely certain information about the Fund that a prospective investor should know before investing. Investors are advised to read and retain it for future reference. A Statement of Additional Information dated                                         , 2009 (the “SAI”) containing additional information about the Fund has been filed with the SEC and is incorporated by reference in its entirety into this prospectus. A copy of the SAI, the table of contents of which appears on page ___of this prospectus, may be obtained without charge by contacting the Fund toll free at (800) 331-1710.

	Estimated Subscription		Estimated Proceeds to the
	Price(1)	Estimated Sales Load (2)	Fund (3)
Per Share		3.75%
Total		3.75%

(1)	Since the Subscription Price will not be determined until after printing and distribution of this prospectus, the Subscription Price above is estimated based on the NAV of a Share of the Fund on ___, 2009 and applying the pricing formula set forth on the cover page of this prospectus and described below under “Subscription Price” (i.e., ___% of the NAV on ___, 2009 (the “Estimated Subscription Price”). See “Subscription Price” and “Payment For Shares” below.
(2)	In connection with the Rights Offering, the Fund has agreed to pay the Dealer Manager a fee for its marketing and soliciting services equal to an aggregate of ___% of the aggregate Subscription Price for the Shares issued pursuant to the Rights Offering and to reimburse the Dealer Manager for out-of-pocket expenses up to $___. The Dealer Manager will reallow to certain broker-dealers in the soliciting group formed by the Dealer Manager solicitation fees of ___% of the Subscription Price for Shares issued pursuant to the Rights Offering as a result of their selling efforts, subject to a maximum. The Fund has agreed to indemnify the Dealer Manager against certain liabilities including liabilities under the Securities Act of 1933 and the Investment Company Act of 1940.
	The Dealer Manager may purchase unsubscribed for Shares at the Subscription Price less a ___% discount and may resell such Shares to broker-dealers that are members of a selling group at the Subscription Price less a selling concession not in excess of ___%. The Dealer Manager may allow, and the selling members may reallow, a concession of not more than ___% to other brokers and dealers. See “Distribution Arrangements.”
(3)	Proceeds to the Fund before deduction of expenses incurred by the Fund in connection with the Offering are estimated to be $___. Amounts received by check prior to the Expiration Date will be deposited in a segregated interest-bearing account pending allocation and distribution of Shares. Interest on subscription monies will be paid to the Fund regardless of whether Shares are issued by the Fund.

     In connection with this Offering, the Dealer Manager may effect transactions which stabilize or maintain the market price of the Rights and the Shares of the Fund at levels above those which might otherwise prevail in the open market. Such transactions may be effected on the NYSE or otherwise. Such stabilizing, if commenced, may be discontinued at any time.

     The Adviser’s parent company, MBIA, Inc. and its affiliates (“Affiliated Parties”) may purchase additional Shares through the Primary Subscription and the Over-Subscription Privilege in such manner and on the same terms as other shareholders.

BOENNING & SCATTERGOOD, INC.

TABLE OF CONTENTS

	Page
PROSPECTUS SUMMARY		6
Purpose and Summary of the Offering		6
Important Terms of the Rights Offering		6
Important Dates for the Rights Offering		6
Key Elements of the Rights Offering		7
Information Regarding the Fund		10
Information Regarding the Adviser		10
Risk Factors and Special Considerations		10
Fixed Income Investment Risk		11
FEE TABLE		12
FINANCIAL HIGHLIGHTS		14
THE FUND		15
THE OFFERING		16
Terms of the Offering		16
Purpose of the Offering		17
Subscription Price		18
Over-Subscription Privilege		18
Expiration of the Rights Offering		19
Subscription Agent		19
Information Agent		19
Method of Exercising Rights		20
Payment for Shares		20
Method of Transferring Rights		21
Delivery of Certificates		22
Foreign Restrictions		22
Federal Income Tax Consequences Associated With the Rights Offering		22
USE OF PROCEEDS		25
CAPITALIZATION		25
Repurchase of Shares of Beneficial Interest		25
MANAGEMENT OF THE FUND		26
Board of Trustees		26
Investment Adviser and Portfolio Management		26
Benefit to the Adviser		27
Expenses of the Fund		27
INVESTMENT OBJECTIVE AND POLICIES		27

	Page
Investment Policies — General		27
U.S. Government Obligations		28
Repurchase Agreements		29
Short-Term Trading		29
Below Investment Grade Corporate Bonds		30
When-Issued Securities		30
Portfolio Turnover Rate		31
Investment Restrictions		31
RISK FACTORS AND SPECIAL CONSIDERATIONS		33
Credit Risk		33
Interest Rate Risk		33
Dilution		34
Risk of Market Price Discount From Net Asset Value		35
Subscription Price Risk		35
Below Investment Grade Securities		35
Reinvestment Risk		36
Mortgage-Related and Other Asset-Backed Securities Risk		36
Mortgage Market/Subprime Risk		37
Government-Entity Risk		37
Convertible Securities Risk		37
Preferred Securities Risk		37
Management Risk		38
Valuation Risk		38
Focused Investment Risk		38
Equity Securities and Related Market Risk		38
Smaller Company Risk		38
Other Investment Companies Risk		39
Inflation/Deflation Risk		39
Liquidity Risk		39
Market Disruption and Geopolitical Risk		39
Repurchase Agreements		39
DIVIDENDS AND DISTRIBUTIONS		40
DIVIDEND REINVESTMENT PLAN		40
TAXATION OF THE FUND		40
Taxation of the Fund		40
Taxation of Shareholders		41
State and Local Tax Matters		42
DETERMINATION OF NET ASSET VALUE		42
DISTRIBUTION ARRANGEMENTS		42
CUSTODIAN, TRANSFER AGENT, DIVIDEND DISBURSING AGENT AND REGISTRAR		43

	Page
LEGAL MATTERS		43
EXPERTS		43
REPORTS TO SHAREHOLDERS		43
WHERE YOU CAN FIND MORE INFORMATION		43
STATEMENT OF ADDITIONAL INFORMATION — TABLE OF CONTENTS		44
APPENDIX A — RATINGS OF CORPORATE OBLIGATIONS AND COMMERCIAL PAPER		45

PROSPECTUS SUMMARY

     This summary highlights some information that is described more fully elsewhere in this prospectus. The summary may not contain all of the information that is important to you. To understand the Offering fully you should read the entire document carefully, including the risk factors.

Purpose and Summary of the Offering

     The Board of Trustees of the Fund (the “Board”) has determined that it would be in the best interests of the Fund and its existing shareholders to increase the assets of the Fund so that the Fund may be in a better position to take advantage of investment opportunities that may arise. In addition, the Board believes that increasing the size of the Fund may lower the Fund’s expenses as a proportion of average net assets because the Fund’s fixed costs would be spread over a larger asset base. There can be no assurance, however, that an increase in the size of the Fund will lower the Fund’s expense ratio. The Board also believes that a larger number of outstanding Shares and a larger number of beneficial owners of Shares could increase the level of market interest in and visibility of the Fund and improve the trading liquidity of Shares on the NYSE. The Rights Offering seeks to reward existing shareholders by giving them the right to purchase additional Shares at a price below NAV on the Pricing Date without incurring any commission or other transaction charges. The distribution to shareholders of transferable rights, which themselves may have intrinsic value, will also afford non-subscribing shareholders the potential of receiving a cash payment upon the sale of such rights, receipt of which may be viewed as partial compensation for the economic dilution of their interests in the Fund. See “Purpose of the Offering” below. At Board meetings held on February 22, 2008, March 12, 2008, June 25, 2008 and January 20, 2009, the Board discussed at length with management and counsel to the Fund the details of a proposed rights offering. At meetings held on March 12, 2008, June 25, 2008 and January 20, 2009, the Board approved a transferable rights offering, the substantive terms of which would permit shareholders to acquire one new Share of the Fund for each three Rights held (i.e., a one-for-three rights offering) for a subscription price equal to ___% of NAV on the Pricing Date. The Fund will use its best efforts to ensure that an adequate trading market for the Rights will exist, but there is no assurance that a market for the Rights will develop.

Important Terms of the Rights Offering

Total number of Shares available for Primary Subscription and pursuant to the Over-Subscription Privilege	[1,635,893]
Number of Rights you will receive for each outstanding Share you own on the Record Date	One Right for every one Share *
Number of Shares you may purchase with your Rights at the Subscription Price per Share	One Share for every three Rights **
Subscription Price	___% of the NAV on the Pricing Date
Estimated Subscription Price	$[___]

*	The number of Rights to be issued to a shareholder on the Record Date will be rounded up to the nearest number of Rights evenly divisible by three.
**	Shareholders will be able to acquire additional Shares pursuant to the Over-Subscription Privilege in certain circumstances.

Important Dates for the Rights Offering

Record Date	, 2009
Subscription Period	, 2009 to                     , 2009*
Pricing Date	, 2009*
Subscription Certificate and Payment of Shares Due **	, 2009

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Notice of Guaranteed Delivery Due **	, 2009
Confirmation to Participants	, 2009
Final Payment of Shares (if any) Due (***)	, 2009

*	Unless the Rights Offering is extended to a date no later than ___, 2009.
**	Record Date Shareholders (defined below) exercising Rights must deliver to the Subscription Agent by the Expiration Date either (i) the Subscription Certificate together with the estimated payment or (ii) a Notice of Guaranteed Delivery. If a Notice of Guaranteed Delivery is provided, the Subscription Certificate must be received by the Subscription Agent on or before ___, 2009.
***	Additional amounts may be due at settlement for additional Shares purchased upon exercising Rights because the Estimated Subscription Price may be less than the actual Subscription Price. See “The Rights Offering — Payment for Shares.”

Key Elements of the Rights Offering

One-for-three Offering	The Rights Offering will give shareholders on the Record Date (“Record Date Shareholders”) the “right” to purchase one new Share for every three Rights received. Amounts not divisible by three will be rounded up to allow the purchase of one whole Share. For example, if you own 100 Shares on the Record Date, you will receive 102 Rights entitling you to purchase 34 new Shares of the Fund. Shareholders will be able to exercise all or some of their Rights. However, shareholders who do not exercise all of their Rights will not be able to participate in the Over-Subscription Privilege. See “Over-Subscription Privilege” below.
Transferable Rights	The Rights issued in the Rights Offering will be “transferable,” will be traded on the NYSE, and will afford non-subscribing shareholders the option of selling their Rights on the NYSE or through the Subscription Agent. Selling the Rights allows a non-exercising shareholder (i.e., a shareholder who does not wish to purchase additional Shares) the ability to offset some of the economic dilution that would otherwise occur. See “Risk Factors and Special Considerations — Dilution” for a further discussion. In contrast, in a non-transferable rights offering (i.e., an offering where the rights cannot be traded), non-exercising shareholders would experience full economic dilution. There can be no assurance that a liquid trading market will develop for the Rights or that the price at which such Rights trade will approximate the amount of economic dilution otherwise realized by a non-exercising shareholder. The period during which Rights will trade will be limited and, upon expiration of the Subscription Period the Rights will cease to trade and will have no residual value.
Subscription Price	New Shares issued upon exercise of Rights will be sold at a price equal to ___% of the NAV on the expiration of the Subscription Period (the “Pricing Date”).
Over-Subscription Privilege	If all of the Rights initially issued are not exercised by Record Date Shareholders, any unsubscribed Shares will be offered to other Record Date Shareholders who have fully exercised the Rights initially issued to them and who wish to acquire additional Shares (the “Over-Subscription Privilege”). If registered Shares are insufficient to honor all over-subscriptions, the available Shares will be allocated pro-rata among those who over-subscribe based on the number of Rights originally issued to them. Affiliates of the Fund and Adviser (defined below) may or may not exercise their Over-Subscription Privilege. If these affiliates fully exercise their Over-Subscription Privilege, under certain circumstances

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	(e.g., low shareholder participation in the Rights Offering, the trading of the Rights and the Over-Subscription Privilege), these affiliates could substantially increase their percentage ownership in the Fund at an advantageous price.
Method for Exercising Rights	Except as described below, subscription certificates evidencing the Rights (“Subscription Certificates”) will be sent to Record Date Shareholders or their nominees. If you wish to exercise your Rights, you may do so in the following ways:

• Notice of Guaranteed Delivery and Subscription Certificate (with payment) sent separately. If, prior to 5:00 p.m., Eastern Time, on the Expiration Date, the Subscription Agent shall have received a notice of guaranteed delivery (“Notice of Guaranteed Delivery”) by telegram or otherwise, from a bank or trust company or a NYSE member firm guaranteeing delivery of (i) payment of the Estimated Subscription Price of $[___] per Share for the Shares subscribed for in the Primary Subscription and any additional Shares subscribed for pursuant to the Over-Subscription Privilege and (ii) a properly completed and executed Subscription Certificate, the subscription will be accepted by the Subscription Agent. The Subscription Agent will not honor a Notice of Guaranteed Delivery unless a properly completed and executed Subscription Certificate is received by the Subscription Agent prior to 5:00 p.m., Eastern Time, on the third Business Day after the Expiration Date. A fee may be charged for this service.

• Subscription Certificate sent with Payment. Alternatively, a shareholder can, together with the properly completed and executed Subscription Certificate, send payment for the Shares acquired in the Primary Subscription and any additional Shares subscribed for pursuant to the Over-Subscription Privilege, to the Subscription Agent based on the Estimated Subscription Price of $12.61 per share. To be accepted, such payment, together with the Subscription Certificate, must be received by the Subscription Agent prior to 5:00 p.m., Eastern Time, on the Expiration Date. Payment pursuant to this method must be in United States dollars by money order or check drawn on a bank located in the United States and must be payable to Rivus Bond Fund.

For purposes of this prospectus, a “Business Day” shall mean any day on which trading is conducted on the NYSE. Rights holders will have no right to rescind a purchase after the Subscription Agent has received the Subscription Certificate or Notice of Guaranteed Delivery. See “The Rights Offering—Method of Exercising Rights” and “The Rights Offering—Payment for Shares.” The Subscription Agent will deposit all checks received by it prior to the final due date into a segregated interest bearing account at Fleet Bank pending distribution of the Shares from the Rights Offering. All interest will accrue to the benefit of the Fund and investors will not earn interest on payments submitted.

Shareholder inquires should be directed to                                                              (the “Information Agent”) at (___)                     .

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Sale of Rights	The Rights are transferable until the Expiration Date and will be admitted for trading on the NYSE. Although no assurance can be given that a market for the Rights will develop, trading in the Rights on the NYSE will begin three Business Days prior to the Record Date and may be conducted until the close of trading on the last Business Day prior to the Expiration Date. The value of the Rights, if any, will be reflected by the market price. Rights may be sold by individual holders or may be submitted to the Subscription Agent for sale. Any Rights submitted to the Subscription Agent for sale must be received by the Subscription Agent on or before 4:00 p.m. Eastern Time                                         , 2009, one Business Day prior to the Expiration Date, due to normal settlement procedures. Trading of the Rights on the NYSE will be conducted on a when-issued basis until and including the date on which the Subscription Certificates are mailed to Record Date shareholders and thereafter will be conducted on a regular way basis until and including the last Business Day prior to the Expiration Date. Shares will begin trading ex-Rights two Business Days prior to the Record Date. Trading “ex-Rights” means that Shares traded at such time will not carry with them the benefit of the Rights to be issued in the Rights Offering. If the Subscription Agent receives Rights for sale in a timely manner, it will use its best efforts to sell the Rights on the NYSE. If the Rights can be sold, sales of these Rights will be deemed to have been effected at the price actually received by the Subscription Agent on the day the Rights are sold. Neither the Fund nor the Subscription Agent will be responsible if Rights cannot be sold and neither has guaranteed any minimum sales price for the Rights.
Shareholders are urged to obtain a recent trading price for the Rights on the NYSE from their broker, bank, financial advisor or the financial press.
Offering Fees and Expenses	The Fund has agreed to pay the Dealer Manager a fee for its marketing and soliciting services equal to an aggregate of ___% of the aggregate Subscription Price for the Shares issued pursuant to the Rights Offering. The Dealer Manager will reallow to certain broker-dealers in the soliciting group formed by the Dealer Manager solicitation fees of ___% of the Subscription Price for Shares issued pursuant to the Rights Offering as a result of their selling efforts, subject to a maximum.
	The Dealer Manager may purchase unsubscribed for Shares at the Subscription Price less a ___% discount and may resell such Shares to broker-dealers that are members of a selling group at the Subscription Price less a selling concession not in excess of ___%. The Dealer Manager may allow, and the selling members may reallow, a concession of not more than ___% to other brokers and dealers as described in this prospectus.
	Other offering expenses incurred by the Fund are estimated at $___, which includes up to $___that may be paid to the Dealer Manager as partial reimbursement for its expenses relating to the Offering.
Restrictions on Foreign Shareholders	Subscription Certificates will only be mailed to Record Date Shareholders on the Record Date whose addresses are within the United States (other than an APO or FPO address). Record Date Shareholders whose addresses are outside the United States or who have an APO or FPO address and who wish to subscribe to the Offering either in part or in full should contact the Subscription Agent, [___], by written instruction or recorded telephone conversation no later than three Business Days prior

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to the Expiration Date. The Fund will determine whether the Offering may be made to any such shareholder. If the Subscription Agent has received no instruction by such date, the Subscription Agent will attempt to sell all Rights and remit the actual proceeds, if any, to such shareholders. If the Rights can be sold, sales of these Rights will be deemed to have been effected at the price actually received by the Subscription Agent on the day the Rights are sold.

Use of Proceeds

The net proceeds of the Offering are estimated to be approximately [NetProceedstoFund]. This figure is based on the Estimated Subscription Price per Share of $[___ ] and assumes all Shares offered are sold and that the expenses related to the Offering estimated at approximately $[___] are paid. The Adviser anticipates that it will take no longer than [three] months for the Fund to invest these proceeds in accordance with its investment objective and policies under current market conditions. Pending investment, the proceeds will be invested in short-term debt instruments. See “Use of Proceeds” below.

Information Regarding the Fund

     The Fund is a diversified, closed-end management investment company registered under the Investment Company Act of 1940 and organized as a Delaware statutory trust. The Fund was initially organized as a Delaware corporation on June 7, 1971 and converted to a Delaware statutory trust on June 13, 2006. Its investment objective is to seek a high rate of return, primarily from interest income and trading activity from a portfolio principally consisting of debt securities It will seek capital appreciation and gain principally by purchasing debt securities at prices the Adviser believes are below their intrinsic value. The Fund will also look to benefit from trading securities to optimize the risk adjusted yields in the Fund. Under normal circumstances, the Fund will invest at least 80% of its total assets in debt securities. The Fund may invest up to 25% of its assets in below investment grade securities (also known as “junk bonds”), and may, but has no current plans to, borrow funds to purchase securities. See “Investment Objective and Policies.” No assurance can be given that the Fund’s investment objective will be achieved. As of January 21, 2009, the Fund had 4,907,678 Shares outstanding. Shares trade on the NYSE under the symbol “BDF.” The average weekly trading volume of the Shares on the NYSE during the nine months ended December 31, 2008 was 60,940 Shares. As of January 21, 2009, the aggregate net assets of the Fund were approximately $79.1 million.

Information Regarding the Adviser

     MBIA Capital Management Corp. (the “Adviser”) acts as the investment adviser to the Fund. The Adviser’s officers and employees have substantial experience in evaluating and investing in debt securities. The Fund pays the Adviser from the Fund’s assets each month an investment advisory fee at an annualized rate of 0.50% of the first $100 million of the NAV of the Fund on the last day of each month and 0.40% of the NAV of the Fund on the last day of such month in excess of $100 million. See “Management of the Fund — Investment Adviser.”

Risk Factors and Special Considerations

Dilution

If you do not exercise all of your Rights, you will likely own a smaller proportional interest in the Fund when the Rights Offering is over (i.e., proportional dilution). In addition, whether or not you exercise your Rights, because the Subscription Price (and net proceeds to the Fund) will be below the Fund’s NAV per Share on the Expiration Date the per Share NAV of your Shares will be diluted (reduced) immediately as a result of the Offering (i.e., economic dilution). See “Risk Factors and Special Considerations — Dilution,” on page 34 herein.

Discount From NAV

Shares of closed-end funds frequently trade at a market price that is below their NAV. This is commonly referred to as “trading at a discount.” This characteristic of Shares of closed-end funds is a risk separate and distinct from the risk that the

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	Fund’s NAV may decrease. The risk of purchasing Shares of a closed-end fund that might trade at a discount or unsustainable premium is more pronounced for investors who wish to sell their Shares in a relatively short period of time after purchasing them because, for those investors, realization of a gain or loss on their investments is likely to be more dependent upon the existence of a premium or discount than upon portfolio performance. Accordingly, the Fund is designed primarily for long-term investors and should not be considered a vehicle for trading purposes. NAV will be reduced following the offering by the amount of offering costs paid by the Fund. See “Risk Factors—Risk of Market Price Discount From Net Asset Value.”
Fixed Income Investment Risk	Changes in interest rates will cause the value of securities held in the Fund’s portfolio to vary inversely to changes in prevailing interest rates. Interest rate changes have a greater effect on the price of fixed income securities that have longer durations. If, however, a security is held to maturity, no gain or loss will be realized as a result of changes in prevailing rates. The value of these securities will also be affected by general market and economic conditions and by the creditworthiness of the issuer. Fluctuations in the value of the Fund’s securities will cause concomitant fluctuations in the NAV per Share of the Fund.
Below Investment Grade Securities Risk	The Fund may invest up to 25% of its total assets in debt securities rated Ba or B by Moody’s Investor Service, Inc. (“Moody’s”) or BB or B by Standard & Poor’s Corporation (“Standard & Poor’s”) at the time of purchase or in unrated securities of comparable quality. The Fund may also invest no more than 10% of its total assets in debt securities rated B by Moody’s or Standard & Poor’s at the time of purchase or in unrated securities of comparable quality. Securities rated below Ba by Moody’s or below BB by Standard & Poor’s are commonly known as “high yield securities” and sometimes as “junk bonds.” High yield (“junk”) bonds involve substantial risk of loss and are considered predominantly speculative with respect to the issuer’s ability to pay interest and repay principal and are susceptible to default or decline in market value due to adverse economic and business developments. The market values for high yield securities tend to be very volatile, and those securities are less liquid than investment grade debt securities. For these reasons, your investment in the Fund is subject to the following specific risks:

• increased price sensitivity to changing interest rates and to a deteriorating economic environment;

• greater risk of loss due to default or declining credit quality;

• adverse company specific events are more likely to render the issuer unable to make interest and/or principal payments; and

• if a negative perception of the high yield market develops, the price and liquidity of high yield securities may be depressed, which may last for a significant period of time

Adverse changes in economic conditions are more likely to lead to a weakened capacity of a high yield issuer to make principal payments and interest payments than of an investment grade issuer. The principal amount of high yield securities outstanding has proliferated in the past decade as an increasing number of issuers have used high yield securities for corporate financing. An economic downturn could severely affect the ability of highly leveraged issuers to service their debt obligations or to repay their obligations upon maturity.

The secondary market for high yield securities may not be as liquid as the secondary market for more highly rated securities, a factor which may have an adverse effect on the Fund’s ability to dispose of a particular security or securities. There are fewer

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dealers in the market for high yield securities than for investment grade obligations. The prices quoted by different dealers may vary significantly and the spread between the bid and asked price is generally much larger than for higher quality instruments. Under adverse market or economic conditions, the secondary market for high yield securities could contract further, independent of any specific adverse changes in the condition of a particular issuer, and these instruments may become illiquid. As a result, the Fund could find it more difficult to sell these securities or may be able to sell the securities only at prices lower than if such securities were widely traded. Prices realized upon the sale of such lower rated or unrated securities, under those circumstances, may be less than the prices used in calculating the Fund’s NAV. See “Risk Factors—High Yield Securities Risk.”

FEE TABLE

Shareholder Transaction Expenses
Sales Load (as a percentage of the offering price)(1)	____%
Dividend Reinvestment Plan Fees	None
Annual Fund Expenses (as a percentage of net assets attributable to Shares)(2)
Management Fees	0.__%(3)
Interest Payments on Borrowed Funds	0.00%
Acquired Funds Fees and Expenses (include if applicable	____%(4)
Other Expenses	0.___%
Total Annual Expenses	0.88%(5)

(1)	The Fund has agreed to pay the Dealer Manager a fee for its marketing and soliciting services equal to ___% of the aggregate Subscription Price for Shares issued pursuant to the Offering. The Dealer Manager will reallow to broker-dealers included in the soliciting group to be formed and managed by the Dealer Manager, solicitation fees equal to ___% of the subscription price per Share for each Share issued pursuant to the Rights Offering as a result of their soliciting efforts, subject to a maximum. The Fund has also agreed to reimburse the Dealer Manager for its expenses relating to the Offering up to an aggregate of $___. In addition, the Fund has agreed to pay fees to the Subscription Agent and the Information Agent (as defined in this prospectus), estimated to be $___and $___respectively, for their services related to the Offering, which includes reimbursement for their out-of-pocket expenses. These fees and expenses will be borne by the Fund and indirectly by all of the Fund’s shareholders, including those shareholders who do not exercise their rights. The Dealer Manager may purchase unsubscribed for Shares at the Subscription Price less a ___% discount and may resell such Shares to broker-dealers that are members of a selling group at the Subscription Price less a selling concession not in excess of ___%. The Dealer Manager may allow, and the selling members may reallow, a concession of not more than ___% to other brokers and dealers.
(2)	Amounts are based on estimated amounts for the Fund’s current fiscal year after giving effect to anticipated net proceeds of the Offering assuming that all of the Rights are exercised.
(3)	The Fund pays the Adviser an annual fee of 0.50% on the first $100 million of the Fund’s month-end net assets, and 0.40% on assets in excess of $100 million.
(4)	Fees and expenses incurred indirectly as a result of investment in Shares of one or more “Acquired Funds,” which include (i) investment companies, or (ii) companies that would be an investment company under Section 3(a) of the Investment Company Act of 1940 (the “1940 Act”) except for exceptions under Sections 3(c)(1) and 3(c)(7) under the 1940 Act.
[(5) “	Total Annual Expenses” do not correlate to the ratios of expenses to average net assets shown in the Financial Highlights; the Financial Highlights expense ratios reflect the operating expenses of the Fund and do not include “Acquired Fund fees and expenses.”]

     The purpose of the above table is to assist investors in understanding the various costs and expenses that an investor will bear directly or indirectly.

Example	1 Year	3 Years	5 Years	10 Years
You would pay the following expenses on a $1,000 investment, assuming a 5% annual return:	$	$	$	$

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     This example should not be considered a representation of past or future expenses or rate of return. For more complete descriptions of certain of the Fund’s costs and expenses, see “Management of the Fund — Expenses of the Fund” in this prospectus and the SAI.

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FINANCIAL HIGHLIGHTS

     The table below sets forth selected financial data for a Share outstanding throughout each period presented. The financial highlights as of or for each annual period presented have been audited by [     ], as stated in their report, which is incorporated by reference into the SAI. The following information should be read in conjunction with the Financial Statements and Notes thereto, which are incorporated by reference into or are included in the SAI. The table below contains per Share operating performance data, total investment returns, ratios to average net assets and other supplemental data.

	Year Ended March 31,
	2008			2007			2006			2005			2004
Per Share Operating Performance:
Net asset value, beginning of period	$	20.01		$	19.72		$	20.62		$	21.31		$	21.50
Net investment income(1)		1.10			1.09			1.10			1.14			1.29
Net realized and unrealized gain/(loss) on investments(1)		(0.95	)		0.35			(0.85	)		(0.59	)		0.83
Total from investment operations		0.15			1.44			0.25			0.55			2.12
Less Distributions:
Dividends from net investment income		(1.15	)		(1.15	)		(1.15	)		(1.14	)		(1.27	)
Distributions from net realized gain		—			—			—			(0.11	)		(0.06	)
Distributions from tax return of capital		—			—			—			—			—
Total distributions		(1.15	)		(1.15	)		(1.15	)		(1.25	)		(1.33	)
Net asset value, end of period	$	19.01		$	20.01		$	19.72		$	20.62		$	21.32
Per Share market price, end of period	$	17.14		$	18.30		$	17.75		$	18.26		$	19.51
Total Investment Return (1)
Based on market value		(0.10	)%		9.93	%		3.52	%		0.22	%		1.13	%
Ratios and Supplemental Data:
Net assets, end of period (in 000’s)	$	93,282		$	98,197		$	96,759		$	101,181		$	104,628
Ratio of expenses to average net assets		0.88	%		1.00	%		0.90	%		0.89	%		0.86	%
Ratio of net investment income to average net assets		5.66	%		5.57	%		5.42	%		5.43	%		5.57	%
Portfolio turnover rate		17.25	%		25.90	%		24.33	%		6.78	%		11.99	%
Number of Shares outstanding at end of period (in 000’s)		4,908			4,908			4,908			4,908			4,908

(1) Total investment return is calculated assuming a purchase of Shares at the market price on the first day and a sale at the market price on the last day of the period reported. Dividends and distributions, if any, are assumed for purposes of this calculation to be reinvested at prices obtained under the Fund’s dividend reinvestment plan. Total investment return does not reflect brokerage commissions. The total investment return, if for less than a full year, is not annualized. Past performance is not a guarantee of future results.

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THE FUND

     Rivus Bond Fund is a diversified, closed-end management investment company organized as a Delaware statutory trust and was formed on June 7, 1971. The Fund was initially organized as a Delaware corporation on June 7, 1971 and converted to a Delaware statutory trust on June 13, 2006. The Fund’s investment objective is to seek a high rate of return, primarily from interest income and trading activity, from a portfolio principally consisting of debt securities. It will seek capital appreciation and gain by purchasing debt securities at prices that the Adviser believes are below their intrinsic value. The Fund will also look to benefit from trading securities to optimize the risk adjusted yields in the Fund. Under normal circumstances, the Fund will invest at least 80% of its total assets in debt securities. The Fund may invest up to 25% of its assets in below investment grade securities (also known as “junk bonds”), and may, but has no current plans to, borrow funds to purchase securities. See “Investment Objective and Policies.” No assurance can be given that the Fund’s investment objective will be achieved.

     As of January 21, 2009, the Fund had 4,907,678 Shares outstanding. Shares are publicly held and are listed and traded on the NYSE under the symbol “BDF.” The average weekly trading volume of the Shares on the NYSE during the nine months ended December 31, 2008 was 60,940 Shares. As of January 21, 2009, the aggregate net assets of the Fund were approximately $79.1 million, the NAV per Share was $16.12, the Share price was $15.53, and the discount was 3.659%. Historically, Shares have traded at a discount to its NAV.

     The following table sets forth, for the periods indicated, the high and low closing sales prices for the Shares on the NYSE, the NAVs per Share that immediately preceded the high and low closing sales prices, and the discount or premium that each sales price represented as a percentage of the preceding NAV:

Share Price Data¹

					NAV
				Low	Preceding	Discount
Quarter	High Closing	NAV Preceding	Discount	Closing	Low Sales	as % of
Ended	Sales Price	High Sales Price	as % of NAV	Sales Price	Price	NAV
12/31/08	$14.81	$15.96	7.206%	$9.93	$16.24	38.855%
09/30/08	$16.72	$18.15	7.879%	$13.75	$17.84	22.926%
06/30/08	$17.75	$19.08	6.971%	$16.77	$18.62	9.936%
03/31/08	$18.19	$19.39	6.189%	$16.87	$18.97	11.070%
12/31/07	$18.04	$19.65	8.193%	$16.97	$19.53	13.108%
09/30/07	$18.14	$19.64	7.637%	$16.48	$19.35	14.842%
06/30/07	$18.58	$19.88	6.539%	$17.56	$19.50	9.949%
03/31/07	$18.45	$19.72	6.440%	$17.89	$19.64	8.910%
12/31/06	$18.26	$19.90	8.241%	$17.76	$19.57	9.245%
09/30/06	$18.25	$19.90	8.291%	$16.71	$19.34	13.599%
06/30/06	$17.72	$19.72	10.142 %	$16.82	$19.17	12.259%

¹ Please note that prior to March 24, 2008, the NAV was calculated on a weekly basis. Subsequent to March 24, 2008, the NAV is being calculated on a daily basis.

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THE OFFERING

Terms of the Offering

     The Fund is issuing to its holders of Shares on the Record Date (“Record Date Shareholders”) Rights to subscribe for additional Shares. Each Record Date Shareholder will receive one transferable Right for each Share owned on the Record Date. The Rights entitle the holder to acquire one Share at the Subscription Price for every three Rights held. The number of Rights to be issued to a Record Date Shareholder will be rounded up to the nearest number of Rights evenly divisible by three. In the case of Shares held of record by Cede & Co., as nominee for the Depository Trust Company, or any other depository or nominee (which may be the case if you hold your Shares in street name), the number of Rights issued to Cede or such other depository or nominee will be adjusted to permit rounding up (to the nearest number of Rights evenly divisible by three) of the Rights to be received by beneficial owners for whom it is the holder of record only if Cede or such other depository or nominee provides to the Fund on or before the close of business on                     , 2009 written representation of the number of Rights required for such rounding. Rights may be exercised at any time during the period which commences on                     , 2009, and ends at 5:00 p.m., Eastern Time, on                     , 2009 (the “Subscription Period”), unless extended by the Fund to a date not later than                     , 2009, at 5:00 p.m., Eastern Time. See “Expiration of the Rights Offering” below. The right to acquire one additional Share for every three Rights held during the Subscription Period at the Subscription Price is hereinafter referred to as the “Primary Subscription.”

     In addition, any Record Date Shareholder who fully exercises all Rights initially issued to him, her or it is entitled to subscribe for Shares which were not otherwise subscribed for by others in the Primary Subscription (the “Over-Subscription Privilege”). For purposes of determining the maximum number of Shares a Record Date Shareholder may acquire pursuant to the Rights Offering, broker-dealers whose Shares are held of record by Cede, as nominee for The Depository Trust Company, or by any other depository or nominee, will be deemed to be the holders of the Rights that are issued to Cede or such other depository or nominee on their behalf. Shares acquired pursuant to the Over-Subscription Privilege are subject to allotment, which is more fully discussed below under “Over-Subscription Privilege.” Holders of Rights who are not Record Date Shareholders may purchase Shares in the Primary Subscription, but are not entitled to subscribe for Shares pursuant to the Over-Subscription Privilege.

     Officers of the Adviser have indicated to the Fund that the Affiliated Parties, as Record Date Shareholders, have been authorized to purchase Shares through the Primary Subscription and the Over-Subscription Privilege to the extent the Shares becomes available to them in accordance with the Primary Subscription and the allotment provisions of the Over- Subscription Privilege. Such over-subscriptions by the Affiliated Parties may disproportionately increase their already existing ownership resulting in a higher percentage ownership of outstanding Shares of the Fund. Any Shares acquired in the Rights Offering by the Affiliated Parties as “affiliates” of the Fund, as that term is defined under the Securities Act of 1933 (the “Securities Act”), may only be sold in accordance with Rule 144 under the Securities Act or another applicable exemption or pursuant to an effective registration statement under the Securities Act. In general, under Rule 144, as currently in effect, an “affiliate” of the Fund is entitled to sell, within any three-month period, a number of Shares that does not exceed the greater of 1% of the then outstanding Shares or the average weekly reported trading volume of the Shares during the four calendar weeks preceding such sale. Sales under Rule 144 are also subject to certain restrictions on the manner of sale, to notice requirements and to the availability of current public information about the Fund. In addition, any profit resulting from the sale of Shares so acquired, if the Shares are held for a period of less than six months, will be returned to the Fund.

     Rights will be evidenced by certificates (“Subscription Certificates”). The number of Rights issued to each Record Date Shareholder will be stated on the Subscription Certificate delivered to the holder. The method by which Rights may be exercised and Shares paid for is set forth below in “Method of Exercising Rights” and “Payment for Shares.” A Rights holder will have no right to rescind a purchase after the Subscription Agent has received payment. See “Payment for Shares” below. Shares of beneficial interest issued pursuant to an exercise of Rights will be listed and available for trading on the NYSE.

     The Rights are transferable until the Expiration Date and have been admitted for trading on the NYSE. Assuming a market exists for the Rights, the Rights may be purchased and sold through usual brokerage channels and sold through the Subscription Agent. Although no assurance can be given that a market for the Rights will develop, trading in the Rights on the NYSE will begin three Business Days before the Record Date and may be conducted until the close of trading on the last Business Day prior to the Expiration Date. For purposes of this prospectus, a “Business Day” shall mean any day on which trading is conducted on the NYSE. Trading of the Rights on the NYSE will be conducted on a when-issued basis until and including the date on which the Subscription Certificates are mailed to Record Date Shareholders and thereafter will be conducted on a regular way basis until and including the last Business Day prior to the Expiration Date. The

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method by which Rights may be transferred is set forth below in “Method of Transferring Rights.” The underlying Shares will also be admitted for trading on the NYSE.

     After the expiration of the Subscription Period, the Dealer Manager may offer Shares not subscribed for to the public at the Subscription Price or to other dealers at the Subscription Price less a selling concession.

Purpose of the Offering

     The Board of Trustees of the Fund (the “Board”) has determined that it would be in the best interests of the Fund and its shareholders to increase the assets of the Fund available for investment. In order to assist the Board in making such determination, it consulted with the Adviser and representatives of the Dealer Manager to help it identify and analyze the factors the Board should consider in making its determination and to provide recommendations regarding the structure, timing and terms of an offering. The Board considered, among other things, using fixed pricing versus variable pricing for the Offering, the benefits and drawbacks of conducting a non-transferable versus a transferable rights offering and the effect on the Fund if the Rights Offering is undersubscribed. The Board also considered the benefit that would inure to shareholders of the Fund should the Rights Offering be authorized. Such benefits include a lower expense ratio as a result of the increased assets in the Fund.

     Among the numerous reasons for the Fund’s conducting the Offering, management has emphasized the following two primary reasons:

     Taking Advantage of Investment Opportunities: As of the date of this prospectus, the Fund is fully invested in accordance with its investment objectives. The increase in yield spreads of investment grade and high yield fixed income securities against U.S. Treasuries affords an attractive opportunity for fixed income investment. For example, the Option Adjusted Spread (“OAS”) on the Lehman U.S. Corporate Investment Grade Index over U.S. Treasuries has risen from a low of 1.81% on December 31, 2007 to 4.93% on December 31, 2008. Over the same period, yields on the benchmark 10-year U.S. Treasury notes have fallen from 4.02% to 2.21% and yields on 30-year U.S. Treasury bonds have fallen from 4.45% to 2.67%. This decline in U.S. Treasury yields reflects a flight to quality among investors in response to ongoing weakness in the overall economy. Similarly, the OAS on the Lehman High Yield Index over U.S. Treasuries rose from 5.69% on December 31, 2007 to 16.62% on December 31, 2008. The rise in spreads increases the yield advantage of investment grade and high yield fixed income securities compared to U.S. Treasuries while mitigating the potential principal loss from the risk of rising interest rates going forward.

     During the recent past, the high stress in the credit and money markets has resulted in a substantial increase in spreads for investment grade and high yield fixed income securities despite generally sound corporate balance sheets and liquidity. The Adviser believes that the current wide spreads will narrow over time as the overall economy improves with the help of continuing and potential future fiscal and monetary interventions. The Adviser believes that this spread narrowing in investment grade and high yield fixed income securities will generate attractive returns for investors.

     Generally, the Adviser believes that higher spreads and more attractive relative characteristics of higher yielding sectors makes commitment of additional funds, at this time, an attractive opportunity for shareholders.

     The Offering will enable the Fund to take advantage of current wider spreads and higher yields. The shareholders will gain from exposure to these assets in a diversified fixed income portfolio.

     Spreading Expenses Across More Assets. As a fund’s assets increase, the fixed costs are spread across a larger asset base, thus resulting in a lower expense ratio (i.e the ratio of expenses to fund assets). This is because all funds have certain fixed costs (e.g., fidelity bonds, insurance, legal, accounting and printing costs, etc.) which are not charged in proportion to the fund’s size. The opposite occurs as a fund’s assets decrease, that is, the fixed costs are spread across a smaller asset base thus resulting in a higher expense ratio.

     The current actual expense ratio (“Current Actual Expense Ratio”) is estimated by management to be ___% on an annualized basis based on total current net assets of approximately $ million (as of                     , 2009). Fees paid to the Adviser comprise ___% of this Current Actual Expense Ratio, and this percentage is expected to lower to ___% as a result of increased assets pursuant to the Offering. The remaining component of the Current Actual Expense Ratio (i.e., ___%) consists primarily of expenses charged as a fixed-dollar amount (e.g., legal fees, customary proxy related expenses, administrative/internal accounting costs and insurance). Since these expenses are not charged on a percentage basis, they do not tend to be significantly affected by increases or decreases in the Fund’s total net assets. Using the actual expenses incurred by the Fund during fiscal year ending March 31, 2008, the fixed-dollar expenses totaled $___, or ___% of current total net assets. It is this fixed-dollar amount that would be spread over the larger asset base from the Offering and thus result in a decrease in the Current Actual Expense Ratio. Assuming that (i) the Subscription Price is $___(i.e., ___% of the Fund’s NAV on                     , 2009), and (ii) the Rights Offering is fully subscribed, the Fund’s estimated expense ratio would be ___%. This compares favorably to the Current Actual Expense Ratio of ___% — a difference of ___% per

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annum — representing a significant increase in operating efficiency. This difference is much smaller if certain expenses that management does not consider to be typical operating expenses are excluded.

     Other reasons supporting the Offering include the following:

     Increased Liquidity. The larger number of Shares outstanding after the Offering should help create a more efficient and active market for the Fund’s Shares and reduce the effect of individual transactions on market price, all of which are believed generally to increase liquidity. In addition, by making the Rights transferable, there is a good probability that the number of shareholders in the Fund will increase after the Offering, which would also increase the likelihood of greater liquidity in the Fund’s Shares.

     Better Trade Execution. Larger funds can buy “in quantity” and can sometimes receive better execution and lower commissions from brokers because of their size.

     Retaining Good Investments. In a closed-end investment company like the Fund, the lack of new capital to invest, generated through the sale of a fund’s securities, limits the fund’s ability to take advantage of new attractive opportunities as they may arise in the future. Rather than sell good investments to free up cash to take advantage of these new opportunities, the Adviser believes that shareholders are better served by raising more cash through the Offering. In addition, this approach, in the long-term, tends to be more tax-efficient by reducing the amount of capital gains realized by the Fund.

     Reduced Transaction Costs. The Rights Offering rewards existing shareholders by providing them an opportunity to purchase additional Shares at a price that is below market value and NAV without the transaction costs that would be associated with open-market purchases or initial public offerings (e.g., brokerage commissions and underwriting fees).

     Improving Analyst Coverage. Increasing the Fund’s size may increase analyst coverage which may in turn stimulate investor interest in the Fund and ultimately result in narrowing and maintaining a narrow discount.

     It should be further understood by investors that the Fund’s Adviser will benefit from the Offering because the Adviser’s fee is based on the average net assets of the Fund. See “Management of the Fund.” It is impossible to state precisely the amount of additional compensation the Adviser will receive as a result of the Offering because the proceeds of the Offering will be invested in additional portfolio securities which will fluctuate in value. However, assuming all Rights are exercised and that the Fund receives the maximum proceeds of the Offering, the annual compensation to be received by the Adviser would be increased by approximately $                    .

Subscription Price

     The Subscription Price for the Shares to be issued in the Rights Offering will be equal to ___% of the NAV on the Pricing Date. Management believes that this pricing formula (as opposed to a higher percentage discount or a pre-determined fixed price) will provide an incentive to shareholders (as well as others who might trade in the transferable Rights) to participate in the Offering and limit dilution to shareholders.

Over-Subscription Privilege

     If some Record Date Shareholders do not exercise all of the Rights initially issued to them to purchase Shares of the Fund, those Record Date Shareholders who have exercised all of the Rights initially issued to them will be offered, by means of the Over-Subscription Privilege, the right to acquire more than the number of Shares for which the Rights issued to them are exercisable. Record Date Shareholders who exercise all the Rights initially issued to them will have the opportunity to indicate on the Subscription Certificate how many Shares they are willing to acquire pursuant to the Over-Subscription Privilege.

     The method by which the Shares will be distributed and allocated pursuant to the Over-Subscription Privilege is as follows: Shares of beneficial interest will be available for purchase pursuant to the Over-Subscription Privilege only to the extent that the maximum number of Shares is not subscribed for through the exercise of the Primary Subscription by the Expiration Date. If the Shares so available (“Excess Shares”) are not sufficient to satisfy all subscriptions pursuant to the Over-Subscription Privilege, the Excess Shares will be allocated pro rata (subject to the elimination of fractional Shares) among those Rights holders exercising the Over-Subscription Privilege, in proportion, not to the number of Shares requested pursuant to the Over-Subscription Privilege, but to the number of Shares held on the Record Date; provided, however, that if this pro rata allocation results in any Rights holder being allocated a greater number of Excess Shares than the Rights holder subscribed for pursuant to the exercise of such Rights holder’s Over-Subscription Privilege, then the Rights holder will be allocated only such number of Excess Shares as such Rights holder subscribed for and the remaining

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Excess Shares will be allocated among all other Rights holders exercising Over-Subscription Privileges. The formula to be used in allocating the Excess Shares is as follows:

Holder’s Record Date Position	X	Excess Shares Remaining
Total Record Date Position by All Over-Subscribers

     The Fund will offer at a ___% discount to the Subscription Price any Shares which are not subscribed for under the Primary Subscription or the Over-Subscription Privilege to the Dealer Manager. The Dealer Manager may, but is not required, to purchase Shares not subscribed for and resell such Shares to the public at the Subscription Price. The Dealer Manager also may resell such Shares to other dealers at the Subscription Price, less a selling concession.

Expiration of the Rights Offering

     The Rights Offering will expire at 5:00 p.m., Eastern Time, on the Expiration Date (                    , 2009), unless extended by the Fund to a date not later than                     , 2009, at 5:00 p.m., Eastern Time (the “Extended Expiration Date”). Rights will expire on the Expiration Date (or Extended Expiration Date as the case may be) and thereafter may not be exercised.

Subscription Agent

     The Subscription Agent is                                                                                 , which will receive, for its administrative, processing, invoicing and other services as Subscription Agent, a fee estimated to be $                     and reimbursement for all out-of-pocket expenses related to the Offering. Questions regarding the Subscription Certificates should be directed to                                                                                                                           by one of the methods described below. The Fund reserves the right to accept Subscription Certificates actually received on a timely basis at any of the addresses listed.

(1)	By First Class Mail:
(2)	By Express Mail of Overnight Courier:
(3)	By Hand:
(4)	By Facsimile: Confirm by telephone to:

     DELIVERY TO AN ADDRESS OR VIA FACSIMILE OTHER THAN THE ABOVE DOES NOT CONSTITUTE GOOD DELIVERY.

Information Agent

     Any questions or requests for assistance may be directed to the Information Agent at its telephone number and address listed below:

The Information Agent for the Offering is:

Banks and Brokers Call:
All Others Call Toll Free:

     The Information Agent will receive a fee estimated to be $                     and reimbursement for out-of-pocket expenses related to the Offering.

     Shareholders may also contact their brokers or nominees for information with respect to the Rights Offering.

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Method of Exercising Rights

     Rights may be exercised by filling in and signing the Subscription Certificate and mailing it in the envelope provided, or otherwise delivering the completed and signed Subscription Certificate to the Subscription Agent, together with payment for the Shares as described below under “Payment for Shares.” Rights holders may also exercise Rights by contacting a bank, trust company or NYSE member firm who can arrange, on behalf of the Rights holder, to guarantee delivery of payment and of a properly completed and executed Subscription Certificate. A fee may be charged for this service. Completed Subscription Certificates and full payment for the Shares subscribed for must be received by the Subscription Agent prior to 5:00 p.m., Eastern time, on the Expiration Date (unless payment is effected by means of a notice of guaranteed delivery as described below under “Payment for Shares”) at one of the offices of the Subscription Agent at the addresses set forth above.

     Qualified financial institutions that hold Shares as nominee for the account of others should notify the respective beneficial owners of such Shares as soon as possible to ascertain such beneficial owners’ intentions and to obtain instructions with respect to the Rights. For purposes of this Prospectus, “Qualified Financial Institution” shall mean a registered broker-dealer, commercial bank or trust company, securities depository or participant therein, or nominee thereof. If the beneficial owner so instructs, the nominee should complete the Subscription Certificate and submit it to the Subscription Agent with the proper payment. In addition, beneficial owners of Shares or Rights held through such a nominee should contact the nominee and request the nominee to effect transactions in accordance with the beneficial owners’ instructions.

     Shareholders who are registered holders can choose between either option set forth under “Payment for Shares” below.

Payment for Shares

      Payment for Shares shall be calculated by multiplying the Estimated Subscription Price of $     per Share times the sum of (i) the number of Rights held and intended to be exercised in the Primary Subscription, plus (ii) the number of additional Shares for which a shareholder wishes to over-subscribe under the Over-Subscription Privilege. For example, if a shareholder receives 300 Rights and wishes to subscribe for 100 Shares in the Primary Subscription, and also wishes to over-subscribe for 50 additional Shares pursuant to the Over-Subscription Privilege, he, she or it would send in [___] x 100 plus [___] x 50. Rights holders who wish to acquire Shares in the Primary Subscription or pursuant to the Over-Subscription Privilege may choose between the following methods of payment:

a.

If, prior to 5:00 p.m., Eastern Time, on the Expiration Date, the Subscription Agent shall have received a Notice of Guaranteed Delivery by telegram or otherwise, from a bank or trust company or a NYSE member firm guaranteeing delivery of (i) payment of the Estimated Subscription Price of $ ___per Share for the Shares subscribed for in the Primary Subscription and any additional Shares subscribed for pursuant to the Over-Subscription Privilege and (ii) a properly completed and executed Subscription Certificate, the subscription will be accepted by the Subscription Agent. The Subscription Agent will not honor a Notice of Guaranteed Delivery unless a properly completed and executed Subscription Certificate is received by the Subscription Agent prior to 5:00 p.m., Eastern Time, on the third Business Day after the Expiration Date (the “Protect Period”).

b.

Alternatively, a shareholder can, together with the properly completed and executed Subscription Certificate, send payment for the Shares acquired in the Primary Subscription and any additional Shares subscribed for pursuant to the Over-Subscription Privilege, to the Subscription Agent based on the Estimated Subscription Price of $      per Share. To be accepted, such payment, together with the Subscription Certificate, must be received by the Subscription Agent prior to 5:00 p.m., Eastern Time, on the Expiration Date.

     If the Estimated Subscription Price is greater than the actual Subscription Price, the excess payment will be applied toward the purchase of additional Shares to the extent that there remain unsubscribed Shares available after the Primary and Over-Subscription allocations are completed and a Rights holder desires to purchase additional Shares pursuant to his, her or its Over-Subscription Privilege. To the extent that sufficient unsubscribed Shares are not available to apply all of the excess payment toward the purchase of such additional Shares, available Shares will be allocated in the manner consistent with that described in the section entitled “Over-Subscription Privilege” above. Any excess payment will be refunded to you to the extent that additional Shares are unavailable.

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     A PAYMENT PURSUANT TO THE SECOND METHOD DESCRIBED ABOVE MUST ACCOMPANY ANY SUBSCRIPTION CERTIFICATE FOR SUCH SUBSCRIPTION CERTIFICATE TO BE ACCEPTED.

     Within five (5) Business Days following the completion of the Protect Period, a confirmation will be sent by the Subscription Agent to each shareholder (or, if the Fund’s Shares on the Record Date are held by a Qualified Financial Institution, to such Qualified Financial Institution). The date of the confirmation is referred to as the “Confirmation Date.” The confirmation will show (i) the number of Shares acquired pursuant to the Primary Subscription; (ii) the number of Shares, if any, acquired pursuant to the Over-Subscription Privilege; (iii) the Subscription Price and total purchase price for the Shares; and (iv) any additional amount payable by such shareholder to the Fund (e.g., if the Estimated Subscription Price was less than the Subscription Price on the Pricing Date) or any excess to be refunded by the Fund to such shareholder (e.g., if the Estimated Subscription Price was more than the Subscription Price on the Pricing Date). Any additional payment required from a shareholder must be received by the Subscription Agent prior to 5:00 p.m., Eastern Time, on the tenth Business Day after the Confirmation Date, and any excess payment to be refunded by the Fund to such shareholder will be mailed by the Subscription Agent within ten (10) Business Days after the Confirmation Date. All payments by a shareholder must be made in United States Dollars by money order or by checks drawn on banks located in the Continental United States payable to “Rivus Bond Fund.”

     Whichever of the above two methods is used, issuance and delivery of certificates for the Shares subscribed for are subject to collection of funds and actual payment pursuant to any notice of guaranteed delivery.

     The Subscription Agent will deposit all checks received by it prior to the final due date into a segregated interest bearing account at ___pending distribution of the Shares from the Rights Offering. All interest will accrue to the benefit of the Fund and investors will not earn interest on payments submitted.

     YOU WILL HAVE NO RIGHT TO RESCIND YOUR SUBSCRIPTION AFTER THE SUBSCRIPTION AGENT HAS RECEIVED THE SUBSCRIPTION CERTIFICATE OR NOTICE OF GUARANTEED DELIVERY.

     If a holder of Rights who acquires Shares pursuant to the Primary Subscription or the Over-Subscription Privilege does not make payment of any amounts due, the Fund reserves the right to take any or all of the following actions: (i) find other purchasers for such subscribed-for and unpaid-for Shares; (ii) apply any payment actually received by it toward the purchase of the greatest whole number of Shares which could be acquired by such holder upon exercise of the Primary Subscription or the Over-Subscription Privilege; (iii) sell all or a portion of the Shares purchased by the holder in the open market, and apply the proceeds to the amounts owed; and (iv) exercise any and all other rights or remedies to which it may be entitled, including, without limitation, the right to set off against payments actually received by it with respect to such subscribed Shares and to enforce the relevant guaranty of payment.

     The instructions accompanying the Subscription Certificates should be read carefully and followed in detail. DO NOT SEND SUBSCRIPTION CERTIFICATES TO THE FUND.

     The method of delivery of Subscription Certificates and payment of the Subscription Price to the Subscription Agent will be at the election and risk of the Rights holders, but if sent by mail it is recommended that the Subscription Certificates and payments be sent by registered mail, properly insured, with return receipt requested, and that a sufficient number of days be allowed to ensure delivery to the Subscription Agent and clearance of payment prior to 5:00 p.m., Eastern Time, on the Expiration Date. Because uncertified personal checks may take at least five Business Days to clear, you are strongly urged to pay, or arrange for payment, by means of a certified or cashier’s check or money order.

     All questions concerning the timeliness, validity, form and eligibility of any exercise of Rights will be determined by the Fund, whose determinations will be final and binding. The Fund in its sole discretion may waive any defect or irregularity, or permit a defect or irregularity to be corrected within such time as it may determine, or reject the purported exercise of any Right. Subscriptions will not be deemed to have been received or accepted until all irregularities have been waived or cured within such time as the Fund determines in its sole discretion. Neither the Fund nor the Subscription Agent will be under any duty to give notification of any defect or irregularity in connection with the submission of Subscription Certificates or incur any liability for failure to give such notification.

Method of Transferring Rights

     Sales through Subscription Agent. Rights holders who do not wish to exercise any or all of their Rights may instruct the Subscription Agent to sell any unexercised Rights. Subscription Certificates representing the Rights to be sold by the Subscription Agent must be received by the Subscription Agent by 4 p.m. Eastern Time on ___, 2009 (or if the Rights Offering is extended, until a comparable number of Business Days before the final Expiration Date). Upon the timely receipt by the Subscription Agent of appropriate instructions to sell Rights, the Subscription Agent will use its best efforts to complete the sale; and the Subscription Agent will remit the proceeds of sale to the Rights holders within 5 days

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after the Expiration Date to the extent practicable. No brokerage commissions will be charged to holders who elect to direct the Subscription Agent to sell their Rights, and the Fund will pay to the Subscription Agent a one-time fee of $___ for a shareholder to sell any or all of his Rights. If the Rights can be sold, sales of such Rights will be deemed to have been effected at the price actually received by the Subscription Agent on the day such Rights are sold. The Subscription Agent will also attempt to sell all Rights which remain unclaimed as a result of Subscription Certificates being returned by the postal authorities to the Subscription Agent as undeliverable as of the fourth Business Day prior to the Expiration Date. Such sales will be made at the price actually received on behalf of the non-claiming shareholders. The Subscription Agent will hold the proceeds from those sales for the benefit of such non-claiming shareholders until such proceeds are either claimed or become subject to escheat. There can be no assurance that the Subscription Agent will be able to complete the sale of any such Rights, and neither the Fund nor the Subscription Agent has guaranteed any minimum sales price for the Rights. All such Rights will be sold at the market price, if any, on the NYSE.

     Other Transfers. The Rights are transferable and will be admitted for trading on the NYSE. Assuming a market for the Rights exists, the Rights may be purchased and sold through usual brokerage channels until the Expiration Date. In such case, you will need to instruct your broker to sell any unexercised Rights in time for the broker to execute the transaction by the close of trading on the Expiration Date. The Rights evidenced by a single Subscription Certificate may be transferred in whole or in part by delivering to the Subscription Agent a Subscription Certificate properly endorsed for transfer, with instructions to register such portion of the Rights evidenced thereby in the name of the transferee and to issue a new Subscription Certificate to the transferee evidencing such transferred Rights. In such event, a new Subscription Certificate evidencing the balance of the Rights will be issued to the transferring Rights holder or, if the transferring Rights holder so instructs, to an additional transferee.

     Except for the fees charged by the Subscription Agent and Dealer Manager, including the one-time $___fee per shareholder related to sales through the Subscription Agent, all commissions, fees and other expenses (including brokerage commissions and transfer taxes) incurred in connection with the purchase, sale or exercise of Rights will be for the account of the transferor of the Rights and none of such commissions, fees or expenses will be paid by the Fund, the Dealer Manager or the Subscription Agent. Neither the Fund nor the Subscription Agent shall have any liability to a transferee or transferor of Rights if Subscription Certificates are not received in time for exercise or sale prior to the Expiration Date.

     The Fund anticipates that the Rights will be eligible for transfer through, and that the exercise of the Primary Subscription and the Over-Subscription Privilege may be effected through, the facilities of DTC.

Delivery of Certificates

     Certificates representing Shares purchased pursuant to the Primary Subscription will be delivered to subscribers as soon as practicable after the corresponding Rights have been validly exercised and full payment for the Shares has been received and cleared. Certificates representing Shares purchased pursuant to the Over-Subscription Privilege will be delivered to subscribers as soon as practicable after the Expiration Date and after all allocations have been effected.

Foreign Restrictions

     Subscription Certificates will only be mailed to Record Date Shareholders whose addresses are within the United States. Record Date Shareholders whose addresses are outside the United States or who have an APO or FPO address and who wish to subscribe to the Rights Offering either in part or in full should contact the Subscription Agent (___), by written instruction or recorded telephone conversation no later than three Business Days prior to the Expiration Date. The Fund will determine whether the Rights Offering may be made to any such shareholder. If the Subscription Agent has received no instruction by the third Business Day prior to the Expiration Date or the Fund has determined that the Rights Offering may not be made to a particular shareholder, the Subscription Agent will attempt to sell all of such shareholder’s Rights and remit the actual proceeds, if any, to such shareholders. If the Rights can be sold, sales of these Rights will be deemed to have been effected at the price actually received by the Subscription Agent on the day the Rights are sold.

Federal Income Tax Consequences Associated With the Rights Offering

     The following is a general summary of the significant federal income tax consequences of the receipt of Rights by a Record Date Shareholder and a subsequent lapse, exercise or sale of such Rights. The discussion also addresses the significant federal income tax consequences to a holder that purchases Rights in a secondary-market transaction (e.g., on the NYSE). The discussion is based upon applicable provisions of the Internal Revenue Code of 1986, as amended (the “Code”), the Treasury Regulations promulgated thereunder and other authorities currently in effect but does not address any state, local or foreign tax consequences of the Rights Offering. The discussion assumes, as is expected, that the fair market

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value of the Rights distributed to all of the Record Date Shareholders will be less than 15% of the total fair market value of all of Shares as of the Record Date.

     For purposes of the following discussion, the term “Old Share” shall mean a currently outstanding Share with respect to which a Right is issued and the term “New Share” shall mean a newly issued Share that is received upon the exercise of a Right.

All Record Date Shareholders

Neither the receipt nor the exercise of Rights by a Record Date Shareholder will result in taxable income to such shareholder for federal income tax purposes regardless of whether or not the shareholder makes the below-described election which is available under Section 307(b)(2) of the Code (a “Section 307(b)(2) Election”).

If a Record Date Shareholder makes a Section 307(b)(2) Election, the shareholder’s federal income tax basis in any Right received pursuant to the Rights Offering will be equal to a portion of the shareholder’s existing federal income tax basis in the related Old Share. If made, a Section 307(b)(2) Election is effective with respect to all Rights received by a Record Date Shareholder. A Section 307(b)(2) Election is made by attaching a statement to the Record Date Shareholder’s federal income tax return for the taxable year which includes the Record Date. Record Date Shareholders should carefully review the differing federal income tax consequences described below before deciding whether or not to make a Section 307(b)(2) Election.

Record Date Shareholders Making a Section 307(B)(2) Election

Lapse of Rights. If a Record Date Shareholder makes a Section 307(b)(2) Election, no taxable loss will be realized for federal income tax purposes if the shareholder retains a Right but allows it to lapse without exercise. Moreover, the existing federal income tax basis of the related Old Share will not be reduced if such lapse occurs.

Exercise of Rights. If an electing Record Date Shareholder exercises a Right, the shareholder’s existing federal income tax basis in the related Old Share must be allocated between such Right and the Old Share in proportion to their respective fair market values as of the Record Date (effectively reducing the shareholder’s basis in his Old Share). Upon such exercise of the shareholder’s Rights, the New Shares received by the shareholder pursuant to such exercise will have a federal income tax basis equal to the sum of the basis of such Rights as described in the previous sentence and the Subscription Price paid for the New Shares (as increased by any servicing fee charged to the shareholder by his broker, bank or trust company and other similar costs). If the Record Date Shareholder subsequently sells such New Shares (and holds such Shares as capital assets at the time of their sale), the shareholder will recognize a capital gain or loss equal to the difference between the amount received from the sale of the New Shares and the shareholder’s federal income tax basis in the New Shares as described above. Such capital gain or loss will be long-term capital gain or loss if the New Shares are sold more than one year after the date that the New Shares are acquired by the Record Date Shareholder. In addition, if a Record Date Shareholder exercises a Right and later sells the related Old Share, his gain on the sale of the Old Share will be increased (or his loss decreased) by the amount of the shareholder’s original basis in the Old Share that was allocated to the related Right as described above.

Sale of Rights. If an electing Record Date Shareholder sells a Right, he will recognize a gain or loss equal to the difference between the amount received for such Right and the federal income tax basis of the Right computed as set forth above under “Exercise of Rights”. Any such gain or loss will be capital gain or loss (if the Right is held as a capital asset at the time of its sale) and the Record Date Shareholder’s holding period for the Right will include the shareholder’s holding period for the related Old Share. Any such capital gain or loss will thus be long-term capital gain or loss if the related Old Share has been held by the Record Date Shareholder for more than one year at the time the Right is sold. In addition, if a Record Date Shareholder sells a Right and later sells the related Old Share, his gain on the sale of the Old Share will be increased (or his loss decreased) by the amount of the shareholder’s original basis in the Old Share that was allocated to the Right as described above.

Record Date Shareholders Not Making a Section 307(B)(2) Election

Lapse of Rights. If a Record Date Shareholder does not make a Section 307(b)(2) Election, no taxable loss will be realized for federal income tax purposes if the shareholder retains a Right but allows it to lapse without exercise. Moreover, the federal income tax basis of the related Old Share will not be reduced if such lapse occurs.

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Exercise of Rights. If a non-electing Record Date Shareholder exercises his Rights, the federal income tax basis of the related Old Shares will remain unchanged and the New Shares will have a federal income tax basis equal to the Subscription Price paid for the New Shares (as increased by any servicing fee charged to the shareholder by his broker, bank or trust company and other similar costs). If the Record Date Shareholder subsequently sells such New Shares (and holds such Shares as capital assets at the time of their sale), the shareholder will recognize a capital gain or loss equal to the difference between the amount received from the sale of the New Shares and the shareholder’s federal income tax basis in the New Shares as described above. Such capital gain or loss will be long-term capital gain or loss if the New Shares are sold more than one year after the Record Date Shareholder acquires the New Shares.

Sale of Rights. If a non-electing Record Date Shareholder sells a Right, he will recognize a gain equal to the entire amount received for such Right. Any such gain will be a capital gain (if the Right is held as a capital asset at the time of its sale) and the Record Date Shareholder’s holding period for the Right will include the shareholder’s holding period for the related Old Share. Any such capital gain will thus be long-term capital gain if the related Old Share has been held for more than one year at the time the Right is sold. In addition, the Record Date Shareholder’s federal income tax basis in the related Old Share will remain unchanged.

Secondary-Market Purchasers of Rights

The exercise of Rights by a purchaser who acquires such Rights on the NYSE or in another secondary-market transaction will not result in taxable income to such purchaser.

Lapse of Rights. A taxable loss will be realized by a purchaser who allows his Rights to expire without exercise. Such taxable loss will be equal to the purchaser’s cost for the Rights (as increased by any brokerage costs and similar costs) and will be a short-term capital loss if the purchaser holds the Rights as capital assets at the time of their lapse.

Exercise of Rights. A purchaser’s basis for determining gain or loss upon the sale of a New Share acquired through the exercise of his Rights will be equal to the sum of the Subscription Price for the New Share plus the purchase price of the Rights that were exercised in order to acquire such New Share (with such Subscription Price and purchase price each being increased by any applicable servicing fees charged to the purchaser by his broker, bank or trust company and other similar costs). A purchaser’s holding period for a New Share acquired upon exercise of a Right begins with the date of exercise of the Right. A taxable gain or loss recognized by a purchaser upon a sale of a New Share will be a capital gain or loss (assuming the New Share is held as a capital asset at the time of its sale) and will be a long-term capital gain or loss if the New Share has been held at the time of its sale for more than one year.

Sale of Rights. A taxable gain or loss recognized by a purchaser upon a sale of a Right will be a short-term capital gain or loss if the Right is held as a capital asset at the time of its sale.

Employee and Benefit Plan Considerations

Shareholders that are employee benefit plans subject to the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and/or plans subject to Section 4975 of the Code including corporate savings and 401(k) plans, Keogh Plans of self-employed individuals and Individual Retirement Accounts (“IRA”) (each a “Benefit Plan” and collectively, “Benefit Plans”), should be aware that additional contributions of cash in order to exercise Rights may be treated as Benefit Plan contributions and, when taken together with contributions previously made, may subject a Benefit Plan to excise taxes for excess or nondeductible contributions. In the case of Benefit Plans qualified under Section 401(a) of the Code, additional cash contributions could cause the maximum contribution limitations of Section 415 of the Code or other qualification rules to be violated. Benefit Plans contemplating making additional cash contributions to exercise Rights should consult with their counsel prior to making such contributions.

Benefit Plans and other tax exempt entities, including governmental plans, should also be aware that if they borrow in order to finance their exercise of Rights, they may become subject to the tax on unrelated business taxable income (“UBTI”) under Section 511 of the Code. If any portion of an IRA is used as security for a loan, the portion so used is also treated as distributed to the IRA depositor.

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ERISA contains prudence and diversification requirements, and ERISA and the Code contain prohibited transaction rules that may impact the exercise of Rights. Among the prohibited transaction exemptions issued by the Department of Labor that may exempt a Benefit Plan’s exercise of Rights are Prohibited Transaction Exemption 84-24 (governing purchases of Shares in investment companies) and Prohibited Transaction Exemption 75-1 (covering sales of securities).

Due to the complexity of these rules and the penalties for noncompliance, Benefit Plans should consult with their counsel regarding the consequences of their exercise of Rights under ERISA and the Code.

Dividend Distributions

In addition, investors who exercise Rights will be buying Shares shortly before the Fund normally declares taxable quarterly dividends and distributions. This is commonly known as “buying the dividend.” The quarterly dividend and distribution may be taxable to shareholders even though a portion of it effectively represents a return of the purchase price of the Shares bought.

USE OF PROCEEDS

     The net proceeds of the Offering, assuming the Offering is fully subscribed, are estimated to be approximately $      million, based on an Estimated Subscription Price of $      per Share, and after deducting expenses related to the Offering estimated at approximately $___. The foregoing estimate of the net proceeds of the Offering is based on the NAV of the Fund’s Shares on ___, 2009. Accordingly, the assumptions and projections contained in this prospectus are subject to change significantly depending on changes in market conditions for the Fund’s Shares and performance of the Fund’s portfolio. The Fund will invest the net proceeds of the Offering in accordance with its investment objective and policies. The Adviser anticipates that the proceeds will be invested promptly as investment opportunities are identified, depending on market conditions and the availability of appropriate securities, and it is anticipated to take not more than approximately [three] months. Pending investment, the proceeds will be invested in short-term debt instruments.

CAPITALIZATION

     The Fund is authorized to issue an unlimited number of Shares of Beneficial Interests, par value of $0.01 per Share. Shares have no preemptive, conversion, exchange or redemption rights. Each Share has equal voting, dividend, distribution and liquidation rights. The Shares outstanding are, and those Shares issuable in the Offering when issued will be, fully paid and non-assessable. Shareholders are entitled to one vote per Share. All voting rights for the election of trustees are non-cumulative, which has the effect of allowing holders of more than 50% of the Shares to elect 100% of the trustees then nominated for election is they choose to do so and, in such event, the holders of the remaining Shares will be unable to elect any trustees. The Fund holds an annual meeting of shareholder each fiscal year. The foregoing description is subject to the provisions contained in the Fund’s Declaration of Trust and Bylaws.

     The following chart shows the number of Shares authorized and outstanding as of ___, 2009:

		Amount Held by		Amount Outstanding Exclusive
		Registrant or for its		of Amounts Held by Registrant
Title of Class	Amount Authorized	Account		or for its Account
Shares of Beneficial Interest, $0.01 par value	Unlimited		0		4,907,678

Repurchase of Shares of Beneficial Interest

Shares of closed-end investment companies often trade at a discount to their NAV, and Shares of the Fund have in the past and may in the future trade at a discount to their NAV. The market price of Shares of the Fund is determined by such factors as relative demand for and supply of such Shares in the market, the Fund’s NAV, general market and economic conditions and other factors beyond the control of the Fund. Although the Fund’s shareholders do not have the right to require the Fund to redeem their Shares, the Fund may take action, from time to time, to repurchase its Shares in the open market or make tender offers for its Shares at its NAV. This may, but will not necessarily, have the effect of reducing any

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market discount from NAV. Because the Fund has never repurchased its Shares and has no present intention to do so, the Board has not established procedures and criteria applicable to repurchases of shares by the Fund.

MANAGEMENT OF THE FUND

Board of Trustees

     The Board is responsible for overseeing the overall management and operations of the Fund. The SAI contains additional information about the Fund’s trustees. Subject to the general supervision of the Board, the Adviser manages the Fund’s portfolio, makes decisions with respect to and places orders for all purchases and sales of the Fund’s securities, and maintains records relating to such purchases and sales.

     A discussion of the basis for the Board approval of the investment advisory agreement for the Fund is available in the semi-annual report to shareholders for the period ended September 30, 2008.

Investment Adviser and Portfolio Management

     Investment Adviser. The Fund is advised by MBIA Capital Management Corp. (the “Adviser”), whose principal business address is 113 King Street, Armonk, New York 10504. The Adviser has been providing advisory services to the Fund since June 2005. As of December 31, 2008, the Adviser had a total of $43.6 billion in assets under management. The Adviser serves as an investment adviser to pension funds, endowments, local government entities insurance companies and several other investment companies. The Adviser is a wholly-owned subsidiary of MBIA, Inc., a Connecticut corporation, whose common stock is a publicly traded on the New York Stock Exchange under the symbol “MBI.” MBIA, Inc., through its subsidiaries is in the business of providing financial guarantee insurance and investment management and financial services to public finance clients and financial institutions on a global basis.

     Pursuant to an advisory agreement (the “Advisory Agreement”) with the Fund dated as of October 31, 2005, the Adviser manages the investment and reinvestment of the Fund’s assets, and administers the Fund’s affairs, subject to the direction of the Fund’s Board and officers. As compensation for its services, the Adviser is entitled to a fee equal to, on an annual basis, 0.50% on the first $100 million of the Fund’s month end net assets and 0.40% on the excess. On September 10, 2008, the Board, including those persons who are interested persons and a majority of the trustees who are not parties to the Advisory Agreement or interested persons of such parties (the “Disinterested Trustees”), approved an extension of the Advisory Agreement through September 2009. At the time of the approval of the latest extension, Mr. W. Thacher Brown, a trustee, was an interested person of the Fund. The Advisory Agreement was last submitted to a vote of the shareholders on September 28, 2005. The Advisory Agreement may be continued annually if approved by both (1) the vote of a majority of the Board or the vote of a majority of the outstanding voting securities of the Fund (as provided in the 1940 Act and (2) by the vote of a majority of the Disinterested Trustees cast in person at a meeting called for the purpose of voting on such approval. The Advisory Agreement may be terminated at any time without the payment of any penalty, upon the vote of a majority of the Board or a majority of the outstanding voting securities of the Fund or by the Adviser, on 60 days’ written notice by either party to the other. The Agreement will terminate automatically in the event of its assignment (as such term is defined in the 1940 Act and the rules thereunder). See the Fund’s SAI for more information about the Fund’s Investment Advisory Agreement. A discussion regarding the basis for the Board’s approval of the Investment Advisory Agreement is available in the Fund’s semi-annual report to shareholders for the semi-annual period ended September 30, 2008.

     Portfolio Management.

     Robert T. Claiborne, CFA, Officer of the Adviser and Vice President of the Fund. Mr. Claiborne has acted as a portfolio manager of the Fund since 2005.

     Gautam Khanna, CPA, CFA, Officer of the Adviser and Vice President of the Fund, has acted as a portfolio manager for the Fund since 2005.

     Both Mr. Claiborne and Mr. Khanna are principally responsible for the day-to-day management of the Fund’s portfolio

     The SAI provides additional information about the portfolio managers’ compensation, other accounts managed by the portfolio managers and their ownership of securities in the Fund.

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Benefit to the Adviser

     The Fund’s Adviser will benefit from the Offering because the Adviser’s fee is based on the average net assets of the Fund. It is not possible to state precisely the amount of additional compensation the Adviser will receive as a result of the Offering because the proceeds of the Offering will be invested in additional portfolio securities which will fluctuate in value. However, assuming all Rights are exercised and that the Fund receives the maximum proceeds of the Offering, the annual compensation to be received by the Adviser would be increased by approximately $___.

     The Fund may, in the future and at its discretion, choose to make additional rights offerings from time to time for a number of Shares and on terms which may or may not be similar to the Offering. Any such future rights offering will be made in accordance with the 1940 Act. Under the laws of Delaware, the state in which the Fund is organized, the Board is authorized to approve rights offerings without obtaining shareholder approval. The staff of the Securities and Exchange Commission has interpreted the 1940 Act as not requiring shareholder approval of a rights offering at a price below the then current NAV so long as certain conditions are met, including a good faith determination by a fund’s board of trustees that such offering would result in a net benefit to existing shareholders.

Expenses of the Fund

     Except as indicated above, the Fund will pay all of its expenses, including fees of the trustees not affiliated with the Adviser and board meeting expenses; fees of the Adviser and Administrator; interest charges; franchise and other taxes; organizational expenses; charges and expenses of the Fund’s legal counsel and independent accountants; expenses of repurchasing Shares; expenses of issuing any preferred Shares or indebtedness; expenses of printing and mailing Share certificates, shareholder reports, notices, proxy statements and reports to governmental offices; brokerage and other expenses connected with the execution, recording and settlement of portfolio security transactions; expenses connected with negotiating, effecting purchase or sale, or registering privately issued portfolio securities; expenses of fidelity bonding and other insurance expenses including insurance premiums; expenses of shareholder meetings; SEC and state registration fees; NYSE listing fees; and fees payable to the National Association of Securities Dealers, Inc. in connection with this Offering and fees of any rating agencies retained to rate any preferred Shares issued by the Fund.

INVESTMENT OBJECTIVE AND POLICIES

     The Fund’s objective is to seek a high rate of return, primarily from interest income and trading activity, from a portfolio principally consisting of debt securities. It will seek capital appreciation and gain principally by purchasing debt securities at prices the Adviser believes are below their intrinsic value. The Fund will also look to benefit from trading securities to optimize the risk adjusted yields in the Fund. The Fund may, but has no current plans to, borrow to obtain investment leverage. There can be no assurance that the Fund will achieve its objective.

Investment Policies — General

     The Fund will normally invest at least 80% of its assets in debt securities. Seventy-five percent of the Fund’s assets will be invested in following types of higher quality, non-convertible debt securities (including bonds and debentures):

• debt securities (with or without attached warrants) rated, at the time of purchase, within the four highest grades as determined by Moody’s (i.e., Aaa, Aa, A or Baa) or Standard & Poor’s (i.e., AAA, AA, A or BBB) (collectively, the “NRSRO Rated Securities”);

• short-term debt securities (“debentures”) which are not NRSRO Rated Securities, but which are obligations of issuers having, at the time of purchase, any NRSRO Rated Securities and which debentures are considered by the Adviser to have an investment quality comparable to NRSRO Rated Securities;

• obligations of the United States Government, its agencies or instrumentalities; and

• bank debt securities (with or without attached warrants) which, although not NRSRO Rated Securities, are considered by the Adviser to have an investment quality comparable NRSRO Rated Securities.

     The securities rated Baa by Moody’s or BBB by Standard & Poor’s held in this portion of the Fund’s portfolio have speculative characteristics. In addition, changes in economic conditions or other circumstances are more likely to result in an issuer of these types of securities having a weakened capacity to make principal and interest payments on such

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securities than would be the case of issuers with higher rated securities. The ratings criteria described above apply at the time of acquisition of the security. In the event that a security held in this portion of the Fund’s portfolio is downgraded to below Baa or BBB, the Fund will no longer include such security in this portion of the Fund’s portfolio. The Fund does not expect that the value of warrants in this part of its portfolio will often be significant. The Moody’s and Standard & Poor’s descriptions of the various rating categories, including the speculative characteristics of the lower categories, are set forth in Appendix A, “Ratings of Corporate Obligations and Commercial Paper.”

     The balance of the Fund’s investments is expected to be principally in debt securities that do not meet the standards described above and in preferred stocks which may be convertible or may be accompanied by warrants or other equity securities. Any securities in this part of the portfolio may be of lower quality and may not be rated by any NRSRO. For a description of the characteristics and risks of such lower-rated debt securities, see “Below Investment Grade Corporate Bonds” below, and “Risk Factors and Special Considerations — Below Investment Grade Securities.” All warrants remaining after sale of the securities to which they were attached and common stocks acquired on conversion or exercise of warrants will be included in this part of the Fund’s portfolio. Any such warrants or common stocks may be held until a long-term holding period has been established for tax purposes, after which they ordinarily will be sold.

     The Fund focuses on a relative value strategy. The Fund seeks to identify opportunities to purchase securities with high risk-adjusted yields across various fixed income sectors in order to maintain and increase the Fund’s income, and therefore the Fund’s dividend payment. The Fund’s average duration is expected to be near the duration of the Lehman U.S. Corporate Investment Grade Credit Index which is the Fund’s benchmark. On December 31, 2008, the Fund’s duration was 5.37 years and the duration of the Fund’s benchmark was 6.03 years. The Adviser expects that the Fund’s duration will remain between 4 and 8 years; however, the Fund’s duration may be lengthened or shortened depending on market conditions.

     The Fund may purchase securities selling at a premium over or at a discount from their face amount.

     When the Adviser believes that market conditions make it appropriate, for temporary, defensive purposes the Fund may invest up to 100% of its assets in cash, high quality short-term money market instruments, and in bills, notes or bonds issued by the U.S. Treasury Department or by other agencies of the U.S. Government. When the Fund makes investments for defensive purposes, it may not achieve its investment objective.

U.S. Government Obligations

     Obligations of the U.S. Treasury include bills, notes and bonds issued by the U.S. Treasury and separately traded interest and component parts of such obligations that are transferable through the federal book-entry system known as Separately Traded Registered Interest and Principal Securities (“STRIPS”) and Coupon Under Book Entry Safekeeping (“CUBES”). Obligations of certain agencies and instrumentalities of the U.S. Government, such as the Government National Mortgage Association and the Export-Import Bank of the United States, are supported by the full faith and credit of the U.S. Treasury; others, such as those of the Federal National Mortgage Association, are supported by the right of the issuer to borrow from the U.S. Treasury; others, such as those of the Student Loan Marketing Association, are supported by the discretionary authority of the U.S. Government to purchase the agency’s obligations; still others, such as those of the Federal Farm Credit Banks or the Federal Home Loan Mortgage Corporation, are supported only by the credit of the instrumentality. No assurance can be given that the U.S. Government would provide financial support to U.S. Government-sponsored agencies or instrumentalities if it is not obligated to do so by law. The Fund may invest in mortgage pass-through securities and in collateralized mortgage obligations (“CMO’s”) that are issued or guaranteed by agencies or instrumentalities of the U.S. Government. Mortgage pass-through securities represent interests in an underlying pool of mortgage loans. CMOs are debt obligations or multiclass pass-through certificates backed by mortgage pass-through securities or pools of whole mortgage loans. The investment characteristics of such mortgage-backed securities differ from traditional debt securities. The major differences include the fact that interest payments and principal repayments on such securities are generally made more frequently (usually monthly), and principal generally may be paid at any time because the underlying mortgage loans generally may be prepaid at any time. Prepayment rates are influenced by changes in current interest rates and a variety of economic, geographic, social, and other factors and cannot be predicted with certainty. Prepayment rates on the underlying mortgage loans tend to increase during periods of declining interest rates. If general interest rates also decline, the amounts available for reinvestment by the Fund during such periods are likely to be reinvested at lower interest rates than the Fund was earning on the mortgage-backed securities that were prepaid. Mortgage-backed securities may decrease in value as a result of increases in interest rates and may benefit less than other fixed income securities from declining interest rates because of the risk of prepayment. See “Risk Factors and Special Considerations — Below Investment Grade Securities — Prepayment Risk.” These differences can result in significantly greater price and yield volatility than is the case with traditional debt securities.

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Repurchase Agreements

     The Fund may enter into repurchase agreements with domestic banks or broker-dealers deemed creditworthy under guidelines approved by the Fund’s Board. A repurchase agreement is a short-term investment in which the purchaser (i.e., the Fund) acquires ownership of a debt security, and the seller agrees to repurchase the obligation at a future time and set price, usually not more than seven days from the date of purchase, thereby determining the yield during the purchaser’s holding period. The value of the underlying securities will be at least equal at all times to the total amount of the repurchase agreement obligation, including the interest factor. If the seller were to default on its obligation to repurchase the underlying instrument, the Fund could experience loss due to delay in liquidating the collateral and to adverse market action. Also, it is possible that the Fund may be unable to substantiate its interest in the underlying securities. To minimize this risk, the securities underlying the repurchase agreement will be held by a custodian at all times in an amount at least equal to the repurchase price, including accrued interest, and the Fund will perfect a security interest in such underlying securities.

Short-Term Trading

     A technique which the Fund intends to use in seeking its investment objective is short-term trading. As used herein, “short-term trading” means selling securities held for a short period of time, usually several months, but often less than one month and occasionally less than one day. Short-term trading will be used by the Fund principally in two situations:

Market Developments. Short-term trading will be used when the Fund sells a security to avoid depreciation in what the Fund anticipates will be a decline in the market prices of debt securities (e.g., when there is a rise in interest rates) or when the Fund purchases a security in anticipation of a rise in the market prices of debt securities (e.g., when there is a decline in interest rates) and later sells such security. Short-term trading of this type involves a continuous evaluation of price levels, the long-term trend of interest rates, interest rates available currently on debt securities, and factors expected to influence interest rates in the near future, such as significant increases or decreases in the overall demand for or supply of debt securities. For example, an unusually large supply might occur when a substantial number of issues are brought to market at or about the same time. The Adviser believes that by continually making these evaluations, it will be able to take advantage of anticipated changes in prices by selling some of the Fund’s debt securities when it anticipates a decline in prices or by purchasing debt securities (possibly with borrowed funds) if it anticipates a rise in prices.

Short-term trading of this type is illustrated by the following examples. If, in the Adviser’s judgment, interest rates are likely to decline and debt security prices likely to rise, the Fund may seek to replace short-term debt securities or debt securities having a relatively high interest rate with long-term debt securities or debt securities selling at a discount from their principal amount if the Adviser believes that, at such times, the prices of such debt securities will appreciate more than the prices of other debt securities. At such times, the Fund may borrow money for the purpose of purchasing securities as discussed in the SAI under “Additional Information About Investment Objective And Policies — Investment Policies — Leverage and Borrowing.” If the Adviser believes that interest rates are likely to increase and debt security prices likely to decline, the Fund may replace long-term or discount debt securities with short-term securities or debt securities selling at or above their call prices if the Adviser believes that, at such times, the prices of such debt securities may depriciate less than the prices of other debt securities.

Of course, if the Adviser’s expectations of changes in interest rates and prices prove to be incorrect, the Fund’s potential capital gains will be reduced or its potential capital losses will be increased.

Yield Spread Disparities. Short-term trading will also be used when the Fund sells a security and purchases another at approximately the same time in order to take advantage of what the Adviser believes is a temporary disparity in the normal yield relationship between the two securities (the “yield spread disparity”). When the Adviser’s evaluation of two debt securities indicates that the yields available on such securities in relation to each other are not in line with this normal (or expected) relationship, there is said to be a “disparity” in the relationship of the yields of the two securities. The Fund attempts to discover such distorted relationships, to determine that the distortion is temporary, and to make portfolio transactions based upon them, in anticipation that the normal yield relationship between the two securities will be restored (or achieved) and the portfolio will be benefited by the resulting change in prices. In some cases, the Adviser’s evaluation is based upon historical relationships between debt securities, but many factors relating to the current market are also involved in the recognition of

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yield spread disparities. While yield spread disparities have occurred in the past, there is no assurance that they will continue to occur in the future.

Such trading of debt securities is sometimes referred to as “bond swapping” and will be undertaken even if levels of interest rates on debt securities remain unchanged. Yield spread disparities occur frequently for reasons not directly related to the general movement of interest rates, such as changes in the overall demand for or supply of various types of debt securities, changes in the investment objectives, market expectations or cash requirements of investors, and the requirements of dealers to correct long or short inventory positions.

The Adviser believes that, by such portfolio transactions, it may be able to increase the appreciation potential or income of the Fund’s portfolio. Of course, if the Adviser’s evaluations of the normal relationship between the yields of two securities are incorrect, the potential capital appreciation and income of the Fund’s portfolio may be lower than if short-term trading had not been utilized or its potential capital losses may be increased.

Short-term trading will be used principally in connection with higher quality, non-convertible debt securities, which are often better suited for short-term trading because generally the market in such securities is of greater depth and offers greater liquidity than the market in debt securities of lower quality. It is anticipated that short-term trading will be less applicable to convertible securities since such securities will usually be purchased when the Fund believes that the market value of the underlying equity security is likely to appreciate over a period of time.

Whether any appreciation or increase in income will be realized by short-term trading will depend upon the ability of the Adviser to evaluate particular securities and anticipate relevant market factors, including interest rate trends and variations from such trends. Short-term trading such as that contemplated by the Fund places a premium upon the ability of the Adviser to obtain relevant information, evaluate it promptly, and take advantage of its evaluations by completing transactions on a favorable basis. To the extent that the Adviser does not accurately evaluate particular securities or anticipate changes in market factors, short-term trading may result in a loss to the Fund.

Below Investment Grade Corporate Bonds

     The Fund may invest up to 25% of its total assets (measured at the time of investment) in lower quality debt securities. These debt securities are securities rated Ba or B by Moody’s or BB or B by Standard & Poor’s and unrated securities of comparable quality; provided, however, that the Fund may invest no more that 10% of its total assets in debt securities rated B by Moody’s or Standard & Poor’s or in unrated securities of comparable quality. Lower rated debt securities, also referred to as “junk bonds,” are considered to be speculative and involve greater risk of default or price changes due to changes in the issuer’s creditworthiness. Yields and market values of these bonds will fluctuate over time, reflecting changing interest rates and the market’s perception of credit quality and the outlook for economic growth. When economic conditions appear to be deteriorating, lower rated bonds may decline in value, regardless of prevailing interest rates. Accordingly, adverse economic developments, including a recession or a substantial period of rising interest rates, may disrupt the high yield bond market, affecting both the value and liquidity of such bonds. The market prices of these securities may fluctuate more than those of higher rated securities and may decline significantly in periods of general economic difficulty, which may follow periods of rising interest rates. An economic downturn could adversely affect the ability of issuers of such bonds to make payments of principal and interest to a greater extent than issuers of higher rated bonds might be affected.

When-Issued Securities

     The Fund may enter into commitments to purchase securities on a forward or when-issued basis. When-issued securities are securities purchased for delivery beyond the normal settlement date at a stated price and yield. In the Fund’s case, these securities are subject to settlement within 45 days of the purchase date. The interest rate realized on these securities is fixed as of the purchase date. The Fund does not pay for such securities prior to the settlement date and no interest accrues to the Fund before settlement. These securities are subject to market fluctuation due to changes in market interest rates. The Fund will enter into these commitments with the intent of buying the security but may dispose of such security prior to settlement. At the time the commitment is entered into, the Fund will establish and maintain a segregated account in an amount sufficient to cover the obligation under the when-issued contract. At the time the Fund makes the commitment to purchase securities on a when-issued basis, it will record the transaction and thereafter reflect the value of

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such security purchased in determining its NAV. At the time of delivery of the security, its value may be more or less than the fixed purchase price.

Portfolio Turnover Rate

     The Fund’s annual portfolio turnover rate during fiscal years ended March 31, 2008, 2007, and 2006 was approximately 17.25%, 25.90% and 24.33% respectively. The turnover rate will depend on a number of factors, including the qualification of the Fund as a regulated investment company under the Code and the number of trading opportunities that occur in which the Fund believes that it can improve the return on its portfolio. The number of such opportunities will be substantially influenced by the general volatility of the bond market and the Fund’s evaluation of its portfolio in relation to unanticipated market movements. A high turnover rate necessarily involves greater expenses to the Fund. The Fund will engage in short-term trading if it believes a transaction, net of costs (including custodian charges and any brokerage commissions), will result in improving the appreciation potential or income of its portfolio. Most of the Fund’s transactions are expected to be affected in the over-the-counter market directly with market markers acting as principal and will not involve the payment of any brokerage commissions.

Investment Restrictions

     The Fund is subject to a number of investment restrictions, some of which are deemed fundamental and may not be changed without the affirmative vote of a majority of the outstanding voting securities of the Fund, and some of which are not fundamental and may be changed by the Fund’s Board. The Fund’s fundamental investment policies may be changed only with the approval of the holders of a “majority of the Fund’s outstanding voting securities,” which, as used in this prospectus, means the lesser of (1) 67% of the Shares represented at a meeting at which more than 50% of the outstanding Shares are present in person or by proxy, or (2) more than 50% of the outstanding Shares. Any investment policy or restriction which involves a maximum percentage of securities or assets is not considered to be violated unless an excess over the percentage occurs immediately after an acquisition of securities or utilization of assets and results therefrom. The Fund’s fundamental policies are set forth below.

1.	The Fund will not issue any senior securities (as defined in the 1940 Act), except insofar as any borrowings permitted in (3) below might be considered to be the issuance of senior securities.
2.	The Fund may write, purchase, hold, exercise and dispose of, put and call options on fixed income securities and on futures contracts on fixed income securities, provided that immediately after an option has been purchased or written by the Fund, the aggregate market value of the securities underlying all such options (in the case of options on future contracts, the securities covered by such contracts) does not exceed 20% of the Fund’s total assets. The Fund may acquire a contractual commitment (a “Stand-by Commitment”) giving it the option to sell modified pass-through mortgage-backed securities guaranteed by the Government National Mortgage Association or long-term U.S. Government bonds to the party issuing the commitment, unless the acquisition would cause the market value of all securities which are the subject of Stand-by Commitments held by the Fund to exceed 10% of its total assets. The Fund will not purchase securities on margin except that it may obtain such short-term credits as may be necessary for the clearance of purchases or sales of securities, and may make margin deposits in connection with the acquisition and holding of futures contracts. The Fund may make short sales hedged by futures contracts for an equivalent amount of securities, provided, however, that short sales will only be made of securities which fall within the categories of higher quality non-convertible debt securities in which, under normal circumstances, at least 75% of the Fund’s assets will be invested. (See “Investment Policies — General” above.)
3.	The Fund will not borrow money, except that it may borrow money from banks (i) on an unsecured basis, provided that immediately after such borrowings, the amount of all borrowings is not more than 20% of the fair market value of the Fund’s assets (including the proceeds of the borrowings) less its liabilities or (ii) for temporary or emergency purposes but only in an amount not exceeding 5% of the market value of its total assets.

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4.	The Fund will not underwrite the securities of other issuers, but this restriction shall not be applicable to the acquisition, holding and sale of securities acquired in private placement as provided in (9)(g) below.
5.	The Fund will not invest more than 25% of the market value of its total assets in the securities of issuers in any industry.
6.	The Fund will not purchase or sell real estate; however, the Fund may purchase or hold securities issued by companies such as real estate investment trusts which deal in real estate or interests therein.
7.	The Fund may purchase and sell interest rate futures contracts and make deposits of assets as margin in connection therewith, as necessary, but otherwise will not purchase or sell commodities or commodity contracts.
8.	The Fund will not make loans to other persons, except that it may (i) purchase debt securities in accordance with its investment objectives, (ii) lend its portfolio securities to brokers, dealers and banks which it deems qualified, if the borrower agrees to pledge collateral to the Fund equal in value at all times to at least 100% of the value of the securities loaned, and (iii) lend cash to securities dealers or banks which it deems qualified, initially on a wholly secured basis, in amounts which, immediately after any such loans, do not exceed in the aggregate 15% of the value of its total assets, nor 5% of such value to any one securities dealer or bank.
9.	(a) The Fund will not mortgage, pledge or hypothecate its assets to secure any borrowing except to secure temporary or emergency borrowing and then only in an amount not exceeding 15% of the market value of its total assets. This restriction shall not be applicable to margin deposits made in connection with the acquisition or holding of futures contracts, or to deposits of assets made in connection with short sales.

(b) The Fund will not invest less than 75% of the value of its total assets in (A) cash and cash items, (B) government securities (as defined in the 1940 Act) and (C) other securities (limited in respect of any one issuer to an amount not exceeding 5% of the value of its total assets).

(c) The Fund will not purchase more than 10% of the outstanding voting securities of any one issuer.

(d) The Fund will not purchase the securities of an issuer, if, to the Fund’s knowledge, one or more officers or directors of the Fund or of the investment adviser of the Fund individually own beneficially more than 0.5%, and those owning more than 0.5% together with beneficially more than 5%, of the outstanding securities of such issuer.

(e) The Fund will not invest more than 5% of the value of its total assets in securities of issuers which, with their predecessors, any guarantor of the securities or any corporation affiliated with the issuer which was agreed to supply to issuer funds sufficient to pay the interest charges on the securities, have not had at least three years’ continuous operation.

(f) The Fund will not participate on a joint or a joint and several basis in any securities trading account.

(g) The Fund will not purchase securities which the Fund may not be free to sell to the public without registration of the securities under the Securities Act of 1933 if such an acquisition would cause the Fund to have more than 15% of the market value of its total assets invested in such securities. Euro-dollar obligations held by the Fund will not be included within this percentage limitation.

(h) The Fund will not acquire any futures contracts to deliver or acquire any security, and will not make any short sales, if, immediately thereafter, the aggregate value of the securities

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required to be delivered and to be acquired by the Fund pursuant to futures contracts would exceed 20% of the total assets of the Fund.

     The foregoing policies are fundamental and may not be changed without shareholder approval.

     The Fund’s policies which are not deemed fundamental and which may be changed by the Board without shareholder approval are set forth below:

a.	The Fund will not invest in companies for the purpose of exercising control or management.
b.	The Fund may not invest in the securities of other investment companies, except that it may invest in securities of no-load open-end money market investment companies and investment companies that invest in high yield debt securities if, immediately after any purchase of the securities of any such investment company: (i) securities issued by such investment company and all other investment companies owned by the Fund do not have an aggregate value in excess of 10% of the value of the total assets of the Fund; (ii) the Fund does not own more than three percent of the total outstanding voting stock of such investment company; and (iii) the Fund does not own securities issued by such investment company having an aggregate value in excess of 5% of the value of the total assets of the Fund. The Fund’s investment in securities of other investment companies will be subject to the proportionate share of the management fees and other expenses attributable to such securities of other investment companies.
c.	The Fund will not invest in the securities of foreign issuers, except for (i) those securities of the Canadian Government, its provinces and municipalities which are payable in United States currency, and (ii) securities of foreign issuers which are payable in United States dollars (“Yankee Bonds”). The Fund may also invest in Euro-dollar obligations with maturities up to one year, but the Fund will not acquire Yankee Bonds or Euro-dollar obligations if the acquisition would cause more than 15% of the Fund’s assets to be invested in Yankee Bonds and Euro-dollar obligations.
d.	The Fund will not invest more than 2% of the value of its total assets in warrants (valued at the lower of cost or market), except warrants acquired on initial issuance where the warrants are attached to or otherwise in a unit with other securities.

     The SAI contains additional information about Fund’s investment objectives and policies.

RISK FACTORS AND SPECIAL CONSIDERATIONS

     Investing in Shares of the Fund will provide you with an equity ownership interest in the Fund. The NAV of the Shares fluctuate with and be affected by, among other things, market discount risk, issuer risk, credit risk, high-yield risk, interest rate risk, reinvestment risk, mortgage-related and other asset-backed securities risk, mortgage market/subprime risk, government entity risk, convertible securities risk, preferred securities risk, management risk, valuation risk, focused investment risk, derivatives risk, counterparty risk, equity securities and related market risk, smaller company risk, other investment companies risk, inflation/deflation risk, liquidity risk, and market disruption. These risks are summarized below.

Credit Risk

     Credit risk is the risk that one or more of the Fund’s investments in debt securities or other instruments will decline in price, or fail to pay interest, liquidation value or principal when due, because the issuer of the obligation or the issuer of a reference security experiences an actual or perceived decline in its financial status, or fails to pay principal or interest when due. If an issuer defaults, the Fund will lose money.

Interest Rate Risk

     Generally, when market interest rates rise, the prices of debt obligations fall, and vice versa. Interest rate risk is the risk that debt obligations and other instruments in the Fund’s portfolio will decline in value because of increases in market interest rates. The prices of long-term debt obligations generally fluctuate more than prices of short-term debt obligations as interest rates change. Because the Fund will normally have an intermediate average portfolio duration (i.e., a two- to eight-

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year time frame), the Shares’ NAV and market price per Share will tend to fluctuate more in response to changes in market interest rates than if the Fund invested mainly in short-term debt securities. During periods of rising interest rates, the average life of certain types of securities may be extended due to slower than expected payments. This may lock in a below market yield, increase the security’s duration and reduce the security’s value. In addition to directly affecting debt securities, rising interest rates may also have an adverse effect on the value of any equity securities held by the Fund. The Fund’s use of leverage, if any, will tend to increase the Fund’s interest rate risk.

     The Fund may invest in variable and floating rate debt securities, which generally are less sensitive to interest rate changes, but may decline in value if their interest rates do not rise as much, or as quickly, as interest rates in general. Conversely, floating rate securities will not generally increase in value if interest rates decline. The Fund also may invest in inverse floating rate debt securities, which may decrease in value if interest rates increase. Inverse floating rate debt securities may also exhibit greater price volatility than a fixed rate debt obligation with similar credit quality. When the Fund holds variable or floating rate securities, a decrease (or, in the case of inverse floating rate securities, an increase) in market interest rates will adversely affect the income received from such securities and the NAV of the Shares.

Dilution

     If you do not exercise all of your Rights, you will likely own a smaller proportional interest in the Fund when the Rights Offering is over (i.e., proportional dilution). In addition, whether or not you exercise your Rights, because the Subscription Price (and net proceeds to the Fund) will be below the Fund’s NAV per Share on the Expiration Date the per Share NAV of your Shares will be diluted (reduced) immediately as a result of the Offering (i.e., economic dilution). In other words, because:

• the Subscription Price per Share is ___% of the NAV on the Pricing Date;

• you will indirectly bear the expenses of the Offering; and

• the number of Shares outstanding after the Offering will have increased proportionately more than the increase in the size of the Fund’s net assets

you will experience economic dilution in addition to proportional dilution.

     The Fund cannot state precisely the amount of any dilution because it is not known at this time

• what the NAV per Share will be on the Expiration Date; or

• what proportion of the Rights will be exercised.

     In addition, because the Dealer Manager may purchase and resell Shares not subscribed for, you could be further diluted.

     The impact of the Offering on NAV per Share is shown by the following example, assuming a Subscription Price of $___, full Primary Subscription and Over-Subscription Privilege exercise, payment of the Dealer Manager and soliciting fees, and $___in estimated expenses related to the Offering.

Net Asset Value (“NAV”)	$	___
Subscription Price	$	___
Reduction in NAV ($)	$	___
Reduction in NAV (%)		%

     If you do not wish to exercise your Rights, you should consider selling these Rights as set forth in this prospectus. Any cash you receive from selling your Rights will serve as a partial offset of any possible economic dilution of your interest in the Fund. The Fund cannot give any assurance, however, that a market for the Rights will develop or that the Rights will have any marketable value.

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Risk of Market Price Discount From Net Asset Value

Shares of closed-end funds frequently trade at a market price that is below their NAV. This is commonly referred to as “trading at a discount.” This characteristic of shares of closed-end funds is a risk separate and distinct from the risk that the Fund’s NAV may decrease. The risk of purchasing shares of a closed-end fund that might trade at a discount or unsustainable premium is more pronounced for investors who wish to sell their shares in a relatively short period of time after purchasing them because, for those investors, realization of a gain or loss on their investments is likely to be more dependent upon the existence of a premium or discount than upon portfolio performance. Accordingly, the Fund is designed primarily for long-term investors and should not be considered a vehicle for trading purposes. NAV will be reduced following the offering by the sales load and the offering costs paid by the Fund and immediately following any offering of preferred shares by the costs of that offering paid by the Fund. The Fund’s Shares are not redeemable at the request of shareholders. The Fund may repurchase its Shares in the open market or in private transactions, although it has no present intention to do so. Shareholders desiring liquidity may, subject to applicable securities laws, trade their Shares in the Fund on the New York Stock Exchange or other markets on which such Shares may trade at the then current market value, which may differ from the then current NAV.

     Whether investors will realize a gain or loss upon the sale of the Fund’s Shares will depend upon whether the market value of the Shares at the time of sale is above or below the price the investor paid, taking into account transaction costs, for the Shares and is not directly dependent upon the Fund’s NAV. Because the market value of the Fund’s Shares will be determined by factors such as the relative demand for and supply of the Shares in the market, general market conditions and other factors beyond the control of the Fund, the Fund cannot predict whether its Shares will trade at, below or above NAV.

Subscription Price Risk

     The Subscription Price could be more than the market price of the Fund’s Shares on the Pricing Date, and once you have submitted a Subscription Certificate, you may not revoke it, even if you would pay more than the then current market price.

Below Investment Grade Securities

     The Fund may invest up to 25% of its total assets in debt securities rated at the time of purchase Ba or B by Moody’s Investor Service, Inc. or BB or B by Standard & Poor’s Corporation or in unrated securities of comparable quality in the Adviser’s judgment. Such securities are commonly know as “high yield securities” and sometimes as “junk bonds.” The Fund may also invest no more than 10% of its total assets in debt securities rated B by Moody’s or Standard & Poor’s or in unrated securities of comparable quality in the Adviser’s judgment. Investors should recognize that the high yield securities in which the Fund will invest have speculative characteristics. Generally, lower rated or unrated securities of equivalent credit quality offer a higher return potential than higher rated securities but involve greater volatility of price and greater risk of loss of income and principal, including the possibility of a default or bankruptcy of the issuers of such securities. Lower rated securities and comparable unrated securities will likely have larger uncertainties or major risk exposure to adverse conditions and are predominantly speculative. The occurrence of adverse conditions and uncertainties would likely reduce the value of such securities held by the Fund, with a commensurate effect on the value of Shares of the Fund. While the market values of lower rated securities and unrated securities of equivalent credit quality tend to react less to fluctuations in interest rate levels than do those of higher-rated securities, the market value of certain of these lower rated securities also tends to be more sensitive to changes in economic conditions, including unemployment rates, inflation rates and negative investor perception than higher-rated securities. In addition, lower-rated securities and unrated securities of equivalent credit quality generally present a higher degree of credit risk, and may be less liquid than certain other fixed income securities. The Fund may incur additional expenses to the extent that it is required to seek recovery upon a default in the payment of principal or interest on its portfolio holdings.

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     Securities which are rated Ba by Moody’s or BB by Standard & Poor’s have speculative characteristics with respect to capacity to pay interest and repay principal. Securities which are rated B generally lack the characteristics of a desirable investment, and assurance of interest and principal payments over any long period of time may be small. Securities which are rated Caa by Moody’s or CCC by Standard & Poor’s or below are of poor standing and highly speculative. Those issues may be in default or present elements of danger with respect to principal or interest. Securities rated C by Moody’s, D by Standard & Poor’s are in the lowest rating class. Such ratings indicate that payments are in default, or that a bankruptcy petition has been filed with respect to the issuer or that the issuer is regarded as having extremely poor prospects. It is unlikely that future payments of principal or interest will be made to the Fund with respect to these highly speculative securities other than as a result of the sale of the securities or the foreclosure or other forms of liquidation of the collateral underlying the securities.

     In general, the ratings of the NRSROs, such as Moody’s and Standard & Poor’s, represent the opinions of these NRSROs as to the quality of securities that they choose to rate. Such ratings are relative and subjective, and are not absolute standards of quality and do not evaluate the market value risk of the securities. Credit ratings do not provide assurance against default or other loss of money. It is possible that an NRSRO might not change its rating of a particular issue to reflect subsequent events. These ratings will be used by the Fund as data in the selection of portfolio securities, but the Fund also will rely upon the independent advice of the Adviser to evaluate potential investments.

     See also “Investment Objective and Policies — Below Investment Grade Corporate Bonds.”

Reinvestment Risk

     Income from the Fund’s portfolio will decline if and when the Fund invests the proceeds from matured, traded or called debt obligations at market interest rates that are below the portfolio’s current earnings rate. For instance, during periods of declining interest rates, an issuer of debt obligations may exercise an option to redeem securities prior to maturity, forcing the Fund to invest in lower-yielding securities. A decline in income received by the Fund from its investments is likely to have a negative effect on the market price, NAV and/or overall return of the Shares.

Mortgage-Related and Other Asset-Backed Securities Risk

     The Fund may invest its assets in a variety of mortgage-related securities issued by government agencies or other governmental entities or by private originators or issuers. These may include, without limitation, mortgage pass-through securities, collateralized mortgage obligations (“CMOs”), commercial or residential mortgage -backed securities, mortgage dollar rolls, CMO residuals, stripped mortgage-backed securities (“SMBSs”) and other securities that directly or indirectly represent a participation in, or are secured by and payable from, mortgage loans on real property. The Fund may also invest in other types of asset-backed securities, including collateralized debt obligations (“CDOs”), which include collateralized bond obligations (“CBOs”), collateralized loan obligations (“CLOs”) and other similarly structured securities.

     Mortgage-related and other asset-backed securities often involve risks that are different from or more acute than risks associated with other types of debt instruments. For instance, these securities may be particularly sensitive to changes in prevailing interest rates. Rising interest rates tend to extend the duration of mortgage-related securities, making them more sensitive to changes in interest rates, and may reduce the market value of the securities. This is known as extension risk. In addition, mortgage-related securities are subject to prepayment risk—the risk that borrowers may pay off their mortgages sooner than expected, particularly when interest rates decline. This can reduce the Fund’s returns because the Fund may have to reinvest that money at lower prevailing interest rates. For instance, the Fund may invest in SMBSs where one class receives all of the interest from the mortgage assets (the interest-only, or “IO” class), while the other class will receive all of the principal (the principal-only, or “PO” class). The yield to maturity on an IO class is extremely sensitive to the rate of principal payments (including prepayments) on the underlying mortgage assets, and a rapid rate of principal payments may have a material adverse effect on the Fund’s yield to maturity from these investments. The Fund’s investments in other asset-backed securities are subject to risks similar to those associated with mortgage-backed securities, as well as additional risks associated with their structure and the nature of the assets underlying the security and the servicing of those assets. For instance, certain CDOs in which the Fund may invest are backed by pools of high-risk, below investment grade debt securities and may involve substantial credit and other risks. Further, due their often complicated structures, various mortgage-related and particularly asset-backed securities may be difficult to value and may constitute illiquid investments.

     Investments in mortgage-related securities may involve particularly high levels of risk under current market conditions.

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Mortgage Market/Subprime Risk

     The residential mortgage market in the United States recently has experienced difficulties that may adversely affect the performance and market value of certain of the Fund’s mortgage-related investments. Delinquencies and losses on residential mortgage loans (especially subprime and second-lien mortgage loans) generally have increased recently and may continue to increase, and a decline in or flattening of housing values (as has recently been experienced and may continue to be experienced in many housing markets) may exacerbate such delinquencies and losses. Borrowers with adjustable rate mortgage loans are more sensitive to changes in interest rates, which affect their monthly mortgage payments, and may be unable to secure replacement mortgages at comparably low interest rates. Also, a number of residential mortgage loan originators have recently experienced serious financial difficulties or bankruptcy. Owing largely to the foregoing, reduced investor demand for mortgage loans and mortgage-related securities and increased investor yield requirements have caused limited liquidity in the secondary market for mortgage-related securities, which can adversely affect the market value of mortgage-related securities. It is possible that such limited liquidity in such secondary markets could continue or worsen.

Government-Entity Risk

     As noted, the Fund may invest in mortgage-related and other debt securities issued or guaranteed by certain U.S. government agencies, instrumentalities and sponsored enterprises. Some U.S. Government securities, such as Treasury bills, notes and bonds, and securities guaranteed by GNMA, are supported by the full faith and credit of the United States; others, such as those of the Federal Home Loan Banks or FHLMC, are supported by the right of the issuer to borrow from the U.S. Treasury; others, such as those of FNMA, are supported by the discretionary authority of the U.S. Government to purchase the agency’s obligations; and still others, such as those of the Student Loan Marketing Association, are supported only by the credit of the instrumentality. Although U.S. Government-sponsored enterprises, such as the Federal Home Loan Banks, FHLMC, FNMA and the Student Loan Marketing Association may be chartered or sponsored by Congress, they are not funded by Congressional appropriations, and their securities are not issued by the U.S. Treasury or supported by the full faith and credit of the U.S. Government and involve increased credit risks. Certain governmental entities, including FNMA and FHLMC, have been subject to regulatory scrutiny regarding their accounting policies and practices and other concerns that may result in legislation, changes in regulatory oversight and/or other consequences that could adversely affect the credit quality, availability or investment character of securities issued by these entities.

Convertible Securities Risk

     Convertible securities generally offer lower interest or dividend yields than non-convertible debt securities of similar quality. The market values of convertible securities tend to decline as interest rates increase and, conversely, to increase as interest rates decline. However, a convertible security’s market value tends to reflect the market price of the common stock of the issuing company when that stock price approaches or is greater than the convertible security’s “conversion price.” The conversion price is defined as the predetermined price at which the convertible security could be exchanged for the associated stock. As the market price of the underlying common stock declines, the price of the convertible security tends to be influenced more by the yield of the convertible security. Thus, it may not decline in price to the same extent as the underlying common stock. In the event of a liquidation of the issuing company, holders of convertible securities would be paid before company’s common stockholders but after holders of any senior debt obligations of the company. Consequently, the issuer’s convertible securities generally entail less risk than its common stock but more risk than its debt obligations.

Preferred Securities Risk

     In addition to equity securities and related market risk, credit risk, and possibly high yield risk, investment in preferred stocks involves certain other risks. Certain preferred stocks contain provisions that allow an issuer under certain conditions to skip or defer distributions. If the Fund owns a preferred stock that is deferring its distribution, the Fund may be required to report income for tax purposes despite the fact that it is not receiving current income on this position. Preferred stocks often are subject to legal provisions that allow for redemption in the event of certain tax or legal changes or at the issuer’s call. In the event of redemption, the Fund may not be able to reinvest the proceeds at comparable rates of return. Preferred stocks are subordinated to bonds and other debt securities in an issuer’s capital structure in terms of priority for corporate income and liquidation payments, and therefore will be subject to greater credit risk than those debt securities. Preferred stocks may trade less frequently and in a more limited volume and may be subject to more abrupt or erratic price movements than many other securities, such as common stocks, corporate debt securities and U.S. Government securities.

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Management Risk

     The Fund is subject to management risk because it is an actively managed portfolio. The Investment Adviser will apply investment techniques and risk analyses in making investment decisions for the Fund, but there can be no guarantee that these decisions will produce the desired results.

Valuation Risk

     When market quotations are not readily available or are deemed to be unreliable, the Fund values its investments at fair value as determined in good faith pursuant to policies and procedures approved by the Board of Trustees. See “Net Asset Value.” 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.

Focused Investment Risk

     Although the Fund has a policy not to concentrate investments in any particular industry, it may (consistent with that policy) invest up to 25% of its assets in any particular industry. To the extent that the Fund focuses its investments in a particular industry, the NAV of the Shares will be more susceptible to events or factors affecting companies in that industry. These may include, but are not limited to, governmental regulation, inflation, rising interest rates, cost increases in raw materials, fuel and other operating expenses, technological innovations that may render existing products and equipment obsolete, competition from new entrants, high research and development costs, increased costs associated with compliance with environmental or other regulation and other economic, market, political or other developments specific to that industry. Also, the Fund may have greater risk to the extent that it invests a substantial portion of its assets in companies in related sectors, such as natural resources, which may share common characteristics, are often subject to similar business risks and regulatory burdens, and whose securities may react similarly to the types of events and factors described above.

Equity Securities and Related Market Risk

     The Fund may hold common stocks and other equity securities from time to time, including those it has received through the conversion of a convertible security held by the Fund or in connection with the restructuring of a debt security. The market price of common stocks and other equity securities may go up or down, sometimes rapidly or unpredictably. Equity securities may decline in value due to factors affecting equity securities markets generally, particular industries represented in those markets, or the issuer itself. The values of equity securities may decline due to general market conditions that are not specifically related to a particular company, such as real or perceived adverse economic conditions, changes in the general outlook for corporate earnings, changes in interest or currency rates or adverse investor sentiment generally. They may also decline due to factors which affect a particular industry or industries, such as labor shortages or increased production costs and competitive conditions within an industry. Debt securities are also subject to the market risks described above; however, equity securities generally have greater price volatility than bonds and other debt securities.

Smaller Company Risk

     The general risks associated with debt instruments or equity securities are particularly pronounced for securities issued by companies with small market capitalizations. Small capitalization companies involve certain special risks. They are more likely than larger companies to have limited product lines, markets or financial resources, or to depend on a small, inexperienced management group. Securities of smaller companies may trade less frequently and in lesser volume than more widely held securities and their values may fluctuate more sharply than other securities. They may also have limited liquidity. These securities may therefore be more vulnerable to adverse developments than securities of larger companies, and the Fund may have difficulty purchasing or selling securities positions in smaller companies at prevailing market prices. Also, there may be less publicly available information about smaller companies or less market interest in their securities as compared to larger companies. Companies with medium-sized market capitalizations may have risks similar to those of smaller companies.

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Other Investment Companies Risk

     The Fund may invest up to 10% of its assets in securities of other open- or closed-end investment companies, including exchange traded funds or “ETFs”, to the extent that such investments are consistent with the Fund’s investment objective and policies and permissible under the 1940 Act. As a shareholder in an investment company, the Fund will bear its ratable Share of that investment company’s expenses, and would remain subject to payment of the Fund’s investment management fees with respect to the assets so invested. Shareholders would therefore be subject to duplicative expenses to the extent the Fund invests in other investment companies. In addition, these other investment companies may utilize leverage, in which case an investment would subject the Fund to additional risks associated with leverage.

Inflation/Deflation Risk

     Inflation risk is the risk that the value of assets or income from the Fund’s investments will be worth less in the future as inflation decreases the value of payments at future dates. As inflation increases, the real value of the Fund’s portfolio could decline. Deflation risk is the risk that prices throughout the economy decline over time. 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 the Fund’s portfolio.

Liquidity Risk

     The Fund may invest in illiquid securities (i.e., securities that cannot be disposed of within seven days in the ordinary course of business at approximately the value at which the Fund has valued the securities). Illiquid securities may trade at a discount from comparable, more liquid investments, and may be subject to wide fluctuations in market value. Also, the Fund may not be able to dispose readily of illiquid securities when that would be beneficial at a favorable time or price or at prices approximating those at which the Fund currently values them. Further, the lack of an established secondary market for illiquid securities may make it more difficult to value such securities, which may negatively impact the price the Fund would receive upon disposition of such securities.

Market Disruption and Geopolitical Risk

     The war with Iraq, its aftermath and the continuing occupation of Iraq are likely to have a substantial impact on the U.S. and world economies and securities markets. The nature, scope and duration of the war and occupation and the potential costs of rebuilding the Iraqi infrastructure cannot be predicted with any certainty. Terrorist attacks on the World Trade Center and the Pentagon on September 11, 2001 closed some of the U.S. securities markets for a four-day period and similar future events cannot be ruled out. The war and occupation, terrorism and related geopolitical risks have led, and may in the future lead, to increased short-term market volatility and may have adverse long-term effects on U.S. and world economies and markets generally. Those events could also have an acute effect on individual issuers or related groups of issuers. These risks could also adversely affect individual issuers and securities markets, interest rates, secondary trading, ratings, credit risk, inflation and other factors relating to the Shares.

Repurchase Agreements

     The use of repurchase agreements involves risks of loss and decreased yields as a result of related costs. For example, if the seller of securities under a repurchase agreement defaults on its obligation to repurchase the underlying securities, as a result of its bankruptcy or otherwise, the Fund will seek to dispose of such securities, which action could involve costs or delays. If the seller becomes insolvent and subject to liquidation or reorganization under applicable bankruptcy or other laws, the Fund’s ability to dispose of the underlying securities may be restricted if the securities are deemed to be merely collateral for a loan. Also, it is possible that the Fund may be unable to substantiate its interest in the underlying securities. If the seller fails to repurchase the securities, the Fund may suffer a loss to the extent proceeds from the sale of the underlying securities are less than the repurchase price. See “Investment Objectives and Policies — Repurchase Agreements.”

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DIVIDENDS AND DISTRIBUTIONS

     The Fund distributes at least quarterly substantially all of its net investment income, if any, and annually all of its capital gains, if any, except to the extent such gains are offset against capital loss carryforwards. For information concerning the tax treatment for such distributions to the Fund and to shareholders, see “Taxation of the Fund.”

DIVIDEND REINVESTMENT PLAN

     Shareholders whose Shares are registered in their own names may elect to be participants in the Fund’s Automatic Dividend Investment Plan (the “Plan”), pursuant to which dividends and capital gain distributions to shareholders will be paid in or reinvested in additional Shares of the Fund (the “Dividend Shares”). PNC Global Investment Servicing, Inc. (the “Transfer Agent”) acts as agent for participants under the Plan. Shareholders whose Shares are held in the name of a broker or nominee should contact such broker or nominee to determine whether or how they may participate in the Plan.

     Dividends and distributions are reinvested under the Plan in one of two ways. If the Fund declares a dividend or distribution payable in cash or in Shares to be issued by the Fund at the lower of market or NAV, the Transfer Agent, on behalf of participants in the Plan, (i) accepts the dividend or distribution in full and fractional Shares provided that the market price is at least 95% of NAV or (ii) if market price is less than 95% of NAV the Transfer Agent, on behalf of participants in the Plan, accepts the dividend or distribution in cash, and uses such cash to purchase Shares on the NYSE for the benefit of participants in the Plan. Alternatively, if the Fund declares a dividend or distribution in cash or in Shares issued at NAV, the Transfer Agent, on behalf of participants in the Plan, either (i) accepts such dividend or distribution in full and fractional Shares if the NAV is equal to or less than the closing price of a Share on the NYSE (plus applicable brokerage commissions) on the last trading day preceding the payment date for the dividend or distribution or (ii) accepts the dividend or distribution in cash, if the NAV is greater than the market price (plus applicable brokerage commissions), and uses such cash to purchase Shares on the NYSE for the benefit of participants in the Plan. For purposes of determining the number of Shares to be distributed under the Plan, the NAV is computed the Friday before the dividend payment date (the “Comparison Date”) and then compared to the market value of such Shares on the Comparison Date. The Plan may be terminated by a participant by delivery of written notice to the Transfer Agent.

     Distributions of investment company taxable income that are invested in additional Shares generally are taxable to shareholders as ordinary income. A capital gain distribution that is reinvested in Shares is taxable to shareholders as long-term capital gain, regardless of the length of time a shareholder has held the Shares or whether such gain was realized by the Fund before the shareholder acquired such Shares and was reflected in the price paid for the Shares.

TAXATION OF THE FUND

     This section and the discussion in the SAI summarize some of the main U.S. federal income tax consequences of owning Shares of the Fund. This section is current as of the date of this prospectus. Tax laws and interpretations change frequently, and this summary does not describe all of the tax consequences to all taxpayers. For example, this summary generally does not describe your situation if you are a corporation, a non-U.S. person, a broker-dealer, or other investor with special circumstances. In addition, this section does not describe your state, local or foreign taxes. As with any investment, you should consult your own tax advisors regarding the tax consequences of investing in the Fund.

Taxation of the Fund

     The Fund has qualified and elected to be taxed as a regulated investment company under Subchapter M of the Code. Accordingly, the Fund must, among other things, (a) derive in each taxable year at least 90% of its gross income (including tax-exempt interest) from dividends, interest, payments with respect to certain securities loans, and gains from the sale or other disposition of stock, securities or foreign currencies, or other income (including but not limited to gains

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from options, futures and forward contracts) derived with respect to its business of investing in such stock, securities or currencies; and (b) diversify its holdings so that, at the end of each quarter of the Fund’s taxable year (i) at least 50% of the market value of the Fund’s total assets is represented by cash and cash items, U.S. Government securities, the securities of other regulated investment companies and other securities, with such other securities limited, in respect of any one issuer, to an amount not greater than 5% of the value of the Fund’s total assets and to not more than 10% of the outstanding voting securities of such issuer, and (ii) not more than 25% of the market value of the Fund’s total assets is invested in the securities of any one issuer (other than U.S. Government securities and the securities of other regulated investment companies) or of any two or more issuers that the Fund controls and which are determined to be engaged in the same trade or business or similar or related trades or businesses.

     As a regulated investment company, the Fund generally is not subject to U.S. federal income tax on income and gains that it distributes each taxable year to its shareholders, if at least 90% of the sum of the Fund’s (i) investment company taxable income (which includes, among other items, dividends, interest and any excess of net short-term capital gains over net long-term capital losses and other taxable income other than any net capital gain (as defined below) reduced by deductible expenses) determined without regard to the deduction for dividends paid and (ii) its net tax-exempt interest (the excess of its gross tax-exempt interest over certain disallowed deductions) is distributed to its shareholders. The Fund intends to distribute at least annually an amount greater than 90% of such income. Failure to satisfy the distribution requirement will cause the Fund’s income to be subject to tax at the regular corporate tax rate without any deduction for distributions to shareholders.

     Amounts not distributed on a timely basis in accordance with a calendar-year distribution requirement are subject to a nondeductible 4% excise tax at the Fund level. In general, to avoid this tax, the Fund must distribute during each calendar year an amount equal to the sum of (1) at least 98% of its ordinary income (not taking into account any capital gains or losses) for the calendar year, (2) at least 98% of its capital gains in excess of its capital losses (adjusted for certain ordinary losses) for a one-year period generally ending on October 31 of the calendar year (unless, an election is made by a fund with a November or December year- end to use the fund’s fiscal year), and (3) certain undistributed amounts from previous years on which the Fund paid no U.S. federal income tax. While the Fund intends to distribute any income and capital gains in the manner necessary to minimize imposition of the 4% excise tax, there can be no assurance that sufficient amounts of the Fund’s taxable income and capital gains will be distributed to avoid entirely the imposition of the tax. In that event, the Fund will be liable for the tax only on the amount by which it does not meet the foregoing distribution requirement.

If for any taxable year the Fund does not qualify as a regulated investment company, all of its taxable income (including its net capital gains) will be subject to tax at regular corporate rates without any deduction for distributions to shareholders, and such distributions will be taxable to shareholders as ordinary dividends to the extent of the Fund’s current and accumulated earnings and profits.

Taxation of Shareholders

     Distributions paid to you by the Fund from its ordinary income (and not designated as qualified dividend income) or from an excess of net short-term capital gains over net long-term capital losses (together referred to hereinafter as “ordinary income dividends”) are taxable to you as ordinary income to the extent of the Fund’s earning and profits. Distributions made to you from an excess of net long-term capital gains over net short-term capital losses (“capital gain dividends”), including capital gain dividends credited to you but retained by the Fund, are taxable to you as long-term capital gains, regardless of the length of time you have owned your Fund Shares. For calendar years 2003 through 2008, distributions that are designated as qualified dividend income will be taxed at the same rate as long-term capital gains. The Fund may designate a distribution as qualified dividend income to the extent attributable to qualified dividend income received by the Fund. Distributions in excess of the Fund’s earnings and profits will first reduce the adjusted tax basis of your Shares and, after such adjusted tax basis is reduced to zero, will constitute capital gains to you (assuming the Shares are held as a capital asset) and will be long term or short term capital gain depending on your holding period in the Shares. Generally, not later than 60 days after the close of its taxable year, the Fund will provide you with a written notice designating the amount of any ordinary income dividends or capital gain dividends and other distributions.

     The sale or other disposition of Shares of the Fund will generally result in a capital gain or loss to you, and will be a long-term capital gain or loss if the Shares have been held for more than one year at the time of sale. Any loss upon the sale or exchange of Fund Shares held for six months or less will be treated as long-term capital loss to the extent of any capital gain dividends received (including amounts credited as an undistributed capital gain dividend) by you. A loss realized on a sale or exchange of Shares of the Fund will be disallowed if other Fund Shares are acquired (whether through the automatic reinvestment of dividends or otherwise) within a 61-day period beginning 30 days before and ending 30 days after the date that the Shares are disposed. In such case, the basis of the Shares acquired will be adjusted to reflect the

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disallowed loss. Present law taxes both long-term and short- term capital gains of corporations at the rates applicable to ordinary income. For individual (non-corporate) taxpayers, however, short-term capital gains and ordinary income are taxed at a maximum rate of 35% for 2008 while long-term capital gains generally will be taxed at a maximum rate of 15%.

     Dividends and other taxable distributions are taxable to you even though they are reinvested in additional Shares of the Fund. If the Fund pays you a dividend in January which was declared in the previous October, November or December to shareholders of record on a specified date in one of such months, then such dividend will be treated for tax purposes as being paid by the Fund and received by you on December 31 of the year in which the dividend was declared.

     The Fund is required in certain circumstances to backup withhold on taxable dividends and certain other payments paid to non-corporate holders of the Fund’s Shares who do not furnish the Fund with their correct taxpayer identification number (in the case of individuals, their Social Security number) and certain certifications, or who are otherwise subject to backup withholding. Backup withholding is not an additional tax. Any amounts withheld from payments made to you may be refunded or credited against your U.S. federal income tax liability, if any, provided that the required information is furnished to the Internal Revenue Service.

     The foregoing is a general and abbreviated summary of the provisions of the Code and the Treasury regulations in effect as of the date hereof and as they directly govern the taxation of the Fund and its shareholders. These provisions are subject to change by legislative or administrative action, and any such change may be retroactive. The foregoing discussion is not intended to be an in depth analysis of the federal income tax consequences to the Fund and the Shareholders and, therefore, the shareholders are urged to consult their tax advisers regarding specific questions as to U.S. federal, foreign, state, local income or other taxes.

State and Local Tax Matters

     You should consult with your tax advisor about state and local tax matters.

DETERMINATION OF NET ASSET VALUE

     The NAV of Shares of the Fund is computed based upon the value of the Fund’s portfolio securities and other assets. NAV per Share of Shares of the Fund is determined as of the close of the regular trading session on the NYSE no less frequently than Friday of each week and the last Business Day of each month, provided, however, that if any such day is a holiday or determination of NAV on such day is impracticable, the NAV is calculated on such earlier or later day as determined by the Adviser. The Fund calculates NAV per Share of Shares of the Fund by subtracting the Fund’s liabilities (including accrued expenses, dividends payable and any borrowings of the Fund) from the Fund’s total assets (the value of the securities the Fund holds plus cash or other assets, including interest accrued but not yet received) and dividing the result by the total number of Shares of the Fund outstanding.

     The Fund values its portfolio securities that are actively traded in the over-the-counter market, including listed securities for which the primary market is believed to be over-the-counter, are valued at the mean between the most recently quoted bid and asked prices provided by the principal market makers. Any security for which the primary market is on an exchange is valued at the last sale price on such exchange on the day of valuation or, if there was no sale on such day, the last bid priced quoted on such day. Options and futures will be valued at a market value of fair value if no market exists. Securities and assets for which market quotations are not readily available are valued at fair value as determined in good faith by or under the direction of the Board of the Fund. However, readily marketable fixed-income securities may be valued on the basis of prices provided by a pricing service when such prices are believed by the Adviser to reflect the fair market value of such securities. The prices provided by a pricing service take into account institutional size trading in similar groups of securities and developments related to specific securities. U.S. Government securities and other debt instruments having 60 days or less remaining until maturity are stated at amortized cost if their original maturity was 60 days or less, or by amortizing their fair value as of the first day prior to maturity if their original term to maturity exceeded 60 days (unless in either case the Fund’s Board determine that this method does not represent fair value).

DISTRIBUTION ARRANGEMENTS

     Boenning & Scattergood, Inc., 4 Tower Bridge, 200 Barr Harbor Drive, Suite 300, West Conshohocken, Pennsylvania, a broker-dealer and member of the National Association of Securities Dealers, Inc., will act as the Dealer Manager for the Offering. Under the terms and subject to the conditions contained in the Dealer Manager Agreement dated the date of this prospectus (the “Dealer Manager Agreement”), the Dealer Manager will provide marketing services in connection with the Offering and will solicit the exercise of Rights and participation in the Over-Subscription Privilege. The Offering is not contingent upon any number of Rights being exercised. The Fund has agreed to pay the Dealer

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Manager a fee for its marketing and soliciting services equal to ___% of the aggregate Subscription Price for Shares issued pursuant to the Offering.

     The Dealer Manager will reallow to broker-dealers included in the soliciting group to be formed and managed by the Dealer Manager (“Soliciting Group Members”) solicitation fees equal to ___% of the Subscription Price per Share for each Share issued pursuant to the Rights Offering as a result of their soliciting efforts, subject to a maximum fee based upon the number of Shares held by each broker-dealer through DTC on the Record Date. Fees will be paid to the broker-dealer designated on the applicable portion of the Subscription Certificates or, in the absence of such designation, to the Dealer Manager. The Dealer Manager may, but is not required, to purchase Shares not subscribed for at the Subscription Price, less a ___% discount and resell such Shares to the public pursuant to this prospectus at the Subscription Price. The Dealer Manager may also resell such Shares to other dealers that are members of a selling group at the Subscription Price, less a selling concession of not in excess of ___%. The Dealer Manager may allow, and these selling group members may reallow, a concession of not more than ___% to other brokers and dealers.

     In addition, the Fund may reimburse the Dealer Manager up to an aggregate of $___for its reasonable expenses incurred in connection with the Offering. The Fund has agreed to indemnify the Dealer Manager or contribute to losses arising out of certain liabilities including liabilities under the Securities Act. The Dealer Manager Agreement also provides that the Dealer Manager will not be subject to any liability to the Fund in rendering the services contemplated by such Agreement except for any act of bad faith, willful misconduct or gross negligence of the Dealer Manager or reckless disregard by the Dealer Manager of its obligations and duties under such Agreement.

     The Fund has agreed not to offer or sell, or enter into any agreement to sell, any equity or equity related securities of the Fund or securities convertible into such securities for a period of [180] days after the date of the Dealer Manager Agreement, except for the Shares and beneficial interest issued in reinvestment of dividends or distributions or other limited circumstances.

     The Fund will bear the expenses of the Offering, which will be paid from the proceeds of the Offering. These expenses include, but are not limited to: the expense of preparation and printing of the prospectus for the Offering, the expense of counsel and auditors in connection with the Offering, the out-of-pocket expenses incurred by the officers of the Fund and others in connection with the Offering.

CUSTODIAN, TRANSFER AGENT, DIVIDEND DISBURSING AGENT AND REGISTRAR

     Custodian. PFPC Trust Company, 8800 Tinicum Boulevard, Philadelphia, Pennsylvania 19153, serves as the custodian of the Fund’s assets pursuant to a custody agreement.

     Transfer Agent. PNC Global Investment Servicing, Inc., P.O. Box 43027 Providence, Rhode Island 02940, serves as the Fund’s transfer agent and dividend disbursing agent and as registrar for Shares of the Fund.

LEGAL MATTERS

     Certain legal matters will be passed on by Pepper Hamilton LLP, Philadelphia, Pennsylvania, counsel to the Fund in connection with the Offering. Certain matters will be passed on for the Dealer Manager by Reed Smith LLP.

EXPERTS

     The financial statements of the Fund as of March 31, 2008 (which have been incorporated into the SAI and the registration statement, of which the SAI forms a part, by reference to the Fund’s 2008 Annual Report to Shareholders), and the financial highlights for each of the five years in the period ended March 31, 2008, included in this prospectus, have been so incorporated and included in reliance on the reports of [     ], independent accountants, given on the authority of said firm as experts in auditing and accounting. The address of [     ] is [     ].

REPORTS TO SHAREHOLDERS

     The Fund sends unaudited, quarterly reports and audited annual reports, including a list of investments held, to shareholders.

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WHERE YOU CAN FIND MORE INFORMATION

     The Fund is subject to the informational requirements of the Securities Exchange Act of 1934 and the 1940 Act and in accordance therewith is required to file reports, proxy statements and other information with the SEC. Any such reports, proxy statements and other information can be inspected and copied at the public reference facilities of the SEC, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and the SEC’s New York Regional Office at 233 Broadway, New York, New York 10279 and its Chicago Regional Office at Suite 1400, Northwestern Atrium Center, 500 West Madison Street, Chicago, Illinois 60661. Reports, proxy statements and other information concerning the Fund can also be inspected at the offices of the NYSE, 20 Broad Street, New York, New York 10005.

     Additional information regarding the Fund and the Offering is contained in the Registration Statement on Form N-2, including amendments, exhibits and schedules thereto, filed by the Fund with the SEC. This prospectus does not contain all of the information set forth in the Registration Statement, including any amendments, exhibits and schedules thereto. For further information with respect to the Fund and the Shares offered hereby, reference is made to the Registration Statement. Statements contained in this prospectus as to the contents of any contract or other document referred to are not necessarily complete and in each instance reference is made to the copy of such contract or other document filed as an exhibit to the Registration Statement, each such statement being qualified in all respects by such reference.

     The Fund’s SAI, annual and semi-annual reports and information about the Fund are accessible, may be viewed or downloaded, free of charge, from the EDGAR database on the SEC’s website at http://www.sec.gov. Such information can also be reviewed and copied at the Public Reference Room of the Securities and Exchange Commission in Washington, D.C. Copies of this information may be obtained, upon payment of a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov or by writing the Public Reference Room of the SEC, Washington, D.C., 20549-0102. Information on the operation of the Public Reference Room may be obtained by calling the SEC at (202) 942-8090. The Fund’s SAI, annual and semi-annual reports and information about the Fund may be obtained without charge by calling (800) 331-1710.

     NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND OR THE FUND’S ADVISER OR THE DEALER MANAGER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE SHARES OF BENEFICIAL INTEREST OFFERED BY THIS PROSPECTUS, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SHARES OF BENEFICIAL INTEREST BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE FACTS AS SET FORTH IN THE PROSPECTUS OR IN THE AFFAIRS OF THE FUND SINCE THE DATE HEREOF.

STATEMENT OF ADDITIONAL INFORMATION — TABLE OF CONTENTS

     Additional information about the Fund is contained in a Statement of Additional Information, which is available upon request without charge by contacting the Fund at (800) 331-1710. Following is the Table of Contents for the Statement of Additional Information:

GENERAL INFORMATION	3
ADDITIONAL INFORMATION ABOUT INVESTMENT OBJECTIVE AND POLICIES	3
MANAGEMENT OF THE FUND	14
TRUSTEE COMPENSATION	17
CODE OF ETHICS	17
PROXY VOTING POLICIES AND PROCEDURES	18
SECURITY OWNERSHIP OF CERTAIN RECORD/BENEFICIAL OWNERS	19
INVESTMENT ADVISORY AND OTHER SERVICES	20
BROKERAGE ALLOCATION AND OTHER PRACTICES	21
REPURCHASE OF SHARES	21
TAX STATUS	22
FINANCIAL STATEMENTS	23

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APPENDIX A — RATINGS OF CORPORATE OBLIGATIONS AND COMMERCIAL PAPER

     Moody’s Investors Service, Inc. (“Moody’s”) and Standard &Poor’s^® (“S&P”). A description of the ratings assigned by Moody’s and S&P^® are provided below. These ratings represent the opinions of these rating services as to the quality of the securities that they undertake to rate. It should be emphasized, however, that ratings are general and are not absolute standards of quality. The Adviser attempts to discern variations in credit rankings of the rating services and to anticipate changes in credit ranking. However, subsequent to purchase by a Fund, an issue of securities (or its issuer) may cease to be rated or its rating may be reduced below the minimum rating required for purchase by a Fund. In that event, the Adviser will consider whether it is in the best interest of a Fund to continue to hold the securities.

     Moody’s credit ratings must be construed solely as statements of opinion and not as statements of fact or recommendations to purchase, sell or hold any securities.

     An S&P issue credit rating is a current opinion of the creditworthiness of an obligor with respect to a specific financial obligation, a specific class of financial obligations, or a specific financial program (including ratings on medium-term note programs and commercial paper programs). It takes into consideration the creditworthiness of guarantors, insurers or other forms of credit enhancement on the obligation and takes into account the currency in which the obligation is denominated. The issue credit rating is not a recommendation to purchase, sell or hold a financial obligation inasmuch as it does not comment as to market price or suitability for a particular investor.

Short-Term Credit Ratings

Moody’s

Moody’s employs the following ratings:

“P-1” — Issuers (or supporting institutions) rated Prime-1 have a superior ability to repay short-term debt obligations.

“P-2” — Issuers (or supporting institutions) rated Prime-2 have a strong ability to repay short-term obligations.

“P-3” — Issuers (or supporting institutions) rated Prime-3 have an acceptable ability to repay short-term debt obligations.

“NP” — Issuers (or supporting institutions) rated Not Prime do not fall within any of the Prime rating categories.

S&P

An S&P short-term issue credit rating is a current opinion of the creditworthiness of an obligor with respect to a specific financial obligation having an original maturity of no more than 365 days. The following summarizes the rating categories used by S&P for short-term issues:

“A-1” — Obligations are rated in the highest category and indicate that the obligor’s capacity to meet its financial commitment on the obligation is strong. Within this category, certain obligations are designated with a plus sign (+). This indicates that the obligor’s capacity to meet its financial commitment on these obligations is extremely strong.

“A-2” — Obligations are somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher rating categories. However, the obligor’s capacity to meet its financial commitment on the obligation is satisfactory.

“A-3” — Obligations exhibit adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.

“B” — Obligations are regarded as having significant speculative characteristics. Ratings of “B-1,” “B-2,” and “B-3” may be assigned to indicate finer distinctions within the “B” category. The obligor currently has the capacity to meet its financial commitment on the obligation; however, it faces major ongoing uncertainties which could lead to the obligor’s inadequate capacity to meet its financial commitment on the obligation.

“B-1” — Obligations are regarded as having significant speculative characteristics, but the obligor has a relatively stronger capacity to meet its financial commitments over the short-term compared to other speculative — grade obligors.

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“B-2” — Obligations are regarded as having significant speculative characteristics, and the obligor has an average speculative — grade capacity to meet its financial commitments over the short-term compared to other speculative — grade obligors.

“B-3” — Obligations are regarded as having significant speculative characteristics, and the obligor has a relatively weaker capacity to meet its financial commitments over the short-term compared to other speculative — grade obligors.

“C” — Obligations are currently vulnerable to nonpayment and are dependent upon favorable business, financial and economic conditions for the obligor to meet its financial commitment on the obligation.

“D” — Obligations are in payment default. The “D” rating category is used when payments on an obligation are not made on the date due even if the applicable grace period has not expired, unless S&P believes that such payments will be made during such grace period. The “D” rating also will be used upon the filing of a bankruptcy petition or the taking of a similar action if payments on an obligation are jeopardized.

Local Currency and Foreign Currency Risks — Country risk considerations are a standard part of S&P’s analysis for credit ratings on any issuer or issue. Currency of repayment is a key factor in this analysis. An obligor’s capacity to repay foreign currency obligations may be lower than its capacity to repay obligations in its local currency due to the sovereign government’s own relatively lower capacity to repay external versus domestic debt. These sovereign risk considerations are incorporated in the debt ratings assigned to specific issues. Foreign Currency issuer ratings are also distinguished from local currency issuer ratings to identify those instances where sovereign risks make them different for the same issuer.

Short-term ratings are opinions of the ability of issuers to honor short-term financial obligations. Ratings may be assigned to issuers, short-term programs or to individual short-term debt instruments. Such obligations generally have an original maturity not exceeding thirteen months, unless explicitly noted.

Long-Term Credit Ratings

Moody’s

The following summarizes the ratings used by Moody’s for long-term debt:

“Aaa” — Obligations rated “Aaa” are judged to be of the highest quality, with minimal credit risk.

“Aa” — Obligations rated “Aa” are judged to be of high quality and are subject to very low credit risk.

“A” — Obligations rated “A” are considered upper-medium grade and are subject to low credit risk.

“Baa” — Obligations rated “Baa” are subject to moderate credit risk. They are considered medium-grade and as such may possess certain speculative characteristics.

“Ba” — Obligations rated “Ba” are judged to have speculative elements and are subject to substantial credit risk.

“B” — Obligations rated “B” are considered speculative and are subject to high credit risk.

“Caa” — Obligations rated “Caa” are judged to be of poor standing and are subject to very high credit risk.

“Ca” — Obligations rated “Ca” are highly speculative and are likely in, or very near, default, with some prospect of recovery of principal and interest.

“C” — Obligations rated “C” are the lowest rated class of bonds and are typically in default, with little prospect for recovery of principal or interest.

Note: Moody’s appends numerical modifiers 1, 2, and 3 to each generic rating classification from “Aa” through “Caa.” The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of that generic rating category.

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S&P

The following summarizes the ratings used by S&P for long-term issues:

“AAA” — An obligation rated “AAA” has the highest rating assigned by S&P. The obligor’s capacity to meet its financial commitment on the obligation is extremely strong.

“AA” — An obligation rated “AA” differs from the highest-rated obligations only to a small degree. The obligor’s capacity to meet its financial commitment on the obligation is very strong.

“A” — An obligation rated “A” is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher-rated categories. However, the obligor’s capacity to meet its financial commitment on the obligation is still strong.

“BBB” — An obligation rated “BBB” exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.

Obligations rated “BB,” “B,” “CCC,” “CC,” and “C” are regarded as having significant speculative characteristics. “BB” indicates the least degree of speculation and “C” the highest. While such obligations will likely have some quality and protective characteristics, these may be outweighed by large uncertainties or major exposures to adverse conditions.

“BB” — An obligation rated “BB” is less vulnerable to nonpayment than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial or economic conditions which could lead to the obligor’s inadequate capacity to meet its financial commitment on the obligation.

“B” — An obligation rated “B” is more vulnerable to nonpayment than obligations rated “BB,” but the obligor currently has the capacity to meet its financial commitment on the obligation. Adverse business, financial or economic conditions will likely impair the obligor’s capacity or willingness to meet its financial commitment on the obligation.

“CCC” — An obligation rated “CCC” is currently vulnerable to nonpayment, and is dependent upon favorable business, financial and economic conditions for the obligor to meet its financial commitment on the obligation. In the event of adverse business, financial, or economic conditions, the obligor is not likely to have the capacity to meet its financial commitment on the obligation.

“CC” — An obligation rated “CC” is currently highly vulnerable to nonpayment.

“C” — A “C” rating is assigned to obligations that are currently highly vulnerable to nonpayment, obligations that have payment arrearages allowed by the terms of the documents, or obligations of an issuer that is the subject of a bankruptcy petition or similar action which have not experienced a payment default. Among others, the “C” rating may be assigned to subordinated debt, preferred stock or other obligations on which cash payments have been suspended in accordance with the instrument’s terms.

“D” — An obligation rated “D” is in payment default. The “D” rating category is used when payments on an obligation are not made on the date due even if the applicable grace period has not expired, unless S&P believes that such payments will be made during such grace period. The “D” rating also will be used upon the filing of a bankruptcy petition or the taking of a similar action if payments on an obligation are jeopardized.

Plus (+) or minus (-) — The ratings from “AA” to “CCC” may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories.

“N. R.” — This indicates that no rating has been requested, that there is insufficient information on which to base a rating or that S&P does not rate a particular obligation as a matter of policy.

Local Currency and Foreign Currency Risks — Country risk considerations are a standard part of S&P’s analysis for credit ratings on any issuer or issue. Currency of repayment is a key factor in this analysis. An obligor’s capacity to repay Foreign Currency obligations may be lower than its capacity to repay obligations in its local currency due to the sovereign government’s own relatively lower capacity to repay external versus domestic debt. These sovereign risk considerations

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are incorporated in the debt ratings assigned to specific issues. Foreign Currency issuer ratings are also distinguished from local currency issuer ratings to identify those instances where sovereign risks make them different for the same issuer.

Notes to Short-Term and Long-Term Credit Ratings

Moody’s

Watchlist: Moody’s uses the Watchlist to indicate that a rating is under review for possible change in the short-term. A rating can be placed on review for possible upgrade (“UPG”), on review for possible downgrade (“DNG”), or more rarely with direction uncertain (“UNC”). A credit is removed from the Watchlist when the rating is upgraded, downgraded or confirmed.

Rating Outlooks: A Moody’s rating outlook is an opinion regarding the likely direction of a rating over the medium term. Where assigned, rating outlooks fall into the following four categories: Positive (“POS”), Negative (“NEG”), Stable (“STA”) and Developing (“DEV” — contingent upon an event). In the few instances where an issuer has multiple outlooks of differing directions, an “(m)” modifier (indicating multiple, differing outlooks) will be displayed, and Moody’s written research will describe any differences and provide the rationale for these differences. A “RUR” (Rating(s) Under Review) designation indicates that the issuer has one or more ratings under review for possible change, and thus overrides the outlook designation. When an outlook has not been assigned to an eligible entity, “NOO” (No Outlook) may be displayed.

S&P

Creditwatch: CreditWatch highlights the potential direction of a short- or long-term rating. It focuses on identifiable events and short-term trends that cause ratings to be placed under special surveillance by S&P’s analytical staff. These may include mergers, recapitalizations, voter referendums, regulatory action or anticipated operating developments. Ratings appear on CreditWatch when such an event or a deviation from an expected trend occurs and additional information is necessary to evaluate the current rating. A listing, however, does not mean a rating change is inevitable, and whenever possible, a range of alternative ratings will be shown. CreditWatch is not intended to include all ratings under review, and rating changes may occur without the ratings having first appeared on CreditWatch. The “positive” designation means that a rating may be raised; “negative” means a rating may be lowered; and “developing” means that a rating may be raised, lowered or affirmed.

Rating Outlook: An S&P rating outlook assesses the potential direction of a long-term credit rating over the intermediate term (typically six months to two years). In determining a rating outlook, consideration is given to any changes in the economic and/or fundamental business conditions. An outlook is not necessarily a precursor of a rating change or future CreditWatch action.

• “Positive” means that a rating may be raised.

• “Negative” means that a rating may be lowered.

• “Stable” means that a rating is not likely to change.

• “Developing” means a rating may be raised or lowered.

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[1,635,893] Shares

Rivus Bond Fund

Shares of Beneficial Interest

MBIA Capital Management Corp.

PROSPECTUS
______________, 2009

BOENNING & SCATTERGOOD, INC.

This Statement of Additional Information and the information contained herein are subject to completion and amendment. Under no circumstances shall this Statement of Additional Information constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the within described securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification thereof under the laws of such jurisdiction.

PRELIMINARY STATEMENT OF ADDITIONAL INFORMATION DATED ___, 2009

RIVUS BOND FUND

STATEMENT OF ADDITIONAL INFORMATION

     Rivus Bond Fund (the “Fund”) is a diversified, closed-end management investment company. This statement of additional information (“SAI”) does not constitute a prospectus, but should be read in conjunction with the Fund’s prospectus dated                     , 2009. This SAI does not include all of the information that a prospective investor should consider before participating in the rights offering described in the prospectus or purchasing the Fund’s shares of beneficial interest. A copy of the Fund’s prospectus describing the rights offering may be obtained without charge by calling (800) 331-1710. You may also obtain a copy of the prospectus on the Securities and Exchange Commission’s web site at http://www.sec.gov. Capitalized terms used, but not defined in this SAI, have the meanings given to them in the prospectus.

This SAI is dated                     , 2009.

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TABLE OF CONTENTS

GENERAL INFORMATION	3
ADDITIONAL INFORMATION ABOUT INVESTMENT OBJECTIVE AND POLICIES	3
MANAGEMENT OF THE FUND	14
TRUSTEE COMPENSATION	17
CODE OF ETHICS	17
PROXY VOTING POLICIES AND PROCEDURES	18
SECURITY OWNERSHIP OF CERTAIN RECORD/BENEFICIAL OWNERS	19
INVESTMENT ADVISORY AND OTHER SERVICES	20
BROKERAGE ALLOCATION AND OTHER PRACTICES	22
REPURCHASE OF SHARES	23
TAX STATUS	23
FINANCIAL STATEMENTS	24

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GENERAL INFORMATION

     The Fund is a diversified, closed-end management investment company registered under the Investment Company Act of 1940 and organized as a Delaware statutory trust. The Fund was initially organized as a Delaware corporation on June 7, 1971. On June 13, 2006, the Fund converted to a Delaware statutory trust and changed its name from 1838 Bond-Debenture Trading Fund. Its investment objective is to seek a high rate of return, primarily from interest income and trading activity, from a portfolio principally consisting of debt securities. Under normal circumstances, the Fund will invest at least 80% of its total assets in debt securities. An investment in the Fund is not appropriate for all investors. No assurances can be given that the Fund’s objective will be achieved.

ADDITIONAL INFORMATION ABOUT INVESTMENT OBJECTIVE AND POLICIES

     Most of the different types of securities in which the Fund may invest, subject to its investment objective, policies and restrictions, are described in the prospectus, under “Risk Factors” and “Investment Objective and Policies.” Additional information concerning certain of the Fund’s investment policies and investments is set forth below.

Investment Policies

     The Fund may, but has no current plans to, borrow to obtain investment leverage. There can be no assurance that the Fund will achieve its objective.

     The following information supplements the discussion of the Fund’s investment objective, policies and techniques that are described in the prospectus.

     Corporate Bonds, Notes and Commercial Paper. The Fund may invest in corporate bonds, notes and commercial paper. These obligations generally represent indebtedness of the issuer and may be subordinated to other outstanding indebtedness of the issuer. Commercial paper consists of short-term unsecured promissory notes issued by corporations in order to finance their current operations. The Fund will only invest in commercial paper rated, at the time of purchase, in the highest category by an NRSRO, such as Moody’s or S&P or, if not rated, determined by the Fund to be of comparable quality.

     Guaranteed Investment Contracts. The Fund may invest in guaranteed investment contracts (“GIC”). A GIC is a general obligation of an insurance company. A GIC is generally structured as a deferred annuity under which the purchaser agrees to pay a given amount of money to an insurer (either in a lump sum or in installments) and the insurer promises to pay interest at a guaranteed rate (either fixed or variable) for the life of the GIC. Some GICs provide that the insurer may periodically pay discretionary excess interest over and above the guaranteed rate. At the GIC’s maturity, the purchaser generally is given the option of receiving payment or an annuity. Certain GICs may have features that permit redemption by the issuer at a discount from par value.

     Generally, GICs are not assignable or transferable without the permission of the issuer. As a result, the acquisition of GICs is subject to the limitations applicable to the Fund’s acquisition of illiquid and restricted securities. The holder of a GIC is dependent on the creditworthiness of the issuer as to whether the issuer is able to meet its obligations.

     Money Market Instruments. Under normal conditions the Fund may hold up to 20% of its assets in cash or money market instruments. The Fund intends to invest in money market instruments (as well as short-term debt securities issued by the U.S. Treasury Department or by other agencies of the U.S. Government) pending investment in debt securities, to serve as collateral in connection with certain investment techniques, and to hold as a reserve pending the payment of dividends to investors. When the Adviser believes that economic circumstances warrant a temporary defensive posture, the Fund may invest without limitation in short-term money market instruments.

     Money market instruments that the Fund may acquire will be securities rated in the highest short-term rating category by Moody’s or Standard & Poor’s or the equivalent from another NRSRO, securities of issuers that have received such ratings with respect to other short-term debt or comparable unrated securities. Money market instruments in which the Fund typically expects to invest include: U.S. government securities; bank obligations (including certificates of deposit, time deposits and bankers’ acceptances of U.S. or foreign banks); commercial paper rated P-1 by Moody’s or A-1 by Standard & Poor’s; and repurchase agreements. See “Appendix A — Ratings of Corporate Obligations and Commercial Paper” attached to the Fund’s prospectus for further information on ratings by Moody’s and Standard & Poor’s.

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Mortgage-Related and Other Asset-Backed Securities. Mortgage-related securities are interests in pools of residential or commercial mortgage loans, including mortgage loans made by savings and loan institutions, mortgage bankers, commercial banks and others. Pools of mortgage loans are assembled as securities for sale to investors by various governmental, government-related and private organizations. See “Mortgage Pass-Through Securities.” The Funds may also invest in debt securities which are secured with collateral consisting of mortgage-related securities (see “Collateralized Mortgage Obligations”).

Mortgage Pass-Through Securities. Interests in pools of mortgage-related securities differ from other forms of debt securities, which normally provide for periodic payment of interest in fixed amounts with principal payments at maturity or specified call dates. Instead, these securities provide a monthly payment which consists of both interest and principal payments. In effect, these payments are a “pass-through” of the monthly payments made by the individual borrowers on their residential or commercial mortgage loans, net of any fees paid to the issuer or guarantor of such securities. Additional payments are caused by repayments of principal resulting from the sale of the underlying property, refinancing or foreclosure, net of fees or costs which may be incurred. Some mortgage-related securities (such as securities issued by the Government National Mortgage Association (“Ginnie Mae”)) are described as “modified pass-through.” These securities entitle the holder to receive all interest and principal payments owed on the mortgage pool, net of certain fees, at the scheduled payment dates regardless of whether or not the mortgagor actually makes the payment.

The rate of pre-payments on underlying mortgages will affect the price and volatility of a mortgage-related security, and may have the effect of shortening or extending the effective duration of the security relative to what was anticipated at the time of purchase. To the extent that unanticipated rates of pre-payment on underlying mortgages increase the effective duration of a mortgage-related security, the volatility of such security can be expected to increase.

The residential mortgage market in the United States recently has experienced difficulties that may adversely affect the performance and market value of certain of the Funds’ mortgage-related investments. Delinquencies and losses on residential mortgage loans (especially subprime and second-lien mortgage loans) generally have increased recently and may continue to increase, and a decline in or flattening of housing values (as has recently been experienced and may continue to be experienced in many housing markets) may exacerbate such delinquencies and losses. Borrowers with adjustable rate mortgage loans are more sensitive to changes in interest rates, which affect their monthly mortgage payments, and may be unable to secure replacement mortgages at comparably low interest rates. Also, a number of residential mortgage loan originators have recently experienced serious financial difficulties or bankruptcy. Consequently, reduced investor demand for mortgage loans and mortgage-related securities and increased investor yield requirements have caused limited liquidity in the secondary market for mortgage-related securities, which can adversely affect the market value of mortgage-related securities. It is possible that such limited liquidity in such secondary markets could continue or worsen.

The principal governmental guarantor of mortgage-related securities is Ginnie Mae. Ginnie Mae is a wholly owned United States Government corporation within the Department of Housing and Urban Development. Ginnie Mae is authorized to guarantee, with the full faith and credit of the United States Government, the timely payment of principal and interest on securities issued by institutions approved by Ginnie Mae (such as savings and loan institutions, commercial banks and mortgage bankers) and backed by pools of mortgages insured by the Federal Housing Administration (the “FHA”), or guaranteed by the Department of Veterans Affairs (the “VA”). Government-related guarantors (i.e., not backed by the full faith and credit of the United States Government) include the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”). Fannie Mae is a government-sponsored corporation owned entirely by private stockholders. It is subject to general regulation by the Secretary of Housing and Urban Development. Fannie Mae purchases conventional (i.e., not insured or guaranteed by any government agency) residential mortgages from a list of approved seller/servicers which include state and federally chartered savings and loan associations, mutual savings banks, commercial banks and credit unions and mortgage bankers. Pass-through securities

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issued by Fannie Mae are guaranteed as to timely payment of principal and interest by Fannie Mae but are not backed by the full faith and credit of the United States Government. Freddie Mac was created by Congress in 1970 for the purpose of increasing the availability of mortgage credit for residential housing. It is a government-sponsored corporation formerly owned by the twelve Federal Home Loan Banks and now owned entirely by private stockholders. Freddie Mac issues Participation Certificates (“PCs”) which are pass-through securities, each representing an undivided interest in a pool of residential mortgages. Freddie Mac guarantees the timely payment of interest and ultimate collection of principal, but PCs are not backed by the full faith and credit of the United States Government.
Fannie Mae and Freddie Mac have both recently faced scrutiny regarding their accounting practices and policies. In May 2006, the Office of Federal Housing Enterprise Oversight (“OFHEO”), which regulates Fannie Mae and Freddie Mac, released a report on certain accounting and corporate governance issues at Fannie Mae. In the report, the OFHEO found that Fannie Mae had not complied with generally accepted accounting principles (“GAAP”) for a large number of its accounting practices, had failed to maintain internal controls, had manipulated OFHEO regulators, had not appropriately informed its board of directors of its actions, and had not had a sufficiently independent board of directors. The OFHEO penalties triggered a settlement between Fannie Mae and the SEC, which had conducted its own investigation. With respect to Freddie Mac, in its Information Statement and Annual Report for the fiscal year ended December 31, 2004, Freddie Mac identified material weaknesses relating to its internal controls and technology applications that affected its financial reporting systems. This caused Freddie Mac to restate its prior years’ financial statements to conform to GAAP. On September 27, 2007, Freddie Mac entered into a settlement with the SEC over charges related to Freddie Mac’s improper earnings management and non-compliance with certain GAAP reporting that, according to the SEC, occurred from at least the second quarter of 1998 through the third quarter of 2002. Freddie Mac agreed to pay a $50 million dollar civil penalty and was enjoined from engaging in activity that violates the anti-fraud provisions of the federal securities laws. Freddie Mac has resumed regular GAAP compliance reporting with the OFHEO, and has stated that it intends to begin the process of registering the company’s common stock with the SEC.

Further, because of the recent difficulties faced by the United States housing and mortgage markets and the related concerns relating to Fannie Mae’s and Freddie Mac’s capital levels, President Bush signed a bill on July 30, 2008 approving the U.S. Department of the Treasury’s plan to allow the government to buy stock of Fannie Mae and Freddie Mac and to increase temporarily the two companies’ credit lines from the Treasury to meet short-term capital needs. The bill will also increase regulation of Fannie Mae and Freddie Mac. In addition, the Federal Reserve voted to allow the Federal Reserve Bank of New York to lend emergency capital to Fannie Mae and Freddie Mac, if needed.

Additionally, there has been ongoing concern expressed by critics and certain members of Congress over the size of the borrowing and purchasing activities of both companies and the impact they have on the United States economy. Congress has also expressed concern over Fannie Mae and Freddie Mac improperly using their non-profit and charitable foundations to evade campaign finance laws to lobby Congress, and has called on Fannie Mae’s board to demand repayment of executive bonuses obtained as a result of improper accounting manipulations. Legislation may be enacted in the future that limits the size and scope of the activities of both Fannie Mae and Freddie Mac and/or subjects these companies to further regulatory oversight. In addition to the above referenced concerns, there continues to be risk associated with the long-term financial stability of both Fannie Mae and Freddie Mac.

On September 7, 2008 both Fannie Mae and Freddie Mac were put into conservatorship of the Federal Housing Finance Agency (“FHFA”). The takeover by FHFA was precipitated by the rapidly deteriorating capital position of both Fannie Mae and Freddie Mac. As a result of the takeover of these enterprises by FHFA, there has been considerable turnover in the management personnel of both Fannie Mae and Freddie Mac. The board of directors of both entities have been replaced in their entirety as well.

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In October 2008, Fannie Mae was sued in a class action on behalf of purchasers of its 8.25% Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series S who purchased the stock between December 11, 2007 and September 5, 2008. In the complaint, plaintiffs allege that the defendants including several former officers and directors of Fannie Mae and the underwriters responsible for the Series S preferred stock offering knew or recklessly disregarded that Fannie Mae was grossly undercapitalized, in violation of Federal regulations, because of its overwhelming investments in subprime and Alt-A mortgages. These assets were not properly accounted for in violation of Generally Accepted Accounting Principles (“GAAP”). Fannie Mae’s capital deficiency also was concealed because its deferred tax assets and guaranty obligations were not properly accounted for in violation of GAAP.

Commercial banks, savings and loan institutions, private mortgage insurance companies, mortgage bankers and other secondary market issuers also create pass-through pools of conventional residential mortgage loans. Such issuers may be the originators and/or servicers of the underlying mortgage loans as well as the guarantors of the mortgage-related securities. Pools created by such non-governmental issuers generally offer a higher rate of interest than government and government-related pools because there are no direct or indirect government or agency guarantees of payments in the former pools. However, timely payment of interest and principal of these pools may be supported by various forms of insurance or guarantees, including individual loan, title, pool and hazard insurance and letters of credit, which may be issued by governmental entities or private insurers. Such insurance and guarantees and the creditworthiness of the issuers thereof will be considered in determining whether a mortgage-related security meets a Fund’s investment quality standards. There can be no assurance that the private insurers or guarantors can meet their obligations under the insurance policies or guarantee arrangements. The Funds may buy mortgage-related securities without insurance or guarantees if, through an examination of the loan experience and practices of the originator/servicers and poolers, the investment adviser determines that the securities meet the Fund’s quality standards. Securities issued by certain private organizations may not be readily marketable. A Fund may not purchase mortgage-related securities or any other assets which in the investment adviser’s opinion are illiquid if, as a result, more than 15% of the value of a Fund’s net assets will be illiquid.

Mortgage-backed securities that are issued or guaranteed by the United States Government, its agencies or instrumentalities, are not subject to the Funds’ industry concentration restrictions, set forth below under “Investment Restrictions,” by virtue of the exclusion from that test available to all United States Government securities. In the case of privately issued mortgage-related securities, the Funds take the position that mortgage-related securities do not represent interests in any particular “industry” or group of industries. The assets underlying such securities may be represented by a portfolio of first lien residential mortgages (including both whole mortgage loans and mortgage participation interests) or portfolios of mortgage pass-through securities issued or guaranteed by Ginnie Mae, Fannie Mae or Freddie Mac. Mortgage loans underlying a mortgage-related security may in turn be insured or guaranteed by the FHA or the VA. In the case of private issue mortgage-related securities whose underlying assets are neither United States Government securities nor United States Government-insured mortgages, to the extent that real properties securing such assets may be located in the same geographical region, the security may be subject to a greater risk of default than other comparable securities in the event of adverse economic, political or business developments that may affect such region and, ultimately, the ability of residential homeowners to make payments of principal and interest on the underlying mortgages.

Collateralized Mortgage Obligations (“CMOs”). A CMO is a debt obligation of a legal entity that is collateralized by mortgages and divided into classes. Similar to a bond, interest and prepaid principal is paid, in most cases, on a monthly basis. CMOs may be collateralized by whole mortgage loans or private mortgage bonds, but are more typically collateralized by portfolios of mortgage pass-through securities guaranteed by Ginnie Mae, Freddie Mac, or Fannie Mae, and their income streams.

CMOs are structured into multiple classes, often referred to as “tranches,” with each class bearing a different stated maturity and entitled to a different schedule for payments of principal and

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interest, including pre-payments. Actual maturity and average life will depend upon the pre-payment experience of the collateral. In the case of certain CMOs (known as “sequential pay” CMOs), payments of principal received from the pool of underlying mortgages, including pre-payments, are applied to the classes of CMOs in the order of their respective final distribution dates. Thus, no payment of principal will be made on any class of sequential pay CMOs until all other classes having an earlier final distribution date have been paid in full.

Commercial Mortgage-Backed Securities include securities that reflect an interest in, and are secured by, mortgage loans on commercial real property. The market for commercial mortgage-backed securities has developed more recently and in terms of total outstanding principal amount of issues is relatively small, compared to the market for residential single-family mortgage-backed securities. Many of the risks of investing in commercial mortgage-backed securities reflect the risks of investing in the real estate securing the underlying mortgage loans. These risks reflect the effects of local and other economic conditions on real estate markets, the ability of tenants to make loan payments, and the ability of a property to attract and retain tenants. Commercial mortgage-backed securities may be less liquid and exhibit greater price volatility than other types of mortgage- or asset-backed securities.

Other Mortgage-Related Securities. Other mortgage-related securities include securities other than those described above that directly or indirectly represent a participation in, or are secured by and payable from, mortgage loans on real property, including mortgage dollar rolls, CMO residuals or stripped mortgage-backed securities (“SMBS”). Other mortgage-related securities may be equity or debt securities issued by agencies or instrumentalities of the United States Government or by private originators of, or investors in, mortgage loans, including savings and loan associations, homebuilders, mortgage banks, commercial banks, investment banks, partnerships, trusts and special purpose entities of the foregoing.

CMO Residuals. CMO residuals are mortgage securities issued by agencies or instrumentalities of the United States Government or by private originators of, or investors in, mortgage loans, including savings and loan associations, homebuilders, mortgage banks, commercial banks, investment banks and special purpose entities of the foregoing.

The cash flow generated by the mortgaged assets underlying a series of CMOs is applied first to make required payments of principal and interest on the CMOs and second to pay the related administrative expenses and any management fee of the issuer. The residual in a CMO structure generally represents the interest in any excess cash flow remaining after making the foregoing payments. Each payment of such excess cash flow to a holder of the related CMO residual represents income and/or a return of capital. The amount of residual cash flow resulting from a CMO will depend on, among other things, the characteristics of the mortgage assets, the coupon rate of each class of CMO, prevailing interest rates, the amount of administrative expenses and the pre-payment experience on the mortgage assets. In particular, the yield to maturity on CMO residuals is extremely sensitive to pre-payments on the related underlying mortgage assets, in the same manner as an interest-only (“IO”) class of stripped mortgage-backed securities. See “Other Mortgage-Related Securities—Stripped Mortgage-Backed Securities.” In addition, if a series of a CMO includes a class that bears interest at an adjustable rate, the yield to maturity on the related CMO residual will also be extremely sensitive to changes in the level of the index upon which interest rate adjustments are based. As described below with respect to stripped mortgage-backed securities, in certain circumstances a Fund may fail to recoup fully its initial investment in a CMO residual.

CMO residuals are generally purchased and sold by institutional investors through several investment banking firms acting as brokers or dealers. The CMO residual market has only very recently been developed and CMO residuals currently may not have the liquidity of other more established securities trading in other markets. Transactions in CMO residuals are generally completed only after careful review of the characteristics of the securities in question. In addition, CMO residuals may, or pursuant to an exemption therefrom, may not have been registered under the 1933 Act. CMO residuals, whether or not registered under the 1933 Act, may be subject to

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certain restrictions on transferability, and may be deemed “illiquid” and subject to a Fund’s limitations on investment in illiquid securities.

Adjustable Rate Mortgage Backed Securities. Adjustable rate mortgage-backed securities (“ARMBS”) have interest rates that reset at periodic intervals. Acquiring ARMBS permits a Fund to participate in increases in prevailing current interest rates through periodic adjustments in the coupons of mortgages underlying the pool on which ARMBS are based. Such ARMBS generally have higher current yield and lower price fluctuations than is the case with more traditional fixed income debt securities of comparable rating and maturity. In addition, when prepayments of principal are made on the underlying mortgages during periods of rising interest rates, a Fund can reinvest the proceeds of such prepayments at rates higher than those at which they were previously invested. Mortgages underlying most ARMBS, however, have limits on the allowable annual or lifetime increases that can be made in the interest rate that the mortgagor pays. Therefore, if current interest rates rise above such limits over the period of the limitation, a Fund, when holding an ARMBS, does not benefit from further increases in interest rates. Moreover, when interest rates are in excess of coupon rates (i.e., the rates being paid by mortgagors) of the mortgages, ARMBS behave more like fixed income securities and less like adjustable rate securities and are subject to the risks associated with fixed income securities. In addition, during periods of rising interest rates, increases in the coupon rate of adjustable rate mortgages generally lag current market interest rates slightly, thereby creating the potential for capital depreciation on such securities.

Stripped Mortgage-Backed Securities. SMBS are derivative multi-class mortgage securities. SMBS may be issued by agencies or instrumentalities of the United States Government, or by private originators of, or investors in, mortgage loans, including savings and loan associations, mortgage banks, commercial banks, investment banks and special purpose entities of the foregoing.

SMBS are usually structured with two classes that receive different proportions of the interest and principal distributions on a pool of mortgage assets. A common type of SMBS will have one class receiving some of the interest and most of the principal from the mortgage assets, while the other class will receive most of the interest and the remainder of the principal. In the most extreme case, one class will receive all of the interest (the “IO” class), while the other class will receive all of the principal (the principal-only or “PO” class). The yield to maturity on an IO class is extremely sensitive to the rate of principal payments (including pre-payments) on the related underlying mortgage assets, and a rapid rate of principal payments may have a material adverse effect on a Fund’s yield to maturity from these securities. If the underlying mortgage assets experience greater than anticipated pre-payments of principal, a Fund may fail to recoup some or all of its initial investment in these securities even if the security is in one of the highest rating categories.

Although SMBS are purchased and sold by institutional investors through several investment banking firms acting as brokers or dealers, these securities were only recently developed. As a result, established trading markets have not yet developed and, accordingly, these securities may be deemed “illiquid” and subject to a Fund’s limitations on investment in illiquid securities.

Collateralized Debt Obligations. The Funds may invest in collateralized debt obligations (“CDOs”), which include collateralized bond obligations (“CBOs”), collateralized loan obligations (“CLOs”) and other similarly structured securities. CBOs and CLOs are types of asset-backed securities. A CBO is a trust which is backed by a diversified pool of high risk, below investment grade fixed income securities. A CLO is a trust typically collateralized by a pool of loans, which may include, among others, domestic and foreign senior secured loans, senior unsecured loans, and subordinate corporate loans, including loans that may be rated below investment grade or equivalent unrated loans. CDOs may charge management fees and administrative expenses.

For both CBOs and CLOs, the cash flows from the trust are split into two or more portions, called tranches, varying in risk and yield. The riskiest portion is the “equity” tranche which bears the bulk of defaults from the bonds or loans in the trust and serves to protect the other, more senior tranches from default in all but the most severe circumstances. Since it is partially protected from defaults, a senior tranche from a CBO trust or CLO trust typically has higher ratings and lower

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yields than its underlying securities, and can be rated investment grade. Despite the protection from the equity tranche, CBO or CLO tranches can experience substantial losses due to actual defaults, increased sensitivity to defaults due to collateral default and disappearance of protecting tranches, market anticipation of defaults, as well as aversion to CBO or CLO securities as a class.

The risks of an investment in a CDO depend largely on the type of the collateral securities and the class of the CDO in which a Fund invests. Normally, CBOs, CLOs and other CDOs are privately offered and sold, and thus, are not registered under the securities laws. As a result, investments in CDOs may be characterized by the Funds as illiquid securities; however, an active dealer market may exist for CDOs, allowing a CDO to qualify as a Rule 144A transaction. In addition to the normal risks associated with fixed income securities discussed elsewhere in this Statement of Additional Information and the Funds’ Prospectuses (e.g., interest rate risk and default risk), CDOs carry additional risks including, but not limited to: (i) the possibility that distributions from collateral securities will not be adequate to make interest or other payments; (ii) the quality of the collateral may decline in value or default; (iii) the Funds may invest in CDOs that are subordinate to other classes; and (iv) the complex structure of the security may not be fully understood at the time of investment and may produce disputes with the issuer or unexpected investment results.

     Zero Coupon Securities. The Fund may invest up to 10% of its assets in zero coupon securities issued by the U.S. Government, its agencies or instrumentalities as well as custodial receipts or certificates underwritten by securities dealers or banks that evidence ownership of future interest payments, principal payments or both on certain government securities. Zero coupon securities pay no cash income to their holders until they mature and are issued at substantial discounts from their value at maturity. When held to maturity, their entire return comes from the difference between their purchase price and their maturity value. Because interest on zero coupon securities is not paid on a current basis, the values of securities of this type are subject to greater fluctuations than are the values of securities that distribute income regularly and may be more speculative than such securities. Accordingly, the values of these securities may be highly volatile as interest rates rise or fall. In addition, the Fund’s investments in zero coupon securities will result in special tax consequences. Although zero coupon securities do not make interest payments, for tax purposes a portion of the difference between a zero coupon security’s maturity value and its purchase price is taxable income of the Fund each year.

     Custodial receipts evidencing specific coupon or principal payments have the same general attributes as zero coupon government securities but are not considered to be government securities. Although typically under the terms of a custodial receipt the Fund is authorized to assert its rights directly against the issuer of the underlying obligation, the Fund may be required to assert through the custodian bank such rights as may exist against the underlying issuer. Thus, in the event the underlying issuer fails to pay principal and/or interest when due, the Fund may be subject to delays, expenses and risks that are greater than those that would have been involved if the Fund had purchased a direct obligation of the issuer. In addition, in the event that the trust or custodial account in which the underlying security has been deposited is determined to be an association taxable as a corporation, instead of a non-taxable entity, the yield on the underlying security would be reduced in respect of any taxes paid.

     Lending Of Securities. The Fund is authorized to lend securities it holds in its portfolio to brokers, dealers and other financial organizations, although it has no current intention of doing so. Loans of the Fund’s securities, if and when made, may not exceed, immediately after the loan, 15% of the Fund’s assets taken at value, nor 5% of such value to any one securities dealer or financial organization. The Fund’s loans of securities will be collateralized by cash, letters of credit or government securities that will be maintained at all times in a segregated account with the Fund’s custodian in an amount at least equal to the current market value of the loaned securities. From time to time, the Fund may pay a part of the interest earned from the investment of collateral received for securities loaned to the borrower and/or a third party that is unaffiliated with the Fund and that is acting as a “finder.”

     By lending its portfolio securities, the Fund can increase its income by continuing to receive interest on the loaned securities, by investing the cash collateral in short-term instruments or by obtaining yield in the form of interest paid by the borrower when government securities are used as collateral. The risk in lending portfolio securities, as with other extensions of credit, consists of the possible delay in recovery of the securities or the possible loss of rights in the collateral should the borrower fail financially. The Fund will adhere to the following conditions whenever it lends its securities: (i) the Fund must receive at least 100% cash collateral or equivalent securities from the borrower, which will be maintained by daily marking-to-market; (ii) the borrower must increase

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the collateral whenever the market value of the securities loaned rises above the level of the collateral; (iii) the Fund must be able to terminate the loan at any time; (iv) the Fund must receive reasonable interest on the loan, as well as any dividends, interest or other distributions on the loaned securities and any increase in market value; (v) the Fund may pay only reasonable custodian fees in connection with the loan; and (vi) voting rights on the loaned securities may pass to the borrower, except that, if a material event adversely affecting the investment in the loaned securities occurs, the Board must terminate the loan and regain the Fund’s right to vote the securities.

     Short Sales Against the Box. The Fund may make short sales of securities in order to reduce market exposure and/or to increase its income if at all times when a short position is open, the Fund owns an equal or greater amount of such securities or owns preferred stock, debt or warrants convertible or exchangeable into an equal or greater number of the shares of common stocks sold short. Short sales of this kind are referred to as short sales “against the box.” The broker-dealer that executes a short sale generally invests the cash proceeds of the sale until they are paid to the Fund. Arrangements may be made with the broker-dealer to obtain a portion of the interest earned by the broker on the investment of short sale proceeds. The Fund will segregate the securities against which short sales against the box have been made in a special account with its custodian. Not more than 10% of the Fund’s net assets (taken at current value) may be held as collateral for such sales at any one time.

     Eurodollar Futures Contracts and Options on Futures Contracts. The Fund may make investments in Eurodollar futures and options thereon for hedging purposes and, in each case, in accordance with the rules and regulations of the CFTC. Eurodollar futures and options thereon are essentially U.S. dollar-denominated futures contracts or options thereon which are linked to LIBOR. Eurodollar futures contracts enable purchasers to obtain a fixed rate for the lending of funds and sellers to obtain a fixed rate for borrowings. The Fund intends to use eurodollar futures contracts and options thereon to hedge against changes in LIBOR, to which many interest rate swaps, short-term borrowings and floating rate securities are linked, and which can affect the market prices of many short-term securities. When the Fund enters into a futures contact it makes a deposit of initial margin and thereafter will be required to pay or entitled to receive variation margin in an amount equal to the change in the value of the contract from the preceding day.

     Leverage and Borrowing. Presently, although there are no current proposals for leveraging the Fund, upon consideration and approval by the Board, the Fund can borrow from banks to purchase securities. See “Investment Restrictions” in the prospectus and below for additional information. As provided in the 1940 Act and subject to certain exceptions and the Fund’s investment policies, the Fund may issue debt so long as the Fund’s total assets immediately after such issuance, less certain ordinary course liabilities, exceed 300% of the amount of the debt outstanding. The Fund would borrow money and use the proceeds to purchase securities principally when it believes that an increase in the prices of debt securities is about to occur. The extent to which the Fund borrows will depend upon the availability of funds, as well as the cost of borrowing from time to time as compared with the possible benefit the Fund expects to achieve thereby. No assurance can be given that the Fund will be able to borrow on terms acceptable to the Fund.

     If the Fund uses borrowed funds to make additional investments, any investment gains made and income earned with the additional funds, in excess of the interest which the Fund will have to pay thereon, will cause the net asset value of the Fund’s shares to rise more than if borrowing were not used. Conversely, if the value of securities purchased with the borrowed funds declines or does not increase sufficiently to cover the cost of the borrowing when combined with income earned thereon, the net asset value of the Fund will decline more than if borrowing were not used. This magnifying effect of borrowing is known as leverage.

     The requirement under the 1940 Act to pay in full interest on debt before any dividends may be paid on common stock means that dividends on common stock from earnings may be reduced or eliminated. Although an inability to pay dividends on shares of beneficial interest could conceivably result in the Fund ceasing to qualify as a regulated investment company under the Code, which would be materially adverse to the holders of shares of beneficial interest, such inability can be avoided through the use of mandatory redemption requirements designed to ensure that the Fund maintains the necessary asset coverage.

     Leverage entails two primary risks. The first risk is that the use of leverage magnifies the impact on the holders of shares of beneficial interest of changes in net asset value. For example, a fund that uses 20% leverage (that is, $20 of leverage per $100 of common equity) will show a 1.2% increase or decline in net asset value for each 1% increase or decline in the value of its total assets. The second risk is that the cost of leverage will exceed the return on the securities acquired with the proceeds of leverage, thereby diminishing rather than enhancing the return to holders of shares of beneficial interest. If the Fund were to utilize leverage, these two risks would generally make

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the Fund’s total return to holders of shares of beneficial more volatile. In addition, the Fund might be required to sell investments in order to meet principal or interest payments on the debt when it may be disadvantageous to do so.

     The Fund expects that, if it determines to borrow, some or all of its borrowings may be made on a secured basis. If secured, the Fund’s custodian will either segregate the assets securing the Fund’s borrowings for the benefit of the Fund’s lenders or arrangements will be made with a suitable sub-custodian, which may include a lender. If the assets used to secure the borrowings decrease in value, the Fund may be required to pledge additional collateral to the lender in the form of cash or securities to avoid liquidation of those assets. The rights of any lenders to the Fund to receive payments of interest on and repayments of principal of borrowings will be senior to the rights of the Fund’s shareholders, and the terms of the Fund’s borrowings may contain provisions that limit certain activities of the Fund and could result in precluding the purchase of instruments that the Fund would otherwise purchase.

     The Fund may borrow by entering into reverse repurchase agreements with any member bank of the Federal Reserve System and any foreign bank that has been determined by the investment adviser to be creditworthy. Under a reverse repurchase agreement, the Fund would sell securities and agree to repurchase them at a mutually agreed date and price. At the time the Fund enters into a reverse repurchase agreement, it will establish and maintain a segregated account with its custodian or a designated sub-custodian or otherwise earmark cash or liquid obligations having a value not less than the repurchase price (including accrued interest). Reverse repurchase agreements involve the risk that the market value of the securities purchased with the proceeds of the sale of securities received by the Fund may decline below the price of the securities the Fund is obligated to repurchase. In the event the buyer of securities under a reverse repurchase agreement files for bankruptcy or becomes insolvent, the buyer or its trustee or receiver may receive an extension of time to determine whether to enforce the Fund’s obligation to repurchase the securities, and the Fund’s use of the proceeds of the reverse repurchase agreement may effectively be restricted pending the decision. Reverse repurchase agreements will be treated as borrowings for purposes of calculating the Fund’s borrowing limitation.

     Futures. The Fund may invest in financial futures contracts, including interest rate futures, (“futures contracts”) and related options thereon. The Fund may sell a futures contract or a call option thereon or purchase a put option on such futures contract, if the Adviser anticipates interest rates to rise as a hedge against a decrease in the value of the securities. If the Adviser anticipates that interest rates will decline, the Fund may purchase a futures contract or a call option thereon or sell a put to protect against an increase in the price of the securities the Fund intends to purchase. These futures contracts and related options thereon will be used only as a hedge against anticipated interest rate changes. A futures contract sale creates an obligation by the Fund, as a seller, to deliver the specific type of instrument called for in the contract at a specified future time for a specified price. A futures contract purchase creates an obligation by the Fund, as purchaser, to take delivery of the specific type of financial instrument at a specified future time at a specified price. The specific securities delivered or taken, respectively, at settlement date, would not be determined until at or near that date. The determination would be in accordance with the rules of the exchange on which the futures contract sale or purchase was effected.

     Although the terms of futures contracts specify actual delivery or receipt of securities, in most instances the contracts are closed out before the settlement date without the making or taking of delivery of the securities. Closing out of a futures contract is effected by entering into an offsetting purchase or sale transaction. An offsetting transaction for a futures contract sale is effected by the Fund entering into a futures contract purchase for the same aggregate amount of the specific type of financial instrument and same delivery date. If the price of the sale exceeds the price of the offsetting purchase, the Fund is immediately paid the difference and thus realizes a gain. If the offsetting purchase price exceeds the sale price, the Fund pays out the difference and realizes a loss. Similarly, the closing out of a futures contract purchase is effected by the Fund entering into a futures contract sale. If the offsetting sale price exceeds the purchase price, the Fund realizes a gain, and if the offsetting sale price is less than the purchase price, the Fund realizes a loss.

     Unlike a futures contract, which requires the parties to buy and sell a security on a set date, an option on a futures contract entitles its holder to decide on or before a future date whether to enter into such a contract. If the holder decides not to enter into the contract, the premium paid for the option is lost. Because the value of the option is fixed at the point of sale, there are no daily payments of cash to reflect the change in the value of the underlying contract as there are by a purchaser or seller of a futures contract. The value of the option does change and is reflected in the net asset value of the Fund.

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     The Fund is required to maintain margin deposits with brokerage firms through which it effects futures contracts and options thereon. The initial margin requirements vary according to the type of underlying security. In addition, due to current industry practice, daily variations in gains and losses on open contracts are required to be reflected in cash in the form of variation margin payments. The Fund may be required to make additional margin payments during the term of the contract.

     Futures contracts can be purchased on debt securities such as U.S. Treasury Bills and Bonds, U.S. Treasury Notes with maturities between six and ten years, certificates of Ginnie Mae and bank certificates of deposit. The Fund may invest in futures contracts covering these instruments as well as in new types of such contracts that become available in the future.

     Financial futures contracts are traded in an auction environment on the floors of several exchanges, principally, the Chicago Board of Trade, the Chicago Mercantile Exchange and the New York Futures Exchange. Each exchange guarantees performance under contract provisions through a clearing corporation, a nonprofit organization managed by the exchange membership which is also responsible for handling accounting of deposit or withdrawals of margin.

     A risk in employing futures contracts and related options to protect against the price volatility of portfolio securities is that the prices of securities subject to futures contracts may correlate imperfectly with the behavior of the cash prices of portfolio securities. The correlation may be distorted by the fact that the futures market is dominated by short-term traders seeking to profit from the difference between a contract or security price and their cost of borrowed funds. This would reduce their value for hedging purposes over a short time period. Such distortions are generally minor and would diminish as the contract approached maturity.

     Another risk related to futures contracts is that the Adviser could be incorrect in its expectations as to the direction or extent of various interest rate movements or the time span within which the movements take place. For example, if the Fund sold futures contracts for the sale of securities in anticipation of an increase in interest rates, and then interest rates declined instead, causing bond prices to rise, the Fund would lose money on the sale.

     In addition, there are particular market risks associated with investing in futures or related options. In particular, the ability to establish close out positions on such futures and options will be subject to the development and maintenance of a liquid secondary market. It is not certain that this market will develop or be maintained. As a result, in volatile markets, the Fund may not be able to close out a transaction without incurring losses substantially greater than the initial deposit.

     The Fund may not enter into futures contracts or related options thereon if immediately thereafter the amount committed to margin plus the amount paid for option premiums exceeds 5% of the value of the Fund’s total assets.

     Options. The Fund may from time to time, and to the extent described below, (1) write (sell) covered call options on securities that it owns or has an immediate right to acquire through conversion or exchange of other securities; or (2) purchase put options on such securities. The Fund may also enter into closing transactions with respect to such options. All options written or purchased by the Fund must be listed on a national securities exchange. The requirements for qualification as a “regulated investment company” may limit the degree to which the Fund may utilize option strategies.

     A call option gives the purchaser the right to buy, and the writer has the obligation to sell, the underlying security at the option exercise price during the option period. The Fund may write only “covered” call options, that is, options on securities that it holds in its portfolio or that it has an immediate right to acquire through conversion or exchange of securities held in its portfolio. The total value of securities underlying options written or purchased by the Fund, including options on futures, may not exceed 20% of the Fund’s total assets.

     The Fund will write covered call options in order to receive premiums which it is paid for writing options. Such premiums represent a gain to the Fund if the option expires unexercised. Such gain may offset possible declines in the market values of the securities held in its portfolio. If, for example, the market price of a security held by the Fund declines in value, such decline will be offset in part (or wholly) by the receipt of the premium for writing the call options on such stock. However, if the market price of the underlying security held by the Fund also increases in value, such increase may be offset in part (or wholly) by a loss resulting from the need to buy back at higher prices the covered call options written by the Fund or through the lost opportunity for any participation in the capital appreciation of the underlying security above the exercise price.

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     In addition to writing covered call options, the Fund may invest in the purchase of put options on securities that it owns or may acquire through the conversion or exchange of other securities that it owns. A put option gives the holder the right to sell the underlying security at the option exercise price at any time during the option period. Any losses realized by the Fund in connection with its purchase of put options will be limited to the premiums paid by the Fund for the purchase of such options plus any transaction costs.

     The Fund intends to purchase put options on particular securities in order to protect against a decline in the market value of the underlying security below the exercise price less the premium paid for the option. Purchasing put options allows the Fund to protect the unrealized gain in an appreciated security in its portfolio without actually selling the security. In addition, the Fund would continue to receive interest or dividend income on the security. The Fund may sell a put option which it has previously purchased prior to the sale of the securities underlying such option. Such sales will result in a net gain or loss depending on whether the amount received on the sale is more or less than the premium and other transaction costs paid for the put option that is sold. Such gain or loss may be wholly or partially offset by a change in the value of the underlying security which the Fund owns or has the right to acquire.

Portfolio Maturity and Turnover

     The Fund’s holdings may include issues of various maturities. Ordinarily, the Fund intends to make investments in medium and longer term instruments (i.e., those with maturities in excess of three years), but the weighted average maturity of portfolio holdings may be shortened or lengthened depending primarily upon the Adviser’s outlook for interest rates. To the extent the weighted average maturity of the Fund’s portfolio securities is lengthened, the value of such holdings will be more susceptible to fluctuation in response to changes in interest rates, creditworthiness and general economic conditions. The weighted average of the Fund’s portfolio will fluctuate depending on market conditions and investment opportunities. The Fund, however, does not expect that the weighted average maturity of the Fund’s portfolio will, under normal conditions, exceed 25 years.

     In pursuit of the Fund’s investment objective and policies, the Fund’s portfolio turnover rate may exceed 100% per annum. A 100% annual turnover rate would occur if all the securities in the Fund’s portfolio were replaced once within a period of one year. There are no limits on portfolio turnover. In periods when there are rapid changes in economic conditions or security price levels or when the investment strategy is changed significantly, portfolio turnover may be significantly higher than during times of economic and market price stability, when the investment strategy remains relatively constant. A high rate of portfolio turnover (i.e., 100% or more) will result in increased transaction costs for the Fund primarily in the form of increased dealer spreads, but may also include brokerage commissions. The Fund’s portfolio turnover rates for the fiscal years ended March 31, 2008, 2007 and 2006 were 17.25%, 25.90% and 24.33%, respectively.

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MANAGEMENT OF THE FUND

     The Board is responsible for the overall management of the Fund, including oversight of the Adviser and other service providers. There are four trustees of the Fund. One of the trustees is an “interested person” (as defined in the Investment Company Act of 1940 (the “1940 Act). Information about both the Fund’s trustees and officers is set forth in the tables below.

Information About Trustees and Officers

     Information about the trustees of the Fund is set forth in the following table.

	Position	Length of Term	Principal	Number of
Name, Address	Held with	Served, and Term of	Occupation for Past	Portfolios Overseen		Other Directorships
and Age	Fund	Office	5 Years	by Trustee		Held by Trustee
Interested Trustee
W. Thacher Brown 113 King Street Armonk, NY 10504, Born: December 1947	Trustee	Trustee of Fund since 1988. Term expires at 2009 Annual Meeting	Former President of MBIA Asset Management LLC from July 1998 to September 2004; and Former President of 1838 Investment Advisors, LLC from July 1988 to May 2004.		1	Director, Airgas, Inc. (Wholesale-Industrial Machinery & Equipment); and Director, Harleysville Mutual Insurance Company, and Harleysville Group (insurance)
Independent Trustees
Suzanne P. Welsh 113 King Street Armonk, NY 10504, Born: March 1953	Trustee	Trustee of Fund since 2008. Term expires at 2009 Annual Meeting	Vice President for Finance and Treasurer, Swarthmore College		1	None
Morris Lloyd, Jr. 113 King Street Armonk, NY 10504, Born: September 1937	Trustee	Trustee of Fund since 1989. Term expires at 2009 Annual Meeting	Retired; former Development Officer, Trinity College from April 1996 to June 2002.		1	Director and Treasurer, Hall Mercer Hospital Foundation; Director and Treasurer, First Hospital Foundation.
J. Lawrence Shane 113 King Street Armonk, NY 10504, Born: January 1935	Trustee	Trustee of Fund since 1974. Term expires at 2009 Annual Meeting	Retired; former Vice Chairman and CFO of Scott Paper Company until 1992.		1	Member and former Chairman of the Board of Managers of Swarthmore College.

* Mr. Brown is an “interested person” (as defined in the 1940 Act) of the Fund because he owns shares of MBIA Inc., of which the investment adviser is an indirect wholly-owned subsidiary.

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     Information about the officers of the Fund is set forth in the following table.

Name, Address and	Position Held			Principal Occupation
Age	with Fund	Position Since		for Past 5 Years
Clifford D. Corso MBIA CMC 113 King Street Armonk, NY 10504 Born: October 1961	President		2005	President and Chief Investment Officer, MBIA Capital Management Corp.; Managing Director and Chief Investment Officer, MBIA Insurance Corporation; Director and officer of other affiliated entities within the MBIA Asset Management Group.
Marc D. Morris MBIA CMC 113 King Street Armonk, NY 10504 Born: March 1959	Treasurer		2005	Director of MBIA Capital Management Corp.; Director and officer of other affiliated entities within the MBIA Asset Management Group.
Leonard I. Chubinsky MBIA CMC 113 King Street Armonk, NY 10504 Born: December 1948	Secretary		2005	Deputy General Counsel of MBIA Insurance Corporation; officer of other affiliated entities within the MBIA Asset Management Group.
Richard J. Walz MBIA CMC 113 King Street Armonk, NY 10504 Born: April 1959	Chief Compliance Officer		2005	Officer of several affiliated entities within the MBIA Asset Management Group.
Robert T. Claiborne MBIA CMC 113 King Street Armonk, NY 10504 Born: August 1955	Vice President		2006	Officer of MBIA Capital Management Corp.
Gautam Khanna MBIA CMC 113 King Street Armonk, NY 10504 Born: October 1969	Vice President		2006	Officer of MBIA Capital Management Corp.

Committees of the Board of Trustees

Audit Committee

     The Board has an Audit Committee and has adopted a written charter for the Audit Committee. The Audit Committee of the Board currently consists of Messrs. Lloyd and Shane and Ms. Welsh, each of whom is an “independent” member of the Board, as that term is defined by the New York Stock Exchange’s listing standards, and also not an “interested person” as that term is defined in the 1940 Act. A copy of the Audit Committee Charter

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is attached to the Fund’s proxy statement filed with the Securities and Exchange Commission (“SEC”) on May 22, 2008.

     The Audit Committee reviews the scope of the audit by the Fund’s independent accountants, confers with the independent accountants with respect to the audit and the internal accounting controls of the Fund and with respect to such other matters as may be important to an evaluation of the audit and the financial statements of the Fund. The Audit Committee also selects and retains the independent accountants for the Fund. During the fiscal year ended March 31, 2008, the Audit Committee met once.

Nominating Committee

     The Board has a Nominating Committee and adopted a written charter for the Nominating Committee. The Nominating Committee of the Board currently consists of Messrs. Lloyd and Shane and Ms. Welsh, none of whom is an “interested person” of the Fund. Each member of the Nominating Committee also is an “independent” Trustee, as that term is defined by the New York Stock Exchange’s listing standards. The Nominating Committee held one meeting during the last fiscal year. At that meeting one nominee was recommended to the Nominating Committee as a nominee by a current Trustee and subsequently approved by the Nominating Committee. A copy of the Nominating Committee Charter is attached to the Fund’s proxy statement filed with the SEC on May 22, 2008.

     The Nominating Committee recommends nominees for Trustees and officers of the Fund for consideration by the full Board. The Nominating Committee also periodically reviews the appropriateness of the compensation paid to the independent trustee and recommends any changes in compensation to the full Board.

     The Fund does not currently have a written policy with regard to shareholder nominations for Trustee. The absence of such a policy does not mean, however, that a shareholder recommendation would not have been considered had one been received in a timely manner as determined by the Committee. In evaluating Trustee nominees, the Nominating Committee considers the following factors: (i) the appropriate size and composition of the Board; (ii) whether the person is an “interested person” of the Fund as defined in Section 2(a)(19) of the 1940 Act; (iii) the needs of the Fund with respect to the particular talents and experience of its Trustees; (iv) the knowledge, skills and experience of nominees in light of prevailing business conditions and the knowledge, skills and experience already possessed by other members of the Board; (v) experience with accounting rules and practices; (vi) whether the person has attained the mandatory retirement age, and (vii) all applicable laws, rules, regulations, and listing standards.

     The Board of Trustees, upon the recommendation of the Nominating Committee, has adopted a mandatory retirement policy requiring each Trustee to submit his resignation from the Board of Trustees effective on a date no later than the last day of the fiscal year in which he or she attains the age of seventy-five years. The Nominating Committee’s goal is to assemble a Board that brings to the Fund a variety of perspectives and skills derived from high quality business and professional experience.

     Other than the foregoing, there are no stated minimum criteria for Trustee nominees, although the Nominating Committee may also consider such other factors as they may deem to be in the best interests of the Fund and its shareholders. The Nominating Committee identifies nominees by first evaluating the current members of the Board willing to continue in service. If the Nominating Committee determines that an additional Trustee is required, the entire Board is polled for suggestions as to individuals meeting the aforementioned criteria. Research may also be performed to identify qualified individuals. It is not the present intention of the Nominating Committee to engage third parties to identify or evaluate or assist in identifying potential nominees, although the Nominating Committee reserves the right to do so in the future.

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Ownership of the Fund By Trustees

     Set forth in the following table are the trustees of the Fund, together with the dollar range of equity securities beneficially owned by each trustee as of ___, 2009, as well as the aggregate dollar range of equity securities in all funds overseen or to be overseen in a family of investment companies (i.e., funds managed by the Adviser).

		Aggregate Dollar Range of
		Equity Securities in All Funds
	Dollar Range of Equity	in Family of Investment
Name	Securities in the Fund	Companies
Interested Trustee
W. Thacher Brown	$50,001-$100,000	$50,000 - $100,000
Independent Trustees
Suzanne P. Welsh	$10,001-$50,000	$10,001-$50,000
Morris Lloyd, Jr.	$10,001-$50,000	$10,001-$50,000
J. Lawrence Shane	$10,001-$50,000	$10,001-$50,000

     As of ___, 2009, trustees and executive officers (10 persons) beneficially owned an aggregate of less than 1% of the Fund’s outstanding shares on that date.

TRUSTEE COMPENSATION

     For the fiscal year ended March 31, 2008, the Fund paid compensation to each Trustee in the amount of $2,500 per quarter in addition to $1,000 for each meeting of the Board and $500 for each Nominating Committee meeting and $1,000 for each Audit Committee meeting, if held separately, attended by the trustee, plus reimbursement for expenses. Such fees totaled $67,386 for the fiscal year ended March 31, 2008.

     The aggregate compensation paid by the Fund to each of its Trustees serving during the fiscal year ended March 31, 2008 is set forth in the compensation table below. None of the Trustees serves on the Board of any other registered investment company to which the Fund’s investment adviser or an affiliated person of the Fund’s investment adviser provides investment advisory services.

     Trustees and executive officers of the Fund do not receive pension or retirement benefits from the Fund.

		Pension or
	Aggregate	Retirement Benefits	Estimated Annual
Name of Person and	Compensation from	Accrued as Part of	Benefits Upon
Position with Fund	the Fund	Fund Expenses	Retirement
W. Thacher Brown, Trustee*	$16,000	$0	$0
John Gilray Christy, Trustee**	$17,000	$0	$0
Morris Lloyd, Jr., Trustee	$17,000	$0	$0
J. Lawrence Shane, Trustee	$17,000	$0	$0

*	“Interested person” of the Fund as defined by Section 2(a)(19) of the 1940 Act.
**	Mr. Christy resigned his position as a Trustee on March 31, 2008.

All compensatory information in the above table is as of fiscal year end March 31, 2008.

CODE OF ETHICS

     The Fund and the Adviser have adopted a joint code of ethics pursuant to Rule 17j-1 under the 1940 Act. The code of ethics permits personnel subject to the code to invest in securities, including securities that may be purchased or held by the Fund, following certain black-out periods specified in the code, and subject to certain other conditions and restrictions.

     The code of ethics is on file with the SEC, and can be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-202-942-8090 and this code of ethics is available on the EDGAR database on the SEC’s internet site at: http://www.sec.gov. Copies of this code of ethics may be obtained, after paying a duplicating fee, by electronic

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request at the following e-mail address: publicinfo@sec.gov or by writing the SEC’s Public Reference Section, Washington, D.C. 20549-0102.

PROXY VOTING POLICIES AND PROCEDURES

     At its September 10, 2008 meeting, the Fund’s Board authorized and directed the Adviser to vote proxies relating to the Fund’s portfolio securities in accordance with the Adviser’s proxy voting policies and procedures. The Adviser, as an Investment Adviser with a fiduciary responsibility to the Fund, analyzes the proxy statements of issuers whose stock is owned by the Fund, if any.

     Proxy Administration. The Adviser’s Proxy Voting Committee develops the Adviser’s positions on all major corporate issues, creates guidelines, and oversees the voting process. The Proxy Committee, composed of portfolio managers, investment operations managers, and internal legal counsel, analyzes proxy policies based on whether they would adversely affect shareholders’ interests and make a company less attractive to own. In evaluating proxy policies each year, the Proxy Voting Committee relies upon its own fundamental research, independent research provided by third parties, and information presented by company managements and shareholder groups.

     Once the Proxy Committee establishes its recommendations, they are distributed to the firm’s portfolio managers as voting guidelines. Ultimately, the portfolio manager votes on the proxy proposals of companies in his or her portfolio. When portfolio managers (“Proxy Voting Portfolio Manager”) cast votes that are counter to the Proxy Committee’s guidelines, they are required to document their reasons in writing to the Proxy Voting Committee. Annually, the Proxy Voting Committee reviews the Adviser’s proxy voting process, policies, and voting records.

     Fiduciary Considerations. The Adviser’s decisions with respect to proxy issues are made in light of the anticipated impact of the issue on the desirability of investing in the portfolio company. Proxies are voted solely in the interests of the Fund or Fund shareholders.

     Consideration Given Management Recommendations. When determining whether to invest in a particular company, one of the key factors the Adviser considers is the quality and depth of its management. As a result, the Adviser believes that recommendations of management on most issues should be given weight in determining how proxy issues should be voted.

     Adviser Voting Policies. Specific voting guidelines have been established by the Proxy Voting Committee for recurring issues that appear on proxies. The following is a summary of the more significant policies:

• Elections of Directors: In general, the Adviser votes in favor of the management-proposed slate of directors. If there is a proxy fight for seats on the Board or the Adviser determines that there are other compelling reasons for withholding votes for directors, the Proxy Voting Portfolio Manager will determine the appropriate vote on the matter.

• Appointment of Auditors: The Adviser believes that the issuer remains in the best position to choose the auditors and will generally support management’s recommendation. When there may be inherent conflicts, for example, when a company’s independent auditor performs substantial non-audit related services for the company, the Adviser would vote against the appointment of auditors if there are reasons to question the independence of the company’s auditors. In such a case, the Adviser evaluates the matter on a case-by-case basis.

• Corporate Restructurings, Mergers and Acquisitions: The Adviser believes proxy votes dealing with corporate reorganizations are an extension of the investment decision. Accordingly, the Adviser analyzes such proposals on a case-by-case basis.

• Proposals Affecting Shareholder Rights: The Adviser generally votes in favor of proposals that give shareholders a greater voice in the affairs of the company and opposes any measure that seeks to limit those rights. However, the Proxy Voting Portfolio Manager will analyze such proposals on a case-by-case basis and will weigh the financial impact of the proposal against the impairment of shareholder rights.

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• Anti-Takeover Measures: The Adviser evaluates, on a case-by-case basis, proposals regarding anti-takeover measures to determine the measure’s likely effect on shareholder value dilution.

• Executive Compensation: The Adviser believes that company management and the compensation committee of the board of directors should, within reason, be given latitude to determine the types and mix of compensation and benefit awards offered. Whether proposed by a shareholder or management, the Proxy Voting Portfolio Manager will review proposals relating to executive compensation plans on a case-by-case basis to ensure that the long-term interests of management and shareholders are properly aligned.

• Social and Corporate Responsibility: The Proxy Voting Committee will review and analyze on a case-by-case basis proposals relating to social, political and environmental issues to determine whether they will have a financial impact on shareholder value. The Adviser will vote against proposals that are unduly burdensome or result in unnecessary and excessive costs to the company. The Adviser may abstain from voting on social proposals that do not have a readily determinable financial impact on shareholder value.

     Monitoring and Resolving Conflicts of Interest. The Proxy Voting Committee is also responsible for monitoring and resolving possible material conflicts between the interests of the Adviser and those of its clients with respect to proxy voting. To ensure that the Adviser’s votes are not the product of a conflict of interest, the Adviser requires that: (i) anyone involved in the decision making process (including the Proxy Voting Portfolio Manager and the other members of the Proxy Voting Committee) disclose to the Proxy Voting Committee any potential conflict that he or she is aware of and any contact that he or she has had with any interested party regarding a proxy vote; (ii) employees involved in the decision making process or vote administration are prohibited from revealing how the Adviser intends to vote on a proposal in order to reduce any attempted influence from interested parties; the Adviser may also review its proposed vote with legal counsel to ensure that the Adviser’s voting decision is consistent with clients’ best interests.

     Proxy Voting Records. Information regarding how the Fund voted proxies relating to portfolio securities for the twelve-month period ending June 30, 2008 will be available after August 31, 2008 without charge by calling the Fund at (800) 331-1710 or on the Commission’s website at http://www.sec.gov.

SECURITY OWNERSHIP OF CERTAIN RECORD/BENEFICIAL OWNERS

     The Fund believes that as of                     . 2009 the following persons own of record or beneficially more than 5% of the outstanding voting shares of the Fund as of the Record Date:

	Percentage	Amount and
	Ownership	Nature of
Name and Address	of Fund	Ownership
Doliver Capital Advisors, Inc.	%
6363 Woodway, Suite 963 Houston, TX 77057
MBIA Inc.	%
113 King Street Armonk, NY 10504
SIT Investment Associates, Inc.	%
4600 Norwest Center 90 South Seventh Street Minneapolis, MN 55402

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INVESTMENT ADVISORY AND OTHER SERVICES

Adviser

     The Fund has engaged MBIA Capital Management Corp., the Adviser, to provide professional investment management to the Fund pursuant to an investment advisory agreement dated October 31, 2005. This investment advisory agreement was approved by the shareholders of the Fund, as required under the 1940 Act, at a special meeting of shareholders held on September 28, 2005. See “Management of the Fund” in the prospectus for additional information about the Adviser, its advisory agreement with the Fund and its parent company MBIA, Inc. Each of Clifford D. Corso, Marc D. Morris, Leonard I. Chubinsky, Richard J. Walz, Robert T. Claiborne and Gautam Khanna are officers of the Fund and employees of the Adviser. Robert T. Claiborne, CFA and Gautam Khanna, CPA, CFA each serve as portfolio managers of the Fund and are each responsible for the day-to-day operation of the Fund. Mr. Claiborne has been a portfolio manager of the Fund since 2005 and Mr. Khanna has been a portfolio manager of the Fund since 2005. See “Management of the Fund — Investment Adviser and Portfolio Manager” in the prospectus for additional information regarding their positions with the Fund and the Adviser.

Advisory Agreement

     On September 10, 2008, the Board, including those persons identified as interested persons and a majority of the trustees who are not parties to the Advisory Agreement or “interested persons” of any such party (the “Independent Trustees”), approved an extension of the Advisory Agreement through September, 2009. At the time of the Board’s approval of the latest extension of the Advisory Agreement, Mr. Brown was an interested person of the Fund. In approving the continuation of Advisory Agreement, the Board, including the Independent Trustees, considered the reasonableness of the advisory fee in light of the extent and quality of the advisory services provided and any additional benefits received by the Adviser or its affiliates in connection with providing services to the Fund, compared the fees charged to those of similar funds or clients for comparable services, and analyzed the expenses incurred by the Adviser with respect to the Fund. The Board also considered the Fund’s performance relative to a selected peer group, the total expenses of the Fund in comparison to other funds of comparable size and other factors. Specifically, the Board noted information received at regular meetings throughout the year related to Fund performance and adviser services, and benefits potentially accruing to the Adviser and its affiliates from securities lending, administrative and brokerage relationships with affiliates of the Adviser, as well as the Adviser’s research arrangements with brokers who execute transactions on behalf of a Fund. After requesting and reviewing such information as they deemed necessary, the Board concluded that the continuation of the Advisory Agreement was in the best interests of the Fund and its shareholders.

     The Advisory Agreement was last submitted to a vote of the shareholders at a special meeting of the shareholders of the Fund held on September 28, 2005. The Advisory Agreement provides that it may be continued annually if approved by both (1) the vote of a majority of the Board of Trustees or the vote of a majority of the outstanding voting securities of the Fund (as provided in the 1940 Act) and (2) by the vote of a majority of the Independent Trustees cast in person at a meeting called for the purpose of voting on such approval. The Advisory Agreement may be terminated at any time without the payment of any penalty, upon the vote of a majority of the Board or a majority of the outstanding voting securities of the Fund or by the Adviser, on 60 days’ written notice by either party to the other. The Agreement will terminate automatically in the event of its assignment (as such term is defined in the 1940 Act and the rules thereunder).

     Pursuant to the Advisory Agreement, the Fund has retained the Adviser to manage the investment and reinvestment of the Fund’s assets, and administer the Fund’s affairs, subject to the direction of the Fund’s Board and officers. The Advisory Agreement provides, among other things, that affiliated persons (as such term is defined in the 1940 Act) of the Adviser who are trustees, officers or employees of the Fund shall receive no compensation from the Fund for acting in such dual capacity. The Advisory Agreement provides that the Fund shall pay to the Adviser a monthly fee for its services which is equal to 0.50% per annum on the first $100 million of the Fund’s month end net assets and 0.40% on the excess. Investment advisory fees paid by the Fund to the Adviser during the fiscal year ended March 31, 2008 amounted to $478,307. For the fiscal years ended March 31, 2007 and 2006, the Adviser’s fees amounted to $482,072 and $506,578, respectively.

Portfolio Manager

     Robert Claiborne and Gautam Khanna are primarily responsible for the day-to-day management of the Fund (the “Fund’s Portfolio Managers”). Mr. Claiborne also manages other accounts, as indicated below. The following tables identify, as of March 31, 2008: (i) the number of other registered investment companies, pooled

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investment vehicles (unregistered) and other accounts managed by the Fund’s Portfolio Managers; and (ii) the total assets of such companies, vehicles and accounts, and the number and total assets of such companies, vehicles and accounts with respect to which the advisory fee is based on performance.

	Number of Other	Total Assets of
	Registered	Other Registered	Number of Other	Total Assets of
Name of	Investment	Investment	Pooled Investment	Other Pooled	Number of Other	Total Assets of
Fund	Companies Managed	Companies Managed	Vehicles Managed by	Investment Vehicles	Accounts Managed by	Other Accounts
Portfolio	by Fund Portfolio	by Fund Portfolio	Fund Manager	Managed by Fund	Fund Portfolio	Managed by Fund
Manager	Manager	Manager	Portfolio Manager	Portfolio Manager	Manager	Portfolio Manager
Robert Claiborne	0	$0	0	$0	3	$658,000,000
Gautam Khanna	0	$0	0	$0	0	$0

	Number of Other	Total Assets of
	Registered	Other Registered	Number of Other	Total Assets of
	Investment	Investment	Pooled Investment	Other Pooled	Number of Other	Total Assets of
	Companies Managed	Companies Managed	Vehicles Managed by	Investment Vehicles	Accounts Managed by	Other Accounts
Name of	by Fund Portfolio	by Fund Portfolio	Fund Manager	Managed by Fund	Fund Portfolio	Managed by Fund
Fund	Manager with	Manager with	Portfolio Manager	Portfolio Manager	Manager with	Portfolio Manager
Portfolio	Performance Based	Performance Based	with Performance	with Performance	Performance Based	with Performance
Manager	Fees	Fees	Based Fees	Based Fees	Fees	Based Fees
Robert Claiborne	0	$0	0	$0	0	$0
Gautam Khanna	0	$0	0	$0	0	$0

Potential Conflict of Interest

     The Fund’s Portfolio Managers may manage other accounts with investment strategies similar to the Fund, including other investment companies, pooled investment vehicles and separately managed accounts. Fees earned by the Adviser may vary among these accounts. These factors could create conflicts of interest because the Fund’s Portfolio Manager may have incentives to favor certain accounts over others, resulting in other accounts outperforming the Fund. A conflict may also exist if the Fund’s Portfolio Manager identified a limited investment opportunity that may be appropriate for more than one account, but the Fund is not able to take full advantage of that opportunity due to the need to allocate that opportunity among multiple accounts. In addition, the Fund’s Portfolio Manager may execute transactions for another account that may adversely impact the value of securities held by the Fund. However, the Adviser believes that these risks are mitigated by the fact that accounts with like investment strategies managed by the Fund’s Portfolio Manager are generally managed in a similar fashion and the Adviser has a policy that seeks to allocate opportunities on a fair and equitable basis.

Compensation of the Portfolio Managers

     The Fund’s Portfolio Managers are each compensated for their services by the Adviser. Their compensation consists of a fixed salary, an annual bonus and a retirement plan. Their salary and annual bonus (if any) are based on a variety of factors, including, without limitation, the financial performance of the Adviser, the general performance of the portfolios which they manage, execution of managerial responsibilities, client interactions and teamwork support.

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Ownership of Shares of the Fund

     As of March 31, 2008, Neither Mr. Claiborne nor Mr. Khanna beneficially owned Fund Shares.

Custodian

     The custodian for the securities and cash of the Fund is PFPC Trust Company, located at 8800 Tinicum Boulevard, Philadelphia, Pennsylvania, 19153. The custodian is a limited purpose trust company incorporated under the laws of Delaware. The custodian’s services include, in addition to the custody of all cash and securities owned by the Fund, the maintenance of a custody account in the custodian’s trust department, the segregation of all certificated securities owned by the Fund, the appointment of authorized agents as sub-custodians, disbursement of funds from the custody account of the Fund, releasing and delivering securities from the custody account of the Fund, maintain records with respect to such custody account, delivering to the Fund a daily and monthly statement with respect to such custody account, and causing proxies to be executed. The custodian’s fee is paid by the Fund.

Independent Auditors

     The Fund’s independent auditor is [     ]. The auditors provide audit and tax return preparation, and consultation services in connection with the review of Fund’s various SEC filings.

BROKERAGE ALLOCATION AND OTHER PRACTICES

     The Adviser is responsible for decisions to buy and sell securities for the Fund, the selection of brokers and dealers to effect the transactions and the negotiation of prices and any brokerage commissions. The securities in which the Fund invests are traded principally on the dealer market. On the dealer market, securities are generally traded on a “net” basis with dealers acting as principals for their own accounts without a stated commission, although the price of the security usually includes a mark-up 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 Fund also may purchase certain money market instruments directly from an issuer, in which case no commissions or discounts are paid. Purchases and sales of securities on stock and futures exchanges are effected through brokers who charge a commission for their services.

     The Adviser when effecting the purchases and sales of portfolio securities for the account of a Fund will do so in a manner deemed fair and reasonable to shareholders of the Fund and not according to any formula. The primary considerations for the Adviser in selecting the manner of executing securities transactions for the Fund will be prompt 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 size of and difficulty in executing the order and the best net price. There are many instances when, in the judgment of the Adviser, more than one firm can offer comparable execution services. In selecting among such firms, consideration may be given to those firms which supply research and other services in addition to execution services. However, it is not the policy of the Adviser, absent special circumstances, to pay higher commissions to a firm because it has supplied such services.

     The Adviser is able to fulfill its obligations to furnish a continuous investment program to the Fund without receiving such information from brokers; however, it considers access to such information to be an important element of financial management. Although such information is considered useful, its value is not determinable because it must be reviewed and assimilated by the Adviser and does not reduce the normal research activities of the Adviser in rendering investment advice under the Advisory Agreement. It is possible that the expenses of the Adviser could be materially increased if they attempted to purchase this type of information or generate it through its own staff.

     One or more of the other accounts which the Adviser may manage may own, from time to time, the same investments as the Fund. Investment decisions for the Fund are made independently from those of such other 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 Adviser in its 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 Fund. In other cases, however, the ability of the Fund to participate in volume transactions may produce better execution for the Fund. It is the opinion of the Board that this advantage, when combined with the other benefits available due to the Adviser’s organization, outweighs any disadvantages that may be said to exist from exposure to simultaneous transactions.

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     The Fund has not paid any brokerage commissions during the past three fiscal years.

REPURCHASE OF SHARES

     Because the Fund has never repurchased its shares of beneficial interest and has no present intention to do so, the Board has not established procedures and criteria applicable to repurchases of shares by the Fund.

TAX STATUS

     The Fund has qualified and elected, and intends to continue to qualify under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”), as a regulated investment company. To qualify for tax treatment as a regulated investment company, the Fund must, among other things: (a) derive 90% of its gross income (including tax exempt interest) each year from dividends, interest, payments with respect to certain securities loans, and gains from the sale or other disposition of stock, securities or foreign currencies, or other income (including but not limited to gains from options, futures and forward contracts) derived with respect to its business of investing in such stock, securities or currencies; (b) distribute to its shareholders at least an amount equal to the sum of (i) 90% of its net investment income (which is its investment company taxable income as that term is defined in the Code but determined without regard to the deduction for dividends paid) and (ii) 90% of its net tax-exempt interest income and (c) diversify its holdings so that, at the end of each quarter of the Fund’s taxable year (i) at least 50% of the market value of the Fund’s assets is represented by cash, cash items, U.S. government securities and securities of other regulated investment companies, and other securities, with these other securities limited, with respect to any one issuer, to an amount not greater in value than 5% of the Fund’s total assets, and to not more than 10% of the outstanding voting securities of such issuer, and (ii) not more than 25% of the market value of the Fund’s assets is invested in the securities of any one issuer (other than U.S. government securities or securities of other regulated investment companies) or of any two or more issuers that the Fund controls and which are determined to be engaged in the same trade or business or similar or related trades or businesses. In meeting these requirements, the Fund may be restricted in the utilization of certain of the investment techniques described above and in the prospectus. If in any year the Fund should fail to qualify for tax treatment as a regulated investment company, the Fund would incur a regular Federal corporate income tax upon its taxable income for that year without any deduction for distributions paid to its shareholders, and distributions to its shareholders would be taxable to such holders as ordinary income to the extent of the Fund’s earnings and profits. A regulated investment company that fails to distribute, by the close of each calendar year, at least an amount equal to the sum of 98% of its ordinary taxable income for such year and 98% of its capital gain net income for the one-year period ending October 31 in such year, plus any shortfalls from the prior year’s required distribution, is liable for a 4% excise tax on the portion of the undistributed amount of such income that is less than the required amount for such distributions. To avoid the imposition of this excise tax, the Fund generally makes the required distributions of its ordinary taxable income, if any, and its capital gain net income, to the extent possible, by the close of each calendar year.

     Certain of the Fund’s investment practices are subject to special provisions of the Code that, among other things, may defer the use of certain deductions or losses of the Fund, affect the holding period of securities held by the Fund and alter the character of the gains or losses realized by the Fund. These provisions may also require the Fund to recognize income or gain without receiving cash with which to make distributions in the amounts necessary to satisfy the requirements for maintaining regulated investment company status and for avoiding income and excise taxes. The Fund will monitor its transactions and may make certain tax elections in order to mitigate the effect of these rules and prevent disqualification of the Fund as a regulated investment company. Distributions to shareholders derived from the Fund’s ordinary income (and not designated as qualified dividend income) and net short-term capital gains, if any, will be taxable to its shareholders as ordinary income. Distributions by the Fund of net capital gain (which is the excess of net long-term capital gain over net short-term capital loss), if any, are taxable as long-term capital gain, regardless of the length of time the shareholder has owned shares of beneficial interest. For calendar years 2003 through 2008, distributions that are designated as qualified dividend income will be taxed at the same rate as long-term capital gains. The Fund may designate a distribution as qualified dividend income to the extent attributable to qualified dividend income received by the Fund. Distributions, if any, in excess of the Fund’s earnings and profits will first reduce the adjusted tax basis of a shareholder’s shares and, after that basis has been reduced to zero, will constitute capital gain to the shareholder (assuming the shares are held as a capital asset).

     The sale or other disposition of common shares will normally result in capital gain or loss to shareholders if such shares are held as capital assets. Present law taxes both long-term and short-term capital gains of corporations at the rates applicable to ordinary income. For non-corporate taxpayers, however, short-term capital gains and ordinary income will be taxed at a maximum rate of 35% for 2003. For the calendar years 2004 through 2008, long-

B-23

term capital gains generally will be taxed at a maximum rate of 15% for taxpayers above the 15% brackets, and 5% (0% for the calendar year 2008) for taxpayers in the 10% and 15% brackets. For the year 2003, long-term capital gains will be subject to special rules for capital gains realized before and after May 6, 2003 to ascertain whether they are subject to the prior 20% and 10% rates or the new 15% and 5% rates. However, because of the limitations on itemized deductions and the deduction for personal exemptions applicable to higher income taxpayers, the effective rate of tax may be higher in certain circumstances. Losses realized by a shareholder on the sale or exchange of shares of the Fund held for six months or less are disallowed to the extent of any distribution of exempt-interest dividends received with respect to such shares, and, if not disallowed, such losses are treated as long-term capital losses to the extent of any distribution of net capital gain received with respect to such shares. A shareholder’s holding period is suspended for any periods during which the shareholder’s risk of loss is diminished as a result of holding one or more other positions in substantially similar or related property, or through certain options or short sales. Any loss realized on a sale or exchange of shares of the Fund will be disallowed to the extent those shares of the Fund are replaced by other Fund shares (whether through the automatic reinvestment of dividends or otherwise) within a period of 61 days beginning 30 days before and ending 30 days after the date of disposition of the original shares. In that event, the basis of the replacement shares of the Fund will be adjusted to reflect the disallowed loss.

     Nonresident alien individuals and certain foreign corporations and other entities (“foreign investors”) generally are subject to U.S. withholding tax at the rate of 30% (or possibly a lower rate provided by an applicable tax treaty) on distributions of net investment income (which includes net short-term capital gain). Different tax consequences may result if the owner is engaged in a trade or business in the United States or, in the case of an individual, is present in the United States for 183 or more days during a taxable year.

     The Fund is required in certain circumstances to backup withhold on taxable dividends and certain other payments paid to non-corporate registered holders of the Fund’s shares who do not furnish to the Fund their correct taxpayer identification number (in the case of individuals, their social security number) and certain certifications, or who are otherwise subject to backup withholding. Backup withholding is not an additional tax. Any amounts withheld from payments made to a shareholder may be refunded or credited against such shareholder’s United States federal income tax liability, if any, provided that the required information is furnished to the IRS.

     The foregoing is a general summary of the provisions of the Code and regulations thereunder presently in effect as they directly govern the taxation of the Fund and its shareholders. These provisions are subject to change by legislative or administrative action, and any such change may be retroactive. Moreover, the foregoing does not address many of the factors that may be determinative of whether an investor will be liable for the federal alternative minimum tax. Shareholders are advised to consult their own tax Adviser for more detailed information concerning the federal income tax consequences of purchasing, holding and disposing of Fund shares, as well as any related state, local and foreign tax consequences.

FINANCIAL STATEMENTS

     The Fund’s Annual Report for the fiscal year ended March 31, 2008 (File No. 811-02201 and Accession No. 0000935069-08-001344, filed May 30, 2008), on Form N-CSR, and the Semi-Annual Report for the six-month period ended September 30, 2008 on Form N-CSRS filed on November 24, 2008 (File No. 811-02201 and Accession No. 0000935069-08-002725) (collectively, the “Reports”), which either accompany this SAI or have previously been provided to the person to whom this SAI is being sent, are incorporated herein by reference with respect to all information other than the information set forth in the Letter to Shareholders included therein. The Fund will furnish, without charge, a copy of the Reports upon request by writing or calling the address or telephone number listed on the cover page of this SAI.

B-24

PART C

OTHER INFORMATION

Item 25. Financial Statements and Exhibits

1. Financial Statements

(a)	Schedule of Investments as of March 31, 2008 (Audited). (1)
(b)	Statement of Assets and Liabilities as of March 31, 2008 (Audited). (1)
(c)	Statement of Operations for the fiscal year ended March 31, 2008 (Audited). (1)
(d)	Statement of Changes in Net Assets for the fiscal years ended March 31, 2008 and 2007 (Audited). (1)
(e)	Notes to Financial Statements for the fiscal year ended March 31, 2008. (1)
(f)	Report of Independent Accountants dated May 9, 2008. (1)
(g)	Schedule of Investments as of September 30, 2008 (Unaudited). (2)
(h)	Statement of Assets and Liabilities as of September 30, 2008 (Unaudited). (2)
(i)	Statement of Operations for the fiscal year ended September 30, 2008 (Unaudited). (2)
(j)	Statement of Changes in Net Assets for the three month period ended September 30, 2008 (Unaudited). (2)
(k)	Notes to Financial Statements for the three month period ended September 30, 2008. (2)

(1)	Incorporated by reference to the Registrant’s Annual Report to Shareholders for the fiscal year ended March 31, 2008 on Form N-CSR filed on May 30, 2008 (File No. 811-02201 and Accession No. 0000935069-08-001344).
(2)	Incorporated by reference to the Registrant’s Semi-Annual Report for the six-month period ended September 30, 2008 on Form N-CSR filed on November 24, 2008 (File No. 811-02201 and Accession No. 0000935069-08-002725).

2. Exhibits

(a)	Agreement and Declaration of Trust is filed herewith.
(b)	Bylaws are filed herewith.
(c)	Not applicable.
(d)	[REFER TO DEC OF TRUST]
(e)	Dividend Reinvestment Plan is filed herewith.
(f)	Not applicable.

(g) Investment Advisory Agreement between the Fund and MBIA Capital Management Corp. is filed herewith.

(h) (i) Form of Dealer Manager Agreement between the Fund and Boenning & Scattergood, Inc is filed herewith.

	(ii)	Form of Soliciting Dealer Agreement to be filed by amendment.
(i)	Not applicable.
(j)	Custodian Services Agreement between the Fund and PFPC Trust Company is filed herewith.

(k) (i) Transfer Agency Services Agreement between the Fund and PNC Global Investment Servicing, Inc. (formerly, PFPC Inc.) (“PNC Global”) is filed herewith.

(ii)	Administration and Accounting Services Agreement between the Fund and PNC Global is filed herewith
(iii)	Subscription Agent Agreement to be filed by amendment.
(iv)	Information Agent Agreement to be filed by amendment.

(l)	Opinion of Pepper Hamilton LLP to be filed by amendment.
(m)	Not applicable.
(n)	Consent of [     ] to be filed by amendment.
(o)	Not applicable.
(p)	Not applicable.
(q)	Not applicable.
(r)	Code of Ethics of the Registrant and MBIA Capital Management Corp is filed herewith.
(s)	Powers of Attorney are filed herewith.

Item 26. Marketing Arrangements

Not applicable.

Item 27. Other Expenses of Issuance and Distributions

The following table sets forth the estimated expenses expected to be incurred in connection with the Offer described in this Registration Statement.

	Estimated
Description of Fees and Expenses	Expenses
Registration fees	$
NYSE listing fees	$
Printing	$
Accounting fees and expenses	$
Legal fees and expenses	$
Dealer Manager fees	$

C-2

	Estimated
Description of Fees and Expenses	Expenses
Subscription Agent fees and expenses	$
Information Agent fees and expenses	$
Miscellaneous	$
Total estimated expenses	$

* To be provided by amendment.

Item 28. Person Controlled by or Under Common Control

None.

Item 29. Number of Holders of Securities

	Number Of
	Record Holders
Title Of Class	As Of ____*
Shares of Beneficial Interest, $0.01 par value	[___]*

* To be provided by amendment.

Item 30. Indemnification

Section 3803 of the Delaware Statutory Trust Act and Article 9 of the Registrant’s Declaration of Trust provides for the indemnification of the Registrant’s trustees and officers for liabilities and expenses that they may incur in such capacities. In general, the Registrant will indemnify its trustees and officers against any liability except where indemnification would be expressly prohibited by law or to the extent such liability arises out of a trustee’s or officer’s bad faith, willful misfeasance, gross negligence or reckless disregard of the duties involved in the conduct of his or her office. The Registrant has purchased insurance insuring its trustees and officers against certain liabilities incurred in their capacities as such, and insuring the Registrant against any payments which it is obligated to make to such persons under the foregoing indemnification provisions.

Section 7 of the Investment Advisory Agreement filed as Exhibit 2(g) to this Registration Statement provides for the Trust to indemnify the Adviser for certain liabilities in connection with rendering services under the agreement except to the extent such liability arises out of the Adviser’s willful misfeasance, bad faith, gross negligence, or reckless disregard of the performance of duties of the Adviser to the Fund.

Section 7 of the Form of Dealer Manager Agreement filed as Exhibit (2)(h)(i) to this Registration Statement provides for each of the parties thereto, including the Registrant and the Dealer Manager, to indemnify the others, their trustees, directors, certain of their officers, trustees, directors and persons who control them against certain liabilities in connection with the offering described herein, including liabilities under the federal securities laws.

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant, pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue.

Item 31. Business and Other Connections of Investment Adviser

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MBIA Capital Management Corp. (“MBIA-CMC”), a Delaware corporation, is a direct wholly-owned subsidiary of MBIA Asset Management LLC, a Delaware limited liability company with principal offices at 113 King Street, Armonk, NY 10504 and an indirect wholly-owned subsidiary of MBIA Inc. (“MBIA”), a Connecticut corporation with principal offices at the same address. MBIA is a publicly held NYSE listed company and reporting company under the Securities Exchange Act of 1934. The directors and officers of MBIA-CMC are provided on MBIA-CMC’s most recently filed Schedule A of Form ADV (IARD No. 37214), which is incorporated herein by reference. Set forth below are the names and businesses of certain directors and officers of MBIA-CMC who are engaged in any other business, profession, vocation or employment of a substantial nature in the past two years:

		Principal Business
	Other Business, Vocation, Profession Or Employment	Address Of Other
Name	Of a Substantial Nature	Employer
Clifford D. Corso	Chief Investment Officer, MBIA Insurance Corporation	113 King Street
		Armonk, NY 10504
Leonard I. Chubinsky	Assistant General Counsel, MBIA Insurance Corporation	113 King Street
		Armonk, NY 10504
William C. Fallon	Head of Structured Finance, MBIA Insurance Corporation	113 King Street
		Armonk, NY 10504

Item 32. Location of Accounts and Records

All such books and other documents required to be maintained by Section 31(a) of the Investment Company Act of 1940 and Rules 31a-1 through 31a-3 thereunder are maintained at one or more of the following locations: (i) MBIA Capital Management Corp., 113 King Street, Armonk, NY 10504; (ii) PNC Global Investments Servicing, Inc., PO Box 43027 Providence, RI 02940, and (iii) PFPC Trust Company, 8800 Tinicum Boulevard Philadelphia, PA 19153.

Item 33. Management Services

None.

Item 34. Undertakings

1.	The Registrant hereby undertakes to suspend the offering of the shares until it amends its prospectus if (1) subsequent to the effective date of its registration statement, the net asset value declines more than 10 percent from its net asset value as of the effective date of the registration statement; or (2) the net asset value increases to an amount greater than its net proceeds as stated in the prospectus.
2.	Not applicable.
3.	The Registrant hereby undertakes to supplement the prospectus, after the expiration of the subscription period, to set forth the results of the subscription offer, the transactions by underwriters during the subscription period, the amount of unsubscribed securities to be purchased by underwriters, and the terms of any subsequent reoffering thereof. The Registrant hereby undertakes to file a post-effective amendment to set forth the terms of such offering if any public offering by the underwriters of the securities being registered is to be made on terms differing from those set forth on the cover page of the prospectus.

4. (a) The Registrant hereby undertakes to file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (1) to include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (2) to reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement; and (3) to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.

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(b)	The Registrant hereby undertakes that, for the purpose of determining any liability under the 1933 Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of those securities at that time shall be deemed to be the initial bona fide offering thereof.
(c)	The Registrant hereby undertakes to remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
(d)	The Registrant hereby undertakes that, for the purpose of determining liability under the 1933 Act to any purchaser, if the Registrant is subject to Rule 430C [17 CFR 230.430C]: Each prospectus filed pursuant to Rule 497(b), (c), (d) or (e) under the 1933 Act [17 CFR 230.497(b), (c), (d) or (e)] as part of a registration statement relating to an offering, other than prospectuses filed in reliance on Rule 430A under the 1933 Act [17 CFR 230.430A], shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supercede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.
(e)	That for the purpose of determining liability of the Registrant under the 1933 Act to any purchaser in the initial distribution of securities, the undersigned Registrant undertakes that in a primary offering of securities of the undersigned Registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned Registrant will be a seller to the purchaser and will be considered to offer or sell such securities to the purchaser: (1) any preliminary prospectus or prospectus of the undersigned Registrant relating to the offering required to be filed pursuant to Rule 497 under the 1933 Act [17 CFR 230.497]; (2) the portion of any advertisement pursuant to Rule 482 under the 1933 Act [17 CFR 230.482] relating to the offering containing material information about the undersigned Registrant or its securities provided by or on behalf of the undersigned Registrant; and (any other communication that is an offer in the offering made by the undersigned Registrant to the purchaser.

(5) (a) The Registrant hereby undertakes that for the purpose of determining any liability under the 1933 Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant under Rule 497(h) under the 1933 Act [17 CFR 230.497(h)] shall be deemed to be part of this registration statement as of the time it was declared effective.

(b) The Registrant hereby undertakes for the purpose of determining any liability under the 1933 Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of the securities at that time shall be deemed to be the initial bona fide offering thereof.

(6) The Registrant hereby undertakes to send by first class mail or other means designed to ensure equally prompt delivery, within two business days of receipt of a written or oral request, any statement of additional information.

C-5

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant has duly caused this registration statement on Form N-2 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Armonk, and the State of New York, on the            day of January, 2009.

RIVUS BOND FUND
By:
	Clifford D. Corso
	President and Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this registration statement on Form N-2 has been signed by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
/s/ W. Thacher Brown* W. Thacher Brown	Trustee	January ___, 2009
/s/ Clifford D. Corso Clifford D. Corso	President and Chief Executive Officer	January ___, 2009
/s/ Morris Lloyd, Jr.* Morris Lloyd, Jr.	Trustee	January ___, 2009
/s/ Marc Morris Marc Morris	Vice President, Treasurer and Chief Financial Officer	January ___, 2009
/s/ J. Lawrence Shane* J. Lawrence Shane	Trustee	January ___, 2009
/s/ Suzanne P. Welsh* Suzanne P. Welsh	Trustee	January ___, 2009

* By
	Clifford D. Corso
	Attorney-in-Fact

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EXHIBIT INDEX

Exhibit No.	Description of Exhibit
2(a)	Agreement and Declaration of Trust.
2(b)	Bylaws.
2(c)	Not applicable.
2(d)	[REFER TO DEC OF TRUST]
2(e)	Dividend Reinvestment Plan.
2(f)	Not applicable.
2(g)	Investment Advisory Agreement.
2(h)(i)	Form of Dealer Manager Agreement.
2(j)	Custodian Services Agreement.
2(k)(i)	Transfer Agency Services Agreement.
2(k)(ii)	Administration and Accounting Services Agreement.
2(r)	Code of Ethics.
2(s)	Powers of Attorney.

C-7

EX-99.2(A)

Exhibit (2)(a)

AGREEMENT AND DECLARATION OF TRUST OF THE RIVUS BOND FUND

          The Agreement and Declaration of Trust of the Rivus Bond Fund (the “Trust”), dated as of June 13, 2006, among the individual(s) listed on the signatory page attached hereto (each, a “Trustee”) and each person who becomes a Shareholder (as defined in Section 1.2) in accordance with the terms hereinafter set forth.

          WHEREAS, pursuant to Section 1.1, the Trustees are authorized to conduct the business of the Trust under any name that they may determine;

          WHEREAS, the Trustees have determined that the business of the Trust shall be conducted under the name of the Rivus Bond Fund and that a Certificate of Trust will be filed with the Secretary of State of the State of Delaware;

          NOW, THEREFORE, the Trustees do hereby declare that all money and property contributed to the Trust hereunder shall be held and managed in trust under this Agreement and Declaration of Trust, for the benefit of the Shareholders as set forth below.

ARTICLE 1
NAME AND DEFINITIONS

          Section 1.1. Name. This trust shall be known as the “Rivus Bond Fund” and the Trustees shall conduct the business of the Trust under that name or any other name as they may from time to time determine.

          Section 1.2. Definitions. Whenever used herein, unless otherwise required by the context or specifically provided:

               1.2.1. “By-Laws” shall mean the By-Laws of the Trust as amended from time to time.

               1.2.2. “Class” shall mean a portion of Shares of a Portfolio of the Trust established in accordance with the provisions of Article 3 hereof.

               1.2.3. “Covered Person” shall have the meaning assigned to it in Section 9.2.1.

               1.2.4. “Declaration of Trust” shall mean this Agreement and Declaration of Trust, as amended or restated from time to time.

               1.2.5. “Delaware Act” refers to the Delaware Statutory Trust Act, 12 Del. C. Section 3801 et seq., as such act may be amended from time to time.

               1.2.6. “Class Expenses” shall mean expenses incurred by a particular Class in connection with a shareholder services arrangement or plan that is specific to such Class or any other differing share of expenses or differing fees, in each case, pursuant to a plan, as such plan or rule may be amended from time to time.

               1.2.7. “Commission” shall mean the U.S. Securities and Exchange Commission.

               1.2.8. “General Assets” shall have the meaning set forth in Section 3.4.1 hereof.

               1.2.9. “Interested Person” shall have the meaning set forth in Section 2(a)(19) of the 1940 Act.

               1.2.10. “Investment Manager” or “Manager” shall mean a party furnishing services to the Trust pursuant to any contract described in Section 6.1 hereof.

               1.2.11. “Person” shall mean and include any of the following: individuals, limited liability companies, corporations, partnerships, trusts, foundations, plans, associations, joint ventures, estates and other entities, whether or not legal entities, and governments and agencies and political subdivisions thereof, whether domestic or foreign.

               1.2.12. “Portfolio” refers to each series of Shares established and designated under or in accordance with the provisions of Article 3 hereof.

               1.2.13. “Principal Underwriter” shall have the meaning set forth in Section (2)(a)(29) of the 1940 Act.

               1.2.14. “Proportionate Interest” shall have the meaning set forth in Section 3.2.2 hereof.

               1.2.15. “Shares” means the shares of beneficial interest into which the beneficial interest in the Trust shall be divided from time to time and, when used in relation to any particular Portfolio or Class of Shares established by the Trustees pursuant to Section 3.2 hereof, shares of beneficial interest into which such Portfolio or Class of Shares shall be divided from time to time in accordance with the terms hereof. The term “Shares” includes fractions of Shares as well as whole Shares.

               1.2.16. “Shareholder” means a record owner of outstanding Shares of the Trust.

               1.2.17. “Successor Entity” shall have the meaning set forth in Section 10.3.

               1.2.18. “Trust” refers to the Delaware statutory trust established by this Declaration of Trust.

               1.2.19. “Trustees” refers to the persons who have signed this Declaration of Trust, so long as they continue in office in accordance with the terms hereof, and all other persons who may from time to time be duly elected or appointed to serve on the Board of Trustees in accordance with the provisions hereof, and reference herein to a Trustee or the Trustees shall refer to such person or persons in their capacity as trustees hereunder.

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               1.2.20. “Trust Property” means any and all property, real or personal, tangible or intangible, which is owned or held by or for the account of the Trust.

               1.2.21. “1940 Act” refers to the Investment Company Act of 1940, and the rules and regulations promulgated thereunder, each as amended from time to time. References herein to specific sections of the 1940 Act shall be deemed to include such rules and regulations as are applicable to such sections as determined by the Trustees or their designees.

ARTICLE 2
PURPOSE OF TRUST

          The purpose of the Trust is to conduct, operate and carry on the business of an investment company registered under the 1940 Act through one or more Portfolios investing primarily in securities and to carry on such other business as the Trustees may from time to time determine pursuant to authority under this Declaration of Trust.

ARTICLE 3
SHARES

          Section 3.1. Shares of Beneficial Interest.

               3.1.1. The beneficial interest in the Trust shall at all times be divided into an unlimited number of Shares, with a par value of $.01 per Share, provided that the Shares of a Portfolio that is established by the Trustees to be taxable as a separate partnership for federal income tax purposes shall have no par value. Shares shall be validly issued, fully paid and non-assessable when issued for such consideration as the Trustees shall determine. All Shares issued in connection with a dividend or other distribution in Shares or a split or reverse split of Shares shall be fully paid and non-assessable.

               3.1.2. Pursuant to Section 3806(b) of the Delaware Act, the Trustees shall have authority, from time to time, (a) to establish Shares of one or more series, each of which constitutes a “Portfolio” and shall be separate and distinct from the Shares in any other Portfolio and (b) to further divide Shares of any Portfolio into one or more separate and distinct classes of Shares, each of which constitutes a “Class.”

               3.1.3. The Portfolios shall include, without limitation, those Portfolios specifically established and designated in Section 3.2.3 hereof, and such other Portfolios as the Trustees may deem necessary or desirable. The Trustees shall have exclusive power, without the requirement of Shareholder approval, from time to time, to establish and designate separate and distinct Portfolios, and, subject to the provisions of this Declaration of Trust and the 1940 Act, to fix and determine the rights of Shareholders of Shares in such Portfolios. If only one Portfolio shall be established, unless provided for otherwise, the Shares shall have the rights and preferences provided for herein and in Section 3.4 hereof to the extent relevant.

               3.1.4. This Trust is a series trust pursuant to Sections 3804(a) and 3806(b) of the Delaware Act, and each Portfolio shall be a separate series of the Trust within the meaning of Section 3806(b)(2) of the Delaware Act. As such, separate and distinct records shall be maintained for each Portfolio and the assets of the Trust associated with each Portfolio shall

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be held in such separate and distinct records (directly or indirectly, including through a nominee or otherwise) and accounted for in such separate and distinct records separately from the other assets of the Trust or any other Portfolio.

          The debts, liabilities, obligations and expenses incurred, contracted for or otherwise existing with respect to each Portfolio shall be enforceable against the assets of such Portfolio only, and not against the assets of the Trust generally or the assets of any other Portfolio nor shall the assets of any Portfolio be charged with the debts, liabilities, obligations and expenses incurred, contracted for or otherwise existing with respect to another Portfolio, or, except as otherwise provided herein, the Trust generally.

          Section 3.2. Establishment and Designation of Portfolios and Classes.

               3.2.1. Portfolios. The Trust shall consist of one or more separate and distinct Portfolios, each with an unlimited number of Shares unless otherwise specified by the Trustees. Any fractional Share of a Portfolio shall have proportionately all rights and obligations of a whole share of such Portfolio, including rights with respect to voting, receipt of dividends and distributions of Shares as set forth in Section 3.4 hereof.

               3.2.2. Classes. The Trustees may establish one or more Classes of Shares of any Portfolio, each with an unlimited number of Shares unless otherwise specified by the Trustees. Each Class so established and designated shall represent a proportionate undivided interest as determined by or at the direction of, or pursuant to authority granted by, the Trustees (“Proportionate Interest”), in the net assets belonging to that Portfolio and shall have identical voting, dividend, liquidation and other rights, preferences, powers, restrictions, limitations and designations and be subject to the same terms and conditions, except as established by the Trustees, including without limitation:

                    (a) each Class may be subject to separate charges, each as determined by the Trustees;

                    (b) class expenses allocated to a Class for which such expenses were incurred shall be borne solely by that Class;

                    (c) other expenses, costs, charges and reserves allocated to a Class in accordance with Section 3.4.2 may be borne solely by that Class, provided that the allocation of such other expenses, costs, charges and reserves is not specifically required to be set forth in a plan adopted by the Trust;

                    (d) dividends declared and payable to a Class pursuant to Section 3.4.3 shall reflect the items separately allocated thereto pursuant to the preceding clauses; and

                    (e) each Class may have separate rights to convert to another Class, exchange rights, and similar rights, each as determined by the Trustees.

               3.2.3. Establishment and Designation by Action of the Trustees. The Trustees hereby establish and designate the Portfolios and Classes listed on Schedule A attached

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hereto and made a part hereof. Each additional Portfolio and the Classes of such additional Portfolio shall be established by the adoption of a resolution adopted by a majority of the Trustees. Each such resolution is incorporated herein by reference and made a part of the Declaration of Trust whether or not expressly stated in such resolution, and shall be effective upon the occurrence of both (a) the date stated therein (or, if no such date is stated, upon the date of such adoption) and (b) the execution of an amendment either to this Declaration of Trust or to Schedule A hereto establishing and designating such additional Portfolios and Classes.

          Section 3.3. Actions Affecting Portfolios. Subject to the right of Shareholders, if any, to vote pursuant to Section 7.1, the Trustees shall have full power and authority, in their sole discretion without obtaining any prior authorization or vote of the Shareholders of any Portfolio, or any Class or Classes thereof, to fix or change such preferences, voting powers, rights and privileges of any Portfolio, or Classes thereof, as the Trustees may from time to time determine, including any change that may adversely affect a Shareholder; to divide or combine the Shares of any Portfolio, or Classes thereof, into a greater or lesser number; to classify, reclassify or convert any issued Shares of any Portfolio, or Classes thereof, into one or more Portfolios or Classes of Shares of a Portfolio; and to take such other action with respect to the Shares as the Trustees may deem desirable. A Portfolio may issue any number of Shares but need not issue any Shares. At any time that there are no outstanding Shares of any particular Portfolio previously established and designated, the Trustees may abolish that Portfolio and the establishment and designation thereof.

          Section 3.4. Relative Rights and Preferences. Shares of each Portfolio established pursuant to Section 3.2 hereof, unless otherwise provided in the resolution establishing such Portfolio, shall have the following relative rights and preferences:

               3.4.1. Assets Held with Respect to a Particular Portfolio or Class.

                    (a) Specific Assets. All consideration received by the Trust for the issue or sale of Shares of a particular Portfolio, including dividends and distributions paid by, and reinvested in, such Portfolio, together with all assets in which such consideration is invested or reinvested, all income, earnings, profits, and proceeds thereof from whatever source derived, including, without limitation, any proceeds derived from the sale, exchange or liquidation of such assets, and any funds or payments derived from any reinvestment of such proceeds in whatever form the same may be, shall irrevocably be held with respect to that Portfolio for all purposes, subject only to the rights of creditors, and shall be so recorded upon the books of account of the Trust. Such consideration, assets, income, earnings, profits and proceeds thereof, from whatever source derived, including, without limitation, any proceeds derived from the sale, exchange or liquidation of such assets, and any funds or payments derived from any reinvestment of such proceeds, in whatever form the same may be, are herein referred to as “assets held with respect to” that Portfolio.

                    (b) General Assets. In the event that there are any assets, income, earnings, profits and proceeds thereof, or any funds or payments derived from any reinvestment of such proceeds, which are not readily identifiable as assets held with respect to any particular Portfolio (collectively “General Assets”), the Trustees shall allocate such General Assets to, between or among any one or more of the Portfolios in such manner and on such basis

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as the Trustees, in their sole discretion, deem fair and equitable, and any General Asset so allocated to a particular Portfolio shall be held with respect to that Portfolio. Each such allocation by the Trustees shall be conclusive and binding upon the Shareholders of all Portfolios for all purposes in the absence of manifest error.

                    (c) Class Proportionate Interests. Each Class of a Portfolio shall have a Proportionate Interest in the net assets belonging to that Portfolio. References herein to assets, expenses, charges, costs and reserves “allocable” or “allocated” to a particular Class of a Portfolio shall mean the aggregate amount of such items held with respect to such Portfolio multiplied by the Class’s Proportionate Interest.

               3.4.2. Liabilities Held with Respect to a Particular Portfolio or Class.

                    (a) Specific Liabilities. The assets of the Trust held with respect to each Portfolio shall be charged with the liabilities of the Trust with respect to such Portfolio and all expenses, costs, charges and reserves attributable to such Portfolio. Class Expenses shall, in all cases, be allocated to the Class for which such Class Expenses were incurred.

                    (b) General Liabilities. Any general liabilities, expenses, costs, charges or reserves of the Trust or any Portfolio that are not readily identifiable as belonging to a particular Portfolio or any particular Class thereof shall be allocated and charged by the Trustees, between or among any one or more of the Portfolios or Classes in such manner and on such basis as the Trustees in their sole discretion deem fair and equitable. Each allocation of liabilities, expenses, costs, charges and reserves by the Trustees shall be conclusive and binding upon the Shareholders of all Portfolios for all purposes in the absence of manifest error.

                    (c) Claims of Creditors. All Persons who have extended credit which has been allocated to a particular Portfolio, or who have a claim or contract which has been allocated to a Portfolio, shall look exclusively to the assets held with respect to such Portfolio for payment of such credit, claim, or contract. None of the debts, liabilities, obligations and expenses incurred, contracted or otherwise existing with respect to the Trust generally which have not been allocated to a specified Portfolio, or with respect to any other Portfolio, shall be enforceable against the assets of such specified Portfolio.

Each creditor, claimant and contracting party shall be deemed nevertheless to have agreed to such limitation unless an express provision to the contrary has been incorporated in the written contract or other document establishing the contractual relationship.

               3.4.3. Dividends, Distributions, and Repurchases.

                    (a) Dividends and Distributions. Shareholders of any Portfolio shall be entitled to receive dividends and distributions, when, if and as declared with respect thereto in the manner provided in Section 8.1 hereof. The Trustees shall have full discretion to determine which items shall be treated as income and which items as capital; and each such determination and allocation shall be conclusive and binding upon the Shareholders in the absence of manifest error. The Trustees may adopt and offer to Shareholders such dividend

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reinvestment plans, cash distribution payment plans, or similar plans as the Trustees deem appropriate.

                    (b) No Priority or Preference. No Share shall have any priority or preference over any other Share of the same Portfolio or Class thereof with respect to dividends or distributions of the Trust or otherwise.

All dividends and other distributions on Shares of a particular Portfolio or Class shall be distributed pro rata to the Shareholders of such Portfolio or Class, as the case may be, in proportion to the number of Shares of such Portfolio or Class they held on the record date established for such payment, provided that such dividends and other distributions on Shares of a Class shall appropriately reflect Class Expenses and other expenses allocated to that Class.

                    (c) Source of Dividends and Distributions. No dividend or distribution including, without limitation, any distribution paid upon termination of the Trust or of any Portfolio or Class with respect to, or any repurchase of, the Shares of any Portfolio or Class shall be effected by the Trust other than from the assets held with respect to such Portfolio or Class, nor shall any Shareholder of any Portfolio or Class otherwise have any right or claim against the assets held with respect to any other Portfolio or Class except to the extent that such Shareholder has such a right or claim hereunder as a Shareholder of such other Portfolio or Class.

               3.4.4. Voting. Each Share shall have voting rights as provided in Article 7 hereof. All Shares of the Trust entitled to vote on a matter shall vote without differentiation among the separate Portfolios or Classes on a one-vote-per-Share basis; provided, however, that:

                    (a) if a matter to be voted on affects only the interests of certain Portfolios, then only the Shareholders of such affected Portfolios shall be entitled to vote on the matter;

                    (b) if a matter to be voted on affects only the interests of a single Portfolio, then only the Shareholders of such Portfolio shall be entitled to vote on the matter;

                    (c) if a matter to be voted on affects only the interests of certain Classes, then only the Shareholders of such affected Classes shall be entitled to vote on the matter; and

                    (d) if a matter to be voted on affects only the interests of a single Class, then only the Shareholders of such Class shall be entitled to vote on the matter.

               3.4.5. Exchange Privilege. The Trustees shall have the authority to provide that the Shareholders of any Portfolio shall have the right to exchange such Shares for Shares of one or more other Portfolios in accordance with such requirements and procedures as may be established by the Trustees.

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               3.4.6. Transferability. The Trustees shall have the authority to provide that the shares of a Portfolio are nontransferable.

               3.4.7. Pre-Emptive Rights. Shareholders shall have no pre-emptive or other right to subscribe to any additional Shares or other securities issued by the Trust or any Portfolio.

          Section 3.5. Notices. Any and all notices to which any Shareholder may be entitled and any and all communications shall be deemed duly served or given (a) if mailed, postage prepaid, addressed to any Shareholder of record at the Shareholder’s last known address as recorded on the register of the Trust, (b) if sent by electronic transmission to the Shareholder of record at the Shareholder’s last known address for electronic delivery as recorded on the register of the Trust, (c) if mailed or sent by electronic delivery to one or more members of the Shareholder’s household in accordance with applicable law or regulation, or (d) if otherwise sent in accordance with applicable law or regulation.

          Section 3.6. Ownership of Shares. The ownership of Shares shall be recorded on the books of the Trust or a transfer or similar agent for the Trust, which books shall be maintained separately for the Shares of each Portfolio and Class thereof. No certificates evidencing the ownership of Shares shall be issued except as the Board of Trustees may otherwise determine from time to time. The Trustees may make such rules as they consider appropriate for the transfer of Shares of each Portfolio and similar matters and, by resolution, may restrict the transfer of Shares of a Portfolio. The record books of the Trust as kept by the Trust or any transfer or similar agent, as the case may be, shall be conclusive as to the identity of the Shareholders of each Portfolio and as to the number of Shares of each Portfolio and Class thereof held from time to time by each Shareholder.

          Section 3.7. Investments in the Trust. Investments may be accepted by the Trust from such Persons, at such times, on such terms, and for such consideration as the Trustees from time to time may authorize. Each investment shall be credited to the Shareholder’s account in the form of full and fractional Shares of the Trust in such Portfolio and Class as the purchaser shall select, at the net asset value per Share next determined for such Portfolio and Class after receipt of the investment; provided, however, that the Trustees may, in their sole discretion, impose a sales or other charges upon investments in the Trust.

          Section 3.8. Status of Shares; Limitation of Personal Liability and Indemnification of Shareholders.

               3.8.1. Shares shall be deemed to be personal property giving only the rights provided in this Declaration of Trust, the By-Laws of the Trust and the resolutions of the Board of Trustees. Every Shareholder by virtue of having become a Shareholder shall be held to have expressly assented and agreed to the terms thereof. The death of a Shareholder during the existence of the Trust shall not operate to terminate the Trust, nor entitle the representative of any deceased Shareholder to an accounting or to take any action in court or elsewhere against the Trust or the Trustees, but shall entitle such representative only to the rights of said deceased Shareholder under this Declaration of Trust. Ownership of Shares shall not entitle a Shareholder to any title in or to the whole or any part of the Trust Property or right to call for a partition or

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division of the same or for an accounting, nor shall the ownership of Shares constitute the Shareholders as partners or joint venturers except as specifically provided for pursuant to Article 3 herein or by resolution of the Board of Trustees.

               3.8.2. No Shareholder shall be personally liable for the debts, liabilities, obligations and expenses incurred by, contracted for, or otherwise existing with respect to, the Trust or any Portfolio. Neither the Trust nor the Trustees, nor any officer, employee or agent of the Trust shall have any power to bind personally any Shareholder, or to call upon any Shareholder for the payment of any sum of money or assessment whatsoever other than such as the Shareholder may at any time agree to pay. Shareholders shall have the same limitation of personal liability as is extended to shareholders of private corporations for profit organized under the general corporation law of the State of Delaware.

               3.8.3. If any Shareholder or former Shareholder of any Portfolio shall be held personally liable solely by reason of his being or having been a Shareholder and not because of his acts or omissions or for some other reason the Shareholder or former Shareholder or his heirs, executors, administrators or other legal representatives (or in the case of any entity, its general successor) shall be entitled out of the assets belonging to the applicable Portfolio to be held harmless from and indemnified against all loss and expense arising from such liability. The Trust, on behalf of the affected Portfolio, shall, upon request by such Shareholder, assume the defense of any such claim made against such Shareholder for any act or obligation of the Portfolio and satisfy any judgment thereon from the assets of the Portfolio.

ARTICLE 4
THE BOARD OF TRUSTEES

          Section 4.1. Number. The number of Trustees constituting the Board of Trustees shall be fixed from time to time by a written instrument signed, or by resolution approved at a duly constituted meeting, by a majority of the Board of Trustees, provided, however, that the number of Trustees shall in no event be less than one (1) nor more than fifteen (15).

          Section 4.2. Election and Tenure. Subject to the requirements of Section 16(a) of the 1940 Act, the Board of Trustees, by action of a majority of the then Trustees at a duly constituted meeting, may fill vacancies in the Board of Trustees and remove Trustees with or without cause. Each Trustee shall serve during the continued lifetime of the Trust until he or she dies, resigns, is declared bankrupt or incompetent by a court of competent jurisdiction, or is removed. Any Trustee may resign at any time by written instrument signed by him and delivered to any officer of the Trust or to a meeting of the Trustees. Such resignation shall be effective upon receipt unless specified to be effective at some other time. Except to the extent expressly provided in a written agreement with the Trust, no Trustee resigning and no Trustee removed shall have any right to any compensation for any period following his or her resignation or removal, or any right to damages or other payment on account of such removal. Any Trustee may be removed at any meeting of Shareholders by a vote of two-thirds of the outstanding Shares of the Trust. A meeting of Shareholders for the purpose of electing or removing one or more Trustees may be called (a) by the Trustees upon their own vote, or (b) upon the demand of Shareholders owning ten percent (10%) or more of the Shares of the Trust in the aggregate.

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          Section 4.3. Effect of Death, Resignation, etc. of a Trustee. The death, declination, resignation, retirement, removal, or incapacity of one or more Trustees, or all of them, shall not operate to annul the Trust or to revoke any existing agency created pursuant to the terms of this Declaration of Trust. Whenever a vacancy in the Board of Trustees shall occur, until such vacancy is filled as provided in Section 4.2, the Trustees in office, regardless of their number, shall have all the powers granted to the Trustees and shall discharge all the duties imposed upon the Trustees by this Declaration of Trust.

          Section 4.4. Trustee Compensation. The Trustees shall be entitled to reasonable compensation from the Trust. The Trustees may fix the amount of their compensation. Nothing herein shall in any way prevent the employment of any Trustee for advisory, management, administrative, legal, accounting, investment banking, underwriting, brokerage, or investment dealer or other services and the payment for the same by the Trust.

ARTICLE 5
POWER OF THE TRUSTEES

          Section 5.1. Management of the Trust. The Trustees shall have exclusive and absolute control over the Trust Property and over the business of the Trust to the extent as if the Trustees were the sole owners of the Trust Property and business in their own right, but with such powers of delegation as may be permitted by this Declaration of Trust. The Trustees shall have power to conduct the business of the Trust and carry on its operations in any and all of its branches and maintain offices both within and without the State of Delaware, in any and all states of the United States of America, in the District of Columbia, in any and all commonwealths, territories, dependencies, colonies, or possessions of the United States of America, and in any and all foreign jurisdictions and to do all such other things and execute any and all such instruments that they may consider desirable, necessary or appropriate in order to promote the interests of the Trust although such things are not herein specifically mentioned. Any determination as to what is in the interests of the Trust made by the Trustees in good faith shall be conclusive. In construing the provisions of this Declaration of Trust, the presumption shall be in favor of a grant of power to the Trustees and unless otherwise specified herein or required by the 1940 Act or other applicable law, any action by the Board of Trustees shall be deemed effective if approved or taken by a majority of the Trustees then in office or a majority of any duly constituted committee of Trustees. The enumeration of any specific power in this Declaration of Trust shall not be construed as limiting the aforesaid power. The powers of the Trustees may be exercised without order of or resort to any court or other authority.

          Section 5.2. Manner of Acting. Except as otherwise provided herein or in the 1940 Act, any action to be taken by the Board of Trustees or any committee thereof may be taken by:

                    (a) a majority of the Trustees or the members of the committee (as the case may be) present at a meeting at which a quorum is present, including any meeting held by means of a conference telephone connection or similar communications equipment by means of which all persons participating in the meeting can hear each other; or

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                    (b) a written consent signed by a majority of the Trustees, or members of the committee, as the case may be, filed with the minutes of the proceedings of the Board of Trustees, or committee.

          Section 5.3. Powers of the Trustees. Without limiting the provisions of Section 5.1, the Trust shall have the power and authority:

               5.3.1. To operate as, and to carry on the business of, an investment company, and exercise all the powers necessary and appropriate to the conduct of such operations;

               5.3.2. To invest and reinvest cash and cash items, to hold cash uninvested, and to subscribe for, invest in, reinvest in, purchase or otherwise acquire, own, hold, pledge, sell, assign, transfer, exchange, distribute, write options on, lend or otherwise deal in or dispose of contracts for the future acquisition or delivery of all types of securities (as used herein to include any and all investments), futures contracts and options thereon, and forward currency contracts of every nature and kind, including, without limitation, all types of bonds, debentures, stocks, preferred stocks, negotiable or non-negotiable instruments, obligations, evidences of indebtedness, certificates of deposit or indebtedness, commercial paper, repurchase agreements, bankers’ acceptances, and other securities of any kind, issued, created, guaranteed, or sponsored by any and all Persons, including, without limitation, the government of the United States and any agencies or instrumentalities thereof, states, territories, and possessions of the United States and the District of Columbia and any political subdivision, agency, or instrumentality thereof, any foreign government or any political subdivision of the U.S. Government or any foreign government, or any international instrumentality or organization, or by any bank or savings institution, or by any corporation or organization organized under the laws of the United States or of any state, territory, or possession thereof, or by any corporation or organization organized under any foreign law, or in “when issued” contracts for any such securities, futures contracts and options thereon, and forward currency contracts; to change the investments of the assets of the Trust; and to exercise any and all rights, powers, and privileges of ownership or interest in respect of any and all such investments of every kind and description, including, without limitation, the right to consent and otherwise act with respect thereto, with power to designate one or more Persons, to exercise any of said rights, powers, and privileges in respect of any of said instruments;

               5.3.3. To sell, exchange, lend, pledge, mortgage, hypothecate, lease, or write options with respect to or otherwise deal in any property rights relating to any or all of the assets of the Trust or any Portfolio;

               5.3.4. To vote or give assent, or exercise any rights of ownership, with respect to stock or other securities or property; and to execute and deliver proxies or powers of attorney to such person or persons as the Trustees shall deem proper, granting to such person or persons such power and discretion with relation to securities or property as the Trustees shall deem proper;

               5.3.5. To exercise powers and rights of subscription or otherwise which in any manner arise out of ownership of securities or property;

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               5.3.6. To hold any security or property in a form not indicating that it is Trust Property, whether in bearer, book entry, unregistered or other negotiable form, or in its own name or in the name of a custodian or subcustodian or a nominee or nominees or otherwise or to authorize the custodian or a subcustodian or a nominee or nominees to deposit the same in a securities depository, subject in each case to the applicable provisions of the 1940 Act;

               5.3.7. To consent to, or participate in, any plan for the reorganization, consolidation or merger of any corporation or issuer of any security which is held in the Trust; to consent to any contract, lease, mortgage, purchase or sale of property by such corporation or issuer; and to pay calls or subscriptions with respect to any security held in the Trust;

               5.3.8. To join with other security holders in acting through a committee, depositary, voting trustee or otherwise, and in that connection to deposit any security with, or transfer any security to, any such committee, depositary or trustee, and to delegate to them such power and authority with relation to any security (whether or not so deposited or transferred) as the Trustees shall deem proper, and to agree to pay, and to pay, such portion of the expenses and compensation of such committee, depositary or trustee as the Trustees shall deem proper;

               5.3.9. To litigate, compromise, arbitrate, settle or otherwise adjust claims in favor of or against the Trust or a Portfolio, or any matter in controversy, including but not limited to claims for taxes;

               5.3.10. To enter into joint ventures, general or limited partnerships and any other combinations or associations;

               5.3.11. To borrow funds or other property in the name of the Trust or Portfolio exclusively for Trust purposes;

               5.3.12. To endorse or guarantee the payment of any notes or other obligations of any Person; to make contracts of guaranty or suretyship, or otherwise assume liability for payment thereof;

               5.3.13. Subject to Article 9, to purchase and pay for entirely out of Trust Property such insurance as the Trustees may deem necessary, desirable or appropriate for the conduct of the business, including, without limitation, insurance policies insuring the assets of the Trust or payment of distributions and principal on its portfolio investments, and insurance policies insuring the Shareholders, Trustees, officers, employees, agents, any Investment Manager, Principal Underwriter, or independent contractors of the Trust, individually against all claims and liabilities of every nature arising by reason of holding Shares, holding, being or having held any such office or position, or by reason of any action taken or omitted, or alleged to have been taken or omitted, by any such Person as Trustee, officer, employee, agent, Investment Manager, Principal Underwriter, or independent contractor, including any action taken or omitted that may be determined to constitute negligence;

               5.3.14. Subject to the provisions of Section 3804 of the Delaware Act, to allocate assets, liabilities and expenses of the Trust to a particular Portfolio or to apportion the

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same between or among two or more Portfolios, provided that any liabilities or expenses incurred by a particular Portfolio shall be payable solely out of the assets of that Portfolio;

               5.3.15. To adopt, establish and carry out pension, profit-sharing, share bonus, share purchase, savings, thrift and other retirement, incentive and benefit plans, trusts and provisions, including the purchasing of life insurance and annuity contracts as a means of providing such retirement and other benefits, for any or all of the Trustees, officers, employees and agents of the Trust;

               5.3.16. To adopt, amend and repeal By-Laws not inconsistent with this Declaration of Trust providing for the regulation and management of the affairs of the Trust;

               5.3.17. To elect and remove such officers and appoint and terminate such agents as they consider appropriate;

               5.3.18. To appoint from their own and establish and terminate one or more committees consisting of two or more Trustees who may exercise the powers and authority of the Board of Trustees to the extent that the Trustees determine and to adopt a committee charter providing for such responsibilities;

               5.3.19. Subject to the 1940 Act and in accordance with Section 6.1, to retain one or more Investment Managers to manage the assets of the Trust (or any Portfolio) and to authorize such Investment Managers to employ one or more sub-advisers;

               5.3.20. In accordance with Section 6.3, to employ one or more custodians of the assets of the Trust and to authorize such custodians to employ subcustodians and to deposit all or any part of such assets in a system or systems for the central handling of securities or with a Federal Reserve Bank;

               5.3.21. In accordance with Section 6.3, to retain one or more administrators, transfer agents or shareholder servicing agents;

               5.3.22. Subject to the 1940 Act and in accordance with Section 6.2, to provide for the issuance and distribution of Shares by the Trust directly or through one or more Principal Underwriters or otherwise;

               5.3.23. To set record dates for the determination of Shareholders with respect to various matters; declare and pay dividends and distributions to Shareholders of each Portfolio from the assets of such Portfolio;

               5.3.24. To establish from time to time one or more separate and distinct Portfolios with separately defined investment objectives and policies and distinct investment purposes in accordance with Article 3 hereof;

               5.3.25. To interpret the investment policies, practices or limitations of any Portfolio;

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               5.3.26. To delegate such authority as they consider desirable to any officer of the Trust, to any committee of the Trustees and to any agent or employee of the Trust or to any such custodian, administrator, transfer or servicing agents, Investment Manager or Principal Underwriter;

               5.3.27. In general to carry on any other business in connection with or incidental to any of the foregoing powers, to do everything necessary, suitable or proper for the accomplishment of any purpose or the attainment of any object or the furtherance of any power set forth herein, either alone or in association with others, and to do every other act or thing incidental or appurtenant to or arising from the businesses, purposes, objects or powers set forth above.

          The Trust shall not be limited to investing in obligations maturing before the possible termination of the Trust or one or more of its Portfolios. The Trust shall not in any way be bound or limited by any present or future law or custom in regard to investment by fiduciaries. The Trust shall not be required to obtain any court order to deal with any assets of the Trust or take any other action hereunder.

          Section 5.4. Payment of Expenses by the Trust. The Trustees are authorized to pay or cause to be paid out of the principal or income of the Trust or a Portfolio, or partly out of the principal and partly out of income, and to charge or allocate the same to, between or among such one or more of the Portfolios, all expenses, fees, charges, taxes and liabilities incurred or arising in connection with the Trust or Portfolios, or in connection with the management thereof, including, but not limited to, the Trustees’ compensation and such expenses and charges for the services of the Trust’s officers, employees, any Investment Manager, Principal Underwriter, auditors, counsel, custodian, transfer agent, servicing agents, administrator and such other agents or independent contractors and such other expenses and charges as the Trustees may deem necessary or proper to incur.

          Section 5.5. Ownership of Assets of the Trust. Title to all of the assets of the Trust shall at all times be considered as vested in the Trust, except that the Trustees shall have power to cause legal title to any Trust Property to be held by or in the name of one or more of the Trustees, or in the name of the Trust, or in the name of any other Person as nominee, on such terms as the Trustees may determine. Upon the resignation, incompetency, bankruptcy, removal, or death of a Trustee he or she shall automatically cease to have any such title in any of the Trust Property, and the title of such Trustee in the Trust Property shall vest automatically in the remaining Trustees. Such vesting and cessation of title shall be effective whether or not conveyancing documents have been executed and delivered. The Trustees may determine that the Trust or the Trustees, acting for and on behalf of the Trust, shall be deemed to hold beneficial ownership of any income earned on the securities owned by the Trust, whether domestic or foreign.

          Section 5.6. Issuance and Repurchase of Shares. The Trustees shall have the power to issue, sell, transfer, repurchase, redeem, retire, cancel, acquire, hold, resell, reissue, dispose of, or otherwise deal in Shares and, subject to applicable law and the provisions set forth in Section 3.3 hereof, to apply to any such repurchase, redemption, retirement, cancellation or

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acquisition of Shares any funds or property of the Trust, or any assets belonging to the particular Portfolio, with respect to which such Shares are issued.

          Section 5.7. Power of Board of Trustees to Change Provisions Relating to Shares. Notwithstanding any other provision of this Declaration of Trust to the contrary, and without limiting the power of the Board of Trustees to amend this Declaration of Trust, the Board of Trustees shall have the power to amend this Declaration of Trust, at any time and from time to time, in such manner as the Board of Trustees may determine in their sole discretion, without the need for action by any Shareholder, so as to add to, delete, replace or otherwise modify any provisions relating to the Shares contained in this Declaration of Trust, provided that before adopting any such amendment without approval of the Shareholders, the Board of Trustees shall determine that it is consistent with the fair and equitable treatment of all Shareholders or that approval of the Shareholders is not required by the 1940 Act or other applicable law. If Shares of any Portfolio have been issued, except as otherwise provided herein, approval of the Shareholders of such Portfolio shall be required to adopt any amendments to this Declaration of Trust which would adversely affect to a material degree the rights and preferences of the Shares of such Portfolio or to increase or decrease the par value of the Shares of such Portfolio.

          Section 5.8. Principal Transactions. Except to the extent prohibited by applicable law, the Trustees may, on behalf of the Trust, buy any securities from or sell any securities to, or lend any assets of the Trust to, any Trustee or officer of the Trust or any firm of which such Trustee or officer is a member acting as principal, or have any such dealings with any affiliated person of the Trust, any Investment Manager, sub-adviser, Principal Underwriter or transfer agent of the Trust or with any Interested Person of such affiliated person or other person; and the Trust may employ any such affiliated person or other person, or firm or company in which such affiliated person or other person is an Interested Person, as broker, legal counsel, registrar, Investment Manager, sub-adviser, Principal Underwriter, transfer agent, dividend disbursing agent, custodian or in any other capacity upon customary terms.

ARTICLE 6
SERVICE CONTRACTS

          Section 6.1. Investment Manager. The Trustees may, at any time and from time to time, contract for exclusive or nonexclusive advisory, management and, if applicable, administrative services for the Trust or for any Portfolio with any Person; and any such contract may contain such other terms as the Trustees may determine, including without limitation, authority for the Investment Manager to determine from time to time without prior consultation with the Trustees what investments shall be purchased, held, sold or exchanged and what portion, if any, of the assets of the Trust shall be held uninvested and to make changes in the Trust’s investments, and such other responsibilities as may specifically be delegated to such Person. The Trustees may authorize the Investment Manager to employ, from time to time, one or more sub-advisers to perform such of the acts and services of the Investment Manager, and upon such terms and conditions, as may be agreed among the Trustees, the Investment Manager and sub-adviser. Any reference in this Declaration of Trust to the Investment Manager shall be deemed to include such sub-advisers, unless the context otherwise requires.

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          Section 6.2. Principal Underwriter. The Trustees may also, at any time and from time to time, contract with any Persons, appointing such Persons exclusive or nonexclusive distributor or Principal Underwriter for the Shares of one or more of the Portfolios or other securities to be issued by the Trust. Every such contract may contain such other terms as the Trustees may determine.

          Section 6.3. Other Service Contracts. The Trustees are also empowered, at any time and from time to time, to contract with any Persons, appointing such Person(s) to serve as custodian(s), administrator(s), transfer agent(s) and/or shareholder servicing agent(s) for the Trust or one or more of its Portfolios. Every such contract shall comply with such terms as may be required by the Trustees. The Trustees are further empowered, at any time and from time to time, to contract with any Persons to provide such other services to the Trust or one or more of the Portfolios, as the Trustees determine to be in the best interests of the Trust and the applicable Portfolios.

          Section 6.4. Validity of Contracts. The fact that:

                    (a) any of the Shareholders, Trustees, or officers of the Trust is a shareholder, director, officer, partner, trustee, employee, Manager, adviser, Principal Underwriter, distributor, or affiliate or agent of or for any Person with which an advisory, management or administration contract, or Principal Underwriter’s or distributor’s contract, or transfer, shareholder servicing or other type of service contract may be made, or

                    (b) any Person with which an advisory, management or administration contract or Principal Underwriter’s or distributor’s contract, or transfer, shareholder servicing or other type of service contract may be made also has an advisory, management or administration contract, or Principal Underwriter’s or distributor’s contract, or transfer, shareholder servicing or other service contract, or has other business or interests with any other Person, shall not affect the validity of any such contract or disqualify any Shareholder, Trustee or officer of the Trust from voting upon or executing the same, or create any liability or accountability to the Trust or its Shareholders, provided approval of each such contract is made pursuant to the applicable requirements of the 1940 Act.

ARTICLE 7
SHAREHOLDERS’ VOTING POWERS AND MEETINGS

          Section 7.1. Voting Powers. The Shareholders shall have the right to vote only:

                    (a) for removal of Trustees as provided in Section 4.2 hereof;

                    (b) with respect to such additional matters relating to the Trust as may be required by applicable provisions of law, including the 1940 Act;

                    (c) with respect to matters specified in Section 10.2; and

                    (d) on such other matters as the Trustees may consider necessary or desirable.

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Each whole Share shall be entitled to one vote as to any matter on which it is entitled to vote and each fractional Share shall be entitled to a proportionate fractional vote. There shall be no cumulative voting in the election of Trustees. Shares may be voted in person or by proxy. A proxy purporting to be executed by or on behalf of a Shareholder shall be deemed valid unless challenged at or prior to its exercise and the burden of proving invalidity shall rest on the challenger.

          Section 7.2. Meetings. Meetings of the Shareholders may be called by the Trustees for the purposes described in Section 7.1 hereof. A meeting of Shareholders may be held at any place designated by the Trustees. Written notice of any meeting of Shareholders shall be given or caused to be given by the Trustees by delivering personally or mailing such notice at least seven (7) days before such meeting, postage prepaid, stating the time and place of the meeting, to each Shareholder in accordance with Section 3.5. Whenever notice of a meeting is required to be given to a Shareholder under this Declaration of Trust, a written waiver thereof, executed before or after the meeting by such Shareholder or his or her attorney thereunto authorized and filed with the records of the meeting, or actual attendance at the meeting of Shareholders in person or by proxy, shall be deemed equivalent to such notice.

          Section 7.3. Quorum and Required Vote. Except when a larger quorum is required by the applicable provisions of the 1940 Act or other applicable law or regulation, forty percent (40%) of the Shares entitled to vote on a matter shall constitute a quorum at a meeting of the Shareholders. Any meeting of Shareholders may be adjourned from time to time by a majority of the votes properly cast upon the question of adjourning a meeting to another date and time, whether or not a quorum is present, and the meeting may be held as adjourned within a reasonable time after the date set for the original meeting without further notice. Subject to Section 3.4.4 and the applicable provisions of the 1940 Act, when a quorum is present at any meeting, a majority of the Shares voted shall decide any questions, except only a plurality vote shall be necessary to elect Trustees.

          Section 7.4. Action by Written Consent. Any action taken by Shareholders may be taken without a meeting if Shareholders holding a majority of the Shares entitled to vote on the matter (or such larger proportion thereof as shall be required by any express provision of this Declaration of Trust or by the By-Laws) and holding a majority (or such larger proportion as aforesaid) of the Shares of any Portfolio (or Class) entitled to vote separately on the matter consent to the action in writing and such written consents are filed with the records of the meetings of Shareholders. Such consent shall be treated for all purposes as a vote taken at a meeting of Shareholders.

          Section 7.5. Record Dates. For the purpose of determining the Shareholders who are entitled to vote or act at any meeting or any adjournment thereof, the Trustees may fix a time, which shall be not more than one hundred twenty (120) days before the date of any meeting of Shareholders, as the record date for determining the Shareholders having the right to notice of and to vote at such meeting and any adjournment thereof, and in such case only Shareholders of record on such record date shall have such right, notwithstanding any transfer of Shares on the books of the Trust after the record date. For the purpose of determining the Shareholders who are entitled to receive payment of any dividend or of any other distribution, the Trustees may fix a date, which shall be before the date for the payment of such dividend or distribution, as the

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record date for determining the Shareholders having the right to receive such dividend or distribution. Nothing in this Section shall be construed as precluding the Trustees from setting different record dates for different Portfolios.

ARTICLE 8
NET ASSET VALUE, AND DISTRIBUTIONS

          Section 8.1. Determination of Net Asset Value, Net Income, and Distributions.

               8.1.1. The Trustees, in their absolute discretion, may prescribe and shall set forth in the By-laws or in a duly adopted resolution of the Trustees such bases and time for determining the net asset value of the Shares of any Portfolio and the net income attributable to the Shares of any Portfolio and the declaration and payment of dividends and distributions on the Shares of any Portfolio, as they may deem necessary or desirable.

          Section 8.2. Redemptions and Repurchases. 8.2.1. The Trust may repurchase such Shares as are offered by any Shareholder, upon the presentation of a proper instrument of transfer and in accordance with such procedures for repurchase as the Trustees may from time to time authorize; and the Trust will pay therefore, less any applicable repurchase fee and sales charge, in accordance with the By-Laws, the applicable provisions of the 1940 Act or as further provided by resolution of the Trustees.

               8.2.2. The repurchase price may in any case or cases be paid in cash or wholly or partly in kind in accordance with the 1940 Act if the Trustees determine that such payment is advisable in the interest of the remaining Shareholders of the Portfolio of which the Shares are being repurchased. Subject to the foregoing, the selection and quantity of securities or other property so paid or delivered as all or part of the repurchase price shall be determined by or under authority of the Trustees. In no case shall the Trust be liable for any delay of any corporation or other Person in transferring securities selected for delivery as all or part of any payment in kind.

          Section 8.3. Redemptions at the Option of the Trust. The Trustees may, at their option, call for the redemption of Shares of any Shareholder or may refuse to transfer or issue Shares to any Person to the extent that the same is necessary to comply with applicable law or advisable to further the purpose for which the Trust was established.

To the extent permitted by law, the Trustees may retain the proceeds of any redemption of Shares required by them for payments of amounts due and owing by a Shareholder to the Trust or any Portfolio.

          Section 8.4. Transfer of Shares. Except to the extent that the Trustees have provided by resolution that the Shares of a Portfolio are non-transferable, the Trust shall transfer shares held of record by any Person to any other Person upon receipt by the Trust or a Person designated by the Trust of a written request therefore in such form and pursuant to such procedures as may be approved by the Trustees.

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ARTICLE 9
LIMITATION OF LIABILITY; INDEMNIFICATION

          Section 9.1. Limitation of Liability of Trustees and Others. 9.1.1. No Trustee, officer, employee or agent of the Trust shall be subject to any personal liability whatsoever to any Person, other than the Trust or its Shareholders for any act, omission or obligation of the Trust or any Trustee; and all Persons shall look solely to the Trust Property for satisfaction of claims of any nature arising in connection with the affairs of the Trust. No Trustee, officer, employee or agent of the Trust shall be liable to the Trust or to any Shareholder, Trustee, officer, employee, or agent of the Trust for any action or failure to act (including without limitation the failure to compel in any way any former or acting Trustee to redress any breach of trust) except for his or her own bad faith, willful misfeasance, gross negligence or reckless disregard of his or her duties involved in the conduct of his or her office.

               9.1.2. Without limiting Section 9.1.1, the appointment, designation or identification of a Trustee as chairperson of the Board of Trustees, a member or chairperson of a committee established by the Trustees, an expert on any topic or in any area (including an audit committee financial expert), or the lead independent Trustee, or any other special appointment, designation or identification of a Trustee, shall not impose on that person any duty, obligation or liability that is greater than the duties, obligations and liabilities imposed on that person as a Trustee in the absence of the appointment, designation or identification (except that the foregoing limitation shall not apply to duties expressly imposed pursuant to the By-Laws, a committee charter or a Trust policy statement), and no Trustee who has special skills or expertise, or is appointed, designated or identified as aforesaid, shall be held to a higher standard of care by virtue thereof. In addition, no appointment, designation or identification of a Trustee as aforesaid shall affect in any way that Trustee’s rights or entitlement to indemnification.

               9.1.3. Every note, bond, contract, instrument, certificate or undertaking and every other act or thing whatsoever issued, executed or done by or on behalf of the Trust or the Trustees or any of them in connection with the Trust shall be conclusively deemed to have been issued, executed or done only in or with respect to their or his or her capacity as Trustees or Trustee, and such Trustees or Trustee shall not be personally liable thereon.

          Section 9.2. Indemnification.

               9.2.1. Subject to Section 9.2.2, the Trust shall indemnify and hold harmless each and every Trustee and officer of the Trust and each former Trustee and officer of the Trust (each hereinafter referred to as a “Covered Person”) from and against any and all claims, demands, costs, losses, expenses, and damages whatsoever arising out of or related to such Covered Person’s performance of his or her duties as a Trustee or officer of the Trust or otherwise relating to any act, omission, or obligation of the Trust.

               9.2.2. Indemnification pursuant to Section 9.2.1 shall be provided to a Covered Person if:

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                    (a) the court or other body before which the proceeding was brought determines, in a final decision on the merits, that the Covered Person was not liable by reason of bad faith, willful misfeasance, gross negligence or reckless disregard of the duties involved in the conduct of that individual’s office; or (b) in the event of a settlement involving a payment by a Trustee, or officer or other disposition not involving a final adjudication as provided in paragraph (a) above resulting in a payment by a Covered Person, there has been either a determination that such Covered Person did not engage in bad faith, willful misfeasance, gross negligence or reckless disregard of the duties involved in the conduct of that individual’s office by the court or other body approving the settlement or other disposition or a reasonable determination, based upon a review of readily available facts (as opposed to a full trial-type inquiry) that that individual did not engage in such conduct:

                         (i) by vote of a majority of the Disinterested Trustees (as defined below) acting on the matter (provided that a majority of the Disinterested Trustees then in office act on the matter); or

                         (ii) by written opinion of legal counsel chosen by a majority of the Trustees and determined by them in their reasonable judgment to be independent.

               9.2.3. The rights of indemnification herein provided may be insured against by policies maintained by the Trust, shall be severable, shall not affect any other rights to which any Covered Person may now or hereafter be entitled, shall continue as to a person who has ceased to be a Covered Person and shall inure to the benefit of the heirs, executors and administrators of such person. Nothing contained herein shall affect any rights to indemnification to which personnel, including Covered Persons, may be entitled by contract or otherwise under law.

               9.2.4. Expenses of preparation and presentation of a defense to any claim, action, suit, or proceeding of the character described in Section 9.2.1 shall be advanced by the Trust prior to final disposition thereof upon receipt of an undertaking by or on behalf of the Covered Person to repay such amount if it is ultimately determined that the Covered Person is not entitled to indemnification under this Section 9.2, provided that either:

                    (a) such undertaking is secured by a surety bond or some other appropriate security or the Trust shall be insured against losses arising out of any such advances; or

                    (b) a majority of the Disinterested Trustees acting on the matter (provided that a majority of the Disinterested Trustees then in office act on the matter) or legal counsel selected as provided in Section 9.2.2(b)(ii) above in a written opinion, shall determine, based upon a review of readily available facts (as opposed to a full trial-type inquiry), that there is reason to believe that the Covered Person ultimately will be found entitled to indemnification.

               9.2.5. As used in this Section 9.2 in relation to any claim for indemnification or advances of expenses in relation to any claim, action, suit, or proceeding, a “Disinterested Trustee” is one (a) who is not an “Interested Person” of the Trust (including

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anyone who has been exempted from being an “Interested Person” by any rule, regulation or order of the Commission), and (b) against whom neither such claim, action, suit or proceeding nor another claim, action, suit or proceeding on the same or similar grounds is then or had been pending.

               9.2.6. In making a determination under Section 9.2.2(b) as to whether a Covered Person engaged in the conduct described therein, or under Section 9.2.4(b) as to whether there is reason to believe that a Covered Person ultimately will be found entitled to indemnification, the Disinterested Trustees or legal counsel making the determination shall afford the Covered Person a rebuttable presumption that the Covered Person has not engaged in bad faith, willful misfeasance, gross negligence or reckless disregard of the duties involved in the conduct of the Covered Person’s office.

          Section 9.3. Trustee’s Good Faith Action, Expert Advice, No Bond or Surety. The exercise by the Trustees of their powers hereunder shall be binding upon everyone interested in or dealing with the Trust. The Trustees, officers, employees, and agents of the Trust shall not be liable for errors of judgment or mistakes of fact or law. Each Trustee, officer, employee, and agent of the Trust shall, in the performance of his or her duties, be under no liability and 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 Trust, upon advice of counsel, or upon reports made to the Trust by any of its officers or employees or by any Investment Manager, the Principal Underwriters, any transfer agent, custodian, any shareholder servicing agent, selected dealers, accountants, appraisers or other experts or consultants selected with reasonable care by the Trustees, officers, employees, or agents of the Trust, regardless of whether such expert or consultant may also be a Trustee. The Trustees shall not be required to give any bond as such, nor any surety if a bond is required.

          Section 9.4. Liability of Third Persons Dealing with Trustees. No Person dealing with the Trustees shall be bound to make any inquiry concerning the validity of any transaction made or to be made by the Trustees or to see to the application of any payments made or property transferred to the Trust or upon its order.

          Section 9.5. Insurance. The Trustees shall be entitled and empowered to the fullest extent permitted by law to purchase with Trust assets insurance for liability and for all expenses reasonably incurred or paid or expected to be paid by any Covered Person in connection with any claim, action, suit or proceeding in which he or she becomes involved by virtue of his or her capacity or former capacity with the Trust.

          Section 9.6. Derivative Actions. No Shareholder shall have the right to bring or maintain any court action, proceeding or claim in the right of the Trust or any Portfolio or Class thereof to recover a judgment in its favor unless (a) Shareholders holding at least ten percent (10%) of the outstanding Shares of the Trust, Portfolio or Class, as applicable, join in the bringing of such court action, proceeding or claim, and (b) the bringing or maintenance of such court action, proceeding or claim is otherwise in accordance with Section 3816 of the Delaware Act. In addition to the requirements of Section 3816 of the Delaware Act, a Shareholder may bring a derivative action on behalf of the Trust with respect to a Portfolio or Class only if the following conditions are met:

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                    (a) the Shareholder or Shareholders must make a pre-suit demand upon the Trustees to bring the subject action unless an effort to cause the Trustees to bring such an action is not likely to succeed; and a demand on the Trustees shall only be deemed not likely to succeed and therefore excused if a majority of the Trustees, or a majority of any committee established to consider the merits of such action, has a personal financial interest in the transaction at issue, and a Trustee shall not be deemed interested in a transaction or otherwise disqualified from ruling on the merits of a Shareholder demand by virtue of the fact that such Trustee receives remuneration for his service as a Trustee of the Trust or as a trustee or director of one or more investment companies that are under common management with or otherwise affiliated with the Trust; and (b) unless a demand is not required under clause (a) of this sentence, the Trustees must be afforded a reasonable amount of time to consider such Shareholder request and to investigate the basis of such claim; and the Trustees shall be entitled to retain counsel or other advisors in considering the merits of the request and shall require an undertaking by the Shareholder(s) making such request to reimburse the Trust for the expense of any such advisors in the event that the Trustees determine not to bring such action. For purposes of this Section 9.6, the Trustees may designate a committee of one Trustee to consider a Shareholder demand if necessary to create a committee with a majority of Trustees who do not have a personal financial interest in the transaction at issue.

          Section 9.7. Modifications of this Article. Any repeal or modification of this Article 9 by the Shareholders of the Trust, or adoption or modification of any other provision of this Declaration of Trust or By-laws inconsistent with this Article 9, shall be prospective only, to the extent that such repeal or modification would, if applied retrospectively, adversely affect any limitation on the liability of any Covered Person or indemnification available to any Covered Person with respect to any act or omission which occurred prior to such repeal, modification or adoption.

ARTICLE 10
TERMINATION; MERGER; REORGANIZATION

          Section 10.1. Termination of Trust or Portfolio. 10.1.1. Unless terminated as provided herein, the Trust shall continue without limitation of time. The Trust may be terminated at any time by the Trustees without shareholder approval upon sixty (60) days prior written notice to the Shareholders. Any Portfolio or Class may be terminated at any time without shareholder approval by the Trustees upon sixty (60) days prior written notice to the Shareholders of that Portfolio or Class.

               10.1.2. Upon termination of the Trust (or any Portfolio or Class, as the case may be), after paying or otherwise providing for all charges, taxes, expenses and liabilities held, severally, with respect to each Portfolio or Class (or the applicable Portfolio or Class, as the case may be), whether due or accrued or anticipated as may be determined by the Trustees, the Trust shall, in accordance with such procedures as the Trustees consider appropriate, reduce the remaining assets held, severally, with respect to each Portfolio or Class (or the applicable Portfolio or Class, as the case may be), to distributable form in cash or shares or other securities, and any combination thereof, and distribute the proceeds held with respect to each Portfolio or Class (or the applicable Portfolio or Class, as the case may be), (a) to the Shareholders of a Portfolio or Class not taxable as a partnership for federal income tax purposes, pro rata according

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to the number of Shares of that Portfolio or Class held by the several Shareholders on the date of termination and, (b) to the Shareholders of a Portfolio or Class, taxable as a partnership for federal income tax purposes, in accordance with the positive Book Capital Account balances of the Shareholders.

          Section 10.2. Merger and Consolidation. The Trustees may cause (a) the Trust or one or more of its Portfolios to the extent consistent with applicable law to be merged into or consolidated with another trust, series of another trust or other Person, (b) the Shares of the Trust or any Portfolio to be converted into beneficial interests in another trust (or series thereof), (c) the Shares to be exchanged for assets or property under or pursuant to any state or federal statute to the extent permitted by law or (d) a sale of assets of the Trust or one or more of its Portfolios. Such merger or consolidation, Share conversion, Share exchange or sale of assets must be authorized by vote as provided in Article 7 herein; provided that in all respects not governed by statute or applicable law, the Trustees shall have power to prescribe the procedure necessary or appropriate to accomplish a merger or consolidation, Share conversion, Share exchange, or sale of assets including the power to create one or more separate trusts to which all or any part of the assets, liabilities, profits or losses of the Trust may be transferred and to provide for the conversion of Shares of the Trust or any Portfolio into beneficial interests in such separate business trust or trusts or series thereof.

          Section 10.3. Reorganization. Notwithstanding Section 10.2, the Trustees may, without the vote or consent of Shareholders, cause to be organized or assist in organizing a corporation or corporations under the laws of any jurisdiction, or any other trust, partnership, limited liability company, association or other organization, or any series or class of any thereof, to acquire all or a portion of the Trust Property (or all or a portion of the Trust Property held with respect to a particular Portfolio or allocable to a particular Class) or to carry on any business in which the Trust shall directly or indirectly have any interest (any of the foregoing, a “Successor Entity”), and to sell, convey and transfer such Trust Property to any such Successor Entity in exchange for the shares or securities thereof or otherwise, and to lend money to, subscribe for the shares or securities of, and enter into any contracts with any such Successor Entity in which the Trust holds or is about to acquire shares or any other interest. The Trustees may also, without the vote or consent of Shareholders, cause a merger or consolidation between the Trust and any Successor Entity if and to the extent permitted by law. The Trustees shall provide written notice to affected Shareholders of each transaction pursuant to this Section 10.3. Such transactions may be effected through share-for-share exchanges, transfers or sales of assets, in-kind redemptions and purchases, exchange offers, or any other method approved by the Trustees.

ARTICLE 11
MISCELLANEOUS

          Section 11.1. Amendments. The Trustees may amend this Declaration of Trust by making an amendment to this Declaration of Trust or to Schedule A hereto, an agreement supplemental hereto, or an amended and restated trust instrument. Any such amendment, having been approved by a majority of the Trustees then holding office, shall become effective, unless otherwise provided by such Trustees, upon execution by a duly authorized officer of the Trust. The Certificate of Trust of the Trust may be restated and/or amended by a similar procedure, and any such restatement and/or amendment shall be effective immediately upon filing with the

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Office of the Secretary of State of the State of Delaware or upon such future date as may be stated therein.

          Section 11.2. Filing of Copies. The original or a copy of this Declaration of Trust and of each restatement and/or amendment hereto shall be kept at the office of the Trust where it may be inspected by any Shareholder. Anyone dealing with the Trust may rely on a certificate by an officer of the Trust as to whether or not any such restatements and/or amendments have been made and as to any matters in connection with the Trust hereunder; and, with the same effect as if it were the original, may rely on a copy certified by an officer of the Trust to be a copy of this Declaration of Trust or of any such restatements and/or amendments.

          Section 11.3. References and Headings. In this Declaration of Trust and in any such restatements and/or amendment, references to this Declaration of Trust, and all expressions like “herein,” “hereof” and “hereunder,” shall be deemed to refer to this Declaration of Trust as amended or affected by any such restatements and/or amendments. Headings are placed herein for convenience of reference only and shall not be taken as a part hereof or control or affect the meaning, construction or effect of this Declaration of Trust. Whenever the singular number is used herein, the same shall include the plural; and the neuter, masculine and feminine genders shall include each other, as applicable.

          Section 11.4. Applicable Law. This Declaration of Trust is created under and is to be governed by and construed and administered according to the laws of the State of Delaware and the Delaware Act. The Trust shall be a Delaware statutory trust pursuant to the Delaware Act, and without limiting the provisions hereof, the Trust may exercise all powers which are ordinarily exercised by such a statutory trust.

          Section 11.5. Provisions in Conflict with Law or Regulations. 11.5.1. The provisions of this Declaration of Trust are severable, and if the Trustees shall determine, with the advice of counsel, that any of such provisions is in conflict with the 1940 Act, the regulated investment company provisions of the Internal Revenue Code of 1986, as amended, or with other applicable laws and regulations, the conflicting provision shall be deemed never to have constituted a part of this Declaration of Trust; provided, however, that such determination shall not affect any of the remaining provisions of this Declaration of Trust or render invalid or improper any action taken or omitted prior to such determination.

               11.5.2. If any provision of this Declaration of Trust shall be held invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall attach only to such provision in such jurisdiction and shall not in any manner affect such provision in any other jurisdiction or any other provision of this Declaration of Trust in any jurisdiction.

          Section 11.6. Statutory Trust Only. It is the intention of the Trustees to create a statutory trust pursuant to the Delaware Act, and thereby to create only the relationship of trustee and beneficial owners within the meaning of such act between the Trustees and each Shareholder. Except to the extent provided by resolution of the Trustees establishing a Portfolio intended to be classified as a partnership for federal income tax purposes, it is not the intention of the Trustees to create a general partnership, limited partnership, joint stock association, corporation, bailment, joint venture, or any form of legal relationship other than a statutory trust

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pursuant to the Delaware Act, and except as so provided in such resolution, nothing in this Declaration of Trust shall be construed to make the Shareholders, either by themselves or with the Trustees, partners or members of a joint stock association.

          Section 11.7. Counterparts. This Declaration of Trust may be executed in any number of counterparts, each of which shall be deemed an original and all of which, when taken together, shall be deemed to constitute a single document.

          IN WITNESS WHEREOF, the Trustee named below does hereby make and enter into this Declaration of Trust of the RIVUS BOND FUND as of June 13, 2006.

/s/ Thacher Brown  

Thacher Brown, as Trustee and Not Individually 

/s/ John Gilray Christy  

John Gilray Christy, as Trustee and Not Individually

/s/ Morris Lloyd, Jr.  

Morris Lloyd, Jr., as Trustee and Not Individually 

/s/ J. Lawrence Shane  

J. Lawrence Shane, as Trustee and Not Individually 

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SCHEDULE A
TO
AGREEMENT AND DECLARATION OF TRUST
OF
RIVUS BOND FUND

SCHEDULE OF PORTFOLIOS

                 Portfolio

Rivus Bond Fund

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EX-99.2(B)

Exhibit (2)(b)

RIVUS BOND FUND

A DELAWARE STATUTORY TRUST

* * * * * * * *

By-Laws

Dated June 13, 2006

* * * * * * * *

ARTICLE 1
DEFINITIONS

          Section 1.1. Definitions.The terms “Class,” “Commission,” “Declaration of Trust,” “Investment Manager,” “Manager,” “Portfolio,” “Shares,” “Shareholder,” “Trust,” “Trustees,” “Trust Property,” and “1940 Act” have the respective meanings given them in the Agreement and Declaration of Trust of Rivus Bond Fund dated as of June 13, 2006, as may be amended from time to time.

ARTICLE 2
OFFICES

          Section 2.1. Delaware Office.The registered office of the Trust in Delaware and the name and address of its resident agent for service of process shall be as set forth in the Certificate of Trust of the Trust, as filed with the Secretary of State of Delaware on July 7, 2006, and as may be amended and restated from time to time.

          Section 2.2. Other Offices.The Trust shall have the power to open additional offices for the conduct of its business, either within or outside the State of Delaware, at such places as the Board of Trustees may from time to time designate.

ARTICLE 3
MEETINGS OF SHAREHOLDERS

          Section 3.1. Place of Meeting.Meetings of Shareholders shall be held at any time or place designated by the Trustees. In the absence of any such designation, Shareholders’ meetings shall be held at the principal office of the Trust at the time of such meetings. Notwithstanding the foregoing, if either the President or Secretary of the Trust, or in the absence or unavailability of the President and the Secretary, any officer of the Trust, determines that the date, time or place designated for a meeting or adjourned meeting of Shareholders is not reasonably practicable or available as a result of (a) fire, flood, elements of nature, or other acts of god, (b) acts of terrorism, (c) outbreak or escalation of hostilities, war, riots or civil disorders or (d) other similar events, such officer may, without further notice to Shareholders, designate

such other date, time or place for such meeting or adjourned meeting as such officer shall, in his or her sole discretion, determine.

          Section 3.2. Call of Meetings.Meetings of the Shareholders may be called at any time by a majority of the Trustees. The Trustees shall call a meeting of Shareholders for the purpose of voting upon the question of removal of one or more Trustees upon the written request of the holders of not less than ten percent (10%) of the outstanding Shares. Business transacted at any special meeting of Shareholders shall be limited to the purpose stated in the notice.

          Section 3.3. Separate Meetings.Whenever a matter is required to be voted by Shareholders of the Trust in the aggregate without differentiation among the separate Portfolios or Classes under Section 3.4.4 and Section 7.1 of the Declaration of Trust, the Trust may either hold a meeting of Shareholders of all Portfolios and Classes to vote on such matter, or hold separate meetings of Shareholders of each of the Portfolios and/or Classes to vote on such matter, provided that (a) such separate meetings shall be held within one year of each other and (b) a quorum of the Portfolios or Classes shall be present at each such separate meeting, and the votes of Shareholders at all such separate meetings shall be aggregated in order to determine if sufficient votes have been cast for such matter to be voted.

          Section 3.4. Notice of Meetings.Written notice of any meeting, including any special meeting, stating the purpose, place, date and hour of the meeting shall be given by the Trustees in accordance with Section 3.5 of the Declaration of Trust to each Shareholder entitled to vote at such meeting not less than seven (7) days before the date of the meeting. Any adjourned meeting may be held as adjourned without further notice. Where separate meetings are held for Shareholders of the Portfolios and/or Classes to vote on a matter required to be voted on by Shareholders of the Trust in the aggregate without differentiation among the separate Portfolios or Classes, notice of each such separate meeting shall be provided in the manner described above. No notice need be given to any Shareholder who shall have failed to inform the Trust of the Shareholder’s current address or if a written waiver of notice, executed before or after the meeting by the Shareholder or the Shareholder’s attorney thereunto authorized, is filed with the records of meeting.

          Section 3.5. Record Date.The Trustees shall determine a record date for each meeting in accordance with Section 7.5 of the Declaration of Trust.

          Section 3.6. Voting.

               3.6.1. The holders of each Share of beneficial interest of the Trust then issued and outstanding and entitled to vote, irrespective of the Portfolios, shall be voted in the aggregate and not separately by Portfolio or Class, except: (a) when otherwise expressly provided by Section 3.4.4 or any other Section of the Declaration of Trust; or (b) when otherwise required by the 1940 Act.

               3.6.2. At all meetings of the Shareholders, every Shareholder of record entitled to vote thereat shall be entitled to vote at such meeting either in person or by written proxy signed by the Shareholder or by his duly authorized attorney-in-fact. A Shareholder may duly authorize such attorney-in-fact through written, electronic, telephonic, computerized,

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facsimile, telecommunication, or oral communication or by any other form of communication. Unless the proxy provides otherwise, such proxy is not valid more than eleven months after its date. Unless otherwise specifically limited by its terms, such proxy shall entitle the holder thereof to vote at any adjournment of a meeting. A proxy purporting to be executed by or on behalf of a Shareholder shall be deemed valid unless challenged at or prior to its exercise, and the burden of proving invalidity shall rest on the challenger.

               3.6.3. When any Share is held jointly by several persons, any one of them may vote at any meeting in person or by proxy in respect of such Share, but if more than one of them shall be present at such meeting in person or by proxy and such joint owners or their proxies so present disagree as to any vote to be cast, such vote shall not be received in respect of such Share.

               3.6.4. If the holder of any Share is a minor or a person of unsound mind, and subject to guardianship or to the legal control of any other person as regards the control or management of such Share, such Share may be voted by such guardian or such other person appointed or having such control, and such vote may be given in person or by proxy.

               3.6.5. At all meetings of Shareholders, unless the voting is conducted by inspectors, all questions relating to the qualification of voters and the validity of proxies and the acceptance or rejection of votes shall be decided by the Chairman of the meeting.

          Section 3.7. Quorum.The existence of a quorum shall be determined in accordance with Section 7.3 of the Declaration of Trust.

          Section 3.8. Inspectors.At any election of Trustees, the Trustees may, or, if they have not so acted, the Chairman of the meeting may, and upon the request of the holders of ten percent (10%) of the Shares entitled to vote at such election shall, appoint one or more inspectors of election who shall first subscribe an oath of affirmation to execute faithfully the duties of inspectors at such election with strict impartiality and according to the best of their ability, and shall after the election make a certificate of the result of the vote taken. No candidate for the office of Trustee shall be appointed such inspector. The Chairman of the meeting may cause a vote by ballot to be taken upon any election or matter, and such vote shall be taken upon the request of the holders of ten percent (10%) of the Shares entitled to vote on such election or matter.

          Section 3.9. Broker Non-Votes.At any meeting of Shareholders, the Trust will consider broker non-votes as present for purposes of determining whether a quorum is present at the meeting. Broker non-votes will not count as votes cast.

ARTICLE 4
TRUSTEES

          Section 4.1. Chairman.The Trustees may elect from their own number a Chairman, to hold office until his or her successor shall have been duly elected and qualified. The Chairman shall preside at all meetings of the Trustees and shall have such other duties as may be assigned to him or her from time to time by the Trustees.

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          Section 4.2. Counsel and Experts.The Trustees who are not “interested persons” of the Trust pursuant to the 1940 Act may, by vote of a majority of such Trustees, at the Trust’s expense, engage such counsel, accountants, appraisers or other experts or consultants whose services such Trustees may, in their discretion, determine to be necessary or desirable from time to time.

          Section 4.3. Place of Meeting.Meetings of the Trustees, regular or special, may be held at any place in or out of the State of Delaware as the Trustees may from time to time determine.

          Section 4.4. Telephone Meeting.The Trustees or a Committee of the Trustees may participate in a meeting by means of a conference telephone or similar communications equipment if all persons participating in the meeting can hear each other at the same time. Participation in a telephone or video conference meeting shall constitute presence in person at such meeting.

          Section 4.5. Quorum.At all meetings of the Trustees a majority of all the Trustees shall constitute a quorum for the transaction of business and the action of a majority of the Trustees present at any meeting at which a quorum is present shall be the action of the Trustees unless the concurrence of a greater or different proportion is required for such action by the 1940 Act. If a quorum shall not be present at any meeting of Trustees, the Trustees present thereat may by a majority vote adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present.

          Section 4.6. Regular Meetings.Regular meetings of the Trustees may be held without notice, except as required by applicable law, at such time and place as shall from time to time be determined by the Trustees.

          Section 4.7. Special Meetings.Special meetings of the Trustees may be called by the President on one day’s notice to each Trustee; special meetings shall be called by the President or Secretary in like manner and on like notice on the written request of two Trustees.

          Section 4.8. Action by Consent.Any action required or permitted to be taken at any meeting of the Trustees or of any Committee thereof may be taken without a meeting if a written consent to such action is signed in one or more counterparts by a majority of the Trustees or of a Committee, as the case may be, and such written consent is filed with the minutes of proceedings of the Trustees or Committee. Such a consent shall be treated as a vote for all purposes.

          Section 4.9. Committees.The Trustees may by resolution passed by a majority of the Trustees appoint from among its members (a) an Executive Committee composed of two (2) or more Trustees, and (b) one or more other Committees (which such Committees may include individuals who are not Trustees). Subject to applicable law, the Trustees may delegate to such Committees any or all of the powers of the Trustees in the management of the business and affairs of the Trust. In the absence of any member of a Committee, the members thereof present at any meeting, whether or not they constitute a quorum, may appoint a Trustee to act in the place of such absent member. The Trustees may designate a Chairman of any Committee. In the

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absence of such designation a Committee may elect its own chairman. Each Committee shall have the power to establish rules for conducting business of the Committee, provided that such rules are consistent with these By-Laws and the determinations of the Trustees.

          Section 4.10. Meetings and Actions of Committees.A Committee shall report its actions and recommendations to the Trustees at the meeting of the Board of Trustees next succeeding the Committee meeting, and any action by a Committee shall be subject to revision and alteration by the Trustees, provided that no rights of third persons shall be affected by any such revision or alteration. Each Committee shall keep regular minutes of its meetings and shall keep records of decisions taken without a meeting and cause them to be kept among the books and records of the Trust.

          Section 4.11. Compensation.Any Trustee, whether or not he or she is a salaried officer or employee of the Trust, may be compensated for his or her services as Trustee or as a member of a Committee of Trustees, or as Chairman of the Board of Trustees or Chairman of a Committee, by fixed periodic payments or by fees for attendance at meetings or by both, and may be reimbursed for transportation and other expenses, all in such manner and amounts as the Trustees may from time to time determine.

ARTICLE 5
NOTICES TO TRUSTEES

          Section 5.1. Form.Notices shall be oral or by telephone, facsimile or telegram or in writing delivered personally or mailed to the Trustees at their addresses appearing on the books of the Trust. Notice by mail shall be deemed to be given at the time when the same shall be mailed. Notice to Trustees need not state the purpose of a regular or special meeting.

          Section 5.2. Waiver.Whenever any notice of the time, place or purpose of any meeting of the Trustees or Committee is required to be given under the provisions of these By-Laws, a waiver thereof in writing, signed by the person or persons entitled to such notice and filed with the records of the meeting, whether before or after the holding thereof, or actual attendance at the meeting of Trustees or Committee in person, shall be deemed equivalent to the giving of such notice to such persons. A waiver of notice need not specify the purpose of any meeting.

ARTICLE 6
OFFICERS

          Section 6.1. Election.The officers of the Trust shall be elected by the Trustees and shall include: a President who shall be the Chief Executive Officer; a Secretary; a Treasurer; a Chief Compliance Officer; and an AML Compliance Officer. The Trustees may, from time to time, elect or appoint a Chief Legal Officer, Controller, one or more Vice Presidents, Assistant Secretaries and Assistant Treasurers. Each officer shall serve until his or her successor is chosen and shall qualify. Two or more offices may be held by the same person but no officer shall execute, acknowledge or verify any instrument in more than one capacity, if such instrument is required by law, the Declaration of Trust or these By-Laws to be executed, acknowledged or verified by two or more officers.

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          Section 6.2. Other Officers.The Trustees from time to time may appoint such other officers and agents as they shall deem advisable, who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Trustees. The Trustees from time to time may delegate to one or more officers or agents the power to appoint any such subordinate officers or agents and to prescribe the respective rights, terms of office, authorities and duties.

          Section 6.3. Compensation.The salaries or other compensation of all officers and agents of the Trust shall be fixed by the Trustees, except that the Trustees may delegate to any person or group of persons the power to fix the salary or other compensation of any subordinate officers or agents appointed pursuant to Section 6.3.

          Section 6.4. Tenure.The officers of the Trust shall serve until his or her resignation is accepted by the Trustees, and his or her successor is chosen, elected and qualified, or until he or she sooner dies or is removed. Any officer or agent may be removed by the affirmative vote of a majority of the Trustees at any time, with or without cause. Any vacancy occurring in any office of the Trust by death, resignation, removal or otherwise shall be filled by the Trustees.

          Section 6.5. President.The President shall be the chief executive officer of the Trust and, for purposes of the Securities Act of 1933 (the “1933 Act”), the principal executive officer of the Trust; he or she shall see that all orders and resolutions of the Trustees are carried into effect. The President shall supervise the other officers of the Trust and may prescribe duties to such officers from time to time, provided that the Trustees, in their sole discretion, may alter any duties prescribed to such officers by the President. The President shall perform such other duties and have such other powers as the Trustees may from time to time prescribe. In the absence or disability of the President, the most senior Vice President shall perform the duties of the President.

          Section 6.6. Vice-Presidents.The Vice-Presidents, in the order of their seniority, shall in the absence or disability of the President, perform the duties and exercise the powers of the President and shall perform such other duties as the Trustees or the President may from time to time prescribe.

          Section 6.7. Secretary.The Secretary and/or an Assistant Secretary shall attend such meetings of the Trustees as the Trustees shall determine and all meetings of the Shareholders and record all the proceedings thereof and shall perform like duties for any Committee when required. The Secretary shall give, or cause to be given, notice of meetings of the Shareholders and of the Trustees, and shall perform such other duties as may be prescribed by the Trustees or President.

          Section 6.8. Assistant Secretaries.The Assistant Secretaries, in order of their seniority, shall in the absence or disability of the Secretary, perform the duties and exercise the powers of the Secretary and shall perform such other duties as the Trustees or the President may from time to time prescribe.

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          Section 6.9. Treasurer.The Treasurer, unless another officer of the Trust has been so designated, shall be the chief financial officer of the Trust and, for purposes of the 1933 Act, the principal financial officer of the Trust. He or she shall be responsible for the maintenance of the Trust’s accounting records and shall render to the Trustees, at their regular meetings, or when the Trustees so require, an account of all the Trust’s financial transactions and a report of the financial condition of the Trust, and shall perform such other duties as the Trustees or the President may from time to time prescribe.

          Section 6.10. Chief Compliance Officer.The Chief Compliance Officer shall have sufficient seniority and authority to compel others to adhere to the compliance policies and procedures of the Trust. The Chief Compliance Officer shall be responsible for administering the compliance policies and procedures of the Portfolios and for providing reports to the Trustees regarding the operation of the compliance policies and procedures and any material compliance matters, all in accordance with applicable laws and regulations governing the duties of the Chief Compliance Officer. The Chief Compliance Officer shall perform such other duties as from time to time may be assigned to him or her by the Trustees.

          Section 6.11. AML Compliance Officer.The AML Compliance Officer shall be responsible for administering the anti-money laundering policies and procedures of the Portfolios and for providing reports to the Trustees regarding the operation of such anti-money laundering policies and procedures and any material violations of such procedures, all in accordance with applicable laws and regulations. The AML Compliance Officer shall perform such other duties as from time to time may be assigned to him or her by the Trustees.

          Section 6.12. Chief Legal Officer.The Trustees may designate a Chief Legal Officer who shall be responsible for receiving any report of a material violation pursuant to “up-the-ladder” reporting provisions as required under applicable laws and regulations and, as required under applicable laws and regulations, for inquiring into the evidence of any material violation and taking reasonable steps to adopt an appropriate response pursuant to such laws and regulations. The Chief Legal Officer shall perform such other duties as from time to time may be assigned to him or her by the Trustees.

          Section 6.13. Controller.The Trustees may designate a Controller who shall be under the direct supervision of, or may be the same person as, the Treasurer. He or she shall maintain adequate records of all assets, liabilities and transactions of the Trust, establish and maintain internal accounting control and, in cooperation with the independent registered public accounting firm selected by the Trustees, shall supervise internal auditing. He or she shall have such further powers and duties as may be conferred upon him or her from time to time by the President or the Trustees.

          Section 6.14. Assistant Treasurers.The Assistant Treasurers, in the order of their seniority, shall in the absence or disability of the Treasurer, perform the duties and exercise the powers of the Treasurer and shall perform such other duties as the Trustees or the President may from time to time prescribe.

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ARTICLE 7
NET ASSET VALUE

          Section 7.1. Net Asset Value.The net asset value per Share of each Portfolio or Class of the Trust shall be determined by dividing the total market value of the investments and other assets belonging to such Portfolio or Class, less any liabilities attributable to such Portfolio or Class, by the total outstanding Shares of such Portfolio or Class. The total market value of the investments and other assets belonging to a Portfolio or Class shall be determined pursuant to such pricing or valuation policies as the Trustees may adopt, in their discretion, from time to time or as described in the registration statement of the Trust filed under the 1940 Act.

ARTICLE 8
SHARES

          Section 8.1. Certificates.Certificates certifying the Portfolio, Class and the number of Shares owned by a Shareholder will not be issued except as the Trustees may otherwise determine from time to time. Any such certificate issued shall be signed by the President or a Vice-President and counter-signed by the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer.

          Section 8.2. Signature.Where a certificate of Share ownership is signed by a transfer agent or an assistant transfer agent or (b) by a transfer clerk acting on behalf of the Trust and a registrar, the signature of any President, Vice-President, Treasurer, Assistant Treasurer, Secretary or Assistant Secretary of the Trust upon such certificate may be a facsimile. In case any officer who has signed any certificate ceases to be an officer of the Trust before the certificate is issued, the certificate may nevertheless be issued by the Trust with the same effect as if the officer had not ceased to be such officer as of the date of its issue.

          Section 8.3. Recording and Transfer without Certificates.The Trust shall have full power to participate in any program approved by the Trustees providing for the recording and transfer of ownership of the Trust’s Shares by electronic or other means without the issuance of certificates.

          Section 8.4. Lost Certificates.The Trustees may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Trust alleged to have been stolen, lost or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be stolen, lost or destroyed, or upon other satisfactory evidence of such loss or destruction. When authorizing such issuance of a new certificate or certificates, the Trustees may, in their discretion and as a condition precedent to the issuance thereof, require the owner of such stolen, lost or destroyed certificate or certificates, or his or her legal representative, to advertise the same in such manner as they shall require and to give the Trust a bond with sufficient surety to indemnify the Trust against any loss or claim that may be made by reason of the issuance of a new certificate. Anything herein to the contrary notwithstanding, the Trustees, in their absolute discretion, may refuse to issue any such new certificate, except as otherwise required by law.

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          Section 8.5. Registered Shareholders.The Trust shall be entitled to recognize the exclusive right of a person registered on its books as the owner of Shares to receive dividends, and to vote as such owner, and shall not be bound to recognize any equitable or other claim to or interest in such Share or Shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware.

          Section 8.6. Transfer Agents and Registrars.The Trustees may, from time to time, appoint or remove transfer agents and/or registrars of transfers of Shares, and the Trustees may appoint the same person as both transfer agent and registrar. Upon any such appointment being made all certificates representing Shares thereafter issued shall be countersigned by one of such transfer agents or by one of such registrars of transfers or by both and shall not be valid unless so countersigned. If the same person shall be both transfer agent and registrar, only countersignature by such person shall be required.

          Section 8.7. Share Ledger.The Trust shall maintain an original Share ledger containing the names and addresses of all Shareholders and the Portfolio, Class and number of Shares held by each Shareholder. Such Share ledger may be in written form or any other form capable of being converted into written form within a reasonable time for visual inspection.

ARTICLE 9
GENERAL PROVISIONS

          Section 9.1. Dividends.The following applies with respect to dividends (including “dividends” designated as “short-” or “long-” term “capital gains” distributions to satisfy requirements of the 1940 Act or the Internal Revenue Code of 1986, as amended (the “Code”)):

               9.1.1. All dividends and distributions on Shares shall be paid in cash or reinvested in additional Shares (or fractions thereof) of the Portfolio and Class in respect of which such dividends were declared.

               9.1.2. Dividends or distributions on Shares shall be paid out of earnings, surplus or other lawfully available assets; provided that each dividend or distribution may be made wholly or partly from any source, accompanied by a written statement clearly indicating what portion of such payment per Share is made from the following sources:

                    (a) accumulated or undistributed net income, not including profits or losses from the sale of securities or other properties;

                    (b) accumulated or undistributed net profits from the sale of securities or other properties;

                    (c) net profits from the sale of securities or other properties during the then current fiscal year; and (d) paid-in surplus or other capital source.

               9.1.3. In declaring dividends and in recognition that one goal of the Trust is to qualify as a “regulated investment company” under the Code, the Trustees shall be entitled to rely upon estimates made in the last two months of the fiscal year (with the advice of

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the Trust’s auditors) as to the amounts of distribution necessary for this purpose; and the Trustees, acting consistently with good accounting practice and with the express provisions of these By-Laws, may credit receipts and charge payments to income or otherwise, as they may deem proper.

               9.1.4. Anything in these By-Laws to the contrary notwithstanding, the Trustees may at any time declare and distribute pro rata among the Shareholders of a record date fixed as above provided, a “Share dividend” out of either authorized but unissued or treasury Shares of a Portfolio or both.

          Section 9.2. Rights in Securities.The Trustees, on behalf of the Trust, shall have the authority to exercise all of the rights of the Trust as owner of any securities which might be exercised by any individual owning such securities in his or her own right; including but not limited to, the rights to vote by proxy for any and all purposes (including the right to authorize any officer or the Investment Manager to execute proxies), to consent to the reorganization, merger or consolidation of any company or to consent to the sale, lease or mortgage of all or substantially all of the property and assets of any company; and to exchange any of the shares of stock of any company for the shares of stock issued therefore upon any such reorganization, merger, consolidation, sale, lease or mortgage.

          Section 9.3. Claims Against Portfolio Assets.Each Portfolio of the Trust shall provide in any loan agreement and any other agreement to pledge, mortgage or hypothecate any of its assets that such loan shall be repaid solely by the Portfolio which borrowed funds, or that to the extent such loan may be secured only by the assets of the Portfolio which obtained the loan, no creditor of such Portfolio shall have any rights to any assets of the Trust other than the specific assets which secure such loan.

          Section 9.4. Reports.The Trust shall furnish Shareholders with reports as required by Section 30 of the 1940 Act and the rules thereunder.

          Section 9.5. Bonding of Officers, Employees and Agents.The Trustees may require any officer, employee or agent of the Trust to execute a bond (including, without limitation, any bond required by the 1940 Act) in such sum and with such surety or sureties as the Trustees may determine, conditioned upon the faithful performance of his or her duties to the Trust including responsibility for negligence and for the accounting of any of the Trust’s property, funds or securities that may come into his or her hands.

          Section 9.6. Fiscal Year.Unless otherwise provided by resolution of the Trustees the fiscal year of the Trust shall begin April 1 and end on the last day of March.

ARTICLE 10
AMENDMENTS

          Section 10.1. Amendments.These By-Laws, or any of them, may be altered, amended, repealed, or restated, or new By-Laws may be adopted, at any time by the Trustees.

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EX-99.2(E)

Exhibit 2(e)

TERMS AND CONDITIONS OF

AMENDED AND RESTATED
AUTOMATIC DIVIDEND REINVESTMENT PLAN

     1. PNC Global Investment Servicing (U.S.) Inc., (the “Agent”) will act as agent for each holder of shares of Beneficial Interest, $0.01 par value (“Shares”), of Rivus Bond Fund (the “Fund”) who has requested the Agent pursuant to an authorization (“Authorization”), a form of which is attached hereto, to open an account for such shareholder (a “Participant”) under this Automatic Dividend Reinvestment Plan (the “Plan”) in the same name in which such Participant’s Shares are registered, and the Agent shall credit whole and fractional Shares of the Fund properly attributable to a Participant arising from dividends and other distributions paid by the Fund on its Shares. The Agent may mingle any cash in a Participant’s account with similar funds of other shareholders of the Fund for whom the Agent acts under the Plan (the “Participants”).

     2. Whenever the Fund declares a dividend or distribution payable either in cash or in shares of Beneficial Interest issued by the Fund at the lower of market price or net asset value per share, (i) the Agent shall take the dividend or distribution in shares of Beneficial Interest of the Fund if the closing market price per share of the Shares of the Fund on the New York Stock Exchange on the Friday preceding the payment date of the dividend or distribution (the “Comparison Date”) plus the brokerage commission applicable to one such share (based on the then prevailing commission on a transaction involving 100 shares) is 95% or more of the net asset value per share (as determined based upon the market price and net asset value on the Comparison Date), and (ii) if the closing market price per share of the Shares of the Fund on the New York Stock Exchange on the Comparison Date plus the brokerage commission applicable to one such share (based on the then prevailing commission on a transaction involving 100 shares) is less than 95% of the net asset value per share on the Comparison Date, the Agent shall take the dividend or distribution in cash and, as soon as practicable thereafter, purchase on the Participants’ behalf in one or more transactions on the New York Stock Exchange (in accordance with the Agent’s normal execution practices and in accordance with such instructions as the Agent and the Fund may from time to time agree upon) as many shares of Beneficial Interest of the Fund as possible. The purchase of such shares on the New York Stock Exchange may be made at such times and on such terms as the Agent may determine. After completing any such purchases in connection with a particular dividend or distribution, the Agent shall credit each Participants’ account with the number of whole and fractional shares (computed to three decimal places) which is equal to the cash received by the Agent in connection with the particular dividend or distribution on the shares held in a Participant’s name divided by the average price per share (including all costs of purchase) on all shares purchased in connection with the particular dividend or distribution. The average price per share actually purchased may, due to market fluctuations, be greater than the net asset value per share was on the Comparison Date. If the Agent does not reinvest the entire dividend or distribution by the close of trading on the last trading day prior to the next record date of the Fund, the uninvested balance of such dividend or distribution in a Participant’s account shall be remitted to the Participant by check at the time of the notification provided for in paragraph 10. The rules and regulations of the Securities and Exchange Commission may require the Agent to limit the Agent’s market purchases or temporarily cease making market purchases for Participants.

     3. Whenever the Fund declares a dividend or distribution payable either in cash or in shares of Beneficial Interest issued by the Fund at net asset value per share, the Agent shall take the dividend or distribution in whole and fractional shares of Beneficial Interest if the net asset value per share is equal to or less than the closing market price per share of the Shares of the Fund on the New York Stock Exchange on the Comparison Date plus the brokerage commission applicable to one such share (based on the then prevailing commission on a transaction involving 100 shares). As soon as practicable after the payment date, the Agent shall credit a Participant’s account with the number of whole and fractional shares (computed to three decimal places) which represent such Participant’s pro rata portion of the total shares received by the Agent on behalf of all Participants.

     If, however, in such a case, such net asset value per share is greater than such market price (plus such brokerage commission), the Agent shall take the dividend or distribution in cash and, as soon as practicable thereafter, purchase in one or more transactions on the New York Stock Exchange (in accordance with the Agent’s normal execution practices and in accordance with such instructions as the Agent and the Fund may from time to time agree upon) as many shares of Beneficial Interest of the Fund as possible. The purchase of such shares on the New York Stock Exchange may be made at such times and on such terms as the Agent may determine. After completing any such purchases in connection with a particular dividend or distribution, the Agent shall credit a Participant’s account with the number of whole and fractional shares (computed to three decimal places) which is equal to the cash received by the Agent in connection with the particular dividend or distribution on the shares held in each Participants’ name divided by the average price per share (including all costs of purchase) on all shares purchased in connection with the particular dividend or distribution. The average price per share actually purchased may due to market fluctuations, be greater than the net asset value per share was on the Comparison Date. If the Agent does not reinvest the entire dividend or distribution by the close of trading on the last trading day prior to the next record date of the Fund, the uninvested balance of such dividend or distribution in each Participants’ account shall be remitted to each Participant by check at the time of the notification provided for in paragraph 10. The rules and regulations of the Securities and Exchange Commission may require an Agent to limit your market purchases or temporarily cease making market purchases for Participants.

     4. An Authorization by a Participant shall be effective as to all dividends and distributions payable to shareholders of record on any date more than 10 days after the receipt of an Authorization by the Agent, provided however, that an Authorization shall not be effective as to any dividend or distribution unless the Shares of the Fund is listed on the New York Stock Exchange on the day preceding the payment date of any such dividend or distribution.

     5. Whenever the Agent receives or purchases shares or fractional interests for a Participant’s account, the Agent will send such Participant a notification of the transaction as soon as practicable. The Agent will hold such shares and fractional interests as such Participant’s agent and may hold them in the Agent’s name or the name of the Agent’s nominee. The Agent will not send a Participant stock certificates for shares unless a Participants so requests in writing or unless a Participant’s account is terminated as stated below. The Agent will vote any shares so held for a Participant in accordance with any proxy returned to the Fund by such Participant in respect of the shares of which such Participant is the record holder.

     6. There is presently no service charge for the Agent serving as Participants’ agent and maintaining Participants’ accounts. The Agent may, however, charge Participants for extra services performed at their request. The Plan may be amended in the future to impose a service charge. In acting as Participants’ agent under the Plan, the Agent shall be liable only for acts, omissions, losses, damages or expenses caused by the Agent’s willful misconduct or gross negligence. In addition, the Agent shall not be liable for any taxes, assessments or governmental charges which may be levied or assessed on any basis whatsoever in connection with the administration of the Plan.

     7. If a Participant holds more than one Share Certificate registered in similar but not identical names or if more than one address is shown for a Participant on the Fund’s records, all of such Participant’s shares of Beneficial Interest must be put into the same name and address prior to signing an Authorization if all of them are to be covered by one account. Additional shares subsequently acquired by a Participant otherwise than through the Plan will be covered by the Plan if and when they are registered in the same name and address as the shares in such Participant’s account.

     8. Participation in the Plan for automatic investment of dividends and distributions does not relieve Participants of any income or capital gain taxes which may be payable by Participants on such dividends and distributions.

     9. The Agent or the Fund may amend the terms of the Plan and the Fund reserves the right to change the agent which acts for all Participants at any time by giving written notice thereof to each Participant at his address as shown on the Agent’s records. Any such change shall be effective as to all dividends and distributions payable to shareholders of record on any date more than 30 days after mailing such notice.

     10. Participants may terminate an Authorization and their participation in the Plan at any time by delivering written notice to the Agent. I understand that the Agent or the Fund may terminate the Plan with respect to all Participants for any reason at any time by sending written notice addressed to Participants at their addresses as shown on the Agent’s records. The Agent may refuse to allow shareholders to participate in the Plan or may terminate the Plan with respect to a Participant by sending written notice if, at any time, the Agent believes that a Participant’s participation in the Plan may be in violation of applicable law. Any such termination by the Agent, the Fund or a Participant shall be effective as to all dividends and distributions payable to shareholders of record on any date more than 10 days after the mailing of such notice by the Agent or the Fund or the receipt by the Agent of such notice from a Participant. the Agent will terminate a Participant’s account if the number of shares registered in a Participant’s name is only a fractional share on any record date for the payment of any dividend or distribution.

     Except as provided above for termination by the Agent or the Fund, the Agent will continue to act as a Participant’s agent and automatically invest all dividends and other distributions on a Participant’s shares subject to the Plan until the effective date of any termination by such Participant.

     Following the effective date of termination of a Participant’s account, the Agent shall send such Participant, at such Participant’s address shown on the Agent’s records, a stock certificate or certificates for the whole shares held by the Agent in such Participant’s account and a check for any uninvested amounts pursuant to paragraphs 2 and 3 and for the value of any factional interest in such Participant’s account based on the closing price of the Shares of the Fund on the New York Stock Exchange on the effective date of the termination.

     11. These terms and conditions shall be governed by the laws of the State of Delaware.

EX-99.2(G)

Exhibit (2)(g)

RIVUS BOND FUND

INVESTMENT ADVISORY AGREEMENT

          AGREEMENT, made by and between RIVUS BOND FUND, a Delaware statutory trust (hereinafter called the “Fund”), and MBIA Capital Management Corp., a Delaware corporation (hereinafter called the “Investment Adviser”).

W I T N E S S E T H:

          WHEREAS, the Fund has been organized and operates as an investment company registered under the Investment Company Act of 1940 (the “1940 Act”) and engages in the business of investing and reinvesting its assets in securities, and the Investment Adviser is a registered Investment Adviser under the Investment Advisers Act of 1940 (the “Advisers Act”) and engages in the business of providing investment management services; and

          WHEREAS, the Fund has selected the Investment Adviser to serve as the investment adviser for the Fund; and

          NOW, THEREFORE, in consideration of the mutual covenants herein contained, and each of the parties hereto intending to be legally bound, it is agreed as follows:

          1. The Fund hereby employs the Investment Adviser to manage the investment and reinvestment of the Fund’s assets and to administer its affairs, subject to the direction of the Board of Directors and officers of the Fund for the period and on the terms hereinafter set forth. The Investment Adviser hereby accepts such employment and agrees during such period to render the services and assume the obligations herein set forth for the compensation herein provided. The Investment Adviser shall, for all purposes herein, be deemed to be an independent contractor, and shall, unless otherwise expressly provided and authorized, have no authority to act for or to represent the Fund in any way, or in any way be deemed an agent of the Fund. The Investment Adviser shall regularly make decisions as to what securities

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to purchase and sell on behalf of the Fund and shall record and implement such decisions and shall furnish the Board of Directors of the Fund with such information and reports regarding the Fund’s investments as the Investment Adviser deems appropriate or as the Directors of the Fund may reasonably request. Subject to compliance with the requirements of the 1940 Act, the Investment Adviser may retain as a sub-adviser to the Fund, at the Investment Adviser’s own expense, any investment adviser registered under the Advisers Act.

          2. The Fund shall conduct its own business and affairs and shall bear the expenses and salaries necessary and incidental thereto including, but not in limitation of the foregoing, the costs incurred in: the maintenance of its corporate existence; the maintenance of its own books, records and procedures; dealing with its own shareholders; the payment of dividends; transfer of stock, including issuance, redemption and repurchase of shares; preparation of share certificates; reports and notices to shareholders; calling and holding of shareholders’ meetings; miscellaneous office expenses; brokerage commissions; custodian fees; legal and accounting fees; and taxes. Officers and employees of the Investment Adviser may be trustees, directors, officers and employees of the funds of which the Investment Adviser serves as investment adviser. Officers and employees of the Investment Adviser who are directors, officers and/or employees of the Fund shall not receive any compensation from the Fund for acting in such dual capacity.

          In the conduct of the respective businesses of the parties hereto and in the performance of this Agreement, the Fund and Investment Adviser may share facilities common to each, with appropriate proration of expenses between them.

          3. (a) The Investment Adviser shall place and execute Fund orders for the purchase and sale of portfolio securities with broker-dealers. Subject to the primary objective of obtaining the best available prices and execution, the Investment Adviser will place

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orders for the purchase and sale of portfolio securities for the Fund with such broker-dealers as it may select from time to time, including brokers who provide statistical, factual and financial information and services to the Fund, to the Investment Adviser, or to any other fund for which the Investment Adviser provides investment advisory services. Broker-dealers who sell shares of the funds of which the Investment Adviser is investment adviser shall only receive orders for the purchase or sale of portfolio securities to the extent that the placing of such orders is in compliance with the Rules of the Securities and Exchange Commission and National Association of Securities Dealers, Inc.

               (b) Notwithstanding the provisions of subparagraph (a) above and subject to such policies and procedures as may be adopted by the Board of Directors and officers of the Fund, the Investment Adviser is authorized to pay a member of an exchange, broker or dealer an amount of commission for effecting a securities transaction in excess of the amount of commission another member of an exchange, broker or dealer would have charged for effecting that transaction in such instances where the Investment Adviser has determined in good faith that such amount of commission was reasonable in relation to the value of the brokerage and research services provided by such member, broker or dealer, viewed in terms of either that particular transaction or the Investment Adviser’s overall responsibilities with respect to the Fund and to other funds for which the Investment Adviser exercises investment discretion.

          4. As compensation for the services to be rendered to the Fund by the Investment Adviser under the provisions of this Agreement, the Fund shall pay to the Investment Adviser from the Fund’s assets each month an investment advisory fee at the annualized rate of 0.50% of the first $100,000,000 of the net asset value of the Fund on the last day of such month and 0.40% of the net asset value of the Fund on the last day of such month in excess of $100,000,000. The net asset value of the Fund shall be defined as the total assets of the Fund,

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less its liabilities, and shall be determined in accordance with any instructions of the Board of Directors.

               If this Agreement shall become effective subsequent to the first day of the month, or shall terminate before the last day of the month, the Investment Adviser’s compensation for such fraction of the month shall be determined by applying the foregoing percentages to the average of the weekly net asset values of the Fund during such fraction of a month (or if none, to the net asset value of the Fund as calculated on the last day of the preceding month on which the New York Stock Exchange was open for trading) and in the proportion that such fraction of a month bears to the entire month.

          If this Agreement is terminated prior to the end of any calendar month, the management fee shall be prorated for the portion of any month in which this Agreement is in effect according to the proportion which the number of calendar days during which the Agreement is in effect bears to the number of calendar days in the month.

          5. The services to be rendered by the Investment Adviser to the Fund under the provisions of this Agreement are not to be deemed to be exclusive, and the Investment Adviser shall be free to render similar or different services to others so long as its ability to render the services provided for in this Agreement shall not be impaired thereby.

          6. The Investment Adviser, its officers, employees, and agents may engage in other businesses, may render investment advisory services to other investment companies, or to any other corporation, association, firm or individual, and may render underwriting services to the Fund or to any other investment company, corporation, association, firm or individual.

          7. In the absence of willful misfeasance, bad faith, gross negligence, or reckless disregard of the performance of duties of the Investment Adviser to the Fund, the Investment Adviser shall not be subject to liabilities to the Fund or to any shareholder of the

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Fund for any action or omission in the course of, or connected with, rendering services hereunder or for any losses that may be sustained in the purchase, holding or sale of any security, or otherwise.

          8. This Agreement shall be executed and become effective as of the date written below. The Agreement will continue in effect for an initial term of two years from the Effective Date (defined below) and may continue thereafter from year to year if specifically approved at least annually by the “vote of a majority of the outstanding voting securities” of the Fund or by the Board and, in either event, by the vote of a majority of the Directors who are not parties to the Agreement or interested persons of any such party, cast in person at a meeting called for such purpose. No amendment to this Agreement shall be effective unless the terms thereof have been approved by the vote of a majority of Directors of the Fund who are not parties to the Agreement or interested persons 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 at any time, without the payment of a penalty, on sixty days’ written notice to the Investment Adviser of the Fund’s intention to do so, pursuant to action by the Board of Directors of the Fund or pursuant to a vote of a majority of the outstanding voting securities of the Fund. The Investment Adviser may terminate this Agreement at any time, without the payment of penalty on sixty days’ written notice to the Fund of its intention to do so. Upon termination of this Agreement, the obligations of all the parties hereunder shall cease and terminate as of the date of such termination, except for any obligation to respond for a breach of this Agreement committed prior to such termination, and except for the obligation of the Fund to pay to the Investment Adviser the fee provided in Paragraph 4 hereof, prorated to the date of termination. This Agreement shall automatically terminate in the event of its assignment.

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          9. This Agreement shall extend to and bind the heirs, executors, administrators and successors of the parties hereto.

          10. For the purposes of this Agreement, the terms “vote of a majority of the outstanding voting securities”; “interested persons”; and “assignment” shall have the meaning defined in the 1940 Act.

          IN WITNESS WHEREOF, the parties have caused this Agreement to be signed on their behalf by their respective officers thereunto duly authorized all as of October 31, 2005 (the “Effective Date”) and as amended and restated as of June 30, 2006.

	Rivus Bond Fund
By:	/s/Clifford Corso
	Clifford Corso
	President
	MBIA Capital Management Corp.
By:	/s/ Clifford Corso
	Clifford Corso
	President

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EX-99.2(H)(I)

EXHIBIT 2(h)(i)

RIVUS BOND FUND
[______] Shares of Beneficial Interest
Issuable Upon Exercise of Transferable Rights
to Subscribe for Such Shares of Beneficial Interest

FORM OF

DEALER MANAGER AGREEMENT

                               , 2009

Boenning & Scattergood, Inc.
4 Tower Bridge
200 Barr Harbor Drive, Suite 300
West Conshohocken, PA 19428-2979

Ladies and Gentlemen:

          Each of Rivus Bond Fund, a Delaware statutory trust (the ”Fund”), and MBIA Capital Management Corp., a Delaware corporation (“the Investment Adviser”), hereby confirms its agreement with and appointment of Boenning & Scattergood, Inc. to act as dealer manager (the “Dealer Manager”) in connection with the issuance by the Fund to the holders of record at the close of business on [___] 2009, or such other date as is established as the record date for such purpose (each a “Holder” and collectively the “Holders”), of [transferable] rights entitling such Holders to subscribe for up to [___] shares (each a “Share” and collectively the “Shares”) of beneficial interest, par value 0.01 per share (the “Beneficial Interest”), of the Fund (the “Offer”). Pursuant to the terms of the Offer, the Fund is issuing each Holder one [transferable] right (each a “Right” and collectively the “Rights”) for each share of Beneficial Interest held by such Holder on the record date set forth in the Prospectus (the “Record Date”) (as defined herein). Such Rights entitle Holders to acquire during the subscription period set forth in the Prospectus (the ”Subscription Period”), at the price (the “Subscription Price”) set forth in such Prospectus, one Share for each [three] Rights exercised on the terms and conditions set forth in such Prospectus. No fractional shares will be issued. Any Holder who fully exercises all Rights initially issued to such Holder will be entitled to subscribe for, subject to allotment, any unsubscribed Shares (the “Over-Subscription Privilege”) on terms and conditions set forth in the Prospectus. The Rights are [transferable] and are expected to be listed on the New York Stock Exchange, Inc. (“NYSE”) under the symbol “[BDF.RT].”

          The Fund has filed with the Securities and Exchange Commission (the “Commission”) a registration statement on Form N- 2 (File Nos. ___and 811-02201) and a related preliminary prospectus and preliminary statement of additional information for the registration of the Shares under the Securities Act of 1933, as amended (the “Securities Act”), the Investment Company Act of 1940, as amended (the “Investment Company Act”), and the rules and regulations of the Commission under the Securities Act and the Investment Company Act (the “Rules and Regulations”), and has filed such amendments to such registration statement on Form N-2, if any, and such amended preliminary prospectuses and preliminary statements of additional information as may have been required to the date hereof. If the registration statement has not become effective, a further amendment to such registration statement, including forms of a final

prospectus and final statement of additional information necessary to permit such registration statement to become effective will promptly be filed by the Fund with the Commission. If the registration statement has become effective and any prospectus or statement of additional information constituting a part thereof omits certain information at the time of effectiveness pursuant to Rule 430A of the Rules and Regulations, a final prospectus and final statement of additional information containing such omitted information will promptly be filed by the Fund with the Commission in accordance with Rule 497(h) of the Rules and Regulations. The term “Registration Statement” means the registration statement, as amended from time to time, at the time it becomes or became effective, including financial statements and all exhibits and all documents, if any, incorporated therein by reference, and any information deemed to be included by Rule 430A. The term “Prospectus” means the final prospectus and final statement of additional information in the forms filed with the Commission pursuant to Rule 497(c), (e), (h) or (j) of the Rules and Regulations, as the case may be, as from time to time amended or supplemented pursuant to the Securities Act. The Prospectus and letters to beneficial owners of the shares of Beneficial Interest of the Fund, subscription certificates and other forms used to exercise rights, brochures, wrappers, any letters from the Fund to securities dealers, commercial banks and other nominees and any newspaper announcements, press releases and other offering materials and information that the Fund may use, approve, prepare or authorize in writing for use in connection with the Offer are collectively referred to hereinafter as the “Offering Materials”.

     1. Representations and Warranties.

     (a) The Fund represents and warrants to, and agrees with, the Dealer Manager as of the date hereof, as of the date of the commencement of the Offer (such date being hereinafter referred to as the “Representation Date”) and as of the Expiration Date (as defined below) that:

     (i) The Fund meets the requirements for use of Form N-2 under the Securities Act and the Investment Company Act and the Rules and Regulations. At the time the Registration Statement became or becomes effective, the Registration Statement did or will contain all statements required to be stated therein in accordance with and did or will comply in all material respects with, the requirements of the Securities Act, the Investment Company Act and the Rules and Regulations and 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 not misleading. From the time the Registration Statement became or becomes effective through the expiration date of the Offer set forth in the Prospectus, as it may be extended as provided in the Prospectus (the “Expiration Date”), the Prospectus and the other Offering Materials will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order 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 not apply to statements in or omissions from the Registration Statement, Prospectus or other Offering Materials made in reliance upon and in conformity with information relating to the Dealer Manager furnished to the Fund in writing by the Dealer Manager expressly for use in the Registration Statement, Prospectus or other Offering Materials.

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     (ii) The Fund has been duly formed and is validly existing as a statutory trust in good standing under the laws of the State of Delaware, has full power and authority to conduct its business as described in the Registration Statement and the Prospectus, and is duly qualified to do business in each jurisdiction, whether foreign or domestic, in which it owns or leases real property or in which the conduct of its business requires such qualification, except where the failure to be so qualified would not result in a material adverse effect upon the business, properties, financial position or results of operations of the Fund (a “Material Adverse Effect”). The Fund has no subsidiaries.

     (iii) The Fund is registered with the Commission under the Investment Company Act as a closed-end, diversified management investment company; no order of suspension or revocation of such registration has been issued or proceedings therefor initiated or threatened by the Commission; all required action has been taken under the Securities Act and the Investment Company Act and the Rules and Regulations to make the Offer and to consummate the issuance of the Rights and the issuance and sale of the Shares by the Fund upon exercise of the Rights, and the provisions of the Fund’s agreement and declaration of trust and by-laws comply as to form in all material respects with the requirements of the Investment Company Act and the Rules and Regulations.

     (iv) To the knowledge of the Fund, after due inquiry, based on written representations made by [     ], [     ] the independent public accountants that certified the financial statements of the Fund set forth or incorporated by reference in the Registration Statement and the Prospectus, are independent public accountants as required by the Securities Act, the Investment Company Act, and the Rules and Regulations and is an independent registered public accounting firm as defined by the rules of the Public Company Accounting Oversight Board.

     (v) The financial statements of the Fund, together with the related notes and schedules thereto, set forth or incorporated by reference in the Registration Statement and the Prospectus, present fairly in all material respects the assets and liabilities, results of operations and changes in net assets of the Fund as of the dates or for the periods indicated in conformity with U.S. generally accepted accounting principles applied on a consistent basis; and the information relating to the Fund included in the Prospectus under the headings “Fee Table” and “Financial Highlights” was prepared on a basis consistent with such financial statements and the books and records of the Fund.

     (vi) The Fund has an authorized capitalization as set forth in the Prospectus; the outstanding shares of Beneficial Interest have been duly authorized and are validly issued, fully paid and non-assessable and conform in all material respects to the description thereof in the Prospectus under the heading “Capitalization”; the Rights have been duly authorized by all requisite action on the part of the Fund for issuance pursuant to the Offer; the Shares have been duly authorized by all requisite action on the part of the Fund for issuance and sale pursuant to the terms of the Offer and, when issued and delivered by the Fund pursuant to the terms of the Offer against payment of the consideration set forth in the Prospectus, will be validly issued, fully paid and non-assessable; the Shares and the Rights conform in all material respects to all statements relating thereto contained in the Registration Statement, the Prospectus and the other

3

Offering Materials; and the issuance of each of the Rights and the Shares is not subject to any preemptive rights.

     (vii) Except as set forth in the Registration Statement and Prospectus, subsequent to the respective date(s) as of which information is given in the Registration Statement and the Prospectus, (A) the Fund has not incurred any liabilities or obligations, direct or contingent, or entered into any transactions, other than in the ordinary course of business, that are material to the Fund, (B) there has not been any material change in the Beneficial Interests or material increase in the short-term or long-term debt of the Fund, or any change that would result in a Material Adverse Effect, or any development involving or which may reasonably be expected to involve a prospective change that would result in a Material Adverse Effect, and (C) there have been no dividends or distributions paid or declared in respect of the Fund’s outstanding Shares of beneficial interest other than the quarterly distribution declared by the Board of Trustees on [___], 2009 and payable on [___], 2009.

     (viii) There is no pending or, to the knowledge of the Fund, threatened or contemplated action, suit or proceeding affecting the Fund or to which the Fund is a party before or by any court or governmental agency, authority or body or any arbitrator, whether foreign or domestic, which is likely to have a Material Adverse Effect.

     (ix) There are no contracts or other documents of the Fund required to be described in the Registration Statement or the Prospectus, or to be filed or incorporated by reference as exhibits which are not described or filed or incorporated by reference therein as permitted by the Securities Act, the Investment Company Act or the Rules and Regulations.

     (x) Each of this agreement (the “Agreement”), the Subscription Agent Agreement (the “Subscription Agent Agreement”) dated as of [___] between the Fund and [___] (the Subscription Agent”), the Information Agent Agreement (the “Information Agent Agreement”) dated as of [___] between the Fund and [___] (the “Information Agent”), the Investment Advisory Agreement (the “Advisory Agreement”) dated as of June 30, 2006 between the Fund and MBIA Capital Management Corp. (the “Investment Adviser”), the Administration and Accounting Services Agreement (the “Administration Agreement”) dated as of August 17, 2005 between the Fund and PNC Global Investment Servicing Inc. (formerly, PFPC Inc.) (“PNC”).; the Transfer Agency Services Agreement (the “Transfer Agency Agreement”) dated as of December 16, 2005 between the Fund and PNC; the Custodial Services Agreement (the “Custodian Agreement”) dated as of December 16, 2005 between the Fund and PFPC Trust Company (the Subscription Agent Agreement, Information Agent Agreement, the Advisory Agreement, the Administration Agreement, the Transfer Agency Agreement, and the Custodian Agreement are collectively referred to herein as the “Fund Agreements”) has been duly authorized, executed and delivered by the Fund; each of this Agreement and the Fund Agreements complies in all material respects with all applicable provisions of the Investment Company Act, the Investment Advisers Act of 1940, as amended (the “Advisers Act”) and the rules and regulations promulgated under such acts; and, assuming due authorization, execution and delivery by the other parties thereto, each of this Agreement and the Fund Agreements constitutes a legal, valid, binding and enforceable obligation of the Fund, subject to the qualification that the enforceability of the Fund’s obligations hereunder and thereunder may be limited by bankruptcy, insolvency, reorganization, moratorium and similar

4

laws of general applicability relating to or affecting creditors’ rights, and to general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at law) and except as enforcement of rights to indemnity and contribution hereunder and thereunder may be limited by federal or state securities laws or principles of public policy.

     (xi) Neither the issuance of the Rights, nor the issuance and sale of the Shares pursuant to the exercise of the Rights, nor the execution, delivery, performance and consummation by the Fund of any other of the transactions contemplated in this Agreement and the Fund Agreements nor the consummation of the transactions contemplated in the Registration Statement will (A) result in a material breach or violation of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance upon any properties or assets of the Fund under the agreement and declaration of trust or by-laws of the Fund, or the terms and provisions of any agreement, indenture, mortgage, lease or other instrument to which the Fund is a party or by which it may be bound, or (B) result in any violation of any order, law, rule or regulation of any court or governmental agency or body, whether foreign or domestic, having jurisdiction over the Fund or any of its properties.

     (xii) No consent, approval, authorization, notification or order of, or any registration or filing with, any court, regulatory body, administrative or other governmental agency or body, whether foreign or domestic, is required for the consummation by the Fund of the transactions contemplated by this Agreement, the Fund Agreements or the Registration Statement, except such as have been obtained, or if the registration statement filed with respect to the Shares is not effective under the Securities Act as of the time of execution hereof, such as may be required (and shall be obtained as provided in this Agreement) under the Securities Act, Investment Company Act, the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and state securities laws.

     (xiii) The Fund owns or possesses all material governmental licenses, permits, consents, orders, approvals or other authorizations, whether foreign or domestic, to enable the Fund to continue to carry on its business and to invest in securities as contemplated in the Prospectus; the Fund has fulfilled and performed all its material obligations with respect to such governmental licenses, permits, consents, orders, approvals or other authorizations, whether foreign or domestic, and no event has occurred which allows, or after notice or lapse of time would allow, revocation or termination thereof or result in any other material impairment of the rights of the Fund under any such permit, subject in each case to such qualification as may be set forth in the Registration Statement.

     (xiv) The shares of Beneficial Interest have been duly listed on the NYSE and prior to their issuance the Shares and the Rights will have been duly approved for listing, subject to official notice of issuance, on the NYSE.

     The Fund (A) has not taken, directly or indirectly, any action designed to cause or to result in, or that has constituted or which might reasonably be expected to constitute, the stabilization or manipulation of the price of any security of the Fund to facilitate the issuance of the Rights or the sale or resale of the Rights and the Shares, (B) has not since the filing of the Registration Statement sold, bid for or purchased, or paid anyone any compensation for soliciting purchases of, shares of Beneficial Interest of the Fund and (C) will not, until the later of the expiration of

5

the Rights or the completion of the distribution (within the meaning of the applicable anti-manipulation rules under the Exchange Act) of the Shares, sell, bid for or purchase, pay or agree to pay to any person any compensation for soliciting another to purchase any other securities of the Fund (except for the solicitation of the exercise of Rights and the Over-Subscription Privilege pursuant to this Agreement); provided, that any action in connection with the Fund’s dividend reinvestment plan or the open market purchases of the Fund’s Shares by an affiliate of the Investment Adviser for investment purposes as reported on Forms 4 filed with the Commission will not be deemed to be within the terms of this Section 1(a)(xv).

     (xv) The Fund intends to direct the investment of the proceeds of the Offer described in the Registration Statement and the Prospectus in such a manner as to continue to comply with the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”), and has at all times since its inception qualified and intends to continue to qualify as a regulated Investment Company under Subchapter M of the Code.

     (xvi) There are no material restrictions, limitations or regulations with respect to the ability of the Fund to invest its assets as described in the Prospectus other than as described therein.

     (xvii) Neither the filing of the Registration Statement nor the Offer as contemplated by this Agreement and the Subscription Agency Agreement gives rise to any rights, other than those which have been waived or satisfied, for or relating to the registration of any shares of Beneficial Interest or other securities of the Fund.

     (xviii) The Fund maintains a system of internal accounting controls sufficient to provide reasonable assurances that (A) transactions are executed in accordance with management’s general or specific authorization and with the applicable requirements of the Investment Company Act and the Rules and Regulations thereunder and the Internal Revenue Code of 1986, as amended (the “Code”); (B) transactions are recorded as necessary to permit preparation of financial statements in conformity with U.S. generally accepted accounting principles and to maintain accountability for assets and to maintain compliance with the books and records requirements under the Investment Company Act and the Rules and Regulations thereunder; (C) access to assets is permitted only in accordance with management’s general or specific authorization; and (D) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

     (xix) The Fund, subject to the Registration Statement having been declared effective and the filing of the Prospectus under Rule 497 under the Securities Act Rules and Regulations, has taken all required action under the Securities Act, the Investment Company Act and the Rules and Regulations to make the Offer and consummate the sale of the Shares as contemplated by this Agreement.

     (xx) The Fund has complied since inception, and intends to direct the investment of the proceeds of the Offer described in the Registration Statement and the Prospectus in such a manner as to continue to comply, with the asset coverage requirements of the Investment Company Act.

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     (xxi) The Fund has (a) appointed a Chief Compliance Officer and (b) adopted and implemented written policies and procedures which the Board of Trustees of the Fund has determined are reasonably designed to prevent violations of the federal securities laws in a manner required by and consistent with Rule 38a-1 of the Rules and Regulations under the Investment Company Act and is in compliance in all material respects with such Rule.

     (xxii) The Fund has established and maintains disclosure controls and procedures (as such term is defined in Rule 30a-3 under the Investment Company Act); such disclosure controls and procedures are designed to ensure that material information relating to the Fund is made known to the Fund’s Chief Executive Officer and its Chief Financial Officer by others within the Fund, and such disclosure controls and procedures are effective to perform the functions for which they were established; the Fund’s independent registered public accounting firm and the Audit Committee of the Board of Trustees of the Fund have been advised of: (A) any significant deficiencies in the design or operation of internal controls over financial reporting which could adversely affect the Fund’s ability to record, process, summarize, and report financial data; and (B) any fraud, whether or not material, that involves management or other employees who have a role in the Fund’s internal controls over financial reporting; any material weaknesses in the Fund’s internal controls over financial reporting have been identified for the Fund’s independent registered public accounting firm; and since the date of the most recent evaluation of such disclosure controls and procedures, there have been no significant changes in internal controls over financial reporting or in other factors that could materially affect internal controls over financial reporting, including any corrective actions with regard to significant deficiencies and material weaknesses.

     (xxiii) Other than the Offering Materials, the Fund has not, without the written permission of the Dealer Manager, used, approved, prepared or authorized any letters to beneficial owners of the Shares, forms used to exercise rights, any letters from the Fund to securities dealers, commercial banks and other nominees or any newspaper announcements or other offering materials and information in connection with the Offer; provided, however, that any use of transmittal documentation and subscription documentation independently prepared by the Dealer Manager, broker-dealers, trustees, nominees or other financial intermediaries shall not cause a violation of this Section (xxi).

     (xxiv) Any Offering Materials authorized in writing by or prepared by the Fund or the Investment Adviser used in connection with the issuance of the Rights do not contain an untrue statement of a material fact or omit to state a 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. Moreover, all Offering Materials complied and will comply in all material respects with the applicable requirements of the Securities Act, the Investment Company Act, the Rules and Regulations and the rules and interpretations of the Financial Industry Regulatory Authority, Inc. (“FINRA”).

     (xxv) The Fund and its officers and trustees, in their capacities as such, are in compliance in all material respects with the applicable provisions of the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated thereunder.

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     (b) The Investment Adviser represents and warrants to, and agrees with, the Dealer Manager as of the date hereof, as of the Representation Date and as of the Expiration Date that:

     (i) The Investment Adviser has been duly incorporated and is validly existing and in good standing under the laws of the State of Delaware, with power and authority to own or lease its properties and conduct its business as described in the Registration Statement and the Prospectus, and has been duly qualified as a foreign corporation for the transaction of business and is in good standing under the laws of each other jurisdiction in which it owns or leases properties, or conducts any business, so as to require such qualification, other than where the failure to be so qualified or in good standing would not have a material adverse effect on the business, properties, financial position or results of operation of the Investment Adviser and its subsidiaries taken as a whole (an “Adviser Material Adverse Effect”).

     (ii) The Investment Adviser is duly registered as an investment adviser under the Investment Advisers Act of 1940, as amended (the “Advisers Act”) and is not prohibited by any provision of the Advisers Act or the Investment Company Act, or the rules and regulations under such Acts, from acting as an investment adviser for the Fund as contemplated in the Prospectus and the Advisory Agreement.

     (iii) Each of this Agreement, the Advisory Agreement and any other Fund Agreement to which the Investment Adviser is a party has been duly authorized, executed and delivered by the Investment Adviser and complies with all applicable provisions of the Advisers Act, the Investment Company Act, and the rules and regulations under such Acts.

     (iv) Neither the execution, delivery or performance by the Investment Adviser of its obligations under this Agreement, the Advisory Agreement or any other Fund Agreement to which the Investment Adviser is a party nor the consummation of the transactions contemplated therein or in the Registration Statement nor the fulfillment of the terms thereof will conflict with or result in a breach of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Investment Adviser is a party or by which the Investment Adviser is bound or to which any of the property or assets of the Investment Adviser is subject, nor will any such action result in any violation of the provisions of the organizational documents of the Investment Adviser or any applicable law or statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Investment Adviser or any of its properties.

     (v) There is no pending or, to the knowledge of the Investment Adviser, threatened or contemplated action, suit or proceeding affecting the Investment Adviser or to which the Investment Adviser is a party before or by any court or domestic governmental agency, authority or body or any arbitrator, whether foreign or domestic, which is likely to have an Adviser Material Adverse Effect.

     (vi) No consent, approval, authorization, order, license, registration or qualification of, or any filing with, any court or governmental agency or body, whether foreign or domestic, is required for the consummation by the Investment Adviser of the transactions contemplated by this Agreement.

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     (vii) The Investment Adviser owns or possesses all material governmental licenses, permits, consents, orders, approvals or other authorizations, whether foreign or domestic, to enable the Investment Adviser to perform its obligations under the Advisory Agreement.

     (viii) The Investment Adviser (A) has not taken, directly or indirectly, any action designed to cause or to result in, or that has constituted or which might reasonably be expected to constitute, the stabilization or manipulation of the price of any security of the Fund to facilitate the issuance of the Rights or the sale or resale of the Rights and the Shares, (B) has not since the filing of the Registration Statement sold, bid for or purchased, or paid anyone any compensation for soliciting purchases of, shares of Beneficial Interest of the Fund and (C) will not, until the later of the expiration of the Rights or the completion of the distribution (within the meaning of the anti-manipulation rules, including Regulation M, under the Exchange Act) of the Shares, sell, bid for or purchase, pay or agree to pay any person any compensation for soliciting another to purchase any other securities of the Fund (except for the solicitation of the exercise of Rights and the Over- Subscription Privilege pursuant to this Agreement); provided that any action in connection with the Fund’s dividend reinvestment plan or the open market purchases of the Fund’s Shares by an affiliate of the Investment Adviser for investment purposes as reported on Forms 4 filed with the Commission will not be deemed to be within the terms of this Section 1(b)(viii).

     (ix) The information regarding the Investment Adviser in the Registration Statement and the Prospectus complies in all material respects with the requirements of Form N-2 and, as of the date of the Prospectus, such information regarding the Investment Adviser did not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.

     (x) The Investment Adviser intends to direct the investment of the proceeds of the Offer described in the Registration Statement and the Prospectus in such a manner as to cause the Fund to comply with the requirements of Subchapter M of the Code.

     (c) Any certificate required by Section 6 of this Agreement that is signed by any officer of the Fund or the Investment Adviser and delivered to the Dealer Manager or counsel for the Dealer Manager shall be deemed a representation and warranty by the Fund or the Investment Adviser, as the case may be, to the Dealer Manager, as to the matters covered thereby.

     2. Agreement to Act as Dealer Manager. (a) On the basis of the representations and warranties contained herein, and subject to the terms and conditions of the Offer:

     (i) The Fund appoints the Dealer Manager as the exclusive dealer manager in connection with the Offer and the Dealer Manager accepts such appointment. The Fund also authorizes the Dealer Manager to form and manage a group of securities dealers (each, a ”Soliciting Dealer” and, collectively, the “Soliciting Group”) to solicit the exercise of Rights pursuant to a Soliciting Dealer Agreement, in the form attached hereto as Exhibit A. The Dealer Manager represents and

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warrants that it is a broker-dealer registered under the Exchange Act and is a FINRA member firm.

     (ii) The Dealer Manager agrees to (A) solicit, in accordance with the Securities Act, the Investment Company Act and the Exchange Act and the rules and regulations thereunder and its customary practice, the exercise of the Rights, subject to the terms and conditions of this Agreement, the Subscription Agent Agreement and the procedures described in the Registration Statement, Prospectus, and the other Offering Materials; and (B) form and manage the Soliciting Group to solicit, in accordance with the Securities Act, the Investment Company Act and the Exchange Act and the Rules and Regulations thereunder and its customary practice, the exercise of the Rights, subject to the terms and conditions of this Agreement, the Subscription Agent Agreement and the procedures described in the Registration Statement, Prospectus, and the other Offering Materials. No securities dealer shall be considered a Soliciting Dealer until it shall have entered into a Soliciting Dealer Agreement with the Dealer Manager in the form of Exhibit A hereto.

     (iii) The Fund agrees to offer to the Dealer Manager any unsubscribed-for Shares after the expiration of the Subscription Period at the Offering Price set forth in the Prospectus, less a 3.75% discount. The Dealer Manager may, but is under no obligation to, purchase the Shares of Beneficial Interest offered by the Fund under this subparagraph (iii) and may resell such Shares pursuant to the Prospectus to the public at the Offering Price or to members of a selling group (which may include Soliciting Dealers) at the Offering Price less a selling concession. Payment of the purchase price for, and delivery of, the Shares purchased by the Dealer Manager pursuant to this subparagraph (iii) shall be made at the offices of the Dealer Manager on the third business day after the date the Dealer Manager agrees to purchase the Shares or at such other time not later than ten business days after such date as the Fund and the Dealer Manager shall otherwise agree. Payment to the Fund by the Dealer Manager shall be in the form of a wire transfer of same day funds to an account or accounts identified by the Fund.

     (iv) The Fund agrees to furnish, or cause to be furnished, to the Dealer Manager, lists, or copies of those lists, showing the names and addresses of, and number of shares of Beneficial Interest held by, Holders as of the Record Date, and the Dealer Manager agrees to use such information only in connection with the Offer and not to furnish such information to any other person except for securities brokers and dealers that have been requested by the Dealer Manager to solicit exercises of Rights.

     (b) The Fund and the Dealer Manager agree that the Dealer Manager is an independent contractor with respect to the solicitation of the exercise of Rights and the Over-Subscription Privilege and the Dealer Manager represents and warrants that it is acting on its own behalf in entering into this Agreement and performing its obligations hereunder.

     (c) The Dealer Manager agrees to perform those services with respect to the Offer as are customarily performed by the Dealer Manager in connection with offers of a like nature, including (but not limited to) using its reasonable best efforts to solicit the exercise of Rights pursuant to the Offer and in communicating with the Soliciting Dealers. In rendering the services contemplated by this Agreement, the Dealer Manager will not be subject to any liability to the Fund, the Investment Adviser, any of their affiliates or any other person, for

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any act or omission on the part of any soliciting broker or dealer (except with respect to the Dealer Manager acting in such capacity) or any other person, and the Dealer Manager will not be liable for acts or omissions in performing its obligations under this Agreement, except as otherwise set forth in Section 7 hereto and except for any losses, claims, damages, liabilities and expenses that are finally judicially determined to have resulted primarily from the bad faith, willful misconduct or gross negligence of the Dealer Manager or by reason of the reckless disregard of the obligations and duties of the Dealer Manager under this Agreement.

     3. Dealer Manager and Solicitation Fees. In full payment for services rendered and to be rendered hereunder by the Dealer Manager, the Fund agrees to pay to the Dealer Manager a fee equal to 3.75% of the aggregate Subscription Price for the Shares issued pursuant to the exercise of Rights, including those exercised pursuant to the Over-Subscription Privilege (“the “Dealer Manager Fee”). The Dealer Manager will reallow a portion of the Dealer Manager Fee to Soliciting Dealers in full payment for their soliciting efforts. Payment to the Dealer Manager by the Fund will be in the form of a wire transfer of same day funds to an account or accounts identified by the Dealer Manager. Such payment will be made on each date on which the Fund issues Shares. Payment to a Soliciting Dealer will be made by the Dealer Manager directly to such Soliciting Dealer by check to an address identified by such Soliciting Dealer. Such payments shall be made in next day funds on or before [___] 2009; provided, however, that if the Expiration Date as set forth in the Prospectus is extended by any number of days, then such payment date shall be extended by the same number of days.

     4. Other Agreements. (a) The Fund covenants with the Dealer Manager, and the Investment Adviser covenants with the Dealer Manager with respect to paragraphs (b) and (c), as follows:

     (i) The Fund will use its best efforts to cause the Registration Statement to become effective and maintain its effectiveness under the Securities Act, and will advise the Dealer Manager promptly as to the time at which the Registration Statement and any amendments thereto (including any post-effective amendment) becomes so effective.

     (ii) The Fund will notify the Dealer Manager immediately, and confirm the notice in writing, (A) of the effectiveness of the Registration Statement and any amendment thereto (including any post-effective amendment), (B) of the receipt of any comments from the Commission, (C) of any request by the Commission for any amendment to the Registration Statement or any amendment or supplement to the Prospectus or for additional information, (D) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose, (E) of the suspension of the qualification of the Shares or the Rights for offering or sale in any jurisdiction, or (F) of the occurrence of any event that necessitates the making of any change in the Registration Statement or the Prospectus in order to make any statement therein or omission therefrom not misleading. The Fund will make every reasonable effort to prevent the issuance of any stop order described in clause (D) hereunder and, if any such stop order is issued, to obtain the lifting thereof at the earliest possible moment.

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     (iii) The Fund will timely file the requisite copies of the Prospectus with the Commission pursuant to Rule 497(c), Rule 497(e) or Rule 497(h) of the Rules and Regulations, whichever is applicable or, if applicable, will timely file the certification permitted by Rule 497(j) of the Rules and Regulations and will advise the Dealer Manager of the time and manner of such filing.

     (iv) The Fund will give the Dealer Manager notice of its intention to file any amendment to the Registration Statement (including any post-effective amendment) or any amendment or supplement to the Prospectus (including any revised prospectus which the Fund proposes for use by the Dealer Manager in connection with the Offer, which differs from the prospectus on file at the Commission at the time the Registration Statement becomes effective, whether or not such revised prospectus is required to be filed pursuant to Rule 497(c), Rule 497(e) or Rule 497(h) of the Rules and Regulations), whether pursuant to the Investment Company Act, the Securities Act, or otherwise, and will furnish the Dealer Manager with copies of any such amendment or supplement within a reasonable amount of time prior to such proposed filing or use, as the case may be, and will not file any such amendment or supplement to which the Dealer Manager or counsel for the Dealer Manager shall reasonably object.

     (v) The Fund will, without charge, deliver to the Dealer Manager, as soon as practicable, the number of copies of the Registration Statement as originally filed and of each amendment thereto as it may reasonably request, in each case with the exhibits filed therewith.

     (vi) The Fund will, without charge, furnish to the Dealer Manager, from time to time during the period when the Prospectus is required to be delivered under the Securities Act, such number of copies of the Prospectus (as amended or supplemented) as the Dealer Manager may reasonably request for the purposes contemplated by the Securities Act or the Rules and Regulations thereunder. The Fund consents to the use of the Prospectus in accordance with the provisions of the Securities Act and with the state securities or blue sky laws of the jurisdictions in which the Shares are offered by the Dealer Manager and by all Soliciting Dealers in connection with the offering and sale of the Shares and for such period of time thereafter as the Prospectus is required by the Securities Act to be delivered in connection therewith.

     (vii) If any event shall occur as a result of which it is necessary, in the judgment of the Fund or the reasonable opinion of counsel for the Dealer Manager, to amend or supplement the Registration Statement or the Prospectus (or such other Offering Materials) in order to make the Prospectus (or such other Offering Materials) not contain an untrue statement of material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading in the light of the circumstances existing at the time it is delivered to a Holder, the Fund will forthwith amend or supplement the Prospectus by preparing and filing with the Commission (and furnishing to the Dealer Manager a reasonable number of copies of) an amendment or amendments of the Registration Statement or an amendment or amendments of, or a supplement or supplements to, the Prospectus (in form and substance satisfactory to counsel for the Dealer Manager), at the Fund’s expense, which will amend or supplement the Registration Statement or the Prospectus (or otherwise will amend or supplement such other Offering Materials) so that the Prospectus (or such other Offering Materials) will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances existing at the time the Prospectus (or such other Offering Materials) is delivered to a Holder, not

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misleading; provided, however, that if the Fund does not promptly amend or supplement the Registration Statement or the Prospectus in form and substance reasonably satisfactory to counsel for the Dealer Manager, then the Dealer Manager may terminate this Agreement pursuant to Section 9(a)(vi) and the Fund shall, at the Fund’s expense, amend or supplement the Registration Statement or the Prospectus to state that the Dealer Manager has terminated this Agreement with respect to the Offer; and provided, further, that any supplement or amendment of the Registration Statement or Prospectus required in order that the Registration Statement or Prospectus will not contain an untrue statement of a material fact with respect to the Dealer Manager or omit to state a material fact with respect to the Dealer Manager shall be made at the Dealer Manager’s expense.

     (viii) The Fund will endeavor, in cooperation with the Dealer Manager and its counsel, to confirm that the Rights and the Shares are not required to be qualified for offering and sale under the applicable securities laws of such states and other jurisdictions of the United States as the Dealer Manager may designate.

     (ix) The Fund will make generally available to its security holders as soon as practicable, but no later than 60 days after the end of the Fund’s fiscal semi-annual or fiscal year end period covered thereby, an earnings statement (which need not be audited) (in form complying with the provisions of Section 11(a) of the Securities Act and Rule 158 of the Rules and Regulations) covering a twelve-month period beginning not later than the first day of the Fund’s fiscal semi-annual period next following the “effective” date (as defined in said Rule 158) of the Registration Statement.

     (x) For a period of 180 days from the date of this Agreement, the Fund will not, without the prior consent of the Dealer Manager, offer or sell, or enter into any agreement to sell, any equity or equity-related securities of the Fund or securities convertible into such securities, other than the Rights and the Shares of Beneficial Interest issued pursuant to the Fund’s dividend reinvestment plan or to any distribution of dividends or capital gains payable in Beneficial Interest declared by the Fund or pursuant to a Beneficial Interest split declared by the Fund.

     (xi) The Fund will apply the net proceeds from the Offer as set forth under “Use of Proceeds” in the Prospectus.

     (xii) The Fund will use its best efforts to cause the Rights and the Shares to be duly authorized for listing by the NYSE prior to the time the Rights and the Shares are issued.

     (xiii) The Fund will use its best efforts to maintain its qualification as a regulated Investment Company under Subchapter M of the Code.

     (xiv) The Fund will use its best efforts to perform all of the agreements required of it and discharge all conditions to closing as set forth in this Agreement.

     (xv) The Fund will advise or cause the Subscription Agent to advise the Dealer Manager and each Soliciting Dealer from day to day during the period of, and promptly after the termination of, the Offer, as to the names and addresses of all Holders exercising Rights, the total number of Rights exercised, and the number of Shares, including Shares requested pursuant to the Over-Subscription Privilege, related thereto by each Holder during the immediately

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preceding day, indicating the total number of Rights verified to be in proper form for exercise, rejected for exercise, and being processed and, for the Dealer Manager and each Soliciting Dealer, the number of Rights exercised and the number of Shares, including Shares requested pursuant to the Over-Subscription Privilege, related thereto on subscription certificates indicating the Dealer Manager or such Soliciting Dealer, as the case may be, as the broker- dealer with respect thereto, and as to such other information as the Dealer Manager may reasonably request; and will notify the Dealer Manager and each Soliciting Dealer, not later than 5:00 P.M., Eastern time, on the first business day following the expiration date of the Offer set forth in the Prospectus (the “Expiration Date”), of the total number of Rights exercised and the number of Shares, including Shares requested pursuant to the Over-Subscription Privilege, related thereto, the total number of Rights verified to be in proper form for exercise, rejected for exercise, and being processed and, for the Dealer Manager and each Soliciting Dealer, the number of Rights exercised and the number of Shares, including Shares requested pursuant to the Over-Subscription Privilege, related thereto on subscription certificates indicating the Dealer Manager or such Soliciting Dealer, as the case may be, as the broker-dealer with respect thereto, and as to such other information as the Dealer Manager may reasonably request.

     (xvi) The Fund will comply with the undertakings contained in Item 33 in Part C of the Registration Statement.

     (xvii) In the event that at any time on or prior to the final issuance and sale of Shares pursuant to the Offer any of the representations, warranties or agreements of the Fund would not be true and correct in all material respects as if given or made at such time, the Fund shall promptly notify the Dealer Manager thereof. The Fund shall also promptly notify the Dealer Manager of its failure to perform any obligation on its part required to be performed or to satisfy any condition on its part required to be satisfied on or before any of the date hereof, the Expiration Date and any date of the issuance and sale of Shares pursuant to the Offer.

     (xviii) The Fund will apply the net proceeds from the Offer in such a manner as to continue to comply with the requirements of the Prospectus and the Investment Company Act.

     (b) The Fund and the Investment Adviser will not take, directly or indirectly, any action designed to cause or to result in, or that has constituted or which might reasonably be expected to constitute, the stabilization or manipulation of the price of any security of the Fund to facilitate the issuance of the Rights or the sale or resale of the Shares.

     (c) In the event that at any time on or prior to the final issuance and sale of Shares pursuant to the Offer any of the representations, warranties or agreements of the Investment Adviser would not be true and correct in all material respects as if given or made at such time, the Investment Adviser shall promptly notify the Dealer Manager thereof. The Investment Adviser shall also promptly notify the Dealer Manager of its failure to perform any obligation on its part required to be performed or to satisfy any condition on its part required to be satisfied on or before any of the date hereof, the Expiration Date and any date of issuance and sale of the Shares pursuant to the Offer.

     (d) Except as required by applicable law, the use of any reference to the Dealer Manager in any Offering Materials or any other document or communication prepared,

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approved or authorized by the Fund or the Investment Adviser in connection with the Offer is subject to the prior approval of the Dealer Manager, provided that if such reference to the Dealer Manager is required by applicable law, the Fund and the Investment Adviser agree to notify the Dealer Manager within a reasonable time prior to such use but the Fund and the Investment Adviser are nonetheless permitted to use such reference.

     5. Payment of Expenses.

     (a) The Fund will pay all expenses incident to the performance of its obligations under this Agreement, including, but not limited to, expenses relating to (i) the printing and filing of the Registration Statement as originally filed and of each amendment thereto, (ii) the preparation, issuance and delivery of the certificates for the Shares and subscription certificates relating to the Rights, (iii) the fees and disbursements of the Fund’s counsel (including the fees and disbursements of local counsel) and accountants, (iv) the qualification of the Rights and the Shares under securities laws in accordance with the provisions of Section 4(a)(vii) of this Agreement, including filing fees and the preparation of the Blue Sky Survey by counsel to the Dealer Manager, (v) the printing or other production and delivery to the Dealer Manager of copies of the Registration Statement as originally filed and of each amendment thereto and of the Prospectus and any amendments or supplements thereto, except for any amendments or supplements described in the second proviso of Section 4(a)(vii), (vi) the printing and other production and delivery of copies of the Blue Sky Survey, (vii) the fees and expenses incurred with respect to filing with FINRA, including the fees and disbursements of the Dealer Manager’s counsel with respect thereto, (viii) the fees and expenses incurred in connection with the listing of the Shares on the NYSE, (ix) the printing or other production, mailing and delivery expenses incurred in connection with Offering Materials, and (x) the fees and expenses incurred with respect to the Subscription Agent and Information Agent.

     (b) In addition to any fees that may be payable to the Dealer Manager under this Agreement, the Fund agrees to reimburse the Dealer Manager upon request made from time to time for its reasonable expenses incurred in connection with its activities under this Agreement, including the reasonable fees and disbursements of its legal counsel (excluding Blue Sky and FINRA fees and expenses which are paid directly by the Fund), in an amount up to $150,000.

     (c) If this Agreement is terminated by the Fund for any reason (other than a material breach by the Dealer Manager of its duties hereunder) or by the Dealer Manager in accordance with the provisions of Section 6 or Section 9(a)(i), 9(a)(ii) or 9(a)(iii), the Fund agrees to reimburse the Dealer Manager for all of its reasonable out-of-pocket expenses incurred in connection with its performance hereunder, including the reasonable fees and disbursements of counsel for the Dealer Manager. In the event the transactions contemplated hereunder are not consummated, the Fund agrees to pay all of the costs and expenses set forth in paragraph (a) of this Section 5 which the Fund would have paid if such transactions had been consummated.

     6. Conditions of the Dealer Manager’s Obligations. The obligations of the Dealer Manager hereunder are subject to the accuracy of the respective representations and

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warranties of the Fund and the Investment Adviser contained herein on the date hereof and as if made on each date up to and including the final issuance and sale of Shares pursuant to the Offer, to the performance by the Fund and the Investment Adviser of their respective obligations hereunder, and to the following further conditions:

     (a) The Registration Statement shall have become effective not later than 5:30 P.M., Eastern time, on the date hereof, or at such later time and date as may be approved in writing by the Dealer Manager; the Prospectus and any amendment or supplement thereto shall have been filed with the Commission in the manner and within the time period required by Rule 497(c), (e), (h) or (j), as the case may be, under the Rules and Regulations; no stop order suspending the effectiveness of the Registration Statement or any amendment thereto shall have been issued, and no proceedings for that purpose shall have been instituted or threatened or, to the knowledge of the Fund, the Investment Adviser or the Dealer Manager, shall be contemplated by the Commission; and the Fund shall have complied with any request of the Commission for additional information (to be included in the Registration Statement or the Prospectus or otherwise).

     (b) On the Representation Date and on the Expiration Date, the Dealer Manager shall have received:

          (1) The favorable opinion, dated the Representation Date or the Expiration Date, as the case may be, of Pepper Hamilton LLP, counsel for the Fund, in form and substance satisfactory to counsel for the Dealer Manager, to the effect that:

     (i) The Fund has been duly organized and is validly existing as a statutory trust in good standing under the laws of the State of Delaware, has full power and authority to conduct its business as described in the Registration Statement and Prospectus, except that counsel need express no opinion as to securities or “blue sky” laws of any state, and is duly qualified to do business as a foreign corporation in each jurisdiction wherein it owns or leases real property or in which the conduct of its business requires such qualification, except where the failure to be so qualified would not result in a Material Adverse Effect.

     (ii) The Fund is registered with the Commission under the Investment Company Act as a closed-end, diversified management Investment Company; to the knowledge of such counsel, no order of suspension or revocation of such registration has been issued or proceedings therefor initiated or threatened by the Commission; all required action has been taken under the Securities Act and the Investment Company Act to make the public offering and consummate the issuance of the Rights and the issuance and sale of the Shares by the Fund upon exercise of the Rights, and the provisions of the Fund’s agreement and declaration of trust and by-laws comply as to form in all material respects with the requirements of the Investment Company Act.

     (iii) The Fund has an authorized capitalization as set forth in the Prospectus under the heading “Capitalization”; the outstanding shares of Beneficial Interest conform in all material respects to the description thereof in the Prospectus under the heading “Capitalization”; the Rights have been duly authorized by all requisite action on the part of the Fund for issuance pursuant to the Offer; the Shares have been duly authorized by all requisite action on the part of the Fund for issuance and sale pursuant to the terms of the Offer and, when issued and delivered

16

by the Fund pursuant to the terms of the Offer against payment of the consideration set forth in the Prospectus, will be validly issued, fully paid and non- assessable; the Rights conform in all material respects to all statements relating thereto contained in the Prospectus under the heading “The Offering”; and, to the knowledge of such counsel, the issuance of each of the Rights and the Shares is not subject to any preemptive rights.

     (iv) To the knowledge of such counsel, there is no pending or threatened action, suit or proceeding affecting the Fund or to which the Fund is a party before or by any court or governmental agency, authority or body or any arbitrator, whether foreign or domestic of a character required to be disclosed in the Registration Statement or the Prospectus which is not adequately disclosed therein.

     (v) To the knowledge of such counsel, there are no contracts or other documents of the Fund required to be described in the Registration Statement or the Prospectus, or to be filed or incorporated by reference as exhibits which are not described or filed or incorporated by reference therein as permitted by the Securities Act, the Investment Company Act or the Rules and Regulations.

     (vi) Each of this Agreement, the Subscription Agent Agreement, the Information Agent Agreement and the Advisory Agreement has been duly authorized, executed and delivered by the Fund; each of this Agreement, the Subscription Agent Agreement, the Information Agent Agreement and the Advisory Agreement complies in all material respects with all applicable provisions of the Investment Company Act, the Advisers Act and the rules and regulations under such Acts; and, assuming due authorization, execution and delivery by the other parties thereto, each of this Agreement, the Subscription Agent Agreement, the Information Agent Agreement and the Advisory Agreement constitutes a legal, valid, binding and enforceable obligation of the Fund, subject to the qualification that the enforceability of the Fund’s obligations thereunder may be limited by bankruptcy, insolvency, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights, and to general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at law) and subject to the qualification that the right to indemnity and/or contribution may be limited by federal or state laws or principles of public policy.

     (vii) Neither the issuance of the Rights, nor the issuance and sale of the Shares, nor the consummation by the Fund of any other of the transactions contemplated in this Agreement, the Subscription Agent Agreement or the Information Agent Agreement nor the consummation of the transactions contemplated in the Registration Statement will result in a breach or violation of, or constitute a default under, the agreement and declaration of trust or by-laws of the Fund, or, to the knowledge of such counsel, result in a breach or violation of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance upon any properties or assets of the Fund under the terms and provisions of any material agreement, indenture, mortgage, lease or other instrument to which the Fund is a party or by which it may be bound or to which any of the property or assets of the Fund is subject, nor, to the knowledge of such counsel, will such action result in any violation of any order, law, rule or regulation of any court or governmental agency or body under the laws of Delaware or federal law.

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     (viii) No consent, approval, authorization, notification or order of, or any filing with, any court or governmental agency or body is required under the laws of Delaware or federal law for the consummation by the Fund or the Investment Adviser of the transactions contemplated by this Agreement or the Registration Statement, except (A) such as have been obtained or will be obtained in a timely manner and (B) such as may be required under the blue sky laws of any jurisdiction in connection with the transactions contemplated hereby.

     (ix) The Shares of Beneficial Interest have been duly listed on the NYSE and the Shares and the Rights have been duly approved for listing, subject to official notice of issuance, on the NYSE.

     (x) The Registration Statement has become effective under the Securities Act; to the knowledge of such counsel after reasonable inquiry, no stop order suspending the effectiveness of the Registration Statement has been issued, and no proceedings for that purpose have been instituted or threatened; and the Registration Statement, the Prospectus and each amendment thereof or supplement thereto (other than the financial statements and the notes thereto and the schedules and other financial and statistical data contained therein, as to which such counsel need express no opinion) comply as to form in all material respects with the applicable requirements of the Securities Act and the Investment Company Act and the Rules and Regulations.

     (xi) The statements in the Prospectus under the heading “Taxation of the Fund”, insofar as such statements describe or summarize United States tax laws, treaties, doctrines or practices, fairly present the information disclosed therein in all material respects as of the date of Prospectus.

     Such counsel shall also have stated that, while they have not themselves checked the accuracy and completeness of or otherwise verified, and are not passing upon and assume no responsibility for the accuracy or completeness of, the statements contained in the Registration Statement or the Prospectus, in the course of their review and discussion of the contents of the Registration Statement and Prospectus with certain officers and employees of the Fund and its independent accountants, no facts have come to their attention which cause them to believe that the Registration Statement (except as to such financial statements or schedules or other financial or statistical data included or incorporated by reference in the Registration Statement or the Prospectus, as to which such counsel expresses no belief), on the date it became effective, contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements contained therein not misleading or that the Prospectus (as it may have been supplemented), as of its date and on such Representation Date or Expiration Date, as the case may be, contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.

     In rendering such opinion, Pepper Hamilton LLP may rely as to matters of fact, to the extent they deem proper, on certificates of responsible officers of the Fund and public officials.

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          (2) The favorable opinion, dated the Representation Date or the Expiration Date, as the case may be, of Pepper Hamilton LLP, counsel to [MBIA Capital Management Corp.] in form and substance satisfactory to counsel for the Dealer Manager, to the effect that:

     (i) The Investment Adviser has been incorporated and is validly existing and in good standing under the laws of Delaware, with power and authority to own its properties and conduct its business as described in the Prospectus;

     (ii) The Investment Adviser has been duly qualified as a foreign corporation for the transaction of business and is in good standing under the laws of each other jurisdiction in which it owns or leases properties, or conducts any business, so as to require such qualification, other than where the failure to be so qualified or in good standing would not have an Adviser Material Adverse Effect;

     (iii) The Investment Adviser is duly registered as an investment adviser under the Advisers Act and is not prohibited by the Advisers Act, the Investment Company Act, or the rules and regulations under such Acts, from acting as an investment adviser for the Fund as contemplated in the Prospectus and the Advisory Agreement.

     (iv) Each of this Agreement and the Advisory Agreement has been duly authorized, executed and delivered by the Investment Adviser; each of this Agreement and the Advisory Agreement complies in all material respects with all applicable provisions of the Investment Company Act, the Advisers Act and the rules and regulations under such Acts; and, assuming due authorization, execution and delivery by the other parties thereto, each of this Agreement and the Advisory Agreement constitutes a legal, valid, binding and enforceable obligation of the Investment Adviser, subject to the qualification that the enforceability of the Investment Adviser’s obligations thereunder may be limited by bankruptcy, insolvency, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights, and to general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at law) and except as enforcement of rights to indemnity and/or contribution may be limited by federal or state laws or principles of public policy.

     (v) Neither the performance by the Investment Adviser of its obligations under this Agreement nor the consummation of the transactions contemplated therein or in the Registration Statement nor the fulfillment of the terms thereof is, or with the giving of notice or lapse of time or both would be, in violation of or constitute a default under, the charter of the Investment Adviser or any agreement known to such counsel to which the Investment Adviser is a party or by which it or any of its properties is bound, except for violations and defaults which individually and in the aggregate are not material to the Investment Adviser and its subsidiaries taken as a whole; or, to the knowledge of such counsel, the terms and provisions of any agreement, to which the Investment Adviser is a party or by which it may be bound or to which any of the property or assets of the Investment Adviser is subject, or any applicable order, law, rule or regulation of any court or governmental agency or body under the laws of Delaware or federal law.

     (vi) To the knowledge of such counsel, there is no pending or threatened action, suit or proceeding to which the Investment Adviser is a party before or by any court or

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governmental agency, authority or body or any arbitrator, whether foreign or domestic, which reasonably might result in an Adviser Material Adverse Effect or might materially and adversely affect the ability of the Investment Adviser to perform its obligations under the Advisory Agreement. In rendering such opinion, Pepper Hamilton LLP may rely as to matters of fact, to the extent such counsel deems proper, on certificates of responsible officers of the Investment Adviser and public officials.

     (c) The Dealer Manager shall have received from Reed Smith LLP, counsel for the Dealer Manager, such opinion, dated the Representation Date or the Expiration Date, as the case may be, with respect to the Offer, the Registration Statement, the Prospectus and other related matters as the Dealer Manager may reasonably require, and the Fund shall have furnished to such counsel such documents as they reasonably request for the purpose of enabling them to pass upon such matters.

     (d) The Fund shall have furnished to the Dealer Manager a certificate of the Fund, signed by the Chairman of the Board, the President or a Vice President of the Fund, dated the Representation Date and the Expiration Date, as the case may be, to the effect that the signers of such certificate have examined the Registration Statement, the Prospectus, any supplement to the Prospectus and this Agreement and that, to the best of their knowledge:

     (i) The representations and warranties of the Fund in this Agreement are true and correct in all material respects on and as of the Representation Date or the Expiration Date, as the case may be, and the Fund has complied with all the agreements and satisfied all the conditions in this Agreement on its part to be performed or satisfied at or prior to such Representation Date or Expiration Date.

     (ii) No stop order suspending the effectiveness of the Registration Statement has been issued and no proceedings for that purpose have been instituted or, to the Fund’s knowledge, threatened.

     (iii) Since the date of the most recent balance sheet included or incorporated by reference in the Prospectus, there has been no material adverse change in the condition (financial or other), earnings, business or properties of the Fund, whether or not arising from transactions in the ordinary course of business, except as set forth in or contemplated in the Prospectus.

     (e) The Investment Adviser shall have furnished to the Dealer Manager a certificate, signed by a senior officer of MBIA Capital Management Corp., dated the Representation Date and the Expiration Date, as the case may be, to the effect that the signatory of such certificate has read the Registration Statement, the Prospectus, any supplement to the Prospectus and this Agreement and, to the best knowledge of such signatory, the representations and warranties of the Investment Adviser in this Agreement are true and correct in all material respects on and as of the Representation Date or the Expiration Date, as the case may be, and the Investment Adviser has complied with all the agreements and satisfied all the conditions in this Agreement on its part to be performed or satisfied at or prior to such Representation Date or Expiration Date.

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     (f) [     ] shall have furnished to the Dealer Manager a Letter, dated the Representation Date and the Expiration Date, as the case may be, in form and substance satisfactory to the Dealer Manager, and stating in effect that:

     (i) They are independent accountants with respect to the Fund within the meaning of the Securities Act and the Investment Company Act and the applicable Rules and Regulations adopted under such acts and [     ] is an independent registered public accounting firm under the rules and regulations adopted by the Public Company Accounting Oversight Board.

     (ii) In its opinion, the audited financial statements examined by it and included or incorporated by reference in the Registration Statement comply as to form in all material respects with the applicable accounting requirements of the Securities Act and the Investment Company Act and the respective Rules and Regulations with respect to registration statements on Form N-2.

     (iii) It has performed procedures specified by the Public Company Accounting Oversight Board for a review of the interim financial information for the period ended [___], 2009, which shall be specified in such letter, and on the basis of such inquiries and procedures nothing came to its attention that caused it to believe that at the date of the latest available financial information read by such accountants, or at a subsequent specified date not more than five business days prior to the Representation Date or the Expiration Date, as the case may be, there was any change in the capital stock, increase in long-term debt or decrease in net assets of the Fund as compared with amounts shown in the most recent statement of assets and liabilities included or incorporated by reference in the Registration Statement, except as the Registration Statement discloses has occurred or may occur or as disclosed in their letter.

     (iv) In addition to the procedures referred to in clause (iii) above, it has performed other specified procedures, not constituting an audit, with respect to certain amounts, percentages, numerical data and financial information appearing in the Registration Statement, which have previously been specified by the Dealer Manager and which shall be specified in such letter, and have compared such items with, and have found such items to be in agreement with, the accounting and financial records of the Fund.

     (g) Subsequent to the respective dates as of which information is given in the Registration Statement and the Prospectus, there shall not have been (i) any change or decrease specified in the letter or letters referred to in paragraph (f) of this Section 6, (ii) any change, or any development involving a prospective change, in or affecting the business, condition (financial or otherwise), properties, net assets or results of operations of the Fund, the effect of which, in any case referred to in clause (i) or (ii) above, makes it, in the reasonable judgment of the Dealer Manager, impractical or inadvisable to proceed with the Offer as contemplated by the Registration Statement and the Prospectus.

     (h) Prior to the Representation Date or the Expiration Date, as the case may be, the Fund shall have furnished to the Dealer Manager such further information, certificates and documents as the Dealer Manager may reasonably request.

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     (i) If any of the conditions specified in this Section 6 shall not have been fulfilled in all material respects when and as provided in this Agreement, or if any of the opinions and certificates mentioned above or elsewhere in this Agreement shall not be in all material respects satisfactory in form and substance to the Dealer Manager and its counsel, this Agreement and all obligations of the Dealer Manager hereunder may be canceled on, or at any time prior to, the Expiration Date by the Dealer Manager. Notice of such cancellation shall be given to the Fund in writing or by telephone or telegraph confirmed in writing.

     7. Indemnification and Contribution. (a) (i) The Fund will indemnify and hold harmless the Dealer Manager, the directors, officers, employees and agents of the Dealer Manager and each person, if any, who controls the Dealer Manager within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act against any and all losses, claims, damages or liabilities, joint or several (including any investigation, legal and other expenses reasonably incurred in connection with, and any amount paid in settlement of, any action, suit or proceeding or any claim asserted), to which they, or any of them, may become subject under the Securities Act, the Exchange Act, the Investment Company Act, the Advisers Act or other statutory law or regulation, at common law or otherwise, whether foreign or domestic, insofar as such losses, claims, damages or liabilities arise out of or are based on any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement (or in the Registration Statement as amended by any post-effective amendment thereof by the Fund), the Prospectus or the Offering Materials, and any amendment or supplement thereto, or the omission or alleged omission to state in any or all such documents a material fact required to be stated therein or necessary to make the statements in it not misleading (in the case of the Prospectus, in light of the circumstances under which such statements were made); provided that the Fund will not be liable to the extent that such loss, claim, damage or liability arises from an untrue statement or omission or alleged untrue statement or omission made in reliance on and in conformity with information furnished in writing to the Fund by the Dealer Manager expressly for use in the document. The foregoing indemnity agreement is in addition to any liability which the Fund may otherwise have to the Dealer Manager or any controlling person of the Dealer Manager.

     (ii) The Investment Adviser will indemnify and hold harmless the Dealer Manager, the directors, officers, employees and agents of the Dealer Manager and each person, if any, who controls the Dealer Manager within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act against any and all losses, claims, damages or liabilities, joint or several (including any investigation, legal and other expenses reasonably incurred in connection with, and any amount paid in settlement of, any action, suit or proceeding or any claim asserted), to which they, or any of them, may become subject under the Securities Act, the Exchange Act, the Investment Company Act, the Advisers Act or other statutory law or regulation, at common law or otherwise, whether foreign or domestic, insofar as such losses, claims, damages or liabilities arise out of or are based on any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement (or in the Registration Statement as amended by any post-effective amendment thereof by the Fund), the Prospectus or the Offering Materials, and any amendment or supplement thereto, or the omission or alleged omission to state in any or all such documents a material fact required to be stated therein or necessary to make the statements in it not misleading (in the case of the Prospectus, in light of the circumstances under which such statements were made); provided

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that the Investment Adviser will not be liable to the extent that such loss, claim, damage or liability arises from an untrue statement or omission or alleged untrue statement or omission made in reliance on and in conformity with information furnished in writing to the Fund by the Dealer Manager expressly for use in the document; and provided further, that the Investment Adviser will not be liable to any such indemnified party in any such case except to the extent that the Fund has failed to indemnify and hold harmless such indemnified party pursuant to paragraph (a)(i) in respect of such losses, claims, damages or liabilities after such indemnified party has made a claim of the Fund. The foregoing indemnity agreement is in addition to any liability which the Investment Adviser may otherwise have to the Dealer Manager or any controlling person of the Dealer Manager.

     (b) The Dealer Manager will indemnify and hold harmless the Fund, the Investment Adviser, each director and officer of the Fund who signs the Registration Statement and each person, if any, who controls the Fund or the Investment Adviser within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, to the same extent as the foregoing indemnity from the Fund or the Investment Adviser to the Dealer Manager, but only insofar as losses, claims, damages or liabilities arise out of or are based on any untrue statement or omission or alleged untrue statement or omission made in reliance on and in conformity with information furnished in writing to the Fund by the Dealer Manager expressly for use in preparation of the documents in which the statement or omission is made or alleged to be made. This indemnity agreement will be in addition to any liability that the Dealer Manager might otherwise have.

     (c) Any party that proposes to assert the right to be indemnified under this Section 7 will, promptly after receipt of notice of commencement of any action against such party in respect of which a claim is to be made against an indemnifying party or parties under this Section 7, notify each such indemnifying party of the commencement of such action, enclosing a copy of all papers served, but the omission to notify such indemnifying party will not, except to the extent set forth below, relieve it from liability that it may have to any indemnified party. No indemnification provided for in Sections 7(a) and (b) hereof shall be available to any party who shall fail to give notice as provided in this Section 7(c) if the party to whom notice was not given was unaware of the proceeding to which such notice would have related and was prejudiced by the failure to give such notice, but the omission to notify such indemnifying party of such action shall not relieve it from any liability that it may have to any indemnified party for contribution or otherwise on account of the provisions in Sections 7(a) or (b). If any such action is brought against any indemnified party and it notifies the indemnifying party of its commencement, the indemnifying party will be entitled to participate in, and, to the extent that it elects by delivering written notice to the indemnified party promptly after receiving notice of the commencement of the action from the indemnified party, jointly with any other indemnifying party similarly notified, to assume the defense of the action, with counsel reasonably satisfactory to the indemnified party, and, after notice from the indemnifying party to the indemnified party of its election to assume the defense, the indemnifying party will not be liable to the indemnified party for any legal or other expenses except as provided below and except for the reasonable costs of investigation subsequently incurred by the indemnified party in connection with the defense. The indemnified party will have the right to employ its counsel in any such action, but the fees and expenses of such counsel will be at the expense of such indemnified party unless (1) the

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employment of counsel by the indemnified party has been authorized in writing by the indemnifying party, (2) the indemnified party has reasonably concluded that there may be legal defenses available to it or other indemnified parties that are different from or in addition to those available to the indemnifying party (in which case the indemnifying party will not have the right to direct the defense of such action on behalf of the indemnified party) or (3) the indemnifying party has not in fact employed counsel to assume the defense of such action within a reasonable time after receiving notice of the commencement of the action, in each of which cases the reasonable fees and expenses of counsel will be at the expense of the indemnifying party or parties. All such fees and expenses will be reimbursed promptly as they are incurred. An indemnifying party will not be liable for any settlement of any action or claim effected without its written consent or, in connection with any proceeding or related proceeding in the same jurisdiction, for the fees and expenses of more than one separate counsel for all indemnified parties except to the extent provided herein.

     (d) In no case shall the indemnification provided in this Section 7 be available to protect any person against any liability to which any such person would otherwise be subject by reason of willful misfeasance, bad faith or gross negligence in the performance of its or his obligations or duties hereunder, or by reason of its or his reckless disregard of its or his obligations and duties hereunder.

     (e) If the indemnification provided for in this section 7 is unavailable to an indemnified party under paragraphs (a) or (b) hereof in respect of any losses, claims, damages, liabilities or expenses referred to therein, then an indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or expenses (i) in such proportion as is appropriate to reflect the relative benefits received by the Fund and the Investment Adviser on the one hand (treated jointly for this purpose as one person) and the Dealer Manager on the other hand from the offering of the Shares or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Fund and the Investment Adviser on the one hand (treated jointly for this purpose as one person) and of the Dealer Manager on the other hand in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative benefits received by the Fund and the Investment Adviser on the one hand (treated jointly for this purpose as one person) and the Dealer Manager on the other hand shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Fund as set forth in the table on the cover page of the Prospectus bear to the total payments received by the Dealer Manager with respect to the Shares as set forth in the table on the cover page of the Prospectus. The relative fault of the Fund and the Investment Adviser on the one hand (treated jointly for this purpose as one person) and of the Dealer Manager on the other hand shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Fund and the Investment Adviser on the one hand (treated jointly for this purpose as one person) or by the Dealer Manager on the other hand and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.

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     (f) The Fund, the Investment Adviser and the Dealer Manager agree that it would not be just and equitable if contribution pursuant to this Section 7 were determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to in paragraph (e) above. The amount paid or payable by an indemnified party as a result of the losses, claims, damages, liabilities and expenses referred to in paragraph (e) above shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with defending any such action, suit or proceeding. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.

     (g) No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened action, suit or proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability from claimants on claims that are the subject matter of such action, suit or proceeding.

     (h) Any losses, claims, damages, liabilities or expenses for which an indemnified party is entitled to indemnification or contribution under this Section 7 shall be paid by the indemnifying party to the indemnified party as such losses, claims, damages, liabilities or expenses are incurred. A successor to the Dealer Manager or to the Fund, the Investment Adviser or their trustees, directors or officers or any person controlling any of them shall be entitled to the benefits of the indemnity, contribution and reimbursement agreements contained in this Section 7.

     (i) The Fund and the Investment Adviser agree to indemnify each Soliciting Dealer, the directors, officers, employees and agents of each Soliciting Dealer and controlling persons of each Soliciting Dealer to the same extent and subject to the same conditions and to the same agreements, including with respect to contribution, provided for in subsections (a), (b), (c), (d), (e), (f), (g) and (h) of this Section 7.

     (j) The Fund and the Investment Adviser acknowledge that the statements contained in the first two paragraphs under the caption ”Distribution Arrangements” in the Prospectus constitute the only information furnished in writing to the Fund by the Dealer Manager expressly for use in such document; and the Dealer Manager confirms that such statements are correct.

     8. Representations, Warranties and Agreements to Survive Delivery. The respective agreements, representations, warranties, indemnities and other statements of the Fund or its officers, of the Investment Adviser and of the Dealer Manager set forth in or made pursuant to this Agreement shall survive the Expiration Date and will remain in full force and effect, regardless of any investigation made by or on behalf of the Dealer Manager, the Fund or the Investment Adviser or any of the officers directors or controlling persons referred to in Section 7 hereof, and will survive delivery of and payment for the Shares pursuant to the

25

Offer. The provisions of Section 5 and 7 hereof shall survive the termination or cancellation of this Agreement.

     9. Termination of Agreement. (a) This Agreement shall be subject to termination in the absolute discretion of the Dealer Manager, by notice given to the Fund prior to the expiration of the Offer, if prior to such time (i) there has been a material change in general economic, political, social or financial conditions in the United States or the effect of international conditions on the financial markets in the United States such that, in the Dealer Manager’s judgment, it is impracticable or inadvisable to proceed with the Offer, (ii) there has occurred any outbreak or material escalation of hostilities or other calamity or crisis the effect of which, in the Dealer Manager’s judgment, renders it impracticable or inadvisable to proceed with the Offer, (iii) trading in the shares of Beneficial Interest shall have been suspended by the Commission or the NYSE, (iv) trading in securities generally on the NYSE shall have been suspended or limited, (v) a banking moratorium shall have been declared either by Federal or New York State authorities or (vi) the Fund shall fail to amend or supplement the Registration Statement or the Prospectus as provided in Section 4(a)(vi).

     (b) If this Agreement is terminated pursuant to this Section, such termination shall be without liability of any party to any other party except as provided in Section 5.

     10. No Fiduciary Relationship. The Fund and the Investment Adviser hereby acknowledge that the Dealer Manager is acting solely as dealer manager in connection with the Offer, including, without limitation, (i) solicitation of the exercise of Rights, (ii) the purchase of Rights, exercise of Rights and to sale to the public of Shares purchased as described herein and forming and managing the Soliciting Group. The Fund and the Investment Adviser further acknowledge that the Dealer Manager is acting pursuant to a contractual relationship created solely by this Agreement entered into on an arm’s length basis, and in no event do the parties intend that the Dealer Manger act or be responsible as a fiduciary to the Fund or the Investment Adviser or their respective managements, stockholders or creditors or any other person in connection with any activity that the Dealer Manager may undertake or have undertaken in furtherance of the Offer, including any purchase and sale of the Shares, either before or after the date hereof. The Dealer Manager hereby expressly disclaim any fiduciary or similar obligations to the Fund or the Investment Adviser, either in connection with the transactions contemplated by this Agreement or any matters leading up to such transactions, and the Fund and the Investment Adviser each hereby confirms its understanding and agreement to that effect. The Fund, the Investment Adviser and the Dealer Manger agree that they are each responsible for making their own independent judgments with respect to any such transactions and that any opinions or views expressed by the Dealer Manager to the Fund or the Investment Adviser regarding such transactions, including, but not limited to, any opinions or views with respect to the price or market for the Fund’s securities, do not constitute advice or recommendations to the Fund or the Investment Adviser. The Fund and the Investment Adviser each hereby waives and releases, to the fullest extent permitted by law, any claims that the Fund or the Investment Adviser may have against the Dealer Manager with respect to any breach or alleged breach of any fiduciary or similar duty to the Fund or the Investment Adviser in connection with the transactions contemplated by this Agreement or any matters leading up to such transactions.

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     11. Notices. All communications hereunder will be in writing and effective only on receipt, and, if sent to The Dealer Manager will be mailed, delivered or telegraphed and confirmed to Boenning & Scattergood Inc., Attn.: Charles K. Hull, 4 Tower Bridge, 200 Barr Harbor Drive, Suite 300, West Conshohocken, PA 19428-2979, or if sent to the Fund or the Investment Adviser, will be mailed, delivered or telegraphed and confirmed to Rivus Bond Fund, Attn: Mr. Leonard I. Chubinsky, Secretary, c/o MBIA Capital Management Corp., 113 King Street Armonk, NY 10504(Fund) and MBIA Capital Management Corp. Attn: Mr. Gautam Khanna, 113 King Street, Armonk, NY, 10504 (Adviser)].

     12. Successors. This Agreement will inure to the benefit of and be binding upon the parties hereto and their respective successors and will inure to the benefit of the officers and directors and controlling persons referred to in Section 7 hereof, and no other person will have any right or obligation hereunder.

     13. Applicable Law. This Agreement will be governed by and construed in accordance with the laws of the State of Delaware.

     14. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument. If the foregoing is in accordance with your understanding of our agreement, please so indicate in the space provided below for that purpose, whereupon this letter shall constitute a binding agreement among the Fund, the Investment Adviser and the Dealer Manager.

Very truly yours,

RIVUS BOND FUND

By:

Name:

Title:

MBIA CAPITAL MANAGEMENT CORP.

By:

Name:

Title:

The foregoing Agreement is hereby confirmed and accepted as of the date first above written.

BOENNING & SCATTERGOOD, INC.

By:

Name:

Title:

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EX-99.2(J)

Exhibit (2)(j)

CUSTODIAN SERVICES AGREEMENT

     THIS AGREEMENT is made as of December 16, 2005 by and between PFPC TRUST COMPANY, a limited purpose trust company incorporated under the laws of Delaware (“PFPC Trust”), and 1838 BOND DEBENTURE TRADING FUND, a Delaware corporation (the “Fund”).

WITNESSETH:

     WHEREAS, the Fund is registered as a closed-end management investment, company under the Investment Company Act of 1940, as amended (the “1940 Act”), the shares of which are traded on the New York Stock Exchange (“NYSE”); and

     WHEREAS, the Fund wishes to retain PFPC Trust to provide custodian services, and PFPC Trust wishes to furnish custodian services, either directly or through an affiliate or affiliates, as more fully described herein.

     NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, and intending to be legally bound hereby, the parties hereto agree as follows:

1. Definitions. As used in this Agreement:

(a)	“1933 Act” means the Securities Act of 1933, as amended.
(b)	“1934 Act” means the Securities Exchange Act of 1934, as amended.
(c)	“Authorized Person” means any officer of the Fund and any other person authorized by the Fund to give Oral or Written Instructions on behalf of the Fund. An Authorized Person’s scope of authority may be limited by setting forth such limitation in a written document signed by both parties hereto.
(d)	“Book-Entry System” means the Federal Reserve Treasury book-entry system for United States and federal agency securities, its successor or successors, and its

	nominee or nominees and any book-entry system registered with the SEC under the 1934 Act
(e)	“CEA” means the Commodities Exchange Act, as amended.
(f)	“Oral Instructions” mean oral instructions received by PFPC Trust from an Authorized Person or from a person reasonably believed by PFPC Trust to be an Authorized Person. PFPC Trust may, in its sole discretion in each separate instance, consider and rely upon instructions it receives from an Authorized Person via electronic mail as Oral Instructions.
(g)	“PFPC Trust” means PFPC Trust Company or a subsidiary or affiliate of PFPC Trust Company.
(h)	“SEC” means the Securities and Exchange Commission, (i) “Securities Laws” mean the 1933 Act, the 1934 Act, the 1940 Act and the CEA. (j) “Shares” mean the shares of beneficial interest of any series or class of the Fund. 00 “Property” means:

(i)	any and all securities and other investment items which the Fund may from time to time deposit, or cause to be deposited, with PFPC Trust or which PFPC Trust may from time to time hold for the Fund;
(ii)	all income in respect of any of such securities or other investment items;
(iii)	all proceeds of the sale of any of such securities or investment items; and
(iv)	all proceeds of the sale of securities issued by the Fund, which are received by PFPC Trust from time to time, from or on behalf of the Fund.

(i) “Written Instructions” mean (i) written instructions signed by two Authorized Persons (or persons reasonably believed by PFPC Trust to be Authorized Persons) and received by PFPC Trust or (ii) trade instructions transmitted by means of an electronic transaction reporting system which requires the use of a password or

other authorized identifier in order to gain access. The instructions may be delivered electronically (with respect to sub-item (ii) above) or by hand, mail or facsimile sending device.

2. Appointment. The Fund hereby appoints PFPC Trust to provide custodian services to the Fund as set forth herein and PFPC Trust accepts such appointment and agrees to furnish such services.

3. Compliance with Laws. PFPC Trust undertakes to comply with material applicable requirements of the Securities Laws and material laws, rules and regulations of regulatory authorities having jurisdiction with respect to the duties to be performed by PFPC Trust hereunder. Except as specifically set forth herein, PFPC Trust assumes no responsibility for such compliance by the Fund or any other entity.

4. Instructions.

(a)	Unless otherwise provided in this Agreement, PFPC Trust shall act only upon Oral Instructions or Written Instructions.
(b)	PFPC Trust shall be entitled to rely upon any Oral Instruction or Written Instruction it receives pursuant to this Agreement. PFPC Trust may assume that any Oral Instructions or Written Instructions received hereunder are not in any way inconsistent with the provisions of organizational documents of the Fund or of any vote, resolution or proceeding of the Fund’s Board of Directors or of the Fund’s shareholders, unless and until PFPC Trust receives Written Instructions to the contrary.
(c)	The Fund agrees to forward to PFPC Trust Written Instructions confirming Oral Instructions (except where such Oral Instructions are given by PFPC Trust or its

affiliates) so that PFPC Trust receives the Written Instructions by the close of business on the same day that such Oral Instructions are received. The fact that such confirming Written Instructions are not received by PFPC Trust or differ from the Oral Instructions shall in no way invalidate the transactions or enforceability of the transactions authorized by the Oral Instructions or PFPC Trust’s ability to rely upon such Oral Instructions.

5. Right to Receive Advice.

(a)	Advice of the Fund. If PFPC Trust is in doubt as to any action it should or should not take, PFPC Trust may request directions or advice, including Oral Instructions or Written Instructions, from the Fund.
(b)	Advice of Counsel. If PFPC Trust shall be in doubt as to any question of law pertaining to any action it should or should not take, PFPC Trust may request advice from counsel of its own choosing (who may be counsel for the Fund, the Fund’s investment adviser or PFPC Trust, at the option of PFPC Trust).
(c)	Conflicting Advice. In the event of a conflict between directions or advice or Oral Instructions or Written Instructions PFPC Trust receives from the Fund, and the advice it receives from counsel, PFPC Trust shall be entitled to rely upon and follow the advice of counsel.
(d)	Protection of PFPC Trust. PFPC Trust shall be indemnified by the Fund and without liability for any action PFPC Trust takes or does not take in reliance upon directions or advice or Oral Instructions or Written Instructions PFPC Trust receives from or on behalf of the Fund or from counsel and which PFPC Trust believes, in good faith, to be consistent with those directions or advice or Oral

Instructions or Written Instructions. Nothing in this section shall be construed so as to impose an obligation upon PFPC Trust (i) to seek such directions or advice or Oral Instructions or Written Instructions, or (ii) to act in accordance with such directions or advice or Oral Instructions or Written Instructions.

6. Records; Visits. The books and records pertaining to the Fund, which are in the possession or under the control of PFPC Trust, shall be the property of the Fund. Such books and records shall be prepared and maintained as required by the 1940 Act and other applicable securities laws, rules and regulations. The Fund and Authorized Persons shall have access to such books and records at all times during PFPC Trust’s normal business hours. Upon the reasonable request of the Fund, copies of any such books and records shall be provided by PFPC Trust to the Fund or to an authorized representative of the Fund, at the Fund’s expense.

7. Confidentiality. Each party shall keep confidential any information relating to the other party’s business (“Confidential Information”). Confidential Information shall include (a) any data or information that is competitively sensitive material, and not generally known to the public, including, but not limited to, information about product plans, marketing strategies, finances, operations, customer relationships, customer profiles, customer lists, sales estimates, business plans, and internal performance results relating to the past, present or future business activities of the Fund or PFPC Trust, their respective subsidiaries and affiliated companies; (b) any scientific or technical information, design, process, procedure, formula, or improvement that is commercially valuable and secret in the sense that its confidentiality affords the Fund or PFPC Trust a competitive advantage over its competitors; (c) all confidential or proprietary concepts, documentation, reports, data, specifications, computer software, source code, object code, flow charts, databases, inventions, know-how, and trade secrets, whether or not patentable or

copyrightable; and (d) anything designated as confidential. Notwithstanding the foregoing, information shall not be Confidential Information and shall not be subject to such confidentiality obligations if: (a) it is already known to the receiving party at the time it is obtained; (b) it is or becomes publicly known or available through no wrongful act of the receiving party; (c) it is rightfully received from a third party who, to the best of the receiving party’s knowledge, is not under a duty of confidentiality; (d) it is released by the protected party to a third party without restriction; (e) it is requested or required to be disclosed by the receiving party pursuant to a court order, subpoena, governmental or regulatory agency request or law (provided the receiving party will provide the other party written notice of the same, to the extent such notice is permitted); (f) release of such information by PFPC Trust is necessary or desirable in connection with the provision of services under this Agreement; (g) it is relevant to the defense of any claim or cause of action asserted against the receiving party; or (h) it has been or is independently developed or obtained by the receiving party.

8. Cooperation with Accountants. PFPC Trust shall cooperate with the Fund’s independent public accountants and shall take all reasonable action to make any requested information available to such accountants as reasonably requested by the Fund.

9. PFPC System. PFPC Trust shall retain title to and ownership of any and all data bases, computer programs, screen formats, report formats, interactive design techniques, derivative works, inventions, discoveries, patentable or copyrightable matters, concepts, expertise, patents, copyrights, trade secrets, and other related legal rights utilized by PFPC Trust in connection with the services provided by PFPC Trust to the Fund.

10. Disaster Recovery. PFPC Trust shall enter into and shall maintain in effect with appropriate parties one or more agreements making reasonable provisions for emergency use of

electronic data processing equipment to the extent appropriate equipment is available. In the event of equipment failures, PFPC Trust shall, at no additional expense to the Fund, take reasonable steps to minimize service interruptions. PFPC Trust shall have no liability with respect to the loss of data or service interruptions caused l>y equipment failure provided such loss or interruption is not caused by PFPC Trust’s own willful misfeasance, bad faith, negligence or reckless disregard of its duties or obligations under this Agreement.

11. Compensation.

(a)

As compensation for custody services rendered by PFPC Trust during the term of this Agreement, the Fund, on behalf of the Fund, will pay to PFPC Trust a fee or fees as may be agreed to in writing from time to time by the Fund and PFPC Trust. The Fund acknowledges that PFPC Trust may receive float benefits in connection with maintaining certain accounts required to provide services under this Agreement.

(b)

The Fund agrees that PFPC Trust shall be afforded the opportunity to present or otherwise discuss with the Fund’s Board of Directors the terms of this Agreement, the fees and expenses associated with the Agreement and, if applicable, any benefits accruing to PFPC Trust or to the adviser or sponsor of the Fund in connection with this Agreement, either prior to or a commercially reasonable time after the effective date of this Agreement (which may include the next regularly scheduled meeting of the Fund’s Board of Directors following the effective date of this Agreement).

12. Indemnification. The Fund agrees to indemnify, defend and hold harmless PFPC Trust and its affiliates, including their respective officers, directors, agents and employees from all

taxes, charges, expenses, assessments, claims and liabilities (including, without limitation, attorneys’ fees and disbursements and liabilities arising under the Securities Laws and any state and foreign securities and blue sky laws) arising directly or indirectly from any action or omission to act which PFPC Trust takes in connection with the provision of services to the Fund. Neither PFPC Trust, nor any of its affiliates, shall be indemnified against any liability (or any expenses incident to such liability) caused by PFPC Trust’s or its affiliates’ own willful misfeasance, bad faith, negligence or reckless disregard in the performance of PFPC Trust’s activities under this Agreement. The provisions of this Section 12 shall survive termination of this Agreement.

13. Responsibility of PFPC Trust.

(a)

PFPC Trust shall be under no duty to take any action hereunder on behalf of the Fund except as specifically set forth herein or as may be specifically agreed to by PFPC Trust and the Fund in a written amendment hereto. PFPC Trust shall be obligated to exercise care and diligence in the performance of its duties hereunder and to act in good faith in performing services provided for under this Agreement. PFPC Trust shall be liable only for any damages arising out of PFPC Trust’s failure to perform its duties under this Agreement and only to the extent such damages arise out of PFPC Trust’s willful misfeasance, bad faith, gross negligence or reckless disregard of its duties under this Agreement.

(b)

Notwithstanding anything in this Agreement to the contrary, (i) PFPC Trust shall not be liable for losses, delays, failure, errors, interruption or loss of data occurring directly or indirectly by reason of circumstances beyond its reasonable control, including without limitation acts of God; action or inaction of civil or

	military authority; public enemy; war; terrorism; riot; fire; flood; sabotage; epidemics; labor disputes; civil commotion; interruption, loss or malfunction of utilities, transportation, computer or communications capabilities; insurrection; elements of nature; or non-performance by a third party; and (ii) PFPC Trust shall not be under any duty or obligation to inquire into and shall not be liable for the validity or invalidity, authority or lack thereof, or truthfulness or accuracy or lack thereof, of any instruction, direction, notice, instrument or other information which PFPC Trust reasonably believes to be genuine.
(c)	Notwithstanding anything in this Agreement to the contrary, (i) neither PFPC Trust nor its affiliates shall be liable for any consequential, special or indirect losses or damages, whether or not the likelihood of such losses or damages was known by PFPC Trust or its affiliates and (ii) PFPC Trust’s cumulative liability to the Fund for all losses, claims, suits, controversies, breaches or damages for any cause whatsoever (including but not limited to those arising out of or related to this Agreement) and regardless of the form of action or legal theory shall not exceed $100,000.
(d)	Each party shall have a duty to mitigate damages for which the other party may become responsible.
(e)	Notwithstanding anything in this Agreement to the contrary (other than as specifically provided in Section 14(h)(ii)(B)(4) and Section 14(h)(iii)(A) of this Agreement), the Fund shall be responsible for all filings, tax returns and reports on any transactions undertaken pursuant to this Agreement, or in respect of the Property or any collections undertaken pursuant to this Agreement, which may he

	requested by any relevant authority. In addition, the Fund shall be responsible for the payment of all taxes and similar items (including without limitation penalties and interest related thereto).
(f)	The provisions of this Section 13 shall survive termination of this Agreement.
(g)	Notwithstanding anything in this Agreement to the contrary, PFPC Trust shall have no liability either for any error or omission of any of its predecessors as servicer on behalf of the Fund or for any failure to discover any such error or omission.

14. Description of Services.

(a)	Delivery of the Property. The Fund will deliver or arrange for delivery to PFPC Trust, all the Property owned by the Fund, including cash received as a result of the distribution of Shares, during the term of this Agreement. PFPC Trust will not be responsible for any assets until actual receipt.
(b)	Receipt and Disbursement of Money. PFPC Trust, acting upon Written Instructions, shall open and maintain a separate account for the Fund (an “Account”) and shall maintain in the Account of the Fund all cash and other assets received from or for the Fund specifically designated to such Account.

PFPC Trust shall make cash payments from or for the Account of the Fund only for:

(i)	purchases of securities in the name of the Fund, PFPC Trust, PFPC Trust’s nominee or a sub-custodian or nominee thereof as provided in sub-section 14(j) and for which PFPC Trust has received a copy of the broker’s or dealer’s confirmation or payee’s invoice, as appropriate;
(ii)	purchase or redemption of Shares of the Fund delivered to PFPC Trust;
(iii)	payment of, subject to Written Instructions, interest, taxes (provided that tax which PFPC Trust considers is required to be deducted or withheld “at source” will be governed by Section 14(h)(iii)(B) of this Agreement),

	administration, accounting, distribution, advisory and management fees which are to be borne by the Fund;
(iv)	payment to, subject to receipt of Written Instructions, the Fund’s transfer agent, as agent for the shareholders, of an amount equal to the amount of dividends and distributions stated in the Written Instructions to be distributed in cash by the transfer agent to shareholders, or, in lieu of paying the Fund’s transfer agent, PFPC Trust may arrange for the direct payment of cash dividends and distributions to shareholders in accordance with procedures mutually agreed upon from time to time by and among the Fund, PFPC Trust and the Fund’s transfer agent;
(v)	payments, upon receipt of Written Instructions, in connection with the conversion, exchange or surrender of securities owned or subscribed to by the Fund and held by or delivered to PFPC Trust;
(vi)	payments of the amounts of dividends received with respect to securities sold short;
(vii)	payments to PFPC Trust for its services hereunder;
(viii)	payments to a sub-custodian pursuant to provisions in sub-section (c) of this Section 14; and
(ix)	other payments, upon Written Instructions.

PFPC Trust is hereby authorized to endorse and collect all checks, drafts or other orders for the payment of money received as custodian for the Accounts.

(c) Receipt of Securities; Subcustodians.

(i)

PFPC Trust shall hold all securities received by it for the Accounts in a separate account that physically segregates such securities from those of any other persons, firms or corporations, except for securities held in a Book-Entry System or through a sub-custodian or depository. All such securities shall be held or disposed of only upon Written Instructions or otherwise pursuant to the terms of this Agreement. PFPC Trust shall have no power or authority to assign, hypothecate, pledge or otherwise dispose of any such securities or investment, except upon the express terms of this Agreement or upon Written Instructions authorizing the transaction. In no case may any member of the Fund’s Board of Directors, or any officer, employee or agent of the Fund withdraw any securities.

At PFPC Trust’s own expense and for its own convenience, PFPC Trust may enter into sub-custodian agreements with other banks or trust companies to perform duties described in this sub-section (c) with respect to domestic assets. Such bank or trust company shall have aggregate

capital, surplus and undivided profits, according to its last published report, of at least one million dollars ($1,000,000), if it is a subsidiary or affiliate of PFPC Trust, or at least twenty million dollars ($20,000,000) if such bank or trust company is not a subsidiary or affiliate of PFPC Trust. In addition, such bank or trust company must be qualified to act as custodian and agree to comply with the relevant provisions of applicable rules and regulations. Any such arrangement will not be entered into without prior written notice to the Fund (or as otherwise provided in the 1940 Act).

In addition, PFPC Trust may enter into arrangements with sub-custodians with respect to services regarding foreign assets. Any such arrangement will not be entered into without prior written notice to the Fund (or as otherwise provided in the 1940 Act).

PFPC Trust shall remain responsible for the acts and omissions of any sub-custodian chosen by PFPC Trust under the terms of this sub-section 14(c) to the same extent that PFPC Trust is responsible for its own acts and omissions under this Agreement.

(d) Transactions Requiring Instructions. Upon receipt of Oral Instructions or Written Instructions and not otherwise, PFPC Trust shall:

(i)	deliver any securities held for the Fund against the receipt of payment for the sale of such securities or otherwise in accordance with standard market practice;
(ii)	execute and deliver to such persons as may be designated in such Oral Instructions or Written Instructions, proxies, consents, authorizations, and any other instruments whereby the authority of the Fund as owner of any securities may be exercised;
(iii)	deliver any securities to the issuer thereof, or its agent, when such securities are called, redeemed, retired or otherwise become payable at the option of the holder; provided that, in any such case, the cash or other consideration is to be delivered to PFPC Trust;
(iv)	deliver any securities held for the Fund against receipt of other securities or cash issued or paid in connection with the liquidation, reorganization, refinancing, tender offer, merger, consolidation or recapitalization of any corporation, or the exercise of any conversion privilege;
(v)	deliver any securities held for the Fund to any protective committee, reorganization committee or other person in connection with the reorganization, refinancing, merger, consolidation, recapitalization or sale of assets of any corporation, and receive and hold under the terms of this

	Agreement such certificates of deposit, interim receipts or other instruments or documents as may be issued to it to evidence such delivery;
(vi)	make such transfer or exchanges of the assets of the Fund and take such other steps as shall be stated in said Oral Instructions or Written Instructions to be for the purpose of effectuating a duly authorized plan of liquidation, reorganization, merger, consolidation or recapitalization of the Fund;
(vii)	release securities belonging to the Fund to any bank or trust company for the purpose of a pledge or hypothecation to secure any loan incurred by the Fund; provided, however, that securities shall be released only upon payment to PFPC Trust of the monies borrowed, except that in cases where additional collateral is required to secure a borrowing already made subject to proper prior authorization, further securities may be released for that purpose; and repay such loan upon redelivery to it of the securities pledged or hypothecated therefor and upon surrender of the note or notes evidencing the loan;
(viii)	release and deliver securities owned by the Fund in connection with any repurchase agreement entered into by the Fund, but only on receipt of payment therefor; and pay out monies of the Fund in connection with such repurchase agreements, but only upon the delivery of the securities;
(ix)	release and deliver or exchange securities owned by the Fund in connection with any conversion of such securities, pursuant to their terms, into other securities;
(x)	release and deliver securities to a broker in connection with the broker’s custody of margin collateral relating to futures and options transactions;
(xi)	release and deliver securities owned by the Fund for the purpose of redeeming in kind shares of the Fund upon delivery thereof to PFPC Trust; and
(xii)	release and deliver or exchange securities owned by the Fund for other purposes.
	PFPC Trust must also receive a certified resolution describing the nature of the corporate purpose and the name and address of the person(s) to whom delivery shall be made when such action is pursuant to sub-paragraph d(xii).

(e) Use of Book-Entry System or Other Depository. PFPC Trust will deposit in Book-Entry Systems and other depositories all securities belonging to the Fund eligible for deposit therein and will utilize Book-Entry Systems and other

depositories to the extent possible in connection with settlements of purchases and sales of securities by the Fund, and deliveries and returns of securities loaned, subject to repurchase agreements or used as collateral in connection with borrowings. PFPC Trust shall continue to perform such duties until it receives Written Instructions or Oral Instructions authorizing contrary actions. Notwithstanding anything in this Agreement to the contrary, PFPC Trust’s use of a Book-Entry System shall comply with the requirements of Rule 17f-4 under the 1940 Act.

PFPC Trust shall administer a Book-Entry System or other depository as follows:

(i)	With respect to securities of the Fund which are maintained in a Book-Entry System or another depository, the records of PFPC Trust shall identify by book-entry or otherwise those securities as belonging to the Fund.
(ii)	Assets of the Fund deposited in a Book-Entry System or another depository will (to the extent consistent with applicable law and standard practice) at all times be segregated from any assets and cash controlled by PFPC Trust in other than a fiduciary or custodian capacity but may be commingled with other assets held in such capacities.

PFPC Trust will provide the Fund with such reports on its own system of internal control as the Fund may reasonably request from time to time.

(f) Registration of Securities. All securities held for the Fund which are issued or issuable only in bearer form, except such securities maintained in the Book-Entry System or in another depository, shall be held by PFPC Trust in bearer form; all other securities maintained for the Fund may be registered in the name of the Fund, PFPC Trust, a Book-Entry System, another depository, a sub-custodian, or any duly appointed nominee of the Fund, PFPC Trust, Book-Entry System, depository or sub-custodian. The Fund reserves the right to instruct PFPC Trust

as to the method of registration and safekeeping of the securities of the Fund. The Fund agrees to furnish to PFPC Trust appropriate instruments to enable PFPC Trust to maintain or deliver in proper form for transfer, or to register in the name of its nominee or in the name of the Book-Entry System or in the name of another appropriate entity, any securities which it may maintain for the Accounts. With respect to uncertificated securities which are registered in the name of the Fund (or a nominee thereof), PFPC Trust will reflect such securities on its records based upon the holdings information provided to it by the issuer of such securities, but notwithstanding anything in this Agreement to the contrary PFPC Trust shall not be obligated to safekeep such securities or to perform other duties with respect to such securities other than to make payment for the purchase of such securities upon receipt of Oral or Written Instructions, accept in sale proceeds received by PFPC Trust upon the sale of such securities of which PFPC Trust is informed pursuant to Oral or Written Instructions, and accept in other distributions received by PFPC Trust with respect to such securities or reflect on its records any reinvested distributions with respect to such securities of which it is informed by the issuer of the securities.

(g)

Voting and Other Action. Neither PFPC Trust nor its nominee shall vote any of the securities held pursuant to this Agreement by or for the account of the Fund, except in accordance with Written Instructions. PFPC Trust, directly or through “the use of another entity, shall execute in blank and promptly deliver all notices, proxies and proxy soliciting materials received by PFPC Trust as custodian of the Property to the registered holder of such securities. If the registered holder is not

	the Fund, then Written Instructions or Oral Instructions must designate the person who owns such securities.
(h)	Transactions Not Requiring Instructions. Notwithstanding anything in this Agreement requiring instructions in order to take a particular action, in the absence of a contrary Written Instruction, PFPC Trust is authorized to take the following actions without the need for instructions:

(i) Collection of Income and Other Payments.

(A)	collect and receive for the account of the Fund, all income, dividends, distributions, coupons, option premiums, other payments and similar items, included or to be included in the Property, and, in addition, promptly advise the Fund of such receipt and credit such income to the Fund’s custodian account;
(B)	endorse and deposit for collection, in the name of the Fund, checks, drafts, or other orders for the payment of money;
(C)	receive and hold for the account of the Fund all securities received as a distribution on the Fund’s securities as a result of a stock dividend, share split-up or reorganization, recapitalization, readjustment or other rearrangement or distribution of rights or similar securities issued with respect to any securities belonging to the Fund and held by PFPC Trust hereunder;
(D)	present for payment and collect the amount payable upon all securities which may mature or be called, redeemed, retired or otherwise become payable (on a mandatory basis) on the date such securities become payable; and
(E)	take any action which may be necessary and proper in connection with the collection and receipt of such income and other payments and the endorsement for collection of checks, drafts, and other negotiable instruments.

(ii) Miscellaneous Transactions.

(A) PFPC Trust is authorized to deliver or cause to be delivered Property against payment or other consideration or written receipt therefor in the following cases:

(1)	for examination by a broker or dealer selling for the account of the Fund in accordance with street delivery custom;
(2)	for the exchange of interim receipts or temporary securities for definitive securities; and
(3)	for transfer of securities into the name of the Fund or PFPC Trust or a sub-custodian or a nominee of one of the foregoing, or for exchange of securities for a different number of bonds, certificates, or other evidence, representing the same aggregate face amount or number of units bearing the same interest rate, maturity date and call provisions, if any; provided that, in any such case, the new securities are to be delivered to PFPC Trust,

(B) PFPC Trust shall:

(1)	pay all income items held by it which call for payment upon presentation and hold the cash received by it upon such payment for the account of the Fund;
(2)	collect interest and cash dividends received, with notice to the Fund, to the account of the Fund;
(3)	hold for the account of the Fund all stock dividends, rights and similar securities issued with respect to any securities held by PFPC Trust; and
(4)	subject to receipt of such documentation and information as PFPC Trust may request, execute as agent on behalf of the Fund all necessary ownership certificates required by a national governmental taxing authority or under the laws of any U.S. state now or hereafter in effect, inserting the Fund’s name on such certificate as the owner of the securities covered thereby, to the extent it may lawfully do so.

(iii) Other Matters

(A) Subject to receipt of such documentation and information as PFPC Trust may request, PFPC Trust will, in such jurisdictions as PFPC Trust may agree from time to time, seek to reclaim or obtain a reduction with respect to any withholdings or other taxes relating to assets maintained hereunder (provided that PFPC Trust will not be liable for failure to obtain any particular relief in a particular jurisdiction); and

(B) PFPC Trust is authorized to deduct or withhold any sum in respect of tax which PFPC Trust considers is required to be deducted or withheld “at source” by any relevant law or practice.

(i) Segregated Accounts,

(i) PFPC Trust shall upon receipt of Written Instructions or Oral Instructions establish and maintain segregated accounts on its records for and on behalf of the Fund. Such accounts may be used to transfer cash and securities, including securities in a Book-Entry System or other depository:

(A)	for the purposes of compliance by the Fund with the procedures required by a securities or option exchange, providing such procedures comply with the 1940 Act and any releases of the SEC relating to the maintenance of segregated accounts by registered investment companies; and
(B)	upon receipt of Written Instructions, for other purposes.

(ii) PFPC Trust shall arrange for the establishment of IRA custodian accounts for such shareholders holding Shares through IRA accounts, in accordance with the Fund’s prospectuses, the Internal Revenue Code of 1986, as amended (including regulations promulgated thereunder), and with such other procedures as are mutually agreed upon from time to time by and among the Fund, PFPC Trust and the Fund’s transfer agent.

(j) Purchases of Securities. PFPC Trust shall settle purchased securities upon receipt of Oral Instructions or Written Instructions that specify;

(i)	the name of the issuer and the title of the securities, including CUSIP number if applicable;
(ii)	the number of shares or the principal amount purchased and accrued interest, if any;
(iii)	the date of purchase and settlement;
(iv)	the purchase price per unit;
(v)	the total amount payable upon such purchase; and
(vi)	the name of the person from whom or the broker through whom the purchase was made. PFPC Trust shall upon receipt of securities purchased by or for the Fund (or otherwise in accordance with standard market practice) pay out of the monies held for the account of the Fund the total amount payable to the person from whom or the broker through whom the

purchase was made, provided that the same conforms to the total amount payable as set forth in such Oral Instructions or Written Instructions.

(k) Sales of Securities. PFPC Trust shall settle sold securities upon receipt of Oral Instructions or Written Instructions that specify:

(i)	the name of the issuer and the title of the security, including CUSIP number if applicable;
(ii)	the number of shares or principal amount sold, and accrued interest, if any;
(iii)	the date of trade and settlement;
(iv)	the sale price per unit;
(v)	the total amount payable to the Fund upon such sale;
(vi)	the name of the broker through whom or the person to whom the sale was made; and
(vii)	the location to which the security must be delivered and delivery deadline, if any.

PFPC Trust shall deliver the securities upon receipt of the total amount payable to the Fund upon such sale, provided that the total amount payable is the same as was set forth in the Oral Instructions or Written Instructions. Notwithstanding anything to the contrary in this Agreement, PFPC Trust may accept payment in such form as is consistent with standard industry practice and may deliver assets and arrange for payment in accordance with standard market practice.

(l) Reports; Proxy Materials.

(i) PFPC Trust shall furnish to the Fund the following reports:

(A)	such periodic and special reports as the Fund may reasonably request;
(B)	a monthly statement summarizing all transactions and entries for the account of the Fund, listing each portfolio security belonging to the Fund (with the corresponding security identification number) held at the end of such month and stating the cash balance of the Fund at the end of such month.

(C)	the reports required to be furnished to the Fund pursuant to Rule 17f-4 of the 1940 Act; and
(D)	such other information as may be agreed upon from time to time between the Fund and PFPC Trust.

(ii) PFPC Trust shall transmit promptly to the Fund any proxy statement, proxy material, notice of a call or conversion or similar communication received by it as custodian of the Property. PFPC Trust shall be under no other obligation to inform the Fund as to such actions or events. For clarification, upon termination of this Agreement PFPC Trust shall have no responsibility to transmit such material or to inform the Fund or any other person of such actions or events.

(m) Crediting of Accounts. PFPC Trust may in its sole discretion credit the Account with respect to income, dividends, distributions, coupons, option premiums, other payments or similar items prior to PFPC Trust’s actual receipt thereof, and in addition PFPC Trust may in its sole discretion credit or debit the assets in the Account on a contractual settlement date with respect to any sale, exchange or purchase applicable to the Account; provided that nothing herein or otherwise shall require PFPC Trust to make any advances or to credit any amounts until PFPC Trust’s actual receipt thereof. If PFPC Trust credits the Account with respect to (a) income, dividends, distributions, coupons, option premiums, other payments or similar items on a contractual payment date or otherwise in advance of PFPC Trust’s actual receipt of the amount due, (b) the proceeds of any sale or other disposition of assets on the contractual settlement date or otherwise in advance of PFPC Trust’s actual receipt of the amount due or (c) provisional crediting of any amounts due, and (i) PFPC Trust is subsequently unable to collect full and final payment for the amounts so credited within a reasonable time period using reasonable efforts or (ii) pursuant to standard industry practice, law or regulation PFPC Trust is required to repay to a third party such amounts so

credited, or if any Property has been incorrectly credited, PFPC Trust shall have the absolute right in its sole discretion without demand to reverse any such credit or payment, to debit or deduct the amount of such credit or payment from the Account, and to otherwise pursue recovery of any such amounts so credited from the Fund. The Fund hereby grants to PFPC Trust and to each sub-custodian utilized by PFPC Trust in connection with providing services to the Fund a first priority contractual possessory security interest in and a right of setoff against the assets maintained in the Account hereunder in the amount necessary to secure the return and payment to PFPC Trust and to each such sub-custodian of any advance or credit made by PFPC Trust and/or by such sub-custodian (including charges related thereto) to the Account. Notwithstanding anything in this Agreement to the contrary, PFPC Trust shall be entitled to assign any rights it has under this sub-section (m) to any sub-custodian utilized by PFPC Trust in connection with providing services to the Fund which sub-custodian makes any credits or advances with respect to the Fund.

(n)

Collections. All collections of monies or other property in respect, or which are to become part, of the Property (but not the safekeeping thereof upon receipt by PFPC Trust) shall be at the sole risk of the Fund. If payment is not received by PFPC Trust within a reasonable time after proper demands have been made, PFPC Trust shall notify the Fund in writing, including copies of all demand letters, any written responses and memoranda of all oral responses and shall await instructions from the Fund. PFPC Trust shall not be obliged to take legal action for collection unless and until reasonably indemnified to its satisfaction. PFPC

	Trust shall also notify the Fund as soon as reasonably practicable whenever income due on securities is not collected in due course and shall provide the Fund with periodic status reports of such income collected after a reasonable time.
(o)	Excess Cash Sweep. PFPC Trust will, consistent with applicable law, sweep any net excess cash balances daily into an investment vehicle or other instrument designated in writing by the Fund, so long as the investment vehicle or instrument is acceptable to PFPC Trust, subject to a fee, paid to PFPC Trust for such service, to be agreed between the parties. Such investment vehicle or instrument may be offered by an affiliate of PFPC Trust or by a PFPC Trust client and PFPC Trust may receive compensation therefrom.
(p)	Foreign Exchange. PFPC Trust and/or sub-custodians may enter into or arrange foreign exchange transactions (at such rates as they may consider appropriate) in order to facilitate transactions under this Agreement, and such entities and/or their affiliates may receive compensation in connection with such foreign exchange transactions.

15. Duration and Termination.

(a) This Agreement shall be effective on the date first written above and shall continue for a period of three (3) years (the “Initial Term”). Upon the expiration of the Initial Term, this Agreement shall automatically renew for successive terms of one (1) year (“Renewal Terms”) each, unless the Fund or PFPC provides written notice to the other of its intent not to renew. Such notice must be received not less than ninety (90) days prior to the expiration of the Initial Term or the then current Renewal Term.

(b)

In the event this Agreement is terminated (pending appointment of a successor to PFPC Trust or vote of the shareholders of the Fund to dissolve or to function without a custodian of its cash, securities or other property), PFPC Trust shall not deliver cash, securities or other property of the Fund. It may deliver them to a bank or trust company of PFPC Trust’s choice, having aggregate capital, surplus and undivided profits, as shown by its last published report, of not less than twenty million dollars ($20,000,000), as a custodian for the Fund to be held under terms similar to those of this Agreement. PFPC Trust shall not be required to make any delivery or payment of assets-upon termination until full payment shall have been made to PFPC Trust of all of its fees, compensation, costs and expenses (including without limitation fees and expenses associated with deconversion or conversion to another service provider and other trailing expenses incurred by PFPC Trust). PFPC Trust shall have a first priority contractual possessory security interest in and shall have a right of setoff against the Property as security for the payment of such fees, compensation, costs and expenses.

(c)

If a party hereto is guilty of a material failure to perform its duties and obligations hereunder (a “Defaulting Party”) the other party (the “Non-Defaulting Party”) may give written notice thereof to the Defaulting Party, and if such material breach shall not have been remedied within thirty (30) days after such written notice is given, then the Non-Defaulting Party may terminate this Agreement by giving thirty (30) days written notice of such termination to the Defaulting Party. In all cases, termination by the Non-Defaulting Party shall not constitute a waiver

by the Non-Defaulting Party of any other rights it might have under this Agreement or otherwise against the Defaulting Party.

16. Notices. Notices shall be addressed (a) if to PFPC Trust at 8800 Tinicum Boulevard, 3^rd Floor, Philadelphia, Pennsylvania 19153, Attention: Sam Sparhawk (or such other address as PFPC Trust may inform the Fund in writing); (b) if to the Fund, at c/o: MBIA-CMC at 113 King Street, Armonk, NY 10504, Attention: Clifford Corso, President; or (c) if to neither of the foregoing, at such other address as shall have been given by like notice to the sender of any such notice or other communication by the other party. If notice is sent by confirming electronic delivery, hand or facsimile sending device, it shall be deemed to have been given immediately. If notice is sent by first-class mail, it shall be deemed to have been given five days after it has been mailed. If notice is sent by messenger, it shall be deemed to have been given on the day it is delivered.

17. Amendments. This Agreement, or any term hereof, may be changed or waived only by a written amendment, signed by the party against whom enforcement of such change or waiver is sought.

18. Delegation; Assignment. PFPC Trust may assign its rights and delegate its duties hereunder to any affiliate of PFPC Trust or of The PNC Financial Services Group, Inc., provided that PFPC Trust gives the Fund 30 days’ prior written notice of such assignment or delegation. Except as noted above, this Agreement may be assigned only upon the written consent of the parties.

19. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

20. Miscellaneous.

(a)	Entire Agreement. This Agreement embodies the entire agreement and understanding between the parties and supersedes all prior agreements and understandings relating to the subject matter hereof, provided that the parties may embody in one or more separate documents their agreement, if any, with respect to delegated duties.
(b)	No Representations or Warranties. Except as expressly provided in this Agreement, PFPC Trust hereby disclaims all representations and warranties, express or implied, made to the Fund or any other person, including, without limitation, any warranties regarding quality, suitability, merchantability, fitness for a particular purpose or otherwise (irrespective of any course of dealing, custom or usage of trade), of any services or any goods provided incidental to services provided under this Agreement. PFPC Trust disclaims any warranty of title or non-infringement except as otherwise set forth in this Agreement.
(c)	No Changes that Materially Affect Obligations. Notwithstanding anything in this Agreement to the contrary, the Fund agrees not to make any modifications to its registration statement or adopt any policies which would affect materially the obligations or responsibilities of PFPC Trust hereunder without the prior written approval of PFPC Trust, which approval shall not be unreasonably withheld or delayed.
(d)	Captions. 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.

(e)	Information. The Fund will provide such information and documentation as PFPC Trust may reasonably request in connection with services provided by PFPC Trust to the Fund.
(f)	Governing Law. This Agreement shall be deemed to be a contract made in Delaware and governed by Delaware law, without regard to principles of conflicts of law.
(g)	Partial Invalidity. 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.
(h)	Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns.
(i)	Facsimile Signatures. The facsimile signature of any party to this Agreement shall constitute the valid and binding execution hereof by such party.
(j)	Customer Identification Program Notice. To help the U.S. government fight the funding of terrorism and money laundering activities, U.S. Federal law requires each financial institution to obtain, verify, and record certain information that identifies each person who initially opens an account with that financial institution on or after October 1, 2003. Consistent with this requirement, PFPC Trust may request (or may have already requested) the Fund’s name, address and taxpayer identification number or other government-issued identification number, and, if such party is a natural person, that party’s date of birth. PFPC Trust may also ask (and may have already asked) for additional identifying information, and

PFPC Trust may take steps (and may have already taken steps) to verify the authenticity and accuracy of these data elements.

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the day and year first above written.

PFPC TRUST COMPANY
By:	/s/ Edward A. Smith III
	Name:	Edward A. Smith III
	Title:	Vice President
1838 BOND DEBENTURE TRADING FUND
By:	/s/ Richard Walz
	Name:	Richard Walz
	Title:	Vice President

EX-99.2(K)(I)

Exhibit (2)(k)(i)

TRANSFER AGENCY SERVICES AGREEMENT

     THIS AGREEMENT is made as of December 16, 2005 by and between PFPC INC., a Massachusetts corporation (“PFPC”) and 1838 BOND DEBENTURE TRADING FUND, a Delaware corporation (the “Fund”).

W I T N E S S E T H:

     WHEREAS, the Fund is registered as a closed-end management investment company under the Investment Company Act of 1940, as amended (the “1940 Act”), which is listed on the New York Stock Exchange (“NYSE”); and

     WHEREAS, the Fund wishes to retain PFPC to serve as transfer agent, registrar, dividend disbursing agent and shareholder servicing agent and PFPC wishes to furnish such services.

     NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, and intending to be legally bound hereby, the parties hereto agree as follows:

1. Definitions. As Used in this Agreement:

(a)	“1933 Act” means the Securities Act of 1933, as amended.
(b)	“1934 Act” means the Securities Exchange Act of 1934, as amended.
(c)	“Authorized Person” means any officer of the Fund and any other person duly authorized by the Fund’s Board of Directors/Trustees to give Oral Instructions and Written Instructions on behalf of the Fund. An Authorized Person’s scope of authority may be limited by setting forth such limitation in a written document signed by both parties hereto.
(d)	“CEA” means the Commodities Exchange Act, as amended.
(e)	“Oral Instructions” mean oral instructions received by PFPC from an Authorized Person or from a person reasonably believed by PFPC to be an Authorized

	Person. PFPC may, in its sole discretion in each separate instance, consider and rely upon instructions it receives from an Authorized Person via electronic mail as Oral Instructions.
(f)	“SEC” means the Securities and Exchange Commission.
(g)	“Securities Laws” mean the 1933 Act, the 1934 Act, the 1940 Act and the CEA.
(h)	“Shares” mean the shares of beneficial interest of any series or class of the Fund.
(i)	“Written Instructions” mean (1) written instructions signed by an Authorized Person and received by PFPC or (ii) trade instructions transmitted (and received by PFPC) by means of an electronic transaction reporting system access to which requires use of a password or other authorized identifier. The instructions may be delivered electronically (with respect to sub-item (ii) above or by hand, mail, tested telegram, cable, telex or facsimile sending device.

2. Appointment. The Fund hereby appoints PFPC to serve as transfer agent, registrar, dividend disbursing agent and shareholder servicing agent to the Fund in accordance with the terms set forth in this Agreement. PFPC accepts such appointment and agrees to furnish such services.

3. Compliance with Rules and Regulations. PFPC undertakes to comply with all applicable requirements of the Securities Laws and any laws, rules and regulations of regulatory authorities having jurisdiction with respect to the duties to be performed by PFPC hereunder. Except as specifically set forth herein, PFPC assumes no responsibility for such compliance by. the Fund or any other entity.

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4. Instructions.

(a)	Unless otherwise provided in this Agreement, PFPC shall act only upon Oral Instructions or Written Instructions.
(b)	PFPC shall be entitled to rely upon any Oral Instruction or Written Instruction it receives from an Authorized Person (or from a person reasonably believed by PFPC to be an Authorized Person) pursuant to this Agreement. PFPC may assume that any Oral Instruction or Written Instruction received hereunder is not in any way inconsistent with the provisions of organizational documents or this Agreement or of any vote, resolution or proceeding of the Fund’s Board of Directors/Trustees or of the Fund’s shareholders, unless and until PFPC receives Written Instructions to the contrary.
(c)	The Fund agrees to forward to PFPC Written Instructions confirming Oral Instructions so that PFPC receives the Written instructions by the close of business on the same day that such Oral Instructions are received. The fact that such confirming Written Instructions are not received by PFPC or differ from the Oral Instructions shall in no way invalidate the transactions or enforceability of the transactions authorized by the Oral Instructions or PFPC’s ability to rely upon such Oral Instructions.

5. Right to Receive Advice.

(a) Advice of the Fund. If PFPC is in doubt as to any action it should or should not take, PFPC may request directions or advice, including Oral Instructions or Written Instructions, from the Fund.

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(b)	Advice of Counsel. If PFPC shall be in doubt as to any question of law pertaining to any action it should or should not take, PFPC may request advice from counsel of its own choosing (who may be counsel for the Fund, the Fund’s investment adviser or PFPC, at the option of PFPC).
(c)	Conflicting Advice. In the event of a conflict between directions or advice or Oral Instructions or Written Instructions PFPC receives from the Fund, and the advice it receives from counsel, PFPC may rely upon and follow the advice of counsel.
(d)	Protection of PFPC. PFPC shall be indemnified by the Fund and without liability for any action PFPC takes or does not take in reliance upon directions or advice or Oral Instructions or Written Instructions PFPC receives from or on behalf of the Fund or from counsel and which PFPC believes, in good faith, to be consistent with those directions or advice or Oral Instructions or Written Instructions. Nothing in this section shall be construed so as to impose an obligation upon PFPC (i) to seek such directions or advice or Oral Instructions or Written Instructions, or (ii) to act in accordance with such directions or advice or Oral Instructions or Written Instructions.

6. Records; Visits. The books and records pertaining to the Fund, which are in the possession or under the control of PFPC, shall be the property of the Fund. Such books and records shall be prepared and maintained as required by the 1940 Act and other applicable securities laws, rules and regulations. The Fund and Authorized Persons shall have access to such books and records at all times during PFPC’s normal business hours.

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Upon the reasonable request of the Fund, copies of any such books and records shall be provided by PFPC to the Fund or to an Authorized Person, at the Fund’s expense.

7. Confidentiality. Each party shall keep confidential any information relating to the other party’s business (“Confidential Information”). Confidential Information shall include (a) any data or information that is competitively sensitive material, and not generally known to the public, including, but not limited to, information about product plans, marketing strategies, finances, operations, customer relationships, customer profiles, customer lists, sales estimates, business plans, and internal performance results relating to the past, present or future business activities of the Fund or PFPC, their respective subsidiaries and affiliated companies; (b) any scientific or technical information, design, process, procedure, formula, or improvement that is commercially valuable and secret in the sense that its confidentiality affords the Fund or PFPC a competitive advantage over its competitors; (c) all confidential or proprietary concepts, documentation, reports, data, specifications, computer software, source code, object code, flow charts, databases, inventions, know-how, and trade secrets, whether or not patentable or copyrightable; and (d) anything designated as confidential. Notwithstanding the foregoing, information shall not be Confidential Information and shall not be subject to such confidentiality obligations if it: (a) is already known to the receiving party at the time it is obtained; (b) is or becomes publicly known or available through no wrongful act of the receiving party; (c) is rightfully received from a third party who, to the best of the receiving party’s knowledge, is not under a duty of confidentiality; (d) is released by the protected party to a third party without restriction; (e) is requested or required to be disclosed by the receiving party pursuant to a court order, subpoena, governmental or regulatory agency

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request or law (provided the receiving party will provide the other party written notice of the same, to the extent such notice is permitted); (f) is relevant to the defense of any claim or cause of action asserted against the receiving party; (g) is necessary or desirable for PFPC to release such information in connection with the provision of services under this Agreement; or (g) has been or is independently developed or obtained by the receiving party.

8. Cooperation with Accountants. PFPC shall cooperate with the Fund’s independent public accountants and shall take all reasonable actions in the performance of its obligations under this Agreement to ensure that the necessary information is made available to such accountants for the expression of their opinion, as required by the Fund.

9. PFPC System. PFPC shall retain title to and ownership of any and all data bases, computer programs, screen formats, report formats, interactive design techniques, derivative works, inventions, discoveries, patentable or copyrightable matters, concepts, expertise, patents, copyrights, trade secrets and other related legal rights utilized by PFPC in connection with the services provided by PFPC to the Fund.

10. Disaster Recovery. PFPC shall enter into and shall maintain in effect with appropriate parties one or more agreements making reasonable provisions for emergency use of electronic data processing equipment to the extent appropriate equipment is available. In the event of equipment failures, PFPC shall, at no additional expense to the Fund, take reasonable steps to minimize service interruptions. PFPC shall have no liability with respect to the loss of data or service interruptions caused by equipment failure, provided such loss or interruption is not caused by PFPC’s own willful misfeasance, bad faith, negligence or reckless disregard of its duties or obligations under this Agreement.

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11. Compensation.

(a)	As compensation for services rendered by PFPC during the term of this Agreement, the Fund will pay to PFPC a fee or fees as may be agreed to from time to time in writing by the Fund and PFPC. In addition, the Fund agrees to pay, and will be billed separately in arrears for, reasonable out-of-pocket expenses (which may include expenses allocated to PFPC) incurred by PFPC in the performance of its duties hereunder.
(b)	PFPC shall establish certain cash management accounts (“Service Accounts”) required to provide services under this Agreement. The Fund acknowledges (i) PFPC may receive investment earnings from sweeping the funds in such Service Accounts into investment accounts including, but not limited, investment accounts maintained at an affiliate or client of PFPC; (ii) balance credits earned with respect to the amounts in such Service Accounts (“Balance Credits”) will be used to offset the banking service fees imposed by the cash management service provider (the “Banking Service Fees”); (iii) PFPC shall retain any excess Balance Credits for its own use; and (iv) Balance Credits will be calculated and applied toward the Fund’s Banking Service Fees regardless of the Service Account balance sweep described in Sub-Section (i).
(c)	The Fund agrees that PFPC shall be afforded the opportunity to present or otherwise discuss with the Fund’s Board of Directors the terms of this Agreement, the fees and expenses associated with the Agreement and, if applicable, any benefits accruing to PFPC or to the adviser or sponsor of the Fund in connection with this Agreement, either prior to or a commercially reasonable time after the

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effective date of this Agreement (which may include the next regularly scheduled meeting of the Fund’s Board of Directors following the effective date of this Agreement).

12. Indemnification. The Fund agrees to indemnify, defend and hold harmless PFPC and its affiliates, including their respective officers, directors, agents and employees, from all taxes, charges, expenses, assessments, claims and liabilities (including, without limitation, attorneys’ fees and disbursements and liabilities arising under the Securities Laws and any state and foreign securities and blue sky laws) arising directly or indirectly from any action or omission to act which PFPC takes in connection with the provision of services to the Fund. Neither PFPC, nor any of its affiliates, shall be indemnified against any liability (or any expenses incident to such liability) caused by PFPC’s or its affiliates’ own willful misfeasance, bad faith, negligence or reckless disregard in the performance of PFPC’s activities under this Agreement, provided that in the absence of a finding to the contrary the acceptance, processing and/or negotiation of a fraudulent payment for the purchase of Shares shall be presumed not to have been the result of PFPC’s or its affiliates own willful misfeasance, bad faith, negligence or reckless disregard of such duties and obligations. The provisions of this Section 12 shall survive termination of this Agreement.

13. Responsibility of PFPC.

(a) PFPC shall be under no duty to take any action hereunder on behalf of the Fund except as specifically set forth herein or as may be specifically agreed to by PFPC and the Fund in a written amendment hereto. PFPC shall be obligated to exercise care and diligence in the performance of its duties hereunder and to act in good

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	faith in performing services provided for under this Agreement. PFPC shall be liable only for any damages arising out of PFPC’s failure to perform its duties under this Agreement to the extent such damages arise out of PFPC’s willful misfeasance, bad faith, gross negligence or reckless disregard of such duties.
(b)	Notwithstanding anything in this Agreement to the contrary, (i) PFPC shall not be liable for losses, delays, failure, errors, interruption or loss of data occurring directly or indirectly by reason of circumstances beyond its reasonable control, including without limitation acts of God; action or inaction of civil or military authority; public enemy; war; terrorism; riot; fire; flood; sabotage; epidemics; labor disputes; civil commotion; interruption, loss or malfunction of utilities, transportation, computer or communications capabilities; insurrection; elements of nature; or .non-performance by a third party; and (ii) PFPC shall not be under any duty or obligation to inquire into and shall not be liable for the validity or invalidity, authority or lack thereof, or truthfulness or accuracy or lack thereof, of any instruction, direction, notice, instrument or other information which PFPC reasonably believes to be genuine.
(c)	Notwithstanding anything in this Agreement to the contrary, (i) neither PFPC nor its affiliates, shall be liable for any consequential, special or indirect losses or damages, whether or not the likelihood of such losses or damages was known by PFPC or its affiliates and (ii) PFPC’s cumulative liability to the Fund for all losses, claims, suits, controversies, breaches or damages for any cause whatsoever (including but not limited to those arising out of or related to this Agreement) and regardless of the form of action or legal theory shall not exceed $100,000.

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(d)	Each party shall have a duty to mitigate damages for which the other party may become responsible.
(e)	The provisions of this Section 13 shall survive termination of this Agreement.
(f)	Notwithstanding anything in this Agreement to the contrary, PFPC shall have no liability either for any error or omission of any of its predecessors as servicer on behalf of the Fund or for any failure to discover any such error or omission.

14. Description of Services.

(a) Services Provided on an Ongoing Basis, if Applicable.

(i)	Maintain shareholder registrations;
(ii)	Provide toll-free lines for shareholder and broker-dealer use;
(iii)	Provide periodic shareholder lists and statistics;
(iv)	Mailing of year-end tax information; and
(v)	Periodic mailing of shareholder dividend reinvestment plan account information and Fund financial reports.

(b) Dividends and Distributions. PFPC must receive a resolution of the Fund’s Board of Directors authorizing the declaration and payment of dividends and distributions. Upon receipt of the resolution, PFPC shall issue the dividends and distributions in cash, or, if the resolution so provides, pay such dividends and distributions in Shares. Such issuance or payment shall be made after deduction and payment of the required amount of funds to be withheld in accordance with any applicable tax laws or other laws, rules or regulations. PFPC shall timely send to the Fund’s shareholders tax forms and other information, or permissible substitute notice, relating to dividends and distributions, paid by the Fund as are required to be filed and mailed by applicable law, rule or regulation. PFPC shall

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maintain and file with the United States Internal Revenue Service and other appropriate taxing authorities reports relating to all dividends above a stipulated amount (currently $10.00 accumulated yearly dividends) paid by the Fund to its shareholders as required by tax or other law, rule or regulation. In accordance with the Prospectus and such procedures. and controls as are mutually agreed upon from time to time by and among the Fund, PFPC and the Fund’s Custodian, PFPC shall process applications from Shareholders relating to the Fund’s Dividend Reinvestment Plan (“Dividend Reinvestment Plan”) and will affect purchases of Shares in connection with the Dividend Reinvestment Plan. As the dividend disbursing agent, PFPC shall, on or before the payment date of any such dividend or distribution, notify the fund accounting agent of the estimated amount required to pay any portion of said dividend or distribution which is payable in cash, and on or before the payment date of such distribution, the Fund shall instruct the custodian to make available to the dividend disbursing agent sufficient funds for the cash amount to be paid out. If a shareholder is entitled to receive additional Shares, by virtue of any distribution or dividend, appropriate credits will be made to his or her account and/or certificates delivered where requested, all in accordance with the Dividend Reinvestment Plan.

(c) Communications to Shareholders. Upon timely written instructions, PFPC shall mail all communications by the Fund to its shareholders, including:

(i)	Reports to shareholders;
(ii)	Monthly or quarterly dividend reinvestment plan statements;
(iii)	Dividend and distribution notices;
(iv)	Proxy material; and

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(v) Tax form information.

	PFPC will receive and tabulate the proxy cards for the meetings of the Fund’s shareholders.
(d)	Records. PFPC shall maintain records of the accounts for each shareholder showing the following information:

(i)	Name, address and United States Tax Identification or Social Security number;
(ii)	Number and class of shares held and number and class of shares for which certificates, if any, have been issued, including certificate numbers and denominations;
(iii)	Historical information regarding the account of each shareholder, including dividends and distributions paid and the date and price for all transactions on a shareholder’s account;
(iv)	Any stop or restraining order placed against a shareholder’s account;
(v)	Any correspondence relating to the current maintenance of a shareholder’s account;
(vi)	Information with respect to withholdings; and
(vii)	Any information required in order for the transfer agent to perform any calculations contemplated or required by this Agreement.

(e) Shareholder Inspection of Stock Records. Upon requests from Fund shareholders to inspect stock records, PFPC will notify the Fund and require instructions granting or denying each such request. Unless PFPC has acted contrary to the Fund’s instructions, the Fund agrees to release PFPC from any liability for refusal of permission for a particular shareholder to inspect the Fund’s shareholder records.

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15. Duration and Termination.

(a)	This Agreement shall be effective on the date first written above and shall continue for a period of three (3) years (the “Initial Term”).
(b)	Upon the expiration of the Initial Term, this Agreement shall automatically renew for successive terms of one (1) year (“Renewal Terms”) each, unless the Fund or PFPC provides written notice to the other of its intent not to renew. Such notice must be received not less than ninety (90) days prior to the expiration of the Initial Term or the then current Renewal Term.
(c)	In the event a termination notice is given by the Fund, any reasonable expenses associated with movement of records and materials and conversion thereof to a successor transfer agent will be borne by the Fund.
(d)	If a party hereto is guilty of a material failure to perform its duties and obligations hereunder (a “Defaulting Party”) the other party (the “Non-Defaulting Party”) may give written notice thereof to the Defaulting Party, and if such material breach shall not have been remedied within thirty (30) days after such written notice is given, then the Non-Defaulting Party may terminate this Agreement by giving thirty (30) days written notice of such termination to the Defaulting Party. In all cases, termination by the Non-Defaulting Party shall not constitute a waiver by the Non-Defaulting Party of any other rights it might have under this Agreement or otherwise against the Defaulting Party.

16. Notices. Notices shall be addressed (a) if to PFPC, at 301 Bellevue Parkway, Wilmington, Delaware 19809, Attention: President (or such other address as PFPC may inform the Fund in writing); (b) if to the Fund, at do: MBIA-CMC at 113 King Street,

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Armonk, NY 10504, Attention: Clifford Corso, President; or (c) if to neither of the foregoing, at such other address as shall have been given by like notice to the sender of any such notice or other communication by the other party. If notice is sent by confirming telegram, cable, telex or facsimile sending device, it shall be deemed to have been given immediately. If notice is sent by first-class mail, it shall be deemed to have been given three days after it has been mailed. If notice is sent by messenger, it shall be deemed to have been given on the day it is delivered.

17.

Amendments. This Agreement, or any term thereof, may be changed or waived only by a written amendment, signed by the party against whom enforcement of such change or waiver is sought.

18.	Delegation; Assignment. PFPC may assign its rights and delegate its duties hereunder to any majority-owned direct or indirect subsidiary of PFPC or of The PNC Financial Services Group, Inc., provided that PFPC gives the Fund 30 days prior written notice of such assignment or delegation. In addition, PFPC may, in its sole discretion, engage subcontractors to perform any of the obligations contained in this Agreement to be performed by PFPC, provided, however, PFPC shall remain responsible for the acts or omissions of any such sub-contractors. Except as noted above, this Agreement may be assigned only upon the written consent of the parties.
19.	Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
20.	Further Actions. Each party agrees to perform such further acts and execute such further documents as are necessary to effectuate the purposes hereof.

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21. Miscellaneous.

(a)	Entire Agreement. This Agreement embodies the entire agreement and understanding between the parties and supersedes all prior agreements and understandings relating to the subject matter hereof, provided that the parties may embody in one or more separate documents their agreement, if any, with respect to delegated duties.
(b)	No Changes that Materially Affect Obligations. Notwithstanding anything in this Agreement to the contrary, the Fund agrees not to make any modifications to its registration statement or adopt any policies which would affect materially the obligations or responsibilities of PFPC hereunder without the prior written approval of PFPC, which approval shall not be unreasonably withheld or delayed.
(c)	Captions. 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.
(d)	Information. The Fund will provide such information and documentation as PFPC may reasonably request in connection with services provided by PFPC to the Fund.
(e)	Governing Law. This Agreement shall be deemed to be a contract made in Delaware and governed by Delaware law, without regard to principles of conflicts of law.
(f)	Partial Invalidity. 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.

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(g)	Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns.
(h)	No Representations or Warranties. Except as expressly provided in this Agreement, PFPC hereby disclaims all representations and warranties, express or implied, made to the Fund or any other person, including, without Limitation, any warranties regarding quality, suitability, merchantability, fitness for a particular purpose or otherwise (irrespective of any course of dealing, custom or usage of trade), of any services or any goods provided incidental to services provided under this Agreement. PFPC disclaims any warranty of title or non-infringement except as otherwise set forth in this Agreement.
(i)	Facsimile Signatures. The facsimile signature of any party to this Agreement shall constitute the valid and binding execution hereof by such party.
(j)	Notwithstanding anything herein to the contrary, PFPC shall not, with respect to any “non-public personal information” (as such term is defined in Regulation S-P) pertaining to the Fund’s investors, disclose such information to any unaffiliated third party or use such information other than for the purpose of providing the services contemplated by this Agreement, or otherwise permitted under Regulation S-P, or under another agreement covering such information.
(k)	Customer Identification Program Notice. To help the U.S. government fight the funding of terrorism and money laundering activities, U.S. Federal law requires each financial institution to obtain, verify, and record certain information that identifies each person who initially opens an account with that financial

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institution on or after October 1, 2003. Certain of PFPC’s affiliates are financial institutions, and PFPC may, as a matter of policy, request (or may have already requested) the Fund’s name, address and taxpayer identification number or other government-issued identification number, and, if such party is a natural person, that party’s date of birth. PFPC may also ask (and may have already asked) for additional identifying information, and PFPC may take steps (and may have already taken steps) to verify the authenticity and accuracy of these data elements.

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     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the day and year first above written.

PFPC INC.

By: /s/ Michael G. McCarthy

Name: Michael G. McCarthy

Title: Sr. Vice President and General Manager

1838 BOND DEBENTURE TRADING FUND

By: /s/ Richard Walz

Name: Richard Walz

Title: Vice President

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EX-99.2(K)(II)

EXHIBIT (2)(k)(ii)

ADMINISTRATION AND ACCOUNTING SERVICES AGREEMENT

          THIS AGREEMENT is made as of August 17, 2005 by and between PFPC Inc., a Massachusetts corporation (“PFPC”) and 1838 BOND DEBENTURE TRADING FUND a Delaware corporation (the “Fund”).

WITNESSETH:

          WHEREAS, the Fund is registered as a closed-end management investment company under the Investment Company Act of 1940, as amended (the “1940 Act”); and

          WHEREAS, the Fund wishes to retain PFPC to provide administration and accounting services to the Fund, and PFPC wishes to furnish such services.

          NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, and intending to be legally bound hereby the parties hereto agree as follows:

1. Definitions. As Used in this Agreement:

a.	“1933 Act” means the Securities Act of 1933, as amended.
b.	“1934 Act” means the Securities Exchange Act of 1934, as amended.
c.	“Authorized Person” means any officer of the Fund and any other person duly authorized by the Fund’s Board of Directors to give Oral Instructions and Written Instructions on behalf of the Fund. An Authorized Person’s scope of authority may be limited by setting forth such limitation in a written document signed by both parties hereto.
d.	“CEA” means the Commodities Exchange Act, as amended.
e.	“Oral Instructions” mean oral instructions received by PFPC from an Authorized Person or from a person reasonably believed by PFPC to be an Authorized Person. PFPC may, in its sole discretion in each separate instance, consider and

rely upon instructions it receives from an Authorized Person via electronic mail as Oral Instructions.

f.	“SEC” means the Securities and Exchange Commission.
g.	“Securities Laws” means the 1933 Act, the 1934 Act, the 1940 Act and the CEA.
h.	“Shares” means the shares of beneficial interest of any series or class of the Fund.
i.	“Written Instructions” mean (i) written instructions signed by an Authorized Person and received by PFPC or (ii) trade instructions transmitted (and received by PFPC) by means of an electronic transaction reporting system access to which requires use of a password or other authorized identifier. The instructions may be delivered electronically (with respect to sub-item (ii) above) or by hand, mail, tested telegram, cable, telex or facsimile sending device.

2. Appointment. The Fund hereby appoints PFPC to provide administration and accounting services to the Fund, in accordance with the terms set forth in this Agreement. PFPC accepts such appointment and agrees to furnish such services.

3. Compliance with Rules and Regulations.

PFPC undertakes to comply with all applicable requirements of the Securities Laws, and any laws, rules and regulations of governmental authorities having jurisdiction with respect to the duties to be performed by PFPC hereunder. Except as specifically set forth herein, PFPC assumes no responsibility for such compliance by the Fund or other entity.

4. Instructions.

a. Unless otherwise provided in this Agreement, PFPC shall act only upon Oral Instructions or Written Instructions.

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b.

PFPC shall be entitled to rely upon any Oral Instruction or Written instruction it receives from an Authorized Person (or from a person reasonably believed by PFPC to be an Authorized Person) pursuant to this Agreement. PFPC may assume that any Oral Instruction or Written Instruction received hereunder is not in any way inconsistent with the provisions of organizational documents or this Agreement or of any vote, resolution or proceeding of the Fund’s Board of Directors or of the Fund’s shareholders, unless and until PFPC receives Written Instructions to the contrary.

c.

The Fund agrees to forward to PFPC Written Instructions confirming Oral Instructions (except where such Oral Instructions are given by PFPC or its affiliates) so that PFPC receives the Written Instructions by the close of business on the same day that such Oral Instructions are received. The fact that such confirming Written Instructions are not received by PFPC or differ from the Oral Instructions shall in no way invalidate the transactions or enforceability of the transactions authorized by the Oral Instructions or PFPC’s ability to rely upon such Oral Instructions.

5. Right to Receive Advice.

a.	Advice of the Fund. If PFPC is in doubt as to any action it should or should not take, PFPC may request directions or advice, including Oral Instructions or Written Instructions, from the Fund.
b.	Advice of Counsel. If PFPC shall be in doubt as to any question of law pertaining to any action it should or should not take, PFPC may request advice from counsel

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of its own choosing (who may be counsel for the Fund, the Fund’s investment adviser or PFPC, at the option of PFPC).

c.

Conflicting Advice. In the event of a conflict between directions or advice or Oral Instructions or Written Instructions PFPC receives from the Fund and the advice PFPC receives from counsel, PFPC may rely upon and follow the advice of counsel.

d.

Protection of PFPC. PFPC shall be indemnified by the Fund and without liability for any action PFPC takes or does not take in reliance upon directions or advice or Oral Instructions or Written instructions PFPC receives from or on behalf of the Fund or from counsel and which PFPC believes, in good faith, to be consistent with those directions or advice and Oral Instructions or Written Instructions. Nothing in this section shall be construed so as to impose an obligation upon PFPC (i) to seek such directions or advice or Oral Instructions or Written Instructions, or (ii) to act in accordance with such directions or advice or Oral Instructions or Written Instructions.

6. Records; Visits.

a. The books and records pertaining to the Fund which are in the possession or under the control of PFPC shall be the property of the Fund. Such books and records shall be prepared and maintained as required by the 1940 Act and other applicable securities laws, rules and regulations. The Fund and Authorized Persons shall have access to such books and records at all times during PFPC’s normal business hours. Upon the reasonable request of the Fund, copies of any such books and

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records shall be provided by PFPC to the Fund or to an Authorized Person, at the Fund’s expense.

b. PFPC shall keep the following records:

(i)	all books and records with respect to the Fund’s books of account;
(ii)	records of the Fund’s securities transactions; and
(iii)	all other books and records as PFPC is required to maintain pursuant to Rule 31a-1 of the 1940 Act in connection with the services provided hereunder.

7. Confidentiality. Each party shall keep confidential any information relating to the other party’s business (“Confidential Information”). Confidential Information shall include (a) any data or information that is competitively sensitive material, and not generally known to the public, including, but not limited to, information about product plans, marketing strategies, finances, operations, customer relationships, customer profiles, customer lists, sales estimates, business plans, and internal performance results relating to the past, present or future business activities of the Fund or PFPC, their respective subsidiaries and affiliated companies; (b) any scientific or technical information, design, process, procedure, formula, or improvement that is commercially valuable and secret in the sense that its confidentiality affords the Fund or PFPC a competitive advantage over its competitors; (c) all confidential or proprietary concepts, documentation, reports, data, specifications, computer software, source code, object code, flow charts, databases, inventions, know-how, and trade secrets, whether or not patentable or copyrightable; and (d) anything designated as confidential. Notwithstanding the foregoing, information shall not be Confidential Information and shall not be subject to such confidentiality obligations if it: (a) is already known to the receiving party at the time it is obtained; (b) is or

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becomes publicly known or available through no wrongful act of the receiving party; (c) is rightfully received from a third party who, to the best of the receiving party’s knowledge, is not under a duty of confidentiality; (d) is released by the protected party to a third party without restriction; (e) is requested or required to be disclosed by the receiving party pursuant to a court order, subpoena, governmental or regulatory agency request or law (provided the receiving party will provide the other party written notice of the same, to the extent such notice is permitted); (f) is relevant to the defense of any claim or cause of action asserted against the receiving party; (g) is necessary or desirable for PFPC to release such information in connection with the provision of services under this Agreement; or (h) has been or is independently developed or obtained by the receiving party.

8. Liaison with Accountants. PFPC shall act as liaison with the Fund’s independent public accountants and shall provide account analyses, fiscal year summaries, and other audit-related schedules with respect to the Fund. PFPC shall take all reasonable action in the performance of its duties under this Agreement to assure that the necessary information is made available to such accountants for the expression of their opinion, as required by the Fund.

9. PFPC System. PFPC shall retain title to and ownership of any and all data bases, computer programs, screen formats, report formats, interactive design techniques, derivative works, inventions, discoveries, patentable or copyrightable matters, concepts, expertise, patents, copyrights, trade secrets, and other related legal rights utilized by PFPC in connection with the services provided by PFPC to the Fund.

10. Disaster Recovery. PFPC shall enter into and shall maintain in effect with appropriate parties one or more agreements making reasonable provisions for emergency use of electronic data processing equipment to the extent appropriate equipment is available. In the event of

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equipment failures, PFPC shall, at no additional expense to the Fund, take reasonable steps to minimize service interruptions. PFPC shall have no liability with respect to the loss of data or service interruptions caused by equipment failure, provided such loss or interruption is not caused by PFPC’s own willful misfeasance, bad faith, negligence or reckless disregard of its duties or obligations under this Agreement.

11. Compensation.

a.

As compensation for services rendered by PFPC during the term of this Agreement, the Fund will pay to PFPC a fee or fees as may be agreed to in writing by the Fund and PFPC.

b.

The Fund agrees that PFPC shall be afforded the opportunity to present or otherwise discuss with the Fund’s Board of Directors the terms of this Agreement, the fees and expenses associated with the Agreement and, if applicable, any benefits accruing to PFPC or to the adviser or sponsor of the Fund in connection with this Agreement, either prior to or a commercially reasonable time after the effective date of this Agreement (which may include the next regularly scheduled meeting of the Fund’s Board of Directors following the effective date of this Agreement).

12. Indemnification. The Fund agrees to indemnify, defend and hold harmless PFPC and its affiliates, including their respective officers, directors, agents and employees, from all taxes, charges, expenses, assessments, claims and liabilities (including, without limitation, attorneys’ fees and disbursements and liabilities arising under the Securities Laws and any state and foreign securities and blue sky laws) arising directly or indirectly from any action or omission to act which PFPC takes in connection with the provision of services to the Fund. Neither PFPC, nor

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any of its affiliates, shall be indemnified against any liability (or any expenses incident to such liability) caused by PFPC’s or its affiliates’ own willful misfeasance, bad faith, negligence or reckless disregard in the performance of PFPC’s activities under this Agreement. The provisions of this Section 12 shall survive termination of this Agreement.

13. Responsibility of PFPC.

a.

PFPC shall be under no duty to take any action hereunder on behalf of the Fund except as specifically set forth herein or as may be specifically agreed to by PFPC and the Fund in a written amendment hereto. PFPC shall be obligated to exercise care and diligence in the performance of its duties hereunder and to act in good faith in performing services provided for under this Agreement. PFPC shall be liable only for any damages arising out of PFPC’s failure to perform its duties under this Agreement to the extent such damages arise out of PFPC’s willful misfeasance, bad faith, gross negligence or reckless disregard of such duties.

b.

Notwithstanding anything in this Agreement to the contrary, (i) PFPC shall not be liable for losses, delays, failure, errors, interruption or loss of data occurring directly or indirectly by reason of circumstances beyond its reasonable control, including without limitation acts of God; action or inaction of civil or military authority; public enemy; war; terrorism; riot; fire; flood; sabotage; epidemics; labor disputes; civil commotion; interruption, loss or malfunction of utilities, transportation, computer or communications capabilities; insurrection; elements of nature; or non-performance by a third party; and (ii) PFPC shall not be under any duty or obligation to inquire into and shall not be liable for the validity or invalidity, authority or lack thereof, or truthfulness or accuracy or lack thereof, of

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any instruction, direction, notice, instrument or other information which PFPC reasonably believes to be genuine.

c.	Notwithstanding anything in this Agreement to the contrary, (i) neither PFPC nor its affiliates shall be liable for any consequential, special or indirect losses or damages, whether or not the likelihood of such losses or damages was known by PFPC or its affiliates and (ii) PFPC’s cumulative liability to the Fund for all losses, claims, suits, controversies, breaches or damages for any cause whatsoever (including but not limited to those arising out of or related to this Agreement) and regardless of the form of action or legal theory shall not exceed $100,000.
d.	Each party shall have a duty to mitigate damages for which the other party may become responsible.
e.	The provisions of this Section 13 shall survive termination of this Agreement.
f.	Notwithstanding anything in this Agreement to the contrary, PFPC shall have no liability either for any error or omission of any of its predecessors as servicer on behalf of the Fund or for any failure to discover any such error or omission.

14. Description of Accounting Services on a Continuous Basis.

PFPC will perform the following accounting services with respect to the Fund:

(i)	Journalize investment, capital share and income and expense activities;
(ii)	Verify investment buy/sell trade tickets when received from the investment adviser for the Fund (the “Adviser”) and transmit trades to the Fund’s custodian (the “Custodian”) for proper settlement;
(iii)	Maintain individual ledgers for investment securities;
(iv)	Maintain historical tax lots for each security;
(v)	Reconcile cash and investment balances of the Fund with the Custodian;

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(vi)	Post to and prepare the Statement of Assets and Liabilities and the Statement of Operations;
(vii)	Calculate various contractual expenses (e.g., advisory and custody fees);
(viii)	Monitor the expense accruals and notify an officer of the Fund of any proposed adjustments;
(ix)	Control all disbursements and authorize such disbursements upon Written Instructions Calculate capital gains and losses;
(x)	Determine net income;
(xi)	Obtain security market quotes from independent pricing services approved by the Adviser, or if such quotes are unavailable, then obtain such prices from the Adviser, and in either case calculate the market value of the Fund’s investments;
(xii)	Transmit or mail a copy of the daily portfolio valuation to the Adviser;
(xiii)	Compute net asset value; and
(xiv)	As appropriate, compute yields, total return, expense ratios, portfolio turnover rate, and, if required, portfolio average dollar-weighted maturity.

15. Description of Administration Services on a Continuous Basis.

PFPC will perform the following administration services with respect to the Fund:

(i)	Prepare quarterly broker security transactions summaries;
(ii)	Prepare monthly security transaction listings;
(iii)	Supply various normal and customary Fund and Fund statistical data as requested on an ongoing basis;
(iv)	Prepare for execution and file the Fund’s Federal and state tax returns;

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(v)	Monitor the Fund’s status as a regulated investment company under Sub-chapter M of the Internal Revenue Code of 1986, as amended;
(vi)	Prepare and file with the SEC the Fund’s semi-annual reports on Form N-SAR;
(vii)	Prepare the Fund’s annual and semi-annual shareholder reports (including Form N-CSR), and if the parties agree in writing prepare the Fund’s Form N-Q and Form N-PX (provided that the Fund provides its voting record to PFPC in the format required by PFPC), and coordinate with the Fund’s financial printer the filing of Form N-CSR, and if mutually agreed, Forms N-Q and N-PX with the SEC;
(viii)	Provide compliance policies and procedures related to services provided by PFPC and, if mutually agreed, certain PFPC affiliates, summary procedures thereof and an annual certification letter; and
(ix)	Coordinate contractual relationships and communications between the Fund and its contractual service providers.

16. Duration and Termination.

a.	This Agreement shall be effective on the date first written above and shall continue for a period of three (3) years (the “Initial Term”).
b.	Upon the expiration of the Initial Term, this Agreement shall automatically renew for successive terms of one (1) year (“Renewal Terms”) each, unless the Fund or PFPC provides written notice to the other of its intent not to renew. Such notice must be received not less than ninety (90) days prior to the expiration of the Initial Term or the then current Renewal Term.

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c.

In the event a termination notice is given by the Fund, any reasonable expenses associated with movement of records and materials and conversion thereof to a successor service provider will be borne by the Fund.

d.

If a party hereto is guilty of a material failure to perform its duties and obligations hereunder (a “Defaulting Party”) the other party (the “Non-Defaulting Party”) may give written notice thereof to the Defaulting Party, and if such material breach shall not have been remedied within thirty (30) days after such written notice is given, then the Non-Defaulting Party may terminate this Agreement by giving thirty (30) days written notice of such termination to the Defaulting Party. In all cases, termination by the Non-Defaulting Party shall not constitute a waiver by the Non-Defaulting Party of any other rights it might have under this Agreement or otherwise against the Defaulting Party.

17. Notices. Notices shall be addressed (a) if to PFPC, at 301 Bellevue Parkway, Wilmington, Delaware 19809, Attention: President (or such other address as PFPC may inform the Fund in writing); (b) if to the Fund, at c/o: MBIA-CMC at 113 King Street, Armonk, NY 10504, Attention: Clifford Corso, President or (c) if to neither of the foregoing, at such other address as shall have been given by like notice to the sender of any such notice or other communication by the other party. If notice is sent by confirming telegram, cable, telex or facsimile sending device, it shall be deemed to have been given immediately. If notice is sent by first-class mail, it shall be deemed to have been given three days after it has been mailed. If notice is sent by messenger, it shall be deemed to have been given on the day it is delivered.

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18. Amendments. This Agreement, or any term thereof, may be changed or waived only by written amendment, signed by the party against whom enforcement of such change or waiver is sought.

19. Assignment. PFPC may assign its rights hereunder to any majority-owned direct or indirect subsidiary of PFPC or of The PNC Financial Services Group, Inc., provided that PFPC gives the Fund 30 days prior written notice of such assignment. Except as noted above, this Agreement may be assigned only upon the written consent of the parties.

20. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

21. Further Actions. Each party agrees to perform such further acts and execute such further documents as are necessary to effectuate the purposes hereof.

22. Miscellaneous.

a.

Notwithstanding anything in this Agreement to the contrary, the Fund agrees not to make any modifications to its registration statement or adopt any policies which would affect materially the obligations or responsibilities of PFPC hereunder without the prior written approval of PFPC, which approval shall not be unreasonably withheld or delayed.

b.

Except as expressly provided in this Agreement, PFPC hereby disclaims all representations and warranties, express or implied, made to the Fund or any other person, including, without limitation, any warranties regarding quality, suitability, merchantability, fitness for a particular purpose or otherwise (irrespective of any course of dealing, custom or usage of trade), of any services or any goods

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provided incidental to services provided under this Agreement. PFPC disclaims any warranty of title or non-infringement except as otherwise set forth in this Agreement.

c.	This Agreement embodies the entire agreement and understanding between the parties and supersedes all prior agreements and understandings relating to the subject matter hereof, provided that the parties may embody in one or more separate documents their agreement, if any, with respect to delegated duties. 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. Notwithstanding any provision hereof, the services of PFPC are not, nor shall they be, construed as constituting legal advice or the provision of legal services for or on behalf of the Fund or any other person.
d.	The Fund will provide such information and documentation as PFPC may reasonably request in connection with services provided by PFPC to the Fund.
e.	This Agreement shall be deemed to be a contract made in Delaware and governed by Delaware law, without regard to principles of conflicts of law.
f.	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 upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns.
g.	The facsimile signature of any party to this Agreement shall constitute the valid and binding execution hereof by such party.

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h. To help the U.S. government fight the funding of terrorism and money laundering activities, U.S. Federal law requires each financial institution to obtain, verify, and record certain information that identifies each person who initially opens an account with that financial institution on or after October 1, 2003. Certain of PFPC’s affiliates are financial institutions, and PFPC may, as a matter of policy, request (or may have already requested) the Fund’s name, address and taxpayer identification number or other government-issued identification number, and, if such party is a natural person, that party’s date of birth. PFPC may also ask (and may have already asked) for additional identifying information, and PFPC may take steps (and may have already taken steps) to verify the authenticity and accuracy of these data elements.

          IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the day and year first above written.

PFPC INC.
By:	/s/ Neal J. Andrews
	Title: Senior Vice President
1838 BOND DEBENTURE TRADING FUND
By:	/s/ Marc D. Morris
	Title: Treasurer

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EX-99.2(R)

Exhibit 2 (r)

AMENDED AND RESTATED

JOINT CODE OF ETHICS

OF

RIVUS BOND FUND

AND

MBIA CAPITAL MANAGEMENT CORP.

PREAMBLE

This Code of Ethics (the “Code”) has been adopted by:

• the Board of Trustees (the “Board of Trustees” or the “Board”) of RIVUS Bond Fund (the “Fund”); and

• MBIA Capital Management Corp. (“MBIA”).

The Code has been adopted in accordance with the requirements of Rule 17j-l (the “1940 Act Rule”) under the investment Company Act of 1940, as amended (the “1940 Act”) and Rule 204A-l (the “Adviser Rule”; together with the 1940 Act Rule, the “Rules”) under the Investment Advisers Act of 1940, as amended (the “Advisers Act”). The 1940 Act Rule requires the Fund and MBIA and the Adviser Rule requires MBIA to adopt a written code of ethics containing provisions reasonably necessary to prevent certain persons from engaging in acts in violation of the Code and the Rules, and to use reasonable diligence to prevent violations of the Code. Violations of sub-paragraph (b) of the 1940 Act Rule may constitute grounds for the imposition of significant administrative, civil injunctive and monetary sanctions by the U.S. Securities and Exchange Commission or the federal courts. In addition, the Fund may impose internal sanctions for violations of this Code. All persons who are, or who are about to become, covered by this Code are expected to be familiar with the proscriptions of the 1940 Act Rule. To that end, a summary of Rule 17j-1(b) is included as Appendix A to this Code. Additionally, all persons who are, or who are about to become, covered by this Code should be familiar with the proscriptions of the Adviser Rule.

Set forth below is the Code of Ethics adopted by the Fund and MBIA in compliance with the Rules. This Code is based on the overriding principle that the financial interests of any individual employed or otherwise engaged by or with the Fund or MBIA must at all times be subordinate to those of the Fund and MBIA’s clients. To that end, the Trustees and officers of the Fund, as well as certain affiliated persons of the Fund and MBIA owe a fiduciary duty to, inter alios, the shareholders of the Fund, to conduct their affairs, including their personal securities transactions, in such manner to avoid (i) serving their personal interests ahead of or with prejudice to the interests of the Fund’s shareholders; (ii) taking inappropriate advantage of their position with the Fund; and (iii) any actual or potential conflicts of interest or any abuse of their position of trust and responsibility. Compliance with the letter and intent of the specific provisions described

herein, as well as compliance with all applicable Federal Securities Laws, is required under the Code and is essential to continuing to be affiliated with MBIA or the Fund.

I. DEFINITIONS

The definitions of the terms used throughout this Code are set forth in Appendix B.

II. PROHIBITED TRANSACTIONS

     A. No Access Person shall engage in any act, practice or course of conduct, which would violate the provisions of Rule 17j-1 set forth in Appendix A.

     B. No Access Person shall:

          1. purchase or sell, directly or indirectly, any security in which he or she has or by reason of such transaction acquires, any direct or indirect beneficial ownership and which to his or her actual knowledge at the time of such purchase or sale:

               a. is being considered for purchase or sale by the Fund, or

               b. is being purchased or sold by the Fund;

          2. disclose to other persons the securities activities engaged in or contemplated for the Fund; or

          3. seek or accept anything of value, either directly or indirectly, from broker-dealers or other persons providing services to the Fund because of such Access Person’s association with the Fund. For the purposes of this provision, the following gifts from broker-dealers or other persons providing services to the Fund will not be considered to be in violation of this section:

               a. an occasional meal;

               b. an occasional ticket to a sporting event, the theater or comparable entertainment; provided, however, that the host attends with the Access Person; and

               c. a holiday gift of fruit or other foods or beverages; provided, however, that such gift is made available to all members of the recipient Access Person’s department.

     C. No Investment Personnel and no Access Person of MBIA shall:

          1. acquire directly or indirectly any beneficial ownership in any securities in an IPO or in a Limited Offering without prior approval of the Chief Compliance Officer or other person designated by the Fund’s Board of Trustees. Any person to whom such prior approval is granted shall disclose such investment in the event that such person is involved in the Fund’s subsequent consideration of an investment in the issuer making such IPO or Limited Offering. In such circumstances, the Fund’s decision to purchase securities of the issuer shall be subject to

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independent review by the Fund’s Independent Trustees and/or such of its officers with no personal interest in the issuer.

          2. profit in the purchase and sale, or sale and purchase, of the same (or equivalent) securities within 60 calendar days without approval of the Chief Compliance Officer or other person designated by the Fund’s Board of Trustees. Any profits realized on such short-term trades shall be subject to disgorgement, except that the provisions in this paragraph II(C)(2) shall not apply to the purchase and sale, or sale and purchase, of MBIA inc. stock options.

          3. serve on the board of Trustees of any publicly traded company without prior authorization of the Chairman and/or President of the Fund. Any such authorization shall be based upon a determination that the board service would be consistent with the interests of the Fund and the shareholders of the Fund, as the case may be.

          4. buy or sell a Covered Security within at least seven calendar days before or after the Fund trades in that security. Any profits realized on trades within the proscribed period are required to be disgorged.

III. EXEMPTED TRANSACTIONS

The prohibitions of Sections II(B) and II(C) of this Code shall not apply to:

     A. purchases or sales effected in any account over which the Access Person has no direct or indirect influence or control;

     B. purchases or sales which are non-volitional on the part of either the Access Person or the Fund;

     C. purchases which are part of an automatic dividend reinvestment plan;

     D. purchases effected upon the exercise of rights issued by an issuer pro-rata to all holders of a class of its securities, to the extent such rights were acquired from such issuer, and sales of such rights so acquired; or

     E. purchases or sales of shares of the Fund.

IV. COMPLIANCE PROCEDURES

     A. Pre-clearance

          1. With the exception of the Independent Trustees, all Access Persons shall receive prior approval from the Chief Compliance Officer or other officer designated by the Board of Trustees before purchasing or selling securities.

          2. The following transactions are exempt from prior clearance requirements:

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• Mutual Funds — purchases or redemptions of shares of any open-end investment company, including an open-end fund managed by MBIA or its affiliates; and

• U.S. Government Obligations — purchases or sales of direct obligations of the U.S. government.

     B. Initial and Annual Holdings Reports

          1. All Access Persons, except the Independent Trustees, shall disclose to the Chief Compliance Officer within ten days of becoming an Access Person, and thereafter on an annual basis as of December 31:

               a. the title and type of security, and as applicable the exchange ticker symbol or CUSIP number, number of shares, and principal amount of each Covered Security in which the Access Person has any direct or indirect beneficial ownership,

               b. the name of any broker, dealer or bank with whom the Access Person maintains a securities account or in which securities are held for the direct or indirect benefit of the Access Person; and

               c. The date the Access Person discloses the information.

          2. The initial and annual reports shall be made on the appropriate forms attached under Appendix C. The information submitted under this paragraph must be current as of a date no more than 45 days prior to the date the person becomes an Access Person or no more than 45 days prior to the date the report was submitted, in the case of the annual reports.

     C. Quarterly Reports

          1. Every Access Person, except as provided in subparagraph (2) below, shall report to the Chief Compliance Officer the information described below with respect to transactions in any Covered Security in which such person has, or by reason of such transaction acquires, any direct or indirect beneficial ownership in the security; provided, however, that an Access Person shall not be required to make a report with respect to transactions effected for any account over which such person has no direct or indirect influence or control.

          2. Each Independent Director need only report, on a quarterly basis, a transaction in a Covered Security if such Trustee, at the time of that transaction knew or, in the ordinary course of fulfilling his or her official duties as a Trustee, should have known that, during the 15-day period immediately preceding or after the date of the transaction by the Trustee, such security was purchased or sold by the Trust or was being considered for purchase or sale by the Fund or by MBIA on behalf of the Fund.

          3. Reports required to be made under this paragraph (C) shall be made not later than 30 days after the end of the calendar quarter. Every Access Person shall, except as provided in subparagraph (2) above, be required to submit a quarterly report for all periods, including those periods in which no securities transactions were effected. A report shall be made on the

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Securities Transaction Report form attached hereto under Appendix C or on any other form containing the following information:

               a. With respect to any transaction during the quarter in a Covered Security in which the Access Person had any direct or indirect beneficial ownership:

                    i) the date of the transaction, the title, and as applicable the exchange ticker symbol or CUSIP number, interest rate and maturity date, number of shares, and principal amount of each Covered Security involved;

                    ii) the nature of the transaction (i.e., purchase, sale or any other type of acquisition or disposition);

                    iii) the price at which the transaction in the Covered Security was effected;

                    iv) the name of the broker, dealer or bank with or through which the transaction was effected; and

                    v) the date that the report is submitted by the Access Person.

               b. With respect to any securities account established at a broker, dealer or bank during the quarter for the direct or indirect benefit of the Access Person:

                    i) the name of the broker, dealer or bank with whom the Access Person established the account;

                    ii) the date the account was established; and

                    iii) the date that the report is submitted by the Access Person.

          4. Any such report may contain a statement that the report shall not be construed as an admission by the person making such report that he or she has any direct or indirect beneficial ownership in the security to which the report relates.

     D. Broker Confirmations

With the exception of the Independent Trustees, every Access Person shall direct his or her brokers to supply to the Chief Compliance Officer, on a timely basis, duplicate copies of the confirmation of all personal securities transactions and copies of all periodic statements for all securities accounts.

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     E. Notification of Reporting Obligation

The Chief Compliance Officer shall notify each Access Person that he or she is subject to these reporting requirements, and shall deliver a copy of this Code and any amendments hereto to each such person.

     F. Certification of Receipt and Compliance with Code of Ethics

          1. With the exception of the Independent Trustees, Access Persons shall certify annually that:

               a. they have received, read and understand the Code and recognize that they are subject thereto;

               b. they have complied with the requirements of the Code; and

               c. they have reported all personal securities transactions required to be reported pursuant to the requirements of the Code.

          2. With the exception of the Independent Trustees, Access Persons shall certify that they have received, read and understand any amendments to this Code and recognize they are subject thereto.

     G. Conflict of interest

Every Access Person shall notify the Chief Compliance Officer of any personal conflict of interest relationship which may involve the Fund or the Adviser, such as the existence of any economic relationship between transactions and securities held or to be acquired by any of the Fund. Such notification shall occur, except in the case of the Independent Trustees, in the pre-clearance process.

     H. Review of Reports

The Chief Compliance Officer or a designee shall immediately review all holdings reports submitted by each Access Person, including confirmations of personal securities transactions, to ensure that no trading has taken place in violation of the Rules or this Code. Any violations of this Code shall be reported to the Board of Trustees, in accordance with Section V hereof. The Chief Compliance Officer shall maintain a list of the persons responsible for reviewing the transactions and holdings reports.

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V. REPORTING OF VIOLATIONS

     A. Any violation of this Code must promptly be reported to the Chief Compliance Officer.

     B. The Chief Compliance Officer shall promptly report to the Board of Trustees:

          1. all apparent violations of this Code and the reporting requirements thereunder; and

          2. any reported transaction in a Covered Security which was purchased or sold by the Fund within 15 days before or after the date of the reported transaction.

     C. When the Chief Compliance Officer finds that a transaction otherwise reportable to the Board of Trustees under paragraph (B) of this Section could not reasonably be found to have resulted in a fraud, deceit or manipulative practice in violation of Rule 17j-l(b), it may, in its discretion, lodge a written memorandum of such finding and the reasons therefor with the reports made pursuant to this Code of Ethics, in lieu of reporting the transaction to the Board.

     D. The Board of Trustees or a committee created by the Board for that purpose, shall consider reports made to the Board hereunder and shall determine whether or not this Code has been violated and what sanctions, if any, should be imposed

VI. ANNUAL REPORTING

     A. The Chief Compliance Officer and MBIA shall furnish the Board of Trustees an annual report relating to this Code. Such annual report shall:

          1. describe any issues arising under this Code since the last such annual report;

          2. identify any material violations of this Code or procedures, including sanctions imposed in response to such violations, since the last such annual report;

          3. identify any recommended changes in the existing restrictions or procedures based upon the Fund’s experience under its Code, evolving industry practices or developments in applicable laws or regulations; and

          4. certify that the Fund and MBIA have adopted procedures reasonably necessary to prevent Access Persons from violating the Code.

VII. SANCTIONS

Upon discovering a violation of this Code, the Board of Trustees or, in the case of Access Persons of the Adviser, the Chief Compliance Officer, may impose such sanctions as they deem appropriate, including, among other things, a letter of censure or suspension or termination of the employment of the violator.

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VIII. RETENTION OF RECORDS

This Code, a list of all persons required to make reports hereunder from time to time, a copy of each report made by Access Persons hereunder, a list of all persons responsible for reviewing the reports required hereunder, a record of any decision, and the reasons supporting the decision, to approve the acquisition by Investment Personnel or Access Persons of securities in an IPO or Limited Offering, each memorandum made by the Chief Compliance Officer hereunder and a record of any violation hereof and any action taken as a result of such violation, shall be maintained by the Fund as required under the Rules.

IX. ADOPTION AND APPROVAL:

The Board of Trustees, including a majority of the Independent Trustees, shall approve this Code after receiving the certification described below, and shall approve any material changes to this Code no later than six months after the adoption of such material change.

Before approving this Code or any amendment to this Code, the Board shall have received a certification from the Fund and MBIA that it has adopted procedures reasonably necessary to prevent Access Persons from violating this Code.

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APPENDIX A
Summary of Rule 17j-1(b)

It shall be unlawful for

• any affiliated person of, or principal underwriter for, a registered investment company, or

• any affiliated person of an investment adviser of, or principal underwriter for, a registered investment company

in connection with the purchase or sale, directly or indirectly, by such person of a security held or to be acquired [see Note below] . . . by such registered investment company:

               (1) to employ any device, scheme or artifice to defraud such registered investment company;

               (2) to make to such registered investment company

• any untrue statement of a material fact or

• omit to state to such registered investment company a material fact necessary in order to make the statements made, in light of the circumstances under which they are made, not misleading;

               (3) to engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any such registered investment company; or

               (4) to engage in any manipulative practice with respect to such registered investment company.

NOTE:

For purposes of Rule 17j-1, a “security held or to be acquired” by a registered investment company means”

                    i) any Covered Security within the meaning of the Rule (see the definition of the term “Covered Security” in Appendix B to this Code) which, within the most recent fifteen (15) calendar days:

• is or has been held by the investment company; or

• is being or has been considered by such company, or its investment adviser, for purchase by the company

                    ii) any option to purchase or sell, and any security convertible into or exchangeable for, a Covered Security described above.

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APPENDIX B
Definitions of Terms Used Within the Code of Ethics

          a. “Access Person” means:

                    i) Any Advisory Person of the Fund or of MBIA. All of the Trust’s Trustees, officers and general partners are presumed to be Access Persons.

                    ii) Any director, officer, or general partner of a principal underwriter who, in the ordinary course of business, makes, participates in or obtains information regarding the purchase or sale of Covered Securities by the Trust for which the principal underwriter acts, or whose functions or duties in the ordinary course of business relate to the making of any recommendations to the Trust regarding the purchase or sale of Covered Securities.

                    iii) With respect to MBIA, only, any supervised persons: who have access to nonpublic information regarding any clients’ purchase or sale of securities, or nonpublic information regarding the portfolio holdings of any reportable fund, or who is involved in making securities recommendations to clients, or who has access to such recommendations that are nonpublic. All Trustees, officers and partners of MBIA are presumed to be Access Persons.

          b. “Advisory Person” means

                    i) any director, officer, general partner or employee of the Fund or MBIA (or of any company in control relationship to the Fund or MBIA) who, in connection with his or her regular functions or duties, makes, participates in, or obtains information regarding the purchase or sale of Covered Securities by the Fund, or whose functions relate to the making of any recommendations with respect to such purchases or sales;

                    ii) and any natural person in a control relationship to the Fund or MBIA, who obtains information concerning recommendations made to the Fund with regard to the purchase or sale of a Covered Security by the Fund.

          c. A security is “being considered for purchase or sale” or is “being purchased or sold” when a recommendation to purchase or sell the security has been made and communicated to the Trading Desk, which includes when the Fund has a pending “buy” or “sell” order with respect to a security, and, with respect to the person making the recommendation, when such person seriously considers making such a recommendation.

          d. “Beneficial ownership” shall be as defined in, and interpreted in the same manner as it would be in determining whether a person is subject to the provisions of, Section 16 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the rules and regulations thereunder which, generally speaking, encompasses those situations where the beneficial owner has the right to enjoy some economic benefit from the ownership of the security regardless of who is the registered owner. This would include:

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                    i) securities which a person holds for his or her own benefit either in bearer form, registered in his or her own name or otherwise regardless of whether the securities are owned individually or jointly;

                    ii) securities held in the name of a member of his or her immediate family (spouse, minor child and adults) sharing the same household;

                    iii) securities held by a trustee, executor, administrator, custodian or broker;

                    iv) securities owned by a general partnership of which the person is a member or a limited partnership of which such person is a general partner;

                    v) securities held by a corporation which can be regarded as a personal holding company of a person; and

                    vi) securities recently purchased by a person and awaiting transfer into his or her name.

          e. “Chief Compliance Officer” means the Chief Compliance Officer of the Fund.

          f. “Control” has the same meaning as that set forth in Section 2(a)(9) of the 1940 Act.

          g. “Covered Security” means a security as defined in Section 2(a)(36) of the 1940 Act, except that it shall not include

                    i) direct obligations of the Government of the United States;

                    ii) bankers’ acceptances, bank certificates of deposit, commercial paper and high quality short-term debt instruments, including repurchase agreements; and

                    iii) shares issued by registered open-end investment companies.

          h. “Federal Securities Laws” includes the Securities Act of 1933, as amended (the “Securities Act”), the Exchange Act, the 1940 Act, the Advisers Act, the Sarbanes-Oxley Act of 2002, Title V of Gramm-Leach-Bliley Act, any rules adopted by the Securities and Exchange Commission under any of these statutes, the Bank Secrecy Act as it applies to funds and investment advisers, and any rules adopted thereunder by the Securities and Exchange Commission or the Department of the Treasury.

          i. “Independent Trustee” means a Trustee of the Fund who is not an “interested person” of the Fund, within the meaning of Section 2(a)(19) of the 1940 Act.

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          j. “Initial Public Offering” (“IPO”) means an offering of securities registered under the Securities Act, the issuer of which, immediately before the registration, was not subject to the reporting requirements of Sections 13 or 15(d) of the Exchange Act.

          k. “Investment Personnel” means:

                    i) any employee of the Fund, or MBIA (or of any company in a control relationship to the Fund or MBIA), who, in connection with his regular functions or duties, makes or participates in making recommendations regarding the purchase or sale of securities by the Fund; and

                    ii) any natural person who controls the Fund, or MB1A and who obtains information concerning recommendations made to the Fund regarding the purchase or sale of securities by the Fund.

          l. “Limited Offering” means an offering that is exempt from registration under the Securities Act pursuant to Section 4(2) or Section 4(6) or pursuant to Rule 504, Rule 505 or Rule 506 under the Securities Act.

          m. “Purchase or Sale of a Covered Security” includes the writing of an option to purchase or sell a Covered Security.

          n. “Security Held or to be Acquired” by the Fund means:

                    i) any Covered Security which, within the most recent fifteen (15) days:

               (a) is or has been held by the Fund; or

               (b) is being or has been considered by the Fund or MBIA for purchase by the Trust or the Fund; and

                    i) any option to purchase or sell, and any security convertible into or exchangeable for, a Covered Security described in paragraph (m)(i) of this section.

          o. “Security” as defined in Section 2(a)(36) of the 1940 Act means any note, stock, treasury stock, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, collateral-trust certificate, preorganization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit for a security, fractional undivided interest in oil, gas, or other mineral rights, any put, call, straddle, option, or privilege on any security (including a certificate of deposit) or on any group or index of securities (including any interest therein or based on the value thereof), or any put, call, straddle, option, or privilege entered into in a national securities exchange relating to foreign currency, or, in general, any interest or instrument commonly known as a “security,” or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase, any of the foregoing.

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APPENDIX C

RIVUS BOND FUND

MBIA CAPITAL MANAGEMENT CORP.

JOINT CODE OF ETHICS

INITIAL HOLDINGS REPORT

To the Chief Compliance Officer of RIVUS Bond Fund or MBIA Capital Management Corp.

2.	I hereby acknowledge receipt of a copy of the Joint Code of Ethics for the Fund and MBIA.
3.	I have read and understand the Code and recognize that I am subject thereto in the capacity of an “Access Person.”
4.	Except as noted below, I hereby certify that I have no knowledge of the existence of any personal conflict of interest relationship which may involve the Fund, such as any economic relationship between my transactions and securities held or to be acquired by the Fund.
5.	As of the date below I had a direct or indirect beneficial ownership interest in the following securities:

Name of Securities (including
Ticker Symbol or CUSIP	Number of Shares and	Type of Interest
Number, if applicable)	Principal Amount	(Direct or Indirect)

6. As of the date below, the following is a list of all brokers, dealers or banks with whom I maintain an account in which securities are held for my direct or indirect benefit:

		Type of Interest
Firm	Account	(Direct or Indirect)

Date:	Signature:
	Print Name:
	Title:
	Employer’s Name:

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RIVUS BOND FUND

MBIA CAPITAL MANAGEMENT CORP.

JOINT CODE OF ETHICS

ANNUAL HOLDINGS REPORT

To the Chief Compliance Officer of RIVUS Bond Fund or MBIA Capital Management Corp.

     I have read and understand the Joint Code of Ethics and recognize that I am subject thereto in the capacity of an “Access Person.”

7.	I hereby certify that, during the year ended December 31,                     , I have complied with the requirements of the Code and I have reported all securities transactions required to be reported pursuant to the Code.
8.	Except as noted below, I hereby certify that I have no knowledge of the existence of any personal conflict of interest relationship which may involve the Fund, such as any economic relationship between my transactions and securities held or to be acquired by the Fund.
9.	As of December 31,           , I had a direct or indirect beneficial ownership interest in the following securities:

Name of Securities (including
Ticker Symbol or CUSIP	Number of Shares and	Type of Interest
Number, if applicable)	Principal Amount	(Direct or Indirect)

10. As of December 31, ___, the following is a list of all brokers, dealers, or banks with whom I maintain an account in which securities are held for my direct or indirect benefit:

		Type of Interest
Firm	Account	(Direct or Indirect)

Date:	Signature:
	Print Name:
	Title:
	Employer’s Name:

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RIVUS BOND FUND

MBIA CAPITAL MANAGEMENT CORP.

Securities Transactions Report

For the Calendar Quarter Ended:                     

To the Chief Compliance Officer of RIVUS Bond Fund or MBIA Capital Management Corp.:

     During the quarter referred to above, the following transactions were effected in securities of which I had, or by reason of such transaction acquired, direct or indirect beneficial ownership, and which are required to be reported pursuant to the Joint Code of Ethics adopted by the Fund.

SECURITY
(including interest
rate and maturity
date, if applicable						BROKER/
and ticker symbol				NATURE OF		DEALER OF BANK
or CUSIP number,	DATE OF		DOLLAR AMOUNT OF	TRANSACTION		THROUGH WHOM
if applicable)	TRANSACTION	NO. OF SHARES	TRANSACTION	(Purchase, Sale, Other)	PRICE	EFFECTED

     During the quarter referred to above, the following accounts were established by me in which securities were held for my direct or indirect benefit:

FIRM NAME	DATE ACCOUNT WAS
(broker, dealer or bank)	ESTABLISHED	ACCOUNT NUMBER

     This report (i) excludes transactions with respect to which I had no direct or indirect influence or control, (ii) excludes other transactions not required to be reported, and (iii) is not an admission that I have or had any direct or indirect beneficial ownership in the securities listed above.

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     Except as noted on the reverse side of this report, I hereby certify that I have no knowledge of the existence of any personal conflict of interest relationship which may involve the Fund, such as the existence of any economic relationship between my transactions and securities held or to be acquired by the Fund.

Date:	Signature:
	Print Name:
	Title:
Employer’s Name:

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EXHIBIT B

RIVUS BOND FUND

CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND
SENIOR FINANCIAL OFFICERS

Purpose of the Code

          The purpose of this code of ethics (the “Code”) is to promote:

• honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;

• full, fair, accurate, timely and understandable disclosure in reports and documents that a registrant files with, or submits to, the Securities and Exchange Commission (“SEC”) and in other public communications made by the registrant;

• compliance with applicable laws and governmental rules and regulations;

• the prompt internal reporting of violations of the Code to an appropriate person or persons identified in the Code; and

• accountability for adherence to the Code.

          Each Covered Officer (defined below) should adhere to a high standard of business ethics and should be sensitive to situations that may give rise to actual as well as apparent conflicts of interest.

X. Covered Officers

          This Code applies to the Principal Executive Officer and the Principal Financial Officer (the “Covered Officers”) of RIVUS Bond Fund (the “Fund”). The names of the Covered Officers of the Fund are listed on Exhibit A.

XI. Covered Officer’s Actual and Apparent Conflicts of Interest

          A “conflict of interest” occurs when a Covered Officer’s private interest interferes with the interests of, or his or her service to, the Fund. For example, a conflict of interest would arise if a Covered Officer, or a member of his or her family, receives improper personal benefits as a result of his or her position with the Fund.

          Certain conflicts of interest arise out of the relationships between Covered Officers and the Fund and already are subject to conflict of interest provisions in the investment Company Act of 1940 (“Investment Company Act”) and the Investment Advisers Act of 1940

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(“Investment Advisers Act”). For example, Covered Officers may not individually engage in certain transactions (such as the purchase or sale of securities or other property) with the Fund because of their status as “affiliated persons” of the Fund. The Fund’s and the investment adviser’s compliance programs and procedures are designed to prevent, or identify and correct, violations of these provisions. This Code does not, and is not intended to, repeat or replace these programs and procedures, and such conflicts fall outside of the parameters of this Code.

          Although typically not presenting an opportunity for improper personal benefit, conflicts arise from, or as a result of, the contractual relationship between the Fund and the investment adviser, or any other service provider, of which the Covered Officers are also officers or employees. As a result, this Code recognizes that the Covered Officers will, in the normal course of their duties (whether formally for the Fund, for the adviser, for other Fund service providers, or for all of them), be involved in establishing policies and implementing decisions that will have different effects on the adviser, other service providers, and the Fund. The participation of the Covered Officers in such activities is inherent in the contractual relationship between the Fund and the adviser or other service provider and is consistent with the performance by the Covered Officers of their duties as officers of the Fund. Thus, if performed in conformity with the provisions of the Investment Company Act and the Investment Advisers Act, such activities will be deemed to have been handled ethically. In addition, it is recognized by the Fund’s Board of Trustees, (“the Board”) that the Covered Officers may also be officers or employees of one or more other investment companies covered by this or other codes.

          Other conflicts of interest are covered by this Code, even if such conflicts of interest are not subject to provisions in the Investment Company Act and the Investment Advisers Act. The following list provides examples of conflicts of interest under the Code, but Covered Officers should keep in mind that these examples are not exhaustive. The overarching principle is that the personal interest of a Covered Officer should not be placed improperly before the interest of the Fund.

          Each Covered Officer must:

• not use his or her personal influence or personal relationships improperly to influence investment decisions or financial reporting by the Fund whereby the Covered Officer would benefit personally to the detriment of the Fund;

• not cause the Fund to take action, or fail to take action, for the individual personal benefit of the Covered Officer rather than the benefit the Fund;

• report to the Fund’s Board any affiliations or other relationships related to conflicts of interest that are disclosed on the Fund’s Trustees and Officers Questionnaire;

          There are some conflict of interest situations that should always be approved by the Chief Compliance Officer of the Fund, if material. Examples of these include:

• service as a director on the board of any public or private company;

• the receipt of any gifts of more than a de minimis value;

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• the receipt of any entertainment from any company with which the Fund has current or prospective business dealings unless such entertainment is business-related, reasonable in cost, appropriate as to time and place, and not so frequent as to raise any question of impropriety;

• any ownership interest in, or any consulting or employment relationship with, any of the Fund’s service providers, other than its investment adviser, principal underwriter, administrator or any affiliated person thereof;

• a direct or indirect financial interest in commissions, transaction charges or spreads paid by the Fund for effecting portfolio transactions or for selling or redeeming shares other than an interest arising from the Covered Officer’s employment, such as compensation or equity ownership.

XII. Disclosure and Compliance

• Each Covered Officer should familiarize himself or herself with the disclosure requirements generally applicable to the Fund;

• Each Covered Officer should not knowingly misrepresent, or cause others to misrepresent, facts about the Fund to others, whether within or outside the Fund, including to the Fund’s Trustees and auditors, and to governmental regulators and self-regulatory organizations;

• Each Covered Officer should, to the extent appropriate within his or her area of responsibility, consult with other officers and employees of the Fund, the adviser, and other affiliated service providers with the goal of promoting full, fair, accurate, timely and understandable disclosure in the reports and documents the Fund’s file with, or submit to, the SEC and in other public communications made by the Fund; and

• It is the responsibility of each Covered Officer to promote compliance with the standards and restrictions imposed by applicable laws, rules and regulations.

XIII. Reporting and Accountability

          Each Covered Officer must:

• upon adoption of the Code (or thereafter as applicable, upon becoming a Covered Officer), affirm in writing to the Board that he or she has received, read, and understands the Code;

• annually thereafter affirm to the Board that he or she has complied with the requirements of the Code;

• not retaliate against any other Covered Officer or any employee of the Fund or their affiliated persons for reports of potential violations that are made in good faith; and

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• notify the Independent Trustees promptly if he or she knows of any violation of this Code. Failure to do so is itself a violation of this Code.

          The Chief Compliance Officer of the Fund’s investment adviser is responsible for applying this Code to specific situations in which questions are presented under it and has the authority to interpret this Code in any particular situation.¹ However, any approvals or waivers² sought by a Covered Officer will be considered by the Audit Committee of the Board (the “Committee”).

          The Fund will follow these procedures in investigating and enforcing this Code:

• the Chief Compliance Officer will take all appropriate action to investigate any potential violations reported to him;

• if, after such investigation, the Chief Compliance Officer believes that no violation has occurred, the Chief Compliance Officer is not required to take any further action;

• any matter that the Chief Compliance Officer believes is a violation will be reported to the Committee;

• if the Committee concurs that a violation has occurred, it will inform and make a recommendation to the Board, which will consider appropriate action, which may include review of, and appropriate modifications to, applicable policies and procedures; notification to appropriate personnel of the investment adviser or its board; or a recommendation to dismiss the Covered Officer;

• the Committee will be responsible for granting waivers, as appropriate; and

• any changes to or waivers of this Code will, to the extent required, be disclosed as provided by SEC rules.

XIV. Other Policies and Procedures

          This Code shall be the sole code of ethics adopted by the Fund for purposes of Section 406 of the Sarbanes-Oxley Act and the rules and forms applicable to registered investment companies thereunder. Insofar as other policies or procedures of the Fund, the Fund’s adviser or other service providers govern or purport to govern the behavior or activities of the Covered Officers who are subject to this Code, they are superseded by this Code to the extent that they overlap or conflict with the provisions of this Code. The Fund’s and its

1

The Chief Compliance Officer is authorized to consult, as appropriate, with the chair of the Committee and/or, counsel to the Company, and is encouraged to do so.

2

Item 2 of Form N-CSR defines “waiver” as “the approval by the registrant of a material departure from a provision of the code of ethics” and “implicit waiver,” which must also be disclosed, as “the registrant’s failure to take action within a reasonable period of time regarding a material departure from a provision of the code of ethics that has been made known to an executive office” of the registrant.

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investment adviser’s codes of ethics under Rule 17j-l under the Investment Company Act and the adviser’s more detailed policies and procedures set forth in are separate requirements applying to the Covered Officers and others, and are not part of this Code.

XV. Amendments

          Any amendments to this Code, other than amendments to Exhibit A, must be approved or ratified by a majority vote of the Board, including a majority of independent Trustees or trustees, as the case may be.

XVI. Confidentiality

          All reports and records prepared or maintained pursuant to this Code will be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law or this Code, such matters shall not be disclosed to anyone other than the appropriate Board and its counsel.

XVII. Internal Use

          The Code is intended solely for the internal use by the Fund and does not constitute an admission, by or on behalf of the Fund, as to any fact, circumstance, or legal conclusion.

Date: March 2006

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EXHIBIT A

Persons Covered by this Code of Ethics

Clifford Corso

Marc Morris

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EX-99.2(S)

Exhibit (2)(s)

POWER OF ATTORNEY

Each of the undersigned Trustees of Rivus Bond Fund (the “Fund”) hereby appoints each of Leonard I. Chubinsky, Clifford D. Corso, Mark D. Morris and Richard J. Walz as attorneys-in-fact and agents, in all capacities, to execute and to file any and all Registration Statements, and any and all amendments, under the Securities Act of 1933 and the Investment Company Act of 1940, as amended, covering the registration of the Fund as an investment company and the sale of shares of the Fund, also including all exhibits and any and all documents required to be filed with respect thereto with the Securities and Exchange Commission or any regulatory authority. Each of the undersigned grants to said attorneys full authority to do every act necessary to be done in order to effectuate the same as fully, to all intents and purposes, as he could do if personally present, thereby ratifying all that said attorneys-in-fact and agents may lawfully do or cause to be done by virtue hereof.

The undersigned Trustees hereby execute this Power of Attorney as of this 21st day of January 2009.

/s/ W. Thacher Brown  

W. Thacher Brown 

/s/ J. Lawrence Shane  

J. Lawrence Shane 

The undersigned Trustees hereby execute this Power of Attorney as of this 22nd day of January 2009.

/s/ Suzanne P. Welsh  

Suzanne P. Welsh 

/s/ Morris Lloyd, Jr.  

Morris Lloyd, Jr. 

CORRESP

3000 Two Logan Square
Eighteenth and Arch Streets
Philadelphia, PA 19103-2799
215.981.4000
Fax 215.981.4750

(215) 981-4506
delrasoj@pepperlaw.com

January 26, 2009

VIA EDGAR

Filing Desk
U.S. Securities and Exchange Commission
100 F Street, NE
Washington, D.C. 20549

Re:	Rivus Bond Fund (the “Fund”)
	1940 Act Filing No. 811-02201

Dear Ladies and Gentlemen:

          On behalf of the Fund, transmitted herewith for filing is a registration statement on Form N-2 (the “Registration Statement”) under the Securities Act of 1933, as amended (the “1933 Act”). Such Registration Statement also constitutes Amendment No. 24 to the Fund’s registration statement under the Investment Company Act of 1940, as amended. The Fund is a non-diversified closed-end investment company whose shares are listed on the New York Stock Exchange (“NYSE”) (Ticker Symbol: BDF).

          The Registration Statement relates to the registration, under the 1933 Act, of shares of beneficial interest upon exercise of transferable rights to subscribe to such shares. As described in the Registration Statement, shareholders on the record date will receive one Right for each outstanding share of beneficial interest owned. The rights entitle a shareholder to purchase one new share of beneficial interest for every three rights owned. In addition, shareholders of record who fully exercise their rights may purchase shares not acquired by other shareholders in the Rights Offering through an over-subscription privilege. The rights are transferable and are expected to be listed and trade on the NYSE. Such securities will be offered on a delayed or continuous basis in reliance on Rule 415 under the 1933 Act.

          Registration fees of $995.22 with respect to the filing has been submitted with this filing (Fed. Ref. No. 0123D3B74V3C002341).

Philadelphia		Boston		Washington, D.C.		Detroit		New York		Pittsburgh
	Berwyn		Harrisburg		Orange County		Princeton		Wilmington

www.pepperlaw.com

U.S. Securities and Exchange Commission
January 26, 2009

Page 2

          Please direct your comments and questions to the undersigned at 215.981.4506 or, in his absence, John P. Falco, Esq. at 215.981.4659.

Very truly yours,

/s/ Joseph V. Del Raso

Joseph V. Del Raso

cc:     John P. Falco, Esq.