Credit Suisse Warburg Pincus Capital Funds
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466 LEXINGTON AVENUE, NEW YORK, NEW YORK 10017
Toll Free (800) 225-8011
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STATEMENT OF ADDITIONAL INFORMATION
dated February 28, 2001
The Credit Suisse Warburg Pincus Capital Funds is a "series fund"
comprised of the following diversified, open-end investment management
companies, commonly known as "mutual funds": Credit Suisse Warburg Pincus Blue
Chip Fund, Credit Suisse Warburg Pincus Value Fund, Credit Suisse Warburg Pincus
Small Company Value Fund, Credit Suisse Warburg Pincus Fixed Income II Fund and
Credit Suisse Warburg Pincus Municipal Trust Fund (individually, a "Fund" and
collectively, the "Capital Funds" or the "Funds"). The Credit Suisse Warburg
Pincus Capital Funds is empowered to expand the series by establishing
additional Funds with investment objectives and policies that differ from those
of the current Funds. The Credit Suisse Warburg Pincus Capital Funds also may
offer additional classes of shares.
This Statement of Additional Information (the "SAI") is not a
prospectus and should be read in conjunction with the Credit Suisse Warburg
Pincus Capital Funds' current Prospectus dated February 28, 2001 (the
"Prospectus"), as supplemented from time to time, which is incorporated herein
by reference. A copy of the Prospectus may be obtained by contacting the Credit
Suisse Warburg Pincus Capital Funds at the address or telephone number listed
above.
TABLE OF CONTENTS
PAGE
Fund History..................................................................4
Description Of The Funds And Their Investments And Risks......................6
Management Of The Funds......................................................49
Investment Advisory And Other Services.......................................56
Brokerage Allocation And Other Practices.....................................69
Capital Stock And Organization...............................................75
Purchases, Redemptions, Exchanges And Pricing Of Fund Shares.................79
Shareholder Investment Account...............................................94
Net Asset Value..............................................................97
Taxes, Dividends, And Distributions.........................................100
Performance Information.....................................................108
General Information.........................................................112
Financial Statements........................................................113
Appendix I - Description Of Security Ratings................................A-1
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FUND HISTORY
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The Credit Suisse Warburg Pincus Capital Funds (formerly the DLJ
Focus Funds) were organized under the laws of the Commonwealth of Massachusetts
on November 26, 1985 as a "business trust" under the name "Winthrop Focus
Funds."
On January 19, 1999, the name was changed from "Winthrop Focus
Funds" to "DLJ Winthrop Focus Funds"; on July 31, 2000 to "DLJ Focus Funds" and
subsequently to "Credit Suisse Warburg Pincus Capital Funds" on January 18,
2001.
In addition, on the latest date the names of Growth Fund, Growth and
Income Fund, Small Company Value Fund, Fixed Income Fund and Municipal Trust
Fund Series were changed to Credit Suisse Warburg Pincus Blue Chip Fund, Credit
Suisse Warburg Pincus Value Fund, Credit Suisse Warburg Pincus Small Company
Value Fund, Credit Suisse Warburg Pincus Fixed Income II Fund and Credit Suisse
Warburg Pincus Municipal Trust Fund, respectively.
The Board of Trustees of the Credit Suisse Warburg Pincus Capital
Funds has approved, subject to shareholder approval at special meetings of
shareholders scheduled for March 23, 2001, the transfer to the Acquiring Fund
listed below of all of the assets and liabilities of the Acquired Fund in
exchange for shares of the Acquiring Fund.
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Acquired Fund Acquiring Fund
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Credit Suisse Warburg
Pincus Fixed Income II Fund Warburg Pincus Fixed Income Fund
Credit Suisse Warburg
Pincus Municipal Trust Fund Warburg, Pincus Municipal Bond Fund, Inc.
Each of the Acquiring Funds has an investment objective and
strategies substantially similar to the investment objective and strategies of
the Acquired Fund to be acquired by it. Shareholders of each Acquired Fund would
receive on a tax-free basis shares of the relevant Acquiring Fund with the same
net asset value as their shares of the Acquired Fund. The investment advisory
fees of the Acquiring Funds would in each case be the same as the relevant
Acquired Funds, and Credit Suisse Asset Management, LLC ("CSAM" or the
"Adviser") has agreed to reimburse expenses of each Acquiring Fund as necessary
so that for the two-year period following the consummation of each acquisition
the annualized expense ratio of each Acquired Fund would not increase above its
expense ratio for the 60-day period prior to consummation of the acquisitions.
Each acquisition would be consummated promptly after receipt of shareholder
approval.
The Board of Trustees of the Credit Suisse Warburg Pincus Capital
Funds has approved the transfer of all of the assets and liabilities of the
Warburg, Pincus Small Company Value II Fund, Inc. and the Warburg, Pincus Value
II Fund, Inc. in exchange for shares of the Credit Suisse Warburg Pincus Small
Company Value Fund and the Credit Suisse Warburg Pincus Value Fund,
respectively. These acquisitions are subject to the approval of shareholders of
the relevant Warburg, Pincus Fund and, if approved, would be consummated in
early June, 2001.
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DESCRIPTION OF THE FUNDS AND THEIR INVESTMENTS AND RISKS
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(a) Classification
Each of the Funds is a diversified open-end management investment
company.
(b) Investment Strategies and Risks
The following investment policies and restrictions supplement, and
should be read in conjunction with, the information set forth under the heading
"Credit Suisse Warburg Pincus Funds' Investment Objectives and Policies" in the
Prospectus. Except as noted in the Prospectus and in this SAI, the Funds'
investment policies are not fundamental and may be changed by the Trustees of
the Credit Suisse Warburg Pincus Capital Funds without shareholder approval;
however, shareholders will be notified prior to a significant change in such
policies. A Fund's fundamental investment restrictions may not be changed
without shareholder approval as defined in "Investment Restrictions" in this
SAI. Credit Suisse Warburg Pincus Capital Funds' investment adviser is CSAM.
I. Credit Suisse Warburg Pincus Blue Chip Fund, Credit Suisse
Warburg Pincus Small Company Value Fund
and Credit Suisse Warburg Pincus Value Fund
The investment objective of the Credit Suisse Warburg Pincus Blue
Chip Fund is long-term capital appreciation. It seeks to achieve this objective
by investing principally in common stock, securities convertible into common
stock and other equity
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securities (i.e., preferred stock, interests in master limited partnerships) of
well-known and established companies (generally, companies in operation for more
than three years) which, in the opinion of the Adviser, have the potential for
long-term capital appreciation. There can be no assurance that the Credit Suisse
Warburg Pincus Blue Chip Fund's investment objective will be achieved.
The investment objective of the Credit Suisse Warburg Pincus Value
Fund is long-term capital appreciation and continuity of income. It seeks to
achieve this objective by investing principally in dividend-paying common stock
and diversifying its investments among different industries and different
companies. Accordingly, the Value Fund invests in securities on the basis of the
Adviser's evaluation of their investment merit and their potential for
appreciation in value and/or income. The selection of securities on the basis of
their capital appreciation or income potential cannot ensure against possible
loss in value. There can be no assurance that the Credit Suisse Warburg Pincus
Value Fund's investment objective will be achieved.
The investment objective of the Credit Suisse Warburg Pincus Small
Company Value Fund is a high level of growth of capital. It seeks to achieve
this objective by investing principally in common stock and securities
convertible into common stock, but it may, when deemed appropriate by the
Adviser, invest part of its assets in preferred stock, other equity securities,
bonds or other debt securities as described below. There can be no assurance
that the Credit Suisse Warburg Pincus Small Company Value Fund's investment
objective will be achieved.
The Credit Suisse Warburg Pincus Small Company Value Fund will
pursue its investment objective by employing a value-oriented investment
approach. The
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Adviser's research efforts may also play a greater role in selecting securities
for the Credit Suisse Warburg Pincus Small Company Value Fund than in a fund
that invests in larger, more established companies. The Credit Suisse Warburg
Pincus Small Company Value Fund seeks securities that appear to be underpriced
and are issued by companies with proven management, consistent earnings, sound
finances and strong potential for market growth. By investing in such companies,
the Small Company Value Fund tries to enhance the potential for appreciation and
limit the risk of decline in the value of its portfolio. The Credit Suisse
Warburg Pincus Small Company Value Fund focuses on the fundamentals of each
small-cap company instead of trying to anticipate what changes might occur in
the stock market, the economy, or the political environment. This approach
differs from that used by many other funds investing in small-cap company
stocks. Those funds often buy stocks of companies they believe will have
above-average earnings growth, based on anticipated future developments. In
contrast, the Credit Suisse Warburg Pincus Small Company Value Fund's securities
are generally selected with the belief that they are currently undervalued based
on existing conditions, and that their earning power or franchise value does not
appear to be reflected in their current stock price. In addition, to further
reduce risk, the Credit Suisse Warburg Pincus Small Company Value Fund
diversifies its holdings among many companies and industries. Other factors
considered in the selection of securities include whether a company has an
established presence in its industry, a product or market niche or whether
management owns a significant stake in the company's operation.
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For a further description of the Funds' investment objectives and
policies, see "Credit Suisse Warburg Pincus Funds' Investment Objective and
Policies" in the Prospectus.
Warrants
The Credit Suisse Warburg Pincus Blue Chip Fund and the Credit
Suisse Warburg Pincus Small Company Value Fund each may invest up to 5% of their
respective total assets in warrants. Warrants may be considered more speculative
than certain other types of investments in that they do not entitle a holder to
dividends or voting rights with respect to the securities which may be
purchased, nor do they represent any rights in the assets of the issuing
company. Also, the value of a warrant does not necessarily change in proportion
to the value of the underlying securities and a warrant ceases to have value if
it is not exercised prior to the expiration date.
Foreign Securities
The Credit Suisse Warburg Pincus Blue Chip Fund and the Credit
Suisse Warburg Pincus Value Fund may invest up to 10% of the value of their
respective total assets in securities of issuers doing business primarily
outside the U.S. or domiciled outside the U.S. ("foreign securities") and the
Credit Suisse Warburg Pincus Small Company Value Fund may invest up to 20% of
the value of its total assets in foreign securities. Investment in foreign
securities involves certain risks not ordinarily associated with investments in
securities of domestic issuers. These risks include fluctuations in foreign
exchange rates, future political and economic developments, and the possible
imposition of exchange controls or other foreign governmental laws or
restrictions. In addition, with respect to certain countries, there is the
possibility of expropriation of
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assets, confiscatory taxation, political or social instability or diplomatic
developments which could adversely affect investments in those countries.
There may be less publicly available information about a foreign
company than about a U.S. company, and foreign companies may not be subject to
accounting, auditing and financial reporting standards and requirements
comparable to or as uniform as those to which U.S. companies are subject.
Non-U.S. securities markets, while experiencing increases in the volume of
securities traded, generally have substantially less volume than U.S. markets,
and securities of many foreign companies are less liquid and their prices more
volatile than securities of comparable U.S. companies. Transaction costs
associated with investing in non-U.S. securities markets generally are higher
than in the U.S. There is generally less government supervision and regulation
of exchanges, brokers and issuers than in the U.S. The Funds might have greater
difficulty taking appropriate legal action in non-U.S. courts. Non-U.S. markets
also have different clearance and settlement procedures, which in some markets
have at times failed to keep pace with the volume of transactions, thereby
creating substantial delays and settlement failures that could adversely affect
a Fund's performance. Dividend and interest income from non-U.S. securities will
generally be subject to withholding taxes by the country in which the issuer is
located and may not be recoverable by the Funds or investors.
Investment-Grade Securities
The Credit Suisse Warburg Pincus Blue Chip Fund and Credit Suisse
Warburg Pincus Small Company Value Fund may invest up to 35% of the value of
their respective total assets in investment-grade fixed-income
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securities, while the Credit Suisse Warburg Pincus Value Fund may invest in
investment-grade fixed-income securities without limitation. Investment-grade
obligations are those obligations rated BBB or better by Standard and Poor's
Ratings Group ("S&P") or Baa or better by Moody's Investors Service, Inc.
("Moody's") in the case of long-term obligations and equivalently rated
obligations in the case of short-term obligations, or unrated instruments
believed by the Adviser to be of comparable quality to such rated instruments.
Issuers with securities rated BBB by S&P are regarded by S&P as having an
adequate capacity to pay interest and repay principal. While such securities
normally exhibit adequate protection parameters, adverse economic conditions or
changing circumstances are more likely, in the opinion of S&P, to lead to a
weakened capacity to pay interest and repay principal for debt in this category
than in higher rated categories. Securities rated Baa by Moody's are considered
by Moody's to be medium-grade obligations; they are neither highly protected nor
poorly secured; interest payments and principal security appear to be adequate
for the present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time; in the opinion of
Moody's, they lack outstanding investment characteristics and in fact have
speculative characteristics as well. Fixed-income securities in which the Funds
may invest include asset and mortgage backed securities. Prepayments of
principal may be made at any time on the obligations underlying asset and
mortgage backed securities and are passed on to the holders of the asset and
mortgage backed securities. As a result, if a Fund purchases such a security at
a premium, faster than expected prepayments will reduce, and slower than
expected prepayments will increase, yield to maturity. Conversely, if a Fund
purchases these securities at a discount, faster than expected
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prepayments will increase, while slower than expected prepayments will reduce,
yield to maturity.
Options
The Credit Suisse Warburg Pincus Blue Chip Fund and the Credit
Suisse Warburg Pincus Value Fund may write covered calls on securities or
securities indices for purposes of hedging against a decline in the value of the
respective portfolio securities. The Credit Suisse Warburg Pincus Small Company
Value Fund may write covered calls, purchase calls and write covered put options
on securities and securities indices both for hedging and return enhancement
purposes.
A call option on a security gives the purchaser of the option, upon
payment of a premium to the writer of the option, the right to purchase from the
writer of the option a specified number of shares of a specified security on or
before a fixed date, at a predetermined price. A call option on a securities
index represents the holder's right to obtain from the writer in cash a fixed
multiple of the amount by which the exercise price is less than the value of the
underlying securities index on the exercise date. So long as a Fund remains
obligated as a writer of a covered call option, it will forego the opportunity
to profit from increases in the market price of the underlying security or index
above the exercise price of the option. A Fund will not write a call option on a
security unless at all times during the option period the Fund owns either (i)
the optioned securities, or securities convertible into or carrying rights to
acquire the optioned securities at no additional cost, or (ii) an offsetting
call option on the same securities at the same or a lower strike price. When a
Fund writes a call option on a securities index, it will establish a segregated
account with its custodian into which it will deposit cash or
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other liquid unencumbered assets, marked-to-market daily, or a combination of
both, with a value equal to or greater than the market value of the option and
will maintain the account while the option is open.
If either the Credit Suisse Warburg Pincus Blue Chip Fund, the
Credit Suisse Warburg Pincus Value Fund or the Credit Suisse Warburg Pincus
Small Company Value Fund desires to sell a particular security from its
portfolio on which it has written an option, such Fund will seek to effect a
closing purchase transaction with respect to such option prior to or
concurrently with the sale of the portfolio security. A Fund may also enter into
a closing purchase transaction in order to terminate its obligation under an
option it has written. A closing purchase transaction is a transaction in which
an investor who is obligated as the writer of an option terminates his
obligation by purchasing an option on the same security and same terms as the
previously written option. There can be no assurances that a closing purchase
transaction can be effected. If a closing purchase transaction cannot be
effected, a Fund will not be able to sell the underlying security until the
option expires or it delivers the underlying security upon exercise. A Fund will
realize a profit from a closing purchase transaction for an option it has
written if the cost of such transaction is less than the premium received from
the writing of the option and will realize a loss if the cost of such
transaction is more than the premium received. The Credit Suisse Warburg Pincus
Blue Chip Fund and Credit Suisse Warburg Pincus Value Fund will only purchase
call options in closing purchase transactions. As indicated above, the Credit
Suisse Warburg Pincus Small Company Value Fund may write or purchase a put
option on securities or securities indices. A put option is a contract that
gives the holder of the option the right, in return for a premium, to sell to
the
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writer of the option the underlying security at a specified price. The seller of
the put, on the other hand, has the obligation to buy the underlying security at
the exercise price. The Credit Suisse Warburg Pincus Small Company Value Fund
will only write "covered" put options (i.e., so long as the Fund is obligated
under the put, it will have on deposit cash or other liquid unencumbered assets,
marked-to-market daily, or a combination of both, with a value equal to or
greater than the exercise price of the underlying securities or index). It is
possible that, as a result of writing a put, the Fund may have to purchase the
underlying securities at an amount greater than their market price at the time
of writing the put.
If the Credit Suisse Warburg Pincus Small Company Value Fund
purchases an option, it runs the risk that the option will expire "out of the
money", resulting in a loss equal to the amount of the premium paid plus any
transaction costs. Thus, in some periods the Credit Suisse Warburg Pincus Small
Company Value Fund may receive a lower total return in connection with its
options transactions than it would have received from the underlying securities
had options not been purchased.
Neither the Credit Suisse Warburg Pincus Blue Chip Fund nor the
Credit Suisse Warburg Pincus Value Fund may write a covered call option if, as a
result thereof, the aggregate value of such Fund's portfolio securities subject
to outstanding call options (valued at the lower of the option price or the
market value of the underlying securities) or the amount deposited in a
segregated account would exceed 5% of such Fund's total assets. The Credit
Suisse Warburg Pincus Small Company Value Fund may not purchase options if, as a
result, the aggregate cost of all outstanding options exceeds 10% of its total
assets.
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Because exercises of index options are settled in cash, a call
writer such as the Credit Suisse Warburg Pincus Blue Chip Fund, the Credit
Suisse Warburg Pincus Value Fund or the Credit Suisse Warburg Pincus Small
Company Value Fund cannot determine the amount of its settlement obligation in
advance and, unlike call writing on specific stocks, cannot provide in advance
for, or cover, its potential obligations by acquiring and holding a particular
security.
Price movements in a Fund's portfolio probably will not correlate
precisely with movements in the level of an index underlying an option and,
therefore, a Fund bears the risk that the price of the securities held by such
Fund may not increase as much as the index on which a Fund has written a covered
call option. In such event, a Fund would bear a loss on the covered call option
that it has written that is not completely offset by movements in the price of
such Fund's portfolio. It is also possible that the index underlying a covered
call may rise when the Fund's portfolio does not rise. If this occurred, a Fund
would incur a loss on the call that would not be offset by an increase in the
value of its portfolio and might also experience a loss in its portfolio.
However, because the value of a diversified portfolio will, over time, generally
tend to move in the same direction as the market, movements in the value of a
Fund in the opposite direction as the market would be likely to occur for only a
short period or to a small degree.
Unless a Fund that has written a call option has other liquid assets
which are sufficient to satisfy the exercise of a call on an index, such Fund
would be required to liquidate portfolio securities in order to satisfy the
exercise.
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When a Fund has written a call on an index, there is also a risk
that the market may decline between the time such Fund has a call exercised
against it, at a price which is fixed as of the closing level of the index on
the date of exercise, and the time such Fund is able to sell stocks in its
portfolio. As with stock options, the Fund will not learn that an index option
has been exercised until the day following the exercise date but, unlike a call
on stock where a Fund would be able to deliver the underlying securities in
settlement, such Fund may have to sell part of its investment portfolio in order
to make settlement in cash, and the price of such investments might decline
before they can be sold. This timing risk makes certain strategies involving
more than one option substantially riskier with index options than with stock
options. For example, even if an index call which a Fund has written is
"covered" by an index call held by such Fund with the same strike price, such
Fund will bear the risk that the level of the index may decline between the
close of trading on the date the exercise notice is filed with the clearing
corporation and the close of trading on the date such Fund exercises the call it
holds or the time such Fund sells the call which, in either case, would occur no
earlier than the day following the day the exercise notice was filed.
If a Fund holds an index option and exercises it before final
determination of the closing index value for that day, it runs the risk that the
level of the underlying index may change before closing. If such a change causes
the exercised option to fall out-of-the-money, the Fund will be required to pay
the difference between the closing index value and the exercise price of the
option (times the applicable multiplier) to the assigned writer. Although a Fund
may be able to minimize this risk by withholding exercise instructions until
just before the daily cutoff time or by selling rather than
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exercising an option when the index level is close to the exercise price, it may
not be possible to eliminate this risk entirely because the cutoff times for
index options may be earlier than those fixed for other types of options and may
occur before definitive closing index values are announced.
Financial Futures and Options Thereon
The Credit Suisse Warburg Pincus Small Company Value Fund may also
seek to increase its return or to hedge all or a portion of its portfolio
investments through the use of financial instruments currently or hereafter
available, such as financial futures contracts and options thereon.
On the futures markets, the Adviser may, with respect to the Credit
Suisse Warburg Pincus Small Company Value Fund, adopt an overall strategy in
response to expected market movements. Such a strategy would involve the
purchase or sale of securities index futures contracts and related options
traded on regulated exchanges, to the extent permitted by the Commodity Futures
Trading Commission ("CFTC"), for bona fide hedging purposes or for other
appropriate risk management purposes permitted under regulations promulgated by
the CFTC. A securities index futures contract is an agreement to take or make
delivery of an amount of cash equal to the difference between the value of the
index at the beginning and at the end of the contract period. The Credit Suisse
Warburg Pincus Small Company Value Fund may enter into securities index futures
contracts in anticipation of or during a market decline to attempt to offset the
decrease in the market value of securities in its portfolio that might otherwise
result.
An option on a futures contract gives the purchaser the right, but
not the obligation, to assume a position in a futures contract (a long position
if the option is a call
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and a short position if the option is a put) at a specified exercise price at
any time during the option exercise period. The writer of the option is required
upon exercise to assume an offsetting futures position (a short position if the
option is a call and a long position if the option is a put). Upon exercise of
the option, the assumption of offsetting futures positions by the holder and
writer of the option will be accompanied by delivery of the accumulated cash
balance in the writer's futures margin account which represents the amount by
which the market price of the futures contract, at exercise, exceeds, in the
case of a call, or is less than, in the case of a put, the exercise price of the
option on the futures contract. With respect to stock indices, options are
traded on futures contracts for various U.S. and foreign stock indices,
including the S&P 500 Stock Index and the NYSE Composite Index. The holder or
writer of an option may terminate its position by selling or purchasing an
option of the same series. There is no guarantee that such closing transactions
can be effected.
The Credit Suisse Warburg Pincus Small Company Value Fund may only
invest in futures contracts and related options to the extent that the Fund
would not be required to register with the CFTC. The Credit Suisse Warburg
Pincus Small Company Value Fund will not engage in financial futures or related
options transactions for speculative purposes but only in an effort to hedge
portfolio risks as described above. In accordance with the foregoing, under
current regulations the Credit Suisse Warburg Pincus Small Company Value Fund
may not purchase or sell futures contracts if, immediately thereafter, the sum
of the amount of initial margin deposits on the Fund's open futures positions
and premiums on open positions thereon would exceed 5% of the market value of
the Credit Suisse Warburg Pincus Small Company Value Fund's total
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assets. Certain provisions of the federal tax laws may limit the extent to which
the Credit Suisse Warburg Pincus Small Company Value Fund may engage in options
and financial futures transactions. Such transactions may also affect the
amount, character and timing of income, gain or loss recognized by the Fund for
federal tax purposes.
The Credit Suisse Warburg Pincus Small Company Value Fund's
successful use of options and financial futures depends on the ability of the
Adviser to predict the direction of the market and is subject to various
additional risks. The investment techniques and skills required to develop and
implement a successful options and futures strategy are different from those
required to select equity and debt securities for investment. The correlation
between movements in the price of an option or future and the price of
securities index futures and options may decline if the composition of the
Fund's portfolio diverges from the composition of the index underlying such
index futures and options. In addition, the ability of the Fund to close out an
option or futures position depends on the existence of a liquid secondary market
for those contracts. There is no assurance that liquid secondary markets will
exist for any particular option or futures contract at any particular time. A
Fund's losses on futures transactions could be unlimited.
New and innovative financial instruments continue to be developed
and the Credit Suisse Warburg Pincus Small Company Value Fund may invest in any
such instrument as may be developed to the extent that the utilization of such
instrument is consistent with its investment objective and policies and the
regulatory requirements applicable to the Fund.
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Risks of Options, Currency Exchange Contracts and Financial Futures Strategies
Participation in the options or futures markets and in currency
exchange transactions involves investment risks and transaction costs to which a
Fund would not be subject absent the use of these strategies. If the Adviser's
predictions of movements in the direction of the securities, foreign currency
and interest rate markets are inaccurate, the adverse consequences to a Fund may
leave the Fund in a worse position than if such strategies were not used. The
loss from entering into futures contracts is potentially unlimited. Risks
inherent in the use of options, foreign currency and futures contracts and
options on futures contracts include (1) dependence on the investment manager's
ability to predict correctly movements in the direction of interest rates,
securities prices and currency markets; (2) imperfect correlation between the
price of options and futures contracts and options thereon and movements in the
prices of securities or currencies being hedged; (3) skills needed to use these
strategies which are different from those needed to select portfolio securities;
(4) the possible absence of a liquid secondary market for any particular
instrument at any time; (5) the possible need to defer closing out certain
hedged positions to avoid adverse tax consequences; and (6) the possible
inability of a Fund to purchase or sell a portfolio security at a time that
otherwise would be favorable for it to do so, or the possible need for a Fund to
sell a portfolio security at a disadvantageous time, due to the need for such
Fund to maintain "cover" or to segregate securities in connection with hedging
transactions.
Small Company Stocks
At least 65% of the Credit Suisse Warburg Pincus Small Company Value
Fund's total assets normally will be invested in equity securities of small
market
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capitalization companies, which for the purposes of this Fund, are those
companies with a market capitalization of $2 billion or less at the time of the
Fund's investment. While small-cap company stocks generally pay low or no
dividends, they are considered to offer greater potential for appreciation than
securities of companies with larger market capitalizations. Small-cap company
stocks generally also have higher risk and volatility, because most are not as
broadly traded as stocks of companies with larger capitalizations and their
prices thus may fluctuate more widely and abruptly. Small-cap company securities
generally are also less researched.
Special Situation Companies
The Credit Suisse Warburg Pincus Small Company Value Fund may also
invest in securities of companies in special situations, that is, in securities
the values of which may be affected by particular developments unrelated to
business conditions generally, and which may fluctuate without relation to
general market trends. In general, a special situation company is a company
whose securities could reasonably be expected to be accorded market recognition
within a foreseeable period of time at an appreciated value solely by reason of
a development particularly or uniquely applicable to that company. The principal
risk associated with an investment in special situation companies is that if the
anticipated development does not occur, the investment is likely not to
appreciate or may decline. Examples of special situation companies are companies
being reorganized or merged, having unusual new products, enjoying particular
tax advantages, or acquiring new management. The Credit Suisse Warburg Pincus
Small Company Value Fund will not, however, invest more than 10% of its assets
(at the time
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of purchase) in equity securities of companies (including predecessors) that
have less than three years of operations.
Short-Term Portfolio Transactions
The Credit Suisse Warburg Pincus Small Company Value Fund may engage
in short-term portfolio transactions in an attempt to generate capital gains
when deemed appropriate by the Adviser under the circumstances, taking into
consideration the market analysis factors of any particular security and the
technical conditions of the securities markets in general. In accordance with
the investment policy of engaging in short-term portfolio transactions, the
Credit Suisse Warburg Pincus Small Company Value Fund has no restrictions with
respect to portfolio turnover and the rate of portfolio turnover is not
considered a prohibitive factor by the Adviser when considering short-term
portfolio transactions. As a result of this policy, it is possible that the
Credit Suisse Warburg Pincus Small Company Value Fund's annual portfolio
turnover rate may exceed 100%, although the Adviser anticipates that such rate
will not exceed 100%. Because it is difficult to predict accurately portfolio
turnover rates, actual turnover may be higher or lower. The portfolio turnover
rate is computed by dividing the lesser of the amount of the securities
purchased or the securities sold by the average monthly value of securities
owned during the year, excluding securities whose maturities at the time of
acquisition were one year or less. A high degree of portfolio turnover results
in increased transaction costs.
IOs and POs
Although the Credit Suisse Warburg Pincus Small Company Value Fund
has no present intention to so invest, the Credit Suisse Warburg Pincus Small
Company
-22-
Value Fund may invest in securities representing interests in a pool of
mortgages or other assets the cash flow of which has been separated into its
interest and principal components, commonly known as "IOs" (interest only) and
"POs" (principal only). IOs and POs issued by parties other than agencies or
instrumentalities of the U.S. Government are considered, under current
guidelines of the staff of the Securities and Exchange Commission, to be
illiquid securities.
Additional Investment Policies of the Credit Suisse Warburg Pincus Blue Chip
Fund and Credit Suisse Warburg Pincus Value Fund
The following additional policies have been adopted by the Credit
Suisse Warburg Pincus Blue Chip Fund and the Credit Suisse Warburg Pincus Value
Fund and may be changed by the Trustees without shareholder approval:
1. The Funds will not make or maintain a short position (other than short
sales against the box) or write, purchase or sell puts, calls, straddles,
spreads or combinations thereof, provided, however, that the Funds may
write covered call options and purchase call options in closing purchase
transactions.
2. The Funds will not invest in oil, gas or other mineral exploration or
development programs, but this shall not prohibit the Funds from investing
in securities of companies engaged in oil, gas or mineral activities or
investigations.
II. Credit Suisse Warburg Pincus Fixed Income II Fund
The investment objective of the Credit Suisse Warburg Pincus Fixed
Income II Fund is to provide as high a level of total return as is consistent
with capital preservation by investing principally in debt securities,
including, without limitation, convertible and nonconvertible debt securities of
foreign and domestic companies,
-23-
including both well-known and established and new and lesser-known companies.
Total return means the sum of net investment income (if any) and realized and
unrealized gains less losses. Capital preservation means minimizing the risk of
capital loss in a period of falling prices (rising interest rates) for debt
securities.
Specifically, the investment policies of the Credit Suisse Warburg
Pincus Fixed Income II Fund permit it to invest, without restriction, in the
following types of securities:
(1) Bonds, including municipal bonds (taxable and tax-exempt, including,
among others, special and general obligation bonds and industrial
development bonds) and other debt securities, which are rated Aaa,
Aa, A or MIG-1 by Moody's or AAA, AA, A or SP-1 by S&P;
(2) U.S. Government Securities;
(3) Obligations issued or guaranteed by national or state bank holding
companies, which obligations are not rated as a matter of policy by
either Moody's or S&P, but which, in the opinion of the Adviser (on
the basis of criteria believed by the Adviser to be comparable to
that used by nationally recognized statistical rating organizations
for assigning ratings), meet the Credit Suisse Warburg Pincus Fixed
Income II Fund's investment objective; and
(4) Commercial paper rated Prime-1 by Moody's or A-1+ or A-1 by S&P.
The Credit Suisse Warburg Pincus Fixed Income II Fund may also
invest not more than 25% (in the aggregate) of its total assets at the time of
investment in (i) debt securities rated Baa or MIG-2 by Moody's or BBB or SP-2
by S&P, to the extent
-24-
that such investments would, in the opinion of the Adviser, be consistent with
the Credit Suisse Warburg Pincus Fixed Income II Fund's investment objective.
See "Additional Information on Investment Policies and Risks" in the Prospectus
for a description of securities rated BBB by S&P and Baa by Moody's and of asset
and mortgage-backed securities.
As a matter of fundamental policy, which cannot be changed without
approval by the vote of a majority of the Credit Suisse Warburg Pincus Fixed
Income II Fund's outstanding voting securities (as defined in this SAI), the
Credit Suisse Warburg Pincus Fixed Income II Fund will invest at least 80% of
the value of its total assets at the time of investment in debt securities. In
normal circumstances, the Credit Suisse Warburg Pincus Fixed Income II Fund will
invest at least 65% of the value of its total assets at the time of investment
in fixed-income securities. However, the Credit Suisse Warburg Pincus Fixed
Income II Fund reserves the right to hold cash and short-term fixed-income
securities and to enter into repurchase agreements as necessary for temporary
defensive or emergency purposes as determined by the Adviser without regard for
the above limitations.
The Credit Suisse Warburg Pincus Fixed Income II Fund may also
invest in restricted securities and in instruments having no ready market if
such purchases at the time thereof would not cause more than 10% of the value of
its net assets to be invested in not readily marketable assets.
The Credit Suisse Warburg Pincus Fixed Income II Fund generally does
not intend to acquire common stocks or equity securities exchangeable for common
stock or rights or warrants to subscribe for or purchase common stock, except
that, with respect
-25-
to convertible debt securities, the Fund may acquire common stock through the
exercise of conversion rights in situations where it believes such exercise is
in the best interest of the Credit Suisse Warburg Pincus Fixed Income II Fund
and its shareholders. In such event, the Credit Suisse Warburg Pincus Fixed
Income II Fund will sell the common stock resulting from such conversion as soon
as practicable. The Credit Suisse Warburg Pincus Fixed Income II Fund may
acquire debt securities, including convertible and non-convertible debt
securities which may have voting rights, but in no case will the Credit Suisse
Warburg Pincus Fixed Income II Fund acquire more than 10% of the voting
securities of any one issuer. The relative size of the Credit Suisse Warburg
Pincus Fixed Income II Fund's investments in any grade or type of security will
vary from time to time. Critical factors which are considered in the selection
of securities or other investment alternatives include trends in the
determinates of interest rates, corporate profits and management capabilities
and practices.
The Credit Suisse Warburg Pincus Fixed Income II Fund may use a
variety of techniques in seeking to attain its investment objective. In making
investment decisions, for example, the Credit Suisse Warburg Pincus Fixed Income
II Fund seeks to balance favorable factors, such as high yields to maturity and
high current rates of income, against unfavorable factors, such as increased
risk which accompanies longer maturities.
The Credit Suisse Warburg Pincus Fixed Income II Fund may use
trading to attain its investment objectives and policies. Trading may be used in
anticipation of market developments or to take advantage of yield disparities
between major sectors of the investment-grade market. For example, the Credit
Suisse Warburg Pincus Fixed
-26-
Income II Fund may employ trading in order to (i) shorten the average maturity
of the portfolio in anticipation of higher interest rates, (ii) lengthen the
average maturity of the portfolio in anticipation of lower interest rates, (iii)
change the average coupon of the portfolio when yield disparities occur between
debt securities selling at differing levels of premium or discount, (iv) sell
one type of debt security (e.g., industrial bonds) and buy another type of debt
security (e.g., Federal agency bonds or notes) when disparities arise in the
relative value of each, and (v) sell one class of fixed-income securities (e.g.,
preferred stocks) and buy another class (e.g., publicly offered utility bonds)
when disparities arise in the relative values of each.
Debt securities acquired for the Credit Suisse Warburg Pincus Fixed
Income II Fund's portfolio may be subject to call by the issuer prior to
maturity, in which case the Credit Suisse Warburg Pincus Fixed Income II Fund
may be forced to sell such securities at prices below market value. The Credit
Suisse Warburg Pincus Fixed Income II Fund may seek protection against calls at
prices below market value. Such protection may be sought by (i) purchasing
securities with high call prices relative to their market prices, (ii)
purchasing securities with sinking fund features which are selling at a premium
where the period before inception of the sinking fund payments is relatively
long, (iii) selling a security whose market price has risen above its call price
and purchasing another security of comparable quality whose market price is
below its call price and (iv) substituting for a security with a refunding date
a comparable security with a more distant refunding date. Depending on market
conditions, debt securities may be purchased at a discount or premium from face
value, producing a yield of more or less than the coupon rate. The market value
of the Credit Suisse Warburg Pincus Fixed
-27-
Income II Fund's assets will reflect yields generally available on debt
securities of similar quality. When such yields (i.e., interest rates) decline,
the market value of the Credit Suisse Warburg Pincus Fixed Income II Fund's
assets already invested can be expected to rise. Similarly, when such yields
increase, the market value of the Fund's assets already invested can be expected
to decline.
III. Credit Suisse Warburg Pincus Municipal Trust Fund
The investment objective of the Credit Suisse Warburg Pincus
Municipal Trust Fund is to provide as high a level of total return as is
consistent with capital preservation by investing principally in high grade
tax-exempt municipal securities. This investment objective, unlike that of most
other municipal bond funds, is not to provide current income which is exempt
from federal and/or state income tax. Total return means the sum of net
investment income (if any) and realized and unrealized gains less losses. The
Credit Suisse Warburg Pincus Municipal Trust Fund intends to distribute annually
its net capital gains. Any such distributions will be taxable to a shareholder
as capital gain. See "Taxes, Dividends, and Distributions."
The Credit Suisse Warburg Pincus Municipal Trust Fund attempts to
provide high total return by actively managing the maturities of the bonds in
the portfolio in response to the Adviser's anticipation of the movement of
interest rates and its assessment of the relative yields. The Fund will shorten
the portfolio's maturities when the Adviser believes that interest rates will
rise and lengthen maturities when the Adviser believes that rates will fall. To
a lesser extent, the Credit Suisse Warburg Pincus Municipal Trust Fund will also
attempt to enhance total return by selecting municipal
-28-
securities which the Adviser believes are undervalued. The success of these
strategies depends upon the Adviser's ability to accurately forecast changes in
interest rates and to properly assess the value of municipal securities. The
investor should be aware that there can be no assurances that the Credit Suisse
Warburg Pincus Municipal Trust Fund's investment strategies will be successful.
Under normal circumstances, it is the Credit Suisse Warburg Pincus
Municipal Trust Fund's policy to invest at least 80% of the value of its net
assets at the time of investment in tax-exempt municipal securities. However,
the Credit Suisse Warburg Pincus Municipal Trust Fund reserves the right to hold
cash and short-term fixed-income securities and to enter into repurchase
agreements as necessary for temporary defensive or emergency purposes as
determined by the Adviser without regard for the above limitation.
The Credit Suisse Warburg Pincus Municipal Trust Fund seeks to
achieve its objective by investing primarily in a diversified portfolio of high
grade, intermediate term municipal securities. Municipal securities fall into
two principal classes: bonds and notes, both of which may have fixed, variable
or floating rates of interest. The investment policies of the Municipal Trust
Fund permit it to invest, without restriction, in tax-exempt municipal bonds and
notes which are rated Aaa, Aa, A or MIG-1 by Moody's or AAA, AA, A or SP-1 by
S&P. The Municipal Trust Fund may also invest not more than 25% (in the
aggregate) of its total assets at the time of investment in (i) municipal
securities rated Baa or MIG-2 by Moody's or BBB or SP-2 by S&P and (ii)
commercial paper rated Prime-2 by Moody's or A-2 by S&P, to the extent that such
investments
-29-
would, in the opinion of the Adviser, be consistent with the Municipal Trust
Fund's investment objective.
Non-rated municipal securities will also be considered for
investment by the Credit Suisse Warburg Pincus Municipal Trust Fund when the
Adviser believes that the financial condition of the issuers of such obligations
and the protection afforded by the terms of the obligations themselves limit the
risk to the Credit Suisse Warburg Pincus Municipal Trust Fund to a degree
comparable to that of rated securities which are consistent with the Credit
Suisse Warburg Pincus Municipal Trust Fund's objective and policies.
Municipal securities include municipal bonds as well as short-term
(i.e., maturing in under one year to as much as three years) municipal notes,
demand notes and tax-exempt commercial paper. In the event the Credit Suisse
Warburg Pincus Municipal Trust Fund invests in demand notes, the Adviser will
continually monitor the ability of the obligor under such notes to meet its
obligations. Typically, municipal bonds are issued to obtain funds used to
construct a wide range of public facilities, such as schools, hospitals,
housing, mass transportation systems, airports, highways and bridges. The funds
may also be used for general operating expenses, refunding of outstanding
obligations and loans to other public institutions and facilities.
Municipal bonds fall into two general classes: general obligation
bonds and revenue or special obligation bonds. Payment of principal of and
interest on general obligation bonds is secured by the issuer's pledge of its
faith, credit and taxing power. Payment on revenue or special obligation bonds
is met only from the revenues obtained from a particular facility or class of
facilities or, in some cases, from the proceeds of a
-30-
special excise tax or other specific revenue source but not from general tax and
other unrestricted revenues of the issuer. The term "issuer" means the agency,
authority, instrumentality or other political subdivision whose assets and
revenues are available for the payment of principal of and interest on the
bonds. Certain types of private activity bonds are also considered municipal
bonds if the interest thereon is exempt from federal income tax. Private
activity bonds are issued by or on behalf of public authorities to obtain funds
for various privately-operated manufacturing facilities, airports, housing
projects, resource recovery programs, solid waste disposal facilities, student
loan programs and water and sewage disposal facilities.
Private activity bonds are in most cases revenue bonds and do not
generally constitute the pledge of the credit or taxing power of the issuer of
such bonds. The payment of the principal and interest on such industrial revenue
bonds depends solely on the ability of the user of the facilities financed by
the bonds to meet its financial obligations and the pledge, if any, of real and
personal property so financed as security for such payment.
Municipal notes in which the Credit Suisse Warburg Pincus Municipal
Trust Fund may invest include demand notes, which are tax-exempt obligations
that have stated maturities in excess of one year, but permit the holder to sell
back the security (at par) to the issuer within 1 to 7 days' notice. The payment
of principal and interest by the issuer of these obligations will ordinarily be
guaranteed by letters of credit offered by banks. The interest rate on a demand
note may be based upon a known lending rate, such as a bank's prime rate, and
may be adjusted when such rate changes, or the interest rate on a demand note
may be a market rate that is adjusted at specified intervals.
-31-
Other short-term obligations constituting municipal notes include
tax anticipation notes, revenue anticipation notes and bond anticipation notes,
and tax-exempt commercial paper.
Tax anticipation notes are issued to finance working capital needs
of municipalities. Generally, they are issued in anticipation of various
seasonal tax revenues, such as income, sales, use and business taxes. Revenue
anticipation notes are issued in expectation of receipt of other types of
revenues, such as federal revenues available under the Federal Revenue Sharing
Programs. Bond anticipation notes are issued to provide interim financing until
long-term financing can be arranged. In most such cases, the long-term bonds
provide the money for the repayment of the notes.
Tax-exempt commercial paper is a short-term obligation with a stated
maturity of 365 days or less (however, issuers typically do not issue such
obligations with maturities longer than seven days). Such obligations are issued
by state and local municipalities to finance seasonal working capital needs or
as short-term financing in anticipation of longer-term financing.
There are, of course, variations in the terms of, and the security
underlying, municipal securities, both within a particular rating classification
and between such classifications, depending on many factors. The ratings of
Moody's and S&P represent their respective opinions of the quality of the
municipal securities rated by them. It should be emphasized that such ratings
are general and are not absolute standards of quality. Consequently, municipal
securities with the same maturity, coupon and rating may have different yields,
while the municipal securities of the same maturity
-32-
and coupon, but with different ratings may have the same yield. The Adviser
appraises independently the fundamental quality of the securities included in
the Fund's portfolio.
Yields on municipal securities are dependent on a variety of
factors, including the general conditions of the municipal securities market,
the size of a particular offering, the maturity of the obligation and the rating
of the issue. Municipal securities with longer maturities tend to produce higher
yields and are generally subject to greater price movements than obligations
with shorter maturities. An increase in interest rates generally will reduce the
market value of portfolio investments, and a decline in interest rates generally
will increase the value of portfolio investments. The achievement of the Fund's
investment objectives depends in part on the continuing ability of the issuers
of municipal securities in which the Fund invests to meet their obligations for
the payment of principal and interest when due. Municipal securities
historically have not been subject to registration with the Securities and
Exchange Commission, although from time to time there have been proposals which
would require registration in the future.
After purchase by the Credit Suisse Warburg Pincus Municipal Trust
Fund, a municipal security may cease to be rated or its rating may be reduced
below the minimum required for purchase by the Credit Suisse Warburg Pincus
Municipal Trust Fund. Neither event requires the sale of such security by the
Credit Suisse Warburg Pincus Municipal Trust Fund, but the Adviser will consider
such event in its determination of whether the Credit Suisse Warburg Pincus
Municipal Trust Fund should continue to hold the security. To the extent that
the ratings given by Moody's or S&P may change as a result of changes in such
organizations or their rating systems, the
-33-
Adviser will attempt to use such changed ratings in a manner consistent with the
Fund's quality criteria as described in the Prospectus.
Obligations of issuers of municipal securities are subject to the
provisions of bankruptcy, insolvency, and other laws affecting the rights and
remedies of creditors, such as the Federal Bankruptcy Code. In addition, the
obligations of such issuers may become subject to laws enacted in the future by
Congress, state legislatures, or referenda extending the time for payment of
principal and/or interest, or imposing other constraints upon enforcement of
such obligations or upon the ability of municipalities to levy taxes. There is
also the possibility that, as a result of litigation or other conditions, the
ability of any issuer to pay, when due, the principal or the interest on its
municipal bonds may be materially affected.
From time to time, proposals have been introduced before Congress
for the purpose of restricting or eliminating the federal income tax exemption
for interest on municipal securities. It can be expected that similar proposals
may be introduced in the future. If such a proposal were enacted, the
availability of municipal securities for investment by the Fund and the value of
the Fund's portfolio would be affected. Additionally, the Fund would reevaluate
its investment objectives and policies.
IV. Additional General Investment Policies
The following general investment policies supplement those set forth
above for each Fund.
Short Sales ("Against the Box")
Except for the Credit Suisse Warburg Pincus Municipal Trust Fund, a
Fund may effect short sales "against the box." While a short sale is a sale of a
security
-34-
the Fund does not own, it is "against the box" if at all times during which a
short position is open, the Fund owns an equal amount of the securities, or, by
virtue of the ownership of securities, has the right, without further
consideration, to obtain an equal amount of the securities sold short. No more
than 10% of each Fund's net assets (taken at the then current market value) will
be held as collateral for its short sales at any time. Neither the Credit Suisse
Warburg Pincus Blue Chip Fund, the Credit Suisse Warburg Pincus Fixed Income II
Fund nor the Credit Suisse Warburg Pincus Value Fund have an intention of
entering into short sales against the box in the foreseeable future.
Repurchase Agreements
A Fund may enter into repurchase agreements with respect to
marketable obligations of, or guaranteed by, the U.S. Government, its agencies
or instrumentalities ("U.S. Government Securities"). While the maturities of the
underlying securities may exceed one year, the term of the repurchase agreement
must always be less than one year. Repurchase agreements often are for short
periods such as one day or one week, but may be longer. In the event that a
vendor defaults on its repurchase obligation, a Fund might suffer a loss to the
extent that the proceeds from the sale of the collateral were less than the
repurchase price. If the vendor becomes the subject of bankruptcy proceedings, a
Fund might be delayed in selling the collateral.
Reverse Repurchase Agreements
The Credit Suisse Warburg Pincus Blue Chip Fund, Credit Suisse
Warburg Pincus Small Company Value Fund, Credit Suisse Warburg Pincus Fixed
Income II Fund and Credit Suisse Warburg Pincus Municipal Trust Fund each may
enter into reverse repurchase agreements. Under a reverse repurchase agreement,
a Fund
-35-
would sell securities and agree to repurchase them at a mutually agreed upon
date and price. At the time a Fund enters into a reverse repurchase agreement,
it would establish and maintain with an approved custodian a segregated account
containing liquid high-grade debt securities having a value not less than the
repurchase price. Reverse repurchase agreements involve the risk that the market
value of the securities subject to such agreement could decline below the
repurchase price to be paid by a Fund for such securities. In the event the
buyer of securities under a reverse repurchase agreement filed for bankruptcy or
became insolvent, such buyer (or receiver for such buyer) would receive an
extension of time to determine whether to enforce the Fund's obligations to
repurchase the securities and the Fund's use of the proceeds of the reverse
repurchase could effectively be restricted pending such decision. Reverse
repurchase agreements create leverage, a speculative factor, but are not
considered senior securities by the Funds or the Securities and Exchange
Commission to the extent liquid, unencumbered assets, marked to market daily,
are segregated in an amount at least equal to the amount of the liability.
Securities Lending
The Credit Suisse Warburg Pincus Blue Chip Fund, Credit Suisse
Warburg Pincus Small Company Value Fund, Credit Suisse Warburg Pincus Fixed
Income II Fund and Credit Suisse Warburg Pincus Municipal Trust Fund each may
seek to receive or increase income by lending their respective portfolio
securities. Under present regulatory policies, such loans may be made to member
firms of the New York Stock Exchange and are required to be secured continuously
by collateral held by Citibank, N.A. (the "Custodian") consisting of cash, cash
equivalents or U.S.
-36-
Government Securities maintained in an amount at least equal to the market value
of the securities loaned. The Funds have the right to call such a loan and
obtain the securities loaned at any time on five days' notice. As is the case
with any extension of credit, loans of portfolio securities involve special
risks in the event that the borrower is unable to repay the loan, including
delays or inability to recover the loaned securities or foreclose against the
collateral. The aggregate value of securities loaned by a Fund may not exceed
25% of the value of its total assets at the time such loan is made.
Restricted Securities
The Credit Suisse Warburg Pincus Blue Chip Fund, the Credit Suisse
Warburg Pincus Value Fund, the Credit Suisse Warburg Pincus Fixed Income II Fund
and the Credit Suisse Warburg Pincus Municipal Trust Fund may invest in
restricted securities and all of the Funds may invest in other assets having no
ready market if such purchases at the time thereof would not cause more than 10%
(or 15% in the case of the Credit Suisse Warburg Pincus Municipal Trust Fund) of
the value of a Fund's net assets to be invested in assets which are not readily
marketable. Restricted securities may be sold only in privately negotiated
transactions, in a public offering with respect to which a registration
statement is in effect under the Securities Act of 1933 or pursuant to Rule 144
promulgated under such Act. Where registration is available or required, the
Fund may be obligated to pay all or part of the registration expense, and a
considerable period of time may elapse between the time of the decision to sell
and the time that the Fund may be permitted to sell a security under an
effective registration statement. If during such a period adverse market
conditions were to develop, the Fund might obtain a less favorable price than
that which prevailed when it decided to sell. Securities salable
-37-
without restriction among qualified institutional investors pursuant to rules
promulgated under the Securities Act of 1933 (e.g., Rule 144A) are not
considered to be subject to legal restrictions on transfer and may be considered
liquid if they satisfy liquidity standards established by the Board of Trustees.
The continued liquidity of such securities is less certain than that of publicly
traded securities, and accordingly the Board of Trustees will monitor their
liquidity. Restricted securities will be valued in such manner as the Trustees
of Credit Suisse Warburg Pincus Capital Funds in good faith deem appropriate to
reflect their fair value.
The staff of the SEC has taken the position that purchased over the
counter ("OTC") options and the assets used as cover for written OTC options are
illiquid securities. However, a Fund may treat the securities it uses as cover
for written OTC options on U.S. Government Securities as liquid, provided the
Fund satisfies the following condition: A Fund may sell OTC options on U.S.
Government Securities only to qualified dealers who agree that the Fund may
repurchase options it writes for a maximum price to be calculated by a
predetermined formula. In such cases, OTC options would be considered liquid
only to the extent that the maximum repurchase price exceeds the intrinsic value
of the option.
When Issued, Delayed Delivery Securities and Forward Commitments
The Funds may, to the extent consistent with their other investment
policies and restrictions, enter into forward commitments for the purchase or
sale of securities, including on a "when issued" or "delayed delivery" basis in
excess of customary settlement periods for the type of security involved. In
some cases, a forward commitment may be conditioned upon the occurrence of a
subsequent event, such as
-38-
approval and consummation of a merger, corporate reorganization or debt
restructuring, i.e., a when, as and if issued security. When such transactions
are negotiated, the price is fixed at the time of the commitment, with payment
and delivery taking place in the future, generally a month or more after the
date of the commitment. While the Funds will only enter into a forward
commitment with the intention of actually acquiring the security, the Funds may
sell the security before the settlement date if it is deemed advisable.
Securities purchased under a forward commitment are subject to
market fluctuations, and no interest (or dividends) accrues to a Fund prior to
the settlement date. The Funds will segregate with the Custodian cash or other
liquid, unencumbered assets, in an aggregate amount at least equal to the amount
of their respective outstanding forward commitments.
Stand-By Commitments
The Credit Suisse Warburg Pincus Municipal Trust Fund may invest in
stand-by commitments which may involve certain additional expenses. The
Custodian will maintain a segregated account containing liquid securities having
value equal to, or greater than, such securities. The price of such securities,
which is generally expressed in yield terms, is fixed at the time the commitment
to purchase is made, but delivery and payment for such securities takes place at
a later time. Normally the settlement date occurs within ten days to one month
after the purchase of the issue. The value of such securities may fluctuate
prior to their settlement, thereby creating an unrealized gain or loss to the
Fund. Such securities are examples of what the SEC considers "illiquid
securities" because the settlement date occurs more than seven days after the
purchase.
-39-
State Undertakings
The Funds also have entered into agreements with certain States
which (a) limit investment in warrants to not more than 5% of the value of each
Fund's net assets (only 2% of the value of each Fund's net assets may be
invested in warrants not listed on the New York or American Stock Exchange), (b)
generally prohibit any investment in oil, gas and other mineral leases, and (c)
prohibit purchases or sales of real property (including limited partnership
interests, but excluding readily marketable interests in real estate investment
trusts or readily marketable securities of companies which invest in real
estate).
The Credit Suisse Warburg Pincus Small Company Value Fund has
entered into additional agreements with certain States which (a) limit to not
more than 5% of its total assets investments in not readily marketable
securities, (b) prohibit investment in commodities and commodity futures
contracts, and (c) limit investment in options, financial futures and stock
index futures to 5% of the value of its net assets. The Credit Suisse Warburg
Pincus Municipal Trust Fund has entered into additional agreements with certain
States which (a) prohibit the purchase of securities of companies which have
been in operation for less than three years, (b) limit to no more than 10% of
its total assets its investments in equity securities and to no more than 5% of
its total assets its investment in equity securities which are not readily
marketable, and (c) limit to no more than 5% of its total assets its aggregate
investment in puts, calls, straddles, spreads, and any combinations thereof.
-40-
The Funds intend to withdraw such undertakings at the earliest
practicable date. Such withdrawals are not expected to have a material effect on
the portfolio of the affected Fund.
(c) Investment Restrictions
The following restrictions are fundamental policies. Fundamental
policies are those which cannot be changed without the approval of the holders
of a majority of the Fund's outstanding voting securities. A "majority of the
Fund's outstanding voting securities," when used in this SAI, means the lesser
of (i) 67% of the voting shares represented at a meeting at which more than 50%
of the outstanding voting shares are present in person or represented by proxy
or (ii) more than 50% of the outstanding voting shares.
The following fundamental investment restrictions are in addition to
those set forth elsewhere in this SAI.
A Fund may not:
1. Purchase the securities of any one issuer other than the United
States Government or any of its agencies or instrumentalities, if
immediately after such purchase more than 5% of the value of the
Fund's assets would be invested in such issuer or the Fund would own
more than 10% of the outstanding voting securities of such issuer,
except that up to 25% of the value of the Fund's total assets may be
invested without regard to such 5% and 10% limitations;
-41-
2. Invest more than 25% of its total assets in the securities of
issuers conducting their principal business activities in any one
industry, provided that, for purposes of this policy, consumer
finance companies, industrial finance companies and gas, electric,
water and telephone utility companies are each considered to be
separate industries, and provided further, that there is no
limitation for the Credit Suisse Warburg Pincus Fixed Income II
Fund, the Credit Suisse Warburg Pincus Municipal Trust Fund, the
Credit Suisse Warburg Pincus Small Company Value Fund or the Credit
Suisse Warburg Pincus Value Fund in respect of investments in U.S.
Government Securities or, for the Credit Suisse Warburg Pincus Fixed
Income II Fund, the Credit Suisse Warburg Pincus Municipal Trust
Fund and the Credit Suisse Warburg Pincus Small Company Value Fund,
in municipal bonds (including industrial development bonds). A Fund
may be deemed to be concentrated to the extent that it invests more
than 25% of its total assets in taxable municipal securities issued
by a single issuer;
3. Purchase securities on margin, but a Fund may obtain such short-term
credits from banks as may be necessary for the clearance of
purchases and sales of securities;
4. Make loans of its assets to any person, except for (i) the purchase
of publicly distributed debt securities, (ii) the purchase of
non-publicly distributed securities subject to paragraph 7, (iii)
the lending of portfolio securities, and (iv) the entering of
repurchase agreements;
-42-
5. Borrow money except for (i) the short-term credits from banks
referred to in paragraph 3 above and (ii) borrowings from banks for
temporary or emergency purposes, including the meeting of redemption
requests which might require the disposition of securities.
Borrowing in the aggregate may not exceed 15%, and borrowing for
purposes other than meeting redemptions may not exceed 5% of the
value of the Fund's total assets (including all amounts borrowed)
less liabilities (not including all amounts borrowed) at the time
the borrowing is made. Outstanding borrowings in excess of 5% of the
value of the Fund's total assets will be repaid before any
subsequent investments are made. This restriction and asset
limitation on borrowing shall not prohibit the Funds from entering
into reverse repurchase agreements;
6. Mortgage, pledge or hypothecate any of its assets, except as may be
necessary in connection with permissible borrowings mentioned in
paragraph 5 and except, with respect to the Credit Suisse Warburg
Pincus Small Company Value Fund and the Credit Suisse Warburg Pincus
Value Fund, in connection with hedging transactions, short sales
(against the box), when issued and forward commitment transactions
and similar investment strategies;
7. Act as an underwriter of securities of other issuers, except that a
Fund may acquire restricted or not readily marketable securities
under circumstances where, if such securities were sold, the Funds
or the Advisor might be
-43-
deemed to be an underwriter for purposes of the Securities Act of
1933 and except, with respect to the Credit Suisse Warburg Pincus
Small Company Value Fund, to the extent that in connection with the
disposition of portfolio securities such Fund may be deemed to be an
underwriter;
8. Invest more than 10%, or 15% in the case of the Credit Suisse
Warburg Pincus Municipal Trust Fund, of the value of its net assets
in the aggregate in restricted securities or other instruments not
having a ready market, including repurchase agreements not
terminable within seven days; provided that the Credit Suisse
Warburg Pincus Small Company Value Fund will not invest in
restricted securities. Securities freely saleable among qualified
institutional investors under special rules adopted by the
Securities and Exchange Commission ("Rule 144A Securities") are not
considered to be subject to legal restrictions on transfer and may
be considered liquid if they satisfy liquidity standards established
by the Board of Trustees. The continued liquidity of such securities
is not as well assured as that of publicly traded securities, and
accordingly, the Board of Trustees will monitor their liquidity.
Restricted securities will be valued in such manner as the Trustees
of Credit Suisse Warburg Pincus Capital Funds in good faith deem
appropriate to reflect their value;
9. With respect to the Credit Suisse Warburg Pincus Blue Chip Fund, the
Credit Suisse Warburg Pincus Fixed Income II Fund, the Credit Suisse
Warburg Pincus Municipal Trust Fund and the Credit Suisse Warburg
-44-
Pincus Value Fund, invest in the securities of any issuer which has
a record of less than three years of continuous operation (including
the operation of any predecessor) if such purchase at the time
thereof would cause more than 10% of the value of the total assets
of the Fund to be invested in the securities of such issuer or
issuers;
10. With respect to the Credit Suisse Warburg Pincus Blue Chip Fund, the
Credit Suisse Warburg Pincus Fixed Income II Fund, the Credit Suisse
Warburg Pincus Municipal Trust Fund and the Credit Suisse Warburg
Pincus Value Fund, purchase or retain the securities of any issuer
if, to the knowledge of Credit Suisse Warburg Pincus Capital Fund's
management, those officers and Trustees of the Credit Suisse Warburg
Pincus Capital Fund and its Adviser who each own beneficially more
than one-half of 1% of the outstanding securities of such issuer
together own more than 5% of the securities of such issuer;
11. With respect to the Credit Suisse Warburg Pincus Blue Chip Fund, the
Credit Suisse Warburg Pincus Fixed Income II Fund, the Credit Suisse
Warburg Pincus Municipal Trust Fund and the Credit Suisse Warburg
Pincus Value Fund, invest more than 5% of the value of its total
assets at the time an investment is made in the non-convertible
preferred stock of issuers whose non-convertible preferred stock is
not readily marketable, subject to the limitation in paragraph 8;
-45-
12. With respect to the Credit Suisse Warburg Pincus Blue Chip Fund, the
Credit Suisse Warburg Pincus Fixed Income II Fund, the Credit Suisse
Warburg Pincus Municipal Trust Fund and the Credit Suisse Warburg
Pincus Value Fund, participate on a joint or joint and several basis
in any securities trading account;
13. Issue any senior security within the meaning of the Investment
Company Act of 1940 (except to the extent that when-issued
securities transactions, forward commitments, stand-by commitments
or reverse repurchase agreements may be considered senior securities
and except, with respect to the Credit Suisse Warburg Pincus Small
Company Value Fund and the Credit Suisse Warburg Pincus Value Fund,
that the hedging transactions in which such Funds may engage and
similar investment strategies are not treated as senior securities);
14. Invest in real estate (other than money market securities secured by
real estate or interests therein or money market securities issued
by companies which invest in real estate or interests therein and,
with respect to the Credit Suisse Warburg Pincus Small Company Value
Fund and the Credit Suisse Warburg Pincus Value Fund, other than
mortgage-backed securities and similar instruments), or commodities
or commodity contracts except, with respect to the Credit Suisse
Warburg Pincus Small Company Value Fund, for hedging purposes;
-46-
15. With respect to the Credit Suisse Warburg Pincus Blue Chip Fund, the
Credit Suisse Warburg Pincus Fixed Income II Fund, the Credit Suisse
Warburg Pincus Municipal Trust Fund and the Credit Suisse Warburg
Pincus Value Fund, invest in the securities of other investment
companies or investment trusts except by purchase in the open market
where no commission or profit to a sponsor or dealer results from
such purchase other than the customary broker's commission, or
except when such purchase, though not in the open market, is part of
a plan of merger, acquisition or transfer of assets, or
consolidation and except, with respect to the Credit Suisse Warburg
Pincus Value Fund, for purchases of securities of money market
funds;
16. Invest in companies for the purpose of exercising control or
management; or
17. With respect to the Credit Suisse Warburg Pincus Municipal Trust
Fund, make short sales of securities.
The Funds do not consider the segregation of assets in connection
with any of their investment practices to be a mortgage, pledge or hypothecation
of such assets.
The following fundamental investment restrictions are applicable
only to the Credit Suisse Warburg Pincus Fixed Income II Fund and may not be
changed with respect to the Credit Suisse Warburg Pincus Fixed Income II Fund
without the approval
-47-
of the shareholders of the Credit Suisse Warburg Pincus Fixed Income II Fund (as
described above).
The Credit Suisse Warburg Pincus Fixed Income II Fund may not:
1. Write, purchase or sell puts, calls, straddles or spreads, or
combinations thereof;
or
2. Invest in oil, gas or other mineral exploration or development
programs.
(d) Temporary Defensive Position
The Credit Suisse Warburg Pincus Blue Chip Fund reserves the right,
when the Adviser determines it appropriate, to invest in investment-grade
short-term fixed-income securities and other investment-grade debt securities,
enter into repurchase agreements and hold cash for temporary defensive purposes.
The Credit Suisse Warburg Pincus Fixed Income II Fund may enter into
repurchase agreements, terminable within 7 days or less, with respect to issues
of the U.S. Treasury, with member banks of the Federal Reserve System or primary
dealers in U.S. Government Securities, without limit for temporary defensive
purposes.
The Credit Suisse Warburg Pincus Municipal Trust Fund reserves the
right to hold cash and short-term fixed-income securities and to enter into
repurchase agreements as necessary for temporary defensive or emergency
purposes, without limit, as determined by the Adviser.
-48-
- --------------------------------------------------------------------------------
MANAGEMENT OF THE FUNDS
- --------------------------------------------------------------------------------
(a) Trustees
The Credit Suisse Warburg Pincus Capital Funds has Trustees who, in
addition to overseeing the actions of the Funds' Adviser and Distributor, decide
upon matters of general policy. The Trustees also review the actions of the
officers of the Credit Suisse Warburg Pincus Capital Funds who conduct and
supervise the daily business operations of the Funds.
The Trustees and principal officers of the Credit Suisse Warburg
Pincus Capital Funds, their ages and their primary occupations during the past
five years are set forth below.
Position(s) Held
with Credit Suisse
Warburg Pincus Principal Occupation(s)
Name, Address and Age (1) Capital Funds During Past 5 Years
- ------------------------- ------------------ -----------------------
*G. MOFFETT COCHRAN (49) Chairman of the President, Managing
Board of Trustees Director and Member of the
and President Management Committee of
CSAM; former Chairman of
DLJAM, with which he had been
associated since prior to 1993;
formerly Senior Vice President
with Bessemer Trust Companies.
Trustee of Credit Suisse
Warburg Pincus Opportunity
Funds, Credit Suisse Warburg
Pincus Select Funds and DLJ
High Yield Bond Fund.
RICHARD J. HANLON (34) Vice President Director of CSAM, which he
joined as a result of
Credit Suisse's acquisition
of DLJ; previously Senior
Vice President of DLJAM,
with which he had been
associated since 1994.
Prior to his becoming
associated with Credit
Suisse Warburg Pincus Funds
and the Adviser, Mr. Hanlon
was a portfolio manager at
Manufacturers
Hanover/Chemical Bank.
-49-
Position(s) Held
with Credit Suisse
Warburg Pincus Principal Occupation(s)
Name, Address and Age (1) Capital Funds During Past 5 Years
- ------------------------- ------------------ -----------------------
STIG HOST (74) Trustee Oil company executive;
Member of the
Boards-International Energy
Corp., International Marine
Sales, Inc., Kriti
Exploration Inc., Alliance
International Fund,
Alliance New Europe Fund,
Alliance All Asia
Investment Fund, Alexander
Host Foundation, American
Scandinavian Foundation,
Trustee of Credit Suisse
Warburg Pincus Opportunity
Funds, Credit Suisse
Warburg Pincus Select Funds
and DLJ High Yield Bond
Fund. His address is 103
Oneida Drive, Greenwich, CT
06830.
MARTIN JAFFE (54)* Trustee, Vice Chief Financial Officer,
President, Managing Director and
Treasurer and Member of the Management
Secretary Committee of CSAM; former
Chief Operating Officer of
DLJAM, with which he had been
associated since prior to 1993.
Trustee of Credit Suisse
Warburg Pincus Opportunity
Funds, Credit Suisse Warburg
Pincus Select Funds and DLJ
High Yield Bond Fund.
CATHY A. JAMESON (46) Vice President Managing Director of CSAM,
which she joined as a
result of Credit Suisse's
acquisition of DLJ;
previously Managing
Director of DLJAM, with
which she had been
associated since prior to
1993.
BRIAN A. KAMMERER (43) Vice President Director of CSAM, which he
joined as a result of
Credit Suisse's acquisition
of DLJ; previously Senior
Vice President of DLJAM
with which he had been
associated since prior to
1993.
PETER F. KROGH (63) Trustee Dean Emeritus and
Distinguished Professor of
International Affairs at
the Edmund A. Walsh School
of Foreign Service,
Georgetown University;
Moderator of PBS foreign
affairs television series;
Member of Board of The
Carlisle Companies Inc.
Member of Selection
Committee for Truman
Scholars and Henry Luce
Scholars. Senior Associate
of Center for Strategic and
International Studies;
Trustee of numerous world
affairs organizations.
Trustee/Director of Credit
Suisse Warburg Pincus
Opportunity Funds, Credit
Suisse Warburg Pincus Select
Funds, DLJ High Yield Bond
Fund and other CSAM-advised
investment companies. His
address is 3417 N. Street NW,
Washington, DC 20007.
-50-
Position(s) Held
with Credit Suisse
Warburg Pincus Principal Occupation(s)
Name, Address and Age (1) Capital Funds During Past 5 Years
- ------------------------- ------------------ -----------------------
MARYBETH B. LEITHEAD (37) Vice President Director of CSAM, which she
joined as a result of
Credit Suisse's acquisition
of DLJ; previously Senior
Vice President of DLJAM,
with which she had been
associated since 1993.
HUGH M. NEUBURGER (56) Vice President Managing Director of CSAM,
which he joined as a result
of Credit Suisse's
acquisition of DLJ;
previously Managing
Director of DLJAM, with
which he had been
associated since March
1995. Prior to his
association with Credit
Suisse Warburg Pincus
Capital Funds and the
Adviser, Mr. Neuburger was
the President of Hugh M.
Neuburger, Inc., a
consulting firm.
JOHN J. SHEEHAN (69) Trustee Owns own consulting firm;
Former President and CEO of
National Computer Analysts,
Inc., Principal Negotiator
for NCA, Director of
National Accounts for Large
Financial Institutions
Group. Trustee of Credit
Suisse Warburg Pincus
Opportunity Funds, Credit
Suisse Warburg Pincus
Select Funds and DLJ High
Yield Bond Fund. His
address is 4 Bennington
Place, Newton, PA18940.
ROGER W. VOGEL (43) Vice President Managing Director of CSAM,
which he joined as a result
of Credit Suisse's
acquisition of DLJ;
previously Managing
Director of DLJAM, a
position he held since July
1993.
ROBERT E. FISCHER (69) Trustee Trustee of the Credit
Suisse Warburg Pincus
Opportunity Funds, Credit
Suisse Warburg Pincus
Select Funds and DLJ High
Yield Bond Fund. Has been
Partner at the law firm of
Wolf, Block, Schorr and
Solis-Cohen LLP (or its
predecessor firm), since
prior to 1993.
WILMOT H. KIDD, III (59) Trustee Trustee of the Credit
Suisse Warburg Pincus
Opportunity Funds, Credit
Suisse Warburg Pincus
Select Funds, has been
President of Central
Securities Corporation,
since prior to 1993.
- ----------
(1) Unless otherwise specified, the address of each of such persons is 466
Lexington Avenue, New York, New York 10017.
-51-
* Those Trustees whose names are preceded by an asterisk are "interested
persons" of Credit Suisse Warburg Pincus Capital Funds as defined by the
Investment Company Act of 1940.
Messrs. Host, Fischer, Kidd, Krogh and Sheehan are members of the
Audit Committee, whose function is to oversee and monitor the integrity of the
Funds' financial reporting processes. Messrs. Cochran and Jaffe are members of
the Executive Committee a function of which is to declare dividends on behalf of
the Trustees. Messrs. Host and Sheehan are members of the Valuation Committee
whose function is to value the securities of each Fund in emergency situations.
To rationalize the management of the Funds and the Warburg Pincus
family of funds managed by CSAM ("Warburg Pincus Funds"), CSAM has proposed, and
the Board of Trustees has approved for submission to shareholders at a meeting
scheduled for March 23, 2001 the replacement of all the current Trustees of the
Funds, other than Peter F. Krogh, with trustees of the Warburg Pincus Funds.
Additionally, the Board of Trustees has appointed James P. McCaughan as Chairman
of the Trust, effective March 23, 2001.
The following table sets forth the aggregate compensation paid by
the Credit Suisse Warburg Pincus Capital Funds to the Trustees who are not
affiliated with the Adviser for the fiscal year ended October 31, 2000 and the
aggregate compensation paid to such Trustees for service on the Funds' Boards
and that of all other investment companies that are part of the same fund
complex. Below are listed the Trustees who have served the Credit Suisse Warburg
Pincus Capital Funds during its most recent fiscal year.
-52-
Compensation Table
Pension or Total Compensation
Retirement Benefits from Credit Suisse
Aggregate Accrued As Part of Warburg Pincus
Compensation From Credit Suisse Capital Funds and
Credit Suisse Warburg Pincus Estimated Annual Fund Complex Paid to
Warburg Pincus Capital Funds Benefits Upon Trustees in Current
Name and Position Capital Funds (1) Expenses Retirement Fiscal Year(2)
- --------------------- ---------------------- --------------------- ------------------ -----------------------
Robert L. Bast* $ 4,000 None None $ 4,000
(Trustee)
Stig Host 11,250 None None 22,000
(Trustee)
Peter F. Krogh 11,250 None None 22,000
(Trustee)
Dennis G. Little* 4,000 None None 4,000
(Trustee)
William H. Mathers* 4,500 None None 4,500
(Trustee)
John J. Sheehan 10,250 None None 19,500
(Trustee)
William C. Simpson** 2,000 None None 2,000
(Trustee)
Robert E. Fischer 6,250 None None 30,500
(Trustee)
Wilmot H. Kidd III 6,250 None None 30,500
(Trustee)
* Retired, April 27, 2000.
** Deceased, April, 2000.
(1) The Capital Funds anticipate paying each independent Trustee approximately
$11,000 in each calendar year.
(2) As of October 31, 2000, the Fund Complex consisted of three open-end
investment companies (DLJ Focus Funds, DLJ Opportunity Funds and DLJ
Select Funds, which were subsequently renamed the Credit Suisse Warburg
Pincus Capital Funds, the Credit Suisse Warburg Pincus Opportunity Funds
and the Credit Suisse Warburg Pincus Select Funds, respectively) with a
total of 12 series and one closed-end investment company (DLJ High Yield
Bond Fund).
The Trustees of Credit Suisse Warburg Pincus Capital Funds who are
officers or employees of the Adviser or any of its affiliates receive no
remuneration from Credit Suisse Warburg Pincus Capital Funds. Effective May 16,
2000, each of the Trustees who is not affiliated with the Adviser will be paid a
$2,500 fee for each board meeting attended, a $250 fee for each Audit Committee
meeting attended, a $500 fee for each special meeting attended and an annual
retainer of $500. For the year ended October 31, 2000, such remuneration totaled
$59,750.
-53-
(b) Control Persons
None.
(c) Principal Holders
To the best of the Fund's knowledge as of January 31, 2001, no
shareholder owned 5% or more of the outstanding Class A, Class B, Class C, Class
D or Common Class shares of the Credit Suisse Warburg Pincus Blue Chip Fund, the
Credit Suisse Warburg Pincus Small Company Value Fund, the Credit Suisse Warburg
Pincus Value Fund, the Credit Suisse Warburg Pincus Municipal Trust Fund or the
Credit Suisse Warburg Pincus Fixed Income II Fund.
The Adviser manages accounts over which it has discretionary power
to vote or dispose of securities held in such accounts and which accounts hold
in the aggregate, as of January 31, 2001, 263,579 shares (2.3%) of the Credit
Suisse Warburg Pincus Blue Chip Fund, 233,704 shares (2.1%) of the Credit Suisse
Warburg Pincus Value Fund, 1,626,676 shares (15.3%) of the Credit Suisse Warburg
Pincus Small Company Value Fund, 476,924 shares (3.5%) of the Credit Suisse
Warburg Pincus Fixed Income II Fund, and 572,009 shares (25.9%) of the Credit
Suisse Warburg Pincus Municipal Trust Fund.
Set forth below is certain information as to persons who owned 5% or
more of a Fund's outstanding shares as of January 31, 2001:
Name and Address % of Class Nature of Ownership
Bankers Trust Company 11.67% Beneficial
Estate of Robert
Winthrop
P.O. Box 9005
Church Street Station
New York, NY 10008
-54-
- -----------------
(d) Management Ownership
As of January 31, 2001, the Trustees and officers of Credit Suisse
Warburg Pincus Capital Funds as a group owned beneficially less than 1.0% of any
class of any Fund.
-55-
- --------------------------------------------------------------------------------
INVESTMENT ADVISORY AND OTHER SERVICES
- --------------------------------------------------------------------------------
(a) Investment Adviser
CSAM, with principal offices at 466 Lexington Avenue, New York, New
York 10017 has been retained under an interim investment advisory agreement
("Interim Investment Advisory Agreement") as Credit Suisse Warburg Pincus
Capital Funds' investment adviser (see "Fund Management" in the Prospectus)
effective November 3, 2000.
Credit Suisse Group ("Credit Suisse") acquired Donaldson, Lufkin &
Jenrette, Inc. ("DLJ"), including its subsidiary, DLJAM, the previous investment
adviser of the Credit Suisse Warburg Pincus Capital Funds, and has combined the
investment advisory business of DLJAM with its existing U.S. asset management
business, CSAM (the "Acquisition"). CSAM is part of Credit Suisse Asset
Management, which is the institutional asset management and mutual fund arm of
Credit Suisse. Credit Suisse is a global financial services company, providing a
comprehensive range of banking and insurance products.
Prior to the Acquisition, DLJAM was a wholly-owned subsidiary of
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ Securities"), the
former distributor of the Funds' shares, a wholly-owned subsidiary of DLJ, which
was, in turn an independently operated, indirect subsidiary of AXA Financial,
Inc., a holding company controlled by AXA, a French insurance holding company.
Following the Acquisition, DLJAM was merged with Credit Suisse Investment
Corporation ("CSIC"), the parent
-56-
company of CSAM. CSIC subsequently changed its name to CSAM Americas Holding
Corp. and CSIC contributed all of its assets and liabilities, including its
investment advisory agreements, to CSAM.
CSAM is an indirect wholly-owned U.S. subsidiary of Credit Suisse.
Credit Suisse is a global financial services company, providing a comprehensive
range of banking and insurance products. Active on every continent and in all
major financial centers, Credit Suisse comprises five business units -- Credit
Suisse Asset Management (asset management), of which CSAM is a member; Credit
Suisse First Boston (investment banking); Credit Suisse Private Banking (private
banking); Credit Suisse (retail banking); and Winterthur (insurance). Credit
Suisse has approximately $680 billion of global assets under management and
employs approximately 62,000 people worldwide. The principal business address of
Credit Suisse is Paradeplatz 8, CH 8070, Zurich, Switzerland. Credit Suisse
Asset Management companies managed approximately $93 billion in the U.S. and
$298 billion globally as of December 31, 2000.
CSAM's sole member is CSAM Americas Holding Corp. located at 466
Lexington Avenue, New York, New York 10017, which is wholly-owned by Credit
Suisse Asset Management Holding Corp., of the same address, which in turn is
wholly-owned by Credit Suisse First Boston, Inc., located at 11 Madison Avenue,
New York, New York 10010, which is indirectly wholly-owned by Credit Suisse
Group.
The Interim Investment Advisory Agreement became effective on
November 3, 2000. The Interim Investment Advisory Agreement replaced an earlier,
substantially identical agreement (the "Previous Investment Advisory Agreement")
with DLJAM that terminated pursuant to the terms of the existing agreement. The
provisions
-57-
of the Interim Investment Advisory Agreement and the Previous Investment
Advisory Agreement are the same, except for the identity of the parties, the
commencement and termination dates and the payment of fees. On October 26, 2000,
the Trustees approved the Interim Investment Advisory Agreement with DLJAM,
which was assigned to CSAM as part of the Acquisition. The Interim Investment
Advisory Agreement terminates, pursuant to its terms, upon the earlier of 150
days from November 3, 2000, which is April 2, 2001, or the date of approval by
the shareholders, voting separately by series, of a new investment advisory
agreement. CSAM has proposed, and the Board of Trustees of the Credit Suisse
Warburg Pincus Capital Funds have approved for submission to shareholders at
meetings scheduled for March 23, 2001, a new investment advisory agreement with
CSAM on the same economic terms as the Interim Investment Advisory Agreement.
The Interim Investment Advisory Agreement provides for termination
at any time without penalty on ten days' prior written notice, by a vote of the
holders of a majority of the Fund's outstanding voting securities or by a vote
of a majority of the Board of Trustees or by the Adviser on sixty days' prior
written notice, and will automatically terminate in the event of its assignment.
For the fiscal years ending October 31, 2000, 1999 and 1998 the
Credit Suisse Warburg Pincus Blue Chip Fund paid the Adviser fees of $1,338,293,
$984,475 and $791,152 respectively; the Credit Suisse Warburg Pincus Small
Company Value Fund paid the Adviser fees of $1,622,703, $1,826,662 and
$2,257,326 respectively; the Credit Suisse Warburg Pincus Fixed Income II Fund
paid the Adviser fees of $837,673, $641,978 and $347,059 respectively; the
Credit Suisse Warburg Pincus Value Fund paid
-58-
the Adviser fees of $1,442,618, $1,377,123 and $1,138,550 respectively; and the
Credit Suisse Warburg Pincus Municipal Trust Fund paid the Adviser fees of
$163,791, $247,109 and $252,180 respectively. During the fiscal years ended
October 31, 2000, 1999 and 1998, the Adviser reimbursed the Credit Suisse
Warburg Pincus Fixed Income II Fund $188,370, $157,981 and $164,206
respectively, and the Credit Suisse Warburg Pincus Municipal Trust Fund
$138,175, $163,442 and $165,742 respectively, for operating expenses.
As required by Rule 15a-4(b)(2)(vi) of the 1940 Act, the Interim
Investment Advisory Agreement provides that fees earned by CSAM with respect to
each series of the Credit Suisse Warburg Pincus Capital Funds will be deposited
into an interest-bearing escrow account with Citibank, N.A., and will only be
paid to CSAM if a majority of the shareholders of such series approves a new
investment advisory agreement for that series. If shareholders of a series do
not approve a new investment advisory agreement, CSAM will receive as
compensation or reimbursement in respect of such series the lesser of: (i) the
fee under such Interim Investment Advisory Agreement; or (ii) the costs of
providing services during the term of such Interim Investment Advisory Agreement
(plus, in each case, interest earned on that amount while in escrow).
Pursuant to the terms of the Interim Investment Advisory Agreement,
the Adviser may retain, at its own expense, a sub-adviser to assist in the
performance of its services to Credit Suisse Warburg Pincus Capital Funds,
although such an arrangement is not currently contemplated.
Certain other clients of the Adviser may have investment objectives
and policies similar to those of the Credit Suisse Warburg Pincus Capital Funds.
The Adviser
-59-
may, from time to time, make recommendations which result in the purchase or
sale of a particular security by its other clients simultaneously with the
Credit Suisse Warburg Pincus Capital Funds. If transactions on behalf of more
than one client during the same period increase the demand for securities being
purchased or the supply of the securities being sold, there may be an adverse
effect on price. It is the policy of the Adviser to allocate advisory
recommendations and the placing of orders in a manner which is deemed equitable
by the Adviser to the accounts involved, including the Credit Suisse Warburg
Pincus Capital Funds. When two or more of the clients of the Adviser (including
the Credit Suisse Warburg Pincus Capital Funds) are purchasing the same security
on a given day from the same broker-dealer, such transactions may be averaged as
to price.
The Fund intends to enter into arrangements with certain
broker-dealers (including affiliates of the Distributor) whose customers are
Credit Suisse Warburg Pincus Capital Funds shareholders pursuant to which the
broker-dealers may perform shareholder servicing functions, such as opening new
shareholder accounts, processing purchase and redemption transactions, and
responding to certain inquiries regarding a Fund's performance and the status of
shareholder accounts. A Fund may pay for the electronic communications equipment
maintained at the broker-dealers' offices that permits access to the Fund's
computer files and, in addition, may reimburse the broker-dealers at cost for
personnel expenses involved in providing the services.
Effective February 1, 2001, the Funds retained Credit Suisse Asset
Management Securities, Inc. ("CSAMSI") and PFPC, Inc. ("PFPC") as
co-administrators to each of the Funds for a total rate not to exceed .18% of
each Funds' average
-60-
daily net assets. DLJAM, and then CSAM, provided administrative services to the
Funds without charge. However, CSAM has agreed to assume DLJAM's undertaking to
limit total annual operating expenses until October 31, 2001, and to limit
average annual expenses from the date of the acquisition of DLJ, November 3,
2000, until November 3, 2002 to the annualized levels previously paid by each of
the Funds measured over the 60-day period ended on the date of the acquisition
of DLJ. Consequently, it is not anticipated that there will be any increase in
the average annualized expense ratio of each Fund until November 3, 2002 as a
result of the retention of new co-administrators. Further, accounting services
previously provided by PFPC pursuant to a separate agreement will be provided by
PFPC under its new co-administration agreement.
Effective February 6, 2001, State Street Bank and Trust Company
("State Street") became the transfer agent for the Funds' Common Class (former
Class R) shares. The Board has approved the retention of State Street as
transfer agent for the Funds' other classes of shares.
(b) Principal Underwriter, Distributor and Rule 12b-1 Plans
CSAMSI, located at 466 Lexington Avenue, New York, New York 10017
(the "Distributor") became the distributor of the Credit Suisse Warburg Pincus
Capital Funds on December 18, 2000. The principal underwriter of the Credit
Suisse Warburg Pincus Capital Funds is also CSAMSI.
Pursuant to Rule 12b-1 adopted by the Securities and Exchange
Commission under the Investment Company Act of 1940, Credit Suisse Warburg
Pincus
-61-
Capital Funds has adopted a Distribution Agreement (the "Distribution
Agreement") and 12b-1 Plans for Class A shares, Class B shares, Class C shares
and Common Class shares of each Fund, and for Advisor Class shares of the Credit
Suisse Warburg Pincus Value Fund, to permit Credit Suisse Warburg Pincus Capital
Funds to compensate the Distributor for activities associated with the
distribution of shares.
Pursuant to the Distribution Agreement and the 12b-1 Plans, the
officers, Adviser or Distributor of Credit Suisse Warburg Pincus Capital Funds
report the amounts expended under the Distribution Agreement and the purposes
for which such expenditures were made to the Trustees of Credit Suisse Warburg
Pincus Capital Funds on a quarterly basis. Also, the 12b-1 Plans provide that
the selection and nomination of disinterested Trustees (as defined in the
Investment Company Act of 1940) are committed to the discretion of the
disinterested Trustees then in office. The Distribution Agreement and 12b-1
Plans may be continued annually if approved by a majority vote of the Trustees,
including a majority of the Trustees who neither are interested persons of
Credit Suisse Warburg Pincus Capital Funds nor have any direct or indirect
financial interest in the Distribution Agreement, the 12b-1 Plans or in any
other agreement related to the 12b-1 Plans, cast in person at a meeting called
for the purpose of voting on such approval.
The Distribution Agreement and 12b-1 Plans for the Class A shares
and Class B shares were initially approved by the Trustees, including a majority
of the disinterested Trustees, on October 19, 1995. The Class A 12b-1 Plans were
approved by shareholders at a special meeting on February 7, 1996. The Class B
12b-1 Plans were approved by the sole Class B shareholder of each Fund on
February 27, 1996. The 12b-1
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Plans were last approved by the Board of Trustees on August 3, 2000. Prior to
February 28, 1996, the Funds operated under 12b-1 Plans pursuant to which each
Fund reimbursed the Distributor up to .50 of 1% of the average daily net assets
of such Fund. The Distribution Agreement and 12b-1 Plans for the Class C shares
were initially approved by the Trustees, including a majority of the
disinterested Trustees, on January 27, 2000. The Class C 12b-1 Plans were
approved by the sole Class C shareholder of each Fund on February 25, 2000. The
Common Class 12b-1 Plans were initially approved by the Trustees, including a
majority of the disinterested Trustees, on May 16, 2000. The Common Class 12b-1
Plans were approved by the sole Common Class shareholder of each Fund on July
31, 2000. The Advisor Class 12b-1 Plans were initially approved by the Trustees,
including a majority of the disinterested Trustees, on December 18, 2000.
As approved, the Class A Plans currently provide that a service fee
of .25 of 1% per year of the average daily net assets of the Class A shares of
the Fund may be paid as compensation to the Distributor for its services. The
Class B Plans currently provide that: (i) an asset based sales charge of .75 of
1% per year and (ii) a service fee of .25 of 1% per year, in each case, of the
average daily net assets of the Class B shares of the Fund may be paid as
compensation to the Distributor for its services. The Class C Plans currently
provide that: (i) an asset based sales charge of .75 of 1% per year and (ii) a
service fee of .25 of 1% per year, in each case, of the average daily net assets
of the Class C shares of the Fund may be paid as compensation to the Distributor
for its services. The Common Class Plans provide that a service fee of .25 of 1%
per year of the average daily net assets of the Common Class shares of the Fund
may be paid as compensation to the Distributor for its services. Advisor Class
shares will be offered
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without a front end sales load or a contingent deferred sales charge but will be
charged a shareholder service fee payable at an annual rate of up to .25%, and a
distribution and/or services fee payable at an annual rate of up to .50% of the
average daily net assets of such class. The aggregate distribution and/or
shareholder services fee payable by the Advisor Class may not exceed .75% of the
average daily net assets relating to that class. The Board of Trustees is
currently limiting the amount payable to .50 of 1% of the average daily net
assets relating to that class. Payments may be made to an institution directly
out of assets of the Fund attributable to the class or by the Distributor on the
Fund's behalf. The Distributor, the Adviser or their affiliates may make
additional payments to institutions for providing distribution, administrative,
accounting and/or other services with respect to Advisor Class shares. Under
certain circumstances, the Fund, on behalf of the Series, may reimburse a
portion of these payments.
All material amendments to the 12b-1 Plans must be approved by a
vote of the Trustees, including a majority of the Trustees who neither are
interested persons of Credit Suisse Warburg Pincus Capital Funds nor have any
direct or indirect financial interest in the 12b-1 Plans or any related
agreement, cast in person at a meeting called for the purpose of voting on such
approval. In addition to such Trustee approval, the 12b-1 Plans may not be
amended in order to increase materially the costs which the Funds may bear
pursuant to the 12b-1 Plans without the approval of a majority of the
outstanding shares of each class of shares of each Fund, voting separately. The
12b-1 Plans may be terminated without penalty at any time by a majority vote of
the disinterested Trustees, by a majority vote of the outstanding shares of each
class of shares of each Fund, voting separately, or by the Adviser. Any
agreement related to the 12b-1 Plans may be
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terminated at any time, without payment of any penalty, by a majority vote of
the independent Trustees or by majority vote of the outstanding shares of each
class of shares of each Fund, voting separately, and will terminate
automatically in the event of assignment.
The 12b-1 Plans require that the Board of Trustees shall review at
least quarterly a written report of the payments made pursuant to each Plan and
the purpose for which such payments were made. For the year ended October 31,
2000, distribution fees paid or payable with respect to Class A shares, Class B
shares, Class C shares and Common Class shares for each fund were as follows:
Class A Class B Class C Common Class
Fund Shares Shares Shares Shares
- --------------------------------------------------------------------------------
Credit Suisse Warburg Pincus $444,797 $428,149 $12,245 $225
Blue Chip Fund
Credit Suisse Warburg Pincus $109,539 $35,617 $2 $7
Fixed Income II Fund
Credit Suisse Warburg Pincus $524,059 $176,261 $363 $19
Small Company Value Fund
Credit Suisse Warburg Pincus $475,998 $408,174 $1,130 $36
Value Fund
Credit Suisse Warburg Pincus $72,659 $9,984 $2 $11
Municipal Trust Fund
During the year ended October 31, 2000, the Distributor received
from each Fund the following amounts as initial sales charges, which are paid in
respect of Class A shares, and contingent deferred sales charges ("CDSC"), which
are paid in respect of Class B shares and Class C shares:
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Fund Initial Sales CDSC
Charges
- --------------------------------------------------------------------------------
Credit Suisse Warburg Pincus Blue $48,092 $85,629
Chip Fund
Credit Suisse Warburg Pincus Fixed $971 $24,343
Income II Fund
Credit Suisse Warburg Pincus Small $10,639 $58,650
Company Value Fund
Credit Suisse Warburg Pincus Value $31,290 $85,470
Fund
Credit Suisse Warburg Pincus $65 $1,296
Municipal Trust Fund
During the year ended October 31, 2000, the Distributor expended
$1,977,691 in respect of the Credit Suisse Warburg Pincus Blue Chip Fund in
distributing such Fund's shares. Of such amount, it is estimated that $178,767
was spent on advertising; $9,266 was spent on printing and mailing of
prospectuses to other than current shareholders; $0 was spent on compensation to
underwriters; $1,204,090 was spent on compensation to broker-dealers; $549,873
was spent on compensation to sales personnel; and $35,695 was spent on other
distributing and consulting costs.
During the year ended October 31, 2000, the Distributor expended
$344,299 in respect of the Credit Suisse Warburg Pincus Fixed Income II Fund in
distributing such Fund's shares. Of such amount, it is estimated that $41,639
was spent on advertising; $507 was spent on printing and mailing of prospectuses
to other than current shareholders; $0 was spent on compensation to
underwriters; $166,998 was spent on compensation to broker-dealers; $127,184 was
spent on compensation to sales personnel; and $7,971 was spent on other
distributing and consulting costs.
During the year ended October 31, 2000, the Distributor expended
$1,391,526 in respect of the Credit Suisse Warburg Pincus Small Company Value
Fund in distributing such Fund's shares. Of such amount, it is estimated that
$198,344 was spent on advertising; $3,024 was spent on printing and mailing of
prospectuses to other
-66-
than current shareholders; $0 was spent on compensation to underwriters;
$570,381 was spent on compensation to broker-dealers; $596,256 was spent on
compensation to sales personnel; and $23,521 was spent on other distributing and
consulting costs.
During the year ended October 31, 2000, the Distributor expended
$1,718,969 in respect of the Credit Suisse Warburg Pincus Value Fund in
distributing such Fund's shares. Of such amount, it is estimated that $134,379
was spent on advertising; $6,992 was spent on printing and mailing of
prospectuses to other than current shareholders; $0 was spent on compensation to
underwriters; $851,641 was spent on compensation to broker-dealers; $686,229 was
spent on compensation to sales personnel; and $39,728 was spent on other
distributing and consulting costs.
During the year ended October 31, 2000, the Distributor expended
$180,389 in respect of the Credit Suisse Warburg Pincus Municipal Trust Fund in
distributing such Fund's shares. Of such amount, it is estimated that $17,835
was spent on advertising; $299 was spent on printing and mailing of prospectuses
to other than current shareholders; $0 was spent on compensation to
underwriters; $68,248 was spent on compensation to broker-dealers; $88,757 was
spent on compensation to sales personnel; and $5,250 was spent on other
distributing and consulting costs.
The Distribution Agreement also provides that the Distributor will
serve as distributor for the Class D shares without compensation from the Funds.
The Distributor anticipates commencing distribution of Advisor Class
shares as of February 28, 2001.
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(c) Other Service Providers
Citibank, N.A. serves as Custodian for the Funds' portfolio
securities and cash and in that capacity maintains certain records pursuant to
an agreement with the Credit Suisse Warburg Pincus Capital Funds.
PFPC, Inc., 211 S. Gulph Road, King of Prussia, PA 19406-3101,
serves as Transfer Agent to the Class A, B, C and D shares of the Credit Suisse
Warburg Pincus Capital Funds and provides customary transfer agency services to
the Funds, including the handling of shareholder communications, the processing
of shareholder transactions, the maintenance of shareholder account records, the
payment of dividends and distributions and related functions. Boston Financial
Data Services, Inc., 66 Brooks Drive, Braintree, MA 02184, serves as Transfer
Agent to the Common Class and Advisor Class shares of the Credit Suisse Warburg
Pincus Capital Funds.
Ernst & Young LLP, 787 Seventh Avenue, New York, NY 10019, serves as
the independent auditor of the Credit Suisse Warburg Pincus Capital Funds.
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- --------------------------------------------------------------------------------
BROKERAGE ALLOCATION AND OTHER PRACTICES
- --------------------------------------------------------------------------------
CSAM is responsible for establishing, reviewing and, where necessary,
modifying each Fund's investment program to achieve its investment objective.
Purchases and sales of newly issued portfolio securities are usually principal
transactions without brokerage commissions effected directly with the issuer or
with an underwriter acting as principal. Other purchases and sales may be
effected on a securities exchange or over-the-counter, depending on where it
appears that the best price and execution will be obtained. The purchase price
paid by a Fund to underwriters of newly issued securities usually includes a
concession paid by the issuer to the underwriter, and purchases of securities
from dealers, acting as either principals or agents in the after market, are
normally executed at a price between the bid and asked price, which includes a
dealer's mark-up or mark-down. Transactions on U.S. stock exchanges and some
foreign stock exchanges involve the payment of negotiated brokerage commissions.
On exchanges on which commissions are negotiated, the cost of transactions may
vary among different brokers. On most foreign exchanges, commissions are
generally fixed. There is generally no stated commission in the case of
securities traded in domestic or foreign over-the-counter markets, but the price
of securities traded in over-the-counter markets includes an undisclosed
commission or mark-up. U.S. Government Securities are generally purchased from
underwriters or dealers, although certain newly issued U.S. Government
Securities may be purchased directly from the U.S. Treasury or from the issuing
agency or instrumentality. No brokerage commissions are typically paid on
purchases and sales of U.S. Government Securities.
In selecting broker-dealers, the Adviser does business exclusively with
those broker-dealers that, in the Adviser's judgment, can be expected to provide
the best service. The service has two main aspects: the execution of buy and
sell orders and the provision of research. In negotiating commissions with
broker-dealers, the Adviser will pay no more for execution and research services
than it considers either, or both together, to be worth. The worth of execution
service depends on the ability of the broker-dealer to minimize costs of
securities purchased and to maximize prices obtained for securities sold. The
worth of research depends on its usefulness in optimizing portfolio composition
and its changes over time. Commissions for the combination of execution and
research services that meet the Adviser's standards may be higher than for
execution services alone or for services that fall below the Adviser's
standards. The Adviser believes that these arrangements may benefit all clients
and not necessarily only the accounts in which the particular investment
transactions occur that are so executed. Further, the Adviser will only receive
brokerage or research service in connection with securities transactions that
are consistent with the "safe harbor" provisions of Section 28(e) of the
Securities Exchange Act of 1934 when paying such higher commissions. Research
services may include research on specific industries or companies, macroeconomic
analyses, analyses of national and international events and trends, evaluations
of thinly traded securities, computerized trading screening techniques and
securities ranking services, and general research services.
Investment decisions for a Fund concerning specific portfolio securities
are made independently from those for other clients advised by the Adviser. Such
other investment clients may invest in the same securities as a Fund. When
purchases or sales of the same security are made at substantially the same time
on behalf of such other clients, transactions are averaged as to price and
available investments allocated as to amount, in a manner which the Adviser
believes to be equitable to each client, including a Fund. In some instances,
this investment procedure may adversely affect the price paid or received by a
Fund or the size of the position obtained or sold for a Fund. To the extent
permitted by law, securities may be aggregated with those to be sold or
purchased for a Fund with those to be sold or purchased for such other
investment clients in order to obtain best execution.
All orders for transactions in securities or options on behalf of a Fund
are placed by the Adviser with broker-dealers that it selects, including Credit
Suisse First Boston ("CSFB"), CSAMSI and affiliates of Credit Suisse. A Fund may
utilize CSFB, CSAMSI or affiliates of Credit Suisse in connection with a
purchase or sale of securities when the Adviser believes that the charge for the
transaction does not exceed usual and customary levels and when doing so is
consistent with guidelines adopted by the Board.
In no instance will portfolio securities be purchased from or sold to
CSAM, CSAMSI or CSFB or any affiliated person of the foregoing entities except
as permitted by SEC exemptive order or by applicable law. In addition, the Funds
will not give preference to any institutions with whom a Fund enters into
distribution or shareholder servicing agreements concerning the provision of
distribution services or support services.
If permitted for a Fund, transactions for such Fund may be effected on
foreign securities exchanges. In transactions for securities not actively traded
on a foreign securities exchange, such Fund will deal directly with the dealers
who make a market in the securities involved, except in those circumstances
where better prices and execution are available elsewhere. Such dealers usually
are acting as principal for their own account. On occasion, securities may be
purchased directly from the issuer. Such portfolio securities are generally
traded on a net basis and do not normally involve brokerage commissions.
Securities firms may receive brokerage commissions on certain portfolio
transactions, including options, futures and options on futures transactions and
the purchase and sale of underlying securities upon exercise of options.
A Fund may participate, if and when practicable, in bidding for the
purchase of securities for a Fund's portfolio directly from an issuer in order
to take advantage of the lower purchase price available to members of such a
group. A Fund will engage in this practice, however, only when the Adviser, in
its sole discretion, believes such practice to be otherwise in a Fund's
interest.
-69-
During the fiscal year ended October 31, 2000, commissions of
$126,881, $460,009 and $299,222 related to transactions of $108,890,562,
$257,745,654 and $125,702,605 were paid to brokers that provided research or
other services to the Credit Suisse Warburg Pincus Blue Chip Fund, the Credit
Suisse Warburg Pincus Value Fund and the Credit Suisse Warburg Pincus Small
Company Value Fund, respectively.
-70-
-71-
The tables below show certain information regarding the payment of
commissions by the Credit Suisse Warburg Pincus Blue Chip Fund, the Credit
Suisse Warburg Pincus Small Company Value Fund and the Credit Suisse Warburg
Pincus Value Fund for the three years ending October 31, 2000.
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Fiscal Years ended October 31,
---------------------------------
2000 1999 1998
-------- -------- --------
Total brokerage commissions incurred by the Credit Suisse
Warburg Pincus Blue Chip Fund ....................................... $126,881 $150,653 $63,125
Total dollar amount paid to Autranet, Inc. .......................... $7,099 $24,637 $0
Percentage of total brokerage commissions paid to Autranet, Inc. .... 5.6% 16.4% 0%
Percentage of aggregate dollar amount of transactions involving
the payment of commissions to Autranet, Inc. ........................ 1.3%
Total dollar amount paid to Donaldson, Lufkin & Jenrette
Securities Corporation .............................................. $0 $19,912 $11,200
Percentage of total brokerage commissions paid to Donaldson,
Lufkin & Jenrette Securities Corporation ............................ 0% 13.2% 17.7%
Percentage of aggregate dollar amount of transactions involving
the payment of commissions to Donaldson, Lufkin & Jenrette
Securities Corporation .............................................. 0% 10.6% 11.9%
Fiscal Years ended October 31,
---------------------------------
2000 1999 1998
-------- -------- --------
Total brokerage commissions incurred by the Credit Suisse
Warburg Pincus Small Company Value Fund ............................. $299,222 $338,342 $468,261
Total dollar amount paid to Autranet, Inc. .......................... $4,108 $24,070 $59,082
Percentage of total brokerage commissions paid to Autranet, Inc. .... 1.4% 7.1% 12.6%
Percentage of aggregate dollar amount of transactions involving
the payment of commissions to Autranet, Inc. ........................ 0.3%
-73-
Fiscal Years ended October 31,
---------------------------------
2000 1999 1998
-------- -------- --------
Total brokerage commissions incurred by the Credit Suisse
Warburg Pincus Value Fund ........................................... $460,009 $120,954 $141,358
Total dollar amount paid to Autranet, Inc. .......................... $46,757 $25,758 $29,410
Percentage of total brokerage commissions paid to Autranet, Inc. .... 10.2% 21.3% 20.8%
Percentage of aggregate dollar amount of transactions involving
the payment of commissions to Autranet, Inc. ........................ 6.0%
Total dollar amount paid to Donaldson, Lufkin & Jenrette
Securities Corporation .............................................. $600 $1,050 0
Percentage of total broker commissions paid to Donaldson,
Lufkin & Jenrette Securities Corporation ............................ 0.1% 0.6% 0
Percentage of aggregate dollar amount of transactions involving
the payment of commissions to Donaldson, Lufkin & Jenrette
Securities Corporation .............................................. 0.1% 0.9% 0
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- --------------------------------------------------------------------------------
CAPITAL STOCK
AND ORGANIZATION
- --------------------------------------------------------------------------------
Each Fund of the Credit Suisse Warburg Pincus Capital Funds is
authorized to issue an unlimited number of shares of beneficial interest per
share divided into four classes, designated Class A, Class B, Class C and Common
Class. In addition, Credit Suisse Warburg Pincus Blue Chip Fund, Credit Suisse
Warburg Pincus Value Fund, Credit Suisse Warburg Pincus Small Company Value Fund
and Credit Suisse Warburg Pincus Fixed Income II Fund are also authorized to
issue an unlimited number of shares of beneficial interest per share, designated
Class D and the Credit Suisse Warburg Pincus Value Fund is also authorized to
issue an unlimited number of shares of beneficial interest per share, designated
Advisor Class. Each class of shares represents an interest in the same assets of
a Fund and is identical in all respects except that (i) each class is subject to
different sales charges and distribution and/or service fees (except for Class D
shares, which are not subject to any sales charges and distribution and/or
service fees), which may affect performance, (ii) each class has exclusive
voting rights on any matter submitted to shareholders that relates solely to its
arrangement and has separate voting rights on any matter submitted to
shareholders in which the interests of one class differ from the interests of
any other class, (iii) each class has a different exchange privilege, (iv) only
Class B shares have a conversion feature, (v) Class D shares are solely
available for purchase by employees of Credit Suisse First Boston ("CSFB") and
its subsidiaries that are eligible to participate in the Employee Savings and
Retirement Plan of Credit Suisse First Boston, certain investment advisory or
brokerage clients of
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CSAM or its affiliates, and certain employee benefit plans for employees of CSAM
or its affiliates (CSFB employees should contact the CSFB Hotline at
1-800-588-6200 concerning how to purchase Class D shares), (vi) Common Class
shares have slightly different procedures for buying and selling shares and
available services, as described in the Prospectus under "How to Buy and Sell
Shares" and "Additional Shareholder Services," and (vii) Advisor Class shares
are available for purchase through certain institutions and financial services
firms and are not available to individual investors directly. In accordance with
the Credit Suisse Warburg Pincus Capital Funds' Amended and Restated Agreement
and Declaration of Trust, the Trustees may authorize the creation of additional
series and classes within such series, with such preferences, privileges,
limitations and voting and dividend rights as the Trustees may determine.
Currently, each Fund is offering four classes of shares, designated Class A,
Class B, Class C and Common Class for each of the Credit Suisse Warburg Pincus
Capital Funds and, in addition, Class D shares for the Credit Suisse Warburg
Pincus Blue Chip Fund, Credit Suisse Warburg Pincus Value Fund, Credit Suisse
Warburg Pincus Small Company Value Fund and Credit Suisse Warburg Pincus Fixed
Income II Fund, and Advisor Class shares for the Credit Suisse Warburg Pincus
Value Fund.
The Trust was formed on November 26, 1985 as a "business trust"
under the laws of The Commonwealth of Massachusetts. Under Massachusetts law,
shareholders of a business trust, unlike shareholders of a corporation, could be
held personally liable as partners for the obligations of the trust under
certain circumstances. The Amended and Restated Agreement and Declaration of
Trust, however, provides that shareholders of Credit Suisse Warburg Pincus
Capital Funds shall not be subject to any
-76-
personal liability for the acts or obligations of Credit Suisse Warburg Pincus
Capital Funds and that every written obligation, contract, instrument or
undertaking made by Credit Suisse Warburg Pincus Capital Funds shall contain a
provision to that effect. Upon payment of any liability, the shareholder will be
entitled to reimbursement from the general assets of the appropriate Fund. The
Trustees intend to conduct the operation of Credit Suisse Warburg Pincus Capital
Funds, with the advice of counsel, in such a way as to avoid, to the extent
possible, ultimate liability of the shareholders for liabilities of Credit
Suisse Warburg Pincus Capital Funds.
The Amended and Restated Agreement and Declaration of Trust further
provide that no Trustee, officer, employee or agent of Credit Suisse Warburg
Pincus Capital Funds is liable to Credit Suisse Warburg Pincus Capital Funds or
to a shareholder, nor is any Trustee, officer, employee or agent liable to any
third persons in connection with the affairs of Credit Suisse Warburg Pincus
Capital Funds, except such liability as may arise from his or its own bad faith,
willful misfeasance, gross negligence or reckless disregard of his or its
duties. It also provides that all third parties shall look solely to the
property of Credit Suisse Warburg Pincus Capital Funds or the property of the
appropriate Fund for satisfaction of claims arising in connection with the
affairs of Credit Suisse Warburg Pincus Capital Funds or of the particular Fund,
respectively. With the exceptions stated, the Amended and Restated Agreement and
Declaration of Trust permits the Trustees to provide for the indemnification of
Trustees, officers, employees or agents of Credit Suisse Warburg Pincus Capital
Funds against all liability in connection with the affairs of Credit Suisse
Warburg Pincus Capital Funds.
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All shares of Credit Suisse Warburg Pincus Capital Funds when duly
issued will be fully paid and non-assessable. The Trustees are authorized to
re-classify and issue any unissued shares to any number of additional series or
classes without shareholder approval. Accordingly, the Trustees in the future,
for reasons such as the desire to establish one or more additional Funds with
different investment objectives, policies or restrictions, may create additional
series or classes of shares. Any issuance of shares of such additional series or
classes would be governed by the Investment Company Act of 1940 and the laws of
the Commonwealth of Massachusetts.
-78-
- --------------------------------------------------------------------------------
PURCHASES, REDEMPTIONS, EXCHANGES AND PRICING OF FUND
SHARES
- --------------------------------------------------------------------------------
The following information supplements that set forth in the
Prospectus under the heading "How to Buy and Sell Shares" and "Other Shareholder
Information."
(a) Purchases
Shares of the Funds are offered at the respective net asset value
per share ("NAV") next determined following receipt of a purchase order in
proper form by Credit Suisse Warburg Pincus Capital Funds or by the Distributor
plus, in the case of Class A shares of each Fund, an initial sales charge
imposed at the time of purchase or, in the case of Class B shares or Class C
shares of each Fund, subject to a contingent deferred sales charge or "CDSC"
upon redemption. Common Class shares of each Fund and Advisor Class shares of
the Credit Suisse Warburg Pincus Value Fund are offered without any sales charge
(but are subject to a distribution and/or servicing fee). Class D shares of the
Credit Suisse Warburg Pincus Blue Chip Fund, the Credit Suisse Warburg Pincus
Value Fund, the Credit Suisse Warburg Pincus Small Company Value Fund and the
Credit Suisse Warburg Pincus Fixed Income II Fund are offered to employees of
CSFB and its subsidiaries that are eligible to participate in the Employee
Savings and Retirement Plan of Credit Suisse First Boston, certain investment
advisory or brokerage clients of CSAM or its affiliates, and certain employee
benefit plans for employees of CSAM or its affiliates at NAV without any sales
charge. The Funds calculate NAV as of the close of
-79-
the regular session of the New York Stock Exchange, which is generally 4:00 p.m.
New York City time on each day that trading is conducted on the New York Stock
Exchange.
Each class of shares of a Fund represents an interest in the same
assets of such Fund and is identical in all respects except that (i) each class
is subject to different sales charges and distribution and/or service fees
(except for Class D shares, which are not subject to any sales charges and
distribution and/or service fees), which may affect performance, (ii) each class
has exclusive voting rights on any matter submitted to shareholders that relates
solely to its arrangement and has separate voting rights on any matter submitted
to shareholders in which the interests of one class differ from the interests of
any other class, (iii) each class has a different exchange privilege, (iv) only
Class B shares have a conversion feature, (v) Class D shares are solely
available for purchase by employees of CSFB and its subsidiaries that are
eligible to participate in the Employee Savings and Retirement Plan of Credit
Suisse First Boston, certain investment advisory or brokerage clients of CSAM or
its affiliates, and certain employee benefit plans for employees of CSAM or its
affiliates (CSFB employees should contact the CSFB Hotline at 1-800-588-6200
concerning how to purchase Class D shares), (vi) Common Class shares have
slightly different procedures for buying and selling shares and available
services, as described in the Prospectus under "How to Buy and Sell Shares" and
"Additional Shareholder Services," and (vii) Advisor Class shares are available
for purchase through certain institutions and financial services firms and are
not available to individual investors directly. In accordance with the Credit
Suisse Warburg Pincus Capital Funds' Amended and Restated Agreement and
Declaration of Trust, the Trustees may authorize the creation of additional
series and classes within such series,
-80-
with such preferences, privileges, limitations and voting and dividend rights as
the Trustees may determine.
To open a new account by wire for Class A, Class B or Class C
shares, first call Credit Suisse Warburg Pincus Funds at 1-800-225-8011 (option
#2) to obtain an account number. A representative will instruct you to send a
completed, signed application to the Transfer Agent. Accounts cannot be opened
without a completed, signed application and a fund account number. Contact your
bank to arrange a wire transfer to:
Boston Safe Deposit & Trust
ABA #011001234
For: PFPC, Inc.
A/C #006068
Attn: Credit Suisse Warburg Pincus Funds
Your wire instructions must also include:
--the name of the Fund in which the money is to be invested,
--your account number at the Fund, and
--the name(s) of the account holder(s)
For Common Class shares, call the Shareholder Service Center at
1-800-WARBURG (800 927-2874) to obtain an application by mail or fax.
Applications can also be downloaded from the Internet Web site at:
www.warburg.com. Contact your bank to arrange a wire transfer to:
State Street Bank and Trust Company
ABA# 0110 000 28
Attn: Mutual Funds/Custody Dept.
[Credit Suisse Warburg Pincus Fund Name]
DDA# 9904-649-2
F/F/C: [Account Number and Registrations
Orders for the purchase of shares of a Fund become effective at the
next transaction time after Federal funds or bank wire monies become available
to Citibank,
-81-
N.A. ("Citibank") for a shareholder's investment. Federal funds are a bank's
deposits in a Federal Reserve Bank. These funds can be transferred by Federal
Reserve wire from the account of one member bank to that of another member bank
on the same day and are considered to be immediately available funds; similar
immediate availability is accorded monies received at Citibank by bank wire.
Investors should note that their banks may impose a charge for this service.
Money transmitted by a check drawn on a member of the Federal Reserve System is
converted to Federal Funds in one business day following receipt. Checks drawn
on banks which are not members of the Federal Reserve System may take longer.
All payments (including checks from individual investors) must be in United
States dollars.
All shares purchased are confirmed to each shareholder and are
credited to such shareholder's account at NAV and with respect to Class A
shares, less any applicable sales charge. To avoid unnecessary expense to the
Funds and to facilitate the immediate redemption of shares, share certificates
are not issued except upon the written request of a shareholder and payment of a
fee in the amount of $50 for such share issuance. The Funds retain the right to
waive such fee in their sole discretion.
Shareholders maintaining Fund accounts through brokerage firms and
other institutions should be aware that such institutions may necessarily set
deadlines for receipt of transaction orders from their clients that are earlier
than the transaction times of the Fund itself so that the institutions may
properly process such orders prior to their transmittal to the Fund or the
Distributor. Should an investor place a transaction order with such an
institution after its deadline, the institution may not effect the order with
the Fund until the next business day. Accordingly, an investor should
familiarize himself or
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herself with the deadlines set by his or her institution. (For example, a
brokerage firm may accept purchase orders from its customers up to 2:15 p.m. for
issuance at the 4:00 p.m. transaction time and price.) A brokerage firm acting
on behalf of a customer in connection with transactions in Fund shares is
subject to the same legal obligations imposed on it generally in connection with
transactions in securities for a customer, including the obligation to act
promptly and accurately.
A Fund may also issue its shares in return for securities or other
assets, subject to approval of the Board of Trustees.
(b) Contingent Deferred Sales Charges
Redemptions of Class B shares will be subject to a contingent
deferred sales charge or CDSC declining from 4% to zero over a four-year period.
Redemptions of Class C shares will be subject to a CDSC of 1% if such
redemptions occur within one year of purchase of the shares redeemed. The CDSC
for Class B shares and Class C shares will be waived for the following
shareholders or transactions:
(1) shares received pursuant to the exchange privilege which are currently
exempt from a CDSC;
(2) liquidations, distributions or loans from the following types of
retirement plans: (i) retirement plans qualified under section 401(k) of
the Code; (ii) plans described in section 403(b) of the Code; and (iii)
deferred compensation plans described in section 457 of the Code;
(3) redemptions as a result of shareholder death or disability (as defined in
the Code);
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(4) redemptions made pursuant to the Credit Suisse Warburg Pincus Capital
Funds' systematic withdrawal plan up to 1% monthly or 3% quarterly of the
account's total purchase payments (excluding dividend reinvestment) not to
exceed 12% of total purchase payments over any 12 month rolling period
(systematic withdrawals elected on a semi-annual or annual basis are not
eligible for the waiver); and
(5) a redemption related to minimum distributions from retirement plans or
accounts at age 70 1/2, which are required without penalty pursuant to
the Internal Revenue Code.
Redemptions effected by Credit Suisse Warburg Pincus Capital Funds
pursuant to its right to liquidate a shareholder's account with a current net
asset value of less than $250 will not be subject to the CDSC.
The CDSC will be deducted from the redemption proceeds and reduce
the amount paid to you. In the case of Class B shares and Class C shares, a CDSC
will be applied on the lesser of the original purchase price or the current
value of the shares being identified for redemption. Increases in the value of
your shares identified for redemption or shares acquired through reinvestment of
dividends or distributions are not subject to a CDSC. The amount of any CDSC
will be paid to and retained by the Distributor.
The amount of the CDSC, if any, will vary depending on the number of
years from the time of payment for the purchase of shares until the time of
redemption of such shares. Solely for purposes of determining the number of
years from the time of any payment for the purchase of shares, all payments
during a month will be aggregated and deemed to have been made on the last day
of the month. The CDSC will be calculated
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from the first day of the month after the initial purchase, excluding the time
shares were held in a money market fund, if the initial purchase was made in
such money market fund.
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The following table sets forth the rates of the CDSC applicable to
redemptions of Class B shares:
Contingent Deferred
Sales Charge as a
Percentage of the
Lesser of Dollars
Year Since Purchase Invested or Redemption
Payment Made Proceeds
---------------------- ----------------------
First................. 4.0%
Second................ 3.0%
Third................. 2.0%
Fourth................ 1.0%
Fifth................. 0.0%
Sixth................. 0.0%
Seventh............... 0.0%
For federal income tax purposes, the amount of the CDSC will reduce
the gain or increase the loss, as the case may be, on the amount recognized on
the redemption of shares.
(c) Redemptions
Payment of the redemption price may be made either in cash or in
portfolio securities (selected at the discretion of the Trustees and taken at
their value used in determining the redemption price), or partly in cash and
partly in portfolio securities. However, payments will be made wholly in cash
unless the Trustees believe that economic conditions exist which would make such
a practice detrimental to the best interest of Credit Suisse Warburg Pincus
Capital Funds. Credit Suisse Warburg Pincus Capital Funds has filed a formal
election with the Securities and Exchange Commission pursuant to which Credit
Suisse Warburg Pincus Capital Funds will only effect a redemption in portfolio
securities where the particular shareholder of record is redeeming
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more than $250,000 or 1% of a Fund's total net assets, whichever is less, during
any 90 day period. In the opinion of Credit Suisse Warburg Pincus Capital Funds'
management, however, the amount of a redemption request would have to be
significantly greater than $250,000 or 1% of total net assets of a Fund before a
redemption wholly or partly in portfolio securities would be made. If payment
for shares redeemed is made wholly or partly in portfolio securities, brokerage
costs may be incurred by the investor in converting the securities to cash. See
the Prospectus for a description of the CDSC which may be applicable to certain
redemptions.
To redeem shares represented by share certificates, investors should
forward the appropriate share certificates, endorsed in blank or with blank
stock powers attached, to Credit Suisse Warburg Pincus Capital Funds with the
request that the shares represented thereby or a specified portfolio thereof be
redeemed at the next determined net asset value per share. The share assignment
form on the reverse side of each share certificate surrendered to Credit Suisse
Warburg Pincus Capital Funds for redemption must be signed by the registered
owner or owners exactly as the registered name appears on the face of the
certificate or, in the alternative, a stock power signed in the same manner may
be attached to the share certificate or certificates, or, where tender is made
by mail, separately mailed to Credit Suisse Warburg Pincus Capital Funds. The
signature or signatures on the assignment form must be guaranteed in the manner
described below.
If the total value of the shares being redeemed exceeds $50,000
(before deducting any applicable CDSC) or a redemption request directs proceeds
to a party other than the registered account owner(s), the signature or
signatures on the letter or the endorsement must be guaranteed by an "eligible
guarantor institution" as defined in Rule
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17Ad-15 under the Securities Exchange Act of 1934. Eligible guarantor
institutions include banks, brokers, dealers, credit unions, national securities
exchanges, registered securities associations, clearing agencies and savings
associations. A broker-dealer guaranteeing signatures must be a member of a
clearing corporation or maintain net capital of at least $100,000. Credit unions
must be authorized to issue signature guarantees. Signature guarantees will be
accepted from any eligible guarantor institution which participates in a
signature guarantee program. Additional documents may be required for redemption
of corporate, partnership or fiduciary accounts.
The requirement for a guaranteed signature is for the protection of
the shareholder in that it is intended to prevent an unauthorized person from
redeeming his shares and obtaining the redemption proceeds.
(d) Exchanges
Class A, Class B, Class C or Common Class shares of a Fund may be
exchanged by mail or telephone for shares of the same class of another Fund or
for shares of the Credit Suisse Warburg Pincus Opportunity Funds or Credit
Suisse Warburg Pincus Select Funds, each investment companies managed by the
Adviser and an affiliate of the Adviser. The Credit Suisse Warburg Pincus
Opportunity Funds are currently comprised of five portfolios: the Credit Suisse
Warburg Pincus Developing Markets Fund, and the Credit Suisse Warburg Pincus
International Equity II Fund (the "Opportunity International Funds") and
together with the Credit Suisse Warburg Pincus High Income Fund (the "Credit
Suisse Warburg Pincus Opportunity Long-term Funds"), and Credit Suisse Warburg
Pincus Municipal Money Fund and Credit Suisse Warburg Pincus U.S.
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Government Money Fund (the "Credit Suisse Warburg Pincus Opportunity Money
Funds"). The Credit Suisse Warburg Pincus Select Funds are currently comprised
of two portfolios: The Credit Suisse Warburg Pincus Strategic Growth Fund and
Credit Suisse Warburg Pincus Technology Fund. Shares exchanged from a Fund must
be exchanged for the same class of shares of the Credit Suisse Warburg Pincus
Opportunity Long-term Funds or Credit Suisse Warburg Pincus Select Funds. Class
A, Class B and Class C shares may also be exchanged for shares of the Credit
Suisse Warburg Pincus Opportunity Money Funds. In addition, Class A shares may
be exchanged for Common Class shares of other Credit Suisse Warburg Pincus
Capital Funds, Credit Suisse Warburg Pincus Opportunity Long-term Funds, or
Credit Suisse Warburg Pincus Select Funds. After about July 1, 2001, Common
Class shares of Credit Suisse Warburg Pincus Funds may be exchanged for Common
Class shares of funds in the Warburg, Pincus family of funds (and vice versa).
Each Credit Suisse Warburg Pincus Opportunity Long-term Fund and
Credit Suisse Warburg Pincus Select Fund portfolio offers four classes of
shares: Class A shares, Class B shares, Class C shares and Common Class shares.
Class A shares are sold with a front-end sales charge of up to 5.75% for the
Opportunity International Funds and Credit Suisse Warburg Pincus Select Funds
and up to 4.75% for the Credit Suisse Warburg Pincus High Income Fund. In
addition, Class A shares of the Credit Suisse Warburg Pincus Opportunity
Long-term Funds and Credit Suisse Warburg Pincus Select Funds are sold with a
12b-1 fee of .25% annually. Class B shares are sold with a CDSC which declines
from 4% to zero, depending on the period of time the shares are held, and a
12b-1 fee of 1% annually. Class C shares are sold subject to a CDSC of 1% if
such
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shares are redeemed within one year of purchase, and a 12b-1 fee of 1% annually.
Common Class shares are subject to a 12b-1 fee of .25% annually. In addition,
the Credit Suisse Warburg Pincus High Income Fund, Credit Suisse Warburg Pincus
International Equity II Fund and Credit Suisse Warburg Pincus Technology Fund
offer Class D shares which are sold without an initial sales charge or CDSC at
net asset value to employees of CSFB and its subsidiaries that are eligible to
participate in the Employee Savings and Retirement Plan of Credit Suisse First
Boston, certain investment advisory or brokerage clients of CSAM or its
affiliates, and certain employee benefit plans for employees of CSAM or its
affiliates. Class D shareholders of the Credit Suisse Warburg Pincus Value Fund
who received Class D shares in exchange for their shares of the Warburg, Pincus
Value Fund II, Inc., but who are not otherwise eligible Class D shareholders,
may exchange such Class D shares for Common Class shares of other Credit Suisse
Warburg Pincus Funds. Such shareholders may exchange their (i) Class D shares of
the Credit Suisse Warburg Pincus Value Fund for Common Class shares of other
Credit Suisse Warburg Pincus Funds, and (ii) Common Class shares of other Credit
Suisse Warburg Pincus Funds for Class D shares of the Credit Suisse Warburg
Pincus Value Fund as long as such shareholders maintain a balance in the Credit
Suisse Warburg Pincus Value Fund. Each Credit Suisse Warburg Pincus Opportunity
Money Fund Portfolio currently offers only one class of shares, and is subject
to a 12 b-1 fee of .25% annually.
Class A shares subject to a CDSC as described in the Prospectus and
Class B shares and Class C shares which are exchanged for shares of the Credit
Suisse Warburg Pincus Opportunity Funds and Credit Suisse Warburg Pincus Select
Funds will continue to be subject to the same CDSC at the same rate and for the
same period of time as they were prior to exchange. The telephone exchange
privilege will be offered automatically
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unless a shareholder declines such option on the Share Purchase Application
found in the Funds' Prospectus, or by writing to the Funds' Transfer Agent,
PFPC, Inc., 211 S. Gulph Road, King of Prussia, PA 19406-3101, Attn: Credit
Suisse Warburg Pincus Funds. Participants within the Employee Savings and
Retirement Plan of Credit Suisse First Boston should contact the CSFB Hotline at
1-800-588-6200 for information regarding the exchange of Class D shares.
In the case of each of the Credit Suisse Warburg Pincus Opportunity
Funds and Credit Suisse Warburg Pincus Select Funds, the exchange privilege is
available only in those jurisdictions where shares of the relevant Fund may be
legally sold. Prospectuses for the Credit Suisse Warburg Pincus Opportunity
Funds may be obtained at the address or telephone number listed on the cover
page of the Prospectus. An exchange is effected on the basis of each Fund's
relative NAV next computed following receipt of an order for such exchange from
the shareholder. In addition, the exchange privilege is available only when
payment for the shares to be redeemed has been made and the shares exchanged are
held by the Transfer Agent or Distributor.
Only those shareholders who have had shares in a Fund for at least
seven days may exchange all or part of those shares for shares of another Fund
or one of the Credit Suisse Warburg Pincus Opportunity Funds or Credit Suisse
Warburg Pincus Select Funds and no partial exchange may be made if, as a result,
the shareholders' interest in a Fund would be reduced to less than $250. The
minimum initial exchange into another Fund is $1,000.
All exchanges into the Credit Suisse Warburg Pincus Opportunity
Funds or Credit Suisse Warburg Pincus Select Funds are subject to the minimum
investment requirements and any other applicable terms set forth in the
Prospectus for the relevant
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Fund whose shares are being acquired. If for these or other reasons the exchange
cannot be effected, the shareholder will be so notified.
A shareholder of Credit Suisse Warburg Pincus Capital Funds who has
exchanged shares for shares of the Credit Suisse Warburg Pincus Opportunity
Funds or Credit Suisse Warburg Pincus Select Funds will have all of the rights
and privileges of a shareholder of the relevant Credit Suisse Warburg Pincus
Opportunity Fund or Credit Suisse Warburg Pincus Select Funds.
The exchange privilege is intended to provide shareholders with a
convenient way to switch their investments when their objectives or perceived
market conditions suggest a change. The exchange privilege is not meant to
afford shareholders an investment vehicle to play short-term swings in the stock
market by engaging in frequent transactions in and out of the Funds.
Shareholders who engage in such frequent transactions may be prohibited or
restricted from placing future exchange orders.
(e) Systematic Withdrawal Plan
Shares of a Fund owned by a participant in Credit Suisse Warburg
Pincus Capital Funds' systematic withdrawal plan will be redeemed as necessary
to meet withdrawal payments. A CDSC which would otherwise be imposed will be
waived in connection with redemptions made pursuant to Credit Suisse Warburg
Pincus Capital Funds' systematic withdrawal plan of up to 1% monthly or 3%
quarterly of an account (excluding dividend reinvestments) not to exceed 12%
over any 12 month rolling period; however, the CDSC will not be waived for
systematic withdrawals elected on a semi-annual or annual basis. See "How to Buy
and Sell Shares" in the Prospectus for a
-92-
description of the CDSC. A shareholder's systematic withdrawal plan may be
terminated at any time by the shareholder or Credit Suisse Warburg Pincus
Capital Funds.
Redemption of shares for withdrawal purposes may reduce or even
liquidate an account. While an occasional lump sum investment may be made by a
shareholder who is maintaining a systematic withdrawal plan, such investment
should normally be an amount equivalent to three times the annual withdrawal or
$5,000 whichever is less.
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- --------------------------------------------------------------------------------
SHAREHOLDER INVESTMENT ACCOUNT
- --------------------------------------------------------------------------------
Each Fund may be a suitable investment vehicle for part or all of
the assets held in various tax-sheltered retirement plans, such as those listed
below. Semper Trust Company serves as custodian under these prototype retirement
plans and charges an annual account maintenance of $15 per participant,
regardless of the number of Funds selected. Persons desiring information
concerning these plans should write or telephone the Capital Funds' Transfer
Agent. While the Credit Suisse Warburg Pincus Capital Funds reserves the right
to suspend sales of its shares in response to conditions in the securities
markets or for other reasons, it is anticipated that any such suspension of
sales would not apply to sales to the types of plans listed below.
(a) Individual Retirement Accounts ("IRA")
The Adviser has available a prototype form of a traditional IRA for
investment in shares of any one or more Funds. Under the Code, individuals may
currently make tax-deferred IRA contributions of up to $2,000 annually. Married
individuals filing jointly may make tax-deferred contributions of up to $2,000
for each spouse if the combined compensation of both spouses is at least equal
to the contributed amount. Contributions to a traditional IRA may be wholly or
partly tax-deductible, depending upon the contributor's income level and
participation in an employer-sponsored retirement plan. The income earned on
shares held in a traditional IRA is not subject to federal income tax until
withdrawn in accordance with the Code. Investors
-94-
may be subject to penalties or additional taxes on contributions to or
withdrawals from traditional IRAs under certain circumstances.
The Adviser has available a prototype form of the new Roth IRA.
Unlike traditional IRAs, contributions to a Roth IRA are not currently
deductible. However, amounts within a Roth IRA account will accumulate tax-free,
and qualified distributions from a Fund held within such an account will not be
included in a shareholder's taxable income. An individual may contribute a
maximum of $2,000 annually to a Roth IRA ($4,000 for joint returns). However,
such limit is calculated in the aggregate with contributions to traditional
IRAs. Roth IRAs are not available to individuals above certain income levels.
The Adviser also has available a prototype form of the new Education
IRA for investment in shares of any one or more Credit Suisse Warburg Pincus
Capital Funds. Like the Roth IRA, contributions are not currently deductible.
However, the investment earnings accumulate tax-free, and qualifying
distributions used for higher education expenses are not taxable. An individual
may contribute a maximum of $500 per account annually. In addition, Educational
IRA's are not available to individuals above certain income levels.
(b) Simplified Employee Pension Plan ("SEP/IRA")
A SEP/IRA is available for investment and may be established on a
group basis by an employer who wishes to sponsor a tax-sheltered retirement
program by making IRA contributions on behalf of all eligible employees.
-95-
(c) Savings Incentive Match Plan for Employees ("SIMPLE") -- SIMPLE IRA and
SIMPLE 401(k)
SIMPLE plans offer employers with 100 or fewer eligible employees
who earned at least $5,000 from the employer in the preceding calendar year the
ability to establish a retirement plan that permits employee contributions. An
employer may also elect to make additional contributions to these Plans. Please
telephone Credit Suisse Warburg Pincus Capital Funds' shareholder servicing
representatives at (800) 225-8011 for more information.
(d) Employer-Sponsored Retirement Plans
The Adviser has a prototype retirement plan available which
provides for investment of plan assets in shares of any one or more of the
Capital Funds. The prototype retirement plan may be used by sole proprietors and
partnerships as well as corporations to establish a tax qualified profit sharing
plan or money purchase pension plan (or both) of their own.
Under the prototype retirement plan, an employer may make annual
tax-deductible contributions for allocation to the accounts of the plan
participants to the maximum extent permitted by the federal tax law for the type
of plan implemented. The Adviser has received favorable opinion letters from the
IRS stating that the prototype retirement plan is acceptable by qualified
employers.
(e) Self-Directed Retirement Plans
Shares of the Credit Suisse Warburg Pincus Capital Funds may be
suitable for self-directed IRA accounts and prototype retirement plans.
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- --------------------------------------------------------------------------------
NET ASSET VALUE
- --------------------------------------------------------------------------------
Net asset value per share is computed each Fund Business Day in
accordance with the Credit Suisse Warburg Pincus Capital Funds' Amended and
Restated Agreement and Declaration of Trust and By-Laws. For this purpose, a
Fund Business Day is any day on which the New York Stock Exchange is open for
business, typically, Monday through Friday exclusive of New Year's Day, Martin
Luther King Jr. Day, Presidents Day, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day, Christmas Day and Good Friday.
The Funds calculate net asset value on each Fund Business Day, as of
the close of the regular session of the New York Stock Exchange, generally 4:00
p.m. New York City time. The NAV is calculated by taking the sum of the value of
a Fund's investments and any cash or other assets, subtracting liabilities, and
dividing by the total number of shares outstanding. All expenses, including the
fees payable to the Adviser, are accrued daily.
The net asset value is calculated separately for each class of
shares. Although the legal rights of each class of shares are substantially
identical, the different expenses attributable to each class will result in
different net asset values and dividends. The net asset value of Class B and
Class C shares will generally be lower than the net asset value of Class A
shares as a result of the larger distribution and service fees imposed on Class
B and Class C shares. The net asset value of Class A shares, Common Class shares
and Advisor Class shares will generally be lower than the net asset value of
Class D shares because Class D shares are not subject to any distribution or
service fees.
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It is expected that the net asset value of Class A shares, Class B shares, Class
C shares, Class D shares, Common Class shares and Advisor Class shares will tend
to converge immediately after the recording of dividends, if any, which will
differ in amount by approximately the differential of the accrual of
distribution fees.
For purposes of the computation of net asset value, each of the
Funds value securities held in their respective portfolios as follows: readily
marketable portfolio securities listed on the New York Stock Exchange are
valued, except as indicated below, at the last sale price at the close of the
New York Stock Exchange on the business day as of which such value is being
determined. If there has been no sale on such day, the securities are valued at
the mean of the closing bid and asked prices on such day, unless it is
determined that such mean does not reasonably reflect true market value, in
which case such value shall be taken at such amount as shall be deemed
reasonable by Trustees of Credit Suisse Warburg Pincus Capital Funds, but not
less than said bid price nor more than said asked price. If no bid or asked
prices are quoted on such day, then the security is valued by such method as the
Trustees of Credit Suisse Warburg Pincus Capital Funds shall determine in good
faith to reflect its fair value.
Readily marketable securities, including certain options, not listed
on the New York Stock Exchange but listed on other national securities exchanges
or admitted to trading on the Nasdaq National Market are valued in a like
manner. Portfolio securities traded on more than one national securities
exchange are valued at the last sale price on the business day as of which such
value is being determined at the close of the exchange representing the
principal market for such securities.
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Readily marketable securities, including certain options traded only
in the over-the-counter market, and listed securities whose primary market is
believed by the Adviser to be over-the-counter (excluding those admitted to
trading on The Nasdaq National Market) are valued at the mean of the current bid
and asked prices as reported by The Nasdaq National Market, or in the case of
securities not quoted on The Nasdaq National Market, the National Quotation
Bureau, Inc. or such other comparable source that the Trustees of the Fund deem
appropriate to reflect their fair market value. However, fixed-income securities
(except short-term 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
are determined without regard to bid or last sale prices but take into account
institutional size trading in similar groups of securities and any developments
related to specific securities. The money market securities in which each Fund
invests are traded primarily in the over-the-counter market and are valued at
the mean between most recent bid and asked prices as obtained from dealers that
make markets in such securities, except for securities having 60 days or less
remaining until maturity which are stated at amortized cost. Portfolio
securities underlying listed call options will be valued at their market prices
and reflected in net assets accordingly. Premiums received on call options
written by the Fund will be included in the liability section of the Statement
of Assets and Liabilities as a deferred credit and subsequently adjusted
(marked-to-market) to the current market value of the option written.
Investments for which market quotations are not readily available are valued at
fair value as determined in good faith by the Trustees of Credit Suisse Warburg
Pincus Capital Funds.
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- --------------------------------------------------------------------------------
TAXES, DIVIDENDS, AND DISTRIBUTIONS
- --------------------------------------------------------------------------------
Each of the Funds has elected to qualify and intends to remain
qualified as a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"). As a regulated investment
company, a Fund will not be subject to federal income taxes if at least 90% of
its net investment income and net short-term capital gains less any available
capital loss carryforwards are distributed to shareholders within allowable time
limits. However, a Fund will be subject to tax on its income and gains to the
extent that it does not distribute to its shareholders an amount equal to such
income and gains. In addition, a Fund will be subject to a nondeductible 4%
excise tax to the extent that it does not make distributions to its shareholders
on a basis such that the distributions are taxed to shareholders in the same
year in which the related income or gain was realized by such Fund. To the
extent possible, each Fund intends to make such distributions as may be
necessary to avoid this excise tax.
Each Fund normally will distribute substantially all of its net
investment income and net capital gain, if any, to shareholders in the form of
dividends to be paid from time to time. Any dividends or distributions paid
shortly after the purchase of shares by an investor may have the effect of
reducing the per share value of the shares owned by the investor by the per
share amount of the dividends or distributions. Furthermore, such dividends and
distributions, although in effect a return of capital, are subject to income
taxes.
-100-
In the event that total distributions (including distributed or
designated net capital gain) of a Fund for a taxable year exceed its investment
company taxable income and net capital gain, a portion of each distribution
generally will be treated as a tax return of capital. Distributions treated as a
return of capital reduce a shareholder's basis in its shares and could result in
a tax on capital gain either when a distribution is in excess of basis or, more
likely, when a shareholder redeems shares.
Upon a redemption or other disposition of shares of a Fund, a
shareholder will generally recognize gain or loss in an amount equal to the
difference between the amount realized and the shareholder's tax basis in such
shares. Generally, such gain or loss will be capital gain or loss and will be
long-term capital gain or loss if the shareholder's holding period for such
shares exceeds one year. Long-term capital gain of a non-corporate shareholder
is generally subject to a maximum tax rate of 20% in respect of property held
for more than one year.
Dividends distributed by a Fund will be eligible for the
dividends-received deduction available to corporate shareholders only to the
extent of the portion of the Fund's gross income which consists of dividends
received on equity securities issued by domestic corporations with respect to
which such Fund meets the same holding period, risk of loss, and borrowing
limitations applicable to the Fund's shareholders. Section 246 of the Code
generally permits the dividends-received deduction to corporate shareholders
only if the shares with respect to which the dividends were paid have been held
for more than 45 days. If the holding period is not satisfied, the
dividends-received deduction is disallowed, regardless of whether the shares
with respect to which the dividends were paid have been sold or otherwise
disposed of. The holding period requirements are
-101-
separately applicable to each block of shares acquired, including each block of
shares received in payment of the Fund's dividends. The Internal Revenue Service
("IRS") has specific regulations governing the identification of shares to be
redeemed by a shareholder that wishes to redeem some, but not all, of its
shares. For purposes of determining whether this holding period requirement has
been met, the day of acquisition and any day after the first 45 days after the
date on which such shares become ex-dividend must be disregarded. In addition,
the holding period is suspended during periods in which the stock is subject to
diminished risk of loss including, for example, because the holder has acquired
a put option or sold a call option (other than certain covered call options
where the exercise price is not substantially below the selling price) or
otherwise hedged his position.
A corporate shareholder would not be entitled to a
dividends-received deduction for dividends paid or accrued after September 5,
1997 unless the 45 day holding period were satisfied over a period immediately
before or immediately after the shareholder became entitled to receive the
dividend. A transition rule provides that the provision will not apply to
dividends received within two years of the date of enactment if (1) the dividend
is paid with respect to stock held on June 8, 1997, and all times thereafter
until the dividend is received; (2) the stock is continuously subject to a
diminished risk of loss (as described above) on June 8, 1997, and all times
thereafter until the dividend is received; and (3) such stock and related
position was identified by the taxpayer by September 30, 1997.
The dividends-received deduction will also be reduced for
shareholders who incur indebtedness that is directly attributable to the
purchase of shares by the
-102-
percentage of the cost of such shares. Such reduction depends on the particular
facts and circumstances of each situation and accordingly shareholders are urged
to consult their tax advisers.
Under section 1059 of the Code, a corporation which receives an
"extraordinary dividend" and disposes of the stock with respect to which such
dividend was paid is required to reduce its basis in such stock (but not below
zero) by the amount of the dividend which was not taxed because of the
dividends-received deduction, with such basis reduction generally being treated
as having occurred immediately before the sale or disposition of such stock
unless such stock has not been held for at least two years prior to the date of
declaration, announcement or agreement about the extraordinary dividend. To the
extent such untaxed amount exceeds the shareholder's basis, such excess will be
taxed as gain upon sale or disposition of such stock. An extraordinary dividend
generally is any dividend that equals or exceeds 10% of the shareholder's basis
in the stock (5% in the case of preferred stock). For this purpose, generally,
all dividends having ex-dividend dates within any 85-day period and, if such
dividends total more than 20% of the shareholder's basis in its stock, all
dividends having ex-dividend dates within one year, must be aggregated. The
shareholder may elect to determine the status of extraordinary dividends by
reference to the fair market value of the stock as of the date before the
ex-dividend date, rather than by reference to the adjusted basis of such stock
(provided the shareholder establishes the fair market value to the satisfaction
of the Commissioner of the IRS). In determining whether the above mentioned
two-year holding period has been met, the same rules apply as are applicable to
the 45-day holding period requirement for the dividends-received deduction.
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Each Fund intends to declare and pay dividends and capital gains
distributions so as to avoid imposition of the 4% federal excise tax referred to
above. Accordingly, each Fund expects to distribute during the calendar year an
amount at least equal to the sum of (i) 98% of its calendar year net investment
income, (ii) 98% of its net capital gain income (the excess of short and
long-term capital gain over short and long-term capital loss) for each one-year
period ending October 31, and (iii) 100% of any undistributed net investment
income or capital gain from the prior year which has not been distributed by
such Fund. Dividends declared in October, November, or December and made payable
to shareholders of record in such month would be deemed paid by a Fund and
taxable to its shareholders on December 31 of such year provided that such
dividends are actually paid during or before January of the following year. A
Fund may make a deemed distribution with respect to its net capital gain by
paying the tax with respect to the net capital gain and then designating, but
not distributing, all or a portion of such gain as a capital gain dividend. Such
Fund's shareholders will treat such designated amounts as net capital gain on
their income tax returns, but will receive a credit or refund equal to federal
income taxes paid by such Fund with respect to such capital gains. In addition,
shareholders will increase their basis in the Fund's shares by the difference
between the amount of such includible gains and the tax deemed paid by such
shareholders in respect of such gains. If a capital gain dividend is paid with
respect to any shares of a Fund which are sold at a loss after being held for
less than six months, any loss realized upon the sale of such shares will be
treated as long-term capital loss to the extent of such capital gain dividend.
Any loss realized on the sale of shares will be disallowed to the extent the
shares disposed of are replaced within a period of 61 days
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beginning 30 days before the disposition of such shares. In such case, the basis
of shares acquired will be adjusted to reflect the disallowed loss.
Some of the investment practices of the Credit Suisse Warburg Pincus
Blue Chip Fund, Credit Suisse Warburg Pincus Small Company Value Fund and the
Credit Suisse Warburg Pincus Value Fund are subject to special provisions that,
among other things, may defer the use of certain losses of such Funds and affect
the holding periods of the securities held by the Funds and the character of the
gains or losses realized. These provisions may also require the Credit Suisse
Warburg Pincus Blue Chip Fund, the Credit Suisse Warburg Pincus Small Company
Value Fund and the Credit Suisse Warburg Pincus Value Fund to mark-to-market
some of the positions in their portfolio (i.e., treat them as if they were
closed out), which may cause such Funds to recognize income without receiving
cash with which to make distributions in amounts necessary to satisfy the
distribution requirements for qualification as a regulated investment company
and for avoiding income and excise taxes. Each 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.
Dividend and interest income from non-U.S. equity and debt
securities may be subject to a withholding tax imposed by the country in which
the issuer is located. Each Fund expects to claim a deduction or foreign tax
credit with respect to any such withholding tax, to the extent allowable under
the Code, regulations thereunder, or an applicable treaty. Since a Fund's
investment policies would preclude it from investing more than 50% of the value
of the total assets of such Fund in non-U.S. equity and debt
-105-
securities, shareholders are not expected to be eligible for a pass-through of
the credit for foreign taxes paid.
For shareholders' federal income tax purposes, distributions to
shareholders out of tax-exempt interest income (less expenses applicable
thereto) earned by the Credit Suisse Warburg Pincus Municipal Trust Fund are not
subject to federal income tax if, at the close of each quarter of the Credit
Suisse Warburg Pincus Municipal Trust Fund's taxable year, at least 50% of the
value of the Credit Suisse Warburg Pincus Municipal Trust Fund's total assets
consist of tax-exempt obligations. The Fund intends to meet this requirement.
However, under current tax law, some individuals and corporations may be subject
to an alternative minimum tax (the "AMT") with respect to their receipt of
certain distributions of tax-exempt interest income from the Credit Suisse
Warburg Pincus Municipal Trust Fund. Distributions of taxable interest income,
other investment income, and short-term capital gains are taxable to
shareholders as ordinary income. Since the Credit Suisse Warburg Pincus
Municipal Trust Fund's investment income is derived from interest rather than
dividends, no portion of such distributions is eligible for the
dividends-received deduction available to corporations. Long-term capital gains,
if any, distributed by the Credit Suisse Warburg Pincus Municipal Trust Fund to
a shareholder are taxable to the shareholder as long-term capital gain,
regardless of the length of time the shareholder may have held the Credit Suisse
Warburg Pincus Municipal Trust Fund shares.
Each Fund is required to withhold and remit to the U.S. Treasury 31%
of the dividends or proceeds of any redemptions or exchanges of shares with
respect to any shareholder who fails to furnish his or her Fund with a correct
taxpayer identification
-106-
number, who has been notified by the U.S. Treasury that he or she has
under-reported dividend or interest income or who fails to certify to his or her
Fund that he or she is not subject to such withholding. An individual's tax
identification number is generally his or her social security number.
Shareholders will be notified annually by the Funds as to the
Federal tax status of dividends and distributions paid during the calendar year.
Dividends and distributions may also be subject to state and local taxes. State
and local tax treatment may vary according to applicable laws.
The foregoing discussion is a general summary of certain current
federal income tax laws regarding the Funds and relates solely to the
application of that law to (i) citizens or residents of the United States, (ii)
domestic corporations or partnerships, or (iii) entities otherwise subject to
U.S. taxation on a net income basis. The discussion does not purport to deal
with all of the federal income tax consequences applicable to the Funds, or to
all categories of investors, some of whom may be subject to special rules. Each
prospective and current shareholder should consult with his or her own
professional tax adviser regarding federal, state and local tax consequences of
ownership of shares of the Funds.
-107-
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PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
Presented below is certain performance information with respect to
an investment in Class A, Class B and Class D shares of beneficial interest of
the Funds. Prior to February 28, 1996, Class A shares were not offered.
Accordingly, the information presented below with respect to Class A shares has
been obtained from the financial statements for the Funds' prior fiscal years.
Because Common Class shares were issued on August 1, 2000, Class C shares were
issued as of February 28, 2000, and Advisor Class shares have not been issued as
of the date of this SAI, no performance information is included for these
classes of shares. Total returns shown reflect the impact of expense waivers
and/or reimbursements by the investment advisor. Absent such
waivers/reimbursements, total returns would be lower.
(a) Average Annual Total Return
The average annual total return of Class A shares for the one, five
and ten year periods ended October 31, 2000 was 7.80%, 21.03% and 16.76% for the
Credit Suisse Warburg Pincus Blue Chip Fund and 0.31%, 3.88% and 6.20% for the
Credit Suisse Warburg Pincus Fixed Income II Fund, respectively. The average
annual total return of Class A shares for the one, five and ten year periods
ended October 31, 2000 for the Credit Suisse Warburg Pincus Small Company Value
Fund (which was previously named the Winthrop Aggressive Growth Fund and which
includes its predecessor, the Neuwirth Fund, Inc.) and the Credit Suisse Warburg
Pincus Value Fund (which includes its predecessor, the Pine Street Fund, Inc.)
was 14.70%, 10.13% and 15.75% for the Credit Suisse Warburg Pincus Small Company
Value Fund and 2.22%, 17.38%
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and 15.71% for the Credit Suisse Warburg Pincus Value Fund, respectively. The
average annual total return of Class A shares for the one and five year periods
ended October 31, 2000 for the Credit Suisse Warburg Pincus Municipal Trust Fund
was 0.21% and 3.28% respectively and 3.54% for the period July 28, 1993
(commencement of operations) through October 31, 2000.
The average annual total return for Class B shares for the one year
period ended October 31, 2000 was 9.58%, 0.57%, 16.80%, 3.66% and 0.45% and for
the period February 28, 1996 (commencement of offering of Class B shares)
through October 31, 2000 was 20.25%, 4.15%, 9.72%, 16.23% and 3.45%, for the
Credit Suisse Warburg Pincus Blue Chip Fund, the Credit Suisse Warburg Pincus
Fixed Income II Fund, the Credit Suisse Warburg Pincus Small Company Value Fund,
the Credit Suisse Warburg Pincus Value Fund and the Credit Suisse Warburg Pincus
Municipal Trust Fund, respectively.
The average annual total return for Class D shares for the one year
period ended October 31, 2000 was 8.75%, 5.62%, and 14.69% for the Credit Suisse
Warburg Pincus Value Fund, the Credit Suisse Warburg Pincus Fixed Income II
Fund, and the Credit Suisse Warburg Pincus Blue Chip Fund, respectively, and for
the period April 30, 1999 (commencement of offering Class D shares for Credit
Suisse Warburg Pincus Value Funds and Credit Suisse Warburg Pincus Fixed Income
II Fund) or May 13, 1999 (commencement of offering of Class D shares for Credit
Suisse Warburg Pincus Blue Chip Fund), as the case may be, through October 31,
2000 the total return for Class D shares for the Credit Suisse Warburg Pincus
Value Fund, the Credit Suisse Warburg
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Pincus Fixed Income II Fund and the Credit Suisse Warburg Pincus Blue Chip Fund
was 5.25%, 3.72% and 13.01%, respectively.
The Fund commenced offering Class C shares on February 28, 2000 and
Common Class shares on August 1, 2000. Therefore, the Fund does not yet have a
full calendar year of performance indicated for these classes.
These amounts were computed by assuming a hypothetical initial
investment of $1,000. It was then assumed that all of the dividends and
distributions by each of the Funds over the relevant time periods were
reinvested. It was then assumed that with respect to the Class A shares of the
Credit Suisse Warburg Pincus Blue Chip Fund, the Credit Suisse Warburg Pincus
Small Company Value Fund and the Credit Suisse Warburg Pincus Value Fund, the
maximum initial sales charge of 5.75% was deducted at the time of investment
and, with respect to the Class A shares of the Credit Suisse Warburg Pincus
Fixed Income II Fund and the Credit Suisse Warburg Pincus Municipal Trust Fund,
the maximum initial sales charge of 4.75% was deducted at the time of
investment. With respect to the Class B shares of each of the Credit Suisse
Warburg Pincus Capital Funds, it was assumed that at the end of these periods
the entire amount was redeemed and the appropriate sales load, if any, was
deducted. The average annual total return was then calculated by using the
annual rate required for the initial payment to grow to the amount which would
have been received upon redemption (i.e., the average annual compounded rate of
return). The results shown should not be considered an indication of future
performance from an investment in any Fund today.
-110-
(b) Computation of the Credit Suisse Warburg Pincus Fixed Income II Fund's and
Credit Suisse Warburg Pincus Municipal Trust Fund's 30-Day Yield Quotation
The 30-day yield for each of the Credit Suisse Warburg Pincus Fixed
Income II Fund and the Credit Suisse Warburg Pincus Municipal Trust Fund for the
period ended October 31, 2000 was with respect to Class A shares, 5.49% and
3.66%, respectively; with respect to Class B shares, 5.01% and 3.11%,
respectively; with respect to Class C shares, 4.86% and 2.61%, respectively;
with respect to Common Class shares, 5.77% and 3.89%, respectively; and with
respect to Class D shares, 6.02% for the Credit Suisse Warburg Pincus Fixed
Income II Fund. The Fund's yield is based on a 30-day period and is computed by
dividing the net investment income per share earned during the period by the
maximum offering price per share on the last day of the period, according to the
following formula:
YIELD = 2[(a-b/cd+1)^6-1]
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends.
d = the maximum offering price per share on the last day of the
period.
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GENERAL INFORMATION
- --------------------------------------------------------------------------------
(a) Counsel and Auditors
Sullivan & Cromwell, 125 Broad Street, New York, New York 10004,
serves as legal counsel for the Credit Suisse Warburg Pincus Capital Funds.
Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019, has
been appointed as independent auditors for the Credit Suisse Warburg Pincus
Capital Funds.
(b) Additional Information
This Statement of Additional Information does not contain all the
information set forth in the Registration Statement filed by Credit Suisse
Warburg Pincus Capital Funds with the Securities and Exchange Commission under
the Securities Act of 1933. Copies of the Registration Statement may be obtained
at a reasonable charge from the Commission or may be examined, without charge,
at the offices of the Commission in Washington, D.C.
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FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The audited financial statements of the Funds for the fiscal year
ended October 31, 2000 and the report of the Funds' independent auditors in
connection therewith are included in the October 31, 2000 Annual Report to
Shareholders. The audited financial statements included in the Annual Report are
incorporated by reference into this Statement of Additional Information. You can
obtain a copy of the Fund's Annual Report by writing the address or calling the
telephone numbers set forth on the cover of this Statement of Additional
Information.
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Appendix I - Description of Security Ratings
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Bond Ratings
Municipal and Corporate Bonds. The four highest ratings of Moody's
Investors Service, Inc. ("Moody's") for municipal corporate bonds are Aaa, Aa, A
and Baa. Bonds rated Aaa are judged to be of high quality by all standards.
Together with the Aa group, they comprise what are generally known as high-grade
bonds. Moody's states that Aa bonds are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities. Bonds which are rated A are judged by Moody's to possess many
favorable investment attributes and are considered "upper medium grade
obligations." Factors giving security to principal and interest of A-rated bonds
are considered adequate, but elements may be present which suggest a
susceptibility to impairment sometime in the future. Bonds rated Baa are
considered as medium-grade obligations, i.e., they are neither highly protected
nor poorly secured. Interest payments and principal appear adequate for the
present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and in fact have speculative
characteristics as well. The generic ratings Aa through Baa may be modified by
the addition of the numerals 1, 2 or 3. The modifier 1 indicates that the
security ranks in the
A-1
higher end of the rating category; the modifier 2 indicates a mid-range rating;
and the modifier 3 indicates that the issue ranks in the lower end of such
rating category.
Moody's highest ratings for short-term municipal loans is MIG-1.
Moody's states that short-term municipal securities rated MIG-1 are of the best
quality, enjoying strong protection from established cash flows of funds for
their servicing and broad-based access to the market for refinancing, or both.
Loans bearing the MIG-2 designation are judged to be of high quality, with
margins of protection ample although not so large as in the MIG-1 group.
The four highest ratings of Standard & Poor's Ratings Group ("S&P")
for municipal and corporate bonds are AAA, AA, A and BBB. Bonds rated AAA have
the highest rating assigned by S&P to a debt obligation and indicate an
extremely strong capacity to pay interest and repay principal. Bonds rated AA
also qualify as high-quality debt obligations and have a very strong capacity to
pay interest and repay principal and in the majority of instances differ from
AAA issues only in a small degree. Bonds rated A have a strong capacity to pay
interest and repay principal although they are somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than bonds
in higher rated categories. The BBB rating, which is the lowest
"investment-grade" security rating of S&P, indicates an adequate capacity to pay
principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for bonds in
this category than for bonds in the A category. The ratings AA through BBB may
be modified by the addition of a plus (+) or minus (-) sign to show relative
standing within such rating categories.
A-2
Notes rated SP-1 have a very strong capacity to pay principal and
interest. Those issues determined by S&P to possess overwhelming safety
characteristics are given an SP-1+ rating. Notes rated SP-2 have a satisfactory
capacity to pay principal and interest. Notes rated SP-3 have a speculative
capacity to pay principal and interest. The rating scale for notes is closely
related to long-term bond ratings; notes rated SP-1+ compare with bonds rated
AAA, AA+, AA and AA-; notes rated SP-1 compare with bonds rated A+, A and A-;
and notes rated SP-2 compare with bonds rated BBB+, BBB and BBB-.
Other Municipal Securities and Commercial Paper
"Prime-1" is the highest rating assigned by Moody's for other
short-term municipal securities and commercial paper, and "A-1+" and "A-1" are
the two highest ratings for commercial paper assigned by S&P (S&P does not rate
short-term tax-free obligations). Moody's uses the numbers 1, 2 and 3 to denote
relative strength within its highest classification of "Prime", while S&P uses
the numbers 1+, 1, 2 and 3 to denote relative strength within the highest
classification of "A". Issuers rated "Prime" by Moody's have the following
characteristics: their short-term debt obligations carry the smallest degree of
investment risk, margins or support for current indebtedness are large or stable
with cash flow and asset protection well assured, current liquidity provides
ample coverage of near-term liabilities and unused alternative financing
arrangements are generally available. While protective elements may change over
the intermediate or longer term, such changes are most likely to impair the
fundamentally strong position of short-term obligations. Commercial paper
issuers rated "A" by S&P have the following characteristics: liquidity ratios
are better than industry average, long-term debt rating is
A-3
A or better, the issuer has access to at least two additional channels of
borrowing, the basic earnings and cash flow are in an upward trend. Typically,
the issuer is a strong company, is in a well-established industry and has
superior management.
A-4