AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
ON MARCH 10, 2003
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Registration No. 333-102820
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
|X| PRE-EFFECTIVE AMENDMENT NO. 1 |_| POST-EFFECTIVE AMENDMENT NO. __
CREDIT SUISSE CAPITAL FUNDS
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
AREA CODE AND TELEPHONE NUMBER: (212) 875-3500
466 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
HAL LIEBES, ESQ.
CREDIT SUISSE CAPITAL FUNDS
466 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017
(NAME AND ADDRESS OF AGENT FOR SERVICE)
WITH A COPY TO:
ROSE F. DIMARTINO, ESQ.
WILLKIE FARR & GALLAGHER
787 SEVENTH AVENUE
NEW YORK, NEW YORK 10019
Approximate date of public offering: As soon as practicable after the effective
date of this Registration Statement.
Title of Securities Being Registered: Shares of beneficial interest, $.01 par
value per share. Registrant has registered an indefinite amount of securities
pursuant to Rule 24f-2 under the Investment Company Act of 1940, as amended;
accordingly, no fee is payable herewith in reliance upon Section 24(f).
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
CONTENTS OF
REGISTRATION STATEMENT
This Registration Statement contains the following pages and documents:
Front Cover
Contents Page
Letter to Shareholders
Notice of Special Meeting
Part A - Prospectus/Proxy Statement
Part B - Statement of Additional Information
Part C - Other Information
Signature Page
Exhibits
CREDIT SUISSE STRATEGIC VALUE FUND, INC.
YOUR VOTE IS IMPORTANT
Dear Shareholder:
We are pleased to invite you to attend a special meeting (the "Special
Meeting") of the shareholders of Credit Suisse Strategic Value Fund, Inc. (the
"Acquired Fund"). The Board of Directors of the Acquired Fund ("Board") has
recently reviewed and unanimously endorsed a proposal for acquisition of the
Acquired Fund by Credit Suisse Large Cap Value Fund (the "Acquiring Fund"), a
series of Credit Suisse Capital Funds (the "Trust"). The Acquiring Fund is
managed by your fund's investment adviser, Credit Suisse Asset Management, LLC
("CSAM"). Under the terms of the proposal, the Acquiring Fund would acquire all
of the assets and liabilities of the Acquired Fund. Shareholders of the Acquired
Fund are also being asked to approve certain other matters that have been set
forth in the Acquired Fund's Notice of Special Meeting.
Important Information About the Acquisition
You are being asked to vote on an Agreement and Plan of Reorganization
(the "Plan") pursuant to which the acquisition of the Acquired Fund by the
Acquiring Fund (the "Acquisition") would be effected. The Board of the Acquired
Fund and CSAM believe that the Acquisition is in the best interests of the
Acquired Fund and its shareholders.
As noted and further described in the attached Prospectus/Proxy
Statement, there are certain differences between the investment philosophy and
policies of the Funds. THE ONLY SIGNIFICANT DIFFERENCE IN THE WAY THE FUNDS
OPERATE IS THAT, WHILE THE ACQUIRED FUND FOCUSES ON LARGE CAPITALIZATION U.S.
COMPANIES, IT MAY INVEST IN COMPANIES OF ANY SIZE, WHEREAS THE ACQUIRING FUND
INVESTS PRIMARILY IN LARGE CAP COMPANIES.
The Acquiring Fund has the same Board of Directors/Trustees,
co-administrators, distributor, custodian, transfer agent, independent
accountant and counsel as the Acquired Fund. The closing of the Acquisition (the
"Closing Date") is expected to be on or about April 17, 2003.
If shareholders of the Acquired Fund approve the Plan, the Acquired
Fund will be liquidated upon consummation of the Acquisition and subsequently
dissolved. In the event the Plan is not approved, you will continue to be a
shareholder of the Acquired Fund and the Board of the Acquired Fund will
consider other possible courses of action available to it, including
resubmitting the Acquisition proposal to shareholders.
Upon consummation of the Acquisition, shareholders of the Acquired Fund
will become shareholders of the Acquiring Fund, having received shares of
beneficial interest of the same class, except for Common Class shareholders who
will receive load-waived Class A shares with an aggregate net asset value equal
to
the aggregate net asset value of such shareholder's investment in the Acquired
Fund immediately prior to the Acquisition. No sales or other charges will be
imposed in connection with the Acquisition. In the opinion of counsel, no gain
or loss will be recognized by the shareholders of the Acquired Fund for Federal
income tax purposes as a result of the Acquisition and the Acquired Fund
generally will not recognize gain or loss for such purposes. CSAM or its
affiliates will bear all expenses incurred in connection with the Acquisition.
The Special Meeting will be held on April 11, 2003 to consider the
Acquisition and the other matters set forth in the Acquired Fund's Notice of
Special Meeting. We strongly invite your participation by asking you to review,
complete and return your proxy promptly.
Detailed information about the proposals is described in the attached
Prospectus/Proxy Statement. THE BOARD OF THE ACQUIRED FUND UNANIMOUSLY
RECOMMENDS THAT YOU VOTE IN FAVOR OF THE PROPOSALS SET FORTH IN THE ACQUIRED
FUND'S NOTICE OF SPECIAL MEETING. On behalf of the Board of the Acquired Fund, I
thank you for your participation as a shareholder and urge you to please
exercise your right to vote by completing, dating and signing the enclosed proxy
card. A self-addressed, postage-paid envelope has been enclosed for your
convenience; if you prefer, you can fax the proxy card to Georgeson Shareholder
Communications, Inc. ("Georgeson"), the Acquired Fund's proxy solicitor at
1-212-248-1866 or toll-free at 1-800-733-1885. We also encourage you to vote by
telephone or through the Internet. Proxies may be voted by telephone by calling
1-866-825-6453 between the hours of 9:00 a.m. and 10:00 p.m. (Eastern time)
Monday through Saturday or through the Internet using the Internet address
located on your proxy card.
Voting by fax, telephone or through the Internet will reduce the time
and costs associated with the proxy solicitations. When the Acquired Fund
records proxies by telephone or through the Internet, it will use procedures
designed to (i) authenticate shareholders' identities, (ii) allow shareholders
to authorize the voting of their shares in accordance with their instructions
and (iii) confirm that their instructions have been properly recorded.
Shareholders voting via the Internet should understand that there may be costs
associated with electronic access, such as usage charges from Internet access
providers and telephone companies, that must be borne by the shareholder. We
have been advised that Internet voting procedures that have been made available
to you are consistent with the requirements of applicable law.
Whichever voting method you choose, please read the full text of the
Prospectus/Proxy Statement before you vote.
If you have any questions regarding the proposed Acquisition or any of
the other proposals, please feel free to call Georgeson. at 1-866-825-6453 who
will be pleased to assist you.
IT IS VERY IMPORTANT THAT YOUR VOTING INSTRUCTIONS BE RECEIVED
PROMPTLY.
Sincerely,
/s/ Hal Liebes
Hal Liebes
Vice President and Secretary
of the Acquired Fund
March 14, 2003
March 14, 2003
CREDIT SUISSE STRATEGIC VALUE FUND, INC.
IMPORTANT NEWS FOR FUND SHAREHOLDERS
While we encourage you to read the full text of the enclosed
Prospectus/Proxy Statement, here is a brief overview of the proposals you are
being asked to vote on.
Q & A: QUESTIONS AND ANSWERS
Q: WHAT IS HAPPENING?
A: Credit Suisse Asset Management, LLC ("CSAM") is proposing to combine
the assets of Credit Suisse Strategic Value Fund, Inc. (the "Acquired
Fund") with Credit Suisse Large Cap Value Fund (the "Acquiring Fund"),
a series of Credit Suisse Capital Funds.
The shareholders of the Acquired Fund are being asked to vote on an
Agreement and Plan of Reorganization (the "Plan") for the assets and
liabilities of the Acquired Fund to be acquired by the Acquiring Fund
in a tax-free exchange of shares (the "Acquisition").
If the Plan is approved and the Acquisition consummated, you would no
longer be a shareholder of the Acquired Fund, but would become a
shareholder of the Acquiring Fund.
Q: WHAT ARE THE DIFFERENCES BETWEEN MY FUND AND THE ACQUIRING FUND?
A: As noted and further described in the attached Prospectus/Proxy
Statement, there are certain differences between the investment
philosophy and policies of the Funds. THE ONLY SIGNIFICANT DIFFERENCE
IN THE WAY THE FUNDS OPERATE IS THAT, WHILE THE ACQUIRED FUND FOCUSES
ON LARGE CAPITALIZATION U.S. COMPANIES, IT MAY INVEST IN COMPANIES OF
ANY SIZE, WHEREAS THE ACQUIRING FUND MUST INVEST AT LEAST 80% OF ITS
NET ASSETS, PLUS ANY BORROWINGS FOR INVESTMENT PURPOSES, IN LARGE CAP
COMPANIES.
The Acquiring Fund has the same Board of Directors/Trustees, investment
adviser, co-administrators, distributor, custodian, transfer agent,
independent accountant and counsel as the Acquired Fund. The closing of
the Acquisition (the "Closing Date") is expected to be on or about
April 17, 2003.
Q: WHAT WILL HAPPEN TO FUND EXPENSES?
A: The Acquisition will result in lower gross and net operating expenses
for the Acquired Fund shareholders.
For the fiscal year ending October 31, 2003, the Acquired Fund's Common
Class, Advisor Class, Class A, Class B and Class C shares are expected
to have total gross annual expenses of 1.27%, 1.77%, 1.52%, 2.27% and
2.27%, respectively, of average daily net assets. The pro forma net
expense ratio of the Acquiring Fund's Advisor Class, Class A, Class B
and Class C shares, assuming completion of the Acquisition, is expected
to be approximately 1.41%, 1.16%, 1.91% and 1.91%, respectively, of
average daily net assets.
Q: WHAT ARE THE BENEFITS OF THE TRANSACTION?
A: The Board of Directors of the Acquired Fund believes that shareholders
may benefit from the proposed Acquisition, in part, because the
Acquisition will result in a single larger fund with a potentially
lower expense ratio. The proposed Acquisition may result in
efficiencies due to a larger asset base. The following pages give you
additional information on the proposed Acquisition on which you are
being asked to vote.
Q: WILL I INCUR TAXES AS A RESULT OF THE TRANSACTION?
A: The Acquisition is expected to be a tax-free event. Generally,
shareholders of the Acquired Fund will not incur capital gains or
losses on the conversion from the Acquired Fund to the Acquiring Fund.
Shareholders will incur capital gains or losses if they sell their
shares in the Acquired Fund before the Acquisition becomes effective or
sell (or exchange) their Acquiring Fund shares after the Acquisition
becomes effective. Shareholders will also be responsible for tax
obligations associated with periodic dividend and capital gains
distributions that occur prior to and after the Acquisition. The
Acquired Fund will pay a dividend of any undistributed net investment
income and capital gains, which may be substantial, immediately prior
to the Closing Date. Please note that qualifying retirement accounts
are exempt from such tax consequences.
Q: WHAT HAPPENS IF THE PLAN IS NOT APPROVED?
A: In the event the Plan is not approved, you will continue to be a
shareholder of the Acquired Fund and the Board of Directors of the
Acquired Fund will consider other possible courses of action available
to it, including resubmitting the Acquisition proposal to shareholders.
Q: ARE THERE OTHER PROPOSALS BEING PRESENTED?
A: Yes. You are also being asked to: (i) elect Directors to the Board of
the Acquired Fund, (ii) consider a series of proposals to modify and/or
eliminate certain investment restrictions of the Acquired Fund and
(iii) change the investment objective of the Acquired Fund from
fundamental to non-fundamental.
Q: HOW DO THE BOARD MEMBERS OF THE ACQUIRED FUND RECOMMEND THAT I VOTE?
A: AFTER CAREFUL CONSIDERATION, THE BOARD OF DIRECTORS OF THE ACQUIRED
FUND, INCLUDING THOSE DIRECTORS WHO ARE NOT "INTERESTED PERSONS" (AS
THAT TERM IS DEFINED IN THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED)
RECOMMENDS THAT YOU VOTE FOR THE PROPOSALS.
Q: WHOM DO I CALL FOR MORE INFORMATION?
A: Please call Georgeson Shareholder Communications, Inc. ("Georgeson"),
the Acquired Fund's proxy solicitor, at 1-866-825-6453.
Q: HOW CAN I VOTE MY SHARES?
A: Please choose one of the following options to vote your shares:
o By mail, with the enclosed proxy card;
o By telephone, with a toll-free call to the telephone number
that appears on your proxy card or, if no toll-free telephone
number appears on your proxy card, to Georgeson, the Acquired
Fund's proxy solicitor, at 1-866-825-6453;
o By faxing the enclosed proxy card to Georgeson at
1-212-248-1866 or toll-free at 1-800-733-1885;
o Through the Internet, by using the Internet address located on
your proxy card and following the instructions on the site; or
o In person at the Special Meeting.
Q: WILL THE ACQUIRED FUND PAY FOR THIS PROXY SOLICITATION?
A: CSAM or its affiliates will bear the costs associated with approving
the Plan. The Acquired Fund will bear the costs associated with the
other proposals.
CREDIT SUISSE STRATEGIC VALUE FUND, INC.
466 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017-3140
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NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 11, 2003
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Notice is hereby given that a Special Meeting of Shareholders (the
"Special Meeting") of Credit Suisse Strategic Value Fund, Inc. (the "Acquired
Fund") will be held at the offices of the Acquired Fund, 466 Lexington Avenue,
16th Floor, New York, New York 10017 on April 11, 2003, commencing at 1:00 p.m.
for the following purposes:
1. The shareholders of the Acquired Fund are being asked to
approve an Agreement and Plan of Reorganization (the "Plan")
providing that (i) the Acquired Fund would transfer to Credit
Suisse Large Cap Value Fund (the "Acquiring Fund"), a series
of Credit Suisse Capital Funds, all of its assets in exchange
for shares of beneficial interest of the Acquiring Fund and
the assumption by the Acquiring Fund of the Acquired Fund's
liabilities, (ii) such shares of beneficial interest of the
Acquiring Fund would be distributed to shareholders of the
Acquired Fund in liquidation of the Acquired Fund, and (iii)
the Acquired Fund would subsequently be dissolved;
2. To elect Directors of the Acquired Fund;
3. To consider a series of proposals to modify and/or eliminate
certain investment restrictions of the Acquired Fund;
4. To change the investment objective of the Acquired Fund from
fundamental to non-fundamental; and
5. To transact such other business as may properly come before
the Special Meeting or any adjournment or adjournments
thereof.
THE BOARD OF DIRECTORS OF THE ACQUIRED FUND UNANIMOUSLY RECOMMENDS THAT
YOU VOTE FOR EACH OF THE PROPOSALS.
The Board of Directors of the Acquired Fund has fixed the close of
business on February 7, 2003 as the record date for the determination of
shareholders of the Acquired Fund entitled to notice of and to vote at the
Special Meeting and any adjournment or adjournments thereof. As a convenience to
shareholders, you can now vote in any one of five ways:
o By mail, with the enclosed proxy card(s);
o By telephone, with a toll-free call to the telephone number
that appears on your proxy card or, if no toll-free telephone
number
appears on your proxy card, to Georgeson, the Acquired Fund's
proxy solicitor, at 1-866-825-6453;
o By faxing the enclosed proxy card to Georgeson at 1-212-
248-1866 or toll-free at 1-800-733-1885;
o Through the Internet, by using the Internet address located on
your proxy card and following the instructions on the site; or
o In person at the Special Meeting.
If you have any questions regarding any of the proposals, please feel
free to call Georgeson 1-866-825-6453.
SHAREHOLDERS WHO DO NOT EXPECT TO ATTEND THE SPECIAL MEETING ARE URGED
TO (A) SIGN AND RETURN WITHOUT DELAY THE ENCLOSED PROXY CARD(S) IN THE ENCLOSED
ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES, (B) VOTE BY
TELEPHONE WITH A TOLL-FREE CALL TO 1-866-825-6453, (C) VOTE THROUGH THE INTERNET
USING THE ADDRESS LOCATED ON THE PROXY CARD OR (D) FAX THE ENCLOSED PROXY
CARD(S) TO GEORGESON AT 1-212-248-1866 OR TOLL-FREE AT 1-800-733-1885, SO THAT
THEIR SHARES MAY BE REPRESENTED AT THE SPECIAL MEETING. INSTRUCTIONS FOR THE
PROPER EXECUTION OF PROXY CARDS ARE SET FORTH ON THE FOLLOWING PAGE. PROXIES MAY
BE REVOKED AT ANY TIME BEFORE THEY ARE EXERCISED BY THE SUBSEQUENT EXECUTION AND
SUBMISSION OF A REVISED PROXY, BY GIVING WRITTEN NOTICE OF REVOCATION TO THE
ACQUIRED FUND AT ANY TIME BEFORE THE PROXY IS EXERCISED OR BY VOTING IN PERSON
AT THE SPECIAL MEETING.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY.
By Order of the Board of Directors,
/s/ Hal Liebes
Hal Liebes
Vice President and Secretary
of the Acquired Fund
March 14, 2003
YOUR PROMPT ATTENTION TO THE ENCLOSED PROXY WILL HELP TO
AVOID THE EXPENSE OF FURTHER SOLICITATION.
INSTRUCTIONS FOR SIGNING PROXY CARDS
The following general rules for signing proxy cards may be of
assistance to you and avoid the time and expense involved in validating your
vote if you fail to sign your proxy card properly.
1. Individual Accounts: Sign your name exactly as it appears in
the registration on the proxy card.
2. Joint Accounts: Either party may sign, but the name of the
party signing should conform exactly to the name shown in the
registration on the proxy card.
3. All Other Accounts: The capacity of the individual signing the
proxy card should be indicated unless it is reflected in the
form of registration. For example:
4. Registration
Corporate Accounts Valid Signatures
(1) ABC Corp. ......................... ABC Corp.
(2) ABC Corp. ......................... John Doe, Treasurer
(3) ABC Corp.
c/o John Doe, Treasurer ........... John Doe
(4) ABC Corp. Profit Sharing Plan ..... John Doe, Trustee
Trust Accounts
(1) ABC Trust ......................... Jane B. Doe, Trustee
(2) Jane B. Doe, Trustee
u/t/d 12/28/78 .................... Jane B. Doe
Custodial or Estate Accounts
(1) John B. Smith, Cust.
f/b/o John B. Smith, Jr. UGMA .... John B. Smith
(2) John B. Smith ..................... John B. Smith, Jr.,
Executor
THIS PAGE INTENTIONALLY LEFT BLANK
PROSPECTUS/PROXY STATEMENT
MARCH 11, 2003
PROXY STATEMENT
CREDIT SUISSE STRATEGIC VALUE FUND, INC.
466 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017
(800) 927-2874
PROSPECTUS
CREDIT SUISSE LARGE CAP VALUE FUND
A SERIES OF CREDIT SUISSE CAPITAL FUNDS
466 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017
(800) 927-2874
This Prospectus/Proxy Statement is being furnished to shareholders of
Credit Suisse Strategic Value Fund, Inc. (the "Acquired Fund"), an open-end,
diversified management investment company organized as a Maryland corporation,
in connection with the solicitation of proxies by the fund's Board of Directors
for use at a Special Meeting of Shareholders to be held on April 11, 2003 at
1:00 p.m. (the "Special Meeting"), at the offices of the Acquired Fund located
at 466 Lexington Avenue, 16th Floor, New York, New York 10017, or any
adjournment(s) thereof. The only proposals to be considered are set forth below:
1. To approve an Agreement and Plan of Reorganization (the
"Plan");
2. To elect Directors of the Acquired Fund;
3. To consider a series of proposals to modify and/or eliminate
certain investment restrictions of the Acquired Fund;
4. To change the investment objective of the Acquired Fund from
fundamental to non-fundamental; and
5. To transact such other business as may properly come before
the Special Meeting and any adjournment(s) thereof.
Pursuant to the Plan, the Acquired Fund would transfer to Credit Suisse
Large Cap Value Fund (the "Acquiring Fund" and together with the Acquired Fund,
the "Funds"), a series of Credit Suisse Capital Funds (the "Trust"), an
open-end, diversified management investment company organized as a Massachusetts
business trust, all of the Acquired Fund's assets in exchange for shares of
beneficial interest of the Acquiring Fund and the assumption by the Acquiring
Fund of the Acquired Fund's liabilities; such shares of beneficial interest of
the Acquiring Fund would be distributed to shareholders of the Acquired Fund in
liquidation of the Acquired Fund; and the Acquired Fund would subsequently be
dissolved (the "Acquisition").
As noted and further described in the attached Prospectus/Proxy
Statement, there are certain differences between the investment philosophy and
policies of the Funds. THE ONLY SIGNIFICANT DIFFERENCE IN THE WAY THE FUNDS
OPERATE IS THAT, WHILE THE ACQUIRED FUND FOCUSES ON LARGE CAPITALIZATION U.S.
COMPANIES, IT MAY INVEST IN COMPANIES OF ANY SIZE, WHEREAS THE ACQUIRING FUND
INVESTS PRIMARILY IN LARGE CAP COMPANIES.
The investment objective of the Acquired Fund is total return. To
achieve its investment objective, the Acquired Fund invests primarily in equity
securities of U.S. companies, with a focus on U.S. companies with large market
capitalizations. The investment objective of the Acquiring Fund is long-term
capital appreciation and continuity of income. To achieve its investment
objective, the Acquiring Fund invests primarily in dividend-paying common stock
of companies with large market capitalizations that appear to be undervalued.
Credit Suisse Asset Management, LLC, the investment adviser for the
Acquiring Fund ("CSAM"), and Credit Suisse Asset Management Securities, Inc.
("CSAMSI") and State Street Bank and Trust Company ("State Street"),
co-administrators of the Acquiring Fund, serve in the same capacities for the
Acquired Fund. In addition, the Acquiring Fund has the same Board of
Directors/Trustees, distributor, custodian, transfer agent, independent
accountant and counsel as the Acquired Fund.
As a result of the proposed Acquisition, shareholders of the Acquired
Fund will receive that number of shares of beneficial interest of the same
class, except for Common Class shareholders who will receive load-waived Class A
shares of the Acquiring Fund having an aggregate net asset value equal to the
aggregate net asset value of such shareholder's shares of the Acquired Fund
immediately prior to the Acquisition. The expenses of the Acquisition and the
costs associated with this solicitation for approval of the Plan will be borne
by CSAM or its affiliates. No sales or other charges will be imposed on the
shares of beneficial interest of the Acquiring Fund received by the shareholders
of the Acquired Fund in connection with the Acquisition. Former Acquired Fund
Common Class shareholders will continue to be able to purchase additional Class
A shares of the Acquiring Fund without a sales charge being assessed. The
transaction is structured to be tax-free for Federal income tax purposes to
shareholders of the Acquired Fund and the Acquiring Fund.
This Prospectus/Proxy Statement, which should be retained for future
reference, sets forth concisely the information about the Acquiring Fund that a
prospective investor should know before voting. This Prospectus/Proxy Statement
is expected to first be sent to shareholders on or about March 14, 2003. A
Statement of Additional Information, dated March __, 2003, relating to this
Prospectus/Proxy Statement and the Acquisition, has been filed with the
Securities and Exchange Commission (the "SEC") and is incorporated by reference
into this Prospectus/Proxy Statement. A copy of such Statement of Additional
Information is available upon oral or written request and without charge by
writing to the Acquiring Fund at P.O. Box 55030, Boston, Massachusetts
02205-5030 or by calling 1-(800) 927-2874.
2
The following documents, which have been filed with the SEC, are
incorporated herein in their entirety by reference.
o The current Class A, B and C Prospectus of the Acquiring Fund,
dated February 28, 2003, as supplemented as of the date
hereof. The Acquiring Fund's Prospectus accompanies this
Prospectus/Proxy Statement.
o The current Common Class, Advisor Class and Class A, B and C
Prospectuses of the Acquired Fund, dated February 28, 2003,
each as supplemented as of the date hereof. Copies may be
obtained without charge by writing to P.O. Box 55030, Boston,
Massachusetts 02205-5030 or by calling 1-(800) 927-2874.
o The Annual Report of the Acquired Fund for the fiscal year
ended October 31, 2002 and the Annual Report of the Acquiring
Fund for the fiscal year ended October 31, 2002. The Annual
Report of the Acquiring Fund accompanies this Prospectus/
Proxy Statement.
Accompanying this Prospectus/Proxy Statement as Exhibit A is a copy of
the form of the Plan for the proposed Acquisition.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS/PROXY STATEMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS/PROXY STATEMENT
AND IN THE MATERIALS EXPRESSLY INCORPORATED HEREIN BY REFERENCE AND, IF GIVEN OR
MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE FUNDS.
3
TABLE OF CONTENTS
PROPOSAL 1 - APPROVAL OF THE PLAN ......................................... 6
Summary ................................................................... 6
Risk Factors .............................................................. 9
Reasons for the Acquisition ............................................... 10
Fee Tables ................................................................ 11
Information About the Acquisition ......................................... 14
Total Returns ............................................................. 18
Ownership of the Funds .................................................... 20
Comparison of Investment Objectives and Policies .......................... 22
Determination of Net Asset Value of Shares of the Acquiring Fund .......... 26
Management of Each Fund ................................................... 26
Interest of CSAM in the Acquisition ....................................... 27
Information on Shareholders' Rights ....................................... 27
Conclusion ................................................................ 30
Required Vote ............................................................. 31
PROPOSAL 2 - ELECTION OF DIRECTORS OF THE
ACQUIRED FUND ............................................................. 31
PROPOSAL 3 - TO MODIFY AND/OR ELIMINATE
CERTAIN INVESTMENT RESTRICTIONS ........................................... 41
Proposal No. 3-A: To Modify the Fundamental
Investment Restriction on Borrowing Money ................................. 43
Proposal No. 3-B: To Modify the Fundamental Investment
Restriction on Lending .................................................... 44
Proposal No. 3-C: To Modify the Fundamental Investment
Restriction on Real Estate Investments .................................... 45
Proposal No. 3-D: To Remove the Fundamental Investment
Restriction on Short Sales ................................................ 46
Proposal No. 3-E: To Remove the Fundamental Investment
Restriction on Margin Transactions ........................................ 46
Proposal No. 3-F: To Remove the Fundamental Investment
Restriction on Pledging Assets ............................................ 47
4
Proposal No. 3-G: To Remove the Fundamental Investment
Restriction on Acquiring More Than 10% of Voting Securities
of Any One Issuer ......................................................... 47
PROPOSAL 4 - TO CHANGE THE INVESTMENT OBJECTIVE
OF THE ACQUIRED FUND FROM FUNDAMENTAL TO
NON-FUNDAMENTAL ........................................................... 48
INFORMATION ON THE ACQUIRED FUND'S INDEPENDENT ACCOUNTANTS ................ 48
ADDITIONAL INFORMATION .................................................... 50
VOTING INFORMATION ........................................................ 50
OTHER BUSINESS ............................................................ 52
FINANCIAL STATEMENTS AND EXPERTS .......................................... 52
ADDITIONAL MATERIALS ...................................................... 52
LEGAL MATTERS ............................................................. 53
EXHIBIT A: AGREEMENT AND PLAN OF REORGANIZATION .......................... A-1
5
PROPOSAL 1 - APPROVAL OF THE PLAN
SUMMARY
THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
ADDITIONAL INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS/PROXY STATEMENT,
THE PLAN (A COPY OF THE FORM OF THE PLAN IS ATTACHED TO THIS PROSPECTUS/PROXY
STATEMENT AS EXHIBIT A), THE PROSPECTUSES OF THE ACQUIRED FUND, THE STATEMENT OF
ADDITIONAL INFORMATION OF THE ACQUIRED FUND, THE PROSPECTUS OF THE ACQUIRING
FUND AND THE STATEMENT OF ADDITIONAL INFORMATION OF THE ACQUIRING FUND.
PROPOSED ACQUISITION. The Plan provides for the acquisition of all of
the assets and liabilities of the Acquired Fund by the Acquiring Fund in
exchange for shares of beneficial interest of the Acquiring Fund. The Plan also
calls for the distribution of shares of beneficial interest of the Acquiring
Fund to the Acquired Fund's shareholders in liquidation of the Acquired Fund. As
a result of the Acquisition, each shareholder of a class of shares of the
Acquired Fund will become the owner of that number of full and fractional shares
of beneficial interest of the same class of the Acquiring Fund, except for
Common Class shareholders who will receive Class A shares of the Acquiring Fund
having an aggregate net asset value ("NAV") equal to the aggregate net asset
value of such shareholder's shares in the Acquired Fund as of the close of
business on the date that the Acquired Fund's assets and liabilities are
exchanged for shares of beneficial interest of the Acquiring Fund. See
"Information About the Acquisition --Agreement and Plan of Reorganization."
Because the Acquiring Fund is a series of the Trust, it does not have a
Board of Trustees separate from the other series of the Trust. Accordingly, when
we refer to the "Trustees of the Acquiring Fund" or the "Board of Trustees of
the Acquiring Fund" elsewhere in this Prospectus/Proxy Statement, we mean the
Trustees and Board of Trustees of the Trust.
For the reasons set forth below under "Reasons for the Acquisition,"
the Board of Directors of the Acquired Fund, including the Directors of the
Acquired Fund who are not "interested persons" (the "Independent Directors"), as
that term is defined in the Investment Company Act of 1940, as amended (the
"1940 Act"), has unanimously concluded that the Acquisition would be in the best
interests of its shareholders and that the interests of its existing
shareholders will not be diluted as a result of the transaction contemplated by
the Acquisition. The Board of Directors of the Acquired Fund therefore has
submitted the Plan for approval by its shareholders. The Board of Trustees of
the Trust has also reached similar conclusions and approved the Acquisition with
respect to the Acquiring Fund.
Approval of the Acquisition requires the affirmative vote of a majority
of the outstanding shares of the Acquired Fund, in the aggregate without regard
to
6
class, present in person or represented by proxy. See "Voting Information." If
shareholders of the Acquired Fund approve the Acquisition, the Acquired Fund
will be liquidated upon consummation of the Acquisition and subsequently
dissolved. In the event the Plan is not approved, the Board of Directors of the
Acquired Fund will consider other possible courses of action available to it,
including resubmitting the Acquisition proposal to shareholders.
TAX CONSEQUENCES. Prior to completion of the Acquisition, the Acquired
Fund and the Acquiring Fund will have received an opinion of counsel that, upon
the closing of the Acquisition, no gain or loss will be recognized by the
shareholders of the Acquired Fund for Federal income tax purposes and, generally
the Acquired Fund will not recognize gain or loss for such purposes. The holding
period and aggregate tax basis of the Acquiring Fund shares of beneficial
interest received by the Acquired Fund shareholder will be the same as the
holding period and aggregate tax basis of the shares of the Acquired Fund
previously held by such shareholder. In addition, the holding period and
aggregate tax basis of the assets of the Acquired Fund in the hands of the
Acquiring Fund as a result of the Acquisition, will generally be the same as in
the hands of the Acquired Fund immediately prior to the Acquisition.
INVESTMENT OBJECTIVES AND POLICIES. As noted and further described in
the attached Prospectus/Proxy Statement, there are certain differences between
the investment philosophy and policies of the Funds. THE ONLY SIGNIFICANT
DIFFERENCE IN THE WAY THE FUNDS OPERATE IS THAT, WHILE THE ACQUIRED FUND FOCUSES
ON LARGE CAPITALIZATION U.S. COMPANIES, IT MAY INVEST IN COMPANIES OF ANY SIZE,
WHEREAS THE ACQUIRING FUND INVESTS PRIMARILY IN LARGE CAP COMPANIES.
The investment objective of the Acquiring Fund is long-term capital
appreciation and continuity of income. To pursue its investment objective, the
Acquiring Fund invests principally in dividend-paying common stock of companies
with large market capitalizations that appear to be undervalued and diversifies
its investment among different industries and companies. Under normal market
conditions, the Acquiring Fund will invest at least 80% of its net assets, plus
any borrowings for investment purposes, in equity securities of U.S. companies
with large market capitalizations. The investment objective of the Acquired Fund
is total return. To pursue its investment objective, the Acquired Fund invests
primarily in equity securities of value companies. The Acquired Fund focuses on
large U.S. companies. Under normal market conditions, the Acquired Fund will
invest at least 80% of its net assets, plus any borrowings for investment
purposes, in U.S. equity securities.
PURCHASE AND REDEMPTION PROCEDURES. Except as otherwise indicated in
this section the Funds have similar policies with respect to purchases and
redemptions. Common Class shares of the Acquired Fund may be purchased directly
from the Acquired Fund or through a variety of financial services firms. Class A
shares of the Acquiring Fund may be purchased from the Acquiring Fund directly,
through the Acquiring Fund's distributor or through securities dealers. Class A
shares of the Acquiring Fund may be purchased at the NAV per share plus
7
an initial sales charge imposed at the time of purchase and may be subject to a
contingent deferred sales charge in cases where the initial sales charge was not
applied because of the size of the purchase. However, the Class A shares
acquired by Acquired Fund Common Class shareholders will not be subject to any
sales charge and Acquired Fund shareholders will be able to acquire additional
Class A shares of the Acquiring Fund without a sales charge being assessed. The
purchase and redemption procedures available to shareholders of all of the other
classes of the Acquiring Fund are identical to those available to shareholders
of the same class of the Acquired Fund.
You should also note that certain brokers who distribute shares of the
Acquired Fund may not distribute shares of the Acquiring Fund. The Prospectus of
the Acquiring Fund provides additional information on purchasing shares of the
Acquiring Fund.
SALES CHARGES. Common Class shares of the Acquired Fund are sold at NAV
per share without an initial sales charge or a contingent deferred sales charge
("CDSC") and are not subject to a 12b-1 fee . The price of Class A shares for
each of the Funds is the NAV plus the initial sales charge. The sales charges
for Class A shares begins at 5.75% for purchases below $50,000 and is gradually
reduced to zero if $1,000,000 or more is purchased. The Class A shares issued to
Acquired Fund Common Class shareholders will be "load-waived," meaning that they
are not subject to any sales charge. It is important to note that former
Acquired Fund Common Class shareholders will continue to be able to purchase
additional Class A shares of the Acquiring Fund on a load-waived basis. The
Class B and Class C shares of the Funds may be purchased at the NAV price,
although a CDSC may be applied. Class B shares have a diminishing CDSC (4% for
the first year and 0% after the fourth year) and become Class A shares after
eight years. Class C shares have a 1% CDSC charge per annum, but remain Class C
shares. Advisor Class shares of the Acquired Fund are subject to a 12b-1 fee of
0.50%. Class A shares of each of the Funds are subject to a 12b-1 fee of 0.25%.
The Class B and Class C shares of the Funds are each subject to a 12b-1 fee of
1.00% per annum of average daily net assets. Each Fund has a compensation type
12b-1 plan in which the distributor receives the distribution fee regardless of
the cost of the distribution activities performed. See "Fee Table" below.
EXCHANGE PRIVILEGES. The exchange privileges available to shareholders
of a class of the Acquiring Fund are identical to those available to
shareholders of the same class of the Acquired Fund. Shareholders of each Fund
may exchange at NAV all or a portion of their shares for shares of the same
class of other mutual funds in the Credit Suisse family of funds at their
respective NAVs, provided that such fund offers the relevant class of shares.
Exchanges may be effected for Advisor Class shares by mail or telephone;
exchanges of Class A, B and C shares may be effected through an investor's
financial representative. Exchanges will be effected without a sales charge but
must satisfy the minimum dollar amount necessary for new purchases in the fund
in which shares are being purchased. The Funds reserve the right to refuse
exchange purchases by any person or group, if in
8
CSAM's judgment, a Fund would be unable to invest the money effectively in
accordance with its investment objective and policies, or would otherwise
potentially be adversely affected. Examples of when an exchange purchase could
be refused are when a Fund receives or anticipates receiving large exchange
orders at or about the same time and/or when a pattern of exchanges within a
short period of time (often associated with a "market timing" strategy) is
discerned. The exchange privilege may be modified or terminated at any time upon
60-days' notice to shareholders.
The exchange privilege is available to shareholders residing in any
state in which the relevant fund's shares being acquired may legally be sold.
When an investor effects an exchange of shares, the exchange is treated for
federal income tax purposes as a redemption. Therefore, the investor may realize
a taxable gain or loss in connection with the exchange. No initial sales charge
is imposed on the shares being acquired in an exchange.
DIVIDENDS. The Acquiring Fund and the Acquired Fund distribute
substantially all of their respective net investment income and net realized
capital gains, if any, to their respective shareholders. All distributions are
reinvested in the form of additional full and fractional shares of the relevant
class of the Fund unless a shareholder elects otherwise. Each Fund typically
declares and pays dividends, if any, from net investment income at least
quarterly. Net realized capital gains, if any, of each Fund are typically
distributed at least annually. The Acquired Fund will pay a dividend of
undistributed net investment income and capital gains, if any, immediately prior
to the Closing Date. The amount of any dividend actually paid prior to the
Closing Date will vary depending on a number of factors, such as changes in the
value of the Acquired Fund's holdings and net redemptions of the Acquired Fund's
shares. If determined as of January 31, 2003, there would have been no
distribution. See "Dividend and Distribution Information" in the accompanying
Prospectus of the Acquiring Fund.
APPRAISAL RIGHTS. Under the laws of the Commonwealth of Massachusetts,
shareholders of the Acquiring Fund do not have appraisal rights in connection
with a combination or acquisition of the assets of the Acquiring Fund. In
addition, under the laws of the State of Maryland, shareholders of the Acquired
Fund do not have appraisal rights in connection with a combination or
acquisition of the assets of the Acquired Fund by another entity. Shareholders
of the Acquired Fund may, however, redeem their shares at NAV prior to the date
of the Acquisition (subject only to certain restrictions set forth in the 1940
Act). See "Information on Shareholders' Rights -- Voting Rights."
RISK FACTORS
The principal risk factor affecting both the Acquiring Fund and the
Acquired Fund is market risk. (Please note that shareholders of both Funds are
being solicited to change each Fund's investment restriction on borrowing that,
if adopted, would result in the Funds having identical investment policies on
borrowing.) The Acquired Fund has greater exposure to the risks of investing in
9
both non-investment grade debt securities and warrants than the Acquiring Fund,
as the Acquired Fund is permitted to invest up to 10% and 15% of its net assets
in non-investment grade debt securities and warrants, respectively, while the
Acquiring Fund may not invest in either type of security. Investing in
non-investment grade debt securities carries additional risks, including an
increased risk of default. The Acquired Fund also has greater exposure to the
risks of investing in options than the Acquiring Fund as the Acquiring Fund may
invest up to 5% of its net assets in options, while the Acquired Fund may invest
up to 25% of its net assets in such securities. In addition the Acquired Fund
has greater exposure to the risks of investing in foreign securities than the
Acquiring Fund as the Acquiring Fund may invest up to 10% of its net assets in
foreign securities, while the Acquired Fund may invest up to 20% of its total
assets in such securities. See the accompanying Prospectus of the Acquiring Fund
for a complete discussion of the risks of investing in the Acquiring Fund.
REASONS FOR THE ACQUISITION
The Board of Directors of Acquired Fund has unanimously determined that
it is in the best interest of the Acquired Fund to effect the Acquisition. In
reaching this conclusion, the Board considered a number of factors, including
the following:
1. the Acquisition will result in a single larger fund that
primarily invests in large capitalization companies, which
historically have been less volatile than a portfolio of
multi-cap stocks;
2. the Acquisition may increase efficiencies, eliminating one of
the two sets of prospectuses, annual reports and other
documents required for two funds, although there is no
guarantee that the combined fund will realize such
efficiencies;
3. a larger asset base could provide portfolio management
benefits, such as the ability to command more attention from
brokers and underwriters of portfolio securities;
4. that the Acquiring Fund has better 1, 5 and 10-year
performance than the Acquired Fund;
5. the terms and conditions of the Acquisition;
6. the similarity of the investment objectives, investment
philosophies, investment policies and restrictions of the
Acquiring Fund in relation to those of the Acquired Fund;
7. that the investment adviser for the Acquiring Fund is the same
as that of the Acquired Fund;
8. the Federal tax consequences of the Acquisition, and that a
legal opinion will be rendered that no gain or loss will be
recognized by the shareholders of the Acquired Fund or by the
Acquiring Fund for Federal income tax purposes as a result of
the Acquisition and that the Acquired Fund generally will not
recognize gain or loss for such purposes;
10
9. that the interests of shareholders of the Acquired Fund will
not be diluted as a result of the Acquisition;
10. that the expenses of the Acquisition will be borne by CSAM or
its affiliates; and
11. that no sales or other charges will be imposed in connection
with the Acquisition.
In light of the foregoing, the Board of Directors of the Acquired Fund,
including the Independent Directors, has determined that it is in the best
interests of the Acquired Fund and its shareholders to effect the Acquisition.
The Board of Directors of the Acquired Fund has also determined that the
Acquisition would not result in a dilution of the interests of the Acquired
Fund's shareholders. In making these determinations, the Board did not give
equal weight to each factor.
The Board of Trustees of the Acquiring Fund has determined that it is
advantageous to the Acquiring Fund to effect the Acquisition. The Board of
Trustees of the Acquiring Fund considered, among other things, the terms and
conditions of the Acquisition and representations that the Acquisition would be
effected as a tax-free reorganization. Accordingly, the Board of Trustees of the
Acquiring Fund, including a majority of the Independent Trustees, has determined
that the Acquisition is in the best interests of the Acquiring Fund's
shareholders and that the interests of the Acquiring Fund's shareholders would
not be diluted as a result of the Acquisition.
FEE TABLES
ACQUIRING FUND ACQUISITION
Following are two tables showing expected fees and expenses for the
fiscal year ending October 31, 2003, for the Common Class, Advisor Class, Class
A, Class B and Class C shares of the Acquired Fund, holders of which will
receive the corresponding class of the Acquiring Fund, except for Common Class
shareholders who will receive load-waived Class A shares of the Acquiring Fund,
upon the closing of the Acquisition, and the expected fees and expenses for the
fiscal year ending October 31, 2003, for the Advisor Class, Class A, Class B and
Class C shares of the Acquiring Fund before and after giving effect to the
Acquisition. The tables do not reflect charges that institutions and financial
intermediaries may impose on their customers.
11
BEFORE FEE WAIVERS AND/OR REIMBURSEMENTS
ACQUIRED ACQUIRING PRO ACQUIRED ACQUIRED ACQUIRING PRO
FUND FUND FORMA FUND FUND FUND FORMA
Advisor Advisor Advisor Common Class A Class A Class A
Class Class* Class Class
- --------------------------------------------------------------------------------
SHAREHOLDER FEES:
Maximum sales
charge imposed
on purchase (as
a percentage of
offering price) None None None None 5.75%** 5.75%** 5.75%**
Maximum deferred
sales charge (as a
percentage of
original purchase
price, or redemption
proceeds, as
applicable) None None None None None None None
ANNUAL FUND OPERATING EXPENSES (DEDUCTED FROM FUND ASSETS)
Management Fee .75% .60% .54% .75% .75% .60% .54%
Distribution and
Service (12b-1) fee .50% .50% .50% .00% .25% .25% .25%
Other Expenses .52% .46% .37% .52% .52% .46% .37%
TOTAL ANNUAL FUND OPERATING
EXPENSES
1.77% 1.56% 1.41% 1.27% 1.52% 1.31% 1.16%
- --------------------------------------------------------------------------------
12
ACQUIRED ACQUIRING PRO ACQUIRED ACQUIRING PRO
FUND FUND FORMA FUND FUND FORMA
CLASS B CLASS B CLASS B CLASS C CLASS C CLASS C
- --------------------------------------------------------------------------------
SHAREHOLDER FEES:
Maximum sales
charge imposed
on purchase (as a
percentage of
offering price) None None None None None None
Maximum deferred
sales charge (as a
percentage of
original purchase
price, or redemption
proceeds, as applicable) 4% 4% 4% 1% 1% 1%
ANNUAL FUND OPERATING EXPENSES (DEDUCTED FROM FUND ASSETS)
Management Fee .75% .60% .54% .75% .60% .54%
Distribution and
Service (12b-1) fee 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
Other Expenses .52% .46% .37% .52% .46% .37%
TOTAL ANNUAL FUND OPERATING
EXPENSES
2.27% 2.06% 1.91% 2.27% 2.06% 1.91%
- --------------------------------------------------------------------------------
* Expenses are based on Class A shares (except for distribution and
service fee (12b-1) which is at the contractual rate of .50%) as the
Acquiring Fund will commence the offering of Advisor Class shares on
the Closing Date.
** Although the Class A shares impose a maximum sales charge of 5.75%,
this charge does not apply to Class A shares received in the
Acquisition or additional Class A shares of the Acquiring Fund
purchased by former Acquired Fund shareholders.
- --------------------------------------------------------------------------------
EXAMPLES
The following examples are intended to assist an investor in understanding the
various costs that an investor in each Fund will bear directly or indirectly.
The examples assume payment of operating expenses at the levels set forth in the
tables presented above (in each case before fee waivers and expense
reimbursements) and that all dividends and distributions are reinvested. The
examples also assume that you invest $10,000 in the Fund for the time periods
indicated an then redeem all of your shares at the end of those periods. The
example also assume that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions your costs would be:
13
One Year Three Years Five Years 10 Years
ACQUIRED FUND
Common Class $129 $403 $697 $1,534
Advisor Class $180 $557 $959 $2,084
Class A (with or without $721 $1,028 $1,356 $2,283
redemption)
Class B (redemption at $630 $909 $1,215 $2,417
end of period)
Class B (no redemption) $230 $709 $1,215 $2,417
Class C (redemption at $330 $709 $1,215 $2,605
end of period)
Class C (no redemption) $230 $709 $1,215 $2,605
ACQUIRING FUND
Advisor Class $159 $493 $850 $1,856
Class A (with or without $701 $966 $1,252 $2,063
redemption)
Class B (redemption at $609 $846 $1,108 $2,197
end of period)
Class B (no redemption) $209 $646 $1,108 $2,197
Class C (redemption at $309 $646 $1,108 $2,390
end of period)
Class C (no redemption) $209 $646 $1,108 $2,390
COMBINED FUND PRO FORMA
Advisor Class $144 $446 $771 $1,691
Class A (with or without $686 $922 $1,177 $1,903
redemption)
Class B (redemption at $594 $800 $1,032 $2,038
end of period)
Class B (no redemption) $194 $600 $1,032 $2,038
Class C (redemption $294 $600 $1,032 $2,233
at end of period)
Class C (no redemption) $194 $600 $1,032 $2,233
INFORMATION ABOUT THE ACQUISITION
AGREEMENT AND PLAN OF REORGANIZATION. The following summary of the Plan
is qualified in its entirety by reference to the form of the Plan (Exhibit A
hereto). The Plan provides that the Acquiring Fund will acquire all of the
assets of the Acquired Fund in exchange for shares of beneficial interest of the
Acquiring Fund and the assumption by the Acquiring Fund of the liabilities of
the Acquired Fund on the Closing Date. The Closing Date is expected to be on or
about April 17, 2003.
Prior to the Closing Date, the Acquired Fund will endeavor to discharge
all of its known liabilities and obligations, other than those liabilities and
obligations which would otherwise be discharged at a later date in the ordinary
course of business. The Acquiring Fund will assume all liabilities, expenses,
costs, charges and reserves, including those liabilities reflected on an
unaudited statement of assets and liabilities for the Acquired Fund, as of the
close of regular trading on The New York Stock Exchange, Inc. ("NYSE"),
currently 4:00 p.m., New York City time, on the Closing Date, in accordance with
generally accepted accounting principles consistently applied from the prior
audited period. The NAV per share of each class of each Fund will be calculated
by determining the total
14
assets attributable to such class, subtracting the relevant class' pro rata
share of the actual and accrued liabilities of Fund and the liabilities
specifically allocated to that class of shares, and dividing the result by the
total number of outstanding shares of the relevant class. Each Fund will utilize
the procedures set forth in its respective current Prospectuses or Statement of
Additional Information to determine the value of its respective portfolio
securities and to determine the aggregate value of each Fund's portfolio.
On or as soon after the Closing Date as conveniently practicable, the
Acquired Fund will liquidate and distribute pro rata to shareholders of record
as of the close of business on the Closing Date the shares of beneficial
interest of the Acquiring Fund received by the Acquired Fund. Such liquidation
and distribution will be accomplished by the establishment of accounts in the
names of the Acquired Fund's shareholders on the share records of the Acquiring
Fund's transfer agent. Each account will represent the number of shares of the
Acquiring Fund due to the Acquired Fund's shareholders calculated in accordance
with the Plan. After such distribution and the winding up of its affairs, the
Acquired Fund will terminate as a management investment company and dissolve as
a Maryland corporation.
The consummation of the Acquisition is subject to the conditions set
forth in the Plan, including approval of the Plan by the Acquired Fund's
shareholders. Notwithstanding approval by the shareholders of the Acquired Fund,
the Plan may be terminated at any time at or prior to the Closing Date: (i) by
mutual agreement of the Acquired Fund and the Acquiring Fund; (ii) by the
Acquired Fund, in the event the Acquiring Fund shall, or by the Acquiring Fund,
in the event the Acquired Fund shall, materially breach any representation,
warranty or agreement contained in the Plan to be performed at or prior to the
Closing Date; or (iii) if a condition to the Plan expressed to be precedent to
the obligations of the terminating party has not been met and it reasonably
appears that it will not or cannot be met within a reasonable time.
Pursuant to the Plan, the Acquiring Fund has agreed to indemnify and
advance expenses to each Director or officer of the Acquired Fund against money
damages incurred in connection with any claim arising out of such person's
services as a Director or officer with respect to matters specifically relating
to the Acquisition, except by reason of such person's willful misfeasance, bad
faith, gross negligence or reckless disregard of his or her duties in the
conduct of his or her office.
Approval of the Plan requires the affirmative vote of a majority of the
outstanding shares of the Acquired Fund, in the aggregate without regard to
class, present in person or represented by proxy. Shareholders of the Acquired
Fund are entitled to one vote for each share. If shareholders of the Acquired
Fund approve the Acquisition, the Acquired Fund will be liquidated upon
consummation of the Acquisition and subsequently dissolved. In the event the
Plan is not approved, the Board of Directors of the Acquired Fund will consider
other possible courses of action available to it, including resubmitting the
Acquisition proposal to shareholders.
15
DESCRIPTION OF THE ACQUIRING FUND SHARES. Shares of beneficial interest
of the Acquiring Fund will be issued to the Acquired Fund in accordance with the
procedures detailed in the Plan and as described in the Acquiring Fund's
Prospectus and Statement of Additional Information. The Acquiring Fund, like the
Acquired Fund, will not issue share certificates to its shareholders. See
"Information on Shareholders' Rights" and the Prospectus of the Acquiring Fund
for additional information with respect to the shares of beneficial interest of
the Acquiring Fund.
The Acquiring Fund has authorized six classes of common stock, called
Common Class, Advisor Class, Class A, Class B, Class C and Class D shares.
Shareholders of the Acquired Fund will be issued the corresponding class of
shares of the Acquiring Fund, except for Common Class shareholders who will
receive Class A shares of the Acquiring Fund. No shareholders will receive
Common Class or Class D shares under the Acquisition. Shares of each class of
the Acquiring Fund represent equal pro rata interests in the Acquiring Fund and
accrue dividends and calculate NAV and performance quotations in the same
manner. The Acquiring Fund intends to continuously offer Advisor Class, Class A,
Class B and Class C shares after consummation of the Acquisition.
FEDERAL INCOME TAX CONSEQUENCES. The exchange of the Acquired Fund
assets for shares of beneficial interest of the Acquiring Fund, followed by the
distribution of these shares, is intended to qualify for U.S. Federal income tax
purposes as a tax-free reorganization under Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code"). As a condition to the closing of
the Acquisition, the Acquiring Fund and the Acquired Fund will receive an
opinion from Willkie Farr & Gallagher, counsel to the Funds, substantially to
the effect that, on the basis of the existing provisions of the Code, U.S.
Treasury regulations issued thereunder, current administrative rules,
pronouncements and court decisions, for federal income tax purposes, upon
consummation of the Acquisition:
(1) the transfer of the Acquired Fund assets to the Acquiring Fund in
exchange for the Acquiring Fund shares of beneficial interest and the assumption
by the Acquiring Fund of the liabilities of the Acquired Fund, and the
distribution of the Acquiring Fund shares of beneficial interest to the
shareholders of the Acquired Fund in exchange for their Acquired Fund shares,
will constitute a "reorganization" within the meaning of Section 368(a) of the
Code, and the Acquiring Fund and the Acquired Fund will be a "party to a
reorganization" within the meaning of Section 368(b) of the Code;
(2) no gain or loss will be recognized by the Acquiring Fund upon the
receipt of the assets of the Acquired Fund solely in exchange for the Acquiring
Fund shares of beneficial interest and the assumption by the Acquiring Fund of
the liabilities of the Acquired Fund;
(3) except for consequences regularly attributable to the closing of
the Acquired Fund's taxable year, no gain or loss will be recognized by the
Acquired Fund upon the transfer of such fund's assets to the Acquiring Fund in
16
exchange for the Acquiring Fund shares of beneficial interest and the assumption
by the Acquiring Fund of the liabilities of the Acquired Fund, or upon the
distribution of the Acquiring Fund shares of beneficial interest to the Acquired
Fund's shareholders;
(4) no gain or loss will be recognized by shareholders of the Acquired
Fund upon the exchange of their Acquired Fund shares for Acquiring Fund shares
of beneficial interest or upon the assumption by the Acquiring Fund of the
liabilities of the Acquired Fund;
(5) the aggregate tax basis of the Acquiring Fund shares of beneficial
interest received by each Acquired Fund shareholder of the Acquired Fund
pursuant to the Acquisition will be the same as the aggregate tax basis of
shares of the Acquired Fund held by such shareholder immediately prior to the
Acquisition, and the holding period of the Acquiring Fund shares of beneficial
interest to be received by each shareholder of the Acquired Fund will include
the period during which the shares of the Acquired Fund exchanged therefor were
held by such shareholder (provided that the Acquired Fund shares were held as
capital assets on the date of the Acquisition); and
(6) except for assets which may be revalued as a consequence of a
termination of the Acquired Fund's taxable year, the tax basis of the Acquired
Fund's assets acquired by the Acquiring Fund will be the same as the tax basis
of such assets to the Acquired Fund immediately prior to the Acquisition, and
the holding period of the assets of the Acquired Fund in the hands of the
Acquiring Fund will include the period during which those assets were held by
the Acquired Fund.
You should recognize that an opinion of counsel is not binding on the
Internal Revenue Service ("IRS") or any court. Neither the Acquired Fund nor the
Acquiring Fund will seek to obtain a ruling from the IRS regarding the tax
consequences of the Acquisition. Accordingly, if the IRS sought to challenge the
tax treatment of the Acquisition and was successful, neither of which is
anticipated, the Acquisition could be treated, in whole or in part, as a taxable
sale of assets of the Acquired Fund, followed by the taxable liquidation
thereof.
Shareholders of the Acquired Fund should consult their tax advisors
regarding the effect, if any, of the proposed Acquisition in light of their
individual circumstances. Since the foregoing discussion only relates to the
U.S. Federal income tax consequences of the Acquisition, shareholders of the
Acquired Fund should also consult their tax advisors as to state and local tax
consequences, if any, of the Acquisition.
17
CAPITALIZATION.
The following table shows the capitalization of the Acquired Fund and
the Acquiring Fund as of October 31, 2002 and the capitalization of the
Acquiring Fund on a pro forma basis as of the closing date of the Acquisition,
after giving effect to such Acquisition.(1)
ACQUIRING ACQUIRED PRO
FUND FUND PRO FORMA FORMA
(ACTUAL) (ACTUAL) ADJUSTMENTS (ACTUAL)
- --------------------------------------------------------------------------------
Common $ 3,060,715 $175,121,019 (175,121,019) $3,060,715
Advisor(2) -- 25,500,591 (4,278) 25,496,313
Class A 114,733,069 404,067 175,091,570(3) 290,228,706
Class B 28,312,471 88,367 (15) 28,400,823
Class C 2,104,064 142,054 (24) 2,246,094
NET ASSET VALUE
Common $16.82 $10.56 -- $16.82
Advisor(2) -- 10.55 -- 16.82
Class A 16.83 10.55 -- 16.83
Class B 16.66 10.51 -- 16.66
Class C 16.58 10.50 -- 16.58
SHARES OUTSTANDING
Common 181,923 16,586,562 (16,586,562) 181,923
Advisor(2) -- 2,417,186 (901,353) 1,515,833
Class A 6,817,930 38,298 10,388,496 17,244,724
Class B 1,699,492 8,410 (3,171) 1,704,731
Class C 126,880 13,525 (4,935) 135,470
- --------------------------------------------------------------------------------
(1) Assumes the Acquisition of the Acquired Fund had been consummated on
October 31, 2002 and is for information purposes only. No assurance can
be given as to how many Acquiring Fund shares will be received by
shareholders of the Acquired Fund on the date the Acquisition takes
place, and the foregoing should not be relied upon to reflect the
number of Acquiring Fund shares that actually will be received on or
after such date.
(2) The Acquiring Fund will commence the offering of Advisor Class shares
on April 17, 2003.
(3) Reflects the elimination of prepaid expenses from the Acquired Fund.
TOTAL RETURNS
Performance information is shown separately for each class of each
Fund. Total return is a measure of the change in value of an investment in a
fund over the period covered, which assumes that any dividends or capital gains
distributions are automatically reinvested in shares of the fund rather than
paid to the investor in cash. The formula for total return used by a fund is
prescribed by the SEC and includes three steps: (1) adding to the total number
of shares of the fund that would be purchased by a hypothetical $1,000
investment in the fund all additional shares that would have been purchased if
all dividends and distributions paid or distributed during the period had been
automatically reinvested; (2) calculating the redeemable value of the
hypothetical initial investment as of the end of the period by multiplying the
total number of shares owned at the end of the period by the net asset value per
share on the last trading day of the period; and (3) dividing this account value
for the hypothetical investor by the amount of the initial investment,
18
and annualizing the result for periods of less than one year. It is assumed that
with respect to Class A shares of the Acquiring Fund, the maximum initial sales
charge of 5.75% was deducted at the time of investment. Total return may be
stated with or without giving effect to any expense limitations in effect for a
fund.
The following table reflects the average annual total return for the
1-year, 5-year, 10-year and since inception periods ending October 31, 2002 for
each Fund:
- --------------------------------------------------------------------------------
1 YEAR 5 YEARS 10 YEARS LIFE OF INCEPTION
CLASS DATE
- --------------------------------------------------------------------------------
ACQUIRED FUND1
- --------------------------------------------------------------------------------
COMMON CLASS -13.29% 1.95% 9.45% 9.68% 10/6/88
- --------------------------------------------------------------------------------
ADVISOR CLASS -13.71% 1.47% N/A 4.92% 5/15/95
- --------------------------------------------------------------------------------
Return After Taxes
on Distributions2 -13.87% -1.37% 6.47% 7.10%
- --------------------------------------------------------------------------------
Return After Taxes on Distributions
and Sale of Fund Shares2 -7.56% 0.92% 7.00% 7.35%
- --------------------------------------------------------------------------------
ACQUIRING FUND3
- --------------------------------------------------------------------------------
CLASS A (NO LOAD) -7.63% 4.14% 10.78% 11.39% 9/19/49
- --------------------------------------------------------------------------------
CLASS B (NO LOAD) -8.29% 3.40% N/A 7.78% 2/28/96
- -------------------------------------------------------------------------------
CLASS C (NO LOAD) -8.35% N/A N/A -2.30% 2/28/00
- -------------------------------------------------------------------------------
CLASS A (WITH LOAD) -12.95% 2.91% 10.21% 11.27%
- -------------------------------------------------------------------------------
CLASS B (WITH LOAD) -11.66% 3.40% N/A 7.78%
- -------------------------------------------------------------------------------
CLASS C (WITH LOAD) -9.19% N/A N/A -2.30%
- -------------------------------------------------------------------------------
Return After Taxes on
Distributions4 (no load) -9.43% 2.41% 8.69% 9.07%
- -------------------------------------------------------------------------------
Return After Taxes on
Distributions4 (with load) -14.64% 1.20% 8.05% 8.95%
- -------------------------------------------------------------------------------
Return After Taxes on
Distributions and Sale of
Fund Shares4 (no load) -2.98% 3.29% 8.43% 9.01%
- -------------------------------------------------------------------------------
Return After Taxes on
Distributions and Sale of
Fund Shares4 (with load) -6.34% 2.28% 7.85% 8.89%
- -------------------------------------------------------------------------------
-----------
n/a = Not disclosed as the classes were not in existence during all of
the period indicated.
(1) Performance for Classes A, B and C shares is not provided because these
classes do not have a full calendar year of performance.
19
(2) After tax returns shown are for Common Class shares.
(3) Performance for Advisor Class is not provided because this class does
not have a full calendar year of performance.
(4) After tax returns shown are for Class A shares.
OWNERSHIP OF THE FUNDS
As of December 31, 2002, the officers, Trustees or Directors of the
Acquiring Fund and the Acquired Fund beneficially owned as a group less than 1%
of the outstanding securities of the relevant Fund. To the best knowledge of
each Fund, as of December 31, 2002, no shareholder or "group" (as that term is
used in Section 13(d) of the Securities Exchange Act of 1934, as amended (the
"1934 Act")), except as set forth below, owned beneficially or of record more
than 5% of the outstanding shares of a class of the Funds.
PERCENT OF
OUTSTANDING
NAME AND ADDRESS SHARES HELD SHARES (CLASS)
ACQUIRED FUND
Charles Schwab & Co. Inc.* 3,927,354.457 25.29% (Common)
Special Custody Account for
the Exclusive Benefit of Customers
Attn: Mutual Funds
101 Montgomery Street
San Francisco, CA 94104
Fidelity Investment Institutional 1,089,365.275 7.01% (Common)
Operations CNT as Agent for
Certain Employee Benefit Plans*
100 Magellan Way
Covington, KY 41015
National Financial SVCS Corp.* 2,677,481.333 17.24% (Common)
FBO Customers
Church Street Station
PO Box 3908
New York, NY 10008
American Enterprise Investment SVC* 1,995.513 5.61% (A)
FBO 212610451
PO Box 9446
Minneapolis, MN 55440
20
PERCENT OF
OUTSTANDING
NAME AND ADDRESS SHARES HELD SHARES (CLASS)
Banc of America Securities LLC* 3,549.963 9.97% (A)
110-11534-17
NC1-004-03-06
200 North College St. 3rd Fl.
Charlotte, NC 28255
Kathryn Miller Boldt & Katherine RE 2,135.26 6.00% (A)
U/W Kyrle Boldt Sr.
Kyrle Boldt St. Residual Trust
12660 Post Oak Road
St. Louis, MO 63131
Pershing LLC* 25,883.024 72.70% (A)
PO Box 2052
Jersey City, NJ 07303
Mary N. Holen 1,547.529 26.18% (B)
6080 Hickory Ridge Rd.
Lebanon, TN 37090
Pershing LLC* 3,866.894 65.42% (B)
PO Box 2052
Jersey City, NJ 07303
Pershing LLC* 12,007.136 88.78% (C)
PO Box 2052
Jersey City, NJ 07303
Connecticut General Life Ins. Co.* 2,040,543.081 97.53% (Advisor)
On Behalf of its Separate Accounts
Attn: Carmen G. Rivera
280 Trumbull St. #H19B
Hartford, CT 06103
21
PERCENT OF
OUTSTANDING
NAME AND ADDRESS SHARES HELD SHARES (CLASS)
ACQUIRING FUND
Guarantee & Trust Company TTEE* 9,679.205 5.27 (Common)
Cathleen Noland Spousal IRA
PO Box 8963
Wilmington, DE 19899
Retirement Plan Non-Legal Employee of 127,716.136 69.55% (Common)
Simpson Thacher & Bartlett*
Maryann Braverman Accounting Dept.
425 Lexington Ave.
New York, NY 10017
Pershing LLC* 27,853.569 19.58% (C)
PO Box 2052
Jersey City, NJ 07303
- --------------------------------------------------------------------------------
* Each Fund believes these entities are not the beneficial owners of
shares held of record by them.
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES
The following discussion is based upon and qualified in its entirety by
the disclosure in the respective Prospectuses and Statements of Additional
Information of the Acquiring Fund and the Acquired Fund.
INVESTMENT OBJECTIVES. The investment objective of the Acquiring Fund
is long-term capital appreciation and continuity of income. The investment
objective of the Acquired Fund is total return. There can be no assurance either
Fund will achieve its investment objective.
Shareholders of the Acquired Fund (in Proposal 4) and shareholders of
the Acquiring Fund (by means of a separate proxy statement) are being asked to
approve changing the Fund's investment objective from fundamental to
non-fundamental. If approved by a Fund's shareholders, the Board of that Fund
could change the Fund's investment objective without shareholder approval.
PRIMARY INVESTMENTS. To pursue its investment objective, the Acquiring
Fund invests principally in dividend-paying common stock of companies with large
market capitalizations that appear to be undervalued and diversifies its
investment among different industries and companies. Under normal market
conditions, the Acquiring Fund will invest at least 80% of its net assets, plus
any borrowings for investment purposes, in equity securities of U.S. companies
with large market capitalizations. The Acquiring Fund considers large companies
to be ones whose market capitalization is equal to or greater than the smallest
company in the Russell 1000 Index. As of May 31, 2002, the market capitalization
of the smallest company in the Russell 1000 Index was $1.3 billion. Some
companies
22
may fall outside the definition of large company after the Acquiring Fund has
purchased their securities. These companies continue to be considered large for
purposes of the fund's minimum 80% allocation to large company equities. In
addition, the Acquiring Fund may invest in companies of any size once the 80%
policy is met.
To pursue its investment objective, the Acquired Fund invests primarily
in equity securities of value companies. Under normal market conditions, the
Acquired Fund will invest at least 80% of its net assets, plus any borrowings
for investment purposes, in U.S.. equity securities. Value companies are
companies whose earnings power or asset value does not appear to be reflected in
the current stock price. As a result, value companies look underpriced according
to financial measurements of their intrinsic worth or business prospects. These
measurements include price-to-earnings, price-to-book and debt-to-equity ratios.
The Acquired Fund may invest in companies of any size. The Acquired Fund focuses
on large cap U.S. companies.
INVESTMENT LIMITATIONS. The Acquiring Fund and the Acquired Fund have
adopted certain fundamental and non-fundamental investment limitations.
Fundamental investment limitations may not be changed without the affirmative
vote of the holders of a "majority" (as defined in the 1940 Act) of the relevant
Fund's outstanding shares. Each Fund has substantially similar investment
limitations with respect to: investing in a single industry; investing in a
single issuer; making loans; underwriting securities; purchasing or selling real
estate; making investments for the purpose of exercising control or management;
investing in commodities and purchasing securities on margin. Each Fund has
different fundamental investment limitations with respect to borrowing as the
Acquiring Fund is limited to 15% of its total assets (5% if the borrowing is for
purposes other than to meet redemptions), while the Acquired Fund's borrowing is
limited to 30% of its total assets. While the Acquired Fund has fundamental
limitations which prohibit it from investing more than 15% of its net assets in
securities which may be illiquid because of legal or contractual restrictions on
resale for which there are no readily available market quotations, the Acquiring
Fund is subject to a 10% fundamental limitation in restricted securities or
other instruments not having a ready market. While the Acquiring Fund has
fundamental investment limitations which prohibit investing more than 10% of its
total assets in securities of any issuer which has a record of less than three
years of continuous operations, the Acquired Fund has no stated limitation in
this context. While the Acquired Fund has fundamental investment limitations
which prohibit it from making short sales of securities or maintaining a short
position, except in limited circumstances, the Acquiring Fund has no stated
fundamental limitation in this context. While the Acquired Fund has fundamental
limitations which prohibit it from investing more than 15% of its total assets
in warrants, the Acquiring Fund has no stated fundamental limitation on
investing in warrants. While the Acquiring Fund has a fundamental limitation
which prohibits it from issuing any senior securities, the Acquired Fund has no
stated fundamental limitation on issuing senior securities. Shareholders of the
Acquiring Fund (by means of a separate
23
proxy statement) are being asked to modify and/or eliminate fundamental
restrictions on borrowing, investing in restricted securities and investing in
unseasoned issuers. If approved, the restrictions of both Funds in these areas
will be substantially the same. The Acquired Fund shareholders (in Proposal 3-D)
are being asked to eliminate the restriction on short-selling, which, if
approved, would give the Acquired Fund and the Acquiring Fund substantially the
same policy in this area. There is no guarantee that shareholders of either of
the Funds will be approve any of the proposed changes to the investment
restrictions or that either of the Funds will thereafter implement any expanded
authority given to them.
CERTAIN INVESTMENT PRACTICES. For each of the following practices, this
table shows the current applicable investment limitation. Risks are indicated
for each practice. The specific risks associated with each of the investment
practices described below are defined for the Acquiring Fund in the Acquiring
Fund's Prospectus, which accompanies this Prospectus/Proxy Statement, and for
the Acquired Fund in its Prospectuses.
KEY TO TABLE:
/x/ Permitted without limitation; does not indicate actual use
20% Italic type (e.g., 20%) represents an investment limitation as a
percentage of net fund assets; does not indicate actual use
20% Roman type (e.g. 20%) represents an investment limitation as a
percentage of total fund assets; does not indicate actual use
/ / Permitted, but not expected to be used to a significant extent
-- Not permitted
- -------------------------------------------------------------------------------------------------------
INVESTMENT PRACTICE LIMIT
- -------------------------------------------------------------------------------------------------------
ACQUIRING ACQUIRED
FUND FUND
- -------------------------------------------------------------------------------------------------------
BORROWING. The borrowing of money from banks to meet redemptions 15% 30%
or for other temporary or emergency purposes. Speculative exposure risk.
- -------------------------------------------------------------------------------------------------------
FOREIGN SECURITIES. Securities of foreign issuers. May include depositary 10% 20%
receipts. Currency, information, market, operational, political, valuation risks.
- -------------------------------------------------------------------------------------------------------
FUTURES AND OPTIONS ON FUTURES. Exchange-traded contracts that enable a -- / /
fund to hedge against or speculate on future changes in currency values,
interest rates or stock indexes. Futures obligate the fund (or give it the right,
in the case of options) to receive or make payment at a specific future time
based on those future changes(1) Correlation, currency, hedged exposure,
interest-rate, market, speculative exposure risks.(2)
- -------------------------------------------------------------------------------------------------------
INVESTMENT-GRADE DEBT SECURITIES. Debt securities rated within the four 20% 20%
highest grades (AAA/Aaa through BBB/Baa) by Standard & Poor's or Moody's rating
service, and unrated securities of comparable quality. Credit, interest-rate,
market risks.
- -------------------------------------------------------------------------------------------------------
MORTGAGE-BACKED AND ASSET-BACKED SECURITIES. Debt securities backed / / / /
by pools of mortgages, including pass-through certificates and other senior
classes of collateralized mortgage obligations (CMOs), or other receivables.
Credit, extension, interest-rate, liquidity, prepayment risks.
- -------------------------------------------------------------------------------------------------------
24
- -------------------------------------------------------------------------------------------------------
INVESTMENT PRACTICE LIMIT
- -------------------------------------------------------------------------------------------------------
ACQUIRING ACQUIRED
FUND FUND
- -------------------------------------------------------------------------------------------------------
NON-INVESTMENT-GRADE DEBT SECURITIES. Debt securities and convertible -- 10%
securities rated below the fourth-highest grade (BBB/Baa) by Standard & Poor's
or Moody's rating service, and unrated securities of comparable quality.
Commonly referred to as junk bonds. Credit, information, interest-rate,
liquidity, market, valuation risks.
- -------------------------------------------------------------------------------------------------------
OPTIONS. Instruments that provide a right to buy (call) or sell (put) a particular 5% 25%
security or an index of securities at a fixed price within a certain time period.
A fund may purchase and write both put and call options for hedging or
speculative purposes. Correlation, credit, hedged exposure, liquidity, market,
speculative exposure risks.
- -------------------------------------------------------------------------------------------------------
REAL-ESTATE INVESTMENT TRUSTS (REITS). Pooled investment vehicles that invest / / / /
primarily in income-producing real estate or real-estate-related loans or
interests. Credit, interest-rate, market risks.
- -------------------------------------------------------------------------------------------------------
RESTRICTED AND OTHER ILLIQUID SECURITIES. Certain securities with restrictions on 10% 15%
trading, or those not actively traded. May include private placements.
Liquidity, market, valuation risks.
- -------------------------------------------------------------------------------------------------------
SECURITIES LENDING. Lending portfolio securities to financial institutions; a 25% 33-1/3%
fund receives cash, U.S. government securities or bank letters of credit as
collateral. Credit, liquidity, market, operational risks.
- -------------------------------------------------------------------------------------------------------
SHORT SALES "AGAINST THE BOX". A short sale where the fund owns enough 10% 10%
shares of the security involved to cover the borrowed securities, if necessary.
Liquidity, market, speculative exposure risks.
- -------------------------------------------------------------------------------------------------------
SPECIAL-SITUATION COMPANIES. Companies experiencing unusual developments / / / /
affecting their market values. Special situations may include acquisition,
consolidation, reorganization, recapitalization, merger, liquidation, special
distribution, tender or exchange offer, or potentially favorable litigation.
Securities of a special situation company could decline in value and hurt a
fund's performance if the anticipated benefits of the special situation do not
materialize. Information, market risks.
- -------------------------------------------------------------------------------------------------------
START-UP AND OTHER SMALL COMPANIES. Companies with small relative market / / / /
capitalizations, including those with continuous operations of less than three
years. Information, liquidity, market, valuation risks.
- -------------------------------------------------------------------------------------------------------
TEMPORARY DEFENSIVE TACTICS. Placing some or all of a fund's assets in -- / /
investments such as money-market obligations and investment-grade debt
securities for defensive purposes. Although intended to avoid losses in adverse
market, economic, political or other conditions, defensive tactics might be
inconsistent with a fund's principal investment strategies and might prevent a
fund from achieving its goal.
- -------------------------------------------------------------------------------------------------------
WARRANTS. Options issued by a company granting the holder the right to buy -- 15%
certain securities, generally common stock, at a specified price and usually
for a limited time. Liquidity, market, speculative exposure risks.
- -------------------------------------------------------------------------------------------------------
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS. The purchase or sale of / / 20%
securities for delivery at a future date; market value may change before
delivery. Liquidity, market, speculative exposure risks.
- ------------
(1) The Funds are not obligated to pursue any hedging strategy and do not
represent that these techniques are available now or will be available
at any time in the future.
(2) Each Fund is limited to 5% of net assets for initial margin and premium
amounts on futures positions considered to be speculative by the
Commodity Futures Trading Commission.
25
DETERMINATION OF NET ASSET VALUE OF SHARES OF THE ACQUIRING FUND
The NAV of each class of shares of beneficial interest of the Acquiring
Fund is determined at the close of regular trading on the NYSE (usually 4 p.m.,
New York City Time) each day the NYSE is open for business. It is calculated by
dividing a class's total assets less its liabilities, by the number of shares of
such class outstanding. The Acquiring Fund values its securities based on market
quotations when it calculates its NAV. If market quotations are not readily
available, securities and other assets are valued by another method the Board of
Trustees believes accurately reflects fair value. Debt obligations that will
mature in 60 days or less are valued on the basis of amortized cost, unless the
Board determines that using this method would not reflect an investment's value.
Some securities of the Acquiring Fund may be listed on foreign exchanges that
are open on days (such as U.S. holidays) when the Acquiring Fund does not
compute its price. This could cause the value of the Acquiring Fund's portfolio
investments to be affected by trading on days when you cannot buy or sell
shares.
MANAGEMENT OF EACH FUND
CSAM, located at 466 Lexington Avenue, 16th Floor, New York, New York
10017-3140, provides investment advisory services to each of the Funds under
separate advisory agreements. The specific persons at CSAM who are responsible
for the day-to-day management of the Acquiring Fund are described in the
Prospectus of the Acquiring Fund, which accompanies this Prospectus/Proxy
Statement.
In addition, State Street and CSAMSI provide accounting and
co-administrative services as applicable to each Fund. State Street became
co-administrator to the Acquiring Fund on July 1, 2002 and to the Acquired Fund
on August 1, 2002. Prior to that, PFPC, Inc. served as co-administrator to the
Funds. Boston Financial Data Services, Inc. acts as the shareholder servicing
agent, transfer agent and dividend disbursing agent for each Fund. State Street
serves as custodian of each of the Funds' assets pursuant to a custodian
agreement. PricewaterhouseCoopers LLP serves as independent accountants for each
of the Funds.
The Acquired Fund pays CSAM a management fee of .75% of its average
daily net assets, while the Acquiring Fund pays CSAM a management fee of .75% on
the first $75 million of its average daily net assets and .50% on amounts of its
average daily net assets above $75 million. In addition to the management fee,
each Fund pays a co-administration fee to CSAMSI of .10% of their respective
average daily net assets. Each Fund pays State Street a fee calculated at the
annual rate of its pro-rated share of .05% of the first $5 billion in average
daily net assets of the Credit Suisse Funds Complex (the "Fund Complex"), .035%
of the Fund Complex's next $5 billion in average daily net assets, and .02% of
the Fund Complex's average daily net assets in excess of $10 billion, exclusive
of out-of-pocket expenses. Importantly, the Acquisition will result in lower
gross and net operating expenses for shareholders of the Acquired Fund.
26
Each class of shares of a Fund bears its proportionate share of fees
payable to CSAM, CSAMSI and State Street in the proportion that its assets bear
to the aggregate assets of the Fund at the time of calculation. These fees are
calculated at an annual rate based on a percentage of a Fund's average daily net
assets.
INTEREST OF CSAM IN THE ACQUISITION
CSAM may be deemed to have an interest in the Plan and the Acquisition
because it provides investment advisory services to each Fund. CSAM receives
compensation from each Fund for services it provides pursuant to separate
advisory agreements. The terms and provisions of the current arrangements with
CSAM are described in each Fund's Prospectuses and Statement of Additional
Information. Future growth of the assets of the Acquiring Fund, if any, can be
expected to increase the total amount of fees payable to CSAM and its
affiliates. CSAM may also be deemed to have an interest in the Plan and the
Acquisition because, as of the December 31, 2002, it or one or more of its
affiliates possessed or shared voting power or investment power as a beneficial
owner or as a fiduciary on behalf of its customers or employees in the Acquired
Fund (see "Information About the Acquisition - Share Ownership of the Funds"
above). CSAM and its affiliates have advised the Acquired Fund that they intend
to vote the shares over which they have voting power at the Special Meeting in
the manner instructed by the customers for which such shares are held. As of
January 30, 2003, CSAM had discretionary power to dispose of securities over
accounts which held in the aggregate 1,161,227.723 shares or 6.48% of the
Acquired Fund's outstanding shares. See "Voting Information."
CSAM may also be deemed to have an interest in the Plan and the
Acquisition because CSAMSI serves as the co-administrator and distributor for
each Fund. As such, CSAMSI receives compensation for its services.
INFORMATION ON SHAREHOLDERS' RIGHTS
GENERAL. The Acquired Fund and the Trust are each an open-end
management investment company registered under the 1940 Act. The Trust is a
Massachusetts business trust that was formed on November 26, 1985 and is
governed by its Amended and Restated Agreement and Declaration of Trust
("Declaration of Trust"), Bylaws and Board of Trustees. The Acquired Fund is a
Maryland corporation that was incorporated on February 29, 1988 and is governed
by its Articles of Incorporation, Bylaws and Board of Directors. Each Fund is
governed by applicable state and federal law. The Acquired Fund has an
authorized capital of six billion shares of common stock with a par value of
$.01 per share; one billion shares are designated Common Class, two billion
shares are designated Advisor Class, one billion shares are designated Class A
shares, on billion shares are designated Class B shares and one billion shares
are designated Class C shares. The Acquiring Fund has an unlimited number of
transferable shares of beneficial interest with par value of $.01 per share. In
each Fund, shares represent interests in the assets of the relevant Fund and
have identical voting, dividend, liquidation and other rights (other than as set
forth below) on the same terms and conditions
27
except that expenses related to the distribution of each class of shares of the
relevant Fund are borne solely by such class and each class of shares has
exclusive voting rights with respect to provisions of such Fund's Rule 12b-1
distribution plan, if any, pertaining to that particular class.
MULTI-CLASS STRUCTURE. The Acquiring Fund and the Acquired Fund are
authorized to offer multiple classes. Each of the Acquiring Fund and the
Acquired Fund offers Common Class, Advisor Class, Class A, Class B and Class C
shares. The Acquiring Fund expects to continue to offer shares of its Advisor
Class, Class A, Class B and Class C shares following the Acquisition. The
Acquiring Fund's Common Class shares are closed to new investments other than
the reinvestment of dividends.
DIRECTORS/TRUSTEES. The Declaration of Trust of the Acquiring Fund and
the By-Laws of the Acquired Fund provide that the term of office of each Trustee
or Director, respectively, shall be from the time of his or her election and
qualification until his or her successor shall have been elected and shall have
qualified. In the case of the Acquiring Fund, the Trustees have the power to set
and alter their terms of office, and at any time to lengthen or shorten their
own terms or make their terms of unlimited duration. Trustees of the Acquiring
Fund may be removed by at least two-thirds of the shares entitled to vote.
Directors of the Acquired Fund may be removed by a majority of the shares
entitled to vote. Vacancies on the Boards of either Fund may be filled by the
Trustees/Directors remaining in office, provided that no vacancy or vacancies
may be filled by action of the remaining Trustees/Directors if, after the
filling of the vacancy or vacancies, fewer than two-thirds of the
Trustees/Directors then holding office shall have been elected by the
shareholders of the relevant Fund. A meeting of shareholders will be required
for the purpose of electing Trustees/Directors whenever (a) fewer than a
majority of the Trustees/Directors then in office were elected by shareholders
of the relevant Fund or (b) a vacancy exists that may not be filled by the
remaining Trustees/Directors and must be filled.
VOTING RIGHTS. Neither Fund holds a meeting of shareholders annually,
and there normally is no meeting of shareholders for the purpose of electing
Trustees/Directors unless and until such time as less than a majority of the
Trustees/Directors of the relevant Fund holding office have been elected by
shareholders or a vacancy exists that may not be filled by the remaining
Trustees/Directors. At such times, the Trustees or Directors then in office will
call a shareholders' meeting for the election of Trustees/Directors.
In addition, the Acquired Fund's By-Laws provide that a special meeting
of shareholders will be called at the written request of shareholders entitled
to cast at least 10% percent of the votes entitled to be cast at the meeting,
provided, however, if the matter to be considered at such special meeting is
substantially the same as another voted on at any special meeting of
stockholders held in the last twelve months, the Acquired Fund does not have to
hold the meeting unless requested to do so by a majority of the stockholders
entitled to vote. Payment by
28
such shareholders of the reasonably estimated cost of preparing and mailing a
notice of the meeting is required in advance of the meeting. The Acquiring
Fund's Declaration of Trust provides that a special meeting of shareholders will
be called at the written request of shareholders holding at least 10% of the
outstanding shares of the Acquiring Fund. To the extent required by law, each
Fund will assist in shareholder communications in such matters. The presence, in
person or by proxy, of at least one-third of the outstanding shares of the
Acquired Fund entitled to vote at a shareholder meeting will constitute a quorum
whereas the presence, in person or by proxy, of at least a majority of shares of
the Acquiring Fund entitled to vote at a meeting will constitute a quorum.
Certain voting rights of the Acquiring Fund's shareholders may change.
The Trust is soliciting shareholder approval of an amendment to its Declaration
of Trust that would permit the Trustees, subject to applicable Federal and state
law to reorganize or combine the Acquiring Fund or any of its classes or series
into another Credit Suisse Fund or class or series thereof or into another class
or series of the Acquiring Fund without shareholder approval. The Acquiring
Fund's current Declaration of Trust requires shareholder approval for any such
actions.
LIQUIDATION OR TERMINATION. In the event of the liquidation or
termination of either Fund, the shareholders of the relevant Fund are entitled
to receive, when and as declared by the Trustees or Directors, the excess of the
assets over the liabilities belonging to such Fund. In either case, the assets
so distributed to shareholders will be distributed among the shareholders in
proportion to the number of shares held by them and recorded on the books of
such Fund.
INVOLUNTARY REDEMPTIONS. The Trust is soliciting shareholder approval
of an amendment to its Declaration of Trust that would permit the Trust to
redeem shares of a class of the Acquiring Fund held by a shareholder or all
shares of the Acquiring Fund as an entirety if the Board of Trustees determines
that doing so is in the best interest of the Acquiring Fund. Redemption proceeds
may be paid in cash or in kind. The Trust's current Declaration of Trust permits
the Trustees to involuntarily redeem shares, but in more limited circumstances.
The exercise of the power granted to the Trustees under either the current
Declaration of Trust or the amended Declaration of Trust to involuntarily redeem
shares would be subject to the Trustees' fiduciary obligation to the
shareholders and any applicable provisions under the 1940 Act and the rules
adopted thereunder.
LIABILITY OF TRUSTEES OR DIRECTORS. The constituent documents of each
Fund provide that its Trustees/Directors and officers shall not be liable in
such capacity for monetary damages for breach of fiduciary duty as a
Trustee/Director or officer, except for willful misfeasance, bad faith, gross
negligence or reckless disregard of duties in the conduct of his office or the
discharge of his functions on the part of such Trustee, Director or officer. The
constituent instruments of each Fund provide that the relevant Fund shall
indemnify each Trustee/Director and officer and permit advances for the payment
of expenses relating to the matter for which indemnification is sought, in the
case of the Acquired Fund, to the fullest extent permitted by applicable law
and, in the case of both Funds, except for bad
29
faith, willful misfeasance, gross negligence or reckless disregard of duties in
the conduct of his office or the discharge of his functions on the part of such
Trustee/ Director or officer.
RIGHTS OF INSPECTION. Maryland law permits any shareholder of the
Acquired Fund or any agent of such shareholder to inspect and copy, during usual
business hours, the By-Laws, minutes of shareholder proceedings, annual
statements of the affairs and voting trust agreements of the Acquired Fund on
file at its principal offices. Massachusetts business trust law does not have
such provisions. However, the Acquiring Fund's Declaration of Trust provides
that the records of the Acquiring Fund shall be open to inspection by
shareholders to the same extent as is permitted to stockholders of a corporation
under the Massachusetts business corporation statute.
SHAREHOLDER LIABILITY. Under Maryland law, shareholders of the Acquired
Fund do not have personal liability for corporate acts and obligations.
Massachusetts law provides that shareholders of the Acquiring Fund could, under
certain circumstances, be held personally liable for the obligation of the
Acquiring Fund. However, the Declaration of Trust of the Acquiring Fund
disclaims shareholder liability for acts or obligations of the Acquiring Fund
and requires that notice of such disclaimer be given in each agreement,
obligation or instrument entered into or executed by such Fund or a Trustee. The
Plan contains such a disclaimer. The Declaration of Trust of the Acquiring Fund
provides for indemnification from the Acquiring Fund's property for all losses
and expenses arising from such liability. Thus, the risk of shareholder
liability is limited to circumstances in which the Acquiring Fund would be
unable to meet its obligations. Upon payment of any liability incurred by the
Acquiring Fund, the shareholder paying the liability will be entitled to
reimbursement from the general assets of the Acquiring Fund.
The foregoing is only a summary of certain characteristics of the
operations of each of the Funds. The foregoing is not a complete description of
the documents cited. Shareholders should refer to the provisions of the
constituent documents and state laws governing each Fund for a more thorough
description.
CONCLUSION
The Plan was approved by the Board of Trustees of the Acquiring Fund
and the Board of Directors of the Acquired Fund on December 12, 2002. The Board
of each Fund has determined that the Acquisition is in the best interests of its
shareholders and that the interests of existing shareholders of its Fund will
not be diluted as a result of the Acquisition. If the shareholders of the
Acquired Fund do not approve the Plan or if the Acquisition is not completed,
the Acquired Fund will continue to engage in business as a registered investment
company and its Board of Directors will consider other possible courses of
action available to it, including resubmitting the Acquisition proposal to
shareholders.
30
REQUIRED VOTE
Approval of the Plan requires the affirmative vote of a majority of the
outstanding shares of the Acquired Fund, in the aggregate without regard to
class, present in person or represented by proxy, if a quorum is present.
THE BOARD OF DIRECTORS OF THE ACQUIRED
FUND, INCLUDING THE DIRECTORS WHO ARE NOT
"INTERESTED PERSONS" (AS THAT TERM IS DEFINED IN THE
1940 ACT) RECOMMENDS THAT YOU VOTE FOR PROPOSAL 1.
PROPOSAL 2 -- ELECTION OF DIRECTORS OF THE
ACQUIRED FUND
At the Special Meeting, eight persons are to be elected who will
constitute the Board of Directors of the Acquired Fund. For election of
Directors at the Special Meeting, the Acquired Fund's Board has approved the
nomination of the following individuals: Richard H. Francis, Jack W. Fritz,
Joseph D. Gallagher, Jeffrey E. Garten, Peter F. Krogh, James S. Pasman, Jr.,
Steven N. Rappaport and William W. Priest. If elected, Mr. Gallagher will become
Chairman of the Acquired Fund's Board.
The persons named as proxies on the enclosed proxy card will vote for
the election of the nominees named above unless authority to vote for any or all
of the nominees is withheld in the proxy. Each Director so elected will serve as
a Director of the Acquired Fund until the next meeting of shareholders, if any,
called for the purpose of electing Directors and until the election and
qualification of a successor or until such Director sooner resigns, dies or is
removed as provided in the organizational documents of the Acquired Fund.
Each of the nominees, except for Mr. Gallagher, currently serves as a
director of the Acquired Fund. Each nominee has indicated that he is willing to
continue to serve as a Director. If any or all of the nominees should become
unavailable for election due to events not now known or anticipated, the persons
named as proxies will vote for such other nominee or nominees as the Directors
may recommend.
The following table sets forth certain information concerning the
current Directors and nominees. Unless otherwise noted, each of the Directors
and nominees has engaged in the principal occupation listed in the following
table for more than five years, but not necessarily in the same capacity.
31
NOMINEES
- -------------------------------------------------------------------------------------------------------------------
NUMBER OF
PORTFOLIOS OTHER
TERM OF IN FUND DIRECTOR-
OFFICE1 COMPLEX SHIPS
POSITION(S) AND OVERSEEN BY HELD BY
NAME, HELD LENGTH PRINCIPAL DIRECTOR OR DIRECTOR
ADDRESS WITH OF TIME OCCUPATION(S) DURING NOMINEE OR NOMINEE
AND AGE FUND SERVED PAST FIVE YEARS FOR DIRECTOR FOR DIRECTOR
- -------------------------------------------------------------------------------------------------------------------
INDEPENDENT
DIRECTORS
- -------------------------------------------------------------------------------------------------------------------
Richard H. Francis Director Since Currently retired; Executive 54 None
c/o Credit Suisse Asset 1999 Vice President and Chief
Management, LLC Financial Officer of Pan Am
466 Lexington Avenue Corporation and Pan American
New York, New York World Airways, Inc. from
10017-3140 1988 to 1991
Age: 70
- -------------------------------------------------------------------------------------------------------------------
Jack W. Fritz Director Since Private investor; Consultant and 52 Director of
2425 North Fish 1987 Director of Fritz Broadcasting, Inc. Advo, Inc.
Creek Road and Fritz Communications (direct mail
P.O. Box 1287 (developers and operators advertising)
Wilson, Wyoming of radio stations) since 1987
83014
Age: 75
- -------------------------------------------------------------------------------------------------------------------
Jeffrey E. Garten Director Since Dean of Yale School of 53 Director of
Box 208200 1998 Management and William S. Aetna, Inc.;
New Haven, Beinecke Professor in the Director of
Connecticut Practice of International Trade Calpine
06520-8200 and Finance; Undersecretary of Energy
Age: 56 Commerce for International Trade Corporation;
from November 1993 to October Director of
1995; Professor at Columbia CarMax
University from September 1992 Group
to November 1993 (used car
dealers)
- -------------------------------------------------------------------------------------------------------------------
- ------------
1 Each Director/Trustee and Officer serves until his or her respective
successor has been duly elected and qualified.
32
- -------------------------------------------------------------------------------------------------------------------
NUMBER OF
PORTFOLIOS OTHER
TERM OF IN FUND DIRECTOR-
OFFICE1 COMPLEX SHIPS
POSITION(S) AND OVERSEEN BY HELD BY
NAME, HELD LENGTH PRINCIPAL DIRECTOR OR DIRECTOR
ADDRESS WITH OF TIME OCCUPATION(S) DURING NOMINEE OR NOMINEE
AND AGE FUND SERVED PAST FIVE YEARS FOR DIRECTOR FOR DIRECTOR
- -------------------------------------------------------------------------------------------------------------------
Peter F. Krogh Director Since Dean Emeritus and 53 Member of
301 ICC 2001 Distinguished Professor of Board of The
Georgetown University International Affairs at the Carlisle
Washington, DC 20057 Edmund A. Walsh School Companies
Age: 65 of Foreign Service, Inc.; Member
Georgetown University; of Selection
Moderator of PBS foreign Committee
affairs television series for Truman
Scholars and
Henry Luce
Scholars;
Senior
Associate of
Center for
Strategic and
International
Studies;
Trustee of
numerous
world affairs
organizations
- -------------------------------------------------------------------------------------------------------------------
James S. Pasman, Jr. Director Since Currently retired; President 55 Director of
c/o Credit Suisse Asset 1999 and Chief Operating Officer Education
Management, LLC of National InterGroup, Inc. Management
466 Lexington Avenue (holding company) from Corp., former
New York, New York April 1989 to March 1991; Director of
10017-3140 Chairman of Permian Oil Co. Tyco
Age: 71 from April 1989 to March 1991 International
Ltd.
- -------------------------------------------------------------------------------------------------------------------
33
- -------------------------------------------------------------------------------------------------------------------
NUMBER OF
PORTFOLIOS OTHER
TERM OF IN FUND DIRECTOR-
OFFICE1 COMPLEX SHIPS
POSITION(S) AND OVERSEEN BY HELD BY
NAME, HELD LENGTH PRINCIPAL DIRECTOR OR DIRECTOR
ADDRESS WITH OF TIME OCCUPATION(S) DURING NOMINEE OR NOMINEE
AND AGE FUND SERVED PAST FIVE YEARS FOR DIRECTOR FOR DIRECTOR
- -------------------------------------------------------------------------------------------------------------------
Steven N. Rappaport Director Since Partner of Lehigh Court, LLC 54 None
Lehigh Court, LLC 1999 since July 2002, President of
40 East 52nd Street, SunGard Securities Finance,
New York, New York Inc., from 2001 to July 2002;
10022 President of Loanet, Inc. (on-line
Age: 54 accounting service) from 1995 to
2001; Director, President, North
American Operations, and former
Executive Vice President from
1992 to 1993 of Worldwide
Operations of Metallurg Inc.
(manufacturer of specialty metals
and alloys); Executive Vice
President, Telerate, Inc. (provider
of real-time information to the
capital markets) from 1987 to
1992; Partner in the law firm of
Hartman & Craven until 1987
- -------------------------------------------------------------------------------------------------------------------
34
- -------------------------------------------------------------------------------------------------------------------
NUMBER OF
PORTFOLIOS OTHER
TERM OF IN FUND DIRECTOR-
OFFICE1 COMPLEX SHIPS
POSITION(S) AND OVERSEEN BY HELD BY
NAME, HELD LENGTH PRINCIPAL DIRECTOR OR DIRECTOR
ADDRESS WITH OF TIME OCCUPATION(S) DURING NOMINEE OR NOMINEE
AND AGE FUND SERVED PAST FIVE YEARS FOR DIRECTOR FOR DIRECTOR
- -------------------------------------------------------------------------------------------------------------------
INTERESTED
DIRECTORS
- -------------------------------------------------------------------------------------------------------------------
Joseph D. Gallagher2 Director N/A Managing Director and 60 None
Credit Suisse Asset Nominee, Chief Executive Officer of
Management, LLC Chairman CSAM since 2003; Chief
466 Lexington Avenue and Chief Executive Officer and Director
New York, New York Executive of Credit Suisse Asset
10017-3140 Oficer Management Limited, London,
Age: 40 England, from June 2000 to 2003;
Director of Credit Suisse Asset
Management Funds (UK) Limited,
London, England, from June 2000
to 2003; Managing Director, Head
- Asian Corporate Finance and
M&A's, Credit Suisse First Boston,
Hong Kong, China, from January
1998 to May 1999; and Director,
Head - Asian Corporate Finance,
Credit Suisse First Boston, Hong
Kong, China, from October 1993
to December 1997
- -------------------------------------------------------------------------------------------------------------------
William W. Priest Director Since Co-Managing Partner, 60 None
Steinberg Priest & 1999 Steinberg Priest &
Sloane Capital Sloane Capital Management
Management since March 2001; Chairman
12 East 49th Street and Managing Director of
12th Floor CSAM from 2000 to February
New York, New York 2001, Chief Executive Officer
10017 and Managing Director
Age: 61 of CSAM from 1990 to 2000
- -------------------------------------------------------------------------------------------------------------------
- ------------
2 Mr. Gallagher is a Director who is an "interested person" of the
Acquired Fund as defined in the 1940 Act, because he is an officer of
CSAM.
3 Mr. Priest is a Director who is an "interested person" of the Acquired
Fund as defined in the 1940 Act, because he provides consulting
services to CSAM.
35
The table below shows the dollar range of each nominee's ownership of
shares of the Acquired Fund and of all the Credit Suisse Funds served, or to be
served, by the Directors all as of December 31, 2002.
NOMINEES' SHARE OWNERSHIP TABLE BY DOLLAR RANGE*
NAME Francis Fritz Garten Gallagher Krogh Pasman Priest Rappaport
- --------------------------------------------------------------------------------
Strategic Value
Fund C E A A A A A B
Aggregate Dollar
Range of Equity
Securities in All
Funds Overseen
by Director in
Family of
Investment
Companies E E A A D C A D
- -------------------------
*KEY TO DOLLAR RANGES:
A. NONE
B. $1-$10,000
C. $10,001-$50,000
D. $50,001-$100,000
E. OVER $100,000
THE INFORMATION AS TO BENEFICIAL OWNERSHIP IS BASED ON STATEMENTS FURNISHED TO
THE ACQUIRED FUND BY EACH DIRECTOR. UNLESS OTHERWISE NOTED, BENEFICIAL OWNERSHIP
IS BASED ON SHARED VOTING AND INVESTMENT POWER WITH SPOUSE AND/OR IMMEDIATE
FAMILY.
Mr. Rappaport informed the Acquired Fund that his former employer,
Loanet, Inc. ("Loanet"), had performed loan processing services for various
Credit Suisse entities (not including CSAM). He indicated that Loanet billed
these Credit Suisse entities approximately $1,700,000 and $2,300,000 during the
years ended December 31, 2000 and 2001, respectively. Prior to May 31, 2001, Mr.
Rappaport was President and a director of Loanet, and held an approximately 25%
equity interest in Loanet. Another investor in Loanet owned an approximately 67%
equity interest and was in control of Loanet until May 31, 2001. On May 31,
2001, Loanet was sold to Sungard Data Systems, Inc. ("Sungard"). Mr. Rappaport
sold his shares to Sungard, but remained President of Loanet until December 31,
2001. Mr. Rappaport remained at Loanet for a nominal salary until July 31, 2002
but had no formal position.
36
RESPONSIBILITIES OF THE BOARD -- BOARD AND COMMITTEE MEETINGS
The Board of Directors of the Acquired Fund is responsible for the
general oversight of the Acquired Fund's business. A majority of the Board's
members are not affiliated with CSAM. These non-interested Directors have
primary responsibility for assuring that the Acquired Fund is managed in a
manner consistent with the best interests of its shareholders.
The Board of Directors meets in person at least quarterly to review the
investment performance of the Acquired Fund and other operational matters,
including policies and procedures designed to assure compliance with various
regulatory requirements. At least annually, the non-interested Directors review
the fees paid to CSAM and its affiliates for investment advisory services and
administrative and distribution services.
The Board of the Acquired Fund has an Audit and a Nominating Committee,
the responsibilities of which are described below. The Board of the Acquired
Fund does not have a compensation committee. The members of the Audit Committee
and the Nominating Committee consist of all of the Independent Directors, namely
Messrs. Francis, Fritz, Garten, Krogh, Pasman and Rappaport.
AUDIT COMMITTEE
In accordance with its written charter adopted by the Board, the Audit
Committee oversees the financial reporting process of the Acquired Fund and
monitors the valuation of portfolio assets. It also makes recommendations to the
Board as to the selection of the independent accountants, reviews the audit plan
and audit fees charged, and reviews the results of the Acquired Fund's annual
audit.
NOMINATING COMMITTEE
The Nominating Committee is charged with the duty of selecting and
nominating candidates for election to the Board as for Independent Directors.
The Nominating Committee will consider nominees recommended by the Acquired
Fund's shareholders when a vacancy becomes available. Shareholders who wish to
recommend a nominee should send nominations to the Acquired Fund's Secretary.
The following chart sets forth the number of meetings of the Board, the
Audit Committee and the Nominating Committee of Acquired Fund during the
calendar year 2002.
NUMBER OF BOARD AND COMMITTEE MEETINGS HELD
DURING THE CALENDAR YEAR 2002
BOARD OF AUDIT NOMINATING
DIRECTORS COMMITTEE COMMITTEE
MEETINGS MEETINGS MEETINGS
- --------------------------------------------------------------------------------
2 0 1
37
Each incumbent Director attended at least 75% of the total number of
Board meetings and meetings of committees on which he served during the Acquired
Fund's last full fiscal year.
EXECUTIVE OFFICERS
The following persons are executive officers of the Acquired Fund:
POSITION(S) HELD
WITH FUND, TERM
OF OFFICE* AND
NAME, LENGTH OF TIME PRINCIPAL OCCUPATION(S)
ADDRESS AND AGE SERVED DURING PAST FIVE YEARS
- --------------------------------------------------------------------------------
Hal Liebes, Esq. Vice President and Managing Director and
Credit Suisse Asset Secretary since 1999 Global General Counsel of
Management, LLC CSAM; Associated with
466 Lexington Avenue Lehman Brothers, Inc. from
New York, New York 1996 to 1997; Associated
10017-3140 with CSAM from 1995
Age: 38 to 1996; Associated with CS
First Boston Investment
Management from 1994 to
1995; Associated with
Division of Enforcement,
U.S. Securities and
Exchange Commission from
1991 to 1994
Michael A. Pignataro Treasurer and Chief Director and Director
Credit Suisse Asset Financial Officer of Fund Administration
Management, LLC since 1999 of CSAM; Associated with
466 Lexington Avenue CSAM since 1984
New York, New York
10017-3140
Age: 43
38
POSITION(S) HELD
WITH FUND, TERM
OF OFFICE* AND
NAME, LENGTH OF TIME PRINCIPAL OCCUPATION(S)
ADDRESS AND AGE SERVED DURING PAST FIVE YEARS
- --------------------------------------------------------------------------------
Gregory N. Bressler, Esq. Assistant Secretary Director of CSAM (since
Credit Suisse Asset since 2000 January 2003) and Deputy
Management, LLC General Counsel of CSAM
466 Lexington Avenue since January 2000;
New York, New York Associated with the law
10017-3140 firm of Swidler Berlin
Age: 36 Shereff Friedman LLP from
1996 to 2000
Kimiko T. Fields, Esq. Assistant Secretary Vice President (since
Credit Suisse Asset since 2002 January 2003) and Legal
Management, LLC Counsel of CSAM(since
466 Lexington Avenue December 2000); Assistant
New York, New York Vice President,
10017-3140 Institutional Marketing
Age: 39 Department, CSAM from
January 2000 to December
2000; Marketing Associate,
International Equity
Department, Warburg Pincus
Asset Management, Inc. from
January 1998 to January
2000; self-employed author
and consultant, from
January 1996 to December
1997
Rocco A. DelGuercio Assistant Treasurer Vice President of Fund
Credit Suisse Asset since 1999 Administration of CSAM;
Management, LLC Associated with CSAM
466 Lexington Avenue since June 1996; Assistant
New York, New York Treasurer, Bankers Trust
10017-3140 Co. -- Fund Administration
Age: 39 from March 1994 to June
1996; Mutual Fund
Accounting Supervisor,
Dreyfus Corporation from
April 1987 to March 1994
39
POSITION(S) HELD
WITH FUND, TERM
OF OFFICE* AND
NAME, LENGTH OF TIME PRINCIPAL OCCUPATION(S)
ADDRESS AND AGE SERVED DURING PAST FIVE YEARS
Joseph Parascondola Assistant Treasurer Assistant Vice President -
Credit Suisse Asset since 2000 Fund Administration of
Management, LLC CSAM since April 2000;
466 Lexington Avenue Assistant Vice President,
New York, New York Deutsche Asset
10017-3140 Management from January
Age: 39 1999 to April 2000;
Assistant Vice President,
Weiss, Peck & Greer LLC
from November 1995 to
December 1998
Robert M. Rizza Assistant Treasurer Assistant Vice President of
Credit Suisse Asset Since 2002 Fund Administration of
Management, LLC CSAM (January 2001 to
466 Lexington Avenue present); Associated with
New York, New York CSAM since March 1998;
10017-3140 Assistant Treasurer of
Age: 37 Bankers Trust Co. (April
1994 to March 1998)
- ---------------------
* Each officer serves until his or her respective successor has been duly
elected and qualified.
COMPENSATION OF DIRECTORS AND OFFICERS
No employee of CSAM, State Street or CSAMSI, or any of their
affiliates, receives any compensation from the Acquired Fund for acting as an
officer or director of the Acquired Fund. Each Director who is not a director,
trustee, officer or employee of CSAM, State Street, CSAMSI or any of their
affiliates receives an annual fee of $750 and $250 for each meeting of the Board
attended by him for his services as Director, and is reimbursed for expenses
incurred in connection with his attendance at Board meetings. Each member of the
Audit Committee receives an annual fee of $250, and the chairman of the Audit
Committee receives an annual fee of $325, for serving on the Audit Committee.
The following Compensation Table provides in tabular form the aggregate
compensation received by each Director of the Acquired Fund during the calendar
year 2002 and total compensation received by each Director from the Fund Complex
during the calendar year 2002.
40
The Directors do not receive any pension or retirement benefits from
any Fund in the Fund Complex.
COMPENSATION TABLE
AGGREGATE COMPENSATION
-----------------------------------------------------------
FRANCIS FRITZ GARTEN KROGH PASMAN RAPPAPORT
- --------------------------------------------------------------------------------
Acquired Fund $ 2,100 $ 1,850 $ 2,100 $ 2,100 $ 2,100 $ 2,100
Total Compensation
from the
Funds and
Fund Complex
Paid to each
Director $82,015 $64,640 $71,515 $75,015 $110,015 $84,360
Messrs. Priest and Gallagher are "interested persons" of the Acquired
Fund and, accordingly, receive no compensation from Fund or any other investment
company in the Fund Complex.
REQUIRED VOTE
Election of each of the listed nominees for Director of the Acquired
Fund requires the affirmative vote of a plurality of the votes of the Acquired
Fund cast at the Special Meeting in person or by proxy. This means that the
eight nominees receiving the largest number of votes will be elected.
THE BOARD OF THE ACQUIRED FUND, INCLUDING THE INDEPENDENT DIRECTORS,
UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS OF THE ACQUIRED FUND
VOTE IN FAVOR OF EACH OF THE NOMINEES LISTED IN THIS PROPOSAL 2.
PROPOSAL 3 -- TO MODIFY AND/OR ELIMINATE
CERTAIN INVESTMENT RESTRICTIONS
The Acquired Fund has adopted certain investment restrictions or
policies that are "fundamental," meaning that as a matter of law they cannot be
changed without shareholder approval. Over time, the Acquired Fund has adopted
fundamental restrictions to reflect certain regulatory, business or industry
conditions. Changes in applicable law now permit investment companies like the
Acquired Fund to remove certain of these restrictions. Investment companies,
however, are required to have fundamental investment restrictions on the topics
addressed in Proposals 3A-3G.
The Acquired Fund's Board, together with the Acquired Fund's officers
and CSAM, have reviewed the Acquired Fund's current fundamental restrictions and
have concluded that certain restrictions should be removed or revised based on
the development of new practices and changes in applicable law and to facilitate
administration of the Acquired Fund. At the Special Meeting, shareholders will
be asked to approve the revised restrictions.
41
The revised restrictions maintain important investor protections while
providing flexibility to respond to changing markets, new investment
opportunities and future changes in applicable law. The proposed modifications
are expected to facilitate the management of the Acquired Fund's assets and
simplify the process of monitoring compliance with investment restrictions. The
revised restrictions will be the standard form for new funds in the Credit
Suisse Fund complex.
The revised restrictions do not affect the investment objective of the
Acquired Fund, which remains unchanged. The Acquired Fund will continue to be
managed in accordance with the investment restrictions described in its
Prospectuses, Statement of Additional Information and in accordance with federal
law. The revised restrictions would give the Acquired Fund an increased ability
to engage in certain activities. The Directors may consider and adopt such
non-fundamental investment restrictions for the Acquired Fund as they determine
to be appropriate and in the shareholders' best interests and those restrictions
could be adopted without shareholder approval. Except where indicated below, the
proposed modifications are not expected to significantly affect the manner in
which the Acquired Fund is managed, the investment programs of the Acquired Fund
or the investment performance of the Acquired Fund. The Board does not
anticipate that the changes, individually or in the aggregate, will result in a
material change in the level of investment risk associated with an investment in
the Acquired Fund, except where indicated below. However, if certain changes are
approved (e.g., increased authority to borrow money) and the Acquired Fund
utilizes that increased authority, the Acquired Fund may be subject to higher
risks than previously.
The Board unanimously recommends that shareholders vote to amend or
remove the Acquired Fund's fundamental investment restrictions as discussed
below. Each section sets out the fundamental investment restrictions that will
apply to the Acquired Fund if shareholders of the Acquired Fund approve that
proposal. To be approved, each proposal must receive the vote of a "majority of
the outstanding voting securities" of the Acquired Fund entitled to vote on the
proposal, as defined in the 1940 Act, which means the vote of 67% or more of the
voting securities entitled to vote on the proposal that are present at the
Special Meeting, if the holders of more than 50% of the outstanding shares are
present or represented by proxy, or the vote of more than 50% of the outstanding
voting securities of the Acquired Fund entitled to vote on the proposal,
whichever is less. If any proposal is not approved, then the Acquired Fund's
existing fundamental restriction on that topic will remain in effect, although
the Board may take other appropriate action, including resoliciting
shareholders. If shareholders approve the following changes to the fundamental
investment restrictions of the Acquired Fund, such changes will become effective
as of June 1, 2003.
42
PROPOSAL NO. 3-A: TO MODIFY THE FUNDAMENTAL INVESTMENT RESTRICTION ON BORROWING
MONEY
If shareholders of the Acquired Fund approve Proposal 3-A, the Acquired
Fund's current fundamental investment restriction on borrowing money would be
modified to read as follows:
"The Fund may not borrow money, except to the extent permitted
under the 1940 Act."
Discussion of Proposed Modifications. The 1940 Act requires every
mutual fund to set forth a fundamental investment restriction indicating the
extent to which the fund may borrow money. Under the 1940 Act, a fund may borrow
money from a bank for any purpose up to 33-1/3% of its total assets. Under its
current fundamental restriction, the Acquired Fund may not: Borrow money except
that the Acquired Fund may (a) borrow from banks for temporary or emergency
purposes and (b) enter into reverse repurchase agreements; provided that reverse
repurchase agreements and any other transactions constituting borrowing by the
Acquired Fund may not exceed 30% of the value of the Acquired Fund's total
assets at the time of such borrowing and only if after such borrowing there is
assets coverage of at least 300% for all borrowings of the Acquired Fund. For
purposes of this restriction, the entry into options, futures contracts and
options on futures contracts shall not constitute borrowing.
Reverse repurchase agreements involve the sale of securities held by a
fund pursuant to the fund's agreement to repurchase the securities at an agreed
upon date and price, which typically reflects the current market rate of
interest. In a dollar roll transaction, a fund sells a security and agrees to
buy a substantially similar security for future delivery.
The Acquired Fund also has a non-fundamental restriction limiting its
ability to purchase securities while borrowings in excess of 5% of the Acquired
Fund's assets are outstanding.
The proposed policy would: (1) permit borrowings of up to 33-1/3% of
total assets; (2) permit the use of reverse repurchase agreements or dollar
rolls; (3) remove the restrictions that allow borrowings to be made only from
banks (the 1940 Act currently allows a fund to borrow any amount in excess of 5%
of its total assets only from banks; however, the SEC has permitted some mutual
funds to borrow from other funds, although there is no assurance that the SEC
would grant the Credit Suisse Funds such permission, and other possibilities may
develop as the financial services industry continues to evolve); and (4) remove
the restrictions that limit the purchase of securities when loans are
outstanding.
For example, removing the fundamental investment restrictions on
purchasing securities when borrowings are greater than 5% of the Acquired Fund's
assets will enhance the Acquired Fund's flexibility in emergency situations. To
the extent the Acquired Fund borrows money, positive or negative performance by
the Acquired Fund's investments may be magnified. The Acquired Fund is required
43
under the 1940 Act to maintain at all times an asset coverage of 300% of the
amount of its borrowings. Any gain in the value of securities purchased with
borrowed money that exceeds the interest paid on the amount borrowed would cause
the net asset value of the Acquired Fund's shares to increase more rapidly than
otherwise would be the case. Conversely, any decline in the value of securities
purchased would cause the net asset value of the Acquired Fund's shares to
decrease more rapidly than otherwise would be the case. Borrowed money thus
creates an opportunity for greater capital gain but at the same time increases
exposure to capital risk. The net cost of any borrowed money would be an expense
that otherwise would not be incurred, and this expense could restrict or
eliminate the Acquired Fund's net investment income in any given period.
THE BOARD OF DIRECTORS OF THE ACQUIRED FUND UNANIMOUSLY
RECOMMENDS THAT YOU VOTE "FOR" PROPOSAL NO. 3-A.
PROPOSAL NO. 3-B: TO MODIFY THE FUNDAMENTAL INVESTMENT RESTRICTION ON LENDING
If shareholders of the Acquired Fund approve Proposal 3-B, the Acquired
Fund's current fundamental investment restriction on lending would be modified
to read as follows:
"The Fund may not make loans except through loans of portfolio
securities, entry into repurchase agreements, acquisitions of
securities consistent with its investment objective and
policies and as otherwise permitted by the 1940 Act."
Discussion of Proposed Modifications. The 1940 Act requires every
mutual fund to set forth a fundamental investment restriction indicating the
extent to which the fund may lend. Under its current fundamental restriction,
the Acquired Fund may not: Make loans, except that the Fund may purchase or hold
fixed-income securities, lend portfolio securities and enter into repurchase
agreements in accordance with its investment objectives, policies and
limitations. A repurchase agreement is an agreement to purchase a security,
coupled with an agreement to sell that security back to the original seller at
an agreed upon date, at a price that generally depends on current interest
rates. The 1940 Act treats these agreements as loans.
The new restriction would allow the Acquired Fund to lend to the full
extent permitted under the 1940 Act. SEC staff interpretations of the 1940 Act
generally prohibit funds from lending more than one-third of their total assets,
except through the purchase of debt obligations or the use of repurchase
agreements.
The proposed modifications also would permit securities lending and the
use of repurchase agreements by the Acquired Fund.
44
THE BOARD OF DIRECTORS OF THE ACQUIRED
FUND UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" PROPOSAL NO. 3-B.
PROPOSAL NO. 3-C: TO MODIFY THE FUNDAMENTAL INVESTMENT RESTRICTION ON REAL
ESTATE INVESTMENTS
If shareholders of the Acquired Fund approve Proposal 3-C, the Acquired
Fund's current fundamental investment restriction on real estate investments
would be modified to read as follows:
"The Fund may not purchase or sell real estate, provided that
the Fund may invest in securities secured by real estate or
interests therein or issued by companies that invest or deal
in real estate or interests therein or are engaged in the real
estate business, including real estate investment trusts."
Discussion of Proposed Modifications. The 1940 Act requires every
mutual fund to set forth a fundamental investment restriction indicating the
extent to which the fund may engage in the purchase and sale of real estate.
Under its current fundamental restriction, the Acquired Fund may not: Purchase
or sell real estate, except that the Fund may invest in (a) securities secured
by real estate, mortgages or interests therein or (b) issued by companies which
invest in real estate or interests therein.
The proposed new restriction would: (1) preserve the ability to invest
in all real estate-related securities and companies whose business consists in
whole or in part of investing in real estate (provided that the investment is
otherwise consistent with the Acquired Fund's investment program) and (2)
clarify the Acquired Fund's ability to invest in real estate investment trusts
("REITs"). As a result of exercising its rights attached to real estate-related
securities, the Acquired Fund could eventually own an interest in real property.
If this occurs, the Acquired Fund would dispose of the property as soon as
practicable, consistent with the Acquired Fund's best interests.
By investing in a REIT, the Acquired Fund will indirectly bear its
proportionate share of any expenses paid by the REIT in addition to the expenses
of the Acquired Fund. A REIT may be affected by changes in the value of the
underlying property owned by such REIT or by the quality of any credit extended
by the REIT. REITs are dependent on management skills, are not diversified
(except to the extent the Internal Revenue Code of 1986, as amended (the
"Code"), requires), and are subject to the risks of financing projects. REITs
are subject to heavy cash flow dependency, default by borrowers,
self-liquidation, the possibilities of failing to qualify for the exemption from
tax for distributed income under the Code and failing to maintain their
exemptions from the 1940 Act. REITs are also subject to interest rate risks.
THE BOARD OF DIRECTORS OF THE ACQUIRED FUND UNANIMOUSLY
RECOMMENDS THAT YOU VOTE "FOR" PROPOSAL NO. 3-C.
45
PROPOSAL NO. 3-D: TO REMOVE THE FUNDAMENTAL INVESTMENT RESTRICTION ON SHORT
SALES
If shareholders of the Acquired Fund approve Proposal 3-D, the Acquired
Fund's current fundamental investment restriction on short sales would be
removed and the Board may adopt a non-fundamental investment restriction on
short sales that, in the future, could be modified without shareholder approval.
Discussion of Proposed Modifications. Funds are not required to have a
fundamental investment restriction on short sales of securities. Typically, in a
short sale, an investor borrows a security from a lender, sells that security to
a third party, and is obligated to return an identical security to the lender.
The obligation to return an identical security to the lender involves the risk
that the price of the securities that the borrower is obligated to purchase (and
then return to the lender) may be higher than the price the borrower received
for the sale of the securities. Under its current fundamental restriction, the
Acquired Fund may not: Make short sales of securities or maintain a short
position, except that the Fund may maintain short positions in options on
currencies, securities and stock indexes, futures contracts and options on
futures contracts and enter into short sales "against the box." The Board of the
Acquired Fund would retain the flexibility to adopt non-fundamental restrictions
geared to its investment goals.
THE BOARD OF DIRECTORS OF THE ACQUIRED FUND UNANIMOUSLY
RECOMMENDS THAT YOU VOTE "FOR" PROPOSAL NO. 3-D.
PROPOSAL NO. 3-E: TO REMOVE THE FUNDAMENTAL INVESTMENT RESTRICTION ON MARGIN
TRANSACTIONS
If shareholders of the Acquired Fund approve Proposal 3-E, the Acquired
Fund's current fundamental investment restriction on margin transactions would
be removed. The Board could adopt a non-fundamental investment restriction on
margin transactions in the future that could be modified without shareholder
approval.
Discussion of Proposed Modifications. Funds are not required to have a
fundamental investment restriction on margin transactions. Margin transactions
involve the purchase of securities with money borrowed from a broker or
elsewhere. Under its current fundamental restriction, the Acquired Fund may not:
Purchase securities on margin, except that the Fund may obtain any short-term
credits necessary for the clearance of purchases and sales of securities. For
purposes of this restriction, the deposit or payment of initial or variation
margin in connection with transactions in options, futures contracts and options
on futures contracts will not be deemed to be a purchase of securities on
margin. The proposed modifications would give the Acquired Fund greater
flexibility to operate consistent with the 1940 Act and relevant SEC rules and
interpretation.
THE BOARD OF DIRECTORS OF THE ACQUIRED FUND UNANIMOUSLY
RECOMMENDS THAT YOU VOTE "FOR" PROPOSAL NO. 3-E.
46
PROPOSAL NO. 3-F: TO REMOVE THE FUNDAMENTAL INVESTMENT RESTRICTION ON PLEDGING
ASSETS
If shareholders of the Acquired Fund approve Proposal 3-F, the Acquired
Fund's current fundamental investment restriction on pledging assets would be
removed and the Board would adopt a non-fundamental investment restriction on
pledging assets that could, in the future, be modified without shareholder
approval. The non-fundamental investment restriction on pledging assets would
state as follows:
"The Fund may not pledge, mortgage or hypothecate its assets
except to secure permitted borrowings or as otherwise
permitted under the 1940 Act."
Discussion of Proposed Modifications. There is no federal requirement
that the Acquired Fund have a fundamental investment restriction on pledging
assets. It is advantageous to remove the fundamental investment restriction on
pledging assets for the Acquired Fund and to permit the Board to address such
situations on a case-by-case basis when it considers the approval of lines of
credit or other borrowing arrangements, consistent with current industry
practice and market conditions. In order to maximize the Acquired Fund's
investment flexibility, the Board proposes that this fundamental investment
restriction be removed.
THE BOARD OF DIRECTORS OF THE ACQUIRED FUND UNANIMOUSLY
RECOMMENDS THAT YOU VOTE "FOR" PROPOSAL NO. 3-F.
PROPOSAL NO. 3-G: TO REMOVE THE FUNDAMENTAL INVESTMENT RESTRICTION ON ACQUIRING
MORE THAN 10% OF VOTING SECURITIES OF ANY ONE ISSUER
If shareholders of the Acquired Fund approve Proposal 3-G, the Acquired
Fund's current fundamental investment restriction on acquiring more than 10% of
voting securities of any one issuer would be removed.
Discussion of Proposed Modification. The Acquired Fund is not required
to have a fundamental investment restriction on acquiring more than 10% of the
voting securities of any one issuer. The 10% limitation is more stringent than
the per issuer limit applicable to diversified funds generally, which applies
this limit to only 75% of a fund's assets. Rather than modifying the limit, the
Board proposes that the Acquired Fund's per issuer limit be removed as it is
governed by the Acquired Fund's determination to be a diversified investment
company under the 1940 Act, which status could not be changed except with
shareholder approval.
THE BOARD OF DIRECTORS OF THE ACQUIRED FUND UNANIMOUSLY
RECOMMENDS THAT YOU VOTE "FOR" PROPOSAL NO. 3-G.
47
PROPOSAL 4 -- TO CHANGE THE INVESTMENT
OBJECTIVE OF THE ACQUIRED FUND FROM FUNDAMENTAL
TO NON-FUNDAMENTAL
Every registered investment company is required to state its investment
objective, i.e., the goal of its investment program, in its prospectus. There is
no requirement that a fund's investment objective be fundamental, but most
funds, including the Acquired Fund, have stated that their investment objectives
are fundamental. The Board of Directors of the Acquired Fund has approved a
proposal to make the Acquired Fund's investment objective non-fundamental.
If approved by shareholders, this change would mean that the Board
would be able to change a Fund's investment objective in the future without
further approval by shareholders. This change would enhance a Fund's flexibility
by allowing a Board to more easily alter the Fund's investment objective when
the Board believes it is in the best interests of shareholders or when necessary
to comply with possible future regulatory changes. Fund shareholders would
receive prior notice of any change to a Fund's investment objective. The Boards
have no current intention of changing any Fund's investment objective.
To be approved for a Fund, this Proposal must receive the vote of a
"majority of the outstanding voting securities" of the Fund entitled to vote on
the proposal, as defined in the 1940 Act, which means the vote of 67% or more of
the voting securities entitled to vote on the proposal that are present at the
Special Meeting, if the holders of more than 50% of the outstanding shares are
present or represented by proxy, or the vote of more than 50% of the outstanding
voting securities of the Fund entitled to vote on the proposal, whichever is
less. If this Proposal is not approved for a Fund, then that Fund's investment
objective will remain fundamental. The Board of the Fund would consider any
other appropriate action, including resoliciting shareholder approval of the
change.
THE BOARD OF DIRECTORS OF THE ACQUIRED FUND
UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" PROPOSAL 4.
INFORMATION ON THE ACQUIRED FUND'S INDEPENDENT ACCOUNTANTS
The Board of the Acquired Fund has selected PricewaterhouseCoopers LLP
("PwC") as the independent accountants for the current fiscal year. PwC has been
the independent accountants of the Acquired Fund since its inception. PwC has
informed the Audit Committee for the Acquired Fund that it has no material
direct or indirect financial interest in the Acquired Fund. In the opinion of
the Audit Committee, the services provided by PwC are compatible with
maintaining its independence.
Representatives of PwC are not expected to be present at the Special
Meeting but have been given the opportunity to make a statement if they so
desire and will be available should any matter arise requiring their presence.
48
Ernst & Young LLP ("Ernst & Young") served as independent accountants
for the Acquiring Fund until September 2001. Ernst & Young resigned as
independent accountants effective as of September 2001. Ernst & Young's reports
on the financial statements for the years immediately preceding their
resignation contained no adverse opinion or disclaimer of opinion and was not
qualified or modified as to uncertainty, audit scope, or accounting principles.
During the fiscal years immediately preceding Ernst & Young's resignation, there
were no disagreements with such accountants on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure.
Audit Fees
The aggregate fees billed by PwC for professional services rendered for
the audit of the Acquired Fund's annual financial statements for the most recent
fiscal year and the review of the financial statements included in the Acquired
Fund's most recent annual reports to shareholders were $22,000. This fee relates
to one fund in the Credit Suisse family of funds consisting of approximately 50
Funds. Total 2002 audit fees for all funds in the Credit Suisse family of funds
were approximately $892,000.
Financial Information Systems Design and Implementation Fees
PwC billed no fees during the Acquired Fund's most recent fiscal year
for professional services rendered to the Acquired Fund in connection with
financial information systems design and implementation services.
For financial information systems design and implementation services
provided to CSAM and all entities controlling, controlled by or under common
control with CSAM that provide services to the Acquired Fund, PwC billed
$5,100,000 during 2002. These fees represent fees paid by Credit Suisse First
Boston (CSFB) to PwC Consulting in connection with the worldwide implementation
of PeopleSoft, a human resources and accounting system. Effective September 30,
2002, PwC sold PwC consulting to IBM Corporation and effective as of this date
PwC and PwC Consulting became two separate entities.
All Other Fees
For other services provided to the Acquired Fund, PwC billed $5,000 in
fees for the Acquired Fund's most recent fiscal year ending October 31, 2002.
These fees are comprised of: (1) tax services of $2,500 in connection with the
review of the Acquired Fundannual excise tax calculation and review and signing
of the Acquired Fund's applicable tax return and (2) $2,500 in connection with
agreed-upon procedures related to the Acquired Fund's change in fund accounting
service provider.
For other services provided to CSAM and all other entities controlling,
controlled by, or under common control with CSAM that provide services to the
Acquired Fund, PwC billed $2,172,000 in fees for the Acquired Fund's most recent
fiscal year. These fees are comprised of: (1) $762,000 in connection with
agreed-upon procedures relating to property financing transactions and pooled
49
securitization transactions, (2) $764,000 in connection with expatriate tax
consulting services, (3) $396,000 in connection with other tax related services
and (4) $250,000 in connection with financial statement audits.
ADDITIONAL INFORMATION
The Acquiring Fund and the Acquired Fund are each subject to the
informational requirements of the 1934 Act and the 1940 Act and in accordance
therewith file reports and other information including proxy material, reports
and charter documents, with the SEC. These materials can be inspected and copies
obtained at the Public Reference Facilities maintained by the SEC at 450 Fifth
Street, N.W, Washington, D.C. 20549 and at the New York Regional Office of the
SEC at 233 Broadway, New York, New York. Copies of such material can also be
obtained from the Public Reference Branch, Office of Consumer Affairs and
Information Services, SEC, Washington, D.C. 20549 at prescribed rates. The
Prospectuses and the Statement of Additional Information for the Acquiring Fund,
along with related information, may be found on the SEC website as well
(http://www.sec.gov).
VOTING INFORMATION
This Prospectus/Proxy Statement is furnished in connection with a
solicitation of proxies by the Board of Directors of the Acquired Fund to be
used at the Special Meeting of Shareholders of the Acquired Fund to be held at
1:00 p.m. on April 11, 2003, at the offices of the Acquired Fund, 466 Lexington
Avenue, 16th Floor, New York, New York 10017-3140 and at any adjournment(s)
thereof. This Prospectus/Proxy Statement, along with a Notice of the Special
Meeting and proxy card(s), is first being mailed to shareholders of the Acquired
Fund on or about February 21, 2003. Only shareholders of record as of the close
of business on February 7, 2003 (the "Record Date") will be entitled to notice
of, and to vote at, the Special Meeting or any adjournment(s) thereof. As of the
February 7, 2003, the Acquired Fund had the following shares outstanding:
15,625,545.827 Common Class shares, 2,206,403.040 Advisor Class shares,
35,577.397 Class A shares, 8,610.315 Class B shares and 13,524.638 Class C
shares. The holders of one-third of the outstanding shares of the Acquired Fund
at the close of business on the Record Date present in person or represented by
proxy will constitute a quorum for the Special Meeting. For purposes of
determining a quorum for transacting business at the Special Meeting,
abstentions and broker "non-votes" (that is, proxies from brokers or nominees
indicating that such persons have not received instructions from the beneficial
owner or other persons entitled to vote shares on a particular matter with
respect to which the brokers or nominees do not have discretionary power) will
be treated as shares that are present but which have not been voted. Abstentions
and broker non-votes will have the effect of a "no" vote for Proposal 3, which
requires the approval of a specified percentage of the outstanding shares of the
Acquired Fund, if such vote is determined on the basis of obtaining the
affirmative vote of more than 50% of the outstanding shares of the Acquired
Fund. Abstentions and broker non-votes will not constitute "yes" or "no" votes,
and will be disregarded in determining the voting securities "present" if such
50
vote is determined on the basis of the affirmative vote of 67% of the voting
securities of the Portfolio present at the Special Meeting with respect to
Proposal 3. Abstentions and broker non-votes will not be counted in favor of,
but will have no other effect on the vote for Proposals 1, 2 and 4 which require
the approval of a (i) for Proposal 2, plurality of the shares of the Acquired
Fund, and (ii) for Proposals 1 and 4, a majority of the shares of the Acquired
Fund, voting at the Special Meeting.
Executed, but unmarked proxies (i.e., executed proxies in which there
is no indication of the shareholder's voting instructions) will be voted FOR
approval of all of the Proposals and FOR approval of any other matters deemed
appropriate. A proxy may be revoked at any time on or before the Special Meeting
by the subsequent execution and submission of a revised proxy, by written notice
to Hal Liebes, Secretary of the Acquired Fund, 466 Lexington Avenue, New York,
New York 10017-3140 or by voting in person at the Special Meeting.
CSAM has retained Georgeson Shareholder Communications, Inc. to solicit
proxies, at an estimated fee of $75,000. Proxy solicitations will be made
primarily by mail, but proxy solicitations also may be made by telephone,
facsimile or personal interviews conducted by officers and employees of CSAM and
its affiliates. The expenses of the Acquisition, which are currently estimated
to be $350,000, including the costs of the proxy solicitations relating to
Proposal 1 and the preparation of enclosures to the Prospectus/Proxy Statement
relating to Proposal 1, reimbursement of expenses of forwarding solicitation
material to beneficial owners of shares of the Acquired Fund and expenses
incurred in connection with the preparation of this Prospectus/Proxy Statement
relating to Proposal 1, will be borne by CSAM or its affiliates (excluding
extraordinary expenses not normally associated with transactions of this type).
Costs of preparing, printing and mailing the enclosed proxy, accompanying notice
and all other costs in connection with the solicitation of proxies for Proposals
2, 3 and 4 will be paid by the Acquired Fund. It is anticipated that banks,
brokerage houses and other institutions, nominees and fiduciaries will be
requested to forward proxy materials to beneficial owners and to obtain
authorization for the execution of proxies. Upon request, banks, brokerage
houses and other institutions, nominees and fiduciaries may be reimbursed for
their expenses in forwarding proxy materials to beneficial owners.
In the event that a quorum necessary to vote on any of the Proposals at
the Special Meeting is not present or sufficient votes to approve any proposal
are not received prior to 1:00 p.m. on April 11, 2003, the persons named as
proxies may propose one or more adjournments of the Special Meeting to permit
further solicitation of proxies to receive the vote necessary for its passage or
to obtain a quorum. If there is represented a sufficient number of votes in
favor of one or more Proposals, an act taken at the Special Meeting will be
effective irrespective of any adjournments with respect to any other Proposal.
In determining whether to adjourn the Special Meeting, the following factors may
be considered: the percentage of votes actually cast, the percentage of negative
votes actually cast, the
51
nature of any further solicitation and the information to be provided to
shareholders with respect to the reasons for the solicitation. Any such
adjournment will require an affirmative vote by the holders of a majority of the
shares of the Acquired Fund present in person or by proxy and entitled to vote
at the Special Meeting. The persons named as proxies will vote upon a decision
to adjourn the Special Meeting after consideration of the best interests of all
shareholders of the Acquired Fund.
As of December 31, 2002, CSAM (or its affiliates) possessed or shared
voting power or investment power as a fiduciary on behalf of its customers, with
respect to the Acquired Fund as set forth above under "Proposal -- Information
About the Acquisition -- Share Ownership of the Fund." CSAM and its affiliates
have advised the Acquired Fund that they intend to vote the shares over which
they have voting power at the Special Meeting, including shares that are held
directly or on behalf of employees, in the manner instructed by the customers or
employees for which such shares are held.
OTHER BUSINESS
The Board of Directors of the Acquired Fund knows of no other business
to be brought before the Special Meeting. However, if any other matters come
before the Special Meeting, proxies that do not contain specific restrictions to
the contrary will be voted on such matters in accordance with the judgment of
the persons named in the enclosed Proxy Card.
The approval of shareholders of the Acquiring Fund is not required in
order to affect the Acquisition and, accordingly, the votes of the shareholders
of the Acquiring Fund are not being solicited by this Prospectus/Proxy
Statement.
FINANCIAL STATEMENTS AND EXPERTS
The audited statement of assets and liabilities of each Fund as of
October 31, 2002, including their respective schedules of portfolio investments,
and the related statements of operations for the year then ended, the statement
of changes in net assets for each of the two years in the period then ended and
the financial highlights for each of the five years (or such shorter period as
the relevant Fund's share class has been in existence) in the period then ended,
have been incorporated by reference into this Prospectus/Proxy Statement in
reliance upon the reports of PricewaterhouseCoopers LLP, independent accountants
to each of the Funds, given on the authority of such firms as experts in
accounting and auditing.
ADDITIONAL MATERIALS
The following additional materials, which have been incorporated by
reference into the Statement of Additional Information, dated March 11, 2003,
relating to this Prospectus/Proxy Statement and the Acquisition, will be sent to
all shareholders of the Acquired Fund requesting a copy of such Statement of
Additional Information.
52
1. The current Statement of Additional Information for the
Acquiring Fund, dated February 28, 2003, as supplemented as of
the date hereof.
2. The current Statement of Additional Information for the
Acquired Fund, dated February 28, 2003, as supplemented as of
the date hereof.
LEGAL MATTERS
Certain legal matters concerning the issuance of shares of beneficial
interest of the Acquiring Fund will be passed upon by Willkie Farr & Gallagher,
787 Seventh Avenue, New York, New York 10019-6099, counsel to the Acquiring
Fund. In rendering such opinion, Willkie Farr & Gallagher may rely on an opinion
of Sullivan & Worcester LLP as to certain matters under Massachusetts law.
53
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EXHIBIT A: AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as
of this ___ day of March, 2003, between and among Credit Suisse Capital Funds, a
Massachusetts business trust (the "Trust"), for and on behalf of its series,
Credit Suisse Large Cap Value Fund (the "Acquiring Fund"), and Credit Suisse
Strategic Value Fund, Inc., a Maryland corporation (the "Acquired Fund"), and,
solely for purposes of Sections 4.3, 5.9 and 9.2 hereof, Credit Suisse Asset
Management, LLC, a limited liability company organized under the laws of the
State of Delaware ("CSAM").
This Agreement is intended to be and is adopted as a plan of
reorganization within the meaning of Section 368(a) of the United States
Internal Revenue Code of 1986, as amended (the "Code"). The reorganization of
the Acquired Fund (collectively, the "Reorganization") will consist of the
transfer of all of the assets of the Acquired Fund in exchange solely for shares
of beneficial interest of the applicable class or classes (collectively, the
"Shares") of the Acquiring Fund, and the assumption by the Acquiring Fund of
liabilities of the Acquired Fund, and the distribution, on or after the Closing
Date hereinafter referred to, of Shares of the Acquiring Fund ("Acquiring Fund
Shares") to the shareholders of the Acquired Fund in liquidation of the Acquired
Fund as provided herein, all upon the terms and conditions hereinafter set forth
in this Agreement.
As the Acquiring Fund is a series of the Trust, all parties to this
Agreement acknowledge and accept that the Acquiring Fund does not have a Board
of Trustees or officers separate from the other series of the Trust.
Accordingly, all representations, warranties, covenants and/or other obligations
of any kind made by the Acquiring Fund in this Agreement are expressly
understood by all parties to this Agreement as being made by the Trustees or
officers of the Trust, as applicable, in their respective capacities as Trustees
or officers (and not in their individual capacities) for, and on behalf of, the
Acquiring Fund.
WHEREAS, the Board of Directors of the Acquired Fund has determined
that the exchange of all of the assets of the Acquired Fund for Acquiring Fund
Shares and the assumption of the liabilities of the Acquired Fund by the
Acquiring Fund is in the best interests of the Acquired Fund and that the
interests of the existing shareholders of the Acquired Fund would not be diluted
as a result of this transaction; and
WHEREAS, the Board of Trustees of the Acquiring Fund has determined
that the exchange of all of the assets of the Acquired Fund for Acquiring Fund
Shares is in the best interests of the Acquiring Fund's shareholders and that
the interests of the existing shareholders of the Acquiring Fund would not be
diluted as a result of this transaction.
A-1
NOW, THEREFORE, in consideration of the premises and of the covenants
and agreements hereinafter set forth, the parties hereto covenant and agree as
follows:
1. Transfer of Assets of the Acquired Fund in Exchange for Acquiring
Fund Shares and Assumption of the Acquired Fund's Liabilities and Liquidation of
the Acquired Fund.
1.1. Subject to the terms and conditions herein set forth and on the
basis of the representations and warranties contained herein, the Acquired Fund
agrees to transfer its assets as set forth in paragraph 1.2 to the Acquiring
Fund, and the Acquiring Fund agrees in exchange therefor: (i) to deliver to the
Acquired Fund the number of each class of the Acquiring Fund Shares, including
fractional Acquiring Fund Shares, of each class of the Acquired Fund determined
by dividing the value of the Acquired Fund's net assets attributable to each
such class of shares, computed in the manner and as of the time and date set
forth in paragraph 2.1, by the net asset value of one Acquiring Fund Share of
the applicable class; and (ii) to assume the liabilities of the Acquired Fund,
as set forth in paragraph 1.3. Such transactions shall take place at the closing
provided for in paragraph 3.1 (the "Closing").
1.2. (a) The assets of the Acquired Fund to be acquired by the
Acquiring Fund shall consist of all property including, without limitation, all
cash, securities and dividend or interest receivables that are owned by or owed
to the Acquired Fund and any deferred or prepaid expenses shown as an asset on
the books of the Acquired Fund on the Closing date provided in paragraph 3.1
(the "Closing Date").
(b) The Acquired Fund has provided the Acquiring Fund with a list of
all of the Acquired Fund's assets as of the date of execution of this Agreement.
The Acquired Fund reserves the right to sell any of these securities but will
not, without the prior approval of the Acquiring Fund, acquire any additional
securities other than securities of the type in which the Acquiring Fund is
permitted to invest. The Acquired Fund will, within a reasonable time prior to
the Closing Date, furnish the Acquiring Fund with a list of the securities, if
any, on the Acquired Fund's list referred to in the first sentence of this
paragraph which do not conform to the Acquiring Fund's investment objective,
policies and restrictions. In the event that the Acquired Fund holds any
investments which the Acquiring Fund may not hold, the Acquired Fund will
dispose of such securities prior to the Closing Date. In addition, if it is
determined that the portfolios of the Acquired Fund and the Acquiring Fund, when
aggregated, would contain investments exceeding certain percentage limitations
imposed upon the Acquiring Fund with respect to such investments, the Acquired
Fund, if requested by the Acquiring Fund, will dispose of and/or reinvest a
sufficient amount of such investments as may be necessary to avoid violating
such limitations as of the Closing Date.
1.3. The Acquired Fund will endeavor to discharge all of the known
liabilities and obligations of the Acquired Fund prior to the Closing Date,
other than those liabilities and obligations which would otherwise be discharged
at a later date
A-2
in the ordinary course of business. The Acquiring Fund shall assume all
liabilities, expenses, costs, charges and reserves, including those liabilities
reflected on unaudited statements of assets and liabilities of the Acquired Fund
and the Acquiring Fund prepared by State Street Bank and Trust Company ("State
Street"), the accounting agent of each Fund, as of the Valuation Date (as
defined in paragraph 2.1), in accordance with generally accepted accounting
principles consistently applied from the prior audited period. The Acquiring
Fund shall also assume any liabilities, expenses, costs or charges incurred by
or on behalf of the Acquired Fund specifically arising from or relating to the
operations and/or transactions of the Acquired Fund prior to and including the
Closing Date but which are not reflected on the above-mentioned statement of
assets and liabilities, including any liabilities, expenses, costs or charges
arising under paragraph 5.7 hereof.
1.4. As soon on or after the Closing Date as is conveniently
practicable (the "Liquidation Date"), the Acquired Fund will liquidate and
distribute pro rata to the Acquired Fund's shareholders of record determined as
of the close of business on the Closing Date (the "Fund Shareholders") the
Acquiring Fund Shares it receives pursuant to paragraph 1.1. Such liquidation
and distribution will be accomplished by the transfer of the Acquiring Fund
Shares then credited to the account of the Acquired Fund on the books of the
Acquiring Fund to open accounts on the share records of the Acquiring Fund in
the name of the Acquired Fund's shareholders representing the respective pro
rata number of the Acquiring Fund Shares due such shareholders. All issued and
outstanding shares of the Acquired Fund will simultaneously be canceled on the
books of the Acquired Fund, although share certificates representing interests
in the Acquired Fund will represent a number of Acquiring Fund Shares after the
Closing Date as determined in accordance with Section 2.2. The Acquiring Fund
shall not issue certificates representing the Acquiring Fund Shares in
connection with such exchange.
1.5. Ownership of Acquiring Fund Shares will be shown on the books of
the Acquiring Fund's transfer agent. Shares of the Acquiring Fund will be issued
in the manner described in the Acquiring Fund's current prospectuses and
statement of additional information.
1.6. Any transfer taxes payable upon issuance of the Acquiring Fund
Shares in a name other than the registered holder of the Acquired Fund Shares on
the books of the Acquired Fund as of that time shall, as a condition of such
issuance and transfer, be paid by the person to whom such Acquiring Fund Shares
are to be issued and transferred.
1.7. Any reporting responsibility of the Acquired Fund is and shall
remain the responsibility of the Acquired Fund up to and including the Closing
Date and such later date on which the Acquired Fund is terminated.
2. Valuation
2.1. The value of the Acquired Fund's assets to be acquired hereunder
shall be the value of such assets computed as of the close of regular trading on
The
A-3
New York Stock Exchange, Inc. (the "NYSE") on the Closing Date (such time and
date being hereinafter called the "Valuation Date"), using the valuation
procedures set forth in the Acquired Fund's then current prospectuses or
statement of additional information.
2.2. The number of Class A, Class B, Class C, Class A and Advisor Class
Shares of the Acquiring Fund to be issued (including fractional shares, if any)
in exchange for Class A, Class B, Class C, Common Class and Advisor Class
shares, respectively, of the Acquired Fund shall be determined by dividing the
value of the net assets of the Acquired Fund attributable to its respective
Class A, Class B, Class C, Common Class and Advisor Class shares determined
using the same valuation procedures referred to in paragraph 2.1 by the net
asset value per Share of the Class A, Class B, Class C, Class A or Advisor Class
shares, respectively, of the Acquiring Fund computed as of the close of regular
trading on the NYSE on the Closing Date, using the valuation procedures set
forth in the Acquiring Fund's then current prospectuses or statement of
additional information.
2.3. All computations of value with respect to the Acquiring Fund and
the Acquired Fund shall be made by State Street in accordance with its regular
practice as pricing agent for the Acquiring Fund.
3. Closing and Closing Date
3.1. The Closing Date for the Reorganization shall be April 17, 2003,
or such other date as the parties to such Reorganization may agree to in
writing. All acts taking place at the Closing shall be deemed to take place
simultaneously as of the close of trading on the NYSE on the Closing Date unless
otherwise provided. The Closing shall be held as of 10:00 a.m., at the offices
of Willkie Farr & Gallagher or at such other time and/or place as the parties
may agree.
3.2. State Street Bank and Trust Company, the custodian for the
Acquiring Fund (the "Custodian"), shall deliver as soon as practicable after the
Closing a certificate of an authorized officer stating that: (a) the Acquired
Fund's portfolio securities, cash and any other assets have been delivered in
proper form to the Acquiring Fund on the Closing Date and (b) all necessary
taxes, including all applicable federal and state stock transfer stamps, if any,
have been paid, or provision for payment has been made, in conjunction with the
delivery of portfolio securities.
3.3. In the event that on the Valuation Date (a) the NYSE or another
primary trading market for portfolio securities of the Acquiring Fund or the
Acquired Fund shall be closed to trading or trading thereon shall be restricted
or (b) trading or the reporting of trading on the NYSE or elsewhere shall be
disrupted so that accurate appraisal of the value of the net assets of the
Acquiring Fund or the Acquired Fund is impracticable, the applicable Closing
Date shall be postponed until the first business day after the day when trading
shall have been fully resumed and reporting shall have been restored.
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3.4. The Acquired Fund shall deliver at the Closing a list of the names
and addresses of the Acquired Fund's shareholders and the number and class of
outstanding Shares owned by each such shareholder immediately prior to the
Closing or provide evidence that such information has been provided to the
Acquiring Fund's transfer agent. The Acquiring Fund shall issue and deliver a
confirmation evidencing the Acquiring Fund Shares to be credited to the Acquired
Fund's account on the Closing Date to the Secretary of the Acquired Fund or
provide evidence satisfactory to the Acquired Fund that such Acquiring Fund
Shares have been credited to the Acquired Fund's account on the books of the
Acquiring Fund. At the Closing, each party shall deliver to the relevant other
parties such bills of sale, checks, assignments, share certificates, if any,
receipts or other documents as such other party or its counsel may reasonably
request.
4. Representations and Warranties
4.1. The Acquired Fund represents and warrants to the Acquiring Fund
as follows:
(a) The Acquired Fund is a duly organized, validly existing corporation
in good standing under the laws of the State of Maryland;
(b) The Acquired Fund is a registered investment company classified as
a management company of the open-end type and its registration with the
Securities and Exchange Commission (the "Commission") as an investment company
under the Investment Company Act of 1940, as amended (the "1940 Act"), is in
full force and effect;
(c) The Acquired Fund is not, and the execution, delivery and
performance of this Agreement by the Acquired Fund will not result, in a
violation of its Articles of Incorporation or ByLaws or any material agreement,
indenture, instrument, contract, lease or other undertaking to which the
Acquired Fund is a party or by which the Acquired Fund or its property is bound
or affected;
(d) There are no contracts or other commitments (other than this
Agreement) of the Acquired Fund which will be terminated with liability to the
Acquired Fund prior to the Closing Date;
(e) Except as previously disclosed in writing to and accepted by the
Acquiring Fund, no litigation or administrative proceeding or investigation of
or before any court or governmental body is presently pending or to its
knowledge threatened against the Acquired Fund or any of its properties or
assets which, if adversely determined, would materially and adversely affect its
financial condition or the conduct of its business. Except as previously
disclosed in writing to and accepted by the Acquiring Fund, the Acquired Fund
knows of no facts which might form the basis for the institution of such
proceedings and is not party to or subject to the provisions of any order,
decree or judgment of any court or governmental body which materially and
adversely affects its business or the business of the Acquired Fund or its
ability to consummate the transactions herein contemplated;
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(f) The Statements of Assets and Liabilities, including the Investment
Portfolio, Statement of Operations, and Changes in Net Assets, and the Financial
Highlights of the Acquired Fund at October 31, 2002 and for the period from
October 31, 2001 to October 31, 2002 have been audited by PricewaterhouseCoopers
LLP, independent accountants, and are in accordance with generally accepted
accounting principles consistently applied, and such statements (copies of which
have been furnished to the Acquiring Fund) fairly reflect the financial
condition of the Acquired Fund as of such dates, and there are no known
contingent liabilities of the Acquired Fund as of such dates not disclosed
therein;
(g) Since October 31, 2002, there has not been any material adverse
change in the Acquired Fund's financial condition, assets, liabilities or
business other than changes occurring in the ordinary course of business, or any
incurrence by the Acquired Fund of indebtedness maturing more than one year from
the date such indebtedness was incurred except as otherwise disclosed to and
accepted in writing by the Acquiring Fund. For purposes of this subsection (g),
a decline in net asset value per share of the Acquired Fund due to declines in
market values of securities in the Acquired Fund's portfolio, the discharge of
Fund liabilities, or the redemption of the Acquired Fund shares by Fund
shareholders shall not constitute a material adverse change;
(h) At the date hereof and the Closing Date, all federal and other tax
returns and reports, including extensions, of the Acquired Fund required by law
to have been filed by such dates shall have been filed, and all federal and
other taxes shall have been paid so far as due, or provision shall have been
made for the payment thereof and, to the best of the Acquired Fund's knowledge,
no such return is currently under audit and no assessment has been asserted with
respect to such returns;
(i) For each taxable year of its operation (including the taxable year
ending on the Closing Date), the Acquired Fund has met the requirements of
Subchapter M of the Code for qualification and treatment as a regulated
investment company; all of the Acquired Fund's issued and outstanding shares
have been offered and sold in compliance in all material respects with
applicable federal and state securities laws;
(j) All issued and outstanding shares of each class of the Acquired
Fund are, and at the Closing Date will be, duly and validly issued and
outstanding, fully paid and non-assessable. All of the issued and outstanding
shares of the Acquired Fund will, at the time of Closing, be held by the persons
and in the amounts set forth in the records of the transfer agent as provided in
paragraph 3.4. The Acquired Fund does not have outstanding any options, warrants
or other rights to subscribe for or purchase any of the Acquired Fund's shares,
nor is there outstanding any security convertible into any of the Acquired
Fund's shares;
(k) At the Closing Date, the Acquired Fund will have good and
marketable title to the Acquired Fund's assets to be transferred to the
Acquiring
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Fund pursuant to paragraph 1.2 and full right, power and authority to sell,
assign, transfer and deliver such assets hereunder and, upon delivery and
payment for such assets, the Acquiring Fund will acquire good and marketable
title thereto, subject to no restrictions on the full transfer thereof, except
such restrictions as might arise under the Securities Act of 1933, as amended
(the "1933 Act"), and the 1940 Act with respect to privately placed or otherwise
restricted securities that the Acquired Fund may have acquired in the ordinary
course of business and of which the Acquiring Fund has received notice and
necessary documentation at or prior to the Closing;
(l) The execution, delivery and performance of this Agreement has been
duly authorized by all necessary actions on the part of the Acquired Fund's
Board of Directors, and subject to the approval of the Acquired Fund's
shareholders, this Agreement will constitute a valid and binding obligation of
the Acquired Fund enforceable in accordance with its terms, subject to the
effect of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other laws relating to or affecting creditors' rights and to
general equity principles;
(m) The information to be furnished by the Acquired Fund for use in
applications for orders, registration statements or proxy materials or for use
in any other document filed or to be filed with any federal, state or local
regulatory authority (including the NASD, Inc.), which may be necessary in
connection with the transactions contemplated hereby, shall be accurate and
complete in all material respects and shall comply in all material respects with
federal securities and other laws and regulations applicable thereto;
(n) The current prospectuses and statements of additional information
of the Acquired Fund conform in all material respects to the applicable
requirements of the 1933 Act and the 1940 Act and the rules and regulations of
the Commission thereunder and do not include any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not materially misleading; and
(o) Insofar as the following relate to the Acquired Fund, the
registration statement filed by the Acquiring Fund on Form N-14 relating to
Acquiring Fund Shares that will be registered with the Commission pursuant to
this Agreement, which, without limitation, shall include a proxy statement of
the Acquired Fund (the "Proxy Statement") and the prospectuses of the Acquiring
Fund with respect to the transactions contemplated by this Agreement, and any
supplement or amendment thereto, and the documents contained or incorporated
therein by reference (the "N-14 Registration Statement"), on the effective date
of the N-14 Registration Statement, at the time of any shareholders' meeting
referred to herein, on the Valuation Date and on the Closing Date: (i) shall
comply in all material respects with the provisions of the 1933 Act, the
Securities Exchange Act of 1934 (the "1934 Act") and the 1940 Act and the rules
and regulations under those Acts, and (ii) shall not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the
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statements therein not misleading; provided, however, that the representations
and warranties in this section shall not apply to statements in or omissions
from the Proxy Statement and the N-14 Registration Statement made in reliance
upon and in conformity with information that was furnished or should have been
furnished by the Acquiring Fund for use therein.
4.2. The Acquiring Fund represents and warrants to the Acquired Fund
as follows:
(a) The Acquiring Fund is a duly established series of the Trust; the
Trust is a Massachusetts business trust duly organized and validly existing
under the laws of The Commonwealth of Massachusetts;
(b) The Trust is a registered investment company classified as a
management company of the open-end type and its registration with the Commission
as an investment company under the 1940 Act is in full force and effect;
(c) The current prospectuses and statements of additional information
filed as part of the Acquiring Fund registration statement on Form N-1A (the
"Acquiring Fund Registration Statement") conform in all material respects to the
applicable requirements of the 1933 Act and the 1940 Act and the rules and
regulations of the Commission under those Acts and do not include any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not materially misleading;
(d) At the Closing Date, the Acquiring Fund will have good and
marketable title to its assets;
(e) The Acquiring Fund is not, and the execution, delivery and
performance of this Agreement will not result, in a violation of its Amended and
Restated Agreement and Declaration of Trust or By-Laws or any material
agreement, indenture, instrument, contract, lease or other undertaking to which
the Acquiring Fund is a party or by which the Acquiring Fund or its property is
bound;
(f) Except as previously disclosed in writing to and accepted by the
Acquired Fund, no litigation or administrative proceeding or investigation of or
before any court or governmental body is presently pending or to its knowledge
threatened against the Acquiring Fund or any of its properties or assets which,
if adversely determined, would materially and adversely affect its financial
condition or the conduct of its business. The Acquiring Fund knows of no facts
which might form the basis for the institution of such proceedings and is not a
party to or subject to the provisions of any order, decree or judgment of any
court or governmental body which materially and adversely affects its business
or its ability to consummate the transactions contemplated herein;
(g) Since October 31, 2002, there has not been any material adverse
change in the Acquiring Fund's financial condition, assets, liabilities or
business other than changes occurring in the ordinary course of business, or any
incurrence
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by the Acquiring Fund of indebtedness maturing more than one year from the date
such indebtedness was incurred except as otherwise disclosed to and accepted in
writing by the Acquired Fund. For purposes of this subsection (g), a decline in
net asset value per share of the Acquiring Fund due to declines in market values
of securities in the Acquiring Fund's portfolio, the discharge of Acquiring Fund
liabilities, or the redemption of Acquiring Fund Shares by Acquiring Fund
Shareholders shall not constitute a material adverse change;
(h) At the Closing Date, all federal and other tax returns and reports,
including extensions, of the Acquiring Fund required by law then to be filed
shall have been filed, and all federal and other taxes shown as due on said
returns and reports shall have been paid or provision shall have been made for
the payment thereof;
(i) For each taxable year of its operation (including the taxable year
which includes the Closing Date), the Acquiring Fund has met the requirements of
Subchapter M of the Code for qualification as a regulated investment company and
has elected to be treated as such, has been eligible to and has computed its
federal income tax under Section 852 of the Code;
(j) At the date hereof, all issued and outstanding Acquiring Fund
Shares of each class are, and at the Closing Date will be, duly and validly
issued and outstanding, fully paid and, except as set forth in the Trust's
Amended and Restated Agreement and Declaration of Trust, non-assessable, by the
Acquiring Fund. The Acquiring Fund does not have outstanding any options,
warrants or other rights to subscribe for or purchase any Acquiring Fund Shares,
nor is there outstanding any security convertible into any Acquiring Fund
Shares;
(k) The execution, delivery and performance of this Agreement has been
duly authorized by all necessary actions on the part of the Acquiring Fund's
Board of Trustees, and this Agreement will constitute a valid and binding
obligation of the Acquiring Fund enforceable in accordance with its terms,
subject to the effect of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other laws relating to or affecting creditors'
rights and to general equity principles;
(l) The Acquiring Fund Shares to be issued and delivered to the
Acquired Fund, for the account of the Acquired Fund's shareholders, pursuant to
the terms of this Agreement, will at the Closing Date have been duly authorized
and when so issued and delivered, will be duly and validly issued Acquiring Fund
Shares, and will be fully paid and, except as set forth in the Trust's Amended
and Restated Agreement and Declaration of Trust, non-assessable, by the
Acquiring Fund;
(m) Insofar as the following relate to the Acquiring Fund, the N-14
Registration Statement, on the effective date of the N-14 Registration
Statement, at the time of any shareholders' meeting referred to herein, on the
Valuation Date and on the Closing Date: (i) shall comply in all material
respects with the provisions of the 1933 Act, the 1934 Act and the 1940 Act and
the rules and regulations under
A-9
those Acts, and (ii) shall not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading; provided, however, that the
representations and warranties in this section shall not apply to statements in
or omissions from the Proxy Statement and the N-14 Registration Statement made
in reliance upon and in conformity with information that was furnished or should
have been furnished by the Acquired Fund for use therein; and
(n) The Acquiring Fund agrees to use all reasonable efforts to obtain
the approvals and authorizations required by the 1933 Act, the 1940 Act and such
of the state Blue Sky or securities laws as it may deem appropriate in order to
continue its operations after the Closing Date.
4.3. CSAM represents and warrants to the Acquiring Fund as follows: To
the knowledge of CSAM (i) there are no claims, actions, suits or proceedings
pending against the Acquired Fund, and (ii) there are no claims, actions, suits
or proceedings threatened, or circumstances that have been identified by the
Management Committee of CSAM and the Secretary thereof as reasonably likely to
give rise to any claims, actions, suits or proceedings, against the Acquired
Fund that would materially adversely affect the Acquired Fund or its assets or
business other than those disclosed in writing to and accepted by the Acquiring
Fund.
5. Covenants of the Acquired Fund and the Acquiring Fund
5.1. The Acquiring Fund and the Acquired Fund will operate their
respective businesses in the ordinary course between the date hereof and the
Closing Date. It is understood that such ordinary course of business will
include the declaration and payment of customary dividends and distributions.
5.2. The Acquired Fund will call a meeting of the shareholders of the
Acquired Fund to consider and act upon this Agreement and to take all other
actions necessary to obtain approval of the transactions contemplated herein.
5.3. The Acquired Fund covenants that the Acquiring Fund Shares to be
issued hereunder are not being acquired for the purpose of making any
distribution thereof other than in accordance with the terms of this Agreement.
5.4. The Acquired Fund will assist the Acquiring Fund in obtaining such
information as the Acquiring Fund reasonably requests concerning the beneficial
ownership of the Acquired Fund's Shares.
5.5. Subject to the provisions of this Agreement, the Acquiring Fund
and the Acquired Fund will each take, or cause to be taken, all action, and do
or cause to be done, all things reasonably necessary, proper or advisable to
consummate and make effective the transactions contemplated by this Agreement.
5.6. The Acquired Fund will provide the Acquiring Fund with information
reasonably necessary for the preparation of a prospectus (the "Prospectus")
which will include the Proxy Statement referred to in paragraph 4.1(o), all to
be included in the N-14 Registration Statement, in compliance with
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the 1933 Act, the 1934 Act and the 1940 Act in connection with the meeting of
the Acquired Fund's shareholders to consider approval of this Agreement and the
transactions contemplated herein.
5.7. The Acquiring Fund agrees to indemnify and advance expenses to
each person who at the time of the execution of this Agreement serves as a
Director or Officer ("Indemnified Person") of the Acquired Fund, against money
damages actually and reasonably incurred by such Indemnified Person in
connection with any claim that is asserted against such Indemnified Person
arising out of such person's service as a Director or officer of the Acquired
Fund with respect to matters specifically relating to the Reorganization,
provided that such indemnification and advancement of expenses shall be
permitted to the fullest extent that is available under applicable law. This
paragraph 5.7 shall not protect any such Indemnified Person against any
liability to the Acquired Fund, the Acquiring Fund or their shareholders to
which he would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or from reckless disregard of the duties involved in the
conduct of his office. An Indemnified Person seeking indemnification shall be
entitled to advances from the Acquiring Fund for payment of the reasonable
expenses incurred by him in connection with the matter as to which he is seeking
indemnification in the manner and to the fullest extent permissible under
applicable law. Such Indemnified Person shall provide to the Acquiring Fund a
written affirmation of his good faith belief that the standard of conduct
necessary for indemnification by the Acquiring Fund under this paragraph has
been met and a written undertaking to repay any advance if it should ultimately
be determined that the standard of conduct has not been met. In addition, at
least one of the following additional conditions shall be met: (a) the
Indemnified Person shall provide security in form and amount acceptable to the
Acquiring Fund for its undertaking; (b) the Acquiring Fund is insured against
losses arising by reason of the advance; or (c) either a majority of a quorum of
disinterested non-party trustees of the Acquiring Fund (collectively, the
"Disinterested Trustees"), or independent legal counsel experienced in mutual
fund matters, selected by the Indemnified Person, in a written opinion, shall
have determined, based on a review of facts readily available to the Acquiring
Fund at the time the advance is proposed to be made, that there is reason to
believe that the Indemnified Person will ultimately be found to be entitled to
indemnification.
5.8. The Acquiring Fund agrees to take no action that would adversely
affect the qualification of the Reorganization as a reorganization under Section
368(a) of the Code. In this regard, the Acquiring Fund covenants that, following
the Reorganization, it (a) will (i) continue the historic business of the
Acquired Fund or (ii) use a significant portion of the Acquired Fund's historic
business assets, and (b) will not sell or otherwise dispose of any of the assets
of the Acquired Fund, except for dispositions in the ordinary course of business
or transfers to a corporation (or other entity classified for federal income tax
purposes as an association taxable as a corporation) that is "controlled" by the
Acquiring Fund within the meaning of Section 368(c) of the Code.
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5.9. CSAM agrees that the Trust will succeed to all rights that the
Acquired Fund has, or would have but for the Reorganization, against CSAM or its
affiliates by reason of any act or failure to act by CSAM or any of its
affiliates prior to the Closing Date.
6. Conditions Precedent to Obligations of the Acquired Fund
The obligations of the Acquired Fund to consummate the transactions
provided for herein shall be subject, at its election, to the performance by the
Acquiring Fund of all of the obligations to be performed by it hereunder on or
before the Closing Date and, in addition thereto, the following further
conditions:
6.1. All representations and warranties of the Acquiring Fund contained
in this Agreement shall be true and correct in all material respects as of the
date hereof and, except as they may be affected by the actions contemplated by
this Agreement, as of the Closing Date with the same force and effect as if made
on and as of the Closing Date;
6.2. The Acquiring Fund shall have delivered to the Acquired Fund a
certificate executed in its name by its Chairman, Vice President, Secretary,
Treasurer or Assistant Treasurer, in a form reasonably satisfactory to the
Acquired Fund and dated as of the Closing Date, to the effect that the
representations and warranties of the Acquiring Fund made in this Agreement are
true and correct at and as of the Closing Date, except as they may be affected
by the transactions contemplated by this Agreement and as to such other matters
as the Acquired Fund shall reasonably request; and
6.3. The Acquired Fund shall have received on the Closing Date a
favorable opinion from Willkie Farr & Gallagher, counsel to the Acquiring Fund,
dated as of the Closing Date, in a form reasonably satisfactory to the Acquired
Fund, covering the following points:
That (a) the Trust is a validly existing business trust under the laws
of The Commonwealth of Massachusetts, and has the trust power to own all of its
properties and assets and to carry on its business as a registered investment
company; (b) the Agreement has been duly authorized, executed and delivered by
the Trust and the Acquiring Fund is a duly established series of the Trust and,
assuming due authorization, execution and delivery of the Agreement by the other
parties hereto, is a valid and binding obligation of the Trust enforceable
against the Acquiring Fund in accordance with its terms, subject to the effect
of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
and to general equity principles; (c) the Acquiring Fund Shares to be issued to
the Acquired Fund's shareholders as provided by this Agreement are duly
authorized and upon such delivery will be validly issued and outstanding and are
fully paid and, except as set forth in the Trust's Amended and Restated
Agreement and Declaration of Trust, non-assessable and no shareholder of the
Acquiring Fund has any preemptive rights to subscription or purchase in respect
thereof; (d) the execution and delivery of this Agreement did not, and the
consummation of the transactions contemplated
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hereby will not, conflict with the Trust's Amended and Restated Agreement and
Declaration of Trust or By-Laws, or result in a material violation of any
provision of any material agreement (known to such counsel) to which the Trust
is a party or by which it or its property is bound or, to the knowledge of such
counsel, result in the acceleration of any obligation or the imposition of any
penalty, under any material agreement, judgment or decree to which the Trust is
a party or by which it or its property is bound; (e) to the knowledge of such
counsel, no consent, approval, authorization or order of any court or
governmental authority of the United States or The Commonwealth of Massachusetts
is required for the consummation by the Trust of the actions contemplated
herein, except such as have been obtained under the 1933 Act, the 1934 Act and
the 1940 Act, and such as may be required under state securities laws; (f) only
insofar as they relate to the Acquiring Fund, the descriptions in the Proxy
Statement of statutes, legal and governmental proceedings, investigations,
orders, decrees or judgments of any court or governmental body in the United
States and contracts and other documents, if any, are accurate and fairly
present the information required to be shown; (g) to the knowledge of such
counsel, there is no legal, administrative or governmental proceeding,
investigation, order, decree or judgment of any court or governmental body, only
insofar as they relate to the Acquiring Fund or its assets or properties,
pending, threatened or otherwise existing on or before the effective date of the
N-14 Registration Statement or the Closing Date, which are required to be
described in the N-14 Registration Statement or to be filed as an exhibit to the
N-14 Registration Statement which is not described and filed as required or
which materially and adversely affect the Acquiring Fund's business; (h) the
Trust is registered as an investment company under the 1940 Act and, to the
knowledge of such counsel, its registration with the Commission as an investment
company under the 1940 Act is in full force and effect; and (i) the Proxy
Statement, as of its date, appeared on its face to be appropriately responsive
in all material respects to the requirements of the 1933 Act, the 1934 Act and
the 1940 Act and the rules and regulations thereunder; provided, however, that
such counsel shall be entitled to state that it does not assume any
responsibility for the accuracy, completeness or fairness of the Proxy
Statement.
With respect to all matters of Massachusetts law, such counsel shall be
entitled to state that, with the approval of the Acquired Fund, they have relied
upon the opinion of Sullivan & Worcester LLP and that their opinion is subject
to the same assumptions, qualifications and limitations with respect to such
matters as are contained in the opinion of Sullivan & Worcester LLP. Such
opinion also shall include such other matters incident to the transaction
contemplated hereby as the Acquired Fund may reasonably request.
In this paragraph 6.3, references to the Proxy Statement include and
relate only to the text of such Proxy Statement and not, except as specifically
stated above, to any exhibits or attachments thereto or to any documents
incorporated by reference therein.
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6.4 The Board of Trustees of the Acquiring Fund, including a majority
of the trustees who are not "interested persons" of the Acquiring Fund (as
defined in the 1940 Act), shall have determined that this Agreement and the
transactions contemplated hereby are in the best interests of the Acquiring Fund
and that the interests of the shareholders in the Acquiring Fund would not be
diluted as a result of such transactions, and the Acquiring Fund shall have
delivered to the Acquired Fund at the Closing, a certificate, executed by an
officer, to the effect that the condition described in this subparagraph has
been satisfied.
7. Conditions Precedent to Obligations of the Acquiring Fund
The obligations of the Acquiring Fund to complete the transactions
provided for herein shall be subject, at its election, to the performance by the
Acquired Fund of all the obligations to be performed by it hereunder on or
before the Closing Date and, in addition thereto, the following conditions:
7.1. All representations and warranties by or on behalf of the Acquired
Fund contained in this Agreement shall be true and correct in all material
respects as of the date hereof and, except as they may be affected by the
transactions contemplated by this Agreement, as of the Closing Date with the
same force and effect as if made on and as of the Closing Date;
7.2. The Acquired Fund shall have delivered to the Acquiring Fund a
statement of the Acquired Fund's assets and liabilities as of the Closing Date,
certified by the Treasurer or Assistant Treasurer of the Acquired Fund;
7.3. The Acquired Fund shall have delivered to the Acquiring Fund on
the Closing Date a certificate executed in its name by its Chairman, Vice
President, Secretary, Treasurer or Assistant Treasurer, in form and substance
satisfactory to the Acquiring Fund and dated as of the Closing Date, to the
effect that the representations and warranties of the Acquired Fund made in this
Agreement are true and correct at and as of the Closing Date, except as they may
be affected by the transactions contemplated by this Agreement, and as to such
other matters as the Acquiring Fund shall reasonably request; and
7.4. The Acquiring Fund shall have received on the Closing Date a
favorable opinion of Willkie Farr & Gallagher, counsel to the Acquired Fund, in
a form satisfactory to the Secretary of the Acquiring Fund, covering the
following points:
That (a) the Acquired Fund is a validly existing corporation and in
good standing under the laws of the State of Maryland and has the statutory
power to own all of its properties and assets and to carry on its business as a
registered investment company; (b) the Agreement has been duly authorized,
executed and delivered by the Acquired Fund and, assuming due authorization,
execution and delivery of the Agreement by the other parties hereto, is a valid
and binding obligation of the Acquired Fund in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights and to general
A-14
equity principles; (c) the execution and delivery of the Agreement did not, and
the consummation of the transactions contemplated hereby will not, conflict with
the Acquired Fund's Articles of Incorporation or By-Laws or result in a material
violation of any provision of any material agreement (known to such counsel) to
which the Acquired Fund is a party or by which it or its property is bound or,
to the knowledge of such counsel, result in the acceleration of any obligation
or the imposition of any penalty, under any material agreement, judgment, or
decree to which the Acquired Fund is a party or by which it or its property is
bound; (d) to the knowledge of such counsel, no consent, approval, authorization
or order of any court or governmental authority of the United States or the
State of Maryland is required for the consummation by the Acquired Fund of the
transactions contemplated herein, except such as have been obtained under the
1933 Act, the 1934 Act and the 1940 Act, and such as may be required under state
securities laws; (e) the Proxy Statement (except as to financial and statistical
data contained therein, as to which no opinion need be given), as of its date,
appeared on its face to be appropriately responsive in all material respects to
the 1934 Act and the 1940 Act and the rules and regulations thereunder;
provided, however, that such counsel shall be entitled to state that it does not
assume any responsibility for the accuracy, completeness or fairness of the
Proxy Statement; (f) to the knowledge of such counsel, there is no legal,
administrative or governmental proceeding, investigation, order, decree or
judgment of any court or governmental body, only insofar as they relate to the
Acquired Fund or its assets or properties, pending, threatened or otherwise
existing on or before the effective date of the N-14 Registration Statement or
the Closing Date, which is required to be described in the N-14 Registration
Statement or to be filed as an exhibit to the N-14 Registration Statement which
is not described or filed as required or which materially and adversely affect
the Acquired Fund's business; and (g) the Acquired Fund is registered as an
investment company under the 1940 Act, and, to the knowledge of such counsel,
its registration with the Commission as an investment company under the 1940 Act
is in full force and effect.
With respect to all matters of Maryland law, such counsel shall be
entitled to state that, with the approval of the Acquiring Fund, they have
relied upon the opinion of Venable, Baetjer and Howard, LLP and that their
opinion is subject to the same assumptions, qualifications and limitations with
respect to such matters as are contained in the opinion of Venable, Baetjer and
Howard, LLP. Such opinion also shall include such other matters incident to the
transaction contemplated hereby as the Acquiring Fund may reasonably request.
In this paragraph 7.4, references to the Proxy Statement include and
relate only to the text of such Proxy Statement and not to any exhibits or
attachments thereto or to any documents incorporated by reference therein.
7.5. The Acquiring Fund shall have received from PricewaterhouseCoopers
LLP a letter addressed to the Acquiring Fund dated as of the effective date of
the N-14 Registration Statement in form and substance satisfactory to the
Acquiring Fund, to the effect that:
A-15
(a) they are independent public accountants with respect to the
Acquired Fund within the meaning of the 1933 Act and the applicable regulations
thereunder; and
(b) in their opinion, the financial statements and financial highlights
of the Acquired Fund included or incorporated by reference in the N-14
Registration Statement and reported on by them comply as to form in all material
aspects with the applicable accounting requirements of the 1933 Act and the
rules and regulations thereunder.
7.6. The Acquired Fund shall have received from PricewaterhouseCoopers
LLP a letter addressed to the Acquired Fund dated as of the effective date of
the N-14 Registration Statement in form and substance satisfactory to the
Acquired Fund, to the effect that:
(a) they are independent public accountants with respect to the
Acquiring Fund within the meaning of the 1933 Act and the applicable regulations
thereunder; and
(b) in their opinion, the financial statements and financial highlights
of the Acquiring Fund included or incorporated by reference in the N-14
Registration Statement and reported on by them comply as to form in all material
aspects with the applicable accounting requirements of the 1933 Act and the
rules and regulations thereunder.
7.7. The Acquiring Fund and the Acquired Fund shall have received from
PricewaterhouseCoopers LLP a letter addressed to both Funds and dated as of the
effective date of the N-14 Registration Statement in form and substance
satisfactory to each Fund, to the effect that: on the basis of limited
procedures agreed upon by the Acquiring Fund and the Acquired Fund and described
in such letter (but not an examination in accordance with generally accepted
auditing standards), specified information relating to each Fund appearing in
the N-14 Registration Statement and the Proxy Statement has been obtained from
the accounting records of each Fund or from schedules prepared by officers of
each Fund having responsibility for financial and reporting matters and such
information is in agreement with such records, schedules or computations made
therefrom.
7.8. The Acquired Fund shall have delivered to the Acquiring Fund,
pursuant to paragraph 4.1(f), copies of financial statements of the Acquired
Fund as of and for the fiscal year ended October 31, 2002.
A-16
7.9. The Acquiring Fund shall have received from
PricewaterhouseCoopers LLP a letter addressed to the Acquiring Fund and dated as
of the Closing Date stating that, as of a date no more than three (3) business
days prior to the Closing Date, PricewaterhouseCoopers LLP performed limited
procedures and that on the basis of those procedures it confirmed the matters
set forth in paragraph 7.6.
7.10. The Board of Directors of the Acquired Fund, including a majority
of the directors who are not "interested persons" of the Acquired Fund (as
defined by the 1940 Act), shall have determined that this Agreement and the
transactions contemplated hereby are in the best interests of the Acquired Fund
and that the interests of the shareholders in the Acquired Fund would not be
diluted as a result of such transactions, and the Acquired Fund shall have
delivered to the Acquiring Fund at the Closing, a certificate, executed by an
officer, to the effect that the condition described in this subparagraph has
been satisfied.
8. Further Conditions Precedent to Obligations of the Acquiring Fund
and the Acquired Fund
If any of the conditions set forth below do not exist on or before the
Closing Date with respect to the Acquiring Fund, the Acquired Fund shall, and if
any of such conditions do not exist on or before the Closing Date with respect
to the Acquired Fund, the Acquiring Fund shall, at their respective option, not
be required to consummate the transactions contemplated by this Agreement.
8.1. The Agreement and the transactions contemplated herein shall have
been approved by the requisite vote of the holders of the outstanding shares of
the Acquired Fund in accordance with the provisions of its Articles of
Incorporation and applicable law and certified copies of the votes evidencing
such approval shall have been delivered to the Acquiring Fund.
8.2. On the Closing Date no action, suit or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection with, this
Agreement or the transactions contemplated herein.
8.3. All consents of other parties and all other consents, orders and
permits of federal, state and local regulatory authorities (including those of
the Commission and of state blue sky and securities authorities, including
"no-action" positions of and exemptive orders from such federal and state
authorities) deemed necessary by the Acquiring Fund or the Acquired Fund to
permit consummation, in all material respects, of the transactions contemplated
hereby shall have been obtained, except where failure to obtain any such
consent, order or permit would not involve a risk of a material adverse effect
on the assets or properties of the Acquiring Fund or the Acquired Fund, provided
that either party hereto may for itself waive any of such conditions.
8.4. The N-14 Registration Statement and the Acquiring Fund
Registration Statement shall each have become or be effective under the 1933 Act
A-17
and no stop orders suspending the effectiveness thereof shall have been issued
and, to the best knowledge of the parties hereto, no investigation or proceeding
for that purpose shall have been instituted or be pending, threatened or
contemplated under the 1933 Act.
8.5. The parties shall have received a favorable opinion of Willkie
Farr & Gallagher, addressed to, and in form and substance satisfactory to, the
Acquired Fund and the Acquiring Fund, substantially to the effect that for U.S.
federal income tax purposes:
(a) The transfer of all of the Acquired Fund's assets to the Acquiring
Fund in exchange for the Acquiring Fund Shares and the assumption by the
Acquiring Fund of the liabilities of the Acquired Fund, and the distribution of
such Acquiring Fund Shares to shareholders of the Acquired Fund in exchange for
their shares of the Acquired Fund, will constitute a "reorganization" within the
meaning of Section 368(a) of the Code, and the Acquiring Fund and the Acquired
Fund will each be a "party to a reorganization" within the meaning of Section
368(b) of the Code; (b) no gain or loss will be recognized by the Acquiring Fund
on the receipt of the assets of the Acquired Fund solely in exchange for the
Acquiring Fund Shares and the assumption by the Acquiring Fund of the
liabilities of the Acquired Fund; (c) except for gain or loss regularly
attributable to the termination of the Acquired Fund's taxable year, no gain or
loss will be recognized by the Acquired Fund upon the transfer of the Acquired
Fund's assets to the Acquiring Fund in exchange for the Acquiring Fund Shares
and the assumption by the Acquiring Fund of the liabilities of the Acquired Fund
or upon the distribution of the Acquiring Fund Shares to the Acquired Fund's
shareholders in exchange for their shares of the Acquired Fund; (d) no gain or
loss will be recognized by shareholders of the Acquired Fund upon the exchange
of their Acquired Fund shares for the Acquiring Fund Shares or upon the
assumption by the Acquiring Fund of the liabilities of the Acquired Fund; (e)
the aggregate tax basis of the Acquiring Fund Shares received by each of the
Acquired Fund's shareholders pursuant to the Reorganization will be the same as
the aggregate tax basis of the Acquired Fund Shares held by such shareholder
immediately prior to the Reorganization, and the holding period of the Acquiring
Fund Shares to be received by each Fund shareholder will include the period
during which the Acquired Fund Shares exchanged therefor were held by such
shareholder (provided that such Acquired Fund Shares were held as capital assets
on the date of the Reorganization); and (f) except for assets which may be
revalued as a consequence of a termination of the Acquired Fund's taxable year,
the tax basis of the Acquired Fund's assets acquired by the Acquiring Fund will
be the same as the tax basis of such assets to the Acquired Fund immediately
prior to the Reorganization and the holding period of the assets of the Acquired
Fund in the hands of the Acquiring Fund will include the period during which
those assets were held by the Acquired Fund.
Notwithstanding anything herein to the contrary, neither the Acquiring
Fund nor the Acquired Fund may waive the conditions set forth in this paragraph
8.5.
A-18
9. Brokerage Fees and Expenses; Other Agreements
9.1. The Acquiring Fund represents and warrants to the Acquired Fund,
and the Acquired Fund represents and warrants to the Acquiring Fund, that there
are no brokers or finders or other entities to receive any payments in
connection with the transactions provided for herein.
9.2. CSAM or its affiliates agrees to bear the reasonable expenses
incurred in connection with the transactions contemplated by this Agreement,
whether or not consummated (excluding extraordinary expenses such as litigation
expenses, damages and other expenses not normally associated with transactions
of the type contemplated by this Agreement). These expenses consist of: (i)
expenses associated with preparing this Agreement, the N-14 Registration
Statement and expenses of the shareholder meetings insofar as they relate to
approval of this Agreement and the transactions contemplated thereby; (ii)
expenses associated with preparing and filing the N-14 Registration Statement
covering the Acquiring Fund Shares to be issued in the Reorganization insofar as
they relate to approval of this Agreement and the transactions contemplated
thereby; (iii) registration or qualification fees and expenses of preparing and
filing such forms, if any, necessary under applicable state securities laws to
qualify the Acquiring Fund Shares to be issued in connection with the
Reorganization; (iv) postage; printing; accounting fees; and legal fees incurred
by the Acquiring Fund and by the Acquired Fund in connection with the
transactions contemplated by this Agreement; (v) solicitation costs incurred in
connection with the shareholders meeting referred to in clause (i) above and
paragraph 5.2 hereof insofar as they relate to approval of this Agreement and
the transactions contemplated thereby and (vi) any other reasonable
Reorganization expenses.
9.3. Any other provision of this Agreement to the contrary
notwithstanding, any liability of either Fund under this Agreement, or in
connection with the transactions contemplated herein with respect to such Fund,
shall be discharged only out of the assets of such Fund.
10. Entire Agreement; Survival of Warranties
10.1. The Acquiring Fund and the Acquired Fund agree that neither party
has made any representation, warranty or covenant not set forth herein and that
this Agreement constitutes the entire agreement among the parties.
10.2. The representations, warranties and covenants contained in this
Agreement or in any document delivered pursuant hereto or in connection herewith
shall survive the consummation of the transactions contemplated hereunder.
11. Termination
11.1. This Agreement may be terminated at any time at or prior to the
Closing Date by: (1) mutual agreement of the Acquired Fund and the Acquiring
Fund; (2) the Acquired Fund in the event the Acquiring Fund shall, or the
Acquiring Fund, in the event the Acquired Fund shall, materially breach any
A-19
representation, warranty or agreement contained herein to be performed at or
prior to the Closing Date; or (3) the Acquired Fund or the Acquiring Fund in the
event a condition herein expressed to be precedent to the obligations of the
terminating party or parties has not been met and it reasonably appears that it
will not or cannot be met within a reasonable time.
11.2. In the event of any such termination, there shall be no liability
for damages on the part of either the Acquiring Fund, the Trust or the Acquired
Fund, or their respective Trustees, Directors or officers, to the other party or
parties.
12. Amendments
This Agreement may be amended, modified or supplemented in writing in
such manner as may be mutually agreed upon by the authorized officers of the
Acquired Fund and the Acquiring Fund; provided, however, that following the
meeting of the Acquired Fund's shareholders called by the Acquired Fund pursuant
to paragraph 5.2 of this Agreement no such amendment may have the effect of
changing the provisions for determining the number of the Acquiring Fund Shares
to be issued to the Acquired Fund's Shareholders under this Agreement to the
detriment of such shareholders without their further approval.
13. Notices
13.1. Any notice, report, statement or demand required or permitted by
any provisions of this Agreement shall be in writing and shall be given by
prepaid telegraph, telecopy or certified mail addressed to the Acquiring Fund
at:
466 Lexington Avenue
New York, NY 10017
Attention: Hal Liebes, Esq.
or to the Acquired Fund at:
466 Lexington Avenue
New York, NY 10017
Attention: Hal Liebes, Esq.
14. Headings; Counterparts; Governing Law; Assignment; Limitation of
Liability
14.1. The article and paragraph headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
14.2. This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original.
14.3. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York.
A-20
14.4. This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof or of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Except as provided in
Section 5.7, nothing herein expressed or implied is intended or shall be
construed to confer upon or give any person, firm or corporation, other than the
parties hereto and their respective successors and assigns, any rights or
remedies under or by reason of this Agreement.
14.5. Notice is hereby given that this Agreement is entered into on
behalf of the Acquiring Fund by an officer of the Trust, and on behalf of the
Acquired Fund by an officer of the Acquired Fund, in each case in such officer's
capacity as an officer and not individually. It is understood and expressly
stipulated that none of the Directors, Trustees, officers or shareholders of the
Acquired Fund or the Trust are personally liable hereunder. All persons dealing
with the Acquiring Trust should look solely to the property of the Acquiring
Trust for the enforcement of any claims against the Acquiring Trust.
A-21
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by its Chairman, President, Vice President or Managing
Director and attested to by its Vice President, Secretary or Assistant
Secretary.
CREDIT SUISSE STRATEGIC VALUE FUND, INC.
By: /s/ Hal Liebes
Name: Hal Liebes
Title: Vice President and Secretary
Attestation By: /s/ Gregory N. Bressler
Name: Gregory N. Bressler
Title: Assistant Secretary
CREDIT SUISSE CAPITAL FUNDS
For and on Behalf of CREDIT SUISSE LARGE CAP VALUE FUND
By: /s/ Hal Liebes
Name: Hal Liebes
Title: Vice President and Secretary
Attestation By: /s/ Gregory N. Bressler
Name: Gregory N. Bressler
Title: Assistant Secretary
Solely with respect to paragraphs 4.3, 5.9 and 9.2 hereof:
CREDIT SUISSE ASSET MANAGEMENT, LLC
By: /s/ Hal Liebes
Name: Hal Liebes
Title: Managing Director
Attestation By: /s/ Gregory N. Bressler
Name: Gregory N. Bressler
Title: Director
A-22
THIS PAGE INTENTIONALLY LEFT BLANK
CS-SVMRGR-0303
LEGAL MATTERS
Certain legal matters concerning the issuance of shares of beneficial
interest of the Acquiring Fund will be passed upon by Willkie Farr & Gallagher,
787 Seventh Avenue, New York, New York 10019-6099, counsel to the Acquiring
Fund. In rendering such opinion, Willkie Farr & Gallagher may rely on an opinion
of Sullivan & Worcester LLP as to certain matters under Massachusetts law.
CREDIT SUISSE
STRATEGIC VALUE FUND, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 11, 2003 AT 1:00 P.M.
I hereby appoint Rocco Del Guercio and Gregory Bressler, and each of them, each
with the full power of substitution, as proxies for the undersigned to vote the
shares of Credit Suisse Strategic Value Fund, Inc. (the "Fund"), as to which I
am entitled to vote, as shown on the reverse side, at a Special Meeting of the
Shareholders of the Fund to be held on Friday, April 11, 2003, at 1:00 p.m.,
Eastern Time, at the offices of the Fund, 466 Lexington Avenue, New York, New
York 10017, 16th Floor, and any adjournments thereof (the "Meeting"), as
follows:
I hereby revoke any and all proxies with respect to such shares previously given
by me. I acknowledge receipt of the Proxy Statement dated March 11, 2003.
THIS PROXY WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATION IS MADE, THIS PROXY
WILL BE VOTED "FOR" THE PROPOSALS.
This instruction may be revoked at any time prior to its exercise at the Meeting
by execution of a subsequent proxy card, by written notice to the Secretary of
the Fund or by voting in person at the Meeting.
- --------------------------------------------------------------------------------
PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Please sign exactly as your name appears on the books of the Fund. Joint owners
should each sign personally. Trustees and other fiduciaries should indicate the
capacity in which they sign, and where more than one name appears, a majority
must sign. If a corporation, this signature should be that of an authorized
officer who should state his or her title.
- --------------------------------------------------------------------------------
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
- --------------------------------------- ------------------------------------
- --------------------------------------- ------------------------------------
- --------------------------------------- ------------------------------------
- --------------------------------------- ------------------------------------
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
- ------------------------------------------------- THE BOARD OF DIRECTORS OF THE FUND UNANIMOUSLY RECOMMENDS A
CREDIT SUISSE STRATEGIC VALUE FUND, INC. VOTE FOR THE PROPOSALS
- ------------------------------------------------- ---
VOTE THIS CARD TODAY For Against Abstain
By mail; phone (1-800-714-3312); 1. To approve an agreement [ ] [ ] [ ]
fax (212-269-2796); or and Plan of Reorganization (the
ONLINE AT WWW.CREDITSUISSEFUNDS.COM "Plan") providing that (i) Credit
(CLICK ON THE PROXY BUTTON) Suisse Strategic value Fund,
Inc. (the "Acquired Fund"), would
transfer all of its assets in
exchange for shares of beneficial
interest of the Credit Suisse Large
Cap Value Fund (the "Acquiring Fund"),
a series of Credit Suisse Capital Funds,
Inc., and the assumption by the Acquiring
Fund of the Acquired Fund's liabilities,
(ii) such shares of beneficial interest
of the Acquiring Fund would be distributed
to shareholders of the Acquired Fund in
liquidation of the Acquired Fund, and
(iii) the Acquired Fund would subsequently
be dissolved.
For All Withheld For all
Nominees Except
[ ] [ ] [ ]
2. To elect Directors of the Acquired Fund:
R.H. Francis J.W. Fritz Joseph D. Gallagher J.E. Garten
B-1
----------------------------------------------------
P.F. Krogh J.S. Pasman W.W. Priest
----------------------------------------------------
S.N. Rappaport
----------------------------------------------------
INSTRUCTION: To withhold authority to vote for any
individual nominee, mark the "For All Except" box and strike
a line through the name(s) of the nominee(s).
3. To modify and/or eliminate certain Acquired Fund
Investment Restrictions on:
CONTROL NUMBER: Borrowing Short Sales
Securities Lending Margin Transaction
Real Estate Pledging
10% per Issuer Limit
For Against Abstain
[ ] [ ] [ ]
If you wish to vote against or abstain from
a particular item in Item 3 applicable to the
Acquired For All Except As Marked Fund, mark
this box and write the number of the item on
the line above and indicate a "Vote Against"
or an "Abstention".
For Against Abstain
[ ] [ ] [ ]
4. To change the investment objective of the
Acquired Fund from fundamental to non-fundamental.
Mark box at right if an address change [ ]
Please be sure to sign and date this or comment has been noted on the reverse
Proxy. Date side of this card.
- ----------------------------------------- ------------
- ------------------------------------------------------
Shareholder sign here Co-owner sign here RECORD DATE SHARES:
B-2
PART B
INFORMATION REQUIRED IN THE STATEMENT OF ADDITIONAL INFORMATION
-2-
STATEMENT OF ADDITIONAL INFORMATION
466 Lexington Avenue
New York, New York 10017-3140
(800) 927-2874
RELATING TO THE ACQUISITION BY THE CREDIT SUISSE CAPITAL FUNDS - LARGE CAP VALUE
FUND (THE "ACQUIRING FUND")
OF THE ASSETS OF THE CREDIT SUISSE STRATEGIC VALUE, INC. (THE "ACQUIRED FUND").
Dated: March 11, 2003
This Statement of Additional Information, relating specifically to the
proposed transfer of all of the assets of the Acquired Fund to the Acquiring
Fund, in exchange for shares of beneficial interest of the Acquiring Fund and
the assumption by the Acquiring Fund of the stated liabilities of the Acquired
Fund, consists of this cover page and the following described documents, each of
which accompanies this Statement of Additional Information and is incorporated
herein by reference.
1. Statement of Additional Information for the Acquiring Fund,
dated February 28, 2003.
2. Statement of Additional Information for the Acquired Fund,
dated February 28, 2003.
3. Annual Report of the Acquiring Fund for the year ended October
31, 2002.
4. Annual Report of the Acquired Fund for the year ended October
31, 2002.
This Statement of Additional Information is not a prospectus. A
Prospectus/Proxy Statement, dated March 11, 2003, relating to the
above-referenced matter may be obtained without charge by calling or writing the
Acquiring Fund at the telephone number or address set forth above. This
Statement of Additional Information should be read in conjunction with the
Prospectus/Proxy Statement.
FINANCIAL STATEMENTS
The Annual Report of each of the Acquired Fund and the Acquiring Fund
for the year ended October 31, 2002, including audited financial statements,
notes to the financial statements and report of the independent auditors, are
incorporated by reference herein. To obtain a copy of the Annual Reports (and
any more recent semi-annual report) without charge, please call (800) 927-2874.
PRO FORMA FINANCIAL STATEMENTS
The following tables set forth the unaudited pro forma condensed
Statement of Assets and Liabilities and Schedule of Investments as of October
31, 2002 and the unaudited pro forma condensed Statement of Operations for the
fiscal year ended October 31, 2002 for each of the Acquiring Fund and the
Acquired Fund, as adjusted, giving effect to the Acquisition.
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 2002 (UNAUDITED)
ACQUIRED FUND ACQUIRING FUND
CS STRATEGIC VALUE CS LARGE CAP VALUE ADJUSTMENTS PRO FORMA
------------------ ------------------ ----------- ---------
COST VALUE COST VALUE COST VALUE
---- ----- ---- ----- ---- -----
ASSETS
Investments at value 205,068,528 202,097,601 124,047,600 148,066,006 329,116,128 350,163,607
Cash - 263 - 54 - 317
Receivable for investment sold
unsettled - 6,656,877 - - - 6,656,877
Receivable for Fund shares sold - 133,176 - 145,205 - 278,381
Dividends and interests receivable - 180,970 - 286,978 - 467,948
Prepaid expenses and other assets - 33,766 - 16,011 (33,766)(a) - 16,011
Other Assets - - - 1,573 - 1,573
------------ ----------- -----------
Total Assets 209,102,653 148,515,827 357,584,714
------------ ----------- -----------
LIABILITIES
Payable for investments purchased 7,124,611 - 7,124,611
unsettled
Advisory fee payable 124,801 37,534 162,335
Administration fee payable 34,272 25,991 60,263
Distribution fee payable 10,965 49,586 60,551
Payable for Fund shares redeemed 399,623 93,911 493,534
Accrued expenses payable 152,283 98,486 250,769
------------ ----------- -----------
Total liabilities 7,846,555 305,508 8,152,063
------------ ----------- -----------
NET ASSETS 201,256,098 148,210,319 (33,766)(a) 349,432,651
============ =========== =========== ===========
COMMON CLASS
Net Assets 175,121,019 3,060,715 (175,121,019)(a),(b) 3,060,715
Shares outstanding 16,586,562 181,923 (16,586,562)(b) 181,923
Net assets value, offering price
and redemption
price per share 10.56 16.82 16.82
ADVISOR CLASS
Net Assets 25,500,591 - (4,278)(a),(b) 25,496,313
Shares outstanding 2,417,186 - (901,353)(b) 1,515,833
Net assets value, offering price
and redemption
price per share 10.55 16.82
CLASS A SHARES
Net Assets 404,067 114,733,069 175,091,570(a),(b) 290,228,706
Shares outstanding 38,298 6,817,930 10,388,496 17,244,724
Net assets value and redemption
price per share 10.55 16.83 16.83
Maximum offering price per share
(net asset value plus maximum sales 11.19 17.86 17.86
charge)
CLASS B SHARES
Net Assets 88,367 28,312,471 (15)(a) 28,400,823
Shares outstanding 8,410 1,699,492 (3,171) 1,704,731
Net assets value and offering price
price per share 10.51 16.66 16.66
CLASS C SHARES
Net Assets 142,054 2,104,064 (24)(a) 2,246,094
Shares outstanding 13,525 126,880 (4,935) 135,470
Net assets value and offering price
price per share 10.50 16.58 16.58
See Pro Form notes to financial statements.
SCHEDULE OF INVESTMENTS
OCTOBER 31, 2002 (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------
CREDIT SUISSE STRATEGIC VALUE FUND (ACQUIRED FUND)
SECURITY NAME
SHARES MARKET VALUE
3M Co. 40,400 $ 5,128,376
Abbott Laboratories 60,700 2,541,509
Abercrombie & Fitch Co. Class A 124,500 2,218,590
Agilent Technologies, Inc. 111,400 1,531,750
Alcoa, Inc. 183,200 4,041,392
Allied Capital Corporation Rights 56,900 589
American International Group, Inc. 44,235 2,766,899
American Standard Companies, Inc. 107,500 7,170,250
Anheuser-Busch Companies, Inc. 107,100 5,650,596
Bank of America Corp. 29,300 2,045,140
BellSouth Corp. 66,600 1,741,590
Best Buy Company, Inc. 77,800 1,603,458
Burlington Northern Santa Fe Corp. 81,200 2,089,276
Cendant Corp. 270,100 3,106,150
Charter One Financial, Inc. 118,230 3,580,005
Citigroup, Inc. 130,700 4,829,365
Comcast Corp. Special Class A 105,000 2,416,050
ConocoPhillips 89,050 4,318,925
Convergys Corp. 109,500 1,629,360
CVS Corp. 76,800 2,129,664
Devon Energy Corp. 81,600 4,120,800
Eaton Corp. 46,000 3,145,940
Equity Residential Properties, (Callable 11/27/02 @ $25.91) 101,000 2,392,690
Exxon Mobil Corp. 132,100 4,446,486
Fannie Mae 63,700 4,258,982
Federated Department Stores, Inc. 149,100 4,577,370
General Mills, Inc. 64,300 2,656,876
H&R Block, Inc. 73,800 3,275,244
Harsco Corp. 75,000 1,923,750
Hartford Financial Services Group, Inc. 48,800 1,927,600
Hewlett-Packard Co. 169,120 2,672,096
Ingersoll-Rand Co. Class A 118,900 4,637,100
ITT Industries, Inc. 128,600 8,356,428
Jefferson-Pilot Corp. 55,500 2,228,325
Johnson Controls, Inc. 46,000 3,588,000
Kimberly-Clark Corp. 40,600 2,090,900
Knight-Ridder, Inc. 60,500 3,640,890
Lear Corp. 85,900 3,139,645
Lehman Brothers Holdings, Inc. 74,100 3,947,307
Lowe's Companies, Inc. 63,600 2,654,028
McGraw-Hill Companies, Inc. 34,700 2,238,150
Micron Technology, Inc. 103,700 1,659,200
Navistar International Corp. 100,000 2,242,000
Pepsi Bottling Group, Inc. 78,800 2,123,660
PepsiCo, Inc. 125,220 5,522,202
Pfizer Inc. 131,100 4,165,047
Pitney Bowes, Inc. 87,200 2,925,560
SCHEDULE OF INVESTMENTS
OCTOBER 31, 2002 (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------
CREDIT SUISSE STRATEGIC VALUE FUND (ACQUIRED FUND)
SECURITY NAME
SHARES MARKET VALUE
Pride International, Inc. 213,600 2,964,768
Public Service Enterprise Group, Inc. 63,000 1,804,950
Rohm & Haas Co. 93,900 3,124,053
Ross Stores, Inc. 68,400 2,862,540
Royal Dutch Petroleum Co. NY Shares 74,900 3,204,222
St. Paul Companies, Inc. 93,000 3,050,400
Tektronix, Inc. 142,400 2,516,208
Tiffany & Co. 91,900 2,405,942
Tyco International, Ltd. 119,800 1,732,308
United Parcel Service, Inc. Class B 30,000 1,800,300
United Technologies Corp. 81,100 5,001,437
Viacom, Inc. Class B* 54,300 2,422,323
Wells Fargo & Co. 97,000 4,895,590
Wyeth 66,100 2,214,350
PAR
State Street Bank & Trust Co. Euro Time Deposit, 1.750%, 11/01/02 $ 11,003 11,003,000
-------------
$202,097,601
=============
SCHEDULE OF INVESTMENTS
OCTOBER 31, 2002 (UNAUDITED)
- ----------------------------------------------------------------------------------------------------------
SHARES MARKET VALUE
CREDIT SUISSE LARGE CAP VALUE FUND (ACQUIRING FUND)
SECURITY NAME
3M Co. 15,200 $ 1,929,488
American Express Co. 90,300 3,284,211
American International Group, Inc. 56,814 3,553,716
Avery Dennison Corp. 67,700 4,213,648
Avon Products, Inc. 56,000 2,715,440
Bank of America Corp. 26,937 1,880,203
Banknorth Group, Inc. 157,600 3,651,592
Berkshire Hathaway, Inc. Class A 55 4,080,450
Burlington Northern Santa Fe Corp. 128,300 3,301,159
Burlington Resources, Inc. 60,500 2,492,600
Cardinal Health, Inc. 56,500 3,910,365
Charter One Financial, Inc. 105,000 3,179,400
ChevronTexaco Corp. 39,780 2,690,321
Citigroup, Inc. 131,333 4,852,754
Comcast Corp. Special Class A 97,200 2,236,572
ConocoPhillips 79,000 3,831,500
Costco Wholesale Corp. 56,000 1,900,080
Devon Energy Corp. 59,500 3,004,750
Emerson Electric Co. 50,800 2,447,544
Engelhard Corp. 108,600 2,405,490
Exxon Mobil Corp. 67,700 2,278,782
Federated Department Stores, Inc. 66,400 2,038,480
Freddie Mac 54,300 3,343,794
General Dynamics Corp. 49,700 3,932,761
General Electric Co. 87,000 2,196,750
General Mills, Inc. 84,000 3,470,880
Hartford Financial Services Group, Inc. 62,900 2,484,550
Hewlett-Packard Co. 105,000 1,659,000
Home Depot, Inc. 101,900 2,942,872
Johnson & Johnson 87,100 5,117,125
Kimberly-Clark Corp. 94,200 4,851,300
Merck & Co., Inc. 40,600 2,202,144
Microsoft Corp. 70,100 3,748,247
Morgan Stanley 43,100 1,677,452
National Fuel Gas Co. 125,000 2,521,250
Pfizer Inc. 7,025 223,184
Pharmacia Corp. 44,351 1,907,093
Philip Morris Companies, Inc. 68,700 2,799,525
Progress Energy, Inc. 88,700 3,700,564
Rohm & Haas Co. 102,400 3,406,848
Sysco Corp. 121,700 3,855,456
Tribune Co. 52,400 2,517,820
Tyco International, Ltd. 74,000 1,070,040
Unisys Corp. 161,200 1,407,276
SCHEDULE OF INVESTMENTS
OCTOBER 31, 2002 (UNAUDITED)
- ----------------------------------------------------------------------------------------------------------
SHARES MARKET VALUE
CREDIT SUISSE LARGE CAP VALUE FUND (ACQUIRING FUND)
SECURITY NAME
United Technologies Corp. 83,700 5,161,779
Washington Mutual, Inc. 134,000 4,791,840
WGL Holdings, Inc. 100,800 2,331,504
PAR
Ginnie Mae Pool #002217X, 6.500%, 8/15/03 $0 407
State Street Bank & Trust Co. Euro Time Deposit, 1.750%, 11/01/02 8,866 8,866,000
------------
$148,066,006
=============
COMBINED SCHEDULE OF INVESTMENTS
OCTOBER 31, 2002 (UNAUDITED)
- ---------------------------------------------------------------------------------------------------------
PRO FORMA FUND
SECURITY NAME
SHARES MARKET VALUE
3M Co. 55,600 $ 7,057,864
Abbott Laboratories 60,700 2,541,509
Abercrombie & Fitch Co. Class A 124,500 2,218,590
Agilent Technologies, Inc. 111,400 1,531,750
Alcoa, Inc. 183,200 4,041,392
Allied Capital Corporation Rights 56,900 589
American Express Co. 90,300 3,284,211
American International Group, Inc. 101,049 6,320,615
American Standard Companies, Inc. 107,500 7,170,250
Anheuser-Busch Companies, Inc. 107,100 5,650,596
Avery Dennison Corp. 67,700 4,213,648
Avon Products, Inc. 56,000 2,715,440
Bank of America Corp. 56,237 3,925,343
Banknorth Group, Inc. 157,600 3,651,592
BellSouth Corp. 66,600 1,741,590
Berkshire Hathaway, Inc. Class A 55 4,080,450
Best Buy Company, Inc. 77,800 1,603,458
Burlington Northern Santa Fe Corp. 209,500 5,390,435
Burlington Resources, Inc. 60,500 2,492,600
Cardinal Health, Inc. 56,500 3,910,365
Cendant Corp. 270,100 3,106,150
Charter One Financial, Inc. 223,230 6,759,405
ChevronTexaco Corp. 39,780 2,690,321
Citigroup, Inc. 262,033 9,682,119
Comcast Corp. Special Class A 202,200 4,652,622
ConocoPhillips 168,050 8,150,425
Convergys Corp. 109,500 1,629,360
Costco Wholesale Corp. 56,000 1,900,080
CVS Corp. 76,800 2,129,664
Devon Energy Corp. Devon Energy Corp. 141,100 7,125,550
Eaton Corp. 46,000 3,145,940
Emerson Electric Co. 50,800 2,447,544
Engelhard Corp. 108,600 2,405,490
Equity Residential Properties, (Callable 11/27/02 @ $25.91) 101,000 2,392,690
Exxon Mobil Corp. Exxon Mobil Corp. 199,800 6,725,268
Fannie Mae 63,700 4,258,982
Federated Department Stores, Inc. 215,500 6,615,850
Freddie Mac 54,300 3,343,794
General Dynamics Corp. 49,700 3,932,761
General Electric Co. 87,000 2,196,750
General Mills, Inc. General Mills, Inc. 148,300 6,127,756
H&R Block, Inc. 73,800 3,275,244
Harsco Corp. 75,000 1,923,750
Hartford Financial Services Group, Inc. 111,700 4,412,150
Hewlett-Packard Co. 274,120 4,331,096
Home Depot, Inc. 101,900 2,942,872
Ingersoll-Rand Co. Class A 118,900 4,637,100
ITT Industries, Inc. 128,600 8,356,428
COMBINED SCHEDULE OF INVESTMENTS
OCTOBER 31, 2002 (UNAUDITED)
- ---------------------------------------------------------------------------------------------------------
PRO FORMA FUND
SECURITY NAME
SHARES MARKET VALUE
Jefferson-Pilot Corp. 55,500 2,228,325
Johnson & Johnson 87,100 5,117,125
Johnson Controls, Inc. 46,000 3,588,000
Kimberly-Clark Corp. 134,800 6,942,200
Knight-Ridder, Inc. 60,500 3,640,890
Lear Corp. 85,900 3,139,645
Lehman Brothers Holdings, Inc. 74,100 3,947,307
Lowe's Companies, Inc. 63,600 2,654,028
McGraw-Hill Companies, Inc. 34,700 2,238,150
Merck & Co., Inc. 40,600 2,202,144
Micron Technology, Inc. 103,700 1,659,200
Microsoft Corp. 70,100 3,748,247
Morgan Stanley 43,100 1,677,452
National Fuel Gas Co. 125,000 2,521,250
Navistar International Corp. 100,000 2,242,000
Pepsi Bottling Group, Inc. 78,800 2,123,660
PepsiCo, Inc. 125,220 5,522,202
Pfizer Inc. 138,125 4,388,231
Pharmacia Corp. 44,351 1,907,093
Philip Morris Companies, Inc. 68,700 2,799,525
Pitney Bowes, Inc. 87,200 2,925,560
Pride International, Inc. 213,600 2,964,768
Progress Energy, Inc. 88,700 3,700,564
Public Service Enterprise Group, Inc. 63,000 1,804,950
Rohm & Haas Co. 196,300 6,530,901
Ross Stores, Inc. 68,400 2,862,540
Royal Dutch Petroleum Co. NY Shares 74,900 3,204,222
St. Paul Companies, Inc. 93,000 3,050,400
Sysco Corp. 121,700 3,855,456
Tektronix, Inc. 142,400 2,516,208
Tiffany & Co. 91,900 2,405,942
Tribune Co. 52,400 2,517,820
Tyco International, Ltd. 193,800 2,802,348
Unisys Corp. 161,200 1,407,276
United Parcel Service, Inc. Class B 30,000 1,800,300
United Technologies Corp. 164,800 10,163,216
Viacom, Inc. Class B* 54,300 2,422,323
Washington Mutual, Inc. 134,000 4,791,840
Wells Fargo & Co. 97,000 4,895,590
WGL Holdings, Inc. 100,800 2,331,504
Wyeth 66,100 2,214,350
PAR
Ginnie Mae Pool #002217X, 6.500%, 8/15/03 $0 407
State Street Bank & Trust Co. Euro Time Deposit, 1.750%, 11/01/02 19,869 19,869,000
--------------
$350,163,607
==============
COMBINED STATEMENT OF OPERATIONS
OCTOBER 31, 2002 (UNAUDITED)
ACQUIRED FUND ACQUIRING FUND
CS STRATEGIC CS LARGE CAP ADJUSTMENTS PRO FORMA
VALUE VALUE
--------------- ---------------- -------------- -------------
INVESTMENT INCOME
Dividends $ 3,945,521 $ 3,506,534 - $ 7,452,055
Interest 101,191 101,632 - 202,823
Foreign tax withheld (13,049) - - (13,049)
--------------- ---------------- -------------- -------------
Total Investment Income 4,033,663 3,608,166 - $ 7,641,829
--------------- ---------------- -------------- -------------
EXPENSES
Investment advisory services 1,862,407 1,126,184 (620,686) (c) 2,367,905
Distribution fees - Class A 293 332,952 533,323 (d) 866,568
Distribution fees - Class B 339 333,191 33 (e) 333,563
Distribution fees - Class C 1,222 20,948 105 (e) 22,275
Distribution fees - Common Class - 7,388 - 7,388
Distribution fees - Advisor Class 173,655 - - 173,655
Transfer agent 531,124 228,797 (162,584) (f) 597,337
Custodian 22,540 17,760 1,572 (g) 41,872
Administration and accounting fees 426,285 316,764 (67,124) (h) 675,925
Registration fees 93,906 79,854 (93,906) (i) 79,854
Interest 5,989 5,669 (5,989) (i) 5,669
Legal 42,341 55,498 (42,341) (i) 55,498
Directors'/Trustees' fees 15,241 5,558 (15,241) (i) 5,558
Audit 27,475 26,564 4,301 (i) 58,340
Printing 98,514 88,911 (98,514) (i) 88,911
Insurance expense 9,796 14,032 (9,796) (i) 14,032
Miscellaneous 11,685 8,343 (11,685) (i) 8,343
--------------- ---------------- -------------- -------------
3,322,812 2,668,413 (588,532) 5,402,693
Less: Expenses waived and reimbursed by CSAM - (509,588) 509,588 (j) -
--------------- ---------------- -------------- -------------
Net Expenses 3,322,812 2,158,825 (78,944) 5,402,693
--------------- ---------------- -------------- -------------
Net Investment Income 710,851 1,449,341 78,944 2,239,136
--------------- ---------------- -------------- -------------
NET REALIZED AND UNREALIZED GAIN/(LOSS) FROM
INVESTMENTS:
Net Investment gain/(loss) from investments (1,192,972) 3,173,446 - 1,980,474
Net change in unrealized appreciation/
(depreciation) from investments (30,902,727) (13,538,321) - (44,441,048)
--------------- ---------------- -------------- -------------
Net realized and unrealized loss from investments (32,095,699) (10,364,875) - (42,460,574)
--------------- ---------------- -------------- -------------
Net increase/(decrease) in net assets resulting $ (31,384,848) $ (8,915,534) $ 78,944 $ (40,221,438)
=============== ================ ============== =============
See Pro Forma notes to financial statements.
CREDIT SUISSE STRATEGIC VALUE FUND
CREDIT SUISSE LARGE CAP VALUE FUND
NOTES TO PRO FORMA FINANCIAL STATEMENTS
OCTOBER 31, 2002 (UNAUDITED)
1. BASIS OF COMBINATION
The unaudited Pro Forma Combined Portfolio of Investments, Pro Forma
Combined Statement of Assets and Liabilities and Pro Forma Combined Statement of
Operations give effect to the proposed merger of the Credit Suisse Strategic
Value Fund ("CS Strategic Value") into the Credit Suisse Large Cap Value Fund
("CS Large Cap Value"). The proposed merger will be accounted for by the method
of accounting for tax-free mergers of investment companies. The merger provides
for the transfer of all or substantially all of the assets of CS Strategic Value
to CS Large Cap Value and the subsequent liquidation of CS Strategic Value. The
accounting survivor in the proposed merger will be CS Large Cap Value. This is
because although CS Strategic Value has the same investment objective as CS
Large Cap Value, the surviving fund will invest in a style that is similar to
the way in which CS Large Cap Value is currently operated.
The pro forma combined statements should be read in conjunction with
the historical financial statements of the constituent fund and the notes
thereto incorporated by reference in the Registration Statement filed on Form
N-14.
CS Strategic Value and CS Large Cap Value are both, open-end,
management investment companies registered under the Investment Company Act of
1940, as amended.
PRO FORMA ADJUSTMENTS:
The Pro Forma adjustments below reflect the impact of the merger
between CS Strategic Value and CS Large Cap Value.
(a) Elimination of Prepaid expenses from CS Strategic Value
(b) Redemption of Class A and Common Class Shares from CS
Strategic Value and purchase of Class A Shares in Acquiring
Fund
(c) To decrease Investment Advisory Services Fee to reflect the CS
Large Cap Value fee schedule.
(d) To increase 12B-1 fees in Class A shares due to additional
assets.
(e) To adjust 12B-1 fees for Class B and C Shares.
(f) Adjustment based on the contractual agreement with the
transfer agent for the combined fund.
(g) Adjustment based on the contractual agreements with the
custodian for the combined fund.
(h) Adjustment to decrease co-administration fee based on combined
assets.
(i) Assumes elimination of duplicate charges in combination, and
reflects management's estimates of combined pro-forma
operations.
(j) Adjustment to decrease CSAM waiver
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Following is a summary of significant accounting policies, which are
consistently followed by CS Strategic Value / CS Large Cap Value in the
preparation of their financial statements. The policies are in conformity with
accounting principles generally accepted in the United States of America.
Preparation of the financial statements includes the use of management
estimates. Actual results could differ from those estimates.
SECURITY VALUATION - The net asset value of each Fund is determined
daily as of the close of regular trading on the New York Stock Exchange, Inc.
Each Fund's equity investments are valued at market value, which is generally
determined using the last reported sales price. If no sales are reported,
investments are generally valued at the last reported bid price. Debt securities
are valued on the basis of broker quotations or valuations provided by a pricing
service which may use a formula or other objective method that takes into
consideration market indices, yield curves and other specific adjustments.
Securities and other assets for which market quotations are not readily
available are valued at fair value as determined in good faith by the Board of
Directors under procedures established by the Board of Directors in the absence
of readily ascertainable market values. Debt obligations that will mature in 60
days or less are valued on the basis of amortized cost, which approximate market
value, unless the Board determines that using this method would not reflect an
investment's value.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions
are accounted for on a trade date basis. Interest income is recorded on the
accrual basis. Dividends are recorded on the ex-dividend date. Income, expenses
(excluding class-specific expenses) and realized/unrealized gains/losses are
allocated proportionately to each class of shares based upon the relative net
asset value of outstanding shares of that class. The cost of investments sold is
determined by use of the specific identification method for both financial
reporting and income tax purposes.
FEDERAL INCOME TAXES - CS Strategic Value / CS Large Cap Value intends
to qualify for tax treatment applicable to regulated investment companies under
the Internal Revenue Code of 1986 (the "Code"), as amended, and distribute all
of its taxable income to its shareholders. Therefore, no provision has been
recorded for Federal income or excise taxes.
DISTRIBUTIONS TO SHAREHOLDERS - Distributions from net investment
income and net realized capital gains, if any, are declared and paid at least
annually.
STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY 28, 2003
- --------------------------------------------------------------------------------
Class A, B, C and Common Shares of the
CREDIT SUISSE SMALL CAP VALUE FUND
Class A, B, C and Advisor Shares of the
CREDIT SUISSE LARGE CAP VALUE FUND
Class A, B and C Shares of the
CREDIT SUISSE TAX EFFICIENT FUND
CREDIT SUISSE INTERNATIONAL FUND
This combined STATEMENT OF ADDITIONAL INFORMATION provides information
about the Credit Suisse Tax Efficient Fund (the "Tax Efficient Fund"), the
Credit Suisse Large Cap Value Fund (the "Large Cap Value Fund"), the Credit
Suisse Small Cap Value Fund (the "Small Cap Value Fund") and the Credit Suisse
International Fund (the "International Fund") (each a "Fund," and together, the
"Funds") that supplements information contained in (i) the PROSPECTUS for the
Common Shares of the Small Cap Value Fund, dated February 28, 2003; (ii) the
PROSPECTUS for the Advisor Shares of the Large Cap Value Fund; and (iii) the
PROSPECTUS for the the Class A, Class B and Class C shares of the Small Cap
Value Fund, Tax Efficient Fund, Large Cap Value Fund and International Fund,
dated February 28, 2003, each as amended or supplemented from time to time
(together the "PROSPECTUSES"), and is incorporated by reference in its entirety
into those PROSPECTUSES.
Each Fund's audited ANNUAL REPORT, dated October 31, 2002, for the
classes of shares it makes available, which either accompanies this STATEMENT OF
ADDITIONAL INFORMATION or has previously been provided to the investor to whom
this STATEMENT OF ADDITIONAL INFORMATION is being sent, as relevant to the
particular investor, is incorporated herein by reference.
This STATEMENT OF ADDITIONAL INFORMATION is not itself a prospectus.
Copies of the PROSPECTUSES, ANNUAL REPORTS and information regarding each Fund's
current performance may be obtained by writing or telephoning:
CLASS A, CLASS B, CLASS C AND COMMON SHARES ADVISOR SHARES
------------------------------------------- --------------
Credit Suisse Funds Credit Suisse Funds
P.O. Box 55030 P.O. Box 55030
Boston, MA 02205-5030 Boston, MA 02205-5030
(800) 927-2874 Attn: Institutional Services
(800) 222-8977
<Page>
TABLE OF CONTENTS
<Table>
<Caption>
PAGE
INVESTMENT OBJECTIVES AND POLICIES 1
Options Generally 2
OPTIONS ON SECURITIES AND SECURITIES INDICES AND CURRENCY TRANSACTIONS 2
SECURITIES OPTIONS 2
SECURITIES INDEX OPTIONS 5
OTC OPTIONS 5
Currency Exchange Transactions 6
FORWARD CURRENCY CONTRACTS 6
CURRENCY OPTIONS 7
CURRENCY HEDGING 7
Futures Activities 8
FUTURES CONTRACTS 9
OPTIONS ON FUTURES CONTRACTS 10
Hedging Generally 10
ASSET COVERAGE FOR FORWARD CONTRACTS, OPTIONS, FUTURES AND OPTIONS ON FUTURES 11
Foreign Investments 12
FOREIGN CURRENCY EXCHANGE 12
INFORMATION 13
POLITICAL INSTABILITY 13
FOREIGN MARKETS 13
INCREASED EXPENSES 13
PRIVATIZATIONS 14
FOREIGN DEBT SECURITIES 14
SOVEREIGN DEBT 14
BRADY BONDS 15
DEPOSITARY RECEIPTS 16
U.S. Government Securities 17
Money Market Obligations 17
Repurchase Agreements 18
Debt Securities 18
Convertible Securities 19
Temporary Defensive Strategies 19
Securities of Other Investment Companies 19
Lending of Portfolio Securities 20
When-Issued Securities, Delayed-Delivery Transactions and Forward Commitments 20
</Table>
<Page>
<Table>
<Caption>
PAGE
Short Sales 21
Short Sales "Against the Box" 22
Reverse Repurchase Agreements 23
Warrants 23
Non-Publicly Traded and Illiquid Securities 24
RULE 144A SECURITIES 25
Interest Only and Principal Only Instruments 25
Borrowing 25
Small Capitalization and Emerging Growth Companies; Unseasoned Issuers 26
"Special Situation" Companies 26
INVESTMENT RESTRICTIONS 26
Tax Efficient Fund, Small Cap Value Fund, Large Cap Value Fund 27
International Fund 29
PORTFOLIO VALUATION 30
PORTFOLIO TRANSACTIONS 31
PORTFOLIO TURNOVER 35
MANAGEMENT OF THE FUNDS 36
Officers and Boards of Trustees 36
Ownership in Securities of the Funds and Fund Complex 46
Committees and Meetings of Trustees 48
Trustees' Total Compensation for Fiscal Year Ended October 31, 2002 49
Advisory Agreements 49
Advisory Fees Paid to CSAM 51
Sub-Advisory Agreements 52
Board Approval of Advisory Agreements 54
Administration Agreements 55
Code of Ethics 58
Custodian and Transfer Agent 58
Distribution and Shareholder Servicing 59
Common Shares 59
Advisor Shares 59
Class A, Class B and Class C Shares 60
International Fund -- Class A, Class B and Class C Shares 62
Organization of the Funds 66
Tax Efficient Fund, Large Cap Value Fund and Small Cap Value Fund 66
International Fund 67
General 68
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION 69
Common Class Shares 69
Class A Shares, Class B Shares and Class C Shares 70
Initial Sales Charges Waivers 71
Redemptions 72
General 72
Automatic Cash Withdrawal Plan 72
Special Provisions Applicable to Each Fund's Class B and
Class C Shares Only. 73
</Table>
ii
<Page>
<Table>
<Caption>
PAGE
Contingent Deferred Sales Charge - General 73
EXCHANGE PRIVILEGE 74
ADDITIONAL INFORMATION CONCERNING TAXES 75
The Funds and Their Investments 75
Special Tax Considerations 77
STRADDLES 78
OPTIONS AND SECTION 1256 CONTRACTS 78
FOREIGN CURRENCY TRANSACTIONS 78
PASSIVE FOREIGN INVESTMENT COMPANIES 79
ASSET DIVERSIFICATION REQUIREMENT 79
FOREIGN TAXES 80
FUND TAXES ON SWAPS 80
DIVIDENDS AND DISTRIBUTIONS 80
SALES OF SHARES 81
BACKUP WITHHOLDING 81
NOTICES 82
OTHER TAXATION 82
DETERMINATION OF PERFORMANCE 82
Average Annual Total Returns 82
Yield 82
After-Tax Return 86
INDEPENDENT ACCOUNTANTS AND COUNSEL 90
MISCELLANEOUS 91
FINANCIAL STATEMENTS 94
APPENDIX 1
</Table>
iii
<Page>
INVESTMENT OBJECTIVES AND POLICIES
The following policies supplement the descriptions of each Fund's
investment objective and policies in the PROSPECTUSES. There are no assurances
that the Funds will achieve their investment objectives.
The investment objective of the Tax Efficient Fund is long-term
capital appreciation on an after tax basis.
The investment objective of the Large Cap Value Fund is long-term
capital appreciation and continuity of income.
The investment objective of the Small Cap Value Fund is a high level
of growth of capital.
The investment objective of the International Fund is long-term growth
of capital.
The Tax Efficient Fund will invest under normal market conditions, at
least 80% of net assets plus any borrowings for investment purposes in equity
securities of U.S. "blue chip" companies. Blue chip companies are those
companies which, at the time of purchase, are represented in the S&P 500 Index.
The Tax Efficient Fund has an explicit investment strategy of seeking to reduce,
though not eliminate, taxable distributions to shareholders. The practices used
to achieve this strategy include offsetting gains realized in one security by
selling another security at a capital loss, limiting sales of securities that
result in capital gains and holding securities long enough to avoid higher
short-term capital tax gains rates. However, gains may be realized when the Fund
believes the risk of holding a security outweighs tax considerations.
The Large Cap Value Fund will invest, under normal market conditions,
at least 80% of net assets plus any borrowings for investment purposes in equity
securities of U.S. companies with large market capitalizations. The Large Cap
Value Fund considers a large company to be one whose market capitalization is
equal to or greater than the smallest company in the Russell 1000 Index.
The Small Cap Value Fund will invest, under normal market conditions,
at least 80% of net assets plus any borrowings for investment purposes in equity
securities of small U.S. companies that appear to be undervalued. "Small cap"
companies, for the purposes of this Fund, are considered to be companies whose
market capitalization is within the range of capitalizations of companies in the
Russell 2000 Index.
The International Fund will invest, under normal market conditions, at
least 80% of net assets plus any borrowings for investment purposes in equity
securities of issuers from at least three foreign markets. These percentage
requirements will not be applicable during periods when the International Fund
pursues a temporary defensive strategy, as discussed below.
The Funds' 80% investment policies are non-fundamental and may be
changed by the Board of Trustees of the Trusts to become effective upon at least
60 days' notice to shareholders of the applicable Fund prior to any such change.
<Page>
Unless otherwise indicated, all of the Funds are permitted, but not
obligated, to engage in the following investment strategies, subject to any
percentage limitations set forth below. The Funds are not obligated to pursue
any of the following strategies and do not represent that these techniques are
available now or will be available in the future.
OPTIONS GENERALLY. The Funds may purchase and write (sell) options on
securities, securities indices and currencies for both hedging purposes and to
increase total return, which may involve speculation, subject to the limitations
set forth below.
OPTIONS ON SECURITIES AND SECURITIES INDICES AND CURRENCY
TRANSACTIONS. The Tax Efficient Fund and the Large Cap 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 Small
Cap Value Fund may write covered calls, purchase calls, purchase put options and
write covered put options on securities and securities indices both for hedging
and return enhancement purposes. The Small Cap 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, such as financial futures contracts
and options thereon. The International Fund may purchase and sell call and put
options, including securities index options. The International Fund may also
purchase and sell financial futures contracts and options thereon, which are
traded on a commodities exchange or board of trade for certain hedging, return
enhancement, and risk management purposes.
Neither the Tax Efficient Fund nor the Large Cap 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 Small Cap Value Fund may not purchase options if, as a result,
the aggregate cost of all outstanding options exceeds 10% of its total assets.
The International Fund will write only fully covered options. The International
Fund may not write a call option if, as a result thereof, the aggregate of the
International Fund's portfolio securities subject to outstanding call options
(valued at the lower of the option price or market value of such securities)
would exceed 10% of its total assets.
SECURITIES OPTIONS. Each Fund realizes fees (referred to as "premiums")
for granting the rights evidenced by the options it has written. A put option
embodies the right of its purchaser to compel the writer of the option to
purchase from the option holder an underlying security at a specified price for
a specified time period or at a specified time. In contrast, a call option
embodies the right of its purchaser to compel the writer of the option to sell
to the option holder an underlying security at a specified price for a specified
time period or at a specified time.
The potential loss associated with purchasing an option is limited to
the premium paid, and the premium would partially offset any gains achieved from
its use. However, for an option writer the exposure to adverse price movements
in the underlying security or index is potentially unlimited during the exercise
period. Writing securities options may result in substantial losses to a Fund,
force the sale or purchase of fund securities at inopportune times or
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at less advantageous prices, limit the amount of appreciation the Fund could
realize on its investments or require the Fund to hold securities it would
otherwise sell.
The principal reason for writing covered options on a security is to
attempt to realize, through the receipt of premiums, a greater return than would
be realized on the securities alone. In return for a premium, a Fund as the
writer of a covered call option forfeits the right to any appreciation in the
value of the underlying security above the strike price for the life of the
option (or until a closing purchase transaction can be effected). A Fund that
writes call options retains the risk of an increase in the price of the
underlying security. The size of the premiums that the Fund may receive may be
adversely affected as new or existing institutions, including other investment
companies, engage in or increase their option-writing activities.
If security prices rise, a put writer would generally expect to
profit, although its gain would be limited to the amount of the premium it
received. If security prices remain the same over time, it is likely that the
writer will also profit, because it should be able to close out the option at a
lower price. If security prices decline, the put writer would expect to suffer a
loss. This loss may be less than the loss from purchasing the underlying
instrument directly to the extent that the premium received offsets the effects
of the decline.
In the case of options written by a Fund that are deemed covered by
virtue of the Fund's holding convertible or exchangeable preferred stock or debt
securities, the time required to convert or exchange and obtain physical
delivery of the underlying common stock with respect to which the Fund has
written options may exceed the time within which the Fund must make delivery in
accordance with an exercise notice. In these instances, the Fund may purchase or
temporarily borrow the underlying securities for purposes of physical delivery.
By so doing, the Fund will not bear any market risk, since the Fund will have
the absolute right to receive from the issuer of the underlying security an
equal number of shares to replace the borrowed securities, but the Fund may
incur additional transaction costs or interest expenses in connection with any
such purchase or borrowing.
Additional risks exist with respect to certain of the securities for
which a Fund may write covered call options. For example, if a Fund writes
covered call options on mortgage-backed securities, the mortgage-backed
securities that it holds as cover may, because of scheduled amortization or
unscheduled prepayments, cease to be sufficient cover. If this occurs, the Fund
may compensate for the decline in the value of the cover by purchasing an
appropriate additional amount of mortgage-backed securities.
Options written by a Fund will normally have expiration dates between
one and nine months from the date written. The exercise price of the options may
be below, equal to or above the market values of the underlying securities at
the times the options are written. In the case of call options, these exercise
prices are referred to as "in-the-money," "at-the-money" and "out-of-the-money,"
respectively. The Funds may write (i) in-the-money call options when Credit
Suisse Asset Management, LLC, the Funds' investment adviser ("CSAM" or the
"Adviser"), expects that the price of the underlying security will remain flat
or decline moderately during the option period, (ii) at-the-money call options
when CSAM expects that the price of the underlying security will remain flat or
advance moderately during the option period and (iii) out-of-the-money call
options when CSAM expects that the premiums received from
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writing the call option plus the appreciation in market price of the underlying
security up to the exercise price will be greater than the appreciation in the
price of the underlying security alone. In any of the preceding situations, if
the market price of the underlying security declines and the security is sold at
this lower price, the amount of any realized loss will be offset wholly or in
part by the premium received. Out-of-the-money, at-the-money and in-the-money
put options (the reverse of call options as to the relation of exercise price to
market price) may be used in the same market environments that such call options
are used in equivalent transactions. To secure its obligation to deliver the
underlying security when it writes a call option, a Fund will be required to
deposit in escrow the underlying security or other assets in accordance with the
rules of the Options Clearing Corporation (the "Clearing Corporation") and of
the securities exchange on which the option is written.
Prior to their expirations, put and call options may be sold in
closing sale or purchase transactions (sales or purchases by a Fund prior to the
exercise of options that it has purchased or, if permissible, written,
respectively, of options of the same series) in which a Fund may realize a
profit or loss from the sale. An option position may be closed out only where
there exists a secondary market for an option of the same series on a recognized
securities exchange or in the OTC market. When a Fund has purchased an option
and engages in a closing sale transaction, whether the Fund realizes a profit or
loss will depend upon whether the amount received in the closing sale
transaction is more or less than the premium the Fund initially paid for the
original option plus the related transaction costs. Similarly, in cases where a
Fund has written an option, it will realize a profit if the cost of the closing
purchase transaction is less than the premium received upon writing the original
option and will incur a loss if the cost of the closing purchase transaction
exceeds the premium received upon writing the original option. A Fund may engage
in a closing purchase transaction to realize a profit, to prevent an underlying
security with respect to which it has written an option from being called or put
or, in the case of a call option, to unfreeze an underlying security (thereby
permitting its sale or the writing of a new option on the security prior to the
outstanding option's expiration). The obligation of a Fund under an option it
has written would be terminated by a closing purchase transaction, but the Fund
would not be deemed to own an option as a result of the transaction. So long as
the obligation of a Fund as the writer of an option continues, the Fund may be
assigned an exercise notice by the broker-dealer through which the option was
sold, requiring the Fund to deliver the underlying security against payment of
the exercise price. This obligation terminates when the option expires or the
Fund effects a closing purchase transaction. A Fund cannot effect a closing
purchase transaction with respect to an option once it has been assigned an
exercise notice.
There is no assurance that sufficient trading interest will exist to
create a liquid secondary market on a securities exchange for any particular
option or at any particular time, and for some options no such secondary market
may exist. A liquid secondary market in an option may cease to exist for a
variety of reasons. In the past, for example, higher than anticipated trading
activity or order flow or other unforeseen events have at times rendered certain
of the facilities of the Clearing Corporation and various securities exchanges
inadequate and resulted in the institution of special procedures, such as
trading rotations, restrictions on certain types of orders or trading halts or
suspensions in one or more options. There can be no assurance that similar
events, or events that may otherwise interfere with the timely execution of
customers' orders, will not recur. In such event, it might not be possible to
effect closing transactions in particular options. Moreover, a Fund's ability to
terminate options positions established in the
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OTC market may be more limited than for exchange-traded options and may also
involve the risk that securities dealers participating in OTC transactions
would fail to meet their obligations to the Fund. The Funds, however, intend
to purchase OTC options only from dealers whose debt securities, as
determined by CSAM, are considered to be investment grade. If, as a covered
call option writer, the Fund is unable to effect a closing purchase
transaction in a secondary market, it will not be able to sell the underlying
security and would continue to be at market risk on the security.
Securities exchanges generally have established limitations governing
the maximum number of calls and puts of each class, which may be held or
written, or exercised within certain time periods by an investor or group of
investors acting in concert (regardless of whether the options are written on
the same or different securities exchanges or are held, written or exercised in
one or more accounts or through one or more brokers). It is possible that the
Funds, a Fund and other clients of CSAM and certain of its affiliates may be
considered to be such a group. A securities exchange may order the liquidation
of positions found to be in violation of these limits and it may impose certain
other sanctions. These limits may restrict the number of options a Fund will be
able to purchase on a particular security.
SECURITIES INDEX OPTIONS. A securities index measures the movement of
a certain group of securities by assigning relative values to the securities
included in the index, fluctuating with changes in the market values of the
securities included in the index. Some securities index options are based on a
broad market index, such as the NYSE Composite Index, or a narrower market index
such as the Standard & Poor's 100. Indexes may also be based on a particular
industry or market segment.
Options on securities indexes are similar to options on securities
except that (i) the expiration cycles of securities index options are monthly,
while those of securities options are currently quarterly, and (ii) the delivery
requirements are different. Instead of giving the right to take or make delivery
of securities at a specified price, an option on a securities index gives the
holder the right to receive a cash "exercise settlement amount" equal to (a) the
amount, if any, by which the fixed exercise price of the option exceeds (in the
case of a put) or is less than (in the case of a call) the closing value of the
underlying index on the date of exercise, multiplied by (b) a fixed "index
multiplier." Receipt of this cash amount will depend upon the closing level of
the securities index upon which the option is based being greater than, in the
case of a call, or less than, in the case of a put, the exercise price of the
index and the exercise price of the option times a specified multiple. The
writer of the option is obligated, in return for the premium received, to make
delivery of this amount. Securities index options may be offset by entering into
closing transactions as described above for securities options.
OTC OPTIONS. The Small Cap Value Fund and the International Fund may
purchase and write put and call options on foreign currency, interest rate and
stock index futures contracts and may enter into closing transactions with
respect to such options to terminate existing positions. There is no guarantee
that such closing transactions can be effected; the ability to establish and
close out positions on such options will be subject to the existence of a liquid
market.
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Each Fund may purchase OTC or dealer options or sell covered OTC
options. Unlike exchange-listed options where an intermediary or clearing
corporation, such as the Clearing Corporation, assures that all transactions in
such options are properly executed, the responsibility for performing all
transactions with respect to OTC options rests solely with the writer and the
holder of those options. A listed call option writer, for example, is obligated
to deliver the underlying securities to the clearing organization if the option
is exercised, and the clearing organization is then obligated to pay the writer
the exercise price of the option. If a Fund were to purchase a dealer option,
however, it would rely on the dealer from whom it purchased the option to
perform if the option were exercised. If the dealer fails to honor the exercise
of the option by the Fund, the Fund would lose the premium it paid for the
option and the expected benefit of the transaction.
Exchange traded options generally have a continuous liquid market
while OTC or dealer options do not. Consequently, the Fund will generally be
able to realize the value of a dealer option it has purchased only by exercising
it or reselling it to the dealer who issued it. Similarly, when the Fund writes
a dealer option, it generally will be able to close out the option prior to its
expiration only by entering into a closing purchase transaction with the dealer
to which the Fund originally wrote the option. Although the Funds will seek to
enter into dealer options only with dealers who will agree to and that are
expected to be capable of entering into closing transactions with the Funds,
there can be no assurance that a Fund will be able to liquidate a dealer option
at a favorable price at any time prior to expiration. The inability to enter
into a closing transaction may result in material losses to a Fund. Until a
Fund, as a covered OTC call option writer, is able to effect a closing purchase
transaction, it will not be able to liquidate securities (or other assets) used
to cover the written option until the option expires or is exercised. This
requirement may impair a Fund's ability to sell portfolio securities or, with
respect to currency options, currencies at a time when such sale might be
advantageous.
CURRENCY EXCHANGE TRANSACTIONS. The value in U.S. dollars of the
assets of a Fund that are invested in foreign securities may be affected
favorably or unfavorably by changes in a variety of factors not applicable to
investment in U.S. securities, and the Fund may incur costs in connection with
conversion between various currencies. Currency exchange transactions may be
from any non-U.S. currency into U.S. dollars or into other appropriate
currencies. Each Fund will conduct its currency exchange transactions (i) on a
spot (I.E., cash) basis at the rate prevailing in the currency exchange market,
(ii) through entering into futures contracts or options on such contracts (as
described above), (iii) through entering into forward contracts to purchase or
sell currency or (iv) by purchasing exchange-traded currency options. Risks
associated with currency forward contracts and purchasing currency options are
similar to those described herein for futures contracts and securities and stock
index options. In addition, the use of currency transactions could result in
losses from the imposition of foreign exchange controls, suspension of
settlement or other governmental actions or unexpected events.
Each Fund may engage in currency exchange transactions for both
hedging purposes and to increase total return.
FORWARD CURRENCY CONTRACTS. The International Fund will generally
enter into forward contracts only under two circumstances. First, when the
International Fund enters into a contract for the purchase or sale of a security
denominated in a foreign currency, it may desire to
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"lock in" the U.S. dollar price of the security in relation to another currency
by entering into a forward contract to buy or sell the amount of foreign
currency needed to settle the transaction. Second, when the Adviser believes
that the currency of a particular foreign country may suffer or enjoy a
substantial movement against another currency, it may enter into a forward
contract to sell or buy the former foreign currency (or another currency which
acts as a proxy for that currency) approximating the value of some or all of the
International Fund's portfolio securities denominated in such foreign currency.
This second investment practice is generally referred to as "cross-hedging."
Although forward contracts will be used primarily to protect the International
Fund from adverse currency movements, they also involve the risk that
anticipated currency movements will not be accurately predicted. A forward
currency contract involves an obligation to purchase or sell a specific currency
at a future date, which may be any fixed number of days from the date of the
contract as agreed upon by the parties, at a price set at the time of the
contract. These contracts are entered into in the interbank market conducted
directly between currency traders (usually large commercial banks and brokers)
and their customers. Forward currency contracts are similar to currency futures
contracts, except that futures contracts are traded on commodities exchanges and
are standardized as to contract size and delivery date.
At or before the maturity of a forward contract, the Fund may either
sell a portfolio security and make delivery of the currency, or retain the
security and fully or partially offset its contractual obligation to deliver the
currency by negotiating with its trading partner to enter into an offsetting
transaction. If the Fund retains the portfolio security and engages in an
offsetting transaction, the Fund, at the time of execution of the offsetting
transaction, will incur a gain or a loss to the extent that movement has
occurred in forward contract prices.
Forward currency contracts are highly volatile, and a relatively small
price movement in forward currency contract may result in substantial losses to
the International Fund. To the extent the Fund engages in forward currency
contracts to generate current income, the Fund will be subject to these risks
which the Fund might otherwise avoid (E.G., through the use of hedging
transactions).
CURRENCY OPTIONS. The Small Cap Value and International Funds may
purchase exchange-traded put and call options on foreign currencies. Put options
convey the right to sell the underlying currency at a price which is anticipated
to be higher than the spot price of the currency at the time the option is
exercised. Call options convey the right to buy the underlying currency at a
price which is expected to be lower than the spot price of the currency at the
time the option is exercised.
CURRENCY HEDGING. The Funds' currency hedging will be limited to
hedging involving either specific transactions or portfolio positions.
Transaction hedging is the purchase or sale of forward currency with respect to
specific receivables or payables of a Fund generally accruing in connection with
the purchase or sale of its portfolio securities. Position hedging is the sale
of forward currency with respect to portfolio security positions. A Fund may not
position hedge to an extent greater than the aggregate market value (at the time
of entering into the hedge) of the hedged securities.
A decline in the U.S. dollar value of a foreign currency in which
the Fund's securities are denominated will reduce the U.S. dollar value of
the securities, even if their value
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in the foreign currency remains constant. The use of currency hedges does not
eliminate fluctuations in the underlying prices of the securities, but it
does establish a rate of exchange that can be achieved in the future. For
example, in order to protect against diminutions in the U.S. dollar value of
non-dollar denominated securities it holds, a Fund may purchase foreign
currency put options. If the value of the foreign currency does decline, the
Fund will have the right to sell the foreign currency for a fixed amount in
dollars and will thereby offset, in whole or in part, the adverse effect on
the U.S. dollar value of its securities that otherwise would have resulted.
Conversely, if a rise in the U.S. dollar value of a currency in which
securities to be acquired are denominated is projected, thereby potentially
increasing the cost of the securities, the Fund may purchase call options on
the particular currency. The purchase of these options could offset, at least
partially, the effects of the adverse movements in exchange rates. The
benefit to the Fund derived from purchases of currency options, like the
benefit derived from other types of options, will be reduced by premiums and
other transaction costs. Because transactions in currency exchange are
generally conducted on a principal basis, no fees or commissions are
generally involved. Currency hedging involves some of the same risks and
considerations as other transactions with similar instruments. Although
currency hedges limit the risk of loss due to a decline in the value of a
hedged currency, at the same time, they also limit any potential gain that
might result should the value of the currency increase. If a devaluation is
generally anticipated, the Fund may not be able to contract to sell a
currency at a price above the devaluation level it anticipates.
While the values of currency futures and options on futures, forward
currency contracts and currency options may be expected to correlate with
exchange rates, they will not reflect other factors that may affect the value of
the Fund's investments and a currency hedge may not be entirely successful in
mitigating changes in the value of the Fund's investments denominated in that
currency. A currency hedge, for example, should protect a Yen-denominated bond
against a decline in the Yen, but will not protect the Fund against a price
decline if the issuer's creditworthiness deteriorates.
FUTURES ACTIVITIES. The Small Cap Value Fund may 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. The International Fund may also purchase
and sell financial futures contracts and options thereon which are traded on a
commodities exchange or board of trade for hedging and risk management purposes
and to enhance gains as permitted by the Commodity Futures Trading Commission
(the "CFTC"). These futures contracts are standardized contracts for the future
delivery of foreign currency or an interest rate sensitive security or, in the
case of stock index and certain other futures contracts, a cash settlement with
reference to a specified multiplier times the change in the specified index,
exchange rate or interest rate. An option on a futures contract gives the
purchaser the right, in return for the premium paid, to assume a position in a
futures contract.
These transactions may be entered into for "bona fide hedging"
purposes as defined in CFTC regulations and other permissible purposes including
hedging against changes in the value of portfolio securities due to anticipated
changes in currency values, interest rates and/or market conditions and
increasing return. Aggregate initial margin and premiums (discussed below)
required to establish positions other than those considered to be "bona fide
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hedging" by the CFTC will not exceed 5% of a Fund's net asset value after taking
into account unrealized profits and unrealized losses on any such contracts it
has entered into.
FUTURES CONTRACTS. A foreign currency futures contract provides for
the future sale by one party and the purchase by the other party of a certain
amount of a specified non-U.S. currency at a specified price, date, time and
place. An interest rate futures contract provides for the future sale by one
party and the purchase by the other party of a certain amount of a specific
interest rate sensitive financial instrument (debt security) at a specified
price, date, time and place. Securities indexes are capitalization weighted
indexes which reflect the market value of the securities represented in the
indexes. A securities index futures contract is an agreement to be settled by
delivery of an amount of cash equal to a specified multiplier times the
difference between the value of the index at the close of the last trading day
on the contract and the price at which the agreement is made.
No consideration is paid or received by a Fund upon entering into a
futures contract. Instead, the Fund is required to segregate with its custodian
an amount of cash or securities acceptable to the broker, such as U.S.
government securities or other liquid high-grade debt obligations, equal to
approximately 1% to 10% of the contract amount (this amount is subject to change
by the exchange on which the contract is traded, and brokers may charge a higher
amount). This amount is known as "initial margin" and is in the nature of a
performance bond or good faith deposit on the contract which is returned to the
Fund upon termination of the futures contract, assuming all contractual
obligations have been satisfied. The broker will have access to amounts in the
margin account if the Fund fails to meet its contractual obligations. Subsequent
payments, known as "variation margin," to and from the broker, will be made
daily as the currency, financial instrument or securities index underlying the
futures contract fluctuates, making the long and short positions in the futures
contract more or less valuable, a process known as "marking-to-market." The
Funds will also incur brokerage costs in connection with entering into futures
transactions.
At any time prior to the expiration of a futures contract, a Fund may
elect to close the position by taking an opposite position, which will operate
to terminate the Fund's existing position in the contract. Positions in futures
contracts and options on futures contracts (described below) may be closed out
only on the exchange on which they were entered into (or through a linked
exchange). No secondary market for such contracts exists. Although the Funds may
enter into futures contracts only if there is an active market for such
contracts, there is no assurance that an active market will exist at any
particular time. Most futures exchanges limit the amount of fluctuation
permitted in futures contract prices during a single trading day. Once the daily
limit has been reached in a particular contract, no trades may be made that day
at a price beyond that limit or trading may be suspended for specified periods
during the day. It is possible that futures contract prices could move to the
daily limit for several consecutive trading days with little or no trading,
thereby preventing prompt liquidation of futures positions at an advantageous
price and subjecting a Fund to substantial losses. In such event, and in the
event of adverse price movements, the Fund would be required to make daily cash
payments of variation margin. In such situations, if the Fund had insufficient
cash, it might have to sell securities to meet daily variation margin
requirements at a time when it would be disadvantageous to do so. In addition,
if the transaction is entered into for hedging purposes, in such circumstances
the Fund may realize a loss on a futures contract or option that is not offset
by an increase in the value of the
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hedged position. Losses incurred in futures transactions and the costs of these
transactions will affect the Fund's performance.
OPTIONS ON FUTURES CONTRACTS. An option on a currency, interest rate
or securities index futures contract, as contrasted with the direct investment
in such a contract, gives the purchaser the right, in return for the premium
paid, to assume a position in a futures contract at a specified exercise price
at any time prior to the expiration date of the option. 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 an option, the delivery of the futures position by the writer
of the option to the holder of the option will be accompanied by delivery of the
accumulated balance in the writer's futures margin account, which represents the
amount by which the market price of the futures contract 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. The potential loss related to the purchase of an option
on a futures contract is limited to the premium paid for the option (plus
transaction costs). Because the value of the option is fixed at the point of
sale, there are no daily cash payments by the purchaser to reflect changes in
the value of the underlying contract; however, the value of the option does
change daily and that change would be reflected in the net asset value of the
Fund.
HEDGING GENERALLY. In addition to entering into options, futures and
currency transactions for other purposes, including generating current income to
offset expenses or increase return, a Fund may enter into these transactions as
hedges to reduce investment risk, generally by making an investment expected to
move in the opposite direction to the portfolio position. A hedge is designed to
offset a loss in a portfolio position with a gain in the hedged position; at the
same time, however, a properly correlated hedge will result in a gain in the
portfolio position being offset by a loss in the hedged position. As a result,
the use of options, futures and currency transactions for hedging purposes could
limit any potential gain from an increase in the value of the position hedged.
In addition, the movement in the portfolio position hedged may not be of the
same magnitude as movement in the hedge. With respect to futures contracts,
since the value of portfolio securities will far exceed the value of the futures
contracts sold by the Small Cap Value Fund or International Fund, an increase in
the value of the futures contracts could only mitigate, but not totally offset,
the decline in the value of the Fund's assets.
In hedging transactions based on an index, whether a Fund will realize
a gain or loss from the purchase or writing of options on an index depends upon
movements in the level of prices in the securities market generally or, in the
case of certain indices, in an industry or market segment, rather than movements
in the price of a particular security. The risk of imperfect correlation
increases as the composition of the Fund's portfolio varies from the composition
of the index. In an effort to compensate for imperfect correlation of relative
movements in the hedged position and the hedge, the Fund's hedge positions may
be in a greater or lesser dollar amount than the dollar amount of the hedged
position. Such "over hedging" or "under hedging" may adversely affect the Fund's
net investment results if market movements are not as anticipated when the hedge
is established. Securities index futures transactions may be subject to
additional correlation risks. First, all participants in the futures market are
subject to margin deposit and maintenance requirements. Rather than meeting
additional margin deposit requirements, investors may close futures contracts
through offsetting transactions which would distort the normal relationship
between the securities index and futures markets. Secondly, from
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the point of view of speculators, the deposit requirements in the futures market
are less onerous than margin requirements in the securities market. Therefore,
increased participation by speculators in the futures market also may cause
temporary price distortions. Because of the possibility of price distortions in
the futures market and the imperfect correlation between movements in a
securities index and movements in the price of securities index futures, a
correct forecast of general market trends by CSAM still may not result in a
successful hedging transaction.
Each Fund will engage in hedging transactions only when deemed
advisable by CSAM, and successful use by the Funds of hedging transactions will
be subject to CSAM's ability to predict trends in currencies, interest rates or
securities markets, as the case may be, and to predict correctly movements in
the directions of the hedge and the hedged position and the correlation between
them, which predictions could prove to be inaccurate. This requires different
skills and techniques than predicting changes in the price of individual
securities, and there can be no assurance that the use of these strategies will
be successful. Even a well-conceived hedge may be unsuccessful to some degree
because of unexpected market behavior or trends. Losses incurred in hedging
transactions and the costs of these transactions will affect a Fund's
performance.
To the extent that a Fund engages in the strategies described above,
the Fund may experience losses greater than if these strategies had not been
utilized. In addition to the risks described above, these instruments may be
illiquid and/or subject to trading limits, and a Fund may be unable to close out
a position without incurring substantial losses, if at all. The Funds are also
subject to the risk of a default by a counterparty to an off-exchange
transaction.
ASSET COVERAGE FOR FORWARD CONTRACTS, OPTIONS, FUTURES AND OPTIONS ON
FUTURES. Each Fund will comply with guidelines established by the U.S.
Securities and Exchange Commission (the "SEC") and other applicable regulatory
bodies with respect to coverage of forward currency contracts; options written
by the Funds on currencies, securities and securities indices; and currency,
interest rate and index futures contracts and options on these futures
contracts. These guidelines may, in certain instances, require segregation by a
Fund of cash or liquid securities with its custodian or a designated
sub-custodian to the extent the Fund's obligations with respect to these
strategies are not otherwise "covered" through ownership of the underlying
security, financial instrument or currency or by other portfolio positions or by
other means consistent with applicable regulatory policies. Segregated assets
cannot be sold or transferred unless equivalent assets are substituted in their
place or it is no longer necessary to segregate them. As a result, there is a
possibility that segregation of a large percentage of a Fund's assets could
impede portfolio management or the Fund's ability to meet redemption requests or
other current obligations.
For example, a call option written by a Fund on securities may require
the Fund to hold the securities subject to the call (or securities convertible
into the securities subject to the call without additional consideration) or to
segregate assets (as described above) sufficient to purchase and deliver the
securities if the call is exercised. A call option written by a Fund on an index
may require the Fund to own portfolio securities that correlate with the index
or to segregate assets (as described above) equal to the excess of the index
value over the exercise price on a current basis. A put option written by a Fund
may require the Fund to segregate assets
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(as described above) equal to the exercise price. A Fund could purchase a put
option if the strike price of that option is the same or higher than the strike
price of a put option sold by the Fund. If a Fund holds a futures or forward
contract, the Fund could purchase a put option on the same futures or forward
contract with a strike price as high or higher than the price of the contract
held. The Funds may enter into fully or partially offsetting transactions so
that its net position, coupled with any segregated assets (equal to any
remaining obligation), equals its net obligation. Asset coverage may be achieved
by other means when consistent with applicable regulatory policies.
To the extent that puts, calls, straddles and similar investment
strategies involve instruments regulated by the CFTC, the International Fund is
limited to an investment not in excess of 5% of its total assets, except that
the International Fund may purchase and sell such instruments, without
limitation, for BONA FIDE hedging purposes.
FOREIGN INVESTMENTS. The International Fund invests primarily in
equity securities of companies located in or conducting a majority of their
business in developed foreign markets, or companies whose securities trade
primarily in developed foreign markets. The Small Cap Value Fund may invest up
to 20% of the value of its net assets in securities of issuers doing business
primarily outside the U.S. or domiciled outside the U.S. ("foreign securities").
The Tax Efficient Fund and the Large Cap Value Fund may each invest up to 10% of
its total assets in foreign securities. Investors should recognize that
investing in foreign companies involves certain risks, including those discussed
below, which are in addition to those associated with investing in U.S. issuers.
Individual foreign economies may differ favorably or unfavorably from the U.S.
economy in such respects as growth of gross national product, rate of inflation,
capital reinvestment, resource self-sufficiency and balance of payments
position. In addition, foreign investments by the Funds are subject to the risk
that natural disasters (such as an earthquake) will weaken a country's economy
and cause investments in that country to lose money. Natural disaster risks are,
of course, not limited to foreign investments and may apply to a Fund's domestic
investments as well. Each Fund may invest in securities of foreign governments
(or agencies or instrumentalities thereof), and many, if not all, of the
foregoing considerations apply to such investments as well.
FOREIGN CURRENCY EXCHANGE. Since each Fund may invest in securities
denominated in currencies other than the U.S. dollar, and since a Fund may
temporarily hold funds in bank deposits or other money market investments
denominated in foreign currencies, each Fund's investments in foreign companies
may be affected favorably or unfavorably by exchange control regulations or
changes in the exchange rate between such currencies and the dollar. A change in
the value of a foreign currency relative to the U.S. dollar will result in a
corresponding change in the dollar value of a Fund's assets denominated in that
foreign currency. Changes in foreign currency exchange rates may also affect the
value of dividends and interest earned, gains and losses realized on the sale of
securities and net investment income and gains, if any, to be distributed by a
Fund with respect to its foreign investments. Unless otherwise contracted, the
rate of exchange between the U.S. dollar and other currencies is determined by
the forces of supply and demand in the foreign exchange markets. Changes in the
exchange rate may result over time from the interaction of many factors directly
or indirectly affecting economic and political conditions in the U.S. and a
particular foreign country, including economic and political developments in
other countries. Governmental intervention
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may also play a significant role. National governments rarely voluntarily allow
their currencies to float freely in response to economic forces. Sovereign
governments use a variety of techniques, such as intervention by a country's
central bank or imposition of regulatory controls or taxes, to affect the
exchange rates of their currencies. A Fund may use hedging techniques with the
objective of protecting against loss through the fluctuation of the valuation of
foreign currencies against the U.S. dollar, particularly the forward market in
foreign exchange, currency options and currency futures. See "Currency Exchange
Transactions" and "Futures Activities" above.
INFORMATION. Many of the foreign securities held by the Funds will not
be registered with, nor the issuers thereof be subject to reporting requirements
of, the SEC. Accordingly, there may be less publicly available information about
these securities and about the foreign company or government issuing them than
is available about a domestic company or government entity. Foreign companies
are generally subject to financial reporting standards, practices and
requirements that are either not uniform or less rigorous than those applicable
to U.S. companies.
POLITICAL INSTABILITY. With respect to some foreign countries, there
is the possibility of expropriation or confiscatory taxation, limitations on the
removal of funds or other assets of the Fund, political or social instability,
or domestic developments which could affect U.S. investments in those and
neighboring countries.
FOREIGN MARKETS. Securities of some foreign companies are less liquid
and their prices are more volatile than securities of comparable U.S. companies.
Certain foreign countries are known to experience long delays between the trade
and settlement dates of securities purchased or sold, which may result in
increased exposure to market and foreign exchange fluctuation and increased
liquidity.
INCREASED EXPENSES. The operating expenses of a Fund, to the extent it
invests in foreign securities, can be expected to be higher than those of an
investment company investing exclusively in U.S. securities, since the expenses
of the Fund associated with foreign investing, such as custodial costs,
valuation costs and communication costs, as well as the rate of the investment
advisory fees, though similar to such expenses of some other international
funds, are higher than those costs incurred by other investment companies. In
addition, foreign securities may be subject to foreign government taxes that
would reduce the net yield on such securities.
PRIVATIZATIONS. All of the Funds may invest in privatizations (I.E.,
foreign government programs of selling interests in government-owned or
controlled enterprises). The ability of U.S. entities, such as the Funds, to
participate in privatizations may be limited by local law, or the terms for
participation may be less advantageous than for local investors. There can be no
assurance that privatization programs will be available or successful.
FOREIGN DEBT SECURITIES. The returns on foreign debt securities
reflect interest rates and other market conditions prevailing in those countries
and the effect of gains and losses in the denominated currencies against the
U.S. dollar, which have had a substantial impact on investment in foreign fixed
income securities. The relative performance of various countries' fixed income
markets historically has reflected wide variations relating to the unique
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characteristics of each country's economy. Year-to-year fluctuations in certain
markets have been significant, and negative returns have been experienced in
various markets from time to time.
The foreign government securities in which a Fund may invest generally
consist of obligations issued or backed by national, state or provincial
governments or similar political subdivisions or central banks in foreign
countries. Foreign government securities also include debt obligations of
supranational entities, which include international organizations designated or
backed by governmental entities to promote economic reconstruction or
development, international banking institutions and related government agencies.
Examples include the International Bank for Reconstruction and Development (the
"World Bank"), the European Coal and Steel Community, the Asian Development Bank
and the Inter-American Development Bank.
Foreign government securities also include debt securities of
"quasi-governmental agencies" and debt securities denominated in multinational
currency units of an issuer (including supranational issuers). Debt securities
of quasi-governmental agencies are issued by entities owned by either a
national, state or equivalent government or are obligations of a political unit
that is not backed by the national government's full faith and credit and
general taxing powers. An example of a multinational currency unit is the euro,
the new single currency for eleven Economic and Monetary Union member states.
The euro represents specified amounts of the currencies of certain member states
of the Economic and Monetary Union and was introduced on January 1, 1999.
SOVEREIGN DEBT. Investments in sovereign debt involve special risks.
The issuer of the debt or the governmental authorities that control the
repayment of the debt may be unable or unwilling to repay principal or interest
when due in accordance with the terms of such debt, and a Fund may have limited
legal recourse in the event of a default. Sovereign debt differs from debt
obligations issued by private entities in that, generally, remedies for defaults
must be pursued in the courts of the defaulting party. Legal recourse is
therefore somewhat limited. Political conditions, especially a sovereign
entity's willingness to meet the terms of its debt obligations, are of
considerable significance. Also, there can be no assurance that the holders of
commercial bank loans to the same sovereign entity may not contest payments to
the holders of sovereign debt in the event of default under commercial bank loan
agreements.
A sovereign debtor's willingness or ability to repay principal and pay
interest in a timely manner may be affected by, among other factors, its cash
flow situation, the extent of its foreign reserves, the availability of
sufficient foreign exchange on the date a payment is due, the relative size of
the debt service burden to the economy as a whole, the sovereign debtor's policy
toward principal international lenders and the political constraints to which a
sovereign debtor may be subject. Increased protectionism on the part of a
country's trading partners, or political changes in those countries, could also
adversely affect its exports. Such events could diminish a country's trade
account surplus, if any, or the credit standing of a particular local government
or agency.
The occurrence of political, social or diplomatic changes in one or
more of the countries issuing sovereign debt could adversely affect a Fund's
investments. Political changes or a deterioration of a country's domestic
economy or balance of trade may affect the willingness
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of countries to service their sovereign debt. While CSAM intends to manage the
Funds in a manner that will minimize the exposure to such risks, there can be no
assurance that adverse political changes will not cause a Fund to suffer a loss
of interest or principal on any of its holdings.
Investors should also be aware that certain sovereign debt instruments
in which a Fund may invest involve great risk. Sovereign debt of issuers in many
emerging markets generally is deemed to be the equivalent in terms of quality to
securities rated below investment grade by Moody's Investors Service ("Moody's")
and Standard and Poor's Ratings Service ("S&P"). Such securities are regarded as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligations and involve
major risk exposure to adverse conditions. Some of such sovereign debt, which
may not be paying interest currently or may be in payment default, may be
comparable to securities rated "D" by S&P or "C" by Moody's. A Fund may have
difficulty disposing of certain sovereign debt obligations because there may be
a limited trading market for such securities. Because there is no liquid
secondary market for many of these securities, the Funds anticipate that such
securities could be sold only to a limited number of dealers or institutional
investors. The lack of a liquid secondary market may have an adverse impact on
the market price of such securities and a Fund's ability to dispose of
particular issues when necessary to meet a Fund's liquidity needs or in response
to a specific economic event, such as a deterioration in the creditworthiness of
the issuer. The lack of a liquid secondary market for certain securities also
may make it more difficult for a Fund to obtain accurate market quotations for
purposes of valuing a Fund's portfolio and calculating its net asset value. From
time to time, a Fund may purchase securities not paying interest at the time
acquired if, in the opinion of the Adviser, such securities have the potential
for future income or capital appreciation.
BRADY BONDS. Each Fund may invest in so-called "Brady Bonds," to the
extent permitted by its other investment restrictions, which have been issued
by, among other countries, Argentina, Brazil, the Dominican Republic, Mexico,
Nigeria, the Philippines, Poland, and Venezuela and which may be issued by other
Latin American and ex-Soviet Union countries. Brady Bonds are issued as part of
a debt restructuring in which the bonds are issued in exchange for cash and
certain of the country's outstanding commercial bank loans. Investors should
recognize that Brady Bonds do not have a long payment history, and are subject
to, among other things, the risk of default. Brady Bonds may be collateralized
or uncollateralized, are issued in various currencies (primarily the U.S.
dollar) and some are actively traded in the OTC secondary market for debt of
Latin American issuers. In light of the history of commercial bank loan defaults
by Latin American public and private entities, investments in Brady Bonds may be
viewed as speculative.
Dollar-denominated, collateralized Brady Bonds, which may be fixed
rate par bonds or floating rate discount bonds, are collateralized in full as to
principal by U.S. Treasury zero coupon bonds having the same maturity as the
bonds. Interest payment on these Brady Bonds generally are collateralized by
cash or securities in the amount that, in the case of fixed rate bonds, is equal
to at least one year of rolling interest payments or, in the case of floating
rate bonds, initially is equal to at least one year's rolling interest payments
based on the applicable interest rate at that time and is adjusted at regular
intervals thereafter.
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Brady Bonds are often viewed as having three or four valuation
components: the collateralized repayment of principal at final maturity; the
collateralized interest payments; the uncollateralized interest payments; and
any uncollateralized repayment of principal at maturity (these uncollateralized
amounts constituting the "residual risk").
DEPOSITARY RECEIPTS. Assets of the Funds may be invested in the
securities of foreign issuers in the form of American Depository Receipts
("ADRs"), European Depository Receipts ("EDRs") and International Depository
Receipts ("IDRs"), instruments that evidence ownership of underlying securities
issued by a foreign corporation. ADRs, EDRs and IDRs may not necessarily be
denominated in the same currency as the securities whose ownership they
represent. ADRs are typically issued by a U.S. bank or trust company. EDRs
(sometimes referred to as Continental Depository Receipts) are issued in Europe
and IDRs (sometimes referred to as Global Depositary Receipts) are issued
outside the United States, each typically by non-U.S. banks and trust companies.
The risks associated with investing in securities of non-U.S. issuers are
generally heightened for investments in securities of issuers in emerging
markets. For purposes of the Funds' investment policies, depository receipts
generally are deemed to have the same classification as the underlying
securities they represent. Thus, a depository receipt representing ownership of
common stock will be treated as common stock.
ADRs are publicly traded on exchanges or over-the-counter in the
United States and are issued through "sponsored" or "unsponsored" arrangements.
In a sponsored ADR arrangement, the foreign issuer assumes the obligation to pay
some or all of the depository's transaction fees, whereas under an unsponsored
arrangement, the foreign issuer assumes no obligations and the depository's
transaction fees are paid directly by the ADR holders. In addition, less
information is available in the United States about an unsponsored ADR than
about a sponsored ADR.
EMERGING MARKETS. Each of the Funds may, to the extent permitted by
its percentage restriction in foreign securities, invest in securities of
issuers located in less developed countries considered to be "emerging markets."
Investing in securities of issuers located in emerging markets involves not only
the risks described above with respect to investing in foreign securities, but
also other risks, including exposure to economic structures that are generally
less diverse and mature than, and to political systems that can be expected to
have less stability than, those of developed countries. Other characteristics of
emerging markets that may affect investment there include certain national
policies that may restrict investment by foreigners in issuers or industries
deemed sensitive to relevant national interests and the absence of developed
legal structures governing private and foreign investments and private property.
The typically small size of the markets for securities of issuers located in
emerging markets and the possibility of a low or nonexistent volume of trading
in those securities may also result in a lack of liquidity and in price
volatility of those securities.
U.S. GOVERNMENT SECURITIES. The obligations issued or guaranteed by
the U.S. government in which the Funds may invest include: direct obligations of
the U.S. Treasury and obligations issued by U.S. government agencies and
instrumentalities. Included among direct obligations of the United States are
Treasury Bills, Treasury Notes and Treasury Bonds, which differ in terms of
their interest rates, maturities and dates of issuance. Treasury Bills have
maturities of less than one year, Treasury Notes have maturities of one to 10
years and Treasury
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Bonds generally have maturities of greater than 10 years at the date of
issuance. Included among the obligations issued by agencies and
instrumentalities of the United States are: instruments that are supported by
the full faith and credit of the United States (such as certificates issued by
the Government National Mortgage Association ("GNMA")); instruments that are
supported by the right of the issuer to borrow from the U.S. Treasury (such as
securities of Federal Home Loan Banks); and instruments that are supported by
the credit of the instrumentality (such as Federal National Mortgage Association
("FNMA") and Federal Home Loan Mortgage Corporation ("FHLMC") bonds).
Other U.S. government securities in which the Funds may invest include
securities issued or guaranteed by the Federal Housing Administration, Farmers
Home Loan Administration, Export-Import Bank of the United States, Small
Business Administration, Government National Mortgage Association, General
Services Administration, Central Bank for Cooperatives, Federal Farm Credit
Banks, Federal Home Loan Banks, Federal Home Loan Mortgage Corporation, Federal
Intermediate Credit Banks, Federal Land Banks, Federal National Mortgage
Association, Federal Maritime Administration, Tennessee Valley Authority,
District of Columbia Armory Board and Student Loan Marketing Association. Each
Fund may also invest in instruments that are supported by the right of the
issuer to borrow from the U.S. Treasury and instruments that are supported by
the credit of the instrumentality. Because the U.S. government is not obligated
by law to provide support to an instrumentality it sponsors, a Fund will invest
in obligations issued by such an instrumentality only if CSAM determines that
the credit risk with respect to the instrumentality does not make its securities
unsuitable for investment by the Fund.
MONEY MARKET OBLIGATIONS. Each of the Funds is authorized to invest in
domestic and foreign short-term (one year or less remaining to maturity) and
medium-term (five years or less remaining to maturity) money market obligations.
Money market instruments consist of obligations issued or guaranteed by the U.S.
government or a foreign government, their agencies or instrumentalities; bank
obligations (including certificates of deposit, time deposits and bankers'
acceptances of domestic or foreign, domestic savings and loans and similar
institutions) that are high quality investments; commercial paper rated no lower
than A-2 by S&P or Prime-2 by Moody's or the equivalent from another major
rating service or, if unrated, of an issuer having an outstanding, unsecured
debt issue then rated within the three highest rating categories; and repurchase
agreements with respect to the foregoing.
REPURCHASE AGREEMENTS. The Tax Efficient Fund, Large Cap Value Fund
and Small Cap Value 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"). The Funds may enter into
repurchase agreements with member banks of the Federal Reserve System and
certain non-bank dealers. Repurchase agreements are contracts under which the
buyer of a security simultaneously commits to resell the security to the seller
at an agreed-upon price and date. Under the terms of a typical repurchase
agreement, a Fund would acquire any underlying security for a relatively short
period (usually not more than one week) subject to an obligation of the seller
to repurchase, and the Fund to resell, the obligation at an agreed-upon price
and time, thereby determining the yield during the Fund's holding period. This
arrangement results in a fixed rate of return that is not subject to market
fluctuations during the Fund's holding period. The value of the underlying
securities will at all
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times be at least equal to the total amount of the purchase obligation,
including interest. The Fund bears a risk of loss in the event that the other
party to a repurchase agreement defaults on its obligations or becomes bankrupt
and the Fund is delayed or prevented from exercising its right to dispose of the
collateral securities, including the risk of a possible decline in the value of
the underlying securities during the period while the Fund seeks to assert this
right. CSAM monitors the creditworthiness of those bank and non-bank dealers
with which the Fund enters into repurchase agreements to evaluate this risk. A
repurchase agreement is considered to be a loan under the Investment Company Act
of 1940 (the "1940 Act").
DEBT SECURITIES. Each Fund may invest up to 20% of its net assets in
investment grade fixed-income securities. The interest income to be derived may
be considered as one factor in selecting debt securities for investment by CSAM.
Because the market value of debt obligations can be expected to vary inversely
to changes in prevailing interest rates, investing in debt obligations may
provide an opportunity for capital growth when interest rates are expected to
decline. The success of such a strategy is dependent upon CSAM's ability to
forecast accurately changes in interest rates. The market value of debt
obligations may also be expected to vary depending upon, among other factors,
the ability of the issuer to repay principal and interest, any change in
investment rating and general economic conditions.
Moody's and S&P are private services that provide ratings of the
credit quality of debt securities and certain other securities. A description of
the ratings assigned to corporate bonds by Moody's and S&P is included in
Appendix A to this STATEMENT OF ADDITIONAL INFORMATION.
Credit ratings attempt to evaluate the safety of principal and
interest payments, but they do not evaluate the volatility of a debt security's
value or its liquidity and do not guarantee the performance of the issuer.
Rating agencies may fail to make timely changes in credit ratings in response to
subsequent events, so that an issuer's current financial condition may be better
or worse than the rating indicates. There is a risk that rating agencies may
downgrade a debt security's rating. Subsequent to a security's purchase by a
Fund, it may cease to be rated or it may be downgraded. Neither event will
require the sale of such securities, although the Adviser will consider such
event in its determination of whether the Fund should continue to hold the
security. The Adviser may use these ratings in determining whether to purchase,
sell or hold a security. It should be emphasized, however, that ratings are
general and are not absolute standards of quality. Consequently, bonds with the
same maturity, interest rate and rating may have different market prices.
The interest income to be derived may be considered as one factor in
selecting debt securities for investment by CSAM. Because the market value of
debt obligations can be expected to vary inversely to changes in prevailing
interest rates, investing in debt obligations may provide an opportunity for
capital appreciation when interest rates are expected to decline. The success of
such a strategy is dependent upon CSAM's ability to accurately forecast changes
in interest rates. The market value of debt obligations may be expected to vary
depending upon, among other factors, interest rates, the ability of the issuer
to repay principal and interest, any change in investment rating and general
economic conditions.
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A security will be deemed to be investment grade if it is rated within
the four highest grades by Moody's or S&P or, if unrated, is determined to be of
comparable quality by CSAM. Moody's considers debt securities rated Baa (its
lowest investment grade rating) to have speculative characteristics. Investors
should be aware that ratings are relative and subjective and not absolute
standards of quality. This means that changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments than is the case with higher grade bonds. Subsequent to
its purchase by a Fund, an issue of securities may cease to be rated or its
rating may be reduced below the minimum required for purchase by the Fund.
Neither event will require sale of such securities, although CSAM will consider
such event in its determination of whether the Fund should continue to hold the
securities.
CONVERTIBLE SECURITIES. The International Fund may invest up to 25% of
its assets in foreign convertible securities. The Adviser currently does not
intend to invest over 5% of the International Fund's assets in convertible
securities rated below investment grade. Convertible securities in which a Fund
may invest, including both convertible debt and convertible preferred stock, may
be converted at either a stated price or stated rate into underlying shares of
common stock. Because of this feature, convertible securities enable an investor
to benefit from increases in the market price of the underlying common stock.
Convertible securities provide higher yields than the underlying equity
securities, but generally offer lower yields than non-convertible securities of
similar quality. Like bonds, the value of convertible securities fluctuates in
relation to changes in interest rates and, in addition, also fluctuates in
relation to the underlying common stock. Subsequent to purchase by a Fund,
convertible securities may cease to be rated or a rating may be reduced. Neither
event will require sale of such securities, although CSAM will consider such
event in its determination of whether the Fund should continue to hold the
securities.
TEMPORARY DEFENSIVE STRATEGIES. The Tax Efficient 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.
SECURITIES OF OTHER INVESTMENT COMPANIES. The Large Cap Value, Tax
Efficient and International Funds may invest in securities of other investment
companies to the extent permitted under the 1940 Act or pursuant to an SEC
order, and the Large Cap Value Fund may invest in securities of unaffiliated
money market funds. Presently, under the 1940 Act, each Fund may hold securities
of another investment company in amounts which (a) do not exceed 3% of the total
outstanding voting stock of such company, (b) do not exceed 5% of the value of
the Fund's total assets and (iii) when added to all other investment company
securities held by the Fund, do not exceed 10% of the value of the Fund's total
assets. As a shareholder of another investment company, each Fund would bear,
along with other shareholders, its pro rata portion of the other investment
company's expenses, including advisory fees. These expenses would be in addition
to the advisory and other expenses that a Fund bears directly in connection with
its own operations.
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LENDING OF PORTFOLIO SECURITIES. Each Fund may each seek to receive or
increase income by lending their respective portfolio securities. The aggregate
value of securities loaned by a Fund may not exceed 25% of the value of its
total assets. Each Fund will have the right to call such loans and obtain the
securities loaned at any time on five days notice. Loans of portfolio securities
will be collateralized by cash or liquid securities, which are segregated at all
times in an amount equal to at least 100% of the current market value of the
loaned securities. Any gain or loss in the market price of the securities loaned
that might occur during the term of the loan would be for the account of the
Fund involved. From time to time, a Fund may return a part of the interest
earned from the investment of collateral received for securities loaned to the
borrower and/or a third party that is unaffiliated with the Fund and is acting
as a "finder."
By lending its securities, a Fund can increase its income by
continuing to receive interest and any dividends on the loaned securities as
well as by either investing the collateral received for securities loaned in
short-term instruments or obtaining yield in the form of interest paid by the
borrower when U.S. Government Securities are used as collateral. Although the
generation of income is not an investment objective of the Funds, income
received could be used to pay a Fund's expenses and would increase an investor's
total return. Each Fund will adhere to the following conditions whenever its
portfolio securities are loaned: (i) the Fund must receive at least the
applicable percentage of cash collateral or equivalent securities of the type
discussed in the preceding paragraph from the borrower; (ii) the borrower must
increase such collateral whenever the market value of the securities rises above
the level of such collateral; (iii) the Fund must be able to terminate the loan
at any time; (iv) the Fund must receive reasonable interest on the loan, as well
as any dividends, interest or other distributions on the loaned securities and
any increase in market value; (v) the Fund may pay only reasonable custodian
fees in connection with the loan; and (vi) voting rights on the loaned
securities may pass to the borrower, provided, however, that if a material event
adversely affecting the investment occurs, the Fund must terminate the loan and
regain the right to vote the securities. Loan agreements involve certain risks
in the event of default or insolvency of the other party including possible
delays or restrictions upon the Fund's ability to recover the loaned securities
or dispose of the collateral for the loan. Default by or bankruptcy of a
borrower would expose the Funds to possible loss because of adverse market
action, expenses and/or delays in connection with the disposition of the
underlying securities. Any loans of a Fund's securities will be fully
collateralized and marked to market daily.
The Funds and CSAM have received an order of exemption (the "Order")
from the Securities and Exchange Commission to permit Credit Suisse First Boston
("CSFB") to act as lending agent for the Funds, to permit securities loans to
broker-dealer affiliates of CSFB, and to permit the investment of cash
collateral received by CSFB from borrowers and other uninvested cash amounts in
certain money market funds advised by CSAM ("Investment Funds"). The Order
contains a number of conditions that are designed to ensure that CSFB's
securities lending program does not involve overreaching by CSAM, CSFB or any of
their affiliates. These conditions include percentage limitations on the amount
of a Fund's assets that may be invested in the Investment Funds, restrictions on
the Investment Funds' ability to collect sales charges and certain other fees,
and a requirement that each fund that invests in the Investment Funds will do so
at the same price as each other Fund and will bear its proportionate shares of
expenses and receive its proportionate share of any dividends.
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WHEN-ISSUED SECURITIES, DELAYED-DELIVERY TRANSACTIONS AND FORWARD
COMMITMENTS. Each Fund may purchase securities on a when-issued basis or on a
forward commitment basis, and it may purchase or sell securities for delayed
delivery (i.e., payment or delivery occur beyond the normal settlement date at a
stated price and yield). Each Fund engages in when-issued purchases and forward
commitments in furtherance of its investment objectives.
In these transactions, payment for and delivery of the securities
occur beyond the regular settlement dates, normally within 30 to 45 days after
the transaction. The Funds will not enter into a when-issued or delayed-delivery
transaction for the purpose of leverage, but may sell the right to acquire a
when-issued security prior to its acquisition or dispose of its right to deliver
or receive securities in a delayed-delivery transaction before the settlement
date if the Adviser deems it advantageous to do so. The payment obligation and
the interest rate that will be received on when-issued and delayed-delivery
transactions are fixed at the time the buyer enters into the commitment. Due to
fluctuations in the value of securities purchased or sold on a when-issued or
delayed-delivery basis, the prices obtained on such securities may be higher or
lower than the prices available in the market on the dates when the investments
are actually delivered to the buyers. Each Fund will establish a segregated
account with its custodian consisting of cash or liquid securities in an amount
equal to its when-issued and delayed-delivery purchase commitments and will
segregate the securities underlying commitments to sell securities for delayed
delivery.
When a Fund agrees to purchase when-issued or delayed-delivery
securities, its custodian will set aside cash or liquid securities equal to the
amount of the commitment in a segregated account. Normally, the custodian will
set aside portfolio securities to satisfy a purchase commitment, and in such a
case a Fund may be required subsequently to place additional assets in the
segregated account in order to ensure that the value of the account remains
equal to the amount of the Fund's commitment. It may be expected that a Fund's
net assets will fluctuate to a greater degree when it sets aside portfolio
securities to cover such purchase commitments than when it sets aside cash. When
a Fund engages in when-issued or delayed-delivery transactions, it relies on the
other party to consummate the trade. Failure of the seller to do so may result
in the Funds' incurring a loss or missing an opportunity to obtain a price
considered to be advantageous.
SHORT SALES. The Small Cap Value Fund may from time to time sell
securities short. A short sale is a transaction in which the Fund sells
securities it does not own in anticipation of a decline in the market price of
the securities. The Small Cap Value Fund may engage in short sales to a limited
extent.
To deliver the securities to the buyer, the Fund must arrange through
a broker to borrow the securities and, in so doing, the Fund becomes obligated
to replace the securities borrowed at their market price at the time of
replacement, whatever that price may be. The Fund will make a profit or incur a
loss as a result of a short sale depending on whether the price of the
securities decreases or increases between the date of the short sale and the
date on which the Fund purchases the security to replace the borrowed securities
that have been sold. The amount
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of any loss would be increased (and any gain decreased) by any premium or
interest the Fund is required to pay in connection with a short sale.
The Fund's obligation to replace the securities borrowed in connection
with a short sale will be secured by cash or liquid securities deposited as
collateral with the broker. In addition, the Fund will place in a segregated
account with its custodian or a qualified sub-custodian an amount of cash or
liquid securities equal to the difference, if any, between (i) the market value
of the securities sold at the time they were sold short and (ii) any cash or
liquid securities deposited as collateral with the broker in connection with the
short sale (not including the proceeds of the short sale). Until it replaces the
borrowed securities, the Fund will maintain the segregated account daily at a
level so that (a) the amount deposited in the account plus the amount deposited
with the broker (not including the proceeds from the short sale) will equal the
current market value of the securities sold short and (b) the amount deposited
in the account plus the amount deposited with the broker (not including the
proceeds from the short sale) will not be less than the market value of the
securities at the time they were sold short.
SHORT SALES "AGAINST THE BOX". Each Fund may enter into short sales
"against the box." No more than 10% of each Fund's net assets (taken at the then
current market value) may be held as collateral for such sales at any one time.
A short sale is "against the box" to the extent that a Fund contemporaneously
owns or has the right to obtain without additional cost an equal amount of the
security being sold short. It may be entered into by a Fund to, for example,
lock in a sale price for a security the Fund does not wish to sell immediately.
If a Fund engages in a short sale, the collateral for the short position will be
segregated in an account with the Fund's custodian or qualified sub-custodian.
While the short sale is open, the Fund will continue to segregate an amount of
securities equal in kind and amount to the securities sold short or securities
convertible into or exchangeable for such equivalent securities. These
securities constitute the Fund's long position.
A Fund may make a short sale as a hedge when it believes that the
price of a security may decline and cause a decline in the value of a security
owned by the Fund (or a security convertible or exchangeable for such security).
In such case, any future losses in the Fund's long position should be offset by
a gain in the short position and, conversely, any gain in the long position
should be reduced by a loss in the short position. The extent to which such
gains or losses are reduced will depend upon the amount of the security sold
short relative to the amount the Fund owns. There will be certain additional
transaction costs associated with short sales against the box, but the Funds
will endeavor to offset these costs with the income from the investment of the
cash proceeds of short sales.
If a Fund effects a short sale of securities at a time when it has an
unrealized gain on the securities, it may be required to recognize that gain as
if it had actually sold the securities (as a "constructive sale") on the date it
effects the short sale. However, such constructive sale treatment may not apply
if the Fund closes out the short sale with securities other than the appreciated
securities held at the time of the short sale and if certain other conditions
are satisfied. Uncertainty regarding the tax consequences of effecting short
sales may limit the extent to which the Funds may effect short sales.
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REVERSE REPURCHASE AGREEMENTS. The Tax Efficient Fund, Small Cap Value
Fund and International Fund may enter into reverse repurchase agreements.
Reverse repurchase agreements involve the sale of securities held by a Fund
pursuant to its agreement to repurchase them at a mutually agreed upon date,
price and rate of interest. At the time the Fund enters into a reverse
repurchase agreement, it will segregate cash or liquid securities in an account
with an approved custodian having a value not less than the repurchase price
(including accrued interest). The segregated assets will be marked to market
directly and additional assets will be segregated on any day in which the assets
fall below the repurchase price (plus accrued interest). The Fund's liquidity
and ability to manage its assets might be affected when it sets aside cash or
Fund securities to cover such commitments. Reverse repurchase agreements involve
the risk that the market value of the securities retained in lieu of sale may
decline below the price of the securities the Fund has sold but is obligated to
repurchase. In the event the buyer of securities under a reverse repurchase
agreement files for bankruptcy or becomes insolvent, such buyer or its trustee
or receiver may receive an extension of time to determine whether to enforce the
Fund's obligation to repurchase the securities, and the Fund's use of the
proceeds of the reverse repurchase agreement may effectively be restricted
pending such decision. Reverse repurchase agreements that are accounted for as
financings are considered to be borrowings under the 1940 Act.
WARRANTS. The Tax Efficient Fund and the Small Cap Value Fund may
invest up to 5% of their respective total assets in warrants. Warrants are
securities that give the holder the right, but not the obligation, to purchase
equity issues of the company issuing the warrants, or a related company, at a
fixed price either on a date certain or during a set period. A Fund may invest
in warrants to purchase newly created equity securities consisting of common and
preferred stock. The equity security underlying a warrant is authorized at the
time the warrant is issued or is issued together with the warrant.
Investing in warrants can provide a greater potential for profit or
loss than an equivalent investment in the underlying security, and, thus, can be
a speculative investment. At the time of issue, the cost of a warrant is
substantially less than the cost of the underlying security itself, and price
movements in the underlying security are generally magnified in the price
movements of the warrant. This leveraging effect enables the investor to gain
exposure to the underlying security with a relatively low capital investment.
This leveraging increases an investor's risk, however, in the event of a decline
in the value of the underlying security and can result in a complete loss of the
amount invested in the warrant. In addition, the price of a warrant tends to be
more volatile than, and may not correlate exactly to, the price of the
underlying security. If the market price of the underlying security is below the
exercise price of the warrant on its expiration date, the warrant will generally
expire without value. The value of a warrant may decline because of a decline in
the value of the underlying security, the passage of time, changes in interest
rates or in the dividend or other policies of the company whose equity underlies
the warrant or a change in the perception as to the future price of the
underlying security, or any combination thereof. Warrants generally pay no
dividends and confer no voting or other rights except for the right to purchase
the underlying security.
NON-PUBLICLY TRADED AND ILLIQUID SECURITIES. The Tax Efficient Fund
and the Large Cap Value Fund may invest in restricted securities and may invest
in other assets having no ready market if such purchases at the time thereof
would not cause more than 10% of the
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value of the Fund's net assets to be invested in assets which are not readily
marketable. The Small Cap Value Fund may invest in assets not having a 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 assets which are not readily
marketable. The International Fund may invest up to 15% of the value of its net
assets in illiquid investments. Securities that have legal or contractual
restrictions on resale but have a readily available market are not considered
illiquid for purposes of this limitation. Repurchase agreements subject to
demand are deemed to have a maturity equal to the notice period.
Historically, illiquid securities have included securities subject to
contractual or legal restrictions on resale because they have not been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
securities which are otherwise not readily marketable and repurchase agreements
having a maturity of longer than seven days. Securities which have not been
registered under the Securities Act are referred to as private placements or
restricted securities and are purchased directly from the issuer or in the
secondary market. Companies whose securities are not publicly traded may not be
subject to the disclosure and other investor protection requirements applicable
to companies whose securities are publicly traded. Limitations on resale may
have an adverse effect on the marketability of portfolio securities and a mutual
fund might be unable to dispose of restricted or other illiquid securities
promptly or at reasonable prices and might thereby experience difficulty
satisfying redemptions within seven days without borrowing. A mutual fund might
also have to register such restricted securities in order to dispose of them
resulting in additional expense and delay. Adverse market conditions could
impede such a public offering of securities.
In recent years, however, a large institutional market has developed
for certain securities that are not registered under the Securities Act
including repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security can be readily
resold or on an issuer's ability to honor a demand for repayment. The fact that
there are contractual or legal restrictions on resale to the general public or
to certain institutions may not be indicative of the liquidity of such
investments.
Non-publicly traded securities (including Rule 144A Securities,
discussed below) may involve a high degree of business and financial risk and
may result in substantial losses. These securities may be less liquid than
publicly traded securities, and a Fund may take longer to liquidate these
positions than would be the case for publicly traded securities. Although these
securities may be resold in privately negotiated transactions, the prices
realized from these sales could be less than those originally paid by a Fund.
Further, companies whose securities are not publicly traded may not be subject
to the disclosure and other investor protection requirements that would be
applicable if their securities were publicly traded. A Fund's investment in
illiquid securities is subject to the risk that should such Fund desire to sell
any of these securities when a ready buyer is not available at a price that is
deemed to be representative of their value, the value of such Fund's net assets
could be adversely affected.
RULE 144A SECURITIES. Rule 144A under the Securities Act adopted by
the SEC allows for a broader institutional trading market for securities
otherwise subject to restriction on resale to the general public. Rule 144A
establishes a "safe harbor" from the registration
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requirements of the Securities Act for resales of certain securities to
qualified institutional buyers. CSAM anticipates that the market for certain
restricted securities such as institutional commercial paper will expand further
as a result of this regulation and use of automated systems for the trading,
clearance and settlement of unregistered securities of domestic and foreign
issuers, such as the PORTAL System sponsored by the NASD, Inc.
An investment in Rule 144A Securities will be considered illiquid; and
therefore, subject to each Fund's limit on the purchase of illiquid securities
that Board or its delegates determine that the Rule 144A Securities are liquid.
In reaching liquidity decisions, the Board or its delegates may consider, INTER
ALIA, the following factors: (i) the unregistered nature of the security; (ii)
the frequency of trades and quotes for the security; (iii) the number of dealers
wishing to purchase or sell the security and the number of other potential
purchasers; (iv) dealer undertakings to make a market in the security; and (v)
the nature of the security and the nature of the marketplace trades (E.G., the
time needed to dispose of the security, the method of soliciting offers and the
mechanics of the transfer).
Investing in Rule 144A Securities could have the effect of increasing
the level of illiquidity in the Funds to the extent that qualified institutional
buyers are unavailable or uninterested in purchasing such securities from the
Funds. The Board has adopted guidelines and delegated to CSAM the daily function
of determining and monitoring the illiquidity of Rule 144A Securities, although
the Board will retain ultimate responsibility for liquidity determinations.
INTEREST ONLY AND PRINCIPAL ONLY INSTRUMENTS. The Small Cap 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
SEC, to be illiquid securities.
BORROWING. The International Fund may borrow up to one-third of the
value of its total assets, and each other Fund may invest up to 15% of its total
assets, from banks to increase its holdings of portfolio securities or for other
purposes. Although the principal of such borrowings will be fixed, a Fund's
assets may change in value during the time the borrowing is outstanding. The
Funds expect that some of their borrowings may be made on a secured basis. In
such situations, either the custodian will segregate the pledged assets for the
benefit of the lender or arrangements will be made with a suitable
sub-custodian, which may include the lender.
SMALL CAPITALIZATION AND EMERGING GROWTH COMPANIES; UNSEASONED
ISSUERS. At least 80% of the Small Cap Value Fund's net assets, plus any
borrowings for investment purposes, will be invested in equity securities of
small market capitalization companies, which for the purposes of this Fund, are
those companies whose market capitalization is within the range of
capitalizations of companies in the Russell 2000 Index. Therefore, an investment
in the Fund may involve a greater degree of risk than an investment in other
mutual funds that seek growth of capital or capital appreciation by investing in
better-known, larger companies. Investments in small- and medium-sized and
emerging growth companies and companies with
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continuous operations of less than three years ("unseasoned issuers"), which may
include foreign securities, involve considerations that are not applicable to
investing in securities of established, larger-capitalization issuers, including
reduced and less reliable information about issuers and markets, less stringent
financial disclosure requirements and accounting standards, illiquidity of
securities and markets, higher brokerage commissions and fees and greater market
risk in general. In addition, securities of these companies may involve greater
risks since these securities may have limited marketability and, thus, may be
more volatile. Because such companies normally have fewer shares outstanding
than larger companies, it may be more difficult for the Fund to buy or sell
significant amounts of such shares without an unfavorable impact on prevailing
prices. These companies may have limited product lines, markets or financial
resources and may lack management depth. In addition, these companies are
typically subject to a greater degree of changes in earnings and business
prospects than are larger, more established companies. There is typically less
publicly available information concerning these companies than for larger, more
established ones.
"SPECIAL SITUATION" COMPANIES. The Small Cap Value Fund may
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. "Special situation" companies are involved in an actual
or prospective acquisition or consolidation; reorganization; recapitalization;
merger, liquidation or distribution of cash, securities or other assets; a
tender or exchange offer; a breakup or workout of a holding company; or
litigation which, if resolved favorably, may provide an attractive investment
opportunity. If the actual or prospective situation does not materialize as
anticipated, the market price of the securities of a "special situation
company" may decline significantly. Although investing in securities of small-
and medium-sized and emerging growth companies, unseasoned issuers or issuers
in "special situations" offers potential for above-average returns if the
companies are successful, the risk exists that the companies will not succeed
and the prices of the companies' shares could significantly decline in value.
Therefore, an investment in the Fund may involve a greater degree of risk than
an investment in other mutual funds that seek growth of capital or capital
appreciation by investing in better-known, larger companies.
INVESTMENT RESTRICTIONS
The following investment limitations of each Fund may not be changed
without the affirmative vote of the holders of a majority of the relevant Fund's
outstanding shares ("Fundamental Restrictions"). Such majority is defined as the
lesser of (i) 67% or more of the shares present at the meeting, if the holders
of more than 50% of the outstanding shares of the Fund are present or
represented by proxy, or (ii) more than 50% of the outstanding shares.
TAX EFFICIENT FUND, SMALL CAP VALUE FUND, LARGE CAP VALUE FUND
The following fundamental investment limitations are applicable to the
Tax Efficient Fund, Small Cap Value Fund and Large Cap Value Fund and may not be
changed with respect to a Fund without the approval of a majority of the
shareholders of that Fund. This means an affirmative vote of the holders of (a)
67% or more of the shares of that Fund represented at a meeting at which more
than 50% of the outstanding shares of the Fund are
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represented or (b) more than 50% of the outstanding shares of that Fund,
whichever is less. Except as set forth in the PROSPECTUS and this STATEMENT OF
ADDITIONAL INFORMATION, all other investment policies or practices are
considered by each Fund not to be fundamental and accordingly may be changed
without shareholder approval. If a percentage restriction is adhered to at the
time of investment, a later increase or decrease in percentage resulting from a
change in values or assets will not constitute a violation of such restriction.
Each 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;
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 Small Cap Value Fund or the Large Cap Value
Fund in respect of investments in U.S. Government Securities or, for the Small
Cap 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;
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 Small Cap Value Fund and the Large Cap Value Fund,
in connection with hedging
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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 deemed to be an underwriter for purposes of the Securities Act of 1933
and except, with respect to the Small Cap 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% 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 Small Cap 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.
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 Capital Funds in good faith deem appropriate to
reflect their value;
9. With respect to the Tax Efficient Fund and the Large Cap 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 Tax Efficient Fund and the Large Cap Value
Fund, purchase or retain the securities of any issuer if, to the knowledge of
the Fund's management, those officers and Trustees of the 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 Tax Efficient Fund and the Large Cap 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;
12. With respect to the Tax Efficient Fund and the Large Cap 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
Small Cap Value Fund and the Large Cap Value Fund, that the
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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 Small Cap Value Fund and the Large Cap Value Fund, other than
mortgage-backed securities and similar instruments), or commodities or commodity
contracts except, with respect to the Small Cap Value Fund, for hedging
purposes;
15. With respect to the Tax Efficient Fund and the Large Cap 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 Large Cap Value Fund, for purchases of securities of
money market funds; or
16. Invest in companies for the purpose of exercising control or
management.
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.
INTERNATIONAL FUND
The Fund may not:
1. Purchase the securities of any one issuer, other than the United
States Government, or any of its agencies or instrumentalities, immediately
after such purchase more than 5% of the value of its total 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;
2. Invest 25% or more of the value of its total assets 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;
3. Issue senior securities (including borrowing money, including on
margin if margin securities are owned and enter into reverse repurchase
agreements) in excess of 33 1/3% of its total assets (including the amount of
senior securities issued but excluding any liabilities and indebtedness not
constituting senior securities) except that the Fund may borrow up to an
additional 5% of its total assets for temporary purposes; or pledge its assets
other than to secure such issuances or in connection with hedging transactions,
short sales, when-issued and forward commitment transactions and similar
investment strategies. The Fund's obligations under swaps are not treated as
senior securities;
4. Make loans of money or property to any person, except through loans
of portfolio securities, the purchase of fixed income securities consistent with
the Fund's
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investment objectives and policies or the acquisition of securities subject to
repurchase agreements;
5. Underwrite the securities of other issuers, except to the extent
that in connection with the disposition of portfolio securities the Fund may be
deemed to be an underwriter;
6. Purchase real estate or interests therein;
7. Purchase or sell commodities or commodities contracts except for
purposes, and only to the extent, permitted by applicable law without the Fund
becoming subject to registration with the CFTC as a commodity pool;
8. Make any short sale of securities except in conformity with
applicable laws, rules and regulations and unless, giving effect to such sale,
the market value of all securities sold short does not exceed 25% of the value
of the Fund's total assets and the Fund's aggregate short sales of a particular
class of securities do not exceed 25% of the then outstanding securities of that
class; or
9. Invest in oil, gas or other mineral leases.
PORTFOLIO VALUATION
The following is a description of the procedures used by each Fund in
valuing its assets.
Equity securities listed on an exchange or traded in an
over-the-counter market will be valued at the closing price on the exchange or
market on which the security is primarily traded (the "Primary Market") at the
time of valuation (the "Valuation Time"). If the security did not trade on the
Primary Market, the security will be valued at the closing price on another
exchange or market where it trades at the Valuation Time. If there are no such
sales prices, the security will be valued at the most recent bid quotation as of
the Valuation Time or at the lowest asked quotation in the case of a short sale
of securities. Debt securities with a remaining maturity greater than 60 days
shall be valued in accordance with the price supplied by an independent pricing
service approved by the Board ("Pricing Service"). If there are no such
quotations, the security will be valued at its fair value as determined in good
faith by or under the direction of the Board of Trustees.
Prices for debt securities supplied by a "Pricing Service may use a
matrix, formula or other objective method that takes into consideration market
indexes, matrices, yield curves and other specific adjustments. The procedures
of Pricing Services are reviewed periodically by the officers of each Fund under
the general supervision and responsibility of the Board, which may replace a
Pricing Service at any time.
If a Pricing Service is not able to supply closing prices and
bid/asked quotations, for an equity security or a price for a debt security, and
there are two or more dealers, brokers or market makers in the security, the
security will be valued at the mean between the highest bid and the lowest asked
quotations from at least two dealers, brokers or market makers. If such
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dealers, brokers or market makers only provide bid quotations, the value shall
be the mean between the highest and the lowest bid quotations provided. If a
Pricing Service is not able to supply closing prices and bid/asked quotations,
for an equity security or a price for a debt security, and there is only one
dealer, broker or market maker in the security, the security will be valued at
the mean between the bid and the asked quotations provided, unless the dealer,
broker or market maker can only provide a bid quotation, in which case the
security will be valued at such bid quotation. Options contracts will be valued
similarly. Futures contracts will be valued at the most recent settlement price
at the time of valuation.
Short-term obligations with maturities of 60 days or less are valued
at amortized cost, which constitutes fair value as determined by or under the
direction of the Board of each Fund. Amortized cost involves valuing a portfolio
instrument at its initial cost and thereafter assuming a constant amortization
to maturity of any discount or premium, regardless of the impact of fluctuating
interest rates on the market value of the instrument. The amortized cost method
of valuation may also be used with respect to other debt obligations with 60
days or less remaining to maturity.
Securities, options, futures contracts and other assets which cannot
be valued pursuant to the foregoing will be valued at their fair value as
determined in good faith by or under the direction of the Board of each Fund. In
addition, the Board of each Fund or its delegates may value a security at fair
value if it determines that such security's value determined by the methodology
set forth above does not reflect its fair value.
Trading in securities in certain foreign countries is completed at
various times prior to the close of business on each business day in New York
(i.e., a day on which the New York Stock Exchange, Inc. (the "NYSE") is open for
trading). In addition, securities trading in a particular country or countries
may not take place on all business days in New York. Furthermore, trading takes
place in various foreign markets on days which are not business days in New York
and days on which each Fund's net asset value is not calculated. As a result,
calculation of each Fund's net asset value may not take place contemporaneously
with the determination of the prices of certain foreign portfolio securities
used in such calculation. All assets and liabilities initially expressed in
foreign currency values will be converted into U.S. dollar values at the
prevailing rate as quoted by a Pricing Service at the close of the London Stock
Exchange. If such quotations are not available, the rate of exchange will be
determined in good faith by or under the direction of the Board of each Fund.
PORTFOLIO TRANSACTIONS
CSAM is responsible for establishing, reviewing and, where necessary,
modifying each Fund's investment program to achieve its investment objective and
has retained its affiliates in the United Kingdom, Japan and Australia to act as
sub-investment advisers to the International Fund. 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 or 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
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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.
CSAM will select portfolio investments and effect transactions for the
Funds. In selecting broker-dealers, CSAM does business exclusively with those
broker-dealers that, in CSAM'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,
CSAM 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
CSAM's standards may be higher than for execution services alone or for services
that fall below CSAM's standards. CSAM 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, CSAM
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.
For the fiscal year ended October 31, 2002, brokers and dealers who
provided research services were paid $18,716, $10,830, $1,700 and $2,666 of
total brokerage commissions from the Tax Efficient Fund, Large Cap Value Fund,
Small Cap Value Fund and International Fund, respectively. Research received
from brokers or dealers is supplemental to CSAM's own research program.
All orders for transactions or other services in securities or options
on behalf of a Fund are placed by CSAM with broker-dealers that it selects,
including Credit Suisse Asset Management Securities, Inc. ("CSAMSI") and other
affiliates of Credit Suisse Group. A Fund may utilize CSAMSI or other affiliates
of Credit Suisse in connection with a purchase or sale of securities when the
CSAM 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.
Investment decisions for a Fund concerning specific portfolio
securities are made independently from those for other clients advised by the
CSAM. Such other investment clients
32
<Page>
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 CSAM believes to be equitable to each
client, including the Funds. In some instances, this investment procedure may
adversely affect the price paid or received by the Funds or the size of the
position obtained or sold for the Funds. To the extent permitted by law, the
CSAM may aggregate the securities to be sold or purchased for each Fund with
those to be sold or purchased for such other investment clients in order to
obtain best execution.
Transactions for each of the Funds may be effected on foreign
securities exchanges. In transactions for securities not actively traded on a
foreign securities exchange, the Funds 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.
Each Fund may participate, if and when practicable, in bidding for the
purchase of securities for the 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 CSAM, in its
sole discretion, believe such practice to be otherwise in the Fund's interest.
For the past three fiscal years ended October 31, the Funds paid
brokerage commissions as follows:
<Table>
<Caption>
FUND YEAR COMMISSIONS
- -------------------------------------------------------------------------------------------
Tax Efficient Fund 2000 $ 126,881
2001 $ 80,478
2002 $ 122,313
- -------------------------------------------------------------------------------------------
Large Cap Value Fund 2000 $ 460,009
2001 $ 301,950
2002 $ 188,101
- -------------------------------------------------------------------------------------------
Small Cap Value Fund 2000 $ 299,222
2001 $ 215,431
2002 $ 225,292
- -------------------------------------------------------------------------------------------
International Fund 2000 $ 126,881
2001 $ 64,126
2002 $ 100,538
- -------------------------------------------------------------------------------------------
</Table>
33
<Page>
In no instance will portfolio securities be purchased from or sold to
CSAM, CSAM's affiliates in the United Kingdom, Japan and Australia, CSAMSI or
Credit Suisse First Boston ("CS First Boston") or any affiliated person of such
companies. In addition, a Fund will not give preference to any institutions with
whom the Fund enters into distribution or shareholder servicing agreements
concerning the provision of distribution services or support services.
As of October 31, 2002, the Funds held the following securities of
their regular brokers or dealers:
<Table>
<Caption>
FUND NAME OF SECURITIES AGGREGATE VALUE OF THE HOLDINGS
- ---- ------------------ -------------------------------
Tax Efficient Fund None
Large Cap Value State Street Bank & Trust Co $8,866,00
Euro Time Deposit 1.750% 11/1/02
Small Cap Value State Street Bank & Trust Co $12,558,000
Euro Time Deposit 1.750% 11/1/02
International Fund State Street Bank & Trust Co $341,000
Euro Time Deposit 1.750% 11/1/02
</Table>
PORTFOLIO TURNOVER
Each Fund does not intend to seek profits through short-term trading,
but the rate of turnover will not be a limiting factor when the Fund deems it
desirable to sell or purchase securities. Each Fund's portfolio turnover rate is
calculated by dividing the lesser of purchases or sales of its portfolio
securities for the year by the monthly average value of the portfolio
securities. Securities with remaining maturities of one year or less at the date
of acquisition are excluded from the calculation.
Certain practices that may be employed by a Fund could result in high
portfolio turnover. For example, options on securities may be sold in
anticipation of a decline in the price of the underlying security (market
decline) or purchased in anticipation of a rise in the price of the underlying
security (market rise) and later sold. To the extent that its portfolio is
traded for the short-term, a Fund will be engaged essentially in trading
activities based on short-term considerations affecting the value of an issuer's
stock instead of long-term investments based on fundamental valuation of
securities. Because of this policy, portfolio securities may be sold without
regard to the length of time for which they have been held. Consequently, the
annual portfolio turnover rate of a Fund may be higher than mutual funds having
similar objectives that do not utilize these strategies.
It is not possible to predict the Funds' portfolio turnover rates.
High portfolio turnover rates (100% or more) may result in higher brokerage
commissions, dealer mark-ups or underwriting commissions as well as other
transaction costs. In addition, gains realized from portfolio turnover may be
taxable to shareholders.
34
<Page>
For the fiscal years ended October 31, 2001 and 2002, the Tax
Efficient Fund's turnover rate was 17% and 19%, the Large Cap Value Fund's
turnover rate was 38% and 2%, the Small Cap Value Fund's turnover rate was 54%
and 18%, the International Fund's turnover rate was 48% and 124%, respectively.
MANAGEMENT OF THE FUNDS
OFFICERS AND BOARDS OF TRUSTEES
Except in the case of the International Fund, the business and affairs
of the Funds are managed by the Board of Trustees in accordance with the laws of
The Commonwealth of Massachusetts. The business and affairs of the International
Fund are managed by the Board of Trustees in accordance with the laws of the
State of Delaware. The Trustees approve all significant agreements between the
Funds and the companies that furnish services to the Funds, including agreements
with the Funds' investment adviser, sub-advisers as applicable, custodian and
transfer agent. Each Board elects officers who are responsible for the
day-to-day operations of a Fund and who execute policies authorized by the
Board.
The names (and ages) of each Fund's Trustees and officers, their
addresses, present positions and principal occupations during the past five
years and other affiliations are set forth below.
<Table>
<Caption>
NUMBER OF
PORTFOLIOS
TERM OF IN FUND
OFFICE(1) AND PRINCIPAL COMPLEX OTHER
POSITION(S) LENGTH OF OCCUPATION(S) DURING OVERSEEN DIRECTORSHIPS
NAME, ADDRESS AND AGE HELD WITH FUND TIME SERVED PAST FIVE YEARS BY TRUSTEE HELD BY TRUSTEE
- ----------------------------------- --------------- ------------- ----------------------- ------------ -------------------
INDEPENDENT TRUSTEES
Richard H. Francis Trustee Since 2001 Currently retired; 54
c/o Credit Suisse Asset Executive Vice
Management, LLC President and Chief
466 Lexington Avenue Financial Officer of
New York, NY 10017-3140 Pan Am Corporation
Age: 70 and Pan American
World Airways, Inc.
from 1988 to 1991.
</Table>
- -------------------
(1) Each Trustee and Officer serves until his or her respective successor
has been duly elected and qualified.
35
<Page>
<Table>
<Caption>
NUMBER OF
PORTFOLIOS
TERM OF IN FUND
OFFICE(1) AND PRINCIPAL COMPLEX OTHER
POSITION(S) LENGTH OF OCCUPATION(S) DURING OVERSEEN DIRECTORSHIPS
NAME, ADDRESS AND AGE HELD WITH FUND TIME SERVED PAST FIVE YEARS BY TRUSTEE HELD BY TRUSTEE
- ----------------------------------- --------------- ------------- ----------------------- ------------ -------------------
Jack W. Fritz Trustee Since 2001 Private investor; 53 Director of Advo,
2425 North Fish Creek Road Consultant and Inc. (direct mail
P.O. Box 1287 Director of Fritz advertising)
Wilson, Wyoming 83014 Broadcasting, Inc.
Age: 75 and Fritz
Communications
(developers
and operators
of radio
stations)
since 1987.
Jeffrey E. Garten Trustee Since 2001 Dean of Yale School 53 Director of
Box 208200 of Management and Aetna, Inc.;
New Haven, Connecticut 06520-8200 William S. Beinecke Director of
Age: 56 Professor in the Calpine Energy
Practice of Corporation;
International Trade Director of
and Finance; CarMax Group
Undersecretary of (used car dealers)
Commerce for
International Trade
from November 1993 to
October 1995;
Professor at
Columbia
University
from September
1992 to
November 1993.
</Table>
36
<Page>
<Table>
<Caption>
NUMBER OF
PORTFOLIOS
TERM OF IN FUND
OFFICE(1) AND PRINCIPAL COMPLEX OTHER
POSITION(S) LENGTH OF OCCUPATION(S) DURING OVERSEEN DIRECTORSHIPS
NAME, ADDRESS AND AGE HELD WITH FUND TIME SERVED PAST FIVE YEARS BY TRUSTEE HELD BY TRUSTEE
- ----------------------------------- --------------- ------------- ----------------------- ------------ -------------------
Peter F. Krogh Trustee Since 2001 Dean Emeritus and 53 Member of Board
301 ICC Distinguished of The Carlisle
Georgetown University Professor of Companies Inc.;
Washington, DC 20057 International Affairs Member of
Age: 66 at the Edmund A. Selection
Walsh School of Committee for
Foreign Service, Truman Scholars
Georgetown and Henry Luce
University; Moderator Scholars; Senior
of PBS foreign Associate of
affairs television Center for
series. Strategic and
International
Studies; Trustee
of numerous world
affairs
organizations
James S. Pasman, Jr. Trustee Since 2001 Currently retired; 55 Director of
c/o Credit Suisse Asset President and Chief Education
Management, LLC Operating Officer of Management Corp.
466 Lexington Avenue National InterGroup,
New York, NY 10017-3140 Inc. (holding
Age: 71 company) April 1989
to March 1991;
Chairman of Permian
Oil Co. from April
1989 to March 1991.
</Table>
37
<Page>
<Table>
<Caption>
NUMBER OF
PORTFOLIOS
TERM OF IN FUND
OFFICE(1) AND PRINCIPAL COMPLEX OTHER
POSITION(S) LENGTH OF OCCUPATION(S) DURING OVERSEEN DIRECTORSHIPS
NAME, ADDRESS AND AGE HELD WITH FUND TIME SERVED PAST FIVE YEARS BY TRUSTEE HELD BY TRUSTEE
- ----------------------------------- --------------- ------------- ----------------------- ------------ -------------------
Steven N. Rappaport Trustee Since 2001 Partner of Lehigh 54
Lehigh Court LLC Court LLC since July
40 East 52nd Street, 2002, President of
New York, New York 10022 SunGard Securities
Age: 54 Finance Inc., from
2001 to July 2002;
President of Loanet,
Inc. (on-line
accounting service)
from 1995 to 2001;
Director, President,
North American
Operations, and
former Executive Vice
President from 1992
to 1993 of Worldwide
Operations of
Metallurg Inc.
(manufacturer of
specialty metals and
alloys); Executive
Vice President,
Telerate, Inc.
(provider of
real-time information
to the capital
markets) from 1987 to
1992; Partner in the
law firm of Hartman &
Craven until 1987.
</Table>
38
<Page>
<Table>
<Caption>
NUMBER OF
PORTFOLIOS
TERM OF IN FUND
OFFICE(1) AND PRINCIPAL COMPLEX OTHER
POSITION(S) LENGTH OF OCCUPATION(S) DURING OVERSEEN DIRECTORSHIPS
NAME, ADDRESS AND AGE HELD WITH FUND TIME SERVED PAST FIVE YEARS BY TRUSTEE HELD BY TRUSTEE
- ----------------------------------- --------------- ------------- ----------------------- ------------ -------------------
INTERESTED TRUSTEE
William W. Priest(2) Trustee Since 2001 Co-Managing Partner, 60
Steinberg Priest & Sloane Capital Steinberg Priest &
Management Sloane Capital
12 East 49th Street Management since
12th Floor March 2001; Chairman
New York, New York 10017 and Managing Director
Age: 61 of CSAM from 2000 to
February 2001, Chief
Executive Officer and
Managing Director of
CSAM from 1990 to 2000.
</Table>
- ----------------
(2) Mr. Priest is a Trustee who is an "interested person" of the Funds as
defined in the 1940 Act, because he provides consulting services to
CSAM.
39
<Page>
<Table>
<Caption>
NUMBER OF
PORTFOLIOS
TERM OF IN FUND
OFFICE(1) AND PRINCIPAL COMPLEX OTHER
POSITION(S) LENGTH OF OCCUPATION(S) DURING OVERSEEN DIRECTORSHIPS
NAME, ADDRESS AND AGE HELD WITH FUND TIME SERVED PAST FIVE YEARS BY TRUSTEE HELD BY TRUSTEE
- ----------------------------------- --------------- ------------- ----------------------- ------------ -------------------
OFFICERS
Laurence R. Smith Chairman Since 2002 Managing Director and -- --
Credit Suisse Asset Management, LLC Global Chief
466 Lexington Avenue Investment Officer
New York, New York 10017-3140 CSAM; Associated with
J.P. Morgan
Age: 44 Investment Management
from 1981 to 1999;
Officer of other
Credit Suisse Funds.
</Table>
40
<Page>
<Table>
<Caption>
NUMBER OF
PORTFOLIOS
TERM OF IN FUND
OFFICE(1) AND PRINCIPAL COMPLEX OTHER
POSITION(S) LENGTH OF OCCUPATION(S) DURING OVERSEEN DIRECTORSHIPS
NAME, ADDRESS AND AGE HELD WITH FUND TIME SERVED PAST FIVE YEARS BY TRUSTEE HELD BY TRUSTEE
- ----------------------------------- --------------- ------------- ----------------------- ------------ -------------------
Hal Liebes, Esq. Vice Since 2001 Managing Director and -- --
Credit Suisse Asset Management, LLC President and Global General
466 Lexington Avenue Secretary Counsel of CSAM;
New York, New York 10017-3140 Associated with
Age: 38 Lehman Brothers, Inc.
from 1996 to 1997;
Associated with CSAM
from 1995 to 1996;
Associated with CS
First Boston
Investment Management
from 1994 to 1995;
Associated with
Division of
Enforcement, U.S.
Securities and
Exchange Commission
from 1991 to 1994.
Officer of other
Credit Suisse Funds.
Michael A. Pignataro Treasurer and Since 2001 Director and Director -- --
Credit Suisse Asset Management, LLC Chief of Fund Administration
466 Lexington Avenue Financial of CSAM; Associated with
New York, New York 10017-3140 Officer CSAM since 1984.
Age: 43 Officer of other
Credit Suisse Funds.
</Table>
41
<Page>
<Table>
<Caption>
NUMBER OF
PORTFOLIOS
TERM OF IN FUND
OFFICE(1) AND PRINCIPAL COMPLEX OTHER
POSITION(S) LENGTH OF OCCUPATION(S) DURING OVERSEEN DIRECTORSHIPS
NAME, ADDRESS AND AGE HELD WITH FUND TIME SERVED PAST FIVE YEARS BY TRUSTEE HELD BY TRUSTEE
- ----------------------------------- --------------- ------------- ----------------------- ------------ -------------------
Gregory N. Bressler, Esq. Assistant Since 2001 Director and Deputy -- --
Credit Suisse Asset Secretary General Counsel of
Management, LLC CSAM; Associated with
466 Lexington Avenue CSAM (since January
New York, New York 10017-3140 2000); Associated
Age: 36 with the law firm of
Swidler Berlin
Shereff Friedman LLP
from 1996 to 2000.
Officer of other
Credit Suisse Funds.
Kimiko T. Fields, Esq. Assistant Since 2002 Vice President and -- --
Credit Suisse Asset Secretary Legal Counsel of
Management, LLC CSAM; Associate with
466 Lexington Avenue CSAM January 1998;
New York, New York 10017-3140 Officer of other
Age: 39 Credit Suisse Funds.
</Table>
42
<Page>
<Table>
<Caption>
NUMBER OF
PORTFOLIOS
TERM OF IN FUND
OFFICE(1) AND PRINCIPAL COMPLEX OTHER
POSITION(S) LENGTH OF OCCUPATION(S) DURING OVERSEEN DIRECTORSHIPS
NAME, ADDRESS AND AGE HELD WITH FUND TIME SERVED PAST FIVE YEARS BY TRUSTEE HELD BY TRUSTEE
- ----------------------------------- --------------- ------------- ----------------------- ------------ -------------------
Rocco A. DelGuercio Assistant Since 2001 Vice President and -- --
Credit Suisse Asset Treasurer Administrative
Management, LLC Officer of CSAM;
466 Lexington Avenue Associated with CSAM
New York, New York 10017-3140 since June 1996;
Age: 39 Assistant Treasurer,
Bankers Trust Co. --
Fund Administration
from March 1994 to
June 1996; Mutual
Fund Accounting
Supervisor, Dreyfus
Corporation from
April 1987 to March
1994. Officer of
other Credit Suisse
Funds.
</Table>
43
<Page>
<Table>
<Caption>
NUMBER OF
PORTFOLIOS
TERM OF IN FUND
OFFICE(1) AND PRINCIPAL COMPLEX OTHER
POSITION(S) LENGTH OF OCCUPATION(S) DURING OVERSEEN DIRECTORSHIPS
NAME, ADDRESS AND AGE HELD WITH FUND TIME SERVED PAST FIVE YEARS BY TRUSTEE HELD BY TRUSTEE
- ----------------------------------- --------------- ------------- ----------------------- ------------ -------------------
Joseph Parascondola Assistant Since 2001 Assistant Vice -- --
Credit Suisse Asset Treasurer President - Fund
Management, LLC Administration of
466 Lexington Avenue CSAM since April
New York, New York 10017-3140 2000; Assistant Vice
Age: 39 President, Deutsche
Asset Management from
January 1999 to April
2000; Assistant Vice
President, Weiss,
Peck & Greer LLC from
November 1995 to
December 1998.
Officer of other
Credit Suisse Funds.
Robert M. Rizza Assistant Since 2002 Assistant Vice -- --
Credit Suisse Asset Treasurer President of CSAM
Management, LLC since January 2001;
466 Lexington Avenue Administrative
New York, New York 10017-3140 Officer of CSAM from
Age: 37 March 1998 to
December 2000;
Assistant Treasurer
of Bankers Trust Co.
from April 1994 to
March 1998; Officer
of other Credit
Suisse Funds.
</Table>
44
<Page>
OWNERSHIP IN SECURITIES OF THE FUNDS AND FUND COMPLEX
As reported to the Funds, the information in the following table
reflects beneficial ownership by the Trustees of certain securities as of
December 31, 2002.
<Table>
<Caption>
AGGREGATE DOLLAR RANGE OF
EQUITY SECURITIES IN ALL
REGISTERED INVESTMENT
COMPANIES OVERSEEN BY
DOLLAR RANGE OF EQUITY TRUSTEE IN FAMILY OF
NAME OF TRUSTEE SECURITIES IN THE FUND*(3) INVESTMENT COMPANIES*(3)
- --------------- -------------------------- ------------------------
INDEPENDENT TRUSTEES
Richard H. Francis Tax Efficient Fund: A E
Large Cap Value Fund: A
Small Cap Value Fund: D
International Fund: A
Jack W. Fritz Tax Efficient Fund: A E
Large Cap Value Fund: A
Small Cap Value Fund: A
International Fund: A
Jeffrey E. Garten Tax Efficient Fund: A A
Large Cap Value Fund: A
Small Cap Value Fund: A
International Fund: A
Peter F. Krogh Tax Efficient Fund: C D
Large Cap Value Fund: A
Small Cap Value Fund: C
International Fund: A
</Table>
- -----------------
(3) Beneficial ownership is determined in accordance with Rule 16a-1(a)(2)
under the Securities Exchange Act of 1934.
45
<Page>
<Table>
<Caption>
AGGREGATE DOLLAR RANGE OF
EQUITY SECURITIES IN ALL
REGISTERED INVESTMENT
COMPANIES OVERSEEN BY
DOLLAR RANGE OF EQUITY TRUSTEE IN FAMILY OF
NAME OF TRUSTEE SECURITIES IN THE FUND*(3) INVESTMENT COMPANIES*(3)
- --------------- -------------------------- ------------------------
James S. Pasman, Jr. Tax Efficient Fund: A C
Large Cap Value Fund: A
Small Cap Value Fund: A
International Fund: A
Steven N. Rappaport Tax Efficient Fund: A D
Large Cap Value Fund: B
Small Cap Value Fund: B
International Fund: A
INTERESTED TRUSTEE
William W. Priest Tax Efficient Fund: A A
Large Cap Value Fund: A
Small Cap Value Fund: A
International Fund: A
</Table>
- ------------------
* Key to Dollar Ranges:
A. None
B. $1 - $10,000
C. $10,000 - $50,000
D. $50,000 - $100,000
E. Over $100,000
46
<Page>
COMMITTEES AND MEETINGS OF TRUSTEES
Each Fund has an Audit Committee and a Nominating Committee. The
members of the Audit Committee and the Nominating Committee consist of all the
Trustees who are not "interested persons" of the Funds as defined in the 1940
Act ("Independent Trustees"), namely Messrs. Francis, Fritz, Garten, Krogh,
Pasman and Rappaport. The Valuation Committee consists of at least two Trustees,
at least one of whom is an Independent Trustee.
In accordance with its written charter adopted by the Board of
Trustees, the Audit Committee assists the Board in fulfilling its responsibility
for oversight of the quality and integrity of the accounting, auditing and
financial reporting practices of the Fund. It also makes recommendations to the
Board as to the selection of the independent public accountants, reviews the
methods, scope and result of the audits and audit fees charged, and reviews the
Fund's internal accounting procedures and controls. The Audit Committee also
considers the scope and amount of non-audit services provided to the Fund, its
Adviser and affiliates by the independent public accountants. The Audit
Committee of each Fund met four times during the fiscal year ended October 31,
2002.
The Nominating Committee is charged with the duty of making all
nominations for Independent Trustees to the Board of Trustees. The Nominating
Committee will consider nominees recommended by the Fund's shareholders when a
vacancy becomes available. Shareholders who wish to recommend a nominee should
send nominations to the Fund's Secretary. The Nominating Committee also
considers the appointment of independent counsel to the Independent Trustees.
The Nominating Committee of each Fund met twice during the fiscal year ended
October 31, 2002.
No employee of CSAM, CSAM's affiliates in the United Kingdom, Japan
and Australia, State Street Bank and Trust Company ("State Street") and CSAMSI,
the Funds' co-administrators, or any of their affiliates, receives any
compensation from a Fund for acting as an officer or trustee of a Fund. Each
Trustee who is not a director, trustee, officer or employee of CSAM, CSAM's
affiliates in the United Kingdom, Japan and Australia, State Street, CSAMSI or
any of their affiliates receives an annual fee of $750 for each meeting of the
Boards attended by him for his services as Trustee, and is reimbursed for
expenses incurred in connection with his attendance at Board meetings. Each
member of the Audit Committee receives an annual fee of $250, and the chairman
of the Audit Committee receives an annual fee of $325, for serving on the Audit
Committee.
47
<Page>
TRUSTEES' TOTAL COMPENSATION FOR FISCAL YEAR ENDED OCTOBER 31, 2002
<Table>
<Caption>
NUMBER OF
ALL INVESTMENT PORTFOLIOS IN
TAX COMPANIES IN FUND COMPLEX
EFFICIENT LARGE CAP SMALL CAP VALUE INTERNATIONAL THE CSAM FUND OVERSEEN BY
NAME OF TRUSTEE FUND VALUE FUND FUND FUND COMPLEX TRUSTEE
- ---------------------------------------------------------------------------------------------------------------------
William W. Priest(3) None None None None None 60
Richard H. Francis $1,437 $1,437 $1,437 $1,734 $103,750 54
Jack W. Fritz $1,187 $1,187 $1,187 $1,484 $ 94,375 53
Jeffrey E. Garten $1,437 $1,437 $1,437 $1,484 $ 97,500 53
Peter F. Krogh $1,437 $1,437 $1,437 $1,734 $ 99,100 53
James S. Pasman, Jr. $1,437 $1,437 $1,437 $1,734 $103,600 55
Steven N. Rappaport $1,537 $1,537 $1,537 $1,809 $110,545 54
</Table>
(3) Mr. Priest is a former employee of CSAM, and accordingly, receives no
compensation from any Fund or any other investment company advised by
CSAM.
Each Trustee is reimbursed for expenses incurred in connection with
attendance at Board meetings.
As of January 24, 2003, Trustees and officers of each Fund as a group
owned of record less than 1% of each Fund's outstanding shares.
ADVISORY AGREEMENTS
CSAM, located at 466 Lexington Avenue, New York, New York 10017-3140
serves as investment adviser to each Fund pursuant to a written investment
advisory agreement between CSAM and the Fund (the "Advisory Agreement"). CSAM is
the institutional and mutual fund asset management arm of Credit Suisse First
Boston ("CSFB"), part of the Credit Suisse Group ("Credit Suisse"), one of the
world's largest financial organizations with approximately $819.6 billion in
assets under management. CSAM is a diversified investment managing global and
domestic equity and fixed income portfolios for retail investors as well as
institutional clients such as corporate pension and profit-sharing plans, state
pension funds, union funds, endowments and charitable institutions. Together
with its predecessor firms, CSAM has been engaged in the investment advisory
business for over 60 years. As of September 30, 2002, Credit Suisse Asset
Management employed 2,270 people worldwide and had global assets under
management of approximately $284.3 billion, with $55.8 billion of assets under
management in the U.S. CSFB is a leading global investment bank serving
institutional, corporate, government and individual clients. CSFB's businesses
include securities underwriting, sales and trading, investment banking, private
equity, financial advisory services, investment research, venture capital,
correspondent brokerage services and asset management. CSFB operates in 77
locations in 36 countries across six continents. CSFB is a business unit of the
Zurich-based Credit Suisse Group. The principal business address of Credit
Suisse is Paradeplatz 8, CH8070, Zurich, Switzerland.
48
<Page>
Prior to November 3, 2000, DLJ Asset Management, Inc. ("DLJAM") served
as the Funds' investment adviser. On November 3, 2000, Credit Suisse acquired
Donaldson, Lufkin & Jenrette, Inc. ("DLJ") including its subsidiary, DLJAM, and
combined the investment advisory business of DLJAM with its existing U.S. asset
management business, CSAM.
The Advisory Agreement between each Fund and CSAM has an initial term
of two years and continues in effect from year to year thereafter if such
continuance is specifically approved at least annually by the vote of a majority
of the Independent Trustees cast in person at a meeting called for the purpose
of voting on such approval, and either by a vote of the Fund's Board of Trustees
or by a majority of the Fund's outstanding voting securities, as defined in the
1940 Act.
Pursuant to each Advisory Agreement, subject to the supervision and
direction of the Board, CSAM is responsible for managing each Fund in accordance
with the Fund's stated investment objective and policies. CSAM is responsible
for providing investment advisory services as well as conducting a continual
program of investment, evaluation and, if appropriate, sale and reinvestment of
the Fund's assets. In addition to expenses that CSAM may incur in performing its
services under the Advisory Agreement, CSAM pays the compensation, fees and
related expenses of all Trustees who are affiliated persons of CSAM or any of
its subsidiaries.
Each Fund bears certain expenses incurred in its operation, including:
investment advisory and administration fees; taxes, interest, brokerage fees and
commissions, if any; fees of Trustees of the Fund who are not officers,
directors, or employees of CSAM or affiliates of any of them; fees of any
pricing service employed to value shares of the Fund; SEC fees, state Blue Sky
qualification fees and any foreign qualification fees; charges of custodians and
transfer and dividend disbursing agents; the Fund's proportionate share of
insurance premiums; outside auditing and legal expenses; costs of maintenance of
the Fund's existence; costs attributable to investor services, including,
without limitation, telephone and personnel expenses; costs of preparing and
printing prospectuses and statements of additional information for regulatory
purposes and for distribution to existing shareholders; costs of shareholders'
reports and meetings of the shareholders of the Fund and of the officers or
Board of Trustees of the Fund; and any extraordinary expenses.
Each class of a Fund bears all of its own expenses not specifically
assumed by the Adviser or another service provider to the Fund. General expenses
of the Funds not readily identifiable as belonging to a particular Fund are
allocated among all Credit Suisse Funds by or under the direction of the Funds'
Boards of Trustees in such manner as the Boards determine to be fair and
accurate. Each class of the Funds pays its own administration fees and may pay a
different share than the other classes of other expenses, except advisory and
custodian fees, if those expenses are actually incurred in a different amount by
such class or if a class receives different services.
Each Advisory Agreement provides that CSAM shall not be liable for any
error of judgment or mistake of law or for any loss suffered by the Fund in
connection with the matters to which the Agreement relates, except that CSAM
shall be liable for a loss resulting from a breach of fiduciary duty by CSAM
with respect to the receipt of compensation for services; provided that nothing
in the Advisory Agreement shall be deemed to protect or purport to protect CSAM
49
<Page>
against any liability to the Fund or to shareholders of the Fund to which CSAM
would otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence on its part in the performance of its duties or by reason of CSAM's
reckless disregard of its obligations and duties under the Advisory Agreement.
Each Fund or CSAM may terminate the Advisory Agreement on 60 days
written notice without penalty. The Advisory Agreement will terminate
automatically in the event of its assignment (as defined in the 1940 Act).
For its services to the Funds, CSAM will be paid (before any voluntary
waivers or reimbursements) a monthly fee computed at the annual rates set forth
below:
<Table>
<Caption>
FUND ANNUAL RATE
- -------------------------- ---------------------------------------------------------------------------------------
Tax Efficient Fund .75% of average daily net assets up to $100 million
.50% of average daily net assets in excess of $100 million
Large Cap Value Fund .75% of average daily net assets up to $75 million
.50% of average daily net assets in excess of $75 million
Small Cap Value Fund .875% of average daily net assets up to $100 million
.75% of average daily net assets in excess of $100 million but less than $200 million
International Fund 1.00% of average daily net assets
</Table>
For the fiscal year ended October 31, 2002, the Funds paid advisory
fees to CSAM at the following rates (net or any voluntary waivers or
reimbursements): 0.31% for Tax Efficient, 0.32% for Large Cap Value, 0.77% for
Small Cap Value 0.34% for International.
CSAM and the Fund's co-administrators may voluntarily waive a portion
of their fees from time to time and temporarily limit the expenses to be paid by
the Fund.
ADVISORY FEES PAID TO CSAM OR TO CSAM'S PREDECESSOR, DLJAM
For the past three fiscal years ended October 31, the Funds paid CSAM
or CSAM's predecessor DLJAM, advisory fees, and CSAM and DLJAM waived fees
and/or, reimbursed expenses of the Funds under the Advisory Agreements as
follows:
50
<Page>
OCTOBER 31, 2002
<Table>
<Caption>
FEES PAID
FUND (AFTER WAIVERS) WAIVERS REIMBURSEMENTS
---- --------------- ------- --------------
Tax Efficient Fund $ 405,035 $522,137 $0
Large Cap Value Fund $ 616,596 $509,588 $0
Small Cap Value Fund $ 1,711,836 $335,009 $0
International Fund $ 72,370 $142,866 $0
</Table>
OCTOBER 31, 2001
<Table>
<Caption>
FEES PAID
FUND (AFTER WAIVERS) WAIVERS REIMBURSEMENTS
---- --------------- ------- --------------
Tax Efficient Fund $1,035,106 $(235,650) $0
Large Cap Value Fund $1,145,568 $(254,834) $0
Small Cap Value Fund $1,784,256 $ (54,966) $0
International Fund $ 466,287 $ 0 $0
</Table>
OCTOBER 31, 2000
<Table>
<Caption>
FEES PAID
FUND (AFTER WAIVERS) WAIVERS REIMBURSEMENTS
---- --------------- ------- --------------
Tax Efficient Fund $1,388,293 $0 $0
Large Cap Value Fund $1,442,618 $0 $0
Small Cap Value Fund $1,622,703 $0 $0
International Fund $ 809,279 $0 $0
</Table>
SUB-ADVISORY AGREEMENTS
International Fund has entered into Sub-Investment Advisory Agreements
with CSAM and each of CSAM's United Kingdom affiliate ("CSAM U.K."), CSAM's
Japanese affiliate ("CSAM Japan") and CSAM's Australian affiliate ("CSAM
Australia"), each of which is named Credit Suisse Asset Management Limited (each
of CSAM U.K., CSAM Japan and CSAM Australia may be referred to as a
"Sub-Adviser").
Subject to the supervision of CSAM, each Sub-Adviser, in the exercise
of its best judgment, will provide investment advisory assistance and portfolio
management advice to the International Fund in accordance with the Fund's
Agreement & Declaration of Trust, as may be amended from time to time, the
PROSPECTUS and STATEMENT OF ADDITIONAL INFORMATION, as from time to time in
effect, and in such manner and to such extent as may from time to time be
approved by the Board. Each Sub-Adviser bears its own expenses incurred in
performing services under the Sub-Advisory Agreement.
CSAM U.K. is a corporation organized under the laws of England in 1982
and is registered as an investment adviser under the Investment Advisers Act of
1940 ("Advisers Act").
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<Page>
The principal executive office of CSAM U.K. is Beaufort House, 15 St. Botolph
Street, London EC3A 7JJ, England. CSAM U.K. is a diversified asset manager,
handling global equity, balanced, fixed income and derivative securities
accounts for other investment companies, corporate pension and profit-sharing
plans, state pension funds, union funds, endowments and other charitable
institutions. CSAM U.K. has been in the money management business for over 16
years and as of September 30, 2002 managed approximately $47.4 billion in
assets.
CSAM Japan is a corporation organized under the laws of Japan in 1993
and is licensed as an investment adviser under the Japanese Investment Advisory
Law and as an investment trust manager under the Japanese Trust Law. CSAM Japan
is also registered as an investment adviser under the Advisers Act. The
principal executive office of CSAM Japan is Shiroyama JT Mori Bldg. 3-1,
Toranomon 4-Chome, Minato-Ku, Tokyo 105-6026 Japan. CSAM Japan is a diversified
asset manager, handling global equity, balanced, fixed income and derivative
securities accounts for other investment companies, corporate pension and
profit-sharing plans, state pension funds, union funds, endowments and other
charitable institutions. CSAM Japan, together with its predecessor company, has
been in the money management business for over 16 years and as of September 30,
2002 managed approximately $8.7 billion in assets.
CSAM Australia was registered as a company under the Laws of Victoria,
Australia on September 15, 1989. CSAM Australia is licensed as a securities
dealer and operator of managed investment schemes under the Australian
Corporations Act of 2001 and is an investment adviser under the Advisers Act.
The registered office of CSAM Australia is Level 32 Gateway, 1 Macquarie Place,
Sydney 2001, Australia. CSAM Australia is a diversified asset manager,
specializing in equity, fixed income and balanced portfolio management for a
range of clients including pension funds, government agencies and large
companies as well as private individuals. CSAM Australia has been in the funds
management business for over 12 years and as of September 30, 2002 managed
approximately $11.7 billion in assets.
Under the Sub-Advisory Agreements with CSAM U.K. and CSAM Japan, CSAM
(not the International Fund) pays each of CSAM U.K. and CSAM Japan an annual fee
of $250,000 for services rendered with respect to the International Fund and all
other Credit Suisse Funds for which that Sub-Adviser has been appointed to act
as such. The portion of the fee allocated with respect to the International Fund
is equal to the product of (a) the total fee and (b) a fraction, (i) the
numerator of which is the average monthly assets of the Fund during such
calendar quarter or portion thereof and (ii) the denominator of which is the
aggregate average monthly assets of the Fund and certain other Credit Suisse
Funds for which the Sub-Adviser has been appointed to act as sub-adviser during
such calendar quarter or portion thereof. For the fiscal year ended October 31,
2002, the portion of the fees allocable to International Fund for CSAM U.K. and
CSAM Japan were $1.682 and $1,692, respectively.
Under the Sub-Advisory Agreement with CSAM Australia, CSAM (not the
International Fund) pays CSAM Australia an annual fee of $480,000 for services
rendered with respect to the International Fund and all other Credit Suisse
Funds for which CSAM Australia has been appointed to act as Sub-Adviser. The
portion of the fee allocated with respect to the International Fund is
calculated in the same manner as set forth above with respect to the
Sub-Advisory Agreements with CSAM U.K. and CSAM Australia. For the fiscal year
ended October
52
<Page>
31, 2002, the portion of the fee allocable to the International Fund for CSAM
Australia was $6,535.
Each Sub-Advisory Agreement has an initial term of two years and
continues in effect from year to year thereafter if such continuance is
specifically approved at least annually by the vote of a majority of the
Independent Trustees cast in person at a meeting called for the purpose of
voting on such approval, and either by a vote of the Fund's Board of Trustees or
by a majority of the Fund's outstanding voting securities, as defined in the
1940 Act. Each Sub-Advisory Agreement provides that the Sub-Adviser shall
exercise its best judgment in rendering the services described in the
Sub-Advisory Agreement and that the Sub-Adviser shall not be liable for any
error of judgment or mistake of law or for any loss suffered by the Fund or CSAM
in connection with the matters to which the Agreement relates, except that the
Sub-Adviser shall be liable for a loss resulting from a breach of fiduciary duty
by the Sub-Adviser with respect to the receipt of compensation for services;
provided that nothing in the Sub-Advisory Agreement shall be deemed to protect
or purport to protect the Sub-Adviser against any liability to the Fund or CSAM
or to shareholders of the Fund to which the Sub-Adviser would otherwise be
subject by reason of willful misfeasance, bad faith or gross negligence on its
part in the performance of its duties or by reason of the Sub-Adviser's reckless
disregard of its obligations and duties under this Agreement. Each Sub-Advisory
Agreement may be terminated without penalty on 60 days' written notice by the
Fund, CSAM or the Sub-Adviser and will terminate automatically in the event of
its assignment (as defined in the 1940 Act).
BOARD APPROVAL OF ADVISORY AGREEMENTS
In approving the Advisory Agreement, the Board of Trustees of each
Fund, including the Independent Trustees, considered the reasonableness of the
advisory fee in light of the extent and quality of the advisory services
provided and any additional benefits received by CSAM or its affiliates in
connection with providing services to the Fund, compared the fees charged by
CSAM to those charged by CSAM with respect to its other clients for comparable
services and to those charged by other investment advisers with respect to
similar funds, and analyzed the expenses incurred by CSAM with respect to the
Fund. The Board of Trustees also considered the Fund's performance relative to a
selected peer group, the Fund's total expenses in comparison to funds of
comparable size, and other factors. Specifically, the Board of Trustees noted
information received at regular meetings throughout the year related to Fund
performance and services rendered by CSAM, and benefits potentially accruing to
CSAM and its affiliates from securities lending, administrative and brokerage
relationships with affiliates of CSAM, as well as the Adviser's research
arrangements with brokers who execute transactions on behalf of the Fund. The
Board reviewed the profitability to CSAM and its affiliates of their services to
the Fund and considered whether economies of scale in the provision of services
to the Fund were being passed along to shareholders. The Board reviewed whether,
and if so to what extent, CSAM or its affiliates were waiving their fees and/or
reimbursing Fund expenses and acknowledged that the fee waivers and
reimbursements could be discontinued at any time. The Board of the International
Fund also reviewed whether it would be appropriate to adopt breakpoints in the
rate of advisory fees, whereby the rate of advisory fees would be reduced as
fund assets increased. After requesting and reviewing such information as they
deemed necessary, the Board concluded that the Advisory Agreement was in the
best interests of the Fund and its shareholders. No single factor reviewed by
the Board was identified by the Board
53
<Page>
as the principal factor in determining whether to approve the Advisory
Agreement. The Independent Trustees were advised by separate independent legal
counsel throughout the process.
In approving each of the Sub-Advisory Agreements with CSAM U.K., CSAM
Japan and CSAM Australia, the Board of the International Fund considered various
matters and materials provided by CSAM, CSAM U.K., CSAM Japan and CSAM
Australia. The Board considered, primarily, the benefits to the International
Fund of retaining CSAM's United Kingdom, Japanese and Australian affiliates
given the increased complexity of the domestic and international securities
markets, specifically that retention of CSAM U.K., CSAM Japan and CSAM Australia
would expand the universe of companies and countries from which investment
opportunities could be sought and enhance the ability of the International Fund
to obtain best price and execution on trades in international markets. The Board
of the International Fund also carefully considered the particular expertise of
CSAM U.K., CSAM Japan and CSAM Australia in managing the types of global
investments which the Fund makes, including their personnel and research
capabilities. The Board also evaluated the extent of the services to be offered
by CSAM U.K., CSAM Japan and CSAM Australia. In addition, the Board of the
International Fund took into account the lack of any anticipated adverse impact
to the Fund as a result of the Sub-Advisory Agreements, particularly that the
compensation paid to CSAM U.K., CSAM Japan and CSAM Australia would be paid by
CSAM, not the International Fund, and, accordingly, that the retention of CSAM
U.K., CSAM Japan and CSAM Australia would not increase the fees or expenses
otherwise incurred by the International Fund's shareholders. After requesting
and reviewing such information as they deemed necessary, the Board of the
International Fund concluded that each Sub-Advisory Agreement was in the best
interests of the Fund and its shareholders. No single factor reviewed by the
Board was identified by the Board as the principal factor in determining whether
to approve each Sub-Advisory Agreement. The Independent Trustees were advised by
separate independent legal counsel throughout the process.
ADMINISTRATION AGREEMENTS
CSAMSI and State Street Bank and Trust Company ("State Street") serve
as co-administrators to each Fund pursuant to separate written agreements with
the Fund (the "CSAMSI Co-Administration Agreement" and the "State Street
Co-Administration Agreement," respectively).
CSAMSI became co-administrator to each Fund on February 1, 2001. For
the services provided by CSAMSI under the CSAMSI Co-Administration Agreement,
Small Cap Value pays CSAMSI a fee calculated daily and paid monthly at the
annual rate of .10 % of the average daily net assets for the Common, Class A,
Class B and Class C shares. Tax Efficient Fund, Large Cap Value Fund and
International Fund pay CSAMSI a fee calculated daily and paid monthly at the
annual rate for the .10% of the average daily net assets for the Class A, Class
B and Class C shares.
54
<Page>
For the past two fiscal years ended October 31, the Funds paid CSAMSI
administration fees, and CSAMSI waived fees and/or reimbursed expenses of the
Funds under the Administration Agreements as follows:
October 31, 2002
<Table>
<Caption>
FUND FEES PAID (AFTER WAIVERS) WAIVERS REIMBURSEMENTS
---- ------------------------- ------- --------------
Tax Efficient Fund $ 97,716 $0 $0
Large Cap Value Fund $187,737 $0 $0
Small Cap Value Fund $267,487 $0 $0
International Fund $ 21,532 $0 $0
</Table>
October 31, 2001
<Table>
<Caption>
FUND FEES PAID (AFTER WAIVERS) WAIVERS REIMBURSEMENTS
---- ------------------------- ------- --------------
Tax Efficient Fund $146,763 $0 $0
Large Cap Value $179,009 $0 $0
Small Cap Value $181,191 $0 $0
International Fund $ 32,136 $0 $0
</Table>
State Street became co-administrator to the Tax Efficient Fund, Large
Cap Value Fund and the Small Cap Value Fund on July 1, 2002 and to the
International Fund on August 1, 2002. For the services provided by State Street
under the State Street Co-Administration Agreement, each Fund pays State Street
a fee calculated at the annual rate of its pro-rated share of .05% of the first
$5 billion in average daily net assets of the Credit Suisse Funds Complex (the
"Fund Complex"), .035% of the Fund Complex's next $5 billion in average daily
net assets, and .02% of the Fund Complex's average daily net assets in excess of
$10 billion, exclusive of out-of-pocket expenses. Each class of shares of the
Funds bears its proportionate share of fees payable to State Street in the
proportion that its assets bear to the aggregate assets of the Fund at the time
of calculation. For the period from July 1, 2002 through October 31, 2002, the
Tax Efficient Fund, Large Cap Value Fund, Small Cap Value Fund paid State Street
fees under the State Street Co-Administration Agreement of $41,588, $23,388 and
$59,962, respectively. For the period from August 1, 2002 through October 31,
2002 the International Fund paid State Street fees under the State Street
Co-Administration Agreement of $4,171.
PFPC Inc. ("PFPC"), an indirect, wholly owned subsidiary of PNC
Financial Services Group, served as a co-administrator to the Tax Efficient
Fund, Large Cap Value Fund and the Small Cap Value Fund from February 1, 2001
through July 1, 2002 and to the International Fund from February 1, 2001 to
August 1, 2002. PFPC received fees for its services calculated on each Fund's
average daily net assets, as follows:
<Table>
<Caption>
FUND ANNUAL RATE
- --------------------------------------------------------------------- ------------------------------------------
Tax Efficient Fund .075% for the first $500 million in assets
.065% for the next $1 billion
</Table>
55
<Page>
<Table>
<Caption>
FUND ANNUAL RATE
- --------------------------------------------------------------------- ------------------------------------------
.055% for assets in excess of $1.5 billion
Large Cap Value Fund .075% of the first $500 million in assets
.065% for the next $1 billion
.055% for assets in excess of $1.5 billion
Small Cap Value Fund .075% for the first $500 million in assets
.065% for the next $1 billion in assets
.055% for assets in excess of $1.5 billion
International Fund .08% for the first $500 million in assets
.07% for the next $1 billion in assets
.06% for assets in excess of $1.5 billion
</Table>
For the fiscal years ended October 31, the Funds paid PFPC
administration fees and PFPC waived fees and/or reimbursed expenses as follows:
November 1, 2001 through June 30, 2002 for the Tax Efficient Fund, Large Cap
Value Fund and Small Cap Value Fund and November 1, 2001 until July 31, 2002,
for the International Fund
<Table>
<Caption>
FUND FEES PAID (AFTER WAIVERS) WAIVERS REIMBURSEMENTS
---- ------------------------- ------- --------------
Tax Efficient Fund $ 94,278 $0 $0
Large Cap Value Fund $105,639 $0 $0
Small Cap Value Fund $126,431 $0 $0
International Fund $ 22,686 $0 $0
</Table>
October 31, 2001
<Table>
<Caption>
FUND FEES PAID (AFTER WAIVERS) WAIVERS REIMBURSEMENTS
---- ------------------------- ------- --------------
Tax Efficient Fund $138,993 $0 $0
Large Cap Value Fund $158,670 $0 $0
Small Cap Value Fund $156,445 $0 $0
International Fund $ 21,080 $0 $0
</Table>
56
<Page>
Each Fund and CSAM have obtained an order of exemption (the "Order")
from the SEC to permit CSFB to act as lending agent for the Funds, to permit
securities loans to broker-dealer affiliates of CSFB, and to permit the
investment of cash collateral received by CSFB in the Cash Reserve Portfolio of
Credit Suisse Institutional Services Fund (the "Portfolio"). The Order contains
a number of conditions that are designed to ensure that CSFB's securities
lending program does not involve overreaching by CSAM, CSFB or any of their
affiliates. These conditions include percentage limitations on the amount of a
Fund's assets that may be invested in the Portfolio, restrictions on the
Portfolio's ability to collect sales charges and certain other fees, and a
requirement that each Fund that invests in the Portfolio will do so at the same
price as each other Fund and will bear its proportionate shares of expenses and
receive its proportionate share of any dividends.
CODE OF ETHICS
Each Fund, CSAM, CSAM U.K., CSAM Japan, CSAM Australia and CSAMSI have
each adopted a written Code of Ethics (the "Code"), which permits personnel
covered by the Code ("Covered Persons") to invest in securities, including
securities that may be purchased or held by the Fund. The Code also contains
provisions designed to address the conflicts of interest that could arise from
personal trading by advisory personnel, including: (1) all Covered Persons must
report their personal securities transactions at the end of each quarter; (2)
with certain limited exceptions, all Covered Persons must obtain preclearance
before executing any personal securities transactions; (3) Covered Persons may
not execute personal trades in a security if there are any pending orders in
that security by the Fund; and (4) Covered Persons may not invest in initial
public offerings.
The Board of each Fund reviews the administration of the Code at least
annually and may impose sanctions for violations of the Code.
CUSTODIAN AND TRANSFER AGENT
State Street acts as the custodian for each Fund and also acts as the
custodian for the Funds' foreign securities pursuant to a Custodian Agreement
(the "Custodian Agreement"). Under the Custodian Agreement, State Street (a)
maintains a separate account or accounts in the name of each Fund, (b) holds and
transfers portfolio securities on account of each Fund, (c) accepts receipts and
makes disbursements of money on behalf of each Fund, (d) collects and receives
all income and other payments and distributions on account of each Fund's
portfolio securities, and (e) makes periodic reports to the Funds' Boards of
Trustees concerning each Fund's operations. With the approval of the Board,
State Street is authorized to select one or more foreign banking institutions
and foreign securities depositories to serve as sub-custodian on behalf of the
Funds and to select one or more domestic banks or trust companies to serve as
sub-custodian on behalf of the Funds. For this service to the Funds under the
Custodian Agreements, State Street receives a fee which is calculated based upon
each Fund's average daily gross assets, exclusive of transaction charges and
out-of-pocket expenses, which are also charged to the Funds. The principal
business address of State Street is 225 Franklin Street, Boston, Massachusetts
02110.
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<Page>
Boston Financial Data Services, Inc., an affiliate of State Street
("BFDS"), serves as the shareholder servicing, transfer and dividend disbursing
agent of each Fund pursuant to a Transfer Agency and Service Agreement, under
which BFDS (i) issues and redeems shares of the Funds, (ii) addresses and mails
all communications by the Funds to record owners of Fund shares, including
reports to shareholders, dividend and distribution notices and proxy material
for its meetings of shareholders, (iii) maintains shareholder accounts and, if
requested, sub-accounts and (iv) makes periodic reports to the Boards concerning
the transfer agent's operations with respect to the Funds. BFDS's principal
business address is 2 Heritage Drive, North Quincy, Massachusetts 02171.
DISTRIBUTION AND SHAREHOLDER SERVICING
DISTRIBUTOR. CSAMSI serves as distributor of the Funds' shares and
offers each Fund's shares on a continuous basis. CSAMSI's principal business
address is 466 Lexington Avenue, New York, New York 10017.
COMMON SHARES
The Small Cap Value Fund has adopted a Shareholder Servicing and
Distribution Plan for its Common shares (the "Common Shares 12b-1 Plan"),
pursuant to Rule 12b-1 under the 1940 Act, pursuant to which the Small Cap Value
Fund pays CSAMSI under the CSAMSI Co-Administration Agreement a fee calculated
at an annual rate of .25% of the average daily net assets of the Common shares
of each Fund. This fee is in addition to the co-administrative service fee paid
by each Fund under the CSAMSI Co-Administrative Agreement and is intended to
compensate CSAMSI, or to enable CSAMSI to compensate other persons ("Service
Providers"), for providing Services (as defined below) to the Fund. Services
performed by CSAMSI under the CSAMSI Co-Administration Agreement or by Service
Providers include (i) services that are primarily intended to result in, or that
are primarily attributable to, the sale of the Common shares, as set forth in
the Common Shares 12b-1 Plan ("Selling Services") and (ii) ongoing servicing
and/or maintenance of the accounts of Common shareholders of the Small Cap Value
Fund, as set forth in the Common Shares 12b-1 Plan ("Shareholder Services," and
together with Selling Services, "Services").
Shareholder Services may include, without limitation, responding to
Fund shareholder inquiries and providing services to shareholders not otherwise
provided by the Fund's distributor or transfer agent. Selling Services may
include, without limitation, (a) the printing and distribution to prospective
investors in Common shares of prospectuses and statements of additional
information describing the Fund; (b) the preparation, including printing, and
distribution of sales literature, advertisements and other informational
materials relating to the Common Shares; (c) providing telephone services
relating to the Fund, including responding to inquiries of prospective Fund
investors; (d) formulating and implementing marketing and promotional
activities, including, but not limited to, direct mail promotions and
television, radio, newspaper, magazine and other mass media advertising and (e)
obtaining whatever information, analyses and reports with respect to marketing
and promotional activities that the Fund may, from time to time, deem advisable.
In providing compensation for Services in accordance with Common Shares 12b-1
Plan, CSAMSI is authorized (i) to make, or cause to be made, payments to Service
Providers reflecting an allocation of overhead and other office expenses related
to
58
<Page>
providing Services and (ii) to make, or cause to be made, payments to
compensate selected dealers or other authorized persons for providing any
Services.
For the fiscal year ended October 31, 2002, the Common Class shares of
the Small Cap Value Fund paid CSAMSI $108,136 under the Common Shares 12b-1
Plans.
Each Fund has authorized certain broker-dealers, financial
institutions, recordkeeping organizations and other financial intermediaries
(collectively, "Service Organizations") or, if applicable, their designees, to
enter confirmed purchase and redemption orders on behalf of their clients and
customers, with payment to follow no later than the Fund's pricing on the
following business day. If payment is not received by such time, the Service
Organization could be held liable for resulting fees or losses. The Fund may be
deemed to have received a purchase or redemption order when a Service
Organization, or, if applicable, its authorized designee, accepts the order.
Such orders received by the Fund in proper form will be priced at the Fund's net
asset value next computed after they are accepted by the Service Organization or
its authorized designee. Service Organizations may impose transaction or
administrative charges or other direct fees, which charges or fees would not be
imposed if Fund shares are purchased directly from the Funds.
For administration, subaccounting, transfer agency and/or other
services, CSAM or its affiliates may pay Service Organizations a fee of up to
..50% of the average annual value of accounts with the Funds maintained by such
Service Organizations. Service Organizations may also be paid additional amounts
on a one-time or ongoing basis, which may include a fee of up to 1.00% of new
assets invested in a Fund. The Service Fee payable to any one Service
Organization is determined based upon a number of factors, including the nature
and quality of services provided, the operations processing requirements of the
relationship and the standardized fee schedule of the Service Organization or
recordkeeper. Each Fund may reimburse CSAM part of this fee at rates they would
normally pay to the transfer agent for providing the services.
ADVISOR SHARES
The Large Cap Value Fund has entered into an agreement (the
"Agreement") with institutional shareholders of record, broker-dealers,
financial institutions, depository institutions, retirement plans and financial
intermediaries ("Institutions") to provide certain distribution, shareholder
servicing, administrative and/or accounting services for their clients or
customers (or participants in the case of retirement plans) ("Customers") who
are beneficial owners of Advisor Shares. The Agreement is governed by a
distribution plan (the "Advisor Shares 12b-1 Plan") pursuant to Rule 12b-1 under
the 1940 Act, pursuant to which the Large Cap Value Fund pays in consideration
for services, a fee calculated at an annual rate of .50% of the average daily
net assets of the Advisor Shares of the Fund, although under the Advisor Shares
12b-1 Plan the Fund is authorized to pay up to .75% of the Fund's Advisor Class
shares. Such payments may be paid to Institutions directly by the Fund or by
CSAMSI on behalf of the Fund.
Certain Institutions may receive additional fees from CSAMSI, CSAM or
their affiliates on a one-time or ongoing basis for providing supplemental
services in connection with investments in the Fund. Institutions may also be
reimbursed for marketing and other costs.
59
<Page>
Additional fees may be up to 0.25% per year of the value of the Fund accounts
maintained by the firm and, in certain cases, may include a fee of up to 1.00%
of new assets invested in the Fund. Fees payable to any particular Institution
are determined based upon a number of factors, including the nature and quality
of the services provided, the operations processing requirements of the
relationship and the standardized fee schedule of the Institution. To the extent
that CSAMSI, CSAM or their affiliates provide additional compensation or
reimbursements for marketing expenses, such payments would not represent an
additional expense to the Fund or their shareholders.
An Institution with which the Fund has entered into an Agreement with
respect to its Advisor Shares may charge a Customer one or more of the following
types of fees, as agreed upon by the Institution and the Customer, with respect
to the cash management or other services provided by the Institution: (i)
account fees (a fixed amount per month or per year); (ii) transaction fees (a
fixed amount per transaction processed); (iii) compensation balance requirements
(a minimum dollar amount a Customer must maintain in order to obtain the
services offered); or (iv) account maintenance fees (a periodic charge based
upon the percentage of assets in the account or of the dividend paid on those
assets). Services provided by an Institution to Customers are in addition to,
and not duplicative of, the services to be provided under the Fund's
co-administration and distribution and shareholder servicing arrangements. A
Customer of an Institution should read the relevant PROSPECTUS and this
STATEMENT OF ADDITIONAL INFORMATION in conjunction with the Agreement and other
literature describing the services and related fees that would be provided by
the Institution to its Customers prior to any purchase of Fund shares.
Prospectuses are available from the Fund's distributor upon request. No
preference will be shown in the selection of Fund portfolio investments for the
instruments of Institutions.
CLASS A, CLASS B AND CLASS C SHARES.
The respective Board of Trustees for the Tax Efficient, Large Cap
Value and Small Cap Value of the Funds have adopted Plans of Distribution for
its Class A shares, Class B shares and Class C shares ("A Shares 12b-1 Plan", "B
Shares 12b-1 Plan" and "C Shares 12b-1 Plan" respectively). Each of the A Shares
12b-1 Plans, B Shares 12b-1 Plan and C Shares 12b-1 Plan permit the Funds to
compensate CSAMSI for activities associated with the distribution of these
classes of shares.
The A Shares 12b-1 Plans currently provide that a service fee of .25%
per year of the average daily net assets of the Class A shares will be paid as
compensation to CSAMSI. The B Shares 12b-1 Plan currently provides that: (i) an
asset based sales charge of .75% per year and (ii) a service fee of .25% per
year, in each case, of the average daily net assets of the Class B shares will
be paid as compensation to CSAMSI. The C Shares 12b-1 Plan currently provides
that: (1) an asset-based sales charge of .75% per year, and (iii) a service fee
of .25% per year, in each case, of the average daily net assets of the Class C
shares will be paid as compensation to CSAMSI. For the fiscal year ended October
31, 2002, each Fund paid CSAMSI under its 12b-1 plans as follows:
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<Page>
<Table>
<Caption>
FUND CLASS A 12b-1 PLAN CLASS B 12b-1 PLAN CLASS C 12b-1 PLAN
---- ------------------ ------------------ ------------------
Tax Efficient Fund $230,629 $313,229 $39,368
Large Cap Value Fund $332,952 $333,191 $20,948
Small Cap Value Fund $499,401 $208,821 $35,900
</Table>
During the fiscal year ended October 31, 2002, CSAMSI spent the fees
paid under each Fund's A Shares 12b-1 Plan as follows:
<Table>
<Caption>
TAX EFFICIENT
FUND LARGE CAP VALUE FUND SMALL CAP VALUE FUND
---- -------------------- --------------------
Advertising $28,953 $28,805 $43,497
Printing and mailing for $43,917 $56,524 $97,343
promotional purposes
Compensation to broker-dealers $116,846 $124,836 $230,211
People-related and occupancy $47,929 $52,083 $104,803
Other $14,716 $18,371 $36,024
</Table>
During the fiscal year ended October 31, 2002, CSAMSI spent the fees
paid under each Fund's B Shares 12b-1 Plans as follows:
<Table>
<Caption>
TAX EFFICIENT
FUND LARGE CAP VALUE FUND SMALL CAP VALUE FUND
---- -------------------- --------------------
Advertising $6,650 $7,153 $4,605
Printing and mailing for $15,846 $16,156 $10,844
promotional purposes
Compensation to broker-dealers $284,301 $316,696 $334,274
People-related and occupancy $16,306 $17,364 $10,928
Other $4,994 $5,454 $3,592
</Table>
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<Page>
During the fiscal year ended October 31, 2002, CSAMSI spent the fees
paid under each Fund's C Shares 12b-1 Plans as follows:
<Table>
<Caption>
TAX EFFICIENT
FUND LARGE CAP VALUE FUND SMALL CAP VALUE FUND
---- -------------------- --------------------
Advertising $826 $478 $821
Printing and mailing for $3,353 $3,576 $2,786
promotional purposes
Compensation to broker-dealers $64,665 $71,188 $63,437
People-related and occupancy $2,045 $5,083 $1,873
Other $565 $1,601 $684
</Table>
With respect to sales of the Funds' Class B, Class C or certain sales
of Class A shares through a broker-dealer, financial intermediary or financial
institution (each a "financial representative"), CSAMSI pays the financial
representative a concession at the time of sale. In addition, an ongoing
maintenance fee is typically paid to financial representatives on sales of Class
A, Class B and Class C shares. The payments to the financial representatives
will continue to be paid for as long as the related assets remain in the Funds.
In addition to the concession and maintenance fee paid to financial
representatives, CSAMSI or its affiliates may from time to time pay additional
compensation on a one-time or ongoing basis to financial representatives in
connection with the sale of shares, which may include a fee of up to 1.00% of
new assets invested in a Fund. Such additional amounts may be utilized, in whole
or in part, in some cases together with other revenues of such financial
representatives, to provide additional compensation to registered
representatives or employees of such intermediaries who sell shares of the
Funds. On some occasions, such compensation will be conditioned on the sale of a
specified minimum dollar amount of the shares of the Funds during a specific
period of time. Such incentives may take the form of payment for meals,
entertainment, or attendance at educational seminars and associated expenses
such as travel and lodging. Such intermediary may elect to receive cash
incentives of equivalent amounts in lieu of such payments.
INTERNATIONAL FUND -CLASS A, CLASS B AND CLASS C SHARES.
Pursuant to Rule 12b-1 adopted by the SEC under the 1940 Act, the
International Fund has a Distribution Agreement (the "Distribution Agreement")
and a Rule 12b-1 Plan for the Fund to permit the Fund directly or indirectly to
pay expenses associated with the distribution of shares.
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<Page>
Pursuant to the provisions of the 12b-1 Plans and the Distribution
Agreement, the International Fund pays a distribution services fee each month to
CSAMSI, with respect to Class A, Class B and Class C shares of the Fund, at an
annual rate of up to .25%, 1% and 1%, respectively. For the fiscal year ended
October 31, 2002, the Fund paid CSAMSI under its 12b-1 Plans as follows:
<Table>
<Caption>
CLASS A CLASS B CLASS C
-------- -------- -------
$32,607 $24,572 $2,043
</Table>
During the fiscal year ended October 31, 2002, CSAMSI spent the fees
paid under the International Fund's A Shares 12b-1 Plan as follows:
<Table>
Advertising $3,768
Printing and mailing for $8,592
promotional purposes
Compensation to broker-dealers $9,611
People-related and occupancy $9,266
Other $20,802
</Table>
During the fiscal year ended October 31, 2002, CSAMSI spent the fees
paid under the International Fund's B Shares 12b-1 Plan as follows:
<Table>
Advertising $45
Printing and mailing for $1,184
promotional purposes
Compensation to broker-dealers $6,204
People-related and occupancy $110
Other $27
</Table>
During the fiscal year ended October 31, 2002, CSAMSI spent the fees
paid under the International Fund's C Shares 12b-1 Plan as follows:
<Table>
Advertising $919
Printing and mailing for $2,030
promotional purposes
Compensation to broker-dealers $29,314
</Table>
63
<Page>
<Table>
People-related and occupancy $1,312
Other $10,312
</Table>
An initial concession or ongoing maintenance fee may be paid to broker
dealers on sales of the Fund's shares. Pursuant to the fund's 12b-1 Plans, if
such fee is paid, the Distributor is then reimbursed for such payments with
amounts paid from the assets of the Fund. The payments to the broker-dealer,
although a Fund expense which is paid by all shareholders, will only directly
benefit investors who purchase their shares through a broker-dealer rather than
from the Fund. Broker-dealers who sell shares of the Fund may provide services
to their customers that are not available to investors who purchase their shares
directly from the Fund. Investors who purchase their shares directly from the
fund will pay a pro rata share of the Fund's expenses of encouraging
broker-dealers to provide such services but no receive any of the direct
benefits of such services. The payments to the broker-dealers will continue to
be paid for as long as the related assets remain in the Fund.
Under the Distribution Agreements, CSAM may make payments to the
Distributor from CSAM's own resources, which may include the management fees
paid by the Fund. In addition to the concession and maintenance fee paid to
dealers or agents, the Distributor will from time to time pay additional
compensation to dealers or agents in connection with the sale of shares. Such
additional amounts may be utilized, in whole or in part, in some cases together
with other revenues of such dealers or agents, to provide additional
compensation to registered representatives of such dealers or agents who sell
shares of the Fund. On some occasions, such compensation will be conditioned on
the sale of a specified minimum dollar amount of the shares of the Fund during a
specific period of time. Such incentives may take the form of payment for meals,
entertainment, or attendance at educational seminars and associated expenses
such as travel and lodging. Such dealer or agent may elect to receive cash
incentives of equivalent amounts in lieu of such payments.
GENERAL. Each 12b-1 Plan will continue in effect for so long as its
continuance is specifically approved at least annually by each Fund's Board,
including a majority of the Trustees who are not interested persons of the Fund
and who have no direct or indirect financial interest in the operation of the
12b-1 Plans ("Independent Trustees"). Any material amendment of any of the
Common Shares 12b-1 Plan, the Advisor Shares 12b-1 Plan or A Shares, B Shares
and C Shares 12b-1 Plans would require the approval of the Board in the same
manner. The Common Shares, Advisor Shares, A Shares, B Shares and C Shares 12b-1
Plans may not be amended to increase materially the amount to be spent
thereunder without shareholder approval of the relevant class of shares. Each of
the Common Shares, Advisor Shares, A Shares, B Shares and C Shares 12b-1 Plans
may be terminated at any time, without penalty, by vote of a majority of the
Independent Trustees or by a vote of a majority of the outstanding voting
securities of the relevant class of shares.
Payments by the Funds to CSAMSI under the Common Shares, Advisor
Shares, A Shares, B Shares and C Shares 12b-1 Plans are not tied exclusively to
the distribution
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<Page>
expenses actually incurred by CSAMSI and the payments may exceed the
distribution expenses actually incurred.
CSAMSI provides the Board of each Fund with periodic reports of
amounts spent under the Common Shares, Advisor Shares, A Shares, B Shares and C
Shares 12b-1 Plans and the purposes for which the expenditures were made.
ORGANIZATION OF THE FUNDS
TAX EFFICIENT FUND, LARGE CAP VALUE FUND AND SMALL CAP VALUE FUND
The Credit Suisse Capital Funds (previously 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 Tax Efficient Fund, Credit Suisse Large Cap Value Fund and Credit
Suisse Small Cap Value Fund (collectively the "Capital Funds"). The Credit
Suisse 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 Capital Funds also may offer additional
classes of shares.
Of the Capital Funds, this Statement of Additional Information is for
the Tax Efficient Fund, the Large Cap Value Fund and the Small Cap Value Fund.
The Tax Efficient Fund, the Large Cap Value Fund and the Small Cap Value Fund
are authorized to issue an unlimited number of shares of beneficial interest
divided into five classes, designated Class A, Class B, Class C, Class D and
Common Class Shares . In addition the Large Cap Value Fund is also authorized to
issue an unlimited number of shares of beneficial interest, designated Advisor
Class Shares. 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, 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, and (v) Common Class shares have slightly different procedures for
buying and selling shares and available services, as described in the Prospectus
under "Buying and Selling Shares" and "Shareholder Services." In accordance with
the Credit Suisse 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 of the
Tax Efficient Fund, Large Cap Value Fund and Small Cap Value Fund are offering
three classes of shares, designated Class A, Class B and Class C and the Small
Cap Value Fund is also offering Common Class shares.
The Credit Suisse Capital Funds 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
Capital Funds shall not be subject to any personal liability for the acts or
65
<Page>
obligations of Credit Suisse Capital Funds and that every written obligation,
contract, instrument or undertaking made by Credit Suisse 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
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 Capital Funds.
The Amended and Restated Agreement and Declaration of Trust further
provide that no Trustee, officer, employee or agent of Credit Suisse Capital
Funds is liable to Credit Suisse 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 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 Capital Funds or the property
of the appropriate Fund for satisfaction of claims arising in connection with
the affairs of Credit Suisse 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 Capital Funds against
all liability in connection with the affairs of Credit Suisse Capital Funds.
All shares of Credit Suisse 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 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.
INTERNATIONAL FUND
Credit Suisse Opportunity Funds (previously the Credit Suisse Warburg
Pincus Opportunity Funds) (the "Opportunity Funds") was formed on May 31, 1995
as a business trust under the laws of the state of Delaware. Its shares are
currently divided into four series, the Credit Suisse High Income Fund, the
Credit Suisse Municipal Money Fund, the Credit Suisse U.S. Government Money Fund
and the Credit Suisse International Fund. The Credit Suisse Opportunity Funds
have an unlimited number of authorized shares of beneficial interest, par value
$.001 per share, which may, without shareholder approval, be divided into an
unlimited number of series and an unlimited number of classes.
The Agreement and Declaration of Trust provides that no Trustee,
officer, employee or agent of the Credit Suisse Opportunity Funds is liable to
the Funds or to a shareholder, nor is any Trustee, officer, employee or agent
liable to any third person in connection with the affairs of the Funds, except
as such liability may arise from his or its own bad faith, willful misfeasance,
gross negligence or reckless disregard of his or her duties. It also provides
that all third parties shall look solely to the property of the appropriate
Credit Suisse Opportunity Fund for satisfaction of claims arising in connection
with the affairs of a Credit Suisse Opportunity Fund. With the exceptions
stated, the Agreement and Declaration of Trust
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<Page>
permits the Trustees to provide for the indemnification of Trustees, officers,
employees or agents of the Credit Suisse Opportunity Funds against all
liability in connection with the affairs of the Credit Suisse Opportunity Funds.
All shares of the Credit Suisse Opportunity 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
without shareholder approval. Accordingly, the Trustees in the future, for
reasons such as the desire to establish one or more additional Credit Suisse
Opportunity Funds with different investment objectives, policies, risk
considerations or restrictions, may create additional series or classes of
shares. Any issuance of shares of such additional series would be governed by
the Act and the laws of the State of Delaware.
On December 12, 2002, the Board of Trustees of Credit Suisse
Opportunity Funds on behalf of the International Fund approved, subject to
shareholder approval, a proposed reorganization (the "Reorganization") whereby
all of the assets and liabilities of the International Fund would be transferred
to the Credit Suisse International Focus Fund ("International Focus Fund"), in
exchange for shares of the International Focus Fund. The International Fund
would be liquidated and shares of the International Focus Fund would be
distributed to International Fund's shareholders.
If the Reorganization is completed, each shareholder of the
International Fund would become a shareholder of the International Focus Fund
with the same aggregate net asset value as their shares of the International
Fund. The Reorganization is subject to the completion of certain conditions,
including the approval of the International Fund's shareholders. Proxy materials
describing the proposed Reorganization will be mailed to shareholders of the
International Fund in anticipation of a special meeting of shareholders to be
held at a later date.
GENERAL
Shares of each class represent equal pro rata interests in the
respective Fund and accrue dividends and calculate net asset value and
performance quotations in the same manner. Because of the higher fees paid by
Class B and Class C shares, the total return on Class B and Class C shares can
be expected to be lower than the total return on Class A and Common shares, and
in turn, because of the higher fees paid by Class A shares, and for the Small
Cap Value Fund the total return on Class A shares can be expected to be lower
than the total return on Common shares. Class B shares convert to Class A shares
after 8 years but Class C shares never convert to another class of shares, so
annual expenses remain higher for Class C shares. Unless the context clearly
suggests otherwise, references to a Fund in this prospectus are to the Fund as a
whole and not to any particular class of the Fund's shares.
Investors in a Fund are entitled to one vote for each full share held
and fractional votes for fractional shares held. Shareholders of a Fund will
vote in the aggregate except where otherwise required by law and except that
each class will vote separately on certain matters pertaining to its
distribution and shareholder servicing arrangements. There will normally be no
meetings of investors for the purpose of electing members of the Board unless
and until such time as less than a majority of the members holding office have
been elected by investors. Any Trustee of each Fund may be removed from office
upon the vote of shareholders holding at least
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<Page>
a majority of the relevant Fund's outstanding shares, at a meeting called for
that purpose. A meeting will be called for the purpose of voting on the
removal of a Board member at the written request of holders of 10% of the
outstanding shares of a Fund.
Each Fund sends to its investors a semiannual report and an audited
annual report, each of which includes a list of the investment securities held
by the Fund and a statement of the performance of the Fund. Periodic listings of
the investment securities held by the Fund, as well as certain statistical
characteristics of the Fund, may be obtained by calling Credit Suisse Funds at
800-927-2874 or on the Credit Suisse Funds web site at
www.CreditSuisseFunds.com.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
The offering price of each Fund's shares is equal to the per share net
asset value of the relevant class of shares of the Fund, plus, in the case of
Class A shares of the Funds, any applicable sales charges.
As a convenience to the investor and to avoid unnecessary expense to
the Funds, share certificates representing shares of the Funds are not issued
except upon the written request of the 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. This facilitates later redemption and relieves the
shareholder of the responsibility and inconvenience of preventing the share
certificates from becoming lost or stolen. No certificates are issued for
fractional shares (although such shares remain in the shareholder's account on
the books of the Funds).
Brokerage firms and other intermediaries which have entered into the
appropriate selling or service agreement with the Funds are authorized to accept
orders on the Funds' behalf. Shareholders maintaining Fund accounts through
brokerage firms and other intermediaries 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 a Fund itself so that the
institutions may properly process such orders prior to their transmittal to the
Fund or CSAMSI. Should an investor place a transaction order with such an
intermediary after its deadline, the intermediary may not effect the order with
the Fund until the next business day. Accordingly, an investor should
familiarize himself or 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.
COMMON CLASS SHARES. To purchase Common shares directly from the Small
Cap Value Fund, contact the Fund to obtain an application. Fill it out and mail
it to the Fund along with an investment check, payable to "Credit Suisse Funds."
The Fund cannot accept "starter" checks that do not have your name preprinted on
them. The Fund also cannot accept checks payable to you or to another party and
endorsed to the order of the Fund. These types of checks may be returned to you
and your purchase order may not be processed.
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<Page>
CLASS A SHARES, CLASS B SHARES AND CLASS C SHARES. Class A shares,
Class B shares and Class C shares are designed for investors seeking the advice
of financial representatives and are not offered directly for purchase from the
Funds. All purchases of Class A shares, Class B shares and Class C shares are
confirmed to each shareholder and are credited to such shareholder's account at
net asset value after receipt in good order and deduction of any applicable
sales charge.
Class A shares of the Funds are sold to investors at the public
offering price, which is the net asset value plus the applicable sales charge
(unless you are entitled to a waiver):
Initial Sales Charge -- Class A Shares
<Table>
<Caption>
AMOUNT PURCHASED AS A % OF AMOUNT AS A % OF OFFERING COMMISSION TO FINANCIAL
INVESTED PRICE REPRESENTATIVE AS A % OF
OFFERING PRICE
- ---------------------------------------------------------------------------------------------------------------
Less than $50,000 6.10% 5.75% 5.00%
$50,000 to less than $100,000 4.99% 4.75% 4.00%
$100,000 to less than $250,000 3.90% 3.75% 3.00%
$250,000 to less than $500,000 2.56% 2.50% 2.00%
$500,000 to less than $1,000,000 2.04% 2.00% 1.75%
$1,000,000 or more 0* 0 1.00%**
</Table>
* On purchases of $1,000,000 or more, there is no initial sales charge
although there could be a Limited CDSC (as described in the Prospectus).
** The distributor may pay a financial representative a fee as follows: up to
1% on purchases up to and including $3 million, up to .50% on the next $47
million, and up to .25% on purchase amounts over $50 million.
From time to time, the distributor may re-allow the full amount of the
sales charge to brokers as a commission for sales of such shares. Members of the
selling group may receive up to 90% of the sales charge and may be deemed to be
underwriters of the Funds as defined in the Securities Act of 1933.
Investment dealers and other firms provide varying arrangements for
their clients to purchase and redeem the Funds' Class A shares, Class B shares
or Class C shares. Some may establish higher minimum investment requirements
than set forth in the Prospectus. Firms may arrange with their clients for other
investment or administrative services. Such firms may independently establish
and charge additional amounts to their clients for such services, which charges
would reduce the client's return. Firms also may hold the Funds' Class A shares,
Class B shares or Class C shares in nominee or street name as agent for and on
behalf of their customers. In such instances, the Funds' transfer agent will
have no information with respect to or control over the accounts of specific
shareholders. Such shareholders may obtain access to their accounts and
information about their accounts only from their firm. Certain of these firms
may receive compensation from the Funds and/or from CSAMSI or an affiliate for
record
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<Page>
keeping and other expenses relating to these nominee accounts. In addition,
certain privileges with respect to the purchase and redemption of shares or the
reinvestment of dividends may not be available through such firms. Some firms
may have access to their clients' direct Fund accounts for servicing including,
without limitation, transfers of registration and dividend payee changes; and
may perform functions such as generation of confirmation statements and
disbursements of cash dividends. Such firms may receive compensation from the
Funds and/or from CSAMSI or an affiliate for these services. The Prospectus
relating to Class A shares, Class B shares or Class C shares should be read in
connection with such firms' material regarding their fees and services.
Reduced sales charges shown in the above schedules apply to the
aggregate of purchases of Class A shares of the Funds made at one time by any
"purchaser." The term "purchaser" includes:
- an individual, the individual's spouse or domestic partner, and his or
her children and parents (each, an "immediate family member"),
including any Individual Retirement Account (IRA) of the individual or
an immediate family member;
- any company controlled by the individual and/or an immediate family
member (a person, entity or group that holds 25% or more of the
outstanding voting securities of a company will be deemed to control
the company, and a partnership will be deemed to be controlled by each
of its general partners);
- a trust created by the individual and/or an immediate family member,
the beneficiaries of which are the individual and/or an immediate
family member; and
- a Uniform Gifts to Minors Act/Uniform Transfers to Minors Act account
created by the individual and/or an immediate family member.
INITIAL SALES CHARGES WAIVERS. The initial sales charge may be waived
for the following shareholders or transactions: (1) investment advisory clients
of the Adviser; (2) officers, current and former Trustees of the Funds, current
and former directors or trustees of other investment companies managed by the
CSAM or its affiliates, officers, directors and full-time employees of CSAM or
its affiliates ("Related Entities"); or the spouse, siblings, children, parents
or grandparents of any such person or any such person's spouse (collectively,
"relatives"), or any trust or individual retirement account or self-employed
retirement plan for the benefit of any such person or relative; or the estate of
any such person or relative, if such sales are made for investment purposes
(such shares may not be resold except to the Funds); (3) an agent or broker of a
dealer that has a sales agreement with the distributor, for his or her own
account or an account of a relative of any such person, or any trust or
individual retirement account or self-employed retirement plan for the benefit
of any such person or relative (such shares may not be resold except to the
Funds); (4) shares purchased by RIAs on behalf of fee-based accounts or by
broker-dealers that have sales agreements with the Funds and for which shares
have been purchased on behalf of wrap fee client accounts and for which such
RIAs or broker-dealers perform advisory, custodial, record keeping or other
services; (5) shareholders who received shares in the Credit Suisse Funds as a
result of the merger of Neuwirth Fund, Inc., Pine Street Fund, Inc. or deVegh
Mutual Fund, Inc., and who have maintained their investment
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in such shares; (6) shares purchased for 401(k) Plans, 403(b) Plans, 457 Plans,
employee benefit plans sponsored by an employer and pension plans; (7) Class B
shares which are automatically converted to Class A shares; and (8) Class A
shares acquired when dividends and distributions are reinvested in the Funds.
For the fiscal year ended October 31, 2002, CSAMSI received $23,621,
$76,255, $164,658 and $11,674 on the sale of Class A shares of Tax Efficient
Fund, Large Cap Value Fund, Small Cap Value Fund and the International Fund,
respectively, of which CSAMSI retained $3,372, $11,137, $22,833 and $2,278,
respectively. For the fiscal year ended October 31, 2002, CSAMSI received $0,
$0, $0, and $0 on contingent deferred sales charges on redemptions of Class A
shares of Tax Efficient Fund, Large Cap Value Fund, Small Cap Value Fund and
International Fund, respectively. For the fiscal year ended October 31, 2002,
CSAMSI received $99,758, $38,231, $24,281 and $4,596 in contingent deferred
sales charges on redemptions of Class B shares, respectively, of Tax
Efficient Fund, Large Cap Value Fund, Small Cap Value Fund, and International
Fund. For the fiscal year ended October 31, 2002, CSAMSI received $3,221,
$1,293, $6,615 and $0 in contingent deferred sales charges on redemptions of
Class C shares, respectively, of Tax Efficient Fund, Large Cap Value Fund,
Small Cap Value Fund, and International Fund.
REDEMPTIONS
GENERAL. Shares of the Funds may be redeemed at a redemption price
equal to the net asset value per share, as next computed as of the regular
trading session of the NYSE following the receipt in proper form by the Funds of
the shares tendered for redemption, less any applicable contingent deferred
sales charge in the case of Class B and Class C shares of the Funds, and certain
redemptions of Class A shares of the Funds.
Under the 1940 Act, a Fund may suspend the right to redemption or
postpone the date of payment upon redemption for any period during which the
NYSE is closed (other than customary weekend and holiday closings), or during
which trading on the NYSE is restricted, or during which (as determined by the
SEC by rule or regulation) an emergency exists as a result of which disposal or
valuation of Fund securities is not reasonably practicable, or for such other
periods as the SEC may permit. (A Fund may also suspend or postpone the
recordation of the transfer of its shares upon the occurrence of any of the
foregoing conditions.)
If conditions exist which make payment of redemption proceeds wholly in
cash unwise or undesirable, a Fund may make payment wholly or partly in
securities or other investment instruments which may not constitute securities
as such term is defined in the applicable securities laws. If a redemption is
paid wholly or partly in securities or other property, a shareholder would incur
transaction costs in disposing of the redemption proceeds. Each Fund has
elected, however, to be governed by Rule 18f-1 under the 1940 Act as a result of
which a Fund is obligated to redeem shares, with respect to any one shareholder
during any 90- day period, solely in cash up to the lesser of $250,000 or 1% of
the net asset value of that Fund at the beginning of the period.
AUTOMATIC CASH WITHDRAWAL PLAN. An automatic cash withdrawal plan (the
"Plan") is available to shareholders who wish to receive specific amounts of
cash periodically.
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Withdrawals may be made under the Plan by redeeming as many shares of the
relevant Fund as may be necessary to cover the stipulated withdrawal payment. To
the extent that withdrawals exceed dividends, distributions and appreciation of
a shareholder's investment in a Fund, there will be a reduction in the value of
the shareholder's investment and continued withdrawal payments may reduce the
shareholder's investment and ultimately exhaust it. Withdrawal payments should
not be considered as income from investment in a Fund. As described in the
Prospectus, certain withdrawals under the Plan for the holder of Class A shares,
Class B shares, and Class C shares of the Funds may be subject to a deferred
sales charge.
SPECIAL PROVISIONS APPLICABLE TO EACH FUND'S CLASS B AND CLASS C
SHARES ONLY.
The following table sets forth the rates of the CDSC applicable to
redemptions of Class B shares:
<Table>
<Caption>
CONTINGENT DEFERRED SALES CHARGE AS A
YEAR SINCE PURCHASE PERCENTAGE OF THE LESSER OF DOLLARS
PAYMENT MADE INVESTED OR REDEMPTION PROCEEDS
------------ -------------------------------
First 4.0%
Second 3.0%
Third 2.0%
Fourth 1.0%
After Fourth 0.0%
</Table>
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.
CONTINGENT DEFERRED SALES CHARGE - GENERAL. The following example will
illustrate the operation of the contingent deferred sales charge on Class B
shares. Assume that an investor makes a single purchase of $10,000 of the Fund's
Class B shares and that 16 months later the value of the shares has grown by
$1,000 through reinvested dividends and by an additional $1,000 of share
appreciation to a total of $12,000. If the investor were then to redeem the
entire $12,000 in share value, the contingent deferred sales charge would be
payable only with respect to $10,000 because neither the $1,000 of reinvested
dividends nor the $1,000 of share appreciation is subject to the charge. The
charge would be at the rate of 3% ($300) because it was in the second year after
the purchase was made.
The rate of the contingent deferred sales charge is determined by the
length of the period of ownership. Investments are tracked on a monthly basis.
The period of ownership for this purpose begins on the last day of the month in
which the order for the investment is received. For example, an investment made
on September 10, 2002 will be eligible for the second year's charge if redeemed
on or after October 1, 2003. In the event no specific order is requested when
redeeming shares subject to a contingent deferred sales charge, the redemption
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will be made first from shares representing reinvested dividends and then from
the earliest purchase of shares. CSAMSI receives any contingent deferred sales
charge directly.
The CDSC applicable to redemptions of Class C shares made within one
year from the original date of purchase of such shares is waived for
donor-advised charitable funds advised or sponsored by CSAM or its affiliates.
A limited Contingent Deferred Sales Charge ("Limited CDSC") is imposed
by each of the Funds upon redemptions of Class A shares made within 12 months of
purchase, if such purchases were made at net asset value on a purchase of
$1,000,000 or more and the distributor paid any commission to the financial
representative. The Limited CDSC also applies to redemptions of shares of other
funds into which such Class A share are exchanged.
EXCHANGE PRIVILEGE
An exchange privilege with certain other funds advised by CSAM is
available to investors in each Fund. A Common shareholder of the Small Cap Value
Fund may exchange Common shares of the Fund for Common shares of another Credit
Suisse Fund at their respective net asset values. An Advisor shareholder of the
Large Cap Value Fund may exchange Advisor shares of the Fund for Advisor shares
of another Credit Suisse Fund at their respective net asset values. Class A,
Class B or Class C shareholder of a Fund may exchange those shares for shares of
the same class of another Credit Suisse Fund at their respective net asset
values, subject to payment of any applicable sales charge differential, or for
shares of a Credit Suisse money market fund, without payment of any sales charge
differential. Not all Credit Suisse Funds offer all classes of shares.
If an exchange request is received by Credit Suisse Funds or their
agent prior to the close of regular trading on the NYSE, the exchange will be
made at each Fund's net asset value determined at the end of that business day.
Exchanges must satisfy the minimum dollar amount necessary for new purchases
and, except for exchanges of Class A shares, Class B shares or Class C shares,
will be effected without a sales charge. The Funds may refuse exchange purchases
at any time without prior notice. Certain Credit Suisse Funds into which shares
are exchanged may required that the shareholder hold the shares for 12 months to
avoid a Limited CDSC.
The exchange privilege is available to shareholders residing in any
state in which the shares being acquired may legally be sold. When an investor
effects an exchange of shares, the exchange is treated for federal income tax
purposes as a redemption. Therefore, the investor may realize a taxable gain or
loss in connection with the exchange. Investors wishing to exchange shares of a
Fund for shares in another Credit Suisse Fund should review the prospectus of
the other fund prior to making an exchange. For further information regarding
the exchange privilege or to obtain a current prospectus for another Credit
Suisse Fund, an investor should contact Credit Suisse Funds at 800-927-2874.
The Funds reserve the right to refuse exchange purchases by any person
or group if, in CSAM's judgment, a Fund would be unable to invest the money
effectively in accordance with its investment objective and policies, or would
otherwise potentially be adversely affected.
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Examples of when an exchange purchase could be refused are when the Fund
receives or anticipates receiving large exchange orders at or about the same
time and/or when a pattern of exchanges within a short period of time (often
associated with a "market timing" strategy) is discerned. The Funds reserve the
right to terminate or modify the exchange privilege at any time upon 60 days
notice to shareholders.
ADDITIONAL INFORMATION CONCERNING TAXES
The following is a summary of the material United States federal income
tax considerations regarding the purchase, ownership and disposition of shares
in the Funds. Each prospective shareholder is urged to consult his own tax
adviser with respect to the specific federal, state, local and foreign tax
consequences of investing in the Funds. The summary is based on the laws in
effect on the date of this Statement of Additional Information and existing
judicial and administrative interpretations thereof, both of which are subject
to change.
THE FUNDS AND THEIR INVESTMENTS
Each Fund intends to continue to qualify to be treated as a regulated
investment company ("RIC") under the code during each taxable. To so qualify, a
Fund must, among other things: (a) derive at least 90% of its gross income in
each taxable year from dividends, interest, payments with respect to securities
loans, gains from the sale or other disposition of stock or securities or
foreign currencies, or other income (including, but not limited to, gains from
options, futures or forward contracts) derived with respect to its business of
investing in such stock, securities or currencies; and (b) diversify its
holdings (the "Asset Diversification Requirement") so that, at the end of each
quarter of the Fund's taxable year, (i) at least 50% of the market value of the
Fund's assets is represented by cash, securities of other regulated investment
companies, United States government securities and other securities, with such
other securities limited, in respect of any one issuer, to an amount not greater
than 5% of the Fund's assets and not greater than 10% of the outstanding voting
securities of such issuer and (ii) not more than 25% of the value of its assets
is invested in the securities (other than United States government securities or
securities of other regulated investment companies) of any one issuer or any two
or more issuers that the Fund controls and which are determined to be engaged in
the same or similar trades or businesses or related trades or businesses.
As a regulated investment company, each Fund that satisfies the minimum
distribution requirement will not be subject to United States federal income tax
on its net investment income (I.E., income other than its net realized long-term
and short-term capital gains) net realized long-term and short-term capital
gains that it distributes to its shareholders, A Fund will satisfy the minimum
distribution requirement if it distributes to its shareholders at least 90% of
the sum of its investment company taxable income (I.E., its taxable income minus
the excess, if any, of its net realized long-term capital gains over its net
realized short-term capital losses (including any capital loss carryovers)), and
its net tax-exempt interest income for the taxable year is. Each Fund will be
subject to tax at regular corporate rates on any investment company taxable
income that it does not distribute to its shareholders. Any dividend declared by
a Fund in October, November or December of any calendar year and payable to
shareholders of record on a specified date in such a month shall be deemed to
have been received by each shareholder on December 31 of such calendar year and
to have been paid by the Fund not later
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than such December 31, provided that such dividend is actually paid by the
Fund during January of the following calendar year.
Each Fund intends to distribute annually to its shareholders
substantially all of its investment company taxable income. The Board of
Trustees of each Fund will determine annually whether to distribute any net
realized long-term capital gains in excess of net realized short-term capital
losses (including any capital loss carryovers). Each Fund currently expects to
distribute any such excess annually to its shareholders. However, if a Fund
retains for investment an amount equal to all or a portion of its net long-term
capital gains in excess of its net short-term capital losses and capital loss
carryovers, it will be subject to a corporate tax (currently at a rate of 35%)
on the amount retained. In that event, the Fund will designate such retained
amounts as undistributed capital gains in a notice to its shareholders who (a)
will be required to include in income for United Stares federal income tax
purposes, as long-term capital gains, their proportionate shares of the
undistributed amount, (b) will be entitled to credit their proportionate shares
of the 35% tax paid by the Fund on the undistributed amount against their own
United States federal income tax liabilities, if any, and to claim refunds to
the extent their credits exceed their liabilities, if any, and (c) will be
entitled to increase their tax basis, for United States federal income tax
purposes, in their shares by an amount equal to 65% of the amount of
undistributed capital gains included in the shareholder's income. Organizations
or persons not subject to federal income tax on such capital gains will be
entitled to a refund of their pro rata share of such taxes paid by the Fund upon
filing appropriate returns or claims for refund with the Internal Revenue
Service (the "IRS").
The Code imposes a 4% nondeductible excise tax on each Fund to the
extent the Fund does not distribute by the end of any calendar year at least 98%
of its net investment income for that year and 98% of the net amount of its
capital gains (both long-term and short-term) for the one-year period ending, as
a general rule, on October 31 of that year. For this purpose, however, any
ordinary income or net capital gains that are subject to corporate income tax in
the hands of the Fund will be considered to have been distributed by year-end.
In addition, the minimum amounts that must be distributed in any year to avoid
the excise tax will be increased or decreased to reflect any under distribution
or over distribution, as the case may be, from the previous year. Each Fund
anticipates that it will pay such dividends and will make such distributions as
are necessary in order to avoid the application of this tax.
With regard to each Fund's investments in foreign securities, exchange
control regulations may restrict repatriations of investment income and capital
or the proceeds of securities sales by foreign investors such as the Fund and
may limit the Fund's ability to pay sufficient dividends and to make sufficient
distributions to satisfy the 90% and excise tax distribution requirements.
If, in any taxable year, a Fund fails to qualify as a regulated
investment company under the Code or fails to meet the distribution requirement,
it would be taxed in the same manner as an ordinary corporation and
distributions to its shareholders would not be deductible by the Fund in
computing its taxable income. In addition, in the event of a failure to qualify,
the Fund's distributions, to the extent derived from the Fund's current or
accumulated earnings and profits would constitute dividends (eligible for the
corporate dividends-received deduction) which are taxable to shareholders as
ordinary income, even though those distributions might
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otherwise (at least in part) have been treated in the shareholders' hands as
long-term capital gains or tax-exempt interest. If a Fund fails to qualify as a
regulated investment company in any year, it must pay out its earnings and
profits accumulated in that year in order to qualify again as a regulated
investment company. In addition, if a Fund failed to qualify as a regulated
investment company for a period greater than two taxable years, the Fund may be
required to recognize any net built-in gains with respect to certain of its
assets (the excess of the aggregate gains, including items of income, over
aggregate losses that would have been realized if it had been liquidated) in
order to qualify as a regulated investment company in a subsequent year.
A Fund's short sales against the box, if any, and transactions in
foreign currencies, forward contracts, options and futures contracts (including
options and futures contracts on foreign currencies) will be subject to special
provisions of the Code that, among other things, may affect the character of
gains and losses realized by the Fund (I.E., may affect whether gains or losses
are ordinary or capital), accelerate recognition of income to the Fund and defer
Fund losses. These rules could therefore affect the character, amount and timing
of distributions to shareholders. These provisions also (a) will require the
Fund to mark-to-market certain types of the positions in its portfolio (I.E.,
treat them as if they were closed out) and (b) may cause the Fund to recognize
income without receiving cash with which to pay dividends or make distributions
in amounts necessary to satisfy the distribution requirements for avoiding
income and excise taxes. Each Fund will monitor its transactions, will make the
appropriate tax elections and will make the appropriate entries in its books and
records when it engages in short sales or acquires any foreign currency, forward
contract, option, futures contract or hedged investment in order to mitigate the
effect of these rules and prevent disqualification of the Fund as a regulated
investment company.
A Fund's investments in zero coupon securities, if any, may create
special tax consequences. Zero coupon securities do not make interest payments,
although a portion of the difference between a zero coupon security's face value
and its purchase price is imputed as income to the Fund each year even though
the Fund receives no cash distribution until maturity. Under the U.S. federal
tax laws, the Fund will not be subject to tax on this income if it pays
dividends to its shareholders substantially equal to all the income received
from, or imputed with respect to, its investments during the year, including its
zero coupon securities. These dividends ordinarily will constitute taxable
income to the shareholders of the Fund.
"Constructive sale" provisions apply to activities by the Fund which
lock in gain on an "appreciated financial position." Generally, a "position" is
defined to include stock, a debt instrument, or partnership interest, or an
interest in any of the foregoing, including through a short sale, an option, or
a future or forward contract. The entry into a short sale, a swap contract or a
future or forward contract relating to an appreciated direct position in any
stock or debt instrument, or the acquisition of a stock or debt instrument at a
time when the Fund holds an offsetting (short) appreciated position in the stock
or debt instrument, is treated as a "constructive sale" that gives rise to the
immediate recognition of gain (but not loss). The application of these rules may
cause a Fund to recognize taxable income from these offsetting transactions in
excess of the cash generated by such activities.
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SPECIAL TAX CONSIDERATIONS
The following discussion relates to the particular federal income tax
consequences of the investment policies of the Funds.
STRADDLES. The options transactions that the Funds enter into may
result in "straddles" for federal income tax purposes. The straddle rules of the
Code may affect the character of gains and losses realized by the Funds. In
addition, losses realized by the Funds on positions that are part of a straddle
may be deferred under the straddle rules, rather than being taken into account
in calculating the investment company taxable income and net capital gain of the
Funds for the taxable year in which such losses are realized. Losses realized
prior to October 31 of any year may be similarly deferred under the straddle
rules in determining the "required distribution" that the Funds must make in
order to avoid federal excise tax. Furthermore, in determining their investment
company taxable income, the Funds may be required to capitalize, rather than
deduct currently, any interest expense on indebtedness incurred or continued to
purchase or carry any positions that are part of a straddle. The tax
consequences to the Funds of holding straddle positions may be further affected
by various elections provided under the Code and Treasury regulations, but at
the present time the Funds are uncertain which (if any) of these elections they
will make.
OPTIONS AND SECTION 1256 CONTRACTS. The writer of a covered put or call
option generally does not recognize income upon receipt of the option premium.
If the option expires unexercised or is closed on an exchange, the writer
generally recognizes short-term capital gain. If the option is exercised, the
premium is included in the consideration received by the writer in determining
the capital gain or loss recognized in the resultant sale. However, certain
options transactions as well as futures transactions and transactions in forward
foreign currency contracts that are traded in the interbank market, will be
subject to special tax treatment as "Section 1256 contracts." Section 1256
contracts are treated as if they are sold for their fair market value on the
last business day of the taxable year (I.E., marked-to-market), regardless of
whether a taxpayer's obligations (or rights) under such contracts have
terminated (by delivery, exercise, entering into a closing transaction or
otherwise) as of such date. Any gain or loss recognized as a consequence of the
year-end marking-to-market of Section 1256 contracts is combined (after
application of the straddle rules that are described above) with any other gain
or loss that was previously recognized upon the termination of Section 1256
contracts during that taxable year. The net amount of such gain or loss for the
entire taxable year is generally treated as 60% long-term capital gain or loss
and 40% short-term capital gain or loss, except in the case of marked-to-market
forward foreign currency contracts for which such gain or loss is treated as
ordinary income or loss. Such short-term capital gain (and, in the case of
marked-to-market forward foreign currency contracts, such ordinary income) would
be included in determining the investment company taxable income of the relevant
Fund for purposes of the Distribution Requirement, even if it were wholly
attributable to the year-end marking-to-market of Section 1256 contracts that
the relevant Fund continued to hold. Investors should also note that Section
1256 contracts will be treated as having been sold on October 31 in calculating
the "required distribution" that a Fund must make to avoid federal excise tax
liability.
Each of the Funds may elect not to have the year-end mark-to-market
rule apply to Section 1256 contracts that are part of a "mixed straddle" with
other investments of such Fund that are not Section 1256 contracts.
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FOREIGN CURRENCY TRANSACTIONS. In general, gains from "foreign
currencies" and from foreign currency options, foreign currency futures and
forward foreign exchange contracts relating to investments in stock, securities
or foreign currencies will be qualifying income for purposes of determining
whether the Fund qualifies as a RIC. It is currently unclear, however, who will
be treated as the issuer of a foreign currency instrument or how foreign
currency options, futures or forward foreign currency contracts will be valued
for purposes of the Asset Diversification Requirement.
Under Code Section 988 special rules are provided for certain
transactions in a foreign currency other than the taxpayer's functional currency
(I.E., unless certain special rules apply, currencies other than the U.S.
dollar). In general, foreign currency gains or losses from certain forward
contracts, from futures contracts that are not "regulated futures contracts",
and from unlisted options will be treated as ordinary income or loss. In certain
circumstances where the transaction is not undertaken as part of a straddle, a
Fund may elect capital gain or loss treatment for such transactions.
Alternatively, a Fund may elect ordinary income or loss treatment for
transactions in futures contracts and options on foreign currency that would
otherwise produce capital gain or loss. In general gains or losses from a
foreign currency transaction subject to Code Section 988 will increase or
decrease the amount of the Fund's investment company taxable income available to
be distributed to shareholders as ordinary income, rather than increasing or
decreasing the amount of the Fund's net capital gain. Additionally, if losses
from a foreign currency transaction subject to Code Section 988 exceed other
investment company taxable income during a taxable year, a Fund will not be able
to make any ordinary dividend distributions, and any distributions made before
the losses were realized but in the same taxable year would be recharacterized
as a return of capital to shareholders, thereby reducing each shareholder's
basis in his Shares.
PASSIVE FOREIGN INVESTMENT COMPANIES. If a Fund acquires shares in
certain foreign investment entities, called "passive foreign investment
companies" ("PFICs"), such Fund may be subject to federal income tax and a
deferral interest charge on any "excess distribution" received with respect to
such shares or any gain recognized upon a disposition of such shares,
notwithstanding the distribution of such income to the shareholders of such
Fund. Additional charges in the nature of interest may also be imposed on a Fund
in respect of such deferred taxes. However, in lieu of sustaining the foregoing
tax consequences, a Fund may elect to have its investment in certain PFICs taxed
as an investment in a "qualified electing fund" ("QEF"). A Fund making a QEF
election would be required to include in its income each year a ratable portion,
whether or not distributed, of the ordinary earnings and net capital gain of the
QEF. Any such QEF inclusions would have to be taken into account by a Fund for
purposes of satisfying the Distribution Requirement and the excise tax
distribution requirement.
A Fund may elect (in lieu of paying deferred tax or making a QEF
election) to mark-to-market annually any PFIC shares that it owns and to include
any gains (but not losses) that it was deemed to realize as ordinary income. A
Fund generally will not be subject to deferred federal income tax on any gains
that it is deemed to realize as a consequence of making a mark-to-market
election, but such gains will be taken into account by the Fund for purposes of
satisfying the Distribution Requirement and the excise tax distribution
requirement.
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ASSET DIVERSIFICATION REQUIREMENT. For purposes of the Asset
Diversification Requirement, the issuer of a call option on a security
(including an option written on an exchange) will be deemed to be the issuer of
the underlying security. The Internal Revenue Service has informally ruled,
however, that a call option that is written by a fund need not be counted for
purposes of the Asset Diversification Requirement where the fund holds the
underlying security. However, the Internal Revenue Service has also informally
ruled that a put option written by a fund must be treated as a separate asset
and its value measured by "the value of the underlying security" for purposes of
the Asset Diversification Requirement, regardless (apparently) of whether it is
"covered" under the rules of the exchange. The Internal Revenue Service has not
explained whether in valuing a written put option in this manner a fund should
use the current value of the underlying security (its prospective future
investment); the cash consideration that must be paid by the fund if the put
option is exercised (its liability); or some other measure that would take into
account the fund's unrealized profit or loss in writing the option. Under the
Code, a fund may not rely on informal rulings of the Internal Revenue Service
issued to other taxpayers. Consequently, a Fund may find it necessary to seek a
ruling from the Internal Revenue Service on this issue or to curtail its writing
of options in order to stay within the limits of the Asset Diversification
Requirement.
FOREIGN TAXES. Dividends and interest received by the Funds on
investments in foreign securities may be subject to withholding and other taxes
imposed by foreign countries. However, tax conventions between certain countries
and the United States may reduce or eliminate such taxes. If a Fund qualifies as
a RIC, if certain asset and distribution requirements are satisfied and if more
than 50% of the Fund's total assets at the close of its taxable year consists of
stock or securities of foreign corporations, the Fund may elect for U.S. income
tax purposes to treat foreign income taxes paid by it as paid by its
shareholders. A Fund may qualify for and make this election in some, but not
necessarily all, of its taxable years. If a Fund were to make such an election,
shareholders of the Fund would be required to take into account an amount equal
to their pro rata portions of such foreign taxes in computing their taxable
income and then treat an amount equal to those foreign taxes as a U.S. federal
income tax deduction or as a foreign tax credit against their own U.S. federal
income taxes. Shortly after any year for which it makes such an election, a Fund
will report to its shareholders the amount per share of such foreign income tax
that must be included in each shareholder's gross income and the amount which
will be available for the deduction or credit. No deduction for foreign taxes
may be claimed by a shareholder who does not itemize deductions. Certain
limitations will be imposed on the extent to which the credit (but not the
deduction) for foreign taxes may be claimed.
FUND TAXES ON SWAPS. As a result of entering into swaps, the Funds may
make or receive periodic net payments. They may also make or receive a payment
when a swap is terminated prior to maturity through an assignment of the swap or
other closing transaction. Periodic net payments will constitute ordinary income
or deductions, while termination of a swap will result in capital gain or loss
(which will be a long-term capital gain or loss if the Fund has been a party to
the swap for more than one year).
DIVIDENDS AND DISTRIBUTIONS. Dividends of investment income and
distributions of short-term capital gains are taxable to a United States
shareholder as ordinary income, whether paid in cash or in shares. Distributions
of long-term capital gains, if any, that a Fund designates as capital gains
dividends are taxable as long-term capital gains, whether paid in cash
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or in shares and regardless of how long a shareholder has held shares of the
Fund. Dividends and distributions paid by a Fund (except for the portion
thereof, if any, attributable to dividends on stock of U.S. corporations
received by the Fund) will not qualify for the deduction for dividends received
by corporations. Distributions in excess of a Fund's current and accumulated
earnings and profits will, as to each shareholder, be treated as a tax-free
return of capital, to the extent of a shareholder's basis in his shares of the
Fund, and as a capital gain thereafter (if the shareholder holds his shares of
the Fund as capital assets).
Shareholders receiving dividends or distributions in the form of
additional shares should be treated for United States federal income tax
purposes as receiving a distribution in an amount equal to the amount of money
that the shareholders receiving cash dividends or distributions will receive,
and should have a cost basis in the shares received equal to such amount.
Investors considering buying shares just prior to a dividend or capital
gain distribution should be aware that, although the price of shares just
purchased at that time may reflect an amount of the forthcoming distribution,
such dividend or distribution may nevertheless be taxable to them.
If a Fund is the holder of record of any stock on the record date for
any dividends payable with respect to such stock, such dividends are included in
the Fund's gross income not as of the date received but as of the later of (a)
the date such stock became ex-dividend with respect to such dividends (I.E., the
date on which a buyer of the stock would not be entitled to receive the
declared, but unpaid, dividends) or (b) the date the Fund acquired such stock.
Accordingly, in order to satisfy its income distribution requirements, the Fund
may be required to pay dividends based on anticipated earnings, and shareholders
may receive dividends in an earlier year than would otherwise be the case.
SALES OF SHARES. Upon the sale or exchange of shares, a shareholder
will recognize a taxable gain or loss equal to the difference between the amount
realized and his basis in his shares. Such gain or loss will be treated as
capital gain or loss if the shares are capital assets in the shareholder's
hands, and will be long-term capital gain or loss if the shares are held for
more than one year and short-term capital gain or loss if the shares are held
for one year or less. Any loss realized on a sale or exchange will be disallowed
to the extent the shares disposed of are replaced, including replacement through
the reinvesting of dividends and capital gains distributions in the Fund, within
a 61-day period beginning 30 days before and ending 30 days after the
disposition of the shares. In such a case, the basis of the shares acquired will
be increased to reflect the disallowed loss. Any loss realized by a shareholder
on the sale of a Fund share held by the shareholder for six months or less will
be treated for United States federal income tax purposes as a long-term capital
loss to the extent of any distributions or deemed distributions of long-term
capital gains received by the shareholder with respect to such share.
BACKUP WITHHOLDING. A Fund may be required to withhold, for United
States federal income tax purposes, a portion of the dividends, distributions
and redemption proceeds payable to shareholders who fail to provide the Fund
with their correct taxpayer identification number or to make required
certifications, or who have been notified by the IRS that they are subject to
backup withholding. Certain shareholders are exempt from backup withholding.
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Backup withholding is not an additional tax and any amount withheld may be
credited against a shareholder's United States federal income tax liability.
NOTICES. Shareholders will be notified annually by the relevant Fund as
to the United States federal income tax status of the dividends, distributions
and deemed distributions attributable to undistributed capital gains (discussed
above in "The Funds and Their Investments") made by the Fund to its
shareholders. Furthermore, shareholders will also receive, if appropriate,
various written notices after the close of the Fund's taxable year regarding the
United States federal income tax status of certain dividends, distributions and
deemed distributions that were paid (or that are treated as having been paid) by
the Fund to its shareholders during the preceding taxable year.
OTHER TAXATION. Distributions also may be subject to additional state,
local and foreign taxes depending on each shareholder's particular situation.
THE FOREGOING IS ONLY A SUMMARY OF CERTAIN MATERIAL FEDERAL INCOME TAX
CONSEQUENCES AFFECTING THE FUNDS AND THEIR SHAREHOLDERS. SHAREHOLDERS ARE
ADVISED TO CONSULT THEIR OWN TAX ADVISERS WITH RESPECT TO THE PARTICULAR TAX
CONSEQUENCES TO THEM OF AN INVESTMENT IN THE FUNDS.
DETERMINATION OF PERFORMANCE
From time to time, a Fund may quote the total return of its shares in
advertisements or in reports and other communications to shareholders. Funds
that meet the size requirements for listing in THE WALL STREET JOURNAL are
listed under the heading "Credit Suisse Common" for Common Class shares, "Credit
Suisse ADV" for Advisor Class shares and "Credit Suisse ABC" for Class A, Class
B and Class C shares. Current total return figures may be obtained by calling
Credit Suisse Funds at 800-927-2874.
AVERAGE ANNUAL TOTAL RETURNS
Average annual total return figures show the average percentage change
in value of an investment in a Fund from the beginning of the measurement period
to the end of the measurement period. The figures reflect changes in the price
of the Fund's shares assuming that any income dividends and/or capital gain
distributions made by the Fund during the period were reinvested in shares of
the Fund. Total return will be shown for recent one-, five- and ten-year
periods, and may be shown for other periods as well (such as from commencement
of the Fund's operations or on a year-by-year, quarterly or current year-to-date
basis).
Each Fund that advertises its "average annual total return" computes
such return separately for each class of shares by determining the average
annual compounded rate of return during specified periods that equates the
initial amount invested to the ending redeemable value of such investment
according to the following formula:
n
P(1+T) = ERV
Where: P = hypothetical initial payment of $1,000;
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<Page>
T = average annual total return;
n = number of years; and
ERV = ending redeemable value of a hypothetical
$1,000 payment made at the beginning of the l, 5
or 10 year (or other) periods at the end of the
applicable period (or a fractional portion
thereof).
Each Fund that advertises its "aggregate total return" computes such
returns separately for each class of shares by determining the aggregate
compounded rates of return during specified periods that likewise equate the
initial amount invested to the ending redeemable value of such investment. The
formula for calculating aggregate total return is as follows:
Aggregate Total Return = [(ERV) - l]
---
P
The calculations are made assuming that (1) all dividends and capital
gain distributions are reinvested on the reinvestment dates at the price per
share existing on the reinvestment date, (2) all recurring fees charged to all
shareholder accounts are included, and (3) for any account fees that vary with
the size of the account, a mean (or median) account size in the Fund during the
periods is reflected. The ending redeemable value (variable "ERV" in the
formulas) is determined by assuming complete redemption of the hypothetical
investment after deduction of all nonrecurring charges at the end of the
measuring period. It is also assumed that with respect to the Class A shares of
the Funds, the maximum initial sales charge of 5.75% was deducted at the time of
investment and with respect to the Class B and Class C shares at the end of the
relevant periods, the entire amount was redeemed and the appropriate CDSC, if
any, was deducted. Investors should note that this performance may not be
representative of the Funds' total returns in longer market cycles.
When considering average total return figures for periods longer than
one year, it is important to note that the annual total return for one year in
the period might have been greater or less than the average for the entire
period. When considering total return figures for periods shorter than one year,
investors should bear in mind that such return may not be representative of any
Fund's return over a longer market cycle. A Fund may also advertise aggregate
total return figures for various periods, representing the cumulative change in
value of an investment in the relevant Fund for the specific period (again
reflecting changes in share prices and assuming reinvestment of dividends and
distributions). Aggregate and average total returns may be shown by means of
schedules, charts or graphs, and may indicate various components of total return
(I.E., change in value of initial investment, income dividends and capital gain
distributions).
With respect to a Fund's Common, Class A, Class B and Class C Shares,
the Funds' average annual total returns for the indicated periods ended October
31, 2002 were as follows (performance figures calculated without waiver by a
Fund's service provider(s), if any, are noted in italics). Performance figures
for the Advisor shares of the Large Cap Value Fund
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<Page>
are not shown because they have less than one year of performance. Advisor
Class Shares of the Large Cap Value Fund have not commenced operations as of
the date hereof.
83
<Page>
TOTAL RETURN
COMMON SHARES
<Table>
<Caption>
PERIOD FROM THE
FUND ONE-YEAR FIVE-YEAR TEN-YEAR COMMENCEMENT OF OPERATIONS
---- --------------- ------------------- ------------------- ---------------------------
Small Cap Value Fund 0.61% N/A N/A 7.08%
</Table>
CLASS A SHARES
<Table>
<Caption>
PERIOD FROM THE
FUND ONE-YEAR FIVE-YEAR TEN-YEAR COMMENCEMENT OF OPERATIONS
---- --------------- ------------------- ------------------- ---------------------------
Tax Efficient Fund -23.51% -0.51% 7.08% 7.48%
Large Cap Value Fund -12.95% 2.91% 10.12% 11.27%
Small Cap Value Fund -5.10% 3.48% 10.06$ 12.64%
International Fund -25.54% -6.33% N/A -2.68%
</Table>
CLASS B SHARES
<Table>
<Caption>
PERIOD FROM THE
FUND ONE-YEAR FIVE-YEAR TEN-YEAR COMMENCEMENT OF OPERATIONS
---- --------------- ------------------- ------------------- ---------------------------
Tax Efficient Fund -22.71% -0.07% N/A 4.40%
Large Cap Value Fund -11.66% 3.40% N/A 7.78%
Small Cap Value Fund -3.57%- -3.92% N/A 8.07%
International Fund -24.68% -5.96% N/A -2.63%
</Table>
CLASS C SHARES
<Table>
<Caption>
PERIOD FROM THE
FUND ONE-YEAR FIVE-YEAR TEN-YEAR COMMENCEMENT OF OPERATIONS
---- --------------- ------------------- ------------------- ---------------------------
Tax Efficient Fund -20.30% N/A N/A -17.06%
Large Cap Value Fund -9.19% N/A N/A -2.30%
Small Cap Value Fund -0.95% N/A N/A 10.81%-
International Fund -19.31% N/A N/A -21.20%
</Table>
From time to time, Fund service providers may have voluntarily agreed
to waive all or a portion of their fees and reimburse some Fund expenses. The
performance figures above reflect the impact of these waivers and expense
reimbursements, if any. Performance figures would be lower, perhaps materially
so, if they were calculated without reflecting the impact of fee waivers and/or
expense reimbursements.
Each Fund may advertise, from time to time, comparisons of its
performance with that of one or more other mutual funds with similar investment
objectives. A Fund may advertise average annual calendar-year-to-date and
calendar quarter returns, which are calculated according to the formula set
forth in the second immediately preceding paragraph, except that the relevant
measuring period would be the number of months that have elapsed in the current
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<Page>
calendar year or most recent three months, as the case may be. Investors should
note that this performance may not be representative of the Fund's total return
in longer market cycles.
The Funds may also from time to time include in advertising an
aggregate total return figure or a total return figure that is not calculated
according to the formulas set forth above in order to compare more accurately a
Fund's performance with other measures of investment return. For example, in
comparing a Fund's total return with data published by Lipper Inc.,
CDA/Wiesenberger Investment Technologies, Inc. or Wiesenberger Investment
Company Service, or with the performance of the Standard & Poor's 500 Stock
Index or the Dow Jones Industrial Average, as appropriate, a Fund may calculate
its aggregate and/or average annual total return for the specified periods of
time by assuming the investment of $10,000 in Fund shares and assuming the
reinvestment of each dividend or other distribution at net asset value on the
reinvestment date. The Funds do not, for these purposes, deduct from the initial
value invested any amount representing sales charges. The Funds will, however,
disclose the maximum sales charge and will also disclose that the performance
data do not reflect sales charges and that inclusion of sales charges would
reduce the performance quoted. Such alternative total return information will be
given no greater prominence in such advertising than the information prescribed
under SEC rules, and all advertisements containing performance data will include
a legend disclosing that such performance data represent past performance and
that the investment return and principal value of an investment will fluctuate
so that an investor's shares, when redeemed, may be worth more or less than
their original cost.
YIELD
Certain Funds may advertise a 30-day (or one month) yield. Such yields
are calculated separately for each class of shares in each Fund in accordance
with the method prescribed by the SEC for mutual funds:
6
YIELD = 2[(a - b +1) - 1)
-----
cd
Where: a = dividends and interest earned by a Fund during
the period;
b = expenses accrued for the period (net of reimbursements);
c = average daily number of shares outstanding during the
period, entitled to receive dividends; and
d = maximum offering price per share on the last day of
the period.
For the purpose of determining net investment income earned during the
period (variable "a" in the formula), dividend income on equity securities held
by a Fund is recognized by accruing 1/360 of the stated dividend rate of the
security each day that the security is in the Fund. Except as noted below,
interest earned on debt obligations held by a Fund is calculated by computing
the yield to maturity of each obligation based on the market value of the
obligation (including actual accrued interest) at the close of business on the
last business day of each month, or, with respect to obligations purchased
during the month, the purchase price (plus actual accrued interest) and dividing
the result by 360 and multiplying the quotient by the market
85
<Page>
value of the obligation (including actual accrued interest) in order to
determine the interest income on the obligation for each day of the subsequent
month that the obligation is held by the Fund. For purposes of this calculation,
it is assumed that each month contains 30 days. The maturity of an obligation
with a call provision is the next call date on which the obligation reasonably
may be expected to be called or, if none, the maturity date. With respect to
debt obligations purchased at a discount or premium, the formula generally calls
for amortization of the discount or premium. The amortization schedule will be
adjusted monthly to reflect changes in the market value of such debt
obligations. Expenses accrued for the period (variable "b" in the formula)
include all recurring fees charged by a Fund to all shareholder accounts in
proportion to the length of the base period and the Fund's mean (or median)
account size. Undeclared earned income will be subtracted from the offering
price per share (variable "d" in the formula).
With respect to receivables-backed obligations that are expected to be
subject to monthly payments of principal and interest ("pay-downs"), (i) gain or
loss attributable to actual monthly pay downs are accounted for as an increase
or decrease to interest income during the period, and (ii) each Fund may elect
either (a) to amortize the discount and premium on the remaining security, based
on the cost of the security, to the weighted average maturity date, if such
information is available, or to the remaining term of the security, if any, if
the weighted average date is not available or (b) not to amortize discount or
premium on the remaining security.
AFTER-TAX RETURN
From time to time the Funds may include after-tax performance
information in advertisements. To the extent the Funds include such information,
it will be computed according to the following formulas:
AVERAGE ANNUAL TOTAL RETURN (AFTER TAXES ON DISTRIBUTIONS)
n
P(1 + T) = ATV
D
Where: P = a hypothetical initial payment of $1,000.
T = average annual total return (after taxes on distributions).
n = number of years.
ATV(sub D) = ending value of a hypothetical $1,000 investment
made at the beginning of the 1-, 5- or 10-year period
at the end of the 1-, 5- or 10-year (or fractional
portion thereof), after taxes on fund distributions
but not after taxes on redemption.
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<Page>
Performance figures for the Advisor shares of the Large Cap Value Fund
are not shown because they have less than one year of performance.
The average annual total returns (after taxes on distributions) for the
Small Cap Value Fund's Common Class shares for the periods ended October 31,
2002 were as follows:
<Table>
<Caption>
FUND 1 YEAR 3 YEAR 5 YEAR 10 YEAR SINCE INCEPTION
---- ------ ------ ------ ------- ---------------
Small Cap Value Fund -2.68% N/A N/A N/A 3.70% 8/1/00
</Table>
The average annual total returns (after taxes on distributions) for
each Fund's Class A shares for the periods ended October 31, 2002 were as
follows:
<Table>
<Caption>
FUND 1 YEAR 3 YEAR 5 YEAR 10 YEAR SINCE INCEPTION
---- ------ ------ ------ ------- ---------------
Tax Efficient Fund -23.51% -15.59% -1.39% 5.25% 5.63% 12/15/86
Large Cap Value -14.64% -6.90% 1.20% 8.05% 8.95% 9/19/39
Small Cap Value -8.16% 4.78% 1.13% 7.84% 10.63% 2/8/67
International Fund -25.56% -19.49% -7.51% N/A -3.54% 9/8/95
</Table>
The average annual total returns (after taxes on distributions) for
each Fund's Class B shares for the periods ended October 31, 2002 were as
follows:
<Table>
<Caption>
FUND 1 YEAR 3 YEAR 5 YEAR 10 YEAR SINCE INCEPTION
---- ------ ------ ------ ------- ---------------
Tax Efficient Fund -22.71% -15.08% -0.96% 5.36% 3.26% 2/28/96
Large Cap Value -13.22% -6.06% 1.91% N/A 6.09% 2/28/96
Small Cap Value -6.87% 5.52% 1.59% N/A 6.03% 2/28/96
International Fund -24.70% -19.09% -7.14% N/A -3.49% 9/8/95
</Table>
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<Page>
The average annual total returns (after taxes on distributions) for
each Fund's Class C shares for the periods ended October 31, 2002 were as
follows:
<Table>
<Caption>
FUND 1 YEAR 3 YEAR 5 YEAR 10 YEAR SINCE INCEPTION
---- ------ ------ ------ ------- ---------------
Tax Efficient Fund -20.30% -14.80% -0.84% 5.54% -17.35% 2/28/00
Large Cap Value -10.77% N/A N/A N/A -3.64% 2/28/00
Small Cap Value -4.25% N/A N/A N/A 7.82% 2/28/00
International Fund -19.34% N/A N/A N/A -21.83% 2/28/00
</Table>
AVERAGE ANNUAL TOTAL RETURN (AFTER TAXES ON DISTRIBUTION AND REDEMPTIONS)
n
P(1 + T) = ATV
DR
Where: P = a hypothetical initial payment of $1,000.
T = average annual total return (after taxes on distributions
and redemption).
n = number of years.
ATV(sub DR) = ending value of a hypothetical $1,000 investment made at the
beginning of the 1-, 5- or 10-year period at the end of the 1-, 5- or 10-year
(or fractional portion thereof), after taxes on fund distributions and
redemption.
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<Page>
Performance figures for the Advisor shares of the Large Cap Value Fund
are not shown because they have not commenced operations as of the date hereof.
The average annual total returns (after taxes on distributions and
redemptions of Fund shares) for the Small Cap Value Fund's Common Class shares
for the periods ended October 31, 2002 were as follows:
<Table>
<Caption>
FUND 1 YEAR 3 YEAR 5 YEAR 10 YEAR SINCE INCEPTION
---- ------ ------ ------ ------- ---------------
Small Cap Value Fund 2.19% N/A N/A N/A 4.95% 8/1/00
</Table>
The average annual total returns (after taxes on distributions and
redemptions of Fund shares) for each Fund's Class A shares for the periods ended
October 31, 2002 were as follows:
<Table>
<Caption>
FUND 1 YEAR 3 YEAR 5 YEAR 10 YEAR SINCE INCEPTION
---- ------ ------ ------ ------- ---------------
Tax Efficient Fund -14.43% -11.22% -0.28% 5.28% 5.57% 12/15/86
Large Cap Value -6.34% -4.16% 2.28% 7.85% 8.89% 9/19/49
Small Cap Value -1.43% 5.78% 2.15% 7.57% 10.41% 2/8/67
International Fund -15.68% -13.64% -4.68 N/A -1.92% 9/8/95
</Table>
The average annual total returns (after taxes on distributions and
redemptions of Fund shares) for each Fund's Class B shares for the periods ended
October 31, 2002 were as follows:
<Table>
<Caption>
FUND 1 YEAR 3 YEAR 5 YEAR 10 YEAR SINCE INCEPTION
---- ------ ------ ------ ------- ---------------
Tax Efficient Fund -13.94% -10.78% 0.10% 5.42% 3.54% 2/28/96
Large Cap Value -5.45% -3.03% 2.82% N/A 6.23% 2/28/96
Small Cap Value -0.30% 6.49% 2.56% N/A 6.08% 2/28/96
</Table>
89
<Page>
<Table>
<Caption>
FUND 1 YEAR 3 YEAR 5 YEAR 10 YEAR SINCE INCEPTION
---- ------ ------ ------ ------- ---------------
International Fund -15.15% -13.25% -4.35% N/A -1.85% 9/8/95
</Table>
The average annual total returns (after taxes on distributions and
redemptions of Fund shares) for each Fund's Class C shares for the periods ended
October 31, 2002 were as follows:
<Table>
<Caption>
FUND 1 YEAR 3 YEAR 5 YEAR 10 YEAR SINCE INCEPTION
---- ------ ------ ------ ------- ---------------
Tax Efficient Fund -12.46% N/A N/A N/A 2/8/00
Large Cap Value -3.92% N/A N/A N/A -1.63% 2/28/00
Small Cap Value 1.31% N/A N/A N/A 8.14% 2/28/00
International Fund -11.85% N/A N/A N/A -16.26% 2/28/00
</Table>
The performance of a class of Fund shares will vary from time to time
depending upon market conditions, the composition of a Fund's portfolio and
operating expenses allocable to it. As described above, total return is based on
historical earnings and is not intended to indicate future performance.
Consequently, any given performance quotation should not be considered as
representative of performance for any specified period in the future.
Performance information may be useful as a basis for comparison with other
investment alternatives. However, a Fund's performance will fluctuate, unlike
certain bank deposits or other investments which pay a fixed yield for a stated
period of time. Any fees charged by financial representatives directly to their
customers in connection with investments in Fund shares are not reflected in a
Fund's total return, and such fees, if charged, will reduce the actual return
received by customers on their investments.
In addition, reference may be made in advertising a class of Fund
shares to opinions of Wall Street economists and analysts regarding economic
cycles and their effects historically on the performance of small companies,
both as a class and relative to other investments. A Fund may also discuss its
beta, or volatility relative to the market, and make reference to its relative
performance in various market cycles in the United States.
A Fund may compare its performance with (i) that of other mutual funds
with similar investment objectives and policies, which may be based on the
rankings prepared by Lipper, Inc. or similar investment services that monitor
the performance of mutual funds; (ii) in
90
<Page>
the case of the Tax Efficient Fund, with the S&P 500 Index, and with appropriate
indices prepared by Frank Russell Company relating to the securities represented
by the Fund; in the case of the Large Cap Value Fund, with the Russell 1000
Value Index and with other appropriate indices prepared by Frank Russell Company
relating to securities represented by the Fund; in the case of the Small Cap
Value Fund, with the Russell 2000 Index, the Russell 2000 Value Index and with
other appropriate indices prepared by Frank Russell Company relating to the
securities represented by the Fund; and in the case of the International Fund,
with the Morgan Stanley Capital International Europe Australasia and Far East
Index and with appropriate indices prepared by Frank Russell Company relating to
the securities represented by the Fund. A Fund may also include evaluations of
the Fund published by nationally recognized ranking services and by financial
publications such as BARRON'S, BUSINESS WEEK, FINANCIAL TIMES, FORBES, FORTUNE,
INC., INSTITUTIONAL INVESTOR, INVESTOR'S BUSINESS DAILY, MONEY, MORNINGSTAR,
SMARTMONEY, THE WALL STREET JOURNAL and Worth. Morningstar, Inc. rates funds in
broad categories based on risk/reward analyses over various time periods. In
addition, each Fund may from time to time compare its expense ratio to that of
investment companies with similar objectives and policies, based on data
generated by Lipper, Inc. or similar investment services that monitor mutual
funds.
In reports or other communications to investors or in advertising, each
Fund may also describe the general biography or work experience of the portfolio
managers of the Fund and may include quotations attributable to the portfolio
managers describing approaches taken in managing the Fund's investments,
research methodology underlying stock selection or the Fund's investment
objective. In addition, a Fund and its portfolio managers may render periodic
updates of Fund activity, which may include a discussion of significant
portfolio holdings; analysis of holdings by industry, country, credit quality
and other characteristics; and comparison and analysis of the Fund with respect
to relevant market and industry benchmarks. Each Fund may also discuss measures
of risk, the continuum of risk and return relating to different investments and
the potential impact of foreign stocks on a portfolio otherwise composed of
domestic securities.
INDEPENDENT ACCOUNTANTS AND COUNSEL
PricewaterhouseCoopers LLP ("PwC"), with principal offices at Two
Commerce Square, 2100 Market Street, Philadelphia, Pennsylvania 19103, serves as
independent accountants for each Fund. The financial statements that are
incorporated by reference in this STATEMENT OF ADDITIONAL INFORMATION have been
audited by PwC, and have been included herein in reliance upon the report of
such firm of independent accountants given upon their authority as experts in
accounting and auditing.
Willkie Farr & Gallagher, 787 Seventh Avenue, New York, NY 10019,
serves as counsel for each Fund and provides legal services from time to time
for CSAM and CSAMSI.
MISCELLANEOUS
As of January 24, 2003, the names, address and percentage of ownership
of other persons that control a Fund (within the meaning of the rules and
regulations under the 1940 Act) or own of record 5% or more of a class of each
Fund's outstanding shares were as follows:
91
<Page>
<Table>
<Caption>
FUND CLASS CLASS CLASS CLASS COMMON ADVISOR
A B C D CLASS CLASS
TAX EFFICIENT FUND
Donaldson Lufkin Jenrette* 11.48%
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-2052
Brian R. Treglown 5.41%
6236 N Wayne Avenue
Chicago, IL 60660-1913
LARGE CAP VALUE
Donaldson Lufkin Jenrette* 19.89%
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-2052
Retirement Plan Non-legal Employment 69.01%
of Simpson Thacher & Bartlett*
Ellen Rosen Attn: Coordinator
425 Lexington Ave.
New York, NY 10017-3903
Guarantee & Trust Company Trustees* 5.23%
Cathleen Noland Spousal IRA
P.O. Box 8963
Wilmington, DE 19899-8963
SMALL CAP VALUE
Merrill Lynch Pierce 6.18%
Fenner & Smith Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6486
Charles Schwab & Co., Inc.* 25.06%
Special Custody Account for the
Exclusive Benefit of Customers
Attn: Mutual Funds
101 Montgomery Street
San Francisco, CA 94104-4122
Fidelity Investment Institutional* 35.15%
Operating Cnt as Agent for CERTA
Employee Benefit Plans
100 Magellan Way
Covington, KY 41015-1999
</Table>
92
<Page>
<Table>
<Caption>
FUND CLASS CLASS CLASS CLASS COMMON ADVISOR
A B C D CLASS CLASS
Nat'l Financial SVCS Corp.* 7.71%
FBO Customers
A/C# SV8849-8436
P.O. Box 3908
Church St. Station
New York, NY 10008-3908
INTERNATIONAL
Donaldson Lufkin Jenrette* 23.23% 80.08%
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-2052
Bankers Trust Company* 19.78%
P.O. Box 9005
Church Street Station
New York, NY 10008
Lehman Brothers, Inc.* 6.89%
744-21739-15
101 Hudson Street, 31st Floor
Jersey City, NJ 07302-3915
William Blair & Co LLC* 5.07%
Delaware Charter Guarantee
222 West Adams Street
Chicago, IL 60606-5312
</Table>
* The Fund believes that these entities are not the beneficial owner of shares
held of record by them.
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<Page>
FINANCIAL STATEMENTS
Each Fund's audited ANNUAL REPORT(S), for the classes of shares it
makes available, dated October 31, 2002, which either accompanies this STATEMENT
OF ADDITIONAL INFORMATION or has previously been provided to the investor to
whom this STATEMENT OF ADDITIONAL INFORMATION is being sent, is incorporated
herein by reference with respect to all information regarding the Fund included
therein. Each Fund will furnish without charge a copy of the annual and
semi-annual reports, report upon request by calling Credit Suisse Funds at
800-927-2874.
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<Page>
APPENDIX
DESCRIPTION OF RATINGS
COMMERCIAL PAPER RATINGS
Commercial paper rated A-1 by Standard & Poor's Ratings Services
("S&P") indicates that the degree of safety regarding timely payment is strong.
Those issues determined to possess extremely strong safety characteristics are
denoted with a plus sign designation. Capacity for timely payment on commercial
paper rated A-2 is satisfactory, but the relative degree of safety is not as
high as for issues designated A-1.
The rating Prime-1 is the highest commercial paper rating assigned by
Moody's Investors Service, Inc. ("Moody's"). Issuers rated Prime-1 (or related
supporting institutions) are considered to have a superior capacity for
repayment of short-term promissory obligations. Issuers rated Prime-2 (or
related supporting institutions) are considered to have a strong capacity for
repayment of short-term promissory obligations. This will normally be evidenced
by many of the characteristics of issuers rated Prime-1 but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternative liquidity is maintained.
CORPORATE BOND RATINGS
The following summarizes the ratings used by S&P for corporate bonds:
AAA - This is the highest rating assigned by S&P to a debt obligation
and indicates an extremely strong capacity to pay interest and repay principal.
AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from AAA issues only in small degree.
A - Debt rated A has 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 debt in higher-rated
categories.
BBB - This is the lowest investment grade. Debt rated BBB has an
adequate capacity to pay interest and repay principal. Although it normally
exhibits adequate protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay interest and
repay principal for bonds in this category than for bonds in higher rated
categories.
BB, B, CCC, CC, C - Debt rated BB, B, CCC, CC and C is regarded, on
balance, as predominately speculative with respect to capacity to pay interest
and repay principal in accordance with the terms of the obligation. BB
represents a lower degree of speculation than B and C the highest degree of
speculation. While such bonds will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
A-1
<Page>
BB - Debt rated BB has less near-term vulnerability to default than
other speculative issues. However, they face major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions, which could
lead to inadequate capacity to meet timely interest and principal payments. The
BB rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB rating.
B - Debt rated B has a greater vulnerability to default but currently
have the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
BB or BB- rating.
CCC - Debt rated CCC has a currently identifiable vulnerability to
default and is dependent upon favorable business, financial and economic
conditions to meet timely payment of interest and repayment of principal. In the
event of adverse business, financial or economic conditions, it is not likely to
have the capacity to pay interest and repay principal. The CCC rating category
is also used for debt subordinated to senior debt that is assigned an actual or
implied B or B- rating.
CC - This rating is typically applied to debt subordinated to senior
debt that is assigned an actual or implied CCC rating.
C - This rating is typically applied to debt subordinated to senior
debt which is assigned an actual or implied CCC- debt rating. The C rating may
be used to cover a situation where a bankruptcy petition has been filed, but
debt service payments are continued.
Additionally, the rating CI is reserved for income bonds on which no
interest is being paid. Such debt is rated between debt rated C and debt rated
D.
To provide more detailed indications of credit quality, the ratings
from "AA" to "CCC" may be modified by the addition of a plus or minus sign to
show relative standing within this major rating category.
D - Debt rated D is in payment default. The D rating category is used
when interest payments or principal payments are not made on the date due even
if the applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period. The D rating also will be used
upon the filing of a bankruptcy petition if debt service payments are
jeopardized.
The following summarizes the ratings used by Moody's for corporate
bonds:
Aaa - Bonds that are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edged." Interest payments are protected by a large or exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
A-2
<Page>
Aa - Bonds that are rated as Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They 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.
A - Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper-medium-grade obligations. Factors
giving security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in the
future.
Baa - Bonds which are rated Baa are considered as medium-grade
obligations, I.E., they are neither highly protected nor poorly secured.
Interest payments and principal security 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.
Ba - Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of desirable
investments. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Moody's applies numerical modifiers (1, 2 and 3) with respect to the
bonds rated "Aa" through "B". The modifier 1 indicates that the bond being rated
ranks in the higher end of its generic rating category; the modifier 2 indicates
a mid-range ranking; and the modifier 3 indicates that the bond ranks in the
lower end of its generic rating category.
Caa - Bonds that are rated Caa are of poor standing. These issues may
be in default or present elements of danger may exist with respect to principal
or interest.
Ca - Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.
C - Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
SHORT-TERM NOTE RATINGS
The following summarizes the two highest ratings used by S&P for
short-term notes:
A-3
<Page>
SP-1 - Loans bearing this designation evidence a very strong or strong
capacity to pay principal and interest. Those issues determined to possess
overwhelming safety characteristics will be given a plus sign designation.
SP-2 - Loans bearing this designation evidence a satisfactory capacity
to pay principal and interest.
The following summarizes the two highest ratings used by Moody's for
short-term notes and variable rate demand obligations:
MIG-1/VMIG-1 - Obligations bearing these designations are of the best
quality, enjoying strong protection from established cash flows of funds for
their servicing or from established and broad-based access to the market for
refinancing, or both.
MIG-2/VMIG-2 - Obligations bearing these designations are of high
quality with margins of protection ample although not so large as in the
preceding group.
MUNICIPAL OBLIGATIONS RATINGS
The following summarizes the ratings used by S&P for Municipal
Obligations:
AAA - This is the highest rating assigned by S&P to a debt obligation
and indicates an extremely strong capacity to pay interest and repay principal.
AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from AAA issues only in small degree.
A - Debt rated A has 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 debt in higher-rated
categories.
BBB - This is the lowest investment grade. Debt rated BBB has an
adequate capacity to pay interest and repay principal. Although adverse economic
conditions or changing circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal for debt in this category than in
higher rated categories.
BB, B, CCC, CC, C - Debt rated BB, B, CCC, CC and C is regarded, on
balance, as predominately speculative with respect to capacity to pay interest
and repay principal in accordance with the terms of the obligation. BB
represents a lower degree of speculation than B and C the highest degree of
speculation. While such bonds will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
BB - Bonds rated BB have less near-term vulnerability to default than
other speculative issues. However, they face major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions, which could
lead to inadequate capacity to meet timely interest and principal payments. The
BB rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB rating.
A-4
<Page>
B - Bonds rated B have a greater vulnerability to default but currently
have the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
BB or BB- rating.
CCC - Debt rated CCC has a currently identifiable vulnerability to
default and is dependent upon favorable business, financial and economic
conditions to meet timely payment of interest and repayment of principal. In the
event of adverse business, financial or economic conditions, it is not likely to
have the capacity to pay interest and repay principal. The CCC rating category
is also used for debt subordinated to senior debt that is assigned an actual or
implied B or B- rating.
CC - This rating is typically applied to debt subordinated to senior
debt that is assigned an actual or implied CCC rating.
C - This rating is typically applied to debt subordinated to senior
debt which is assigned an actual or implied CCC- debt rating. The C rating may
be used to cover a situation where a bankruptcy petition has been filed, but
debt service payments are continued.
Additionally, the rating CI is reserved for income bonds on which no
interest is being paid. Such debt is rated between debt rated C and debt rated
D.
To provide more detailed indications of credit quality, the ratings
from "AA" to "CCC" may be modified by the addition of a plus or minus sign to
show relative standing within this major rating category.
D - Debt rated D is in payment default. The D rating category is used
when interest payments or principal payments are not made on the date due even
if the applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period. The D rating also will be used
upon the filing of a bankruptcy petition if debt service payments are
jeopardized.
The following summarizes the highest four municipal ratings used by
Moody's:
Aaa - Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa - Bonds which are rated as Aa are judged to be of high quality by
all standards. Together with the Aaa group they comprise what are generally
known as high-grade bonds. They 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.
A-5
<Page>
A - Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper-medium-grade obligations. Factors
giving security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in the
future.
Baa - Bonds which are rated Baa are considered as medium-grade
obligations, I.E., they are neither highly protected nor poorly secured.
Interest payments and principal security 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.
Ba - Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of desirable
investments. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
NOTE: Those bonds in the Aa, A, Baa, Ba and B groups which Moody's
believes possess the strongest investment attributes are designated by the
symbols Aa1, A1, Baa1, Ba1, and B1.
Caa - Bonds that are rated Caa are of poor standing. These issues may
be in default or present elements of danger may exist with respect to principal
or interest.
Ca - Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.
C - Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
A-6
[CREDIT SUISSE ASSET MANAGEMENT LOGO]
CREDIT SUISSE FUNDS
ANNUAL REPORT
OCTOBER 31, 2002
- - CREDIT SUISSE
LARGE CAP VALUE FUND
- - CREDIT SUISSE
STRATEGIC VALUE FUND
- - CREDIT SUISSE
SMALL CAP VALUE FUND
MORE COMPLETE INFORMATION ABOUT THE FUNDS, INCLUDING CHARGES AND EXPENSES, IS
PROVIDED IN THE PROSPECTUS, WHICH MUST PRECEDE OR ACCOMPANY THIS DOCUMENT AND
WHICH SHOULD BE READ CAREFULLY BEFORE INVESTING. YOU MAY OBTAIN ADDITIONAL
COPIES BY CALLING 800-927-2874 OR BY WRITING TO CREDIT SUISSE FUNDS, P.O. BOX
55030, BOSTON, MA 02205-5030.
CREDIT SUISSE ASSET MANAGEMENT SECURITIES, INC., DISTRIBUTOR, IS LOCATED AT 466
LEXINGTON AVE., NEW YORK, NY 10017-3147. CREDIT SUISSE FUNDS ARE ADVISED BY
CREDIT SUISSE ASSET MANAGEMENT, LLC.
THE FUNDS' INVESTMENT ADVISER AND CO-ADMINISTRATORS MAY WAIVE SOME FEES AND/OR
REIMBURSE SOME EXPENSES, WITHOUT WHICH PERFORMANCE WOULD BE LOWER. WAIVERS
AND/OR REIMBURSEMENTS ARE SUBJECT TO CHANGE.
RETURNS INCLUDE CHANGE IN SHARE PRICE AND REINVESTMENT OF DIVIDENDS AND CAPITAL
GAINS. PAST PERFORMANCE CANNOT GUARANTEE FUTURE RESULTS. RETURNS AND SHARE PRICE
WILL FLUCTUATE, AND REDEMPTION VALUE MAY BE MORE OR LESS THAN ORIGINAL COST.
THE VIEWS OF THE FUNDS' MANAGEMENT ARE AS OF THE DATE OF THE LETTER AND THE
PORTFOLIO HOLDINGS DESCRIBED IN THIS DOCUMENT ARE AS OF OCTOBER 31, 2002; THESE
VIEWS AND PORTFOLIO HOLDINGS MAY HAVE CHANGED SUBSEQUENT TO THESE DATES. NOTHING
IN THIS DOCUMENT IS A RECOMMENDATION TO PURCHASE OR SELL SECURITIES.
FUND SHARES ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF CREDIT SUISSE ASSET
MANAGEMENT, LLC ("CSAM") OR ANY AFFILIATE, ARE NOT FDIC-INSURED AND ARE NOT
GUARANTEED BY CSAM OR ANY AFFILIATE.
CREDIT SUISSE LARGE CAP VALUE FUND
ANNUAL INVESTMENT ADVISER'S REPORT
October 31, 2002
December 2, 2002
Dear Shareholder:
For the 12 months ended October 31, 2002, the Common Class Shares of Credit
Suisse Large Cap Value Fund(1) (the "Fund") had a loss of 7.63%, vs. declines of
15.11%, 15.78% and 10.03%, respectively, for the S&P 500 Index, the S&P/Barra
Value Index and the Russell 1000 Value Index.(2) The Fund's Class A Shares,
Class B Shares and Class C Shares had returns of -7.63%, -8.29% and -8.35%,
respectively, for the same period.(3)
The period was a very poor one for stocks in general. Markets actually rose
over the first part of the period, rebounding from their post-September 11th
plunge amid historically low interest rates and signs of economic recovery.
However, a confluence of negative developments sent equities spiraling downward
into early October 2002. Certain highly visible U.S. corporations were revealed
to have accounting problems, in some cases involving outright fraud. Meanwhile,
the economic data began to indicate that expectations of recovery had been too
optimistic. The looming prospects for a U.S.-led war on Iraq added to the
uncertainty. Investors fled risk in all forms, preferring the liquidity and
stability of cash-like investments and high-quality bonds. In the end, despite
the early rally and the positive finish to the period (stocks rose broadly in
October), prominent U.S. equity indexes had significant declines for the 12
months.
The Fund had a loss, hurt by the broad market selloff, though it outperformed
its Russell 1000 Value benchmark. Stocks that had relatively good showing in the
Fund included its consumer-discretionary, materials, energy and health-care
holdings. One factor that hindered the Fund's relative return was its
underweighting in the financial-services sector (financial companies account for
about a third of the Russell 1000 Value Index), which outperformed the broader
equity market in the period.
Despite the positive October for equities, we remain of the view that the
market is undervalued and could have a fair amount of upside potential when risk
concerns begin to fade. We base this opinion on our dividend discount model --
which we anchor to fairly conservative assumptions. That said, it could take
some time for risk levels to normalize, given the still-uncertain state of the
economy and the possibility of a U.S. led war on Iraq. The threat and reality of
terrorism also could keep risk thresholds high.
From the sector perspective, we view technology and telecommunications stocks
as being generally expensive, and plan to limit our exposure in these areas over
the intermediate term. Our favored companies at present include a number of "old
economy" names within the industrial, specialty-retail, energy and health-care
sectors. We also view certain financial-services stocks as attractive but remain
quite selective in this area.
Sincerely yours,
The Credit Suisse Value Team
1
[CHART]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE
CREDIT SUISSE LARGE CAP VALUE FUND(1) COMMON CLASS SHARES,
THE RUSSELL 1000 VALUE INDEX(2), THE S&P 500 INDEX(2) AND
THE S&P BARRA VALUE INDEX(2) FROM INCEPTION (8/01/00). (UNAUDITED)
CREDIT SUISSE LARGE CAP VALUE RUSSELL 1000 VALUE S&P 500 S&P BARRA VALUE
FUND(1) COMMON CLASS -- $9,006 INDEX(2) -- $8,656 INDEX(2) -- $6,387 INDEX(2) -- $7,466
8/1/2000 $ 10,000 $ 10,000 $ 10,000 $ 10,000
8/31/2000 $ 10,432 $ 10,557 $ 10,621 $ 10,671
9/30/2000 $ 10,530 $ 10,654 $ 10,060 $ 10,668
10/31/2000 $ 10,870 $ 10,916 $ 10,018 $ 10,867
11/30/2000 $ 10,602 $ 10,511 $ 9,228 $ 10,311
12/31/2000 $ 11,296 $ 11,037 $ 9,273 $ 10,842
1/31/2001 $ 11,126 $ 11,079 $ 9,602 $ 11,299
2/28/2001 $ 10,957 $ 10,771 $ 8,726 $ 10,550
3/31/2001 $ 10,584 $ 10,391 $ 8,174 $ 10,134
4/30/2001 $ 11,027 $ 10,900 $ 8,809 $ 10,822
5/31/2001 $ 11,236 $ 11,145 $ 8,868 $ 10,935
6/30/2001 $ 10,871 $ 10,898 $ 8,652 $ 10,581
7/31/2001 $ 10,799 $ 10,875 $ 8,567 $ 10,398
8/31/2001 $ 10,405 $ 10,439 $ 8,031 $ 9,797
9/30/2001 $ 9,747 $ 9,704 $ 7,382 $ 8,866
10/31/2001 $ 9,727 $ 9,621 $ 7,523 $ 8,866
11/30/2001 $ 10,215 $ 10,180 $ 8,100 $ 9,429
12/31/2001 $ 10,523 $ 10,419 $ 8,171 $ 9,572
1/31/2002 $ 10,354 $ 10,339 $ 8,052 $ 9,309
2/28/2002 $ 10,481 $ 10,356 $ 7,896 $ 9,226
3/31/2002 $ 10,808 $ 10,845 $ 8,193 $ 9,699
4/30/2002 $ 10,479 $ 10,473 $ 7,697 $ 9,213
5/31/2002 $ 10,490 $ 10,526 $ 7,640 $ 9,250
6/30/2002 $ 9,873 $ 9,922 $ 7,096 $ 8,666
7/31/2002 $ 9,170 $ 8,999 $ 6,543 $ 7,729
8/31/2002 $ 9,186 $ 9,067 $ 6,586 $ 7,783
9/30/2002 $ 8,423 $ 8,059 $ 5,870 $ 6,893
10/31/2002 $ 9,006 $ 8,656 $ 6,387 $ 7,466
[CHART]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE
CREDIT SUISSE LARGE CAP VALUE FUND(1) CLASS A SHARES(3),
THE RUSSELL 1000 VALUE INDEX(2), THE S&P 500 INDEX(2) AND
THE S&P BARRA VALUE INDEX(2) FOR TEN YEARS. (UNAUDITED)
CREDIT SUISSE LARGE CAP VALUE RUSSELL 1000 VALUE S&P 500 S&P BARRA VALUE
FUND(1) CLASS A(3) -- $26,233 INDEX(2) -- $29,018 INDEX(2) -- $25,655 INDEX(2) -- $25,283
10/92 $ 9,425 $ 10,000 $ 10,000 $ 10,000
11/92 $ 9,647 $ 10,328 $ 10,338 $ 10,271
12/92 $ 9,800 $ 10,574 $ 10,473 $ 10,457
1/93 $ 9,791 $ 10,881 $ 10,550 $ 10,746
2/93 $ 9,969 $ 11,264 $ 10,692 $ 11,116
3/93 $ 10,348 $ 11,596 $ 10,922 $ 11,423
4/93 $ 10,096 $ 11,448 $ 10,654 $ 11,377
5/93 $ 10,250 $ 11,678 $ 10,942 $ 11,590
6/93 $ 10,465 $ 11,935 $ 10,977 $ 11,743
7/93 $ 10,398 $ 12,069 $ 10,926 $ 11,889
8/93 $ 10,823 $ 12,505 $ 11,343 $ 12,355
9/93 $ 10,863 $ 12,525 $ 11,259 $ 12,350
10/93 $ 11,019 $ 12,516 $ 11,488 $ 12,417
11/93 $ 10,889 $ 12,258 $ 11,380 $ 12,195
12/93 $ 11,330 $ 12,490 $ 11,520 $ 12,403
1/94 $ 11,868 $ 12,963 $ 11,905 $ 12,981
2/94 $ 11,681 $ 12,520 $ 11,583 $ 12,511
3/94 $ 11,098 $ 12,054 $ 11,079 $ 11,997
4/94 $ 11,415 $ 12,285 $ 11,223 $ 12,249
5/94 $ 11,450 $ 12,427 $ 11,406 $ 12,452
6/94 $ 11,172 $ 12,129 $ 11,124 $ 12,108
7/94 $ 11,559 $ 12,506 $ 11,492 $ 12,517
8/94 $ 11,817 $ 12,866 $ 11,960 $ 12,871
9/94 $ 11,505 $ 12,439 $ 11,671 $ 12,418
10/94 $ 11,531 $ 12,612 $ 11,938 $ 12,688
11/94 $ 11,185 $ 12,103 $ 11,500 $ 12,174
12/94 $ 11,067 $ 12,242 $ 11,668 $ 12,324
1/95 $ 11,257 $ 12,619 $ 11,971 $ 12,657
2/95 $ 11,557 $ 13,118 $ 12,436 $ 13,149
3/95 $ 11,802 $ 13,406 $ 12,804 $ 13,511
4/95 $ 11,983 $ 13,829 $ 13,180 $ 13,956
5/95 $ 12,430 $ 14,411 $ 13,700 $ 14,577
6/95 $ 12,485 $ 14,607 $ 14,023 $ 14,687
7/95 $ 12,760 $ 15,115 $ 14,490 $ 15,193
8/95 $ 12,888 $ 15,329 $ 14,530 $ 15,323
9/95 $ 13,425 $ 15,883 $ 15,140 $ 15,856
10/95 $ 13,389 $ 15,725 $ 15,086 $ 15,609
11/95 $ 14,006 $ 16,522 $ 15,750 $ 16,427
12/95 $ 14,337 $ 16,937 $ 16,042 $ 16,883
1/96 $ 14,932 $ 17,465 $ 16,594 $ 17,388
2/96 $ 15,122 $ 17,597 $ 16,753 $ 17,551
3/96 $ 15,111 $ 17,896 $ 16,913 $ 17,962
4/96 $ 15,254 $ 17,965 $ 17,163 $ 18,145
5/96 $ 15,596 $ 18,189 $ 17,605 $ 18,418
6/96 $ 15,659 $ 18,204 $ 17,676 $ 18,329
7/96 $ 15,270 $ 17,516 $ 16,889 $ 17,556
8/96 $ 15,431 $ 18,017 $ 17,248 $ 18,041
9/96 $ 16,049 $ 18,733 $ 18,217 $ 18,813
10/96 $ 16,422 $ 19,457 $ 18,716 $ 19,451
11/96 $ 17,713 $ 20,868 $ 20,137 $ 20,939
12/96 $ 17,489 $ 20,602 $ 19,743 $ 20,597
1/97 $ 18,343 $ 21,601 $ 20,968 $ 21,547
2/97 $ 18,637 $ 21,918 $ 21,137 $ 21,703
3/97 $ 17,738 $ 21,130 $ 20,257 $ 20,960
4/97 $ 18,395 $ 22,018 $ 21,466 $ 21,746
5/97 $ 19,658 $ 23,248 $ 22,784 $ 23,109
6/97 $ 20,455 $ 24,245 $ 23,785 $ 23,993
7/97 $ 21,785 $ 26,069 $ 25,675 $ 25,912
8/97 $ 20,723 $ 25,140 $ 24,252 $ 24,741
9/97 $ 21,719 $ 26,659 $ 25,574 $ 26,192
10/97 $ 21,442 $ 25,915 $ 24,733 $ 25,229
11/97 $ 22,527 $ 27,060 $ 25,867 $ 26,191
12/97 $ 23,220 $ 27,850 $ 26,304 $ 26,772
1/98 $ 23,054 $ 27,456 $ 26,602 $ 26,442
2/98 $ 24,678 $ 29,304 $ 28,514 $ 28,426
3/98 $ 25,676 $ 31,097 $ 29,977 $ 29,866
4/98 $ 25,587 $ 31,305 $ 30,288 $ 30,219
5/98 $ 25,243 $ 30,840 $ 29,761 $ 29,794
6/98 $ 26,193 $ 31,236 $ 30,970 $ 30,020
7/98 $ 25,587 $ 30,684 $ 30,641 $ 29,368
8/98 $ 22,188 $ 26,119 $ 26,217 $ 24,646
9/98 $ 23,746 $ 27,618 $ 27,915 $ 26,143
10/98 $ 25,557 $ 29,758 $ 30,175 $ 28,191
11/98 $ 26,559 $ 31,145 $ 32,005 $ 29,659
12/98 $ 27,548 $ 32,204 $ 33,867 $ 30,701
1/99 $ 27,786 $ 32,461 $ 35,261 $ 31,321
2/99 $ 27,204 $ 32,003 $ 34,166 $ 30,647
3/99 $ 27,899 $ 32,665 $ 35,538 $ 31,576
4/99 $ 29,490 $ 35,716 $ 36,891 $ 34,298
5/99 $ 28,870 $ 35,323 $ 36,039 $ 33,692
6/99 $ 30,332 $ 36,349 $ 38,008 $ 34,986
7/99 $ 30,133 $ 35,284 $ 36,851 $ 33,910
8/99 $ 29,276 $ 33,975 $ 36,679 $ 33,051
9/99 $ 28,206 $ 32,788 $ 35,663 $ 31,758
10/99 $ 29,236 $ 34,675 $ 37,931 $ 33,551
11/99 $ 29,416 $ 34,403 $ 38,706 $ 33,354
12/99 $ 30,417 $ 34,569 $ 40,982 $ 34,607
1/00 $ 29,278 $ 33,442 $ 38,923 $ 33,506
2/00 $ 27,558 $ 30,958 $ 38,187 $ 31,413
3/00 $ 29,901 $ 34,735 $ 41,922 $ 34,688
4/00 $ 30,148 $ 34,332 $ 40,661 $ 34,456
5/00 $ 30,728 $ 34,694 $ 39,827 $ 34,563
6/00 $ 29,688 $ 33,109 $ 40,808 $ 33,198
7/00 $ 28,867 $ 33,523 $ 40,171 $ 33,862
8/00 $ 30,438 $ 35,388 $ 42,665 $ 36,133
9/00 $ 30,741 $ 35,714 $ 40,412 $ 36,124
10/00 $ 31,717 $ 36,593 $ 40,241 $ 36,799
11/00 $ 30,935 $ 35,235 $ 37,069 $ 34,916
12/00 $ 32,972 $ 37,000 $ 37,250 $ 36,712
1/01 $ 32,462 $ 37,141 $ 38,572 $ 38,262
2/01 $ 31,967 $ 36,108 $ 35,055 $ 35,726
3/01 $ 30,890 $ 34,834 $ 32,834 $ 34,316
4/01 $ 32,182 $ 36,541 $ 35,386 $ 36,644
5/01 $ 32,808 $ 37,363 $ 35,623 $ 37,028
6/01 $ 31,742 $ 36,533 $ 34,756 $ 35,828
7/01 $ 31,529 $ 36,457 $ 34,414 $ 35,209
8/01 $ 30,375 $ 34,995 $ 32,259 $ 33,174
9/01 $ 28,452 $ 32,531 $ 29,654 $ 30,023
10/01 $ 28,395 $ 32,251 $ 30,220 $ 30,023
11/01 $ 29,819 $ 34,125 $ 32,538 $ 31,928
12/01 $ 30,724 $ 34,929 $ 32,823 $ 32,413
1/02 $ 30,217 $ 34,659 $ 32,344 $ 31,524
2/02 $ 30,587 $ 34,715 $ 31,721 $ 31,242
3/02 $ 31,542 $ 36,357 $ 32,914 $ 32,842
4/02 $ 30,599 $ 35,110 $ 30,918 $ 31,197
5/02 $ 30,631 $ 35,285 $ 30,690 $ 31,321
6/02 $ 28,812 $ 33,260 $ 28,504 $ 29,346
7/02 $ 26,757 $ 30,167 $ 26,282 $ 26,174
8/02 $ 26,820 $ 30,396 $ 26,455 $ 26,354
9/02 $ 24,580 $ 27,016 $ 23,580 $ 23,343
10/02 $ 26,233 $ 29,018 $ 25,655 $ 25,283
2
[CHART]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE
CREDIT SUISSE LARGE CAP VALUE FUND(1) CLASS B SHARES(3),
THE RUSSELL 1000 VALUE INDEX(2), THE S&P 500 INDEX(2) AND
THE S&P BARRA VALUE INDEX(2) FROM INCEPTION (2/28/96). (UNAUDITED)
CREDIT SUISSE RUSSELL 1000
LARGE CAP VALUE FUND(1) VALUE INDEX S&P 500 S&P BARRA VALUE
CLASS B(3) -- $16,490 (2) -- $16,491 INDEX(2) -- $15,314 INDEX(2) -- $14,406
2/29/1996 $ 10,000 $ 10,000 $ 10,000 $ 10,000
3/31/1996 $ 9,984 $ 10,170 $ 10,096 $ 10,234
4/30/1996 $ 10,071 $ 10,209 $ 10,245 $ 10,338
5/31/1996 $ 10,291 $ 10,337 $ 10,509 $ 10,494
6/30/1996 $ 10,329 $ 10,345 $ 10,551 $ 10,443
7/31/1996 $ 10,061 $ 9,954 $ 10,081 $ 10,003
8/31/1996 $ 10,162 $ 10,239 $ 10,295 $ 10,279
9/30/1996 $ 10,568 $ 10,646 $ 10,874 $ 10,719
10/31/1996 $ 10,808 $ 11,057 $ 11,172 $ 11,083
11/30/1996 $ 11,652 $ 11,859 $ 12,020 $ 11,930
12/31/1996 $ 11,492 $ 11,708 $ 11,785 $ 11,735
1/31/1997 $ 12,048 $ 12,276 $ 12,516 $ 12,276
2/28/1997 $ 12,236 $ 12,456 $ 12,617 $ 12,366
3/31/1997 $ 11,636 $ 12,008 $ 12,092 $ 11,942
4/30/1997 $ 12,060 $ 12,512 $ 12,813 $ 12,390
5/31/1997 $ 12,875 $ 13,211 $ 13,600 $ 13,167
6/30/1997 $ 13,393 $ 13,778 $ 14,198 $ 13,670
7/31/1997 $ 14,257 $ 14,815 $ 15,325 $ 14,764
8/31/1997 $ 13,553 $ 14,287 $ 14,476 $ 14,097
9/30/1997 $ 14,201 $ 15,150 $ 15,265 $ 14,923
10/31/1997 $ 14,005 $ 14,727 $ 14,763 $ 14,375
11/30/1997 $ 14,708 $ 15,378 $ 15,440 $ 14,923
12/31/1997 $ 15,145 $ 15,827 $ 15,701 $ 15,254
1/31/1998 $ 15,029 $ 15,603 $ 15,879 $ 15,066
2/28/1998 $ 16,076 $ 16,653 $ 17,020 $ 16,196
3/31/1998 $ 16,723 $ 17,672 $ 17,894 $ 17,016
4/30/1998 $ 16,650 $ 17,790 $ 18,079 $ 17,218
5/31/1998 $ 16,418 $ 17,526 $ 17,765 $ 16,976
6/30/1998 $ 17,021 $ 17,751 $ 18,486 $ 17,104
7/31/1998 $ 16,619 $ 17,438 $ 18,290 $ 16,733
8/31/1998 $ 14,400 $ 14,843 $ 15,649 $ 14,042
9/30/1998 $ 15,407 $ 15,695 $ 16,663 $ 14,895
10/31/1998 $ 16,567 $ 16,911 $ 18,012 $ 16,062
11/30/1998 $ 17,211 $ 17,699 $ 19,104 $ 16,899
12/31/1998 $ 17,839 $ 18,301 $ 20,215 $ 17,492
1/31/1999 $ 17,976 $ 18,447 $ 21,048 $ 17,846
2/28/1999 $ 17,589 $ 18,187 $ 20,394 $ 17,462
3/31/1999 $ 18,033 $ 18,563 $ 21,213 $ 17,991
4/30/1999 $ 19,048 $ 20,297 $ 22,021 $ 19,542
5/31/1999 $ 18,637 $ 20,074 $ 21,512 $ 19,196
6/30/1999 $ 19,572 $ 20,657 $ 22,688 $ 19,934
7/31/1999 $ 19,427 $ 20,052 $ 21,996 $ 19,321
8/31/1999 $ 18,871 $ 19,308 $ 21,894 $ 18,831
9/30/1999 $ 18,162 $ 18,633 $ 21,288 $ 18,095
10/31/1999 $ 18,831 $ 19,705 $ 22,641 $ 19,116
11/30/1999 $ 18,929 $ 19,551 $ 23,104 $ 19,004
12/31/1999 $ 19,560 $ 19,645 $ 24,462 $ 19,718
1/31/1900 $ 18,813 $ 19,005 $ 23,233 $ 19,091
2/29/2000 $ 17,702 $ 17,593 $ 22,794 $ 17,898
3/31/2000 $ 19,195 $ 19,739 $ 25,024 $ 19,764
4/30/2000 $ 19,344 $ 19,510 $ 24,271 $ 19,632
5/31/2000 $ 19,701 $ 19,716 $ 23,773 $ 19,693
6/30/2000 $ 19,021 $ 18,815 $ 24,359 $ 18,915
7/31/2000 $ 18,481 $ 19,051 $ 23,978 $ 19,294
8/31/2000 $ 19,477 $ 20,111 $ 25,467 $ 20,587
9/30/2000 $ 19,651 $ 20,296 $ 24,122 $ 20,582
10/31/2000 $ 20,273 $ 20,795 $ 24,020 $ 20,967
11/30/2000 $ 19,751 $ 20,024 $ 22,127 $ 19,894
12/31/2000 $ 21,035 $ 21,027 $ 22,235 $ 20,917
1/31/2001 $ 20,707 $ 21,107 $ 23,024 $ 21,801
2/28/2001 $ 20,379 $ 20,520 $ 20,924 $ 20,356
3/31/2001 $ 19,671 $ 19,796 $ 19,599 $ 19,552
4/30/2001 $ 20,492 $ 20,766 $ 21,122 $ 20,879
5/31/2001 $ 20,866 $ 21,233 $ 21,263 $ 21,097
6/30/2001 $ 20,219 $ 20,761 $ 20,746 $ 20,414
7/31/2001 $ 20,073 $ 20,718 $ 20,542 $ 20,061
8/31/2001 $ 19,325 $ 19,887 $ 19,256 $ 18,901
9/30/2001 $ 18,090 $ 18,487 $ 17,701 $ 17,106
10/31/2001 $ 18,044 $ 18,328 $ 18,038 $ 17,106
11/30/2001 $ 18,938 $ 19,393 $ 19,422 $ 18,191
12/31/2001 $ 19,502 $ 19,850 $ 19,592 $ 18,468
1/31/2002 $ 19,166 $ 19,697 $ 19,307 $ 17,961
2/28/2002 $ 19,166 $ 19,728 $ 18,934 $ 17,800
3/31/2002 $ 19,747 $ 20,661 $ 19,646 $ 18,712
4/30/2002 $ 19,141 $ 19,953 $ 18,455 $ 17,775
5/31/2002 $ 19,150 $ 20,052 $ 18,319 $ 17,846
6/30/2002 $ 18,005 $ 18,901 $ 17,014 $ 16,720
7/31/2002 $ 16,711 $ 17,143 $ 15,688 $ 14,913
8/31/2002 $ 16,731 $ 17,274 $ 15,791 $ 15,015
9/30/2002 $ 15,335 $ 15,353 $ 14,075 $ 13,300
10/31/2002 $ 16,490 $ 16,491 $ 15,314 $ 14,406
[CHART]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE
CREDIT SUISSE LARGE CAP VALUE FUND(1) CLASS C SHARES(3),(4),
THE RUSSELL 1000 VALUE INDEX(2),(4), THE S&P 500 INDEX(2),(4) AND
THE S&P BARRA VALUE INDEX(2),(4). (UNAUDITED)
CREDIT SUISSE LARGE
CAP VALUE FUND(1) RUSSELL 1000 VALUE S&P 500 S&P BARRA VALUE
CLASS C(3),(4) -- $9,326 INDEX(2),(4) -- $9,373 INDEX(2),(4) -- $6,718 INDEX(2),(4) -- $8,049
3/00(4) $ 10,000 $ 10,000 $ 10,000 $ 10,000
3/31/2000 $ 10,839 $ 11,220 $ 10,978 $ 11,043
4/30/2000 $ 10,918 $ 11,090 $ 10,648 $ 10,969
5/31/2000 $ 11,120 $ 11,207 $ 10,429 $ 11,003
6/30/2000 $ 10,741 $ 10,695 $ 10,687 $ 10,568
7/31/2000 $ 10,431 $ 10,829 $ 10,520 $ 10,780
8/31/2000 $ 10,994 $ 11,431 $ 11,173 $ 11,503
9/30/2000 $ 11,092 $ 11,536 $ 10,583 $ 11,500
10/31/2000 $ 11,444 $ 11,820 $ 10,538 $ 11,715
11/30/2000 $ 11,153 $ 11,382 $ 9,707 $ 11,115
12/31/2000 $ 11,880 $ 11,952 $ 9,755 $ 11,687
1/31/2001 $ 11,689 $ 11,997 $ 10,101 $ 12,181
2/28/2001 $ 11,498 $ 11,664 $ 9,180 $ 11,373
3/31/2001 $ 11,100 $ 11,252 $ 8,598 $ 10,924
4/30/2001 $ 11,565 $ 11,803 $ 9,266 $ 11,665
5/31/2001 $ 11,776 $ 12,069 $ 9,329 $ 11,788
6/30/2001 $ 11,405 $ 11,801 $ 9,102 $ 11,406
7/31/2001 $ 11,322 $ 11,776 $ 9,012 $ 11,209
8/31/2001 $ 10,899 $ 11,304 $ 8,448 $ 10,561
9/30/2001 $ 10,202 $ 10,508 $ 7,766 $ 9,557
10/31/2001 $ 10,177 $ 10,418 $ 7,914 $ 9,557
11/30/2001 $ 10,683 $ 11,023 $ 8,521 $ 10,164
12/31/2001 $ 10,996 $ 11,283 $ 8,595 $ 10,319
1/31/2002 $ 10,807 $ 11,196 $ 8,470 $ 10,035
2/28/2002 $ 10,935 $ 11,214 $ 8,307 $ 9,946
3/31/2002 $ 11,269 $ 11,744 $ 8,619 $ 10,455
4/30/2002 $ 10,922 $ 11,341 $ 8,097 $ 9,931
5/31/2002 $ 10,927 $ 11,398 $ 8,037 $ 9,971
6/30/2002 $ 10,276 $ 10,744 $ 7,464 $ 9,342
7/31/2002 $ 9,534 $ 9,745 $ 6,882 $ 8,332
8/31/2002 $ 9,545 $ 9,819 $ 6,928 $ 8,390
9/30/2002 $ 8,747 $ 8,727 $ 6,175 $ 7,431
10/31/2002 $ 9,326 $ 9,373 $ 6,718 $ 8,049
3
Past performance is not predictive of future performance. Investment return and
principal value of an investment will fluctuate so that an investor's shares
upon redemption may be worth more or less than their original cost. The
performance results do not reflect the deduction of taxes that a shareholder
would pay on fund distributions or the redemption of fund shares.
AVERAGE ANNUAL RETURNS AS OF SEPTEMBER 30, 2002(1)
SINCE
1 YEAR 5 YEAR 10 YEAR INCEPTION
------ ------ ------- ---------
Common (13.57%) -- -- (7.51%)
Class A Without
Sales Charge (13.62%) 2.53% 9.88% 11.28%
Class A With Maximum
Sales Charge (18.59%) 1.32% 9.23% 11.15%
Class B Without CDSC (14.23%) 1.79% -- 6.84%
Class B With CDSC (17.39%) 1.79% -- 6.84%
Class C Without CDSC (14.26%) -- -- (4.76%)
Class C With CDSC (15.05%) -- -- (4.76%)
AVERAGE ANNUAL RETURNS AS OF OCTOBER 31, 2002(1)
SINCE
1 YEAR 5 YEAR 10 YEAR INCEPTION
------ ------ ------- ---------
Common (7.63%) -- -- (4.54%)
Class A Without
Sales Charge (7.63%) 4.14% 10.78% 11.39%
Class A With Maximum
Sales Charge (12.95%) 2.91% 10.12% 11.27%
Class B Without CDSC (8.29%) 3.40% -- 7.78%
Class B With CDSC (11.66%) 3.40% -- 7.78%
Class C Without CDSC (8.35%) -- -- (2.30%)
Class C With CDSC (9.19%) -- -- (2.30%)
4
- ----------
(1) Fee waivers and/or expense reimbursements reduced expenses for the Fund,
without which performance would be lower. Waivers and/or reimbursements may
be discontinued at any time.
(2) The Fund added the Standard & Poor's/BARRA Value Index as a benchmark,
effective 5/1/2001, to its existing benchmark, the Standard & Poor's 500
Index ("S&P 500 Index"). Effective 11/15/2001, in light of the Fund's
emphasis on value stocks, the Fund discontinued use of these benchmarks and
adopted the Russell 1000 Value Index. The S&P 500 Index is an unmanaged
index (with no defined investment objective) of common stocks. It includes
reinvestment of dividends, and is a registered trademark of McGraw-Hill
Co., Inc. The Standard & Poor's/BARRA Value Index is a
capitalization-weighted index of all the stocks in the S&P 500 Index that
have lower price-to-book ratios. The Russell 1000(R) Value Index measures
the performance of those companies in the Russell 1000 Index with lower
price-to-book ratios and lower forecasted growth values. It is an unmanaged
index of common stocks that includes reinvestment of dividends and is
compiled by Frank Russell company. The Russell 1000(R) Index measures the
performance of the 1,000 largest companies in the Russell 3000(R) Index,
which measures the performance of 3,000 of the largest U.S. companies by
market capitalization. Investors cannot invest directly in an index.
(3) Total return for Class A Shares for the reporting period, based on offering
price (with maximum sales charge of 5.75%), was -12.95%. Total return for
Class B Shares for the reporting period, based on redemption value
(including maximum contingent deferred sales charge of 4%), was -11.66%.
Total return for Class C Shares for the reporting period, based on
redemption value (including maximum contingent deferred sales charge of
1%), was -9.19%.
(4) Performance for the benchmarks is not available for the period beginning
February 28, 2000 (commencement of operations). For that reason,
performance is shown for the period beginning March 1, 2000.
5
CREDIT SUISSE STRATEGIC VALUE FUND
ANNUAL INVESTMENT ADVISER'S REPORT
October 31, 2002
December 2, 2002
Dear Shareholder:
For the 12 months ended October 31, 2002, the Common Class and Advisor Class
shares of Credit Suisse Strategic Value Fund (the "Fund") had losses of 13.29%
and 13.71%, respectively, vs. a decline of 15.11% for the S&P 500 Index(1) and a
decline of 10.03% for the Russell 1000 Value Index(1). The Fund's Class A, Class
B and Class C Shares (all of which have inception dates of November 30, 2001)
had losses of 18.76%, 19.23% and 19.31%, respectively, for the 11 month
period(2),(3) ended October 31, 2002, vs. a same-period decline of 21.15% for
the S&P 500 Index(1) and a same-period decline of 14.97% for the Russell 1000
Value Index(1).
The period was a very poor one for stocks in general. Markets actually rose
over the first part of the period, rebounding from their post-September 11th
plunge amid historically low interest rates and signs of economic recovery.
However, a confluence of negative developments sent equities spiraling downward
into early October 2002. Certain highly visible U.S. corporations were revealed
to have accounting problems, in some cases involving outright fraud. Meanwhile,
the economic data began to indicate that expectations of recovery had been too
optimistic. The looming prospects for a U.S.-led war on Iraq added to the
uncertainty. Investors fled risk in all forms, preferring the liquidity and
stability of cash-like investments and high-quality bonds. In the end, despite
the early rally and the positive finish to the period (stocks rose broadly in
October), prominent U.S. equity indexes had significant declines for the 12
months.
The Fund's return reflected the difficult backdrop for equities, though it
outperformed its benchmark. Factors that aided the Fund's relative return
included its underweighting in the struggling technology sector. The Fund was
also supported by its overweighting in the consumer-discretionary sector, which
outperformed most sectors, and by good stock selection within that area. Stocks
that hindered the Fund's return included its utilities and health-care holdings.
With respect to general strategy, we continued to hold what we view as a mix
of cyclical and relatively economically insensitive companies. We remained
fairly well diversified by sector, but with very limited exposure to the
technology area, where we saw a lackluster earnings picture.
The uncertain economy notwithstanding, we were reluctant to pare our exposure
to cyclical sectors of the market, in the belief that a more robust, sustainable
economic recovery has been delayed, not avoided. We think that
6
the Federal Reserve will continue to apply stimulus tools, providing liquidity
while holding interest rates at low levels. Should this prove ineffective, we
expect that fiscal strategies -- e.g., tax cuts -- could be increasingly debated
and ultimately agreed to.
For our part, we will continue to focus on companies whose managements in our
view can successfully execute their business goals. We believe that companies
that do the right things now, amid difficult economic and market conditions,
should be rewarded over time, when risk factors recede and investors take note
of discrepancies between a company's true worth and its value in the market.
Sincerely yours,
The Credit Suisse Value Team
7
[CHART]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE
CREDIT SUISSE STRATEGIC VALUE FUND COMMON CLASS SHARES,
THE S&P 500 INDEX(1) AND THE RUSSELL 1000 VALUE INDEX(1)
FOR TEN YEARS. (UNAUDITED)
CREDIT SUISSE STRATEGIC
VALUE FUND COMMON S&P 500 RUSSELL 1000 VALUE
CLASS -- $24,674 INDEX(1) -- $25,655 INDEX(1) -- $29,018
10/31/1992 $ 10,000 $ 10,000 $ 10,000
11/30/1992 $ 10,140 $ 10,338 $ 10,328
12/31/1992 $ 10,411 $ 10,473 $ 10,574
1/31/1993 $ 10,576 $ 10,550 $ 10,881
2/28/1993 $ 10,901 $ 10,692 $ 11,264
3/31/1993 $ 11,639 $ 10,922 $ 11,596
4/30/1993 $ 12,571 $ 10,654 $ 11,448
5/31/1993 $ 13,602 $ 10,942 $ 11,678
6/30/1993 $ 13,727 $ 10,977 $ 11,935
7/31/1993 $ 13,953 $ 10,926 $ 12,069
8/31/1993 $ 13,936 $ 11,343 $ 12,505
9/30/1993 $ 13,436 $ 11,259 $ 12,525
10/31/1993 $ 13,738 $ 11,488 $ 12,516
11/30/1993 $ 13,262 $ 11,380 $ 12,258
12/31/1993 $ 14,143 $ 11,520 $ 12,490
1/31/1994 $ 14,634 $ 11,905 $ 12,963
2/28/1994 $ 15,214 $ 11,583 $ 12,520
3/31/1994 $ 15,314 $ 11,079 $ 12,054
4/30/1994 $ 14,974 $ 11,223 $ 12,285
5/31/1994 $ 15,150 $ 11,406 $ 12,427
6/30/1994 $ 14,734 $ 11,124 $ 12,129
7/31/1994 $ 15,085 $ 11,492 $ 12,506
8/31/1994 $ 15,951 $ 11,960 $ 12,866
9/30/1994 $ 15,929 $ 11,671 $ 12,439
10/31/1994 $ 15,886 $ 11,938 $ 12,612
11/30/1994 $ 15,152 $ 11,500 $ 12,103
12/31/1994 $ 15,221 $ 11,668 $ 12,242
1/31/1995 $ 15,311 $ 11,971 $ 12,619
2/28/1995 $ 15,759 $ 12,436 $ 13,118
3/31/1995 $ 16,264 $ 12,804 $ 13,406
4/30/1995 $ 16,310 $ 13,180 $ 13,829
5/31/1995 $ 16,725 $ 13,700 $ 14,411
6/30/1995 $ 17,011 $ 14,023 $ 14,607
7/31/1995 $ 17,868 $ 14,490 $ 15,115
8/31/1995 $ 18,453 $ 14,530 $ 15,329
9/30/1995 $ 18,212 $ 15,140 $ 15,883
10/31/1995 $ 17,475 $ 15,086 $ 15,725
11/30/1995 $ 18,597 $ 15,750 $ 16,522
12/31/1995 $ 18,338 $ 16,042 $ 16,937
1/31/1996 $ 19,483 $ 16,594 $ 17,465
2/29/1996 $ 19,351 $ 16,753 $ 17,597
3/31/1996 $ 19,509 $ 16,913 $ 17,896
4/30/1996 $ 19,820 $ 17,163 $ 17,965
5/31/1996 $ 19,952 $ 17,605 $ 18,189
6/30/1996 $ 18,519 $ 17,676 $ 18,204
7/31/1996 $ 17,121 $ 16,889 $ 17,516
8/31/1996 $ 17,803 $ 17,248 $ 18,017
9/30/1996 $ 17,560 $ 18,217 $ 18,733
10/31/1996 $ 17,717 $ 18,716 $ 19,457
11/30/1996 $ 18,795 $ 20,137 $ 20,868
12/31/1996 $ 18,125 $ 19,743 $ 20,602
1/31/1997 $ 18,891 $ 20,968 $ 21,601
2/28/1997 $ 19,166 $ 21,137 $ 21,918
3/31/1997 $ 18,448 $ 20,257 $ 21,130
4/30/1997 $ 19,036 $ 21,466 $ 22,018
5/31/1997 $ 20,357 $ 22,784 $ 23,248
6/30/1997 $ 21,110 $ 23,785 $ 24,245
7/31/1997 $ 22,761 $ 25,675 $ 26,069
8/31/1997 $ 22,219 $ 24,252 $ 25,140
9/30/1997 $ 23,386 $ 25,574 $ 26,659
10/31/1997 $ 22,408 $ 24,733 $ 25,915
11/30/1997 $ 23,000 $ 25,867 $ 27,060
12/31/1997 $ 23,608 $ 26,304 $ 27,850
1/31/1998 $ 23,766 $ 26,602 $ 27,456
2/28/1998 $ 25,356 $ 28,514 $ 29,304
3/31/1998 $ 26,366 $ 29,977 $ 31,097
4/30/1998 $ 26,496 $ 30,288 $ 31,305
5/31/1998 $ 26,409 $ 29,761 $ 30,840
6/30/1998 $ 26,659 $ 30,970 $ 31,236
7/31/1998 $ 25,955 $ 30,641 $ 30,684
8/31/1998 $ 22,130 $ 26,217 $ 26,119
9/30/1998 $ 22,821 $ 27,915 $ 27,618
10/31/1998 $ 24,449 $ 30,175 $ 29,758
11/30/1998 $ 25,890 $ 32,005 $ 31,145
12/31/1998 $ 26,596 $ 33,867 $ 32,204
1/31/1999 $ 26,744 $ 35,261 $ 32,461
2/28/1999 $ 26,075 $ 34,166 $ 32,003
3/31/1999 $ 26,319 $ 35,538 $ 32,665
4/30/1999 $ 29,343 $ 36,891 $ 35,716
5/31/1999 $ 29,685 $ 36,039 $ 35,323
6/30/1999 $ 30,659 $ 38,008 $ 36,349
7/31/1999 $ 29,585 $ 36,851 $ 35,284
8/31/1999 $ 28,988 $ 36,679 $ 33,975
9/30/1999 $ 28,155 $ 35,663 $ 32,788
10/31/1999 $ 28,304 $ 37,931 $ 34,675
11/30/1999 $ 28,155 $ 38,706 $ 34,403
12/31/1999 $ 28,117 $ 40,982 $ 34,569
1/31/2000 $ 25,883 $ 38,923 $ 33,442
2/29/2000 $ 24,323 $ 38,187 $ 30,958
3/31/2000 $ 27,522 $ 41,922 $ 34,735
4/30/2000 $ 27,676 $ 40,661 $ 34,332
5/31/2000 $ 28,698 $ 39,827 $ 34,694
6/30/2000 $ 27,336 $ 40,808 $ 33,109
7/31/2000 $ 27,414 $ 40,171 $ 33,523
8/31/2000 $ 29,270 $ 42,665 $ 35,388
9/30/2000 $ 29,243 $ 40,412 $ 35,714
10/31/2000 $ 29,999 $ 40,241 $ 36,593
11/30/2000 $ 28,643 $ 37,069 $ 35,235
12/31/2000 $ 30,712 $ 37,250 $ 37,000
1/31/2001 $ 31,366 $ 38,572 $ 37,141
2/28/2001 $ 31,366 $ 35,055 $ 36,108
3/31/2001 $ 30,336 $ 32,834 $ 34,834
4/30/2001 $ 31,872 $ 35,386 $ 36,541
5/31/2001 $ 32,844 $ 35,623 $ 37,363
6/30/2001 $ 31,689 $ 34,756 $ 36,533
7/31/2001 $ 31,485 $ 34,414 $ 36,457
8/31/2001 $ 30,625 $ 32,259 $ 34,995
9/30/2001 $ 28,254 $ 29,654 $ 32,531
10/31/2001 $ 28,458 $ 30,220 $ 32,251
11/30/2001 $ 30,295 $ 32,538 $ 34,125
12/31/2001 $ 31,201 $ 32,823 $ 34,929
1/31/2002 $ 30,736 $ 32,344 $ 34,659
2/28/2002 $ 30,992 $ 31,721 $ 34,715
3/31/2002 $ 31,996 $ 32,914 $ 36,357
4/30/2002 $ 31,039 $ 30,918 $ 35,110
5/31/2002 $ 30,667 $ 30,690 $ 35,285
6/30/2002 $ 28,716 $ 28,504 $ 33,260
7/31/2002 $ 26,287 $ 26,282 $ 30,167
8/31/2002 $ 26,054 $ 26,455 $ 30,396
9/30/2002 $ 23,203 $ 23,580 $ 27,016
10/31/2002 $ 24,674 $ 25,655 $ 29,018
[CHART]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE
CREDIT SUISSE STRATEGIC VALUE FUND ADVISOR CLASS SHARES,
THE S&P 500 INDEX(1) AND THE RUSSELL 1000 VALUE INDEX(1)
FROM INCEPTION (5/15/95). (UNAUDITED)
CREDIT SUISSE STRATEGIC
VALUE FUND ADVISOR S&P 500 RUSSELL 1000 VALUE
CLASS -- $14,314 INDEX(1) -- $19,466 INDEX(1) -- $20,983
5/15/1995 $ 10,000 $ 10,000 $ 10,000
5/31/1995 $ 10,034 $ 10,395 $ 10,421
6/30/1995 $ 10,199 $ 10,640 $ 10,562
7/31/1995 $ 10,705 $ 10,994 $ 10,930
8/31/1995 $ 11,049 $ 11,024 $ 11,084
9/30/1995 $ 10,906 $ 11,487 $ 11,485
10/31/1995 $ 10,458 $ 11,447 $ 11,371
11/30/1995 $ 11,130 $ 11,951 $ 11,947
12/31/1995 $ 10,972 $ 12,172 $ 12,247
1/31/1996 $ 11,649 $ 12,590 $ 12,629
2/29/1996 $ 11,571 $ 12,711 $ 12,724
3/31/1996 $ 11,654 $ 12,833 $ 12,941
4/30/1996 $ 11,833 $ 13,022 $ 12,990
5/31/1996 $ 11,911 $ 13,358 $ 13,153
6/30/1996 $ 11,051 $ 13,412 $ 13,163
7/31/1996 $ 10,217 $ 12,815 $ 12,666
8/31/1996 $ 10,616 $ 13,087 $ 13,028
9/30/1996 $ 10,468 $ 13,823 $ 13,546
10/31/1996 $ 10,561 $ 14,201 $ 14,070
11/30/1996 $ 11,196 $ 15,279 $ 15,090
12/31/1996 $ 10,797 $ 14,980 $ 14,897
1/31/1997 $ 11,246 $ 15,910 $ 15,620
2/28/1997 $ 11,410 $ 16,037 $ 15,849
3/31/1997 $ 10,975 $ 15,370 $ 15,279
4/30/1997 $ 11,325 $ 16,287 $ 15,921
5/31/1997 $ 12,110 $ 17,287 $ 16,810
6/30/1997 $ 12,551 $ 18,047 $ 17,532
7/31/1997 $ 13,533 $ 19,481 $ 18,850
8/31/1997 $ 13,203 $ 18,401 $ 18,179
9/30/1997 $ 13,891 $ 19,405 $ 19,278
10/31/1997 $ 13,310 $ 18,766 $ 18,739
11/30/1997 $ 13,654 $ 19,627 $ 19,567
12/31/1997 $ 14,017 $ 19,958 $ 20,139
1/31/1998 $ 14,102 $ 20,184 $ 19,854
2/28/1998 $ 15,046 $ 21,635 $ 21,190
3/31/1998 $ 15,633 $ 22,745 $ 22,486
4/30/1998 $ 15,709 $ 22,981 $ 22,637
5/31/1998 $ 15,650 $ 22,581 $ 22,301
6/30/1998 $ 15,792 $ 23,499 $ 22,587
7/31/1998 $ 15,374 $ 23,249 $ 22,188
8/31/1998 $ 13,099 $ 19,893 $ 18,886
9/30/1998 $ 13,504 $ 21,181 $ 19,971
10/31/1998 $ 14,468 $ 22,895 $ 21,518
11/30/1998 $ 15,321 $ 24,284 $ 22,521
12/31/1998 $ 15,731 $ 25,697 $ 23,287
1/31/1999 $ 15,810 $ 26,754 $ 23,473
2/28/1999 $ 15,405 $ 25,923 $ 23,141
3/31/1999 $ 15,546 $ 26,965 $ 23,620
4/30/1999 $ 17,323 $ 27,991 $ 25,826
5/31/1999 $ 17,526 $ 27,344 $ 25,542
6/30/1999 $ 18,078 $ 28,839 $ 26,284
7/31/1999 $ 17,444 $ 27,960 $ 25,514
8/31/1999 $ 17,084 $ 27,830 $ 24,568
9/30/1999 $ 16,587 $ 27,060 $ 23,709
10/31/1999 $ 16,667 $ 28,780 $ 25,074
11/30/1999 $ 16,570 $ 29,368 $ 24,877
12/31/1999 $ 16,541 $ 31,095 $ 24,997
1/31/2000 $ 15,215 $ 29,533 $ 24,182
2/29/2000 $ 14,297 $ 28,974 $ 22,386
3/31/2000 $ 16,171 $ 31,809 $ 25,117
4/30/2000 $ 16,261 $ 30,852 $ 24,826
5/31/2000 $ 16,850 $ 30,218 $ 25,087
6/30/2000 $ 16,040 $ 30,963 $ 23,941
7/31/2000 $ 16,085 $ 30,479 $ 24,241
8/31/2000 $ 17,163 $ 32,372 $ 25,590
9/30/2000 $ 17,146 $ 30,663 $ 25,825
10/31/2000 $ 17,577 $ 30,533 $ 26,460
11/30/2000 $ 16,772 $ 28,126 $ 25,479
12/31/2000 $ 17,984 $ 28,264 $ 26,755
1/31/2001 $ 18,353 $ 29,266 $ 26,857
2/28/2001 $ 18,353 $ 26,598 $ 26,110
3/31/2001 $ 17,743 $ 24,913 $ 25,188
4/30/2001 $ 18,627 $ 26,849 $ 26,423
5/31/2001 $ 19,182 $ 27,029 $ 27,017
6/30/2001 $ 18,511 $ 26,371 $ 26,417
7/31/2001 $ 18,379 $ 26,111 $ 26,362
8/31/2001 $ 17,863 $ 24,477 $ 25,305
9/30/2001 $ 16,482 $ 22,500 $ 23,523
10/31/2001 $ 16,588 $ 22,929 $ 23,321
11/30/2001 $ 17,659 $ 24,688 $ 24,676
12/31/2001 $ 18,181 $ 24,905 $ 25,257
1/31/2002 $ 17,897 $ 24,541 $ 25,062
2/28/2002 $ 18,046 $ 24,068 $ 25,102
3/31/2002 $ 18,629 $ 24,973 $ 26,290
4/30/2002 $ 18,046 $ 23,459 $ 25,388
5/31/2002 $ 17,829 $ 23,286 $ 25,515
6/30/2002 $ 16,690 $ 21,627 $ 24,050
7/31/2002 $ 15,278 $ 19,941 $ 21,814
8/31/2002 $ 15,128 $ 20,072 $ 21,980
9/30/2002 $ 13,473 $ 17,891 $ 19,535
10/31/2002 $ 14,314 $ 19,466 $ 20,983
8
[CHART]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE
CREDIT SUISSE STRATEGIC VALUE FUND CLASS A, B, AND C SHARES(2),
THE S&P 500 INDEX(1) AND THE RUSSELL 1000 VALUE INDEX(1)
FROM INCEPTION (11/30/01). (UNAUDITED)
CREDIT SUISSE STRATEGIC CREDIT SUISSE STRATEGIC CREDIT SUISSE
VALUE FUND VALUE FUND STRATEGIC VALUE FUND S&P 500 RUSSELL 1000 VALUE
CLASS A(2) -- $7,654 CLASS B(2) -- $7,766 CLASS C(2) -- $7,990 INDEX(1) -- $7,885 INDEX(1) -- $8,503
11/30/2001 $ 9,425 $ 10,000 $ 10,000 $ 10,000 $ 10,000
12/31/2001 $ 9,711 $ 10,296 $ 10,297 $ 10,088 $ 10,236
1/31/2002 $ 9,559 $ 10,133 $ 10,128 $ 9,940 $ 10,157
2/28/2002 $ 9,638 $ 10,209 $ 10,214 $ 9,749 $ 10,173
3/31/2002 $ 9,947 $ 10,530 $ 10,537 $ 10,115 $ 10,654
4/30/2002 $ 9,643 $ 10,199 $ 10,104 $ 9,502 $ 10,289
5/31/2002 $ 9,527 $ 10,076 $ 9,975 $ 9,432 $ 10,340
6/30/2002 $ 8,921 $ 9,423 $ 9,335 $ 8,760 $ 9,747
7/31/2002 $ 8,166 $ 8,623 $ 8,536 $ 8,077 $ 8,840
8/31/2002 $ 8,085 $ 8,531 $ 8,453 $ 8,130 $ 8,907
9/30/2002 $ 7,197 $ 7,594 $ 7,525 $ 7,247 $ 7,917
10/31/2002 $ 7,654 $ 7,766 $ 7,990 $ 7,885 $ 8,503
Past performance is not predictive of future performance. Investment return and
principal value of an investment will fluctuate so that an investor's shares
upon redemption may be worth more or less than their original cost. The
performance results do not reflect the deduction of taxes that a shareholder
would pay on fund distributions or the redemption of fund shares.
AVERAGE ANNUAL RETURNS AS OF SEPTEMBER 30, 2002
SINCE
1 YEAR 5 YEAR 10 YEAR INCEPTION
------ ------ ------- ---------
Common (17.87%) (0.16%) 8.78% 9.26%
Advisor (18.26%) (0.61%) -- 4.12%
Class A Without
Sales Charge -- -- -- (28.03%)(3)
Class A With Maximum
Sales Charge -- -- -- (23.61%)(3)
Class B Without CDSC -- -- -- (26.96%)(3)
Class B With CDSC -- -- -- (24.00%)(3)
Class C Without CDSC -- -- -- (24.74%)(3)
Class C With CDSC -- -- -- (24.00%)(3)
9
AVERAGE ANNUAL RETURNS AS OF OCTOBER 31, 2002
SINCE
1 YEAR 5 YEAR 10 YEAR INCEPTION
------ ------ ------- ---------
Common (13.29%) 1.95% 9.45% 9.68%
Advisor (13.71%) 1.47% -- 4.92%
Class A Without
Sales Charge -- -- -- (18.76%)(3)
Class A With Maximum
Sales Charge -- -- -- (23.46%)(3)
Class B Without CDSC -- -- -- (19.23%)(3)
Class B With CDSC -- -- -- (22.38%)(3)
Class C Without CDSC -- -- -- (19.31%)(3)
Class C With CDSC -- -- -- (20.10%)(3)
- ----------
(1) The S&P 500 Index is an unmanaged index (with no defined investment
objective) of common stocks. It includes reinvestment of dividends, and is
a registered trademark of McGraw-Hill Co., Inc. The Russell 1000(R) Value
Index measures the performance of those companies in the Russell 1000(R)
Index with lower price-to-book ratios and lower forecasted growth values.
It is an unmanaged index of common stocks that includes reinvestment of
dividends and is compiled by Frank Russell Company. Investors cannot invest
directly in an index.
(2) Total return for Class A Shares for the reporting period, based on offering
price (with maximum sales charge of 5.75%), was -23.46%. Total return for
Class B Shares for the reporting period, based on redemption value
(including maximum contingent deferred sales charge of 4%), was -22.38%.
Total return for Class C Shares for the reporting period, based on
redemption value (including maximum contingent deferred sales charge of
1%), was -20.10%.
(3) Returns for periods of less than one year are not annualized.
10
CREDIT SUISSE SMALL CAP VALUE FUND
ANNUAL INVESTMENT ADVISER'S REPORT
October 31, 2002
December 2, 2002
Dear Shareholder:
For the 12 months ended October 31, 2002, the Common Class Shares of Credit
Suisse Small Cap Value Fund(1) (the "Fund") had a gain of 0.61%, vs. losses of
11.56% and 2.52%, respectively, for the Russell 2000 Index(2) and the Russell
2000 Value Index.(2) The Fund's Class A Shares, Class B Shares and Class C
Shares had returns of 0.71%, -0.08% and -0.07%, respectively, for the same
period.(3)
The period was a very poor one for stocks in general. Markets actually rose
over the first part of the period, rebounding from their post-September 11th
plunge amid historically low interest rates and signs of economic recovery.
However, a confluence of negative developments sent equities spiraling downward
into early October 2002. Certain highly visible U.S. corporations were revealed
to have accounting problems, in some cases involving outright fraud. Meanwhile,
the economic data began to indicate that expectations of recovery had been too
optimistic. The looming prospects for a U.S.-led war on Iraq added to the
uncertainty. Investors fled risk in all forms, preferring the liquidity and
stability of cash-like investments and high-quality bonds. Small-cap and value
stocks outperformed their larger-cap and growth-oriented counterparts for the
period. One factor aiding the small-cap group was its perceived lack of
large-company-type accounting problems.
Against this backdrop, the Fund had a slight gain and outperformed its
benchmarks. Stocks that helped the Fund's relative return included its consumer,
health-care, energy and financial-services holdings. Factors that hindered the
Fund included its overweighting in the producer durables sector, which
underperformed the broader small-cap-value market.
Despite the positive October for equities, we remain of the view that the
market is undervalued and have a fair amount of upside potential when risk
concerns begin to fade. We base this opinion on our dividend discount model --
which we anchor to fairly conservative assumptions. That said, it could take
some time for risk levels to normalize, given the still-uncertain state of the
economy and the possibility of a U.S.-led war on Iraq. The threat and reality of
terrorism also could keep risk thresholds high.
From the sector perspective, we view technology and telecommunications stocks
as being generally expensive, and plan to limit our exposure in these areas over
the intermediate term. Our favored companies at present include a number of "old
economy" names within the industrial, specialty-retail, energy and health-care
sectors. We also view certain financial-services stocks as
11
attractive but remain quite selective in this area.
Sincerely yours,
The Credit Suisse Value Team
INVESTMENTS IN SMALL COMPANIES MAY BE MORE VOLATILE AND LESS LIQUID THAN
INVESTMENTS IN LARGER COMPANIES.
12
[CHART]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE
CREDIT SUISSE SMALL CAP VALUE FUND(1) COMMON CLASS SHARES,
THE RUSSELL 2000 INDEX(2) AND THE RUSSELL 2000 VALUE INDEX(2)
FROM INCEPTION (8/01/00). (UNAUDITED)
CREDIT SUISSE SMALL CAP
VALUE FUND(1) RUSSELL 2000 RUSSELL 2000 VALUE
COMMON CLASS -- $11,666 INDEX(2) -- $7,706 INDEX(2) -- $10,973
8/1/2000 $ 10,000 $ 10,000 $ 10,000
8/31/2000 $ 10,510 $ 10,763 $ 10,447
9/30/2000 $ 10,482 $ 10,447 $ 10,388
10/31/2000 $ 10,562 $ 9,981 $ 10,351
11/30/2000 $ 10,308 $ 8,956 $ 10,140
12/31/2000 $ 11,546 $ 9,725 $ 11,230
1/31/2001 $ 11,661 $ 10,232 $ 11,540
2/28/2001 $ 11,403 $ 9,560 $ 11,524
3/31/2001 $ 11,298 $ 9,093 $ 11,339
4/30/2001 $ 11,953 $ 9,804 $ 11,864
5/31/2001 $ 12,300 $ 10,045 $ 12,169
6/30/2001 $ 12,581 $ 10,392 $ 12,658
7/31/2001 $ 12,394 $ 9,830 $ 12,375
8/31/2001 $ 12,317 $ 9,512 $ 12,331
9/30/2001 $ 11,172 $ 8,232 $ 10,970
10/31/2001 $ 11,596 $ 8,713 $ 11,256
11/30/2001 $ 12,119 $ 9,388 $ 12,066
12/31/2001 $ 12,842 $ 9,967 $ 12,805
1/31/2002 $ 12,980 $ 9,864 $ 12,974
2/28/2002 $ 13,345 $ 9,593 $ 13,054
3/31/2002 $ 14,136 $ 10,365 $ 14,031
4/30/2002 $ 14,451 $ 10,459 $ 14,525
5/31/2002 $ 13,934 $ 9,995 $ 14,044
6/30/2002 $ 13,418 $ 9,499 $ 13,734
7/31/2002 $ 12,048 $ 8,065 $ 11,693
8/31/2002 $ 12,395 $ 8,044 $ 11,642
9/30/2002 $ 11,427 $ 7,467 $ 10,810
10/31/2002 $ 11,666 $ 7,706 $ 10,973
[CHART]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE
CREDIT SUISSE SMALL CAP VALUE FUND(1) CLASS A SHARES(3), THE RUSSELL 2000
INDEX(2) AND THE RUSSELL 2000 VALUE INDEX(2) FOR TEN YEARS. (UNAUDITED)
CREDIT SUISSE SMALL
CAP VALUE FUND(1) RUSSELL 2000 RUSSELL 2000 VALUE
CLASS A(3) -- $27,668 INDEX(2) -- $21,622 INDEX(2) -- $29,995
10/31/1992 $ 9,425 $ 10,000 $ 10,000
11/30/1992 $ 9,815 $ 10,766 $ 10,619
12/31/1992 $ 9,986 $ 11,140 $ 11,059
1/31/1993 $ 10,242 $ 11,517 $ 11,646
2/28/1993 $ 10,205 $ 11,251 $ 11,692
3/31/1993 $ 10,373 $ 11,616 $ 12,136
4/30/1993 $ 10,153 $ 11,296 $ 11,844
5/31/1993 $ 10,490 $ 11,796 $ 12,217
6/30/1993 $ 10,614 $ 11,869 $ 12,332
7/31/1993 $ 10,615 $ 12,033 $ 12,544
8/31/1993 $ 11,089 $ 12,553 $ 13,034
9/30/1993 $ 11,504 $ 12,907 $ 13,346
10/31/1993 $ 11,752 $ 13,240 $ 13,652
11/30/1993 $ 11,606 $ 12,808 $ 13,305
12/31/1993 $ 12,104 $ 13,246 $ 13,696
1/31/1994 $ 12,481 $ 13,661 $ 14,184
2/28/1994 $ 12,677 $ 13,611 $ 14,142
3/31/1994 $ 12,158 $ 12,894 $ 13,509
4/30/1994 $ 12,159 $ 12,971 $ 13,642
5/31/1994 $ 12,065 $ 12,825 $ 13,623
6/30/1994 $ 11,924 $ 12,392 $ 13,269
7/31/1994 $ 12,175 $ 12,596 $ 13,514
8/31/1994 $ 12,496 $ 13,298 $ 14,046
9/30/1994 $ 12,402 $ 13,252 $ 13,896
10/31/1994 $ 12,238 $ 13,199 $ 13,642
11/30/1994 $ 11,706 $ 12,666 $ 13,091
12/31/1994 $ 11,960 $ 13,005 $ 13,484
1/31/1995 $ 11,862 $ 12,840 $ 13,419
2/28/1995 $ 12,345 $ 13,375 $ 13,915
3/31/1995 $ 12,541 $ 13,604 $ 13,983
4/30/1995 $ 12,844 $ 13,906 $ 14,399
5/31/1995 $ 13,000 $ 14,145 $ 14,708
6/30/1995 $ 13,237 $ 14,879 $ 15,210
7/31/1995 $ 13,753 $ 15,736 $ 15,765
8/31/1995 $ 13,876 $ 16,062 $ 16,234
9/30/1995 $ 14,088 $ 16,349 $ 16,476
10/31/1995 $ 13,597 $ 15,618 $ 15,818
11/30/1995 $ 14,191 $ 16,274 $ 16,447
12/31/1995 $ 14,373 $ 16,703 $ 16,956
1/31/1996 $ 14,146 $ 16,685 $ 17,069
2/29/1996 $ 14,541 $ 17,205 $ 17,336
3/31/1996 $ 14,936 $ 17,555 $ 17,700
4/30/1996 $ 15,113 $ 18,494 $ 18,183
5/31/1996 $ 15,541 $ 19,223 $ 18,643
6/30/1996 $ 15,230 $ 18,434 $ 18,423
7/31/1996 $ 14,129 $ 16,824 $ 17,444
8/31/1996 $ 14,886 $ 17,800 $ 18,201
9/30/1996 $ 15,424 $ 18,496 $ 18,697
10/31/1996 $ 15,474 $ 18,211 $ 18,914
11/30/1996 $ 16,012 $ 18,961 $ 19,932
12/31/1996 $ 16,469 $ 19,458 $ 20,579
1/31/1997 $ 16,565 $ 19,847 $ 20,895
2/28/1997 $ 16,635 $ 19,366 $ 21,094
3/31/1997 $ 16,284 $ 18,452 $ 20,528
4/30/1997 $ 16,328 $ 18,503 $ 20,830
5/31/1997 $ 17,830 $ 20,562 $ 22,488
6/30/1997 $ 18,646 $ 21,443 $ 23,626
7/31/1997 $ 19,718 $ 22,441 $ 24,618
8/31/1997 $ 20,078 $ 22,954 $ 25,009
9/30/1997 $ 21,149 $ 24,634 $ 26,672
10/31/1997 $ 20,499 $ 23,552 $ 25,946
11/30/1997 $ 20,724 $ 23,400 $ 26,231
12/31/1997 $ 20,774 $ 23,809 $ 27,120
1/31/1998 $ 20,607 $ 23,433 $ 26,629
2/28/1998 $ 22,060 $ 25,166 $ 28,239
3/31/1998 $ 22,815 $ 26,204 $ 29,385
4/30/1998 $ 22,712 $ 26,349 $ 29,530
5/31/1998 $ 21,771 $ 24,930 $ 28,484
6/30/1998 $ 21,091 $ 24,982 $ 28,323
7/31/1998 $ 19,573 $ 22,960 $ 26,105
8/31/1998 $ 16,610 $ 18,501 $ 22,017
9/30/1998 $ 17,262 $ 19,950 $ 23,260
10/31/1998 $ 18,203 $ 20,764 $ 23,950
11/30/1998 $ 18,906 $ 21,852 $ 24,599
12/31/1998 $ 19,816 $ 23,204 $ 25,370
1/31/1999 $ 18,534 $ 23,513 $ 24,794
2/28/1999 $ 17,431 $ 21,608 $ 23,102
3/31/1999 $ 17,524 $ 21,946 $ 22,911
4/30/1999 $ 19,096 $ 23,912 $ 25,003
5/31/1999 $ 19,442 $ 24,261 $ 25,771
6/30/1999 $ 20,312 $ 25,358 $ 26,704
7/31/1999 $ 20,331 $ 24,663 $ 26,071
8/31/1999 $ 19,582 $ 23,750 $ 25,118
9/30/1999 $ 19,125 $ 23,755 $ 24,616
10/31/1999 $ 19,201 $ 23,851 $ 24,123
11/30/1999 $ 19,778 $ 25,275 $ 24,248
12/31/1999 $ 20,109 $ 28,137 $ 24,993
1/31/2000 $ 18,927 $ 27,684 $ 24,339
2/29/2000 $ 19,736 $ 32,255 $ 25,827
3/31/2000 $ 21,654 $ 30,129 $ 25,948
4/30/2000 $ 21,219 $ 28,315 $ 26,102
5/31/2000 $ 21,177 $ 26,665 $ 25,703
6/30/2000 $ 21,790 $ 28,989 $ 26,454
7/31/2000 $ 22,133 $ 28,057 $ 27,336
8/31/2000 $ 23,254 $ 30,197 $ 28,558
9/30/2000 $ 23,191 $ 29,309 $ 28,396
10/31/2000 $ 23,369 $ 28,002 $ 28,295
11/30/2000 $ 22,808 $ 25,126 $ 27,719
12/31/2000 $ 25,552 $ 27,285 $ 30,698
1/31/2001 $ 25,796 $ 28,706 $ 31,545
2/28/2001 $ 25,225 $ 26,823 $ 31,501
3/31/2001 $ 25,007 $ 25,512 $ 30,996
4/30/2001 $ 26,453 $ 27,507 $ 32,431
5/31/2001 $ 27,208 $ 28,183 $ 33,265
6/30/2001 $ 27,830 $ 29,155 $ 34,602
7/31/2001 $ 27,416 $ 27,578 $ 33,827
8/31/2001 $ 27,248 $ 26,687 $ 33,708
9/30/2001 $ 24,707 $ 23,095 $ 29,987
10/31/2001 $ 25,644 $ 24,447 $ 30,770
11/30/2001 $ 26,799 $ 26,339 $ 32,983
12/31/2001 $ 28,406 $ 27,965 $ 35,002
1/31/2002 $ 28,711 $ 27,674 $ 35,467
2/28/2002 $ 31,635 $ 26,916 $ 35,683
3/31/2002 $ 33,492 $ 29,080 $ 38,356
4/30/2002 $ 34,249 $ 29,344 $ 39,706
5/31/2002 $ 33,017 $ 28,041 $ 38,392
6/30/2002 $ 31,814 $ 26,650 $ 37,543
7/31/2002 $ 28,577 $ 22,626 $ 31,964
8/31/2002 $ 29,394 $ 22,570 $ 31,824
9/30/2002 $ 27,104 $ 20,949 $ 29,551
10/31/2002 $ 27,668 $ 21,622 $ 29,995
13
[CHART]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE
CREDIT SUISSE SMALL CAP VALUE FUND(1) CLASS B SHARES(3),(4),
THE RUSSELL 2000 INDEX(2),(4) AND THE RUSSELL 2000 VALUE INDEX(2),(4).
(UNAUDITED)
CREDIT SUISSE SMALL
CAP VALUE FUND(1) RUSSELL 2000 RUSSELL 2000 VALUE
CLASS B(3),(4) -- $16,900 INDEX(2),(4) -- $12,567 INDEX(2),(4) -- $17,302
3/96(4) $ 10,000 $ 10,000 $ 10,000
3/31/1996 $ 10,266 $ 10,204 $ 10,210
4/30/1996 $ 10,382 $ 10,749 $ 10,488
5/31/1996 $ 10,677 $ 11,173 $ 10,754
6/30/1996 $ 10,457 $ 10,714 $ 10,627
7/31/1996 $ 9,694 $ 9,778 $ 10,062
8/31/1996 $ 10,207 $ 10,346 $ 10,499
9/30/1996 $ 10,573 $ 10,750 $ 10,785
10/31/1996 $ 10,600 $ 10,585 $ 10,910
11/30/1996 $ 10,960 $ 11,021 $ 11,497
12/31/1996 $ 11,273 $ 11,310 $ 11,871
1/31/1997 $ 11,327 $ 11,535 $ 12,053
2/28/1997 $ 11,376 $ 11,256 $ 12,168
3/31/1997 $ 11,129 $ 10,725 $ 11,841
4/30/1997 $ 11,147 $ 10,755 $ 12,015
5/31/1997 $ 12,167 $ 11,951 $ 12,972
6/30/1997 $ 12,722 $ 12,463 $ 13,628
7/31/1997 $ 13,439 $ 13,043 $ 14,200
8/31/1997 $ 13,676 $ 13,341 $ 14,426
9/30/1997 $ 14,399 $ 14,318 $ 15,385
10/31/1997 $ 13,947 $ 13,689 $ 14,967
11/30/1997 $ 14,089 $ 13,600 $ 15,131
12/31/1997 $ 14,114 $ 13,838 $ 15,644
1/31/1998 $ 13,993 $ 13,620 $ 15,361
2/28/1998 $ 14,975 $ 14,627 $ 16,289
3/31/1998 $ 15,474 $ 15,230 $ 16,950
4/30/1998 $ 15,397 $ 15,315 $ 17,034
5/31/1998 $ 14,745 $ 14,490 $ 16,431
6/30/1998 $ 14,285 $ 14,520 $ 16,338
7/31/1998 $ 13,245 $ 13,345 $ 15,058
8/31/1998 $ 11,235 $ 10,753 $ 12,700
9/30/1998 $ 11,667 $ 11,595 $ 13,417
10/31/1998 $ 12,274 $ 12,068 $ 13,815
11/30/1998 $ 12,743 $ 12,701 $ 14,189
12/31/1998 $ 13,349 $ 13,487 $ 14,634
1/31/1999 $ 12,480 $ 13,666 $ 14,302
2/28/1999 $ 11,727 $ 12,559 $ 13,326
3/31/1999 $ 11,784 $ 12,755 $ 13,216
4/30/1999 $ 12,832 $ 13,898 $ 14,422
5/31/1999 $ 13,061 $ 14,101 $ 14,866
6/30/1999 $ 13,635 $ 14,739 $ 15,404
7/31/1999 $ 13,635 $ 14,334 $ 15,038
8/31/1999 $ 13,130 $ 13,804 $ 14,489
9/30/1999 $ 12,811 $ 13,807 $ 14,199
10/31/1999 $ 12,855 $ 13,863 $ 13,915
11/30/1999 $ 13,230 $ 14,691 $ 13,987
12/31/1999 $ 13,442 $ 16,354 $ 14,417
1/31/2000 $ 12,650 $ 16,090 $ 14,040
2/29/2000 $ 13,180 $ 18,747 $ 14,898
3/31/2000 $ 14,453 $ 17,511 $ 14,968
4/30/2000 $ 14,157 $ 16,457 $ 15,056
5/31/2000 $ 14,122 $ 15,498 $ 14,827
6/30/2000 $ 14,518 $ 16,849 $ 15,260
7/31/2000 $ 14,738 $ 16,307 $ 15,768
8/31/2000 $ 15,473 $ 17,551 $ 16,473
9/30/2000 $ 15,423 $ 17,035 $ 16,380
10/31/2000 $ 15,530 $ 16,275 $ 16,322
11/30/2000 $ 15,146 $ 14,604 $ 15,989
12/31/2000 $ 16,952 $ 15,858 $ 17,707
1/31/2001 $ 17,109 $ 16,685 $ 18,196
2/28/2001 $ 16,726 $ 15,590 $ 18,171
3/31/2001 $ 16,561 $ 14,828 $ 17,880
4/30/2001 $ 17,518 $ 15,987 $ 18,707
5/31/2001 $ 18,008 $ 16,381 $ 19,188
6/30/2001 $ 18,408 $ 16,946 $ 19,960
7/31/2001 $ 18,117 $ 16,029 $ 19,512
8/31/2001 $ 17,992 $ 15,511 $ 19,444
9/30/2001 $ 16,312 $ 13,423 $ 17,298
10/31/2001 $ 16,910 $ 14,209 $ 17,749
11/30/2001 $ 17,668 $ 15,309 $ 19,026
12/31/2001 $ 18,717 $ 16,254 $ 20,190
1/31/2002 $ 18,899 $ 16,085 $ 20,458
2/28/2002 $ 19,422 $ 15,644 $ 20,583
3/31/2002 $ 20,557 $ 16,902 $ 22,125
4/30/2002 $ 21,005 $ 17,055 $ 22,904
5/31/2002 $ 20,242 $ 16,298 $ 22,146
6/30/2002 $ 19,489 $ 15,490 $ 21,656
7/31/2002 $ 17,490 $ 13,151 $ 18,438
8/31/2002 $ 17,976 $ 13,118 $ 18,357
9/30/2002 $ 16,567 $ 12,176 $ 17,046
10/31/2002 $ 16,900 $ 12,567 $ 17,302
[CHART]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE
CREDIT SUISSE SMALL CAP VALUE FUND(1) CLASS C SHARES(3),(5), THE RUSSELL 2000
INDEX(2),(5) AND THE RUSSELL 2000 VALUE INDEX(2),(5). (UNAUDITED)
CREDIT SUISSE SMALL
CAP VALUE FUND(1) RUSSELL 2000 RUSSELL 2000 VALUE
CLASS C(3),(5) -- $12,812 INDEX(2),(5) -- $6,703 INDEX(2),(5) -- $11,614
3/00(5) $ 10,000 $ 10,000 $ 10,000
3/31/2000 $ 10,960 $ 9,341 $ 10,047
4/30/2000 $ 10,730 $ 8,778 $ 10,106
5/31/2000 $ 10,703 $ 8,267 $ 9,952
6/30/2000 $ 11,003 $ 8,987 $ 10,243
7/31/2000 $ 11,170 $ 8,698 $ 10,584
8/31/2000 $ 11,728 $ 9,362 $ 11,057
9/30/2000 $ 11,690 $ 9,087 $ 10,995
10/31/2000 $ 11,771 $ 8,681 $ 10,956
11/30/2000 $ 11,479 $ 7,790 $ 10,733
12/31/2000 $ 12,853 $ 8,459 $ 11,886
1/31/2001 $ 12,973 $ 8,900 $ 12,214
2/28/2001 $ 12,676 $ 8,316 $ 12,197
3/31/2001 $ 12,556 $ 7,909 $ 12,001
4/30/2001 $ 13,276 $ 8,528 $ 12,557
5/31/2001 $ 13,649 $ 8,738 $ 12,880
6/30/2001 $ 13,953 $ 9,039 $ 13,398
7/31/2001 $ 13,732 $ 8,550 $ 13,098
8/31/2001 $ 13,637 $ 8,274 $ 13,052
9/30/2001 $ 12,360 $ 7,160 $ 11,611
10/31/2001 $ 12,821 $ 7,579 $ 11,914
11/30/2001 $ 13,391 $ 8,166 $ 12,771
12/31/2001 $ 14,188 $ 8,670 $ 13,553
1/31/2002 $ 14,326 $ 8,580 $ 13,732
2/28/2002 $ 14,724 $ 8,345 $ 13,816
3/31/2002 $ 15,585 $ 9,015 $ 14,851
4/30/2002 $ 15,925 $ 9,097 $ 15,374
5/31/2002 $ 15,345 $ 8,694 $ 14,865
6/30/2002 $ 14,773 $ 8,262 $ 14,536
7/31/2002 $ 13,259 $ 7,015 $ 12,376
8/31/2002 $ 13,629 $ 6,997 $ 12,322
9/30/2002 $ 12,558 $ 6,495 $ 11,442
10/31/2002 $ 12,812 $ 6,703 $ 11,614
14
Past performance is not predictive of future performance. Investment return and
principal value of an investment will fluctuate so that an investor's shares
upon redemption may be worth more or less than their original cost. The
performance results do not reflect the deduction of taxes that a shareholder
would pay on fund distributions or the redemption of fund shares.
AVERAGE ANNUAL RETURNS AS OF SEPTEMBER 30, 2002(1)
SINCE
1 YEAR 5 YEAR 10 YEAR INCEPTION
------ ------ ------- ---------
Common 2.29% -- -- 6.35%
Class A Without
Sales Charge 2.39% 3.63% 10.03% 12.79%
Class A With Maximum
Sales Charge (3.50%) 2.41% 10.68% 12.61%
Class B Without CDSC 1.55% 2.85% -- 7.85%
Class B With CDSC (2.00%) 2.85% -- 7.85%
Class C Without CDSC 1.61% -- -- 10.33%
Class C With CDSC 0.72% -- -- 10.33%
AVERAGE ANNUAL RETURNS AS OF OCTOBER 31, 2002(1)
SINCE
1 YEAR 5 YEAR 10 YEAR INCEPTION
------ ------ ------- ---------
Common 0.61% -- -- 7.08%
Class A Without
Sales Charge 0.71% 4.71% 10.71% 12.82%
Class A With Maximum
Sales Charge (5.10%) 3.48% 10.06% 12.64%
Class B Without CDSC (0.08%) 3.92% -- 8.07%
Class B With CDSC (3.57%) 3.92% -- 8.07%
Class C Without CDSC (0.07%) -- -- 10.81%
Class C With CDSC (0.95%) -- -- 10.81%
15
- ----------
(1) Fee waivers and/or expense reimbursements reduced expenses for the Fund,
without which performance would be lower. Waivers and/or reimbursements may
be discontinued at any time.
(2) The Russell 2000(R) Index measures the performance of the 2,000 smallest
companies in the Russell 3000(R) Index, that represent approximately 8% of
the total market capitalization of the Russell 3000(R) Index. It is an
unmanaged index of common stocks which includes reinvestment of dividends
and is compiled by Frank Russell Company. The Russell 3000(R) Index is
composed of 3,000 of the largest U.S. companies by market capitalization.
The returns for the Russell 2000(R) Index do not include any sales charges,
fees or other expenses. The Russell 2000(R) Value Index measures the
performance of those companies in the Russell 2000(R) Index with lower
price-to-book ratios and lower forecasted growth values. It is an unmanaged
index of common stocks that includes reinvestment of dividends and is
compiled by Frank Russell Company. Investors cannot invest directly in an
index.
(3) Total return for Class A Shares for the reporting period, based on offering
price (with maximum sales charge of 5.75%), was -5.10%. Total return for
Class B Shares for the reporting period, based on redemption value
(including maximum contingent deferred sales charge of 4%), was -3.57%.
Total return for Class C Shares for the reporting period, based on
redemption value (including maximum contingent deferred sales charge of
1%), was -0.95%.
(4) Performance for the benchmarks is not available for the period beginning
February 28, 1996 (commencement of operations). For that reason,
performance is shown for the period beginning March 1, 1996.
(5) Performance for the benchmarks is not available for the period beginning
February 28, 2000 (commencement of operations). For that reason,
performance is shown for the period beginning March 1, 2000.
16
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CREDIT SUISSE LARGE CAP VALUE FUND
SCHEDULE OF INVESTMENTS
October 31, 2002
NUMBER OF
SHARES VALUE
------------- -------------
COMMON STOCKS (93.9%)
AEROSPACE & DEFENSE (6.1%)
General Dynamics Corp. 49,700 $ 3,932,761
United Technologies Corp. 83,700 5,161,779
-------------
9,094,540
-------------
BANKS (9.1%)
Bank of America Corp. 26,937 1,880,203
Banknorth Group, Inc. 157,600 3,651,592
Charter One Financial, Inc. 105,000 3,179,400
Washington Mutual, Inc. 134,000 4,791,840
-------------
13,503,035
-------------
CHEMICALS (3.9%)
Engelhard Corp. 108,600 2,405,490
Rohm & Haas Co. 102,400 3,406,848
-------------
5,812,338
-------------
COMMERCIAL SERVICES & SUPPLIES (2.8%)
Avery Dennison Corp. 67,700 4,213,648
-------------
COMPUTERS & PERIPHERALS (1.1%)
Hewlett-Packard Co. 105,000 1,659,000
-------------
DIVERSIFIED FINANCIALS (8.9%)
American Express Co. 90,300 3,284,211
Citigroup, Inc. 131,333 4,852,754
Freddie Mac 54,300 3,343,794
Morgan Stanley 43,100 1,677,452
-------------
13,158,211
-------------
ELECTRIC UTILITIES (2.5%)
Progress Energy, Inc. 88,700 3,700,564
-------------
ELECTRICAL EQUIPMENT (1.7%)
Emerson Electric Co. 50,800 2,447,544
-------------
FOOD & DRUG RETAILING (2.6%)
Sysco Corp. 121,700 3,855,456
-------------
FOOD PRODUCTS (2.3%)
General Mills, Inc. 84,000 3,470,880
-------------
GAS UTILITIES (3.3%)
National Fuel Gas Co. 125,000 2,521,250
WGL Holdings, Inc. 100,800 2,331,504
-------------
4,852,754
-------------
HEALTHCARE PROVIDERS & SERVICES (2.6%)
Cardinal Health, Inc. 56,500 3,910,365
-------------
HOUSEHOLD PRODUCTS (3.3%)
Kimberly-Clark Corp. 94,200 4,851,300
-------------
See Accompanying Notes to Financial Statements.
18
NUMBER OF
SHARES VALUE
------------- -------------
COMMON STOCKS (CONTINUED)
INDUSTRIAL CONGLOMERATES (3.5%)
3M Co. 15,200 $ 1,929,488
General Electric Co. 87,000 2,196,750
Tyco International, Ltd. 74,000 1,070,040
-------------
5,196,278
-------------
INSURANCE (6.8%)
American International Group, Inc. 56,814 3,553,716
Berkshire Hathaway, Inc. Class A* 55 4,080,450
Hartford Financial Services Group, Inc. 62,900 2,484,550
-------------
10,118,716
-------------
IT CONSULTING & SERVICES (1.0%)
Unisys Corp.* 161,200 1,407,276
-------------
MEDIA (3.2%)
Comcast Corp. Special Class A* 97,200 2,236,572
Tribune Co. 52,400 2,517,820
-------------
4,754,392
-------------
MULTILINE RETAIL (2.7%)
Costco Wholesale Corp.* 56,000 1,900,080
Federated Department Stores, Inc.* 66,400 2,038,480
-------------
3,938,560
-------------
OIL & GAS (9.7%)
Burlington Resources, Inc. 60,500 2,492,600
ChevronTexaco Corp. 39,780 2,690,321
ConocoPhillips 79,000 3,831,500
Devon Energy Corp. 59,500 3,004,750
Exxon Mobil Corp. 67,700 2,278,782
-------------
14,297,953
-------------
PERSONAL PRODUCTS (1.8%)
Avon Products, Inc. 56,000 2,715,440
-------------
PHARMACEUTICALS (6.4%)
Johnson & Johnson 87,100 5,117,125
Merck & Company, Inc. 40,600 2,202,144
Pfizer Inc. 7,025 223,184
Pharmacia Corp. 44,351 1,907,093
-------------
9,449,546
-------------
ROAD & RAIL (2.2%)
Burlington Northern Santa Fe Corp. 128,300 3,301,159
-------------
SOFTWARE (2.5%)
Microsoft Corp.* 70,100 3,748,247
-------------
SPECIALTY RETAIL (2.0%)
Home Depot, Inc. 101,900 2,942,872
-------------
See Accompanying Notes to Financial Statements.
19
NUMBER OF
SHARES VALUE
------------- -------------
COMMON STOCKS (CONCLUDED)
TOBACCO (1.9%)
Philip Morris Companies, Inc. 68,700 $ 2,799,525
-------------
TOTAL COMMON STOCKS (Cost $115,181,218) 139,199,599
-------------
PAR
(000)
-------------
MORTGAGE-BACKED SECURITIES (0.0%)
GNMA (0.0%)
Ginnie Mae Pool #002217X, 6.500%, 8/15/03
(Cost $382) $ 0** 407
-------------
SHORT-TERM INVESTMENT (6.0%)
State Street Bank & Trust Co. Euro Time Deposit, 1.750%, 11/01/02
(Cost $8,866,000) 8,866 8,866,000
-------------
TOTAL INVESTMENTS AT VALUE (99.9%) (Cost $124,047,600) 148,066,006
OTHER ASSETS IN EXCESS OF LIABILITIES (0.1%) 144,313
-------------
NET ASSETS (100.0%) $ 148,210,319
=============
* Non-income producing security.
** Amount represents less than $1,000 par value.
See Accompanying Notes to Financial Statements.
20
CREDIT SUISSE STRATEGIC VALUE FUND
SCHEDULE OF INVESTMENTS
October 31, 2002
NUMBER OF
SHARES VALUE
------------- -------------
COMMON STOCKS (93.7%)
AEROSPACE & DEFENSE (2.5%)
United Technologies Corp. 81,100 $ 5,001,437
-------------
AIR FREIGHT & COURIERS (0.9%)
United Parcel Service, Inc. Class B 30,000 1,800,300
-------------
AUTO COMPONENTS (3.3%)
Johnson Controls, Inc. 46,000 3,588,000
Lear Corp.* 85,900 3,139,645
-------------
6,727,645
-------------
BANKS (5.2%)
Bank of America Corp. 29,300 2,045,140
Charter One Financial, Inc. 118,230 3,580,005
Wells Fargo & Co. 97,000 4,895,590
-------------
10,520,735
-------------
BEVERAGES (6.6%)
Anheuser-Busch Companies, Inc. 107,100 5,650,596
Pepsi Bottling Group, Inc. 78,800 2,123,660
PepsiCo, Inc. 125,220 5,522,202
-------------
13,296,458
-------------
BUILDING PRODUCTS (3.6%)
American Standard Companies, Inc.* 107,500 7,170,250
-------------
CHEMICALS (1.6%)
Rohm & Haas Co. 93,900 3,124,053
-------------
COMMERCIAL SERVICES & SUPPLIES (5.4%)
Cendant Corp.* 270,100 3,106,150
Convergys Corp.* 109,500 1,629,360
H&R Block, Inc. 73,800 3,275,244
Pitney Bowes, Inc. 87,200 2,925,560
-------------
10,936,314
-------------
COMPUTERS & PERIPHERALS (1.3%)
Hewlett-Packard Co. 169,120 2,672,096
-------------
DIVERSIFIED FINANCIALS (6.5%)
Citigroup, Inc. 130,700 4,829,365
Fannie Mae 63,700 4,258,982
Lehman Brothers Holdings, Inc. 74,100 3,947,307
-------------
13,035,654
-------------
DIVERSIFIED TELECOMMUNICATION SERVICES (0.9%)
BellSouth Corp. 66,600 1,741,590
-------------
ELECTRIC UTILITIES (0.9%)
Public Service Enterprise Group, Inc. 63,000 1,804,950
-------------
See Accompanying Notes to Financial Statements.
21
NUMBER OF
SHARES VALUE
------------- -------------
COMMON STOCKS (CONTINUED)
ELECTRONIC EQUIPMENT & INSTRUMENTS (2.0%)
Agilent Technologies, Inc.* 111,400 $ 1,531,750
Tektronix, Inc.* 142,400 2,516,208
-------------
4,047,958
-------------
ENERGY EQUIPMENT & SERVICES (1.5%)
Pride International, Inc.* 213,600 2,964,768
-------------
FOOD & DRUG RETAILING (1.1%)
CVS Corp. 76,800 2,129,664
-------------
FOOD PRODUCTS (1.3%)
General Mills, Inc. 64,300 2,656,876
-------------
HOME PRODUCTS (1.0%)
Kimberly-Clark Corp. 40,600 2,090,900
-------------
INDUSTRIAL CONGLOMERATES (3.4%)
3M Co. 40,400 5,128,376
Tyco International, Ltd. 119,800 1,732,308
-------------
6,860,684
-------------
INSURANCE (5.0%)
American International Group, Inc. 44,235 2,766,899
Hartford Financial Services Group, Inc. 48,800 1,927,600
Jefferson-Pilot Corp. 55,500 2,228,325
St. Paul Companies, Inc. 93,000 3,050,400
-------------
9,973,224
-------------
MACHINERY (10.1%)
Eaton Corp. 46,000 3,145,940
Harsco Corp. 75,000 1,923,750
Ingersoll-Rand Co. Class A 118,900 4,637,100
ITT Industries, Inc. 128,600 8,356,428
Navistar International Corp.* 100,000 2,242,000
-------------
20,305,218
-------------
MEDIA (5.3%)
Comcast Corp. Special Class A* 105,000 2,416,050
Knight-Ridder, Inc. 60,500 3,640,890
McGraw-Hill Companies, Inc. 34,700 2,238,150
Viacom, Inc. Class B* 54,300 2,422,323
-------------
10,717,413
-------------
METALS & MINING (2.0%)
Alcoa, Inc. 183,200 4,041,392
-------------
MULTILINE RETAIL (2.3%)
Federated Department Stores, Inc.* 149,100 4,577,370
-------------
See Accompanying Notes to Financial Statements.
22
NUMBER OF
SHARES VALUE
------------- -------------
COMMON STOCKS (CONTINUED)
OIL & GAS (8.0%)
ConocoPhillips 89,050 $ 4,318,925
Devon Energy Corp. 81,600 4,120,800
ExxonMobil Corp. 132,100 4,446,486
Royal Dutch Petroleum Co. NY Shares 74,900 3,204,222
-------------
16,090,433
-------------
PHARMACEUTICALS (4.4%)
Abbott Laboratories 60,700 2,541,509
Pfizer Inc. 131,100 4,165,047
Wyeth 66,100 2,214,350
-------------
8,920,906
-------------
ROAD & RAIL (1.0%)
Burlington Northern Santa Fe Corp. 81,200 2,089,276
-------------
SEMICONDUCTOR EQUIPMENT & PRODUCTS (0.8%)
Micron Technology, Inc.* 103,700 1,659,200
-------------
SPECIALTY RETAIL (5.8%)
Abercrombie & Fitch Co. Class A* 124,500 2,218,590
Best Buy Company, Inc.* 77,800 1,603,458
Lowe's Companies, Inc. 63,600 2,654,028
Ross Stores, Inc. 68,400 2,862,540
Tiffany & Co. 91,900 2,405,942
-------------
11,744,558
-------------
TOTAL COMMON STOCKS (Cost $191,553,357) 188,701,322
-------------
PREFERRED STOCK (1.2%)
REAL ESTATE (1.2%)
Equity Residential Properties, (Callable 11/27/02 @ $25.91)
(Cost $2,512,171) 101,000 2,392,690
-------------
RIGHTS (0.0%)
DIVERSIFIED FINANCIALS (0.0%)
Allied Capital Corp.^
(Cost $0) 56,900 589
-------------
PAR
(000)
-------------
SHORT-TERM INVESTMENT (5.5%)
State Street Bank & Trust Co. Euro Time Deposit, 1.750%, 11/01/02
(Cost $11,003,000) $ 11,003 11,003,000
-------------
TOTAL INVESTMENTS AT VALUE (100.4%) (Cost $205,068,528) 202,097,601
LIABILITIES IN EXCESS OF OTHER ASSETS (-0.4%) (841,503)
-------------
NET ASSETS (100.0%) $ 201,256,098
=============
* Non-income producing security.
^ Not readily marketable security; security is valued at fair value as
determined in good faith by the Board of Directors.
See Accompanying Notes to Financial Statements.
23
CREDIT SUISSE SMALL CAP VALUE FUND
SCHEDULE OF INVESTMENTS
October 31, 2002
NUMBER OF
SHARES VALUE
------------- -------------
COMMON STOCKS (93.7%)
AEROSPACE & DEFENSE (1.2%)
DRS Technologies, Inc.* 80,000 $ 2,651,200
-------------
BANKS (18.6%)
Alabama National Bancorp 48,800 2,271,152
Associated Banc-Corp 123,530 4,145,667
Banknorth Group, Inc. 138,200 3,202,094
Century Bancorp, Inc. Class A 26,700 718,497
Cullen/Frost Bankers, Inc. 79,700 2,760,011
First Financial Holdings, Inc. 141,100 3,606,516
FirstFed Financial Corp.* 134,000 3,631,400
FirstMerit Corp. 170,000 3,884,500
Hudson United Bancorp 157,800 4,805,010
Prosperity Bancshares, Inc. 130,600 2,451,362
Sky Financial Group, Inc. 119,000 2,287,180
Susquehanna Bancshares, Inc. 158,900 3,368,680
Webster Financial Corp. 120,000 3,889,200
-------------
41,021,269
-------------
CHEMICALS (3.4%)
Cambrex Corp. 86,400 2,405,376
H.B. Fuller Co. 180,000 5,124,600
-------------
7,529,976
-------------
COMMERCIAL SERVICES & SUPPLIES (5.3%)
Banta Corp. 130,000 4,004,000
United Stationers, Inc.* 140,000 4,162,200
Watson Wyatt & Company Holdings* 175,800 3,472,050
-------------
11,638,250
-------------
CONSTRUCTION & ENGINEERING (1.7%)
EMCOR Group, Inc.* 75,000 3,645,750
-------------
CONTAINERS & PACKAGING (3.6%)
AptarGroup, Inc. 150,000 4,189,500
Myers Industries, Inc. 312,218 3,840,281
-------------
8,029,781
-------------
ELECTRICAL EQUIPMENT (4.7%)
AMETEK, Inc. 130,000 4,587,700
Brady Corp. 120,000 3,958,800
C&D Technologies, Inc. 120,000 1,914,000
-------------
10,460,500
-------------
ELECTRONIC EQUIPMENT & INSTRUMENTS (9.7%)
Electro Scientific Industries, Inc.* 225,100 4,204,868
Littelfuse, Inc.* 149,000 2,330,509
Pioneer-Standard Electronics, Inc. 239,450 1,676,150
Rogers Corp.* 150,000 3,747,000
Roper Industries, Inc. 89,200 3,443,120
Varian, Inc.* 144,000 4,235,040
See Accompanying Notes to Financial Statements.
24
NUMBER OF
SHARES VALUE
------------- -------------
COMMON STOCKS (CONTINUED)
ELECTRONIC EQUIPMENT & INSTRUMENTS(CONCLUDED)
Woodhead Industries, Inc. 162,300 $ 1,671,690
-------------
21,308,377
-------------
ENERGY EQUIPMENT & SERVICES (4.4%)
Oceaneering International, Inc.* 197,000 5,456,900
Varco International, Inc.* 261,767 4,303,450
-------------
9,760,350
-------------
FOOD & DRUG RETAILING (3.2%)
Performance Food Group Co.* 92,000 3,421,480
Ruddick Corp. 250,000 3,745,000
-------------
7,166,480
-------------
FOOD PRODUCTS (2.4%)
Sensient Technologies Corp. 220,800 5,376,480
-------------
GAS UTILITIES (3.3%)
National Fuel Gas Co. 179,200 3,614,464
WGL Holdings, Inc. 160,000 3,700,800
-------------
7,315,264
-------------
HEALTHCARE EQUIPMENT & SUPPLIES (4.6%)
Arrow International, Inc. 100,000 3,516,000
Cooper Companies, Inc. 58,200 3,084,600
Invacare Corp. 110,000 3,476,000
-------------
10,076,600
-------------
HOTELS RESTAURANTS & LEISURE (1.0%)
Marcus Corp. 159,975 2,276,444
-------------
HOUSEHOLD DURABLES (4.4%)
Ethan Allen Interiors, Inc. 100,000 3,205,000
Lancaster Colony Corp. 141,000 6,408,450
-------------
9,613,450
-------------
INDUSTRIAL CONGLOMERATES (4.0%)
Carlisle Companies, Inc. 80,000 2,981,600
Lydall, Inc.* 199,500 2,274,300
Teleflex, Inc. 85,000 3,575,100
-------------
8,831,000
-------------
INSURANCE (3.8%)
Brown & Brown 86,100 2,617,440
HCC Insurance Holdings, Inc. 112,000 2,747,360
Horace Mann Educators Corp. 200,000 3,002,000
-------------
8,366,800
-------------
IT CONSULTING & SERVICES (0.9%)
Keane, Inc.* 230,200 1,896,848
-------------
See Accompanying Notes to Financial Statements.
25
NUMBER OF
SHARES VALUE
------------- -------------
COMMON STOCKS (CONCLUDED)
MACHINERY (6.3%)
ESCO Technologies, Inc.* 101,100 $ 3,680,040
Flowserve Corp.* 167,600 1,964,272
Graco, Inc. 168,000 4,594,800
The Manitowoc Company, Inc. 157,000 3,703,630
-------------
13,942,742
-------------
MEDIA (1.9%)
Harte-Hanks, Inc. 225,000 4,293,000
-------------
REAL ESTATE (1.1%)
Liberty Property Trust 80,000 2,347,200
-------------
ROAD & RAIL (1.7%)
Werner Enterprises, Inc. 185,000 3,783,250
-------------
SOFTWARE (1.5%)
Progress Software Corp.* 260,000 3,244,800
-------------
TRADING COMPANIES & DISTRIBUTORS (1.0%)
MSC Industrial Direct Company, Inc.* 175,000 2,268,000
-------------
TOTAL COMMON STOCKS (Cost $169,994,827) 206,843,811
-------------
WARRANTS (0.0%)
BANKS (0.0%)
Dime Bancorp.*
(Cost $5,015) 22,100 2,210
-------------
PAR
(000)
-------------
SHORT-TERM INVESTMENT (5.7%)
State Street Bank & Trust Co. Euro Time Deposit, 1.750%, 11/01/02
(Cost $12,558,000) $ 12,558 12,558,000
-------------
TOTAL INVESTMENTS AT VALUE (99.4%) (Cost $182,557,842) 219,404,021
OTHER ASSETS IN EXCESS OF LIABILITIES (0.6%) 1,281,383
-------------
NET ASSETS (100.0%) $ 220,685,404
=============
* Non-income producing security.
See Accompanying Notes to Financial Statements.
26
CREDIT SUISSE FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
October 31, 2002
LARGE CAP STRATEGIC SMALL CAP
VALUE FUND VALUE FUND VALUE FUND
------------- ------------- -------------
ASSETS
Investments at value (Cost $124,047,600,
$205,068,528, and $182,557,842, respectively) $ 148,066,006 $ 202,097,601 $ 219,404,021
Cash 54 263 393
Dividends and interest receivable 286,978 180,970 247,437
Receivable for fund shares sold 145,205 133,176 137,895
Receivable for investments sold -- 6,656,877 1,284,024
Prepaid expenses and other assets 17,584 33,766 29,082
------------- ------------- -------------
Total Assets 148,515,827 209,102,653 221,102,852
------------- ------------- -------------
LIABILITIES
Advisory fee payable 37,534 124,801 133,515
Administrative services fee payable 25,991 34,272 38,581
Payable for investments purchased -- 7,124,611 --
Distribution fee payable 49,586 10,965 60,915
Payable for fund shares redeemed 93,911 399,623 105,548
Directors'/Trustees' fee payable -- 2,281 --
Other accrued expenses payable 98,486 150,002 78,889
------------- ------------- -------------
Total Liabilities 305,508 7,846,555 417,448
------------- ------------- -------------
NET ASSETS
Capital stock, $0.001 par value 8,826 19,064 11,927
Paid-in capital 124,373,270 205,667,116 165,319,116
Accumulated undistributed net investment income 159,478 -- 128,931
Accumulated net realized gain (loss) on investments (349,661) (1,459,155) 18,379,251
Net unrealized appreciation (depreciation)
from investments 24,018,406 (2,970,927) 36,846,179
------------- ------------- -------------
Net Assets $ 148,210,319 $ 201,256,098 $ 220,685,404
============= ------------- -------------
COMMON SHARES
Net assets $ 3,060,715 $ 175,121,019 $ 45,075,158
Shares outstanding 181,923 16,586,562 2,428,392
------------- ------------- -------------
Net asset value, offering price and redemption
price per share $ 16.82 $ 10.56 $ 18.56
============= ============= =============
ADVISOR SHARES
Net assets N/A $ 25,500,591 N/A
Shares outstanding N/A 2,417,186 N/A
------------- ------------- -------------
Net asset value, offering price and redemption
price per share N/A $ 10.55 N/A
============= ============= =============
See Accompanying Notes to Financial Statements.
27
LARGE CAP STRATEGIC SMALL CAP
VALUE FUND VALUE FUND VALUE FUND
------------- ------------- -------------
A SHARES
Net assets $ 114,733,069 $ 404,067 $ 151,340,303
Shares outstanding 6,817,930 38,298 8,129,338
------------- ------------- -------------
Net asset value and redemption price per share $ 16.83 $ 10.55 $ 18.62
============= ============= =============
Maximum offering price per share
(net asset value/(1-5.75%)) $ 17.86 $ 11.19 $ 19.76
============= ============= =============
B SHARES
Net assets $ 28,312,471 $ 88,367 $ 19,998,751
Shares outstanding 1,699,492 8,410 1,127,333
------------- ------------- -------------
Net asset value and offering price per share $ 16.66 $ 10.51 $ 17.74
============= ============= =============
C SHARES
Net assets $ 2,104,064 $ 142,054 $ 4,271,192
Shares outstanding 126,880 13,525 241,461
------------- ------------- -------------
Net asset value and offering price per share $ 16.58 $ 10.50 $ 17.69
============= ============= =============
See Accompanying Notes to Financial Statements.
28
CREDIT SUISSE FUNDS
STATEMENTS OF OPERATIONS
For the Year Ended October 31, 2002
LARGE CAP STRATEGIC SMALL CAP
VALUE FUND VALUE FUND VALUE FUND
------------- ------------- -------------
INVESTMENT INCOME
Dividends $ 3,506,534 $ 3,945,521 $ 3,768,757
Interest 101,632 101,191 63,743
Foreign taxes withheld -- (13,049) --
------------- ------------- -------------
Total investment income 3,608,166 4,033,663 3,832,500
------------- ------------- -------------
EXPENSES
Investment advisory fees 1,126,184 1,862,407 2,046,845
Administrative services fees 316,764 426,285 453,880
Shareholder servicing/Distribution fees 694,479 175,509 852,258
Transfer agent fees 228,797 531,124 343,311
Printing fees 88,911 98,514 114,730
Registration fees 79,854 93,906 75,412
Legal fees 55,498 42,341 74,029
Audit fees 26,564 27,475 20,175
Custodian fees 17,760 22,540 26,847
Insurance expense 14,032 9,796 20,371
Interest expense 5,669 5,989 11,226
Directors'/Trustees' fees 5,558 15,241 5,679
Miscellaneous expense 8,343 11,685 4,618
------------- ------------- -------------
Total expenses 2,668,413 3,322,812 4,049,381
Less: fees waived (509,588) -- (335,009)
------------- ------------- -------------
Net expenses 2,158,825 3,322,812 3,714,372
------------- ------------- -------------
Net investment income 1,449,341 710,851 118,128
------------- ------------- -------------
NET REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENTS
Net realized gain (loss) from investments 3,173,446 (1,192,972) 19,290,175
Net change in unrealized appreciation (depreciation)
from investments (13,538,321) (30,902,727) (14,804,671)
------------- ------------- -------------
Net realized and unrealized gain (loss)
from investments (10,364,875) (32,095,699) 4,485,504
------------- ------------- -------------
Net increase (decrease) in net assets resulting
from operations $ (8,915,534) $ (31,384,848) $ 4,603,632
============= ============= =============
See Accompanying Notes to Financial Statements.
29
CREDIT SUISSE FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
LARGE CAP VALUE FUND
------------------------------
FOR THE YEAR ENDED OCTOBER 31,
------------------------------
2002 2001
------------- -------------
FROM OPERATIONS
Net investment income $ 1,449,341 $ 2,089,788
Net realized gain (loss) from investments 3,173,446 15,244,162
Net change in unrealized appreciation (depreciation) from investments (13,538,321) (42,695,915)
------------- -------------
Net increase (decrease) in net assets resulting from operations (8,915,534) (25,361,965)
------------- -------------
FROM DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income
Common Class shares (28,797) (18,349)
Advisor Class shares -- --
Class A shares (1,322,171) (1,351,242)
Class B shares (111,266) (82,889)
Class C shares (7,918) (3,707)
Class D shares (82,437) (528,735)
DISTRIBUTIONS FROM NET REALIZED GAINS
Common Class shares (222,334) (8,726)
Advisor Class shares -- --
Class A shares (11,038,633) (14,073,743)
Class B shares (2,788,798) (3,586,179)
Class C shares (165,188) (48,654)
Class D shares (3,299,124) (3,943,625)
RETURN OF CAPITAL
Common Class shares -- --
Class A shares -- --
------------- -------------
Net decrease in net assets resulting from dividends and distributions (19,066,666) (23,645,849)
------------- -------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares 22,065,483 27,258,454
Exchange value of shares due to merger 14,973,364 --
Reinvestment of dividends and distributions 16,059,536 20,868,471
Net asset value of shares redeemed (90,669,775) (36,719,870)
------------- -------------
Net increase (decrease) in net assets from capital share transactions (37,571,392) 11,407,055
------------- -------------
Net increase (decrease) in net assets (65,553,592) (37,600,759)
NET ASSETS
Beginning of year 213,763,911 251,364,670
------------- -------------
End of year $ 148,210,319 $ 213,763,911
============= =============
UNDISTRIBUTED NET INVESTMENT INCOME $ 159,478 $ 262,734
============= =============
See Accompanying Notes to Financial Statements.
30
STRATEGIC VALUE FUND
------------------------------
FOR THE YEAR ENDED OCTOBER 31,
------------------------------
2002 2001
------------- -------------
FROM OPERATIONS
Net investment income $ 710,851 $ 1,901,932
Net realized gain (loss) from investments (1,192,972) 7,371,839
Net change in unrealized appreciation (depreciation) from investments (30,902,727) (24,159,539)
------------- -------------
Net increase (decrease) in net assets resulting from operations (31,384,848) (14,885,768)
------------- -------------
FROM DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income
Common Class shares (744,117) (1,809,160)
Advisor Class shares -- (94,568)
Class A shares (236) --
Class B shares -- --
Class C shares -- --
Class D shares -- --
DISTRIBUTIONS FROM NET REALIZED GAINS
Common Class shares (6,095,193) (34,194,577)
Advisor Class shares (1,030,567) (5,702,373)
Class A shares (27) --
Class B shares (26) --
Class C shares (26) --
Class D shares -- --
RETURN OF CAPITAL
Common Class shares (68,226) --
Class A shares (20) --
------------- -------------
Net decrease in net assets resulting from dividends and distributions (7,938,438) (41,800,678)
------------- -------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares 32,802,513 62,788,635
Exchange value of shares due to merger -- --
Reinvestment of dividends and distributions 7,817,621 41,146,267
Net asset value of shares redeemed (55,949,687) (88,739,277)
------------- -------------
Net increase (decrease) in net assets from capital share transactions (15,329,553) 15,195,625
------------- -------------
Net increase (decrease) in net assets (54,652,839) (41,490,821)
NET ASSETS
Beginning of year 255,908,937 297,399,758
------------- -------------
End of year $ 201,256,098 $ 255,908,937
============= =============
UNDISTRIBUTED NET INVESTMENT INCOME $ -- $ 39,915
============= =============
SMALL CAP VALUE FUND
------------------------------
FOR THE YEAR ENDED OCTOBER 31,
------------------------------
2002 2001
------------- -------------
FROM OPERATIONS
Net investment income $ 118,128 $ 434,376
Net realized gain (loss) from investments 19,290,175 32,187,267
Net change in unrealized appreciation (depreciation) from investments (14,804,671) (15,843,676)
------------- -------------
Net increase (decrease) in net assets resulting from operations 4,603,632 16,777,967
------------- -------------
FROM DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income
Common Class shares (76,133) (551)
Advisor Class shares -- --
Class A shares (268,011) (439,646)
Class B shares -- --
Class C shares -- (735)
Class D shares -- --
DISTRIBUTIONS FROM NET REALIZED GAINS
Common Class shares (4,111,025) (16,437)
Advisor Class shares -- --
Class A shares (26,202,108) (26,873,775)
Class B shares (2,444,105) (2,525,961)
Class C shares (221,991) (39,456)
Class D shares -- --
RETURN OF CAPITAL
Common Class shares -- --
Class A shares -- --
------------- -------------
Net decrease in net assets resulting from dividends and distributions (33,323,373) (29,896,561)
------------- -------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares 90,362,161 35,083,467
Exchange value of shares due to merger -- 33,444,688
Reinvestment of dividends and distributions 31,664,945 27,594,410
Net asset value of shares redeemed (121,800,767) (39,906,819)
------------- -------------
Net increase (decrease) in net assets from capital share transactions 226,339 56,215,746
------------- -------------
Net increase (decrease) in net assets (28,493,402) 43,097,152
NET ASSETS
Beginning of year 249,178,806 206,081,654
------------- -------------
End of year $ 220,685,404 $ 249,178,806
============= =============
UNDISTRIBUTED NET INVESTMENT INCOME $ 128,931 $ 369,227
============= =============
See Accompanying Notes to Financial Statements.
31
CREDIT SUISSE LARGE CAP VALUE FUND
FINANCIAL HIGHLIGHTS
(For a Common Class Share of the Fund Outstanding Throughout Each Period)
FOR THE YEAR ENDED OCTOBER 31,
-------------------------------------
2002 2001 2000(1)
--------- --------- ---------
PER SHARE DATA
Net asset value, beginning of period $ 19.95 $ 24.63 $ 22.44
--------- --------- ---------
INVESTMENT OPERATIONS
Net investment income(2) 0.17 0.19 0.02
Net gain (loss) on investments
(both realized and unrealized) (1.45) (2.52) 2.21
--------- --------- ---------
Total from investment operations (1.28) (2.33) 2.23
--------- --------- ---------
LESS DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (0.19) (0.22) (0.04)
Distributions from net realized gains (1.66) (2.13) --
--------- --------- ---------
Total dividends and distributions (1.85) (2.35) (0.04)
--------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 16.82 $ 19.95 $ 24.63
========= ========= =========
Total return(3) (7.63)% (10.51)% 9.96%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $ 3,061 $ 3,421 $ 96
Ratio of expenses to average net assets 1.03% 1.03% 0.43%(4)
Ratio of net investment income
to average net assets 0.92% 0.86% 0.07%(4)
Decrease reflected in above operating expense
ratios due to waivers/reimbursements 0.29% 0.18% --
Portfolio turnover rate 28% 38% 55%
(1) For the period August 1, 2000 (inception date) through October 31, 2000.
(2) Per share information is calculated using the average share outstanding
method.
(3) Total returns are historical and assume changes in share price and
reinvestments of all dividends and distributions. Had certain expenses not
been reduced during the periods shown, total returns would have been lower.
Total returns for periods less than one year are not annualized.
(4) Annualized.
See Accompanying Notes to Financial Statements.
32
CREDIT SUISSE LARGE CAP VALUE FUND
FINANCIAL HIGHLIGHTS
(For a Class A Share of the Fund Outstanding Throughout Each Period)
FOR THE YEAR ENDED OCTOBER 31,
---------------------------------------------------------------------------
2002 2001 2000 1999 1998
----------- ----------- ----------- ----------- -----------
PER SHARE DATA
Net asset value, beginning of period $ 19.96 $ 24.62 $ 23.49 $ 22.60 $ 20.09
----------- ----------- ----------- ----------- -----------
INVESTMENT OPERATIONS
Net investment income(1) 0.17 0.21 0.16 0.12 0.20
Net gain (loss) on investments
(both realized and unrealized) (1.45) (2.55) 1.78 2.87 3.51
----------- ----------- ----------- ----------- -----------
Total from investment operations (1.28) (2.34) 1.94 2.99 3.71
----------- ----------- ----------- ----------- -----------
LESS DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (0.19) (0.19) (0.12) (0.09) (0.17)
Distributions from net realized gains (1.66) (2.13) (0.69) (2.01) (1.03)
----------- ----------- ----------- ----------- -----------
Total dividends and distributions (1.85) (2.32) (0.81) (2.10) (1.20)
----------- ----------- ----------- ----------- -----------
NET ASSET VALUE, END OF PERIOD $ 16.83 $ 19.96 $ 24.62 $ 23.49 $ 22.60
=========== =========== =========== =========== ===========
Total return(2) (7.63)% (10.48)% 8.44% 14.37% 19.14%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $ 114,733 $ 133,665 $ 162,871 $ 174,213 $ 163,936
Ratio of expenses to average net assets 1.03% 1.04% 1.08% 1.11% 1.13%
Ratio of net investment income
to average net assets 0.90% 0.94% 0.71% 0.52% 0.92%
Decrease reflected in above operating expense
ratios due to waivers/reimbursements 0.28% 0.10% -- -- --
Portfolio turnover rate 28% 38% 55% 25% 33%
(1) Per share information is calculated using the average share outstanding
method.
(2) Total returns are historical and assume changes in share price,
reinvestments of all dividends and distributions, and no sales charge. Had
certain expenses not been reduced during the periods shown, total returns
would have been lower.
See Accompanying Notes to Financial Statements.
33
CREDIT SUISSE LARGE CAP VALUE FUND
FINANCIAL HIGHLIGHTS
(For a Class B Share of the Fund Outstanding Throughout Each Period)
FOR THE YEAR ENDED OCTOBER 31,
----------------------------------------------------------------------
2002 2001 2000 1999 1998
---------- ---------- ---------- ---------- ----------
PER SHARE DATA
Net asset value, beginning of period $ 19.78 $ 24.44 $ 23.37 $ 22.55 $ 20.06
---------- ---------- ---------- ---------- ----------
INVESTMENT OPERATIONS
Net investment income (loss)(1) 0.03 0.04 -- (0.04) 0.04
Net gain (loss) on investments
(both realized and unrealized) (1.43) (2.52) 1.76 2.88 3.50
---------- ---------- ---------- ---------- ----------
Total from investment operations (1.40) (2.48) 1.76 2.84 3.54
---------- ---------- ---------- ---------- ----------
LESS DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (0.06) (0.05) -- (0.01) (0.02)
Distributions from net realized gains (1.66) (2.13) (0.69) (2.01) (1.03)
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (1.72) (2.18) (0.69) (2.02) (1.05)
---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $ 16.66 $ 19.78 $ 24.44 $ 23.37 $ 22.55
========== ========== ========== ========== ==========
Total return(2) (8.29)% (11.00)% 7.66% 13.66% 18.29%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $ 28,312 $ 33,087 $ 41,194 $ 41,144 $ 33,325
Ratio of expenses to average net assets 1.78% 1.79% 1.80% 1.81% 1.83%
Ratio of net investment income (loss)
to average net assets 0.15% 0.19% (0.01)% (0.18)% 0.22%
Decrease reflected in above operating expense
ratios due to waivers/reimbursements 0.27% 0.10% -- -- --
Portfolio turnover rate 28% 38% 55% 25% 33%
(1) Per share information is calculated using the average share outstanding
method.
(2) Total returns are historical and assume changes in share price,
reinvestments of all dividends and distributions, and no sales charge. Had
certain expenses not been reduced during the periods shown, total returns
would have been lower.
See Accompanying Notes to Financial Statements.
34
CREDIT SUISSE LARGE CAP VALUE FUND
FINANCIAL HIGHLIGHTS
(For a Class C Share of the Fund Outstanding Throughout Each Period)
FOR THE YEAR ENDED OCTOBER 31,
-------------------------------------
2002 2001 2000(1)
--------- --------- ---------
PER SHARE DATA
Net asset value, beginning of period $ 19.71 $ 24.39 $ 20.87
--------- --------- ---------
INVESTMENT OPERATIONS
Net investment income (loss)(2) 0.03 0.03 (0.01)
Net gain (loss) on investments
(both realized and unrealized) (1.43) (2.51) 3.56
--------- --------- ---------
Total from investment operations (1.40) (2.48) 3.55
--------- --------- ---------
LESS DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (0.07) (0.07) (0.03)
Distributions from net realized gains (1.66) (2.13) --
--------- --------- ---------
Total dividends and distributions (1.73) (2.20) (0.03)
--------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 16.58 $ 19.71 $ 24.39
========= ========= =========
Total return(3) (8.35)% (11.07)% 17.02%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $ 2,104 $ 1,916 $ 496
Ratio of expenses to average net assets 1.78% 1.79% 1.28%(4)
Ratio of net investment income (loss)
to average net assets 0.16% 0.13% (0.03)%(4)
Decrease reflected in above operating expense
ratios due to waivers/reimbursements 0.28% 0.10% --
Portfolio turnover rate 28% 38% 55%
(1) For the period February 28, 2000 (inception date) through October 31, 2000.
(2) Per share information is calculated using the average share outstanding
method.
(3) Total returns are historical and assume changes in share price,
reinvestments of all dividends and distributions, and no sales charge. Had
certain expenses not been reduced during the periods shown, total returns
would have been lower. Total returns for periods less than one year are not
annualized.
(4) Annualized.
See Accompanying Notes to Financial Statements.
35
CREDIT SUISSE STRATEGIC VALUE FUND
FINANCIAL HIGHLIGHTS
(For a Common Class Share of the Fund Outstanding Throughout Each Period)
FOR THE YEAR ENDED OCTOBER 31,
------------------------------------------------------------------------------
2002 2001 2000 1999 1998
---------- ---------- ---------- ---------- ----------
PER SHARE DATA
Net asset value, beginning of period $ 12.55 $ 15.49 $ 18.93 $ 16.97 $ 18.56
---------- ---------- ---------- ---------- ----------
INVESTMENT OPERATIONS
Net investment income 0.04(1) 0.10 0.11 0.13 0.14
Net gain (loss) on investments
(both realized and unrealized) (1.63) (0.86) 0.70 2.49 1.36
---------- ---------- ---------- ---------- ----------
Total from investment operations (1.59) (0.76) 0.81 2.62 1.50
---------- ---------- ---------- ---------- ----------
LESS DIVIDENDS, DISTRIBUTIONS AND RETURN OF
CAPITAL
Dividends from net investment income (0.05) (0.10) (0.11) (0.13) (0.14)
Distributions from net realized gains (0.35) (2.08) (4.14) (0.53) (2.95)
Return of capital --(2) -- -- -- --
---------- ---------- ---------- ---------- ----------
Total dividends, distributions and
return of capital (0.40) (2.18) (4.25) (0.66) (3.09)
---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $ 10.56 $ 12.55 $ 15.49 $ 18.93 $ 16.97
========== ========== ========== ========== ==========
Total return(3) (13.29)% (5.14)% 5.99% 15.77% 9.11%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $ 175,121 $ 219,223 $ 254,842 $ 602,282 $ 703,808
Ratio of expenses to average net assets 1.27% 1.13%(4) 1.16%(4) 1.14% 1.19%
Ratio of net investment income
to average net assets 0.36% 0.72% 0.67% 0.65% 0.83%
Portfolio turnover rate 30% 38% 49% 78% 78%
(1) Per share information is calculated using the average share outstanding
method.
(2) Total is less than $0.01 per share.
(3) Total returns are historical and assume changes in share price and
reinvestments of all dividends and distributions.
(4) Interest earned on uninvested cash balances is used to offset portions of
the transfer agent expense. These arrangements resulted in a reduction to
the Common Class shares' net expense ratio by .00%, and .02%, for the years
ended October 31, 2001 and 2000, respectively. These arrangements had no
effect on the fund's expense ratio for the other periods presented. The
Common Class shares' operating expense ratios after reflecting these
arrangements were 1.13% and 1.14% for the years ended October 31, 2001 and
2000, respectively.
See Accompanying Notes to Financial Statements.
36
CREDIT SUISSE STRATEGIC VALUE FUND
FINANCIAL HIGHLIGHTS
(For an Advisor Class Share of the Fund Outstanding Throughout Each Period)
FOR THE YEAR ENDED OCTOBER 31,
---------------------------------------------------------------------------------
2002 2001 2000 1999 1998
---------- ---------- ---------- ---------- ----------
PER SHARE DATA
Net asset value, beginning of period $ 12.55 $ 15.49 $ 18.92 $ 16.96 $ 18.55
---------- ---------- ---------- ---------- ----------
INVESTMENT OPERATIONS
Net investment income (loss) (0.02)(1) 0.03 0.01 0.03 0.10
Net gain (loss) on investments
(both realized and unrealized) (1.63) (0.86) 0.73 2.49 1.35
---------- ---------- ---------- ---------- ----------
Total from investment operations (1.65) (0.83) 0.74 2.52 1.45
---------- ---------- ---------- ---------- ----------
LESS DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income -- (0.03) (0.03) (0.03) (0.09)
Distributions from net realized gains (0.35) (2.08) (4.14) (0.53) (2.95)
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (0.35) (2.11) (4.17) (0.56) (3.04)
---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $ 10.55 $ 12.55 $ 15.49 $ 18.92 $ 16.96
========== ========== ========== ========== ==========
Total return(2) (13.71)% (5.63)% 5.47% 15.20% 8.70%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $ 25,501 $ 36,686 $ 42,558 $ 71,572 $ 96,397
Ratio of expenses to average net assets 1.76% 1.63%(3) 1.66%(3) 1.64%(3) 1.55%
Ratio of net investment income (loss)
to average net assets (0.14)% 0.22% 0.17% 0.15% 0.47%
Portfolio turnover rate 30% 38% 49% 78% 78%
(1) Per share information is calculated using the average share outstanding
method.
(2) Total returns are historical and assume changes in share price and
reinvestments of all dividends and distributions.
(3) Interest earned on uninvested cash balances is used to offset portions of
the transfer agent expense. These arrangements resulted in a reduction to
the Advisor Class shares' net expense ratio by .00%, .02%, and .01%, for
the years ended October 31, 2001, 2000, and 1999, respectively. These
arrangements had no effect on the fund's expense ratio for the other
periods presented. The Advisor Class shares' operating expense ratios after
reflecting these arrangements were 1.63%, 1.64%, and 1.63% for the years
ended October 31, 2001, 2000, and 1999, respectively.
See Accompanying Notes to Financial Statements.
37
CREDIT SUISSE STRATEGIC VALUE FUND
FINANCIAL HIGHLIGHTS
(For a Class A Share of the Fund Outstanding Throughout the Period)
FOR THE PERIOD
ENDED,
OCTOBER 31, 2002(1)
-------------------
PER SHARE DATA
Net asset value, beginning of period $ 13.36
--------
INVESTMENT OPERATIONS
Net investment loss (0.01)(2)
Net loss on investments
(both realized and unrealized) (2.42)
--------
Total from investment operations (2.43)
--------
LESS DIVIDENDS, DISTRIBUTIONS AND RETURN OF CAPITAL
Dividends from net investment income (0.03)
Distributions from net realized gains (0.35)
Return of Capital --(3)
--------
Total dividends, distributions and return of capital (0.38)
--------
NET ASSET VALUE, END OF PERIOD $ 10.55
========
Total return (18.76)%(4)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $ 404
Ratio of expenses to average net assets 1.63%(5)
Ratio of net investment loss to average net assets (0.10)%(5)
Portfolio turnover rate 30%
(1) For the period November 30, 2001 (inception date) through October 31, 2002.
(2) Per share information is calculated using the average share outstanding
method.
(3) Total is less than $0.01 per share.
(4) Total returns are historical and assume changes in share price,
reinvestments of all dividends and distributions, and no sales charge.
Total return for periods less than one year are not annualized.
(5) Annualized.
See Accompanying Notes to Financial Statements.
38
CREDIT SUISSE STRATEGIC VALUE FUND
FINANCIAL HIGHLIGHTS
(For a Class B Share of the Fund Outstanding Throughout the Period)
FOR THE PERIOD
ENDED,
OCTOBER 31, 2002(1)
-------------------
PER SHARE DATA
Net asset value, beginning of period $ 13.36
--------
INVESTMENT OPERATIONS
Net investment loss (0.08)(2)
Net loss on investments
(both realized and unrealized) (2.42)
--------
Total from investment operations (2.50)
--------
LESS DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income --(3)
Distributions from net realized gains (0.35)
--------
Total dividends and distributions (0.35)
--------
NET ASSET VALUE, END OF PERIOD $ 10.51
========
Total return (19.23)%(4)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $ 88
Ratio of expenses to average net assets 2.33%(5)
Ratio of net investment loss to average net assets (0.71)%(5)
Portfolio turnover rate 30%
(1) For the period November 30, 2001 (inception date) through October 31, 2002.
(2) Per share information is calculated using the average share outstanding
method.
(3) Total is less than $.01 per share.
(4) Total return is historical and assumes changes in share price,
reinvestments of all dividends and distributions, and no sales charge.
Total returns for periods less than one year are not annualized.
(5) Annualized.
See Accompanying Notes to Financial Statements.
39
CREDIT SUISSE STRATEGIC VALUE FUND
FINANCIAL HIGHLIGHTS
(For a Class C Share of the Fund Outstanding Throughout the Period)
FOR THE PERIOD
ENDED,
OCTOBER 31, 2002(1)
-------------------
PER SHARE DATA
Net asset value, beginning of period $ 13.36
--------
INVESTMENT OPERATIONS
Net investment loss (0.08)(2)
Net loss on investments
(both realized and unrealized) (2.43)
--------
Total from investment operations (2.51)
--------
LESS DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income --(3)
Distributions from net realized gains (0.35)
--------
Total dividends and distributions (0.35)
--------
NET ASSET VALUE, END OF PERIOD $ 10.50
========
Total return (19.31)%(4)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $ 142
Ratio of expenses to average net assets 2.30%(5)
Ratio of net investment loss to average net assets (0.71)%(5)
Portfolio turnover rate 30%
(1) For the period November 30, 2001 (inception date) through October 31, 2002.
(2) Per share information is calculated using the average share outstanding
method.
(3) Total is less than $.01 per share.
(4) Total returns are historical and assume changes in share price,
reinvestments of all dividends and distributions, and no sales charge.
Total return for periods less than one year are not annualized.
(5) Annualized.
See Accompanying Notes to Financial Statements.
40
CREDIT SUISSE SMALL CAP VALUE FUND
FINANCIAL HIGHLIGHTS
(For a Common Class Share of the Fund Outstanding Throughout Each Period)
FOR THE YEAR ENDED OCTOBER 31,
----------------------------------------
2002 2001 2000(1)
---------- ---------- ----------
PER SHARE DATA
Net asset value, beginning of period $ 21.07 $ 22.62 $ 21.35
---------- ---------- ----------
INVESTMENT OPERATIONS
Net investment income(2) 0.02 0.04 0.02
Net gain on investments
(both realized and unrealized) 0.31 1.72 1.25
---------- ---------- ----------
Total from investment operations 0.33 1.76 1.27
---------- ---------- ----------
LESS DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (0.05) (0.09) --
Distributions from net realized gains (2.79) (3.22) --
---------- ---------- ----------
Total dividends and distributions (2.84) (3.31) --
---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $ 18.56 $ 21.07 $ 22.62
========== ========== ==========
Total return(3) 0.61% 9.79% 5.95%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $ 45,075 $ 30,667 $ 105
Ratio of expenses to average net assets 1.32% 1.33% 0.34%(4)
Ratio of net investment income to average net assets 0.12% 0.18% 0.09%(4)
Decrease reflected in above operating expense
ratios due to waivers/reimbursements 0.14% 0.02% --
Portfolio turnover rate 18% 54% 42%
(1) For the period August 1, 2000 (inception date) through October 31, 2000.
(2) Per share information is calculated using the average share outstanding
method.
(3) Total returns are historical and assume changes in share price and
reinvestments of all dividends and distributions. Had certain expenses not
been reduced during the periods shown, total returns would have been lower.
Total returns for periods less than one year are not annualized.
(4) Annualized.
See Accompanying Notes to Financial Statements.
41
CREDIT SUISSE STRATEGIC VALUE FUND
FINANCIAL HIGHLIGHTS
(For a Class A Share of the Fund Outstanding Throughout Each Period)
FOR THE YEAR ENDED OCTOBER 31,
---------------------------------------------------------------------------
2002 2001 2000 1999 1998
----------- ----------- ----------- ----------- -----------
PER SHARE DATA
Net asset value, beginning of period $ 21.09 $ 22.54 $ 20.52 $ 19.54 $ 23.34
----------- ----------- ----------- ----------- -----------
INVESTMENT OPERATIONS
Net investment income(1) 0.02 0.05 0.06 0.06 0.07
Net gain (loss) on investments
(both realized and unrealized) 0.33 1.76 4.05 1.01 (2.55)
----------- ----------- ----------- ----------- -----------
Total from investment operations 0.35 1.81 4.11 1.07 (2.48)
----------- ----------- ----------- ----------- -----------
LESS DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (0.03) (0.04) (0.04) (0.07) (0.06)
Distributions from net realized gains (2.79) (3.22) (2.05) (0.02) (1.26)
----------- ----------- ----------- ----------- -----------
Total dividends and distributions (2.82) (3.26) (2.09) (0.09) (1.32)
----------- ----------- ----------- ----------- -----------
NET ASSET VALUE, END OF PERIOD $ 18.62 $ 21.09 $ 22.54 $ 20.52 $ 19.54
=========== =========== =========== =========== ===========
Total return(2) 0.71% 9.70% 21.69% 5.47% (11.20)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $ 151,340 $ 199,213 $ 188,501 $ 188,192 $ 237,873
Ratio of expenses to average net assets 1.32% 1.33% 1.39% 1.37% 1.29%
Ratio of net investment income
to average net assets 0.11% 0.25% 0.28% 0.33% 0.30%
Decrease reflected in above operating expense
ratios due to waivers/ reimbursements 0.12% 0.02% -- -- --
Portfolio turnover rate 18% 54% 42% 30% 42%
(1) Per share information is calculated using the average share outstanding
method.
(2) Total returns are historical and assume changes in share price,
reinvestments of all dividends and distributions, and no sales charge. Had
certain expenses not been reduced during the periods shown, total returns
would have been lower.
See Accompanying Notes to Financial Statements.
42
CREDIT SUISSE STRATEGIC VALUE FUND
FINANCIAL HIGHLIGHTS
(For a Class B Share of the Fund Outstanding Throughout Each Period)
FOR THE YEAR ENDED OCTOBER 31,
----------------------------------------------------------------------
2002 2001 2000 1999 1998
---------- ---------- ---------- ---------- ----------
PER SHARE DATA
Net asset value, beginning of period $ 20.33 $ 21.95 $ 20.13 $ 19.23 $ 23.12
---------- ---------- ---------- ---------- ----------
INVESTMENT OPERATIONS
Net investment loss(1) (0.12) (0.10) (0.09) (0.14) (0.09)
Net gain (loss) on investments
(both realized and unrealized) 0.32 1.70 3.96 1.06 (2.55)
---------- ---------- ---------- ---------- ----------
Total from investment operations 0.20 1.60 3.87 0.92 (2.64)
---------- ---------- ---------- ---------- ----------
LESS DISTRIBUTIONS
Distributions from net realized gains (2.79) (3.22) (2.05) (0.02) (1.25)
---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $ 17.74 $ 20.33 $ 21.95 $ 20.13 $ 19.23
========== ========== ========== ========== ==========
Total return(2) (0.08)% 8.88% 20.80% 4.75% (11.98)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $ 19,999 $ 17,818 $ 17,255 $ 19,257 $ 22,284
Ratio of expenses to average net assets 2.07% 2.08% 2.10% 2.07% 1.99%
Ratio of net investment loss
to average net assets (0.63)% (0.50)% (0.43)% (0.71)% (0.40)%
Decrease reflected in above operating expense
ratios due to waivers/reimbursements 0.13% 0.02% -- -- --
Portfolio turnover rate 18% 54% 42% 30% 42%
(1) Per share information is calculated using the average share outstanding
method.
(2) Total returns are historical and assume changes in share price,
reinvestments of all dividends and distributions, and no sales charge. Had
certain expenses not been reduced during the periods shown, total returns
would have been lower.
See Accompanying Notes to Financial Statements.
43
CREDIT SUISSE STRATEGIC VALUE FUND
FINANCIAL HIGHLIGHTS
(For a Class C Share of the Fund Outstanding Throughout Each Period)
FOR THE YEAR ENDED OCTOBER 31,
-------------------------------------
2002 2001 2000(1)
--------- --------- ---------
PER SHARE DATA
Net asset value, beginning of period $ 20.28 $ 21.94 $ 17.96
--------- --------- ---------
INVESTMENT OPERATIONS
Net investment loss(2) (0.12) (0.11) (0.07)
Net gain on investments
(both realized and unrealized) 0.32 1.67 4.05
--------- --------- ---------
Total from investment operations 0.20 1.56 3.98
--------- --------- ---------
LESS DISTRIBUTIONS
Distributions from net realized gains (2.79) (3.22) --
--------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 17.69 $ 20.28 $ 21.94
========= ========= =========
Total return(3) (0.07)% 8.93% 22.16%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $ 4,271 $ 1,481 $ 220
Ratio of expenses to average net assets 2.07% 2.08% 1.42%(4)
Ratio of net investment loss
to average net assets (0.63)% (0.52)% (0.33)%(4)
Decrease reflected in above operating expense
ratios due to waivers/reimbursements 0.14% 0.02% --
Portfolio turnover rate 18% 54% 42%
(1) For the period February 28, 2000 (inception date) through October 31, 2000.
(2) Per share information is calculated using the average share outstanding
method.
(3) Total returns are historical and assume changes in share price,
reinvestments of all dividends and distributions, and no sales charge. Had
certain expenses not been reduced during the periods shown, total returns
would have been lower. Total returns for periods less than one year are not
annualized.
(4) Annualized.
See Accompanying Notes to Financial Statements.
44
CREDIT SUISSE FUNDS
NOTES TO FINANCIAL STATEMENTS
October 31, 2002
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Credit Suisse Funds covered in this report are comprised of Credit Suisse
Large Cap Value Fund ("Large Cap Value"), Credit Suisse Strategic Value Fund
("Strategic Value") and Credit Suisse Small Cap Value Fund ("Small Cap Value"),
(each a "Fund" and collectively, the "Funds"). Each Fund is registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as diversified,
open-end management investment companies. Strategic Value was incorporated under
the laws of the State of Maryland on February 29, 1988. Large Cap Value and
Small Cap Value are series of the Credit Suisse Capital Funds, which was
organized under the laws of the Commonwealth of Massachusetts as a business
trust on November 26, 1985.
Investment objectives for each Fund are as follows: Large Cap Value seeks
long-term capital appreciation and continuity of income; Strategic Value seeks
total returns; Small Cap Value seeks a high level of growth of capital.
Strategic Value is authorized to offer five classes of shares: Common Class,
Advisor Class, Class A, Class B, and Class C. Large Cap Value and Small Cap
Value each offer four classes of shares: Common Class, Class A, Class B, and
Class C. Each class of shares in each Fund represents an equal pro rata interest
in each Fund, except that they bear different expenses which reflect the
difference in the range of services provided to them. Common Class shares of
each Fund, except Strategic Value, bear expenses paid pursuant to a distribution
plan at an annual rate of .25% of the average daily net asset value of the
Fund's Common Class shares. Common Class shares of Strategic Value are not
subject to distribution fees. Advisor Class shares bear expenses paid pursuant
to a shareholder servicing and distribution plan adopted by Strategic Value at
an annual rate not to exceed .75% of the average daily net asset value of
Strategic Value's Advisor Class shares. Advisor Class shares currently bear
expenses of .50% of average daily net assets. Class A shares are sold subject to
a front-end sales charge of up to 5.75% and bear expenses paid pursuant to a
distribution plan at an annual rate of .25% of the average daily net asset value
of each applicable Fund's Class A shares. Class B shares are sold subject to a
contingent deferred sales charge which declines from 4% to zero depending on the
period of time the shares are held and bear expenses paid pursuant to a
distribution plan at an annual rate of 1.00% of the average daily net asset
value of each applicable Fund's Class B shares. Class C shares are sold subject
to a contingent deferred sales charge of 1% if redeemed within the first year of
purchase and bear expenses paid pursuant to a distribution plan at an annual
rate of 1.00% of the average daily net asset value of each applicable Fund's
Class C shares.
45
During the current fiscal year, the classes offered by the Funds changed as
follows: Effective November 30, 2001, Strategic Value began offering Class A,
Class B and Class C shares. Effective December 12, 2001, Small Cap Value closed
the Common Class to new investors. Effective December 12, 2001, Large Cap Value
closed the Common Class to new investments, except for reinvestments of
dividends. Large Cap Value's Common Class shareholders as of the close of
business on December 12, 2001 may continue to hold Common Class shares but will
be unable to add to their accounts. Although no further shares can be purchased,
Large Cap Value's shareholders can redeem their Common Class shares through any
available method. Effective March 18, 2002, Large Cap Value ceased operations of
its Class D shares.
Effective as of the close of business on June 8, 2001, Small Cap Value
acquired all of the net assets of the Credit Suisse Warburg Pincus Small Company
Value II Fund ("Small Company Value II") in a tax-free exchange of shares. The
shares exchanged were 2,616,209 shares (valued at $33,389,925) of the Common
Class shares of Small Company Value II for 1,463,517 Common Class shares of
Small Cap Value and 4,333 shares (valued at $54,763) of Advisor Class shares of
Small Company Value II for 2,401 Common Class shares of Small Cap Value. The
Small Company Value II net assets of $33,444,688 at that date, which included
$6,405,554 of unrealized appreciation, were combined with those of Small Cap
Value. The aggregate net assets of Small Company Value II and Small Cap Value
immediately before the acquisition were $33,444,688 and $239,666,573,
respectively and the combined net assets of Small Cap Value after the
acquisition were $273,111,261.
Effective as of the close of business on April 12, 2002, Large Cap Value
acquired all of the net assets of the Credit Suisse Balanced Fund ("Balanced")
in a tax-free exchange of shares. The shares exchanged were 741,460 shares
(valued at $14,901,765) of the Class A of Large Cap Value for 1,561,419 shares
of the Common Class of Balanced, and 3,563 shares (valued at $71,599) of the
Class A of Large Cap Value for 7,511 shares of the Advisor Class of Balanced.
Balanced Fund's net assets of $14,973,364 at that date, which consisted of
$476,771 of unrealized depreciation, were combined with those of Large Cap
Value. The aggregate net assets of Balanced and Large Cap Value immediately
before the acquisition were $14,973,364 and $178,554,035, respectively, and the
combined net assets of Large Cap Value after the acquisition were $193,527,399.
46
A) SECURITY VALUATION -- The net asset value of each Fund is determined daily
as of the close of regular trading on the New York Stock Exchange, Inc. Each
Fund's equity investments are valued at market value, which is generally
determined using the last reported sales price. If no sales are reported,
investments are generally valued at the last reported bid price. Debt securities
are valued on the basis of broker quotations or valuations provided by a pricing
service which may use a matrix, formula or other objective method that takes
into consideration market indices, yield curves and other specific adjustments.
Securities and other assets for which market quotations are not readily
available are valued at fair value as determined in good faith by, or under the
direction of the Board of Directors/Trustees under procedures established by the
Board of Directors/Trustees in the absence of readily ascertainable market
values. Debt obligations that will mature in 60 days or less are valued on the
basis of amortized cost, which approximates market value, unless the Board
determines that using this method would not reflect an investment's fair value.
B) SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on a trade date basis. Interest income is recorded on the accrual
basis. Dividends are recorded on the ex-dividend date. Income, expenses
(excluding class-specific expenses) and realized/unrealized gains/losses are
allocated proportionately to each class of shares based upon the relative net
asset value of outstanding shares of that class. The cost of investments sold is
determined by use of the specific identification method for both financial
reporting and income tax purposes.
C) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS --Dividends from net
investment income and distributions of net realized capital gains, if any, are
declared and paid at least annually. However, to the extent that a net realized
capital gain can be reduced by a capital loss carryover, such gain will not be
distributed. Income and capital gain distributions are determined in accordance
with federal income tax regulations which may differ from accounting principles
generally accepted in the United States of America (GAAP).
D) FEDERAL INCOME TAXES -- No provision is made for federal taxes as it is
each Fund's intention to continue to qualify for and elect the tax treatment
applicable to regulated investment companies under the Internal Revenue Code of
1986, as amended, and make the requisite distributions to its shareholders which
will be sufficient to relieve it from federal income and excise taxes.
47
E) USE OF ESTIMATES -- The preparation of financial statements in conformity
with GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, disclosure of contingent assets and
liabilities, at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from these estimates.
F) SHORT-TERM INVESTMENTS -- The Funds, together with other funds advised by
Credit Suisse Asset Management, LLC ("CSAM"), an indirect, wholly-owned
subsidiary of Credit Suisse Group, pool available cash into a short-term time
deposit issued by State Street Bank and Trust Company, the Funds' custodian. The
short-term time deposit is a variable rate account classified as a short-term
investment.
G) SECURITIES LENDING -- Loans of securities are required at all times to be
secured by collateral at least equal to 102% of the market value of domestic
securities on loan including any accrued interest thereon and 105% of the market
value of foreign securities on loan including any accrued interest thereon. Cash
collateral received by the Funds in connection with securities lending activity
is invested in the AIM Institutional Funds - Liquid Asset Portfolio. However, in
the event of default or bankruptcy by the other party to the agreement,
realization and/or retention of the collateral may be subject to legal
proceedings. The Funds had no securities out on loan during the year ended
October 31, 2002.
Credit Suisse First Boston ("CSFB"), an affiliate of CSAM, has been engaged
by the Funds to act as the Fund's securities lending agent. CSFB has agreed to
charge the Funds fees for its securities lending activities equal to its costs
in providing services as securities lending agent. CSFB also has voluntarily
agreed to waive its fees for the securities lending agent services that it
provides. CSFB may discontinue its voluntary fee waivers at any time.
H) OTHER -- Strategic Value may invest up to 15% of its net assets in
non-publicly traded securities. Small Cap Value and Large Cap Value may each
invest up to 10% of its net assets in such securities. Non-publicly traded
securities may be less liquid than publicly traded securities. Although these
securities may be resold in privately negotiated transactions, the prices
realized from such sales could differ from the price originally paid by the
Funds or the current carrying values, and the difference could be material.
48
NOTE 2. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
CSAM serves as investment adviser for the Funds. For its investment advisory
services, CSAM is entitled to receive the following fees, computed daily and
payable monthly on each Fund's average daily net assets as follows:
FUND ANNUAL RATE
---- -----------
Large Cap Value 0.75% of average daily net assets less than $75 million
0.50% of average daily net assets greater than $75 million
Strategic Value 0.75% of average daily net assets
Small Cap Value 0.875% of first $100 million of average daily net assets
0.75% of next $100 million of average daily net assets
0.625% of average daily net assets greater than $200 million
For the year ended October 31, 2002, investment advisory fees earned and
voluntarily waived were as follows:
GROSS NET
ADVISORY ADVISORY
FUND FEE WAIVER FEE
---- ----------- --------- -----------
Large Cap Value $ 1,126,184 $ 509,588 $ 616,596
Strategic Value 1,862,407 -- 1,862,407
Small Cap Value 2,046,845 335,009 1,711,836
Credit Suisse Asset Management Securities, Inc. ("CSAMSI"), an affiliate of
CSAM, and State Street Bank and Trust Company ("SSB") serve as co-administrators
to the Funds. At its meeting held on February 12, 2002 the Board of
Directors/Trustees approved SSB to replace PFPC, Inc. ("PFPC"), as
co-administrator effective July 1, 2002 for Large Cap Value and Small Cap Value
and August 1, 2002 for Strategic Value.
For its co-administrative services, CSAMSI currently receives a fee
calculated at an annual rate of .10% of each Fund's average daily net assets.
For the year ended October 31, 2002, co-administrative services fees earned
by CSAMSI were as follows:
FUND CO-ADMINISTRATION FEE
---- ---------------------
Large Cap Value $ 187,737
Strategic Value 248,321
Small Cap Value 267,487
For its co-administrative services, PFPC was entitled to receive a fee for
each fund, exclusive of out-of-pocket expenses, based on the following fee
structure:
AVERAGE DAILY NET ASSETS ANNUAL RATE
------------------------ -----------
First $500 million .075% of average daily net assets
Next $1 billion .065% of average daily net assets
Over $1.5 billion .055% of average daily net assets
49
For the period November 1, 2001 through June 30, 2002 for Large Cap Value and
Small Cap Value, and for the period November 1, 2001 through July 31, 2002 for
Strategic Value, co-administrative services fees earned by PFPC (including
out-of-pocket expenses) were as follows:
FUND CO-ADMINISTRATION FEE
---- ---------------------
Large Cap Value $ 105,639
Strategic Value 149,432
Small Cap Value 126,431
For its co-administrative services SSB receives a fee, exclusive of
out-of-pocket expenses, based upon the following fee structure calculated in
total for all the Credit Suisse Funds co-administered by SSB and allocated based
upon relative average net assets of each fund.
AVERAGE DAILY NET ASSETS ANNUAL RATE
------------------------ -----------
First $5 billion .050% of average daily net assets
Next $5 billion .035% of average daily net assets
Over $10 billion .020% of average daily net assets
For the period July 1, 2002 through October 31, 2002 for Large Cap Value and
Small Cap Value, and for the period August 1, 2002 through October 31, 2002 for
Strategic Value, co-administrative service fees earned by SSB (including
out-of-pocket expenses) were as follows:
FUND CO-ADMINISTRATION FEE
---- ---------------------
Large Cap Value $ 23,388
Strategic Value 28,532
Small Cap Value 59,962
In addition to serving as each Fund's co-administrator, CSAMSI currently
serves as distributor of each Fund's shares. Pursuant to a distribution plan
adopted by each Fund pursuant to Rule 12b-1 under the 1940 Act, CSAMSI receives
a fee for its distribution services. This fee is calculated at an annual rate of
..25% of the average daily net assets of the Class A and Common Class shares of
Large Cap Value and Small Cap Value. For the Advisor Class shares of Strategic
Value, the shareholder servicing and distribution fee is calculated at an annual
rate of .50% of the average daily net assets. For the Class B and Class C
shares, the fee is calculated at annual rate of 1.00% of average daily
50
net assets. For the year ended October 31, 2002, shareholder servicing and
distribution fees paid to CSAMSI were as follows:
SHAREHOLDER SERVICING/
FUND DISTRIBUTION FEE
---- ----------------------
Large Cap Value
Common Class $ 7,388
Class A 332,952
Class B 333,191
Class C 20,948
---------
$ 694,479
=========
Strategic Value
Advisor Class $ 173,655
Class A 293
Class B 339
Class C 1,222
---------
$ 175,509
=========
Small Cap Value
Common Class $ 108,136
Class A 499,401
Class B 208,821
Class C 35,900
---------
$ 852,258
=========
Certain brokers, dealers and financial representatives provide transfer agent
related services to the Funds, and receive compensation for these services from
CSAM. CSAM is then reimbursed by the Funds. For the year ended October 31, 2002,
the Funds reimbursed CSAM the following amounts, which are included in the
Funds' transfer agent expense:
FUND AMOUNT
---- ---------
Large Cap Value $ 5,080
Strategic Value 244,797
Small Cap Value 71,709
For the year ended October 31, 2002, CSAMSI and its affiliates advised the
Funds that it retained the following amounts from commissions earned on the sale
of the Funds' shares:
FUND AMOUNT
---- ---------
Large Cap Value $ 50,674
Strategic Value 929
Small Cap Value 53,730
51
Merrill Corporation ("Merrill"), an affiliate of CSAM, has been engaged by
the Funds to provide certain financial printing and fulfillment services. For
the year ended October 31, 2002, Merrill was paid for its services by the Funds
as follows:
FUND AMOUNT
---- ---------
Large Cap Value $ 66,512
Strategic Value 27,896
Small Cap Value 97,107
NOTE 3. LINE OF CREDIT
Through June 18, 2002, the Funds, together with other funds/portfolios
advised by CSAM (collectively, the "Participating Funds"), participated in a
$200 million committed, unsecured line of credit facility ("Prior Credit
Facility") with Deutsche Bank, A.G. as administrative agent, State Street Bank
and Trust Company as operations agent, BNP Paribas as syndication agent and
certain other lenders, for temporary or emergency purposes primarily relating to
unanticipated Participating Funds' share redemptions. Under the terms of the
Prior Credit Facility, the Participating Funds paid an aggregate commitment fee
at a rate of .10% per annum on the average unused amount of the Prior Credit
Facility, which was allocated among the Participating Funds in such a manner as
was determined by the governing Boards of the Participating Funds. In addition,
the Participating Funds paid interest on borrowings at the Federal funds rate
plus .50%.
Effective June 19, 2002, the Participating Funds, together with additional
funds/portfolios advised by CSAM (collectively with the Participating Funds, the
"New Participating Funds"), established a new $150 million committed, unsecured,
line of credit facility (the "New Credit Facility") with Deutsche Bank, A.G. as
administrative agent and syndication agent and State Street Bank and Trust
Company as operations agent for the same purposes as the Prior Credit Facility.
Terms of the New Credit Facility remain the same as the Prior Credit Facility.
The commitment fee rate and interest rate is unchanged. At October 31, 2002,
there were no loans outstanding for any of the Funds either under the New Credit
Facility or the Prior Credit Facility.
52
During the year ended October 31, 2002, the following Fund had borrowings
under the Prior Credit Facility and/or the New Credit Facility as follows:
AVERAGE DAILY WEIGHTED AVERAGE MAXIMUM DAILY
FUND LOAN BALANCE INTEREST RATE % LOAN OUTSTANDING
---- ------------- ---------------- ----------------
Small Cap Value 2,231,182 2.303% 4,570,000
NOTE 4. PURCHASES AND SALES OF SECURITIES
For the year ended October 31, 2002, purchases and sales of investment
securities (excluding short-term investments) were as follows:
FUND PURCHASES SALES
---- ------------ -------------
Large Cap Value $ 51,757,345 $ 122,725,342
Strategic Value 69,284,030 91,546,012
Small Cap Value 45,922,450 84,089,968
NOTE 5. CAPITAL SHARE TRANSACTIONS
Strategic Value is authorized to issue six billion full and fractional shares
of capital stock, $.001 par value per share, of which one billion are classified
as Common shares, two billion are classified as Advisor shares and one billion
each are classified as Class A, Class B and Class C shares. Large Cap Value and
Small Cap Value are each authorized to issue an unlimited number of full and
fractional shares of beneficial interest, $.001 par value per share, of which an
unlimited number of shares are classified as the Common Class, and an unlimited
number of shares are classified as the Class A, Class B, and Class C shares.
Transactions in capital shares of the Funds were as follows:
LARGE CAP VALUE
------------------------------------------------------------
COMMON CLASS
------------------------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED
OCTOBER 31, 2002 OCTOBER 31, 2001
------------------------------------------------------------
SHARES VALUE SHARES VALUE
------------ ------------ ------------ ------------
Shares sold 103,965 $ 2,023,735 247,678 $ 5,610,931
Shares issued in reinvestment
of dividends and distributions 12,434 242,387 852 18,040
Shares redeemed (105,918) (2,094,726) (80,982) (1,820,615)
------------ ------------ ------------ ------------
Net increase 10,481 $ 171,396 167,548 $ 3,808,356
============ ============ ============ ============
53
LARGE CAP VALUE
----------------------------------------------------------------
CLASS A
----------------------------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED
OCTOBER 31, 2002 OCTOBER 31, 2001
----------------------------------------------------------------
SHARES VALUE SHARES VALUE
------------- ------------- ------------- -------------
Shares sold 626,066 $ 12,458,395 497,633 $ 10,992,519
Shares exchanged due to merger 745,023 14,973,364 -- --
Shares issued in reinvestment of
dividends and distributions 493,645 9,681,586 587,498 12,903,682
Shares redeemed (1,742,654) (33,021,060) (1,003,451) (21,875,515)
------------- ------------- ------------- -------------
Net increase 122,080 $ 4,092,285 81,680 $ 2,020,686
============= ============= ============= =============
LARGE CAP VALUE
----------------------------------------------------------------
CLASS B
----------------------------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED
OCTOBER 31, 2002 OCTOBER 31, 2001
----------------------------------------------------------------
SHARES VALUE SHARES VALUE
------------- ------------- ------------- -------------
Shares sold 290,681 $ 5,488,383 136,380 $ 2,979,246
Shares issued in reinvestment of
dividends and distributions 133,172 2,598,132 157,054 3,422,233
Shares redeemed (396,941) (7,219,735) (306,403) (6,625,998)
------------- ------------- ------------- -------------
Net increase (decrease) 26,912 $ 866,780 (12,969) $ (224,519)
============= ============= ============= =============
LARGE CAP VALUE
----------------------------------------------------------------
CLASS C
----------------------------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED
OCTOBER 31, 2002 OCTOBER 31, 2001
----------------------------------------------------------------
SHARES VALUE SHARES VALUE
------------- ------------- ------------- -------------
Shares sold 54,693 $ 1,022,052 81,416 $ 1,797,567
Shares issued in reinvestment of
dividends and distributions 8,035 155,964 2,401 52,155
Shares redeemed (33,052) (615,500) (6,944) (152,097)
------------- ------------- ------------- -------------
Net increase 29,676 $ 562,516 76,873 $ 1,697,625
============= ============= ============= =============
LARGE CAP VALUE
----------------------------------------------------------------
CLASS D
----------------------------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED
OCTOBER 31, 2002(1) OCTOBER 31, 2001
----------------------------------------------------------------
SHARES VALUE SHARES VALUE
------------- ------------- ------------- -------------
Shares sold 53,963 $ 1,072,918 263,799 $ 5,878,192
Shares issued in reinvestment of
dividends and distributions 171,387 3,381,467 303,506 4,472,360
Shares redeemed (2,311,557) (47,718,754) (276,713) (6,245,645)
------------- ------------- ------------- -------------
Net increase (decrease) (2,086,207) $ (43,264,369) 190,592 $ 4,104,907
============= ============= ============= =============
54
STRATEGIC VALUE
----------------------------------------------------------------
COMMON CLASS
----------------------------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED
OCTOBER 31, 2002 OCTOBER 31, 2001
----------------------------------------------------------------
SHARES VALUE SHARES VALUE
------------- ------------- ------------- -------------
Shares sold 2,197,385 $ 27,640,532 3,725,127 $ 51,683,209
Shares issued in reinvestment of
dividends and distributions 515,385 6,786,899 2,749,394 35,349,336
Shares redeemed (3,600,864) (44,820,752) (5,453,055) (74,139,460)
------------- ------------- ------------- -------------
Net increase (decrease) (888,094) $ (10,393,321) 1,021,466 $ 12,893,085
============= ============= ============= =============
STRATEGIC VALUE
----------------------------------------------------------------
ADVISOR CLASS
----------------------------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED
OCTOBER 31, 2002 OCTOBER 31, 2001
----------------------------------------------------------------
SHARES VALUE SHARES VALUE
------------- ------------- ------------- -------------
Shares sold 354,262 $ 4,443,977 801,031 $ 11,105,426
Shares issued in reinvestment of
dividends and distributions 77,486 1,030,565 450,848 5,796,931
Shares redeemed (937,589) (11,126,396) (1,076,470) (14,599,817)
------------- ------------- ------------- -------------
Net increase (decrease) (505,841) $ (5,651,854) 175,409 $ 2,302,540
============= ============= ============= =============
STRATEGIC VALUE
----------------------------------------------------------------
CLASS A CLASS B
----------------------------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED
OCTOBER 31, 2002(2) OCTOBER 31, 2002(2)
------------------------------ ------------------------------
SHARES VALUE SHARES VALUE
------------------------------ ------------------------------
Shares sold 38,285 $ 440,384 8,602 $ 102,640
Shares issued in reinvestment of
dividends and distributions 13 157 -- --
Shares redeemed -- -- (192) (2,539)
------------- ------------- ------------- -------------
Net increase 38,298 $ 440,541 8,410 $ 100,101
============= ============= ============= =============
STRATEGIC VALUE
------------------------------
CLASS C
------------------------------
FOR THE YEAR ENDED
OCTOBER 31, 2002(2)
------------------------------
SHARES VALUE
------------- -------------
Shares sold 13,525 $ 174,980
------------- -------------
Net increase 13,525 $ 174,980
============= =============
55
SMALL CAP VALUE
----------------------------------------------------------------
COMMON CLASS
----------------------------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED
OCTOBER 31, 2002 OCTOBER 31, 2001
----------------------------------------------------------------
SHARES VALUE SHARES VALUE
------------- ------------- ------------- -------------
Shares sold 2,037,442 $ 43,491,976 397,275 $ 8,783,388
Shares exchanged due to merger -- -- 1,465,919 33,444,703
Shares issued in reinvestment of
dividends and distributions 206,532 4,122,723 -- --
Shares redeemed (1,271,379) (26,177,786) (412,055) (9,044,812)
------------- ------------- ------------- -------------
Net increase 972,595 $ 21,436,913 1,451,139 $ 33,183,279
============= ============= ============= =============
SMALL CAP VALUE
----------------------------------------------------------------
CLASS A
----------------------------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED
OCTOBER 31, 2002 OCTOBER 31, 2001
----------------------------------------------------------------
SHARES VALUE SHARES VALUE
------------- ------------- ------------- -------------
Shares sold 1,317,940 $ 35,671,755 1,061,823 $ 22,929,213
Shares issued in reinvestment of
dividends and distributions 1,250,540 25,063,759 1,330,676 25,192,101
Shares redeemed (3,884,528) (90,304,871) (1,309,249) (28,022,948)
------------- ------------- ------------- -------------
Net increase (decrease) (1,316,048) $ (29,569,357) 1,083,250 $ 20,098,366
============= ============= ============= =============
SMALL CAP VALUE
----------------------------------------------------------------
CLASS B
----------------------------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED
OCTOBER 31, 2002 OCTOBER 31, 2001
----------------------------------------------------------------
SHARES VALUE SHARES VALUE
------------- ------------- ------------- -------------
Shares sold 352,858 $ 7,019,306 95,195 $ 1,975,413
Shares issued in reinvestment of
dividends and distributions 117,607 2,258,049 129,006 2,362,103
Shares redeemed (219,418) (4,302,841) (134,033) (2,738,710)
------------- ------------- ------------- -------------
Net increase 251,047 $ 4,974,514 90,168 $ 1,598,806
============= ============= ============= =============
SMALL CAP VALUE
----------------------------------------------------------------
CLASS C
----------------------------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED
OCTOBER 31, 2002 OCTOBER 31, 2001
----------------------------------------------------------------
SHARES VALUE SHARES VALUE
------------- ------------- ------------- -------------
Shares sold 210,925 $ 4,179,124 66,176 $ 1,395,453
Shares issued in reinvestment of
dividends and distributions 11,516 220,414 2,190 40,191
Shares redeemed (54,000) (1,015,269) (5,367) (100,349)
------------- ------------- ------------- -------------
Net increase 168,441 $ 3,384,269 62,999 $ 1,335,295
============= ============= ============= =============
(1) Large Cap Value Class D ceased operations effective March 18, 2002.
(2) For the period November 30, 2001 (inception date) through October 31, 2002.
56
On October 31, 2002, the number of shareholders that held 5% or more of the
outstanding shares of each class of the Funds were as follows:
NUMBER OF APPROXIMATE PERCENTAGE
SHAREHOLDERS OF OUTSTANDING SHARES
------------ ---------------------
Large Cap Value
Common Class 2 73%
Class C 2 20%
Strategic Value
Common Class 3 46%
Advisor Class 1 98%
Class A 7 67%
Class B 5 59%
Class C 3 88%
Small Cap Value
Common Class 3 66%
Class C 1 6%
Some of the shareholders are comprised of omnibus accounts, which are held on
behalf of several individual shareholders.
NOTE 6. FEDERAL INCOME TAXES
Income and capital gain distributions are determined in accordance with
federal income tax regulations, which may differ from GAAP. These differences
are primarily due to differing treatments of losses deferred due to wash sales
and excise tax regulations.
The tax characteristics of dividends and distributions paid during the period
ended October 31, for the Funds were as follows:
ORDINARY INCOME LONG-TERM CAPITAL GAIN RETURN OF CAPITAL
--------------------------- --------------------------- ---------------------------
FUND 2002 2001 2002 2001 2002 2001
---- ------------ ------------ ------------ ------------ ------------ ------------
Large Cap Value $ 1,552,589 $ 1,984,922 $ 17,514,077 $ 21,660,927 $ -- $ --
Strategic Value 750,766 1,903,728 7,119,425 39,896,950 68,246 --
Small Cap Value 10,814,993 8,274,362 22,508,380 21,622,199 -- --
At October 31, 2002, the components of distributable earnings on a tax basis
were as follows:
LARGE CAP VALUE STRATEGIC VALUE SMALL CAP VALUE
--------------- --------------- ---------------
Undistributed ordinary income $ 159,497 $ -- $ 785,837
Accumulated realized gain (loss) (1,349,517) (1,256,325) 18,618,941
Unrealized appreciation (depreciation) 22,319,212 (3,173,757) 35,949,583
--------------- --------------- ---------------
$ 21,129,192 $ (4,430,082) $ 55,354,361
=============== =============== ===============
57
At October 31, 2002, the Funds had capital loss carryovers available to
offset possible future capital gains as follows:
EXPIRES OCTOBER 31,
--------------------------
FUND 2009 2010
---- ----------- -----------
Large Cap Value $ 1,362,521 $ --
Strategic Value -- 1,256,325
Small Cap Value -- --
At October 31, 2002, the identified cost for federal income tax purposes, as
well as the gross unrealized appreciation from investments for those securities
having an excess of value over cost, gross unrealized depreciation from
investments for those securities having an excess of cost over value and the net
unrealized appreciation (depreciation) from investments were as follows:
NET UNREALIZED
GROSS UNREALIZED GROSS UNREALIZED APPRECIATION/
FUND IDENTIFIED COST APPRECIATION (DEPRECIATION) (DEPRECIATION)
---- --------------- ---------------- ---------------- --------------
Large Cap Value $ 125,746,794 $ 27,346,913 $ 5,027,701 $ 22,319,212
Strategic Value 205,271,358 24,631,530 27,805,287 (3,173,757)
Small Cap Value 183,454,438 47,400,516 11,450,933 35,949,583
At October 31, 2002, accumulated undistributed net investment income (loss),
accumulated net realized gain (loss) from investments, and paid-in capital have
been adjusted for current period permanent book/tax differences which arose
principally from differing book/tax treatments of reit dividends and capital
loss carryovers from a fund acquisition. Net assets were not affected by these
reclassifications:
INCREASE (DECREASE)
-------------------------------------------------
ACCUMULATED NET
UNDISTRIBUTED REALIZED GAIN
PAID-IN NET INVESTMENT (LOSS) ON
FUND CAPITAL INCOME (LOSS) INVESTMENT
---- ------------ -------------- ---------------
Large Cap Value $ 1,827,222 $ (8) $ (1,827,214)
Strategic Value (68,246) 61,832 6,414
Small Cap Value -- (14,280) 14,280
58
NOTE 7. SUBSEQUENT EVENT
On December 12, 2002, the Board of Directors of Strategic Value approved,
subject to shareholder approval, a proposed reorganization (the
"Reorganization"). If the Reorganization is completed, each shareholder of
Strategic Value would become a shareholder of Large Cap Value (the "Acquiring
Fund") and would receive on a tax-free basis shares of the Acquiring Fund with
the same aggregate net asset value as their shares of Strategic Value. The
Reorganization is subject to the approval of Strategic Value's shareholders.
Proxy materials describing the proposed Reorganization will be mailed to
shareholders in anticipation of a special meeting of shareholders to be held at
a later date.
59
CREDIT SUISSE FUNDS
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors/Trustees and Shareholders of
Credit Suisse Large Cap Value Fund;
Credit Suisse Strategic Value Fund, Inc.;
Credit Suisse Small Cap Value Fund:
In our opinion, the accompanying statements of assets and liabilities,
including the schedules of investments, and the related statement of operations
and of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Credit Suisse Large Cap Value Fund,
Credit Suisse Strategic Value Fund, Inc. and Credit Suisse Small Cap Value Fund
(Credit Suisse Large Cap Value Fund and Credit Suisse Small Cap Value Fund are
series of the Credit Suisse Capital Funds) (collectively referred to as the
"Funds") at October 31, 2002, the results of their operations for the year then
ended, the changes in each of their net assets and financial highlights (for
Credit Suisse Large Cap Value Fund and Credit Suisse Small Cap Value Fund) for
each of the two years in the period then ended and the financial highlights (for
Credit Suisse Strategic Value Fund, Inc.) for each of the years (or periods)
presented, in conformity with accounting principles generally accepted in the
United States of America. These financial statements and the financial
highlights (hereafter referred to as the "financial statements") are the
responsibility of the Funds' management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at October
31, 2002 by correspondence with the custodian and brokers, provide a reasonable
basis for our opinion. The financial highlights of Credit Suisse Large Cap Value
Fund and Credit Suisse Small Cap Value Fund for each of the periods presented in
the period ended October 31, 2000 were audited by other independent accountants,
whose report dated December 20, 2000 expressed an unqualified opinion on those
statements.
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
December 18, 2002
60
CREDIT SUISSE FUNDS
INFORMATION CONCERNING DIRECTORS/TRUSTEES AND OFFICERS (UNAUDITED)
NUMBER OF
TERM PORTFOLIOS IN
OF OFFICE(1) FUND
AND COMPLEX OTHER
POSITION(S) LENGTH PRINCIPAL OVERSEEN BY DIRECTORSHIPS
HELD WITH OF TIME OCCUPATION(S) DURING DIRECTOR/ HELD BY
NAME, ADDRESS AND AGE FUNDS SERVED PAST FIVE YEARS TRUSTEE DIRECTOR/TRUSTEE
- ------------------------------ ------------ -------------- ------------------------- --------------- ----------------
INDEPENDENT DIRECTORS/TRUSTEES
Richard H. Francis Director/ Since Currently retired; 53 Director of
c/o Credit Suisse Trustee 1999 Executive Vice The Indonesia
Asset Management, LLC and (Strategic President and Fund, Inc.
466 Lexington Avenue Audit Value), Chief Financial
New York, New York Committee 2001 Officer of Pan Am
10017-3147 Member (Large Cap Corporation and
Value and Pan American
Age: 70 Small Cap World Airways,
Value) Inc. from 1988 to
1991
Jack W. Fritz Director/ Since Private investor; 52 Director of
2425 North Fish Creek Road Trustee and 1996 Consultant and Advo, Inc.
P.O. Box 1287 Audit (Strategic Director of Fritz (direct mail
Wilson, Wyoming 83014 Committee Value), Broadcasting, Inc. advertising)
Member 2001 and Fritz
Age: 75 (Large Cap Communications
Value and (developers and
Small Cap operators of radio
Value) stations) since
1987
Jeffrey E. Garten Director/ Since Dean of Yale 52 Director of
Box 208200 Trustee and 1998 School of Aetna, Inc.;
New Haven, Connecticut Audit (Strategic Management and Director of
06520-8200 Committee Value), William S. Beinecke Calpine Energy
Member 2001 Professor in the Corporation;
Age: 56 (Large Cap Practice of Director of
Value and International CarMax Group
Small Cap Trade and Finance; (used car
Value) Undersecretary of dealers)
Commerce for
International Trade
from November 1993
to October 1995;
Professor at
Columbia University
from September
1992 to November
1993
- ----------
(1) Director/Trustee and Officer serves until his or her respective successor
has been duly elected and qualified.
61
NUMBER OF
TERM PORTFOLIOS IN
OF OFFICE(1) FUND
AND COMPLEX OTHER
POSITION(S) LENGTH PRINCIPAL OVERSEEN BY DIRECTORSHIPS
HELD WITH OF TIME OCCUPATION(S) DURING DIRECTOR/ HELD BY
NAME, ADDRESS AND AGE FUNDS SERVED PAST FIVE YEARS TRUSTEE DIRECTOR/TRUSTEE
- ------------------------------ ------------ -------------- ------------------------- --------------- ----------------
INDEPENDENT DIRECTORS/TRUSTEES
--(CONTINUED)
Peter F. Krogh Director/ Since Dean Emeritus and 52 Member of
301 ICC Trustee and 2001 Distinguished Professor Board
Georgetown University Audit (All Funds) of International Affairs of The Carlisle
Washington, DC 20057 Committee at the Edmund A. Walsh Companies Inc.;
Member School of Foreign Service, Member of
Age: 65 Georgetown University; Selection
Moderator of PBS Committee
Foreign affairs television for Truman
Series Scholars and
Henry Luce
Scholars; Senior
Associate of
Center for
Strategic and
International
Studies; Trustee
of numerous
world affairs
organizations
James S. Pasman, Jr. Director/ Since 1999 Currently retired; 54 Director of
c/o Credit Suisse Trustee and (Strategic President and Chief Education
Asset Management, LLC Audit Value), Operating Officer of Management
466 Lexington Avenue Committee 2001 National InterGroup, Corp.; Director
New York, New York Member (Large Cap Inc. (holding company) of Credit
10017-3147 Value and from April 1989 Suisse Asset
Small Cap to March 1991; Management
Age: 71 Value) Chairman of Permian Income Fund,
Oil Co. from April 1989 Inc.; Trustee of
to March 1991 Credit Suisse
High Yield Bond
Fund
62
NUMBER OF
TERM PORTFOLIOS IN
OF OFFICE(1) FUND
AND COMPLEX OTHER
POSITION(S) LENGTH PRINCIPAL OVERSEEN BY DIRECTORSHIPS
HELD WITH OF TIME OCCUPATION(S) DURING DIRECTOR/ HELD BY
NAME, ADDRESS AND AGE FUNDS SERVED PAST FIVE YEARS TRUSTEE DIRECTOR/TRUSTEE
- ------------------------------ ------------ -------------- ------------------------- --------------- ----------------
INDEPENDENT DIRECTORS/TRUSTEES
--(CONTINUED)
Steven N. Rappaport Director/ Since 1999 Partner of Lehigh Court 53 Director of
Lehigh Court, LLC Trustee and (Strategic LLC since July 2002; The First Israel
40 East 52nd Street Audit Value), President of Sunguard Fund, Inc.
New York, New York Committee 2001 Securities Finance, Inc.
10022 Chairman (Large Cap from 2001 to July 2002;
Value and President of Loanet, Inc.
Age: 54 Small Cap (on-line accounting
Value) service) from 1995 to
2001; Director, President,
North American
Operations, and former
Executive Vice President
from 1992 to 1993 of
Worldwide Operations of
Metallurg Inc.
(manufacture of specially
metals and alloys);
Executive Vice President,
Telerate, Inc. (provider
of real-time information
to the capital markets)
from 1987 to 1992;
Partner in the law firm
of Hartman & Craven
until 1987
INTERESTED DIRECTOR/TRUSTEE
William W. Priest(2) Director/ Since 1999 Senior Partner and 59 Director of The
Steinberg Priest & Sloane Trustee (Strategic Fund Manager, Brazilian Equity
Capital Management Value), Steinberg Fund, Inc.; The
12 East 49th Street 2001 Priest & Sloane Capital Chile Fund, Inc.;
12th Floor (Large Cap Management since The Emerging
New York, New York Value and March 2001; Chairman Markets Tele-
10017 Small Cap and Managing communications
Value) Director of CSAM Fund, Inc.; The
Age: 61 from 2000 to First Israel Fund,
February 2001, Chief Inc.; The Latin
Executive Officer and American Equity
Managing Director of Fund, Inc.; The
CSAM from 1990 to Indonesia Fund,
2000 Inc.; and Credit
Suisse Asset
Management
Income Fund, Inc.
- ------------
(2) Mr. Priest is a Director/Trustee who is an "interested person" of the Funds
as defined in the 1940 Act, because he was an officer of CSAM until February
2001.
63
TERM
OF OFFICE(1)
AND
POSITION(S) LENGTH
HELD WITH OF TIME
NAME, ADDRESS AND AGE FUNDS SERVED PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
- --------------------- ------------ -------------- ---------------------------------------------------------
OFFICERS
Laurence R. Smith Chairman Since Managing Director and Global Chief Investment Officer
Credit Suisse Asset 2002 of CSAM; Associated with JP Morgan Investment
Management, LLC (All Funds) Management from 1981 to 1999; Officer of Other Credit
466 Lexington Avenue Suisse Funds
New York, New York
10017-3147
Age: 44
Hal Liebes, Esq. Vice President Since 1999 Managing Director and Global General Counsel of CSAM;
Credit Suisse Asset and Secretary (Strategic Associated with Lehman Brothers, Inc. from 1996 to 1997;
Management, LLC Value), Associated with CSAM from 1995 to 1996; Associated
466 Lexington Avenue 2001 with CS First Boston Investment Management from
New York, New York (Large Cap 1994 to 1995; Associated with Division of Enforcement,
10017-3147 Value and U.S. Securities and Exchange Commission from 1991
Small Cap to 1994; Officer of Other Credit Suisse Funds
Value)
Age: 38
Michael A. Pignataro Treasurer Since 1999 Director and Director of Fund Administration of CSAM;
Credit Suisse Asset and Chief (Strategic Associated with CSAM since 1984; Officer of Other Credit
Management, LLC Financial Value), Suisse Funds
466 Lexington Avenue Officer 2001
New York, New York (Large Cap
10017-3147 Value and
Small Cap
Value)
Age: 43
Gregory N. Bressler, Esq. Assistant Since 2000 Vice President and Legal Counsel of CSAM since January
Credit Suisse Asset Secretary (Strategic 2000; Associated with the law firm of Swidler Berlin
Management, LLC Value), Shereff Friedman LLP from 1996 to 2000; Officer of Other
466 Lexington Avenue 2001 Credit Suisse Funds
New York, New York (Large Cap
10017-3147 Value and
Small Cap
Value)
Age: 36
64
TERM
OF OFFICE(1)
AND
POSITION(S) LENGTH
HELD WITH OF TIME
NAME, ADDRESS AND AGE FUNDS SERVED PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
- --------------------- ------------ -------------- ---------------------------------------------------------
OFFICERS--(CONTINUED)
Kimiko T. Fields, Esq. Assistant Since Assistant Vice President and Legal Counsel of CSAM
Credit Suisse Asset Secretary 2002 since December 2000; Assistant Vice President, Institutional
Management, LLC (All Funds) Marketing Department, CSAM, from January 2000 to
466 Lexington Avenue December 2000; Marketing Associate, International Equity
New York, New York Department, Warburg Pincus Asset Management, Inc.
10017-3147 from January 1998 to January 2000; self-employed author
and consultant, from January 1996 to December 1997;
Officer of Other Credit Suisse Funds
Age: 38
Rocco A. Del Guercio Assistant Since 1999 Vice President and Administrative Officer of CSAM;
Credit Suisse Asset Treasurer (Strategic Associated with CSAM since June 1996; Assistant
Management, LLC Value), Treasurer, Bankers Trust -- Fund Administration from
466 Lexington Avenue 2001 March 1994 to June 1996; Mutual Fund Accounting
New York, New York (Large Cap Supervisor, Dreyfus Corporation from April 1987
10017-3147 Value and to March 1994; Officer of Other Credit Suisse Funds
Small Cap
Value)
Age: 39
Joseph Parascondola Assistant Since 2000 Assistant Vice President -- Fund Administration of CSAM
Credit Suisse Asset Treasurer (Strategic since April 2000; Assistant Vice President, Deutsche
Management, LLC Value), Asset Management from January 1999 to April 2000;
466 Lexington Avenue 2001 Assistant Vice President, Weiss, Peck & Greer LLC
New York, New York (Large Cap from November 1995 to December 1998; Officer of Other
10017-3147 Value and Credit Suisse Funds
Small Cap
Value)
Age: 39
Robert M. Rizza Assistant Since Assistant Vice President of CSAM since January 2001;
Credit Suisse Asset Treasurer 2002 Administrative Officer of CSAM from March 1998
Management, LLC (All Funds) to December 2000; Assistant Treasurer of Bankers
466 Lexington Avenue Trust Co. from April 1994 to March 1998; Officer of Other
New York, New York Credit Suisse Funds
10017-3147
Age: 37
The Statement of Additional Information includes additional information about
the Directors/Trustees and is available, without charge, upon request, by
calling 800-927-2874.
65
CREDIT SUISSE FUNDS
TAX INFORMATION LETTER (UNAUDITED)
October 31, 2002
IMPORTANT TAX INFORMATION FOR CORPORATE SHAREHOLDERS
Corporate shareholders should note for the year ended October 31, 2002, the
percentage of the Fund's investment income (i.e., net investment income plus
short-term capital gains) that qualified for the intercorporate dividends
received deduction are as follows:
FUND PERCENTAGE
---- ----------
Large Cap Value 83.41%
Strategic Value 100.00%
Small Cap Value 98.73%
IMPORTANT TAX INFORMATION FOR SHAREHOLDERS
During the year ended October 31, 2002, the Funds declared the following
dividends that were designated as 20% long-term capital gains dividends:
FUND AMOUNT
---- ------------
Large Cap Value $ 17,514,077
Strategic Value 7,119,425
Small Cap Value 22,514,838
66
P.O. BOX 55030, BOSTON, MA 02205-5030 [CREDIT SUISSE ASSET MANAGEMENT LOGO]
800-927-2874 - www.CreditSuisseFunds.com
CREDIT SUISSE ASSET MANAGEMENT SECURITIES, INC., DISTRIBUTOR. CSVAL-2-1002
STATEMENT OF ADDITIONAL INFORMATION
February 28, 2003
ADVISOR CLASS AND COMMON CLASS,
CLASS A, CLASS B AND CLASS C SHARES OF THE
CREDIT SUISSE STRATEGIC VALUE FUND
CREDIT SUISSE CAPITAL APPRECIATION FUND
This combined Statement of Additional Information provides information about
Credit Suisse Strategic Value Fund (the "Strategic Value Fund") and Credit
Suisse Capital Appreciation Fund (the "Capital Appreciation Fund" and together
with the Strategic Value Fund, the "Funds") that supplements information
contained in (i) the combined Prospectus for the Common Shares of the Funds
dated February 28, 2003; (ii) the Prospectuses for the Advisor Shares of the
Funds, each dated February 28, 2003; and (iii) the Prospectuses for the Class A,
Class B and Class C shares of the Funds, each dated February 28, 2003, as each
is amended or supplemented from time to time (collectively, the "Prospectus"),
and is incorporated by reference in its entirety into the Prospectus.
Each Fund's audited Annual Report dated October 31, 2002, which either
accompanies this Statement of Additional Information or has previously been
provided to the investor to whom this Statement of Additional Information is
being sent, is incorporated herein by reference.
This Statement of Additional Information is not in itself a prospectus. Copies
of the Prospectuses and the Annual Report can be obtained by writing or
telephoning:
Class A, Class B, Class C and Common Shares Advisor Shares
Credit Suisse Funds Credit Suisse Funds
P.O. Box 55030 P.O. Box 55030
Boston, Massachusetts 02205-5030 Boston, Massachusetts 02205-5030
800-927-2874 Attn: Institutional Services
800-222-8977
597589.28
TABLE OF CONTENTS
Page
----
INVESTMENT OBJECTIVES AND POLICIES................................................................................1
Options, Futures and Currency Exchange Transactions......................................................1
Securities Options..............................................................................1
Securities Index Options........................................................................4
OTC Options.....................................................................................5
Futures Activities..............................................................................5
Currency Exchange Transactions..................................................................7
Hedging Generally...............................................................................9
Asset Coverage for Forward Contracts, Options, Futures and Options on Futures..................10
Additional Information on Other Investment Practices....................................................11
U.S. Government Securities.....................................................................11
Money Market Obligations.......................................................................11
Convertible Securities.........................................................................12
Structured Securities..........................................................................12
Debt Securities................................................................................15
Below Investment Grade Securities..............................................................16
Zero Coupon Securities.........................................................................17
Securities of Other Investment Companies.......................................................17
Lending of Portfolio Securities................................................................18
Foreign Investments............................................................................19
Warrants.......................................................................................21
Non-Publicly Traded and Illiquid Securities....................................................22
Borrowing......................................................................................23
Reverse Repurchase Agreements..................................................................23
When-Issued Securities and Delayed-Delivery Transactions.......................................23
REITs .........................................................................................24
Small Capitalization and Emerging Growth Companies; Unseasoned Issuers.........................24
"Special Situation" Companies..................................................................25
Strategy Available to the Capital Appreciation Fund.....................................................25
Dollar Rolls...................................................................................25
Strategy Available to the Strategic Value Fund..........................................................25
Short Sales "Against the Box"..................................................................25
INVESTMENT RESTRICTIONS..........................................................................................26
Both Funds.....................................................................................26
Strategic Value Fund...........................................................................26
Capital Appreciation Fund......................................................................28
PORTFOLIO VALUATION..............................................................................................29
PORTFOLIO TRANSACTIONS...........................................................................................31
PORTFOLIO TURNOVER...............................................................................................33
597589.28
Page
----
MANAGEMENT OF THE FUNDS..........................................................................................34
Officers and Board of Directors/Trustees................................................................34
Directors'/Trustees' Total Compensation for the Fiscal Year Ended October 31, 2002......................41
Investment
Advisory Agreements.....................................................................................42
Board Approval of Advisory Agreements...................................................................44
Administration Agreements...............................................................................45
Code of Ethics..........................................................................................45
Custodian and Transfer Agent............................................................................46
Organization of the Funds...............................................................................46
Capital Appreciation Fund......................................................................46
Strategic Value Fund...........................................................................47
Both Funds.....................................................................................47
Distribution and Shareholder Servicing..................................................................48
Distributor....................................................................................48
Advisor Shares.................................................................................49
Class A, Class B and Class C Shares............................................................50
General........................................................................................52
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION...................................................................53
Purchases...............................................................................................53
Common Class Shares............................................................................53
Redemptions.............................................................................................56
Automatic Cash Withdrawal Plan.................................................................56
Contingent Deferred Sales Charge - General.....................................................57
EXCHANGE PRIVILEGE...............................................................................................57
ADDITIONAL INFORMATION CONCERNING TAXES..........................................................................58
The Funds and Their Investments.........................................................................58
Passive Foreign Investment Companies....................................................................61
Dividends and Distributions.............................................................................61
Sales of Shares.........................................................................................62
Foreign Taxes...........................................................................................62
Special Tax Matters Relating to Zero Coupon Securities..................................................63
Backup Withholding......................................................................................63
Notices ................................................................................................63
Other Taxation..........................................................................................63
DETERMINATION OF PERFORMANCE.....................................................................................63
After-Tax Return........................................................................................66
INDEPENDENT ACCOUNTANTS AND COUNSEL..............................................................................69
MISCELLANEOUS....................................................................................................69
(ii)
597589.28
Page
----
FINANCIAL STATEMENTS.............................................................................................74
APPENDIX - DESCRIPTION OF RATINGS...............................................................................A-1
INVESTMENT OBJECTIVES AND POLICIES
The following information supplements the discussion of each Fund's
investment objective and policies in the Prospectuses. There are no assurances
that the Funds will achieve their investment objectives.
The investment objective of the Strategic Value Fund is total return.
The investment objective of the Capital Appreciation Fund is long-term
capital appreciation.
The Strategic Value Fund under normal market conditions invests at least
80% of its net assets, plus any borrowings for investment purposes, in U.S.
equity securities. This percentage requirement will not be applicable during
periods when the Strategic Value Fund pursues a temporary defensive strategy, as
discussed below. The policy regarding investment of at least 80% of the
Strategic Value Fund's net assets is non-fundamental, which means that it can be
changed by the Board of Directors upon 60 days' notice to shareholders.
Unless otherwise indicated, both Funds are permitted to engage in the
following investment strategies, subject to any percentage limitations set forth
below. Any percentage limitation on a Fund's ability to invest in debt
securities will not be applicable during periods when the Fund pursues a
temporary defensive strategy as discussed below.
The Funds are not obligated to pursue any of the following strategies and
do not represent that these techniques are available now or will be available in
the future.
Options, Futures and Currency Exchange Transactions
Each Fund may purchase and write covered or collateralized options on
securities, securities indices and currencies for both hedging purposes and to
increase total return. Each Fund may enter into futures contracts and options on
futures contracts on securities, securities indices and currencies and may
engage in currency exchange transactions for these same purposes, which may
involve speculation.
Securities Options. Each Fund may purchase options and write (sell) covered
or collateralized options on securities, securities indices and, to the extent
the Fund is authorized to invest in foreign securities, currencies for both
hedging purposes and to increase total return. Up to 25% of a Fund's assets may
be at risk in connection with investing in options on securities, securities
indices and, if applicable, currencies. The amount of assets considered to be
"at risk" in these transactions is, in the case of purchasing options, the
amount of the premium paid, and, in the case of writing options, the value of
the underlying obligation. These options may be traded on an exchange or
over-the-counter ("OTC").
Each Fund realizes fees (referred to as "premiums") for granting the rights
evidenced by the options it has written. A put option embodies the right of its
purchaser to
597589.28
compel the writer of the option to purchase from the option holder an underlying
security at a specified price for a specified time period or at a specified
time. In contrast, a call option embodies the right of its purchaser to compel
the writer of the option to sell to the option holder an underlying security at
a specified price for a specified time period or at a specified time.
The potential loss associated with purchasing an option is limited to the
premium paid, and the premium would partially offset any gains achieved from its
use. However, for an option writer the exposure to adverse price movements in
the underlying security or index is potentially unlimited during the exercise
period. Writing securities options may result in substantial losses to a Fund,
force the sale or purchase of portfolio securities at inopportune times or at
less advantageous prices, limit the amount of appreciation the Fund could
realize on its investments or require the Fund to hold securities it would
otherwise sell.
The principal reason for writing covered options on a security is to
attempt to realize, through the receipt of premiums, a greater return than would
be realized on the securities alone. In return for a premium, a Fund as the
writer of a covered call option forfeits the right to any appreciation in the
value of the underlying security above the strike price for the life of the
option (or until a closing purchase transaction can be effected). A Fund that
writes call options retains the risk of an increase in the price of the
underlying security. The size of the premiums that a Fund may receive may be
adversely affected as new or existing institutions, including other investment
companies, engage in or increase their option-writing activities.
If security prices rise, a put writer would generally expect to profit,
although its gain would be limited to the amount of the premium it received. If
security prices remain the same over time, it is likely that the writer will
also profit, because it should be able to close out the option at a lower price.
If security prices decline, the put writer would expect to suffer a loss. This
loss may be less than the loss from purchasing the underlying instrument
directly to the extent that the premium received offsets the effects of the
decline.
In the case of options written by a Fund that are deemed covered by virtue
of the Fund's holding convertible or exchangeable preferred stock or debt
securities, the time required to convert or exchange and obtain physical
delivery of the underlying common stock with respect to which the Fund has
written options may exceed the time within which the Fund must make delivery in
accordance with an exercise notice. In these instances, a Fund may purchase or
temporarily borrow the underlying securities for purposes of physical delivery.
By so doing, the Fund will not bear any market risk, since the Fund will have
the absolute right to receive from the issuer of the underlying security an
equal number of shares to replace the borrowed securities, but the Fund may
incur additional transaction costs or interest expenses in connection with any
such purchase or borrowing.
Additional risks exist with respect to certain of the securities for which
a Fund may write covered call options. For example, if the Fund writes covered
call options on mortgage-backed securities, the mortgage-backed securities that
it holds as cover may, because of scheduled amortization or unscheduled
prepayments, cease to be sufficient cover. If this occurs, the Fund will
compensate for the decline in the value of the cover by purchasing an
appropriate additional amount of mortgage-backed securities.
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Options written by a Fund will normally have expiration dates between one
and nine months from the date written. The exercise price of the options may be
below, equal to or above the market values of the underlying securities at the
times the options are written. In the case of call options, these exercise
prices are referred to as "in-the-money," "at-the-money" and "out-of-the-money,"
respectively. Each Fund may write (i) in-the-money call options when Credit
Suisse Asset Management, LLC ("CSAM"), each Fund's investment adviser, expects
that the price of the underlying security will remain flat or decline moderately
during the option period, (ii) at-the-money call options when CSAM expects that
the price of the underlying security will remain flat or advance moderately
during the option period and (iii) out-of-the-money call options when CSAM
expects that the premiums received from writing the call option plus the
appreciation in market price of the underlying security up to the exercise price
will be greater than the appreciation in the price of the underlying security
alone. In any of the preceding situations, if the market price of the underlying
security declines and the security is sold at this lower price, the amount of
any realized loss will be offset wholly or in part by the premium received.
Out-of-the-money, at-the-money and in-the-money put options (the reverse of call
options as to the relation of exercise price to market price) may be used in the
same market environments that such call options are used in equivalent
transactions. To secure its obligation to deliver the underlying security when
it writes a call option, each Fund will be required to deposit in escrow the
underlying security or other assets in accordance with the rules of the Options
Clearing Corporation (the "Clearing Corporation") and of the securities exchange
on which the option is written.
Prior to their expirations, put and call options may be sold in closing
sale or purchase transactions (sales or purchases by a Fund prior to the
exercise of options that it has purchased or written, respectively, of options
of the same series) in which a Fund may realize a profit or loss from the sale.
An option position may be closed out only where there exists a secondary market
for an option of the same series on a recognized securities exchange or in the
OTC market. When a Fund has purchased an option and engages in a closing sale
transaction, whether the Fund realizes a profit or loss will depend upon whether
the amount received in the closing sale transaction is more or less than the
premium the Fund initially paid for the original option plus the related
transaction costs. Similarly, in cases where a Fund has written an option, it
will realize a profit if the cost of the closing purchase transaction is less
than the premium received upon writing the original option and will incur a loss
if the cost of the closing purchase transaction exceeds the premium received
upon writing the original option. A Fund may engage in a closing purchase
transaction to realize a profit, to prevent an underlying security with respect
to which it has written an option from being called or put or, in the case of a
call option, to unfreeze an underlying security (thereby permitting its sale or
the writing of a new option on the security prior to the outstanding option's
expiration). The obligation of a Fund under an option it has written would be
terminated by a closing purchase transaction (a Fund would not be deemed to own
an option as a result of the transaction). So long as the obligation of a Fund
as the writer of an option continues, the Fund may be assigned an exercise
notice by the broker-dealer through which the option was sold, requiring the
Fund to deliver the underlying security against payment of the exercise price.
This obligation terminates when the option expires or a Fund effects a closing
purchase transaction. A Fund cannot effect a closing purchase transaction with
respect to an option once it has been assigned an exercise notice.
3
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There is no assurance that sufficient trading interest will exist to create
a liquid secondary market on a securities exchange for any particular option or
at any particular time, and for some options no such secondary market may exist.
A liquid secondary market in an option may cease to exist for a variety of
reasons. In the past, for example, higher than anticipated trading activity or
order flow or other unforeseen events have at times rendered certain of the
facilities of the Clearing Corporation and various securities exchanges
inadequate and resulted in the institution of special procedures, such as
trading rotations, restrictions on certain types of orders or trading halts or
suspensions in one or more options. There can be no assurance that similar
events, or events that may otherwise interfere with the timely execution of
customers' orders, will not recur. In such event, it might not be possible to
effect closing transactions in particular options. Moreover, a Fund's ability to
terminate options positions established in the OTC market may be more limited
than for exchange-traded options and may also involve the risk that securities
dealers participating in OTC transactions would fail to meet their obligations
to the Fund. Each Fund, however, intends to purchase OTC options only from
dealers whose debt securities, as determined by CSAM, are considered to be
investment grade. If, as a covered call option writer, the Fund is unable to
effect a closing purchase transaction in a secondary market, it will not be able
to sell the underlying security and would continue to be at market risk on the
security.
Securities exchanges generally have established limitations governing the
maximum number of calls and puts of each class which may be held or written, or
exercised within certain time periods by an investor or group of investors
acting in concert (regardless of whether the options are written on the same or
different securities exchanges or are held, written or exercised in one or more
accounts or through one or more brokers). It is possible that the Funds and
other clients of CSAM and certain of its affiliates may be considered to be such
a group. A securities exchange may order the liquidation of positions found to
be in violation of these limits and it may impose certain other sanctions. These
limits may restrict the number of options a Fund will be able to purchase on a
particular security.
Securities Index Options. Each Fund may purchase and write exchange-listed
and OTC put and call options on securities indexes. A securities index measures
the movement of a certain group of securities by assigning relative values to
the securities included in the index, fluctuating with changes in the market
values of the securities included in the index. Some securities index options
are based on a broad market index, such as the NYSE Composite Index, or a
narrower market index such as the Standard & Poor's 100. Indexes may also be
based on a particular industry or market segment.
Options on securities indexes are similar to options on securities except
that (i) the expiration cycles of securities index options are monthly, while
those of securities options are currently quarterly, and (ii) the delivery
requirements are different. Instead of giving the right to take or make delivery
of securities at a specified price, an option on a securities index gives the
holder the right to receive a cash "exercise settlement amount" equal to (a) the
amount, if any, by which the fixed exercise price of the option exceeds (in the
case of a put) or is less than (in the case of a call) the closing value of the
underlying index on the date of exercise, multiplied by (b) a fixed "index
multiplier." Receipt of this cash amount will depend upon the closing level of
the securities index upon which the option is based being greater than, in the
case of a call, or less than, in the case of a put, the exercise price of the
index and the exercise price of the option times
4
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a specified multiple. The writer of the option is obligated, in return for the
premium received, to make delivery of this amount. Securities index options may
be offset by entering into closing transactions as described above for
securities options.
OTC Options. Each Fund may purchase OTC or dealer options or sell covered
OTC options. Unlike exchange-listed options where an intermediary or clearing
corporation, such as the Clearing Corporation, assures that all transactions in
such options are properly executed, the responsibility for performing all
transactions with respect to OTC options rests solely with the writer and the
holder of those options. A listed call option writer, for example, is obligated
to deliver the underlying securities to the clearing organization if the option
is exercised, and the clearing organization is then obligated to pay the writer
the exercise price of the option. If a Fund were to purchase a dealer option,
however, it would rely on the dealer from whom it purchased the option to
perform if the option were exercised. If the dealer fails to honor the exercise
of the option by the Fund, the Fund would lose the premium it paid for the
option and the expected benefit of the transaction.
Exchange-traded options generally have a continuous liquid market while OTC
or dealer options do not. Consequently, a Fund will generally be able to realize
the value of a dealer option it has purchased only by exercising it or reselling
it to the dealer who issued it. Similarly, when a Fund writes a dealer option,
it generally will be able to close out the option prior to its expiration only
by entering into a closing purchase transaction with the dealer to which the
Fund originally wrote the option. Although each Fund will seek to enter into
dealer options only with dealers who will agree to and that are expected to be
capable of entering into closing transactions with the Fund, there can be no
assurance that the Fund will be able to liquidate a dealer option at a favorable
price at any time prior to expiration. The inability to enter into a closing
transaction may result in material losses to a Fund. Until the Fund, as a
covered OTC call option writer, is able to effect a closing purchase
transaction, it will not be able to liquidate securities (or other assets) used
to cover the written option until the option expires or is exercised. This
requirement may impair a Fund's ability to sell portfolio securities or, with
respect to currency options, currencies at a time when such sale might be
advantageous.
Futures Activities. Each Fund may enter into futures contracts and options
on futures contracts on securities, securities indices and, to the extent the
Fund is authorized to invest in foreign securities, currencies for bona fide
hedging and speculative purposes These futures contracts are standardized
contracts for the future delivery of a non-U.S. currency, an interest rate
sensitive security or, in the case of index futures contracts or certain other
futures contracts, a cash settlement with reference to a specified multiplier
times the change in the index. An option on a futures contract gives the
purchaser the right, in return for the premium paid, to assume a position in a
futures contract.
These transactions may be entered into for "bona fide hedging" purposes, as
defined in regulations of the Commodity Futures Trading Commission ("CFTC"), and
other permissible purposes including hedging against changes in the value of
portfolio securities due to anticipated changes in currency values, interest
rates and/or market conditions and increasing return. Aggregate initial margin
and premiums (discussed below) required to establish positions other than those
considered to be "bona fide hedging" by the CFTC will not exceed 5% of a Fund's
net asset value after taking into account unrealized profits and unrealized
losses on any such contracts it has entered into.
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Each Fund reserves the right to engage in transactions involving futures
contracts and options on futures contracts to the extent allowed by CFTC
regulations in effect from time to time and in accordance with the Fund's
policies. There is no overall limit on the percentage of Fund assets that may be
at risk with respect to futures activities.
Futures Contracts. A foreign currency futures contract provides for the
future sale by one party and the purchase by the other party of a certain amount
of a specified non-U.S. currency at a specified price, date, time and place. An
interest rate futures contract provides for the future sale by one party and the
purchase by the other party of a certain amount of a specific interest rate
sensitive financial instrument (debt security) at a specified price, date, time
and place. Securities indexes are capitalization weighted indexes which reflect
the market value of the securities represented in the indexes. A securities
index futures contract is an agreement to be settled by delivery of an amount of
cash equal to a specified multiplier times the difference between the value of
the index at the close of the last trading day on the contract and the price at
which the agreement is made.
No consideration is paid or received by a Fund upon entering into a futures
contract. Instead, the Fund is required to deposit in a segregated account with
its custodian an amount of cash or liquid securities acceptable to the broker,
equal to approximately 1% to 10% of the contract amount (this amount is subject
to change by the exchange on which the contract is traded, and brokers may
charge a higher amount). This amount is known as "initial margin" and is in the
nature of a performance bond or good faith deposit on the contract which is
returned to a Fund upon termination of the futures contract, assuming all
contractual obligations have been satisfied. The broker will have access to
amounts in the margin account if the Fund fails to meet its contractual
obligations. Subsequent payments, known as "variation margin," to and from the
broker, will be made daily as the currency, financial instrument or securities
index underlying the futures contract fluctuates, making the long and short
positions in the futures contract more or less valuable, a process known as
"marking-to-market." A Fund will also incur brokerage costs in connection with
entering into futures transactions.
At any time prior to the expiration of a futures contract, a Fund may elect
to close the position by taking an opposite position, which will operate to
terminate the Fund's existing position in the contract. Positions in futures
contracts and options on futures contracts (described below) may be closed out
only on the exchange on which they were entered into (or through a linked
exchange). No secondary market for such contracts exists. Although each Fund may
enter into futures contracts only if there is an active market for such
contracts, there is no assurance that an active market will exist at any
particular time. Most futures exchanges limit the amount of fluctuation
permitted in futures contract prices during a single trading day. Once the daily
limit has been reached in a particular contract, no trades may be made that day
at a price beyond that limit or trading may be suspended for specified periods
during the day. It is possible that futures contract prices could move to the
daily limit for several consecutive trading days with little or no trading,
thereby preventing prompt liquidation of futures positions at an advantageous
price and subjecting the Fund to substantial losses. In such event, and in the
event of adverse price movements, the Fund would be required to make daily cash
payments of variation margin. In such situations, if a Fund had insufficient
cash, it might have to sell securities to meet daily variation margin
requirements at a time when it would be disadvantageous to do so. In addition,
if the transaction is entered into for hedging purposes, in
6
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such circumstances the Fund may realize a loss on a futures contract or option
that is not offset by an increase in the value of the hedged position. Losses
incurred in futures transactions and the costs of these transactions will affect
a Fund's performance.
Options on Futures Contracts. Each Fund may purchase and write put and call
options on foreign currency, interest rate and stock index futures contracts and
may enter into closing transactions with respect to such options to terminate
existing positions. There is no guarantee that such closing transactions can be
effected; the ability to establish and close out positions on such options will
be subject to the existence of a liquid market.
An option on a currency, interest rate or securities index futures
contract, as contrasted with the direct investment in such a contract, gives the
purchaser the right, in return for the premium paid, to assume a position in a
futures contract at a specified exercise price at any time prior to the
expiration date of the option. 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
an option, the delivery of the futures position by the writer of the option to
the holder of the option will be accompanied by delivery of the accumulated
balance in the writer's futures margin account, which represents the amount by
which the market price of the futures contract 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. The potential loss related to the purchase of an option on a
futures contract is limited to the premium paid for the option (plus transaction
costs). Because the value of the option is fixed at the point of sale, there are
no daily cash payments by the purchaser to reflect changes in the value of the
underlying contract; however, the value of the option does change daily and that
change would be reflected in the net asset value of a Fund.
Currency Exchange Transactions. The value in U.S. dollars of the assets of
a Fund that are invested in foreign securities may be affected favorably or
unfavorably by a variety of factors not applicable to investment in U.S.
securities, and the Fund may incur costs in connection with conversion between
various currencies. Currency exchange transactions may be from any non-U.S.
currency into U.S. dollars or into other appropriate currencies. A Fund will
conduct its currency exchange transactions (i) on a spot (i.e., cash) basis at
the rate prevailing in the currency exchange market, (ii) through entering into
futures contracts or options on such contracts (as described above), (iii)
through entering into forward contracts to purchase or sell currency or (iv) by
purchasing exchange-traded currency options. Risks associated with currency
forward contracts and purchasing currency options are similar to those described
herein for futures contracts and securities and stock index options. In
addition, the use of currency transactions could result in losses from the
imposition of foreign exchange controls, suspension of settlement or other
governmental actions or unexpected events.
The Capital Appreciation Fund will engage in currency exchange transactions
only for hedging purposes. The Strategic Value Fund may engage in currency
exchange transactions for both hedging purposes and to increase total return,
which may involve speculation.
Forward Currency Contracts. A forward currency contract involves an
obligation to purchase or sell a specific currency at a future date, which may
be any fixed number of days from the date of the contract as agreed upon by the
parties, at a price set at the
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time of the contract. These contracts are entered into in the interbank market
conducted directly between currency traders (usually large commercial banks and
brokers) and their customers. Forward currency contracts are similar to currency
futures contracts, except that futures contracts are traded on commodities
exchanges and are standardized as to contract size and delivery date.
At or before the maturity of a forward contract, a Fund may either sell a
portfolio security and make delivery of the currency, or retain the security and
fully or partially offset its contractual obligation to deliver the currency by
negotiating with its trading partner to enter into an offsetting transaction. If
a Fund retains the portfolio security and engages in an offsetting transaction,
the Fund, at the time of execution of the offsetting transaction, will incur a
gain or a loss to the extent that movement has occurred in forward contract
prices.
Forward currency contracts are highly volatile, and a relatively small
price movement in a forward currency contract may result in substantial losses
to a Fund. To the extent a Fund engages in forward currency contracts to
generate current income, the Fund will be subject to these risks which the Fund
might otherwise avoid (e.g., through the use of hedging transactions).
Currency Options. Each Fund may purchase exchange-traded put and call
options on foreign currencies. Put options convey the right to sell the
underlying currency at a price which is anticipated to be higher than the spot
price of the currency at the time the option is exercised. Call options convey
the right to buy the underlying currency at a price which is expected to be
lower than the spot price of the currency at the time the option is exercised.
Currency Hedging. Each Fund's currency hedging will be limited to hedging
involving either specific transactions or portfolio positions. Transaction
hedging is the purchase or sale of forward currency with respect to specific
receivables or payables of a Fund generally accruing in connection with the
purchase or sale of its portfolio securities. Position hedging is the sale of
forward currency with respect to portfolio security positions. No Fund may
position hedge to an extent greater than the aggregate market value (at the time
of entering into the hedge) of the hedged securities.
A decline in the U.S. dollar value of a foreign currency in which a Fund's
securities are denominated will reduce the U.S. dollar value of the securities,
even if their value in the foreign currency remains constant. The use of
currency hedges does not eliminate fluctuations in the underlying prices of the
securities, but it does establish a rate of exchange that can be achieved in the
future. For example, in order to protect against diminutions in the U.S. dollar
value of non-dollar denominated securities it holds, a Fund may purchase foreign
currency put options. If the value of the foreign currency does decline, the
Fund will have the right to sell the currency for a fixed amount in dollars and
will thereby offset, in whole or in part, the adverse effect on the U.S. dollar
value of its securities that otherwise would have resulted. Conversely, if a
rise in the U.S. dollar value of a currency in which securities to be acquired
are denominated is projected, thereby potentially increasing the cost of the
securities, a Fund may purchase call options on the particular currency. The
purchase of these options could offset, at least partially, the effects of the
adverse movements in exchange rates. The benefit to a Fund derived from
purchases of currency options, like the benefit derived from other types of
options, will be reduced by premiums and other transaction costs. Because
transactions in currency exchange are generally conducted on a principal basis,
no fees or commissions are generally involved.
8
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Currency hedging involves some of the same risks and considerations as other
transactions with similar instruments. Although currency hedges limit the risk
of loss due to a decline in the value of a hedged currency, at the same time,
they also limit any potential gain that might result should the value of the
currency increase. If a devaluation is generally anticipated, a Fund may not be
able to contract to sell a currency at a price above the devaluation level it
anticipates.
While the values of currency futures and options on futures, forward
currency contracts and currency options may be expected to correlate with
exchange rates, they will not reflect other factors that may affect the value of
a Fund's investments and a currency hedge may not be entirely successful in
mitigating changes in the value of the Fund's investments denominated in that
currency. A currency hedge, for example, should protect a Yen-denominated bond
against a decline in the Yen, but will not protect the Fund against a price
decline if the issuer's creditworthiness deteriorates.
Hedging Generally. In addition to entering into options, futures and
currency exchange transactions for other purposes, including generating current
income to offset expenses or increase return, each Fund may enter into these
transactions as hedges to reduce investment risk, generally by making an
investment expected to move in the opposite direction of a portfolio position. A
hedge is designed to offset a loss in a portfolio position with a gain in the
hedged position; at the same time, however, a properly correlated hedge will
result in a gain in the portfolio position being offset by a loss in the hedged
position. As a result, the use of options, futures contracts and currency
exchange transactions for hedging purposes could limit any potential gain from
an increase in the value of the position hedged. In addition, the movement in
the portfolio position hedged may not be of the same magnitude as movement in
the hedge. With respect to futures contracts, since the value of portfolio
securities will far exceed the value of the futures contracts sold by a Fund, an
increase in the value of the futures contracts could only mitigate, but not
totally offset, the decline in the value of the Fund's assets.
In hedging transactions based on an index, whether a Fund will realize a
gain or loss depends upon movements in the level of securities prices in the
stock market generally or, in the case of certain indexes, in an industry or
market segment, rather than movements in the price of a particular security. The
risk of imperfect correlation increases as the composition of a Fund's portfolio
varies from the composition of the index. In an effort to compensate for
imperfect correlation of relative movements in the hedged position and the
hedge, the Fund's hedge positions may be in a greater or lesser dollar amount
than the dollar amount of the hedged position. Such "over hedging" or "under
hedging" may adversely affect the Fund's net investment results if market
movements are not as anticipated when the hedge is established. Securities index
futures transactions may be subject to additional correlation risks. First, all
participants in the futures market are subject to margin deposit and maintenance
requirements. Rather than meeting additional margin deposit requirements,
investors may close futures contracts through offsetting transactions which
would distort the normal relationship between the securities index and futures
markets. Secondly, from the point of view of speculators, the deposit
requirements in the futures market are less onerous than margin requirements in
the securities market. Therefore, increased participation by speculators in the
futures market also may cause temporary price distortions. Because of the
possibility of price distortions in the futures market and the imperfect
correlation between movements in the securities index and
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movements in the price of securities index futures, a correct forecast of
general market trends by CSAM still may not result in a successful hedging
transaction.
Each Fund will engage in hedging transactions only when deemed advisable by
CSAM, and successful use by the Funds of hedging transactions will be subject to
CSAM's ability to predict trends in currency, interest rate or securities
markets, as the case may be, and to predict correctly movements in the
directions of the hedge and the hedged position and the correlation between
them, which predictions could prove to be inaccurate. This requires different
skills and techniques than predicting changes in the price of individual
securities, and there can be no assurance that the use of these strategies will
be successful. Even a well-conceived hedge may be unsuccessful to some degree
because of unexpected market behavior or trends. Losses incurred in hedging
transactions and the costs of these transactions will affect a Fund's
performance.
To the extent that a Fund engages in the strategies described above, the
Fund may experience losses greater than if these strategies had not been
utilized. In addition to the risks described above, these instruments may be
illiquid and/or subject to trading limits, and a Fund may be unable to close out
a position without incurring substantial losses, if at all. The Funds are also
subject to the risk of a default by a counterparty to an off-exchange
transaction.
Asset Coverage for Forward Contracts, Options, Futures and Options on
Futures. Each Fund will comply with guidelines established by the Securities and
Exchange Commission (the "SEC") and other applicable regulatory bodies with
respect to coverage of forward currency contracts, options written by the Funds
on securities and indexes; and currency, interest rate and security index
futures contracts and options on these futures contracts. These guidelines may,
in certain instances, require segregation by a Fund of cash or liquid securities
with its custodian or a designated sub-custodian to the extent the Fund's
obligations with respect to these strategies are not otherwise "covered" through
ownership of the underlying security or financial instrument or by other
portfolio positions or by other means consistent with applicable regulatory
policies. Segregated assets cannot be sold or transferred unless equivalent
assets are substituted in their place or it is no longer necessary to segregate
them. As a result, there is a possibility that segregation of a large percentage
of a Fund's assets could impede portfolio management or the Fund's ability to
meet redemption requests or other current obligations.
For example, a call option written by a Fund on securities may require the
Fund to hold the securities subject to the call (or securities convertible into
the securities without additional consideration) or to segregate assets (as
described above) sufficient to purchase and deliver the securities if the call
is exercised. A call option written by a Fund on an index may require the Fund
to own portfolio securities that correlate with the index or to segregate assets
(as described above) equal to the excess of the index value over the exercise
price on a current basis. A put option written by a Fund may require the Fund to
segregate assets (as described above) equal to the exercise price. A Fund could
purchase a put option if the strike price of that option is the same or higher
than the strike price of a put option sold by the Fund. If a Fund holds a
futures or forward contract, the Fund could purchase a put option on the same
futures or forward contract with a strike price as high or higher than the price
of the contract held. The Funds may enter into fully or partially offsetting
transactions so that its net position, coupled with any segregated assets (equal
to any remaining obligation), equals its net obligation. Asset coverage may be
achieved by other means when consistent with applicable regulatory policies.
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Additional Information on Other Investment Practices
U.S. Government Securities. The obligations issued or guaranteed by the
U.S. government in which a Fund may invest include direct obligations of the
U.S. Treasury and obligations issued by U.S. government agencies and
instrumentalities ("U.S. Government Securities"). Included among direct
obligations of the United States are Treasury Bills, Treasury Notes and Treasury
Bonds, which differ in terms of their interest rates, maturities and dates of
issuance. Treasury Bills have maturities of less than one year, Treasury Notes
have maturities of one to 10 years and Treasury Bonds generally have maturities
of greater than 10 years at the date of issuance. Included among the obligations
issued by agencies and instrumentalities of the United States are instruments
that are supported by the full faith and credit of the United States (such as
certificates issued by the Government National Mortgage Association ("GNMA"));
instruments that are supported by the right of the issuer to borrow from the
U.S. Treasury (such as securities of Federal Home Loan Banks); and instruments
that are supported by the credit of the instrumentality (such as Federal
National Mortgage Association ("FNMA") and Federal Home Loan Mortgage
Corporation ("FHLMC") bonds).
Other U.S. Government Securities the Funds may invest in include securities
issued or guaranteed by the Federal Housing Administration, Farmers Home Loan
Administration, Export-Import Bank of the United States, Small Business
Administration, General Services Administration, Central Bank for Cooperatives,
Federal Farm Credit Banks, Federal Intermediate Credit Banks, Federal Land
Banks, Federal Maritime Administration, Tennessee Valley Authority, District of
Columbia Armory Board and Student Loan Marketing Association. Because the U.S.
government is not obligated by law to provide support to an instrumentality it
sponsors, a Fund will invest in obligations issued by such an instrumentality
only if CSAM determines that the credit risk with respect to the instrumentality
does not make its securities unsuitable for investment by the Fund.
Money Market Obligations. Each Fund is authorized to invest, under normal
market conditions, up to 20% of its total assets in domestic and foreign
short-term (one year or less remaining to maturity) and medium-term (five year
or less remaining to maturity) money market obligations and for temporary
defensive purposes may invest in these securities without limit. These
instruments consist of obligations issued or guaranteed by the U.S. government
or a foreign government, their agencies or instrumentalities; bank obligations
(including certificates of deposit, time deposits and bankers' acceptances of
domestic or foreign banks, domestic savings and loans and similar institutions)
that are high quality investments; commercial paper rated no lower than A-2 by
Standard & Poor's Ratings Services ("S&P") or Prime-2 by Moody's Investors
Service, Inc. ("Moody's") or the equivalent from another major rating service
or, if unrated, of an issuer having an outstanding, unsecured debt issue then
rated within the three highest rating categories; and repurchase agreements with
respect to the foregoing.
Money Market Mutual Funds. Where CSAM believes that it would be beneficial
to a Fund and appropriate considering the factors of return and liquidity, each
Fund may invest up to 5% of its assets in securities of money market mutual
funds that are unaffiliated with the Fund or CSAM. As a shareholder in any
mutual fund, a Fund will bear its ratable share of the mutual fund's expenses,
including management fees, and will remain subject to payment of the Fund's
management fees and other expenses with respect to assets so invested.
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Repurchase Agreements. The Funds may invest in repurchase agreement
transactions with member banks of the Federal Reserve System and certain
non-bank dealers. Repurchase agreements are contracts under which the buyer of a
security simultaneously commits to resell the security to the seller at an
agreed-upon price and date. Under the terms of a typical repurchase agreement, a
Fund would acquire any underlying security for a relatively short period
(usually not more than one week) subject to an obligation of the seller to
repurchase, and the Fund to resell, the obligation at an agreed-upon price and
time, thereby determining the yield during the Fund's holding period. This
arrangement results in a fixed rate of return that is not subject to market
fluctuations during the Fund's holding period. The value of the underlying
securities will at all times be at least equal to the total amount of the
purchase obligation, including interest. The Fund bears a risk of loss in the
event that the other party to a repurchase agreement defaults on its obligations
or becomes bankrupt and the Fund is delayed or prevented from exercising its
right to dispose of the collateral securities, including the risk of a possible
decline in the value of the underlying securities during the period in which the
Fund seeks to assert this right. CSAM monitors the creditworthiness of those
bank and non-bank dealers with which each Fund enters into repurchase agreements
to evaluate this risk. A repurchase agreement is considered to be a loan under
the Investment Company Act of 1940, as amended (the "1940 Act").
Convertible Securities. Convertible securities in which a Fund may invest,
including both convertible debt and convertible preferred stock, may be
converted at either a stated price or stated rate into underlying shares of
common stock. Because of this feature, convertible securities enable an investor
to benefit from increases in the market price of the underlying common stock.
Convertible securities provide higher yields than the underlying equity
securities, but generally offer lower yields than non-convertible securities of
similar quality. The value of convertible securities fluctuates in relation to
changes in interest rates like bonds and, in addition, fluctuates in relation to
the underlying common stock. Subsequent to purchase by a Fund, convertible
securities may cease to be rated or a rating may be reduced below the minimum
required for purchase by the Fund. Neither event will require sale of such
securities, although CSAM will consider such event in its determination of
whether the Fund should continue to hold the securities.
Structured Securities. The Funds may purchase any type of publicly traded
or privately negotiated fixed income security, including mortgage- and
asset-backed securities; structured notes, bonds or debentures, and assignments
of and participations in loans.
Mortgage-Backed Securities. A Fund may invest in mortgage-backed securities
sponsored by U.S. and foreign issuers, as well as non-governmental issuers.
Non-government issued mortgage-backed securities may offer higher yields than
those issued by government entities, but may be subject to greater price
fluctuations. Mortgage-backed securities represent direct or indirect
participations in, or are secured by and payable from, mortgage loans secured by
real property. The mortgages backing these securities include, among other
mortgage instruments, conventional 30-year fixed-rate mortgages, 15-year
fixed-rate mortgages, graduated payment mortgages and adjustable rate mortgages.
The government or the issuing agency typically guarantees the payment of
interest and principal of these securities. However, the guarantees do not
extend to the securities' yield or value, which are likely to vary inversely
with fluctuations in interest rates, nor do the guarantees extend to the yield
or value of
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the Fund's shares. These securities generally are "pass-through" instruments,
through which the holders receive a share of all interest and principal payments
from the mortgages underlying the securities, net of certain fees. Some
mortgage-backed securities, such as collateralized mortgage obligations
("CMOs"), make payouts of both principal and interest at a variety of intervals;
others make semiannual interest payments at a predetermined rate and repay
principal at maturity (like a typical bond).
Yields on pass-through securities are typically quoted by investment
dealers and vendors based on the maturity of the underlying instruments and the
associated average life assumption. The average life of pass-through pools
varies with the maturities of the underlying mortgage loans. A pool's term may
be shortened by unscheduled or early payments of principal on the underlying
mortgages. The occurrence of mortgage prepayments is affected by various
factors, including the level of interest rates, general economic conditions, the
location, scheduled maturity and age of the mortgage and other social and
demographic conditions. Because prepayment rates of individual pools vary
widely, it is not possible to predict accurately the average life of a
particular pool. For pools of fixed-rate 30-year mortgages in a stable interest
rate environment, a common industry practice in the U.S. has been to assume that
prepayments will result in a 12-year average life, although it may vary
depending on numerous factors. At present, mortgage pools, particularly those
with loans with other maturities or different characteristics, are priced on an
assumption of average life determined for each pool. In periods of falling
interest rates, the rate of prepayment tends to increase, thereby shortening the
actual average life of a pool of mortgage-related securities. Conversely, in
periods of rising rates the rate of prepayment tends to decrease, thereby
lengthening the actual average life of the pool. However, these effects may not
be present, or may differ in degree, if the mortgage loans in the pools have
adjustable interest rates or other special payment terms, such as a prepayment
charge. Actual prepayment experience may cause the yield of mortgage-backed
securities to differ from the assumed average life yield. Reinvestment of
prepayments may occur at higher or lower interest rates than the original
investment, thus affecting the Fund's yield.
The rate of interest on mortgage-backed securities is lower than the
interest rates paid on the mortgages included in the underlying pool due to the
annual fees paid to the servicer of the mortgage pool for passing through
monthly payments to certificate holders and to any guarantor, such as GNMA, and
due to any yield retained by the issuer. Actual yield to the holder may vary
from the coupon rate, even if adjustable, if the mortgage-backed securities are
purchased or traded in the secondary market at a premium or discount. In
addition, there is normally some delay between the time the issuer receives
mortgage payments from the servicer and the time the issuer makes the payments
on the mortgage-backed securities, and this delay reduces the effective yield to
the holder of such securities.
Asset-Backed Securities. A Fund may invest in asset-backed securities,
which represent participations in, or are secured by and payable from, assets
such as motor vehicle installment sales, installment loan contracts, leases of
various types of real and personal property and receivables from revolving
credit (credit card) agreements. Such assets are securitized through the use of
trusts and special purpose corporations. Payments or distributions of principal
and interest may be guaranteed up to certain amounts and for a certain time
period by a letter of credit or a pool insurance policy issued by a financial
institution unaffiliated with the trust or corporation.
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Asset-backed securities present certain risks that are not presented by
other securities in which the Fund may invest. Automobile receivables generally
are secured by automobiles. Most issuers of automobile receivables permit the
loan servicers to retain possession of the underlying obligations. If the
servicer were to sell these obligations to another party, there is a risk that
the purchaser would acquire an interest superior to that of the holders of the
asset-backed securities. In addition, because of the large number of vehicles
involved in a typical issuance and technical requirements under state laws, the
trustee for the holders of the automobile receivables may not have a proper
security interest in the underlying automobiles. Therefore, there is the
possibility that recoveries on repossessed collateral may not, in some cases, be
available to support payments on these securities. Credit card receivables are
generally unsecured, and the debtors are entitled to the protection of a number
of state and federal consumer credit laws, many of which give such debtors the
right to set off certain amounts owed on the credit cards, thereby reducing the
balance due. In addition, there is no assurance that the security interest in
the collateral can be realized.
Structured Notes, Bonds or Debentures. Typically, the value of the
principal and/or interest on these instruments is determined by reference to
changes in the value of specific currencies, interest rates, commodities,
indexes or other financial indicators (the "Reference") or the relevant change
in two or more References. The interest rate or the principal amount payable
upon maturity or redemption may be increased or decreased depending upon changes
in the applicable Reference. The terms of the structured securities may provide
that in certain circumstances no principal is due at maturity and, therefore,
may result in the loss of a Fund's entire investment. The value of structured
securities may move in the same or the opposite direction as the value of the
Reference, so that appreciation of the Reference may produce an increase or
decrease in the interest rate or value of the security at maturity. In addition,
the change in interest rate or the value of the security at maturity may be a
multiple of the change in the value of the Reference so that the security may be
more or less volatile than the Reference, depending on the multiple.
Consequently, structured securities may entail a greater degree of market risk
and volatility than other types of debt obligations.
Assignments and Participations.
A Fund may invest in fixed and floating rate loans ("Loans") arranged
through private negotiations between a foreign government, corporation or other
entity (a "Borrower") and one or more financial institutions ("Lenders"). The
majority of the Fund's investments in Loans are expected to be in the form of
participations in Loans ("Participations") and assignments of portions of Loans
from third parties ("Assignments"). Participations typically will result in the
Fund having a contractual relationship only with the Lender, not with the
Borrower. A Fund will have the right to receive payments of principal, interest
and any fees to which it is entitled only from the Lender selling the
Participation and only upon receipt by the Lender of the payments from the
Borrower. In connection with purchasing Participations, the Fund generally will
have no right to enforce compliance by the Borrower with the terms of the loan
agreement relating to the Loan, nor any rights of set-off against the Borrower,
and the Fund may not directly benefit from any collateral supporting the
14
597589.28
Loan in which it has purchased the Participation. As a result, the Fund will
assume the credit risk of both the Borrower and the Lender that is selling the
Participation. In the event of the insolvency of the Lender selling a
Participation, the Fund may be treated as a general creditor of the Lender and
may not benefit from any set-off between the Lender and the Borrower. The Fund
will acquire Participations only if the Lender interpositioned between the Fund
and the Borrower is determined by CSAM to be creditworthy.
When a Fund purchases Assignments from Lenders, the Fund will acquire
direct rights against the Borrower on the Loan. However, since Assignments are
generally arranged through private negotiations between potential assignees and
potential assignors, the rights and obligations acquired by the Fund as the
purchaser of an Assignment may differ from, and be more limited than, those held
by the assigning Lender.
There are risks involved in investing in Participations and Assignments. A
Fund may have difficulty disposing of them because there is no liquid market for
such securities. The lack of a liquid secondary market will have an adverse
impact on the value of such securities and on the Fund's ability to dispose of
particular Participations or Assignments when necessary to meet the Fund's
liquidity needs or in response to a specific economic event, such as a
deterioration in the creditworthiness of the Borrower. The lack of a liquid
market for Participations and Assignments also may make it more difficult for a
Fund to assign a value to these securities for purposes of valuing the Fund's
portfolio and calculating its net asset value.
Debt Securities. The Strategic Value Fund may invest up to 20% of its net
assets and the Capital Appreciation Fund may invest up to 20% of its total
assets in debt securities. Debt obligations of corporations in which the Funds
may invest include corporate bonds, debentures and notes. Debt securities
convertible into common stock and certain preferred stocks may have risks
similar to those described below.
Moody's and S&P are private services that provide ratings of the credit
quality of debt securities and certain other securities. A description of the
ratings assigned to corporate bonds by Moody's and S&P is included in Appendix A
to this Statement of Additional Information.
Credit ratings attempt to evaluate the safety of principal and interest
payments, but they do not evaluate the volatility of a debt security's value or
its liquidity and do not guarantee the performance of the issuer. Rating
agencies may fail to make timely changes in credit ratings in response to
subsequent events, so that an issuer's current financial condition may be better
or worse than the rating indicates. There is a risk that rating agencies may
downgrade a debt security's rating. Subsequent to a security's purchase by a
Fund, it may cease to be rated or it may be downgraded. Neither event will
require the sale of such securities, although the Adviser will consider such
event in its determination of whether the Fund should continue to hold the
security. The Adviser may use these ratings in determining whether to purchase,
sell or hold a security. It should be emphasized, however, that ratings are
general and are not absolute standards of quality. Consequently, bonds with the
same maturity, interest rate and rating may have different market prices.
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The interest income to be derived may be considered as one factor in
selecting debt securities for investment by CSAM. Because the market value of
debt obligations can be expected to vary inversely to changes in prevailing
interest rates, investing in debt obligations may provide an opportunity for
capital appreciation when interest rates are expected to decline. The success of
such a strategy is dependent upon CSAM's ability to accurately forecast changes
in interest rates. The market value of debt obligations may be expected to vary
depending upon, among other factors, interest rates, the ability of the issuer
to repay principal and interest, any change in investment rating and general
economic conditions.
A security will be deemed to be investment grade if it is rated within the
four highest grades by Moody's or S&P or, if unrated, is determined to be of
comparable quality by CSAM. Moody's considers debt securities rated Baa (its
lowest investment grade rating) to have speculative characteristics. This means
that changes in economic conditions or other circumstances are more likely to
lead to a weakened capacity to make principal and interest payments than is the
case with higher grade bonds. A Fund's holdings of debt securities rated below
investment grade (commonly referred to as "junk bonds") may be rated as low as C
by Moody's or D by S&P at the time of purchase, or may be unrated securities
considered to be of equivalent quality. Securities that are rated C by Moody's
comprise the lowest rated class and can be regarded as having extremely poor
prospects of ever attaining any real investment standing. Debt rated D by S&P is
in default or is expected to default upon maturity or payment date. Investors
should be aware that ratings are relative and subjective and not absolute
standards of quality. Any percentage limitation on a Fund's ability to invest in
debt securities will not be applicable during periods when the Fund pursues a
temporary defensive strategy as discussed below.
When CSAM believes that a defensive posture is warranted, each Fund may
invest temporarily without limit in investment grade debt obligations and in
domestic and foreign money market obligations, including repurchase agreements.
Below Investment Grade Securities. The Strategic Value Fund may invest up
to 10% of its net assets and the Capital Appreciation Fund may invest up to 5%
of its total assets in securities rated below investment grade, including
convertible debt securities.
Below investment grade debt securities may be rated as low as C by Moody's
or D by S&P, or be deemed by CSAM to be of equivalent quality. Securities that
are rated C by Moody's are the lowest rated class and can be regarded as having
extremely poor prospects of ever attaining any real investment standing. A
security rated D by S&P is in default or is expected to default upon maturity or
payment date. Below investment grade securities (commonly referred to as "junk
bonds"), (i) will likely have some quality and protective characteristics that,
in the judgment of the rating organizations, are outweighed by large
uncertainties or major risk exposures to adverse conditions and (ii) are
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligation. The market
values of certain of these securities also tend to be more sensitive to
individual corporate developments and changes in economic conditions than
16
597589.28
investment grade securities. In addition, these securities generally present a
higher degree of credit risk. The risk of loss due to default is significantly
greater because these securities generally are unsecured and frequently are
subordinated to the prior payment of senior indebtedness. Issuers of medium- and
lower-rated securities and unrated securities are often highly leveraged and may
not have more traditional methods of financing available to them so that their
ability to service their obligations during an economic downturn or during
sustained periods of rising interest rates may be impaired.
An economic recession could disrupt severely the market for medium- and
lower-rated securities and may adversely affect the value of such securities and
the ability of the issuers of such securities to repay principal and pay
interest thereon. To the extent a secondary trading market for these securities
does exist, it generally is not as liquid as the secondary market for
higher-rated securities. The lack of a liquid secondary market, as well as
adverse publicity and investor perception with respect to these securities, may
have an adverse impact on market price and a Fund's ability to dispose of
particular issues when necessary to meet the Fund's liquidity needs or in
response to a specific economic event such as a deterioration in the
creditworthiness of the issuer. The lack of a liquid secondary market for
certain securities also may make it more difficult for a Fund to obtain accurate
market quotations for purposes of valuing the Fund and calculating its net asset
value.
The market value of securities in medium- and lower-rated categories is
also more volatile than that of higher quality securities. Factors adversely
impacting the market value of these securities will adversely impact a Fund's
net asset value. A Fund will rely on the judgment, analysis and experience of
CSAM in evaluating the creditworthiness of an issuer. In this evaluation, in
addition to relying on ratings assigned by Moody's or S&P, CSAM will take into
consideration, among other things, the issuer's financial resources, its
sensitivity to economic conditions and trends, its operating history, the
quality of the issuer's management and regulatory matters. Interest rate trends
and specific developments which may affect individual issuers will also be
analyzed. Subsequent to its purchase by a Fund, an issue of securities may cease
to be rated or its rating may be reduced. Neither event will require sale of
such securities, although CSAM will consider such event in its determination of
whether a Fund should continue to hold the securities. A Fund may incur
additional expenses to the extent it is required to seek recovery upon a default
in the payment of principal or interest on its portfolio holdings of such
securities. At times, adverse publicity regarding lower-rated securities has
depressed the prices for such securities to some extent.
Zero Coupon Securities. Each Fund may invest in "zero coupon" U.S.
Treasury, foreign government and U.S. and foreign corporate convertible and
nonconvertible debt securities, which are bills, notes and bonds that have been
stripped of their unmatured interest coupons and custodial receipts or
certificates of participation representing interests in such stripped debt
obligations and coupons. A zero coupon security pays no interest to its holder
prior to maturity. Accordingly, such securities usually trade at a deep discount
from their face or par value and will be subject to greater fluctuations of
market value in response to changing interest rates than debt obligations of
comparable maturities that make current distributions of interest. Redemption of
shares of the Fund that require it to sell zero coupon securities prior to
maturity may result in capital gains or losses that may be substantial. Federal
tax law requires that a holder of a zero coupon security accrue a portion of the
discount at which the security was
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597589.28
purchased as income each year, even though the holder receives no interest
payment on the security during the year. Such accrued discount will be
includible in determining the amount of dividends the Fund must pay each year
and, in order to generate cash necessary to pay such dividends, the Fund may
liquidate portfolio securities at a time when it would not otherwise have done
so.
Securities of Other Investment Companies. Each Fund may invest in
securities of other investment companies to the extent permitted under the 1940
Act or pursuant to an SEC order. Presently, under the 1940 Act, each Fund may
hold securities of another investment company in amounts which (a) do not exceed
3% of the total outstanding voting stock of such company, (b) do not exceed 5%
of the value of the Fund's total assets and (c) when added to all other
investment company securities held by the Fund, do not exceed 10% of the value
of the Fund's total assets. As a shareholder of another investment company, each
Fund would bear, along with other shareholders, its pro rata portion of the
other investment company's expenses, including advisory fees. These expenses
would be in addition to the advisory and other expenses that a Fund bears
directly in connection with its own operations.
Lending of Portfolio Securities. Each Fund may lend portfolio securities to
brokers, dealers and other financial organizations that meet capital and other
credit requirements or other criteria established by the Fund's Board of
Directors (the "Board"). These loans, if and when made, may not exceed 33 1/3%
of the Fund's total assets taken at value (including the loan collateral). Loans
of portfolio securities will be collateralized by cash, letters of credit or
U.S. Government Securities, which are maintained at all times in an amount equal
to at least 100% of the current market value of the loaned securities. Any gain
or loss in the market price of the securities loaned that might occur during the
term of the loan would be for the account of the Fund. From time to time, a Fund
may return a part of the interest earned from the investment of collateral
received for securities loaned to the borrower and/or a third party that is
unaffiliated with the Fund and that is acting as a "finder."
By lending its securities, a Fund can increase its income by continuing to
receive interest and any dividends on the loaned securities as well as by either
investing the collateral received for securities loaned in short-term
instruments or obtaining yield in the form of interest paid by the borrower when
U.S. Government Securities are used as collateral. Each Fund will adhere to the
following conditions whenever its portfolio securities are loaned: (i) the Fund
must receive at least 100% cash collateral or equivalent securities of the type
discussed in the preceding paragraph from the borrower; (ii) the borrower must
increase such collateral whenever the market value of the securities rises above
the level of such collateral; (iii) the Fund must be able to terminate the loan
at any time; (iv) the Fund must receive reasonable interest on the loan, as well
as any dividends, interest or other distributions on the loaned securities and
any increase in market value; (v) the Fund may pay only reasonable custodian
fees in connection with the loan; and (vi) voting rights on the loaned
securities may pass to the borrower, provided, however, that if a material event
adversely affecting the investment occurs, the Fund must terminate the loan and
regain the right to vote the securities. Loan agreements involve certain risks
in the event of default or insolvency of the other party, including possible
delays or restrictions upon a Fund's ability to recover the loaned securities or
dispose of the collateral for the loan. Default by or bankruptcy of a borrower
would expose the Funds to possible loss because of adverse market action,
expenses and/or delays in connection with the disposition of
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597589.28
the underlying securities. Any loans of a Fund's securities will be fully
collateralized and marked to market daily.
Each Fund and CSAM have obtained an order of exemption (the "Order") from
the SEC to permit Credit Suisse First Boston ("CSFB") to act as lending agent
for the Funds, to permit securities loans to broker-dealer affiliates of CSFB,
and to permit the investment of cash collateral received by CSFB from borrowers
and other uninvested cash amounts in certain money market funds advised by CSAM
("Investment Funds"). The Order contains a number of conditions that are
designed to ensure that CSFB's securities lending program does not involve
overreaching by CSAM, CSFB or any of their affiliates. These conditions include
percentage limitations on the amount of a Fund's assets that may be invested in
the Investment Funds, restrictions on the Investment Funds' ability to collect
sales charges and certain other fees, and a requirement that each Fund that
invests in the Investment Funds will do so at the same price as each other Fund
and will bear its proportionate shares of expenses and receive its proportionate
share of any dividends.
Foreign Investments. The Strategic Value and Capital Appreciation Funds may
invest up to 20% of net assets and 20% of total assets, respectively, in the
securities of foreign issuers. Investors should recognize that investing in
foreign companies involves certain risks, including those discussed below, which
are in addition to those associated with investing in U.S. issuers. Individual
foreign economies may differ favorably or unfavorably from the U.S. economy in
such respects as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency, and balance of payments position. The
Funds may invest in securities of foreign governments (or agencies or
instrumentalities thereof), and many, if not all, of the foregoing
considerations apply to such investments as well.
Depository Receipts. The assets of each Fund may be invested in the
securities of foreign issuers in the form of American Depository Receipts
("ADRs"), European Depository Receipts ("EDRs") and International Depository
Receipts ("IDRs"). These securities may not necessarily be denominated in the
same currency as the securities into which they may be converted. ADRs are
receipts typically issued by a U.S. bank or trust company which evidence
ownership of underlying securities issued by a foreign corporation. EDRs, which
are sometimes referred to as Continental Depository Receipts ("CDRs"), are
receipts issued in Europe, and IDRs, which are sometimes referred to as Global
Depository Receipts ("GDRs"), are issued outside the United States. EDRs (CDRs)
and IDRs (GDRs) are typically issued by non-U.S. banks and trust companies and
evidence ownership of either foreign or domestic securities. Generally, ADRs in
registered form are designed for use in U.S. securities markets, and EDRs (CDRs)
and IDRs (GDRs) in bearer form are designed for use in European and non-U.S.
securities markets, respectively. For purposes of the Funds' investment
policies, depository receipts generally are deemed to have the same
classification as the underlying securities they represent. Thus, a depository
receipt representing ownership of common stock will be treated as common stock.
ADRs are publicly traded on exchanges or over-the-counter in the United
States and are issued through "sponsored" or "unsponsored" arrangements. In a
sponsored ADR arrangement, the foreign issuer assumes the obligation to pay some
or all of the depository's transaction fees, whereas under an unsponsored
arrangement, the foreign issuer assumes no obligations and the depository's
transaction fees are paid directly
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by the ADR holders. In addition, less information is available in the United
States about an unsponsored ADR than about a sponsored ADR.
Foreign Currency Exchange. Since the Funds may be investing in securities
denominated in currencies of non-U.S. countries, and since the Funds may
temporarily hold funds in bank deposits or other money market investments
denominated in foreign currencies, the Funds may be affected favorably or
unfavorably by exchange control regulations or changes in the exchange rate
between such currencies and the dollar. A change in the value of a foreign
currency relative to the U.S. dollar will result in a corresponding change in
the dollar value of the Fund assets denominated in that foreign currency.
Changes in foreign currency exchange rates may also affect the value of
dividends and interest earned, gains and losses realized on the sale of
securities and net investment income and gains, if any, to be distributed to
shareholders by a Fund. Unless otherwise contracted, the rate of exchange
between the U.S. dollar and other currencies is determined by the forces of
supply and demand in the foreign exchange markets. Changes in the exchange rate
may result over time from the interaction of many factors directly or indirectly
affecting economic and political conditions in the U.S. and a particular foreign
country, including economic and political developments in other countries.
Governmental intervention may also play a significant role. National governments
rarely voluntarily allow their currencies to float freely in response to
economic forces. Sovereign governments use a variety of techniques, such as
intervention by a country's central bank or imposition of regulatory controls or
taxes, to affect the exchange rates of their currencies. The Funds may use
hedging techniques with the objective of protecting against loss through the
fluctuation of the value of foreign currencies against the U.S. dollar,
particularly the forward market in foreign exchange, currency options and
currency futures.
Information. Many of the foreign securities held by a Fund will not be
registered with, nor will the issuers thereof be subject to reporting
requirements of, the SEC. Accordingly, there may be less publicly available
information about these securities and about the foreign company or government
issuing them than is available about a domestic company or government entity.
Foreign companies are generally subject to financial reporting standards,
practices and requirements that are either not uniform or less rigorous than
those applicable to U.S. companies.
Political Instability. With respect to some foreign countries, there is the
possibility of expropriation or confiscatory taxation, limitations on the
removal of funds or other assets of the Funds, political or social instability,
or domestic developments which could affect U.S. investments in those and
neighboring countries.
Foreign Markets. Securities of some foreign companies are less liquid and
their prices are more volatile than securities of comparable U.S. companies.
Certain foreign countries are known to experience long delays between the trade
and settlement dates of securities purchased or sold which may result in
increased exposure to market and foreign exchange fluctuations and increased
illiquidity.
Increased Expenses. The operating expenses of a Fund, to the extent it
invests in foreign securities, may be higher than those of an investment company
investing exclusively in U.S. securities, since the expenses of the Funds, such
as the cost of converting foreign currency
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into U.S. dollars, the payment of fixed brokerage commissions on foreign
exchanges, custodial costs, valuation costs and communication costs, may be
higher than those costs incurred by other investment companies not investing in
foreign securities. In addition, foreign securities may be subject to foreign
government taxes that would reduce the net yield on such securities.
Foreign Debt Securities. The returns on foreign debt securities reflect
interest rates and other market conditions prevailing in those countries. The
relative performance of various countries' fixed income markets historically has
reflected wide variations relating to the unique characteristics of each
country's economy. Year-to-year fluctuations in certain markets have been
significant, and negative returns have been experienced in various markets from
time to time.
The foreign government securities in which each of the Funds may invest
generally consist of obligations issued or backed by national, state or
provincial governments or similar political subdivisions or central banks in
foreign countries. Foreign government securities also include debt obligations
of supranational entities, which include international organizations designated
or backed by governmental entities to promote economic reconstruction or
development, international banking institutions and related government agencies.
Examples include the International Bank for Reconstruction and Development (the
"World Bank"), the European Coal and Steel Community, the Asian Development Bank
and the Inter-American Development Bank.
Privatizations. Each Fund may invest in privatizations (i.e. foreign
government programs of selling interests in government-owned or controlled
enterprises). The ability of U.S. entities, such as the Funds, to participate in
privatizations may be limited by local law, or the terms for participation may
be less advantageous than for local investors. There can be no assurance that
privatization programs will be available or successful.
Brady Bonds. Each Fund may invest in so-called "Brady Bonds," which have
been issued by Costa Rica, Mexico, Uruguay and Venezuela and which may be issued
by other Latin American countries. Brady Bonds are issued as part of a debt
restructuring in which the bonds are issued in exchange for cash and certain of
the country's outstanding commercial bank loans. Investors should recognize that
Brady Bonds do not have a long payment history, and are subject to, among other
things, the risk of default. Brady Bonds may be collateralized or
uncollateralized, are issued in various currencies (primarily the U.S. dollar)
and are actively traded in the OTC secondary market for debt of Latin American
issuers. In light of the history of commercial bank loan defaults by Latin
American public and private entities, investments in Brady Bonds may be viewed
as speculative.
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Warrants. The Strategic Value and Capital Appreciation Funds may invest up
to 15% and 10% of its net assets, respectively, in warrants. Each Fund may
purchase warrants issued by domestic and foreign companies to purchase newly
created equity securities consisting of common and preferred stock. Warrants are
securities that give the holder the right, but not the obligation to purchase
equity issues of the company issuing the warrants, or a related company, at a
fixed price either on a date certain or during a set period. The equity security
underlying a warrant is authorized at the time the warrant is issued or is
issued together with the warrant.
Investing in warrants can provide a greater potential for profit or loss
than an equivalent investment in the underlying security, and, thus, can be a
speculative investment. At the time of issue, the cost of a warrant is
substantially less than the cost of the underlying security itself, and price
movements in the underlying security are generally magnified in the price
movements of the warrant. This leveraging effect enables the investor to gain
exposure to the underlying security with a relatively low capital investment.
This leveraging increases an investor's risk, however, in the event of a decline
in the value of the underlying security and can result in a complete loss of the
amount invested in the warrant. In addition, the price of a warrant tends to be
more volatile than, and may not correlate exactly to, the price of the
underlying security. If the market price of the underlying security is below the
exercise price of the warrant on its expiration date, the warrant will generally
expire without value. The value of a warrant may decline because of a decline in
the value of the underlying security, the passage of time, changes in interest
rates or in the dividend or other policies of the company whose equity underlies
the warrant or a change in the perception as to the future price of the
underlying security, or any combination thereof. Warrants generally pay no
dividends and confer no voting or other rights other than to purchase the
underlying security.
Non-Publicly Traded and Illiquid Securities. The Strategic Value and
Capital Appreciation Funds may invest up to 15% of its net assets and 10% of its
total assets, respectively, in non-publicly traded and illiquid securities,
including securities that are illiquid by virtue of the absence of a readily
available market, time deposits maturing in more than seven
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days, certain Rule 144A Securities (as defined below) and repurchase agreements
which have a maturity of longer than seven days. Securities that have legal or
contractual restrictions on resale but have a readily available market are not
considered illiquid for purposes of this limitation. Repurchase agreements
subject to demand are deemed to have a maturity equal to the notice period.
Historically, illiquid securities have included securities subject to
contractual or legal restrictions on resale because they have not been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
securities which are otherwise not readily marketable and repurchase agreements
having a maturity of longer than seven days. Securities which have not been
registered under the Securities Act are referred to as private placements or
restricted securities and are purchased directly from the issuer or in the
secondary market. Companies whose securities are not publicly traded may not be
subject to the disclosure and other investor protection requirements applicable
to companies whose securities are publicly traded. Limitations on resale may
have an adverse effect on the marketability of portfolio securities and a mutual
fund might be unable to dispose of restricted or other illiquid securities
promptly or at reasonable prices and might thereby experience difficulty
satisfying redemptions within seven days without borrowing. A mutual fund might
also have to register such restricted securities in order to dispose of them
resulting in additional expense and delay. Adverse market conditions could
impede such a public offering of securities.
In recent years, however, a large institutional market has developed for
certain securities that are not registered under the Securities Act including
repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security can be readily
resold or on an issuer's ability to honor a demand for repayment. The fact that
there are contractual or legal restrictions on resale to the general public or
to certain institutions may not be indicative of the liquidity of such
investments.
Rule 144A Securities. Rule 144A under the Securities Act adopted by the SEC
allows for a broader institutional trading market for securities otherwise
subject to restriction on resale to the general public. Rule 144A establishes a
"safe harbor" from the registration requirements of the Securities Act for
resales of certain securities to qualified institutional buyers. CSAM
anticipates that the market for certain restricted securities such as
institutional commercial paper will expand further as a result of this
regulation and use of automated systems for the trading, clearance and
settlement of unregistered securities of domestic and foreign issuers, such as
the PORTAL System sponsored by the NASD Inc.
An investment in Rule 144A Securities will be considered illiquid and
therefore subject to each Fund's limit on the purchase of illiquid securities
unless the Board or its delegates determines that the Rule 144A Securities are
liquid. In reaching liquidity decisions, the Board and its delegates may
consider, inter alia, the following factors: (i) the unregistered nature of the
security; (ii) the frequency of trades and quotes for the security; (iii) the
number of dealers wishing to purchase or sell the security and the number of
other potential purchasers; (iv) dealer undertakings to make a market in the
security and (v) the nature of the security and the nature of the marketplace
trades (e.g., the time needed to dispose of the security, the method of
soliciting offers and the mechanics of the transfer).
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Investing in Rule 144A securities could have the effect of increasing
the level of illiquidity in the Funds to the extent that qualified institutional
buyers are unavailable or uninterested in purchasing such securities from the
Funds. The Boards have adopted guidelines and delegated to CSAM the daily
function of determining and monitoring the liquidity of Rule 144A Securities,
although each Board will retain ultimate responsibility for liquidity
determinations.
Borrowing. The Strategic Value Fund may borrow up to 30% of its total
assets, and the Capital Appreciation Fund may borrow up to 10% of its total
assets, for temporary or emergency purposes, including to meet portfolio
redemption requests so as to permit the orderly disposition of portfolio
securities or to facilitate settlement transactions on portfolio securities, so
long as there is asset coverage of at least 300% for all borrowings of the Fund.
Additional investments (including roll-overs) will not be made when borrowings
exceed 5% of a Fund's total assets. Although the principal of such borrowings
will be fixed, the Fund's assets may change in value during the time the
borrowing is outstanding. Each Fund expects that some of its borrowings may be
made on a secured basis. In such situations, either the custodian will segregate
the pledged assets for the benefit of the lender or arrangements will be made
with a suitable subcustodian, which may include the lender.
Reverse Repurchase Agreements . Each Fund may enter into reverse repurchase
agreements with member banks of the Federal Reserve System and certain non-bank
dealers. Reverse repurchase agreements involve the sale of securities held by
the Fund pursuant to its agreement to repurchase them at a mutually agreed upon
date, price and rate of interest. At the time the Fund enters into a reverse
repurchase agreement, it will segregate with an approved custodian cash or
liquid high-grade debt securities having a value not less than the repurchase
price (including accrued interest). The segregated assets will be
marked-to-market daily and additional assets will be segregated on any day in
which the assets fall below the repurchase price (plus accrued interest). The
Fund's liquidity and ability to manage its assets might be affected when it sets
aside cash or portfolio securities to cover such commitments. Reverse repurchase
agreements involve the risk that the market value of the securities retained in
lieu of sale may decline below the price of the securities the Fund has sold but
is obligated to repurchase. In the event the buyer of securities under a reverse
repurchase agreement files for bankruptcy or becomes insolvent, such buyer or
its trustee or receiver may receive an extension of time to determine whether to
enforce the Fund's obligation to repurchase the securities, and the Fund's use
of the proceeds of the reverse repurchase agreement may effectively be
restricted pending such decision. Reverse repurchase agreements that are
accounted for as financings are considered to be borrowings under the 1940 Act.
When-Issued Securities and Delayed-Delivery Transactions. Each Fund may
utilize up to 20% of its total assets to purchase securities on a "when-issued"
basis or purchase or sell securities for delayed delivery (i.e., payment or
delivery occur beyond the normal settlement date at a stated price and yield).
In these transactions, payment for and delivery of the securities occur beyond
the regular settlement dates, normally within 30 to 45 days after the
transaction. The Fund will enter into a when-issued transaction for the purpose
of acquiring portfolio securities and not for the purpose of leverage, but may
sell the securities before the settlement date if CSAM deems it advantageous to
do so. The payment obligation and the interest rate that will be received on
when-issued and delayed-delivery securities are fixed at the time the buyer
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enters into the commitment. Due to fluctuations in the value of securities
purchased or sold on a when-issued or delayed-delivery basis, the yields
obtained on such securities may be higher or lower than the yields available in
the market on the dates when the investments are actually delivered to the
buyers. When-issued securities may include securities purchased on a "when, as
and if issued" basis, under which the issuance of the security depends on the
occurrence of a subsequent event, such as approval of a merger, corporate
reorganization or debt restructuring.
When a Fund agrees to purchase when-issued or delayed-delivery securities,
its custodian will set aside cash or liquid securities equal to the amount of
the commitment in a segregated account. Normally, the custodian will set aside
portfolio securities to satisfy a purchase commitment, and in such a case, the
Fund may be required subsequently to place additional assets in the segregated
account in order to ensure that the value of the account remains equal to the
amount of the Fund's commitment. It may be expected that the Fund's net assets
will fluctuate to a greater degree when it sets aside portfolio securities to
cover such purchase commitments than when it sets aside cash. When the Fund
engages in when-issued or delayed-delivery transactions, it relies on the other
party to consummate the trade. Failure of the seller to do so may result in the
Fund incurring a loss or missing an opportunity to obtain a price considered to
be advantageous.
REITs. Each Fund may invest in real estate investment trusts ("REITs"),
which are pooled investment vehicles that invest primarily in income-producing
real estate or real estate related loans or interests. Like regulated investment
companies such as the Fund, REITs are not taxed on income distributed to
shareholders provided they comply with several requirements of the Internal
Revenue Code of 1986, as amended (the "Code"). By investing in a REIT, the Fund
will indirectly bear its proportionate share of any expenses paid by the REIT in
addition to the expenses of the Fund.
Investing in REITs involves certain risks. A REIT may be affected by
changes in the value of the underlying property owned by such REIT or by the
quality of any credit extended by the REIT. REITs are dependent on management
skills, are not diversified (except to the extent the Code requires), and are
subject to the risks of financing projects. REITs are subject to heavy cash flow
dependency, default by borrowers, self-liquidation and the possibilities of
failing to qualify for the exemptions from the 1940 Act. REITs are also subject
to interest rate risks.
Small Capitalization and Emerging Growth Companies; Unseasoned Issuers.
Investments in small- and medium- sized and emerging growth companies, as well
as companies with continuous operations of less than three years ("unseasoned
issuers") involve considerations that are not applicable to investing in
securities of established, larger-capitalization issuers, including reduced and
less reliable information about issuers and markets, less stringent financial
disclosure requirements, illiquidity of securities and markets, higher brokerage
commissions and fees and greater market risk in general. In addition, securities
of small- and medium-sized and emerging growth companies and unseasoned issuers
may involve greater risks since these securities may have limited marketability
and, thus, may be more volatile.
"Special Situation" Companies. "Special situation companies" are involved
in an actual or prospective acquisition or consolidation; reorganization;
recapitalization; merger, liquidation or distribution of cash, securities or
other assets; a tender or exchange offer; a
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breakup or workout of a holding company; or litigation which, if resolved
favorably, would improve the value of the company's stock. If the actual or
prospective situation does not materialize as anticipated, the market price of
the securities of a "special situation company" may decline significantly. CSAM
believes, however, that if it analyzes "special situation companies" carefully
and invests in the securities of these companies at the appropriate time, the
Fund may achieve maximum capital appreciation. There can be no assurance,
however, that a special situation that exists at the time of an investment will
be consummated under the terms and within the time period contemplated.
Strategy Available to the Capital Appreciation Fund
Dollar Rolls. The Capital Appreciation Fund may enter into "dollar rolls,"
in which the Fund sells fixed-income securities for delivery in the current
month and simultaneously contracts to repurchase similar but not identical (same
type, coupon and maturity) securities on a specified future date. During the
roll period, the Fund would forgo principal and interest paid on such
securities. The Fund would be compensated by the difference between the current
sale price and the forward price for the future purchase, as well as by the
interest earned on the cash proceeds of the initial sale. At the time the Fund
enters into a dollar roll transaction, it will segregate with an approved
custodian cash or liquid securities having a value not less than the repurchase
price (including accrued interest) and will subsequently monitor the segregated
assets to ensure that its value is maintained.
Strategy Available to the Strategic Value Fund
Short Sales "Against the Box". The Strategic Value Fund may engage in a
short sale if at the time of the short sale the Fund owns or has the right to
obtain without additional cost an equal amount of the security being sold short.
This investment technique is known as a short sale "against the box." It may be
entered into by the Fund to, for example, lock in a sale price for a security
the Fund does not wish to sell immediately. If the Fund engages in a short sale,
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the collateral for the short position will be segregated in an account with the
Fund's custodian or qualified sub-custodian. No more than 10% of the Fund's net
assets (taken at current value) may be held as collateral for short sales
against the box at any one time.
The Fund may make a short sale as a hedge, when it believes that the price
of a security may decline, causing a decline in the value of a security owned by
the Fund (or a security convertible or exchangeable for such security). In such
case, any future losses in the Fund's long position should be offset by a gain
in the short position and, conversely, any gain in the long position should be
reduced by a loss in the short position. The extent to which such gains or
losses are reduced will depend upon the amount of the security sold short
relative to the amount the Fund owns. There will be certain additional
transaction costs associated with short sales against the box, but the Fund will
endeavor to offset these costs with the income from the investment of the cash
proceeds of short sales.
If the Fund effects a short sale of securities at a time when it has an
unrealized gain on the securities, it may be required to recognize that gain as
if it had actually sold the securities (as a "constructive sale") on the date it
effects the short sale. However, such constructive sale treatment may not apply
if the Fund closes out the short sale with securities other than the appreciated
securities held at the time of the short sale and if certain other conditions
are satisfied. Uncertainty regarding the tax consequences of effecting short
sales may limit the extent to which the Fund may effect short sales.
INVESTMENT RESTRICTIONS
Both Funds. Certain investment limitations of each Fund may not be changed
without the affirmative vote of the holders of a majority of the Fund's
outstanding shares ("Fundamental Restrictions"). Such majority is defined as the
lesser of (i) 67% or more of the shares present at the meeting, if the holders
of more than 50% of the outstanding shares of the Fund are present or
represented by proxy, or (ii) more than 50% of the outstanding shares. If a
percentage restriction (other than the percentage limitation set forth in No. 2
of the Capital Appreciation Fund and No. 1 of the Strategic Value Fund) is
adhered to at the time of an investment, a later increase or decrease in the
percentage of assets resulting from a change in the values of portfolio
securities or in the amount of a Fund's assets will not constitute a violation
of such restriction.
Strategic Value Fund. The investment limitations numbered 1 through 12 are
Fundamental Restrictions. Investment limitations numbered 13 though 15 may be
changed by a vote of the Board at any time.
The Strategic Value Fund may not:
1. Borrow money except that the Fund may (a) borrow from banks for
temporary or emergency purposes and (b) enter into reverse repurchase
agreements; provided that reverse repurchase agreements and any other
transactions constituting borrowing by the Fund may not exceed 30% of the value
of the Fund's total assets at the time of such borrowing and only if after such
borrowing there is assets coverage of at least 300% for all borrowings of the
Fund. For purposes of this restriction, the entry into options, futures
contracts and options on futures contracts shall not constitute borrowing.
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2. Purchase the securities of any issuer if as a result more than 5% of the
value of the Fund's total assets would be invested in the securities of such
issuer or more than 10% of the outstanding voting securities of such issuer
would be owned by the Fund, except that this 5% limitation does not apply to
U.S. Government Securities and except that up to 25% of the value of the Fund's
total assets may be invested without regard to this 5% limitation.
3. Make loans, except that the Fund may purchase or hold fixed-income
securities, lend portfolio securities and enter into repurchase agreements in
accordance with its investment objectives, policies and limitations.
4. Underwrite any securities issued by others except to the extent that the
investment in restricted securities and the sale of securities or the purchase
of securities directly from the issuer in accordance with the Fund's investment
objectives, policies and limitations may be deemed to be underwriting.
5. Purchase or sell real estate, except that the Fund may invest in (a)
securities secured by real estate, mortgages or interests therein or (b) issued
by companies which invest in real estate or interests therein.
6. Make short sales of securities or maintain a short position, except that
the Fund may maintain short positions in options on currencies, securities and
stock indexes, futures contracts and options on futures contracts and enter into
short sales "against the box."
7. Purchase securities on margin, except that the Fund may obtain any
short-term credits necessary for the clearance of purchases and sales of
securities. For purposes of this restriction, the deposit or payment of initial
or variation margin in connection with transactions in options, futures
contracts and options on futures contracts will not be deemed to be a purchase
of securities on margin.
8. Invest in commodities, except that the Fund may purchase and sell
futures contracts and options on futures contracts, currencies, securities or
indexes.
9. Pledge, mortgage or hypothecate its assets, except (a) to the extent
necessary to secure permitted borrowings and (b) to the extent related to the
deposit of assets in escrow in connection with collateral and initial or
variation margin arrangements with respect to options, futures contracts, and
options on futures contracts and in amounts not in excess of 125% of the dollar
amount borrowed.
10. Invest more than 15% of the Fund's net assets in securities which may
be illiquid because of legal or contractual restrictions on resale or securities
for which there are no readily available market quotations. For purposes of this
limitation, repurchase agreements with maturities greater than seven days shall
be considered illiquid securities.
11. Make additional investments (including roll-overs) if the Fund's
borrowings exceed 5% of its net assets.
12. Purchase any securities which would cause 25% or more of the value of
the Fund's total assets at the time of purchase to be invested in the securities
of issuers conducting their principal business activities in the same industry;
provided that there shall be no limit on the purchase of U.S. Government
Securities.
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597589.28
13. Make investments for the purpose of exercising control or management.
14. Invest in oil, gas or mineral exploration or development programs,
except that the Fund may invest in securities of companies that invest in or
sponsor oil, gas or mineral exploration or development programs.
15. Invest in warrants (other than warrants acquired by the Fund as part of
a unit or attached to securities at the time of purchase) if, as a result, the
investments (valued at the lower of cost or market) would exceed 15% of the
value of the Fund's total assets.
With regard to investment limitation No. 10, relating to Strategic Value
Fund's holdings of illiquid securities, the Fund will monitor the liquidity of
its portfolio on an ongoing basis to determine whether, in light of current
circumstances, an adequate level of liquidity is being maintained. Particularly,
the Board will check routinely the value of illiquid securities in its portfolio
and should the value of such securities approach 15% of the net assets of the
Fund's portfolio, the Board will take action to reduce the Fund's holdings of
illiquid securities in an orderly fashion to maintain adequate liquidity. In no
event will the Fund purchase an illiquid security if doing so would result in
more than 15% of the Fund's net assets being invested in illiquid securities.
Capital Appreciation Fund. The investment limitations numbered 1 through 11
are Fundamental Restrictions. Investment limitations 12 through 14 may be
changed by a vote of the Board at any time.
The Capital Appreciation Fund may not:
1. Purchase the securities of any issuer if as a result more than 5% of the
value of the Fund's total assets would be invested in the securities of such
issuer, except that this 5% limitation does not apply to U.S. Government
Securities and except that up to 25% of the value of the Fund's total assets may
be invested without regard to this 5% limitation.
2. Borrow money or issue senior securities except that the Fund may (a)
borrow from banks for temporary or emergency purposes, and not for leveraging,
and then in amounts not in excess of 10% of the value of the Fund's total assets
at the time of such borrowing and (b) enter into futures contracts; or mortgage,
pledge or hypothecate any assets except in connection with any bank borrowing
and in amounts not in excess of the lesser of the dollar amounts borrowed or 10%
of the value of the Fund's total assets at the time of such borrowing. Whenever
borrowings described in (a) exceed 5% of the value of the Fund's total assets,
the Fund will not make any additional investments (including roll-overs). For
purposes of this restriction, (a) the deposit of assets in escrow in connection
with the purchase of securities on a when-issued or delayed-delivery basis and
(b) collateral arrangements with respect to initial or variation margin for
futures contracts will not be deemed to be pledges of the Fund's assets.
3. Purchase any securities which would cause 25% or more of the value of
the Fund's total assets at the time of purchase to be invested in the securities
of issuers conducting
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their principal business activities in the same industry; provided that there
shall be no limit on the purchase of U.S. Government Securities.
4. Make loans, except that the Fund may purchase or hold publicly
distributed fixed-income securities, lend portfolio securities and enter into
repurchase agreements.
5. Underwrite any issue of securities except to the extent that the
investment in restricted securities and the purchase of fixed-income securities
directly from the issuer thereof in accordance with the Fund's investment
objective, policies and limitations may be deemed to be underwriting.
6. Purchase or sell real estate, real estate investment trust securities,
commodities or commodity contracts, or invest in oil, gas or mineral exploration
or development programs, except that the Fund may invest in (a) fixed-income
securities secured by real estate, mortgages or interests therein, (b)
securities of companies that invest in or sponsor oil, gas or mineral
exploration or development programs and (c) futures contracts and related
options.
7. Make short sales of securities or maintain a short position.
8. Purchase, write or sell puts, calls, straddles, spreads or combinations
thereof, except that the Fund may (a) purchase put and call options on
securities, (b) write covered call options on securities, (c) purchase and write
put and call options on stock indices and (d) enter into options on futures
contracts.
9. Purchase securities of other investment companies except in connection
with a merger, consolidation, acquisition, reorganization or offer of exchange
or as otherwise permitted under the 1940 Act.
10. Purchase more than 10% of the voting securities of any one issuer, more
than 10% of the securities of any class of any one issuer or more than 10% of
the outstanding debt securities of any one issuer; provided that this limitation
shall not apply to investments in U.S. Government Securities.
11. Purchase securities on margin, except that the Fund may obtain any
short-term credits necessary for the clearance of purchases and sales of
securities. For purposes of this restriction, the deposit or payment of initial
or variation margin in connection with futures contracts or related options will
not be deemed to be a purchase of securities on margin.
12. Invest more than 10% of the value of the Fund's total assets in
securities which may be illiquid because of legal or contractual restrictions on
resale or securities for which there are no readily available market quotations.
For purposes of this limitation, (a) repurchase agreements with maturities
greater than seven days and (b) time deposits maturing in more than seven
calendar days shall be considered illiquid securities.
13. Invest in warrants (other than warrants acquired by the Fund as part of
a unit or attached to securities at the time of purchase) if, as a result, the
investments (valued at the lower of cost or market) would exceed 10% of the
value of the Fund's net assets.
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14. Invest in oil, gas or mineral leases.
PORTFOLIO VALUATION
The following is a description of the procedures used by each Fund in
valuing its assets.
Equity securities listed on an exchange or traded in an over-the-counter
market will be valued at the closing price on the exchange or market on which
the security is primarily traded (the "Primary Market") at the time of valuation
(the "Valuation Time"). If the security did not trade on the Primary Market, the
security will be valued at the closing price on another exchange or market where
it trades at the Valuation Time. If there are no such sales prices, the security
will be valued at the most recent bid quotation as of the Valuation Time or at
the lowest asked quotation in the case of a short sale of securities. Debt
securities with a remaining maturity greater than 60 days shall be valued in
accordance with the price supplied by an independent pricing service approved by
the Board ("Pricing Service"). If there are no such quotations, the security
will be valued at its fair value as determined in good faith by or under the
Board of Directors.
Prices for debt securities supplied by a pricing service may use a matrix,
formula or other objective method that takes into consideration market indexes,
matrices, yield curves and other specific adjustments. The procedures of Pricing
Services are reviewed periodically by the officers of each Fund under the
general supervision and responsibility of the Board, which may replace a Pricing
Service at any time.
If a Pricing Service is not able to supply closing prices and bid/asked
quotations for an equity security or a price for a debt security, and there are
two or more dealers, brokers or market makers in the security, the security will
be valued at the mean between the highest bid and the lowest asked quotations
from at least two dealers, brokers or market makers. If such dealers, brokers or
market makers only provide bid quotations, the value shall be the mean between
the highest and the lowest bid quotations provided. If a Pricing Service is not
able to supply closing prices and bid/asked quotations, for an equity security
or a price for a debt security, and there is only one dealer, broker or market
maker in the security, the security will be valued at the mean between the bid
and the asked quotations provided, unless the dealer, broker or market maker can
only provide a bid quotation in which case the security will be valued at such
bid quotation. Options contracts will be valued similarly. Futures contracts
will be valued at the most recent settlement price at the time of valuation.
Short-term obligations with maturities of 60 days or less are valued at
amortized cost, which constitutes fair value as determined by or under the
direction of the Board of each Fund. Amortized cost involves valuing a portfolio
instrument at its initial cost and thereafter assuming a constant amortization
to maturity of any discount or premium, regardless of the impact of fluctuating
interest rates on the market value of the instrument. The
597589.28
amortized cost method of valuation may also be used with respect to other debt
obligations with 60 days or less remaining to maturity.
Securities, options, futures contracts and other assets which cannot be
valued pursuant to the foregoing will be valued at their fair value as
determined in good faith by or under the direction of the Board of each Fund. In
addition, the Board of each Fund or its delegates may value a security at fair
value if it determines that such security's value determined by the methodology
set forth above does not reflect its fair value.
Trading in securities in certain foreign countries is completed at various
times prior to the close of business on each business day in New York (i.e., a
day on which the New York Stock Exchange, Inc. (the "NYSE") is open for
trading). The NYSE is currently scheduled to be closed on New Year's Day, Dr.
Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day, and on the
preceding Friday or subsequent Monday when one of these holidays falls on a
Saturday or Sunday, respectively. In addition, securities trading in a
particular country or countries may not take place on all business days in New
York. Furthermore, trading takes place in various foreign markets on days which
are not business days in New York and days on which each Fund's net asset value
is not calculated. As a result, calculation of each Fund's net asset value may
not take place contemporaneously with the determination of the prices of certain
foreign portfolio securities used in such calculation. All assets and
liabilities initially expressed in foreign currency values will be converted
into U.S. dollar values at the prevailing rate as quoted by a Pricing Service at
the close of the London Stock Exchange. If such quotations are not available,
the rate of exchange will be determined in good faith by or under the direction
of the Board of each Fund.
PORTFOLIO TRANSACTIONS
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 or 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.
32
597589.28
CSAM will select portfolio investments and effect transactions for the
Funds. In selecting broker-dealers, CSAM does business exclusively with those
broker-dealers that, in CSAM'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,
CSAM 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
CSAM's standards may be higher than for execution services alone or for services
that fall below CSAM's standards. CSAM 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, CSAM
will only receive brokerage or research services 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.
During the fiscal year ended October 31, 2002, Strategic Value Fund paid
$14,500 in commissions to Credit Suisse First Boston, representing 5.43% of the
total brokerage commissions paid. Credit Suisse First Boston effected 6.26% of
the aggregate dollar amount of transactions involving the payment of
commissions. During the fiscal years ended 2001 and 2000, Strategic Value Fund
did not pay any brokerage commissions to Credit Suisse First Boston.
For the fiscal year ended October 31, 2002, $21,422 and $107,001 of total
brokerage commissions for the Strategic Value Fund and Capital Appreciation
Fund, respectively, was paid to brokers and dealers who provided research
services. The Strategic Value Fund and the Capital Appreciation Fund directed
$20,642,560 and $84,794,474, respectively, in transactions to brokers and
dealers who provided such research. Research received from brokers or dealers is
supplemental to CSAM's own research program.
The following table details amounts paid by each Fund in commissions to
broker-dealers for execution of portfolio transactions during the indicated
fiscal years ended October 31.
<Table>
<Caption>
FUND YEAR COMMISSIONS
- ---- ---- -----------
</Table>
33
FUND YEAR COMMISSIONS
- ---- ---- -----------
Strategic Value Fund 2000 $1,017,561
2001 $ 404,947
2002 $ 266,931
Capital Appreciation Fund 2000 $2,799,307
2001 $2,501,023
2002 $1,115,582*
* The decrease in brokerage commissions paid by Capital Appreciation Fund during
the period was a result of a number of factors, including a decrease in the net
assets of the Fund and a lower portfolio turnover ratio relative to the
preceding year.
All orders for transactions in securities or options on behalf of a Fund
are placed by CSAM with broker-dealers that it selects, including Credit Suisse
Asset Management Securities, Inc., the Funds' distributor and an affiliate of
CSAM ("CSAMSI") and affiliates of Credit Suisse Group. A Fund may utilize CSAMSI
or affiliates of Credit Suisse in connection with a purchase or sale of
securities when CSAM 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.
Investment decisions for a Fund concerning specific portfolio securities
are made independently from those for other clients advised by CSAM. 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 CSAM believes to be
equitable to each client, including the Funds. In some instances, this
investment procedure may adversely affect the price paid or received by the Fund
or the size of the position obtained or sold for the Fund. To the extent
permitted by law, CSAM may aggregate the securities 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.
In no instance will portfolio securities be purchased from or sold to CSAM,
CSAMSI or CSFB or any affiliated person of such companies, except as permitted
by SEC exemptive order or by applicable law. In addition, a Fund will not give
preference to any institutions with whom the Fund enters into distribution or
shareholder servicing agreements concerning the provision of distribution
services or support services.
Transactions for each of the Funds may be effected on foreign securities
exchanges. In transactions for securities not actively traded on a foreign
securities exchange, a 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
34
597589.28
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.
Each Fund may participate, if and when practicable, in bidding for the
purchase of securities for the 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 CSAM, in its sole
discretion, believes such practice to be otherwise in the Fund's interest.
As of October 31, 2002, the Funds held the following securities of their
regular brokers or dealers:
AGGREGATE VALUE
FUND NAME OF SECURITIES OF THE HOLDINGS
- ---- ------------------ ---------------
Strategic Value State Street Bank and Trust Company Euro Time Deposit $11,003,000
Capital Appreciation State Street Bank and Trust Company Euro Time Deposit $2,183,000
PORTFOLIO TURNOVER
Each Fund does not intend to seek profits through short-term trading, but
the rate of turnover will not be a limiting factor when the Fund deems it
desirable to sell or purchase securities. Each Fund's portfolio turnover rate is
calculated by dividing the lesser of purchases or sales of its portfolio
securities for the year by the monthly average value of the portfolio
securities. Securities with remaining maturities of one year or less at the date
of acquisition are excluded from the calculation.
Certain practices that may be employed by a Fund could result in high
portfolio turnover. For example, options on securities may be sold in
anticipation of a decline in the price of the underlying security (market
decline) or purchased in anticipation of a rise in the price of the underlying
security (market rise) and later sold. To the extent that its portfolio is
traded for the short-term, a Fund will be engaged essentially in trading
activities based on short-term considerations affecting the value of an issuer's
stock instead of long-term investments based on fundamental valuation of
securities. Because of this policy, portfolio securities may be sold without
regard to the length of time for which they have been held. Consequently, the
annual portfolio turnover rate of a Fund may be higher than mutual funds having
similar objectives that do not utilize these strategies.
It is not possible to predict the Funds' portfolio turnover rates. High
portfolio turnover rates (100% or more) may result in higher brokerage
commissions, dealer mark-ups or underwriting commissions as well as other
transaction costs. In addition, gains realized from portfolio turnover may be
taxable to shareholders.
35
597589.28
For the fiscal years ended October 31, 2001 and 2002, the Strategic Value
Fund's turnover rate was 38% and 30% and the Capital Appreciation Fund's
turnover rate was 100% and 50%, respectively.
MANAGEMENT OF THE FUNDS
Officers and Board of Directors/Trustees
The business and affairs of the Strategic Value Fund are managed by the
Board of Directors in accordance with the laws of the State of Maryland. The
business and affairs of the Capital Appreciation Fund are managed by a Board of
Trustees in accordance with the laws of the Commonwealth of Massachusetts. Each
Board elects officers who are responsible for the day-to-day operations of the
Fund and who execute policies authorized by the Board. The Board approves all
significant agreements between the Funds and the companies that furnish services
to the Funds, including agreements with the Funds' investment adviser, custodian
and transfer agent.
The names and ages of each Fund's Directors/Trustees and officers, their
addresses, present positions and principal occupations during the past five
years and other affiliations are set forth below.
Information Concerning Directors/Trustees And Officers
NUMBER OF
PORTFOLIOS
IN FUND
TERM OF COMPLEX OTHER
POSITION(S) OFFICE(1) OVERSEEN BY DIRECTORSHIPS
HELD WITH AND LENGTH OF PRINCIPAL OCCUPATION(S) DIRECTOR/ HELD BY DIRECTOR/
NAME, ADDRESS AND AGE FUND TIME SERVED DURING PAST FIVE YEARS TRUSTEE TRUSTEE
- --------------------- ---------- ------------- ---------------------- ----------- -------------------------
INDEPENDENT
DIRECTORS/TRUSTEES
Richard H. Francis Director/ Since 1999 Currently retired; 54 None
c/o Credit Suisse Asset Trustee Executive Vice President
Management, LLC and Chief Financial
466 Lexington Avenue Officer of Pan Am
New York, New York Corporation and Pan
10017-3140 American World Airways,
Age: 70 Inc. from 1988 to 1991
Jack W. Fritz Director/ Since Private investor; 53 Director of Advo, Inc.
2425 North Fish Creek Road Trustee Fund Consultant and Director (direct mail advertising)
P.O. Box 1287 inception of Fritz Broadcasting,
Wilson, Wyoming 83014 Inc. and Fritz
Age: 75 Communications
(developers and operators
of radio stations) since
1987
- -----------------
(1) Each Director/Trustee and Officer serves until his or her respective
successor has been duly elected and qualified.
36
NUMBER OF
PORTFOLIOS
IN FUND
TERM OF COMPLEX OTHER
POSITION(S) OFFICE(1) OVERSEEN BY DIRECTORSHIPS
HELD WITH AND LENGTH OF PRINCIPAL OCCUPATION(S) DIRECTOR/ HELD BY DIRECTOR/
NAME, ADDRESS AND AGE FUND TIME SERVED DURING PAST FIVE YEARS TRUSTEE TRUSTEE
- --------------------- ---------- ------------- ---------------------- ----------- ------------------------
Jeffrey E. Garten Director/ Since 1998 Dean of Yale School of 53 Director of Aetna, Inc.;
Box 208200 Trustee Management and William S. Director of
New Haven, Connecticut Beinecke Professor in the Calpine Energy
06520-8200 Practice of International Corporation;
Age: 56 Trade and Finance; Director of Car
Undersecretary of Max Group (used
Commerce for car dealers)
International Trade from
November 1993 to October
1995; Professor at
Columbia University from
September 1992 to
November 1993
Peter F. Krogh Director/ Since 2001 Dean Emeritus and 53 Member of Board of
301 ICC Trustee Distinguished Professor The Carlisle Companies Inc.;
Georgetown University of International Affairs Member of Selection
Washington, DC 20057 at the Edmund A. Walsh Committee for Truman
Age: 66 School of Foreign Scholars and Henry
Service, Georgetown Luce Scholars; Senior
University; Moderator of Associate of Center for
PBS foreign affairs Strategic and International
television series Studies; Trustee
of numerous world affairs
organizations
James S. Pasman, Jr. Director/ Since 1999 Currently retired; 55 Director of Education
c/o Credit Suisse Asset Trustee President and Chief Management Corp.
Management, LLC Operating Officer of
466 Lexington Avenue National InterGroup, Inc.
New York, New York (holding company) from
10017-3140 April 1989 to March 1991;
Age: 71 Chairman of Permian Oil Co.
from April 1989 to March
1991
37
597589.28
NUMBER OF
PORTFOLIOS
IN FUND
TERM OF COMPLEX OTHER
POSITION(S) OFFICE(1) OVERSEEN BY DIRECTORSHIPS
HELD WITH AND LENGTH OF PRINCIPAL OCCUPATION(S) DIRECTOR/ HELD BY DIRECTOR/
NAME, ADDRESS AND AGE FUND TIME SERVED DURING PAST FIVE YEARS TRUSTEE TRUSTEE
- --------------------- ---------- ----------- ---------------------- ---------- ------------------------
Steven N. Rappaport Director/ Since 1999 Partner of Lehigh Court, 54 None
Lehigh Court, LLC Trustee LLC since July 2002;
40 East 52nd Street, President of SunGard
New York, New York 10022 Securities Finance, Inc.,
Age: 54 from 2001 to July 2002;
President of
Loanet, Inc.
(on-line
accounting
service) from
1995 to 2001;
Director,
President, North
American
Operations, and
former Executive
Vice President
from 1992 to 1993
of Worldwide
Operations of
Metallurg Inc.
(manufacturer of
specialty metals
and alloys);
Executive Vice
President,
Telerate, Inc.
(provider of
real-time
information to
the capital
markets) from
1987 to 1992;
Partner in the
law firm of
Hartman & Craven
until 1987
INTERESTED
DIRECTOR/TRUSTEE
William W. Priest(2) Director/ Since 1999 Co-Managing Partner 60 None
Steinberg Priest & Sloane Trustee Steinberg Priest
Capital Management & Sloane Capital
12 East 49th Street Management since March
12th Floor 2001; Chairman and
New York, New York 10017 Managing Director of CSAM
Age: 61 from 2000 to February
2001, Chief Executive
Officer and Managing
Director of CSAM from
1990 to 2000
- -----------------
(2) Mr. Priest is a Director/Trustee who is an "interested person" of the Funds
as defined in the 1940 Act, because he provides consulting services to
CSAM.
38
597589.28
NUMBER OF
PORTFOLIOS
IN FUND
TERM OF COMPLEX OTHER
POSITION(S) OFFICE(1) OVERSEEN BY DIRECTORSHIPS
HELD WITH AND LENGTH OF PRINCIPAL OCCUPATION(S) DIRECTOR/ HELD BY DIRECTOR/
NAME, ADDRESS AND AGE FUND TIME SERVED DURING PAST FIVE YEARS TRUSTEE TRUSTEE
- --------------------- ---------- ------------- ---------------------- ----------- ------------------------
OFFICERS
Laurence R. Smith Chairman Since 2002 Managing Director and -- --
Credit Suisse Asset Global Chief Investment
Management, LLC Officer of CSAM;
466 Lexington Avenue Associated with J.P.
New York, New York Morgan Investment
10017-3140 Management from 1981 to
Age: 44 1999; Officer of
other Credit Suisse
Funds
Hal Liebes, Esq. Vice Since 1999 Managing Director and -- --
Credit Suisse Asset President Global General Counsel of
Management, LLC and CSAM; Associated with
466 Lexington Avenue Secretary Lehman Brothers, Inc.
New York, New York from 1996 to 1997;
10017-3140 Associated with CSAM from
Age: 38 1995 to 1996; Associated
with CSFB
Investment
Management from
1994 to 1995;
Associated with
Division of
Enforcement, U.S.
Securities and
Exchange
Commission from
1991 to 1994;
Officer of other
Credit Suisse
Funds
Michael A. Pignataro Treasurer Since 1999 Director and Director of -- --
Credit Suisse Asset and Chief Fund Administration of
Management, LLC Financial CSAM; Associated with
466 Lexington Avenue Officer CSAM since 1984; Officer
New York, New York of other Credit Suisse
10017-3140 Funds
Age: 43
Gregory N. Bressler, Esq. Assistant Since 2000 Director and Deputy -- --
Credit Suisse Asset Secretary General Counsel;
Management, LLC Associated with CSAM
466 Lexington Avenue since January 2000;
New York, New York Associated with the law
10017-3140 firm of Swidler Berlin
Age: 36 Shereff Friedman LLP from
1996 to 2000; Officer of
other Credit Suisse Funds
Kimiko T. Fields, Esq. Assistant Since 2002 Vice President and -- --
Credit Suisse Asset Secretary Legal Counsel;
Management, LLC Associated with CSAM
466 Lexington Avenue since January 1998;
New York, New York Officer of other Credit
10017-3140 Suisse Funds
Age: 38
39
597589.28
NUMBER OF
PORTFOLIOS
IN FUND
TERM OF COMPLEX OTHER
POSITION(S) OFFICE(1) OVERSEEN BY DIRECTORSHIPS
HELD WITH AND LENGTH OF PRINCIPAL OCCUPATION(S) DIRECTOR/ HELD BY DIRECTOR/
NAME, ADDRESS AND AGE FUND TIME SERVED DURING PAST FIVE YEARS TRUSTEE TRUSTEE
- --------------------- ---------- ----------- ---------------------- ----------- ------------------------
Rocco A. DelGuercio Assistant Since 1999 Vice President and -- --
Credit Suisse Asset Treasurer Administrative Officer of
Management, LLC CSAM; Associated with
466 Lexington Avenue CSAM since June 1996;
New York, New York Assistant Treasurer,
10017-3140 Bankers Trust Co. --
Age: 39 Fund Administration from
March 1994 to June 1996;
Mutual Fund Accounting
Supervisor, Dreyfus
Corporation from April
1987 to March 1994;
Officer of other Credit
Suisse Funds
Joseph Parascondola Assistant Since 2000 Assistant Vice President -- --
Credit Suisse Asset Treasurer -- Fund Administration of
Management, LLC CSAM since April 2000;
466 Lexington Avenue Assistant Vice President,
New York, New York Deutsche Asset Management
10017-3140 from January 1999 to
Age: 39 April 2000; Assistant
Vice President, Weiss,
Peck & Greer LLC from
November 1995 to December
1998; Officer of other
Credit Suisse Funds
Robert M. Rizza Assistant Since 2002 Assistant Vice President
Credit Suisse Asset Treasurer of CSAM (January 2001 to
Management, LLC present); Administrative
466 Lexington Avenue Officer of CSAM (March
New York, New York 1998 to December 2000);
10017-3140 Assistant Treasurer of
Age: 37 Bankers Trust Co. (April
1994 to March 1998);
Officer of other Credit
Suisse Funds
40
597589.28
Ownership in Securities of the Fund and Fund Complex
As reported to the Funds, the information in the following table reflects
beneficial ownership by the Directors/Trustees of certain securities as of
December 31, 2002.
AGGREGATE DOLLAR RANGE OF EQUITY
SECURITIES IN ALL REGISTERED
INVESTMENT COMPANIES OVERSEEN BY
DOLLAR RANGE OF EQUITY SECURITIES IN DIRECTOR IN FAMILY OF INVESTMENT
NAME OF DIRECTOR THE FUND*(3) COMPANIES*(3)
- ------------------------- ------------------------------------ ---------------------------------
INDEPENDENT DIRECTORS
Richard H. Francis Strategic Value Fund - C E
Capital Appreciation Fund - C
Jack W. Fritz Strategic Value Fund - E E
Capital Appreciation Fund - E
Jeffrey E. Garten Strategic Value Fund - A A
Capital Appreciation Fund - A
Peter F. Krogh Strategic Value Fund - A D
Capital Appreciation Fund - A
James S. Pasman, Jr. Strategic Value Fund - A C
Capital Appreciation Fund - C
Steven N. Rappaport Strategic Value Fund - B D
Capital Appreciation Fund - B
INTERESTED DIRECTOR
William W. Priest Strategic Value Fund - A A
Capital Appreciation Fund - A
- -------------------
* Key to Dollar Ranges:
A. None
B. $1 - $10,000
C. $10,000 - $50,000
D. $50,000 - $100,000
E. Over $100,000
No employee of CSAM, State Street Bank and Trust Company, CSAMSI, the
Funds' co-administrators or any of their affiliates receives any compensation
from a Fund for acting as an officer or director/trustee of the Fund. Each
Director/Trustee who is not a
- -------------------
(3) Beneficial ownership is determined in accordance with Rule 16a-1(a)(2)
under the Securities Exchange Act of 1934.
41
597589.28
director, trustee, officer or employee of CSAM, State Street Bank and Trust
Company, CSAMSI, or any of their affiliates receives an annual fee of $750 and
$250 for each meeting of the Boards attended by him for his services as
Director, and is reimbursed for expenses incurred in connection with his
attendance at Board meetings. Each member of the Audit Committee receives an
annual fee of $250 and the chairman of the Audit Committee receives an annual
fee of $325, for serving on the Audit Committee.
Information concerning Committees and Meetings of Directors/Trustees
Each Fund has an Audit Committee and a Nominating Committee. The members of
the Audit Committee and the Nominating Committee consist of all the
Directors/Trustees who are not "interested persons" of the Funds as defined in
the 1940 Act ("Independent Directors/Trustees"), namely Messrs. Francis, Fritz,
Garten, Krogh, Pasman and Rappaport.
In accordance with its written charter adopted by the Board of
Directors/Trustees, the Audit Committee assists the Board in fulfilling its
responsibility for oversight of the quality and integrity of the accounting,
auditing and financial reporting practices of the Funds. It also makes
recommendations to the Board as to the selection of the independent public
accountants, reviews the methods, scope and result of the audits and audit fees
charged, and reviews the Funds' internal accounting procedures and controls. The
Audit Committee also considers the scope and amount of non-audit services
provided to the Funds, its adviser and affiliates by the independent public
accountants. The Audit Committee of each Fund met four times during the fiscal
year ended October 31, 2002.
The Nominating Committee is charged with the duty of making all nominations
for Independent Directors to the Board of Directors/Trustees. The Nominating
Committee will consider nominees recommended by the Fund's shareholders when a
vacancy becomes available. Shareholders who wish to recommend a nominee should
send nominations to the Fund's Secretary. The Nominating Committee also
considers the appointment of independent counsel to the Independent
Directors/Trustees. The Nominating Committee of each Fund met twice during the
fiscal year ended October 31, 2002.
DIRECTORS'/TRUSTEES' TOTAL COMPENSATION FOR THE FISCAL YEAR ENDED OCTOBER 31,
2002
TOTAL NUMBER OF FUNDS
ALL INVESTMENT FOR WHICH DIRECTOR/
NAME OF STRATEGIC CAPITAL COMPANIES TRUSTEE SERVES WITHIN
DIRECTOR/TRUSTEE VALUE FUND APPRECIATION FUND IN FUND COMPLEX FUND COMPLEX
- --------------------- ----------- ----------------- --------------- -----------------------
William W. Priest* None None None 60
Richard H. Francis $3,562.50 $3,562.50 $ 103,749.50 54
Jack W. Fritz $3,312.50 $3,312.50 $ 94,374.48 53
Jeffrey E. Garten $3,312.50 $3,312.50 $ 97,499.50 53
Peter F. Krogh $3,312.50 $3,312.50 $ 99,099.50 53
James S. Pasman, Jr. $3,562.50 $3,562.50 $ 103,599.50 55
Steven N. Rappaport $3,862.50 $3,862.50 $ 110,554.76 54
- -------------------
* Mr. Priest is an "interested person" of the Funds and, accordingly, receives
no compensation from any Fund or any other investment company advised by
CSAM.
42
597589.28
As of January 24, 2003, Directors/Trustees and officers as a group owned of
record less than 1% of each Fund's outstanding shares.
Investment
ADVISORY AGREEMENTS
CSAM, located at 466 Lexington Avenue, New York, New York 10017-3140,
serves as investment adviser to each Fund pursuant to a written investment
advisory agreement between CSAM and the Fund (the "Advisory Agreement"). CSAM is
the institutional and mutual fund asset management arm of CSFB, part of the
Credit Suisse Group ("Credit Suisse"), one of the world's largest financial
43
597589.28
organizations with approximately $819.6 billion in assets under management. CSAM
is a diversified investment adviser managing global and domestic equity and
fixed income portfolios for retail investors as well as institutional clients
such as corporate pension and profit-sharing plans, state pension funds, union
funds, endowments and charitable institutions. Together with its predecessor
firms, CSAM has been engaged in the investment advisory business for over 60
years. As of September 31, 2002, Credit Suisse Asset Management employed 2,270
people worldwide and had global assets under management of approximately $284.3
billion, with $55.8 billion of assets under management in the U.S. CSFB is a
leading global investment bank serving institutional, corporate, government and
individual clients. CSFB's businesses include securities underwriting, sales and
trading, investment banking, private equity, financial advisory services,
investment research, venture capital, correspondent brokerage services and asset
management. CSFB operates in 77 locations in 36 countries across six continents.
CSFB is a business unit of the Zurich-based Credit Suisse. The principal
business address of Credit Suisse is Paradeplatz 8, CH8070, Zurich, Switzerland.
The Advisory Agreement between each Fund and CSAM has an initial term of
two years and continues in effect from year to year thereafter if such
continuance is specifically approved at least annually by the vote of a majority
of the Independent Directors/Trustees cast in person at a meeting called for the
purpose of voting on such approval, and either by a vote of the Fund's Board of
Directors/Trustees or by a majority of the Fund's outstanding voting securities,
as defined in the 1940 Act.
Pursuant to each Advisory Agreement, subject to the supervision and
direction of the Board, CSAM is responsible for managing each Fund in accordance
with the Fund's stated investment objective and policies. CSAM is responsible
for providing investment advisory services as well as conducting a continual
program of investment, evaluation and, if appropriate, sale and reinvestment of
the Fund's assets. In addition to expenses that CSAM may incur in performing its
services under the Advisory Agreement, CSAM pays the compensation, fees and
related expenses of all Directors/Trustees who are affiliated persons of CSAM or
any of its subsidiaries.
44
597589.28
Each Fund bears certain expenses incurred in its operation, including:
investment advisory and administration fees; taxes, interest, brokerage fees and
commissions, if any; fees of Directors of the Fund who are not officers,
directors, or employees of CSAM or affiliates of any of them; fees of any
pricing service employed to value shares of the Fund; SEC fees, state Blue Sky
qualification fees and any foreign qualification fees; charges of custodians and
transfer and dividend disbursing agents; the Fund's proportionate share of
insurance premiums; outside auditing and legal expenses; costs of maintenance of
the Fund's existence; costs attributable to investor services, including,
without limitation, telephone and personnel expenses; costs of preparing and
printing prospectuses and statements of additional information for regulatory
purposes and for distribution to existing shareholders; costs of shareholders'
reports and meetings of the shareholders of the Fund and of the officers or
Board of Directors/Trustees of the Fund; and any extraordinary expenses.
Each class of a Fund bears all of its own expenses not specifically assumed
by the Adviser or another service provider to the Fund. General expenses of the
Funds not readily identifiable as belonging to a particular Fund are allocated
among all Credit Suisse Funds by or under the direction of the Funds' Boards of
Directors/Trustees in such manner as the Boards determine to be fair and
accurate. Each class of the Funds pays its own administration fees and may pay a
different share than the other classes of other expenses, except advisory and
custodian fees, if those expenses are actually incurred in a different amount by
such class or if a class receives different services.
Each Advisory Agreement provides that CSAM shall not be liable for any
error of judgment or mistake of law or for any loss suffered by the Fund in
connection with the matters to which the Agreement relates, except that CSAM
shall be liable for a loss resulting from a breach of fiduciary duty by CSAM
with respect to the receipt of compensation for services; provided that nothing
in the Advisory Agreement shall be deemed to protect or purport to protect CSAM
against any liability to the Fund or to shareholders of the Fund to which CSAM
would otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence on its part in the performance of its duties or by reason of CSAM's
reckless disregard of its obligations and duties under the Advisory Agreement.
Each Fund or CSAM may terminate the Advisory Agreement on 60 days' written
notice without penalty. The Advisory Agreement will terminate automatically in
the event of its assignment (as defined in the 1940 Act).
For its services to the Strategic Value and Capital Appreciation Funds,
CSAM is paid (before any voluntary waivers or reimbursements) a fee computed
daily and paid monthly at the annual rate of .75% and .70% of such Fund's
average daily net assets, respectively. CSAM may voluntarily waive a portion of
its fees from time to time and temporarily limit the expenses to be borne by a
Fund.
For the past three fiscal years ended October 31, the Funds paid CSAM
advisory fees, and CSAM waived fees and/or reimbursed expenses of the Funds
under the Advisory Agreements as follows:
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OCTOBER 31, 2002
FUND FEES PAID (AFTER WAIVERS) WAIVERS REIMBURSEMENTS
---- ------------------------- ------- --------------
Strategic Value $1,862,407 $0 $0
Capital Appreciation $5,607,846 $0 $0
OCTOBER 31, 2001
FUND FEES PAID (AFTER WAIVERS) WAIVERS REIMBURSEMENTS
---- ------------------------- ------- --------------
Strategic Value $2,186,298 $0 $0
Capital Appreciation $9,141,750 $0 $0
OCTOBER 31, 2000
FUND FEES PAID (AFTER WAIVERS) WAIVERS REIMBURSEMENTS
---- ------------------------- ------- --------------
Strategic Value $ 2,924,687 $0 $0
Capital Appreciation $10,269,516 $0 $0
BOARD APPROVAL OF ADVISORY AGREEMENTS
In approving the Advisory Agreement, the Board of Directors/Trustees of
each Fund, including the Independent Directors/Trustees, considered the
reasonableness of the advisory fee in light of the extent and quality of the
advisory services provided and any additional benefits received by CSAM or its
affiliates in connection with providing services to the Fund, compared the fees
charged by CSAM to those charged by CSAM with respect to its other clients for
comparable services and to those charged by other investment advisers with
respect to similar funds, and analyzed the expenses incurred by CSAM with
respect to the Fund. The Board of Directors/Trustees also considered the Fund's
performance relative to a selected peer group, the Fund's total expenses in
comparison to funds of comparable size, and other factors. Specifically, the
Board of Directors/Trustees noted information received at regular meetings
throughout the year related to Fund performance and services rendered by CSAM,
and benefits potentially accruing to CSAM and its affiliates from securities
lending, administrative and brokerage relationships with affiliates of CSAM, as
well as the Adviser's research arrangements with brokers who execute
transactions on behalf of the Fund. The Board reviewed the profitability to CSAM
and its affiliates of their services to the Fund and considered whether
economies of scale in the provision of services to the Fund were being
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597589.28
passed along to shareholders. The Board reviewed whether, and if so to what
extent, CSAM or its affiliates were waiving their fees and/or reimbursing Fund
expenses and acknowledged that the fee waivers and reimbursements could be
discontinued at any time. The Board also reviewed whether it would be
appropriate to adopt breakpoints in the rate of advisory fees, whereby the rate
of advisory fees would be reduced as fund assets increased. After requesting and
reviewing such information as they deemed necessary, the Board concluded that
the Advisory Agreement was in the best interests of the Fund and its
shareholders. No single factor reviewed by the Board was identified by the Board
as the principal factor in determining whether to approve the Advisory
Agreement. The Independent Directors were advised by separate independent legal
counsel throughout the process.
ADMINISTRATION AGREEMENTS
CSAMSI and State Street Bank and Trust Company ("State Street") serve as
co-administrators to each Fund pursuant to separate written agreements with the
Fund (the "CSAMSI Co-Administration Agreement" and the "State Street
Co-Administration Agreement," respectively).
CSAMSI became co-administrator to each Fund on November 1, 1999. For the
services provided by CSAMSI under the CSAMSI Co-Administration Agreement, each
Fund pays CSAMSI a fee calculated daily and paid monthly at the annual rate of
10% of the Fund's average daily net assets.
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597589.28
State Street became co-administrator to each Fund on August 1,
2002. For the services provided by State Street under the State Street
Co-Administration Agreement, each Fund pays State Street a fee calculated at the
annual rate of its pro-rated share of .05% of the first $5 billion in average
daily net assets of the Credit Suisse Funds Complex (the "Fund Complex"), .035%
of the Fund Complex's next $5 billion in average daily net assets, and .02% of
the Fund Complex's average daily net assets in excess of $10 billion, exclusive
of out-of-pocket expenses. Each class of shares of the Funds bears its
proportionate share of fees payable to State Street in the proportion that its
assets bear to the aggregate assets of the Fund at the time of calculation. For
the period from August 1, 2002 through October 31, 2002, the Strategic Value and
Capital Appreciation Funds paid State Street fees under the State Street
Co-Administration Agreement of $28,532 and $80,886, respectively.
PFPC Inc. ("PFPC"), an indirect, wholly owned subsidiary of PNC
Financial Services Group, served as a co-administrator to each Fund prior to
August 1, 2002. PFPC received from each Fund a fee calculated at an annual rate
of .075% of the Fund's first $500 million in average daily net assets, .065% of
the next $1 billion in average daily net assets and .055% of average daily net
assets exceeding $1.5 billion, exclusive of out-of-pocket expenses.
During the three fiscal years ended October 31, PFPC and CSAMSI
earned the following amounts in co-administration fees.
FUND YEAR PFPC CSAMS
---- ------ ----------- -----------
Strategic Value Fund 2000 $ 544,463 $ 389,958
2001 $ 239,012 $ 291,506
2002 $ 149,432 $ 248,321
Capital Appreciation Fund 2000 $ 1,228,069 $ 1,467,074
2001 $ 972,394 $ 1,305,964
2002 $ 462,765 $ 801,121
Code of Ethics
The Funds, CSAM and CSAMSI have each adopted a written Code of
Ethics (the "Code of Ethics"), which permits personnel covered by the Code of
Ethics ("Covered Persons") to invest in securities, including securities that
may be purchased or held by the Fund. The Code of Ethics also contains
provisions designed to address the conflicts of interest that could arise from
personal trading by advisory personnel, including: (1) all Covered Persons must
report their personal securities transactions at the end of each quarter; (2)
with certain limited exceptions, all Covered Persons must obtain preclearance
before executing any personal securities transactions; (3) Covered Persons may
not execute personal trades in a security if there
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are any pending orders in that security by the Fund; and (4) Covered Persons may
not invest in initial public offerings.
The Board reviews the administration of the Code of Ethics at
least annually and may impose sanctions for violations of the Code of Ethics.
Custodian and Transfer Agent
State Street acts as the custodian for each Fund and also acts as
the custodian for the Funds' foreign securities pursuant to a Custodian
Agreement (the "Custodian Agreement"). Under the Custodian Agreement, State
Street (a) maintains a separate account or accounts in the name of each Fund,
(b) holds and transfers portfolio securities on account of each Fund, (c)
accepts receipts and makes disbursements of money on behalf of each Fund, (d)
collects and receives all income and other payments and distributions on account
of each Fund's portfolio securities, and (e) makes periodic reports to the
Funds' Boards of Directors/Trustees concerning each Fund's operations. With the
approval of the Board, State Street is authorized to select one or more foreign
banking institutions and foreign securities depositories to serve as
sub-custodian on behalf of the Funds and to select one or more domestic banks or
trust companies to serve as sub-custodian on behalf of the Funds. For this
service to the Funds under the Custodian Agreements, State Street receives a fee
which is calculated based upon each Fund's average daily gross assets, exclusive
of transaction charges and out-of-pocket expenses, which are also charged to the
Funds. The principal business address of State Street is 225 Franklin Street,
Boston, Massachusetts 02110.
Boston Financial Data Services, Inc., an affiliate of State
Street ("BFDS"), serves as the shareholder servicing, transfer and dividend
disbursing agent of each Fund pursuant to a Transfer Agency and Service
Agreement, under which BFDS (i) issues and redeems shares of the Funds, (ii)
addresses and mails all communications by the Funds to record owners of Fund
shares, including reports to shareholders, dividend and distribution notices and
proxy material for meetings of shareholders, (iii) maintains shareholder
accounts and, if requested, sub-accounts and (iv) makes periodic reports to the
Boards concerning the transfer agent's operations with respect to the Funds.
BFDS's principal business address is 2 Heritage Drive, North Quincy,
Massachusetts 02171.
Organization of the Funds
Capital Appreciation Fund. The Fund's Agreement and Declaration
of Trust (the "Trust Agreement") authorizes the Board to issue an unlimited
number of full and fractional shares of common stock, $.001 par value per share,
of which an unlimited number are designated "Common Shares," "Advisor Shares,"
"Class A Shares," "Class B Shares" and "Class C Shares."
Massachusetts law provides that shareholders could, under certain
circumstances, be held personally liable for the obligations of the Capital
Appreciation Fund. However, the Trust Agreement disclaims shareholder liability
for acts or obligations of the Fund and requires that notice of such disclaimer
be given in each agreement, obligation or instrument entered into or executed by
the Fund or a Trustee. The Trust Agreement provides for indemnification from
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the Fund's property for all losses and expenses of any shareholder held
personally liable for the obligations of the Fund. Thus, the risk of a
shareholder's incurring financial loss on account of shareholder liability is
limited to circumstances in which the Fund would be unable to meet its
obligations, a possibility that CSAM believes is remote and immaterial. Upon
payment of any liability incurred by the Fund, the shareholder paying the
liability will be entitled to reimbursement from the general assets of the Fund.
The Trustees intend to conduct the operations of the Fund in such a way so as to
avoid, as far as possible, ultimate liability of the shareholders for
liabilities of the Fund.
Strategic Value Fund. The Fund's charter authorizes the Board to
issue full and fractional shares of common stock, $.001 par value per share, of
which one billion shares are designated "Common Shares," two billion shares are
designated "Advisor Shares," one billion shares are designated "Class A Shares,"
one billion shares are designated "Class B Shares," and one billion shares are
designated "Class C Shares."
Both Funds. All shareholders of a Fund in each class, upon
liquidation, will participate ratably in the Fund's net assets. Shares do not
have cumulative voting rights, which means that holders of more than 50% of the
shares voting for the election of Directors/Trustees can elect all
Directors/Trustees. Shares are transferable but have no preemptive, conversion
or subscription rights. Shares of each class represent equal pro rata interests
in the respective Fund and accrue dividends and calculate net asset value and
performance quotations in the same manner. Because of the higher fees paid by
Class B and Class C shares, the total return on Class B and Class C shares can
be expected to be lower than the total return on Class A and Common shares, and
in turn, because of the higher fees paid by Class A shares, the total return on
Class A shares can be expected to be lower than the total return on Common
shares. Class B shares convert to Class A shares after 8 years but Class C
shares never convert to another class of shares, so annual expenses remain
higher for Class C shares. Common shares can be purchased only by certain types
of investors as outlined in the Common class Prospectus. Unless the context
clearly suggests otherwise, references to a Fund in this prospectus are to the
Fund as a whole and not to any particular class of the Fund's shares.
Investors in a Fund are entitled to one vote for each full share
held and fractional votes for fractional shares held. Shareholders of a Fund
will vote in the aggregate except where otherwise required by law and except
that each class will vote separately on certain matters pertaining to its
distribution and shareholder servicing arrangements. There will normally be no
meetings of investors for the purpose of electing members of the governing Board
unless and until such time as less than a majority of the members holding office
have been elected by investors. Any Director of a Fund may be removed from
office upon the vote of shareholders holding at least a majority of the relevant
Fund's outstanding shares, at a meeting called for that purpose. A meeting will
be called for the purpose of voting on the removal of a Board member at the
written request of holders of 10% of the outstanding shares of a Fund.
The Funds are open-end management investment companies within
the meaning of the 1940 Act. The Strategic Value Fund was incorporated on
January 29, 1996, under the laws of the State of Maryland. The Capital
Appreciation Fund was organized on January 20, 1987 under the laws of The
Commonwealth of Massachusetts and is a business entity commonly known as a
"Massachusetts business trust." Each of the Funds is diversified. Each Fund
offers
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597589.28
five classes of shares, Common, Advisor, Class A, Class B and Class C. Unless
otherwise indicated, references to a "Fund" apply to each class of shares of
that Fund.
Each Fund sends to its investors a semiannual report and an
audited annual report, each of which includes a list of the investment
securities held by the Fund and a statement of the performance of the Fund.
Periodic listings of the investment securities held by the Fund, as well as
certain statistical characteristics of the Fund, may be obtained by calling
Credit Suisse Funds at 800-927-2874 or on the Credit Suisse Funds web site at
www.CreditSuisseFunds.com.
The Strategic Value Fund was incorporated under the name Warburg,
Pincus Growth & Income Fund, Inc. On May 3, 1996, the Warburg Pincus Growth &
Income Fund, Inc. acquired all of the assets and liabilities of the investment
portfolio of the RBB Fund with a similar name.
On December 6, 1999, the Strategic Value Fund changed its name
from "Warburg, Pincus Growth & Income Fund, Inc." to "Warburg, Pincus Value
Fund, Inc." On February 5, 2001, the Strategic Value Fund changed its name from
"Warburg, Pincus Value Fund, Inc." to "Warburg, Pincus Value II Fund, Inc." On
March 26, 2001, the Strategic Value Fund changed its name from "Warburg Pincus
Value II Fund, Inc." to "Credit Suisse Warburg Pincus Value II Fund, Inc." On
December 12, 2001, the Strategic Value Fund changed its name from "Credit Suisse
Warburg Pincus Value II Fund" to "Credit Suisse Strategic Value Fund."
On February 26, 1992, the Capital Appreciation Fund amended its
Agreement and Declaration of Trust to change its name from "Counsellors Capital
Appreciation Fund" to "Warburg, Pincus Capital Appreciation Fund." On March 16,
2001, the Capital Appreciation Fund changed its name from "Warburg, Pincus
Capital Appreciation Fund" to "Credit Suisse Warburg Pincus Capital Appreciation
Fund." On December 12, 2001, the Capital Appreciation Fund changed its name from
"Credit Suisse Warburg Pincus Capital Appreciation Fund" to "Credit Suisse
Capital Appreciation Fund."
On December 12, 2002, the Board of Directors of the Strategic
Value Fund approved, subject to shareholder approval, a proposed reorganization
(the "Reorganization") whereby all of the assets and liabilities of the
Strategic Value Fund would be transferred to the Large Cap Value Fund of Credit
Suisse Capital Funds (the "Acquiring Fund") in exchange for shares of the
Acquiring Fund. The Reorganization is subject to the completion of certain
conditions, including the approval of the Strategic Value Fund's shareholders.
The Reorganization is expected to be consummated in April, 2003, after which
shares of the Strategic Value Fund would no longer be offered.
Distribution and Shareholder Servicing
Distributor. CSAMSI serves as distributor of the Funds' shares
and offers each Fund's shares on a continuous basis. CSAMSI's principal business
address is 466 Lexington Avenue, New York, New York 10017-3140.
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597589.28
Each Fund has authorized certain broker-dealers, financial
institutions, recordkeeping organizations and other financial intermediaries
(collectively, "Service Organizations") or, if applicable, their designees, to
enter confirmed purchase and redemption orders on behalf of their clients and
customers, with payment to follow no later than the Fund's pricing on the
following business day. If payment is not received by such time, the Service
Organization could be held liable for resulting fees or losses. The Fund may be
deemed to have received a purchase or redemption order when a Service
Organization, or, if applicable, its authorized designee, accepts the order.
Such orders received by the Fund in proper form will be priced at the Fund's net
asset value next computed after they are accepted by the Service Organization or
its authorized designee. Service Organizations may impose transaction or
administrative charges or other direct fees, which charges or fees would not be
imposed if Fund shares are purchased directly from the Funds.
For administration, subaccounting, transfer agency and/or other
services, CSAM or its affiliates may pay Service Organizations a fee of up to
..50% of the average annual value of accounts with the Funds maintained by such
Service Organizations. Service Organizations may also be paid additional amounts
on a one-time or ongoing basis, which may include a fee of up to 1.00% of new
assets invested in a Fund. The Service Fee payable to any one Service
Organization is determined based upon a number of factors, including the nature
and quality of services provided, the operations processing requirements of the
relationship and the standardized fee schedule of the Service Organization or
recordkeeper. Each Fund may reimburse CSAM part of this fee at rates they would
normally pay to the transfer agent for providing the services.
Advisor Shares. The Strategic Value and the Capital Appreciation
Funds have entered into agreements ("Agreements") with institutional
shareholders of record, broker-dealers, financial institutions, depository
institutions, retirement plans and financial intermediaries ("Institutions") to
provide certain distribution, shareholder servicing, administrative and/or
accounting services for their clients or customers (or participants in the case
of retirement plans) ("Customers") who are beneficial owners of Advisor Shares.
Agreements are governed by a distribution plan (the "Advisor Shares 12b-1 Plan")
pursuant to Rule 12b-1 under the 1940 Act, pursuant to which the Fund pays in
consideration for services, a fee calculated at an annual rate of .50% of the
average daily net assets of the Advisor Shares of the Fund, although under the
Advisor Shares 12b-1 Plan the Fund is authorized to pay up to .75% of the Fund's
Advisor Class shares. Such payments may be paid to Institutions directly by a
Fund or by CSAMSI on behalf of the Fund.
Certain Institutions may receive additional fees from CSAMSI,
CSAM or their affiliates on a one-time or ongoing basis for providing
supplemental services in connection with
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investments in the Funds. Institutions may also be reimbursed for marketing and
other costs. Additional fees may be up to 0.25% per year of the value of Fund
accounts maintained by the firm and, in certain cases, may include a fee of up
to 1.00% of new assets invested in a Fund. Fees payable to any particular
Institution are determined based upon a number of factors, including the nature
and quality of the services provided, the operations processing requirements of
the relationship and the standardized fee schedule of the Institution. To the
extent that CSAMSI, CSAM or their affiliates provide additional compensation or
reimbursements for marketing expenses, such payments would not represent an
additional expense to the Funds or their shareholders.
An Institution with which the Funds have entered into an
Agreement with respect to its Advisor Shares may charge a Customer one or more
of the following types of fees, as agreed upon by the Institution and the
Customer, with respect to the cash management or other services provided by the
Institution: (i) account fees (a fixed amount per month or per year); (ii)
transaction fees (a fixed amount per transaction processed); (iii) compensation
balance requirements (a minimum dollar amount a Customer must maintain in order
to obtain the services offered); or (iv) account maintenance fees (a periodic
charge based upon the percentage of assets in the account or of the dividend
paid on those assets). Services provided by an Institution to Customers are in
addition to, and not duplicative of, the services to be provided under each
Fund's co-administration and distribution and shareholder servicing
arrangements. A Customer of an Institution should read the relevant Prospectus
and this Statement of Additional Information in conjunction with the Agreement
and other literature describing the services and related fees that would be
provided by the Institution to its Customers prior to any purchase of Fund
shares. Prospectuses are available from each Fund's distributor upon request. No
preference will be shown in the selection of Fund portfolio investments for the
instruments of Institutions.
Class A, Class B and Class C Shares. The Strategic Value Fund and
the Capital Appreciation Fund have adopted Plans of Distribution for its Class A
shares, Class B shares and Class C shares ("A Shares 12b-Plan", "B Shares 12b-1
Plan" and "C Shares 12b-1 Plan," respectively). Each of the A Shares 12b-1
Plans, B Shares 12b-1 Plan and C Shares 12b-1 PlaN permit the Funds to
compensate CSAMSI for activities associated with the distribution of these
classes shares.
The A Shares 12b-1 Plans currently a service fee of .25% per
yearprovide that a service fee of .25% per year of the average daily net assets
of the Class A shares will be paid as compensation to CSAMSI. The Class B Plan
currently provides that: (i) an asset based sales charge of .75% per year and
(ii) a service fee of .25% per year, in each case, of the average daily net
assets of the Class B shares will be paid as compensation to CSAMSI. The Class C
Plan currently provides that: (i) an asset -based sales charge of .75% per year
will be paid as compensation: (i) an asset based sales charge and (ii) a service
fee of .25% per year, in each case, of the average daily net assets of the Class
C shares will be paid as compensation to CSAMSI. For the fiscal year ended
October 31, 2002, each Fund paid CSAMSI under its 12b-1 plans as follows:
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FUND CLASS A 12B-1 PLAN CLASS B 12B-1 PLAN CLASS C 12B-1 PLAN
- ---------- ------------------- ------------------- -------------------
Strategic Value $293 $339 $1,222
Capital Appreciation $409 $786 $ 443
During the fiscal year ended October 31, 2002, CSAMSI spent the
fees paid under each Fund's A Shares 12b-1 Plan as follows:
STRATEGIC VALUE CAPITAL APPRECIATION
---------------- ---------------------
Advertising $ 22 $ 30
Printing and mailing prospectuses for $262 $351
promotional purposes
Compensation to broker-dealers $ 80 $102
People-related and occupancy $ 50 $288
Other $ 29 $ 43
During the fiscal year ended October 31, 2002, CSAMSI spent the
fees paid under each Fund's B Shares 12b-1 Plans as follows:
STRATEGIC VALUE CAPITAL APPRECIATION
---------------- ---------------------
Advertising $ 7 $ 12
Printing and mailing prospectuses for $ 209 $ 139
promotional purposes
Compensation to broker-dealers $1,507 $ 5,424
People-related and occupancy $ 16 $108,237
Other $ 5 $ 10
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During the fiscal year ended October 31, 2002, CSAMSI spent the
fees paid under each Fund's C Shares 12b-1 Plans as follows:
STRATEGIC VALUE CAPITAL APPRECIATION
---------------- ---------------------
Advertising $ 28 $ 6
Printing and mailing prospectuses for $ 268 $ 141
promotional purposes
Compensation to broker-dealers $2,342 $1,419
People-related and occupancy $ 41 $ 21
Other $ 51 $ 6
With respect to sales of the Capital Appreciation and the
Strategic Value Funds' Class B, Class C or certain sales of Class A shares
through a broker-dealer, financial intermediary or financial institution (each a
"financial representative"), CSAMSI pays the financial representative a
concession at the time of sale. In addition, an ongoing maintenance fee is
typically paid to financial representatives on sales of Class A, Class B and
Class C shares. The payments to the financial representatives will continue to
be paid for as long as the related assets remain in the Fund.
In addition to the concession and maintenance fee paid to
financial representatives, CSAMSI or its affiliates may from time to time pay
additional compensation on a one-time or ongoing basis to financial
representatives in connection with the sale of shares, which may include a fee
of up to 1.00% of new assets invested in a Fund. Such additional amounts may be
utilized, in whole or in part, in some cases together with other revenues of
such financial representatives, to provide additional compensation to registered
representatives or employees of such intermediaries who sell shares of the Fund.
On some occasions, such compensation will be conditioned on the sale of a
specified minimum dollar amount of the shares of the Fund during a specific
period of time. Such incentives may take the form of payment for meals,
entertainment, or attendance at educational seminars and associated expenses
such as travel and lodging. Such intermediary may elect to receive cash
incentives of equivalent amounts in lieu of such payments.
General. Each of the Advisor Shares 12b-1 Plans, the A Shares, B
Shares and C Shares 12b-1 Plans will continue in effect for so long as its
continuance is specifically approved at least annually by each Fund's Board,
including a majority of the Directors/Trustees who are not interested persons of
the Fund and who have no direct or indirect financial interest in the operation
of the Advisor Shares, the A Shares, B Shares and C Shares 12b-1 Plans, as the
case may be ("Independent Directors/Trustees"). Any material amendment of any
Advisor Shares, the A Shares, B Shares and C Shares 12b-1 Plans would require
the approval of the Board in the same manner. None of the Advisor Shares, the A
Shares, B Shares and C
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Shares 12b-1 Plans may be amended to increase materially the amount to be spent
thereunder without shareholder approval of the relevant class of shares. Each of
the Advisor Shares, A Shares, B Shares and C Shares 12b-1 Plans may be
terminated at any time, without penalty, by vote of a majority of the
Independent Directors/Trustees or by a vote of a majority of the outstanding
voting securities of the relevant class of shares.
Payments by the Funds to CSAMSI under the Advisor Shares, A
Shares, B Shares and C Shares 12b-1 Plans are not tied exclusively to the
distribution expenses actually incurred by CSAMSI and the payments may exceed
the distribution expenses actually incurred.
CSAMSI provides the Board of each Fund with periodic reports of
amounts spent under the Advisor Shares, A Shares, B Shares and C Shares 12b-1
Plans and the purposes for which the expenditures were made.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Purchases
The offering price of a Fund's shares is equal to the per share
net asset value of the relevant class of shares of the Fund plus, in the case of
Class A Shares, any applicable sales charge.
As a convenience to the investor and to avoid unnecessary expense
to a Fund, share certificates representing shares of the Fund are not issued
except upon the written request of the shareholder and payment of a fee in the
amount of $50 for such share issuance. Each Fund retains the right to waive such
fee in its sole discretion. This facilitates later redemption and relieves the
shareholder of the responsibility and inconvenience of preventing the share
certificates from becoming lost or stolen. No certificates are issued for
fractional shares (although such shares remain in the shareholder's account on
the books of the Fund).
Brokerage firms and other intermediaries which have entered into
the appropriate selling or service agreement with a Fund are authorized to
accept orders on the Fund's behalf. Shareholders maintaining Fund accounts
through brokerage firms and other intermediaries 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 CSAMSI. Should an investor place a transaction order
with such an intermediary after its deadline, the intermediary may not effect
the order with the Fund until the next business day. Accordingly, an investor
should familiarize himself or 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
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597589.28
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.
Common Class Shares. To purchase Common shares directly from a
Fund, contact the Fund to obtain an application. Fill it out and mail it to the
Funds along with an investment check, payable to "Credit Suisse Funds." The
Funds cannot accept "starter" checks that do not have your name preprinted on
them. The Funds also cannot accept checks payable to you or to another party and
endorsed to the order of the Funds. These types of checks may be returned to you
and your purchase order may not be processed.
The Common Class shares of each Fund are closed to new investors,
other than (1) investors in employee retirement, stock, bonus, pension or profit
sharing plans, (2) investment advisory clients of CSAM, (3) certain registered
investment advisers ("RIAs") and (4) certain broker-dealers and RIAs with
clients participating in comprehensive fee programs. Any Common Class
shareholder of a Fund as of the close of business on December 12, 2001 can
continue to buy Common Class shares of that Fund and open new accounts under the
same social security number. Prospective investors in Common Class shares may be
required to provide documentation to determine their eligibility to purchase
Common Class shares. Each Common Class shareholder receives a quarterly account
statement, as well as a statement after any transaction that affects the
shareholder's account balance or share registration (other than distribution
reinvestments and automatic transactions such as the Automatic Monthly
Investment Plan and Automatic Withdrawal Plan).
Class A Shares, B Shares and C Shares. Class A Shares, B Shares
and C Shares are designed for investors seeking the advice of financial
representatives and are not offered directly for purchase from the Funds. All
purchases of Class A Shares, Class B Shares and Class C Shares are confirmed to
each shareholder and are credited to such shareholder's account at net asset
value after receipt in good order and deduction of any applicable sales charge.
Class A Shares of the Fund are sold to investors at the public
offering price, which is the net asset value plus the applicable sales charge
(unless you are entitled to a waiver):
Initial Sales Charge -- Class A
AS A % OF COMMISSION TO FINANCIAL
AMOUNT AS A % OF REPRESENTATIVE AS A % OF
AMOUNT PURCHASED INVESTED OFFERING PRICE OFFERING PRICE
- ------------------ ----------- --------------- --------------------------
Less than $50,000 6.10% 5.75% 5.00%
$50,000 to less than $100,000 4.99% 4.75% 4.00%
$100,000 to less than $250,000 3.90% 3.75% 3.00%
$250,000 to less than $500,000 2.56% 2.50% 2.00%
$500,000 to less than $1,000,000 2.04% 2.00% 1.75%
$1,000,000 or more 0* 0 1.00%**
57
597589.28
* On purchases of $1,000,000 or more, there is no initial sales charge
although there could be a Limited CDSC (as described in the
Prospectus).
** The distributor may pay a financial representative a fee as follows:
up to 1% on purchases up to and including $3 million, up to .50% on
the next $47 million, up to .25% on purchase amounts over $50 million.
The reduced sales charges shown above apply to the aggregate of
purchases of Class A Shares of a Fund made at one time by any "purchaser." The
term "purchaser" includes:
o an individual, the individual's spouse or domestic partner, and their
children and parents (each, an "immediate family member"), including any
Individual Retirement Account (IRA) of the individual or an immediate
family member;
o any company controlled by the individual and/or an immediate family member
(a person, entity or group that holds 25% or more of the outstanding voting
securities of a company will be deemed to control the company, and a
partnership will be deemed to be controlled by each of its general
partners);
o a trust created by the individual and/or an immediate family member, the
beneficiaries of which are the individual and/or an immediate family
member;
o a Uniform Gifts to Minors Act/Uniform Transfers to Minors Act account
created by the individual and/or an immediate family member.
From time to time, the distributor may re-allow the full amount
of the sales charge to brokers as a commission for sales of such shares. Members
of the selling group may receive up to 90% of the sales charge and may be deemed
to be underwriters of a Fund as defined in the Securities Act of 1933.
Investment dealers and other firms provide varying arrangements
for their clients to purchase and redeem a Fund's Class A, Class B or Class C
Shares. Some may establish higher minimum investment requirements than set forth
in the Prospectus. Firms may arrange with their clients for other investment or
administrative services. Such firms may independently establish and charge
additional amounts to their clients for such services, which charges would
reduce the client's return. Firms also may hold a Fund's Class A, Class B or
Class C Shares in nominee or street name as agent for and on behalf of their
customers. In such instances, the Fund's transfer agent will have no information
with respect to or control over the accounts of specific shareholders. Such
shareholders may obtain access to their accounts and information about their
accounts only from their firm. Certain of these firms may receive compensation
from a Fund and/or from CSAMSI or an affiliate for recordkeeping and other
expenses relating to these nominee accounts. In addition, certain privileges
with respect to the purchase and redemption of shares or the reinvestment of
dividends may not be available through such firms. Some firms may have access to
their clients' direct Fund accounts for servicing including, without limitation,
transfers of registration and dividend payee changes, and may perform functions
such as generation of confirmation statements and disbursements of cash
dividends.
58
Such firms may receive compensation from the Fund and/or from CSAMSI or an
affiliate for these services. The Prospectus relating to Class A, Class B or
Class C Shares should be read in connection with such firms' material regarding
their fees and services.
Initial Sales Charges Waivers. The initial sales charge may be
waived for the following shareholders or transactions: (1) investment advisory
clients of the Adviser; (2) officers, current and former Directors of the Funds,
current and former directors or trustees of other investment companies managed
by the CSAM or its affiliates, officers, directors and full-time employees of
the CSAM affiliates ("Related Entities"); or the spouse, siblings, children,
parents or grandparents of any such person or any such person's spouse
(collectively, "relatives"), or any trust or individual retirement account or
self-employed retirement plan for the benefit of any such person or relative; or
the estate of any such person or relative, if such sales are made for investment
purposes (such shares may not be resold except to the Fund); (3) an agent or
broker of a dealer that has a sales agreement with the distributor, for his or
her own account or an account of a relative of any such person, or any trust or
individual retirement account or self-employed retirement plan for the benefit
of any such person or relative (such shares may not be resold except to the
Fund); (4) shares purchased by RIAs on behalf of fee-based accounts or by
broker-dealers that have sales agreements with the Fund and for which shares
have been purchased on behalf of wrap fee client accounts and for which such
RIAs or broker-dealers perform advisory, custodial, record keeping or other
services; (5) shareholders who received shares in the Credit Suisse Funds as a
result of the merger of certain funds into a Fund, and who have maintained their
investment in such shares; (6) shares purchased for 401(k) Plans, 403(B) Plans,
457 Plans, employee benefit plans sponsored by an employer, and pension plans;
(7) Class B shares which are automatically converted to Class A shares; and (8)
Class A shares acquired when dividends and distributions are reinvested in the
Fund.
For the fiscal year ended October 31, 2002, CSAMSI received
$6,211 and $4,537 on the sale of Class A shares of Strategic Value and Capital
Appreciation Funds, respectively, of which CSAMSI retained $929 and $581,
respectively. For the fiscal year ended October 31, 2002, CSAMSI did not receive
any fees on contingent deferred sales charges on redemptions of Class A shares
of Strategic Value and Capital Appreciation Funds. For the fiscal year ended
October 31, 2002, CSAMSI did not receive any fees on contingent deferred sales
charges on redemptions of Class B and Class C shares, respectively, of the
Strategic Value Fund. For the fiscal year ended October 31, 2002, CSAMSI
received $149 and $20 in contingent deferred sales charges on redemptions of
Class B and Class C shares, respectively, of the Capital Appreciation Fund.
Redemptions
General. Shares of the Funds may be redeemed at a redemption
price equal to the net asset value per share, as next computed as of the regular
trading session of the NYSE following the receipt in proper form by the Funds of
the shares tendered for redemption, less any applicable contingent deferred
sales charge in the case of Class B and Class C Shares of the Capital
Appreciation Fund and the Strategic Value Fund.
Under the 1940 Act, a Fund may suspend the right of redemption or
postpone the date of payment upon redemption for any period during which the
NYSE is closed, other than
59
597589.28
customary weekend and holiday closings, or during which trading on the NYSE is
restricted, or during which (as determined by the SEC) an emergency exists as a
result of which disposal or fair valuation of portfolio securities is not
reasonably practicable, or for such other periods as the SEC may permit. (A Fund
may also suspend or postpone the recordation of an exchange of its shares upon
the occurrence of any of the foregoing conditions.)
If conditions exist which make payment of redemption proceeds
wholly in cash unwise or undesirable, a Fund may make payment wholly or partly
in securities or other investment instruments which may not constitute
securities as such term is defined in the applicable securities laws. If a
redemption is paid wholly or partly in securities or other property, a
shareholder would incur transaction costs in disposing of the redemption
proceeds. Each Fund has elected, however, to be governed by Rule 18f-1 under the
1940 Act as a result of which a Fund is obligated to redeem shares, with respect
to any one shareholder during any 90 day period, solely in cash up to the lesser
of $250,000 or 1% of the net asset value of that Fund at the beginning of the
period.
Automatic Cash Withdrawal Plan. An automatic cash withdrawal plan
(the "Plan") is available to shareholders who wish to receive specific amounts
of cash periodically. Withdrawals may be made under the Plan by redeeming as
many shares of a Fund as may be necessary to cover the stipulated withdrawal
payment. To the extent that withdrawals exceed dividends, distributions and
appreciation of a shareholder's investment in a Fund, there will be a reduction
in the value of the shareholder's investment and continued withdrawal payments
may reduce the shareholder's investment and ultimately exhaust it. Withdrawal
payments should not be considered as income from investment in a Fund. As
described in the Prospectus, certain withdrawals under the Plan for the Class A,
B and C Shares of the Capital Appreciation and Strategic Value Funds may be
subject to a deferred sales charge.
Special Provisions Applicable to the Capital Appreciation and
Strategic Class B and C Shares.
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 PAYMENT MADE INVESTED OR REDEMPTION PROCEEDS
- --------------------------------- -------------------------------------
First............................ 4.0%
Second........................... 3.0%
Third............................ 2.0%
Fourth........................... 1.0%
After Fourth................... 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.
60
597589.28
Contingent Deferred Sales Charge - General. The following example
will illustrate the operation of the contingent deferred sales charge on Class B
Shares. Assume that an investor makes a single purchase of $10,000 of a Fund's
Class B Shares and that 16 months later the value of the shares has grown by
$1,000 through reinvested dividends and by an additional $1,000 of share
appreciation to a total of $12,000. If the investor were then to redeem the
entire $12,000 in share value, the contingent deferred sales charge would be
payable only with respect to $10,000 because neither the $1,000 of reinvested
dividends nor the $1,000 of share appreciation is subject to the charge. The
charge would be at the rate of 3% ($300) because it was in the second year after
the purchase was made.
The rate of the contingent deferred sales charge is determined by
the length of the period of ownership. Investments are tracked on a monthly
basis. The period of ownership for this purpose begins on the last day of the
month in which the order for the investment is received. For example, an
investment made on September 10, 2002 will be eligible for the second year's
charge if redeemed on or after October 1, 2003. In the event no specific order
is requested when redeeming shares subject to a contingent deferred sales
charge, the redemption will be made first from shares representing reinvested
dividends and then from the earliest purchase of shares. CSAMSI receives any
contingent deferred sales charge directly.
The CDSC applicable to redemptions of Class C Shares made within
one year from the original date of purchase of such shares is waived for
donor-advised charitable funds advised or sponsored by CSAM or its affiliates.
EXCHANGE PRIVILEGE
An exchange privilege with certain other funds advised by CSAM is
available to investors in each Fund. A Common shareholder may exchange Common
shares of a Fund for Common shares of another Credit Suisse Fund at their
respective net asset values. An Advisor shareholder may exchange Advisor shares
of a Fund for Advisor shares of another Credit Suisse Fund at their respective
net asset values. Exchanges of Common and Advisor shares as described above will
be effected without a sales charge. A Class A, Class B or Class C shareholder
may exchange those shares for shares of the same class of another Credit Suisse
fund at their respective net asset values, subject to payment of any applicable
sales charge differential, or for shares of a Credit Suisse money market fund,
without payment of any sales charge differential. Not all Credit Suisse Funds
offer all classes of shares. If an exchange request is received by Credit Suisse
Funds or their agent prior to the close of regular trading on the NYSE, the
exchange will be made at each Fund's net asset value determined at the end of
that business day. Exchanges must satisfy the minimum dollar amount necessary
for new purchases. Each Fund may refuse exchange purchases at any time without
prior notice.
The exchange privilege is available to shareholders residing in
any state in which the shares being acquired may legally be sold. When an
investor effects an exchange of shares, the exchange is treated for federal
income tax purposes as a redemption. Therefore, the investor may realize a
taxable gain or loss in connection with the exchange. Investors wishing to
exchange shares of a Fund for shares in another Credit Suisse fund should review
the prospectus of the other fund prior to making an exchange. For further
information regarding the exchange
61
597589.28
privilege or to obtain a current prospectus for another Credit Suisse fund, an
investor should contact Credit Suisse Funds at (800) 927-2874.
Each Fund reserves the right to refuse exchange purchases by any
person or group if, in CSAM's judgment, the Fund would be unable to invest the
money effectively in accordance with its investment objective and policies, or
would otherwise potentially be adversely affected. Examples of when an exchange
purchase could be refused are when a Fund receives or anticipates receiving
large exchange orders at or about the same time and/or when a pattern of
exchanges within a short period of time (often associated with a "market timing"
strategy) is discerned. Each Fund reserves the right to terminate or modify the
exchange privilege at any time upon 60 days' notice to shareholders.
ADDITIONAL INFORMATION CONCERNING TAXES
The following is a summary of the material United States federal
income tax considerations regarding the purchase, ownership and disposition of
shares in each Fund. Each prospective shareholder is urged to consult his own
tax adviser with respect to the specific federal, state, local and foreign tax
consequences of investing in a Fund. The summary is based on the laws in effect
on the date of this Statement of Additional Information and existing judicial
and administrative interpretations thereof, both of which are subject to change.
The Funds and Their Investments
Each Fund intends to continue to qualify as a regulated
investment company under the Code during each of its taxable years. To so
qualify, a Fund must, among other things: (a) derive at least 90% of its gross
income in each taxable year from dividends, interest, payments with respect to
securities loans and gains from the sale or other disposition of stock,
securities or foreign currencies, or other income (including, but not limited
to, gains from options, futures or forward contracts) derived with respect to
its business of investing in such stock, securities or currencies; and (b)
diversify its holdings so that, at the end of each quarter of the Fund's taxable
year, (i) at least 50% of the market value of the Fund's assets is represented
by cash, securities of other regulated investment companies, United States
Government Securities and other securities, with such other securities limited,
in respect of any one issuer, to an amount not greater than 5% of the Fund's
assets and not greater than 10% of the outstanding voting securities of such
issuer and (ii) not more than 25% of the value of its assets is invested in the
securities (other than U.S. Government Securities or securities of other
regulated investment companies) of any one issuer or any two or more issuers
that the Fund controls and which are determined to be engaged in the same or
similar trades or businesses or related trades or businesses.
As a regulated investment company, each Fund that satisfies the
minimum distribution requirement will not be subject to United States federal
income tax on its net investment income (i.e., income other than its net
realized long-term and short-term capital gains) and net realized long-term and
short-term capital gains that it distributes to its shareholders. A Fund will
satisfy the minimum distribution requirement if it distributes to its
shareholders at least 90% of the sum of its investment company taxable income
(i.e., 90% of its taxable income minus the excess, if any, of its net realized
long-term capital gains over its net realized short-term capital losses
(including any capital loss carryovers), plus or minus certain
62
597589.28
other adjustments as specified in the Code) and its net tax-exempt income for
the taxable year. Each Fund will be subject to tax at regular corporate rates on
any investment company taxable income that it does not distribute to its
shareholders. Any dividend declared by a Fund in October, November or December
of any calendar year and payable to shareholders of record on a specified date
in such a month shall be deemed to have been received by each shareholder on
December 31 of such calendar year and to have been paid by the Fund not later
than such December 31, provided that such dividend is actually paid by the Fund
during January of the following calendar year.
Each Fund intends to distribute annually to its shareholders
substantially all of its investment company taxable income. The Board of each
Fund will determine annually whether to distribute any net realized long-term
capital gains in excess of net realized short-term capital losses (including any
capital loss carryovers). Each Fund currently expects to distribute any such
excess annually to its shareholders. However, if a Fund retains for investment
an amount equal to all or a portion of its net long-term capital gains in excess
of its net short-term capital losses and capital loss carryovers, it will be
subject to a corporate tax (currently at a rate of 35%) on the amount retained.
In that event, the Fund will designate such retained amounts as undistributed
capital gains in a notice to its shareholders who (a) will be required to
include in income for United Stares federal income tax purposes, as long-term
capital gains, their proportionate shares of the undistributed amount, (b) will
be entitled to credit their proportionate shares of the 35% tax paid by the Fund
on the undistributed amount against their own United States federal income tax
liabilities, if any, and to claim refunds to the extent their credits exceed
their tax liabilities, if any, and (c) will be entitled to increase their tax
basis, for United States federal income tax purposes, in their Fund shares by an
amount equal to 65% of the amount of undistributed capital gains included in
their income. Organizations or persons not subject to federal income tax on such
capital gains will be entitled to a refund of their pro rata share of such taxes
paid by a Fund upon filing appropriate returns or claims for refund with the
Internal Revenue Service (the "IRS").
The Code imposes a 4% nondeductible excise tax on each Fund to
the extent the Fund does not distribute by the end of any calendar year at least
98% of its ordinary income for that year and at least 98% of its net capital
gains (both long-term and short-term) for the one-year period ending, as a
general rule, on October 31 of that year. For this purpose, however, any
ordinary income or net capital gains that are subject to corporate income tax in
the hands of a Fund will be considered to have been distributed by year-end. In
addition, the minimum amounts that must be distributed in any year to avoid the
excise tax will be increased or decreased to reflect any underdistribution or
overdistribution, as the case may be, from the previous year. Each Fund
anticipates that it will pay such dividends and will make such distributions as
are necessary in order to avoid the application of this excise tax.
With regard to each Fund's investments in foreign securities,
exchange control regulations may restrict repatriations of investment income and
capital or the proceeds of securities sales by foreign investors such as the
Fund and may limit the Fund's ability to pay sufficient dividends and to make
sufficient distributions to satisfy the 90% and excise tax distribution
requirements.
If, in any taxable year, a Fund fails to qualify as a regulated
investment company under the Code or fails to meet the distribution requirement,
it would be taxed in the same
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597589.28
manner as an ordinary corporation and distributions to its shareholders would
not be deductible by the Fund in computing its taxable income. In addition, the
Fund's distributions, to the extent derived from the Fund's current or
accumulated earnings and profits, would constitute dividends (eligible for the
corporate dividends-received deduction) which are taxable to shareholders as
ordinary income, even though those distributions might otherwise (at least in
part) have been treated in the shareholders' hands as long-term capital gains.
If a Fund fails to qualify as a regulated investment company in any year, it
must pay out its earnings and profits accumulated in that year in order to
qualify again as a regulated investment company. Moreover, if the Fund failed to
qualify as a regulated investment company for a period greater than two taxable
years, the Fund may be required to recognize any net built-in gains with respect
to certain of its assets (the excess of the aggregate gains, including items of
income, over aggregate losses that would have been realized if the Fund had been
liquidated) in order to qualify as a regulated investment company in a
subsequent year.
Each Fund's short sales against the box, if any, and transactions
in foreign currencies, forward contracts, options and futures contracts
(including options and futures contracts on foreign currencies) will be subject
to special provisions of the Code that, among other things, may affect the
character of gains and losses realized by the Fund (i.e., may affect whether
gains or losses are ordinary or capital), accelerate recognition of income to
the Fund and defer Fund losses. These rules could therefore affect the
character, amount and timing of distributions to shareholders. These provisions
also (a) will require each Fund to mark-to-market certain types of the positions
in its portfolio (i.e., treat them as if they were closed out) and (b) may cause
the Fund to recognize income without receiving cash with which to pay dividends
or make distributions in amounts necessary to satisfy the distribution
requirements for avoiding income and excise taxes. Each Fund will monitor its
transactions, will make the appropriate tax elections and will make the
appropriate entries in its books and records when it engages in short sales
against the box or acquires any foreign currency, forward contract, option,
futures contract or hedged investment in order to mitigate the effect of these
rules and prevent disqualification of the Fund as a regulated investment
company.
Passive Foreign Investment Companies
If a Fund purchases shares in certain foreign investment
entities, called "passive foreign investment companies" ("PFICs"), it may be
subject to United States federal income tax on any "excess distribution" or gain
from the disposition of such shares even if such income is distributed as a
taxable dividend by the Fund to its shareholders. Additional charges in the
nature of interest may be imposed on the Fund in respect of deferred taxes
arising from such distributions or gains. If a Fund were to invest in a PFIC and
elected to treat the PFIC as a "qualified electing fund" under the Code, in lieu
of the foregoing requirements, the Fund might be required to include in income
each year a portion of the ordinary earnings and net capital gains of the
qualified electing fund, even if not distributed to the Fund, and such amounts
would be subject to the 90% and excise tax distribution requirements described
above. In order to make this election, the Fund would be required to obtain
certain annual information from the PFICs in which it invests, which may be
difficult or impossible to obtain.
Alternatively, a Fund may make a mark-to-market election that
will result in the Fund being treated as if it had sold and repurchased all of
the PFIC stock at the end of each year. In such case, the Fund would report any
such gains as ordinary income and would deduct any
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597589.28
such losses as ordinary losses to the extent of previously recognized gains. The
election, once made, would be effective for all subsequent taxable years of the
Fund, unless revoked with the consent of the IRS. By making the election, a Fund
could potentially ameliorate the adverse tax consequences with respect to its
ownership of shares in a PFIC, but in any particular year may be required to
recognize income in excess of the distributions it receives from PFICs and its
proceeds from dispositions of PFIC stock. The Fund may have to distribute this
"phantom" income and gain to satisfy the 90% distribution requirement and to
avoid imposition of the 4% excise tax. Each Fund will make the appropriate tax
elections if possible, and take any additional steps that are necessary to
mitigate the effect of these rules.
Dividends and Distributions
Dividends of investment income and distributions of short-term
capital gains are taxable to a United States shareholder as ordinary income,
whether paid in cash or in shares. Distributions of long-term capital gains, if
any, that a Fund designates as capital gains dividends are taxable as long-term
capital gains, whether paid in cash or in shares and regardless of how long a
shareholder has held shares of the Fund. Dividends and distributions paid by a
Fund (except for the portion thereof, if any, attributable to dividends on stock
of U.S. corporations received by the Fund) will not qualify for the deduction
for dividends received by corporations. Distributions in excess of a Fund's
current and accumulated earnings and profits will, as to each shareholder, be
treated as a tax-free return of capital, to the extent of a shareholder's basis
in his shares of the Fund, and as a capital gain thereafter (if the shareholder
holds his shares of the Fund as capital assets).
Shareholders receiving dividends or distributions in the form of
additional shares should be treated for United States federal income tax
purposes as receiving a distribution in an amount equal to an amount of money
that the shareholders receiving cash dividends or distributions will receive,
and should have a cost basis in the shares received equal to such amount.
Investors considering buying shares just prior to a dividend or
capital gain distribution should be aware that, although the price of shares
just purchased at that time may reflect the amount of the forthcoming
distribution, such dividend or distribution may nevertheless be taxable to them.
If a Fund is the holder of record of any stock on the record date
for any dividends payable with respect to such stock, such dividends are
included in the Fund's gross income not as of the date received but as of the
later of (a) the date such stock became ex-dividend with respect to such
dividends (i.e., the date on which a buyer of the stock would not be entitled to
receive the declared, but unpaid, dividends) or (b) the date the Fund acquired
such stock. Accordingly, in order to satisfy its income distribution
requirements, the Fund may be required to pay dividends based on anticipated
earnings, and shareholders may receive dividends in an earlier year than would
otherwise be the case.
Sales of Shares
Upon the sale or exchange of shares, a shareholder will recognize
a taxable gain or loss equal to the difference between the amount realized and
his basis in his shares. Such
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597589.28
gain or loss will be treated as capital gain or loss if the shares are capital
assets in the shareholder's hands, and will be long-term capital gain or loss if
the shares are held for more than one year and short-term capital gain or loss
if the shares are held for one year or less. Any loss realized on a sale or
exchange will be disallowed to the extent the shares disposed of are replaced,
including replacement through the reinvesting of dividends and capital gains
distributions in a Fund, within a 61-day period beginning 30 days before and
ending 30 days after the disposition of the shares. In such a case, the basis of
the shares acquired will be increased to reflect the disallowed loss. Any loss
realized by a shareholder on the sale of a Fund share held for six months or
less will be disallowed for federal income tax purposes to the extent of any
exempt interest dividends received by the shareholder with respect to such
share. Moreover, any loss realized by a shareholder on the sale of a share of
any Fund held by the shareholder for six months or less will (to the extent not
disallowed as set forth in the previous sentence) be treated for United States
federal income tax purposes as a long-term capital loss to the extent of any
distributions or deemed distributions of long-term capital gains received by the
shareholder with respect to such share.
Foreign Taxes
Income received by a Fund from non-U.S. sources may be subject to
withholding and other taxes imposed by other countries. Because it is not
expected that more than 50 percent of the value of a Fund's total assets at the
close of its taxable year will consist of stock and securities of non-U.S.
corporations, it is not expected that a Fund will be eligible to elect to "pass
through" to the Fund's shareholders the amount of foreign income and similar
taxes paid by the Fund. In the absence of such an election, the foreign taxes
paid by a Fund will reduce its investment company taxable income, and
distributions of investment company taxable income received by the Fund from
non-U.S. sources will be treated as United States source income.
Special Tax Matters Relating to Zero Coupon Securities
Investment by a Fund in zero coupon securities may create special
tax consequences. Zero coupon securities do not make interest payments; however,
a portion of the difference between a zero coupon security's maturity value and
its purchase price is imputed as income to the Fund each year even though the
Fund receives no cash distribution until maturity. Under the United States
federal income tax laws applicable to mutual funds, the Fund will not be subject
to tax on this income if it pays dividends to its shareholders substantially
equal to all the income received from, or imputed with respect to, its
investments during the year, including its zero coupon securities. These
dividends will ordinarily constitute taxable income to shareholders of the Fund.
Backup Withholding
Each Fund may be required to withhold, for United States federal
income tax purposes, a portion of the dividends and distributions payable to
shareholders who fail to provide the Fund with their correct taxpayer
identification number or to make required certifications, or who have been
notified by the IRS that they are subject to backup withholding. Certain
shareholders are exempt from backup withholding. Backup withholding is not an
additional tax and any amount withheld may be credited against a shareholder's
United States federal income tax liability.
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597589.28
Notices
Shareholders will be notified annually by each Fund as to the
United States federal income tax status of the dividends, distributions and
deemed distributions attributable to undistributed capital gains (discussed
above in "The Funds and Their Investments") made by the Fund to its
shareholders. Furthermore, shareholders will also receive, if appropriate,
various written notices after the close of a Fund's taxable year regarding the
United States federal income tax status of certain dividends, distributions and
deemed distributions that were paid (or that are treated as having been paid) by
the Fund to its shareholders during the preceding taxable year.
Other Taxation
Distributions also may be subject to additional state, local and
foreign taxes depending on each shareholder's particular situation.
THE FOREGOING IS ONLY A SUMMARY OF CERTAIN MATERIAL FEDERAL
INCOME TAX CONSEQUENCES AFFECTING EACH FUND AND ITS SHAREHOLDERS. SHAREHOLDERS
ARE ADVISED TO CONSULT THEIR OWN TAX ADVISERS WITH RESPECT TO THE PARTICULAR TAX
CONSEQUENCES TO THEM OF AN INVESTMENT IN A FUND.
DETERMINATION OF PERFORMANCE
From time to time, a Fund may quote the total return of its
shares in advertisements or in reports and other communications to shareholders.
Funds that meet the size requirements for listing in The Wall Street Journal are
listed under the heading "Credit Suisse Common" for Common Class shares, "Credit
Suisse ADV" for Advisor Class shares and "Credit Suisse ABC" for Class A, Class
B and Class C shares. Current total return figures may be obtained by calling
Credit Suisse Funds at 800-927-2874.
The Funds' average annual total returns for various classes for
the indicated periods ended October 31, 2002 were as follows (performance
figures calculated without waiver by a Fund's service provider(s), if any, are
noted in italics):
TOTAL RETURN
COMMON SHARES
PERIOD FROM THE
COMMENCEMENT OF
ONE-YEAR FIVE-YEAR TEN-YEAR OPERATIONS
----------- ---------- ---------- ----------------
Strategic Value Fund
(10/6/88) -13.29% 1.95% 9.45% 9.68%
Capital Appreciation Fund
(8/17/87) -22.79% -0.24% 9.53% 9.10%
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ADVISOR SHARES
PERIOD FROM THE
COMMENCEMENT OF
ONE-YEAR FIVE-YEAR TEN-YEAR OPERATIONS
----------- ---------- ---------- ----------------
Strategic Value Fund
(5/15/95) -13.71% 1.47% N/A 4.92%
Capital Appreciation Fund
(4/4/91) -23.13% -0.72% 9.02% 8.73%
CLASS A, B AND C SHARES
(PERIOD FROM THE COMMENCEMENT OF OPERATIONS THROUGH OCTOBER 31, 2002)
CLASS A CLASS B CLASS C
--------- --------- ---------
Strategic Value Fund
(11/30/01) -23.46% -22.38% -20.10%
Capital Appreciation Fund
(11/30/01) -33.61% -32.88% -30.78%
From time to time, Fund service providers may have voluntarily
agreed to waive all or a portion of their fees and reimburse some Fund expenses.
The performance figures above reflect the impact of these fee waivers and
expense reimbursements, if any. Performance figures would be lower, perhaps
materially so, if they were calculated without reflecting the impact of fee
waivers and/or expense reimbursements.
Average annual total return figures show the average percentage
change in value of an investment in a Fund from the beginning of the measurement
period to the end of the measurement period. The figures reflect changes in the
price of the Fund's shares assuming that any income dividends and/or capital
gain distributions made by the Fund during the period were reinvested in shares
of the Fund. Total return will be shown for recent one-, five- and ten-year
periods, and may be shown for other periods as well (such as from commencement
of the Fund's operations or on a year-by-year, quarterly or current year-to-date
basis).
Average annual total return figures are calculated by finding
the average annual compounded rates of return for the one-, five- and ten- (or
such shorter period as the relevant class of shares has been offered) year
periods that would equate the initial amount invested to the ending redeemable
value according to the following formula: P (1 + T)n = ERV. For purposes of this
formula, "P" is a hypothetical investment of $1,000; "T" is average annual total
return; "n" is number of years; and "ERV" is the ending redeemable value of a
hypothetical $1,000 payment made at the beginning of the one-, five- or ten-year
periods (or fractional portion thereof). Total return or "T" is computed by
finding the average annual change in the value of an initial $1,000 investment
over the period and assumes that all dividends and distributions are reinvested
during the period. It is also assumed that with respect to the Class A shares,
the maximum initial sales charge of 5.75% was deducted at the time of investment
and with respect to the Class B shares, at the end of these periods the entire
amount was redeemed and the appropriate sales load, if any, was deducted.
Investors should note that this performance may not be representative of a
Fund's total return over longer market cycles.
When considering average total return figures for periods
longer than one year, it is important to note that the annual total return for
one year in the period might have been greater
68
597589.28
or less than the average for the entire period. When considering total return
figures for periods shorter than one year, investors should bear in mind that
each Fund seeks long-term appreciation and that such return may not be
representative of any Fund's return over a longer market cycle. A Fund may also
advertise aggregate total return figures for various periods, representing the
cumulative change in value of an investment in the relevant Fund for the
specific period (again reflecting changes in share prices and assuming
reinvestment of dividends and distributions). Aggregate and average total
returns may be shown by means of schedules, charts or graphs and may indicate
various components of total return (i.e., change in value of initial investment,
income dividends and capital gain distributions).
A Fund may advertise, from time to time, comparisons of its
performance with that of one or more other mutual funds with similar investment
objectives. A Fund may advertise average annual calendar year-to-date and
calendar quarter returns, which are calculated according to the formula set
forth in the preceding paragraph, except that the relevant measuring period
would be the number of months that have elapsed in the current calendar year or
most recent three months, as the case may be. Investors should note that this
performance may not be representative of the Fund's total return in longer
market cycles.
A Fund may also advertise its yield. Yield is calculated by
annualizing the net investment income generated by the Fund over a specified
thirty-day period according to the following formula:
YIELD = 2[( a-b + 1)6 -1]
-----
cd
For purposes of this formula: "a" is dividends and interest earned during the
period; "b" is expenses accrued for the period (net of reimbursements); "c" is
the average daily number of shares outstanding during the period that were
entitled to receive dividends; and "d" is the maximum offering price per share
on the last day of the period.
The yield for the Common Shares of the Strategic Value Fund for
the thirty-day period ended October 31, 2002 was -0.33% and for the Advisor
Shares was -0.81%.
After-Tax Return
From time to time the Funds may include after-tax performance
information in advertisements. To the extent the Funds include such information,
it will be computed according to the following formulas:
Average Annual Total Return (After Taxes on Distributions)
P(1 + T)n = ATVD
Where: P = a hypothetical initial payment of $1,000.
T = average annual total return (after taxes on distributions).
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597589.28
n = number of years.
ATVD = ending value of a hypothetical $1,000 investment made at the
beginning of the 1-,5- or 10-year period at the end of the 1-,
5- or 10-year (or fractional portion thereof), after taxes on
fund distributions but not after taxes on redemption.
The average annual total returns (after taxes on distributions)
for each Fund's Common Shares for the periods ended October 31, 2002 were as
follows:
FUND 1 YEAR 5 YEAR 10 YEAR SINCE INCEPTION
- -------- -------- -------- --------- -------------------
Strategic Value -13.87% -1.37% 6.47% 7.10% 10/6/88
Capital -22.79% -2.95% 6.53% 6.87% 8/17/87
Appreciation
The average annual total returns (after taxes on distributions)
for each Fund's Advisor Shares for the periods ended October 31, 2002 were as
follows:
FUND 1 YEAR 5 YEAR 10 YEAR SINCE INCEPTION
- -------- -------- -------- --------- -------------------
Strategic Value -14.15% -1.66% 6.17% 2.40% 5/15/95
Capital -23.13% -3.35% 6.12% 6.56% 4/4/91
Appreciation
The average annual total returns (after taxes on
distributions) for each Fund's Class A, B and C shares for the period since
inception to October 31, 2002 were as follows:
FUND CLASS A CLASS B CLASS C INCEPTION DATE
- -------- ------- ------- --------- ---------------
Strategic Value -25.98% -24.77% -22.29% 11/30/01
Capital -36.52% -35.72% -33.44% 11/30/01
Appreciation
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597589.28
Average Annual Total Return (After Taxes on Distribution and Redemptions)
P(1 + T)n = ATVDR
Where: P = a hypothetical initial payment of $1,000.
T = average annual total return (after taxes on
distributions and redemption).
n = number of years.
ATVDR = ending value of a hypothetical $1,000 investment
made at the beginning of the 1-, 5- or 10-year period
at the end of the 1-, 5- or 10-year (or fractional
portion thereof), after taxes on fund distributions
and redemption.
The average annual total returns (after taxes on distributions and
redemptions of Fund shares) for each Fund's Common Shares for the periods ended
October 31, 2002 were as follows:
FUND 1 YEAR 5 YEAR 10 YEAR SINCE INCEPTION
---- ------ ------ ------- ----------------
Strategic Value -7.56% 0.92% 7.00% 7.35% 10/6/88
Capital
Appreciation -13.99% -0.33% 7.16% 7.11% 8/17/87
The average annual total returns (after taxes on distributions and
redemptions of Fund shares) for each Fund's Advisor Shares for the periods ended
October 31, 2002 were as follows:
FUND 1 YEAR 5 YEAR 10 YEAR SINCE INCEPTION
---- ------ ------ ------- ----------------
Strategic Value -7.82% 0.64% 6.70% 3.46% 5/15/95
Capital
Appreciation -14.20% -0.65% 6.79% 6.83% 4/4/91
The average annual total returns (after taxes on distributions and
redemptions of Fund shares) for each Fund's Class A, B and C shares for the
period since inception to October 31, 2002 were as follows:
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597589.28
FUND CLASS A CLASS B CLASS C INCEPTION DATE
---- ------- ------- -------- --------------
Strategic Value -15.07% -14.32% -12.80% 11/30/01
Capital
Appreciation -22.42% -21.93% -20.53% 11/30/01
The performance of a class of Fund shares will vary from time to time
depending upon market conditions, the composition of a Fund's portfolio and
operating expenses allocable to it. As described above, total return is based on
historical earnings and is not intended to indicate future performance.
Consequently, any given performance quotation should not be considered as
representative of performance for any specified period in the future.
Performance information may be useful as a basis for comparison with other
investment alternatives. However, a Fund's performance will fluctuate, unlike
certain bank deposits or other investments which pay a fixed yield for a stated
period of time. Any fees charged by Institutions or other institutional
investors directly to their customers in connection with investments in Fund
shares are not reflected in a Fund's total return, and such fees, if charged,
will reduce the actual return received by customers on their investments.
In addition, reference may be made in advertising a class of Fund shares to
opinions of Wall Street economists and analysts regarding economic cycles and
their effects historically on the performance of small companies, both as a
class and relative to other investments. A Fund may also discuss its beta, or
volatility relative to the market, and make reference to its relative
performance in various market cycles in the United States.
Each Fund may compare its performance with (i) that of other mutual funds
as listed in the rankings prepared by Lipper, Inc. or similar investment
services that monitor the performance of mutual funds or as set forth in the
publications listed below; (ii) in the case of the Strategic Value Fund, with
the S&P 500 Index and Russell 1000 Value Index; and in the case of the Capital
Appreciation Fund, with appropriate indexes prepared by Frank Russell Company
relating to securities represented in the Fund, the Russell 1000 Growth Index;
or (iii) other appropriate indexes of investment securities or with data
developed by CSAM derived from such indexes. A Fund may include evaluations of
the Fund published by nationally recognized ranking services and by financial
publications that are nationally recognized, such as Barron's, Business Week,
Financial Times, Forbes, Fortune, Inc., Institutional Investor, Investor's
Business Daily, Money, Morningstar, SmartMoney, The Wall Street Journal and
Worth. Morningstar, Inc. rates funds in broad categories based on risk/reward
analyses over various time periods. In addition, each Fund may from time to time
compare its expense ratios to that of any investment companies with similar
objectives and policies, based on data generated by Lipper, Inc. or similar
investment services that monitor mutual funds.
In reports or other communications to investors or in advertising, each
Fund may also describe the general biography or work experience of the portfolio
managers of the Fund and may include quotations attributable to the portfolio
managers describing approaches taken in managing the Fund's investments,
research methodology underlying stock selection or the Fund's
72
597589.28
investment objective. In addition, a Fund and its portfolio managers may render
periodic updates of Fund activity, which may include a discussion of significant
portfolio holdings; analysis of holdings by industry, country, credit quality
and other characteristics; and comparison and analysis of the Fund with respect
to relevant market industry benchmarks. Each Fund may also discuss measures of
risk, the continuum of risk and return relating to different investments and the
potential impact of foreign stocks on a portfolio otherwise composed of domestic
securities.
INDEPENDENT ACCOUNTANTS AND COUNSEL
PricewaterhouseCoopers LLP ("PwC"), with principal offices at Two Commerce
Square, Philadelphia, Pennsylvania 19103, serves as independent accountants for
each Fund. The financial statements that are incorporated by reference into this
Statement of Additional Information have been audited by PwC and have been
incorporated by reference herein in reliance upon the report of such firm of
independent accountants given upon their authority as experts in accounting and
auditing.
Willkie Farr & Gallagher, 787 Seventh Avenue, New York, New York 10019,
serves as counsel for each Fund and provides legal services from time to time
for CSAM and CSAMSI.
MISCELLANEOUS
As of January 24, 2003, the name, address and percentage of ownership of
each person that owns of record 5% or more of each Fund's outstanding shares
were as follows:
73
597589.28
STRATEGIC VALUE FUND
COMMON ADVISOR CLASS A CLASS B CLASS C
SHARES SHARES SHARES SHARES SHARES
------ ------- ------- ------- -------
Charles Schwab & Co. Inc. 25.36%
Special Custody Account for the
Exclusive Benefit of Customers
Attn Mutual Funds
101 Montgomery St.
San Francisco, CA 94104-4122
National Financial Services Corp. 17.05%
FBO Customers
Church Street Station
PO Box 3908
New York, NY 10008-3908
Fidelity Investment Institutional 6.92%
Operations Center
as agents for Certain Employee
Benefits Plans
100 Magellan Way
Covington, KY 41015-1999
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597589.28
COMMON ADVISOR CLASS A CLASS B CLASS C
SHARES SHARES SHARES SHARES SHARES
------ ------- ------- ------- -------
Connecticut General Life Ins. Co. 97.9%
On Behalf of its Separate Account
Attention: Carmen G. Rivera
280 Trumbull Street #H19B
Hartford, CT 06103-3509
Donaldson Lufkin Jenrette 27.25%
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette 18.39%
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette 16.21%
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette 10.91%
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-2052
Banc of America Securities LLC 9.98%
110-11534-17
NC1-004-03-06
200 North College St. 3rd Fl.
Charlotte, NC 28255-0001
Kathryn Miller Boldt & Kathryn Rees 6%
U/W Kyrle Boldt Sr
Kyrle Boldt Sr Residual Trust
12660 Post Oak Road
St. Louis, MO 63131-1416
American Enterprise Investment Svcs 5.61% 31.6%
FBO 212610451
P.O. Box 9446
Minneapolis, MN 55440-9446
Donaldson Lufkin Jenrette 20.24%
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-2052
75
597589.28
COMMON ADVISOR CLASS A CLASS B CLASS C
SHARES SHARES SHARES SHARES SHARES
------ ------- ------- ------- -------
Mary H. Nolen 18.01%
6080 Hickory Ridge Rd.
Lebanon, TN 37090-8239
Donaldson Lufkin Jenrette 7.89%
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette 7.16%
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette 5.91%
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette 57.32%
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette 20.06%
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette 11.4%
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-2052
CAPITAL APPRECIATION FUND
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597589.28
COMMON ADVISOR CLASS A CLASS B CLASS C
SHARES SHARES SHARES SHARES SHARES
------ ------- ------- ------- -------
Charles Schwab & Co. Inc. 13.58%
Special Custody Account for the
Exclusive Benefit of Customers*
Attn Mutual Funds
101 Montgomery St.
San Francisco, CA 94104-4122
Fidelity Investment Institutional 12.88%
Operations Center
as agent for Certain Employee
Benefits Plans*
100 Magellan Way
Covington, KY 41015-1999
International Truck & Engine Corp. 9.21%
OC Plan Master Trust # 132748
UMB Bank N/A C/O J.P. Morgan America
Century RPS TTEE UAD*
12/01/99
P.O. Box 419784
Kansas City, MO 64141-6784
Connecticut General Life Ins. Co. 61.3%
On Behalf of its Separate Account*
Attention: Carmen G. Rivera
280 Trumbull Street # H19B
Hartford, CT 06103-3509
Provident Bank 6.27%
Process Equity 401K Profit*
Attn: Dennis Hamilton
309 Vine Street, 653B
Cincinnati, OH 45202-3524
Donaldson Lufkin Jenrette 23.26%
Securities Corporation Inc.*
P.O. Box 2052
Jersey City, NJ 07303-2052
State Street Bank & Trust Co. 17.27%
Cust for the IRA of
William B. Sholinsky*
3020 Avenue Y
Brooklyn, NY 11235-1452
77
597589.28
COMMON ADVISOR CLASS A CLASS B CLASS C
SHARES SHARES SHARES SHARES SHARES
------ ------- ------- ------- -------
Donaldson Lufkin Jenrette 14.93%
Securities Corporation Inc.*
P.O. Box 2052
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette 11.57%
Securities Corporation Inc.*
P.O. Box 2052
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette 7.91%
Securities Corporation Inc.*
P.O. Box 2052
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette 7.01%
Securities Corporation Inc.*
P.O. Box 2052
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette 6.61%
Securities Corporation Inc.*
P.O. Box 2052
Jersey City, NJ 07303-2052
Morgan Stanley DW Inc Cust 19.56%
For Charles Dent*
P.O. Box 250 Church Street Station
New York, NY 10008-0250
Donaldson Lufkin Jenrette 17.12%
Securities Corporation Inc.*
P.O. Box 2052
Jersey City, NJ 07303-2052
American Enterprise Investment Svcs* 10.82%
FBO 208004211
P.O. Box 9446
Minneapolis, MN 55440-9446
Merrill Lynch Pierce 10.4%
Fenner & Smith Inc.*
Building 1 Team A Fl 2
4800 Deer Lake Drive East
Jacksonville, FL 32246-6486
Donaldson Lufkin Jenrette 10.13%
Securities Corporation Inc.*
P.O. Box 2052
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette 8.98%
Securities Corporation Inc.*
P.O. Box 2052
Jersey City, NJ 07303-2052
78
597589.28
COMMON ADVISOR CLASS A CLASS B CLASS C
SHARES SHARES SHARES SHARES SHARES
------ ------- ------- ------- -------
Dean Witter for the Benefit of 6.06%
Charles E. Dent TTEE*
P.O. Box 250 Church Street Station
New York, NY 10008-0250
American Enterprise Investment Svcs* 36.75%
FBO 210830841
P.O. Box 9446
Minneapolis, MN 55440-9446
Donaldson Lufkin Jenrette 32.7%
Securities Corporation Inc.*
P.O. Box 2052
Jersey City, NJ 07303-2052
Merrill Lynch Pierce 10.18%
Fenner & Smith Inc.*
Building 1 Team A Fl 2
4800 Deer Lake Drive East
Jacksonville, FL 32246-6486
American Enterprise Investment Svcs* 8.08%
FBO 208117821
P.O. Box 9446
Minneapolis, MN 55440-9446
- ------------
* Each Fund believes these entities are not the beneficial owners of shares
held of record by them.
FINANCIAL STATEMENTS
Each Fund's audited Annual Reports for the classes of shares it makes
available, which either accompanies this Statement of Additional Information or
has previously been provided to the investor to whom this Statement of
Additional Information is being sent, as relevant to the particular investor, is
incorporated herein by reference with respect to all information regarding the
relevant Fund included therein. Each Fund will furnish without charge a copy of
its Annual Report upon request by calling Credit Suisse Funds at 800-927-2874
(for the Advisor Shares, please call 800-222-8977).
79
597589.28
APPENDIX DESCRIPTION OF RATINGS
Commercial Paper Ratings
Commercial paper rated A-1 by Standard and Poor's Ratings Services ("S&P")
indicates that the degree of safety regarding timely payment is strong. Those
issues determined to possess extremely strong safety characteristics are denoted
with a plus sign designation. Capacity for timely payment on commercial paper
rated A-2 is satisfactory, but the relative degree of safety is not as high as
for issues designated A-1.
The rating Prime-1 is the highest commercial paper rating assigned by
Moody's Investors Service, Inc. ("Moody's"). Issuers rated Prime-1 (or related
supporting institutions) are considered to have a superior capacity for
repayment of short-term promissory obligations. Issuers rated Prime-2 (or
related supporting institutions) are considered to have a strong capacity for
repayment of short-term promissory obligations. This will normally be evidenced
by many of the characteristics of issuers rated Prime-1 but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternative liquidity is maintained.
Short-Term Note Ratings
The following summarizes the two highest ratings used by S&P for short-term
notes:
SP-1 - Loans bearing this designation evidence a very strong or strong
capacity to pay principal and interest. Those issues determined to possess
overwhelming safety characteristics will be given a plus sign designation.
SP-2 - Loans bearing this designation evidence a satisfactory capacity to
pay principal and interest.
The following summarizes the two highest ratings used by Moody's for
short-term notes and variable rate demand obligations:
MIG-1/VMIG-1 - Obligations bearing these designations are of the best
quality, enjoying strong protection from established cash flows of funds for
their servicing or from established and broad-based access to the market for
refinancing, or both.
MIG-2/VMIG-2 - Obligations bearing these designations are of high quality
with margins of protection ample although not so large as in the preceding
group.
Corporate Bond and Municipal Obligations Ratings
The following summarizes the ratings used by S&P for corporate bonds and
Municipal Obligations:
A-1
597589.28
AAA - This is the highest rating assigned by S&P to a debt obligation and
indicates an extremely strong capacity to pay interest and repay principal.
AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from AAA issues only in small degree.
A - Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher-rated categories.
BBB - This is the lowest investment grade. Debt rated BBB is regarded as
having an adequate capacity to pay interest and repay principal. Although it
normally exhibits adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for bonds in this category than for bonds in higher
rated categories.
BB, B and CCC - Debt rated BB and B are regarded, on balance, as
predominately speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB represents a lower
degree of speculation than B, and CCC the highest degree of speculation. While
such bonds will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
BB - Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions, which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB rating.
B - Debt rated B has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
BB or BB- rating.
CCC - Debt rated CCC has a currently identifiable vulnerability to default
and is dependent upon favorable business, financial and economic conditions to
meet timely payment of interest and repayment of principal. In the event of
adverse business, financial or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The CCC rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
B or B- rating.
CC - This rating is typically applied to debt subordinated to senior debt
that is assigned an actual or implied CCC rating.
C - This rating is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC- debt rating. The C rating may be
used to cover a situation where a bankruptcy petition has been filed, but debt
service payments are continued.
A-2
597589.28
Additionally, the rating CI is reserved for income bonds on which no
interest is being paid. Such debt is rated between debt rated C and debt rated
D.
To provide more detailed indications of credit quality, the ratings may be
modified by the addition of a plus or minus sign to show relative standing
within this major rating category.
D - Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The D rating also will be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.
The following summarizes the ratings used by Moody's for corporate bonds
and Municipal Obligations:
Aaa - Bonds that are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edged." Interest payments are protected by a large or exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa - Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They 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.
A - Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper-medium-grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa - Bonds which are rated Baa are considered as medium-grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security 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.
Ba - Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of desirable
investments. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
A-3
597589.28
Moody's applies numerical modifiers (1, 2 and 3) with respect to the bonds
rated "Aa" through "B." The modifier 1 indicates that the bond being rated ranks
in the higher end of its generic rating category; the modifier 2 indicates a
mid-range ranking; and the modifier 3 indicates that the bond ranks in the lower
end of its generic rating category.
Caa - Bonds that are rated Caa are of poor standing. These issues may be in
default or present elements of danger may exist with respect to principal or
interest.
Ca - Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings.
C - Bonds which are rated C comprise the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
A-4
[CREDIT SUISSE ASSET MANAGEMENT LOGO]
CREDIT SUISSE FUNDS
ANNUAL REPORT
OCTOBER 31, 2002
- - CREDIT SUISSE
LARGE CAP VALUE FUND
- - CREDIT SUISSE
STRATEGIC VALUE FUND
- - CREDIT SUISSE
SMALL CAP VALUE FUND
MORE COMPLETE INFORMATION ABOUT THE FUNDS, INCLUDING CHARGES AND EXPENSES, IS
PROVIDED IN THE PROSPECTUS, WHICH MUST PRECEDE OR ACCOMPANY THIS DOCUMENT AND
WHICH SHOULD BE READ CAREFULLY BEFORE INVESTING. YOU MAY OBTAIN ADDITIONAL
COPIES BY CALLING 800-927-2874 OR BY WRITING TO CREDIT SUISSE FUNDS, P.O. BOX
55030, BOSTON, MA 02205-5030.
CREDIT SUISSE ASSET MANAGEMENT SECURITIES, INC., DISTRIBUTOR, IS LOCATED AT 466
LEXINGTON AVE., NEW YORK, NY 10017-3147. CREDIT SUISSE FUNDS ARE ADVISED BY
CREDIT SUISSE ASSET MANAGEMENT, LLC.
THE FUNDS' INVESTMENT ADVISER AND CO-ADMINISTRATORS MAY WAIVE SOME FEES AND/OR
REIMBURSE SOME EXPENSES, WITHOUT WHICH PERFORMANCE WOULD BE LOWER. WAIVERS
AND/OR REIMBURSEMENTS ARE SUBJECT TO CHANGE.
RETURNS INCLUDE CHANGE IN SHARE PRICE AND REINVESTMENT OF DIVIDENDS AND CAPITAL
GAINS. PAST PERFORMANCE CANNOT GUARANTEE FUTURE RESULTS. RETURNS AND SHARE PRICE
WILL FLUCTUATE, AND REDEMPTION VALUE MAY BE MORE OR LESS THAN ORIGINAL COST.
THE VIEWS OF THE FUNDS' MANAGEMENT ARE AS OF THE DATE OF THE LETTER AND THE
PORTFOLIO HOLDINGS DESCRIBED IN THIS DOCUMENT ARE AS OF OCTOBER 31, 2002; THESE
VIEWS AND PORTFOLIO HOLDINGS MAY HAVE CHANGED SUBSEQUENT TO THESE DATES. NOTHING
IN THIS DOCUMENT IS A RECOMMENDATION TO PURCHASE OR SELL SECURITIES.
FUND SHARES ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF CREDIT SUISSE ASSET
MANAGEMENT, LLC ("CSAM") OR ANY AFFILIATE, ARE NOT FDIC-INSURED AND ARE NOT
GUARANTEED BY CSAM OR ANY AFFILIATE.
CREDIT SUISSE LARGE CAP VALUE FUND
ANNUAL INVESTMENT ADVISER'S REPORT
October 31, 2002
December 2, 2002
Dear Shareholder:
For the 12 months ended October 31, 2002, the Common Class Shares of Credit
Suisse Large Cap Value Fund(1) (the "Fund") had a loss of 7.63%, vs. declines of
15.11%, 15.78% and 10.03%, respectively, for the S&P 500 Index, the S&P/Barra
Value Index and the Russell 1000 Value Index.(2) The Fund's Class A Shares,
Class B Shares and Class C Shares had returns of -7.63%, -8.29% and -8.35%,
respectively, for the same period.(3)
The period was a very poor one for stocks in general. Markets actually rose
over the first part of the period, rebounding from their post-September 11th
plunge amid historically low interest rates and signs of economic recovery.
However, a confluence of negative developments sent equities spiraling downward
into early October 2002. Certain highly visible U.S. corporations were revealed
to have accounting problems, in some cases involving outright fraud. Meanwhile,
the economic data began to indicate that expectations of recovery had been too
optimistic. The looming prospects for a U.S.-led war on Iraq added to the
uncertainty. Investors fled risk in all forms, preferring the liquidity and
stability of cash-like investments and high-quality bonds. In the end, despite
the early rally and the positive finish to the period (stocks rose broadly in
October), prominent U.S. equity indexes had significant declines for the 12
months.
The Fund had a loss, hurt by the broad market selloff, though it outperformed
its Russell 1000 Value benchmark. Stocks that had relatively good showing in the
Fund included its consumer-discretionary, materials, energy and health-care
holdings. One factor that hindered the Fund's relative return was its
underweighting in the financial-services sector (financial companies account for
about a third of the Russell 1000 Value Index), which outperformed the broader
equity market in the period.
Despite the positive October for equities, we remain of the view that the
market is undervalued and could have a fair amount of upside potential when risk
concerns begin to fade. We base this opinion on our dividend discount model --
which we anchor to fairly conservative assumptions. That said, it could take
some time for risk levels to normalize, given the still-uncertain state of the
economy and the possibility of a U.S. led war on Iraq. The threat and reality of
terrorism also could keep risk thresholds high.
From the sector perspective, we view technology and telecommunications stocks
as being generally expensive, and plan to limit our exposure in these areas over
the intermediate term. Our favored companies at present include a number of "old
economy" names within the industrial, specialty-retail, energy and health-care
sectors. We also view certain financial-services stocks as attractive but remain
quite selective in this area.
Sincerely yours,
The Credit Suisse Value Team
1
[CHART]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE
CREDIT SUISSE LARGE CAP VALUE FUND(1) COMMON CLASS SHARES,
THE RUSSELL 1000 VALUE INDEX(2), THE S&P 500 INDEX(2) AND
THE S&P BARRA VALUE INDEX(2) FROM INCEPTION (8/01/00). (UNAUDITED)
CREDIT SUISSE LARGE CAP VALUE RUSSELL 1000 VALUE S&P 500 S&P BARRA VALUE
FUND(1) COMMON CLASS -- $9,006 INDEX(2) -- $8,656 INDEX(2) -- $6,387 INDEX(2) -- $7,466
8/1/2000 $ 10,000 $ 10,000 $ 10,000 $ 10,000
8/31/2000 $ 10,432 $ 10,557 $ 10,621 $ 10,671
9/30/2000 $ 10,530 $ 10,654 $ 10,060 $ 10,668
10/31/2000 $ 10,870 $ 10,916 $ 10,018 $ 10,867
11/30/2000 $ 10,602 $ 10,511 $ 9,228 $ 10,311
12/31/2000 $ 11,296 $ 11,037 $ 9,273 $ 10,842
1/31/2001 $ 11,126 $ 11,079 $ 9,602 $ 11,299
2/28/2001 $ 10,957 $ 10,771 $ 8,726 $ 10,550
3/31/2001 $ 10,584 $ 10,391 $ 8,174 $ 10,134
4/30/2001 $ 11,027 $ 10,900 $ 8,809 $ 10,822
5/31/2001 $ 11,236 $ 11,145 $ 8,868 $ 10,935
6/30/2001 $ 10,871 $ 10,898 $ 8,652 $ 10,581
7/31/2001 $ 10,799 $ 10,875 $ 8,567 $ 10,398
8/31/2001 $ 10,405 $ 10,439 $ 8,031 $ 9,797
9/30/2001 $ 9,747 $ 9,704 $ 7,382 $ 8,866
10/31/2001 $ 9,727 $ 9,621 $ 7,523 $ 8,866
11/30/2001 $ 10,215 $ 10,180 $ 8,100 $ 9,429
12/31/2001 $ 10,523 $ 10,419 $ 8,171 $ 9,572
1/31/2002 $ 10,354 $ 10,339 $ 8,052 $ 9,309
2/28/2002 $ 10,481 $ 10,356 $ 7,896 $ 9,226
3/31/2002 $ 10,808 $ 10,845 $ 8,193 $ 9,699
4/30/2002 $ 10,479 $ 10,473 $ 7,697 $ 9,213
5/31/2002 $ 10,490 $ 10,526 $ 7,640 $ 9,250
6/30/2002 $ 9,873 $ 9,922 $ 7,096 $ 8,666
7/31/2002 $ 9,170 $ 8,999 $ 6,543 $ 7,729
8/31/2002 $ 9,186 $ 9,067 $ 6,586 $ 7,783
9/30/2002 $ 8,423 $ 8,059 $ 5,870 $ 6,893
10/31/2002 $ 9,006 $ 8,656 $ 6,387 $ 7,466
[CHART]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE
CREDIT SUISSE LARGE CAP VALUE FUND(1) CLASS A SHARES(3),
THE RUSSELL 1000 VALUE INDEX(2), THE S&P 500 INDEX(2) AND
THE S&P BARRA VALUE INDEX(2) FOR TEN YEARS. (UNAUDITED)
CREDIT SUISSE LARGE CAP VALUE RUSSELL 1000 VALUE S&P 500 S&P BARRA VALUE
FUND(1) CLASS A(3) -- $26,233 INDEX(2) -- $29,018 INDEX(2) -- $25,655 INDEX(2) -- $25,283
10/92 $ 9,425 $ 10,000 $ 10,000 $ 10,000
11/92 $ 9,647 $ 10,328 $ 10,338 $ 10,271
12/92 $ 9,800 $ 10,574 $ 10,473 $ 10,457
1/93 $ 9,791 $ 10,881 $ 10,550 $ 10,746
2/93 $ 9,969 $ 11,264 $ 10,692 $ 11,116
3/93 $ 10,348 $ 11,596 $ 10,922 $ 11,423
4/93 $ 10,096 $ 11,448 $ 10,654 $ 11,377
5/93 $ 10,250 $ 11,678 $ 10,942 $ 11,590
6/93 $ 10,465 $ 11,935 $ 10,977 $ 11,743
7/93 $ 10,398 $ 12,069 $ 10,926 $ 11,889
8/93 $ 10,823 $ 12,505 $ 11,343 $ 12,355
9/93 $ 10,863 $ 12,525 $ 11,259 $ 12,350
10/93 $ 11,019 $ 12,516 $ 11,488 $ 12,417
11/93 $ 10,889 $ 12,258 $ 11,380 $ 12,195
12/93 $ 11,330 $ 12,490 $ 11,520 $ 12,403
1/94 $ 11,868 $ 12,963 $ 11,905 $ 12,981
2/94 $ 11,681 $ 12,520 $ 11,583 $ 12,511
3/94 $ 11,098 $ 12,054 $ 11,079 $ 11,997
4/94 $ 11,415 $ 12,285 $ 11,223 $ 12,249
5/94 $ 11,450 $ 12,427 $ 11,406 $ 12,452
6/94 $ 11,172 $ 12,129 $ 11,124 $ 12,108
7/94 $ 11,559 $ 12,506 $ 11,492 $ 12,517
8/94 $ 11,817 $ 12,866 $ 11,960 $ 12,871
9/94 $ 11,505 $ 12,439 $ 11,671 $ 12,418
10/94 $ 11,531 $ 12,612 $ 11,938 $ 12,688
11/94 $ 11,185 $ 12,103 $ 11,500 $ 12,174
12/94 $ 11,067 $ 12,242 $ 11,668 $ 12,324
1/95 $ 11,257 $ 12,619 $ 11,971 $ 12,657
2/95 $ 11,557 $ 13,118 $ 12,436 $ 13,149
3/95 $ 11,802 $ 13,406 $ 12,804 $ 13,511
4/95 $ 11,983 $ 13,829 $ 13,180 $ 13,956
5/95 $ 12,430 $ 14,411 $ 13,700 $ 14,577
6/95 $ 12,485 $ 14,607 $ 14,023 $ 14,687
7/95 $ 12,760 $ 15,115 $ 14,490 $ 15,193
8/95 $ 12,888 $ 15,329 $ 14,530 $ 15,323
9/95 $ 13,425 $ 15,883 $ 15,140 $ 15,856
10/95 $ 13,389 $ 15,725 $ 15,086 $ 15,609
11/95 $ 14,006 $ 16,522 $ 15,750 $ 16,427
12/95 $ 14,337 $ 16,937 $ 16,042 $ 16,883
1/96 $ 14,932 $ 17,465 $ 16,594 $ 17,388
2/96 $ 15,122 $ 17,597 $ 16,753 $ 17,551
3/96 $ 15,111 $ 17,896 $ 16,913 $ 17,962
4/96 $ 15,254 $ 17,965 $ 17,163 $ 18,145
5/96 $ 15,596 $ 18,189 $ 17,605 $ 18,418
6/96 $ 15,659 $ 18,204 $ 17,676 $ 18,329
7/96 $ 15,270 $ 17,516 $ 16,889 $ 17,556
8/96 $ 15,431 $ 18,017 $ 17,248 $ 18,041
9/96 $ 16,049 $ 18,733 $ 18,217 $ 18,813
10/96 $ 16,422 $ 19,457 $ 18,716 $ 19,451
11/96 $ 17,713 $ 20,868 $ 20,137 $ 20,939
12/96 $ 17,489 $ 20,602 $ 19,743 $ 20,597
1/97 $ 18,343 $ 21,601 $ 20,968 $ 21,547
2/97 $ 18,637 $ 21,918 $ 21,137 $ 21,703
3/97 $ 17,738 $ 21,130 $ 20,257 $ 20,960
4/97 $ 18,395 $ 22,018 $ 21,466 $ 21,746
5/97 $ 19,658 $ 23,248 $ 22,784 $ 23,109
6/97 $ 20,455 $ 24,245 $ 23,785 $ 23,993
7/97 $ 21,785 $ 26,069 $ 25,675 $ 25,912
8/97 $ 20,723 $ 25,140 $ 24,252 $ 24,741
9/97 $ 21,719 $ 26,659 $ 25,574 $ 26,192
10/97 $ 21,442 $ 25,915 $ 24,733 $ 25,229
11/97 $ 22,527 $ 27,060 $ 25,867 $ 26,191
12/97 $ 23,220 $ 27,850 $ 26,304 $ 26,772
1/98 $ 23,054 $ 27,456 $ 26,602 $ 26,442
2/98 $ 24,678 $ 29,304 $ 28,514 $ 28,426
3/98 $ 25,676 $ 31,097 $ 29,977 $ 29,866
4/98 $ 25,587 $ 31,305 $ 30,288 $ 30,219
5/98 $ 25,243 $ 30,840 $ 29,761 $ 29,794
6/98 $ 26,193 $ 31,236 $ 30,970 $ 30,020
7/98 $ 25,587 $ 30,684 $ 30,641 $ 29,368
8/98 $ 22,188 $ 26,119 $ 26,217 $ 24,646
9/98 $ 23,746 $ 27,618 $ 27,915 $ 26,143
10/98 $ 25,557 $ 29,758 $ 30,175 $ 28,191
11/98 $ 26,559 $ 31,145 $ 32,005 $ 29,659
12/98 $ 27,548 $ 32,204 $ 33,867 $ 30,701
1/99 $ 27,786 $ 32,461 $ 35,261 $ 31,321
2/99 $ 27,204 $ 32,003 $ 34,166 $ 30,647
3/99 $ 27,899 $ 32,665 $ 35,538 $ 31,576
4/99 $ 29,490 $ 35,716 $ 36,891 $ 34,298
5/99 $ 28,870 $ 35,323 $ 36,039 $ 33,692
6/99 $ 30,332 $ 36,349 $ 38,008 $ 34,986
7/99 $ 30,133 $ 35,284 $ 36,851 $ 33,910
8/99 $ 29,276 $ 33,975 $ 36,679 $ 33,051
9/99 $ 28,206 $ 32,788 $ 35,663 $ 31,758
10/99 $ 29,236 $ 34,675 $ 37,931 $ 33,551
11/99 $ 29,416 $ 34,403 $ 38,706 $ 33,354
12/99 $ 30,417 $ 34,569 $ 40,982 $ 34,607
1/00 $ 29,278 $ 33,442 $ 38,923 $ 33,506
2/00 $ 27,558 $ 30,958 $ 38,187 $ 31,413
3/00 $ 29,901 $ 34,735 $ 41,922 $ 34,688
4/00 $ 30,148 $ 34,332 $ 40,661 $ 34,456
5/00 $ 30,728 $ 34,694 $ 39,827 $ 34,563
6/00 $ 29,688 $ 33,109 $ 40,808 $ 33,198
7/00 $ 28,867 $ 33,523 $ 40,171 $ 33,862
8/00 $ 30,438 $ 35,388 $ 42,665 $ 36,133
9/00 $ 30,741 $ 35,714 $ 40,412 $ 36,124
10/00 $ 31,717 $ 36,593 $ 40,241 $ 36,799
11/00 $ 30,935 $ 35,235 $ 37,069 $ 34,916
12/00 $ 32,972 $ 37,000 $ 37,250 $ 36,712
1/01 $ 32,462 $ 37,141 $ 38,572 $ 38,262
2/01 $ 31,967 $ 36,108 $ 35,055 $ 35,726
3/01 $ 30,890 $ 34,834 $ 32,834 $ 34,316
4/01 $ 32,182 $ 36,541 $ 35,386 $ 36,644
5/01 $ 32,808 $ 37,363 $ 35,623 $ 37,028
6/01 $ 31,742 $ 36,533 $ 34,756 $ 35,828
7/01 $ 31,529 $ 36,457 $ 34,414 $ 35,209
8/01 $ 30,375 $ 34,995 $ 32,259 $ 33,174
9/01 $ 28,452 $ 32,531 $ 29,654 $ 30,023
10/01 $ 28,395 $ 32,251 $ 30,220 $ 30,023
11/01 $ 29,819 $ 34,125 $ 32,538 $ 31,928
12/01 $ 30,724 $ 34,929 $ 32,823 $ 32,413
1/02 $ 30,217 $ 34,659 $ 32,344 $ 31,524
2/02 $ 30,587 $ 34,715 $ 31,721 $ 31,242
3/02 $ 31,542 $ 36,357 $ 32,914 $ 32,842
4/02 $ 30,599 $ 35,110 $ 30,918 $ 31,197
5/02 $ 30,631 $ 35,285 $ 30,690 $ 31,321
6/02 $ 28,812 $ 33,260 $ 28,504 $ 29,346
7/02 $ 26,757 $ 30,167 $ 26,282 $ 26,174
8/02 $ 26,820 $ 30,396 $ 26,455 $ 26,354
9/02 $ 24,580 $ 27,016 $ 23,580 $ 23,343
10/02 $ 26,233 $ 29,018 $ 25,655 $ 25,283
2
[CHART]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE
CREDIT SUISSE LARGE CAP VALUE FUND(1) CLASS B SHARES(3),
THE RUSSELL 1000 VALUE INDEX(2), THE S&P 500 INDEX(2) AND
THE S&P BARRA VALUE INDEX(2) FROM INCEPTION (2/28/96). (UNAUDITED)
CREDIT SUISSE RUSSELL 1000
LARGE CAP VALUE FUND(1) VALUE INDEX S&P 500 S&P BARRA VALUE
CLASS B(3) -- $16,490 (2) -- $16,491 INDEX(2) -- $15,314 INDEX(2) -- $14,406
2/29/1996 $ 10,000 $ 10,000 $ 10,000 $ 10,000
3/31/1996 $ 9,984 $ 10,170 $ 10,096 $ 10,234
4/30/1996 $ 10,071 $ 10,209 $ 10,245 $ 10,338
5/31/1996 $ 10,291 $ 10,337 $ 10,509 $ 10,494
6/30/1996 $ 10,329 $ 10,345 $ 10,551 $ 10,443
7/31/1996 $ 10,061 $ 9,954 $ 10,081 $ 10,003
8/31/1996 $ 10,162 $ 10,239 $ 10,295 $ 10,279
9/30/1996 $ 10,568 $ 10,646 $ 10,874 $ 10,719
10/31/1996 $ 10,808 $ 11,057 $ 11,172 $ 11,083
11/30/1996 $ 11,652 $ 11,859 $ 12,020 $ 11,930
12/31/1996 $ 11,492 $ 11,708 $ 11,785 $ 11,735
1/31/1997 $ 12,048 $ 12,276 $ 12,516 $ 12,276
2/28/1997 $ 12,236 $ 12,456 $ 12,617 $ 12,366
3/31/1997 $ 11,636 $ 12,008 $ 12,092 $ 11,942
4/30/1997 $ 12,060 $ 12,512 $ 12,813 $ 12,390
5/31/1997 $ 12,875 $ 13,211 $ 13,600 $ 13,167
6/30/1997 $ 13,393 $ 13,778 $ 14,198 $ 13,670
7/31/1997 $ 14,257 $ 14,815 $ 15,325 $ 14,764
8/31/1997 $ 13,553 $ 14,287 $ 14,476 $ 14,097
9/30/1997 $ 14,201 $ 15,150 $ 15,265 $ 14,923
10/31/1997 $ 14,005 $ 14,727 $ 14,763 $ 14,375
11/30/1997 $ 14,708 $ 15,378 $ 15,440 $ 14,923
12/31/1997 $ 15,145 $ 15,827 $ 15,701 $ 15,254
1/31/1998 $ 15,029 $ 15,603 $ 15,879 $ 15,066
2/28/1998 $ 16,076 $ 16,653 $ 17,020 $ 16,196
3/31/1998 $ 16,723 $ 17,672 $ 17,894 $ 17,016
4/30/1998 $ 16,650 $ 17,790 $ 18,079 $ 17,218
5/31/1998 $ 16,418 $ 17,526 $ 17,765 $ 16,976
6/30/1998 $ 17,021 $ 17,751 $ 18,486 $ 17,104
7/31/1998 $ 16,619 $ 17,438 $ 18,290 $ 16,733
8/31/1998 $ 14,400 $ 14,843 $ 15,649 $ 14,042
9/30/1998 $ 15,407 $ 15,695 $ 16,663 $ 14,895
10/31/1998 $ 16,567 $ 16,911 $ 18,012 $ 16,062
11/30/1998 $ 17,211 $ 17,699 $ 19,104 $ 16,899
12/31/1998 $ 17,839 $ 18,301 $ 20,215 $ 17,492
1/31/1999 $ 17,976 $ 18,447 $ 21,048 $ 17,846
2/28/1999 $ 17,589 $ 18,187 $ 20,394 $ 17,462
3/31/1999 $ 18,033 $ 18,563 $ 21,213 $ 17,991
4/30/1999 $ 19,048 $ 20,297 $ 22,021 $ 19,542
5/31/1999 $ 18,637 $ 20,074 $ 21,512 $ 19,196
6/30/1999 $ 19,572 $ 20,657 $ 22,688 $ 19,934
7/31/1999 $ 19,427 $ 20,052 $ 21,996 $ 19,321
8/31/1999 $ 18,871 $ 19,308 $ 21,894 $ 18,831
9/30/1999 $ 18,162 $ 18,633 $ 21,288 $ 18,095
10/31/1999 $ 18,831 $ 19,705 $ 22,641 $ 19,116
11/30/1999 $ 18,929 $ 19,551 $ 23,104 $ 19,004
12/31/1999 $ 19,560 $ 19,645 $ 24,462 $ 19,718
1/31/1900 $ 18,813 $ 19,005 $ 23,233 $ 19,091
2/29/2000 $ 17,702 $ 17,593 $ 22,794 $ 17,898
3/31/2000 $ 19,195 $ 19,739 $ 25,024 $ 19,764
4/30/2000 $ 19,344 $ 19,510 $ 24,271 $ 19,632
5/31/2000 $ 19,701 $ 19,716 $ 23,773 $ 19,693
6/30/2000 $ 19,021 $ 18,815 $ 24,359 $ 18,915
7/31/2000 $ 18,481 $ 19,051 $ 23,978 $ 19,294
8/31/2000 $ 19,477 $ 20,111 $ 25,467 $ 20,587
9/30/2000 $ 19,651 $ 20,296 $ 24,122 $ 20,582
10/31/2000 $ 20,273 $ 20,795 $ 24,020 $ 20,967
11/30/2000 $ 19,751 $ 20,024 $ 22,127 $ 19,894
12/31/2000 $ 21,035 $ 21,027 $ 22,235 $ 20,917
1/31/2001 $ 20,707 $ 21,107 $ 23,024 $ 21,801
2/28/2001 $ 20,379 $ 20,520 $ 20,924 $ 20,356
3/31/2001 $ 19,671 $ 19,796 $ 19,599 $ 19,552
4/30/2001 $ 20,492 $ 20,766 $ 21,122 $ 20,879
5/31/2001 $ 20,866 $ 21,233 $ 21,263 $ 21,097
6/30/2001 $ 20,219 $ 20,761 $ 20,746 $ 20,414
7/31/2001 $ 20,073 $ 20,718 $ 20,542 $ 20,061
8/31/2001 $ 19,325 $ 19,887 $ 19,256 $ 18,901
9/30/2001 $ 18,090 $ 18,487 $ 17,701 $ 17,106
10/31/2001 $ 18,044 $ 18,328 $ 18,038 $ 17,106
11/30/2001 $ 18,938 $ 19,393 $ 19,422 $ 18,191
12/31/2001 $ 19,502 $ 19,850 $ 19,592 $ 18,468
1/31/2002 $ 19,166 $ 19,697 $ 19,307 $ 17,961
2/28/2002 $ 19,166 $ 19,728 $ 18,934 $ 17,800
3/31/2002 $ 19,747 $ 20,661 $ 19,646 $ 18,712
4/30/2002 $ 19,141 $ 19,953 $ 18,455 $ 17,775
5/31/2002 $ 19,150 $ 20,052 $ 18,319 $ 17,846
6/30/2002 $ 18,005 $ 18,901 $ 17,014 $ 16,720
7/31/2002 $ 16,711 $ 17,143 $ 15,688 $ 14,913
8/31/2002 $ 16,731 $ 17,274 $ 15,791 $ 15,015
9/30/2002 $ 15,335 $ 15,353 $ 14,075 $ 13,300
10/31/2002 $ 16,490 $ 16,491 $ 15,314 $ 14,406
[CHART]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE
CREDIT SUISSE LARGE CAP VALUE FUND(1) CLASS C SHARES(3),(4),
THE RUSSELL 1000 VALUE INDEX(2),(4), THE S&P 500 INDEX(2),(4) AND
THE S&P BARRA VALUE INDEX(2),(4). (UNAUDITED)
CREDIT SUISSE LARGE
CAP VALUE FUND(1) RUSSELL 1000 VALUE S&P 500 S&P BARRA VALUE
CLASS C(3),(4) -- $9,326 INDEX(2),(4) -- $9,373 INDEX(2),(4) -- $6,718 INDEX(2),(4) -- $8,049
3/00(4) $ 10,000 $ 10,000 $ 10,000 $ 10,000
3/31/2000 $ 10,839 $ 11,220 $ 10,978 $ 11,043
4/30/2000 $ 10,918 $ 11,090 $ 10,648 $ 10,969
5/31/2000 $ 11,120 $ 11,207 $ 10,429 $ 11,003
6/30/2000 $ 10,741 $ 10,695 $ 10,687 $ 10,568
7/31/2000 $ 10,431 $ 10,829 $ 10,520 $ 10,780
8/31/2000 $ 10,994 $ 11,431 $ 11,173 $ 11,503
9/30/2000 $ 11,092 $ 11,536 $ 10,583 $ 11,500
10/31/2000 $ 11,444 $ 11,820 $ 10,538 $ 11,715
11/30/2000 $ 11,153 $ 11,382 $ 9,707 $ 11,115
12/31/2000 $ 11,880 $ 11,952 $ 9,755 $ 11,687
1/31/2001 $ 11,689 $ 11,997 $ 10,101 $ 12,181
2/28/2001 $ 11,498 $ 11,664 $ 9,180 $ 11,373
3/31/2001 $ 11,100 $ 11,252 $ 8,598 $ 10,924
4/30/2001 $ 11,565 $ 11,803 $ 9,266 $ 11,665
5/31/2001 $ 11,776 $ 12,069 $ 9,329 $ 11,788
6/30/2001 $ 11,405 $ 11,801 $ 9,102 $ 11,406
7/31/2001 $ 11,322 $ 11,776 $ 9,012 $ 11,209
8/31/2001 $ 10,899 $ 11,304 $ 8,448 $ 10,561
9/30/2001 $ 10,202 $ 10,508 $ 7,766 $ 9,557
10/31/2001 $ 10,177 $ 10,418 $ 7,914 $ 9,557
11/30/2001 $ 10,683 $ 11,023 $ 8,521 $ 10,164
12/31/2001 $ 10,996 $ 11,283 $ 8,595 $ 10,319
1/31/2002 $ 10,807 $ 11,196 $ 8,470 $ 10,035
2/28/2002 $ 10,935 $ 11,214 $ 8,307 $ 9,946
3/31/2002 $ 11,269 $ 11,744 $ 8,619 $ 10,455
4/30/2002 $ 10,922 $ 11,341 $ 8,097 $ 9,931
5/31/2002 $ 10,927 $ 11,398 $ 8,037 $ 9,971
6/30/2002 $ 10,276 $ 10,744 $ 7,464 $ 9,342
7/31/2002 $ 9,534 $ 9,745 $ 6,882 $ 8,332
8/31/2002 $ 9,545 $ 9,819 $ 6,928 $ 8,390
9/30/2002 $ 8,747 $ 8,727 $ 6,175 $ 7,431
10/31/2002 $ 9,326 $ 9,373 $ 6,718 $ 8,049
3
Past performance is not predictive of future performance. Investment return and
principal value of an investment will fluctuate so that an investor's shares
upon redemption may be worth more or less than their original cost. The
performance results do not reflect the deduction of taxes that a shareholder
would pay on fund distributions or the redemption of fund shares.
AVERAGE ANNUAL RETURNS AS OF SEPTEMBER 30, 2002(1)
SINCE
1 YEAR 5 YEAR 10 YEAR INCEPTION
------ ------ ------- ---------
Common (13.57%) -- -- (7.51%)
Class A Without
Sales Charge (13.62%) 2.53% 9.88% 11.28%
Class A With Maximum
Sales Charge (18.59%) 1.32% 9.23% 11.15%
Class B Without CDSC (14.23%) 1.79% -- 6.84%
Class B With CDSC (17.39%) 1.79% -- 6.84%
Class C Without CDSC (14.26%) -- -- (4.76%)
Class C With CDSC (15.05%) -- -- (4.76%)
AVERAGE ANNUAL RETURNS AS OF OCTOBER 31, 2002(1)
SINCE
1 YEAR 5 YEAR 10 YEAR INCEPTION
------ ------ ------- ---------
Common (7.63%) -- -- (4.54%)
Class A Without
Sales Charge (7.63%) 4.14% 10.78% 11.39%
Class A With Maximum
Sales Charge (12.95%) 2.91% 10.12% 11.27%
Class B Without CDSC (8.29%) 3.40% -- 7.78%
Class B With CDSC (11.66%) 3.40% -- 7.78%
Class C Without CDSC (8.35%) -- -- (2.30%)
Class C With CDSC (9.19%) -- -- (2.30%)
4
- ----------
(1) Fee waivers and/or expense reimbursements reduced expenses for the Fund,
without which performance would be lower. Waivers and/or reimbursements may
be discontinued at any time.
(2) The Fund added the Standard & Poor's/BARRA Value Index as a benchmark,
effective 5/1/2001, to its existing benchmark, the Standard & Poor's 500
Index ("S&P 500 Index"). Effective 11/15/2001, in light of the Fund's
emphasis on value stocks, the Fund discontinued use of these benchmarks and
adopted the Russell 1000 Value Index. The S&P 500 Index is an unmanaged
index (with no defined investment objective) of common stocks. It includes
reinvestment of dividends, and is a registered trademark of McGraw-Hill
Co., Inc. The Standard & Poor's/BARRA Value Index is a
capitalization-weighted index of all the stocks in the S&P 500 Index that
have lower price-to-book ratios. The Russell 1000(R) Value Index measures
the performance of those companies in the Russell 1000 Index with lower
price-to-book ratios and lower forecasted growth values. It is an unmanaged
index of common stocks that includes reinvestment of dividends and is
compiled by Frank Russell company. The Russell 1000(R) Index measures the
performance of the 1,000 largest companies in the Russell 3000(R) Index,
which measures the performance of 3,000 of the largest U.S. companies by
market capitalization. Investors cannot invest directly in an index.
(3) Total return for Class A Shares for the reporting period, based on offering
price (with maximum sales charge of 5.75%), was -12.95%. Total return for
Class B Shares for the reporting period, based on redemption value
(including maximum contingent deferred sales charge of 4%), was -11.66%.
Total return for Class C Shares for the reporting period, based on
redemption value (including maximum contingent deferred sales charge of
1%), was -9.19%.
(4) Performance for the benchmarks is not available for the period beginning
February 28, 2000 (commencement of operations). For that reason,
performance is shown for the period beginning March 1, 2000.
5
CREDIT SUISSE STRATEGIC VALUE FUND
ANNUAL INVESTMENT ADVISER'S REPORT
October 31, 2002
December 2, 2002
Dear Shareholder:
For the 12 months ended October 31, 2002, the Common Class and Advisor Class
shares of Credit Suisse Strategic Value Fund (the "Fund") had losses of 13.29%
and 13.71%, respectively, vs. a decline of 15.11% for the S&P 500 Index(1) and a
decline of 10.03% for the Russell 1000 Value Index(1). The Fund's Class A, Class
B and Class C Shares (all of which have inception dates of November 30, 2001)
had losses of 18.76%, 19.23% and 19.31%, respectively, for the 11 month
period(2),(3) ended October 31, 2002, vs. a same-period decline of 21.15% for
the S&P 500 Index(1) and a same-period decline of 14.97% for the Russell 1000
Value Index(1).
The period was a very poor one for stocks in general. Markets actually rose
over the first part of the period, rebounding from their post-September 11th
plunge amid historically low interest rates and signs of economic recovery.
However, a confluence of negative developments sent equities spiraling downward
into early October 2002. Certain highly visible U.S. corporations were revealed
to have accounting problems, in some cases involving outright fraud. Meanwhile,
the economic data began to indicate that expectations of recovery had been too
optimistic. The looming prospects for a U.S.-led war on Iraq added to the
uncertainty. Investors fled risk in all forms, preferring the liquidity and
stability of cash-like investments and high-quality bonds. In the end, despite
the early rally and the positive finish to the period (stocks rose broadly in
October), prominent U.S. equity indexes had significant declines for the 12
months.
The Fund's return reflected the difficult backdrop for equities, though it
outperformed its benchmark. Factors that aided the Fund's relative return
included its underweighting in the struggling technology sector. The Fund was
also supported by its overweighting in the consumer-discretionary sector, which
outperformed most sectors, and by good stock selection within that area. Stocks
that hindered the Fund's return included its utilities and health-care holdings.
With respect to general strategy, we continued to hold what we view as a mix
of cyclical and relatively economically insensitive companies. We remained
fairly well diversified by sector, but with very limited exposure to the
technology area, where we saw a lackluster earnings picture.
The uncertain economy notwithstanding, we were reluctant to pare our exposure
to cyclical sectors of the market, in the belief that a more robust, sustainable
economic recovery has been delayed, not avoided. We think that
6
the Federal Reserve will continue to apply stimulus tools, providing liquidity
while holding interest rates at low levels. Should this prove ineffective, we
expect that fiscal strategies -- e.g., tax cuts -- could be increasingly debated
and ultimately agreed to.
For our part, we will continue to focus on companies whose managements in our
view can successfully execute their business goals. We believe that companies
that do the right things now, amid difficult economic and market conditions,
should be rewarded over time, when risk factors recede and investors take note
of discrepancies between a company's true worth and its value in the market.
Sincerely yours,
The Credit Suisse Value Team
7
[CHART]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE
CREDIT SUISSE STRATEGIC VALUE FUND COMMON CLASS SHARES,
THE S&P 500 INDEX(1) AND THE RUSSELL 1000 VALUE INDEX(1)
FOR TEN YEARS. (UNAUDITED)
CREDIT SUISSE STRATEGIC
VALUE FUND COMMON S&P 500 RUSSELL 1000 VALUE
CLASS -- $24,674 INDEX(1) -- $25,655 INDEX(1) -- $29,018
10/31/1992 $ 10,000 $ 10,000 $ 10,000
11/30/1992 $ 10,140 $ 10,338 $ 10,328
12/31/1992 $ 10,411 $ 10,473 $ 10,574
1/31/1993 $ 10,576 $ 10,550 $ 10,881
2/28/1993 $ 10,901 $ 10,692 $ 11,264
3/31/1993 $ 11,639 $ 10,922 $ 11,596
4/30/1993 $ 12,571 $ 10,654 $ 11,448
5/31/1993 $ 13,602 $ 10,942 $ 11,678
6/30/1993 $ 13,727 $ 10,977 $ 11,935
7/31/1993 $ 13,953 $ 10,926 $ 12,069
8/31/1993 $ 13,936 $ 11,343 $ 12,505
9/30/1993 $ 13,436 $ 11,259 $ 12,525
10/31/1993 $ 13,738 $ 11,488 $ 12,516
11/30/1993 $ 13,262 $ 11,380 $ 12,258
12/31/1993 $ 14,143 $ 11,520 $ 12,490
1/31/1994 $ 14,634 $ 11,905 $ 12,963
2/28/1994 $ 15,214 $ 11,583 $ 12,520
3/31/1994 $ 15,314 $ 11,079 $ 12,054
4/30/1994 $ 14,974 $ 11,223 $ 12,285
5/31/1994 $ 15,150 $ 11,406 $ 12,427
6/30/1994 $ 14,734 $ 11,124 $ 12,129
7/31/1994 $ 15,085 $ 11,492 $ 12,506
8/31/1994 $ 15,951 $ 11,960 $ 12,866
9/30/1994 $ 15,929 $ 11,671 $ 12,439
10/31/1994 $ 15,886 $ 11,938 $ 12,612
11/30/1994 $ 15,152 $ 11,500 $ 12,103
12/31/1994 $ 15,221 $ 11,668 $ 12,242
1/31/1995 $ 15,311 $ 11,971 $ 12,619
2/28/1995 $ 15,759 $ 12,436 $ 13,118
3/31/1995 $ 16,264 $ 12,804 $ 13,406
4/30/1995 $ 16,310 $ 13,180 $ 13,829
5/31/1995 $ 16,725 $ 13,700 $ 14,411
6/30/1995 $ 17,011 $ 14,023 $ 14,607
7/31/1995 $ 17,868 $ 14,490 $ 15,115
8/31/1995 $ 18,453 $ 14,530 $ 15,329
9/30/1995 $ 18,212 $ 15,140 $ 15,883
10/31/1995 $ 17,475 $ 15,086 $ 15,725
11/30/1995 $ 18,597 $ 15,750 $ 16,522
12/31/1995 $ 18,338 $ 16,042 $ 16,937
1/31/1996 $ 19,483 $ 16,594 $ 17,465
2/29/1996 $ 19,351 $ 16,753 $ 17,597
3/31/1996 $ 19,509 $ 16,913 $ 17,896
4/30/1996 $ 19,820 $ 17,163 $ 17,965
5/31/1996 $ 19,952 $ 17,605 $ 18,189
6/30/1996 $ 18,519 $ 17,676 $ 18,204
7/31/1996 $ 17,121 $ 16,889 $ 17,516
8/31/1996 $ 17,803 $ 17,248 $ 18,017
9/30/1996 $ 17,560 $ 18,217 $ 18,733
10/31/1996 $ 17,717 $ 18,716 $ 19,457
11/30/1996 $ 18,795 $ 20,137 $ 20,868
12/31/1996 $ 18,125 $ 19,743 $ 20,602
1/31/1997 $ 18,891 $ 20,968 $ 21,601
2/28/1997 $ 19,166 $ 21,137 $ 21,918
3/31/1997 $ 18,448 $ 20,257 $ 21,130
4/30/1997 $ 19,036 $ 21,466 $ 22,018
5/31/1997 $ 20,357 $ 22,784 $ 23,248
6/30/1997 $ 21,110 $ 23,785 $ 24,245
7/31/1997 $ 22,761 $ 25,675 $ 26,069
8/31/1997 $ 22,219 $ 24,252 $ 25,140
9/30/1997 $ 23,386 $ 25,574 $ 26,659
10/31/1997 $ 22,408 $ 24,733 $ 25,915
11/30/1997 $ 23,000 $ 25,867 $ 27,060
12/31/1997 $ 23,608 $ 26,304 $ 27,850
1/31/1998 $ 23,766 $ 26,602 $ 27,456
2/28/1998 $ 25,356 $ 28,514 $ 29,304
3/31/1998 $ 26,366 $ 29,977 $ 31,097
4/30/1998 $ 26,496 $ 30,288 $ 31,305
5/31/1998 $ 26,409 $ 29,761 $ 30,840
6/30/1998 $ 26,659 $ 30,970 $ 31,236
7/31/1998 $ 25,955 $ 30,641 $ 30,684
8/31/1998 $ 22,130 $ 26,217 $ 26,119
9/30/1998 $ 22,821 $ 27,915 $ 27,618
10/31/1998 $ 24,449 $ 30,175 $ 29,758
11/30/1998 $ 25,890 $ 32,005 $ 31,145
12/31/1998 $ 26,596 $ 33,867 $ 32,204
1/31/1999 $ 26,744 $ 35,261 $ 32,461
2/28/1999 $ 26,075 $ 34,166 $ 32,003
3/31/1999 $ 26,319 $ 35,538 $ 32,665
4/30/1999 $ 29,343 $ 36,891 $ 35,716
5/31/1999 $ 29,685 $ 36,039 $ 35,323
6/30/1999 $ 30,659 $ 38,008 $ 36,349
7/31/1999 $ 29,585 $ 36,851 $ 35,284
8/31/1999 $ 28,988 $ 36,679 $ 33,975
9/30/1999 $ 28,155 $ 35,663 $ 32,788
10/31/1999 $ 28,304 $ 37,931 $ 34,675
11/30/1999 $ 28,155 $ 38,706 $ 34,403
12/31/1999 $ 28,117 $ 40,982 $ 34,569
1/31/2000 $ 25,883 $ 38,923 $ 33,442
2/29/2000 $ 24,323 $ 38,187 $ 30,958
3/31/2000 $ 27,522 $ 41,922 $ 34,735
4/30/2000 $ 27,676 $ 40,661 $ 34,332
5/31/2000 $ 28,698 $ 39,827 $ 34,694
6/30/2000 $ 27,336 $ 40,808 $ 33,109
7/31/2000 $ 27,414 $ 40,171 $ 33,523
8/31/2000 $ 29,270 $ 42,665 $ 35,388
9/30/2000 $ 29,243 $ 40,412 $ 35,714
10/31/2000 $ 29,999 $ 40,241 $ 36,593
11/30/2000 $ 28,643 $ 37,069 $ 35,235
12/31/2000 $ 30,712 $ 37,250 $ 37,000
1/31/2001 $ 31,366 $ 38,572 $ 37,141
2/28/2001 $ 31,366 $ 35,055 $ 36,108
3/31/2001 $ 30,336 $ 32,834 $ 34,834
4/30/2001 $ 31,872 $ 35,386 $ 36,541
5/31/2001 $ 32,844 $ 35,623 $ 37,363
6/30/2001 $ 31,689 $ 34,756 $ 36,533
7/31/2001 $ 31,485 $ 34,414 $ 36,457
8/31/2001 $ 30,625 $ 32,259 $ 34,995
9/30/2001 $ 28,254 $ 29,654 $ 32,531
10/31/2001 $ 28,458 $ 30,220 $ 32,251
11/30/2001 $ 30,295 $ 32,538 $ 34,125
12/31/2001 $ 31,201 $ 32,823 $ 34,929
1/31/2002 $ 30,736 $ 32,344 $ 34,659
2/28/2002 $ 30,992 $ 31,721 $ 34,715
3/31/2002 $ 31,996 $ 32,914 $ 36,357
4/30/2002 $ 31,039 $ 30,918 $ 35,110
5/31/2002 $ 30,667 $ 30,690 $ 35,285
6/30/2002 $ 28,716 $ 28,504 $ 33,260
7/31/2002 $ 26,287 $ 26,282 $ 30,167
8/31/2002 $ 26,054 $ 26,455 $ 30,396
9/30/2002 $ 23,203 $ 23,580 $ 27,016
10/31/2002 $ 24,674 $ 25,655 $ 29,018
[CHART]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE
CREDIT SUISSE STRATEGIC VALUE FUND ADVISOR CLASS SHARES,
THE S&P 500 INDEX(1) AND THE RUSSELL 1000 VALUE INDEX(1)
FROM INCEPTION (5/15/95). (UNAUDITED)
CREDIT SUISSE STRATEGIC
VALUE FUND ADVISOR S&P 500 RUSSELL 1000 VALUE
CLASS -- $14,314 INDEX(1) -- $19,466 INDEX(1) -- $20,983
5/15/1995 $ 10,000 $ 10,000 $ 10,000
5/31/1995 $ 10,034 $ 10,395 $ 10,421
6/30/1995 $ 10,199 $ 10,640 $ 10,562
7/31/1995 $ 10,705 $ 10,994 $ 10,930
8/31/1995 $ 11,049 $ 11,024 $ 11,084
9/30/1995 $ 10,906 $ 11,487 $ 11,485
10/31/1995 $ 10,458 $ 11,447 $ 11,371
11/30/1995 $ 11,130 $ 11,951 $ 11,947
12/31/1995 $ 10,972 $ 12,172 $ 12,247
1/31/1996 $ 11,649 $ 12,590 $ 12,629
2/29/1996 $ 11,571 $ 12,711 $ 12,724
3/31/1996 $ 11,654 $ 12,833 $ 12,941
4/30/1996 $ 11,833 $ 13,022 $ 12,990
5/31/1996 $ 11,911 $ 13,358 $ 13,153
6/30/1996 $ 11,051 $ 13,412 $ 13,163
7/31/1996 $ 10,217 $ 12,815 $ 12,666
8/31/1996 $ 10,616 $ 13,087 $ 13,028
9/30/1996 $ 10,468 $ 13,823 $ 13,546
10/31/1996 $ 10,561 $ 14,201 $ 14,070
11/30/1996 $ 11,196 $ 15,279 $ 15,090
12/31/1996 $ 10,797 $ 14,980 $ 14,897
1/31/1997 $ 11,246 $ 15,910 $ 15,620
2/28/1997 $ 11,410 $ 16,037 $ 15,849
3/31/1997 $ 10,975 $ 15,370 $ 15,279
4/30/1997 $ 11,325 $ 16,287 $ 15,921
5/31/1997 $ 12,110 $ 17,287 $ 16,810
6/30/1997 $ 12,551 $ 18,047 $ 17,532
7/31/1997 $ 13,533 $ 19,481 $ 18,850
8/31/1997 $ 13,203 $ 18,401 $ 18,179
9/30/1997 $ 13,891 $ 19,405 $ 19,278
10/31/1997 $ 13,310 $ 18,766 $ 18,739
11/30/1997 $ 13,654 $ 19,627 $ 19,567
12/31/1997 $ 14,017 $ 19,958 $ 20,139
1/31/1998 $ 14,102 $ 20,184 $ 19,854
2/28/1998 $ 15,046 $ 21,635 $ 21,190
3/31/1998 $ 15,633 $ 22,745 $ 22,486
4/30/1998 $ 15,709 $ 22,981 $ 22,637
5/31/1998 $ 15,650 $ 22,581 $ 22,301
6/30/1998 $ 15,792 $ 23,499 $ 22,587
7/31/1998 $ 15,374 $ 23,249 $ 22,188
8/31/1998 $ 13,099 $ 19,893 $ 18,886
9/30/1998 $ 13,504 $ 21,181 $ 19,971
10/31/1998 $ 14,468 $ 22,895 $ 21,518
11/30/1998 $ 15,321 $ 24,284 $ 22,521
12/31/1998 $ 15,731 $ 25,697 $ 23,287
1/31/1999 $ 15,810 $ 26,754 $ 23,473
2/28/1999 $ 15,405 $ 25,923 $ 23,141
3/31/1999 $ 15,546 $ 26,965 $ 23,620
4/30/1999 $ 17,323 $ 27,991 $ 25,826
5/31/1999 $ 17,526 $ 27,344 $ 25,542
6/30/1999 $ 18,078 $ 28,839 $ 26,284
7/31/1999 $ 17,444 $ 27,960 $ 25,514
8/31/1999 $ 17,084 $ 27,830 $ 24,568
9/30/1999 $ 16,587 $ 27,060 $ 23,709
10/31/1999 $ 16,667 $ 28,780 $ 25,074
11/30/1999 $ 16,570 $ 29,368 $ 24,877
12/31/1999 $ 16,541 $ 31,095 $ 24,997
1/31/2000 $ 15,215 $ 29,533 $ 24,182
2/29/2000 $ 14,297 $ 28,974 $ 22,386
3/31/2000 $ 16,171 $ 31,809 $ 25,117
4/30/2000 $ 16,261 $ 30,852 $ 24,826
5/31/2000 $ 16,850 $ 30,218 $ 25,087
6/30/2000 $ 16,040 $ 30,963 $ 23,941
7/31/2000 $ 16,085 $ 30,479 $ 24,241
8/31/2000 $ 17,163 $ 32,372 $ 25,590
9/30/2000 $ 17,146 $ 30,663 $ 25,825
10/31/2000 $ 17,577 $ 30,533 $ 26,460
11/30/2000 $ 16,772 $ 28,126 $ 25,479
12/31/2000 $ 17,984 $ 28,264 $ 26,755
1/31/2001 $ 18,353 $ 29,266 $ 26,857
2/28/2001 $ 18,353 $ 26,598 $ 26,110
3/31/2001 $ 17,743 $ 24,913 $ 25,188
4/30/2001 $ 18,627 $ 26,849 $ 26,423
5/31/2001 $ 19,182 $ 27,029 $ 27,017
6/30/2001 $ 18,511 $ 26,371 $ 26,417
7/31/2001 $ 18,379 $ 26,111 $ 26,362
8/31/2001 $ 17,863 $ 24,477 $ 25,305
9/30/2001 $ 16,482 $ 22,500 $ 23,523
10/31/2001 $ 16,588 $ 22,929 $ 23,321
11/30/2001 $ 17,659 $ 24,688 $ 24,676
12/31/2001 $ 18,181 $ 24,905 $ 25,257
1/31/2002 $ 17,897 $ 24,541 $ 25,062
2/28/2002 $ 18,046 $ 24,068 $ 25,102
3/31/2002 $ 18,629 $ 24,973 $ 26,290
4/30/2002 $ 18,046 $ 23,459 $ 25,388
5/31/2002 $ 17,829 $ 23,286 $ 25,515
6/30/2002 $ 16,690 $ 21,627 $ 24,050
7/31/2002 $ 15,278 $ 19,941 $ 21,814
8/31/2002 $ 15,128 $ 20,072 $ 21,980
9/30/2002 $ 13,473 $ 17,891 $ 19,535
10/31/2002 $ 14,314 $ 19,466 $ 20,983
8
[CHART]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE
CREDIT SUISSE STRATEGIC VALUE FUND CLASS A, B, AND C SHARES(2),
THE S&P 500 INDEX(1) AND THE RUSSELL 1000 VALUE INDEX(1)
FROM INCEPTION (11/30/01). (UNAUDITED)
CREDIT SUISSE STRATEGIC CREDIT SUISSE STRATEGIC CREDIT SUISSE
VALUE FUND VALUE FUND STRATEGIC VALUE FUND S&P 500 RUSSELL 1000 VALUE
CLASS A(2) -- $7,654 CLASS B(2) -- $7,766 CLASS C(2) -- $7,990 INDEX(1) -- $7,885 INDEX(1) -- $8,503
11/30/2001 $ 9,425 $ 10,000 $ 10,000 $ 10,000 $ 10,000
12/31/2001 $ 9,711 $ 10,296 $ 10,297 $ 10,088 $ 10,236
1/31/2002 $ 9,559 $ 10,133 $ 10,128 $ 9,940 $ 10,157
2/28/2002 $ 9,638 $ 10,209 $ 10,214 $ 9,749 $ 10,173
3/31/2002 $ 9,947 $ 10,530 $ 10,537 $ 10,115 $ 10,654
4/30/2002 $ 9,643 $ 10,199 $ 10,104 $ 9,502 $ 10,289
5/31/2002 $ 9,527 $ 10,076 $ 9,975 $ 9,432 $ 10,340
6/30/2002 $ 8,921 $ 9,423 $ 9,335 $ 8,760 $ 9,747
7/31/2002 $ 8,166 $ 8,623 $ 8,536 $ 8,077 $ 8,840
8/31/2002 $ 8,085 $ 8,531 $ 8,453 $ 8,130 $ 8,907
9/30/2002 $ 7,197 $ 7,594 $ 7,525 $ 7,247 $ 7,917
10/31/2002 $ 7,654 $ 7,766 $ 7,990 $ 7,885 $ 8,503
Past performance is not predictive of future performance. Investment return and
principal value of an investment will fluctuate so that an investor's shares
upon redemption may be worth more or less than their original cost. The
performance results do not reflect the deduction of taxes that a shareholder
would pay on fund distributions or the redemption of fund shares.
AVERAGE ANNUAL RETURNS AS OF SEPTEMBER 30, 2002
SINCE
1 YEAR 5 YEAR 10 YEAR INCEPTION
------ ------ ------- ---------
Common (17.87%) (0.16%) 8.78% 9.26%
Advisor (18.26%) (0.61%) -- 4.12%
Class A Without
Sales Charge -- -- -- (28.03%)(3)
Class A With Maximum
Sales Charge -- -- -- (23.61%)(3)
Class B Without CDSC -- -- -- (26.96%)(3)
Class B With CDSC -- -- -- (24.00%)(3)
Class C Without CDSC -- -- -- (24.74%)(3)
Class C With CDSC -- -- -- (24.00%)(3)
9
AVERAGE ANNUAL RETURNS AS OF OCTOBER 31, 2002
SINCE
1 YEAR 5 YEAR 10 YEAR INCEPTION
------ ------ ------- ---------
Common (13.29%) 1.95% 9.45% 9.68%
Advisor (13.71%) 1.47% -- 4.92%
Class A Without
Sales Charge -- -- -- (18.76%)(3)
Class A With Maximum
Sales Charge -- -- -- (23.46%)(3)
Class B Without CDSC -- -- -- (19.23%)(3)
Class B With CDSC -- -- -- (22.38%)(3)
Class C Without CDSC -- -- -- (19.31%)(3)
Class C With CDSC -- -- -- (20.10%)(3)
- ----------
(1) The S&P 500 Index is an unmanaged index (with no defined investment
objective) of common stocks. It includes reinvestment of dividends, and is
a registered trademark of McGraw-Hill Co., Inc. The Russell 1000(R) Value
Index measures the performance of those companies in the Russell 1000(R)
Index with lower price-to-book ratios and lower forecasted growth values.
It is an unmanaged index of common stocks that includes reinvestment of
dividends and is compiled by Frank Russell Company. Investors cannot invest
directly in an index.
(2) Total return for Class A Shares for the reporting period, based on offering
price (with maximum sales charge of 5.75%), was -23.46%. Total return for
Class B Shares for the reporting period, based on redemption value
(including maximum contingent deferred sales charge of 4%), was -22.38%.
Total return for Class C Shares for the reporting period, based on
redemption value (including maximum contingent deferred sales charge of
1%), was -20.10%.
(3) Returns for periods of less than one year are not annualized.
10
CREDIT SUISSE SMALL CAP VALUE FUND
ANNUAL INVESTMENT ADVISER'S REPORT
October 31, 2002
December 2, 2002
Dear Shareholder:
For the 12 months ended October 31, 2002, the Common Class Shares of Credit
Suisse Small Cap Value Fund(1) (the "Fund") had a gain of 0.61%, vs. losses of
11.56% and 2.52%, respectively, for the Russell 2000 Index(2) and the Russell
2000 Value Index.(2) The Fund's Class A Shares, Class B Shares and Class C
Shares had returns of 0.71%, -0.08% and -0.07%, respectively, for the same
period.(3)
The period was a very poor one for stocks in general. Markets actually rose
over the first part of the period, rebounding from their post-September 11th
plunge amid historically low interest rates and signs of economic recovery.
However, a confluence of negative developments sent equities spiraling downward
into early October 2002. Certain highly visible U.S. corporations were revealed
to have accounting problems, in some cases involving outright fraud. Meanwhile,
the economic data began to indicate that expectations of recovery had been too
optimistic. The looming prospects for a U.S.-led war on Iraq added to the
uncertainty. Investors fled risk in all forms, preferring the liquidity and
stability of cash-like investments and high-quality bonds. Small-cap and value
stocks outperformed their larger-cap and growth-oriented counterparts for the
period. One factor aiding the small-cap group was its perceived lack of
large-company-type accounting problems.
Against this backdrop, the Fund had a slight gain and outperformed its
benchmarks. Stocks that helped the Fund's relative return included its consumer,
health-care, energy and financial-services holdings. Factors that hindered the
Fund included its overweighting in the producer durables sector, which
underperformed the broader small-cap-value market.
Despite the positive October for equities, we remain of the view that the
market is undervalued and have a fair amount of upside potential when risk
concerns begin to fade. We base this opinion on our dividend discount model --
which we anchor to fairly conservative assumptions. That said, it could take
some time for risk levels to normalize, given the still-uncertain state of the
economy and the possibility of a U.S.-led war on Iraq. The threat and reality of
terrorism also could keep risk thresholds high.
From the sector perspective, we view technology and telecommunications stocks
as being generally expensive, and plan to limit our exposure in these areas over
the intermediate term. Our favored companies at present include a number of "old
economy" names within the industrial, specialty-retail, energy and health-care
sectors. We also view certain financial-services stocks as
11
attractive but remain quite selective in this area.
Sincerely yours,
The Credit Suisse Value Team
INVESTMENTS IN SMALL COMPANIES MAY BE MORE VOLATILE AND LESS LIQUID THAN
INVESTMENTS IN LARGER COMPANIES.
12
[CHART]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE
CREDIT SUISSE SMALL CAP VALUE FUND(1) COMMON CLASS SHARES,
THE RUSSELL 2000 INDEX(2) AND THE RUSSELL 2000 VALUE INDEX(2)
FROM INCEPTION (8/01/00). (UNAUDITED)
CREDIT SUISSE SMALL CAP
VALUE FUND(1) RUSSELL 2000 RUSSELL 2000 VALUE
COMMON CLASS -- $11,666 INDEX(2) -- $7,706 INDEX(2) -- $10,973
8/1/2000 $ 10,000 $ 10,000 $ 10,000
8/31/2000 $ 10,510 $ 10,763 $ 10,447
9/30/2000 $ 10,482 $ 10,447 $ 10,388
10/31/2000 $ 10,562 $ 9,981 $ 10,351
11/30/2000 $ 10,308 $ 8,956 $ 10,140
12/31/2000 $ 11,546 $ 9,725 $ 11,230
1/31/2001 $ 11,661 $ 10,232 $ 11,540
2/28/2001 $ 11,403 $ 9,560 $ 11,524
3/31/2001 $ 11,298 $ 9,093 $ 11,339
4/30/2001 $ 11,953 $ 9,804 $ 11,864
5/31/2001 $ 12,300 $ 10,045 $ 12,169
6/30/2001 $ 12,581 $ 10,392 $ 12,658
7/31/2001 $ 12,394 $ 9,830 $ 12,375
8/31/2001 $ 12,317 $ 9,512 $ 12,331
9/30/2001 $ 11,172 $ 8,232 $ 10,970
10/31/2001 $ 11,596 $ 8,713 $ 11,256
11/30/2001 $ 12,119 $ 9,388 $ 12,066
12/31/2001 $ 12,842 $ 9,967 $ 12,805
1/31/2002 $ 12,980 $ 9,864 $ 12,974
2/28/2002 $ 13,345 $ 9,593 $ 13,054
3/31/2002 $ 14,136 $ 10,365 $ 14,031
4/30/2002 $ 14,451 $ 10,459 $ 14,525
5/31/2002 $ 13,934 $ 9,995 $ 14,044
6/30/2002 $ 13,418 $ 9,499 $ 13,734
7/31/2002 $ 12,048 $ 8,065 $ 11,693
8/31/2002 $ 12,395 $ 8,044 $ 11,642
9/30/2002 $ 11,427 $ 7,467 $ 10,810
10/31/2002 $ 11,666 $ 7,706 $ 10,973
[CHART]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE
CREDIT SUISSE SMALL CAP VALUE FUND(1) CLASS A SHARES(3), THE RUSSELL 2000
INDEX(2) AND THE RUSSELL 2000 VALUE INDEX(2) FOR TEN YEARS. (UNAUDITED)
CREDIT SUISSE SMALL
CAP VALUE FUND(1) RUSSELL 2000 RUSSELL 2000 VALUE
CLASS A(3) -- $27,668 INDEX(2) -- $21,622 INDEX(2) -- $29,995
10/31/1992 $ 9,425 $ 10,000 $ 10,000
11/30/1992 $ 9,815 $ 10,766 $ 10,619
12/31/1992 $ 9,986 $ 11,140 $ 11,059
1/31/1993 $ 10,242 $ 11,517 $ 11,646
2/28/1993 $ 10,205 $ 11,251 $ 11,692
3/31/1993 $ 10,373 $ 11,616 $ 12,136
4/30/1993 $ 10,153 $ 11,296 $ 11,844
5/31/1993 $ 10,490 $ 11,796 $ 12,217
6/30/1993 $ 10,614 $ 11,869 $ 12,332
7/31/1993 $ 10,615 $ 12,033 $ 12,544
8/31/1993 $ 11,089 $ 12,553 $ 13,034
9/30/1993 $ 11,504 $ 12,907 $ 13,346
10/31/1993 $ 11,752 $ 13,240 $ 13,652
11/30/1993 $ 11,606 $ 12,808 $ 13,305
12/31/1993 $ 12,104 $ 13,246 $ 13,696
1/31/1994 $ 12,481 $ 13,661 $ 14,184
2/28/1994 $ 12,677 $ 13,611 $ 14,142
3/31/1994 $ 12,158 $ 12,894 $ 13,509
4/30/1994 $ 12,159 $ 12,971 $ 13,642
5/31/1994 $ 12,065 $ 12,825 $ 13,623
6/30/1994 $ 11,924 $ 12,392 $ 13,269
7/31/1994 $ 12,175 $ 12,596 $ 13,514
8/31/1994 $ 12,496 $ 13,298 $ 14,046
9/30/1994 $ 12,402 $ 13,252 $ 13,896
10/31/1994 $ 12,238 $ 13,199 $ 13,642
11/30/1994 $ 11,706 $ 12,666 $ 13,091
12/31/1994 $ 11,960 $ 13,005 $ 13,484
1/31/1995 $ 11,862 $ 12,840 $ 13,419
2/28/1995 $ 12,345 $ 13,375 $ 13,915
3/31/1995 $ 12,541 $ 13,604 $ 13,983
4/30/1995 $ 12,844 $ 13,906 $ 14,399
5/31/1995 $ 13,000 $ 14,145 $ 14,708
6/30/1995 $ 13,237 $ 14,879 $ 15,210
7/31/1995 $ 13,753 $ 15,736 $ 15,765
8/31/1995 $ 13,876 $ 16,062 $ 16,234
9/30/1995 $ 14,088 $ 16,349 $ 16,476
10/31/1995 $ 13,597 $ 15,618 $ 15,818
11/30/1995 $ 14,191 $ 16,274 $ 16,447
12/31/1995 $ 14,373 $ 16,703 $ 16,956
1/31/1996 $ 14,146 $ 16,685 $ 17,069
2/29/1996 $ 14,541 $ 17,205 $ 17,336
3/31/1996 $ 14,936 $ 17,555 $ 17,700
4/30/1996 $ 15,113 $ 18,494 $ 18,183
5/31/1996 $ 15,541 $ 19,223 $ 18,643
6/30/1996 $ 15,230 $ 18,434 $ 18,423
7/31/1996 $ 14,129 $ 16,824 $ 17,444
8/31/1996 $ 14,886 $ 17,800 $ 18,201
9/30/1996 $ 15,424 $ 18,496 $ 18,697
10/31/1996 $ 15,474 $ 18,211 $ 18,914
11/30/1996 $ 16,012 $ 18,961 $ 19,932
12/31/1996 $ 16,469 $ 19,458 $ 20,579
1/31/1997 $ 16,565 $ 19,847 $ 20,895
2/28/1997 $ 16,635 $ 19,366 $ 21,094
3/31/1997 $ 16,284 $ 18,452 $ 20,528
4/30/1997 $ 16,328 $ 18,503 $ 20,830
5/31/1997 $ 17,830 $ 20,562 $ 22,488
6/30/1997 $ 18,646 $ 21,443 $ 23,626
7/31/1997 $ 19,718 $ 22,441 $ 24,618
8/31/1997 $ 20,078 $ 22,954 $ 25,009
9/30/1997 $ 21,149 $ 24,634 $ 26,672
10/31/1997 $ 20,499 $ 23,552 $ 25,946
11/30/1997 $ 20,724 $ 23,400 $ 26,231
12/31/1997 $ 20,774 $ 23,809 $ 27,120
1/31/1998 $ 20,607 $ 23,433 $ 26,629
2/28/1998 $ 22,060 $ 25,166 $ 28,239
3/31/1998 $ 22,815 $ 26,204 $ 29,385
4/30/1998 $ 22,712 $ 26,349 $ 29,530
5/31/1998 $ 21,771 $ 24,930 $ 28,484
6/30/1998 $ 21,091 $ 24,982 $ 28,323
7/31/1998 $ 19,573 $ 22,960 $ 26,105
8/31/1998 $ 16,610 $ 18,501 $ 22,017
9/30/1998 $ 17,262 $ 19,950 $ 23,260
10/31/1998 $ 18,203 $ 20,764 $ 23,950
11/30/1998 $ 18,906 $ 21,852 $ 24,599
12/31/1998 $ 19,816 $ 23,204 $ 25,370
1/31/1999 $ 18,534 $ 23,513 $ 24,794
2/28/1999 $ 17,431 $ 21,608 $ 23,102
3/31/1999 $ 17,524 $ 21,946 $ 22,911
4/30/1999 $ 19,096 $ 23,912 $ 25,003
5/31/1999 $ 19,442 $ 24,261 $ 25,771
6/30/1999 $ 20,312 $ 25,358 $ 26,704
7/31/1999 $ 20,331 $ 24,663 $ 26,071
8/31/1999 $ 19,582 $ 23,750 $ 25,118
9/30/1999 $ 19,125 $ 23,755 $ 24,616
10/31/1999 $ 19,201 $ 23,851 $ 24,123
11/30/1999 $ 19,778 $ 25,275 $ 24,248
12/31/1999 $ 20,109 $ 28,137 $ 24,993
1/31/2000 $ 18,927 $ 27,684 $ 24,339
2/29/2000 $ 19,736 $ 32,255 $ 25,827
3/31/2000 $ 21,654 $ 30,129 $ 25,948
4/30/2000 $ 21,219 $ 28,315 $ 26,102
5/31/2000 $ 21,177 $ 26,665 $ 25,703
6/30/2000 $ 21,790 $ 28,989 $ 26,454
7/31/2000 $ 22,133 $ 28,057 $ 27,336
8/31/2000 $ 23,254 $ 30,197 $ 28,558
9/30/2000 $ 23,191 $ 29,309 $ 28,396
10/31/2000 $ 23,369 $ 28,002 $ 28,295
11/30/2000 $ 22,808 $ 25,126 $ 27,719
12/31/2000 $ 25,552 $ 27,285 $ 30,698
1/31/2001 $ 25,796 $ 28,706 $ 31,545
2/28/2001 $ 25,225 $ 26,823 $ 31,501
3/31/2001 $ 25,007 $ 25,512 $ 30,996
4/30/2001 $ 26,453 $ 27,507 $ 32,431
5/31/2001 $ 27,208 $ 28,183 $ 33,265
6/30/2001 $ 27,830 $ 29,155 $ 34,602
7/31/2001 $ 27,416 $ 27,578 $ 33,827
8/31/2001 $ 27,248 $ 26,687 $ 33,708
9/30/2001 $ 24,707 $ 23,095 $ 29,987
10/31/2001 $ 25,644 $ 24,447 $ 30,770
11/30/2001 $ 26,799 $ 26,339 $ 32,983
12/31/2001 $ 28,406 $ 27,965 $ 35,002
1/31/2002 $ 28,711 $ 27,674 $ 35,467
2/28/2002 $ 31,635 $ 26,916 $ 35,683
3/31/2002 $ 33,492 $ 29,080 $ 38,356
4/30/2002 $ 34,249 $ 29,344 $ 39,706
5/31/2002 $ 33,017 $ 28,041 $ 38,392
6/30/2002 $ 31,814 $ 26,650 $ 37,543
7/31/2002 $ 28,577 $ 22,626 $ 31,964
8/31/2002 $ 29,394 $ 22,570 $ 31,824
9/30/2002 $ 27,104 $ 20,949 $ 29,551
10/31/2002 $ 27,668 $ 21,622 $ 29,995
13
[CHART]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE
CREDIT SUISSE SMALL CAP VALUE FUND(1) CLASS B SHARES(3),(4),
THE RUSSELL 2000 INDEX(2),(4) AND THE RUSSELL 2000 VALUE INDEX(2),(4).
(UNAUDITED)
CREDIT SUISSE SMALL
CAP VALUE FUND(1) RUSSELL 2000 RUSSELL 2000 VALUE
CLASS B(3),(4) -- $16,900 INDEX(2),(4) -- $12,567 INDEX(2),(4) -- $17,302
3/96(4) $ 10,000 $ 10,000 $ 10,000
3/31/1996 $ 10,266 $ 10,204 $ 10,210
4/30/1996 $ 10,382 $ 10,749 $ 10,488
5/31/1996 $ 10,677 $ 11,173 $ 10,754
6/30/1996 $ 10,457 $ 10,714 $ 10,627
7/31/1996 $ 9,694 $ 9,778 $ 10,062
8/31/1996 $ 10,207 $ 10,346 $ 10,499
9/30/1996 $ 10,573 $ 10,750 $ 10,785
10/31/1996 $ 10,600 $ 10,585 $ 10,910
11/30/1996 $ 10,960 $ 11,021 $ 11,497
12/31/1996 $ 11,273 $ 11,310 $ 11,871
1/31/1997 $ 11,327 $ 11,535 $ 12,053
2/28/1997 $ 11,376 $ 11,256 $ 12,168
3/31/1997 $ 11,129 $ 10,725 $ 11,841
4/30/1997 $ 11,147 $ 10,755 $ 12,015
5/31/1997 $ 12,167 $ 11,951 $ 12,972
6/30/1997 $ 12,722 $ 12,463 $ 13,628
7/31/1997 $ 13,439 $ 13,043 $ 14,200
8/31/1997 $ 13,676 $ 13,341 $ 14,426
9/30/1997 $ 14,399 $ 14,318 $ 15,385
10/31/1997 $ 13,947 $ 13,689 $ 14,967
11/30/1997 $ 14,089 $ 13,600 $ 15,131
12/31/1997 $ 14,114 $ 13,838 $ 15,644
1/31/1998 $ 13,993 $ 13,620 $ 15,361
2/28/1998 $ 14,975 $ 14,627 $ 16,289
3/31/1998 $ 15,474 $ 15,230 $ 16,950
4/30/1998 $ 15,397 $ 15,315 $ 17,034
5/31/1998 $ 14,745 $ 14,490 $ 16,431
6/30/1998 $ 14,285 $ 14,520 $ 16,338
7/31/1998 $ 13,245 $ 13,345 $ 15,058
8/31/1998 $ 11,235 $ 10,753 $ 12,700
9/30/1998 $ 11,667 $ 11,595 $ 13,417
10/31/1998 $ 12,274 $ 12,068 $ 13,815
11/30/1998 $ 12,743 $ 12,701 $ 14,189
12/31/1998 $ 13,349 $ 13,487 $ 14,634
1/31/1999 $ 12,480 $ 13,666 $ 14,302
2/28/1999 $ 11,727 $ 12,559 $ 13,326
3/31/1999 $ 11,784 $ 12,755 $ 13,216
4/30/1999 $ 12,832 $ 13,898 $ 14,422
5/31/1999 $ 13,061 $ 14,101 $ 14,866
6/30/1999 $ 13,635 $ 14,739 $ 15,404
7/31/1999 $ 13,635 $ 14,334 $ 15,038
8/31/1999 $ 13,130 $ 13,804 $ 14,489
9/30/1999 $ 12,811 $ 13,807 $ 14,199
10/31/1999 $ 12,855 $ 13,863 $ 13,915
11/30/1999 $ 13,230 $ 14,691 $ 13,987
12/31/1999 $ 13,442 $ 16,354 $ 14,417
1/31/2000 $ 12,650 $ 16,090 $ 14,040
2/29/2000 $ 13,180 $ 18,747 $ 14,898
3/31/2000 $ 14,453 $ 17,511 $ 14,968
4/30/2000 $ 14,157 $ 16,457 $ 15,056
5/31/2000 $ 14,122 $ 15,498 $ 14,827
6/30/2000 $ 14,518 $ 16,849 $ 15,260
7/31/2000 $ 14,738 $ 16,307 $ 15,768
8/31/2000 $ 15,473 $ 17,551 $ 16,473
9/30/2000 $ 15,423 $ 17,035 $ 16,380
10/31/2000 $ 15,530 $ 16,275 $ 16,322
11/30/2000 $ 15,146 $ 14,604 $ 15,989
12/31/2000 $ 16,952 $ 15,858 $ 17,707
1/31/2001 $ 17,109 $ 16,685 $ 18,196
2/28/2001 $ 16,726 $ 15,590 $ 18,171
3/31/2001 $ 16,561 $ 14,828 $ 17,880
4/30/2001 $ 17,518 $ 15,987 $ 18,707
5/31/2001 $ 18,008 $ 16,381 $ 19,188
6/30/2001 $ 18,408 $ 16,946 $ 19,960
7/31/2001 $ 18,117 $ 16,029 $ 19,512
8/31/2001 $ 17,992 $ 15,511 $ 19,444
9/30/2001 $ 16,312 $ 13,423 $ 17,298
10/31/2001 $ 16,910 $ 14,209 $ 17,749
11/30/2001 $ 17,668 $ 15,309 $ 19,026
12/31/2001 $ 18,717 $ 16,254 $ 20,190
1/31/2002 $ 18,899 $ 16,085 $ 20,458
2/28/2002 $ 19,422 $ 15,644 $ 20,583
3/31/2002 $ 20,557 $ 16,902 $ 22,125
4/30/2002 $ 21,005 $ 17,055 $ 22,904
5/31/2002 $ 20,242 $ 16,298 $ 22,146
6/30/2002 $ 19,489 $ 15,490 $ 21,656
7/31/2002 $ 17,490 $ 13,151 $ 18,438
8/31/2002 $ 17,976 $ 13,118 $ 18,357
9/30/2002 $ 16,567 $ 12,176 $ 17,046
10/31/2002 $ 16,900 $ 12,567 $ 17,302
[CHART]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE
CREDIT SUISSE SMALL CAP VALUE FUND(1) CLASS C SHARES(3),(5), THE RUSSELL 2000
INDEX(2),(5) AND THE RUSSELL 2000 VALUE INDEX(2),(5). (UNAUDITED)
CREDIT SUISSE SMALL
CAP VALUE FUND(1) RUSSELL 2000 RUSSELL 2000 VALUE
CLASS C(3),(5) -- $12,812 INDEX(2),(5) -- $6,703 INDEX(2),(5) -- $11,614
3/00(5) $ 10,000 $ 10,000 $ 10,000
3/31/2000 $ 10,960 $ 9,341 $ 10,047
4/30/2000 $ 10,730 $ 8,778 $ 10,106
5/31/2000 $ 10,703 $ 8,267 $ 9,952
6/30/2000 $ 11,003 $ 8,987 $ 10,243
7/31/2000 $ 11,170 $ 8,698 $ 10,584
8/31/2000 $ 11,728 $ 9,362 $ 11,057
9/30/2000 $ 11,690 $ 9,087 $ 10,995
10/31/2000 $ 11,771 $ 8,681 $ 10,956
11/30/2000 $ 11,479 $ 7,790 $ 10,733
12/31/2000 $ 12,853 $ 8,459 $ 11,886
1/31/2001 $ 12,973 $ 8,900 $ 12,214
2/28/2001 $ 12,676 $ 8,316 $ 12,197
3/31/2001 $ 12,556 $ 7,909 $ 12,001
4/30/2001 $ 13,276 $ 8,528 $ 12,557
5/31/2001 $ 13,649 $ 8,738 $ 12,880
6/30/2001 $ 13,953 $ 9,039 $ 13,398
7/31/2001 $ 13,732 $ 8,550 $ 13,098
8/31/2001 $ 13,637 $ 8,274 $ 13,052
9/30/2001 $ 12,360 $ 7,160 $ 11,611
10/31/2001 $ 12,821 $ 7,579 $ 11,914
11/30/2001 $ 13,391 $ 8,166 $ 12,771
12/31/2001 $ 14,188 $ 8,670 $ 13,553
1/31/2002 $ 14,326 $ 8,580 $ 13,732
2/28/2002 $ 14,724 $ 8,345 $ 13,816
3/31/2002 $ 15,585 $ 9,015 $ 14,851
4/30/2002 $ 15,925 $ 9,097 $ 15,374
5/31/2002 $ 15,345 $ 8,694 $ 14,865
6/30/2002 $ 14,773 $ 8,262 $ 14,536
7/31/2002 $ 13,259 $ 7,015 $ 12,376
8/31/2002 $ 13,629 $ 6,997 $ 12,322
9/30/2002 $ 12,558 $ 6,495 $ 11,442
10/31/2002 $ 12,812 $ 6,703 $ 11,614
14
Past performance is not predictive of future performance. Investment return and
principal value of an investment will fluctuate so that an investor's shares
upon redemption may be worth more or less than their original cost. The
performance results do not reflect the deduction of taxes that a shareholder
would pay on fund distributions or the redemption of fund shares.
AVERAGE ANNUAL RETURNS AS OF SEPTEMBER 30, 2002(1)
SINCE
1 YEAR 5 YEAR 10 YEAR INCEPTION
------ ------ ------- ---------
Common 2.29% -- -- 6.35%
Class A Without
Sales Charge 2.39% 3.63% 10.03% 12.79%
Class A With Maximum
Sales Charge (3.50%) 2.41% 10.68% 12.61%
Class B Without CDSC 1.55% 2.85% -- 7.85%
Class B With CDSC (2.00%) 2.85% -- 7.85%
Class C Without CDSC 1.61% -- -- 10.33%
Class C With CDSC 0.72% -- -- 10.33%
AVERAGE ANNUAL RETURNS AS OF OCTOBER 31, 2002(1)
SINCE
1 YEAR 5 YEAR 10 YEAR INCEPTION
------ ------ ------- ---------
Common 0.61% -- -- 7.08%
Class A Without
Sales Charge 0.71% 4.71% 10.71% 12.82%
Class A With Maximum
Sales Charge (5.10%) 3.48% 10.06% 12.64%
Class B Without CDSC (0.08%) 3.92% -- 8.07%
Class B With CDSC (3.57%) 3.92% -- 8.07%
Class C Without CDSC (0.07%) -- -- 10.81%
Class C With CDSC (0.95%) -- -- 10.81%
15
- ----------
(1) Fee waivers and/or expense reimbursements reduced expenses for the Fund,
without which performance would be lower. Waivers and/or reimbursements may
be discontinued at any time.
(2) The Russell 2000(R) Index measures the performance of the 2,000 smallest
companies in the Russell 3000(R) Index, that represent approximately 8% of
the total market capitalization of the Russell 3000(R) Index. It is an
unmanaged index of common stocks which includes reinvestment of dividends
and is compiled by Frank Russell Company. The Russell 3000(R) Index is
composed of 3,000 of the largest U.S. companies by market capitalization.
The returns for the Russell 2000(R) Index do not include any sales charges,
fees or other expenses. The Russell 2000(R) Value Index measures the
performance of those companies in the Russell 2000(R) Index with lower
price-to-book ratios and lower forecasted growth values. It is an unmanaged
index of common stocks that includes reinvestment of dividends and is
compiled by Frank Russell Company. Investors cannot invest directly in an
index.
(3) Total return for Class A Shares for the reporting period, based on offering
price (with maximum sales charge of 5.75%), was -5.10%. Total return for
Class B Shares for the reporting period, based on redemption value
(including maximum contingent deferred sales charge of 4%), was -3.57%.
Total return for Class C Shares for the reporting period, based on
redemption value (including maximum contingent deferred sales charge of
1%), was -0.95%.
(4) Performance for the benchmarks is not available for the period beginning
February 28, 1996 (commencement of operations). For that reason,
performance is shown for the period beginning March 1, 1996.
(5) Performance for the benchmarks is not available for the period beginning
February 28, 2000 (commencement of operations). For that reason,
performance is shown for the period beginning March 1, 2000.
16
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CREDIT SUISSE LARGE CAP VALUE FUND
SCHEDULE OF INVESTMENTS
October 31, 2002
NUMBER OF
SHARES VALUE
------------- -------------
COMMON STOCKS (93.9%)
AEROSPACE & DEFENSE (6.1%)
General Dynamics Corp. 49,700 $ 3,932,761
United Technologies Corp. 83,700 5,161,779
-------------
9,094,540
-------------
BANKS (9.1%)
Bank of America Corp. 26,937 1,880,203
Banknorth Group, Inc. 157,600 3,651,592
Charter One Financial, Inc. 105,000 3,179,400
Washington Mutual, Inc. 134,000 4,791,840
-------------
13,503,035
-------------
CHEMICALS (3.9%)
Engelhard Corp. 108,600 2,405,490
Rohm & Haas Co. 102,400 3,406,848
-------------
5,812,338
-------------
COMMERCIAL SERVICES & SUPPLIES (2.8%)
Avery Dennison Corp. 67,700 4,213,648
-------------
COMPUTERS & PERIPHERALS (1.1%)
Hewlett-Packard Co. 105,000 1,659,000
-------------
DIVERSIFIED FINANCIALS (8.9%)
American Express Co. 90,300 3,284,211
Citigroup, Inc. 131,333 4,852,754
Freddie Mac 54,300 3,343,794
Morgan Stanley 43,100 1,677,452
-------------
13,158,211
-------------
ELECTRIC UTILITIES (2.5%)
Progress Energy, Inc. 88,700 3,700,564
-------------
ELECTRICAL EQUIPMENT (1.7%)
Emerson Electric Co. 50,800 2,447,544
-------------
FOOD & DRUG RETAILING (2.6%)
Sysco Corp. 121,700 3,855,456
-------------
FOOD PRODUCTS (2.3%)
General Mills, Inc. 84,000 3,470,880
-------------
GAS UTILITIES (3.3%)
National Fuel Gas Co. 125,000 2,521,250
WGL Holdings, Inc. 100,800 2,331,504
-------------
4,852,754
-------------
HEALTHCARE PROVIDERS & SERVICES (2.6%)
Cardinal Health, Inc. 56,500 3,910,365
-------------
HOUSEHOLD PRODUCTS (3.3%)
Kimberly-Clark Corp. 94,200 4,851,300
-------------
See Accompanying Notes to Financial Statements.
18
NUMBER OF
SHARES VALUE
------------- -------------
COMMON STOCKS (CONTINUED)
INDUSTRIAL CONGLOMERATES (3.5%)
3M Co. 15,200 $ 1,929,488
General Electric Co. 87,000 2,196,750
Tyco International, Ltd. 74,000 1,070,040
-------------
5,196,278
-------------
INSURANCE (6.8%)
American International Group, Inc. 56,814 3,553,716
Berkshire Hathaway, Inc. Class A* 55 4,080,450
Hartford Financial Services Group, Inc. 62,900 2,484,550
-------------
10,118,716
-------------
IT CONSULTING & SERVICES (1.0%)
Unisys Corp.* 161,200 1,407,276
-------------
MEDIA (3.2%)
Comcast Corp. Special Class A* 97,200 2,236,572
Tribune Co. 52,400 2,517,820
-------------
4,754,392
-------------
MULTILINE RETAIL (2.7%)
Costco Wholesale Corp.* 56,000 1,900,080
Federated Department Stores, Inc.* 66,400 2,038,480
-------------
3,938,560
-------------
OIL & GAS (9.7%)
Burlington Resources, Inc. 60,500 2,492,600
ChevronTexaco Corp. 39,780 2,690,321
ConocoPhillips 79,000 3,831,500
Devon Energy Corp. 59,500 3,004,750
Exxon Mobil Corp. 67,700 2,278,782
-------------
14,297,953
-------------
PERSONAL PRODUCTS (1.8%)
Avon Products, Inc. 56,000 2,715,440
-------------
PHARMACEUTICALS (6.4%)
Johnson & Johnson 87,100 5,117,125
Merck & Company, Inc. 40,600 2,202,144
Pfizer Inc. 7,025 223,184
Pharmacia Corp. 44,351 1,907,093
-------------
9,449,546
-------------
ROAD & RAIL (2.2%)
Burlington Northern Santa Fe Corp. 128,300 3,301,159
-------------
SOFTWARE (2.5%)
Microsoft Corp.* 70,100 3,748,247
-------------
SPECIALTY RETAIL (2.0%)
Home Depot, Inc. 101,900 2,942,872
-------------
See Accompanying Notes to Financial Statements.
19
NUMBER OF
SHARES VALUE
------------- -------------
COMMON STOCKS (CONCLUDED)
TOBACCO (1.9%)
Philip Morris Companies, Inc. 68,700 $ 2,799,525
-------------
TOTAL COMMON STOCKS (Cost $115,181,218) 139,199,599
-------------
PAR
(000)
-------------
MORTGAGE-BACKED SECURITIES (0.0%)
GNMA (0.0%)
Ginnie Mae Pool #002217X, 6.500%, 8/15/03
(Cost $382) $ 0** 407
-------------
SHORT-TERM INVESTMENT (6.0%)
State Street Bank & Trust Co. Euro Time Deposit, 1.750%, 11/01/02
(Cost $8,866,000) 8,866 8,866,000
-------------
TOTAL INVESTMENTS AT VALUE (99.9%) (Cost $124,047,600) 148,066,006
OTHER ASSETS IN EXCESS OF LIABILITIES (0.1%) 144,313
-------------
NET ASSETS (100.0%) $ 148,210,319
=============
* Non-income producing security.
** Amount represents less than $1,000 par value.
See Accompanying Notes to Financial Statements.
20
CREDIT SUISSE STRATEGIC VALUE FUND
SCHEDULE OF INVESTMENTS
October 31, 2002
NUMBER OF
SHARES VALUE
------------- -------------
COMMON STOCKS (93.7%)
AEROSPACE & DEFENSE (2.5%)
United Technologies Corp. 81,100 $ 5,001,437
-------------
AIR FREIGHT & COURIERS (0.9%)
United Parcel Service, Inc. Class B 30,000 1,800,300
-------------
AUTO COMPONENTS (3.3%)
Johnson Controls, Inc. 46,000 3,588,000
Lear Corp.* 85,900 3,139,645
-------------
6,727,645
-------------
BANKS (5.2%)
Bank of America Corp. 29,300 2,045,140
Charter One Financial, Inc. 118,230 3,580,005
Wells Fargo & Co. 97,000 4,895,590
-------------
10,520,735
-------------
BEVERAGES (6.6%)
Anheuser-Busch Companies, Inc. 107,100 5,650,596
Pepsi Bottling Group, Inc. 78,800 2,123,660
PepsiCo, Inc. 125,220 5,522,202
-------------
13,296,458
-------------
BUILDING PRODUCTS (3.6%)
American Standard Companies, Inc.* 107,500 7,170,250
-------------
CHEMICALS (1.6%)
Rohm & Haas Co. 93,900 3,124,053
-------------
COMMERCIAL SERVICES & SUPPLIES (5.4%)
Cendant Corp.* 270,100 3,106,150
Convergys Corp.* 109,500 1,629,360
H&R Block, Inc. 73,800 3,275,244
Pitney Bowes, Inc. 87,200 2,925,560
-------------
10,936,314
-------------
COMPUTERS & PERIPHERALS (1.3%)
Hewlett-Packard Co. 169,120 2,672,096
-------------
DIVERSIFIED FINANCIALS (6.5%)
Citigroup, Inc. 130,700 4,829,365
Fannie Mae 63,700 4,258,982
Lehman Brothers Holdings, Inc. 74,100 3,947,307
-------------
13,035,654
-------------
DIVERSIFIED TELECOMMUNICATION SERVICES (0.9%)
BellSouth Corp. 66,600 1,741,590
-------------
ELECTRIC UTILITIES (0.9%)
Public Service Enterprise Group, Inc. 63,000 1,804,950
-------------
See Accompanying Notes to Financial Statements.
21
NUMBER OF
SHARES VALUE
------------- -------------
COMMON STOCKS (CONTINUED)
ELECTRONIC EQUIPMENT & INSTRUMENTS (2.0%)
Agilent Technologies, Inc.* 111,400 $ 1,531,750
Tektronix, Inc.* 142,400 2,516,208
-------------
4,047,958
-------------
ENERGY EQUIPMENT & SERVICES (1.5%)
Pride International, Inc.* 213,600 2,964,768
-------------
FOOD & DRUG RETAILING (1.1%)
CVS Corp. 76,800 2,129,664
-------------
FOOD PRODUCTS (1.3%)
General Mills, Inc. 64,300 2,656,876
-------------
HOME PRODUCTS (1.0%)
Kimberly-Clark Corp. 40,600 2,090,900
-------------
INDUSTRIAL CONGLOMERATES (3.4%)
3M Co. 40,400 5,128,376
Tyco International, Ltd. 119,800 1,732,308
-------------
6,860,684
-------------
INSURANCE (5.0%)
American International Group, Inc. 44,235 2,766,899
Hartford Financial Services Group, Inc. 48,800 1,927,600
Jefferson-Pilot Corp. 55,500 2,228,325
St. Paul Companies, Inc. 93,000 3,050,400
-------------
9,973,224
-------------
MACHINERY (10.1%)
Eaton Corp. 46,000 3,145,940
Harsco Corp. 75,000 1,923,750
Ingersoll-Rand Co. Class A 118,900 4,637,100
ITT Industries, Inc. 128,600 8,356,428
Navistar International Corp.* 100,000 2,242,000
-------------
20,305,218
-------------
MEDIA (5.3%)
Comcast Corp. Special Class A* 105,000 2,416,050
Knight-Ridder, Inc. 60,500 3,640,890
McGraw-Hill Companies, Inc. 34,700 2,238,150
Viacom, Inc. Class B* 54,300 2,422,323
-------------
10,717,413
-------------
METALS & MINING (2.0%)
Alcoa, Inc. 183,200 4,041,392
-------------
MULTILINE RETAIL (2.3%)
Federated Department Stores, Inc.* 149,100 4,577,370
-------------
See Accompanying Notes to Financial Statements.
22
NUMBER OF
SHARES VALUE
------------- -------------
COMMON STOCKS (CONTINUED)
OIL & GAS (8.0%)
ConocoPhillips 89,050 $ 4,318,925
Devon Energy Corp. 81,600 4,120,800
ExxonMobil Corp. 132,100 4,446,486
Royal Dutch Petroleum Co. NY Shares 74,900 3,204,222
-------------
16,090,433
-------------
PHARMACEUTICALS (4.4%)
Abbott Laboratories 60,700 2,541,509
Pfizer Inc. 131,100 4,165,047
Wyeth 66,100 2,214,350
-------------
8,920,906
-------------
ROAD & RAIL (1.0%)
Burlington Northern Santa Fe Corp. 81,200 2,089,276
-------------
SEMICONDUCTOR EQUIPMENT & PRODUCTS (0.8%)
Micron Technology, Inc.* 103,700 1,659,200
-------------
SPECIALTY RETAIL (5.8%)
Abercrombie & Fitch Co. Class A* 124,500 2,218,590
Best Buy Company, Inc.* 77,800 1,603,458
Lowe's Companies, Inc. 63,600 2,654,028
Ross Stores, Inc. 68,400 2,862,540
Tiffany & Co. 91,900 2,405,942
-------------
11,744,558
-------------
TOTAL COMMON STOCKS (Cost $191,553,357) 188,701,322
-------------
PREFERRED STOCK (1.2%)
REAL ESTATE (1.2%)
Equity Residential Properties, (Callable 11/27/02 @ $25.91)
(Cost $2,512,171) 101,000 2,392,690
-------------
RIGHTS (0.0%)
DIVERSIFIED FINANCIALS (0.0%)
Allied Capital Corp.^
(Cost $0) 56,900 589
-------------
PAR
(000)
-------------
SHORT-TERM INVESTMENT (5.5%)
State Street Bank & Trust Co. Euro Time Deposit, 1.750%, 11/01/02
(Cost $11,003,000) $ 11,003 11,003,000
-------------
TOTAL INVESTMENTS AT VALUE (100.4%) (Cost $205,068,528) 202,097,601
LIABILITIES IN EXCESS OF OTHER ASSETS (-0.4%) (841,503)
-------------
NET ASSETS (100.0%) $ 201,256,098
=============
* Non-income producing security.
^ Not readily marketable security; security is valued at fair value as
determined in good faith by the Board of Directors.
See Accompanying Notes to Financial Statements.
23
CREDIT SUISSE SMALL CAP VALUE FUND
SCHEDULE OF INVESTMENTS
October 31, 2002
NUMBER OF
SHARES VALUE
------------- -------------
COMMON STOCKS (93.7%)
AEROSPACE & DEFENSE (1.2%)
DRS Technologies, Inc.* 80,000 $ 2,651,200
-------------
BANKS (18.6%)
Alabama National Bancorp 48,800 2,271,152
Associated Banc-Corp 123,530 4,145,667
Banknorth Group, Inc. 138,200 3,202,094
Century Bancorp, Inc. Class A 26,700 718,497
Cullen/Frost Bankers, Inc. 79,700 2,760,011
First Financial Holdings, Inc. 141,100 3,606,516
FirstFed Financial Corp.* 134,000 3,631,400
FirstMerit Corp. 170,000 3,884,500
Hudson United Bancorp 157,800 4,805,010
Prosperity Bancshares, Inc. 130,600 2,451,362
Sky Financial Group, Inc. 119,000 2,287,180
Susquehanna Bancshares, Inc. 158,900 3,368,680
Webster Financial Corp. 120,000 3,889,200
-------------
41,021,269
-------------
CHEMICALS (3.4%)
Cambrex Corp. 86,400 2,405,376
H.B. Fuller Co. 180,000 5,124,600
-------------
7,529,976
-------------
COMMERCIAL SERVICES & SUPPLIES (5.3%)
Banta Corp. 130,000 4,004,000
United Stationers, Inc.* 140,000 4,162,200
Watson Wyatt & Company Holdings* 175,800 3,472,050
-------------
11,638,250
-------------
CONSTRUCTION & ENGINEERING (1.7%)
EMCOR Group, Inc.* 75,000 3,645,750
-------------
CONTAINERS & PACKAGING (3.6%)
AptarGroup, Inc. 150,000 4,189,500
Myers Industries, Inc. 312,218 3,840,281
-------------
8,029,781
-------------
ELECTRICAL EQUIPMENT (4.7%)
AMETEK, Inc. 130,000 4,587,700
Brady Corp. 120,000 3,958,800
C&D Technologies, Inc. 120,000 1,914,000
-------------
10,460,500
-------------
ELECTRONIC EQUIPMENT & INSTRUMENTS (9.7%)
Electro Scientific Industries, Inc.* 225,100 4,204,868
Littelfuse, Inc.* 149,000 2,330,509
Pioneer-Standard Electronics, Inc. 239,450 1,676,150
Rogers Corp.* 150,000 3,747,000
Roper Industries, Inc. 89,200 3,443,120
Varian, Inc.* 144,000 4,235,040
See Accompanying Notes to Financial Statements.
24
NUMBER OF
SHARES VALUE
------------- -------------
COMMON STOCKS (CONTINUED)
ELECTRONIC EQUIPMENT & INSTRUMENTS(CONCLUDED)
Woodhead Industries, Inc. 162,300 $ 1,671,690
-------------
21,308,377
-------------
ENERGY EQUIPMENT & SERVICES (4.4%)
Oceaneering International, Inc.* 197,000 5,456,900
Varco International, Inc.* 261,767 4,303,450
-------------
9,760,350
-------------
FOOD & DRUG RETAILING (3.2%)
Performance Food Group Co.* 92,000 3,421,480
Ruddick Corp. 250,000 3,745,000
-------------
7,166,480
-------------
FOOD PRODUCTS (2.4%)
Sensient Technologies Corp. 220,800 5,376,480
-------------
GAS UTILITIES (3.3%)
National Fuel Gas Co. 179,200 3,614,464
WGL Holdings, Inc. 160,000 3,700,800
-------------
7,315,264
-------------
HEALTHCARE EQUIPMENT & SUPPLIES (4.6%)
Arrow International, Inc. 100,000 3,516,000
Cooper Companies, Inc. 58,200 3,084,600
Invacare Corp. 110,000 3,476,000
-------------
10,076,600
-------------
HOTELS RESTAURANTS & LEISURE (1.0%)
Marcus Corp. 159,975 2,276,444
-------------
HOUSEHOLD DURABLES (4.4%)
Ethan Allen Interiors, Inc. 100,000 3,205,000
Lancaster Colony Corp. 141,000 6,408,450
-------------
9,613,450
-------------
INDUSTRIAL CONGLOMERATES (4.0%)
Carlisle Companies, Inc. 80,000 2,981,600
Lydall, Inc.* 199,500 2,274,300
Teleflex, Inc. 85,000 3,575,100
-------------
8,831,000
-------------
INSURANCE (3.8%)
Brown & Brown 86,100 2,617,440
HCC Insurance Holdings, Inc. 112,000 2,747,360
Horace Mann Educators Corp. 200,000 3,002,000
-------------
8,366,800
-------------
IT CONSULTING & SERVICES (0.9%)
Keane, Inc.* 230,200 1,896,848
-------------
See Accompanying Notes to Financial Statements.
25
NUMBER OF
SHARES VALUE
------------- -------------
COMMON STOCKS (CONCLUDED)
MACHINERY (6.3%)
ESCO Technologies, Inc.* 101,100 $ 3,680,040
Flowserve Corp.* 167,600 1,964,272
Graco, Inc. 168,000 4,594,800
The Manitowoc Company, Inc. 157,000 3,703,630
-------------
13,942,742
-------------
MEDIA (1.9%)
Harte-Hanks, Inc. 225,000 4,293,000
-------------
REAL ESTATE (1.1%)
Liberty Property Trust 80,000 2,347,200
-------------
ROAD & RAIL (1.7%)
Werner Enterprises, Inc. 185,000 3,783,250
-------------
SOFTWARE (1.5%)
Progress Software Corp.* 260,000 3,244,800
-------------
TRADING COMPANIES & DISTRIBUTORS (1.0%)
MSC Industrial Direct Company, Inc.* 175,000 2,268,000
-------------
TOTAL COMMON STOCKS (Cost $169,994,827) 206,843,811
-------------
WARRANTS (0.0%)
BANKS (0.0%)
Dime Bancorp.*
(Cost $5,015) 22,100 2,210
-------------
PAR
(000)
-------------
SHORT-TERM INVESTMENT (5.7%)
State Street Bank & Trust Co. Euro Time Deposit, 1.750%, 11/01/02
(Cost $12,558,000) $ 12,558 12,558,000
-------------
TOTAL INVESTMENTS AT VALUE (99.4%) (Cost $182,557,842) 219,404,021
OTHER ASSETS IN EXCESS OF LIABILITIES (0.6%) 1,281,383
-------------
NET ASSETS (100.0%) $ 220,685,404
=============
* Non-income producing security.
See Accompanying Notes to Financial Statements.
26
CREDIT SUISSE FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
October 31, 2002
LARGE CAP STRATEGIC SMALL CAP
VALUE FUND VALUE FUND VALUE FUND
------------- ------------- -------------
ASSETS
Investments at value (Cost $124,047,600,
$205,068,528, and $182,557,842, respectively) $ 148,066,006 $ 202,097,601 $ 219,404,021
Cash 54 263 393
Dividends and interest receivable 286,978 180,970 247,437
Receivable for fund shares sold 145,205 133,176 137,895
Receivable for investments sold -- 6,656,877 1,284,024
Prepaid expenses and other assets 17,584 33,766 29,082
------------- ------------- -------------
Total Assets 148,515,827 209,102,653 221,102,852
------------- ------------- -------------
LIABILITIES
Advisory fee payable 37,534 124,801 133,515
Administrative services fee payable 25,991 34,272 38,581
Payable for investments purchased -- 7,124,611 --
Distribution fee payable 49,586 10,965 60,915
Payable for fund shares redeemed 93,911 399,623 105,548
Directors'/Trustees' fee payable -- 2,281 --
Other accrued expenses payable 98,486 150,002 78,889
------------- ------------- -------------
Total Liabilities 305,508 7,846,555 417,448
------------- ------------- -------------
NET ASSETS
Capital stock, $0.001 par value 8,826 19,064 11,927
Paid-in capital 124,373,270 205,667,116 165,319,116
Accumulated undistributed net investment income 159,478 -- 128,931
Accumulated net realized gain (loss) on investments (349,661) (1,459,155) 18,379,251
Net unrealized appreciation (depreciation)
from investments 24,018,406 (2,970,927) 36,846,179
------------- ------------- -------------
Net Assets $ 148,210,319 $ 201,256,098 $ 220,685,404
============= ------------- -------------
COMMON SHARES
Net assets $ 3,060,715 $ 175,121,019 $ 45,075,158
Shares outstanding 181,923 16,586,562 2,428,392
------------- ------------- -------------
Net asset value, offering price and redemption
price per share $ 16.82 $ 10.56 $ 18.56
============= ============= =============
ADVISOR SHARES
Net assets N/A $ 25,500,591 N/A
Shares outstanding N/A 2,417,186 N/A
------------- ------------- -------------
Net asset value, offering price and redemption
price per share N/A $ 10.55 N/A
============= ============= =============
See Accompanying Notes to Financial Statements.
27
LARGE CAP STRATEGIC SMALL CAP
VALUE FUND VALUE FUND VALUE FUND
------------- ------------- -------------
A SHARES
Net assets $ 114,733,069 $ 404,067 $ 151,340,303
Shares outstanding 6,817,930 38,298 8,129,338
------------- ------------- -------------
Net asset value and redemption price per share $ 16.83 $ 10.55 $ 18.62
============= ============= =============
Maximum offering price per share
(net asset value/(1-5.75%)) $ 17.86 $ 11.19 $ 19.76
============= ============= =============
B SHARES
Net assets $ 28,312,471 $ 88,367 $ 19,998,751
Shares outstanding 1,699,492 8,410 1,127,333
------------- ------------- -------------
Net asset value and offering price per share $ 16.66 $ 10.51 $ 17.74
============= ============= =============
C SHARES
Net assets $ 2,104,064 $ 142,054 $ 4,271,192
Shares outstanding 126,880 13,525 241,461
------------- ------------- -------------
Net asset value and offering price per share $ 16.58 $ 10.50 $ 17.69
============= ============= =============
See Accompanying Notes to Financial Statements.
28
CREDIT SUISSE FUNDS
STATEMENTS OF OPERATIONS
For the Year Ended October 31, 2002
LARGE CAP STRATEGIC SMALL CAP
VALUE FUND VALUE FUND VALUE FUND
------------- ------------- -------------
INVESTMENT INCOME
Dividends $ 3,506,534 $ 3,945,521 $ 3,768,757
Interest 101,632 101,191 63,743
Foreign taxes withheld -- (13,049) --
------------- ------------- -------------
Total investment income 3,608,166 4,033,663 3,832,500
------------- ------------- -------------
EXPENSES
Investment advisory fees 1,126,184 1,862,407 2,046,845
Administrative services fees 316,764 426,285 453,880
Shareholder servicing/Distribution fees 694,479 175,509 852,258
Transfer agent fees 228,797 531,124 343,311
Printing fees 88,911 98,514 114,730
Registration fees 79,854 93,906 75,412
Legal fees 55,498 42,341 74,029
Audit fees 26,564 27,475 20,175
Custodian fees 17,760 22,540 26,847
Insurance expense 14,032 9,796 20,371
Interest expense 5,669 5,989 11,226
Directors'/Trustees' fees 5,558 15,241 5,679
Miscellaneous expense 8,343 11,685 4,618
------------- ------------- -------------
Total expenses 2,668,413 3,322,812 4,049,381
Less: fees waived (509,588) -- (335,009)
------------- ------------- -------------
Net expenses 2,158,825 3,322,812 3,714,372
------------- ------------- -------------
Net investment income 1,449,341 710,851 118,128
------------- ------------- -------------
NET REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENTS
Net realized gain (loss) from investments 3,173,446 (1,192,972) 19,290,175
Net change in unrealized appreciation (depreciation)
from investments (13,538,321) (30,902,727) (14,804,671)
------------- ------------- -------------
Net realized and unrealized gain (loss)
from investments (10,364,875) (32,095,699) 4,485,504
------------- ------------- -------------
Net increase (decrease) in net assets resulting
from operations $ (8,915,534) $ (31,384,848) $ 4,603,632
============= ============= =============
See Accompanying Notes to Financial Statements.
29
CREDIT SUISSE FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
LARGE CAP VALUE FUND
------------------------------
FOR THE YEAR ENDED OCTOBER 31,
------------------------------
2002 2001
------------- -------------
FROM OPERATIONS
Net investment income $ 1,449,341 $ 2,089,788
Net realized gain (loss) from investments 3,173,446 15,244,162
Net change in unrealized appreciation (depreciation) from investments (13,538,321) (42,695,915)
------------- -------------
Net increase (decrease) in net assets resulting from operations (8,915,534) (25,361,965)
------------- -------------
FROM DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income
Common Class shares (28,797) (18,349)
Advisor Class shares -- --
Class A shares (1,322,171) (1,351,242)
Class B shares (111,266) (82,889)
Class C shares (7,918) (3,707)
Class D shares (82,437) (528,735)
DISTRIBUTIONS FROM NET REALIZED GAINS
Common Class shares (222,334) (8,726)
Advisor Class shares -- --
Class A shares (11,038,633) (14,073,743)
Class B shares (2,788,798) (3,586,179)
Class C shares (165,188) (48,654)
Class D shares (3,299,124) (3,943,625)
RETURN OF CAPITAL
Common Class shares -- --
Class A shares -- --
------------- -------------
Net decrease in net assets resulting from dividends and distributions (19,066,666) (23,645,849)
------------- -------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares 22,065,483 27,258,454
Exchange value of shares due to merger 14,973,364 --
Reinvestment of dividends and distributions 16,059,536 20,868,471
Net asset value of shares redeemed (90,669,775) (36,719,870)
------------- -------------
Net increase (decrease) in net assets from capital share transactions (37,571,392) 11,407,055
------------- -------------
Net increase (decrease) in net assets (65,553,592) (37,600,759)
NET ASSETS
Beginning of year 213,763,911 251,364,670
------------- -------------
End of year $ 148,210,319 $ 213,763,911
============= =============
UNDISTRIBUTED NET INVESTMENT INCOME $ 159,478 $ 262,734
============= =============
See Accompanying Notes to Financial Statements.
30
STRATEGIC VALUE FUND
------------------------------
FOR THE YEAR ENDED OCTOBER 31,
------------------------------
2002 2001
------------- -------------
FROM OPERATIONS
Net investment income $ 710,851 $ 1,901,932
Net realized gain (loss) from investments (1,192,972) 7,371,839
Net change in unrealized appreciation (depreciation) from investments (30,902,727) (24,159,539)
------------- -------------
Net increase (decrease) in net assets resulting from operations (31,384,848) (14,885,768)
------------- -------------
FROM DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income
Common Class shares (744,117) (1,809,160)
Advisor Class shares -- (94,568)
Class A shares (236) --
Class B shares -- --
Class C shares -- --
Class D shares -- --
DISTRIBUTIONS FROM NET REALIZED GAINS
Common Class shares (6,095,193) (34,194,577)
Advisor Class shares (1,030,567) (5,702,373)
Class A shares (27) --
Class B shares (26) --
Class C shares (26) --
Class D shares -- --
RETURN OF CAPITAL
Common Class shares (68,226) --
Class A shares (20) --
------------- -------------
Net decrease in net assets resulting from dividends and distributions (7,938,438) (41,800,678)
------------- -------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares 32,802,513 62,788,635
Exchange value of shares due to merger -- --
Reinvestment of dividends and distributions 7,817,621 41,146,267
Net asset value of shares redeemed (55,949,687) (88,739,277)
------------- -------------
Net increase (decrease) in net assets from capital share transactions (15,329,553) 15,195,625
------------- -------------
Net increase (decrease) in net assets (54,652,839) (41,490,821)
NET ASSETS
Beginning of year 255,908,937 297,399,758
------------- -------------
End of year $ 201,256,098 $ 255,908,937
============= =============
UNDISTRIBUTED NET INVESTMENT INCOME $ -- $ 39,915
============= =============
SMALL CAP VALUE FUND
------------------------------
FOR THE YEAR ENDED OCTOBER 31,
------------------------------
2002 2001
------------- -------------
FROM OPERATIONS
Net investment income $ 118,128 $ 434,376
Net realized gain (loss) from investments 19,290,175 32,187,267
Net change in unrealized appreciation (depreciation) from investments (14,804,671) (15,843,676)
------------- -------------
Net increase (decrease) in net assets resulting from operations 4,603,632 16,777,967
------------- -------------
FROM DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income
Common Class shares (76,133) (551)
Advisor Class shares -- --
Class A shares (268,011) (439,646)
Class B shares -- --
Class C shares -- (735)
Class D shares -- --
DISTRIBUTIONS FROM NET REALIZED GAINS
Common Class shares (4,111,025) (16,437)
Advisor Class shares -- --
Class A shares (26,202,108) (26,873,775)
Class B shares (2,444,105) (2,525,961)
Class C shares (221,991) (39,456)
Class D shares -- --
RETURN OF CAPITAL
Common Class shares -- --
Class A shares -- --
------------- -------------
Net decrease in net assets resulting from dividends and distributions (33,323,373) (29,896,561)
------------- -------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares 90,362,161 35,083,467
Exchange value of shares due to merger -- 33,444,688
Reinvestment of dividends and distributions 31,664,945 27,594,410
Net asset value of shares redeemed (121,800,767) (39,906,819)
------------- -------------
Net increase (decrease) in net assets from capital share transactions 226,339 56,215,746
------------- -------------
Net increase (decrease) in net assets (28,493,402) 43,097,152
NET ASSETS
Beginning of year 249,178,806 206,081,654
------------- -------------
End of year $ 220,685,404 $ 249,178,806
============= =============
UNDISTRIBUTED NET INVESTMENT INCOME $ 128,931 $ 369,227
============= =============
See Accompanying Notes to Financial Statements.
31
CREDIT SUISSE LARGE CAP VALUE FUND
FINANCIAL HIGHLIGHTS
(For a Common Class Share of the Fund Outstanding Throughout Each Period)
FOR THE YEAR ENDED OCTOBER 31,
-------------------------------------
2002 2001 2000(1)
--------- --------- ---------
PER SHARE DATA
Net asset value, beginning of period $ 19.95 $ 24.63 $ 22.44
--------- --------- ---------
INVESTMENT OPERATIONS
Net investment income(2) 0.17 0.19 0.02
Net gain (loss) on investments
(both realized and unrealized) (1.45) (2.52) 2.21
--------- --------- ---------
Total from investment operations (1.28) (2.33) 2.23
--------- --------- ---------
LESS DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (0.19) (0.22) (0.04)
Distributions from net realized gains (1.66) (2.13) --
--------- --------- ---------
Total dividends and distributions (1.85) (2.35) (0.04)
--------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 16.82 $ 19.95 $ 24.63
========= ========= =========
Total return(3) (7.63)% (10.51)% 9.96%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $ 3,061 $ 3,421 $ 96
Ratio of expenses to average net assets 1.03% 1.03% 0.43%(4)
Ratio of net investment income
to average net assets 0.92% 0.86% 0.07%(4)
Decrease reflected in above operating expense
ratios due to waivers/reimbursements 0.29% 0.18% --
Portfolio turnover rate 28% 38% 55%
(1) For the period August 1, 2000 (inception date) through October 31, 2000.
(2) Per share information is calculated using the average share outstanding
method.
(3) Total returns are historical and assume changes in share price and
reinvestments of all dividends and distributions. Had certain expenses not
been reduced during the periods shown, total returns would have been lower.
Total returns for periods less than one year are not annualized.
(4) Annualized.
See Accompanying Notes to Financial Statements.
32
CREDIT SUISSE LARGE CAP VALUE FUND
FINANCIAL HIGHLIGHTS
(For a Class A Share of the Fund Outstanding Throughout Each Period)
FOR THE YEAR ENDED OCTOBER 31,
---------------------------------------------------------------------------
2002 2001 2000 1999 1998
----------- ----------- ----------- ----------- -----------
PER SHARE DATA
Net asset value, beginning of period $ 19.96 $ 24.62 $ 23.49 $ 22.60 $ 20.09
----------- ----------- ----------- ----------- -----------
INVESTMENT OPERATIONS
Net investment income(1) 0.17 0.21 0.16 0.12 0.20
Net gain (loss) on investments
(both realized and unrealized) (1.45) (2.55) 1.78 2.87 3.51
----------- ----------- ----------- ----------- -----------
Total from investment operations (1.28) (2.34) 1.94 2.99 3.71
----------- ----------- ----------- ----------- -----------
LESS DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (0.19) (0.19) (0.12) (0.09) (0.17)
Distributions from net realized gains (1.66) (2.13) (0.69) (2.01) (1.03)
----------- ----------- ----------- ----------- -----------
Total dividends and distributions (1.85) (2.32) (0.81) (2.10) (1.20)
----------- ----------- ----------- ----------- -----------
NET ASSET VALUE, END OF PERIOD $ 16.83 $ 19.96 $ 24.62 $ 23.49 $ 22.60
=========== =========== =========== =========== ===========
Total return(2) (7.63)% (10.48)% 8.44% 14.37% 19.14%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $ 114,733 $ 133,665 $ 162,871 $ 174,213 $ 163,936
Ratio of expenses to average net assets 1.03% 1.04% 1.08% 1.11% 1.13%
Ratio of net investment income
to average net assets 0.90% 0.94% 0.71% 0.52% 0.92%
Decrease reflected in above operating expense
ratios due to waivers/reimbursements 0.28% 0.10% -- -- --
Portfolio turnover rate 28% 38% 55% 25% 33%
(1) Per share information is calculated using the average share outstanding
method.
(2) Total returns are historical and assume changes in share price,
reinvestments of all dividends and distributions, and no sales charge. Had
certain expenses not been reduced during the periods shown, total returns
would have been lower.
See Accompanying Notes to Financial Statements.
33
CREDIT SUISSE LARGE CAP VALUE FUND
FINANCIAL HIGHLIGHTS
(For a Class B Share of the Fund Outstanding Throughout Each Period)
FOR THE YEAR ENDED OCTOBER 31,
----------------------------------------------------------------------
2002 2001 2000 1999 1998
---------- ---------- ---------- ---------- ----------
PER SHARE DATA
Net asset value, beginning of period $ 19.78 $ 24.44 $ 23.37 $ 22.55 $ 20.06
---------- ---------- ---------- ---------- ----------
INVESTMENT OPERATIONS
Net investment income (loss)(1) 0.03 0.04 -- (0.04) 0.04
Net gain (loss) on investments
(both realized and unrealized) (1.43) (2.52) 1.76 2.88 3.50
---------- ---------- ---------- ---------- ----------
Total from investment operations (1.40) (2.48) 1.76 2.84 3.54
---------- ---------- ---------- ---------- ----------
LESS DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (0.06) (0.05) -- (0.01) (0.02)
Distributions from net realized gains (1.66) (2.13) (0.69) (2.01) (1.03)
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (1.72) (2.18) (0.69) (2.02) (1.05)
---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $ 16.66 $ 19.78 $ 24.44 $ 23.37 $ 22.55
========== ========== ========== ========== ==========
Total return(2) (8.29)% (11.00)% 7.66% 13.66% 18.29%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $ 28,312 $ 33,087 $ 41,194 $ 41,144 $ 33,325
Ratio of expenses to average net assets 1.78% 1.79% 1.80% 1.81% 1.83%
Ratio of net investment income (loss)
to average net assets 0.15% 0.19% (0.01)% (0.18)% 0.22%
Decrease reflected in above operating expense
ratios due to waivers/reimbursements 0.27% 0.10% -- -- --
Portfolio turnover rate 28% 38% 55% 25% 33%
(1) Per share information is calculated using the average share outstanding
method.
(2) Total returns are historical and assume changes in share price,
reinvestments of all dividends and distributions, and no sales charge. Had
certain expenses not been reduced during the periods shown, total returns
would have been lower.
See Accompanying Notes to Financial Statements.
34
CREDIT SUISSE LARGE CAP VALUE FUND
FINANCIAL HIGHLIGHTS
(For a Class C Share of the Fund Outstanding Throughout Each Period)
FOR THE YEAR ENDED OCTOBER 31,
-------------------------------------
2002 2001 2000(1)
--------- --------- ---------
PER SHARE DATA
Net asset value, beginning of period $ 19.71 $ 24.39 $ 20.87
--------- --------- ---------
INVESTMENT OPERATIONS
Net investment income (loss)(2) 0.03 0.03 (0.01)
Net gain (loss) on investments
(both realized and unrealized) (1.43) (2.51) 3.56
--------- --------- ---------
Total from investment operations (1.40) (2.48) 3.55
--------- --------- ---------
LESS DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (0.07) (0.07) (0.03)
Distributions from net realized gains (1.66) (2.13) --
--------- --------- ---------
Total dividends and distributions (1.73) (2.20) (0.03)
--------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 16.58 $ 19.71 $ 24.39
========= ========= =========
Total return(3) (8.35)% (11.07)% 17.02%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $ 2,104 $ 1,916 $ 496
Ratio of expenses to average net assets 1.78% 1.79% 1.28%(4)
Ratio of net investment income (loss)
to average net assets 0.16% 0.13% (0.03)%(4)
Decrease reflected in above operating expense
ratios due to waivers/reimbursements 0.28% 0.10% --
Portfolio turnover rate 28% 38% 55%
(1) For the period February 28, 2000 (inception date) through October 31, 2000.
(2) Per share information is calculated using the average share outstanding
method.
(3) Total returns are historical and assume changes in share price,
reinvestments of all dividends and distributions, and no sales charge. Had
certain expenses not been reduced during the periods shown, total returns
would have been lower. Total returns for periods less than one year are not
annualized.
(4) Annualized.
See Accompanying Notes to Financial Statements.
35
CREDIT SUISSE STRATEGIC VALUE FUND
FINANCIAL HIGHLIGHTS
(For a Common Class Share of the Fund Outstanding Throughout Each Period)
FOR THE YEAR ENDED OCTOBER 31,
------------------------------------------------------------------------------
2002 2001 2000 1999 1998
---------- ---------- ---------- ---------- ----------
PER SHARE DATA
Net asset value, beginning of period $ 12.55 $ 15.49 $ 18.93 $ 16.97 $ 18.56
---------- ---------- ---------- ---------- ----------
INVESTMENT OPERATIONS
Net investment income 0.04(1) 0.10 0.11 0.13 0.14
Net gain (loss) on investments
(both realized and unrealized) (1.63) (0.86) 0.70 2.49 1.36
---------- ---------- ---------- ---------- ----------
Total from investment operations (1.59) (0.76) 0.81 2.62 1.50
---------- ---------- ---------- ---------- ----------
LESS DIVIDENDS, DISTRIBUTIONS AND RETURN OF
CAPITAL
Dividends from net investment income (0.05) (0.10) (0.11) (0.13) (0.14)
Distributions from net realized gains (0.35) (2.08) (4.14) (0.53) (2.95)
Return of capital --(2) -- -- -- --
---------- ---------- ---------- ---------- ----------
Total dividends, distributions and
return of capital (0.40) (2.18) (4.25) (0.66) (3.09)
---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $ 10.56 $ 12.55 $ 15.49 $ 18.93 $ 16.97
========== ========== ========== ========== ==========
Total return(3) (13.29)% (5.14)% 5.99% 15.77% 9.11%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $ 175,121 $ 219,223 $ 254,842 $ 602,282 $ 703,808
Ratio of expenses to average net assets 1.27% 1.13%(4) 1.16%(4) 1.14% 1.19%
Ratio of net investment income
to average net assets 0.36% 0.72% 0.67% 0.65% 0.83%
Portfolio turnover rate 30% 38% 49% 78% 78%
(1) Per share information is calculated using the average share outstanding
method.
(2) Total is less than $0.01 per share.
(3) Total returns are historical and assume changes in share price and
reinvestments of all dividends and distributions.
(4) Interest earned on uninvested cash balances is used to offset portions of
the transfer agent expense. These arrangements resulted in a reduction to
the Common Class shares' net expense ratio by .00%, and .02%, for the years
ended October 31, 2001 and 2000, respectively. These arrangements had no
effect on the fund's expense ratio for the other periods presented. The
Common Class shares' operating expense ratios after reflecting these
arrangements were 1.13% and 1.14% for the years ended October 31, 2001 and
2000, respectively.
See Accompanying Notes to Financial Statements.
36
CREDIT SUISSE STRATEGIC VALUE FUND
FINANCIAL HIGHLIGHTS
(For an Advisor Class Share of the Fund Outstanding Throughout Each Period)
FOR THE YEAR ENDED OCTOBER 31,
---------------------------------------------------------------------------------
2002 2001 2000 1999 1998
---------- ---------- ---------- ---------- ----------
PER SHARE DATA
Net asset value, beginning of period $ 12.55 $ 15.49 $ 18.92 $ 16.96 $ 18.55
---------- ---------- ---------- ---------- ----------
INVESTMENT OPERATIONS
Net investment income (loss) (0.02)(1) 0.03 0.01 0.03 0.10
Net gain (loss) on investments
(both realized and unrealized) (1.63) (0.86) 0.73 2.49 1.35
---------- ---------- ---------- ---------- ----------
Total from investment operations (1.65) (0.83) 0.74 2.52 1.45
---------- ---------- ---------- ---------- ----------
LESS DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income -- (0.03) (0.03) (0.03) (0.09)
Distributions from net realized gains (0.35) (2.08) (4.14) (0.53) (2.95)
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (0.35) (2.11) (4.17) (0.56) (3.04)
---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $ 10.55 $ 12.55 $ 15.49 $ 18.92 $ 16.96
========== ========== ========== ========== ==========
Total return(2) (13.71)% (5.63)% 5.47% 15.20% 8.70%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $ 25,501 $ 36,686 $ 42,558 $ 71,572 $ 96,397
Ratio of expenses to average net assets 1.76% 1.63%(3) 1.66%(3) 1.64%(3) 1.55%
Ratio of net investment income (loss)
to average net assets (0.14)% 0.22% 0.17% 0.15% 0.47%
Portfolio turnover rate 30% 38% 49% 78% 78%
(1) Per share information is calculated using the average share outstanding
method.
(2) Total returns are historical and assume changes in share price and
reinvestments of all dividends and distributions.
(3) Interest earned on uninvested cash balances is used to offset portions of
the transfer agent expense. These arrangements resulted in a reduction to
the Advisor Class shares' net expense ratio by .00%, .02%, and .01%, for
the years ended October 31, 2001, 2000, and 1999, respectively. These
arrangements had no effect on the fund's expense ratio for the other
periods presented. The Advisor Class shares' operating expense ratios after
reflecting these arrangements were 1.63%, 1.64%, and 1.63% for the years
ended October 31, 2001, 2000, and 1999, respectively.
See Accompanying Notes to Financial Statements.
37
CREDIT SUISSE STRATEGIC VALUE FUND
FINANCIAL HIGHLIGHTS
(For a Class A Share of the Fund Outstanding Throughout the Period)
FOR THE PERIOD
ENDED,
OCTOBER 31, 2002(1)
-------------------
PER SHARE DATA
Net asset value, beginning of period $ 13.36
--------
INVESTMENT OPERATIONS
Net investment loss (0.01)(2)
Net loss on investments
(both realized and unrealized) (2.42)
--------
Total from investment operations (2.43)
--------
LESS DIVIDENDS, DISTRIBUTIONS AND RETURN OF CAPITAL
Dividends from net investment income (0.03)
Distributions from net realized gains (0.35)
Return of Capital --(3)
--------
Total dividends, distributions and return of capital (0.38)
--------
NET ASSET VALUE, END OF PERIOD $ 10.55
========
Total return (18.76)%(4)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $ 404
Ratio of expenses to average net assets 1.63%(5)
Ratio of net investment loss to average net assets (0.10)%(5)
Portfolio turnover rate 30%
(1) For the period November 30, 2001 (inception date) through October 31, 2002.
(2) Per share information is calculated using the average share outstanding
method.
(3) Total is less than $0.01 per share.
(4) Total returns are historical and assume changes in share price,
reinvestments of all dividends and distributions, and no sales charge.
Total return for periods less than one year are not annualized.
(5) Annualized.
See Accompanying Notes to Financial Statements.
38
CREDIT SUISSE STRATEGIC VALUE FUND
FINANCIAL HIGHLIGHTS
(For a Class B Share of the Fund Outstanding Throughout the Period)
FOR THE PERIOD
ENDED,
OCTOBER 31, 2002(1)
-------------------
PER SHARE DATA
Net asset value, beginning of period $ 13.36
--------
INVESTMENT OPERATIONS
Net investment loss (0.08)(2)
Net loss on investments
(both realized and unrealized) (2.42)
--------
Total from investment operations (2.50)
--------
LESS DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income --(3)
Distributions from net realized gains (0.35)
--------
Total dividends and distributions (0.35)
--------
NET ASSET VALUE, END OF PERIOD $ 10.51
========
Total return (19.23)%(4)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $ 88
Ratio of expenses to average net assets 2.33%(5)
Ratio of net investment loss to average net assets (0.71)%(5)
Portfolio turnover rate 30%
(1) For the period November 30, 2001 (inception date) through October 31, 2002.
(2) Per share information is calculated using the average share outstanding
method.
(3) Total is less than $.01 per share.
(4) Total return is historical and assumes changes in share price,
reinvestments of all dividends and distributions, and no sales charge.
Total returns for periods less than one year are not annualized.
(5) Annualized.
See Accompanying Notes to Financial Statements.
39
CREDIT SUISSE STRATEGIC VALUE FUND
FINANCIAL HIGHLIGHTS
(For a Class C Share of the Fund Outstanding Throughout the Period)
FOR THE PERIOD
ENDED,
OCTOBER 31, 2002(1)
-------------------
PER SHARE DATA
Net asset value, beginning of period $ 13.36
--------
INVESTMENT OPERATIONS
Net investment loss (0.08)(2)
Net loss on investments
(both realized and unrealized) (2.43)
--------
Total from investment operations (2.51)
--------
LESS DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income --(3)
Distributions from net realized gains (0.35)
--------
Total dividends and distributions (0.35)
--------
NET ASSET VALUE, END OF PERIOD $ 10.50
========
Total return (19.31)%(4)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $ 142
Ratio of expenses to average net assets 2.30%(5)
Ratio of net investment loss to average net assets (0.71)%(5)
Portfolio turnover rate 30%
(1) For the period November 30, 2001 (inception date) through October 31, 2002.
(2) Per share information is calculated using the average share outstanding
method.
(3) Total is less than $.01 per share.
(4) Total returns are historical and assume changes in share price,
reinvestments of all dividends and distributions, and no sales charge.
Total return for periods less than one year are not annualized.
(5) Annualized.
See Accompanying Notes to Financial Statements.
40
CREDIT SUISSE SMALL CAP VALUE FUND
FINANCIAL HIGHLIGHTS
(For a Common Class Share of the Fund Outstanding Throughout Each Period)
FOR THE YEAR ENDED OCTOBER 31,
----------------------------------------
2002 2001 2000(1)
---------- ---------- ----------
PER SHARE DATA
Net asset value, beginning of period $ 21.07 $ 22.62 $ 21.35
---------- ---------- ----------
INVESTMENT OPERATIONS
Net investment income(2) 0.02 0.04 0.02
Net gain on investments
(both realized and unrealized) 0.31 1.72 1.25
---------- ---------- ----------
Total from investment operations 0.33 1.76 1.27
---------- ---------- ----------
LESS DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (0.05) (0.09) --
Distributions from net realized gains (2.79) (3.22) --
---------- ---------- ----------
Total dividends and distributions (2.84) (3.31) --
---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $ 18.56 $ 21.07 $ 22.62
========== ========== ==========
Total return(3) 0.61% 9.79% 5.95%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $ 45,075 $ 30,667 $ 105
Ratio of expenses to average net assets 1.32% 1.33% 0.34%(4)
Ratio of net investment income to average net assets 0.12% 0.18% 0.09%(4)
Decrease reflected in above operating expense
ratios due to waivers/reimbursements 0.14% 0.02% --
Portfolio turnover rate 18% 54% 42%
(1) For the period August 1, 2000 (inception date) through October 31, 2000.
(2) Per share information is calculated using the average share outstanding
method.
(3) Total returns are historical and assume changes in share price and
reinvestments of all dividends and distributions. Had certain expenses not
been reduced during the periods shown, total returns would have been lower.
Total returns for periods less than one year are not annualized.
(4) Annualized.
See Accompanying Notes to Financial Statements.
41
CREDIT SUISSE STRATEGIC VALUE FUND
FINANCIAL HIGHLIGHTS
(For a Class A Share of the Fund Outstanding Throughout Each Period)
FOR THE YEAR ENDED OCTOBER 31,
---------------------------------------------------------------------------
2002 2001 2000 1999 1998
----------- ----------- ----------- ----------- -----------
PER SHARE DATA
Net asset value, beginning of period $ 21.09 $ 22.54 $ 20.52 $ 19.54 $ 23.34
----------- ----------- ----------- ----------- -----------
INVESTMENT OPERATIONS
Net investment income(1) 0.02 0.05 0.06 0.06 0.07
Net gain (loss) on investments
(both realized and unrealized) 0.33 1.76 4.05 1.01 (2.55)
----------- ----------- ----------- ----------- -----------
Total from investment operations 0.35 1.81 4.11 1.07 (2.48)
----------- ----------- ----------- ----------- -----------
LESS DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (0.03) (0.04) (0.04) (0.07) (0.06)
Distributions from net realized gains (2.79) (3.22) (2.05) (0.02) (1.26)
----------- ----------- ----------- ----------- -----------
Total dividends and distributions (2.82) (3.26) (2.09) (0.09) (1.32)
----------- ----------- ----------- ----------- -----------
NET ASSET VALUE, END OF PERIOD $ 18.62 $ 21.09 $ 22.54 $ 20.52 $ 19.54
=========== =========== =========== =========== ===========
Total return(2) 0.71% 9.70% 21.69% 5.47% (11.20)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $ 151,340 $ 199,213 $ 188,501 $ 188,192 $ 237,873
Ratio of expenses to average net assets 1.32% 1.33% 1.39% 1.37% 1.29%
Ratio of net investment income
to average net assets 0.11% 0.25% 0.28% 0.33% 0.30%
Decrease reflected in above operating expense
ratios due to waivers/ reimbursements 0.12% 0.02% -- -- --
Portfolio turnover rate 18% 54% 42% 30% 42%
(1) Per share information is calculated using the average share outstanding
method.
(2) Total returns are historical and assume changes in share price,
reinvestments of all dividends and distributions, and no sales charge. Had
certain expenses not been reduced during the periods shown, total returns
would have been lower.
See Accompanying Notes to Financial Statements.
42
CREDIT SUISSE STRATEGIC VALUE FUND
FINANCIAL HIGHLIGHTS
(For a Class B Share of the Fund Outstanding Throughout Each Period)
FOR THE YEAR ENDED OCTOBER 31,
----------------------------------------------------------------------
2002 2001 2000 1999 1998
---------- ---------- ---------- ---------- ----------
PER SHARE DATA
Net asset value, beginning of period $ 20.33 $ 21.95 $ 20.13 $ 19.23 $ 23.12
---------- ---------- ---------- ---------- ----------
INVESTMENT OPERATIONS
Net investment loss(1) (0.12) (0.10) (0.09) (0.14) (0.09)
Net gain (loss) on investments
(both realized and unrealized) 0.32 1.70 3.96 1.06 (2.55)
---------- ---------- ---------- ---------- ----------
Total from investment operations 0.20 1.60 3.87 0.92 (2.64)
---------- ---------- ---------- ---------- ----------
LESS DISTRIBUTIONS
Distributions from net realized gains (2.79) (3.22) (2.05) (0.02) (1.25)
---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $ 17.74 $ 20.33 $ 21.95 $ 20.13 $ 19.23
========== ========== ========== ========== ==========
Total return(2) (0.08)% 8.88% 20.80% 4.75% (11.98)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $ 19,999 $ 17,818 $ 17,255 $ 19,257 $ 22,284
Ratio of expenses to average net assets 2.07% 2.08% 2.10% 2.07% 1.99%
Ratio of net investment loss
to average net assets (0.63)% (0.50)% (0.43)% (0.71)% (0.40)%
Decrease reflected in above operating expense
ratios due to waivers/reimbursements 0.13% 0.02% -- -- --
Portfolio turnover rate 18% 54% 42% 30% 42%
(1) Per share information is calculated using the average share outstanding
method.
(2) Total returns are historical and assume changes in share price,
reinvestments of all dividends and distributions, and no sales charge. Had
certain expenses not been reduced during the periods shown, total returns
would have been lower.
See Accompanying Notes to Financial Statements.
43
CREDIT SUISSE STRATEGIC VALUE FUND
FINANCIAL HIGHLIGHTS
(For a Class C Share of the Fund Outstanding Throughout Each Period)
FOR THE YEAR ENDED OCTOBER 31,
-------------------------------------
2002 2001 2000(1)
--------- --------- ---------
PER SHARE DATA
Net asset value, beginning of period $ 20.28 $ 21.94 $ 17.96
--------- --------- ---------
INVESTMENT OPERATIONS
Net investment loss(2) (0.12) (0.11) (0.07)
Net gain on investments
(both realized and unrealized) 0.32 1.67 4.05
--------- --------- ---------
Total from investment operations 0.20 1.56 3.98
--------- --------- ---------
LESS DISTRIBUTIONS
Distributions from net realized gains (2.79) (3.22) --
--------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 17.69 $ 20.28 $ 21.94
========= ========= =========
Total return(3) (0.07)% 8.93% 22.16%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $ 4,271 $ 1,481 $ 220
Ratio of expenses to average net assets 2.07% 2.08% 1.42%(4)
Ratio of net investment loss
to average net assets (0.63)% (0.52)% (0.33)%(4)
Decrease reflected in above operating expense
ratios due to waivers/reimbursements 0.14% 0.02% --
Portfolio turnover rate 18% 54% 42%
(1) For the period February 28, 2000 (inception date) through October 31, 2000.
(2) Per share information is calculated using the average share outstanding
method.
(3) Total returns are historical and assume changes in share price,
reinvestments of all dividends and distributions, and no sales charge. Had
certain expenses not been reduced during the periods shown, total returns
would have been lower. Total returns for periods less than one year are not
annualized.
(4) Annualized.
See Accompanying Notes to Financial Statements.
44
CREDIT SUISSE FUNDS
NOTES TO FINANCIAL STATEMENTS
October 31, 2002
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Credit Suisse Funds covered in this report are comprised of Credit Suisse
Large Cap Value Fund ("Large Cap Value"), Credit Suisse Strategic Value Fund
("Strategic Value") and Credit Suisse Small Cap Value Fund ("Small Cap Value"),
(each a "Fund" and collectively, the "Funds"). Each Fund is registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as diversified,
open-end management investment companies. Strategic Value was incorporated under
the laws of the State of Maryland on February 29, 1988. Large Cap Value and
Small Cap Value are series of the Credit Suisse Capital Funds, which was
organized under the laws of the Commonwealth of Massachusetts as a business
trust on November 26, 1985.
Investment objectives for each Fund are as follows: Large Cap Value seeks
long-term capital appreciation and continuity of income; Strategic Value seeks
total returns; Small Cap Value seeks a high level of growth of capital.
Strategic Value is authorized to offer five classes of shares: Common Class,
Advisor Class, Class A, Class B, and Class C. Large Cap Value and Small Cap
Value each offer four classes of shares: Common Class, Class A, Class B, and
Class C. Each class of shares in each Fund represents an equal pro rata interest
in each Fund, except that they bear different expenses which reflect the
difference in the range of services provided to them. Common Class shares of
each Fund, except Strategic Value, bear expenses paid pursuant to a distribution
plan at an annual rate of .25% of the average daily net asset value of the
Fund's Common Class shares. Common Class shares of Strategic Value are not
subject to distribution fees. Advisor Class shares bear expenses paid pursuant
to a shareholder servicing and distribution plan adopted by Strategic Value at
an annual rate not to exceed .75% of the average daily net asset value of
Strategic Value's Advisor Class shares. Advisor Class shares currently bear
expenses of .50% of average daily net assets. Class A shares are sold subject to
a front-end sales charge of up to 5.75% and bear expenses paid pursuant to a
distribution plan at an annual rate of .25% of the average daily net asset value
of each applicable Fund's Class A shares. Class B shares are sold subject to a
contingent deferred sales charge which declines from 4% to zero depending on the
period of time the shares are held and bear expenses paid pursuant to a
distribution plan at an annual rate of 1.00% of the average daily net asset
value of each applicable Fund's Class B shares. Class C shares are sold subject
to a contingent deferred sales charge of 1% if redeemed within the first year of
purchase and bear expenses paid pursuant to a distribution plan at an annual
rate of 1.00% of the average daily net asset value of each applicable Fund's
Class C shares.
45
During the current fiscal year, the classes offered by the Funds changed as
follows: Effective November 30, 2001, Strategic Value began offering Class A,
Class B and Class C shares. Effective December 12, 2001, Small Cap Value closed
the Common Class to new investors. Effective December 12, 2001, Large Cap Value
closed the Common Class to new investments, except for reinvestments of
dividends. Large Cap Value's Common Class shareholders as of the close of
business on December 12, 2001 may continue to hold Common Class shares but will
be unable to add to their accounts. Although no further shares can be purchased,
Large Cap Value's shareholders can redeem their Common Class shares through any
available method. Effective March 18, 2002, Large Cap Value ceased operations of
its Class D shares.
Effective as of the close of business on June 8, 2001, Small Cap Value
acquired all of the net assets of the Credit Suisse Warburg Pincus Small Company
Value II Fund ("Small Company Value II") in a tax-free exchange of shares. The
shares exchanged were 2,616,209 shares (valued at $33,389,925) of the Common
Class shares of Small Company Value II for 1,463,517 Common Class shares of
Small Cap Value and 4,333 shares (valued at $54,763) of Advisor Class shares of
Small Company Value II for 2,401 Common Class shares of Small Cap Value. The
Small Company Value II net assets of $33,444,688 at that date, which included
$6,405,554 of unrealized appreciation, were combined with those of Small Cap
Value. The aggregate net assets of Small Company Value II and Small Cap Value
immediately before the acquisition were $33,444,688 and $239,666,573,
respectively and the combined net assets of Small Cap Value after the
acquisition were $273,111,261.
Effective as of the close of business on April 12, 2002, Large Cap Value
acquired all of the net assets of the Credit Suisse Balanced Fund ("Balanced")
in a tax-free exchange of shares. The shares exchanged were 741,460 shares
(valued at $14,901,765) of the Class A of Large Cap Value for 1,561,419 shares
of the Common Class of Balanced, and 3,563 shares (valued at $71,599) of the
Class A of Large Cap Value for 7,511 shares of the Advisor Class of Balanced.
Balanced Fund's net assets of $14,973,364 at that date, which consisted of
$476,771 of unrealized depreciation, were combined with those of Large Cap
Value. The aggregate net assets of Balanced and Large Cap Value immediately
before the acquisition were $14,973,364 and $178,554,035, respectively, and the
combined net assets of Large Cap Value after the acquisition were $193,527,399.
46
A) SECURITY VALUATION -- The net asset value of each Fund is determined daily
as of the close of regular trading on the New York Stock Exchange, Inc. Each
Fund's equity investments are valued at market value, which is generally
determined using the last reported sales price. If no sales are reported,
investments are generally valued at the last reported bid price. Debt securities
are valued on the basis of broker quotations or valuations provided by a pricing
service which may use a matrix, formula or other objective method that takes
into consideration market indices, yield curves and other specific adjustments.
Securities and other assets for which market quotations are not readily
available are valued at fair value as determined in good faith by, or under the
direction of the Board of Directors/Trustees under procedures established by the
Board of Directors/Trustees in the absence of readily ascertainable market
values. Debt obligations that will mature in 60 days or less are valued on the
basis of amortized cost, which approximates market value, unless the Board
determines that using this method would not reflect an investment's fair value.
B) SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on a trade date basis. Interest income is recorded on the accrual
basis. Dividends are recorded on the ex-dividend date. Income, expenses
(excluding class-specific expenses) and realized/unrealized gains/losses are
allocated proportionately to each class of shares based upon the relative net
asset value of outstanding shares of that class. The cost of investments sold is
determined by use of the specific identification method for both financial
reporting and income tax purposes.
C) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS --Dividends from net
investment income and distributions of net realized capital gains, if any, are
declared and paid at least annually. However, to the extent that a net realized
capital gain can be reduced by a capital loss carryover, such gain will not be
distributed. Income and capital gain distributions are determined in accordance
with federal income tax regulations which may differ from accounting principles
generally accepted in the United States of America (GAAP).
D) FEDERAL INCOME TAXES -- No provision is made for federal taxes as it is
each Fund's intention to continue to qualify for and elect the tax treatment
applicable to regulated investment companies under the Internal Revenue Code of
1986, as amended, and make the requisite distributions to its shareholders which
will be sufficient to relieve it from federal income and excise taxes.
47
E) USE OF ESTIMATES -- The preparation of financial statements in conformity
with GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, disclosure of contingent assets and
liabilities, at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from these estimates.
F) SHORT-TERM INVESTMENTS -- The Funds, together with other funds advised by
Credit Suisse Asset Management, LLC ("CSAM"), an indirect, wholly-owned
subsidiary of Credit Suisse Group, pool available cash into a short-term time
deposit issued by State Street Bank and Trust Company, the Funds' custodian. The
short-term time deposit is a variable rate account classified as a short-term
investment.
G) SECURITIES LENDING -- Loans of securities are required at all times to be
secured by collateral at least equal to 102% of the market value of domestic
securities on loan including any accrued interest thereon and 105% of the market
value of foreign securities on loan including any accrued interest thereon. Cash
collateral received by the Funds in connection with securities lending activity
is invested in the AIM Institutional Funds - Liquid Asset Portfolio. However, in
the event of default or bankruptcy by the other party to the agreement,
realization and/or retention of the collateral may be subject to legal
proceedings. The Funds had no securities out on loan during the year ended
October 31, 2002.
Credit Suisse First Boston ("CSFB"), an affiliate of CSAM, has been engaged
by the Funds to act as the Fund's securities lending agent. CSFB has agreed to
charge the Funds fees for its securities lending activities equal to its costs
in providing services as securities lending agent. CSFB also has voluntarily
agreed to waive its fees for the securities lending agent services that it
provides. CSFB may discontinue its voluntary fee waivers at any time.
H) OTHER -- Strategic Value may invest up to 15% of its net assets in
non-publicly traded securities. Small Cap Value and Large Cap Value may each
invest up to 10% of its net assets in such securities. Non-publicly traded
securities may be less liquid than publicly traded securities. Although these
securities may be resold in privately negotiated transactions, the prices
realized from such sales could differ from the price originally paid by the
Funds or the current carrying values, and the difference could be material.
48
NOTE 2. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
CSAM serves as investment adviser for the Funds. For its investment advisory
services, CSAM is entitled to receive the following fees, computed daily and
payable monthly on each Fund's average daily net assets as follows:
FUND ANNUAL RATE
---- -----------
Large Cap Value 0.75% of average daily net assets less than $75 million
0.50% of average daily net assets greater than $75 million
Strategic Value 0.75% of average daily net assets
Small Cap Value 0.875% of first $100 million of average daily net assets
0.75% of next $100 million of average daily net assets
0.625% of average daily net assets greater than $200 million
For the year ended October 31, 2002, investment advisory fees earned and
voluntarily waived were as follows:
GROSS NET
ADVISORY ADVISORY
FUND FEE WAIVER FEE
---- ----------- --------- -----------
Large Cap Value $ 1,126,184 $ 509,588 $ 616,596
Strategic Value 1,862,407 -- 1,862,407
Small Cap Value 2,046,845 335,009 1,711,836
Credit Suisse Asset Management Securities, Inc. ("CSAMSI"), an affiliate of
CSAM, and State Street Bank and Trust Company ("SSB") serve as co-administrators
to the Funds. At its meeting held on February 12, 2002 the Board of
Directors/Trustees approved SSB to replace PFPC, Inc. ("PFPC"), as
co-administrator effective July 1, 2002 for Large Cap Value and Small Cap Value
and August 1, 2002 for Strategic Value.
For its co-administrative services, CSAMSI currently receives a fee
calculated at an annual rate of .10% of each Fund's average daily net assets.
For the year ended October 31, 2002, co-administrative services fees earned
by CSAMSI were as follows:
FUND CO-ADMINISTRATION FEE
---- ---------------------
Large Cap Value $ 187,737
Strategic Value 248,321
Small Cap Value 267,487
For its co-administrative services, PFPC was entitled to receive a fee for
each fund, exclusive of out-of-pocket expenses, based on the following fee
structure:
AVERAGE DAILY NET ASSETS ANNUAL RATE
------------------------ -----------
First $500 million .075% of average daily net assets
Next $1 billion .065% of average daily net assets
Over $1.5 billion .055% of average daily net assets
49
For the period November 1, 2001 through June 30, 2002 for Large Cap Value and
Small Cap Value, and for the period November 1, 2001 through July 31, 2002 for
Strategic Value, co-administrative services fees earned by PFPC (including
out-of-pocket expenses) were as follows:
FUND CO-ADMINISTRATION FEE
---- ---------------------
Large Cap Value $ 105,639
Strategic Value 149,432
Small Cap Value 126,431
For its co-administrative services SSB receives a fee, exclusive of
out-of-pocket expenses, based upon the following fee structure calculated in
total for all the Credit Suisse Funds co-administered by SSB and allocated based
upon relative average net assets of each fund.
AVERAGE DAILY NET ASSETS ANNUAL RATE
------------------------ -----------
First $5 billion .050% of average daily net assets
Next $5 billion .035% of average daily net assets
Over $10 billion .020% of average daily net assets
For the period July 1, 2002 through October 31, 2002 for Large Cap Value and
Small Cap Value, and for the period August 1, 2002 through October 31, 2002 for
Strategic Value, co-administrative service fees earned by SSB (including
out-of-pocket expenses) were as follows:
FUND CO-ADMINISTRATION FEE
---- ---------------------
Large Cap Value $ 23,388
Strategic Value 28,532
Small Cap Value 59,962
In addition to serving as each Fund's co-administrator, CSAMSI currently
serves as distributor of each Fund's shares. Pursuant to a distribution plan
adopted by each Fund pursuant to Rule 12b-1 under the 1940 Act, CSAMSI receives
a fee for its distribution services. This fee is calculated at an annual rate of
..25% of the average daily net assets of the Class A and Common Class shares of
Large Cap Value and Small Cap Value. For the Advisor Class shares of Strategic
Value, the shareholder servicing and distribution fee is calculated at an annual
rate of .50% of the average daily net assets. For the Class B and Class C
shares, the fee is calculated at annual rate of 1.00% of average daily
50
net assets. For the year ended October 31, 2002, shareholder servicing and
distribution fees paid to CSAMSI were as follows:
SHAREHOLDER SERVICING/
FUND DISTRIBUTION FEE
---- ----------------------
Large Cap Value
Common Class $ 7,388
Class A 332,952
Class B 333,191
Class C 20,948
---------
$ 694,479
=========
Strategic Value
Advisor Class $ 173,655
Class A 293
Class B 339
Class C 1,222
---------
$ 175,509
=========
Small Cap Value
Common Class $ 108,136
Class A 499,401
Class B 208,821
Class C 35,900
---------
$ 852,258
=========
Certain brokers, dealers and financial representatives provide transfer agent
related services to the Funds, and receive compensation for these services from
CSAM. CSAM is then reimbursed by the Funds. For the year ended October 31, 2002,
the Funds reimbursed CSAM the following amounts, which are included in the
Funds' transfer agent expense:
FUND AMOUNT
---- ---------
Large Cap Value $ 5,080
Strategic Value 244,797
Small Cap Value 71,709
For the year ended October 31, 2002, CSAMSI and its affiliates advised the
Funds that it retained the following amounts from commissions earned on the sale
of the Funds' shares:
FUND AMOUNT
---- ---------
Large Cap Value $ 50,674
Strategic Value 929
Small Cap Value 53,730
51
Merrill Corporation ("Merrill"), an affiliate of CSAM, has been engaged by
the Funds to provide certain financial printing and fulfillment services. For
the year ended October 31, 2002, Merrill was paid for its services by the Funds
as follows:
FUND AMOUNT
---- ---------
Large Cap Value $ 66,512
Strategic Value 27,896
Small Cap Value 97,107
NOTE 3. LINE OF CREDIT
Through June 18, 2002, the Funds, together with other funds/portfolios
advised by CSAM (collectively, the "Participating Funds"), participated in a
$200 million committed, unsecured line of credit facility ("Prior Credit
Facility") with Deutsche Bank, A.G. as administrative agent, State Street Bank
and Trust Company as operations agent, BNP Paribas as syndication agent and
certain other lenders, for temporary or emergency purposes primarily relating to
unanticipated Participating Funds' share redemptions. Under the terms of the
Prior Credit Facility, the Participating Funds paid an aggregate commitment fee
at a rate of .10% per annum on the average unused amount of the Prior Credit
Facility, which was allocated among the Participating Funds in such a manner as
was determined by the governing Boards of the Participating Funds. In addition,
the Participating Funds paid interest on borrowings at the Federal funds rate
plus .50%.
Effective June 19, 2002, the Participating Funds, together with additional
funds/portfolios advised by CSAM (collectively with the Participating Funds, the
"New Participating Funds"), established a new $150 million committed, unsecured,
line of credit facility (the "New Credit Facility") with Deutsche Bank, A.G. as
administrative agent and syndication agent and State Street Bank and Trust
Company as operations agent for the same purposes as the Prior Credit Facility.
Terms of the New Credit Facility remain the same as the Prior Credit Facility.
The commitment fee rate and interest rate is unchanged. At October 31, 2002,
there were no loans outstanding for any of the Funds either under the New Credit
Facility or the Prior Credit Facility.
52
During the year ended October 31, 2002, the following Fund had borrowings
under the Prior Credit Facility and/or the New Credit Facility as follows:
AVERAGE DAILY WEIGHTED AVERAGE MAXIMUM DAILY
FUND LOAN BALANCE INTEREST RATE % LOAN OUTSTANDING
---- ------------- ---------------- ----------------
Small Cap Value 2,231,182 2.303% 4,570,000
NOTE 4. PURCHASES AND SALES OF SECURITIES
For the year ended October 31, 2002, purchases and sales of investment
securities (excluding short-term investments) were as follows:
FUND PURCHASES SALES
---- ------------ -------------
Large Cap Value $ 51,757,345 $ 122,725,342
Strategic Value 69,284,030 91,546,012
Small Cap Value 45,922,450 84,089,968
NOTE 5. CAPITAL SHARE TRANSACTIONS
Strategic Value is authorized to issue six billion full and fractional shares
of capital stock, $.001 par value per share, of which one billion are classified
as Common shares, two billion are classified as Advisor shares and one billion
each are classified as Class A, Class B and Class C shares. Large Cap Value and
Small Cap Value are each authorized to issue an unlimited number of full and
fractional shares of beneficial interest, $.001 par value per share, of which an
unlimited number of shares are classified as the Common Class, and an unlimited
number of shares are classified as the Class A, Class B, and Class C shares.
Transactions in capital shares of the Funds were as follows:
LARGE CAP VALUE
------------------------------------------------------------
COMMON CLASS
------------------------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED
OCTOBER 31, 2002 OCTOBER 31, 2001
------------------------------------------------------------
SHARES VALUE SHARES VALUE
------------ ------------ ------------ ------------
Shares sold 103,965 $ 2,023,735 247,678 $ 5,610,931
Shares issued in reinvestment
of dividends and distributions 12,434 242,387 852 18,040
Shares redeemed (105,918) (2,094,726) (80,982) (1,820,615)
------------ ------------ ------------ ------------
Net increase 10,481 $ 171,396 167,548 $ 3,808,356
============ ============ ============ ============
53
LARGE CAP VALUE
----------------------------------------------------------------
CLASS A
----------------------------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED
OCTOBER 31, 2002 OCTOBER 31, 2001
----------------------------------------------------------------
SHARES VALUE SHARES VALUE
------------- ------------- ------------- -------------
Shares sold 626,066 $ 12,458,395 497,633 $ 10,992,519
Shares exchanged due to merger 745,023 14,973,364 -- --
Shares issued in reinvestment of
dividends and distributions 493,645 9,681,586 587,498 12,903,682
Shares redeemed (1,742,654) (33,021,060) (1,003,451) (21,875,515)
------------- ------------- ------------- -------------
Net increase 122,080 $ 4,092,285 81,680 $ 2,020,686
============= ============= ============= =============
LARGE CAP VALUE
----------------------------------------------------------------
CLASS B
----------------------------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED
OCTOBER 31, 2002 OCTOBER 31, 2001
----------------------------------------------------------------
SHARES VALUE SHARES VALUE
------------- ------------- ------------- -------------
Shares sold 290,681 $ 5,488,383 136,380 $ 2,979,246
Shares issued in reinvestment of
dividends and distributions 133,172 2,598,132 157,054 3,422,233
Shares redeemed (396,941) (7,219,735) (306,403) (6,625,998)
------------- ------------- ------------- -------------
Net increase (decrease) 26,912 $ 866,780 (12,969) $ (224,519)
============= ============= ============= =============
LARGE CAP VALUE
----------------------------------------------------------------
CLASS C
----------------------------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED
OCTOBER 31, 2002 OCTOBER 31, 2001
----------------------------------------------------------------
SHARES VALUE SHARES VALUE
------------- ------------- ------------- -------------
Shares sold 54,693 $ 1,022,052 81,416 $ 1,797,567
Shares issued in reinvestment of
dividends and distributions 8,035 155,964 2,401 52,155
Shares redeemed (33,052) (615,500) (6,944) (152,097)
------------- ------------- ------------- -------------
Net increase 29,676 $ 562,516 76,873 $ 1,697,625
============= ============= ============= =============
LARGE CAP VALUE
----------------------------------------------------------------
CLASS D
----------------------------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED
OCTOBER 31, 2002(1) OCTOBER 31, 2001
----------------------------------------------------------------
SHARES VALUE SHARES VALUE
------------- ------------- ------------- -------------
Shares sold 53,963 $ 1,072,918 263,799 $ 5,878,192
Shares issued in reinvestment of
dividends and distributions 171,387 3,381,467 303,506 4,472,360
Shares redeemed (2,311,557) (47,718,754) (276,713) (6,245,645)
------------- ------------- ------------- -------------
Net increase (decrease) (2,086,207) $ (43,264,369) 190,592 $ 4,104,907
============= ============= ============= =============
54
STRATEGIC VALUE
----------------------------------------------------------------
COMMON CLASS
----------------------------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED
OCTOBER 31, 2002 OCTOBER 31, 2001
----------------------------------------------------------------
SHARES VALUE SHARES VALUE
------------- ------------- ------------- -------------
Shares sold 2,197,385 $ 27,640,532 3,725,127 $ 51,683,209
Shares issued in reinvestment of
dividends and distributions 515,385 6,786,899 2,749,394 35,349,336
Shares redeemed (3,600,864) (44,820,752) (5,453,055) (74,139,460)
------------- ------------- ------------- -------------
Net increase (decrease) (888,094) $ (10,393,321) 1,021,466 $ 12,893,085
============= ============= ============= =============
STRATEGIC VALUE
----------------------------------------------------------------
ADVISOR CLASS
----------------------------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED
OCTOBER 31, 2002 OCTOBER 31, 2001
----------------------------------------------------------------
SHARES VALUE SHARES VALUE
------------- ------------- ------------- -------------
Shares sold 354,262 $ 4,443,977 801,031 $ 11,105,426
Shares issued in reinvestment of
dividends and distributions 77,486 1,030,565 450,848 5,796,931
Shares redeemed (937,589) (11,126,396) (1,076,470) (14,599,817)
------------- ------------- ------------- -------------
Net increase (decrease) (505,841) $ (5,651,854) 175,409 $ 2,302,540
============= ============= ============= =============
STRATEGIC VALUE
----------------------------------------------------------------
CLASS A CLASS B
----------------------------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED
OCTOBER 31, 2002(2) OCTOBER 31, 2002(2)
------------------------------ ------------------------------
SHARES VALUE SHARES VALUE
------------------------------ ------------------------------
Shares sold 38,285 $ 440,384 8,602 $ 102,640
Shares issued in reinvestment of
dividends and distributions 13 157 -- --
Shares redeemed -- -- (192) (2,539)
------------- ------------- ------------- -------------
Net increase 38,298 $ 440,541 8,410 $ 100,101
============= ============= ============= =============
STRATEGIC VALUE
------------------------------
CLASS C
------------------------------
FOR THE YEAR ENDED
OCTOBER 31, 2002(2)
------------------------------
SHARES VALUE
------------- -------------
Shares sold 13,525 $ 174,980
------------- -------------
Net increase 13,525 $ 174,980
============= =============
55
SMALL CAP VALUE
----------------------------------------------------------------
COMMON CLASS
----------------------------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED
OCTOBER 31, 2002 OCTOBER 31, 2001
----------------------------------------------------------------
SHARES VALUE SHARES VALUE
------------- ------------- ------------- -------------
Shares sold 2,037,442 $ 43,491,976 397,275 $ 8,783,388
Shares exchanged due to merger -- -- 1,465,919 33,444,703
Shares issued in reinvestment of
dividends and distributions 206,532 4,122,723 -- --
Shares redeemed (1,271,379) (26,177,786) (412,055) (9,044,812)
------------- ------------- ------------- -------------
Net increase 972,595 $ 21,436,913 1,451,139 $ 33,183,279
============= ============= ============= =============
SMALL CAP VALUE
----------------------------------------------------------------
CLASS A
----------------------------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED
OCTOBER 31, 2002 OCTOBER 31, 2001
----------------------------------------------------------------
SHARES VALUE SHARES VALUE
------------- ------------- ------------- -------------
Shares sold 1,317,940 $ 35,671,755 1,061,823 $ 22,929,213
Shares issued in reinvestment of
dividends and distributions 1,250,540 25,063,759 1,330,676 25,192,101
Shares redeemed (3,884,528) (90,304,871) (1,309,249) (28,022,948)
------------- ------------- ------------- -------------
Net increase (decrease) (1,316,048) $ (29,569,357) 1,083,250 $ 20,098,366
============= ============= ============= =============
SMALL CAP VALUE
----------------------------------------------------------------
CLASS B
----------------------------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED
OCTOBER 31, 2002 OCTOBER 31, 2001
----------------------------------------------------------------
SHARES VALUE SHARES VALUE
------------- ------------- ------------- -------------
Shares sold 352,858 $ 7,019,306 95,195 $ 1,975,413
Shares issued in reinvestment of
dividends and distributions 117,607 2,258,049 129,006 2,362,103
Shares redeemed (219,418) (4,302,841) (134,033) (2,738,710)
------------- ------------- ------------- -------------
Net increase 251,047 $ 4,974,514 90,168 $ 1,598,806
============= ============= ============= =============
SMALL CAP VALUE
----------------------------------------------------------------
CLASS C
----------------------------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED
OCTOBER 31, 2002 OCTOBER 31, 2001
----------------------------------------------------------------
SHARES VALUE SHARES VALUE
------------- ------------- ------------- -------------
Shares sold 210,925 $ 4,179,124 66,176 $ 1,395,453
Shares issued in reinvestment of
dividends and distributions 11,516 220,414 2,190 40,191
Shares redeemed (54,000) (1,015,269) (5,367) (100,349)
------------- ------------- ------------- -------------
Net increase 168,441 $ 3,384,269 62,999 $ 1,335,295
============= ============= ============= =============
(1) Large Cap Value Class D ceased operations effective March 18, 2002.
(2) For the period November 30, 2001 (inception date) through October 31, 2002.
56
On October 31, 2002, the number of shareholders that held 5% or more of the
outstanding shares of each class of the Funds were as follows:
NUMBER OF APPROXIMATE PERCENTAGE
SHAREHOLDERS OF OUTSTANDING SHARES
------------ ---------------------
Large Cap Value
Common Class 2 73%
Class C 2 20%
Strategic Value
Common Class 3 46%
Advisor Class 1 98%
Class A 7 67%
Class B 5 59%
Class C 3 88%
Small Cap Value
Common Class 3 66%
Class C 1 6%
Some of the shareholders are comprised of omnibus accounts, which are held on
behalf of several individual shareholders.
NOTE 6. FEDERAL INCOME TAXES
Income and capital gain distributions are determined in accordance with
federal income tax regulations, which may differ from GAAP. These differences
are primarily due to differing treatments of losses deferred due to wash sales
and excise tax regulations.
The tax characteristics of dividends and distributions paid during the period
ended October 31, for the Funds were as follows:
ORDINARY INCOME LONG-TERM CAPITAL GAIN RETURN OF CAPITAL
--------------------------- --------------------------- ---------------------------
FUND 2002 2001 2002 2001 2002 2001
---- ------------ ------------ ------------ ------------ ------------ ------------
Large Cap Value $ 1,552,589 $ 1,984,922 $ 17,514,077 $ 21,660,927 $ -- $ --
Strategic Value 750,766 1,903,728 7,119,425 39,896,950 68,246 --
Small Cap Value 10,814,993 8,274,362 22,508,380 21,622,199 -- --
At October 31, 2002, the components of distributable earnings on a tax basis
were as follows:
LARGE CAP VALUE STRATEGIC VALUE SMALL CAP VALUE
--------------- --------------- ---------------
Undistributed ordinary income $ 159,497 $ -- $ 785,837
Accumulated realized gain (loss) (1,349,517) (1,256,325) 18,618,941
Unrealized appreciation (depreciation) 22,319,212 (3,173,757) 35,949,583
--------------- --------------- ---------------
$ 21,129,192 $ (4,430,082) $ 55,354,361
=============== =============== ===============
57
At October 31, 2002, the Funds had capital loss carryovers available to
offset possible future capital gains as follows:
EXPIRES OCTOBER 31,
--------------------------
FUND 2009 2010
---- ----------- -----------
Large Cap Value $ 1,362,521 $ --
Strategic Value -- 1,256,325
Small Cap Value -- --
At October 31, 2002, the identified cost for federal income tax purposes, as
well as the gross unrealized appreciation from investments for those securities
having an excess of value over cost, gross unrealized depreciation from
investments for those securities having an excess of cost over value and the net
unrealized appreciation (depreciation) from investments were as follows:
NET UNREALIZED
GROSS UNREALIZED GROSS UNREALIZED APPRECIATION/
FUND IDENTIFIED COST APPRECIATION (DEPRECIATION) (DEPRECIATION)
---- --------------- ---------------- ---------------- --------------
Large Cap Value $ 125,746,794 $ 27,346,913 $ 5,027,701 $ 22,319,212
Strategic Value 205,271,358 24,631,530 27,805,287 (3,173,757)
Small Cap Value 183,454,438 47,400,516 11,450,933 35,949,583
At October 31, 2002, accumulated undistributed net investment income (loss),
accumulated net realized gain (loss) from investments, and paid-in capital have
been adjusted for current period permanent book/tax differences which arose
principally from differing book/tax treatments of reit dividends and capital
loss carryovers from a fund acquisition. Net assets were not affected by these
reclassifications:
INCREASE (DECREASE)
-------------------------------------------------
ACCUMULATED NET
UNDISTRIBUTED REALIZED GAIN
PAID-IN NET INVESTMENT (LOSS) ON
FUND CAPITAL INCOME (LOSS) INVESTMENT
---- ------------ -------------- ---------------
Large Cap Value $ 1,827,222 $ (8) $ (1,827,214)
Strategic Value (68,246) 61,832 6,414
Small Cap Value -- (14,280) 14,280
58
NOTE 7. SUBSEQUENT EVENT
On December 12, 2002, the Board of Directors of Strategic Value approved,
subject to shareholder approval, a proposed reorganization (the
"Reorganization"). If the Reorganization is completed, each shareholder of
Strategic Value would become a shareholder of Large Cap Value (the "Acquiring
Fund") and would receive on a tax-free basis shares of the Acquiring Fund with
the same aggregate net asset value as their shares of Strategic Value. The
Reorganization is subject to the approval of Strategic Value's shareholders.
Proxy materials describing the proposed Reorganization will be mailed to
shareholders in anticipation of a special meeting of shareholders to be held at
a later date.
59
CREDIT SUISSE FUNDS
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors/Trustees and Shareholders of
Credit Suisse Large Cap Value Fund;
Credit Suisse Strategic Value Fund, Inc.;
Credit Suisse Small Cap Value Fund:
In our opinion, the accompanying statements of assets and liabilities,
including the schedules of investments, and the related statement of operations
and of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Credit Suisse Large Cap Value Fund,
Credit Suisse Strategic Value Fund, Inc. and Credit Suisse Small Cap Value Fund
(Credit Suisse Large Cap Value Fund and Credit Suisse Small Cap Value Fund are
series of the Credit Suisse Capital Funds) (collectively referred to as the
"Funds") at October 31, 2002, the results of their operations for the year then
ended, the changes in each of their net assets and financial highlights (for
Credit Suisse Large Cap Value Fund and Credit Suisse Small Cap Value Fund) for
each of the two years in the period then ended and the financial highlights (for
Credit Suisse Strategic Value Fund, Inc.) for each of the years (or periods)
presented, in conformity with accounting principles generally accepted in the
United States of America. These financial statements and the financial
highlights (hereafter referred to as the "financial statements") are the
responsibility of the Funds' management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at October
31, 2002 by correspondence with the custodian and brokers, provide a reasonable
basis for our opinion. The financial highlights of Credit Suisse Large Cap Value
Fund and Credit Suisse Small Cap Value Fund for each of the periods presented in
the period ended October 31, 2000 were audited by other independent accountants,
whose report dated December 20, 2000 expressed an unqualified opinion on those
statements.
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
December 18, 2002
60
CREDIT SUISSE FUNDS
INFORMATION CONCERNING DIRECTORS/TRUSTEES AND OFFICERS (UNAUDITED)
NUMBER OF
TERM PORTFOLIOS IN
OF OFFICE(1) FUND
AND COMPLEX OTHER
POSITION(S) LENGTH PRINCIPAL OVERSEEN BY DIRECTORSHIPS
HELD WITH OF TIME OCCUPATION(S) DURING DIRECTOR/ HELD BY
NAME, ADDRESS AND AGE FUNDS SERVED PAST FIVE YEARS TRUSTEE DIRECTOR/TRUSTEE
- ------------------------------ ------------ -------------- ------------------------- --------------- ----------------
INDEPENDENT DIRECTORS/TRUSTEES
Richard H. Francis Director/ Since Currently retired; 53 Director of
c/o Credit Suisse Trustee 1999 Executive Vice The Indonesia
Asset Management, LLC and (Strategic President and Fund, Inc.
466 Lexington Avenue Audit Value), Chief Financial
New York, New York Committee 2001 Officer of Pan Am
10017-3147 Member (Large Cap Corporation and
Value and Pan American
Age: 70 Small Cap World Airways,
Value) Inc. from 1988 to
1991
Jack W. Fritz Director/ Since Private investor; 52 Director of
2425 North Fish Creek Road Trustee and 1996 Consultant and Advo, Inc.
P.O. Box 1287 Audit (Strategic Director of Fritz (direct mail
Wilson, Wyoming 83014 Committee Value), Broadcasting, Inc. advertising)
Member 2001 and Fritz
Age: 75 (Large Cap Communications
Value and (developers and
Small Cap operators of radio
Value) stations) since
1987
Jeffrey E. Garten Director/ Since Dean of Yale 52 Director of
Box 208200 Trustee and 1998 School of Aetna, Inc.;
New Haven, Connecticut Audit (Strategic Management and Director of
06520-8200 Committee Value), William S. Beinecke Calpine Energy
Member 2001 Professor in the Corporation;
Age: 56 (Large Cap Practice of Director of
Value and International CarMax Group
Small Cap Trade and Finance; (used car
Value) Undersecretary of dealers)
Commerce for
International Trade
from November 1993
to October 1995;
Professor at
Columbia University
from September
1992 to November
1993
- ----------
(1) Director/Trustee and Officer serves until his or her respective successor
has been duly elected and qualified.
61
NUMBER OF
TERM PORTFOLIOS IN
OF OFFICE(1) FUND
AND COMPLEX OTHER
POSITION(S) LENGTH PRINCIPAL OVERSEEN BY DIRECTORSHIPS
HELD WITH OF TIME OCCUPATION(S) DURING DIRECTOR/ HELD BY
NAME, ADDRESS AND AGE FUNDS SERVED PAST FIVE YEARS TRUSTEE DIRECTOR/TRUSTEE
- ------------------------------ ------------ -------------- ------------------------- --------------- ----------------
INDEPENDENT DIRECTORS/TRUSTEES
--(CONTINUED)
Peter F. Krogh Director/ Since Dean Emeritus and 52 Member of
301 ICC Trustee and 2001 Distinguished Professor Board
Georgetown University Audit (All Funds) of International Affairs of The Carlisle
Washington, DC 20057 Committee at the Edmund A. Walsh Companies Inc.;
Member School of Foreign Service, Member of
Age: 65 Georgetown University; Selection
Moderator of PBS Committee
Foreign affairs television for Truman
Series Scholars and
Henry Luce
Scholars; Senior
Associate of
Center for
Strategic and
International
Studies; Trustee
of numerous
world affairs
organizations
James S. Pasman, Jr. Director/ Since 1999 Currently retired; 54 Director of
c/o Credit Suisse Trustee and (Strategic President and Chief Education
Asset Management, LLC Audit Value), Operating Officer of Management
466 Lexington Avenue Committee 2001 National InterGroup, Corp.; Director
New York, New York Member (Large Cap Inc. (holding company) of Credit
10017-3147 Value and from April 1989 Suisse Asset
Small Cap to March 1991; Management
Age: 71 Value) Chairman of Permian Income Fund,
Oil Co. from April 1989 Inc.; Trustee of
to March 1991 Credit Suisse
High Yield Bond
Fund
62
NUMBER OF
TERM PORTFOLIOS IN
OF OFFICE(1) FUND
AND COMPLEX OTHER
POSITION(S) LENGTH PRINCIPAL OVERSEEN BY DIRECTORSHIPS
HELD WITH OF TIME OCCUPATION(S) DURING DIRECTOR/ HELD BY
NAME, ADDRESS AND AGE FUNDS SERVED PAST FIVE YEARS TRUSTEE DIRECTOR/TRUSTEE
- ------------------------------ ------------ -------------- ------------------------- --------------- ----------------
INDEPENDENT DIRECTORS/TRUSTEES
--(CONTINUED)
Steven N. Rappaport Director/ Since 1999 Partner of Lehigh Court 53 Director of
Lehigh Court, LLC Trustee and (Strategic LLC since July 2002; The First Israel
40 East 52nd Street Audit Value), President of Sunguard Fund, Inc.
New York, New York Committee 2001 Securities Finance, Inc.
10022 Chairman (Large Cap from 2001 to July 2002;
Value and President of Loanet, Inc.
Age: 54 Small Cap (on-line accounting
Value) service) from 1995 to
2001; Director, President,
North American
Operations, and former
Executive Vice President
from 1992 to 1993 of
Worldwide Operations of
Metallurg Inc.
(manufacture of specially
metals and alloys);
Executive Vice President,
Telerate, Inc. (provider
of real-time information
to the capital markets)
from 1987 to 1992;
Partner in the law firm
of Hartman & Craven
until 1987
INTERESTED DIRECTOR/TRUSTEE
William W. Priest(2) Director/ Since 1999 Senior Partner and 59 Director of The
Steinberg Priest & Sloane Trustee (Strategic Fund Manager, Brazilian Equity
Capital Management Value), Steinberg Fund, Inc.; The
12 East 49th Street 2001 Priest & Sloane Capital Chile Fund, Inc.;
12th Floor (Large Cap Management since The Emerging
New York, New York Value and March 2001; Chairman Markets Tele-
10017 Small Cap and Managing communications
Value) Director of CSAM Fund, Inc.; The
Age: 61 from 2000 to First Israel Fund,
February 2001, Chief Inc.; The Latin
Executive Officer and American Equity
Managing Director of Fund, Inc.; The
CSAM from 1990 to Indonesia Fund,
2000 Inc.; and Credit
Suisse Asset
Management
Income Fund, Inc.
- ------------
(2) Mr. Priest is a Director/Trustee who is an "interested person" of the Funds
as defined in the 1940 Act, because he was an officer of CSAM until February
2001.
63
TERM
OF OFFICE(1)
AND
POSITION(S) LENGTH
HELD WITH OF TIME
NAME, ADDRESS AND AGE FUNDS SERVED PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
- --------------------- ------------ -------------- ---------------------------------------------------------
OFFICERS
Laurence R. Smith Chairman Since Managing Director and Global Chief Investment Officer
Credit Suisse Asset 2002 of CSAM; Associated with JP Morgan Investment
Management, LLC (All Funds) Management from 1981 to 1999; Officer of Other Credit
466 Lexington Avenue Suisse Funds
New York, New York
10017-3147
Age: 44
Hal Liebes, Esq. Vice President Since 1999 Managing Director and Global General Counsel of CSAM;
Credit Suisse Asset and Secretary (Strategic Associated with Lehman Brothers, Inc. from 1996 to 1997;
Management, LLC Value), Associated with CSAM from 1995 to 1996; Associated
466 Lexington Avenue 2001 with CS First Boston Investment Management from
New York, New York (Large Cap 1994 to 1995; Associated with Division of Enforcement,
10017-3147 Value and U.S. Securities and Exchange Commission from 1991
Small Cap to 1994; Officer of Other Credit Suisse Funds
Value)
Age: 38
Michael A. Pignataro Treasurer Since 1999 Director and Director of Fund Administration of CSAM;
Credit Suisse Asset and Chief (Strategic Associated with CSAM since 1984; Officer of Other Credit
Management, LLC Financial Value), Suisse Funds
466 Lexington Avenue Officer 2001
New York, New York (Large Cap
10017-3147 Value and
Small Cap
Value)
Age: 43
Gregory N. Bressler, Esq. Assistant Since 2000 Vice President and Legal Counsel of CSAM since January
Credit Suisse Asset Secretary (Strategic 2000; Associated with the law firm of Swidler Berlin
Management, LLC Value), Shereff Friedman LLP from 1996 to 2000; Officer of Other
466 Lexington Avenue 2001 Credit Suisse Funds
New York, New York (Large Cap
10017-3147 Value and
Small Cap
Value)
Age: 36
64
TERM
OF OFFICE(1)
AND
POSITION(S) LENGTH
HELD WITH OF TIME
NAME, ADDRESS AND AGE FUNDS SERVED PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
- --------------------- ------------ -------------- ---------------------------------------------------------
OFFICERS--(CONTINUED)
Kimiko T. Fields, Esq. Assistant Since Assistant Vice President and Legal Counsel of CSAM
Credit Suisse Asset Secretary 2002 since December 2000; Assistant Vice President, Institutional
Management, LLC (All Funds) Marketing Department, CSAM, from January 2000 to
466 Lexington Avenue December 2000; Marketing Associate, International Equity
New York, New York Department, Warburg Pincus Asset Management, Inc.
10017-3147 from January 1998 to January 2000; self-employed author
and consultant, from January 1996 to December 1997;
Officer of Other Credit Suisse Funds
Age: 38
Rocco A. Del Guercio Assistant Since 1999 Vice President and Administrative Officer of CSAM;
Credit Suisse Asset Treasurer (Strategic Associated with CSAM since June 1996; Assistant
Management, LLC Value), Treasurer, Bankers Trust -- Fund Administration from
466 Lexington Avenue 2001 March 1994 to June 1996; Mutual Fund Accounting
New York, New York (Large Cap Supervisor, Dreyfus Corporation from April 1987
10017-3147 Value and to March 1994; Officer of Other Credit Suisse Funds
Small Cap
Value)
Age: 39
Joseph Parascondola Assistant Since 2000 Assistant Vice President -- Fund Administration of CSAM
Credit Suisse Asset Treasurer (Strategic since April 2000; Assistant Vice President, Deutsche
Management, LLC Value), Asset Management from January 1999 to April 2000;
466 Lexington Avenue 2001 Assistant Vice President, Weiss, Peck & Greer LLC
New York, New York (Large Cap from November 1995 to December 1998; Officer of Other
10017-3147 Value and Credit Suisse Funds
Small Cap
Value)
Age: 39
Robert M. Rizza Assistant Since Assistant Vice President of CSAM since January 2001;
Credit Suisse Asset Treasurer 2002 Administrative Officer of CSAM from March 1998
Management, LLC (All Funds) to December 2000; Assistant Treasurer of Bankers
466 Lexington Avenue Trust Co. from April 1994 to March 1998; Officer of Other
New York, New York Credit Suisse Funds
10017-3147
Age: 37
The Statement of Additional Information includes additional information about
the Directors/Trustees and is available, without charge, upon request, by
calling 800-927-2874.
65
CREDIT SUISSE FUNDS
TAX INFORMATION LETTER (UNAUDITED)
October 31, 2002
IMPORTANT TAX INFORMATION FOR CORPORATE SHAREHOLDERS
Corporate shareholders should note for the year ended October 31, 2002, the
percentage of the Fund's investment income (i.e., net investment income plus
short-term capital gains) that qualified for the intercorporate dividends
received deduction are as follows:
FUND PERCENTAGE
---- ----------
Large Cap Value 83.41%
Strategic Value 100.00%
Small Cap Value 98.73%
IMPORTANT TAX INFORMATION FOR SHAREHOLDERS
During the year ended October 31, 2002, the Funds declared the following
dividends that were designated as 20% long-term capital gains dividends:
FUND AMOUNT
---- ------------
Large Cap Value $ 17,514,077
Strategic Value 7,119,425
Small Cap Value 22,514,838
66
P.O. BOX 55030, BOSTON, MA 02205-5030 [CREDIT SUISSE ASSET MANAGEMENT LOGO]
800-927-2874 - www.CreditSuisseFunds.com
CREDIT SUISSE ASSET MANAGEMENT SECURITIES, INC., DISTRIBUTOR. CSVAL-2-1002
PART C
OTHER INFORMATION
Item 15. Indemnification. Registrant and officers and directors of
Credit Suisse Asset Management, LLC ("CSAM"), Credit Suisse
Asset Management Securities, Inc. ("CSAMSI") and Registrant
are covered by insurance policies indemnifying them for
liability incurred in connection with the operation of
Registrant. Discussion of this coverage is incorporated by
reference to Item 25 of Part C of Post-Effective Amendment No.
30 to Registrant's Registration Statement on Form N-1A, filed
on February 14, 2002.
Item 16. Exhibits.
1. Declaration of Trust
(a) Amended and Restated Declaration of Trust is incorporated
by reference to Post-Effective Amendment No. 14 to the Registrant's Registration
Statement on Form N-1A filed on December 29, 1995 (Securities Act File No.
33-3706)
(b) Amendment to Amended and Restated Declaration of Trust is
incorporated by reference to Post-Effective Amendment No. 16 to the Registrant's
Registration Statement on Form N-1A filed on February 20, 1997 (Securities Act
File No. 33-3706).
(c) Amendment No. 2 to Amended and Restated Declaration of
Trust is incorporated by reference to Post-Effective Amendment No. 23 to the
Registrant's Registration Statement on Form N-1A filed on February 28, 2000
(Securities Act File No. 33-3706).
(d) Amendment No. 3 to Amended and Restated Declaration of
Trust is incorporated by reference to Post-Effective Amendment No. 27 to the
Registrant's Registration Statement on Form N-1A filed on January 24, 2001
(Securities Act File No. 33-3706).
(e) Amendment No. 4 to Amended and Restated Declaration of
Trust is incorporated by reference to Post-Effective Amendment No. 28 to the
Registrant's Registration Statement on Form N-1A filed on February 28, 2001
(Securities Act File No. 33-3706).
(f) Amendment to Declaration of Trust is incorporated by
reference to Post-Effective Amendment No. 29 to the Registrant's Registration
Statement on Form N-1A filed on December 31, 2001 (Securities Act File No.
33-3706).
2. By-Laws
(a) By-Laws of the Registrant is incorporated herein by
reference to Registrant's Registration Statement on Form N-1A ( Securities Act
File No. 33-3706) filed on March 4, 1986.
(b) Amendment to By-Laws is incorporated by reference to
Post-Effective Amendment No. 28 to the Registrant's Registration Statement on
Form N-1A filed on February 28, 2001 (Securities Act File No. 33-3706).
(c) Amended By-Laws dated February 5, 2001 is incorporated by
reference to Post-Effective Amendment No. 5 to the Registration Statement on
Form N-1A of Credit Suisse International Small Company Fund, Inc., filed on
February 22, 2001 (Securities Act File No. 333-49537).
(d) Amendment to By-Laws is incorporated by reference to
Post-Effective Amendment No. 29 to the Registrant's Registration Statement on
Form N-1A filed on December 31, 2001 (Securities Act File No. 33-3706).
3. Not applicable.
4. Form of the Plan of Reorganization (included as Exhibit A
to Registrant's Prospectus/Proxy Statement contained in Part A of this
Registration Statement).
5. Specimen Stock Certificate is incorporated herein by
reference to Post-Effective Amendment No. 7 to Registrant's Registration
Statement on Form N-1A filed on February 3, 1992 (Securities Act File No.
33-3706).
6. Investment Advisory Agreement with Credit Suisse Asset
Management, LLC dated March 23, 2001.
7. Not applicable.
8. Not applicable.
9. Custodian Agreements
(a) Custodian Agreement with State Street Bank and Trust
Company ("State Street") is incorporated by reference to the Registration
Statement on Form N-1A of Credit Suisse Trust, filed on November 22, 2000
(Securities Act File No. 33-58125).
(b) Amendment to Custodian Agreement with State Street, dated
April 26, 2001, is incorporated by reference to the Registration Statement on
Form N-1A of Credit Suisse Trust, filed on June 29, 2001 (Securities Act File
No. 33-58125).
(c) Amendment to Custodian Agreement with State Street, dated
May 16, 2001, is incorporated by reference to the Registration Statement on Form
N-1A of Credit Suisse Trust, filed on June 29, 2001.
(d) Amended Exhibit I to Custodian Agreement with State
Street, dated May 16, 2001, is incorporated by reference to the Registration
Statement on Form N-1A of Credit Suisse Trust, filed on June 29, 2001.
10. Rule 12b-1 and Rule 18f-3 Plans.
-2-
(a) Credit Suisse Large Cap Value Fund - Class A Plan is
incorporated herein by reference to Post-Effective Amendment No. 25 to
Registrant's Registration Statement on Form N-1A filed on August 1, 2000
(Securities Act File No. 33-3706).
(b) Credit Suisse Large Cap Value Fund - Class B Plan is
incorporated herein by reference to Post-Effective Amendment No. 15 to
Registrant's Registration Statement on Form N-1A filed on December 31, 1996
(Securities Act File No. 33-3706).
(c) Credit Suisse Large Cap Value Fund - Class C Plan
Incorporated by reference to Post-Effective Amendment No. 23 to the Registrant's
Registration Statement on Form N-1A filed on February 28, 2000 (Securities Act
File No. 33-3706).
(d) Credit Suisse Large Cap Value Fund - Common Class Plan is
incorporated herein by reference to Post-Effective Amendment No. 25 to
Registrant's Registration Statement on Form N-1A filed on August 1, 2000
(Securities Act File No. 33-3706)
(e) Credit Suisse Large Cap Value Fund - Advisor Class Plan is
incorporated herein by reference to Post-Effective Amendment No. 26 to
Registrant's Registration Statement on Form N-1A filed on December 29, 2000
(Securities Act File No. 33-3706).
(f) Amended Form of Rule 18f-3 Plan dated November 12, 2001 is
incorporated by reference to Post-Effective Amendment No. 25 to the Registration
Statement on Form N-1A of Credit Suisse Capital Appreciation Fund, filed on
November 8, 2001 (Securities Act File No. 33-12344).
11. Opinion and Consent of Willkie Farr & Gallagher, counsel
to the Registrant, with respect to validity of shares.
12. Form of Opinion of Willkie Farr & Gallagher with respect
to tax matters is incorporated by reference to the Registrant's Registration
Statement on Form N-14, filed on January 30, 2003 (Securities Act File No.
333-102820).
13. Material Contracts
(a) Form of Services Agreement is incorporated by reference to
Pre-Effective Amendment No. 1 to the Registration Statement on Form N-1A of
Credit Suisse Select Funds, filed on August 10, 1999 (Securities Act File No.
333-84885).
(b) Form of Interim and Restated Services Agreement is
incorporated by reference to Post-Effective Amendment No. 15 to the Registrant's
Registration Statement on Form N-1A of Credit Suisse Opportunity Funds, filed on
December 29, 2000 (Securities Act File No. 333-84885).
(c) Assignment Agreement by and between CSAMSI and Provident
Distributors is incorporated by reference to Post-Effective Amendment No. 17 to
the
- ------------------
* To be filed by amendment.
-3-
Registration Statement on Form N-1A of Credit Suisse Opportunity Funds, filed on
December 28, 2001 (Securities Act File No. 33-92982).
(d) Form of Co-Administration Agreement with CSAMSI is
incorporated by reference to Post-Effective Amendment No. 28 to the Registrant's
Registration Statement on Form N-1A filed on February 28, 2001 (Securities Act
File No. 33-3706).
(e) Form of Transfer Agency and Service Agreement with Boston
Financial Data Services, Inc. is incorporated by reference to Post-Effective
Amendment No. 5 to the Registration Statement on Form N-1A of Credit Suisse
International Small Company Fund, Inc., filed on February 22, 2001 (Securities
Act File No. 333-49537).
(f) Co-Administration Agreement with State Street.
14. Consent of PricewaterhouseCoopers LLP.
15. Not applicable.
16. Powers of Attorney is incorporated by reference to the
Registrant's Registration Statement on Form N-14, filed on January 30, 2003
(Securities Act File No. 333-102820).
17. Additional Exhibits
(a) Form of Proxy Card (included as an exhibit to Registrant's
Prospectus/Proxy Statement contained in Part A of this Registration Statement).
(b) Prospectuses and Statement of Additional Information of
the Registrant, dated February 28, 2003 are incorporated by reference to
Registrant's Registration Statement on Form N-1A, filed on February 24, 2003.
(c) Prospectuses and Statement of Additional
Information of the Acquired Fund, dated February 28, 2003 are incorporated by
reference to Registrant's Registration Statement on Form N-1A, filed on February
21, 2003.
(d) Annual Report of the Registrant, dated October
31, 2002 is incorporated herein by reference.
(e) Annual Report of the Acquired Fund, dated October
31, 2002 is incorporated herein by reference.
1. Undertakings
(1) The undersigned Registrant agrees that prior to
any public reoffering of the securities registered through the use of a
prospectus which is part of this Registration Statement by any person or party
who is deemed to be an underwriter within the meaning of
-4-
Rule 145(c) of the Securities Act [17 CFR 230.15c], the reoffering prospectus
will contain the information called for by the applicable registration form for
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
(2) The undersigned Registrant agrees that every
prospectus that is filed under paragraph (1) above will be filed as a part of an
amendment to the Registration Statement and will not be used until the amendment
is effective, and that, in determining any liability under the Securities Act of
1933, as amended, each post-effective amendment shall be deemed to be a new
registration statement for the securities offered therein, and the offering of
the securities at that time shall be deemed to be the initial bona fide offering
of them.
-5-
SIGNATURES
As required by the Securities Act of 1933, as amended, this
Registration Statement has been signed on behalf of the registrant, in the City
of New York and State of New York, on the 10th day of March, 2003.
Credit Suisse Capital Funds
By: /s/ Joseph D. Gallagher
Joseph D. Gallagher
Chairman (Chief Executive Officer)
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated:
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ Joseph D. Gallagher Chairman (Chief Executive March 10, 2003
- ---------------------- Officer)
Joseph D. Gallagher
/s/ Michael A. Pignataro Treasurer and Chief Financial March 10, 2003
- ------------------------- Officer
Michael A. Pignataro
/s/ Richard H. Francis * Trustee March 10, 2003
- ----------------------
Richard H. Francis
/s/ Jack W. Fritz* Trustee March 10, 2003
- -----------------
Jack W. Fritz
/s/ Jeffrey E. Garten* Trustee March 10, 2003
- ---------------------
Jeffrey E. Garten
/s/ Peter F. Krogh* Trustee March 10, 2003
- -------------------
Peter F. Krogh
/s/ James S. Pasman, Jr.* Trustee March 10, 2003
- ------------------------
James S. Pasman, Jr.
/s/ William W. Priest* Trustee March 10, 2003
- ---------------------
William W. Priest
/s/ Steven N. Rappaport* Trustee March 10, 2003
- -----------------------
Steven N. Rappaport
* By: /s/ Michael A. Pignataro
------------------------
Michael A. Pignataro as Attorney-in-Fact
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- ----------------------
(11) Opinion and Consent of Willkie Farr & Gallagher,
with respect to validity of shares.
(14) Consent of PricewaterhouseCoopers LLP.