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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
ON MAY 21, 2003
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REGISTRATION NO. 033-________________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
| | PRE-EFFECTIVE AMENDMENT NO. __ | | POST-EFFECTIVE AMENDMENT NO. __
CREDIT SUISSE FIXED INCOME FUND
(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 INVESTMENT GRADE BOND FUND, INC.
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, $.001 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).
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE ON JUNE 20, 2003 PURSUANT
TO RULE 488.
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 INVESTMENT GRADE BOND 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 Investment Grade Bond Fund, Inc.
(the "Acquired Fund"). The Board of Directors of the Acquired Fund has recently
reviewed and unanimously endorsed a proposal for the acquisition of the Acquired
Fund by Credit Suisse Fixed Income Fund (the "Acquiring Fund" and together with
the Acquired Fund, the "Funds"). 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.
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 Directors 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, the Acquired Fund and the Acquiring Fund have similar investment
objectives and policies. The Acquired Fund's investment objective is total
return and the Acquired Fund's investment objective is to generate high current
income and, secondarily, capital appreciation. The day-to-day operations of the
Funds are managed by the same portfolio managers. Both Funds invest primarily in
fixed-income securities. However, there are certain differences between the
investment policies of the Acquired Fund and the Acquiring Fund. THE MOST
SIGNIFICANT DIFFERENCES IN THE WAY THE FUNDS ARE MANAGED ARE THAT (I) THE
ACQUIRED FUND INVESTS AT LEAST 80% OF ITS NET ASSETS IN INVESTMENT GRADE
FIXED-INCOME SECURITIES AND MAY INVEST UP TO 20% OF ITS NET ASSETS IN
FIXED-INCOME SECURITIES RATED BELOW INVESTMENT GRADE, WHILE THE ACQUIRING FUND
INVESTS AT LEAST 80% OF ITS NET ASSETS IN FIXED-INCOME SECURITIES, OF WHICH AT
LEAST 65% MUST BE RATED INVESTMENT GRADE, AND MAY INVEST UP TO 35% OF ITS NET
ASSETS IN FIXED-INCOME SECURITIES RATED BELOW INVESTMENT GRADE AND (II) THE
ACQUIRING FUND MAY INVEST UP TO 35% OF ITS TOTAL ASSETS IN EMERGING MARKETS DEBT
SECURITIES, WHILE THE ACQUIRED FUND DOES NOT INVEST TO A SIGNIFICANT EXTENT IN
SUCH SECURITIES. There are also some additional differences in investment
policies and restrictions which are described in the attached Prospectus/Proxy
Statement.
CSAM is the investment adviser for each of the Funds, and 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 August 29, 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 Directors 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 the
Acquiring Fund 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 August 15, 2003 to consider the
Acquisition. We strongly invite your participation by asking you to review,
complete and return your proxy promptly.
Detailed information about the proposal is described in the attached
Prospectus/Proxy Statement. THE BOARD OF DIRECTORS OF THE ACQUIRED FUND
UNANIMOUSLY RECOMMENDS THAT YOU VOTE IN FAVOR OF THE PROPOSAL SET FORTH IN THE
ACQUIRED FUND'S NOTICE OF SPECIAL MEETING. On behalf of the Board of Directors
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 D.F.
King & Co., Inc., the Acquired Fund's proxy solicitor, Attn.: Dominick F.
Maurillo, at 1-212-269-2796. We also encourage you to vote by telephone or
through the Internet. Proxies may be voted by telephone by calling
1-(800)-714-3312 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 solicitation. 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, please
feel free to call D.F. King & Co., Inc. at 1-(800)-714-3314 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
Credit Suisse Investment Grade Bond Fund, Inc.
June 30, 2003
June 30, 2003
CREDIT SUISSE INVESTMENT GRADE BOND 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 proposal 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 Investment Grade Bond Fund, Inc. (the
"Acquired Fund") with Credit Suisse Fixed Income Fund (the "Acquiring
Fund"), with the Acquiring Fund surviving the acquisition.
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, the Acquired Fund and the Acquiring Fund have similar
investment objectives. Both Funds invest primarily in fixed-income
securities, and the Funds have the same portfolio managers. However,
there are certain differences between the investment philosophy and
policies of the Acquired Fund and the Acquiring Fund. THE MOST
SIGNIFICANT DIFFERENCES IN THE WAY THE FUNDS ARE MANAGED ARE THAT (I)
THE ACQUIRED FUND INVESTS AT LEAST 80% OF ITS NET ASSETS IN INVESTMENT
GRADE FIXED-INCOME SECURITIES AND MAY INVEST UP TO 20% OF ITS NET
ASSETS IN FIXED-INCOME SECURITIES RATED BELOW INVESTMENT GRADE, WHILE
THE ACQUIRING FUND INVESTS AT LEAST 80% OF ITS NET ASSETS IN
FIXED-INCOME SECURITIES, OF WHICH AT LEAST 65% MUST BE RATED INVESTMENT
GRADE, AND MAY INVEST UP TO 35% OF ITS NET ASSETS IN FIXED-INCOME
SECURITIES RATED BELOW INVESTMENT GRADE AND (II) THE ACQUIRING FUND MAY
INVEST UP TO 35% OF ITS TOTAL ASSETS IN EMERGING MARKETS DEBT
SECURITIES, WHILE THE ACQUIRED FUND DOES NOT INVEST TO A SIGNIFICANT
EXTENT IN SUCH SECURITIES.
The Acquiring Fund has the same Board members, 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 August
29, 2003.
Q: WHAT WILL HAPPEN TO FUND EXPENSES?
A: The Acquisition will result in lower gross and higher net annual
operating expenses for former Acquired Fund shareholders. For the
fiscal year ended October 31, 2002, the Acquired Fund had total gross
annual expenses for its Common Class, Class A, Class B and Class C
shares of 1.30%, 1.55%, 2.30% and 2.30%, respectively, of average daily
net assets and total net annual expenses
for its Common Class, Class A, Class B and Class C shares of 0.60%,
0.85%, 1.60% and 1.60%, respectively, of average daily net assets. The
pro forma gross and net expense ratio of the Acquiring Fund shares,
assuming completion of the Acquisition, is estimated to be, for the
Class A, Class B and Class C shares, approximately 1.17%, 1.92% and
1.92%, respectively, of average daily net assets and 0.95%, 1.70% and
1.70%, respectively, of average daily net assets. (The Common Class
shareholders of the Acquired Fund are proposed to receive load-waived
Class A shares of the Acquiring Fund if the Acquisition is approved by
shareholders.) The increase in total net expenses experienced by the
former Acquired Fund shareholders is due to the impact of voluntary fee
waivers and expense reimbursements on the Acquired Fund by CSAM. Fee
waivers and expense reimbursements are voluntary and may be
discontinued at any time.
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 (i.e., the Acquiring
Fund). The Acquisition will eliminate possible confusion in the
marketplace associated with there being two funds investing in
investment grade fixed-income securities managed by the same investment
adviser. The proposed Acquisition may result in efficiencies due to a
larger asset base.
Shareholders of the Acquired Fund may not immediately recognize
efficiencies due to a larger (combined) asset base since the net fees
(after voluntary waivers and expense reimbursements) payable by each
class of Acquired Fund shareholders are lower than the expected net
fees of the class of Acquiring Fund shares they will receive in the
Acquisition. Shareholders of the Acquired Fund may benefit from the
greater flexibility of the Acquiring Fund to invest in below investment
grade securities. 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 generally tax-free event.
Shareholders of the Acquired Fund generally will not recognize capital
gain or loss on the conversion from the Acquired Fund to the Acquiring
Fund. The holding period and tax basis of Acquiring Fund shares
received by a shareholder will be the same as the holding period and
tax basis of the shareholder's Acquired Fund shares. Shareholders will
recognize gain or loss if they sell (or exchange) 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: 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 PROPOSAL.
Q: WHOM DO I CALL FOR MORE INFORMATION?
A: Please call D.F. King & Co., Inc., the Acquired Fund's proxy solicitor,
at 1-(800)-714-3314.
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, D.F. King & Co., Inc. at
1-(800)-714-3312;
o By faxing the enclosed proxy card to D.F. King & Co., Inc.,
Attn.: Dominick F. Maurillo, at 1-212-269-2796;
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: No, CSAM or its affiliates will bear the costs associated with
approving the Plan.
CREDIT SUISSE INVESTMENT GRADE BOND FUND, INC.
466 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held on August 15, 2003
Notice is hereby given that a Special Meeting of Shareholders (the
"Special Meeting") of Credit Suisse Investment Grade Bond 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 August 15, 2003, commencing at
2:00 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 Fixed Income Fund (the "Acquiring Fund") 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; and
2. 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 THE PROPOSAL.
The Board of Directors of the Acquired Fund has fixed the close of
business on June 12, 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;
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 D.F. King & Co., Inc.,
the Acquired Fund's proxy solicitor, at 1-(800)-714-3312;
o By faxing the enclosed proxy card to D.F. King & Co., Inc.,
Attn.: Dominick F. Maurillo at 1-212-269-2796;
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 the proposal, please feel free to
call D.F. King & Co., Inc. at 1-(800)-714-3314.
SHAREHOLDERS WHO DO NOT EXPECT TO ATTEND THE SPECIAL MEETING ARE URGED
TO (A) SIGN AND RETURN WITHOUT DELAY THE ENCLOSED PROXY CARD IN THE ENCLOSED
ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES, (B) VOTE BY
TELEPHONE WITH A TOLL-FREE CALL TO 1-800-714-3312, (C) VOTE THROUGH THE INTERNET
USING THE ADDRESS LOCATED ON THE PROXY CARD OR (D) FAX THE ENCLOSED PROXY CARD
TO D.F. KING & CO., INC. AT 1-212-269-2796 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
CREDIT SUISSE INVESTMENT GRADE BOND FUND, INC.
JUNE 30, 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 Valid Signatures
Corporate Accounts
(1) ABC Corp. ABC Corp.
(2) ABC Corp. John Doe, Treasurer
(3) ABC Corp. John Doe
c/o John Doe, Treasurer
(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
SUBJECT TO COMPLETION, DATED MAY 21, 2003
PRELIMINARY PROSPECTUS/PROXY STATEMENT
JUNE 30, 2003
PROXY STATEMENT
CREDIT SUISSE INVESTMENT GRADE BOND FUND, INC.
466 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017
800-927-2874
PROSPECTUS
CREDIT SUISSE FIXED INCOME FUND
466 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017
800-927-2874
This Prospectus/Proxy Statement is being furnished to shareholders of
Credit Suisse Investment Grade Bond 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 its Board of
Directors for use at a Special Meeting of Shareholders to be held on August 15,
2003 at 2:00 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"); and
2. 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
Fixed Income Fund (the "Acquiring Fund" and, together with the Acquired Fund,
the "Funds"), 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 disclosed herein, the Acquired Fund and the Acquiring Fund have
similar investment objectives and policies. The investment objective of the
Acquired Fund is total return, while the investment objective of the Acquiring
Fund is to generate high current income consistent with reasonable risk and,
secondarily, capital appreciation. Each Fund invests primarily in fixed-income
securities, and each Fund has the same portfolio managers. THE MOST SIGNIFICANT
DIFFERENCES IN THE WAY THE FUNDS ARE MANAGED ARE THAT (I) THE ACQUIRED FUND
INVESTS AT LEAST 80% OF ITS NET ASSETS IN INVESTMENT GRADE FIXED-INCOME
SECURITIES AND MAY INVEST UP TO 20% OF ITS NET ASSETS IN FIXED-INCOME SECURITIES
RATED BELOW INVESTMENT GRADE, WHILE THE ACQUIRING FUND INVESTS AT LEAST 80% OF
ITS NET ASSETS IN FIXED-INCOME SECURITIES, OF WHICH AT LEAST 65% MUST BE RATED
INVESTMENT GRADE, AND MAY INVEST UP TO 35% OF ITS NET ASSETS IN FIXED-INCOME
SECURITIES RATED BELOW INVESTMENT GRADE AND (II) THE ACQUIRING FUND MAY INVEST
UP TO 35% OF ITS TOTAL ASSETS IN EMERGING MARKETS DEBT SECURITIES, WHILE THE
ACQUIRED FUND DOES NOT INVEST TO A SIGNIFICANT EXTENT IN SUCH SECURITIES.
Credit Suisse Asset Management, LLC ("CSAM") is the investment adviser
for each of the Funds. 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, each Class A, Class B and
Class C shareholder of the Acquired Fund will receive that number of shares of
the same class 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. Each Common Class shareholder of the
Acquired Fund will receive that number of Class A shares of the Acquiring Fund
having an aggregate net asset value equal to the aggregate net asset value of
such shareholder's Common Class shares of the Acquired Fund immediately prior to
the Acquisition. The expenses of the Acquisition and the costs associated with
this solicitation will be borne by CSAM or its affiliates. No sales or other
charges will be imposed on the shares 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 to each 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 June 30, 2003. A
Statement of Additional Information dated June 30, 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.
The following documents, which have been filed with the SEC, are
incorporated herein in their entirety by reference.
o The current Common Class and Class A, B and C Prospectuses of
the Acquiring Fund, each dated February 28, 2003, as
supplemented as of the date hereof. The Acquiring Fund's Class
A, B and C Prospectus accompanies this Prospectus/Proxy
Statement.
o The current Common Class and Class A, B and C Prospectuses of
the Acquired Fund, each dated February 28, 2003, 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.
TABLE OF CONTENTS
PROPOSAL 1 - APPROVAL OF THE PLAN..............................................1
Summary.....................................................................1
Risk Factors................................................................4
Reasons for the Acquisition.................................................4
FEE TABLES.....................................................................6
Examples....................................................................8
Information About the Acquisition..............................................8
Total Returns..............................................................12
Share Ownership of the Funds...............................................14
Comparison of Investment Objectives and Policies..............................14
Determination of Net Asset Value of Shares of the Acquiring Fund...........19
Management of Each Fund....................................................19
Interest of CSAM in the Acquisition........................................19
Information on Shareholders' Rights........................................20
Conclusion.................................................................22
Required Vote..............................................................22
ADDITIONAL INFORMATION........................................................22
VOTING INFORMATION............................................................22
OTHER BUSINESS................................................................24
FINANCIAL STATEMENTS AND EXPERTS..............................................24
ADDITIONAL MATERIALS..........................................................24
LEGAL MATTERS.................................................................24
EXHIBIT A: AGREEMENT AND PLAN OF REORGANIZATION..........................A-1
-i-
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 COMMON CLASS AND CLASS A, B AND C PROSPECTUSES OF
THE ACQUIRED FUND, THE STATEMENT OF ADDITIONAL INFORMATION OF THE ACQUIRED FUND,
THE CLASS A, B AND C 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 Common Class, Class A, Class B and Class C
shareholders in liquidation of the Acquired Fund. As a result of the
Acquisition, each shareholder of Class A, Class B and Class C shares of the
Acquired Fund will become the owner of that number of full and fractional shares
of the same class of the Acquiring Fund having an aggregate net asset value
("NAV") equal to the aggregate NAV of such shareholder's shares of the Acquired
Fund and each shareholder of Common Class shares of the Acquired Fund will
become the owner of that number of full and fractional Class A shares of the
Acquired Fund having an aggregate NAV equal to the aggregate NAV of such
shareholder's shares of the Acquired Fund, in each case as of the close of
business on the date that the Acquired Fund's assets and liabilities are
exchanged for shares of the Acquiring Fund. See "Information About the
Acquisition -- Agreement and Plan of Reorganization."
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 Acquiring Fund 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 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 as a result of
the exchange of Acquired Fund shares for Acquiring Fund shares, and generally
the Acquired Fund will not recognize gain or loss for such purposes as a result
of its transfer of assets and liabilities to the Acquiring Fund in exchange for
Acquired Fund shares. The holding period and aggregate tax basis of the
Acquiring Fund shares received by an Acquired Fund shareholder generally 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 generally will be the same as in the hands of the Acquired Fund
immediately prior to the Acquisition.
DIFFERENCES BETWEEN THE INVESTMENT OBJECTIVES AND POLICIES OF THE
ACQUIRED FUND AND THE ACQUIRING FUND. As noted and further described in this
Prospectus/Proxy Statement, there are certain differences between the investment
philosophy and policies of the Funds. THE MOST SIGNIFICANT DIFFERENCES IN THE
WAY THE FUNDS ARE MANAGED ARE THAT (I) THE ACQUIRED FUND INVESTS AT LEAST 80% OF
ITS NET ASSETS IN INVESTMENT GRADE FIXED-INCOME SECURITIES AND MAY INVEST UP TO
20% OF ITS NET ASSETS IN FIXED-INCOME SECURITIES RATED BELOW INVESTMENT GRADE,
WHILE THE ACQUIRING FUND INVESTS AT LEAST 80% OF ITS NET ASSETS IN FIXED-INCOME
SECURITIES, OF WHICH AT LEAST 65% MUST BE RATED INVESTMENT GRADE, AND MAY INVEST
UP TO 35% OF ITS NET ASSETS IN FIXED-INCOME SECURITIES RATED BELOW INVESTMENT
GRADE AND (II) THE ACQUIRING FUND MAY INVEST UP TO 35% OF ITS TOTAL ASSETS IN
EMERGING MARKETS DEBT SECURITIES, WHILE THE ACQUIRED FUND DOES NOT INVEST TO A
SIGNIFICANT EXTENT IN SUCH SECURITIES.
The investment objective of the Acquired Fund is total return, while
the investment objective of the Acquiring Fund is to generate high current
income consistent with reasonable risk and, secondarily, capital appreciation.
Each Fund invests primarily in fixed-income securities, and each Fund has the
same portfolio managers. However, while the Acquired Fund invests at least 80%
of its net assets, plus any borrowings for investment purposes, in fixed-income
securities rated investment grade (average credit rating of A), the Acquiring
Fund invests at least 80% of its net assets, plus the amount of any borrowings
for investment purposes, in fixed-income securities, of which at least 65% must
be rated investment grade. The Acquired Fund may invest up to 20% of its net
assets in fixed-income securities rated below investment grade, while the
Acquiring Fund may invest up to 35% of its net assets in fixed-income securities
rated below investment grade. Additionally, the Acquiring Fund may invest up to
35% of its total assets in emerging markets debt securities, while the Acquired
Fund does not invest to a significant extent in such securities. The fundamental
and non-fundamental investment limitations of the Acquiring Fund are identical
to those of the Acquired Fund. See "Comparison of Investment Objectives and
Policies."
PURCHASE AND REDEMPTION PROCEDURES. Except as otherwise indicated in
this section, the Funds have similar policies with respect to purchases and
redemptions of shares. Common Class shares of the Acquired Fund and the
Acquiring Fund are generally closed to new investors, with certain exceptions.
To the extent Common Class shares can be purchased, they may be purchased
directly from the applicable Fund or through a variety of financial services
firms. Class A shares of the Acquiring Fund and the Acquired Fund may be
purchased from the Fund directly, through the Acquiring Fund's or Acquired
Fund's distributor or through securities dealers. Class A shares of the
Acquiring Fund or the Acquired Fund may be purchased at NAV per share plus 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 COMMON CLASS AND CLASS A SHAREHOLDERS OF THE ACQUIRED FUND WILL NOT
BE SUBJECT TO ANY SALES CHARGE AND COMMON CLASS SHAREHOLDERS OF THE ACQUIRED
FUND 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.
-2-
SALES CHARGES. Common Class shares of the Acquired Fund and the
Acquiring Fund are sold at NAV per share without an initial sales charge or a
contingent deferred sales charge ("CDSC") and Common Class shares of the
Acquired Fund are not subject to a 12b-1 fee. Class A shares of the Acquired
Fund and the Acquiring Fund are sold at an offering price equal to NAV plus an
initial sales charge. The sales charges for Class A shares begins at 4.75% 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 COMMON CLASS AND CLASS A ACQUIRED
FUND SHAREHOLDERS WILL BE "LOAD-WAIVED," MEANING THAT THEY ARE NOT SUBJECT TO
ANY SALES CHARGE. FORMER COMMON CLASS ACQUIRED FUND SHAREHOLDERS WILL CONTINUE
TO BE ABLE TO PURCHASE ADDITIONAL CLASS A SHARES OF THE ACQUIRING FUND ON A
LOAD-WAIVED BASIS. 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. The Class A, Class B and Class C Shares of
the Acquired Fund and the Acquired Fund are subject to a 12b-1 fee of 0.25%,
1.00% and 1.00%, of the average daily net assets of the Class A, B and C Shares,
respectively. If the Acquisition is approved by shareholders, Common Class
shareholders of the Acquired Fund will be subject to a 12b-1 fee of 0.25% as
Class A Shareholders of the Acquiring Fund. The Class B and Class C shares of
the Acquiring Fund and the Acquired Fund 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 year, but remain Class C
shares. See "Fee Table" below.
EXCHANGE PRIVILEGES. The exchange privileges available to shareholders
of the Acquiring Fund are identical to those available to shareholders 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 of Common Class shares may be effected
by mail or telephone; exchanges of Class A shares may be effected through an
investor's financial representative. FORMER COMMON CLASS SHAREHOLDERS OF THE
ACQUIRED FUNDS WILL CONTINUE TO BE ABLE TO EXCHANGE THEIR SHARES BY MAIL OR BY
TELEPHONE. 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 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 dividends daily and distributes them monthly. Net realized capital
gains, if any, of each Fund will be 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
-3-
Acquired Fund's holdings and net redemptions of the Acquired Fund's shares. If
paid as of April 30, 2003, the amount of this dividend would have been $.03 per
Common Class share of the Acquired Fund, $.02 per Class A share of the Acquired
Fund, $.02 per Class B share of the Acquired Fund and $.02 per Class C share of
the Acquired Fund. As of April 30, 2003, there were no capital gains to
distribute. 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 factors affecting both the Acquiring Fund and the
Acquired Fund are (i) credit risk, (ii) foreign securities risk, (iii)
interest-rate risk and (iv) market risk. The Acquiring Fund has greater exposure
to the risks associated with investing in securities rated below investment
grade (commonly known as junk bonds) because it can invest up to 35% of its net
assets in fixed income securities rated below investment grade, while the
Acquired Fund can invest up to 20% of its net assets in such securities. In
addition, the Acquiring Fund has greater exposure to the risks associated with
investing in non-U.S. securities than the Acquiring Fund as the Acquiring Fund
may invest without limit in U.S. dollar-denominated, investment-grade foreign
securities, up to 35% of its total assets in non-U.S. securities and up to 35%
of its total assets in emerging markets debt securities, while the Acquired Fund
does not invest in foreign securities to a significant extent. 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 the 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 focused on
investments in fixed-income securities with a potentially
lower gross expense ratio;
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. the Acquisition will eliminate confusion in the marketplace
associated with there being two funds investing in investment
grade fixed-income securities managed by the same investment
adviser;
4. a larger asset base could provide portfolio management
benefits, such as greater diversification to mitigate the
risks of investing in a limited number of equity securities
and the ability to command more attention from brokers and
underwriters of portfolio securities;
5. the terms and conditions of the Acquisition;
-4-
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, co-administrators, transfer
agent, custodian, distributor, independent accountant, counsel
and portfolio managers for the Acquiring Fund are the same as
those of the Acquired Fund;
8. the Federal tax consequences of the Acquisition to the
Acquired Fund, the Acquiring Fund and the shareholders of each
Fund, 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;
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
and/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 dilution of the interests of the Acquired Fund's
shareholders. In making these determinations, the Board of Directors 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.
-5-
FEE TABLES
Following are two tables showing the expected fees and expenses for the
fiscal year ending October 31, 2003 of Common Class, Class A, Class B and Class
C shares of the Acquired Fund, holders of which will receive the corresponding
class of shares of the Acquiring Fund upon closing of the Acquisition except for
Common Class shareholders who will receive load-waived Class A shares of the
Acquiring Fund, the expected fees and expenses for the fiscal year ending
October 31, 2003 of Class A, Class B and Class C shares of the Acquiring Fund
and the expected fees and expenses for the fiscal year ending October 31, 2003
of Class A, Class B and Class C shares of the Acquiring Fund after giving effect
to the Acquisition. The tables do not reflect charges that institutions and
financial intermediaries may impose on their customers.
BEFORE FEE WAIVERS AND/OR REIMBURSEMENTS
ACQUIRED FUND ACQUIRING FUND
------------------------------------------- ------------------------------
Common
Class Class A Class B Class C Class A Class B Class C
--------------------------------------------------------------------------
Shareholder Transaction
Expenses:
Maximum sales charge None 4.75% None None 4.75%* None None
imposed on purchases
(as a percentage
of offering price)
Maximum deferred sales None None 4% 1% None 4% 1%
charge (as a percentage
of original purchase
price, or redemption
proceeds, as applicable)
Annual Fund Operating
Expenses
(expenses that are
deducted from
fund assets)
Management fees 0.50% 0.50% 0.50% 0.50% 0.50% 0.50% 0.50%
12b-1 fees None 0.25% 1.00% 1.00% 0.25% 1.00% 1.00%
Other expenses 0.80% 0.80% 0.80% 0.80% 0.42% 0.42% 0.42%
TOTAL ANNUAL FUND
OPERATING EXPENSES** 1.30% 1.55% 2.30% 2.30% 1.17% 1.92% 1.92%
CREDIT SUISSE FIXED INCOME FUND
PRO FORMA
AFTER ACQUISITION
Class A Class B Class C
---------------------------------------------
Shareholder Transaction Expenses: 4.75% None None
Maximum sales charge imposed
on purchases (as a percentage
of offering price)
Maximum deferred sales charge (as a
percentage of original purchase price,
or redemption proceeds, as applicable) None 4% 1%
-6-
Annual Fund Operating Expenses
(expenses that are deducted from
fund assets)
Management fees 0.50% 0.50% 0.50%
12b-1 fees 0.25% 1.00% 1.00%
Other expenses 0.38% 0.38% 0.38%
TOTAL ANNUAL FUND
OPERATING EXPENSES** 1.13% 1.88% 1.88%
* Although the Class A shares impose a maximum sales charge of 4.75%,
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 Common Class shareholders.
** Actual fees and expenses for the fiscal year ended October 31, 2002 are
shown below. Fee waivers and expense reimbursements or credits reduced
expenses for each of the Funds during their most recent fiscal years
but may be discontinued at any time.
AFTER FEE WAIVERS AND REIMBURSEMENTS
--------------------------------------------------------------------------
ACQUIRED FUND ACQUIRING FUND
------------------------------------------ ------------------------------
Common
Class Class A Class B Class C Class A Class B Class C
--------------------------------------------------------------------------
Annual Fund Operating
Expenses
- -------------------------
(expenses that are
deducted from
fund assets)
Management fees 0.00% 0.00% 0.00% 0.00% 0.28% 0.28% 0.28%
12b-1 fees None 0.25% 1.00% 1.00% 0.25% 1.00% 1.00%
Other expenses 0.60% 0.60% 0.60% 0.60% 0.42% 0.42% 0.42%
NET ANNUAL FUND
OPERATING EXPENSES 0.60% 0.85% 1.60% 1.60% 0.95% 1.70% 1.70%
CREDIT SUISSE FIXED INCOME FUND
PRO FORMA
Class A Class B Class C
------------------ ------------------ -----------------
Annual Fund Operating Expenses
(expenses that are deducted from
fund assets)
Management fees 0.32% 0.32% 0.32%
12b-1 fees 0.25% 1.00% 1.00%
Other expenses 0.38% 0.38% 0.38%
NET ANNUAL FUND
OPERATING EXPENSES 0.95% 1.70% 1.70%
-7-
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 first table presented above (i.e., before fee waivers and
expense reimbursements and credits) 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 and then redeem all of your shares at the end of those
periods. The examples 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:
ONE YEAR THREE YEARS FIVE YEARS 10 YEARS
ACQUIRED FUND
Common Class $132 $412 $713 $1,568
Class A (with or without $625 $941 $1,280 $2,233
redemption)
Class B (redemption at end of $633 $918 $1,230 $2,448
period)
Class B (no redemption) $233 $718 $1,230 $2,448
Class C (redemption at end of $333 $718 $1,230 $2,636
period)
Class C (no redemption) $233 $718 $1,230 $2,636
ACQUIRING FUND
Class A (with or without $589 $829 $1,088 $1,828
redemption)
Class B (redemption at end of $595 $803 $1,037 $2,048
period)
Class B (no redemption) $195 $603 $1,037 $2,048
Class C (redemption at end of $295 $603 $1,037 $2,243
period)
Class C (no redemption) $195 $603 $1,037 $2,243
COMBINED FUND PRO FORMA
Class A (with or without $585 $817 $1,068 $1,784
redemption)
Class B (redemption at end of $591 $791 $1,016 $2,005
period)
Class B (no redemption) $191 $591 $1,016 $2,005
Class C (redemption at end of $291 $591 $1,016 $2,201
period)
Class C (no redemption) $191 $591 $1,016 $2,201
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
-8-
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 August 29, 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 of 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 assets attributable to such class, subtracting the
relevant class' pro rata share of the actual and accrued liabilities of the 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 Prospectus
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 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
either the Acquired Fund or the Acquiring Fund by written notice to the other;
(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, if a quorum is present.
Shareholders of the Acquired Fund are entitled to one vote for each full share
and fractional votes for fractional shares. 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.
-9-
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.
Class A, B and C shares of the Acquiring Fund will be issued to holders
of Class A, B and C shares, respectively, of the Acquired Fund. Class A shares
of the Acquiring Fund will be issued to holders of Common Class shares of the
Acquired Fund. Shares of the Acquiring Fund may be purchased directly from the
Acquiring Fund, or through a variety of financial services firms. 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 Class A, B and C
shares after consummation of the Acquisition.
FEDERAL INCOME TAX CONSEQUENCES. The exchange of the Acquired Fund
assets for shares 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'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 the Acquiring
Fund shares 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
each 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 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 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;
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;
5. the aggregate tax basis of the Acquiring Fund shares received by
each 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 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
-10-
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.
CAPITALIZATION. The following table shows the capitalization of the
Acquired Fund and the Acquiring Fund as of _________ __, 2003 and the
capitalization of the Acquiring Fund on a pro forma basis as of the Closing
Date, after giving effect to the Acquisition.(1)
Pro Forma
Acquired Fund Acquiring Fund Pro Forma Combined
(actual) (actual) Adjustments (actual)
- ---------------------------------------------------------------------------------------------------------------
NET ASSETS - FUND LEVEL
Common Class $35,030,854 $194,688,461 $(35,030,854) $194,688,161
Class A(2) 255,720 3,829,239 35,030,854 39,115,813
Class B(2) 1,143,336 5,148,500 6,291,836
Class C(2) 221,514 1,032,744 1,254,258
Advisor Class(2) ___ 25,649,954 ___ 25,649,954
NET ASSET VALUE
Common Class $10.02 $9.42 ___ $9.42
Class A(2) 10.02 9.42 ___ 9.42
Class B(2) 10.02 9.42 ___ 9.42
Class C(2) 10.02 9.42 ___ 9.42
Advisor Class(2) 9.42 ___ 9.42
SHARES OUTSTANDING
Common Class $3,495,648 $20,672,405 $(3,495,648) $20,672,405
Class A(2) 25,522 406,392 3,720,508 4,152,422
Class B(2) 114,088 546,683 7,152 667,923
Class C(2) 22,098 109,664 1,386 133,148
Advisor Class(2) ___ 2,723,136 ___ 2,723,136
- -----------------
(1) Assumes the Acquisition of the Acquired Fund had been consummated on
__________ __, 2003 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.
-11-
(2) The Acquired Fund commenced offering Common Class shares on August 22,
1988 and Class A, Class B and Class C shares on December 24, 2001. The
Acquiring Fund commenced offering Common Class shares on August 17,
1987, Advisor Class Shares on July 3, 1996 and Class A, Class B and
Class C shares on July 31, 2001.
[(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 NAV 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, 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 4.75%
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:
- --------------------------------- -------------- ---------------- ---------------- ---------------- -------------
INCEPTION
1 YEAR 5 YEARS 10 YEARS LIFE OF CLASS DATE
- --------------------------------- -------------- ---------------- ---------------- ---------------- -------------
ACQUIRED FUND
- --------------------------------- -------------- ---------------- ---------------- ---------------- -------------
COMMON CLASS -0.55% 5.47% 5.83% 7.17% 8/22/88
Return Before Taxes
- --------------------------------- -------------- ---------------- ---------------- ---------------- -------------
Return After Taxes on -2.27% 3.27% 3.13% 4.59% 8/22/88
Distributions (no load)
- --------------------------------- -------------- ---------------- ---------------- ---------------- -------------
Return After Taxes on -0.35% 3.28% 3.30% 4.61% 8/22/88
Distributions and Sale of Fund
Shares (no load)
- --------------------------------- -------------- ---------------- ---------------- ---------------- -------------
CLASS A (NO LOAD) N/A N/A N/A 1.87% 12/24/01
Return Before Taxes
- --------------------------------- -------------- ---------------- ---------------- ---------------- -------------
CLASS B (NO LOAD) N/A N/A N/A 1.14% 12/24/01
Return Before Taxes
- --------------------------------- -------------- ---------------- ---------------- ---------------- -------------
CLASS C (NO LOAD) N/A N/A N/A 1.18% 12/24/01
Return Before Taxes
- --------------------------------- -------------- ---------------- ---------------- ---------------- -------------
CLASS A (WITH LOAD) N/A N/A N/A -3.77% 12/24/01
Return Before Taxes
- --------------------------------- -------------- ---------------- ---------------- ---------------- -------------
CLASS B (WITH LOAD) N/A N/A N/A -3.45% 12/24/01
Return Before Taxes
- --------------------------------- -------------- ---------------- ---------------- ---------------- -------------
CLASS C (WITH LOAD) N/A N/A N/A 0.04% 12/24/01
Return Before Taxes
- --------------------------------- -------------- ---------------- ---------------- ---------------- -------------
Return After Taxes on N/A N/A N/A 0.25% 12/24/01
Distributions2 (no load)
- --------------------------------- -------------- ---------------- ---------------- ---------------- -------------
Return After Taxes on N/A N/A N/A -5.32% 12/24/01
Distributions2 (with load)
- --------------------------------- -------------- ---------------- ---------------- ---------------- -------------
Return After Taxes on N/A N/A N/A 1.14% 12/24/01
Distributions and Sale of Fund
Shares2 (no load)
- --------------------------------- -------------- ---------------- ---------------- ---------------- -------------
-12-
- --------------------------------- -------------- ---------------- ---------------- ---------------- -------------
INCEPTION
1 YEAR 5 YEARS 10 YEARS LIFE OF CLASS DATE
- --------------------------------- -------------- ---------------- ---------------- ---------------- -------------
Return After Taxes on N/A N/A N/A -2.33% 12/24/01
Distributions and Sale of Fund
Shares2 (with load)
- --------------------------------- -------------- ---------------- ---------------- ---------------- -------------
ACQUIRING FUND
- --------------------------------- -------------- ---------------- ---------------- ---------------- -------------
COMMON CLASS -4.07% 4.14% 6.02% 6.90% 8/17/87
- --------------------------------- -------------- ---------------- ---------------- ---------------- -------------
ADVISOR CLASS -4.31% 3.88% N/A 5.18% 7/3/96
- --------------------------------- -------------- ---------------- ---------------- ---------------- -------------
Return After Taxes on -5.93% 1.67% 3.42% 4.27% 8/17/87
Distributions1
- --------------------------------- -------------- ---------------- ---------------- ---------------- -------------
Return After Taxes on -2.49% 2.08% 3.54% 4.35% 8/17/87
Distributions and Sale of Fund
Shares1
- --------------------------------- -------------- ---------------- ---------------- ---------------- -------------
CLASS A (NO LOAD) -4.27% N/A N/A -1.78% 7/31/01
Return Before Taxes
- --------------------------------- -------------- ---------------- ---------------- ---------------- -------------
CLASS B (NO LOAD) -5.02% N/A N/A -2.53% 7/31/01
Return Before Taxes
- --------------------------------- -------------- ---------------- ---------------- ---------------- -------------
CLASS C (NO LOAD) -5.03% N/A N/A -2.59% 7/31/01
Return Before Taxes
- --------------------------------- -------------- ---------------- ---------------- ---------------- -------------
CLASS A (WITH LOAD) -8.86% N/A N/A -5.51% 7/31/01
Return Before Taxes
- --------------------------------- -------------- ---------------- ---------------- ---------------- -------------
CLASS B (WITH LOAD) -8.67% N/A N/A -4.75% 7/31/01
Return Before Taxes
- --------------------------------- -------------- ---------------- ---------------- ---------------- -------------
CLASS C (WITH LOAD) -5.94% N/A N/A -2.59% 7/31/01
Return Before Taxes
- --------------------------------- -------------- ---------------- ---------------- ---------------- -------------
Return After Taxes on -6.05% N/A N/A -3.67% 7/31/01
Distributions2 (no load)
- --------------------------------- -------------- ---------------- ---------------- ---------------- -------------
Return After Taxes on -10.55% N/A N/A -7.32%
Distributions2 (with load) 7/31/01
- --------------------------------- -------------- ---------------- ---------------- ---------------- -------------
Return After Taxes on -2.61% N/A N/A -2.31% 7/31/01
Distributions and Sale of Fund
Shares2 (no load)
- --------------------------------- -------------- ---------------- ---------------- ---------------- -------------
Return After Taxes on -5.43% N/A N/A -5.25% 7/31/01
Distributions and Sale of Fund
Shares2 (with load)
- --------------------------------- -------------- ---------------- ---------------- ---------------- -------------
- -----------
n/a = Not disclosed as the classes were not in existence during all of the
period indicated.
(1) After-tax returns are shown for Common Class shares.
(2) After-tax returns are shown for Class A shares.
If CSAM had not temporarily waived fees and reimbursed expenses, the
cumulative total return of each Fund for the periods shown would have been
lower.
-13-
SHARE OWNERSHIP OF THE FUNDS
As of May __, 2003, the officers or Directors/Trustees of the
Acquired Fund and the Acquiring 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 May __, 2003, 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 SHARES
NAME AND ADDRESS SHARES HELD (CLASS)
- -------------------------------------------------------------------------------------------------------------------
ACQUIRING FUND
--------------
NAME AND ADDRESS PERCENT OWNED AS OF RECORD DATE
- -------------------------------------------------------------------------------------------------------------------
ACQUIRED FUND
-------------
* 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 both of the Funds is
similar. The investment objective of the Acquired Fund is total return and the
investment objective of the Acquiring Fund is to generate high current income
consistent with reasonable risk and, secondarily capital appreciation. There can
be no assurance that either Fund will achieve its investment objective.
PRIMARY INVESTMENTS. To pursue its investment objective, the Acquiring
Fund invests principally in fixed income securities. Under normal market
conditions, the Acquiring Fund will invest at least 80% of its net assets, plus
any borrowings for investment purposes, in fixed-income securities such as
corporate bonds; debentures and notes; convertible debt securities; preferred
stocks; government securities; municipal securities; mortgage-backed securities;
and repurchase agreements involving portfolio securities. Under normal market
conditions, at least 65% of the Acquiring Fund's fixed-income securities will be
investment grade. The Acquiring Fund will maintain a weighted-average maturity
of 10 years or less. The Acquiring Fund may invest without limit in U.S.
dollar-denominated, investment grade foreign securities; up to 35% of assets in
non-dollar-denominated foreign securities; up to 35% of assets in fixed-income
securities rated below investment grade (junk bonds); and up to 35% in emerging
markets debt securities. To a limited extent, the Acquiring Fund may also engage
in other investment practices.
-14-
To pursue its investment objective, the Acquired Fund invests primarily
in fixed income securities. Under normal market conditions, the Acquired Fund
will invest at least 80% of its net assets, plus any borrowings for investment
purposes, in investment grade fixed-income securities. In choosing investments
for the Acquired Fund, the portfolio managers seek to maintain an average
dollar-weighted credit rating of the Acquired Fund of A or better, although the
overall rating may vary; use sector rotation and security selection as primary
sources of performance; and generally invest in securities represented in the
Lehman Brothers Aggregate Bond Index (the "Index), or securities that have
similar characteristics to those of the Index.
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 identical investment limitations with
respect to: borrowing, 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.
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 Common Class, Advisor Class and Class A, B and C Prospectus, which
accompany this Prospectus/Proxy Statement, and for the Acquired Fund in its
Common Class and Class A, B and C Prospectus.
-15-
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
FUND ACQUIRED FUND
--------- -------------
BORROWING. The borrowing of money from banks to meet redemptions or 33 1/3% 33 1/3%
for other temporary or emergency purposes. Speculative exposure risk.
CURRENCY TRANSACTIONS. Instruments, such as options, futures, /x/ / /
forwards or swaps, intended to manage fund exposure to currency risk
or to enhance total return. Options, futures or forwards involve the
right or obligation to buy or sell a given amount of foreign currency
at a specified price and future date. Swaps involve the right or
obligation to receive or make payments based on two different currency
rates.(1) Correlation, credit, currency, hedged exposure, liquidity,
political, speculative exposure, valuation risks.(2)
EMERGING MARKETS. Countries generally considered to be relatively 35% / /
less developed or industrialized. Emerging markets often face
economic problems that could subject a fund to increased volatility or
substantial declines in value. Deficiencies in regulatory oversight,
market infrastructure, shareholder protections and company laws could
expose a fund to risks beyond those generally encountered in developed
countries. Access, currency, information, liquidity, market,
operational, political, valuation risks.
FOREIGN SECURITIES. Securities of foreign issuers. May include /x/ / /
depository receipts. Currency, information, liquidity, market,
operational, political, valuation risks.
FUTURES AND OPTIONS ON FUTURES. Exchange-traded contracts that enable / / 20%
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
-16-
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 /x/ /x/
four 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 /x/ /x/
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.
MUNICIPAL SECURITIES. Debt obligations issued by or on behalf of /x/ /x/
states, territories and possessions of the U.S. and the District of
Columbia and their political subdivisions, agencies and
instrumentalities. Municipal securities may be affected by
uncertainties regarding their tax status, legislative changes or
rights of municipal-securities holders. Credit, interest-rate,
market, regulatory risks.
NON-INVESTMENT-GRADE DEBT SECURITIES. Debt securities rated below the 35% 20%
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) 20% / /
a particular security, currency or an index of securities at a fixed
price within a certain time period. A fund may purchase or sell
(write) both put and call options for hedging or speculative
purposes.(1) Correlation, credit, hedged exposure, liquidity, market,
speculative exposure risks.
REAL-ESTATE INVESTMENT TRUSTS (REITS). Pooled investment vehicles / / /x/
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 15% 15%
restrictions on trading, or those not actively traded. May include
private placements. Liquidity, market, valuation risks.
SECURITIES LENDING. Lending portfolio securities to financial 33 1/3% 33 1/3%
institutions; a fund receives cash, U.S. government securities or bank
letters of credit as collateral. Credit, liquidity, market risks.
-17-
START-UP AND OTHER SMALL COMPANIES. Companies with small relative /x/ /x/
market capitalizations, including those with continuous operations of
less than three years. Information, liquidity, market, valuation risks.
STRUCTURED INSTRUMENTS. Swaps, structured securities and other / / /x/
instruments that allow a fund to gain access to the performance of a
benchmark asset (such as an index or selected stocks) that may be more
attractive or accessible than the fund's direct investment. Credit,
currency, information, interest-rate, liquidity, market, political,
speculative exposure, 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 10% 10%
buy 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 20% /x/
of securities for delivery at a future date; market value may change
before delivery. Liquidity, market, speculative exposure risks.
ZERO-COUPON BONDS. Debt securities that pay no cash income until /x/ /x/
maturity and are issued at a discount from maturity value. At
maturity, the entire return comes from the difference between purchase
price and maturity value. Interest-rate, market risks.
- ---------------
(1) Each Fund is not obligated to pursue any hedging strategy. In addition,
hedging practices may not be available, may be too costly to be used
effectively or may be unable to be used for other reasons.
(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.
-18-
DETERMINATION OF NET ASSET VALUE OF SHARES OF THE ACQUIRING FUND
The NAV of each class of shares of the Acquiring Fund is determined at
the close of regular trading on the NYSE (usually 4 p.m. Eastern Time) each day
the NYSE is open for business. It is calculated by dividing a class's total
assets less its liabilities, by the total 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, the
fair value of the securities and other assets is determined in good faith by or
under the direction of the Board of Trustees. 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 fair 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 same persons at CSAM are responsible for the
day-to-day management of each of the Acquiring Fund and Acquired Fund and are
described in the Prospectuses for the Funds.
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. CSAMSI is the distributor of both 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
Fund's 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 .50% of its average
daily net assets and the Acquiring Fund pays CSAM a management fee of .50% of
its average daily net assets. 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.
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
[and to reduce the amount of fees and expenses required to be waived to maintain
total fees and expenses of the Acquiring Fund at agreed upon levels]. CSAM may
also be
-19-
deemed to have an interest in the Plan and the Acquisition because, as of
_____________ __, 2003, 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 __________
___, 2003, CSAM had discretionary power to dispose of securities over accounts
which held in the aggregate __________ shares or ___% 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 Acquiring Fund are each open-end
management investment companies registered under the 1940 Act. The Acquiring
Fund is a Massachusetts business trust organized on January 20, 1987 and is
governed by its Agreement and Declaration of Trust, By-Laws and Board of
Trustees. The Acquired Fund is a Maryland corporation that was incorporated on
June 21, 1988 and is governed by its Articles of Incorporation, By-Laws and
Board of Directors. Each Fund is also governed by applicable state and federal
law. The Acquiring Fund has an authorized capital of an unlimited number of
shares of beneficial interest with a par value of $.001 per share, of which an
unlimited number are designated Advisor Class, an unlimited number are
designated Common Class, an unlimited number are designated Class A, an
unlimited number are designated Class B and an unlimited number are designated
Class C. The Acquired Fund has an authorized capital of six billion full and
fractional shares of stock, with a par value of $.001 per share, of which two
billion are designated Common Class, Class A, two billion are designated Class B
and Class C. 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.
MULTI-CLASS STRUCTURE. Each Fund is authorized to offer multiple
classes of shares. The Acquired Fund currently offers Common Class, Class A,
Class B and Class C shares. The Acquiring Fund currently offers Common Class,
Class A, Class B, Class C and Advisor Class shares. Each Fund's Common Class
shares are closed to new investors, with limited exceptions.
DIRECTORS/TRUSTEES. The term of office of each Director/Trustee 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. Any Director/Trustee
of the Acquired Fund or the Acquiring Fund may be removed by a majority of the
votes entitled to be cast for the election of directors. Vacancies on the Boards
of either Fund may be filled by the Directors/Trustees remaining in office,
provided that no vacancy or vacancies may be filled by action of the remaining
Directors/Trustees if, after the filling of the vacancy or vacancies, fewer than
two-thirds of the Directors/Trustees 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 Directors/Trustees whenever (a) fewer than
a majority of the Directors/Trustees then in office were elected by shareholders
of the relevant Fund or (b) a vacancy exists that may not be filled by the
remaining Directors/Trustees 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
Directors/Trustees unless and until such time as less than a majority of the
Directors/Trustees of the relevant Fund holding office have been elected by
shareholders or a vacancy exists that may not be filled by the remaining
Directors/Trustees. At such
-20-
times, the Directors/Trustees then in office will call a shareholders' meeting
for the election of Directors/Trustees.
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
shareholders 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 shareholders
entitled to vote. The Acquiring Fund's By-Laws provide that a special meeting of
shareholders will be called by written request of shareholders holding at least
10 percent of the shares then outstanding for the purpose of voting upon removal
of any Trustee. The Acquiring Fund's By-Laws further provide that any proposal
that is otherwise properly brought before an annual or special meeting by a
shareholder (through timely notice) will not be eligible for consideration by
the shareholders at such annual or special meeting if such proposal is
substantially the same as a matter properly brought before such annual or
special meeting by or at the direction of the Board of Trustees. Payment by such
shareholders of the applicable Fund of the reasonably estimated cost of
preparing and mailing a notice of the meeting is required in advance of the
meeting. 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.
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 Directors/Trustees, 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. Each Fund is permitted to redeem shares held
by a shareholder if the Board of Directors/Trustees determines that doing so is
in the best interest of the Fund. Redemption proceeds may be paid in cash or in
kind. The exercise of the power granted to the Directors/Trustees under the
Articles of Incorporation/Declaration of Trust to involuntarily redeem shares
would be subject to the Director's/Trustee's fiduciary obligation to the
shareholders and any applicable provisions under the 1940 Act and the rules
thereunder.
LIABILITY OF DIRECTORS OR TRUSTEES. The constituent documents of each
Fund provide that its Directors/Trustees and officers shall not be liable in
such capacity for monetary damages for breach of fiduciary duty as a
Director/Trustee 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 Director/Trustee or officer. The
constituent instruments of each Fund provide that the relevant Fund shall
indemnify each 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 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 Director/Trustee 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
-21-
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 Directors of the Acquired Fund
and by the Board of Trustees of the Acquiring Fund on May 20, 2003. 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 would
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.
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.
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
2:00 p.m. on August 15, 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.
-22-
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 June 30, 2003. Only shareholders of record as of the close of business on
June 12, 2003 (the "Record Date") will be entitled to notice of, and to vote at,
the Special Meeting or any adjournment(s) thereof. As of ________ ___, 2003, the
Acquired Fund had the following shares outstanding and entitled to vote:
___________ Common Class shares, _________ Class A shares, ________ Class B
shares and ________ 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 not be counted in favor
of, but will have no other effect on the vote for the Proposal which requires
the requisite approval of a majority of the shares of the Acquired Fund, voting
at the Special Meeting. If the enclosed proxy is properly executed and returned
in time to be voted at the Special Meeting, the proxies named therein will vote
the shares represented by the proxy in accordance with the instructions marked
thereon. 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 the Proposal 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 D.F. King & Co., Inc. to solicit proxies. 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 $_________, including the costs of the proxy
solicitation and the preparation of enclosures to the Prospectus/Proxy
Statement, reimbursement of expenses of forwarding solicitation material to
owners of shares of the Acquired Fund and expenses incurred in connection with
the preparation of this Prospectus/Proxy Statement, will be borne by CSAM or its
affiliates (excluding extraordinary expenses not normally associated with
transactions of this type). 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 the Proposal at the
Special Meeting is not present or sufficient votes to approve any proposal are
not received prior to 2:00 p.m. on August 15, 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. 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 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 ________ ___, 2003, 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 1-Information
About the Acquisition -- Share Ownership of the Acquired Fund."
-23-
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 effect 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 of the
Acquiring Fund and the Acquired Fund, each 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 firm 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 June 30, 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.
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 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.
-24-
Exhibit A
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as
of this 20th day of May, 2003, between and among Credit Suisse Fixed Income
Fund, a Massachusetts business trust (the "Acquiring Fund"), and Credit Suisse
Investment Grade Bond 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 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 of the Acquiring Fund ("Acquiring Fund
Shares"), and the assumption by the Acquiring Fund of the liabilities of the
Acquired Fund, and the distribution, on or after the Closing Date hereinafter
referred to, of Acquiring Fund Shares to the shareholders of the Acquired Fund
("Acquired Fund Shareholders") in liquidation of the Acquired Fund as provided
herein, all upon the terms and conditions hereinafter set forth in this
Agreement.
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 Acquiring Fund Shareholders would not be diluted
as a result of this transaction.
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 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
Shareholders of record determined as of the close of business on
the Closing Date 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 Shareholders
representing the respective pro rata number of the Acquiring Fund
Shares due such shareholders. All issued and outstanding shares of
the Acquired Fund ("Acquired Fund Shares") 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. Acquiring Fund Shares will be
issued in the manner described in the Acquiring Fund's current
prospectuses and statement of additional information.
-2-
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 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 and Class A Acquiring Fund
Shares to be issued (including fractional shares, if any) in
exchange for Class A, Class B, Class C and Common Class,
respectively, Acquired Fund Shares 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 and Common Class shares,
determined using the same valuation procedures referred to in
paragraph 2.1, by the per share net asset value of the Class A,
Class B, Class C and Class A, respectively, Acquiring Fund Shares
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 August 29, 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, the custodian for the Acquiring Fund, 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
-3-
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.
3.4. The Acquired Fund shall deliver at the Closing a list of the names
and addresses of the Acquired Fund Shareholders and the number and
class of outstanding Acquired Fund 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 the Acquired Fund's 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;
-4-
(f) The Statements of Assets and Liabilities of the Acquired Fund
as of October 31, 2002, including the Schedule of Investments
and the related Statement 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 in the period then
ended, have been audited by PricewaterhouseCoopers LLP (or one
of its legacy firms), 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 October 31, 2002 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 the per
share net asset value of the Acquired Fund Shares 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 Acquired 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
issued and outstanding Acquired Fund Shares have been offered
and sold in compliance in all material respects with
applicable federal and state securities laws;
(j) All issued and outstanding Acquired Fund Shares of each class
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 Acquired Fund Shares 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 Acquired Fund Shares, nor is there outstanding any
security convertible into any Acquired Fund 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 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
-5-
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 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 statement 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 (collectively, 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 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 Massachusetts business trust duly
organized and validly existing under the laws of The
Commonwealth of Massachusetts;
-6-
(b) The Acquiring Fund 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 statement 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 the Acquiring Fund's 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 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 the
per share net asset value of the Acquiring Fund Shares 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;
-7-
(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 Acquiring Fund's 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
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
Acquiring Fund's 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 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
-8-
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 Acquired Fund
Shareholders 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 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 the 1933 Act, the 1934 Act and the
1940 Act in connection with the meeting of the Acquired Fund
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 respective 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
-9-
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.
5.9. CSAM agrees that the Acquiring Fund 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, President, 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 Acquiring Fund 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 Acquiring Fund and, assuming due authorization,
execution and delivery of the Agreement by the other parties thereto, is a valid
and binding obligation of the Acquiring Fund 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
-10-
be issued to the Acquired Fund 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 Acquiring Fund's 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 hereby will not, conflict with the Acquiring
Fund's 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 Acquiring 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 Acquiring Fund 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 Acquiring
Fund 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 Acquiring 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; 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.
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.
-11-
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, President, 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
corporate 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 enforceable
against 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
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
-12-
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) 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
-13-
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.
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 Acquired Fund Shares in accordance with the provisions
of the Acquired Fund's 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 and no stop orders suspending the effectiveness
thereof shall have been issued and, to the best knowledge of the
parties hereto,
-14-
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 Acquired Fund Shareholders in exchange for 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 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 Shareholders in exchange for their Acquired Fund
Shares; (d) no gain or loss will be recognized by Acquired
Fund Shareholders upon the exchange of their Acquired Fund
Shares for the Acquiring Fund Shares; (e) the aggregate tax
basis of the Acquiring Fund Shares received by each of the
Acquired Fund 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 Acquired 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.
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
entitled 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
-15-
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) either the Acquired Fund or the Acquiring
Fund by written notice to the other; (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
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 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 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.
-16-
13. Notices
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.
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 Acquiring Fund,
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, officers or shareholders of the Acquired
Fund or the Acquiring Fund are personally liable hereunder. All
persons dealing with the Acquiring Fund should look solely to the
property of the Acquiring Fund for the enforcement of any claims
against the Acquiring Fund.
-17-
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 INVESTMENT GRADE BOND FUND, INC.
By: /s/ Hal Liebes
-----------------------------------------------------------------------------
Name: Hal Liebes
Title: Vice President and Secretary
Attestation By: /s/ Gregory Bressler
-----------------------------------------------------------------
Name: Gregory Bressler
Title: Assistant Secretary
CREDIT SUISSE FIXED INCOME FUND
By: /s/ Hal Liebes
-----------------------------------------------------------------------------
Name: Hal Liebes
Title: Vice President and Secretary
Attestation By: /s/ Gregory Bressler
-----------------------------------------------------------------
Name: Gregory 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 Bressler
-----------------------------------------------------------------
Name: Gregory Bressler
Title: Vice President
Exhibit B
FORM OF PROXY CARD
CREDIT SUISSE INVESTMENT GRADE BOND FUND, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON AUGUST 15, 2003 AT 2:00 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 Investment Grade Bond 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, August 15, 2003, at 2:00
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 June 30, 2003. THIS
PROXY WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATION IS MADE, THIS PROXY WILL
BE VOTED "FOR" THE PROPOSAL.
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 Funds. Joint owners
should each sign personally. Directors 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 INVESTMENT GRADE BOND FUND, INC. VOTE FOR THE PROPOSAL
- ------------------------------------------------- ---
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
(CLICK ON THE PROXY BUTTON) Credit Suisse
Investment Grade Bond
Fund, Inc. (the
"Acquired Fund"), would
transfer all of its
assets in exchange for
shares of Credit Suisse
Fixed Income Fund (the
"Acquiring Fund"), and
the assumption by the
Acquiring Fund of the
Acquired Fund's
liabilities, (ii) such
shares 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.
Please be sure to sign and date this Proxy. Date Mark box at right if an address change
- ------------------------------------------- --------- or comment has been noted on the reverse
side of this card.
- ----------------------------- -----------------------
Shareholder sign here Co-owner sign here RECORD DATE SHARES:
STATEMENT OF ADDITIONAL INFORMATION
466 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017
(212) 875-2874
RELATING TO THE ACQUISITION BY CREDIT SUISSE FIXED INCOME FUND
(THE "ACQUIRING FUND")
OF THE ASSETS OF CREDIT SUISSE INVESTMENT GRADE BOND FUND, INC.
(THE "ACQUIRED FUND").
DATED: JUNE 30, 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 June 30, 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
Credit Suisse Credit Suisse
Investment Grade Bond Fixed Income Adjustments Pro Forma
---------------------------- ----------------------------- ----------- ---------------------------
Cost Value Cost Value Cost Value
---- ----- ---- ----- ---- -----
ASSETS
Investments at value 47,840,325 $47,754,070(1) 308,625,246 $302,640,279(1) 356,465,57(1) $350,394,349
Cash 28 82 - 565 28 647
Collateral receivable for
securities loaned - 3,463,095 12,141,101 15,604,196
Receivable for investment
sold unsettled - 683,566 - 3,354,520 - 4,038,086
Receivable for Fund shares
sold - 23,503 226,647 250,150
Dividends and interest
receivable - 351,343 - 2,637,982 - 2,989,325
Receivable from advisor - 39,685 - - 31,660(a) - 71,345
Variation margin receivable - 105,920 105,920
Prepaid expenses - 31,660 - 34,906 (31,660)(a) - 34,906
Other assets - 2,461 - 2,160 - 4,621
---------- ----------- -----------
Total Assets 52,349,465 321,144,080 373,493,545
---------- ----------- -----------
LIABILITIES
Payable for investments
purchased unsettled 12,142,682 78,109,785 90,252,467
Advisory fee payable - - 35,614 - 35,614
Administration fee payable 4,283 45,522 49,805
Distribution fee payable 1,148 11,462 12,610
Directors'/Trustees' fee
payable 2,281 2,281 4,562
Payable on return of
securities loaned - 3,463,095 - 12,141,101 - 15,604,196
Payable for Fund shares
redeemed 43,448 - 278,626 - 322,074
Dividend payable 10,544 63,653 74,197
Accrued expenses payable 30,560 107,138 137,698
------ ------- -------
Total Liabilities 15,698,041 90,795,182 106,493,223
========== ========== ===========
NET ASSETS 36,651,424 230,348,898 - 267,000,322
---------- ----------- -----------
COMMON CLASS
Net Assets 35,030,854 194,688,461 (35,030,854)(b) 194,688,461
Shares outstanding 3,495,648 20,672,405 (3,495,648)(b) 20,672,405
Net assets value, offering price
and redemption price per share 10.02 9.42 9.42
ADVISOR CLASS
Net Assets - 25,649,954 - 25,649,954
Shares outstanding - 2,723,136 - 2,723,136
Net assets value, offering price
and redemption price per share - 9.42 - 9.42
CLASS A SHARES
Net Assets 255,720 3,829,239 35,030,854 (b) 39,115,813
Shares outstanding 25,522 406,392 3,720,508 (b) 4,152,422
Net assets value and redemption
price per share 10.02 9.42 9.42
Maximum offering price per
share (net asset value
plus maximum sales charge) 10.52 9.89 9.99
CLASS B SHARES
Net Assets 1,143,336 5,148,500 - 6,291,836
Shares outstanding 114,088 546,683 7,152(c) 667,923
Net assets value and offering
price
price per share 10.02 9.42 - 9.42
CLASS C SHARES
Net Assets 221,514 1,032,744 - 1,254,258
Shares outstanding 22,098 109,664 1,386 (d) 133,148
Net assets value and
offering price per share 10.02 9.42 - 9.42
(1) Includes $3,366,741, $11,819,607 and $15,186,348 of securities on loan
respectively.
See notes to pro forma financial statements.
Credit Suisse Investment Grade Bond Fund
(Acquired Fund)
Pro Forma Schedule of Investments
As of October 31, 2002 (unaudited)
Maturity
Par Security Name Ratings** Date Rate Market Value
--- ------------- --------- ---- ---- ------------
CORPORATE BONDS (29.8%)
$105 ALLTEL Corp., Global Senior Notes (A, A2) 7/1/12 7 $118,470
110 ALLTEL Corp., Global Senior Notes (A, A2) 7/1/32 7.875 126,146
55 AOL Time Warner, Inc., Global Bonds (BBB+, Baa1) 4/15/31 7.625 50,000
475 AT&T Corp., Global Notes (BBB+, Baa2) 3/15/09 6 454,330
30 AT&T Corp., Global Notes (BBB+, Baa2) 3/15/29 6.5 25,890
65 AT&T Wireless Services, Inc., Global Senior Notes (BBB, Baa2) 5/1/07 7.5 57,588
360 AT&T Wireless Services, Inc., Global Senior Notes (BBB, Baa2) 3/1/31 8.75 288,766
100 AT&T Wireless Services, Inc., Senior Notes (BBB, Baa2) 3/1/11 7.875 87,151
140 Baxter International, Inc., Notes (A, A3) 5/1/07 5.25 146,393
140 BB&T Corp., Global Subordinated Note (A-, A2) 8/1/11 6.5 156,865
50 Boeing Capital Corp., Global Bonds (A+, A3) 1/15/13 5.8 48,740
30 Burlington Resources Finance Co., Yankee Company Guaranteed (BBB+, Baa1) 3/1/07 5.7 32,306
110 Carnival Corp., Yankee Notes (A, A2) 4/15/08 6.15 116,115
140 Cincinnati Gas & Electric Co., Notes (BBB, Baa1) 9/15/12 5.7 139,133
55 Citizens Communications Co., Global Senior Notes (BBB, Baa2) 8/15/31 9 52,958
330 Citizens Communications Co., Notes (BBB, Baa2) 5/15/11 9.25 348,768
20 Clear Channel Communications, Inc., Debentures (BBB-, Baa3) 10/15/27 7.25 19,493
120 Clear Channel Communications, Inc., Global Senior Notes (BBB-, Baa3) 11/1/06 6 123,622
385 Comcast Cable Communications, Inc., Senior Notes (BBB, Baa3) 1/30/11 6.75 368,070
35 ConAgra Foods, Inc., Notes (BBB+, Baa1) 9/15/11 6.75 39,566
5 ConAgra Foods, Inc., Notes (BBB+, Baa1) 9/15/30 8.25 6,347
135 Conoco Funding Co., Global Company Guaranteed (A-, A3) 10/15/31 7.25 153,851
20 Conoco, Inc., Senior Global Notes (A-, A3) 4/15/09 6.35 22,120
245 Countrywide Home Loans, Inc., Global Company Guaranteed (A, A3) 2/1/07 5.5 255,011
15 Countrywide Home Loans, Inc., Global Company Guaranteed (A, A3) 5/15/07 5.625 15,718
350 Cox Communications, Inc., Notes (BBB, Baa2) 11/1/10 7.75 375,014
50 DaimlerChrysler NA Holding Corp., Global Company Guaranteed (BBB+, A3) 6/15/10 8 56,274
180 Deutsche Telekom International Finance BV (BBB+, Baa1) 6/15/05 8.25 194,124
85 Devon Energy Corp., Debentures (BBB, Baa2) 4/15/32 7.95 98,881
475 Dominion Resources, Inc. (BBB+, Baa1) 6/15/10 8.125 532,152
100 El Paso Corp., Rule 144A, Private Placement, Notes++ (BBB, Baa3) 6/15/12 7.875 67,117
105 Energy East Corp., Notes (BBB, Baa2) 6/15/12 6.75 112,382
160 Enterprise Products Partners LP, Company Guaranteed (BBB, Baa2) 2/1/11 7.5 158,669
210 EOP Operating LP, Notes (BBB+, Baa1) 6/15/04 6.5 219,272
140 Ford Motor Credit Co., Global Bonds (BBB+, A3) 2/1/11 7.375 125,304
370 Ford Motor Credit Co., Global Notes (BBB, A3) 2/1/06 6.875 341,361
115 Ford Motor Credit Co., Global Notes (BBB, A3) 10/25/11 7.25 100,643
170 General Motors Acceptance Corp., Global Notes (BBB, A2) 1/15/06 6.75 168,525
150 General Motors Acceptance Corp., Global Notes (NR, A2) 8/28/07 6.125 144,248
190 General Motors Corp., Global Notes (BBB, A3) 1/15/11 7.2 178,952
220 HCA, Inc., Notes (BBB-, Ba1) 7/1/07 7 233,602
240 Household Finance Corp., Global Notes (A-, A2) 1/30/07 5.75 213,662
130 Lockheed Martin Corp., Bonds (BBB, Baa2) 12/1/29 8.5 168,048
105 Morgan Stanley Dean Witter, Global Unsubordinated (A+, Aa3) 4/15/06 6.1 112,828
220 News America Holdings, Inc., Company Guaranteed (BBB-, Baa3) 2/1/13 9.25 249,072
150 News America Holdings, Inc., Debentures (BBB-, Baa3) 8/10/18 8.25 146,613
90 Norsk Hydro A/S, Yankee Debentures (A, A2) 6/15/23 7.75 105,807
80 Oncor Electric Delivery Co., Rule 144A, Private Placement, Senior Secured
Notes ++ (BBB, A3) 5/1/12 6.375 81,538
70 Park Place Entertainment Corp., Senior Notes (BBB-, Ba1) 11/15/06 8.5 72,876
335 Petronas Capital Ltd., Rule 144A, Private Placement, Company
Guaranteed ++ (BBB+, Baa1) 5/22/22 7.875 347,827
260 PG&E National Energy Group, Global Senior Notes # (B-, B3) 5/16/11 10.375 55,900
385 Progress Energy, Inc., Senior Notes (BBB, Baa1) 3/1/06 6.75 395,830
75 PSEG Power LLC, Rule 144A, Private Placement, Notes ++ (BBB, Baa1) 6/1/12 6.95 65,380
5 Safeway, Inc., Senior Debentures (BBB, Baa2) 2/1/31 7.25 5,485
155 Safeway, Inc., Senior Notes (BBB, Baa2) 9/15/04 7.25 167,592
205 Sprint Capital Corp. (BBB-, Baa3) 1/30/11 7.625 165,422
200 Sprint Capital Corp., Senior, Global Company Guaranteed (BBB-, Baa3) 11/15/28 6.875 132,929
65 Tennessee Gas Pipeline Co., Debentures (BBB+, Baa2) 4/1/17 7.5 58,647
45 Tennessee Gas Pipeline Co., Debentures (BBB+, Baa2) 10/15/28 7 38,375
180 The Boeing Co., Debentures (A+, A2) 8/15/42 7.5 56,960
260 Tyson Foods, Inc., Global Notes (BBB, Baa3) 10/1/04 6.625 274,872
130 Verizon Global Funding Corp., Global Notes (NR, A1) 6/15/12 6.875 138,970
100 Verizon Global Funding Corp., Global Notes (A+, A1) 9/1/12 7.375 110,300
245 Verizon Global Funding Corp., Global Notes (A+, A1) 12/1/30 7.75 263,460
65 Verizon Global Funding Corp., Global Notes (A+, A1) 6/15/32 7.75 69,977
225 Verizon New York, Inc. (A+, A1) 4/1/12 6.875 241,116
245 Verizon Wireless, Inc., Rule 144A, Private Placement Notes++ (A+, A2) 12/15/06 5.375 242,163
100 Viacom, Inc., Global Company Guaranteed (A-, A3) 8/15/12 5.625 104,342
45 Walt Disney Co., Global Notes (BBB+, Baa1) 3/1/12 6.375 48,255
160 Washington Mutual, Inc., Global Senior Notes (BBB+, A3) 1/15/07 5.625 169,732
20 Waste Management, Inc., Notes (BBB, Ba1) 4/30/04 8 20,652
165 Waste Management, Inc., Rule 144A, Private Placements, Bonds++ (BBB, Ba1) 5/15/32 7.75 161,718
80 Waste Management, Inc., Senior Notes (BBB, Ba1) 8/1/10 7.375 84,141
ASSET BACKED SECURITIES (5.7%)
Credit Suisse Investment Grade Bond Fund
(Acquired Fund)
Pro Forma Schedule of Investments
As of October 31, 2002 (unaudited)
Maturity
Par Security Name Ratings** Date Rate Market Value
--- ------------- --------- ---- ---- ------------
$535 Chase Credit Card Master Trust, Series 2000-2 Class A (AAA, Aaa) 7/15/05 1.903 $535,019
185 CNH Equipment Trust, Series 2002-A, Class A3 (AAA, Aaa) 7/17/06 2.053 185,648
105 DaimlerChrylser Master Owner Trust, Series 2002-A, Class A (AAA, Aaa) 5/15/07 1.863 105,043
225 Discover Card Master Trust I, Series 1999-5, Class A (AAA, Aaa) 12/18/06 1.983 225,440
370 First USA Credit Card Master Trust, Series 2001-4 Class A (AAA, Aaa) 1/12/09 1.94 370,625
95 Fleet Credit Master Trust II, Series 2002-A, Class A (AAA, Aaa) 10/15/07 1.853 95,040
130 Ford Credit Floorplan Master Owner Trust, Series 2001-1, Class A (AAA, Aaa) 7/17/06 1.893 130,197
85 LB-UBS Commerical Mortgage Trust, Series 2002-C2, Class A4 (AAA, Aaa) 6/15/31 5.594 89,776
120 MBNA Master Credit Card Trust, Series 1996-M, Class A (AAA, Aaa) 4/15/09 1.88 120,172
160 MMCA Automobile Trust, Series 2002-2, Class A3 (AAA, Aaa) 7/17/06 3.67 164,002
50 Morgan Stanley Mortgage Trust, Series 40, Class 8 (AAA, Aaa) 7/20/21 7 49,936
MORTGAGE-BACKED SECURITIES (54.6%)
630 Bear Stearns Commercial Mortgage Securities, Inc., Series 2002-TOP6,
Class A2 (AAA, Aaa) 10/15/36 6.46 703,121
125 Chase Funding Mortgage Loan, Series 2002-2, Class 1A4 (AAA, Aaa) 8/25/28 4.877 128,331
690 Fannie Mae (AAA, Aaa) 12/10/07 6.56 693,288
2,700 Fannie Mae, Global Notes (AAA, Aaa) 3/15/05 3.875 2,813,940
80 Fannie Mae, Global Notes (AAA, Aaa) 4/15/07 5.25 87,227
910 Fannie Mae, Global Notes (AAA, Aaa) 3/15/12 6.125 1,022,967
336 Fannie Mae, Pool #498569 (AAA, Aaa) 5/1/29 7.5 356,062
256 Fannie Mae, Pool #499251 (AAA, Aaa) 7/1/29 7 267,494
430 Fannie Mae, Pool #501931 (AAA, Aaa) 2/1/30 7 449,854
12 Fannie Mae, Pool #503857 (AAA, Aaa) 7/1/29 7.5 12,641
155 Fannie Mae, Pool #515160 (AAA, Aaa) 9/1/29 7.5 163,594
9 Fannie Mae, Pool #517826 (AAA, Aaa) 2/1/30 7 9,196
11 Fannie Mae, Pool #521146 (AAA, Aaa) 12/1/29 7 11,075
19 Fannie Mae, Pool #524164 (AAA, Aaa) 11/1/29 7 19,856
99 Fannie Mae, Pool #524946 (AAA, Aaa) 3/1/30 8 105,635
54 Fannie Mae, Pool #530172 (AAA, Aaa) 3/1/30 7.5 56,733
86 Fannie Mae, Pool #532011 (AAA, Aaa) 3/1/30 7.5 90,728
155 Fannie Mae, Pool #533091 (AAA, Aaa) 3/1/30 7.5 164,321
20 Fannie Mae, Pool #533421 (AAA, Aaa) 3/1/30 8 21,710
206 Fannie Mae, Pool #533440 (AAA, Aaa) 1/1/30 8 220,295
57 Fannie Mae, Pool #533714 (AAA, Aaa) 3/1/30 8 60,457
796 Fannie Mae, Pool #650077 (AAA, Aaa) 7/1/32 7.5 842,673
430 Fannie Mae, Pool #662830 (AAA, Aaa) 10/1/32 7.5 454,985
1,470 Fannie Mae TBA (AAA, Aaa) 11/1/17 6.5 1,543,956
3,660 Fannie Mae TBA (AAA, Aaa) 11/1/26 8 3,913,931
1,850 Fannie Mae TBA (AAA, Aaa) 11/1/28 7 1,933,250
1,520 Fannie Mae TBA (AAA, Aaa) 11/1/29 6 1,562,742
2,075 Fannie Mae TBA (AAA, Aaa) 11/1/29 6.5 2,150,219
150 J.P. Morgan Chase Commercial Mortgage Securities, Series 2002-CIB4,
Class A3 (AAA, Aaa) 5/12/34 6.162 163,507
FOREIGN BONDS (0.9%)
110 British Telecommunications PLC, Global Notes (Great Britian) (A-, Baa1) 12/15/05 7.625 122,848
250 TELUS Corp., Yankee Notes (Canada) (BBB, Ba1) 6/1/11 8 193,750
UNITED STATES TREASURY OBLIGATIONS (12.1%)
1,795 United States Treasury Bonds (AAA, Aaa) 2/15/31 5.375 1,895,199
414 United States Treasury Notes (AAA, Aaa) 1/15/08 3.625 448,589
419 United States Treasury Notes (AAA, Aaa) 1/15/10 4.25 472,945
231 United States Treasury Notes (AAA, Aaa) 7/15/12 3 243,081
1,315 United States Treasury Notes (AAA, Aaa) 8/15/12 4.375 1,365,546
SHORT-TERM U.S. GOVERNMENT AGENCY (17.7%)
3,800 Federal Home Loan Bank, Discount Notes (AAA, Aaa) 11/1/02 1.5 3,800,000
2,700 Federal Home Loan Bank, Discount Notes (AAA, Aaa) 11/1/02 1.69 2,700,000
3,487 State Street Bank & Trust Co. Euro Time Deposit (Cost $3,487,000) 11/1/2 1.75 3,487,000
------------
TOTAL INVESTMENTS AT VALUE (Cost $47,840,325) $47,754,070
============
Credit Suisse Fixed Income Fund
(Acquiring Fund)
Pro Forma Schedule of Investments
As of October 31, 2002 (unaudited)
Maturity
Par Security Name Ratings** Date Rate Market Value
--- ------------- --------- ---- ---- ------------
CORPORATE BONDS (39.1%)
$135 Abraxas Petroleum Corp., Series B, Company Guaranteed (Callable 12/05/02
@ $100.00) (CCC-, B3) 3/15/03 12.875 $135,000
300 Agrilink Foods, Inc., Company Guaranteed, Senior Subordinated Notes
(Callable 11/01/03 @ $105.94) (B-, B3) 11/1/08 11.875 312,000
105 AK Steel Corp., Company Guaranteed (Callable 02/15/04 @ $103.94) (BB, B1) 2/15/09 7.875 105,000
175 Alamosa PCS Holdings, Inc., Company Guaranteed, Senior Discount Notes
(Callable 02/15/05 @ $106.44) + (CCC, Caa3) 2/15/10 12.875 25,375
1,580 Allied Waste North America, Series B, Company Guaranteed (Callable
08/01/04 @ $105.00) (B+, B2) 8/1/09 10 1,524,700
85 Allied Waste North America, Series B, Company Guaranteed, Senior Notes
(Callable 01/01/04 @ $103.94) (BB-, Ba3) 1/1/09 7.875 81,175
1,600 Allied Waste North America, Series B, Global Company Guaranteed (BB-, Ba3) 4/1/08 8.875 1,592,000
220 ALLTEL Corp., Global Senior Notes (A, A2) 7/1/12 7 248,223
760 ALLTEL Corp., Global Senior Notes (A, A2) 7/1/32 7.875 871,558
345 Ameristar Casinos, Inc., Global Company Guaranteed (Callable 02/15/06 @
$105.38) (B, B3) 2/15/09 10.75 374,325
355 AOL Time Warner, Inc., Global Bonds (BBB+, Baa1) 4/15/31 7.625 322,726
350 Appleton Papers, Inc., Series B, Global Company Guaranteed (Callable
12/15/05 @ $106.25) (B+, B3) 12/15/08 12.5 365,750
280 Applied Extrusion Technologies, Inc., Series B, Company Guaranteed
(Callable 07/01/06 @ $105.38) (B, Caa1) 7/1/11 10.75 169,400
65 Archibald Candy Corp., Company Guaranteed, Senior Secured Notes (Callable
12/05/02 @ $102.56)0 (NR, Caa2) 7/1/04 10.25 32,175
455 Argosy Gaming Co., Company Guaranteed (Callable 06/01/04 @ $105.38) (B+, B2) 6/1/09 10.75 502,775
270 Armkel LLC & Armkel Financial, Global Senior Subordinated Notes (Callable
08/15/05 @ $104.75) (B-, B2) 8/15/09 9.5 289,575
1,085 AT&T Corp., Global Notes (BBB+, Baa2) 3/15/09 6 1,037,786
240 AT&T Corp., Global Notes (BBB+, Baa2) 3/15/29 6.5 207,116
1,290 AT&T Corp., Global Senior Notes (BBB+, Baa2) 11/15/11 7.3 1,266,665
1,215 AT&T Wireless Services, Inc., Global Senior Notes (BBB, Baa2) 5/1/07 7.5 1,076,454
495 AT&T Wireless Services, Inc., Global Senior Notes (BBB, Baa2) 3/1/31 8.75 397,052
680 AT&T Wireless Services, Inc., Senior Notes (BBB, Baa2) 3/1/11 7.875 592,629
230 Aurora Foods, Inc., Series B, Senior Subordinated Notes (Callable
07/01/03 @ $106.38) (CCC, Caa3) 7/1/08 8.75 101,200
540 Avecia Group PLC, Global Company Guaranteed (Callable 07/01/04 @ $105.50) (B-, B3) 7/1/09 11 456,300
120 Aztar Corp., Senior Subordinated Notes (Callable 05/15/03 @ $104.44) (B+, Ba3) 5/15/07 8.875 120,000
665 Baxter International, Inc., Notes (A, A3) 5/1/07 5.25 695,369
200 Bluegreen Corp., Company Guaranteed (B, B3) 4/1/08 10.5 170,000
1,195 Boeing Capital Corp., Global Bonds (A+, A3) 1/15/13 5.8 1,164,886
175 Box USA Holdings, Series B, Senior Secured Notes (Callable 12/05/02
@ $104.00) (B, B3) 6/1/06 12 182,000
215 Boyd Gaming Corp., Company Guaranteed (Callable 08/01/05 @ $104.62) (BB-, Ba3) 8/1/09 9.25 233,813
295 Building Materials Corp., Company Guaranteed (B, B2) 12/1/08 8 216,825
180 Burlington Resources Finance Co., Yankee Company Guaranteed (BBB+, Baa1) 3/1/07 5.7 193,838
90 Calpine Corp., Senior Notes (B+, B1) 8/15/10 8.625 29,250
1,825 Calpine Corp., Senior Notes (B+, B1) 2/15/11 8.5 602,250
625 Carnival Corp., Yankee Notes (A, A2) 4/15/08 6.15 659,741
10 Chancellor Media Corp., Company Guaranteed, Senior Notes (BBB-, Ba1) 11/1/08 8 10,588
1,085 Charter Communications Holdings LLC, Global Senior Notes (B-, B3) 10/1/09 10.75 485,537
550 Charter Communications Holdings LLC, Global Senior Notes (B-, B3) 11/15/09 9.625 237,875
10 Charter Communications Holdings LLC, Senior Discount Notes (Callable
04/01/04 @ $104.96)0 (B-, B3) 4/1/11 8.625 3,150
75 Charter Communications Holdings LLC, Senior Notes (Callable 04/01/04 @
$104.31) (B-, B3) 4/1/09 8.625 32,625
225 Chesapeake Energy Corp., Global Company Guaranteed, Senior Notes
(Callable 04/01/06 @ $104.06) (B+, B1) 4/1/11 8.125 230,625
175 Chukchansi Economic Development Authority, Rule 144A, Private Placement,
Senior Notes (Callable 10/01/06 @ $113.00) ++ (NA, NA) 6/15/09 14.5 161,437
750 Cilcorp, Inc., Bonds (BB+, Baa2) 10/15/29 9.375 646,713
825 Cincinnati Gas & Electric Co., Notes (BBB, Baa1) 9/15/12 5.7 819,892
1,155 Citizens Communications Co., Global Senior Notes (BBB, Baa2) 8/15/08 7.625 1,162,383
320 Citizens Communications Co., Global Senior Notes (BBB, Baa2) 8/15/31 9 308,118
1,130 Citizens Communications Co., Notes (BBB, Baa2) 5/15/06 8.5 1,142,329
35 Clear Channel Communications, Inc., Debentures (BBB-, Baa3) 10/15/27 7.25 34,113
615 Clear Channel Communications, Inc., Global Senior Notes (BBB-, Baa3) 11/1/06 6 633,561
200 CMS Energy Corp. (BBB-, Baa3) 9/15/06 6.25 190,976
95 CMS Energy Corp., Senior Notes (B+, B3) 1/15/09 7.5 68,492
235 CMS Energy Corp., Series B, Senior Notes (B+, B3) 1/15/04 6.75 190,409
80 Coaxial Communications/Phoenix, Company Guaranteed, Senior Notes
(Callable 12/05/02 @ $105.00) (B, B3) 8/15/06 10 68,500
280 Collins & Aikman Products Corp., Company Guaranteed, Senior Subordinated
Notes (Callable 12/05/02 @ $103.83) (B, B2) 4/15/06 11.5 233,100
1,805 Comcast Cable Communications, Inc., Senior Notes (BBB, Baa3) 1/30/11 6.75 1,725,629
420 ConAgra Foods, Inc., Notes (BBB+, Baa1) 9/15/11 6.75 474,794
525 ConAgra Foods, Inc., Notes (BBB+, Baa1) 9/15/30 8.25 666,430
10 Conoco Funding Co., Global Company Guaranteed (A-, A3) 10/15/11 6.35 11,020
1,940 Conoco Funding Co., Global Company Guaranteed (A-, A3) 10/15/31 7.25 2,210,892
Credit Suisse Fixed Income Fund
(Acquiring Fund)
Pro Forma Schedule of Investments
As of October 31, 2002 (unaudited)
Maturity
Par Security Name Ratings** Date Rate Market Value
--- ------------- --------- ---- ---- ------------
$60 Conoco, Inc., Senior Global Notes (A-, A3) 4/15/09 6.35 $66,360
1,690 Consolidated Natural Gas Co., Senior Notes (BBB+, A3) 4/15/11 6.85 1,821,053
415 Countrywide Home Loans, Inc., Global Company Guaranteed (A, A3) 6/15/04 6.85 438,252
325 Countrywide Home Loans, Inc., Global Company Guaranteed (A, A3) 2/1/07 5.5 338,280
425 Countrywide Home Loans, Inc., Global Company Guaranteed (A, A3) 5/15/07 5.625 445,344
1,150 Cox Communications, Inc., Notes (BBB, Baa2) 11/1/10 7.75 1,232,189
1,600 CSC Holdings, Inc., Series B, Senior Notes (BB-, B1) 4/1/11 7.625 1,316,000
100 CSC Holdings, Inc., Series B, Senior Notes (BB-, B1) 7/15/09 8.125 83,500
175 DaimlerChrylser NA Holding Corp., Company Guaranteed, Global Notes (BBB+, A3) 1/15/12 7.3 189,782
160 Dayton Superior Corp., Company Guaranteed Notes (Callable 06/15/07 @
$102.17) (B-, Caa2) 6/15/09 13 125,600
230 Denbury Management, Inc., Company Guaranteed, Senior Subordinated Notes
(Callable 03/01/03 @ $104.50) (B, B3) 3/1/08 9 235,175
500 Devon Energy Corp., Debentures (BBB, Baa2) 4/15/32 7.95 581,657
510 Devon Financing Corp. ULC, Global Company Guaranteed (BBB, Baa2) 9/30/11 6.875 566,931
80 DIVA Systems Corp., Series B, Senior Discount Notes (Callable 03/01/03 @
$106.31)0 (NA, NR) 3/1/08 12.625 1,200
600 El Paso Corp., Rule 144A, Private Placement, Notes ++ (BBB-, Baa3) 6/15/12 7.875 402,703
520 Energy East Corp., Notes (BBB, Baa2) 6/15/12 6.75 556,558
870 Enterprise Products Partners LP, Company Guaranteed (BBB, Baa2) 2/1/11 7.5 862,762
465 EOP Operating LP, Notes (BBB+, Baa1) 6/15/04 6.5 485,531
500 EOP Operating LP, Senior Notes (BBB+, Baa1) 2/15/05 6.625 529,017
110 Extendicare Health Services, Inc., Company Guaranteed (Callable 12/15/02 @
$104.67) (CCC+, B3) 12/15/07 9.35 95,150
20 Fisher Scientific International, Senior Subordinated Notes (Callable
02/01/03 @ $104.50) (B, B3) 2/1/08 9 20,800
130 Fleming Companies, Inc., Company Guaranteed (Callable 06/15/06 @ $104.62) (B+, B2) 6/15/10 9.25 107,250
145 Fleming Companies, Inc., Global Company Guaranteed (Callable 04/01/05 @
$105.06) (BB-, B2) 4/1/08 10.125 123,975
170 Flextronics International, Ltd., Yankee Senior Subordinated Notes
(Callable 07/01/05 @ $104.94) (BB-, Ba2) 7/1/10 9.875 177,650
2,550 Ford Motor Credit Co., Global Notes (BBB, A3) 2/1/06 6.875 2,352,623
1,290 Ford Motor Credit Co., Global Notes (BBB, A3) 10/28/09 7.375 1,169,288
3,080 General Motors Corp., Global Notes (BBB, A3) 1/15/11 7.2 2,900,898
270 General Motors Corp., Series MTN, Notes (BBB, A2) 5/16/05 5.25 264,206
290 Georgia-Pacific Corp., Senior Notes (BB+, Ba1) 5/15/31 8.875 223,868
280 Hard Rock Hotel, Inc., Series B, Senior Subordinated Notes (Callable
12/05/02 @ $104.62) (B-, Caa1) 4/1/05 9.25 277,900
90 HCA, Inc. (BBB-, Ba1) 9/1/10 8.75 100,307
235 HCA, Inc., Notes (BBB-, Ba1) 6/15/05 6.91 247,023
1,175 HCA, Inc., Notes (BBB-, Ba1) 7/1/07 7 1,247,649
530 Hilton Hotels Corp., Notes (BBB-, Ba1) 2/15/11 8.25 541,495
135 Hockey Co. & Sports Maska, Inc., Senior Secured, Global Notes, Units
(Callable 04/15/06 @ $105.62) (NA, B2) 4/15/09 11.25 129,600
50 Horseshoe Gaming Holding Corp., Series B, Company Guaranteed (Callable
05/15/04 @ $104.31) (B+, B2) 5/15/09 8.625 52,875
1,520 Household Finance Corp., Global Notes (A-, A2) 1/30/07 5.75 1,353,191
60 Insight Midwest, Global Senior Notes (Callable 11/01/05 @ $105.25) (B+, B2) 11/1/10 10.5 52,200
40 Insight Midwest, Senior Notes (Callable 10/01/04 @ $104.88) (B+, B2) 10/1/09 9.75 34,200
100 Iron Mountain, Inc., Company Guaranteed (Callable 04/01/06 @ $104.31) (B, B2) 4/1/13 8.625 104,750
200 Isle of Capri Casinos, Inc., Company Guaranteed (Callable 04/15/04 @
$104.38) (B, B2) 4/15/09 8.75 201,000
515 ITT Corp. (BBB-, Ba1) 11/15/05 6.75 499,952
35 James Cable Partners LP, Series B, Senior Notes (Callable 12/05/02 @
$102.69) (NR, Ca) 8/15/04 10.75 17,325
110 KB Home, Senior Subordinated Notes (Callable 02/15/06 @ $104.75) (BB-, Ba3) 2/15/11 9.5 114,675
215 Kerzner International, Ltd., Global Company Guaranteed, Senior
Subordinated Notes (Callable 08/15/06 @ $104.44) (B+, B2) 8/15/11 8.875 217,150
1,025 KeySpan Corp., Senior Notes (A, A3) 11/15/30 8 1,233,537
215 La Petite Academy, Inc., Series B, Company Guaranteed (Callable 05/15/03
@ $105.00) (CC, Ca) 5/15/08 10 112,875
215 Land O' Lakes, Inc., Global Senior Notes (Callable 11/15/06 @ $104.38) (B+, B2) 11/15/11 8.75 119,325
300 Leslie's Poolmart, Senior Notes (Callable 12/05/02 @ $102.59) (B-, B3) 7/15/04 10.375 280,125
10 Level 3 Communications, Inc., Senior Notes (Callable 05/01/03 @ $104.56) (CC, Caa3) 5/1/08 9.125 5,700
125 Levi Strauss & Co., Notes (BB-, Caa1) 11/1/06 7 106,250
140 Lin Televison Corp., Company Guaranteed (Callable 03/01/03 @ $104.19) (B-, B3) 3/1/08 8.375 145,950
715 Lockheed Martin Corp., Bonds (BBB, Baa2) 12/1/29 8.5 924,266
195 Lucent Technologies, Inc., Notes (B-, Caa1) 7/15/06 7.25 98,475
290 Magellan Health Services, Inc., Senior Subordinated Notes (Callable
02/15/03 @ $104.50) (CC, Ca) 2/15/08 9 50,750
370 Magnum Hunter Resources, Inc., Company Guaranteed (Callable 12/05/02
@ $105.00) (B+, B2) 6/1/07 10 386,650
325 Majestic Investor Holdings, Company Guaranteed, Senior Secured Notes (
Callable 11/30/05 @ $105.83) (B, B2) 11/30/07 11.653 284,781
20 Mandalay Resort Group, Senior Subordinated Notes (Callable 12/01/02 @
$104.62) (BB-, Ba3) 12/1/05 9.25 20,750
295 Metaldyne Corp., Rule 144A, Private Placement, Senior Subordinated Notes
(Callable 06/15/07 @ $105.50) ++ (B, B3) 6/15/12 11 210,925
30 MGM Mirage, Inc., Company Guaranteed (BB+, Ba2) 6/1/07 9.75 33,150
50 Mission Resources Corp., Series C, Global Company Guaranteed (Callable
12/05/02 @ $105.44) (B-, Caa1) 4/1/07 10.875 30,250
315 Mississippi Chemical Corp., Bonds (CCC, Caa2) 11/15/17 7.25 58,275
490 Mohegan Tribal Gaming, Global Senior Subordinated Notes (Callable
07/01/06 @ $104.19) (BB-, Ba3) 7/1/11 8.375 514,500
60 Motors & Gears, Inc., Series D, Senior Notes (Callable 12/05/02 @
$105.38) (B-, Caa1) 11/15/06 10.75 51,300
180 NBTY, Inc., Series B, Senior Subordinated Notes (Callable 12/05/02 @
$104.31) (B+, B1) 9/15/07 8.625 181,800
620 News America Holdings, Inc., Company Guaranteed (BBB-, Baa3) 2/1/13 9.25 701,929
1,190 News America Holdings, Inc., Debentures (BBB-, Baa3) 8/10/18 8.25 1,163,132
Credit Suisse Fixed Income Fund
(Acquiring Fund)
Pro Forma Schedule of Investments
As of October 31, 2002 (unaudited)
Maturity
Par Security Name Ratings** Date Rate Market Value
--- ------------- --------- ---- ---- ------------
$85 Nextel Communications, Inc., Senior Discount Notes (Callable 02/15/03 @
$104.97) + (B, B3) 2/15/08 9.95 $72,463
960 Nextel Communications, Inc., Senior Notes (Callable 11/15/04 @ $104.688) (B, B3) 11/15/09 9.375 828,000
1,290 Nextlink Communications, Senior Discount Notes (Callable 12/01/04 @
$106.06)0 (NR, Ca) 12/1/09 9.45 9,675
1,805 Nextlink Communications, Senior Notes (Callable 12/01/04 @ $105.25) (NR, Ca) 12/1/09 10.5 13,538
495 Norsk Hydro A/S, Yankee Debentures (A, A2) 6/15/23 7.75 581,936
400 Nortek, Inc., Series B, Global Senior Subordinated Notes (Callable
06/15/06 @ $104.94) (B-, B3) 6/15/11 9.875 379,000
70 Northland Cable Television, Company Guaranteed, Senior Subordinated Notes
(Callable 12/05/02 @ $105.12) (CC, Caa1) 11/15/07 10.25 40,250
30 Ocean Energy, Inc., Series B, Company Guaranteed (Callable 07/01/03 @
$104.19) (BB+, Ba1) 7/1/08 8.375 31,650
525 Oncor Electric Delivery Co., Rule 144A, Private Placement, Senior Secured
Notes ++ (BBB, A3) 5/1/12 6.375 535,091
200 Owens-Brockway Glass Containers, Global Company Guaranteed (Callable
02/15/06 @ $104.44) (BB, B2) 2/15/09 8.875 206,500
150 Owens-Illinois, Inc., Senior Notes (B+, B3) 5/15/08 7.35 134,625
240 Packaged Ice, Inc., Series B, Company Guaranteed, Senior Unsecured Notes
(Callable 12/05/02 @ $104.88) (B-, Caa3) 2/1/05 9.75 178,800
1,495 Park Place Entertainment Corp., Senior Subordinated Notes (BB+, Ba2) 12/15/05 7.875 1,506,213
55 Parker Drilling Co., Series B, Senior Notes, Company Guaranteed (Callable
11/15/04 @ $105.06) (B+, B1) 11/15/09 10.125 53,625
320 Penn National Gaming, Inc., Company Guaranteed (Callable 03/15/06 @
$104.44) (B-, B3) 3/15/10 8.875 324,000
1,775 Petronas Capital Ltd., Rule 144A, Private Placement, Company
Guaranteed ++ (BBB+, Baa1) 5/22/22 7.875 1,842,963
1,775 PG&E National Energy Group, Global Senior Notes 0 (D, Ca) 5/16/11 10.375 381,625
280 Prime Hospitality Corp., Series B, Global Senior Subordinated Notes
(Callable 05/01/07 @ $104.19) (B+, B1) 5/1/12 8.375 256,200
795 Progress Energy, Inc., Senior Notes (BBB, Baa1) 3/1/06 6.75 817,364
1,080 Progress Energy, Inc., Senior Notes (BBB, Baa1) 3/1/31 7.75 1,064,599
855 PSEG Power LLC, Global Company Guaranteed (BBB, Baa1) 4/15/06 6.875 795,859
305 PSEG Power LLC, Rule 144A, Private Placement, Notes ++ (BBB, Baa1) 6/1/12 6.95 265,880
300 Riviera Holdings Corp., Rule 144A, Private Placement, Company Guaranteed
(Callable 06/15/06 @ $105.50) ++ (B+, B2) 6/15/10 11 275,250
75 Ryland Group, Senior Notes (Callable 09/01/05 @ $104.88) (BB+, Ba2) 9/1/10 9.75 81,562
615 Safeway, Inc., Senior Debentures (BBB, Baa2) 2/1/31 7.25 674,642
560 Safeway, Inc., Senior Notes (BBB, Baa2) 9/15/04 7.25 605,495
135 Salem Communications Corp., Series B, Company Guaranteed, Senior
Subordinated Notes (Callable 12/05/02 @ $104.75) (B-, B3) 10/1/07 9.5 140,738
140 Sbarro, Inc., Company Guaranteed, Senior Notes (Callable 09/15/04 @
$105.50) (B+, B2) 9/15/09 11 125,300
120 Scotts Co., Company Guaranteed (Callable 01/15/04 @ $104.31) (B+, B2) 1/15/09 8.625 125,400
30 Sequa Corp., Senior Notes (BB-, Ba3) 8/1/09 9 25,350
95 Sequa Corp., Series B, Senior Notes (BB-, Ba3) 4/1/08 8.875 80,275
140 Simmons Co., Series B, Senior Subordinated Notes (Callable 03/15/04 @
$105.12) (B-, B2) 3/15/09 10.25 149,800
144 Southwest Royalties, Inc., Company Guaranteed (Callable 12/05/02 @
$100.00) (CCC-, NA) 6/30/04 10.5 143,820
41 Southwest Royalties, Inc., Company Guaranteed, Senior Secured Notes
(Callable 12/05/02 @ $100.00) (CCC-, NA) 6/30/04 10.5 41,000
250 Sovereign Bancorp, Inc., Senior Notes (BBB-, Ba2) 11/15/06 10.5 280,000
610 Sprint Capital Corp., Global Company Guaranteed (BBB-, Baa3) 1/15/07 6 492,722
1,655 Sprint Capital Corp., Senior, Global Company Guaranteed (BBB-, Baa3) 11/15/28 6.875 1,099,986
1,810 Starwood Hotels & Resorts Worldwide, Inc., Rule 144A, Private Placement,
Notes ++ (BBB-, Ba1) 5/1/07 7.375 1,737,600
120 Stater Brothers Holdings, Inc., Senior Notes (Callable 08/15/03 @
$105.38) (B-, B2) 8/15/06 10.75 121,800
380 Stone Container Corp., Global Senior Notes (Callable 07/01/07 @ $104.19) (B, B2) 7/1/12 8.375 393,300
306 TeleCorp PCS, Inc., Company Guaranteed, Senior Subordinated Notes
(Callable 04/15/04 @ $105.81) + (BBB, Baa2) 4/15/09 11.625 255,510
430 Tennessee Gas Pipeline Co., Debentures (BBB, Baa2) 4/1/17 7.5 387,973
305 Tennessee Gas Pipeline Co., Debentures (BBB, Baa2) 10/15/28 7 260,093
660 Tesoro Petroleum Corp., Global Senior Subordinated Notes (Callable
04/01/07 @ $104.81) (B, B2) 4/1/12 9.625 339,900
165 The Boeing Co., Debentures (A+, A2) 8/15/42 7.5 170,880
1,075 Tyson Foods, Inc., Global Notes (BBB, Baa3) 10/1/04 6.625 1,136,490
110 U.S. Unwired, Inc., Series B, Company Guaranteed, Senior Discount Notes
(Callable 11/01/04 @ $106.69) + (CCC+, Caa2) 11/1/09 13.375 8,800
160 Unisys Corp., Senior Notes (BB+, Ba1) 1/15/05 7.25 160,800
2,126 Verizon Global Funding Corp., Global Notes (A+, A1) 6/15/12 6.875 2,272,694
450 Verizon Global Funding Corp., Global Notes (A+, A1) 9/1/12 7.375 496,352
1,395 Verizon Global Funding Corp., Global Notes (A+, A1) 12/1/30 7.75 1,500,106
380 Verizon Global Funding Corp., Global Notes (A+, A1) 6/15/32 7.75 409,096
2,095 Verizon Wireless, Inc., Rule 144A, Private Placement Notes ++ (A+, A2) 12/15/06 5.375 2,070,740
510 Viacom, Inc., Global Company Guaranteed (A-, A3) 8/15/12 5.625 532,144
650 Voicestream Wireless Corp., Senior Discount Notes (Callable 11/15/04 @
$105.94) + (A-, Baa2) 11/15/09 11.875 542,750
370 Voicestream Wireless Corp., Senior Notes (Callable 11/15/04 @ $105.19) (A-, Baa2) 11/15/09 10.375 382,950
295 Walt Disney Co., Global Notes (BBB+, Baa1) 3/1/12 6.375 316,340
725 Washington Mutual, Inc., Global Senior Notes (BBB+, A3) 1/15/07 5.625 769,094
110 Waste Management, Inc., Notes (BBB, Ba1) 4/30/04 8 113,587
930 Waste Management, Inc., Rule 144A, Private Placements, Bonds ++ (BBB, Ba1) 5/15/32 7.75 911,500
490 Waste Management, Inc., Senior Notes (BBB, Ba1) 8/1/10 7.375 515,365
170 Werner Holding Co., Inc., Series A, Company Guaranteed (Callable 12/05/02
@ $105.00) (B-, B2) 11/15/07 10 160,650
190 Western Gas Resources, Inc., Company Guaranteed (Callable 06/15/04 @
$105.00) (BB-, Ba3) 6/15/09 10 200,450
85 Westpoint Stevens, Inc., Senior Notes (CCC+, Ca) 6/15/05 7.875 25,925
920 Williams Companies, Inc., Notes (B, B1) 9/1/21 7.875 519,800
665 Williams Companies, Inc., Notes (B, B1) 6/15/31 7.75 369,075
Credit Suisse Fixed Income Fund
(Acquiring Fund)
Pro Forma Schedule of Investments
As of October 31, 2002 (unaudited)
Maturity
Par Security Name Ratings** Date Rate Market Value
--- ------------- --------- ---- ---- ------------
$340 Windsor Woodmont Black Hawk, Series B, First Mortgage (Callable 12/05/02
@ $113.00)0 (NR, NA) 3/15/05 13 $222,700
940 XO Communications, Inc., Senior Discount Notes (Callable 04/15/03 @
$104.72) (NA, Ca) 4/15/08 9.45 7,050
240 Yum! Brands, Inc., Senior Notes (BB, Ba1) 7/1/12 7.7 249,600
ASSET BACKED SECURITIES (3.9%)
900 Chase Credit Card Master Trust, Series 2001-1, Class A (AAA, Aaa) 6/15/07 1.973 903,055
1,050 CNH Equipment Trust, Series 2002-A, Class A3 (AAA, Aaa) 7/17/06 2.073 1,053,681
595 DaimlerChrylser Master Owner Trust, Series 2002-A, Class A (AAA, Aaa) 5/15/07 1.883 595,243
1,295 Discover Card Master Trust I, Series 1999-5, Class A (AAA, Aaa) 12/18/06 1.983 1,297,535
102 Donaldson Lufkin & Jenrette, Inc., Series 1989-1, Class F (AAA, Aaa) 8/1/19 11 117,812
500 Embarcadero Aircraft Secs Trust (BBB, A3) 8/15/25 1.803 400,000
555 Fleet Credit Master Trust II, Series 2002-A, Class A (AAA, Aaa) 10/15/07 1.873 555,231
755 Ford Credit Floorplan Master Owner Trust, Series 2001-1, Class A (AAA, Aaa) 7/17/06 1.913 756,141
830 LB-UBS Commerical Mortgage Trust, Series 2002-C2, Class A4 (AAA, Aaa) 6/15/31 5.594 876,638
575 MBNA Master Credit Card Trust, Series 1996-M, Class A (AAA, Aaa) 4/15/09 1.88 575,826
1,045 MMCA Automobile Trust, Series 2002-2, Class A3 (AAA, Aaa) 7/17/06 3.67 1,071,140
289 Morgan Stanley Mortgage Trust, Series 40, Class 8 (AAA, NR) 7/20/21 7 289,861
493 Small Business Administration, Series 1992-20D, Class 1 (NA, Aaa) 4/1/12 8.2 539,628
MORTGAGE-BACKED SECURITIES (47.7%)
4,005 Bear Stearns Commercial Mortgage Securities, Inc., Series 2002-TOP6,
Class A2 (AAA, Aaa) 10/15/36 6.46 4,469,842
3,995 Fannie Mae, Global Notes (AAA, Aaa) 3/15/12 6.125 4,490,939
415 Fannie Mae, Pool #252492 (AAA, Aaa) 5/1/29 7.5 438,800
214 Fannie Mae, Pool #252874 (AAA, Aaa) 11/1/29 7.5 226,854
263 Fannie Mae, Pool #253183 (AAA, Aaa) 4/1/30 7.5 278,870
237 Fannie Mae, Pool #270674 (AAA, Aaa) 9/1/17 9 262,479
87 Fannie Mae, Pool #447109 (AAA, Aaa) 11/1/29 7.5 92,279
14 Fannie Mae, Pool #504305 (AAA, Aaa) 8/1/29 7.5 15,234
40 Fannie Mae, Pool #504338 (AAA, Aaa) 10/1/29 7.5 42,624
8 Fannie Mae, Pool #504669 (AAA, Aaa) 10/1/29 7.5 8,847
15 Fannie Mae, Pool #504672 (AAA, Aaa) 10/1/29 7.5 16,229
188 Fannie Mae, Pool #533440 (AAA, Aaa) 1/1/30 8 201,700
74 Fannie Mae, Pool #533714 (AAA, Aaa) 3/1/30 8 79,061
4,644 Fannie Mae, Pool #650077 (AAA, Aaa) 7/1/32 7.5 4,913,902
276 Fannie Mae, Series 1999-52, Class TC (AAA, Aaa) 5/25/22 7 276,399
70 Fannie Mae Pool #004542 (AAA, Aaa) 12/1/08 12 76,095
16 Fannie Mae Pool #035574 (AAA, Aaa) 10/1/08 8.75 17,200
1 Fannie Mae Pool #076368 (AAA, Aaa) 9/1/03 9.25 989
605 Fannie Mae Pool #124211 (AAA, Aaa) 12/1/21 5.412 618,489
203 Fannie Mae Pool #124790 (AAA, Aaa) 2/1/23 9 224,259
265 Fannie Mae Pool #125136 (AAA, Aaa) 7/1/07 8 281,117
85 Fannie Mae Pool #243876 (AAA, Aaa) 1/1/09 9 89,636
259 Fannie Mae Pool #507037 (AAA, Aaa) 8/1/29 7.5 274,337
33 Fannie Mae Pool #508801 (AAA, Aaa) 8/1/29 7.5 35,020
74 Fannie Mae Pool #515542 (AAA, Aaa) 10/1/29 8 79,088
174 Fannie Mae Pool #515943 (AAA, Aaa) 10/1/29 7.5 184,211
2 Fannie Mae Pool #515955 (AAA, Aaa) 10/1/29 7.5 2,495
25 Fannie Mae Pool #516832 (AAA, Aaa) 1/1/30 7.5 26,814
270 Fannie Mae Pool #517894 (AAA, Aaa) 3/1/30 7.5 286,253
11 Fannie Mae Pool #521205 (AAA, Aaa) 12/1/29 7.5 12,143
37 Fannie Mae Pool #521369 (AAA, Aaa) 12/1/29 7 38,377
38 Fannie Mae Pool #523929 (AAA, Aaa) 11/1/29 7.5 40,487
75 Fannie Mae Pool #527587 (AAA, Aaa) 12/1/29 7.5 79,830
13 Fannie Mae Pool #527805 (AAA, Aaa) 3/1/30 7.5 13,878
77 Fannie Mae Pool #528126 (AAA, Aaa) 3/1/30 7.5 81,338
34 Fannie Mae Pool #528289 (AAA, Aaa) 3/1/30 7.5 35,870
6 Fannie Mae Pool #528508 (AAA, Aaa) 2/1/30 7.5 6,639
19 Fannie Mae Pool #528800 (AAA, Aaa) 1/1/30 7 19,945
184 Fannie Mae Pool #528803 (AAA, Aaa) 1/1/30 7.5 195,260
17 Fannie Mae Pool #529210 (AAA, Aaa) 2/1/30 7.5 18,437
61 Fannie Mae Pool #531075 (AAA, Aaa) 2/1/30 8 65,074
25 Fannie Mae Pool #532496 (AAA, Aaa) 3/1/30 7.5 26,315
195 Fannie Mae Pool #533026 (AAA, Aaa) 3/1/30 8 208,630
365 Fannie Mae Pool #533033 (AAA, Aaa) 3/1/30 8 390,445
110 Fannie Mae Pool #533586 (AAA, Aaa) 3/1/30 7.5 115,961
103 Fannie Mae Pool #534125 (AAA, Aaa) 3/1/30 7.5 108,603
159 Fannie Mae Pool #535083 (AAA, Aaa) 12/1/29 7.5 168,062
1,840 Fannie Mae Pool #535101 (AAA, Aaa) 8/1/13 6.5 1,938,742
111 Fannie Mae Pool #535159 (AAA, Aaa) 2/1/30 7 116,003
2,175 Fannie Mae Pool #653373 (AAA, Aaa) 9/1/32 7.5 2,301,437
9,560 Fannie Mae TBA (AAA, Aaa) 11/1/32 6 9,828,827
4,900 Fannie Mae TBA (AAA, Aaa) 11/1/32 6.5 5,146,519
13,040 Fannie Mae TBA (AAA, Aaa) 11/1/32 6.5 13,512,700
15,355 Fannie Mae TBA (AAA, Aaa) 11/1/32 7 16,045,975
1,840 Fannie Mae TBA (AAA, Aaa) 11/1/32 7.5 1,946,374
21,160 Fannie Mae TBA (AAA, Aaa) 11/1/32 8 22,628,081
661 Freddie Mac Pool #292065 (AAA, Aaa) 4/1/17 8.5 716,578
404 Freddie Mac Pool #606523 (AAA, Aaa) 10/1/19 5.658 414,156
8 Ginnie Mae Pool #058985 (AAA, Aaa) 7/15/13 11 9,761
10 Ginnie Mae Pool #068764 (AAA, Aaa) 9/15/13 12 12,138
76 Ginnie Mae Pool #093401 (AAA, Aaa) 1/15/10 9.5 85,017
2 Ginnie Mae Pool #296254 (AAA, Aaa) 9/15/20 9.5 2,392
3,278 Ginnie Mae Pool #508483 (AAA, Aaa) 5/15/31 7 3,444,109
1,004 Ginnie Mae Pool #545822 (AAA, Aaa) 6/15/31 7.5 1,067,696
7,705 Ginnie Mae TBA (AAA, Aaa) 11/1/17 7 8,092,654
1,425 J.P. Morgan Chase Commercial Mortgage Securities, Series 2002-CIB4,
Class A3 (NA, Aaa) 5/12/34 6.162 1,553,318
Credit Suisse Fixed Income Fund
(Acquiring Fund)
Pro Forma Schedule of Investments
As of October 31, 2002 (unaudited)
Maturity
Par Security Name Ratings** Date Rate Market Value
--- ------------- --------- ---- ---- ------------
$1,215 LB Commercial Conduit Mortgage Trust, Series 1999-C2, Class A1 (NA, Aaa) 10/15/32 7.105 $1,339,938
FOREIGN BONDS (2.7%)
1,325 British Telecommunications PLC, Global Bonds (United Kingdom) (A-, Baa1) 12/15/30 8.875 1,604,787
440 France Telecom SA, Global Notes (BBB-, Baa3) 3/1/06 8.7 471,786
410 Government of Russia (NA, NA) 5/14/08 3 309,550
90 Intrawest Corp., Rule 144A, Private Placement, Senior Notes (Callable
02/01/05 @ $105.25) (Canada) ++ (B+, B1) 2/1/10 10.5 90,900
180 Intrawest Corp., Yankee Senior Notes (Callable 02/01/05 @ $105.25)
(Canada) (B+, B1) 2/1/10 10.5 181,800
1,010 Republic of Philippines, Series B, Restructured Debt, Foreign Government
Guaranteed (Callable 06/02/03 @ $100.00) (Philippines) (BB+, Ba1) 12/1/17 6.5 933,509
65 Rogers Communications, Inc., Yankee Senior Notes (Callable 12/05/02 @
$103.04) (BB-, Ba1) 1/15/06 9.125 55,006
1,165 Royal Bank of Scotland Group PLC, Series 3, Perpetual Global Bonds
(Callable 12/31/05 @ $100.00) (United Kingdom) (A-, A1) 11/29/49 7.816 1,310,012
300 TELUS Corp., Yankee Notes (Canada) (BBB, Ba1) 6/1/07 7.5 249,000
1,135 TELUS Corp., Yankee Notes (Canada) (BBB, Ba1) 6/1/11 8 879,625
UNITED STATES TREASURY OBLIGATIONS (3.4%)
490 United States Treasury Bills +++ (AAA, Aaa) 2/13/03 1.59 488,046
185 United States Treasury Bonds (AAA, Aaa) 2/15/31 5.375 195,327
2,343 United States Treasury Notes (AAA, Aaa) 1/15/08 3.625 2,539,989
2,883 United States Treasury Notes (AAA, Aaa) 1/15/10 4.25 3,256,045
1,372 United States Treasury Notes (AAA, Aaa) 7/15/12 3 1,442,631
COMMON STOCKS (0.0%)
2,156 Southwest Royalties, Inc., Class A *^ (Cost $71,271) 32,620
WARRANTS (0.0%)
65 Dayton Superior Corp., Wts., Rule 144A, strike $0.01, expires
June 2009* ++
40 GT Group Telecom, Inc., Rule 144A, expires February 2010 * ++ 40
70 IWO Holdings, Inc., Rule 144A, strike $7.00, expires January 2011 * ++
SHORT-TERM INVESTMENT (34.6%)
38,005 Federal Home Loan Bank, Discount Notes (1) (AAA , Aaa) 11/1/02 1.5 38,005,000
26,995 Federal Home Loan Bank, Discount Notes (1) (AAA , Aaa) 11/1/02 1.69 26,995,000
14,784 State Street Bank & Trust Co. Euro Time Deposit 11/1/02 1.75 14,784,000
------------
TOTAL INVESTMENTS AT VALUE (Cost $308,625,246) $302,640,279
============
Credit Suisse Investment Grade Bond Fund into Credit Suisse Fixed Income Fund
Pro Forma Combined Schedule of Investments
As of October 31, 2002 (unaudited)
Maturity
Par Security Name Ratings** Date Rate Market Value
--- ------------- --------- ---- ---- ------------
CORPORATE BONDS (39.1%)
$135 Abraxas Petroleum Corp., Series B, Company Guaranteed (Callable 12/05/02
@ $100.00) (CCC-, B3) 3/15/03 12.875 $135,000
300 Agrilink Foods, Inc., Company Guaranteed, Senior Subordinated Notes
(Callable 11/01/03 @ $105.94) (B-, B3) 11/1/08 11.875 312,000
105 AK Steel Corp., Company Guaranteed (Callable 02/15/04 @ $103.94) (BB, B1) 2/15/09 7.875 105,000
175 Alamosa PCS Holdings, Inc., Company Guaranteed, Senior Discount Notes
(Callable 02/15/05 @ $106.44) + (CCC, Caa3) 2/15/10 12.875 25,375
1580 Allied Waste North America, Series B, Company Guaranteed (Callable
08/01/04 @ $105.00) (B+, B2) 8/1/09 10 1,524,700
85 Allied Waste North America, Series B, Company Guaranteed, Senior Notes
(Callable 01/01/04 @ $103.94) (BB-, Ba3) 1/1/09 7.875 81,175
1600 Allied Waste North America, Series B, Global Company Guaranteed (BB-, Ba3) 4/1/08 8.875 1,592,000
325 ALLTEL Corp., Global Senior Notes (A, A2) 7/1/12 7 366,693
870 ALLTEL Corp., Global Senior Notes (A, A2) 7/1/32 7.875 997,704
345 Ameristar Casinos, Inc., Global Company Guaranteed (Callable 02/15/06 @
$105.38) (B, B3) 2/15/09 10.75 374,325
410 AOL Time Warner, Inc., Global Bonds (BBB+, Baa1) 4/15/31 7.625 372,726
350 Appleton Papers, Inc., Series B, Global Company Guaranteed (Callable
12/15/05 @ $106.25) (B+, B3) 12/15/08 12.5 365,750
280 Applied Extrusion Technologies, Inc., Series B, Company Guaranteed
(Callable 07/01/06 @ $105.38) (B, Caa1) 7/1/11 10.75 169,400
65 Archibald Candy Corp., Company Guaranteed, Senior Secured Notes
(Callable 12/05/02 @ $102.56)0 (NR, Caa2) 7/1/04 10.25 32,175
455 Argosy Gaming Co., Company Guaranteed (Callable 06/01/04 @ $105.38) (B+, B2) 6/1/09 10.75 502,775
270 Armkel LLC & Armkel Financial, Global Senior Subordinated Notes (Callable
08/15/05 @ $104.75) (B-, B2) 8/15/09 9.5 289,575
1560 AT&T Corp., Global Notes (BBB+, Baa2) 3/15/09 6 1,492,116
270 AT&T Corp., Global Notes (BBB+, Baa2) 3/15/29 6.5 233,006
1290 AT&T Corp., Global Senior Notes (BBB+, Baa2) 11/15/11 7.3 1,266,665
1280 AT&T Wireless Services, Inc., Global Senior Notes (BBB, Baa2) 5/1/07 7.5 1,134,042
855 AT&T Wireless Services, Inc., Global Senior Notes (BBB, Baa2) 3/1/31 8.75 685,818
780 AT&T Wireless Services, Inc., Senior Notes (BBB, Baa2) 3/1/11 7.875 679,780
230 Aurora Foods, Inc., Series B, Senior Subordinated Notes (Callable
07/01/03 @ $106.38) (CCC, Caa3) 7/1/08 8.75 101,200
540 Avecia Group PLC, Global Company Guaranteed (Callable 07/01/04 @ $105.50) (B-, B3) 7/1/09 11 456,300
120 Aztar Corp., Senior Subordinated Notes (Callable 05/15/03 @ $104.44) (B+, Ba3) 5/15/07 8.875 120,000
805 Baxter International, Inc., Notes (A, A3) 5/1/07 5.25 841,762
140 BB&T Corp., Global Subordinated Note (A-, A2) 8/1/11 6.5 156,865
200 Bluegreen Corp., Company Guaranteed (B, B3) 4/1/08 10.5 170,000
1245 Boeing Capital Corp., Global Bonds (A+, A3) 1/15/13 5.8 1,213,626
175 Box USA Holdings, Series B, Senior Secured Notes (Callable 12/05/02 @
$104.00) (B, B3) 6/1/06 12 182,000
215 Boyd Gaming Corp., Company Guaranteed (Callable 08/01/05 @ $104.62) (BB-, Ba3) 8/1/09 9.25 233,813
295 Building Materials Corp., Company Guaranteed (B, B2) 12/1/08 8 216,825
210 Burlington Resources Finance Co., Yankee Company Guaranteed (BBB+, Baa1) 3/1/07 5.7 226,144
90 Calpine Corp., Senior Notes (B+, B1) 8/15/10 8.625 29,250
1825 Calpine Corp., Senior Notes (B+, B1) 2/15/11 8.5 602,250
735 Carnival Corp., Yankee Notes (A, A2) 4/15/08 6.15 775,856
10 Chancellor Media Corp., Company Guaranteed, Senior Notes (BBB-, Ba1) 11/1/08 8 10,588
1085 Charter Communications Holdings LLC, Global Senior Notes (B-, B3) 10/1/09 10.75 485,537
550 Charter Communications Holdings LLC, Global Senior Notes (B-, B3) 11/15/09 9.625 237,875
10 Charter Communications Holdings LLC, Senior Discount Notes (Callable
04/01/04 @ $104.96) 0 (B-, B3) 4/1/11 8.625 3,150
75 Charter Communications Holdings LLC, Senior Notes (Callable 04/01/04 @
$104.31) (B-, B3) 4/1/09 8.625 32,625
225 Chesapeake Energy Corp., Global Company Guaranteed, Senior Notes
(Callable 04/01/06 @ $104.06) (B+, B1) 4/1/11 8.125 230,625
175 Chukchansi Economic Development Authority, Rule 144A, Private Placement,
Senior Notes (Callable 10/01/06 @ $113.00) ++ (NA, NA) 6/15/09 14.5 161,437
750 Cilcorp, Inc., Bonds (BB+, Baa2) 10/15/29 9.375 646,713
965 Cincinnati Gas & Electric Co., Notes (BBB, Baa1) 9/15/12 5.7 959,025
1155 Citizens Communications Co., Global Senior Notes (BBB, Baa2) 8/15/08 7.625 1,162,383
375 Citizens Communications Co., Global Senior Notes (BBB, Baa2) 8/15/31 9 361,076
1130 Citizens Communications Co., Notes (BBB, Baa2) 5/15/06 8.5 1,142,329
330 Citizens Communications Co., Notes (BBB, Baa2) 5/15/11 9.25 348,768
55 Clear Channel Communications, Inc., Debentures (BBB-, Baa3) 10/15/27 7.25 53,606
735 Clear Channel Communications, Inc., Global Senior Notes (BBB-, Baa3) 11/1/06 6 757,183
200 CMS Energy Corp. (BBB-, Baa3) 9/15/06 6.25 190,976
95 CMS Energy Corp., Senior Notes (B+, B3) 1/15/09 7.5 68,492
235 CMS Energy Corp., Series B, Senior Notes (B+, B3) 1/15/04 6.75 190,409
80 Coaxial Communications/Phoenix, Company Guaranteed, Senior Notes
(Callable 12/05/02 @ $105.00) (B, B3) 8/15/06 10 68,500
280 Collins & Aikman Products Corp., Company Guaranteed, Senior Subordinated
Notes (Callable 12/05/02 @ $103.83) (B, B2) 4/15/06 11.5 233,100
2190 Comcast Cable Communications, Inc., Senior Notes (BBB, Baa3) 1/30/11 6.75 2,093,699
455 ConAgra Foods, Inc., Notes (BBB+, Baa1) 9/15/11 6.75 514,360
530 ConAgra Foods, Inc., Notes (BBB+, Baa1) 9/15/30 8.25 672,777
10 Conoco Funding Co., Global Company Guaranteed (A-, A3) 10/15/11 6.35 11,020
Credit Suisse Investment Grade Bond Fund into Credit Suisse Fixed Income Fund
Pro Forma Combined Schedule of Investments
As of October 31, 2002 (unaudited)
Maturity
Par Security Name Ratings** Date Rate Market Value
--- ------------- --------- ---- ---- ------------
$2075 Conoco Funding Co., Global Company Guaranteed (A-, A3) 10/15/31 7.25 $2,364,743
80 Conoco, Inc., Senior Global Notes (A-, A3) 4/15/09 6.35 88,480
1690 Consolidated Natural Gas Co., Senior Notes (BBB+, A3) 4/15/11 6.85 1,821,053
415 Countrywide Home Loans, Inc., Global Company Guaranteed (A, A3) 6/15/04 6.85 438,252
570 Countrywide Home Loans, Inc., Global Company Guaranteed (A, A3) 2/1/07 5.5 593,291
440 Countrywide Home Loans, Inc., Global Company Guaranteed (A, A3) 5/15/07 5.625 461,062
1500 Cox Communications, Inc., Notes (BBB, Baa2) 11/1/10 7.75 1,607,203
1600 CSC Holdings, Inc., Series B, Senior Notes (BB-, B1) 4/1/11 7.625 1,316,000
100 CSC Holdings, Inc., Series B, Senior Notes (BB-, B1) 7/15/09 8.125 83,500
175 DaimlerChrylser NA Holding Corp., Company Guaranteed, Global Notes (BBB+, A3) 1/15/12 7.3 189,782
50 DaimlerChrysler NA Holding Corp., Global Company Guaranteed (BBB+, A3) 6/15/10 8 56,274
180 Deutsche Telekom International Finance BV (BBB+, Baa1) 6/15/05 8.25 194,124
160 Dayton Superior Corp., Company Guaranteed Notes (Callable 06/15/07 @
$102.17) (B-, Caa2) 6/15/09 13 125,600
230 Denbury Management, Inc., Company Guaranteed, Senior Subordinated Notes
(Callable 03/01/03 @ $104.50) (B, B3) 3/1/08 9 235,175
Devon Energy Corp., Debentures (BBB, Baa2) 4/15/32 7.95 680,538
510 Devon Financing Corp. ULC, Global Company Guaranteed (BBB, Baa2) 9/30/11 6.875 566,931
80 DIVA Systems Corp., Series B, Senior Discount Notes (Callable 03/01/03 @
$106.31)0 (NA, NR) 3/1/08 12.625 1,200
475 Dominion Resources, Inc. (BBB+, Baa1) 6/15/10 8.125 532,152
700 El Paso Corp., Rule 144A, Private Placement, Notes ++ (BBB-, Baa3) 6/15/12 7.875 469,820
625 Energy East Corp., Notes (BBB, Baa2) 6/15/12 6.75 668,940
1030 Enterprise Products Partners LP, Company Guaranteed (BBB, Baa2) 2/1/11 7.5 1,021,431
675 EOP Operating LP, Notes (BBB+, Baa1) 6/15/04 6.5 704,803
500 EOP Operating LP, Senior Notes (BBB+, Baa1) 2/15/05 6.625 529,017
110 Extendicare Health Services, Inc., Company Guaranteed (Callable 12/15/02
@ $104.67) (CCC+, B3) 12/15/07 9.35 95,150
20 Fisher Scientific International, Senior Subordinated Notes (Callable
02/01/03 @ $104.50) (B, B3) 2/1/08 9 20,800
130 Fleming Companies, Inc., Company Guaranteed (Callable 06/15/06 @ $104.62) (B+, B2) 6/15/10 9.25 107,250
145 Fleming Companies, Inc., Global Company Guaranteed (Callable 04/01/05 @
$105.06) (BB-, B2) 4/1/08 10.125 123,975
170 Flextronics International, Ltd., Yankee Senior Subordinated Notes
(Callable 07/01/05 @ $104.94) (BB-, Ba2) 7/1/10 9.875 177,650
140 Ford Motor Credit Co., Global Bonds (BBB+, A3) 2/1/11 7.375 125,304
2920 Ford Motor Credit Co., Global Notes (BBB, A3) 2/1/06 6.875 2,693,984
1290 Ford Motor Credit Co., Global Notes (BBB, A3) 10/28/09 7.375 1,169,288
115 Ford Motor Credit Co., Global Notes (BBB, A3) 10/25/11 7.25 100,643
170 General Motors Acceptance Corp., Global Notes (BBB, A2) 1/15/06 6.75 168,525
150 General Motors Acceptance Corp., Global Notes (NR, A2) 8/28/07 6.125 144,248
3270 General Motors Corp., Global Notes (BBB, A3) 1/15/11 7.2 3,079,850
270 General Motors Corp., Series MTN, Notes (BBB, A2) 5/16/05 5.25 264,206
290 Georgia-Pacific Corp., Senior Notes (BB+, Ba1) 5/15/31 8.875 223,868
280 Hard Rock Hotel, Inc., Series B, Senior Subordinated Notes (Callable
12/05/02 @ $104.62) (B-, Caa1) 4/1/05 9.25 277,900
90 HCA, Inc. (BBB-, Ba1) 9/1/10 8.75 100,307
235 HCA, Inc., Notes (BBB-, Ba1) 6/15/05 6.91 247,023
1395 HCA, Inc., Notes (BBB-, Ba1) 7/1/07 7 1,481,251
530 Hilton Hotels Corp., Notes (BBB-, Ba1) 2/15/11 8.25 541,495
135 Hockey Co. & Sports Maska, Inc., Senior Secured, Global Notes, Units
(Callable 04/15/06 @ $105.62) (NA, B2) 4/15/09 11.25 129,600
50 Horseshoe Gaming Holding Corp., Series B, Company Guaranteed (Callable
05/15/04 @ $104.31) (B+, B2) 5/15/09 8.625 52,875
1760 Household Finance Corp., Global Notes (A-, A2) 1/30/07 5.75 1,566,853
60 Insight Midwest, Global Senior Notes (Callable 11/01/05 @ $105.25) (B+, B2) 11/1/10 10.5 52,200
40 Insight Midwest, Senior Notes (Callable 10/01/04 @ $104.88) (B+, B2) 10/1/09 9.75 34,200
100 Iron Mountain, Inc., Company Guaranteed (Callable 04/01/06 @ $104.31) (B, B2) 4/1/13 8.625 104,750
200 Isle of Capri Casinos, Inc., Company Guaranteed (Callable 04/15/04 @
$104.38) (B, B2) 4/15/09 8.75 201,000
515 ITT Corp. (BBB-, Ba1) 11/15/05 6.75 499,952
35 James Cable Partners LP, Series B, Senior Notes (Callable 12/05/02 @
$102.69) (NR, Ca) 8/15/04 10.75 17,325
110 KB Home, Senior Subordinated Notes (Callable 02/15/06 @ $104.75) (BB-, Ba3) 2/15/11 9.5 114,675
215 Kerzner International, Ltd., Global Company Guaranteed, Senior
Subordinated Notes (Callable 08/15/06 @ $104.44) (B+, B2) 8/15/11 8.875 217,150
1,025 KeySpan Corp., Senior Notes (A, A3) 11/15/30 8 1,233,537
215 La Petite Academy, Inc., Series B, Company Guaranteed (Callable 05/15/03
@ $105.00) (CC, Ca) 5/15/08 10 112,875
215 Land O' Lakes, Inc., Global Senior Notes (Callable 11/15/06 @ $104.38) (B+, B2) 11/15/11 8.75 119,325
300 Leslie's Poolmart, Senior Notes (Callable 12/05/02 @ $102.59) (B-, B3) 7/15/04 10.375 280,125
10 Level 3 Communications, Inc., Senior Notes (Callable 05/01/03 @ $104.56) (CC, Caa3) 5/1/08 9.125 5,700
125 Levi Strauss & Co., Notes (BB-, Caa1) 11/1/06 7 106,250
140 Lin Televison Corp., Company Guaranteed (Callable 03/01/03 @ $104.19) (B-, B3) 3/1/08 8.375 145,950
845 Lockheed Martin Corp., Bonds (BBB, Baa2) 12/1/29 8.5 1,092,314
195 Lucent Technologies, Inc., Notes (B-, Caa1) 7/15/06 7.25 98,475
290 Magellan Health Services, Inc., Senior Subordinated Notes (Callable
02/15/03 @ $104.50) (CC, Ca) 2/15/08 9 50,750
370 Magnum Hunter Resources, Inc., Company Guaranteed (Callable 12/05/02
@ $105.00) (B+, B2) 6/1/07 10 386,650
325 Majestic Investor Holdings, Company Guaranteed, Senior Secured Notes
(Callable 11/30/05 @ $105.83) (B, B2) 11/30/07 11.653 284,781
20 Mandalay Resort Group, Senior Subordinated Notes (Callable 12/01/02 @
$104.62) (BB-, Ba3) 12/1/05 9.25 20,750
295 Metaldyne Corp., Rule 144A, Private Placement, Senior Subordinated Notes
(Callable 06/15/07 @ $105.50) ++ (B, B3) 6/15/12 11 210,925
30 MGM Mirage, Inc., Company Guaranteed (BB+, Ba2) 6/1/07 9.75 33,150
50 Mission Resources Corp., Series C, Global Company Guaranteed (Callable
12/05/02 @ $105.44) (B-, Caa1) 4/1/07 10.875 30,250
315 Mississippi Chemical Corp., Bonds (CCC, Caa2) 11/15/17 7.25 58,275
490 Mohegan Tribal Gaming, Global Senior Subordinated Notes (Callable
Credit Suisse Investment Grade Bond Fund into Credit Suisse Fixed Income Fund
Pro Forma Combined Schedule of Investments
As of October 31, 2002 (unaudited)
Maturity
Par Security Name Ratings** Date Rate Market Value
--- ------------- --------- ---- ---- ------------
07/01/06 @ $104.19) (BB-, Ba3) 7/1/11 8.375 $514,500
$105 Morgan Stanley Dean Witter, Global Unsubordinated (A+, Aa3) 4/15/06 6.1 112,828
60 Motors & Gears, Inc., Series D, Senior Notes (Callable 12/05/02 @
$105.38) (B-, Caa1) 11/15/06 10.75 51,300
180 NBTY, Inc., Series B, Senior Subordinated Notes (Callable 12/05/02 @
$104.31) (B+, B1) 9/15/07 8.625 181,800
840 News America Holdings, Inc., Company Guaranteed (BBB-, Baa3) 2/1/13 9.25 951,001
1340 News America Holdings, Inc., Debentures (BBB-, Baa3) 8/10/18 8.25 1,309,745
85 Nextel Communications, Inc., Senior Discount Notes (Callable 02/15/03 @
$104.97) + (B, B3) 2/15/08 9.95 72,463
960 Nextel Communications, Inc., Senior Notes (Callable 11/15/04 @ $104.688) (B, B3) 11/15/09 9.375 828,000
1290 Nextlink Communications, Senior Discount Notes (Callable 12/01/04 @
$106.06)0 (NR, Ca) 12/1/09 9.45 9,675
1805 Nextlink Communications, Senior Notes (Callable 12/01/04 @ $105.25) (NR, Ca) 12/1/09 10.5 13,538
585 Norsk Hydro A/S, Yankee Debentures (A, A2) 6/15/23 7.75 687,743
400 Nortek, Inc., Series B, Global Senior Subordinated Notes (Callable
06/15/06 @ $104.94) (B-, B3) 6/15/11 9.875 379,000
70 Northland Cable Television, Company Guaranteed, Senior Subordinated Notes
(Callable 12/05/02 @ $105.12) (CC, Caa1) 11/15/07 10.25 40,250
30 Ocean Energy, Inc., Series B, Company Guaranteed (Callable 07/01/03 @
$104.19) (BB+, Ba1) 7/1/08 8.375 31,650
605 Oncor Electric Delivery Co., Rule 144A, Private Placement, Senior Secured
Notes ++ (BBB, A3) 5/1/12 6.375 616,629
200 Owens-Brockway Glass Containers, Global Company Guaranteed (Callable
02/15/06 @ $104.44) (BB, B2) 2/15/09 8.875 206,500
150 Owens-Illinois, Inc., Senior Notes (B+, B3) 5/15/08 7.35 134,625
240 Packaged Ice, Inc., Series B, Company Guaranteed, Senior Unsecured Notes
(Callable 12/05/02 @ $104.88) (B-, Caa3) 2/1/05 9.75 178,800
70 Park Place Entertainment Corp., Senior Notes (BBB-, Ba1) 11/15/06 8.5 72,876
1495 Park Place Entertainment Corp., Senior Subordinated Notes (BB+, Ba2) 12/15/05 7.875 1,506,213
55 Parker Drilling Co., Series B, Senior Notes, Company Guaranteed (Callable
11/15/04 @ $105.06) (B+, B1) 11/15/09 10.125 53,625
320 Penn National Gaming, Inc., Company Guaranteed (Callable 03/15/06 @
$104.44) (B-, B3) 3/15/10 8.875 324,000
2110 Petronas Capital Ltd., Rule 144A, Private Placement, Company
Guaranteed ++ (BBB+, Baa1) 5/22/22 7.875 2,190,790
2035 PG&E National Energy Group, Global Senior Notes 0 (D, Ca) 5/16/11 10.375 437,525
280 Prime Hospitality Corp., Series B, Global Senior Subordinated Notes
(Callable 05/01/07 @ $104.19) (B+, B1) 5/1/12 8.375 256,200
1180 Progress Energy, Inc., Senior Notes (BBB, Baa1) 3/1/06 6.75 1,213,194
1080 Progress Energy, Inc., Senior Notes (BBB, Baa1) 3/1/31 7.75 1,064,599
855 PSEG Power LLC, Global Company Guaranteed (BBB, Baa1) 4/15/06 6.875 795,859
380 PSEG Power LLC, Rule 144A, Private Placement, Notes ++ (BBB, Baa1) 6/1/12 6.95 331,260
300 Riviera Holdings Corp., Rule 144A, Private Placement, Company Guaranteed
(Callable 06/15/06 @ $105.50) ++ (B+, B2) 6/15/10 11 275,250
75 Ryland Group, Senior Notes (Callable 09/01/05 @ $104.88) (BB+, Ba2) 9/1/10 9.75 81,562
620 Safeway, Inc., Senior Debentures (BBB, Baa2) 2/1/31 7.25 680,127
715 Safeway, Inc., Senior Notes (BBB, Baa2) 9/15/04 7.25 773,087
135 Salem Communications Corp., Series B, Company Guaranteed, Senior
Subordinated Notes (Callable 12/05/02 @ $104.75) (B-, B3) 10/1/07 9.5 140,738
140 Sbarro, Inc., Company Guaranteed, Senior Notes (Callable 09/15/04 @
$105.50) (B+, B2) 9/15/09 11 125,300
120 Scotts Co., Company Guaranteed (Callable 01/15/04 @ $104.31) (B+, B2) 1/15/09 8.625 125,400
30 Sequa Corp., Senior Notes (BB-, Ba3) 8/1/09 9 25,350
95 Sequa Corp., Series B, Senior Notes (BB-, Ba3) 4/1/08 8.875 80,275
140 Simmons Co., Series B, Senior Subordinated Notes (Callable 03/15/04 @
$105.12) (B-, B2) 3/15/09 10.25 149,800
144 Southwest Royalties, Inc., Company Guaranteed (Callable 12/05/02 @
$100.00) (CCC-, NA) 6/30/04 10.5 143,820
41 Southwest Royalties, Inc., Company Guaranteed, Senior Secured Notes
(Callable 12/05/02 @ $100.00) (CCC-, NA) 6/30/04 10.5 41,000
250 Sovereign Bancorp, Inc., Senior Notes (BBB-, Ba2) 11/15/06 10.5 280,000
205 Sprint Capital Corp. (BBB-, Baa3) 1/30/11 7.625 165,422
610 Sprint Capital Corp., Global Company Guaranteed (BBB-, Baa3) 1/15/07 6 492,722
1855 Sprint Capital Corp., Senior, Global Company Guaranteed (BBB-, Baa3) 11/15/28 6.875 1,232,915
1810 Starwood Hotels & Resorts Worldwide, Inc., Rule 144A, Private Placement,
Notes ++ (BBB-, Ba1) 5/1/07 7.375 1,737,600
120 Stater Brothers Holdings, Inc., Senior Notes (Callable 08/15/03 @
$105.38) (B-, B2) 8/15/06 10.75 121,800
380 Stone Container Corp., Global Senior Notes (Callable 07/01/07 @ $104.19) (B, B2) 7/1/12 8.375 393,300
306 TeleCorp PCS, Inc., Company Guaranteed, Senior Subordinated Notes
(Callable 04/15/04 @ $105.81) + (BBB, Baa2) 4/15/09 11.625 255,510
495 Tennessee Gas Pipeline Co., Debentures (BBB, Baa2) 4/1/17 7.5 446,620
350 Tennessee Gas Pipeline Co., Debentures (BBB, Baa2) 10/15/28 7 298,468
660 Tesoro Petroleum Corp., Global Senior Subordinated Notes
(Callable 04/01/07 @ $104.81) (B, B2) 4/1/12 9.625 339,900
345 The Boeing Co., Debentures (A+, A2) 8/15/42 7.5 227,840
1335 Tyson Foods, Inc., Global Notes (BBB, Baa3) 10/1/04 6.625 1,411,362
110 U.S. Unwired, Inc., Series B, Company Guaranteed, Senior Discount Notes
(Callable 11/01/04 @ $106.69) + (CCC+, Caa2) 11/1/09 13.375 8,800
160 Unisys Corp., Senior Notes (BB+, Ba1) 1/15/05 7.25 160,800
2256 Verizon Global Funding Corp., Global Notes (A+, A1) 6/15/12 6.875 2,411,664
550 Verizon Global Funding Corp., Global Notes (A+, A1) 9/1/12 7.375 606,652
1640 Verizon Global Funding Corp., Global Notes (A+, A1) 12/1/30 7.75 1,763,566
445 Verizon Global Funding Corp., Global Notes (A+, A1) 6/15/32 7.75 479,073
225 Verizon New York, Inc. (A+, A1) 4/1/12 6.875 241,116
2340 Verizon Wireless, Inc., Rule 144A, Private Placement Notes ++ (A+, A2) 12/15/06 5.375 2,312,903
610 Viacom, Inc., Global Company Guaranteed (A-, A3) 8/15/12 5.625 636,486
650 Voicestream Wireless Corp., Senior Discount Notes (Callable 11/15/04 @
$105.94) + (A-, Baa2) 11/15/09 11.875 542,750
370 Voicestream Wireless Corp., Senior Notes (Callable 11/15/04 @ $105.19) (A-, Baa2) 11/15/09 10.375 382,950
Credit Suisse Investment Grade Bond Fund into Credit Suisse Fixed Income Fund
Pro Forma Combined Schedule of Investments
As of October 31, 2002 (unaudited)
Maturity
Par Security Name Ratings** Date Rate Market Value
--- ------------- --------- ---- ---- ------------
$340 Walt Disney Co., Global Notes (BBB+, Baa1) 3/1/12 6.375 $364,595
885 Washington Mutual, Inc., Global Senior Notes (BBB+, A3) 1/15/07 5.625 938,826
130 Waste Management, Inc., Notes (BBB, Ba1) 4/30/04 8 134,239
1095 Waste Management, Inc., Rule 144A, Private Placements, Bonds ++ (BBB, Ba1) 5/15/32 7.75 1,073,218
570 Waste Management, Inc., Senior Notes (BBB, Ba1) 8/1/10 7.375 599,506
170 Werner Holding Co., Inc., Series A, Company Guaranteed (Callable
12/05/02 @ $105.00) (B-, B2) 11/15/07 10 160,650
190 Western Gas Resources, Inc., Company Guaranteed (Callable 06/15/04 @
$105.00) (BB-, Ba3) 6/15/09 10 200,450
85 Westpoint Stevens, Inc., Senior Notes (CCC+, Ca) 6/15/05 7.875 25,925
920 Williams Companies, Inc., Notes (B, B1) 9/1/21 7.875 519,800
665 Williams Companies, Inc., Notes (B, B1) 6/15/31 7.75 369,075
340 Windsor Woodmont Black Hawk, Series B, First Mortgage (Callable 12/05/02
@ $113.00)0 (NR, NA) 3/15/05 13 222,700
940 XO Communications, Inc., Senior Discount Notes (Callable 04/15/03 @
$104.72) (NA, Ca) 4/15/08 9.45 7,050
240 Yum! Brands, Inc., Senior Notes (BB, Ba1) 7/1/12 7.7 249,600
ASSET BACKED SECURITIES (3.9%)
535 Chase Credit Card Master Trust, Series 2000-2 Class A (AAA, Aaa) 7/15/05 1.903 535,019
900 Chase Credit Card Master Trust, Series 2001-1, Class A (AAA, Aaa) 6/15/07 1.973 903,055
1235 CNH Equipment Trust, Series 2002-A, Class A3 (AAA, Aaa) 7/17/06 2.073 1,239,329
700 DaimlerChrylser Master Owner Trust, Series 2002-A, Class A (AAA, Aaa) 5/15/07 1.883 700,286
1520 Discover Card Master Trust I, Series 1999-5, Class A (AAA, Aaa) 12/18/06 1.983 1,522,975
102 Donaldson Lufkin & Jenrette, Inc., Series 1989-1, Class F (AAA, Aaa) 8/1/19 11 117,812
500 Embarcadero Aircraft Secs Trust (BBB, A3) 8/15/25 1.803 400,000
370 First USA Credit Card Master Trust, Series 2001-4 Class A (AAA, Aaa) 1/12/09 1.94 370,625
650 Fleet Credit Master Trust II, Series 2002-A, Class A (AAA, Aaa) 10/15/07 1.873 650,271
885 Ford Credit Floorplan Master Owner Trust, Series 2001-1, Class A (AAA, Aaa) 7/17/06 1.913 886,338
915 LB-UBS Commerical Mortgage Trust, Series 2002-C2, Class A4 (AAA, Aaa) 6/15/31 5.594 966,414
695 MBNA Master Credit Card Trust, Series 1996-M, Class A (AAA, Aaa) 4/15/09 1.88 695,998
1205 MMCA Automobile Trust, Series 2002-2, Class A3 (AAA, Aaa) 7/17/06 3.67 1,235,142
339 Morgan Stanley Mortgage Trust, Series 40, Class 8 (AAA, NR) 7/20/21 7 339,797
493 Small Business Administration, Series 1992-20D, Class 1 (NA, Aaa) 4/1/12 8.2 539,628
MORTGAGE-BACKED SECURITIES (47.7%)
4635 Bear Stearns Commercial Mortgage Securities, Inc., Series 2002-TOP6,
Class A2 (AAA, Aaa) 10/15/36 6.46 5,172,963
125 Chase Funding Mortgage Loan, Series 2002-2, Class 1A4 (AAA, Aaa) 8/25/28 4.877 128,331
690 Fannie Mae (AAA, Aaa) 12/10/07 6.56 693,288
2700 Fannie Mae, Global Notes (AAA, Aaa) 3/15/05 3.875 2,813,940
80 Fannie Mae, Global Notes (AAA, Aaa) 4/15/07 5.25 87,227
4905 Fannie Mae, Global Notes (AAA, Aaa) 3/15/12 6.125 5,513,906
336 Fannie Mae, Pool #498569 (AAA, Aaa) 5/1/29 7.5 356,062
415 Fannie Mae, Pool #252492 (AAA, Aaa) 5/1/29 7.5 438,800
214 Fannie Mae, Pool #252874 (AAA, Aaa) 11/1/29 7.5 226,854
263 Fannie Mae, Pool #253183 (AAA, Aaa) 4/1/30 7.5 278,870
237 Fannie Mae, Pool #270674 (AAA, Aaa) 9/1/17 9 262,479
256 Fannie Mae, Pool #499251 (AAA, Aaa) 7/1/29 7 267,494
430 Fannie Mae, Pool #501931 (AAA, Aaa) 2/1/30 7 449,854
12 Fannie Mae, Pool #503857 (AAA, Aaa) 7/1/29 7.5 12,641
155 Fannie Mae, Pool #515160 (AAA, Aaa) 9/1/29 7.5 163,594
9 Fannie Mae, Pool #517826 (AAA, Aaa) 2/1/30 7 9,196
11 Fannie Mae, Pool #521146 (AAA, Aaa) 12/1/29 7 11,075
19 Fannie Mae, Pool #524164 (AAA, Aaa) 11/1/29 7 19,856
99 Fannie Mae, Pool #524946 (AAA, Aaa) 3/1/30 8 105,635
54 Fannie Mae, Pool #530172 (AAA, Aaa) 3/1/30 7.5 56,733
86 Fannie Mae, Pool #532011 (AAA, Aaa) 3/1/30 7.5 90,728
155 Fannie Mae, Pool #533091 (AAA, Aaa) 3/1/30 7.5 164,321
20 Fannie Mae, Pool #533421 (AAA, Aaa) 3/1/30 8 21,710
206 Fannie Mae, Pool #533440 (AAA, Aaa) 1/1/30 8 220,295
57 Fannie Mae, Pool #533714 (AAA, Aaa) 3/1/30 8 60,457
87 Fannie Mae, Pool #447109 (AAA, Aaa) 11/1/29 7.5 92,279
14 Fannie Mae, Pool #504305 (AAA, Aaa) 8/1/29 7.5 15,234
40 Fannie Mae, Pool #504338 (AAA, Aaa) 10/1/29 7.5 42,624
8 Fannie Mae, Pool #504669 (AAA, Aaa) 10/1/29 7.5 8,847
15 Fannie Mae, Pool #504672 (AAA, Aaa) 10/1/29 7.5 16,229
188 Fannie Mae, Pool #533440 (AAA, Aaa) 1/1/30 8 201,700
74 Fannie Mae, Pool #533714 (AAA, Aaa) 3/1/30 8 79,061
5440 Fannie Mae, Pool #650077 (AAA, Aaa) 7/1/32 7.5 5,756,575
276 Fannie Mae, Series 1999-52, Class TC (AAA, Aaa) 5/25/22 7 276,399
70 Fannie Mae Pool #004542 (AAA, Aaa) 12/1/08 12 76,095
16 Fannie Mae Pool #035574 (AAA, Aaa) 10/1/08 8.75 17,200
1 Fannie Mae Pool #076368 (AAA, Aaa) 9/1/03 9.25 989
605 Fannie Mae Pool #124211 (AAA, Aaa) 12/1/21 5.412 618,489
203 Fannie Mae Pool #124790 (AAA, Aaa) 2/1/23 9 224,259
265 Fannie Mae Pool #125136 (AAA, Aaa) 7/1/07 8 281,117
85 Fannie Mae Pool #243876 (AAA, Aaa) 1/1/09 9 89,636
259 Fannie Mae Pool #507037 (AAA, Aaa) 8/1/29 7.5 274,337
33 Fannie Mae Pool #508801 (AAA, Aaa) 8/1/29 7.5 35,020
74 Fannie Mae Pool #515542 (AAA, Aaa) 10/1/29 8 79,088
174 Fannie Mae Pool #515943 (AAA, Aaa) 10/1/29 7.5 184,211
2 Fannie Mae Pool #515955 (AAA, Aaa) 10/1/29 7.5 2,495
25 Fannie Mae Pool #516832 (AAA, Aaa) 1/1/30 7.5 26,814
270 Fannie Mae Pool #517894 (AAA, Aaa) 3/1/30 7.5 286,253
11 Fannie Mae Pool #521205 (AAA, Aaa) 12/1/29 7.5 12,143
37 Fannie Mae Pool #521369 (AAA, Aaa) 12/1/29 7 38,377
38 Fannie Mae Pool #523929 (AAA, Aaa) 11/1/29 7.5 40,487
75 Fannie Mae Pool #527587 (AAA, Aaa) 12/1/29 7.5 79,830
Credit Suisse Investment Grade Bond Fund into Credit Suisse Fixed Income Fund
Pro Forma Combined Schedule of Investments
As of October 31, 2002 (unaudited)
Maturity
Par Security Name Ratings** Date Rate Market Value
--- ------------- --------- ---- ---- ------------
$13 Fannie Mae Pool #527805 (AAA, Aaa) 3/1/30 7.5 $13,878
77 Fannie Mae Pool #528126 (AAA, Aaa) 3/1/30 7.5 81,338
34 Fannie Mae Pool #528289 (AAA, Aaa) 3/1/30 7.5 35,870
6 Fannie Mae Pool #528508 (AAA, Aaa) 2/1/30 7.5 6,639
19 Fannie Mae Pool #528800 (AAA, Aaa) 1/1/30 7 19,945
184 Fannie Mae Pool #528803 (AAA, Aaa) 1/1/30 7.5 195,260
17 Fannie Mae Pool #529210 (AAA, Aaa) 2/1/30 7.5 18,437
61 Fannie Mae Pool #531075 (AAA, Aaa) 2/1/30 8 65,074
25 Fannie Mae Pool #532496 (AAA, Aaa) 3/1/30 7.5 26,315
195 Fannie Mae Pool #533026 (AAA, Aaa) 3/1/30 8 208,630
365 Fannie Mae Pool #533033 (AAA, Aaa) 3/1/30 8 390,445
110 Fannie Mae Pool #533586 (AAA, Aaa) 3/1/30 7.5 115,961
103 Fannie Mae Pool #534125 (AAA, Aaa) 3/1/30 7.5 108,603
159 Fannie Mae Pool #535083 (AAA, Aaa) 12/1/29 7.5 168,062
1840 Fannie Mae Pool #535101 (AAA, Aaa) 8/1/13 6.5 1,938,742
111 Fannie Mae Pool #535159 (AAA, Aaa) 2/1/30 7 116,003
430 Fannie Mae, Pool #662830 (AAA, Aaa) 10/1/32 7.5 454,985
2175 Fannie Mae Pool #653373 (AAA, Aaa) 9/1/32 7.5 2,301,437
1470 Fannie Mae TBA (AAA, Aaa) 11/1/17 6.5 1,543,956
3,660 Fannie Mae TBA (AAA, Aaa) 11/1/26 8 3,913,931
1850 Fannie Mae TBA (AAA, Aaa) 11/1/28 7 1,933,250
1520 Fannie Mae TBA (AAA, Aaa) 11/1/29 6 1,562,742
2075 Fannie Mae TBA (AAA, Aaa) 11/1/29 6.5 2,150,219
9560 Fannie Mae TBA (AAA, Aaa) 11/1/32 6 9,828,827
4900 Fannie Mae TBA (AAA, Aaa) 11/1/32 6.5 5,146,519
13040 Fannie Mae TBA (AAA, Aaa) 11/1/32 6.5 13,512,700
15355 Fannie Mae TBA (AAA, Aaa) 11/1/32 7 16,045,975
1840 Fannie Mae TBA (AAA, Aaa) 11/1/32 7.5 1,946,374
21160 Fannie Mae TBA (AAA, Aaa) 11/1/32 8 22,628,081
661 Freddie Mac Pool #292065 (AAA, Aaa) 4/1/20 8.5 716,578
404 Freddie Mac Pool #606523 (AAA, Aaa) 10/1/19 5.658 414,156
8 Ginnie Mae Pool #058985 (AAA, Aaa) 7/15/13 11 9,761
10 Ginnie Mae Pool #068764 (AAA, Aaa) 9/15/13 12 12,138
76 Ginnie Mae Pool #093401 (AAA, Aaa) 1/15/10 9.5 85,017
2 Ginnie Mae Pool #296254 (AAA, Aaa) 9/15/20 9.5 2,392
3278 Ginnie Mae Pool #508483 (AAA, Aaa) 5/15/31 7 3,444,109
1004 Ginnie Mae Pool #545822 (AAA, Aaa) 6/15/31 7.5 1,067,696
7705 Ginnie Mae TBA (AAA, Aaa) 11/1/17 7 8,092,654
1575 J.P. Morgan Chase Commercial Mortgage Securities, Series 2002-CIB4,
Class A3 (NA, Aaa) 5/12/34 6.162 1,716,825
1215 LB Commercial Conduit Mortgage Trust, Series 1999-C2, Class A1 (NA, Aaa) 10/15/32 7.105 1,339,938
FOREIGN BONDS (2.7%)
110 British Telecommunications PLC, Global Notes (Great Britian) (A-, Baa1) 12/15/05 7.625 122,848
1325 British Telecommunications PLC, Global Bonds (United Kingdom) (A-, Baa1) 12/15/30 8.875 1,604,787
440 France Telecom SA, Global Notes (BBB-, Baa3) 3/1/06 8.7 471,786
410 Government of Russia (NA, NA) 5/14/08 3 309,550
90 Intrawest Corp., Rule 144A, Private Placement, Senior Notes (Callable
02/01/05 @ $105.25) (Canada) ++ (B+, B1) 2/1/10 10.5 90,900
180 Intrawest Corp., Yankee Senior Notes (Callable 02/01/05 @ $105.25)
(Canada) (B+, B1) 2/1/10 10.5 181,800
1010 Republic of Philippines, Series B, Restructured Debt, Foreign Government
Guaranteed (Callable 06/02/03 @ $100.00) (Philippines) (BB+, Ba1) 12/1/17 6.5 933,509
65 Rogers Communications, Inc., Yankee Senior Notes (Callable 12/05/02 @
$103.04) (BB-, Ba1) 1/15/06 9.125 55,006
1165 Royal Bank of Scotland Group PLC, Series 3, Perpetual Global Bonds
(Callable 12/31/05 @ $100.00) (United Kingdom) (A-, A1) 11/29/49 7.816 1,310,012
300 TELUS Corp., Yankee Notes (Canada) (BBB, Ba1) 6/1/07 7.5 249,000
1385 TELUS Corp., Yankee Notes (Canada) (BBB, Ba1) 6/1/11 8 1,073,375
UNITED STATES TREASURY OBLIGATIONS (3.4%)
490 United States Treasury Bills +++ (AAA, Aaa) 2/13/03 1.59 488,046
1980 United States Treasury Bonds (AAA, Aaa) 2/15/31 5.375 2,090,526
2757 United States Treasury Notes (AAA, Aaa) 1/15/08 3.625 2,988,578
3302 United States Treasury Notes (AAA, Aaa) 1/15/10 4.25 3,728,990
1603 United States Treasury Notes (AAA, Aaa) 7/15/12 3 1,685,712
1315 United States Treasury Notes (AAA, Aaa) 8/15/12 4.375 1,365,546
SHARES
------
COMMON STOCKS (0.0%)
2156 Southwest Royalties, Inc., Class A *^ (Cost $71,271) 0 1/0/00 0 32,620
WARRANTS (0.0%)
2665 Dayton Superior Corp., Wts., Rule 144A, strike $0.01, expires
June 2009 * ++ 26
40 GT Group Telecom, Inc., Rule 144A, expires February 2010 * ++ 40
070 IWO Holdings, Inc., Rule 144A, strike $7.00, expires January 2011 * ++ 0
PARSHORT-TERM INVESTMENT (34.6%)
41805 Federal Home Loan Bank, Discount Notes (1) (AAA , Aaa) 11/1/02 1.5 41,805,000
29695 Federal Home Loan Bank, Discount Notes (1) (AAA , Aaa) 11/1/02 1.69 29,695,000
18271 State Street Bank & Trust Co. Euro Time Deposit 11/1/02 1.75 18,271,000
------------
TOTAL INVESTMENTS AT VALUE (Cost $356,465,571) $350,394,349
============
TBA To Be Announced
** Credit Ratings given by Standard & Poor's Ratings Group and Moody's
Investor Services, Inc. are unaudited.
* Non Income producing security
+ Step bond - The interest as of October 31, 2002 is 0% and will reset to the
interest rate shown at a future date.
++ Security exempt from registration under rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
+++ Collateral segregated for futures
^ Not readily marketable; security is valued in good faith by the Board of
Trustees/Directors
1 Collateral segregated for TBA securities
0 Bond is currently in default
PRO FORMA COMBINED STATEMENT OF OPERATIONS
AS OF OCTOBER 31, 2002 (UNAUDITED)
ACQUIRED FUND ACQUIRING FUND
------------- --------------
CREDIT SUISSE
INVESTMENT CREDIT SUISSE
GRADE BOND FIXED INCOME
FUND FUND ADJUSTMENTS PRO-FORMA
---------- ------------- ----------- ------------
INVESTMENT INCOME
Dividends....................................... $ -- $ -- -- $ --
Interest........................................ 2,477,922 17,083,744 -- 19,561,666
Securities Lending.............................. 2,688 12,969 -- 15,657
Foreign tax withheld............................ -- (9,261) -- (9,261)
---------- ------------- ---------- ------------
Total Investment Income....................... 2,480,610 17,087,452 -- 19,568,062
---------- ------------- ---------- ------------
EXPENSES
Investment advisory services.................... 235,329 1,529,324 63(e) 1,764,716
Distribution fees - Class A..................... 242 4,182 116,551(f) 120,975
Distribution fees - Class B..................... 2,941 29,042 10(g) 31,993
Distribution fees - Class C..................... 543 7,721 1(h) 8,265
Distribution fees - Common Class................ -- -- -- --
Distribution fees - Advisor Class............... -- 88,735 88,738(i) 177,473
Transfer agent.................................. 53,055 318,114 (36,791)(j) 334,378
Custodian....................................... 14,351 63,917 (4,181)(k) 74,087
Administrative and accounting fees.............. 85,216 526,133 (43,110)(l) 568,239
Registration fees............................... 68,318 124,456 (68,318)(m) 124,456
Interest ....................................... 1,487 8,514 (1,487)(m) 8,514
Legal........................................... 59,391 51,016 (59,391)(m) 51,016
Directors'/Trustees' fees....................... 14,790 15,526 (14,790)(m) 15,526
Audit........................................... 14,676 33,675 (14,676)(m) 33,675
Printing........................................ 53,172 112,679 (53,172)(m) 112,679
Insurance expense............................... 4,515 13,024 (4,515)(m) 13,024
Miscellaneous................................... 9,047 7,905 (9,047)(m) 7,905
---------- ------------- ---------- ------------
617,073 2,933,963 (104,116) 3,446,920
Less: Expenses waived and reimbursed by CSAM.... (330,953) (663,228) 356,569(n) (637,612)
Less: Expenses offset by Transfer Agent......... -- -- -- --
---------- ------------- ---------- ------------
Net Expenses.................................... 286,120 2,270,735 252,453 2,809,308
---------- ------------- ---------- ------------
Net Investment Income.............................. 2,194,490 14,816,717 (252,453) 16,758,754
---------- ------------- ---------- ------------
NET REALIZED AND UNREALIZED GAIN/(LOSS) FROM
INVESTMENTS:
Net realized gain (loss) from investments....... 451,794 (18,211,422) -- (17,759,628)
Net realized gain (loss) from futures contracts. -- (1,478,202) -- (1,478,202)
Net realized gain from foreign currency
transactions.................................... 83,215 912,831 -- 996,046
Net change in unrealized
appreciation/(depreciation) from investments.... (3,136,932) (9,399,032) -- (12,535,964)
Net change in unrealized
appreciation/(depreciation) from futures
transactions.................................... -- 333,805 -- 333,805
Net change in unrealized
appreciation/(depreciation) from foreign currency
translations.................................... -- (1,160,737) -- (1,160,737)
---------- ------------- ---------- ----------
Net realized and unrealized loss from
investments................................... (2,601,923) (29,002,757) -- (31,604,680)
------------- ---------- ------------
Net decrease in net assets resulting from
operations.................................... $ (407,433) $ (14,186,040) $ (252,453) $(14,845,926)
========== ============= ========== ============
SEE NOTES TO PRO FORMA FINANCIAL STATEMENTS.
CREDIT SUISSE INVESTMENT GRADE BOND FUND
CREDIT SUISSE FIXED INCOME 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 Investment
Grade Bond Fund ("Investment Grade Bond") into the Credit Suisse Fixed Income
Fund ("Fixed Income"). 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 Investment Grade
Bond to Fixed Income and the subsequent liquidation of Investment Grade Bond.
The accounting survivor in the proposed merger will be Fixed Income. This is
because although Investment Grade Bond has the same investment objective as
Fixed Income, the surviving fund will invest in a style that is similar to the
way in which Fixed Income is currently operated (including hedging and
investment in debt securities).
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.
Investment Grade Bond and Fixed Income 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 Investment Grade Bond and Fixed Income.
(a) Elimination of Prepaid expenses from Investment Grade Bond.
(b) Redemption of Class A and Common Class shares from acquired fund and
purchase of Class A shares in acquiring fund.
(c) Redemption of Class B shares from acquired fund and purchase of Class B
shares in acquiring fund.
(d) Redemption of Class C shares from acquired fund and purchase of Class C
shares in acquiring fund.
(e) To adjust investment advisory services fee due to rounding effect.
(f) To increase 12B-1 fees for Class A shares due to additional assets.
(g) To increase 12B-1 fees for Class B shares due to additional assets.
(h) To increase 12B-1 fees for Class C shares due to additional assets.
(i) To increase 12B-1 fees for the Advisor Class due to an increase in the
annual rate.
(j) Adjustment based on the contractual agreement with the transfer agent
for the combined fund.
CREDIT SUISSE INVESTMENT GRADE BOND FUND
CREDIT SUISSE FIXED INCOME FUND
NOTES TO PRO FORMA FINANCIAL STATEMENTS
OCTOBER 31, 2002 (UNAUDITED)
(k) Adjustment based on the contractual agreements with the custodian for
the combined fund.
(l) Adjustment to decrease co-administration fee based upon combined
assets.
(m) Assumes elimination of duplicate charges in combination, and reflects
management's estimates of combined pro-forma operations.
(n) Adjustment to decrease Credit Suisse Asset Management waiver.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Following is a summary of significant accounting policies, which are
consistently followed by Investment Grade Bond/ Fixed Income 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 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 approximate market value, unless the Board
determines that using this method would not reflect an investment's fair 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.
FOREIGN CURRENCY TRANSACTIONS - The books and records of each Fund are
maintained in U.S. dollars. Transactions denominated in foreign currencies are
recorded at the current prevailing exchange rates. All assets and liabilities
denominated in foreign currencies are translated into U.S. dollar amounts at the
current exchange rate at the end of the period. Translation gains or losses
resulting from changes in the exchange rate during the reporting period and
realized gains and losses on the settlement of foreign currency transactions are
reported in the results of operations for the current period. Each Fund does not
isolate that portion of realized gains and losses on investments in equity
securities which is due to changes in the foreign exchange rate from that which
is due to changes in market prices of equity securities. Each Fund isolates that
portion of realized gains and losses on investments in debt securities which is
due to changes in the foreign exchange rate from that which is due to changes in
market prices of debt securities.
CREDIT SUISSE INVESTMENT GRADE BOND FUND
CREDIT SUISSE FIXED INCOME FUND
NOTES TO PRO FORMA FINANCIAL STATEMENTS
OCTOBER 31, 2002 (UNAUDITED)
FEDERAL INCOME TAXES - Investment Grade Bond and Fixed Income each
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 - Dividends from net investment income
are declared daily and paid monthly. Distributions of net realized capital
gains, if any, are declared and paid at least annually.
THE STATEMENT OF ADDITIONAL INFORMATION OF THE ACQUIRING FUND
DATED FEBRUARY 28, 2003 AND THE ANNUAL REPORT OF THE ACQUIRING FUND
DATED OCTOBER 31, 2002
THE STATEMENT OF ADDITIONAL INFORMATION OF THE ACQUIRED FUND
DATED FEBRUARY 28, 2003 AND THE ANNUAL REPORT OF THE ACQUIRED FUND
DATED OCTOBER 31, 2002
[CREDIT SUISSE ASSET MANAGEMENT LOGO]
CREDIT SUISSE FUNDS
ANNUAL REPORT
OCTOBER 31, 2002
- - CREDIT SUISSE
FIXED INCOME FUND
MORE COMPLETE INFORMATION ABOUT THE FUND, 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 800-927-2674 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 FUND'S 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 FUND'S 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 FIXED INCOME FUND
ANNUAL INVESTMENT ADVISER'S REPORT
October 31, 2002
December 2, 2002
Dear Shareholder:
For the 12 months ended October 31, 2002, the share classes of Credit Suisse
Fixed Income Fund(1) (the "Fund") generated returns as follows: Common shares
declined 4.07%, Advisor shares declined 4.31%, Class A shares(2) declined 4.27%,
Class B shares(2) declined 5.02%, and Class C shares(2) declined 5.03%. By
contrast, the Lehman Brothers U.S. Aggregate Bond Index(3) gained 5.89% and the
Lehman Brothers Intermediate Government/Corporate Bond Index(4) 5.49%.
We attribute the Fund's performance to several factors:
- At a number of points during the fiscal year, activity in the broad fixed
income market exhibited a classic "flight to quality" pattern in which
highest-quality instruments like U.S. Treasury issues and government agency
securities thrived, while comparatively risky sectors endured heavy
selling. Our holdings in non-Treasury categories like investment-grade
corporate bonds, high yield and emerging market debt dampened the Fund's
overall return accordingly.
- Early in 2002, the unfolding Enron scandal triggered anxiety about
questionable accounting practices and corporate governance issues across
financial markets. Unfortunately for the Fund, we held above-market
positions in the bonds of a handful of telecommunications and energy
companies that were tarred by the broad strokes of the Enron brush.
- In the second half of the year, performance suffered from our security
selection in the telecom and energy sectors, as well as our small
allocation to high yield. Our analysis at the time concluded that telecom's
historically generous yields offered satisfactory compensation for the
fundamental credit risk of the underlying issuers, but the sector
nonetheless crumbled under the weight of accounting-based improprieties by
companies like WorldCom and Qwest Communications International. [Note: at
October 31, the Fund did not own securities of WorldCom or Qwest.] Bonds of
a number of energy companies, which experienced problems much like those in
telecom, similarly declined.
- We had exposure (albeit low) to Argentine sovereign debt and certain high
yield issuers in late 2001, at a time when each fared poorly.
1
On the positive side of the ledger, we added value within our approach to
securitized debt. This was most pronounced in mortgage-backed securities (MBS),
in which our sector allocation and security selection were particularly
effective. We tended to focus our MBS holdings on high-coupon issues that were
protected from prepayment, which benefited from their comparatively low
availability as interest rates fell. Not only did this enhance the Fund's
ability to gain from a decline in interest rates, but these characteristics were
also especially desirable to MBS buyers in a period of falling market-based
interest rates. Our holdings' prices rose accordingly.
An additional plus from our securitized approach was our position in
commercial MBS, which turned out to be the benchmark's strongest subcategory in
the fiscal year, by far.
It's also worth noting that our holdings in corporate bonds began to
meaningfully help overall performance in August, when the flow of negative news
subsided and investors started to become less pessimistic than previously about
the outlook for corporate credit quality.
Jo Ann Corkran, Leland Crabbe, Suzanne E. Moran
Co-Portfolio Manager Co-Portfolio Manager Co-Portfolio Manager
2
[CHART]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE
CREDIT SUISSE FIXED INCOME FUND(1) COMMON CLASS SHARES,
THE LEHMAN BROTHERS U.S. AGGREGATE BOND INDEX(3) AND
THE LEHMAN BROTHERS INTERMEDIATE GOVERNMENT/CORPORATE
BOND INDEX(4) FOR TEN YEARS. (UNAUDITED)
LEHMAN BROTHERS
CREDIT SUISSE LEHMAN BROTHERS INTERMEDIATE
FIXED INCOME FUND(1) U.S. AGGREGATE BOND GOVERNMENT/CORPORATE
COMMON CLASS -- $ 17,938 INDEX(3) -- $ 20,552 BOND INDEX(4) -- $ 19,484
10/31/92 $ 10,000 $ 10,000 $ 10,000
11/30/92 $ 9,955 $ 10,002 $ 9,959
12/31/92 $ 10,048 $ 10,161 $ 10,088
1/31/93 $ 10,276 $ 10,356 $ 10,275
2/28/93 $ 10,476 $ 10,537 $ 10,427
3/31/93 $ 10,563 $ 10,582 $ 10,465
4/30/93 $ 10,660 $ 10,656 $ 10,547
5/31/93 $ 10,656 $ 10,670 $ 10,518
6/30/93 $ 10,816 $ 10,862 $ 10,670
7/31/93 $ 10,851 $ 10,924 $ 10,692
8/31/93 $ 10,999 $ 11,115 $ 10,851
9/30/93 $ 11,066 $ 11,145 $ 10,895
10/31/93 $ 11,158 $ 11,186 $ 10,921
11/30/93 $ 11,109 $ 11,091 $ 10,867
12/31/93 $ 11,173 $ 11,151 $ 10,912
1/31/94 $ 11,342 $ 11,302 $ 11,020
2/28/94 $ 11,252 $ 11,105 $ 10,869
3/31/94 $ 11,061 $ 10,831 $ 10,710
4/30/94 $ 10,941 $ 10,744 $ 10,641
5/31/94 $ 10,911 $ 10,743 $ 10,649
6/30/94 $ 10,914 $ 10,720 $ 10,651
7/31/94 $ 11,042 $ 10,933 $ 10,791
8/31/94 $ 11,123 $ 10,946 $ 10,822
9/30/94 $ 11,054 $ 10,785 $ 10,733
10/31/94 $ 11,091 $ 10,775 $ 10,735
11/30/94 $ 11,051 $ 10,752 $ 10,687
12/30/94 $ 11,098 $ 10,826 $ 10,722
1/31/95 $ 11,186 $ 11,040 $ 10,896
2/28/95 $ 11,379 $ 11,303 $ 11,107
3/31/95 $ 11,376 $ 11,372 $ 11,168
4/30/95 $ 11,551 $ 11,531 $ 11,297
5/31/95 $ 11,942 $ 11,977 $ 11,616
6/30/95 $ 12,035 $ 12,065 $ 11,690
7/31/95 $ 12,082 $ 12,041 $ 11,695
8/31/95 $ 12,247 $ 12,186 $ 11,792
9/29/95 $ 12,376 $ 12,305 $ 11,871
10/31/95 $ 12,515 $ 12,464 $ 12,001
11/30/95 $ 12,622 $ 12,651 $ 12,147
12/31/95 $ 12,803 $ 12,829 $ 12,267
1/31/96 $ 12,925 $ 12,913 $ 12,371
2/29/96 $ 12,807 $ 12,689 $ 12,240
3/31/96 $ 12,749 $ 12,600 $ 12,184
4/30/96 $ 12,684 $ 12,529 $ 12,149
5/31/96 $ 12,742 $ 12,504 $ 12,143
6/30/96 $ 12,815 $ 12,672 $ 12,266
7/31/96 $ 12,857 $ 12,706 $ 12,304
8/31/96 $ 12,918 $ 12,684 $ 12,318
9/30/96 $ 13,122 $ 12,905 $ 12,477
10/31/96 $ 13,358 $ 13,191 $ 12,682
11/30/96 $ 13,591 $ 13,417 $ 12,835
12/31/96 $ 13,584 $ 13,292 $ 12,766
1/31/97 $ 13,666 $ 13,333 $ 12,815
2/28/97 $ 13,765 $ 13,367 $ 12,836
3/31/97 $ 13,655 $ 13,218 $ 12,763
4/30/97 $ 13,779 $ 13,417 $ 12,907
5/31/97 $ 13,915 $ 13,544 $ 13,008
6/30/97 $ 14,080 $ 13,705 $ 13,119
7/31/97 $ 14,431 $ 14,075 $ 13,361
8/31/97 $ 14,330 $ 13,956 $ 13,310
9/30/97 $ 14,531 $ 14,162 $ 13,455
10/31/97 $ 14,660 $ 14,368 $ 13,611
11/30/97 $ 14,685 $ 14,434 $ 13,641
12/31/97 $ 14,776 $ 14,580 $ 13,752
1/31/98 $ 15,001 $ 14,766 $ 13,932
2/28/98 $ 14,947 $ 14,754 $ 13,917
3/31/98 $ 14,991 $ 14,804 $ 13,961
4/30/98 $ 15,059 $ 14,881 $ 14,027
5/31/98 $ 15,172 $ 15,023 $ 14,124
6/30/98 $ 15,292 $ 15,151 $ 14,219
7/31/98 $ 15,291 $ 15,182 $ 14,273
8/31/98 $ 15,464 $ 15,430 $ 14,543
9/30/98 $ 15,698 $ 15,791 $ 14,883
10/31/98 $ 15,605 $ 15,707 $ 14,908
11/30/98 $ 15,687 $ 15,797 $ 14,862
12/31/98 $ 15,732 $ 15,844 $ 14,920
1/31/99 $ 15,780 $ 15,957 $ 14,986
2/28/99 $ 15,586 $ 15,677 $ 14,781
3/31/99 $ 15,706 $ 15,764 $ 14,879
4/30/99 $ 15,758 $ 15,814 $ 14,919
5/31/99 $ 15,647 $ 15,675 $ 14,828
6/30/99 $ 15,642 $ 15,625 $ 14,849
7/31/99 $ 15,621 $ 15,559 $ 14,851
8/31/99 $ 15,599 $ 15,551 $ 14,872
9/30/99 $ 15,723 $ 15,732 $ 14,999
10/31/99 $ 15,751 $ 15,790 $ 15,029
11/30/99 $ 15,761 $ 15,788 $ 15,039
12/31/99 $ 15,729 $ 15,713 $ 14,992
1/31/00 $ 15,665 $ 15,661 $ 14,942
2/29/00 $ 15,793 $ 15,850 $ 15,066
3/31/00 $ 15,915 $ 16,059 $ 15,238
4/30/00 $ 15,770 $ 16,013 $ 15,231
5/31/00 $ 15,756 $ 16,005 $ 15,272
6/30/00 $ 16,121 $ 16,338 $ 15,515
7/31/00 $ 16,273 $ 16,486 $ 15,618
8/31/00 $ 16,513 $ 16,725 $ 15,793
9/30/00 $ 16,641 $ 16,831 $ 15,931
10/31/00 $ 16,634 $ 16,942 $ 16,040
11/30/00 $ 16,799 $ 17,220 $ 16,275
12/31/00 $ 17,207 $ 17,540 $ 16,562
1/31/01 $ 17,750 $ 17,826 $ 16,783
2/28/01 $ 17,804 $ 17,981 $ 16,937
3/31/01 $ 17,815 $ 18,071 $ 17,060
4/30/01 $ 17,768 $ 17,995 $ 17,006
5/31/01 $ 17,931 $ 18,104 $ 17,076
6/30/01 $ 17,951 $ 18,173 $ 17,131
7/31/01 $ 18,309 $ 18,580 $ 17,450
8/31/01 $ 18,475 $ 18,793 $ 17,605
9/30/01 $ 18,441 $ 19,011 $ 17,981
10/31/01 $ 18,707 $ 19,409 $ 18,262
11/30/01 $ 18,499 $ 19,141 $ 18,044
12/31/01 $ 18,345 $ 19,018 $ 17,957
1/31/02 $ 18,409 $ 19,172 $ 18,034
2/28/02 $ 18,465 $ 19,358 $ 18,183
3/31/02 $ 18,254 $ 19,037 $ 17,909
4/30/02 $ 18,387 $ 19,406 $ 18,244
5/31/02 $ 18,444 $ 19,571 $ 18,371
6/30/02 $ 17,954 $ 19,741 $ 18,601
7/31/02 $ 17,469 $ 19,980 $ 18,952
8/31/02 $ 17,854 $ 20,318 $ 19,168
9/30/02 $ 17,953 $ 20,647 $ 19,497
10/31/02 $ 17,938 $ 20,552 $ 19,484
[CHART]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE
CREDIT SUISSE FIXED INCOME FUND(1) ADVISOR CLASS SHARES,
THE LEHMAN BROTHERS U.S. AGGREGATE BOND INDEX(3) AND
THE LEHMAN BROTHERS INTERMEDIATE GOVERNMENT/CORPORATE BOND INDEX(4)
FROM INCEPTION (7/03/96). (UNAUDITED)
LEHMAN BROTHERS
CREDIT SUISSE LEHMAN BROTHERS INTERMEDIATE
FIXED INCOME FUND(1) U.S. AGGREGATE BOND GOVERNMENT/CORPORATE
ADVISOR CLASS -- $ 13,767 INDEX(3) -- $ 16,219 BOND INDEX(4) -- $ 15,885
7/96 $ 10,000 $ 10,000 $ 10,000
7/96 $ 10,014 $ 10,027 $ 10,031
8/96 $ 10,058 $ 10,010 $ 10,042
9/96 $ 10,214 $ 10,184 $ 10,172
10/96 $ 10,393 $ 10,410 $ 10,339
11/96 $ 10,573 $ 10,588 $ 10,464
12/96 $ 10,565 $ 10,490 $ 10,408
1/97 $ 10,638 $ 10,522 $ 10,448
2/97 $ 10,703 $ 10,549 $ 10,465
3/97 $ 10,615 $ 10,431 $ 10,405
4/97 $ 10,709 $ 10,588 $ 10,523
5/97 $ 10,813 $ 10,689 $ 10,605
6/97 $ 10,939 $ 10,816 $ 10,695
7/97 $ 11,210 $ 11,108 $ 10,893
8/97 $ 11,129 $ 11,013 $ 10,851
9/97 $ 11,272 $ 11,176 $ 10,969
10/97 $ 11,381 $ 11,338 $ 11,097
11/97 $ 11,387 $ 11,391 $ 11,121
12/97 $ 11,466 $ 11,506 $ 11,212
1/98 $ 11,628 $ 11,653 $ 11,358
2/98 $ 11,596 $ 11,644 $ 11,346
3/98 $ 11,617 $ 11,683 $ 11,381
4/98 $ 11,668 $ 11,744 $ 11,436
5/98 $ 11,764 $ 11,855 $ 11,515
6/98 $ 11,845 $ 11,956 $ 11,592
7/98 $ 11,841 $ 11,981 $ 11,637
8/98 $ 11,972 $ 12,177 $ 11,857
9/98 $ 12,163 $ 12,462 $ 12,133
10/98 $ 12,087 $ 12,396 $ 12,153
11/98 $ 12,149 $ 12,466 $ 12,116
12/98 $ 12,170 $ 12,504 $ 12,163
1/99 $ 12,204 $ 12,592 $ 12,218
2/99 $ 12,062 $ 12,372 $ 12,050
3/99 $ 12,152 $ 12,440 $ 12,130
4/99 $ 12,179 $ 12,480 $ 12,163
5/99 $ 12,090 $ 12,370 $ 12,088
6/99 $ 12,082 $ 12,330 $ 12,106
7/99 $ 12,063 $ 12,279 $ 12,107
8/99 $ 12,044 $ 12,273 $ 12,124
9/99 $ 12,149 $ 12,415 $ 12,228
10/99 $ 12,168 $ 12,461 $ 12,253
11/99 $ 12,174 $ 12,460 $ 12,261
12/99 $ 12,133 $ 12,400 $ 12,222
1/00 $ 12,093 $ 12,359 $ 12,182
2/00 $ 12,177 $ 12,508 $ 12,282
3/00 $ 12,281 $ 12,673 $ 12,423
4/00 $ 12,165 $ 12,637 $ 12,418
5/00 $ 12,139 $ 12,630 $ 12,451
6/00 $ 12,430 $ 12,893 $ 12,648
7/00 $ 12,534 $ 13,010 $ 12,732
8/00 $ 12,730 $ 13,199 $ 12,875
9/00 $ 12,813 $ 13,282 $ 12,988
10/00 $ 12,817 $ 13,370 $ 13,077
11/00 $ 12,929 $ 13,589 $ 13,269
12/00 $ 13,255 $ 13,842 $ 13,503
1/02 $ 13,671 $ 14,068 $ 13,682
2/02 $ 13,697 $ 14,190 $ 13,808
3/02 $ 13,717 $ 14,261 $ 13,908
4/02 $ 13,677 $ 14,201 $ 13,864
5/02 $ 13,799 $ 14,287 $ 13,921
6/02 $ 13,813 $ 14,341 $ 13,966
7/02 $ 14,087 $ 14,662 $ 14,227
8/02 $ 14,226 $ 14,831 $ 14,353
9/02 $ 14,183 $ 15,003 $ 14,659
10/02 $ 14,386 $ 15,317 $ 14,888
11/02 $ 14,236 $ 15,105 $ 14,710
12/02 $ 14,116 $ 15,009 $ 14,639
1/02 $ 14,148 $ 15,130 $ 14,702
2/02 $ 14,189 $ 15,277 $ 14,824
3/02 $ 14,039 $ 15,023 $ 14,601
4/02 $ 14,125 $ 15,315 $ 14,874
5/02 $ 14,168 $ 15,445 $ 14,978
6/02 $ 13,788 $ 15,579 $ 15,165
7/02 $ 13,428 $ 15,768 $ 15,451
8/02 $ 13,708 $ 16,034 $ 15,627
9/02 $ 13,783 $ 16,294 $ 15,896
10/02 $ 13,767 $ 16,219 $ 15,885
3
[CHART]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE
CREDIT SUISSE FIXED INCOME FUND1 CLASS A, B AND C SHARES,(2)
THE LEHMAN BROTHERS U.S. AGGREGATE BOND INDEX(3) AND
THE LEHMAN BROTHERS INTERMEDIATE GOVERNMENT/CORPORATE BOND INDEX(4)
FROM INCEPTION (7/31/01). (UNAUDITED)
CREDIT SUISSE CREDIT SUISSE CREDIT SUISSE
FIXED INCOME FUND(1) FIXED INCOME FUND(1) FIXED INCOME FUND(1)
CLASS A(2) -- $ 9,314 CLASS B(2) -- $ 9,408 CLASS C(2) -- $ 9,676
7/01 $ 9,525 $ 10,000 $ 10,000
8/01 $ 9,619 $ 10,092 $ 10,087
9/01 $ 9,590 $ 10,058 $ 10,051
10/01 $ 9,728 $ 10,196 $ 10,189
11/01 $ 9,626 $ 10,074 $ 10,076
12/01 $ 9,545 $ 9,982 $ 9,985
1/02 $ 9,567 $ 10,009 $ 10,001
2/02 $ 9,594 $ 10,032 $ 10,024
3/02 $ 9,483 $ 9,909 $ 9,902
4/02 $ 9,550 $ 9,974 $ 9,965
5/02 $ 9,579 $ 9,997 $ 9,989
6/02 $ 9,322 $ 9,724 $ 9,716
7/02 $ 9,068 $ 9,453 $ 9,445
8/02 $ 9,258 $ 9,655 $ 9,647
9/02 $ 9,318 $ 9,701 $ 9,693
10/02 $ 9,314 $ 9,408 $ 9,676
LEHMAN BROTHERS
LEHMAN BROTHERS INTERMEDIATE GOVERNMENT/CORPORATE
U.S. AGGREGATE BOND INDEX(3) -- $ 11,062 BOND INDEX(4) -- $ 11,165
7/01 $ 10,000 $ 10,000
8/01 $ 10,115 $ 10,089
9/01 $ 10,232 $ 10,304
10/01 $ 10,446 $ 10,465
11/01 $ 10,302 $ 10,340
12/01 $ 10,236 $ 10,290
1/02 $ 10,319 $ 10,335
2/02 $ 10,419 $ 10,420
3/02 $ 10,246 $ 10,263
4/02 $ 10,445 $ 10,455
5/02 $ 10,534 $ 10,528
6/02 $ 10,625 $ 10,659
7/02 $ 10,754 $ 10,860
8/02 $ 10,936 $ 10,984
9/02 $ 11,113 $ 11,173
10/02 $ 11,062 $ 11,165
4
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 YEARS 10 YEARS INCEPTION
------ ------- -------- ---------
Common Class (2.59%) 4.34% 5.88% 6.95%
Advisor Class (2.83%) 4.10% -- 5.27%
Class A Without Sales Charge (2.83%) -- -- (1.43%)
Class A With Maximum Sales Charge (7.45%) -- -- (5.43%)
Class B Without Sales Charge (3.55%) -- -- (2.14%)
Class B With Maximum Sales Charge (7.25%) -- -- (4.52%)
Class C Without Sales Charge (3.56%) -- -- (2.20%)
Class C With Maximum Sales Charge (4.49%) -- -- (2.20%)
AVERAGE ANNUAL RETURNS AS OF OCTOBER 31, 2002(1)
SINCE
1 YEAR 5 YEARS 10 YEARS INCEPTION
------ ------- -------- ---------
Common Class (4.07%) 4.14% 6.02% 6.90%
Advisor Class (4.31%) 3.88% -- 5.18%
Class A Without Sales Charge (4.27%) -- -- (1.78%)
Class A With Maximum Sales Charge (8.86%) -- -- (5.51%)
Class B Without Sales Charge (5.02%) -- -- (2.53%)
Class B With Maximum Sales Charge (8.67%) -- -- (4.75%)
Class C Without Sales Charge (5.03%) -- -- (2.59%)
Class C With Maximum Sales Charge (5.94%) -- -- (2.59%)
- ----------
(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) Total return for Class A Shares for the reporting period, based on offering
price (with maximum sales charge of 4.75%), was -8.86%. Total return for
Class B Shares for the reporting period, based on redemption value
(including maximum contingent deferred sales charge of 4%), was -8.67%.
Total return for Class C shares for the reporting period, based on
redemption value (including maximum contingent deferred sales charge of
1%), was -5.94%.
(3) The Lehman Brothers U.S. Aggregate Bond Index is composed of the Lehman
Brothers Government/Corporate Bond Index and the Lehman Brothers
Mortgage-Backed Securities Index. The U.S. Aggregate Bond Index includes
U.S. Treasury and agency issues, corporate bond issues and mortgage-backed
securities rated investment-grade or higher by Moody's Investors Service,
Standard & Poor's Corporation or Fitch Investors' Service. Investors cannot
invest directly in an index.
(4) The Lehman Brothers Intermediate Government/Corporate Bond Index is an
unmanaged index (with no defined investment objective) of
intermediate-maturity U.S. Government bonds and is calculated by Lehman
Brothers, Inc. Investors cannot invest directly in an index.
5
CREDIT SUISSE FIXED INCOME FUND
SCHEDULE OF INVESTMENTS
October 31, 2002
PAR RATINGS+
(000) (S&P/MOODY'S) MATURITY RATE% VALUE
----- ------------- -------- ------ -------------
CORPORATE BONDS (39.1%)
AEROSPACE & DEFENSE (0.5%)
$ 715 Lockheed Martin Corp., Bonds (BBB, Baa2) 12/01/29 8.500 $ 924,266
30 Sequa Corp., Senior Notes (BB-, Ba3) 08/01/09 9.000 25,350
95 Sequa Corp., Series B, Senior Notes (BB-, Ba3) 04/01/08 8.875 80,275
165 The Boeing Co., Debentures (A+, A2) 08/15/42 7.500 170,880
-------------
1,200,771
-------------
APPAREL (0.0%)
125 Levi Strauss & Co., Notes (BB-, Caa1) 11/01/06 7.000 106,250
-------------
AUTOMOBILE MANUFACTURERS (1.5%)
175 DaimlerChrysler NA Holding Corp., Company
Guaranteed, Global Notes (BBB+, A3) 01/15/12 7.300 189,782
3,080 General Motors Corp., Global Notes (BBB, A3) 01/15/11 7.200 2,900,898
270 General Motors Corp., Series MTN, Notes (BBB, A2) 05/16/05 5.250 264,206
-------------
3,354,886
-------------
AUTOMOBILE PARTS & EQUIPMENT (0.2%)
280 Collins & Aikman Products Corp., Company
Guaranteed, Senior Subordinated Notes
(Callable 12/05/02 @ $103.83) (B, B2) 04/15/06 11.500 233,100
295 Metaldyne Corp., Rule 144A, Private
Placement, Senior Subordinated Notes
(Callable 6/15/07 @ $105.50)++ (B, B3) 06/15/12 11.000 210,925
-------------
444,025
-------------
BANKING (0.1%)
250 Sovereign Bancorp, Inc., Senior Notes (BBB-, Ba2) 11/15/06 10.500 280,000
-------------
BUILDING MATERIALS (0.3%)
295 Building Materials Corp., Company Guaranteed (B, B2) 12/01/08 8.000 216,825
160 Dayton Superior Corp., Company Guaranteed Notes
(Callable 6/15/07 @ $102.17) (B-, Caa2) 06/15/09 13.000 125,600
400 Nortek, Inc., Series B, Global Senior Subordinated
Notes (Callable 6/15/06 @ $104.94) (B-, B3) 06/15/11 9.875 379,000
-------------
721,425
-------------
CABLE (0.6%)
1,600 CSC Holdings, Inc., Series B, Senior Notes (BB-, B1) 04/01/11 7.625 1,316,000
80 DIVA Systems Corp., Series B, Senior Discount
Notes (Callable 3/01/03 @ $106.31)** (NA, NR) 03/01/08 12.625 1,200
40 Insight Midwest, Senior Notes (Callable
10/01/04 @ $104.88) (B+, B2) 10/01/09 9.750 34,200
35 James Cable Partners LP, Series B, Senior Notes
(Callable 12/05/02 @ $102.69) (NR, Ca) 08/15/04 10.750 17,325
70 Northland Cable Television, Company
Guaranteed, Senior Subordinated Notes
(Callable 12/05/02 @ $105.12) (CC, Caa1) 11/15/07 10.250 40,250
-------------
1,408,975
-------------
See Accompanying Notes to Financial Statements.
6
PAR RATINGS+
(000) (S&P/MOODY'S) MATURITY RATE% VALUE
----- ------------- -------- ------ -------------
CORPORATE BONDS (CONTINUED)
CHEMICALS (0.4%)-
$ 280 Applied Extrusion Technologies, Inc.,
Series B, Company Guaranteed
(Callable 7/01/06 @ $105.38) (B, Caa1) 07/01/11 10.750 $ 169,400
540 Avecia Group PLC, Global Company Guaranteed
(Callable 7/01/04 @ $105.50) (B-, B3) 07/01/09 11.000 456,300
315 Mississippi Chemical Corp., Bonds (CCC, Caa2) 11/15/17 7.250 58,275
120 Scotts Co., Company Guaranteed
(Callable 1/15/04 @ $104.31) (B+, B2) 01/15/09 8.625 125,400
-------------
809,375
-------------
COMMERCIAL SERVICES (0.1%)
100 Iron Mountain, Inc., Company Guaranteed
(Callable 4/01/06 @ $104.31) (B, B2) 04/01/13 8.625 104,750
215 La Petite Academy, Inc.,
Series B, CompanyGuaranteed
(Callable 5/15/03 @ $105.00) (CC, Ca) 05/15/08 10.000 112,875
-------------
217,625
-------------
COMPUTERS (0.1%)
160 Unisys Corp., Senior Notes (BB+, Ba1) 01/15/05 7.250 160,800
-------------
DIVERSIFIED FINANCIALS (5.5%)
270 Armkel LLC & Armkel Financial,
Global Senior Subordinated Notes
(Callable 8/15/05 @ $104.75) (B-, B2) 08/15/09 9.500 289,575
1,195 Boeing Capital Corp., Global Bonds (A+, A3) 01/15/13 5.800 1,164,886
180 Burlington Resources Finance Co., Yankee
Company Guaranteed (BBB+, Baa1) 03/01/07 5.700 193,838
175 Chukchansi Economic Development Authority,
Rule 144A, Private Placement, Senior Notes
(Callable 10/01/06 @ $113.00)++ (NA, NA) 06/15/09 14.500 161,437
415 Countrywide Home Loans, Inc., Global
Company Guaranteed (A, A3) 06/15/04 6.850 438,252
325 Countrywide Home Loans, Inc., Global
Company Guaranteed (A, A3) 02/01/07 5.500 338,280
425 Countrywide Home Loans, Inc., Global
Company Guaranteed (A, A3) 05/15/07 5.625 445,344
2,550 Ford Motor Credit Co., Global Notes (BBB, A3) 02/01/06 6.875 2,352,623
1,290 Ford Motor Credit Co., Global Notes (BBB, A3) 10/28/09 7.375 1,169,288
1,520 Household Finance Corp., Global Notes (A-, A2) 01/30/07 5.750 1,353,191
2,126 Verizon Global Funding Corp., Global Notes (A+, A1) 06/15/12 6.875 2,272,694
450 Verizon Global Funding Corp., Global Notes (A+, A1) 09/01/12 7.375 496,352
1,395 Verizon Global Funding Corp., Global Notes (A+, A1) 12/01/30 7.750 1,500,106
380 Verizon Global Funding Corp., Global Notes (A+, A1) 06/15/32 7.750 409,096
-------------
12,584,962
-------------
See Accompanying Notes to Financial Statements.
7
PAR RATINGS+
(000) (S&P/MOODY'S) MATURITY RATE% VALUE
----- ------------- -------- ------ -------------
CORPORATE BONDS (CONTINUED)
ELECTRIC (2.8%)
$ 90 Calpine Corp., Senior Notes (B+, B1) 08/15/10 8.625 $ 29,250
1,825 Calpine Corp., Senior Notes (B+, B1) 02/15/11 8.500 602,250
750 Cilcorp, Inc., Bonds (BB+, Baa2) 10/15/29 9.375 646,713
825 Cincinnati Gas & Electric Co., Notes (BBB, Baa1) 09/15/12 5.700 819,892
200 CMS Energy Corp. (BBB-, Baa3) 09/15/06 6.250 190,976
95 CMS Energy Corp., Senior Notes (B+, B3) 01/15/09 7.500 68,492
235 CMS Energy Corp., Series B, Senior Notes (B+, B3) 01/15/04 6.750 190,409
520 Energy East Corp., Notes (BBB, Baa2) 06/15/12 6.750 556,558
1,775 PG&E National Energy Group, Global
Senior Notes (D, Ca) 05/16/11 10.375 381,625
795 Progress Energy, Inc., Senior Notes (BBB, Baa1) 03/01/06 6.750 817,364
1,080 Progress Energy, Inc., Senior Notes (BBB, Baa1) 03/01/31 7.750 1,064,599
855 PSEG Power LLC, Global Company Guaranteed (BBB, Baa1) 04/15/06 6.875 795,859
305 PSEG Power LLC, Rule 144A, Private
Placement, Notes++ (BBB, Baa1) 06/01/12 6.950 265,880
-------------
6,429,867
-------------
ELECTRICAL COMPONENTS & EQUIPMENT (0.3%)
60 Motors & Gears, Inc., Series D, Senior Notes
(Callable 12/05/02 @ $105.38) (B-, Caa1) 11/15/06 10.750 51,300
525 Oncor Electric Delivery Co., Rule 144A, Private
Placement, Senior Secured Notes++ (BBB, A3) 05/01/12 6.375 535,091
-------------
586,391
-------------
ELECTRONICS (0.1%)
20 Fisher Scientific International,
Senior Subordinated Notes
(Callable 2/01/03 @ $104.50) (B, B3) 02/01/08 9.000 20,800
170 Flextronics International, Ltd., Yankee
Senior Subordinated Notes
(Callable 7/01/05 @ $104.94) (BB-, Ba2) 07/01/10 9.875 177,650
-------------
198,450
-------------
ENTERTAINMENT (0.9%)
455 Argosy Gaming Co., Company Guaranteed
(Callable 6/01/04 @ $105.38) (B+, B2) 06/01/09 10.750 502,775
200 Bluegreen Corp., Company Guaranteed (B, B3) 04/01/08 10.500 170,000
50 Horseshoe Gaming Holding Corp.,
Series B, Company Guaranteed
(Callable 5/15/04 @ $104.31) (B+, B2) 05/15/09 8.625 52,875
200 Isle of Capri Casinos, Inc., Company
Guaranteed (Callable 4/15/04 @ $104.38) (B, B2) 04/15/09 8.750 201,000
215 Kerzner International, Ltd., Global Company
Guaranteed, Senior Subordinated Notes
(Callable 8/15/06 @ $104.44) (B+, B2) 08/15/11 8.875 217,150
See Accompanying Notes to Financial Statements.
8
PAR RATINGS+
(000) (S&P/MOODY'S) MATURITY RATE% VALUE
----- ------------- -------- ------- -------------
CORPORATE BONDS (CONTINUED)
ENTERTAINMENT (CONTINUED)
$ 490 Mohegan Tribal Gaming, Global
Senior Subordinated Notes
(Callable 7/01/06 @ $104.19) (BB-, Ba3) 07/01/11 8.375 $ 514,500
320 Penn National Gaming, Inc., Company
Guaranteed (Callable 3/15/06 @ $104.44) (B-, B3) 03/15/10 8.875 324,000
-------------
1,982,300
-------------
ENVIRONMENTAL CONTROL (2.1%)
1,580 Allied Waste North America,
Series B, Company Guaranteed
(Callable 8/01/04 @ $105.00) (B+, B2) 08/01/09 10.000 1,524,700
85 Allied Waste North America, Series B,
Company Guaranteed, Senior Notes
(Callable 1/01/04 @ $103.94) (BB-, Ba3) 01/01/09 7.875 81,175
1,600 Allied Waste North America, Series B,
Global Company Guaranteed (BB-, Ba3) 04/01/08 8.875 1,592,000
110 Waste Management, Inc., Notes (BBB, Ba1) 04/30/04 8.000 113,587
930 Waste Management, Inc., Rule 144A,
Private Placements, Bonds++ (BBB, Ba1) 05/15/32 7.750 911,500
490 Waste Management, Inc., Senior Notes (BBB, Ba1) 08/01/10 7.375 515,365
-------------
4,738,327
-------------
FINANCE (0.3%)
725 Washington Mutual, Inc., Global Senior Notes (BBB+, A3) 01/15/07 5.625 769,094
-------------
FOOD (1.9%)
300 Agrilink Foods, Inc., Company Guaranteed,
Senior Subordinated Notes
(Callable 11/01/03 @ $105.94) (B-, B3) 11/01/08 11.875 312,000
65 Archibald Candy Corp., Company Guaranteed,
Senior Secured Notes
(Callable 12/05/02 @ $102.56)** (NR, Caa2) 07/01/04 10.250 32,175
230 Aurora Foods, Inc.,
Series B, Senior Subordinated Notes
(Callable 7/01/03 @ $106.38) (CCC, Caa3) 07/01/08 8.750 101,200
420 ConAgra Foods, Inc., Notes (BBB+, Baa1) 09/15/11 6.750 474,794
525 ConAgra Foods, Inc., Notes (BBB+, Baa1) 09/15/30 8.250 666,430
130 Fleming Companies, Inc., Company
Guaranteed (Callable 6/15/06 @ $104.62) (B+, B2) 06/15/10 9.250 107,250
145 Fleming Companies, Inc., Global Company
Guaranteed (Callable 4/01/05 @ $105.06) (BB-, B2) 04/01/08 10.1250 123,975
215 Land O' Lakes, Inc., Global
Senior Notes (Callable 11/15/06 @ $104.38) (B+, B2) 11/15/11 8.750 119,325
615 Safeway, Inc., Senior Debentures (BBB, Baa2) 02/01/31 7.250 674,642
560 Safeway, Inc., Senior Notes (BBB, Baa2) 09/15/04 7.250 605,495
See Accompanying Notes to Financial Statements.
9
PAR RATINGS+
(000) (S&P/MOODY'S) MATURITY RATE% VALUE
----- ------------- -------- ------ -------------
CORPORATE BONDS (CONTINUED)
FOOD (CONTINUED)
$ 120 Stater Brothers Holdings, Inc.,
Senior Notes (Callable 8/15/03 @ $105.38) (B-, B2) 08/15/06 10.750 $ 121,800
1,075 Tyson Foods, Inc., Global Notes (BBB, Baa3) 10/01/04 6.625 1,136,490
-------------
4,475,576
-------------
FOREST PRODUCTS, PAPER (0.3%)
350 Appleton Papers, Inc.,
Series B, Global Company Guaranteed
(Callable 12/15/05 @ $106.25) (B+, B3) 12/15/08 12.500 365,750
290 Georgia-Pacific Corp., Senior Notes (BB+, Ba1) 05/15/31 8.875 223,868
-------------
589,618
-------------
GAS (0.5%)
1,025 KeySpan Corp., Senior Notes (A, A3) 11/15/30 8.000 1,233,537
-------------
HEALTHCARE FACILITIES/SUPPLIES (0.3%)
665 Baxter International, Inc., Notes (A, A3) 05/01/07 5.250 695,369
110 Extendicare Health Services, Inc., Company
Guaranteed (Callable 12/15/02 @ $104.67) (CCC+, B3) 12/15/07 9.350 95,150
-------------
790,519
-------------
HEALTHCARE SERVICES (0.7%)
90 HCA, Inc. (BBB-, Ba1) 09/01/10 8.750 100,307
235 HCA, Inc. (BBB-, Ba1) 06/15/05 6.910 247,023
1,175 HCA, Inc. (BBB-, Ba1) 07/01/07 7.000 1,247,649
290 Magellan Health Services, Inc.,
Senior Subordinated Notes
(Callable 2/15/03 @ $104.50) (CC, Ca) 02/15/08 9.000 50,750
-------------
1,645,729
-------------
HOLDING COMPANIES (0.1%)
170 Werner Holding Co., Inc.,
Series A, Company Guaranteed
(Callable 12/05/02 @ $105.00) (B-, B2) 11/15/07 10.000 160,650
-------------
HOME BUILDERS (0.1%)
110 KB Home, Senior Subordinated Notes
(Callable 2/15/06 @ $104.75) (BB-, Ba3) 02/15/11 9.500 114,675
75 Ryland Group, Senior Notes
(Callable 9/01/05 @ $104.88) (BB+, Ba2) 09/01/10 9.750 81,562
-------------
196,237
-------------
INDUSTRIAL (0.3%)
495 Norsk Hydro A/S, Yankee Debentures (A, A2) 06/15/23 7.750 581,936
-------------
IRON & STEEL (0.0%)
105 AK Steel Corp., Company Guaranteed
(Callable 2/15/04 @ $103.94) (BB, B1) 02/15/09 7.875 105,000
-------------
See Accompanying Notes to Financial Statements.
10
PAR RATINGS+
(000) (S&P/MOODY'S) MATURITY RATE% VALUE
----- ------------- -------- ------ -------------
CORPORATE BONDS (CONTINUED)
LEISURE (0.4%)
$ 625 Carnival Corp., Yankee Notes (A, A2) 04/15/08 6.150 $ 659,741
280 Hard Rock Hotel, Inc.,
Series B, Senior Subordinated Notes
(Callable 12/05/02 @ $104.62) (B-, Caa1) 04/01/05 9.250 277,900
-------------
937,641
-------------
LODGING (2.6%)
345 Ameristar Casinos, Inc.,
Global Company Guaranteed
(Callable 2/15/06 @ $105.38) (B, B3) 02/15/09 10.750 374,325
120 Aztar Corp., Senior Subordinated Notes
(Callable 5/15/03 @ $104.44) (B+, Ba3) 05/15/07 8.8750 120,000
215 Boyd Gaming Corp., Company Guaranteed
(Callable 8/01/05 @ $104.62) (BB-, Ba3) 08/01/09 9.250 233,813
530 Hilton Hotels Corp., Notes (BBB-, Ba1) 02/15/11 8.250 541,495
515 ITT Corp. (BBB-, Ba1) 11/15/05 6.750 499,952
325 Majestic Investor Holdings,
Company Guaranteed, Senior Secured Notes
(Callable 11/30/05 @ $105.83) (B, B2) 11/30/07 11.653 284,781
20 Mandalay Resort Group,
Senior Subordinated Notes
(Callable 12/01/02 @ $104.62) (BB-, Ba3) 12/01/05 9.250 20,750
30 MGM Mirage, Inc., Company Guaranteed (BB+, Ba2) 06/01/07 9.750 33,150
1,495 Park Place Entertainment Corp.,
Senior Subordinated Notes (BB+, Ba2) 12/15/05 7.875 1,506,213
280 Prime Hospitality Corp.,
Series B, Global Senior Subordinated Notes
(Callable 5/01/07 @ $104.19) (B+, B1) 05/01/12 8.375 256,200
300 Riviera Holdings Corp., Rule 144A,
Private Placement, Company Guaranteed
(Callable 6/15/06 @ $105.50)++ (B+, B2) 06/15/10 11.000 275,250
1,810 Starwood Hotels & Resorts Worldwide, Inc.,
Rule 144A, Private Placement, Notes++ (BBB-, Ba1) 05/01/07 7.375 1,737,600
340 Windsor Woodmont Black Hawk,
Series B, First Mortgage
(Callable 12/05/02 @ $113.00)** (NR, NA) 03/15/05 13.000 222,700
-------------
6,106,229
-------------
MEDIA (2.9%)
355 AOL Time Warner, Inc., Global Bonds (BBB+, Baa1) 04/15/31 7.625 322,726
10 Chancellor Media Corp.,
Company Guaranteed, Senior Notes (BBB-, Ba1) 11/01/08 8.000 10,588
1,085 Charter Communications Holdings LLC,
Global Senior Notes (B-, B3) 10/01/09 10.750 485,537
See Accompanying Notes to Financial Statements.
11
PAR RATINGS+
(000) (S&P/MOODY'S) MATURITY RATE% VALUE
----- ------------- -------- ------ -------------
CORPORATE BONDS (CONTINUED)
MEDIA (CONTINUED)
$ 550 Charter Communications Holdings LLC,
Global Senior Notes (B-, B3) 11/15/09 9.625 $ 237,875
10 Charter Communications Holdings LLC,
Senior Discount Notes
(Callable 4/01/04 @ $104.96)+** (B-, B3) 04/01/11 8.625 3,150
75 Charter Communications Holdings LLC,
Senior Notes (Callable 4/01/04 @ $104.31) (B-, B3) 04/01/09 8.625 32,625
35 Clear Channel Communications, Inc.,
Debentures (BBB-, Baa3) 10/15/27 7.250 34,113
615 Clear Channel Communications, Inc.,
Global Senior Notes (BBB-, Baa3) 11/01/06 6.000 633,561
80 Coaxial Communications/Phoenix,
Company Guaranteed, Senior Notes
(Callable 12/05/02 @ $105.00) (B, B3) 08/15/06 10.000 68,500
1,805 Comcast Cable Communications, Inc.,
Senior Notes (BBB, Baa3) 01/30/11 6.750 1,725,629
100 CSC Holdings, Inc., Series B, Senior Notes (BB-, B1) 07/15/09 8.125 83,500
140 Lin Televison Corp., Company Guaranteed
(Callable 3/01/03 @ $104.19) (B-, B3) 03/01/08 8.375 145,950
620 News America Holdings, Inc.,
Company Guaranteed (BBB-, Baa3) 02/01/13 9.250 701,929
1,190 News America Holdings, Inc., Debentures (BBB-, Baa3) 08/10/18 8.250 1,163,132
135 Salem Communications Corp., Series B,
Company Guaranteed, Senior Subordinated
Notes (Callable 12/05/02 @ $104.75) (B-, B3) 10/01/07 9.500 140,738
510 Viacom, Inc., Global Company Guaranteed (A-, A3) 08/15/12 5.625 532,144
295 Walt Disney Co., Global Notes (BBB+, Baa1) 03/01/12 6.375 316,340
-------------
6,638,037
-------------
OIL & GAS (3.7%)
135 Abraxas Petroleum Corp.,
Series B, Company Guaranteed
(Callable 12/05/02 @ $100.00) (CCC-, B3) 03/15/03 12.875 135,000
10 Conoco Funding Co., Global Company Guaranteed (A-, A3) 10/15/11 6.350 11,020
1,940 Conoco Funding Co., Global Company Guaranteed (A-, A3) 10/15/31 7.250 2,210,892
60 Conoco, Inc., Senior Global Notes (A-, A3) 04/15/09 6.350 66,360
1,690 Consolidated Natural Gas Co., Senior Notes (BBB+, A3) 04/15/11 6.850 1,821,053
500 Devon Energy Corp., Debentures (BBB, Baa2) 04/15/32 7.950 581,657
510 Devon Financing Corp., ULC,
Global Company Guaranteed (BBB, Baa2) 09/30/11 6.875 566,931
870 Enterprise Products Partners LP,
Company Guaranteed (BBB, Baa2) 02/01/11 7.500 862,762
30 Ocean Energy, Inc., Series B,
Company Guaranteed
(Callable 7/01/03 @ $104.19) (BB+, Ba1) 07/01/08 8.375 31,650
See Accompanying Notes to Financial Statements.
12
PAR RATINGS+
(000) (S&P/MOODY'S) MATURITY RATE% VALUE
----- ------------- -------- ------ -------------
CORPORATE BONDS (CONTINUED)
OIL & GAS (CONTINUED)
$ 55 Parker Drilling Co.,
Series B, Senior Notes, Company
Guaranteed (Callable 11/15/04 @ $105.06) (B+, B1) 11/15/09 10.125 $ 53,625
1,775 Petronas Capital Ltd.,-
Rule 144A, Private Placement, Company
Guaranteed++ (BBB+, Baa1) 05/22/22 7.875 1,842,963
660 Tesoro Petroleum Corp.,
Global Senior Subordinated
Notes (Callable 4/01/07 @ $104.81) (B, B2) 04/01/12 9.625 339,900
-------------
8,523,813
-------------
PACKAGING & CONTAINERS (0.5%)
175 Box USA Holdings, Series B,
Senior Secured Notes
(Callable 12/05/02 @ $104.00) (B, B3) 06/01/06 12.000 182,000
200 Owens-Brockway Glass Containers,
Global Company Guaranteed
(Callable 2/15/06 @ $104.44) (BB, B2) 02/15/09 8.875 206,500
150 Owens-Illinois, Inc., Senior Notes (B+, B3) 05/15/08 7.350 134,625
240 Packaged Ice, Inc., Series B,
Company Guaranteed, Senior Unsecured
Notes (Callable 12/05/02 @ $104.88) (B-, Caa3) 02/01/05 9.750 178,800
380 Stone Container Corp., Global Senior
Notes (Callable 7/01/07 @ $104.19) (B, B2) 07/01/12 8.375 393,300
-------------
1,095,225
-------------
PHARMACEUTICALS (0.1%)
180 NBTY, Inc., Series B, Senior Subordinated
Notes (Callable 12/05/02 @ $104.31) (B+, B1) 09/15/07 8.625 181,800
-------------
PIPELINES (0.9%)
600 El Paso Corp., Rule 144A, Private
Placement, Notes++ (BBB-, Baa3) 06/15/12 7.875 402,703
430 Tennessee Gas Pipeline Co., Debentures (BBB, Baa2) 04/01/17 7.500 387,973
305 Tennessee Gas Pipeline Co., Debentures (BBB, Baa2) 10/15/28 7.000 260,093
190 Western Gas Resources, Inc., Company
Guaranteed (Callable 6/15/04 @ $105.00) (BB-, Ba3) 06/15/09 10.000 200,450
920 Williams Companies, Inc., Notes (B, B1) 09/01/21 7.875 519,800
665 Williams Companies, Inc., Notes (B, B1) 06/15/31 7.750 369,075
-------------
2,140,094
-------------
REAL ESTATE (0.4%)
465 EOP Operating LP, Notes (BBB+, Baa1) 06/15/04 6.500 485,531
500 EOP Operating LP, Senior Notes (BBB+, Baa1) 02/15/05 6.625 529,017
-------------
1,014,548
-------------
See Accompanying Notes to Financial Statements.
13
PAR RATINGS+
(000) (S&P/MOODY'S) MATURITY RATE% VALUE
----- ------------- -------- ------ -------------
CORPORATE BONDS (CONTINUED)
RETAIL (0.3%)
$ 135 Hockey Co. & Sports Maska, Inc.,
Senior Secured, Global Notes, Units
(Callable 4/15/06 @ $105.62) (NA, B2) 04/15/09 11.250 $ 129,600
300 Leslie's Poolmart, Senior Notes
(Callable 12/05/02 @ $102.59) (B-, B3) 07/15/04 10.375 280,125
140 Sbarro, Inc., Company Guaranteed, Senior Notes
(Callable 9/15/04 @ $105.50) (B+, B2) 09/15/09 11.000 125,300
240 Yum! Brands, Inc., Senior Notes (BB, Ba1) 07/01/12 7.700 249,600
-------------
784,625
-------------
SECONDARY OIL & GAS PRODUCERS (0.5%)
225 Chesapeake Energy Corp.,
Global Company Guaranteed, Senior Notes
(Callable 4/01/06 @ $104.06) (B+, B1) 04/01/11 8.125 230,625
230 Denbury Management, Inc.,
Company Guaranteed, Senior Subordinated
Notes (Callable 3/01/03 @ $104.50) (B, B3) 03/01/08 9.000 235,175
370 Magnum Hunter Resources, Inc., Company
Guaranteed (Callable 12/05/02 @ $105.00) (B+, B2) 06/01/07 10.000 386,650
50 Mission Resources Corp., Series C,
Global Company Guaranteed
(Callable 12/05/02 @ $105.44) (B-, Caa1) 04/01/07 10.875 30,250
144 Southwest Royalties, Inc., Company
Guaranteed (Callable 12/05/02 @ $100.00) (CCC-, NA) 06/30/04 10.500 143,820
41 Southwest Royalties, Inc.,
Company Guaranteed, Senior Secured Notes
(Callable 12/05/02 @ $100.00) (CCC-, NA) 06/30/04 10.500 41,000
-------------
1,067,520
-------------
TELECOMMUNICATIONS (5.7%)
175 Alamosa PCS Holdings, Inc.,
Company Guaranteed, Senior Discount
Notes (Callable 2/15/05 @ $106.44)+ (CCC, Caa3) 02/15/10 12.875 25,375
1,085 AT&T Corp., Global Notes (BBB+, Baa2) 03/15/09 6.000 1,037,786
240 AT&T Corp., Global Notes (BBB+, Baa2) 03/15/29 6.500 207,116
1,290 AT&T Corp., Global Senior Notes (BBB+, Baa2) 11/15/11 7.300 1,266,665
1,215 AT&T Wireless Services, Inc., Global Senior Notes (BBB, Baa2) 05/01/07 7.500 1,076,454
495 AT&T Wireless Services, Inc., Global Senior Notes (BBB, Baa2) 03/01/31 8.750 397,052
680 AT&T Wireless Services, Inc., Senior Notes (BBB, Baa2) 03/01/11 7.875 592,629
1,155 Citizens Communications Co., Global Senior Notes (BBB, Baa2) 08/15/08 7.625 1,162,383
320 Citizens Communications Co., Global Senior Notes (BBB, Baa2) 08/15/31 9.000 308,118
1,130 Citizens Communications Co., Notes (BBB, Baa2) 05/15/06 8.500 1,142,329
1,150 Cox Communications, Inc., Notes (BBB, Baa2) 11/01/10 7.750 1,232,189
60 Insight Midwest, Global Senior Notes
(Callable 11/01/05 @ $105.25) (B+, B2) 11/01/10 10.500 52,200
See Accompanying Notes to Financial Statements.
14
PAR RATINGS+
(000) (S&P/MOODY'S) MATURITY RATE% VALUE
----- ------------- -------- ------ -------------
CORPORATE BONDS (CONTINUED)
TELECOMMUNICATIONS (CONTINUED)
$ 10 Level 3 Communications, Inc.,
Senior Notes (Callable 5/01/03 @ $104.56) (CC, Caa3) 05/01/08 9.125 $ 5,700
195 Lucent Technologies, Inc., Notes (B-, Caa1) 07/15/06 7.250 98,475
85 Nextel Communications, Inc.,
Senior Discount Notes
(Callable 2/15/03 @ $104.97)+ (B, B3) 02/15/08 9.950 72,463
960 Nextel Communications, Inc.,
Senior Notes (Callable 11/15/04 @ $104.688) (B, B3) 11/15/09 9.375 828,000
1,290 Nextlink Communications,
Senior Discount Notes
(Callable 12/01/04 @ $106.06)** (NR, Ca) 12/01/09 9.450 9,675
1,805 Nextlink Communications,
Senior Notes (Callable 12/01/04 @ $105.25) (NR, Ca) 12/01/09 10.500 13,538
610 Sprint Capital Corp., Global Company Guaranteed (BBB-, Baa3) 01/15/07 6.000 492,722
1,655 Sprint Capital Corp., Senior, Global
Company Guaranteed (BBB-, Baa3) 11/15/28 6.875 1,099,986
2,095 Verizon Wireless, Inc.,
Rule 144A, Private Placement Notes++ (A+, A2) 12/15/06 5.375 2,070,740
940 XO Communications, Inc.,
Senior Discount Notes
(Callable 4/15/03 @ $104.72)** (NA, Ca) 04/15/08 9.450 7,050
-------------
13,198,645
-------------
TEXTILES (0.1%)
140 Simmons Co., Series B,
Senior Subordinated Notes
(Callable 3/15/04 @ $105.12) (B-, B2) 03/15/09 10.25 149,800
85 Westpoint Stevens, Inc., Senior Notes (CCC+, Ca) 06/15/05 7.875 25,925
-------------
175,725
-------------
WIRELESS (1.0%)
220 ALLTEL Corp., Global Senior Notes (A, A2) 07/01/12 7.000 248,223
760 ALLTEL Corp., Global Senior Notes (A, A2) 07/01/32 7.875 871,558
306 TeleCorp PCS, Inc., Company Guaranteed,
Senior Subordinated Notes
(Callable 4/15/04 @ $105.81)+ (BBB, Baa2) 04/15/09 11.625 255,510
110 U.S. Unwired, Inc., Series B, Company
Guaranteed, Senior Discount Notes
(Callable 11/01/04 @ $106.69)+ (CCC+, Caa2) 11/01/09 13.375 8,800
650 Voicestream Wireless Corp.,
Senior Discount Notes
(Callable 11/15/04 @ $105.94)+ (A-, Baa2) 11/15/09 11.875 542,750
370 Voicestream Wireless Corp.,
Senior Notes (Callable 11/15/04 @ $105.19) (A-, Baa2) 11/15/09 10.375 382,950
-------------
2,309,791
-------------
TOTAL CORPORATE BONDS (Cost $97,527,195) 89,946,018
-------------
See Accompanying Notes to Financial Statements.
15
PAR RATINGS+
(000) (S&P/MOODY'S) MATURITY RATE% VALUE
----- ------------- -------- ------ -------------
ASSET BACKED SECURITIES (3.9%)
$ 900 Chase Credit Card Master Trust,
Series 2001-1, Class A (AAA, Aaa) 06/15/07 1.973 $ 903,055
1,050 CNH Equipment Trust, Series 2002-A, Class A3 (AAA, Aaa) 07/17/06 2.073 1,053,681
595 DaimlerChrysler Master Owner Trust,
Series 2002-A, Class A (AAA, Aaa) 05/15/07 1.883 595,243
1,295 Discover Card Master Trust I,
Series 1999-5, Class A (AAA, Aaa) 12/18/06 1.983 1,297,535
102 Donaldson Lufkin & Jenrette, Inc.,
Series 1989-1, Class F (AAA, Aaa) 08/01/19 11 117,812
500 Embarcadero Aircraft Secs Trust (BBB, A3) 08/15/25 1.803 400,000
555 Fleet Credit Master Trust II,
Series 2002-A, Class A (AAA, Aaa) 10/15/07 1.873 555,231
755 Ford Credit Floorplan Master Owner Trust,
Series 2001-1, Class A (AAA, Aaa) 07/17/06 1.913 756,141
830 LB-UBS Commercial Mortgage Trust,
Series 2002-C2, Class A4 (AAA, Aaa) 06/15/31 5.594 876,638
575 MBNA Master Credit Card Trust,
Series 1996-M, Class A (AAA, Aaa) 04/15/09 1.880 575,826
1,045 MMCA Automobile Trust,
Series 2002-2, Class A3 (AAA, Aaa) 07/17/06 3.670 1,071,140
289 Morgan Stanley Mortgage Trust,
Series 40, Class 8 (AAA, NR) 07/20/21 7.000 289,861
493 Small Business Administration,
Series 1992-20D, Class 1 (NA, Aaa) 04/01/12 8.200 539,628
-------------
9,031,791
-------------
TOTAL ASSET BACKED SECURITIES (Cost $8,902,503) 9,031,791
-------------
FOREIGN BONDS (2.7%)
BANKS (0.6%)
$ 1,165 Royal Bank of Scotland Group PLC, Series 3,
Perpetual Global Bonds (Callable 12/31/05
@ $100.00) (United Kingdom) (A-, A1) 11/29/49 7.816 1,310,012
-------------
FOREIGN GOVERNMENT BONDS (0.8%)
440 France Telecom SA, Global Notes (BBB-, Baa3) 03/01/06 8.700 471,786
410 Government of Russia (NA, NA) 05/14/08 3.000 309,550
1,010 Republic of Philippines, Series B, Restructured
Debt, Foreign Government Guaranteed
(Callable 6/02/03 @ $100.00) (Philippines) (BB+, Ba1) 12/01/17 6.500 933,509
-------------
1,714,845
-------------
REAL ESTATE (0.1%)
90 Intrawest Corp., Rule 144A, Private Placement,
Senior Notes (Callable 2/01/05 @ $105.25)
(Canada)++ (B+, B1) 02/01/10 10.500 90,900
180 Intrawest Corp., Yankee Senior Notes
(Callable 2/01/05 @ $105.25) (Canada) (B+, B1) 02/01/10 10.500 181,800
-------------
272,700
-------------
See Accompanying Notes to Financial Statements.
16
PAR RATINGS+
(000) (S&P/MOODY'S) MATURITY RATE% VALUE
----- ------------- -------- ------ -------------
FOREIGN BONDS (CONTINUED)
TELECOMMUNICATIONS (1.2%)
$ 1,325 British Telecommunications PLC,
Global Bonds (United Kingdom) (A-, Baa1) 12/15/30 8.875 $ 1,604,787
65 Rogers Communications, Inc., Yankee
Senior Notes (Callable 12/05/02 @ $103.04) (BB-, Ba1) 01/15/06 9.125 55,006
300 TELUS Corp., Yankee Notes (Canada) (BBB, Ba1) 06/01/07 7.500 249,000
1,135 TELUS Corp., Yankee Notes (Canada) (BBB, Ba1) 06/01/11 8.000 879,625
-------------
2,788,418
-------------
TOTAL FOREIGN BONDS (Cost $5,901,196) 6,085,975
-------------
UNITED STATES TREASURY OBLIGATIONS (3.4%)
UNITED STATES TREASURY BILLS (0.2%)
490 United States Treasury Bills++++ (AAA, Aaa) 02/13/03 1.590 488,046
-------------
UNITED STATES TREASURY BONDS (0.1%)
185 United States Treasury Bonds (AAA, Aaa) 02/15/31 5.375 195,327
-------------
UNITED STATES TREASURY NOTES (3.1%)
2,343 United States Treasury Notes (AAA, Aaa) 01/15/08 3.625 2,539,989
2,883 United States Treasury Notes (AAA, Aaa) 01/15/10 4.250 3,256,045
1,372 United States Treasury Notes (AAA, Aaa) 07/15/12 3.000 1,442,631
-------------
7,238,665
-------------
TOTAL UNITED STATES TREASURY OBLIGATIONS (Cost $7,737,155) 7,922,038
-------------
MORTGAGE-BACKED SECURITIES (47.7%)
4,005 Bear Stearns Commercial Mortgage Securities, Inc.,
Series 2002-TOP6, Class A2 (AAA, Aaa) 10/15/36 6.460 4,469,842
3,995 Fannie Mae Global Notes (AAA, Aaa) 03/15/12 6.125 4,490,939
70 Fannie Mae Pool #004542 (AAA, Aaa) 12/01/08 12.000 76,095
16 Fannie Mae Pool #035574 (AAA, Aaa) 10/01/08 8.750 17,200
1 Fannie Mae Pool #076368 (AAA, Aaa) 09/01/03 9.250 989
605 Fannie Mae Pool #124211 (AAA, Aaa) 12/01/21 5.412 618,489
203 Fannie Mae Pool #124790 (AAA, Aaa) 02/01/23 9.000 224,259
265 Fannie Mae Pool #125136 (AAA, Aaa) 07/01/07 8.000 281,117
85 Fannie Mae Pool #243876 (AAA, Aaa) 01/01/09 9.000 89,636
415 Fannie Mae Pool #252492 (AAA, Aaa) 05/01/29 7.500 438,800
214 Fannie Mae Pool #252874 (AAA, Aaa) 11/01/29 7.500 226,854
263 Fannie Mae Pool #253183 (AAA, Aaa) 04/01/30 7.500 278,870
237 Fannie Mae Pool #270674 (AAA, Aaa) 09/01/17 9.000 262,479
87 Fannie Mae Pool #447109 (AAA, Aaa) 11/01/29 7.500 92,279
14 Fannie Mae Pool #504305 (AAA, Aaa) 08/01/29 7.500 15,234
40 Fannie Mae Pool #504338 (AAA, Aaa) 10/01/29 7.500 42,624
8 Fannie Mae Pool #504669 (AAA, Aaa) 10/01/29 7.500 8,847
15 Fannie Mae Pool #504672 (AAA, Aaa) 10/01/29 7.500 16,229
259 Fannie Mae Pool #507037 (AAA, Aaa) 08/01/29 7.500 274,337
33 Fannie Mae Pool #508801 (AAA, Aaa) 08/01/29 7.500 35,020
74 Fannie Mae Pool #515542 (AAA, Aaa) 10/01/29 8.000 79,088
174 Fannie Mae Pool #515943 (AAA, Aaa) 10/01/29 7.500 184,211
2 Fannie Mae Pool #515955 (AAA, Aaa) 10/01/29 7.500 2,495
See Accompanying Notes to Financial Statements.
17
PAR RATINGS+
(000) (S&P/MOODY'S) MATURITY RATE% VALUE
----- ------------- -------- ------ -------------
MORTGAGE-BACKED SECURITIES (CONTINUED)
$ 25 Fannie Mae Pool #516832 (AAA, Aaa) 01/01/30 7.500 $ 26,814
270 Fannie Mae Pool #517894 (AAA, Aaa) 03/01/30 7.500 286,253
11 Fannie Mae Pool #521205 (AAA, Aaa) 12/01/29 7.500 12,143
37 Fannie Mae Pool #521369 (AAA, Aaa) 12/01/29 7.000 38,377
38 Fannie Mae Pool #523929 (AAA, Aaa) 11/01/29 7.500 40,487
75 Fannie Mae Pool #527587 (AAA, Aaa) 12/01/29 7.500 79,830
13 Fannie Mae Pool #527805 (AAA, Aaa) 03/01/30 7.500 13,878
77 Fannie Mae Pool #528126 (AAA, Aaa) 03/01/30 7.500 81,338
34 Fannie Mae Pool #528289 (AAA, Aaa) 03/01/30 7.500 35,870
6 Fannie Mae Pool #528508 (AAA, Aaa) 02/01/30 7.500 6,639
19 Fannie Mae Pool #528800 (AAA, Aaa) 01/01/30 7.000 19,945
184 Fannie Mae Pool #528803 (AAA, Aaa) 01/01/30 7.500 195,260
17 Fannie Mae Pool #529210 (AAA, Aaa) 02/01/30 7.500 18,437
61 Fannie Mae Pool #531075 (AAA, Aaa) 02/01/30 8.000 65,074
25 Fannie Mae Pool #532496 (AAA, Aaa) 03/01/30 7.500 26,315
195 Fannie Mae Pool #533026 (AAA, Aaa) 03/01/30 8.000 208,630
365 Fannie Mae Pool #533033 (AAA, Aaa) 03/01/30 8.000 390,445
188 Fannie Mae Pool #533440 (AAA, Aaa) 01/01/30 8.000 201,700
110 Fannie Mae Pool #533586 (AAA, Aaa) 03/01/30 7.500 115,961
74 Fannie Mae Pool #533714 (AAA, Aaa) 03/01/30 8.000 79,061
103 Fannie Mae Pool #534125 (AAA, Aaa) 03/01/30 7.500 108,603
159 Fannie Mae Pool #535083 (AAA, Aaa) 12/01/29 7.500 168,062
1,840 Fannie Mae Pool #535101 (AAA, Aaa) 08/01/13 6.500 1,938,742
111 Fannie Mae Pool #535159 (AAA, Aaa) 02/01/30 7.000 116,003
4,644 Fannie Mae Pool #650077 (AAA, Aaa) 07/01/32 7.500 4,913,902
2,175 Fannie Mae Pool #653373 (AAA, Aaa) 09/01/32 7.500 2,301,437
276 Fannie Mae, Series 1999-52, Class TC (AAA, Aaa) 05/25/22 7.000 276,399
9,560 Fannie Mae TBA (AAA, Aaa) 11/01/32 6.000 9,828,827
4,900 Fannie Mae TBA (AAA, Aaa) 11/01/32 6.500 5,146,519
13,040 Fannie Mae TBA (AAA, Aaa) 11/01/32 6.500 13,512,700
15,355 Fannie Mae TBA (AAA, Aaa) 11/01/32 7.000 16,045,975
1,840 Fannie Mae TBA (AAA, Aaa) 11/01/32 7.500 1,946,374
21,160 Fannie Mae TBA (AAA, Aaa) 11/01/32 8.000 22,628,081
661 Freddie Mac Pool #292065 (AAA, Aaa) 04/01/17 8.500 716,578
404 Freddie Mac Pool #606523 (AAA, Aaa) 10/01/19 5.658 414,156
8 Ginnie Mae Pool #058985 (AAA, Aaa) 07/15/13 11.000 9,761
10 Ginnie Mae Pool #068764 (AAA, Aaa) 09/15/13 12.000 12,138
76 Ginnie Mae Pool #093401 (AAA, Aaa) 01/15/10 9.500 85,017
2 Ginnie Mae Pool #296254 (AAA, Aaa) 09/15/20 9.500 2,392
3,278 Ginnie Mae Pool #508483 (AAA, Aaa) 05/15/31 7.000 3,444,109
1,004 Ginnie Mae Pool #545822 (AAA, Aaa) 06/15/31 7.500 1,067,696
7,705 Ginnie Mae TBA (AAA, Aaa) 11/01/17 7.000 8,092,654
1,425 J.P. Morgan Chase Commercial Mortgage
Securities, Series 2002-CIB4, Class A3 (NA, Aaa) 05/12/34 6.162 1,553,318
1,215 LB Commercial Conduit Mortgage Trust,
Series 1999-C2, Class A1 (NA, Aaa) 10/15/32 7.105 1,339,938
-------------
TOTAL MORTGAGE-BACKED SECURITIES (Cost $108,698,626) 109,837,771
-------------
See Accompanying Notes to Financial Statements.
18
NUMBER OF
SHARES VALUE
--------- -------------
COMMON STOCK (0.0%)
SECONDARY OIL & GAS PRODUCERS (0.0%)
2,156 Southwest Royalties, Inc., Class A*^
(Cost $71,271) $ 32,620
-------------
WARRANTS (0.0%)
BUILDING MATERIALS (0.0%)
65 Dayton Superior Corp., Wts., Rule 144A, expires June 2009*++ 26
-------------
TELECOMMUNICATIONS (0.0%)
40 GT Group Telecom, Inc., Rule 144A, expires Feburary 2010*++ 40
70 IWO Holdings, Inc., Rule 144A, strike $7.00, expires January 2011*++^ 0
-------------
40
-------------
TOTAL WARRANTS (Cost $3,300) 66
-------------
PAR RATINGS+
(000) (S&P/MOODY'S) MATURITY RATE%
----- ------------- -------- -----
SHORT-TERM INVESTMENTS (34.6%)
$ 38,005 Federal Home Loan Bank, Discount Notes(1) (AAA, Aaa) 11/01/02 1.500 38,005,000
26,995 Federal Home Loan Bank, Discount Notes(1) (AAA, Aaa) 11/01/02 1.690 26,995,000
14,784 State Street Bank and Trust Co. Euro
Time Deposit(1) 11/01/02 1.750 14,784,000
-------------
79,784,000
-------------
TOTAL SHORT-TERM INVESTMENTS (Cost $79,784,000) 79,784,000
-------------
TOTAL INVESTMENTS AT VALUE (131.4%) (Cost $308,625,246) 302,640,279
LIABILITIES IN EXCESS OF OTHER ASSETS (-31.4%) (72,291,381)
-------------
NET ASSETS (100.0%) $ 230,348,898
=============
INVESTMENT ABBREVIATIONS
TBA = To Be Announced
+ Credit ratings given by Standard & Poor's Ratings Group and Moody's
Investors Services, Inc. are unaudited.
++ Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At October 31,
2002, these securities amounted to a value of $8,505,055 or 3.7% of net
assets.
** Security in default.
+ Step Bond -- The interest as of October 31, 2002 is 0% and will reset to
the interest rate shown at a future date.
++++ Collateral segregated for futures contracts.
* Non-income producing security.
^ Not readily marketable; security is valued at fair value as determined in
good faith by the Board of Trustees.
(1) Collateral segregated for TBA securities.
See Accompanying Notes to Financial Statements.
19
CREDIT SUISSE FIXED INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2002
ASSETS
Investments at value (Cost $308,625,246) $ 302,640,279(1)
Cash 565
Collateral received for securities loaned 12,141,101
Receivable for investments sold 3,354,520
Dividend and interest receivable 2,637,982
Receivable for fund shares sold 226,647
Variation margin receivable 105,920
Prepaid expenses and other assets 37,066
--------------
Total Assets 321,144,080
--------------
LIABILITIES
Advisory fee payable 35,614
Administrative services fee payable 45,522
Distribution fee payable 11,462
Payable upon return of securities loaned 12,141,101
Payable for investments purchased 78,109,785
Payable for fund shares redeemed 278,626
Dividend payable 63,653
Trustees' fee payable 2,281
Other accrued expenses payable 107,138
--------------
Total Liabilities 90,795,182
--------------
NET ASSETS
Capital stock, $0.001 par value 24,458
Paid-in capital 258,756,185
Accumulated net investment income 919,194
Accumulated net realized loss on investments (23,699,777)
Net unrealized depreciation from investments, futures
transactions and foreign currency translations (5,651,162)
--------------
Net Assets $ 230,348,898
==============
COMMON SHARES
Net assets $ 194,688,461
Shares outstanding 20,672,405
--------------
Net asset value, offering price and redemption price per share $ 9.42
==============
ADVISOR SHARES
Net assets $ 25,649,954
Shares outstanding 2,723,136
--------------
Net asset value, offering price and redemption price per share $ 9.42
==============
See Accompanying Notes to Financial Statements.
20
A SHARES
Net assets $ 3,829,239
Shares outstanding 406,392
--------------
Net asset value and redemption price per share $ 9.42
==============
Maximum offering price per share (net asset value/(1-4.75%)) $ 9.89
==============
B SHARES
Net assets $ 5,148,500
Shares outstanding 546,683
--------------
Net asset value and offering price per share $ 9.42
==============
C SHARES
Net assets $ 1,032,744
Shares outstanding 109,664
--------------
Net asset value and offering price per share $ 9.42
==============
(1) Including $11,819,607 of securities on loan.
See Accompanying Notes to Financial Statements.
21
CREDIT SUISSE FIXED INCOME FUND
STATEMENT OF OPERATIONS
For the Year Ended October 31, 2002
INVESTMENT INCOME
Interest $ 17,083,744
Securities Lending 12,969
Foreign Taxes (9,261)
--------------
Total investment income 17,087,452
--------------
EXPENSES
Investment advisory fees 1,529,324
Administrative services fees 526,133
Shareholder servicing/Distribution Fees 129,680
Transfer agent fees 318,114
Registration fees 124,456
Printing fees 112,679
Custodian fees 63,917
Legal fees 51,016
Audit fees 33,675
Trustees' fees 15,526
Insurance expense 13,024
Interest expense 8,514
Miscellaneous expense 7,905
--------------
Total expenses 2,933,963
Less: fees waived (663,228)
--------------
Net expenses 2,270,735
--------------
Net investment income 14,816,717
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENTS
Net realized loss from investments (18,211,422)
Net realized loss from futures contracts (1,478,202)
Net realized gain on foreign currency transactions 912,831
Net change in unrealized appreciation (depreciation)
from investments (9,399,032)
Net change in unrealized appreciation (depreciation)
from futures transactions 333,805
Net change in unrealized appreciation (depreciation)
from foreign currency translations (1,160,737)
--------------
Net realized and unrealized loss from investments,
futures transactions, and foreign currency related items (29,002,757)
--------------
Net decrease in net assets resulting from operations $ (14,186,040)
==============
See Accompanying Notes to Financial Statements.
22
CREDIT SUISSE FIXED INCOME FUND
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR FOR THE YEAR
ENDED ENDED
OCTOBER 31, 2002 OCTOBER 31, 2001
---------------- ----------------
FROM OPERATIONS
Net investment income $ 14,816,717 $ 24,196,765
Net gain (loss) on investments, futures transactions
and foreign currency transactions (18,776,793) 9,763,020
Net change in unrealized appreciation (depreciation) from
investments, futures transactions and foreign currency
translations (10,225,964) 8,810,260
---------------- ----------------
Net increase (decrease) in net assets resulting from operations (14,186,040) 42,770,045
---------------- ----------------
FROM DIVIDENDS
Dividends from net investment income
Common Class shares (13,524,004) (22,611,857)
Advisor shares (1,724,079) (1,575,183)
Class A shares (77,454) (1,640)
Class B shares (113,035) (5,920)
Class C shares (30,679) (2,165)
---------------- ----------------
Net decrease in net assets resulting from dividends (15,469,251) (24,196,765)
---------------- ----------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares 141,942,883 265,889,816
Exchange value of shares due to merger -- 133,335,833
Reinvestment of dividends 12,760,334 22,067,919
Net asset value of shares redeemed (273,724,434) (369,833,021)
---------------- ----------------
Net increase (decrease) in net assets from capital share
transactions (119,021,217) 51,460,547
---------------- ----------------
Net increase (decrease) in net assets (148,676,508) 70,033,827
NET ASSETS
Beginning of year 379,025,406 308,991,579
---------------- ----------------
End of year $ 230,348,898 $ 379,025,406
================ ================
ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME $ 919,194 $ 23,013
================ ================
See Accompanying Notes to Financial Statements.
23
CREDIT SUISSE FIXED INCOME FUND
FINANCIAL HIGHLIGHTS
(For a Common Class Share of the Fund Outstanding Throughout Each Period)
FOR THE YEAR ENDED OCTOBER 31,
--------------------------------------------------------------------
2002(1) 2001 2000 1999 1998
---------- ---------- ---------- --------- ---------
PER SHARE DATA
Net asset value, beginning of period $ 10.33 $ 9.78 $ 9.89 $ 10.41 $ 10.43
---------- ---------- ---------- --------- ---------
INVESTMENT OPERATIONS
Net investment income 0.50 0.64 0.64 0.57 0.59
Net gain (loss) on investments (both realized
and unrealized) and foreign currency related items
(both realized and unrealized) (0.91) 0.55 (0.11) (0.48) 0.07
---------- ---------- ---------- --------- ---------
Total from investment operations (0.41) 1.19 0.53 0.09 0.66
---------- ---------- ---------- --------- ---------
LESS DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (0.50) (0.64) (0.64) (0.57) (0.59)
Distributions from net realized gains -- -- -- (0.04) (0.09)
---------- ---------- ---------- --------- ---------
Total dividends and distributions (0.50) (0.64) (0.64) (0.61) (0.68)
---------- ---------- ---------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 9.42 $ 10.33 $ 9.78 $ 9.89 $ 10.41
========== ========== ========== ========= =========
Total return(2) (4.07)% 12.52% 5.59% 0.92% 6.48%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $ 194,688 $ 334,647 $ 302,188 $ 393,433 $ 423,536
Ratio of expenses to average net assets 0.70% 0.72%(3) 0.77%(3) 0.76%(3) 30.75%(3)
Ratio of net investment income to average
net assets 4.90% 6.32% 6.53% 5.63% 5.64%
Decrease reflected in above operating
expense ratios due to waivers/reimbursements 0.22% 0.13% 0.02% 0.04% 0.04%
Portfolio turnover rate 385% 383% 247% 144% 124%
(1) As required, effective November 1, 2001, the Fund adopted the provisions of
AICPA Audit and Accounting Guide for Investment Companies and began
including paydown gains and losses in interest income. The effect of this
change is less than $0.01 per share on net investment income and net
realized and unrealized gains and losses and less than 0.01% for the ratio
of net investment income to average net assets for the year ended October
31, 2002. Per share ratios and supplemental data for prior periods have not
been restated to reflect this change.
(2) 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.
(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 Common Class shares' expense ratio by .00%, .02%, .01%, and .00% for
the years ended October 31, 2001, 2000, 1999, and 1998, respectively. The
Common Class shares' operating expense ratios after reflecting these
arrangements were .72% for the year ended October 31, 2001, and .75% for
the years ended October 31, 2000, 1999, and 1998, respectively.
See Accompanying Notes to Financial Statements.
24
CREDIT SUISSE FIXED INCOME FUND
FINANCIAL HIGHLIGHTS
(For an Advisor Class Share of the Fund Outstanding Throughout Each Period)
FOR THE YEAR ENDED OCTOBER 31,
--------------------------------------------------------------------
2002(1) 2001 2000 1999 1998
---------- ---------- ---------- --------- ---------
PER SHARE DATA
Net asset value, beginning of period $ 10.33 $ 9.78 $ 9.89 $ 10.41 $ 10.43
---------- ---------- ---------- --------- ---------
INVESTMENT OPERATIONS
Net investment income 0.47 0.62 0.62 0.54 0.56
Net gain (loss) on investments
and foreign currency related items
(both realized and unrealized) (0.91) 0.55 (0.11) (0.48) 0.07
---------- ---------- ---------- --------- ---------
Total from investment operations (0.44) 1.17 0.51 0.06 0.63
---------- ---------- ---------- --------- ---------
LESS DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (0.47) (0.62) (0.62) (0.54) (0.56)
Distributions from net realized gains -- -- -- (0.04) (0.09)
---------- ---------- ---------- --------- ---------
Total dividends and distributions (0.47) (0.62) (0.62) (0.58) (0.65)
---------- ---------- ---------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 9.42 $ 10.33 $ 9.78 $ 9.89 $ 10.41
========== ========== ========== ========= =========
Total return(2) (4.31)% 12.24% 5.33% 0.67% 6.21%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $ 25,650 $ 42,633 $ 6,804 $ 6,817 $ 3,058
Ratio of expenses to average net assets 0.95% 0.96%(3) 1.02%(3) 1.01%(3) 1.00%(3)
Ratio of net investment income to average
net assets 4.65% 5.86% 6.31% 5.38% 5.40%
Decrease reflected in above operating expense
ratios due to waivers/reimbursements 0.22% 0.17% 0.02% 0.05% 0.04%
Portfolio turnover rate 385% 383% 247% 144% 124%
(1) As required, effective November 1, 2001, the Fund adopted the provisions of
AICPA Audit and Accounting Guide for Investment Companies and began
including paydown gains and losses in interest income. The effect of this
change is less than $0.01 per share on net investment income and net
realized and unrealized gains and losses and less than 0.01% for the ratio
of net investment income to average net assets for the year ended October
31, 2002. Per share ratios and supplemental data for prior periods have not
been restated to reflect this change.
(2) 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.
(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' expense ratio by .01%, .02%, .01%, and .00% for
the years ended October 31, 2001, 2000, 1999, and 1998, respectively. The
Advisor Class shares' operating expense ratios after reflecting these
arrangements was .95% for the year ended October 31, 2001 and 1.00% for the
years ended October 31, 2000, 1999, and 1998, respectively.
See Accompanying Notes to Financial Statements.
25
CREDIT SUISSE FIXED INCOME FUND
FINANCIAL HIGHLIGHTS
(For a Class A Share of the Fund Outstanding Throughout Each Period)
FOR THE YEAR FOR THE YEAR
ENDED ENDED
OCTOBER 31, 2002(1) OCTOBER 31, 2001(2)
------------------- -------------------
PER SHARE DATA
Net asset value, beginning of period $ 10.33 $ 10.26
---------- ----------
INVESTMENT OPERATIONS
Net investment income 0.48 0.15
Net gain (loss) on investments
and foreign currency related items
(both realized and unrealized) (0.91) 0.07
---------- ----------
Total from investment operations (0.43) 0.22
---------- ----------
LESS DIVIDENDS
Dividends from net investment income (0.48) (0.15)
---------- ----------
NET ASSET VALUE, END OF PERIOD $ 9.42 $ 10.33
========== ==========
Total return(3) (4.27)% 2.13%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $ 3,829 $ 406
Ratio of expenses to average net assets 0.95% 0.95%(4)
Ratio of net investment income to average net assets 4.54% 5.66%(4)
Decrease reflected in above operating expense ratios
due to waivers/reimbursements 0.25% 0.31%(4)
Portfolio turnover rate 385% 383%
(1) As required, effective November 1, 2001, the Fund adopted the provisions of
AICPA Audit and Accounting Guide for Investment Companies and began
including paydown gains and losses in interest income. The effect of this
change is less than $0.01 per share on net investment income and net
realized and unrealized gains and losses and less than 0.01% for the ratio
of net investment income to average net assets for the year ended October
31, 2002. Per share ratios and supplemental data for prior periods have not
been restated to reflect this change.
(2) For the period July 31, 2001 (inception date) through October 31, 2001.
(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 of less than one year are
not annualized.
(4) Annualized.
See Accompanying Notes to Financial Statements.
26
CREDIT SUISSE FIXED INCOME FUND
FINANCIAL HIGHLIGHTS
(For a Class B Share of the Fund Outstanding Throughout Each Period)
FOR THE YEAR FOR THE YEAR
ENDED ENDED
OCTOBER 31, 2002(1) OCTOBER 31, 2001(2)
------------------- -------------------
PER SHARE DATA
Net asset value, beginning of period $ 10.33 $ 10.26
---------- ----------
INVESTMENT OPERATIONS
Net investment income 0.40 0.13
Net gain (loss) on investments and foreign currency
related items (both realized and unrealized) (0.91) 0.07
---------- ----------
Total from investment operations (0.51) 0.20
---------- ----------
LESS DIVIDENDS
Dividends from net investment income (0.40) (0.13)
---------- ----------
NET ASSET VALUE, END OF PERIOD $ 9.42 $ 10.33
========== ==========
Total return(3) (5.02)% 1.96%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $ 5,149 $ 1,044
Ratio of expenses to average net assets 1.70% 1.70%(4)
Ratio of net investment income to average net assets 3.76% 4.87%(4)
Decrease reflected in above operating expense ratios
due to waivers 0.24% 0.32%(4)
Portfolio turnover rate 385% 383%
(1) As required, effective November 1, 2001, the Fund adopted the provisions of
AICPA Audit and Accounting Guide for Investment Companies and began
including paydown gains and losses in interest income. The effect of this
change is less than $0.01 per share on net investment income and net
realized and unrealized gains and losses and less than 0.01% for the ratio
of net investment income to average net assets for the year ended October
31, 2002. Per share ratios and supplemental data for prior periods have not
been restated to reflect this change.
(2) For the period July 31, 2001 (inception date) through October 31, 2001.
(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 of less than one year are
not annualized.
(4) Annualized.
See Accompanying Notes to Financial Statements.
27
CREDIT SUISSE FIXED INCOME FUND
FINANCIAL HIGHLIGHTS
(For a Class C Share of the Fund Outstanding Throughout Each Period)
FOR THE YEAR FOR THE YEAR
ENDED ENDED
OCTOBER 31, 2002(1) OCTOBER 31, 2001(2)
------------------- -------------------
PER SHARE DATA
Net asset value, beginning of period $ 10.33 $ 10.26
---------- ----------
INVESTMENT OPERATIONS
Net investment income 0.40 0.12
Net gain (loss) on investments and foreign currency
related items (both realized and unrealized) (0.91) 0.07
---------- ----------
Total from investment operations (0.51) 0.19
---------- ----------
LESS DIVIDENDS
Dividends from net investment income (0.40) (0.12)
---------- ----------
NET ASSET VALUE, END OF PERIOD $ 9.42 $ 10.33
========== ==========
Total return(3) (5.03)% 1.89%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $ 1,033 $ 296
Ratio of expenses to average net assets 1.70% 1.70%(4)
Ratio of net investment income to average net assets 3.81% 4.82%(4)
Decrease reflected in above operating expense ratios
due to waivers 0.23% 0.33%(4)
Portfolio turnover rate 385% 383%
(1) As required, effective November 1, 2001, the Fund adopted the provisions of
AICPA Audit and Accounting Guide for Investment Companies and began
including paydown gains and losses in interest income. The effect of this
change is less than $0.01 per share on net investment income and net
realized and unrealized gains and losses and less than 0.01% for the ratio
of net investment income to average net assets for the year ended October
31, 2002. Per share ratios and supplemental data for prior periods have not
been restated to reflect this change.
(2) For the period July 31, 2001 (inception date) through October 31, 2001.
(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 of less than one year are
not annualized.
(4) Annualized.
See Accompanying Notes to Financial Statements.
28
CREDIT SUISSE FIXED INCOME FUND
NOTES TO FINANCIAL STATEMENTS
October 31, 2002
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Credit Suisse Fixed Income Fund (the "Fund") is registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as a diversified
open-end management investment company that seeks to generate high current
income consistent with reasonable risk and, secondarily, capital appreciation.
The fund was organized under the laws of the Commonwealth of Massachusetts as a
business trust on January 20, 1987.
The Fund is authorized to offer five classes of shares: Common Class, Advisor
Class, Class A, Class B, and Class C shares. Each class of shares represents an
equal pro rata interest in the Fund, except that they bear different expenses
which reflect the differences in the range of services provided to them.
Effective December 12, 2001, the Common Class closed to new investors. Common
Class shares do not bear any distribution fees. Advisor Class shares bear
expenses paid pursuant to a shareholder servicing plan adopted by the Fund at an
annual rate not to exceed .75% of the average daily net asset value of the
Fund's outstanding Advisor Class shares. Advisor Class shares currently bear
expenses of .25% of average daily net assets. Class A shares are sold subject to
a front-end sales charge of 4.75% and 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 Class A shares. Class B shares are sold subject to a contingent
deferred sales charge which declines from 4.00% 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 the
Fund's Class B shares. Class C shares are sold subject to a contingent deferred
sales charge of 1.00% 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 the Fund's Class C shares.
Effective as of the close of business on April 6, 2001, the Fund acquired all
of the net assets of the Credit Suisse Warburg Pincus Fixed Income II Fund
("Fixed Income II") in a tax-free exchange of shares. The shares exchanged were
9,206,012 shares (valued at $93,738,572) of the Common Class of the Fund for
9,152,071 shares of Class D of Fixed Income II, 3,550,971 shares (valued at
$36,153,007) of the Advisor Class of the Fund for 3,530,165 shares of Class A of
Fixed Income II, 323,384 shares (valued at $3,292,431) of the Advisor Class of
the Fund for 321,489 shares of Class B of Fixed Income II, and 14,919 shares
(valued at $151,823) of the Advisor Class of the Fund for 14,817 shares of Class
D of Fixed Income II. The Fixed Income II net assets of $133,335,834 at that
date, which included $2,388,035 of unrealized
29
appreciation, were combined with those of the Fund. The aggregate net assets of
Fixed Income II and the Fund immediately before the acquisition were
$133,335,834 and $339,752,048, respectively, and the combined net assets of the
Fund were $473,087,882.
A) SECURITY VALUATION -- The net asset value of the Fund is determined daily
as of the close of regular trading on the New York Stock Exchange, Inc. 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. The 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.
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 Trustees under procedures established by the Board of
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) FOREIGN CURRENCY TRANSACTIONS -- The books and records of the Fund are
maintained in U.S. dollars. Transactions denominated in foreign currencies are
recorded at the current prevailing exchange rates. All assets and liabilities
denominated in foreign currencies are translated into U.S. dollar amounts at the
current exchange rate at the end of the period. Translation gains or losses
resulting from changes in the exchange rate during the reporting period and
realized gains and losses on the settlement of foreign currency transactions are
reported in the results of operations for the current period. The Fund does not
isolate that portion of realized gains and losses on investments in equity
securities which is due to changes in the foreign exchange rate from that which
is due to changes in market prices of equity securities. The Fund isolates that
portion of realized gains and losses on investments in debt securities which is
due to changes in the foreign exchange rate from that which is due to changes in
market prices of debt securities.
C) SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on a trade date basis. Interest income is recorded on the accrual
basis. The Fund amortizes premium and accretes discount using the effective
interest method. Dividends are recorded on the ex-dividend date. Income,
expenses (excluding class-specific expenses) and
30
realized/unrealized gains/losses are allocated proportionately to each class of
shares based upon the relative net asset value of the 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.
Effective November 1, 2001, the Fund adopted the revised AICPA Audit and
Accounting Guide, Audits of Investment Companies and began to classify gains and
losses on paydowns of mortgage- and asset-backed securities, previously included
in realized gain and losses as a component of interest income. The effect of
this change for the year ended October 31, 2002, to the Fund was to decrease net
investment income by $39,096 and to increase net realized gains by $39,096.
These reclassifications had no impact on net assets or net asset value per
share. The statements of changes in net assets and the financial highlights for
all prior periods shown have not been restated to reflect this change.
D) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- Dividends from net
investment income are declared daily and paid monthly. 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").
E) FEDERAL INCOME TAXES -- No provision is made for federal taxes as it is
the 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.
F) 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.
G) SHORT-TERM INVESTMENTS -- The Fund, 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
31
Fund's custodian. The short-term time deposit is a variable rate account
classified as a short-term investment.
H) TBA PURCHASE COMMITMENTS -- The Fund may enter into "TBA" (to be
announced) purchase commitments to purchase securities for a fixed price at a
future date, typically not exceeding 45 days. TBA purchase commitments may be
considered securities in themselves, and involve a risk of loss if the value of
the security to be purchased declines prior to settlement date. This risk is in
addition to the risk of decline in the Fund's other assets. Unsettled TBA
purchase commitments are valued at the current market value of the underlying
securities, according to the procedures described under "Security Valuation"
above.
I) FUTURES -- The Fund may enter into futures contracts to the extent
permitted by its investment policies and objectives. Upon entering into a
futures contract, the Fund is required to deposit cash or pledge U.S. Government
securities as initial margin. Subsequent payments, which are dependent on the
daily fluctuations in the value of the underlying instrument, are made or
received by the Fund each day (daily variation margin) and are recorded as
unrealized gains or losses until the contracts are closed. When the contracts
are closed, the Fund records a realized gain or loss equal to the difference
between the proceeds from (or cost of) the closing transactions and the Fund's
basis in the contracts. Risks of entering into futures contracts for hedging
purposes include the possibility that a change in the value of the contract may
not correlate with the changes in the value of the underlying instruments. In
addition, the purchase of futures contracts involves the risk that the Fund
could lose more than the original margin deposit and subsequent payments
required for a futures transaction. At October 31, 2002, the Fund had the
following open futures contracts:
UNREALIZED
NUMBER OF EXPIRATION CONTRACT CONTRACT APPRECIATION/
FUTURES CONTRACTS CONTRACTS DATE AMOUNT VALUE (DEPRECIATION)
----------------- --------- ---------- ------------- ------------- ---------------
U.S. Treasury 10
Year Note Futures 134 12/19/02 $ 15,309,992 $ 15,372,312 $ 62,320
U.S. Treasury 2
Year Note Futures 184 12/30/02 39,162,151 39,591,625 429,474
U.S. Treasury
Bond Futures 86 12/20/02 9,547,235 9,516,438 (30,797)
---- ------------- ------------- ---------------
404 $ 64,019,378 $ 64,480,375 $ 460,997
==== ============= ============= ===============
U.S. Treasury 5
Year Bond Futures (118) 12/19/02 $ (13,293,464) $ (13,420,656) $ (127,192)
==== ============= ============= ===============
32
J) 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 Fund 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 market value of securities on loan to brokers and the value of collateral
held by the Fund with respect to such loans at October 31, 2002 is as follows:
MARKET VALUE OF VALUE OF
SECURITIES LOANED COLLATERAL RECEIVED
----------------- -------------------
$ 11,819,607 $ 12,141,101
Credit Suisse First Boston ("CSFB"), an affiliate of CSAM, has been engaged
by the Fund to act as the Fund's securities lending agent. CSFB has agreed to
charge the Fund 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.
K) OTHER -- The Fund may invest in securities of foreign countries and
governments, which involve certain risks in addition to those inherent in
domestic investments. Such risks generally include, among other things, currency
risk (fluctuations in currency exchange rates), information risk (key
information may be inaccurate or unavailable) and political risk (expropriation,
nationalization or the imposition of capital or currency controls or punitive
taxes). Other risks of investing in foreign securities include liquidity and
valuation risks.
The Fund may be subject to taxes imposed by countries in which it invests,
with respect to its investments in issuers existing or operating in such
countries. Such taxes are generally based on income earned or repatriated and
capital gains realized on the sale of such investments. The Fund accrues such
taxes when the related income or gains are earned.
33
Lower-rated debt securities (commonly known as "junk bonds") possess
speculative characteristics and are subject to greater market fluctuations and
risk of lost income and principal than higher-rated debt securities for a
variety of reasons. Also, during an economic downturn or substantial period of
rising interest rates, highly leveraged issuers may experience financial stress
which would adversely effect their ability to service their principal and
interest payment obligations, to meet projected business goals and to obtain
additional financing.
In addition, periods of economic uncertainty and changes can be expected to
result in increased volatility of market prices of lower-rated debt securities
and (to the extent a Fund invests in junk bonds) the Fund's net asset value.
NOTE 2. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
CSAM serves as investment adviser for the Fund. For its investment advisory
services, CSAM is entitled to receive a fee from the Fund at an annual rate of
..50% of the Fund's average daily net assets. For the year ended October 31,
2002, investment advisory fees earned and voluntarily waived were $1,529,324 and
$663,228, respectively.
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 Fund. At its meeting held on February 12, 2002 the Board of Trustees
approved SSB to replace PFPC, Inc. ("PFPC"), as co- administrator effective July
1, 2002.
For its co-administrative services, CSAMSI currently receives a fee
calculated at an annual rate of .10% of the Fund's average daily net assets. For
the year ended October 31, 2002, co-administrative services fees earned by
CSAMSI were $305,865.
For its co-administrative services, PFPC was entitled to receive a fee,
exclusive of out-of-pocket expenses, based on the following fee structure:
AVERAGE DAILY NET ASSETS ANNUAL RATE
------------------------ --------------------------------
First $150 million .07% of average daily net assets
Next $150 million .06% of average daily net assets
Over $300 million .05% of average daily net assets
For the period November 1, 2001 through June 30, 2002, co-administrative
service fees earned by PFPC (including out-of-pocket expenses) were $145,579.
34
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 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, administrative service
fees earned by SSB (including out-of-pocket expenses) were $74,689.
In addition to serving as the Fund's co-administrator, CSAMSI currently
serves as distributor of the Fund's shares. Pursuant to a distribution plan
adopted by the 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 Advisor Class and Class A shares.
For Class B and Class C shares of the Fund, the fee is calculated at an annual
rate of 1.00% of average daily net assets of the Class B and Class C shares of
the Fund. CSAMSI may use this fee to compensate service organizations for
shareholder servicing and distribution services. For the year ended October 31,
2002, shareholder servicing and distribution fees earned by CSAMSI were as
follows:
SHAREHOLDER SERVICING/
DISTRIBUTION FEE
----------------------
Advisor $ 88,735
Class A 4,182
Class B 29,042
Class C 7,721
---------
$ 129,680
=========
Certain brokers, dealers and financial representatives provide transfer agent
related services to the Fund, and receive compensation from CSAM. CSAM is then
reimbursed by the Fund. For the year ended October 31, 2002, the Fund reimbursed
CSAM $191,759, which is included in the Fund's transfer agent expense.
For the year ended October 31, 2002, CSAMSI and its affiliates advised the
Fund that it retained $12,169 from commissions earned on the sale of the Fund's
shares.
35
Merrill Corporation ("Merrill"), an affiliate of CSAM, has been engaged by
the Fund to provide certain financial printing and fulfillment services. For the
year ended October 31, 2002, Merrill was paid $61,731 for its services to the
Fund.
NOTE 3. LINE OF CREDIT
Through June 18, 2002, the Fund, 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 the Fund either under the New Credit
Facility or the Prior Credit Facility. During the year ended October 31, 2002,
the Fund had no borrowings under the Prior Credit Facility and/or the New Credit
Facility.
NOTE 4. PURCHASES AND SALES OF SECURITIES
For the year ended October 31, 2002, purchases and sales of investment
securities (excluding short-term investments) and U.S. Government and Agency
obligations were $1,166,184,353, $1,274,940,617, $767,731,317 and $768,190,763,
respectively.
36
NOTE 5. CAPITAL SHARE TRANSACTIONS
The Fund is 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 shares, Advisor Class
shares, Class A shares, Class B shares and Class C shares. Transactions in
capital shares for each class were as follows:
COMMON CLASS
-----------------------------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED
OCTOBER 31, 2002 OCTOBER 31, 2001
-----------------------------------------------------------------
SHARES VALUE SHARES VALUE
------------- -------------- ------------- --------------
Shares sold 12,935,824 $ 127,315,250 25,561,666 $ 259,862,002
Shares exchanged due to merger -- -- 9,206,012 93,717,204
Shares issued in reinvestment
of dividends 1,165,358 11,445,049 2,045,797 20,787,938
Shares redeemed (25,825,803) (252,907,577) (35,301,525) (359,565,867)
------------- -------------- ------------- --------------
Net increase (decrease) (11,724,621) $ (114,147,278) 1,511,950 $ 14,801,277
============= ============== ============= ==============
ADVISOR CLASS
-----------------------------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED
OCTOBER 31, 2002 OCTOBER 31, 2001
-----------------------------------------------------------------
SHARES VALUE SHARES VALUE
------------- -------------- ------------- --------------
Shares sold 442,170 $ 4,399,467 414,413 $ 4,232,335
Shares exchanged due to merger -- -- 3,889,274 39,592,807
Shares issued in reinvestment
of dividends 119,167 1,172,018 124,945 1,273,972
Shares redeemed (1,964,601) (19,124,277) (997,897) (10,168,343)
------------- -------------- ------------- --------------
Net increase (decrease) (1,403,264) $ (13,552,792) 3,430,735 $ 34,930,771
============= ============== ============= ==============
CLASS A
-----------------------------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED
OCTOBER 31, 2002 OCTOBER 31, 2001(1)
-----------------------------------------------------------------
SHARES VALUE SHARES VALUE
------------- -------------- ------------- --------------
Shares sold 431,754 $ 4,181,523 43,442 $ 444,863
Shares issued in reinvestment
of dividends 6,150 58,737 109 1,119
Shares redeemed (70,779) (704,769) (4,284) (43,949)
------------- -------------- ------------- --------------
Net increase 367,125 $ 3,535,491 39,267 $ 402,033
============= ============== ============= ==============
CLASS B
-----------------------------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED
OCTOBER 31, 2002 OCTOBER 31, 2001(1)
-----------------------------------------------------------------
SHARES VALUE SHARES VALUE
------------- -------------- ------------- --------------
Shares sold 487,239 $ 4,735,172 106,093 $ 1,085,244
Shares issued in reinvestment
of dividends 6,325 60,929 264 2,713
Shares redeemed (47,906) (459,888) (5,332) (54,862)
------------- -------------- ------------- --------------
Net increase 445,658 $ 4,336,213 101,025 $ 1,033,095
============= ============== ============= ==============
37
CLASS C
-----------------------------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED
OCTOBER 31, 2002 OCTOBER 31, 2001(1)
-----------------------------------------------------------------
SHARES VALUE SHARES VALUE
------------- -------------- ------------- --------------
Shares sold 133,764 $ 1,311,471 28,430 $ 291,194
Shares issued in reinvestment
of dividends 2,421 23,601 211 2,177
Shares redeemed (55,162) (527,923) -- --
------------- -------------- ------------- --------------
Net increase 81,023 $ 807,149 28,641 $ 293,371
============= ============== ============= ==============
(1) For the period July 31, 2001 (inception date) through October 31, 2001.
On October 31, 2002, the number of shareholders that held 5% or more of the
outstanding shares of each Class of the Fund was as follows:
NUMBER OF APPROXIMATE PERCENTAGE
SHAREHOLDERS OF OUTSTANDING SHARES
------------ ----------------------
Common Class 3 55%
Class A 3 55%
Class C 4 49%
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 foreign currency transactions,
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 Fund was as follows:
ORDINARY INCOME LONG-TERM CAPITAL GAIN
--------------------------- ----------------------
2002 2001 2002 2001
------------ ------------ ------ ------
$ 15,469,251 $ 24,196,765 $ -- $ --
At October 31, 2002, the components of distributable earnings on a tax basis
for the Fund were as follows:
Undistributed ordinary income $ 919,194
Accumulated realized loss (23,334,480)
Unrealized depreciation (5,682,655)
--------------
$ (28,097,941)
==============
38
At October 31, 2002, the Fund had capital loss carryovers available to offset
possible future capital gains as follows:
EXPIRES OCTOBER 31,
-----------------------
2008 2010
--------- ----------
1,683,356 21,651,124
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 $308,656,739,
$5,193,758, $(10,876,413) and $(5,682,655), respectively.
At October 31, 2002, the Fund reclassified $1,548,715 to accumulated
undistributed net investment income from accumulated net realized gain (loss)
from investments, to adjust for current period permanent book/tax differences
which arose principally from differing book/tax treatments of defaulted bonds
and paydowns. Net assets were not affected by these reclassifications.
39
CREDIT SUISSE FIXED INCOME FUND
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees and Shareholders of
Credit Suisse Fixed Income Fund:
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of operations
and of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Credit Suisse Fixed Income Fund
(the "Fund") at October 31, 2002, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights 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 financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's 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 broker, provide a reasonable
basis for our opinion.
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
December 18, 2002
40
CREDIT SUISSE FIXED INCOME FUND
INFORMATION CONCERNING TRUSTEES AND OFFICERS (UNAUDITED)
TERM NUMBER OF
OF OFFICE(1) PORTFOLIOS IN
AND FUND
POSITION(S) LENGTH PRINCIPAL COMPLEX OTHER
HELD WITH OF TIME OCCUPATION(S) DURING OVERSEEN BY DIRECTORSHIPS
NAME, ADDRESS AND AGE TRUST SERVED PAST FIVE YEARS TRUSTEE HELD BY TRUSTEE
- --------------------- ----------- ------------ -------------------- ------------- ---------------
INDEPENDENT TRUSTEES
Richard H. Francis Trustee and Since Currently retired; 53 Director of
c/o Credit Suisse Asset Audit 1999 Executive Vice The Indonesia
Management, LLC Committee President and Fund, Inc.
466 Lexington Avenue Member Chief Financial
New York, New York Officer of Pan Am
10017-3147 Corporation and
Pan American
Age: 70 World Airways,
Inc. from 1988 to
1991
Jack W. Fritz Trustee and Since Private investor; 52 Director of
2425 North Fish Creek Road Audit Fund Consultant and Advo, Inc.
P.O. Box 1287 Committee Inception Director of Fritz (direct mail
Wilson, Wyoming 83014 Member Broadcasting, Inc. advertising)
and Fritz
Age: 75 Communications
(developers and
operators of radio
stations) since
1987
Jeffrey E. Garten Trustee and Since Dean of Yale 52 Director of
Box 208200 Audit 1988 School of Aetna, Inc.;
New Haven, Connecticut Committee Management and Director of
06520-8200 Member William S. Beinecke Calpine Energy
Professor in the Corporation;
Age: 56 Practice of Director of
International CarMax Group
Trade and Finance; (used car
Undersecretary of dealers)
Commerce for
International Trade
from November 1993
to October 1995;
Professor at
Columbia University
from September
1992 to November
1993
41
TERM NUMBER OF
OF OFFICE(1) PORTFOLIOS IN
AND FUND
POSITION(S) LENGTH PRINCIPAL COMPLEX OTHER
HELD WITH OF TIME OCCUPATION(S) DURING OVERSEEN BY DIRECTORSHIPS
NAME, ADDRESS AND AGE TRUST SERVED PAST FIVE YEARS TRUSTEE HELD BY TRUSTEE
- --------------------- ----------- ------------ -------------------- ------------- ---------------
INDEPENDENT
TRUSTEES--(CONTINUED)
Peter F. Krogh Trustee and Since Dean Emeritus and 52 Member of
301 ICC Audit 2001 Distinguished Professor Board
Georgetown University Committee of International Affairs of The Carlisle
Washington, DC 20057 Member at the Edmund A. Companies Inc.;
Walsh School of Member of
Age: 65 Foreign Service, Selection
Georgetown University; Committee
Moderator of PBS for Truman
foreign affairs television Scholars and
series Henry Luce
Scholars; Senior
Associate of
Center for
Strategic and
International
Studies; Trustee
of numerous
world affairs
organizations
James S. Pasman, Jr. Trustee and Since Currently retired; 54 Director of
c/o Credit Suisse Asset Audit 1999 President and Chief Education
Management, LLC Committee Operating Officer of Management
466 Lexington Avenue Member National InterGroup, Corp.,
New York, New York Inc. (holding company) Director of
10017-3147 from April 1989 to Credit Suisse
March 1991; Chairman Asset
Age: 71 of Permian Oil Co. Management
from April 1989 to Income Fund,
March 1991 Inc.; Trustee of
Credit Suisse
High Yield Bond
Fund;
42
TERM NUMBER OF
OF OFFICE(1) PORTFOLIOS IN
AND FUND
POSITION(S) LENGTH PRINCIPAL COMPLEX OTHER
HELD WITH OF TIME OCCUPATION(S) DURING OVERSEEN BY DIRECTORSHIPS
NAME, ADDRESS AND AGE TRUST SERVED PAST FIVE YEARS TRUSTEE HELD BY TRUSTEE
- --------------------- ----------- ------------ -------------------- ------------- ---------------
INDEPENDENT
TRUSTEES--(CONTINUED)
Steven N. Rappaport Trustee and Since Partner of Lehigh 53 Director of
Lehigh Court, LLC Audit 1999 Court, LLC since July The First Israel
40 East 52nd Street Committee 2002; President of Fund, Inc.
New York, New York Chairman Surguard Securities
10022 Finance, Inc. from 2001
to July 2002; President
Age: 54 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.;
Executive Vice
President, Telerate, Inc.
(provider of realtime
information to the capital
markets) from 1987 to
1992; Partner in the law
firm of Hartman & Craven
until 1987
INTERESTED TRUSTEE
William W. Priest(2) Trustee Since Senior Partner and 59 Director of The
Steinberg Priest & Sloane 1999 Fund Manager, Brazilian Equity
Capital Management Steinberg Fund, Inc.; The
& Sloane 12 East 49th Street Priest & Sloane Capital Chile Fund, Inc.;
12th Floor Management since The Emerging
New York, New York March 2001; Chairman Markets Tele-
10017 and Managing communications
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.
43
TERM
OF OFFICE(1)
END
POSTIONS(S) LENGTH
HELD WITH OF TIME
NAME, ADDRESS AND AGE FUND 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 Management from 1981 to 1999; Officer of other
466 Lexington Avenue Credit Suisse Funds
New York, New York
10017-3147
Age: 44
Hal Liebes, Esq. Vice President Since Managing Director and Global General Counsel of CSAM;
Credit Suisse Asset and Secretary 1999 Associated with Lehman Brothers, Inc. from 1996 to 1997;
Management, LLC Associated with CSAM from 1995 to 1996; Associated
466 Lexington Avenue with CS First Boston Investment Management from 1994
New York, New York to 1995; Associated with Division of Enforcement,
10017-3147 U.S. Securities and Exchange Commission
from 1991 to 1994; Officer of other Credit Suisse Funds
Age: 38
Michael A. Pignataro Treasurer and Since Director and Director of Fund Administration
Credit Suisse Asset Chief Financial 1999 of CSAM; Associated with CSAM since 1984;
Management, LLC Officer Officer of other Credit Suisse Funds
466 Lexington Avenue
New York, New York
10017-3147
Age: 43
Gregory N. Bressler, Esq. Assistant Since Vice President and Legal Counsel of CSAM
Credit Suisse Asset Secretary 2000 since January 2000; Associated with the
Management, LLC law firm of Swidler Berlin Shereff Friedman LLP
466 Lexington Avenue from 1996 to 2000; Officer of other Credit
New York, New York Suisse Funds
10017-3147
Age: 36
44
TERM
OF OFFICE(1)
END
POSTIONS(S) LENGTH
HELD WITH OF TIME
NAME, ADDRESS AND AGE FUND 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,
Management, LLC Institutional Marketing Department, CSAM, from
466 Lexington Avenue January 2000 to December 2000; Marketing Associate,
New York, New York International Equity Department, Warburg Pincus
10017-3147 Asset Management, Inc. from January 1998 to
January 2000; self-employed author and consultant,
Age: 38 from January 1996 to December 1997; Officer of
other Credit Suisse Funds
Rocco A. DelGuercio Assistant Since Vice President and Administrative Officer of CSAM;
Credit Suisse Asset Treasurer 1999 Associated with CSAM since June 1996;
Management, LLC Assistant Treasurer, Bankers Trust Co. - Fund
466 Lexington Avenue Administration from March 1994 to June
New York, New York 1996; Mutual Fund Accounting Supervisor,
10017-3147 Dreyfus Corporation from April 1987 to March 1994;
Officer of other Credit Suisse Funds
Age: 39
Joseph Parascondola Assistant Since Assistant Vice President - Fund Administration of
Credit Suisse Asset Treasurer 2000 CSAM since April 2000; Assistant Vice President, Deutsche
Management, LLC Asset Management from January 1999 to April 2000;
466 Lexington Avenue Assistant Vice President, Weiss, Peck & Greer LLC
New York, New York from November 1995 to December 1998; Officer of
10017-3147 other Credit Suisse Funds
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 to
Management, LLC December 2000; Assistant Treasurer of Bankers
466 Lexington Avenue Trust Co. from April 1994 to March 1998; Officer of.
New York, New York other Credit Suisse Funds
10017-3147
Age: 37
- ----------
(1) Each Trustee and Officer serves his or her respective successor has been
duly elected and qualified.
(2) Mr. Priest is a Trustee who is an "interested person" of the Fund as
defined in the 1940 Act, because he was an officer of CSAM until February
2001.
The Statement of Additional Information includes additional information
about the Trustees and is available, without charge, upon request, by calling
800-927-2874.
45
[CREDIT SUISSE ASSET MANAGEMENT LOGO]
P.O. BOX 55030, BOSTON, MA 02205-5030
800-927-2874 - www.CreditSuisseFunds.com
CREDIT SUISSE ASSET MANAGEMENT SECURITIES, INC., DISTRIBUTOR. WPFIX-2-1002
STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY 28, 2003
CREDIT SUISSE INVESTMENT GRADE BOND FUND
CREDIT SUISSE NEW YORK MUNICIPAL FUND
CREDIT SUISSE FIXED INCOME FUND
CREDIT SUISSE GLOBAL FIXED INCOME FUND
This combined Statement of Additional Information provides information about
Credit Suisse Investment Grade Bond Fund (the "Investment Grade Fund"), Credit
Suisse New York Municipal Fund (the "New York Municipal Fund"), Credit Suisse
Fixed Income Fund (the "Fixed Income Fund") and Credit Suisse Global Fixed
Income Fund (the "Global Fixed Income Fund") (each, a "Fund" and collectively,
"the Funds") that supplements information contained in the combined Prospectus
for the Common Shares of the Funds, the Prospectus for the Advisor Shares of the
Fixed Income Fund, the Prospectus for the Class A, Class B and Class C Shares of
the Fixed Income Fund, the Prospectus for the Class A, B and C shares of the
Investment Grade Fund, the Prospectus for the Class A Shares of the New York
Municipal Fund and the Prospectus for the Class A Shares of the Global Fixed
Income Fund, each dated February 28, 2003, each as amended or supplemented from
time to time (collectively, the "Prospectus").
Each Fund's audited Annual Report(s) for the Common Class, Advisor Class, Class
A, Class B and Class C shares, as applicable, 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, as relevant to the particular investor, is incorporated herein by
reference.
This Statement of Additional Information is not a prospectus and should be read
in conjunction with the Prospectuses. Copies of the Prospectuses and the Annual
Report(s) can be obtained by writing or telephoning:
Class A, Class B, Class C and Advisor Shares:
Common Shares: Credit Suisse Advisor Funds
Credit Suisse Funds P.O. Box 55030
P.O. Box 55030 Boston, MA 02205-5030
Boston, MA 02205-5030 Attn: Institutional Services
800-927-2874 800-222-8977
TABLE OF CONTENTS
Page
INVESTMENT OBJECTIVES AND POLICIES................................................................................1
General Investment Strategies............................................................................1
Securities Options..............................................................................2
Securities Index Options........................................................................5
OTC Options.....................................................................................5
Currency Transactions...........................................................................6
Forward Currency Contracts......................................................................6
Currency Options................................................................................6
Currency Hedging................................................................................7
Hedging Generally...............................................................................7
Asset Coverage for Forward Contracts, Options, Futures and Options on Futures...................9
Futures Activities.......................................................................................9
Futures Contracts..............................................................................10
Options on Futures Contracts...................................................................11
Money Market Obligations................................................................................11
Temporary Defensive Strategies.................................................................12
Money Market Mutual Funds......................................................................12
Convertible Securities..................................................................................12
Structured Securities...................................................................................12
Mortgage-Backed Securities.....................................................................13
Asset-Backed Securities........................................................................14
Structured Notes, Bonds or Debentures..........................................................14
Assignments and Participations.................................................................15
Interest Rate, Index, Mortgage and Currency Swaps; Interest Rate Caps, Floors and Collars...............15
Foreign Investments (Investment Grade, Fixed Income and Global Fixed Income Funds only)................16
Foreign Currency Exchange......................................................................17
Information....................................................................................17
Political Instability..........................................................................18
Foreign Markets................................................................................18
Increased Expenses.............................................................................18
Dollar-Denominated Debt Securities of Foreign Issuers..........................................18
Foreign Debt Securities........................................................................18
Privatizations.................................................................................19
Brady Bonds....................................................................................19
Depositary Receipts............................................................................20
U.S. Government Securities..............................................................................20
Government Trust Certificates (Investment Grade Fund only).............................................21
Municipal Obligations...................................................................................21
Taxable Investments (New York Municipal Fund only).....................................................23
Page
Alternative Minimum Tax Bonds (Investment Grade, New York Municipal and Fixed Income Funds only).......23
Securities of Other Investment Companies................................................................23
Below Investment Grade Securities (Investment Grade, Fixed Income and Global Fixed Income Funds only)..23
Emerging Markets (Investment Grade, Fixed Income and Global Fixed Income Funds only)....................26
Lending Portfolio Securities............................................................................26
Repurchase Agreements...................................................................................27
Reverse Repurchase Agreements and Dollar Rolls..........................................................28
Zero Coupon Securities..................................................................................28
Government Zero Coupon Securities.......................................................................29
Short Sales (Investment Grade, Fixed Income and Global Fixed Income Funds only)........................29
Emerging Growth and Smaller Capitalization Companies; Unseasoned Issuers................................30
"Special Situation" Companies (Investment Grade, Fixed Income and Global Fixed Income Funds only)......30
Variable Rate and Master Demand Notes (Investment Grade, New York Municipal and
Fixed Income Funds only)................................................................................30
When-Issued Securities and Delayed-Delivery Transactions................................................31
To-Be-Announced Mortgage-Backed Securities (Investment Grade and Fixed Income Funds only)......31
Stand-By Commitment Agreements (Investment Grade, New York Municipal and Fixed Income Funds only)......32
REITs (Investment Grade, Fixed Income and Global Fixed Income Funds only)..............................33
Warrants (Investment Grade, Fixed Income and Global Fixed Income Funds only)...........................33
Non-Publicly Traded and Illiquid Securities.............................................................34
Rule 144A Securities...........................................................................35
Borrowing...............................................................................................35
Non-Diversified Status (New York Municipal and Global Fixed Income Funds only).........................36
INVESTMENT RESTRICTIONS..........................................................................................36
Investment Grade Fund...................................................................................36
New York Municipal Fund.................................................................................38
Fixed Income Fund.......................................................................................40
Global Fixed Income Fund................................................................................41
PORTFOLIO VALUATION..............................................................................................43
PORTFOLIO TRANSACTIONS...........................................................................................45
PORTFOLIO TURNOVER...............................................................................................48
SPECIAL CONSIDERATIONS RELATING TO NEW YORK MUNICIPAL OBLIGATIONS................................................49
MANAGEMENT OF THE FUNDS..........................................................................................73
Officers and Boards of Directors/Trustees...............................................................73
Directors'/Trustees' Compensation.......................................................................87
ii
Page
Investment..............................................................................................87
Code of Ethics..........................................................................................97
Custodian and Transfer Agent............................................................................97
Organization of the Funds...............................................................................98
Distribution and Shareholder Servicing.................................................................100
Common Shares.................................................................................100
Advisor Shares................................................................................102
Class A, Class B and Class C Shares...........................................................103
General ......................................................................................107
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION..................................................................107
Purchases..............................................................................................108
Initial Sales Charges Waivers.................................................................111
Redemptions............................................................................................112
Automatic Cash Withdrawal Plan................................................................113
Contingent Deferred Sales Charge - General....................................................114
EXCHANGE PRIVILEGE..............................................................................................114
ADDITIONAL INFORMATION CONCERNING TAXES.........................................................................115
The Funds and Their Investments........................................................................116
Special Tax Matters Regarding the Investment Grade Fund, Fixed Income Fund and
Global Fixed Income Fund...............................................................................118
Special Tax Matters Regarding the Investment Grade Fund................................................118
Special Tax Considerations Regarding the New York Municipal Fund.......................................118
Passive Foreign Investment Companies (Fixed Income and Global Fixed Income Funds only)................121
Dividends and Distributions............................................................................121
Sales of Shares........................................................................................122
Foreign Taxes..........................................................................................122
Backup Withholding.....................................................................................123
Notices................................................................................................123
Other Taxation.........................................................................................123
DETERMINATION OF PERFORMANCE....................................................................................124
INDEPENDENT ACCOUNTANTS AND COUNSEL.............................................................................137
MISCELLANEOUS...................................................................................................138
FINANCIAL STATEMENTS............................................................................................144
APPENDIX - DESCRIPTION OF RATINGS A-1
iii
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 Investment Grade Fund is to
achieve total return. The Investment Grade Fund will invest, under normal market
conditions, at least 80% of its net assets, plus any borrowings for investment
purposes, in investment grade fixed-income securities. The investment objective
of the New York Municipal Fund is to maximize current interest income exempt
from federal income tax and New York State and New York City personal income
taxes to the extent consistent with prudent investment management and the
preservation of capital. The New York Municipal Fund will invest, under normal
market conditions, at least 80% of its net assets, plus any borrowings for
investment purposes, in New York municipal securities the income from which is
exempt from federal income taxes and New York State and New York City personal
income taxes. The investment objectives of the Fixed Income Fund are to generate
high current income consistent with reasonable risk and, secondarily, capital
appreciation. The Fixed Income Fund will invest, under normal market conditions,
at least 80% of its net assets, plus any borrowings for investment purposes, in
fixed-income securities. The investment objective of the Global Fixed Income
Fund is to maximize total investment return consistent with prudent investment
management, consisting of a combination of interest income, currency gains and
capital appreciation. The Global Fixed Income Fund will invest, under normal
market conditions, at least 80% of its net assets, plus any borrowings for
investment purposes, in fixed-income securities of issuers located in at least
three countries, which may include the U.S. There is no limit in the Global
Fixed Income Fund's ability to invest in emerging markets. The 80% investment
policies will not be applicable during periods when a Fund pursues a temporary
defensive strategy, as discussed below. For the Investment Grade Fund, the Fixed
Income Fund and the Global Fixed Income Fund, the 80% investment policies are
non-fundamental and may be changed by the Board of Directors/Trustees of the
Fund to become effective upon 60 days' notice to shareholders of the applicable
Fund prior to any such change. For the New York Municipal Fund, the 80%
investment policy is fundamental, and may be changed only by the shareholders of
the Fund.
General Investment Strategies
Unless otherwise indicated, each Fund is permitted, but not
obligated, 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 do not represent that these techniques are available
now or will be available at any time in the future.
STRATEGIC AND OTHER TRANSACTIONS
Options, Futures and Currency Transactions. Each Fund may
purchase and write (sell) 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. Up to 20%
of a Fund's total 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. Options may be traded on an
exchange or over-the-counter ("OTC").
Securities Options. Each Fund may write covered put and call
options on stock and debt securities and each Fund may purchase such options
that are traded on foreign and U.S. exchanges, as well as OTC options. A 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 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). When a Fund
writes call options, it 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
2
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.
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. A Fund may write (i) in-the-money call options
when Credit Suisse Asset Management, LLC, each Fund's investment adviser
("CSAM"), or, for Global Fixed Income Fund, Credit Suisse Asset Management
Limited (U.K.) or Credit Suisse Asset Management Limited (Japan), as applicable,
the Global Fixed Income Fund's sub-investment advisers (each, together with
CSAM, an "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 the Adviser 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 the Adviser 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, the 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.
3
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 the 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. The 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 the 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. The 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 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, a 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
4
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. A 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 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. A 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 the 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 a 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 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
5
which the Fund originally wrote the option. Although the 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 the Fund's ability to sell portfolio securities or, with
respect to currency options, currencies at a time when such sale might be
advantageous.
Currency Transactions. (Investment Grade, Fixed Income and
Global Fixed Income Funds only) 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 and may be
entered into for hedging purposes or to seek to enhance total return
(speculation). 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.
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 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 use of hedging
transactions).
Currency Options. A 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.
6
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. A 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 the 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 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 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 and
futures 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 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
7
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 and futures 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 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 a 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 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.
A Fund will engage in hedging transactions only when deemed
advisable by CSAM, and successful use by the Fund 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 the 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 the 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.
8
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") with respect to coverage of
forward currency contracts, options written by the Fund on currencies,
securities and indexes, and currency, interest rate and index futures contracts
and options on these futures contracts. These guidelines may, in certain
instances, require segregation by the 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 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 the 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
the Fund may require the Fund to segregate assets (as described above) equal to
the exercise price. The 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 the 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 Fund 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.
Futures Activities
A Fund may enter into foreign currency, interest rate and
securities index futures contracts and purchase and write (sell) related options
traded on exchanges designated by the Commodity Futures Trading Commission (the
"CFTC") or consistent with CFTC regulations on foreign exchanges. 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
9
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. The Funds reserve 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 a
Fund's policies.
Futures Contracts. (The New York Municipal Fund may not engage
in foreign currency futures transactions.) 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, a Fund is required to segregate with its
custodian an amount of cash or 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 a 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 a 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 a Fund to substantial losses. In such event, and in the
event of adverse price
10
movements, a 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 such circumstances a 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. (The New York Municipal Fund may
not purchase or write options on foreign currency futures.) A 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.
Money Market Obligations
Each Fund is authorized to invest, under normal conditions, up
to 20% of its total assets in short-term money market obligations having
remaining maturities of less than one year at the time of purchase. These
short-term instruments consist of obligations issued or guaranteed by the United
States government, its agencies or instrumentalities ("Government Securities");
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 or, if unrated, deemed by CSAM
to be 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; in the case of the Fixed
Income Fund and the Global Fixed Income Fund, obligations of foreign
governments, their agencies or instrumentalities; and repurchase agreements with
respect to portfolio securities. The short-term money market obligations in
11
which the New York Municipal Fund is authorized to invest generally will be
tax-exempt obligations; however, the Fund may invest in taxable obligations when
suitable tax-exempt obligations are unavailable or to maintain liquidity for
meeting anticipated redemptions and paying operating expenses. Tax-exempt money
market obligations in which the New York Municipal Fund may invest consist of
investment grade tax-exempt notes and tax-exempt 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 not rated, of municipal issuers having an issue of
outstanding municipal obligations rated within the three highest grades by
Moody's or S&P.
Temporary Defensive Strategies. For temporary defensive
purposes or, in the case of the Global Fixed Income Fund, during times of
international political or economic uncertainty, each Fund other than the
Investment Grade Fund may invest without limit in short-term money market
obligations, and the Investment Grade Fund may invest without limit in short
term Government Securities.
Money Market Mutual Funds. 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 where CSAM believes that it would be beneficial to the Fund and
appropriate considering the factors of return and liquidity. A money market
mutual fund is an investment company that invests in short-term high quality
money market instruments. A money market mutual fund generally does not purchase
securities with a remaining maturity of more than one year. The New York
Municipal Fund would invest in money market mutual funds that invest in
tax-exempt securities. 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.
Convertible Securities
Convertible securities in which the Investment Grade, Fixed
Income and Global Fixed Income Funds 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.
12
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. 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 atypical bond). 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 the Fund's shares.
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
fixed-rate environment, a common industry practice in the U.S. has been to
assume that prepayments will result in a 12-year average life. At present,
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.
13
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.
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,
14
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
borrowing corporation, government 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 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.
With respect to the New York Municipal Fund, income derived
from Participations or Assignments may not be tax-exempt, depending on the
structure of the particular securities. To the extent such income is not
tax-exempt, it will be subject to the New York Municipal Fund's 20% limit on
investing in non-municipal securities.
Interest Rate, Index, Mortgage and Currency Swaps; Interest Rate Caps, Floors
and Collars
Each Fund may enter into interest rate, index and mortgage
swaps and interest rate caps, floors and collars for hedging purposes or to seek
to increase total return; the
15
Investment Grade, Fixed Income and Global Fixed Income Funds may enter into
currency swaps for hedging purposes and, in the case of the Global Fixed Income
Fund, to seek to enhance total return (speculation) as well. Interest rate swaps
involve the exchange by the Fund with another party of their respective
commitments to pay or receive interest, such as an exchange of fixed rate
payments for floating rate payments. Index swaps involve the exchange by the
Fund with another party of the respective amounts payable with respect to a
notional principal amount related to one or more indexes. Mortgage swaps are
similar to interest rate swaps in that they represent commitments to pay and
receive interest. The notional principal amount, however, is tied to a reference
pool or pools of mortgages. Currency swaps involve the exchange of cash flows on
a notional amount of two or more currencies based on their relative future
values. The purchase of an interest rate cap entitles the purchaser, to the
extent that a specified index exceeds a predetermined interest rate, to receive
payment of interest on a notional principal amount from the party selling such
interest rate cap. The purchase of an interest rate floor entitles the
purchaser, to the extent that a specified index falls below a predetermined
interest rate, to receive payments of interest on a notional principal amount
from the party selling the interest rate floor. An interest rate collar is the
combination of a cap and a floor that preserves a certain return within a
predetermined range of interest rates.
A Fund will enter into interest rate, index and mortgage swaps
only on a net basis, which means that the two payment streams are netted out,
with the Fund receiving or paying, as the case may be, only the net amount of
the two payments. Interest rate, index and mortgage swaps do not involve the
delivery of securities, other underlying assets or principal. Accordingly, the
risk of loss with respect to interest rate, index and mortgage swaps is limited
to the net amount of interest payments that the Fund is contractually obligated
to make. If the other party to an interest rate, index or mortgage swap
defaults, the Fund's risk of loss consists of the net amount of interest
payments that the Fund is contractually entitled to receive. In contrast,
currency swaps usually involve the delivery of a gross payment stream in one
designated currency in exchange for the gross payment stream in another
designated currency. Therefore, the entire payment stream under a currency swap
is subject to the risk that the other party to the swap will default on its
contractual delivery obligations. To the extent that the net amount payable by
the Fund under an interest rate, index or mortgage swap and the entire amount of
the payment stream payable by the Fund under a currency swap or an interest rate
cap, floor or collar are held in a segregated account consisting of cash or
liquid securities, the Funds and CSAM believe that swaps do not constitute
senior securities under the Investment Company Act of 1940, as amended (the
"1940 Act") and, accordingly, will not treat them as being subject to each
Fund's borrowing restriction.
The Fund will not enter into interest rate, index, mortgage or
currency swaps, or interest rate cap, floor or collar transactions unless the
unsecured commercial paper, senior debt or claims paying ability of the other
party is rated either AA or A-1 or better by S&P or Aa or P-1 or better by
Moody's or, if unrated by such rating organizations, determined to be of
comparable quality by CSAM.
16
Foreign Investments (Investment Grade, Fixed Income and Global Fixed Income
Funds only)
Investors should recognize that investing in foreign companies
involves certain risks, including those discussed below, which are not typically
associated with investing in United States 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 positions. A 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 a Fund may invest in
securities denominated in currencies other than the U.S. dollar, and since the
Fund may temporarily hold funds in bank deposits or other money market
investments denominated in foreign currencies, the Fund 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 the Fund. 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 United States 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. A Fund 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. See "Currency
Transactions" and "Futures Activities" above.
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 the securities and about the foreign
17
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 fluctuations and increased
illiquidity.
Increased Expenses. The operating expenses of a Fund, to the
extent it invests in foreign securities, may be higher than that of an
investment company investing exclusively in U.S. securities, since the expenses
of the Fund, such as the cost of converting foreign currency 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 the 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
18
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
European Currency Unit ("ECU"). An ECU represents specified amounts of the
currencies of certain member states of the European Economic Community. The
specific amounts of currencies comprising the ECU may be adjusted by the Council
of Ministers of the European Union to reflect changes in relative values of the
underlying currencies.
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 a Fund, 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."
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. Brady Bonds may be collateralized or uncollateralized, are
issued in various currencies (primarily the U.S. dollar) and are actively traded
in the over-the-counter ("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 and subject to, among other things, the risk of default.
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.
Brady Bonds are often viewed as having three or four valuation
components: the collateralized repayment of principal at final maturity; the
collateralized interest
19
payments; the uncollateralized interest payments; and any uncollateralized
repayment of principal at maturity (these uncollateralized amounts constituting
the "residual risk").
Depository Receipts. Assets of a 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 Depositary Receipts ("CDRs"), are
receipts issued in Europe and IDRs, which are sometimes referred to as Global
Depositary Receipts, are issued outside the United States. EDRs and IDRs 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 and IDRs in bearer form are
designed for use in European securities markets and non-U.S. securities markets,
respectively. For purposes of a Fund's 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.
U.S. Government Securities
Each Fund may invest in Government Securities. Direct
obligations of the U.S. Treasury include a variety of securities that differ in
their interest rates, maturities and dates of issuance. U.S. government
securities also include securities issued or guaranteed by the Federal Housing
Administration, Farmers Home Loan Administration, Export-Import Bank of the
United States, Small Business Administration, GNMA, General Services
Administration, Central Bank for Cooperatives, Federal Farm Credit Banks,
Federal Home Loan Banks, FHLMC, Federal Intermediate Credit Banks, Federal Land
Banks, FNMA, Maritime Administration, Tennessee Valley Authority, District of
Columbia Armory Board and Student Loan Marketing Association. A 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 United States Government is not obligated by law to
provide support to an instrumentality it sponsors, the 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.
20
Government Trust Certificates (Investment Grade Fund only)
The Fund may invest in Government Trust Certificates. Each
Certificate evidences an undivided fractional interest in a Government Trust
(each, a "Trust"). The assets of each Trust consist of a promissory note,
payable in U.S. Dollars (the "Loan Note"), representing a loan made by the Trust
to the government of Israel (the "Borrower"), backed by a full faith and credit
guaranty issued by the United States of America, acting through the Defense
Security Assistance Agency of the Department of Defense (the "Guaranty"), of the
due and punctual payment of 90% of payments of principal and interest due on the
Loan Note and a security interest in collateral, consisting of non-callable
securities issued or guaranteed by the United States government, or derivatives
thereof, such as trust receipts or other securities evidencing an interest in
such United States government securities, sufficient to pay the remaining 10% of
all payments of principal and interest due on the Loan Notes. Each Certificate
issued by a Trust represents the right to receive a portion of the payments due
on the Loan Note held by that Trust. The Certificates are not subject to
prepayment or acceleration. Each Guaranty is entitled to the full faith and
credit of the United States of America. A certificate-holder's right to receive
any payments with respect to the Guaranty will be subject to termination if such
holder breaches the terms of its Certificate.
Certificates are not considered by the Fund to be Government
Securities. The Certificates represent undivided fractional interests in the
Loan Notes, but the Certificates are not direct obligations of, and are not
guaranteed by, the Borrower. Thus, in the event of a failure to pay principal
and/or interest when due, the Fund may be subject to delays, expenses and risks
that are greater than those that would have been involved if the Fund had
purchased a direct obligation of the Borrower.
Municipal Obligations
Under normal circumstances, each Fund may and the Municipal
Fund will invest in "Municipal Obligations." Municipal Obligations are debt
obligations issued by or on behalf of states (including the State of New York),
territories and possessions of the United States and the District of Columbia
and their political subdivisions, agencies and instrumentalities. Except for
temporary defensive purposes, the New York Municipal Fund will invest its assets
in intermediate and long term obligations with interest which is excluded from
gross income for federal income tax purposes and which is exempt from New York
State and New York City personal income taxes ("New York Municipal Obligations")
and intends to invest substantially all of its assets in those obligations. New
York Municipal Obligations include obligations issued by or on the behalf of the
State of New York, its political subdivisions, agencies and instrumentalities.
Municipal Obligations are issued by governmental entities to
obtain funds for various public purposes, including the construction of a wide
range of public facilities, the refunding of outstanding obligations, the
payment of general operating expenses and the extension of loans to public
institutions and facilities. Private activity bonds that are issued by or on
behalf of public authorities to finance various privately-operated facilities
are included within the term Municipal Obligations if the interest paid thereon
is exempt from federal income tax.
21
The two principal types of Municipal Obligations, in terms of
the source of payment of debt service on the bonds, consist of "general
obligation" and "revenue" issues. General obligation bonds are secured by the
issuer's pledge of its full faith, credit and taxing power for the payment of
principal and interest. Revenue bonds are payable from the revenues derived from
a particular facility or class of facilities or in some cases, from the proceeds
of a special excise tax or other specific revenue source such as the user of the
facility being financed. Consequently, the credit quality of revenue bonds is
usually directly related to the credit standing of the user of the facility
involved.
There are, of course, variations in the quality of Municipal
Obligations, both within a particular classification and between
classifications, and the yields on Municipal Obligations depend upon a variety
of factors, including general money market conditions, the financial condition
of the issuer, general conditions of the municipal bond market, the size of a
particular offering, the maturity of the obligation and the rating of the issue.
The ratings of Moody's and S&P represent their opinions as to the quality of
Municipal Obligations. It should be emphasized, however, that ratings are
general and are not absolute standards of quality, and Municipal Obligations
with the same maturity, interest rate and rating may have different yields while
Municipal Obligations of the same maturity and interest rate with different
ratings may have the same yield. Subsequent to its purchase by a Fund, an issue
of Municipal Obligations may cease to be rated or its rating may be reduced
below the minimum rating required for purchase by the Fund. The Fund's
investment adviser will consider such an event in determining whether the Fund
should continue to hold the obligation. See the Appendix attached hereto for
further information concerning the ratings of Moody's and S&P and their
significance.
Among other instruments, a Fund may purchase short term Tax
Anticipation Notes, Bond Anticipation Notes, Revenue Anticipation Notes and
other forms of short term loans. Such notes are issued with a short term
maturity in anticipation of the receipt of tax funds, the proceeds of bond
placements or other revenues.
The yields on Municipal Obligations are dependent upon a
variety of factors, including general economic and monetary conditions, money
market factors, conditions of the municipal bond market, size of a particular
offering, maturity of the obligation offered and rating of the issue.
Municipal Obligations are also subject to the provisions of
bankruptcy, insolvency and other laws affecting the rights and remedies of
creditors, such as the Federal Bankruptcy Code, and laws, if any, which may be
enacted by Congress or state legislatures extending the time for payment of
principal or interest, or both, or imposing other constraints upon enforcement
of such obligations or upon the ability of municipalities to levy taxes. There
is also the possibility that as a result of litigation or other conditions, the
power or ability of any one or more issuers to pay, when due, principal of and
interest on its, or their, Municipal Obligations may be materially affected.
22
Taxable Investments (New York Municipal Fund only)
Because the Fund's purpose is to provide income exempt from
federal income tax and New York State and New York City personal income tax, the
Fund generally will invest in taxable obligations only if and when the Fund's
investment adviser believes it would be in the best interests of the Fund's
investors to do so. Situations in which the Fund may invest up to 20% of its
total assets in taxable securities include: (i) pending investment of proceeds
of sales of Fund shares or portfolio securities or (ii) when the Fund requires
highly liquid securities in order to meet anticipated redemptions. The Fund may
temporarily invest more than 20% of its total assets in taxable securities to
maintain a "defensive" posture when the Fund's investment adviser determines
that it is advisable to do so because of adverse market conditions affecting the
market for Municipal Obligations generally.
Alternative Minimum Tax Bonds (Investment Grade, New York Municipal and Fixed
Income Funds only)
A Fund may invest without limit in "Alternative Minimum Tax
Bonds," which are certain bonds issued after August 7, 1986 to finance certain
non-governmental activities. While the income from Alternative Minimum Tax Bonds
is exempt from regular federal income tax, it is a tax preference item for
purposes of the federal individual and corporate "alternative minimum tax." The
alternative minimum tax is a special tax that applies to a limited number of
taxpayers who have certain adjustments or tax preference items. Available
returns on Alternative Minimum Tax Bonds acquired by a Fund may be lower than
those from other Municipal Obligations acquired by a Fund due to the possibility
of federal, state and local alternative minimum or minimum income tax liability
on Alternative Minimum Tax Bonds. At present, the Investment Grade and Fixed
Income Funds do not intend to purchase Alternative Minimum Tax Bonds.
Securities of Other Investment Companies
A 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, a Fund may hold securities of another investment
company in amounts which (i) do not exceed 3% of the total outstanding voting
stock of such company, (ii) 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, a 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.
Below Investment Grade Securities (Investment Grade, Fixed Income and Global
Fixed Income Funds only)
A Fund may invest up to 35% (20% for the Investment Grade
Fund) of its net assets in fixed income securities rated below investment grade
and as low as C by Moody's or D by S&P, and in comparable unrated securities.
23
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 the Adviser. Bonds rated in the fourth highest grade may
have speculative characteristics and 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. Bonds rated below investment grade may have
speculative characteristics and 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. Investors should
be aware that ratings are relative and subjective and are 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 a Fund pursues a temporary
defensive strategy as discussed below.
An economic recession could disrupt severely the market for
below investment grade securities and may adversely affect the value of below
investment grade securities and the ability of the issuers of such securities to
repay principal and pay interest thereon.
A Fund may have difficulty disposing of certain of these
securities because there may be a thin trading market. Because there is no
established retail secondary market for many of these securities, the Fund
anticipates that these securities could be sold only to a limited number of
dealers or institutional investors. To the extent a secondary trading market for
these securities does exist, it generally is not as liquid as the secondary
market for investment grade 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 the 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 the Fund to obtain
accurate market quotations for purposes of valuing the Fund and calculating its
net asset value.
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 by
the Fund, although CSAM will consider such event in its determination of whether
the Fund should continue to hold the securities. The Fixed
24
Income Fund and the Global Fixed Income Fund may invest in securities rated as
low as C by Moody's or D by S&P and in unrated securities considered 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. Debt rated D by S&P is in default or is expected
to default upon maturity or payment date.
Securities rated below investment grade and comparable unrated
securities: (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. 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 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 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 the Adviser in evaluating the creditworthiness of an issuer. In
this evaluation, in addition to relying on ratings assigned by Moody's or S&P,
the Adviser 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 the Adviser will
consider such event in its determination of whether the Fund should continue to
hold the
25
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.
Emerging Markets (Investment Grade, Fixed Income and Global Fixed Income Funds
only)
The Fixed Income Fund may invest up to 35% of its total fund
assets in securities of issuers located in "emerging markets" (less developed
countries located outside of the U.S.). The Investment Grade and Global Fixed
Income Funds may invest without limit in emerging markets securities. Investing
in emerging markets involves not only the risks described above with respect to
investing in foreign securities generally, 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 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 structures governing private and foreign
investments and private property. The typically small size of the markets of
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.
Lending Portfolio Securities
A Fund may lend portfolio securities to brokers, dealers and
other financial organizations that meet capital and other credit requirements or
other criteria established by a Fund's Board of Directors/Trustees (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 or liquid 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. The 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
26
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 Board of a 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 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 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.
Repurchase Agreements
Each Fund may invest up to 20% of its total assets 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 while the Fund seeks to assert this right. CSAM
monitors the creditworthiness of those bank and non-bank dealers with which
27
the Fund enters into repurchase agreements to evaluate this risk. A repurchase
agreement is considered to be a loan under the 1940 Act.
Reverse Repurchase Agreements and Dollar Rolls
A 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 a Fund pursuant to
its agreement to repurchase them at a mutually agreed upon date, price and rate
of interest. At the time a 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). A Fund's liquidity and ability to
manage its assets might be affected when it sets aside cash or portfolio
securities to cover such commitments.
A Fund also 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, a Fund would forgo principal and interest paid on such securities. A
Fund would be compensated by the difference between the current sales 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 a 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. Reverse repurchase agreements and dollar rolls that are
accounted for as financings are considered to be borrowings under the 1940 Act.
Reverse repurchase agreements and dollar rolls involve the
risk that the market value of the securities retained in lieu of sale may
decline below the price of the securities a 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 a
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.
Zero Coupon Securities
A Fund may invest without limit 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 representation 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.
28
Federal tax law requires that a holder of a zero coupon security accrue a
portion of the discount at which the security was 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. At present, the U.S. Treasury and
certain U.S. agencies issue stripped Government Securities. In addition, in the
recent past, a number of banks and brokerage firms have separated the principal
portions from the coupon portions of U.S. Treasury bonds and notes and sold them
separately in the form of receipts or certificates representing undivided
interests in these instruments.
Government Zero Coupon Securities
A Fund may invest in (i) Government Securities that have been
stripped of their unmatured interest coupons, (ii) the coupons themselves and
(iii) receipts or certificates representing interests in stripped Government
Securities and coupons (collectively referred to as "Government zero coupon
securities").
Short Sales (Investment Grade, Fixed Income and Global Fixed Income Funds only)
In a short sale, a Fund sells a borrowed security and has a
corresponding obligation to the lender to return the identical security. The
seller does not immediately deliver the securities sold and is said to have a
short position in those securities until delivery occurs. If the Fund engages in
a short sale, the collateral for the short position will be maintained by the
Fund's custodian or qualified sub-custodian. While the short sale is open, the
Fund will maintain in a segregated account an amount of securities equal in
value to the securities sold short.
While a short sale is made by selling a security a Fund does
not own, a short sale is "against the box" to the extent that the Fund
contemporaneously owns or has the right to obtain, at no added cost, securities
identical to those sold short. Not more than 10% of a Fund's net assets (taken
at current value) may be held as collateral for short sales against the box at
any one time. A Fund does not intend to engage in short sales against the box
for investment purposes. A Fund may, however, 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 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
29
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 a Fund may
effect short sales.
Emerging Growth and Smaller Capitalization Companies; Unseasoned Issuers
Investing in securities of companies with continuous
operations of less than three years ("unseasoned issuers") may involve greater
risks since these securities may have limited marketability and, thus, may be
more volatile than securities of larger, more established companies or the
market in general. Because such companies normally have fewer shares outstanding
than larger companies, it may be more difficult for a 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.
Although investing in securities of unseasoned issuers 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 a Fund
may involve a greater degree of risk than an investment in other mutual funds
that seek capital appreciation by investing in more established, larger
companies.
"Special Situation" Companies (Investment Grade, Fixed Income and Global Fixed
Income Funds only)
"Special situation companies" are companies 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, 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 capital growth. There
can be no assurance, however, that a special situation that exists at the time
of an its investment will be consummated under the terms and within the time
period contemplated.
Variable Rate and Master Demand Notes (Investment Grade, New York Municipal and
Fixed Income Funds only)
Variable rate demand notes ("VRDNs") are obligations issued by
corporate or governmental entities which contain a floating or variable interest
rate adjustment formula and an unconditional right of demand to receive payment
of the unpaid principal balance plus accrued interest upon a short notice period
not to exceed seven days. The interest rates are adjustable at intervals ranging
from daily to up to every six months to some prevailing market rate for similar
investments, such adjustment formula being calculated to maintain the market
30
value of the VRDN at approximately the par value of the VRDN upon the adjustment
date. The adjustments are typically based upon the prime rate of a bank or some
other appropriate interest rate adjustment index.
Master demand notes are notes which provide for a periodic
adjustment in the interest rate paid (usually tied to the Treasury Bill auction
rate) and permit daily changes in the principal amount borrowed. While there may
be no active secondary market with respect to a particular VRDN purchased by a
Fund, the Fund may, upon the notice specified in the note, demand payment of the
principal of and accrued interest on the note at any time and may resell the
note at any time to a third party. The absence of such an active secondary
market, however, could make it difficult for the Fund to dispose of the VRDN
involved in the event the issuer of the note defaulted on its payment
obligations, and the Fund could, for this or other reasons, suffer a loss to the
extent of the default.
When-Issued Securities and Delayed-Delivery Transactions
A Fund may utilize its 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). 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 securities 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 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 a Fund agrees to purchase when-issued or delayed-delivery
securities, its custodian will set aside cash or liquid securities that are
acceptable as collateral to the appropriate regulatory authority 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
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 Fund's incurring a loss or missing an opportunity to obtain a price
considered to be advantageous.
To-Be-Announced Mortgage-Backed Securities (Investment Grade
and Fixed Income Funds only)
As with other delayed-delivery transactions, a seller agrees
to issue a to-be-announced mortgage-backed security (a "TBA") at a future date.
A TBA transaction arises when a mortgage-backed security, such as a GNMA
pass-through security, is purchased or sold with specific pools that will
constitute that GNMA pass-through security to be announced on a future
31
settlement date. However, at the time of purchase, the seller does not specify
the particular mortgage-backed securities to be delivered. Instead, the Fund
agrees to accept any mortgage-backed security that meets specified terms. Thus,
the Fund and the seller would agree upon the issuer, interest rate and terms of
the underlying mortgages, but the seller would not identify the specific
underlying mortgages until shortly before it issues the mortgage-backed
security. TBAs increase interest rate risks because the underlying mortgages may
be less favorable than anticipated by the Fund. For a further description of
mortgage-backed securities, see "Structured Securities -- Mortgage-Backed
Securities" above.
Stand-By Commitments (Investment Grade, New York Municipal and Fixed Income
Funds only)
A Fund may invest in "stand-by commitments" with respect to
securities held in its portfolio. Under a stand-by commitment, a dealer agrees
to purchase at the Fund's option specified securities at a specified price. The
Fund's right to exercise stand-by commitments is unconditional and unqualified.
Stand-by commitments acquired by the Fund may also be referred to as "put"
options. A stand-by commitment is not transferable by the Fund, although the
Fund can sell the underlying securities to a third party at any time.
The principal risk of stand-by commitments is that the writer
of a commitment may default on its obligation to repurchase the securities
acquired with it. When investing in stand-by commitments, a Fund will seek to
enter into stand-by commitments only with brokers, dealers and banks that, in
the opinion of CSAM, present minimal credit risks. In evaluating the
creditworthiness of the issuer of a stand-by commitment, CSAM will periodically
review relevant financial information concerning the issuer's assets,
liabilities and contingent claims. The Fund acquires stand-by commitments only
in order to facilitate portfolio liquidity and does not expect to exercise its
rights under stand-by commitments for trading purposes.
The amount payable to a Fund upon its exercise of a stand-by
commitment is normally (i) the Fund's acquisition cost of the securities
(excluding any accrued interest which the Fund paid on their acquisition), less
any amortized market premium or plus any amortized market or original issue
discount during the period the Fund owned the securities, plus (ii) all interest
accrued on the securities since the last interest payment date during that
period.
Each Fund expects that stand-by commitments will generally be
available without the payment of any direct or indirect consideration. However,
if necessary or advisable, a Fund may pay for a stand-by commitment either
separately in cash or by paying a higher price for portfolio securities which
are acquired subject to the commitment (thus reducing the yield to maturity
otherwise available for the same securities). The total amount paid in either
manner for outstanding stand-by commitments held in the Fund's portfolio will
not exceed 1/2 of 1% of the value of the Fund's total assets calculated
immediately after each stand-by commitment is acquired.
A Fund would acquire stand-by commitments solely to facilitate
portfolio liquidity and does not intend to exercise its rights thereunder for
trading purposes. The acquisition of a stand-by commitment would not affect the
valuation or assumed maturity of the
32
underlying securities. Stand-by commitments acquired by the Fund would be valued
at zero in determining net asset value. Where the Fund paid any consideration
directly or indirectly for a stand-by commitment, its cost would be reflected as
unrealized depreciation for the period during which the commitment was held by
the Fund.
A Fund will at all times maintain a segregated account with
its custodian consisting of cash or liquid securities in an aggregate amount
equal to the purchase price of the securities underlying the commitment. The
assets contained in the segregated account will be marked-to-market daily and
additional assets will be placed in such account on any day in which assets fall
below the amount of the purchase price. A Fund's liquidity and ability to manage
its assets might be affected when it sets aside cash or portfolio securities to
cover such commitments.
The Internal Revenue Service ("IRS") has issued a revenue
ruling to the effect that a registered investment company will be treated for
federal income tax purposes as the owner of the Municipal Obligations acquired
subject to a stand-by commitment and the interest on the Municipal Obligations
will be tax exempt to a Fund.
REITs (Investment Grade, Fixed Income and Global Fixed Income Funds only)
A 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 Funds, 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"). The Fund investing in a REIT 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, 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.
Warrants (Investment Grade, Fixed Income and Global Fixed Income Funds only)
A Fund may utilize up to 10% of its net assets to purchase
warrants issued by domestic and foreign companies to purchase newly created
equity securities consisting of common and preferred stock. Neither Fund
currently intends to invest in warrants. The equity security underlying a
warrant is outstanding 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. The
33
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
A Fund may not invest more than 15% of its net assets in
non-publicly traded and illiquid securities, including securities that are
illiquid by virtue of the absence of a readily available market, repurchase
agreements which have a maturity of longer than seven days, VRDNs and master
demand notes providing for settlement upon more than seven days notice by the
Fund, and time deposits maturing in more than seven calendar 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. 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) 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 the Fund. Further, companies
whose securities are not publicly traded
34
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 the 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 the
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 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 a Fund's limit on the purchase of illiquid
securities unless the Fund's Board of Directors/Trustees or its delegates
determines that the Rule 144A Securities are liquid. In reaching liquidity
decisions, CSAM 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 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
A Fund may borrow up to 30% 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. Investments (including
roll-overs) will not be made when borrowings exceed 5% of the Fund's net assets.
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 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.
35
Non-Diversified Status (New York Municipal and Global Fixed Income Funds only)
The Funds are classified as non-diversified within the meaning
of the 1940 Act, which means that they are not limited by such Act in the
proportion of its assets that it may invest in securities of a single issuer. As
non-diversified investment companies, the Funds may invest a greater proportion
of their assets in the obligations of a small number of issuers and, as a
result, may be subject to greater risk with respect to portfolio securities. To
the extent that the Funds assume large positions in the securities of a small
number of issuers, their return may fluctuate to a greater extent than that of a
diversified company as a result of changes in the financial condition or in the
market's assessment of the issuers.
A Fund's investments will be limited, however, in order to
qualify as a "regulated investment company" for purposes of the Code. See
"Additional Information Concerning Taxes." To qualify, a Fund will comply with
certain requirements, including limiting its investments so that at the close of
each quarter of the taxable year (i) not more than 25% of the market value of
its total assets will be invested in the securities of a single issuer, and (ii)
with respect to 50% of the market value of its total assets, not more than 5% of
the market value of its total assets will be invested in the securities of a
single issuer and the Fund will not own more than 10% of the outstanding voting
securities of a single issuer.
INVESTMENT RESTRICTIONS
Investment Grade Fund
The investment limitations numbered 1 through 12 may not be
changed without the affirmative vote of the holders of a majority of the
Investment Grade 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. Investment limitations 13 through 15 may be changed by a
vote of the Board at any time.
The Investment Grade 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, dollar roll
transactions that are accounted for as financings and any other transactions
constituting borrowing by the Fund may not exceed 30% of the value of the Fund's
total assets. For purposes of this restriction, short sales, the entry into
currency transactions, options, futures contracts, options on futures contracts,
forward commitment transactions and dollar roll transactions that are not
accounted for as financings (and the segregation of assets in connection with
any of the foregoing) shall not constitute borrowing.
2. 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
Government Securities.
36
3. Make loans except that the Fund may purchase or hold fixed
income securities, including loan participations, assignments and structured
securities; lend portfolio securities and enter into repurchase agreements.
4. Underwrite any securities issued by others except to the
extent that the investment in restricted securities and the sale of securities
in accordance with the Fund's investment objective, policies and limitations may
be deemed to be underwriting.
5. Purchase or sell real estate, real estate investment trust
securities or invest in oil, gas or mineral exploration or development programs,
except that the Fund may invest in securities secured by real estate, mortgages
or interests therein.
6. Make short sales of securities or maintain a short
position, except the Fund may maintain short positions in forward currency
contracts, options, futures contracts and options on futures contracts and make
short sales "against the box".
7. Purchase more than 10% of the voting securities of any one
issuer; provided that this limitation shall not apply to investments in
Government Securities.
8. 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 currencies,
options, futures contracts or related options will not be deemed to be a
purchase of securities on margin.
9. Invest in commodities, except that the Fund may purchase
and sell futures contracts, including those relating to securities, currencies
and indexes, and options on futures contracts, securities, currencies or
indexes, and purchase and sell currencies or securities on a forward commitment
or delayed-delivery basis.
10. Issue any senior security except as permitted in these
Investment Restrictions.
11. 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
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.
12. Purchase securities of other investment companies except
in connection with a merger, consolidation, acquisition, reorganization or offer
of exchange or as permitted under the 1940 Act.
13. Pledge, mortgage or hypothecate its assets, except to the
extent necessary to secure permitted borrowings and to the extent related to the
deposit of assets in escrow in connection with the writing of covered put and
call options and purchase of securities on a forward commitment or
delayed-delivery basis and collateral and initial or variation margin
arrangements with respect to currency transactions, options, futures contracts,
and options on futures contracts.
37
14. Invest more than 15% of the value 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.
15. Make additional investments (including roll-overs) if the
Fund's borrowings exceed 5% of its net assets.
New York Municipal Fund
The investment limitations numbered 1 through 10 are
Fundamental Restrictions. Investment limitations 11 through 14 may be changed by
a vote of the Board at any time.
The New York Municipal 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, dollar roll
transactions that are accounted for as financings and any other transactions
constituting borrowing by the Fund may not exceed 30% of the value of the Fund's
total assets. For purposes of this restriction, short sales, the entry into
currency transactions, options, futures contracts, options on futures contracts,
forward commitment transactions and dollar roll transactions that are not
accounted for as financings (and the segregation of assets in connection with
any of the foregoing) shall not constitute borrowing.
2. Purchase any securities which would cause more than 25% 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 (a) U.S.
government securities, (b) certificates of deposit issued by United States
branches of United States banks or (c) Municipal Obligations. For purposes of
this restriction, private purpose bonds ultimately payable by companies within
the same industry are treated as if they were issued by issuers in the same
industry.
3. Make loans except that the Fund may purchase or hold
fixed-income securities, including loan participations, assignments and
structured securities, and enter into repurchase agreements in accordance with
its investment objective, 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
in accordance with the Fund's investment objective, policies and limitations may
be deemed to be underwriting.
5. Purchase or sell real estate, real estate investment trust
securities or invest in oil, gas or mineral exploration or development programs,
except that the Fund may invest in securities secured by real estate, mortgages
or interests therein.
6. Make short sales of securities or maintain a short
position, except the Fund
38
may maintain short positions in forward currency contracts, options, futures
contracts and options on futures contracts.
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 currencies,
options, futures contracts or related options 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, including those relating to securities, currencies
and indexes, and options on futures contracts, securities or indexes, and
purchase and sell currencies or securities on a forward commitment or
delayed-delivery basis.
9. Issue any senior security except as permitted in these
Investment Restrictions.
10. Purchase securities of other investment companies except
(a) in connection with a merger, consolidation, acquisition or reorganization or
(b) as permitted under the 1940 Act.
11. Invest less than 80% of its assets in securities the
interest on which is exempt from federal income tax and New York State and New
York City personal income tax, except during temporary defensive periods or
under unusual market conditions, as determined by the Fund's investment adviser.
12. Pledge, mortgage or hypothecate its assets, except to the
extent necessary to secure permitted borrowings and to the extent related to the
deposit of assets in escrow in connection with the writing of covered put and
call options and purchased securities on a forward commitment or
delayed-delivery basis and collateral and initial or variation margin
arrangements with respect to currency transactions, options, futures contracts,
and options on futures contracts.
13. Invest more than 15% of the value 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, (a) repurchase agreements with
maturities greater than seven days, (b) variable rate and master demand notes
providing for settlement upon more than seven days' notice by the Fund and (c)
time deposits maturing in more than seven calendar days shall be considered
illiquid securities.
14. Make additional investments (including roll-overs) if the
Fund's borrowings exceed 5% of its net assets.
Fixed Income Fund
The investment limitations numbered 1 through 12
39
are Fundamental Restrictions. Investment limitations 13 through 15 may be
changed by a vote of the Board at any time.
The Fixed Income Fund may not:
1. Borrow money except that the Fund may (i) borrow from banks
for temporary or emergency purposes, and (ii) enter into reverse repurchase
agreements; provided that reverse repurchase agreements, dollar roll
transactions that are accounted for as financings and any other transactions
constituting borrowing by the Fund may not exceed 30% of the value of the Fund's
total assets. For purposes of this restriction, short sales, the entry into
currency transactions, options, futures contracts, options on futures contracts,
forward commitment transactions and dollar roll transactions that are not
accounted for as financings (and the segregation of assets in connection with
any of the foregoing) shall not constitute borrowing.
2. 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.
3. Make loans except that the Fund may purchase or hold
fixed-income securities, including loan participations, assignments and
structured securities; lend portfolio securities; and enter into repurchase
agreements.
4. Underwrite any securities issued by others except to the
extent that the investment in restricted securities and the sale of securities
in accordance with the Fund's investment objective, policies and limitations may
be deemed to be underwriting.
5. Purchase or sell real estate or invest in oil, gas or
mineral exploration or development programs or oil, gas and mineral leases,
except that the Fund may invest in (a) securities secured by real estate,
mortgages or interests therein and (b) securities of companies that invest in or
sponsor oil, gas or mineral exploration or development programs.
6. Make short sales of securities or maintain a short
position, except the Fund may maintain short positions in forward currency
contracts, options, futures contracts and options on futures contracts and make
short sales "against the box."
7. Purchase more than 10% of the voting securities of any one
issuer; provided that this limitation shall not apply to investments in U.S.
government securities.
8. 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 currencies,
options, futures contracts or related options will not be deemed to be a
purchase of securities on margin.
40
9. Invest in commodities, except that the Fund may purchase
and sell futures contracts, including those relating to securities, currencies
and indexes, and options on futures contracts, securities, currencies or
indexes, and purchase and sell currencies or securities on a forward commitment
or delayed-delivery basis.
10. Issue any senior security except as permitted in these
Investment Restrictions.
11. 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.
12. 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.
13. Pledge, mortgage or hypothecate its assets, except to the
extent necessary to secure permitted borrowings and to the extent related to the
deposit of assets in escrow in connection with the writing of covered put and
call options and purchase of securities on a forward commitment or
delayed-delivery basis and collateral and initial or variation margin
arrangements with respect to currency transactions, options, futures contracts,
and options on futures contracts.
14. Invest more than 15% of the value 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, (a) repurchase agreements
with maturities greater than seven days, (b) VRDNs and master demand notes
providing for settlement upon more than seven days notice by the Fund and (c)
time deposits maturing in more than seven calendar days shall be considered
illiquid securities.
15. Make additional investments (including roll-overs) if the
Fund's borrowings exceed 5% of its net assets.
Global Fixed Income Fund
The investment limitations numbered 1 through 10 are
Fundamental Restrictions. Investment limitations 11 through 13 may be changed by
a vote of the Board at any time.
The Global Fixed Income 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, dollar roll
transactions that are accounted for as financings and any other transactions
constituting borrowing by the Fund may not exceed 30% of the value of the Fund's
total assets. For purposes of this restriction, short sales, the entry into
currency transactions,
41
options, futures contracts, options on futures contracts, forward commitment
transactions and dollar roll transactions that are not accounted for as
financings (and the segregation of assets in connection with any of the
foregoing) shall not constitute borrowing.
2. 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.
3. Make loans, except that the Fund may purchase or hold
fixed-income securities, including loan participations and assignments and
structured securities; lend portfolio securities; and enter into repurchase
agreements.
4. Underwrite any securities issued by others except to the
extent that the investment in restricted securities and the sale of securities
in accordance with the Fund's investment objective, policies and limitations may
be deemed to be underwriting.
5. Purchase or sell real estate or invest in real estate
limited partnerships, oil, gas or mineral exploration or development programs or
oil, gas and mineral leases, except that the Fund may invest in (a) securities
secured by real estate, mortgages or interests therein and (b) securities of
companies that invest in or sponsor oil, gas or mineral exploration or
development programs.
6. Make short sales of securities or maintain a short
position, except the Fund may maintain short positions in forward currency
contracts, options, futures contracts and options on futures contracts and make
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 currencies,
options, futures contracts or related options 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, including those relating to securities, currencies
and indexes, and options on futures contracts, securities, currencies or
indexes, and purchase and sell currencies or securities on a forward commitment
or delayed-delivery basis.
9. Issue any senior security except as permitted in these
Investment Restrictions.
10. 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.
11. Pledge, mortgage or hypothecate its assets, except to the
extent necessary to secure permitted borrowings and to the extent related to the
deposit of assets in escrow in connection with the writing of covered put and
call options and purchase of securities on a
42
forward commitment or delayed-delivery basis and collateral and initial or
variation margin arrangements with respect to currency transactions, options,
futures contracts, and options on futures contracts.
12. Invest more than 15% of the value 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.
13. Make additional investments (including roll-overs) if the
Fund's borrowings exceed 5% of its net assets.
If a percentage restriction (other than the percentage
limitation set forth in each of No. 1 above) 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.
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.
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 the
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 security will be
valued
43
at 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 in good
faith by or under the direction of the Board. 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. In addition,
the Board 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. ("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 a Fund's net asset value is
not calculated. As a result, calculation of the 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. Events affecting the
values of portfolio securities that occur between the time their prices are
determined and the close of regular trading on the NYSE will not be reflected in
a Fund's calculation of net asset value unless the Board or its delegates deems
that the particular event would materially affect net asset value, in which case
an adjustment may be made. 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 pursuant to consistently applied procedures
established by the Board.
44
PORTFOLIO TRANSACTIONS
CSAM is responsible for establishing, reviewing and, where
necessary, modifying a Fund's investment program to achieve its investment
objectives. CSAM has retained Credit Suisse Asset Management Limited (U.K.) and
Credit Suisse Asset Management Limited (Japan) to act as sub-advisers for the
Global Fixed Income 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 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.
Government securities are generally purchased from underwriters or dealers,
although certain newly issued 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 government
securities.
The Adviser will select portfolio investments and effect
transactions for the Funds. In selecting broker-dealers, the Adviser does
business exclusively with those broker-dealers that, in the Adviser's judgment,
can be expected to provide the best service. The service has two main aspects:
the execution of buy and sell orders and the provision of research. In
negotiating commissions with broker-dealers, the Adviser will pay no more for
execution and research services that it considers either, or both together, to
be worth. The worth of execution service depends on the ability of the
broker-dealer to minimize costs of securities purchased and to maximize prices
obtained for securities sold. The worth of research depends on its usefulness in
optimizing portfolio composition and its changes over time. Commissions for the
combination of execution and research services that meet the Adviser's standards
may be higher than for execution services alone or for services that fall below
the Adviser's standards. The Adviser believes that these arrangements may
benefit all clients and not necessarily only the accounts in which the
particular investment transactions occur that are so executed. Further, the
Adviser will only receive brokerage or research service in connection with
securities transactions that are consistent with the "safe harbor" provisions of
Section 28(e) of the Securities Exchange Act of 1934 when paying such higher
commissions. Research services may include research on specific industries or
companies, macroeconomic analyses, analyses of national and international events
and trends, evaluations of thinly traded securities, computerized trading
screening techniques and securities ranking services, and general research
services. Research received from brokers or dealers is supplemental to the
Adviser's own research program.
45
For the fiscal year ended October 31, 2002, none of the Funds
paid any brokerage commissions to brokers and dealers who provided such research
services.
The following table details amounts paid by each Fund in
commissions to broker-dealers for execution of portfolio transactions during the
indicated fiscal years.
Fiscal year ended Fiscal year ended Fiscal year ended
October 31, 2000 October 31, 2001 October 31, 2002
Investment Grade Fund 0 0 0
New York Municipal Fund 0 0 0
Fixed Income Fund 0 $17,034 $44,658
Global Fixed Income Fund 0 $9,564 $14,670
All orders for transactions in securities or options on behalf
of a Fund are placed by the Adviser with broker-dealers that it selects,
including Credit Suisse Asset Management Securities, Inc., the Funds'
distributor and an affiliate of CSAM ("CSAMSI"), and affiliates of Credit Suisse
Group ("Credit Suisse"). 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.
During the fiscal year ended October 31, 2002, none of the
Funds paid commissions to CSFB.
Investment decisions for a Fund concerning specific portfolio
securities are made independently from those for other clients advised by the
Adviser. Such other investment clients may invest in the same securities as the
Fund. When purchases or sales of the same security are made at substantially the
same time on behalf of such other clients, transactions are averaged as to price
and available investments allocated as to amount, in a manner which the Adviser
believes to be equitable to each client, including the Fund. In some instances,
this investment procedure may adversely affect the price paid or received by a
Fund or the size of the position obtained or sold for the Fund. To the extent
permitted by law,
46
the Adviser may aggregate the securities to be sold or purchased for the 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, 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 the Investment Grade, Fixed Income and Global
Fixed Income 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 normally involve brokerage commissions. Securities firms may receive
brokerage commissions on certain portfolio transactions, including options,
futures and options on futures transactions and the purchase and sale of
underlying securities upon exercise of options.
A Fund may participate, if and when practicable, in bidding
for the purchase of securities for 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. The Fund will engage in this practice, however, only when the
Adviser, in its sole discretion, believes such practice to be otherwise in the
Fund's interest.
The following table details amounts paid by each Fund in
commissions to broker-dealers for execution of portfolio transactions during the
indicated fiscal year or period.
Fiscal year ended Fiscal year ended Fiscal year ended
October 31, 2000 October 31, 2001 October 31, 2002
---------------- ---------------- ----------------
Investment Grade Fund 0 0 0
New York Municipal Fund 0 0 0
Fixed Income Fund 0 $17,034 $44,658
Global Fixed Income Fund 0 $9,564 $14,670
As of October 31, 2002, each Fund held the following
securities of its regular brokers or dealers:
47
Name of Fund Name of Securities Aggregate Value of the Holdings
- ------------------------------------- ---------------------------------------- ---------------------------------------
Investment Grade Fund State Street Bank & Trust Co. Euro $3,487,000
Time Deposit
- ------------------------------------- ---------------------------------------- ---------------------------------------
New York Municipal Fund None --
- ------------------------------------- ---------------------------------------- ---------------------------------------
Fixed Income Fund State Street Bank & Trust Co. Euro $14,784,000
Time Deposit
- ------------------------------------- ---------------------------------------- ---------------------------------------
Global Fixed Income Fund State Street Bank & Trust Co. Euro $16,319,000
Time Deposit
PORTFOLIO TURNOVER
The Funds do 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. A 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 the Fund could
result in high portfolio turnover. For example, portfolio securities may be sold
in anticipation of a rise in interest rates (market decline) or purchased in
anticipation of a decline in interest rates (market rise) and later sold. In
addition, a security may be sold and another of comparable quality purchased at
approximately the same time to take advantage of what CSAM believes to be a
temporary disparity in the normal yield relationship between the two securities.
These yield disparities may occur for reasons not directly related to the
investment quality of particular issues or the general movement of interest
rates, such as changes in the overall demand for, or supply of, various types of
securities. In addition, 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, the
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 the Fund may be higher than mutual funds having a similar objective 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 commission, higher dealer markups or underwriting commissions as well
as other transaction costs. In addition, gains realized from portfolio turnover
may be taxable to shareholders.
For the fiscal year ended October 31, 2001 and 2002, the
portfolio turnover rate for the Investment Grade Fund was 41% and 171%; for the
New York Municipal Fund, 51% and 34%; for the Fixed Income
48
Fund, 383% and 385%; and for the Global Fixed Income Fund, 144% and 150%,
respectively. For the year ended October 31, 2001, the increase in the Fixed
Income Fund's portfolio turnover rate resulted from a number of factors,
including an increase in the portion of the Fund's portfolio invested in TBAs
and the Fund's concomitantly increased use of dollar rolls with respect to these
securities. In a dollar roll, the Fund sells TBAs for delivery in the current
month and simultaneously contracts to repurchase similar but not identical
securities on a specified future date, generally one month ahead. This monthly
roll over resulted in a higher portfolio turnover rate. For the year ended
October 31, 2002 the increase in the Investment Grade Fund's portfolio turnover
rate was due to the change in portfolio managers.
SPECIAL CONSIDERATIONS RELATING TO NEW YORK MUNICIPAL OBLIGATIONS
Some of the significant financial considerations relating to
the New York Municipal Fund's investments in New York Municipal Obligations are
summarized below. This summary information is not intended to be a complete
description and is principally derived from the Annual Information Statement of
the State of New York as supplemented and contained in official statements
relating to issues of New York Municipal Obligations that were available prior
to the date of this Statement of Additional Information. The accuracy and
completeness of the information contained in those official statements have not
been independently verified.
The State of New York's most recent fiscal year began on April
1, 2002 and ends on March 31, 2003. The most recent published Update to the
Annual Information Statement was dated November 14, 2002 with supplement dated
January 10, 2003.
Special Considerations. Current economic and financial trends
have substantially heightened the risk that actual receipts for the 2002-03
fiscal year will fall significantly below the levels reported in the current
Financial Plan. An unusual amount of uncertainty surrounds those factors that
have historically been most prominent in determining the State's revenue
performance. These factors include the profit performance of the
49
financial sector and the timing of tax payments from high-income individuals and
businesses.
It now appears more likely that the national and State
economies will rebound at a slower pace than projected under the current
forecast. Equity market instability (fueled by poor earnings, accounting
concerns, and fears of further terrorist attacks), a further escalation of
tensions in the Middle East and the resultant upward pressure on energy prices,
a weakening of growth in consumer spending, and a failure of investment spending
to rebound are all factors that are combining to produce a potential return to
recessionary conditions.
More important from a revenue perspective, the prolonged and
substantial decline in equity markets has increased the likelihood that tax
payments will fall below current projections, as well as increased the
uncertainty of the timing of such tax payments. The State receives a substantial
portion of tax receipts from the income and profits of financial service
employees and companies. In addition, the taxable income of State taxpayers is
affected by the changing value of equities and the associated impact on the
value of capital gain transactions. Historically, declines in the stock market
are followed by declines in personal income tax payments as tax liability
associated with market transactions declines.
50
Finally, financial service firms have suffered a second
consecutive year of poor profit performance related to stock market declines and
the fallout associated with the corporate accounting scandals. As a result,
there have been, and it is generally expected that there will continue to be,
further reductions in employment for this industry and declines in the
compensation of highly paid financial service employees.
For these reasons, it now appears more likely that the State
will experience a significant decline in its revenue situation in fiscal year
2002-03. The Division of the Budget ("DOB") is continuously analyzing actual
data and available information from the financial services industry and the
economy in general to assess any potential negative impact on receipts. However,
given the uncertainties surrounding the economy in general and the financial
services sector in particular, DOB is unable at this time to quantify with
confidence the potential impact on expected tax receipts.
51
The State currently has $710 million in the Tax Stabilization
Reserve Fund to guard against potential risks. Consistent with prudent fiscal
practices, DOB is also developing a range of approaches totaling five percent of
General Fund spending to help bolster the State's reserves and respond to the
heightened uncertainties surrounding the receipts forecast. Accordingly, DOB
will continue to maintain a strict hiring freeze and controls on all
discretionary spending, initiate debt management actions to lower debt service
costs, and take other administrative measures to reduce costs in the current
year. In the past, the State has taken both administrative and legislative
actions to address potential Financial Plan shortfalls, and DOB believes similar
actions can be taken to respond to adverse variances in the current year.
In addition, the Governor has proposed legislation to permit
the State to securitize all or a portion of its share of future payments from
the tobacco industry under the national master settlement agreement. To guard
against the risk that the enabling legislation necessary for tobacco
securitization is not enacted in fiscal year 2002-03, DOB is identifying a range
of additional administrative remedies beyond those already underway that would
reduce costs in the current year (e.g., deferring certain discretionary payments
until fiscal year 2003-04, thereby adding to General Fund costs in that year).
Such measures, if implemented, are expected by DOB to be sufficient to close the
2002-03 fiscal year in balance. As a result of these actions, DOB does not
anticipate the State will need to draw on the Tax Stabilization Reserve Fund to
maintain budget balance.
DOB expects to propose actions to close a 2003-04 budget gap
that DOB currently anticipates to be several times larger than the budgetary
shortfall projected for the current year, and substantially larger than the $2.8
billion imbalance projected in February 2002. Factors affecting the potential
budget imbalance include the possible
52
impact of economic and financial market instability on receipts (which could
cause losses in excess of five percent of earlier projections), the use of
reserves and other non-recurring resources to balance the 2002-03 budget, and
higher pension costs and entitlement spending.
State Economy. As anticipated, the World Trade Center
terrorist attacks have had an even more devastating impact on New York than on
the national economy as a whole. As a result, the State economy could remain in
recession even after the initiation of a recovery for the nation overall.
Employment is expected to decline by 0.8 percent in 2002, following a 0.5
percent decline in 2001. Wages and salaries are expected to show an increase of
2.4 percent for 2001, followed by a decline of 1.5 percent for 2002 due to
weakness in securities industry profits in the first quarter of 2002. Total
State personal income, of which wages and salaries are the largest component, is
projected to grow 0.5 percent in 2002, following growth of 2.9 percent for 2001.
The risks to the New York forecast are substantial. Weaker
than expected growth for both the national and international economies could
delay the onset of the State's recovery. This would result in even slower
employment and income growth than projected. This decline, if it continues,
could result in a large negative impact in underlying economic activity. Adverse
developments in the equity markets have the potential to significantly disrupt
economic activity in New York, given the prominence of financial services in the
State's economy.
53
In contrast, stronger national and international growth could result in an
earlier recovery than projected. At the State level, the cleanup of the World
Trade Center site has been completed and redevelopment is expected to commence
shortly. As a result, employment growth could be stronger than projected.
Financial sector activity remains the largest risk to the New York forecast.
Wall Street compensation fell precipitously in early 2002. Continued weakness in
this sector would have a deleterious impact on the State's prospects for
economic recovery, while a sharp improvement in profits for the financial
industry would likely have a significant beneficial impact on the State's
economy.
The possibility of hostilities in the Middle East poses
another risk. It is impossible to accurately predict the economic impact of such
an event or even its direction. However, a further spike in oil prices, a loss
of international tourism, and the redirection toward the war effort of resources
that might have aided in strengthening the current recovery can be expected to
have a negative impact.
New York is the third most populous state in the nation and
has a relatively high level of personal wealth. The State's economy is diverse
with a comparatively large share of the nation's finance, insurance,
transportation, communications and
54
services employment, and a very small share of the nation's farming and mining
activity. The State's location and its air transport facilities and natural
harbors have made it an important link in international commerce. Travel and
tourism constitute an important part of the economy. Like the rest of the
nation, New York has a declining proportion of its workforce engaged in
manufacturing, and an increasing proportion engaged in service industries.
Services: The services sector, which includes entertainment,
personal services, such as health care and auto repairs, and business-related
services, such as information processing, law and accounting, is the State's
leading economic sector. The services sector accounts for more than three of
every ten nonagricultural jobs in New York and has a noticeably higher
proportion of total jobs than does the rest of the nation.
Manufacturing: Manufacturing employment continues to decline
in New York, as in most other states, and New York's economy is less reliant on
this sector than in the past. However, it remains an important sector of the
State economy, particularly for the upstate economy, as high concentrations of
manufacturing industries for transportation equipment, optics and imaging,
materials processing, and refrigeration, heating, and electrical equipment
products are located in the upstate region.
Trade: Wholesale and retail trade is the second largest sector
in terms of nonagricultural jobs in New York but is considerably smaller when
measured by income share. Trade consists of wholesale businesses and retail
businesses, such as department stores and eating and
55
drinking establishments.
Finance, Insurance and Real Estate: New York City is the
nation's leading center of banking and finance and, as a result, this is a far
more important sector in the State than in the nation as a whole. Although this
sector accounts for under one-tenth of all nonagricultural jobs in the State, it
contributes about one-fifth of total wages.
Agriculture: Farming is an important part of the economy in
rural areas, although it constitutes a very minor part of total State output.
Principal agricultural products of the State include milk and dairy products,
greenhouse and nursery products, fruits, and vegetables. New York ranks among
the nation's leaders in the production of these commodities.
Government: Federal, State and local governments together are
the third largest sector in terms of nonagricultural jobs, with the bulk of the
employment accounted for by local governments. Public education is the source of
nearly one-half of total State and local government employment.
State Budget. The State Constitution requires the Governor of
New York ("Governor") to submit to the State legislature (the "Legislature") a
balanced executive budget which contains a complete plan of expenditures for the
ensuing fiscal year and all moneys and revenues estimated to be available
therefor, accompanied by bills containing all proposed appropriations or
reappropriations and any new or modified revenue measures to be enacted in
connection with the executive budget. The entire plan constitutes the proposed
State financial plan for that fiscal year. The Governor is required to submit to
the Legislature quarterly budget updates which include a revised cash-basis
state financial plan, and an explanation of any changes from the previous state
financial plan.
State law requires the Governor to propose a balanced budget
each year. In recent years, the State has closed projected budget gaps which DOB
estimated at $5.0 billion (1995-
56
96), $3.9 billion (1996-97), $2.3 billion (1997-98), less than $1 billion (in
each of the fiscal years 1998-99 through 2000-01) and $6.8 billion in 2002-03.
The 2002-03 Financial Plan projected budget gaps of $2.8 billion in 2003-04 and
$3.3 billion in 2004-05.
Four governmental fund types comprise the State Financial
Plan: the General Fund, the Special Revenue Funds, the Capital Projects Funds,
and the Debt Service Funds. The State's fund structure adheres to the accounting
standards of the Governmental Accounting Standards Board.
General Fund. The General Fund is the principal operating fund
of the State and is used to account for all financial transactions except those
required to be accounted for in another fund. It is the State's largest fund and
receives almost all State taxes and other resources not dedicated to particular
purposes. In the State's 2002-03 fiscal year, the General Fund is expected to
account for approximately 42 percent of All Governmental Funds disbursements.
General Fund moneys are also transferred to other funds, primarily to support
certain capital projects and debt service payments in other fund types.
Total General Fund receipts, including transfers from other
funds, are projected to total $39.90 billion in fiscal year 2002-03, a decrease
of $1.25 billion or -3.0 percent from the 2001-02 fiscal year. This total
includes $35.08 billion in tax receipts, $2.15 billion in miscellaneous
receipts, and $2.67 billion in transfers from other funds. The transfer of $1.68
billion in resources through the tax refund reserve account from fiscal year
2001-02 to fiscal year 2002-03 has the effect of exaggerating the change in
State receipts from year to year by depressing 2001-02 figures and increasing
2002-03 projections.
The year-to-year decline in receipts is caused primarily by
the economic dislocation caused by the terrorist attacks of September 11, the
national recession, the decline in equity markets, and the drop in compensation
paid to financial service workers. Personal income tax payments associated with
the 2001 tax year are significantly below 2000 levels, with associated impacts
on final payments and refunds.
General Fund disbursements, including transfers to other
funds, are projected to total $40.21 billion for 2002-03, an annual decrease of
$1.01 billion or -2.4
57
percent from the 2001-02 fiscal year. All Governmental Funds spending for
2002-03 is projected to be $89.56 billion, consisting of $59.35 billion in
State-supported spending and $30.21 billion in federal aid. This represents an
increase of $5.08 billion or 6.0 percent for 2001-02 (after excluding federal
World Trade Center "pass-through" disaster assistance funds to The City of New
York and other localities).
The projected 2002-03 General Fund closing balance of $716
million, a decline of $316 million from 2001-02 (30.6 percent), consists of $710
million in the Tax Stabilization Reserve Fund (the State's "rainy day" fund) and
$6 million in the Contingency Reserve Fund (the State's litigation reserve).
The 2002-03 General Fund balance excludes amounts on deposit
in the refund reserve account. The State had a balance of $1.68 billion on
deposit in the refund reserve account at the end of the 2001-02 fiscal year and
projects to have a balance of $427 million on deposit at the end of 2002-03 (a
decline of $1.25 billion from 2001-02). A portion of these reserves ($1.1
billion) are expected to be used to help balance the Financial Plan by replacing
revenues lost in the aftermath of the World Trade Center terrorist attacks. The
refund reserve account is used to pay for tax refunds across fiscal years and to
help accomplish other Financial Plan objectives, including the movement of
resources from one fiscal year to the next. Changes to the refund reserve impact
the level of reported personal income tax receipts.
Over the next several years, a substantial amount of federal
aid is projected to flow through the State to localities for disaster response
and reconstruction activities related to the World Trade Center attacks. The
Financial Plan estimated that federal "flow-through" disaster aid totaled $569
million in 2001-02 and is projected to total $2.76 billion in 2002-03 as
recovery and rebuilding efforts reach full capacity. Nearly all of the federal
disaster aid is expected to flow from the Federal Emergency Management Agency
through the State Emergency Management Office (SEMO) to New York City and other
localities affected by the terrorist attacks. This "flow-through" spending is
not counted in the All Governmental Funds Financial Plan.
The All Governmental Funds Financial Plan does include State
spending for World Trade Center costs of $330 million in 2002-03. Unlike the
flow-through aid, these projected disbursements in the Financial Plan finance
State government activities. Most of this spending is supported by Federal funds
($306 million) which will finance, among other things, payments to the victims
of the attack, State Police and Division of Military and Naval Affairs staffing
costs directly related to the terrorist attacks, expanded counseling and trauma
services, and infrastructure repairs.
Through December 2002, preliminary General Fund receipts and
transfers from other funds (based on DOB's estimate) totaled $27.32 billion,
$1.17 billion below cash-flow projections for fiscal year 2002-03 derived from
the October 2002 Financial Plan, with negative variances against planned
collections concentrated in the personal income tax and in business taxes.
However, it remains uncertain at this point how much of the receipts shortfall
to date is related to the timing of tax payments within the same fiscal year
(but
58
across individual and business tax years), and how much is related to economic
conditions. Preliminary General Fund disbursements and transfers to other funds
totaled $26.88 billion, $400 million below cash-flow projections derived from
the October 2002 Financial Plan. The variances result in a preliminary General
Fund closing balance of $1.47 billion at the end of December 2002, which is $772
million below DOB's cash-flow projections.
Based on operating results through December 31, 2002, the
anemic performance of the national economy, faltering retail sales, and
continuing weakness in the State's financial services sector, DOB believes the
State will experience a budgetary shortfall in the range of $2 billion to $2.5
billion in the current fiscal year.
Special Revenue Funds. State special revenue spending is
projected to be $14.57 billion, an increase of $3.0 billion or 25.9 percent from
2001-02. The largest area of growth in State special revenue funding is for
Medicaid, which is projected to total $2.50 billion in 2002-03, an increase of
$1.35 billion. Special Revenue Funds, which include Federal grants and State
Special Revenue Funds, comprise 50 percent of the All Governmental Funds
Financial Plan.
Capital Projects Funds. Spending from Capital Projects Funds
in 2002-03 is projected at $5.29 billion, an increase of $977 million or 22.7
percent from last year. The increase will primarily support capital investments
to promote economic development ($340 million), transportation ($291 million),
and education ($210 million).
Debt Service Funds. Spending from Debt Service Funds is
estimated at $3.56 billion in 2002-03, a decrease of $592 million or 14.3
percent from 2001-02. The decrease is primarily attributable to the use of $500
million in Debt Reduction Reserve Fund (DRRF) monies during 2001-02 (which
technically is shown as an increase in debt service spending in that year),
savings in 2002-03 generated from the use of DRRF to reduce debt and debt
service costs, the use of lower-cost State Personal Income Tax Revenue Bonds,
and the impact of legislation that will enhance the State's ability to manage
its bond portfolio and reduce borrowing costs, and lower interest rates.
The historical financial results for the prior three fiscal years are
presented below.
2001-02 Fiscal Year. The State ended its 2001-02 fiscal year
on March 31, 2002 in balance on a cash basis. There was no General Fund surplus
reported by DOB. After year-end adjustments related to the refund reserve
account, the closing balance in the General Fund was $1.03 billion, a decrease
of $67 million from the 2000-01 fiscal year. Of this balance, $710 million was
held in the Tax Stabilization Reserve Fund ("TSRF") (after a deposit of $83
million in fiscal year 2001-02), $157 million in the Contingency Reserve Fund
("CRF"), $159 million in the Community Projects Fund ("CPF"), and $5 million in
the Universal Pre-kindergarten Fund. The closing fund balance excludes $1.68
billion on deposit in the refund reserve account at the end of the 2001-02
fiscal year.
General Fund receipts, including transfers from other funds,
totaled $41.14 billion for the 2001-02 fiscal year, an increase of $1.26 billion
(3.3 percent) over fiscal year 2000-01 results. Receipts results for fiscal year
2001-02 reflect refund reserve transactions
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that had the effect of reducing personal income tax receipts in the 2001-02
fiscal year and increasing them in the 2002-03 fiscal year. When the refund
reserve is adjusted for the set-aside of $1.07 billion for economic
uncertainties, General Fund receipts and transfers from other funds totaled
$42.21 billion. General Fund disbursements, including transfers to other funds,
totaled $41.22 billion for the 2001-02 fiscal year, an increase of $1.52 billion
(3.8 percent) from the 2000-01 fiscal year.
2000-01 Fiscal Year. The State ended its 2001-01 fiscal year
on March 31, 2001 in balance on a cash basis with a General Fund surplus of
$2.73 billion as reported by DOB. After year-end adjustments described below,
the closing balance in the General Fund was $1.10 billion, a decrease of $69
million from the 1999-2000 fiscal year. Of this balance, $627 million was held
in the TSRF (after a deposit of $80 million in fiscal year 2000-01), $150
million in the CRF, $292 million in the CPF, and $29 million in the Universal
Pre-kindergarten Fund.
The closing fund balance excluded $3.52 billion on deposit in
the tax refund reserve account at the end of the 2000-01 fiscal year. The State
retained $2.65 billion of the $3.52 billion balance for reserves, with $2.4
billion set aside for economic uncertainties and $250 million deposited into the
Debt Reduction Reserve Fund in 2001-02. The remaining balance of $865 million
was comprised of $293 million in resources to pay for costs incurred in 2000-01
but disbursed in 2001-02, $521 million from the Local Government Assistance
Corporation ("LGAC") that was used to pay tax refunds during fiscal year 2001-02
and $51 million in additional funds used to pay refunds related to the Earned
Income Tax Credit and the Dependent Care Tax Credit.
The 2000-01 General Fund closing balance also excluded $1.2
billion that was on deposit in the School Tax Relief ("STAR") Special Revenue
Fund at the end of the 2000-01 fiscal year (to meet a portion of the STAR
payments in fiscal year 2001-02) and $250 million on deposit in the Debt
Reduction Reserve Fund ("DRRF") for debt reduction in fiscal year 2001-02.
General Fund receipts, including transfers from other funds,
totaled $39.88 billion for the 2000-01 fiscal year, an increase of $2.49 million
(6.7 percent) over fiscal year 1999-2000 results. General Fund disbursements,
including transfers to other funds, totaled $39.70 billion for the 2000-01
fiscal year, an increase of $2.53 billion (6.8 percent) from the 1999-2000
fiscal year.
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1999-00 Fiscal Year. The State ended its 1999-2000 fiscal year
in balance on a cash basis, with a General Fund cash-basis surplus of $1.51
billion as reported by DOB. As in recent years, strong growth in receipts above
forecasted amounts produced most of the year-end surplus. Spending was also
modestly below projections, further adding to the surplus.
The State reported a closing balance of $1.17 billion in the
General Fund, an increase of $275 million over the closing balance from the
prior year. The balance was held in four accounts within the General Fund: the
TSRF, the CRF, the DRRF and the CPF. The balance is comprised of $547 million in
the TSRF after a deposit of $74 million in 1999-2000; $107 million in the CRF;
$250 million in the DRRF; and $263 million in the CPF.
The closing fund balance excludes $3.97 billion that the State
deposited into the tax refund reserve account at the close of 1999-2000 to pay
for tax refunds in 2000-01 of which $521 million was made available as a result
of the LGAC financing program and was required to be on deposit as of March 31,
2000. The tax refund reserve account transaction has the effect of decreasing
reported personal income tax receipts in 1999-2000, while increasing reported
receipts in 2000-01.
General Fund receipts and transfers from other funds (net of
tax refund reserve account activity) for the 1999-2000 fiscal year totaled
$37.40 billion, an increase of 1.6 percent over 1998-99. General Fund
disbursements and transfers to other funds totaled $37.17 billion, an increase
of 1.6 percent from the prior fiscal year.
Debt Limits and Outstanding Debt. There are a number of
methods by which the State of New York may incur debt. The State may issue
general obligation bonds. Under the State Constitution, the State may not, with
limited exceptions for emergencies, undertake long-term general obligation
borrowing (i.e., borrowing for more than one year) unless the borrowing is
authorized in a specific amount for a single work or purpose by the Legislature
and approved by the voters. There is no constitutional limitation on the amount
of long-term general obligation debt that may be so authorized and subsequently
incurred by the State. However, the Debt Reform Act of 2000 (the "Debt Reform
Act") imposes statutory limitations on new State-supported debt outstanding,
which apply to general obligations bonds as well as other State-supported bonds
issued on and after April 1, 2000. The State Constitution also provides that
general obligation bonds must be paid in equal annual installments or
installments that result in substantially level or declining debt service
payments, within 40 years after issuance, and beginning not more than one year
after issuance of such bonds. General obligation housing bonds must be paid
within 50 years after issuance, commencing no more than three years after
issuance. However, the Debt Reform Act of 2000 limits the maximum term of
State-supported bonds, including general obligation bonds, to thirty years.
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The Debt Reform Act implemented statutory initiatives intended
to improve the State's borrowing practices. The Debt Reform Act imposes
phased-in caps on new debt outstanding and new debt service costs. The Act also
limited the use of debt to capital works and purposes only.
The cap on new State-supported debt outstanding began at 0.75
percent of personal income in 2000-01 and is gradually increasing until it is
fully phased-in at 4 percent of personal income in 2010-11. Similarly, the cap
on new State-supported debt service costs began at 0.75 percent of total
governmental funds receipts on 2000-01 and is gradually increasing until it is
fully phased at 5 percent in 2013-14.
The Debt Reform Act requires the limitations on the issuance
of State-supported debt and debt services costs to be calculated by October 31
of each year and reported in the quarterly Financial Plan Update most proximate
to October 31st of each year. If the calculations for new State-supported debt
outstanding and debt service costs are less than the State-supported debt
outstanding and debt service costs permitted under the Debt Reform Act, new
State-supported debt may continue to be issued. However, if either the debt
outstanding or the debt service cap is met or exceeded, the State would be
precluded from contracting new State-supported debt until the next annual cap
calculation is made and State-supported debt is found to be within the
appropriate limitations. The DOB expects that the prohibition on issuing new
State-supported debt if the caps are met or exceeded will provide an incentive
to treat the debt caps as absolute limits that should not be reached, and
therefore DOB intends to manage subsequent capital plans and issuance schedules
under these limits.
Pursuant to the provisions of the Debt Reform Act, the first
calculation of the Debt Reform Act's limitations was reported in the Financial
Plan Update most proximate to October 31, 2001. For the 2001-02 fiscal year,
both caps are set at 1.25 percent. On October 30, 2002, the State reported that
it was in compliance with both debt caps, with new debt outstanding at 0.67
percent of personal income and new debt service at 0.36 percent of total
governmental receipts. The DOB expects that debt outstanding and debt service
costs for the 2002-03 fiscal year will also be within the statutory caps.
The State may undertake short-term borrowings without voter
approval (i) in anticipation of the receipt of taxes and revenues, by issuing
tax and revenue anticipation notes, and (ii) in anticipation of the receipt of
proceeds from the sale of duly authorized but unissued general obligation bonds,
by issuing bond anticipation notes. The State may also, pursuant to specific
constitutional authorization, directly guarantee certain obligations of the
State of New York's authorities and public benefit corporations ("Authorities").
The State has never been called upon to make any direct payments pursuant to any
such guarantees. Payments of debt service on New York State general obligation
and New York State-guaranteed bonds and notes are legally enforceable
obligations of the State of New York.
State Finance Law requires the State to update its five-year
Capital Program and Financing Plan (the "Plan") within 90 days after the
enactment of the State Budget. DOB issued an update to the Plan covering the
years 2002-03 through 2006-07 on August
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16, 2002. Over the five-year Plan, annual debt issuances are expected to average
$3.1 billion to support average annual capital projects spending of $5.1
billion, with the remainder financed with State and federal pay-as-you-go
resources. Total State-supported debt service costs are projected to increase
from $3.65 billion in 2002-03 to $4.75 billion in 2006-07, an average annual
increase of 6.8 percent, and total State-supported debt outstanding is expected
to increase from $39.0 billion in 2002-03 to $41.9 billion in 2006-07, an
average annual increase of 1.8 percent.
In 2001, legislation was enacted to provide for the issuance
by certain State authorities of State Personal Income Tax Revenue Bonds, which
are expected to become the primary financing vehicle for a broad range of
State-supported debt programs authorized to be secured by service contract or
lease-purchase payments. These State Personal Income Tax Revenue Bonds are
expected to reduce borrowing costs by improving the marketability and
creditworthiness of State-supported obligations and by permitting the
consolidation of multiple bonding programs to reduce administrative costs.
The legislation provides that 25 percent of personal income
tax receipts (excluding refunds owed to taxpayers and deposits to the School Tax
Relief Fund) be deposited to the Revenue Bond Tax Fund for purposes of making
debt service payments on these bonds, with excess amounts returned to the
General Fund. In the event that (i) the State Legislature fails to appropriate
amounts required to make all debt service payments on the State Personal Income
Tax Revenue Bonds or (ii) having been appropriated and set aside pursuant to a
certificate of the Director of the Budget, financing agreement payments have not
been made when due on the bonds, the legislation requires that personal income
tax receipts continue to be deposited to the Revenue Bond Tax Fund until amounts
on deposit in the Fund equal the greater of 25 percent of annual personal income
tax receipts or $6 billion.
The State issued its first State Personal Income Tax Revenue
Bonds (in an aggregate principal amount of $225 million) on May 9, 2002.
The State employs additional long-term financing mechanisms,
lease-purchase and contractual-obligation financings, which involve obligations
of public authorities or municipalities that are State-supported but are not
general obligations of the State. Under these financing arrangements, certain
public authorities and municipalities have issued obligations to finance the
construction and rehabilitation of facilities or the acquisition and
rehabilitation of equipment, and expect to meet their debt service requirements
through the receipt of rental or other contractual payments made by the State.
Although these financing arrangements involve a contractual agreement by the
State to make payments to a public authority, municipality or other entity, the
State's obligation to make such payments is generally expressly made subject to
appropriation by the Legislature and the actual availability of money to the
State for making the payments. The State has also entered into a
contractual-obligation financing arrangement with the LGAC to restructure the
way the State makes certain local aid payments.
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On January 13, 1992, S&P reduced its ratings on the State's
general obligation bonds from A to A- and, in addition, reduced its ratings on
the State's moral obligation, lease purchase, guaranteed and contractual
obligation debt. On August 28, 1997, S&P revised its ratings on the State's
general obligation bonds from A- to A and revised its ratings on the State's
moral obligation, lease purchase, guaranteed and contractual obligation debt. On
March 5, 1999, S&P affirmed its A rating on the State's outstanding bonds. On
March 10, 2000, S&P assigned its A+ rating on New York State's long-term general
obligations. On December 19, 2000, S&P assigned its AA rating on New York
State's long-term general obligations.
On January 6, 1992, Moody's reduced its ratings on outstanding
limited-liability State lease purchase and contractual obligations from A to
Baa1. On February 28, 1994, Moody's reconfirmed its A rating on the State's
general obligation long-term indebtedness. On March 20, 1998, Moody's assigned
the highest commercial paper rating of P-1 to the short-term notes of the State.
On March 5, 1999, Moody's affirmed its A2 rating with a stable outlook to the
State's general obligations. In June 2000, Moody's revised its outlook on the
State's general obligations from stable to positive. On December 6, 2002,
Moody's changed its outlook on the State's general obligation bonds from stable
to negative but retained its A2 rating.
New York State has never defaulted on any of its general
obligation indebtedness or its obligations under lease-purchase or
contractual-obligation financing arrangements and has never been called upon to
make any direct payments pursuant to its guarantees.
Litigation. The legal proceedings listed below involve State
finances and programs and miscellaneous civil rights, real property, contract
and other tort claims in which the State is a defendant and the potential
monetary claims against the State are deemed to be material, generally in excess
of $100 million. These proceedings could adversely affect the financial
condition of the State in the 2002-03 fiscal year or thereafter. The State will
describe newly initiated proceedings which the State believes to be material, as
well as any material and adverse developments in the listed proceedings, in
updates or supplements to its Annual Information Statement.
Certain litigation pending against New York State or its
officers or employees could have a substantial or long-term adverse effect on
New York State finances. Among the more significant of these cases are those
that involve (1) the validity of agreements and treaties by which various Indian
tribes transferred title to New York State of certain land in central and
upstate New York; (2) certain aspects of New York State's Medicaid policies,
including its rates, regulations and procedures; (3) the validity of certain
provisions of State gaming law; (4) a challenge to the Governor's application of
his constitutional line item veto authority; (5) a challenge to the funding for
New York City public schools; (6) a challenge as to the adequacy of the shelter
allowance granted to recipients of public assistance and (7) the Governor
seeking a judgment declaring that the actions of the Senate and the Assembly in
voting and passing 46
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budget bills violated the State Constitution, because they deleted provisions of
appropriations proposed by the Governor, substituted other appropriations, and
considered other bills prior to taking action on the appropriation bills
submitted by the Governor.
Adverse developments in the proceedings described above, other
proceedings for which there are unanticipated, unfavorable and material
judgments, or the initiation of new proceedings could affect the ability of the
State to maintain a balanced 2002-03 Financial Plan. The State believes that the
proposed 2002-03 Financial Plan includes sufficient reserves to offset the costs
associated with the payment of judgments that may be required during the 2002-03
fiscal year. These reserves include (but are not limited to) amounts
appropriated for Court of Claims payments and projected fund balances in the
General Fund. In addition, any amounts ultimately required to be paid by the
State may be subject to settlement or may be paid over a multi-year period.
There can be no assurance, however, that adverse decisions in legal proceedings
against the State would not exceed the amount of all potential 2002-03 Financial
Plan resources available for the payment of judgments, and could therefore
affect the ability of the State to maintain a balanced 2002-03 Financial Plan.
Although other litigation is pending against New York State,
except as described herein, no current material litigation involves New York
State's Constitutional or statutory authority to contract indebtedness, issue
its obligations, or pay such indebtedness when due, or affects New York State's
power or ability, as a matter of law, to impose or collect significant amounts
of taxes and revenues.
On November 23, 1998, the attorneys general for 46 states
(including New York) entered into a master settlement agreement ("MSA") with the
nation's largest tobacco manufacturers. Under the terms of the MSA, the states
agreed to release the manufacturers from all smoking-related claims in exchange
for specified payments and the imposition of restrictions on tobacco advertising
and marketing. New York is projected to receive $25 billion over 25 years under
the MSA, with payments apportioned among the State (51 percent), counties (22
percent), and New York City (27 percent). The projected payments are an estimate
and subject to adjustments for, among other things, the annual change in the
volume of cigarette shipments and the rate of inflation. From 1999-2000 through
2002-03, the State expects to receive $1.54 billion under the nationwide
settlement with cigarette manufacturers. Counties, including New York City, will
receive settlement payments of $1.47 billion over the same period.
Authorities. The fiscal stability of New York State is
related, in part, to the fiscal stability of its Authorities, which generally
have responsibility for financing, constructing and operating revenue-producing
public benefit facilities. Authorities are not subject to the constitutional
restrictions on the incurrence of debt which apply to the State itself, and may
issue bonds and notes within the amounts of, and as otherwise restricted by,
their legislative
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authorization. The State's access to the public credit markets could be
impaired, and the market price of its outstanding debt may be materially and
adversely affected, if any of the Authorities were to default on their
respective obligations, particularly with respect to debt that is
State-supported or State-related.
Authorities are generally supported by revenues generated by
the projects financed or operated, such as fares, user fees on bridges, highway
tolls and rentals for dormitory rooms and housing. In recent years, however, New
York State has provided financial assistance through appropriations, in some
cases of a recurring nature, to certain of the Authorities for operating and
other expenses and, in fulfillment of its commitments on moral obligation
indebtedness or otherwise, for debt service. This operating assistance is
expected to continue to be required in future years. In addition, certain
statutory arrangements provide for State local assistance payments otherwise
payable to localities to be made under certain circumstances to certain
Authorities. The State has no obligation to provide additional assistance to
localities whose local assistance payments have been paid to Authorities under
these arrangements. However, in the event that such local assistance payments
are so diverted, the affected localities could seek additional State funds.
For purposes of analyzing the financial condition of the
State, debt of the State and of certain public authorities may be classified as
State-supported debt, which includes general obligation debt of the State and
lease-purchase and contractual obligations of public authorities (and
municipalities) where debt service is paid from State appropriations (including
dedicated tax sources, and other revenues such as patient charges and dormitory
facilities rentals). In addition, a broader classification, referred to as
State-related debt, includes State-supported debt, as well as certain types of
contingent obligations, including moral obligation financings, certain
contingent contractual-obligation financing arrangements, and State-guaranteed
debt described above, where debt service is expected to be paid from other
sources and State appropriations are contingent in that they may be made and
used only under certain circumstances.
New York City and Other Localities. The fiscal health of the
State may also be affected by the fiscal health of New York City, which
continues to receive significant financial assistance from the State. State aid
contributes to the city's ability to balance its budget and meet its cash
requirements. The State may also be affected by the ability of the City, and
certain entities issuing debt for the benefit of the city, to market their
securities successfully in the public credit markets.
On September 11, 2001, two hijacked passenger jetliners flew
into the world Trade Center, resulting in a substantial loss of life,
destruction of the World Trade Center, and damage to other buildings in the
vicinity. Trading on the major New York stock exchanges was suspended until
September 17, 2001, and business in the financial district was interrupted.
Recovery efforts were completed on May 30, 2002.
Recovery, cleanup, and repair efforts will result in
substantial expenditures. The U.S. congress passed emergency legislation
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that authorized $40 billion for disaster assistance, increased security costs,
and the rebuilding of infrastructure systems and other public facilities, and
disaster recovery and related activities. Congress and the President have
already appropriated over $10 billion of this amount for disaster assistance in
New York, Pennsylvania and Virginia. The President has submitted a bill to
congress that would bring the total commitment of federal disaster assistance
for New York to $21.4 billion. In addition, the State legislature increased the
financing capacity of the New York City Transitional Finance authority (TFA) by
$2.5 billion to fund recovery costs, and has authorized the TFA to issue debt
without limit as to principal amount that is payable solely from State or
federal aid received on account of the disaster.
On March 9, 2002, the President signed nationwide stimulus
legislation that includes $5.5 billion toward the $21.4 billion commitment, in
the form of temporary tax provisions aimed at creating redevelopment incentives
for businesses located in the Liberty Zone, the area surrounding the World Trade
Center site. The Liberty Zone provisions expand the work opportunity tax credit,
provide a bonus 30 percent depreciation deduction, authorize the issuance of $8
billion in tax-exempt private activity bonds, allow for advance refunding of
certain bonds for facilities in New York city, and increase the small business
expensing limit.
The City is seeking to be reimbursed by the federal government
for all of its direct costs for response and remediation of the World Trade
Center site. These costs are now expected to be substantially below previous
estimates. The City also expects to receive federal funds for costs of economic
revitalization and other needs, not directly payable through the City budget,
relating to the September 11 attack.
The City has achieved balanced operating results for each of
its fiscal years since 1981 as measured by the GAAP standards in force at that
time. The City prepares a four-year financial plan annually and updates it
periodically, and
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prepares a comprehensive annual financial report each October describing its
most recent fiscal year.
In 1975, New York City suffered a fiscal crisis that impaired
the borrowing ability of both the City and New York State. In that year the City
lost access to the public credit markets. The City was not able to sell
short-term notes to the public again until 1979. In 1975, S&P suspended its A
rating of City bonds. This suspension remained in effect until March 1981, at
which time the City received an investment grade rating of BBB from S&P.
On July 2, 1985, S&P revised its rating of City bonds upward
to BBB+ and on November 19, 1987, to A-. On February 3, 1998 and again on May
27, 1998, S&P assigned a BBB+ rating to the City's general obligation debt and
placed the ratings on CreditWatch with positive implications. On March 9, 1999,
S&P assigned its A- rating to Series 1999H of New York City general obligation
bonds and affirmed the A- rating on various previously issued New York City
bonds. On November 27, 2002, S&P changed its outlook for the City's general
obligation debt to "negative" from "stable" but maintained its single-A rating.
Moody's ratings of City bonds were revised in November 1981
from B (in effect since 1977) to Ba1, in November 1983 to Baa, in December 1985
to Baa1, in May 1988 to A and again in February 1991 to Baa1. On February 25,
1998, Moody's upgraded approximately $28 billion of the City's general
obligations from Baa1 to A3. On June 9, 1998, Moody's affirmed its A3 rating to
the City's general obligations and stated that its outlook was stable. In August
2000, Moody's upgraded approximately $26 billion of the City's general
obligations from A3 to A2.
On March 8, 1999, Fitch IBCA upgraded New York City's $26
billion outstanding general obligation bonds from A- to A. Subsequent to that
time, the City's general obligation bonds have not been downgraded by Fitch
IBCA.
In response to the City's fiscal crisis in 1975, the State
took action to assist the City in returning to fiscal stability. Among those
actions, the State established the Municipal Assistance Corporation for the City
of New York ("NYC MAC") to provide financing assistance to the City; the New
York State Financial Control Board (the "Control Board") to oversee the City's
financial affairs; and the Office of the State Deputy Comptroller for the City
of New York ("OSDC") to assist the Control Board in exercising its powers and
responsibilities. A "control period" existed from 1975 to 1986, during which the
City was subject to certain statutorily-prescribed fiscal controls. The Control
Board terminated the control period in 1986 when certain statutory conditions
were met. State law requires the Control Board to reimpose a control period upon
the occurrence, or "substantial likelihood and imminence" of the occurrence, of
certain
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events, including (but not limited to) a City operating budget deficit of more
than $100 million or impaired access to the public credit markets.
Currently, the City and its Covered Organizations (i.e., those
organizations which receive or may receive moneys from the City directly,
indirectly or contingently) operate under the City's Financial Plan. The City's
Financial Plan summarizes its capital, revenue and expense projections and
outlines proposed gap-closing programs for years with projected budget gaps. The
City's projections set forth in its Financial Plan are based on various
assumptions and contingencies, some of which are uncertain and may not
materialize. Unforeseen developments (such as the World Trade Center attack) and
changes in major assumptions could significantly affect the City's ability to
balance its budget as required by State law and to meet its annual cash flow and
financing requirements.
For the 2000-01 and 2001-02 fiscal years (ending June 30), the
City had operating surpluses of $2.9 billion and $682 million, respectively,
before discretionary and other transfers, and achieved balanced operating
results after discretionary and other transfers, in accordance with GAAP. Prior
to its gap-closing program, the City projected a $4.8 billion budget gap for
fiscal year 2003, and even larger gaps in subsequent years. The City's June
Financial Plan, which incorporates the enacted budget for 2002-03, includes
gap-closing actions of $4.8 billion that balance the 2002-03 budget. The
gap-closing program includes resources from agency actions and anticipates
actions to be taken by the federal and State governments and the municipal
unions. The 2002-03 budget also includes $1.5 billion in bond proceeds from the
TFA to mitigate a portion of the lost tax revenues related to the September 11
attack on the World Trade Center. The financial plan does not include wage
increases for any City employees beyond the current round of collective
bargaining.
The City published its First Quarter Modification to its
financial plan on November 14, 2002. The Modification included significantly
lower tax revenue projections, reflecting the continuing decline in financial
services sector profits and other revised forecasts, which will result in
projected gaps to be closed in fiscal years 2002-03 and 2003-04 of approximately
$1.1 billion and $6.4 billion, respectively.
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The City's gap estimates assume a 4 percent loss in pension
fund assets in 2002-03; losses in excess of 3 percent would require the City to
make pension expenditures in excess of budgeted amounts. The gaps do not include
any potential wage increases for police officers and firefighters beyond those
negotiated with the unions representing other uniformed employees or wage
increases for any employees beyond the current round of collective bargaining
that generally ended June 30, 2002.
On July 18, 2002, the Mayor announced he was reserving 7.5
percent of City-funded agency spending, and on October 28, 2002 certain agencies
were directed to identify additional savings aggregating 2 percent in fiscal
year 2002-03 and 4 percent in 2003-04. The City is working to implement a
program that accommodates these reductions by lowering City spending, or
identifying alternative revenue sources, in an aggregate amount of approximately
$1 billion annually starting in fiscal year 2002-03. As a result of the size of
the projected gaps, the First Quarter Modification reflects substantial
additional revenue initiatives, including proposed increased taxes, which
requires City Council and/or State approval, and City proposals for additional
State and federal assistance, to eliminate the projected gap for 2002-03 and to
substantially reduce or eliminate the projected gap for fiscal year 2003-04.
New York City is heavily dependent on New York State and
federal assistance to cover insufficiencies in its revenues. There can be no
assurance that in the future federal and State assistance will enable the City
to make up its budget deficits. Although the City has consistently maintained
balanced budgets and is projected to achieve balanced operating results for the
current fiscal year, there can be no assurance that the gap-closing actions
proposed in its Financial Plan can be successfully implemented or that the City
will maintain a balanced budget in future years without additional State aid,
revenue increases or expenditure reductions. Additional tax increases and
reductions in essential City services could adversely affect the City's economic
base.
The projections set forth in the City's Financial Plan were
based on various assumptions and contingencies which are uncertain and which may
not materialize. Changes in major assumptions could significantly affect the
City's ability to balance its budget as required by State law and to meet its
annual cash flow and financing requirements. Such assumptions and contingencies
include the condition of the regional and local economies, the impact on real
estate tax revenues of the real estate market, wage increases for City employees
consistent with those assumed in the Financial Plan, employment growth, the
ability to implement proposed reductions in City personnel and other cost
reduction initiatives, the ability of the Health and Hospitals Corporation to
take actions to offset reduced revenues, the ability to complete revenue
generating transactions, provision of State and Federal aid and mandate relief
and the impact on City revenues and expenditures of Federal and State welfare
reform and any future legislation affecting Medicare or other entitlements.
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To successfully implement its Financial Plan, the City and
certain entities issuing debt for the benefit of the City must market their
securities successfully. This debt is issued to finance the rehabilitation of
the City's infrastructure and other capital needs and to refinance existing
debt, as well as to finance seasonal needs and recovery costs related to the
attacks on the World Trade Center. In recent years, the State Constitutional
debt limit would have prevented the City from entering into new capital
contracts. To prevent disruptions in the capital program, two actions were taken
to increase the City's capital financing capacity: (i) the State Legislature
created the New York City Transitional Finance Authority in 1997, and (ii) in
1999, the City created TSASC, Inc., a not-for-profit corporation empowered to
issue tax-exempt debt backed by tobacco settlement revenues. The City expects
that these actions will provide sufficient financing capacity to continue its
capital program through City fiscal year 2011.
The City Comptroller and other agencies and public officials
have issued reports and made public statements which, among other things, state
that projected revenues and expenditures may be different from those forecast in
the City's financial plans. It is reasonable to expect that such reports and
statements will continue to be issued and to engender public comment.
Certain localities, in addition to the City, have experienced
financial problems and have requested and received additional New York State
assistance during the last several State fiscal years. The potential impact on
the State of any future requests by localities for additional assistance is not
included in the State's projections of its receipts and disbursements for the
fiscal year.
Municipalities and school districts have engaged in
substantial short-term and long-term borrowings. State law requires the
Comptroller to review and make recommendations concerning the budgets of those
local government units other than New York City that are authorized by State law
to issue debt to finance deficits during the period that such deficit financing
is outstanding.
From time to time, federal expenditure reductions could
reduce, or in some cases eliminate, federal funding of some local programs and
accordingly might impose substantial increased expenditure requirements on
affected localities. If the State, the City or any of the Authorities were to
suffer serious financial difficulties jeopardizing their respective access to
the public credit markets, the marketability of notes and bonds issued by
localities within the State could be adversely affected. Localities also face
anticipated and potential problems resulting from certain pending litigation,
judicial decisions and long-range economic trends. Long-range potential problems
of declining urban population, increasing expenditures and other economic trends
could adversely affect localities and require increasing the State assistance in
the future.
MANAGEMENT OF THE FUNDS
Officers and Boards of Directors/Trustees
The business and affairs of the Global Fixed Income and
Investment Grade Funds are managed by a Board of Directors in accordance with
the laws of the State of Maryland.
73
The business and affairs of the Fixed Income and New York Municipal Funds are
managed by a Board of Trustees in accordance with the laws of The Commonwealth
of Massachusetts. Each Board approves all significant agreements between a Fund
and the companies that furnish services to the Fund, including agreements with
the Fund's Adviser(s), 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 the Funds' Directors/Trustees and
officers, their addresses, present positions and principal occupations during
the past five years and other affiliations are set forth below.
Number of
Portfolios
in Fund
Term of Complex Other
Position(s) Office(1) and Principal Overseen by Directorships
Held with Length of Occupation(s) During Director/ Held by
Name, Address and Age Fund Time Served Past Five Years Trustee Director/Trustee
- ----------------------------------- ------------ ------------- ----------------------- ------------ -------------------
INDEPENDENT DIRECTORS/TRUSTEES
- ----------------------------------- ------------ ------------- ----------------------- ------------ -------------------
Richard H. Francis Director/ Since 1999 Currently retired; 54 --
c/o Credit Suisse Asset Trustee Executive Vice
Management, LLC President and Chief
466 Lexington Avenue Financial Officer of
New York, New York Pan Am Corporation
10017-3140 and Pan American
Age: 70 World Airways, Inc.
from 1988 to 1991
- ----------------------------------- ------------ ------------- ----------------------- ------------ -------------------
Jack W. Fritz Director/ Since 1987 Private investor; 53 Director of Advo,
2425 North Fish Creek Road Trustee for the Consultant and Inc. (direct mail
P.O. Box 1287 Fixed Director of Fritz advertising)
Wilson, Wyoming 83014 Income Broadcasting, Inc.
Fund. and Fritz
- -------------------
(1) Each Director and Officer serves until his or her respective successor
has been duly elected and qualified.
74
Number of
Portfolios
in Fund
Term of Complex Other
Position(s) Office(1) and Principal Overseen by Directorships
Held with Length of Occupation(s) During Director/ Held by
Name, Address and Age Fund Time Served Past Five Years Trustee Director/Trustee
- ----------------------------------- ------------ ------------- ----------------------- ------------ -------------------
Age: 75 Since 1986 Communications
for the New (developers and
York operators of radio
Municipal stations) since 1987
Fund.
Since 1990
for the
Global
Fixed
Income
Fund.
Since 1988
for the
Investment
Grade Fund.
- ----------------------------------- ------------ ------------- ----------------------- ------------ -------------------
Jeffrey E. Garten(2) Director/ Since 1988 Dean of Yale School 53 Director of
Box 208200 Trustee for the of Management and Aetna, Inc.;
New Haven, Connecticut Fixed William S. Beinecke Director of
06520-8200 Income Professor in the Calpine Energy
Age: 56 Fund, the Practice of Corporation;
New York International Trade Director of
Municipal and Finance; CarMax Group
Fund and Undersecretary of (used car dealers)
the Commerce for
Investment International Trade
Grade from November 1993 to
Fund.. October 1995;
Since 1990 Professor at Columbia
for the University from
Global September 1992 to
Fixed November 1993
Income Fund.
- ----------------------------------- ------------ ------------- ----------------------- ------------ -------------------
Peter F. Krogh Director/ Since 2001 Dean Emeritus and 53 Member of the
301 ICC Trustee Distinguished Board of The
Georgetown University Professor of Carlisle
Washington, DC 20057 International Affairs Companies Inc.;
- ---------------------
(2) Mr. Garten was initially appointed as a Director/Trustee on February
6, 1998. He resigned as Director/Trustee on February 3, 2000 and was
subsequently reappointed on December 21, 2000.
75
Number of
Portfolios
in Fund
Term of Complex Other
Position(s) Office(1) and Principal Overseen by Directorships
Held with Length of Occupation(s) During Director/ Held by
Name, Address and Age Fund Time Served Past Five Years Trustee Director/Trustee
- ----------------------------------- ------------ ------------- ----------------------- ------------ -------------------
Age: 66 at the Edmund A. Member of
Walsh School of Selection
Foreign Service, Committee for
Georgetown Truman Scholars
University; Moderator and Henry Luce
of PBS foreign Scholars; Senior
affairs television Associate of
series Center for
Strategic and
International
Studies; Trustee
of numerous world
affairs
organizations
- ----------------------------------- ------------ ------------- ----------------------- ------------ -------------------
James S. Pasman, Jr. Director/ Since 1999 Currently retired; 55 Director of
c/o Credit Suisse Asset Trustee President and Chief Education
Management, LLC Operating Officer of Management Corp.
466 Lexington Avenue National InterGroup,
New York, New York Inc. (holding
10017-3140 company) from April
Age: 71 1989 to March 1991;
Chairman of Permian
Oil Co. from April
1989 to March 1991
- ----------------------------------- ------------ ------------- ----------------------- ------------ -------------------
Steven N. Rappaport Director/ Since 1999 Partner of Lehigh 54
Lehigh Court, LLC Trustee Court, LLC since July
40 East 52nd Street 2002; President of
New York, New York 10022 SunGard Securities
Finance, Inc. from
2001 to July
2002; President
76
Number of
Portfolios
in Fund
Term of Complex Other
Position(s) Office(1) and Principal Overseen by Directorships
Held with Length of Occupation(s) During Director/ Held by
Name, Address and Age Fund Time Served Past Five Years Trustee Director/Trustee
- ----------------------------------- ------------ ------------- ---------------------- ------------ -----------------
Age: 54 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(3) Director/ Since 1999 Co-Managing Partner, 60 --
Steinberg Priest & Trustee Steinberg Priest &
Sloane Capital Management Sloane Capital
12 East 49th Street Management since
12th Floor March 2001; Chairman
New York, New York 10017 and Managing Director
- ---------------------
(3) Mr. Priest is a Director who is an "interested person" of the Funds as
defined in the 1940 Act, because he provides consulting services to CSAM.
77
Number of
Portfolios
in Fund
Term of Complex Other
Position(s) Office(1) and Principal Overseen by Directorships
Held with Length of Occupation(s) During Director/ Held by
Name, Address and Age Fund Time Served Past Five Years Trustee Director/Trustee
- ---------------------------------- ------------ ------------- ----------------------- ------------ -------------------
Age: 61 of CSAM from 2000 to
February 2001, Chief
Executive Officer and
Managing Director of
CSAM from 1990 to 2000
- ---------------------------------- ------------ ------------- ----------------------- ------------ -------------------
OFFICERS
- ---------------------------------- ------------ ------------- ----------------------- ------------ -------------------
Laurence R. Smith Chairman Since 2002 Managing Director and -- --
Credit Suisse Asset Global Chief
Management, LLC Investment Officer of
466 Lexington Avenue CSAM; Associated with
New York, New York J.P. Morgan
10017-3140 Investment Management
Age: 4 from 1981 to 1999;
Officer of other
Credit Suisse Funds
- ---------------------------------- ------------- ------------- ----------------------- ------------ -------------------
Hal Liebes, Esq. Vice Since 1999 Managing Director and -- --
Credit Suisse Asset President Global General
Management, LLC and Secretary Counsel of CSAM;
466 Lexington Avenue Associated with
New York, New York Lehman Brothers, Inc.
10017-3140 from 1996 to 1997;
Age: 38
78
Number of
Portfolios
in Fund
Term of Complex Other
Position(s) Office(1) and Principal Overseen by Directorships
Held with Length of Occupation(s) During Director/ Held by
Name, Address and Age Fund Time Served Past Five Years Trustee Director/Trustee
- ----------------------------------- ------------- ------------- ----------------------- ------------ -------------------
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
CSAMSI and
other Credit
Suisse Funds
- ----------------------------------- ------------- ------------- ----------------------- ------------ -------------------
Michael A. Pignataro Treasurer Since 1999 Director and Director -- --
Credit Suisse Asset and Chief of Fund
Management, LLC Financial Administration of
466 Lexington Avenue Officer CSAM; Associated with
New York, New York CSAM since 1984;
10017-3140 Officer of
Age: 43
79
Number of
Portfolios
in Fund
Term of Complex Other
Position(s) Office(1) and Principal Overseen by Directorships
Held with Length of Occupation(s) During Director/ Held by
Name, Address and Age Fund Time Served Past Five Years Trustee Director/Trustee
- ----------------------------------- -------------- ------------- ---------------------- ------------ -------------------
other
Credit Suisse Funds
- ----------------------------------- -------------- ------------- ---------------------- ------------ -------------------
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
10017-3140 law firm of Swidler
Age: 36 Berlin Shereff
Friedman LLP from
1996 to 2000; Officer
of other Credit
Suisse
80
Number of
Portfolios
in Fund
Term of Complex Other
Position(s) Office(1) and Principal Overseen by Directorships
Held with Length of Occupation(s) During Director/ Held by
Name, Address and Age Fund Time Served Past Five Years Trustee Director/Trustee
- ----------------------------------- -------------- ------------- ---------------------- ------------ -------------------
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
10017-3140 Credit Suisse Funds
Age: 39
- ----------------------------------- -------------- ------------- ---------------------- ------------ -------------------
Rocco A. DelGuercio Assistant Since 1999 Vice President and -- --
Credit Suisse Asset Treasurer Administrative
Management, LLC Officer of CSAM;
466 Lexington Avenue Associated with CSAM
New York, New York since June 1996;
10017-3140 Assistant Treasurer,
Age: 39 Bankers Trust Co. --
Fund Administration
81
Number of
Portfolios
in Fund
Term of Complex Other
Position(s) Office(1) and Principal Overseen by Directorships
Held with Length of Occupation(s) During Director/ Held by
Name, Address and Age Fund Time Served Past Five Years Trustee Director/Trustee
- ----------------------------------- -------------- ------------- --------------------- ------------ -------------------
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 -- --
Credit Suisse Asset Treasurer President - Fund
Management, LLC Administration of
466 Lexington Avenue CSAM since April
New York, New York 2000; Assistant Vice
10017-3140 President, Deutsche
Age: 39 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
82
Number of
Portfolios
in Fund
Term of Complex Other
Position(s) Office(1) and Principal Overseen by Directorships
Held with Length of Occupation(s) During Director/ Held by
Name, Address and Age Fund Time Served Past Five Years Trustee Director/Trustee
- ----------------------------------- -------------- ------------- --------------------- ------------- -------------------
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 Officer of CSAM from
10017-3140 March 1998 to
Age: 37 December 2000;
Assistant Treasurer
of Bankers Trust Co.
from April 1994 to
March 1998; Officer
of other Credit
Suisse Funds
83
OWNERSHIP IN SECURITIES OF THE FUND AND FUND COMPLEX
As reported to the Fund(s), 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/Trustee in Family of
Name of Director/Trustee the Fund*(4) Investment Companies*,(4)
- ---------------------------------------- -------------------------------------- --------------------------------------
INDEPENDENT DIRECTORS/TRUSTEES
- ---------------------------------------- -------------------------------------- --------------------------------------
Richard H. Francis Investment Grade - A
New York Municipal - A
Fixed Income - A E
Global Fixed Income - A
- ---------------------------------------- -------------------------------------- --------------------------------------
Jack W. Fritz Investment Grade - A
New York Municipal - A
Fixed Income - E E
Global Fixed Income - A
- ---------------------------------------- -------------------------------------- --------------------------------------
Jeffrey E. Garten Investment Grade - A
New York Municipal - A
Fixed Income - A A
Global Fixed Income - A
- ---------------------------------------- -------------------------------------- --------------------------------------
Peter F. Krogh Investment Grade - A
New York Municipal - A
Fixed Income - A D
Global Fixed Income - A
- ---------------------------------------- -------------------------------------- --------------------------------------
James S. Pasman, Jr. Investment Grade - A
New York Municipal - A
Fixed Income - A C
Global Fixed Income - A
- ---------------------------------------- -------------------------------------- --------------------------------------
Steven N. Rappaport Investment Grade - B D
New York Municipal - B
Fixed Income - B
Global Fixed Income - B
- -----------------
(4) Beneficial ownership is determined in accordance with Rule 16a-1(a)(2)
under the Securities Exchange Act of 1934.
84
Aggregate Dollar Range of Equity
Securities in all Registered
Investment Companies Overseen by
Dollar Range of Equity Securities in Director/Trustee in Family of
Name of Director/Trustee the Fund*(4) Investment Companies*,(4)
- ---------------------------------------- -------------------------------------- --------------------------------------
INTERESTED DIRECTOR/TRUSTEE
- ---------------------------------------- -------------------------------------- --------------------------------------
William W. Priest Investment Grade - A
New York Municipal - A
Fixed Income - A A
Global Fixed Income - 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
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
85
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 4 times during the fiscal year
ended October 31, 2002.
The Nominating Committee is charged with the duty of making
all nominations for Independent Directors/Trustees 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.
No employee of CSAM, State Street Bank and Trust Company and
CSAMSI, the Funds' co-administrators, or any of their affiliates, receives any
compensation from a Fund for acting as an officer or director of the Fund. Each
Director/Trustee 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/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.
86
Directors'/Trustees' Total Compensation For the Fiscal Year Ended October 31,
2002
Total Number
of Funds for
Total Total Total which
Compensation Compensation Total Compensation All Investment Director/
from from Compensation from Global Companies Trustee
Name of Director/ Investment New York from Fixed Fixed Income in the CSAM Serves Within
Trustee Grade Fund Municipal Fund Income Fund Fund Fund Complex Fund Complex
- ----------------- ------------- -------------- ------------- ------------ -------------- --------------
William W. None None None None None 60
Priest*
Richard H. $3,562.50 $3,562.50 $3,562.50 $3,562.50 $110,749.50 54
Francis
Jack W. Fritz $3,312.50 $3,312.50 $3,312.50 $3,312.50 $94,374.48 53
Jeffrey E. Garten $3,312.50 $3,312.50 $3,312.50 $3,312.50 $97,499.50 53
Peter F. Krogh $3,312.50 $3,312.50 $3,312.50 $3,312.50 $99,099.50 53
James S. Pasman, $3,562.50 $3,562.50 $3,562.50 $3,562.50 $138,599.50 55
Jr.
Steven N. $3,862.50 $3,862.50 $3,862.50 $3,862.50 $117,544.76 54
Rappaport
- ------------------
* 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.
As of January 24, 2003, the Directors/Trustees and officers of
each Fund as a group owned of record less than 1% of each class of the shares of
each Fund.
INVESTMENT
87
ADVISORY AGREEMENT.
88
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
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 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. The principal
business address of Credit Suisse is Paradeplatz 8, CH8070, Zurich, Switzerland.
The Advisory Agreement between each Fund and CSAM continues in
effect from year to year 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.
89
Pursuant to the Advisory Agreements, 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 Agreements, CSAM pays
the compensation, fees and related expenses of all Directors/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 Directors/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 Directors/Trustees of the Fund; and any extraordinary
expenses.
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 a 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.
A Fund or CSAM may terminate the respective Advisory Agreement
on 60 days' written notice without penalty. Each Advisory Agreement will
terminate automatically in the event of its assignment (as defined in the 1940
Act).
For its services
90
to the Fixed Income Fund, Global Fixed Income Fund, Investment Grade Fund and
New York Municipal Fund, CSAM is paid (before any voluntary waivers or
reimbursements) a fee computed daily and paid monthly calculated at an annual
rate of .50%, 1.00%, .50% and .40%, respectively, of the Fund's average daily
net assets. CSAM may voluntarily waive a portion of its fees from time to time
and temporarily limit the expenses to be borne by the Fund.
For the fiscal year ended October 31, 2000, 2001 and 2002,
each Fund paid CSAM, and CSAM waived fees and/or reimbursed expenses of each
Fund under the Advisory Agreement as follows(portion of fees waived, if any, are
noted in parentheses next to the amount paid):
Fiscal year ended Fiscal year ended Fiscal year ended
October 31, 2000 October 31, 2001 October 31, 2002
-------------------------- -------------------------- --------------------------
Investment Grade Fund $ 261,469 ($143,332) $ 38,414 ($210,812) 0 ($330,953)
New York Municipal Fund $ 312,719 ($ 85,541) $ 226,918 ($151,434) $142,804 ($241,130)
Fixed Income Fund $1,681,883 ($ 81,285) $1,420,017 ($504,459) $866,096 ($663,228)
Global Fixed Income Fund $1,214,634 ($619,726) $ 513,355 ($707,054) $243,582 ($827,266)
SUB-ADVISORY AGREEMENTS. The Global Fixed Income Fund has
entered into Sub-Investment Advisory Agreements with CSAM and each of CSAM's
United Kingdom affiliate ("CSAM U.K.") and CSAM's Japanese affiliate ("CSAM
Japan"), each of which is named Credit Suisse Asset Management Limited (each of
CSAM U.K. and CSAM Japan 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 Fund in accordance with the Fund's Articles
of Incorporation, 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
91
approved by the Board. The 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"). 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 advisers 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.
Under the Sub-Advisory Agreements with CSAM U.K. and CSAM
Japan, CSAM (not the Fund) pays each of CSAM U.K. and CSAM Japan an annual fee
of $250,000 for services rendered with respect to the 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 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
the Fund for CSAM U.K. and CSAM Japan was $ 12,032.38 and $12,111.47,
respectively.
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 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 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
92
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 Agreements, 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 each 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 each Fund. The Board of
Directors/Trustees also considered each 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 Boards reviewed the profitability to CSAM and its
affiliates of their services to each Fund and considered whether economies of
scale in the provision of services to the Fund were being passed along to
shareholders. The Boards 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 Boards 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 applicable Board concluded that the
Advisory Agreement was in the best interests of the Fund and its shareholders.
No single factor reviewed by the Boards was identified by the Boards as the
principal factor in determining whether to approve the Advisory Agreements.
93
The Independent Directors/Trustees were advised by separate independent legal
counsel throughout the process.
In approving each of the Sub-Advisory Agreements with CSAM
U.K. and CSAM Japan, the Board of the Global Fixed Income Fund considered
various matters and materials provided by CSAM, CSAM U.K. and CSAM Japan. The
Board considered, primarily, the benefits to the Fund of retaining CSAM's United
Kingdom and Japanese affiliates given the increased complexity of the domestic
and international securities markets, specifically that retention of CSAM U.K.
and CSAM Japan would expand the universe of companies and countries from which
investment opportunities could be sought and enhance the ability of the Fund to
obtain best price and execution on trades in international markets. The Board of
the Fund also carefully considered the particular expertise of CSAM U.K. and
CSAM Japan 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. and CSAM Japan. In
addition, the Board of the 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. and CSAM Japan would be
paid by CSAM, not the Fund, and, accordingly, that the retention of CSAM U.K.
and CSAM Japan would not increase the fees or expenses otherwise incurred by the
Fund's shareholders. After requesting and reviewing such information as they
deemed necessary, the Board of the 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
Directors/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 each Fund (the "CSAMSI Co-Administration
Agreements" and the "State Street Co-Administration Agreements," respectively).
CSAMSI became co-administrator to each Fund on November 1,
1999. For the services provided by CSAMSI under the CSAMSI Co-Administration
Agreements, 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.
For the fiscal years ended October 31, 2000, 2001 and 2002,
the Funds paid CSAMSI administration fees and CSAMSI waived fees and/or
reimbursed expenses as follows (waivers and reimbursements, if any, are shown in
parentheses next to the amounts earned):
94
Fiscal year ended Fiscal year ended Fiscal year ended
October 31, 2000 October 31, 2001 October 31, 2002
---------------- ---------------- ----------------
Investment Grade Fund $ 52,294 $ 49,845 $ 47,066
New York Municipal Fund $ 78,180 $ 94,588 $ 95,983
Fixed Income Fund $336,377 $406,784 $305,865
Global Fixed Income Fund $121,463 $122,041 $107,085
State Street became co-administrator to the Fixed Income Fund
on July 1, 2002 and to the Investment Grade Fund, the New York Municipal Fund
and the Global Fixed Income Fund on August 1, 2002. For the services provided by
State Street under the State Street Co-Administration Agreements, each Fund pays
State Street a fee calculated at the annual rate of its pro-rated share of .050%
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 .020% of the Fund Complex's average daily net
assets in excess of $10 billion, exclusive of out-of-pocket expenses.
For the fiscal period ended October 31, 2002, the Funds paid
State Street administration fees and State Street waived fees and/or reimbursed
expenses as follows (waivers and reimbursements, if any, are shown in
parentheses next to the amounts earned):
Fiscal period ended
October 31, 2002
----------------
Investment Grade Fund $10,387
New York Municipal Fund $21,359
Fixed Income Fund $74,689
Global Fixed Income Fund $31,481
PFPC Inc. ("PFPC"), an indirect, wholly owned subsidiary of
PNC Financial Services Group, served as a co-administrator to the Fixed Income
Fund prior to July 1, 2002 and to the Investment Grade Fund, the New York
Municipal Fund and the Global Fixed Income Fund prior to August 1, 2002. For the
services provided by PFPC under the PFPC Co-Administration Agreement, each Fund
paid PFPC a fee calculated at an annual rate of .07% of the Fund's first $150
million in average daily net assets, .06% of the Fund's next $150 million in
average daily net assets, and .05% of the Fund's average daily net assets
exceeding $300 million, exclusive of out-of-pocket expenses.
95
For the fiscal years ended October 31, 2000 and 2001 and the
fiscal period ended May 31, 2002, the Funds paid PFPC administration fees and
PFPC waived fees and/or reimbursed expenses as follows (waivers and
reimbursements, if any, are shown in parentheses next to the amounts earned):
Fiscal year ended Fiscal year ended Fiscal year ended
October 31, 2000 October 31, 2001 October 31, 2002
----------------------- --------------------- -----------------------
Investment Grade Fund $ 33,364 ($20,148) $ 38,903 $ 27,763
New York Municipal Fund $ 51,820 $ 75,195 $ 56,738
Fixed Income Fund $193,192 $262,101 $145,579
Global Fixed Income Fund $ 72,613 $ 93,593 $ 62,421
96
Code of Ethics
The Funds, CSAM, CSAM U.K., CSAM Japan 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 a 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 are any
pending orders in that security by the Fund; and (4) Covered Persons may not
invest in initial public offerings.
The Board of Directors/Trustees 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 serves as custodian of each Fund's non-U.S.
assets and U.S. assets. Pursuant to a custodian agreement (the "Custodian
Agreement"), State Street (i) maintains a separate account or accounts in the
name of each Fund, (ii) holds and transfers portfolio securities on account of
each Fund, (iii) makes receipts and disbursements of money on behalf of each
Fund, (iv) collects and receives all income and other payments and distributions
for the account of each Fund's portfolio securities and (v) makes periodic
reports to the Board of Directors/Trustees concerning each Fund's custodial
arrangements. With approval of the Board, State Street is authorized to select
one or more foreign and domestic banking institutions and securities
depositories to serve as sub-custodian on behalf of each Fund. 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 each Fund, (ii)
addresses and mails all communications by each Fund 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
Board of Directors/Trustees concerning the transfer agent's operations with
respect to each Fund. BFDS's principal business address is 2 Heritage Drive,
North Quincy, Massachusetts 02171.
97
Organization of the Funds
The Funds are open-end management investment companies. The
Fixed Income and New York Municipal Funds were organized in 1987 and 1986,
respectively, under the laws of The Commonwealth of Massachusetts and each is a
business entity commonly known as a "Massachusetts business trust." The Global
Fixed Income and Investment Grade Funds were incorporated in 1990 and 1988,
respectively, under the laws of the State of Maryland and each is an entity
commonly known as a "Maryland corporation." Each of the Funds is "diversified"
within the meaning of the 1940 Act, other than the Global Fixed Income and New
York Municipal Funds, which are "non-diversified." The Investment Grade Fund has
four classes of shares, Common Shares, Class A Shares, Class B Shares and Class
C Shares. The New York Municipal Fund has two classes of shares, Common Shares
and Class A Shares. The Fixed Income Fund has five classes of shares, Common
Shares, Advisor Shares, Class A Shares, Class B Shares and Class C Shares. The
Global Fixed Income Fund has three classes of shares, Common Shares, Advisor
Shares and Class A Shares. The Global Fixed Income Fund's Advisor Shares are
closed to new investments. Unless otherwise indicated, references to a "Fund"
apply to each class of shares of that Fund.
The New York Municipal Fund's Agreement and Declaration of
Trust and the Global Fixed Income Fund's and Investment Grade Fund's charter
authorizes the Board of each Fund to issue full and fractional shares of common
stock, $.001 par value per share ("Common Stock"), of which one billion shares
are designated Common Shares and two billion shares are designated Advisor
Shares and one billion shares are designated Class A Shares. The Fixed Income
Fund's Agreement and Declaration of Trust (together with the New York Municipal
Fund's Agreement and Declaration of Trust, the "Trust Agreements") and the
Investment Grade Fund's Articles of Incorporation each 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. On December 12, 2001, each Fund's Common Class was
closed to new investments. Under each Fund's Charter, the Board may classify or
reclassify any unissued shares of the Fund into one or more additional classes
by setting or changing in any one or more respects their relative rights, voting
powers, restrictions, limitations as to dividends, qualifications and terms and
conditions of redemption. The Board may similarly classify or reclassify any
class of its shares into one or more series and, without shareholder approval,
may increase the number of authorized shares of the Funds.
Massachusetts law provides that shareholders could, under
certain circumstances, be held personally liable for the obligations of the
Fixed Income and New York Municipal Funds. However, the Trust Agreements
disclaim shareholder liability for acts or obligations of a 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
Agreements provide for indemnification from 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
98
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.
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 of a
Fund. Shares are transferable but have no preemptive, conversion or subscription
rights. Because of the higher fees paid by Class A, Class B and Class C shares,
the total return on Class A, Class B and Class C shares can be expected to be
lower than the total return on Common shares. Common class shares can be
purchased only by certain types of investors as outlined in the Common class
Prospectus.
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 Fixed Income Fund and the New York Municipal Fund were
organized under the laws of The Commonwealth of Massachusetts as Massachusetts
business trusts in 1987 and 1986, respectively. In 1992, these Funds changed
their names from "Counsellors Fixed Income Fund" and "Counsellors New York
Municipal Bond Fund" to "Warburg, Pincus Fixed Income Fund" and "Warburg, Pincus
New York Municipal Bond Fund," respectively. On February 28, 1995, the New York
Municipal Fund changed its name to "Warburg, Pincus New York Intermediate
Municipal Fund." The Global Fixed Income Fund and the Intermediate Government
Fund were incorporated under the laws of the State of Maryland in 1990 and 1988,
respectively, under the names "Counsellors Global Fixed Income Fund, Inc." and
"Counsellors Intermediate Maturity Government Fund, Inc.," respectively. On
October 27, 1995 and February 16, 1996, the Funds amended their respective
charters to change their names to "Warburg, Pincus Global Fixed Income Fund,
Inc." and "Warburg, Pincus Intermediate Maturity Government Fund, Inc." On March
26, 2001, the Intermediate Government Fund, the New York Municipal Fund, the
Fixed Income Fund and the Global Fixed Income Fund changed their names to
"Credit Suisse Warburg Pincus Intermediate Maturity Government Fund, Inc.,"
"Credit Suisse Warburg Pincus New York Intermediate Municipal Fund," "Credit
Suisse Warburg Pincus Fixed Income Fund," and "Credit Suisse Warburg Pincus
Global Fixed Income Fund, Inc.," respectively. Effective December 12, 2001, the
"Credit Suisse Warburg Pincus New York Intermediate Municipal Fund," "Credit
Suisse Warburg Pincus Fixed Income Fund," and "Credit Suisse Warburg Pincus
Global Fixed Income Fund, Inc." changed their names to "Credit Suisse New York
Municipal Fund, Inc.," "Credit Suisse Fixed Income Fund, Inc." and "Credit
Suisse Global
99
Fixed Income Fund, Inc.," respectively. Effective December 19, 2001, the "Credit
Suisse Warburg Pincus Intermediate Maturity Government Fund, Inc." changed its
name to "Credit Suisse Investment Grade Fund, Inc."
Distribution and Shareholder Servicing
Distributor. CSAMSI serves as distributor of the Funds' shares
and offers the Fund's shares on a continuous basis. CSAMSI's principal business
address is 466 Lexington Avenue, New York, New York 10017.
Common Shares. Each 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 each Fund pays
CSAMSI under the CSAMSI Co-Administration Agreements a fee calculated at an
annual rate of .25% of the average daily net assets of the Common shares of the
Fund. The fee is in addition to the co-administrative services fee paid by each
Fund under the CSAMSI Co-Administration Agreements and is intended to compensate
CSAMSI, or to enable CSAMSI to compensate other persons ("Service Providers"),
for providing Services (as defined below) to the Funds. Services performed by
CSAMSI under the CSAMSI Co-Administration Agreements or by
100
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
Funds, as set forth in the Common Shares 12b-1 Plan ("Shareholder Services,"
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 Funds' 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 each 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 each 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
obtaining whatever information, analyses and reports with respect to marketing
and promotional activities that each Fund may, from time to time, deem
advisable. In providing compensation for Services in accordance with the Common
Shares Plan, CSAMSI is expressly authorized (i) to make, or cause to be made,
payments to Service Providers reflecting an allocation of overhead and other
office expenses related to providing Services and (ii) to make, or cause to be
made, payments to compensate selected dealers or other authorized persons for
providing any Services.
101
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. Each 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 a 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 Fund.
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 each Fund 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 part of this Fee at rates they would
normally pay to the transfer agent for providing the services.
Advisor Shares. The Fixed Income Fund has 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 will be
governed by a distribution plan (the "Advisor Share 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. Such payments may be paid to
Institutions directly by the Fund or by CSAMSI on behalf of the Fund The Advisor
Share 12b-1 Plan requires the Board, at least quarterly, to receive and review
written reports of amounts expended under the Advisor Share 12b-1 Plan and the
purposes for which such expenditures were made.
102
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 Advisor Class shares
of the Fund. Institutions may also be reimbursed for marketing and other costs.
Additional fees may be up to .25% per year of the value of Fund accounts
maintained by the firm and, in certain cases, may be paid a fee of up to 1.00%
of new assets invested in Advisor Class shares of 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 Funds or their shareholders.
For the fiscal year ended October 31, 2002, the Advisor Class
shares of the Fixed Income Fund paid CSAMSI $88,735 under the Advisor Shares
12b-1 Plan, all of which was spent on advertising, marketing communications,
public relations and people-related and occupancy costs.
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 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. Each of the Investment
Grade and Fixed Income Funds has adopted a Plan of Distribution (the "A, B and C
Shares 12b-1 Plans") for Class A Shares, Class B Shares and Class C Shares of
the Funds, respectively, and the New York Municipal Fund and the Global Fixed
Income Fund each has adopted a Plan of Distribution for Class A Shares, to
permit the Funds to compensate CSAMSI for activities associated with the
distribution of these shares.
103
The Class A Plan currently provides that a service fee of .50%
per year of the average daily net assets of the Class A shares of the Fund 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 of the
Fund will be paid as compensation to CSAMSI. The Class C 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 C
shares of the Fund will be paid as compensation to CSAMSI.
For the fiscal year ended October 31, 2002, the Investment
Grade Fund, the New York Municipal Fund, the Fixed Income Fund and the Global
Fixed Income Fund paid $243, $78, $4,182 and $45, respectively, to CSAMSI under
the Class A Shares 12b-1 Plan. For the fiscal year ended October 31, 2002, the
Investment Grade Fund and the Fixed Income Fund paid $2,941 and $29,042,
respectively, to CSAMSI under the Class B Shares 12b-1 Plan. For the fiscal year
ended October 31, 2002, the Investment Grade Fund and the Fixed Income Fund paid
$542 and $7,721, respectively, to CSAMSI under the Class C Shares 12b-1 Plan.
During the fiscal year ended October 31, 2002, CSAMSI spent
the fees paid under the Investment Grade Fund's A Shares 12b-1 Plan as follows:
Advertising $21
- --------------------------------------------------------------- ------------
Printing and mailing prospectuses for promotional purposes $1,654
- --------------------------------------------------------------- ------------
Payment to broker-dealers $575
- --------------------------------------------------------------- ------------
People-related and occupancy $48
- --------------------------------------------------------------- ------------
Other $18
- --------------------------------------------------------------- ------------
During the fiscal year ended October 31, 2002, CSAMSI spent
the fees paid under the New York Municipal Fund's A Shares 12b-1 Plan as
follows:
Advertising $2
- --------------------------------------------------------------- ------------
Printing and mailing prospectuses for promotional purposes $3,773
- --------------------------------------------------------------- ------------
Payment to broker-dealers $2,140
- --------------------------------------------------------------- ------------
People-related and occupancy $13
- --------------------------------------------------------------- ------------
Other $4
- --------------------------------------------------------------- ------------
104
During the fiscal year ended October 31, 2002, CSAMSI spent
the fees paid under the Fixed Income Fund's A Shares 12b-1 Plan as follows:
Advertising $373
- --------------------------------------------------------------- ------------
Printing and mailing prospectuses for promotional purposes $4,109
- --------------------------------------------------------------- ------------
Payment to broker-dealers $9,034
- --------------------------------------------------------------- ------------
People-related and occupancy $879
- --------------------------------------------------------------- ------------
Other $307
- --------------------------------------------------------------- ------------
During the fiscal year ended October 31, 2002, CSAMSI spent
the fees paid under the Global Fixed Income Fund's A Shares 12b-1 Plan as
follows:
Advertising $7
- --------------------------------------------------------------- ------------
Printing and mailing prospectuses for promotional purposes $2,786
- --------------------------------------------------------------- ------------
Payment to broker-dealers $16
- --------------------------------------------------------------- ------------
People-related and occupancy $11
- --------------------------------------------------------------- ------------
Other $5
- --------------------------------------------------------------- ------------
During the fiscal year ended October 31, 2002, CSAMSI spent
the fees paid under the Investment Grade Fund's B Shares 12b-1 Plan as follows:
Advertising $39
- --------------------------------------------------------------- ------------
Printing and mailing prospectuses for promotional purposes $1,701
- --------------------------------------------------------------- ------------
Payment to broker-dealers $30,195
- --------------------------------------------------------------- ------------
People-related and occupancy $146
- --------------------------------------------------------------- ------------
Other $43
- --------------------------------------------------------------- ------------
During the fiscal year ended October 31, 2002, CSAMSI spent
the fees paid under the Fixed Income Fund's B Shares 12b-1 Plan as follows:
105
Advertising $600
- --------------------------------------------------------------- ------------
Printing and mailing prospectuses for promotional purposes $4,640
- --------------------------------------------------------------- ------------
Payment to broker-dealers $170,551
- --------------------------------------------------------------- ------------
People-related and occupancy $1,514
- --------------------------------------------------------------- ------------
Other $512
- --------------------------------------------------------------- ------------
During the fiscal year ended October 31, 2002, CSAMSI spent
the fees paid under the Investment Grade Fund's C Shares 12b-1 Plan as follows:
Advertising $10
- --------------------------------------------------------------- ------------
Printing and mailing prospectuses for promotional purposes $1,629
- --------------------------------------------------------------- ------------
Payment to broker-dealers $2,384
- --------------------------------------------------------------- ------------
People-related and occupancy $27
- --------------------------------------------------------------- ------------
Other $10
- --------------------------------------------------------------- ------------
During the fiscal year ended October 31, 2002, CSAMSI spent
the fees paid under the Fixed Income Fund's C Shares 12b-1 Plan as follows:
Advertising $174
- --------------------------------------------------------------- ------------
Printing and mailing prospectuses for promotional purposes $3,512
- --------------------------------------------------------------- ------------
Payment to broker-dealers $17,630
- --------------------------------------------------------------- ------------
People-related and occupancy $401
- --------------------------------------------------------------- ------------
Other $158
- --------------------------------------------------------------- ------------
With respect to sales of the Investment Grade and Fixed Income
Fund's Class B, Class C or 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.
106
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, B and C Shares 12b-1
Plans and the Common Shares 12b-1 Plans will continue in effect for so long as
their continuance is separately, 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 12b-1 Plan, the A, B and C
Shares 12b-1 Plans and the Common Shares 12b-1 Plans ("Independent
Directors/Trustees"). Any material amendment of any Advisor Shares 12b-1 Plans,
the A, B and C Shares 12b-1 Plans and the Common Shares 12b-1 Plans would
require the approval of the Board in the same manner. None of the Advisor Shares
12b-1 Plan, the A, B and C Shares 12b-1 Plans and the Common 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 Advisor Shares 12b-1
Plan, A, B and C Shares 12b-1 Plan and the Common Shares 12b-1 Plan 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 12b-1
Plans, the A, B, C 12b-1 Plans and the Common 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 Funds' Boards with periodic reports of
amounts spent under the Common Shares, the Adviser Shares and the Class A, B, C
Shares 12b-1 Plans, as applicable, and the purposes for which the expenditures
were made.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
107
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 a Fund, 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
108
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 a
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 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 Fund. These types of checks may be returned to you
and your purchase order may not be processed.
Class A, B and C Shares. Class A, B and C Shares are designed
for investors seeking the advice of financial representatives and are not
directly offered from the Funds. All purchases of 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):
INVESTMENT GRADE, FIXED INCOME AND GLOBAL FIXED INCOME FUNDS
INITIAL SALES CHARGE -- CLASS A
Amount Purchased As a % of As a % of Commission to Financial
Amount Offering Representative as a % of
Invested Price Offering Price
- ----------------------------------------------- --------------- ---------------- --------------------------------
Less than $50,000 4.99% 4.75% 4.25%
- ----------------------------------------------- --------------- ---------------- --------------------------------
$50,000 to less than $100,000 4.71% 4.50% 4.00%
- ----------------------------------------------- --------------- ---------------- --------------------------------
$100,000 to less than $250,000 3.63% 3.50% 3.25%
- ----------------------------------------------- --------------- ---------------- --------------------------------
$250,000 to less than $500,000 2.56% 2.50% 2.25%
- ----------------------------------------------- --------------- ---------------- --------------------------------
$500,000 to less than $1,000,000 2.04% 2.00% 1.75%
- ----------------------------------------------- --------------- ---------------- --------------------------------
$1,000,000 or more 0* 0 .50%**
- ----------------------------------------------- --------------- ---------------- --------------------------------
* 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 .50% on purchases up to and including $3 million, up to .25% on
the next $47 million and up to .125% on purchase amounts over $50
million.
109
NEW YORK MUNICIPAL FUND
INITIAL SALES CHARGE -- CLASS A
Amount Purchased As a % of As a % of Commission to Financial
Amount Offering Representative as a % of
Invested Price Offering Price
- ----------------------------------------------- --------------- ---------------- --------------------------------
Less than $50,000 3.09% 3.00% 2.75%
- ----------------------------------------------- --------------- ---------------- --------------------------------
$50,000 to less than $100,000 2.04% 2.00% 1.75%
- ----------------------------------------------- --------------- ---------------- --------------------------------
$100,000 to less than $250,000 1.01% 1.00% 0.90%
- ----------------------------------------------- --------------- ---------------- --------------------------------
$250,000 to less than $500,000 0* 0 0.50%**
- ----------------------------------------------- --------------- ---------------- --------------------------------
* On purchases of $250,000 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 .50% on purchases up to and including $3 million, up to .25% on
the next $47 million and up to .125% 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 a Fund as defined in the Securities Act of 1933,
as amended.
110
Investment dealers and other firms provide varying
arrangements for their clients to purchase and redeem a Fund's Class A, B or 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, B or 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. Such firms may
receive compensation from a Fund and/or from CSAMSI or an affiliate for these
services. The Prospectus relating to Class A, B or C Shares should be read in
connection with such firms' material regarding their fees and services.
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 the individual's 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% of 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 or an immediate family member;
o a Uniform Gifts to Minors Act/Uniform Transfer 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 Directors/Trustees of
the Funds, current and former directors or trustees of other investment
companies managed by the Adviser or its affiliates, officers, directors and
full-time employees of the Adviser and of its
111
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 hid 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 registered investment advisers 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 registered investment advisers 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 in such shares; (6) shares purchased for 401(k)
Plans, 403(b) Plans, 457 Plans and employee benefit plans sponsored by an
employer and pension plans; and (7) Class A shares acquired when dividends and
distributions are reinvested in the Fund.
For the fiscal year ended October 31,2002, CSAMSI received
$38,970, $4,211, $4,986 and $11,092 on the sale of Class A shares of the Fixed
Income Fund, Global Fixed Income Fund, the Investment Grade Bond Fund and the
New York Municipal Fund, respectively, of which CSAMSI retained $3,775, $426,
$450 and $474, 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 the Fixed Income Fund, Global Fixed Income
Fund, Investment Grade Bond Fund or the New York Municipal Fund. 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 Investment Grade Bond Fund or the New York Municipal Fund.
For the fiscal year ended October 31, 2002, CSAMSI received $3,958 and $4,436
in contingent deferred sales charges on redemptions of Class B and Class C
shares, respectively, of the Fixed Income Fund.
Redemptions.
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 Investment Grade
and Fixed Income Funds, and certain redemptions of Class A shares of the Funds.
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 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.
112
Each Fund has elected, however, to be governed by Rule 18f-1 under the 1940 Act
as a result of which the 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 the 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 Funds may be subject to a
deferred sales charge.
During the fiscal year ended October 31, 2002, CSAMSI earned
$456, $480, $3,775 and $400, respectively, in commissions on the sale of Class A
shares of the Investment Grade Fund, New York Municipal Fund, Fixed Income Fund
and Global Fixed Income Fund, of which CSAM retained $456, $480, $3,775 and
$400, respectively. CSAMSI received no contingent deferred sales charges on
redemptions of Class A shares of any of the Funds.
During the fiscal year ended October 31, 2002, CSAMSI received
$800,799 and $3,785,384 on contingent deferred sales charges on redemptions of
Class B shares of the Investment Grade Fund and the Fixed Income Fund,
respectively.
During the fiscal year ended October 31, 2002, CSAMSI received
$219,995.60 and $1,174,087 on contingent deferred sales charges on redemptions
of Class C shares of the Investment Grade Fund and the Fixed Income Fund,
respectively.
113
Special Provisions Applicable to the Investment Grade Fund and
Fixed Income Fund Class A, B and C Shares Only.
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 Invested or Redemption
Year Since Purchase Payment Made Proceeds
-------------------------------- --------------------------------
First........................... 4.0%
- -----
Second.......................... 3.0%
- ------
Third........................... 2.0%
- -----
Fourth.......................... 1.0%
- ------
Fifth........................... 0.0%
- -----
Sixth........................... 0.0%
- -----
Seventh......................... 0.0%
- -------
For federal income tax purposes, the amount of the CDSC will
reduce the gain or increase the loss, as the case may be, on the amount
recognized on the redemption of shares.
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, 2001 will be eligible for the second year's
charge if redeemed on or after October 1, 2002. 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.
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
114
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 and will be effected without a sales charge. 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 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 the Adviser'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, possibly with retroactive effect.
115
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, 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 the Fund's assets is invested in the
securities (other than 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 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 or gains 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, including the income
(if any) imputed with respect to investments in zero coupon securities. 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, a 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
116
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 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 the Fund upon filing
appropriate returns or claims for refund with the IRS.
The Code imposes a 4% nondeductible excise tax on a 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 calendar 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 retained by the Fund that is
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 manner as an ordinary corporation and
distributions to its shareholders would not be deductible by the Fund in
computing its taxable income. In addition, a Fund's distributions, to the extent
derived from the Fund's current or accumulated earnings and profits (including
amounts derived from interest on tax-exempt obligations), 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 at the end of the last
taxable year prior to qualifying as a regulated investment company) in order to
qualify as a regulated investment company in a subsequent year.
117
Special Tax Matters Regarding the Investment Grade Fund, Fixed Income Fund and
Global Fixed Income Fund
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.
Special Tax Matters Regarding the Investment Grade Fund
Interest income on most types of government securities is
generally exempt from state and local personal income taxes if the owner of such
government securities is an individual. Furthermore, some states, if certain
requirements are satisfied, permit individual investors to treat the portion of
their regulated investment company dividends that is attributable to interest
income on these government securities as tax-exempt income for state or local
personal income tax purposes. Other states treat all of these dividends as
subject to state and local personal income taxation. Investors in a Fund should
consult their own tax advisers to assess the consequences of investing in the
Fund under state and local laws generally and to determine whether dividends
paid by the Fund that represent interest derived from government securities are
exempt from any applicable state or local taxes.
Special Tax Considerations Regarding the New York Municipal Fund
Because the New York Municipal Fund will distribute
exempt-interest dividends, interest on indebtedness incurred by a shareholder to
purchase or carry Fund shares is not deductible for federal income tax purposes
or for New York State and New York City personal income tax purposes. If a
shareholder receives an exempt-interest dividend with respect to any share of
the Fund and if such share is held by the shareholder for six months or less,
then any loss on the sale or exchange of such share, to the extent of such
exempt-interest dividend, shall be disallowed for federal income tax purposes or
for New York State and New York City personal income tax purposes. In addition,
the Code may require a shareholder, if he or she receives exempt-interest
dividends, to treat as taxable income a portion of certain otherwise non-taxable
social security and railroad retirement benefit payments. Furthermore, that
portion
118
of any exempt interest dividend paid by the Fund which represents income from
certain "private activity bonds" may not retain its tax-exempt status for
federal income tax purposes in the hands of a shareholder who is a "substantial
user" (or person related thereto) of a facility financed by such bonds (although
similar rules generally do not apply for purposes of New York State and New York
City personal income taxes). Prospective investors should consult their own tax
advisors as to whether they are "substantial users" with respect to a facility
or related to such users within the meaning of the code.
Under the Code, interest on "specified private activity bonds"
issued after August 7, 1986, although otherwise exempt from federal income tax,
is treated as an item of tax preference for purposes of the federal alternative
minimum tax on individuals and corporations. If the New York Municipal Fund
invests in such specified private activity bonds, it will report a portion of
the exempt-interest dividends paid to its shareholders as interest on specified
private activity bonds, and hence as a tax preference item. Moreover, all exempt
interest dividends are included in the adjusted current earnings of a
corporation for purposes of the corporate alternative minimum tax. The amount of
the alternative minimum tax imposed by the Code is the excess, if any, of the
taxpayer's "tentative minimum tax" over the taxpayer's regular tax liability for
the taxable year. The "tentative minimum tax" is equal to (i) 26% of the first
$175,000, and 28% of any amount over $175,000 (for corporations, 20% of the
whole) of the taxpayer's alternative minimum taxable income (defined as regular
taxable income modified by certain adjustments and increased by the taxpayer's
"items of tax preference," including in the case of a corporation the adjustment
for adjusted current earnings and the tax preference for tax-exempt interest on
specified private activity bonds described above) for the taxable year in excess
of the exemption amount, less (ii) the alternative minimum tax foreign tax
credit for the taxable year. The exemption amount is $40,000 for corporations,
$45,000 for individuals filing joint returns, lesser amounts for others, and is
phased out over certain income levels. Prospective investors should consult
their own tax advisers with respect to the possible application of a federal or
state alternative minimum tax to their tax situations.
In addition, the receipt of New York Municipal Fund dividends
and distributions may affect a foreign corporate shareholder's federal "branch
profits" tax liability and a Subchapter S corporation shareholder's federal
"excess net passive income" tax liability. Shareholders should consult their own
tax advisers as to whether they are subject to the federal branch profits tax or
the federal excess net passive income tax.
While the New York Municipal Fund does not expect to realize a
significant amount of net capital gains, any such gains realized will be
distributed annually as described in the Fund's Prospectus. Such distributions
("capital gain dividends"), if any, will be taxable to the shareholders as
long-term capital gains, regardless of how long a shareholder has held the
Fund's shares, and will be designated as capital gain dividends in a written
notice mailed by the Fund to the shareholders within 60 days after the close of
the Fund's taxable year. If a shareholder receives a capital gain dividend with
respect to any share and if such share is held by the shareholder for six months
or less, then any loss (to the extent not disallowed pursuant to the
119
other six month rule described above) on the sale or exchange of such share, to
the extent of the capital gain dividend, shall be treated as a long-term capital
loss.
Capital gain distributions by the New York Municipal Fund
result in a reduction in the net asset value of the Fund's shares. Should a
distribution reduce the net asset value below a shareholder's cost basis, such
distribution would nevertheless be taxable to the shareholder as ordinary income
or capital gain as described above, even though, from an investment standpoint,
it may constitute a partial return of capital. In particular, investors should
consider the tax implications of buying shares just prior to a distribution. The
price of shares purchased at that time reflects the amount of the forthcoming
distribution. Those purchasing just prior to a distribution will then receive a
partial return of capital upon the distribution, which will nevertheless be
taxable to them.
If, for any full fiscal year, the New York Municipal Fund's
total distributions exceed net investment income and net realized capital gains,
the excess distributions may be treated as a taxable dividend or as a tax-free
return of capital (up to the amount of the shareholder's tax basis in his or her
shares). The amount treated as a tax-free return of capital will reduce a
shareholder's adjusted basis in his or her shares. Pursuant to the requirements
of the 1940 Act and other applicable laws, a notice will accompany any
distribution paid from sources other than net investment income.
Dividends paid by the New York Municipal Fund from tax-exempt
interest are designated as tax-exempt in the same percentage of the day's
dividend as the actual tax-exempt income earned by the Fund on that day. Thus,
the percentage of the dividend designated as tax-exempt may vary from day to
day. Similarly, dividends paid by the Fund from interest on New York State
Municipal Obligations will be designated as exempt from New York State and New
York City personal income taxation in the same percentage of the day's dividend
as the actual interest on New York's Municipal Obligations earned by the Fund on
that day.
It should be noted that the portion of any New York Municipal
Fund dividends constituting New York exempt-interest dividends is excludable
from income for New York State and New York City personal income tax purposes
only. Any dividends paid to the Fund's shareholders subject to New York State
corporate franchise tax or New York City corporate income tax therefore may be
taxed as ordinary dividends to such shareholders, notwithstanding that all or a
portion of such dividends is exempt from New York State or New York City
personal income tax.
Potential shareholders in the New York Municipal Fund,
including, in particular, corporate shareholders which may be subject to either
New York State franchise tax or New York City corporate income tax, should
consult their tax advisers with respect to (i) the application of corporate and
franchise taxes to the receipt of Fund dividends and as to their own state and
local tax situation in general, and (ii) the application of other state and
local taxes to the receipt of the Fund's dividends and distributions.
Although the New York Municipal Fund expects to be relieved of
all or substantially all federal, New York State and New York City income or
franchise taxes,
120
depending upon the extent of its activities in other states and localities in
which its offices are maintained, in which its agents or independent contractors
are located or in which it is otherwise deemed to be conducting business, that
portion of the Fund's income which is treated as earned in any such other state
or locality could be subject to state and local tax. Any such taxes paid by the
Fund would reduce the amount of income and gains available for distribution to
shareholders.
Passive Foreign Investment Companies (Fixed Income and Global Fixed Income Funds
only)
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, a 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
its PFIC stock at the end of each year. In such case, a Fund would report any
such gains as ordinary income and would deduct any 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. A 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
121
shareholder holds his shares of the Fund as capital assets). 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.
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.
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 his 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 during such
six-month period.
Foreign Taxes
Dividends and interest received by a Fund with respect to its
foreign investments 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 any of the Investment Grade
Fund, Fixed Income Fund or the Global Fixed Income Fund qualifies as a regulated
investment company, if certain asset and distribution requirements are satisfied
and if more than 50% of the respective Fund's total assets at the close of its
taxable year
122
consists of stock or securities of foreign corporations, that Fund may elect for
U.S. income tax purposes to treat foreign income taxes paid by it as paid by its
shareholders. The Investment Grade Fund, Fixed Income Fund or the Global Fixed
Income Fund may qualify for and make this election in some, but not necessarily
all, of its taxable years. As a result, shareholders of the Fund would be
required to include their pro rata portions of such foreign taxes in computing
their taxable incomes 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 U.S.
federal income taxes. Shortly after any year for which it makes such an
election, each Fund will report to its shareholders the amount per share of such
foreign 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.
Backup Withholding
A 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.
Notices
Shareholders will be notified annually by a 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
a 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.
123
THE FOREGOING IS ONLY A SUMMARY OF CERTAIN MATERIAL TAX CONSEQUENCES AFFECTING
A 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 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.
If a Fund meets the size requirements for listing in The Wall Street Journal,
its Common shares will be listed under the heading "Credit Suisse Common", the
Advisor Shares of the Fixed Income Fund will be listed under the heading "Credit
Suisse ADV," and the Class A, B and C shares of the Investment Grade and Fixed
Income Fund will be listed under the heading "Credit Suisse ABC." Current total
return figures may be obtained by calling Credit Suisse Funds at 800-927-2874.
AVERAGE ANNUAL TOTAL RETURNS. "Average annual total return" is
computed separately for each class of shares by determining the average annual
compounded rate of return during specified periods
124
that equates the initial amount invested to the ending redeemable value of such
investment according to the following formula:
P(1+T)n = ERV
Where: P = hypothetical initial payment of $1,000;
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
125
at the end of the applicable period (or a fractional
portion thereof).
"Aggregate total return" is computed 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 Fund, the maximum initial sales charge of 5.75% was deducted at the time of
investment. Investors should note that this performance may not be
representative of the Fund's total returns in longer market cycles.
126
Although total return is calculated in a separate manner for
each class of shares, under certain circumstances, performance information for a
class may include performance information of another class with an earlier
inception date.
TOTAL RETURN
The Funds' average annual total returns for the Common Class
shares 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):
COMMON SHARES
(PERIOD FROM COMMENCEMENT OF OPERATIONS)
Period from the
commencement of
One-Year Five-Year Ten-Year operations
-------- --------- -------- -------------
Investment Grade Fund -0.55% 5.47% 5.83% 7.17%
(August 22, 1988)
New York Municipal Fund 4.91% 5.28% 5.68% 5.76%
(April 1, 1987)
Fixed Income Fund -4.07% 4.14% 6.02% 6.90%
(August 17, 1987)
Global Fixed Income Fund 4.27% 4.53% 6.32% 6.82%
(November 1, 1990)
The Fixed Income Fund's average annual total returns for the Adviser Class
shares 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):
ADVISOR SHARES
(PERIOD FROM COMMENCEMENT OF OPERATIONS)
Period from the
commencement of
One-Year Five-Year Ten-Year operations
-------- --------- -------- -------------
Fixed Income Fund -4.31% 3.88% N/A 5.18%
(July 3, 1996)
127
The Funds' total returns for the periods ended October 31,
2002 for the Class A shares were as follows (performance figures calculated
without waiver by a Fund's service provider(s), if any, are noted in italics):
CLASS A SHARES
(PERIOD FROM COMMENCEMENT OF OPERATIONS)
Period from the
commencement of
One-Year Five-Year Ten-Year operations
-------- --------- -------- ----------------
Investment Grade Fund N/A N/A N/A -3.23%
(December 24, 2001) (not annualized)
New York Municipal Fund N/A N/A N/A 2.28%
(November 30, 2001) (not annualized)
Fixed Income Fund -8.86% N/A N/A -5.51%
(July 31, 2001)
Global Fixed Income Fund N/A N/A N/A -0.46%
(November 30, 2001) (not annualized)
The Investment Grade Fund's and the Fixed Income Fund's
total returns for the periods ended October 31, 2002 for the Class B shares were
as follows (performance figures calculated without waiver by a Fund's service
provider(s), if any, are noted in italics):
CLASS B SHARES
(PERIOD FROM COMMENCEMENT OF OPERATIONS)
Period from the
commencement of
One-Year Five-Year Ten-Year operations
-------- --------- -------- -------------
Investment Grade Fund N/A N/A N/A -2.95%
(December 24, 2001) (not annualized)
Fixed Income Fund -8.67% N/A N/A -4.75%
(July 31, 2001)
128
The Investment Grade Fund's and the Fixed Income Fund's
average annual total returns for the periods ended October 31, 2002 for the
Class C shares were as follows:
CLASS C SHARES
(PERIOD FROM COMMENCEMENT OF OPERATIONS)
Period from the
commencement of
One-Year Five-Year Ten-Year operations
-------- --------- -------- ---------------
Investment Grade Fund N/A N/A N/A 0.03%
(December 24, 2001) (not annualized)
Fixed Income Fund -5.94% N/A N/A -2.59%
(July 31, 2001)
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, the Dow Jones Industrial Average or the Lehman Brothers U.S. Aggregate
Bond Index, the Lehman Brothers 5 Year Municipal Bond Index or the Lehman
Brothers Global Aggregate Bond Index, 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. 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 the Investment Grade Fund seeks to
achieve total return, the New York Municipal Fund seeks to maximize current
interest income exempt from federal income tax and New York State and New York
City personal income taxes to
129
the extent consistent with prudent investment management and the preservation of
capital, the Fixed Income Fund seeks to generate high current income consistent
with reasonable risk and, secondarily, capital appreciation, and the Global
Fixed Income Fund seeks to maximize total investment return consistent with
prudent investment management, consisting of a combination of interest income,
currency gains and capital appreciation, and that such return may not be
representative of any Fund's return over a longer market cycle. The Funds 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 gains distributions.
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 Funds' Common Class shares and the Fixed
Income and Global Fixed Income Funds' Advisor Class shares for the 30-day period
ended October 31, 2002 were as follows:
130
Common Shares Advisor Shares
------------------------------ -----------------------------
Fund With Waiver Without Waiver With Waiver Without Waiver
- ---- ----------- -------------- ----------- --------------
Investment Grade Fund 4.88% 3.10% N/A N/A
New York Municipal Fund 2.61% 2.17% N/A N/A
Fixed Income Fund 4.63% 4.31% 3.64% 3.36%
Global Fixed Income Fund 3.23% 2.06% 2.71%% 1.56%
The yield for the Funds' Class A, B and C shares for the
30-day period ended October 30, 2002 were as follows:
Class A Shares Class B Shares Class C Shares
---------------------------- ---------------------------- ----------------------------
Fund With Waiver Without Waiver With Waiver Without Waiver With Waiver Without Waiver
- ---- ----------- -------------- ----------- -------------- ----------- --------------
Investment Grade Fund 2.27% 3.10% 3.90% 2.08% 3.89% 2.09%
New York Municipal Fund 4.88% 1.83% N/A N/A N/A N/A
Fixed Income Fund 4.18% 3.88% 3.64% 3.32% 3.63% 3.31%
Global Fixed Income 2.85% 1.74% N/A N/A N/A N/A
Fund
Tax equivalent yield is calculated over a specified thirty-day
period by dividing that portion of the Fund's yield which is tax-exempt by one
minus the aggregate of the maximum federal, state and local income tax rates and
adding the product to that portion, if any, of the yield of the New York
Municipal Fund that is not tax-exempt. The New York Municipal Fund's
tax-equivalent yield for the thirty-day period ending October 31, 2002 was
3.70.
After-Tax Return
From time to time each Fund may include after-tax performance
information in advertisements. To the extent a Fund includes such information,
it will be computed according to the following formulas:
131
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.
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 Class Shares for the periods ended October
31, 2002 were as follows:
Fund 1 year 5 year 10 year Since Inception
- -------------------- -------------- -------------- ----------- ----------- -------------
Investment Grade -2.27% 3.27% 3.13% 4.59% 8/22/88
Fund
- -------------------- -------------- -------------- ----------- ----------- -------------
New York Municipal 3.36% 3.57% 3.76% 3.88% 4/1/87
Fund
- -------------------- -------------- -------------- ----------- ----------- -------------
Fixed Income Fund -5.93% 1.67% 3.42% 4.27% 8/17/87
- -------------------- -------------- -------------- ----------- ----------- -------------
Global Fixed 2.24% 1.96% 3.54% 4.19% 11/1/90
Income Fund
- -------------------- -------------- -------------- ----------- ----------- -------------
The average annual total returns (after taxes on
distributions) for the Fixed Income Fund's Advisor Class Shares for the periods
ended October 31, 2002 were as follows:
Fund 1 year 5 year 10 year Since Inception
- -------------------- -------------- -------------- ----------- ----------- -------------
Fixed Income Fund -6.08% 1.52% N/A 2.79% 7/3/96
- -------------------- -------------- -------------- ----------- ----------- -------------
132
The average annual total returns (after taxes on
distributions) for each Fund's Class A Shares and, for the Investment Grade Fund
and the Fixed Income Fund, Class B and C shares for the periods ended October
31, 2002 were as follows:
Class A:
Fund 1 Year 5 Year 10 Year Since Inception
- ---------------- -------- -------- --------- -------------------
Investment Grade N/A N/A N/A -5.32% 12/24/01
Fund
New York Municipal N/A N/A N/A 1.12% 11/30/01
Fund
Fixed Income Fund -[7.32]% N/A N/A -7.32% 7/31/01
Global Fixed N/A N/A N/A -2.51% 11/30/01
Income Fund
Class B:
Fund 1 Year 5 Year 10 Year Since Inception
- ---------------- -------- -------- --------- -------------------
Investment Grade N/A N/A N/A -0.20% 12/24/01
Fund
New York Municipal N/A N/A N/A N/A
Fund
Fixed Income Fund -6.51% N/A N/A -4.12% 7/31/01
Global Fixed N/A N/A N/A N/A
Income Fund
Class C:
Fund 1 Year 5 Year 10 Year Since Inception
- ---------------- -------- -------- --------- -------------------
Investment Grade N/A N/A N/A -0.12% 12/24/01
Fund
New York Municipal N/A N/A N/A N/A
Fund
Fixed Income Fund -6.51% N/A N/A -4.16% 7/31/01
Global Fixed N/A N/A N/A N/A
Income Fund
133
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
- -------------------- -------- -------- --------- --------------------
Investment Grade -0.35% 3.28% 3.30% 4.61% 8/22/88
Fund
New York Municipal 3.09% 3.40% 3.62% 3.79% 4/1/87
Fund
Fixed Income Fund -2.49% 2.08% 3.54% 4.35% 8/17/87
Global Fixed 2.56% 2.30% 3.68% 4.23% 11/1/90
Income Fund
The average annual total returns (after taxes on distributions
and redemption of Fund shares) for the Fixed Income Fund's Advisor Shares for
the periods ended October 31, 2002 were as follows:
134
Fund 1 Year 5 Year 10 Year Since Inception
- ---------------- -------- -------- --------- -------------------
Fixed Income Fund -2.64% 1.93% N/A 2.97% 7/3/96
The average annual total returns (after taxes on distributions
and redemptions of Fund shares) for each Fund's Class A Shares and, for the
Investment Grade Fund and the Fixed Income Fund, Class B and C shares for the
periods ended October 31, 2002 were as follows:
Class A:
Fund 1 Year 5 Year 10 Year Since Inception
- ---------------- -------- -------- --------- -------------------
Investment Grade N/A N/A N/A -1.99% 12/24/01
Fund
New York Municipal N/A N/A N/A 1.48% 11/30/01
Fund
Fixed Income Fund -2.61% N/A N/A -5.25% 7/31/01
Global Fixed N/A N/A N/A -0.34% 11/30/01
Income Fund
Class B:
Fund 1 Year 5 Year 10 Year Since Inception
- ---------------- -------- -------- --------- -------------------
Investment Grade N/A N/A N/A -1.82% 12/24/01
Fund
New York Municipal N/A N/A N/A N/A
Fund
Fixed Income Fund -5.31% N/A N/A -4.54% 7/31/01
Global Fixed N/A N/A N/A N/A
Income Fund
135
Class C:
Fund 1 Year 5 Year 10 Year Since Inception
- -------------------- -------------- -------------- ----------- --------------------- --------------------
Investment Grade N/A N/A N/A -1.82% 12/24/01
Fund
- -------------------- -------------- -------------- ----------- --------------------- --------------------
New York Municipal N/A N/A N/A N/A
Fund
- -------------------- -------------- -------------- ----------- --------------------- --------------------
Fixed Income Fund -5.31% N/A N/A -4.54% 7/31/01
- -------------------- -------------- -------------- ----------- --------------------- --------------------
Global Fixed N/A N/A N/A N/A
Income Fund
- -------------------- -------------- -------------- ----------- --------------------- --------------------
The performance of a class of Fund shares will vary from time
to time depending upon market conditions, the composition of the 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, the 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 the 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. The 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 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 Investment Grade Fund, with
the Lehman Brothers U.S. Aggregate Bond Index (composed of the Lehman Brothers
Government/Corporate Bond Index and the Lehman Brothers Mortgage-Backed
Securities Index and including U.S. Treasury and agency issues, corporate bond
issues and mortgage-backed securities rated investment-grade or higher by rating
agencies); in the case of the New York Municipal Fund, with the Lehman Brothers
5-Year Municipal Bond Index; in the case of the
136
Fixed Income Fund, with the Lehman Brothers U.S. Aggregate Bond Index (described
above); and in the case of the Global Fixed Income Fund, the Lehman Brothers
Global Aggregate Bond Index (a macro index of global government and corporate
bond markets, composed of various indices calculated by Lehman Brothers, Inc.,
including the U.S. Aggregate Bond Index, the Pan-European Aggregate Index, the
Global Treasury Index, the Asian-Pacific Aggregate Index, the Eurodollar Index
and the U.S. Investment Grade 144A Index); or (iii) other appropriate indexes of
investment securities or with data developed by the Adviser derived from such
indexes. The 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, the Fund may from time to time compare the expense ratio of its Common
Shares to that of any investment company with similar objectives and policies,
based on data generated by Lipper or similar investment services that monitor
mutual funds.
In its reports, investor communications or advertisements, the
Fund may also include: (i) its total return performance; (ii) its performance
compared with various indexes or other mutual funds; (iii) published evaluations
by nationally recognized ranking services and financial publications; (iv)
descriptions and updates concerning its strategies and portfolio investments;
(v) its goals, risk factors and expenses compared with other mutual funds; (vi)
analysis of its investments by industry, country, credit quality and other
characteristics; (vii) a discussion of the risk/return continuum relating to
different investments; (viii) the general biography or work experience of the
portfolio managers of the Fund; (ix) portfolio manager commentary or market
updates; (x) research methodology underlying stock selection or the Fund's
investment objective; and (xi) other information of interest to investors.
INDEPENDENT ACCOUNTANTS AND COUNSEL
PricewaterhouseCoopers LLP ("PwC"), with principal offices at
Two Commerce Square, Philadelphia, Pennsylvania 19103, serves as independent
accountants for the Funds. The financial statements for the fiscal year ended
October 31, 2002 that are incorporated by reference
137
in this Statement of Additional Information have been audited by PwC, whose
report thereon appears elsewhere herein 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 the Funds 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:
Investment Grade Fund Common Advisor Class A Class B Class C
Shares Shares Shares Shares Shares
------ ------- ------- ------- -------
Charles Schwab & Co., Inc.* 36.31%
Special Custody Account for the
Exclusive Benefit of Customers
Attn.: Mutual Funds Department
101 Montgomery Street
San Francisco, CA 94104-4122
Nat'l Financial Svcs. Corp.* 7.18%
FBO Customers
Church Street Station
P.O. Box 3908
New York, NY 10008-3908
Retirement Plan Nonlegal Employees of 6.39%
Simpson Thacher & Bartlett*
Mary Ann Braverman,
Accounting Department
425 Lexington Avenue
New York, NY 10017-3903
Beth Dater 6.10%
55 Park Avenue, Apt. 3E
New York, NY 10021-8166
Larkin Industries Inc. PSP & Trust* 37.46%
2020 Energy Park Drive
St. Paul, MN 55108-1506
American Enterprise Investment 13.42%
Services*
FBO 211060911
P.O. Box 3446
Minneapolis, MN 55440-9446
Donaldson Lufkin Jenrette 11.53%
Securities Corporation Inc.*
P.O. Box 2052
Jersey City, NJ 07303-2052
138
Investment Grade Fund Common Advisor Class A Class B Class C
Shares Shares Shares Shares Shares
------ ------- ------- ------- -------
American Enterprise Investment 10.98%
Services*
FBO 211369571
P.O. Box 3446
Minneapolis, MN 55440-9446
American Enterprise Investment 9.49%
Services*
FBO 569633581
P.O. Box 3446
Minneapolis, MN 55440-9446
American Enterprise Investment 7.80%
Services*
FBO 212610451
P.O. Box 3446
Minneapolis, MN 55440-9446
Donaldson Lufkin Jenrette 11.54%
Securities Corporation Inc.*
P.O. Box 2052
Jersey City, NJ 07303-2052
139
Investment Grade Fund Common Advisor Class A Class B Class C
Shares Shares Shares Shares Shares
------ ------- ------- ------- -------
Merrill Lynch Pierce
Fenner & Smith Inc.* 10.31%
Building 1 Team A Fl. 2
4800 Deer Lake Drive East
Jacksonville, FL 32246-6486
Daun Rauscher Inc.* 9.04%
FBO Boog-Scott Family Limited
Partnership
John Boog-Scott, General Partner
4232 Danmire
Richardson TX 75082-3758
American Enterprise Investment 7.66%
Services*
FBO 132542221
P.O. Box 3446
Minneapolis, MN 55440-9446
Donaldson Lufkin Jenrette 6.56%
Securities Corporation Inc.*
P.O. Box 2052
Jersey City, NJ 07303-2052
American Enterprise Investment 6.09%
Services*
FBO 127304381
P.O. Box 3446
Minneapolis, MN 55440-9446
American Enterprise Investment 5.13%
Services*
FBO 216292251
P.O. Box 3446
Minneapolis, MN 55440-9446
Donaldson Lufkin Jenrette 36.60%
Securities Corporation Inc.*
P.O. Box 2052
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette 36.58%
Securities Corporation Inc.*
P.O. Box 2052
Jersey City, NJ 07303-2052
Merrill Lynch Pierce 16.48%
Fenner & Smith Inc.*
Building 1 Team A Fl. 2
4800 Deer Lake Drive East
Jacksonville, FL 32246-6486
New York Municipal Fund Common Advisor Class A Class B Class C
Shares Shares Shares Shares Shares
------ ------- ------- ------- -------
Charles Schwab & Co., Inc.* 29.09%
Special Custody Account for the
Exclusive Benefit of Customers
Attn.: Mutual Funds Department
101 Montgomery Street
San Francisco, CA 94104-4122
Nat'l Financial Svcs. Corp.* 17.85%
FBO Customers
Church St. Station
P.O. Box 3908
New York, NY 10008-3908
American Enterprise Investment 80.90%
Services*
FBO 195706131
P.O. Box 3446
Minneapolis, MN 55440-9446
140
New York Municipal Fund Common Advisor Class A Class B Class C
Shares Shares Shares Shares Shares
------ ------- ------ ------- -------
Donaldson Lufkin Jenrette 5.84%
Securities Corporation Inc.*
P.O. Box 2052
Jersey City, NJ 07303-2052
Merrill Lynch Pierce 5.00%
Fenner & Smith Inc.*
Building 1 Team A Fl. 2
4800 Deer Lake Drive East
Jacksonville, FL 32246-6486
Fixed Income Fund Common Advisor Class A Class B Class C
Shares Shares Shares Shares Shares
------ ------- ------- ------- -------
Charles Schwab & Co., Inc.* 37.26%
Special Custody Account for the
Exclusive Benefit of Customers
Attn.: Mutual Funds Department
101 Montgomery Street
San Francisco, CA 94104-4122
Nat'l Financial Svcs. Corp.* 8.39%
FBO Customers
Church St. Station
P.O. Box 3908
New York, NY 10008-3908
Bost. & Co. A/C MIDF858662* 7.54%
Mutual Funds Operations
P.O. Box 3198
Pittsburgh, PA 15230-3198
141
New York Municipal Fund Common Advisor Class A Class B Class C
Shares Shares Shares Shares Shares
------ ------- ------- ------- -------
Salomon Smith Barney Inc.* 5.21%
Book Entry Account
Attn.: Matt Maestri
333 West 34 Street
7th Floor Mutual Funds Dept.
New York, NY 10001-2483
Donaldson Lufkin Jenrette 5.12%
Securities Corporation Inc.*
P.O. Box 2052
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette 13.29%
Securities Corporation Inc.*
P.O. Box 2052
Jersey City, NJ 07303-2052
State Street Bank & Trust Co.* 9.77%
Cust. for the R/O IRA of
Judith Berbenich
55 Tabb Pl.
Staten Island, NY 10302-2033
State Street Bank & Trust Co.* 7.83%
Cust. for the R/O IRA of
Margaret T. Capehart
381 E. 7 St.
Brooklyn, NY 11218-4105
Olivia W. Russell 5.95%
702 Chickasaw Dr. S.
Flowood, MS 39232-8675
American Enterprise Investment 5.48%
Services*
FBO 195521161
P.O. Box 3446
Minneapolis, MN 55440-9446
Larkin Industries Inc. PSP & Trust* 5.08%
2020 Energy Park Drive
St. Paul, MN 55108-1506
Merrill Lynch Pierce 15.10%
Fenner & Smith Inc.*
Building 1 Team A Fl. 2
4800 Deer Lake Drive East
Jacksonville, FL 32246-6486
Donaldson Lufkin Jenrette 14.25%
Securities Corporation Inc.*
P.O. Box 2052
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette 9.96%
Securities Corporation Inc.*
P.O. Box 2052
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette 7.98%
Securities Corporation Inc.*
P.O. Box 2052
Jersey City, NJ 07303-2052
142
New York Municipal Fund Common Advisor Class A Class B Class C
Shares Shares Shares Shares Shares
------ ------- ------- ------- -------
Salomon Smith Barney Inc.* 6.32%
333 West 34 Street - 3rd Floor
7th Floor Mutual Funds Dept.
New York, NY 10001-2483
Global Fixed Income Fund Common Advisor Class A Class B Class C
Shares Shares Shares Shares Shares
------ ------- ------- ------- -------
Charles Schwab & Co., Inc.* 21.67%
Special Custody Account for the
Exclusive Benefit of Customers
Attn.: Mutual Funds Department
101 Montgomery Street
San Francisco, CA 94104-4122
Salomon Smith Barney Inc.* 18.71%
Book Entry Account
Attn.: Matt Maestri
333 West 34 Street
7th Floor Mutual Funds Dept.
New York, NY 10001-2483
Fidelity Investments Institutional* 11.84%
Operations Center as Agent for
Certain Employee Benefit Plans
100 Magellan Way
Covington, KY 41015-1999
Nat'l Financial Svcs. Corp.* 10.02%
FBO Customers
Church Street Station
P.O. Box 3908
New York, NY 10008-3908
143
Global Fixed Income Fund Common Advisor Class A Class B Class C
Shares Shares Shares Shares Shares
------ ------- ------- ------- -------
Smith Barney Corporate Trust 9.52%
Company Trustee FBO Smith Barney 401
Advisor Group Trust Dated 01/01/98*
2 Tower Center
P.O. Box 1063 Plan Valuation
Services
East Brunswick, NJ 08816-1063
* The Funds believe that these entities are not the beneficial owner of shares
held of record by them.
FINANCIAL STATEMENTS
Each Fund's audited annual report for the Common Class, the
Advisor Class and the Class A, Class B and Class C shares, as applicable, 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 relevant Fund included
therein. Each Fund will furnish without charge a copy of the annual reports upon
request by calling Credit Suisse Funds at 800-927-2874.
144
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.
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
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.
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
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
A-4
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 - 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 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
A-5
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.
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
THE PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION OF THE
ACQUIRED FUND DATED FEBRUARY 28, 2003
AND THE ANNUAL REPORT OF THE ACQUIRED FUND
DATED OCTOBER 31, 2002.
[Credit Suisse Asset Management Logo]
CREDIT SUISSE FUNDS
Prospectus
COMMON CLASS
February 28, 2003
- CREDIT SUISSE
INVESTMENT GRADE BOND FUND
- CREDIT SUISSE
NEW YORK MUNICIPAL FUND
- CREDIT SUISSE
FIXED INCOME FUND
- CREDIT SUISSE
GLOBAL FIXED INCOME FUND
As with all mutual funds, the Securities and Exchange
Commission has not approved these funds, nor has it passed
upon the adequacy or accuracy of this Prospectus. It is a
criminal offense to state otherwise.
Credit Suisse Funds are advised by Credit Suisse Asset
Management, LLC.
CONTENTS
<Table>
KEY POINTS................... .................... 4
Goals and Principal Strategies................. 4
A Word About Risk.............................. 5
Investor Profile............................... 6
PERFORMANCE SUMMARY............... ............... 7
Year-by-Year Total Returns..................... 7
Average Annual Total Returns................... 8
INVESTOR EXPENSES................ ................ 12
Fees and Fund Expenses......................... 12
Example........................................ 13
THE FUNDS IN DETAIL............... ............... 14
The Management Firms........................... 14
Multi-Class Structure.......................... 15
Fund Information Key........................... 15
INVESTMENT GRADE BOND FUND........... ............ 16
NEW YORK MUNICIPAL FUND............. ............. 19
FIXED INCOME FUND................ ................ 22
GLOBAL FIXED INCOME FUND............ ............. 25
MORE ABOUT RISK................. ................. 28
Introduction................................... 28
Types of Investment Risk....................... 28
Certain Investment Practices................... 30
MEET THE MANAGERS................ ................ 34
ABOUT YOUR ACCOUNT............... ................ 36
Share Valuation................................ 36
Account Statements............................. 36
Distributions.................................. 36
Taxes.......................................... 37
Buying Shares.................................. 39
Selling Shares................................. 42
Shareholder Services........................... 44
BUYING SHARES.................. .................. 39
SELLING SHARES................. .................. 42
SHAREHOLDER SERVICES.............. ............... 44
OTHER POLICIES................. .................. 45
OTHER INFORMATION................ ................ 46
About the Distributor.......................... 46
FOR MORE INFORMATION............... .............. back cover
Each fund's Common Class is closed to new investors other than
those described on page 39.
</Table>
3
KEY POINTS
GOALS AND PRINCIPAL STRATEGIES
<Table>
<Caption>
- ----------------------------------------------------------------------------------------------
FUND/GOAL PRINCIPAL STRATEGIES PRINCIPAL RISK FACTORS
- ----------------------------------------------------------------------------------------------
INVESTMENT GRADE BOND FUND - Invests at least 80% of - Credit risk
Total return its net assets, plus any - Foreign securities
borrowings for investment - Interest-rate risk
purposes, in investment - Market risk
grade fixed-income
securities (average credit
rating of A)
- Uses sector rotation and
security selection as
primary sources of
performance
- ----------------------------------------------------------------------------------------------
NEW YORK MUNICIPAL FUND - Invests at least 80% of - Credit risk
To maximize current its net assets, plus any - Geographic risk
interest income exempt from borrowings for investment - Interest-rate risk
federal income tax and New purposes, in New York - Market risk
York state and New York municipal securities - Non-diversified status
City personal income taxes, - Normally maintains a
to the extent consistent weighted-average portfolio
with prudent investment and maturity of between three
the preservation of capital and 10 years
- Emphasizes
investment-grade securities
- ----------------------------------------------------------------------------------------------
FIXED INCOME FUND - Invests at least 80% of - Credit risk
To generate high current its net assets, plus any - Foreign securities
income consistent with borrowings for investment - Interest-rate risk
reasonable risk and, purposes, in fixed-income - Market risk
secondarily, capital securities
appreciation - Normally maintains a
weighted-average
portfolio maturity of 10
years or less
- Favors investment-grade
securities, but may
diversify credit quality
in pursuit of its goal
- ----------------------------------------------------------------------------------------------
GLOBAL FIXED INCOME FUND - Invests at least 80% of - Credit risk
To maximize total its net assets, plus any - Foreign securities
investment return borrowings for investment - Interest-rate risk
consistent with prudent purposes, in fixed-income - Market risk
investment management, securities of issuers - Non-diversified status
consisting of a combination located in at least 3
of interest income, countries, which may
currency gains and capital include the U.S.
appreciation - Favors investment-grade
securities, but may
diversify credit quality
in pursuit of its goal
- Investment decisions are
based on fundamental
market factors, currency
trends and credit
quality.
- ----------------------------------------------------------------------------------------------
</Table>
4
A WORD ABOUT RISK
All investments involve some level of risk. Simply defined, risk is the
possibility that you will lose money or not make money.
Principal risk factors for the funds are discussed below. Before you invest,
please make sure you understand the risks that apply to your fund. As with any
mutual fund, you could lose money over any period of time.
Investments in the funds are not bank deposits and are not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
CREDIT RISK
All funds
The issuer of a security or the counterparty to a contract may default or
otherwise become unable to honor a financial obligation.
FOREIGN SECURITIES
Investment Grade Bond Fund, Fixed Income Fund, Global Fixed Income Fund
Since these funds invest in foreign securities, they carry additional risks
that include:
- CURRENCY RISK Fluctuations in exchange rates between the U.S. dollar and
foreign currencies may negatively affect an investment. Adverse changes in
exchange rates may erode or reverse any gains produced by foreign-currency-
denominated investments and may widen any losses. Although a fund may seek to
reduce currency risk by hedging part or all of its exposure to various
foreign currencies, it is not required to do so.
- INFORMATION RISK Key information about an issuer, security or market may be
inaccurate or unavailable.
- POLITICAL RISK Foreign governments may expropriate assets, impose capital or
currency controls, impose punitive taxes, or nationalize a company or
industry. Any of these actions could have a severe effect on security prices
and impair a fund's ability to bring its capital or income back to the U.S.
Other political risks include economic policy changes, social and political
instability, military action and war.
GEOGRAPHIC RISK
New York Municipal Fund
A fund that invests primarily in New York municipal securities is more
susceptible to economic, political and other developments that may adversely
affect issuers of such securities than a more geographically diversified fund.
The default or credit-rating downgrade of one of these issuers could affect the
market values and marketability of all New York municipal securities, thereby
hurting the fund's performance.
INTEREST-RATE RISK
All funds
Changes in interest rates may cause a decline in the market value of an
investment. With bonds and other fixed-
5
income securities, a rise in interest rates typically causes a fall in values.
MARKET RISK
All funds
The market value of a security may fluctuate, sometimes rapidly and
unpredictably. These fluctuations, which are often referred to as "volatility,"
may cause a security to be worth less than it was worth at an earlier time.
Market risk may affect a single issuer, industry, sector of the economy, or the
market as a whole. Market risk is common to most investments-including stocks
and bonds, and the mutual funds that invest in them.
Bonds and other fixed-income securities generally involve less market risk
than stocks. The risk of bonds can vary significantly depending upon factors
such as issuer and maturity. The bonds of some companies may be riskier than the
stocks of others.
NON-DIVERSIFIED STATUS
New York Municipal Fund, Global Fixed Income Fund
The funds are considered non-diversified investment companies under the
Investment Company Act of 1940 and are permitted to invest a greater proportion
of their assets in the securities of a smaller number of issuers. As a result,
the funds may be subject to greater volatility with respect to their respective
portfolio securities than a fund that is more broadly diversified.
INVESTOR PROFILE
THESE FUNDS ARE DESIGNED FOR INVESTORS WHO:
- are seeking total return or investment income
- are looking for higher potential returns than money-market funds and are
willing to accept more risk and volatility than money-market funds
- want to diversify their portfolios with fixed-income funds
THEY MAY NOT BE APPROPRIATE IF YOU:
- are investing for maximum return over a long time horizon
- require stability of your principal
You should base your selection of a fund on your own goals, risk preferences
and time horizon.
6
PERFORMANCE SUMMARY
The bar chart below and the table on the next page provide an indication of the
risks of investing in these funds. The bar chart shows you how each fund's
performance has varied from year to year for up to 10 years. The table compares
each fund's performance (before and after taxes) over time to that of a broad
based securities market index and other indexes, if applicable. As with all
mutual funds, past performance (before and after taxes) is not a prediction of
the future.
YEAR-BY-YEAR TOTAL RETURNS
<Table>
<Caption>
YEAR ENDED 12/31: 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
INVESTMENT GRADE BOND FUND 7.87% -1.78% 16.26% 2.27% 7.55% 8.15% -0.44% 9.98% 7.66% 4.53%
Best quarter: 5.25% (Q3 02)
Worst quarter: -2.20% (Q1 92)
Inception date: 8/22/88
- ---------------------------------------------------------------------------------------------------------------------------------
NEW YORK MUNICIPAL FUND 9.89% -0.55% 9.64% 4.32% 5.88% 5.48% -0.41% 9.04% 4.73% 8.16%
Best quarter: 3.54% (Q4 00)
Worst quarter: -2.87% (Q1 94)
Inception date: 4/1/87
- ---------------------------------------------------------------------------------------------------------------------------------
FIXED INCOME FUND 11.23% -0.67% 15.13% 5.15% 8.80% 6.51% -0.04% 9.40% 5.51% 1.68%
Best quarter: 5.81% (Q2 95)
Worst quarter: -1.63% (Q2 02)
Inception date: 8/17/87
- ---------------------------------------------------------------------------------------------------------------------------------
GLOBAL FIXED INCOME FUND 2.10% 19.62% -5.48% 16.01% 9.97% 2.17% 8.42% 0.39% 7.24% 10.22%
Best quarter: 8.45% (Q1 93)
Worst quarter: -4.06% (Q1 92)
Inception date: 11/1/90
- ---------------------------------------------------------------------------------------------------------------------------------
</Table>
7
AVERAGE ANNUAL TOTAL RETURNS
<Table>
<Caption>
ONE YEAR FIVE YEARS TEN YEARS LIFE OF INCEPTION
PERIOD ENDED 12/31/02: 2002 1998-2002 1993-2002 FUND DATE
INVESTMENT GRADE BOND
FUND
RETURN BEFORE TAXES 4.53% 5.91% 6.09% 7.32% 8/22/88
RETURN AFTER TAXES ON
DISTRIBUTIONS 2.72% 3.72% 3.53% 4.75%
RETURN AFTER TAXES ON
DISTRIBUTIONS AND SALE
OF FUND SHARES 2.74% 3.63% 3.58% 4.72%
LEHMAN BROTHERS U.S.
AGGREGATE BOND INDEX
(REFLECTS NO
DEDUCTIONS FOR FEES,
EXPENSES OR TAXES) 1 10.25% 7.55% 7.51% 0.72% 2
NEW YORK MUNICIPAL
FUND
RETURN BEFORE TAXES 8.16% 5.35% 5.56% 5.80% 4/1/87
RETURN AFTER TAXES ON
DISTRIBUTIONS 7.74% 3.85% 3.76% 3.99%
RETURN AFTER TAXES ON
DISTRIBUTIONS AND SALE
OF FUND SHARES 6.70% 3.73% 3.66% 3.91%
LEHMAN BROTHERS 5 YEAR
MUNICIPAL BOND INDEX
(REFLECTS NO
DEDUCTIONS FOR FEES,
EXPENSES OR TAXES) 3 9.27% 5.91% 5.89% 6.67% 4
</Table>
8
<Table>
<Caption>
ONE YEAR FIVE YEARS TEN YEARS LIFE OF INCEPTION
PERIOD ENDED 12/31/02: 2002 1998-2002 1993-2002 FUND DATE
FIXED INCOME FUND
RETURN BEFORE TAXES 1.68% 4.78% 6.38% 7.09% 8/1/87
RETURN AFTER TAXES ON
DISTRIBUTIONS -0.38% 2.36% 3.77% 4.46%
RETURN AFTER TAXES ON
DISTRIBUTIONS AND SALE
OF FUND SHARES 1.00% 2.61% 3.81% 4.50%
LEHMAN BROTHERS U.S.
AGGREGATE BOND INDEX
(REFLECTS NO
DEDUCTIONS FOR FEES,
EXPENSES OR TAXES) 1 10.25% 7.55% 7.51% 8.62% 5
GLOBAL FIXED INCOME
FUND
RETURN BEFORE TAXES 10.22% 5.82% 6.94% 7.13% 11/1/90
RETURN AFTER TAXES ON
DISTRIBUTIONS 7.25% 3.09% 4.09% 4.36%
RETURN AFTER TAXES ON
DISTRIBUTIONS AND SALE
OF FUND SHARES 6.24% 3.28% 4.15% 4.41%
LEHMAN BROTHERS GLOBAL
AGGREGATE BOND INDEX 5 16.53% 5.65% 6.68% 7.52% 7
</Table>
1 The Lehman Brothers U.S. Aggregate Bond Index is composed of the Lehman
Brothers Government/CorporateBond Index and the Lehman Brothers
Mortgage-Backed Securities Index. The U.S. Aggregate Bond Index includes U.S.
Treasury and agency issues, corporate bond issues and mortgage-backed
securities rated investment-grade or higher by Moody's Investors Service,
Standard & Poor's Corporation or Fitch Investors' Service.
2 Performance since August 31, 1988.
3 The Lehman Brothers 5 Year Municipal Bond Index is an unmanaged index (with no
defined investment objective) of municipal bonds with maturities between four
and six years, and is calculated by Lehman Brothers Inc.
4 Performance since January 1, 1988.
9
5 Performance since July 31, 1987.
6 The Lehman Brothers Global Aggregate Bond Index is a macro index of global
government and corporate bond markets, and is composed of various indices
calculated by Lehman Brothers Inc., including the U.S. Aggregate Bond Index,
the Pan-European Aggregate Index, the Global Treasury Index, the
Asian-Pacific Aggregate Index, the Eurodollar Index and the U.S. Investment
Grade 144A Index.
7 Performance since October 31, 1990.
UNDERSTANDING PERFORMANCE
- - TOTAL RETURN tells you how much an investment in a fund has changed in value
over a given time period. It assumes that all dividends and capital gains (if
any) were reinvested in additional shares. The change in value can be stated
either as a cumulative return or as an average annual rate of return.
- - A CUMULATIVE TOTAL RETURN is the actual return of an investment for a
specified period. The year-by-year total returns in the bar chart are examples
of one-year cumulative total returns.
- - An AVERAGE ANNUAL TOTAL RETURN applies to periods longer than one year. It
smoothes out the variations in year-by-year performance to tell you what
constant annual return would have produced the investment's actual cumulative
return. This gives you an idea of an investment's annual contribution to your
portfolio, assuming you held it for the entire period.
- - Because of compounding, the average annual total returns in the table cannot
be computed by averaging the returns in the bar chart.
- - AFTER-TAX RETURNS are calculated using the historical highest individual
federal marginal income tax rates and do not reflect the impact of state and
local taxes. Actual after-tax returns depend on an investor's tax situation
and may differ from those shown, and after-tax returns shown are not relevant
to investors who hold their fund shares through tax-deferred arrangements,
such as 401(k) plans or individual retirement accounts.
10
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11
INVESTOR EXPENSES
FEES AND FUND EXPENSES
This table describes the fees and expenses you may pay as a shareholder of each
fund. Annual fund operating expenses are for the fiscal year ended October 31,
2002.
<Table>
<Caption>
INTERMEDIATE NEW GLOBAL
MATURITY YORK FIXED FIXED
GOVERNMENT MUNICIPAL INCOME INCOME
FUND FUND FUND FUND
SHAREHOLDER FEES
(paid directly from your investment)
- ----------------------------------------------------------------------------------
Sales charge (load) on purchases NONE NONE NONE NONE
- ----------------------------------------------------------------------------------
Deferred sales charge (load) NONE NONE NONE NONE
- ----------------------------------------------------------------------------------
Sales charge (load) on reinvested
distributions NONE NONE NONE NONE
- ----------------------------------------------------------------------------------
Redemption fees NONE NONE NONE NONE
- ----------------------------------------------------------------------------------
Exchange fees NONE NONE NONE NONE
- ----------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
(deducted from fund assets)
- ----------------------------------------------------------------------------------
Management fee 0.50% 0.40% 0.50% 1.00%
- ----------------------------------------------------------------------------------
Distribution and service (12b-1) fee NONE NONE NONE NONE
- ----------------------------------------------------------------------------------
Other expenses 0.80% 0.45% 0.42% 0.72%
- ----------------------------------------------------------------------------------
TOTAL ANNUAL FUND OPERATING EXPENSES* 1.30% 0.85% 0.92% 1.72%
</Table>
* Fee waivers and expense reimbursements or credits reduced expenses for the
funds during 2002 but may be discontinued at any time, except for Fixed Income
Fund, whose waivers and reimbursements will remain in effect until April 6,
2003. Actual fees and expenses for the fiscal year ended October 31, 2002 are
shown below:
<Table>
<Caption>
INVESTMENT NEW GLOBAL
GRADE YORK FIXED FIXED
EXPENSES AFTER WAIVERS BOND MUNICIPAL INCOME INCOME
AND REIMBURSEMENTS FUND FUND FUND FUND
Management fee 0.00% 0.15% 0.28% 0.23%
Distribution and service (12b-1) fee NONE NONE NONE NONE
Other expenses 0.60% 0.45% 0.42% 0.72%
---- ---- ---- ----
NET ANNUAL FUND OPERATING EXPENSES 0.60% 0.60% 0.70% 0.95%
</Table>
12
EXAMPLE
This example may help you compare the cost of investing in these funds with the
cost of investing in other mutual funds. Because it uses hypothetical
conditions, your actual costs may be higher or lower.
Assume you invest $10,000, each fund returns 5% annually, expense ratios remain
as listed in the first table on the opposite page (before fee waivers and
expense reimbursements or credits), and you close your account at the end of
each of the time periods shown. Based on these assumptions, your cost would be:
<Table>
<Caption>
- ---------------------------------------------------------------------------------------------
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
- ---------------------------------------------------------------------------------------------
INVESTMENT GRADE BOND FUND $132 $412 $ 713 $1,568
- ---------------------------------------------------------------------------------------------
NEW YORK MUNICIPAL FUND $ 87 $271 $ 471 $1,049
- ---------------------------------------------------------------------------------------------
FIXED INCOME FUND $ 94 $293 $ 509 $1,131
- ---------------------------------------------------------------------------------------------
GLOBAL FIXED INCOME FUND $175 $542 $ 933 $2,030
- ---------------------------------------------------------------------------------------------
</Table>
13
THE FUNDS IN DETAIL
THE MANAGEMENT FIRMS
CREDIT SUISSE ASSET
MANAGEMENT, LLC
466 Lexington Avenue
New York, NY 10017
- Investment adviser for the funds
- Responsible for managing each fund's assets according to its goal and
strategies and supervising the activities of the sub-investment advisers for
the Global Fixed Income Fund
- A member of Credit Suisse Asset Management, the institutional and mutual fund
asset management arm of Credit Suisse First Boston, the investment banking
business of Credit Suisse Group (Credit Suisse). Under the management of
Credit Suisse First Boston, Credit Suisse Asset Management provides asset
management products and services to global corporate, institutional and
government clients
- Credit Suisse Asset Management companies manage approximately $55.8 billion
in the U.S. and $284.3 billion globally
- Credit Suisse Asset Management has offices in 14 countries, including
SEC-registered offices in New York, London, Sydney and Tokyo; other offices
(such as those in Budapest, Frankfurt, Milan, Moscow, Paris, Prague, Warsaw
and Zurich) are not registered with the U.S. Securities and Exchange
Commission
For the 2002 fiscal year, the Investment Grade Bond Fund, the New York
Municipal Fund, the Fixed Income Fund and the Global Fixed Income Fund paid CSAM
0.00%, 0.28%, 0.15% and 0.23%, respectively, of their average net assets for
advisory services.
For easier reading, Credit Suisse Asset Management, LLC will be referred to
as "CSAM" or "we" throughout this Prospectus.
CREDIT SUISSE ASSET
MANAGEMENT, LIMITED
Beaufort House
15 St. Botolph Street
London, EC3A 7JJ
United Kingdom
- Sub-investment adviser for the Global Fixed Income Fund
- Responsible for assisting CSAM in the management of the fund's international
assets according to its goal and strategies
- Also a member of Credit Suisse Asset Management
CREDIT SUISSE ASSET
MANAGEMENT, LIMITED
Shiroyama JT Mori Bldg. 3-1
Toranomon 4-Chome
Minato-Ku
Tokyo 105-6026
Japan
- Sub-investment adviser for the Global Fixed Income Fund
- Responsible for assisting CSAM in the management of the fund's international
assets according to its goal and strategies
- Also a member of Credit Suisse Asset Management
14
MULTI-CLASS STRUCTURE
The Investment Grade Bond Fund and the Fixed Income Fund also offer Class A,
B and C shares, as described in separate prospectuses.
The New York Municipal Fund and the Global Fixed Income Fund also offer Class
A shares, as described in separate prospectuses.
FUND INFORMATION KEY
Concise fund-by-fund descriptions begin on the next page. Each description
provides the following information:
GOAL AND STRATEGIES
The fund's particular investment goal and the strategies it intends to use in
pursuing that goal. Percentages of fund assets are based on total assets unless
indicated otherwise.
PORTFOLIO INVESTMENTS
The principal types of securities in which the fund invests. Secondary
investments are described in "More About Risk."
RISK FACTORS
The principal risk factors associated with the fund. Additional risk factors
are included in "More About Risk."
PORTFOLIO MANAGEMENT
The individuals designated by the investment adviser to handle the fund's
day-to-day management.
FINANCIAL HIGHLIGHTS
A table showing the fund's audited financial performance for up to five
years.
- TOTAL RETURN How much you would have earned on an investment in the fund,
assuming you had reinvested all dividend and capital-gain distributions.
- PORTFOLIO TURNOVER An indication of trading frequency. The funds may sell
securities without regard to the length of time they have been held. A high
turnover rate may increase a fund's transaction costs and negatively affect
its performance. Portfolio turnover may also result in capital-gain
distributions that could raise your income-tax liability.
The Annual Report includes the auditor's report, along with each fund's
financial statements. It is available free upon request.
15
INVESTMENT GRADE BOND FUND
GOAL AND STRATEGIES
The Investment Grade Bond Fund seeks total return. To pursue this goal, it
invests, under normal market conditions, at least 80% of its net assets, plus
any borrowings for investment purposes, in investment grade fixed-income
securities.
In choosing investments for the fund, the portfolio managers:
- seek to maintain an average dollar-weighted credit rating of the fund of A or
better, although the overall rating may vary
- use sector rotation and security selection as primary sources of performance
- generally invest in securities represented in the Lehman Brothers Aggregate
Bond Index (the "Index"), or securities that have similar credit
characteristics to those of the Index
The portfolio managers will sell a security when there has been a fundamental
change in the issuer's prospects or financial condition. The portfolio managers
also may sell securities for a variety of other reasons, such as to realize
profits, limit losses or take advantage of better investment opportunities.
Investment grade securities are securities rated BBB or better by Standard &
Poor's Ratings Services (or similarly rated by another major rating agency), or
unrated securities determined by CSAM to be of equivalent quality, at the time
of purchase.
In the event that a security held by the fund is downgraded below investment
grade, the portfolio managers will take this into consideration in deciding
whether to continue to hold the security, but are not required to dispose of the
security.
The fund's policy of investing 80% of its net assets in investment grade
fixed-income securities is non-fundamental, which means that it may be changed
by the fund's Board of Directors on 60 days' notice to shareholders.
PORTFOLIO INVESTMENTS
The fund invests primarily in fixed income securities, which include:
- corporate bonds, debentures and notes
- government securities
- mortgage-backed securities
- repurchase agreements involving portfolio securities
- convertible debt securities
- preferred stocks
- municipal securities
The fund may invest:
- without limit in U.S. dollar-denominated foreign securities
- up to 10% of assets in non-dollar-denominated foreign securities
To a limited extent, the fund may also engage in other investment practices.
16
RISK FACTORS
The fund's principal risk factors are:
- credit risk
- foreign securities
- interest-rate risk
- market risk
You should expect fluctuations in share price, yield and total return,
particularly with changes in interest rates. Typically, a rise in interest rates
causes a decline in the market value of fixed-income securities. There is also
the risk that an issuer of a debt security will fail to make timely payments of
principal or interest to the fund.
To the extent that it invests in certain securities, the fund may be affected
by additional risks:
- mortgage-backed securities: extension and prepayment risks
- foreign securities: currency, information and political risks
- equity securities (including convertible debt securities and preferred
stocks): information, market and other risks
These risks are defined in "More About Risk." That section also details
certain other investment practices the fund may use. Please read "More About
Risk" carefully before you invest.
PORTFOLIO MANAGEMENT
Jo Ann Corkran, Leland Crabbe and Suzanne E. Moran manage the fund. You can
find out more about them in "Meet the Managers."
17
FINANCIAL HIGHLIGHTS
The figures below have been audited by the fund's independent auditors,
PricewaterhouseCoopers LLP, whose report on the fund's financial statements is
included in the Annual Report.
<Table>
<Caption>
- ----------------------------------------------------------------------------------------------------------
COMMON CLASS PERIOD ENDED: 10/02(1) 10/01 10/00 10/99 10/98
PER SHARE DATA
- ----------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.54 $9.80 $9.77 $ 10.37 $10.05
- ----------------------------------------------------------------------------------------------------------
Investment operations
Net investment income 0.47 0.53 0.56 0.53 0.56
Net gain (loss) on investments (both
realized and unrealized) and foreign
currency related items (both realized and
unrealized) (0.53) 0.74 0.03 (0.54) 0.32
- ----------------------------------------------------------------------------------------------------------
Total from investment operations (0.06) 1.27 0.59 (0.01) 0.88
- ----------------------------------------------------------------------------------------------------------
Less Dividends and Distributions
Dividends from net investment income (0.46) (0.53) (0.56) (0.53) (0.56)
Distributions from net realized gains -- -- -- (0.04) --
Distributions in excess of net realized
gains -- -- -- (0.02) --
- ----------------------------------------------------------------------------------------------------------
Total dividends and distributions (0.46) (0.53) (0.56) (0.59) (0.56)
- ----------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 10.02 $ 10.54 $ 9.80 $ 9.77 $10.37
- ----------------------------------------------------------------------------------------------------------
Total return(2) (0.55)% 13.25% 6.27% (0.05)% 9.35%
- ----------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $35,031 $53,986 $47,974 $56,625 $78,200
Ratio of expenses to average net assets 0.60% 0.60%(3) 0.62%(3) 0.61%(3) 0.60%(3)
Ratio of net investment income to average
net assets 4.67% 5.18% 5.77% 5.27% 5.54%
Decrease reflected in above operating
expense ratios due to
waivers/reimbursements 0.70% 0.42% 0.31% 0.28% 0.34%
Portfolio turnover rate 171% 41% 84% 91% 134%
- ----------------------------------------------------------------------------------------------------------
</Table>
- ---------------
(1) As required, effective November 1, 2001, the fund adopted the provisions of
AICPA Audit and Accounting Guide for Investment Companies and began
including paydown gains and losses in interest income. The effect of this
change for the period ended October 31, 2002 was to increase net investment
income per share by $0.01, decrease net realized and unrealized gains and
losses per share by $0.01 and increase the ratio of net investment income to
average net assets from 4.52% to 4.67%. Per share ratios and supplemental
data for prior periods have not been restated to reflect this change.
(2) 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 period shown, total returns would have been lower.
(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 Common Shares' net expense ratio by .00%, .02%, .01%, and .00% for the
years ended October 31, 2001, 2000, 1999, and 1998, respectively. The Common
Class Shares' net operating expense ratio after reflecting these
arrangements was .60% for the year ended October 31, 2001, 2000, 1999, and
1998, respectively.
18
NEW YORK MUNICIPAL FUND
GOAL AND STRATEGIES
The New York Municipal Fund seeks to maximize current interest income exempt
from federal income tax and New York state and New York City personal income
taxes, to the extent consistent with prudent investment and the preservation of
capital. To pursue this goal, the fund invests in New York municipal securities.
New York municipal securities are debt obligations (other than short-term
securities) whose interest is exempt from federal and New York state and City
income taxes.
Under normal market conditions, the fund will:
- invest at least 80% of its net assets, plus any borrowings for investment
purposes, in New York municipal securities the income from which is exempt
from federal and New York State and New York City income taxes.
- maintain a weighted-average maturity of between three and 10 years
The fund's policy of investing 80% of its net assets in New York municipal
securities the income from which is exempt from federal and New York state and
New York City income taxes is fundamental and may be changed only by the
shareholders of the fund.
PORTFOLIO INVESTMENTS
The fund invests at least 65% of assets in investment-grade New York
municipal securities. The fund may invest up to 20% of net assets in types of
debt securities other than New York municipal securities. To a limited extent,
it may also engage in other investment practices.
RISK FACTORS
This fund's principal risk factors are:
- credit risk
- geographic risk
- interest-rate risk
- market risk
- non-diversified status
You should expect fluctuations in share price, yield and total return,
particularly with changes in interest rates. Typically, a rise in interest rates
causes a decline in the market value of debt securities. There is also the risk
that an issuer of a debt security will fail to make timely payments of principal
or interest to the fund.
The fund's ability to achieve its goal depends upon the ability of the
issuers of New York municipal securities to repay their debt. New York state and
New York City have at times faced serious economic problems that have adversely
affected New York municipal issuers. The fund may be more volatile than a more
geographically diverse
19
municipal fund. In the aftermath of the terrorist attack on September 11, 2001,
issuers of municipal securities in New York state and New York City have
suffered financial difficulties, which could adversely affect the ability of
those issuers to make prompt payments of principal and interest on their
securities, as well as the credit rating, market value and yield of such
securities. The default or credit-rating downgrade of one of these issuers could
affect the market values and marketability of all New York municipal securities,
thereby hurting the fund's performance. Furthermore, if the fund has difficulty
finding attractive New York municipal securities to purchase, the fund may
purchase securities that pay interest not exempt from New York taxes.
The fund's status as a non-diversified fund may compound the risks associated
with investing in the fund. Compared to a diversified mutual fund, a
non-diversified fund may invest a greater portion of its assets in the
securities of fewer issuers. Because the fund is non-diversified, its share
price and yield might fluctuate more than they would for a diversified fund.
"More About Risk" details certain other investment practices the fund may
use. Please read that section carefully before you invest.
PORTFOLIO MANAGEMENT
Lori A. Cohane and Frank J. Biondo manage the fund. You can find out more
about them in "Meet the Managers."
20
FINANCIAL HIGHLIGHTS
The figures below have been audited by the fund's independent auditors,
PricewaterhouseCoopers LLP, whose report on the fund's financial statements is
included in the Annual Report.
<Table>
<Caption>
- ----------------------------------------------------------------------------------------------------------
COMMON CLASS PERIOD ENDED: 10/02 10/01 10/00 10/99 10/98
PER SHARE DATA
- ----------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.74 $ 10.24 $ 10.04 $ 10.54 $ 10.35
- ----------------------------------------------------------------------------------------------------------
Investment operations
Net investment income 0.381 0.43 0.44 0.42 0.44
Net gain (loss) on investments
(both realized and unrealized) 0.13 0.50 0.20 (0.44) 0.19
- ----------------------------------------------------------------------------------------------------------
Total from investment operations 0.51 0.93 0.64 (0.02) 0.63
- ----------------------------------------------------------------------------------------------------------
Less Dividends and Distributions
Dividends from net investment income (0.38) (0.43) (0.44) (0.42) (0.44)
Distributions from net realized gains (0.06) -- -- (0.06) --
- ----------------------------------------------------------------------------------------------------------
Total dividends and distributions (0.44) (0.43) (0.44) (0.48) (0.44)
- ----------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 10.81 $ 10.74 $ 10.24 $ 10.04 $ 10.54
- ----------------------------------------------------------------------------------------------------------
Total return2 4.91% 9.20% 6.54% (0.26)% 6.24%
- ----------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $83,434 $113,371 $74,948 $83,934 $106,922
Ratio of expenses to average net assets 0.60% 0.60%3 0.62%3 0.61%3 0.60%3
Ratio of net investment income to average
net assets 3.58% 4.03% 4.37% 4.03% 4.24%
Decrease reflected in above operating
expense ratios due to waivers 0.25% 0.16% 0.11% 0.10% 0.07%
Portfolio turnover rate 34% 51% 29% 55% 37%
- ----------------------------------------------------------------------------------------------------------
</Table>
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. Had certain expenses not
been reduced during the period shown, total returns would have been lower.
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
Common Class shares' net expense ratio by .00%, .02%, .01%, and .00% for the
years ended October 31, 2001, 2000, 1999, and 1998, respectively. The Common
Class shares' net operating expense ratio after reflecting these arrangements
were .72% for the years ended October 31, 2001, and .75% for the years ended
October 31, 2000, 1999, and 1998, respectively.
21
FIXED INCOME FUND
GOAL AND STRATEGIES
The Fixed Income Fund seeks to generate high current income consistent with
reasonable risk and, secondarily, capital appreciation. To pursue these goals,
it invests in fixed-income securities.
Under normal market conditions:
- at least 65% of the fund's fixed-income securities will be investment grade
- the fund will maintain a weighted-average maturity of 10 years or less
PORTFOLIO INVESTMENTS
Under normal market conditions, this fund invests at least 80% of net assets,
plus any borrowings for investment purposes, in fixed-income securities such as:
- corporate bonds, debentures and notes
- convertible debt securities
- preferred stocks
- government securities
- municipal securities
- mortgage-backed securities
- repurchase agreements involving portfolio securities
The fund may invest:
- without limit in U.S. dollar-denominated, investment-grade foreign securities
- up to 35% of assets in non-dollar-denominated foreign securities
- up to 35% of assets in fixed-income securities rated below investment grade
(junk bonds)
- up to 35% of assets in emerging markets debt securities
To a limited extent, the fund may also engage in other investment practices.
The fund's policy of investing 80% of its net assets in fixed-income
securities is non-fundamental, which means that it may be changed by the fund's
Board of Trustees on 60 days' notice to shareholders.
RISK FACTORS
The fund's principal risk factors are:
- credit risk
- foreign securities
- interest rate risk
- market risk
You should expect fluctuations in share price, yield and total return,
particularly with changes in interest rates. Typically, a rise in interest rates
causes a decline in the market value of fixed-income securities. There is also
the risk that an issuer of a debt security will fail to make timely payments of
principal or interest to the fund.
22
Junk bonds are considered speculative with respect to the issuer's continuing
ability to meet principal and interest payments. In the event of a payment
problem by an issuer of junk bonds, more senior debt (such as bank loans and
investment-grade bonds) will likely be paid a greater portion of any payment
made by the issuer.
To the extent that it invests in certain securities, such as mortgage-backed
securities, start-up and other small companies and emerging markets debt
securities, the fund may be affected by additional risks.
These risks are defined in "More About Risk." That section also details
certain other investment practices the fund may use. Please read "More About
Risk" carefully before you invest.
PORTFOLIO MANAGEMENT
Jo Ann Corkran, Leland Crabbe and Suzanne E. Moran manage the fund. You can
find out more about them in "Meet the Managers."
23
FINANCIAL HIGHLIGHTS
The figures below have been audited by the fund's independent auditors,
PricewaterhouseCoopers LLP, whose report on the fund's financial statements is
included in the Annual Report.
<Table>
<Caption>
- -------------------------------------------------------------------------------------------------------------
COMMON CLASS PERIOD ENDED: 10/021 10/01 10/00 10/99 10/98
PER SHARE DATA
- -------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.33 $ 9.78 $ 9.89 $ 10.41 $ 10.43
- -------------------------------------------------------------------------------------------------------------
Investment operations
Net investment income 0.50 0.64 0.64 0.57 0.59
Net gain (loss) on investments (both
realized and unrealized) and foreign
currency related items (both realized
and unrealized) (0.91) 0.55 (0.11) (0.48) 0.07
- -------------------------------------------------------------------------------------------------------------
Total from investment operations (0.41) 1.19 0.53 0.09 0.66
- -------------------------------------------------------------------------------------------------------------
Less Dividends and Distributions
Dividends from net investment income (0.50) (0.64) (0.64) (0.57) (0.59)
Distributions from net realized gains $ -- -- -- (0.04) (0.09)
- -------------------------------------------------------------------------------------------------------------
Total dividends and distributions (0.50) (0.64) (0.64) (0.61) (0.68)
- -------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 9.42 $ 10.33 $ 9.78 $ 9.89 $ 10.41
- -------------------------------------------------------------------------------------------------------------
Total return2 (4.07)% 12.52% 5.59% 0.92% 6.48%
- -------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------------------
Net assets, end of period (000s
omitted) $194,688 $334,647 $302,188 $393,433 $423,536
Ratio of expenses to average net
assets 0.70% 0.72%3 0.77%3 0.76%3 0.75%3
Ratio of net investment income to
average net assets 4.90% 6.32% 6.53% 5.63% 5.64%
Decrease reflected in above operating
expense ratios due to
waivers/reimbursements 0.22% 0.13% 0.02% 0.04% 0.04%
Portfolio turnover rate 385% 383% 247% 144% 124%
- -------------------------------------------------------------------------------------------------------------
</Table>
1 As required, effective November 1, 2001, the fund adopted the provisions of
AICPA Audit and Accounting Guide for Investment Companies and began including
paydown gains and losses in interest income. The effect of this change is less
than $0.01 per share on net investment income and net realized and unrealized
gains and losses and less than 0.01% for the ratio of net investment income to
average net assets for the year ended October 31, 2002. Per share ratios and
supplemental data have not been restated to reflect this change.
2 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 period shown, total returns would have been lower.
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
Common Shares' net expense ratio by .00%, .02%, .01%, and .00% for the years
ended October 31, 2001, 2000, 1999, and 1998, respectively. The Common Class
Shares' net operating expense ratio after reflecting these arrangements were
72% for the year ended October 31, 2001, and .75% for the years ended October
31, 2000, 1999, and 1998, respectively.
24
GLOBAL FIXED INCOME FUND
GOAL AND STRATEGIES
The Global Fixed Income Fund seeks to maximize total investment return
consistent with prudent investment management, consisting of a combination of
interest income, currency gains and capital appreciation. To pursue this goal,
the fund invests in fixed-income securities of U.S. and foreign issuers
including:
- foreign governments and companies, including those in emerging markets
- multinational organizations, such as the World Bank
- the U.S. government, its agencies and instrumentalities
Under normal market conditions, the fund invests at least 80% of net assets,
plus any borrowings for investment purposes, in fixed-income securities of
issuers located in at least three countries, which may include the U.S. There is
no limit in the fund's ability to invest in emerging markets.
The portfolio managers base their investment decisions on fundamental market
factors, currency trends and credit quality. The fund generally invests in
countries where the combination of fixed-income returns and currency exchange
rates appears attractive, or, if the currency trend is unfavorable, where the
managers believe the currency risk can be reduced through hedging.
The fund's policy of investing at least 80% of its net assets in fixed-income
securities of issuers in at least three countries is non-fundamental, which
means that it may be changed by the fund's Board of Directors on 60 days' notice
to shareholders.
PORTFOLIO INVESTMENTS
This fund may invest in all types of fixed-income securities, including:
- corporate bonds, debentures and notes
- convertible debt securities
- preferred stocks
- government securities
- municipal securities
- mortgage-backed securities
- repurchase agreements involving portfolio securities
The fund may purchase securities denominated in foreign currencies or in U.S.
dollars.
The fund may invest up to:
- 40% of assets in securities of issuers located in any single foreign country
- 35% of net assets in fixed-income securities rated below investment grade
(junk bonds)
- 25% of assets in the securities of any one foreign government, its agencies,
instrumentalities and political subdivisions
25
- 20% of net assets in equity securities, including common stocks, warrants and
rights
To a limited extent, the fund may also engage in other investment practices.
RISK FACTORS
The fund's principal risk factors are:
- credit risk
- foreign securities
- interest-rate risk
- market risk
- non-diversified status
You should expect fluctuations in share price, yield and total return,
particularly with changes in interest rates. Typically, a rise in interest rates
causes a decline in the market value of fixed-income securities. There is also
the risk that an issuer of a debt security will fail to make timely payments of
either principal or interest to the fund.
International investing, particularly in emerging markets, carries additional
risks, including currency, information and political risks. These risks are
defined in "More About Risk."
Compared to a diversified mutual fund, a non-diversified fund may invest a
greater portion of its assets in the securities of fewer issuers. Because the
fund is non-diversified, its share price and yield might fluctuate more than
they would for a diversified fund.
Junk bonds are considered speculative with respect to the issuer's continuing
ability to meet principal and interest payments. In the event of a payment
problem by an issuer of junk bonds, more senior debt (such as bank loans and
investment grade bonds) will likely be paid a greater portion of any payment
made by the issuer. To the extent that the fund invests in junk bonds and
securities of start-up and other small companies, it takes on further risks that
could hurt its performance. "More About Risk" details these and certain other
investment practices the fund may use. Please read that section carefully before
you invest.
PORTFOLIO MANAGEMENT
Charles C. Van Vleet manages the fund. You can find out more about him in
"Meet the Managers."
26
FINANCIAL HIGHLIGHTS
The figures below have been audited by the fund's independent auditors,
PricewaterhouseCoopers LLP, whose report on the fund's financial statements is
included in the Annual Report.
<Table>
<Caption>
- -----------------------------------------------------------------------------------------------------------------
COMMON CLASS PERIOD ENDED: 10/02(1) 10/01 10/00 10/99 10/98
PER SHARE DATA
- -----------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.99 $ 9.71 $ 10.25 $ 10.62 $ 10.91
- -----------------------------------------------------------------------------------------------------------------
Investment operations
Net investment income 0.38(2) 0.53 0.56 0.52 0.58
Net gain (loss) on investments, futures
transactions and foreign currency related
items (both realized and unrealized) 0.03 0.21 (0.13) (0.29) (0.16)
- -----------------------------------------------------------------------------------------------------------------
Total from investment operations 0.41 0.74 0.43 0.23 0.42
- -----------------------------------------------------------------------------------------------------------------
Less Dividends
Dividends from net investment income (0.50) (0.46) (0.76) (0.59) (0.71)
Dividends in excess of net investment income -- -- (0.21) (0.01) --
- -----------------------------------------------------------------------------------------------------------------
Total dividends (0.50) (0.46) (0.97) (0.60) (0.71)
- -----------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 9.90 $ 9.99 $ 9.71 $ 10.25 $ 10.62
- -----------------------------------------------------------------------------------------------------------------
Total return(3) 4.27% 7.81% 4.37% 2.18% 4.10%
- -----------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $108,535 $118,876 $121,309 $135,327 $154,131
Ratio of expenses to average net assets 0.95% 0.95%(4) 0.97%(4) 0.96%(4) 0.95%(4)
Ratio of net investment income to average net
assets 3.89% 5.15% 5.51% 5.00% 5.21%
Decrease reflected in above operating expense
ratios due to waivers/reimbursements 0.77% 0.58% 0.51% 0.57% 0.46%
Portfolio turnover rate 150% 144% 101% 365% 234%
- -----------------------------------------------------------------------------------------------------------------
</Table>
(1) As required, effective November 1, 2001, the Fund adopted the provisions of
AICPA Audit and Accounting Guide for Investment Companies and began
including paydown gains and losses in interest income. The effect of this
change for the year ended October 31, 2002 was to increase net investment
income per share by $0.02, decrease net realized and unrealized gains and
losses per share by $0.02 and increase the ratio of net investment income to
average net assets from 3.87% to 3.89%. Per share ratios and supplemental
data for prior periods have not been restated to reflect this change.
(2) Per share information is calculated using the average shares 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.
(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 Shares' net expense ratio by .00%, .02%, .01%, and .00% for the
years ended October 31, 2001, 2000, 1999, and 1998, respectively. The Common
Class shares' net operating expense ratio after reflecting these
arrangements was .95% for the years ended October 31, 2001, 2000, 1999, and
1998, respectively.
27
MORE ABOUT RISK
INTRODUCTION
A fund's goal and principal strategies largely determine its risk profile.
You will find a concise description of each fund's risk profile in "Key Points."
The fund-by-fund discussions contain more detailed information. This section
discusses other risks that may affect the funds.
The funds may use certain investment practices that have higher risks
associated with them. However, each fund has limitations and policies designed
to reduce many of the risks. The "Certain Investment Practices" table describes
these practices and the limitations on their use.
TYPES OF INVESTMENT RISK
The following risks are referred to throughout this Prospectus.
ACCESS RISK Some countries may restrict a fund's access to investments or
offer terms that are less advantageous than those for local investors. This
could limit the attractive investment opportunities available to a fund.
CORRELATION RISK The risk that changes in the value of a hedging instrument
will not match those of the investment being hedged.
CREDIT RISK The issuer of a security or the counterparty to a contract may
default or otherwise become unable to honor a financial obligation.
CURRENCY RISK Fluctuations in exchange rates between the U.S. dollar and
foreign currencies may negatively affect an investment. Adverse changes in
exchange rates may erode or reverse any gains produced by foreign-
currency-denominated investments and may widen any losses.
EXPOSURE RISK The risk associated with investments (such as derivatives) or
practices (such as short selling) that increase the amount of money a fund could
gain or lose on an investment.
- HEDGED Exposure risk could multiply losses generated by a derivative or
practice used for hedging purposes. Such losses should be substantially
offset by gains on the hedged investment. However, while hedging can
reduce or eliminate losses, it can also reduce or eliminate gains.
- SPECULATIVE To the extent that a derivative or practice is not used as a
hedge, the fund is directly exposed to its risks. Gains or losses from
speculative positions in a derivative may be much greater than the
derivative's original cost. For example, potential losses from writing
uncovered call options and from speculative short sales are unlimited.
EXTENSION RISK An unexpected rise in interest rates may extend the life of a
mortgage-backed security beyond the expected prepayment time, typically reducing
the security's value.
28
INFORMATION RISK Key information about an issuer, security or market may be
inaccurate or unavailable.
INTEREST-RATE RISK Changes in interest rates may cause a decline in the
market value of an investment. With bonds and other fixed-income securities, a
rise in interest rates typically causes a fall in values.
LIQUIDITY RISK Certain fund securities may be difficult or impossible to sell
at the time and the price that the fund would like. A fund may have to lower the
price, sell other securities instead or forgo an investment opportunity. Any of
these could have a negative effect on fund management or performance.
MARKET RISK The market value of a security may fluctuate, sometimes rapidly
and unpredictably. These fluctuations, which are often referred to as
"volatility," may cause a security to be worth less than it was worth at an
earlier time. Market risk may affect a single issuer, industry, sector of the
economy, or the market as a whole. Market risk is common to most
investments--including stocks and bonds, and the mutual funds that invest in
them.
Bonds and other fixed-income securities generally involve less market risk
than stocks. However, the risk of bonds can vary significantly depending upon
factors such as issuer and maturity. The bonds of some companies may be riskier
than the stocks of others.
OPERATIONAL RISK Some countries have less-developed securities markets (and
related transaction, registration and custody practices) that could subject a
fund to losses from fraud, negligence, delay or other actions.
POLITICAL RISK Foreign governments may expropriate assets, impose capital or
currency controls, impose punitive taxes, or nationalize a company or industry.
Any of these actions could have a severe effect on security prices and impair a
fund's ability to bring its capital or income back to the U.S. Other political
risks include economic policy changes, social and political instability,
military action and war.
PREPAYMENT RISK Securities with high stated interest rates may be prepaid
prior to maturity. During periods of falling interest rates, a fund would
generally have to reinvest the proceeds at lower rates.
REGULATORY RISK Governments, agencies or other regulatory bodies may adopt or
change laws or regulations that could adversely affect the issuer, the market
value of the security, or a fund's performance.
VALUATION RISK The lack of an active trading market may make it difficult to
obtain an accurate price for a security held by a fund.
29
CERTAIN INVESTMENT PRACTICES
For each of the following practices, this table shows the applicable investment
limitation. Risks are indicated for each practice.
KEY TO TABLE:
<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
</Table>
<Table>
<Caption>
INVESTMENT NEW FIXED GLOBAL
GRADE YORK INCOME FIXED
BOND MUNICIPAL FUND INCOME
FUND FUND FUND
INVESTMENT PRACTICE LIMIT
BORROWING The borrowing of money from banks to meet
redemptions or for other temporary or emergency purposes.
Speculative exposure risk. 30% 30% 30% 30%
- ---------------------------------------------------------------------------------------------------
CURRENCY TRANSACTIONS Instruments, such as options, futures,
forwards or swaps, intended to manage fund exposure to
currency risk or to enhance total return. Options, futures
or forwards involve the right or obligation to buy or sell a
given amount of foreign currency at a specified price and
future date. Swaps involve the right or obligation to
receive or make payments based on two different currency
rates.(1) Correlation, credit, currency, hedged exposure,
liquidity, political, speculative exposure, valuation
risks.(2) [ ] -- [X] [X]
- ---------------------------------------------------------------------------------------------------
EMERGING MARKETS Countries generally considered to be
relatively less developed or industrialized. Emerging
markets often face economic problems that could subject a
fund to increased volatility or substantial declines in
value. Deficiencies in regulatory oversight, market
infrastructure, shareholder protections and company laws
could expose a fund to risks beyond those generally
encountered in developed countries. Access, currency,
information, liquidity, market, operational, political,
valuation risks. [ ] -- 35% [X]
- ---------------------------------------------------------------------------------------------------
FOREIGN SECURITIES Securities of foreign issuers. May
include depository receipts. Currency, information,
liquidity, market, operational, political, valuation risks. [ ] -- [X] [X]
- ---------------------------------------------------------------------------------------------------
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, securities 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) 20% [ ] [ ] [ ]
- ---------------------------------------------------------------------------------------------------
INVESTMENT-GRADE DEBT SECURITIES Debt securities rated
within the four 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. [X] [X] [X] [X]
- ---------------------------------------------------------------------------------------------------
</Table>
30
<Table>
<Caption>
INVESTMENT NEW FIXED GLOBAL
GRADE YORK INCOME FIXED
BOND MUNICIPAL FUND INCOME
FUND FUND FUND
INVESTMENT PRACTICE LIMIT
MORTGAGE-BACKED AND ASSET-BACKED SECURITIES Debt securities
backed by pools of mortgages, including passthrough
certificates and other senior classes of collateralized
mortgage obligations (CMOs), or other receivables. Credit,
extension, interest-rate, liquidity, prepayment risks. [x] [x] [x] [x]
- ---------------------------------------------------------------------------------------------------
MUNICIPAL SECURITIES Debt obligations issued by or on behalf
of states, territories and possessions of the U.S. and the
District of Columbia and their political subdivisions,
agencies and instrumentalities. Municipal securities may be
affected by uncertainties regarding their tax status,
legislative changes or rights of municipal-securities
holders. Credit, interest-rate, market, regulatory risks. [X] [X] [X] [X]
- ---------------------------------------------------------------------------------------------------
NON-INVESTMENT-GRADE DEBT SECURITIES Debt 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. /20%/ -- /35%/ /35%/
- ---------------------------------------------------------------------------------------------------
OPTIONS Instruments that provide a right to buy (call) or
sell (put) a particular security, currency or index of
securities at a fixed price within a certain time period. A
fund may purchase or sell (write) both put and call options
for hedging or speculative purposes.(1) Correlation, credit,
hedged exposure, liquidity, market, speculative exposure
risks. [ ] [ ] 20% 20%
- ---------------------------------------------------------------------------------------------------
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. [X] -- [ ] [ ]
- ---------------------------------------------------------------------------------------------------
RESTRICTED AND OTHER ILLIQUID SECURITIES Certain securities
with restrictions on trading, or those not actively traded.
May include private placements. Liquidity, market, valuation
risks. /15%/ /15%/ /15%/ /15%/
- ---------------------------------------------------------------------------------------------------
SECURITIES LENDING Lending portfolio securities to financial
institutions; a fund receives cash, U.S. government
securities or bank letters of credit as collateral. Credit,
liquidity, market risks. 33 1/3% 33 1/3% 33 1/3% 33 1/3%
- ---------------------------------------------------------------------------------------------------
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. [x] [x] [x] [x]
- ---------------------------------------------------------------------------------------------------
</Table>
31
<Table>
<Caption>
INVESTMENT NEW FIXED GLOBAL
GRADE YORK INCOME FIXED
BOND INTERMEDIATE FUND INCOME
FUND MUNICIPAL FUND
FUND
INVESTMENT PRACTICE LIMIT
STRUCTURED INSTRUMENTS Swaps, structured securities and
other instruments that allow a fund to gain access to the
performance of a benchmark asset (such as an index or
selected stocks) that may be more attractive or accessible
than the fund's direct investment. Credit, currency,
information, interest-rate, liquidity, market, political,
speculative exposure, valuation risks. [X] [ ] [ ] [ ]
- ------------------------------------------------------------------------------------------------------
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 certain securities, generally common stock, at
a specified price and usually for a limited time. Liquidity,
market, speculative exposure risks. /10%/ -- /10%/ 10%
- ------------------------------------------------------------------------------------------------------
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS The purchase
or sale of securities for delivery at a future date; market
value may change before delivery. Liquidity, market,
speculative exposure risks. [x] [x] 20% 20%
- ------------------------------------------------------------------------------------------------------
ZERO-COUPON BONDS Debt securities that pay no cash income to
holders until maturity and are issued at a discount from
maturity value. At maturity, the entire return comes from
the difference between purchase price and maturity value.
Interest-rate, market risks. [x] [x] [x] [x]
- ------------------------------------------------------------------------------------------------------
</Table>
(1) Each fund is not obligated to pursue any hedging strategy. In addition,
hedging practices may not be available, may be too costly to be used
effectively or may be unable to be used for other reasons.
(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.
32
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33
MEET THE MANAGERS
The following individuals are responsible for the day-to-day portfolio
management of the funds:
LORI A. COHANE, Managing Director, has been Co-Portfolio Manager of the New York
Municipal Fund since July 2002. She joined CSAM in 2002 from Morgan Stanley
Investment Group (Morgan Stanley), where she ultimately served as Executive
Director and head of fixed income portfolio management. Prior to joining Morgan
Stanley in 1994, she was portfolio manager and senior credit analyst of
municipal bond portfolios at Salomon Brothers Asset Management, which she had
joined in 1986. Ms. Cohane graduated magna cum laude from the State University
of New York at Albany with a B.S. in Finance.
JO ANN CORKRAN, Managing Director, has been Co-Portfolio Manager of the
Investment Grade Bond Fund and the Fixed Income Fund since January 2001. She
joined CSAM in 1997 from Morgan Stanley, where she headed the mortgage and
asset-backed research group. Previously, she worked in the insurance group
within fixed income research at First Boston and as a pension analyst at Buck
Consultants. Ms. Corkran holds a B.A. in Mathematics from New York University
and has qualified as a Fellow of the Society of Actuaries.
LELAND CRABBE, Director, is global head of emerging market debt and has been
Co-Portfolio Manager of the Investment Grade Bond Fund and the Fixed Income Fund
since January 2001. Mr. Crabbe, who rejoined CSAM in 1999 from Cigna
Investments, first came to CSAM in 1998 from Merrill Lynch, where he had been
corporate bond strategist since 1984. Mr. Crabbe holds a B.A. in Economics from
California State University at Fullerton and a Ph.D. in Economics from the
University of California at Los Angeles.
SUZANNE E. MORAN, Director, has been Co-Portfolio Manager of the Investment
Grade Bond Fund and the Fixed Income Fund since July 2002. She came to CSAM in
1995 as a result of Credit Suisse's acquisition of CS First Boston Investment
Management (CS First Boston). She joined CS First Boston in 1991. Ms. Moran
holds a B.A. in Finance from the University of Maryland.
Job titles indicate position with the investment adviser.
34
FRANK J. BIONDO, CFA, Vice President, has been Co-Portfolio Manager of the New
York Municipal Fund since July 2002. He joined CSAM in 2002 from UBS Global
Asset Management (UBS), where he was a Director, head trader for separately
managed accounts and portfolio manager of closed-end municipal bond funds. Prior
to joining UBS in 2001, Mr. Biondo was Vice President, trader and assistant
portfolio manager for Morgan Stanley, where, from 1996 to 2001, he assisted in
the management of fixed income and money market portfolios. He managed money
market funds and institutional cash accounts for Salomon Brothers Asset
Management from 1993 to 1996. Mr. Biondo holds a B.S. in Accounting and
Economics from New York University.
CHARLES C. VAN VLEET, Director, has been Portfolio Manager of the Global Fixed
Income Fund since May 1998. He came to CSAM in 1999 as a result of Credit
Suisse's acquisition of Warburg Pincus. Mr. Van Fleet, who has been with Warburg
Pincus since 1998, was senior vice president and senior global strategist with
Putnam Investment Management from 1994 to 1998. He holds a B.A. in Economics
from the University of California at Berkeley.
Job titles indicate position with the investment adviser.
35
ABOUT YOUR ACCOUNT
SHARE VALUATION
The price of your shares is also referred to as their net asset value (NAV).
The NAV is determined at the close of regular trading on the New York Stock
Exchange (NYSE) (usually 4 p.m. Eastern Time) each day the NYSE is open for
business. It is calculated by dividing the Common Class's total assets, less its
liabilities, by the number of Common Class shares outstanding.
Each fund values its securities based on market quotations when it calculates
its NAV. If market quotations are not readily available, the fair value of the
securities and other assets is determined in good faith by or under the
direction of the Board of Directors/Trustees. Debt obligations that will mature
in 60 days or less are valued on the basis of amortized cost, unless it is
determined that using this method would not reflect an investment's fair value.
Some fund securities may be listed on foreign exchanges that are open on days
(such as U.S. holidays) when a fund does not compute its price. This could cause
the value of a fund's portfolio investments to be affected by trading on days
when you cannot buy or sell shares.
ACCOUNT STATEMENTS
In general, you will receive account statements or notices as follows:
- after every transaction that affects your account balance (except for
distribution reinvestments and automatic transactions)
- after any changes of name or address of the registered owner(s)
- otherwise, every calendar quarter
You will receive annual and semiannual financial reports.
DISTRIBUTIONS
As an investor in a fund, you will receive distributions.
Each fund earns dividends from stocks and interest from bond, money-market
and other investments. These are passed along as dividend distributions. A fund
realizes capital gains whenever it sells securities for a higher price than it
paid for them. These are passed along as capital-gain distributions.
The Investment Grade Bond, New York Municipal and Fixed Income Funds declare
dividend distributions daily and pay them monthly. The Global Fixed Income Fund
declares and pays dividend distributions quarterly. The funds typically
distribute capital gains annually, usually in December. Each fund may make
additional distributions at other times if necessary for the fund to avoid a
federal tax.
Distributions will be reinvested in additional Common Class shares, unless
you choose on your account application to have a check for your
36
distributions mailed to you or sent by electronic transfer.
Estimated year-end distribution information, including record and payment
dates, generally will be available late in the year at www.CreditSuisseFunds.com
or by calling 800-927-2874. Investors are encouraged to consider the potential
tax consequences of distributions prior to buying or selling shares of a fund.
TAXES
As with any investment, you should consider how your investment in a fund
will be taxed. If your account is not a tax-advantaged retirement account, you
should be especially aware of the following potential tax implications. Please
consult your tax professional concerning your own tax situation.
TAXES ON DISTRIBUTIONS
As long as a fund continues to meet the requirements for being a tax-
qualified regulated investment company, it pays no federal income tax on the
earnings and gains, if any, it distributes to shareholders.
Distributions you receive from a fund, whether reinvested or taken in cash,
are generally considered taxable. However, any interest that the New York
Municipal Fund receives that is federally tax-free remains tax-free when it is
distributed to you. Gain on the sale of tax-free securities results in taxable
distributions.
Distributions from a fund's long-term capital gains are taxed as long-term
capital gains, regardless of how long you have held fund shares. Distributions
from other sources are generally taxed as ordinary income.
If you buy shares shortly before or on the "record date"-the date that
establishes you as the person to receive the upcoming distribution-you may
receive a portion of the money you just invested in the form of a taxable
distribution.
The Form 1099-DIV that is mailed to you every January details your
distributions and their federal tax category, including the portion taxable as
long-term capital gains.
New York Municipal Fund-Special Tax Matters
The New York Municipal Fund intends to pay federally tax-exempt distributions
derived from qualifying municipal securities. To the extent that the fund's
dividend distributions are derived from state tax-free investments, they will be
free from New York state and City personal income taxes. Corporate taxpayers
should note that the fund's distributions are not exempt from New York state and
City franchise or corporate income taxes.
Some income from the fund that is exempt from federal tax may be subject to
state and local income taxes. In addition, the fund may invest a portion of its
assets in securities that generate income that is not exempt from federal or
state income tax.
37
TAXES ON TRANSACTIONS
Any time you sell or exchange shares, it is considered a taxable event for
you. Depending on the purchase price and the sale price of the shares you sell
or exchange, you may have a gain or loss on the transaction. You are responsible
for any tax liabilities generated by your transactions.
38
BUYING SHARES
OPENING AN ACCOUNT
Your account application provides us with key information we need to set up
your account correctly. It also lets you authorize services that you may find
convenient in the future.
If you need an application, call our Shareholder Service Center to receive
one by mail or fax. Or you can download it from our Internet Web site:
www.CreditSuisseFunds.com.
You can make your initial investment by check or wire. The "By Wire" method
in the table enables you to buy shares on a particular day at that day's closing
NAV.
Each fund's Common Class shares 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 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 may be required to
provide documentation to determine their eligibility to purchase Common Class
shares.
BUYING AND SELLING SHARES
Each fund is open on those days when the NYSE is open, typically Monday
through Friday. If we receive your request in proper form by the close of the
NYSE (usually 4 p.m. Eastern Time), your transaction will be priced at that
day's NAV. If we receive it after that time, it will be priced at the next
business day's NAV. "Proper form" means we have received a completed purchase
application and payment for shares (as described in this Prospectus).
FINANCIAL-SERVICES FIRMS
You can also buy and sell fund shares through a variety of financial-
services firms such as banks, brokers and financial advisors. The fund has
authorized these firms (and other intermediaries that the firms may designate)
to accept orders. When an authorized firm or its designee has received your
order, it is considered received by the fund and will be priced at the
next-computed NAV.
Financial-services firms may charge transaction fees or other fees that you
could avoid by investing directly with the fund. Financial-services firms may
impose their own requirements for minimum initial or subsequent investments or
for minimum account balances required to keep your account open. Please read
their program materials for any special provisions or
39
additional service features that may apply to your investment.
Some of the firms through which the fund is available include:
- Charles Schwab & Co., Inc. Mutual Fund OneSource(R) service
- Fidelity Brokerage Services, Inc. FundsNetwork(R) Program
- TD Waterhouse Mutual Fund Network
MINIMUM INITIAL INVESTMENT
<Table>
Regular account: $2,500
IRAs: $ 500
Transfers/Gifts to
Minors: $ 500
</Table>
There is no minimum investment for employees or clients of CSAM and its
affiliates or for retirement plan programs. The funds reserve the right to
modify or waive minimum initial investment requirements.
ADDING TO AN ACCOUNT
You can add to your account in a variety of ways, as shown in the table. If
you want to use Automated Clearing House (ACH) transfer, be sure to complete the
"ACH on Demand" section of the Common Class account application.
INVESTMENT CHECKS
Checks should be made payable in U.S. dollars to Credit Suisse Funds.
Unfortunately, we cannot accept "starter" checks that do not have your name
pre-printed on them. We also cannot accept checks payable to you or to another
party and endorsed to the order of Credit Suisse Funds. These types of checks
may be returned to you and your purchase order may not be processed.
40
BUYING SHARES
<Table>
<Caption>
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
BY CHECK
- - Complete the New Account Application. - Make your check payable to Credit Suisse Funds.
- - For IRAs use the Universal IRA Application. - Write the account number and the fund name on
- - Make your check payable to Credit Suisse Funds. your check.
- - Write the fund name on the check. - Mail to Credit Suisse Funds.
- - Mail to Credit Suisse Funds. - Minimum amount is $100.
BY EXCHANGE
- - Call our Shareholder Service Center to request - Call our Shareholder Service Center to request
an exchange from another Credit Suisse Fund. Be an exchange from another Credit Suisse Fund.
sure to read the current Prospectus for the new - Minimum amount is $250.
fund. Also please observe the minimum initial - If you do not have telephone privileges, mail or
investment. fax a letter of instruction signed by all
- - If you do not have telephone privileges, mail or shareholders.
fax a letter of instruction signed by all
shareholders.
BY WIRE
- - Complete and sign the New Account Application. - Call our Shareholder Service Center by 4 p.m.
- - Call our Shareholder Service Center and fax the Eastern Time to inform us of the incoming wire.
signed New Account Application by 4 p.m. Eastern Please be sure to specify your name, account
Time. number and the fund name on your wire advice.
- - The Shareholder Service Center will telephone - Wire the money for receipt that day.
you with your account number. Please be sure to - Minimum amount is $500.
specify your name, the account number and the fund
name on your wire advice.
- - Wire your initial investment for receipt that
day.
- - Mail the original, signed application to Credit
Suisse Funds.
This method is not available for IRAs.
BY ACH TRANSFER
- - Cannot be used to open an account. - Call our Shareholder Service Center to request
an ACH transfer from your bank.
- Your purchase will be effective at the next NAV
calculated after we receive your order in proper
form.
- Minimum amount is $50.
- Requires ACH on Demand privileges.
</Table>
800-927-2874
MONDAY-FRIDAY, 8 A.M.-6 P.M. ET
41
SELLING SHARES
<Table>
<Caption>
SELLING SOME OR ALL OF YOUR SHARES CAN BE USED FOR
BY MAIL
Write us a letter of instruction that - Accounts of any type.
includes: - Sales of any amount.
- - your name(s) and signature(s) For IRAs please use the IRA Distribution
- - the fund name and account number Request Form.
- - the dollar amount you want to sell
- - how to send the proceeds
Obtain a signature guarantee or other
documentation, if required (see "Selling
Shares in Writing").
Mail the materials to Credit Suisse
Funds.
If only a letter of instruction is
required, you can fax it to the
Shareholder Service Center (unless a
signature guarantee is required).
BY EXCHANGE
- -Call our Shareholder Service Center to - Accounts with telephone privileges.
request an exchange into another Credit If you do not have telephone privileges,
Suisse Fund. Be sure to read the current mail or fax a letter of instruction to
Prospectus for the new fund. Also please exchange shares.
observe the minimum initial investment.
BY PHONE
Call our Shareholder Service Center to -Non-IRA accounts with telephone
request a redemption. You can receive the privileges.
proceeds as:
- - a check mailed to the address of record
($100 minimum)
- -an ACH transfer to your bank ($50
minimum)
- - a wire to your bank ($500 minimum)
See "By Wire or ACH Transfer" for
details.
BY WIRE OR ACH TRANSFER
- - Complete the "Wire Instructions" or -Non-IRA accounts with wire-redemption or
"ACH on Demand" section of your New ACH on Demand privileges.
Account Application. - Requests by phone or mail.
- - For federal-funds wires, proceeds will
be wired on the next business day. For
ACH transfers, proceeds will be
delivered within two business days.
</Table>
42
HOW TO REACH US
SHAREHOLDER SERVICE CENTER
Toll free: 800-927-2874
Fax: 888-606-8252
MAIL
Credit Suisse Funds
P.O. Box 9030
Boston, MA 02205-9030
OVERNIGHT/COURIER SERVICE
Boston Financial Data Services, Inc.
Attn: Credit Suisse Funds
66 Brooks Drive
Braintree, MA 02184
INTERNET WEB SITE
www.CreditSuisseFunds.com
WIRE INSTRUCTIONS
State Street Bank and Trust Company
ABA# 0110 000 28
Attn: Mutual Funds/Custody Dept.
[Credit Suisse Fund Name]
DDA# 9904-649-2
F/F/C: [Account Number and Account registration]
SELLING SHARES IN WRITING
Some circumstances require a written sell order, along with a signature
guarantee. These include:
- accounts whose address of record has been changed within the past 30 days
- redemptions in certain large accounts (other than by exchange)
- requests to send the proceeds to a different payee or address than on record
- shares represented by certificates, which must be returned with your sell
order
A signature guarantee helps protect against fraud. You can obtain one from
most banks or securities dealers, but not from a notary public.
RECENTLY PURCHASED SHARES
For fund shares purchased other than by bank wire, bank check, U.S. Treasury
check, certified check or money order, the fund will delay payment of your cash
redemption proceeds until the check or other purchase payment clears, which
generally takes up to 10 calendar days from the day of purchase. At any time
during this period, you may exchange into another fund.
LOW-BALANCE ACCOUNTS
If your account balance falls below the minimum required to keep it open due
to redemptions or exchanges, the fund may ask you to increase your balance. If
it is still below the minimum after 60 days, the fund may close your account and
mail you the proceeds.
MINIMUM TO KEEP AN ACCOUNT OPEN
<Table>
Regular account: $2,000
IRAs: $ 250
Transfers/Gifts to
Minors: $ 250
</Table>
The funds reserve the right to modify or waive this requirement. If a fund
increases the amount required to keep an account open, it will give current
shareholders 15 days' notice of any increases.
800-927-2874
MONDAY-FRIDAY, 8 A.M.-6 P.M. ET
43
SHAREHOLDER SERVICES
AUTOMATIC SERVICES
Buying or selling shares automatically is easy with the services described
below. You can set up most of these services with your account application or by
calling our Shareholder Service Center.
AUTOMATIC MONTHLY INVESTMENT PLAN
For making automatic investments ($50 minimum) from a designated bank
account.
AUTOMATIC WITHDRAWAL PLAN
For making automatic monthly, quarterly, semiannual or annual withdrawals of
$250 or more.
DISTRIBUTION SWEEP
For automatically reinvesting your dividend and capital-gain distributions
into another identically registered Credit Suisse Fund. Not available for IRAs.
STATEMENTS AND REPORTS
Each fund produces financial reports, which include a list of the fund's
portfolio holdings, semiannually and updates its prospectus annually. The funds
generally do not hold shareholder meetings. To reduce expenses by eliminating
duplicate mailings to the same address, a fund may choose to mail only one
report, prospectus or proxy statement to your household, even if more than one
person in the household has an account with the fund. If you would like to
receive additional reports, prospectuses or proxy statements, please call
800-927-2874.
RETIREMENT PLANS
Credit Suisse offers a range of tax-advantaged retirement accounts,
including:
- Traditional IRAs
- Roth IRAs
- Spousal IRAs
- Rollover IRAs
- SEP IRAs
To transfer your IRA to Credit Suisse, use the IRA Transfer/Direct Rollover
Form. If you are opening a new IRA, you will also need to complete the Universal
IRA Application. Please consult your tax professional concerning your IRA
eligibility and tax situation.
TRANSFERS/GIFTS TO MINORS
Depending on state laws, you can set up a custodial account under the Uniform
Transfers to Minors Act (UTMA) or the Uniform Gifts to Minors Act (UGMA). Please
consult your tax professional about these types of accounts.
ACCOUNT CHANGES
Call our Shareholder Service Center to update your account records whenever
you change your address. The Shareholder Service Center can also help you change
your account information or privileges.
44
OTHER POLICIES
TRANSACTION DETAILS
You are entitled to capital-gain and earned-dividend distributions as soon as
your purchase order is executed.
Your purchase order will be canceled if you place a telephone order by 4 p.m.
Eastern Time and we do not receive your wire that day. Your purchase order will
be canceled and you may be liable for losses or fees incurred by the fund if
your investment check or ACH transfer does not clear.
If you wire money without first calling our Shareholder Service Center to
place an order, and your wire arrives after the close of regular trading on the
NYSE, then your order will not be executed until the end of the next business
day. In the meantime, your payment will be held uninvested. Your bank or other
financial-services firm may charge a fee to send or receive wire transfers.
While we monitor telephone-servicing resources carefully, during periods of
significant economic or market change it may be difficult to place orders by
telephone.
Uncashed redemption or distribution checks to not earn interest.
SPECIAL SITUATIONS
Each fund reserves the right to:
- refuse any purchase or exchange request, including those from any person or
group who, in the fund's view, is likely to engage in excessive trading. For
exchanges, your redemption will be computed at the next-determined NAV. In
determining whether to accept or reject a purchase or exchange request, the
fund considers the historical trading activity of the account making the
trade, as well as the potential impact of any specific transaction on the
fund and its shareholders
- change or discontinue its exchange privilege after 60 days' notice to current
investors, or temporarily suspend this privilege during unusual market
conditions
- charge a wire-redemption fee
- make a "redemption in kind"-payment in portfolio securities rather than
cash-for certain large redemption amounts that could hurt fund operations
- suspend redemptions or postpone payment dates as permitted by law (such as
during periods other than weekends or holidays when the NYSE is closed or
trading on the NYSE is restricted, or any other time that the SEC permits)
- stop offering its shares for a period of time (such as when management
believes that a substantial increase in assets could adversely affect it)
800-927-2874
MONDAY-FRIDAY, 8 A.M.-6 P.M. ET
45
OTHER INFORMATION
ABOUT THE DISTRIBUTOR
Credit Suisse Asset Management Securities, Inc. ("CSAMSI"), an affiliate of
CSAM, is responsible for:
- making the funds available to you
- account servicing and maintenance
- other administrative services related to sale of the Common Class shares
CSAMSI, CSAM or their affiliates may make payments out of their own resources
to firms offering Common Class shares for providing administration,
subaccounting, transfer agency and/or other services. Under certain
circumstances the funds may reimburse a portion of these payments.
46
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47
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48
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49
FOR MORE INFORMATION
More information about the funds is available free upon request, including
the following:
ANNUAL/SEMIANNUAL REPORTS TO SHAREHOLDERS
Includes financial statements, portfolio investments and detailed performance
information.
The Annual Report also contains letters from the fund's managers discussing
market conditions and investment strategies that significantly affected fund
performance during its past fiscal year.
OTHER INFORMATION
A current Statement of Additional Information (SAI), which provides more
details about the funds, is on file with the Securities and Exchange Commission
(SEC) and is incorporated by reference.
You may visit the SEC's Internet Web site (www.sec.gov) to view the SAI,
material incorporated by reference and other information. You can also obtain
copies by visiting the SEC's Public Reference Room in Washington, DC (phone
202-942-8090) or by sending your request and a duplicating fee to the SEC's
Public Reference Section, Washington, DC 20549-0102 or electronically at
publicinfo@sec.gov.
Please contact Credit Suisse Funds to obtain, without charge, the SAI, Annual
and Semiannual Reports and portfolio holdings and other information, and to make
shareholder inquiries:
BY TELEPHONE:
800-927-2874
BY FACSIMILE:
888-606-8252
BY MAIL:
Credit Suisse Funds
P.O. Box 55030
Boston, MA 02205-5030
BY OVERNIGHT OR COURIER SERVICE:
Boston Financial Data Services, Inc.
Attn: Credit Suisse Funds
66 Brooks Drive
Braintree, MA 02184
ON THE INTERNET:
www.CreditSuisseFunds.com
SEC FILE NUMBERS:
Credit Suisse Investment Grade Bond
Fund 811-05600
Credit Suisse New York
Municipal Fund 811-04964
Credit Suisse Fixed Income Fund 811-05039
Credit Suisse Global Fixed Income Fund 811-06143
[LOGO]
P.O. BOX 55030, BOSTON, MA 02205-5030
800-927-2874 - www.CreditSuisseFunds.com
CREDIT SUISSE ASSET MANAGEMENT SECURITIES, INC., DISTRIBUTOR. WPBDF-1-0203
STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY 28, 2003
CREDIT SUISSE INVESTMENT GRADE BOND FUND
CREDIT SUISSE NEW YORK MUNICIPAL FUND
CREDIT SUISSE FIXED INCOME FUND
CREDIT SUISSE GLOBAL FIXED INCOME FUND
This combined Statement of Additional Information provides information about
Credit Suisse Investment Grade Bond Fund (the "Investment Grade Fund"), Credit
Suisse New York Municipal Fund (the "New York Municipal Fund"), Credit Suisse
Fixed Income Fund (the "Fixed Income Fund") and Credit Suisse Global Fixed
Income Fund (the "Global Fixed Income Fund") (each, a "Fund" and collectively,
"the Funds") that supplements information contained in the combined Prospectus
for the Common Shares of the Funds, the Prospectus for the Advisor Shares of the
Fixed Income Fund, the Prospectus for the Class A, Class B and Class C Shares of
the Fixed Income Fund, the Prospectus for the Class A, B and C shares of the
Investment Grade Fund, the Prospectus for the Class A Shares of the New York
Municipal Fund and the Prospectus for the Class A Shares of the Global Fixed
Income Fund, each dated February 28, 2003, each as amended or supplemented from
time to time (collectively, the "Prospectus").
Each Fund's audited Annual Report(s) for the Common Class, Advisor Class, Class
A, Class B and Class C shares, as applicable, 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, as relevant to the particular investor, is incorporated herein by
reference.
This Statement of Additional Information is not a prospectus and should be read
in conjunction with the Prospectuses. Copies of the Prospectuses and the Annual
Report(s) can be obtained by writing or telephoning:
Class A, Class B, Class C and Advisor Shares:
Common Shares: Credit Suisse Advisor Funds
Credit Suisse Funds P.O. Box 55030
P.O. Box 55030 Boston, MA 02205-5030
Boston, MA 02205-5030 Attn: Institutional Services
800-927-2874 800-222-8977
TABLE OF CONTENTS
Page
INVESTMENT OBJECTIVES AND POLICIES................................................................................1
General Investment Strategies............................................................................1
Securities Options..............................................................................2
Securities Index Options........................................................................5
OTC Options.....................................................................................5
Currency Transactions...........................................................................6
Forward Currency Contracts......................................................................6
Currency Options................................................................................6
Currency Hedging................................................................................7
Hedging Generally...............................................................................7
Asset Coverage for Forward Contracts, Options, Futures and Options on Futures...................9
Futures Activities.......................................................................................9
Futures Contracts..............................................................................10
Options on Futures Contracts...................................................................11
Money Market Obligations................................................................................11
Temporary Defensive Strategies.................................................................12
Money Market Mutual Funds......................................................................12
Convertible Securities..................................................................................12
Structured Securities...................................................................................12
Mortgage-Backed Securities.....................................................................13
Asset-Backed Securities........................................................................14
Structured Notes, Bonds or Debentures..........................................................14
Assignments and Participations.................................................................15
Interest Rate, Index, Mortgage and Currency Swaps; Interest Rate Caps, Floors and Collars...............15
Foreign Investments (Investment Grade, Fixed Income and Global Fixed Income Funds only)................16
Foreign Currency Exchange......................................................................17
Information....................................................................................17
Political Instability..........................................................................18
Foreign Markets................................................................................18
Increased Expenses.............................................................................18
Dollar-Denominated Debt Securities of Foreign Issuers..........................................18
Foreign Debt Securities........................................................................18
Privatizations.................................................................................19
Brady Bonds....................................................................................19
Depositary Receipts............................................................................20
U.S. Government Securities..............................................................................20
Government Trust Certificates (Investment Grade Fund only).............................................21
Municipal Obligations...................................................................................21
Taxable Investments (New York Municipal Fund only).....................................................23
Page
Alternative Minimum Tax Bonds (Investment Grade, New York Municipal and Fixed Income Funds only).......23
Securities of Other Investment Companies................................................................23
Below Investment Grade Securities (Investment Grade, Fixed Income and Global Fixed Income Funds only)..23
Emerging Markets (Investment Grade, Fixed Income and Global Fixed Income Funds only)....................26
Lending Portfolio Securities............................................................................26
Repurchase Agreements...................................................................................27
Reverse Repurchase Agreements and Dollar Rolls..........................................................28
Zero Coupon Securities..................................................................................28
Government Zero Coupon Securities.......................................................................29
Short Sales (Investment Grade, Fixed Income and Global Fixed Income Funds only)........................29
Emerging Growth and Smaller Capitalization Companies; Unseasoned Issuers................................30
"Special Situation" Companies (Investment Grade, Fixed Income and Global Fixed Income Funds only)......30
Variable Rate and Master Demand Notes (Investment Grade, New York Municipal and
Fixed Income Funds only)................................................................................30
When-Issued Securities and Delayed-Delivery Transactions................................................31
To-Be-Announced Mortgage-Backed Securities (Investment Grade and Fixed Income Funds only)......31
Stand-By Commitment Agreements (Investment Grade, New York Municipal and Fixed Income Funds only)......32
REITs (Investment Grade, Fixed Income and Global Fixed Income Funds only)..............................33
Warrants (Investment Grade, Fixed Income and Global Fixed Income Funds only)...........................33
Non-Publicly Traded and Illiquid Securities.............................................................34
Rule 144A Securities...........................................................................35
Borrowing...............................................................................................35
Non-Diversified Status (New York Municipal and Global Fixed Income Funds only).........................36
INVESTMENT RESTRICTIONS..........................................................................................36
Investment Grade Fund...................................................................................36
New York Municipal Fund.................................................................................38
Fixed Income Fund.......................................................................................40
Global Fixed Income Fund................................................................................41
PORTFOLIO VALUATION..............................................................................................43
PORTFOLIO TRANSACTIONS...........................................................................................45
PORTFOLIO TURNOVER...............................................................................................48
SPECIAL CONSIDERATIONS RELATING TO NEW YORK MUNICIPAL OBLIGATIONS................................................49
MANAGEMENT OF THE FUNDS..........................................................................................73
Officers and Boards of Directors/Trustees...............................................................73
Directors'/Trustees' Compensation.......................................................................87
ii
Page
Investment..............................................................................................87
Code of Ethics..........................................................................................97
Custodian and Transfer Agent............................................................................97
Organization of the Funds...............................................................................98
Distribution and Shareholder Servicing.................................................................100
Common Shares.................................................................................100
Advisor Shares................................................................................102
Class A, Class B and Class C Shares...........................................................103
General ......................................................................................107
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION..................................................................107
Purchases..............................................................................................108
Initial Sales Charges Waivers.................................................................111
Redemptions............................................................................................112
Automatic Cash Withdrawal Plan................................................................113
Contingent Deferred Sales Charge - General....................................................114
EXCHANGE PRIVILEGE..............................................................................................114
ADDITIONAL INFORMATION CONCERNING TAXES.........................................................................115
The Funds and Their Investments........................................................................116
Special Tax Matters Regarding the Investment Grade Fund, Fixed Income Fund and
Global Fixed Income Fund...............................................................................118
Special Tax Matters Regarding the Investment Grade Fund................................................118
Special Tax Considerations Regarding the New York Municipal Fund.......................................118
Passive Foreign Investment Companies (Fixed Income and Global Fixed Income Funds only)................121
Dividends and Distributions............................................................................121
Sales of Shares........................................................................................122
Foreign Taxes..........................................................................................122
Backup Withholding.....................................................................................123
Notices................................................................................................123
Other Taxation.........................................................................................123
DETERMINATION OF PERFORMANCE....................................................................................124
INDEPENDENT ACCOUNTANTS AND COUNSEL.............................................................................137
MISCELLANEOUS...................................................................................................138
FINANCIAL STATEMENTS............................................................................................144
APPENDIX - DESCRIPTION OF RATINGS A-1
iii
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 Investment Grade Fund is to
achieve total return. The Investment Grade Fund will invest, under normal market
conditions, at least 80% of its net assets, plus any borrowings for investment
purposes, in investment grade fixed-income securities. The investment objective
of the New York Municipal Fund is to maximize current interest income exempt
from federal income tax and New York State and New York City personal income
taxes to the extent consistent with prudent investment management and the
preservation of capital. The New York Municipal Fund will invest, under normal
market conditions, at least 80% of its net assets, plus any borrowings for
investment purposes, in New York municipal securities the income from which is
exempt from federal income taxes and New York State and New York City personal
income taxes. The investment objectives of the Fixed Income Fund are to generate
high current income consistent with reasonable risk and, secondarily, capital
appreciation. The Fixed Income Fund will invest, under normal market conditions,
at least 80% of its net assets, plus any borrowings for investment purposes, in
fixed-income securities. The investment objective of the Global Fixed Income
Fund is to maximize total investment return consistent with prudent investment
management, consisting of a combination of interest income, currency gains and
capital appreciation. The Global Fixed Income Fund will invest, under normal
market conditions, at least 80% of its net assets, plus any borrowings for
investment purposes, in fixed-income securities of issuers located in at least
three countries, which may include the U.S. There is no limit in the Global
Fixed Income Fund's ability to invest in emerging markets. The 80% investment
policies will not be applicable during periods when a Fund pursues a temporary
defensive strategy, as discussed below. For the Investment Grade Fund, the Fixed
Income Fund and the Global Fixed Income Fund, the 80% investment policies are
non-fundamental and may be changed by the Board of Directors/Trustees of the
Fund to become effective upon 60 days' notice to shareholders of the applicable
Fund prior to any such change. For the New York Municipal Fund, the 80%
investment policy is fundamental, and may be changed only by the shareholders of
the Fund.
General Investment Strategies
Unless otherwise indicated, each Fund is permitted, but not
obligated, 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 do not represent that these techniques are available
now or will be available at any time in the future.
STRATEGIC AND OTHER TRANSACTIONS
Options, Futures and Currency Transactions. Each Fund may
purchase and write (sell) 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. Up to 20%
of a Fund's total 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. Options may be traded on an
exchange or over-the-counter ("OTC").
Securities Options. Each Fund may write covered put and call
options on stock and debt securities and each Fund may purchase such options
that are traded on foreign and U.S. exchanges, as well as OTC options. A 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 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). When a Fund
writes call options, it 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
2
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.
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. A Fund may write (i) in-the-money call options
when Credit Suisse Asset Management, LLC, each Fund's investment adviser
("CSAM"), or, for Global Fixed Income Fund, Credit Suisse Asset Management
Limited (U.K.) or Credit Suisse Asset Management Limited (Japan), as applicable,
the Global Fixed Income Fund's sub-investment advisers (each, together with
CSAM, an "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 the Adviser 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 the Adviser 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, the 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.
3
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 the 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. The 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 the 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. The 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 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, a 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
4
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. A 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 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. A 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 the 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 a 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 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
5
which the Fund originally wrote the option. Although the 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 the Fund's ability to sell portfolio securities or, with
respect to currency options, currencies at a time when such sale might be
advantageous.
Currency Transactions. (Investment Grade, Fixed Income and
Global Fixed Income Funds only) 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 and may be
entered into for hedging purposes or to seek to enhance total return
(speculation). 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.
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 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 use of hedging
transactions).
Currency Options. A 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.
6
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. A 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 the 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 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 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 and
futures 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 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
7
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 and futures 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 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 a 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 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.
A Fund will engage in hedging transactions only when deemed
advisable by CSAM, and successful use by the Fund 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 the 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 the 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.
8
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") with respect to coverage of
forward currency contracts, options written by the Fund on currencies,
securities and indexes, and currency, interest rate and index futures contracts
and options on these futures contracts. These guidelines may, in certain
instances, require segregation by the 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 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 the 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
the Fund may require the Fund to segregate assets (as described above) equal to
the exercise price. The 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 the 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 Fund 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.
Futures Activities
A Fund may enter into foreign currency, interest rate and
securities index futures contracts and purchase and write (sell) related options
traded on exchanges designated by the Commodity Futures Trading Commission (the
"CFTC") or consistent with CFTC regulations on foreign exchanges. 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
9
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. The Funds reserve 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 a
Fund's policies.
Futures Contracts. (The New York Municipal Fund may not engage
in foreign currency futures transactions.) 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, a Fund is required to segregate with its
custodian an amount of cash or 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 a 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 a 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 a Fund to substantial losses. In such event, and in the
event of adverse price
10
movements, a 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 such circumstances a 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. (The New York Municipal Fund may
not purchase or write options on foreign currency futures.) A 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.
Money Market Obligations
Each Fund is authorized to invest, under normal conditions, up
to 20% of its total assets in short-term money market obligations having
remaining maturities of less than one year at the time of purchase. These
short-term instruments consist of obligations issued or guaranteed by the United
States government, its agencies or instrumentalities ("Government Securities");
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 or, if unrated, deemed by CSAM
to be 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; in the case of the Fixed
Income Fund and the Global Fixed Income Fund, obligations of foreign
governments, their agencies or instrumentalities; and repurchase agreements with
respect to portfolio securities. The short-term money market obligations in
11
which the New York Municipal Fund is authorized to invest generally will be
tax-exempt obligations; however, the Fund may invest in taxable obligations when
suitable tax-exempt obligations are unavailable or to maintain liquidity for
meeting anticipated redemptions and paying operating expenses. Tax-exempt money
market obligations in which the New York Municipal Fund may invest consist of
investment grade tax-exempt notes and tax-exempt 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 not rated, of municipal issuers having an issue of
outstanding municipal obligations rated within the three highest grades by
Moody's or S&P.
Temporary Defensive Strategies. For temporary defensive
purposes or, in the case of the Global Fixed Income Fund, during times of
international political or economic uncertainty, each Fund other than the
Investment Grade Fund may invest without limit in short-term money market
obligations, and the Investment Grade Fund may invest without limit in short
term Government Securities.
Money Market Mutual Funds. 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 where CSAM believes that it would be beneficial to the Fund and
appropriate considering the factors of return and liquidity. A money market
mutual fund is an investment company that invests in short-term high quality
money market instruments. A money market mutual fund generally does not purchase
securities with a remaining maturity of more than one year. The New York
Municipal Fund would invest in money market mutual funds that invest in
tax-exempt securities. 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.
Convertible Securities
Convertible securities in which the Investment Grade, Fixed
Income and Global Fixed Income Funds 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.
12
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. 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 atypical bond). 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 the Fund's shares.
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
fixed-rate environment, a common industry practice in the U.S. has been to
assume that prepayments will result in a 12-year average life. At present,
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.
13
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.
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,
14
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
borrowing corporation, government 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 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.
With respect to the New York Municipal Fund, income derived
from Participations or Assignments may not be tax-exempt, depending on the
structure of the particular securities. To the extent such income is not
tax-exempt, it will be subject to the New York Municipal Fund's 20% limit on
investing in non-municipal securities.
Interest Rate, Index, Mortgage and Currency Swaps; Interest Rate Caps, Floors
and Collars
Each Fund may enter into interest rate, index and mortgage
swaps and interest rate caps, floors and collars for hedging purposes or to seek
to increase total return; the
15
Investment Grade, Fixed Income and Global Fixed Income Funds may enter into
currency swaps for hedging purposes and, in the case of the Global Fixed Income
Fund, to seek to enhance total return (speculation) as well. Interest rate swaps
involve the exchange by the Fund with another party of their respective
commitments to pay or receive interest, such as an exchange of fixed rate
payments for floating rate payments. Index swaps involve the exchange by the
Fund with another party of the respective amounts payable with respect to a
notional principal amount related to one or more indexes. Mortgage swaps are
similar to interest rate swaps in that they represent commitments to pay and
receive interest. The notional principal amount, however, is tied to a reference
pool or pools of mortgages. Currency swaps involve the exchange of cash flows on
a notional amount of two or more currencies based on their relative future
values. The purchase of an interest rate cap entitles the purchaser, to the
extent that a specified index exceeds a predetermined interest rate, to receive
payment of interest on a notional principal amount from the party selling such
interest rate cap. The purchase of an interest rate floor entitles the
purchaser, to the extent that a specified index falls below a predetermined
interest rate, to receive payments of interest on a notional principal amount
from the party selling the interest rate floor. An interest rate collar is the
combination of a cap and a floor that preserves a certain return within a
predetermined range of interest rates.
A Fund will enter into interest rate, index and mortgage swaps
only on a net basis, which means that the two payment streams are netted out,
with the Fund receiving or paying, as the case may be, only the net amount of
the two payments. Interest rate, index and mortgage swaps do not involve the
delivery of securities, other underlying assets or principal. Accordingly, the
risk of loss with respect to interest rate, index and mortgage swaps is limited
to the net amount of interest payments that the Fund is contractually obligated
to make. If the other party to an interest rate, index or mortgage swap
defaults, the Fund's risk of loss consists of the net amount of interest
payments that the Fund is contractually entitled to receive. In contrast,
currency swaps usually involve the delivery of a gross payment stream in one
designated currency in exchange for the gross payment stream in another
designated currency. Therefore, the entire payment stream under a currency swap
is subject to the risk that the other party to the swap will default on its
contractual delivery obligations. To the extent that the net amount payable by
the Fund under an interest rate, index or mortgage swap and the entire amount of
the payment stream payable by the Fund under a currency swap or an interest rate
cap, floor or collar are held in a segregated account consisting of cash or
liquid securities, the Funds and CSAM believe that swaps do not constitute
senior securities under the Investment Company Act of 1940, as amended (the
"1940 Act") and, accordingly, will not treat them as being subject to each
Fund's borrowing restriction.
The Fund will not enter into interest rate, index, mortgage or
currency swaps, or interest rate cap, floor or collar transactions unless the
unsecured commercial paper, senior debt or claims paying ability of the other
party is rated either AA or A-1 or better by S&P or Aa or P-1 or better by
Moody's or, if unrated by such rating organizations, determined to be of
comparable quality by CSAM.
16
Foreign Investments (Investment Grade, Fixed Income and Global Fixed Income
Funds only)
Investors should recognize that investing in foreign companies
involves certain risks, including those discussed below, which are not typically
associated with investing in United States 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 positions. A 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 a Fund may invest in
securities denominated in currencies other than the U.S. dollar, and since the
Fund may temporarily hold funds in bank deposits or other money market
investments denominated in foreign currencies, the Fund 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 the Fund. 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 United States 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. A Fund 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. See "Currency
Transactions" and "Futures Activities" above.
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 the securities and about the foreign
17
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 fluctuations and increased
illiquidity.
Increased Expenses. The operating expenses of a Fund, to the
extent it invests in foreign securities, may be higher than that of an
investment company investing exclusively in U.S. securities, since the expenses
of the Fund, such as the cost of converting foreign currency 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 the 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
18
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
European Currency Unit ("ECU"). An ECU represents specified amounts of the
currencies of certain member states of the European Economic Community. The
specific amounts of currencies comprising the ECU may be adjusted by the Council
of Ministers of the European Union to reflect changes in relative values of the
underlying currencies.
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 a Fund, 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."
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. Brady Bonds may be collateralized or uncollateralized, are
issued in various currencies (primarily the U.S. dollar) and are actively traded
in the over-the-counter ("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 and subject to, among other things, the risk of default.
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.
Brady Bonds are often viewed as having three or four valuation
components: the collateralized repayment of principal at final maturity; the
collateralized interest
19
payments; the uncollateralized interest payments; and any uncollateralized
repayment of principal at maturity (these uncollateralized amounts constituting
the "residual risk").
Depository Receipts. Assets of a 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 Depositary Receipts ("CDRs"), are
receipts issued in Europe and IDRs, which are sometimes referred to as Global
Depositary Receipts, are issued outside the United States. EDRs and IDRs 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 and IDRs in bearer form are
designed for use in European securities markets and non-U.S. securities markets,
respectively. For purposes of a Fund's 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.
U.S. Government Securities
Each Fund may invest in Government Securities. Direct
obligations of the U.S. Treasury include a variety of securities that differ in
their interest rates, maturities and dates of issuance. U.S. government
securities also include securities issued or guaranteed by the Federal Housing
Administration, Farmers Home Loan Administration, Export-Import Bank of the
United States, Small Business Administration, GNMA, General Services
Administration, Central Bank for Cooperatives, Federal Farm Credit Banks,
Federal Home Loan Banks, FHLMC, Federal Intermediate Credit Banks, Federal Land
Banks, FNMA, Maritime Administration, Tennessee Valley Authority, District of
Columbia Armory Board and Student Loan Marketing Association. A 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 United States Government is not obligated by law to
provide support to an instrumentality it sponsors, the 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.
20
Government Trust Certificates (Investment Grade Fund only)
The Fund may invest in Government Trust Certificates. Each
Certificate evidences an undivided fractional interest in a Government Trust
(each, a "Trust"). The assets of each Trust consist of a promissory note,
payable in U.S. Dollars (the "Loan Note"), representing a loan made by the Trust
to the government of Israel (the "Borrower"), backed by a full faith and credit
guaranty issued by the United States of America, acting through the Defense
Security Assistance Agency of the Department of Defense (the "Guaranty"), of the
due and punctual payment of 90% of payments of principal and interest due on the
Loan Note and a security interest in collateral, consisting of non-callable
securities issued or guaranteed by the United States government, or derivatives
thereof, such as trust receipts or other securities evidencing an interest in
such United States government securities, sufficient to pay the remaining 10% of
all payments of principal and interest due on the Loan Notes. Each Certificate
issued by a Trust represents the right to receive a portion of the payments due
on the Loan Note held by that Trust. The Certificates are not subject to
prepayment or acceleration. Each Guaranty is entitled to the full faith and
credit of the United States of America. A certificate-holder's right to receive
any payments with respect to the Guaranty will be subject to termination if such
holder breaches the terms of its Certificate.
Certificates are not considered by the Fund to be Government
Securities. The Certificates represent undivided fractional interests in the
Loan Notes, but the Certificates are not direct obligations of, and are not
guaranteed by, the Borrower. Thus, in the event of a failure to pay principal
and/or interest when due, the Fund may be subject to delays, expenses and risks
that are greater than those that would have been involved if the Fund had
purchased a direct obligation of the Borrower.
Municipal Obligations
Under normal circumstances, each Fund may and the Municipal
Fund will invest in "Municipal Obligations." Municipal Obligations are debt
obligations issued by or on behalf of states (including the State of New York),
territories and possessions of the United States and the District of Columbia
and their political subdivisions, agencies and instrumentalities. Except for
temporary defensive purposes, the New York Municipal Fund will invest its assets
in intermediate and long term obligations with interest which is excluded from
gross income for federal income tax purposes and which is exempt from New York
State and New York City personal income taxes ("New York Municipal Obligations")
and intends to invest substantially all of its assets in those obligations. New
York Municipal Obligations include obligations issued by or on the behalf of the
State of New York, its political subdivisions, agencies and instrumentalities.
Municipal Obligations are issued by governmental entities to
obtain funds for various public purposes, including the construction of a wide
range of public facilities, the refunding of outstanding obligations, the
payment of general operating expenses and the extension of loans to public
institutions and facilities. Private activity bonds that are issued by or on
behalf of public authorities to finance various privately-operated facilities
are included within the term Municipal Obligations if the interest paid thereon
is exempt from federal income tax.
21
The two principal types of Municipal Obligations, in terms of
the source of payment of debt service on the bonds, consist of "general
obligation" and "revenue" issues. General obligation bonds are secured by the
issuer's pledge of its full faith, credit and taxing power for the payment of
principal and interest. Revenue bonds are payable from the revenues derived from
a particular facility or class of facilities or in some cases, from the proceeds
of a special excise tax or other specific revenue source such as the user of the
facility being financed. Consequently, the credit quality of revenue bonds is
usually directly related to the credit standing of the user of the facility
involved.
There are, of course, variations in the quality of Municipal
Obligations, both within a particular classification and between
classifications, and the yields on Municipal Obligations depend upon a variety
of factors, including general money market conditions, the financial condition
of the issuer, general conditions of the municipal bond market, the size of a
particular offering, the maturity of the obligation and the rating of the issue.
The ratings of Moody's and S&P represent their opinions as to the quality of
Municipal Obligations. It should be emphasized, however, that ratings are
general and are not absolute standards of quality, and Municipal Obligations
with the same maturity, interest rate and rating may have different yields while
Municipal Obligations of the same maturity and interest rate with different
ratings may have the same yield. Subsequent to its purchase by a Fund, an issue
of Municipal Obligations may cease to be rated or its rating may be reduced
below the minimum rating required for purchase by the Fund. The Fund's
investment adviser will consider such an event in determining whether the Fund
should continue to hold the obligation. See the Appendix attached hereto for
further information concerning the ratings of Moody's and S&P and their
significance.
Among other instruments, a Fund may purchase short term Tax
Anticipation Notes, Bond Anticipation Notes, Revenue Anticipation Notes and
other forms of short term loans. Such notes are issued with a short term
maturity in anticipation of the receipt of tax funds, the proceeds of bond
placements or other revenues.
The yields on Municipal Obligations are dependent upon a
variety of factors, including general economic and monetary conditions, money
market factors, conditions of the municipal bond market, size of a particular
offering, maturity of the obligation offered and rating of the issue.
Municipal Obligations are also subject to the provisions of
bankruptcy, insolvency and other laws affecting the rights and remedies of
creditors, such as the Federal Bankruptcy Code, and laws, if any, which may be
enacted by Congress or state legislatures extending the time for payment of
principal or interest, or both, or imposing other constraints upon enforcement
of such obligations or upon the ability of municipalities to levy taxes. There
is also the possibility that as a result of litigation or other conditions, the
power or ability of any one or more issuers to pay, when due, principal of and
interest on its, or their, Municipal Obligations may be materially affected.
22
Taxable Investments (New York Municipal Fund only)
Because the Fund's purpose is to provide income exempt from
federal income tax and New York State and New York City personal income tax, the
Fund generally will invest in taxable obligations only if and when the Fund's
investment adviser believes it would be in the best interests of the Fund's
investors to do so. Situations in which the Fund may invest up to 20% of its
total assets in taxable securities include: (i) pending investment of proceeds
of sales of Fund shares or portfolio securities or (ii) when the Fund requires
highly liquid securities in order to meet anticipated redemptions. The Fund may
temporarily invest more than 20% of its total assets in taxable securities to
maintain a "defensive" posture when the Fund's investment adviser determines
that it is advisable to do so because of adverse market conditions affecting the
market for Municipal Obligations generally.
Alternative Minimum Tax Bonds (Investment Grade, New York Municipal and Fixed
Income Funds only)
A Fund may invest without limit in "Alternative Minimum Tax
Bonds," which are certain bonds issued after August 7, 1986 to finance certain
non-governmental activities. While the income from Alternative Minimum Tax Bonds
is exempt from regular federal income tax, it is a tax preference item for
purposes of the federal individual and corporate "alternative minimum tax." The
alternative minimum tax is a special tax that applies to a limited number of
taxpayers who have certain adjustments or tax preference items. Available
returns on Alternative Minimum Tax Bonds acquired by a Fund may be lower than
those from other Municipal Obligations acquired by a Fund due to the possibility
of federal, state and local alternative minimum or minimum income tax liability
on Alternative Minimum Tax Bonds. At present, the Investment Grade and Fixed
Income Funds do not intend to purchase Alternative Minimum Tax Bonds.
Securities of Other Investment Companies
A 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, a Fund may hold securities of another investment
company in amounts which (i) do not exceed 3% of the total outstanding voting
stock of such company, (ii) 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, a 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.
Below Investment Grade Securities (Investment Grade, Fixed Income and Global
Fixed Income Funds only)
A Fund may invest up to 35% (20% for the Investment Grade
Fund) of its net assets in fixed income securities rated below investment grade
and as low as C by Moody's or D by S&P, and in comparable unrated securities.
23
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 the Adviser. Bonds rated in the fourth highest grade may
have speculative characteristics and 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. Bonds rated below investment grade may have
speculative characteristics and 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. Investors should
be aware that ratings are relative and subjective and are 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 a Fund pursues a temporary
defensive strategy as discussed below.
An economic recession could disrupt severely the market for
below investment grade securities and may adversely affect the value of below
investment grade securities and the ability of the issuers of such securities to
repay principal and pay interest thereon.
A Fund may have difficulty disposing of certain of these
securities because there may be a thin trading market. Because there is no
established retail secondary market for many of these securities, the Fund
anticipates that these securities could be sold only to a limited number of
dealers or institutional investors. To the extent a secondary trading market for
these securities does exist, it generally is not as liquid as the secondary
market for investment grade 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 the 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 the Fund to obtain
accurate market quotations for purposes of valuing the Fund and calculating its
net asset value.
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 by
the Fund, although CSAM will consider such event in its determination of whether
the Fund should continue to hold the securities. The Fixed
24
Income Fund and the Global Fixed Income Fund may invest in securities rated as
low as C by Moody's or D by S&P and in unrated securities considered 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. Debt rated D by S&P is in default or is expected
to default upon maturity or payment date.
Securities rated below investment grade and comparable unrated
securities: (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. 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 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 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 the Adviser in evaluating the creditworthiness of an issuer. In
this evaluation, in addition to relying on ratings assigned by Moody's or S&P,
the Adviser 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 the Adviser will
consider such event in its determination of whether the Fund should continue to
hold the
25
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.
Emerging Markets (Investment Grade, Fixed Income and Global Fixed Income Funds
only)
The Fixed Income Fund may invest up to 35% of its total fund
assets in securities of issuers located in "emerging markets" (less developed
countries located outside of the U.S.). The Investment Grade and Global Fixed
Income Funds may invest without limit in emerging markets securities. Investing
in emerging markets involves not only the risks described above with respect to
investing in foreign securities generally, 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 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 structures governing private and foreign
investments and private property. The typically small size of the markets of
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.
Lending Portfolio Securities
A Fund may lend portfolio securities to brokers, dealers and
other financial organizations that meet capital and other credit requirements or
other criteria established by a Fund's Board of Directors/Trustees (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 or liquid 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. The 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
26
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 Board of a 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 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 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.
Repurchase Agreements
Each Fund may invest up to 20% of its total assets 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 while the Fund seeks to assert this right. CSAM
monitors the creditworthiness of those bank and non-bank dealers with which
27
the Fund enters into repurchase agreements to evaluate this risk. A repurchase
agreement is considered to be a loan under the 1940 Act.
Reverse Repurchase Agreements and Dollar Rolls
A 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 a Fund pursuant to
its agreement to repurchase them at a mutually agreed upon date, price and rate
of interest. At the time a 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). A Fund's liquidity and ability to
manage its assets might be affected when it sets aside cash or portfolio
securities to cover such commitments.
A Fund also 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, a Fund would forgo principal and interest paid on such securities. A
Fund would be compensated by the difference between the current sales 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 a 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. Reverse repurchase agreements and dollar rolls that are
accounted for as financings are considered to be borrowings under the 1940 Act.
Reverse repurchase agreements and dollar rolls involve the
risk that the market value of the securities retained in lieu of sale may
decline below the price of the securities a 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 a
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.
Zero Coupon Securities
A Fund may invest without limit 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 representation 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.
28
Federal tax law requires that a holder of a zero coupon security accrue a
portion of the discount at which the security was 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. At present, the U.S. Treasury and
certain U.S. agencies issue stripped Government Securities. In addition, in the
recent past, a number of banks and brokerage firms have separated the principal
portions from the coupon portions of U.S. Treasury bonds and notes and sold them
separately in the form of receipts or certificates representing undivided
interests in these instruments.
Government Zero Coupon Securities
A Fund may invest in (i) Government Securities that have been
stripped of their unmatured interest coupons, (ii) the coupons themselves and
(iii) receipts or certificates representing interests in stripped Government
Securities and coupons (collectively referred to as "Government zero coupon
securities").
Short Sales (Investment Grade, Fixed Income and Global Fixed Income Funds only)
In a short sale, a Fund sells a borrowed security and has a
corresponding obligation to the lender to return the identical security. The
seller does not immediately deliver the securities sold and is said to have a
short position in those securities until delivery occurs. If the Fund engages in
a short sale, the collateral for the short position will be maintained by the
Fund's custodian or qualified sub-custodian. While the short sale is open, the
Fund will maintain in a segregated account an amount of securities equal in
value to the securities sold short.
While a short sale is made by selling a security a Fund does
not own, a short sale is "against the box" to the extent that the Fund
contemporaneously owns or has the right to obtain, at no added cost, securities
identical to those sold short. Not more than 10% of a Fund's net assets (taken
at current value) may be held as collateral for short sales against the box at
any one time. A Fund does not intend to engage in short sales against the box
for investment purposes. A Fund may, however, 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 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
29
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 a Fund may
effect short sales.
Emerging Growth and Smaller Capitalization Companies; Unseasoned Issuers
Investing in securities of companies with continuous
operations of less than three years ("unseasoned issuers") may involve greater
risks since these securities may have limited marketability and, thus, may be
more volatile than securities of larger, more established companies or the
market in general. Because such companies normally have fewer shares outstanding
than larger companies, it may be more difficult for a 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.
Although investing in securities of unseasoned issuers 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 a Fund
may involve a greater degree of risk than an investment in other mutual funds
that seek capital appreciation by investing in more established, larger
companies.
"Special Situation" Companies (Investment Grade, Fixed Income and Global Fixed
Income Funds only)
"Special situation companies" are companies 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, 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 capital growth. There
can be no assurance, however, that a special situation that exists at the time
of an its investment will be consummated under the terms and within the time
period contemplated.
Variable Rate and Master Demand Notes (Investment Grade, New York Municipal and
Fixed Income Funds only)
Variable rate demand notes ("VRDNs") are obligations issued by
corporate or governmental entities which contain a floating or variable interest
rate adjustment formula and an unconditional right of demand to receive payment
of the unpaid principal balance plus accrued interest upon a short notice period
not to exceed seven days. The interest rates are adjustable at intervals ranging
from daily to up to every six months to some prevailing market rate for similar
investments, such adjustment formula being calculated to maintain the market
30
value of the VRDN at approximately the par value of the VRDN upon the adjustment
date. The adjustments are typically based upon the prime rate of a bank or some
other appropriate interest rate adjustment index.
Master demand notes are notes which provide for a periodic
adjustment in the interest rate paid (usually tied to the Treasury Bill auction
rate) and permit daily changes in the principal amount borrowed. While there may
be no active secondary market with respect to a particular VRDN purchased by a
Fund, the Fund may, upon the notice specified in the note, demand payment of the
principal of and accrued interest on the note at any time and may resell the
note at any time to a third party. The absence of such an active secondary
market, however, could make it difficult for the Fund to dispose of the VRDN
involved in the event the issuer of the note defaulted on its payment
obligations, and the Fund could, for this or other reasons, suffer a loss to the
extent of the default.
When-Issued Securities and Delayed-Delivery Transactions
A Fund may utilize its 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). 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 securities 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 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 a Fund agrees to purchase when-issued or delayed-delivery
securities, its custodian will set aside cash or liquid securities that are
acceptable as collateral to the appropriate regulatory authority 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
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 Fund's incurring a loss or missing an opportunity to obtain a price
considered to be advantageous.
To-Be-Announced Mortgage-Backed Securities (Investment Grade
and Fixed Income Funds only)
As with other delayed-delivery transactions, a seller agrees
to issue a to-be-announced mortgage-backed security (a "TBA") at a future date.
A TBA transaction arises when a mortgage-backed security, such as a GNMA
pass-through security, is purchased or sold with specific pools that will
constitute that GNMA pass-through security to be announced on a future
31
settlement date. However, at the time of purchase, the seller does not specify
the particular mortgage-backed securities to be delivered. Instead, the Fund
agrees to accept any mortgage-backed security that meets specified terms. Thus,
the Fund and the seller would agree upon the issuer, interest rate and terms of
the underlying mortgages, but the seller would not identify the specific
underlying mortgages until shortly before it issues the mortgage-backed
security. TBAs increase interest rate risks because the underlying mortgages may
be less favorable than anticipated by the Fund. For a further description of
mortgage-backed securities, see "Structured Securities -- Mortgage-Backed
Securities" above.
Stand-By Commitments (Investment Grade, New York Municipal and Fixed Income
Funds only)
A Fund may invest in "stand-by commitments" with respect to
securities held in its portfolio. Under a stand-by commitment, a dealer agrees
to purchase at the Fund's option specified securities at a specified price. The
Fund's right to exercise stand-by commitments is unconditional and unqualified.
Stand-by commitments acquired by the Fund may also be referred to as "put"
options. A stand-by commitment is not transferable by the Fund, although the
Fund can sell the underlying securities to a third party at any time.
The principal risk of stand-by commitments is that the writer
of a commitment may default on its obligation to repurchase the securities
acquired with it. When investing in stand-by commitments, a Fund will seek to
enter into stand-by commitments only with brokers, dealers and banks that, in
the opinion of CSAM, present minimal credit risks. In evaluating the
creditworthiness of the issuer of a stand-by commitment, CSAM will periodically
review relevant financial information concerning the issuer's assets,
liabilities and contingent claims. The Fund acquires stand-by commitments only
in order to facilitate portfolio liquidity and does not expect to exercise its
rights under stand-by commitments for trading purposes.
The amount payable to a Fund upon its exercise of a stand-by
commitment is normally (i) the Fund's acquisition cost of the securities
(excluding any accrued interest which the Fund paid on their acquisition), less
any amortized market premium or plus any amortized market or original issue
discount during the period the Fund owned the securities, plus (ii) all interest
accrued on the securities since the last interest payment date during that
period.
Each Fund expects that stand-by commitments will generally be
available without the payment of any direct or indirect consideration. However,
if necessary or advisable, a Fund may pay for a stand-by commitment either
separately in cash or by paying a higher price for portfolio securities which
are acquired subject to the commitment (thus reducing the yield to maturity
otherwise available for the same securities). The total amount paid in either
manner for outstanding stand-by commitments held in the Fund's portfolio will
not exceed 1/2 of 1% of the value of the Fund's total assets calculated
immediately after each stand-by commitment is acquired.
A Fund would acquire stand-by commitments solely to facilitate
portfolio liquidity and does not intend to exercise its rights thereunder for
trading purposes. The acquisition of a stand-by commitment would not affect the
valuation or assumed maturity of the
32
underlying securities. Stand-by commitments acquired by the Fund would be valued
at zero in determining net asset value. Where the Fund paid any consideration
directly or indirectly for a stand-by commitment, its cost would be reflected as
unrealized depreciation for the period during which the commitment was held by
the Fund.
A Fund will at all times maintain a segregated account with
its custodian consisting of cash or liquid securities in an aggregate amount
equal to the purchase price of the securities underlying the commitment. The
assets contained in the segregated account will be marked-to-market daily and
additional assets will be placed in such account on any day in which assets fall
below the amount of the purchase price. A Fund's liquidity and ability to manage
its assets might be affected when it sets aside cash or portfolio securities to
cover such commitments.
The Internal Revenue Service ("IRS") has issued a revenue
ruling to the effect that a registered investment company will be treated for
federal income tax purposes as the owner of the Municipal Obligations acquired
subject to a stand-by commitment and the interest on the Municipal Obligations
will be tax exempt to a Fund.
REITs (Investment Grade, Fixed Income and Global Fixed Income Funds only)
A 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 Funds, 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"). The Fund investing in a REIT 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, 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.
Warrants (Investment Grade, Fixed Income and Global Fixed Income Funds only)
A Fund may utilize up to 10% of its net assets to purchase
warrants issued by domestic and foreign companies to purchase newly created
equity securities consisting of common and preferred stock. Neither Fund
currently intends to invest in warrants. The equity security underlying a
warrant is outstanding 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. The
33
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
A Fund may not invest more than 15% of its net assets in
non-publicly traded and illiquid securities, including securities that are
illiquid by virtue of the absence of a readily available market, repurchase
agreements which have a maturity of longer than seven days, VRDNs and master
demand notes providing for settlement upon more than seven days notice by the
Fund, and time deposits maturing in more than seven calendar 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. 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) 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 the Fund. Further, companies
whose securities are not publicly traded
34
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 the 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 the
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 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 a Fund's limit on the purchase of illiquid
securities unless the Fund's Board of Directors/Trustees or its delegates
determines that the Rule 144A Securities are liquid. In reaching liquidity
decisions, CSAM 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 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
A Fund may borrow up to 30% 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. Investments (including
roll-overs) will not be made when borrowings exceed 5% of the Fund's net assets.
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 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.
35
Non-Diversified Status (New York Municipal and Global Fixed Income Funds only)
The Funds are classified as non-diversified within the meaning
of the 1940 Act, which means that they are not limited by such Act in the
proportion of its assets that it may invest in securities of a single issuer. As
non-diversified investment companies, the Funds may invest a greater proportion
of their assets in the obligations of a small number of issuers and, as a
result, may be subject to greater risk with respect to portfolio securities. To
the extent that the Funds assume large positions in the securities of a small
number of issuers, their return may fluctuate to a greater extent than that of a
diversified company as a result of changes in the financial condition or in the
market's assessment of the issuers.
A Fund's investments will be limited, however, in order to
qualify as a "regulated investment company" for purposes of the Code. See
"Additional Information Concerning Taxes." To qualify, a Fund will comply with
certain requirements, including limiting its investments so that at the close of
each quarter of the taxable year (i) not more than 25% of the market value of
its total assets will be invested in the securities of a single issuer, and (ii)
with respect to 50% of the market value of its total assets, not more than 5% of
the market value of its total assets will be invested in the securities of a
single issuer and the Fund will not own more than 10% of the outstanding voting
securities of a single issuer.
INVESTMENT RESTRICTIONS
Investment Grade Fund
The investment limitations numbered 1 through 12 may not be
changed without the affirmative vote of the holders of a majority of the
Investment Grade 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. Investment limitations 13 through 15 may be changed by a
vote of the Board at any time.
The Investment Grade 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, dollar roll
transactions that are accounted for as financings and any other transactions
constituting borrowing by the Fund may not exceed 30% of the value of the Fund's
total assets. For purposes of this restriction, short sales, the entry into
currency transactions, options, futures contracts, options on futures contracts,
forward commitment transactions and dollar roll transactions that are not
accounted for as financings (and the segregation of assets in connection with
any of the foregoing) shall not constitute borrowing.
2. 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
Government Securities.
36
3. Make loans except that the Fund may purchase or hold fixed
income securities, including loan participations, assignments and structured
securities; lend portfolio securities and enter into repurchase agreements.
4. Underwrite any securities issued by others except to the
extent that the investment in restricted securities and the sale of securities
in accordance with the Fund's investment objective, policies and limitations may
be deemed to be underwriting.
5. Purchase or sell real estate, real estate investment trust
securities or invest in oil, gas or mineral exploration or development programs,
except that the Fund may invest in securities secured by real estate, mortgages
or interests therein.
6. Make short sales of securities or maintain a short
position, except the Fund may maintain short positions in forward currency
contracts, options, futures contracts and options on futures contracts and make
short sales "against the box".
7. Purchase more than 10% of the voting securities of any one
issuer; provided that this limitation shall not apply to investments in
Government Securities.
8. 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 currencies,
options, futures contracts or related options will not be deemed to be a
purchase of securities on margin.
9. Invest in commodities, except that the Fund may purchase
and sell futures contracts, including those relating to securities, currencies
and indexes, and options on futures contracts, securities, currencies or
indexes, and purchase and sell currencies or securities on a forward commitment
or delayed-delivery basis.
10. Issue any senior security except as permitted in these
Investment Restrictions.
11. 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
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.
12. Purchase securities of other investment companies except
in connection with a merger, consolidation, acquisition, reorganization or offer
of exchange or as permitted under the 1940 Act.
13. Pledge, mortgage or hypothecate its assets, except to the
extent necessary to secure permitted borrowings and to the extent related to the
deposit of assets in escrow in connection with the writing of covered put and
call options and purchase of securities on a forward commitment or
delayed-delivery basis and collateral and initial or variation margin
arrangements with respect to currency transactions, options, futures contracts,
and options on futures contracts.
37
14. Invest more than 15% of the value 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.
15. Make additional investments (including roll-overs) if the
Fund's borrowings exceed 5% of its net assets.
New York Municipal Fund
The investment limitations numbered 1 through 10 are
Fundamental Restrictions. Investment limitations 11 through 14 may be changed by
a vote of the Board at any time.
The New York Municipal 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, dollar roll
transactions that are accounted for as financings and any other transactions
constituting borrowing by the Fund may not exceed 30% of the value of the Fund's
total assets. For purposes of this restriction, short sales, the entry into
currency transactions, options, futures contracts, options on futures contracts,
forward commitment transactions and dollar roll transactions that are not
accounted for as financings (and the segregation of assets in connection with
any of the foregoing) shall not constitute borrowing.
2. Purchase any securities which would cause more than 25% 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 (a) U.S.
government securities, (b) certificates of deposit issued by United States
branches of United States banks or (c) Municipal Obligations. For purposes of
this restriction, private purpose bonds ultimately payable by companies within
the same industry are treated as if they were issued by issuers in the same
industry.
3. Make loans except that the Fund may purchase or hold
fixed-income securities, including loan participations, assignments and
structured securities, and enter into repurchase agreements in accordance with
its investment objective, 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
in accordance with the Fund's investment objective, policies and limitations may
be deemed to be underwriting.
5. Purchase or sell real estate, real estate investment trust
securities or invest in oil, gas or mineral exploration or development programs,
except that the Fund may invest in securities secured by real estate, mortgages
or interests therein.
6. Make short sales of securities or maintain a short
position, except the Fund
38
may maintain short positions in forward currency contracts, options, futures
contracts and options on futures contracts.
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 currencies,
options, futures contracts or related options 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, including those relating to securities, currencies
and indexes, and options on futures contracts, securities or indexes, and
purchase and sell currencies or securities on a forward commitment or
delayed-delivery basis.
9. Issue any senior security except as permitted in these
Investment Restrictions.
10. Purchase securities of other investment companies except
(a) in connection with a merger, consolidation, acquisition or reorganization or
(b) as permitted under the 1940 Act.
11. Invest less than 80% of its assets in securities the
interest on which is exempt from federal income tax and New York State and New
York City personal income tax, except during temporary defensive periods or
under unusual market conditions, as determined by the Fund's investment adviser.
12. Pledge, mortgage or hypothecate its assets, except to the
extent necessary to secure permitted borrowings and to the extent related to the
deposit of assets in escrow in connection with the writing of covered put and
call options and purchased securities on a forward commitment or
delayed-delivery basis and collateral and initial or variation margin
arrangements with respect to currency transactions, options, futures contracts,
and options on futures contracts.
13. Invest more than 15% of the value 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, (a) repurchase agreements with
maturities greater than seven days, (b) variable rate and master demand notes
providing for settlement upon more than seven days' notice by the Fund and (c)
time deposits maturing in more than seven calendar days shall be considered
illiquid securities.
14. Make additional investments (including roll-overs) if the
Fund's borrowings exceed 5% of its net assets.
Fixed Income Fund
The investment limitations numbered 1 through 12
39
are Fundamental Restrictions. Investment limitations 13 through 15 may be
changed by a vote of the Board at any time.
The Fixed Income Fund may not:
1. Borrow money except that the Fund may (i) borrow from banks
for temporary or emergency purposes, and (ii) enter into reverse repurchase
agreements; provided that reverse repurchase agreements, dollar roll
transactions that are accounted for as financings and any other transactions
constituting borrowing by the Fund may not exceed 30% of the value of the Fund's
total assets. For purposes of this restriction, short sales, the entry into
currency transactions, options, futures contracts, options on futures contracts,
forward commitment transactions and dollar roll transactions that are not
accounted for as financings (and the segregation of assets in connection with
any of the foregoing) shall not constitute borrowing.
2. 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.
3. Make loans except that the Fund may purchase or hold
fixed-income securities, including loan participations, assignments and
structured securities; lend portfolio securities; and enter into repurchase
agreements.
4. Underwrite any securities issued by others except to the
extent that the investment in restricted securities and the sale of securities
in accordance with the Fund's investment objective, policies and limitations may
be deemed to be underwriting.
5. Purchase or sell real estate or invest in oil, gas or
mineral exploration or development programs or oil, gas and mineral leases,
except that the Fund may invest in (a) securities secured by real estate,
mortgages or interests therein and (b) securities of companies that invest in or
sponsor oil, gas or mineral exploration or development programs.
6. Make short sales of securities or maintain a short
position, except the Fund may maintain short positions in forward currency
contracts, options, futures contracts and options on futures contracts and make
short sales "against the box."
7. Purchase more than 10% of the voting securities of any one
issuer; provided that this limitation shall not apply to investments in U.S.
government securities.
8. 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 currencies,
options, futures contracts or related options will not be deemed to be a
purchase of securities on margin.
40
9. Invest in commodities, except that the Fund may purchase
and sell futures contracts, including those relating to securities, currencies
and indexes, and options on futures contracts, securities, currencies or
indexes, and purchase and sell currencies or securities on a forward commitment
or delayed-delivery basis.
10. Issue any senior security except as permitted in these
Investment Restrictions.
11. 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.
12. 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.
13. Pledge, mortgage or hypothecate its assets, except to the
extent necessary to secure permitted borrowings and to the extent related to the
deposit of assets in escrow in connection with the writing of covered put and
call options and purchase of securities on a forward commitment or
delayed-delivery basis and collateral and initial or variation margin
arrangements with respect to currency transactions, options, futures contracts,
and options on futures contracts.
14. Invest more than 15% of the value 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, (a) repurchase agreements
with maturities greater than seven days, (b) VRDNs and master demand notes
providing for settlement upon more than seven days notice by the Fund and (c)
time deposits maturing in more than seven calendar days shall be considered
illiquid securities.
15. Make additional investments (including roll-overs) if the
Fund's borrowings exceed 5% of its net assets.
Global Fixed Income Fund
The investment limitations numbered 1 through 10 are
Fundamental Restrictions. Investment limitations 11 through 13 may be changed by
a vote of the Board at any time.
The Global Fixed Income 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, dollar roll
transactions that are accounted for as financings and any other transactions
constituting borrowing by the Fund may not exceed 30% of the value of the Fund's
total assets. For purposes of this restriction, short sales, the entry into
currency transactions,
41
options, futures contracts, options on futures contracts, forward commitment
transactions and dollar roll transactions that are not accounted for as
financings (and the segregation of assets in connection with any of the
foregoing) shall not constitute borrowing.
2. 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.
3. Make loans, except that the Fund may purchase or hold
fixed-income securities, including loan participations and assignments and
structured securities; lend portfolio securities; and enter into repurchase
agreements.
4. Underwrite any securities issued by others except to the
extent that the investment in restricted securities and the sale of securities
in accordance with the Fund's investment objective, policies and limitations may
be deemed to be underwriting.
5. Purchase or sell real estate or invest in real estate
limited partnerships, oil, gas or mineral exploration or development programs or
oil, gas and mineral leases, except that the Fund may invest in (a) securities
secured by real estate, mortgages or interests therein and (b) securities of
companies that invest in or sponsor oil, gas or mineral exploration or
development programs.
6. Make short sales of securities or maintain a short
position, except the Fund may maintain short positions in forward currency
contracts, options, futures contracts and options on futures contracts and make
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 currencies,
options, futures contracts or related options 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, including those relating to securities, currencies
and indexes, and options on futures contracts, securities, currencies or
indexes, and purchase and sell currencies or securities on a forward commitment
or delayed-delivery basis.
9. Issue any senior security except as permitted in these
Investment Restrictions.
10. 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.
11. Pledge, mortgage or hypothecate its assets, except to the
extent necessary to secure permitted borrowings and to the extent related to the
deposit of assets in escrow in connection with the writing of covered put and
call options and purchase of securities on a
42
forward commitment or delayed-delivery basis and collateral and initial or
variation margin arrangements with respect to currency transactions, options,
futures contracts, and options on futures contracts.
12. Invest more than 15% of the value 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.
13. Make additional investments (including roll-overs) if the
Fund's borrowings exceed 5% of its net assets.
If a percentage restriction (other than the percentage
limitation set forth in each of No. 1 above) 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.
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.
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 the
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 security will be
valued
43
at 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 in good
faith by or under the direction of the Board. 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. In addition,
the Board 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. ("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 a Fund's net asset value is
not calculated. As a result, calculation of the 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. Events affecting the
values of portfolio securities that occur between the time their prices are
determined and the close of regular trading on the NYSE will not be reflected in
a Fund's calculation of net asset value unless the Board or its delegates deems
that the particular event would materially affect net asset value, in which case
an adjustment may be made. 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 pursuant to consistently applied procedures
established by the Board.
44
PORTFOLIO TRANSACTIONS
CSAM is responsible for establishing, reviewing and, where
necessary, modifying a Fund's investment program to achieve its investment
objectives. CSAM has retained Credit Suisse Asset Management Limited (U.K.) and
Credit Suisse Asset Management Limited (Japan) to act as sub-advisers for the
Global Fixed Income 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 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.
Government securities are generally purchased from underwriters or dealers,
although certain newly issued 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 government
securities.
The Adviser will select portfolio investments and effect
transactions for the Funds. In selecting broker-dealers, the Adviser does
business exclusively with those broker-dealers that, in the Adviser's judgment,
can be expected to provide the best service. The service has two main aspects:
the execution of buy and sell orders and the provision of research. In
negotiating commissions with broker-dealers, the Adviser will pay no more for
execution and research services that it considers either, or both together, to
be worth. The worth of execution service depends on the ability of the
broker-dealer to minimize costs of securities purchased and to maximize prices
obtained for securities sold. The worth of research depends on its usefulness in
optimizing portfolio composition and its changes over time. Commissions for the
combination of execution and research services that meet the Adviser's standards
may be higher than for execution services alone or for services that fall below
the Adviser's standards. The Adviser believes that these arrangements may
benefit all clients and not necessarily only the accounts in which the
particular investment transactions occur that are so executed. Further, the
Adviser will only receive brokerage or research service in connection with
securities transactions that are consistent with the "safe harbor" provisions of
Section 28(e) of the Securities Exchange Act of 1934 when paying such higher
commissions. Research services may include research on specific industries or
companies, macroeconomic analyses, analyses of national and international events
and trends, evaluations of thinly traded securities, computerized trading
screening techniques and securities ranking services, and general research
services. Research received from brokers or dealers is supplemental to the
Adviser's own research program.
45
For the fiscal year ended October 31, 2002, none of the Funds
paid any brokerage commissions to brokers and dealers who provided such research
services.
The following table details amounts paid by each Fund in
commissions to broker-dealers for execution of portfolio transactions during the
indicated fiscal years.
Fiscal year ended Fiscal year ended Fiscal year ended
October 31, 2000 October 31, 2001 October 31, 2002
Investment Grade Fund 0 0 0
New York Municipal Fund 0 0 0
Fixed Income Fund 0 $17,034 $44,658
Global Fixed Income Fund 0 $9,564 $14,670
All orders for transactions in securities or options on behalf
of a Fund are placed by the Adviser with broker-dealers that it selects,
including Credit Suisse Asset Management Securities, Inc., the Funds'
distributor and an affiliate of CSAM ("CSAMSI"), and affiliates of Credit Suisse
Group ("Credit Suisse"). 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.
During the fiscal year ended October 31, 2002, none of the
Funds paid commissions to CSFB.
Investment decisions for a Fund concerning specific portfolio
securities are made independently from those for other clients advised by the
Adviser. Such other investment clients may invest in the same securities as the
Fund. When purchases or sales of the same security are made at substantially the
same time on behalf of such other clients, transactions are averaged as to price
and available investments allocated as to amount, in a manner which the Adviser
believes to be equitable to each client, including the Fund. In some instances,
this investment procedure may adversely affect the price paid or received by a
Fund or the size of the position obtained or sold for the Fund. To the extent
permitted by law,
46
the Adviser may aggregate the securities to be sold or purchased for the 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, 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 the Investment Grade, Fixed Income and Global
Fixed Income 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 normally involve brokerage commissions. Securities firms may receive
brokerage commissions on certain portfolio transactions, including options,
futures and options on futures transactions and the purchase and sale of
underlying securities upon exercise of options.
A Fund may participate, if and when practicable, in bidding
for the purchase of securities for 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. The Fund will engage in this practice, however, only when the
Adviser, in its sole discretion, believes such practice to be otherwise in the
Fund's interest.
The following table details amounts paid by each Fund in
commissions to broker-dealers for execution of portfolio transactions during the
indicated fiscal year or period.
Fiscal year ended Fiscal year ended Fiscal year ended
October 31, 2000 October 31, 2001 October 31, 2002
---------------- ---------------- ----------------
Investment Grade Fund 0 0 0
New York Municipal Fund 0 0 0
Fixed Income Fund 0 $17,034 $44,658
Global Fixed Income Fund 0 $9,564 $14,670
As of October 31, 2002, each Fund held the following
securities of its regular brokers or dealers:
47
Name of Fund Name of Securities Aggregate Value of the Holdings
- ------------------------------------- ---------------------------------------- ---------------------------------------
Investment Grade Fund State Street Bank & Trust Co. Euro $3,487,000
Time Deposit
- ------------------------------------- ---------------------------------------- ---------------------------------------
New York Municipal Fund None --
- ------------------------------------- ---------------------------------------- ---------------------------------------
Fixed Income Fund State Street Bank & Trust Co. Euro $14,784,000
Time Deposit
- ------------------------------------- ---------------------------------------- ---------------------------------------
Global Fixed Income Fund State Street Bank & Trust Co. Euro $16,319,000
Time Deposit
PORTFOLIO TURNOVER
The Funds do 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. A 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 the Fund could
result in high portfolio turnover. For example, portfolio securities may be sold
in anticipation of a rise in interest rates (market decline) or purchased in
anticipation of a decline in interest rates (market rise) and later sold. In
addition, a security may be sold and another of comparable quality purchased at
approximately the same time to take advantage of what CSAM believes to be a
temporary disparity in the normal yield relationship between the two securities.
These yield disparities may occur for reasons not directly related to the
investment quality of particular issues or the general movement of interest
rates, such as changes in the overall demand for, or supply of, various types of
securities. In addition, 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, the
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 the Fund may be higher than mutual funds having a similar objective 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 commission, higher dealer markups or underwriting commissions as well
as other transaction costs. In addition, gains realized from portfolio turnover
may be taxable to shareholders.
For the fiscal year ended October 31, 2001 and 2002, the
portfolio turnover rate for the Investment Grade Fund was 41% and 171%; for the
New York Municipal Fund, 51% and 34%; for the Fixed Income
48
Fund, 383% and 385%; and for the Global Fixed Income Fund, 144% and 150%,
respectively. For the year ended October 31, 2001, the increase in the Fixed
Income Fund's portfolio turnover rate resulted from a number of factors,
including an increase in the portion of the Fund's portfolio invested in TBAs
and the Fund's concomitantly increased use of dollar rolls with respect to these
securities. In a dollar roll, the Fund sells TBAs for delivery in the current
month and simultaneously contracts to repurchase similar but not identical
securities on a specified future date, generally one month ahead. This monthly
roll over resulted in a higher portfolio turnover rate. For the year ended
October 31, 2002 the increase in the Investment Grade Fund's portfolio turnover
rate was due to the change in portfolio managers.
SPECIAL CONSIDERATIONS RELATING TO NEW YORK MUNICIPAL OBLIGATIONS
Some of the significant financial considerations relating to
the New York Municipal Fund's investments in New York Municipal Obligations are
summarized below. This summary information is not intended to be a complete
description and is principally derived from the Annual Information Statement of
the State of New York as supplemented and contained in official statements
relating to issues of New York Municipal Obligations that were available prior
to the date of this Statement of Additional Information. The accuracy and
completeness of the information contained in those official statements have not
been independently verified.
The State of New York's most recent fiscal year began on April
1, 2002 and ends on March 31, 2003. The most recent published Update to the
Annual Information Statement was dated November 14, 2002 with supplement dated
January 10, 2003.
Special Considerations. Current economic and financial trends
have substantially heightened the risk that actual receipts for the 2002-03
fiscal year will fall significantly below the levels reported in the current
Financial Plan. An unusual amount of uncertainty surrounds those factors that
have historically been most prominent in determining the State's revenue
performance. These factors include the profit performance of the
49
financial sector and the timing of tax payments from high-income individuals and
businesses.
It now appears more likely that the national and State
economies will rebound at a slower pace than projected under the current
forecast. Equity market instability (fueled by poor earnings, accounting
concerns, and fears of further terrorist attacks), a further escalation of
tensions in the Middle East and the resultant upward pressure on energy prices,
a weakening of growth in consumer spending, and a failure of investment spending
to rebound are all factors that are combining to produce a potential return to
recessionary conditions.
More important from a revenue perspective, the prolonged and
substantial decline in equity markets has increased the likelihood that tax
payments will fall below current projections, as well as increased the
uncertainty of the timing of such tax payments. The State receives a substantial
portion of tax receipts from the income and profits of financial service
employees and companies. In addition, the taxable income of State taxpayers is
affected by the changing value of equities and the associated impact on the
value of capital gain transactions. Historically, declines in the stock market
are followed by declines in personal income tax payments as tax liability
associated with market transactions declines.
50
Finally, financial service firms have suffered a second
consecutive year of poor profit performance related to stock market declines and
the fallout associated with the corporate accounting scandals. As a result,
there have been, and it is generally expected that there will continue to be,
further reductions in employment for this industry and declines in the
compensation of highly paid financial service employees.
For these reasons, it now appears more likely that the State
will experience a significant decline in its revenue situation in fiscal year
2002-03. The Division of the Budget ("DOB") is continuously analyzing actual
data and available information from the financial services industry and the
economy in general to assess any potential negative impact on receipts. However,
given the uncertainties surrounding the economy in general and the financial
services sector in particular, DOB is unable at this time to quantify with
confidence the potential impact on expected tax receipts.
51
The State currently has $710 million in the Tax Stabilization
Reserve Fund to guard against potential risks. Consistent with prudent fiscal
practices, DOB is also developing a range of approaches totaling five percent of
General Fund spending to help bolster the State's reserves and respond to the
heightened uncertainties surrounding the receipts forecast. Accordingly, DOB
will continue to maintain a strict hiring freeze and controls on all
discretionary spending, initiate debt management actions to lower debt service
costs, and take other administrative measures to reduce costs in the current
year. In the past, the State has taken both administrative and legislative
actions to address potential Financial Plan shortfalls, and DOB believes similar
actions can be taken to respond to adverse variances in the current year.
In addition, the Governor has proposed legislation to permit
the State to securitize all or a portion of its share of future payments from
the tobacco industry under the national master settlement agreement. To guard
against the risk that the enabling legislation necessary for tobacco
securitization is not enacted in fiscal year 2002-03, DOB is identifying a range
of additional administrative remedies beyond those already underway that would
reduce costs in the current year (e.g., deferring certain discretionary payments
until fiscal year 2003-04, thereby adding to General Fund costs in that year).
Such measures, if implemented, are expected by DOB to be sufficient to close the
2002-03 fiscal year in balance. As a result of these actions, DOB does not
anticipate the State will need to draw on the Tax Stabilization Reserve Fund to
maintain budget balance.
DOB expects to propose actions to close a 2003-04 budget gap
that DOB currently anticipates to be several times larger than the budgetary
shortfall projected for the current year, and substantially larger than the $2.8
billion imbalance projected in February 2002. Factors affecting the potential
budget imbalance include the possible
52
impact of economic and financial market instability on receipts (which could
cause losses in excess of five percent of earlier projections), the use of
reserves and other non-recurring resources to balance the 2002-03 budget, and
higher pension costs and entitlement spending.
State Economy. As anticipated, the World Trade Center
terrorist attacks have had an even more devastating impact on New York than on
the national economy as a whole. As a result, the State economy could remain in
recession even after the initiation of a recovery for the nation overall.
Employment is expected to decline by 0.8 percent in 2002, following a 0.5
percent decline in 2001. Wages and salaries are expected to show an increase of
2.4 percent for 2001, followed by a decline of 1.5 percent for 2002 due to
weakness in securities industry profits in the first quarter of 2002. Total
State personal income, of which wages and salaries are the largest component, is
projected to grow 0.5 percent in 2002, following growth of 2.9 percent for 2001.
The risks to the New York forecast are substantial. Weaker
than expected growth for both the national and international economies could
delay the onset of the State's recovery. This would result in even slower
employment and income growth than projected. This decline, if it continues,
could result in a large negative impact in underlying economic activity. Adverse
developments in the equity markets have the potential to significantly disrupt
economic activity in New York, given the prominence of financial services in the
State's economy.
53
In contrast, stronger national and international growth could result in an
earlier recovery than projected. At the State level, the cleanup of the World
Trade Center site has been completed and redevelopment is expected to commence
shortly. As a result, employment growth could be stronger than projected.
Financial sector activity remains the largest risk to the New York forecast.
Wall Street compensation fell precipitously in early 2002. Continued weakness in
this sector would have a deleterious impact on the State's prospects for
economic recovery, while a sharp improvement in profits for the financial
industry would likely have a significant beneficial impact on the State's
economy.
The possibility of hostilities in the Middle East poses
another risk. It is impossible to accurately predict the economic impact of such
an event or even its direction. However, a further spike in oil prices, a loss
of international tourism, and the redirection toward the war effort of resources
that might have aided in strengthening the current recovery can be expected to
have a negative impact.
New York is the third most populous state in the nation and
has a relatively high level of personal wealth. The State's economy is diverse
with a comparatively large share of the nation's finance, insurance,
transportation, communications and
54
services employment, and a very small share of the nation's farming and mining
activity. The State's location and its air transport facilities and natural
harbors have made it an important link in international commerce. Travel and
tourism constitute an important part of the economy. Like the rest of the
nation, New York has a declining proportion of its workforce engaged in
manufacturing, and an increasing proportion engaged in service industries.
Services: The services sector, which includes entertainment,
personal services, such as health care and auto repairs, and business-related
services, such as information processing, law and accounting, is the State's
leading economic sector. The services sector accounts for more than three of
every ten nonagricultural jobs in New York and has a noticeably higher
proportion of total jobs than does the rest of the nation.
Manufacturing: Manufacturing employment continues to decline
in New York, as in most other states, and New York's economy is less reliant on
this sector than in the past. However, it remains an important sector of the
State economy, particularly for the upstate economy, as high concentrations of
manufacturing industries for transportation equipment, optics and imaging,
materials processing, and refrigeration, heating, and electrical equipment
products are located in the upstate region.
Trade: Wholesale and retail trade is the second largest sector
in terms of nonagricultural jobs in New York but is considerably smaller when
measured by income share. Trade consists of wholesale businesses and retail
businesses, such as department stores and eating and
55
drinking establishments.
Finance, Insurance and Real Estate: New York City is the
nation's leading center of banking and finance and, as a result, this is a far
more important sector in the State than in the nation as a whole. Although this
sector accounts for under one-tenth of all nonagricultural jobs in the State, it
contributes about one-fifth of total wages.
Agriculture: Farming is an important part of the economy in
rural areas, although it constitutes a very minor part of total State output.
Principal agricultural products of the State include milk and dairy products,
greenhouse and nursery products, fruits, and vegetables. New York ranks among
the nation's leaders in the production of these commodities.
Government: Federal, State and local governments together are
the third largest sector in terms of nonagricultural jobs, with the bulk of the
employment accounted for by local governments. Public education is the source of
nearly one-half of total State and local government employment.
State Budget. The State Constitution requires the Governor of
New York ("Governor") to submit to the State legislature (the "Legislature") a
balanced executive budget which contains a complete plan of expenditures for the
ensuing fiscal year and all moneys and revenues estimated to be available
therefor, accompanied by bills containing all proposed appropriations or
reappropriations and any new or modified revenue measures to be enacted in
connection with the executive budget. The entire plan constitutes the proposed
State financial plan for that fiscal year. The Governor is required to submit to
the Legislature quarterly budget updates which include a revised cash-basis
state financial plan, and an explanation of any changes from the previous state
financial plan.
State law requires the Governor to propose a balanced budget
each year. In recent years, the State has closed projected budget gaps which DOB
estimated at $5.0 billion (1995-
56
96), $3.9 billion (1996-97), $2.3 billion (1997-98), less than $1 billion (in
each of the fiscal years 1998-99 through 2000-01) and $6.8 billion in 2002-03.
The 2002-03 Financial Plan projected budget gaps of $2.8 billion in 2003-04 and
$3.3 billion in 2004-05.
Four governmental fund types comprise the State Financial
Plan: the General Fund, the Special Revenue Funds, the Capital Projects Funds,
and the Debt Service Funds. The State's fund structure adheres to the accounting
standards of the Governmental Accounting Standards Board.
General Fund. The General Fund is the principal operating fund
of the State and is used to account for all financial transactions except those
required to be accounted for in another fund. It is the State's largest fund and
receives almost all State taxes and other resources not dedicated to particular
purposes. In the State's 2002-03 fiscal year, the General Fund is expected to
account for approximately 42 percent of All Governmental Funds disbursements.
General Fund moneys are also transferred to other funds, primarily to support
certain capital projects and debt service payments in other fund types.
Total General Fund receipts, including transfers from other
funds, are projected to total $39.90 billion in fiscal year 2002-03, a decrease
of $1.25 billion or -3.0 percent from the 2001-02 fiscal year. This total
includes $35.08 billion in tax receipts, $2.15 billion in miscellaneous
receipts, and $2.67 billion in transfers from other funds. The transfer of $1.68
billion in resources through the tax refund reserve account from fiscal year
2001-02 to fiscal year 2002-03 has the effect of exaggerating the change in
State receipts from year to year by depressing 2001-02 figures and increasing
2002-03 projections.
The year-to-year decline in receipts is caused primarily by
the economic dislocation caused by the terrorist attacks of September 11, the
national recession, the decline in equity markets, and the drop in compensation
paid to financial service workers. Personal income tax payments associated with
the 2001 tax year are significantly below 2000 levels, with associated impacts
on final payments and refunds.
General Fund disbursements, including transfers to other
funds, are projected to total $40.21 billion for 2002-03, an annual decrease of
$1.01 billion or -2.4
57
percent from the 2001-02 fiscal year. All Governmental Funds spending for
2002-03 is projected to be $89.56 billion, consisting of $59.35 billion in
State-supported spending and $30.21 billion in federal aid. This represents an
increase of $5.08 billion or 6.0 percent for 2001-02 (after excluding federal
World Trade Center "pass-through" disaster assistance funds to The City of New
York and other localities).
The projected 2002-03 General Fund closing balance of $716
million, a decline of $316 million from 2001-02 (30.6 percent), consists of $710
million in the Tax Stabilization Reserve Fund (the State's "rainy day" fund) and
$6 million in the Contingency Reserve Fund (the State's litigation reserve).
The 2002-03 General Fund balance excludes amounts on deposit
in the refund reserve account. The State had a balance of $1.68 billion on
deposit in the refund reserve account at the end of the 2001-02 fiscal year and
projects to have a balance of $427 million on deposit at the end of 2002-03 (a
decline of $1.25 billion from 2001-02). A portion of these reserves ($1.1
billion) are expected to be used to help balance the Financial Plan by replacing
revenues lost in the aftermath of the World Trade Center terrorist attacks. The
refund reserve account is used to pay for tax refunds across fiscal years and to
help accomplish other Financial Plan objectives, including the movement of
resources from one fiscal year to the next. Changes to the refund reserve impact
the level of reported personal income tax receipts.
Over the next several years, a substantial amount of federal
aid is projected to flow through the State to localities for disaster response
and reconstruction activities related to the World Trade Center attacks. The
Financial Plan estimated that federal "flow-through" disaster aid totaled $569
million in 2001-02 and is projected to total $2.76 billion in 2002-03 as
recovery and rebuilding efforts reach full capacity. Nearly all of the federal
disaster aid is expected to flow from the Federal Emergency Management Agency
through the State Emergency Management Office (SEMO) to New York City and other
localities affected by the terrorist attacks. This "flow-through" spending is
not counted in the All Governmental Funds Financial Plan.
The All Governmental Funds Financial Plan does include State
spending for World Trade Center costs of $330 million in 2002-03. Unlike the
flow-through aid, these projected disbursements in the Financial Plan finance
State government activities. Most of this spending is supported by Federal funds
($306 million) which will finance, among other things, payments to the victims
of the attack, State Police and Division of Military and Naval Affairs staffing
costs directly related to the terrorist attacks, expanded counseling and trauma
services, and infrastructure repairs.
Through December 2002, preliminary General Fund receipts and
transfers from other funds (based on DOB's estimate) totaled $27.32 billion,
$1.17 billion below cash-flow projections for fiscal year 2002-03 derived from
the October 2002 Financial Plan, with negative variances against planned
collections concentrated in the personal income tax and in business taxes.
However, it remains uncertain at this point how much of the receipts shortfall
to date is related to the timing of tax payments within the same fiscal year
(but
58
across individual and business tax years), and how much is related to economic
conditions. Preliminary General Fund disbursements and transfers to other funds
totaled $26.88 billion, $400 million below cash-flow projections derived from
the October 2002 Financial Plan. The variances result in a preliminary General
Fund closing balance of $1.47 billion at the end of December 2002, which is $772
million below DOB's cash-flow projections.
Based on operating results through December 31, 2002, the
anemic performance of the national economy, faltering retail sales, and
continuing weakness in the State's financial services sector, DOB believes the
State will experience a budgetary shortfall in the range of $2 billion to $2.5
billion in the current fiscal year.
Special Revenue Funds. State special revenue spending is
projected to be $14.57 billion, an increase of $3.0 billion or 25.9 percent from
2001-02. The largest area of growth in State special revenue funding is for
Medicaid, which is projected to total $2.50 billion in 2002-03, an increase of
$1.35 billion. Special Revenue Funds, which include Federal grants and State
Special Revenue Funds, comprise 50 percent of the All Governmental Funds
Financial Plan.
Capital Projects Funds. Spending from Capital Projects Funds
in 2002-03 is projected at $5.29 billion, an increase of $977 million or 22.7
percent from last year. The increase will primarily support capital investments
to promote economic development ($340 million), transportation ($291 million),
and education ($210 million).
Debt Service Funds. Spending from Debt Service Funds is
estimated at $3.56 billion in 2002-03, a decrease of $592 million or 14.3
percent from 2001-02. The decrease is primarily attributable to the use of $500
million in Debt Reduction Reserve Fund (DRRF) monies during 2001-02 (which
technically is shown as an increase in debt service spending in that year),
savings in 2002-03 generated from the use of DRRF to reduce debt and debt
service costs, the use of lower-cost State Personal Income Tax Revenue Bonds,
and the impact of legislation that will enhance the State's ability to manage
its bond portfolio and reduce borrowing costs, and lower interest rates.
The historical financial results for the prior three fiscal years are
presented below.
2001-02 Fiscal Year. The State ended its 2001-02 fiscal year
on March 31, 2002 in balance on a cash basis. There was no General Fund surplus
reported by DOB. After year-end adjustments related to the refund reserve
account, the closing balance in the General Fund was $1.03 billion, a decrease
of $67 million from the 2000-01 fiscal year. Of this balance, $710 million was
held in the Tax Stabilization Reserve Fund ("TSRF") (after a deposit of $83
million in fiscal year 2001-02), $157 million in the Contingency Reserve Fund
("CRF"), $159 million in the Community Projects Fund ("CPF"), and $5 million in
the Universal Pre-kindergarten Fund. The closing fund balance excludes $1.68
billion on deposit in the refund reserve account at the end of the 2001-02
fiscal year.
General Fund receipts, including transfers from other funds,
totaled $41.14 billion for the 2001-02 fiscal year, an increase of $1.26 billion
(3.3 percent) over fiscal year 2000-01 results. Receipts results for fiscal year
2001-02 reflect refund reserve transactions
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that had the effect of reducing personal income tax receipts in the 2001-02
fiscal year and increasing them in the 2002-03 fiscal year. When the refund
reserve is adjusted for the set-aside of $1.07 billion for economic
uncertainties, General Fund receipts and transfers from other funds totaled
$42.21 billion. General Fund disbursements, including transfers to other funds,
totaled $41.22 billion for the 2001-02 fiscal year, an increase of $1.52 billion
(3.8 percent) from the 2000-01 fiscal year.
2000-01 Fiscal Year. The State ended its 2001-01 fiscal year
on March 31, 2001 in balance on a cash basis with a General Fund surplus of
$2.73 billion as reported by DOB. After year-end adjustments described below,
the closing balance in the General Fund was $1.10 billion, a decrease of $69
million from the 1999-2000 fiscal year. Of this balance, $627 million was held
in the TSRF (after a deposit of $80 million in fiscal year 2000-01), $150
million in the CRF, $292 million in the CPF, and $29 million in the Universal
Pre-kindergarten Fund.
The closing fund balance excluded $3.52 billion on deposit in
the tax refund reserve account at the end of the 2000-01 fiscal year. The State
retained $2.65 billion of the $3.52 billion balance for reserves, with $2.4
billion set aside for economic uncertainties and $250 million deposited into the
Debt Reduction Reserve Fund in 2001-02. The remaining balance of $865 million
was comprised of $293 million in resources to pay for costs incurred in 2000-01
but disbursed in 2001-02, $521 million from the Local Government Assistance
Corporation ("LGAC") that was used to pay tax refunds during fiscal year 2001-02
and $51 million in additional funds used to pay refunds related to the Earned
Income Tax Credit and the Dependent Care Tax Credit.
The 2000-01 General Fund closing balance also excluded $1.2
billion that was on deposit in the School Tax Relief ("STAR") Special Revenue
Fund at the end of the 2000-01 fiscal year (to meet a portion of the STAR
payments in fiscal year 2001-02) and $250 million on deposit in the Debt
Reduction Reserve Fund ("DRRF") for debt reduction in fiscal year 2001-02.
General Fund receipts, including transfers from other funds,
totaled $39.88 billion for the 2000-01 fiscal year, an increase of $2.49 million
(6.7 percent) over fiscal year 1999-2000 results. General Fund disbursements,
including transfers to other funds, totaled $39.70 billion for the 2000-01
fiscal year, an increase of $2.53 billion (6.8 percent) from the 1999-2000
fiscal year.
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1999-00 Fiscal Year. The State ended its 1999-2000 fiscal year
in balance on a cash basis, with a General Fund cash-basis surplus of $1.51
billion as reported by DOB. As in recent years, strong growth in receipts above
forecasted amounts produced most of the year-end surplus. Spending was also
modestly below projections, further adding to the surplus.
The State reported a closing balance of $1.17 billion in the
General Fund, an increase of $275 million over the closing balance from the
prior year. The balance was held in four accounts within the General Fund: the
TSRF, the CRF, the DRRF and the CPF. The balance is comprised of $547 million in
the TSRF after a deposit of $74 million in 1999-2000; $107 million in the CRF;
$250 million in the DRRF; and $263 million in the CPF.
The closing fund balance excludes $3.97 billion that the State
deposited into the tax refund reserve account at the close of 1999-2000 to pay
for tax refunds in 2000-01 of which $521 million was made available as a result
of the LGAC financing program and was required to be on deposit as of March 31,
2000. The tax refund reserve account transaction has the effect of decreasing
reported personal income tax receipts in 1999-2000, while increasing reported
receipts in 2000-01.
General Fund receipts and transfers from other funds (net of
tax refund reserve account activity) for the 1999-2000 fiscal year totaled
$37.40 billion, an increase of 1.6 percent over 1998-99. General Fund
disbursements and transfers to other funds totaled $37.17 billion, an increase
of 1.6 percent from the prior fiscal year.
Debt Limits and Outstanding Debt. There are a number of
methods by which the State of New York may incur debt. The State may issue
general obligation bonds. Under the State Constitution, the State may not, with
limited exceptions for emergencies, undertake long-term general obligation
borrowing (i.e., borrowing for more than one year) unless the borrowing is
authorized in a specific amount for a single work or purpose by the Legislature
and approved by the voters. There is no constitutional limitation on the amount
of long-term general obligation debt that may be so authorized and subsequently
incurred by the State. However, the Debt Reform Act of 2000 (the "Debt Reform
Act") imposes statutory limitations on new State-supported debt outstanding,
which apply to general obligations bonds as well as other State-supported bonds
issued on and after April 1, 2000. The State Constitution also provides that
general obligation bonds must be paid in equal annual installments or
installments that result in substantially level or declining debt service
payments, within 40 years after issuance, and beginning not more than one year
after issuance of such bonds. General obligation housing bonds must be paid
within 50 years after issuance, commencing no more than three years after
issuance. However, the Debt Reform Act of 2000 limits the maximum term of
State-supported bonds, including general obligation bonds, to thirty years.
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The Debt Reform Act implemented statutory initiatives intended
to improve the State's borrowing practices. The Debt Reform Act imposes
phased-in caps on new debt outstanding and new debt service costs. The Act also
limited the use of debt to capital works and purposes only.
The cap on new State-supported debt outstanding began at 0.75
percent of personal income in 2000-01 and is gradually increasing until it is
fully phased-in at 4 percent of personal income in 2010-11. Similarly, the cap
on new State-supported debt service costs began at 0.75 percent of total
governmental funds receipts on 2000-01 and is gradually increasing until it is
fully phased at 5 percent in 2013-14.
The Debt Reform Act requires the limitations on the issuance
of State-supported debt and debt services costs to be calculated by October 31
of each year and reported in the quarterly Financial Plan Update most proximate
to October 31st of each year. If the calculations for new State-supported debt
outstanding and debt service costs are less than the State-supported debt
outstanding and debt service costs permitted under the Debt Reform Act, new
State-supported debt may continue to be issued. However, if either the debt
outstanding or the debt service cap is met or exceeded, the State would be
precluded from contracting new State-supported debt until the next annual cap
calculation is made and State-supported debt is found to be within the
appropriate limitations. The DOB expects that the prohibition on issuing new
State-supported debt if the caps are met or exceeded will provide an incentive
to treat the debt caps as absolute limits that should not be reached, and
therefore DOB intends to manage subsequent capital plans and issuance schedules
under these limits.
Pursuant to the provisions of the Debt Reform Act, the first
calculation of the Debt Reform Act's limitations was reported in the Financial
Plan Update most proximate to October 31, 2001. For the 2001-02 fiscal year,
both caps are set at 1.25 percent. On October 30, 2002, the State reported that
it was in compliance with both debt caps, with new debt outstanding at 0.67
percent of personal income and new debt service at 0.36 percent of total
governmental receipts. The DOB expects that debt outstanding and debt service
costs for the 2002-03 fiscal year will also be within the statutory caps.
The State may undertake short-term borrowings without voter
approval (i) in anticipation of the receipt of taxes and revenues, by issuing
tax and revenue anticipation notes, and (ii) in anticipation of the receipt of
proceeds from the sale of duly authorized but unissued general obligation bonds,
by issuing bond anticipation notes. The State may also, pursuant to specific
constitutional authorization, directly guarantee certain obligations of the
State of New York's authorities and public benefit corporations ("Authorities").
The State has never been called upon to make any direct payments pursuant to any
such guarantees. Payments of debt service on New York State general obligation
and New York State-guaranteed bonds and notes are legally enforceable
obligations of the State of New York.
State Finance Law requires the State to update its five-year
Capital Program and Financing Plan (the "Plan") within 90 days after the
enactment of the State Budget. DOB issued an update to the Plan covering the
years 2002-03 through 2006-07 on August
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16, 2002. Over the five-year Plan, annual debt issuances are expected to average
$3.1 billion to support average annual capital projects spending of $5.1
billion, with the remainder financed with State and federal pay-as-you-go
resources. Total State-supported debt service costs are projected to increase
from $3.65 billion in 2002-03 to $4.75 billion in 2006-07, an average annual
increase of 6.8 percent, and total State-supported debt outstanding is expected
to increase from $39.0 billion in 2002-03 to $41.9 billion in 2006-07, an
average annual increase of 1.8 percent.
In 2001, legislation was enacted to provide for the issuance
by certain State authorities of State Personal Income Tax Revenue Bonds, which
are expected to become the primary financing vehicle for a broad range of
State-supported debt programs authorized to be secured by service contract or
lease-purchase payments. These State Personal Income Tax Revenue Bonds are
expected to reduce borrowing costs by improving the marketability and
creditworthiness of State-supported obligations and by permitting the
consolidation of multiple bonding programs to reduce administrative costs.
The legislation provides that 25 percent of personal income
tax receipts (excluding refunds owed to taxpayers and deposits to the School Tax
Relief Fund) be deposited to the Revenue Bond Tax Fund for purposes of making
debt service payments on these bonds, with excess amounts returned to the
General Fund. In the event that (i) the State Legislature fails to appropriate
amounts required to make all debt service payments on the State Personal Income
Tax Revenue Bonds or (ii) having been appropriated and set aside pursuant to a
certificate of the Director of the Budget, financing agreement payments have not
been made when due on the bonds, the legislation requires that personal income
tax receipts continue to be deposited to the Revenue Bond Tax Fund until amounts
on deposit in the Fund equal the greater of 25 percent of annual personal income
tax receipts or $6 billion.
The State issued its first State Personal Income Tax Revenue
Bonds (in an aggregate principal amount of $225 million) on May 9, 2002.
The State employs additional long-term financing mechanisms,
lease-purchase and contractual-obligation financings, which involve obligations
of public authorities or municipalities that are State-supported but are not
general obligations of the State. Under these financing arrangements, certain
public authorities and municipalities have issued obligations to finance the
construction and rehabilitation of facilities or the acquisition and
rehabilitation of equipment, and expect to meet their debt service requirements
through the receipt of rental or other contractual payments made by the State.
Although these financing arrangements involve a contractual agreement by the
State to make payments to a public authority, municipality or other entity, the
State's obligation to make such payments is generally expressly made subject to
appropriation by the Legislature and the actual availability of money to the
State for making the payments. The State has also entered into a
contractual-obligation financing arrangement with the LGAC to restructure the
way the State makes certain local aid payments.
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On January 13, 1992, S&P reduced its ratings on the State's
general obligation bonds from A to A- and, in addition, reduced its ratings on
the State's moral obligation, lease purchase, guaranteed and contractual
obligation debt. On August 28, 1997, S&P revised its ratings on the State's
general obligation bonds from A- to A and revised its ratings on the State's
moral obligation, lease purchase, guaranteed and contractual obligation debt. On
March 5, 1999, S&P affirmed its A rating on the State's outstanding bonds. On
March 10, 2000, S&P assigned its A+ rating on New York State's long-term general
obligations. On December 19, 2000, S&P assigned its AA rating on New York
State's long-term general obligations.
On January 6, 1992, Moody's reduced its ratings on outstanding
limited-liability State lease purchase and contractual obligations from A to
Baa1. On February 28, 1994, Moody's reconfirmed its A rating on the State's
general obligation long-term indebtedness. On March 20, 1998, Moody's assigned
the highest commercial paper rating of P-1 to the short-term notes of the State.
On March 5, 1999, Moody's affirmed its A2 rating with a stable outlook to the
State's general obligations. In June 2000, Moody's revised its outlook on the
State's general obligations from stable to positive. On December 6, 2002,
Moody's changed its outlook on the State's general obligation bonds from stable
to negative but retained its A2 rating.
New York State has never defaulted on any of its general
obligation indebtedness or its obligations under lease-purchase or
contractual-obligation financing arrangements and has never been called upon to
make any direct payments pursuant to its guarantees.
Litigation. The legal proceedings listed below involve State
finances and programs and miscellaneous civil rights, real property, contract
and other tort claims in which the State is a defendant and the potential
monetary claims against the State are deemed to be material, generally in excess
of $100 million. These proceedings could adversely affect the financial
condition of the State in the 2002-03 fiscal year or thereafter. The State will
describe newly initiated proceedings which the State believes to be material, as
well as any material and adverse developments in the listed proceedings, in
updates or supplements to its Annual Information Statement.
Certain litigation pending against New York State or its
officers or employees could have a substantial or long-term adverse effect on
New York State finances. Among the more significant of these cases are those
that involve (1) the validity of agreements and treaties by which various Indian
tribes transferred title to New York State of certain land in central and
upstate New York; (2) certain aspects of New York State's Medicaid policies,
including its rates, regulations and procedures; (3) the validity of certain
provisions of State gaming law; (4) a challenge to the Governor's application of
his constitutional line item veto authority; (5) a challenge to the funding for
New York City public schools; (6) a challenge as to the adequacy of the shelter
allowance granted to recipients of public assistance and (7) the Governor
seeking a judgment declaring that the actions of the Senate and the Assembly in
voting and passing 46
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budget bills violated the State Constitution, because they deleted provisions of
appropriations proposed by the Governor, substituted other appropriations, and
considered other bills prior to taking action on the appropriation bills
submitted by the Governor.
Adverse developments in the proceedings described above, other
proceedings for which there are unanticipated, unfavorable and material
judgments, or the initiation of new proceedings could affect the ability of the
State to maintain a balanced 2002-03 Financial Plan. The State believes that the
proposed 2002-03 Financial Plan includes sufficient reserves to offset the costs
associated with the payment of judgments that may be required during the 2002-03
fiscal year. These reserves include (but are not limited to) amounts
appropriated for Court of Claims payments and projected fund balances in the
General Fund. In addition, any amounts ultimately required to be paid by the
State may be subject to settlement or may be paid over a multi-year period.
There can be no assurance, however, that adverse decisions in legal proceedings
against the State would not exceed the amount of all potential 2002-03 Financial
Plan resources available for the payment of judgments, and could therefore
affect the ability of the State to maintain a balanced 2002-03 Financial Plan.
Although other litigation is pending against New York State,
except as described herein, no current material litigation involves New York
State's Constitutional or statutory authority to contract indebtedness, issue
its obligations, or pay such indebtedness when due, or affects New York State's
power or ability, as a matter of law, to impose or collect significant amounts
of taxes and revenues.
On November 23, 1998, the attorneys general for 46 states
(including New York) entered into a master settlement agreement ("MSA") with the
nation's largest tobacco manufacturers. Under the terms of the MSA, the states
agreed to release the manufacturers from all smoking-related claims in exchange
for specified payments and the imposition of restrictions on tobacco advertising
and marketing. New York is projected to receive $25 billion over 25 years under
the MSA, with payments apportioned among the State (51 percent), counties (22
percent), and New York City (27 percent). The projected payments are an estimate
and subject to adjustments for, among other things, the annual change in the
volume of cigarette shipments and the rate of inflation. From 1999-2000 through
2002-03, the State expects to receive $1.54 billion under the nationwide
settlement with cigarette manufacturers. Counties, including New York City, will
receive settlement payments of $1.47 billion over the same period.
Authorities. The fiscal stability of New York State is
related, in part, to the fiscal stability of its Authorities, which generally
have responsibility for financing, constructing and operating revenue-producing
public benefit facilities. Authorities are not subject to the constitutional
restrictions on the incurrence of debt which apply to the State itself, and may
issue bonds and notes within the amounts of, and as otherwise restricted by,
their legislative
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authorization. The State's access to the public credit markets could be
impaired, and the market price of its outstanding debt may be materially and
adversely affected, if any of the Authorities were to default on their
respective obligations, particularly with respect to debt that is
State-supported or State-related.
Authorities are generally supported by revenues generated by
the projects financed or operated, such as fares, user fees on bridges, highway
tolls and rentals for dormitory rooms and housing. In recent years, however, New
York State has provided financial assistance through appropriations, in some
cases of a recurring nature, to certain of the Authorities for operating and
other expenses and, in fulfillment of its commitments on moral obligation
indebtedness or otherwise, for debt service. This operating assistance is
expected to continue to be required in future years. In addition, certain
statutory arrangements provide for State local assistance payments otherwise
payable to localities to be made under certain circumstances to certain
Authorities. The State has no obligation to provide additional assistance to
localities whose local assistance payments have been paid to Authorities under
these arrangements. However, in the event that such local assistance payments
are so diverted, the affected localities could seek additional State funds.
For purposes of analyzing the financial condition of the
State, debt of the State and of certain public authorities may be classified as
State-supported debt, which includes general obligation debt of the State and
lease-purchase and contractual obligations of public authorities (and
municipalities) where debt service is paid from State appropriations (including
dedicated tax sources, and other revenues such as patient charges and dormitory
facilities rentals). In addition, a broader classification, referred to as
State-related debt, includes State-supported debt, as well as certain types of
contingent obligations, including moral obligation financings, certain
contingent contractual-obligation financing arrangements, and State-guaranteed
debt described above, where debt service is expected to be paid from other
sources and State appropriations are contingent in that they may be made and
used only under certain circumstances.
New York City and Other Localities. The fiscal health of the
State may also be affected by the fiscal health of New York City, which
continues to receive significant financial assistance from the State. State aid
contributes to the city's ability to balance its budget and meet its cash
requirements. The State may also be affected by the ability of the City, and
certain entities issuing debt for the benefit of the city, to market their
securities successfully in the public credit markets.
On September 11, 2001, two hijacked passenger jetliners flew
into the world Trade Center, resulting in a substantial loss of life,
destruction of the World Trade Center, and damage to other buildings in the
vicinity. Trading on the major New York stock exchanges was suspended until
September 17, 2001, and business in the financial district was interrupted.
Recovery efforts were completed on May 30, 2002.
Recovery, cleanup, and repair efforts will result in
substantial expenditures. The U.S. congress passed emergency legislation
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that authorized $40 billion for disaster assistance, increased security costs,
and the rebuilding of infrastructure systems and other public facilities, and
disaster recovery and related activities. Congress and the President have
already appropriated over $10 billion of this amount for disaster assistance in
New York, Pennsylvania and Virginia. The President has submitted a bill to
congress that would bring the total commitment of federal disaster assistance
for New York to $21.4 billion. In addition, the State legislature increased the
financing capacity of the New York City Transitional Finance authority (TFA) by
$2.5 billion to fund recovery costs, and has authorized the TFA to issue debt
without limit as to principal amount that is payable solely from State or
federal aid received on account of the disaster.
On March 9, 2002, the President signed nationwide stimulus
legislation that includes $5.5 billion toward the $21.4 billion commitment, in
the form of temporary tax provisions aimed at creating redevelopment incentives
for businesses located in the Liberty Zone, the area surrounding the World Trade
Center site. The Liberty Zone provisions expand the work opportunity tax credit,
provide a bonus 30 percent depreciation deduction, authorize the issuance of $8
billion in tax-exempt private activity bonds, allow for advance refunding of
certain bonds for facilities in New York city, and increase the small business
expensing limit.
The City is seeking to be reimbursed by the federal government
for all of its direct costs for response and remediation of the World Trade
Center site. These costs are now expected to be substantially below previous
estimates. The City also expects to receive federal funds for costs of economic
revitalization and other needs, not directly payable through the City budget,
relating to the September 11 attack.
The City has achieved balanced operating results for each of
its fiscal years since 1981 as measured by the GAAP standards in force at that
time. The City prepares a four-year financial plan annually and updates it
periodically, and
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prepares a comprehensive annual financial report each October describing its
most recent fiscal year.
In 1975, New York City suffered a fiscal crisis that impaired
the borrowing ability of both the City and New York State. In that year the City
lost access to the public credit markets. The City was not able to sell
short-term notes to the public again until 1979. In 1975, S&P suspended its A
rating of City bonds. This suspension remained in effect until March 1981, at
which time the City received an investment grade rating of BBB from S&P.
On July 2, 1985, S&P revised its rating of City bonds upward
to BBB+ and on November 19, 1987, to A-. On February 3, 1998 and again on May
27, 1998, S&P assigned a BBB+ rating to the City's general obligation debt and
placed the ratings on CreditWatch with positive implications. On March 9, 1999,
S&P assigned its A- rating to Series 1999H of New York City general obligation
bonds and affirmed the A- rating on various previously issued New York City
bonds. On November 27, 2002, S&P changed its outlook for the City's general
obligation debt to "negative" from "stable" but maintained its single-A rating.
Moody's ratings of City bonds were revised in November 1981
from B (in effect since 1977) to Ba1, in November 1983 to Baa, in December 1985
to Baa1, in May 1988 to A and again in February 1991 to Baa1. On February 25,
1998, Moody's upgraded approximately $28 billion of the City's general
obligations from Baa1 to A3. On June 9, 1998, Moody's affirmed its A3 rating to
the City's general obligations and stated that its outlook was stable. In August
2000, Moody's upgraded approximately $26 billion of the City's general
obligations from A3 to A2.
On March 8, 1999, Fitch IBCA upgraded New York City's $26
billion outstanding general obligation bonds from A- to A. Subsequent to that
time, the City's general obligation bonds have not been downgraded by Fitch
IBCA.
In response to the City's fiscal crisis in 1975, the State
took action to assist the City in returning to fiscal stability. Among those
actions, the State established the Municipal Assistance Corporation for the City
of New York ("NYC MAC") to provide financing assistance to the City; the New
York State Financial Control Board (the "Control Board") to oversee the City's
financial affairs; and the Office of the State Deputy Comptroller for the City
of New York ("OSDC") to assist the Control Board in exercising its powers and
responsibilities. A "control period" existed from 1975 to 1986, during which the
City was subject to certain statutorily-prescribed fiscal controls. The Control
Board terminated the control period in 1986 when certain statutory conditions
were met. State law requires the Control Board to reimpose a control period upon
the occurrence, or "substantial likelihood and imminence" of the occurrence, of
certain
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events, including (but not limited to) a City operating budget deficit of more
than $100 million or impaired access to the public credit markets.
Currently, the City and its Covered Organizations (i.e., those
organizations which receive or may receive moneys from the City directly,
indirectly or contingently) operate under the City's Financial Plan. The City's
Financial Plan summarizes its capital, revenue and expense projections and
outlines proposed gap-closing programs for years with projected budget gaps. The
City's projections set forth in its Financial Plan are based on various
assumptions and contingencies, some of which are uncertain and may not
materialize. Unforeseen developments (such as the World Trade Center attack) and
changes in major assumptions could significantly affect the City's ability to
balance its budget as required by State law and to meet its annual cash flow and
financing requirements.
For the 2000-01 and 2001-02 fiscal years (ending June 30), the
City had operating surpluses of $2.9 billion and $682 million, respectively,
before discretionary and other transfers, and achieved balanced operating
results after discretionary and other transfers, in accordance with GAAP. Prior
to its gap-closing program, the City projected a $4.8 billion budget gap for
fiscal year 2003, and even larger gaps in subsequent years. The City's June
Financial Plan, which incorporates the enacted budget for 2002-03, includes
gap-closing actions of $4.8 billion that balance the 2002-03 budget. The
gap-closing program includes resources from agency actions and anticipates
actions to be taken by the federal and State governments and the municipal
unions. The 2002-03 budget also includes $1.5 billion in bond proceeds from the
TFA to mitigate a portion of the lost tax revenues related to the September 11
attack on the World Trade Center. The financial plan does not include wage
increases for any City employees beyond the current round of collective
bargaining.
The City published its First Quarter Modification to its
financial plan on November 14, 2002. The Modification included significantly
lower tax revenue projections, reflecting the continuing decline in financial
services sector profits and other revised forecasts, which will result in
projected gaps to be closed in fiscal years 2002-03 and 2003-04 of approximately
$1.1 billion and $6.4 billion, respectively.
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The City's gap estimates assume a 4 percent loss in pension
fund assets in 2002-03; losses in excess of 3 percent would require the City to
make pension expenditures in excess of budgeted amounts. The gaps do not include
any potential wage increases for police officers and firefighters beyond those
negotiated with the unions representing other uniformed employees or wage
increases for any employees beyond the current round of collective bargaining
that generally ended June 30, 2002.
On July 18, 2002, the Mayor announced he was reserving 7.5
percent of City-funded agency spending, and on October 28, 2002 certain agencies
were directed to identify additional savings aggregating 2 percent in fiscal
year 2002-03 and 4 percent in 2003-04. The City is working to implement a
program that accommodates these reductions by lowering City spending, or
identifying alternative revenue sources, in an aggregate amount of approximately
$1 billion annually starting in fiscal year 2002-03. As a result of the size of
the projected gaps, the First Quarter Modification reflects substantial
additional revenue initiatives, including proposed increased taxes, which
requires City Council and/or State approval, and City proposals for additional
State and federal assistance, to eliminate the projected gap for 2002-03 and to
substantially reduce or eliminate the projected gap for fiscal year 2003-04.
New York City is heavily dependent on New York State and
federal assistance to cover insufficiencies in its revenues. There can be no
assurance that in the future federal and State assistance will enable the City
to make up its budget deficits. Although the City has consistently maintained
balanced budgets and is projected to achieve balanced operating results for the
current fiscal year, there can be no assurance that the gap-closing actions
proposed in its Financial Plan can be successfully implemented or that the City
will maintain a balanced budget in future years without additional State aid,
revenue increases or expenditure reductions. Additional tax increases and
reductions in essential City services could adversely affect the City's economic
base.
The projections set forth in the City's Financial Plan were
based on various assumptions and contingencies which are uncertain and which may
not materialize. Changes in major assumptions could significantly affect the
City's ability to balance its budget as required by State law and to meet its
annual cash flow and financing requirements. Such assumptions and contingencies
include the condition of the regional and local economies, the impact on real
estate tax revenues of the real estate market, wage increases for City employees
consistent with those assumed in the Financial Plan, employment growth, the
ability to implement proposed reductions in City personnel and other cost
reduction initiatives, the ability of the Health and Hospitals Corporation to
take actions to offset reduced revenues, the ability to complete revenue
generating transactions, provision of State and Federal aid and mandate relief
and the impact on City revenues and expenditures of Federal and State welfare
reform and any future legislation affecting Medicare or other entitlements.
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To successfully implement its Financial Plan, the City and
certain entities issuing debt for the benefit of the City must market their
securities successfully. This debt is issued to finance the rehabilitation of
the City's infrastructure and other capital needs and to refinance existing
debt, as well as to finance seasonal needs and recovery costs related to the
attacks on the World Trade Center. In recent years, the State Constitutional
debt limit would have prevented the City from entering into new capital
contracts. To prevent disruptions in the capital program, two actions were taken
to increase the City's capital financing capacity: (i) the State Legislature
created the New York City Transitional Finance Authority in 1997, and (ii) in
1999, the City created TSASC, Inc., a not-for-profit corporation empowered to
issue tax-exempt debt backed by tobacco settlement revenues. The City expects
that these actions will provide sufficient financing capacity to continue its
capital program through City fiscal year 2011.
The City Comptroller and other agencies and public officials
have issued reports and made public statements which, among other things, state
that projected revenues and expenditures may be different from those forecast in
the City's financial plans. It is reasonable to expect that such reports and
statements will continue to be issued and to engender public comment.
Certain localities, in addition to the City, have experienced
financial problems and have requested and received additional New York State
assistance during the last several State fiscal years. The potential impact on
the State of any future requests by localities for additional assistance is not
included in the State's projections of its receipts and disbursements for the
fiscal year.
Municipalities and school districts have engaged in
substantial short-term and long-term borrowings. State law requires the
Comptroller to review and make recommendations concerning the budgets of those
local government units other than New York City that are authorized by State law
to issue debt to finance deficits during the period that such deficit financing
is outstanding.
From time to time, federal expenditure reductions could
reduce, or in some cases eliminate, federal funding of some local programs and
accordingly might impose substantial increased expenditure requirements on
affected localities. If the State, the City or any of the Authorities were to
suffer serious financial difficulties jeopardizing their respective access to
the public credit markets, the marketability of notes and bonds issued by
localities within the State could be adversely affected. Localities also face
anticipated and potential problems resulting from certain pending litigation,
judicial decisions and long-range economic trends. Long-range potential problems
of declining urban population, increasing expenditures and other economic trends
could adversely affect localities and require increasing the State assistance in
the future.
MANAGEMENT OF THE FUNDS
Officers and Boards of Directors/Trustees
The business and affairs of the Global Fixed Income and
Investment Grade Funds are managed by a Board of Directors in accordance with
the laws of the State of Maryland.
73
The business and affairs of the Fixed Income and New York Municipal Funds are
managed by a Board of Trustees in accordance with the laws of The Commonwealth
of Massachusetts. Each Board approves all significant agreements between a Fund
and the companies that furnish services to the Fund, including agreements with
the Fund's Adviser(s), 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 the Funds' Directors/Trustees and
officers, their addresses, present positions and principal occupations during
the past five years and other affiliations are set forth below.
Number of
Portfolios
in Fund
Term of Complex Other
Position(s) Office(1) and Principal Overseen by Directorships
Held with Length of Occupation(s) During Director/ Held by
Name, Address and Age Fund Time Served Past Five Years Trustee Director/Trustee
- ----------------------------------- ------------ ------------- ----------------------- ------------ -------------------
INDEPENDENT DIRECTORS/TRUSTEES
- ----------------------------------- ------------ ------------- ----------------------- ------------ -------------------
Richard H. Francis Director/ Since 1999 Currently retired; 54 --
c/o Credit Suisse Asset Trustee Executive Vice
Management, LLC President and Chief
466 Lexington Avenue Financial Officer of
New York, New York Pan Am Corporation
10017-3140 and Pan American
Age: 70 World Airways, Inc.
from 1988 to 1991
- ----------------------------------- ------------ ------------- ----------------------- ------------ -------------------
Jack W. Fritz Director/ Since 1987 Private investor; 53 Director of Advo,
2425 North Fish Creek Road Trustee for the Consultant and Inc. (direct mail
P.O. Box 1287 Fixed Director of Fritz advertising)
Wilson, Wyoming 83014 Income Broadcasting, Inc.
Fund. and Fritz
- -------------------
(1) Each Director and Officer serves until his or her respective successor
has been duly elected and qualified.
74
Number of
Portfolios
in Fund
Term of Complex Other
Position(s) Office(1) and Principal Overseen by Directorships
Held with Length of Occupation(s) During Director/ Held by
Name, Address and Age Fund Time Served Past Five Years Trustee Director/Trustee
- ----------------------------------- ------------ ------------- ----------------------- ------------ -------------------
Age: 75 Since 1986 Communications
for the New (developers and
York operators of radio
Municipal stations) since 1987
Fund.
Since 1990
for the
Global
Fixed
Income
Fund.
Since 1988
for the
Investment
Grade Fund.
- ----------------------------------- ------------ ------------- ----------------------- ------------ -------------------
Jeffrey E. Garten(2) Director/ Since 1988 Dean of Yale School 53 Director of
Box 208200 Trustee for the of Management and Aetna, Inc.;
New Haven, Connecticut Fixed William S. Beinecke Director of
06520-8200 Income Professor in the Calpine Energy
Age: 56 Fund, the Practice of Corporation;
New York International Trade Director of
Municipal and Finance; CarMax Group
Fund and Undersecretary of (used car dealers)
the Commerce for
Investment International Trade
Grade from November 1993 to
Fund.. October 1995;
Since 1990 Professor at Columbia
for the University from
Global September 1992 to
Fixed November 1993
Income Fund.
- ----------------------------------- ------------ ------------- ----------------------- ------------ -------------------
Peter F. Krogh Director/ Since 2001 Dean Emeritus and 53 Member of the
301 ICC Trustee Distinguished Board of The
Georgetown University Professor of Carlisle
Washington, DC 20057 International Affairs Companies Inc.;
- ---------------------
(2) Mr. Garten was initially appointed as a Director/Trustee on February
6, 1998. He resigned as Director/Trustee on February 3, 2000 and was
subsequently reappointed on December 21, 2000.
75
Number of
Portfolios
in Fund
Term of Complex Other
Position(s) Office(1) and Principal Overseen by Directorships
Held with Length of Occupation(s) During Director/ Held by
Name, Address and Age Fund Time Served Past Five Years Trustee Director/Trustee
- ----------------------------------- ------------ ------------- ----------------------- ------------ -------------------
Age: 66 at the Edmund A. Member of
Walsh School of Selection
Foreign Service, Committee for
Georgetown Truman Scholars
University; Moderator and Henry Luce
of PBS foreign Scholars; Senior
affairs television Associate of
series Center for
Strategic and
International
Studies; Trustee
of numerous world
affairs
organizations
- ----------------------------------- ------------ ------------- ----------------------- ------------ -------------------
James S. Pasman, Jr. Director/ Since 1999 Currently retired; 55 Director of
c/o Credit Suisse Asset Trustee President and Chief Education
Management, LLC Operating Officer of Management Corp.
466 Lexington Avenue National InterGroup,
New York, New York Inc. (holding
10017-3140 company) from April
Age: 71 1989 to March 1991;
Chairman of Permian
Oil Co. from April
1989 to March 1991
- ----------------------------------- ------------ ------------- ----------------------- ------------ -------------------
Steven N. Rappaport Director/ Since 1999 Partner of Lehigh 54
Lehigh Court, LLC Trustee Court, LLC since July
40 East 52nd Street 2002; President of
New York, New York 10022 SunGard Securities
Finance, Inc. from
2001 to July
2002; President
76
Number of
Portfolios
in Fund
Term of Complex Other
Position(s) Office(1) and Principal Overseen by Directorships
Held with Length of Occupation(s) During Director/ Held by
Name, Address and Age Fund Time Served Past Five Years Trustee Director/Trustee
- ----------------------------------- ------------ ------------- ---------------------- ------------ -----------------
Age: 54 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(3) Director/ Since 1999 Co-Managing Partner, 60 --
Steinberg Priest & Trustee Steinberg Priest &
Sloane Capital Management Sloane Capital
12 East 49th Street Management since
12th Floor March 2001; Chairman
New York, New York 10017 and Managing Director
- ---------------------
(3) Mr. Priest is a Director who is an "interested person" of the Funds as
defined in the 1940 Act, because he provides consulting services to CSAM.
77
Number of
Portfolios
in Fund
Term of Complex Other
Position(s) Office(1) and Principal Overseen by Directorships
Held with Length of Occupation(s) During Director/ Held by
Name, Address and Age Fund Time Served Past Five Years Trustee Director/Trustee
- ---------------------------------- ------------ ------------- ----------------------- ------------ -------------------
Age: 61 of CSAM from 2000 to
February 2001, Chief
Executive Officer and
Managing Director of
CSAM from 1990 to 2000
- ---------------------------------- ------------ ------------- ----------------------- ------------ -------------------
OFFICERS
- ---------------------------------- ------------ ------------- ----------------------- ------------ -------------------
Laurence R. Smith Chairman Since 2002 Managing Director and -- --
Credit Suisse Asset Global Chief
Management, LLC Investment Officer of
466 Lexington Avenue CSAM; Associated with
New York, New York J.P. Morgan
10017-3140 Investment Management
Age: 4 from 1981 to 1999;
Officer of other
Credit Suisse Funds
- ---------------------------------- ------------- ------------- ----------------------- ------------ -------------------
Hal Liebes, Esq. Vice Since 1999 Managing Director and -- --
Credit Suisse Asset President Global General
Management, LLC and Secretary Counsel of CSAM;
466 Lexington Avenue Associated with
New York, New York Lehman Brothers, Inc.
10017-3140 from 1996 to 1997;
Age: 38
78
Number of
Portfolios
in Fund
Term of Complex Other
Position(s) Office(1) and Principal Overseen by Directorships
Held with Length of Occupation(s) During Director/ Held by
Name, Address and Age Fund Time Served Past Five Years Trustee Director/Trustee
- ----------------------------------- ------------- ------------- ----------------------- ------------ -------------------
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
CSAMSI and
other Credit
Suisse Funds
- ----------------------------------- ------------- ------------- ----------------------- ------------ -------------------
Michael A. Pignataro Treasurer Since 1999 Director and Director -- --
Credit Suisse Asset and Chief of Fund
Management, LLC Financial Administration of
466 Lexington Avenue Officer CSAM; Associated with
New York, New York CSAM since 1984;
10017-3140 Officer of
Age: 43
79
Number of
Portfolios
in Fund
Term of Complex Other
Position(s) Office(1) and Principal Overseen by Directorships
Held with Length of Occupation(s) During Director/ Held by
Name, Address and Age Fund Time Served Past Five Years Trustee Director/Trustee
- ----------------------------------- -------------- ------------- ---------------------- ------------ -------------------
other
Credit Suisse Funds
- ----------------------------------- -------------- ------------- ---------------------- ------------ -------------------
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
10017-3140 law firm of Swidler
Age: 36 Berlin Shereff
Friedman LLP from
1996 to 2000; Officer
of other Credit
Suisse
80
Number of
Portfolios
in Fund
Term of Complex Other
Position(s) Office(1) and Principal Overseen by Directorships
Held with Length of Occupation(s) During Director/ Held by
Name, Address and Age Fund Time Served Past Five Years Trustee Director/Trustee
- ----------------------------------- -------------- ------------- ---------------------- ------------ -------------------
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
10017-3140 Credit Suisse Funds
Age: 39
- ----------------------------------- -------------- ------------- ---------------------- ------------ -------------------
Rocco A. DelGuercio Assistant Since 1999 Vice President and -- --
Credit Suisse Asset Treasurer Administrative
Management, LLC Officer of CSAM;
466 Lexington Avenue Associated with CSAM
New York, New York since June 1996;
10017-3140 Assistant Treasurer,
Age: 39 Bankers Trust Co. --
Fund Administration
81
Number of
Portfolios
in Fund
Term of Complex Other
Position(s) Office(1) and Principal Overseen by Directorships
Held with Length of Occupation(s) During Director/ Held by
Name, Address and Age Fund Time Served Past Five Years Trustee Director/Trustee
- ----------------------------------- -------------- ------------- --------------------- ------------ -------------------
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 -- --
Credit Suisse Asset Treasurer President - Fund
Management, LLC Administration of
466 Lexington Avenue CSAM since April
New York, New York 2000; Assistant Vice
10017-3140 President, Deutsche
Age: 39 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
82
Number of
Portfolios
in Fund
Term of Complex Other
Position(s) Office(1) and Principal Overseen by Directorships
Held with Length of Occupation(s) During Director/ Held by
Name, Address and Age Fund Time Served Past Five Years Trustee Director/Trustee
- ----------------------------------- -------------- ------------- --------------------- ------------- -------------------
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 Officer of CSAM from
10017-3140 March 1998 to
Age: 37 December 2000;
Assistant Treasurer
of Bankers Trust Co.
from April 1994 to
March 1998; Officer
of other Credit
Suisse Funds
83
OWNERSHIP IN SECURITIES OF THE FUND AND FUND COMPLEX
As reported to the Fund(s), 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/Trustee in Family of
Name of Director/Trustee the Fund*(4) Investment Companies*,(4)
- ---------------------------------------- -------------------------------------- --------------------------------------
INDEPENDENT DIRECTORS/TRUSTEES
- ---------------------------------------- -------------------------------------- --------------------------------------
Richard H. Francis Investment Grade - A
New York Municipal - A
Fixed Income - A E
Global Fixed Income - A
- ---------------------------------------- -------------------------------------- --------------------------------------
Jack W. Fritz Investment Grade - A
New York Municipal - A
Fixed Income - E E
Global Fixed Income - A
- ---------------------------------------- -------------------------------------- --------------------------------------
Jeffrey E. Garten Investment Grade - A
New York Municipal - A
Fixed Income - A A
Global Fixed Income - A
- ---------------------------------------- -------------------------------------- --------------------------------------
Peter F. Krogh Investment Grade - A
New York Municipal - A
Fixed Income - A D
Global Fixed Income - A
- ---------------------------------------- -------------------------------------- --------------------------------------
James S. Pasman, Jr. Investment Grade - A
New York Municipal - A
Fixed Income - A C
Global Fixed Income - A
- ---------------------------------------- -------------------------------------- --------------------------------------
Steven N. Rappaport Investment Grade - B D
New York Municipal - B
Fixed Income - B
Global Fixed Income - B
- -----------------
(4) Beneficial ownership is determined in accordance with Rule 16a-1(a)(2)
under the Securities Exchange Act of 1934.
84
Aggregate Dollar Range of Equity
Securities in all Registered
Investment Companies Overseen by
Dollar Range of Equity Securities in Director/Trustee in Family of
Name of Director/Trustee the Fund*(4) Investment Companies*,(4)
- ---------------------------------------- -------------------------------------- --------------------------------------
INTERESTED DIRECTOR/TRUSTEE
- ---------------------------------------- -------------------------------------- --------------------------------------
William W. Priest Investment Grade - A
New York Municipal - A
Fixed Income - A A
Global Fixed Income - 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
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
85
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 4 times during the fiscal year
ended October 31, 2002.
The Nominating Committee is charged with the duty of making
all nominations for Independent Directors/Trustees 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.
No employee of CSAM, State Street Bank and Trust Company and
CSAMSI, the Funds' co-administrators, or any of their affiliates, receives any
compensation from a Fund for acting as an officer or director of the Fund. Each
Director/Trustee 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/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.
86
Directors'/Trustees' Total Compensation For the Fiscal Year Ended October 31,
2002
Total Number
of Funds for
Total Total Total which
Compensation Compensation Total Compensation All Investment Director/
from from Compensation from Global Companies Trustee
Name of Director/ Investment New York from Fixed Fixed Income in the CSAM Serves Within
Trustee Grade Fund Municipal Fund Income Fund Fund Fund Complex Fund Complex
- ----------------- ------------- -------------- ------------- ------------ -------------- --------------
William W. None None None None None 60
Priest*
Richard H. $3,562.50 $3,562.50 $3,562.50 $3,562.50 $110,749.50 54
Francis
Jack W. Fritz $3,312.50 $3,312.50 $3,312.50 $3,312.50 $94,374.48 53
Jeffrey E. Garten $3,312.50 $3,312.50 $3,312.50 $3,312.50 $97,499.50 53
Peter F. Krogh $3,312.50 $3,312.50 $3,312.50 $3,312.50 $99,099.50 53
James S. Pasman, $3,562.50 $3,562.50 $3,562.50 $3,562.50 $138,599.50 55
Jr.
Steven N. $3,862.50 $3,862.50 $3,862.50 $3,862.50 $117,544.76 54
Rappaport
- ------------------
* 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.
As of January 24, 2003, the Directors/Trustees and officers of
each Fund as a group owned of record less than 1% of each class of the shares of
each Fund.
INVESTMENT
87
ADVISORY AGREEMENT.
88
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
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 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. The principal
business address of Credit Suisse is Paradeplatz 8, CH8070, Zurich, Switzerland.
The Advisory Agreement between each Fund and CSAM continues in
effect from year to year 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.
89
Pursuant to the Advisory Agreements, 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 Agreements, CSAM pays
the compensation, fees and related expenses of all Directors/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 Directors/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 Directors/Trustees of the Fund; and any extraordinary
expenses.
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 a 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.
A Fund or CSAM may terminate the respective Advisory Agreement
on 60 days' written notice without penalty. Each Advisory Agreement will
terminate automatically in the event of its assignment (as defined in the 1940
Act).
For its services
90
to the Fixed Income Fund, Global Fixed Income Fund, Investment Grade Fund and
New York Municipal Fund, CSAM is paid (before any voluntary waivers or
reimbursements) a fee computed daily and paid monthly calculated at an annual
rate of .50%, 1.00%, .50% and .40%, respectively, of the Fund's average daily
net assets. CSAM may voluntarily waive a portion of its fees from time to time
and temporarily limit the expenses to be borne by the Fund.
For the fiscal year ended October 31, 2000, 2001 and 2002,
each Fund paid CSAM, and CSAM waived fees and/or reimbursed expenses of each
Fund under the Advisory Agreement as follows(portion of fees waived, if any, are
noted in parentheses next to the amount paid):
Fiscal year ended Fiscal year ended Fiscal year ended
October 31, 2000 October 31, 2001 October 31, 2002
-------------------------- -------------------------- --------------------------
Investment Grade Fund $ 261,469 ($143,332) $ 38,414 ($210,812) 0 ($330,953)
New York Municipal Fund $ 312,719 ($ 85,541) $ 226,918 ($151,434) $142,804 ($241,130)
Fixed Income Fund $1,681,883 ($ 81,285) $1,420,017 ($504,459) $866,096 ($663,228)
Global Fixed Income Fund $1,214,634 ($619,726) $ 513,355 ($707,054) $243,582 ($827,266)
SUB-ADVISORY AGREEMENTS. The Global Fixed Income Fund has
entered into Sub-Investment Advisory Agreements with CSAM and each of CSAM's
United Kingdom affiliate ("CSAM U.K.") and CSAM's Japanese affiliate ("CSAM
Japan"), each of which is named Credit Suisse Asset Management Limited (each of
CSAM U.K. and CSAM Japan 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 Fund in accordance with the Fund's Articles
of Incorporation, 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
91
approved by the Board. The 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"). 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 advisers 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.
Under the Sub-Advisory Agreements with CSAM U.K. and CSAM
Japan, CSAM (not the Fund) pays each of CSAM U.K. and CSAM Japan an annual fee
of $250,000 for services rendered with respect to the 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 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
the Fund for CSAM U.K. and CSAM Japan was $ 12,032.38 and $12,111.47,
respectively.
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 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 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
92
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 Agreements, 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 each 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 each Fund. The Board of
Directors/Trustees also considered each 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 Boards reviewed the profitability to CSAM and its
affiliates of their services to each Fund and considered whether economies of
scale in the provision of services to the Fund were being passed along to
shareholders. The Boards 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 Boards 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 applicable Board concluded that the
Advisory Agreement was in the best interests of the Fund and its shareholders.
No single factor reviewed by the Boards was identified by the Boards as the
principal factor in determining whether to approve the Advisory Agreements.
93
The Independent Directors/Trustees were advised by separate independent legal
counsel throughout the process.
In approving each of the Sub-Advisory Agreements with CSAM
U.K. and CSAM Japan, the Board of the Global Fixed Income Fund considered
various matters and materials provided by CSAM, CSAM U.K. and CSAM Japan. The
Board considered, primarily, the benefits to the Fund of retaining CSAM's United
Kingdom and Japanese affiliates given the increased complexity of the domestic
and international securities markets, specifically that retention of CSAM U.K.
and CSAM Japan would expand the universe of companies and countries from which
investment opportunities could be sought and enhance the ability of the Fund to
obtain best price and execution on trades in international markets. The Board of
the Fund also carefully considered the particular expertise of CSAM U.K. and
CSAM Japan 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. and CSAM Japan. In
addition, the Board of the 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. and CSAM Japan would be
paid by CSAM, not the Fund, and, accordingly, that the retention of CSAM U.K.
and CSAM Japan would not increase the fees or expenses otherwise incurred by the
Fund's shareholders. After requesting and reviewing such information as they
deemed necessary, the Board of the 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
Directors/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 each Fund (the "CSAMSI Co-Administration
Agreements" and the "State Street Co-Administration Agreements," respectively).
CSAMSI became co-administrator to each Fund on November 1,
1999. For the services provided by CSAMSI under the CSAMSI Co-Administration
Agreements, 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.
For the fiscal years ended October 31, 2000, 2001 and 2002,
the Funds paid CSAMSI administration fees and CSAMSI waived fees and/or
reimbursed expenses as follows (waivers and reimbursements, if any, are shown in
parentheses next to the amounts earned):
94
Fiscal year ended Fiscal year ended Fiscal year ended
October 31, 2000 October 31, 2001 October 31, 2002
---------------- ---------------- ----------------
Investment Grade Fund $ 52,294 $ 49,845 $ 47,066
New York Municipal Fund $ 78,180 $ 94,588 $ 95,983
Fixed Income Fund $336,377 $406,784 $305,865
Global Fixed Income Fund $121,463 $122,041 $107,085
State Street became co-administrator to the Fixed Income Fund
on July 1, 2002 and to the Investment Grade Fund, the New York Municipal Fund
and the Global Fixed Income Fund on August 1, 2002. For the services provided by
State Street under the State Street Co-Administration Agreements, each Fund pays
State Street a fee calculated at the annual rate of its pro-rated share of .050%
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 .020% of the Fund Complex's average daily net
assets in excess of $10 billion, exclusive of out-of-pocket expenses.
For the fiscal period ended October 31, 2002, the Funds paid
State Street administration fees and State Street waived fees and/or reimbursed
expenses as follows (waivers and reimbursements, if any, are shown in
parentheses next to the amounts earned):
Fiscal period ended
October 31, 2002
----------------
Investment Grade Fund $10,387
New York Municipal Fund $21,359
Fixed Income Fund $74,689
Global Fixed Income Fund $31,481
PFPC Inc. ("PFPC"), an indirect, wholly owned subsidiary of
PNC Financial Services Group, served as a co-administrator to the Fixed Income
Fund prior to July 1, 2002 and to the Investment Grade Fund, the New York
Municipal Fund and the Global Fixed Income Fund prior to August 1, 2002. For the
services provided by PFPC under the PFPC Co-Administration Agreement, each Fund
paid PFPC a fee calculated at an annual rate of .07% of the Fund's first $150
million in average daily net assets, .06% of the Fund's next $150 million in
average daily net assets, and .05% of the Fund's average daily net assets
exceeding $300 million, exclusive of out-of-pocket expenses.
95
For the fiscal years ended October 31, 2000 and 2001 and the
fiscal period ended May 31, 2002, the Funds paid PFPC administration fees and
PFPC waived fees and/or reimbursed expenses as follows (waivers and
reimbursements, if any, are shown in parentheses next to the amounts earned):
Fiscal year ended Fiscal year ended Fiscal year ended
October 31, 2000 October 31, 2001 October 31, 2002
----------------------- --------------------- -----------------------
Investment Grade Fund $ 33,364 ($20,148) $ 38,903 $ 27,763
New York Municipal Fund $ 51,820 $ 75,195 $ 56,738
Fixed Income Fund $193,192 $262,101 $145,579
Global Fixed Income Fund $ 72,613 $ 93,593 $ 62,421
96
Code of Ethics
The Funds, CSAM, CSAM U.K., CSAM Japan 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 a 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 are any
pending orders in that security by the Fund; and (4) Covered Persons may not
invest in initial public offerings.
The Board of Directors/Trustees 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 serves as custodian of each Fund's non-U.S.
assets and U.S. assets. Pursuant to a custodian agreement (the "Custodian
Agreement"), State Street (i) maintains a separate account or accounts in the
name of each Fund, (ii) holds and transfers portfolio securities on account of
each Fund, (iii) makes receipts and disbursements of money on behalf of each
Fund, (iv) collects and receives all income and other payments and distributions
for the account of each Fund's portfolio securities and (v) makes periodic
reports to the Board of Directors/Trustees concerning each Fund's custodial
arrangements. With approval of the Board, State Street is authorized to select
one or more foreign and domestic banking institutions and securities
depositories to serve as sub-custodian on behalf of each Fund. 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 each Fund, (ii)
addresses and mails all communications by each Fund 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
Board of Directors/Trustees concerning the transfer agent's operations with
respect to each Fund. BFDS's principal business address is 2 Heritage Drive,
North Quincy, Massachusetts 02171.
97
Organization of the Funds
The Funds are open-end management investment companies. The
Fixed Income and New York Municipal Funds were organized in 1987 and 1986,
respectively, under the laws of The Commonwealth of Massachusetts and each is a
business entity commonly known as a "Massachusetts business trust." The Global
Fixed Income and Investment Grade Funds were incorporated in 1990 and 1988,
respectively, under the laws of the State of Maryland and each is an entity
commonly known as a "Maryland corporation." Each of the Funds is "diversified"
within the meaning of the 1940 Act, other than the Global Fixed Income and New
York Municipal Funds, which are "non-diversified." The Investment Grade Fund has
four classes of shares, Common Shares, Class A Shares, Class B Shares and Class
C Shares. The New York Municipal Fund has two classes of shares, Common Shares
and Class A Shares. The Fixed Income Fund has five classes of shares, Common
Shares, Advisor Shares, Class A Shares, Class B Shares and Class C Shares. The
Global Fixed Income Fund has three classes of shares, Common Shares, Advisor
Shares and Class A Shares. The Global Fixed Income Fund's Advisor Shares are
closed to new investments. Unless otherwise indicated, references to a "Fund"
apply to each class of shares of that Fund.
The New York Municipal Fund's Agreement and Declaration of
Trust and the Global Fixed Income Fund's and Investment Grade Fund's charter
authorizes the Board of each Fund to issue full and fractional shares of common
stock, $.001 par value per share ("Common Stock"), of which one billion shares
are designated Common Shares and two billion shares are designated Advisor
Shares and one billion shares are designated Class A Shares. The Fixed Income
Fund's Agreement and Declaration of Trust (together with the New York Municipal
Fund's Agreement and Declaration of Trust, the "Trust Agreements") and the
Investment Grade Fund's Articles of Incorporation each 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. On December 12, 2001, each Fund's Common Class was
closed to new investments. Under each Fund's Charter, the Board may classify or
reclassify any unissued shares of the Fund into one or more additional classes
by setting or changing in any one or more respects their relative rights, voting
powers, restrictions, limitations as to dividends, qualifications and terms and
conditions of redemption. The Board may similarly classify or reclassify any
class of its shares into one or more series and, without shareholder approval,
may increase the number of authorized shares of the Funds.
Massachusetts law provides that shareholders could, under
certain circumstances, be held personally liable for the obligations of the
Fixed Income and New York Municipal Funds. However, the Trust Agreements
disclaim shareholder liability for acts or obligations of a 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
Agreements provide for indemnification from 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
98
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.
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 of a
Fund. Shares are transferable but have no preemptive, conversion or subscription
rights. Because of the higher fees paid by Class A, Class B and Class C shares,
the total return on Class A, Class B and Class C shares can be expected to be
lower than the total return on Common shares. Common class shares can be
purchased only by certain types of investors as outlined in the Common class
Prospectus.
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 Fixed Income Fund and the New York Municipal Fund were
organized under the laws of The Commonwealth of Massachusetts as Massachusetts
business trusts in 1987 and 1986, respectively. In 1992, these Funds changed
their names from "Counsellors Fixed Income Fund" and "Counsellors New York
Municipal Bond Fund" to "Warburg, Pincus Fixed Income Fund" and "Warburg, Pincus
New York Municipal Bond Fund," respectively. On February 28, 1995, the New York
Municipal Fund changed its name to "Warburg, Pincus New York Intermediate
Municipal Fund." The Global Fixed Income Fund and the Intermediate Government
Fund were incorporated under the laws of the State of Maryland in 1990 and 1988,
respectively, under the names "Counsellors Global Fixed Income Fund, Inc." and
"Counsellors Intermediate Maturity Government Fund, Inc.," respectively. On
October 27, 1995 and February 16, 1996, the Funds amended their respective
charters to change their names to "Warburg, Pincus Global Fixed Income Fund,
Inc." and "Warburg, Pincus Intermediate Maturity Government Fund, Inc." On March
26, 2001, the Intermediate Government Fund, the New York Municipal Fund, the
Fixed Income Fund and the Global Fixed Income Fund changed their names to
"Credit Suisse Warburg Pincus Intermediate Maturity Government Fund, Inc.,"
"Credit Suisse Warburg Pincus New York Intermediate Municipal Fund," "Credit
Suisse Warburg Pincus Fixed Income Fund," and "Credit Suisse Warburg Pincus
Global Fixed Income Fund, Inc.," respectively. Effective December 12, 2001, the
"Credit Suisse Warburg Pincus New York Intermediate Municipal Fund," "Credit
Suisse Warburg Pincus Fixed Income Fund," and "Credit Suisse Warburg Pincus
Global Fixed Income Fund, Inc." changed their names to "Credit Suisse New York
Municipal Fund, Inc.," "Credit Suisse Fixed Income Fund, Inc." and "Credit
Suisse Global
99
Fixed Income Fund, Inc.," respectively. Effective December 19, 2001, the "Credit
Suisse Warburg Pincus Intermediate Maturity Government Fund, Inc." changed its
name to "Credit Suisse Investment Grade Fund, Inc."
Distribution and Shareholder Servicing
Distributor. CSAMSI serves as distributor of the Funds' shares
and offers the Fund's shares on a continuous basis. CSAMSI's principal business
address is 466 Lexington Avenue, New York, New York 10017.
Common Shares. Each 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 each Fund pays
CSAMSI under the CSAMSI Co-Administration Agreements a fee calculated at an
annual rate of .25% of the average daily net assets of the Common shares of the
Fund. The fee is in addition to the co-administrative services fee paid by each
Fund under the CSAMSI Co-Administration Agreements and is intended to compensate
CSAMSI, or to enable CSAMSI to compensate other persons ("Service Providers"),
for providing Services (as defined below) to the Funds. Services performed by
CSAMSI under the CSAMSI Co-Administration Agreements or by
100
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
Funds, as set forth in the Common Shares 12b-1 Plan ("Shareholder Services,"
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 Funds' 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 each 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 each 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
obtaining whatever information, analyses and reports with respect to marketing
and promotional activities that each Fund may, from time to time, deem
advisable. In providing compensation for Services in accordance with the Common
Shares Plan, CSAMSI is expressly authorized (i) to make, or cause to be made,
payments to Service Providers reflecting an allocation of overhead and other
office expenses related to providing Services and (ii) to make, or cause to be
made, payments to compensate selected dealers or other authorized persons for
providing any Services.
101
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. Each 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 a 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 Fund.
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 each Fund 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 part of this Fee at rates they would
normally pay to the transfer agent for providing the services.
Advisor Shares. The Fixed Income Fund has 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 will be
governed by a distribution plan (the "Advisor Share 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. Such payments may be paid to
Institutions directly by the Fund or by CSAMSI on behalf of the Fund The Advisor
Share 12b-1 Plan requires the Board, at least quarterly, to receive and review
written reports of amounts expended under the Advisor Share 12b-1 Plan and the
purposes for which such expenditures were made.
102
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 Advisor Class shares
of the Fund. Institutions may also be reimbursed for marketing and other costs.
Additional fees may be up to .25% per year of the value of Fund accounts
maintained by the firm and, in certain cases, may be paid a fee of up to 1.00%
of new assets invested in Advisor Class shares of 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 Funds or their shareholders.
For the fiscal year ended October 31, 2002, the Advisor Class
shares of the Fixed Income Fund paid CSAMSI $88,735 under the Advisor Shares
12b-1 Plan, all of which was spent on advertising, marketing communications,
public relations and people-related and occupancy costs.
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 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. Each of the Investment
Grade and Fixed Income Funds has adopted a Plan of Distribution (the "A, B and C
Shares 12b-1 Plans") for Class A Shares, Class B Shares and Class C Shares of
the Funds, respectively, and the New York Municipal Fund and the Global Fixed
Income Fund each has adopted a Plan of Distribution for Class A Shares, to
permit the Funds to compensate CSAMSI for activities associated with the
distribution of these shares.
103
The Class A Plan currently provides that a service fee of .50%
per year of the average daily net assets of the Class A shares of the Fund 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 of the
Fund will be paid as compensation to CSAMSI. The Class C 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 C
shares of the Fund will be paid as compensation to CSAMSI.
For the fiscal year ended October 31, 2002, the Investment
Grade Fund, the New York Municipal Fund, the Fixed Income Fund and the Global
Fixed Income Fund paid $243, $78, $4,182 and $45, respectively, to CSAMSI under
the Class A Shares 12b-1 Plan. For the fiscal year ended October 31, 2002, the
Investment Grade Fund and the Fixed Income Fund paid $2,941 and $29,042,
respectively, to CSAMSI under the Class B Shares 12b-1 Plan. For the fiscal year
ended October 31, 2002, the Investment Grade Fund and the Fixed Income Fund paid
$542 and $7,721, respectively, to CSAMSI under the Class C Shares 12b-1 Plan.
During the fiscal year ended October 31, 2002, CSAMSI spent
the fees paid under the Investment Grade Fund's A Shares 12b-1 Plan as follows:
Advertising $21
- --------------------------------------------------------------- ------------
Printing and mailing prospectuses for promotional purposes $1,654
- --------------------------------------------------------------- ------------
Payment to broker-dealers $575
- --------------------------------------------------------------- ------------
People-related and occupancy $48
- --------------------------------------------------------------- ------------
Other $18
- --------------------------------------------------------------- ------------
During the fiscal year ended October 31, 2002, CSAMSI spent
the fees paid under the New York Municipal Fund's A Shares 12b-1 Plan as
follows:
Advertising $2
- --------------------------------------------------------------- ------------
Printing and mailing prospectuses for promotional purposes $3,773
- --------------------------------------------------------------- ------------
Payment to broker-dealers $2,140
- --------------------------------------------------------------- ------------
People-related and occupancy $13
- --------------------------------------------------------------- ------------
Other $4
- --------------------------------------------------------------- ------------
104
During the fiscal year ended October 31, 2002, CSAMSI spent
the fees paid under the Fixed Income Fund's A Shares 12b-1 Plan as follows:
Advertising $373
- --------------------------------------------------------------- ------------
Printing and mailing prospectuses for promotional purposes $4,109
- --------------------------------------------------------------- ------------
Payment to broker-dealers $9,034
- --------------------------------------------------------------- ------------
People-related and occupancy $879
- --------------------------------------------------------------- ------------
Other $307
- --------------------------------------------------------------- ------------
During the fiscal year ended October 31, 2002, CSAMSI spent
the fees paid under the Global Fixed Income Fund's A Shares 12b-1 Plan as
follows:
Advertising $7
- --------------------------------------------------------------- ------------
Printing and mailing prospectuses for promotional purposes $2,786
- --------------------------------------------------------------- ------------
Payment to broker-dealers $16
- --------------------------------------------------------------- ------------
People-related and occupancy $11
- --------------------------------------------------------------- ------------
Other $5
- --------------------------------------------------------------- ------------
During the fiscal year ended October 31, 2002, CSAMSI spent
the fees paid under the Investment Grade Fund's B Shares 12b-1 Plan as follows:
Advertising $39
- --------------------------------------------------------------- ------------
Printing and mailing prospectuses for promotional purposes $1,701
- --------------------------------------------------------------- ------------
Payment to broker-dealers $30,195
- --------------------------------------------------------------- ------------
People-related and occupancy $146
- --------------------------------------------------------------- ------------
Other $43
- --------------------------------------------------------------- ------------
During the fiscal year ended October 31, 2002, CSAMSI spent
the fees paid under the Fixed Income Fund's B Shares 12b-1 Plan as follows:
105
Advertising $600
- --------------------------------------------------------------- ------------
Printing and mailing prospectuses for promotional purposes $4,640
- --------------------------------------------------------------- ------------
Payment to broker-dealers $170,551
- --------------------------------------------------------------- ------------
People-related and occupancy $1,514
- --------------------------------------------------------------- ------------
Other $512
- --------------------------------------------------------------- ------------
During the fiscal year ended October 31, 2002, CSAMSI spent
the fees paid under the Investment Grade Fund's C Shares 12b-1 Plan as follows:
Advertising $10
- --------------------------------------------------------------- ------------
Printing and mailing prospectuses for promotional purposes $1,629
- --------------------------------------------------------------- ------------
Payment to broker-dealers $2,384
- --------------------------------------------------------------- ------------
People-related and occupancy $27
- --------------------------------------------------------------- ------------
Other $10
- --------------------------------------------------------------- ------------
During the fiscal year ended October 31, 2002, CSAMSI spent
the fees paid under the Fixed Income Fund's C Shares 12b-1 Plan as follows:
Advertising $174
- --------------------------------------------------------------- ------------
Printing and mailing prospectuses for promotional purposes $3,512
- --------------------------------------------------------------- ------------
Payment to broker-dealers $17,630
- --------------------------------------------------------------- ------------
People-related and occupancy $401
- --------------------------------------------------------------- ------------
Other $158
- --------------------------------------------------------------- ------------
With respect to sales of the Investment Grade and Fixed Income
Fund's Class B, Class C or 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.
106
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, B and C Shares 12b-1
Plans and the Common Shares 12b-1 Plans will continue in effect for so long as
their continuance is separately, 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 12b-1 Plan, the A, B and C
Shares 12b-1 Plans and the Common Shares 12b-1 Plans ("Independent
Directors/Trustees"). Any material amendment of any Advisor Shares 12b-1 Plans,
the A, B and C Shares 12b-1 Plans and the Common Shares 12b-1 Plans would
require the approval of the Board in the same manner. None of the Advisor Shares
12b-1 Plan, the A, B and C Shares 12b-1 Plans and the Common 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 Advisor Shares 12b-1
Plan, A, B and C Shares 12b-1 Plan and the Common Shares 12b-1 Plan 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 12b-1
Plans, the A, B, C 12b-1 Plans and the Common 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 Funds' Boards with periodic reports of
amounts spent under the Common Shares, the Adviser Shares and the Class A, B, C
Shares 12b-1 Plans, as applicable, and the purposes for which the expenditures
were made.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
107
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 a Fund, 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
108
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 a
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 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 Fund. These types of checks may be returned to you
and your purchase order may not be processed.
Class A, B and C Shares. Class A, B and C Shares are designed
for investors seeking the advice of financial representatives and are not
directly offered from the Funds. All purchases of 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):
INVESTMENT GRADE, FIXED INCOME AND GLOBAL FIXED INCOME FUNDS
INITIAL SALES CHARGE -- CLASS A
Amount Purchased As a % of As a % of Commission to Financial
Amount Offering Representative as a % of
Invested Price Offering Price
- ----------------------------------------------- --------------- ---------------- --------------------------------
Less than $50,000 4.99% 4.75% 4.25%
- ----------------------------------------------- --------------- ---------------- --------------------------------
$50,000 to less than $100,000 4.71% 4.50% 4.00%
- ----------------------------------------------- --------------- ---------------- --------------------------------
$100,000 to less than $250,000 3.63% 3.50% 3.25%
- ----------------------------------------------- --------------- ---------------- --------------------------------
$250,000 to less than $500,000 2.56% 2.50% 2.25%
- ----------------------------------------------- --------------- ---------------- --------------------------------
$500,000 to less than $1,000,000 2.04% 2.00% 1.75%
- ----------------------------------------------- --------------- ---------------- --------------------------------
$1,000,000 or more 0* 0 .50%**
- ----------------------------------------------- --------------- ---------------- --------------------------------
* 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 .50% on purchases up to and including $3 million, up to .25% on
the next $47 million and up to .125% on purchase amounts over $50
million.
109
NEW YORK MUNICIPAL FUND
INITIAL SALES CHARGE -- CLASS A
Amount Purchased As a % of As a % of Commission to Financial
Amount Offering Representative as a % of
Invested Price Offering Price
- ----------------------------------------------- --------------- ---------------- --------------------------------
Less than $50,000 3.09% 3.00% 2.75%
- ----------------------------------------------- --------------- ---------------- --------------------------------
$50,000 to less than $100,000 2.04% 2.00% 1.75%
- ----------------------------------------------- --------------- ---------------- --------------------------------
$100,000 to less than $250,000 1.01% 1.00% 0.90%
- ----------------------------------------------- --------------- ---------------- --------------------------------
$250,000 to less than $500,000 0* 0 0.50%**
- ----------------------------------------------- --------------- ---------------- --------------------------------
* On purchases of $250,000 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 .50% on purchases up to and including $3 million, up to .25% on
the next $47 million and up to .125% 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 a Fund as defined in the Securities Act of 1933,
as amended.
110
Investment dealers and other firms provide varying
arrangements for their clients to purchase and redeem a Fund's Class A, B or 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, B or 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. Such firms may
receive compensation from a Fund and/or from CSAMSI or an affiliate for these
services. The Prospectus relating to Class A, B or C Shares should be read in
connection with such firms' material regarding their fees and services.
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 the individual's 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% of 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 or an immediate family member;
o a Uniform Gifts to Minors Act/Uniform Transfer 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 Directors/Trustees of
the Funds, current and former directors or trustees of other investment
companies managed by the Adviser or its affiliates, officers, directors and
full-time employees of the Adviser and of its
111
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 hid 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 registered investment advisers 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 registered investment advisers 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 in such shares; (6) shares purchased for 401(k)
Plans, 403(b) Plans, 457 Plans and employee benefit plans sponsored by an
employer and pension plans; and (7) Class A shares acquired when dividends and
distributions are reinvested in the Fund.
For the fiscal year ended October 31,2002, CSAMSI received
$38,970, $4,211, $4,986 and $11,092 on the sale of Class A shares of the Fixed
Income Fund, Global Fixed Income Fund, the Investment Grade Bond Fund and the
New York Municipal Fund, respectively, of which CSAMSI retained $3,775, $426,
$450 and $474, 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 the Fixed Income Fund, Global Fixed Income
Fund, Investment Grade Bond Fund or the New York Municipal Fund. 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 Investment Grade Bond Fund or the New York Municipal Fund.
For the fiscal year ended October 31, 2002, CSAMSI received $3,958 and $4,436
in contingent deferred sales charges on redemptions of Class B and Class C
shares, respectively, of the Fixed Income Fund.
Redemptions.
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 Investment Grade
and Fixed Income Funds, and certain redemptions of Class A shares of the Funds.
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 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.
112
Each Fund has elected, however, to be governed by Rule 18f-1 under the 1940 Act
as a result of which the 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 the 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 Funds may be subject to a
deferred sales charge.
During the fiscal year ended October 31, 2002, CSAMSI earned
$456, $480, $3,775 and $400, respectively, in commissions on the sale of Class A
shares of the Investment Grade Fund, New York Municipal Fund, Fixed Income Fund
and Global Fixed Income Fund, of which CSAM retained $456, $480, $3,775 and
$400, respectively. CSAMSI received no contingent deferred sales charges on
redemptions of Class A shares of any of the Funds.
During the fiscal year ended October 31, 2002, CSAMSI received
$800,799 and $3,785,384 on contingent deferred sales charges on redemptions of
Class B shares of the Investment Grade Fund and the Fixed Income Fund,
respectively.
During the fiscal year ended October 31, 2002, CSAMSI received
$219,995.60 and $1,174,087 on contingent deferred sales charges on redemptions
of Class C shares of the Investment Grade Fund and the Fixed Income Fund,
respectively.
113
Special Provisions Applicable to the Investment Grade Fund and
Fixed Income Fund Class A, B and C Shares Only.
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 Invested or Redemption
Year Since Purchase Payment Made Proceeds
-------------------------------- --------------------------------
First........................... 4.0%
- -----
Second.......................... 3.0%
- ------
Third........................... 2.0%
- -----
Fourth.......................... 1.0%
- ------
Fifth........................... 0.0%
- -----
Sixth........................... 0.0%
- -----
Seventh......................... 0.0%
- -------
For federal income tax purposes, the amount of the CDSC will
reduce the gain or increase the loss, as the case may be, on the amount
recognized on the redemption of shares.
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, 2001 will be eligible for the second year's
charge if redeemed on or after October 1, 2002. 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.
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
114
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 and will be effected without a sales charge. 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 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 the Adviser'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, possibly with retroactive effect.
115
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, 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 the Fund's assets is invested in the
securities (other than 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 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 or gains 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, including the income
(if any) imputed with respect to investments in zero coupon securities. 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, a 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
116
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 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 the Fund upon filing
appropriate returns or claims for refund with the IRS.
The Code imposes a 4% nondeductible excise tax on a 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 calendar 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 retained by the Fund that is
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 manner as an ordinary corporation and
distributions to its shareholders would not be deductible by the Fund in
computing its taxable income. In addition, a Fund's distributions, to the extent
derived from the Fund's current or accumulated earnings and profits (including
amounts derived from interest on tax-exempt obligations), 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 at the end of the last
taxable year prior to qualifying as a regulated investment company) in order to
qualify as a regulated investment company in a subsequent year.
117
Special Tax Matters Regarding the Investment Grade Fund, Fixed Income Fund and
Global Fixed Income Fund
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.
Special Tax Matters Regarding the Investment Grade Fund
Interest income on most types of government securities is
generally exempt from state and local personal income taxes if the owner of such
government securities is an individual. Furthermore, some states, if certain
requirements are satisfied, permit individual investors to treat the portion of
their regulated investment company dividends that is attributable to interest
income on these government securities as tax-exempt income for state or local
personal income tax purposes. Other states treat all of these dividends as
subject to state and local personal income taxation. Investors in a Fund should
consult their own tax advisers to assess the consequences of investing in the
Fund under state and local laws generally and to determine whether dividends
paid by the Fund that represent interest derived from government securities are
exempt from any applicable state or local taxes.
Special Tax Considerations Regarding the New York Municipal Fund
Because the New York Municipal Fund will distribute
exempt-interest dividends, interest on indebtedness incurred by a shareholder to
purchase or carry Fund shares is not deductible for federal income tax purposes
or for New York State and New York City personal income tax purposes. If a
shareholder receives an exempt-interest dividend with respect to any share of
the Fund and if such share is held by the shareholder for six months or less,
then any loss on the sale or exchange of such share, to the extent of such
exempt-interest dividend, shall be disallowed for federal income tax purposes or
for New York State and New York City personal income tax purposes. In addition,
the Code may require a shareholder, if he or she receives exempt-interest
dividends, to treat as taxable income a portion of certain otherwise non-taxable
social security and railroad retirement benefit payments. Furthermore, that
portion
118
of any exempt interest dividend paid by the Fund which represents income from
certain "private activity bonds" may not retain its tax-exempt status for
federal income tax purposes in the hands of a shareholder who is a "substantial
user" (or person related thereto) of a facility financed by such bonds (although
similar rules generally do not apply for purposes of New York State and New York
City personal income taxes). Prospective investors should consult their own tax
advisors as to whether they are "substantial users" with respect to a facility
or related to such users within the meaning of the code.
Under the Code, interest on "specified private activity bonds"
issued after August 7, 1986, although otherwise exempt from federal income tax,
is treated as an item of tax preference for purposes of the federal alternative
minimum tax on individuals and corporations. If the New York Municipal Fund
invests in such specified private activity bonds, it will report a portion of
the exempt-interest dividends paid to its shareholders as interest on specified
private activity bonds, and hence as a tax preference item. Moreover, all exempt
interest dividends are included in the adjusted current earnings of a
corporation for purposes of the corporate alternative minimum tax. The amount of
the alternative minimum tax imposed by the Code is the excess, if any, of the
taxpayer's "tentative minimum tax" over the taxpayer's regular tax liability for
the taxable year. The "tentative minimum tax" is equal to (i) 26% of the first
$175,000, and 28% of any amount over $175,000 (for corporations, 20% of the
whole) of the taxpayer's alternative minimum taxable income (defined as regular
taxable income modified by certain adjustments and increased by the taxpayer's
"items of tax preference," including in the case of a corporation the adjustment
for adjusted current earnings and the tax preference for tax-exempt interest on
specified private activity bonds described above) for the taxable year in excess
of the exemption amount, less (ii) the alternative minimum tax foreign tax
credit for the taxable year. The exemption amount is $40,000 for corporations,
$45,000 for individuals filing joint returns, lesser amounts for others, and is
phased out over certain income levels. Prospective investors should consult
their own tax advisers with respect to the possible application of a federal or
state alternative minimum tax to their tax situations.
In addition, the receipt of New York Municipal Fund dividends
and distributions may affect a foreign corporate shareholder's federal "branch
profits" tax liability and a Subchapter S corporation shareholder's federal
"excess net passive income" tax liability. Shareholders should consult their own
tax advisers as to whether they are subject to the federal branch profits tax or
the federal excess net passive income tax.
While the New York Municipal Fund does not expect to realize a
significant amount of net capital gains, any such gains realized will be
distributed annually as described in the Fund's Prospectus. Such distributions
("capital gain dividends"), if any, will be taxable to the shareholders as
long-term capital gains, regardless of how long a shareholder has held the
Fund's shares, and will be designated as capital gain dividends in a written
notice mailed by the Fund to the shareholders within 60 days after the close of
the Fund's taxable year. If a shareholder receives a capital gain dividend with
respect to any share and if such share is held by the shareholder for six months
or less, then any loss (to the extent not disallowed pursuant to the
119
other six month rule described above) on the sale or exchange of such share, to
the extent of the capital gain dividend, shall be treated as a long-term capital
loss.
Capital gain distributions by the New York Municipal Fund
result in a reduction in the net asset value of the Fund's shares. Should a
distribution reduce the net asset value below a shareholder's cost basis, such
distribution would nevertheless be taxable to the shareholder as ordinary income
or capital gain as described above, even though, from an investment standpoint,
it may constitute a partial return of capital. In particular, investors should
consider the tax implications of buying shares just prior to a distribution. The
price of shares purchased at that time reflects the amount of the forthcoming
distribution. Those purchasing just prior to a distribution will then receive a
partial return of capital upon the distribution, which will nevertheless be
taxable to them.
If, for any full fiscal year, the New York Municipal Fund's
total distributions exceed net investment income and net realized capital gains,
the excess distributions may be treated as a taxable dividend or as a tax-free
return of capital (up to the amount of the shareholder's tax basis in his or her
shares). The amount treated as a tax-free return of capital will reduce a
shareholder's adjusted basis in his or her shares. Pursuant to the requirements
of the 1940 Act and other applicable laws, a notice will accompany any
distribution paid from sources other than net investment income.
Dividends paid by the New York Municipal Fund from tax-exempt
interest are designated as tax-exempt in the same percentage of the day's
dividend as the actual tax-exempt income earned by the Fund on that day. Thus,
the percentage of the dividend designated as tax-exempt may vary from day to
day. Similarly, dividends paid by the Fund from interest on New York State
Municipal Obligations will be designated as exempt from New York State and New
York City personal income taxation in the same percentage of the day's dividend
as the actual interest on New York's Municipal Obligations earned by the Fund on
that day.
It should be noted that the portion of any New York Municipal
Fund dividends constituting New York exempt-interest dividends is excludable
from income for New York State and New York City personal income tax purposes
only. Any dividends paid to the Fund's shareholders subject to New York State
corporate franchise tax or New York City corporate income tax therefore may be
taxed as ordinary dividends to such shareholders, notwithstanding that all or a
portion of such dividends is exempt from New York State or New York City
personal income tax.
Potential shareholders in the New York Municipal Fund,
including, in particular, corporate shareholders which may be subject to either
New York State franchise tax or New York City corporate income tax, should
consult their tax advisers with respect to (i) the application of corporate and
franchise taxes to the receipt of Fund dividends and as to their own state and
local tax situation in general, and (ii) the application of other state and
local taxes to the receipt of the Fund's dividends and distributions.
Although the New York Municipal Fund expects to be relieved of
all or substantially all federal, New York State and New York City income or
franchise taxes,
120
depending upon the extent of its activities in other states and localities in
which its offices are maintained, in which its agents or independent contractors
are located or in which it is otherwise deemed to be conducting business, that
portion of the Fund's income which is treated as earned in any such other state
or locality could be subject to state and local tax. Any such taxes paid by the
Fund would reduce the amount of income and gains available for distribution to
shareholders.
Passive Foreign Investment Companies (Fixed Income and Global Fixed Income Funds
only)
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, a 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
its PFIC stock at the end of each year. In such case, a Fund would report any
such gains as ordinary income and would deduct any 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. A 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
121
shareholder holds his shares of the Fund as capital assets). 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.
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.
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 his 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 during such
six-month period.
Foreign Taxes
Dividends and interest received by a Fund with respect to its
foreign investments 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 any of the Investment Grade
Fund, Fixed Income Fund or the Global Fixed Income Fund qualifies as a regulated
investment company, if certain asset and distribution requirements are satisfied
and if more than 50% of the respective Fund's total assets at the close of its
taxable year
122
consists of stock or securities of foreign corporations, that Fund may elect for
U.S. income tax purposes to treat foreign income taxes paid by it as paid by its
shareholders. The Investment Grade Fund, Fixed Income Fund or the Global Fixed
Income Fund may qualify for and make this election in some, but not necessarily
all, of its taxable years. As a result, shareholders of the Fund would be
required to include their pro rata portions of such foreign taxes in computing
their taxable incomes 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 U.S.
federal income taxes. Shortly after any year for which it makes such an
election, each Fund will report to its shareholders the amount per share of such
foreign 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.
Backup Withholding
A 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.
Notices
Shareholders will be notified annually by a 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
a 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.
123
THE FOREGOING IS ONLY A SUMMARY OF CERTAIN MATERIAL TAX CONSEQUENCES AFFECTING
A 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 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.
If a Fund meets the size requirements for listing in The Wall Street Journal,
its Common shares will be listed under the heading "Credit Suisse Common", the
Advisor Shares of the Fixed Income Fund will be listed under the heading "Credit
Suisse ADV," and the Class A, B and C shares of the Investment Grade and Fixed
Income Fund will be listed under the heading "Credit Suisse ABC." Current total
return figures may be obtained by calling Credit Suisse Funds at 800-927-2874.
AVERAGE ANNUAL TOTAL RETURNS. "Average annual total return" is
computed separately for each class of shares by determining the average annual
compounded rate of return during specified periods
124
that equates the initial amount invested to the ending redeemable value of such
investment according to the following formula:
P(1+T)n = ERV
Where: P = hypothetical initial payment of $1,000;
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
125
at the end of the applicable period (or a fractional
portion thereof).
"Aggregate total return" is computed 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 Fund, the maximum initial sales charge of 5.75% was deducted at the time of
investment. Investors should note that this performance may not be
representative of the Fund's total returns in longer market cycles.
126
Although total return is calculated in a separate manner for
each class of shares, under certain circumstances, performance information for a
class may include performance information of another class with an earlier
inception date.
TOTAL RETURN
The Funds' average annual total returns for the Common Class
shares 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):
COMMON SHARES
(PERIOD FROM COMMENCEMENT OF OPERATIONS)
Period from the
commencement of
One-Year Five-Year Ten-Year operations
-------- --------- -------- -------------
Investment Grade Fund -0.55% 5.47% 5.83% 7.17%
(August 22, 1988)
New York Municipal Fund 4.91% 5.28% 5.68% 5.76%
(April 1, 1987)
Fixed Income Fund -4.07% 4.14% 6.02% 6.90%
(August 17, 1987)
Global Fixed Income Fund 4.27% 4.53% 6.32% 6.82%
(November 1, 1990)
The Fixed Income Fund's average annual total returns for the Adviser Class
shares 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):
ADVISOR SHARES
(PERIOD FROM COMMENCEMENT OF OPERATIONS)
Period from the
commencement of
One-Year Five-Year Ten-Year operations
-------- --------- -------- -------------
Fixed Income Fund -4.31% 3.88% N/A 5.18%
(July 3, 1996)
127
The Funds' total returns for the periods ended October 31,
2002 for the Class A shares were as follows (performance figures calculated
without waiver by a Fund's service provider(s), if any, are noted in italics):
CLASS A SHARES
(PERIOD FROM COMMENCEMENT OF OPERATIONS)
Period from the
commencement of
One-Year Five-Year Ten-Year operations
-------- --------- -------- ----------------
Investment Grade Fund N/A N/A N/A -3.23%
(December 24, 2001) (not annualized)
New York Municipal Fund N/A N/A N/A 2.28%
(November 30, 2001) (not annualized)
Fixed Income Fund -8.86% N/A N/A -5.51%
(July 31, 2001)
Global Fixed Income Fund N/A N/A N/A -0.46%
(November 30, 2001) (not annualized)
The Investment Grade Fund's and the Fixed Income Fund's
total returns for the periods ended October 31, 2002 for the Class B shares were
as follows (performance figures calculated without waiver by a Fund's service
provider(s), if any, are noted in italics):
CLASS B SHARES
(PERIOD FROM COMMENCEMENT OF OPERATIONS)
Period from the
commencement of
One-Year Five-Year Ten-Year operations
-------- --------- -------- -------------
Investment Grade Fund N/A N/A N/A -2.95%
(December 24, 2001) (not annualized)
Fixed Income Fund -8.67% N/A N/A -4.75%
(July 31, 2001)
128
The Investment Grade Fund's and the Fixed Income Fund's
average annual total returns for the periods ended October 31, 2002 for the
Class C shares were as follows:
CLASS C SHARES
(PERIOD FROM COMMENCEMENT OF OPERATIONS)
Period from the
commencement of
One-Year Five-Year Ten-Year operations
-------- --------- -------- ---------------
Investment Grade Fund N/A N/A N/A 0.03%
(December 24, 2001) (not annualized)
Fixed Income Fund -5.94% N/A N/A -2.59%
(July 31, 2001)
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, the Dow Jones Industrial Average or the Lehman Brothers U.S. Aggregate
Bond Index, the Lehman Brothers 5 Year Municipal Bond Index or the Lehman
Brothers Global Aggregate Bond Index, 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. 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 the Investment Grade Fund seeks to
achieve total return, the New York Municipal Fund seeks to maximize current
interest income exempt from federal income tax and New York State and New York
City personal income taxes to
129
the extent consistent with prudent investment management and the preservation of
capital, the Fixed Income Fund seeks to generate high current income consistent
with reasonable risk and, secondarily, capital appreciation, and the Global
Fixed Income Fund seeks to maximize total investment return consistent with
prudent investment management, consisting of a combination of interest income,
currency gains and capital appreciation, and that such return may not be
representative of any Fund's return over a longer market cycle. The Funds 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 gains distributions.
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 Funds' Common Class shares and the Fixed
Income and Global Fixed Income Funds' Advisor Class shares for the 30-day period
ended October 31, 2002 were as follows:
130
Common Shares Advisor Shares
------------------------------ -----------------------------
Fund With Waiver Without Waiver With Waiver Without Waiver
- ---- ----------- -------------- ----------- --------------
Investment Grade Fund 4.88% 3.10% N/A N/A
New York Municipal Fund 2.61% 2.17% N/A N/A
Fixed Income Fund 4.63% 4.31% 3.64% 3.36%
Global Fixed Income Fund 3.23% 2.06% 2.71%% 1.56%
The yield for the Funds' Class A, B and C shares for the
30-day period ended October 30, 2002 were as follows:
Class A Shares Class B Shares Class C Shares
---------------------------- ---------------------------- ----------------------------
Fund With Waiver Without Waiver With Waiver Without Waiver With Waiver Without Waiver
- ---- ----------- -------------- ----------- -------------- ----------- --------------
Investment Grade Fund 2.27% 3.10% 3.90% 2.08% 3.89% 2.09%
New York Municipal Fund 4.88% 1.83% N/A N/A N/A N/A
Fixed Income Fund 4.18% 3.88% 3.64% 3.32% 3.63% 3.31%
Global Fixed Income 2.85% 1.74% N/A N/A N/A N/A
Fund
Tax equivalent yield is calculated over a specified thirty-day
period by dividing that portion of the Fund's yield which is tax-exempt by one
minus the aggregate of the maximum federal, state and local income tax rates and
adding the product to that portion, if any, of the yield of the New York
Municipal Fund that is not tax-exempt. The New York Municipal Fund's
tax-equivalent yield for the thirty-day period ending October 31, 2002 was
3.70.
After-Tax Return
From time to time each Fund may include after-tax performance
information in advertisements. To the extent a Fund includes such information,
it will be computed according to the following formulas:
131
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.
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 Class Shares for the periods ended October
31, 2002 were as follows:
Fund 1 year 5 year 10 year Since Inception
- -------------------- -------------- -------------- ----------- ----------- -------------
Investment Grade -2.27% 3.27% 3.13% 4.59% 8/22/88
Fund
- -------------------- -------------- -------------- ----------- ----------- -------------
New York Municipal 3.36% 3.57% 3.76% 3.88% 4/1/87
Fund
- -------------------- -------------- -------------- ----------- ----------- -------------
Fixed Income Fund -5.93% 1.67% 3.42% 4.27% 8/17/87
- -------------------- -------------- -------------- ----------- ----------- -------------
Global Fixed 2.24% 1.96% 3.54% 4.19% 11/1/90
Income Fund
- -------------------- -------------- -------------- ----------- ----------- -------------
The average annual total returns (after taxes on
distributions) for the Fixed Income Fund's Advisor Class Shares for the periods
ended October 31, 2002 were as follows:
Fund 1 year 5 year 10 year Since Inception
- -------------------- -------------- -------------- ----------- ----------- -------------
Fixed Income Fund -6.08% 1.52% N/A 2.79% 7/3/96
- -------------------- -------------- -------------- ----------- ----------- -------------
132
The average annual total returns (after taxes on
distributions) for each Fund's Class A Shares and, for the Investment Grade Fund
and the Fixed Income Fund, Class B and C shares for the periods ended October
31, 2002 were as follows:
Class A:
Fund 1 Year 5 Year 10 Year Since Inception
- ---------------- -------- -------- --------- -------------------
Investment Grade N/A N/A N/A -5.32% 12/24/01
Fund
New York Municipal N/A N/A N/A 1.12% 11/30/01
Fund
Fixed Income Fund -[7.32]% N/A N/A -7.32% 7/31/01
Global Fixed N/A N/A N/A -2.51% 11/30/01
Income Fund
Class B:
Fund 1 Year 5 Year 10 Year Since Inception
- ---------------- -------- -------- --------- -------------------
Investment Grade N/A N/A N/A -0.20% 12/24/01
Fund
New York Municipal N/A N/A N/A N/A
Fund
Fixed Income Fund -6.51% N/A N/A -4.12% 7/31/01
Global Fixed N/A N/A N/A N/A
Income Fund
Class C:
Fund 1 Year 5 Year 10 Year Since Inception
- ---------------- -------- -------- --------- -------------------
Investment Grade N/A N/A N/A -0.12% 12/24/01
Fund
New York Municipal N/A N/A N/A N/A
Fund
Fixed Income Fund -6.51% N/A N/A -4.16% 7/31/01
Global Fixed N/A N/A N/A N/A
Income Fund
133
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
- -------------------- -------- -------- --------- --------------------
Investment Grade -0.35% 3.28% 3.30% 4.61% 8/22/88
Fund
New York Municipal 3.09% 3.40% 3.62% 3.79% 4/1/87
Fund
Fixed Income Fund -2.49% 2.08% 3.54% 4.35% 8/17/87
Global Fixed 2.56% 2.30% 3.68% 4.23% 11/1/90
Income Fund
The average annual total returns (after taxes on distributions
and redemption of Fund shares) for the Fixed Income Fund's Advisor Shares for
the periods ended October 31, 2002 were as follows:
134
Fund 1 Year 5 Year 10 Year Since Inception
- ---------------- -------- -------- --------- -------------------
Fixed Income Fund -2.64% 1.93% N/A 2.97% 7/3/96
The average annual total returns (after taxes on distributions
and redemptions of Fund shares) for each Fund's Class A Shares and, for the
Investment Grade Fund and the Fixed Income Fund, Class B and C shares for the
periods ended October 31, 2002 were as follows:
Class A:
Fund 1 Year 5 Year 10 Year Since Inception
- ---------------- -------- -------- --------- -------------------
Investment Grade N/A N/A N/A -1.99% 12/24/01
Fund
New York Municipal N/A N/A N/A 1.48% 11/30/01
Fund
Fixed Income Fund -2.61% N/A N/A -5.25% 7/31/01
Global Fixed N/A N/A N/A -0.34% 11/30/01
Income Fund
Class B:
Fund 1 Year 5 Year 10 Year Since Inception
- ---------------- -------- -------- --------- -------------------
Investment Grade N/A N/A N/A -1.82% 12/24/01
Fund
New York Municipal N/A N/A N/A N/A
Fund
Fixed Income Fund -5.31% N/A N/A -4.54% 7/31/01
Global Fixed N/A N/A N/A N/A
Income Fund
135
Class C:
Fund 1 Year 5 Year 10 Year Since Inception
- -------------------- -------------- -------------- ----------- --------------------- --------------------
Investment Grade N/A N/A N/A -1.82% 12/24/01
Fund
- -------------------- -------------- -------------- ----------- --------------------- --------------------
New York Municipal N/A N/A N/A N/A
Fund
- -------------------- -------------- -------------- ----------- --------------------- --------------------
Fixed Income Fund -5.31% N/A N/A -4.54% 7/31/01
- -------------------- -------------- -------------- ----------- --------------------- --------------------
Global Fixed N/A N/A N/A N/A
Income Fund
- -------------------- -------------- -------------- ----------- --------------------- --------------------
The performance of a class of Fund shares will vary from time
to time depending upon market conditions, the composition of the 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, the 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 the 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. The 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 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 Investment Grade Fund, with
the Lehman Brothers U.S. Aggregate Bond Index (composed of the Lehman Brothers
Government/Corporate Bond Index and the Lehman Brothers Mortgage-Backed
Securities Index and including U.S. Treasury and agency issues, corporate bond
issues and mortgage-backed securities rated investment-grade or higher by rating
agencies); in the case of the New York Municipal Fund, with the Lehman Brothers
5-Year Municipal Bond Index; in the case of the
136
Fixed Income Fund, with the Lehman Brothers U.S. Aggregate Bond Index (described
above); and in the case of the Global Fixed Income Fund, the Lehman Brothers
Global Aggregate Bond Index (a macro index of global government and corporate
bond markets, composed of various indices calculated by Lehman Brothers, Inc.,
including the U.S. Aggregate Bond Index, the Pan-European Aggregate Index, the
Global Treasury Index, the Asian-Pacific Aggregate Index, the Eurodollar Index
and the U.S. Investment Grade 144A Index); or (iii) other appropriate indexes of
investment securities or with data developed by the Adviser derived from such
indexes. The 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, the Fund may from time to time compare the expense ratio of its Common
Shares to that of any investment company with similar objectives and policies,
based on data generated by Lipper or similar investment services that monitor
mutual funds.
In its reports, investor communications or advertisements, the
Fund may also include: (i) its total return performance; (ii) its performance
compared with various indexes or other mutual funds; (iii) published evaluations
by nationally recognized ranking services and financial publications; (iv)
descriptions and updates concerning its strategies and portfolio investments;
(v) its goals, risk factors and expenses compared with other mutual funds; (vi)
analysis of its investments by industry, country, credit quality and other
characteristics; (vii) a discussion of the risk/return continuum relating to
different investments; (viii) the general biography or work experience of the
portfolio managers of the Fund; (ix) portfolio manager commentary or market
updates; (x) research methodology underlying stock selection or the Fund's
investment objective; and (xi) other information of interest to investors.
INDEPENDENT ACCOUNTANTS AND COUNSEL
PricewaterhouseCoopers LLP ("PwC"), with principal offices at
Two Commerce Square, Philadelphia, Pennsylvania 19103, serves as independent
accountants for the Funds. The financial statements for the fiscal year ended
October 31, 2002 that are incorporated by reference
137
in this Statement of Additional Information have been audited by PwC, whose
report thereon appears elsewhere herein 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 the Funds 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:
Investment Grade Fund Common Advisor Class A Class B Class C
Shares Shares Shares Shares Shares
------ ------- ------- ------- -------
Charles Schwab & Co., Inc.* 36.31%
Special Custody Account for the
Exclusive Benefit of Customers
Attn.: Mutual Funds Department
101 Montgomery Street
San Francisco, CA 94104-4122
Nat'l Financial Svcs. Corp.* 7.18%
FBO Customers
Church Street Station
P.O. Box 3908
New York, NY 10008-3908
Retirement Plan Nonlegal Employees of 6.39%
Simpson Thacher & Bartlett*
Mary Ann Braverman,
Accounting Department
425 Lexington Avenue
New York, NY 10017-3903
Beth Dater 6.10%
55 Park Avenue, Apt. 3E
New York, NY 10021-8166
Larkin Industries Inc. PSP & Trust* 37.46%
2020 Energy Park Drive
St. Paul, MN 55108-1506
American Enterprise Investment 13.42%
Services*
FBO 211060911
P.O. Box 3446
Minneapolis, MN 55440-9446
Donaldson Lufkin Jenrette 11.53%
Securities Corporation Inc.*
P.O. Box 2052
Jersey City, NJ 07303-2052
138
Investment Grade Fund Common Advisor Class A Class B Class C
Shares Shares Shares Shares Shares
------ ------- ------- ------- -------
American Enterprise Investment 10.98%
Services*
FBO 211369571
P.O. Box 3446
Minneapolis, MN 55440-9446
American Enterprise Investment 9.49%
Services*
FBO 569633581
P.O. Box 3446
Minneapolis, MN 55440-9446
American Enterprise Investment 7.80%
Services*
FBO 212610451
P.O. Box 3446
Minneapolis, MN 55440-9446
Donaldson Lufkin Jenrette 11.54%
Securities Corporation Inc.*
P.O. Box 2052
Jersey City, NJ 07303-2052
139
Investment Grade Fund Common Advisor Class A Class B Class C
Shares Shares Shares Shares Shares
------ ------- ------- ------- -------
Merrill Lynch Pierce
Fenner & Smith Inc.* 10.31%
Building 1 Team A Fl. 2
4800 Deer Lake Drive East
Jacksonville, FL 32246-6486
Daun Rauscher Inc.* 9.04%
FBO Boog-Scott Family Limited
Partnership
John Boog-Scott, General Partner
4232 Danmire
Richardson TX 75082-3758
American Enterprise Investment 7.66%
Services*
FBO 132542221
P.O. Box 3446
Minneapolis, MN 55440-9446
Donaldson Lufkin Jenrette 6.56%
Securities Corporation Inc.*
P.O. Box 2052
Jersey City, NJ 07303-2052
American Enterprise Investment 6.09%
Services*
FBO 127304381
P.O. Box 3446
Minneapolis, MN 55440-9446
American Enterprise Investment 5.13%
Services*
FBO 216292251
P.O. Box 3446
Minneapolis, MN 55440-9446
Donaldson Lufkin Jenrette 36.60%
Securities Corporation Inc.*
P.O. Box 2052
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette 36.58%
Securities Corporation Inc.*
P.O. Box 2052
Jersey City, NJ 07303-2052
Merrill Lynch Pierce 16.48%
Fenner & Smith Inc.*
Building 1 Team A Fl. 2
4800 Deer Lake Drive East
Jacksonville, FL 32246-6486
New York Municipal Fund Common Advisor Class A Class B Class C
Shares Shares Shares Shares Shares
------ ------- ------- ------- -------
Charles Schwab & Co., Inc.* 29.09%
Special Custody Account for the
Exclusive Benefit of Customers
Attn.: Mutual Funds Department
101 Montgomery Street
San Francisco, CA 94104-4122
Nat'l Financial Svcs. Corp.* 17.85%
FBO Customers
Church St. Station
P.O. Box 3908
New York, NY 10008-3908
American Enterprise Investment 80.90%
Services*
FBO 195706131
P.O. Box 3446
Minneapolis, MN 55440-9446
140
New York Municipal Fund Common Advisor Class A Class B Class C
Shares Shares Shares Shares Shares
------ ------- ------ ------- -------
Donaldson Lufkin Jenrette 5.84%
Securities Corporation Inc.*
P.O. Box 2052
Jersey City, NJ 07303-2052
Merrill Lynch Pierce 5.00%
Fenner & Smith Inc.*
Building 1 Team A Fl. 2
4800 Deer Lake Drive East
Jacksonville, FL 32246-6486
Fixed Income Fund Common Advisor Class A Class B Class C
Shares Shares Shares Shares Shares
------ ------- ------- ------- -------
Charles Schwab & Co., Inc.* 37.26%
Special Custody Account for the
Exclusive Benefit of Customers
Attn.: Mutual Funds Department
101 Montgomery Street
San Francisco, CA 94104-4122
Nat'l Financial Svcs. Corp.* 8.39%
FBO Customers
Church St. Station
P.O. Box 3908
New York, NY 10008-3908
Bost. & Co. A/C MIDF858662* 7.54%
Mutual Funds Operations
P.O. Box 3198
Pittsburgh, PA 15230-3198
141
New York Municipal Fund Common Advisor Class A Class B Class C
Shares Shares Shares Shares Shares
------ ------- ------- ------- -------
Salomon Smith Barney Inc.* 5.21%
Book Entry Account
Attn.: Matt Maestri
333 West 34 Street
7th Floor Mutual Funds Dept.
New York, NY 10001-2483
Donaldson Lufkin Jenrette 5.12%
Securities Corporation Inc.*
P.O. Box 2052
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette 13.29%
Securities Corporation Inc.*
P.O. Box 2052
Jersey City, NJ 07303-2052
State Street Bank & Trust Co.* 9.77%
Cust. for the R/O IRA of
Judith Berbenich
55 Tabb Pl.
Staten Island, NY 10302-2033
State Street Bank & Trust Co.* 7.83%
Cust. for the R/O IRA of
Margaret T. Capehart
381 E. 7 St.
Brooklyn, NY 11218-4105
Olivia W. Russell 5.95%
702 Chickasaw Dr. S.
Flowood, MS 39232-8675
American Enterprise Investment 5.48%
Services*
FBO 195521161
P.O. Box 3446
Minneapolis, MN 55440-9446
Larkin Industries Inc. PSP & Trust* 5.08%
2020 Energy Park Drive
St. Paul, MN 55108-1506
Merrill Lynch Pierce 15.10%
Fenner & Smith Inc.*
Building 1 Team A Fl. 2
4800 Deer Lake Drive East
Jacksonville, FL 32246-6486
Donaldson Lufkin Jenrette 14.25%
Securities Corporation Inc.*
P.O. Box 2052
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette 9.96%
Securities Corporation Inc.*
P.O. Box 2052
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette 7.98%
Securities Corporation Inc.*
P.O. Box 2052
Jersey City, NJ 07303-2052
142
New York Municipal Fund Common Advisor Class A Class B Class C
Shares Shares Shares Shares Shares
------ ------- ------- ------- -------
Salomon Smith Barney Inc.* 6.32%
333 West 34 Street - 3rd Floor
7th Floor Mutual Funds Dept.
New York, NY 10001-2483
Global Fixed Income Fund Common Advisor Class A Class B Class C
Shares Shares Shares Shares Shares
------ ------- ------- ------- -------
Charles Schwab & Co., Inc.* 21.67%
Special Custody Account for the
Exclusive Benefit of Customers
Attn.: Mutual Funds Department
101 Montgomery Street
San Francisco, CA 94104-4122
Salomon Smith Barney Inc.* 18.71%
Book Entry Account
Attn.: Matt Maestri
333 West 34 Street
7th Floor Mutual Funds Dept.
New York, NY 10001-2483
Fidelity Investments Institutional* 11.84%
Operations Center as Agent for
Certain Employee Benefit Plans
100 Magellan Way
Covington, KY 41015-1999
Nat'l Financial Svcs. Corp.* 10.02%
FBO Customers
Church Street Station
P.O. Box 3908
New York, NY 10008-3908
143
Global Fixed Income Fund Common Advisor Class A Class B Class C
Shares Shares Shares Shares Shares
------ ------- ------- ------- -------
Smith Barney Corporate Trust 9.52%
Company Trustee FBO Smith Barney 401
Advisor Group Trust Dated 01/01/98*
2 Tower Center
P.O. Box 1063 Plan Valuation
Services
East Brunswick, NJ 08816-1063
* The Funds believe that these entities are not the beneficial owner of shares
held of record by them.
FINANCIAL STATEMENTS
Each Fund's audited annual report for the Common Class, the
Advisor Class and the Class A, Class B and Class C shares, as applicable, 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 relevant Fund included
therein. Each Fund will furnish without charge a copy of the annual reports upon
request by calling Credit Suisse Funds at 800-927-2874.
144
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.
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
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.
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
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
A-4
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 - 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 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
A-5
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.
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
INVESTMENT GRADE BOND FUND
MORE COMPLETE INFORMATION ABOUT THE FUND, 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 FUND'S 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 FUND'S 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 INVESTMENT GRADE BOND 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 Investment Grade Bond Fund(1) (the "Fund") had a loss of 0.55%, vs. gains
of 5.89% and 6.41%, respectively, for the Lehman Brothers U.S. Aggregate Bond
Index(2) and the Lehman Brothers U.S. Intermediate Government Bond Index(2). The
Fund's Class A, Class B and Class C Shares (all of which have an inception date
of December 24, 2001) returned 1.60%,(3),(4) 0.97%(3),(4) and 0.91%,(3),(4)
respectively, for the roughly 10-month period ended October 31, 2002, vs.
respective same-period gains of 8.68% and 9.06% for the two Lehman Brothers
indices.
We attribute the Fund's performance to several factors:
- At a number of points during the fiscal year, activity in the broad fixed
income market exhibited a classic "flight to quality" pattern in which
highest-quality instruments like U.S. Treasury issues and government agency
securities thrived, while comparatively risky sectors endured heavy
selling. Our holdings in non-Treasury categories like investment-grade
corporate bonds dampened the Fund's overall return accordingly.
- Early in 2002, the unfolding Enron scandal triggered anxiety about
questionable accounting practices and corporate governance issues across
financial markets. Unfortunately for the Fund, we held above-market
positions in the bonds of a handful of telecommunications and energy
companies that were tarred by the broad strokes of the Enron brush.
- In the second half of the year, performance suffered from our security
selection in the telecom and energy sectors. Our analysis at the time
concluded that telecom's historically generous yields offered satisfactory
compensation for the fundamental credit risk of the underlying issuers, but
the sector nonetheless crumbled under the weight of accounting-based
improprieties by companies like WorldCom and Qwest Communications
International. [Note: at October 31, the Fund did not own securities of
WorldCom or Qwest Communications International.] Bonds of a number of
energy companies, which experienced problems much like those in telecom,
similarly declined.
On the positive side of the ledger, we added value within our approach to
securitized debt. This was most pronounced in mortgage-backed securities (MBS),
in which our sector allocation and security selection were particularly
effective. We tended to focus our MBS holdings on high-coupon issues that
1
were protected from prepayment, which benefited from their comparatively low
availability as interest rates fell. Not only did this enhance the Fund's
ability to gain from a decline in interest rates, but these characteristics were
also especially desirable to MBS buyers in a period of falling market-based
interest rates. Our holdings' prices rose accordingly.
An additional plus from our securitized approach was our position in
commercial MBS, which turned out to be the benchmark's strongest subcategory in
the fiscal year, by far.
It's also worth noting that our holdings in corporate bonds began to
meaningfully help overall performance in August, when the flow of negative news
subsided and investors started to become less pessimistic than previously about
the outlook for corporate credit quality.
Jo Ann Corkran, Leland Crabbe, Suzanne E. Moran,
Co-Portfolio Manager Co-Portfolio Manager Co-Portfolio Manager
2
[CHART]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE
CREDIT SUISSE INVESTMENT GRADE BOND FUND(1) COMMON CLASS SHARES,
THE LEHMAN BROTHERS U.S. AGGREGATE BOND INDEX(2) AND
THE LEHMAN BROTHERS INTERMEDIATE U.S. GOVT INDEX(2) FOR THE
TEN YEARS. (UNAUDITED)
CREDIT SUISSE INVESTMENT GRADE BOND LEHMAN BROTHERS U.S. AGGREGATE BOND LEHMAN BROTHERS INTERMEDIATE U.S. GOVT BOND
FUND(1) COMMON CLASS -- $17,621 INDEX(2) -- $20,552 INDEX(2) -- $19,484
10/92 $ 10,000 $ 10,000 $ 10,000
11/92 $ 9,921 $ 10,002 $ 9,959
12/92 $ 10,072 $ 10,161 $ 10,088
1/93 $ 10,279 $ 10,356 $ 10,275
2/93 $ 10,445 $ 10,537 $ 10,427
3/93 $ 10,483 $ 10,582 $ 10,465
4/93 $ 10,577 $ 10,656 $ 10,547
5/93 $ 10,529 $ 10,670 $ 10,518
6/93 $ 10,671 $ 10,862 $ 10,670
7/93 $ 10,664 $ 10,924 $ 10,692
8/93 $ 10,807 $ 11,115 $ 10,851
9/93 $ 10,852 $ 11,145 $ 10,895
10/93 $ 10,859 $ 11,186 $ 10,921
11/93 $ 10,795 $ 11,091 $ 10,867
12/93 $ 10,844 $ 11,151 $ 10,912
1/94 $ 10,965 $ 11,302 $ 11,020
2/94 $ 10,830 $ 11,105 $ 10,869
3/94 $ 10,698 $ 10,831 $ 10,710
4/94 $ 10,598 $ 10,744 $ 10,641
5/94 $ 10,596 $ 10,743 $ 10,649
6/94 $ 10,593 $ 10,720 $ 10,651
7/94 $ 10,720 $ 10,933 $ 10,791
8/94 $ 10,749 $ 10,946 $ 10,822
9/94 $ 10,680 $ 10,785 $ 10,733
10/94 $ 10,668 $ 10,775 $ 10,735
11/94 $ 10,621 $ 10,752 $ 10,687
12/94 $ 10,654 $ 10,826 $ 10,722
1/95 $ 10,832 $ 11,040 $ 10,896
2/95 $ 11,008 $ 11,303 $ 11,107
3/95 $ 11,065 $ 11,372 $ 11,168
4/95 $ 11,165 $ 11,531 $ 11,297
5/95 $ 11,531 $ 11,977 $ 11,616
6/95 $ 11,587 $ 12,065 $ 11,690
7/95 $ 11,576 $ 12,041 $ 11,695
8/95 $ 11,726 $ 12,186 $ 11,792
9/95 $ 11,815 $ 12,305 $ 11,871
10/95 $ 11,978 $ 12,464 $ 12,001
11/95 $ 12,199 $ 12,651 $ 12,147
12/95 $ 12,381 $ 12,829 $ 12,267
1/96 $ 12,437 $ 12,913 $ 12,371
2/96 $ 12,264 $ 12,689 $ 12,240
3/96 $ 12,141 $ 12,600 $ 12,184
4/96 $ 12,077 $ 12,529 $ 12,149
5/96 $ 12,063 $ 12,504 $ 12,143
6/96 $ 12,194 $ 12,672 $ 12,266
7/96 $ 12,217 $ 12,706 $ 12,304
8/96 $ 12,227 $ 12,684 $ 12,318
9/96 $ 12,372 $ 12,905 $ 12,477
10/96 $ 12,595 $ 13,191 $ 12,682
11/96 $ 12,742 $ 13,417 $ 12,835
12/96 $ 12,661 $ 13,292 $ 12,766
1/97 $ 12,698 $ 13,333 $ 12,815
2/97 $ 12,731 $ 13,367 $ 12,836
3/97 $ 12,652 $ 13,218 $ 12,763
4/97 $ 12,777 $ 13,417 $ 12,907
5/97 $ 12,866 $ 13,544 $ 13,008
6/97 $ 12,980 $ 13,705 $ 13,119
7/97 $ 13,240 $ 14,075 $ 13,361
8/97 $ 13,159 $ 13,956 $ 13,310
9/97 $ 13,313 $ 14,162 $ 13,455
10/97 $ 13,470 $ 14,368 $ 13,611
11/97 $ 13,492 $ 14,434 $ 13,641
12/97 $ 13,611 $ 14,580 $ 13,752
1/98 $ 13,800 $ 14,766 $ 13,932
2/98 $ 13,766 $ 14,754 $ 13,917
3/98 $ 13,819 $ 14,804 $ 13,961
4/98 $ 13,856 $ 14,881 $ 14,027
5/98 $ 13,965 $ 15,023 $ 14,124
6/98 $ 14,073 $ 15,151 $ 14,219
7/98 $ 14,085 $ 15,182 $ 14,273
8/98 $ 14,376 $ 15,430 $ 14,543
9/98 $ 14,736 $ 15,791 $ 14,883
10/98 $ 14,700 $ 15,707 $ 14,908
11/98 $ 14,675 $ 15,797 $ 14,862
12/98 $ 14,730 $ 15,844 $ 14,920
1/99 $ 14,794 $ 15,957 $ 14,986
2/99 $ 14,566 $ 15,677 $ 14,781
3/99 $ 14,661 $ 15,764 $ 14,879
4/99 $ 14,695 $ 15,814 $ 14,919
5/99 $ 14,586 $ 15,675 $ 14,828
6/99 $ 14,579 $ 15,625 $ 14,849
7/99 $ 14,557 $ 15,559 $ 14,851
8/99 $ 14,563 $ 15,551 $ 14,872
9/99 $ 14,690 $ 15,732 $ 14,999
10/99 $ 14,700 $ 15,790 $ 15,029
11/99 $ 14,709 $ 15,788 $ 15,039
12/99 $ 14,673 $ 15,713 $ 14,992
1/00 $ 14,608 $ 15,661 $ 14,942
2/00 $ 14,719 $ 15,850 $ 15,066
3/00 $ 14,855 $ 16,059 $ 15,238
4/00 $ 14,852 $ 16,013 $ 15,231
5/00 $ 14,895 $ 16,005 $ 15,272
6/00 $ 15,125 $ 16,338 $ 15,515
7/00 $ 15,217 $ 16,486 $ 15,618
8/00 $ 15,386 $ 16,725 $ 15,793
9/00 $ 15,539 $ 16,831 $ 15,931
10/00 $ 15,630 $ 16,942 $ 16,040
11/00 $ 15,896 $ 17,220 $ 16,275
12/00 $ 16,146 $ 17,540 $ 16,562
1/01 $ 16,333 $ 17,826 $ 16,783
2/01 $ 16,467 $ 17,981 $ 16,937
3/01 $ 16,573 $ 18,071 $ 17,060
4/01 $ 16,498 $ 17,995 $ 17,006
5/01 $ 16,569 $ 18,104 $ 17,076
6/01 $ 16,608 $ 18,173 $ 17,131
7/01 $ 16,944 $ 18,580 $ 17,450
8/01 $ 17,082 $ 18,793 $ 17,605
9/01 $ 17,402 $ 19,011 $ 17,981
10/01 $ 17,708 $ 19,409 $ 18,262
11/01 $ 17,473 $ 19,141 $ 18,044
12/01 $ 17,392 $ 19,018 $ 17,957
1/02 $ 17,427 $ 19,172 $ 18,034
2/02 $ 17,527 $ 19,358 $ 18,183
3/02 $ 17,206 $ 19,037 $ 17,909
4/02 $ 17,306 $ 19,406 $ 18,244
5/02 $ 17,426 $ 19,571 $ 18,371
6/02 $ 17,166 $ 19,741 $ 18,601
7/02 $ 17,072 $ 19,980 $ 18,952
8/02 $ 17,428 $ 20,318 $ 19,168
9/02 $ 17,680 $ 20,647 $ 19,497
10/02 $ 17,621 $ 20,552 $ 19,484
[CHART]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE
CREDIT SUISSE INVESTMENT GRADE BOND FUND(1) CLASS A SHARES, CLASS B
SHARES, AND C SHARES(3),(4), THE LEHMAN BROTHERS U.S. AGGREGATE BOND INDEX(2)
AND THE LEHMAN BROTHERS INTERMEDIATE U.S. GOVT INDEX(2) FROM
INCEPTION (12/24/01). (UNAUDITED)
CREDIT SUISSE INVESTMENT GRADE BOND CREDIT SUISSE INVESTMENT GRADE BOND CREDIT SUISSE INVESTMENT GRADE BOND
FUND(1) CLASS A(3),(4) -- $9,677 FUND(1) CLASS B(3),(4) -- $9,705 FUND(1) CLASS C(3),(4) -- $10,003
12/24/01 $ 9,525 $ 10,000 $ 10,000
12/31/01 $ 9,577 $ 10,060 $ 10,056
1/31/02 $ 9,593 $ 10,071 $ 10,067
2/28/02 $ 9,644 $ 10,120 $ 10,126
3/31/02 $ 9,465 $ 9,926 $ 9,932
4/30/02 $ 9,508 $ 9,966 $ 9,971
5/31/02 $ 9,582 $ 10,037 $ 10,042
6/30/02 $ 9,426 $ 9,869 $ 9,873
7/31/02 $ 9,373 $ 9,807 $ 9,811
8/31/02 $ 9,566 $ 10,003 $ 10,004
9/30/02 $ 9,711 $ 10,150 $ 10,137
10/31/02 $ 9,677 $ 9,705 $ 10,003
LEHMAN BROTHERS U.S. AGGREGATE BOND LEHMAN BROTHERS INTERMEDIATE U.S. GOVT BOND
INDEX(2) -- $10,737 INDEX(2) -- $10,798
12/24/01 $ 10,000 $ 10,000
12/31/01 $ 9,936 $ 9,952
1/31/02 $ 10,016 $ 9,995
2/28/02 $ 10,114 $ 10,077
3/31/02 $ 9,946 $ 9,925
4/30/02 $ 10,139 $ 10,111
5/31/02 $ 10,225 $ 10,182
6/30/02 $ 10,314 $ 10,309
7/31/02 $ 10,439 $ 10,503
8/31/02 $ 10,615 $ 10,623
9/30/02 $ 10,787 $ 10,806
10/31/02 $ 10,737 $ 10,798
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
ONE YEAR FIVE YEAR TEN YEAR INCEPTION
-------- --------- -------- ---------
Common Class 1.53% 5.79% 5.69% 7.24%
Class A Without Sales Charge -- -- -- 1.96%(4)
Class A With Maximum
Sales Charge -- -- -- (2.88%)(4)
Class B Without CDSC -- -- -- 1.40%(4)
Class B With CDSC -- -- -- (2.55%)(4)
Class C Without CDSC -- -- -- 1.34%(4)
Class C With CDSC -- -- -- 0.35%(4)
AVERAGE ANNUAL RETURNS AS OF OCTOBER 31, 2002(1)
SINCE
ONE YEAR FIVE YEAR TEN YEAR INCEPTION
-------- --------- -------- ---------
Common Class (0.55%) 5.47% 5.83% 7.17%
Class A Without Sales Charge -- -- -- 1.60%(4)
Class A With Maximum
Sales Charge -- -- -- (3.23%)(4)
Class B Without CDSC -- -- -- 0.97%(4)
Class B With CDSC -- -- -- (2.95%)(4)
Class C Without CDSC -- -- -- 0.91%(4)
Class C With CDSC -- -- -- 0.03%(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 changed its benchmark from the Lehman Brothers U.S. Intermediate
Government Bond Index to the Lehman Brothers U.S. Aggregate Bond Index,
effective December 19, 2001, since the Aggregate Bond Index more closely
reflects the Fund's investments. The Lehman Brothers Intermediate U.S.
Government Bond Index is an unmanaged index (with no defined investment
objective) of intermediate-maturity U.S. government bonds, and is calculated
by Lehman Brothers Inc. The Lehman Brothers U.S. Aggregate Bond Index is
composed of the Lehman Brothers Government/Corporate Bond Index and the
Lehman Brothers Mortgage-Backed Securities Index. The U.S. Aggregate Bond
Index includes U.S. Treasury and agency issues, corporate bond issues and
mortgage-backed securities rated investment-grade or higher by Moody's
Investors Service, Standard & Poor's Corporation or Fitch Investor Service.
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 4.75%), was -3.23%. Total return for
Class B Shares for the reporting period, based on redemption value
(including maximum contingent deferred sales charge of 4%), was -2.95%.
Total return for Class C shares for the reporting period, based on
redemption value (including maximum contingent deferred sales charge of 1%),
was 0.03%.
(4) Returns for periods of less than one year are not annualized.
4
CREDIT SUISSE INVESTMENT GRADE BOND FUND
SCHEDULE OF INVESTMENTS
October 31, 2002
PAR RATINGS+
(000) (S&P/MOODY'S) MATURITY RATE% VALUE
----- ------------- -------- ------ ----------
CORPORATE BONDS (29.8%)
AEROSPACE & DEFENSE (0.6%)
$ 130 Lockheed Martin Corp., Bonds (BBB , Baa2) 12/01/29 8.500 $ 168,048
180 The Boeing Co., Debentures (A+ , A2) 08/15/42 7.500 56,960
----------
225,008
----------
AUTOMOBILE MANUFACTURERS (0.2%)
50 DaimlerChrysler NA Holding Corp., Global
Company Guaranteed (BBB+ , A3) 06/15/10 8.000 56,274
----------
BANKS (0.9%)
140 BB&T Corp., Global Subordinated Note (A- , A2) 08/01/11 6.500 156,865
160 Washington Mutual, Inc., Global Senior Notes (BBB+ , A3) 01/15/07 5.625 169,732
----------
326,597
----------
DIVERSIFIED FINANCIALS (5.8%)
50 Boeing Capital Corp., Global Bonds (A+ , A3) 01/15/13 5.800 48,740
30 Burlington Resources Finance Co.,
Yankee Company Guaranteed (BBB+ , Baa1) 03/01/07 5.700 32,306
245 Countrywide Home Loans, Inc.,
Global Company Guaranteed (A , A3) 02/01/07 5.500 255,011
15 Countrywide Home Loans, Inc.,
Global Company Guaranteed (A , A3) 05/15/07 5.625 15,718
140 Ford Motor Credit Co., Global Bonds (BBB+ , A3) 02/01/11 7.375 125,304
370 Ford Motor Credit Co., Global Notes (BBB , A3) 02/01/06 6.875 341,361
115 Ford Motor Credit Co., Global Notes (BBB , A3) 10/25/11 7.250 100,643
170 General Motors Acceptance Corp.,
Global Notes (BBB , A2) 01/15/06 6.750 168,525
150 General Motors Acceptance Corp.,
Global Notes (NR , A2) 08/28/07 6.125 144,248
240 Household Finance Corp., Global Notes (A- , A2) 01/30/07 5.750 213,662
105 Morgan Stanley Dean Witter,
Global Unsubordinated (A+ , Aa3) 04/15/06 6.100 112,828
130 Verizon Global Funding Corp., Global Notes (A+ , A1) 06/15/12 6.875 138,970
100 Verizon Global Funding Corp., Global Notes (A+ , A1) 09/01/12 7.375 110,300
245 Verizon Global Funding Corp., Global Notes (A+ , A1) 12/01/30 7.750 263,460
65 Verizon Global Funding Corp., Global Notes (A+ , A1) 06/15/32 7.750 69,977
----------
2,141,053
----------
ELECTRIC (2.3%)
140 Cincinnati Gas & Electric Co., Notes (BBB , Baa1) 09/15/12 5.700 139,133
105 Energy East Corp., Notes (BBB , Baa2) 06/15/12 6.750 112,382
80 Oncor Electric Delivery Co., Rule 144A,
Private Placement, Senior Secured Notes++ (BBB , A3) 05/01/12 6.375 81,538
260 PG&E National Energy Group, Global
Senior Notes** (D , Ca) 05/16/11 10.375 55,900
385 Progress Energy, Inc., Senior Notes (BBB , Baa1) 03/01/06 6.750 395,830
75 PSEG Power LLC, Rule 144A, Private
Placement, Notes++ (BBB , Baa1) 06/01/12 6.950 65,380
----------
850,163
----------
See Accompanying Notes to Financial Statements.
5
PAR RATINGS+
(000) (S&P/MOODY'S) MATURITY RATE% VALUE
----- ------------- -------- ----- ----------
CORPORATE BONDS (CONTINUED)
ENVIRONMENTAL CONTROL (0.7%)
$ 20 Waste Management, Inc., Notes (BBB , Ba1) 04/30/04 8.000 $ 20,652
165 Waste Management, Inc., Rule 144A,
Private Placements, Bonds++ (BBB , Ba1) 05/15/32 7.750 161,718
80 Waste Management, Inc., Senior Notes (BBB , Ba1) 08/01/10 7.375 84,141
----------
266,511
----------
FOOD (0.8%)
260 Tyson Foods, Inc., Global Notes (BBB , Baa3) 10/01/04 6.625 274,872
----------
HEALTHCARE FACILITIES/SUPPLIES (0.4%)
140 Baxter International, Inc., Notes (A , A3) 05/01/07 5.250 146,393
----------
HEALTHCARE SERVICES (0.6%)
220 HCA, Inc., Notes (BBB- , Ba1) 07/01/07 7.000 233,602
----------
INDUSTRIAL (1.4%)
35 ConAgra Foods, Inc., Notes (BBB+ , Baa1) 09/15/11 6.750 39,566
5 ConAgra Foods, Inc., Notes (BBB+ , Baa1) 09/15/30 8.250 6,347
20 Conoco, Inc., Senior Global Notes (A- , A3) 04/15/09 6.350 22,120
190 General Motors Corp., Global Notes (BBB , A3) 01/15/11 7.200 178,952
90 Norsk Hydro A/S, Yankee Debentures (A , A2) 06/15/23 7.750 105,807
5 Safeway, Inc., Senior Debentures (BBB , Baa2) 02/01/31 7.250 5,485
155 Safeway, Inc., Senior Notes (BBB , Baa2) 09/15/04 7.250 167,592
----------
525,869
----------
LEISURE (0.5%)
110 Carnival Corp., Yankee Notes (A , A2) 04/15/08 6.150 116,115
45 Walt Disney Co., Global Notes (BBB+ , Baa1) 03/01/12 6.375 48,255
----------
164,370
----------
LODGING (0.2%)
70 Park Place Entertainment Corp.,
Senior Notes (BBB- , Ba1) 11/15/06 8.500 72,876
----------
MEDIA (2.9%)
55 AOL Time Warner, Inc., Global Bonds (BBB+ , Baa1) 04/15/31 7.625 50,000
20 Clear Channel Communications, Inc.,
Debentures (BBB- , Baa3) 10/15/27 7.250 19,493
120 Clear Channel Communications, Inc.,
Global Senior Notes (BBB- , Baa3) 11/01/06 6.000 123,622
385 Comcast Cable Communications, Inc.,
Senior Notes (BBB , Baa3) 01/30/11 6.750 368,070
220 News America Holdings, Inc., Company
Guaranteed (BBB- , Baa3) 02/01/13 9.250 249,072
150 News America Holdings, Inc., Debentures (BBB- , Baa3) 08/10/18 8.250 146,613
100 Viacom, Inc., Global Company Guaranteed (A- , A3) 08/15/12 5.625 104,342
----------
1,061,212
----------
See Accompanying Notes to Financial Statements.
6
PAR RATINGS+
(000) (S&P/MOODY'S) MATURITY RATE% VALUE
----- ------------- -------- ----- ----------
CORPORATE BONDS (CONTINUED)
OIL & GAS (3.5%)
$ 135 Conoco Funding Co., Global Company
Guaranteed (A- , A3) 10/15/31 7.250 $ 153,851
85 Devon Energy Corp., Debentures (BBB , Baa2) 04/15/32 7.950 98,881
475 Dominion Resources, Inc. (BBB+ , Baa1) 06/15/10 8.125 532,152
160 Enterprise Products Partners LP,
Company Guaranteed (BBB , Baa2) 02/01/11 7.500 158,669
335 Petronas Capital Ltd., Rule 144A,
Private Placement, Company Guaranteed++ (BBB+ , Baa1) 05/22/22 7.875 347,827
----------
1,291,380
----------
PIPELINES (0.5%)
100 El Paso Corp., Rule 144A, Private
Placement, Notes++ (BBB , Baa3) 06/15/12 7.875 67,117
65 Tennessee Gas Pipeline Co., Debentures (BBB+ , Baa2) 04/01/17 7.500 58,647
45 Tennessee Gas Pipeline Co., Debentures (BBB+ , Baa2) 10/15/28 7.000 38,375
----------
164,139
----------
REAL ESTATE (0.6%)
210 EOP Operating LP, Notes (BBB+ , Baa1) 06/15/04 6.500 219,272
----------
TELECOMMUNICATIONS (7.9%)
105 ALLTEL Corp., Global Senior Notes (A , A2) 07/01/12 7.000 118,470
110 ALLTEL Corp., Global Senior Notes (A , A2) 07/01/32 7.875 126,146
475 AT&T Corp., Global Notes (BBB+ , Baa2) 03/15/09 6.000 454,330
30 AT&T Corp., Global Notes (BBB+ , Baa2) 03/15/29 6.500 25,890
65 AT&T Wireless Services, Inc.,
Global Senior Notes (BBB , Baa2) 05/01/07 7.500 57,588
360 AT&T Wireless Services, Inc.,
Global Senior Notes (BBB , Baa2) 03/01/31 8.750 288,766
100 AT&T Wireless Services, Inc., Senior Notes (BBB , Baa2) 03/01/11 7.875 87,151
55 Citizens Communications Co.,
Global Senior Notes (BBB , Baa2) 08/15/31 9.000 52,958
330 Citizens Communications Co., Notes (BBB , Baa2) 05/15/11 9.250 348,768
350 Cox Communications, Inc., Notes (BBB , Baa2) 11/01/10 7.750 375,014
180 Deutsche Telekom International Finance BV (BBB+ , Baa1) 06/15/05 8.250 194,124
205 Sprint Capital Corp. (BBB- , Baa3) 01/30/11 7.625 165,422
200 Sprint Capital Corp., Senior, Global
Company Guaranteed (BBB- , Baa3) 11/15/28 6.875 132,929
225 Verizon New York, Inc. (A+ , A1) 04/01/12 6.875 241,116
245 Verizon Wireless, Inc., Rule 144A,
Private Placement Notes++ (A+ , A2) 12/15/06 5.375 242,163
----------
2,910,835
----------
TOTAL CORPORATE BONDS (Cost $11,348,128) 10,930,426
----------
See Accompanying Notes to Financial Statements.
7
PAR RATINGS+
(000) (S&P/MOODY'S) MATURITY RATE% VALUE
----- ------------- -------- ----- ----------
ASSET BACKED SECURITIES (5.7%)
$ 535 Chase Credit Card Master Trust,
Series 2000-2 Class A (AAA , Aaa) 07/15/05 1.903 $ 535,019
185 CNH Equipment Trust, Series 2002-A,
Class A3 (AAA , Aaa) 07/17/06 2.053 185,648
105 Daimler Chrysler Master Owner Trust,
Series 2002-A, Class A (AAA , Aaa) 05/15/07 1.863 105,043
225 Discover Card Master Trust I, Series 1999-5,
Class A (AAA , Aaa) 12/18/06 1.983 225,440
370 First USA Credit Card Master Trust,
Series 2001-4 Class A (AAA , Aaa) 01/12/09 1.940 370,625
95 Fleet Credit Master Trust II, Series 2002-A,
Class A (AAA , Aaa) 10/15/07 1.853 95,040
130 Ford Credit Floorplan Master Owner Trust,
Series 2001-1, Class A (AAA , Aaa) 07/17/06 1.893 130,197
85 LB-UBS Commercial Mortgage Trust,
Series 2002-C2, Class A4 (AAA , Aaa) 06/15/31 5.594 89,776
120 MBNA Master Credit Card Trust,
Series 1996-M, Class A (AAA , Aaa) 04/15/09 1.880 120,172
160 MMCA Automobile Trust, Series 2002-2,
Class A3 (AAA , Aaa) 07/17/06 3.670 164,002
50 Morgan Stanley Mortgage Trust, Series 40,
Class 8 (AAA , Aaa) 07/20/21 7.000 49,936
----------
2,070,898
----------
TOTAL ASSET BACKED SECURITIES (Cost $2,059,707) 2,070,898
----------
MORTGAGE-BACKED SECURITIES (54.6%)
630 Bear Stearns Commercial Mortgage
Securities, Inc., Series 2002-TOP6,
Class A2 (AAA , Aaa) 10/15/36 6.460 703,121
125 Chase Funding Mortgage Loan,
Series 2002-2, Class 1A4 (AAA , Aaa) 08/25/28 4.877 128,331
690 Fannie Mae (AAA , Aaa) 12/10/07 6.560 693,288
2,700 Fannie Mae, Global Notes (AAA , Aaa) 03/15/05 3.875 2,813,940
80 Fannie Mae, Global Notes (AAA , Aaa) 04/15/07 5.250 87,227
910 Fannie Mae, Global Notes (AAA , Aaa) 03/15/12 6.125 1,022,967
336 Fannie Mae, Pool #498569 (AAA , Aaa) 05/01/29 7.500 356,062
256 Fannie Mae, Pool #499251 (AAA , Aaa) 07/01/29 7.000 267,494
430 Fannie Mae, Pool #501931 (AAA , Aaa) 02/01/30 7.000 449,854
12 Fannie Mae, Pool #503857 (AAA , Aaa) 07/01/29 7.500 12,641
155 Fannie Mae, Pool #515160 (AAA , Aaa) 09/01/29 7.500 163,594
9 Fannie Mae, Pool #517826 (AAA , Aaa) 02/01/30 7.000 9,196
11 Fannie Mae, Pool #521146 (AAA , Aaa) 12/01/29 7.000 11,075
19 Fannie Mae, Pool #524164 (AAA , Aaa) 11/01/29 7.000 19,856
99 Fannie Mae, Pool #524946 (AAA , Aaa) 03/01/30 8.000 105,635
54 Fannie Mae, Pool #530172 (AAA , Aaa) 03/01/30 7.500 56,733
86 Fannie Mae, Pool #532011 (AAA , Aaa) 03/01/30 7.500 90,728
155 Fannie Mae, Pool #533091 (AAA , Aaa) 03/01/30 7.500 164,321
See Accompanying Notes to Financial Statements.
8
PAR RATINGS+
(000) (S&P/MOODY'S) MATURITY RATE% VALUE
----- ------------- -------- ----- -----------
MORTGAGE-BACKED SECURITIES (CONTINUED)
$ 20 Fannie Mae, Pool #533421 (AAA , Aaa) 03/01/30 8.000 $ 21,710
206 Fannie Mae, Pool #533440 (AAA , Aaa) 01/01/30 8.000 220,295
57 Fannie Mae, Pool #533714 (AAA , Aaa) 03/01/30 8.000 60,457
796 Fannie Mae, Pool #650077 (AAA , Aaa) 07/01/32 7.500 842,673
430 Fannie Mae, Pool #662830 (AAA , Aaa) 10/01/32 7.500 454,985
1,470 Fannie Mae TBA (AAA , Aaa) 11/01/17 6.500 1,543,956
3,660 Fannie Mae TBA (AAA , Aaa) 11/01/32 8.000 3,913,931
1,850 Fannie Mae TBA (AAA , Aaa) 11/01/32 7.000 1,933,250
1,520 Fannie Mae TBA (AAA , Aaa) 11/01/32 6.000 1,562,742
2,075 Fannie Mae TBA (AAA , Aaa) 11/01/32 6.500 2,150,219
150 J.P. Morgan Chase Commercial Mortgage
Securities, Series 2002-CIB4, Class A3 (AAA , Aaa) 05/12/34 6.162 163,507
-----------
20,023,788
-----------
TOTAL MORTGAGE-BACKED SECURITIES (Cost $19,715,099) 20,023,788
-----------
FOREIGN BONDS (0.9%)
TELECOMMUNICATIONS (0.9%)
110 British Telecommunications PLC, Global
Notes (Great Britian) (A- , Baa1) 12/15/05 7.625 122,848
250 TELUS Corp., Yankee Notes (Canada) (BBB , Ba1) 06/01/11 8.000 193,750
-----------
316,598
-----------
TOTAL FOREIGN BONDS (Cost $379,765) 316,598
-----------
UNITED STATES TREASURY OBLIGATIONS (12.1%)
UNITED STATES TREASURY BONDS (5.2%)
1,795 United States Treasury Bonds(1) (AAA , Aaa) 02/15/31 5.375 1,895,199
-----------
UNITED STATES TREASURY NOTES (6.9%)
414 United States Treasury Notes (AAA , Aaa) 01/15/08 3.625 448,589
419 United States Treasury Notes (AAA , Aaa) 01/15/10 4.250 472,945
231 United States Treasury Notes (AAA , Aaa) 07/15/12 3.000 243,081
1,315 United States Treasury Notes (AAA , Aaa) 08/15/12 4.375 1,365,546
-----------
2,530,161
-----------
TOTAL UNITED STATES TREASURY OBLIGATIONS (Cost $4,350,626) 4,425,360
-----------
SHORT-TERM U.S. GOVERNMENT AGENCY (17.7%)
FHLMC (17.7%)
3,800 Federal Home Loan Bank, Discount Notes(1) (AAA , Aaa) 11/01/02 1.500 3,800,000
2,700 Federal Home Loan Bank, Discount Notes(1) (AAA , Aaa) 11/01/02 1.690 2,700,000
-----------
6,500,000
-----------
TOTAL SHORT-TERM U.S. GOVERNMENT AGENCY (Cost $6,500,000) 6,500,000
-----------
See Accompanying Notes to Financial Statements.
9
PAR
(000) MATURITY RATE% VALUE
----- -------- ----- -------------
SHORT-TERM INVESTMENT (9.5%)
$ 3,487 State Street Bank & Trust Co. Euro Time
Deposit (Cost $3,487,000)(1) 11/01/02 1.750 $ 3,487,000
-------------
TOTAL INVESTMENTS (130.3%) (Cost $47,840,325) 47,754,070
LIABILITIES IN EXCESS OF OTHER ASSETS (-30.3%) (11,102,646)
-------------
NET ASSETS (100.0%) $ 36,651,424
=============
INVESTMENT ABBREVIATIONS
TBA = To Be Announced
+ Credit ratings given by Standard & Poor's Rating Group and Moody's Investors
Services, Inc. are unaudited.
++ Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At October 31,
2002, these securities amounted to a value of $965,743 or 2.6% of net
assets.
** Bond is currently in default.
(1) Collateral segregated for TBA securities.
See Accompanying Notes to Financial Statements.
10
CREDIT SUISSE INVESTMENT GRADE BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2002
ASSETS
Investments at value (Cost $47,840,325) $ 47,754,070(1)
Cash 54
Foreign currency (Cost $28) 28
Collateral received for securities loaned 3,463,095
Receivable for investments sold 683,566
Interest receivable 351,343
Receivable from investment adviser 39,685
Receivable for fund shares sold 23,503
Prepaid expenses and other assets 34,121
---------------
Total Assets 52,349,465
---------------
LIABILITIES
Administrative services fee payable 4,283
Distribution fee payable 1,148
Directors' fee payable 2,281
Payable for investments purchased 12,142,682
Payable upon return of securities loaned 3,463,095
Payable for fund shares redeemed 43,448
Dividend payable 10,544
Other accrued expenses payable 30,560
---------------
Total Liabilities 15,698,041
---------------
NET ASSETS
Capital stock, $0.001 par value 3,657
Paid-in capital 37,188,437
Accumulated net investment income 86,038
Accumulated net realized loss on investments and foreign currency transactions (540,453)
Net unrealized depreciation from investments and foreign currency translations (86,255)
---------------
Net Assets $ 36,651,424
===============
COMMON SHARES
Net assets $ 35,030,854
Shares outstanding 3,495,648
---------------
Net asset value, offering price and redemption price per share $ 10.02
===============
A SHARES
Net assets $ 255,720
Shares outstanding 25,522
---------------
Net asset value and redemption price per share $ 10.02
===============
Maximum offering price per share (net asset value/(1-4.75%)) $ 10.52
===============
B SHARES
Net assets $ 1,143,336
Shares outstanding 114,088
---------------
Net asset value and offering price per share $ 10.02
===============
C SHARES
Net assets $ 221,514
Shares outstanding 22,098
---------------
Net asset value and offering price per share $ 10.02
===============
(1) Including $3,366,741 of securities on loan.
See Accompanying Notes to Financial Statements.
11
CREDIT SUISSE INVESTMENT GRADE BOND FUND
STATEMENT OF OPERATIONS
For the Year Ended October 31, 2002
INVESTMENT INCOME
Interest $ 2,477,922
Securities Lending 2,688
---------------
Total investment income 2,480,610
---------------
EXPENSES
Investment advisory fees 235,329
Administrative services fees 85,216
Distribution Fees 3,726
Registration fees 68,318
Legal fees 59,391
Printing fees 53,172
Transfer agent fees 53,055
Directors' fees 14,790
Audit fees 14,676
Custodian fees 14,351
Insurance expense 4,515
Interest expense 1,487
Miscellaneous expense 9,047
---------------
Total expenses 617,073
Less: fees waived and expenses reimbursed (330,953)
---------------
Net expenses 286,120
---------------
Net investment income 2,194,490
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENTS
Net realized gain from investments 451,794
Net realized gain on foreign currency transactions 83,215
Net change in unrealized appreciation/(depreciation) from investments (3,136,932)
---------------
Net realized and unrealized loss from investments and foreign currency
related items (2,601,923)
---------------
Net decrease in net assets resulting from operations $ (407,433)
===============
See Accompanying Notes to Financial Statements.
12
CREDIT SUISSE INVESTMENT GRADE BOND FUND
STATEMENTS OF CHANGES IN NET ASSETS
October 31, 2002
FOR THE YEAR ENDED
----------------------------------
OCTOBER 31, 2002 OCTOBER 31, 2001
---------------- ----------------
FROM OPERATIONS
Net investment income $ 2,194,490 $ 2,581,607
Net realized gain on investments and foreign currency
transactions 535,009 192,884
Net change in unrealized appreciation (depreciation)
from investments and foreign currency translations (3,136,932) 3,425,476
-------------- --------------
Net increase (decrease) in net assets resulting from
operations (407,433) 6,199,967
-------------- --------------
FROM DIVIDENDS
Dividends from net investment income
Common Class shares (2,106,728) (2,581,607)
Class A shares (3,997) --
Class B shares (9,441) --
Class C shares (1,675) --
-------------- --------------
Net decrease in net assets resulting from dividends (2,121,841) (2,581,607)
-------------- --------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares 37,343,848 50,060,690
Reinvestment of dividends 1,919,661 2,267,284
Net asset value of shares redeemed (54,068,360) (49,935,072)
-------------- --------------
Net increase (decrease) in net assets from capital
share transactions (14,804,851) 2,392,902
-------------- --------------
Net increase (decrease) in net assets (17,334,125) 6,011,262
NET ASSETS
Beginning of year 53,985,549 47,974,287
-------------- --------------
End of year $ 36,651,424 $ 53,985,549
============== ==============
ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME $ 86,038 $ --
============== ==============
See Accompanying Notes to Financial Statements.
13
CREDIT SUISSE INVESTMENT GRADE BOND FUND
FINANCIAL HIGHLIGHTS
(For a Common Class Share of the Fund Outstanding Throughout Each Period)
FOR THE YEAR ENDED OCTOBER 31,
---------------------------------------------------------------------
2002(1) 2001 2000 1999 1998
---------- ---------- ---------- ---------- ----------
PER SHARE DATA
Net asset value, beginning of period $ 10.54 $ 9.80 $ 9.77 $ 10.37 $ 10.05
---------- ---------- ---------- ---------- ----------
INVESTMENT OPERATIONS
Net investment income 0.47 0.53 0.56 0.53 0.56
Net gain (loss) on investments
(both realized and unrealized)
and foreign currency related items
(both realized and unrealized) (0.53) 0.74 0.03 (0.54) 0.32
---------- ---------- ---------- ---------- ----------
Total from investment operations (0.06) 1.27 0.59 (0.01) 0.88
---------- ---------- ---------- ---------- ----------
LESS DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (0.46) (0.53) (0.56) (0.53) (0.56)
Distributions from net realized gains -- -- -- (0.04) --
Distributions in excess of net realized gains -- -- -- (0.02) --
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (0.46) (0.53) (0.56) (0.59) (0.56)
---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $ 10.02 $ 10.54 $ 9.80 $ 9.77 $ 10.37
========== ========== ========== ========== ==========
Total return(2) (0.55)% 13.25% 6.27% (0.05)% 9.35
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $ 35,031 $ 53,986 $ 47,974 $ 56,625 $ 78,200
Ratio of expenses to average net assets 0.60% 0.60%(3) 0.62%(3) 0.61%(3) 0.60%(3)
Ratio of net investment income to
average net assets 4.67% 5.18% 5.77% 5.27% 5.54%
Decrease reflected in above operating
expense ratios due to
waivers/reimbursements 0.70% 0.42% 0.31% 0.28% 0.34%
Portfolio turnover rate 171% 41% 84% 91% 134%
(1) As required, effective November 1, 2001, the Fund adopted the provisions of
AICPA Audit and Accounting Guide for Investment Companies and began
including paydown gains and losses in interest income. The effect of this
change for the year ended October 31, 2002 was to increase net investment
income per share by $0.01, decrease net realized and unrealized gains and
losses per share by $0.01 and increase the ratio of net investment income to
average net assets from 4.52% to 4.67%. Per share ratios and supplemental
data for prior periods have not been restated to reflect this change.
(2) 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 period shown, total returns would have been lower.
(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 Common Shares' net expense ratio by .00%, .02%, .01%, and .00% for the
years ended October 31, 2001, 2000, 1999, and 1998, respectively. The Common
Class Shares' net operating expense ratio after reflecting these
arrangements was .60% for the year ended October 31, 2001, 2000, 1999, and
1998, respectively.
See Accompanying Notes to Financial Statements.
14
CREDIT SUISSE INVESTMENT GRADE BOND FUND
FINANCIAL HIGHLIGHTS
(For a Class A Share of the Fund Outstanding Throughout the Period)
FOR THE PERIOD
ENDED
OCTOBER 31, 2002(1),(2)
-----------------------
PER SHARE DATA
Net asset value, beginning of period $ 10.22
----------
INVESTMENT OPERATIONS
Net investment income 0.37
Net loss on investments
and foreign currency related items
(both realized and unrealized) (0.21)
----------
Total from investment operations 0.16
----------
LESS DIVIDENDS
Dividends from net investment income (0.36)
----------
NET ASSET VALUE, END OF PERIOD $ 10.02
==========
Total return 1.60%(3)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $ 256
Ratio of expenses to average net assets 0.85%(4)
Ratio of net investment income to average net assets 4.30%(4)
Decrease reflected in above operating expense ratios
due to waivers/reimbursements 0.93%(4)
Portfolio turnover rate 171%
(1) For the period December 24, 2001 (inception date) through October 31, 2002.
(2) As required, effective November 1, 2001, the Fund adopted the provisions of
AICPA Audit and Accounting Guide for Investment Companies and began
including paydown gains and losses in interest income. The effect of this
change for the period ended October 31, 2002 was to increase net investment
income per share by $0.02, decrease net realized and unrealized gains and
losses per share by $0.02 and increase the ratio of net investment income to
average net assets from 4.12% to 4.30%.
(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 period 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.
15
CREDIT SUISSE INVESTMENT GRADE BOND FUND
FINANCIAL HIGHLIGHTS
(For a Class B Share of the Fund Outstanding Throughout the Period)
FOR THE PERIOD
ENDED
OCTOBER 31, 2002(1),(2)
-----------------------
PER SHARE DATA
Net asset value, beginning of period $ 10.22
----------
INVESTMENT OPERATIONS
Net investment income 0.30
Net loss on investments
and foreign currency related items
(both realized and unrealized) (0.20)
----------
Total from investment operations 0.10
----------
LESS DIVIDENDS
Dividends from net investment income (0.30)
----------
NET ASSET VALUE, END OF PERIOD $ 10.02
==========
Total return 0.97%(3)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $ 1,143
Ratio of expenses to average net assets 1.60%(4)
Ratio of net investment income to
average net assets 3.38%(4)
Decrease reflected in above operating expense ratios
due to waivers/reimbursements 1.11%(4)
Portfolio turnover rate 171%
(1) For the period December 24, 2001 (inception date) through October 31, 2002.
(2) As required, effective November 1, 2001, the Fund adopted the provisions of
AICPA Audit and Accounting Guide for Investment Companies and began
including paydown gains and losses in interest income. The effect of this
change for the period ended October 31, 2002 was to increase net investment
income per share by $0.02, decrease net realized and unrealized gains and
losses per share by $0.02 and increase the ratio of net investment income to
average net assets from 3.20% to 3.38%.
(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 period 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.
16
CREDIT SUISSE INVESTMENT GRADE BOND FUND
FINANCIAL HIGHLIGHTS
(For a Class C Share of the Fund Outstanding Throughout the Period)
FOR THE PERIOD
ENDED
OCTOBER 31, 2002(1),(2)
-----------------------
PER SHARE DATA
Net asset value, beginning of period $ 10.22
----------
INVESTMENT OPERATIONS
Net investment income 0.29
Net loss on investments
and foreign currency related items
(both realized and unrealized) (0.20)
----------
Total from investment operations 0.09
----------
LESS DIVIDENDS
Dividends from net investment income (0.29)
----------
NET ASSET VALUE, END OF PERIOD $ 10.02
==========
Total return 0.91%(3)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $ 222
Ratio of expenses to average net assets 1.60%(4)
Ratio of net investment income to average net assets 3.26%(4)
Decrease reflected in above operating expense
ratios due to waivers 1.04%(4)
Portfolio turnover rate 171%
(1) For the period December 24, 2001 (inception date) through October 31, 2002.
(2) As required, effective November 1, 2001, the Fund adopted the provisions of
AICPA Audit and Accounting Guide for Investment Companies and began
including paydown gains and losses in interest income. The effect of this
change for the period ended October 31, 2002 was to increase net investment
income per share by $0.02, decrease net realized and unrealized gains and
losses per share by $0.02 and increase the ratio of net investment income to
average net assets from 3.08% to 3.26%.
(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 period 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.
17
CREDIT SUISSE INVESTMENT GRADE BOND FUND
NOTES TO FINANCIAL STATEMENTS
October 31, 2002
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Credit Suisse Investment Grade Bond Fund, Inc. (the "Fund") is registered
under the Investment Company Act of 1940, as amended (the "1940 Act"), as a
diversified open-end management investment company. The Fund seeks to achieve a
high total return. The Fund was incorporated under the laws of the State of
Maryland on June 21, 1988.
The Fund is authorized to offer four classes of shares: Common, Class A,
Class B, and Class C. Effective December 24, 2001, the Fund began offering Class
A, Class B, and Class C shares to new investors. Effective December 12, 2001,
the Common Class shares closed to new investors. Each class of shares represents
an equal pro rata interest in the Fund, except that they bear different expenses
which reflect the differences in the range of services provided to them. Common
Class shares are not subject to distribution fees. Class A shares are sold
subject to a front-end sales charge of 4.75% and 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 Class A shares. Class B shares are sold subject to a
contingent deferred sales charge which declines from 4.00% 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 the Fund's Class B shares. Class C shares are sold subject to a
contingent deferred sales charge of 1.00% 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 the Fund's Class C shares.
A) SECURITY VALUATION -- The net asset value of the Fund is determined daily
as of the close of regular trading on the New York Stock Exchange, Inc. 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. The 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.
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 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 approximates market value, unless the Board determines
that using this method would not reflect an investment's fair value.
18
B) SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on a trade date basis. Interest income is recorded on the accrual
basis. The Fund amortizes premium and accretes discount using the effective
interest method. 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 the 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.
Effective November 1, 2001, the Fund adopted the revised AICPA Audit and
Accounting Guide, Audits of Investment Companies and began to classify gains and
losses on paydowns of mortgage- and asset-backed securities, previously included
in realized gain and losses as a component of interest income. The effect of
this change for the year ended October 31, 2002, to the Fund was to increase net
investment income by $72,692 and to decrease net realized gains by $72,692.
These reclassifications had no impact on net assets or net asset value per
share. The statements of changes in net assets and the financial highlights for
all prior periods shown have not been restated to reflect this change.
C) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- Dividends from net
investment income are declared daily and paid monthly. 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
the 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.
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
19
and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from these estimates.
F) SHORT-TERM INVESTMENTS -- The Fund, 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 Fund's custodian. The
short-term time deposit is a variable rate account classified as a short-term
investment.
G) TBA PURCHASE COMMITMENTS -- The Fund may enter into "TBA" (to be
announced) purchase commitments to purchase securities for a fixed price at a
future date, typically not exceeding 45 days. TBA purchase commitments may be
considered securities in themselves, and involve a risk of loss if the value of
the security to be purchased declines prior to settlement date. This risk is in
addition to the risk of decline in the Fund's other assets. Unsettled TBA
purchase commitments are valued at the current market value of the underlying
securities, according to the procedures described under "Security Valuation"
above.
H) 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 Fund 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 market value of securities on loan to brokers and the value of collateral
held by the Fund with respect to such loans at October 31, 2002 is as follows:
MARKET VALUE OF VALUE OF
SECURITIES LOANED COLLATERAL RECEIVED
----------------- -------------------
$ 3,366,741 $ 3,463,095
Credit Suisse First Boston ("CSFB"), an affiliate of CSAM, has been engaged
by the Fund to act as the Fund's securities lending agent. CSFB has agreed to
charge the Fund fees for its securities lending activities equal to its
20
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.
NOTE 2. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
CSAM serves as investment adviser for the Fund. For its investment advisory
services, CSAM is entitled to receive a fee from the Fund at an annual rate of
0.50% of the Fund's average daily net assets. For the year ended October 31,
2002, investment advisory fees earned, voluntarily waived, and expenses
reimbursed were as follows:
GROSS ADVISORY NET EXPENSE
FEE WAIVER ADVISORY FEE REIMBURSEMENT
-------------- --------- ------------ -------------
$ 235,329 $ 235,329 $ -- $ 95,624
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 Fund. At its meeting held on February 12, 2002 the Board of Directors
approved SSB to replace PFPC, Inc. ("PFPC"), as co-administrator effective
August 1, 2002.
For its co-administrative services, CSAMSI currently receives a fee
calculated at an annual rate of .10% of the Fund's average daily net assets. For
the year ended October 31, 2002, co-administrative services fees earned by
CSAMSI were $47,066.
For its co-administrative services, PFPC was entitled to receive a fee,
exclusive of out-of-pocket expenses, based on the following fee structure:
AVERAGE DAILY NET ASSETS ANNUAL RATE
------------------------ -----------
First $150 million .07% of average daily net assets
Next $150 million .06% of average daily net assets
Over $300 million .05% of average daily net assets
For the period November 1, 2001 through July 31, 2002, co-administrative
service fees earned by PFPC (including out-of-pocket expenses) were $27,763.
21
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 August 1, 2002 to October 31, 2002, co-administrative service
fees earned by SSB (including out-of-pocket expenses) were $10,387.
In addition to serving as the Fund's co-administrator, CSAMSI currently
serves as distributor of the Fund's shares. Pursuant to a distribution plan
adopted by the 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 shares, and 1.00% of average
daily net assets of each of the Class B and Class C shares. CSAMSI may use this
fee to compensate service organizations for distribution services. For the year
ended October 31, 2002, distribution fees earned by CSAMSI were as follows:
FUND DISTRIBUTION FEE
---- ----------------
Class A $ 243
Class B 2,941
Class C 542
-------
$ 3,726
=======
Certain brokers, dealers and financial representatives provide transfer agent
related services to the Fund, and receive compensation for these services from
CSAM. CSAM is then reimbursed by the Fund. For the year ended October 31, 2002,
the Fund reimbursed CSAM $37,212, which is included in the Fund's transfer agent
expense.
For the year ended October 31, 2002, CSAMSI and its affiliates advised the
Fund that it retained $450 from commissions earned on the sale of the Fund's
shares.
Merrill Corporation ("Merrill"), an affiliate of CSAM, has been engaged by
the Fund to provide certain financial printing and fulfillment services. For the
year ended October 31, 2002, Merrill was paid $37,731 for its services to the
Fund.
22
NOTE 3. LINE OF CREDIT
Through June 18, 2002, the Fund, 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 the Fund either under the New Credit
Facility or the Prior Credit Facility. During the year ended October 31, 2002,
the Fund had borrowings under the Prior Credit Facility and/or the New Credit
Facility as follows:
AVERAGE DAILY WEIGHTED AVERAGE MAXIMUM DAILY
LOAN BALANCE INTEREST RATE LOAN OUTSTANDING
------------- ---------------- ----------------
$ 1,046,000 2.375% $ 1,046,000
NOTE 4. PURCHASES AND SALES OF SECURITIES
For the year ended October 31, 2002, purchases and sales of investment
securities (excluding short-term investments) and U.S. Government and Agency
Obligations were $77,879,197 and $90,511,743, and $135,721,063 and $165,240,242,
respectively.
23
NOTE 5. CAPITAL SHARE TRANSACTIONS
The Fund is authorized to issue six billion full and fractional shares of
capital stock, $.001 par value per share, of which two billion shares are
classified as the Common Class shares and one billion shares are each classified
as the Advisor Class shares, Class A shares, Class B shares and Class C shares.
The Advisor Class shares of the fund were liquidated on June 1, 2000.
Transactions in capital shares for each other class were as follows:
COMMON CLASS
------------------------------------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED
OCTOBER 31, 2002 OCTOBER 31, 2001
------------------------------------------------------------------------
SHARES VALUE SHARES VALUE
--------------- --------------- --------------- ---------------
Shares sold 3,495,919 $ 35,697,090 4,141,422 $ 39,868,056
Shares issued in reinvestment
of dividends 188,689 1,906,711 274,002 2,648,525
Shares redeemed (5,312,905) (54,018,090) (5,315,667) (51,277,314)
--------------- --------------- --------------- ---------------
Net decrease (1,628,297) $ (16,414,289) (900,243) $ (8,760,733)
=============== =============== =============== ===============
CLASS A CLASS B
------------------------------------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED
OCTOBER 31, 2002(1) OCTOBER 31, 2002(1)
------------------------------------------------------------------------
SHARES VALUE SHARES VALUE
--------------- --------------- --------------- ---------------
Shares sold 25,126 $ 251,491 118,308 $ 1,173,704
Shares issued in reinvestment
of dividends 396 3,964 867 8,662
Shares redeemed -- -- (5,087) (50,270)
--------------- --------------- --------------- ---------------
Net increase 25,522 $ 255,455 114,088 $ 1,132,096
=============== =============== =============== ===============
CLASS C
------------------------
FOR THE YEAR ENDED
OCTOBER 31, 2002(1)
------------------------
SHARES VALUE
-------- ---------
Shares sold 22,066 $ 221,563
Shares issued in reinvestment
of dividends 32 324
-------- ---------
Net increase 22,098 $ 221,887
======== =========
(1) For the period December 24, 2001 (inception date) through October 31, 2002.
24
On October 31, 2002, the number of shareholders that held 5% or more of the
outstanding shares of each class of the Fund were as follows:
NUMBER OF APPROXIMATE PERCENTAGE
SHAREHOLDERS OF OUTSTANDING SHARES
------------ ----------------------
Common Class 4 57%
Class A 5 91%
Class B 5 49%
Class C 2 86%
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 paydowns, 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 Fund was as follows:
ORDINARY INCOME LONG-TERM CAPITAL GAIN
------------------------ ------------------------
2002 2001 2002 2001
----------- ----------- ---------- ------------
$ 2,121,841 $ 2,581,607 $ -- $ --
At October 31, 2002, the components of distributable earnings on a tax basis
for the Fund were as follows:
Undistributed ordinary income $ 86,038
Accumulated realized loss (534,622)
Unrealized depreciation (92,086)
---------
$(540,670)
=========
At October 31, 2002, the Fund had capital loss carryovers available to offset
possible future capital gains as follows:
EXPIRES OCTOBER 31,
----------------------------
2007 2008
-------- ---------
$ 6,297 $ 528,326
25
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 $47,846,156,
$649,131, $(741,217) and $(92,086), respectively.
At October 31, 2002, the Fund reclassified $13,389 from accumulated
undistributed net investment income to accumulated net realized gain (loss) from
investments, to adjust for current period permanent book/tax differences which
arose principally from differing book/tax treatments of paydowns and forward
foreign currency contracts. Net assets were not affected by these
reclassifications.
26
CREDIT SUISSE INVESTMENT GRADE BOND FUND
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Credit Suisse Investment Grade Bond Fund, Inc.:
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of operations
and of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Credit Suisse Investment Grade Bond
Fund, Inc. (the "Fund") at October 31, 2002, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended and the financial highlights 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 financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's 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 or broker, provide a reasonable
basis for our opinion.
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
December 18, 2002
27
CREDIT SUISSE INVESTMENT GRADE BOND FUND
INFORMATION CONCERNING DIRECTORS AND OFFICERS (UNAUDITED)
TERM NUMBER OF
OF OFFICE(1) PORTFOLIOS IN
AND FUND
POSITION(S) LENGTH PRINCIPAL COMPLEX OTHER
HELD WITH OF TIME OCCUPATION(S) DURING OVERSEEN BY DIRECTORSHIPS
NAME, ADDRESS AND AGE FUND SERVED PAST FIVE YEARS DIRECTOR HELD BY DIRECTOR
- --------------------- ----------- ------------ -------------------- ------------- ----------------
INDEPENDENT DIRECTORS
Richard H. Francis Director and Since Currently retired; 53 Director of
c/o Credit Suisse Audit 1999 Executive Vice The Indonesia
Asset Management LLC Committee President and Fund, Inc.
466 Lexington Avenue Member Chief Financial
New York, New York Officer of Pan Am
10017-3147 Corporation and
Pan American
Age: 70 World Airways,
Inc. from 1988 to
1991
Jack W. Fritz Director and Since Private investor; 52 Director of
2425 North Fish Creek Road Audit 1988 Consultant and Advo, Inc.
P.O. Box 1287 Committee Director of Fritz (direct mail
Wilson, Wyoming 83014 Member Broadcasting, Inc. advertising)
and Fritz
Age: 75 Communications
(developers and
operators of radio
stations) since
1987
Jeffrey E. Garten Director and Since Dean of Yale 52 Director of
Box 208200 Audit 1988 School of Aetna, Inc.;
New Haven, Connecticut Committee Management and Director of
06520-8200 Member William S. Beinecke Calpine Energy
Professor in the Corporation;
Age: 56 Practice of Director of
International CarMax Group
Trade and Finance; (used car
Undersecretary of dealers)
Commerce for
International Trade
from November 1993
to October 1995;
Professor at
Columbia University
from September
1992 to November
1993
- ----------
(1) Each Director and Officer serves his or her respective successor has been
duly elected and qualified.
28
TERM NUMBER OF
OF OFFICE(1) PORTFOLIOS IN
AND FUND
POSITION(S) LENGTH PRINCIPAL COMPLEX OTHER
HELD WITH OF TIME OCCUPATION(S) DURING OVERSEEN BY DIRECTORSHIPS
NAME, ADDRESS AND AGE FUND SERVED PAST FIVE YEARS DIRECTOR HELD BY DIRECTOR
- --------------------- ----------- ------------ -------------------- ------------- ----------------
INDEPENDENT DIRECTORS--
(CONTINUED)
Peter F. Krogh Director and Since Dean Emeritus and 52 Member of the
301 ICC Audit 2001 Distinguished Board
Georgetown University Committee Professor of of The Carlisle
Washington, DC 20057 Member International Companies Inc.;
Affairs at the Member of
Age: 65 Edmund A. Walsh Selection
School of Foreign Committee
Service, Georgetown for Truman
University; Moderator Scholars and
of PBS Foreign Henry Luce
affairs television Scholars; Senior
Series Associate of
Center for
Strategic and
International
Studies;
Trustee of
numerous world
affairs organizations
James S. Pasman, Jr. Director and Since Currently retired; 54 Director of
c/o Credit Suisse Audit 1999 President and Chief Education
Asset Management LLC Committee Operating Officer of Management
466 Lexington Avenue Member National InterGroup, Corp.; Director
New York, New York Inc. (holding of Credit
10017-3147 company) from April Suisse Asset
1989 to March 1991; Management
Age: 71 Chairman of Permian Income Fund,
Oil Co. from April Inc.; Trustee of
1989 to March 1991 Credit Suisse High Yield
Bond Fund;
29
TERM NUMBER OF
OF OFFICE(1) PORTFOLIOS IN
AND FUND
POSITION(S) LENGTH PRINCIPAL COMPLEX OTHER
HELD WITH OF TIME OCCUPATION(S) DURING OVERSEEN BY DIRECTORSHIPS
NAME, ADDRESS AND AGE FUND SERVED PAST FIVE YEARS DIRECTOR HELD BY DIRECTOR
- --------------------- ----------- ------------ -------------------- ------------- ----------------
INDEPENDENT DIRECTORS--
(CONTINUED)
Steven N. Rappaport Director and Since Partner of Lehigh Court 53 Director of The
Lehigh Court, LLC Audit 1999 LLC since July 2002; First Israel Fund,
40 East 52nd Street Committee President of Sunguard Inc.
New York, New York Chairman Securities Finance, Inc.
10022 from 2001 to July 2002;
President of Loanet, Inc.
Age: 54 (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
William W. Priest(2) Director Since Senior Partner and 59 Director of The
Steinberg Priest & Sloane 1999 Fund Manager, Brazilian Equity
Capital Management Steinberg Priest & Fund, Inc.; The
12 East 49th Street Sloane Capital Chile Fund, Inc.;
12th Floor Management since The Emerging
New York, New York March 2001; Chairman Markets Tele-
10017 and Managing Director communications
of CSAM from 2000 Fund, Inc.; The
Age: 61 to February 2001, Chief First Israel Fund,
Executive Officer and Inc.; The Latin
Managing Director of American Equity
CSAM from 1990 to Fund, Inc.; The
2000 Indonesia Fund,
Inc.; and Credit
Suisse Asset
Management Income
Fund, Inc.
- --------
(2) Mr. Priest is a Director who is an "interested person" of the Fund as
defined in the 1940 Act, because he was an officer of CSAM until February
2001.
30
TERM
OF OFFICE(1)
AND
POSITION(S) LENGTH
HELD WITH OF TIME
NAME, ADDRESS AND AGE FUND SERVED PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
- --------------------- ----------- ------------ ----------------------------------------------
OFFICERS
Laurence R. Smith Chairman Since Managing Director and Global Chief Investment Officer of
Credit Suisse Asset 2002 CSAM; Associated with JP Morgan Investment Management
Management, LLC from 1981 to 1999; Officer of other Credit Suisse Funds.
466 Lexington Avenue
New York, New York
10017-3147
Age: 44
Hal Liebes, Esq. Vice Since Managing Director and Global General Counsel of CSAM;
Credit Suisse Asset President 1999 Associated with Lehman Brothers, Inc. from 1996 to 1997;
Management, LLC and Associated with CSAM from 1995 to 1996; Associated with
466 Lexington Avenue Secretary CS First Boston Investment Management from 1994 to
New York, New York 1995; Associated with Division of Enforcement, U.S.
10017-3147 Securities and Exchange Commission from 1991 to 1994;
Officer of other Credit Suisse Funds.
Age: 38
Michael A. Pignataro Treasurer Since Director and Director of Fund Administration of CSAM;
Credit Suisse Asset and Chief 1999 Associated with CSAM since 1984; Officer of other
Management, LLC Financial Credit Suisse Funds.
466 Lexington Avenue Officer
New York, New York
10017-3147
Age: 43
Gregory N. Bressler, Esq. Assistant Since Vice President and Legal Counsel of CSAM since
Credit Suisse Asset Secretary 2000 January 2000; Associated with the law firm of Swidler Berlin
Management, LLC Shereff Friedman LLP from 1996 to 2000; Officer of other
466 Lexington Avenue Credit Suisse Funds.
New York, New York
10017-3147
Age: 36
Kimiko T. Fields, Esq. Assistant Since Assistant Vice President and Legal Counsel of CSAM since
Credit Suisse Asset Secretary 2002 December 2000; Assistant Vice President, Institutional
Management, LLC 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. from
10017-3147 January 1998 to January 2000; self-employed author and
consultant, from January 1996 to December 1997;
Age: 38 Officer of other Credit Suisse Funds.
31
TERM
OF OFFICE(1)
AND
POSITION(S) LENGTH
HELD WITH OF TIME
NAME, ADDRESS AND AGE FUND SERVED PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
- --------------------- ----------- ------------ ----------------------------------------------
OFFICERS--(CONTINUED)
Rocco A. Del Guercio Assistant Since Vice President and Administrative Officer of CSAM;
Credit Suisse Asset Treasurer 1999 Associated with CSAM since June 1996; Assistant
Management, LLC Treasurer, Bankers Trust Co. -- Fund Administration from
466 Lexington Avenue March 1994 to June 1996; Mutual Fund Accounting
New York, New York Supervisor, Dreyfus Corporation from April 1987 to
10017-3147 March 1994; Officer of other Credit Suisse Funds.
Age: 39
Joseph Parascondola Assistant Since Assistant Vice President -- Fund Administration of CSAM
Credit Suisse Asset Treasurer 2000 since April 2000; Assistant Vice President, Deutsche Asset
Management, LLC Management from January 1999 to April 2000; Assistant
466 Lexington Avenue Vice President, Weiss, Peck & Greer LLC from
New York, New York November 1995 to December 1998; Officer of other
10017-3147 Credit Suisse Funds.
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 to
Management, LLC December 2000; Assistant Treasurer of Bankers Trust Co.
466 Lexington Avenue 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 and is available, without charge, upon request, by calling
800-927-2874.
32
[CREDIT SUISSE ASSET MANAGEMENT LOGO]
P.O. BOX 55030, BOSTON, MA 02205-5030
800-927-2874 - www.CreditSuisseFunds.com
CREDIT SUISSE ASSET MANAGEMENT SECURITIES, INC., DISTRIBUTOR. CSIGL-2-1002
PART C
OTHER INFORMATION
Item 15. Indemnification. Registrant and officers and directors or trustees of
Credit Suisse Asset Management, LLC ("CSAM") and 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 27 of Part C of
Post-Effective Amendment No. 14 to Registrant's Registration Statement
on Form N-1A, filed on February 11, 1997.
Item 16. Exhibits
(1)(a) Agreement and Declaration of Trust dated January 20, 1987. 1
(1)(b) Articles of Amendment dated January 15, 1997. 2
(1)(c) Certificate of Amendment dated February 23, 2001. 3
(1)(d) Certificate of Authorization, Establishment and Designation of
Shares dated May 17, 2001. 4
(1)(e) Certificate of Amendment dated October 16, 2001. 5
(1)(f) Certificate and Instrument of Amendment to the Agreement and
Declaration of Trust dated June 17, 2002. 6
(2)(a) Second Amended and Restated By-Laws as amended April 5, 1995. 1
- ---------------------
1 Incorporated by reference to Post-Effective Amendment No. 13 to
Registrant's Registration Statement on Form N-1A, filed on January 16,
1996.
2 Incorporated by reference to Post-Effective Amendment No. 14 to
Registrant's Registration Statement on Form N-1A, filed on February 11,
1997.
3 Incorporated by reference to Post-Effective Amendment No. 21 to
Registrant's Registration Statement on Form N-1A, filed on April 30, 2001.
4 Incorporated by reference to Post-Effective Amendment No. 22 to
Registrant's Registration Statement on Form N-1A, filed on February 14,
2002.
5 Incorporated by reference to Post-Effective Amendment No. 15 to
Registrant's Registration Statement on Form N-1A, filed on February 17,
1998.
6 Incorporated by reference to Post-Effective Amendment No. 23 to
Registrant's Registration Statement on Form N-1A, filed on February 24,
2003.
(2)(b) Amendment to By-Laws dated February 6, 1998. 5
(2)(c) Amended By-Laws dated February 5, 2001. 7
(2)(d) Amendment to By-Laws dated March 26, 2001. 3
(2)(e) Amendment to By-Laws dated December 12, 2001. 4
(2)(f) Amended and Restated By-Laws. 6
(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) Registrant's Form of Stock Certificates. 8
(6)(a) Investment Advisory Agreement dated July 6, 1999. 6
(7)(a) Distribution Agreement with Credit Suisse Asset Management
Securities, Inc. ("CSAMSI") dated August 1, 2000. 9
(7)(b) Amendment to Distribution Agreement with CSAMSI dated April 26, 2001. 6
(8) Not applicable.
(9)(a) Custodian Agreement with State Street Bank and Trust Company ("State
Street") dated October 20, 2000.10
(9)(b) Amendment to the Custodian Agreement with State Street dated
April 26, 2001.11
(9)(c) Amendment to the Custodian Agreement with State Street dated
May 16, 2001.11
- ------------------------
7 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).
8 Incorporated by reference; material provisions of this exhibit are
substantially similar to those of the corresponding exhibit in
Pre-Effective Amendment No. 1 to the Registration Statement on Form N-1A of
Credit Suisse Trust, filed on June 14, 1995 (Securities Act File No.
33-58125).
9 Incorporated by reference to the Registration Statement on Form N-14 of
Credit Suisse Emerging Markets Fund, Inc., filed on December 27, 2000
(Securities Act File No. 333-52818).
10 Incorporated by reference to Post-Effective Amendment No. 14 to the
Registration Statement on Form N-1A of Credit Suisse Trust, filed on
November 22, 2000 (Securities Act File No. 33-58125).
11 Incorporated by reference to Post-Effective Amendment No. 16 to the
Registration Statement on Form N-1A of Credit Suisse Trust, filed on June
29, 2001(Securities Act File No. 33-58125).
2
(9)(d) Amended Exhibit I to the Custodian Agreement with State Street dated
May 16, 2001.11
(10)(a) Shareholder Servicing and Distribution Plan for Common Class shares
dated November 16, 2000.6
(10)(b) Distribution Plan for Adviser Class shares dated November 16, 2000.6
(10)(c) Amended Rule 18f-3 Plan dated November 12, 2001.10
(11)(a) Opinion and Consent of Willkie Farr & Gallagher, counsel to the
Registrant, with respect to validity of shares.
(11)(b) Opinion and consent of Sullivan & Worcester LLP, Massachusetts
counsel to the Registrant, with respect to validity of
shares.
(12) Form of opinion of Willkie Farr & Gallagher with respect to tax
matters.
(13)(a) Forms of Services Agreements.12
(13)(b) Co-Administration Agreement with CSAMSI dated November 1, 1999. 6
(13)(c) Co-Administration Agreement with CSAMSI dated March 18, 2002. 13
(13)(d) Transfer Agency Agreement with Boston Financial Data Services, Inc.
dated February 1, 2001.6
(13)(e) Amendment to the Transfer Agency and Service Agreement with Boston
Financial Data Services, Inc. dated December 31, 2002.6
(14) Consent of PricewaterhouseCoopers LLP, Independent Accountants.
(15) Not Applicable.
(16) Powers of Attorney (filed on the signature page to this Registration
Statement).
(17) Additional Exhibits.
- ---------------------
12 Incorporated by reference; material provisions of this exhibit are
substantially similar to those of the corresponding exhibit in
Pre-Effective Amendment No. 1 to the Registration Statement on Form N-1A of
Credit Suisse Japan Growth Fund, Inc., filed on December 18, 1995
(Securities Act File No. 33-63653).
13 Incorporated by reference to Pre-Effective Amendment No. 1 to the
Registration Statement on Form N-1A of Credit Suisse Strategic Small Cap
Fund, filed on May 3, 2002 (Securities Act File No. 333-64554).
3
(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 Acquiring
Fund, dated February 28, 2003 are incorporated by reference to the
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 the
Acquired Fund's Registration Statement on Form N-1A, filed on February
24, 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.
(f) Amended Form of Code of Ethics dated February 12, 2002 is incorporated
by reference to Post-Effective Amendment No. 18 to the Registration
Statement on Form N-1A of Credit Suisse Trust, filed on April 5, 2002
(Securities Act File No. 33-58125).
Item 17. 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 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.
4
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 21st day of May, 2003.
Credit Suisse Fixed Income Fund
By: /s/ Laurence S. Smith
----------------------
Laurence R. Smith
Chairman (Chief Executive Officer)
POWER OF ATTORNEY
Each person whose signature appears below, hereby makes, constitutes and
appoints each of Hal Liebes and Michael A. Pignataro, with full power to act
without the other, as his agent and attorney-in-fact for the purpose of
executing in his name, in his capacity as a Trustee of the Credit Suisse Fixed
Income Fund, this registration statement on Form N-14 (including amendments
thereto) to be filed with the United States Securities and Exchange Commission
pursuant to the Securities Act of 1933, as amended, and the Investment Company
Act of 1940, as amended, and the rules and regulations promulgated thereunder.
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/ Laurence R. Smith Chairman (Chief Executive May 21, 2003
- --------------------- Officer)
Laurence R. Smith
/s/ Michael A. Pignataro Treasurer and Chief Financial May 21, 2003
- ------------------------ Officer
Michael A. Pignataro
/s/ Richard H. Francis Trustee May 21, 2003
- ----------------------
Richard H. Francis
/s/ Jack W. Fritz Trustee May 21, 2003
- -----------------
Jack W. Fritz
/s/ Jeffrey E. Garten Trustee May 21, 2003
- ---------------------
Jeffrey E. Garten
Trustee
- ----------------------
Peter F. Krogh
/s/ James S. Pasman, Jr. Trustee May 21, 2003
- ------------------------
James S. Pasman, Jr.
/s/ William W. Priest Trustee May 21, 2003
- ---------------------
William W. Priest
/s/ Steven N. Rappaport Trustee May 21, 2003
- -----------------------
Steven N. Rappaport
INDEX TO EXHIBITS
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
(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).
(11)(a) Opinion and consent of Willkie Farr & Gallagher, counsel to the
Registrant, with respect to validity of shares.
(11)(b) Opinion and consent of Sullivan & Worcester LLP with respect to
validity of shares.
(12) Form of opinion of Willkie Farr & Gallagher with respect to tax matters.
(14) Consent of PricewaterhouseCoopers LLP, Independent Accountants.
(16) Powers of Attorney (included on the signature page to the Registration
Statement).
(17(a) Form of Proxy Card (included as an exhibit to Registrant's
Prospectus/Proxy Statement contained in Part A of the Registration
Statement).