AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
ON OCTOBER 10, 2003
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Registration No. 333-108326
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
|X| PRE-EFFECTIVE AMENDMENT NO. 2 |_| POST-EFFECTIVE AMENDMENT NO. __
CREDIT SUISSE SELECT EQUITY FUND, INC.
(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 SELECT EQUITY 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 LLP
787 SEVENTH AVENUE
NEW YORK, NEW YORK 10019
Approximate date of public offering: Registrant proposes that the Registration
Statement become effective on October 10, 2003 pursuant to Rule 488 under the
Securities Act of 1933, as amended.
Title of Securities Being Registered: Shares of common stock, $.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).
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 CAPITAL FUNDS - CREDIT SUISSE TAX EFFICIENT FUND
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 Tax Efficient Fund (the "Acquired
Fund"), a series of Credit Suisse Capital Funds (the "Trust"). The Board of
Trustees of the Trust (the "Board") has recently reviewed and unanimously
endorsed a proposal for acquisition of the Acquired Fund by Credit Suisse Select
Equity Fund, Inc. (the "Acquiring Fund"). 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 the Trust and
CSAM believe that the Acquisition is in the best interests of the Acquired Fund
and its shareholders.
As noted and further described in the attached Prospectus/Proxy
Statement, there are certain differences between the investment philosophy and
policies of the Funds. THE MOST SIGNIFICANT DIFFERENCES IN THE WAY THE FUNDS ARE
MANAGED ARE THAT: (I) AS A FOCUSED FUND, THE ACQUIRING FUND GENERALLY INVESTS A
GREATER PROPORTION OF ITS ASSETS IN THE SECURITIES OF A SMALLER NUMBER OF
ISSUERS (NORMALLY 40-60 U.S. COMPANIES), WHILE THE ACQUIRED FUND INVESTS MORE
BROADLY IN EQUITY SECURITIES OF U.S. BLUE CHIP COMPANIES; AND (II) ALTHOUGH BOTH
FUNDS SEEK LONG-TERM CAPITAL APPRECIATION, THE ACQUIRED FUND SEEKS TO REDUCE,
THOUGH NOT ELIMINATE, TAXABLE DISTRIBUTIONS TO SHAREHOLDERS IN ORDER TO REDUCE
THE IMPACT OF FEDERAL AND STATE INCOME TAXES ON ITS AFTER-TAX RETURNS. IN
ADDITION, THE ACQUIRING FUND IS CLASSIFIED AS NON-DIVERSIFIED WITHIN THE MEANING
OF THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED (THE "1940 ACT"), WHILE THE
ACQUIRED FUND IS CLASSIFIED AS DIVERSIFIED. AS A NON-DIVERSIFIED FUND, THE
ACQUIRING FUND IS NOT LIMITED BY THE 1940 ACT IN THE PROPORTION OF ITS ASSETS
THAT IT MAY INVEST IN SECURITIES OF A SINGLE ISSUER.
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 December 5, 2003.
If shareholders of the Acquired Fund approve the Plan, the Acquired
Fund will be liquidated upon consummation of the Acquisition and subsequently
terminated as a series of the Trust. In the event the Plan is not approved, you
will continue to be a shareholder of the Acquired Fund and the Board of the
Trust 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
same class, except for
Common Class shareholders who will receive load-waived Class A shares, with an
aggregate net asset value equal to the aggregate net asset value of such
shareholder's investment in the Acquired Fund immediately prior to the
Acquisition. No sales or other charges will be imposed in connection with the
Acquisition. In the opinion of counsel, no gain or loss will be recognized by
the shareholders of the Acquired Fund for federal income tax purposes as a
result of their exchange of Acquired Fund shares of beneficial interest for
Acquiring Fund shares pursuant to 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 November 21, 2003 to consider the
Acquisition set forth in the Acquired Fund's Notice of Special Meeting. We
strongly invite your participation by asking you to review, complete and return
your proxy promptly.
Detailed information about the proposal is described in the attached
Prospectus/Proxy Statement. THE BOARD OF THE TRUST 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 the Trust, 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 ("D.F. King"),
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 1-800-714-3314 between
the hours of 9:00 a.m. and 10:00 p.m. (Eastern time) Monday through Saturday or
through the Internet using the Internet address located on your proxy card.
Voting by fax, telephone or through the Internet will reduce the time
and costs associated with the proxy solicitations. When the Acquired Fund
records proxies by telephone or through the Internet, it will use procedures
designed to (i) authenticate shareholders' identities, (ii) allow shareholders
to authorize the voting of their shares of beneficial interest 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 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
of the Acquired Fund
September __, 2003
September _, 2003
CREDIT SUISSE CAPITAL FUNDS - CREDIT SUISSE TAX EFFICIENT FUND
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 Tax Efficient Fund (the "Acquired Fund"), a series
of Credit Suisse Capital Funds (the "Trust"), with Credit Suisse Select
Equity Fund, Inc. (the "Acquiring Fund").
The shareholders of the Acquired Fund are being asked to vote on an
Agreement and Plan of Reorganization (the "Plan") for the assets and
liabilities of the Acquired Fund to be acquired by the Acquiring Fund in a
tax-free exchange of shares (the "Acquisition").
If the Plan is approved and the Acquisition consummated, you would no
longer be a shareholder of the Acquired Fund, but would become a
shareholder of the Acquiring Fund.
Q: WHAT ARE THE DIFFERENCES BETWEEN MY FUND AND THE ACQUIRING FUND?
A: As noted and further described in the attached Prospectus/Proxy Statement,
there are certain differences between the investment philosophy and
policies of the Funds. THE MOST SIGNIFICANT DIFFERENCES IN THE WAY THE
FUNDS ARE MANAGED ARE THAT: (I) AS A FOCUSED FUND, THE ACQUIRING FUND
GENERALLY INVESTS A GREATER PROPORTION OF ITS ASSETS IN THE SECURITIES OF A
SMALLER NUMBER OF ISSUERS (NORMALLY 40-60 U.S. COMPANIES), WHILE THE
ACQUIRED FUND INVESTS MORE BROADLY IN EQUITY SECURITIES OF U.S. BLUE CHIP
COMPANIES; AND (II) ALTHOUGH BOTH FUNDS SEEK LONG-TERM CAPITAL
APPRECIATION, THE ACQUIRED FUND SEEKS TO REDUCE, THOUGH NOT ELIMINATE,
TAXABLE DISTRIBUTIONS TO SHAREHOLDERS IN ORDER TO REDUCE THE IMPACT OF
FEDERAL AND STATE INCOME TAXES ON ITS AFTER-TAX RETURNS. IN ADDITION, THE
ACQUIRING FUND IS CLASSIFIED AS NON-DIVERSIFIED WITHIN THE MEANING OF THE
INVESTMENT COMPANY ACT OF 1940, AS AMENDED (THE "1940 ACT"), WHILE THE
ACQUIRED FUND IS CLASSIFIED AS DIVERSIFIED. AS A NON-DIVERSIFIED FUND, THE
ACQUIRING FUND IS NOT LIMITED BY THE 1940 ACT IN THE PROPORTION OF ITS
ASSETS THAT IT MAY INVEST IN SECURITIES OF A SINGLE ISSUER.
The Acquiring Fund has the same Board of Directors/Trustees, investment
adviser, co-administrators, distributor, custodian, transfer agent,
independent accountant and counsel as the Acquired Fund. The closing of the
Acquisition (the "Closing Date") is expected to be on or about December 5,
2003.
Q: WHAT WILL HAPPEN TO FUND EXPENSES?
A: The Acquisition will result in slightly higher gross operating expenses and
lower net operating expenses for the Acquired Fund shareholders. The
Acquisition will result in a .01% increase in the gross annual expense
ratio and a .05% decrease in the net annual expense ratio for former Common
Class, Class A, Class B and Class C shareholders of the Acquired Fund.
Please see the enclosed Prospectus/Proxy Statement for information on the
comparative fees and expenses (including pro forma expenses) of the Funds.
Q: WHAT ARE THE BENEFITS OF THE TRANSACTION?
A: The Board of Trustees of the Trust believes that shareholders may benefit
from the proposed Acquisition, in part, because the Acquisition will result
in a single larger fund with a potentially lower expense ratio. The
proposed Acquisition may result in efficiencies due to a larger asset base.
The following pages give you additional information on the proposed
Acquisition on which you are being asked to vote.
Q: WILL I INCUR TAXES AS A RESULT OF THE TRANSACTION?
A: The Acquisition is expected to be a tax-free event. Generally, shareholders
of the Acquired Fund will not recognize capital gains or losses on the
exchange of their shares of beneficial interest of the Acquired Fund for
Acquiring Fund shares. Shareholders will incur capital gains or losses if
they sell their shares of beneficial interest 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 Trustees of the Trust
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 TRUST RECOMMEND THAT I VOTE?
A: AFTER CAREFUL CONSIDERATION, THE BOARD OF TRUSTEES OF THE TRUST, INCLUDING
THOSE TRUSTEES WHO ARE NOT "INTERESTED PERSONS" (AS THAT TERM IS DEFINED IN
THE 1940 ACT) RECOMMENDS THAT YOU VOTE FOR THE PROPOSAL.
---
Q: WHOM DO I CALL FOR MORE INFORMATION?
A: Please call D.F. King & Co., Inc. ("D.F. King"), the Acquired Fund's proxy
solicitor, at 1-800-714-3314.
Q: HOW CAN I VOTE MY SHARES OF BENEFICIAL INTEREST?
A: Please choose one of the following options to vote your shares of
beneficial interest:
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, the Acquired Fund's proxy
solicitor, at 1-800-714-3314;
o By faxing the enclosed proxy card to D.F. King, 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 CAPITAL FUNDS -
CREDIT SUISSE TAX EFFICIENT FUND
466 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017-3140
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NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 21, 2003
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Notice is hereby given that a Special Meeting of Shareholders (the
"Special Meeting") of Credit Suisse Tax Efficient Fund (the "Acquired Fund"), a
series of Credit Suisse Capital Funds (the "Trust"), will be held at the offices
of the Acquired Fund, 466 Lexington Avenue, 16th Floor, New York, New York 10017
on November 21, 2003, commencing at 4:00 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 Select
Equity Fund, Inc. (the "Acquiring Fund") all of its assets in
exchange for shares of 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 terminated as a
series of the Trust; and
2. To transact such other business as may properly come before the
Special Meeting or any adjournment or adjournments thereof.
THE BOARD OF TRUSTEES OF THE TRUST UNANIMOUSLY RECOMMENDS THAT
YOU VOTE FOR THE PROPOSAL.
The Board of Trustees of the Trust has fixed the close of business on
September 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(s);
o By telephone, with a toll-free call to the telephone number that
appears on your proxy card or, if no toll-free telephone number
appears on your proxy card, to D.F. King, the Acquired Fund's
proxy solicitor, at 1-800-714-3314;
o By faxing the enclosed proxy card to D.F. King, 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 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 1-800-714-3314, (C) VOTE THROUGH THE
INTERNET USING THE ADDRESS LOCATED ON THE PROXY CARD OR (D) FAX THE ENCLOSED
PROXY CARD TO D.F. KING AT 1-212-269-2796, SO THAT THEIR SHARES OF BENEFICIAL
INTEREST 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 Trustees,
/s/ Hal Liebes
Hal Liebes
Vice President and Secretary
of the Acquired Fund
September __, 2003
YOUR PROMPT ATTENTION TO THE ENCLOSED PROXY WILL HELP TO
AVOID THE EXPENSE OF FURTHER SOLICITATION.
INSTRUCTIONS FOR SIGNING PROXY CARD
The following general rules for signing proxy cards may be of
assistance to you and avoid the time and expense involved in validating your
vote if you fail to sign your proxy card properly.
1. Individual Accounts: Sign your name exactly as it appears in the
registration on the proxy card.
2. Joint Accounts: Either party may sign, but the name of the party
signing should conform exactly to the name shown in the
registration on the proxy card.
3. All Other Accounts: The capacity of the individual signing the
proxy card should be indicated unless it is reflected in the form
of registration. For example:
4. Registration
Corporate Accounts Valid Signatures
------------------ ----------------
(1) ABC Corp. .................................ABC Corp.
(2) ABC Corp. .................................John Doe, Treasurer
(3) ABC Corp.
c/o John Doe, Treasurer ...................John Doe
(4) ABC Corp. Profit Sharing Plan .............John Doe, Trustee
Trust Accounts
(1) ABC Trust. ................................Jane B. Doe, Trustee
(2) Jane B. Doe, Trustee
u/t/d 12/28/78 ............................Jane B. Doe
Custodial or Estate Accounts
----------------------------
(1) John B. Smith, Cust.
f/b/o John B. Smith, Jr. UGMA..............John B. Smith
(2) John B. Smith .............................John B. Smith, Jr., Executor
This page intentionally left blank.
PROSPECTUS/PROXY STATEMENT
SEPTEMBER __, 2003
PROXY STATEMENT
CREDIT SUISSE TAX EFFICIENT FUND
A SERIES OF CREDIT SUISSE CAPITAL FUNDS
466 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017
1-800-927-2874
PROSPECTUS
CREDIT SUISSE SELECT EQUITY FUND, INC.
466 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017
1-800-927-2874
This Prospectus/Proxy Statement is being furnished to shareholders of
Credit Suisse Tax Efficient Fund (the "Acquired Fund"), a series of Credit
Suisse Capital Funds (the "Trust"), an open-end, diversified management
investment company organized as a Massachusetts business trust, in connection
with the solicitation of proxies by the Acquired Fund's Board of Trustees for
use at a Special Meeting of Shareholders to be held on November 21, 2003 at 4:00
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 proposal to be considered is set forth below:
1. To approve an Agreement and Plan of Reorganization (the "Plan").
Pursuant to the Plan, the Acquired Fund would transfer to Credit Suisse
Select Equity Fund, Inc. (the "Acquiring Fund" and together with the Acquired
Fund, the "Funds"), an open-end, non-diversified management investment company
organized as a Maryland corporation, all of the Acquired Fund's assets in
exchange for shares of the Acquiring Fund and the assumption by the Acquiring
Fund of the Acquired Fund's liabilities; such shares 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 terminated as a
series of the Trust (the "Acquisition").
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) AS A FOCUSED FUND, THE ACQUIRING FUND GENERALLY INVESTS A GREATER
PROPORTION OF ITS ASSETS IN THE SECURITIES OF A SMALLER NUMBER OF ISSUERS
(NORMALLY 40-60 U.S. COMPANIES), WHILE THE ACQUIRED FUND INVESTS MORE BROADLY IN
EQUITY SECURITIES OF U.S. BLUE CHIP COMPANIES; AND (II) ALTHOUGH BOTH FUNDS SEEK
LONG-TERM CAPITAL APPRECIATION, THE ACQUIRED FUND SEEKS TO REDUCE, THOUGH NOT
ELIMINATE, TAXABLE DISTRIBUTIONS TO SHAREHOLDERS IN ORDER TO REDUCE THE IMPACT
OF FEDERAL AND STATE INCOME TAXES ON ITS AFTER-TAX RETURNS. IN ADDITION, THE
ACQUIRING FUND IS CLASSIFIED AS NON-DIVERSIFIED WITHIN
THE MEANING OF THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED (THE "1940 ACT"),
WHILE THE ACQUIRED FUND IS CLASSIFIED AS DIVERSIFIED. AS A NON-DIVERSIFIED FUND,
THE ACQUIRING FUND IS NOT LIMITED BY THE 1940 ACT IN THE PROPORTION OF ITS
ASSETS THAT IT MAY INVEST IN SECURITIES OF A SINGLE ISSUER.
Credit Suisse Asset Management, LLC, the investment adviser for the
Acquiring Fund ("CSAM"), and Credit Suisse Asset Management Securities, Inc.
("CSAMSI") and State Street Bank and Trust Company ("State Street"),
co-administrators of the Acquiring Fund, serve in the same capacities for the
Acquired Fund. In addition, the Acquiring Fund has the same Board of
Directors/Trustees, distributor, custodian, transfer agent, independent
accountant and counsel as the Acquired Fund.
As a result of the proposed Acquisition, shareholders of the Acquired
Fund will receive that number of shares of the same class, except for Common
Class shareholders who will receive load-waived Class A shares of the Acquiring
Fund, having an aggregate net asset value equal to the aggregate net asset value
of such shareholder's shares of beneficial interest of the Acquired Fund
immediately prior to the Acquisition. The expenses of the Acquisition and the
costs associated with this solicitation for approval of the Plan will be borne
by CSAM or its affiliates. No sales or other charges will be imposed on the
shares of 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.
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 September _, 2003. A
Statement of Additional Information, dated September _, 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, dated January 1, 2003, each 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, dated August __, 2003 and 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 Semi-Annual Report of the Acquired Fund
for the semi-annual period ended
2
April 30, 2003. The Annual Report of the Acquiring Fund for the
fiscal year ended August 31, 2002 and the Semi-Annual Report of
the Acquiring Fund for the semi-annual period ended February 28,
2003. The Annual and Semi-Annual Reports of the Acquiring Fund
accompany this Prospectus/Proxy Statement.
Accompanying this Prospectus/Proxy Statement as Exhibit A is a copy of
the form of the Plan for the proposed Acquisition.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS/PROXY STATEMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS/PROXY STATEMENT
AND IN THE MATERIALS EXPRESSLY INCORPORATED HEREIN BY REFERENCE AND, IF GIVEN OR
MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE FUNDS.
3
TABLE OF CONTENTS
PAGE
PROPOSAL - APPROVAL OF THE PLAN...............................................5
Summary.......................................................................5
Risk Factors..................................................................9
Reasons for the Acquisition...................................................9
Fee Tables...................................................................11
Information About the Acquisition............................................14
Total Returns................................................................18
Ownership of the Funds.......................................................20
Comparison of Investment Objectives and Policies.............................20
Determination of Net Asset Value of Shares of the Acquiring Fund.............24
Management of Each Fund......................................................25
Interest of CSAM in the Acquisition..........................................25
Information on Shareholders' Rights..........................................26
Conclusion...................................................................29
Required Vote................................................................29
ADDITIONAL INFORMATION.......................................................29
VOTING INFORMATION...........................................................29
OTHER BUSINESS...............................................................31
FINANCIAL STATEMENTS AND EXPERTS.............................................31
ADDITIONAL MATERIALS.........................................................31
LEGAL MATTERS................................................................32
EXHIBIT A: AGREEMENT AND PLAN OF REORGANIZATION............................A-1
4
PROPOSAL - APPROVAL OF THE PLAN
SUMMARY
THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
ADDITIONAL INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS/PROXY STATEMENT,
THE PLAN (A COPY OF THE FORM OF THE PLAN IS ATTACHED TO THIS PROSPECTUS/PROXY
STATEMENT AS EXHIBIT A), THE PROSPECTUSES OF THE ACQUIRED FUND, THE STATEMENT OF
ADDITIONAL INFORMATION OF THE ACQUIRED FUND, THE PROSPECTUS OF THE ACQUIRING
FUND AND THE STATEMENT OF ADDITIONAL INFORMATION OF THE ACQUIRING FUND.
PROPOSED ACQUISITION. The Plan provides for the acquisition of all of
the assets and liabilities of the Acquired Fund by the Acquiring Fund in
exchange for shares of the Acquiring Fund. The Plan also calls for the
distribution of shares of the Acquiring Fund to the Acquired Fund's shareholders
in liquidation of the Acquired Fund. As a result of the Acquisition, each
shareholder of a class of shares of beneficial interest of the Acquired Fund
will become the owner of that number of full and fractional shares of the same
class of the Acquiring Fund, except for Common Class shareholders who will
receive Class A shares of the Acquiring Fund, having an aggregate net asset
value ("NAV") equal to the aggregate net asset value of such shareholder's
shares of beneficial interest in the Acquired Fund as of the close of business
on the date that the Acquired Fund's assets and liabilities are exchanged for
shares of the Acquiring Fund. See "Information About the Acquisition - Agreement
and Plan of Reorganization."
Because the Acquired Fund is a series of the Trust, it does not have a
Board of Trustees separate from the other series of the Trust. Accordingly, when
we refer to the "Trustees of the Acquired Fund" or the "Board of Trustees of the
Acquired Fund" elsewhere in this Prospectus/Proxy Statement, we mean the
Trustees and Board of Trustees of the Trust.
For the reasons set forth below under "Reasons for the Acquisition,"
the Board of Trustees of the Acquired Fund, including the Trustees of the
Acquired Fund who are not "interested persons" (the "Independent Trustees"), as
that term is defined in 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 Trustees of the
Acquired Fund therefore has submitted the Plan for approval by its shareholders.
The Board of Directors 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 beneficial interest 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 terminated as a series of the Trust. In the event
the Plan is not approved, the Board of Trustees of the Acquired Fund will
consider other
5
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, as a
result of the Acquisition, no gain or loss will be recognized by the
shareholders of the Acquired Fund for federal income tax purposes and generally
the Acquired Fund will not recognize gain or loss for such purposes. The holding
period and aggregate tax basis of the Acquiring Fund shares received by an
Acquired Fund shareholder will be the same as the holding period and aggregate
tax basis of the shares of beneficial interest of the Acquired Fund exchanged
therefor by such shareholder. In addition, the holding period and aggregate tax
basis of the assets of the Acquired Fund in the hands of the Acquiring Fund as a
result of the Acquisition, will generally be the same as in the hands of the
Acquired Fund immediately prior to the Acquisition.
INVESTMENT OBJECTIVES AND POLICIES. As noted and further described in
the attached Prospectus/Proxy Statement, there are certain differences between
the investment philosophy and policies of the Funds. The investment objective of
the Acquiring Fund is long-term capital appreciation. To pursue its investment
objective, under normal market conditions, the Acquiring Fund invests at least
80% of its net assets, plus any borrowings for investment purposes, in U.S.
equity securities. The Acquiring Fund invests in securities of 40-60 U.S.
companies. The "top ten" (largest company holdings) in the Acquiring Fund's
portfolio may account for 40% or more of the fund's assets.
The Acquiring Fund's portfolio managers search for industry sectors
with favorable economic profit trends and may focus the portfolio in these
sectors. The Acquiring Fund's portfolio managers use both traditional
value-based analyses (such as price/book ratio), as well as the economic profit
of a company measured by its cash flow relative to its capital assets. In
choosing securities, the Acquiring Funds' portfolio managers look for companies
that (i) earn rates of return exceeding their risk-adjusted costs of capital, as
opposed to earning more than they have spent (accounting profits), (ii) create
shareholder value by gaining the most from their investment spending, or use
their cost of capital as a competitive advantage and (iii) have current market
valuations that do not fully recognize future economically profitable growth.
The investment objective of the Acquired Fund is long-term capital
appreciation on an after-tax basis. To pursue its investment objective, the
Acquired Fund invests at least 80% of its net assets, plus any borrowings for
investment purposes, in equity securities of U.S. blue chip companies. Blue chip
companies are those which, at the time of purchase, are represented in the S&P
500 Index. If some companies cease to be represented in the S&P 500 Index after
purchase, the fund may continue to hold such securities. The Acquired Fund seeks
to reduce, though not eliminate, taxable distributions to shareholders by
following strategies designed to reduce the impact of federal and state income
taxes on its after-tax returns. The Acquired Fund is "sector neutral" meaning
that its investments are allocated in proportion to the sector allocation of the
S&P 500 Index, with the exception of electric and gas utilities sectors.
In choosing securities, the Acquired Fund's portfolio manager looks at
a number of factors, including (i) the reliability and effectiveness of
management, (ii) whether the issuer is a leader in its business segment, (iii)
whether the price of the security is attractive compared to its
6
competitors, (iv) whether the company is expected to generate above-average
growth rates and (v) the economic and political outlook.
THE MOST SIGNIFICANT DIFFERENCES IN THE WAY THE FUNDS ARE MANAGED ARE
THAT: (I) AS A FOCUSED FUND, THE ACQUIRING FUND GENERALLY INVESTS A GREATER
PROPORTION OF ITS ASSETS IN THE SECURITIES OF A SMALLER NUMBER OF ISSUERS
(NORMALLY 40-60 U.S. COMPANIES), WHILE THE ACQUIRED FUND INVESTS MORE BROADLY IN
EQUITY SECURITIES OF U.S. BLUE CHIP COMPANIES; AND (II) ALTHOUGH BOTH FUNDS SEEK
LONG-TERM CAPITAL APPRECIATION, THE ACQUIRED FUND SEEKS TO REDUCE, THOUGH NOT
ELIMINATE, TAXABLE DISTRIBUTIONS TO SHAREHOLDERS IN ORDER TO REDUCE THE IMPACT
OF FEDERAL AND STATE INCOME TAXES ON ITS AFTER-TAX RETURNS. IN ADDITION, THE
ACQUIRING FUND IS CLASSIFIED AS NON-DIVERSIFIED WITHIN THE MEANING OF THE 1940
ACT, WHILE THE ACQUIRED FUND IS CLASSIFIED AS DIVERSIFIED. AS A NON-DIVERSIFIED
FUND, THE ACQUIRING FUND IS NOT LIMITED BY THE 1940 ACT IN THE PROPORTION OF ITS
ASSETS THAT IT MAY INVEST IN SECURITIES OF A SINGLE ISSUER.
PURCHASE AND REDEMPTION PROCEDURES. Except as otherwise indicated in
this section, the Funds have similar policies with respect to purchases and
redemptions. Common Class shares of beneficial interest of the Acquired Fund are
closed to new investments. Class A shares of the Acquiring Fund may be purchased
through securities dealers. Class A shares of the Acquiring Fund may be
purchased at the 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 Acquired Fund Common Class
shareholders will not be subject to any sales charge and former Acquired Fund
Common Class shareholders will be able to acquire additional Class A shares of
the Acquiring Fund without a sales charge being assessed. The purchase and
redemption procedures available to shareholders of all of the other classes of
the Acquiring Fund are identical to those available to shareholders of the same
class of the Acquired Fund.
You should also note that certain brokers who distribute shares of
beneficial interest of the Acquired Fund may not distribute shares of the
Acquiring Fund. The Prospectus of the Acquiring Fund provide additional
information on purchasing shares of the Acquiring Fund.
SALES CHARGES. Common Class shares of beneficial interest of the
Acquired Fund are not subject to an initial sales charge or a contingent
deferred sales charge ("CDSC") or a 12b-1 fee. The price of Class A shares for
each of the Funds is the NAV plus the initial sales charge. The sales charge for
Class A shares begins at 5.75% for purchases below $50,000 and is gradually
reduced to zero if $1,000,000 or more is purchased. The Class A shares issued to
Acquired Fund Common Class shareholders will be "load-waived," meaning that they
are not subject to any sales charge. The Class B and Class C shares of the Funds
may be purchased at the NAV price, although a CDSC may be applied. Class B
shares have a diminishing CDSC (4% for the first year and 0% after the fourth
year) and become Class A shares after eight years. Class C shares have a 1% CDSC
charge if you redeem those shares within 1 year of purchase; Class C shares do
not convert into any other class. Class A shares of each of the Funds are
subject to a 12b-1 fee of 0.25%. The Class B and Class C shares of the Funds are
each subject to a 12b-1 fee of 1.00% per annum of average daily net assets. Each
Fund has a compensation type 12b-1 plan in which
7
the distributor receives the distribution fee regardless of the cost of the
distribution activities performed. See "Fee Table" below.
EXCHANGE PRIVILEGES. The exchange privileges available to shareholders
of a class of the Acquiring Fund are identical to those available to
shareholders of the same class of the Acquired Fund. Shareholders of each Fund
may exchange at NAV all or a portion of their shares for shares of the same
class of other mutual funds in the Credit Suisse family of funds at their
respective NAVs, provided that such fund offers the relevant class of shares.
Exchanges of Class A, B and C shares may be effected through an investor's
financial representative. Exchanges will be effected without a sales charge but
must satisfy the minimum dollar amount necessary for new purchases in the fund
in which shares are being purchased. The Funds reserve the right to refuse
exchange purchases by any person or group, if in CSAM's judgment, a Fund would
be unable to invest the money effectively in accordance with its investment
objective and policies, or would otherwise potentially be adversely affected.
Examples of when an exchange purchase could be refused are when a Fund receives
or anticipates receiving large exchange orders at or about the same time and/or
when a pattern of exchanges within a short period of time (often associated with
a "market timing" strategy) is discerned. The exchange privilege may be modified
or terminated at any time upon 60-days' notice to shareholders.
The exchange privilege is available to shareholders residing in any
state in which the relevant fund's shares being acquired may legally be sold.
When an investor effects an exchange of shares, the exchange is treated for
federal income tax purposes as a redemption. Therefore, the investor may realize
a taxable gain or loss in connection with the exchange. No initial sales charge
is imposed on the shares being acquired in an exchange.
DIVIDENDS. The Acquiring Fund and the Acquired Fund distribute
substantially all of their respective net investment income and net realized
capital gains, if any, to their respective shareholders. All distributions are
reinvested in the form of additional full and fractional shares of the relevant
class of the Fund unless a shareholder elects otherwise. Each Fund typically
declares and pays dividends, if any, from net investment income at least
annually. Net realized capital gains, if any, of each Fund are typically
distributed at least annually. The Acquired Fund will pay a dividend of
undistributed net investment income and capital gains, if any, immediately prior
to the Closing Date. The amount of any dividend actually paid prior to the
Closing Date will vary depending on a number of factors, such as changes in the
value of the Acquired Fund's holdings and net redemptions of the Acquired Fund's
shares of beneficial interest. If determined as of August 15, 2003, the Acquired
Fund would have distributed $133,768 or $0.02 per share. 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 Acquired Fund do not have appraisal rights in connection
with a combination or acquisition of the assets of the Acquired Fund by another
entity. In addition, under the laws of the State of Maryland, shareholders of
the Acquiring Fund do not have appraisal rights in connection with a combination
or acquisition of the assets of the Acquiring Fund. 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."
8
RISK FACTORS
The principal risk factor affecting both the Acquiring Fund and the
Acquired Fund is market risk. The other principal risk factor of the Acquiring
Fund relates to its non-diversified status, while the Acquired Fund is also
subject to the principal risk of tax awareness.
The Acquiring Fund has greater exposure to the risks of investing in
foreign securities than the Acquired Fund as the Acquiring Fund may invest up to
20% of its net assets in foreign securities, while the Acquired Fund may invest
up to 10% of its total assets in such securities. The Acquiring Fund has greater
exposure to the risks of investing in restricted and other illiquid securities
than the Acquired Fund as the Acquiring Fund may invest up to 15% of its net
assets in restricted and other illiquid securities, while the Acquired Fund may
invest up to 10% of its net assets in such securities. The Acquiring Fund has
greater exposure to the risks of investing in when-issued securities and forward
commitments than the Acquired Fund as the Acquiring Fund may invest up to 25% of
its net assets in when-issued securities and forward commitments, while the
Acquired Fund is permitted, but not expected, to invest to a significant extent
in such securities.
The Acquired Fund has greater exposure to the risks of investing in
investment-grade debt securities than the Acquiring Fund as the Acquired Fund
may invest up to 20% of its net assets in investment-grade debt securities,
while the Acquiring Fund is permitted, but not expected, to invest to a
significant extent in such securities. The Acquired Fund has greater exposure to
the risks of investing in both options and warrants than the Acquiring Fund as
the Acquired Fund may invest up to 5% of its total assets in both options and
warrants, while the Acquiring Fund is permitted, but not expected, to invest to
a significant extent in such securities. The Acquired Fund has greater exposure
to the risks of investing in short sales "against the box" than the Acquiring
Fund as the Acquired Fund may invest up to 10% of its net assets in short sales
"against the box", while the Acquiring Fund is permitted, but not expected, to
invest to a significant extent in such securities. See the accompanying
Prospectus of the Acquiring Fund for a complete discussion of the risks of
investing in the Acquiring Fund.
REASONS FOR THE ACQUISITION
The Board of Trustees of the Acquired Fund has unanimously determined
that it is in the best interest of the Acquired Fund to the 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 seeking
long-term capital appreciation through investments in a limited
number of U.S. companies;
2. while the gross expense ratio of the combined entity is expected
to be slightly higher, the net expense ratios of the combined
entity is expected to be lower than that of the Acquired Fund;
9
3. the Acquisition will eliminate any confusion in the marketplace
associated with having two funds managed by CSAM investing large
capitalization core equity securities;
4. the Acquisition should increase efficiencies, eliminating one of
the two sets of prospectuses, reports to shareholders and other
documents required if the Acquired and Acquiring Funds remained
separate, although there is no guarantee that the combined fund
will realize such efficiencies;
5. the terms and conditions of the Acquisition;
6. the larger combined asset base could produce portfolio management
benefits, such as the ability to command more attention from
brokers and underwriters of securities in which the Funds invest
than either Fund currently enjoys, although the primary
beneficiary will be the Acquiring Fund;
7. that the investment adviser for the Acquiring Fund is the same as
that of the Acquired Fund;
8. that, in selecting investments, both Funds are now relying on the
research provided by CSAM whereas, in the past, the Acquired Fund
had primarily utilized research from other sources;
9. that CSAM had indicated that in their view, the tax efficient
strategy of the Acquired Fund had become less attractive to
investors due to recent tax law changes;
10. the federal tax consequences of the Acquisition, and that a legal
opinion will be rendered that no gain or loss will be recognized
by the shareholders of the Acquired Fund or by the Acquiring Fund
for federal income tax purposes as a result of the Acquisition
and that the Acquired Fund generally will not recognize gain or
loss for such purposes;
11. that the interests of shareholders of the Acquired Fund will not
be diluted as a result of the Acquisition;
12. that the expenses of the Acquisition will be borne by CSAM or its
affiliates; and
13. that no sales or other charges will be imposed in connection with
the Acquisition.
In considering the Acquisition, the Board of Trustees noted that the
Acquiring Fund may have greater volatility and risk due to its non-diversified
status. They also were cognizant of the fact that the Acquiring Fund is not
managed in a manner designed to produce tax efficiencies for investors,
recognizing, however, that the large amount of capital loss carryovers of the
combined fund (estimated to be approximately $17.1 million) is likely to reduce
taxable capital gains distributions for a period of time (although the use of
such losses after the Acquisition may be subject to certain restrictions).
Finally, the Trustees were aware that the advisory fee for the Acquiring Fund
does not contain a breakpoint as does the fee for the Acquired Fund, which would
result in CSAM being paid a higher fee should assets of the combined fund exceed
$100 million. However, the Trustees noted CSAM's historic willingness to waive
fees and reimburse
10
expenses in order to maintain a competitive return and that CSAM had waived its
entire fee and had reimbursed $244,784 in Acquiring Fund expenses for the 12
months ended June 30, 2003.
In light of the foregoing, the Board of Trustees of the Acquired Fund,
including the Independent Trustees, has determined that it is in the best
interests of the Acquired Fund and its shareholders to effect the Acquisition.
The Board of Trustees 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 Trustees did not give
equal weight to each factor.
The Board of Directors of the Acquiring Fund has determined that it is
advantageous to the Acquiring Fund to effect the Acquisition. The Board of
Directors 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 Directors of
the Acquiring Fund, including a majority of the Independent Directors, has
determined that the Acquisition is in the best interests of the Acquiring Fund's
shareholders and that the interests of the Acquiring Fund's shareholders would
not be diluted as a result of the Acquisition.
FEE TABLES
Following are two tables showing expected fees and expenses for the 12
months ending October 31, 2003, for the Common Class, Class A, Class B and Class
C shares of the Acquired Fund, holders of which will receive the corresponding
class of the Acquiring Fund, except for Common Class shareholders who will
receive load-waived Class A shares of the Acquiring Fund, upon the closing of
the Acquisition, and the expected fees and expenses for the 12 months ending
August 31, 2003, for the Class A, Class B and Class C shares of the Acquiring
Fund before and after giving effect to the Acquisition. The tables do not
reflect charges that institutions and financial intermediaries may impose on
their customers.
11
BEFORE FEE WAIVERS AND/OR REIMBURSEMENTS
ACQUIRED FUND ACQUIRED FUND ACQUIRING FUND PRO FORMA
Common Class Class A Class A Class A
- ------------------------------- ------------- ------------------ ------------------ ------------------ ---------------
SHAREHOLDER FEES:
Maximum sales charge imposed on None 5.75%* 5.75%* 5.75%*
purchase (as a percentage of offering
price)
Maximum deferred sales charge (as a None None None None
percentage of original purchase price,
or redemption proceeds, as applicable)
ANNUAL FUND OPERATING EXPENSES (DEDUCTED FROM FUND ASSETS)
Management Fee .75% .75% .75% .75%
Distribution and Service .25% .25% .25% .25%
(12b-1) fee
Other Expenses .68% .68% 3.40% .69%
TOTAL ANNUAL FUND OPERATING EXPENSES
1.68% 1.68% 4.40% 1.69%
ACQUIRED ACQUIRING FUND PRO FORMA ACQUIRED FUND ACQUIRING FUND PRO FORMA
FUND
CLASS B CLASS B CLASS B CLASS C CLASS C CLASS C
- ----------------------------- ------------ ----------------- ------------ --------------- ---------------- -------------
SHAREHOLDER FEES:
Maximum sales charge None None None None None None
imposed on purchase (as a
percentage of offering
price)
Maximum deferred sales 4% 4% 4% 1% 1% 1%
charge (as a percentage of
original purchase price, or
redemption proceeds, as
applicable)
ANNUAL FUND OPERATING EXPENSES (DEDUCTED FROM FUND ASSETS)
Management Fee .75% .75% .75% .75% .75% .75%
Distribution and 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
Service (12b-1) fee
12
Other Expenses .68% 3.40% .69% .68% 3.40% .69%
TOTAL ANNUAL FUND OPERATING EXPENSES
2.43% 5.15% 2.44% 2.43% 5.15% 2.44%
- ------------------------- ---------------- ----------------- ------------ --------------- ---------------- -------------
* Although the Class A shares impose a maximum sales charge of
5.75%, this charge does not apply to Class A shares received in the Acquisition
or additional Class A shares of the Acquiring Fund purchased by former Acquired
Fund Common Class shareholders.
** Expected fees and expenses for the 12 months ending October
31, 2003 (after fee waivers and/or expense reimbursements or credits) are shown
below. Fee waivers and expense reimbursements or credits are expected to reduce
expenses for the Funds but may be discontinued at any time;
AFTER FEE WAIVERS AND/OR REIMBURSEMENTS
ACQUIRED FUND ACQUIRED FUND ACQUIRING FUND PRO FORMA
Common Class Class A Class A Class A
ANNUAL FUND OPERATING EXPENSES (DEDUCTED FROM FUND ASSETS)
Management Fee .42% .42% .00% .36%
Distribution and
Service (12b-1) fee .25% .25% .25% .25%
Other Expenses .68% .68% 1.05% .69%
NET ANNUAL FUND
OPERATING EXPENSES 1.35% 1.35% 1.30% 1.30%
ACQUIRED ACQUIRING PRO ACQUIRED ACQUIRING PRO FORMA
FUND FUND FORMA FUND FUND
CLASS B CLASS B CLASS B CLASS C CLASS C CLASS C
ANNUAL FUND OPERATING EXPENSES (DEDUCTED FROM FUND ASSETS)
Management Fee .42% .00% .36% .42% .00% .36%
Distribution and 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
Service (12b-1) fee
Other Expenses .68% 1.05% .69% .68% 1.05% .69%
NET ANNUAL FUND
OPERATING EXPENSES 2.10% 2.05% 2.05% 2.10% 2.05% 2.05%
EXAMPLES
The following examples are intended to assist an investor in
understanding the various costs that an investor in each Fund will bear directly
or indirectly. The examples assume payment of operating expenses at the levels
set forth in the tables presented above (in each case before fee waivers and
expense reimbursements) and that all dividends and distributions are reinvested.
The examples also assume that you invest $10,000 in the Funds for the time
periods indicated and then redeem all of your shares at the end of those
periods. The example also assume that your investment has a 5% return each year
and that the Funds' operating expenses
13
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 $171 $530 $913 $1,987
Class A (with or without $736 $1,074 $1,435 $2,448
redemption)
Class B (redemption at end of $646 $958 $1,296 $2,581
period)
Class B (no redemption) $246 $758 $1,296 $2,581
Class C (redemption at end of $346 $758 $1,296 $2,766
period)
Class C (no redemption) $246 $758 $1,296 $2,766
ACQUIRING FUND
Class A (with or without $991 $1,830 $2,680 $4,849
redemption)
Class B (redemption at end of $915 $1,742 $2,565 $4,970
period)
Class B (no redemption) $515 $1,542 $2,565 $4,970
Class C (redemption at end of $615 $1,542 $2,565 $5,112
period)
Class C (no redemption) $515 $1,542 $2,565 $5,112
COMBINED FUND PRO FORMA
Class A (with or without $737 $1,077 $1,440 $2,458
redemption)
Class B (redemption at end of $647 $961 $1,301 $2,591
period)
Class B (no redemption) $247 $761 $1,301 $2,591
Class C (redemption at end of $347 $761 $1,301 $2,776
period)
Class C (no redemption) $247 $761 $1,301 $2,776
INFORMATION ABOUT THE ACQUISITION
AGREEMENT AND PLAN OF REORGANIZATION. The following summary of the Plan
is qualified in its entirety by reference to the form of the Plan (Exhibit A
hereto). The Plan provides that the Acquiring Fund will acquire all of the
assets of the Acquired Fund in exchange for shares of 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 December 5, 2003.
14
Prior to the Closing Date, the Acquired Fund will endeavor to discharge
all of its known liabilities and obligations, other than those liabilities and
obligations which would otherwise be discharged at a later date in the ordinary
course of business. The Acquiring Fund will assume all liabilities, expenses,
costs, charges and reserves, including those liabilities reflected on an
unaudited statement of assets and liabilities for the Acquired Fund, as of the
close of regular trading on The New York Stock Exchange, Inc. ("NYSE"),
currently 4:00 p.m., New York City time, on the Closing Date, in accordance with
generally accepted accounting principles consistently applied from the prior
audited period. The NAV per share of each class of each Fund will be calculated
by determining the total assets attributable to such class, subtracting the
relevant class' pro rata share of the actual and accrued liabilities of Fund and
the liabilities specifically allocated to that class of shares, and dividing the
result by the total number of outstanding shares of the relevant class. Each
Fund will utilize the procedures set forth in its respective current
Prospectuses or Statement of Additional Information to determine the value of
its respective portfolio securities and to determine the aggregate value of each
Fund's portfolio.
On or as soon after the Closing Date as conveniently practicable, the
Acquired Fund will liquidate and distribute pro rata to shareholders of record
as of the close of business on the Closing Date the shares of 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 series of the Trust.
The consummation of the Acquisition is subject to the conditions set
forth in the Plan, including approval of the Plan by the Acquired Fund's
shareholders. Notwithstanding approval by the shareholders of the Acquired Fund,
the Plan may be terminated at any time at or prior to the Closing Date: (i) by
mutual agreement of the Acquired Fund and the Acquiring Fund; (ii) by the
Acquired Fund, in the event the Acquiring Fund shall, or by the Acquiring Fund,
in the event the Acquired Fund shall, materially breach any representation,
warranty or agreement contained in the Plan to be performed at or prior to the
Closing Date; or (iii) if a condition to the Plan expressed to be precedent to
the obligations of the terminating party has not been met and it reasonably
appears that it will not or cannot be met within a reasonable time.
Pursuant to the Plan, the Acquiring Fund has agreed to indemnify and
advance expenses to each Trustee or officer of the Acquired Fund against money
damages incurred in connection with any claim arising out of such person's
services as a Trustee or officer with respect to matters specifically relating
to the Acquisition, except by reason of such person's willful misfeasance, bad
faith, gross negligence or reckless disregard of his or her duties in the
conduct of his or her office.
Approval of the Plan requires the affirmative vote of a majority of the
outstanding shares of the Acquired Fund, in the aggregate without regard to
class, present in person or represented by proxy. Shareholders of the Acquired
Fund are entitled to one vote for each share of beneficial interest. If
shareholders of the Acquired Fund approve the Acquisition, the Acquired Fund
will be liquidated upon consummation of the Acquisition and subsequently
terminated as a series of the Trust. In the event the Plan is not approved, the
Board of Trustees of the Acquired Fund will
15
consider other possible courses of action available to it, including
resubmitting the Acquisition proposal to shareholders.
DESCRIPTION OF THE ACQUIRING FUND SHARES. Shares 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 the Acquiring Fund.
The Acquiring Fund has authorized six classes of common stock, called
Common Class, Advisor Class, Institutional Class, Class A, Class B and Class C
shares. Shareholders of the Acquired Fund will be issued the corresponding class
of shares of the Acquiring Fund, except for Common Class shareholders who will
receive Class A shares of the Acquiring Fund. No shareholders will receive
Common Class, Advisor Class or Institutional Class shares of the Acquiring Fund
under the Acquisition. Shares of each class of the Acquiring Fund represent
equal pro rata interests in the Acquiring Fund and accrue dividends and
calculate NAV and performance quotations in the same manner. The Acquiring Fund
intends to continuously offer Class A, Class B and Class C shares after
consummation of the Acquisition.
FEDERAL INCOME TAX CONSEQUENCES. The closing of the Acquisition is
conditioned upon the receipt by the Funds of an opinion from Willkie Farr &
Gallagher, counsel to the Funds, to the effect that, based upon certain facts,
assumptions and representations, the Acquisition will constitute a tax-free
reorganization within the meaning of section 368(a)(1) of the Internal Revenue
Code of 1986, as amended (the "Code"). If the Acquisition constitutes a tax-free
reorganization, no gain or loss will be recognized by the Acquired Fund
shareholders as a result of their exchange of shares of beneficial interest
pursuant to the Acquisition and no gain or loss will generally be recognized by
the Acquired Fund and the Acquiring Fund as a result of the Acquisition. This
opinion, in substance, will state that for U.S. federal income tax purposes:
(1) the transfer of all of the Acquired Fund 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 shares of beneficial interest of the Acquired Fund, will constitute a
"reorganization" within the meaning of Section 368(a) of the Code, and the
Acquiring Fund and the Acquired Fund each will be a "party to a reorganization"
within the meaning of Section 368(b) of the Code;
(2) no gain or loss will be recognized by the Acquiring Fund upon the
receipt of the assets of the Acquired Fund solely in exchange for the Acquiring
Fund shares and the assumption by the Acquiring Fund of the liabilities of the
Acquired Fund;
(3) 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 the assumption by the Acquiring
Fund of the liabilities of the Acquired Fund or upon the distribution
16
of the Acquiring Fund shares to the Acquired Fund's shareholders in exchange for
their shares of beneficial interest of the Acquired Fund;
(4) no gain or loss will be recognized by shareholders of the Acquired
Fund upon the exchange of their shares of beneficial interest of the Acquired
Fund for Acquiring Fund shares or upon the assumption by the Acquiring Fund of
the liabilities of the Acquired Fund;
(5) the aggregate tax basis of the Acquiring Fund shares received by
each of the Acquired Fund's shareholders pursuant to the Acquisition will be the
same as the aggregate tax basis of shares of beneficial interest 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
beneficial interest of the Acquired Fund exchanged therefor were held by such
shareholder (provided that the Acquired Fund shares of beneficial interest were
held as capital assets on the date of the Acquisition); and
(6) except for assets that 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, local and
foreign tax consequences, if any, of the Acquisition.
CAPITALIZATION
The following table shows the capitalization of the Acquired Fund and
the Acquiring Fund as of June 30, 2003 and the capitalization of the Acquiring
Fund on a pro forma basis as of the closing date of the Acquisition, after
giving effect to such Acquisition.(1)
ACQUIRING ACQUIRED PRO FORMA PRO
FUND FUND ADJUSTMENTS (2) FORMA
17
(ACTUAL) (ACTUAL) (ACTUAL)
------------ ------------- --------------
Common $5,695,545 $ 778,000 (778,000) $ 5,695,545
Class A 1,591,262 62,052,336 778,000 64,421,648
Class B 1,051,706 20,067,688 21,119,394
Class C 408,865 2,997,556 3,406,421
NET ASSET VALUE
Common $11.05 $13.44 $11.05
Class A 11.07 13.45 11.07
Class B 10.92 12.75 10.92
Class C 10.89 12.75 10.89
SHARES OUTSTANDING
Common 515,525 57,907 (57,907) 515,525
Class A 143,714 4,612,848 1,062,914 5,819,476
Class B 96,269 1,573,564 264,177 1,934,010
Class C 37,532 235,096 40,175 312,803
---------------
(1) Assumes the Acquisition of the Acquired Fund had been consummated on
June 30, 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.
(2) Reflects the elimination of prepaid expenses from the Acquired Fund.
TOTAL RETURNS
Performance information is shown separately for each class of each
Fund. Total return is a measure of the change in value of an investment in a
fund over the period covered, which assumes that any dividends or capital gains
distributions are automatically reinvested in shares of the fund rather than
paid to the investor in cash. The formula for total return used by a fund is
prescribed by the SEC and includes three steps: (1) adding to the total number
of shares of the fund that would be purchased by a hypothetical $1,000
investment in the fund all additional shares that would have been purchased if
all dividends and distributions paid or distributed during the period had been
automatically reinvested; (2) calculating the redeemable value of the
hypothetical initial investment as of the end of the period by multiplying the
total number of shares owned at the end of the period by the net asset value per
share on the last trading day of the period; and (3) dividing this account value
for the hypothetical investor by the amount of the initial investment, and
annualizing the result for periods of less than one year. It is assumed that
with respect to Class A shares of the Acquiring Fund, the maximum initial sales
charge of 5.75% was deducted at the time of investment. Total return may be
stated with or without giving effect to any expense limitations in effect for a
fund.
The following table reflects the average annual total return for the
1-year, 5-year, 10-year and since inception periods ending June 30, 2003 for
each Fund:
- -------------------------------- --------------- -------------- -------------- ------------------- -------------------
1 YEAR 5 YEARS 10 YEARS LIFE OF INCEPTION DATE
CLASS
- -------------------------------- --------------- -------------- -------------- ------------------- -------------------
ACQUIRED FUND
- ----------------------------------------------------------------------------------------------------------------------
18
- -------------------------------- --------------- -------------- -------------- ------------------- -------------------
1 YEAR 5 YEARS 10 YEARS LIFE OF INCEPTION DATE
CLASS
- -------------------------------- --------------- -------------- -------------- ------------------- -------------------
Common Class (NO LOAD) (2.26)% N/A N/A (14.89)% 08/01/00
- -------------------------------- --------------- ------------- --------------- ------------------- -------------------
CLASS A (NO LOAD) (2.26)% (1.82)% 7.77% 8.15% 12/15/86
- -------------------------------- --------------- ------------- --------------- ------------------- -------------------
CLASS B (NO LOAD) (3.04)% (2.55)% N/A 5.23% 2/28/96
- -------------------------------- --------------- ------------- --------------- ------------------- -------------------
CLASS C (NO LOAD) (2.97)% N/A N/A (11.65)% 2/28/00
- -------------------------------- --------------- ------------- --------------- ------------------- -------------------
CLASS A (WITH LOAD) (7.87)% (2.97)% 7.14% 7.76%
- -------------------------------- --------------- ------------- --------------- ------------------- -------------------
CLASS B (WITH LOAD) (6.92)% (2.55)% N/A 5.23%
- -------------------------------- --------------- ------------- --------------- ------------------- -------------------
CLASS C (WITH LOAD) (3.94)% N/A N/A (11.65)%
- -------------------------------- --------------- ------------- --------------- ------------------- -------------------
Return After Taxes on (2.34)% (2.40)% 6.38% 6.36%
Distributions1 (no load)
- -------------------------------- --------------- ------------- --------------- ------------------- -------------------
Return After Taxes on (7.95)% (3.55)% 5.75% 5.98%
Distributions1 (with load)
- -------------------------------- --------------- ------------- --------------- ------------------- -------------------
Return After Taxes on (1.48)% (1.57)% 6.17% 6.21%
Distributions and Sale of Fund
Shares1 (no load)
- -------------------------------- --------------- ------------- --------------- ------------------- -------------------
Return After Taxes on (5.13)% (2.54)% 5.59% 5.85%
Distributions and Sale of Fund
Shares1 (with load)
- ----------------------------------------------------------------------------------------------------------------------
ACQUIRING FUND
- -------------------------------- --------------- -------------- -------------- ------------------- -------------------
CLASS A (NO LOAD) (5.08)% N/A N/A (12.01)% 07/31/01
- -------------------------------- --------------- -------------- -------------- ------------------- -------------------
CLASS B (NO LOAD) (5.69)% N/A N/A (12.67)% 07/31/01
- -------------------------------- --------------- -------------- -------------- ------------------- -------------------
CLASS C (NO LOAD) (6.04)% N/A N/A (12.83)% 07/31/01
- -------------------------------- --------------- -------------- -------------- ------------------- -------------------
CLASS A (WITH LOAD) (10.53)% N/A N/A (14.70)%
- -------------------------------- --------------- -------------- -------------- ------------------- -------------------
CLASS B (WITH LOAD) (9.47)% N/A N/A (14.04)%
- -------------------------------- --------------- -------------- -------------- ------------------- -------------------
CLASS C (WITH LOAD) (6.98)% N/A N/A (12.83)%
- -------------------------------- --------------- -------------- -------------- ------------------- -------------------
Return After Taxes on (5.11)% N/A N/A (12.05)%
Distributions1 (no load)
- -------------------------------- --------------- -------------- -------------- ------------------- -------------------
Return After Taxes on (10.55)% N/A N/A (14.74)%
Distributions1 (with load)
- -------------------------------- --------------- -------------- -------------- ------------------- -------------------
Return After Taxes on (3.31)% N/A N/A (10.13)%
Distributions and Sale of Fund
Shares1 (no load)
- -------------------------------- --------------- -------------- -------------- ------------------- -------------------
Return After Taxes on (6.84)% N/A N/A (12.37)%
Distributions and Sale of Fund
Shares1 (with load)
- -------------------------------- --------------- -------------- -------------- ------------------- -------------------
-----------
n/a = Not disclosed as the classes were not in existence during all of
the period indicated.
(1) After tax returns shown are for Class A shares.
19
OWNERSHIP OF THE FUNDS
As of ______, 2003, the officers, Trustees or Directors of the
Acquiring Fund and the Acquired Fund beneficially owned as a group less than 1%
of the outstanding securities of the relevant Fund. To the best knowledge of
each Fund, as of ______, 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.
NAME COMMON
ACQUIRED FUND CLASS CLASS A CLASS B CLASS C
- ------------- ----- ------- ------- -------
ACQUIRING 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 the Acquiring Fund
is long-term appreciation of capital. The investment objective of the Acquired
Fund is long-term capital appreciation on an after-tax basis. There can be no
assurance either Fund will achieve its investment objective.
PRIMARY INVESTMENTS. The investment objective of the Acquiring Fund is
long-term capital appreciation. To pursue its investment objective, under normal
market conditions, the Acquiring Fund invests at least 80% of its net assets,
plus any borrowings for investment purposes, in U.S. equity securities. The
Acquiring Fund invests in securities of 40-60 U.S. companies. The "top ten"
(largest company holdings) in the Acquiring Fund's portfolio may account for 40%
or more of the Fund's assets.
20
The Acquiring Fund's portfolio managers search for industry sectors
with favorable economic profit trends and may focus the portfolio in these
sectors. The Acquiring Fund's portfolio managers use both traditional
value-based analyses (such as price/book ratio), as well as the economic profit
of a company measured by its cash flow relative to its capital assets. In
choosing securities, the Acquiring Fund's portfolio managers look for companies
that (i) earn rates of return exceeding their risk-adjusted costs of capital, as
opposed to earning more than they have spent (accounting profits), (ii) create
shareholder value by gaining the most from their investment spending, or use
their cost of capital as a competitive advantage and (iii) have current market
valuations that do not fully recognize future economically profitable growth.
The Acquiring Fund may invest up to 20% of its net assets, plus any
borrowings for investment purposes, in foreign securities, including
dollar-denominated ADRs of foreign issuers.
The investment objective of the Acquired Fund is long-term capital
appreciation on an after-tax basis. To pursue its investment objective, the
Acquired Fund invests at least 80% of its net assets, plus any borrowings for
investment purposes, in equity securities of U.S. blue chip companies. Blue chip
companies are those which, at the time of purchase, are represented in the S&P
500 Index. If some companies cease to be represented in the S&P 500 Index after
purchase, the Fund may continue to hold such securities. The Acquired Fund seeks
to reduce, though not eliminate, taxable distributions to shareholders by
following strategies designed to reduce the impact of federal and state income
taxes on its after-tax returns. The Acquired Fund is "sector neutral" meaning
that its investments are allocated in proportion to the sector allocation of the
S&P 500 Index, with the exception of electric and gas utilities sectors.
In choosing securities, the Acquired Fund's portfolio manager looks at
a number of factors, including (i) the reliability and effectiveness of
management, (ii) whether the issuer is a leader in its business segment, (iii)
whether the price of the security is attractive compared to its competitors,
(iv) whether the company is expected to generate above-average growth rates and
(v) the economic and political outlook.
The Acquired Fund may invest up to 20% of its nets assets in
investment-grade fixed income securities to earn income when the investment
manager believes that this will not compromise the Fund's investment objective.
The Acquired Fund may invest up to 10% of its assets in non-U.S. securities and
another 10% of its assets in restricted securities or other instruments with no
ready market.
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 of the outstanding voting securities of the
relevant Fund. Each Fund has substantially similar fundamental investment
limitations with the following exceptions. While the Acquired Fund has
fundamental limitations which prohibit it from investing more than 10% of its
net assets in restricted securities or other instruments not having a ready
market, the Acquiring Fund has no stated fundamental limitation on investing in
restricted securities or other instruments not having a ready market. The
Acquired Fund has fundamental limitations which prohibit it from investing more
than 5% of its total assets at the time an investment is made in the
non-convertible
21
preferred stock of issuers whose non-convertible preferred stock is not readily
marketable, while the Acquiring Fund has no stated fundamental limitation on
investing in such securities.
CERTAIN INVESTMENT PRACTICES. For each of the following practices, this
table shows the current applicable investment limitation. Risks are indicated
for each practice. The specific risks associated with each of the investment
practices described below are defined for the Acquiring Fund in the Acquiring
Fund's Prospectus, which accompanies this Prospectus/Proxy Statement, and for
the Acquired Fund in its Prospectuses.
KEY TO TABLE:
[X] Permitted without limitation; does not indicate actual use
20% Italic type (e.g., 20%) represents an investment limitation as a
percentage of net fund assets; does not indicate actual use
20% Roman type (e.g. 20%) represents an investment limitation as a
percentage of total fund assets; does not indicate actual use
[ ] Permitted, but not expected to be used to a significant extent
-- Not permitted
- --------------------------------------------------------
INVESTMENT PRACTICE LIMIT
- -------------------------------------------------------- ------------------- ----------------------
ACQUIRING ACQUIRED
FUND FUND
---- ----
BORROWING. The borrowing of money from banks to meet 33 1/3% 33 1/3%
redemptions or for other temporary or emergency
purposes. Speculative exposure risk.
- -------------------------------------------------------- ------------------- ----------------------
FOREIGN SECURITIES. Securities of foreign issuers. 20% 10%
May include depositary receipts. Currency, information, market, operational,
political, valuation risks.
- -------------------------------------------------------- ------------------- ----------------------
FUTURES AND OPTIONS ON FUTURES. Exchange-traded [ ] --
contracts that enable a fund to hedge against or
speculate on future changes in currency values,
interest rates or stock indexes. Futures obligate the
fund (or give it the right, in the case of options) to
receive or make payment at a specific future time
based on those future changes (1) Correlation,
currency, hedged exposure, interest-rate, market,
speculative exposure risks.(2)
- -------------------------------------------------------- ------------------- ----------------------
INVESTMENT-GRADE DEBT SECURITIES. Debt securities [ ] 20%
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.
22
- --------------------------------------------------------
INVESTMENT PRACTICE LIMIT
- -------------------------------------------------------- ------------------- ----------------------
ACQUIRING ACQUIRED
FUND FUND
---- ----
- -------------------------------------------------------- ------------------- ----------------------
MORTGAGE-BACKED AND ASSET-BACKED SECURITIES. [ ] [ ]
Debt securities backed by pools of mortgages, including
pass-through certificates and other senior classes of
collateralized mortgage obligations (CMOs), or other
receivables. Credit, extension, interest-rate,
liquidity, prepayment risks.
- -------------------------------------------------------- ------------------- ----------------------
NON-INVESTMENT-GRADE DEBT SECURITIES. Debt securities [ ] --
and convertible securities rated below the
fourth-highest grade (BBB/Baa) by Standard & Poor's or
Moody's rating service, and unrated securities of
comparable quality. Commonly referred to as junk
bonds. Credit, information, interest-rate, liquidity,
market, valuation risks.
- -------------------------------------------------------- ------------------- ----------------------
OPTIONS. Instruments that provide a right to buy [ ] 5%
(call) or sell (put) a particular security or an index
of securities at a fixed price within a certain time
period. A fund may purchase and write both put and
call options for hedging or speculative purposes.
Correlation, credit, hedged exposure, liquidity, market,
speculative exposure risks.
- -------------------------------------------------------- ------------------- ----------------------
REAL-ESTATE INVESTMENT TRUSTS (REITS). Pooled -- [ ]
investment vehicles that invest primarily in
income-producing real estate or real-estate-related
loans or interests. Credit, interest-rate, market
risks.
- -------------------------------------------------------- ------------------- ----------------------
RESTRICTED AND OTHER ILLIQUID SECURITIES. Certain 10% 15%
securities with restrictions on trading, or those not
actively traded. May include private placements.
Liquidity, market, valuation risks.
- -------------------------------------------------------- ------------------- ----------------------
SECURITIES LENDING. Lending portfolio securities to 33 1/3% 33-1/3%
financial institutions; a fund receives cash, U.S.
government securities or bank letters of credit as
collateral. Credit, liquidity, market, operational
risks.
- -------------------------------------------------------- ------------------- ----------------------
SHORT SALES "AGAINST THE BOX". A short sale where the [ ] 10%
fund owns enough shares of the security involved to
cover the borrowed securities, if necessary.
Liquidity, market, speculative exposure risks.
- -------------------------------------------------------- ------------------- ----------------------
SPECIAL-SITUATION COMPANIES. Companies experiencing -- [ ]
unusual developments affecting their market values.
Special situations may include acquisition,
consolidation, reorganization, recapitalization,
merger, liquidation, special distribution, tender or
exchange offer, or potentially
23
- --------------------------------------------------------
INVESTMENT PRACTICE LIMIT
- -------------------------------------------------------- ------------------- ----------------------
ACQUIRING ACQUIRED
FUND FUND
---- ----
- -------------------------------------------------------- ------------------- ----------------------
favorable litigation. Securities of a special situation
company could decline in value and hurt a fund's
performance if the anticipated benefits of the special
situation do not materialize. Information, market risks.
- -------------------------------------------------------- ------------------- ----------------------
START-UP AND OTHER SMALL COMPANIES. Companies with 5% [ ]
small relative market capitalizations, including those
with continuous operations of less than three years.
Information, liquidity, market, valuation risks.
- -------------------------------------------------------- ------------------- ----------------------
TEMPORARY DEFENSIVE TACTICS. Placing some or all of a [ ] [ ]
fund's assets in investments such as money-market
obligations and investment-grade debt securities for
defensive purposes. Although intended to avoid losses
in adverse market, economic, political or other
conditions, defensive tactics might be inconsistent with
a fund's principal investment strategies and might
prevent a fund from achieving its goal.
- -------------------------------------------------------- ------------------- ----------------------
WARRANTS. Options issued by a company granting the [ ] 5%
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.
- -------------------------------------------------------- ------------------- ----------------------
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS. The 25% [ ]
purchase or sale of securities for delivery at a
future date; market value may change before delivery.
Liquidity, market, speculative exposure risks.
- ------------
(1) The Funds are not obligated to pursue any hedging strategy and do not
represent that these techniques are available now or will be available at
any time in the future.
(2) Each Fund is limited to 5% of net assets for initial margin and premium
amounts on futures positions considered to be speculative by the Commodity
Futures Trading Commission.
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., New York City Time)
each day the NYSE is open for business. It is calculated by dividing a class's
total assets less its liabilities, by the number of shares of such class
outstanding. The Acquiring Fund values its securities based on market quotations
when it calculates its NAV. If market quotations are not readily available,
securities and other assets are valued by another method the Board of Directors
believes accurately reflects fair value. Debt obligations that will mature in 60
days or less are valued on the basis of
24
amortized cost, unless the Board determines that using this method would not
reflect an investment's value. Some securities of the Acquiring Fund may be
listed on foreign exchanges that are open on days (such as U.S. holidays) when
the Acquiring Fund does not compute its price. This could cause the value of the
Acquiring Fund's portfolio investments to be affected by trading on days when
you cannot buy or sell shares.
MANAGEMENT OF EACH FUND
CSAM, located at 466 Lexington Avenue, 16th Floor, New York, New York
10017-3140, provides investment advisory services to each of the Funds under
separate advisory agreements. The specific persons at CSAM who are responsible
for the day-to-day management of the Acquiring Fund are D. Susan Everly and
Sheryl M. Henpel and are described in the Prospectus of the Acquiring Fund,
which accompanies this Prospectus/Proxy Statement. Hugh Neuberger manages the
Acquired Fund.
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 June 1, 2002 and to the Acquired Fund
on July 1, 2002. Prior to that, PFPC, Inc. served as co-administrator to the
Funds. Boston Financial Data Services, Inc. acts as the shareholder servicing
agent, transfer agent and dividend disbursing agent for each Fund. State Street
serves as custodian of each of the Funds' assets pursuant to a custodian
agreement. PricewaterhouseCoopers LLP serves as independent auditors for each of
the Funds.
The Acquiring Fund pays CSAM a management fee of .75% of its average
daily net assets, while the Acquired Fund pays CSAM a management fee of .75% on
the first $100 million of its average daily net assets and .50% on amounts of
its average daily net assets above $100 million. In addition to the management
fee, the Acquired Fund pays a co-administration fee to CSAMSI of .10% of its
average daily net assets, while the Acquiring Fund pays a co-administration fee
to CSAMSI of .05% of its average daily net assets. Each Fund pays State Street a
fee calculated at the annual rate of its pro-rated share of .05% of the first $5
billion in average daily net assets of the Credit Suisse Funds Complex (the
"Fund Complex"), .035% of the Fund Complex's next $5 billion in average daily
net assets, and .02% of the Fund Complex's average daily net assets in excess of
$10 billion, exclusive of out-of-pocket expenses. Importantly, the Acquisition
will result in lower gross and net operating expenses for shareholders of the
Acquired Fund.
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
25
any, can be expected to increase the total amount of fees payable to CSAM and
its affiliates. Even in the absence of asset growth, however, the combination of
the two funds will result in an increase in advisory fees received by CSAM
(estimated to be $384,562 as of June 30, 2003), due to the fact that CSAM's fee
waivers and expense reimbursements for the Acquiring Fund will substantially
decrease. CSAM may also be deemed to have an interest in the Plan and the
Acquisition because, as of August 30, 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 of beneficial interest or ___% of the Acquired
Fund's outstanding shares of beneficial interest. 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 Acquiring Fund and the Trust are each an open-end
management investment company registered under the 1940 Act. The Acquired Fund
is a series of the Trust, a Massachusetts business trust, that was formed on
November 26, 1985 and is governed by its Amended and Restated Agreement and
Declaration of Trust ("Declaration of Trust"), Bylaws and Board of Trustees. The
Acquired Fund is a Maryland corporation that was incorporated on July 31, 1998
and is governed by its Articles of Incorporation, Bylaws and Board of Directors.
Each Fund is governed by applicable state and federal law. The Acquiring Fund
has an authorized capital of six billion shares of common stock with a par value
of $.001 per share; one billion shares are designated Common Class, one billion
shares are designated Advisor Class, one billion shares are designated
Institutional Class, 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. The Acquired Fund has an unlimited number of
transferable shares of beneficial interest with par value of $.001 per share. In
each Fund, shares represent interests in the assets of the relevant Fund and
have identical voting, dividend, liquidation and other rights (other than as set
forth below) on the same terms and conditions except that expenses related to
the distribution of each class of shares of the relevant Fund are borne solely
by such class and each class of shares has exclusive voting rights with respect
to provisions of such Fund's Rule 12b-1 distribution plan, if any, pertaining to
that particular class.
MULTI-CLASS STRUCTURE. The Acquiring Fund and the Acquired Fund are
authorized to offer multiple classes. Each of the Acquiring Fund and the
Acquired Fund offers Common Class, Class A, Class B and Class C shares. The
Acquiring Fund expects to continue to offer shares of its Class A, Class B and
Class C shares following the Acquisition. The Acquiring Fund's Common Class
shares are closed to new investors (with very limited exceptions).
26
DIRECTORS/TRUSTEES. The Amended and Restated Declaration of Trust of
the Trust and the By-Laws of the Acquiring Fund provide that the term of office
of each Trustee or Director, respectively, shall be from the time of his or her
election and qualification until his or her successor shall have been elected
and shall have qualified. In the case of the Acquired Fund, the Trustees have
the power to set and alter their terms of office, and at any time to lengthen or
shorten their own terms or make their terms of unlimited duration. Trustees of
the Acquired Fund may be removed by at least two-thirds of the shares entitled
to vote. Directors of the Acquiring Fund may be removed by a majority of the
shares entitled to vote. Vacancies on the Boards of either Fund may be filled by
the Trustees/Directors remaining in office, provided that no vacancy or
vacancies may be filled by action of the remaining Trustees/Directors if, after
the filling of the vacancy or vacancies, fewer than two-thirds of the
Trustees/Directors then holding office shall have been elected by the
shareholders of the relevant Fund. A meeting of shareholders will be required
for the purpose of electing Trustees/Directors whenever (a) fewer than a
majority of the Trustees/Directors then in office were elected by shareholders
of the relevant Fund or (b) a vacancy exists that may not be filled by the
remaining Trustees/Directors and must be filled.
VOTING RIGHTS. Neither Fund holds a meeting of shareholders annually,
and there normally is no meeting of shareholders for the purpose of electing
Trustees/Directors unless and until such time as less than a majority of the
Trustees/Directors of the relevant Fund holding office have been elected by
shareholders or a vacancy exists that may not be filled by the remaining
Trustees/Directors. At such times, the Trustees or Directors then in office will
call a shareholders' meeting for the election of Trustees/Directors.
In addition, the Acquiring Fund's By-Laws provide that a special
meeting of shareholders will be called at the written request of shareholders
entitled to cast at least 10% percent of the votes entitled to be cast at the
meeting, provided, however, if the matter to be considered at such special
meeting is substantially the same as another voted on at any special meeting of
stockholders held in the last twelve months, the Acquiring Fund does not have to
hold the meeting unless requested to do so by a majority of the stockholders
entitled to vote. Payment by such shareholders of the reasonably estimated cost
of preparing and mailing a notice of the meeting is required in advance of the
meeting. The Trust's Amended and Restated Declaration of Trust provides that a
special meeting of shareholders will be called at the written request of
shareholders holding at least 10% of the outstanding shares of the Acquired
Fund. To the extent required by law, each Fund will assist in shareholder
communications in such matters. The presence, in person or by proxy, of at least
one-third of the outstanding shares of the Acquiring 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 beneficial interest of the
Acquired 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 Trustees or Directors, the excess of the
assets over the liabilities belonging to such Fund. In either case, the assets
so distributed to shareholders will be distributed among the shareholders in
proportion to the number of shares held by them and recorded on the books of
such Fund.
27
INVOLUNTARY REDEMPTIONS. The Acquiring Fund is permitted to redeem
shares held by a shareholder if the Board of Directors determines that doing so
is in the best interest of the Fund. Redemption proceeds may be paid in cash or
in kind. The Trust's Declaration of Trust permits the Trustees to involuntarily
redeem shares, but in more limited circumstances. The exercise of the power
granted to the Directors/Trustees under the Articles of Incorporation Amended
and Restated Declaration of Trust to involuntarily redeem shares is subject to
the Directors'/Trustees' fiduciary obligation to the shareholders and any
applicable provisions under the 1940 Act and the rules adopted thereunder.
LIABILITY OF TRUSTEES OR DIRECTORS. The constituent documents of each
Fund provide that its Trustees/Directors and officers shall not be liable in
such capacity for monetary damages for breach of fiduciary duty as a
Trustee/Director or officer, except for willful misfeasance, bad faith, gross
negligence or reckless disregard of duties in the conduct of his office or the
discharge of his functions on the part of such Trustee, Director or officer. The
constituent instruments of each Fund provide that the relevant Fund shall
indemnify each Trustee/Director and officer and permit advances for the payment
of expenses relating to the matter for which indemnification is sought, in the
case of the Acquiring 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 Trustee/ Director or officer.
RIGHTS OF INSPECTION. Maryland law permits any shareholder of the
Acquiring 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 Acquiring Fund on
file at its principal offices. Massachusetts business trust law does not have
such provisions. However, the Acquired Fund's Amended and Restated Declaration
of Trust provides that the records of the Acquired 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
Acquiring Fund do not have personal liability for corporate acts and
obligations. Massachusetts law provides that shareholders of the Acquired Fund
could, under certain circumstances, be held personally liable for the obligation
of the Acquired Fund. However, the Amended and Restated Declaration of Trust of
the Acquired Fund disclaims shareholder liability for acts or obligations of the
Acquired 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 Amended and Restated
Declaration of Trust of the Acquired Fund provides for indemnification from the
Acquired 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 Acquired Fund would be unable to meet its obligations. Upon payment
of any liability incurred by the Acquired Fund, the shareholder paying the
liability will be entitled to reimbursement from the general assets of the
Acquired 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
28
should refer to the provisions of the constituent documents and state laws
governing each Fund for a more thorough description.
CONCLUSION
The Plan was approved by the Board of Trustees of the Acquired Fund and
the Board of Directors of the Acquiring Fund on August 12, 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 will
not be diluted as a result of the Acquisition. If the shareholders of the
Acquired Fund do not approve the Plan or if the Acquisition is not completed,
the Acquired Fund will continue to engage in business as a registered investment
company and its Board of Trustees 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 TRUSTEES OF THE ACQUIRED
FUND, INCLUDING THE TRUSTEES WHO ARE NOT
"INTERESTED PERSONS" (AS THAT TERM IS
DEFINED IN THE 1940 ACT) RECOMMENDS THAT
YOU VOTE FOR THE PROPOSAL.
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 Trustees of the Acquired Fund to be used
at the Special Meeting of Shareholders of the Acquired Fund to be held at 4:00
p.m. on November 21, 2003, at the offices of the Acquired Fund, 466 Lexington
Avenue, 16th Floor, New York, New York 10017-3140 and at any adjournment(s)
thereof. This Prospectus/Proxy Statement, along with a Notice of the Special
Meeting and proxy card(s), is first being mailed to shareholders of the Acquired
Fund on or about October 6, 2003. Only shareholders of record as of the close of
business on September 12, 2003 (the "Record Date") will be entitled to notice
of, and to vote at, the Special Meeting or
29
any adjournment(s) thereof. As of the September 12, 2003, the Acquired Fund had
the following shares outstanding: _________ Common Class shares, __________
Class A shares, __________ Class B shares and __________ Class C shares. The
holders of a majority of the outstanding shares of beneficial interest of the
Acquired Fund entitled to vote at the close of business on the Record Date
present in person or represented by proxy will constitute a quorum for the
Special Meeting. For purposes of determining a quorum for transacting business
at the Special Meeting, abstentions and broker "non-votes" (that is, proxies
from brokers or nominees indicating that such persons have not received
instructions from the beneficial owner or other persons entitled to vote shares
on a particular matter with respect to which the brokers or nominees do not have
discretionary power) will be treated as shares that are present but which have
not been voted. Abstentions and broker non-votes will have the effect of a "no"
vote for the Proposal which requires the approval of a majority of the shares of
beneficial interest of the Acquired Fund entitled to vote at the Special
Meeting.
Executed, but unmarked proxies (i.e., executed proxies in which there
is no indication of the shareholder's voting instructions) will be voted FOR
approval of 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 solicitations
and the preparation of enclosures to the Prospectus/Proxy Statement,
reimbursement of expenses of forwarding solicitation material to beneficial
owners of shares of beneficial interest 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 the Proposal are
not received prior to 4:00 p.m. on November 21, 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 beneficial
interest of the Acquired Fund present in person or by proxy and entitled to vote
at the Special Meeting. The
30
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 - Information
About the Acquisition - Share Ownership of the Fund." CSAM and its affiliates
have advised the Acquired Fund that they intend to vote the shares of beneficial
interest over which they have voting power at the Special Meeting, including
shares of beneficial interest that are held directly or on behalf of employees,
in the manner instructed by the customers or employees for which such shares of
beneficial interest are held.
OTHER BUSINESS
The Board of Trustees of the Acquired Fund knows of no other business
to be brought before the Special Meeting. However, if any other matters come
before the Special Meeting, proxies that do not contain specific restrictions to
the contrary will be voted on such matters in accordance with the judgment of
the persons named in the enclosed Proxy Card.
The approval of shareholders of the Acquiring Fund is not required in
order to affect the Acquisition and, accordingly, the votes of the shareholders
of the Acquiring Fund are not being solicited by this Prospectus/Proxy
Statement.
FINANCIAL STATEMENTS AND EXPERTS
The audited statement of assets and liabilities of the Acquiring Fund
as of August 31, 2002 and the Acquired Fund as of October 31, 2002, including
their respective schedules of portfolio investments, and the related statements
of operations for the year then ended, the statement of changes in net assets
for each of the two years in the period then ended and the financial highlights
for each of the five years (or such shorter period as the relevant Fund's share
class has been in existence) in the period then ended, have been incorporated by
reference into this Prospectus/Proxy Statement in reliance upon the reports of
PricewaterhouseCoopers LLP, independent auditors to each of the Funds, given on
the authority of such firms as experts in accounting and auditing.
ADDITIONAL MATERIALS
The following additional materials, which have been incorporated by
reference into the Statement of Additional Information, dated September __,
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 January 1, 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.
31
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
Venable, Baetjer and Howard, LLP as to certain matters under Maryland law.
32
EXHIBIT A: AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is
made as of this ___ day of October, 2003, between and among Credit Suisse Select
Equity Fund, Inc., a Maryland corporation (the "Acquiring Fund"), and Credit
Suisse Capital Funds, a Massachusetts business trust (the "Trust"), for and on
behalf of its series, Credit Suisse Tax Efficient Fund (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 the applicable
class or classes (collectively, the "Shares") of the Acquiring Fund, and the
assumption by the Acquiring Fund of liabilities of the Acquired Fund, and the
distribution, on or after the Closing Date hereinafter referred to, of Shares of
the Acquiring Fund ("Acquiring Fund Shares") to the shareholders of the Acquired
Fund in liquidation of the Acquired Fund as provided herein, all upon the terms
and conditions hereinafter set forth in this Agreement.
As the Acquired Fund is a series of the Trust, all parties to
this Agreement acknowledge and accept that the Acquired Fund does not have a
Board of Trustees or officers separate from the other series of the Trust.
Accordingly, all representations, warranties, covenants and/or other obligations
of any kind made by the Acquired Fund in this Agreement are expressly understood
by all parties to this Agreement as being made by the Trustees or officers of
the Trust, as applicable, in their respective capacities as Trustees or officers
(and not in their individual capacities) for, and on behalf of, the Acquired
Fund.
WHEREAS, the Board of Trustees 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 Directors of the Acquiring Fund has
determined that the exchange of all of the assets of the Acquired Fund for
Acquiring Fund Shares is in the best interests of the Acquiring Fund's
shareholders and that the interests of the existing shareholders of the
Acquiring Fund would not be diluted as a result of this transaction.
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's shareholders of record determined as
of the close of business on the Closing Date (the
- 2 -
"Fund Shareholders") the Acquiring Fund Shares it receives pursuant to paragraph
1.1. Such liquidation and distribution will be accomplished by the transfer of
the Acquiring Fund Shares then credited to the account of the Acquired Fund on
the books of the Acquiring Fund to open accounts on the share records of the
Acquiring Fund in the name of the Acquired Fund's shareholders representing the
respective pro rata number of the Acquiring Fund Shares due such shareholders.
All issued and outstanding shares of the Acquired Fund will simultaneously be
canceled on the books of the Acquired Fund, although share certificates
representing interests in the Acquired Fund will represent a number of Acquiring
Fund Shares after the Closing Date as determined in accordance with Section 2.2.
The Acquiring Fund shall not issue certificates representing the Acquiring Fund
Shares in connection with such exchange.
1.5. Ownership of Acquiring Fund Shares will be shown on the
books of the Acquiring Fund's transfer agent. Shares of the Acquiring Fund will
be issued in the manner described in the Acquiring Fund's current prospectuses
and statement of additional information.
1.6. Any transfer taxes payable upon issuance of the Acquiring
Fund Shares in a name other than the registered holder of the Acquired Fund
Shares on the books of the Acquired Fund as of that time shall, as a condition
of such issuance and transfer, be paid by the person to whom such Acquiring Fund
Shares are to be issued and transferred.
1.7. Any reporting responsibility of the Acquired Fund is and
shall remain the responsibility of the Acquired Fund up to and including the
Closing Date and such later date on which the Acquired Fund is terminated.
2. Valuation
2.1. The value of the Acquired Fund's assets to be acquired
hereunder shall be the value of such assets computed as of the close of regular
trading on The 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 load-waived
Class A Shares of the Acquiring Fund to be issued (including fractional shares,
if any) in exchange for Class A, Class B, Class C and Common Class shares of
beneficial interest, respectively, of the Acquired Fund shall be determined by
dividing the value of the net assets of the Acquired Fund attributable to its
respective Class A, Class B, Class C and Common Class shares of beneficial
interest determined using the same valuation procedures referred to in paragraph
2.1 by the net asset value per Share of the Class A, Class B, Class C and
load-waived Class A shares, respectively, of the Acquiring Fund computed as of
the close of regular trading on the NYSE on the Closing Date, using the
valuation procedures set forth in the Acquiring Fund's then current prospectuses
or statement of additional information.
2.3. All computations of value with respect to the Acquiring
Fund and the Acquired Fund shall be made by State Street in accordance with its
regular practice as pricing agent for the Acquiring Fund.
- 3 -
3. Closing and Closing Date
3.1. The Closing Date for the Reorganization shall be December
5, 2003, or such other date as the parties to such Reorganization may agree to
in writing. All acts taking place at the Closing shall be deemed to take place
simultaneously as of the close of trading on the NYSE on the Closing Date unless
otherwise provided. The Closing shall be held as of 10:00 a.m., at the offices
of Willkie Farr & Gallagher or at such other time and/or place as the parties
may agree.
3.2. State Street Bank and Trust Company, the custodian for
the Acquiring Fund (the "Custodian"), shall deliver as soon as practicable after
the Closing a certificate of an authorized officer stating that: (a) the
Acquired Fund's portfolio securities, cash and any other assets have been
delivered in proper form to the Acquiring Fund on the Closing Date and (b) all
necessary taxes, including all applicable federal and state stock transfer
stamps, if any, have been paid, or provision for payment has been made, in
conjunction with the delivery of portfolio securities.
3.3. In the event that on the Valuation Date (a) the NYSE or
another primary trading market for portfolio securities of the Acquiring Fund or
the Acquired Fund shall be closed to trading or trading thereon shall be
restricted or (b) trading or the reporting of trading on the NYSE or elsewhere
shall be disrupted so that accurate appraisal of the value of the net assets of
the Acquiring Fund or the Acquired Fund is impracticable, the applicable Closing
Date shall be postponed until the first business day after the day when trading
shall have been fully resumed and reporting shall have been restored.
3.4. The Acquired Fund shall deliver at the Closing a list of
the names and addresses of the Acquired Fund's shareholders and the number and
class of outstanding Shares owned by each such shareholder immediately prior to
the Closing or provide evidence that such information has been provided to the
Acquiring Fund's transfer agent. The Acquiring Fund shall issue and deliver a
confirmation evidencing the Acquiring Fund Shares to be credited to the Acquired
Fund's account on the Closing Date to the Secretary of the Acquired Fund or
provide evidence satisfactory to the Acquired Fund that such Acquiring Fund
Shares have been credited to the Acquired Fund's account on the books of the
Acquiring Fund. At the Closing, each party shall deliver to the relevant other
parties such bills of sale, checks, assignments, share certificates, if any,
receipts or other documents as such other party or its counsel may reasonably
request.
4. Representations and Warranties
4.1. The Acquired Fund represents and warrants to the
Acquiring Fund as follows:
(a) The Acquired Fund is a duly established series of the
Trust; the Trust is a Massachusetts business trust duly organized and validly
existing under the laws of The Commonwealth of Massachusetts;
(b) The Trust is a registered investment company classified as
a management company of the open-end type and its registration with the
Securities and Exchange Commission
- 4 -
(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 Trust will not result, in a violation of
its Amended and Restated Agreement and Declaration of Trust or By-Laws or any
material agreement, indenture, instrument, contract, lease or other undertaking
to which the Acquired Fund is a party or by which the Acquired Fund or its
property is bound;
(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;
(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 two years in the period then ended, have
been audited by PricewaterhouseCoopers LLP (or one of its legacy firms),
independent auditors 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. The financial
highlights of the Acquired Fund for each of the periods presented in the period
ended October 31, 2000 were audited by other independent auditors, whose report
dated December 20, 2000 expressed an unqualified opinion on those statements.
(g) Since October 31, 2002 there has not been any material
adverse change in the Acquired Fund's financial condition, assets, liabilities
or business other than changes occurring in the ordinary course of business, or
any incurrence by the Acquired Fund of indebtedness maturing more than one year
from the date such indebtedness was incurred except as otherwise disclosed to
and accepted in writing by the Acquiring Fund. For purposes of this subsection
(g), a decline in net asset value per share of beneficial interest of the
Acquired Fund due to declines in market values of securities in the Acquired
Fund's portfolio, the discharge of Fund liabilities, or the redemption of the
Acquired Fund shares by Fund shareholders shall not constitute a material
adverse change;
(h) At the date hereof and the Closing Date, all federal and
other tax returns and reports, including extensions, of the Acquired Fund
required by law to have been filed by
- 5 -
such dates shall have been filed, and all federal and other taxes shall have
been paid so far as due, or provision shall have been made for the payment
thereof and, to the best of the Acquired Fund's knowledge, no such return is
currently under audit and no assessment has been asserted with respect to such
returns;
(i) For each taxable year of its operation (including the
taxable year ending on the Closing Date), the Acquired Fund has met the
requirements of Subchapter M of the Code for qualification and treatment as a
regulated investment company. All of the Acquired Fund's issued and outstanding
shares have been offered and sold in compliance in all material respects with
applicable federal and state securities laws;
(j) All issued and outstanding shares of beneficial interest
of each class of the Acquired Fund are, and at the Closing Date will be, duly
and validly issued and outstanding, fully paid and, except as set forth in the
Trust's Amended and Restated Declaration of Trust, non-assessable. All of the
issued and outstanding shares of beneficial interest of the Acquired Fund will,
at the time of Closing, be held by the persons and in the amounts set forth in
the records of the transfer agent as provided in paragraph 3.4. The Acquired
Fund does not have outstanding any options, warrants or other rights to
subscribe for or purchase any of the Acquired Fund's shares, nor is there
outstanding any security convertible into any of the Acquired Fund's shares;
(k) At the Closing Date, the Acquired Fund will have good and
marketable title to the Acquired Fund's assets to be transferred to the
Acquiring Fund pursuant to paragraph 1.2 and full right, power and authority to
sell, assign, transfer and deliver such assets hereunder and, upon delivery and
payment for such assets, the Acquiring Fund will acquire good and marketable
title thereto, subject to no restrictions on the full transfer thereof, except
such restrictions as might arise under the Securities Act of 1933, as amended
(the "1933 Act"), and the 1940 Act with respect to privately placed or otherwise
restricted securities that the Acquired Fund may have acquired in the ordinary
course of business and of which the Acquiring Fund has received notice and
necessary documentation at or prior to the Closing;
(l) The execution, delivery and performance of this Agreement
has been duly authorized by all necessary actions on the part of the Acquired
Fund's Board of Trustees, and subject to the approval of the Acquired Fund's
shareholders, this Agreement will constitute a valid and binding obligation of
the Acquired Fund enforceable in accordance with its terms, subject to the
effect of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other laws relating to or affecting creditors' rights and to
general equity principles;
(m) The information to be furnished by the Acquired Fund for
use in applications for orders, registration statements or proxy materials or
for use in any other document filed or to be filed with any federal, state or
local regulatory authority (including the NASD, Inc.), which may be necessary in
connection with the transactions contemplated hereby, shall be accurate and
complete in all material respects and shall comply in all material respects with
federal securities and other laws and regulations applicable thereto;
- 6 -
(n) The current prospectuses and statements of additional
information of the Acquired Fund conform in all material respects to the
applicable requirements of the 1933 Act and the 1940 Act and the rules and
regulations of the Commission thereunder and do not include any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not materially misleading; and
(o) Insofar as the following relate to the Acquired Fund, the
registration statement filed by the Acquiring Fund on Form N-14 relating to
Acquiring Fund Shares that will be registered with the Commission pursuant to
this Agreement, which, without limitation, shall include a proxy statement of
the Acquired Fund (the "Proxy Statement") and the prospectuses of the Acquiring
Fund with respect to the transactions contemplated by this Agreement, and any
supplement or amendment thereto, and the documents contained or incorporated
therein by reference (the "N-14 Registration Statement"), on the effective date
of the N-14 Registration Statement, at the time of any shareholders' meeting
referred to herein, on the Valuation Date and on the Closing Date: (i) shall
comply in all material respects with the provisions of the 1933 Act, the
Securities Exchange Act of 1934 (the "1934 Act") and the 1940 Act and the rules
and regulations under those Acts, and (ii) shall not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading;
provided, however, that the representations and warranties in this section shall
not apply to statements in or omissions from the Proxy Statement and the N-14
Registration Statement made in reliance upon and in conformity with information
that was furnished or should have been furnished by the Acquiring Fund for use
therein.
4.2. The Acquiring Fund represents and warrants to the
Acquired Fund as follows:
(a) The Acquiring Fund is a duly organized, validly existing
corporation in good standing under the laws of the State of Maryland;
(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 statements of additional
information filed as part of the Acquiring Fund registration statement on Form
N-1A (the "Acquiring Fund Registration Statement") conform in all material
respects to the applicable requirements of the 1933 Act and the 1940 Act and the
rules and regulations of the Commission under those Acts and do not include any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not materially misleading;
(d) At the Closing Date, the Acquiring Fund will have good
and marketable title to its assets;
(e) The Acquiring Fund is not, and the execution, delivery and
performance of this Agreement by the Acquiring Fund will not result in a
violation of its Articles of
- 7 -
Incorporation or ByLaws 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 or affected;
(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 August 31, 2003 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 net asset value per share of the Acquiring Fund due to
declines in market values of securities in the Acquiring Fund's portfolio, the
discharge of Acquiring Fund liabilities, or the redemption of Acquiring Fund
Shares by Acquiring Fund Shareholders shall not constitute a material adverse
change;
(h) At the Closing Date, all federal and other tax returns and
reports, including extensions, of the Acquiring Fund required by law then to be
filed shall have been filed, and all federal and other taxes shown as due on
said returns and reports shall have been paid or provision shall have been made
for the payment thereof;
(i) For each taxable year of its operation (including the
taxable year which includes the Closing Date), the Acquiring Fund has met the
requirements of Subchapter M of the Code for qualification as a regulated
investment company and has elected to be treated as such, has been eligible to
and has computed its federal income tax under Section 852 of the Code;
(j) At the date hereof, all issued and outstanding Acquiring
Fund Shares of each class are, and at the Closing Date will be, duly and validly
issued and outstanding, fully paid and, except as set forth in the Articles of
Incorporation, 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 Directors, 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;
- 8 -
(l) The Acquiring Fund Shares to be issued and delivered to
the Acquired Fund, for the account of the Acquired Fund's shareholders, pursuant
to the terms of this Agreement, will at the Closing Date have been duly
authorized and when so issued and delivered, will be duly and validly issued
Acquiring Fund Shares, and will be fully paid and, 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 ordinary course of business will
include the declaration and payment of customary dividends and distributions.
5.2. The Acquired Fund will call a meeting of the shareholders
of the Acquired Fund to consider and act upon this Agreement and to take all
other actions necessary to obtain approval of the transactions contemplated
herein.
5.3. The Acquired Fund covenants that the Acquiring Fund
Shares to be issued hereunder are not being acquired for the purpose of making
any distribution thereof other than in accordance with the terms of this
Agreement.
- 9 -
5.4. The Acquired Fund will assist the Acquiring Fund in
obtaining such information as the Acquiring Fund reasonably requests concerning
the beneficial ownership of the Acquired Fund's Shares.
5.5. Subject to the provisions of this Agreement, the
Acquiring Fund and the Acquired Fund will each take, or cause to be taken, all
action, and do or cause to be done, all things reasonably necessary, proper or
advisable to consummate and make effective the transactions contemplated by this
Agreement.
5.6. The Acquired Fund will provide the Acquiring Fund with
information reasonably necessary for the preparation of a prospectus (the
"Prospectus") which will include the Proxy Statement referred to in paragraph
4.1(o), all to be included in the N-14 Registration Statement, in compliance
with the 1933 Act, the 1934 Act and the 1940 Act in connection with the meeting
of the Acquired Fund's shareholders to consider approval of this Agreement and
the transactions contemplated herein.
5.7. The Acquiring Fund agrees to indemnify and advance
expenses to each person who at the time of the execution of this Agreement
serves as a Trustee 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 Trustee or officer of the
Acquired Fund with respect to matters specifically relating to the
Reorganization, provided that such indemnification and advancement of expenses
shall be permitted to the fullest extent that is available under applicable law.
This paragraph 5.7 shall not protect any such Indemnified Person against any
liability to the Acquired Fund, the Acquiring Fund or their shareholders to
which he would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or from reckless disregard of the duties involved in the
conduct of his office. An Indemnified Person seeking indemnification shall be
entitled to advances from the Acquiring Fund for payment of the reasonable
expenses incurred by him in connection with the matter as to which he is seeking
indemnification in the manner and to the fullest extent permissible under
applicable law. Such Indemnified Person shall provide to the Acquiring Fund a
written affirmation of his good faith belief that the standard of conduct
necessary for indemnification by the Acquiring Fund under this paragraph has
been met and a written undertaking to repay any advance if it should ultimately
be determined that the standard of conduct has not been met. In addition, at
least one of the following additional conditions shall be met: (a) the
Indemnified Person shall provide security in form and amount acceptable to the
Acquiring Fund for its undertaking; (b) the Acquiring Fund is insured against
losses arising by reason of the advance; or (c) either a majority of a quorum of
disinterested non-party directors of the Acquiring Fund (collectively, the
"Disinterested Directors"), or independent legal counsel experienced in mutual
fund matters, selected by the Indemnified Person, in a written opinion, shall
have determined, based on a review of facts readily available to the Acquiring
Fund at the time the advance is proposed to be made, that there is reason to
believe that the Indemnified Person will ultimately be found to be entitled to
indemnification.
5.8. The Acquiring Fund agrees to take no action that would
adversely affect the qualification of the Reorganization as a reorganization
under Section 368(a) of the Code. In this regard, the Acquiring Fund covenants
that, following the Reorganization, it will (i) continue
- 10 -
the historic business of the Acquired Fund or (ii) use a significant portion of
the Acquired Fund's historic business assets.
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, 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 corporation
and in good standing under the laws of the State of Maryland and has the
statutory power to own all of its properties and assets and to carry on its
business as a registered investment company; (b) the Agreement has been duly
authorized, executed and delivered by the Acquiring Fund, assuming due
authorization, execution and delivery of the Agreement by the other parties
hereto, 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 be issued to
the Acquired Fund's shareholders as provided by this Agreement are duly
authorized and upon such delivery will be validly issued and outstanding and are
fully paid and 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
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
Acquiring Fund is a party or by which it or its
- 11 -
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 State of Maryland 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 Maryland law, such counsel
shall be entitled to state that, with the approval of the Acquired 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 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 Directors of the Acquiring Fund, including a
majority of the directors 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.
- 12 -
7.Conditions Precedent to Obligations of the Acquiring Fund
The obligations of the Acquiring Fund to complete the
transactions provided for herein shall be subject, at its election, to the
performance by the Acquired Fund of all the obligations to be performed by it
hereunder on or before the Closing Date and, in addition thereto, the following
conditions:
7.1. All representations and warranties by or on behalf of the
Acquired Fund contained in this Agreement shall be true and correct in all
material respects as of the date hereof and, except as they may be affected by
the transactions contemplated by this Agreement, as of the Closing Date with the
same force and effect as if made on and as of the Closing Date;
7.2. The Acquired Fund shall have delivered to the Acquiring
Fund a statement of the Acquired Fund's assets and liabilities as of the Closing
Date, certified by the Treasurer or Assistant Treasurer of the Acquired Fund;
7.3. The Acquired Fund shall have delivered to the Acquiring
Fund on the Closing Date a certificate executed in its name by its Chairman,
Vice President, Secretary, Treasurer or Assistant Treasurer, in form and
substance satisfactory to the Acquiring Fund and dated as of the Closing Date,
to the effect that the representations and warranties of the Acquired Fund made
in this Agreement are true and correct at and as of the Closing Date, except as
they may be affected by the transactions contemplated by this Agreement, and as
to such other matters as the Acquiring Fund shall reasonably request; and
7.4. The Acquiring Fund shall have received on the Closing
Date a favorable opinion of Willkie Farr & Gallagher, counsel to the Acquired
Fund, in a form satisfactory to the Secretary of the Acquiring Fund, covering
the following points:
That (a) the Trust is a validly existing business trust under
the laws of The Commonwealth of Massachusetts, and has the trust power to own
all of its properties and assets and to carry on its business as a registered
investment company; (b) the Agreement has been duly authorized, executed and
delivered by the Trust and the Acquired Fund is a duly established series of the
Trust and, assuming due authorization, execution and delivery of the Agreement
by the other parties hereto, is a valid and binding obligation of the Trust 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 Trust's Amended and
Restated Declaration of Trust 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 Commonwealth of Massachusetts
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
- 13 -
securities laws; (e) the Proxy Statement (except as to financial and statistical
data contained therein, as to which no opinion need be given), as of its date,
appeared on its face to be appropriately responsive in all material respects to
the 1934 Act and the 1940 Act and the rules and regulations thereunder;
provided, however, that such counsel shall be entitled to state that it does not
assume any responsibility for the accuracy, completeness or fairness of the
Proxy Statement; (f) to the knowledge of such counsel, there is no legal,
administrative or governmental proceeding, investigation, order, decree or
judgment of any court or governmental body, only insofar as they relate to the
Acquired Fund or its assets or properties, pending, threatened or otherwise
existing on or before the effective date of the N-14 Registration Statement or
the Closing Date, which is required to be described in the N-14 Registration
Statement or to be filed as an exhibit to the N-14 Registration Statement which
is not described or filed as required or which materially and adversely affect
the Acquired Fund's business; and (g) the Trust is registered as an investment
company under the 1940 Act, and, to the knowledge of such counsel, its
registration with the Commission as an investment company under the 1940 Act is
in full force and effect.
With respect to all matters of Massachusetts law, such counsel
shall be entitled to state that, with the approval of the Acquiring 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 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
- 14 -
(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 (except for the financial highlights for each of the
periods presented in the period ended October 31, 2000 that were audited by
other independent auditors, whose report dated December 20, 2000 expressed an
unqualified opinion on those statements) 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 auditors with respect to the
Acquiring Fund within the meaning of the 1933 Act and the applicable regulations
thereunder; and
(b) in their opinion, the financial statements and financial
highlights of the Acquiring Fund included or incorporated by reference in the
N-14 Registration Statement and reported on by them comply as to form in all
material aspects with the applicable accounting requirements of the 1933 Act and
the rules and regulations thereunder.
7.7. The Acquiring Fund and the Acquired Fund shall have
received from PricewaterhouseCoopers LLP a letter addressed to both Funds and
dated as of the effective date of the N-14 Registration Statement in form and
substance satisfactory to each Fund, to the effect that: on the basis of limited
procedures agreed upon by the Acquiring Fund and the Acquired Fund and described
in such letter (but not an examination in accordance with generally accepted
auditing standards), specified information relating to each Fund appearing in
the N-14 Registration Statement and the Proxy Statement has been obtained from
the accounting records of each Fund or from schedules prepared by officers of
each Fund having responsibility for financial and reporting matters and such
information is in agreement with such records, schedules or computations made
therefrom.
7.8. The 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.
7.9. The Board of Trustees of the Trust, including a majority
of the trustees 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 Trust 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 A
cquiring Fund and the Acquired Fund
If any of the conditions set forth below do not exist on or
before the Closing Date with respect to the Acquiring Fund, the Acquired Fund
shall, and if any of such conditions do not exist on or before the Closing Date
with respect to the Acquired Fund, the Acquiring Fund shall, at their respective
option, not be required to consummate the transactions contemplated by this
Agreement.
8.1. The Agreement and the transactions contemplated herein
shall have been approved by the requisite vote of the holders of the outstanding
shares of beneficial interest of the Acquired Fund in accordance with the
provisions of the Trust's Amended and Restated Declaration of Trust and
applicable law and certified copies of the votes evidencing such approval shall
have been delivered to the Acquiring Fund.
- 15 -
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, no investigation or proceeding
for that purpose shall have been instituted or be pending, threatened or
contemplated under the 1933 Act.
8.5. The parties shall have received a favorable opinion of
Willkie Farr & Gallagher, addressed to, and in form and substance satisfactory
to, the Acquired Fund and the Acquiring Fund, substantially to the effect that
for U.S. federal income tax purposes:
(a) The transfer of all of the Acquired Fund's assets to the
Acquiring Fund in exchange for the Acquiring Fund Shares and the assumption by
the Acquiring Fund of the liabilities of the Acquired Fund, and the distribution
of such Acquiring Fund Shares to shareholders of the Acquired Fund in exchange
for their shares of beneficial interest of the Acquired Fund, will constitute a
"reorganization" within the meaning of Section 368(a) of the Code, and the
Acquiring Fund and the Acquired Fund will each be a "party to a reorganization"
within the meaning of Section 368(b) of the Code; (b) no gain or loss will be
recognized by the Acquiring Fund on the receipt of the assets of the Acquired
Fund solely in exchange for the Acquiring Fund Shares and the assumption by the
Acquiring Fund of the liabilities of the Acquired Fund; (c) except for gain or
loss regularly attributable to the termination of the Acquired Fund's taxable
year, no gain or loss will be recognized by the Acquired Fund upon the transfer
of the Acquired Fund's assets to the Acquiring Fund in exchange for the
Acquiring Fund Shares and the assumption by the Acquiring Fund of the
liabilities of the Acquired Fund or upon the distribution of the Acquiring Fund
Shares to the Acquired Fund's shareholders in exchange for their shares of the
Acquired Fund; (d) no gain or loss will be recognized by shareholders of the
Acquired Fund upon the exchange of their Acquired Fund shares of beneficial
interest for the Acquiring Fund Shares or upon the assumption by the Acquiring
Fund of the liabilities of the Acquired Fund; (e) the aggregate tax basis of the
Acquiring Fund Shares received by each of the Acquired Fund's shareholders
pursuant to the Reorganization will be the same as the aggregate tax basis of
the Acquired Fund shares of beneficial interest held by such shareholder
immediately prior to the Reorganization, and the holding period of the Acquiring
Fund Shares to be received by each Fund shareholder will include the period
during which the Acquired Fund shares of beneficial interest exchanged therefor
were held by such shareholder (provided that such
- 16 -
Acquired Fund shares of beneficial interest 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 to receive any
payments in connection with the transactions provided for herein.
9.2. CSAM or its affiliates agrees to bear the reasonable
expenses incurred in connection with the transactions contemplated by this
Agreement, whether or not consummated (excluding extraordinary expenses such as
litigation expenses, damages and other expenses not normally associated with
transactions of the type contemplated by this Agreement). These expenses consist
of: (i) expenses associated with preparing this Agreement, the N-14 Registration
Statement and expenses of the shareholder meetings insofar as they relate to
approval of this Agreement and the transactions contemplated thereby; (ii)
expenses associated with preparing and filing the N-14 Registration Statement
covering the Acquiring Fund Shares to be issued in the Reorganization insofar as
they relate to approval of this Agreement and the transactions contemplated
thereby; (iii) registration or qualification fees and expenses of preparing and
filing such forms, if any, necessary under applicable state securities laws to
qualify the Acquiring Fund Shares to be issued in connection with the
Reorganization; (iv) postage; printing; accounting fees; and legal fees incurred
by the Acquiring Fund and by the Acquired Fund in connection with the
transactions contemplated by this Agreement; (v) solicitation costs incurred in
connection with the shareholders meeting referred to in clause (i) above and
paragraph 5.2 hereof insofar as they relate to approval of this Agreement and
the transactions contemplated thereby and (vi) any other reasonable
Reorganization expenses.
9.3. Any other provision of this Agreement to the contrary
notwithstanding, any liability of either Fund under this Agreement, or in
connection with the transactions contemplated herein with respect to such Fund,
shall be discharged only out of the assets of such Fund.
10. Entire Agreement; Survival of Warranties
10.1. The Acquiring Fund and the Acquired Fund agree that
neither party has made any representation, warranty or covenant not set forth
herein and that this Agreement constitutes the entire agreement among the
parties.
- 17 -
10.2. The representations, warranties and covenants contained
in this Agreement or in any document delivered pursuant hereto or in connection
herewith shall survive the consummation of the transactions contemplated
hereunder.
11. Termination
11.1. This Agreement may be terminated at any time at or prior
to the Closing Date by: (1) mutual agreement of the Acquired Fund and the
Acquiring Fund; (2) the Acquired Fund in the event the Acquiring Fund shall, or
the Acquiring Fund, in the event the Acquired Fund shall, materially breach any
representation, warranty or agreement contained herein to be performed at or
prior to the Closing Date; or (3) the Acquired Fund or the Acquiring Fund in the
event a condition herein expressed to be precedent to the obligations of the
terminating party or parties has not been met and it reasonably appears that it
will not or cannot be met within a reasonable time.
11.2. In the event of any such termination, there shall be no
liability for damages on the part of either the Acquiring Fund, the Trust or the
Acquired Fund, or their respective Trustees, Directors or officers, to the other
party or parties.
12. Amendments
This Agreement may be amended, modified or supplemented in
writing in such manner as may be mutually agreed upon by the authorized officers
of the Acquired Fund and the Acquiring Fund; provided, however, that following
the meeting of the Acquired Fund's shareholders called by the Acquired Fund
pursuant to paragraph 5.2 of this Agreement no such amendment may have the
effect of changing the provisions for determining the number of the Acquiring
Fund Shares to be issued to the Acquired Fund's Shareholders under this
Agreement to the detriment of such shareholders without their further approval.
13. Notices
13.1. Any notice, report, statement or demand required or
permitted by any provisions of this Agreement shall be in writing and shall be
given by prepaid telegraph, telecopy or certified mail addressed to the
Acquiring Fund at:
466 Lexington Avenue
New York, NY 10017
Attention: Hal Liebes, Esq.
or to the Acquired Fund at:
466 Lexington Avenue
New York, NY 10017
Attention: Hal Liebes, Esq.
14. Headings; Counterparts; Governing Law; Assignment;
Limitation of Liability
14.1. The article and paragraph headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
- 18 -
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 Trust, in each case in such
officer's capacity as an officer and not individually. It is understood and
expressly stipulated that none of the Directors, Trustees, officers or
shareholders of the Acquiring Fund or the Trust are personally liable hereunder.
All persons dealing with the Acquired Fund should look solely to the property of
the Acquired Fund for the enforcement of any claims against the Acquired Fund.
- 19 -
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 Select Equity, INC.
By:
-----------------------------------------------------------------------------
Name:
Title:
Attestation By:
-----------------------------------------------------------------
Name:
Title:
CREDIT SUISSE CAPITAL FUNDS
For and on Behalf of CREDIT SUISSE Tax Efficient FUND
By:
-----------------------------------------------------------------------------
Name:
Title:
Attestation By:
-----------------------------------------------------------------
Name:
Title:
Solely with respect to paragraphs 4.3, 5.9 and 9.2 hereof:
CREDIT SUISSE ASSET MANAGEMENT, LLC
By:
-----------------------------------------------------------------------------
Name: Hal Liebes
Title: Managing Director
Attestation By:
-----------------------------------------------------------------
Name: Gregory Bressler
Title: Vice President
PART B
INFORMATION REQUIRED IN THE
STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF ADDITIONAL INFORMATION
466 Lexington Avenue
New York, New York 10017-3140
1-800-927-2874
RELATING TO THE ACQUISITION BY CREDIT SUISSE SELECT EQUITY FUND, INC.
(THE "ACQUIRING FUND")
OF THE ASSETS OF CREDIT SUISSE CAPITAL FUNDS - TAX EFFICIENT FUND
(THE "ACQUIRED FUND").
Dated: September __, 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 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
January 1, 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 August 31,
2002.
4. Semi-Annual Report of the Acquiring Fund for the semi-annual
period ended February 28, 2003.
5. Annual Report of the Acquired Fund for the year ended October 31,
2002.
6. Semi-Annual Report of the Acquired Fund for the semi-annual
period ended April 30, 2003.
This Statement of Additional Information is not a prospectus. A
Prospectus/Proxy Statement, dated September __, 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 years ended October 31, 2002 and August 31, 2002, respectively,
including audited financial statements, notes to the financial statements and
report of the independent auditors, are incorporated by reference herein. The
Semi-Annual Report of each of the Acquired Fund and the Acquiring Fund for the
semi-annual periods ended February 28, 2003 and April 30, 2003, respectively,
including unaudited 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 and Semi-Annual Reports without charge, please call
1-800-927-2874.
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 June 30,
2003 and the unaudited pro forma condensed Statement of Operations for the 12
months ended June 30, 2003 for each of the Acquiring Fund and the Acquired Fund,
as adjusted, giving effect to the Acquisition.
CREDIT SUISSE TAX EFFICIENT FUND INTO CREDIT SUISSE SELECT EQUITY FUND
PRO FORMA COMBINED STATEMENT OF ASSETS AND LIABILITIES
AS OF JUNE 30, 2003 (UNAUDITED)
ACQUIRED FUND ACQUIRING FUND
--------------------------- ------------------------
CS TAX EFFICIENT CS SELECT EQUITY ADJUSTMENTS PRO FORMA
--------------------------- ------------------------ ------------- -------------------------
COST VALUE COST VALUE COST VALUE
------------- ------------ --------- ------------- ----------- ------------
ASSETS
Investments at value................ $73,309,187 $ 85,888,528 $7,952,552 $ 8,791,070 $81,261,739 $94,679,598
Cash................................ 713 825 1,538
Receivable for investment sold
unsettled......................... 267,292 195,592 462,884
Receivable for Fund shares sold..... 88,152 64,674 152,826
Dividends and interest receivable... 51,029 4,699 55,728
Receivable from advisor............. -- 12,661 7,275 (a) 19,936
Prepaid expenses.................... 7,275 32,744 (7,275) (a) 32,744
------------ ----------- ---------
Total Assets.................... 86,302,989 9,102,265 95,405,254
------------ ----------- ----------
LIABILITIES
Payable for investments purchased
unsettled......................... -- 289,031 289,031
Payable for fund shares repurchased. 61,532 5,066 66,598
Advisory fee payable................ 42,334 -- 42,334
Loan payable........................ 144,000 -- 144,000
Administration fee payable.......... 16,048 1,254 17,302
Distribution fee payable............ 32,448 2,691 35,139
Directors'/Trustees fee payable..... -- 761 761
Accrued expenses payable............ 111,047 56,084 167,131
------------ ----------- ----------
Total Liabilities............... 407,409 354,887 762,296
------------ ----------- ----------
NET ASSETS........................... $85,895,580 $ 8,747,378 -- 94,642,958
============ =========== ======== ==========
COMMON CLASS
Net Assets.......................... $ 778,000 $ 5,695,545 (778,000) (b) $ 5,695,545
Shares outstanding.................. 57,907 515,525 (57,907) (b) 515,525
Net asset value, offering price
and redemption price per share.... $ 13.44 $ 11.05 $ 11.05
CLASS A SHARES
Net Assets.......................... $ 62,052,336 $ 1,591,262 778,000 (b) $64,421,598
Shares outstanding.................. 4,612,848 143,714 1,062,914 (b) 5,819,476
Net asset value and redemption
price
per share......................... $ 13.45 $ 11.07 $ 11.07
Maximum offering price per share
(net asset value plus maximum
sales
charge)........................... $ 14.27 $ 11.75 $ 11.75
CLASS B SHARES
Net Assets.......................... $ 20,067,688 $ 1,051,706 -- $21,119,394
Shares outstanding.................. 1,573,564 96,269 264,177 (c) 1,934,010
Net asset value and offering
price
per share......................... $ 12.75 $ 10.92 -- $ 10.92
CLASS C SHARES
Net Assets.......................... $ 2,997,556 $ 408,865 -- $ 3,406,421
Shares outstanding.................. 235,096 37,532 40,175 (d) 312,803
Net asset value and offering
price
per share......................... $ 12.75 $ 10.89 -- $ 10.89
See notes to pro forma financial statements.
CREDIT SUISSE TAX EFFICIENT FUND INTO CREDIT SUISSE SELECT EQUITY FUND
PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED JUNE 30, 2003 (UNAUDITED)
ACQUIRING
ACQUIRED FUND FUND
------------- ---------
CS TAX CS SELECT
EFFICIENT EQUITY ADJUSTMENTS PRO-FORMA
------------- ---------- ----------- ---------
INVESTMENT INCOME
Dividends........................................... $1,472,212 $ 118,872 -- 1,591,084
Interest............................................ (695) 3,911 -- 3,216
Securities Lending.................................. -- 69 -- 69
--------- ---------- --------- ---------
Total Investment Income 1,471,517 122,852 -- 1,594,369
--------- ---------- --------- ---------
EXPENSES
Investment advisory services........................ 675,683 71,028 80 (e) 746,791
Distribution fees - Class A......................... 162,660 2,346 2,192 (f) 167,198
Distribution fees - Class B ........................ 211,100 7,484 -- 218,584
Distribution fees - Class C......................... 30,488 3,189 -- 33,677
Distribution fees - Common Class.................... 2,192 14,056 (2,192) (f) 14,056
Transfer agent...................................... 213,797 47,287 (25,514) (g) 235,570
Custodian........................................... 10,217 31,950 29,404 (h) 71,571
Administrative and accounting fees.................. 145,646 13,827 (48,948) (i) 110,525
Registration fees................................... 66,653 78,525 (78,525) (j) 66,653
Interest............................................ 6,649 1,341 (1,341) (j) 6,649
Legal............................................... 60,340 30,201 (30,201) (j) 60,340
Directors'/Trustees' fees........................... 5,397 17,422 (5,397) (j) 17,422
Audit............................................... 23,901 20,135 (14,036) (j) 30,000
Printing............................................ 62,357 70,509 (62,357) (j) 70,509
Insurance expense................................... 12,540 6,577 (6,577) (j) 12,540
Miscellaneous....................................... 3,010 4,535 (3,010) (j) 4,535
--------- ---------- -------- ---------
1,692,630 420,412 (246,422) 1,866,620
Less: Expenses waived and reimbursed by CSAM........ (456,267) (315,812) 384,482 (k) (387,597)
Less: Expenses offset by Transfer Agent............ -- (64) -- (64)
--------- ---------- -------- ---------
Net Expenses........................................ 1,236,363 104,536 138,060 1,478,959
--------- ---------- -------- ---------
Net Investment Income.................................. 235,154 18,316 (138,060) 115,410
--------- ---------- -------- ---------
NET REALIZED AND UNREALIZED GAIN/(LOSS) FROM
INVESTMENTS:
Net realized gain (loss) from investments........... (4,946,175) (2,694,000) -- (7,640,175)
Net change in unrealized appreciation/(depreciation)
from investments.................................. (355,601) 1,526,210 -- 1,170,609
--------- ---------- -------- ---------
Net realized and unrealized loss from investments (5,301,776) (1,167,790) -- (6,469,566)
---------- ---------- -------- ----------
Net decrease in net assets resulting from
operations.................................... $(5,066,622) $(1,149,474) $(138,060) (6,354,156)
=========== =========== ========= ==========
See notes to pro forma financial statements.
CREDIT SUISSE TAX EFFICIENT FUND (ACQUIRED FUND)
PRO FORMA SCHEDULE OF INVESTMENTS (UNAUDITED)
AS OF JUNE 30, 2003 (UNAUDITED)
- ------------------------------------------------------------
MARKET
SECURITY NAME SHARES VALUE
- -------------------------------------- ---------- ----------
Abbott Laboratories 40,500 $1,772,28
Amgen, Inc.* 46,300 3,076,172
Avery Dennison Corp. 25,000 1,255,000
Avon Products, Inc. 12,500 777,500
Bank of America Corp. 24,000 1,896,720
BellSouth Corp. 56,000 1,491,280
Charter One Financial, Inc. 61,000 1,901,980
Cisco Systems, Inc.* 101,500 1,694,035
Citigroup, Inc. 72,600 3,107,280
Clear Channel Communications, Inc.* 22,000 932,580
Colgate-Palmolive Co. 24,500 1,419,775
Conoco Phillips 40,704 2,230,579
Costco Wholesale Corp.* 42,500 1,555,500
CVS Corp. 41,000 1,149,230
Dell Computer Corp.* 41,000 1,310,360
E.W. Scripps Co. Class A 21,800 1,934,096
Estee Lauder Companies, Inc. Class A 33,700 1,129,961
Exxon Mobil Corp. 81,000 2,908,710
FedEx Corp. 16,600 1,029,698
Freddie Mac 20,500 1,040,785
Gannett Company, Inc. 6,000 460,860
General Electric Co. 57,900 1,660,572
General Mills, Inc. 25,00 1,185,250
Hartford Financial Services Group, 36,700 1,848,212
Inc.
Intel Corp. 107,000 2,223,888
CREDIT SUISSE TAX EFFICIENT FUND (ACQUIRED FUND)
PRO FORMA SCHEDULE OF INVESTMENTS (UNAUDITED)
AS OF JUNE 30, 2003 (UNAUDITED)
- ------------------------------------------------------------
MARKET
SECURITY NAME SHARES VALUE
- -------------------------------------- ---------- ----------
International Business Machines Corp. 25,000 2,062,500
J.P. Morgan Chase &Co. 40,000 1,367,200
Johnson & Johnson 48,000 2,481,600
Marsh & McLennan Companies, Inc. 42,200 2,155,154
Maxim Integrated Products, Inc. 15,500 529,945
Medtronic, Inc. 27,000 1,295,190
Mercury Interactive Corp.* 16,000 617,760
Merrill Lynch & Company, Inc. 29,500 1,377,060
Microsoft Corp. 120,000 3,073,200
Omnicom Group, Inc. 24,200 1,735,140
PepsiCo, Inc. 25,500 1,134,750
Pfizer, Inc. 108,000 3,688,200
PPG Industries, Inc. 24,000 1,217,760
Procter & Gamble Co. 14,750 1,315,405
St. Paul Companies, Inc. 42,200 1,540,722
Symantec Corp.* 11,000 482,460
Target Corp. 50,000 1,892,000
Texas Instruments, Inc. 73,300 1,290,080
Travelers Property Casualty Corp. 23,000 362,710
Class B
Tyco International, Ltd. 67,300 1,277,354
United Technologies Corp. 38,500 2,726,955
VERITAS Software Corp. * 22,000 630,740
Verizon Communications, Inc. 44,000 1,735,800
Viacom, Inc. Class B 43,000 1,877,380
Wal-Mart Stores, Inc. 59,000 3,166,530
Wells Fargo & Co. 43,200 2,177,280
Wyeth 37,000 1,685,350
-----------
-
$85,888,528
===========
CREDIT SUISSE SELECT EQUITY FUND (ACQUIRING FUND)
PRO FORMA SCHEDULE OF INVESTMENTS (UNAUDITED)
AS OF JUNE 30 2003 (UNAUDITED)
- -------------------------------------------------------------
MARKET
SECURITY NAME SHARES VALUE
- -------------------------------------- ----------- ----------
Abbott Laboratories 5,000 $218,800
AFLAC, Inc. 6,900 212,175
Altria Group, Inc. 2,100 95,424
American International Group, Inc. 4,814 265,637
Amgen, Inc.* 1,400 93,016
Anheuser-Busch Companies, Inc. 3,400 173,570
Bank of America Corp. 1,700 134,351
Biomet, Inc. 8,100 232,146
Burlington Resources, Inc. 1,700 91,919
Cendant Corp.* 13,900 254,648
Cisco Systems, Inc.* 3,800 63,422
Citigroup, Inc. 5,171 221,319
Clear Channel Communications, 2,500 105,975
Inc.*
Clorox Co. 2,600 110,890
Coca-Cola Co. 4,448 206,432
Conoco Phillips 2,962 162,316
Consolidated Edison, Inc. 400 17,312
Dell Computer Corp.* 2,800 89,488
Devon Energy Corp. 1,600 85,440
Dominion Resources, Inc. 500 32,135
Du Pont (E.I.) de Nemours & Co. 5,500 229,020
Eli Lilly & Co. 2,600 179,322
Emerson Electric Co. 4,032 206,035
Estee Lauder Companies, Inc. 3,600 120,708
Class A
Exxon Mobil Corp. 7,800 280,098
Gillette Co. 7,740 246,596
Harley-Davidson, Inc. 2,900 115,594
Hartford Financial Services 3,100 156,116
Group, Inc.
Hewlett-Packard Co. 5,200 110,760
Illinois Tool Works, Inc. 4,000 263,400
Intel Corp. 7,900 164,194
CREDIT SUISSE SELECT EQUITY FUND (ACQUIRING FUND)
PRO FORMA SCHEDULE OF INVESTMENTS (UNAUDITED)
AS OF JUNE 30 2003 (UNAUDITED)
- -------------------------------------------------------------
MARKET
SECURITY NAME SHARES VALUE
- -------------------------------------- ----------- ----------
International Paper Co. 2,900 103,617
Lockheed Martin Corp. 5,500 261,635
Medtronic, Inc. 7,000 335,790
Microsoft Corp. 16,300 417,443
Monster Worldwide, Inc.* 1,000 19,730
Newell Rubbermaid, Inc. 5,700 159,600
PepsiCo, Inc. 4,506 200,517
Pfizer, Inc. 11,200 382,480
PPG Industries, Inc. 1,800 91,332
SPDR Trust Series 1 1,400 136,682
Staples, Inc.* 3,400 62,390
The Chubb Corp. 1,500 90,000
The Goldman Sachs Group, Inc. 790 66,162
The Southern Co. 1,700 52,972
Transocean, Inc. 4,800 105,456
United Technologies Corp. 2,000 141,660
UnitedHealth Group, Inc. 2,400 120,600
VERITAS Software Corp. * 3,100 88,877
Viacom, Inc. Class B 3,500 152,810
Wal-Mart Stores, Inc. 3,141 168,577
Wells Fargo & Co. 6,200 312,480
PAR
State Street Bank and Trust Co.
- -- - ----
Euro Time Deposit, 1.063%, 7/01/03 382 382,000
-------
$8,791,070
==========
CREDIT SUISSE TAX EFFICIENT FUND INTO CREDIT SUISSE SELECT EQUITY
FUND PRO FORMA COMBINED SCHEDULE OF INVESTMENTS (UNAUDITED)
AS OF JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------
MARKET
SECURITY NAME SHARES VALUE
- ------------------------------------- ----------- ------------
Abbott Laboratories 45,500 $1,991,080
AFLAC, Inc. 6,900 212,175
Altria Group, Inc. 2,100 95,424
American International Group, Inc. 4,814 265,637
Amgen, Inc.* 47,700 3,169,188
Anheuser-Busch Companies, Inc. 3,400 173,570
Avery Dennison Corp. 25,000 1,255,000
Avon Products, Inc. 12,500 777,500
Bank of America Corp. 25,700 2,031,071
BellSouth Corp. 56,000 1,491,280
Biomet, Inc. 8,100 232,146
Burlington Resources, Inc. 1,700 91,919
Cendant Corp.* 13,900 254,648
Charter One Financial, Inc. 61,000 1,901,980
Cisco Systems, Inc.* 105,300 1,757,457
Citigroup, Inc. 77,771 3,328,599
Clear Channel Communications, Inc.* 24,500 1,038,555
Clorox Co. 2,600 110,890
Colgate-Palmolive Co. 24,500 1,419,775
Coca-Cola Co. 4,448 206,432
Conoco Phillips 43,666 2,392,897
Consolidated Edison, Inc. 400 17,312
Costco Wholesale Corp.* 42,500 1,555,500
CVS Corp. 41,000 1,149,230
Dell Computer Corp.* 43,800 1,399,848
Devon Energy Corp. 1,600 85,440
Dominion Resources, Inc. 500 32,135
Du Pont (E.I.) de Nemours & Co. 5,500 229,020
E.W. Scripps Co. Class A 21,800 1,934,096
Eli Lilly & Co. 2,600 179,322
Emerson Electric Co. 4,032 206,035
Estee Lauder Companies, Inc. Class 37,300 1,250,669
A
Exxon Mobil Corp. 88,800 3,188,808
FedEx Corp. 16,600 1,029,698
Freddie Mac 20,500 1,040,785
Gannett Company, Inc. 6,000 460,860
General Electric Co. 57,900 1,660,572
General Mills, Inc. 25,000 1,185,250
Gillette Co. 7,740 246,596
Harley-Davidson, Inc. 2,900 115,594
Hartford Financial Services Group, 39,800 2,004,328
Inc.
Hewlett-Packard Co. 5,200 110,760
Illinois Tool Works, Inc. 4,000 263,400
Intel Corp. 114,900 2,388,082
CREDIT SUISSE TAX EFFICIENT FUND INTO CREDIT SUISSE SELECT EQUITY
FUND PRO FORMA COMBINED SCHEDULE OF INVESTMENTS (UNAUDITED)
AS OF JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------
MARKET
SECURITY NAME SHARES VALUE
- ------------------------------------- ----------- ------------
International Business Machines 25,000 2,062,500
Corp.
International Paper Co. 2,900 103,617
J.P. Morgan Chase &Co. 40,000 1,367,200
Johnson & Johnson 48,000 2,481,600
Lockheed Martin Corp. 5,500 261,635
Marsh & McLennan Companies, Inc. 42,200 2,155,154
Maxim Integrated Products, Inc. 15,500 529,945
Medtronic, Inc. 34,000 1,630,980
Mercury Interactive Corp.* 16,000 617,760
Merrill Lynch & Company, Inc. 29,500 1,377,060
Microsoft Corp. 136,300 3,490,643
Monster Worldwide, Inc.* 1,000 19,730
Newell Rubbermaid, Inc. 5,700 159,600
Omnicom Group, Inc. 24,200 1,735,140
PepsiCo, Inc. 30,006 1,335,,267
Pfizer, Inc. 119,200 4,070,680
PPG Industries, Inc. 25,800 1,309,092
Procter & Gamble Co. 14,750 1,315,405
SPDR Trust Series 1 1,400 136,682
Staples, Inc.* 3,400 62,390
St. Paul Companies, Inc. 42,200 1,540,722
Symantec Corp.* 11,000 482,460
Target Corp. 50,000 1,892,000
Texas Instruments, Inc. 73,300 1,290,080
The Chubb Corp. 1,500 90,000
The Goldman Sachs Group, Inc. 790 66,162
The Southern Co. 1,700 52,972
Transocean, Inc. 4,800 105,456
Travelers Property Casualty Corp. 23,000 362,710
Class B
Tyco International, Ltd. 67,300 1,277,354
United Technologies Corp. 40,500 2,868,615
UnitedHealth Group, Inc. 2,400 120,600
VERITAS Software Corp. * 25,100 719,617
Verizon Communications, Inc. 44,000 1,735,800
Viacom, Inc. Class B 46,500 2,030,190
Wal-Mart Stores, Inc. 62,141 3,335,107
Wells Fargo & Co. 49,400 2,489,760
Wyeth 37,000 1,685,350
PAR
State Street Bank and Trust Co.
Euro Time Deposit, 1.063%, 7/01/03 382 382,000
-------
$94,679,598
===========
CREDIT SUISSE TAX EFFICIENT FUND
CREDIT SUISSE SELECT EQUITY FUND
NOTES TO PRO FORMA FINANCIAL STATEMENTS
JUNE 30, 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 Tax Efficient
Fund ("Tax Efficient" or "Acquired Fund"), a series of the Credit Suisse Capital
Funds, into the Credit Suisse Select Equity Fund, Inc. ("Select Equity" or
"Acquiring Fund"). 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 Tax Efficient to
Select Equity and the subsequent liquidation of Tax Efficient. The accounting
survivor in the proposed merger will be Select Equity. Although Tax Efficient is
the larger fund, the surviving fund will invest in the style that is similar to
the way in which Select Equity is currently operated and will be subject to the
investment policies and restrictions of Select Equity. Select Equity (i) is
classified as a "non-diversified company," as defined under Section 5 of the
Investment Company Act of 1940, as amended; (ii) has a focused investment
approach; (iii) uses both traditional value-based analyses (such as price/book
ratio), as well as the economic profit of a company measured by its cash flow
relative to its capital assets; and (iv) does not have an objective of tax
efficiency. It is anticipated that the portfolio composition of the surviving
fund will be similar to Select Equity. Furthermore, the surviving fund will be
managed by Select Equity's managers, who are different managers than Tax
Efficient, and will be subject to the contractual expense ratios and expense
reimbursement and/or waiver (which may be discontinued at any time) with respect
to Select Equity.
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.
Tax Efficient and Select Equity 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 Tax
Efficient and Select Equity.
(a) Elimination of Prepaid expenses from Tax Efficient to be reimbursed by
CSAM.
(b) Redemption of Class A and Common Class fund shares from Acquired fund and
purchase of Class A shares in Acquiring fund.
(c) Redemption of Class B fund shares from Acquired fund and purchase of Class
B shares in Acquiring fund.
(d) Redemption of Class C fund 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 Rule 12b-1 fees in Class A fund shares of the Acquiring Fund
due to additional assets from Common Class fund shares from Acquired Fund.
(g) Adjustment based on the contractual agreement with the transfer agent for
the combined fund.
(h) Adjustment based on the contractual agreements with the custodian for the
combined fund.
(i) Adjustment to decrease co-administration fee based upon combined assets.
(j) Assumes elimination of duplicate charges in combination, and reflects
management's estimates of combined pro-forma operations.
(k) Adjustment to decrease Credit Suisse Asset Management, LLC waiver.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Following is a summary of significant accounting policies, which are
consistently followed by Tax Efficient and Select Equity 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.
(the "Exchange") on each day the Exchange is open for business. Each fund's
equity investments are valued at market value, which is generally determined
using the closing price on the exchange or market on which the security is
primarily traded at the time of valuation (the "Valuation Time"). If no sales
are reported, equity investments are generally 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 are valued in accordance with the price supplied 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 the Board of
Directors (or Board of Trustees as the case may be) (each a "Board of
Directors") under
CREDIT SUISSE TAX EFFICIENT FUND
CREDIT SUISSE SELECT EQUITY FUND
NOTES TO PRO FORMA FINANCIAL STATEMENTS
JUNE 30, 2002 (UNAUDITED)
procedures established by the Board of Directors in the absence of readily
ascertainable market values. Debt obligations that will mature in 60 days or
less are valued on the basis of amortized cost, which approximate market value,
unless it is determined that this method would not represent 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.
FEDERAL INCOME TAXES - Tax Efficient and Select Equity intend 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
and distributions of net realized capital gains, if any, are declared and paid
at least annually.
THE ANNUAL REPORT AND STATEMENT OF ADDITIONAL
INFORMATION OF THE ACQUIRING FUND DATED AUGUST 31, 2002, AND
JANUARY 1, 2003, RESPECTIVELY.
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.
PART C
OTHER INFORMATION
Item 15. Indemnification. Registrant and officers and directors of Credit
Suisse Asset Management, LLC ("CSAM"), Credit Suisse Asset Management
Securities, Inc. ("CSAMSI") and Registrant are covered by insurance
policies indemnifying them for liability incurred in connection with
the operation of Registrant. Discussion of this coverage is
incorporated by reference to Item 25 of Part C of Post-Effective
Amendment No. 6 to Registrant's Registration Statement on Form N-1A,
filed on December 13, 2002.
Item 16. Exhibits.
1. Articles of Incorporation.
(a) Articles of Incorporation are incorporated by reference to the
Registrant's Registration Statement on Form N-1A, filed on August 5, 1998
(Securities Act File No. 333-60675)
(b) Amendment to Articles of Incorporation are incorporated by
reference to the Registrant's Post-Effective Amendment No. 3 to the
Registration Statement on Form N-1A, filed on December 29, 2000 (Securities
Act File No. 333-60675).
(c) Amendment to Articles of Incorporation are incorporated by
reference to the Registrant's Post-Effective Amendment No. 4 to the
Registrant's Statement on Form N-1A, filed on April 30, 2001 (Securities
Act File No. 333-60675)
(d) Articles Supplementary are incorporated by reference to the
Registrant's Post-Effective Amendment No. 5 to the Registration Statement
on Form N-1A, filed on December 21, 2001 (Securities Act File No.
333-60675)
(e) Articles of Amendment are incorporated by reference to the
Registrant's Post-Effective Amendment No. 5 to the Registration Statement
on Form N-1A, filed on December 21, 2001 (Securities Act File No.
333-60675)
2. By-Laws.
(a) By-Laws of the Registrant are incorporated by reference to the
Registration's Registration Statement on Form N-1A, filed on August 5, 1998
(Securities Act File No. 333-60675)
(b) Amendment to By-Laws are incorporated by reference to the the
Registrant's Post-Effective Amendment No. 3 to the Registration Statement
on Form N-1A, filed on December 29, 2000 (Securities Act File No.
333-60675).
(c) Amendment to By-Laws is incorporated by reference to Registrant's
Post-Effective Amendment No. 4 to the Registration Statement on Form N-1A,
filed on April 30, 2001 (Securities Act File No. 333-60675)
(d) Amendment to By-Laws is incorporated by reference to Registrant's
Post-Effective Amendment No. 5 to the Registration Statement on Form N-1A,
filed on December 21, 2001 (Securities Act File No. 333-60675)
(e) Amendment to By-Laws is incorporated by reference to Registrant's
Post-Effective Amendment No. 6 to the Registration Statement on Form N-1A,
filed on December 13, 2002 (Securities Act File No. 333-60675)
3. Not applicable.
4. Form of the Plans of Reorganization (included as Exhibit A to
Registrant's Prospectus/Proxy Statement contained in Part A of this Registration
Statement).
5. Form of Stock Certificates are incorporated by reference to
Pre-Effective Amendment No. 1 to the Registrant's Registration Statement on
Form N-1A filed on August 14, 1998 (Securities Act File No. 333-60675)
6. Investment Advisory Agreements.
(a) Investment Advisory Agreement is incorporated by reference to
Registrant's Post-Effective Amendment No. 6 to the Registration Statement
on Form N-1A, filed on December 13, 2002 (Securities Act File No.
333-60675)
7. Distribution Agreements
(a) Distribution Agreement with Credit Suisse Asset Management
Securities, Inc. ("CSAMSI") is incorporated by reference to Form N-14 of
Credit Suisse Emerging Markets Fund, Inc. filed on December 27, 2000
(Securities Act File No. 333-52818)
8. Not applicable.
9. Custodian Agreements
(a) Custodian Agreement with State Street Bank and Trust Company
("State Street") is incorporated by reference to the 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)
(b) Amendment to Custodian Agreement with State Street is 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
(c) Amended Custodian Agreement with State Street is 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).
(d) Amended Exhibit I to Custodian Agreement with State Street is
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).
10. Rule 12b-1 and Rule 18f-3 Plans.
(a) Credit Suisse Select Equity Fund - Shareholder Servicing and
Distribution Plan for Common Class Shares is incorporated herein by
reference to Registrant's Post-Effective Amendment No. 6 to the
Registration Statement on Form N-1A, filed on December 13, 2002 (Securities
Act File No. 333-60675)
(b) Credit Suisse Select Equity Fund - Distribution Plan for Advisor
Class Shares is incorporated herein by reference to Registrant's
Post-Effective Amendment No. 6 to the Registration Statement on Form N-1A,
filed on December 13, 2002 (Securities Act File No. 333-60675)
(c) Credit Suisse International Focus Fund - Class A, B and C
Distribution Plan is incorporated by reference to Post-Effective Amendment
No. 25 to the Registration Statement on Form N-1A of Credit Suisse Capital
Appreciation Fund, filed on November 8, 2001 (Securities Act File No.
33-12344).
(d) Amended Form of Rule 18f-3 Plan is incorporated by reference to
Post-Effective Amendment No. 5 to the Registration Statement on Form N-1A
of Credit Suisse International Small Company Fund, filed on February 22,
2001 (Securities Act File No. 33-49537).
11. Opinions
(a) Opinion and Consent of Willkie Farr & Gallagher LLP, counsel to
Registrant, with respect to validity of shares to be issued in connection
with the Acquisition of the Credit Suisse Tax Efficient Fund, a series of
Credit Suisse Capital Funds is incorporated by reference to the
Registration Statement on N-14 filed on August 28, 2003 (Securities Act
File No. 333-108326).
12. Tax Opinions
(a) Form of Opinion of Willkie Farr & Gallagher LLP with respect to
tax matters is incorporated by reference to the Registrant's Registration
Statement on N-14 filed on August 28, 2003 (Securities Act File No.
333-108326).
13. Material Contracts
(a) Form of Co-Administration Agreement with CSAMSI is incorporated by
reference to the Registrant's Post-Effective Amendment No. 6 to the
Registration Statement on Form N-1A, filed on December 13, 2002 (Securities
Act File No. 333-60675)
3
(b) Form of Transfer Agency and Service Agreement with Boston
Financial Data Services, Inc. is incorporated by reference to
Post-Effective Amendment No. 5 to the Registration Statement on Form N-1A
of Credit Suisse International Small Company Fund, Inc., filed on February
22, 2001 (Securities Act File No. 333-49537).
14. Consent of PricewaterhouseCoopers LLP filed herewith.
15. Not applicable.
16. Powers of Attorney are 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).
17. Additional Exhibits
(a) Form of Proxy Card (included as an exhibit to Registrant's
Prospectus/Proxy Statement contained in Part A of this Registration
Statement).
(b) Prospectuses and Statement of Additional Information of the
Registrant, dated January 1, 2003 are incorporated by reference to
Registrant's Registration Statement on Form N-1A, filed on December 13,
2002.
(c) Prospectuses and Statement of Additional Information of the
Credit Suisse Tax Efficient Fund, dated February 28, 2003 are incorporated
by reference to Registrant's Registration Statement on Form N-1A, filed
on February 24, 2003.
(d) Annual Report of the Registrant, dated August 31, 2002 is
incorporated herein by reference.
(e) Annual Report of the Credit Suisse Tax Efficient Fund, dated
October 31, 2002 is incorporated herein by reference.
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 10th day of October, 2003.
Credit Suisse Select Equity Fund, Inc.
By: /s/ Joseph D. Gallagher
----------------------------------
Joseph D. Gallagher
Chairman (Chief Executive Officer)
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated:
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ Joseph D. Gallagher Chairman (Chief Executive October 10, 2003
- ----------------------- Officer)
Joseph D. Gallagher
/s/ Michael A. Pignataro Treasurer and Chief Financial October 10, 2003
- ------------------------ Officer
Michael A. Pignataro
/s/ Richard H. Francis* Director October 10, 2003
- -----------------------
Richard H. Francis
/s/ Jack W. Fritz* Director October 10, 2003
- ------------------
Jack W. Fritz
/s/ Jeffrey E. Garten* Director October 10, 2003
- ----------------------
Jeffrey E. Garten
/s/ Peter F. Krogh* Director October 10, 2003
- -------------------
Peter F. Krogh
/s/ James S. Pasman, Jr.* Director October 10, 2003
- -------------------------
James S. Pasman, Jr.
/s/ William W. Priest* Director October 10, 2003
- ----------------------
William W. Priest
/s/ Steven N. Rappaport* Director October 10, 2003
- ------------------------
Steven N. Rappaport
* By: /s/ Michael A. Pignataro October 10, 2003
-------------------------
Michael A. Pignataro as Attorney-in-Fact
EXHIBIT INDEX
14. Consent of PricewaterhouseCoopers LLP