-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QQ2ovQoozjxexWLt6AneLu4ChM124XGkaIoXIrr4lfSy5m0R2DCqL+oiYG6P7lSJ RluowOpuwb/iXw621OnorA== 0001047469-03-000575.txt : 20030107 0001047469-03-000575.hdr.sgml : 20030107 20030107170706 ACCESSION NUMBER: 0001047469-03-000575 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20021031 FILED AS OF DATE: 20030107 EFFECTIVENESS DATE: 20030107 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CREDIT SUISSE HIGH YIELD BOND FUND CENTRAL INDEX KEY: 0001061353 IRS NUMBER: 134009166 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-08777 FILM NUMBER: 03506871 BUSINESS ADDRESS: STREET 1: 277 PARK AVENUE CITY: NEW YORK STATE: NY ZIP: 10172 BUSINESS PHONE: 2128926692 MAIL ADDRESS: STREET 1: 277 PARK AVENUE CITY: NEW YORK STATE: NY ZIP: 10172 FORMER COMPANY: FORMER CONFORMED NAME: DLJ HIGH YIELD BOND FUND DATE OF NAME CHANGE: 19980508 N-30D 1 a2100099zn-30d.txt N-30D CREDIT SUISSE HIGH YIELD BOND FUND ANNUAL REPORT OCTOBER 31, 2002 CREDIT SUISSE HIGH YIELD BOND FUND 466 LEXINGTON AVENUE NEW YORK, NY 10017 TRUSTEES ENRIQUE R. ARZAC LAWRENCE J. FOX JAMES S. PASMAN, JR. OFFICERS LAURENCE R. SMITH INTERIM CHIEF EXECUTIVE OFFICER RICHARD J. LINDQUIST PRESIDENT AND CHIEF INVESTMENT OFFICER HAL LIEBES SENIOR VICE PRESIDENT MICHAEL A. PIGNATARO CHIEF FINANCIAL OFFICER, VICE PRESIDENT AND SECRETARY ROBERT M. RIZZA VICE PRESIDENT AND TREASURER MAXINE C. EVERTZ ASSISTANT SECRETARY ROCCO A. DELGUERCIO ASSISTANT TREASURER INVESTMENT ADVISER CREDIT SUISSE ASSET MANAGEMENT, LLC 466 LEXINGTON AVENUE NEW YORK, NY 10017 ADMINISTRATOR STATE STREET CORP. 225 FRANKLIN STREET BOSTON, MA 02110 CUSTODIAN CUSTODIAL TRUST COMPANY 101 CARNEGIE CENTER PRINCETON, NJ 08540 SHAREHOLDER SERVICING AGENT PFPC, INC. 101 FEDERAL STREET BOSTON, MA 02110 LEGAL COUNSEL WILLKIE FARR & GALLAGHER 787 7TH AVENUE NEW YORK, NY 10019 INDEPENDENT ACCOUNTANTS PRICEWATERHOUSECOOPERS LLP TWO COMMERCE SQUARE PHILADELPHIA, PENNSYLVANIA 19103 Dear Shareholder: November 13, 2002 We are writing to report on the activities of Credit Suisse High Yield Bond Fund ("the Fund") for the fiscal year ended October 31, 2002 and to discuss our investment strategy. On October 31, 2002, the Fund's net asset value ("NAV") was $3.53, compared to an NAV of $4.49 at October 31, 2001. The Fund's total return (based on NAV and assuming reinvestment of dividends of $0.81 per share) for the period was down 4.99%. On October 31, 2002, $252.4 million was invested in high yield debt securities; $5.3 million in investment-grade debt securities; and $0.2 million in equity securities. Of the debt securities, the largest concentration (73.9%) was invested in issues rated B through BB. The Fund announced on October 21, 2002 that, based on information available at that time, it was estimated that approximately $0.10 per share of its distributions for the fiscal year will be a return of capital. Further, the return of capital was due in part to changing market conditions which may continue throughout 2003. Accordingly, the dividend rate for future periods may be revised upward or downward depending on conditions at those times. The amounts of the Fund's distributions attributable to net investment income, net realized capital gains and return of capital may be subject to retroactive recharacterization at the end of the fiscal year based on tax regulations. The actual amounts attributable to each of these sources will be reported to each shareholder in January 2003 on Form 1099-DIV. THE MARKET: HEADING NORTH, THEN SOUTH After enjoying solid performance during the first half of the Fund's fiscal year, the broad high yield market (to which we refer generically as "high yield") reversed course and headed south in the second half. As measured by the Salomon Smith Barney High-Yield Market Index (SSBHYMI)*, aggregate high yield securities fell 6.8%. The Fund benefited in the fiscal year's first half on the back of gains in November, January, March and April. The beginning of this period coincided with a sharp rebound after high yield endured one of its worst monthly performances on record in September following the tragic events of September 11. Bond prices, which had started to rise in earnest around mid-October, kept going strong through late November. Prices rose modestly in January, when high yield underperformed investment-grade debt but significantly outperformed equities. Increasingly clear indications that the U.S. economy was picking up steam helped to buoy the market in March and April. (Note: historically, a strengthening economy tends to be favorable for high yield via higher cash flows available for debt service, better credit quality and lower default rates; of course, past performance is not a guarantee of future results.) Mutual fund inflows were especially strong. Sentiment and buying cooled off in May, though, in response to diminishing optimism about the economy and bad news about companies whose worsening financial health had a direct impact on the key high yield industry sectors of telecommunications and cable television. Market conditions took a turn for the worse in June, so much so that some broad high yield indices experienced their worst-ever single-month performance as measured in percentage terms. June was tough for most financial markets due to a number of factors, notably plummeting trust in the integrity of corporate managements and accounting standards, disappointing corporate earnings and rising fears of renewed terrorism in the U.S. An exclamation point of sorts occurred on June 25, when WorldCom announced that it had used questionable accounting procedures to enormously overstate its profitability in 2001 and 2002. The downward trend in sentiment and activity extended into July as well. After a brief rally in August, prices had little in the way of fundamental support in September and fell accordingly. Prominent negative influences on market sentiment were rising talk of war with Iraq and its potential economic consequences; and fresh economic data suggesting that a vigorous recovery in the economy might begin later than previously thought. The fiscal year ended with essentially flat returns in October. Declines early in the month were ultimately offset by gains, as investors bought in response to rising stock prices and in anticipation of a cut in nominal interest rates by the Federal Reserve. PERFORMANCE: HELPED MOST BY ALLOCATIONS TO UTILITIES, AEROSPACE AND TELECOM We attribute the Fund's modest outperformance of the broad high yield market (i.e., as represented by SSBHYMI) in the fiscal year primarily to our positioning of the portfolio in certain industry sectors. Highlights in this regard included: - - We had only minimal exposure to the weak utility industry, which suffered as credit ratings for numerous companies were downgraded, with some falling to high yield status from investment-grade. Our stance was based on our perception of the industry's poor pricing environment and lack of confidence in the energy-trading business that had been widely embraced, only to be discredited in the wake of Enron's demise. - - Our exposure to diversified telecom service providers did not include some of the sector's worst-perfoming securities. - - In four sectors--aerospace, miscellaneous services, publishing and health care--successful security selection was magnified by our above-market allocation. Relative results were least favorable in three sectors: competitive local-exchange telecom carriers, wireless telecom service providers and metals/mining. In each case, our above-market allocation exacerbated the negative impact of security selection. OUTLOOK: STILL CAUTIOUSLY OPTIMISTIC Looking ahead, our cautiously optimistic view on the prospects for high yield is unchanged. Our caution stems from the shadows of economic and geopolitical uncertainty overhanging the investment climate these days. Financial markets do not enjoy much near-term visibility, in our opinion. Assuming a lack of exogenous shocks like war or further terrorist attacks, we expect the next substantive move in the U.S. economy to be one of renewed strength. Any such renewal would likely bode well for high yield. Its timing, however, is far from clear. A bright spot worth noting is that our analysis indicates that yield spreads for bonds rated B and BB (which account for the vast majority of high yield's investable universe) remain at historically wide levels versus U.S. Treasury debt. Along with desirably high coupon yields, we believe that this could help to cushion the high yield market against significant downside risk. Given the overall climate, we continue to position the Fund fairly defensively. Compared to broad market indices like SSBHYMI, we are thus overweighting the gaming, energy, food/beverage/ bottling, consumer products and health care industry sectors; and underweighting telecom, finance, utilities and airlines. We appreciate your interest in the Fund and would be pleased to respond to your questions or comments. Any questions regarding net asset value, performance, dividends, portfolio management or allocations should be directed to Credit Suisse Asset Management at (800) 293-1232. All other inquiries regarding account information, requests for the latest financial information or other reports should be directed to the Fund's Shareholder Servicing Agent at (800) 331-1710. Sincerely yours, /s/ Richard J. Lindquist Richard J. Lindquist President and Chief Investment Officer** /s/ Laurence R. Smith Laurence R. Smith Interim Chief Executive Officer FROM CREDIT SUISSE ASSET MANAGEMENT, LLC ("CSAM"): We wish to remind shareholders whose shares are registered in their own name that they automatically participate in the Fund's dividend reinvestment program known as the Investlink(SM) Program (the "Program"). The Program can be of value to shareholders in maintaining their proportional ownership interest in the Fund in an easy and convenient way. A shareholder whose shares are held in the name of a broker/dealer or nominee should contact the Fund's Transfer Agent for details about participating in the Program. The Program is described on pages 23 through 25 of this report. * The Salomon Smith Barney High-Yield Market Index is a broad-based, unmanaged index of high yield securities. Investors cannot invest directly in an index. ** Richard J. Lindquist, who is a Managing Director of CSAM, is primarily responsible for management of the Fund's assets. He has served in such capacity since December 8, 2000. Mr. Lindquist joined CSAM on May 1, 1995 as a result of Credit Suisse Group's acquisition of CS First Boston Investment Management Corporation ("CSFBIM"). Prior to joining CSAM and beginning in July, 1989, he held various offices at CSFBIM. Mr. Lindquist also is President and Chief Investment Officer of Credit Suisse Asset Management Income Fund, Inc. CREDIT SUISSE HIGH YIELD BOND FUND (UNAUDITED) TOP TEN HOLDINGS (AS A % OF NET ASSETS AS OF 10/31/2002) SECURITY DESCRIPTION 1. Transocean Sedco Forex, Inc. 2.57% 9.500% 12/15/08 2. AMC Entertainment, Inc. 2.44% 9.500% 03/15/09 3. Alaris Medical, Inc. 2.36% 0.000% 08/01/03 4. Packaging Corp. of America 2.22% 9.625% 04/01/09 5. Luiginos, Inc. 2.22% 10.000% 02/01/06 6. Triton PCS, Inc. 2.13% 0.000% 05/01/03 7. Echostar DBS Corp. 2.11% 9.375% 02/01/09 8. Transdigm, Inc. 1.96% 10.375% 12/01/08 9. Big 5 Corp. 1.95% 10.875% 11/15/07 10. Kinetic Concepts, Inc. 1.93% 9.625% 11/01/07
CREDIT QUALITY BREAKDOWN (AS A % OF TOTAL INVESTMENTS AS OF 10/31/2002) A/A 2.1% BB/Ba 11.4 B/B 60.3 CCC/Caa 17.7 CC/Ca 2.8 D 0.2 NR 5.4 ----- Subtotal 99.9 Equities and Other 0.1 ----- Total 100.0% =====
1 CREDIT SUISSE HIGH YIELD BOND FUND--SCHEDULE OF INVESTMENTS OCTOBER 31, 2002
PRINCIPAL AMOUNT VALUE --------------- --------------- CORPORATE BONDS--137.4% AEROSPACE--3.2% Condor Systems, Inc., Company Guaranteed (Callable 05/01/04 @ $105.94) 11.875%, 05/01/09 ** $ 2,097,000 $ 471,825 Fairchild Corp., Company Guaranteed (Callable 04/15/04 @ $105.38) 10.750%, 04/15/09 1,750,000 1,706,250 Transdigm, Inc., Company Guaranteed, Senior Subordinated Notes (Callable 12/01/03 @ $105.19) 10.375%, 12/01/08 3,500,000 3,552,500 --------------- 5,730,575 --------------- AIRLINES--1.2% American Airlines, Inc., Series 01-2, Pass Thru Certificates 7.800%, 04/01/08 1,000,000 680,914 Amtran Inc., Company Guaranteed (Callable 12/15/03 @ $104.81) 9.625%, 12/15/05 3,500,000 1,417,500 --------------- 2,098,414 --------------- AUTOMOBILE MANUFACTURING/VEHICLE PARTS--4.5% ADV Accessory Systems, Series B, Company Guaranteed, Senior Subordinated Notes (Callable 01/06/03 @ $104.88) 9.750%, 10/01/07 700,000 626,500 American Axle & Manufacturing, Inc., Company Guaranteed (Callable 03/01/04 @ $104.88) 9.750%, 03/01/09 1,750,000 1,872,500 Cambridge Industries Liquidating Trust *, ^^ 774,557 465 Collins & Aikman Products Co., Global Company Guaranteed (Callable 12/31/06 @ $105.38) 10.750%, 12/31/11 1,000,000 930,000 Collins & Aikman Products Corp., Company Guaranteed, Senior Subordinated Notes (Callable 11/12/02 @ $103.83) 11.500%, 04/15/06 1,500,000 1,248,750 J. L. French Automotive Castings, Inc., Series B, Company Guaranteed (Callable 06/01/04 @ $105.75) 11.500%, 06/01/09 3,547,000 1,259,185 Key Plastics Holdings, Inc., Series B, Company Guaranteed (Callable 11/12/02 @ $105.12) 10.250%, 03/15/07 **, ^^ 250,000 1,875 Metaldyne Corp., Rule 144A, Private Placement, Senior Subordinated Notes (Callable 06/15/07 @ $105.50) 11.000%, 06/15/12 ++ 1,200,000 858,000 Roller Bearing Co. America, Inc., Series B, Company Guaranteed (Callable 11/12/02 @ $104.81) 9.625%, 06/15/07 $ 1,150,000 $ 1,075,250 Venture Holdings Trust, Company Guaranteed, Senior Notes (Callable 06/01/03 @ $105.50) 11.000%, 06/01/07 1,250,000 281,250 --------------- 8,153,775 --------------- BROADBAND--0.1% Level 3 Communications, Inc., Senior Notes (Callable 05/01/03 @ $104.56) 9.125%, 05/01/08 350,000 199,500 Ono Finance PLC, Private Placement, Subordinated Debentures 0.000%, 05/31/09 5,980 60 --------------- 199,560 --------------- BROADCAST/OUTDOOR--2.2% Interep National Radio Sales, Inc., Series B, Company Guaranteed, Senior Notes (Callable 07/01/03 @ $105.00) 10.000%, 07/01/08 1,000,000 826,250 Paxson Communications Corp., Global Company Guaranteed, Senior Discount Notes (Callable 01/15/06 @ $106.12) 0.000%, 01/15/06 + 5,150,000 2,549,250 Young Broadcasting, Inc., Global Company Guaranteed (Callable 03/01/06 @ $105.00) 10.000%, 03/01/11 680,000 629,000 --------------- 4,004,500 --------------- BUILDING PRODUCTS--1.7% AAF-McQuay, Inc., Senior Notes 8.875%, 02/15/03 1,000,000 1,010,000 Atrium Companies, Inc., Company Guaranteed, Senior Subordinated Notes (Callable 05/01/04 @ $105.25) 10.500%, 05/01/09 1,000,000 923,750 Building Materials Corp., Series B, Senior Notes (Callable 11/12/02 @ $104.31) 8.625%, 12/15/06 1,500,000 1,147,500 --------------- 3,081,250 --------------- CABLE--4.8% @Entertainment, Inc., Series B, Senior Discount Notes (Callable 02/01/04 @ $108.75) 0.000%, 02/01/04 + 2,200,000 385,000 Adelphia Communications Corp., Senior Notes 10.875%, 10/01/10 ** 3,000,000 1,005,000 Century Communications Corp., Series B, Senior Discount Notes 0.000%, 03/15/03 ** 1,000,000 195,000 SEE NOTES TO FINANCIAL STATEMENTS. 2 PRINCIPAL AMOUNT VALUE --------------- --------------- Charter Communications Holdings LLC, Senior Notes (Callable 04/01/04 @ $104.31) 8.625%, 04/01/09 $ 3,000,000 $ 1,305,000 Coaxial Communications/Phoenix, Company Guaranteed, Senior Notes (Callable 12/06/02 @ $105.00) 10.000%, 08/15/06 1,050,000 899,062 CSC Holdings, Inc., Senior Notes 7.250%, 07/15/08 400,000 331,000 CSC Holdings, Inc., Senior Subordinated Debentures (Callable 02/15/03 @ $104.80) 9.875%, 02/15/13 1,000,000 775,000 CSC Holdings, Inc., Series B, Senior Notes 7.625%, 04/01/11 1,500,000 1,233,750 DIVA Systems Corp., Series B, Senior Discount Notes (Callable 03/01/03 @ $106.31) 12.625%, 03/01/08 ** 1,750,000 26,250 Insight Communications Company, Inc., Senior Discount Notes (Callable 02/15/06 @ $106.12) 12.250%, 02/15/11 + 2,000,000 770,000 James Cable Partners LP, Series B, Senior Notes (Callable 12/06/02 @ $102.69) 10.750%, 08/15/04 500,000 247,500 Mediacom LLC Capital Corp., Senior Notes (Callable 01/15/06 @ $104.75) 9.500%, 01/15/13 2,000,000 1,460,000 NTL Communications Corp., Senior Notes (Callable 10/01/03 @ $105.75) 11.500%, 10/01/08 ** 1,650,000 123,750 --------------- 8,756,312 --------------- CAPITAL GOODS--1.6% Amtrol, Inc., Senior Subordinated Notes (Callable 11/12/02 @ $105.31) 10.625%, 12/31/06 450,000 227,250 International Wire Group, Inc., Senior Subordinated Notes (Callable 11/12/02 @ $101.96) 11.750%, 06/01/05 1,000,000 600,000 Jordan Industries, Inc., Series D, Senior Notes (Callable 12/09/02 @ $105.19) 10.375%, 08/01/07 3,475,000 1,980,750 --------------- 2,808,000 --------------- CHEMICALS--6.0% Acetex Corp., Global Senior Notes (Callable 08/01/05 @ $105.44) 10.875%, 08/01/09 1,000,000 1,055,000 Buckeye Technologies, Inc., Senior Subordinated Notes (Callable 12/09/02 @ $102.83) 8.500%, 12/15/05 1,000,000 825,000 Equistar Chemicals LP/ Equistar Funding Corp., Global Company Guaranteed 10.125%, 09/01/08 $ 1,000,000 $ 905,000 Ferro Corp., Senior Notes 9.125%, 01/01/09 1,000,000 1,049,007 Huntsman International Holdings LLC, Senior Discount Notes (Callable 07/01/04 @ $106.69) 0.000%, 12/31/09 9,445,000 1,936,225 Lyondell Chemical Co., Global Company Guaranteed (Callable 12/15/05 @ $104.75) 9.500%, 12/15/08 1,400,000 1,316,000 Millennium America, Inc., Rule 144A, Private Placement, Senior Notes 9.250%, 06/15/08 ++ 750,000 757,500 Mississippi Chemical Corp., Bonds 7.250%, 11/15/17 1,250,000 231,250 PCA LLC/PCA Finance Corp., Rule 144A, Private Placement, Senior Notes 11.875%, 08/01/09 ++ 1,000,000 1,000,000 Terra Industries, Inc., Series B, Senior Notes (Callable 12/09/02 @ $100.00) 10.500%, 06/15/05 1,500,000 1,282,500 United Industries Corp., Senior Subordinated Notes (Callable 04/01/04 @ $104.94) 9.875%, 04/01/09 425,000 423,937 --------------- 10,781,419 --------------- COMPETITIVE LOCAL EXCHANGE CARRIER (CLEC)--1.1% Quest Corp., Notes 5.625%, 11/15/08 900,000 724,500 RCN Corp., Senior Discount Notes (Callable 11/12/02 @ $105.56) 11.125%, 10/15/07 6,485,000 1,070,025 RCN Corp., Senior Notes (Callable 12/09/02 @ $105.00) 10.000%, 10/15/07 1,000,000 175,000 --------------- 1,969,525 --------------- CONSUMER PRODUCTS/TOBACCO--3.2% American Greetings Corp., Global Senior Subordinated Notes (Callable 07/15/05 @ $105.88) 11.750%, 07/15/08 1,150,000 1,239,125 Diamond Brands Operating, Company Guaranteed, Senior Subordinated Notes (Callable 04/15/03 @ $105.06) 10.125%, 04/15/08 ** 3,097,000 30,970 Packaged Ice, Inc., Series B, Company Guaranteed, Senior Unsecured Notes (Callable 12/09/02 @ $104.88) 9.750%, 02/01/05 1,000,000 745,000 SEE NOTES TO FINANCIAL STATEMENTS. 3 PRINCIPAL AMOUNT VALUE --------------- --------------- Revlon Consumer Products Corp., Global Company Guaranteed 12.000%, 12/01/05 $ 1,750,000 $ 1,540,000 Samsonite Corp., Senior Subordinated Notes (Callable 06/15/03 @ $105.38) 10.750%, 06/15/08 1,550,000 1,170,250 Scotts Co., Company Guaranteed (Callable 01/15/04 @ $104.31) 8.625%, 01/15/09 1,000,000 1,045,000 Styling Technology Corp., Company Guaranteed, Senior Subordinated Notes (Callable 07/01/03 @ $105.44) 10.875%, 07/01/08 **, ^^ 1,500,000 90,000 --------------- 5,860,345 --------------- CONTAINERS--3.4% Berry Plastics Corp., Rule 144A, Private Placement, Senior Subordinated Notes (Callable 07/15/07 @ $105.38) 10.750%, 07/15/12 ++ 1,100,000 1,149,500 Owens-Brockway Glass Containers, Global Company Guaranteed (Callable 02/15/06 @ $104.44) 8.875%, 02/15/09 1,000,000 1,032,500 Packaging Corp. of America, Company Guaranteed (Callable 04/01/04 @ $104.81) 9.625%, 04/01/09 3,700,000 4,023,750 --------------- 6,205,750 --------------- DIVERSIFIED TELECOMMUNICATIONS--0.7% Gray Television, Inc., Rule 144A, Senior Subordinated Notes (Callable 12/15/06 @ $104.62) 9.250%, 12/15/11 ++ 1,000,000 1,057,500 Primus Telecommunications Group, Inc., Senior Notes (Callable 01/15/04 @ $105.62) 11.250%, 01/15/09 597,000 271,635 --------------- 1,329,135 --------------- ENERGY - OTHER--2.0% Hanover Equipment Trust, Rule 144A, Private Placement, Senior Secured Notes (Callable 09/01/05 @ $104.25) 8.500%, 09/01/08 ++ 550,000 525,250 Swift Energy Co., Senior Subordinated Notes (Callable 08/01/04 @ $105.12) 10.250%, 08/01/09 2,000,000 1,970,000 Trico Marine Services, Inc., Global Company Guaranteed (Callable 05/15/07 @ $104.44) 8.875%, 05/15/12 1,500,000 1,177,500 --------------- 3,672,750 --------------- ENVIRONMENTAL SERVICES--1.8% Allied Waste North America, Series B, Company Guaranteed (Callable 08/01/04 @ $105.00) 10.000%, 08/01/09 $ 3,400,000 $ 3,281,000 --------------- FINANCE - OTHER--3.2% AmeriCredit Corp., Company Guaranteed (Callable 04/15/03 @ $104.94) 9.875%, 04/15/06 500,000 407,500 Asat Finance LLC, Company Guaranteed (Callable 11/01/03 @ $106.25) 12.500%, 11/01/06 3,250,000 1,966,250 Ocwen Financial Corp., Notes 11.875%, 10/01/03 3,445,000 3,462,225 --------------- 5,835,975 --------------- FOOD PROCESSORS/BEVERAGE/BOTTLING--5.6% Archibald Candy Corp., Company Guaranteed, Senior Secured Notes (Callable 12/09/02 @ $102.56) 10.250%, 07/01/04 ** 795,000 393,525 Aurora Foods, Inc., Series B, Senior Subordinated Notes (Callable 07/01/03 @ $106.38) 8.750%, 07/01/08 1,500,000 660,000 Burns Phillip Capital Property, Ltd., Rule 144A, Private Placement, Company Guaranteed (Callable 07/15/07 @ $104.88) 9.750%, 07/15/12 ++ 1,000,000 985,000 Curtice Burns Food, Inc., Company Guaranteed, Senior Subordinated Notes (Callable 11/01/03 @ $105.94) 11.875%, 11/01/08 1,000,000 1,040,000 Fleming Companies, Inc., Series D, Global Company Guaranteed (Callable 12/09/02 @ $105.31) 10.625%, 07/31/07 3,870,000 2,476,800 Land O' Lakes, Inc., Global Senior Notes (Callable 11/15/06 @ $104.38) 8.750%, 11/15/11 1,100,000 610,500 Luiginos, Inc., Senior Subordinated Notes (Callable 02/01/03 @ $105.00) 10.000%, 02/01/06 4,000,000 4,020,000 --------------- 10,185,825 --------------- GAMING--13.8% Ameristar Casinos, Inc., Global Company Guaranteed (Callable 02/15/06 @ $105.38) 10.750%, 02/15/09 1,500,000 1,627,500 Argosy Gaming Co., Company Guaranteed (Callable 06/01/04 @ $105.38) 10.750%, 06/01/09 3,000,000 3,315,000 Aztar Corp., Global Senior Subordinated Notes (Callable 08/15/06 @ $104.50) 9.000%, 08/15/11 1,550,000 1,553,875 SEE NOTES TO FINANCIAL STATEMENTS. 4 PRINCIPAL AMOUNT VALUE --------------- --------------- Boyd Gaming Corp., Company Guaranteed (Callable 08/01/05 @ $104.62) 9.250%, 08/01/09 $ 1,200,000 $ 1,305,000 Circus Circus & Eldorado, Rule 144A, Private Placement, First Mortgage (Callable 03/01/07 @ $105.06) 10.125%, 03/01/12 ++ 1,000,000 985,000 Hard Rock Hotel, Inc., Series B, Senior Subordinated Notes (Callable 12/09/02 @ $104.62) 9.250%, 04/01/05 1,895,000 1,880,787 Hollywood Casino Corp., Company Guaranteed (Callable 05/01/03 @ $107.00) 11.250%, 05/01/07 3,000,000 3,255,000 Hollywood Casino Corp., Company Guaranteed (Callable 08/01/03 @ $106.50) 1.000%, 08/01/06 2,000,000 2,070,000 Isle of Capri Casinos, Inc., Company Guaranteed (Callable 04/15/04 @ $104.38) 8.750%, 04/15/09 500,000 502,500 Jazz Casino Co. LLC, Senior Notes 4.548%, 12/30/02 # 333,014 328,019 Kerzner International, Ltd., Global Company Guaranteed, Senior Subordinated Notes (Callable 08/15/06 @ $104.44) 8.875%, 08/15/11 750,000 757,500 Majestic Investor Holdings, Company Guaranteed, Senior Secured Notes (Callable 11/30/05 @ $105.83) 11.653%, 11/30/07 1,400,000 1,226,750 Mohegan Tribal Gaming, Global Senior Subordinated Notes (Callable 07/01/06 @ $104.19) 8.375%, 07/01/11 1,000,000 1,050,000 Penn National Gaming, Inc., Series B, Global Company Guaranteed, Senior Subordinated Notes (Callable 03/01/05 @ $105.56) 11.125%, 03/01/08 1,250,000 1,351,563 Penninsula Gaming LLC, Series B, Company Guaranteed, Senior Subordinated Notes (Callable 07/01/03 @ $108.00) 12.250%, 07/01/06 594,000 596,970 Riviera Holdings Corp., Rule 144A, Private Placement, Company Guaranteed (Callable 06/15/06 @ $105.50) 11.000%, 06/15/10 ++ 1,110,000 1,018,425 Station Casinos, Inc., Global Senior Notes (Callable 02/15/05 @ $103.33) 8.375%, 02/15/08 250,000 265,000 Windsor Woodmont Black Hawk, Series B, First Mortgage (Callable 12/06/02 @ $113.00) 13.000%, 03/15/05 ** 2,256,000 1,477,680 Wynn Las Vegas LLC, Second Mortgage Note (Callable 11/01/06 @ $112.00) 12.000%, 11/01/10 $ 500,000 $ 472,500 --------------- 25,039,069 --------------- HEALTHCARE FACILITIES/SUPPLIES--8.4% Alaris Medical, Inc., Senior Discount Notes (Callable 08/01/03 @ $105.56) 0.000%, 08/01/03 + 5,088,000 4,273,920 DaVita, Inc., Rule 144A, Private Placement 7.000%, 05/15/09 ++ 3,000,000 2,917,500 Extendicare Health Services, Inc., Company Guaranteed (Callable 12/15/02 @ $104.67) 9.350%, 12/15/07 1,000,000 865,000 Fisher Scientific International, Inc., Global Senior Subordinated Notes (Callable 05/01/07 @ $104.06) 8.125%, 05/01/12 1,000,000 1,020,000 Kinetic Concepts, Inc., Series B, Company Guaranteed (Callable 11/12/02 @ $104.81) 9.625%, 11/01/07 3,500,000 3,482,500 Magellan Health Services, Inc., Rule 144A, Private Placement, Senior Notes (Callable 11/15/05 @ $104.69) 9.375%, 11/15/07 ++ 950,000 612,750 Magellan Health Services, Inc., Senior Subordinated Notes (Callable 02/15/03 @ $104.50) 9.000%, 02/15/08 1,150,000 201,250 Medquest, Inc., Rule 144A, Private Placement, Senior Subordinated Notes (Callable 08/15/07 @ $105.94) 11.875%, 08/15/12 ++ 1,000,000 1,000,000 Senior Housing Properties Trust, Senior Notes 8.625%, 01/15/12 800,000 788,000 --------------- 15,160,920 --------------- HOME BUILDERS--1.9% KB Home, Senior Subordinated Notes 8.625%, 12/15/08 850,000 858,500 KB Home, Senior Subordinated Notes (Callable 02/15/06 @ $104.75) 9.500%, 02/15/11 1,000,000 1,042,500 Toll Corp., Senior Subordinated Notes (Callable 12/01/06 @ $104.12) 8.250%, 12/01/11 700,000 693,000 WCI Communities, Inc., Global Company Guaranteed, Senior Subordinated Notes (Callable 05/01/07 @ $104.56) 9.125%, 05/01/12 1,000,000 832,500 --------------- 3,426,500 --------------- SEE NOTES TO FINANCIAL STATEMENTS. 5 PRINCIPAL AMOUNT VALUE --------------- --------------- INDUSTRIAL - OTHER--2.7% Actuant Corp., Company Guaranteed, Senior Subordinated Notes (Callable 05/01/07 @ $102.17) 13.000%, 05/01/09 $ 2,325,000 $ 2,673,750 Amerigas Partners LP Eagle Finance Corp., Global Senior Notes (Callable 05/20/06 @ $104.44) 8.875%, 05/20/11 1,000,000 1,025,000 GSI Group, Inc., Company Guaranteed, Senior Subordinated Notes (Callable 11/12/02 @ $105.19) 10.250%, 11/01/07 1,000,000 705,000 International Utility Structures, Inc., Yankee Senior Subordinated Notes (Callable 02/01/03 @ $105.38) 10.750%, 02/01/08 1,020,500 464,328 --------------- 4,868,078 --------------- LEISURE--4.9% AMC Entertainment, Inc., Senior Subordinated Notes (Callable 11/12/02 @ $104.75) 9.500%, 03/15/09 4,950,000 4,417,875 Bluegreen Corp., Company Guaranteed, Senior Secured Notes (Callable 04/01/03 @ $105.25) 10.500%, 04/01/08 1,000,000 850,000 Booth Creek Ski Holdings, Inc., Series B, Company Guaranteed (Callable 12/06/02 @ $106.25) 12.500%, 03/15/07 1,000,000 890,000 Icon Health & Fitness, Inc., Rule 144A, Private Placement, Company Guaranteed (Callable 04/01/07 @ $105.62) 11.250%, 04/01/12 ++ 1,000,000 905,000 Regal Cinemas, Inc., Series B, Global Company Guaranteed (Callable 02/01/07 @ $104.69) 9.375%, 02/01/12 1,100,000 1,155,000 Six Flags, Inc., Global Senior Notes (Callable 02/01/06 @ $104.44) 8.875%, 02/01/10 800,000 704,000 --------------- 8,921,875 --------------- LODGING--2.3% Extended Stay America, Inc., Senior Subordinated Notes (Callable 03/15/03 @ $104.58) 9.150%, 03/15/08 3,000,000 2,820,000 Host Marriot Corp., Series A, Company Guaranteed (Callable 11/12/02 @ $103.94) 7.875%, 08/01/05 500,000 492,500 John Q. Hammons Hotels, Series B, Global Notes, First Mortgage (Callable 05/15/07 @ $104.44) 8.875%, 05/15/12 800,000 774,000 --------------- 4,086,500 --------------- MEDIA--0.8% Charter Communications Holdings LLC, Senior Discount Notes (Callable 04/01/04 @ $104.96) 0.000%, 04/01/11 + $ 4,500,000 $ 1,417,500 --------------- METALS & MINING--2.4% AEI Resources LLC/Horizon Finance Corp., Company Guaranteed, Senior Secured Notes (Callable 12/06/02 @ $100.00) 11.750%, 05/08/09 1,400,000 49,000 Great Lakes Carbon Corp., Series B, Company Guaranteed, Senior Subordinated Notes (Callable 05/15/03 @ $105.12) 10.250%, 05/15/08 4,260,000 2,790,300 Ormet Corp., Rule 144A, Private Placement, Company Guaranteed, Senior Secured Notes (Callable 08/15/03 @ $105.50) 11.000%, 08/15/08 ++ 1,035,000 605,475 UCAR Finance, Inc., Global Company Guaranteed (Callable 02/15/07 @ $105.12) 10.250%, 02/15/12 1,000,000 675,000 WCI Steel, Inc., Series B, Senior Secured Notes (Callable 12/09/02 @ $103.33) 10.000%, 12/01/04 500,000 122,500 --------------- 4,242,275 --------------- OIL EQUIPMENT--3.4% Grey Wolf, Inc., Senior Notes (Callable 11/12/02 @ $104.44) 8.875%, 07/01/07 1,500,000 1,537,500 Transocean, Inc., Notes 9.500%, 12/15/08 3,750,000 4,648,958 --------------- 6,186,458 --------------- PAPER & FOREST PRODUCTS--3.6% Appleton Papers, Inc., Series B, Global Company Guaranteed (Callable 12/15/05 @ $106.25) 12.500%, 12/15/08 1,250,000 1,306,250 Box USA Holdings, Series B, Senior Secured Notes (Callable 12/06/02 @ $104.00) 12.000%, 06/01/06 1,250,000 1,300,000 Fonda Group, Inc., Series B, Senior Subordinated Notes (Callable 11/12/02 @ $104.75) 9.500%, 03/01/07 700,000 493,500 Riverwood International Corp., Company Guaranteed (Callable 12/06/02 @ $104.08) 10.875%, 04/01/08 3,300,000 3,366,000 --------------- 6,465,750 --------------- SEE NOTES TO FINANCIAL STATEMENTS. 6 PRINCIPAL AMOUNT VALUE --------------- --------------- PHARMACEUTICALS--0.4% aaiPharma, Inc., Global Company Guaranteed (Callable 04/01/06 @ 105.50) 11.000%, 04/01/10 $ 750,000 $ 723,750 --------------- PUBLISHING--3.3% Hollinger International Publishing, Inc., Company Guaranteed, Senior Subordinated Notes (Callable 12/06/02 @ $104.62) 9.250%, 03/15/07 750,000 757,500 Liberty Group Operating, Inc., Private Placement, Company Guaranteed (Callable 02/01/03 @ 104.69) 9.375%, 02/01/08 3,000,000 2,557,500 Liberty Group Publishing, Debentures (Callable 02/01/03 @ $105.81) 0.000%, 02/01/09 + 1,774,000 895,870 Phoenix Color Corp., Company Guaranteed (Callable 02/01/04 @ 105.19) 10.375%, 02/01/09 2,267,000 1,827,769 --------------- 6,038,639 --------------- RESTAURANTS--2.8% American Restaurant Group, Inc., Series D, Company Guaranteed (Callable 11/01/04 @ $105.75) 11.500%, 11/01/06 1,329,000 1,169,520 CKE Restaurants, Inc., Company Guaranteed (Callable 05/01/04 @ $104.56) 9.125%, 05/01/09 500,000 407,500 Denny's Corp., Senior Notes (Callable 01/15/03 @ $105.62) 11.250%, 01/15/08 1,850,000 1,415,250 Hockey Co. & Sports Maska, Inc., Senior Secured, Global Notes, Units (Callable 04/15/06 @ $105.62) 11.250%, 04/15/09 1,000,000 960,000 New World Restaurant Group, Inc., Rule 144A, Private Placement, Company Guaranteed (Callable 12/06/02 @ $100.00) 18.000%, 06/15/03 ++, ^^ 750,000 712,500 Romacorp, Inc., Company Guaranteed, Senior Notes 12.000%, 07/01/06 870,000 450,225 --------------- 5,114,995 --------------- RETAIL - FOOD & DRUG--1.3% Herbalife International, Inc., Rule 144A, Private Placement, Senior Subordinated Notes (Callable 07/15/06 @ $105.88) 11.750%, 07/15/10 ++ 1,000,000 920,000 Pathmark Stores, Inc., Global Company Guaranteed, Senior Subordinated Notes (Callable 02/01/07 @ $104.38) 8.750%, 02/01/12 1,100,000 957,000 Stater Brothers Holdings, Inc., Senior Notes (Callable 08/15/03 @ $105.38) 10.750%, 08/15/06 $ 500,000 $ 507,500 --------------- 2,384,500 --------------- RETAIL STORES--6.0% Advance Holding Corp., Series B, Senior Discount Debenture (Callable 04/15/03 @ $106.44) 0.000%, 04/15/09 + 500,000 510,000 Advance Stores Company, Inc., Global Company Guaranteed (Callable 04/15/03 @ $105.12) 10.250%, 04/15/08 1,000,000 1,050,000 Big 5 Corp., Senior Notes (Callable 11/15/02 @ $105.47) 10.875%, 11/15/07 3,500,000 3,535,000 J. Crew Operating Corp., Senior Subordinated Notes (Callable 11/12/02 @ $105.19) 10.375%, 10/15/07 2,000,000 1,460,000 Leslie's Poolmart, Senior Notes (Callable 12/06/02 @ $102.59) 10.375%, 07/15/04 1,200,000 1,120,500 Michaels Stores, Inc., Senior Notes (Callable 07/01/05 @ $104.62) 9.250%, 07/01/09 900,000 954,000 Office Depot, Inc., Global Senior Subordinated Notes 10.000%, 07/15/08 1,000,000 1,117,500 Pep Boys - Manny, Moe & Jack, Series MTNB, Notes 6.920%, 07/07/06 1,150,000 1,072,375 --------------- 10,819,375 --------------- SATELLITE--3.7% EchoStar DBS Corp., Senior Notes (Callable 02/01/04 @ $104.69) 9.375%, 02/01/09 3,800,000 3,819,000 PanAmSat Corp., Rule 144A, Private Placement, Company Guaranteed (Callable 02/01/07 @ $104.25) 8.500%, 02/01/12 ++ 500,000 452,500 Pegasus Communications Corp., Series B, Senior Notes (Callable 11/12/02 @ $102.41) 9.625%, 10/15/05 4,000,000 1,640,000 Pegasus Communications Corp., Series B, Senior Notes (Callable 12/01/02 @ $104.88) 9.750%, 12/01/06 2,000,000 820,000 --------------- 6,731,500 --------------- SECONDARY OIL & GAS PRODUCERS--8.7% Abraxas Petroleum Corp., Series A, Company Guaranteed, Senior Subordinated Notes (Callable 12/06/02 @ $100.00) 11.500%, 11/01/04 1,995,000 847,875 SEE NOTES TO FINANCIAL STATEMENTS. 7 PRINCIPAL AMOUNT VALUE --------------- --------------- Chesapeake Energy Corp., Global Company Guaranteed, Senior Notes (Callable 04/01/06 @ $104.06) 8.125%, 04/01/11 $ 2,500,000 $ 2,562,500 Continental Global Group, Inc., Senior Notes (Callable 11/12/02 @ $105.50) 11.000%, 04/01/07 2,000,000 1,110,000 Continental Resources, Inc., Company Guaranteed, Senior Subordinated Notes (Callable 08/01/03 @ $105.12) 10.250%, 08/01/08 1,200,000 1,050,000 Contour Energy Co., Company Guaranteed 14.000%, 04/15/03 950,000 983,250 Denbury Management, Inc., Company Guaranteed, Senior Subordinated Notes (Callable 03/01/03 @ $104.50) 9.000%, 03/01/08 1,250,000 1,278,125 Grey Wolf, Inc., Series C, Company Guaranteed (Callable 11/12/02 @ $104.44) 8.875%, 07/01/07 1,000,000 1,012,500 Magnum Hunter Resources, Inc., Global Company Guaranteed (Callable 03/15/07 @ $104.80) 9.600%, 03/15/12 750,000 791,250 Mariner Energy, Inc., Series B, Senior Subordinated Notes (Callable 11/12/02 @ $102.62) 10.500%, 08/01/06 3,100,000 2,945,000 Mission Resources Corp., Series C, Global Company Guaranteed (Callable 12/06/02 @ $105.44) 10.875%, 04/01/07 650,000 393,250 Southwest Royalties, Inc., Company Guaranteed, Senior Secured Notes (Callable 11/12/02 @ $100.00) 10.500%, 12/31/02 ^^ 1,021,000 1,021,000 Wiser Oil Co., Company Guaranteed, Senior Subordinated Notes (Callable 12/09/02 @ $104.75) 9.500%, 05/15/07 2,297,000 1,774,432 --------------- 15,769,182 --------------- SERVICES - OTHER--11.0% APCOA, Inc., Company Guaranteed, Senior Subordinated Notes (Callable 03/15/03 @ $104.62) 9.250%, 03/15/08 700,000 186,375 Applied Extrusion Technologies, Inc., Series B, Company Guaranteed (Callable 07/01/06 @ $105.38) 10.750%, 07/01/11 1,000,000 605,000 Chukchansi Economic Development Authority, Rule 144A, Private Placement, Senior Notes (Callable 10/01/06 @ $113.00) 14.500%, 06/15/09 ++ 2,000,000 1,845,000 Diamond Triumph Auto, Company Guaranteed (Callable 04/01/03 @ $104.62) 9.250%, 04/01/08 $ 400,000 $ 338,000 Great Lakes Dredge & Dock, Company Guaranteed, Senior Subordinated Notes (Callable 08/15/03 @ $105.62) 11.250%, 08/15/08 2,500,000 2,590,625 IESI Corp., Rule 144A, Private Placement, Senior Subordinated Notes (Callable 06/15/07 @ $105.12) 10.250%, 06/15/12 ++ 2,000,000 1,830,000 Iron Mountain, Inc., Company Guaranteed (Callable 04/01/06 @ $104.31) 8.625%, 04/01/13 1,000,000 1,047,500 La Petite Academy, Inc., Series B, Company Guaranteed (Callable 05/15/03 @ $105.00) 10.000%, 05/15/08 1,300,000 682,500 MDP Acquisitions PLC, Rule 144A, Private Placement, Senior Notes (Callable 10/01/07 @ $104.81) 9.625%, 10/01/12 ++ 750,000 772,500 Neff Corp., Company Guaranteed, Senior Subordinated Notes (Callable 06/01/03 @ $105.12) 10.250%, 06/01/08 2,000,000 670,000 Rent-A-Center, Inc., Series D, Global Company Guaranteed (Callable 08/15/03 @ $105.50) 11.000%, 08/15/08 3,250,000 3,477,500 Salton, Inc., Global Senior Subordinated Notes (Callable 04/15/05 @ $106.12) 12.250%, 04/15/08 1,200,000 1,098,000 Volume Services America, Inc., Company Guaranteed, Senior Subordinated Notes (Callable 03/01/04 @ $105.62) 11.250%, 03/01/09 2,000,000 1,910,000 Wesco Distribution, Inc., Global Company Guaranteed, Senior Subordinated Notes (Callable 06/01/03 @ $104.56) 9.125%, 06/01/08 500,000 390,000 Worldwide Flight Services, Inc., Series B, Company Guaranteed, Senior Subordinated Notes (Callable 08/15/03 @ $106.12) 12.250%, 08/15/07 2,250,000 2,466,562 --------------- 19,909,562 --------------- TECHNOLOGY--1.0% Ampex Corp., Series B, Secured Notes (Callable 12/09/02 @ $100.00) 12.000%, 08/15/08 1,583,500 237,525 Lucent Technologies, Inc., Notes 7.250%, 07/15/06 1,000,000 505,000 SEE NOTES TO FINANCIAL STATEMENTS. 8 PRINCIPAL AMOUNT VALUE --------------- --------------- SCG Holding & Semiconductor Co., Company Guaranteed (Callable 08/01/04 @ $106.00) 12.000%, 08/01/09 $ 2,575,000 $ 965,625 --------------- 1,708,150 --------------- TEXTILE/APPAREL/SHOE MANUFACTURING--1.1% BGF Industries, Inc., Series B, Senior Subordinated Notes (Callable 01/15/04 @ $105.25) 10.250%, 01/15/09 3,347,000 1,690,235 Levi Strauss & Co., Global Senior Notes (Callable 01/15/05 @ $105.81) 11.625%, 01/15/08 250,000 246,250 --------------- 1,936,485 --------------- TRANSPORTATION/OTHER--1.8% North American Van Lines, Inc., Global Company Guaranteed (Callable 12/01/04 @ $106.69) 13.375%, 12/01/09 2,500,000 2,462,500 Ultrapetrol (Bahamas), Ltd., First Mortgage 10.500%, 04/01/08 894,000 719,670 --------------- 3,182,170 --------------- UTILITIES--0.4% CMS Energy Corp., Senior Notes 8.900%, 07/15/08 1,000,000 750,917 --------------- WIRELESS--5.4% American Cellular Corp., Company Guaranteed (Callable 10/15/05 @ $104.75) 9.500%, 10/15/09 1,500,000 232,500 Crown Castle International Corp., Senior Notes (Callable 08/01/04 @ $104.75) 9.500%, 08/01/11 1,500,000 1,080,000 Nextel Communications, Inc., Global Senior Notes (Callable 02/01/06 @ $104.75) 9.500%, 02/01/11 1,050,000 895,125 Nextel Partners, Inc., Senior Discount Notes (Callable 02/01/04 @ $107.00) 0.000%, 02/01/09 + 900,000 544,500 TeleCorp PCS, Inc., Company Guaranteed, Senior Subordinated Notes (Callable 04/15/04 @ $105.81) 0.000%, 04/15/04 + 3,275,000 2,734,625 Tritel PCS, Inc., Global Company Guaranteed, Senior Subordinated Notes (Callable 01/15/06 @ $105.19) 10.375%, 01/15/11 487,000 472,390 Triton PCS, Inc., Company Guaranteed, Senior Subordinated Discount Notes (Callable 05/01/03@ $105.50) 0.000%, 05/01/08 + $ 5,250,000 $ 3,858,750 --------------- 9,817,890 --------------- TOTAL CORPORATE BONDS (COST $304,468,312) 248,656,150 --------------- FOREIGN COPORATE BONDS--5.0% BUILDING PRODUCTS--0.8% Ainsworth Lumber Company, Ltd., Global Secured Notes (Callable 01/15/05 @ $106.94) 13.875%, 07/15/07 1,300,000 1,378,000 --------------- CABLE--0.2% Cablevision SA, Yankee Notes 13.750%, 04/30/07 ** 2,000,000 310,000 --------------- CHEMICALS--1.3% Avecia Group PLC, Global Company Guaranteed (Callable 07/01/04 @ $105.50) 11.000%, 07/01/09 2,850,000 2,408,250 --------------- DIVERSIFIED TELECOMMUNICATIONS--0.9% Filtronic PLC, Senior Notes (Callable 12/01/02 @ $105.00) 10.000%, 12/01/05 2,000,000 1,710,000 --------------- LEISURE--0.5% Imax Corp., Yankee Senior Unsecured Notes (Callable 12/01/02 @ $103.94) 7.875%, 12/01/05 1,300,000 945,750 --------------- WIRELESS--1.3% Polska Telefonica Cyfrowa International Finance II SA, Company Guaranteed, Senior Subordinated Notes (Callable 12/01/04 @ $105.62) 11.250%, 12/01/09 2,250,000 2,272,500 --------------- TOTAL FOREIGN CORPORATE BONDS (COST $11,375,005) 9,024,500 --------------- SHARES --------------- COMMON STOCKS--0.2% DIVERSIFIED TELECOMMUNICATIONS--0.1% Versatel Telecom International NV 19,480 64,820 --------------- SEE NOTES TO FINANCIAL STATEMENTS. 9 SHARES VALUE --------------- --------------- INDUSTRIAL - OTHER--0.0% The Manitowoc Company, Inc.* 1 $ 14 --------------- SECONDARY OIL & GAS PRODUCERS--0.1% Southwest Royalties, Inc., Class A *, ^^ 15,324 231,852 --------------- TOTAL COMMON STOCKS (COST $1,262,024) 296,686 --------------- PREFERRED STOCK--0.0% TECHNOLOGY--0.0% Viasystems Group, Inc. *, ^^ (Cost $3,772,614) 264,480 0 --------------- WARRANTS--0.0% AIRLINES--0.0% Worldwide Flight Services, Inc. (expires 08/15/07) ^^ 4,000 40 --------------- BROADBAND--0.0% GT Group Telecom, Inc. (expires 02/01/10) 6,750 6,750 Versatel Telecom International NV (expires 05/15/2008) 3,000 1,875 --------------- 8,625 --------------- FINANCE - OTHER--0.0% Asat Finance LLC (expires 11/01/06) 5,000 $ 6,250 --------------- GAMING--0.0% Windsor Woodmont Black Hawk (expires 03/15/10) ^^ 106 0 --------------- RESTAURANTS--0.0% New World Restaurant Group, Inc. (expires 06/15/06) ^^ 600 300 --------------- TOTAL WARRANTS (COST $815) 15,215 --------------- TOTAL INVESTMENTS--142.6% (COST $320,878,770) 257,992,551 LIABILITIES IN EXCESS OF OTHER ASSETS--(42.6)% (77,103,361) --------------- NET ASSETS--(100.0%) $ 180,889,190 ===============
SEE NOTES TO FINANCIAL STATEMENTS. 10 NOTES: ++ Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At October 31, 2002, these securities amounted to $20,909,400 or 11.56% of net assets. + Step Bond--Coupon rate is low or zero for an initial period and then increases to a higher coupon rate thereafter. ** Defaulted Security. # Variable rate obligations--The interest rate shown is the rate as of October 31, 2002. * Non-income producing security. ^^ Not readily marketable security; security is valued at fair value as determined in good faith by the Board of Trustees. SEE NOTES TO FINANCIAL STATEMENTS. 11 CREDIT SUISSE HIGH YIELD BOND FUND--STATEMENT OF ASSETS AND LIABILITIES OCTOBER 31, 2002
ASSETS: Investments in securities at value(1) (Cost $320,878,770) $ 257,992,551 Cash 599,116 Dividend and interest receivable 8,144,864 Collateral received for securities loaned 53,284,585 Prepaid expenses and other assets 48,408 -------------- Total Assets 320,069,524 -------------- LIABILITIES: Loan payable 85,250,000 Payable upon return of securities loaned 53,284,585 Investment advisory fees 226,914 Administrative fees 11,940 Interest payable 148,776 Trustees fees 12,875 Payable for investments purchased 102,006 Other accrued expenses payable 143,238 -------------- Total Liabilities 139,180,334 ============== NET ASSETS Applicable to 51,225,790 shares outstanding $ 180,889,190 ============== NET ASSETS CONSIST OF: Capital stock, $0.001 par value $ 51,226 Paid-in capital 472,637,331 Distributions in excess of net investment income (291,383) Accumulated net realized loss on investments (228,621,765) Net unrealized depreciation from investments (62,886,219) -------------- Net Assets $ 180,889,190 ============== NET ASSET VALUE PER SHARE ($180,889,190 DIVIDED BY 51,225,790) $ 3.53 ============== MARKET PRICE PER SHARE $ 4.10 ==============
(1) Including $48,639,715 of securities on loan. SEE NOTES TO FINANCIAL STATEMENTS. 12 CREDIT SUISSE HIGH YIELD BOND FUND--STATEMENT OF OPERATIONS FOR THE YEAR ENDED OCTOBER 31, 2002
INVESTMENT INCOME: Interest $ 38,109,992 Dividends 55,554 Securities Lending 363,208 -------------- Total investment income 38,528,754 ============== EXPENSES: Investment advisory fees (Note 2) 3,126,299 Administrative fees (Note 2) 120,777 Interest and leveraging fees (Note 5) 2,409,903 Legal fees 155,888 Printing fees 108,688 Audit fees 60,125 Trustees fees (Note 2) 52,391 Transfer agent fees 51,469 Registration fees 40,784 Amortization of organization costs 29,511 Custodian fees 27,677 Insurance expense 21,474 Miscellaneous expense 3,322 -------------- Total expenses 6,208,308 -------------- NET INVESTMENT INCOME 32,320,446 -------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized loss on investments (75,223,745) Net change in unrealized depreciation on investments 34,775,558 -------------- Net realized and unrealized loss on investments (40,448,187) -------------- NET DECREASE IN NET ASSETS FROM OPERATIONS $ (8,127,741) ==============
SEE NOTES TO FINANCIAL STATEMENTS. 13 CREDIT SUISSE HIGH YIELD BOND FUND--STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED YEAR ENDED 10/31/2002 10/31/2001 -------------- -------------- OPERATIONS: Net investment income $ 32,320,446 $ 39,076,518 Net realized loss on investments (75,223,745) (67,076,973) Net change in unrealized depreciation on investments 34,775,558 (9,968,630) -------------- -------------- Net decrease in net assets resulting from operations (8,127,741) (37,969,085) -------------- -------------- DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: From net investment income (35,310,754) (40,744,208) Return of capital (5,125,403) (1,060,861) -------------- -------------- Net decrease in net assets resulting from dividends and distributions (40,436,157) (41,805,069) -------------- -------------- CAPITAL SHARE TRANSACTIONS: Reinvestment of dividends 10,012,798 12,376,870 -------------- -------------- Net increase in net assets from capital share transactions 10,012,798 12,376,870 -------------- -------------- Net decrease in net assets (38,551,100) (67,397,284) -------------- -------------- NET ASSETS: Beginning of year 219,440,290 286,837,574 -------------- -------------- End of year $ 180,889,190 $ 219,440,290 ============== ==============
SEE NOTES TO FINANCIAL STATEMENTS. 14 CREDIT SUISSE HIGH YIELD BOND FUND--STATEMENT OF CASH FLOWS FOR THE YEAR ENDED OCTOBER 31, 2002 CASH FLOWS FROM OPERATING ACTIVITIES: Interest and dividends received $ 32,642,944 Operating expenses paid (6,354,513) Purchases of long-term securities (102,949,903) Proceeds from sales of long-term securities 123,210,659 -------------- Net cash provided by operating activities $ 46,549,187 CASH FLOWS USED FOR FINANCING ACTIVITIES: Proceeds from borrowings (16,250,000) Cash dividends paid (30,423,324) -------------- Net cash used for financing activities (46,673,324) -------------- Net decrease in cash (124,137) Cash--beginning of year 723,253 -------------- Cash--end of year $ 599,116 ============== RECONCILIATION OF NET DECREASE IN NET ASSETS FROM OPERATION TO NET CASH USED IN OPERATING ACTIVITIES: Net decrease in net assets resulting from operations $ (8,127,741) ADJUSTMENTS TO RECONCILE NET INCRASE IN NET ASSETS FROM OPERATIONS TO NET CASH USED IN OPERATING ACTIVITIES: Decrease in dividends and interest receivable $ 1,746,963 Increase in accrued expenses 40,166 Decrease in interest payable (161,071) Decrease in prepaid expenses and other assets 17,604 Decrease in advisory fees payable (42,904) Net amortization of discount on investments (7,632,773) Net increase in cash from investing activities 20,260,756 Net realized and unrealized loss on investments 40,448,187 -------------- Total adjustments 54,676,928 -------------- Net cash provided by operating activities $ 46,549,187 ==============
SEE NOTES TO FINANCIAL STATEMENTS. 15 CREDIT SUISSE HIGH YIELD BOND FUND--FINANCIAL HIGHLIGHTS The table below sets forth financial data for a share of beneficial interest outstanding throughout the periods presented. This information has been derived from the Fund's financial statements.
YEAR ENDED ------------------------------------------------- PERIOD ENDED 10/31/2002 10/31/2001 10/31/2000 10/31/1999 10/31/1998* ---------- ---------- ---------- ---------- ------------ Net asset value, beginning of period $ 4.49 $ 6.16 $ 7.98 $ 8.36 $ 10.00 ---------- ---------- ---------- ---------- ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.65+ 0.84 0.96+ 0.98 0.24 Net realized and unrealized gain (loss) on investments (0.80) (1.63) (1.80) (0.38) (1.62) ---------- ---------- ---------- ---------- ------------ Total from investment operations (0.15) (0.79) (0.84) 0.60 (1.38) ---------- ---------- ---------- ---------- ------------ LESS DIVIDENDS AND DISTRIBUTIONS: From net investment income (0.71) (0.86) (0.98) (0.98) (0.24) Return of Capital (0.10) (0.02) -- -- -- ---------- ---------- ---------- ---------- ------------ Total dividends and distributions to shareholders (0.81) (0.88) (0.98) (0.98) (0.24) Offering costs charged to paid-in-capital -- -- -- 0.00++ (0.02) ---------- ---------- ---------- ---------- ------------ Net asset value, end of period $ 3.53 $ 4.49 $ 6.16 $ 7.98 $ 8.36 ========== ========== ========== ========== ============ Market value, end of period $ 4.10 $ 5.07 $ 6.19 $ 8.06 $ 9.56 ========== ========== ========== ========== ============ Total return (market value)** (2.15)% (3.21)% (12.15)% (5.71)% (1.74)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (000s omitted) $ 180,889 $ 219,440 $ 286,838 $ 358,679 $ 359,956 Average debt per share $ 1.99 $ 2.49 $ 3.47 $ 3.18 $ 1.02 Ratio of operating expenses to average net assets 2.91% 4.29% 4.81% 3.62% 1.81%*** Ratio of operating expense to average net assets, excluding interest and leveraging expenses 1.78% 1.73% 1.61% 1.53% 1.16%*** Ratio of net investment income to average net assets 15.17% 15.22% 12.90% 11.24% 10.48%*** Portfolio turnover rate 33.22% 46.11% 31.29% 60.23% 15.26%
* The Fund commenced operations on July 28, 1998. ** Total return is based on the change in market price of a share during the period and assumes reinvestment of dividends and distributions at actual prices pursant to the Fund's Dividend Reinvestment Plan. Total return for periods of less than one year are not annualized. Total return based on market value, which can be significantly greater or lesser than the net asset value, may result in substantially different returns. *** Annualized. + Based on average shares outstanding. ++ Amount rounds to less than $0.01 SEE NOTES TO FINANCIAL STATEMENTS. 16 CREDIT SUISSE HIGH YIELD BOND FUND--NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 2002 1. SIGNIFICANT ACCOUNTING POLICIES Credit Suisse High Yield Bond Fund (the "Fund") is a business trust organized under the laws of the State of Delaware on April 30, 1998. The Fund is registered with the Securities and Exchange Commission under the Investment Company Act of 1940, as amended (the "1940 Act"), as a non-diversified, closed-end management investment company. The Fund's shares trade on the New York Stock Exchange under the ticker symbol DHY. The Fund's primary objective is to seek high current income. The following is a summary of significant accounting policies consistently followed by the Fund in its operations and in connection with the preparation of its financial statements. PORTFOLIO VALUATION: Fixed-income securities (other than short-term obligations, but including listed issues) are valued based on prices obtained by one or more independent pricing services approved by the Board of Trustees. Pricing services use a matrix, formula or other objective method that takes into consideration market indices, matrices, yield curves and other specific adjustments. Securities (other than fixed-income securities) for which the principal market is one or more securities exchanges are valued at the last reported sale price (or if there has been no current sale, at the closing bid price) on the primary exchange on which such securities are traded. If a securities exchange is not the principal market for a security, such security will, if market quotations are readily available, be valued at the closing bid price in the over-the-counter market (or the last sale price in the case of securities reported on the NASDAQ national market system for which any sales occurred during the day). 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 Trustees under procedures established by the Board of Trustees in the absence of readily ascertainable market values. Debt obligations that will mature in 60 days or less are valued on the basis of amoritized cost, which approximates market value, unless the Board determines that using this method would not reflect an investment's value. SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are recorded as of the trade date. Realized gains and losses from securities transactions are recorded on the identified cost basis. Dividend income is recorded on the ex-dividend date. Interest income is earned on the accrual basis. Accretion of discount and amortization of premium is recognized using effective interest method. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: The Fund declares and pays dividends on a monthly basis. Each dividend is recorded on the ex-dividend date. Capital gains, if any, net of capital losses, are distributed annually. Income distributions and capital gain distributions are determined in accordance with income tax regulations, which may differ from accounting principles generally accepted in the United States of America ("GAAP"). These differences are primarily due to differing treatments of income and gains on various investment securities held by the Fund, timing differences and differing characterization of distributions made by the Fund. The Fund's dividend policy is to distribute substantially all of its net investment income to its shareholders on a monthly basis. However, in order to provide shareholders with a more consistent yield to the current trading price of shares of Common Stock of the Fund, the Fund may at times pay out less than the entire amount of net investment income earned in any particular month and may at times in any month pay out such accumulated but undistributed income in addition to net investment income earned in that month. As a result, the dividends paid by the Fund for any particular month may be more or less than the amount of net investment income earned by the Fund during such month. 17 FEDERAL INCOME TAXES: No provision is made for federal taxes as it is the Fund's intention to continue to qualify for and elect the tax treatment applicable to regulated investment companies under the Internal Revenue Code of 1986, as amended, and make the requisite distributions to its shareholders which will be sufficient to relieve it from federal income and excise taxes. CASH FLOW INFORMATION: Cash, as used in the Statement of Cash Flows, is the amount reported in the Statement of Assets and Liabilities. The Fund invests in securities and distributes dividends from net investment income and net realized gains, if any, (which are either paid in cash or reinvested at the discretion of shareholders). These activities are reported in the Statement of Changes in Net Assets. Information on cash payments is presented in the Statement of Cash Flows. Accounting practices that do not affect reporting activities on a cash basis include unrealized gain or loss on investment securities and accretion or amortization income recognized on investment securities. USE OF ESTIMATES: The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. 2. INVESTMENT ADVISORY FEE, ADMINISTRATION FEE AND OTHER RELATED PARTY TRANSACTIONS The Fund has entered into an Investment Advisory Agreement (the "Advisory Agreement") with Credit Suisse Asset Management, LLC ("CSAM"). The Advisory Agreement provides for a fee at the annual rate of 1% of the average weekly value of the Fund's total assets minus the sum of liabilities (other than aggregate indebtedness constituting leverage). Under the Advisory Agreement with the Fund, the Adviser provides investment advisory services and order placement facilities for the Fund and pays all compensation of Trustees of the Fund who are affiliated persons of the Advisor. At its meeting held on February 12, 2002 the Board of Trustees approved State Street Bank and Trust Company ("SSB") to replace PFPC, Inc. ("PFPC"), as Accounting and Administrative Agent effective September 1, 2002. For the period November 1, 2001 through August 31, 2002, the Fund had an Accounting, Administration and Support Agreement with PFPC, Inc., to provide all accounting and administrative services to the Fund other than those related to investment decisions. For these accounting services, the Fund paid PFPC, Inc. a fee at the annual rate of $33,000 per year plus .01% of average daily net assets up to and including $1 billion, and .0075% of average daily net assets over $1 billion. For these administration services, the Fund paid PFPC, Inc. a fee at the annual rate of $50,000 per year. PFPC, Inc. also serves as the Fund's shareholder servicing agent (transfer agent) at an annual rate of $30,000 per year plus any additional out-of-pocket expenses. For its administrative services, SSB receives a fee, exclusive of out-of-pocket expenses, based upon the following fee structure calculated in total for all the Credit Suisse Funds administered by SSB and allocated based upon relative average net assets of each fund. 18
AVERAGE DAILY NET ASSETS ANNUAL RATE ------------------------ --------------------------------- First $5 billion .050% of average daily net assets Next $5 billion .035% of average daily net assets Over $10 billion .020% of average daily net assets
The Fund pays each Trustee not affiliated with CSAM $1,000 per regular quarterly board meeting attended, and an annual retainer fee of $12,500. In addition, the Fund reimburses each Trustee for travel and out-of-pocket expenses relating to their attendance at such meetings. 3. INVESTMENTS Cost of purchases and proceeds from sales of investment securities, excluding short-term investments, during the year ended October 31, 2002, amounted to $102,077,650 and $122,599,683, respectively. 4. FUND SHARES The Fund has one class of shares of beneficial interest, par value $0.001 per share; an unlimited number of shares are authorized. Transactions in shares of beneficial interest were as follows:
FOR THE YEAR ENDED FOR THE YEAR ENDED OCTOBER 31, 2002 OCTOBER 31, 2001 ------------------ ------------------ Shares issued through reinvestment of dividends 2,362,917 2,325,658 ========= =========
5. NOTES PAYABLE The Fund has a $150 million line of credit provided by Citicorp North America, Inc., under a Revolving Credit and Security Agreement (the "Agreement") dated April 12, 2002, primarily to leverage its investment portfolio. Under this Agreement, the Fund may borrow the lesser of $150 million or 33 1/3% of its gross assets. Interest is payable at the Bank's Base Rate plus a commission of 0.05%. The Fund is charged a structuring fee of $19,000 per quarter until July 2003, a program fee of 0.20% of the average daily amount leveraged, an administration fee of 0.02% of the average daily amount leveraged and a liquidity fee of 0.13% of the maximum borrowing limit (currently $150 million). The Agreement requires, among other provisions, that the percentage obtained by dividing total indebtedness for money borrowed by total assets of the Fund shall not exceed 33 1/3%. The average daily amount of borrowings during the year ended October 31, 2002 was $99,459,589 with a weighted average interest rate of 1.921%. 6. CONCENTRATION OF RISK The Fund invests in securities offering high current income, which generally will be in the lower rating categories of recognized ratings agencies (commonly known as "junk bonds"). These securities generally involve more credit risk than securities in the higher rating categories. In addition, the trading market for high yield securities may be relatively less liquid than the market for higher-rated securities. The Fund's use of leverage also increases exposure to capital risk. 7. SECURITIES LENDING The Fund loaned securities during the year to certain brokers, with the Fund's custodian acting as lending agent. Upon such loans, the Fund receives collateral, which is maintained by the custodian and 19 earns income, in the form of negotiated lender's fees. On a daily basis, the Fund monitors the market value of securities loaned and maintains collateral against the securities loaned in an amount not less than the value of the securities loaned. The Fund may receive collateral in the form of cash or other eligible securities. Risks may arise upon entering into securities lending to the extent that the value of the collateral is less than the value of the securities loaned due to changes in the value of the collateral or the loaned securities. Cash collateral received by the Fund in connection with securities lending activity is invested as follows:
VALUE --------------- REPURCHASE AGREEMENTS: Bear Stearns & Co., 1.88%, Dated 10/31/02, due 11/1/02, proceeds at maturity $796,617 (fully collateralized by U.S. Treasury Strip, due 8/15/16. Market Value of collateral is $814,851) $ 796,617 Bear Stearns & Co., 1.88%, Dated 10/31/02, due 11/1/02, proceeds at maturity $4,067,076 (fully collateralized by U.S. Treasury Strip, due 8/15/16. Market Value of collateral is $4,149,014) 4,067,076 Bear Stearns & Co., 1.88%, Dated 10/31/02, due 11/1/02, proceeds at maturity $18,420,892 (fully collateralized by U.S. Treasury Strip, due 8/15/15-8/15/16. Market Value of collateral is $18,791,572) 18,420,892 SHORT TERM INVESTMENT FUNDS: Dreyfus Cash Management, Class A, Institutional shares 15,000,000 Dreyfus Cash Management Plus, Inc., Institutional shares 15,000,000 --------------- TOTAL $ 53,284,585 ===============
8. FEDERAL INCOME TAXES Income and capital gain distributions are determined in accordance with federal income tax regulations, which may differ from GAAP. These differences are primarily due to differing treatments of losses deferred due to wash sales and income from defaulted bonds. The tax characteristics of dividends and distributions paid during the period ended October 31, for the Fund was as follows:
ORDINARY INCOME RETURN OF CAPITAL --------------------------- ------------------------- 2002 2001 2002 2001 ------------ ------------ ----------- ----------- $ 35,310,754 $ 40,744,208 $ 5,125,403 $ 1,060,861
At October 31, 2002, the components of distributable earnings on a tax basis for the Fund were as follows:
Net investment loss $ (291,383) Accumulated realized loss (228,580,558) Unrealized depreciation (62,927,426) -------------- (291,799,367) ==============
20 At October 31, 2002, the Fund had capital loss carryovers available to offset possible future capital gains as follows:
EXPIRES OCTOBER 31, -------------------------------------------------------------------------------- 2006 2007 2008 2009 2010 ---------- ---------- ---------- ---------- ---------- 13,855,150 30,606,551 37,573,747 68,628,620 77,916,490
At October 31, 2002, the identified cost for federal income tax purposes, as well as the gross unrealized appreciation from investments for those securities having an excess of value over cost, gross unrealized depreciation from investments for those securities having an excess of cost over value and the net unrealized appreciation (depreciation) from investments were as follows:
GROSS UNREALIZED GROSS UNREALIZED NET UNREALIZED IDENTIFIED COST APPRECIATION (DEPRECIATION) (DEPRECIATION) --------------- ---------------- ---------------- -------------- $ 320,919,977 $ 7,422,892 $ (70,395,318) $ (62,972,426)
At October 31, 2002, the Fund reclassified $2,698,925 from accumulated loss and $5,301,033 from paid-in capital to undistributed net investment income, to adjust for current period permanent book/tax differences which arose principally from differing book/tax treatments of net operating losses. Net assets were not affected by these reclassifications. 21 CREDIT SUISSE HIGH YIELD BOND FUND--REPORT OF INDEPENDENT ACCOUNTANTS OCTOBER 31, 2002 To the Trustees and Shareholders of Credit Suisse High Yield Bond Fund In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations, of changes in net assets and of cash flows and the financial highlights present fairly, in all material respects, the financial position of Credit Suisse High Yield Bond Fund (the "Fund") at October 31, 2002, the results of its operations and its cash flows for the year then ended, and the changes in its net assets and financial highlights for each of the two years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at October 31, 2002 by correspondence with the custodian and broker, provide a reasonable basis for our opinion. The financial highlights for each of the periods presented in the period ended October 31, 2000 were audited by other independent accountants, whose report dated December 20, 2000 expressed an unqualified opinion on those statements. PricewaterhouseCoopers LLP Philadelphia, Pennsylvania December 18, 2002 22 CREDIT SUISSE HIGH YIELD BOND FUND--ADDITIONAL INFORMATION (UNAUDITED) DIVIDEND REINVESTMENT PLAN Referenced below are policies related to the Fund's Automatic Dividend Reinvestment Plan (the "Plan"). These policies apply to shareholders whose shares are registered directly with the Fund in their own name. Shareholders whose shares are purchased through a broker-dealer or nominee should contact such broker-dealer or nominee regarding questions related to the reinvestment of the Fund's dividends. Pursuant to the Fund's Plan, unless a shareholder otherwise elects, all dividends and capital gain distributions will be automatically reinvested by PFPC, Inc. as agent for Shareholders in administering the Plan (the "Plan Agent"), in additional shares of the Fund. Shareholders who elect not to participate in the Plan will receive all dividends and other distributions in cash paid by check mailed directly to the shareholder of record (or, if the shares are held in street or other nominee name, then to such nominee) by PFPC, Inc. as the Dividend Disbursing Agent. Such participants may elect not to participate in the Plan and to receive all dividends and capital gain distributions in cash by sending written instructions to PFPC, Inc. as the Dividend Disbursing Agent, at the address set forth below. Participation in the Plan is completely voluntary and may be terminated or resumed at any time without penalty by written notice if received by the Plan Agent not less than ten days prior to any dividend record date; otherwise such termination will be effective with respect to any subsequently declared dividend or other distribution. Whenever the Fund declares an income dividend or a capital gain distribution (collectively referred to as "dividends") payable either in shares or in cash, non-participants in the Plan will receive cash and participants in the Plan will receive the equivalent in shares. The shares will be acquired by the Plan Agent for the participants' accounts, depending upon the circumstances described below, either (i) through receipt of additional unissued but authorized shares from the Fund ("newly issued shares") or (ii) by purchase of outstanding shares on the open market ("open-market purchases") on the NYSE or elsewhere. If on the record date for the dividend, the net asset value per share is equal to or less than the market price per share plus estimated brokerage commissions (such condition being referred to herein as "market premium"), the Plan Agent will invest the dividend amount in newly issued shares on behalf of the participants. The number of newly issued shares to be credited to each participant's account will be determined by dividing the dollar amount of the dividend by the net asset value per share on the date the shares are issued. If on the dividend record date the net asset value per share is greater than the market value (such condition being referred to herein as "market-discount"), the Plan Agent will invest the dividend amount in shares acquired on behalf of the participants in open-market purchases. In the event of a market discount on the dividend record date, the Plan Agent will have until the last business day before the next date on which the shares trade on an "ex-dividend" basis or in no event more than 30 days after the dividend record date (the "last purchase date") to invest the dividend amount in shares acquired in open-market purchases. It is contemplated that the Fund will pay monthly income dividends. Therefore, the period during which open-market purchases can be made will exist only from the record date of the dividend through the date before the next "ex-dividend" date. If, before the Plan Agent has completed its open-market purchases, the market price of a share exceeds the net asset value per share, the average per share purchase price paid by the Plan Agent may exceed the net asset value of the shares, resulting in the acquisition of fewer shares than if the dividend had been paid in newly issued shares on the dividend record date. Because of the foregoing difficulty with respect to open market purchases, the Plan provides that if the Plan Agent in unable to invest the full dividend amount in open-market purchases during the purchase period or if the market discount shifts to a market premium during the purchase period, the Plan Agent may cease making open-market purchases and may invest the uninvested portion of the dividend amount in newly issued shares at the net asset 23 value per share at the close of business on the last purchase date. The Plan Agent maintains all shareholders' accounts in the Plan and furnishes written confirmation of all transactions in the accounts, including information needed by shareholders for tax records. Shares in the account of each Plan participant will be held by the Plan Agent on behalf of the Plan participant, and each shareholder proxy will include those shares purchased or received pursuant to the Plan. The Plan Agent will forward all proxy solicitation materials to participants and vote proxies for shares held pursuant to the Plan in accordance with the instructions of the participants. In the case of shareholders such as banks, brokers or nominees that hold shares for others who are the beneficial owners, the Plan Agent will administer the Plan on the basis of the number of shares certified from time to time by the record shareholder and held for the account of beneficial owners who participate in the Plan. There will be no brokerage charges with respect to shares issued directly by the Fund as a result of dividends or capital gains distributions payable either in shares or in cash. However, each participant will pay a pro rata share of brokerage commissions incurred with respect to the Plan Agent's open-market purchases in connection with the reinvestment of dividends. The automatic reinvestment of dividends will not relieve participants of any Federal, state or local income tax that may be payable (or required to be withheld) on such dividends. Shareholders participating in the Plan may receive benefits not available to shareholders not participating in the Plan. If the market price (plus commissions) of the shares is above their net asset value, participants in the Plan will receive shares of the Fund at less than they could otherwise purchase them and will have shares with a cash value greater than the value of any cash distribution they would have received on their shares. If the market price plus commissions is below the net asset value, participants will receive distributions in shares with a net asset value greater than the value of any cash distribution they would have received on their shares. However, there may be insufficient shares available in the market to make distributions in shares at prices below the net asset value. Also, since the Fund does not redeem shares, the price on resale may be more or less than the net asset value. Experience under the Plan may indicate that changes are desirable. Accordingly, the Fund reserves the right to amend or terminate the Plan. There is no direct service charge to participants in the Plan; however, the Fund reserves the right to amend the Plan to include a service charge payable by the participants. All correspondence concerning the Plan should be directed to the Plan Agent at P.O. Box 8030, Boston, MA 02266-8030, 1-800-331-1710. LEVERAGE--BENEFITS AND RISKS The use of leverage by the Fund creates an opportunity for increased net income and capital appreciation for the Fund, but, at the same time, creates special risks, and there can be no assurance that a leveraging strategy will be successful during any period in which it is employed. The Fund intends to utilize leverage to provide the Shareholders with a potentially higher return. Leverage creates risks for Shareholders including the likelihood of greater volatility of net asset value and market price of the Fund's shares and the risk that fluctuations in interest rates on borrowings and short-term debt may affect the return to Shareholders. To the extent the income or capital appreciation derived from securities purchased with funds received from leverage exceeds the cost of leverage, the Fund's return will be greater than if leverage had not been used. Conversely, if the income or capital appreciation from the securities purchased with such funds is not sufficient to cover the cost of leverage, the return to the Fund will be less than if leverage had not been used, and therefore the amount available for distribution to Shareholders as dividends and other distributions will be reduced. In the latter case, the Advisor in its best judgment nevertheless may determine to maintain the Fund's leveraged 24 position if it deems such action to be appropriate under the circumstances. During periods in which the Fund is utilizing leverage, the Management Fee will be higher than if the Fund did not utilize a leveraged capital structure because the fee is calculated as a percentage of the Managed Assets including those purchased with leverage. Certain types of borrowings by the Fund may result in the Fund's being subject to covenants in credit agreements, including those relating to asset coverage and portfolio composition requirements. The Fund's lenders may establish guidelines for borrowing which may impose asset coverage or portfolio composition requirements that are more stringent than those imposed by the Investment Company Act. It is not anticipated that these covenants or guidelines will impede the Advisor in managing the Fund's portfolio in accordance with the Fund's investment objectives and policies. 25 CREDIT SUISSE HIGH YIELD BOND FUND--INFORMATION CONCERNING TRUSTEES AND OFFICERS (UNAUDITED)
POSITION(S) CURRENT PRINCIPAL OCCUPATION TERM OF OFFICE HELD WITH AND PRINCIPAL EMPLOYMENT AND LENGTH NAME AND ADDRESS (AGE) FUND DURING THE PAST FIVE YEARS OF TIME SERVED OTHER DIRECTORSHIPS HELD BY TRUSTEE - ---------------------- ------------ ---------------------------- -------------------- ------------------------------------ INDEPENDENT TRUSTEES Enrique R. Arzac Trustee Professor of Finance and Since 2001; current Director of The Brazilian Equity Columbia University Economics, Graduate School term ends at the Fund, Inc.; The Chile Fund, Inc.; Graduate School of of Business, Columbia 2005 annual meeting. The Emerging Markets Business University (1971-present). Telecommunications Fund, Inc.; The New York, NY 10027 First Israel Fund, Inc.; The Latin America Equity Fund, Inc.; The (60) Indonesia Fund, Inc.; The Adams Express Company; and Petroleum and Resources Corporation; Director of Credit Suisse Asset Management Income Fund, Inc. Lawrence J. Fox Trustee Partner of Drinker Biddle & Since 2001; current Director of The Indonesia Fund, One Logan Square Reath (since 1976); Former term ends at the Inc.; Director of Credit Suisse 18th & Cherry Streets Managing Partner of Drinker 2004 annual meeting. Asset Management Income Fund, Inc. Philadelphia, PA 19103 Biddle & Reath (1991-1998). (58) James S. Pasman, Jr. Trustee Currently retired; President Since 2001; current Director of Education Management 29 The Trillium and Chief Operating Officer term ends at the Corp., Director/Trustee of Credit Pittsburgh, PA 15238 of National InterGroup, Inc. 2003 annual meeting. Suisse Funds; Director of Credit from April 1989 to March Suisse Asset Management Income (71) 1991; Chairman of Permian Fund, Inc. Oil Co. from April 1989 to March 1991. 26 POSITION(S) CURRENT PRINCIPAL OCCUPATION TERM OF OFFICE HELD WITH AND PRINCIPAL EMPLOYMENT AND LENGTH NAME AND ADDRESS (AGE) FUND DURING THE PAST FIVE YEARS OF TIME SERVED OTHER DIRECTORSHIPS HELD BY TRUSTEE - ---------------------- ------------- ---------------------------- -------------------- ------------------------------------ OFFICERS* Laurence R. Smith Interim Chief Global Chief Investment Since 2002 N/A c/o CSAM Executive Officer and Managing 466 Lexington Avenue Officer Director of CSAM New York, NY 10017 (6/99-present); Managing Director of J.P. Morgan (44) Investment Management (1981-1999). Hal Liebes Senior Vice Managing Director and Global Since 2001 N/A c/o CSAM President General Counsel of CSAM 466 Lexington Avenue (7/02-present); Managing New York, NY 10017 Director and General Counsel of CSAM (12/99-7/02); (38) Director and General Counsel of CSAM (3/97-12/99). Richard J. Lindquist President Managing Director of Since 2000 N/A c/o CSAM and Chief CSAM (4/95-present). 466 Lexington Avenue Investment New York, NY 10017 Officer (41) Michael A. Pignataro Chief Director of CSAM Since 2000 N/A c/o CSAM Financial (1/01-present); Vice 466 Lexington Avenue Officer, Vice President of CSAM New York, NY 10017 President and (12/95-12/00). Secretary (43) Robert M. Rizza Vice Assistant Vice President of Since 2001 N/A c/o CSAM President and CSAM (1/01-present); 466 Lexington Avenue Treasurer Administrative Officer of New York, NY 10017 CSAM (3/98-12/00); Assistant Treasurer of Bankers Trust (37) Co. (4/94-3/98).
- ---------- * The officers of the Fund shown are officers that make policy decisions. 27 CSHYF-2-1002 -----END PRIVACY-ENHANCED MESSAGE-----