WARBURG PINCUS SMALL CO VALUE FUND INC, 485BPOS, 1998-02-27

WARBURG PINCUS SMALL CO VALUE FUND INC
485BPOS, 1998-02-27

Previous: PRICE T ROWE HEALTH & LIFE SCIENCES FUND INC, 497, 1998-02-27

Next: TAX MANAGED GROWTH PORTFOLIO, POS AMI, 1998-02-27

<PAGE> 1
As filed with the U.S. Securities and Exchange Commission

on February 27, 1998

Securities Act File No. 033-63653
Investment Company Act File No. 811-07375

U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [x]

Pre-Effective Amendment No. [ ]

Post-Effective Amendment No. 3 [x]

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [x]

Amendment No. 4 [x]

(Check appropriate box or boxes)

Warburg, Pincus Small Company Value Fund, Inc.
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)

466 Lexington Avenue
New York, New York 10017-3147
- --------------------------------------- -----------
(Address of Principal Executive Offices) (Zip Code)

Registrant's Telephone Number, including Area Code: (212) 878-0600

Mr. Eugene P. Grace
Warburg, Pincus Small Company Value Fund, Inc.
466 Lexington Avenue
New York, New York 10017-3147
-----------------------------------------------
(Name and Address of Agent for Service)

Copy to:

Rose F. DiMartino, Esq.
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022-4677
<PAGE> 2

Approximate Date of Proposed Public Offering: February 27, 1998

It is proposed that this filing will become effective (check appropriate box):

[X] immediately upon filing pursuant to paragraph (b)

[ ] on (date) pursuant to paragraph (b)

[ ] 60 days after filing pursuant to paragraph (a)(1)

[ ] on (date) pursuant to paragraph (a)(1)

[ ] 75 days after filing pursuant to paragraph (a)(2)

[ ] on (date) pursuant to paragraph (a)(2) of Rule 485.

If appropriate, check the following box:

[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.

Title of Securities Being Registered:
Common stock, par value $.001
--------------------------------------

<PAGE> 3
WARBURG, PINCUS SMALL COMPANY VALUE FUND, INC.

FORM N-1A

CROSS REFERENCE SHEET

<TABLE>
<CAPTION>
Heading for the Common Shares
Part A and the Advisor Shares
Item No. Prospectuses*
-------- -------------
<S> <C> <C>
1. Cover Page.................................. Cover Page

2. Synopsis.................................... The Funds' Expenses

3. Condensed Financial Information............. Financial Highlights

4. General Description of Registrant........... Cover Page; Investment Objectives and Policies;
Portfolio Investments; Risk Factors and Special
Considerations; Certain Investment Strategies;
Investment Guidelines; General Information

5. Management of the Fund...................... Management of the Funds

6. Capital Stock and Other Securities.......... General Information

7. Purchase of Securities Being Offered........ How to Open an Account; How to Purchase Shares;
Net Asset Value

8. Redemption or Repurchase.................... How to Redeem and Exchange Shares

9. Legal Proceedings........................... Not applicable
</TABLE>

* With respect to the Advisor Prospectus, all references to "the Funds,"
in this cross reference sheet should be read as "the Fund."
<PAGE> 4

<TABLE>
<CAPTION>
Part B Statement of Additional
Item No. Information Heading
-------- -------------------
<S> <C> <C>
10. Cover Page.................................. Cover Page

11. Table of Contents........................... Contents

12. General Information and History............. Management of the Funds;
Notes to Financial Statements; See
Prospectuses--"General Information"

13. Investment Objectives and Policies.......... Investment Objectives; Investment Policies

14. Management of the Registrant................ Management of the Funds; See Prospectuses--"Management
of the Funds"

15. Control Persons and Principal Holders of
Securities.................................. Management of the Funds; Miscellaneous; See
Prospectuses--"General Information"

16. Investment Advisory and Other Services...... Management of the Funds; See Prospectuses--"Management
of the Funds" and "Shareholder Servicing"

17. Brokerage Allocation........................ Investment Policies; See Prospectuses--"Portfolio
Transactions and Turnover Rate"

18. Capital Stock and Other Securities.......... Management of the Funds--Organization of the Fund; See
Prospectuses--"General Information"
</TABLE>

2
<PAGE> 5
<TABLE>
<S> <C> <C>
19. Purchase, Redemption and Pricing of Securities
Being Offered............................... Additional Purchase and Redemption Information; See
Prospectuses--"How to Open an Account," "How to Purchase
Shares," "How to Redeem and Exchange Shares" and "Net
Asset Value"

20. Tax Status.................................. Additional Information Concerning Taxes; See
Prospectuses--"Dividends, Distributions and Taxes"

21. Underwriters................................ Investment Policies--Portfolio Transactions; See
Prospectuses --"Management of the Fund" and "Shareholder
Servicing"

22. Calculation of Performance Data............. Determination of Performance

23. Financial Statements........................ Report of Independent Accountants; Financial Statement
</TABLE>

Part C

Information required to be included in Part C is set forth
after the appropriate item, so numbered, in Part C to this Registration
Statement.

3
<PAGE> 6

PROSPECTUS

February 27, 1998

WARBURG PINCUS

EMERGING GROWTH FUND

WARBURG PINCUS

POST-VENTURE CAPITAL FUND

WARBURG PINCUS

SMALL COMPANY GROWTH FUND

WARBURG PINCUS
SMALL COMPANY VALUE FUND

[WARBURG PINCUS FUNDS LOGO]
<PAGE> 7

PROSPECTUS February 27, 1998

Warburg Pincus Funds is a family of open-end mutual funds that offer investors a
variety of investment opportunities. Four funds are described in this
Prospectus:

WARBURG PINCUS EMERGING GROWTH FUND seeks maximum capital appreciation by
investing in equity securities of small- to medium-sized domestic companies with
emerging or renewed growth potential.

WARBURG PINCUS POST-VENTURE CAPITAL FUND seeks long-term growth of capital. The
Fund will pursue its objective by investing primarily in equity securities of
issuers in their post-venture capital stage of development and pursues an
aggressive investment strategy.

Because of the nature of the Fund's investments and certain strategies it may
use, an investment in the Fund involves certain risks and may not be appropriate
for all investors.

WARBURG PINCUS SMALL COMPANY GROWTH FUND seeks capital growth by investing in
equity securities of small-sized domestic companies.

WARBURG PINCUS SMALL COMPANY VALUE FUND seeks long-term capital appreciation by
investing primarily in a portfolio of equity securities of small capitalization
companies.

NO LOAD CLASS OF COMMON SHARES
- --------------------------------------------------------------------------------

Each Fund offers two classes of shares. A class of Common Shares that is "no
load" is offered by this Prospectus (i) directly from the Funds' distributor,
Counsellors Securities Inc., and (ii) through various brokerage firms including
Charles Schwab & Company, Inc. Mutual Fund OneSource(TM) Program; Fidelity
Brokerage Services, Inc. FundsNetwork(TM) Program; Jack White & Company, Inc.;
and Waterhouse Securities, Inc.

LOW MINIMUM INVESTMENT
- --------------------------------------------------------------------------------

The minimum initial investment in each Fund is $2,500 ($500 for an IRA or
Uniform Transfers/Gifts to Minors Act account) and the minimum subsequent
investment is $100. Through the Automatic Monthly Investment Plan, subsequent
investment minimums may be as low as $50. See "How to Purchase Shares."

This Prospectus briefly sets forth certain information about the Funds that
investors should know before investing. Investors are advised to read this
Prospectus and retain it for future reference. Additional information about each
Fund has been filed with the Securities and Exchange Commission (the "SEC"). The
SEC maintains a Web site (http://www.sec.gov) that contains the Statement of
Additional Information, material incorporated by reference and other information
regarding the Funds. The Statement of Additional Information is also available
upon request and without charge by calling Warburg Pincus Funds at (800)
927-2874. Information regarding the status of shareholder accounts may be
obtained by calling Warburg Pincus Funds at (800) 927-2874. Warburg Pincus Funds
maintains a Web site at www.warburg.com. The Statement of Additional
Information, as amended or supplemented from time to time, bears the same date
as this Prospectus and is incorporated by reference in its entirety into this
Prospectus.

SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF OR GUARANTEED OR ENDORSED
BY ANY BANK, AND SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
INVESTMENTS IN SHARES OF THE FUNDS INVOLVE INVESTMENT RISKS, INCLUDING THE
POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
- --------------------------------------------------------------------------------

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. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<PAGE> 8

THE FUNDS' EXPENSES
- --------------------------------------------------------------------------------

Each of Warburg Pincus Emerging Growth Fund (the "Emerging Growth Fund"),
Warburg Pincus Post-Venture Capital Fund (the "Post-Venture Capital Fund"),
Warburg Pincus Small Company Growth Fund (the "Small Company Growth Fund") and
Warburg Pincus Small Company Value Fund (the "Small Company Value Fund" and each
a "Fund") currently offers two separate classes of shares: Common Shares and
Advisor Shares. For a description of Advisor Shares see "General Information."
Common Shares of each of the Post-Venture Capital, Small Company Growth and the
Small Company Value Funds pay the Fund's distributor a 12b-1 fee. See
"Management of the Funds -- Distributor."

<TABLE>
<CAPTION>
Emerging Post-Venture Small Company Small Company
Growth Capital Growth Value
Fund Fund Fund Fund
-------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases (as a
percentage of offering price)................... 0 0 0 0
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees................................. .90% .84% .44% .97%
12b-1 Fees...................................... 0 .25% .25% .25%
Other Expenses.................................. .32% .57% .72% .48%
----- ----- ----- -----
Total Fund Operating Expenses (after fee
waivers)+..................................... 1.22%* 1.66%* 1.41%* 1.70%*
===== ===== ===== =====
EXAMPLE
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and
(2) redemption at the end of each time period:
1 year......................................... $ 12 $ 17 $ 14 $ 17
3 years........................................ $ 39 $ 52 $ 45 $ 54
5 years........................................ $ 67 $ 90 $ 77 $ 92
10 years........................................ $148 $197 $ 169 $ 201
</TABLE>

- --------------------------------------------------------------------------------

+ Annual Fund Operating Expenses for the Funds listed above are based on actual
expenses for the fiscal year ended October 31, 1997, net of any fee waivers or
expense reimbursements. Absent such waivers and/or reimbursements, Management
Fees for the Post-Venture Capital, Small Company Growth and Small Company
Value Funds would have equalled 1.25%, 1.00% and 1.00%, respectively; Other
Expenses would have equalled .57%, 3.82% and .47%, respectively; and Total
Fund Operating Expenses would have equalled 2.07%, 5.07% and 1.72%,
respectively. The investment adviser and co-administrator are under no
obligation to continue any applicable waivers.

* Operating expenses for each Fund were reduced by .01% for the fiscal year
ended October 31, 1997 as a result of certain arrangements that served to
offset portions of the Funds' respective transfer agent expense. After
reflecting these arrangements, "Total Fund Operating Expenses (after fee
waivers)" for the Emerging Growth, Post-Venture Capital, Small Company Growth
and Small Company Value Funds were 1.21%, 1.65%, 1.40% and 1.69%,
respectively, for the fiscal year ended October 31, 1997.

---------------------------

The expense table shows the costs and expenses that an investor will bear
directly or indirectly as a Common Shareholder of each Fund. Certain broker-
dealers and financial institutions also may charge their clients fees in
connection with investments in a Fund's Common Shares, which fees are not
reflected in the table. The Example should not be considered a representation of
past or future expenses; actual Fund expenses may be greater or less than those
shown. Moreover, while the Example assumes a 5% annual return, each Fund's
actual performance will vary and may result in a return greater or less than 5%.
Long-term shareholders of each of the Post-Venture Capital Fund, Small Company
Growth Fund and the Small Company Value Fund may pay more than the economic
equivalent of the maximum sales charges permitted by the National Association of
Securities Dealers, Inc.

2
<PAGE> 9

FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A COMMON SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

The following information regarding each Fund for the five fiscal years ended
October 31, 1997 has been derived from information audited by Coopers & Lybrand
L.L.P., independent accountants, whose report dated December 19, 1997 is
incorporated by reference in the Statement of Additional Information. Further
information about the performance of the Funds is contained in the Funds' annual
report, dated October 31, 1997, copies of which may be obtained without charge
by calling Warburg Pincus Funds at (800) 927-2874.

EMERGING GROWTH FUND

For the Year Ended October 31,
-----------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991
----- ----- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
YEAR............................. $32.80 $29.97 $22.38 $23.74 $18.28 $16.97 $10.83
---- ---- ---- ---- ---- ---- ----
Income from Investment
Operations:
Net Investment Income (Loss)..... (0.19) (0.02) (0.05) (0.06) (0.10) (0.03) 0.05
Net Gains (Loss) on Securities
(both realized and
unrealized).................... 7.12 4.60 7.64 0.06 5.93 1.71 6.16
---- ---- ---- ---- ---- ---- ----
Total from Investment
Operations..................... 6.93 4.58 7.59 0.00 5.83 1.68 6.21
---- ---- ---- ---- ---- ---- ----
Less Distributions:
Dividends (from Net Investment
Income)........................ 0.00 0.00 0.00 0.00 0.00 (0.01) (0.07)
Distributions (from realized
gains)......................... (0.07) (1.75) 0.00 (1.36) (0.37) (0.36) 0.00
---- ---- ---- ---- ---- ---- ----
Total Distributions.............. (0.07) (1.75) 0.00 (1.36) (0.37) (0.37) (0.07)
---- ---- ---- ---- ---- ---- ----
NET ASSET VALUE, END OF YEAR...... $39.66 $32.80 $29.97 $22.38 $23.74 $18.28 $16.97
==== ==== ==== ==== ==== ==== ====
Total Return...................... 21.18% 16.14% 33.91% 0.16% 32.28% 9.87% 57.57%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Year (000s).... $1,515,385 $1,104,684 $487,537 $240,664 $165,525 $99,562 $42,061
Ratios to average
daily net assets:
Operating expenses............... 1.22%@ 1.28% 1.26% 1.22% 1.23% 1.24% 1.25%
Net investment income (loss)..... (.59%) (.63%) (.58%) (.58%) (.60%) (.25%) .32%
Decrease reflected in above
operating expense ratios due to
waivers/ reimbursements........ .00% .00% .00% .04% .00% .08% .47%
Portfolio Turnover Rate........... 87.03% 65.77% 84.82% 60.38% 68.35% 63.35% 97.69%
Average Commission Rate#.......... $0.0566 $0.0567 -- -- -- -- --

<CAPTION>
For the Period
January 21, 1988
(Commencement
of Operations)
through
October 31,
1990 1989 1988
--- --- -----------------
<S> <C<C> <C> <C>
NET ASSET VALUE, BEGINNING OF
YEAR............................. $13.58 $11.21 $10.00
---- ---- ------
Income from Investment
Operations:
Net Investment Income (Loss)..... 0.13 0.16 0.07
Net Gains (Loss) on Securities
(both realized and
unrealized).................... (2.32) 2.51 1.18
---- ---- ------
Total from Investment
Operations..................... (2.19) 2.67 1.25
---- ---- ------
Less Distributions:
Dividends (from Net Investment
Income)........................ (0.18) (0.12) (0.04)
Distributions (from realized
gains)......................... (0.38) (0.18) 0.00
---- ---- ------
Total Distributions.............. (0.56) (0.30) (0.04)
---- ---- ------
NET ASSET VALUE, END OF YEAR...... $10.83 $13.58 $11.21
==== ==== ======
Total Return...................... (16.90%) 24.20% 16.34 %*
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Year (000s).... $23,075 $26,685 $10,439
Ratios to average
daily net assets:
Operating expenses............... 1.25% 1.25% 1.25 %*
Net investment income (loss)..... 1.05% 1.38% 1.10 %*
Decrease reflected in above
operating expense ratios due to
waivers/ reimbursements........ .42% .78% 3.36 %*
Portfolio Turnover Rate........... 107.30% 100.18% 82.21 %
Average Commission Rate#.......... -- -- --
</TABLE>

- --------------------------------------------------------------------------------
*Annualized.

@ Interest earned on uninvested cash balances is used to offset portions of
transfer agent expense. These arrangements resulted in a reduction to the
Common Shares' expenses by .01% and 01% for the years ended October 31, 1997
and 1996, respectively. The Common Shares operating expense ratio after
reflecting these arrangements were 1.21% and 1.27% for the years ended October
31, 1997 and 1996, respectively.

# Computed by dividing the total amount of commissions paid by the total number
of shares purchased and sold during the period for which there was a
commission charged. The Average Commission Rate is not required for fiscal
periods beginning before September 1, 1995.

3
<PAGE> 10

POST-VENTURE CAPITAL FUND

September 29, 1995
For the Year Ended (Commencement of
October 31, Operations)
---------------------- through
1997 1996 October 31, 1995
--- --- ------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD................................. $16.03 $10.69 $10.00
---- ---- ----------
Income from Investment Operations
Net Investment Loss................................................. (0.35) (0.11) 0.00
Net Gain on Securities and Foreign Currency Related Items (both
realized and unrealized).......................................... 1.93 5.45 0.69
---- ---- ----------
Total from Investment Operations.................................... 1.58 5.34 0.69
---- ---- ----------
Less Distributions:
Dividend from net investment income................................. 0.00 0.00 0.00
Distribution from realized gains.................................... 0.00 0.00 0.00
---- ---- ----------
Total Distributions................................................. 0.00 0.00 0.00
---- ---- ----------
NET ASSET VALUE, END OF PERIOD....................................... $17.51 $16.03 $10.69
==== ==== ==========
Total Return......................................................... 9.86% 49.95% 6.90%+
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000s)..................................... $109,575 $165,081 $3,024
Ratios to average daily net assets:
Operating expenses.................................................. 1.66%@ 1.66%@ 1.65%*
Net investment income (loss)........................................ (1.27%) (1.13%) .25%*
Decrease reflected in above operating expense ratio due to
waivers/reimbursements............................................ .41% .66% 23.76%*
Portfolio Turnover Rate.............................................. 197.56% 168.46% 16.90%+
Average Commission Rate#............................................. $0.0401 $0.0529 --
</TABLE>

- --------------------------------------------------------------------------------

@ Interest earned on uninvested cash balances is used to offset portions of
transfer agent expense. These arrangements resulted in a reduction to the
Common Shares' expenses by .01% and 01% for the years ended October 31, 1997
and 1996, respectively. The Common Shares' operating expense ratio after
reflecting these arrangements were 1.65% and 1.65% for the years ended October
31, 1997 and 1996, respectively.

+ Non-annualized.

* Annualized.

SMALL COMPANY GROWTH FUND

<TABLE>
<CAPTION>
For the Period
December 31, 1996
(Commencement of
Operations)
through
October 31, 1997
-----------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD........................................................ $10.00
---------
Income from Investment Operations
Net Investment Loss........................................................................ (0.04)
Net Gain on Securities (both realized and unrealized)...................................... 2.29
---------
Total from Investment Operations........................................................... 2.25
---------
Less Distributions:
Dividends from net investment income....................................................... 0.00
Distributions from realized gains.......................................................... 0.00
---------
Total Distributions........................................................................ 0.00
---------
NET ASSET VALUE, END OF PERIOD.............................................................. $12.25
=========
Total Return................................................................................ 22.50%+
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000s)............................................................ $11,977
Ratios to average daily net assets:
Operating expenses......................................................................... 1.41%@*
Net investment loss........................................................................ (.53%)*
Decrease reflected in above operating expense ratio due to waivers/reimbursements.......... 3.66%*
Portfolio Turnover Rate..................................................................... 123.24%*+
Average Commission Rate#.................................................................... $0.0577
</TABLE>

- --------------------------------------------------------------------------------

@ Interest earned on uninvested cash balances is used to offset portions of
transfer agent expense. These arrangements reduced the Common Shares expense
ratio by .01% for the period ended October 31, 1997. The Common Shares'
operating expense ratio after reflecting these arrangements was 1.40% for the
year ended October 31, 1997.

+ Non-annualized.

* Annualized.

# Computed by dividing the total amount of commissions paid by the total number
of shares purchased and sold during the period for which there was a
commission charged.

4
<PAGE> 11

SMALL COMPANY VALUE FUND

<TABLE>
<CAPTION>
For the Period
December 29, 1995
For the (Commencement of
Year Ended Operations) through
October 31, 1997 October 31, 1996
---------------- -------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD...................................... $14.38 $10.00
-------- ----------
Income from Investment Operations
Net Investment Loss...................................................... (0.08) (0.02)
Net Gain on Securities (both realized and unrealized).................... 4.64 4.40
-------- ----------
Total from Investment Operations......................................... 4.56 4.38
-------- ----------
Less Distributions:
Dividends from net investment income..................................... 0.00 0.00
Distributions from realized gains........................................ (0.17) 0.00
-------- ----------
Total Distributions...................................................... (0.17) 0.00
-------- ----------
NET ASSET VALUE, END OF PERIOD............................................ $18.77 $14.38
======== ==========
Total Return.............................................................. 32.05% 43.80%+
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000s).......................................... $223,675 $84,045
Ratios to average daily net assets:
Operating expenses....................................................... 1.70%@ 1.75%@*
Net investment loss...................................................... (.63%) (.43%)*
Decrease reflected in above operating expense ratio due to
waivers/reimbursements................................................. .03% .44%*
Portfolio Turnover Rate................................................... 105.87% 43.14%*+
Average Commission Rate#.................................................. $0.0555 $0.0570
</TABLE>

- --------------------------------------------------------------------------------

@ Interest earned on uninvested cash balances is used to offset portions of
transfer agent expense. These arrangements resulted in a reduction to the
Common Shares' expenses by .01% and .00% for its year or period ended October
31, 1997 and 1996, respectively. The Common Shares' operating expense ratio
after reflecting these arrangements were 1.69% and 1.75% for the years ended
October 31, 1997 and 1996, respectively.

+ Non-annualized.

* Annualized.

# Computed by dividing the total amount of commissions paid by the total number
of shares purchased and sold during the period for which there was a
commission charged.

INVESTMENT OBJECTIVES AND POLICIES
- --------------------------------------------------------------------------------

Each Fund's objective is a fundamental policy and may not be amended without
first obtaining the approval of a majority of the outstanding shares of that
Fund. Any investment involves risk and, therefore, there can be no assurance
that any Fund will achieve its investment objective. See "Portfolio Investments"
and "Certain Investment Strategies" for descriptions of certain types of
investments the Funds may make.

EMERGING GROWTH FUND
The Emerging Growth Fund seeks maximum capital appreciation. The Fund is a
non-diversified management investment company that pursues its investment
objective by investing in a portfolio of equity securities of domestic
companies. The Fund ordinarily will invest at least 65% of its total assets in
common stocks or warrants of emerging growth companies that represent attractive
opportunities for maximum capital appreciation. Emerging growth companies are
small- or medium-sized companies that have passed their start-up phase and that
show positive earnings and prospects of achieving significant profit and gain in
a relatively short period of time.
Emerging growth companies generally stand to benefit from new products or
services, technological developments or changes in management and other factors
and include smaller companies experiencing unusual developments affecting their
market value. These "special situation companies" include

5
<PAGE> 12

companies that are involved in the following: an acquisition or consolidation; a
reorganization; a recapitalization; a merger, liquidation, or distribution of
cash, securities or other assets; a tender or exchange offer; a breakup or
workout of a holding company; litigation which, if resolved favorably, would
improve the value of the company's stock; or a change in corporate control.

POST-VENTURE CAPITAL FUND

Because of the nature of the Post-Venture Capital Fund's investments and
certain strategies it may use, such as investing in Private Funds (as defined
below), an investment in the Fund should be considered only for the aggressive
portion of an investor's portfolio and may not be appropriate for all investors.

The Post-Venture Capital Fund's investment objective is long-term growth of
capital. The Fund is a diversified management investment company that pursues an
aggressive investment strategy. The Fund pursues its investment objective by
investing primarily in equity securities of companies considered by Warburg
Pincus Asset Management, Inc., the Fund's investment adviser ("Warburg") to be
in their post-venture capital stage of development. The Fund intends to invest
in securities of post-venture capital companies, as defined below, that are
traded on a national securities exchange or in an organized over-the-counter
market.

Although the Fund may invest up to 10% of its assets in venture capital and
other investment funds, the Fund is not designed primarily to provide venture
capital financing. Rather, under normal market conditions, the Fund will invest
at least 65% of its total assets in equity securities of "post-venture capital
companies." A post-venture capital company is a company that has received
venture capital financing either (a) during the early stages of the company's
existence or the early stages of the development of a new product or service, or
(b) as part of a restructuring or recapitalization of the company. The
investment of venture capital financing, distribution of such company's
securities to venture capital investors, or initial public offering ("IPO"),
whichever is later, will have been made within ten years prior to the Fund's
purchase of the company's securities.

Warburg believes that venture capital participation in a company's capital
structure can lead to revenue/earnings growth rates above those of older, public
companies such as those in the Dow Jones Industrial Average, the Fortune 500 or
the Morgan Stanley Capital International Europe, Australasia, Far East ("EAFE")
Index. Venture capitalists finance start-up companies, companies in the early
stages of developing new products or services and companies undergoing a
restructuring or recapitalization, since these companies may not have access to
conventional forms of financing (such as bank loans or public issuances of
stock). Venture capitalists may hold substantial positions in companies that may
have been acquired at prices significantly below the initial public offering
price. This may create a potential adverse impact in the short-term on the
market price of a company's stock due to sales in the open market by a venture
capitalist or others who acquired the stock at lower prices

6
<PAGE> 13

prior to the company's IPO. Warburg will consider the impact of such sales in
selecting post-venture capital investments. Venture capitalists may be
individuals or funds organized by venture capitalists which are typically
offered only to large institutions, such as pension funds and endowments, and
certain accredited investors. Outside of the United States, venture capitalists
may also consist of merchant banks and other banking institutions that provide
venture capital financing in a manner similar to U.S. venture capitalists.
Venture capital participation in a company is often reduced when the company
engages in an IPO of its securities or when it is involved in a merger, tender
offer or acquisition.

Warburg has experience in researching smaller companies, companies in the
early stages of development and venture capital-financed companies. Its team of
analysts, led by Elizabeth Dater and Stephen Lurito, regularly monitors
portfolio companies whose securities are held by over 400 of the larger domestic
venture capital funds. Ms. Dater and Mr. Lurito have managed post-venture equity
securities in separate accounts for institutions since 1989 and currently manage
over $1 billion of such assets for investment companies and other institutions.

PRIVATE FUND INVESTMENTS. Up to 10% of the Fund's assets may be invested in
United States or foreign private limited partnerships or other investment funds
("Private Funds") that themselves invest in equity or debt securities of (a)
companies in the venture capital or post-venture capital stages of development
or (b) companies engaged in special situations or changes in corporate control,
including buyouts. In selecting Private Funds for investment, Abbott Capital
Management, LLC, the Fund's sub-investment adviser with respect to Private Funds
("Abbott"), attempts to invest in a mix of Private Funds that will provide an
above average internal rate of return (i.e., the discount rate at which the
present value of an investment's future cash inflows (dividend income and
capital gains) are equal to the cost of the investment). Warburg believes that
the Fund's investments in Private Funds offers individual investors a unique
opportunity to participate in venture capital and other private investment
funds, providing access to investment opportunities typically available only to
large institutions and accredited investors. Although the Fund's investments in
Private Funds are limited to a maximum of 10% of the Fund's assets, these
investments are highly speculative and volatile and may produce gains or losses
in the portion of the Fund that exceed those of the Fund's other holdings and of
more mature companies generally.

Because Private Funds generally are investment companies for purposes of the
Investment Company Act of 1940, as amended (the "1940 Act"), the Fund's ability
to invest in them will be limited. In addition, Fund shareholders will remain
subject to the Fund's expenses while also bearing their pro rata share of the
operating expenses of the Private Funds. The ability of the Fund to dispose of
interests in Private Funds is very limited and will involve the risks described
under "Risk Factors and Special Considerations -- Non-Publicly Traded
Securities; Rule 144A Securities." In valuing the Fund's holdings

7
<PAGE> 14

of interests in Private Funds, the Fund will be relying on the most recent
reports provided by the Private Funds themselves prior to calculation of the
Fund's net asset value. These reports, which are provided on an infrequent
basis, often depend on the subjective valuations of the managers of the Private
Funds and, in addition, would not generally reflect positive or negative
subsequent developments affecting companies held by the Private Fund. See "Net
Asset Value." Debt securities held by a Private Fund will tend to be rated below
investment grade and may be rated as low as C by Moody's Investors Service, Inc.
("Moody's") or D by Standard & Poor's Ratings Services ("S&P"). Securities in
these rating categories are in payment default or have extremely poor prospects
of attaining any investment standing. For a discussion of the risks of investing
in below investment grade debt, see "Investment Policies -- Below Investment
Grade Debt Securities" in the Statement of Additional Information. For a
discussion of the possible tax consequences of investing in foreign Private
Funds, see "Additional Information Concerning Taxes -- Investment in Passive
Foreign Investment Companies" in the Statement of Additional Information.

The Fund may also hold non-publicly traded equity securities of companies in
the venture and post-venture stages of development, such as those of
closely-held companies or private placements of public companies. The portion of
the Fund's assets invested in these non-publicly traded securities will vary
over time depending on investment opportunities and other factors. The Fund's
illiquid assets, including interests in Private Funds and other illiquid
non-publicly traded securities, may not exceed 15% of the Fund's net assets.

OTHER STRATEGIES. The Fund may invest up to 35% of its assets in exchange-
traded and over-the-counter securities that do not meet the definition of post-
venture capital companies without regard to market capitalization. Up to 10% of
the Fund's assets may be invested, directly or through Private Funds, in
securities of issuers engaged at the time of purchase in "special situations,"
such as a restructuring or recapitalization; an acquisition, consolidation,
merger or tender offer; a change in corporate control or investment by a venture
capitalist.

To attempt to reduce risk, the Fund will diversify its investments over a
broad range of issuers operating in a variety of industries. The Fund may hold
securities of companies of any size, and will not limit capitalization of
companies it selects to invest in. However, due to the nature of the venture
capital to post-venture cycle, the Fund anticipates that the average market
capitalization of companies in which it invests will be less than $1 billion at
the time of investment. Although the Fund will invest primarily in U.S.
companies, up to 20% of the Fund's assets may be invested in securities of
issuers located in foreign countries. Equity securities in which the Fund will
invest are common stock, preferred stock, warrants, securities convertible into
or exchangeable for common stock and partnership interests. The Fund may engage
in a variety of strategies to reduce risk or seek to enhance return, including
engaging in short selling (see "Certain Investment Strategies").

8
<PAGE> 15

SMALL COMPANY GROWTH FUND

The Fund seeks capital growth. The Fund is a diversified investment fund that
pursues its investment objective by investing in a portfolio of equity
securities of small-sized domestic companies. The Fund intends to invest at
least 80% of its total assets in common stocks or warrants of small companies
that present attractive opportunities for capital growth and, under normal
market conditions, will invest at least 65% of its total assets in such
securities. The Fund considers a "small" company to be one that has a market
capitalization, measured at the time the Fund purchases a security of that
company, within the range of capitalizations of companies represented in the
Russell 2000 Index. (As of January 31, 1998, the Russell 2000 Index included
companies with the market capitalizations between $23.7 million and $2.7
billion.) Companies whose capitalization no longer meets this definition after
purchase continue to be considered small companies for purposes of the Fund's
policy of investing at least 65% of its assets in small companies. In addition,
the Fund has the flexibility to invest in companies with a market capitalization
of any size when the 65% policy is met. As a result of these policies, the
average market capitalization of the Fund at any particular time may exceed $2.7
billion, particularly at times when the market values of small company stocks
are rising. The Fund will invest primarily in companies whose securities are
traded on domestic stock exchanges or in the over-the-counter market, but may
invest up to 20% of its assets in foreign securities which are not included
within the Fund's 65% policy of investing in small companies, described above.
Small companies in which the Fund may invest may still be in the developmental
stage, may be older companies that appear to be entering a new stage of growth
progress owing to factors such as management changes or development of new
technology, products or markets or may be companies providing products or
services with a high unit volume growth rate. The Fund's investments will be
made on the basis of their equity characteristics and securities ratings
generally will not be a factor in the selection process.

The Fund may also invest in securities of emerging growth companies, which can
be either small- or medium-sized companies that have passed their start-up phase
and that show positive earnings and prospects of achieving significant profit
and gain in a relatively short period of time. Emerging growth companies
generally stand to benefit from new products or services, technological
developments or changes in management and other factors and include smaller
companies experiencing unusual developments affecting their market value.

SMALL COMPANY VALUE FUND
The Small Company Value Fund seeks long-term capital appreciation. The Fund is
a diversified management investment company that pursues its investment
objective by investing primarily in a portfolio of equity securities of small
capitalization companies that Warburg considers to be relatively undervalued.
Current income is a secondary consideration in selecting portfolio

9
<PAGE> 16

investments. Under normal market conditions the Fund will invest at least
65% of its total assets in common stocks, preferred stocks, debt securities
convertible into common stocks, warrants and other rights of small companies.
The Fund considers a "small" company to be one that has a market capitalization,
measured at the time the Fund purchases a security of that company, within the
range of capitalizations of companies represented in the Russell 2000 Index. (As
of January 31, 1998, the Russell 2000 Index included companies with market
capitalizations between $23.7 million and $2.7 billion.) Companies whose
capitalization no longer meets this definition after purchase continue to be
considered small companies for purposes of the Fund's policy of investing at
least 65% of its assets in small companies. In addition, the Fund has the
flexibility to invest in companies with a market capitalization of any size when
the 65% policy is met. As a result of these policies, the average market
capitalization of the Fund at any particular time may exceed $2.7 billion,
particularly at times when the market values of small company stocks are rising.

Warburg will determine whether a company is undervalued based on a variety of
measures, including price/earnings ratio, price/book ratio, price/cash flow
ratio, earnings growth and debt/capital ratio. Other relevant factors, including
a company's asset value, franchise value and quality of management, will also be
considered. The Fund will invest primarily in companies whose securities are
traded on U.S. stock exchanges or in the U.S. over-the-counter market, but may
invest up to 20% of its assets in foreign securities which are not included
within the Fund's 65% policy on investing in small companies, described above.

PORTFOLIO INVESTMENTS
- --------------------------------------------------------------------------------

DEBT SECURITIES. Each Fund may invest up to 20% of its total assets in debt
securities (other than money market obligations) and, in the case of the
Emerging Growth Fund, preferred stocks that are not convertible into common
stock for the purpose of seeking capital appreciation. The interest income to be
derived may be considered as one factor in selecting debt securities for
investment by Warburg. Because the market value of debt obligations can be
expected to vary inversely to changes in prevailing interest rates, investing in
debt obligations may provide an opportunity for capital appreciation when
interest rates are expected to decline. The success of such a strategy is
dependent upon Warburg's ability to accurately forecast changes in interest
rates. The market value of debt obligations may also be expected to vary
depending upon, among other factors, the ability of the issuer to repay
principal and interest, any change in investment rating and general economic
conditions. Each Fund's holdings of debt securities will be considered
investment grade at the time of purchase, except that up to 5% of the Small
Company Growth Fund's assets may be below investment grade. A security will be
deemed to be investment grade if it is rated within the four highest grades by
Moody's or S&P or, if unrated, is determined to be of comparable quality by
Warburg.

10
<PAGE> 17

Bonds rated in the fourth highest grade may have speculative characteristics and
changes in economic conditions or other circumstances are more likely to lead to
a weakened capacity to make principal and interest payments than is the case
with higher grade bonds. The Small Company Growth Fund's holdings of debt
securities rated below investment grade (commonly referred to as "junk bonds")
may be rated as low as C by Moody's or D by S&P at the time of purchase, or may
be unrated securities considered to be of equivalent quality. Securities that
are rated C by Moody's comprise the lowest rated class and can be regarded as
having extremely poor prospects of ever attaining any real investment standing.
Debt rated D by S&P is in default or is expected to default upon maturity or
payment date. Subsequent to its purchase by a Fund, an issue of securities may
cease to be rated or its rating may be reduced below the minimum required for
purchase by the Fund. Neither event will require sale of such securities,
although Warburg will consider such event in its determination of whether the
Fund should continue to hold the securities.

When Warburg believes that a defensive posture is warranted, each Fund may
invest temporarily without limit in investment grade debt obligations and in
domestic and foreign money market obligations, including repurchase agreements.
MONEY MARKET OBLIGATIONS. Each Fund is authorized to invest, under normal
market conditions, up to 20% of its total assets in domestic and foreign
short-term (one year or less remaining to maturity) and medium-term (five years
or less remaining to maturity) money market obligations and for temporary
defensive purposes may invest in these securities without limit. These
instruments consist of obligations issued or guaranteed by the U.S. government
or a foreign government, their agencies or instrumentalities; bank obligations
(including certificates of deposit, time deposits and bankers' acceptances of
domestic or foreign banks, domestic savings and loans and similar institutions)
that are high quality investments or, if unrated, deemed by Warburg to be high
quality investments; commercial paper rated no lower than A-2 by S&P or Prime-2
by Moody's or the equivalent from another major rating service or, if unrated,
of an issuer having an outstanding, unsecured debt issue then rated within the
three highest rating categories; and repurchase agreements with respect to the
foregoing.
Repurchase Agreements. The Funds may invest in repurchase agreement
transactions with member banks of the Federal Reserve System and certain
non-bank dealers. Repurchase agreements are contracts under which the buyer of a
security simultaneously commits to resell the security to the seller at an
agreed-upon price and date. Under the terms of a typical repurchase agreement, a
Fund would acquire any underlying security for a relatively short period
(usually not more than one week) subject to an obligation of the seller to
repurchase, and the Fund to resell, the obligation at an agreed-upon price and
time, thereby determining the yield during the Fund's holding period. This
arrangement results in a fixed rate of return that is not subject to market
fluctuations during the Fund's holding period. The value of the under-

11
<PAGE> 18

lying securities will at all times be at least equal to the total amount of the
purchase obligation, including interest. The Fund bears a risk of loss in the
event that the other party to a repurchase agreement defaults on its obligations
or becomes bankrupt and the Fund is delayed or prevented from exercising its
right to dispose of the collateral securities, including the risk of a possible
decline in the value of the underlying securities during the period in which the
Fund seeks to assert this right. Warburg, acting under the supervision of the
Fund's Board of Directors (the "Board"), monitors the creditworthiness of those
bank and non-bank dealers with which each Fund enters into repurchase agreements
to evaluate this risk. A repurchase agreement is considered to be a loan under
the 1940 Act.

Money Market Mutual Funds. Where Warburg believes that it would be beneficial
to the Fund and appropriate considering the factors of return and liquidity,
each Fund may invest up to 5% of its assets in securities of money market mutual
funds that are unaffiliated with the Fund or Warburg. As a shareholder in any
mutual fund, a Fund will bear its ratable share of the mutual fund's expenses,
including management fees, and will remain subject to payment of the Fund's
administration fees and other expenses with respect to assets so invested.

U.S. GOVERNMENT SECURITIES. U.S. government securities in which a Fund may
invest include: direct obligations of the U.S. Treasury and obligations issued
by U.S. government agencies and instrumentalities, including instruments that
are supported by the full faith and credit of the United States, instruments
that are supported by the right of the issuer to borrow from the U.S. Treasury
and instruments that are supported by the credit of the instrumentality.

CONVERTIBLE SECURITIES. Convertible securities in which a Fund may invest,
including both convertible debt and convertible preferred stock, may be
converted at either a stated price or stated rate into underlying shares of
common stock. Because of this feature, convertible securities enable an investor
to benefit from increases in the market price of the underlying common stock.
Convertible securities provide higher yields than the underlying equity
securities, but generally offer lower yields than non-convertible securities of
similar quality. The value of convertible securities fluctuates in relation to
changes in interest rates like bonds and, in addition, fluctuates in relation to
the underlying common stock. Subsequent to purchase by a Fund, convertible
securities may cease to be rated or a rating may be reduced below the minimum
required for purchase by the Fund. Neither event will require sale of such
securities, although Warburg will consider such event in its determination of
whether a Fund should continue to hold the securities. Each of the Small Company
Growth and Small Company Value Funds does not currently intend during the coming
year to hold more than 5% of its net assets in convertible securities rated
below investment grade.

WARRANTS. Each Fund may invest up to 10% of its total assets, 15% in the case
of the Small Company Growth Fund, in warrants. Warrants are securities

12
<PAGE> 19

that give the holder the right, but not the obligation, to purchase equity
issues of the company issuing the warrants, or a related company, at a fixed
price either on a date certain or during a set period.

RISK FACTORS AND SPECIAL CONSIDERATIONS
- --------------------------------------------------------------------------------

Investing in common stocks and securities convertible into common stocks is
subject to the inherent risk of fluctuations in the prices of such securities.
For certain additional risks relating to each Fund's investments, see "Portfolio
Investments" and "Certain Investment Strategies" in this Prospectus.

SMALL CAPITALIZATION AND EMERGING GROWTH COMPANIES; UNSEASONED ISSUERS. Each
Fund may invest in securities of emerging growth and small- and medium-sized
companies and companies with continuous operations of less than three years
("unseasoned issuers"). These investments may involve greater risks since these
securities may have limited marketability and, thus, may be more volatile than
securities of larger, more established companies or the market averages in
general. Because these issuers normally have fewer shares outstanding than
larger companies, it may be more difficult to buy or sell significant amounts of
such shares without an unfavorable impact on prevailing prices. These issuers
may have limited product lines, markets or financial resources and may lack
management depth. In addition, these issuers are typically subject to a greater
degree of changes in earnings and business prospects than are larger, more
established companies. There is typically less publicly available information
concerning these issuers than for larger, more established ones. Securities of
issuers in "special situations" also may be more volatile, since the market
value of these securities may decline in value if the anticipated benefits do
not materialize. Companies in "special situations" include, but are not limited
to, companies involved in an acquisition or consolidation; reorganization;
recapitalization; merger, liquidation or distribution of cash, securities or
other assets; a tender or exchange offer, a breakup or workout of a holding
company; or litigation which, if resolved favorably, would improve the value of
the companies' securities. Although investing in securities of small- and
medium-sized or emerging growth companies, unseasoned issuers or "special
situations" offers potential for above-average returns if the companies are
successful, the risk exists that the companies will not succeed and the prices
of the companies' shares could significantly decline in value. Therefore, an
investment in a Fund may involve a greater degree of risk than an investment in
other mutual funds that seek capital appreciation by investing in better-known,
larger companies.

NON-PUBLICLY TRADED SECURITIES; RULE 144A SECURITIES. The Funds may purchase
securities that are not registered under the Securities Act of 1933, as amended
(the "Securities Act"), but that can be sold to "qualified institutional buyers"
in accordance with Rule 144A under the Securities Act ("Rule 144A Securities").
An investment in Rule 144A Securities will be considered illiquid and therefore
subject to each Fund's limitation on the purchase of illiquid securities, unless
the Fund's Board determines on an ongoing basis that an

13
<PAGE> 20

adequate trading market exists for the security. In addition to an adequate
trading market, each Board will also consider factors such as trading activity,
availability of reliable price information and other relevant information in
determining whether a Rule 144A Security is liquid. This investment practice
could have the effect of increasing the level of illiquidity in the Funds to the
extent that qualified institutional buyers become uninterested for a time in
purchasing Rule 144A Securities. The Board of each Fund will carefully monitor
any investments by the Fund in Rule 144A Securities. The Boards may adopt
guidelines and delegate to Warburg the daily function of determining and
monitoring the liquidity of Rule 144A Securities, although each Board will
retain ultimate responsibility for any determination regarding liquidity.

Non-publicly traded securities (including interests in Rule 144A Securities
and, with respect to the Post-Venture Capital Fund, Private Funds) may involve a
high degree of business and financial risk and may result in substantial losses.
These securities may be less liquid than publicly traded securities, and a Fund
may take longer to liquidate these positions than would be the case for publicly
traded securities. Although these securities may be resold in privately
negotiated transactions, the prices realized on such sales could be less than
those originally paid by the Fund. Further, companies whose securities are not
publicly traded may not be subject to the disclosure and other investor
protection requirements applicable to companies whose securities are publicly
traded. A Fund's investment in illiquid securities is subject to the risk that
should the Fund desire to sell any of these securities when a ready buyer is not
available at a price that is deemed to be representative of their value, the
value of the Fund's net assets could be adversely affected.

NON-DIVERSIFIED STATUS. The Emerging Growth Fund is classified as a non-
diversified investment company under the 1940 Act, which means that the Fund is
not limited by the 1940 Act in the proportion of its assets that it may invest
in the obligations of a single issuer. The Fund will, however, comply with
diversification requirements imposed by the Internal Revenue Code of 1986, as
amended (the "Code"), for qualification as a regulated investment company. As a
non-diversified investment company, the Fund may invest a greater proportion of
its assets in the obligations of a small number of issuers and, as a result, may
be subject to greater risk with respect to portfolio securities. To the extent
that the Fund assumes large positions in the securities of a small number of
issuers, its return may fluctuate to a greater extent than that of a diversified
company as a result of changes in the financial condition or in the market's
assessment of the issuers.

14
<PAGE> 21

addition, the price of a warrant tends to be more volatile than, and may not
correlate exactly to, the price of the underlying security. If the market price
of the underlying security is below the exercise price of the warrant on its
expiration date, the warrant will generally expire without value.

PORTFOLIO TRANSACTIONS AND TURNOVER RATE
- --------------------------------------------------------------------------------

A Fund will attempt to purchase securities with the intent of holding them for
investment but may purchase and sell portfolio securities whenever Warburg
believes it to be in the best interests of the relevant Fund. A Fund will not
consider portfolio turnover rate a limiting factor in making investment
decisions consistent with its investment objective and policies. High portfolio
turnover rates (100% or more) may result in higher dealer mark-ups or
underwriting commissions as well as other transaction costs, including
correspondingly higher brokerage commissions. In addition, short-term gains
realized from portfolio turnover may be taxable to shareholders as ordinary
income. See "Dividends, Distributions and Taxes -- Taxes" below and "Investment
Policies -- Portfolio Transactions" in the Statement of Additional Information.

All orders for transactions in securities or options on behalf of a Fund are
placed by Warburg with broker-dealers that it selects, including Counsellors
Securities Inc., the Funds' distributor ("Counsellors Securities"). A Fund may
utilize Counsellors Securities in connection with a purchase or sale of
securities when Warburg believes that the charge for the transaction does not
exceed usual and customary levels and when doing so is consistent with
guidelines adopted by the governing Board.

CERTAIN INVESTMENT STRATEGIES
- --------------------------------------------------------------------------------

Although there is no intention of doing so during the coming year, the Small
Company Value Fund may purchase securities on a when-issued basis and purchase
or sell securities for delayed delivery and each Fund is authorized to engage in
the following investment strategies: (i) lending portfolio securities and (ii)
entering into reverse repurchase agreements and dollar rolls. Detailed
information concerning each Fund's strategies and related risks is contained
below and in the Statement of Additional Information.

FOREIGN SECURITIES. Each Fund may invest up to 20% of its total assets in the
securities of foreign issuers. There are certain risks involved in investing in
securities of companies and governments of foreign nations which are in addition
to the usual risks inherent in domestic investments. These risks include those
resulting from fluctuations in currency exchange rates, revaluation of
currencies, future adverse political and economic developments and the possible
imposition of currency exchange blockages or other foreign governmental laws or
restrictions, reduced availability of public information concerning issuers, the
lack of uniform accounting, auditing and financial reporting standards and other
regulatory practices and requirements that are often generally less rigorous
than those applied in the United States. Moreover, securities of many foreign
companies may be less liquid and their prices

15
<PAGE> 22

more volatile than those of securities of comparable U.S. companies. Certain
foreign countries are known to experience long delays between the trade and
settlement dates of securities purchased or sold. In addition, with respect to
certain foreign countries, there is the possibility of expropriation,
nationalization, confiscatory taxation and limitations on the use or removal of
funds or other assets of the Funds, including the withholding of dividends.
Foreign securities may be subject to foreign government taxes that would reduce
the net yield on such securities. Moreover, individual foreign economies may
differ favorably or unfavorably from the U.S. economy in such respects as growth
of gross national product, rate of inflation, capital reinvestment, resource
self-sufficiency and balance of payments positions. Investment in foreign
securities will also result in higher operating expenses due to the cost of
converting foreign currency into U.S. dollars, the payment of fixed brokerage
commissions on foreign exchanges, which generally are higher than commissions on
U.S. exchanges, higher valuation and communications costs and the expense of
maintaining securities with foreign custodians.

DEPOSITARY RECEIPTS. Certain of the above risks may be involved with American
Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs") and
International Depositary Receipts ("IDRs"), instruments that evidence ownership
of underlying securities issued by a foreign corporation. ADRs, EDRs and IDRs
may not necessarily be denominated in the same currency as the securities whose
ownership they represent. ADRs are typically issued by a U.S. bank or trust
company. EDRs (sometimes referred to as Continental Depositary Receipts) are
issued in Europe and IDRs (sometimes referred to as Global Depositary Receipts)
are issued outside the United States, each typically by non-U.S. banks and trust
companies.

OPTIONS, FUTURES AND CURRENCY TRANSACTIONS. At the discretion of Warburg, each
Fund may, but is not required to, engage in a number of strategies involving
options, futures and forward currency contracts. These strategies, commonly
referred to as "derivatives," may be used (i) for the purpose of hedging against
a decline in value of the Fund's current or anticipated portfolio holdings, (ii)
as a substitute for purchasing or selling portfolio securities or (iii) to seek
to generate income to offset expenses or increase return. TRANSACTIONS THAT ARE
NOT CONSIDERED HEDGING SHOULD BE CONSIDERED SPECULATIVE AND MAY SERVE TO
INCREASE A FUND'S INVESTMENT RISK. Transaction costs and any premiums associated
with these strategies, and any losses incurred, will affect a Fund's net asset
value and performance. Therefore, an investment in a Fund may involve a greater
risk than an investment in other mutual funds that do not utilize these
strategies. The Funds' use of these strategies may be limited by position and
exercise limits established by securities and commodities exchanges and other
applicable regulatory authorities.

Securities Options and Stock Index Options. Each Fund may write covered call
and, in the case of the Small Company Value Fund, put options on up to 25% of
the net asset value of the stock and debt securities in its portfolio and will
realize fees (referred to as "premiums") for granting the rights evidenced by

16
<PAGE> 23

the options. The Emerging Growth Fund may utilize up to 2% of its assets to
purchase U.S. exchange-traded and over-the-counter ("OTC") options; each of the
Post-Venture Capital, Small Company Growth and Small Company Value Funds may
utilize up to 10% of its assets to purchase options on stocks and debt
securities that are traded on U.S. and foreign exchanges, as well as OTC
options. The purchaser of a put option on a security has the right to compel the
purchase by the writer of the underlying security, while the purchaser of a call
option on a security has the right to purchase the underlying security from the
writer. In addition to purchasing and writing options on securities, each Fund
may also utilize up to 10% of its total assets to purchase exchange-listed and
OTC put and call options on stock indexes, and may also write such options. A
stock index measures the movement of a certain group of stocks by assigning
relative values to the common stocks included in the index.

The potential loss associated with purchasing an option is limited to the
premium paid, and the premium would partially offset any gains achieved from its
use. However, for an option writer the exposure to adverse price movements in
the underlying security or index is potentially unlimited during the exercise
period. Writing securities options may result in substantial losses to a Fund,
force the sale or purchase of portfolio securities at inopportune times or at
less advantageous prices, limit the amount of appreciation the Fund could
realize on its investments or require the Fund to hold securities it would
otherwise sell.

Futures Contracts and Related Options. Each Fund may enter into foreign
currency, interest rate and stock index futures contracts and purchase and write
(sell) related options that are traded on an exchange designated by the
Commodity Futures Trading Commission (the "CFTC") or, if consistent with CFTC
regulations, on foreign exchanges. These futures contracts are standardized
contracts for the future delivery of foreign currency or an interest rate
sensitive security or, in the case of stock index and certain other futures
contracts, are settled in cash with reference to a specified multiplier times
the change in the specified index, exchange rate or interest rate. An option on
a futures contract gives the purchaser the right, in return for the premium
paid, to assume a position in a futures contract.
Aggregate initial margin and premiums required to establish positions other
than those considered by the CFTC to be "bona fide hedging" will not exceed 5%
of a Fund's net asset value, after taking into account unrealized profits and
unrealized losses on any such contracts. Although the Funds are limited in the
amount of assets that may be invested in futures transactions, there is no
overall limit on the percentage of Fund assets that may be at risk with respect
to futures activities.
Currency Exchange Transactions. The Funds will conduct their currency exchange
transactions either (i) on a spot (i.e., cash) basis at the rate prevailing in
the currency exchange market, (ii) through entering into futures contracts or
options on futures contracts (as described above), (iii) through entering into
forward contracts to purchase or sell currency or (iv) by purchasing exchange-

17
<PAGE> 24

traded currency options. A forward currency contract involves an obligation to
purchase or sell a specific currency at a future date at a price set at the time
of the contract. An option on a foreign currency operates similarly to an option
on a security. Risks associated with currency forward contracts and purchasing
currency options are similar to those described in this Prospectus for futures
contracts and securities and stock index options. In addition, the use of
currency transactions could result in losses from the imposition of foreign
exchange controls, suspension of settlement or other governmental actions or
unexpected events. The Emerging Growth Fund will only engage in currency
exchange transactions for hedging purposes.

Hedging Considerations. The Funds may engage in options, futures and currency
transactions for, among other reasons, hedging purposes. A hedge is designed to
offset a loss on a portfolio position with a gain in the hedge position; at the
same time, however, a properly correlated hedge will result in a gain in the
portfolio position being offset by a loss in the hedge position. As a result,
the use of options, futures contracts and currency exchange transactions for
hedging purposes could limit any potential gain from an increase in value of the
position hedged. In addition, the movement in the portfolio position hedged may
not be of the same magnitude as movement in the hedge. A Fund will engage in
hedging transactions only when deemed advisable by Warburg, and successful use
of hedging transactions will depend on Warburg's ability to predict correctly
movements in the hedge and the hedged position and the correlation between them,
which could prove to be inaccurate. Even a well-conceived hedge may be
unsuccessful to some degree because of unexpected market behavior or trends.

Additional Considerations. To the extent that a Fund engages in the strategies
described above, the Fund may experience losses greater than if these strategies
had not been utilized. In addition to the risks described above, these
instruments may be illiquid and/or subject to trading limits, and the Fund may
be unable to close out a position without incurring substantial losses, if at
all. The Fund is also subject to the risk of a default by a counterparty to an
off-exchange transaction.

Asset Coverage. Each Fund will comply with applicable regulatory requirements
designed to eliminate any potential for leverage with respect to options written
by the Fund on securities, indexes and currencies; currency, interest rate and
stock index futures contracts and options on these futures contracts; and
forward currency contracts. The use of these strategies may require that the
Fund maintain cash or liquid securities in a segregated account with its
custodian or a designated sub-custodian to the extent the Fund's obligations
with respect to these strategies are not otherwise "covered" through ownership
of the underlying security, financial instrument or currency or by other
portfolio positions or by other means consistent with applicable regulatory
policies. Segregated assets cannot be sold or transferred unless equivalent
assets are substituted in their place or it is no longer necessary to segregate
them. As a result, there is a possibility that segregation of a large percentage
of

18
<PAGE> 25

the Fund's assets could impede portfolio management or the Fund's ability to
meet redemption requests or other current obligations.

SHORT SELLING. Each of the Post-Venture Capital and Small Company Growth Funds
may from time to time sell securities short. A short sale is a transaction in
which a Fund sells borrowed securities it does not own in anticipation of a
decline in the market price of the securities. The current market value of the
securities sold short (excluding short sales "against the box") will not exceed
10% of the Fund's assets.

To deliver the securities to the buyer, a Fund must arrange through a broker
to borrow the securities and, in so doing, the Fund becomes obligated to replace
the securities borrowed at their market price at the time of replacement,
whatever that price may be. A Fund will make a profit or incur a loss as a
result of a short sale depending on whether the price of the securities
decreases or increases between the date of the short sale and the date on which
the Fund purchases the security to replace the borrowed securities that have
been sold. The amount of any loss would be increased (and any gain decreased) by
any premium or interest the Fund is required to pay in connection with a short
sale. A Fund may have to pay a premium to borrow the securities and must pay any
dividends or interest payable on the securities until they are replaced.

A Fund's obligation to replace the securities borrowed in connection with a
short sale will be secured by cash or liquid securities deposited as collateral
with the broker. In addition, a Fund will place in a segregated account with its
custodian or a qualified subcustodian an amount of cash or liquid securities
equal to the difference, if any, between (i) the market value of the securities
sold at the time they were sold short and (ii) any cash or liquid securities
deposited as collateral with the broker in connection with the short sale (not
including the proceeds of the short sale). Until it replaces the borrowed
securities, a Fund will maintain the segregated account daily at a level so that
(a) the amount deposited in the account plus the amount deposited with the
broker (not including the proceeds from the short sale) will equal the current
market value of the securities sold short and (b) the amount deposited in the
account plus the amount deposited with the broker (not including the proceeds
from the short sale) will not be less than the market value of the securities at
the time they were sold short.

Short Sales Against the Box. Each of the Post-Venture Capital, Small Company
Growth and Small Company Value Funds may enter into a short sale of securities
such that when the short position is open the Fund owns an equal amount of the
securities sold short or owns preferred stocks or debt securities, convertible
or exchangeable without payment of further consideration, into an equal number
of securities sold short. This kind of short sale, which is referred to as one
"against the box," may be entered into by a Fund to, for example, lock in a sale
price for a security the Fund does not wish to sell immediately. A Fund will
deposit, in a segregated account with its custodian or a qualified subcustodian,
the securities sold short or convertible or exchangeable pre-

19
<PAGE> 26

ferred stocks or debt securities in connection with short sales against the box.
Not more than 10% of a Fund's net assets (taken at current value) may be held as
collateral for short sales against the box at any one time.

WHEN-ISSUED SECURITIES AND DELAYED-DELIVERY TRANSACTIONS. Each of the
Emerging Growth, Post-Venture Capital and Small Company Growth Funds may utilize
up to 20% of its total assets to purchase securities on a when-issued basis and
purchase or sell securities on a delayed-delivery basis. In these transactions,
payment for and delivery of the securities occurs beyond the regular settlement
dates. A Fund will not enter into a when-issued or delayed-delivery transaction
for the purpose of leverage, but may sell the right to acquire a when-issued
security prior to its acquisition or dispose of its right to deliver or receive
securities in a delayed-delivery transaction if Warburg deems it advantageous to
do so. The payment obligation and interest rate that will be received in
when-issued and delayed-delivery transactions are fixed at the time the buyer
enters into the commitment. Due to fluctuations in the value of securities
purchased or sold on a when-issued or delayed-delivery basis, the prices of such
securities may be higher or lower than the prices available in the market on the
dates when the investments are actually delivered to the buyers.

Each Fund will establish a segregated account with its custodian consisting of
cash or liquid securities in an amount equal to the amount of its when-issued
and delayed-delivery purchase commitments and will segregate the securities
underlying commitments to sell securities for delayed delivery.

INVESTMENT GUIDELINES
- --------------------------------------------------------------------------------

Each Fund may invest up to 10% of its total assets, 15% of net assets in the
case of each of the Post-Venture Capital and Small Company Growth Funds, in
securities with contractual or other restrictions on resale and other
instruments that are not readily marketable ("illiquid securities"), including
(i) securities issued as part of a privately negotiated transaction between an
issuer and one or more purchasers; (ii) repurchase agreements with maturities
greater than seven days; (iii) time deposits maturing in more than seven
calendar days; and (iv) certain Rule 144A Securities. Each Fund may borrow from
banks for temporary or emergency purposes, such as meeting anticipated
redemption requests, provided that reverse repurchase agreements and any other
borrowing by the Fund may not exceed 10% of its total assets (30% in the case of
each of the Post-Venture Capital, Small Company Growth and Small Company Value
Funds), and may pledge up to 10% of its assets in connection with borrowings (to
the extent necessary to secure permitted borrowings in the case of each of the
Post-Venture Capital, Small Company Growth and Small Company Value Funds).
Whenever borrowings (including reverse repurchase agreements) exceed 5% of the
value of a Fund's total assets (in the case of each of the Post-Venture Capital
and Small Company Growth Funds, 5% of net assets), the Fund will not make any
investments (including roll-overs). Except for the limitations on borrowing, the
investment guidelines

20
<PAGE> 27

set forth in this paragraph may be changed at any time without shareholder
consent by vote of the Board of each Fund, subject to the limitations contained
in the 1940 Act. A complete list of investment restrictions that each Fund has
adopted identifying additional restrictions that cannot be changed without the
approval of the majority of the Fund's outstanding shares is contained in the
Statement of Additional Information.

MANAGEMENT OF THE FUNDS
- --------------------------------------------------------------------------------

INVESTMENT ADVISERS. Each Fund employs Warburg as its investment adviser and
the Post-Venture Capital Fund employs Abbott as its sub-investment adviser.
Warburg, subject to the control of each Fund's officers and the Board, manages
the investment and reinvestment of the assets of the Funds in accordance with
each Fund's investment objective and stated investment policies. Warburg makes
investment decisions for each Fund, places orders to purchase or sell securities
on behalf of each such Fund and supervises the activities of Abbott. Warburg
also employs a support staff of management personnel to provide services to the
Funds and furnishes each Fund with office space, furnishings and equipment.
Abbott, in accordance with the investment objective and policies of the
Post-Venture Capital Fund, makes investment decisions for the Fund regarding
investments in Private Funds, effects transactions in interests in Private Funds
on behalf of the Fund and assists in administrative functions relating to
investments in Private Funds.

For the services provided by Warburg, the Emerging Growth Fund, the
Post-Venture Capital Fund, the Small Company Growth Fund and the Small Company
Value Fund pay Warburg a fee calculated at an annual rate of .90%, 1.25% (out of
which Warburg pays Abbott for sub-investment advisory services), 1.00% and
1.00%, respectively, of the Fund's average daily net assets. Warburg and each
Fund's co-administrators may voluntarily waive a portion of their fees from time
to time and temporarily limit the expenses to be borne by the Fund.

Warburg. Warburg is a professional investment advisory firm which provides
investment services to investment companies, employee benefit plans, endowment
funds, foundations and other institutions and individuals. As of December 31,
1997, Warburg managed approximately $19.7 billion of assets, including
approximately $11.3 billion of investment company assets. Incorporated in 1970,
Warburg is indirectly controlled by Warburg, Pincus & Co. ("WP&Co."), which has
no business other than being a holding company of Warburg and its affiliates.
Lionel I. Pincus, the managing partner of WP&Co., may be deemed to control both
WP&Co. and Warburg. Warburg's address is 466 Lexington Avenue, New York, New
York 10017-3147.

Abbott. Abbott is an independent specialized investment firm with assets under
management of approximately $2.3 billion. Abbott is a registered investment
adviser which concentrates on venture capital, buyout and special situations
partnership investments. Abbott's management team provides full-service private
equity programs to clients. The predecessor firm to Abbott was

21
<PAGE> 28

organized in 1986 as a Delaware limited partnership and converted to a Delaware
limited liability company effective July 1, 1997. Abbott's principal office is
located at 50 Rowes Wharf, Suite 240, Boston, Massachusetts 02110-3328.

PORTFOLIO MANAGERS.

Emerging Growth Fund. The Co-Portfolio Managers of the Emerging Growth Fund
are Elizabeth B. Dater and Stephen J. Lurito. Ms. Dater has been Co-Portfolio
Manager of the Emerging Growth Fund since its inception on January 21, 1988. She
is a Managing Director of Warburg and has been a Portfolio Manager of Warburg
since 1978. Mr. Lurito has been a Co-Portfolio Manager of the Emerging Growth
Fund since 1990. He is a Managing Director of Warburg and has been with Warburg
since 1987.

Post-Venture Capital Fund. Ms. Dater and Mr. Lurito, described above, are also
Co-Portfolio Managers of the Post-Venture Capital Fund.

Robert S. Janis and Christopher M. Nawn are Associate Portfolio Managers and
Research Analysts for the Fund. Mr. Janis is a Senior Vice President of Warburg
and has been with Warburg since October 1994, before which time he was a vice
president and senior research analyst at U.S. Trust Company of New York. Mr.
Nawn is also a Senior Vice President of Warburg and has been with Warburg since
September 1994, before which time he was a senior sector analyst and portfolio
manager at the Dreyfus Corporation.

Raymond L. Held and Thaddeus I. Gray, Investment Managers and Managing
Directors of Abbott, manage the Fund's investments in Private Funds. Mr. Held
and Mr. Gray have been associated with Abbott and its predecessor firm since
1986 and 1989, respectively.

Small Company Growth Fund. Mr. Lurito, described above, is also Portfolio
Manager of the Small Company Growth Fund.

Small Company Value Fund. George U. Wyper is the Portfolio Manager of the
Small Company Value Fund. Mr. Wyper is a Managing Director of Warburg, which he
joined in August 1994, before which time he was chief investment officer of
White River Corporation and president of Hanover Advisors, Inc. Kyle F. Frey, a
Senior Vice President of Warburg, is Associate Portfolio Manager and Research
Analyst of the Fund. Mr. Frey has been with Warburg since 1989.

CO-ADMINISTRATORS. The Funds employ Counsellors Funds Service, Inc.
("Counsellors Service"), a wholly owned subsidiary of Warburg, as a co-
administrator. As co-administrator, Counsellors Service provides shareholder
liaison services to the Funds including responding to shareholder inquiries and
providing information on shareholder investments. Counsellors Service also
performs a variety of other services, including furnishing certain executive and
administrative services, acting as liaison between the Funds and their various
service providers, furnishing corporate secretarial services, which include
preparing materials for meetings of the Boards, preparing proxy statements and
annual and semiannual reports, assisting in the preparation of tax returns and
monitoring and developing compliance procedures for the Funds.

22
<PAGE> 29

As compensation, each Fund pays Counsellors Service a fee calculated at an
annual rate of .10% of the Fund's average daily net assets.

Each Fund employs PFPC Inc. ("PFPC"), an indirect, wholly owned subsidiary of
PNC Bank Corp., as a co-administrator. As a co-administrator, PFPC calculates
the Fund's net asset value, provides all accounting services for the Fund and
assists in related aspects of the Fund's operations. As compensation each Fund
pays PFPC a fee calculated at an annual rate of .10% of the Fund's first $500
million in average daily net assets, .075% of the next $1 billion in assets and
.05% of assets exceeding $1.5 billion, exclusive of out-of-pocket expenses. PFPC
has its principal offices at 400 Bellevue Parkway, Wilmington, Delaware 19809.

CUSTODIANS. PNC Bank, National Association ("PNC") serves as custodian of each
Fund's U.S. assets, and State Street Bank and Trust Company ("State Street")
serves as custodian of each Fund's non-U.S. assets. Like PFPC, PNC is a
subsidiary of PNC Bank Corp. and its principal business address is 1600 Market
Street, Philadelphia, Pennsylvania 19103. State Street's principal business
address is 225 Franklin Street, Boston, Massachusetts 02110.

TRANSFER AGENT. State Street also acts as shareholder servicing agent,
transfer agent and dividend disbursing agent for the Funds. It has delegated to
Boston Financial Data Services, Inc., a 50% owned subsidiary ("BFDS"),
responsibility for most shareholder servicing functions. BFDS's principal
business address is 2 Heritage Drive, North Quincy, Massachusetts 02171.

DISTRIBUTOR. Counsellors Securities serves as distributor of the shares of the
Funds. Counsellors Securities is a wholly owned subsidiary of Warburg and is
located at 466 Lexington Avenue, New York, New York 10017-3147. No compensation
is payable by the Emerging Growth Fund to Counsellors Securities for
distribution services. Counsellors Securities receives a fee at an annual rate
equal to .25% of the average daily net assets of each of the Post-Venture
Capital, Small Company Growth and Small Company Value Funds' Common Shares for
distribution services, pursuant to a shareholder servicing and distribution plan
(the "12b-1 Plan") adopted by the Fund pursuant to Rule 12b-1 under the 1940
Act. Amounts paid to Counsellors Securities under the 12b-1 Plan may be used by
Counsellors Securities to cover expenses that are primarily intended to result
in, or that are primarily attributable to, (i) the sale of the Common Shares,
(ii) ongoing servicing and/or maintenance of the accounts of Common Shareholders
of a Fund and (iii) sub-transfer agency services, subaccounting services or
administrative services related to the sale of the Common Shares, all as set
forth in the 12b-1 Plan. Payments under the 12b-1 Plan are not tied exclusively
to the distribution expenses actually incurred by Counsellors Securities and the
payments may exceed distribution expenses actually incurred. The Board of each
of the Post-Venture Capital, Small Company Growth and Small Company Value Funds
evaluates the appropriateness of the 12b-1 Plan on a continuing basis and in
doing so considers all relevant factors, including expenses borne by Counsellors
Securities and amounts received under the 12b-1 Plan.

23
<PAGE> 30

Warburg or its affiliates may, at their own expense, provide promotional
incentives for qualified recipients who support the sale of shares of a Fund,
consisting of securities dealers who have sold Fund shares or others, including
banks and other financial institutions, under special arrangements. Incentives
may include opportunities to attend business meetings, conferences, sales or
training programs for recipients' employees or clients and other programs or
events and may also include opportunities to participate in advertising or sales
campaigns and/or shareholder services and programs regarding one or more Warburg
Pincus Funds. Warburg or its affiliates may pay for travel, meals and lodging in
connection with these promotional activities. In some instances, these
incentives may be offered only to certain institutions whose representatives
provide services in connection with the sale or expected sale of Fund shares.

DIRECTORS AND OFFICERS. The officers of each Fund manage its day-to-day
operations and are directly responsible to its Board. The Boards set broad
policies for each Fund and choose its officers. A list of the Directors and
officers of each Fund and a brief statement of their present positions and
principal occupations during the past five years is set forth in the Statement
of Additional Information.

HOW TO OPEN AN ACCOUNT
- --------------------------------------------------------------------------------

In order to invest in a Fund, an investor must first complete and sign an
account application. To obtain an application, an investor may telephone Warburg
Pincus Funds at (800) 927-2874. An investor may also obtain an account
application by writing to:

Warburg Pincus Funds
P.O. Box 9030
Boston, Massachusetts 02205-9030

OR
Overnight to:

BFDS
Attn: Warburg Pincus Funds
2 Heritage Drive
North Quincy, Massachusetts 02171

Completed and signed account applications should be sent to the above.

RETIREMENT PLANS AND UTMA/UGMA ACCOUNTS. For information (i) about investing
in the Funds through a tax-advantaged retirement plan, such as an Individual
Retirement Account ("IRA") or (ii) about opening a Uniform Transfers to Minors
Act ("UTMA") account or Uniform Gifts to Minors Act ("UGMA") account, an
investor should telephone Warburg Pincus Funds at (800) 927-2874 or write to
Warburg Pincus Funds at an address set forth above. Investors should consult
their own tax advisers about the establishment of retirement plans and UTMA or
UGMA accounts.

24
<PAGE> 31

CHANGES TO ACCOUNT. For information on how to make changes to an account,
including changes to account registration, addresses and/or privileges, an
investor should telephone Warburg Pincus Funds at (800) 927-2874. Shareholders
are responsible for maintaining current account registration and addresses with
a Fund. No interest will be paid on amounts represented by uncashed distribution
or redemption checks.

HOW TO PURCHASE SHARES
- --------------------------------------------------------------------------------

Common Shares of each Fund may be purchased either by mail or, with special
advance instructions, by wire and automated clearing house transactions ("ACH on
Demand"). The minimum initial investment in each Fund is $2,500 and the minimum
subsequent investment is $100, except that subsequent minimum investments can be
as low as $50 under the Automatic Monthly Investment Plan or by ACH on Demand,
as described below. For certain retirement plans (described above) and UTMA/UGMA
accounts, the minimum initial investment is $500. The Fund reserves the right to
change the initial and subsequent investment minimum requirements at any time.
In addition, each Fund may, in its sole discretion, waive the initial and
subsequent investment minimum requirements with respect to investors who are
employees of Warburg or its affiliates or persons with whom Warburg has entered
into an investment advisory agreement. Existing investors will be given 15 days'
notice by mail of any increase in investment minimum requirements.

After an investor has made his initial investment, additional shares may be
purchased at any time by mail or by wire in the manner outlined below. Wire
payments for initial and subsequent investments should be preceded by an order
placed with a Fund and should clearly indicate the investor's account number and
the name of the Fund in which shares are being purchased. In the interest of
economy and convenience, physical certificates representing shares in a Fund are
not normally issued.

BY MAIL. If the investor desires to purchase Common Shares by mail, a check or
money order made payable to a Fund or Warburg Pincus Funds (in U.S. currency)
should be sent along with the completed account application to Warburg Pincus
Funds through its distributor, Counsellors Securities, at an address set forth
above. Checks payable to the investor and endorsed to the order of the Fund or
Warburg Pincus Funds will not be accepted as payment and will be returned to the
sender. If payment is received in proper form prior to the close of regular
trading on The New York Stock Exchange, Inc. (the "NYSE") (currently 4:00 p.m.,
Eastern time) on a day that the Fund calculates its net asset value (a "business
day"), the purchase will be made at the Fund's net asset value calculated at the
end of that day. If payment is received at or after the close of regular trading
on the NYSE, the purchase will be effected at the Fund's net asset value
determined for the next business day after payment has been received. Checks or
money orders that are not in proper form or that are not accompanied or preceded
by a complete account application will be

25
<PAGE> 32

returned to the sender. Shares purchased by check or money order are entitled to
receive dividends and distributions beginning on the day payment is received.
Checks or money orders in payment for shares of more than one Warburg Pincus
Fund should be made payable to Warburg Pincus Funds and should be accompanied by
a breakdown of amounts to be invested in each fund. If a check used for purchase
does not clear, the Fund will cancel the purchase and the investor may be liable
for losses or fees incurred. For a description of the manner of calculating the
Fund's net asset value, see "Net Asset Value" below.

BY WIRE. Investors may also purchase Common Shares in the Fund by wiring funds
from their banks. Telephone orders by wire will not be accepted until a
completed account application in proper form has been received and an account
number has been established. Investors should place an order with the Fund prior
to wiring funds by telephoning (800) 927-2874. Federal funds may be wired using
the following wire address:

State Street Bank and Trust Company
ABA# 0110 000 28
Attn: Mutual Funds/Custody Department
[Insert Fund name(s) here]
DDA# 9904-649-2
F/F/C: [Account Number and Account Registration]

If a telephone order is received prior to the close of regular trading on the
NYSE and payment by wire is received on the same day in proper form in
accordance with instructions set forth above, the shares will be priced
according to the net asset value of the Fund on that day and are entitled to
dividends and distributions beginning on that day. However, if a wire in proper
form that is not preceded by a telephone order is received at or after the close
of regular trading on the NYSE, the payment will be held uninvested until the
order is effected at the close of business on the next business day. Payment for
orders that are not accepted will be returned to the prospective investor after
prompt inquiry. If a telephone order is placed and payment by wire is not
received on the same day, the Fund will cancel the purchase and the investor may
be liable for losses or fees incurred.

AUTOMATIC MONTHLY INVESTMENT PLAN AND ACH ON DEMAND. The Automatic Monthly
Investment Plan allows shareholders to authorize a Fund or its agent to debit
their bank account monthly ($50 minimum) for the purchase of Fund shares on or
about either the tenth or twentieth calender day of each month. Shareholders may
also purchase shares by calling (800) 927-2874 on any business day to request
direct deposit or credit (for redemptions) of their bank account through an ACH
on Demand transaction.

To establish the Automatic Monthly Investment Plan and/or ACH on Demand
option, obtain a separate application or complete the relevant section of the
account application. Only an account maintained at a financial institution which
is an automatic clearing house member may be used, and one common name must
appear on both the shareholder's Fund registration and bank

26
<PAGE> 33

account registration. Shareholders using this service must satisfy the initial
investment minimum for the Fund prior to or concurrent with the start of any
Automatic Monthly Investment Plan or ACH on Demand transaction. Please contact
Warburg Pincus Funds at (800) 927-2874 for additional information. Investors
should allow a period of up to 30 days in order to implement an Automatic
Monthly Investment Plan or ACH on Demand transaction. The failure to provide
complete information could result in further delays.

If an ACH on Demand transaction request is received prior to the close of
regular trading on the NYSE, the shares will be priced according to the net
asset value of Fund shares on that day and are entitled to dividends and
distributions as described above for wire purchases. If a request is received at
or after the close of regular trading on the NYSE, the shares will be priced at
the relevant Fund's net asset value on the following business day.

TELEPHONE TRANSACTIONS. Unless otherwise indicated on the account application
or if the ACH on Demand option is elected, transactions may be conducted by
telephone. Investors should realize that in conducting transactions by
telephone, they may be giving up a measure of security that they may have if
they were to conduct such transactions in writing. Neither a Fund nor its agents
will be liable for following instructions communicated by telephone that it
reasonably believes to be genuine. Reasonable procedures will be employed on
behalf of each Fund designed to give reasonable assurance that instructions
communicated by telephone are genuine. Such procedures include providing written
confirmation of telephone transactions, tape recording telephone instructions
and requiring specific personal information prior to acting upon telephone
instructions.

PURCHASES THROUGH INTERMEDIARIES. Common Shares of each Fund are available
through the Charles Schwab & Company, Inc. Mutual Fund OneSource(TM) Program;
Fidelity Brokerage Services, Inc. Funds-Network(TM) Program; Jack White &
Company, Inc.; and Waterhouse Securities, Inc. Generally, these programs require
customers to pay either no or low transaction fees in connection with purchases,
exchanges or redemptions. Each Fund is also available through certain
broker-dealers, financial institutions and other industry professionals
(including the brokerage firms offering the programs described above,
collectively, "Service Organizations"). Certain features of each Fund, such as
the initial and subsequent investment minimums, redemption fees and certain
trading restrictions, may be modified or waived by Service Organizations.
Service Organizations may impose transaction or administrative charges or other
direct fees, which charges or fees would not be imposed if Fund shares are
purchased directly from the Fund. Therefore, a client or customer should contact
the Service Organization acting on his behalf concerning the fees (if any)
charged in connection with a purchase, exchange or redemption of Fund shares and
should read this Prospectus in light of the terms governing his accounts with
the Service Organization. Service Organizations will be responsible for promptly
transmitting client or customer

27
<PAGE> 34

purchase and redemption orders to the Fund in accordance with their agreements
with the Fund and with clients or customers.

Service Organizations or, if applicable, their designees may enter confirmed
purchase, exchange or redemption orders on behalf of clients and customers, with
payment to follow no later than a Fund's pricing on the following business day.
If payment is not received by such time, the Service Organization could be held
liable for resulting fees or losses. A Fund may be deemed to have received a
purchase or redemption order when a Service Organization, or, if applicable, its
authorized designee, accepts the order. Such orders received by a Fund in proper
form will be priced at the Fund's net asset value next computed after they are
accepted by the Service Organization or its authorized designee.

For administration, subaccounting, transfer agency and/or other services,
Warburg, Counsellors Securities or their affiliates may pay Service
Organizations and certain recordkeeping organizations a fee of up to .40% (the
"Service Fee") of the average annual value of accounts with the Fund maintained
by such Service Organizations or recordkeepers. A portion of the Service Fee may
be borne by the Fund as a transfer agency fee. In addition, a Service
Organization or recordkeeper may directly or indirectly pay a portion of its
Service Fee to the Fund's custodian or transfer agent for costs related to
accounts of its clients or customers. The Service Fee payable to any one Service
Organization or recordkeeper is determined based upon a number of factors,
including the nature and quality of services provided, the operations processing
requirements of the relationship and the standardized fee schedule of the
Service Organization or recordkeeper.

GENERAL. Each Fund reserves the right to reject any specific purchase order,
including certain purchases made by exchange (see "How to Redeem and Exchange
Shares -- Exchange of Shares" below). Purchase orders may be refused if, in
Warburg'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. A Fund may discontinue sales of its shares if
management believes that a substantial further increase in assets may adversely
affect the Fund's ability to achieve its investment objective. In such event,
however, it is anticipated that existing shareholders would be permitted to
continue to authorize investment in the Fund and to reinvest any dividends or
capital gains distributions.

HOW TO REDEEM AND EXCHANGE SHARES
- --------------------------------------------------------------------------------
REDEMPTION OF SHARES. An investor in a Fund may redeem (sell) his shares on
any day that the Fund's net asset value is calculated (see "Net Asset Value"
below).

Common Shares of the Funds may either be redeemed by mail or by telephone. If
an investor desires to redeem his shares by mail, a written request for
redemption should be sent to Warburg Pincus Funds at an address indicated above
under "How to Open an Account." An investor should be sure

28
<PAGE> 35

that the redemption request identifies the Fund, the number of shares to be
redeemed and the investor's account number. Payment of redemption proceeds may
be delayed in conjunction with account changes. Each mail redemption request
must be signed by the registered owner(s) (or his legal representative(s))
exactly as the shares are registered. If an investor has applied for the
telephone redemption feature on his account application, he may redeem his
shares by calling Warburg Pincus Funds at (800) 927-2874. An investor making a
telephone withdrawal should state (i) the name of the Fund, (ii) the account
number of the Fund, (iii) the name of the investor(s) appearing on the Fund's
records, (iv) the amount to be withdrawn and (v) the name of the person
requesting the redemption.

After receipt of the redemption request by mail or by telephone, the
redemption proceeds will, at the option of the investor, be paid by check and
mailed to the investor of record or be wired to the investor's bank as indicated
in the account application previously filled out by the investor. No Fund
currently imposes a service charge for effecting wire transfers but each Fund
reserves the right to do so in the future. During periods of significant
economic or market change, telephone redemptions may be difficult to implement.
If an investor is unable to contact Warburg Pincus Funds by telephone, an
investor may deliver the redemption request to Warburg Pincus Funds by mail at
an address shown above under "How to Open an Account." Although each Fund will
redeem shares purchased by check, through the Automatic Monthly Investment Plan
or by ACH on Demand before the funds or check clear, payments of the redemption
proceeds will be delayed for up to five days (for funds received through the
Automatic Monthly Investment Plan or by ACH on Demand) or up to 10 days (for
check purchases) from the date of purchase. Investors should consider purchasing
shares using a certified or bank check, money order or federal funds wire if
they anticipate an immediate need for redemption proceeds.

If a redemption order is received by a Fund or its agent prior to the close of
regular trading on the NYSE, the redemption order will be effected at the net
asset value per share as determined on that day. If a redemption order is
received after the close of regular trading on the NYSE, the redemption order
will be effected at the net asset value as next determined. Except as noted
above, redemption proceeds will normally be mailed or wired to an investor on
the next business day following the date a redemption order is effected. If,
however, in the judgment of Warburg, immediate payment would adversely affect a
Fund, each Fund reserves the right to pay the redemption proceeds within seven
days after the redemption order is effected. Furthermore, each Fund may suspend
the right of redemption or postpone the date of payment upon redemption (as well
as suspend or postpone the recordation of an exchange of shares) for such
periods as are permitted under the 1940 Act.

29
<PAGE> 36

tions declared up to and including the date of redemption are paid along with
the proceeds of the redemption.

If, due to redemptions, the value of an investor's account drops to less than
$2,000 ($250 in the case of a retirement plan or UTMA or UGMA account), each
Fund reserves the right to redeem the shares in that account at net asset value.
Prior to any redemption, the Fund will notify an investor in writing that this
account has a value of less than the minimum. The investor will then have 60
days to make an additional investment before a redemption will be processed by
the Fund.

AUTOMATIC CASH WITHDRAWAL PLAN. Each Fund offers investors an automatic cash
withdrawal plan under which investors may elect to receive periodic cash
payments of at least $250 monthly or quarterly. To establish this service,
complete the "Automatic Withdrawal Plan" section of the account application and
attach a voided check from the bank account to be credited. For further
information regarding the automatic cash withdrawal plan or to modify or
terminate the plan, investors should contact Warburg Pincus Funds at (800)
927-2874.

EXCHANGE OF SHARES. An investor may exchange Common Shares of a Fund for
Common Shares of another Fund or for Common Shares of another Warburg Pincus
Fund at their respective net asset values. Exchanges may be effected by mail or
by telephone in the manner described under "Redemption of Shares" above. If an
exchange request is received by Warburg Pincus Funds or its agent prior to the
close of regular trading on the NYSE, the exchange will be made at each Fund's
net asset value determined at the end of that business day. Exchanges will be
effected without a sales charge but must satisfy the minimum dollar amount
necessary for new purchases. A Fund may refuse exchange privileges at any time
without prior notice.

Currently, exchanges may be made among the Funds and with the following other
funds:
- - WARBURG PINCUS CASH RESERVE FUND -- a money market fund investing in
short-term, high quality money market instruments;
- - WARBURG PINCUS NEW YORK TAX EXEMPT FUND -- a money market fund investing in
short-term, high quality municipal obligations designed for New York investors
seeking income exempt from federal, New York State and New York City income
tax;
- - WARBURG PINCUS NEW YORK INTERMEDIATE MUNICIPAL FUND -- an intermediate-term
municipal bond fund designed for New York investors seeking income exempt from
federal, New York State and New York City income tax;

- - WARBURG PINCUS INTERMEDIATE MATURITY GOVERNMENT FUND -- an intermediate-term
bond fund investing in obligations issued or guaranteed by the U.S.
government, its agencies or instrumentalities;

- - WARBURG PINCUS FIXED INCOME FUND -- a bond fund seeking current income and,
secondarily, capital appreciation by investing in a diversified portfolio of
fixed-income securities;

30
<PAGE> 37

- - WARBURG PINCUS GLOBAL FIXED INCOME FUND -- a bond fund investing in a
portfolio consisting of investment grade fixed-income securities of
governmental and corporate issuers denominated in various currencies,
including U.S. dollars;
- - WARBURG PINCUS BALANCED FUND -- a fund seeking maximum total return through a
combination of long-term growth of capital and current income consistent with
preservation of capital through diversified investments in equity and debt
securities;
- - WARBURG PINCUS GROWTH & INCOME FUND -- an equity fund seeking long-term growth
of capital and income and a reasonable current return;

- - WARBURG PINCUS CAPITAL APPRECIATION FUND -- an equity fund seeking long-term
capital appreciation by investing primarily in a broadly diversified portfolio
of equity securities of domestic companies;

- - WARBURG PINCUS STRATEGIC VALUE FUND -- an equity fund seeking capital
appreciation by investing in undervalued companies and market sectors;

- - WARBURG PINCUS HEALTH SCIENCES FUND -- an equity fund seeking capital
appreciation by investing primarily in equity and debt securities of health
sciences companies;

- - WARBURG PINCUS GLOBAL POST-VENTURE CAPITAL FUND -- an equity fund seeking
long-term growth of capital by investing principally in equity securities of
U.S. and foreign issuers in their post-venture capital stage of development;

- - WARBURG PINCUS MAJOR FOREIGN MARKETS FUND -- an equity fund seeking long-term
capital appreciation by investing in equity securities of issuers consisting
of companies in major foreign securities markets;

- - WARBURG PINCUS INTERNATIONAL EQUITY FUND -- an equity fund seeking long-term
capital appreciation by investing primarily in equity securities of non-United
States issuers;
- - WARBURG PINCUS EMERGING MARKETS FUND -- an equity fund seeking growth of
capital by investing primarily in securities of non-United States issuers
consisting of companies in emerging securities markets;
- - WARBURG PINCUS JAPAN GROWTH FUND -- an equity fund seeking long-term growth of
capital by investing primarily in equity securities of Japanese issuers; and
- - WARBURG PINCUS JAPAN OTC FUND -- an equity fund seeking long-term capital
appreciation by investing in a portfolio of securities traded in the Japanese
over-the-counter market.
The exchange privilege is available to shareholders residing in any state in
which the Common Shares being acquired may legally be sold. When an investor
effects an exchange of shares, the exchange is treated for federal income tax
purposes as a redemption. Therefore, the investor may realize a taxable gain or
loss in connection with the exchange. Investors wishing to exchange Common
Shares of a Fund for Common Shares in another Warburg Pincus Fund should review
the prospectus of the other fund prior to making an exchange. For further
information regarding the exchange privilege or to

31
<PAGE> 38

obtain a current prospectus for another Warburg Pincus Fund, an investor
should contact Warburg Pincus Funds at (800) 927-2874.

Each Fund reserves the right to refuse exchange purchases by any person or
group if, in Warburg's judgment, the Fund would be unable to invest the money
effectively in accordance with its investment objective and policies, or would
otherwise potentially be adversely affected. Examples of when an exchange
purchase could be refused are when a Fund receives or anticipates receiving
large exchange orders at or about the same time and/or when a pattern of
exchanges within a short period of time (often associated with a "market timing"
strategy) is discerned. Each Fund reserves the right to terminate or modify the
exchange privilege at any time upon 30 days' notice to shareholders.

DIVIDENDS, DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------

DIVIDENDS AND DISTRIBUTIONS. Each Fund calculates its dividends from net
investment income. Net investment income includes interest accrued and dividends
earned on the Fund's portfolio securities for the applicable period less
applicable expenses. Each Fund declares dividends from its net investment income
and net realized short-term and long-term capital gains annually and pays them
in the calendar year in which they are declared, generally in November or
December. Net investment income earned on weekends and when the NYSE is not open
will be computed as of the next business day. Unless an investor instructs a
Fund to pay dividends or distributions in cash, dividends and distributions will
automatically be reinvested in additional Common Shares of the relevant Fund at
net asset value. The election to receive dividends in cash may be made on the
account application or, subsequently, by writing to Warburg Pincus Funds at an
address set forth under "How to Open an Account" or by calling Warburg Pincus
Funds at (800) 927-2874.

A Fund may be required to withhold for U.S. federal income taxes 31% of all
distributions payable to shareholders who fail to provide the Fund with their
correct taxpayer identification number or to make required certifications, or
who have been notified by the U.S. Internal Revenue Service that they are
subject to backup withholding.
TAXES. Each Fund intends to qualify each year as a "regulated investment
company" within the meaning of the Code. Each Fund, if it qualifies as a
regulated investment company, will be subject to a 4% non-deductible excise tax
measured with respect to certain undistributed amounts of ordinary income and
capital gain. Each Fund expects to pay such additional dividends and to make
such additional distributions as are necessary to avoid the application of this
tax.
Dividends paid from net investment income and distributions of net realized
short-term capital gains are taxable to investors as ordinary income, and
distributions derived from net realized long-term capital gains are taxable to
investors as long-term capital gains, in each case regardless of how long the

32
<PAGE> 39

shareholder has held Fund shares and whether received in cash or reinvested in
additional Fund shares. As a general rule, an investor's gain or loss on a sale
or redemption of his Fund shares will be a long-term capital gain or loss if he
has held his shares for more than one year and will be a short-term capital gain
or loss if he has held his shares for one year or less. However, any loss
realized upon the sale or redemption of shares within six months from the date
of their purchase will be treated as a long-term capital loss to the extent of
any amounts treated as distributions of long-term capital gain during such six-
month period with respect to such shares.

The Taxpayer Relief Act of 1997 made certain changes to the Code with respect
to taxation of long-term capital gains earned by taxpayers other than a
corporation. In general, the maximum tax rate for individual taxpayers on net
long-term capital gains is lowered to 20% for gains recognized on the sale of
assets held for more than 18 months at the time of disposition (including long-
term capital gains recognized by shareholders on the sale or redemption of Fund
shares that were held as capital assets). Capital gains on the disposition of
assets held for more than one year and up to 18 months at the time of
disposition will be taxed as "mid-term gain" at a maximum rate of 28%. A rate of
18% instead of 20% will apply after December 31, 2000 for assets held for more
than five years. However, the 18% rate applies only to assets acquired after
December 31, 2000 unless the taxpayer elects to treat an asset held prior to
such date as sold for fair market value on January 1, 2001.

In the case of individuals whose ordinary income is taxed at a 15% rate, the
20% rate is reduced to 10% and the 10% rate for assets held for more than five
years is reduced to eight percent. Each Fund will provide information relating
to that portion of a "capital gain dividend" that may be treated by investors as
eligible for the reduced capital gains rate for capital assets held for more
than 18 months.

Investors may be proportionately liable for taxes on income and gains of a
Fund, but investors not subject to tax on their income will not be required to
pay tax on amounts distributed to them. Each Fund's investment activities,
including short sales of securities, will not result in unrelated business
taxable income to a tax-exempt investor. Each Fund will designate that portion
of the Fund's dividends that will qualify for the federal dividends received
deduction for corporations. Each Fund's investments in foreign securities may
subject it to certain withholding and other taxes imposed by foreign countries
with respect to dividends, interest, capital gains and other income. It is not
expected that the payment of such taxes by a Fund will give rise to a direct
credit or deduction available to the Fund's shareholders.

GENERAL. Statements as to the tax status of each investor's dividends and
distributions are mailed annually. Each investor will also receive, if
applicable, various written notices after the close of a Fund's prior taxable
year with respect to certain dividends and distributions which were received
from the Fund during the Fund's prior taxable year. Investors should consult
their own

33
<PAGE> 40

tax advisers with specific reference to their own tax situations, including
their state and local tax liabilities.

NET ASSET VALUE
- --------------------------------------------------------------------------------

Each Fund's net asset value per share is calculated as of the close of regular
trading on the NYSE (currently 4:00 p.m., Eastern time) on each business day,
Monday through Friday, except on days when the NYSE is closed. The NYSE is
currently scheduled to be closed on New Year's Day, Dr. Martin Luther King, Jr.
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day, and on the preceding Friday or subsequent
Monday when one of these holidays falls on a Saturday or Sunday, respectively.
The net asset value per share of each Fund generally changes each day.

The net asset value per Common Share of each Fund is computed by adding the
Common Shares' pro rata share of the value of the Fund's assets, deducting the
Common Shares' pro rata share of the Fund's liabilities and the liabilities
specifically allocated to Common Shares and then dividing the result by the
total number of outstanding Common Shares.

Securities listed on a U.S. securities exchange (including securities traded
through the Nasdaq National Market System) or foreign securities exchange or
traded in an over-the-counter market will be valued at the most recent sale
price when the valuation is made. Options and futures contracts will be valued
similarly. Debt obligations that mature in 60 days or less from the valuation
date are valued on the basis of amortized cost, unless the Board determines that
using this valuation method would not reflect the investments' value. The
Post-Venture Capital Fund's investments in Private Funds will be valued
initially at cost and, thereafter, in accordance with periodic reports received
by Abbott from the Private Funds (generally quarterly). Because the issuers of
securities held by Private Funds are generally not subject to the reporting
requirements of the federal securities laws, interim changes in value of
investments in Private Funds will not generally be reflected in the Post-Venture
Capital Fund's net asset value. However, Warburg will report to the Board of the
Post-Venture Capital Fund information about certain holdings of Private Funds
that, in its judgment, could have a material impact on the valuation of a
Private Fund. The Board of the Post-Venture Capital Fund will take these reports
into account in valuing Private Funds. Securities, options and futures contracts
for which market quotations are not readily available and other assets,
including, with respect to the Post-Venture Capital Fund, Private Funds, will be
valued at their fair value as determined in good faith pursuant to consistently
applied procedures established by the relevant Board. Further information
regarding valuation policies is contained in the Statement of Additional
Information.

34
<PAGE> 41

PERFORMANCE
- --------------------------------------------------------------------------------

The Funds quote the performance of Common Shares separately from Advisor
Shares. The net asset value of Common Shares is listed in The Wall Street
Journal each business day under the heading "Warburg Pincus Funds." From time to
time, each Fund may advertise the average annual total return of its Common
Shares over various periods of time. These total return figures show the average
percentage change in value of an investment in the Common Shares from the
beginning of the measuring period to the end of the measuring period. The
figures reflect changes in the price of the Common Shares assuming that any
income dividends and/or capital gain distributions made by a Fund during the
period were reinvested in Common Shares of the Fund. Total return will be shown
for recent one-, five- and ten-year periods, and may be shown for other periods
as well (such as from commencement of the Fund's operations or on a
year-by-year, quarterly or current year-to-date basis).

When considering average total return figures for periods longer than one
year, it is important to note that the annual total return for one year in the
period might have been greater or less than the average for the entire period.
When considering total return figures for periods shorter than one year,
investors should bear in mind that each Fund seeks long-term appreciation and
that such return may not be representative of any Fund's return over a longer
market cycle. Each Fund may also advertise aggregate total return figures of its
Common Shares for various periods, representing the cumulative change in value
of an investment in the Common Shares for the specific period (again reflecting
changes in share prices and assuming reinvestment of dividends and
distributions). Aggregate and average total returns may be shown by means of
schedules, charts or graphs and may indicate various components of total return
(i.e., change in value of initial investment, income dividends and capital gain
distributions).
Investors should note that total return figures are based on historical
earnings and are not intended to indicate future performance. The Statement of
Additional Information describes the method used to determine the total return.
Current total return figures may be obtained by calling Warburg Pincus Funds at
(800) 927-2874.

Each Fund may compare its performance with (i) that of other mutual funds as
listed in the rankings prepared by Lipper Analytical Services, Inc. or similar
investment services that monitor the performance of mutual funds or as set forth
in the publications listed below; (ii) with appropriate indexes prepared by
Frank Russell Company relating to securities represented in a Fund, the T. Rowe
Price New Horizons Fund Index and the S&P 500 Index and, in the case of the
Post-Venture Capital Fund, with the Venture Capital 100 Index (compiled by
Venture Capital Journal); or (iii) other appropriate indexes of investment
securities or with data developed by Warburg derived from such indexes. The
Post-Venture Capital Fund may also make comparisons using data and indexes
compiled by the National Venture Capital Association,

35
<PAGE> 42

VentureOne and Private Equity Analysts Newsletter and similar organizations and
publications. A Fund may include evaluations of the Fund published by nationally
recognized ranking services and by financial publications that are nationally
recognized, such as Barron's, Business Week, Financial Times, Forbes, Fortune,
Inc., Institutional Investor, Investor's Business Daily, Money, Morningstar,
Mutual Fund Magazine, SmartMoney, The Wall Street Journal and Worth.
Morningstar, Inc. rates funds in broad categories based on risk/reward analyses
over various time periods. In addition, each Fund may from time to time compare
the expense ratio of its Common Shares to that of investment companies with
similar objectives and policies, based on data generated by Lipper Analytical
Services, Inc. or similar investment services that monitor mutual funds.

In reports or other communications to investors or in advertising, each Fund
may also describe the general biography or work experience of the portfolio
managers of the Fund and may include quotations attributable to the portfolio
managers describing approaches taken in managing the Fund's investments,
research methodology underlying stock selection or the Fund's investment
objective. In addition, a Fund and its portfolio managers may render periodic
updates of Fund activity, which may include a discussion of significant
portfolio holdings; analysis of holdings by industry, country, credit quality
and other characteristics; and comparison and analysis of the Fund with respect
to relevant market and industry benchmarks. The Post-Venture Capital Fund may
also discuss characteristics of venture capital financed companies and the
benefits expected to be achieved from investing in these companies. Each Fund
may also discuss measures of risk, the continuum of risk and return relating to
different investments and the potential impact of foreign stocks on a portfolio
otherwise composed of domestic securities.

GENERAL INFORMATION
- --------------------------------------------------------------------------------

ORGANIZATION. The Emerging Growth Fund was incorporated on November 12, 1987
under the laws of the State of Maryland under the name "Counsellors Emerging
Growth Fund, Inc." On October 27, 1995 the Fund amended its charter to change
its name to "Warburg, Pincus Emerging Growth Fund, Inc." The Post-Venture
Capital Fund was incorporated on July 12, 1995 under the laws of the State of
Maryland under the name "Warburg, Pincus Post-Venture Capital Fund, Inc." The
Small Company Growth Fund was incorporated on October 31, 1996 under the laws of
the State of Maryland under the name "Warburg, Pincus Small Company Growth Fund,
Inc." The Small Company Value Fund was incorporated on October 23, 1995 under
the laws of the State of Maryland under the name "Warburg, Pincus Small Company
Value Fund, Inc."

Each Fund's charter authorizes the relevant Board to issue three billion full
and fractional shares of capital stock, $.001 par value per share, of which one
billion shares are designated Common Shares and two billion are designated
Advisor Shares. Under each Fund's charter documents, the Board has the

36
<PAGE> 43

power to classify or reclassify any unissued shares of the Fund into one or
more additional classes by setting or changing in any one or more respects their
relative rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption. A Board may similarly
classify or reclassify any class of its shares into one or more series and,
without shareholder approval, may increase the number of authorized shares of
the Fund.

MULTI-CLASS STRUCTURE. Each Fund offers a separate class of shares, the
Advisor Shares, pursuant to a separate prospectus. Individual investors may only
purchase Advisor Shares through institutional shareholders of record,
broker-dealers, financial institutions, depository institutions, retirement
plans and financial intermediaries. Shares of each class represent equal pro
rata interests in the respective Fund and accrue dividends and calculate net
asset value and performance quotations in the same manner. Because of the higher
fees paid by the Advisor Shares, the total return on such shares can be expected
to be lower than the total return on Common Shares. Investors may obtain
information concerning the Advisor Shares from their investment professional or
by calling Counsellors Securities at (800) 927-2874.

VOTING RIGHTS. Investors in a Fund are entitled to one vote for each full
share held and fractional votes for fractional shares held. Shareholders of a
Fund will vote in the aggregate except where otherwise required by law and
except that each class will vote separately on certain matters pertaining to its
distribution and shareholder servicing arrangements. There will normally be no
meetings of investors for the purpose of electing members of the governing Board
unless and until such time as less than a majority of the members holding office
have been elected by investors. Any Director of a Fund may be removed from
office upon the vote of shareholders holding at least a majority of the relevant
Fund's outstanding shares, at a meeting called for that purpose. A meeting will
be called for the purpose of voting on the removal of a Board member at the
written request of holders of 10% of the outstanding shares of a Fund. Lionel I.
Pincus may be deemed to be a controlling person of the Small Company Growth Fund
because he may be deemed to possess or share investment power over shares owned
by clients of Warburg.

SHAREHOLDER COMMUNICATIONS. Each investor will receive a quarterly statement
of his account, as well as a statement of his account after any transaction that
affects his share balance or share registration (other than the reinvestment of
dividends or distributions or investment made through the Automatic Monthly
Investment Plan). Each Fund will also send to its investors a semiannual report
and an audited annual report, each of which includes a list of the investment
securities held by the Fund and a statement of the performance of the Fund.
Periodic listings of the investment securities held by a Fund, as well as
certain statistical characteristics of the Fund, may be obtained by calling
Warburg Pincus Funds at (800) 927-2874 or on the Warburg Pincus Funds Web site
at www.warburg.com.

37
<PAGE> 44

The Common Share prospectuses of the Funds are combined in this Prospectus.
Each Fund offers only its own shares, yet it is possible that a Fund might
become liable for a misstatement, inaccuracy or omission in this Prospectus with
regard to another Fund.

------------------------------

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, THE STATEMENT OF
ADDITIONAL INFORMATION OR THE FUNDS' OFFICIAL SALES LITERATURE IN CONNECTION
WITH THE OFFERING OF SHARES OF THE FUNDS, AND IF GIVEN OR MADE, SUCH OTHER
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY EACH FUND. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF THE COMMON SHARES
OF THE FUNDS IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM, SUCH OFFER MAY NOT
LAWFULLY BE MADE.

38
<PAGE> 45

(THIS PAGE INTENTIONALLY LEFT BLANK)
<PAGE> 46

TABLE OF CONTENTS

<TABLE>
<S> <C>
The Funds' Expenses...................................... 2
Financial Highlights..................................... 3
Investment Objectives and Policies....................... 5
Portfolio Investments.................................... 10
Risk Factors and Special Considerations.................. 13
Portfolio Transactions and Turnover Rate................. 15
Certain Investment Strategies............................ 15
Investment Guidelines.................................... 20
Management of the Funds.................................. 21
How to Open an Account................................... 24
How to Purchase Shares................................... 25
How to Redeem and Exchange Shares........................ 28
Dividends, Distributions and Taxes....................... 32
Net Asset Value.......................................... 34
Performance.............................................. 35
General Information...................................... 36
</TABLE>

[WARBURG PINCUS FUNDS LOGO]
P.O. BOX 9030, BOSTON, MA 02205-9030
800-WARBURG (800-927-2874)
www.warburg.com

COUNSELLORS SECURITIES INC., DISTRIBUTOR. WPUSS-1-0298

<PAGE> 47

WARBURG PINCUS ADVISOR FUNDS FEBRUARY 27, 1998

SMALL COMPANY VALUE FUND

[LOGO]

<PAGE> 48

PROSPECTUS February 27, 1998

Warburg Pincus Advisor Funds is a family of open-end mutual funds that are
offered to investors who wish to buy shares through an investment professional,
to financial institutions investing on behalf of their customers and to
retirement plans that elect to make one or more Advisor Funds an investment
option for participants in the plans. One Advisor Fund is described in this
Prospectus:

WARBURG PINCUS SMALL COMPANY VALUE FUND seeks long-term capital appreciation by
investing primarily in a portfolio of equity securities of small capitalization
companies.

The Fund currently offers two classes of shares, one of which, the Advisor
Shares, is offered pursuant to this Prospectus. The Advisor Shares of the Fund,
as well as Advisor Shares of certain other Warburg Pincus-advised funds, are
sold under the name "Warburg Pincus Advisor Funds." Individual investors may
purchase Advisor Shares through institutional shareholders of record,
broker-dealers, financial institutions, depository institutions, retirement
plans and other financial intermediaries ("Institutions"). The Advisor Shares
impose a 12b-1 fee of .50% per annum, which is the economic equivalent of a
sales charge. The Fund's Common Shares are available for purchase by individuals
directly and are offered by a separate prospectus.

NO MINIMUM INVESTMENT
- --------------------------------------------------------------------------------

There is no minimum amount of initial or subsequent purchases of shares imposed
on Institutions. See "How to Purchase Shares."

This Prospectus briefly sets forth certain information about the Fund that
investors should know before investing. Investors are advised to read this
Prospectus and retain it for future reference. Additional information about the
Fund has been filed with the Securities and Exchange Commission (the "SEC"). The
SEC maintains a Web site (http://www.sec.gov) that contains the Statement of
Additional Information, material incorporated by reference and other information
regarding the Fund. The Statement of Additional Information is also available
upon request and without charge by calling the Fund at (800) 369-2728.
Information regarding the status of shareholder accounts may also be obtained by
calling the Fund at the same number. Warburg Pincus Funds maintains a Web site
at www.warburg.com. The Statement of Additional Information, as amended or
supplemented from time to time, bears the same date as this Prospectus and is
incorporated by reference in its entirety into this Prospectus.

SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF OR GUARANTEED OR ENDORSED
BY ANY BANK, AND SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
INVESTMENTS IN SHARES OF THE FUND INVOLVE INVESTMENT RISKS, INCLUDING THE
POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
- --------------------------------------------------------------------------------

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. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<PAGE> 49

THE FUND'S EXPENSES

- --------------------------------------------------------------------------------

Warburg Pincus Small Company Value Fund (the "Fund") currently offers two
separate classes of shares: Common Shares and Advisor Shares. See "General
Information." Because of the higher fees paid by Advisor Shares, the total
return on such shares can be expected to be lower than the total return on
Common Shares.

<TABLE>
<S> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases (as a percentage of offering price).... 0
Annual Fund Operating Expenses (as a percentage of average net assets)
Management Fees................................................................ .97%
12b-1 Fees..................................................................... .50%+
Other Expenses................................................................. .42%
----
Total Fund Operating Expenses#................................................. 1.89%*
====
EXAMPLE
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each time period:
1 year........................................................................ $ 19
3 years....................................................................... $ 59
5 years....................................................................... $102
10 years....................................................................... $221
</TABLE>

- --------------------------------------------------------------------------------

+ Current 12b-1 fees are .50% out of a maximum .75% authorized under the Advisor
Shares' Distribution Plan.

# Management Fees, Other Expenses and Total Fund Operating Expenses are based on
actual expenses for the fiscal year ended October 31, 1997.

* Operating expenses for the Fund were reduced by .01% for the fiscal year ended
October 31, 1997 as a result of certain arrangements that served to offset
portions of the Fund's respective transfer agent expense. After reflecting
these arrangements, "Total Fund Operating Expenses (after fee waivers)" for
the Fund amounted to 1.88% for the fiscal year ended October 31, 1997.

---------------------------

The expense table shows the costs and expenses that an investor will bear
directly or indirectly as an Advisor Shareholder of the Fund. Institutions also
may charge their clients fees in connection with investments in the Advisor
Shares, which fees are not reflected in the table. The Example should not be
considered a representation of past or future expenses; actual Fund expenses may
be greater or less than those shown. Moreover, while the Example assumes a 5%
annual return, the Fund's actual performance will vary and may result in a
return greater or less than 5%. Long-term shareholders of Advisor Shares may pay
more than the economic equivalent of the maximum sales charges permitted by the
National Association of Securities Dealers, Inc.

2
<PAGE> 50

FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------

(FOR AN ADVISOR SHARE OF THE FUND OUTSTANDING THROUGHOUT EACH PERIOD)

The following information regarding the Fund for the fiscal year ended October
31, 1997 and the fiscal period ended October 31, 1996 has been derived from
information audited by Coopers & Lybrand L.L.P., independent accountants, whose
report dated December 19, 1997 is incorporated by reference in the Statement of
Additional Information. Further information about the performance of the Fund is
contained in the annual report dated October 31, 1997, copies of which may be
obtained without charge by calling the Fund at (800) 369-2728.

<TABLE>
<CAPTION>
December 29, 1995
(Commencement of
For the Operations)
Year Ended through
October 31, 1997 October 31, 1996
---------------- -----------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD................ $14.46 $10.00
------- ------
Income from Investment Operations:
Net Investment Loss............................... (0.08) (0.02)
Net Gain on Securities (both realized and
unrealized)..................................... 4.44 4.48
------- ------
Total from Investment Operations.................. 4.36 4.46
------- ------
Less Distributions:
Dividends from net investment income.............. 0.00 0.00
Distributions from realized gains................. (0.17) 0.00
------- ------
Total Distributions............................... (0.17) 0.00
------- ------
NET ASSET VALUE, END OF PERIOD...................... $18.65 $14.46
======= ======
Total Return........................................ 30.47% 44.60%+
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000s).................... $255 $5
Ratios to average daily net assets:
Operating expenses................................ 1.89%@ 1.97%@*
Net investment loss............................... (.78%) (.52%)*
Decrease reflected in above operating expense
ratio due to waivers/reimbursements............. .00% 1.46%*
Portfolio Turnover Rate............................. 105.87% 43.14%+
Average Commission Rate#............................ $0.0555 $0.0570
</TABLE>

- --------------------------------------------------------------------------------

@Interest earned on uninvested cash balances is used to offset portions of
transfer agent expense. These arrangements resulted in a reduction to the
Advisor Shares' expenses by .01% and .00% for the year or period ended October
31, 1997 and 1996, respectively. The Advisor Shares' operating expense ratio
after reflecting these arrangements were 1.88% and 1.97% for the years ended
October 31, 1997 and 1996, respectively.

+ Non-annualized

* Annualized

# Computed by dividing the total amount of commissions paid by the total number
of shares purchased or sold during the period for which there was a commission
charged.

3
<PAGE> 51

INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------
The Fund seeks long-term capital appreciation. The Fund's objective is a
fundamental policy and may not be amended without first obtaining the approval
of a majority of the outstanding shares of the Fund. Any investment involves
risk and, therefore, there can be no assurance that the Fund will achieve its
investment objective. See "Portfolio Investments" and "Certain Investment
Strategies" for descriptions of certain types of investments the Fund may make.

The Fund is a diversified management investment company that pursues its
investment objective by investing primarily in a portfolio of equity securities
of small capitalization companies that Warburg Pincus Asset Management, Inc.,
the Fund's investment adviser ("Warburg"), considers to be relatively
undervalued. Current income is a secondary consideration in selecting portfolio
investments. Under normal market conditions the Fund will invest at least 65% of
its total assets in common stocks, preferred stocks, debt securities convertible
into common stocks, warrants and other rights of small companies. The Fund
considers a "small" company to be one that has a market capitalization, measured
at the time the Fund purchases a security of that company, within the range of
capitalizations of companies represented in the Russell 2000 Index. (As of
January 31, 1998, the Russell 2000 Index included companies with market
capitalizations between $23.7 million and $2.7 billion.) Companies whose
capitalization no longer meets this definition after purchase continue to be
considered small companies for purposes of the Fund's policy of investing at
least 65% of its assets in small companies. In addition, the Fund has the
flexibility to invest in companies with a market capitalization of any size when
the 65% policy is met. As a result of these policies, the average market
capitalization of the Fund at any particular time may exceed $2.7 billion,
particularly at times when the market values of small company stocks are rising.

Warburg will determine whether a company is undervalued based on a variety of
measures, including price/earnings ratio, price/book ratio, price/ cash flow
ratio, earnings growth and debt/capital ratio. Other relevant factors, including
a company's asset value, franchise value and quality of management, will also be
considered. The Fund will invest primarily in companies whose securities are
traded on U.S. stock exchanges or in the U.S. over-the-counter market, but may
invest up to 20% of its assets in foreign securities which are not included
within the Fund's 65% policy on investing in small companies, described above.

PORTFOLIO INVESTMENTS
- --------------------------------------------------------------------------------
DEBT SECURITIES. The Fund may invest up to 20% of its total assets in
investment grade debt securities (other than money market obligations) that are
not convertible into common stock for the purpose of seeking capital
appreciation. The interest income to be derived may be considered as one factor
in selecting debt securities for investment by Warburg. Because the

4
<PAGE> 52

market value of debt obligations can be expected to vary inversely to changes
in prevailing interest rates, investing in debt obligations may provide an
opportunity for capital appreciation when interest rates are expected to
decline. The success of such a strategy is dependent upon Warburg's ability to
accurately forecast changes in interest rates. The market value of debt
obligations may also be expected to vary depending upon, among other factors,
the ability of the issuer to repay principal and interest, any change in
investment rating and general economic conditions.
A security will be deemed to be investment grade if it is rated within the
four highest grades by Moody's Investors Service, Inc. ("Moody's") or Standard &
Poor's Ratings Services ("S&P") or, if unrated, is determined to be of
comparable quality by Warburg. Bonds rated in the fourth highest grade may have
speculative characteristics and changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments than is the case with higher grade bonds. Subsequent to
its purchase by the Fund, an issue of securities may cease to be rated or its
rating may be reduced below the minimum required for purchase by the Fund.
Neither event will require sale of such securities. Warburg will consider such
event in its determination of whether the Fund should continue to hold the
securities.
When Warburg believes that a defensive posture is warranted, the Fund may
invest temporarily without limit in investment grade debt obligations and in
domestic and foreign money market obligations, including repurchase agreements.
MONEY MARKET OBLIGATIONS. The Fund is authorized to invest, under normal
circumstances, up to 20% of its total assets in domestic and foreign short-term
(one year or less remaining to maturity) and medium-term (five years or less
remaining to maturity) money market obligations and for temporary defensive
purposes may invest in these securities without limit. These instruments consist
of obligations issued or guaranteed by the U.S. government or a foreign
government, their agencies or instrumentalities; bank obligations (including
certificates of deposit, time deposits and bankers' acceptances of domestic or
foreign banks, domestic savings and loans and similar institutions) that are
high quality investments or, if unrated, deemed by Warburg to be high quality
investments; commercial paper rated no lower than A-2 by S&P or Prime-2 by
Moody's or the equivalent from another major rating service or, if unrated, of
an issuer having an outstanding, unsecured debt issue then rated within the
three highest rating categories; and repurchase agreements with respect to the
foregoing.
Repurchase Agreements. The Fund may enter into repurchase agreement
transactions with member banks of the Federal Reserve System and certain
non-bank dealers. Repurchase agreements are contracts under which the buyer of a
security simultaneously commits to resell the security to the seller at an
agreed-upon price and date. Under the terms of a typical repurchase agreement,
the Fund would acquire any underlying security for a relatively

5
<PAGE> 53

short period (usually not more than one week) subject to an obligation of the
seller to repurchase, and the Fund to resell, the obligation at an agreed-upon
price and time, thereby determining the yield during the Fund's holding period.
This arrangement results in a fixed rate of return that is not subject to market
fluctuations during the Fund's holding period. The value of the underlying
securities will at all times be at least equal to the total amount of the
purchase obligation, including interest. The Fund bears a risk of loss in the
event that the other party to a repurchase agreement defaults on its obligations
or becomes bankrupt and the Fund is delayed or prevented from exercising its
right to dispose of the collateral securities, including the risk of a possible
decline in the value of the underlying securities during the period in which the
Fund seeks to assert this right. Warburg, acting under the supervision of the
Fund's Board of Directors (the "Board"), monitors the creditworthiness of those
bank and non-bank dealers with which the Fund enters into repurchase agreements
to evaluate this risk. A repurchase agreement is considered to be a loan under
the Investment Company Act of 1940, as amended (the "1940 Act").

Money Market Mutual Funds. Where Warburg believes that it would be beneficial
to the Fund and appropriate considering the factors of return and liquidity, the
Fund may invest up to 5% of its assets in securities of money market mutual
funds that are unaffiliated with the Fund or Warburg. As a shareholder in any
mutual fund, the Fund will bear its ratable share of the mutual fund's expenses,
including management fees, and will remain subject to payment of the Fund's
administration fees and other expenses with respect to assets so invested.

U.S. GOVERNMENT SECURITIES. U.S. government securities in which the Fund may
invest include: direct obligations of the U.S. Treasury and obligations issued
by U.S. government agencies and instrumentalities, including instruments that
are supported by the full faith and credit of the United States, instruments
that are supported by the right of the issuer to borrow from the U.S. Treasury
and instruments that are supported by the credit of the instrumentality.
CONVERTIBLE SECURITIES. Convertible securities in which the Fund may invest,
including both convertible debt and convertible preferred stock, may be
converted at either a stated price or stated rate into underlying shares of
common stock. Because of this feature, convertible securities enable an investor
to benefit from increases in the market price of the underlying common stock.
Convertible securities provide higher yields than the underlying equity
securities, but generally offer lower yields than non-convertible securities of
similar quality. The value of convertible securities fluctuates in relation to
changes in interest rates like bonds and, in addition, fluctuates in relation to
the underlying common stock. Subsequent to purchase by the Fund, convertible
securities may cease to be rated or a rating may be reduced below the minimum
required for purchase by the Fund. Neither event will require sale of such
securities, although Warburg will consider such event in its determina-

6
<PAGE> 54

tion of whether the Fund should continue to hold the securities. The Fund does
not currently intend during the coming year to hold more than 5% of its net
assets in convertible securities rated below investment grade.
WARRANTS. The Fund may invest up to 10% of its total assets in warrants.
Warrants are securities that give the holder the right, but not the obligation,
to purchase equity issues of the company issuing the warrants, or a related
company, at a fixed price either on a date certain or during a set period.

RISK FACTORS AND SPECIAL CONSIDERATIONS
- --------------------------------------------------------------------------------

Investing in common stocks and securities convertible into common stocks is
subject to the inherent risk of fluctuations in the prices of such securities.
For certain additional risks relating to the Fund's investments, see "Portfolio
Investments" and "Certain Investment Strategies" in this Prospectus.

SMALL CAPITALIZATION COMPANIES; UNSEASONED ISSUERS. Investing in securities of
small- and medium-sized companies and companies with continuous operations of
less than three years ("unseasoned issuers") may involve greater risks since
these securities may have limited marketability and, thus, may be more volatile
than securities of larger, more established companies or the market averages in
general. Because these issuers normally have fewer shares outstanding than
larger companies, it may be more difficult for the Fund to buy or sell
significant amounts of such shares without an unfavorable impact on prevailing
prices. These issuers may have limited product lines, markets or financial
resources and may lack management depth. In addition, small companies are
typically subject to a greater degree of changes in earnings and business
prospects than are larger, more established companies. There is typically less
publicly available information concerning these issuers than for larger, more
established ones. Therefore, an investment in the Fund may involve a greater
degree of risk than an investment in other mutual funds that seek capital
appreciation by investing in better-known, larger companies.

NON-PUBLICLY TRADED SECURITIES; RULE 144A SECURITIES. The Fund may purchase
securities that are not registered under the Securities Act of 1933, as amended
(the "Securities Act"), but that can be sold to "qualified institutional buyers"
in accordance with Rule 144A under the Securities Act ("Rule 144A Securities").
An investment in Rule 144A Securities will be considered illiquid and therefore
subject to the Fund's limitation on the purchase of illiquid securities, unless
the Fund's governing Board determines on an ongoing basis that an adequate
trading market exists for the security. In addition to an adequate trading
market, the Board will also consider factors such as trading activity,
availability of reliable price information and other relevant information in
determining whether a Rule 144A Security is liquid. This investment practice
could have the effect of increasing the level of illiquidity in the Fund to the
extent that qualified institutional buyers become uninterested for a time in
purchasing Rule 144A Securities. The Board will carefully monitor any
investments by the Fund in Rule 144A Securities. The Board may adopt guidelines
and delegate to Warburg the daily function of determining and monitor-

7
<PAGE> 55

ing the liquidity of Rule 144A Securities, although the Board will retain
ultimate responsibility for any determination regarding liquidity.
Non-publicly traded securities (including Rule 144A Securities) may involve a
high degree of business and financial risk and may result in substantial losses.
These securities may be less liquid than publicly traded securities, and the
Fund may take longer to liquidate these positions than would be the case for
publicly traded securities. Although these securities may be resold in privately
negotiated transactions, the prices realized on such sales could be less than
those originally paid by the Fund. Further, companies whose securities are not
publicly traded may not be subject to the disclosure and other investor
protection requirements applicable to companies whose securities are publicly
traded. The Fund's investment in illiquid securities is subject to the risk that
should the Fund desire to sell any of these securities when a ready buyer is not
available at a price that is deemed to be representative of their value, the
value of the Fund's net assets could be adversely affected.

WARRANTS. At the time of issue, the cost of a warrant is substantially less
than the cost of the underlying security itself, and price movements in the
underlying security are generally magnified in the price movements of the
warrant. This leveraging effect enables the investor to gain exposure to the
underlying security with a relatively low capital investment but increases an
investor's risk in the event of a decline in the value of the underlying
security and can result in a complete loss of the amount invested in the
warrant. In addition, the price of a warrant tends to be more volatile than, and
may not correlate exactly to, the price of the underlying security. If the
market price of the underlying security is below the exercise price of the
warrant on its expiration date, the warrant will generally expire without value.

PORTFOLIO TRANSACTIONS AND TURNOVER RATE
- --------------------------------------------------------------------------------

The Fund will attempt to purchase securities with the intent of holding them
for investment but may purchase and sell portfolio securities whenever Warburg
believes it to be in the best interests of the Fund. The Fund will not consider
portfolio turnover rate a limiting factor in making investment decisions
consistent with its investment objective and policies. High portfolio turnover
rates (100% or more) may result in higher dealer mark-ups or underwriting
commissions as well as other transaction costs, including correspondingly higher
brokerage commissions. In addition, short-term gains realized from portfolio
turnover may be taxable to shareholders as ordinary income. See "Dividends,
Distributions and Taxes -- Taxes" below and "Investment Policies -- Portfolio
Transactions" in the Statement of Additional Information.

All orders for transactions in securities or options on behalf of the Fund are
placed by Warburg with broker-dealers that it selects, including Counsellors
Securities Inc., the Fund's distributor ("Counsellors Securities"). The Fund may
utilize Counsellors Securities in connection with a purchase or sale of
securities when Counsellors believes that the charge for the transaction does

8
<PAGE> 56

not exceed usual and customary levels and when doing so is consistent with
guidelines adopted by the Board.

CERTAIN INVESTMENT STRATEGIES
- --------------------------------------------------------------------------------

Although there is no intention of doing so during the coming year, the Fund is
authorized to engage in the following investment strategies: (i) purchasing
securities on a when-issued basis and purchasing or selling securities for
delayed delivery; (ii) lending portfolio securities; and (iii) entering into
reverse repurchase agreements and dollar rolls. Detailed information concerning
the Fund's strategies and related risks is contained below and in the Statement
of Additional Information.

FOREIGN SECURITIES. The Fund may invest up to 20% of its total assets in the
securities of foreign issuers. There are certain risks involved in investing in
securities of companies and governments of foreign nations which are in addition
to the usual risks inherent in domestic investments. These risks include those
resulting from fluctuations in currency exchange rates, revaluation of
currencies, future adverse political and economic developments and the possible
imposition of currency exchange blockages or other foreign governmental laws or
restrictions, reduced availability of public information concerning issuers, the
lack of uniform accounting, auditing and financial reporting standards and other
regulatory practices and requirements that are often generally less rigorous
than those applied in the United States. Moreover, securities of many foreign
companies may be less liquid and their prices more volatile than those of
securities of comparable U.S. companies. Certain foreign countries are known to
experience long delays between the trade and settlement dates of securities
purchased or sold. In addition, with respect to certain foreign countries, there
is the possibility of expropriation, nationalization, confiscatory taxation and
limitations on the use or removal of funds or other assets of the Fund,
including the withholding of dividends. Foreign securities may be subject to
foreign government taxes that would reduce the net yield on such securities.
Moreover, individual foreign economies may differ favorably or unfavorably from
the U.S. economy in such respects as growth of gross national product, rate of
inflation, capital reinvestment, resource self-sufficiency and balance of
payments positions. Investment in foreign securities will also result in higher
operating expenses due to the cost of converting foreign currency into U.S.
dollars, the payment of fixed brokerage commissions on foreign exchanges, which
generally are higher than commissions on U.S. exchanges, higher valuation and
communications costs and the expense of maintaining securities with foreign
custodians.

9
<PAGE> 57

issued by a U.S. bank or trust company and EDRs (sometimes referred to as
Continental Depositary Receipts) are issued in Europe and IDRs (sometimes
referred to as Global Depositary Receipts) are issued outside the U.S., each
typically by non-U.S. banks and trust companies.

OPTIONS, FUTURES AND CURRENCY TRANSACTIONS. At the discretion of Warburg, the
Fund may, but is not required to, engage in a number of strategies involving
options, futures and forward currency contracts. These strategies, commonly
referred to as "derivatives," may be used (i) for the purpose of hedging against
a decline in value of the Fund's current or anticipated portfolio holdings, (ii)
as a substitute for purchasing or selling portfolio securities or (iii) to seek
to generate income to offset expenses or increase return. TRANSACTIONS THAT ARE
NOT CONSIDERED HEDGING SHOULD BE CONSIDERED SPECULATIVE AND MAY SERVE TO
INCREASE THE FUND'S INVESTMENT RISK. Transaction costs and any premiums
associated with these strategies, and any losses incurred, will affect the
Fund's net asset value and performance. Therefore, an investment in the Fund may
involve a greater risk than an investment in other mutual funds that do not
utilize these strategies. The Fund's use of these strategies may be limited by
position and exercise limits established by securities and commodities exchanges
and other applicable regulatory authorities.

Securities Options and Stock Index Options. The Fund may write put and call
options on up to 25% of the net asset value of the stock and debt securities in
its portfolio and will realize fees (referred to as "premiums") for granting the
rights evidenced by the options. The Fund may also utilize up to 10% of its
assets to purchase options on stocks and debt securities that are traded on U.S.
and foreign exchanges, as well as over-the-counter ("OTC") options. The
purchaser of a put option on a security has the right to compel the purchase by
the writer of the underlying security, while the purchaser of a call option on a
security has the right to purchase the underlying security from the writer. In
addition to purchasing and writing options on securities, the Fund may also
utilize up to 10% of its total assets to purchase exchange-listed and OTC put
and call options on stock indexes, and may also write such options. A stock
index measures the movement of a certain group of stocks by assigning relative
values to the common stocks included in the index.

The potential loss associated with purchasing an option is limited to the
premium paid, and the premium would partially offset any gains achieved from its
use. However, for an option writer the exposure to adverse price movements in
the underlying security or index is potentially unlimited during the exercise
period. Writing securities options may result in substantial losses to the Fund,
force the sale or purchase of portfolio securities at inopportune times or at
less advantageous prices, limit the amount of appreciation the Fund could
realize on its investments or require the Fund to hold securities it would
otherwise sell.
Futures Contracts and Related Options. The Fund may enter into foreign
currency, interest rate and stock index futures contracts and purchase and write
(sell) related options that are traded on an exchange designated by the Com-

10
<PAGE> 58

modity Futures Trading Commission (the "CFTC") or, if consistent with CFTC
regulations, on foreign exchanges. These futures contracts are standardized
contracts for the future delivery of foreign currency or an interest rate
sensitive security or, in the case of stock index and certain other futures
contracts, are settled in cash with reference to a specified multiplier times
the change in the specified index, exchange rate or interest rate. An option on
a futures contract gives the purchaser the right, in return for the premium
paid, to assume a position in a futures contract.
Aggregate initial margin and premiums required to establish positions other
than those considered by the CFTC to be "bona fide hedging" will not exceed 5%
of the Fund's net asset value, after taking into account unrealized profits and
unrealized losses on any such contracts. Although the Fund is limited in the
amount of assets that may be invested in futures transactions, there is no
overall limit on the percentage of Fund assets that may be at risk with respect
to futures activities.
Currency Exchange Transactions. The Fund will conduct its currency exchange
transactions either (i) on a spot (i.e., cash) basis at the rate prevailing in
the currency exchange market, (ii) through entering into futures contracts or
options on futures contracts (as described above), (iii) through entering into
forward contracts to purchase or sell currency or (iv) by purchasing exchange-
traded currency options. A forward currency contract involves an obligation to
purchase or sell a specific currency at a future date at a price set at the time
of the contract. An option on a foreign currency operates similarly to an option
on a security. Risks associated with currency forward contracts and purchasing
currency options are similar to those described in this Prospectus for futures
contracts and securities and stock index options. In addition, the use of
currency transactions could result in losses from the imposition of foreign
exchange controls, suspension of settlement or other governmental actions or
unexpected events.

Hedging Considerations. The Fund may engage in options, futures and currency
transactions for, among other reasons, hedging purposes. A hedge is designed to
offset a loss on a portfolio position with a gain in the hedge position; at the
same time, however, a properly correlated hedge will result in a gain in the
portfolio position being offset by a loss in the hedge position. As a result,
the use of options, futures contracts and currency exchange transactions for
hedging purposes could limit any potential gain from an increase in value of the
position hedged. In addition, the movement in the portfolio position hedged may
not be of the same magnitude as movement in the hedge. The Fund will engage in
hedging transactions only when deemed advisable by Warburg, and successful use
of hedging transactions will depend on Warburg's ability to predict correctly
movements in the hedge and the hedged position and the correlation between them,
which could prove to be inaccurate. Even a well-conceived hedge may be
unsuccessful to some degree because of unexpected market behavior or trends.

11
<PAGE> 59

Additional Considerations. To the extent that the Fund engages in the
strategies described above, the Fund may experience losses greater than if these
strategies had not been utilized. In addition to the risks described above,
these instruments may be illiquid and/or subject to trading limits, and the Fund
may be unable to close out a position without incurring substantial losses, if
at all. The Fund is also subject to the risk of a default by a counterparty to
an off-exchange transaction.

Asset Coverage. The Fund will comply with applicable regulatory requirements
designed to eliminate any potential for leverage with respect to options written
by the Fund on securities, indexes and currencies; currency, interest rate and
stock index futures contracts and options on these futures contracts; and
forward currency contracts. The use of these strategies may require that the
Fund maintain cash or liquid securities in a segregated account with its
custodian or a designated sub-custodian to the extent the Fund's obligations
with respect to these strategies are not otherwise "covered" through ownership
of the underlying security, financial instrument or currency or by other
portfolio positions or by other means consistent with applicable regulatory
policies. Segregated assets cannot be sold or transferred unless equivalent
assets are substituted in their place or it is no longer necessary to segregate
them. As a result, there is a possibility that segregation of a large percentage
of the Fund's assets could impede portfolio management or the Fund's ability to
meet redemption requests or other current obligations.

SHORT SALES AGAINST THE BOX. The Fund may enter into a short sale of
securities such that when the short position is open the Fund owns an equal
amount of the securities sold short or owns preferred stocks or debt securities,
convertible or exchangeable without payment of further consideration, into an
equal number of securities sold short. This kind of short sale, which is
referred to as one "against the box," may be entered into by the Fund to, for
example, lock in a sale price for a security the Fund does not wish to sell
immediately. The Fund will deposit, in a segregated account with its custodian
or a qualified subcustodian, the securities sold short or convertible or
exchangeable preferred stocks or debt securities in connection with short sales
against the box. Not more than 10% of the Fund's net assets (taken at current
value) may be held as collateral for short sales against the box at any one
time.

INVESTMENT GUIDELINES
- --------------------------------------------------------------------------------
The Fund may invest up to 10% of its net assets in securities with contractual
or other restrictions on resale and other investments that are not readily
marketable, including (i) securities issued as part of a privately negotiated
transaction between an issuer and one or more purchasers; (ii) repurchase
agreements with maturities greater than seven days; (iii) time deposits maturing
in more than seven calendar days; and (iv) certain Rule 144A Securities. The
Fund may borrow from banks for temporary or emergency purposes, such as meeting
anticipated redemption requests, provided that borrowings by the Fund may not
exceed 30% of its total assets, and may pledge its assets

12
<PAGE> 60

to the extent necessary to secure permitted borrowings. Whenever borrowings
exceed 5% of the value of the Fund's net assets, the Fund will not make any
investments (including roll-overs). Except for the limitations on borrowing, the
investment guidelines set forth in this paragraph may be changed at any time
without shareholder consent by vote of the Board, subject to the limitations
contained in the 1940 Act. A complete list of investment restrictions that the
Fund has adopted identifying additional restrictions that cannot be changed
without the approval of the majority of the Fund's outstanding shares is
contained in the Statement of Additional Information.

MANAGEMENT OF THE FUND
- --------------------------------------------------------------------------------
INVESTMENT ADVISER. The Fund employs Warburg as investment adviser to the
Fund. Warburg, subject to the control of the Fund's officers and the Board,
manages the investment and reinvestment of the assets of the Funds in accordance
with the Fund's investment objective and stated investment policies. Warburg
makes investment decisions for the Fund and places orders to purchase or sell
securities on behalf of the Fund. Warburg also employs a support staff of
management personnel to provide services to the Fund and furnishes the Fund with
office space, furnishings and equipment.
For the services provided by Warburg, the Fund pays Warburg a fee calculated
at an annual rate of 1.00% of the Fund's average daily net assets. Warburg and
the Fund's co-administrators may voluntarily waive a portion of their fees from
time to time and temporarily limit the expenses to be borne by the Fund.

Warburg is a professional investment advisory firm which provides investment
services to investment companies, employee benefit plans, endowment funds,
foundations and other institutions and individuals. As of December 31, 1997,
Warburg managed approximately $19.7 billion of assets, including approximately
$11.3 billion of investment company assets. Incorporated in 1970, Warburg is
indirectly controlled by Warburg, Pincus & Co. ("WP&Co."), which has no business
other than being a holding company of Warburg and its affiliates. Lionel I.
Pincus, the managing partner of WP&Co., may be deemed to control both WP&Co. and
Warburg. Warburg's address is 466 Lexington Avenue, New York, New York
10017-3147.

PORTFOLIO MANAGERS. George U. Wyper has been the Portfolio Manager of the Fund
since its inception. Mr. Wyper is a Managing Director of Warburg, which he
joined in August 1994, before which time he was chief investment officer of
White River Corporation and president of Hanover Advisors, Inc. Kyle F. Frey, a
Senior Vice President of Warburg, has been Associate Portfolio Manager and
Research Analyst of the Fund since its inception. Mr. Frey has been with Warburg
since 1989.

CO-ADMINISTRATORS. The Fund employs Counsellors Funds Service, Inc.
("Counsellors Service"), a wholly owned subsidiary of Warburg, as a co-
administrator. As co-administrator, Counsellors Service provides shareholder
liaison services to the Fund including responding to shareholder inquiries and

13
<PAGE> 61

providing information on shareholder investments. Counsellors Service also
performs a variety of other services, including furnishing certain executive and
administrative services, acting as liaison between the Fund and its various
service providers, furnishing corporate secretarial services, which include
preparing materials for meetings of the Board, preparing proxy statements and
annual and semiannual reports, assisting in the preparation of tax returns and
monitoring and developing compliance procedures for the Fund. As compensation,
the Fund pays Counsellors Service a fee calculated at an annual rate of .10% of
its average daily net assets.

The Fund employs PFPC Inc. ("PFPC"), an indirect, wholly owned subsidiary of
PNC Bank Corp., as a co-administrator. As a co-administrator, PFPC calculates
the Fund's net asset value, provides all accounting services for the Fund and
assists in related aspects of the Fund's operations. As compensation, the Fund
pays to PFPC a fee calculated at an annual rate of .10% of the Fund's first $500
million in average daily net assets, .075% of the next $1 billion in assets and
.05% of assets exceeding $1.5 billion, exclusive of out-of-pocket expenses. PFPC
has its principal offices at 400 Bellevue Parkway, Wilmington, Delaware 19809.

CUSTODIANS. PNC Bank, National Association ("PNC") serves as custodian of the
Fund's U.S. assets, and State Street Bank and Trust Company ("State Street")
serves as custodian of the Fund's non-U.S. assets. Like PFPC, PNC is a
subsidiary of PNC Bank Corp. and its principal business address is 1600 Market
Street, Philadelphia, Pennsylvania 19103. State Street's principal business
address is 225 Franklin Street, Boston, Massachusetts 02110.

TRANSFER AGENT. State Street also acts as shareholder servicing agent,
transfer agent and dividend disbursing agent for the Fund. It has delegated to
Boston Financial Data Services, Inc., a 50% owned subsidiary ("BFDS"),
responsibility for most shareholder servicing functions. BFDS's principal
business address is 2 Heritage Drive, North Quincy, Massachusetts 02171.

DISTRIBUTOR. Counsellors Securities serves as distributor of the shares of the
Fund. Counsellors Securities is a wholly owned subsidiary of Warburg and is
located at 466 Lexington Avenue, New York, New York 10017-3147. No compensation
is payable by the Advisor Shares to Counsellors Securities for distribution
services.

Warburg or its affiliates may, at their own expense, provide promotional
incentives for qualified recipients who support the sale of shares of the Fund,
consisting of securities dealers who have sold Fund shares or others, including
banks and other financial institutions, under special arrangements. Incentives
may include opportunities to attend business meetings, conferences, sales or
training programs for recipients' employees or clients and other programs or
events and may also include opportunities to participate in advertising or sales
campaigns and/or shareholder services and programs regarding one or more Warburg
Pincus Funds. Warburg or its affiliates may pay for travel, meals and lodging in
connection with these promotional activities. In some instances, these
incentives may be offered only to certain institutions whose

14
<PAGE> 62

representatives provide services in connection with the sale or expected sale of
Fund shares.

DIRECTORS AND OFFICERS. The officers of the Fund manage its day-to-day
operations and are directly responsible to the Board. The Board sets broad
policies for the Fund and chooses its officers. A list of the Directors and
officers of the Fund and a brief statement of their present positions and
principal occupations during the past five years is set forth in the Statement
of Additional Information.

HOW TO OPEN AN ACCOUNT

- --------------------------------------------------------------------------------

In order to invest in the Fund, an account application must first be completed
and signed. To obtain an application, telephone the Fund at (800) 369-2728. An
application may also be obtained by writing to:

Warburg Pincus Advisor Funds

P.O. Box 4906
Grand Central Station
New York, New York 10163
Attn: Institutional Services
OR
Overnight to:
Warburg Pincus Advisor Funds
335 Madison Avenue
15th Floor
New York, New York 10017
Attn: Institutional Services

Completed and signed applications should be sent to the above. References in
this Prospectus to shareholders or investors also include Institutions which may
act as record holders of the Advisor Shares.

UTMA/UGMA ACCOUNTS. For information about opening a Uniform Transfers to
Minors Act ("UTMA") account or Uniform Gifts to Minors Act ("UGMA") account, an
Institution should telephone the Fund at (800) 369-2728 or write to an address
set forth above. Individual investors should consult their own tax advisors
about the establishment of UTMA or UGMA accounts.

CHANGES TO ACCOUNT. For Information on how to make changes to an account,
including changes to account registration and/or address, telephone the Fund at
(800) 369-2728. Institutions and their customers are responsible for maintaining
current account registrations and addresses with the Fund. No interest will be
paid on amounts represented by uncashed distribution or redemption checks.

HOW TO PURCHASE SHARES
- --------------------------------------------------------------------------------

Individual investors may only purchase Warburg Pincus Advisor Fund shares
through Institutions. The Fund reserves the right to make Advisor Shares
available to other investors in the future.

15
<PAGE> 63

Each Institution separately determines the rules applicable to its customers
investing in the Fund, including minimum initial and subsequent investment
requirements and the procedures to be followed to effect purchases, redemptions
and exchanges of Advisor Shares. There is no minimum amount of initial or
subsequent purchases of Advisor Shares imposed on Institutions, although the
Fund reserves the right to impose minimums in the future.
Orders for the purchase of Advisor Shares are placed with an Institution by
its customers. The Institution is responsible for the prompt transmission of the
order to the Fund or its agent.

Advisor Shares may be purchased at any time by mail or by wire in the manner
outlined below. Wire payments for initial and subsequent investments should be
preceded by an order placed with the Fund and should clearly indicate the
account number and the name of the Fund in which shares are being purchased. In
the interest of economy and convenience, physical certificates representing
shares in the Fund are not normally issued.

BY MAIL. To purchase Advisor Shares by mail, a check or money order made
payable to the Fund or Warburg Pincus Advisor Funds (in U.S. currency) should be
sent along with a completed account application to Warburg Pincus Advisor Funds
at an address set forth above. Checks payable to the investor and endorsed to
the order of the Fund or Warburg Pincus Advisor Funds will not be accepted as
payment and will be returned to the sender. If payment is received in proper
form prior to the close of regular trading on The New York Stock Exchange, Inc.
(the "NYSE") (currently 4:00 p.m., Eastern time) on a day that the Fund
calculates its net asset value (a "business day"), the purchase will be made at
the Fund's net asset value calculated at the end of that day. If payment is
received at or after the close of regular trading on the NYSE, the purchase will
be effected at the Fund's net asset value determined for the next business day
after payment has been received. Checks or money orders that are not in proper
form or that are not accompanied or preceded by a complete account application
will be returned to the sender. Shares purchased by check or money order are
entitled to receive dividends and distributions beginning on the day payment is
received. Checks or money orders in payment for shares of more than one Warburg
Pincus Advisor Fund should be made payable to Warburg Pincus Advisor Funds and
should be accompanied by a breakdown of amounts to be invested in each fund. If
a check used for purchase does not clear, the Fund will cancel the purchase and
the investor may be liable for losses or fees incurred. For a description of the
manner of calculating the Fund's net asset value, see "Net Asset Value" below.

BY WIRE. Advisor Shares in the Fund may also be purchased by wired funds from
a bank. Telephone orders by wire will not be accepted until a completed account
application in proper form has been received and an account number has been
established. Orders should be placed with the Fund

16
<PAGE> 64

prior to wiring funds by telephoning (800) 369-2728. Federal funds may be wired
using the following wire address:

State Street Bank and Trust Company
ABA# 0110 000 28
Attn: Mutual Funds/Custody Department
Warburg Pincus Advisor Small Company Value Fund
DDA# 9904-649-2
F/F/C: [Account Number and Account Registration]

TELEPHONE TRANSACTIONS. Unless otherwise indicated on the account application,
transactions may be conducted by telephone. Institutions should realize that in
conducting transactions by telephone they may be giving up a measure of security
that they may have if they were to conduct these transactions in writing.
Neither the Fund nor its agents will be liable for following instructions
communicated by telephone that it reasonably believes to be genuine. Reasonable
procedures will be employed on behalf of the Fund designed to give reasonable
assurance that instructions communicated by telephone are genuine. Such
procedures include providing written confirmation of telephone transactions,
tape recording telephone instructions and requiring specific personal
information prior to acting upon telephone instructions.

GENERAL. The Fund understands that some Institutions may impose certain
conditions on their clients or customers that invest in the Fund, which are in
addition to or different than those described in this Prospectus, and may charge
their clients or customers transaction or administrative charges or other direct
fees. Certain features of the Fund, such as the initial and subsequent
investment minimums, redemption fees and certain trading restrictions, may be
modified or waived by Institutions. Therefore, a client or customer should
contact the Institution acting on his behalf concerning the fees (if any)
charged in connection with a purchase, exchange or redemption of Fund shares and
should read this Prospectus in light of the terms governing his account with the
Institution. Institutions will be responsible for promptly transmitting client
or customer purchase and redemption orders to the Fund in accordance with their
agreements with the Fund and with clients or customers.

17
<PAGE> 65

Institutions or, if applicable, their designees may enter confirmed purchase,
exchange or redemption orders on behalf of clients and customers, with payment
to follow no later than the Fund's pricing on the following business day. If
payment is not received by such time, the Institution could be held liable for
resulting fees or losses. The Fund may be deemed to have received a purchase or
redemption order when an Institution, or, if applicable, its authorized
designee, accepts the order. Such orders received by the Fund in proper form
will be priced at the Fund's net asset value next computed after they are
accepted by the Institution or its authorized designee.

The Fund reserves the right to reject any specific purchase order, including
certain purchases made by exchange (see "How to Redeem and Exchange
Shares -- Exchange of Shares" below). Purchase orders may be refused if, in
Warburg's opinion, the Fund would be unable to invest the money effectively in
accordance with its investment objective and policies, or would otherwise
potentially be adversely affected. The Fund may discontinue sales of its shares
if management believes that a substantial further increase in assets may
adversely affect the Fund's ability to achieve its investment objective. In such
event, however, it is anticipated that existing shareholders would be permitted
to continue to authorize investment in the Fund and to reinvest any dividends or
capital gains distributions.

HOW TO REDEEM AND EXCHANGE SHARES

- --------------------------------------------------------------------------------

REDEMPTION OF SHARES. An investor of the Fund may redeem (sell) shares on any
day that the Fund's net asset value is calculated (see "Net Asset Value" below).
Requests for the redemption (or exchange) of Advisor Shares are placed with an
Institution by its customers, which is then responsible for the prompt
transmission of this request to the Fund or its agent.

Advisor Shares of the Fund may either be redeemed by mail or by telephone. If
an investor desires to redeem his shares by mail, a written request for
redemption should be sent to Warburg Pincus Advisor Funds at an address
indicated above under "How to Open an Account." An investor should be sure that
the redemption request identifies the Fund, the number of shares to be redeemed
and the investor's account number. Payment of redemption proceeds may be delayed
in connection with account changes. Each mail redemption request must be signed
by the registered owner(s) (or his legal representative(s)) exactly as the
shares are registered. Institutions may redeem Advisor Shares by calling Warburg
Pincus Advisor Funds at (800) 369-2728 between 9:00 a.m. and 4:00 p.m. (Eastern
time) on any business day. An Institution making a telephone withdrawal should
state (i) the name of the Fund, (ii) the account number of the Fund, (iii) the
name of the investor(s) appearing on the Fund's records, (iv) the amount to be
withdrawn and (v) the name of the person requesting the redemption.

18
<PAGE> 66

in the account application previously filled out. The Fund currently does not
impose a service charge for effecting wire transfers but the Fund reserves the
right to do so in the future. During periods of significant economic or market
change, telephone redemptions may be difficult to implement. If an investor is
unable to contact Warburg Pincus Advisor Funds by telephone, an investor may
deliver the redemption request to Warburg Pincus Advisor Funds by mail at an
address shown above under "How to Open an Account." Although the Fund will
redeem shares purchased by check before the funds or check clear, payments of
the redemption proceeds will be delayed for up to 10 days from the date of
purchase. Investors should consider purchasing shares using a certified or bank
check, money order or federal funds wire if they anticipate an immediate need
for redemption proceeds.

If a redemption order is received by the Fund or its agent prior to the close
of regular trading on the NYSE, the redemption order will be effected at the net
asset value per share as determined on that day. If a redemption order is
received at or after the close of regular trading on the NYSE, the redemption
order will be effected at the net asset value as next determined. Except as
noted above, redemption proceeds will normally be mailed or wired to an investor
on the next business day following the date a redemption order is effected. If,
however, in the judgment of Warburg, immediate payment would adversely affect
the Fund, the Fund reserves the right to pay the redemption proceeds within
seven days after the redemption order is effected. Furthermore, the Fund may
suspend the right of redemption or postpone the date of payment upon redemption
(as well as suspend or postpone the recordation of an exchange of shares) for
such periods as are permitted under the 1940 Act.

The proceeds paid upon redemption may be more or less than the amount invested
depending upon a share's net asset value at the time of redemption. If an
investor redeems all the shares in his account, all dividends and distributions
declared up to and including the date of redemption are paid along with the
proceeds of the redemption.

EXCHANGE OF SHARES. An Institution may exchange Advisor Shares of the Fund for
Advisor Shares of the other Warburg Pincus Advisor Funds at their respective net
asset values. Exchanges may be effected in the manner described under
"Redemption of Shares" above. If an exchange request is received by Warburg
Pincus Advisor Funds or its agent prior to the close of regular trading on the
NYSE, the exchange will be made at each fund's net asset value determined at the
end of that business day. Exchanges will be effected without a sales charge. The
Fund may refuse exchange purchases at any time without prior notice.

The exchange privilege is available to shareholders residing in any state in
which Advisor Shares being acquired may legally be sold. When an investor
effects an exchange of shares, the exchange is treated for federal income tax
purposes as a redemption. Therefore, the investor may realize a taxable gain or
loss in connection with the exchange. Investors wishing to exchange Advisor
Shares of the Fund for shares in another Warburg Pincus Advisor Fund

19
<PAGE> 67

should review the prospectus of the other fund prior to making an exchange.
For further information regarding the exchange privilege or to obtain a current
prospectus for another Warburg Pincus Advisor Fund, an investor should contact
the Fund at (800) 369-2728.

The Fund reserves the right to refuse exchange purchases by any person or
group if, in Warburg's judgment, the Fund would be unable to invest the money
effectively in accordance with its investment objective and policies, or would
otherwise potentially be adversely affected. Examples of when an exchange
purchase could be refused are when the Fund receives or anticipates receiving
large exchange orders at or about the same time and/or when a pattern of
exchanges within a short period of time (often associated with a "market timing"
strategy) is discerned. The Fund reserves the right to terminate or modify the
exchange privilege at any time upon 30 days' notice to shareholders.

DIVIDENDS, DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------

DIVIDENDS AND DISTRIBUTIONS. The Fund calculates its dividends from net
investment income. Net investment income includes interest accrued and dividends
earned on the Fund's portfolio securities for the applicable period less
applicable expenses. The Fund declares dividends from its net investment income
and net realized short-term and long-term capital gains annually and pays them
in the calendar year in which they are declared, generally in November or
December. Net investment income earned on weekends and when the NYSE is not open
will be computed as of the next business day. Unless an investor instructs the
Fund to pay dividends or distributions in cash, dividends and distributions will
automatically be reinvested in additional Advisor Shares of the Fund at net
asset value. The election to receive dividends in cash may be made on the
account application or, subsequently, by writing to Warburg Pincus Advisor Funds
at an address set forth under "How to Open an Account" or by calling the Fund at
(800) 369-2728.

The Fund may be required to withhold for U.S. federal income taxes 31% of all
distributions payable to shareholders who fail to provide the Fund with their
correct taxpayer identification number or to make required certifications, or
who have been notified by the U.S. Internal Revenue Service that they are
subject to backup withholding.

TAXES. The Fund intends to qualify each year as a "regulated investment
company" within the meaning of the Internal Revenue Code of 1986, as amended
(the "Code"). The Fund, if it qualifies as a regulated investment company, will
be subject to a 4% non-deductible excise tax measured with respect to certain
undistributed amounts of ordinary income and capital gain. The Fund expects to
pay such additional dividends and to make such additional distributions as are
necessary to avoid the application of this tax.

Dividends paid from net investment income and distributions of net realized
short-term capital gains are taxable to investors as ordinary income, and

20
<PAGE> 68

distributions derived from net realized long-term capital gains are taxable to
investors as long-term capital gains, in each case regardless of how long the
shareholder has held Advisor Shares or whether received in cash or reinvested in
additional Advisor Shares. As a general rule, an investor's gain or loss on a
sale or redemption of its Fund shares will be a long-term capital gain or loss
if it has held its shares for more than one year and will be a short-term
capital gain or loss if it has held its shares for one year or less. However,
any loss realized upon the sale or redemption of shares within six months from
the date of their purchase will be treated as a long-term capital loss to the
extent of any amounts treated as distributions of long-term capital gain during
such six-month period with respect to such shares.

In the case of individuals whose ordinary income is taxed at a 15% rate, the
20% rate is reduced to 10% and the 10% rate for assets held for more than five
years is reduced to eight percent. The Fund will provide information relating to
that portion of a "capital gain dividend" that may be treated by investors as
eligible for the reduced capital gains rate for capital assets held for more
than 18 months.

Investors may be proportionately liable for taxes on income and gains of the
Fund, but investors not subject to tax on their income will not be required to
pay tax on amounts distributed to them. The Fund's investment activities,
including short sales of securities, will not result in unrelated business
taxable income to a tax-exempt investor. The Fund will designate that portion of
the Fund's dividends that will qualify for the federal dividends-received
deduction for corporations. The Fund's investments in foreign securities may
subject it to certain withholding and other taxes imposed by foreign countries
with respect to dividends, interest, capital gains and other income. It is not
expected that the payment of such taxes by the Fund will give rise to a direct
credit or deduction available to the Fund's shareholders.

GENERAL. Statements as to the tax status of each investor's dividends and
distributions are mailed annually. Each investor will also receive, if
applicable, various written notices after the close of the Fund's prior taxable
year with respect to certain dividends and distributions which were received
from the

21
<PAGE> 69

Fund during the Fund's prior taxable year. Investors should consult their own
tax advisers with specific reference to their own tax situations, including
their state and local tax liabilities. Individuals investing in the Fund through
Institutions should consult those Institutions or their own tax advisers
regarding the tax consequences of investing in the Fund.

NET ASSET VALUE
- --------------------------------------------------------------------------------

The Fund's net asset value per share is calculated as of the close of regular
trading on the NYSE (currently 4:00 p.m., Eastern time) on each business day,
Monday through Friday, except on days when the NYSE is closed. The NYSE is
currently scheduled to be closed on New Year's Day, Dr. Martin Luther King, Jr.
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day, and on the preceding Friday or subsequent
Monday when one of these holidays falls on a Saturday or Sunday, respectively.
The net asset value per share of the Fund generally changes each day.

The net asset value per Advisor Share of the Fund is computed by adding the
Advisor Shares' pro rata share of the value of the Fund's assets, deducting the
Advisor Shares' pro rata share of the Fund's liabilities and the liabilities
specifically allocated to Advisor Shares and then dividing the result by the
total number of outstanding Advisor Shares.
Securities listed on a U.S. securities exchange (including securities traded
through the Nasdaq National Market System) or foreign securities exchange or
traded in an over-the-counter market will be valued at the most recent sale
price when the valuation is made. Options and futures contracts will be valued
similarly. Debt obligations that mature in 60 days or less from the valuation
date are valued on the basis of amortized cost, unless the Board determines that
using this valuation method would not reflect the investments' value.
Securities, options and futures contracts for which market quotations are not
readily available and other assets will be valued at their fair value as
determined in good faith pursuant to consistently applied procedures established
by the Board. Further information regarding valuation policies is contained in
the Statement of Additional Information.

PERFORMANCE
- --------------------------------------------------------------------------------
The Fund quotes the performance of Advisor Shares separately from Common
Shares. The net asset value of the Advisor Shares is listed in The Wall Street
Journal each business day under the heading Warburg Pincus Advisor Funds. From
time to time, the Fund may advertise the average annual total return of Advisor
Shares over various periods of time. These total return figures show the average
percentage change in value of an investment in the Advisor Shares from the
beginning of the measuring period to the end of the measuring period. The
figures reflect changes in the price of the Advisor Shares assuming that any
income dividends and/or capital gain distributions made by the Fund during the
period were reinvested in Advisor Shares. Total

22
<PAGE> 70

return will be shown for recent one-, five- and ten-year periods, and may be
shown for other periods as well (such as on a year-by-year, quarterly or current
year-to-date basis).
When considering average total return figures for periods longer than one
year, it is important to note that the annual total return for one year in the
period might have been greater or less than the average for the entire period.
When considering total return figures for periods shorter than one year,
investors should bear in mind that the Fund seeks long-term appreciation and
that such return may not be representative of the Fund's return over a longer
market cycle. The Fund may also advertise aggregate total return figures of
Advisor Shares for various periods, representing the cumulative change in value
of an investment in the Advisor Shares for the specific period (again reflecting
changes in share prices and assuming reinvestment of dividends and
distributions). Aggregate and average total returns may be shown by means of
schedules, charts or graphs and may indicate various components of total return
(i.e., change in value of initial investment, income dividends and capital gain
distributions).
Investors should note that total return figures are based on historical
earnings and are not intended to indicate future performance. The Statement of
Additional Information describes the method used to determine the total return.
Current total return figures may be obtained by calling the Fund at (800)
369-2728.

The Fund may compare its performance with (i) that of other mutual funds as
listed in the rankings prepared by Lipper Analytical Services, Inc. or similar
investment services that monitor the performance of mutual funds or as set forth
in the publications listed below; (ii) appropriate indexes prepared by Frank
Russell Company relating to securities represented in the Fund, the T. Rowe
Price New Horizons Fund Index and the S&P 500 Index, which are unmanaged
indexes; or (iii) other appropriate indexes of investment securities or with
data developed by Warburg derived from such indexes. The Fund may also include
evaluations of the Fund published by nationally recognized ranking services and
by financial publications that are nationally recognized, such as Barron's,
Business Week, Financial Times, Forbes, Fortune, Inc., Institutional Investor,
Investor's Business Daily, Money, Morningstar, Mutual Fund Magazine, SmartMoney,
The Wall Street Journal and Worth. Morningstar, Inc. rates funds in broad
categories based on risk/reward analyses over various time periods. In addition,
the Fund may from time to time compare the expense ratio of Advisor Shares to
that of investment companies with similar objectives and policies, based on data
generated by Lipper Analytical Services, Inc. or similar investment services
that monitor mutual funds.

In reports or other communications to investors or in advertising, the Fund
may also describe the general biography or work experience of the portfolio
managers of the Fund and may include quotations attributable to the portfolio
managers describing approaches taken in managing the Fund's investments,
research methodology underlying stock selection or the Fund's investment

23
<PAGE> 71

objective. In addition, the Fund and its portfolio managers may render periodic
updates of Fund activity, which may include a discussion of significant
portfolio holdings; analysis of holdings by industry, country, credit quality
and other characteristics; and comparison and analysis of the Fund with respect
to relevant market and industry benchmarks. The Fund may also discuss measures
of risk, the continuum of risk and return relating to different investments and
the potential impact of foreign stocks on a portfolio otherwise composed of
domestic securities.

GENERAL INFORMATION
- --------------------------------------------------------------------------------
ORGANIZATION. The Fund was incorporated on October 23, 1995 under the laws of
the State of Maryland under the name "Warburg, Pincus Small Company Value Fund,
Inc." The Fund's charter authorizes the Board to issue three billion full and
fractional shares of capital stock, $.001 par value per share, of which one
billion shares are designated Common Shares and two billion shares are
designated Advisor Shares. Under the Fund's charter documents, the Board has the
power to classify or reclassify any unissued shares of the Fund into one or more
additional classes by setting or changing in any one or more respects their
relative rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption. The Board may similarly
classify or reclassify any class of its shares into one or more series and,
without shareholder approval, may increase the number of authorized shares of
the Fund.
MULTI-CLASS STRUCTURE. The Fund offers a separate class of shares, the Common
Shares, directly to individuals pursuant to a separate prospectus. Shares of
each class represent equal pro rata interests in the Fund and accrue dividends
and calculate net asset value and performance quotations in the same manner,
except that Advisor Shares bear fees payable by the Fund to Institutions for
services they provide to the beneficial owners of such shares and enjoy certain
exclusive voting rights on matters relating to these fees. Because of the higher
fees paid by the Advisor Shares, the total return on such shares can be expected
to be lower than the total return on Common Shares. Investors may obtain
information concerning the Common Shares from their investment professional or
by calling Counsellors Securities at (800) 927-2874.
VOTING RIGHTS. Investors in the Fund are entitled to one vote for each full
share held and fractional votes for fractional shares held. Shareholders of the
Fund will vote in the aggregate except where otherwise required by law and
except that each class will vote separately on certain matters pertaining to its
distribution and shareholder servicing arrangements. There will normally be no
meetings of investors for the purpose of electing members of the Board unless
and until such time as less than a majority of the members holding office have
been elected by investors. Any member of the Board may be removed from office
upon the vote of shareholders holding at least a majority of the Fund's
outstanding shares, at a meeting called for that purpose. A meeting will be
called for the purpose of voting on the removal of a Board

24
<PAGE> 72

member at the written request of holders of 10% of the outstanding shares of the
Fund. Lionel I. Pincus may be deemed to be a controlling person of the Fund
because he may be deemed to possess or share investment power over shares owned
by clients of Warburg.

SHAREHOLDER COMMUNICATIONS. Each investor will receive a quarterly statement
of its account, as well as a statement of its account after any transaction that
affects his share balance or share registration (other than the reinvestment of
dividends or distributions or investment made through the Automatic Investment
Program). The Fund will also send to its investors a semiannual report and an
audited annual report, each of which includes a list of the investment
securities held by the Fund and a statement of the performance of the Fund.
Periodic listings of the investment securities held by the Fund, as well as
certain statistical characteristics of the Fund, may be obtained by calling the
Fund at (800) 369-2728 or on the Warburg Pincus Funds Web site at
www.warburg.com. Each Institution that is the record owner of Advisor Shares on
behalf of its customers will send a statement to those customers periodically
showing their indirect interest in Advisor Shares, as well as providing other
information about the Fund. See "Shareholder Servicing."

SHAREHOLDER SERVICING
- --------------------------------------------------------------------------------

The Fund is authorized to offer Advisor Shares exclusively through
Institutions whose clients or customers (or participants in the case of
retirement plans) ("Customers") are owners of Advisor Shares. Either those
Institutions or companies providing certain services to Customers (together,
"Service Organizations") will enter into agreements ("Agreements") with the Fund
and/ or Counsellors Securities pursuant to a Distribution Plan as described
below. Such entities may provide certain distribution, shareholder servicing,
administrative and/or accounting services for Customers. Distribution services
would be marketing or other services in connection with the promotion and sale
of Advisor Shares. Shareholder services that may be provided include responding
to Customer inquiries, providing information on Customer investments and
providing other shareholder liaison services. Administrative and accounting
services related to the sale of Advisor Shares may include (i) aggregating and
processing purchase and redemption requests from Customers and placing net
purchase and redemption orders with the Fund's transfer agent, (ii) processing
dividend payments from the Fund on behalf of Customers and (iii) providing
sub-accounting related to the sale of Advisor Shares beneficially owned by
Customers or the information to the Fund necessary for sub-accounting. The Board
has approved a Distribution Plan (the "Plan") pursuant to Rule 12b-1 under the
1940 Act under which each participating Service Organization will be paid, out
of the assets of the Fund (either directly by the Fund or by Counsellors
Securities on behalf of the Fund), a negotiated fee on an annual basis not to
exceed .75% (up to .25% annual service fee and a .50% annual distribution and/or
administrative services fee) of the value of the average daily net assets of its
Customers invested in Advisor Shares. The

25
<PAGE> 73

current 12b-1 fee is .50% per annum. The Board evaluates the appropriateness of
the Plan on a continuing basis and in doing so considers all relevant factors.

Warburg, Counsellors Securities and Counsellors Service or any of their
affiliates may, from time to time, at their own expense, provide compensation to
Service Organizations. To the extent they do so, such compensation does not
represent an additional expense to the Fund or its shareholders. In addition
Warburg, Counsellors Securities or any of their affiliates may, from time to
time, at their own expense, pay certain transfer agent fees and expenses related
to accounts of Customers. A Service Organization may use a portion of the fees
paid pursuant to the Plan to compensate the Fund's custodian or transfer agent
for costs related to accounts of Customers.

------------------------------

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, THE FUND'S
STATEMENT OF ADDITIONAL INFORMATION OR THE FUND'S OFFICIAL SALES LITERATURE IN
CONNECTION WITH THE OFFERING OF SHARES OF THE FUND, AND IF GIVEN OR MADE, SUCH
OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE FUND. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF THE
ADVISOR SHARES IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM, SUCH OFFER MAY
NOT LAWFULLY BE MADE.

26
<PAGE> 74

(THIS PAGE INTENTIONALLY LEFT BLANK)
<PAGE> 75

TABLE OF CONTENTS

<TABLE>
<S> <C>
The Fund's Expenses...................................... 2
Financial Highlights..................................... 3
Investment Objective and Policies........................ 4
Portfolio Investments.................................... 4
Risk Factors and Special Considerations.................. 7
Portfolio Transactions and Turnover Rate................. 8
Certain Investment Strategies............................ 9
Investment Guidelines.................................... 12
Management of the Fund................................... 13
How to Open an Account................................... 15
How to Purchase Shares................................... 15
How to Redeem and Exchange Shares........................ 18
Dividends, Distributions and Taxes....................... 20
Net Asset Value.......................................... 22
Performance.............................................. 22
General Information...................................... 24
Shareholder Servicing.................................... 25
</TABLE>

[WARBURG PINCUS LOGO]

P.O. BOX 4906, GRAND CENTRAL STATION

NEW YORK, NY 10163

800-369-2728

COUNSELLORS SECURITIES INC., DISTRIBUTOR. ADSCV-1-0297
<PAGE> 76
STATEMENT OF ADDITIONAL INFORMATION

February 27, 1998

WARBURG PINCUS EMERGING GROWTH FUND

WARBURG PINCUS POST-VENTURE CAPITAL FUND

WARBURG PINCUS SMALL COMPANY GROWTH FUND

WARBURG PINCUS SMALL COMPANY VALUE FUND

P.O. Box 9030, Boston, Massachusetts 02205-9030
For information, call (800) WARBURG

CONTENTS
Page

Investment Objectives................................................... 2
Investment Policies..................................................... 2
Management of the Funds................................................. 29
Additional Purchase and Redemption Information.......................... 38
Exchange Privilege...................................................... 39
Additional Information Concerning Taxes................................. 40
Determination of Performance............................................ 45
Independent Accountants and Counsel..................................... 47
Miscellaneous........................................................... 47
Financial Statements.................................................... 50
Appendix -- Description of Ratings...................................... A-1

This combined Statement of Additional Information is meant to be read in
conjunction with the combined Prospectus for the Common Shares of Warburg Pincus
Emerging Growth Fund (the "Emerging Growth Fund"), Warburg Pincus Post-Venture
Capital Fund (the "Post-Venture Capital Fund"), Warburg Pincus Small Company
Growth Fund (the "Small Company Growth Fund") and Warburg Pincus Small Company
Value Fund (the "Small Company Value Fund" and collectively, the "Funds"), and
with the Prospectus for the Advisor Shares of each Fund, each dated February 27,
1998, as amended or supplemented from time to time, and is incorporated by
reference in its entirety into those Prospectuses. Because this Statement of
Additional Information is not itself a prospectus, no investment in shares of a
Fund should be made solely upon the information contained herein. Copies of the
Funds' Prospectuses and information regarding the Funds' current performance may
be obtained by calling the Funds at (800) 927-2874. Information regarding the
status of shareholder accounts may be obtained by calling the Funds at (800)
927-2874 or by writing to

<PAGE> 77
the Funds, P.O. Box 9030, Boston, Massachusetts 02205-9030.

INVESTMENT OBJECTIVES

The investment objective of the Emerging Growth Fund is maximum capital
appreciation. The investment objective of the Post-Venture Capital Fund is
long-term growth of capital. The investment objective of the Small Company
Growth Fund is capital growth. The investment objective of the Small Company
Value Fund is long-term capital appreciation.

INVESTMENT POLICIES

The following policies supplement the descriptions of the Funds'
investment objectives and policies in the Prospectuses.

Options, Futures and Currency Exchange Transactions

Securities Options. Each Fund may write covered call options on stock and
debt securities and may purchase U.S. exchanged-traded and over-the counter
("OTC") put and call options.

Each Fund realizes fees (referred to as "premiums") for granting the
rights evidenced by the options it has written. A put option embodies the right
of its purchaser to compel the writer of the option to purchase from the option
holder an underlying security at a specified price for a specified time period
or at a specified time. In contrast, a call option embodies the right of its
purchaser to compel the writer of the option to sell to the option holder an
underlying security at a specified price for a specified time period or at a
specified time.

The principal reason for writing covered options on a security is to
attempt to realize, through the receipt of premiums, a greater return than would
be realized on the securities alone. In return for a premium, a Fund as the
writer of a covered call option forfeits the right to any appreciation in the
value of the underlying security above the strike price for the life of the
option (or until a closing purchase transaction can be effected). Nevertheless,
the Fund as a call writer retains the risk of a decline in the price of the
underlying security. The size of the premiums that a Fund may receive may be
adversely affected as new or existing institutions, including other investment
companies, engage in or increase their option-writing activities.

In the case of options written by a Fund that are deemed covered by virtue
of the Fund's holding convertible or exchangeable preferred stock or debt
securities, the time required to convert or exchange and obtain physical
delivery of the underlying common stock with respect to which the Fund has
written options may exceed the time within which the Fund must make delivery in
accordance with an exercise notice. In these instances, a Fund may purchase or
temporarily borrow the underlying securities for purposes of physical delivery.
By so doing, the Fund will not bear any market risk, since the Fund will have
the absolute

2
<PAGE> 78
right to receive from the issuer of the underlying security an equal number of
shares to replace the borrowed securities, but the Fund may incur additional
transaction costs or interest expenses in connection with any such purchase or
borrowing.

Additional risks exist with respect to certain of the securities for which
a Fund may write covered call options. For example, if the Fund writes covered
call options on mortgage-backed securities, the mortgage-backed securities that
it holds as cover may, because of scheduled amortization or unscheduled
prepayments, cease to be sufficient cover. If this occurs, the Fund will
compensate for the decline in the value of the cover by purchasing an
appropriate additional amount of mortgage-backed securities.

Options written by a Fund will normally have expiration dates between one
and nine months from the date written. The exercise price of the options may be
below, equal to or above the market values of the underlying securities at the
times the options are written. In the case of call options, these exercise
prices are referred to as "in-the-money," "at-the-money" and "out-of-the-money,"
respectively. Each Fund may write (i) in-the-money call options when Warburg
Pincus Asset Management, Inc., each Fund's investment adviser ("Warburg"),
expects that the price of the underlying security will remain flat or decline
moderately during the option period, (ii) at-the-money call options when Warburg
expects that the price of the underlying security will remain flat or advance
moderately during the option period and (iii) out-of-the-money call options when
Warburg expects that the premiums received from writing the call option plus the
appreciation in market price of the underlying security up to the exercise price
will be greater than the appreciation in the price of the underlying security
alone. In any of the preceding situations, if the market price of the underlying
security declines and the security is sold at this lower price, the amount of
any realized loss will be offset wholly or in part by the premium received. To
secure its obligation to deliver the underlying security when it writes a call
option, each Fund will be required to deposit in escrow the underlying security
or other assets in accordance with the rules of the Options Clearing Corporation
(the "Clearing Corporation") and of the securities exchange on which the option
is written.

Prior to their expirations, put and call options may be sold in closing
sale or purchase transactions (sales or purchases by a Fund prior to the
exercise of options that it has purchased or written, respectively, of options
of the same series) in which the Fund may realize a profit or loss from the
sale. An option position may be closed out only where there exists a secondary
market for an option of the same series on a recognized securities exchange or
in the over-the-counter market. When a Fund has purchased an option and engages
in a closing sale transaction, whether the Fund realizes a profit or loss will
depend upon whether the amount received in the closing sale transaction is more
or less than the premium the Fund initially paid for the original option plus
the related transaction costs. Similarly, in cases where a Fund has written an
option, it will realize a profit if the cost of the closing purchase transaction
is less than the premium received upon writing the original option and will
incur a loss if the cost of the closing purchase transaction exceeds the premium
received upon writing the original option. A Fund may engage in a closing
purchase transaction to realize a profit, to prevent an underlying security with
respect to which it has written an option from being called or put or, in the
case of a call option, to unfreeze an underlying security (thereby

3
<PAGE> 79
permitting its sale or the writing of a new option on the security prior to the
outstanding option's expiration). The obligation of a Fund under an option it
has written would be terminated by a closing purchase transaction, but the Fund
would not be deemed to own an option as a result of the transaction. So long as
the obligation of a Fund as the writer of an option continues, the Fund may be
assigned an exercise notice by the broker-dealer through which the option was
sold, requiring the Fund to deliver the underlying security against payment of
the exercise price. This obligation terminates when the option expires or the
Fund effects a closing purchase transaction. A Fund can no longer effect a
closing purchase transaction with respect to an option once it has been assigned
an exercise notice.

There is no assurance that sufficient trading interest will exist to
create a liquid secondary market on a securities exchange for any particular
option or at any particular time, and for some options no such secondary market
may exist. A liquid secondary market in an option may cease to exist for a
variety of reasons. In the past, for example, higher than anticipated trading
activity or order flow or other unforeseen events have at times rendered certain
of the facilities of the Clearing Corporation and various securities exchanges
inadequate and resulted in the institution of special procedures, such as
trading rotations, restrictions on certain types of orders or trading halts or
suspensions in one or more options. There can be no assurance that similar
events, or events that may otherwise interfere with the timely execution of
customers' orders, will not recur. In such event, it might not be possible to
effect closing transactions in particular options. Moreover, a Fund's ability to
terminate options positions established in the over-the-counter market may be
more limited than for exchange-traded options and may also involve the risk that
securities dealers participating in over-the-counter transactions would fail to
meet their obligations to the Fund. Each Fund, however, intends to purchase
over-the-counter options only from dealers whose debt securities, as determined
by Warburg, are considered to be investment grade. If, as a covered call option
writer, the Fund is unable to effect a closing purchase transaction in a
secondary market, it will not be able to sell the underlying security until the
option expires or it delivers the underlying security upon exercise. In either
case, the Fund would continue to be at market risk on the security and could
face higher transaction costs, including brokerage commissions.

Securities exchanges generally have established limitations governing the
maximum number of calls and puts of each class which may be held or written, or
exercised within certain time periods by an investor or group of investors
acting in concert (regardless of whether the options are written on the same or
different securities exchanges or are held, written or exercised in one or more
accounts or through one or more brokers). It is possible that the Funds and
other clients of Warburg and certain of its affiliates may be considered to be
such a group. A securities exchange may order the liquidation of positions found
to be in violation of these limits and it may impose certain other sanctions.
These limits may restrict the number of options a Fund will be able to purchase
on a particular security.

Securities Index Options. Each Fund may purchase and write exchange-listed
and OTC put and call options on securities indexes. A securities index measures
the movement of a certain group of securities by assigning relative values to
the securities included in the index, fluctuating with changes in the market
values of the securities included in the index. Some securities index options
are based on a broad market index,

4
<PAGE> 80
such as the NYSE Composite Index, or a narrower market index such as the
Standard & Poor's 100. Indexes may also be based on a particular industry or
market segment.

Options on securities indexes are similar to options on securities except
that (i) the expiration cycles of securities index options are monthly, while
those of securities options are currently quarterly, and (ii) the delivery
requirements are different. Instead of giving the right to take or make delivery
of stock at a specified price, an option on a securities index gives the holder
the right to receive a cash "exercise settlement amount" equal to (a) the
amount, if any, by which the fixed exercise price of the option exceeds (in the
case of a put) or is less than (in the case of a call) the closing value of the
underlying index on the date of exercise, multiplied by (b) a fixed "index
multiplier." Receipt of this cash amount will depend upon the closing level of
the securities index upon which the option is based being greater than, in the
case of a call, or less than, in the case of a put, the exercise price of the
index and the exercise price of the option times a specified multiple. The
writer of the option is obligated, in return for the premium received, to make
delivery of this amount. Securities index options may be offset by entering into
closing transactions as described above for securities options.

OTC Options. Each Fund may purchase OTC or dealer options or sell covered
OTC options. Unlike exchange-listed options where an intermediary or clearing
corporation, such as the Clearing Corporation, assures that all transactions in
such options are properly executed, the responsibility for performing all
transactions with respect to OTC options rests solely with the writer and the
holder of those options. A listed call option writer, for example, is obligated
to deliver the underlying securities to the clearing organization if the option
is exercised, and the clearing organization is then obligated to pay the writer
the exercise price of the option. If a Fund were to purchase a dealer option,
however, it would rely on the dealer from whom it purchased the option to
perform if the option were exercised. If the dealer fails to honor the exercise
of the option by the Fund, the Fund would lose the premium it paid for the
option and the expected benefit of the transaction.

Listed options generally have a continuous liquid market while dealer
options have none. Consequently, a Fund will generally be able to realize the
value of a dealer option it has purchased only by exercising it or reselling it
to the dealer who issued it. Similarly, when a Fund writes a dealer option, it
generally will be able to close out the option prior to its expiration only by
entering into a closing purchase transaction with the dealer to which the Fund
originally wrote the option. Although each Fund will seek to enter into dealer
options only with dealers who will agree to and that are expected to be capable
of entering into closing transactions with the Fund, there can be no assurance
that the Fund will be able to liquidate a dealer option at a favorable price at
any time prior to expiration. The inability to enter into a closing transaction
may result in material losses to a Fund. Until the Fund, as a covered OTC call
option writer, is able to effect a closing purchase transaction, it will not be
able to liquidate securities (or other assets) used to cover the written option
until the option expires or is exercised. This requirement may impair a Fund's
ability to sell portfolio securities or, with respect to currency options,
currencies at a time when such sale might be advantageous. In the event of
insolvency of the other party, the Fund may be unable to liquidate a dealer
option.

5
<PAGE> 81

Futures Activities. Each Fund may enter into foreign currency, interest
rate and securities index futures contracts and purchase and write (sell)
related options traded on exchanges designated by the Commodity Futures Trading
Commission (the "CFTC") or consistent with CFTC regulations on foreign
exchanges. These transactions may be entered into for "bona fide hedging"
purposes as defined in CFTC regulations and other permissible purposes including
hedging against changes in the value of portfolio securities due to anticipated
changes in currency values, interest rates and/or market conditions and
increasing return.

No Fund will enter into futures contracts and related options for which
the aggregate initial margin and premiums (discussed below) required to
establish positions other than those considered to be "bona fide hedging" by the
CFTC exceed 5% of the Fund's net asset value after taking into account
unrealized profits and unrealized losses on any such contracts it has entered
into. Each Fund reserves the right to engage in transactions involving futures
contracts and options on futures contracts to the extent allowed by CFTC
regulations in effect from time to time and in accordance with the Fund's
policies. There is no overall limit on the percentage of Fund assets that may be
at risk with respect to futures activities.

Futures Contracts. A foreign currency futures contract provides for the
future sale by one party and the purchase by the other party of a certain amount
of a specified non-U.S. currency at a specified price, date, time and place. An
interest rate futures contract provides for the future sale by one party and the
purchase by the other party of a certain amount of a specific interest rate
sensitive financial instrument (debt security) at a specified price, date, time
and place. Securities indexes are capitalization weighted indexes which reflect
the market value of the securities listed on the indexes. A securities index
futures contract is an agreement to be settled by delivery of an amount of cash
equal to a specified multiplier times the difference between the value of the
index at the close of the last trading day on the contract and the price at
which the agreement is made.

No consideration is paid or received by a Fund upon entering into a
futures contract. Instead, the Fund is required to deposit in a segregated
account with its custodian an amount of cash or liquid securities acceptable to
the broker, equal to approximately 1% to 10% of the contract amount (this amount
is subject to change by the exchange on which the contract is traded, and
brokers may charge a higher amount). This amount is known as "initial margin"
and is in the nature of a performance bond or good faith deposit on the contract
which is returned to a Fund upon termination of the futures contract, assuming
all contractual obligations have been satisfied. The broker will have access to
amounts in the margin account if the Fund fails to meet its contractual
obligations. Subsequent payments, known as "variation margin," to and from the
broker, will be made daily as the currency, financial instrument or securities
index underlying the futures contract fluctuates, making the long and short
positions in the futures contract more or less valuable, a process known as
"marking-to-market." A Fund will also incur brokerage costs in connection with
entering into futures transactions.

At any time prior to the expiration of a futures contract, a Fund may
elect to close the position by taking an opposite position, which will operate
to terminate the Fund's

6
<PAGE> 82
existing position in the contract. Positions in futures contracts and options on
futures contracts (described below) may be closed out only on the exchange on
which they were entered into (or through a linked exchange). No secondary market
for such contracts exists. Although each Fund intends to enter into futures
contracts only if there is an active market for such contracts, there is no
assurance that an active market will exist at any particular time. Most futures
exchanges limit the amount of fluctuation permitted in futures contract prices
during a single trading day. Once the daily limit has been reached in a
particular contract, no trades may be made that day at a price beyond that limit
or trading may be suspended for specified periods during the day. It is possible
that futures contract prices could move to the daily limit for several
consecutive trading days with little or no trading, thereby preventing prompt
liquidation of futures positions at an advantageous price and subjecting the
Fund to substantial losses. In such event, and in the event of adverse price
movements, the Fund would be required to make daily cash payments of variation
margin. In such situations, if a Fund had insufficient cash, it might have to
sell securities to meet daily variation margin requirements at a time when it
would be disadvantageous to do so. In addition, if the transaction is entered
into for hedging purposes, in such circumstances the Fund may realize a loss on
a futures contract or option that is not offset by an increase in the value of
the hedged position. Losses incurred in futures transactions and the costs of
these transactions will affect a Fund's performance.

Options on Futures Contracts. Each Fund may purchase and write put and
call options on foreign currency, interest rate and stock index futures
contracts and may enter into closing transactions with respect to such options
to terminate existing positions. There is no guarantee that such closing
transactions can be effected; the ability to establish and close out positions
on such options will be subject to the existence of a liquid market.

An option on a currency, interest rate or securities index futures
contract, as contrasted with the direct investment in such a contract, gives the
purchaser the right, in return for the premium paid, to assume a position in a
futures contract at a specified exercise price at any time prior to the
expiration date of the option. The writer of the option is required upon
exercise to assume an offsetting futures position (a short position if the
option is a call and a long position if the option is a put). Upon exercise of
an option, the delivery of the futures position by the writer of the option to
the holder of the option will be accompanied by delivery of the accumulated
balance in the writer's futures margin account, which represents the amount by
which the market price of the futures contract exceeds, in the case of a call,
or is less than, in the case of a put, the exercise price of the option on the
futures contract. The potential loss related to the purchase of an option on
futures contracts is limited to the premium paid for the option (plus
transaction costs). Because the value of the option is fixed at the point of
sale, there are no daily cash payments by the purchaser to reflect changes in
the value of the underlying contract; however, the value of the option does
change daily and that change would be reflected in the net asset value of a
Fund.

Currency Exchange Transactions. The value in U.S. dollars of the assets of
a Fund that are invested in foreign securities may be affected favorably or
unfavorably by changes in exchange control regulations, and the Fund may incur
costs in connection with conversion between various currencies. Currency
exchange transactions may be from any

7
<PAGE> 83
non-U.S. currency into U.S. dollars or into other appropriate currencies. Each
Fund will conduct its currency exchange transactions (i) on a spot (i.e., cash)
basis at the rate prevailing in the currency exchange market, (ii) through
entering into futures contracts or options on such contracts (as described
above), (iii) through entering into forward contracts to purchase or sell
currency or (iv) by purchasing exchange-traded currency options.

Forward Currency Contracts. A forward currency contract involves an
obligation to purchase or sell a specific currency at a future date, which may
be any fixed number of days from the date of the contract as agreed upon by the
parties, at a price set at the time of the contract. These contracts are entered
into in the interbank market conducted directly between currency traders
(usually large commercial banks and brokers) and their customers. Forward
currency contracts are similar to currency futures contracts, except that
futures contracts are traded on commodities exchanges and are standardized as to
contract size and delivery date.

At or before the maturity of a forward contract, a Fund may either sell a
portfolio security and make delivery of the currency, or retain the security and
fully or partially offset its contractual obligation to deliver the currency by
negotiating with its trading partner to purchase a second, offsetting contract.
If a Fund retains the portfolio security and engages in an offsetting
transaction, the Fund, at the time of execution of the offsetting transaction,
will incur a gain or a loss to the extent that movement has occurred in forward
contract prices.

Currency Options. Each Fund may purchase exchange-traded put and call
options on foreign currencies. Put options convey the right to sell the
underlying currency at a price which is anticipated to be higher than the spot
price of the currency at the time the option is exercised. Call options convey
the right to buy the underlying currency at a price which is expected to be
lower than the spot price of the currency at the time the option is exercised.

Currency Hedging. Each Fund's currency hedging will be limited to hedging
involving either specific transactions or portfolio positions. Transaction
hedging is the purchase or sale of forward currency with respect to specific
receivables or payables of a Fund generally accruing in connection with the
purchase or sale of its portfolio securities. Position hedging is the sale of
forward currency with respect to portfolio security positions. No Fund may
position hedge to an extent greater than the aggregate market value (at the time
of entering into the hedge) of the hedged securities.

A decline in the U.S. dollar value of a foreign currency in which a Fund's
securities are denominated will reduce the U.S. dollar value of the securities,
even if their value in the foreign currency remains constant. The use of
currency hedges does not eliminate fluctuations in the underlying prices of the
securities, but it does establish a rate of exchange that can be achieved in the
future. For example, in order to protect against diminutions in the U.S. dollar
value of securities it holds, a Fund may purchase currency put options. If the
value of the currency does decline, the Fund will have the right to sell the
currency for a fixed amount in dollars and will thereby offset, in whole or in
part, the adverse effect on the U.S.

8
<PAGE> 84
dollar value of its securities that otherwise would have resulted. Conversely,
if a rise in the U.S. dollar value of a currency in which securities to be
acquired are denominated is projected, thereby potentially increasing the cost
of the securities, the Fund may purchase call options on the particular
currency. The purchase of these options could offset, at least partially, the
effects of the adverse movements in exchange rates. The benefit to a Fund
derived from purchases of currency options, like the benefit derived from other
types of options, will be reduced by premiums and other transaction costs.
Because transactions in currency exchange are generally conducted on a principal
basis, no fees or commissions are generally involved. Currency hedging involves
some of the same risks and considerations as other transactions with similar
instruments. Although currency hedges limit the risk of loss due to a decline in
the value of a hedged currency, at the same time, they also limit any potential
gain that might result should the value of the currency increase. If a
devaluation is generally anticipated, a Fund may not be able to contract to sell
a currency at a price above the devaluation level it anticipates.

While the values of currency futures and options on futures, forward
currency contracts and currency options may be expected to correlate with
exchange rates, they will not reflect other factors that may affect the value of
a Fund's investments and a currency hedge may not be entirely successful in
mitigating changes in the value of the Fund's investments denominated in that
currency. A currency hedge, for example, should protect a Yen-denominated bond
against a decline in the Yen, but will not protect the Fund against a price
decline if the issuer's creditworthiness deteriorates.

Hedging. In addition to entering into options, futures and currency
exchange transactions for other purposes, including generating current income to
offset expenses or increase return, each Fund may enter into these transactions
as hedges to reduce investment risk, generally by making an investment expected
to move in the opposite direction of a portfolio position. A hedge is designed
to offset a loss in a portfolio position with a gain in the hedged position; at
the same time, however, a properly correlated hedge will result in a gain in the
portfolio position being offset by a loss in the hedged position. As a result,
the use of options, futures, contracts and currency exchange transactions for
hedging purposes could limit any potential gain from an increase in the value of
the position hedged. In addition, the movement in the portfolio position hedged
may not be of the same magnitude as movement in the hedge. With respect to
futures contracts, since the value of portfolio securities will far exceed the
value of the futures contracts sold by a Fund, an increase in the value of the
futures contracts could only mitigate, but not totally offset, the decline in
the value of the Fund's assets.

In hedging transactions based on an index, whether a Fund will realize a
gain or loss from the purchase or writing of options on an index depends upon
movements in the level of securities prices in the stock market generally or, in
the case of certain indexes, in an industry or market segment, rather than
movements in the price of a particular security. The risk of imperfect
correlation increases as the composition of a Fund's portfolio varies from the
composition of the index. In an effort to compensate for imperfect correlation
of relative movements in the hedged position and the hedge, the Fund's hedge
positions may be in a greater or lesser dollar amount than the dollar amount of
the hedged position. Such "over

9
<PAGE> 85

hedging" or "under hedging" may adversely affect the Fund's net investment
results if market movements are not as anticipated when the hedge is
established. Securities index futures transactions may be subject to additional
correlation risks. First, all participants in the futures market are subject to
margin deposit and maintenance requirements. Rather than meeting additional
margin deposit requirements, investors may close futures contracts through
offsetting transactions which would distort the normal relationship between the
securities index and futures markets. Secondly, from the point of view of
speculators, the deposit requirements in the futures market are less onerous
than margin requirements in the securities market. Therefore, increased
participation by speculators in the futures market also may cause temporary
price distortions. Because of the possibility of price distortions in the
futures market and the imperfect correlation between movements in the securities
index and movements in the price of securities index futures, a correct forecast
of general market trends by Warburg still may not result in a successful hedging
transaction.

Each Fund will engage in hedging transactions only when deemed advisable
by Warburg, and successful use by the Fund of hedging transactions will be
subject to Warburg's ability to predict trends in currency, interest rate or
securities markets, as the case may be, and to predict correctly movements in
the directions of the hedge and the hedged position and the correlation between
them, which predictions could prove to be inaccurate. This requires different
skills and techniques than predicting changes in the price of individual
securities, and there can be no assurance that the use of these strategies will
be successful. Even a well-conceived hedge may be unsuccessful to some degree
because of unexpected market behavior or trends. Losses incurred in hedging
transactions and the costs of these transactions will affect a Fund's
performance.

Asset Coverage for Forward Contracts, Options, Futures and Options on
Futures. As described in the Prospectuses, each Fund will comply with guidelines
established by the U.S. Securities and Exchange Commission (the "SEC") with
respect to coverage of forward currency contracts; options written by the Fund
on securities and indexes; and currency, interest rate and index futures
contracts and options on these futures contracts. These guidelines may, in
certain instances, require segregation by a Fund of cash or liquid securities.

For example, a call option written by a Fund on securities may require the
Fund to hold the securities subject to the call (or securities convertible into
the securities without additional consideration) or to segregate assets (as
described above) sufficient to purchase and deliver the securities if the call
is exercised. A call option written by a Fund on an index may require the Fund
to own portfolio securities that correlate with the index or to segregate assets
(as described above) equal to the excess of the index value over the exercise
price on a current basis. A Fund could purchase a put option if the strike price
of that option is the same or higher than the strike price of a put option sold
by the Fund. If a Fund holds a futures or forward contract, the Fund could
purchase a put option on the same futures or forward contract with a strike
price as high or higher than the price of the contract held. A Fund may enter
into fully or partially offsetting transactions so that its net position,
coupled with any segregated assets (equal to any remaining obligation), equals
its net obligation. Asset

10
<PAGE> 86
coverage may be achieved by other means when consistent with applicable
regulatory policies.

Additional Information on Other Investment Practices

Foreign Investments. Each Fund may invest up to 20% of its total assets in
the securities of foreign issuers. Investors should recognize that investing in
foreign companies involves certain risks, including those discussed below, which
are not typically associated with investing in U.S. issuers.

Foreign Currency Exchange. Since a Fund may invest in securities
denominated in currencies other than the U.S. dollar, and since the Fund may
temporarily hold funds in bank deposits or other money market investments
denominated in foreign currencies, the Fund may be affected favorably or
unfavorably by exchange control regulations or changes in the exchange rate
between such currencies and the dollar. A change in the value of a foreign
currency relative to the U.S. dollar will result in a corresponding change in
the dollar value of the Fund assets denominated in that foreign currency.
Changes in foreign currency exchange rates may also affect the value of
dividends and interest earned, gains and losses realized on the sale of
securities and net investment income and gains, if any, to be distributed to
shareholders by a Fund. The rate of exchange between the U.S. dollar and other
currencies is determined by the forces of supply and demand in the foreign
exchange markets. Changes in the exchange rate may result over time from the
interaction of many factors directly or indirectly affecting economic and
political conditions in the United States and a particular foreign country,
including economic and political developments in other countries. Of particular
importance are rates of inflation, interest rate levels, the balance of payments
and the extent of government surpluses or deficits in the United States and the
particular foreign country, all of which are in turn sensitive to the monetary,
fiscal and trade policies pursued by the governments of the United States and
foreign countries important to international trade and finance. Governmental
intervention may also play a significant role. National governments rarely
voluntarily allow their currencies to float freely in response to economic
forces. Sovereign governments use a variety of techniques, such as intervention
by a country's central bank or imposition of regulatory controls or taxes, to
affect the exchange rates of their currencies. Each Fund may use hedging
techniques with the objective of protecting against loss through the fluctuation
of the value of foreign currencies against the U.S. dollar, particularly the
forward market in foreign exchange, currency options and currency futures. See
"Currency Transactions" and "Futures Transactions" above.

Information. Many of the foreign securities held by a Fund will not be
registered with, nor the issuers thereof be subject to reporting requirements
of, the SEC. Accordingly, there may be less publicly available information about
the securities and about the foreign company or government issuing them than is
available about a domestic company or government entity. Foreign companies are
generally not subject to uniform financial reporting standards, practices and
requirements comparable to those applicable to U.S. companies.

Political Instability. With respect to some foreign countries, there is
the possibility of expropriation or confiscatory taxation, limitations on the
removal of funds or

11
<PAGE> 87

other assets of a Fund, political or social instability, or domestic
developments which could affect U.S. investments in those and neighboring
countries.

Delays. Securities of some foreign companies are less liquid and their
prices are more volatile than securities of comparable U.S. companies. Certain
foreign countries are known to experience long delays between the trade and
settlement dates of securities purchased or sold. Due to the increased exposure
of a Fund to market and foreign exchange fluctuations brought about by such
delays, and due to the corresponding negative impact on Fund liquidity, each
Fund will avoid investing in countries which are known to experience settlement
delays which may expose the Fund to unreasonable risk of loss.

Increased Expenses. The operating expenses of a Fund, to the extent it
invests in foreign securities, may be higher than that of an investment company
investing exclusively in U.S. securities, since the expenses of the Fund, such
as custodial costs, valuation costs and communication costs, may be higher than
those costs incurred by investment companies not investing in foreign
securities.

Dollar-Denominated Debt Securities of Foreign Issuers. The returns on
foreign debt securities reflect interest rates and other market conditions
prevailing in those countries. The relative performance of various countries'
fixed income markets historically has reflected wide variations relating to the
unique characteristics of each country's economy. Year-to-year fluctuations in
certain markets have been significant, and negative returns have been
experienced in various markets from time to time.

General. Individual foreign economies may differ favorably or unfavorably
from the U.S. economy in such respects as growth of gross national product, rate
of inflation, capital reinvestment, resource self-sufficiency, and balance of
payments positions. Each Fund may invest in securities of foreign governments
(or agencies or instrumentalities thereof), and many, if not all, of the
foregoing considerations apply to such investments as well.

U.S. Government Securities. Each Fund may invest in debt obligations of
varying maturities issued or guaranteed by the United States government, its
agencies or instrumentalities ("U.S. Government Securities"). Direct obligations
of the U.S. Treasury include a variety of securities that differ in their
interest rates, maturities and dates of issuance. U.S. Government Securities
also include securities issued or guaranteed by the Federal Housing
Administration, Farmers Home Loan Administration, Export-Import Bank of the
United States, Small Business Administration, Government National Mortgage
Association ("GNMA"), General Services Administration, Central Bank for
Cooperatives, Federal Farm Credit Banks, Federal Home Loan Banks, Federal Home
Loan Mortgage Corporation ("FHLMC"), Federal Intermediate Credit Banks, Federal
Land Banks, Federal National Mortgage Association ("FNMA"), Maritime
Administration, Tennessee Valley Authority, District of Columbia Armory Board
and Student Loan Marketing Association. Each Fund may also invest in instruments
that are supported by the right of the issuer to borrow from the U.S. Treasury
and instruments that are supported by the credit of the instrumentality. Because
the U.S. government is not obligated by law to provide support to an
instrumentality it

12
<PAGE> 88
sponsors, a Fund will invest in obligations issued by such an instrumentality
only if Warburg determines that the credit risk with respect to the
instrumentality does not make its securities unsuitable for investment by the
Fund.

Securities of Other Investment Companies. Each Fund may invest in
securities of other investment companies to the extent permitted under the
Investment Company Act of 1940, as amended (the "1940 Act"). Presently, under
the 1940 Act, a Fund may hold securities of another investment company in
amounts which (i) do not exceed 3% of the total outstanding voting stock of such
company, (ii) do not exceed 5% of the value of the Fund's total assets and (iii)
when added to all other investment company securities held by the Fund, do not
exceed 10% of the value of the Fund's total assets.

Lending of Portfolio Securities. Each Fund may lend portfolio securities
to brokers, dealers and other financial organizations that meet capital and
other credit requirements or other criteria established by the Fund's Board of
Directors (the "Board"). These loans, if and when made, may not exceed 20% of a
Fund's total assets taken at value. No Fund will lend portfolio securities to
affiliates of Warburg unless it has applied for and received specific authority
to do so from the SEC. Loans of portfolio securities will be collateralized by
cash, letters of credit or U.S. Government Securities, which are maintained at
all times in an amount equal to at least 100% of the current market value of the
loaned securities. Any gain or loss in the market price of the securities loaned
that might occur during the term of the loan would be for the account of a Fund.
From time to time, a Fund may return a part of the interest earned from the
investment of collateral received for securities loaned to the borrower and/or a
third party that is unaffiliated with the Fund and that is acting as a "finder."

By lending its securities, a Fund can increase its income by continuing to
receive interest and any dividends on the loaned securities as well as by either
investing the collateral received for securities loaned in short-term
instruments or obtaining yield in the form of interest paid by the borrower when
U.S. Government Securities are used as collateral. Although the generation of
income is not the primary investment objective of any of the Funds, income
received could be used to pay a Fund's expenses and would increase an investor's
total return. Each Fund will adhere to the following conditions whenever its
portfolio securities are loaned: (i) the Fund must receive at least 100% cash
collateral or equivalent securities of the type discussed in the preceding
paragraph from the borrower; (ii) the borrower must increase such collateral
whenever the market value of the securities rises above the level of such
collateral; (iii) the Fund must be able to terminate the loan at any time; (iv)
the Fund must receive reasonable interest on the loan, as well as any dividends,
interest or other distributions on the loaned securities and any increase in
market value; (v) the Fund may pay only reasonable custodian fees in connection
with the loan; and (vi) voting rights on the loaned securities may pass to the
borrower, provided, however, that if a material event adversely affecting the
investment occurs, the Board must terminate the loan and regain the right to
vote the securities. Loan agreements involve certain risks in the event of
default or insolvency of the other party including possible delays or
restrictions upon a Fund's ability to recover the loaned securities or dispose
of the collateral for the loan.

13
<PAGE> 89

When-Issued Securities and Delayed-Delivery Transactions. Each of Funds
may utilize up to 20% of its total assets to purchase securities on a
"when-issued" basis or purchase or sell securities for delayed delivery (i.e.,
payment or delivery occur beyond the normal settlement date at a stated price
and yield). A Fund will enter into a when-issued transaction for the purpose of
acquiring portfolio securities and not for the purpose of leverage, but may sell
the securities before the settlement date if Warburg deems it advantageous to do
so. The payment obligation and the interest rate that will be received on
when-issued securities are fixed at the time the buyer enters into the
commitment. Due to fluctuations in the value of securities purchased or sold on
a when-issued or delayed-delivery basis, the prices of such securities may be
higher or lower than the prices available in the market on the dates when the
investments are actually delivered to the buyers.

When a Fund agrees to purchase when-issued or delayed-delivery securities,
its custodian will set aside cash or liquid securities equal to the amount of
the commitment in a segregated account. Normally, the custodian will set aside
portfolio securities to satisfy a purchase commitment, and in such a case the
Fund may be required subsequently to place additional assets in the segregated
account in order to ensure that the value of the account remains equal to the
amount of the Fund's commitment. It may be expected that the Fund's net assets
will fluctuate to a greater degree when it sets aside portfolio securities to
cover such purchase commitments than when it sets aside cash. When the Fund
engages in when-issued or delayed-delivery transactions, it relies on the other
party to consummate the trade. Failure of the seller to do so may result in the
Fund incurring a loss or missing an opportunity to obtain a price considered to
be advantageous.

Warrants. Each Fund may purchase warrants issued by domestic and foreign
companies to purchase newly created equity securities consisting of common and
preferred stock. The equity security underlying a warrant is outstanding at the
time the warrant is issued or is issued together with the warrant.

Investing in warrants can provide a greater potential for profit or loss
than an equivalent investment in the underlying security, and, thus, can be a
speculative investment. The value of a warrant may decline because of a decline
in the value of the underlying security, the passage of time, changes in
interest rates or in the dividend or other policies of the company whose equity
underlies the warrant or a change in the perception as to the future price of
the underlying security, or any combination thereof. Warrants generally pay no
dividends and confer no voting or other rights other than to purchase the
underlying security.

Non-Publicly Traded and Illiquid Securities. No Fund may invest more than
10% of its total assets in non-publicly traded and illiquid securities,
including securities that are illiquid by virtue of the absence of a readily
available market, repurchase agreements which have a maturity of longer than
seven days, certain Rule 144A Securities (as defined below), time deposits
maturing in more than seven days and, with respect to the Post-Venture Capital
Fund, Private Funds (as defined in the relevant Prospectuses). Each of

14
<PAGE> 90

the Post-Venture Capital and Small Company Growth Funds may invest up to 15% of
its net assets in such securities. Securities that have legal or contractual
restrictions on resale but have a readily available market are not considered
illiquid for purposes of this limitation. Repurchase agreements subject to
demand are deemed to have a maturity equal to the notice period.

Historically, illiquid securities have included securities subject to
contractual or legal restrictions on resale because they have not been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
securities which are otherwise not readily marketable and repurchase agreements
having a maturity of longer than seven days. Securities which have not been
registered under the Securities Act are referred to as private placements or
restricted securities and are purchased directly from the issuer or in the
secondary market. Limitations on resale may have an adverse effect on the
marketability of portfolio securities and a mutual fund might be unable to
dispose of restricted or other illiquid securities promptly or at reasonable
prices and might thereby experience difficulty satisfying redemptions within
seven days without borrowing. A mutual fund might also have to register such
restricted securities in order to dispose of them resulting in additional
expense and delay. Adverse market conditions could impede such a public offering
of securities.

In recent years, however, a large institutional market has developed for
certain securities that are not registered under the Securities Act including
repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security can be readily
resold or on an issuer's ability to honor a demand for repayment. The fact that
there are contractual or legal restrictions on resale to the general public or
to certain institutions may not be indicative of the liquidity of such
investments.

Rule 144A Securities. Rule 144A under the Securities Act adopted by the
SEC allows for a broader institutional trading market for securities otherwise
subject to restriction on resale to the general public. Rule 144A establishes a
"safe harbor" from the registration requirements of the Securities Act for
resales of certain securities to qualified institutional buyers. Warburg
anticipates that the market for certain restricted securities such as
institutional commercial paper will expand further as a result of this
regulation and use of automated systems for the trading, clearance and
settlement of unregistered securities of domestic and foreign issuers, such as
the PORTAL System sponsored by the National Association of Securities Dealers,
Inc.

An investment in Rule 144A Securities will be considered illiquid and
therefore subject to a Fund's limit on the purchase of illiquid securities
unless the Board or its delegates determines that the Rule 144A Securities are
liquid. In reaching liquidity decisions, the Board and its delegates may
consider, inter alia, the following factors: (i) the unregistered nature of the
security; (ii) the frequency of trades and quotes for the security; (iii) the
number of dealers wishing to purchase or sell the security and the number of
other potential purchasers; (iv) dealer undertakings to make a market in the
security and (v) the nature of the security and the nature of the marketplace
trades (e.g., the time needed to dispose of the security, the method of
soliciting offers and the mechanics of the transfer).

15
<PAGE> 91

Private Funds (Post-Venture Capital Fund). Although investments in Private
Funds offer the opportunity for significant capital gains, these investments
involve a high degree of business and financial risk that can result in
substantial losses in the portion of the Post-Venture Capital Fund's assets
invested in these investments. Among these are the risks associated with
investment in companies in an early stage of development or with little or no
operating history, companies operating at a loss or with substantial variation
in operation results from period to period, companies with the need for
substantial additional capital to support expansion or to maintain a competitive
position, or companies with significant financial leverage. Such companies may
also face intense competition from others including those with greater financial
resources or more extensive development, manufacturing, distribution or other
attributes, over which the Portfolio will have no control.

Interests in the Private Funds in which the Post-Venture Capital Fund may
invest will be subject to substantial restrictions on transfer and, in some
instances, may be non-transferable for a period of years. Private Funds may
participate in only a limited number of investments and, as a consequence, the
return of a particular Private Fund may be substantially adversely affected by
the unfavorable performance of even a single investment. Certain of the Private
Funds in which the Fund may invest may pay their investment managers a fee based
on the performance of the Fund, which may create an incentive for the manager to
make investments that are riskier or more speculative than would be the case if
the manager was paid a fixed fee. Private Funds are not registered under the
1940 Act and, consequently, are not subject to the restrictions on affiliated
transactions and other protections applicable to regulated investment companies.
The valuation of companies held by Private Funds, the securities of which are
generally unlisted and illiquid, may be very difficult and will often depend on
the subjective valuation of the managers of the Private Funds, which may prove
to be inaccurate. Inaccurate valuations of a Private Fund's portfolio holdings
may affect the Portfolio's net asset value calculations. Private Funds in which
the Fund invests will not borrow to increase the amount of assets available for
investment or otherwise engage in leverage.

Borrowing. Each of the Post-Venture Capital, Small Company Growth and
Small Company Value Funds may borrow up to 30%, and the Emerging Growth Fund may
borrow up to 10%, of its total assets for temporary or emergency purposes,
including to meet portfolio redemption requests so as to permit the orderly
disposition of portfolio securities or to facilitate settlement transactions on
portfolio securities. Investments (including roll-overs) will not be made when
borrowings exceed 5% of a Fund's total assets. Although the principal of such
borrowings will be fixed, a Fund's assets may change in value during the time
the borrowing is outstanding. Each Fund expects that some of its borrowings may
be made on a secured basis. In such situations, either the custodian will
segregate the pledged assets for the benefit of the lender or arrangements will
be made with a suitable subcustodian, which may include the lender.

Other Investment Policies and Practices

16
<PAGE> 92

Small Capitalization and Emerging Growth Companies; Unseasoned Issuers.
Investments in small- and medium-sized and emerging growth companies, as well
as companies with continuous operations of less than three years ("unseasoned
issuers") involve considerations that are not applicable to investing in
securities of established, larger-capitalization issuers, including reduced and
less reliable information about issuers and markets, less stringent financial
disclosure requirements, illiquidity of securities and markets, higher brokerage
commissions and fees and greater market risk in general. In addition, securities
of small- and medium-sized and emerging growth companies and unseasoned issuers
may involve greater risks since these securities may have limited marketability
and, thus, may be more volatile.

"Special situation companies" are involved in an actual or prospective
acquisition or consolidation; reorganization; recapitalization; merger,
liquidation or distribution of cash, securities or other assets; a tender or
exchange offer; a breakup or workout of a holding company; or litigation which,
if resolved favorably, would improve the value of the company's stock. If the
actual or prospective situation does not materialize as anticipated, the market
price of the securities of a "special situation company" may decline
significantly. Warburg believes, however, that if it analyzes "special situation
companies" carefully and invests in the securities of these companies at the
appropriate time, the Fund may achieve maximum capital appreciation. There can
be no assurance, however, that a special situation that exists at the time of an
investment will be consummated under the terms and within the time period
contemplated.

Non-Diversified Status. The Emerging Growth Fund is classified as
non-diversified within the meaning of the 1940 Act, which means that it is not
limited by such Act in the proportion of its assets that it may invest in
securities of a single issuer. The Fund's investments will be limited, however,
in order to qualify as a "regulated investment company" for purposes of the
Code. See "Additional Information Concerning Taxes." To qualify, the Fund will
comply with certain requirements, including limiting its investments so that at
the close of each quarter of the taxable year (a) not more than 25% of the
market value of its total assets will be invested in the securities of a single
issuer, and (b) with respect to 50% of the market value of its total assets, not
more than 5% of the market value of its total assets will be invested in the
securities of a single issuer and the will not own more than 10% of the
outstanding voting securities of a single issuer.

Below Investment Grade Securities. While the market values of below
investment grade securities tend to react less to fluctuations in interest rate
levels than do those of investment grade securities, the market values of
certain of these securities also tend to be more sensitive to individual
corporate developments and changes in economic conditions than investment grade
securities. In addition, below investment grade securities generally present a
higher degree of credit risk. Issuers of below investment grade securities are
often highly leveraged and may not have more traditional methods of financing
available to them so that their ability to service their obligations during an
economic downturn or during sustained periods of rising interest rates may be
impaired. The risk of loss due to default by such issuers is significantly
greater because below investment grade

17
<PAGE> 93
securities generally are unsecured and frequently are subordinated to the prior
payment of senior indebtedness.

The market for below investment grade securities is relatively new and has
not weathered a major economic recession. Any such recession could disrupt
severely the market for such securities and may adversely affect the value of
such securities and the ability of the issuers of such securities to repay
principal and pay interest thereon.

The Fund may have difficulty disposing of certain of these securities
because there may be a thin trading market. Because there is no established
retail secondary market for many of these securities, the Fund anticipates that
these securities could be sold only to a limited number of dealers or
institutional investors. To the extent a secondary trading market for these
securities does exist, it generally is not as liquid as the secondary market for
higher-rated securities. The lack of a liquid secondary market, as well as
adverse publicity and investor perception with respect to these securities, may
have an adverse impact on market price and the Fund's ability to dispose of
particular issues when necessary to meet the Fund's liquidity needs or in
response to a specific economic event such as a deterioration in the
creditworthiness of the issuer. The lack of a liquid secondary market for
certain securities also may make it more difficult for the Fund to obtain
accurate market quotations for purposes of valuing the Fund and calculating its
net asset value.

The market value of below investment grade securities is more volatile
than that of investment grade securities. Factors adversely impacting the market
value of these securities will adversely impact the Fund's net asset value. The
Fund will rely on the judgment, analysis and experience of Warburg in evaluating
the creditworthiness of an issuer. In this evaluation, Warburg will take into
consideration, among other things, the issuer's financial resources, its
sensitivity to economic conditions and trends, its operating history, the
quality of the issuer's management and regulatory matters. Normally, below
investment grade securities are not intended for short-term investment. The Fund
may incur additional expenses to the extent it is required to seek recovery upon
a default in the payment of principal or interest on its portfolio holdings of
such securities.

Short Sales. (Post-Venture Capital and Small Company Growth Funds) These
Funds may engage in "short sales" that do not meet the definition of short sales
"against the box." In a short sale, the investor sells a borrowed security and
has a corresponding obligation to the lender to return the identical security.
The seller does not immediately deliver the securities sold and is said to have
a short position in those securities until delivery occurs. If a Fund engages in
a short sale, the collateral for the short position will be maintained by the
Fund's custodian or qualified sub-custodian. While the short sale is open, a
Fund will maintain in a segregated account an amount of securities equal in kind
and amount to the securities sold short or securities convertible into or
exchangeable for such equivalent securities.

Short Sales Against the Box. Each Fund (except the Emerging Growth Fund)
may enter into short sales "against the box." While a short sale is made by
selling a security a Fund does not own, a short sale is "against the box" to the
extent that a Fund

18
<PAGE> 94

contemporaneously owns or has the right to obtain, at no added cost, securities
identical to those sold short. No Fund intends to engage in short sales against
the box for investment purposes. A Fund may, however, make a short sale as a
hedge, when it believes that the price of a security may decline, causing a
decline in the value of a security owned by the Fund (or a security convertible
or exchangeable for such security). In such case, any future losses in the
Fund's long position should be offset by a gain in the short position and,
conversely, any gain in the long position should be reduced by a loss in the
short position. The extent to which such gains or losses are reduced will depend
upon the amount of the security sold short relative to the amount the Fund owns.
There will be certain additional transaction costs associated with short sales
against the box, but the Fund will endeavor to offset these costs with the
income from the investment of the cash proceeds of short sales.

If a Fund effects a short sale of securities at a time when it has an
unrealized gain on the securities, it may be required to recognize that gain as
if it had actually sold the securities (as a "constructive sale") on the date it
effects the short sale. However, such constructive sale treatment may not apply
if the Fund closes out the short sale with securities other than the appreciated
securities held at the time of the short sale and if certain other conditions
are satisfied. Uncertainty regarding the tax consequences of effecting short
sales may limit the extent to which a Fund may effect short sales.

Reverse Repurchase Agreements and Dollar Rolls. Each of the Funds may
enter into reverse repurchase agreements with the same parties with whom it may
enter into repurchase agreements. Reverse repurchase agreements involve the sale
of securities held by the Fund pursuant to its agreement to repurchase them at a
mutually agreed upon date, price and rate of interest. At the time the Fund
enters into a reverse repurchase agreement, it will establish and maintain a
segregated account with an approved custodian containing cash or liquid
securities having a value not less than the repurchase price (including accrued
interest). The assets contained in the segregated account will be
marked-to-market daily and additional assets will be placed in such account on
any day in which the assets fall below the repurchase price (plus accrued
interest). The Fund's liquidity and ability to manage its assets might be
affected when it sets aside cash or portfolio securities to cover such
commitments. Reverse repurchase agreements involve the risk that the market
value of the securities retained in lieu of sale may decline below the price of
the securities the Fund has sold but is obligated to repurchase. In the event
the buyer of securities under a reverse repurchase agreement files for
bankruptcy or becomes insolvent, such buyer or its trustee or receiver may
receive an extension of time to determine whether to enforce the Fund's
obligation to repurchase the securities, and the Fund's use of the proceeds of
the reverse repurchase agreement may effectively be restricted pending such
decision.

The Funds also may enter into "dollar rolls," in which the Fund sells
fixed-income securities for delivery in the current month and simultaneously
contracts to repurchase similar but not identical (same type, coupon and
maturity) securities on a specified future date. During the roll period, the
Fund would forego principal and interest paid on such securities. The Fund would
be compensated by the difference between the current sales price and the forward
price for the future purchase, as well as by the interest earned on the cash
proceeds of

19
<PAGE> 95

the initial sale. At the time the Fund enters into a dollar roll transaction, it
will place in a segregated account maintained with an approved custodian cash or
liquid securities having a value not less than the repurchase price (including
accrued interest) and will subsequently monitor the account to ensure that its
value is maintained. Reverse repurchase agreements and dollar rolls that are
accounted for as financings are considered to be borrowings under the 1940 Act.

Other Investment Limitations

All Funds. Certain investment limitations of each Fund may not be changed
without the affirmative vote of the holders of a majority of the Fund's
outstanding shares ("Fundamental Restrictions"). Such majority is defined as the
lesser of (i) 67% or more of the shares present at the meeting, if the holders
of more than 50% of the outstanding shares of the Fund are present or
represented by proxy, or (ii) more than 50% of the outstanding shares. If a
percentage restriction (other than the percentage limitation set forth in No. 1
with respect to each Fund) is adhered to at the time of an investment, a later
increase or decrease in the percentage of assets resulting from a change in the
values of portfolio securities or in the amount of a Fund's assets will not
constitute a violation of such restriction.

Emerging Growth Fund. The investment limitations numbered 1 through 9 are
Fundamental Restrictions. Investment limitations 10 through 13 may be changed by
a vote of the Board at any time.

The Emerging Growth Fund may not:

1. Borrow money or issue senior securities except that the Fund may (a)
borrow from banks for temporary or emergency purposes, and not for leveraging,
and then in amounts not in excess of 10% of the value of the Fund's total assets
at the time of such borrowing and (b) enter into futures contracts; or mortgage,
pledge or hypothecate any assets except in connection with any bank borrowing
and in amounts not in excess of the lesser of the dollar amounts borrowed or 10%
of the value of the Fund's total assets at the time of such borrowing. Whenever
borrowings described in (a) exceed 5% of the value of the Fund's total assets,
the Fund will not make any additional investments (including roll-overs). For
purposes of this restriction, (a) the deposit of assets in escrow in connection
with the purchase of securities on a when-issued or delayed-delivery basis and
(b) collateral arrangements with respect to initial or variation margin for
futures contracts will not be deemed to be pledges of

20
<PAGE> 96
the Fund's assets.

2. Purchase any securities which would cause 25% or more of the value
of the Fund's total assets at the time of purchase to be invested in the
securities of issuers conducting their principal business activities in the same
industry; provided that there shall be no limit on the purchase of U.S.
Government Securities.

3. Make loans, except that the Fund may purchase or hold publicly
distributed fixed-income securities, lend portfolio securities and enter into
repurchase agreements.

4. Underwrite any issue of securities except to the extent that the
investment in restricted securities and the purchase of fixed-income securities
directly from the issuer thereof in accordance with the Fund's investment
objective, policies and limitations may be deemed to be underwriting.

5. Purchase or sell real estate, real estate investment trust
securities, real estate limited partnerships, commodities or commodity
contracts, or invest in oil, gas or mineral exploration or development programs,
except that the Fund may invest in (a) fixed-income securities secured by real
estate, mortgages or interests therein, (b) securities of companies that invest
in or sponsor oil, gas or mineral exploration or development programs and (c)
futures contracts and related options.

6. Make short sales of securities or maintain a short position.

7. Purchase, write or sell puts, calls, straddles, spreads or
combinations thereof, except that the Fund may (a) purchase put and call options
on securities, (b) write covered call options on securities, (c) purchase and
write put and call options on stock indices and (d) enter into options on
futures contracts.

8. Purchase securities of other investment companies except in
connection with a merger, consolidation, acquisition, reorganization or offer of
exchange or as otherwise permitted under the 1940 Act.

9. Purchase securities on margin, except that the Fund may obtain any
short-term credits necessary for the clearance of purchases and sales of
securities. For purposes of this restriction, the deposit or payment of initial
or variation margin in connection with futures contracts or related options will
not be deemed to be a purchase of securities on margin.

10. Invest more than 10% of the value of the Fund's total assets in
securities which may be illiquid because of legal or contractual restrictions on
resale or securities for which there are no readily available market quotations.
For purposes of this limitation, repurchase agreements with maturities greater
than seven days shall be considered illiquid securities.

11. Invest more than 10% of the value of the Fund's total assets in time

21
<PAGE> 97
deposits maturing in more than seven calendar days.

12. Invest in warrants (other than warrants acquired by the Fund as part
of a unit or attached to securities at the time of purchase) if, as a result,
the investments (valued at the lower of cost or market) would exceed 10% of the
value of the Fund's net assets.

13. Invest in oil, gas or mineral leases.

Post-Venture Capital and Small Company Growth Funds. The investment
limitations numbered 1 through 9 are Fundamental Restrictions. Investment
limitations 10 through 13 may be changed by a vote of the Board at any time.

Each of the Post-Venture Capital and Small Company Growth Funds may not:

1. Borrow money except that the Fund may (a) borrow from banks for
temporary or emergency purposes and (b) enter into reverse repurchase
agreements; provided that reverse repurchase agreements, dollar roll
transactions that are accounted for as financings and any other transactions
constituting borrowing by the Fund may not exceed 30% of the value of the Fund's
total assets at the time of such borrowing. For purposes of this restriction,
short sales, the entry into currency transactions, options, futures contracts,
options on futures contracts, forward commitment transactions and dollar roll
transactions that are not accounted for as financings (and the segregation of
assets in connection with any of the foregoing) shall not constitute borrowing.

3. Purchase the securities of any issuer if as a result more than 5% of
the value of the Fund's total assets would be invested in the securities of such
issuer, except that this 5% limitation does not apply to U.S. Government
Securities and except that up to 25% of the value of the Fund's total assets may
be invested without regard to this 5% limitation.

4. Make loans, except that the Fund may purchase or hold fixed-income
securities, including loan participations, assignments and structured
securities, lend portfolio securities and enter into repurchase agreements.

5. Underwrite any securities issued by others except to the extent that
the investment in restricted securities and the sale of securities in accordance
with the Fund's investment objective, policies and limitations may be deemed to
be underwriting.

6. Purchase or sell real estate or invest in oil, gas or mineral
exploration or development programs, except that the Fund may invest in (a)
securities secured by real

22
<PAGE> 98
estate, mortgages or interests therein and (b) securities of companies that
invest in or sponsor oil, gas or mineral exploration or development programs.

7. Purchase securities on margin, except that the Fund may obtain any
short-term credits necessary for the clearance of purchases and sales of
securities. For purposes of this restriction, the deposit or payment of initial
or variation margin in connection with transactions in currencies, options,
futures contracts or related options will not be deemed to be a purchase of
securities on margin.

8. Invest in commodities, except that the Fund may purchase and sell
futures contracts, including those relating to securities, currencies and
indexes, and options on futures contracts, securities, currencies or indexes,
purchase and sell currencies on a forward commitment or delayed-delivery basis
and enter into stand-by commitments.

9. Issue any senior security except as permitted in the Fund's
investment limitations.

10. Purchase securities of other investment companies except in
connection with a merger, consolidation, acquisition, reorganization or offer of
exchange, or as otherwise permitted under the 1940 Act.

11. Pledge, mortgage or hypothecate its assets, except to the extent
necessary to secure permitted borrowings and to the extent related to the
deposit of assets in escrow in connection with the purchase of securities on a
forward commitment or delayed-delivery basis and collateral and initial or
variation margin arrangements with respect to currency transactions, options,
futures contracts, and options on futures contracts.

12. Invest more than 15% of the Fund's net assets in securities which
may be illiquid because of legal or contractual restrictions on resale or
securities for which there are no readily available market quotations. For
purposes of this limitation, repurchase agreements with maturities greater than
seven days shall be considered illiquid securities.

13. Make additional investments (including roll-overs) if the Fund's
borrowings exceed 5% of its net assets.

Small Company Value Fund. The investment limitations numbered 1 through 10
are Fundamental Restrictions. Investment limitations 11 through 15 may be
changed by a vote of the Board at any time.

The Small Company Value Fund may not:

1. Borrow money except that the Fund may (a) borrow from banks for
temporary or emergency purposes and (b) enter into reverse repurchase
agreements; provided

23
<PAGE> 99
that reverse repurchase agreements, dollar roll transactions that are accounted
for as financings and any other transactions constituting borrowing by the Fund
may not exceed 30% of the value of the Fund's total assets at the time of such
borrowing. For purposes of this restriction, the entry into currency
transactions, options, futures contracts, options on futures contracts, forward
commitment transactions and dollar roll transactions that are not accounted for
as financings (and the segregation of assets in connection with any of the
foregoing) shall not constitute borrowing.

3. Purchase the securities of any issuer if as a result more than 5% of
the value of the Fund's total assets would be invested in the securities of such
issuer, except that this 5% limitation does not apply to U.S. government
securities and except that up to 25% of the value of the Fund's total assets may
be invested without regard to this 5% limitation.

6. Purchase or sell real estate or invest in oil, gas or mineral
exploration or development programs, except that the Fund may invest in (a)
securities secured by real estate, mortgages or interests therein and (b)
securities of companies that invest in or sponsor oil, gas or mineral
exploration or development programs.

7. Make short sales of securities or maintain a short position, except
that the Fund may maintain short positions in forward currency contracts,
options, futures contracts and options on futures contracts and enter into short
sales "against the box."

8. Purchase securities on margin, except that the Fund may obtain any
short-term credits necessary for the clearance of purchases and sales of
securities. For purposes of this restriction, the deposit or payment of initial
or variation margin in connection with transactions in currencies, options,
futures contracts or related options will not be deemed to be a purchase of
securities on margin.

9. Invest in commodities, except that the Fund may purchase and sell
futures contracts, including those relating to securities, currencies and
indexes, and options on futures contracts, securities, currencies or indexes,
purchase and sell currencies on a forward commitment or delayed-delivery basis
and enter into stand-by commitments.

10. Issue any senior security except as permitted in the Fund's
investment

24
<PAGE> 100
limitations.

11. Purchase securities of other investment companies except in
connection with a merger, consolidation, acquisition, reorganization or offer of
exchange, or as otherwise permitted under the 1940 Act.

12. Pledge, mortgage or hypothecate its assets, except to the extent
necessary to secure permitted borrowings and to the extent related to the
deposit of assets in escrow in connection with the purchase of securities on a
forward commitment or delayed-delivery basis and collateral and initial or
variation margin arrangements with respect to currency transactions, options,
futures contracts, and options on futures contracts.

13. Invest more than 10% of the Fund's net assets in securities which
may be illiquid because of legal or contractual restrictions on resale or
securities for which there are no readily available market quotations. For
purposes of this limitation, repurchase agreements with maturities greater than
seven days shall be considered illiquid securities.

14. Invest in warrants (other than warrants acquired by the Fund as part
of a unit or attached to securities at the time of purchase) if, as a result,
the investments (valued at the lower of cost or market) would exceed 10% of the
value of the Fund's net assets.

15. Make additional investments (including roll-overs) if the Fund's
borrowings exceed 5% of its net assets.

Portfolio Valuation

The Prospectuses discuss the time at which the net asset value of each
Fund is determined for purposes of sales and redemptions. The following is a
description of the procedures used by each Fund in valuing its assets.

Securities listed on a U.S. securities exchange (including securities
traded through the Nasdaq National Market System) or foreign securities exchange
or traded in an over-the-counter market will be valued at the most recent sale
as of the time the valuation is made or, in the absence of sales, at the mean
between the bid and asked quotations. If there are no such quotations, the value
of the securities will be taken to be the highest bid quotation on the exchange
or market. Options or futures contracts will be valued similarly. A security
which is listed or traded on more than one exchange is valued at the quotation
on the exchange determined to be the primary market for such security. In
determining the market value of portfolio investments, each Fund may employ
outside organizations (a "Pricing Service") which may use a matrix, formula or
other objective method that takes into consideration market indexes, matrices,
yield curves and other specific adjustments. The procedures of Pricing Services
are reviewed periodically by the officers of each Fund under the general
supervision and responsibility of the Board, which may replace a Pricing Service
at any time. Short-term obligations with maturities of 60 days or less are
valued at amortized cost, which constitutes fair value as determined by the
Board. Amortized cost involves valuing a portfolio instrument at its initial
cost and thereafter assuming a constant amortization to maturity of any

25
<PAGE> 101
discount or premium, regardless of the impact of fluctuating interest rates on
the market value of the instrument. The amortized cost method of valuation may
also be used with respect to other debt obligations with 60 days or less
remaining to maturity. In determining the market value of portfolio investments,
each Fund may employ outside organizations (a "Price Service") which may use a
matrix, formula or other objective method that takes into consideration market
indexes, matrices, yield curves and other specific adjustments. The procedures
of Pricing Services are reviewed periodically by the officers of each Fund under
the general supervision and responsibility of the Board, which may replace a
Pricing Service at any time. Securities, options and futures contracts for which
market quotations are not available and certain other assets of each Fund will
be valued at their fair value as determined in good faith pursuant to
consistently applied procedures established by the Board. In addition, the Board
or its delegates may value a security at fair value if it determines that such
security's value determined by the methodology set forth above does not reflect
its fair value.

Trading in securities in certain foreign countries is completed at various
times prior to the close of business on each business day in New York (i.e., a
day on which The New York Stock Exchange, Inc. (the "NYSE") is open for
trading). In addition, securities trading in a particular country or countries
may not take place on all business days in New York. Furthermore, trading takes
place in various foreign markets on days which are not business days in New York
and days on which a Fund's net asset value is not calculated. As a result,
calculation of a Fund's net asset value may not take place contemporaneously
with the determination of the prices of certain foreign portfolio securities
used in such calculation. All assets and liabilities initially expressed in
foreign currency values will be converted into U.S. dollar values at the
prevailing rate as quoted by a Pricing Service. If such quotations are not
available, the rate of exchange will be determined in good faith pursuant to
consistently applied procedures established by the Board.

Portfolio Transactions

Warburg is responsible for establishing, reviewing and, where necessary,
modifying each Fund's investment program to achieve its investment objective.
Purchases and sales of newly issued portfolio securities are usually principal
transactions without brokerage commissions effected directly with the issuer or
with an underwriter acting as principal. Other purchases and sales may be
effected on a securities exchange or over-the-counter, depending on where it
appears that the best price or execution will be obtained. The purchase price
paid by a Fund to underwriters of newly issued securities usually includes a
concession paid by the issuer to the underwriter, and purchases of securities
from dealers, acting as either principals or agents in the after market, are
normally executed at a price between the bid and asked price, which includes a
dealer's mark-up or mark-down. Transactions on U.S. stock exchanges and some
foreign stock exchanges involve the payment of negotiated brokerage commissions.
On exchanges on which commissions are negotiated, the cost of transactions may
vary among different brokers. On most foreign exchanges, commissions are
generally fixed. Purchases of Private Funds by the Post-Venture Capital Fund
through a broker or placement agent may also involve a commission or other fee.
There is generally no stated commission in the case of securities traded in
domestic or foreign over-the-counter markets, but the price of securities traded
in over-the-counter markets includes an undisclosed

26
<PAGE> 102
commission or mark-up. U.S. Government Securities are generally purchased from
underwriters or dealers, although certain newly issued U.S. Government
Securities may be purchased directly from the U.S. Treasury or from the issuing
agency or instrumentality. No brokerage commissions are typically paid on
purchases and sales of U.S. Government Securities.

Except for Private Funds investments managed by Abbott Capital Management,
LLC, the Post-Venture Capital Fund's sub-investment adviser with respect to
Private Funds ("Abbott"), Warburg will select specific portfolio investments and
effect transactions for each Fund and in doing so seeks to obtain the overall
best execution of portfolio transactions. In evaluating prices and executions,
Warburg will consider the factors it deems relevant, which may include the
breadth of the market in the security, the price of the security, the financial
condition and execution capability of a broker or dealer and the reasonableness
of the commission, if any, for the specific transaction and on a continuing
basis. Warburg may, in its discretion, effect transactions in portfolio
securities with brokers and dealers who provide brokerage and research services
(as those terms are defined in Section 28(e) of the Securities Exchange Act of
1934) to a Fund and/or other accounts over which Warburg exercises investment
discretion. Warburg may place portfolio transactions with a broker or dealer
with whom it has negotiated a commission that is in excess of the commission
another broker or dealer would have charged for effecting the transaction if
Warburg determines in good faith that such amount of commission was reasonable
in relation to the value of such brokerage and research services provided by
such broker or dealer viewed in terms of either that particular transaction or
of the overall responsibilities of Warburg. Research and other services received
may be useful to Warburg in serving both the Fund and its other clients and,
conversely, research or other services obtained by the placement of business of
other clients may be useful to Warburg in carrying out its obligations to a
Fund. Research may include furnishing advice, either directly or through
publications or writings, as to the value of securities, the advisability of
purchasing or selling specific securities and the availability of securities or
purchasers or sellers of securities; furnishing seminars, information, analyses
and reports concerning issuers, industries, securities, trading markets and
methods, legislative developments, changes in accounting practices, economic
factors and trends and portfolio strategy; access to research analysts,
corporate management personnel, industry experts, economists and government
officials; comparative performance evaluation and technical measurement services
and quotation services; and products and other services (such as third party
publications, reports and analyses, and computer and electronic access,
equipment, software, information and accessories that deliver, process or
otherwise utilize information, including the research described above) that
assist Warburg in carrying out its responsibilities. For the fiscal year ended
October 31, 1997, $133,944, $45,984, $24,051 and $44,316 of total brokerage
commissions was paid by the Emerging Growth, Post-Venture Capital, Small Company
Growth and Small Company Value Funds, respectively, to brokers and dealers who
provided such research and other services. Research received from brokers or
dealers is supplemental to Warburg's own research program. The fees to Warburg
under its advisory agreement with each Fund are not reduced by reason of its
receiving any brokerage and research services.

27
<PAGE> 103
The following table details amounts paid by each Fund in commissions to
broker-dealers for execution of portfolio transactions during the indicated
fiscal years or period ended October 31.

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------
FUND YEAR COMMISSIONS
---------------------------------------------------------------------------------
<S> <C> <C>
Emerging Growth 1995 $795,163
1996 $1,592,936
1997 $2,702,386*
---------------------------------------------------------------------------------
Post-Venture Capital 1995 $2,616
1996 $200,468
1997 $335,766
---------------------------------------------------------------------------------
Small Company Growth 1997 $24,051
---------------------------------------------------------------------------------
Small Company Value 1996 $144,319
1997 $547,325*
---------------------------------------------------------------------------------
</TABLE>

* The increase in brokerage commissions paid in the most recent
fiscal year was due to an increase in overall assets of the
Fund and increased equity investments.

The table below shows the amount of outstanding repurchase agreements that
each Fund had, as of October 31, 1997, with Goldman, Sachs & Co., one of the
regular broker-dealers of each Fund.

<TABLE>
--------------------------------------------
<S> <C>
Emerging Growth $203,806,000
--------------------------------------------
Post-Venture Capital $ 926,000
--------------------------------------------
Small Company Growth $ 297,000
--------------------------------------------
Small Company Value $ 7,265,000
--------------------------------------------
</TABLE>

Investment decisions for each Fund concerning specific portfolio
securities are made independently from those for other clients advised by
Warburg or Abbott, as relevant. Such other investment clients may invest in the
same securities as a Fund. When purchases or sales of the same security are made
at substantially the same time on behalf of such other clients, transactions are
averaged as to price and available investments allocated as to amount, in a
manner which Warburg or Abbott, as the case may be, believes to be equitable to
each client, including the Funds. In some instances, this investment procedure
may adversely affect

28
<PAGE> 104

the price paid or received by the Fund or the size of the position obtained or
sold for the Fund. To the extent permitted by law, securities may be aggregated
with those to be sold or purchased for a Fund with those to be sold or purchased
for such other investment clients in order to obtain best execution.

Any portfolio transaction for a Fund may be executed through Counsellors
Securities Inc., each Fund's distributor ("Counsellors Securities"), if, in
Warburg's judgment, the use of Counsellors Securities is likely to result in
price and execution at least as favorable as those of other qualified brokers,
and if, in the transaction, Counsellors Securities charges the Fund a commission
rate consistent with those charged by Counsellors Securities to comparable
unaffiliated customers in similar transactions. All transactions with affiliated
brokers will comply with Rule 17e-1 under the 1940 Act. No portfolio
transactions have been executed through Counsellors Securities since the
commencement of the Funds' operations.

In no instance will portfolio securities be purchased from or sold to
Warburg, Abbott or Counsellors Securities or any affiliated person of such
companies. In addition, the Fund will not give preference to any institutions
with whom a Fund enters into distribution or shareholder servicing agreements
concerning the provision of distribution services or support services. See the
Prospectuses, "Shareholder Servicing."

Transactions for a Fund may be effected on foreign securities exchanges.
In transactions for securities not actively traded on a foreign securities
exchange, a Fund will deal directly with the dealers who make a market in the
securities involved, except in those circumstances where better prices and
execution are available elsewhere. Such dealers usually are acting as principal
for their own account. On occasion, securities may be purchased directly from
the issuer. Such portfolio securities are generally traded on a net basis and do
not normally involve brokerage commissions. Securities firms may receive
brokerage commissions on certain portfolio transactions, including options,
futures and options on futures transactions and the purchase and sale of
underlying securities upon exercise of options.

Each Fund may participate, if and when practicable, in bidding for the
purchase of securities for the Fund's portfolio directly from an issuer in order
to take advantage of the lower purchase price available to members of such a
group. A Fund will engage in this practice, however, only when Warburg, in its
sole discretion, believes such practice to be otherwise in the Fund's interest.

Portfolio Turnover

Each Fund does not intend to seek profits through short-term trading, but
the rate of turnover will not be a limiting factor when the Fund deems it
desirable to sell or purchase securities. Each Fund's portfolio turnover rate is
calculated by dividing the lesser of purchases or sales of its portfolio
securities for the year by the monthly average value of the portfolio
securities. Securities with remaining maturities of one year or less at the date
of acquisition are excluded from the calculation.

29
<PAGE> 105

Certain practices that may be employed by a Fund could result in high
portfolio turnover. For example, options on securities may be sold in
anticipation of a decline in the price of the underlying security (market
decline) or purchased in anticipation of a rise in the price of the underlying
security (market rise) and later sold. To the extent that its portfolio is
traded for the short-term, a Fund will be engaged essentially in trading
activities based on short-term considerations affecting the value of an issuer's
stock instead of long-term investments based on fundamental valuation of
securities. Because of this policy, portfolio securities may be sold without
regard to the length of time for which they have been held. Consequently, the
annual portfolio turnover rate of a Fund may be higher than mutual funds having
similar objectives that do not utilize these strategies.

MANAGEMENT OF THE FUNDS

Officers and Board of Directors

The names (and ages) of the each Fund's Directors and officers, their
addresses, present positions and principal occupations during the past five
years and other affiliations are set forth below.

<TABLE>
<S> <C>
Richard N. Cooper (63)* Director
Harvard University Professor at Harvard University; National Intelligence Council
1737 Cambridge Street from June 1995 until January 1997; Director or Trustee of
Cambridge, Massachusetts 02138 CircuitCity Stores, Inc. (retail electronics and appliances) and
Phoenix Home Life Mutual Insurance Company; Director/Trustee of other
investment companies advised by Warburg.

Jack W. Fritz (70) Director
2425 North Fish Creek Road Private investor; Consultant and Director of Fritz Broadcasting,
P.O. Box 483 Inc. and Fritz Communications (developers and operators of radio
Wilson, Wyoming 83014 stations); Director of Advo, Inc. (direct mail advertising);
Director/Trustee of other investment companies advised by Warburg.

John L. Furth* (67) Chairman of the Board
466 Lexington Avenue Vice Chairman, Director and Managing Director of Warburg;
New York, New York 10017-3147 Associated with Warburg since 1970; Director of Counsellors
Securities; Chairman of the Board of other investment
companies advised by Warburg.
</TABLE>

* Indicates a Director who is an "interested person" of each Fund as defined
in the 1940 Act.

30
<PAGE> 106

<TABLE>
<S> <C>
Jeffrey E. Garten (51) Director
Box 208200 Dean of Yale School of Management and William S. Beinecke
New Haven, Connecticut 06520-8200 Professor in the Practice of International Trade and Finance;
Undersecretary of Commerce for International Trade from November 1993
to October 1995; Professor at Columbia University from September 1992
to November 1993; Director/Trustee of other investment companies
advised by Warburg.

Thomas A. Melfe (66) Director
30 Rockefeller Plaza Partner in the law firm of Donovan Leisure Newton & Irvine;
New York, New York 10112 Chairman of the Board, Municipal Fund for New York Investors,
Inc.; Director/Trustee of other investment companies advised by
Warburg.

Arnold M. Reichman* (49) Director
466 Lexington Avenue Managing Director, Chief Operating Officer and Assistant Secretary
New York, New York 10017-3147 of Warburg; Associated with Warburg since 1984; Director of The
RBB Fund, Inc.; Director and officer of Counsellors Securities;
Director/Trustee of other investment companies advised by Warburg.

Alexander B. Trowbridge (68) Director
1317 F Street, N.W., 5th Floor President of Trowbridge Partners, Inc. (business consulting) from
Washington, DC 20004 January 1990 to November 1996; Director or Trustee of New England
Life Insurance Co., ICOS Corporation (biopharmaceuticals), WMX
Technologies Inc. (solid and hazardous waste collection and
disposal), The Rouse Company (real estate development), Harris
Corp. (electronics and communications equipment), The Gillette Co.
(personal care products) and Sun Company Inc. (petroleum refining
and marketing); Director/Trustee of other investment companies
advised by Warburg.

Eugene L. Podsiadlo (41) President
466 Lexington Avenue Managing Director of Warburg; Associated with Warburg since 1991;
New York, New York 10017-3147 Officer of Counsellors Securities and of other investment
companies advised by Warburg.
</TABLE>

31
<PAGE> 107

<TABLE>
<S> <C>
Stephen Distler (44) Vice President
466 Lexington Avenue Managing Director of Warburg; Associated with Warburg since 1984;
New York, New York 10017-3147 Officer of Counsellors Securities; and of other investment
companies advised by Warburg.

Eugene P. Grace (46) Vice President and Secretary
466 Lexington Avenue Senior Vice President of Warburg; Associated with Warburg since
New York, New York 10017-3147 April 1994; Attorney-at-law from September 1989 to April 1994;
life insurance agent, New York Life Insurance Company from
1993 to 1994; Officer of Counsellors Securities and of
other investment companies advised by Warburg.

Howard Conroy, CPA (44) Vice President and Chief Financial Officer
466 Lexington Avenue Vice President of Warburg; Associated with Warburg since 1992; New York,
New York, New York 10017-3147 Officer of other investment companies advised by Warburg.

Daniel S. Madden, CPA (32) Treasurer and Chief Accounting Officer
466 Lexington Avenue Vice President of Warburg; Associated with Warburg since 1995; New York,
New York, New York 10017-3147 Associated with BlackRock Financial Management, Inc. from
September 1994 to October 1995;Associated with BEA Associates
from April 1993 to September 1994; Officer of other investment
companies advised by Warburg.

Janna Manes, Esq. (30) Assistant Secretary
466 Lexington Avenue Vice President of Warburg; Associated with Warburg since 1996;
New York, New York 10017-3147 Associated with the law firm of Willkie Farr & Gallagher from 1993
to 1996; Officer of other investment companies advised by Warburg.
</TABLE>

No employee of Warburg, PFPC Inc., the Funds' co-administrator ("PFPC"),
or any of their affiliates receives any compensation from the Funds for acting
as an officer or director/trustee of a Fund. Each Director who is not a
director, trustee, officer or employee of Warburg, PFPC or any of their
affiliates receives the following annual and per-meeting fees:

32
<PAGE> 108

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
FUND ANNUAL FEE FEE FOR EACH MEETING ATTENDED
------------------------------------------------------------------------------------
<S> <C> <C>
Emerging Growth $1,000 $250
------------------------------------------------------------------------------------
Post-Venture Capital $ 500 $250
------------------------------------------------------------------------------------
Small Company Growth $ 500 $250
------------------------------------------------------------------------------------
Small Company Value $ 500 $250
------------------------------------------------------------------------------------
</TABLE>

Each Director is reimbursed for expenses incurred in connection with his
attendance at Board meetings.

Directors' Total Compensation
(for the fiscal year ended October 31, 1997)

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
ALL INVESTMENT
COMPANIES
POST-VENTURE SMALL COMPANY SMALL COMPANY MANAGED BY
NAME OF DIRECTOR EMERGING GROWTH CAPITAL GROWTH VALUE WARBURG*
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
John L. Furth** None None None None None
- --------------------------------------------------------------------------------------------------------------
Arnold M. Reichman** None None None None None
- --------------------------------------------------------------------------------------------------------------
Richard N. Cooper $2,000 $1,500 $1,500 $1,500 $44,500
- --------------------------------------------------------------------------------------------------------------
Donald J. Donahue $2,000 $1,500 $1,500 $1,500 $44,500
- --------------------------------------------------------------------------------------------------------------
Jack W. Fritz*** $2,000 $1,500 $1,500 $1,500 $44,500
- --------------------------------------------------------------------------------------------------------------
Jeffrey E. Garten**** N/A N/A N/A N/A N/A
- --------------------------------------------------------------------------------------------------------------
Thomas A. Melfe $2,000 $1,500 $1,500 $1,500 $44,500
- --------------------------------------------------------------------------------------------------------------
Alexander B. Trowbridge $2,000 $1,500 $1,500 $1,500 $44,500
- --------------------------------------------------------------------------------------------------------------
</TABLE>

* Each Director serves as a Director or Trustee of 24 investment
companies advised by Warburg.

** Mr. Furth and Mr. Reichman receive compensation as affiliates of
Warburg and, accordingly, receive no compensation from any Fund or
any other investment company advised by Warburg.

*** Mr. Donohue resigned as a Director of each Fund effective February
6, 1998.

**** Mr. Garten became a Director of each Fund effective February 6, 1998
and, accordingly, received no compensation from the Funds for the
fiscal year ended October 31, 1997.

As of January 30, 1998, the Directors and officers of each Fund as a group
owned less than 1% of the outstanding shares of each Fund.

33
<PAGE> 109
Portfolio Managers

Emerging Growth Fund. Elizabeth B. Dater is Co-Portfolio
Manager of the Emerging Growth Fund and manages other funds advised by
Warburg Pincus. Prior to joining Warburg in 1978, she was a vice president
of research at Fiduciary Trust Company of New York and an institutional sales
assistant at Lehman Brothers. Ms. Dater has been a regular panelist on
Maryland Public Television's Wall Street Week with Louis Rukeyser since
1976. Ms. Dater earned a B.A. degree from Boston University in Massachusetts.

Stephen J. Lurito is Co-Portfolio Manager of the Emerging
Growth Fund and manages other funds advised by Warburg Pincus. Mr. Lurito
has been with Warburg since 1987. Prior to that he was a research analyst at
Sanford C. Bernstein & Company, Inc. Mr. Lurito earned a B.A. degree from
the University of Virginia and an M.B.A. from The Wharton School, University
of Pennsylvania.

Post-Venture Capital Fund. Ms. Dater and Mr. Lurito, described
above, are also Co-Portfolio Managers of the Post-Venture Capital Fund.

Robert S. Janis and Christopher M. Nawn are Associate
Portfolio Managers and Research Analysts of the Post-Venture Fund and of
other Warburg Pincus Funds. Prior to joining Warburg in October 1994, Mr.
Janis was a vice president and senior research analyst at U.S. Trust Company
of New York. He earned B.A. and M.B.A. degrees from the University of
Pennsylvania. Prior to joining Warburg in September 1994, Mr. Nawn was a
senior sector analyst and portfolio manager at the Dreyfus Corporation. He
earned a B.A. degree from the Colorado College and an M.B.A. degree from the
University of Texas.

Raymond L. Held and Thaddeus I. Gray, Investment Managers and
Managing Directors of Abbott, manage the Post-Venture Capital Fund's
investments in Private Funds. Abbott also acts as sub-investment adviser for
other Warburg Pincus Funds. Prior to co-founding a predecessor of Abbott in
1986, Mr. Held had been an investment analyst and portfolio manager at
Manufacturers Hanover Investment Corporation since 1970, before which time he
had been a security analyst with Weis, Voisin, Cannon, Inc., L.M. Rosenthal &
Co., Shearson, Hammill & Co. and Standard & Poor's Corporation. Mr. Held
earned an M.B.A. from New York University, an M.A. from Columbia University
and a B.A. from Queens College.

Prior to joining a predecessor of Abbott in 1989, Mr. Gray was an
assistant vice president at Commerzbank Capital Markets Corporation, where he
managed the area responsible for underwriting and distributing all new issues
of securities. Prior to this, he was an associate with Credit Commercial de
France in Paris in the Corporate Finance Department. Mr. Gray received his
B.A. in History from the University of Pennsylvania and his M.B.A. in Finance
from New York University. He is also a Chartered Financial Analyst.

34
<PAGE> 110

Small Company Growth Fund. Mr. Lurito (described above) is also
Portfolio Manager of the Small Company Growth Fund.

Small Company Value Fund. George U. Wyper is Co-Portfolio
Manager of the Small Company Value Fund and manages other Warburg Pincus
Funds. From 1987 until 1990, Mr. Wyper was the director of fixed income
investments at Fireman's Fund Insurance Company, and from 1990 until 1993 he
was chief investment officer of Fund American Enterprises, Inc. Mr. Wyper
was chief investment officer of White River Corporation and president of
Hanover Advisers, Inc. from 1993 until he joined Warburg in August 1994 as a
managing director of Warburg. Mr. Wyper earned a B.S. degree in economics
from the Wharton School of Business of the University of Pennsylvania and a
Masters of Management from Yale University.

Kyle F. Frey, Associate Portfolio Manager and Research Analyst of
the Small Company Value Fund, serves in similar positions with other Warburg
Pincus Funds. Mr. Frey, a Senior Vice President of Warburg, is also a Research
Analyst and Assistant Portfolio Manager for small-cap growth equity and
distribution management products. Prior to joining Warburg in 1989, Mr. Frey
was with Goldman, Sachs & Co. in the institutional sales division. Mr. Frey
earned a B.S. degree from the University of New Hampshire and an M.B.A. from New
York University.

Investment Advisers and Co-Administrators

Warburg serves as investment adviser to each Fund, Abbott serves as
sub-investment adviser to the Post-Venture Capital Fund, Counsellors Funds
Service, Inc. ("Counsellors Service") and PFPC serve as co-administrators to the
Fund pursuant to separate written agreements (the "Advisory Agreement," the
"Counsellors Service Co-Administration Agreement" and the "PFPC
Co-Administration Agreement," respectively). The services provided by, and the
fees payable by the Fund to, Warburg under the Advisory Agreement, Counsellors
Service under the Counsellors Service Co-Administration Agreement and PFPC under
the PFPC Co-Administration Agreement are described in the Prospectuses.+ Each
class of shares of the Fund bears its proportionate share of fees payable to
Warburg, Counsellors Service and PFPC 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 Portfolio's average
daily net assets. See the Prospectuses, "Management of the Fund."

- ----------

+ With respect to the Post-Venture Capital Fund, the services provided by
Abbott under the Sub-Investment Advisory Agreement are also described in
the Prospectus; Warburg pays Abbott for sub-investment advisory services
out of the fees Warburg receives from the Fund.

35
<PAGE> 111

For the following fiscal years or period ended October 31 during
which a Fund had investment operations, investment advisory fees earned by
Warburg, waivers and net advisory fees for each Fund were as follows:

<TABLE>
<CAPTION>
GROSS NET
FUND YEAR ADVISORY FEE WAIVER ADVISORY FEE
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Emerging Growth 1995 $ 3,824,061 0 $ 3,824,061
--------------------------------------------------------
1996 $ 9,738,214 0 $ 9,738,214
--------------------------------------------------------
1997 $14,879,436 0 $14,879,436
- --------------------------------------------------------------------------------
Post-Venture Capital 1995 $ 1,756 $ 1,756 $ 0
--------------------------------------------------------
1996 $ 1,253,423 $ 634,122 $ 629,301
--------------------------------------------------------
1997 $ 1,704,057 $ 553,243 $ 1,150,814
- --------------------------------------------------------------------------------
Small Company Growth 1997 $ 69,204 $ 69,204 0
(commenced
operations 12/31/96)
- --------------------------------------------------------------------------------
Small Company Value 1996 $ 280,663 $ 115,171 $ 165,492
(commenced
operations 12/29/95)
--------------------------------------------------------
1997 $ 1,735,893 $ 55,966 $ 1,679,927
- --------------------------------------------------------------------------------
</TABLE>

During the following fiscal years or period ended October 31 during
which a Fund had investment operations, PFPC and Counsellors Service earned the
following amounts in co-administration fees.

<TABLE>
<CAPTION>
FUND YEAR PFPC COUNSELLORS SERVICE
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Emerging Growth 1995 $ 424,895 $ 424,895
---------- ---------- ----------
1996 $1,043,313 $1,082,024
---------- ---------- ----------
1997 $1,324,178 $1,653,283
- --------------------------------------------------------------------------------
Post-Venture Capital 1995 $ 140 $ 140
---------- ---------- ----------
1996 $ 100,274 $ 100,274
---------- ---------- ----------
</TABLE>

36
<PAGE> 112

<TABLE>
<S> <C> <C> <C>
1997 $ 136,324 $ 136,324
- --------------------------------------------------------------------------------
Small Company Growth 1997 $ 6,920 $ 6,920
(commenced (fully waived)
operations 12/31/96)
- --------------------------------------------------------------------------------
Small Company Value 1996 $ 237 $ 28,066
(commenced (fully waived)
operations 12/29/95)
--------------------------------------------
1997 $ 173,589 $ 173,589
- --------------------------------------------------------------------------------
</TABLE>

Custodians and Transfer Agent

Pursuant to separate custodian agreements with each Fund (the
"Custodian Agreements"), PNC Bank, National Association ("PNC") is custodian of
Fund's U.S. assets and State Street serves as custodian of the Funds' non-U.S.
assets. Under the Custodian Agreements, PNC and State Street each (i) maintains
a separate account or accounts in the name of the Fund, (ii) holds and transfers
portfolio securities on account of the Fund, (iii) makes receipts and
disbursements of money on behalf of the Fund, (iv) collects and receives all
income and other payments and distributions on account of the Fund's portfolio
securities and (v) makes periodic reports to the Board concerning the Fund's
custodial arrangements. PNC may delegate its duties under its Custodian
Agreement with the Fund to a wholly owned direct or indirect subsidiary of PNC
or PNC Bank Corp. upon notice to the Fund and upon the satisfaction of certain
other conditions. State Street is authorized to select one or more foreign
banking institutions and foreign securities depositories to serve as
sub-custodian on behalf of the Small Company Growth Fund. PNC is an indirect,
wholly owned subsidiary of PNC Bank Corp. and its principal business address is
1600 Market Street, Philadelphia, Pennsylvania 19103. The principal business
address of State Street is 225 Franklin Street, Boston, Massachusetts 02110.

State Street also serves as the shareholder servicing, transfer and
dividend disbursing agent of each Fund pursuant to a Transfer Agency and Service
Agreement, under which State Street (i) issues and redeems shares of the Fund,
(ii) addresses and mails all communications by the Fund to record owners of Fund
shares, including reports to shareholders, dividend and distribution notices and
proxy material for its meetings of shareholders, (iii) maintains shareholder
accounts and, if requested, sub-accounts and (iv) makes periodic reports to the
Board concerning the transfer agent's operations with respect to the Fund. State
Street has delegated to Boston Financial Data Services, Inc., a 50% owned
subsidiary ("BFDS"), responsibility for most shareholder servicing functions.
BFDS's principal business address is 2 Heritage Drive, North Quincy,
Massachusetts 02171.

37
<PAGE> 113

Organization of the Funds

All shareholders of a Fund in each class, upon liquidation, will
participate ratably in the Fund's net assets. Shares do not have cumulative
voting rights, which means that holders of more than 50% of the shares voting
for the election of Directors can elect all Directors. Shares are transferable
but have no preemptive, conversion or subscription rights.

Distribution and Shareholder Servicing

Post-Venture Capital, Small Company Growth and Small Company Value
Funds, Common Shares. Each of these Funds has entered into a Shareholder
Servicing and Distribution Plan (the "12b-1 Plan"), pursuant to Rule 12b-1 under
the 1940 Act, pursuant to which the Fund will pay Counsellors Securities, in
consideration for Services (as defined below), a fee calculated at an annual
rate of .25% of the average daily net assets of the Common Shares of the Fund.
Services performed by Counsellors Securities include (i) the sale of the Common
Shares, as set forth in the 12b-1 Plan ("Selling Services"), (ii) ongoing
servicing and/or maintenance of the accounts of Common Shareholders of the Fund,
as set forth in the 12b-1 Plan ("Shareholder Services"), and (iii) sub-transfer
agency services, subaccounting services or administrative services related to
the sale of the Common Shares, as set forth in the 12b-1 Plan ("Administrative
Services" and collectively with Selling Services and Administrative Services,
"Services") including, without limitation, (a) payments reflecting an allocation
of overhead and other office expenses of Counsellors Securities related to
providing Services; (b) payments made to, and reimbursement of expenses of,
persons who provide support services in connection with the distribution of the
Common Shares including, but not limited to, office space and equipment,
telephone facilities, answering routine inquiries regarding the Fund, and
providing any other Shareholder Services; (c) payments made to compensate
selected dealers or other authorized persons for providing any Services; (d)
costs relating to the formulation and implementation of marketing and
promotional activities for the Common Shares, including, but not limited to,
direct mail promotions and television, radio, newspaper, magazine and other mass
media advertising, and related travel and entertainment expenses; (e) costs of
printing and distributing prospectuses, statements of additional information and
reports of the Fund to prospective shareholders of the Fund; and (f) costs
involved in obtaining whatever information, analyses and reports with respect to
marketing and promotional activities that the Fund may, from time to time, deem
advisable.

Pursuant to the 12b-1 Plan, Counsellors Securities provides the
Board with periodic reports of amounts expended under the 12b-1 Plan and the
purpose for which the expenditures were made. For the fiscal year ended October
31, 1997, the Common Shares of the Post-Venture Capital, Small Company Growth
and Small Company Value Funds paid $340,220, $17,301 and $428,482, respectively,
pursuant to the 12b-1 Plan, which was spent on advertising, marketing
communications and public relations.

All Funds, Advisor Shares. The Funds have entered into agreements
("Agreements") with institutional shareholders of record, broker-dealers,
financial institutions,

38
<PAGE> 114

depository institutions, retirement plans and financial intermediaries
("Institutions") to provide certain distribution, shareholder servicing,
administrative and/or accounting services for their customers (or participants
in the case of retirement plans) ("Customers") who are beneficial owners of
Advisor Shares. See the Advisor Prospectuses, "Shareholder Servicing."
Agreements will be governed by a distribution plan (the "Distribution Plan")
pursuant to Rule 12b-1 under the 1940 Act. The Distribution Plan requires the
Board, at least quarterly, to receive and review written reports of amounts
expended under the Distribution Plan and the purposes for which such
expenditures were made. For the fiscal year ended October 31, 1997, the Advisor
Shares of the Emerging Growth, Post-Venture Capital and Small Company Value
Funds paid $1,969,695, $1,183, and $10,983, respectively, all of which were paid
to Institutions.

An Institution with which a Fund has entered into an Agreement with
respect to its Advisor Shares may charge a Customer one or more of the following
types of fees, as agreed upon by the Institution and the Customer, with respect
to the cash management or other services provided by the Institution: (i)
account fees (a fixed amount per month or per year); (ii) transaction fees (a
fixed amount per transaction processed); (iii) compensation balance requirements
(a minimum dollar amount a Customer must maintain in order to obtain the
services offered); or (iv) account maintenance fees (a periodic charge based
upon the percentage of assets in the account or of the dividend paid on those
assets). Services provided by an Institution to Customers are in addition to,
and not duplicative of, the services to be provided under each Fund's
co-administration and distribution and shareholder servicing arrangements. A
Customer of an Institution should read the relevant Prospectus and this
Statement of Additional Information in conjunction with the Agreement and other
literature describing the services and related fees that would be provided by
the Institution to its Customers prior to any purchase of Fund shares.
Prospectuses are available from each Fund's distributor upon request. No
preference will be shown in the selection of Fund portfolio investments for the
instruments of Institutions.

General. The Distribution Plans and the 12b-1 Plans will continue in
effect for so long as its continuance is specifically approved at least annually
by each Fund's Board, including a majority of the Directors who are not
interested persons of the Fund and who have no direct or indirect financial
interest in the operation of the Distribution Plans or the 12b-1 Plans, as the
case may be ("Independent Directors"). Any material amendment of the
Distribution Plans or the 12b-1 Plans would require the approval of the Board in
the same manner. Neither the Distribution Plans nor the 12b-1 Plans may be
amended to increase materially the amount to be spent thereunder without
shareholder approval of the relevant class of shares. Each Distribution Plan or
12b-1 Plan may be terminated at any time, without penalty, by vote of a majority
of the Independent Directors or by a vote of a majority of the outstanding
voting securities of the relevant class of shares.

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION

The offering price of each Fund's shares is equal to the per share
net asset value of the relevant class of shares of the Fund. Information on how
to purchase and redeem Fund

39
<PAGE> 115
shares and how such shares are priced is included in the Prospectuses under "Net
Asset Value."

Under the 1940 Act, a Fund may suspend the right of redemption or
postpone the date of payment upon redemption for any period during which the
NYSE is closed, other than customary weekend and holiday closings, or during
which trading on the NYSE is restricted, or during which (as determined by the
SEC) an emergency exists as a result of which disposal or fair valuation of
portfolio securities is not reasonably practicable, or for such other periods as
the SEC may permit. (A Fund may also suspend or postpone the recordation of an
exchange of its shares upon the occurrence of any of the foregoing conditions.)

If the Board determines that conditions exist which make payment of
redemption proceeds wholly in cash unwise or undesirable, a Fund may make
payment wholly or partly in securities or other investment instruments which may
not constitute securities as such term is defined in the applicable securities
laws. If a redemption is paid wholly or partly in securities or other property,
a shareholder would incur transaction costs in disposing of the redemption
proceeds. Each Fund will comply with Rule 18f-1 promulgated under the 1940 Act
with respect to redemptions in kind.

Automatic Cash Withdrawal Plan. An automatic cash withdrawal plan
(the "Plan") is available to shareholders who wish to receive specific amounts
of cash periodically. Withdrawals may be made under the Plan by redeeming as
many shares of the relevant Fund as may be necessary to cover the stipulated
withdrawal payment. To the extent that withdrawals exceed dividends,
distributions and appreciation of a shareholder's investment in a Fund, there
will be a reduction in the value of the shareholder's investment and continued
withdrawal payments may reduce the shareholder's investment and ultimately
exhaust it. Withdrawal payments should not be considered as income from
investment in a Fund.

EXCHANGE PRIVILEGE

An exchange privilege with certain other funds advised by Warburg is
available to investors in each Fund. The funds into which exchanges of Common
Shares currently can be made are listed in the Common Share Prospectus.
Exchanges may also be made between certain Warburg Pincus Advisor Funds.

The exchange privilege enables shareholders to acquire shares in a
fund with a different investment objective when they believe that a shift
between funds is an appropriate investment decision. Subject to the restrictions
on exchange purchases contained in the Common Share Prospectus and any other
applicable restrictions, this privilege is available to shareholders residing in
any state in which the Common Shares or Advisor Shares being acquired, as
relevant, may legally be sold. Prior to any exchange, the investor should obtain
and review a copy of the current prospectus of the relevant class of each fund
into which an exchange is being considered. Shareholders may obtain a prospectus
of the relevant class of the fund into which they are contemplating an exchange
from Counsellors Securities.

40
<PAGE> 116

Subject to the restrictions described above, upon receipt of proper
instructions and all necessary supporting documents, shares submitted for
exchange are redeemed at the then-current net asset value of the relevant class
and the proceeds are invested on the same day, at a price as described above, in
shares of the relevant class of the fund being acquired. The exchange privilege
may be modified or terminated at any time upon 30 days' notice to shareholders.

ADDITIONAL INFORMATION CONCERNING TAXES

The following is a summary of the material United States federal
income tax considerations regarding the purchase, ownership and disposition of
shares in each Fund. Each prospective shareholder is urged to consult his own
tax adviser with respect to the specific federal, state, local and foreign tax
consequences of investing in a Fund. The summary is based on the laws in effect
on the date of this Statement of Additional Information, which are subject to
change.

The Funds and Their Investments

The Funds and Their Investments. Each Fund intends to continue to
qualify to be treated as a regulated investment company each taxable year under
the Internal Revenue Code of 1986, as amended (the "Code"). To so qualify, a
Fund must, among other things: (a) derive at least 90% of its gross income in
each taxable year from dividends, interest, payments with respect to securities,
loans and gains from the sale or other disposition of stock or securities or
foreign currencies, or other income (including, but not limited to, gains from
options, futures or forward contracts) derived with respect to its business of
investing in such stock, securities or currencies; and (b) diversify its
holdings so that, at the end of each quarter of the Fund's taxable year, (i) at
least 50% of the market value of the Fund's assets is represented by cash,
securities of other regulated investment companies, United States government
securities and other securities, with such other securities limited, in respect
of any one issuer, to an amount not greater than 5% of the Fund's assets and not
greater than 10% of the outstanding voting securities of such issuer and (ii)
not more than 25% of the value of its assets is invested in the securities
(other than United States government securities or securities of other regulated
investment companies) of any one issuer or any two or more issuers that the Fund
controls and are determined to be engaged in the same or similar trades or
businesses or related trades or businesses. Each Fund expects that all of its
foreign currency gains will be directly related to its principal business of
investing in stocks and securities.

As a regulated investment company, each Fund will not be subject to
United States federal income tax on its net investment income (i.e., income
other than its net realized long- and short-term capital gains) and its net
realized long- and short-term capital gains, if any, that it distributes to its
shareholders, provided that an amount equal to at least 90% of the sum of its
investment company taxable income (i.e., 90% of its taxable income minus the
excess, if any, of its net realized long-term capital gains over its net
realized short-term capital losses (including any capital loss carryovers), plus
or

41
<PAGE> 117

minus certain other adjustments as specified in the Code) and its net tax-exempt
income for the taxable year is distributed, but will be subject to tax at
regular corporate rates on any taxable income or gains that it does not
distribute. Furthermore, each Fund will be subject to a United States corporate
income tax with respect to such distributed amounts in any year that it fails to
qualify as a regulated investment company or fails to meet this distribution
requirement. Any dividend declared by a Fund in October, November or December of
any calendar year and payable to shareholders of record on a specified date in
such a month shall be deemed to have been received by each shareholder on
December 31 of such calendar year and to have been paid by the Fund not later
than such December 31, provided that such dividend is actually paid by the Fund
during January of the following calendar year.

Each Fund intends to distribute annually to its shareholders
substantially all of its investment company taxable income. The Board of
Directors of each Fund will determine annually whether to distribute any net
realized long-term capital gains in excess of net realized short-term capital
losses (including any capital loss carryovers). Each Fund currently expects to
distribute any excess annually to its shareholders. However, if a Fund retains
for investment an amount equal to all or a portion of its net long-term capital
gains in excess of its net short-term capital losses and capital loss
carryovers, it will be subject to a corporate tax (currently at a rate of 35%)
on the amount retained. In that event, the Fund will designate such retained
amounts as undistributed capital gains in a notice to its shareholders who (a)
will be required to include in income for United Stares federal income tax
purposes, as long-term capital gains, their proportionate shares of the
undistributed amount, (b) will be entitled to credit their proportionate shares
of the 35% tax paid by the Fund on the undistributed amount against their United
States federal income tax liabilities, if any, and to claim refunds to the
extent their credits exceed their liabilities, if any, and (c) will be entitled
to increase their tax basis, for United States federal income tax purposes, in
their shares by an amount equal to 65% of the amount of undistributed capital
gains included in the shareholder's income. Organizations or persons not subject
to federal income tax on such capital gains will be entitled to a refund of
their pro rata share of such taxes paid by a Fund upon filing appropriate
returns or claims for refund with the Internal Revenue Service (the "IRS"). Even
if a Fund makes such an election, it is possible that it may incur an excise tax
as a result of not having distributed net capital gains.

The Code imposes a 4% nondeductible excise tax on each Fund to the
extent the Fund does not distribute by the end of any calendar year at least 98%
of its net investment income for that year and 98% of the net amount of its
capital gains (both long-and short-term) for the one-year period ending, as a
general rule, on October 31 of that year. For this purpose, however, any income
or gain retained by a Fund that is subject to corporate income tax will be
considered to have been distributed by year-end. In addition, the minimum
amounts that must be distributed in any year to avoid the excise tax will be
increased or decreased to reflect any underdistribution or overdistribution, as
the case may be, from the previous year. Each Fund anticipates that

42
<PAGE> 118

it will pay such dividends and will make such distributions as are necessary in
order to avoid the application of this tax.

With regard to each Fund's investments in foreign securities,
exchange control regulations may restrict repatriations of investment income and
capital or the proceeds of securities sales by foreign investors such as the
Fund and may limit the Fund's ability to pay sufficient dividends and to make
sufficient distributions to satisfy the 90% and excise tax distribution
requirements.

If, in any taxable year, a Fund fails to qualify as a regulated
investment company under the Code, it would be taxed in the same manner as an
ordinary corporation and distributions to its shareholders would not be
deductible by the Fund in computing its taxable income. In addition, in the
event of a failure to qualify, the Fund's distributions, to the extent derived
from the Fund's current or accumulated earnings and profits would constitute
dividends (eligible for the corporate dividends-received deduction) which are
taxable to shareholders as ordinary income, even though those distributions
might otherwise (at least in part) have been treated in the shareholders' hands
as long-term capital gains. If a Fund fails to qualify as a regulated investment
company in any year, it must pay out its earnings and profits accumulated in
that year in order to qualify again as a regulated investment company. In
addition, if the Fund failed to qualify as a regulated investment company for a
period greater than one taxable year, the Fund may be required to recognize any
net built-in gains (the excess of the aggregate gains, including items of
income, over aggregate losses that would have been realized if it had been
liquidated) in order to qualify as a regulated investment company in a
subsequent year.

Each Fund's short sales against the box, if any, and transactions in
foreign currencies, forward contracts, options and futures contracts (including
options and futures contracts on foreign currencies) will be subject to special
provisions of the Code that, among other things, may affect the character of
gains and losses realized by the Fund (i.e., may affect whether gains or losses
are ordinary or capital), accelerate recognition of income to the Fund and defer
Fund losses. These rules could therefore affect the character, amount and timing
of distributions to shareholders. These provisions also (a) will require each
Fund to mark-to-market certain types of the positions in its portfolio (i.e.,
treat them as if they were closed out) and (b) may cause the Fund to recognize
income without receiving cash with which to pay dividends or make distributions
in amounts necessary to satisfy the distribution requirements for avoiding
income and excise taxes. Each Fund will monitor its transactions, will make the
appropriate tax elections and will make the appropriate entries in its books and
records when it acquires any foreign currency, forward contract, option, futures
contract or hedged investment in order to mitigate the effect of these rules and
prevent disqualification of the Fund as a regulated investment company.

Passive Foreign Investment Companies. If a Fund purchases shares in
certain foreign investment entities, called "passive foreign investment
companies" (a "PFIC"), it may be subject to United States federal income tax on
a portion of any

43
<PAGE> 119

"excess distribution" or gain from the disposition of such shares even if such
income is distributed as a taxable dividend by the Fund to its shareholders.
Additional charges in the nature of interest may be imposed on the Fund in
respect of deferred taxes arising from such distributions or gains. Any tax paid
by a Fund as a result of its ownership of shares in a PFIC will not give rise to
any deduction or credit to the Fund or any shareholder. If a Fund were to invest
in a PFIC and elected to treat the PFIC as a "qualified electing fund" under the
Code, in lieu of the foregoing requirements, the Fund might be required to
include in income each year a portion of the ordinary earnings and net capital
gains of the qualified election fund, even if not distributed to the Fund, and
such amounts would be subject to the 90% and excise tax distribution
requirements described above. In order to make this election, the Fund would be
required to obtain certain annual information from the passive foreign
investment companies in which it invests, which may be difficult or not possible
to obtain. On October 9, 1997, the Ways and Means Committee of the U.S. Congress
approved technical corrections legislation that would treat PFICs as
pass-through entities for purposes of applying the 20% rate to the portion of a
PFIC's long-term gain attributable to assets held more than 18 months.

Recently, legislation was enacted that provides a mark-to-market
election for regulated investment companies effective for taxable years
beginning after December 31, 1997. This election would result in a Fund being
treated as if it had sold and repurchased all of the PFIC stock at the end of
each year. In this case, the Fund would report gains as ordinary income and
would deduct losses as ordinary losses to the extent of previously recognized
gains. The election, once made, would be effective for all subsequent taxable
years of the Fund, unless revoked with the consent of the IRS. By making the
election, a Fund could potentially ameliorate the adverse tax consequences with
respect to its ownership of shares in a PFIC, but in any particular year may be
required to recognize income in excess of the distributions it receives from
PFICs and its proceeds from dispositions of PFIC company stock. The Fund may
have to distribute this "phantom" income and gain to satisfy its distribution
requirement and to avoid imposition of the 4% excise tax. The Fund will make the
appropriate tax elections, if possible, and take any additional steps that are
necessary to mitigate the effect of these rules.

Dividends and Distributions. Dividends of net investment income and
distributions of net realized short-term capital gains are taxable to a United
States shareholder as ordinary income, whether paid in cash or in shares.
Distributions of net-long-term capital gains, if any, that a Fund designates as
capital gains dividends are taxable as long-term capital gains, whether paid in
cash or in shares and regardless of how long a shareholder has held shares of
the Fund. Dividends and distributions paid by a Fund (except for the portion
thereof, if any, attributable to dividends on stock of U.S. corporations
received by the Fund) will not qualify for the deduction for dividends received
by corporations. Distributions in excess of a Fund's current and accumulated
earnings and profits will, as to each shareholder, be treated as a tax-free
return of

44
<PAGE> 120

capital, to the extent of a shareholder's basis in his shares of the Fund, and
as a capital gain thereafter (if the shareholder holds his shares of the Fund as
capital assets).

Shareholders receiving dividends or distributions in the form of
additional shares should be treated for United States federal income tax
purposes as receiving a distribution in the amount equal to the amount of money
that the shareholders receiving cash dividends or distributions will receive,
and should have a cost basis in the shares received equal to such amount.

Investors considering buying shares just prior to a dividend or
capital gain distribution should be aware that, although the price of shares
just purchased at that time may reflect the amount of the forthcoming
distribution, such dividend or distribution may nevertheless be taxable to them.

If a Fund is the holder of record of any stock on the record date
for any dividends payable with respect to such stock, such dividends are
included in the Fund's gross income not as of the date received but as of the
later of (a) the date such stock became ex-dividend with respect to such
dividends (i.e., the date on which a buyer of the stock would not be entitled to
receive the declared, but unpaid, dividends) or (b) the date the Fund acquired
such stock. Accordingly, in order to satisfy its income distribution
requirements, the Fund may be required to pay dividends based on anticipated
earnings, and shareholders may receive dividends in an earlier year than would
otherwise be the case.

Sales of Shares. Upon the sale or exchange of his shares, a
shareholder will realize a taxable gain or loss equal to the difference between
the amount realized and his basis in his shares. Such gain or loss will be
treated as capital gain or loss, if the shares are capital assets in the
shareholder's hands, and will be long-term capital gain or loss if the shares
are held for more than one year and short-term capital gain or loss if the
shares are held for one year or less. Any loss realized on a sale or exchange
will be disallowed to the extent the shares disposed of are replaced, including
replacement through the reinvesting of dividends and capital gains distributions
in a Fund, within a 61-day period beginning 30 days before and ending 30 days
after the disposition of the shares. In such a case, the basis of the shares
acquired will be increased to reflect the disallowed loss. Any loss realized by
a shareholder on the sale of a Fund share held by the shareholder for six months
or less will be treated for United States federal income tax purposes as a
long-term capital loss to the extent of any distributions or deemed
distributions of long-term capital gains received by the shareholder with
respect to such share.

Backup Withholding. Each Fund may be required to withhold, for
United States federal income tax purposes, 31% of the dividends and
distributions payable to shareholders who fail to provide the Fund with their
correct taxpayer identification number or to make required certifications, or
who have been notified by the IRS that they are subject to backup withholding.
Certain shareholders are exempt from backup

45
<PAGE> 121

withholding. Backup withholding is not an additional tax and any amount withheld
may be credited against a shareholder's United States federal income tax
liabilities.

Notices. Shareholders will be notified annually by each Fund as to
the United States federal income tax status of the dividends, distributions and
deemed distributions attributable to undistributed capital gains (discussed
above in "The Funds and Their Investments") made by the Fund to its
shareholders. Furthermore, shareholders will also receive, if appropriate,
various written notices after the close of a Fund's taxable year regarding the
United States federal income tax status of certain dividends, distributions and
deemed distributions that were paid (or that are treated as having been paid) by
the Fund to its shareholders during the preceding taxable year.

Other Taxation

Distributions also may be subject to additional state, local and
foreign taxes depending on each shareholder's particular situation.

THE FOREGOING IS ONLY A SUMMARY OF CERTAIN MATERIAL TAX CONSEQUENCES AFFECTING
EACH FUND AND ITS SHAREHOLDERS. SHAREHOLDERS ARE ADVISED TO CONSULT THEIR OWN
TAX ADVISERS WITH RESPECT TO THE PARTICULAR TAX CONSEQUENCES TO THEM OF AN
INVESTMENT IN A FUND.

DETERMINATION OF PERFORMANCE

From time to time, a Fund may quote the total return of its Common
Shares and/or Advisor Shares in advertisements or in reports and other
communications to shareholders. With respect to the Funds' Common and Advisor
Shares, the Funds ' average annual total returns for the indicated periods ended
October 31, 1997 were as follows (performance figures calculated without waiver
by a Fund's service providers(s), if any, are noted in italics):

46
<PAGE> 122
COMMON SHARES

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
FUND ONE-YEAR FIVE-YEARS SINCE INCEPTION
(INCEPTION DATE)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Emerging Growth 21.18% N/A 20.08% N/A 17.92% N/A
(1/21/88)
- --------------------------------------------------------------------------------
Post-Venture 9.86% 9.30% N/A N/A 31.04% 30.33%
Capital
(9/29/95)
- --------------------------------------------------------------------------------
Small Company N/A N/A N/A N/A 22.50% 19.80%
Growth+
(12/31/96)
- --------------------------------------------------------------------------------
Small Company 32.05% 31.98% N/A N/A 41.59% 41.57%
Value
(12/29/95)
- --------------------------------------------------------------------------------
</TABLE>

+ Non-annualized.

ADVISOR SHARES*

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
FUND ONE-YEAR FIVE-YEARS SINCE INCEPTION
(INCEPTION DATE)
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Emerging Growth 20.62% N/A 19.54% N/A 18.06% N/A
(4/4/91)
- -------------------------------------------------------------------------------
Post-Venture 9.48% 8.79% N/A N/A 30.44% 29.97%
Capital
(9/29/95)
- -------------------------------------------------------------------------------
Small Company 30.47% 30.26% N/A N/A 41.10% 40.97%
Value+
(12/29/95)
- -------------------------------------------------------------------------------
</TABLE>

* No Small Company Growth Fund Advisor shares were outstanding as of October
31, 1997.

+ Non-annualized.

These figures are calculated by finding the average annual
compounded rates of return for the one-, five- and ten- (or such shorter period
as the relevant class of shares has been offered) year periods that would equate
the initial amount invested to the ending redeemable value according to the
following formula: P (1 + T)(n) = ERV. For purposes of this formula, "P" is a
hypothetical investment of $1,000; "T" is average annual total return; "n" is
number of years; and "ERV" is the ending redeemable value of a hypothetical
$1,000 payment made at the beginning of the one-, five- or ten-year periods (or
fractional portion thereof). Total return or "T" is computed by finding the
average annual change in the value of an initial $1,000 investment over the
period and assumes that all dividends and distributions are reinvested during
the period.

47
<PAGE> 123
A Fund may advertise, from time to time, comparisons of the
performance of its Common Shares and/or Advisor Shares with that of one or more
other mutual funds with similar investment objectives. A Fund may advertise
average annual calendar year-to-date and calendar quarter returns, which are
calculated according to the formula set forth in the preceding paragraph, except
that the relevant measuring period would be the number of months that have
elapsed in the current calendar year or most recent three months, as the case
may be. Investors should note that this performance may not be representative of
the Fund's total return in longer market cycles.

The performance of a class of Fund shares will vary from time to
time depending upon market conditions, the composition of a Fund's portfolio and
operating expenses allocable to it. As described above, total return is based on
historical earnings and is not intended to indicate future performance.
Consequently, any given performance quotation should not be considered as
representative of performance for any specified period in the future.
Performance information may be useful as a basis for comparison with other
investment alternatives. However, a Fund's performance will fluctuate, unlike
certain bank deposits or other investments which pay a fixed yield for a stated
period of time. Any fees charged by Institutions or other institutional
investors directly to their customers in connection with investments in Fund
shares are not reflected in a Fund's total return, and such fees, if charged,
will reduce the actual return received by customers on their investments.

INDEPENDENT ACCOUNTANTS AND COUNSEL

Coopers & Lybrand L.L.P. ("Coopers & Lybrand"), with principal
offices at 2400 Eleven Penn Center, Philadelphia, Pennsylvania 19103, serves as
independent accountants for each Fund. The financial statements that are
incorporated by reference into this Statement of Additional Information have
been audited by Coopers & Lybrand, and have been incorporated by reference
herein in reliance upon the report of such firm of independent accountants given
upon their authority as experts in accounting and auditing.

Willkie Farr & Gallagher serves as counsel for each Fund as well as
counsel to Warburg and Counsellors Securities.

MISCELLANEOUS

As of January 30, 1998, the name, address and percentage of
ownership of each person that owns of record 5% or more of each Fund's
outstanding shares were as follows:

EMERGING GROWTH

<TABLE>
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON SHARES Charles Schwab & Co., Inc.* 18.42%
Reinvest Account
Attn: Mutual Funds Dept.
101 Montgomery Street
San Francisco, California 94104-4122
------------------------------------------------------------
</TABLE>

48
<PAGE> 124

<TABLE>
------------------------------------------------------------
<S> <C> <C>
Nationwide Life Insurance Company* 11.47%
Nationwide QPVA
c/o IPO Portfolio Accounting
PO Box 182029
Columbus, Ohio 43218-2029
------------------------------------------------------------
National Financial Services Corp.* 6.80%
FBO Customers
PO Box 3908
Church Street Station
New York, New York 10008-3908
------------------------------------------------------------
First Trust NA TR* 6.69%
United Healthcare Corp. 401K
Savings TR UAD 6-9-93
Attn: Mutual Funds #21740224
PO Box 64010
St. Paul, Minnesota 55164-0010
------------------------------------------------------------
Fidelity Investment Institutional* 6.24%
Operations Cnt as Agent for CERTA
Employee Benefit Plans
100 Magellan Way
Covington, Kentucky 41015-1999
- --------------------------------------------------------------------------------
ADVISOR SHARES Connecticut General Life Ins. Co.* 98.35%
On behalf of its separate accounts
55E c/o Melissa Spencer M110
CIGNA Corp. PO Box 2975
Hartford, Connecticut 06104-2975
- --------------------------------------------------------------------------------
</TABLE>

POST-VENTURE CAPITAL

<TABLE>
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON SHARES Charles Schwab & Co. Inc.* 32.51%
Reinvest Account
Attn Mutual Funds Dept
101 Montgomery St.
San Francisco, CA 94104-4122
---------------------------------------------------------
National Financial Services Corp.* 13.74
FBO Customers
PO Box 3908
Church Street Station
New York, New York 10008-3908
</TABLE>

49
<PAGE> 125

<TABLE>
- --------------------------------------------------------------------------------
<S> <C> <C>
ADVISOR SHARES Donaldson Lufkin & Jenrette Secs.* 48.57%
PO Box 2052
Jersey City, New Jersey 07303-2052
---------------------------------------------------------
State Street Bank & Trust Co. 14.49%
Cust. for the IRA of
Peggy D. Polonkey
150 Stable Rd.
Norristown, Pennsylvania 19403-2664
---------------------------------------------------------
Daniel R. Hurley 12.15%
Mary C. Hurley, Jt Ten
4399 Boulder Creek Dr.
Gahanna, Ohio 43230-1395
- --------------------------------------------------------------------------------
</TABLE>

SMALL COMPANY VALUE FUND

COMMON SHARES Charles Schwab & Co. Inc.* 28.48%
Reinvest Account
Attn Mutual Funds Dept
101 Montgomery St.
San Francisco, CA 94104-4122
-----------------------------------------------------
National Financial Services Corp.* 12.14%
FBO Customers
PO Box 3908
Church Street Station
New York, New York 10008-3908
- --------------------------------------------------------------------------------
ADVISOR SHARES Donaldson Lufkin & Jenrette Secs.* 32.61%
PO Box 2052
Jersey City, New Jersey 07303-2052
-----------------------------------------------------
FTC & Co.* 24.93%
Attn Datalynx - House Account
PO Box 173736
Denver, Colorado 80217-3736
-----------------------------------------------------
National Financial Services Corp.* 10.85%
FBO Customers
PO Box 3908
Church Street Station
New York, New York 10008-3908
-----------------------------------------------------
</TABLE>

50
<PAGE> 126

<TABLE>
-----------------------------------------------------
<S> <C> <C>
Donald J. Smith, Robert J. Smith TTEES* 10.58%
E.M. Smith Jewelers Inc.
PS Pension Fund Trust
1334 Bridge St.
Chillicothe, Ohio 45601
-----------------------------------------------------
Donald J. Smith, Robert J. Smith, 5.71%
David E. Smith, TTEES
Eugene M. Smith Revocable Trust*
UAD 4 8 80
17 Briarcliff Dr.
Chillicothe, Ohio 45601
- --------------------------------------------------------------------------------
</TABLE>

* Each Fund believes these entities are not the beneficial owners of shares
held of record by them.

Mr. Lionel I. Pincus, Chairman of the Board and Chief Executive
Officer of Warburg, may be deemed to have beneficially owned 11.3%, 4.9%, 66.4%
and 23.8% of the Common Shares outstanding of each of the Emerging Growth,
Post-Venture Capital, Small Company Growth and Small Company Value Funds,
respectively, including shares owned by clients for which Warburg has investment
discretion and by companies that Warburg may be deemed to control. Mr. Pincus
disclaims ownership of these shares and does not intend to exercise voting
rights with respect to these shares.

FINANCIAL STATEMENTS

Each Fund's audited annual report dated October 31, 1997, which
either accompanies this Statement of Additional Information or has previously
been provided to the investor to whom this Statement of Additional Information
is being sent, is incorporated herein by reference. Each Fund will furnish
without charge a copy of its annual report upon request by calling Warburg
Pincus Funds at (800) 927-2874.

51
<PAGE> 127
APPENDIX
DESCRIPTION OF RATINGS

Commercial Paper Ratings

Commercial paper rated A-1 by Standard and Poor's Ratings Services
("S&P") indicates that the degree of safety regarding timely payment is strong.
Those issues determined to possess extremely strong safety characteristics are
denoted with a plus sign designation. Capacity for timely payment on commercial
paper rated A-2 is satisfactory, but the relative degree of safety is not as
high as for issues designated A-1.

The rating Prime-1 is the highest commercial paper rating assigned
by Moody's Investors Service, Inc. ("Moody's"). Issuers rated Prime-1 (or
related supporting institutions) are considered to have a superior capacity for
repayment of short-term promissory obligations. Issuers rated Prime-2 (or
related supporting institutions) are considered to have a strong capacity for
repayment of short-term promissory obligations. This will normally be evidenced
by many of the characteristics of issuers rated Prime-1 but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternative liquidity is maintained.

Corporate Bond Ratings

The following summarizes the ratings used by S&P for corporate
bonds:

AAA - This is the highest rating assigned by S&P to a debt
obligation and indicates an extremely strong capacity to pay interest and repay
principal.

AA - Debt rated AA has a very strong capacity to pay interest and
repay principal and differs from AAA issues only in small degree.

A - Debt rated A has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher-rated
categories.

BBB - This is the lowest investment grade. Debt rated BBB is
regarded as having an adequate capacity to pay interest and repay principal.
Although it normally exhibits adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal for bonds in this category than for
bonds in higher rated categories.

BB, B and CCC - Debt rated BB and B is regarded, on balance, as
predominately speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB represents a lower
degree of speculation than B, and CCC the highest degree of speculation. While
such bonds will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk
<PAGE> 128
exposures to adverse conditions.

BB - Debt rated BB has less near-term vulnerability to default than
other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions, which could
lead to inadequate capacity to meet timely interest and principal payments. The
BB rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB rating.

B - Debt rated B has a greater vulnerability to default but
currently has the capacity to meet interest payments and principal repayments.
Adverse business, financial, or economic conditions will likely impair capacity
or willingness to pay interest and repay principal. The B rating category is
also used for debt subordinated to senior debt that is assigned an actual or
implied BB or BB- rating.

CCC - Debt rated CCC has a currently identifiable vulnerability to
default and is dependent upon favorable business, financial and economic
conditions to meet timely payment of interest and repayment of principal. In the
event of adverse business, financial or economic conditions, it is not likely to
have the capacity to pay interest and repay principal. The CCC rating category
is also used for debt subordinated to senior debt that is assigned an actual or
implied B or B- rating.

CC - This rating is typically applied to debt subordinated to senior
debt that is assigned an actual or implied CCC rating.

C - This rating is typically applied to debt subordinated to senior
debt which is assigned an actual or implied CCC- debt rating. The C rating may
be used to cover a situation where a bankruptcy petition has been filed, but
debt service payments are continued.

Additionally, the rating CI is reserved for income bonds on which no
interest is being paid. Such debt is rated between debt rated C and debt rated
D.

To provide more detailed indications of credit quality, the ratings
may be modified by the addition of a plus or minus sign to show relative
standing within this major rating category.

The following summarizes the ratings used by Moody's for corporate
bonds:

Aaa - Bonds that are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edged." Interest payments are protected by a large or exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.

Aa - Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there

A-2
<PAGE> 129
may be other elements present which make the long-term risks appear somewhat
larger than in Aaa securities.

A - Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper-medium-grade obligations. Factors
giving security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in the
future.

Baa - Bonds which are rated Baa are considered as medium-grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.

Ba - Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well assured. Often the
protection of interest and principal payments may be very moderate and thereby
not well safeguarded during both good and bad times over the future. Uncertainty
of position characterizes bonds in this class.

B - Bonds which are rated B generally lack characteristics of
desirable investments. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.

Moody's applies numerical modifiers (1, 2 and 3) with respect to the
bonds rated "Aa" through "B." The modifier 1 indicates that the bond being rated
ranks in the higher end of its generic rating category; the modifier 2 indicates
a mid-range ranking; and the modifier 3 indicates that the bond ranks in the
lower end of its generic rating category.

Caa - Bonds that are rated Caa are of poor standing. These issues
may be in default or present elements of danger may exist with respect to
principal or interest.

Ca - Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.

C - Bonds which are rated C comprise the lowest rated class of
bonds, and issues so rated can be regarded as having extremely poor prospects of
ever attaining any real investment standing.

A-3
<PAGE> 130
PART C

OTHER INFORMATION

Item 24. Financial Statements and Exhibits

(a) Financial Statements included in Part A:
(1) Financial Highlights.

(b) Financial Statements included in Part B:
(incorporated by reference to the Fund's
Annual Report dated October 31, 1997)

(1) Statement of Net Assets
(2) Statement of Operations
(3) Statement of Changes in Net Assets
(4) Financial Highlights
(5) Notes to Financial Statements
(6) Report of Coopers & Lybrand L.L.P.,
Independent Accountants
(7) Statement of Assets and Liabilities

Exhibit No. Description of Exhibit

1(a) Articles of Incorporation.(1)

(b) Articles Supplementary.(2)

2(a) By-Laws.(3)

(b) Amendment to By-Laws.(3)

3 Not applicable.

(1) Incorporated by reference to Registrant's Registration Statement on
Form N-1A, filed on October 25, 1995.

(2) Incorporated by reference to the corresponding exhibit in
Post-Effective Amendment No. 2 to Registrant's Registration Statement
on Form N-1A, filed on February 20, 1997.

(3) Incorporated by reference to Post-Effective Amendment No. 1 to
Registrant's Registration Statement on Form N-1A, filed with the
Securities and Exchange Commission on July 2, 1996.

(4) Incorporated by reference; material provisions of this exhibit
substantially similar to those of the corresponding exhibit to
Post-Effective Amendment No. 8 to Registration Statement on Form N-1A
of Warburg, Pincus Global Fixed Income Fund, Inc. filed on February 17,
1998 (Securities Act File No. 33-36066; Investment Company Act File No.
811-06143).

C-1
<PAGE> 131

4 Forms of Share Certificates.(5)

5 Form of Investment Advisory Agreement.(6)

6 Form of Distribution Agreement.(2)

7 Not applicable.

8(a) Form of Custodian Agreement with State Street
Bank & Trust Company.(7)

(b) Form of Custodian Agreement with PNC Bank,
National Association.(8)

9(a) Form of Transfer Agency Agreement.(5)

(b) Forms of Co-Administration Agreements.(5)

10 Opinion and Consent of Willkie Farr & Gallagher,
Counsel to the Fund.

11 Consent of Coopers & Lybrand L.L.P., Independent
Accountants.

12 Not applicable.

13 Form of Purchase Agreement.(5)

14 Not applicable.

(5) Incorporated by reference; material provisions of this exhibit
substantially similar to those of the corresponding exhibit in
Pre-Effective Amendment No. 2 to the Registration Statement on Form
N-1A of Warburg, Pincus Post-Venture Capital Fund, Inc., filed on
September 22, 1995 (Securities Act File No. 33-61225).

(6) Incorporated by reference to the corresponding exhibit in Pre-Effective
Amendment No. 1 to Registrant's Registration Statement on Form N-1A,
filed on December 27, 1996.

(7) Incorporated by reference; material provisions of this exhibit
substantially similar to those of the corresponding exhibit to the
Registration Statement on Form N-14 of the Warburg, Pincus Major
Foreign Markets Fund, Inc. (formerly known as Warburg, Pincus Managed
EAFE(R) Countries Fund, Inc.) filed on November 5, 1997 (Securities Act
File No. 333-39611).

(8) Incorporated by reference; material provisions of this exhibit
substantially similar to those of the corresponding exhibit in
Pre-Effective Amendment No. 1 to the Registration Statement on Form
N-1A of the Warburg, Pincus Trust filed on June 14, 1995 (Securities
Act File No. 33-58125).

C-2
<PAGE> 132

15(a) Form of Shareholder Servicing and Distribution Plan.
(7)

(b) Form of Distribution Plan.(7)

16 Schedule for Computation of Total Return Performance
Quotation.

17(a) Financial Data Schedule relating to Common Shares.

(b) Financial Data Schedule relating to Advisor Shares.

18 Form of Rule 18f-3 Plan.(2)

Item 25. Persons Controlled by or Under Common Control
with Registrant

From time to time, Warburg Pincus Asset Management, Inc.
("Warburg"), Registrant's investment adviser, may be deemed to control
Registrant and other registered investment companies it advises through its
beneficial ownership of more than 25% of the relevant fund's shares on behalf of
discretionary advisory clients. Warburg has five wholly-owned subsidiaries:
Counsellors Securities Inc., a New York corporation; Counsellors Funds Service,
Inc., a Delaware corporation; Counsellors Agency Inc., a New York corporation;
Warburg, Pincus Investments International (Bermuda), Ltd., a Bermuda
corporation; and Warburg, Pincus Asset Management International, Inc., a
Delaware corporation.

Item 26. Number of Holders of Securities

<TABLE>
<CAPTION>
Number of Record
Title of Class of Common Stock Holders as of
par value $.001 per share January 30, 1998
------------------------- ----------------
<S> <C>
Common Shares............................ 5,147

Advisor Shares........................... 16
</TABLE>

Item 27. Indemnification

Registrant and officers and directors of Warburg, Counsellors
Securities Inc. ("Counsellors Securities") and Registrant are covered by
insurance policies indemnifying them for liability incurred in connection with
the operation of Registrant. Discussion of this coverage is incorporated by
reference to Item 27 of Part C of Registrant's Registration Statement on Form
N-1A, filed on October 25, 1995.

Item 28. Business and Other Connections of
Investment Adviser

C-3
<PAGE> 133

Warburg, a wholly-owned subsidiary of Warburg, Pincus Asset
Management Holdings, Inc., acts as investment adviser to Registrant. Warburg
renders investment advice to a wide variety of individual and institutional
clients. The list required by this Item 28 of officers and directors of Warburg,
together with information as to their other business, profession, vocation or
employment of a substantial nature during the past two years, is incorporated by
reference to Schedules A and D of Form ADV filed by Warburg (SEC File No.
801-07321).

Item 29. Principal Underwriter

(a) Counsellors Securities will act as distributor for
Registrant. Counsellors Securities currently acts as distributor for The RBB
Fund, Inc.; Warburg Pincus Balanced Fund; Warburg Pincus Capital Appreciation
Fund; Warburg Pincus Cash Reserve Fund; Warburg Pincus Emerging Growth Fund;
Warburg Pincus Emerging Markets Fund; Warburg Pincus Fixed Income Fund; Warburg
Pincus Global Fixed Income Fund; Warburg Pincus Global Post-Venture Capital
Fund; Warburg Pincus Growth & Income Fund, Inc.; Warburg Pincus Health Sciences
Fund, Inc.; Warburg Pincus Institutional Fund, Inc.; Warburg Pincus Intermediate
Maturity Government Fund; Warburg Pincus International Equity Fund; Warburg
Pincus Japan Growth Fund; Warburg Pincus Japan OTC Fund; Warburg Pincus Major
Foreign Markets Fund, Warburg Pincus New York Intermediate Municipal Fund;
Warburg Pincus New York Tax Exempt Fund; Warburg Pincus Post-Venture Capital
Fund; Warburg, Pincus Small Company Growth Fund; Warburg Pincus Small Company
Value Fund; Warburg Pincus Strategic Value Fund; Warburg Pincus Trust and
Warburg Pincus Trust II.

(b) For information relating to each director and officer of
Counsellors Securities, reference is made to Form BD (SEC File No. 15-654) filed
by Counsellors Securities under the Securities Exchange Act of 1934.

Item 30. Location of Accounts and Records

(1) Warburg, Pincus Small Company Value Fund, Inc.
466 Lexington Avenue
New York, New York 10017-3147
(Registrant's Articles of Incorporation, By-Laws
and minute books)

(2) Warburg Pincus Asset Management, Inc.
466 Lexington Avenue
New York, New York 10017-3147
(records relating to its functions as investment adviser)

C-4
<PAGE> 134
(3) Counsellors Funds Service, Inc.
466 Lexington Avenue
New York, New York 10017-3147
(records relating to its functions as co-administrator)

(4) PFPC Inc.
400 Bellevue Parkway
Wilmington, Delaware 19809
(records relating to its functions as co-administrator)

(5) PNC Bank, National Association
Broad and Chestnut Streets
Philadelphia, Pennsylvania 19101
(records relating to its functions as custodian)

(6) Counsellors Securities Inc.
466 Lexington Avenue
New York, New York 10017-3147
(records relating to its functions as distributor)

(7) State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
(records relating to its functions as custodian,
shareholder servicing agent, transfer
agent and dividend disbursing agent)

(8) Boston Financial Data Services, Inc.
2 Heritage Drive
North Quincy, Massachusetts 02171
(records relating to its functions transfer agent
and dividend disbursing agent)

Item 31. Management Services

Not applicable.

Item 32. Undertakings

(a) Registrant hereby undertakes to call a meeting of its
shareholders for the purpose of voting upon the question of removal of a
director or directors of Registrant when requested in writing to do so by the
holders of at least 10% of Registrant's outstanding shares. Registrant
undertakes further, in connection with the meeting, to comply with the
provisions of Section 16(c) of the 1940 Act relating to communications with the
shareholders of certain common-law trusts.

(b) Registrant hereby undertakes to furnish each person to
whom a prospectus is delivered with a copy of Registrant's latest annual report
to shareholders, upon request and without charge.

C-5
<PAGE> 135
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as
amended (the "Securities Act"), and the Investment Company Act of 1940, as
amended, the Registrant certifies that it meets all of the requirements for
effectiveness of this Amendment to the Registration Statement pursuant to Rule
485(b) under the Securities Act and has duly caused this Amendment to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of New
York and the State of New York, on the 27th day of February, 1998.

WARBURG, PINCUS SMALL COMPANY VALUE
FUND, INC.

By:/s/ Eugene L. Podsiadlo
-----------------------
Eugene L. Podsiadlo
President

Pursuant to the requirements of the Securities Act, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated:

<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ John L. Furth Chairman of the February 27, 1998
- ---------------------------- Board of Directors
John L. Furth

/s/ Eugene L. Podsiadlo President February 27, 1998
- -----------------------------
Eugene L. Podsiadlo

/s/ Howard Conroy Vice President and February 27, 1998
- ---------------------------- Chief Financial
Howard Conroy Officer

/s/ Daniel S. Madden Treasurer and Chief February 27, 1998
- ---------------------------- Accounting Officer
Daniel S. Madden

/s/ Richard N. Cooper Director February 27, 1998
- ----------------------------
Richard N. Cooper

/s/ Jack W. Fritz Director February 27, 1998
- ----------------------------
Jack W. Fritz

/s/ Jeffrey E. Garten Director February 27, 1998
- ----------------------------
Jeffrey E. Garten
</TABLE>

<PAGE> 136

<TABLE>
<S> <C> <C>
/s/ Thomas A. Melfe Director February 27, 1998
- ----------------------------
Thomas A. Melfe

/s/ Arnold M. Reichman Director February 27, 1998
- ---------------------------
Arnold M. Reichman

/s/ Alexander B. Trowbridge Director February 27, 1998
- ----------------------------
Alexander B. Trowbridge
</TABLE>

<PAGE> 137
INDEX TO EXHIBITS

Exhibit No. Description of Exhibit

10 Opinion and Consent of Willkie Farr & Gallagher,
Counsel to the Fund.

11 Consent of Coopers & Lybrand L.L.P., Independent
Accountants.

16 Schedule for Computation of Total Return
Performance Quotation.

17(a) Financial Data Schedule relating to Common Shares.

(b) Financial Data Schedule relating to Advisor Shares.

<PAGE> 1
February 27, 1998

Warburg, Pincus Small Company Value Fund, Inc.
466 Lexington Avenue
New York, New York 10017-3147

Re: Post-Effective Amendment No. 3 to Registration Statement
(Securities Act File No. 33-63653; Investment Company Act
File No. 811-07375) (the "Registration Statement")

Ladies and Gentlemen:

You have requested us, as counsel to Warburg, Pincus Small Company Value Fund,
Inc. (the "Fund"), a corporation organized under the laws of the State of
Maryland, to furnish you with this opinion in connection with the Fund's filing
of Post-Effective Amendment No. 3 to its Registration Statement on Form N-1A
(the "Amendment").

We have examined copies of the Fund's Articles of Incorporation, as amended or
supplemented (the "Articles"), the Fund's By-Laws, as amended (the "By-Laws"),
and the Amendment. We have also examined such other records, documents, papers,
statutes and authorities as we have deemed necessary to form a basis for the
opinion hereinafter expressed.

In our examination of material, we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as originals and
the conformity to original documents of all copies submitted to us. As to
various questions of fact material to our opinion, we have relied upon
statements and certificates of officers and representatives of the Fund and
others.

Based upon the foregoing, we are of the opinion that the shares of common stock
of the Fund, par value $.001 per share (the "Shares"), when duly sold, issued
and paid for in accordance with the laws of applicable jurisdictions and the
terms of the Articles, the By-Laws and the Prospectuses and Statement of
Additional Information ("SAI") included as part of the Amendment, and assuming
that at the time of sale such Shares will be sold at a sales price in each case
in excess of the par value, will be valid, legally issued, fully paid and
non-assessable.
<PAGE> 2
Warburg, Pincus Small Company Value Fund, Inc.
February 27, 1998
Page 2

We hereby consent to the filing of this opinion as an exhibit to the Amendment,
to the reference to our name under the heading "Independent Accountants and
Counsel" in the SAI included as part of the Amendment, and to the filing of this
opinion as an exhibit to any application made by or on behalf of the Fund or any
distributor or dealer in connection with the registration or qualification of
the Fund or the Shares under the securities laws of any state or other
jurisdiction.

We are members of the Bar of the State of New York only and do not opine as to
the laws of any jurisdiction other than the laws of the State of New York and
the laws of the United States, and the opinions set forth above are,
accordingly, limited to the laws of those jurisdictions.

Very truly yours,

/s/ WILLKIE FARR & GALLAGHER

<PAGE> 1
CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the incorporation by reference in this Post-Effective Amendment
No. 3 to the Registration Statement under the Securities Act of 1933 on Form
N-1A (File No. 033-63653) of our report dated December 19, 1997 of our audit of
the financial statements and financial highlights of Warburg, Pincus Small
Company Value Fund, Inc., which report is included in the Annual Report to
Shareholders for the year ended October 31, 1997. We also consent to the
reference to our Firm under the caption "Financial Highlights" in the Prospectus
and under the caption "Independent Accountants and Counsel" in the Statement of
Additional Information.

/s/ COOPERS & LYBRAND L.L.P.
- ----------------------------
COOPERS & LYBRAND L.L.P.

2400 Eleven Penn Center
Philadelphia, Pennsylvania
February 26, 1998

<PAGE> 1
SCHEDULE 16 CALCULATIONS
WARBURG PINCUS SMALL COMPANY VALUE FUND
FOR THE YEAR ENDED OCTOBER 31, 1997
ANNUALIZED TOTAL RETURNS WITH WAIVERS

<TABLE>
<CAPTION>
COMMON SHARES
<S> <C> <C>
1/1
One Year ((13,204.70/10000) -1)= 32.05%

1/3
Three Year ((00,000.00/10000) -1)= 0.00%

1/5
Five year ((00,000.00/10000) -1)= 0.00%

1/1.84384
From Inception ((18,988.37/10000) -1)= 41.59%
</TABLE>

<TABLE>
<CAPTION>
ADVISOR SHARES
<S> <C> <C>
1/1
One Year ((13,046.91/10000) -1)= 30.47%

1/3
Three Year ((00,000.00/10000) -1)= 0.00%

1/5
Five year ((00,000.00/10000) -1)= 0.00%

1/1.84384
From Inception ((18,865.82/10000) -1)= 41.10%
</TABLE>

<TABLE>
<CAPTION>
ANNUALIZED TOTAL RETURNS WITHOUT WAIVERS
COMMON SHARES
<S> <C> <C>
1/1
One Year ((13,197.66/10000) -1)= 31.98%

1/3
Three Year ((00,000.00/10000) -1)= 0.00%

1/5
Five year ((00,000.00/10000) -1)= 0.00%

1/1.84384
From Inception ((18,968.14/10000) -1)= 41.51%
</TABLE>

ADVISOR SHARES
<S> <C> <C>
1/1
One Year ((13,025.92/10000) -1)= 30.26%

1/3
Three Year ((00,000.00/10000) -1)= 0.00%

1/5
Five year ((00,000.00/10000) -1)= 0.00%

1/1.84384
From Inception ((18,835.47/10000) -1)= 40.97%
</TABLE>

<ARTICLE> 6
<RESTATED>
<CIK> 0001002651
<NAME> WARBURG PINCUS SMALL COMPANY VALUE
<SERIES>
<NUMBER> 001
<NAME> COMMON CLASS

<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 187318207
<INVESTMENTS-AT-VALUE> 218072152
<RECEIVABLES> 7730055
<ASSETS-OTHER> 48400
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 225850607
<PAYABLE-FOR-SECURITIES> 1136236
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 784538
<TOTAL-LIABILITIES> 1920774
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 172525223
<SHARES-COMMON-STOCK> 11933002
<SHARES-COMMON-PRIOR> 5844654
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 20650665
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 30753945
<NET-ASSETS> 223929833
<DIVIDEND-INCOME> 1104309
<INTEREST-INCOME> 752659
<OTHER-INCOME> 0
<EXPENSES-NET> 2954419
<NET-INVESTMENT-INCOME> (1097451)
<REALIZED-GAINS-CURRENT> 21703083
<APPREC-INCREASE-CURRENT> 22597554
<NET-CHANGE-FROM-OPS> 43203186
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (1184510)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 258418031
<NUMBER-OF-SHARES-REDEEMED> (161650157)
<SHARES-REINVESTED> 1093316
<NET-CHANGE-IN-ASSETS> 139879866
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 1229542
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1735894
<INTEREST-EXPENSE> 2500
<GROSS-EXPENSE> 3010385
<AVERAGE-NET-ASSETS> 171392700
<PER-SHARE-NAV-BEGIN> 14.38
<PER-SHARE-NII> (.08)
<PER-SHARE-GAIN-APPREC> 4.64
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (.17)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 18.77
<EXPENSE-RATIO> 1.70
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<CIK> 0001002651
<NAME> WARBURG PINCUS SMALL COMPANY VALUE
<SERIES>
<NUMBER> 002
<NAME> ADVISOR CLASS

<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 187318207
<INVESTMENTS-AT-VALUE> 218072152
<RECEIVABLES> 7730055
<ASSETS-OTHER> 48400
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 225850607
<PAYABLE-FOR-SECURITIES> 1136236
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 784538
<TOTAL-LIABILITIES> 1920774
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 172525223
<SHARES-COMMON-STOCK> 11933002
<SHARES-COMMON-PRIOR> 5844654
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 20650665
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 30753945
<NET-ASSETS> 223929833
<DIVIDEND-INCOME> 1104309
<INTEREST-INCOME> 752659
<OTHER-INCOME> 0
<EXPENSES-NET> 2954419
<NET-INVESTMENT-INCOME> (1097451)
<REALIZED-GAINS-CURRENT> 21703083
<APPREC-INCREASE-CURRENT> 22597554
<NET-CHANGE-FROM-OPS> 43203186
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (1184510)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 258418031
<NUMBER-OF-SHARES-REDEEMED> (161650157)
<SHARES-REINVESTED> 1093316
<NET-CHANGE-IN-ASSETS> 139879866
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 1229542
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1735894
<INTEREST-EXPENSE> 2500
<GROSS-EXPENSE> 3010385
<AVERAGE-NET-ASSETS> 2196660
<PER-SHARE-NAV-BEGIN> 14.46
<PER-SHARE-NII> (.08)
<PER-SHARE-GAIN-APPREC> 4.44
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (.17)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 18.65
<EXPENSE-RATIO> 1.89
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>