<PAGE>
<PAGE>
As filed with the U.S. Securities and Exchange Commission
on May 3, 1996
Securities Act File No. 333-00627
Investment Company Act File No.
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. 1 [x]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [x]
Amendment No. 2 [x]
(Check appropriate box or boxes)
Warburg, Pincus Growth & Income Fund, Inc.
......................................................................
(Exact Name of Registrant as Specified in Charter)
466 Lexington Avenue
New York, New York 10017-3147
........................................ ................
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, including Area Code:
(212) 878-0600
Mr. Eugene P. Grace
Warburg, Pincus Growth & Income 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>
<PAGE>
It is proposed that this filing will become effective
(check appropriate box)
____ immediately upon filing pursuant to paragraph (b)
x on May 6, 1996 pursuant to paragraph (b)
----
____ 60 days after filing pursuant to paragraph (a)(1)
____ on May __, 1996 pursuant to paragraph (a)(1)
____ 75 days after filing pursuant to paragraph (a)(2)
____ on _____ pursuant to paragraph (a)(2) of rule 485
If appropriate, check following box:
____ this post-effective amendment designates a
new effective date for a previously filed
post-effective amendment.
---------------------
Pursuant to Rule 24f-2 under the Investment Company Act of 1940,
Registrant has elected to register an indefinite number of shares of common
stock under the Securities Act of 1933. Registrant will file its notice pursuant
to Rule 24f-2 for the fiscal year ended August 31, 1996 in a timely manner.
---------------------
<PAGE>
<PAGE>
WARBURG, PINCUS GROWTH & INCOME FUND, INC.
FORM N-1A
CROSS REFERENCE SHEET
___________________________________
<TABLE>
<CAPTION>
Part A Heading for the Common Shares and
Item No. the Advisor Shares Prospectuses
- ----------------------- ---------------------------------
<S> <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
Part B Heading for the Statement of
Item No. Additional Information
- -------------------------- ----------------------------------
10. Cover Page.......................... Cover Page
11. Table of Contents................... Contents
12. General Information and History..... Management of the Fund;
Notes to Financial Statements; See
Prospectuses--"General Information"
<PAGE>
<PAGE>
13. Investment Objectives and
Policies......................... Investment Objectives; Investment Policies
14. Management of the Registrant.... Management of the Fund; See Prospectuses--"Management
of the Fund"
15. Control Persons and Principal
Holders of Securities............ Management of the Fund; Miscellaneous; See
Prospectuses--"General Information"
16. Investment Advisory and Other
Services......................... Management of the Fund; See Prospectuses--"Management
of the Fund" and "Shareholder Servicing"
17. Brokerage Allocation............ Investment Policies; See Prospectuses--"Portfolio
Transactions and Turnover Rate"
18. Capital Stock and Other
Securities....................... Management of the Fund--Organization of the Fund; See
Prospectuses--"General Information"
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............ Financial Highlights; Financial Statements
2
<PAGE>
<PAGE>
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.
<PAGE>
<PAGE>
PROSPECTUS
May 6, 1996
WARBURG PINCUS
GROWTH & INCOME FUND
WARBURG PINCUS
BALANCED FUND
WARBURG PINCUS
TAX FREE FUND
[Logo]
<PAGE>
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
Subject to Completion, dated May 3, 1996
PROSPECTUS May 6, 1996
Warburg Pincus Funds are a family of open-end mutual funds that offer investors
a variety of investment opportunities. Three funds are described in this
Prospectus:
WARBURG PINCUS GROWTH & INCOME FUND seeks long-term growth of capital and income
and a reasonable current return by investing primarily in equity securities and
in various income producing securities including, but not limited to, dividend
paying equity securities, fixed income securities and money market instruments.
WARBURG PINCUS BALANCED FUND seeks maximum total return through a combination of
long-term growth of capital and current income consistent with preservation of
capital by investing in a diversified portfolio of equity and debt investments
managed using a multi-manager approach.
WARBURG PINCUS TAX FREE FUND seeks maximum current income exempt from federal
income taxes, consistent with preservation of capital, by investing
substantially all its assets in a diversified portfolio of municipal
obligations.
NO LOAD CLASS OF COMMON SHARES
__________________________________________________
Warburg Pincus Growth & Income Fund and Warburg Pincus Balanced Fund each offers
two classes of shares, one of which, the Common Shares, 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 OneSourceTM Program; Fidelity Brokerage Services, Inc.
FundsNetworkTM Program; Jack White & Company, Inc.; and Waterhouse Securities,
Inc. Common Shares of the Balanced Fund and the Tax Free Fund are subject to a
12b-1 fee of .25% per annum. The Advisor Shares of the Warburg Pincus Growth &
Income and Balanced Funds are offered by separate prospectuses.
LOW MINIMUM INVESTMENT
__________________________________________________________
The minimum initial investment in each Fund is $1,000 ($500 for an IRA or
Uniform 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, contained in a Statement of Additional Information, has been filed with
the Securities and Exchange Commission (the 'SEC') and is available to investors
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. The Statements of Additional Information, as
amended or supplemented from time to time, bear the same date as this Prospectus
and are incorporated by reference in their entirety into this Prospectus.
- --------------------------------------------------------------------------------
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>
<PAGE>
THE FUNDS' EXPENSES
_____________________________________________________________
Warburg Pincus Growth & Income Fund and Balanced Fund each currently offers
two separate classes of shares: Common Shares and Advisor Shares. For a
description of Advisor Shares see 'General Information.' Common Shares of the
Balanced Fund and the Tax Free Fund pay the Fund's distributor a 12b-1 fee. See
'Management of the Funds -- Distributor.'
</TABLE>
<TABLE>
<CAPTION>
Growth & Tax
Income Balanced Free
Fund Fund Fund
-------- -------- ----
<S> <C> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)............... 0 0 0
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees (after fee waivers)................. .75% 0 0
12b-1 Fees.......................................... 0 .25% .25 %
Other Expenses (after expense reimbursements)....... .51% 1.35% .25 %
--- --- ----
Total Fund Operating Expenses (after fee waivers
and expense reimbursements)`D'.................... 1.26% 1.60% .50 %
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.............................................. $ 13 $ 16 $ 5
3 years............................................. $ 40 $ 50 $ 16
5 years............................................. $ 69 $ 87 $ 28
10 years............................................ $152 $190 $ 63
</TABLE>
- --------------------------------------------------------------------------------
`D' The Funds' investment adviser and co-administrator have undertaken to limit
Total Fund Operating Expenses of each Fund through May 3, 1997 to the
percentages shown above. There is no obligation to continue these waivers
after that time. Absent the waiver of fees by the Funds' investment adviser
and co-administrator, Management Fees for the Balanced and Tax Free Funds
would equal .90% and .50%, respectively, Other Expenses would equal 1.71%
and 2.86%, respectively, and Total Fund Operating Expenses would equal 2.86%
and 3.61%, respectively. Other Expenses for the Funds are based on
annualized estimates of expenses for the fiscal year ending August 31, 1996,
net of expense reimbursements.
---------------------------
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 the Balanced Fund or the Tax Free Fund may pay more
than the economic equivalent of the maximum front-end sales charges permitted by
the National Association of Securities Dealers, Inc. (the 'NASD').
2
<PAGE>
<PAGE>
FINANCIAL HIGHLIGHTS
________________________________________________________
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The tables below set forth certain information concerning the investment
results of shares of the Warburg Pincus Growth & Income, Balanced and Tax Free
Funds (formerly investment portfolios of The RBB Fund, Inc. (the 'RBB Fund'))
for the periods indicated. The financial data included in these tables for the
six months ended February 29, 1996 has not been audited. The financial data for
each of the years ended August 31, 1991 through 1995 are a part of the RBB
Fund's financial statements, which have been audited by Coopers & Lybrand
L.L.P., the RBB Fund's independent accountants, whose report thereon appears in
the Statement of Additional Information along with the financial statements. The
financial data for the Funds for the year ended August 31, 1990 and the period
ended August 31, 1989 is part of previous financial statements also audited by
Coopers & Lybrand L.L.P. The financial data included in these tables should be
read in conjunction with the financial statements and related notes included in
the Statement of Additional Information. Further information about the
performance of the Funds is contained in the Funds' semi-annual report, dated
February 29, 1996, and the annual report dated August 31, 1995, copies of which
may be obtained without charge by calling Warburg Pincus Funds at (800)
927-2874.
WARBURG PINCUS GROWTH & INCOME FUND(d)
<TABLE>
<CAPTION>
For the
Period
October 6,
1988
(Commencement
For the Six of
Months Ended For the Year Ended August 31, Operations)
February 29, --------------------------------------------------------------- to August 31,
1996 1995 1994 1993 1992 1991 1990 1989
------------ ------- ------- ------- ------ ------- ------ -------------
Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of
Period............. $ 16.40 $ 14.56 $ 16.72 $ 11.99 $12.11 $ 11.00 $11.53 $ 10.00
------ ------- ------- ------- ------ ------- ------ -----
Income from
Investment
Operations
Net Investment
Income........... 0.0758 0.2224 .0785 .0464 .1912 .3744 .3574 .3876
Net Gains (Losses)
on Securities
(both realized
and
unrealized)...... 0.6717 1.9834 1.8151 4.8499 .0402 1.6891 (.1856) 1.4225
------ ------- ------- ------- ------ ------- ------ -----
Total from
Investment
Operations....... 0.7475 2.2058 1.8936 4.8963 .2314 2.0635 .1718 1.8101
------ ------- ------- ------- ------ ------- ------ -----
Less Distributions
Dividends (from net
investment
income).......... (0.0942) (0.1824) (.0785) (.0875) (.1871) (.4043) (.3951) (.2833)
Distributions (from
capital gains)... (0.8133) (0.1834) (3.9751) (.0788) (.1643) (.5492) (.3067) --
------ ------- ------- ------- ------ ------- ------ -----
Total
Distributions.... (0.9075) (0.3658) (4.0536) (.1663) (.3514) (.9535) (.7018) (.2833)
------ ------- ------- ------- ------ ------- ------ -----
Net Asset Value, End
of Period.......... $ 16.24 $ 16.40 $ 14.56 $ 16.72 $11.99 $ 12.11 $11.00 $ 11.53
------ ------- ------- ------- ------ ------- ------ -----
------ ------- ------- ------- ------ ------- ------ -----
Total Returns....... 4.86%(c) 15.62% 14.41% 41.17%(e) 1.99%(e) 19.91%(e) 1.48%(e) 18.48%(c)(e)
Ratios/Supplemental
Data
Net Assets, End of
Period (000)..... $1,042,834 $1,038,193 $410,658 $60,689 $28,976 $24,726 $1,396 $ 1,150
Ratios of expenses
to average net
assets........... 1.14%(b) 1.22% 1.28% 1.14% 1.25%(a) 1.30%(a) 1.40%(a) 1.40%(a)(b)
Ratios of net
investment income
to average net
assets........... 0.90%(b) 1.64% .41% .30% 1.66% 3.42% 3.32% 4.32%(b)
Portfolio Turnover
Rate............... 44%(c) 109% 150% 344% 175% 41% 98% 111%(c)
Average Commission
Rate............... $ .06
</TABLE>
- --------------------------------------------------------------------------------
(a) Without the waiver of advisory and administration fees and without the
reimbursement of certain operating expenses, the ratios of expenses to
average net assets for the Warburg Pincus Growth & Income Fund investment
portfolio of the RBB Fund would have been 1.28%, 2.17% and 3.81% for the
years ended August 31, 1992, 1991 and 1990, respectively, and 2.82%
annualized for the period ended August 31, 1989.
(b) Annualized.
(c) Not annualized.
(d) Financial Highlights relate solely to the Common Shares of the Warburg
Pincus Growth & Income Fund investment portfolio of the RBB Fund. Prior to
December 1992, the Warburg Pincus Growth & Income Fund investment portfolio
of the RBB Fund was advised by PNC Institutional Management Corporation.
(e) Sales load not reflected in total return. The sales load was eliminated
effective July 29, 1993.
3
<PAGE>
<PAGE>
WARBURG PINCUS BALANCED FUND(d)
<TABLE>
<CAPTION>
For the
Period
October 6,
1988
(Commencement
For the Six of
Months Ended For the Year Ended August 31, Operations)
February 29, ------------------------------------------------------------------- to August 31,
1996 1995 1994 1993 1992 1991 1990 1989
------------ ------- ------- ------- ------- ------- ------- -------------
(Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of
Period........... $ 11.12 $ 11.01 $ 11.71 $ 12.04 $ 12.05 $ 10.60 $ 11.32 $ 10.00
------ ------- ------- ------- ------- ------- ------- ------
Income from Investment
Operations
Net Investment
Income......... 0.0621 0.2080 .4132 .5555 .4408 .4213 .4080 .4371
Net Gains
(Losses) on
Securities
(both realized
and
unrealized).... 0.8646 1.7225 .3248 1.1253 .5155 1.7196 (.2785) 1.2239
------ ------- ------- ------- ------- ------- ------- ------
Total from
Investment
Operations..... 0.9267 1.9305 .7380 1.6808 .9563 2.1409 .1295 1.6610
------ ------- ------- ------- ------- ------- ------- ------
Less
Distributions
Dividends (from
net investment
income)........ (0.0505) (0.3136) (0.4586) (0.5412) (0.3713) (0.4128) (0.4296) (0.3419)
Distributions
(from capital
gains)......... (0.1462) (1.5069) (.9794) (1.4696) (.5950) (.2781) (.4199) --
------ ------- ------- ------- ------- ------- ------- ------
Total
Distributions... (0.1967) (1.8205) (1.4380) (2.0108) (.9663) (.6909) (.8495) (.3419)
------ ------- ------- ------- ------- ------- ------- ------
Net Asset Value,
End of Period.... $ 11.85 $ 11.12 $ 11.01 $ 11.71 $ 12.04 $ 12.05 $ 10.60 $ 11.32
------ ------- ------- ------- ------- ------- ------- ------
------ ------- ------- ------- ------- ------- ------- ------
Total Returns..... 8.44%(c) 21.56% 6.86%(e) 15.27%(e) 8.07%(e) 21.18%(e) 1.09%(e) 17.03%(c)(e)
Ratios/Supplemental
Data
Net Assets, End
of Period
(000).......... $19,629 $5,342 $808 $762 $1,026 $1,290 $1,373 $1,128
Ratios of
expenses to
average net
assets......... 1.60%(a)(b) 1.53%(a) 0%(a) 0%(a) .67%(a) 1.40%(a) 1.40%(a) 1.40%(a)(b)
Ratios of net
investment
income to
average net
assets......... 3.03%(b) 2.27% 3.76% 4.13% 3.68% 3.58% 3.80% 4.90%(b)
Portfolio Turnover
Rate............. 37%(c) 107% 32% 30% 93% 76% 95% 35%(c)
Average Commission
Rate............. $ .06
</TABLE>
- --------------------------------------------------------------------------------
(a) Without the waiver of advisory and administration fees and without the
reimbursement of certain operating expenses, the ratios of expenses to
average net assets for the Warburg Pincus Balanced Fund investment
portfolio of the RBB Fund would have been 2.64% (annualized), 6.04%, 5.46%,
5.37%, 3.88%, 3.89% and 3.76% for the six months ended February 29, 1996
and for the years ended August 31, 1995, 1994, 1993, 1992, 1991 and 1990,
respectively, and 2.83% (annualized) for the period ended August 31, 1989.
(b) Annualized.
(c) Not annualized.
(d) Financial Highlights relate solely to the Common Shares of the Warburg
Pincus Balanced Fund investment portfolio of the RBB Fund. Prior to
October 1, 1994, the Warburg Pincus Balanced Fund investment portfolio of
the RBB Fund was advised by PNC Institutional Management Corporation.
(e) Sales load not reflected in total return. The sales load was eliminated
effective August 31, 1994.
4
<PAGE>
<PAGE>
WARBURG PINCUS TAX FREE FUND(d)
<TABLE>
<CAPTION>
For the
Period
October 18,
1988
(Commencement
of
For the Six Operations)
Months Ended For the Year Ended August 31, to
February 29, ------------------------------------------------------------------ August 31,
1996 1995 1994 1993 1992 1991 1990 1989
------------ ------- ------- ------- ------- ------- ------ -------------
(Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of
Period............ $ 10.41 $ 10.40 $ 11.53 $ 11.04 $ 10.46 $ 10.05 $10.28 $ 10.00
------ ------- ------- ------- ------- ------- ------ -----
Income from
Investment
Operations
Net Investment
Income.......... 0.2569 0.5426 0.6026 0.6385 0.6771 0.6027 .5940 .5273
Net Gains (Losses)
on Securities
(both realized
and
unrealized)..... 0.2100 0.3077 (0.6259) 0.8654 0.6145 0.4402 (.1741) 0.247
------ ------- ------- ------- ------- ------- ------ -----
Total from
Investment
Operations...... 0.4669 0.8503 (0.0233) 1.5039 1.2916 1.0429 .4199 .7320
------ ------- ------- ------- ------- ------- ------ -----
Less Distributions
Dividends (from
net investment
income)......... (0.2569) (0.5426) (0.6092) (0.6725) (0.6345) (0.6212) (.6499) (.4549)
Distributions (in
excess of net
investment
income)......... -- -- (0.0135) -- -- -- -- --
Distributions
(from capital
gains).......... -- (0.2979) (0.4886) (0.3414) (0.0771) (0.0117) -- --
------ ------- ------- ------- ------- ------- ------ -----
Total
Distributions... (0.2569) (0.8403) (1.1113) (1.0139) (0.7116) (0.6329) (.6499) (.4549)
------ ------- ------- ------- ------- ------- ------ -----
Net Asset Value,
End of Period..... $ 10.62 $ 10.41 $ 10.40 $ 11.53 $ 11.04 $ 10.46 $10.05 $ 10.28
------ ------- ------- ------- ------- ------- ------ -----
------ ------- ------- ------- ------- ------- ------ -----
Total Returns...... 4.51%(c) 8.89%(e) (0.30%)(e) 14.45%(e) 12.77%(e) 10.66%(e) 4.00%(e) 7.94%(c)(e)
Ratios/Supplemental
Data
Net Assets, End of
Period (000).... $4,427 $4,127 $5,465 $6,631 $6,491 $8,840 $1,187 $1,095
Ratios of expenses
to average net
assets.......... .50%(a)(b) .48%(a) .15%(a) .17%(a) .33%(a) .84%(a) 1.25%(a) 1.25%(a)(b)
Ratios of net
investment
income to
average net
assets.......... 4.88%(b) 5.53% 5.51% 5.71% 6.21% 6.02% 5.74% 6.01%(b)
Portfolio Turnover
Rate.............. 51%(c) 38% 20% 70% 78% 63% 10% 175%(c)
</TABLE>
- --------------------------------------------------------------------------------
(a) Without the waiver of advisory and administration fees and without the
reimbursement of certain operating expenses, the ratios of expenses to
average net assets for the Warburg Pincus Tax Free Fund investment
portfolio of the RBB Fund would have been 2.91% (annualized), 2.12%, 1.84%,
1.76%, 1.61%, 3.06% and 3.75% for the six months ended February 29, 1996
and for the years ended August 31, 1995, 1994, 1993, 1992, 1991 and 1990,
respectively, and 2.48% annualized for the period ended August 31, 1989.
(b) Annualized.
(c) Not annualized.
(d) Financial Highlights related solely to the Common Shares of the Warburg
Pincus Tax Free Fund investment portfolio of the RBB Fund. Prior to April
10, 1995, the Warburg Pincus Tax Free Fund investment portfolio of the RBB
Fund was advised by PNC Institutional Management Corporation.
(e) Sales load not reflected in total return. The sales load was eliminated
effective February 1, 1995.
5
<PAGE>
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
______________________________________________
Each Fund's investment objective(s) and policies are non-fundamental policies
and may be changed by the Fund's Board of Directors (the 'Board') without first
obtaining the approval of a majority of the outstanding shares of that Fund. Any
changes may result in the Fund having investment objectives different from those
an investor may have considered at the time of investment. 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.
GROWTH & INCOME FUND
The Growth & Income Fund's investment objectives are to seek long-term growth
of capital and income and a reasonable current return. The Fund is a diversified
management investment company that pursues its objectives by investing primarily
in equity securities. The policy of the Fund is to invest substantially all of
its assets in equity securities under normal market conditions. Equity
securities include common stocks, securities which are convertible into common
stocks and readily marketable securities, such as rights and warrants, which
derive their value from common stock. The Fund seeks to achieve its income
objective by investing in various income producing securities including, but not
limited to, dividend paying equity securities and fixed income securities. The
portion of the Fund invested from time to time in equity securities, fixed
income securities and money market securities will vary depending on market
conditions, and there may be extended periods when the Fund is primarily
invested in one of them. In addition, the amount of income generated from the
Fund will fluctuate depending on, among other things, the composition of the
Fund's holdings and the level of interest and dividend income paid on those
holdings. Investments in common stock in general are subject to market risks
that may cause their prices to fluctuate over time. Therefore, an investment in
the Fund may be more suitable for long-term investors who can bear the risk of
these fluctuations.
The Fund may invest up to 10% of its total assets in securities of foreign
issuers and may hold from time to time various foreign currencies pending
investment in foreign securities or conversion into U.S. dollars. The Fund may
also purchase without limitation dollar-denominated American Depository Receipts
('ADRs'). ADRs are issued by domestic banks and evidence ownership of underlying
foreign securities. The Fund may also invest up to 5% of its net assets in
mortgage-related and asset-backed securities.
BALANCED FUND
The Balanced Fund's investment objective is to seek to maximize total return
through a combination of long-term growth of capital and current
6
<PAGE>
<PAGE>
income consistent with preservation of capital. The Fund is a diversified
management investment company that pursues its objective through a policy of
diversified investment in common stocks, convertible and non-convertible
preferred stocks and debt securities, such as government, corporate, bank and
commercial obligations. The Fund may also purchase warrants provided they are
attached to securities that may otherwise be purchased by the Fund. At all
times, the Fund will have a minimum of 25% of its assets in equity securities
and a minimum of 25% in fixed income securities. Compliance with these
percentage requirements may limit the ability of the Fund to maximize total
return. With respect to convertible senior securities, only that portion of the
value of such securities attributable to their fixed income characteristics will
be used for purposes of determining the percentage of the assets of the Fund
that are invested in fixed income securities. The actual percentage of assets
invested in equity and fixed income securities will vary from time to time,
depending on the judgment of Warburg, Pincus Counsellors, Inc., the investment
adviser of each Fund ('Warburg'), as to general market and economic conditions,
trends and yields and interest rates and changes in fiscal and monetary
policies.
The Fund will be managed by a team of senior managers of Warburg. Two
managers are designated overall portfolio strategists and are responsible for
determining the portion of the Fund allocated between equity and fixed income
securities and the allocation among the various equity sectors. See 'Management
of the Funds -- Portfolio Managers' for information about the portfolio
managers.
EQUITY INVESTMENT. Each of the equity portfolio managers will manage an
allocated portion of the equity holdings of the Fund. Each manager will manage
his/her portion with a different investment emphasis or approach, but in each
case consistent with the overall objective of long-term growth of capital for
the Balanced Fund's equity portion.
The four sectors in the equity portion are:
U.S. Value Sector invests primarily in stocks whose acquisition price
represents low absolute or relative value, based on historical and financial
analysis and compared to other stocks and sectors of the Standard & Poor's 500
universe of common stocks and other indexes.
U.S. Small Company Sector invests primarily in common stocks and warrants of
small capitalization and emerging growth U.S. companies that represent
attractive opportunities for maximum capital appreciation. Emerging growth
companies are small- and medium-sized companies that have passed their start up
phase and that show positive earnings and prospects for achieving significant
profit and gain in a relatively short period of time.
U.S. Mid-Cap Sector invests primarily in a diversified portfolio of common
stocks, warrants and securities convertible into or exchangeable for common
stock of 'mid-cap' U.S. companies. These are companies that have market
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capitalizations in the $660 million to $13.8 billion range and includes a
potential universe of companies in such indexes as the Russell Midcap Index and
Standard & Poor's Midcap 400 Index. The managers attempt to identify sectors of
the market and companies within market sectors that they believe will outperform
the overall market.
International Equity Sector invests primarily in a broadly diversified
portfolio of equity securities of companies that, wherever organized, have their
principal business activities and interests outside the United States. The
international equity managers intend to invest principally in the securities of
financially strong companies with opportunities for growth within growing
international economies and markets through increased earnings power and
improved utilization or recognition of assets. Investments may be made in equity
securities of companies of any size, whether traded on or off a national
securities exchange.
FIXED INCOME INVESTMENT. The fixed income portion invests primarily in debt
instruments such as corporate obligations, U.S. government obligations,
municipal obligations and mortgage-related and asset-backed debt securities.
TAX FREE FUND
The Tax Free Fund's investment objective is to seek to maximize current
interest income which is exempt from federal income taxes, consistent with
preservation of capital. The Fund is a diversified management investment company
that pursues its investment objective by investing substantially all of its
assets in a diversified portfolio of obligations issued by or on behalf of
states, territories and possessions of the United States, the District of
Columbia and their political subdivisions, agencies, instrumentalities and
authorities ('Municipal Obligations'), the interest on which, in the opinion of
bond counsel or counsel to the issuer, as the case may be, is exempt from
regular federal income tax. During normal market conditions, at least 80% of the
net assets of the Fund will be invested in Municipal Obligations the interest on
which is exempt from regular federal income taxes and does not constitute an
item of tax preference for purposes of the federal alternative minimum tax ('Tax
Exempt Interest'). The Fund may also invest up to 5% of its net assets in
mortgage-related and asset-backed securities.
PORTFOLIO INVESTMENTS
___________________________________________________________
ALL FUNDS
U.S. GOVERNMENT OBLIGATIONS. The obligations issued or guaranteed by the U.S.
government in which a Fund may invest include direct obligations of the U.S.
Treasury and obligations issued by U.S. government agencies and
instrumentalities. Included among direct obligations of the United States are
Treasury Bills, Treasury Notes and Treasury Bonds, which differ principally in
terms of their maturities. Treasury Bills have maturities of less than one year,
Treasury Notes have maturities of one to 10 years and Treasury Bonds
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generally have maturities of greater than 10 years at the date of issuance.
Included among the obligations issued by agencies and instrumentalities of the
United States are: instruments that are supported by the full faith and credit
of the United States (such as certificates issued by the Government National
Mortgage Association); instruments that are supported by the right of the issuer
to borrow from the U.S. Treasury (such as securities of Federal Home Loan
Banks); and instruments that are supported by the credit of the instrumentality
(such as Federal National Mortgage Association and Federal Home Loan Mortgage
Corporation bonds).
TEMPORARY DEFENSIVE MEASURES. When Warburg believes that a defensive posture
is warranted, the Growth & Income Fund and the Balanced Fund may invest
temporarily without limit in U.S. dollar-denominated money market obligations,
including repurchase agreements. The Tax Free Fund may hold uninvested cash
reserves pending investment, during temporary defensive periods or when, in the
opinion of Warburg, suitable Municipal Obligations are unavailable. Uninvested
cash reserves will not earn income.
GROWTH & INCOME FUND AND BALANCED FUND
INVESTMENT GRADE DEBT. The Growth & Income and Balanced Funds may each invest
in investment grade debt securities and preferred stocks. Debt obligations of
corporations in which the Funds may invest include corporate bonds, debentures,
debentures convertible into common stocks and notes. The interest income to be
derived may be considered as one factor in selecting debt securities for
investment by Warburg. The market value of debt obligations may be expected to
vary depending upon, among other factors, interest rates, the ability of the
issuer to repay principal and interest, any change in investment rating and
general economic conditions. A security will be deemed to be investment grade if
it is rated within the four highest grades by Moody's Investors Service, Inc.
('Moody's') or Standard & Poor's Ratings Group ('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.
In selecting debt securities for a Fund, Warburg will review and monitor the
creditworthiness of each issuer and issue, in addition to relying on ratings
assigned by Moody's or S&P. Interest rate trends and specific developments which
may affect individual issuers will also be analyzed. The Balanced Fund may only
invest in debt securities rated within the three highest grades by Moody's or
S&P or, if unrated, determined to be of comparable quality by Warburg.
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 and downgraded
securities may be retained without limit as to quantity or
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quality, although Warburg will consider such event in its determination of
whether the Fund should continue to hold the securities.
LOWER-RATED SECURITIES. Lower-rated and comparable unrated securities
(commonly referred to as 'junk bonds'), which a Fund may come to hold as a
result of a downgrade (i) will likely have some quality and protective
characteristics that, in the judgment of the rating organization, are outweighed
by large uncertainties or major risk exposures to adverse conditions and (ii)
are predominantly speculative with respect to the issuer's capacity to pay
interest and repay principal in accordance with the terms of the obligations.
The market values of certain of these securities also tend to be more sensitive
to individual corporate developments and changes in economic conditions than
higher-quality securities. In addition, medium- and lower-rated securities and
comparable unrated securities generally present a higher degree of credit risk.
The risk of loss due to default by such issuers is significantly greater because
medium- and lower-rated securities and unrated securities generally are
unsecured and frequently are subordinated to the prior payment of senior
indebtedness.
The market value of securities in lower-rated categories is more volatile
than that of higher quality securities. In addition, a Fund may have difficulty
disposing of certain of these securities because there may be a thin trading
market, which may also make it more difficult for a Fund to obtain accurate
market quotations for purposes of calculating a Fund's net asset value.
REPURCHASE AGREEMENTS. The Growth & Income Fund and the Balanced Fund may
invest in repurchase agreement transactions with member banks of the Federal
Reserve System and certain non-bank dealers. Repurchase agreements are contracts
under which the buyer of a security simultaneously commits to resell the
security to the seller at an agreed-upon price and date. Under the terms of a
typical repurchase agreement, a Fund would acquire any underlying security for a
relatively short period (usually not more than one week) subject to an
obligation of the seller to repurchase, and the Fund to resell, the obligation
at an agreed-upon price and time, thereby determining the yield during the
Fund's holding period. This arrangement results in a fixed rate of return that
is not subject to market fluctuations during the Fund's holding period. The
value of the underlying securities will at all times be at least equal to the
total amount of the purchase obligation, including interest. The Fund bears a
risk of loss in the event that the other party to a repurchase agreement
defaults on its obligations or becomes bankrupt and the Fund is delayed or
prevented from exercising its right to dispose of the collateral securities,
including the risk of a possible decline in the value of the underlying
securities during the period while the Fund seeks to assert this right. Warburg,
acting under the supervision of each Fund's 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').
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CONVERTIBLE SECURITIES. Convertible securities in which the Growth & Income
Fund and the Balanced 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.
BALANCED FUND
MORTGAGE-RELATED AND ASSET-BACKED DEBT SECURITIES. The Balanced Fund may
purchase mortgage-related debt securities without limit. Such securities
represent interests in pools of mortgage loans made by lenders such as savings
and loan institutions, mortgage bankers, commercial banks and others and
assembled for sale to investors by various governmental, government-related and
private organizations. Mortgage-related securities are based on different types
of mortgages, including those on commercial real estate or residential
properties. Mortgage-related securities in which the Fund may invest include
adjustable rate securities. The Fund may also invest in asset-backed securities
which are backed by installment sales contracts, credit card receivables or
other assets. The remaining maturity of any asset-backed security the Fund
invests in will be 397 days or less. As new types of mortgage-related securities
will likely be developed in the future, the Fund may invest in them if Warburg
determines they are consistent with the Fund's investment objectives and
policies.
Non-government mortgage-related securities may offer higher yields than those
issued by governmental or government-related entities, but may be subject to
greater price fluctuations and, in addition, may not be readily marketable.
The existence of any insurance or guarantees supporting mortgage-related or
asset-backed securities and the creditworthiness of the issuer will be
considered in determining whether a security meets the Fund's investment
standards, although the Fund may purchase mortgage-related and asset-backed
securities without insurance or guarantees if Warburg determines that the issuer
is creditworthy.
The value of mortgage-related and asset-backed securities may change due to
shifts in the market's perception of issuers, and regulatory or tax changes may
adversely affect the mortgage or asset-backed securities market as a whole.
Foreclosures and prepayments, which occur when unscheduled or early payments are
made on the underlying mortgages, may shorten the effective maturities of these
securities, and the Fund's yield may be affected by reinvestment of prepayments
at higher or lower rates than the original
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investment. Prepayments may tend to increase due to refinancing of mortgages as
interest rates decline. In addition, like other debt securities, the values of
mortgage-related and asset-backed securities will generally fluctuate in
response to interest rates.
RISK FACTORS AND SPECIAL CONSIDERATIONS
_________________________________________
Investing in securities is subject to the inherent risk of fluctuations in
prices. For certain additional risks relating to each Fund's investments,
including with respect to high portfolio turnover, foreign securities and
lower-rated securities, see 'Portfolio Investments' beginning at page 8 and
'Certain Investment Strategies' beginning at page 14.
NON-PUBLICLY TRADED SECURITIES; RULE 144A SECURITIES. Each Fund may purchase
securities that are not registered under the Securities Act of 1933, as amended
(the '1933 Act'), but that can be sold to 'qualified institutional buyers' in
accordance with Rule 144A under the 1933 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 adequate trading market
exists for the security. In addition to an adequate trading market, the Boards
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 Rule 144A Securities) may involve a
high degree of business and financial risk and may result in substantial losses.
These securities may be less liquid than publicly traded securities, and a Fund
may take longer to liquidate these positions than would be the case for publicly
traded securities. Although these securities may be resold in privately
negotiated transactions, the prices realized 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.
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BALANCED FUND
EMERGING GROWTH AND SMALL COMPANIES. Investing in securities of emerging
growth and small- and medium-sized companies may involve greater risks since
these securities may have limited marketability and, thus, may be more volatile
than securities of larger, more established companies or the market in general.
Because small- and medium-sized companies normally have fewer shares outstanding
than larger companies, it may be more difficult for the Fund to buy or sell
significant amounts of such shares without an unfavorable impact on prevailing
prices. Small-sized companies may have limited product lines, markets or
financial resources and may lack management depth. In addition, small- and
medium-sized 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 small- and
medium-sized companies than for larger, more established ones. Although
investing in securities of emerging growth companies 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, the Balanced Fund's U.S. Small
Company Sector and Mid-Cap Sector may involve a greater degree of risk than
investment in better-known, larger companies.
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. It is not
possible to predict the Funds' portfolio turnover rates. However, it is
anticipated that the Growth & Income Fund's annual turnover rate should not
exceed 150% and the Balanced and Tax Free Funds' portfolio turnover rates should
not exceed 100%. High portfolio turnover rates (100% or more) may result in
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 each Fund's 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 Board.
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CERTAIN INVESTMENT STRATEGIES
___________________________________________________
Although there is no current intention of doing so during the coming year,
each Fund is authorized to engage in the following investment strategies: (i)
lending portfolio securities, (ii) entering into reverse repurchase agreements
and (iii) in the case of the Tax Free Fund, engaging in options and futures
transactions. Detailed information concerning each Fund's strategies and related
risks is contained below and in the Fund's Statement of Additional Information.
STRATEGY AVAILABLE TO ALL FUNDS
SHORT SALES AGAINST THE BOX. Each 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,' will be entered into by a Fund for the
purpose of receiving a portion of the interest earned by the executing broker
from the proceeds of the sale. The proceeds of the sale will generally be held
by the broker until the settlement date when the Fund delivers securities to
close out its short position. Although prior to delivery the Fund will have to
pay an amount equal to any dividends paid on the securities sold short, the Fund
will receive the dividends from the securities sold short or the dividends from
the preferred stock or interest from the debt securities convertible or
exchangeable into the securities sold short, plus a portion of the interest
earned from the proceeds of the short sale. A 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. The Fund will endeavor to offset
transaction costs associated with short sales against the box with the income
from the investment of the cash proceeds.
The extent to which a Fund may make short sales may be limited by
requirements of the Internal Revenue Code of 1986, as amended (the 'Code'), for
qualification as a regulated investment company. See 'Dividends, Distributions
and Taxes' for other tax considerations applicable to short sales.
STRATEGIES AVAILABLE TO THE GROWTH & INCOME FUND AND
THE BALANCED FUND
FOREIGN SECURITIES. Each of the Growth & Income Fund and the Balanced Fund
may invest up to 10% 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 U.S. 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
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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 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.
OPTIONS AND FUTURES TRANSACTIONS. At the discretion of Warburg, each Fund
may, but is not required to, engage in a number of strategies involving options
and futures contracts. These strategies, commonly referred to as 'derivatives,'
may be used (i) for the purpose of hedging against a decline in value of a
Fund's current or anticipated portfolio holdings and (ii) in the case of the
Growth & Income Fund, (a) as a substitute for purchasing or selling portfolio
securities or (b) 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 Growth & Income 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 the NASD and by the Code.
Securities and Stock Index Options. Each Fund may write covered call options
and put options and purchase put and call options on securities and stock
indexes and will realize fees (referred to as 'premiums') for granting the
rights evidenced by the options. Such options may be traded on an exchange or
may trade over-the-counter ('OTC'). 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 has the right to
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purchase the underlying security from the writer. A stock index measures the
movement of a certain group of stocks by assigning relative values to the 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 interest rate
and securities 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 an interest rate sensitive security or, in the case of index
futures contracts, are settled in cash with reference to a specified multiplier
times the change in the specified interest rate or index. An option on a futures
contract gives the purchaser the right, in return for the premium paid, to
assume a position in a futures contract.
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. However, the Growth & Income Fund may not write put
options or purchase or sell futures contracts or options on futures contracts to
hedge more than its total assets unless immediately after any such transaction
the aggregate amount of premiums paid on put options and the amount of margin
deposits on its existing futures positions do not exceed 5% of its total assets.
Hedging Considerations. 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 and
futures 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 correctly predict movements in the hedge and
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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 an option or futures position without incurring
substantial losses, if at all. A 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 and indexes and interest rate and index futures
contracts and options on these futures contracts. The use of these strategies
may require that the Fund maintain cash or certain liquid high-grade debt
obligations or other assets that are acceptable as collateral to the appropriate
regulatory authority 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 or financial instrument or by other portfolio positions or by other
means consistent with applicable regulatory policies. Segregated assets cannot
be sold or transferred unless equivalent assets are substituted in their place
or it is no longer necessary to segregate them. As a result, there is a
possibility that segregation of a large percentage of the Fund's assets could
impede portfolio management or the Fund's ability to meet redemption requests or
other current obligations.
STRATEGIES AVAILABLE TO THE BALANCED FUND AND
THE TAX FREE FUND
MUNICIPAL OBLIGATIONS. The two principal types of Municipal Obligations, in
terms of the source of payment of debt service on the bonds, are general
obligation bonds and revenue securities, and a Fund may hold both in any
proportion. General obligation bonds are secured by the issuer's pledge of its
full faith, credit and taxing power for the payment of principal and interest.
Revenue securities are payable only from the revenues derived from a particular
facility or class of facilities or, in some cases, from the proceeds of a
special excise or other specific revenue source but not from the general taxing
power.
Although the Tax Free Fund may invest more than 25% of its net assets in (i)
Municipal Obligations whose issuers are in the same state, (ii) Municipal
Obligations the interest on which is paid solely from revenues of similar
projects and (iii) private activity bonds bearing Tax Exempt Interest (described
below), it does not currently intend to do so on a regular basis. To the extent
a Fund's assets are concentrated in Municipal Obligations that are payable from
the revenues of economically related projects or facilities or
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whose issuers are located in the same state, the Fund will be subject to the
peculiar risks presented by the laws and economic conditions relating to such
states or projects or facilities to a greater extent than it would be if its
assets were not so concentrated.
Private Activity Bonds; Alternative Minimum Tax Bonds. The Funds may invest
in 'Alternative Minimum Tax Bonds,' which are certain private activity bonds
issued after August 7, 1986 to finance certain non-governmental activities.
While the income from Alternative Minimum Tax Bonds is exempt from regular
federal income tax, it is a tax preference item for purposes of the federal
individual and corporate 'alternative minimum tax.' The alternative minimum tax
is a special tax that applies to a limited number of taxpayers who have certain
adjustments or tax preference items. Available returns on Alternative Minimum
Tax Bonds acquired by a Fund may be lower than those from other Municipal
Obligations acquired by a Fund due to the possibility of federal, state and
local alternative minimum or minimum income tax liability on Alternative Minimum
Tax Bonds. Depending on market conditions, the Tax Free Fund may invest up to
20% of its net assets in private activity bonds.
Variable Rate Notes. Municipal Obligations purchased by a Fund may include
variable rate demand notes issued by industrial development authorities and
other governmental entities. Variable rate demand notes are tax exempt Municipal
Obligations that provide for a periodic adjustment in the interest rate paid on
the notes. While there may be no active secondary market with respect to a
particular variable rate demand note purchased by a Fund, the Fund may, upon
notice as specified in the note, demand payment of the principal of and accrued
interest on the note at any time or during specified periods not exceeding one
year (depending on the instrument involved) and may resell the note at any time
to a third party. The absence of such an active secondary market, however, could
make it difficult for the Fund to dispose of the variable rate demand note
involved in the event the issuer of the note defaulted on its payment
obligations and during the periods that the Fund is not entitled to exercise its
demand rights, and a Fund could, for this or other reasons, suffer a loss to the
extent of the default plus any expenses involved in an attempt to recover the
investment.
Variable rate demand notes are frequently not rated by credit rating
agencies, but unrated notes purchased by the Fund will have been determined by
Warburg to be of comparable quality at the time of the purchase to rated
instruments purchasable by the Fund. Warburg monitors the continuing
creditworthiness of issuers of such notes to determine whether the Fund should
continue to hold such notes.
Ratings. The Funds may invest in Municipal Obligations which are determined
by Warburg to present minimal credit risks and which at the time of purchase are
considered to be 'high grade' -- e.g., rated 'A' or higher by S&P or Moody's in
the case of bonds; rated 'SP-1' by S&P or 'MIG-1' by
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Moody's ('MIG-2' in the case of the Balanced Fund) in the case of notes; rated
'VMIG-1' by Moody's in the case of variable rate demand notes ('VMIG-2' by
Moody's in the case of the Balanced Fund); or, in the case of the Tax Free Fund,
rated 'A-1' by S&P or 'Prime-1' by Moody's in the case of tax exempt commercial
paper. In addition, the Tax Free Fund may invest in 'high quality' notes and tax
exempt commercial paper rated 'MIG-2,' 'VMIG-2' or 'Prime-2' by Moody's or 'A-2'
by S&P if deemed advisable by Warburg. The Funds may also purchase securities
that are unrated at the time of purchase provided that the securities are
determined to be of comparable quality by Warburg. The applicable Municipal
Obligations ratings are described in the Appendix to each Fund's Statement of
Additional Information.
Stand-by Commitments. The Tax Free Fund may acquire stand-by commitments with
respect to Municipal Obligations held in its portfolio. Under a stand-by
commitment, which is commonly known as a 'put,' a dealer agrees to purchase, at
the Fund's option, specified Municipal Obligations at a specified price. The
Fund may pay for stand-by commitments either separately in cash or by paying a
higher price for the securities acquired with the commitment, thus increasing
the cost of the securities and reducing the yield otherwise available from them,
and will be valued at zero in determining the Fund's net asset value. The
principal risk of stand-by commitments is that the writer of a commitment may
default on its obligation to repurchase the securities acquired with it. The
Fund intends to enter into stand-by commitments only with brokers, dealers and
banks that, in the opinion of Warburg, present minimal credit risks. The total
amount paid for outstanding stand-by commitments will not exceed 1/2 of 1% of
the value of the Fund's total assets calculated immediately after the stand-by
commitment is acquired. The Fund will acquire stand-by commitments only in order
to facilitate portfolio liquidity and does not intend to exercise its rights
under stand-by commitments for trading purposes.
WHEN-ISSUED SECURITIES AND DELAYED-DELIVERY TRANSACTIONS. The Funds may each
purchase securities on a when-issued or delayed-delivery basis. In these
transactions, payment for and delivery of the securities occur beyond the
regular settlement dates, normally within 30-45 days after the transaction. The
payment obligation and the 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 on a
when-issued or delayed-delivery basis, the yields obtained on such securities
may be higher or lower than the yields available in the market on the dates when
the investments are actually delivered to the buyers. When-issued securities may
include securities purchased on a 'when, as and if issued' basis under which the
issuance of the security depends on the occurrence of a subsequent event, such
as approval of a merger, corporate reorganization or debt restructuring. Each
Fund is required to segregate assets
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equal to the amount of its when-issued and delayed-delivery purchase
commitments.
STRATEGY AVAILABLE TO THE TAX FREE FUND
TAX EXEMPT DERIVATIVE SECURITIES. The Tax Free Fund may invest in tax exempt
derivative securities such as tender option bonds, custodial receipts,
participations, beneficial interests in trusts and partnership interests. A
typical tax exempt derivative security involves the purchase of an interest in a
pool of Municipal Obligations which interest includes a tender option, demand or
other feature, allowing the Fund to tender the underlying Municipal Obligation
to a third party at periodic intervals and to receive the principal amount
thereof. In some cases, Municipal Obligations are represented by custodial
receipts evidencing rights to future principal or interest payments, or both, on
underlying Municipal Obligations held by a custodian and such receipts include
the option to tender the underlying securities to the sponsor (usually a bank,
broker-dealer or other financial institution). Although the Internal Revenue
Service has not ruled on whether the interest received on derivative securities
in the form of participation interests or custodial receipts is Tax Exempt
Interest, opinions relating to the validity of, and the tax exempt status of
payments received by, the Fund from such derivative securities are rendered by
counsel to the respective sponsors of such derivatives and relied upon by the
Fund in purchasing such securities. Neither the Fund nor Warburg will review the
proceedings relating to the creation of any tax exempt derivative securities or
the basis for such legal opinions.
INVESTMENT GUIDELINES
___________________________________________________________
Each Fund may invest up to 15% of its net assets 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) time deposits maturing in more than seven calendar days; (iii)
certain Rule 144A Securities and (iv) in the case of the Growth & Income and
Balanced Funds, repurchase agreements with maturities greater than seven days.
In addition, up to 5% of each Fund's total assets may be invested in the
securities of issuers which have been in continuous operation for less than
three years. 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 30% of
its total assets at the time of borrowing. Each Fund may also pledge its assets
in connection with borrowings up to 125% of the amount borrowed. Whenever
borrowings (including reverse repurchase agreements) exceed 5% of the value of
the Fund's total assets, the Fund will not purchase portfolio securities. Except
for the limitations on borrowing, the investment guidelines set forth in this
paragraph may be changed at any time without
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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 each Fund's Statement of Additional Information.
MANAGEMENT OF THE FUNDS
_________________________________________________________
INVESTMENT ADVISER. Each Fund employs Warburg as its 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 and places orders to purchase or sell
securities on behalf of each such Fund. 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.
For the services provided by Warburg, the Growth & Income Fund, the Balanced
Fund and the Tax Free Fund pay Warburg a fee calculated at an annual rate of
.75%, .90% and .50%, respectively, of the Fund's average daily net assets.
Although in the case of the Growth & Income Fund and the Balanced Fund this
advisory fee is higher than that paid by most other investment companies,
including money market and fixed income funds, Warburg believes that it is
comparable to fees charged by other mutual funds with similar policies and
strategies. The advisory agreement between each Fund and Warburg provides that
Warburg will reimburse the Fund to the extent certain expenses that are
described in the Statement of Additional Information exceed applicable state
expense limitations. 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 paid by the Fund.
Warburg is a professional investment counselling firm which provides
investment services to investment companies, employee benefit plans, endowment
funds, foundations and other institutions and individuals. As of February 29,
1996, Warburg managed approximately $14.0 billion of assets, including
approximately $7.7 billion of investment company assets. Incorporated in 1970,
Warburg is a wholly owned subsidiary of Warburg, Pincus Counsellors G.P.
('Warburg G.P.'), a New York general partnership. E.M. Warburg, Pincus & Co.,
Inc. ('EMW') controls Warburg through its ownership of a class of voting
preferred stock of Warburg. Warburg G.P. has no business other than being a
holding company of Warburg and its subsidiaries. Warburg's address is 466
Lexington Avenue, New York, New York 10017-3147.
PORTFOLIO MANAGERS. GROWTH & INCOME FUND. Anthony G. Orphanos, a managing
director of EMW, has been portfolio manager of the Fund since
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November 1991. Mr. Orphanos has been with Warburg since 1977. Linda Diaz,
assistant vice president of Warburg, is a research analyst and assistant
portfolio manager of the Fund. Ms. Diaz has been with Warburg since 1995, before
which time she was an assistant vice president and portfolio manager in the
asset management division for Kidder Peabody & Co.
BALANCED FUND. As described above, the Fund is managed using a multi-manager
approach where different managers are responsible for sectors of the Fund's
portfolio. Anthony G. Orphanos and Dale C. Christensen are the overall portfolio
strategists for the Fund and are responsible for determining the portion of the
Fund's portfolio to be allocated among sectors.
U.S. Value Sector. The U.S. Value Sector is managed by Anthony G. Orphanos,
portfolio manager of the Growth & Income Fund.
U.S. Small Company Sector. Elizabeth B. Dater and Stephen J. Lurito manage
the U.S. Small Company Sector. Ms. Dater, a senior managing director of EMW, has
been a portfolio manager of Warburg since 1978. Mr. Lurito, a managing director
of EMW, has been with Warburg since 1987, before which time he was a research
analyst at Sanford C. Bernstein & Company, Inc.
U.S. Mid-Cap Sector. George U. Wyper and Susan L. Black, senior managing
directors of Warburg, manage the U.S. Mid-Cap Sector. Mr. Wyper joined Warburg
in August 1994, before which time he was chief investment officer of White River
Corporation and president of Hanover Advisers, Inc. (1993-August 1994) and chief
investment officer of Fund American Enterprises, Inc. (1990-1993). Ms. Black has
been with Warburg since 1985.
International Equity Sector. Richard H. King and Nicholas Horsley manage the
International Equity Sector. Mr. King, a senior managing director of EMW, has
been with Warburg since 1988. Mr. Horsley is a senior vice president of Warburg
and has been with Warburg since 1993, before which time he was a director,
portfolio manager and analyst at Barclays deZoete Wedd in New York City.
Fixed Income Sector. Dale C. Christensen, a managing director of EMW, manages
the Fixed Income Sector and has been with Warburg since 1989.
TAX FREE FUND. Dale C. Christensen, portfolio manager of the Fixed Income
Sector of the Balanced Fund, and Sharon B. Parente are portfolio managers of the
Fund. Ms. Parente is a senior vice president of Warburg and has been with
Warburg since 1992, before which time she was a vice president at Citibank, N.A.
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
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and their various service providers, furnishing corporate secretarial services,
which include preparing materials for meetings of the Board, preparing proxy
statements and annual, semiannual and quarterly reports, assisting in other
regulatory filings as necessary and monitoring and developing compliance
procedures for the Funds. As compensation, the Growth & Income Fund pays
Counsellors Service a fee calculated at an annual rate of .05% of the Fund's
first $125 million of average daily net assets and .10% of average daily net
assets over $125 million; the Balanced and Tax Free Funds each pay 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, the Growth
& Income Fund pays PFPC a fee calculated at an annual rate of .20% of the Fund's
first $125 million of average daily net assets and .15% of average daily net
assets over $125 million; the Balanced and Tax Free Funds each pay PFPC a fee
calculated at a rate of .15% of its average daily net assets, subject to a
minimum annual fee. PFPC has its principal offices at 400 Bellevue Parkway,
Wilmington, Delaware 19809.
CUSTODIANS. PNC Bank, National Association ('PNC') serves as custodian of the
U.S. assets of the Funds and State Street Bank and Trust Company ('State
Street') serves as custodian of the Growth & Income and Balanced Funds' non-U.S.
assets. Like PFPC, PNC is a subsidiary of PNC Bank Corp. and its principal
business address is Broad and Chestnut Streets, Philadelphia, Pennsylvania
19101. State Street's principal business address is 225 Franklin Street, Boston,
Massachusetts 02110.
TRANSFER AGENT. State Street also serves as shareholder servicing agent,
transfer agent and dividend disbursing agent for the Funds. 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.
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 Growth & Income 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 Balanced and Tax
Free Fund's Common Shares for distribution services, pursuant to a shareholder
servicing and distribution plan (the '12b-1 Plan') adopted by each Fund pursuant
to Rule 12b-1 under the 1940 Act. Amounts paid to Counsellors Securities under a
12b-1 Plan may be used by Counsellors Securities to cover expenses that are
primarily intended to result
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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 the 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 Plans. Payments under the 12b-1 Plans are not tied
exclusively to the distribution expenses actually incurred by Counsellors
Securities and the payments may exceed distribution expenses actually incurred.
The Boards of the Balanced Fund and the Tax Free Fund evaluate the
appropriateness of the 12b-1 Plans on a continuing basis and in doing so
consider all relevant factors, including expenses paid by Counsellors Securities
and amounts received under the 12b-1 Plan.
Warburg or its affiliates may, at their own expense, provide promotional
incentives to parties who support the sale of shares of the Funds, consisting of
securities dealers who have sold Fund shares or others, including banks and
other financial institutions, under special arrangements. 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
significant amounts 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 of each Fund.
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
Completed and signed account applications should be mailed to Warburg Pincus
Funds at the above address.
RETIREMENT PLANS AND UGMA ACCOUNTS. For information (i) about investing in
the Funds through a tax-deferred retirement plan, such as an Individual
Retirement Account ('IRA') or a Simplified Employee Pension IRA ('SEP-IRA'), or
(ii) about opening a Uniform Gifts to Minors Act or Uniform Transfers to Minors
Act ('UGMA') account, an investor should telephone Warburg Pincus Funds at (800)
927-2874 or write to Warburg Pincus Funds at the address set forth above.
Investors should consult their own tax advisers about the establishment of
retirement plans and UGMA accounts.
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CHANGES TO ACCOUNT. For information on how to make changes to an account, an
investor should telephone Warburg Pincus Funds at (800) 927-2874.
HOW TO PURCHASE SHARES
__________________________________________________________
Common Shares of each Fund may be purchased either by mail or, with special
advance instructions, by wire.
BY MAIL. If the investor desires to purchase Common Shares by mail, a check
or money order made payable to the 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 Inc., at the
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 by the
close of regular trading on the New York Stock Exchange (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 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 after payment has been
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 a 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
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funds may be wired to Counsellors Securities Inc. using the following wire
address:
State Street Bank and Trust Co.
225 Franklin St.
Boston, MA 02101
ABA# 0110 000 28
Attn: Mutual Funds/Custody Dept.
[Insert Warburg Pincus Fund name(s) here]
DDA# 9904-649-2
[Shareowner name]
[Shareowner account number]
If a telephone order is received by 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. If payment by wire is received in proper
form by the close of the NYSE without a prior telephone order, the purchase will
be priced according to the net asset value of the Fund on that day and is
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 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.
The minimum initial investment in each Fund is $1,000 and the minimum
subsequent investment is $100. For retirement plans and UGMA accounts, the
minimum initial investment is $500. Subsequent minimum investments can be as low
as $50 under the Automatic Monthly Investment Plan described in the next
section. The Fund reserves the right to change the initial and subsequent
investment minimum requirements at any time. In addition, the Fund may, in its
sole discretion, waive the initial and subsequent investment minimum
requirements with respect to investors who are employees of EMW 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 above. Wire
payments for initial and subsequent investments should be preceded by an order
placed with the 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 the Funds
are not normally issued.
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PURCHASES THROUGH INTERMEDIARIES. The Funds understand that some
broker-dealers (other than Counsellors Securities), financial institutions,
securities dealers and other industry professionals, including certain of the
programs discussed below, may impose certain conditions on their clients or
customers that invest in the Funds, which are in addition to or different than
those described in this Prospectus, and may charge their clients or customers
direct fees. Certain features of the Funds, such as the initial and subsequent
investment minimums, redemption fees and certain trading restrictions, may be
modified or waived in these programs, and administrative charges may be imposed
for the services rendered. Therefore, a client or customer should contact the
organization acting on his behalf concerning the fees (if any) charged in
connection with a purchase or redemption of Fund shares and should read this
Prospectus in light of the terms governing his accounts with the organization.
These organizations will be responsible for promptly transmitting client or
customer purchase and redemption orders to the Funds in accordance with their
agreements with clients or customers.
Common Shares of each Fund are available through the Charles Schwab &
Company, Inc. Mutual Fund OneSourceTM Program; Fidelity Brokerage Services, Inc.
Funds-NetworkTM Program; Jack White & Company, Inc.; and Waterhouse Securities,
Inc. Generally, these programs do not require customers to pay a transaction fee
in connection with purchases. These and other organizations that have entered
into agreements with a Fund or its agent may enter confirmed purchase orders on
behalf of clients and customers, with payment to follow no later than the Funds'
pricing on the following business day. If payment is not received by such time,
the organization could be held liable for resulting fees or losses. For
distribution, administration and subaccounting services, Counsellors Securities
may pay certain financial institutions, broker-dealers and recordkeeping
organizations with whom it has entered into agreements up to .35% of the annual
average value of accounts maintained by such organizations with the Funds.
AUTOMATIC MONTHLY INVESTING. Automatic monthly investing allows shareholders
to authorize a Fund to debit their bank account monthly ($50 minimum) for the
purchase of Fund shares on or about either the tenth or twentieth calendar day
of each month. To establish the automatic monthly investing option, obtain a
separate application or complete the 'Automatic Investment Program' section of
the account applications and include a voided, unsigned check from the bank
account to be debited. Only an account maintained at a domestic financial
institution which is an automated clearing house member may be used.
Shareholders using this service must satisfy the initial investment minimum for
the Fund prior to or concurrent with the start of any Automatic Investment
Program. Please refer to an account application for further information, or
contact Warburg Pincus Funds at (800) 927-2874 for information or to modify or
terminate the program. Investors should allow a period of up to 30 days in order
to implement an automatic
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investment program. The failure to provide complete information could result in
further delays.
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.
Investors should realize that in using the telephone redemption and exchange
option, you may be giving up a measure of security that you may have if you were
to redeem or exchange your shares in writing. If an investor desires to redeem
his shares by mail, a written request for redemption should be sent to Warburg
Pincus Funds at the 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. In order to
change the bank account or address designated to receive the redemption
proceeds, the investor must send a written request (with signature guarantee of
all investors listed on the account when such a change is made in conjunction
with a redemption request) to Warburg Pincus Funds. 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 between 9:00 a.m. and
4:00 p.m. (Eastern time) on any business day. 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
the address shown above under 'How to Open an Account.' Although each Fund will
redeem shares purchased by check before the check clears, payments of the
redemption proceeds will be delayed until such check has cleared, which may take
up to 15 days from the purchase date. Investors should consider purchasing
shares using a certified or bank check or money order if they anticipate an
immediate need for redemption proceeds.
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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.
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.
If, due to redemptions, the value of an investor's account drops to less than
$500, 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.
TELEPHONE TRANSACTIONS. In order to request redemptions by telephone,
investors must have completed and returned to Warburg Pincus Funds an account
application containing a telephone election. Unless contrary instructions are
elected, an investor will be entitled to make exchanges by telephone. 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 to confirm 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.
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 $1,000 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.
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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 their agent prior to the
close of regular trading on the NYSE, the exchange will be made at each Fund's
net asset value determined at the end of that business day. Exchanges may be
effected without a sales charge but must satisfy the minimum dollar amount
necessary for new purchases. Due to the costs involved in effecting exchanges,
each Fund reserves the right to refuse to honor more than three exchange
requests by a shareholder in any 30-day period. The exchange privilege may be
modified or terminated at any time upon 60 days' notice to shareholders.
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;
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 CAPITAL APPRECIATION FUND -- an equity fund seeking long-term
capital appreciation by investing principally in equity securities of
medium-sized domestic companies;
WARBURG PINCUS SMALL COMPANY VALUE FUND -- an equity fund seeking long-term
capital appreciation by investing primarily in equity securities of small
companies;
WARBURG PINCUS EMERGING GROWTH FUND -- an equity fund seeking maximum capital
appreciation by investing in emerging growth companies;
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WARBURG PINCUS POST-VENTURE CAPITAL FUND -- an equity fund seeking long-term
growth of capital by investing principally in equity securities of issuers in
their post-venture capital stage of development.
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 obtain a current prospectus
for another Warburg Pincus Fund, an investor should contact Warburg Pincus Funds
at (800) 927-2874.
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 (which
includes amortization of market discounts) less amortization of market premiums
and applicable expenses. The Growth & Income Fund and the Balanced Fund each
declares and pays its dividends from its net investment income quarterly. The
Tax Free Fund declares dividends from its net investment income daily and pays
those dividends monthly. Each Fund declares distributions of its 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 the
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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 ('capital gain
dividends') are taxable to investors as long-term capital gains, in each case
regardless of how long the 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. In the
case of the Tax Free Fund, any loss realized by a shareholder on the sale or
redemption of a Fund share held by the shareholder for six months or less will
be disallowed to the extent of the amount of any exempt-interest dividend
received by the shareholder with respect to such share. The portion of such loss
not disallowed as described in the preceding sentence shall be treated for
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. An investor in the Tax Free Fund who
redeems his shares prior to the declaration of a dividend may lose tax exempt
status on accrued income attributable to tax exempt Municipal Obligations.
Investors may be proportionately liable for taxes on income and gains of the
Funds, but investors not subject to tax on their income will not be required to
pay tax on amounts distributed to them. The Funds' investment activities,
including short sales of securities, should not result in unrelated business
taxable income to a tax exempt investor.
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The Growth & Income and Balanced Funds anticipate that dividends paid by
these Funds will be eligible for the 70% dividends received deduction allowed to
certain corporations to the extent of the gross amount of qualified dividends
received by each Fund for the year. However, corporate shareholders will have to
take into account the entire amount of any dividend received in determining
their adjusted current earnings adjustment for alternative minimum tax purposes.
The dividends received deduction is not available for capital gain dividends.
Certain provisions of the Code may require that a gain recognized by a Fund
upon the closing of a short sale be treated as a short-term capital gain, and
that a loss recognized by the Fund upon the closing of a short sale be treated
as a long-term capital loss, regardless of the amount of time that the Fund held
the securities used to close the short sale. A Fund's use of short sales may
also affect the holding periods of certain securities held by the Fund if such
securities are 'substantially identical' to securities used by the Fund to close
the short sale.
Special Tax Matters Relating to the Tax Free Fund. As a regulated investment
company, the Tax Free Fund will designate and pay exempt-interest dividends
derived from interest earned on qualifying Municipal Obligations. Such
exempt-interest dividends may be excluded by investors of the Fund from their
gross income for federal income tax purposes although (i) all or a portion of
such exempt-interest dividends and tax exempt interest will be a specific
tax-preference item for purposes of the federal individual and corporate
alternative minimum taxes to the extent they are derived from certain types of
private activity bonds issued after August 7, 1986 and (ii) all exempt-interest
dividends will be a component of the 'current earnings' adjustment item for
purposes of the federal corporate alternative minimum tax. Furthermore,
exempt-interest dividends paid by the Fund will constitute a component of the
'current earnings' adjustment item for purposes of the .12% corporate
environmental tax. Moreover, dividends paid by the Fund will be subject to a
branch profits tax of up to 30% when received by certain foreign corporate
investors.
GENERAL. Statements as to the tax status of each investor's dividends and
distributions are mailed annually. In the case of the Tax Exempt Fund, these
statements set forth the dollar amount of income excluded or exempt from federal
income taxes and the dollar amount, if any, subject to taxation. These
statements also designate the amount of exempt-interest dividends that is a
specific preference item for purposes of the federal individual and corporate
alternative minimum taxes. 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 tax
advisers with specific reference to their own tax situations, including their
state and local tax liabilities.
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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, Washington's Birthday, Good
Friday, Memorial Day (observed), 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.
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 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 yield and average annual total return of its
Common Shares over various periods of time. The yield refers to net investment
income generated by the Common Shares over a specified thirty-day period, which
is then annualized. In addition, advertisements concerning the Tax Free Fund may
describe a tax equivalent yield. The tax equivalent yield demonstrates the yield
on a taxable investment necessary to produce an after-tax yield equal to the
Common Shares' tax-free yield. It is calculated by increasing the yield shown
for the Common Shares to the extent necessary to reflect the payment of
specified tax rates. Thus, the tax equivalent yield will always exceed a Fund's
Common Shares' yield. These total return figures show the average percentage
change in value of an investment in the Common Shares from the beginning of the
measuring
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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 the 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). Performance quotations of a Fund will include performance
of a predecessor fund.
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 yield, tax-equivalent yield and total return
figures are based on historical earnings and are not intended to indicate future
performance. Each Fund's Statement of Additional Information describes the
method used to determine the yield, tax-equivalent yield and total return.
Current performance figures may be obtained by calling Warburg Pincus Funds at
(800) 927-2874.
In reports or other communications to investors or in advertising material, a
Fund may describe general economic and market conditions affecting the Fund. 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) in the case of the Growth & Income Fund,
with the S&P 500 Index; in the case of the Balanced Fund, with the Lipper
Balanced Fund Index and the S&P 500 Index; and in the case of the Tax Free Fund,
with Lipper General Municipal Debt Funds Average; or (iii) other appropriate
indexes of investment securities or with data developed by Warburg derived from
such indexes. A Fund may include evaluations of the Fund published by nationally
recognized ranking services and by financial publications that are nationally
recognized, such as The Wall Street Journal, Investor's Daily, Money, Inc.,
Institutional Investor, Barron's, Fortune, Forbes, Business Week, Mutual Fund
Magazine, Morningstar, Inc. and Financial Times.
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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 and analysis of holdings by industry, country, credit quality
and other characteristics. Each Fund may also discuss measures of risk, the
continuum of risk and return relating to different investments and the potential
impact of foreign securities on a portfolio otherwise composed of domestic
securities. 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.
GENERAL INFORMATION
_____________________________________________________________
ORGANIZATION. The Funds were incorporated on January 29, 1996 under the laws
of the State of Maryland under the names 'Warburg, Pincus Growth & Income Fund,
Inc.,' 'Warburg, Pincus Balanced Fund, Inc.' and 'Warburg, Pincus Tax Free Fund,
Inc.' On May 3, 1996 each Fund acquired all of the assets and liabilities of the
investment portfolio of the RBB Fund with a similar name.
The charter of each Fund authorizes its Board to issue three billion full and
fractional shares of capital stock, $.001 par value per share, of which one
billion shares are designated Advisor Shares. Under each 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 Growth & Income and Balanced Funds each offer 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
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<PAGE>
Advisor Shares from their investment professional or by calling Counsellors
Securities at (800) 369-2728.
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 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.
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 Investment
Program). 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 may be obtained by
calling Warburg Pincus Funds at (800) 927-2874.
The 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.
SHAREHOLDER SERVICING
___________________________________________________________
Common Shares may be sold to or through institutions, including insurance
companies, financial institutions and broker-dealers, that will not be paid a
distribution fee by a Fund pursuant to Rule 12b-1 under the 1940 Act for
services to their clients or customers who may be deemed to be beneficial owners
of Common Shares. These institutions may be paid fees by a Fund, Warburg,
Counsellors Securities or any of their affiliates for transfer agency,
administrative, accounting, shareholder liaison and/or other services provided
to their clients or customers that invest in the Funds' Common Shares.
Organizations that provide recordkeeping or other services to certain employee
benefit plans and qualified and other retirement plans that include a Fund as an
investment alternative and registered representatives (including retirement plan
consultants) that facilitate the administration and servicing of shareholder
accounts may also be paid a fee. Fees paid vary depending on
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the arrangements and the amount of assets held by an institution's clients or
customers and/or the number of plan participants investing in a Fund. Warburg,
Counsellors Securities or any of their affiliates may, from time to time, at
their own expense, pay certain fund transfer agent fees and expenses related to
clients and customers of their institutions and organizations. In addition,
these institutions may use a portion of their compensation to compensate a
Fund's custodian or transfer agent for costs related to accounts of their
clients or customers.
------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, EACH FUNDS'
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
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TABLE OF CONTENTS
<TABLE>
<S> <C>
The Funds' Expenses..................................................... 2
Financial Highlights.................................................... 3
Investment Objectives and Policies...................................... 6
Portfolio Investments................................................... 8
Risk Factors and Special Considerations................................. 12
Portfolio Transactions and Turnover Rate................................ 13
Certain Investment Strategies........................................... 14
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...................................... 31
Net Asset Value......................................................... 34
Performance............................................................. 34
General Information..................................................... 36
Shareholder Servicing................................................... 37
</TABLE>
[Logo]
P.O. BOX 9030, BOSTON, MA 02205-9030
800-WARBURG (800-927-2874)
WPRBB-1-0596
<PAGE>
<PAGE>
[LOGO]
PROSPECTUS
MAY 6, 1996
[ ] WARBURG PINCUS GROWTH & INCOME FUND
<PAGE>
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
Subject to Completion, dated May 3, 1996
WARBURG PINCUS ADVISOR FUNDS
P.O. BOX 9030
BOSTON, MASSACHUSETTS 02205-9030
TELEPHONE NUMBER: (800) 369-2728
May 6, 1996
PROSPECTUS
Warburg Pincus Advisor Funds are 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 GROWTH & INCOME FUND seeks long-term growth of capital and income
and a reasonable current return by investing primarily in equity securities and
in various income producing securities including, but not limited to, dividend
paying equity securities, fixed income securities and money market instruments.
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 only 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 up to .75% 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 contained in a Statement of Additional Information, has been filed with the
Securities and Exchange Commission (the 'SEC') and is available to investors
without charge by calling Warburg Pincus Advisor Funds at (800) 369-2728.
Information regarding the status of shareholder accounts may also be obtained by
calling Warburg Pincus Advisor Funds at (800) 369-2728. 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 PRINCIPAL.
- --------------------------------------------------------------------------------
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>
<PAGE>
THE FUND'S EXPENSES
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 (after fee waivers).............................................................. .75%
12b-1 Fees*...................................................................................... .50
Other Expenses (after expense reimbursements).................................................... .39%
Total Fund Operating Expenses (after fee waivers and expense reimbursements)`D'.................. 1.64%
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.......................................................................................... $ 17
3 years......................................................................................... $ 52
5 years......................................................................................... $ 89
10 years......................................................................................... $ 194
</TABLE>
- ------------
* The Advisor Shares impose a 12b-1 fee of up to .75% per annum, which is the
economic equivalent of a sales charge.
`D' The Fund's investment adviser and co-administrator have undertaken to limit
Total Fund Operating Expenses through May 3, 1997 to the percentage shown
above. There is no obligation to continue these waivers after that time.
Other Expenses are based on annualized estimates of expenses for the fiscal
year ending August 31, 1996, net of expense reimbursements.
------------------------
The expense table shows the costs and expenses that an investor will bear
directly or indirectly as a Common Shareholder of the Fund. Certain
broker-dealers and financial institutions also may charge their clients fees in
connection with investments in the 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, 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 front-end sales charges permitted by the National
Association of Securities Dealers, Inc. (the 'NASD').
2
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FINANCIAL HIGHLIGHTS
WARBURG PINCUS GROWTH & INCOME FUND(C)
(for a share outstanding throughout each period)
The table below sets forth certain information concerning the investment
results of shares of the Warburg Pincus Growth & Income Fund investment
portfolio of The RBB Fund, Inc. (the 'RBB Fund') for the periods indicated. The
financial data included in this table for the period from May 15, 1995 to August
31, 1995 are part of the RBB Fund's financial statements, which have been
audited by Coopers & Lybrand L.L.P., the RBB Fund's independent accountants,
whose report thereon appears in the Statement of Additional Information along
with the financial statements. The financial data included in the table should
be read in conjunction with the financial statements and related notes included
in the Statement of Additional Information. Further information about the
performance of the Fund is contained in the semi-annual report, dated February
29, 1996, and the annual report, dated August 31, 1995, copies of which may be
obtained without charge by calling Warburg Pincus Funds at (800) 369-2728.
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE MAY 15, 1995
SIX MONTHS (COMMENCEMENT
ENDED OF OPERATIONS) TO
FEBRUARY 29, 1996 AUGUST 31, 1995
----------------- -----------------
(UNAUDITED) (AUDITED)
<S> <C> <C>
Net Asset Value, Beginning of Period............................ $ 16.38 $ 14.87
------------ ------------
Income From Investment Operations
Net Investment Income...................................... 0.0581 0.0236
Net Gains (Losses) on Securities (both realized and
unrealized).............................................. 0.6671 1.5323
------------ ------------
Total from Investment Operations...................... 0.7252 1.5559
------------ ------------
Less Distributions
Dividends (from net investment income)..................... (0.0619) (0.0459)
Distributions (from capital gains)......................... (0.8133) 0.0000
------------ ------------
Total Distributions................................... (0.8752) (0.0459)
------------ ------------
Net Asset Value, End of Period.................................. $ 16.23 $ 16.38
------------ ------------
------------ ------------
Total Returns................................................... 4.72%(b) 10.49%(b)
Ratios/Supplemental Data
Net Assets, End of Period (000)................................. $ 80,161 $56,902
Ratio of Expenses to Average Net Assets......................... 1.37%(a) 1.92%(a)
Ratio of Net Investment Income to Average Net Assets............ 0.50%(a) 0.43%(a)
Portfolio Turnover Rate......................................... 44%(b) 109%(b)
Average commission rate......................................... $ .06
</TABLE>
- ------------
(a) Annualized.
(b) Not Annualized.
(c) Financial Highlights relate solely to the Advisor Class of shares of the
Fund.
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INVESTMENT OBJECTIVES AND POLICIES
The Fund's investment objectives are to seek long-term growth of capital
and income and a reasonable current return. The Fund's objectives and policies
are non-fundamental policies and may be changed without first obtaining the
approval of a majority of the outstanding shares of that Fund. Any changes may
result in the Fund having investment objectives different from those an investor
may have considered at the time of investment. 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.
The Fund is a diversified management investment company that pursues its
objectives by investing primarily in equity securities. The policy of the Fund
is to invest substantially all of its assets in equity securities under normal
market conditions. Equity securities include common stocks, securities which are
convertible into common stocks and readily marketable securities, such as rights
and warrants, which derive their value from common stock. The Fund seeks to
achieve its income objective by investing in various income producing securities
including, but not limited to, dividend paying equity securities and fixed
income securities. The portion of the Fund invested from time to time in equity
securities, fixed income securities and money market securities will vary
depending on market conditions, and there may be extended periods when the Fund
is primarily invested in one of them. In addition, the amount of income
generated from the Fund will fluctuate depending on, among other things, the
composition of the Fund's holdings and the level of interest and dividend income
paid on those holdings. Investments in common stock in general are subject to
market risks that may cause their prices to fluctuate over time. Therefore, an
investment in the Fund may be more suitable for long-term investors who can bear
the risk of these fluctuations.
The Fund may invest up to 10% of its total assets in securities of foreign
issuers and may hold from time to time various foreign currencies pending
investment in foreign securities or conversion into U.S. dollars. The Fund may
also purchase without limitation dollar-denominated American Depository Receipts
('ADRs'). ADRs are issued by domestic banks and evidence ownership of underlying
foreign securities. The Fund may also invest up to 5% of its net assets in
mortgage-related and asset-backed securities.
PORTFOLIO INVESTMENTS
U.S. GOVERNMENT OBLIGATIONS. The obligations issued or guaranteed by the U.S.
government in which a Fund may invest include direct obligations of the U.S.
Treasury and obligations issued by U.S. government agencies and
instrumentalities. Included among direct obligations of the United States are
Treasury Bills, Treasury Notes and Treasury Bonds, which differ principally in
terms of their maturities. Treasury Bills have maturities of less than one year,
Treasury Notes have maturities of one to 10 years and Treasury Bonds generally
have maturities of greater than 10 years at the date of issuance. Included among
the obligations issued by agencies and instrumentalities of the United States
are: instruments that are supported by the full faith and credit of the United
States (such as certificates issued by the Government National Mortgage
Association); instruments that are supported by the right of the issuer to
borrow from the U.S. Treasury (such as securities of Federal Home Loan Banks);
and instruments that are supported by the credit of the instrumentality (such as
Federal National Mortgage Association and Federal Home Loan Mortgage Corporation
bonds).
TEMPORARY DEFENSIVE MEASURES. When Warburg, Pincus Counsellors, Inc., the Fund's
investment adviser ('Warburg'), believes that a defensive
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posture is warranted, the Fund may invest temporarily without limit in U.S.
dollar-denominated money market obligations, including repurchase agreements.
INVESTMENT GRADE DEBT. The Fund may invest in investment grade debt securities
and preferred stocks. Debt obligations of corporations in which the Fund may
invest include corporate bonds, debentures, debentures convertible into common
stocks and notes. The interest income to be derived may be considered as one
factor in selecting debt securities for investment by Warburg. The market value
of debt obligations may be expected to vary depending upon, among other factors,
interest rates, the ability of the issuer to repay principal and interest, any
change in investment rating and general economic conditions. A security will be
deemed to be investment grade if it is rated within the four highest grades by
Moody's Investors Service, Inc. ('Moody's') or Standard & Poor's Ratings Group
('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.
In selecting debt securities for the Fund, Warburg will review and monitor
the creditworthiness of each issuer and issue, in addition to relying on ratings
assigned by Moody's or S&P. Interest rate trends and specific developments which
may affect individual issuers will also be analyzed. 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 and downgraded securities may be retained
without limit as to quantity or quality, although Warburg will consider such
event in its determination of whether the Fund should continue to hold the
securities.
LOWER-RATED SECURITIES. Lower-rated and comparable unrated securities (commonly
referred to as 'junk bonds'), which the Fund may come to hold as a result of a
downgrade (i) will likely have some quality and protective characteristics that,
in the judgment of the rating organization, are outweighed by large
uncertainties or major risk exposures to adverse conditions and (ii) are
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligations. The market
values of certain of these securities also tend to be more sensitive to
individual corporate developments and changes in economic conditions than
higher-quality securities. In addition, medium- and lower-rated securities and
comparable unrated securities generally present a higher degree of credit risk.
The risk of loss due to default by such issuers is significantly greater because
medium- and lower-rated securities and unrated securities generally are
unsecured and frequently are subordinated to the prior payment of senior
indebtedness.
The market value of securities in lower-rated categories is more volatile
than that of higher quality securities. In addition, the Fund may have
difficulty disposing of certain of these securities because there may be a thin
trading market, which may also make it more difficult for the Fund to obtain
accurate market quotations for purposes of calculating the Fund's net asset
value.
REPURCHASE AGREEMENTS. The Fund 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, the 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
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time, thereby determining the yield during the Fund's
holding period. This arrangement results in a fixed rate of return that is not
subject to market fluctuations during the Fund's holding period. The value of
the underlying securities will at all times be at least equal to the total
amount of the purchase obligation, including interest. The Fund bears a risk of
loss in the event that the other party to a repurchase agreement defaults on its
obligations or becomes bankrupt and the Fund is delayed or prevented from
exercising its right to dispose of the collateral securities, including the risk
of a possible decline in the value of the underlying securities during the
period while the Fund seeks to assert this right. Warburg, acting under the
supervision of the Fund's 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').
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.
RISK FACTORS AND SPECIAL
CONSIDERATIONS
Investing in securities is subject to the inherent risk of fluctuations in
prices. For certain additional risks relating to the Fund's investments,
including with respect to high portfolio turnover, foreign securities and
lower-rated securities, see 'Portfolio Investments' beginning at page 4, and
'Certain Investment Strategies' beginning at page 7.
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 '1933 Act'), but that can be sold to 'qualified institutional buyers' in
accordance with Rule 144A under the 1933 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 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 monitoring 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,
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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.
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. It is not
possible to predict the Fund's portfolio turnover rates. However, it is
anticipated that the Fund's annual turnover rate should not exceed 150%. High
portfolio turnover rates (100% or more) may result in 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 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 Board.
CERTAIN INVESTMENT STRATEGIES
Although there is no current intention of doing so during the coming year,
the Fund is authorized to engage in the following investment strategies: (i)
lending portfolio securities and (ii) entering into reverse repurchase
agreements. Detailed information concerning the Fund's strategies and related
risks is contained below and in the Statement of Additional Information.
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,' will be entered into by the Fund for the purpose of receiving
a portion of the interest earned by the executing broker from the proceeds of
the sale. The proceeds of the sale will generally be held by the broker until
the settlement date when the Fund delivers securities to close out its short
position. Although prior to delivery the Fund will have to pay an amount equal
to any dividends paid on the securities sold short, the Fund will receive the
dividends from the securities sold short or the dividends from the preferred
stock or interest from the debt securities convertible or exchangeable into the
securities sold short, plus a portion of the interest earned from the proceeds
of the short sale. 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. The Fund will
endeavor to offset transaction costs associated with short sales against the box
with the income from the investment of the cash proceeds.
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The extent to which the Fund may make short sales may be limited by
requirements of the Internal Revenue Code of 1986, as amended (the 'Code'), for
qualification as a regulated investment company. See 'Dividends, Distributions
and Taxes' for other tax considerations applicable to short sales.
FOREIGN SECURITIES. The Fund may invest up to 10% 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 U.S. 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.
OPTIONS AND FUTURES TRANSACTIONS. At the discretion of Warburg, the Fund may,
but is not required to, engage in a number of strategies involving options and
futures 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. 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 the NASD
and by the Code.
Securities and Stock Index Options. The Fund may write covered call options
and put options and purchase put and call options on securities and stock
indexes and will realize fees (referred to as 'premiums') for granting the
rights evidenced by the options. Such options may be traded on an exchange or
may trade over-the-counter ('OTC'). 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 has the right to purchase the underlying
security from the writer. A stock index measures the movement of a certain
group of stocks by assigning relative valuesto the stocks included in the index.
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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 interest
rate and securities 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 an interest rate sensitive security or, in the case of index
futures contracts, are settled in cash with reference to a specified multiplier
times the change in the specified interest rate or index. An option on a futures
contract gives the purchaser the right, in return for the premium paid, to
assume a position in a futures contract.
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. However, the Fund may not write put options or purchase
or sell futures contracts or options on futures contracts to hedge more than its
total assets unless immediately after any such transaction the aggregate amount
of premiums paid on put options and the amount of margin deposits on its
existing futures positions do not exceed 5% of its total assets.
Hedging Considerations. 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 and
futures 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 correctly predict 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 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 an option or futures 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 and indexes and interest rate and
index futures contracts and options on these futures contracts. The use of
these strategies may require that the Fund maintain cash or certain liquid
high-grade debt obligations or other assets that are accept-
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able as collateral to the appropriate regulatory authority 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 or financial instrument
or by other portfolio positions or by other means consistent with applicable
regulatory policies. Segregated assets cannot be sold or transferred unless
equivalent assets are substituted in their place or it is no longer necessary to
segregate them. As a result, there is a possibility that segregation of a large
percentage of the Fund's assets could impede portfolio management or the Fund's
ability to meet redemption requests or other current obligations.
INVESTMENT GUIDELINES
The Fund may invest up to 15% of its net assets 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) time deposits maturing in more than seven calendar days; (iii)
certain Rule 144A Securities and (iv) repurchase agreements with maturities
greater than seven days. In addition, up to 5% of the Fund's total assets may be
invested in the securities of issuers which have been in continuous operation
for less than three years. The 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 30% of its total assets at the time of borrowing. The Fund may also
pledge its assets in connection with borrowings up to 125% of the amount
borrowed. Whenever borrowings (including reverse repurchase agreements) exceed
5% of the value of the Fund's total assets, the Fund will not purchase portfolio
securities. 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 of each Fund, 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 its investment adviser. Warburg,
subject to the control of the Fund's officers and the Board, manages the
investment and reinvestment of the assets of the Fund in accordance with the
Fund's investment objectives 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 .75% of the Fund's average daily net assets.
Although this advisory fee is higher than that paid by most other investment
companies, including money market and fixed income funds, Warburg believes that
it is comparable to fees charged by other mutual funds with similar policies and
strategies. The advisory agreement between the Fund and Warburg provides that
Warburg will reimburse the Fund to the extent certain expenses that are
described in the Statement of Additional Information exceed applicable state
expense limitations. 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 paid by the Fund.
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Warburg is a professional investment counselling firm which provides
investment services to investment companies, employee benefit plans, endowment
funds, foundations and other institutions and individuals. As of February 29,
1996, Warburg managed approximately $14.0 billion of assets, including
approximately $7.7 billion of investment company assets. Incorporated in 1970,
Warburg is a wholly owned subsidiary of Warburg, Pincus Counsellors G.P.
('Warburg G.P.'), a New York general partnership. E.M. Warburg, Pincus & Co.,
Inc. ('EMW') controls Warburg through its ownership of a class of voting
preferred stock of Warburg. Warburg G.P. has no business other than being a
holding company of Warburg and its subsidiaries. Warburg's address is 466
Lexington Avenue, New York, New York 10017-3147.
PORTFOLIO MANAGERS. Anthony G. Orphanos, a managing director of EMW, has been
portfolio manager of the Fund since November 1991. Mr. Orphanos has been with
Warburg since 1977. Linda Diaz, assistant vice president of Warburg, is a
research analyst and assistant portfolio manager of the Fund. Ms. Diaz has been
with Warburg since 1995, before which time she was an assistant vice president
and portfolio manager in the asset management division for Kidder Peabody & Co.
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
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, semiannual and quarterly reports, assisting in other regulatory filings
as necessary and monitoring and developing compliance procedures for the Funds.
As compensation, the Fund pays Counsellors Service a fee calculated at an annual
rate of .05% of the Fund's first $125 million of 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 PFPC a fee calculated at an annual rate of .20% of the Fund's first $125
million of average daily net assets and .15% of average daily net assets over
$125 million. PFPC has its principal offices at 400 Bellevue Parkway,
Wilmington, Delaware 19809.
CUSTODIANS. PNC Bank, National Association ('PNC') serves as custodian of the
U.S. assets of the Fund 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 Broad and
Chestnut Streets, Philadelphia, Pennsylvania 19101. State Street's principal
business address is 225 Franklin Street, Boston, Massachusetts 02110.
TRANSFER AGENT. State Street also serves as shareholder servicing agent,
transfer agent and dividend disbursing agent for 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.
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 Fund to Counsellors Securities for distribution
services.
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Warburg or its affiliates may, at their own expense, provide promotional
incentives to parties who support the sale of shares of the Funds, consisting of
securities dealers who have sold Fund shares or others, including banks and
other financial institutions, under special arrangements. 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
significant amounts 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 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. References in this Prospectus to
shareholders or investors also include Institutions which may act as record
holders of the Advisor Shares.
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.
Institutions may purchase Advisor Shares by telephoning the Fund and
sending payment by wire. After telephoning (800) 369-2728 for instructions, an
Institution should then wire federal funds to Counsellors Securities Inc. using
the following wire address:
State Street Bank and Trust Co.
225 Franklin St.
Boston, MA 02101
ABA# 0110 000 28
Attn: Mutual Funds/Custody Dept.
Warburg Pincus Advisor Growth & Income
Fund
DDA# 9904-649-2
[Shareowner name]
[Shareowner account number]
Orders by wire will not be accepted until a completed account application
has been received in proper form, and an account number has been established. If
a telephone order is received by the close of regular trading on the New York
Stock Exchange (the 'NYSE') (currently 4:00 p.m., Eastern time) 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. If payment by wire is received in proper form by the close of the
NYSE without a prior telephone order, the purchase will be priced according to
the net asset value of the Fund on that day and is 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 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 after prompt inquiry. Certain organizations or
Institutions that have entered into agreements with the Fund or its agent may
enter confirmed purchase orders on behalf of customers, with payment to follow
no later than three business days following the day the order is effected. If
payment is not
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received by such time, the organization could be held liable for
resulting fees or losses.
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 above. Wire
payments for initial and subsequent investments should be preceded by an order
placed with the Fund or its agent and should clearly indicate the investor's
account number. In the interest of economy and convenience, physical
certificates representing shares in the Fund are not normally issued.
The Fund understands that some broker-dealers (other than Counsellors
Securities), financial institutions, securities dealers and other industry
professionals 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 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 in these programs, and administrative charges may be imposed for the
services rendered. Therefore, a client or customer should contact the
organization acting on his behalf concerning the fees (if any) charged in
connection with a purchase or redemption of Fund shares and should read this
Prospectus in light of the terms governing his account with the organization.
HOW TO REDEEM AND EXCHANGE
SHARES
REDEMPTION OF SHARES. An investor 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 the
request to the Fund or its agent.
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 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 the redemption proceeds will be
wired to the investor's bank as indicated in the account application previously
filled out by the investor. The Fund does not currently impose a service charge
for effecting wire transfers but 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 Warburg Pincus Advisor Funds,
P.O. Box 9030, Boston, Massachusetts 02205-9030.
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 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 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)
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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 their agent prior to 4:00 p.m. (Eastern time), the
exchange will be made at each fund's net asset value determined at the end of
that business day. Exchanges may be effected without a sales charge. The
exchange privilege may be modified or terminated at any time upon 60 days'
notice to shareholders.
The exchange privilege is available to shareholders residing in any state
in which the 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 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 Warburg
Pincus Advisor Funds at (800) 369-2728.
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 (which
includes amortization of market discounts) less amortization of market premiums
and applicable expenses. The Fund declares and pays its dividends from its net
investment income quarterly. The Fund declares distributions of its 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 Common 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 Funds at the address
set forth under 'How to Open an Account' or by calling Warburg Pincus Funds 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 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
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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 ('capital gain
dividends') are taxable to investors as long-term capital gains, in each case
regardless of how long the 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. 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, should not result in unrelated business taxable income to a
tax exempt investor.
The Fund anticipates that dividends paid by the Fund will be eligible for
the 70% dividends received deduction allowed to certain corporations to the
extent of the gross amount of qualified dividends received by the Fund for the
year. However, corporate shareholders will have to take into account the entire
amount of any dividend received in determining their adjusted current earnings
adjustment for alternative minimum tax purposes. The dividends received
deduction is not available for capital gain dividends.
Certain provisions of the Code may require that a gain recognized by the
Fund upon the closing of a short sale be treated as a short-term capital gain,
and that a loss recognized by the Fund upon the closing of a short sale be
treated as a long-term capital loss, regardless of the amount of time that the
Fund held the securities used to close the short sale. The Fund's use of short
sales may also affect the holding periods of certain securities held by the Fund
if such securities are 'substantially identical' to securities used by the Fund
to close the short sale.
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 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.
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, Washington's Birthday, Good
Friday, Memorial Day (observed), 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.
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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 Common Shares is listed in The Wall Street
Journal each business day under the heading 'Warburg Pincus Funds.' From time to
time, the Fund may advertise yield and average annual total return of its
Advisor Shares over various periods of time. The yield refers to the net
investment income generated by the Advisor Shares over a specified thirty-day
period, which is then annualized. 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 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). Performance quotations
of the Fund will include performance of a predecessor fund.
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 Warburg Pincus Advisor
Funds at (800) 369-2728.
In reports or other communications to investors or in advertising material,
the Fund may describe general economic and market conditions affecting the Fund.
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) with the S&P 500 Index; or (iii) other
appropriate indexes of investment securities or with data developed by Warburg
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derived from such indexes. The Fund may include evaluations of the Fund
published by nationally recognized ranking services and by financial
publications that are nationally recognized, such as The Wall
Street Journal, Investor's Daily, Money, Inc., Institutional Investor, Barron's,
Fortune, Forbes, Business Week, Mutual Fund Magazine, Morningstar, Inc. and
Financial Times.
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
objectives. In addition, the Fund and its portfolio managers may render periodic
updates of Fund activity, which may include a discussion of significant
portfolio holdings and analysis of holdings by industry, country, credit quality
and other characteristics. The Fund may also discuss measures of risk, the
continuum of risk and return relating to different investments and the potential
impact of foreign securities on a portfolio otherwise composed of domestic
securities. 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.
GENERAL INFORMATION
ORGANIZATION. The Fund was incorporated on January 29, 1996 under the laws of
the State of Maryland under the name 'Warburg Pincus Growth & Income Fund, Inc.'
On May 3, 1996 the Fund acquired all of the assets and liabilities of the
corresponding investment portfolio of The RBB Fund, Inc. with a similar name.
The charter of the Fund 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 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
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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 Director of
the Fund 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 member at the written request of holders of 10% of the outstanding
shares of the Fund.
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 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 may be obtained
by calling Warburg Pincus Advisor Funds at (800) 369-2728. 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.'
The common share prospectuses of certain other Warburg Pincus Funds are
combined with the Fund's Common Share Prospectus. Each fund offers only its own
shares, yet it is possible that the Fund may become liable for a misstatement,
inaccuracy or omission in that prospectus with regard to another fund.
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 a .25% annual service fee and a .50% annual distribution fee)
of the value of the average daily net assets of its Customers invested in
Advisor Shares. The 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.
To offset start-up costs and expenses associated with certain qualified
retirement plans making Advisor Shares available to plan participants,
Counsellors Securities pays CIGNA Financial Advisors, Inc., a registered
broker-dealer which
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is the broker of record for Connecticut General Life Insurance
Company, a one-time fee of .25% of the average aggregate account
balances of plan participants during the first year of implementation.
Warburg, Counsellors Securities, 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 Fund 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.
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TABLE OF CONTENTS
THE FUND'S EXPENSES ........................................ 2
FINANCIAL HIGHLIGHTS ....................................... 3
INVESTMENT OBJECTIVES AND POLICIES ......................... 4
PORTFOLIO INVESTMENTS ...................................... 4
RISK FACTORS AND SPECIAL
CONSIDERATIONS .......................................... 6
PORTFOLIO TRANSACTIONS AND TURNOVER
RATE .................................................... 7
CERTAIN INVESTMENT STRATEGIES .............................. 7
INVESTMENT GUIDELINES ..................................... 10
MANAGEMENT OF THE FUND .................................... 10
HOW TO PURCHASE SHARES .................................... 12
HOW TO REDEEM AND EXCHANGE
SHARES ................................................. 13
DIVIDENDS, DISTRIBUTIONS AND TAXES ........................ 14
NET ASSET VALUE ........................................... 15
PERFORMANCE ............................................... 16
GENERAL INFORMATION ....................................... 17
SHAREHOLDER SERVICING ..................................... 18
[LOGO]
[ ] WARBURG PINCUS
GROWTH & INCOME FUND
PROSPECTUS
MAY 6, 1996
ADGAI-1-0596
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Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
Subject to Completion, dated May 3, 1996
STATEMENT OF ADDITIONAL INFORMATION
May 6, 1996
WARBURG PINCUS GROWTH & INCOME FUND
P.O. Box 9030, Boston, Massachusetts 02205-9030
For information, call (800) WARBURG
CONTENTS
<TABLE>
<CAPTION>
Page
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Investment Objective.........................................................................2
Investment Policies..........................................................................2
Management of the Fund......................................................................24
Additional Purchase and Redemption Information..............................................31
Exchange Privilege..........................................................................31
Additional Information Concerning Taxes.....................................................32
Determination of Performance................................................................35
Independent Accountants and Counsel.........................................................36
Miscellaneous...............................................................................37
Financial Statements........................................................................37
Appendix - Description of Ratings..........................................................A-1
</TABLE>
This Statement of Additional Information is meant to be read in
conjunction with the combined Prospectus for the Common Shares of Warburg Pincus
Growth & Income Fund (the "Fund"), Warburg Pincus Balanced Fund and Warburg
Pincus Tax Free Fund and with the Prospectus for the Advisor Shares of the Fund,
each dated May 6, 1996, 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 the Fund should be made solely upon the information contained herein.
Copies of the Fund's Prospectuses and information regarding the Fund's current
performance may be obtained by calling the Fund at (800) 927-2874. Information
regarding the status of shareholder accounts may be obtained by calling the Fund
at (800) 927-2874 or by writing to the Fund, P.O. Box 9030, Boston,
Massachusetts 02205-9030.
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INVESTMENT OBJECTIVE
The investment objective of the Fund is long-term growth of
capital and a reasonable current return.
INVESTMENT POLICIES
The following policies supplement the descriptions of the Fund's
investment objective and policies in the Prospectuses.
Options and Futures Transactions
Securities Options. The Fund may write covered call options and
put options on securities, and may purchase such options, that are traded on
exchanges, as well as over-the-counter ("OTC").
The 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, the 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 put or call writer retains the risk of a decline in the price of
the underlying security. The size of the premiums that the Fund may receive may
be adversely affected as new or existing institutions, including other
investment companies, engage in or increase their option-writing activities.
If security prices rise, a put writer would generally expect to
profit, although its gain would be limited to the amount of the premium it
received. If security prices remain the same over time, it is likely that the
writer will also profit, because it should be able to close out the option at a
lower price. If security prices fall, the put writer would expect to suffer a
loss. This loss should be less than the loss from purchasing the underlying
instrument directly, however, because the premium received for writing the
option should mitigate the effects of the decline.
In the case of options written by the Fund that are deemed
covered by virtue of the Fund's holding convertible or exchangeable preferred
stock or debt securities, the time
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required to convert or exchange and obtain physical delivery of the
underlying common stock with respect to which the Fund has written options may
exceed the time within which the Fund must make delivery in accordance with an
exercise notice. In these instances, the Fund may purchase or temporarily borrow
the underlying securities for purposes of physical delivery. By so doing, the
Fund will not bear any market risk, since the Fund will have the absolute right
to receive from the issuer of the underlying security an equal number of shares
to replace the borrowed securities, but the Fund may incur additional
transaction costs or interest expenses in connection with any such purchase or
borrowing.
Additional risks exist with respect to certain of the securities
for which the 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 the Fund will normally have expiration dates
between one and nine months from the date written. The exercise price of the
options may be below, equal to or above the market values of the underlying
securities at the times the options are written. In the case of call options,
these exercise prices are referred to as "in-the-money," "at-the-money" and
"out-of-the-money," respectively. The Fund may write (i) in-the-money call
options when Warburg, Pincus Counsellors, Inc., the 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. Out-of-the-money, at-the-money and in-the-money put options
(the reverse of call options as to the relation of exercise price to market
price) may be used in the same market environments that such call options are
used in equivalent transactions. To secure its obligation to deliver the
underlying security when it writes a call option, the Fund will be required to
deposit in escrow the underlying security or other assets in accordance with the
rules of the Options Clearing Corporation (the "Clearing Corporation") and of
the securities exchange on which the option is written.
Prior to their expirations, put and call options may be sold in
closing sale or purchase transactions (sales or purchases by the 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 the Fund has purchased an
option and engages in a closing sale transaction, whether the Fund realizes a
profit or loss will depend upon whether
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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 the Fund has written an option,
it will realize a profit if the cost of the closing purchase transaction is
less than the premium received upon writing the original option and will incur
a loss if the cost of the closing purchase transaction exceeds the premium
received upon writing the original option. The Fund may engage in a closing
purchase transaction to realize a profit, to prevent an underlying security
with respect to which it has written an option from being called or put or, in
the case of a call option, to unfreeze an underlying security (thereby
permitting its sale or the writing of a new option on the security prior to
the outstanding option's expiration). The obligation of the 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 the Fund as the writer of
an option continues, the Fund may be assigned an exercise notice by the
broker-dealer through which the option was sold, requiring the Fund to deliver
the underlying security against payment of the exercise price. This obligation
terminates when the option expires or the Fund effects a closing purchase
transaction. The Fund 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, the 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. The 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
Fund and other clients of Warburg and certain of its affiliates may be
considered to be
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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 the Fund will
be able to purchase on a particular security.
Stock Index Options. The Fund may purchase and write
exchange-listed and OTC put and call options on stock indexes. A stock index
measures the movement of a certain group of stocks by assigning relative values
to the stocks included in the index, fluctuating with changes in the market
values of the stocks included in the index. Some index options are based on a
broad market index such as the NYSE Composite Index, or a narrower market index
such as the Standard & Poor's 100. Indexes may also be based on a particular
industry or market segment.
Options on stock indexes are similar to options on securities
except that (i) the expiration cycles of stock index options are monthly, while
those of stock 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 stock 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 stock
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. Stock index options may be offset by entering into closing
transactions as described above for securities options.
OTC Options. The 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 stock to the clearing
organization if the option is exercised, and the clearing organization is then
obligated to pay the writer the exercise price of the option. If the Fund were
to purchase a dealer option, however, it would rely on the dealer from whom it
purchased the option to perform if the option were exercised. If the dealer
fails to honor the exercise of the option by 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, the Fund will generally be able to
realize the value of a dealer option it has purchased only by exercising it or
reselling it to the dealer who issued it. Similarly, when the Fund writes a
dealer option, it generally will be able to close out the option prior to its
expiration only by entering into a closing purchase transaction with the dealer
to which the Fund originally wrote the option. Although the Fund will seek to
enter into dealer options only with dealers who will agree to and that are
expected to be capable of
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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 the Fund. Until the Fund, as a
covered OTC call option writer, is able to effect a closing purchase
transaction, it will not be able to liquidate securities (or other
assets) used to cover the written option until the option expires or is
exercised. This requirement may impair the Fund's ability to sell portfolio
securities 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.
Futures Activities. The Fund may enter into interest rate and
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 interest rates and/or market
conditions and increasing return.
The Fund will not 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. The 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. The ability of the Fund to trade in
futures contracts and options on futures contracts may be limited by the
requirements of the Internal Revenue Code of 1986, as amended (the "Code"),
applicable to a regulated investment company.
Futures Contracts. 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. An 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 the 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 cash equivalents,
such as U.S. government securities or other liquid high-grade debt obligations,
equal to approximately 1% to 10% of the contract amount (this amount is subject
to change by the exchange on which the contract is traded, and brokers may
charge a higher amount). This amount is known as "initial margin" and is in the
nature of a performance bond or good faith deposit on the contract which is
returned to the Fund upon
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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 financial instrument or index underlying the futures
contract fluctuates, making the long and short positions in the futures
contract more or less valuable, a process known as "marking-to-market." The Fund
will also incur brokerage costs in connection with entering into futures
transactions.
At any time prior to the expiration of a futures contract, the
Fund may elect to close the position by taking an opposite position, which will
operate to terminate the Fund's existing position in the contract. Positions in
futures contracts and options on futures contracts (described below) may be
closed out only on the exchange on which they were entered into (or through a
linked exchange). No secondary market for such contracts exists. Although the
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 the fund had insufficient
cash, it might have to sell securities to meet daily variation margin
requirements at a time when it would be disadvantageous to do so. In addition,
if the transaction is entered into for hedging purposes, in such circumstances
the Fund may realize a loss on a futures contract or option that is not offset
by an increase in the value of the hedged position. Losses incurred in futures
transactions and the costs of these transactions will affect the Fund's
performance.
Options on Futures Contracts. The Fund may purchase and write put
and call options on interest rate and 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 an interest rate or 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
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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 the Fund.
Hedging. In addition to entering into options and futures
transactions for other purposes, including generating current income to offset
expenses or increase return, the 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 and futures transactions for hedging purposes could limit any
potential gain from an increase in the value of the position hedged. In
addition, the movement in the portfolio position hedged may not be of the same
magnitude as movement in the hedge. With respect to futures contracts, since the
value of portfolio securities will far exceed the value of the futures contracts
sold by the 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 the Fund will
realize a gain or loss from the purchase or writing of options on an index
depends upon movements in the level of stock 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 stock. The risk of imperfect
correlation increases as the composition of the Fund's portfolio varies from the
composition of the index. In an effort to compensate for imperfect correlation
of relative movements in the hedged position and the hedge, the Fund's hedge
positions may be in a greater or lesser dollar amount than the dollar amount of
the hedged position. Such "over hedging" or "under hedging" may adversely affect
the Fund's net investment results if market movements are not as anticipated
when the hedge is established. Stock 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 stock 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 a securities
index and movements in the price of index futures, a correct forecast of general
market trends by Warburg still may not result in a successful hedging
transaction.
The 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
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ability to predict trends in interest rates or securities markets, as the case
may be, and to correctly predict movements in the directions of the hedge and
the hedged position and the correlation between them, which predictions could
prove to be inaccurate. This requires different skills and techniques than
predicting changes in the price of individual securities, and there can be no
assurance that the use of these strategies will be successful. Even a
well-conceived hedge may be unsuccessful to some degree because of unexpected
market behavior or trends. Losses incurred in hedging transactions and the
costs of these transactions will affect the Fund's performance.
Asset Coverage for Forward Contracts, Options, Futures and
Options on Futures. As described in the Prospectuses, the Fund will comply with
guidelines established by the Securities and Exchange Commission (the "SEC")
with respect to coverage of options written by the Fund on securities and
indexes and interest rate and index futures contracts and options on these
futures contracts. These guidelines may, in certain instances, require
segregation by the Fund of cash or liquid high-grade debt securities or other
securities that are acceptable as collateral to the appropriate regulatory
authority.
For example, a call option written by the Fund on securities may
require the Fund to hold the securities subject to the call (or securities
convertible into the securities without additional consideration) or to
segregate assets (as described above) sufficient to purchase and deliver the
securities if the call is exercised. A call option written by the Fund on an
index may require the Fund to own portfolio securities that correlate with the
index or to segregate assets (as described above) equal to the excess of the
index value over the exercise price on a current basis. A put option written by
the Fund may require the Fund to segregate assets (as described above) equal to
the exercise price. The Fund could purchase a put option if the strike price of
that option is the same or higher than the strike price of a put option sold by
the Fund. If the Fund holds a futures or forward contract, the Fund could
purchase a put option on the same futures or forward contract with a strike
price as high or higher than the price of the contract held. The Fund may enter
into fully or partially offsetting transactions so that its net position,
coupled with any segregated assets (equal to any remaining obligation), equals
its net obligation. Asset coverage may be achieved by other means when
consistent with applicable regulatory policies.
Additional Information on Other Investment Practices
U.S. Government Securities. The 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
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Mortgage Association ("FNMA"), Maritime Administration, Tennessee Valley
Authority, District of Columbia Armory Board and Student Loan Marketing
Association. The Fund may also invest in instruments that are supported by the
right of the issuer to borrow from the U.S. Treasury and instruments that are
supported by the credit of the instrumentality. Because the U.S. government is
not obligated by law to provide support to an instrumentality it sponsors, the
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.
Mortgage-Backed Securities. The Fund may invest in
mortgage-backed securities, such as those issued by GNMA, FNMA, FHLMC or private
organizations. Mortgage-backed securities represent direct or indirect
participations in, or are secured by and payable from, mortgage loans secured by
real property. The mortgages backing these securities include, among other
mortgage instruments, conventional 30-year fixed-rate mortgages, 15-year
fixed-rate mortgages, graduated payment mortgages and adjustable rate mortgages.
Although there may be government or private guarantees on the payment of
interest and principal of these securities. However, the guarantees do not
extend to the securities' yield or value, which are likely to vary inversely
with fluctuations in interest rates, nor do the guarantees extend to the yield
or value of the Fund's shares. These securities generally are "pass-through"
instruments, through which the holders receive a share of all interest and
principal payments from the mortgages underlying the securities, net of certain
fees.
Yields on pass-through securities are typically quoted by
investment dealers and vendors based on the maturity of the underlying
instruments and the associated average life assumption. The average life of
pass-through pools varies with the maturities of the underlying mortgage loans.
A pool's term may be shortened by unscheduled or early payments of principal on
the underlying mortgages. The occurrence of mortgage prepayments is affected by
various factors, including the level of interest rates, general economic
conditions, the location, scheduled maturity and age of the mortgage and other
social and demographic conditions. Because prepayment rates of individual pools
vary widely, it is not possible to predict accurately the average life of a
particular pool. For pools of fixed-rate 30-year mortgages, a common industry
practice in the U.S. has been to assume that prepayments will result in a
12-year average life. At present, pools, particularly those with loans with
other maturities or different characteristics, are priced on an assumption of
average life determined for each pool. In periods of falling interest rates, the
rate of prepayment tends to increase, thereby shortening the actual average life
of a pool of mortgage-related securities. Conversely, in periods of rising rates
the rate of prepayment tends to decrease, thereby lengthening the actual average
life of the pool. However, these effects may not be present, or may differ in
degree, if the mortgage loans in the pools have adjustable interest rates or
other special payment terms, such as a prepayment charge. Actual prepayment
experience may cause the yield of mortgage-backed securities to differ from the
assumed average life yield. Reinvestment of prepayments may occur at higher or
lower interest rates than the original investment, thus affecting the Fund's
yield.
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The rate of interest on mortgage-backed securities is lower than
the interest rates paid on the mortgages included in the underlying pool due to
the annual fees paid to the servicer of the mortgage pool for passing through
monthly payments to certificate holders and to any guarantor, such as GNMA, and
due to any yield retained by the issuer. Actual yield to the holder may vary
from the coupon rate, even if adjustable, if the mortgage-backed securities are
purchased or traded in the secondary market at a premium or discount. In
addition, there is normally some delay between the time the issuer receives
mortgage payments from the servicer and the time the issuer makes the payments
on the mortgage-backed securities, and this delay reduces the effective yield to
the holder of such securities.
Asset-Backed Securities. The Fund may also invest in asset-backed
securities, which represent participations in, or are secured by and payable
from, assets such as motor vehicle installment sales, installment loan
contracts, leases of various types of real and personal property and receivables
from revolving credit (credit card) agreements. Such assets are securitized
through the use of trusts and special purpose corporations. Payments or
distributions of principal and interest may be guaranteed up to certain amounts
and for a certain time period by a letter of credit or a pool insurance policy
issued by a financial institution unaffiliated with the trust or corporation.
Asset-backed securities present certain risks that are not
presented by other securities in which the Fund may invest. Automobile
receivables generally are secured by automobiles. Most issuers of automobile
receivables permit the loan servicers to retain possession of the underlying
obligations. If the servicer were to sell these obligations to another party,
there is a risk that the purchaser would acquire an interest superior to that of
the holders of the asset-backed securities. In addition, because of the large
number of vehicles involved in a typical issuance and technical requirements
under state laws, the trustee for the holders of the automobile receivables may
not have a proper security interest in the underlying automobiles. Therefore,
there is the possibility that recoveries on repossessed collateral may not, in
some cases, be available to support payments on these securities. Credit card
receivables are generally unsecured, and the debtors are entitled to the
protection of a number of state and federal consumer credit laws, many of which
give such debtors the right to set off certain amounts owed on the credit cards,
thereby reducing the balance due. Because asset-backed securities are relatively
new, the market experience in these securities is limited, and the market's
ability to sustain liquidity through all phases of the market cycle has not been
tested.
Downgraded Debt and Convertible Securities. Although the Fund may
invest only in investment grade securities (as described in the Prospectuses),
it is not required to dispose of securities downgraded below investment grade
subsequent to acquisition by the Fund. While the market values of medium- and
lower-rated securities and unrated securities of comparable quality tend to
react less to fluctuations in interest rate levels than do those of higher-rated
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 higher-quality securities. In addition, medium- and lower-rated
securities and comparable unrated securities generally present a higher degree
of credit risk. Issuers of medium- and
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lower-rated securities and unrated securities are often highly
leveraged and may not have more traditional methods of financing available to
them so that their ability to service their obligations during an economic
downturn or during sustained periods of rising interest rates may be impaired.
The risk of loss due to default by such issuers is significantly greater
because medium- and lower-rated securities and unrated securities generally
are unsecured and frequently are subordinated to the prior payment of senior
indebtedness.
The market for medium- and lower-rated and unrated 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 securities in medium- and lower-rated
categories is more volatile than that of higher quality 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, medium- and lower-rated and comparable unrated 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. Recent
adverse publicity regarding lower-rated securities may have depressed the prices
for such securities to some extent. Whether investor perceptions will continue
to have a negative effect on the price of such securities is uncertain.
Lending of Portfolio Securities. The 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"). The Fund will not lend portfolio
securities to E.M. Warburg, Pincus & Co., Inc. ("EMW") or its affiliates 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.
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government securities, which are maintained at all times in an amount equal
to at least 100% of the current market value of the loaned securities. Any gain
or loss in the market price of the securities loaned that might occur during the
term of the loan would be for the account of the Fund. From time to time, the
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, the Fund can increase its income by
continuing to receive interest and any dividends on the loaned securities as
well as by either investing the collateral received for securities loaned in
short-term instruments or obtaining yield in the form of interest paid by the
borrower when U.S. government securities are used as collateral. Although the
generation of income is not an investment objective of the Fund, income received
could be used to pay the Fund's expenses and would increase an investor's total
return. The Fund will adhere to the following conditions whenever its portfolio
securities are loaned: (i) the Fund must receive at least 100% cash collateral
or equivalent securities of the type discussed in the preceding paragraph from
the borrower; (ii) the borrower must increase such collateral whenever 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 the
Fund's ability to recover the loaned securities or dispose of the collateral for
the loan.
Foreign Investments. The Fund may invest up to 10% 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. 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's assets
denominated in that foreign currency. Changes in foreign currency exchange rates
may also affect the value of dividends and interest earned, gains and losses
realized on the sale of securities and net investment income and gains, if any,
to be distributed to shareholders by the Fund. The rate of exchange between the
U.S. dollar and other currencies is determined by the forces of supply and
demand in the foreign exchange markets. Changes in the exchange rate may result
over time from the interaction of many factors directly or indirectly affecting
economic and political conditions in the United States and a particular foreign
country, including economic and political developments in other countries. 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
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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.
Many of the foreign securities held by the 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. In addition, with
respect to some foreign countries, there is the possibility of expropriation or
confiscatory taxation, limitations on the removal of funds or other assets of
the Fund, political or social instability, or domestic developments which could
affect U.S. investments in those countries. 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. The
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.
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 the Fund to market and foreign exchange fluctuations brought about by such
delays, and due to the corresponding negative impact on Fund liquidity, the Fund
will avoid investing in countries which are known to experience settlement
delays which may expose the Fund to unreasonable risk of loss.
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.
Short Sales "Against the Box". In a short sale, the Fund sells a
borrowed security and has a corresponding obligation to the lender to return the
identical security. The seller does not immediately deliver the securities sold
and is said to have a short position in those securities until delivery occurs.
If the Fund engages in a short sale, the collateral for the short position will
be maintained by the Fund's custodian or qualified sub-custodian. While the
short sale is open, the Fund will maintain in a segregated account an amount of
securities equal in kind and amount to the securities sold short or securities
convertible into or exchangeable for such equivalent securities. These
securities constitute the Fund's long position.
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While a short sale is made by selling a security the Fund does
not own, a short sale is "against the box" to the extent that the Fund
contemporaneously owns or has the right to obtain, at no added cost, securities
identical to those sold short. The Fund does not intend to engage in short sales
against the box for investment purposes. The 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), or when the Fund wants to sell
the security at an attractive current price, but also wishes to defer
recognition of gain or loss for U.S. federal income tax purposes and for
purposes of satisfying certain tests applicable to regulated investment
companies under the Code. 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.
American Depositary Receipts. The assets of the Fund may be
invested in the securities of foreign issuers in the form of American Depositary
Receipts ("ADRs"). These securities may not necessarily be denominated in the
same currency as the securities into which they may be converted. ADRs are
receipts typically issued by a U.S. bank or trust company which evidence
ownership of underlying securities issued by a foreign corporation. Generally,
ADRs are in registered form and are designed for use in U.S. securities markets.
Warrants. The Fund may invest up to 5% of net assets in warrants
(valued at the lower of cost or market) (other than warrants acquired by the
Fund as part of a unit or attached to securities at the time of purchase).
Because a warrant does not carry with it the right to dividends or voting rights
with respect to the securities which it entitles a holder to purchase, and
because it does not represent any rights in the assets of the issuer, warrants
may be considered more speculative than certain other types of investments.
Also, the value of a warrant does not necessarily change with the value of the
underlying securities and a warrant ceases to have value if it is not exercised
prior to its expiration date.
Non-Publicly Traded and Illiquid Securities. The Fund may not
invest more than 15% of its net assets in non-publicly traded and illiquid
securities, including securities that are illiquid by virtue of the absence of a
readily available market, time deposits maturing in more than seven days,
certain Rule 144A Securities (as defined below) and repurchase agreements which
have a maturity of longer than seven days. Securities that have legal or
contractual restrictions on resale but have a readily available market are not
considered illiquid for purposes of this limitation. Repurchase agreements
subject to demand are deemed to have a maturity equal to the notice period.
Historically, illiquid securities have included securities
subject to contractual or legal restrictions on resale because they have not
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), securities which are otherwise not readily marketable
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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. Mutual funds do not typically hold a
significant amount of these restricted or other illiquid securities because of
the potential for delays on resale and uncertainty in valuation. Limitations on
resale may have an adverse effect on the marketability of portfolio securities
and a mutual fund might be unable to dispose of restricted or other illiquid
securities promptly or at reasonable prices and might thereby experience
difficulty satisfying redemptions within seven days. A mutual fund might also
have to register such restricted securities in order to dispose of them
resulting in additional expense and delay. Adverse market conditions could
impede such a public offering of securities.
In recent years, however, a large institutional market has
developed for certain securities that are not registered under the Securities
Act including repurchase agreements, commercial paper, foreign securities,
municipal securities and corporate bonds and notes. Institutional investors
depend on an efficient institutional market in which the unregistered security
can be readily resold or on an issuer's ability to honor a demand for repayment.
The fact that there are contractual or legal restrictions on resale to the
general public or to certain institutions may not be indicative of the liquidity
of such investments.
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 the 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).
Borrowing. The Fund may borrow up to 30% of its total assets for
temporary or emergency purposes, including to meet portfolio redemption requests
so as to permit the orderly disposition of portfolio securities or to facilitate
settlement transactions on portfolio securities, so long as there is asset
coverage of at least 300% for all borrowings of the Fund. The Fund will not
purchase portfolio securities whenever borrowings (including reverse
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repurchase agreements) exceed 5% of the Fund's net assets. Although the
principal of such borrowings will be fixed, the Fund's assets may change in
value during the time the borrowing is outstanding. The Fund expects that some
of its borrowings may be made on a secured basis. In such situations, either the
custodian will segregate the pledged assets for the benefit of the lender or
arrangements will be made with a suitable subcustodian, which may include the
lender.
Reverse Repurchase Agreements. The Fund 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
high-grade debt 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 a Fund's obligation
to repurchase the securities, and the Fund's use of the proceeds of the reverse
repurchase agreement may effectively be restricted pending such decision.
Other Investment Limitations
The investment limitations numbered 1 through 11 may not be
changed without the affirmative vote of the holders of a majority of the Fund's
outstanding shares. Such majority is defined as the lesser of (i) 67% or more of
the shares present at the meeting, if the holders of more than 50% of the
outstanding shares of the Fund are present or represented by proxy, or (ii) more
than 50% of the outstanding shares. Investment limitations 12 through 18 may be
changed by a vote of the Board at any time.
The Fund may not:
1. Borrow money except that the Fund may (a) borrow from banks
for temporary or emergency purposes and (b) enter into reverse repurchase
agreements; provided that reverse repurchase agreements and any other
transactions constituting borrowing by the Fund may not exceed 30% of the value
of the Fund's total assets at the time of such borrowing and only if after such
borrowing there is assets coverage of at least 300% for all borrowings of the
Fund. For purposes of this restriction, the entry into options, futures
contracts and options on futures contracts shall not constitute borrowing.
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2. Purchase the securities of any issuer if as a result more than 5% of the
value of the Fund's total assets would be invested in the securities of such
issuer or more than 10% of the outstanding voting securities of such issuer
would be owned by the Fund, except that this 5% limitation does not apply to
U.S. government securities and except that up to 25% of the value of the Fund's
total assets may be invested without regard to this 5% limitation.
3. Make loans, except that the Fund may purchase or hold fixed-income
securities, lend portfolio securities and enter into repurchase agreements in
accordance with its investment objectives, policies and limitations.
4. Underwrite any securities issued by others except to the extent that the
investment in restricted securities and the sale of securities or the purchase
of securities directly from the issuer in accordance with the Fund's investment
objectives, policies and limitations may be deemed to be underwriting.
5. Purchase or sell real estate, except that the Fund may invest in (a)
securities secured by real estate, mortgages or interests therein or (b) issued
by companies which invest in real estate or interests therein.
6. Make short sales of securities or maintain a short position, except that
the Fund may maintain short positions in options on currencies, securities and
stock indexes, futures contracts and options on futures contracts and enter into
short sales "against the box."
7. Purchase securities on margin, except that the Fund may obtain any
short-term credits necessary for the clearance of purchases and sales of
securities. For purposes of this restriction, the deposit or payment of initial
or variation margin in connection with transactions in options, futures
contracts and options on futures contracts will not be deemed to be a purchase
of securities on margin.
8. Invest in commodities, except that the Fund may purchase and sell
futures contracts and options on futures contracts, currencies, securities or
indexes.
9. Pledge, mortgage or hypothecate its assets, except (a) to the extent
necessary to secure permitted borrowings and (b) to the extent related to the
deposit of assets in escrow in connection with collateral and initial or
variation margin arrangements with respect to options, futures contracts, and
options on futures contracts and in amounts not in excess of 125% of the dollar
amount borrowed.
10. Invest more than 15% of the Fund's net assets in securities which may
be illiquid because of legal or contractual restrictions on resale or securities
for which there are no readily available market quotations. For purposes of this
limitation, repurchase agreements with maturities greater than seven days shall
be considered illiquid securities.
11. Make additional investments (including roll-overs) if the Fund's
borrowings exceed 5% of its net assets.
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12. Make investments for the purpose of exercising control or management.
13. 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.
14. Purchase securities of other investment companies except in connection
with a merger, consolidation, acquisition, reorganization or offer of exchange.
15. Purchase any security if as a result the Fund would then have more than
5% of its total assets invested in securities of companies (including
predecessors) that have been in continuous operation for fewer than three years.
16. Invest in oil, gas or mineral exploration or development programs,
except that the Fund may invest in securities of companies that invest in or
sponsor oil, gas or mineral exploration or development programs.
17. Purchase or retain securities of any company if any of the Fund's
officers or Directors or any officer or director of Warburg individually owns
more than 1/2 of 1% of the outstanding securities of such company and together
they own beneficially more than 5% of the securities.
18. 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 5% of the value
of the Fund's net assets.
The aggregate of all Rule 144A Securities, non-publicly traded
and illiquid securities and securities of companies (including predecessors)
that have been in continuous operation for three years or less is limited to 15%
of total assets. This and certain other non-fundamental investment limitations
are currently required by one or more states in which shares of the Fund are
sold. These may be more restrictive than the limitations set forth above. Should
the Fund determine that any such commitment is no longer in the best interest of
the Fund and its shareholders, the Fund will revoke the commitment by
terminating the sale of Fund shares in the state involved. In addition, the
relevant state may change or eliminate its policy regarding such investment
limitations.
If a percentage restriction (other than the percentage limitation
set forth in No. 1 above) is adhered to at the time of an investment, a later
increase or decrease in the percentage of assets resulting from a change in the
values of portfolio securities or in the amount of the Fund's assets will not
constitute a violation of such restriction.
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Portfolio Valuation
The Prospectuses discuss the time at which the net asset value of
the Fund is determined for purposes of sales and redemptions. The following is a
description of the procedures used by the 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. The valuation of short sales of securities, which are not traded
on a national exchange, will be at the mean of bid and asked prices. Amortized
cost involves valuing a portfolio instrument at its initial cost and thereafter
assuming a constant amortization to maturity of an discount or premium,
regardless of the impact of fluctuating interest rates on the market value of
the instrument. Short-term obligations with maturities of 60 days or less are
valued at amortized cost, which constitutes fair value as determined by the
Board. 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, the 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 the 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 the 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 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 the Fund's net
asset value is not calculated. As a result, calculation of the Fund's net asset
value may not take place contemporaneously with the determination of the prices
of certain portfolio securities used in such calculation. Events affecting the
values of portfolio securities that occur between the time their prices are
determined and the close of regular trading on the NYSE will not be reflected in
the Fund's calculation of net asset value unless the Board or its delegates
deems that the particular event would materially affect net asset value, in
which case an adjustment may be made. All assets and liabilities initially
expressed in foreign currency
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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 the 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 the Fund to underwriters of newly issued securities usually includes a
concession paid by the issuer to the underwriter, and purchases of securities
from dealers, acting as either principals or agents in the after market, are
normally executed at a price between the bid and asked price, which includes a
dealer's mark-up or mark-down. Transactions on U.S. stock exchanges and some
foreign stock exchanges involve the payment of negotiated brokerage commissions.
On exchanges on which commissions are negotiated, the cost of transactions may
vary among different brokers. On most foreign exchanges, commissions are
generally fixed. There is generally no stated commission in the case of
securities traded in domestic or foreign over-the-counter markets, but the price
of securities traded in over-the-counter markets includes an undisclosed
commission or mark-up. U.S. government securities are generally purchased from
underwriters or dealers, although certain newly issued U.S. government
securities may be purchased directly from the U.S. Treasury or from the issuing
agency or instrumentality.
Warburg will select specific portfolio investments and effect
transactions for the 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 dealers who provide brokerage and research services (as those
terms are defined in Section 28(e) of the Securities Exchange Act of 1934) to
the 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 the
Fund. Research may include furnishing advice, either directly or through
publications or writings, as to the value of securities, the advisability of
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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
August 31, 1995, $________ of total brokerage commissions was paid by the
Warburg Pincus Growth & Income Fund investment portfolio of The RBB Fund, Inc.
(the "RBB Fund") to brokers and dealers who provided such research and other
services on portfolio transactions of $___________. (The Fund is the successor
to the Warburg Pincus Growth & Income Fund investment portfolio of the RBB Fund,
having acquired its assets and liabilities on May 3, 1996.) Research received
from brokers or dealers is supplemental to Warburg's own research program. The
fees to Warburg under its advisory agreement with the Fund are not reduced by
reason of its receiving any brokerage and research services.
During the fiscal years ended August 31, 1995, 1994 and 1993 the
Warburg Pincus Growth & Income investment portfolio of the RBB Fund paid
brokerage commissions of $3,023,620, $1,222,416 and $599,044, respectively. As
of August 31, 1995, the Fund has had an outstanding repurchase agreement in the
amount of $151,138,000, with Greenwich Capital Markets Inc., one of the Fund's
regular broker-dealers.
Investment decisions for the Fund concerning specific portfolio
securities are made independently from those for other clients advised by
Warburg. Such other investment clients may invest in the same securities as the
Fund. When purchases or sales of the same security are made at substantially the
same time on behalf of such other clients, transactions are averaged as to price
and available investments allocated as to amount, in a manner which Warburg
believes to be equitable to each client, including the Fund. In some instances,
this investment procedure may adversely affect the price paid or received by the
Fund or the size of the position obtained or sold for the Fund. To the extent
permitted by law, Warburg may aggregate the securities to be sold or purchased
for the Fund with those to be sold or purchased for such other investment
clients in order to obtain best execution.
Any portfolio transaction for the Fund may be executed through
Counsellors Securities Inc., the 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.
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In no instance will portfolio securities be purchased from or
sold to Warburg or Counsellors Securities or any affiliated person of such
companies. In addition, the Fund will not give preference to any institutions
with whom the Fund enters into distribution or shareholder servicing agreements
concerning the provision of distribution services or support services. See the
Prospectuses, "Shareholder Servicing."
Transactions for the Fund may be effected on foreign securities
exchanges. In transactions for securities not actively traded on a foreign
securities exchange, the 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.
The Fund may participate, if and when practicable, in bidding for
the purchase of securities for the Fund's portfolio directly from an issuer in
order to take advantage of the lower purchase price available to members of such
a group. The Fund will engage in this practice, however, only when Warburg, in
its sole discretion, believes such practice to be otherwise in the Fund's
interest.
Portfolio Turnover
The 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. The Fund's portfolio turnover
rate is calculated by dividing the lesser of purchases or sales of its portfolio
securities for the year by the monthly average value of the portfolio
securities. Securities with remaining maturities of one year or less at the date
of acquisition are excluded from the calculation.
Certain practices that may be employed by the Fund could result
in high portfolio turnover. For example, options on securities may be sold in
anticipation of a decline in the price of the underlying security (market
decline) or purchased in anticipation of a rise in the price of the underlying
security (market rise) and later sold. To the extent that its portfolio is
traded for the short-term, the Fund will be engaged essentially in trading
activities based on short-term considerations affecting the value of an issuer's
stock instead of long-term investments based on fundamental valuation of
securities. Because of this policy, portfolio securities may be sold without
regard to the length of time for which they have been held.
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MANAGEMENT OF THE FUNDMANAGEMENT OF THE FUND
Officers and Board of Directors
The names (and ages) of the 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 (61).............. Director
Harvard University.................. National Intelligence Counsel;
1737 Cambridge Street............... Professor at Harvard University;
Cambridge, MA 02138................. Director or Trustee of Circuit
.................................... City Stores, Inc. (retail electronics and
appliances) and Phoenix Home Life Insurance Co.
Donald J. Donahue (71).............. Director
99 Indian Field Road................ Chairman of Magma Copper Company
Greenwich, Connecticut 06830........ since January 1987; Director or Trustee of GEV
Corporation and Signet Star
Reinsurance Company; Chairman and
Director of NAC Holdings from
September 1990-June 1993.
Jack W. Fritz (69).................. Director
2425 North Fish Creek Road.......... Private investor; Consultant and
P.O. Box 483........................ Director of Fritz Broadcasting, Inc. and
Wilson, Wyoming 83014............... Fritz Communications (developers and operators of
radio stations); Director of Advo, Inc. (direct
mail advertising).
John L. Furth* (65)................. Chairman of the Board
466 Lexington Avenue................ Vice Chairman and Director of E.M. Warburg,
New York, New York 10017-3147....... Pincus & Co., Inc. ("EMW"); Associated
with EMW since 1970; President of
The Grant Street Settlement; Trustee
of Blythedale Children's Hospital
and Barnard College; Treasurer of
the Foundation for Child
Development; Director and officer of
other investment companies advised
by Warburg.
</TABLE>
- -----------------------
* Indicates a Director who is an "interested person" of the Fund as defined in
the 1940 Act.
24
<PAGE>
<PAGE>
<TABLE>
<S> <C>
Thomas A. Melfe (64)................ Director
30 Rockefeller Plaza................ Partner in the law firm of Donovan Leisure
New York, New York 10112............ Newton & Irvine; Director of Municipal Fund for
New York Investors, Inc.
Alexander B. Trowbridge (66)........ Director
1155 Connecticut Avenue, N.W........ President of Trowbridge Partners, Inc.
Suite 700........................... (business consulting) from January 1990-
Washington, DC 20036................ January 1994; President of the National
Association of Manufacturers from 1980-1990;
Director or Trustee of New England Mutual Life
Insurance Co., ICOS Corporation
(biopharmaceuticals), P.H.H. Corporation (fleet
auto management; housing and plant relocation
service), WMX Technologies Inc. (solid and
hazardous waste collection and disposal), The
Rouse Company (real estate development),
SunResorts International Ltd. (hotel and real
estate management), Harris Corp. (electronics and
communications equipment), The Gillette Co.
(personal care products) and Sun Company Inc.
(petroleum refining and marketing).]
Arnold M. Reichman* (47)............ President and Director
466 Lexington Avenue................ Managing Director and Assistant Secretary
New York, New York 10017-3147....... of EMW; Associated with EMW since 1984; Senior
Vice President, Secretary and Chief
Operating Officer of Counsellors
Securities; Officer of other
investment companies advised by
Warburg.
Eugene L. Podsiadlo (39)............ Senior Vice President
466 Lexington Avenue................ Managing Director of EMW;
New York, New York 10017-3147....... Associated with EMW since 1991; Vice President of
Citibank, N.A. from 1987-1991; Senior Vice
President of Counsellors Securities and officer
of other investment companies advised by Warburg.
</TABLE>
- -----------------------
* Indicates a Director who is an "interested person" of the Fund as defined in
the 1940 Act.
25
<PAGE>
<PAGE>
<TABLE>
<S> <C>
Stephen Distler (42)................ Vice President, Treasurer, Chief Financial
466 Lexington Avenue................ Officer and Chief Accounting Officer
New York, New York 10017-3147...... Managing Director, Controller and Assistant
Secretary of EMW; Associated with EMW since 1984;
Treasurer of Counsellors Securities; Treasurer
and Chief Accounting Officer or Vice President
and Chief Financial Officer of other investment
companies advised by Warburg.
Eugene P. Grace (44)................ Vice President and Secretary
466 Lexington Avenue................ Associated with EMW since April 1994;
New York, New York 10017-3147....... Attorney-at-law from September 1989-April 1994;
life insurance agent, New York Life
Insurance Company from 1993-1994;
General Counsel and Secretary, Home
Unity Savings Bank from 1991-1992;
Vice President, Chief Compliance
Officer and Assistant Secretary of
Counsellors Securities; Vice
President and Secretary of other
investment companies advised by
Warburg.
Howard Conroy (42).................. Vice President, Treasurer and Chief
466 Lexington Avenue................ Accounting Officer
New York, New York 10017-3147....... Associated with EMW since 1992;
Associated with Martin Geller, C.P.A. from
1990-1992; Vice President, Finance with
Gabelli/Rosenthal & Partners, L.P. until 1990;
Vice President, Treasurer and Chief Accounting
Officer of other investment companies advised by
Warburg.
Janna Manes (28).................... Assistant Secretary
466 Lexington Avenue................ Associated with EMW since March 1996;
New York, New York 10017-3147...... Associated with the law firm of Willkie Farr &
Gallagher from 1993-1996; Assistant
Secretary of other investment
companies advised by Warburg.
</TABLE>
No employee of Warburg or PFPC Inc., the Fund's co-administrator
("PFPC"), or any of their affiliates receives any compensation from the Fund for
acting as an officer or director of the Fund. Each Director who is not a
director, trustee, officer or employee of Warburg, PFPC or any of their
affiliates receives an annual fee of $500, and $250 for each meeting of the
Board attended by him for his services as Director and is reimbursed for
expenses incurred in connection with his attendance at Board meetings.
26
<PAGE>
<PAGE>
Directors' Compensation
<TABLE>
<CAPTION>
Total Total Compensation from
Compensation from all Investment Companies
Name of Director Fund Managed by Warburg
--------------- ---- -------------------
<S> <C> <C>
John L. Furth None** None**
Arnold M. Reichman None** None*
Richard N. Cooper $1,500 $47,000
Donald J. Donahue $1,500 $47,000
Jack W. Fritz $1,500 $47,000
Thomas A. Melfe $1,500 $47,000
Alexander B. Trowbridge $1,500 $47,000
</TABLE>
'D' Amounts shown are estimates of future payments to be made in the fiscal
year ending August 31, 1996 pursuant to existing arrangements.
* Each Director also serves as a Director or Trustee of 19 other
investment companies advised by Warburg.
** Mr. Furth is considered to be an interested person of the Fund and
Warburg, as defined under Section 2(a)(19) of the 1940 Act, and,
accordingly, receives no compensation from the Fund or any other
investment company managed by Warburg.
As of April 30, 1996, there were no outstanding shares of the Fund.
Portfolio Managers
Mr. Anthony G. Orphanos, portfolio manager of the Fund, is also
the senior portfolio manager of Warburg's institutional value product. He has 23
years of investment experience. Prior to joining Warburg, Mr. Orphanos was vice
president and investment officer of Dreyfus Leverage Fund, Inc. from 1972 to
1977. He received his A.B. degree from Harvard University and his M.B.A. from
New York University.
Ms. Linda Diaz, CFA, is a research analyst and assistant
portfolio manager of the Fund as well as Warburg's institutional value equity
product. Ms. Diaz has 10 years of investment experience. Prior to joining
Warburg, Ms. Diaz was an assistant vice president and portfolio manager in the
asset management division for Kidder Peabody & Co. from 1991 to 1994. She
received her B.S. degree from The Wharton School, University of Pennsylvania.
27
<PAGE>
<PAGE>
Investment Adviser and Co-Administrators
Warburg serves as investment adviser to the Fund pursuant to a
written agreement (the "Advisory Agreement"). Counsellors Funds Service, Inc.
("Counsellors Service") and PFPC both serve as co-administrators to the Fund
pursuant to separate written agreements (the "Counsellors Service
Co-Administration Agreement" and the "PFPC Co-Administration Agreement,"
respectively). Prior to October 1, 1993, PNC Institutional Management Corp.
("PIMC") and Warburg rendered advisory and sub-advisory services, respectively,
to the predecessor to the Fund, the Warburg Pincus Growth & Income Fund
investment portfolio of the RBB Fund. Sub-advisory fees were paid by the advisor
and not the Fund. 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.
For the fiscal years ended August 31, 1995 and 1994 Warburg
received advisory fees with respect to the Warburg Pincus Growth & Income Fund
investment portfolio of the RBB Fund in the amount of $5,824,947 and $1,030,566,
respectively. Warburg did not waive any advisory fees in the fiscal years ended
August 31, 1995 or 1994. For the fiscal years ended August 31, 1994 and 1993,
PIMC received advisory fees of $20,162 and $171,718, respectively. PIMC did not
waive any advisory fees for the fiscal year ended August 31, 1994, but did waive
advisory fees of $210 for the fiscal year ended August 31, 1993. Under the
Counsellors Co-Administration Agreement, for the fiscal years ended August 31,
1995 and 1994, Counsellors Service was paid $714,152 and $24,186, respectively.
Counsellors Service did not waive fees in either of those fiscal years. Under
the PFPC Co-Administration Agreement, for the fiscal years ended August 31,
1995, 1994 and 1993, PFPC was paid $1,227,497, $269,859 and $38,206,
respectively. PFPC did not waive any fees during those fiscal years.
Warburg agrees that if, in any fiscal year, the expenses borne by
the Fund exceed the applicable expense limitations imposed by the securities
regulations of any state in which shares of the Fund are registered or qualified
for sale to the public, it will reimburse the Fund to the extent required by
such regulations. Unless otherwise required by law, such reimbursement would be
accrued and paid on a monthly basis. At the date of this Statement of Additional
Information, the most restrictive annual expense limitation applicable to the
Fund is 2.5% of the first $30 million of the average net assets of the Fund, 2%
of the next $70 million of the average net assets of the Fund and 1.5% of the
remaining average net assets of the Fund.
Custodians and Transfer Agent
PNC Bank, National Association ("PNC") and State Street Bank and
Trust Company ("State Street") serve as custodians of the Fund's U.S. and
foreign assets,
28
<PAGE>
<PAGE>
respectively, pursuant to separate custodian agreements (the "Custodian
Agreements"). 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 for the account of the Fund's
portfolio securities held by it 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. With the approval of the Board, State
Street is authorized to select one or more foreign banking institutions and
foreign securities depositories to serve as sub-custodian on behalf of the Fund.
PNC is an indirect, wholly owned subsidiary of PNC Bank Corp. and its principal
business address is Broad and Chestnut Streets, Philadelphia, Pennsylvania
19101. The principal business address of State Street is 225 Franklin Street,
Boston, Massachusetts 02110.
State Street Bank and Trust Company ("State Street") acts as the
shareholder servicing, transfer and dividend disbursing agent of the 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, Boston, Massachusetts 02171.
Organization of the Fund
The Fund's charter authorizes the Board to issue three billion
full and fractional shares of common stock, $.001 par value per share ("Common
Shares"), of which one billion shares are designated Common Stock and one
billion shares are designated Advisor Shares. Only Common Shares and Advisor
Shares have been issued by the Fund.
All shareholders of the 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
The Fund may, in the future, enter into agreements ("agreements")
with institutional shareholders of record, broker-dealers, financial
institutions, depository institutions, retirement plans and financial
intermediaries ("Institutions") to provide certain distribution, shareholder
servicing, administrative and accounting services for their clients or customers
(or participants in the case of retirement plans) ("Customers") who are
beneficial
29
<PAGE>
<PAGE>
owners of Advisor Shares. See the Advisor Prospectus, "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.
An Institution with which the Fund has entered into an Agreement
with respect to its Advisor Shares may charge a Customer one or more of the
following types of fees, as agreed upon by the Institution and the Customer,
with respect to the cash management or other services provided by the
Institution: (i) account fees (a fixed amount per month or per year); (ii)
transaction fees (a fixed amount per transaction processed); (iii) compensation
balance requirements (a minimum dollar amount a Customer must maintain in order
to obtain the services offered); or (iv) account maintenance fees (a periodic
charge based upon the percentage of assets in the account or of the dividend
paid on those assets). Services provided by an Institution to Customers are in
addition to, and not duplicative of, the services to be provided under the
Fund's co-administration and distribution and shareholder servicing
arrangements. A Customer of an Institution should read the relevant Prospectus
and this Statement of Additional Information in conjunction with the Agreement
and other literature describing the services and related fees that would be
provided by the Institution to its Customers prior to any purchase of Fund
shares. Prospectuses are available from the Fund's distributor upon request. No
preference will be shown in the selection of Fund portfolio investments for the
instruments of Institutions.
The Distribution Plan will continue in effect for so long as its
continuance is specifically approved at least annually by the 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 Plan ("Independent Directors"). Any material amendment of the
Distribution Plan would require the approval of the Board in the same manner.
The Distribution Plan may not be amended to increase materially the amount to be
spent thereunder without shareholder approval of the relevant class of shares.
The Distribution Plan Advisor 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 Advisor Shares of the Fund.
For the fiscal years ended August 31, 1995, 1994 and 1993
distribution fees of $0, $0 and $131,530, respectively, were paid to Counsellors
Securities Inc., a wholly owned subsidiary of Warburg, on behalf of the Common
Shares of the Warburg Pincus Growth & Income Fund investment portfolio of the
RBB Fund, for direct payments to financial institutions or other financial
intermediaries. For the fiscal year ended August 31, 1995, distribution fees of
$71,233 were paid to Counsellors Securities Inc., on behalf of the Advisor
Shares of the Warburg Pincus Growth & Income Fund investment portfolio of the
RBB Fund, for the same purposes.
30
<PAGE>
<PAGE>
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
The offering price of the 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 shares and how such shares are priced is included in
the Prospectuses under "Net Asset Value."
Under the 1940 Act, the 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. (The 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, the 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. The 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 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 the 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 the
Fund. All dividends and distributions on shares in the Plan are automatically
reinvested at net asset value in additional shares of the Fund.
EXCHANGE PRIVILEGE
An exchange privilege with certain other funds advised by Warburg
is available to investors in the 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
31
<PAGE>
<PAGE>
investment decision. 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.
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. Warburg reserves the right to reject more than three exchange requests
by a shareholder in any 30-day period. The exchange privilege may be modified or
terminated at any time upon 60 days' notice to shareholders.
ADDITIONAL INFORMATION CONCERNING TAXES
The discussion set out below of tax considerations generally
affecting the Fund and its shareholders is intended to be only a summary and is
not intended as a substitute for careful tax planning by prospective
shareholders. Shareholders are advised to consult their own tax advisers with
respect to the particular tax consequences to them of an investment in the Fund.
The Fund intends to qualify each year as a "regulated investment
company" under Subchapter M of the Code. If it qualifies as a regulated
investment company, the Fund will pay no federal income taxes on its taxable net
investment income (that is, taxable income other than net realized capital
gains) and its net realized capital gains that are distributed to shareholders.
To qualify under Subchapter M, the Fund must, among other things: (i) distribute
to its shareholders at least 90% of its taxable net investment income (for this
purpose consisting of taxable net investment income and net realized short-term
capital gains); (ii) derive at least 90% of its gross income from dividends,
interest, payments with respect to loans of securities, gains from the sale or
other disposition of securities, or other income (including, but not limited to,
gains from options, futures, and forward contracts) derived with respect to the
Fund's business of investing in securities; (iii) derive less than 30% of its
annual gross income from the sale or other disposition of securities, options,
futures or forward contracts held for less than three months; and (iv) diversify
its holdings so that, at the end of each fiscal quarter of the Fund (a) at least
50% of the market value of the Fund's assets is represented by cash, U.S.
government securities and other securities, with those other securities limited,
with respect to any one issuer, to an amount no greater in value than 5% of the
Fund's total assets and to not more than 10% of the outstanding voting
securities of the issuer, and (b) not more than 25% of the market value of the
Fund's assets is invested in the securities of any one issuer (other than U.S.
government securities or securities of other regulated investment companies) or
of two or more issuers that the Fund controls and that are determined to be in
the same or similar trades or businesses or related trades or businesses. In
meeting these requirements, the Fund may be restricted in the selling of
securities held by the
32
<PAGE>
<PAGE>
Fund for less than three months and in the utilization of certain of the
investment techniques described above and in the Fund's Prospectuses. As a
regulated investment company, the Fund will be subject to a 4% non-deductible
excise tax measured with respect to certain undistributed amounts of ordinary
income and capital gain required to be but not distributed under a prescribed
formula. The formula requires payment to shareholders during a calendar year of
distributions representing at least 98% of the Fund's taxable ordinary income
for the calendar year and at least 98% of the excess of its capital gains over
capital losses realized during the one-year period ending October 31 during such
year, together with any undistributed, untaxed amounts of ordinary income and
capital gains from the previous calendar year. The Fund expects to pay the
dividends and make the distributions necessary to avoid the application of this
excise tax.
The Fund's transactions, if any, in foreign currencies, forward
contracts, options and futures contracts (including options and forward
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
recognized by the Fund (i.e., may affect whether gains or losses are ordinary or
capital), accelerate recognition of income to the Fund, defer Fund losses and
cause the Fund to be subject to hyperinflationary currency rules. These rules
could therefore affect the character, amount and timing of distributions to
shareholders. These provisions also (i) will require the Fund to mark-to-market
certain types of its positions (i.e., treat them as if they were closed out) and
(ii) 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. The 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 so
that (a) neither the Fund nor its shareholders will be treated as receiving a
materially greater amount of capital gains or distributions than actually
realized or received, (b) the Fund will be able to use substantially all of its
losses for the fiscal years in which the losses actually occur and (c) the Fund
will continue to qualify as a regulated investment company.
A shareholder of the Fund receiving dividends or distributions in
additional shares should be treated for federal income tax purposes as receiving
a distribution in an amount equal to the amount of money that a shareholder
receiving cash dividends or distributions receives, and should have a cost basis
in the shares received equal to that amount.
Investors considering buying shares just prior to a dividend or
capital gain distribution should be aware that, although the price of shares
purchased at that time may reflect the amount of the forthcoming distribution,
those who purchase just prior to a distribution will receive a distribution that
will nevertheless be taxable to them. Upon the sale or exchange of shares, a
shareholder will realize a taxable gain or loss depending upon the amount
realized and the basis in the 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, as described in the Prospectuses, will be long-term or short-term
depending upon the shareholder's holding period for the shares. Any loss
realized on a sale or exchange will be disallowed to the extent the
33
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<PAGE>
shares disposed of are replaced, including replacement through the reinvestment
of dividends and capital gains distributions in the Fund, within a period of 61
days 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.
Each shareholder will receive an annual statement as to the
federal income tax status of his dividends and distributions from the Fund for
the prior calendar year. Furthermore, shareholders will also receive, if
appropriate, various written notices after the close of the Fund's taxable year
regarding the federal income tax status of certain dividends and distributions
that were paid (or that are treated as having been paid) by the Fund to its
shareholders during the preceding year.
If a shareholder fails to furnish a correct taxpayer
identification number, fails to report fully dividend or interest income, or
fails to certify that he has provided a correct taxpayer identification number
and that he is not subject to "backup withholding," the shareholder may be
subject to a 31% "backup withholding" tax with respect to (i) taxable dividends
and distributions and (ii) the proceeds of any sales or repurchases of shares of
the Fund. An individual's taxpayer identification number is his social security
number. Corporate shareholders and other shareholders specified in the Code are
or may be exempt from backup withholding. The backup withholding tax is not an
additional tax and may be credited against a taxpayer's federal income tax
liability. Dividends and distributions also may be subject to state and local
taxes depending on each shareholder's particular situation.
Investment in Passive Foreign Investment Companies
If the Fund purchases shares in certain foreign entities
classified under the Code as "passive foreign investment companies" ("PFICs"),
the Fund may be subject to federal income tax on a portion of an "excess
distribution" or gain from the disposition of the shares, even though the income
may have to be distributed as a taxable dividend by the Fund to its
shareholders. In addition, gain on the disposition of shares in a PFIC generally
is treated as ordinary income even though the shares are capital assets in the
hands of the Fund. Certain interest charges may be imposed on either the Fund or
its shareholders with respect to any taxes arising from excess distributions or
gains on the disposition of shares in a PFIC.
The Fund may be eligible to elect to include in its gross income
its share of earnings of a PFIC on a current basis. Generally, the election
would eliminate the interest charge and the ordinary income treatment on the
disposition of stock, but such an election may have the effect of accelerating
the recognition of income and gains by the Fund compared to a fund that did not
make the election. In addition, information required to make such an election
may not be available to the Fund.
On April 1, 1992 proposed regulations of the Internal Revenue
Service (the "IRS") were published providing a mark-to-market election for
regulated investment companies. The IRS subsequently issued a notice indicating
that final regulations will provide that regulated investment companies may
elect the mark-to-market election for tax years
34
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<PAGE>
ending after March 31, 1992 and before April 1, 1993. Whether and to what
extent the notice will apply to taxable years of the Fund is unclear. If the
Fund is not able to make the foregoing election, it may be able to avoid the
interest charge (but not the ordinary income treatment) on disposition of the
stock by electing, under proposed regulations, each year to mark-to-market the
stock (that is, treat it as if it were sold for fair market value). Such an
election could result in acceleration of income to the Fund.
DETERMINATION OF PERFORMANCE
From time to time, the Fund may quote the total return of its
Common Shares and/or Advisor Shares in advertisements or in reports and other
communications to shareholders. The average annual total return and the
aggregate total return of the Common Shares of the Warburg Pincus Growth &
Income Fund investment portfolio of the RBB Fund for the fiscal year ended
August 31, 1995 were both 15.62% and for the Advisor Shares they were both
10.49%. The average annual total return of the Common Shares for the five-year
period ended August 31, 1995 was 17.95% with waivers and 17.38% without waivers.
Average annual total return is 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. For the period beginning on the commencement of the predecessor
Fund's operations (October 1988) and ending August 31, 1995, the average annual
total return and aggregate total return, both with waivers, were 15.74% and
174.48%, respectively, for the Fund's Common Shares. Without waivers, for the
same time period, the average annual total return and the aggregate total return
of Common Shares of the Fund would have been 14.77% and 158.96%, respectively.
For the period from May 15, 1995 (commencement of operations) to August 31,
1995, both the average annual total return and aggregate total return, with
waivers, were 10.49% for the Advisor Shares of the Warburg Pincus Growth &
Income Fund investment portfolio of the RBB Fund.
The 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. The 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.
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The Fund may also advertise its yield. The yield for the Common
Shares of the Warburg Pincus Growth & Income Fund investment portfolio of the
RBB Fund for the thirty-day period ended August 31, 1995 was 0.57%, and for the
Advisor Shares was -0.01%. Yield is calculated by annualizing the net investment
income generated by the Fund over a specified thirty-day period according to the
following formula:
YIELD = 2[(a-b + 1)'PP'6 -1]
___
cd
For purposes of this formula: "a" is dividends and interest earned during the
period; "b" is expenses accrued for the period (net of reimbursements); "c" is
the average daily number of shares outstanding during the period that were
entitled to receive dividends; and "d" is the maximum offering price per share
on the last day of the period.
The performance of a class of Fund shares will vary from time to
time depending upon market conditions, the composition of the Fund's portfolio
and operating expenses allocable to it. As described above, total return is
based on historical earnings and is not intended to indicate future performance.
Consequently, any given performance quotation should not be considered as
representative of performance for any specified period in the future.
Performance information may be useful as a basis for comparison with other
investment alternatives. However, the Fund's performance will fluctuate, unlike
certain bank deposits or other investments which pay a fixed yield for a stated
period of time. Any fees charged by Institutions or other institutional
investors directly to their customers in connection with investments in Fund
shares are not reflected in the Fund's total return, and such fees, if charged,
will reduce the actual return received by customers on their investments.
In addition, reference may be made in advertising a class of Fund
shares to opinions of Wall Street economists and analysts regarding economic
cycles and their effects historically on the performance of small companies,
both as a class and relative to other investments. The Fund may also discuss its
beta, or volatility relative to the market, and make reference to its relative
performance in various market cycles in the United States.
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 the Fund. Willkie Farr & Gallagher serves as counsel
for the Fund as well as counsel to Warburg, Counsellors Service and Counsellors
Securities.
36
<PAGE>
<PAGE>
MISCELLANEOUS
As of April 15, 1996, the names, addresses and percentage
ownership of each person that owned 5% or more of the outstanding shares of the
Warburg Pincus Growth & Income Fund investment portfolio of the RBB Fund were as
follows:
<TABLE>
<CAPTION>
Percent owned
Type of Shares Name and Address as of April 15, 1996
- -------------- ---------------- --------------------
<S> <C> <C>
Common Shares Charles Schwab & Co. Inc. 34.77%
Reinvest Account
Attn: Mutual Funds Dept
101 Montgomery St.
San Francisco, CA 94104-4122
National Financial Services Corp. 11.24%
FBC Customers
P.O. Box 3908
Church Street Station
New York, NY 10008-3908
Advisor Shares Connecticut General Life Insurance Co. 98.70%
on Behalf of its Separate Accounts
55S c/o Melissa Spencer M110
Cigna Corp
P.O. Box 2975
Hartford, CT 06104-2975
</TABLE>
FINANCIAL STATEMENTS
The unaudited financial statements for the six months ended
February 29, 1996, the audited financial statements for the fiscal period ended
August 31, 1995 and the Report of Independent Accountants of the Warburg Pincus
Growth & Income Fund investment portfolio of the RBB Fund are attached to this
Statement of Additional Information.
37
<PAGE>
<PAGE>
APPENDIX
DESCRIPTION OF RATINGS
Commercial Paper Ratings
Commercial paper rated A-1 by Standard and Poor's Ratings Group
("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 Services, 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.
<PAGE>
<PAGE>
BB, B, CCC, CC and C - Debt rated BB and B are regarded, on
balance, as predominately speculative with respect to capacity to pay interest
and repay principal in accordance with the terms of the obligation. BB
represents a lower degree of speculation than B, and CCC the highest degree of
speculation. While such bonds will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
BB - Debt rated BB has less near-term vulnerability to default
than other speculative issues. However, they face major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions, which could
lead to inadequate capacity to meet timely interest and principal payments. The
BB rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB rating.
B - Debt rated B has a greater vulnerability to default but
currently have the capacity to meet interest payments and principal repayments.
Adverse business, financial, or economic conditions will likely impair capacity
or willingness to pay interest and repay principal. The B rating category is
also used for debt subordinated to senior debt that is assigned an actual or
implied BB or BB- rating.
CCC - Debt rated CCC has a currently identifiable vulnerability
to default and is dependent upon favorable business, financial and economic
conditions to meet timely payment of interest and repayment of principal. In the
event of adverse business, financial or economic conditions, it is not likely to
have the capacity to pay interest and repay principal. The CCC rating category
is also used for debt subordinated to senior debt that is assigned an actual or
implied B or B- rating.
CC - This rating is typically applied to debt subordinated to
senior debt that is assigned an actual or implied CCC rating.
C - This rating is typically applied to debt subordinated to
senior debt which is assigned an actual or implied CCC- debt rating. The C
rating may be used to cover a situation where a bankruptcy petition has been
filed, but debt service payments are continued.
Additionally, the rating CI is reserved for income bonds on which
no interest is being paid. Such debt is rated between debt rated C and debt
rated D.
To provide more detailed indications of credit quality, the
ratings may be modified by the addition of a plus or minus sign to show relative
standing within this major rating category.
D - Debt rated D is in payment default. The D rating category is
used when interest payments or principal payments are not made on the date due
even if the applicable grace period has not expired, unless S&P believes that
such payments will be made during such grace period. The D rating also will be
used upon the filing of a bankruptcy petition if debt service payments are
jeopardized.
A-2
<PAGE>
<PAGE>
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 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.
A-3
<PAGE>
<PAGE>
Ca - Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.
C - Bonds which are rated C are the lowest rated class of bonds,
and issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
A-4
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
[Logo]
SEMIANNUAL REPORT
February 29, 1996
/ / Warburg Pincus
Growth & Income Fund
/ / Warburg Pincus
Balanced Fund
Warburg Pincus Funds
P.O. Box 9030
/ / Warburg Pincus
Boston, Massachusetts 02205-9030 Tax Free Fund
Shareholder Services
1-800-927-2874
Counsellors Securities Inc., Distributor
Prospectuses
1-800-927-2874
WPGBT-3-02-96
The views of the Fund's management are as of the date of this letter and
Portfolio holdings described in this semi-annual report are as of February 29,
1996; these views and positions may have changed subsequent to these dates.
- --------------------------------------------------------------------------------
Warburg Pincus Growth & Income Fund
Semiannual Investment Adviser's Report
- --------------------------------------------------------------------------------
April 22, 1996
For the six months ended February 29, 1996, the Warburg Pincus Growth &
Income Fund (the "Fund") appreciated 4.86%* vs. an increase of 15.30% in the S&P
500 Index.
Strong performers for the Fund during the period were banking and
financial-services stocks, which benefited from a favorable interest-rate
environment and consolidation activity within the industry, especially the
banking area. The Fund saw particularly strong performance from First Interstate
Bancorp, one of its largest holdings. The bank's share price climbed
significantly through the period in response to Wells Fargo's announced takeover
bid, which was approved by both sets of shareholders and finalized at the end of
March.
The Fund's gold stocks also contributed positively to its performance.
These issues rose sharply in response to an increase in the price of gold to
over $415 an ounce in January of this year, its highest level in several years.
We used the opportunity to take some profits in some of the Fund's
better-performing gold stocks, but we remain very much committed to gold shares
based on what we project will be a long-term imbalance between supply and demand
for the metal.
Industrial cyclical stocks, another heavily weighted area in the portfolio,
also performed well during the period. We believe that the prospects for these
stocks remain favorable, given our expectations for stronger economic growth
through the remainder of the year.
Other strong performers for the Fund during the period were oil-services
stocks, whose prices rallied strongly in recent months to their highest levels
in years. Reasons for the surge in performance include a rise in the price of
oil, a steady increase in world-wide demand and a jump in drilling activity. We
think that the fundamentals for the industry remain positive.
The Fund also saw good performance from its holdings in the
telecommunications sector, which we believe stands to benefit greatly from
deregulatory effects of the new telecommunications law. The Fund's holdings at
the end of the period included Airtouch Communications, Comcast and Tele-
Communications Inc.
Anthony G. Orphanos
Portfolio Manager
- ---------------
* For the one-year, five-year and since inception (10/6/88) periods ended March
29, 1996, average annual total returns were 19.91%, 16.26%, and 15.28%,
respectively. From time to time, the Fund's investment adviser and
co-administrators had waived some fees and/or reimbursed some expenses,
without which performance would be lower. All figures cited represent past
performance and do not guarantee future results. Investment return and
principal value of an investment will fluctuate so that an investor's shares
upon redemption may be worth more or less than original cost.
1
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Warburg Pincus Balanced Fund
Semiannual Investment Adviser's Report
- --------------------------------------------------------------------------------
April 22, 1996
For the six months ended February 29, 1996, the Warburg Pincus Balanced
Fund (the "Fund") gained 8.44%*, vs. a gain of 8.78% for the Lipper Balanced
Fund Index.
Declining interest rates, continued economic growth and the absence of
significant inflationary pressures provided an ideal backdrop for financial
markets through most of the period. Throughout, we attempted to maintain an
optimal mix of stocks and bonds in the portfolio, one intended to provide solid
returns at a relatively low level of volatility.
The Fund finished the reporting period with a 50.2% commitment to domestic
common stocks, with its heaviest weightings in, respectively, the technology,
metals and mining, and financial-services sectors. Good stock selection within
these sectors played a significant role in the Fund's performance during the
period, and we believe that the prospects for our holdings remain positive.
The Fund's foreign-equity exposure (6.8% of assets at the close of the
period) consisted of a diversified mix of issues from Asian and European
countries, with the largest weightings in Japan, Portugal and Hong Kong,
respectively. We continue to find attractive opportunities among foreign
markets, particularly in Asia.
The Fund's fixed-income weighting was concentrated primarily in U.S.
Treasury obligations through the six months. As of February 29, Treasuries
represented 32.8% of the portfolio. We maintained relatively limited exposure to
the fixed-income sector through much of the period, reflecting our more-positive
view on the prospects of stocks vs. those of bonds.
Anthony G. Orphanos Dale C. Christensen
Co-Portfolio Co-Portfolio
Strategist Strategist
- ---------------
* For the one-year, five-year and since inception (10/6/88) periods ended March
29, 1996, average annual total returns were 28.42%, 13.42%, and 13.13%,
respectively. Warburg, Pincus Counsellors, Inc. assumed management of the Fund
on 9/30/94. From time to time, the Fund's investment adviser and
co-administrators may waive some fees and/or reimburse some expenses, without
which performance would be lower. Waivers and/or reimbursements are subject to
change. All figures cited represent past performance and do not guarantee
future results. Investment return and principal value of an investment will
fluctuate so that an investor's shares upon redemption may be worth more or
less than original cost.
2
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Warburg Pincus Tax Free Fund
Semiannual Investment Adviser's Report
- --------------------------------------------------------------------------------
April 22, 1996
For the six months ended February 29, 1996, the Warburg Pincus Tax Free
Fund (the "Fund") gained 4.51%*, vs. a gain of 4.87% for the Lehman Brothers
Municipal Bond Index. Its 30-day SEC yield at the end of the period was 4.85%.
Municipal bonds, along with their taxable counterparts, enjoyed a favorable
backdrop through the first four months of the reporting period (September
through December 1995). Interest rates declined, driven by perceptions of
continued moderate economic growth and the absence of significant inflationary
pressures. Yields on high-quality, long-term municipal bonds fell to
approximately 5% at the end of December.
During this period, the Fund maintained an average maturity of
approximately 15 years, which allowed it to take full advantage of the decline
in rates. Regarding credit quality, the Fund maintained its emphasis on
high-quality municipal bonds, since the relatively narrow yield spreads between
these and lower-quality issues provided little incentive for "dropping down the
credit ladder" in pursuit of higher yield.
The first two months of 1996 provided a less-hospitable environment for
municipal bonds. Rates moved higher amid expectations of stronger economic
growth, and in response to higher Treasury yields due to hedge-fund selling and
decreased buying by foreign central banks. Over the two months, yields on
high-quality, long-term municipals rose to 5.4%. In response, as a defensive
measure, the Fund shortened its average maturity, which stood at 12 years as of
February 29. The Fund maintained its focus on high-quality bonds, reflecting the
still-narrow yield spreads between these and lower-quality issues.
Going forward, we remain positive in our outlook on municipal bonds. The
supply of new issues is expected to be approximately $150 billion in 1996,
comparable to 1995's level but still well below that of previous years. Demand
for municipals, in turn, should increase, we believe, given the very attractive
tax-equivalent yields on municipal bonds vs. those of high-quality taxable
issues.
Dale C. Christensen Sharon B. Parente
Co-Portfolio Manager Co-Portfolio Manager
- ---------------
* For the one-year, five-year and since inception (10/6/88) periods ended March
29, 1996, average annual total returns were 7.60%, 8.59%, and 8.12%,
respectively. Warburg, Pincus Counsellors, Inc. assumed management of the Fund
on 4/10/95. From time to time, the Fund's investment adviser and
co-administrators may waive some fees and/or reimburse some expenses, without
which performance would be lower. Waivers and/or reimbursements are subject to
change. All figures cited represent past performance and do not guarantee
future results. Investment return and principal value of an investment will
fluctuate so that an investor's shares upon redemption may be worth more or
less than original cost.
3
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
[Logo]
SEMIANNUAL REPORT
February 29, 1996
/ / Warburg Pincus Growth & Income Fund
/ / Warburg Pincus Balanced Fund
/ / Warburg Pincus Tax Free Fund
A prospectus containing more complete information, including management fees and
expenses, may be obtained by calling 1-800-927-2874 or by writing to Warburg
Pincus Funds, P.O. Box 9030, Boston, MA 02205-9030. Investors should read the
prospectus carefully before investing.
- --------------------------------------------------------------------------------
Warburg Pincus Growth & Income Fund
Statement of Net Assets
February 29, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares Value
---------- ----------------
<S> <C> <C>
COMMON STOCKS AND WARRANTS (82.9%)
Automobiles (1.4%)
Navistar International Corp.** 1,200,000 $ 12,150,000
Standard Products Co. 185,000 3,838,750
----------------
15,988,750
----------------
Banking (5.0%)
First Interstate Bancorp 340,000 55,547,500
----------------
Commercial Printing (0.3%)
Agrium, Inc. 220,000 3,403,125
----------------
Construction (2.0%)
Stone & Webster, Inc. 663,200 22,548,800
----------------
Electronic Computers (5.5%)
GRC International, Inc.** 800,000 26,900,000
Honeywell, Inc. 655,000 34,715,000
----------------
61,615,000
----------------
Electronics (0.4%)
Vishay Intertechnology, Inc.** 170,000 4,483,750
----------------
Entertainment (2.7%)
Acclaim Entertainment, Inc.** 1,125,000 14,132,812
Boardwalk Casino, Inc.** 525,000 3,281,250
Boardwalk Casino, Inc. Warrants (expire 02/11/98)** 375,000 796,875
Time Warner, Inc. 280,000 11,970,000
----------------
30,180,937
----------------
Financial Services (4.4%)
BankAmerica Corp. 435,000 30,993,750
Crestar Financial Corp. 200,000 11,700,000
Greenpoint Financial Corp. 233,000 6,174,500
----------------
48,868,250
----------------
Healthcare (0.6%)
Caremark International, Inc. 240,000 6,120,000
----------------
</TABLE>
See Accompanying Notes to Financial Statements.
4
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Warburg Pincus Growth & Income Fund
Statement of Net Assets (cont'd)
February 29, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares Value
---------- ----------------
<S> <C> <C>
COMMON STOCKS AND WARRANTS (cont'd)
Insurance (1.9%)
USF&G Corp. 1,444,000 $ 21,660,000
----------------
Manufacturing (3.0%)
Corning Glass, Inc. 965,000 31,362,500
Rauma OY Sponsored ADR** 137,900 2,654,575
----------------
34,017,075
----------------
Medical & Medical Services (2.4%)
Acuson Corp.** 210,000 3,123,750
Amsco International, Inc.** 30,000 468,750
Creative Biomolecules, Inc.** 359,300 3,188,787
Cytogen Corp.** 363,200 2,905,600
Foxmeyer Health Corp.** 980,000 16,782,500
----------------
26,469,387
----------------
Metals (2.8%)
Inco Ltd. 970,000 30,918,750
----------------
Mining (23.4%)
Cyprus Amax Minerals 317,000 8,202,375
Echo Bay Mines Ltd. 1,300,000 17,875,000
Hecla Mining Co.** 2,200,000 18,975,000
Homestake Mining Co. 2,514,000 48,708,750
Newmont Mining Corp. 1,000,000 56,875,000
Pegasus Gold, Inc.** 2,664,000 41,958,000
Placer Dome, Inc. 2,000,000 56,500,000
Prime Resources Group, Inc.** 1,400,000 13,524,420
----------------
262,618,545
----------------
Oil (1.3%)
Quaker State Corp. 715,000 10,010,000
Santa Fe Energy Resources, Inc.** 525,000 4,856,250
----------------
14,866,250
----------------
</TABLE>
See Accompanying Notes to Financial Statements.
5
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Warburg Pincus Growth & Income Fund
Statement of Net Assets (cont'd)
February 29, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares Value
---------- ----------------
<S> <C> <C>
COMMON STOCKS AND WARRANTS (cont'd)
Oil Services (4.4%)
Baker Hughes, Inc. 1,055,000 $ 27,825,625
Halliburton Co. 400,000 21,950,000
----------------
49,775,625
----------------
Paper & Forest Products (2.0%)
James River Corp. of Virginia 290,000 7,648,750
Westvaco Corp. 105,000 3,045,000
Weyerhaeuser Co. 275,000 11,653,125
----------------
22,346,875
----------------
Retail--General Merchandise Stores (0.0%)
Ben Franklin Retail Stores Inc.** 114,833 200,958
----------------
Semi-Conductors & Related Products (1.0%)
Micron Technology, Inc. 350,000 11,200,000
----------------
Steel (13.0%)
AK Steel Holding Corp. 600,000 21,675,000
Bethlehem Steel Corp. 2,015,000 27,706,250
Inland Steel Industries, Inc. 1,025,000 24,984,375
LTV Corp. 2,289,000 29,184,750
USX-U.S. Steel Group, Inc. 1,089,000 35,664,750
WHX, Inc.** 623,000 7,242,375
----------------
146,457,500
----------------
Telecommunications (5.4%)
Airtouch Communications, Inc.** 598,800 18,562,800
Comcast Corp., Special Class A Non-Voting 1,064,000 20,881,000
Tele-Communications, Inc., TCI Class A** 1,034,000 21,714,000
----------------
61,157,800
----------------
TOTAL COMMON STOCKS AND WARRANTS
(Cost $798,860,480) 930,444,877
----------------
</TABLE>
See Accompanying Notes to Financial Statements.
6
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Warburg Pincus Growth & Income Fund
Statement of Net Assets
February 29, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Maturity Par (000) Value
---------- ----------- ----------------
<S> <C> <C> <C>
UNITED STATES TREASURY OBLIGATIONS (3.5%)
U.S. Treasury Bills
4.980% 03/07/96 $ 10,000 $ 9,991,700
4.970% 04/11/96 10,000 9,945,711
4.870% 05/02/96 10,000 9,914,600
4.990% 05/23/96 10,000 9,886,133
----------------
TOTAL U. S. TREASURY OBLIGATIONS (Cost $39,736,121) 39,738,144
----------------
REPURCHASE AGREEMENTS (14.7%)
J. P. Morgan Securities 5.420% 03/01/96 164,827 164,827,000
(Agreement dated 02/29/96 to be repurchased at $164,851,816,
collateralized by $155,249,000 U.S. Treasury Bonds 7.125% to 7.500%
due 02/15/23 to 11/15/24. Market value of collateral is $168,126,440.)
(Cost $164,827,000)
----------------
TOTAL INVESTMENTS AT VALUE (101.1%)
(Cost $1,003,423,601*) 1,135,010,021
LIABILITIES IN EXCESS OF OTHER ASSETS (1.1%) (12,014,448)
----------------
NET ASSETS (Applicable to 64,202,032 Common Shares and 4,939,717 Advisor
Shares) (100.0%) $ 1,122,995,573
----------------
----------------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER COMMON SHARE ($1,042,834,096 : 64,202,032) $16.24
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER ADVISOR SHARE ($80,161,477 : 4,939,717) $16.23
</TABLE>
* Cost for Federal income tax purposes at February 29, 1996, is $1,003,600,561.
The gross appreciation (depreciation) on a tax basis is as follows:
<TABLE>
<S> <C>
Gross Appreciation $ 163,892,722
Gross Depreciation (32,483,262)
---------------
Net Appreciation $ 131,409,460
---------------
---------------
</TABLE>
** Non-income producing.
See Accompanying Notes to Financial Statements.
7
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Warburg Pincus Balanced Fund
Statement of Net Assets
February 29, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares Value
----------- ------------
<S> <C> <C>
COMMON STOCKS (57.0%)
U.S. Common Stocks
Aerospace & Defense (0.7%)
Loral Corp. 3,100 $ 146,087
------------
Banking (1.1%)
Bank of Boston Corp. 2,200 106,975
First Interstate Bancorp 700 114,363
------------
221,338
------------
Business Services (1.5%)
Dun & Bradstreet Corp. 500 31,625
Emcare Holdings, Inc.** 1,000 26,625
Equifax, Inc. 4,000 83,000
HPR, Inc** 1,000 37,000
Paging Network, Inc.** 4,200 111,300
------------
289,550
------------
Chemicals (1.3%)
Mallinckrodt Group, Inc. 1,600 62,800
Monsanto Co. 1,400 188,475
------------
251,275
------------
Communications & Media (0.3%)
Infinity Broadcasting Corp. Class A** 1,600 66,000
------------
Computer & Office Equipment (1.4%)
Atria Software, Inc.** 2,000 94,000
Shared Medical Systems Corp. 1,800 100,350
Synopsys, Inc.** 2,500 81,875
------------
276,225
------------
Construction (0.5%)
Jacobs Engineering Group, Inc.** 2,000 57,000
Stone & Webster, Inc. 1,000 34,000
------------
91,000
------------
</TABLE>
See Accompanying Notes to Financial Statements.
8
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Warburg Pincus Balanced Fund
Statement of Net Assets (cont'd)
February 29, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares Value
----------- ------------
<S> <C> <C>
COMMON STOCKS (cont'd)
Consumer Services (0.3%)
Devry, Inc.** 1,000 $ 29,625
Sylvan Learning Systems, Inc.** 1,000 30,875
------------
60,500
------------
Electrical Equipment (0.4%)
Methode Electronics, Inc. Class A 5,250 73,500
------------
Electronic Computers (3.9%)
American Management Systems, Inc.** 3,000 72,000
Auspex Systems Inc.** 3,000 61,125
Cabletron Systems, Inc.** 700 52,588
Conitinuum Co., Inc.** 2,200 87,175
Filenet Corp.** 1,000 63,500
GRC International, Inc.** 3,000 100,875
Honeywell, Inc. 800 42,400
Linear Technology Corp. 1,000 46,500
Platinum Technology, Inc.** 4,900 69,212
System Software Associates, Inc. 3,150 66,150
Xilinx, Inc.** 2,500 96,563
------------
758,088
------------
Electronics (2.3%)
Burr-Brown Corp.** 2,400 54,600
Input/Output, Inc.** 5,600 166,600
Solectron Corp.** 2,600 126,100
Thermotrex Corp.** 1,800 79,200
Thermedics, Inc.** 1,000 26,000
------------
452,500
------------
Entertainment (0.5%)
Acclaim Entertainment, Inc.** 3,000 37,688
Boardwalk Casino, Inc.** 3,000 18,750
Time Warner, Inc. 800 34,200
------------
90,638
------------
</TABLE>
See Accompanying Notes to Financial Statements.
9
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Warburg Pincus Balanced Fund
Statement of Net Assets (cont'd)
February 29, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares Value
----------- ------------
<S> <C> <C>
COMMON STOCKS (cont'd)
Environmental Services (0.4%)
Allied Waste Industries, Inc. 5,000 $ 41,250
USA Waste Services, Inc.** 1,500 32,063
------------
73,313
------------
Financial Services (4.8%)
BankAmerica Corp. 500 35,625
Citicorp 1,200 93,600
Crestar Financial Corp. 500 29,250
Cullen/Frost Bankers 2,000 98,000
First Data Corp. 1,500 103,875
Fund American Enterprises 700 53,900
Great Financial Corp. 2,000 48,250
Greenpoint Financial Corp. 800 21,200
Legg Mason, Inc. 3,000 90,375
Mercury Finance Co. 17,000 233,750
Merrill Lynch & Co., Inc. 500 28,813
United Companies Financial Corp. 2,000 54,000
Wells Fargo & Co. 200 49,325
------------
939,963
------------
Healthcare (2.9%)
Caremark International, Inc. 6,000 153,000
Health Management Associates Class A** 2,700 84,713
Healthcare Realty Trust, Inc.** 9,000 193,500
Healthsource, Inc.** 1,000 37,875
Meditrust SBI 3,000 99,750
------------
568,838
------------
Insurance (2.2%)
Leucadia National Corp. 4,000 106,500
Riscorp, Inc. Class A** 3,500 75,250
Security Connecticut Corp. 3,000 82,125
USF&G Corp. 5,000 75,000
Vesta Insurance Group, Inc. 2,700 89,100
------------
427,975
------------
</TABLE>
See Accompanying Notes to Financial Statements.
10
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Warburg Pincus Balanced Fund
Statement of Net Assets (cont'd)
February 29, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares Value
----------- ------------
<S> <C> <C>
COMMON STOCKS (cont'd)
Lodging & Restaurants (0.2%)
Doubletree Corp.** 1,500 $ 41,625
------------
Manufacturing (1.3%)
Allied Products Corp. 1,500 36,000
Corning Glass, Inc. 1,300 42,250
Maxim Integrated Products, Inc.** 2,600 94,250
Roper Industries, Inc. 2,000 90,250
------------
262,750
------------
Medical & Medical Services (2.7%)
American Oncology Resources, Inc.** 1,000 40,250
Acuson Corp.** 1,000 14,875
Creative Biomolecules, Inc.** 1,000 8,875
Cytogen Corp.** 1,000 8,000
ESC Medical Systems Ltd.** 6,000 198,000
Foxmeyer Health Corp.** 4,000 68,500
Healthcare Compare Corp.** 4,000 195,000
------------
533,500
------------
Metals (0.6%)
Inco Ltd. 3,500 111,562
------------
Mining (5.0%)
Coeur D'Alene Mines Corp. 4,500 106,313
Cyprus Amax Minerals Co. 1,000 25,875
Hecla Mining Co.** 5,000 43,125
Homestake Mining Co. 9,000 174,375
Newmont Mining Corp. 3,500 199,062
Pegasus Gold, Inc.** 10,000 157,500
Placer Dome, Inc. 7,000 197,750
Prime Resources Group, Inc.** 3,000 28,981
Western Deep Levels Ltd. ADR 800 40,000
------------
972,981
------------
Office Furniture (0.6%)
Viking Office Products, Inc.** 1,900 108,062
------------
</TABLE>
See Accompanying Notes to Financial Statements.
11
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Warburg Pincus Balanced Fund
Statement of Net Assets (cont'd)
February 29, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares Value
----------- ------------
<S> <C> <C>
COMMON STOCKS (cont'd)
Oil (0.4%)
Quaker State Corp. 500 $ 7,000
Texas Meridian Resources Corp.** 5,000 61,875
------------
68,875
------------
Oil Services (1.4%)
Baker Hughes, Inc. 3,500 92,312
Halliburton Co. 500 27,437
Nabors Industries, Inc.** 5,000 64,375
Smith International, Inc.** 4,500 91,688
------------
275,812
------------
Optical Instruments & Lenses (0.7%)
Luxottica Group SPA Sponsored ADR** 2,000 140,500
------------
Paper & Forest Products (0.3%)
James River Corp. of Virginia 1,000 26,375
Westvaco Corp. 200 5,800
Weyerhaeuser Co. 800 33,900
------------
66,075
------------
Personal Care Products (0.5%)
Nature's Sunshine Products, Inc. 3,000 93,000
------------
Pharmaceuticals (1.1%)
Alpharma, Inc. Class A 2,000 51,250
Gilead Sciences, Inc.** 3,000 106,500
Ligand Pharmaceuticals, Inc. Class B** 4,000 48,500
------------
206,250
------------
Printing & Publishing (0.6%)
K-III Communications Corp.** 10,000 116,250
------------
Radio & TV Broadcasting & Communication Equipment (0.6%)
Chancellor Corp. Class A** 6,000 123,000
------------
</TABLE>
See Accompanying Notes to Financial Statements.
12
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Warburg Pincus Balanced Fund
Statement of Net Assets (cont'd)
February 29, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares Value
----------- ------------
<S> <C> <C>
COMMON STOCKS (cont'd)
Real Estate (1.5%)
First Industrial Realty Trust, Inc. 4,000 $ 93,500
NHP, Inc.** 5,700 104,737
Wellsford Residential Property Trust 4,000 90,500
------------
288,737
------------
Retail Stores (0.9%)
Ben Franklin Retail Stores, Inc.** 333 583
Borders Group, Inc.** 4,000 92,500
PetSmart Inc.** 2,000 69,500
------------
162,583
------------
Semi-Conductors & Related Products (0.2%)
Micron Technology, Inc. 1,300 41,600
------------
Services--Computer Programming Services (1.9%)
DST Systems, Inc.** 4,500 154,125
Engineering Animation, Inc.** 2,000 51,500
National Instruments Corp.** 2,000 37,750
Network General Corp.** 1,000 40,250
Transactions Systems Architects, Inc. Class A** 2,400 84,600
------------
368,225
------------
Steel (1.5%)
Bethlehem Steel Corp.** 5,000 68,750
LTV Corp.** 8,000 102,000
Republic Engineered Steels Inc.** 3,000 15,750
USX-U.S. Steel Group 3,000 98,250
WHX, Inc.** 1,600 18,600
------------
303,350
------------
</TABLE>
See Accompanying Notes to Financial Statements.
13
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Warburg Pincus Balanced Fund
Statement of Net Assets (cont'd)
February 29, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares Value
----------- ------------
<S> <C> <C>
COMMON STOCKS (cont'd)
Telecommunications (2.8%)
Airtouch Communications, Inc.** 2,000 $ 62,000
Comcast Corp., Special Class A Non-Voting 1,500 29,437
Glenayre Technologies, Inc.** 2,000 88,250
Picturetel, Inc.** 2,400 84,900
Tele-Communications, Inc. TCI, Class A** 4,000 84,000
Tele-Communications, Inc., Series A Liberty Media Group** 3,000 82,875
Tellabs, Inc.** 2,500 118,125
------------
549,587
------------
Transportation (0.4%)
Fritz Companies, Inc.** 2,000 78,000
------------
Trucking And Courier Services (0.2%)
Mark VII, Inc.** 2,000 34,250
------------
Wholesale--Miscellaneous Nondurable Goods (0.3%)
Rykoff-Sexton, Inc. 4,000 57,500
------------
Foreign Common Stocks
Austria (0.7%)
VA Technologie AG** 1,165 147,273
------------
Denmark (0.7%)
International Service System B 5,600 142,958
------------
France (0.7%)
Bouygues 539 53,368
Compagnie Francaise de Petroleum Total 1,326 87,535
------------
140,903
------------
Germany (0.7%)
Adidas AG** 2,230 143,812
------------
Hong Kong (0.9%)
Citic Pacific Ltd. 16,000 62,299
Jardine Matheson Holdings Ltd. 15,600 124,800
------------
187,099
------------
</TABLE>
See Accompanying Notes to Financial Statements.
14
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Warburg Pincus Balanced Fund
Statement of Net Assets (cont'd)
February 29, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares Value
----------- ------------
<S> <C> <C>
COMMON STOCKS (cont'd)
Israel (0.1%)
Clal Electronics Industries Ltd.** 180 $ 23,422
------------
Japan (1.4%)
Keyence Corp. 1,000 118,050
Nikon Corp. 12,000 164,509
------------
282,559
------------
Malaysia (0.1%)
Westmont B.** 12,000 26,845
------------
Portugal (1.1%)
Portugal Telecommunications SA ADR** 9,500 218,500
------------
Sweden (0.4%)
Astra Free B 1,935 88,643
------------
TOTAL COMMON STOCKS (Cost $9,960,113) 11,192,878
------------
CONVERTIBLE PREFERRED STOCK (2.5%)
Globalstar Telecommunications** (Cost $500,000) 10,000 500,000
------------
Par
Maturity (000) Value
---------- --------- -------------
UNITED STATES TREASURY OBLIGATIONS (32.8%)
U.S. Treasury Notes
6.500% 08/15/05 $ 3,100 $ 3,174,553
8.500% 11/15/00 2,500 2,782,825
-------------
5,957,378
-------------
U.S. Treasury STRIP Notes 05/15/20 2,500 481,700
-------------
TOTAL U. S. TREASURY OBLIGATIONS (Cost $6,523,364) 6,439,078
-------------
AGENCY OBLIGATIONS (0.1%)
Government National Mortgage Association 6.500% (Cost $11,959) 08/15/03 13 12,220
-------------
ZERO COUPON BONDS (0.8%)
President Enterprises (Cost $148,989) 07/22/99 120 157,350
-------------
</TABLE>
See Accompanying Notes to Financial Statements.
15
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Warburg Pincus Balanced Fund
Statement of Net Assets
February 29, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Maturity (000) Value
<S> <C> <C> <C>
REPURCHASE AGREEMENTS (9.8%) ---------- --------- -------------
State Street Bank & Trust Co. 5.280% 03/01/96 $ 1,921 $ 1,921,000
(Agreement dated 02/29/96 to be repurchased at $1,921,282,
collateralized by $1,945,000 U.S. Treasury Notes 6.00% due 08/31/97.
Market value of collateral is $1,962,019.) (Cost $1,921,000)
-------------
TOTAL INVESTMENTS AT VALUE (103.0%) (Cost $19,065,425) 20,222,526
LIABILITIES IN EXCESS OF OTHER ASSETS (3.0%) (592,246)
-------------
NET ASSETS (Applicable to 1,656,311 Common Shares and 111 Advisor Shares)
(100.0%) $ 19,630,280
-------------
-------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER COMMON SHARE
($19,628,965 : 1,656,311) $11.85
-------------
-------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER ADVISOR SHARE
($1,315 : 111) $11.85
-------------
-------------
* Also cost for Federal income tax purposes. The gross appeciation
(depreciation) on a tax basis is as follows:
Gross Appreciation $ 1,495,741
Gross Depreciation (338,640)
------------
Net Appreciation $ 1,157,101
------------
------------
</TABLE>
** Non-income producing.
See Accompanying Notes to Financial Statements.
16
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Warburg Pincus Tax Free Fund
Statement of Net Assets
February 29, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Rate Maturity (000) Value
--------- ---------- --------- ------------
<S> <C> <C> <C> <C>
MUNICIPAL BONDS (96.4%)
Arizona (2.4%)
Phoenix GO Bond (Aa, AA+) 6.375% 07/01/13 $ 100 $ 107,125
------------
California (4.5%)
California State Public Works Board Various Universities Projects
Series A (Aaa, AAA) 6.600 12/01/22 175 200,375
------------
Georgia (4.8%)
Gwinnett County GO Bonds (Aa1, AA) 6.000 01/01/10 200 213,000
------------
Maryland (18.6%)
Baltimore Consolidated Public Improvement MB Series 1991C/(FGIC
Insurance) (Aaa, AAA) 7.500 10/15/09 400 497,000
Montgomery County Parking RB (Silver Spring Group)/(FGIC Insurance)
(Aaa, AAA) 6.250 06/01/07 300 328,500
------------
825,500
------------
Massachusetts (9.2%)
Massachusetts Bay Transportation Authority (General Transportation
Systems) Series A (A1, A+) 6.250 03/01/05 200 222,000
Massachusetts State Water Authority Series B (Aaa, AAA) 5.000 12/01/16 200 186,250
------------
408,250
------------
Michigan (8.9%)
Detroit Water Supply Systems Second Lien-Series A (Aaa, AAA) 5.500 07/01/15 200 196,000
University of Michigan RB Series B/(MBIA Insurance) (AA1, AA+) 5.250 04/01/14 200 195,750
------------
391,750
------------
New Jersey (10.2%)
New Jersey State Turnpike Authority RB Refunding Series 1991/(MBIA
Insurance) (Aaa, AAA) 6.500 01/01/16 400 449,500
------------
New York (14.4%)
New York State Dormitory Authority State University Educational
Facility Series A (Baa1, BBB) 6.500 05/15/06 200 215,250
New York State Thruway Authority (Service Contract Highway & Bridges)
Series A (Aaa, AAA) 6.000 01/01/04 205 224,475
New York State Urban Development RB/(MBIA Insurance) (Baa1, BBB) 5.750 04/01/11 200 199,000
------------
638,725
------------
North Carolina (4.9%)
North Carolina Municipal Power Agency (Catawba Electric) RB/(MBIA
Insurance) (Aaa, AAA) 6.000 01/01/10 200 216,750
------------
</TABLE>
See Accompanying Notes to Financial Statements.
17
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Warburg Pincus Tax Free Fund
Statement of Net Assets
February 29, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Rate Maturity (000) Value
--------- ---------- --------- ------------
<S> <C> <C> <C> <C>
MUNICIPAL BONDS (cont'd)
Pennsylvania (7.2%)
Philadelphia Water & Waste Water RB (Aaa, AAA) 6.250 08/01/09 $ 200 $ 219,750
Quakertown Hospital Authority VRDN RB/(FNB Chicago LOC) (A1, VMIG1)+ 3.200 03/05/96 100 100,000
------------
319,750
------------
Puerto Rico (6.5%)
Puerto Rico Commonwealth GO/(MBIA Insurance)
(Aaa, AAA) 6.500 07/01/08 250 286,250
------------
South Carolina (4.8%)
Spartanburg Water Systems Improvement Refunding RB
(A1, AA-) 6.200 06/01/09 200 213,000
------------
TOTAL INVESTMENTS AT VALUE (96.4%) (Cost $4,031,851*) 4,269,975
OTHER ASSETS IN EXCESS OF LIABILITIES (3.6%) 157,173
------------
NET ASSETS (Applicable to 416,882 Shares)(100.0%) $ 4,427,148
------------
------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($4,427,148/416,882) $ 10.62
------------
------------
</TABLE>
+ Variable Rate Demand Notes--The interest rate shown is the rate as of February
29, 1996 and the maturity date shown is the longer of the next interest
readjustment date or the date the principal amount can be recovered through
demand.
* Also cost for Federal income tax purposes. The gross appreciation
(depreciation) on a tax basis is as follows:
<TABLE>
<S> <C>
Gross Appreciation $ 245,984
Gross Depreciation (7,860)
----------
Net Appreciation $ 238,124
----------
----------
</TABLE>
The Moody's Investors Service, Inc. and Standard & Poor's Ratings Group
ratings indicated are the most recent ratings available at February 29,
1996.
INVESTMENT ABBREVIATIONS
<TABLE>
<S> <C>
VRDN................................................. Variable Rate Demand Note
GO................................................... General Obligations
LOC.................................................. Letter of Credit
MB................................................... Municipal Bond
RB................................................... Revenue Bond
</TABLE>
See Accompanying Notes to Financial Statements.
18
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Warburg Pincus Funds
Statement of Operations
For the Six Months Ended February 29, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Warburg Pincus Warburg Pincus Warburg Pincus
Growth & Income Fund Balanced Fund Tax Free Fund
--------------------- -------------- --------------
<S> <C> <C> <C>
Investment Income:
Interest $ 5,495,073 $ 24,095 $ 116,435
Dividends 6,083,186 147,753 0
Foreign taxes withheld 0 (96) 0
--------------------- -------------- --------------
Total investment income 11,578,259 171,752 116,435
--------------------- -------------- --------------
Expenses:
Investment advisory fees 4,051,011 50,840 10,788
Co-administration fees 1,350,338 14,122 5,393
Distribution fees 166,934 14,125 5,394
Custodian fees 103,245 21,141 6,510
Transfer agent fees 604,000 18,933 15,014
Legal fees 27,883 3,684 3,432
Audit fees 24,108 180 164
Registration fees 78,002 21,129 9,382
Insurance expense 13,421 137 54
Printing expense 158,325 6,399 5,923
Other expenses 20,688 2,643 929
--------------------- -------------- --------------
6,597,955 153,333 62,983
Less fees waived 0 (52,827) (14,024)
Less expense reimbursement by adviser 0 (9,896) (38,146)
--------------------- -------------- --------------
Total expenses 6,597,955 90,610 10,813
--------------------- -------------- --------------
Net investment income 4,980,304 81,142 105,622
--------------------- -------------- --------------
Realized and Unrealized Gain (Loss) from Investments and
Foreign Currency Related Items:
Net realized gain from investment transactions 27,856,945 228,214 84,608
Net realized loss from foreign currency related
items 0 (1,225) 0
Net change in unrealized appreciation (depreciation)
from investments and foreign currency related
items 13,831,010 691,644 (2,589)
--------------------- -------------- --------------
Net gain on investments and foreign currency
transactions 41,687,955 918,633 82,019
--------------------- -------------- --------------
Net increase in net assets resulting from operations $ 46,668,259 $ 999,775 $ 187,641
--------------------- -------------- --------------
--------------------- -------------- --------------
</TABLE>
See Accompanying Notes to Financial Statements.
19
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Warburg Pincus Funds
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Warburg Pincus
Growth & Income Fund
----------------------------------
For the For the
Six Months Ended Year Ended
February 29, 1996 August 31, 1995
----------------- ---------------
(Unaudited)
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income $ 4,980,304 $ 12,539,769
Net gain on investments and foreign currency transactions 41,687,955 135,061,213
----------------- ---------------
Net increase in net assets resulting from operations 46,668,259 147,600,982
----------------- ---------------
Distributions to shareholders:
Dividends to shareholders from net investment income:
Common shares (5,947,107) (9,949,389)
Advisor shares (244,891) (137,213)
Distributions to shareholders from net realized capital gains:
Common shares (49,915,078) (8,067,592)
Advisor shares (3,362,883) --
----------------- ---------------
Total distributions to shareholders (59,469,959) (18,154,194)
----------------- ---------------
Net capital share transactions 40,702,027 554,990,830
----------------- ---------------
Total increase in net assets 27,900,327 684,437,618
Net Assets:
Beginning of period 1,095,095,246 410,657,628
----------------- ---------------
End of period $ 1,122,995,573 $ 1,095,095,246
----------------- ---------------
----------------- ---------------
</TABLE>
20
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Warburg Pincus Warburg Pincus Tax
Balanced Fund Free Fund
- ---------------------------------- ----------------------------------
For the For the
Six Months For the Six Months For the
Ended Year Ended Ended Year Ended
February 29, 1996 August 31, 1995 February 29, 1996 August 31, 1995
- ----------------- --------------- ----------------- ---------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
$ 81,142 $ 38,382 $ 105,622 $ 252,434
918,633 495,992 82,019 107,773
- ----------------- --------------- ----------------- ---------------
999,775 534,374 187,641 360,207
- ----------------- --------------- ----------------- ---------------
(43,153) (38,909) (105,622) (252,796)
(4) -- -- --
(149,992) (111,945) -- (137,718)
(16) -- -- --
- ----------------- --------------- ----------------- ---------------
(193,165) (150,854) (105,622) (390,514)
- ----------------- --------------- ----------------- ---------------
13,481,821 4,150,301 218,016 (1,307,539)
- ----------------- --------------- ----------------- ---------------
14,288,431 4,533,821 300,035 (1,337,846)
5,341,849 808,028 4,127,113 5,464,959
- ----------------- --------------- ----------------- ---------------
$ 19,630,280 $ 5,341,849 $ 4,427,148 $ 4,127,113
- ----------------- --------------- ----------------- ---------------
- ----------------- --------------- ----------------- ---------------
See Accompanying Notes to Financial Statements.
</TABLE>
21
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
[This Page Intentionally Left Blank]
22
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Warburg Pincus Growth & Income Fund
Financial Highlights (b)
(For a Share Outstanding Throughout each Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the
Six Months
Ended For the Years Ended August 31,
February 29, ------------------------------------------------------
1996 1995 1994 1993 1992 1991
--------------- ---------- --------- --------- --------- ---------
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period $16.40 $14.56 $16.72 $11.99 $12.11 $11.00
Income From Investment
Operations:
Net Investment Income 0.0758 0.2224 0.0785 0.0464 0.1912 0.3744
Net Gains on Securities (both
realized and unrealized) 0.6717 1.9834 1.8151 4.8499 0.0402 1.6891
Total from Investment
Operations 0.7475 2.2058 1.8936 4.8963 0.2314 2.0635
Less Distributions:
Dividends (from net investment
income) (0.0942) (0.1824) (0.0785) (0.0875) (0.1871) (0.4043)
Distributions (from capital
gains) (0.8133) (0.1834) (3.9751) (0.0788) (0.1643) (0.5492)
Total Distributions (0.9075) (0.3658) (4.0536) (0.1663) (0.3514) (0.9535)
Net Asset Value, End of Period $16.24 $16.40 $14.56 $16.72 $11.99 $12.11
Total Return 4.86%(d) 15.62% 14.41% 41.17% 1.99% 19.91%
Ratios/Supplemental Data
Net Assets, End of Period (000) $1,042,834 $1,038,193 $410,658 $60,689 $28,976 $24,726
Ratio of Expenses to Average Net
Assets 1.14%(c) 1.22% 1.28%(a) 1.14%(a) 1.25%(a) 1.30%(a)
Ratio of Net Investment Income to
Average Net Assets 0.90%(c) 1.64% 0.41% 0.30% 1.66% 3.42%
Portfolio Turnover Rate 44%(d) 109% 150% 344% 175% 41%
Average Commission Rate $0.06(e) -- -- -- -- --
</TABLE>
(a) Without the waiver of advisory and administration fees and without the
reimbursement of certain operating expenses, the ratio of expenses to
average net assets for the Warburg Pincus Growth & Income Fund would have
been 1.28%, 1.14%, 1.28% and 2.17% for the years ended August 31, 1994,
1993, 1992 and 1991, respectively.
(b) Financial Highlights relate solely to the Common Shares of the Fund.
(c) Annualized.
(d) Not Annualized.
(e) Computed by dividing the total amount of commissions paid by the total
number of shares purchased and sold during the period.
See Accompanying Notes to Financial Statements.
23
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Warburg Pincus Balanced Fund
Financial Highlights (b)
(For a Share Outstanding Throughout each Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the
Six Months
Ended For the Years Ended August 31,
February 29, -----------------------------------------------------
1996 1995 1994 1993 1992 1991
--------------- --------- --------- --------- --------- ---------
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $11.12 $11.01 $11.71 $12.04 $12.05 $10.60
Income From Investment Operations:
Net Investment Income 0.0621 0.2080 0.4132 0.5555 0.4408 0.4213
Net Gains on Securities (both
realized and unrealized) 0.8646 1.7225 0.3248 1.1253 0.5155 1.7196
Total from Investment Operations 0.9267 1.9305 0.7380 1.6808 0.9563 2.1409
Less Distributions:
Dividends (from net investment
income) (0.0505) (0.3136) (0.4586) (0.5412) (0.3713) (0.4128)
Distributions (from capital gains) (0.1462) (1.5069) (0.9794) (1.4696) (0.5950) (0.2781)
Total Distributions (0.1967) (1.8205) (1.4380) (2.0108) (0.9663) (0.6909)
Net Asset Value, End of Period $11.85 $11.12 $11.01 $11.71 $12.04 $12.05
Total Return 8.44%(d) 21.56% 6.86% 15.27% 8.07% 21.18%
Ratios/Supplemental Data
Net Assets, End of Period (000) $19,629 $5,342 $808 $762 $1,026 $1,290
Ratio of Expenses to Average Net Assets 1.60%(a)(c) 1.53%(a) 0%(a) 0%(a) .67%(a) 1.40%(a)
Ratio of Net Investment Income to
Average Net Assets 3.03%(c) 2.27% 3.76% 4.13% 3.68% 3.58%
Portfolio Turnover Rate 37%(d) 107% 32% 30% 93% 76%
Average Commission Rate $0.06(e) -- -- -- -- --
</TABLE>
(a) Without the waiver of advisory and administration fees and without the
reimbursement of certain operating expenses, the ratio of expenses to
average net assets for the Warburg Pincus Balanced Fund would have been
2.64% annualized for the six months ended February 29, 1996, and
6.04%, 5.46%, 5.37%, 3.88% and 3.89% for the years ended August 31,
1995, 1994, 1993, 1992 and 1991, respectively.
(b) Financial Highlights relate solely to the Common Shares of the Fund.
(c) Annualized.
(d) Not Annualized.
(e) Computed by dividing the total amount of commissions paid by the total
number of shares purchased and sold during the period.
See Accompanying Notes to Financial Statements.
24
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Warburg Pincus Tax Free Fund
Financial Highlights
(For a Share Outstanding Throughout each Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the
Six Months
Ended For the Years Ended August 31,
February 29, -----------------------------------------------------
1996 1995 1994 1993 1992 1991
--------------- --------- --------- --------- --------- ---------
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $10.41 $10.40 $11.53 $11.04 $10.46 $10.05
Income From Investment Operations:
Net Investment Income 0.2569 0.5426 0.6026 0.6385 0.6771 0.6027
Net Gains (Losses) on Securities
(both realized and unrealized) 0.2100 0.3077 (0.6259) 0.8654 0.6145 0.4402
Total from Investment Operations 0.4669 0.8503 (0.0233) 1.5039 1.2916 1.0429
Less Distributions:
Dividends (from net investment
income) (0.2569) (0.5426) (0.6092) (0.6725) (0.6345) (0.6212)
Distributions (from excess net
investment income) -- -- (0.0135) -- -- --
Distributions (from capital gains) -- (0.2977) (0.4886) (0.3414) (0.0771) (0.0117)
Total Distributions (0.2569) (0.8403) (1.1113) (1.0139) (0.7116) (0.6329)
Net Asset Value, End of Period $10.62 $10.41 $10.40 $11.53 $11.04 $10.46
Total Return 4.51%(c) 8.89% (0.30%) 14.45% 12.77% 10.66%
Ratios/Supplemental Data
Net Assets, End of Period (000) $4,427 $4,127 $5,465 $6,631 $6,491 $8,840
Ratio of Expenses to Average Net Assets .50%(a)(b) .48%(a) .15%(a) .17%(a) .33%(a) .83%(a)
Ratio of Net Investment Income to
Average Net Assets 4.88%(b) 5.53% 5.51% 5.71% 6.21% 6.02%
Portfolio Turnover Rate 51%(c) 38% 20% 70% 78% 63%
</TABLE>
(a) Without the waiver of advisory, administration and custody fees and without
the reimbursement of certain operating expenses, the ratio of expenses to
average net assets for the Warburg Pincus Tax Free Fund would have been
2.91% annualized for the six months ended February 29, 1996, and 2.12%,
1.84%, 1.76%, 1.61% and 3.06% for the years ended August 31, 1995, 1994,
1993, 1992 and 1991, respectively.
(b) Annualized.
(c) Not Annualized.
See Accompanying Notes to Financial Statements.
25
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Warburg Pincus Funds
Notes to Financial Statements
February 29, 1996 (Unaudited)
- --------------------------------------------------------------------------------
1. Significant Accounting Policies
The RBB Fund, Inc. (the "Company") is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end management
investment company. The Company was incorporated in Maryland on February 29,
1988 and currently has seventeen investment portfolios, three of which are
included in these financial statements.
The Company has authorized capital of thirty billion shares of common stock
of which 12.2 billion are currently classified into sixty-one classes. Each
class represents an interest in one of seventeen investment portfolios of the
Company, fifteen of which are currently in operation. The classes have been
grouped into fifteen separate "families", eight of which have begun investment
operations including the Warburg Pincus Family. The Warburg Pincus Family is
comprised of the Warburg Pincus Growth & Income Fund (the "Growth & Income
Fund"), the Warburg Pincus Balanced Fund (the "Balanced Fund") and the Warburg
Pincus Tax Free Fund (the "Tax Free Fund"), which are covered in this report.
The Growth & Income Fund and the Balanced Fund each have two classes of shares:
Common Shares and Advisor Shares.
The net asset value of each Fund is determined daily as of the close of
regular trading on the New York Stock Exchange. Each Fund's securities are
valued at market value, which is currently determined using the last reported
sales price. If no sales are reported, as in the case of some securities traded
over-the-counter, portfolio securities are valued at the mean between the last
reported bid and asked prices. Corporate bonds, tax-exempt bonds and notes and
government securities are valued on the basis of quotations provided by an
independent pricing service which uses information with respect to transactions
on bonds, quotations from bond dealers, market transactions in comparable
securities and various relationships between securities in determining value.
Short-term obligations with maturities of 60 days or less are valued at
amortized cost which approximates market value.
Security transactions are accounted for on a trade date basis. The cost of
investments sold is determined by use of the specific identification method for
both financial reporting and income tax purposes. Interest income is recorded on
the accrual basis. Dividends are recorded on the ex-dividend date. Certain
expenses, principally distribution, transfer agent and printing, are class
specific expenses and vary by class. Expenses not directly attributable to a
specific portfolio or class are allocated based on relative net assets of each
Fund and class, respectively.
For the Growth & Income and the Balanced Funds, dividends from net
investment income, if any, are declared and paid at least quarterly. For the Tax
Free Fund, dividends from net investment income, if any, are declared daily and
paid monthly. For all Funds, dividends from net realized capital gains, if any,
will be distributed at least annually. Income distributions and capital gain
distributions are determined in accordance with income tax regulations which may
differ from generally accepted accounting principles.
26
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Warburg Pincus Funds
Notes to Financial Statements (cont'd)
February 29, 1996 (Unaudited)
- --------------------------------------------------------------------------------
No provision is made for Federal taxes as it is the Company's intention to
have each portfolio continue to qualify for and elect the tax treatment
applicable to regulated investment companies under the Internal Revenue Code and
make the requisite distributions to its shareholders which will be sufficient to
relieve it from Federal income and excise taxes.
Money market instruments may be purchased subject to the seller's agreement
to repurchase them at an agreed upon date and price. The seller will be required
on a daily basis to maintain the value of the securities subject to the
agreement at not less than the repurchase price. The agreements are conditioned
upon the collateral being deposited under the Federal Reserve book-entry system
or with the Fund's custodian or a third party sub-custodian.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. Investment Adviser, Co-Administrators and Distributor
Warburg, Pincus Counsellors, Inc. ("Warburg"), a wholly owned subsidiary of
Warburg, Pincus Counsellors G.P. ("Counsellors G.P.") serves as each Fund's
investment adviser. For its advisory services, Warburg is entitled to receive
the following fees, computed daily and payable monthly based on a Fund's average
daily net assets:
<TABLE>
<CAPTION>
Fund Annual Rate
- ---------------------------- -----------------------------------
<S> <C>
Growth & Income Fund .75% average daily net assets.
Balanced Fund .90% average daily net assets.
Tax Free Fund .50% average daily net assets.
</TABLE>
Warburg may, at its discretion, voluntarily waive all or any portion of its
advisory fees for any of the Funds. For the six months ended February 29, 1996,
investment advisory fees, waivers and reimbursements were as follows:
<TABLE>
<CAPTION>
Gross Net Expense
Advisory Fee Waiver Advisory Fee Reimbursement
------------- --------- ------------- --------------
<S> <C> <C> <C> <C>
Growth & Income Fund $ 4,051,011 $ -- $ 4,051,011 $ --
Balanced Fund 50,840 (45,385) 5,455 (9,896)
Tax Free Fund 10,788 (10,788) -- (38,146)
</TABLE>
PFPC Inc. ("PFPC"), an indirect wholly owned subsidiary of PNC Bank Corp.,
and Counsellors Funds Service, Inc. ("CFSI"), a wholly owned subsidiary of
Warburg, serve as co-administrators for
27
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Warburg Pincus Funds
Notes to Financial Statements (cont'd)
February 29, 1996 (Unaudited)
- --------------------------------------------------------------------------------
each of the Funds. For the Growth & Income Fund, the co-administration fees are
computed daily and payable monthly at an annual rate of .20% of the first $125
million of average daily net assets and .15% of average daily net assets in
excess of $125 million for PFPC and .05% of the first $125 million of average
daily net assets and .10% of average daily net assets in excess of $125 million
for CFSI.
For the Balanced and Tax Free Funds, the co-administration fees are
computed daily and payable monthly at an annual rate of .15% of average daily
net assets for PFPC and .10% of average daily net assets for CFSI.
PFPC and CFSI may, at their discretion, voluntarily waive all or any
portion of their co-administration fees for any of the Funds. For the six months
ended February 29, 1996, PFPC and CFSI's co-administration fees and waivers were
as follows:
<TABLE>
<CAPTION>
Gross Net
Co-administration Fees Waivers Co-administration Fees
---------------------- --------- ----------------------
<S> <C> <C> <C>
Growth & Income Fund $ 1,350,338 $ -- $ 1,350,338
Balanced Fund 14,122 (7,442) 6,680
Tax Free Fund 5,393 (3,236) 2,157
</TABLE>
The Company, on behalf of each class of shares within the investment
portfolios, has adopted Distribution Plans pursuant to Rule 12b-1 under the 1940
Act, as amended, and has entered into Distribution Contracts with Counsellors
Securities Inc. ("CSI"), also a wholly owned subsidiary of Warburg, which
provide for each class to make monthly payments, based on average daily net
assets, to CSI. No compensation is payable by the Growth & Income Fund's Common
Shares. For distribution services with respect to the Balanced and the Tax Free
Funds' Common Shares, CSI receives a fee at the annual rate of .25%, computed
daily and payable monthly, on average daily net assets. For distribution
services with respect to the Growth & Income and Balanced Funds' Advisor Shares,
CSI receives a fee at the annual rate of .50%, computed daily and payable
monthly, on average daily net assets. For the six months ended February 29,
1996, distribution fees were as follows:
<TABLE>
<CAPTION>
Distribution
Fees
----------------
<S> <C>
Growth & Income Fund
Advisor Shares $ 166,934
----------------
----------------
Balanced Fund
Common Shares $ 14,121
Advisor Shares 4
----------------
$ 14,125
----------------
----------------
Tax Free Fund
Common Shares $ 5,394
----------------
----------------
28
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Warburg Pincus Funds
Notes to Financial Statements (cont'd)
February 29, 1996 (Unaudited)
- --------------------------------------------------------------------------------
3. Investment in Securities
For the six months ended February 29, 1996, purchases and sales of
investment securities (other than short-term investments) were as follows:
</TABLE>
<TABLE>
<CAPTION>
Investment Securities
----------------------------------
Purchases Sales
---------------- ----------------
<S> <C> <C>
Growth & Income Fund $ 379,995,182 $ 390,848,716
Balanced Fund 16,531,248 3,773,882
Tax Free Fund 2,210,395 2,054,653
</TABLE>
4. Capital Shares
Transactions in capital shares for each period were as follows:
<TABLE>
<CAPTION>
GROWTH & INCOME FUND BALANCED FUND
------------------------------------------------ ---------------------------------------------
For the For the For the For the
Six Months Ended Year Ended Six Month Ended Year Ended
February 29, 1996 August 31, 1995 February 29,1996 August 31, 1995
----------------------- ----------------------- ---------------------- ---------------------
(Unaudited) (Unaudited)
Shares Value Shares Value Shares Value Shares Value
---------- ----------- ---------- ----------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares Sold
Common Shares 14,067,891 $227,215,178 46,345,660 $670,088,619 1,415,541 $16,235,714 423,875 $4,348,625
Advisor Shares 1,419,208 22,753,049 3,521,620 52,908,038 -- -- 110 1,180
Shares issued in
reinvestment of
dividends
Common Shares 3,395,293 52,633,846 6,891 96,291 16,467 184,324 16,171 148,491
Advisor Shares 233,220 3,607,770 9,051 137,213 2 19 -- --
Shares repurchased
Common Shares (16,556,353) (262,516,812) (11,270,725) (167,348,709) (255,758) (2,938,233) (33,364) (347,995)
Advisor Shares (185,586) (2,991,004) (57,795) (890,622) -- (3) -- --
---------- ----------- ---------- ----------- ---------- ---------- ---------- ----------
Net increase 2,373,673 $40,702,027 38,554,702 $554,990,830 1,176,252 $13,481,821 406,792 $4,150,301
---------- ----------- ---------- ----------- ---------- ----------- ---------- ----------
---------- ----------- ---------- ----------- ---------- ----------- ---------- ----------
Common Shares authorized 100,000,000 100,000,000 100,000,000 100,000,000
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
29
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Warburg Pincus Funds
Notes to Financial Statements (cont'd)
February 29, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TAX FREE FUND
------------------------------------------------------------
For the For the
Six Months Ended Year Ended
February 29, 1996 August 31, 1995
---------------------------- ------------------------------
(Unaudited)
Shares Value Shares Value
-------------- ------------ -------------- --------------
<S> <C> <C> <C> <C>
Shares sold:
Common Shares 36,199 $ 386,071 16,896 $ 172,004
Shares issued in reinvestment of
dividends:
Common Shares 6,151 65,417 24,384 240,772
Shares repurchased:
Common Shares (21,938) (233,472) (170,342) (1,720,315)
-------------- ------------ -------------- --------------
Net increase (decrease) 20,412 $ 218,016 (129,062) $ (1,307,539)
-------------- ------------ -------------- --------------
-------------- ------------ -------------- --------------
Common Shares authorized 100,000,000 100,000,000
-------------- --------------
-------------- --------------
</TABLE>
5. Net Assets
At February 29, 1996, net assets consisted of the following: (Unaudited)
<TABLE>
<CAPTION>
Growth & Income Fund Balanced Fund Tax Free Fund
----------------------- -------------- --------------
<S> <C> <C> <C>
Capital paid-in $ 984,662,324 $ 18,290,237 $ 4,153,042
Undistributed net
investment income 1,241,473 43,898 --
Amortized market discount -- -- 5,642
Accumulated net realized gain on investment transactions
and foreign currency transactions 5,505,356 139,041 30,340
Unrealized appreciation on investments and foreign
currency transactions 131,586,420 1,157,104 238,124
----------------------- -------------- --------------
$ 1,122,995,573 $ 19,630,280 $ 4,427,148
----------------------- -------------- --------------
----------------------- -------------- --------------
</TABLE>
30
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Warburg Pincus Funds
Notes to Financial Statements (cont'd)
February 29, 1996 (Unaudited)
- --------------------------------------------------------------------------------
6. Other Financial Highlights
The Growth & Income and the Balanced Funds currently offer one other class
of shares, Advisor Shares, representing an additional interest in each of the
Funds. The Financial highlights of each of the Advisor Shares are as follows:
<TABLE>
<CAPTION>
Advisor Shares
---------------------------------------------------------------------
Growth & Income Balanced
Fund Fund
--------------------------------- ----------------------------------
For the Period For the Period
For the May 15, 1995 July 31, 1995
Six Months (Commencement For the (Commencement
Ended of Operations) Six Months of Operations)
February 29, to Ended to
1996 August 31, 1995 February 29, 1996 August 31, 1995
---------------- --------------- ----------------- ---------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 16.38 $ 14.87 $ 11.13 $ 10.72
---------------- --------------- -------- -------
Income From Investment Operations:
Net Investment Income 0.0581 0.0236 0.0417 0.0170
Net Gains on Securities (both
realized and unrealized) 0.6671 1.5323 0.8603 0.3930
---------------- --------------- -------- -------
Total from Investment
Operations 0.7252 1.5559 0.9020 0.4100
---------------- --------------- -------- -------
Less Distributions:
Dividends (from net investment
income) (0.0619) (0.0459) (0.0358) 0.0000
Distributions (from capital
gains) (0.8133) 0.0000 (0.1462) 0.0000
---------------- --------------- -------- -------
Total Distributions (0.8752) (0.0459) (0.1820) 0.0000
---------------- --------------- -------- -------
Net Asset Value, End of Period $ 16.23 $ 16.38 $ 11.85 $ 11.13
---------------- --------------- -------- -------
---------------- --------------- -------- -------
Total Return 4.72%(c) 10.49%(c) 8.20%(c) 3.82%(c)
Ratios/Supplemental Data
Net Assets, End of Period (000) $ 80,161 $ 56,902 $ 1 $ 1
Ratio of Expenses to Average Net
Assets 1.37%(b) 1.92%(b) 1.85%(a)(b) 1.76%(a)(b)
Ratio of Net Investment Income to
Average Net Assets 0.50%(b) 0.43%(b) 2.78%(b) 2.00%(b)
Portfolio Turnover Rate 44%(c) 109%(c) 37%(c) 107%(c)
Average Commission Rate $ 0.06(e) -- $ 0.06(e) --
</TABLE>
(a) Without the waiver of advisory and administration fees and without the
reimbursement of certain operating expenses, the ratio of expenses to
average net assets for the Balanced Fund would have been 632.54% annualized
for the six months ended February 29, 1996 and 628.47% annualized for the
period ended August 31, 1995.
(b) Annualized.
(c) Not Annualized.
31
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Warburg Pincus Funds
Notes to Financial Statements (cont'd)
February 29, 1996 (Unaudited)
- --------------------------------------------------------------------------------
(e) Computed by dividing the total amount of commissions paid by the total
number of Shares purchased and sold during the period.
7. Subsequent Event
On January 24, 1996, the Board of Directors of The RBB Fund, Inc.
unanimously endorsed proposals for the reorganizations of three of its
investment series--Warburg Pincus Growth & Income Fund, Warburg Pincus Balanced
Fund and Warburg Pincus Tax Free Fund (each, an "Existing Warbug Fund"). Under
the terms of the proposals, each of three newly-formed investment companies--
Warburg, Pincus Growth & Income Fund, Inc., Warburg, Pincus Balanced Fund, Inc.
and Warburg, Pincus Tax Free Fund, Inc.--would acquire all or substantially all
of the assets and liabilities of the Existing Warburg Fund with a similar name.
For shareholders of record of the existing Warburg funds on March 1, 1996,
a meeting will be held on May 1, 1996 to consider this transaction. The closing
date of the reorganization, if approved, will be May 3, 1996.
32
<PAGE>
<PAGE>
Warburg Pincus Advisor Funds
SEMI ANNUAL REPORT
February 29, 1996
Warburg Pincus Advisor
Growth & Income Fund
Warburg Pincus Advisor
Balanced Fund
A PROSPECTUS CONTAINING MORE COMPLETE INFORMATION, INCLUDING
MANAGEMENT FEES AND EXPENSES, MAY BE OBTAINED BY CALLING
1-800-369-2728 OR BY WRITING TO WARBURG PINCUS ADVISOR FUNDS,
P.O. BOX 9030, BOSTON, MA 02205-9030. INVESTORS SHOULD READ THE
PROSPECTUS CAREFULLY BEFORE INVESTING.
The views of the Fund's Management are as of the date of this letter and
Portfolio holdings described in this semi-annual report are as of February 29,
1996; these views and positions may have changed subsequent to these dates.
- --------------------------------------------------------------------------------
Warburg Pincus Advisor Growth & Income Fund
Semiannual Investment Adviser's Report
- --------------------------------------------------------------------------------
April 22, 1996
For the six months ended February 29, 1996, the Warburg Pincus Advisor
Growth & Income Fund (the "Fund") appreciated 4.72%* vs. an increase of 15.30%
in the S&P 500 Index.
Strong performers for the Fund during the period were banking and
financial-services stocks, which benefited from a favorable interest-rate
environment and consolidation activity within the industry, especially the
banking area. The Fund saw particularly strong performance from First Interstate
Bancorp, one of its largest holdings. The bank's share price climbed
significantly through the period in response to Wells Fargo's announced takeover
bid, which was approved by both sets of shareholders and finalized at the end of
March.
The Fund's gold stocks also contributed positively to its performance.
These issues rose sharply in response to an increase in the price of gold to
over $415 an ounce in January of this year, its highest level in several years.
We used the opportunity to take some profits in some of the Fund's
better-performing gold stocks, but we remain very much committed to gold shares
based on what we project will be a long-term imbalance between supply and demand
for the metal.
Industrial cyclical stocks, another heavily weighted area in the portfolio,
also performed well during the period. We believe that the prospects for these
stocks remain favorable, given our expectations for stronger economic growth
through the remainder of the year.
Other strong performers for the Fund during the period were oil-services
stocks, whose prices rallied strongly in recent months to their highest levels
in years. Reasons for the surge in performance include a rise in the price of
oil, a steady increase in world-wide demand and a jump in drilling activity. We
think that the fundamentals for the industry remain positive.
The Fund also saw good performance from its holdings in the
telecommunications sector, which we believe stands to benefit greatly from the
deregulatory effects of the new telecommunications law. The Fund's holdings at
the end of the period included Airtouch Communications, Comcast and Tele-
Communications Inc.
Anthony G. Orphanos
Portfolio Manager
- ---------------
* For the since inception (5/15/95) period ended March 29, 1996, total return
(non-annualized) was 16.54%. From time to time, the Fund's investment adviser
and co-administrators had waived some fees and/or reimbursed some expenses,
without which performance would be lower. All figures cited represent past
performance and do not guarantee future results. Investment return and
principal value of an investment will fluctuate so that an investor's shares
upon redemption may be worth more or less than original cost.
1
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Warburg Pincus Advisor Balanced Fund
Semiannual Investment Adviser's Report
- --------------------------------------------------------------------------------
April 22, 1996
For the six months ended February 29, 1996, the Warburg Pincus Advisor
Balanced Fund (the "Fund") gained 8.20%*, vs. a gain of 8.78% for the Lipper
Balanced Fund Index.
Declining interest rates, continued economic growth and the absence of
significant inflationary pressures provided an ideal backdrop for financial
markets through most of the period. Throughout, we attempted to maintain an
optimal mix of stocks and bonds in the portfolio, one intended to provide solid
returns at a relatively low level of volatility.
The Fund finished the reporting period with a 50.2% commitment to domestic
common stocks, with its heaviest weightings in, respectively, the technology,
metals and mining, and financial-services sectors. Good stock selection within
these sectors played a significant role in the Fund's performance during the
period, and we believe that the prospects for our holdings remain positive.
The Fund's foreign-equity exposure (6.8% of assets at the close of the
period) consisted of a diversified mix of issues from Asian and European
countries, with the largest weightings in Japan, Portugal and Hong Kong,
respectively. We continue to find attractive opportunities among foreign
markets, particularly in Asia.
The Fund's fixed-income weighting was concentrated primarily in U.S.
Treasury obligations through the six months. As of February 29, Treasuries
represented 32.8% of the portfolio. We maintained relatively limited exposure to
the fixed-income sector through much of the period, reflecting our more-positive
view on the prospects of stocks vs. those of bonds.
Anthony G. Orphanos
Dale C. Christensen
Co-Portfolio Strategist
Co-Portfolio Strategist
- ---------------
* For the since inception (7/31/95) period ended March 29, 1996, total return
(non-annualized) was 12.42%. From time to time, the Fund's investment adviser
and co-administrators may waive some fees and/or reimburse some expenses,
without which performance would be lower. Waivers and/or reimbursements are
subject to change. All figures cited represent past performance and do not
guarantee future results. Investment return and principal value of an
investment will fluctuate so that an investor's shares upon redemption may be
worth more or less than original cost.
2
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Warburg Pincus Growth & Income Fund
Statement of Net Assets
February 29, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares Value
---------- ----------------
<S> <C> <C>
COMMON STOCKS AND WARRANTS (82.9%)
Automobiles (1.4%)
Navistar International Corp.** 1,200,000 $ 12,150,000
Standard Products Co. 185,000 3,838,750
----------------
15,988,750
----------------
Banking (5.0%)
First Interstate Bancorp 340,000 55,547,500
----------------
Commercial Printing (0.3%)
Agrium, Inc. 220,000 3,403,125
----------------
Construction (2.0%)
Stone & Webster, Inc. 663,200 22,548,800
----------------
Electronic Computers (5.5%)
GRC International, Inc.** 800,000 26,900,000
Honeywell, Inc. 655,000 34,715,000
----------------
61,615,000
----------------
Electronics (0.4%)
Vishay Intertechnology, Inc.** 170,000 4,483,750
----------------
Entertainment (2.7%)
Acclaim Entertainment, Inc.** 1,125,000 14,132,812
Boardwalk Casino, Inc.** 525,000 3,281,250
Boardwalk Casino, Inc. Warrants (expire 02/11/98)** 375,000 796,875
Time Warner, Inc. 280,000 11,970,000
----------------
30,180,937
----------------
Financial Services (4.4%)
BankAmerica Corp. 435,000 30,993,750
Crestar Financial Corp. 200,000 11,700,000
Greenpoint Financial Corp. 233,000 6,174,500
----------------
48,868,250
----------------
Healthcare (0.6%)
Caremark International, Inc. 240,000 6,120,000
----------------
</TABLE>
See Accompanying Notes to Financial Statements.
3
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Warburg Pincus Growth & Income Fund
Statement of Net Assets (cont'd)
February 29, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares Value
---------- ----------------
<S> <C> <C>
COMMON STOCKS AND WARRANTS (cont'd)
Insurance (1.9%)
USF&G Corp. 1,444,000 $ 21,660,000
----------------
Manufacturing (3.0%)
Corning Glass, Inc. 965,000 31,362,500
Rauma OY Sponsored ADR** 137,900 2,654,575
----------------
34,017,075
----------------
Medical & Medical Services (2.4%)
Acuson Corp.** 210,000 3,123,750
Amsco International, Inc.** 30,000 468,750
Creative Biomolecules, Inc.** 359,300 3,188,787
Cytogen Corp.** 363,200 2,905,600
Foxmeyer Health Corp.** 980,000 16,782,500
----------------
26,469,387
----------------
Metals (2.8%)
Inco Ltd. 970,000 30,918,750
----------------
Mining (23.4%)
Cyprus Amax Minerals 317,000 8,202,375
Echo Bay Mines Ltd. 1,300,000 17,875,000
Hecla Mining Co.** 2,200,000 18,975,000
Homestake Mining Co. 2,514,000 48,708,750
Newmont Mining Corp. 1,000,000 56,875,000
Pegasus Gold, Inc.** 2,664,000 41,958,000
Placer Dome, Inc. 2,000,000 56,500,000
Prime Resources Group, Inc.** 1,400,000 13,524,420
----------------
262,618,545
----------------
Oil (1.3%)
Quaker State Corp. 715,000 10,010,000
Santa Fe Energy Resources, Inc.** 525,000 4,856,250
----------------
14,866,250
----------------
</TABLE>
See Accompanying Notes to Financial Statements.
4
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Warburg Pincus Growth & Income Fund
Statement of Net Assets (cont'd)
February 29, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares Value
---------- ----------------
<S> <C> <C>
COMMON STOCKS AND WARRANTS (cont'd)
Oil Services (4.4%)
Baker Hughes, Inc. 1,055,000 $ 27,825,625
Halliburton Co. 400,000 21,950,000
----------------
49,775,625
----------------
Paper & Forest Products (2.0%)
James River Corp. of Virginia 290,000 7,648,750
Westvaco Corp. 105,000 3,045,000
Weyerhaeuser Co. 275,000 11,653,125
----------------
22,346,875
----------------
Retail--General Merchandise Stores (0.0%)
Ben Franklin Retail Stores** 114,833 200,958
----------------
Semi-Conductors & Related Products (1.0%)
Micron Technology, Inc. 350,000 11,200,000
----------------
Steel (13.0%)
AK Steel Holding Corp. 600,000 21,675,000
Bethlehem Steel Corp. 2,015,000 27,706,250
Inland Steel Industries, Inc. 1,025,000 24,984,375
LTV Corp. 2,289,000 29,184,750
USX-U.S. Steel Group, Inc. 1,089,000 35,664,750
WHX, Inc.** 623,000 7,242,375
----------------
146,457,500
----------------
Telecommunications (5.4%)
Airtouch Communications, Inc.** 598,800 18,562,800
Comcast Corp., Special Class A Non-Voting 1,064,000 20,881,000
Tele-Communications, Inc., TCI Class A** 1,034,000 21,714,000
----------------
61,157,800
----------------
TOTAL COMMON STOCKS AND WARRANTS
(Cost $798,860,480) 930,444,877
----------------
</TABLE>
See Accompanying Notes to Financial Statements.
5
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Warburg Pincus Growth & Income Fund
Statement of Net Assets (concluded)
February 29, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Maturity Par (000) Value
---------- ----------- ----------------
<S> <C> <C> <C>
UNITED STATES TREASURY OBLIGATIONS (3.5%)
U.S. Treasury Bills
4.980% 03/07/96 $ 10,000 $ 9,991,700
4.970% 04/11/96 10,000 9,945,711
4.870% 05/02/96 10,000 9,914,600
4.990% 05/23/96 10,000 9,886,133
----------------
TOTAL U. S. TREASURY OBLIGATIONS (Cost $39,736,121) 39,738,144
----------------
REPURCHASE AGREEMENTS (14.7%)
J. P. Morgan Securities 5.420% 03/01/96 164,827 164,827,000
(Agreement dated 02/29/96 to be repurchased at $164,851,816,
collateralized by $155,249,000 U.S. Treasury Bonds 7.125% to 7.500%
due 02/15/23 to 11/15/24. Market value of collateral is $168,126,440.)
(Cost $164,827,000)
----------------
TOTAL INVESTMENTS AT VALUE (101.1%)
(Cost $1,003,423,601*) 1,135,010,021
LIABILITIES IN EXCESS OF OTHER ASSETS (1.1%) (12,014,448)
----------------
NET ASSETS (Applicable to 64,202,032 Common Shares and 4,939,717 Advisor
Shares) (100.0%) $ 1,122,995,573
----------------
----------------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER COMMON SHARE ($1,042,834,096 : 64,202,032) $16.24
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER ADVISOR SHARE ($80,161,477 : 4,939,717) $16.23
</TABLE>
* Cost for Federal income tax purposes at February 29, 1996, is $1,003,600,561.
The gross appreciation (depreciation) on a tax basis is as follows:
<TABLE>
<S> <C>
Gross Appreciation $ 163,892,722
Gross Depreciation (32,483,262)
---------------
Net Appreciation $ 131,409,460
---------------
---------------
</TABLE>
** Non-income producing.
See Accompanying Notes to Financial Statements.
6
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Warburg Pincus Balanced Fund
Statement of Net Assets
February 29, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares Value
----------- ------------
<S> <C> <C>
COMMON STOCKS (57.0%)
U.S. Common Stocks
Aerospace & Defense (0.7%)
Loral Corp. 3,100 $ 146,087
------------
Banking (1.1%)
Bank of Boston Corp. 2,200 106,975
First Interstate Bancorp 700 114,363
------------
221,338
------------
Business Services (1.5%)
Dun & Bradstreet Corp. 500 31,625
Emcare Holdings, Inc.** 1,000 26,625
Equifax, Inc. 4,000 83,000
HPR, Inc** 1,000 37,000
Paging Network, Inc.** 4,200 111,300
------------
289,550
------------
Chemicals (1.3%)
Mallinckrodt Group, Inc. 1,600 62,800
Monsanto Co. 1,400 188,475
------------
251,275
------------
Communications & Media (0.3%)
Infinity Broadcasting Corp. Class A** 1,600 66,000
------------
Computer & Office Equipment (1.4%)
Atria Software, Inc.** 2,000 94,000
Shared Medical Systems Corp. 1,800 100,350
Synopsys, Inc.** 2,500 81,875
------------
276,225
------------
Construction (0.5%)
Jacobs Engineering Group, Inc.** 2,000 57,000
Stone & Webster, Inc. 1,000 34,000
------------
91,000
------------
</TABLE>
See Accompanying Notes to Financial Statements.
7
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Warburg Pincus Balanced Fund
Statement of Net Assets (cont'd)
February 29, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares Value
----------- ------------
<S> <C> <C>
COMMON STOCKS (cont'd)
Consumer Services (0.3%)
Devry, Inc.** 1,000 $ 29,625
Sylvan Learning Systems, Inc.** 1,000 30,875
------------
60,500
------------
Electrical Equipment (0.4%)
Methode Electronics, Inc. Class A 5,250 73,500
------------
Electronic Computers (3.9%)
American Management Systems, Inc.** 3,000 72,000
Auspex Systems Inc.** 3,000 61,125
Cabletron Systems, Inc.** 700 52,588
Conitinuum Co., Inc.** 2,200 87,175
Filenet Corp.** 1,000 63,500
GRC International, Inc.** 3,000 100,875
Honeywell, Inc. 800 42,400
Linear Technology Corp. 1,000 46,500
Platinum Technology, Inc.** 4,900 69,212
System Software Associates, Inc. 3,150 66,150
Xilinx, Inc.** 2,500 96,563
------------
758,088
------------
Electronics (2.3%)
Burr-Brown Corp.** 2,400 54,600
Input/Output, Inc.** 5,600 166,600
Solectron Corp.** 2,600 126,100
Thermotrex Corp.** 1,800 79,200
Thermedics, Inc.** 1,000 26,000
------------
452,500
------------
Entertainment (0.5%)
Acclaim Entertainment, Inc.** 3,000 37,688
Boardwalk Casino, Inc.** 3,000 18,750
Time Warner, Inc. 800 34,200
------------
90,638
------------
</TABLE>
See Accompanying Notes to Financial Statements.
8
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Warburg Pincus Balanced Fund
Statement of Net Assets (cont'd)
February 29, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares Value
----------- ------------
<S> <C> <C>
COMMON STOCKS (cont'd)
Environmental Services (0.4%)
Allied Waste Industries, Inc. 5,000 $ 41,250
USA Waste Services, Inc.** 1,500 32,063
------------
73,313
------------
Financial Services (4.8%)
BankAmerica Corp. 500 35,625
Citicorp 1,200 93,600
Crestar Financial Corp. 500 29,250
Cullen/Frost Bankers 2,000 98,000
First Data Corp. 1,500 103,875
Fund American Enterprises 700 53,900
Great Financial Corp. 2,000 48,250
Greenpoint Financial Corp. 800 21,200
Legg Mason, Inc. 3,000 90,375
Mercury Finance Co. 17,000 233,750
Merrill Lynch & Co., Inc. 500 28,813
United Companies Financial Corp. 2,000 54,000
Wells Fargo & Co. 200 49,325
------------
939,963
------------
Healthcare (2.9%)
Caremark International, Inc. 6,000 153,000
Health Management Associates Class A** 2,700 84,713
Healthcare Realty Trust, Inc.** 9,000 193,500
Healthsource, Inc.** 1,000 37,875
Meditrust SBI 3,000 99,750
------------
568,838
------------
Insurance (2.2%)
Leucadia National Corp. 4,000 106,500
Riscorp, Inc. Class A** 3,500 75,250
Security Connecticut Corp. 3,000 82,125
USF&G Corp. 5,000 75,000
Vesta Insurance Group, Inc. 2,700 89,100
------------
427,975
------------
</TABLE>
See Accompanying Notes to Financial Statements.
9
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Warburg Pincus Balanced Fund
Statement of Net Assets (cont'd)
February 29, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares Value
----------- ------------
<S> <C> <C>
COMMON STOCKS (cont'd)
Lodging & Restaurants (0.2%)
Doubletree Corp.** 1,500 $ 41,625
------------
Manufacturing (1.3%)
Allied Products Corp. 1,500 36,000
Corning Glass, Inc. 1,300 42,250
Maxim Integrated Products, Inc.** 2,600 94,250
Roper Industries, Inc. 2,000 90,250
------------
262,750
------------
Medical & Medical Services (2.7%)
American Oncology Resources, Inc.** 1,000 40,250
Acuson Corp.** 1,000 14,875
Creative Biomolecules, Inc.** 1,000 8,875
Cytogen Corp.** 1,000 8,000
ESC Medical Systems Ltd.** 6,000 198,000
Foxmeyer Health Corp.** 4,000 68,500
Healthcare Compare Corp.** 4,000 195,000
------------
533,500
------------
Metals (0.6%)
Inco Ltd. 3,500 111,562
------------
Mining (5.0%)
Coeur D'Alene Mines Corp. 4,500 106,313
Cyprus Amax Minerals Co. 1,000 25,875
Hecla Mining Co.** 5,000 43,125
Homestake Mining Co. 9,000 174,375
Newmont Mining Corp. 3,500 199,062
Pegasus Gold, Inc.** 10,000 157,500
Placer Dome, Inc. 7,000 197,750
Prime Resources Group, Inc.** 3,000 28,981
Western Deep Levels Ltd. ADR 800 40,000
------------
972,981
------------
Office Furniture (0.6%)
Viking Office Products, Inc.** 1,900 108,062
------------
</TABLE>
See Accompanying Notes to Financial Statements.
10
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Warburg Pincus Balanced Fund
Statement of Net Assets (cont'd)
February 29, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares Value
----------- ------------
<S> <C> <C>
COMMON STOCKS (cont'd)
Oil (0.4%)
Quaker State Corp. 500 $ 7,000
Texas Meridian Resources Corp.** 5,000 61,875
------------
68,875
------------
Oil Services (1.4%)
Baker Hughes, Inc. 3,500 92,312
Halliburton Co. 500 27,437
Nabors Industries, Inc.** 5,000 64,375
Smith International, Inc.** 4,500 91,688
------------
275,812
------------
Optical Instruments & Lenses (0.7%)
Luxottica Group SPA Sponsored ADR** 2,000 140,500
------------
Paper & Forest Products (0.3%)
James River Corp. 1,000 26,375
Westvaco Corp. 200 5,800
Weyerhaeuser Co. 800 33,900
------------
66,075
------------
Personal Care Products (0.5%)
Nature's Sunshine Products, Inc. 3,000 93,000
------------
Pharmaceuticals (1.1%)
Alpharma, Inc. Class A 2,000 51,250
Gilead Sciences, Inc.** 3,000 106,500
Ligand Pharmaceuticals, Inc. Class B** 4,000 48,500
------------
206,250
------------
Printing & Publishing (0.6%)
K-III Communications Corp.** 10,000 116,250
------------
Radio & TV Broadcasting & Communication Equipment (0.6%)
Chancellor Corp. Class A** 6,000 123,000
------------
</TABLE>
See Accompanying Notes to Financial Statements.
11
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Warburg Pincus Balanced Fund
Statement of Net Assets (cont'd)
February 29, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares Value
----------- ------------
<S> <C> <C>
COMMON STOCKS (cont'd)
Real Estate (1.5%)
First Industrial Realty Trust, Inc. 4,000 $ 93,500
NHP, Inc.** 5,700 104,737
Wellsford Residential Property Trust 4,000 90,500
------------
288,737
------------
Retail Stores (0.9%)
Ben Franklin Retail Stores, Inc.** 333 583
Borders Group, Inc.** 4,000 92,500
PetSmart Inc.** 2,000 69,500
------------
162,583
------------
Semi-Conductors & Related Products (0.2%)
Micron Technology, Inc. 1,300 41,600
------------
Services--Computer Programming Services (1.9%)
DST Systems, Inc.** 4,500 154,125
Engineering Animation, Inc.** 2,000 51,500
National Instruments Corp.** 2,000 37,750
Network General Corp.** 1,000 40,250
Transactions Systems Architects, Inc. Class A** 2,400 84,600
------------
368,225
------------
Steel (1.5%)
Bethlehem Steel Corp.** 5,000 68,750
LTV Corp.** 8,000 102,000
Republic Engineered Steels Inc.** 3,000 15,750
USX-U.S. Steel Group 3,000 98,250
WHX, Inc.** 1,600 18,600
------------
303,350
------------
</TABLE>
See Accompanying Notes to Financial Statements.
12
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Warburg Pincus Balanced Fund
Statement of Net Assets (cont'd)
February 29, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares Value
----------- ------------
<S> <C> <C>
COMMON STOCKS (cont'd)
Telecommunications (2.8%)
Airtouch Communications, Inc.** 2,000 $ 62,000
Comcast Corp., Special Class A Non-Voting 1,500 29,437
Glenayre Technologies, Inc.** 2,000 88,250
Picturetel, Inc.** 2,400 84,900
Tele-Communications, Inc. TCI, Class A** 4,000 84,000
Tele-Communications, Inc., Series A Liberty Media Group** 3,000 82,875
Tellabs, Inc.** 2,500 118,125
------------
549,587
------------
Transportation (0.4%)
Fritz Companies, Inc.** 2,000 78,000
------------
Trucking And Courier Services (0.2%)
Mark VII, Inc.** 2,000 34,250
------------
Wholesale--Miscellaneous Nondurable Goods (0.3%)
Rykoff-Sexton, Inc. 4,000 57,500
------------
Foreign Common Stocks
Austria (0.7%)
VA Technologie AG** 1,165 147,273
------------
Denmark (0.7%)
International Service System B 5,600 142,958
------------
France (0.7%)
Bouygues 539 53,368
Compagnie Francaise de Petroleum Total 1,326 87,535
------------
140,903
------------
Germany (0.7%)
Adidas AG** 2,230 143,812
------------
Hong Kong (0.9%)
Citic Pacific Ltd. 16,000 62,299
Jardine Matheson Holdings Ltd. 15,600 124,800
------------
187,099
------------
</TABLE>
See Accompanying Notes to Financial Statements.
13
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Warburg Pincus Balanced Fund
Statement of Net Assets (cont'd)
February 29, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares Value
----------- ------------
<S> <C> <C>
COMMON STOCKS (cont'd)
Israel (0.1%)
Clal Electronics Industries Ltd.** 180 $ 23,422
------------
Japan (1.4%)
Keyence Corp. 1,000 118,050
Nikon Corp. 12,000 164,509
------------
282,559
------------
Malaysia (0.1%)
Westmont B.** 12,000 26,845
------------
Portugal (1.1%)
Portugal Telecommunications SA ADR** 9,500 218,500
------------
Sweden (0.4%)
Astra Free B 1,935 88,643
------------
TOTAL COMMON STOCKS (Cost $9,960,113) 11,192,878
------------
CONVERTIBLE PREFERRED STOCK (2.5%)
Globalstar Telecommunications** (Cost $500,000) 10,000 500,000
------------
</TABLE>
<TABLE>
<CAPTION>
Par
Maturity (000) Value
---------- --------- -------------
<S> <C> <C> <C>
UNITED STATES TREASURY OBLIGATIONS (32.8%)
U.S. Treasury Notes
6.500% 08/15/05 $ 3,100 $ 3,174,553
8.500% 11/15/00 2,500 2,782,825
-------------
5,957,378
-------------
U.S. Treasury STRIP Notes 05/15/20 2,500 481,700
-------------
TOTAL U. S. TREASURY OBLIGATIONS (Cost $6,523,364) 6,439,078
-------------
AGENCY OBLIGATIONS (0.1%)
Government National Mortgage Association 6.500% (Cost $11,959) 08/15/03 13 12,220
-------------
ZERO COUPON BONDS (0.8%)
President Enterprises (Cost $148,989) 07/22/99 120 157,350
-------------
</TABLE>
See Accompanying Notes to Financial Statements.
14
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Warburg Pincus Balanced Fund
Statement of Net Assets (concluded)
February 29, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Maturity (000) Value
REPURCHASE AGREEMENTS (9.8%) ---------- --------- -------------
<S> <C> <C> <C>
State Street Bank & Trust Co. 5.280% 03/01/96 $ 1,921 $ 1,921,000
(Agreement dated 02/29/96 to be repurchased at $1,921,282,
collateralized by $1,945,000 U.S. Treasury Notes 6.00% due 08/31/97.
Market value of collateral is $1,962,019.) (Cost $1,921,000)
-------------
TOTAL INVESTMENTS AT VALUE (103.0%) (Cost $19,065,425) 20,222,526
LIABILITIES IN EXCESS OF OTHER ASSETS (3.0%) (592,246)
-------------
NET ASSETS (Applicable to 1,656,311 Common Shares and 111 Advisor Shares)
(100.0%) $ 19,630,280
-------------
-------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER COMMON SHARE
($19,628,965 : 1,656,311) $11.85
-------------
-------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER ADVISOR SHARE
($1,315 : 111) $11.85
-------------
-------------
</TABLE>
* Also cost for Federal income tax purposes. The gross appeciation
(depreciation) on a tax basis is as follows:
<TABLE>
<S> <C>
Gross Appreciation $ 1,495,741
Gross Depreciation (338,640)
------------
Net Appreciation $ 1,157,101
------------
------------
</TABLE>
** Non-income producing.
See Accompanying Notes to Financial Statements.
15
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Warburg Pincus Funds
Statement of Operations
For the Six Months Ended February 29, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Warburg Pincus Warburg Pincus
Growth & Income Fund Balanced Fund
--------------------- --------------
<S> <C> <C>
Investment Income:
Interest $ 5,495,073 $ 24,095
Dividends 6,083,186 147,753
Foreign taxes withheld 0 (96)
--------------------- --------------
Total investment income 11,578,259 171,752
--------------------- --------------
Expenses:
Investment advisory fees 4,051,011 50,840
Co-administration fees 1,350,338 14,122
Distribution fees 166,934 14,125
Custodian fees 103,245 21,141
Transfer agent fees 604,000 18,933
Legal fees 27,883 3,684
Audit fees 24,108 180
Registration fees 78,002 21,129
Insurance expense 13,421 137
Printing expense 158,325 6,399
Other expenses 20,688 2,643
--------------------- --------------
6,597,955 153,333
Less fees waived 0 (52,827)
Less expense reimbursement by advisor 0 (9,896)
--------------------- --------------
Total expenses 6,597,955 90,610
--------------------- --------------
Net investment income 4,980,304 81,142
--------------------- --------------
Realized and Unrealized Gain (Loss) from Investments and Foreign Currency
Related Items:
Net realized gain from investment transactions 27,856,945 228,214
Net realized loss from foreign currency related items 0 (1,225)
Net change in unrealized appreciation (depreciation) from investments
and foreign currency related items 13,831,010 691,644
--------------------- --------------
Net gain on investments and foreign currency transactions 41,687,955 918,633
--------------------- --------------
Net increase in net assets resulting from operations $ 46,668,259 $ 999,775
--------------------- --------------
--------------------- --------------
</TABLE>
See Accompanying Notes to Financial Statements.
16
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Warburg Pincus Funds
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Warburg Pincus Warburg Pincus
Growth & Income Fund Balanced Fund
-------------------------------------- ----------------------------------
For the For the
Six Months For the Six Months For the
Ended Year Ended Ended Year Ended
February 29, 1996 August 31, 1995 February 29, 1996 August 31, 1995
------------------ ------------------ ----------------- ---------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income $ 4,980,304 $ 12,539,769 $ 81,142 $ 38,382
Net gain on investments and foreign
currency the funds 41,687,955 135,061,213 918,633 495,992
------------------ ------------------ ----------------- ---------------
Net increase in net assets
resulting from operations 46,668,259 147,600,982 999,775 534,374
------------------ ------------------ ----------------- ---------------
Distributions to shareholders:
Dividends to shareholders from net
investment income:
Common shares (5,947,107) (9,949,389) (43,153) (38,909)
Advisor shares (244,891) (137,213) (4) --
Distributions to shareholders from
net realized capital gains:
Common shares (49,915,078) (8,067,592) (149,992) (111,945)
Advisor shares (3,362,883) -- (16) --
------------------ ------------------ ----------------- ---------------
Total distributions to
shareholders (59,469,959) (18,154,194) (193,165) (150,854)
------------------ ------------------ ----------------- ---------------
Net capital share transactions 40,702,027 554,990,830 13,481,821 4,150,301
------------------ ------------------ ----------------- ---------------
Total increase in net assets 27,900,327 684,437,618 14,288,431 4,533,821
Net Assets:
Beginning of period 1,095,095,246 410,657,628 5,341,849 808,028
------------------ ------------------ ----------------- ---------------
End of period $ 1,122,995,573 $ 1,095,095,246 $ 19,630,280 $ 5,341,849
------------------ ------------------ ----------------- ---------------
------------------ ------------------ ----------------- ---------------
</TABLE>
See Accompanying Notes to Financial Statements.
17
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Warburg Pincus Advisor Funds
Financial Highlights (d)
(For a Share Outstanding Throughout each Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Warburg Pincus Warburg Pincus
Growth & Income Balanced
Fund Fund
-------------------------------- --------------------------------
For the Period For the Period
For the May 15, 1995 For the July 31, 1995
Six Months (Commencement Six Months (Commencement
Ended of Operations) Ended of Operations)
February 29, to February 29, to
1996 August 31, 1995 1996 August 31, 1995
--------------- --------------- --------------- ---------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $16.38 $14.87 $11.13 $10.72
Income From Investment Operations:
Net Investment Income 0.0581 0.0236 0.0417 0.0170
Net Gains on Securities (both realized and
unrealized) 0.6671 1.5323 0.8603 0.3930
------- ------- ------- -------
Total from Investment Operations 0.7252 1.5559 0.9020 0.4100
------- ------- ------- -------
Less Distributions:
Dividends (from net investment income) (0.0619) (0.0459) (0.0358) 0.0000
Distributions (from capital gains) (0.8133) 0.0000 (0.1462) 0.0000
------- ------- ------- -------
Total Distributions (0.8752) (0.0459) (0.1820) 0.0000
------- ------- ------- -------
Net Asset Value, End of Period $16.23 $16.38 $11.85 $11.13
Total Returns 4.72%(c) 10.49%(c) 8.20%(c) 3.82%(c)
Ratios/Supplemental Data
Net Assets, End of Period (000) $80,161 $56,902 $1 $1
Ratio of Expenses to Average Net Assets 1.37%(b) 1.92%(b) 1.85%(a (b) 1.76%(a)(b)
Ratio of Net Investment Income to Average Net
Assets 0.50%(b) 0.43%(b) 2.78%(b) 2.00%(b)
Portfolio Turnover Rate 44%(c) 109%(c) 37%(c) 107%(c)
Average Commission Rate $0.06(e) -- $0.06(e) --
</TABLE>
(a) Without the waiver of advisory and administration fees and without the
reimbursement of certain operating expenses, the ratio of expenses to
average net assets for the Warburg Pincus Balanced Fund would have been
632.54% annualized for the six months ended February 29, 1996 and 628.47%
annualized for the period ended August 31, 1995.
(b) Annualized.
(c) Not Annualized.
(d) Financial Highlights relate solely to the Advisor Shares with the Fund.
(e) Computed by dividing the total amount of commissions paid by the total
number of shares purchased and sold during the period.
18
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Warburg Pincus Advisor Funds
Notes to Financial Statements
February 29, 1996 (Unaudited)
- --------------------------------------------------------------------------------
1. Significant Accounting Policies
The RBB Fund, Inc. (the "Company") is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end management
investment company. The Company was incorporated in Maryland on February 29,
1988 and currently has seventeen investment portfolios, two of which are
included in these financial statements.
The Company has authorized capital of thirty billion shares of common stock
of which 12.2 billion are currently classified into sixty-one classes. Each
class represents an interest in one of seventeen investment portfolios of the
Company, fifteen of which are currently in operation. The classes have been
grouped into fifteen separate "families", eight of which have begun investment
operations including the Warburg Pincus Family. The Warburg Pincus Family
represents interests in three funds, two of which, the Warburg Pincus Growth &
Income Fund (the "Growth & Income Fund") and the Warburg Pincus Balanced Fund
(the "Balanced Fund"), are covered in this report. The Growth & Income Fund and
Balanced Fund each have two classes of shares: Common Shares and Advisor Shares.
The Advisor Shares (also referred to as Series 2 shares) are sold by financial
institutions and operate under the name Warburg Pincus Advisor Funds.
The net asset value of each Fund is determined daily as of the close of
regular trading on the New York Stock Exchange. Each Fund's securities are
valued at market value, which is currently determined using the last reported
sales price. If no sales are reported, as in the case of some securities traded
over-the-counter, portfolio securities are valued at the mean between the last
reported bid and asked prices. Corporate bonds and government securities are
valued on the basis of quotations provided by an independent pricing service
which uses information with respect to transactions on bonds, quotations from
bond dealers, market transactions in comparable securities and various
relationships between securities in determining value. Short-term obligations
with maturities of 60 days or less are valued at amortized cost which
approximates market value.
Security transactions are accounted for on a trade date basis. The cost of
investments sold is determined by use of the specific identification method for
both financial reporting and income tax purposes. Interest income is recorded on
the accrual basis. Dividends are recorded on the ex-dividend date. Certain
expenses, principally distribution, transfer agent and printing, are class
specific expenses and vary by class. Expenses not directly attributable to a
specific portfolio or class are allocated based on relative net assets of each
portfolio and class, respectively.
Dividends from net investment income, if any, are declared and paid at
least quarterly. Dividends from net realized capital gains, if any, will be
distributed at least annually. Income distributions and capital gain
distributions are determined in accordance with income tax regulations which may
differ from generally accepted accounting principles.
No provision is made for Federal taxes as it is the Company's intention to
have each portfolio continue to qualify for and elect the tax treatment
applicable to regulated investment companies under the Internal Revenue Code and
make the requisite distributions to its shareholder which will be sufficient to
relieve it from Federal income and excise taxes.
19
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Warburg Pincus Advisor Funds
Notes to Financial Statements (cont'd)
February 29, 1996 (Unaudited)
- --------------------------------------------------------------------------------
Money market instruments may be purchased subject to the seller's agreement
to repurchase them at an agreed upon date and price. The seller will be required
on a daily basis to maintain the value of the securities subject to the
agreement at not less than the repurchase price. The agreements are conditioned
upon the collateral being deposited under the Federal Reserve book-entry system
or with the Fund's custodian or a third party sub-custodian.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. Investment Adviser, Co-Administrators and Distributor
Warburg, Pincus Counsellors, Inc. ("Warburg"), a wholly owned subsidiary of
Warburg, Pincus Counsellors G.P. ("Counsellors G.P.") serves as each Fund's
investment adviser. For its advisory services, Warburg is entitled to receive
the following fees, computed daily and payable monthly based on a fund's average
daily net assets.
<TABLE>
<CAPTION>
Fund Annual Rate
- ------------------------------------ ----------------------------------
<S> <C>
Growth & Income Fund .75% average daily net assets
Balanced Fund .90% average daily net assets
</TABLE>
Warburg may, at its discretion, voluntarily waive all or any portion of its
advisory fees for any of the Funds. For the six months ended February 29, 1996,
investment advisory fees, waivers and reimbursements were as follows:
<TABLE>
<CAPTION>
Gross Net Expense
Advisory Fee Waiver Advisory Fee Reimbursements
------------ --------- ------------ ---------------
<S> <C> <C> <C> <C>
Growth & Income Fund $4,051,011 $ -- $4,051,011 $ --
Balanced Fund 50,840 (45,385) 5,455 (9,896)
</TABLE>
PFPC Inc. ("PFPC"), an indirect wholly owned subsidiary of PNC Bank Corp.,
and Counsellors Funds Service, Inc. ("CFSI"), a wholly owned subsidiary of
Warburg, serve as co-administrators for each of the Funds. For the Growth &
Income Fund, the co-administration fees are computed daily and payable monthly
at an annual rate of .20% of the first $125 million of average daily net assets
and .15% of average daily net assets in excess of $125 million for PFPC and .05%
of the first $125 million of average daily net assets and .10% of average daily
net assets in excess of $125 million for CFSI.
For the Balanced Fund, the co-administration fees are computed daily and
payable monthly at an annual rate of .15% of average daily net assets for PFPC
and .10% of average daily net assets for CFSI.
20
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Warburg Pincus Advisor Funds
Notes to Financial Statements (cont'd)
February 29, 1996 (Unaudited)
- --------------------------------------------------------------------------------
PFPC and CFSI may, at their discretion, voluntarily waive all or any
portion of their co-administration fees for any of the Funds. For the six months
ended February 29,1996, PFPC and CFSI's co-administration fees and waivers were
as follows:
<TABLE>
<CAPTION>
Gross Net
Co-administration Fees Waivers Co-administration Fees
---------------------- --------- ----------------------
<S> <C> <C> <C>
Growth & Income Fund $ 1,350,338 $ -- $ 1,350,338
Balanced Fund 14,122 (7,442) 6,680
</TABLE>
The Company, on behalf of each class of shares within the investment
portfolios, has adopted Distribution Plans pursuant to Rule 12b-1 under the 1940
Act, as amended, and has entered into Distribution contracts with Counsellors
Securities Inc. ("CSI"), also a wholly owned subsidiary of Warburg, which
provide for each class to make monthly payments, based on average daily net
assets to CSI. No compensation is payable by the Growth & Income Fund's Common
Shares. For distribution services with respect to the Balanced Fund's Common
Shares, CSI receives a fee at the annual rate of .25%, computed daily and
payable monthly, on average daily net assets. For distribution services with
respect to the Growth & Income and Balanced Funds' Advisor shares, CSI receives
a fee at the annual rate of .50% computed daily and payable monthly on average
daily net assets. For the six months ended February 29, 1996, distribution fees
and waivers were as follows:
<TABLE>
<CAPTION>
Distribution
Fees
----------------
<S> <C>
Growth & Income Fund
Advisor Shares $ 166,934
----------------
----------------
Balanced Fund
Common Shares $ 14,121
Advisor Shares 4
----------------
$ 14,125
----------------
----------------
</TABLE>
3. Investment in Securities
For the six months ended February 29,1996, purchases and sales of
investment securities (other than short-term investments) were as follows:
<TABLE>
<CAPTION>
Investment Securities
----------------------------------
Purchases Sales
---------------- ----------------
<S> <C> <C>
Growth & Income Fund $ 379,995,182 $ 390,848,716
Balanced Fund 16,531,248 3,773,882
</TABLE>
21
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Warburg Pincus Advisor Funds
Notes to Financial Statements (cont'd)
February 29, 1996 (Unaudited)
- --------------------------------------------------------------------------------
4. Capital Shares
Transactions in capital shares for each period were as follows:
<TABLE>
<CAPTION>
GROWTH & INCOME FUND BALANCED FUND
---------------------------------------------------- -------------------------------------------------
For the For the For the For the
Six Months Ended Year Ended Six Months Ended Year Ended
February 29,1996 August 31, 1995 February 29, 1996 August 31, 1995
------------------------- ------------------------- ------------------------ -----------------------
(Unaudited) (Unaudited)
Shares Value Shares Value Shares Value Shares Value
----------- ------------ ----------- ------------ ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares Sold
Common Shares 14,067,891 $227,215,178 46,345,660 $670,088,619 1,415,541 $16,235,714 423,875 $4,348,625
Advisor Shares 1,419,208 22,753,049 3,521,620 52,908,038 -- -- 110 1,180
Shares issued in
reinvestment of
dividends
Common Shares 3,395,293 52,633,846 6,891 96,291 16,467 184,324 16,171 148,491
Advisor Shares 233,220 3,607,770 9,051 137,213 2 19 -- --
Shares repurchased
Common Shares (16,556,353) (262,516,812) (11,270,725) (167,348,709) (255,758) (2,938,233) (33,364) (347,995)
Advisor Shares (185,586) (2,991,004) (57,795) (890,622) -- (3) -- --
----------- ------------ ----------- ------------ ----------- ----------- ----------- ----------
Net increase 2,373,673 $ 40,702,027 38,554,702 $554,990,830 1,176,252 $13,481,821 406,792 $4,150,301
----------- ------------ ----------- ------------ ----------- ----------- ----------- ----------
----------- ------------ ----------- ------------ ----------- ----------- ----------- ----------
Advisor Shares
authorized 100,000,000 100,000,000 100,000,000 100,000,000
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
5. Net Assets
At February 29, 1996, net assets consisted of the following: (Unaudited)
<TABLE>
<CAPTION>
Growth & Income Fund Balanced Fund
----------------------- --------------
<S> <C> <C>
Capital paid-in..................................... $ 984,662,324 $ 18,290,237
Undistributed net investment income................. 1,241,473 43,898
Accumulated net realized gain on investments
transactions and foreign currency transactions.... 5,505,356 139,041
Unrealized appreciation on investments and foreign
currency transactions............................... 131,586,420 1,157,104
----------------------- --------------
$ 1,122,995,573 $ 19,630,280
----------------------- --------------
----------------------- --------------
</TABLE>
22
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Warburg Pincus Advisor Funds
Notes to Financial Statements (cont'd)
February 29, 1996
- --------------------------------------------------------------------------------
6. Other Financial Highlights
The Growth & Income and the Balanced Fund currently offer one other class
of shares, Common Shares, representing an additional interest in each of the
Funds. The financial highlights of each of the common shares are as follows:
<TABLE>
<CAPTION>
Growth & Income Fund Common Shares
-----------------------------------------------------------------------
For the
Six Months
Ended For the Years Ended August 31,
February 29, ------------------------------------------------------
1996 1995 1994 1993 1992 1991
--------------- ---------- --------- --------- --------- ---------
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $16.40 $14.56 $16.72 $11.99 $12.11 $11.00
Income From Investment Operations:
Net Investment Income 0.0758 0.2224 0.0785 0.0464 0.1912 0.3744
Net Gains on Securities (both realized
and unrealized) 0.6717 1.9834 1.8151 4.8499 0.0402 1.6891
Total from Investment Operations 0.7475 2.2058 1.8936 4.8963 0.2314 2.0635
Less Distributions:
Dividends (from net investment income) (0.0942) (0.1824) (0.0785) (0.0875) (0.1871) (0.4043)
Distributions (from capital gains) (0.8133) (0.1834) (3.9751) (0.0788) (0.1643) (0.5492)
Total Distributions (0.9075) (0.3658) (4.0536) (0.1663) (0.3514) (0.9535)
Net Asset Value, End of Period $16.24 $16.40 $14.56 $16.72 $11.99 $12.11
Total Return 4.86%(c) 15.62% 14.41% 41.17% 1.99% 19.91%
Ratios/Supplemental Data
Net Assets, End of Period (000) $1,042,834 $1,038,193 $410,658 $60,689 $28,976 $24,726
Ratio of Expenses to Average Net Assets 1.14%(b) 1.22% 1.28%(a) 1.14%(a) 1.25%(a) 1.30%(a)
Ratio of Net Investment Income to Average
Net Assets 0.90%(b) 1.64% 0.41% 0.30% 1.66% 3.42%
Portfolio Turnover Rate 44%(c) 109% 150% 344% 175% 41%
Average Commission Rate $0.06(e) -- -- -- -- --
</TABLE>
(a) Without the waiver of advisory and administration fees and without the
reimbursement of certain operating expenses, the ratio of expenses to
average net assets for the Growth & Income Fund would have been 1.28%,
1.14%, 1.28% and 2.17% for the years ended August 31, 1994, 1993, 1992 and
1991, respectively.
(b) Annualized.
(c) Not Annualized.
(e) Computed by dividing the total amount of commissions paid by the total
number of shares purchased and sold during the period.
23
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Warburg Pincus Advisor Funds
Notes to Financial Statements (cont'd)
February 29, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Balanced Fund Common Shares
-----------------------------------------------------------------------
For the
Six Months
Ended For the Years Ended August 31,
February 29, ------------------------------------------------------
1996 1995 1994 1993 1992 1991
--------------- ---------- --------- --------- --------- ---------
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $11.12 $11.01 $11.71 $12.04 $12.05 $10.60
Income From Investment Operations:
Net Investment Income 0.0621 0.2080 0.4132 0.5555 0.4408 0.4213
Net Gains on Securities (both realized
and unrealized) 0.8646 1.7225 0.3248 1.1253 0.5155 1.7196
Total from Investment Operations 0.9267 1.9305 0.7380 1.6808 0.9563 2.1409
Less Distributions:
Dividends (from net investment income) (0.0505) (0.3136) (0.4586) (0.5412) (0.3713) (0.4128)
Distributions (from capital gains) (0.1462) (1.5069) (0.9794) (1.4696) (0.5950) (0.2781)
Total Distributions (0.1967) (1.8205) (1.4380) (2.0108) (0.9663) (0.6909)
Net Asset Value, End of Period $11.85 $11.12 $11.01 $11.71 $12.04 $12.05
Total Return 8.44%(c) 21.56% 6.86% 15.27% 8.07% 21.18%
Ratios/Supplemental Data
Net Assets, End of Period (000) $19,629 $5,342 $808 $762 $1,026 $1,290
Ratio of Expenses to Average Net Assets 1.60%(a)(b) 1.53%(a) 0%(a) 0%(a) .67%(a) 1.40%(a)
Ratio of Net Investment Income to Average
Net Assets 3.03%(b) 2.27% 3.76% 4.13% 3.68% 3.58%
Portfolio Turnover Rate 37%(c) 107% 32% 30% 93% 76%
Average Commission Rate $0.06(e) -- -- -- -- --
</TABLE>
(a) Without the waiver of advisory and administration fees and without the
reimbursement of certain operating expenses, the ratio of expenses to
average net assets for the Balanced Fund would have been 2.64% annualized
for the six months ended February 29, 1996, 6.04%, 5.46%, 5.37%, 3.88% and
3.89% for the years ended August 31, 1995, 1994, 1993, 1992 and 1991,
respectively.
(b) Annualized.
(c) Not Annualized.
(e) Computed by dividing the total amount of commissions paid by the total
number of shares purchased and sold during the period.
24
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Warburg Pincus Advisor Funds
Notes to Financial Statements
February 29, 1996 (Unaudited)
- --------------------------------------------------------------------------------
7. Subsequent Event
On January 24, 1996, the Board of Directors of The RBB Fund, Inc.
unanimously endorsed proposals for the reorganizations of three of its
investment series--Warburg Pincus Growth & Income Fund, Warburg Pincus Balanced
Fund and Warburg Pincus Tax Free Fund (each, an "Existing Warburg Fund"). Under
the terms of the proposals, each of three newly-formed investment
companies--Warburg, Pincus Growth & Income Fund, Inc., Warburg, Pincus Balanced
Fund, Inc. and Warburg, Pincus Tax Free Fund, Inc.--would acquire all or
substantially all of the assets and liabilities of the Existing Warburg Fund
with a similar name.
For shareholders of record of the existing Warburg Funds on March 1, 1996,
a meeting will be held on May 1, 1996 to consider this transaction. The closing
date of the reorganization, if approved, will be May 3, 1996.
25
- --------------------------------------------------------------------------------
ADANN-2-895
Warburg Pincus Advisor Funds
Counsellors Securities Inc., distributor
800-369-2728
<PAGE>
<PAGE>
[LOGO]
ANNUAL REPORT
AUGUST 31, 1995
/ / WARBURG PINCUS GROWTH & INCOME FUND
/ / WARBURG PINCUS BALANCED FUND
/ / WARBURG PINCUS TAX FREE FUND
A prospectus containing more complete information, including management fees and
expenses, may be obtained by calling 1-800-257-5614 or by writing to Warburg
Pincus Funds, P.O. Box 9030, Boston, MA 02205-9030. Investors should read the
prospectus carefully before investing.
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS GROWTH & INCOME FUND
ANNUAL INVESTMENT ADVISER'S REPORT
- --------------------------------------------------------------------------------
For the 12 months ended August 31, 1995, Warburg Pincus Growth & Income Fund
appreciated 15.62% vs. an increase of 21.38% in the S&P 500 Index.
Much of the Fund's underperformance relative to the S&P 500 during the
period is attributable to its underweighting in technology, the sector that has
led the market for the last several quarters. While we concur, in general, with
the market's assessment of the long-term earnings potential for many of these
companies, we differ in our views of what constitutes fair value for the
companies' securities. Many technology stocks, we believe, had been bid up to
levels unjustified by their fundamentals, hence our decision to exclude them
from the portfolio. We continue to monitor the sector closely, however, and will
use any periods of price weakness over the coming months to establish and build
positions that we think have particularly favorable prospects.
Among our top performers during the 12 months ended August 31, 1995 were
banking and financial-services stocks. We had established our position in these
issues last year, when rising interest rates and derivatives-related scandals
had driven their prices down to what we deemed to be attractive levels. This
year, though, the sector, particularly the banking area, has rebounded strongly,
buoyed by falling interest rates, merger activity and subsiding fears of the
industry's vulnerability to derivatives. We saw especially strong gains from
BankAmerica and First Interstate Bancorporation, two of our largest positions.
Industrial cyclical stocks, another heavily weighted area in our portfolio,
also performed well 12 months ended August 31, 1995. We took profits in some of
our top performers--e.g., Inco, whose share price jumped nearly 50% from June
through September. The company produces roughly 25% of the world's nickel, in
addition to copper and other metals and metal-related products. Less impressive
was the performance of our steel companies, which include Bethlehem Steel,
Inland Steel and USX-U.S. Steel Group. The steel group has significantly
underperformed the market thus far in 1995, but we believe shifts in the global
supply/demand balance will provide considerable support for steel prices, and
these companies' earnings, going forward. Hence we have viewed the stocks'
short-term price weakness as a buying opportunity.
Supply/demand factors argue strongly for higher prices in many of the
metals, but the case is particularly strong for precious metals. Accordingly, we
have maintained our exposure to gold- and silver-mining companies, including
Hecla Mining, Homestake Mining, Newmont Mining, Pegasus Gold and Placer Dome. We
believe these stocks have considerable upside potential, especially over the
intermediate and long term.
We remain similarly committed to the telecommunications sector, an area that
has done quite well for us in 1995. We expect these stocks to continue to excel
through the rest of this year and well into 1996, particularly after the new
telecommunications bill becomes law. Our holdings here include AirTouch
Communications, which provides cellular-telephone communication services and
related
1
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS GROWTH & INCOME FUND
ANNUAL INVESTMENT ADVISER'S REPORT (CONT'D)
- --------------------------------------------------------------------------------
products, and Qualcomm, whose technology to multiply tenfold the number of
telephone calls that can be carried over a single channel stands to
revolutionize the industry.
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE
WARBURG PINCUS GROWTH & INCOME FUND AND THE S&P 500
FROM 12/31/91* AND AT EACH FISCAL YEAR END
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
RBEGX S&P 500 RBEGX S&P 500
======================= ========================
<S> <C> <C> <C> <C>
$10,000 $10,000
12/31/91 - 08/31/92 $10,290 $10,126 2.90% 1.26%
12/31/91 - 08/31/93 $14,526 $11,664 41.17% 15.19%
12/31/91 - 08/31/94 $16,620 $12,301 14.41% 5.46%
12/31/91 - 08/31/95 $19,216 $14,931 15.62% 21.38%
</TABLE>
Average Annual Total Return
One Year Ending 08/31/95 15.62%
From 12/31/91 to 08/31/95 19.51%
- --------------------------------------------------------------------------
* Hypothetical illustration of $10,000 investment since December 31, 1991.
Warburg, Pincus Counsellors, Inc. ("Counsellors") began to provide advisory
services to the Fund in late December 1991. Previous periods during which the
Fund was not advised by Counsellors are not shown.
Note: All figures cited here represent past performance and do not guarantee
future results. Investment return and the principal value of an investment
will fluctuate so that an investor's shares upon redemption may be more or
less than original shares.
2
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS BALANCED FUND
ANNUAL INVESTMENT ADVISER'S REPORT
- --------------------------------------------------------------------------------
For the 12 months ended August 31, 1995, Warburg Pincus Balanced Fund gained
21.56%, vs. a gain of 13.11% for the Lipper Balanced Fund Index.
Falling interest rates, continued economic growth and the absence of
significant inflationary pressures provided an ideal backdrop for both stock and
bond markets through most of the period. Throughout, we attempted to maintain an
optimal mix of stocks and bonds, one intended to provide solid returns at a
relatively low level of volatility.
The Fund finished the reporting period with a 51.5% commitment to domestic
common stocks, with its heaviest weightings in, respectively, the technology,
financial services, metals and mining, manufacturing, and oil sectors. Good
stock selection within these sectors, especially in the technology and
financial-services groups, played a significant role in the Fund's relatively
strong performance during the period, and we believe the prospects of our
holdings in these categories remain positive going forward.
The Fund's foreign-equity exposure (8.7% of assets at the close of the
period) consists of a diversified mix of issues among Asian and European
countries, with the largest weightings in Japan (1.9%) and the United Kingdom
(1.8%). We continue to find attractive opportunities in Asian markets, broadly
speaking, and in European markets on a stock-by-stock basis.
The Fund's fixed-income weighting remains concentrated most heavily in
short-term U.S. Treasury obligations. We maintained a minimal exposure to the
fixed-income sector through much of the reporting period, reflecting our bullish
view on the relative prospects of stocks vs. bonds. Looking ahead, we believe
conditions remains favorable for both markets, but particularly so for stocks,
and we have allocated the Fund's assets accordingly.
3
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS BALANCED FUND
ANNUAL INVESTMENT ADVISER'S REPORT (CONT'D)
- --------------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE
WARBURG PINCUS BALANCED FUND, S&P 500 AND LIPPER BALANCED FUND INDEX
FROM 9/30/94* AND THE FISCAL YEAR END
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
FUND * LIPPER S&P 500
======================================
<S> <C> <C> <C>
$10,000 $10,000 $10,000
09/30/94 - 08/31/95 $12,301 $11,529 12,444
TOTAL RETURN (09/30/94 - 08/31/95) 23.01%
</TABLE>
* LIPPER BALANCED FUND INDEX
- ------------------------------------------------------------------------
* Hypothetical illustration of $10,000 investment since September 30, 1994.
Warburg, Pincus Counsellors, Inc. ("Counsellors") began to provide advisory
services to the Fund in late September 1994. Previous periods during which the
Fund was not advised by Counsellors are not shown.
Note: All figures cited here represent past performance and do not guarantee
future results. Investment return and the principal value of an investment
will fluctuate so that an investor's shares upon redemption may be more or
less than original shares.
4
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS TAX FREE FUND
ANNUAL INVESTMENT ADVISER'S REPORT
- --------------------------------------------------------------------------------
For the 12 months ended August 31, 1995, Warburg Pincus Tax Free Fund gained
8.89% vs. a gain of 7.34% for the Lipper General Municipal Debt Funds Average.
Municipal bond prices have risen with the rest of the fixed-income sector in
1995, driven by falling interest rates, moderate economic growth and the absence
of significant inflationary pressures. This comes as welcome relief after 1994,
when the Federal Reserve raised interest rates aggressively in an effort to
quell inflation. The rate hikes had a disastrous impact on the entire bond
market, including both the taxable and tax-free sectors.
While municipal bonds' performance has been strong in absolute terms in
1995, it has lagged the broad fixed-income group in relative terms. Weighing on
the municipal market have been investors' fears of significant tax reform.
Particularly troubling to municipal investors has been talk of the so-called
flat tax, which, if adopted, would greatly reduce the attractiveness of
tax-exempt bonds relative to their taxable counterparts. While congressional
passage of significant tax reform is viewed by many as unlikely, and is at least
a year away if reform is enacted at all, the mere fact that it is being
discussed in serious tones has been sufficient to keep municipal investors on
edge in 1995.
That cautious investor sentiment has created excellent buying opportunities
in municipals, especially in long-term issues. Indeed, yields on long-term
municipal bonds have risen to a relatively high 90% to 95% of the yields on
similar-maturity Treasuries, creating the potential for significant capital
appreciation if inflation stays low and no significant tax reform is passed. We
have used the opportunity to purchase attractively valued, high-quality bonds,
maintaining our emphasis on issues from the states of Maryland, New Jersey and
Georgia.
One factor that has supported the municipal market in 1995 is a shortage of
new supply. New issuance of municipal bonds is down sharply relative to 1994. We
do, though, expect the supply of new issues to pick up somewhat in the months
ahead, as municipalities attempt to take advantage of the current
low-interest-rate environment to call and refinance outstanding issues. This
could result in temporary short-term upward pressure on yields, especially in
some of the higher-tax states like New Jersey. We will use the opportunity to
selectively add high-quality bonds to our portfolios at attractive yields.
5
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS TAX FREE FUND
ANNUAL INVESTMENT ADVISER'S REPORT (CONT'D)
- --------------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE
WARBURG PINCUS TAX FREE FUND AND THE LIPPER GENERAL MUNICIPAL DEBT FUNDS AVERAGE
FROM 4/30/95* AND THE FISCAL YEAR END
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
FUND * LIPPER
===========================
<S> <C> <C>
$10,000 $10,000
4/30/95 - 08/31/95 10,431 10,371
TOTAL RETURN (04/30/95 - 08/31/95)
AGGREGATE 4.31%
</TABLE>
* Lipper General Municipal Debt Funds Avg.
* Performance measured from 4/30/95 - 8/31/95
- ------------------------------------------------------------------------
* Hypothetical illustration of $10,000 investment since April 30, 1995. Warburg,
Pincus Counsellors, Inc. ("Counsellors") began to provide advisory services to
the Fund in April 1995. Previous periods during which the Fund was not advised
by Counsellors are not shown.
Note: All figures cited here represent past performance and do not guarantee
future results. Investment return and the principal value of an investment
will fluctuate so that an investor's shares upon redemption may be more or
less than original shares.
6
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS GROWTH & INCOME FUND
STATEMENT OF NET ASSETS
August 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
--------- -----
<S> <C> <C>
COMMON STOCKS AND WARRANTS (82.2%)
Aerospace (1.3%)
Allied-Signal, Inc. 325,000 $ 14,421,875
--------------
Agriculture Production Corporations (0.4%)
Terra Industries, Inc. 320,300 4,284,013
--------------
Air Conditioning & Heating (0.9%)
Management Systems Johnson Controls, Inc. 170,000 10,348,750
--------------
Automobiles (1.3%)
Navistar International** 1,130,000 14,690,000
--------------
Banking (3.2%)
First Interstate Bancorp 368,000 35,144,000
--------------
Chemicals (1.4%)
PPG Industries, Inc. 355,000 15,176,250
--------------
Construction (2.2%)
Stone & Webster, Inc. 655,000 24,235,000
--------------
Electronic Computers (6.2%)
GRC International, Inc.** 667,000 16,341,500
Honeywell, Inc. 655,000 28,656,250
International Business Machines Corp. 221,000 22,845,875
--------------
67,843,625
--------------
Electronics (1.2%)
Motorola, Inc. 175,000 13,081,250
--------------
Entertainment (3.8%)
Acclaim Entertainment, Inc.** 1,420,000 35,855,000
Boardwalk Casino, Inc.** 525,000 4,528,125
Boardwalk Casino, Inc. Warrants (expire 02/14/98)** 375,000 1,453,125
--------------
41,836,250
--------------
Financial Services (7.0%)
BankAmerica Corp. 655,000 37,007,500
Crestar Financial Corp. 270,000 15,221,250
Loyola Capital Corp. 247,500 8,662,500
Midlantic Corp. 302,000 15,553,000
--------------
76,444,250
--------------
Insurance (3.3%)
Chubb Corp. 150,000 13,687,500
USF&G Corp. 1,234,000 22,366,250
--------------
36,053,750
--------------
</TABLE>
See Accompanying Notes to Financial Statements.
7
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS GROWTH & INCOME FUND
STATEMENT OF NET ASSETS (CONT'D)
August 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
--------- -----
<S> <C> <C>
COMMON STOCKS AND WARRANTS (CONT'D)
Manufacturing (4.5%)
Corning Glass, Inc. 909,000 $ 29,656,125
Rauma OY Sponsored ADR** 102,900 2,443,875
Trinity Industries, Inc. 500,000 16,187,500
Whitman Corp. 50,000 1,006,250
--------------
49,293,750
--------------
Medical & Medical Services (1.9%)
Acuson Corp.** 210,000 2,756,250
Foxmeyer Health Corp.** 689,000 17,741,750
--------------
20,498,000
--------------
Metals & Mining (19.0%)
Echo Bay Mines Ltd. 500,000 5,187,500
Hecla Mining Co.** 1,940,000 22,310,000
Homestake Mining Co. 2,282,500 37,661,250
Inco Ltd. 985,000 34,475,000
Newmont Mining Corp. 903,000 39,280,500
Pegasus Gold, Inc.** 1,419,000 17,737,500
Placer Dome, Inc. 1,519,600 39,699,550
Prime Resources Group, Inc.** 1,400,000 11,210,360
--------------
207,561,660
--------------
Oil (1.0%)
Quaker State Corp. 715,000 10,725,000
--------------
Oil Services (4.4%)
Baker Hughes, Inc. 871,500 19,608,750
Halliburton Co. 521,000 22,077,375
Occidental Petroleum Corp. 280,000 6,090,000
--------------
47,776,125
--------------
Steel (13.0%)
AK Steel Holding Corp.** 454,000 14,471,250
Bethlehem Steel Corp.** 1,581,000 23,122,125
CBI Industries, Inc. 1,160,000 28,420,000
Inland Steel Industries, Inc. 585,000 16,014,375
LTV Corp.** 1,122,500 17,539,062
USX-US Steel Group 1,050,000 34,387,500
WHX Corp.** 623,000 7,865,376
--------------
141,819,688
--------------
Telecommunications (5.6%)
Airtouch Communications, Inc.** 363,400 11,810,500
Comcast Corp. Special Class A Non-Voting 1,000,000 21,375,000
Qualcomm, Inc.** 280,000 13,650,000
Tele-Communications, Inc. Class A** 800,000 14,800,000
--------------
61,635,500
--------------
</TABLE>
See Accompanying Notes to Financial Statements.
8
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS GROWTH & INCOME FUND
STATEMENT OF NET ASSETS (CONCLUDED)
August 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
--------- -----
<S> <C> <C>
COMMON STOCKS AND WARRANTS (CONT'D)
Tire & Rubber (0.4%)
Cooper Tire & Rubber Co. 160,000 $ 4,160,000
--------------
Transportation (0.2%)
Consolidated Freightways, Inc. 100,000 2,587,500
--------------
TOTAL COMMON STOCKS AND WARRANTS (Cost $781,860,824) 899,616,236
--------------
</TABLE>
<TABLE>
<CAPTION>
MATURITY PAR (000)
-------- ---------
<S> <C> <C> <C>
UNITED STATES TREASURY OBLIGATIONS (2.7%)
U.S. Treasury Bills 5.40% (Cost $29,973,000) 09/07/95 $ 30,000 29,973,000
--------------
REPURCHASE AGREEMENTS (13.8%)
Greenwich Capital Markets Inc. 5.83% 09/01/95 151,138 151,138,000
(Agreement dated 08/31/95 to be repurchased at
$151,162,476, collateralized by $150,000,000 U.S.
Treasury Notes 7.50% due 01/31/97. Market value of
collateral is $154,312,500).
(Cost $151,138,000)
--------------
TOTAL INVESTMENTS AT VALUE (Cost $962,971,826*) (98.7%) 1,080,727,236
OTHER ASSETS IN EXCESS OF LIABILITIES (1.3%) 14,368,010
--------------
NET ASSETS (Applicable to 63,295,201 Common Shares and
3,472,875 Advisor Shares) (100.0%) $1,095,095,246
--------------
--------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER
COMMON SHARE ($1,038,193,292 : 63,295,201) $16.40
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER
ADVISOR SHARE ($56,901,954 : 3,472,875) $16.38
======
</TABLE>
* Cost for Federal income tax purposes at August 31, 1995, is $963,365,013. The
gross appreciation (depreciation) on a tax basis is as follows:
<TABLE>
<S> <C>
Gross Appreciation $126,262,394
Gross Depreciaton (8,900,171)
------------
Net Appreciation $117,362,223
------------
------------
</TABLE>
** Non-income producing.
See Accompanying Notes to Financial Statements.
9
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- -------------------------------------------------------------------------------
WARBURG PINCUS GROWTH & INCOME FUND
STATEMENT OF OPERATIONS
For the Year Ended August 31, 1995
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends $ 10,389,100
Interest 11,731,546
------------
Total investment income 22,120,646
------------
EXPENSES:
Investment advisory fees 5,824,947
Administration fees 1,941,649
Distribution fees 71,233
Custodian fees 162,248
Transfer agent fees 1,060,279
Legal fees 63,384
Audit fees 55,268
Registration fees 264,509
Insurance expense 23,560
Printing expense 86,973
Other expenses 26,827
------------
Total expenses 9,580,877
------------
Net investment income 12,539,769
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) from:
Investment transactions 41,087,749
Futures contracts (2,798,582)
------------
38,289,167
------------
Net change in unrealized appreciation of investments 96,772,046
------------
Net gain on investments and future contracts 135,061,213
------------
Net increase in net assets resulting from operations $147,600,982
------------
------------
</TABLE>
See Accompanying Notes to Financial Statements.
10
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS GROWTH & INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the For the
Year Ended Year Ended
August 31, 1995 August 31, 1994
--------------- ---------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income $ 12,539,769 $ 572,031
Net gain on investments and future contracts 135,061,213 17,971,937
--------------- ---------------
Net increase in net assets resulting from operations 147,600,982 18,543,968
--------------- ---------------
Distributions to shareholders:
Dividends to shareholders from net investment income:
Common shares ($.1824 and $.0785, respectively,
per share) (9,949,389) (572,031)
Advisor shares ($.0459 per share for 1995) (137,213) --
Distributions to shareholders from net realized capital
gains:
Common shares ($.1834 and $3.9751, respectively,
per share) (8,067,592) (10,054,939)
--------------- ---------------
Total distributions to shareholders (18,154,194) (10,626,970)
--------------- ---------------
Net capital share transactions 554,990,830 342,051,251
--------------- ---------------
Total increase in net assets 684,437,618 349,968,249
Net assets:
Beginning of year 410,657,628 60,689,379
--------------- ---------------
End of year $ 1,095,095,246 $ 410,657,628
--------------- ---------------
--------------- ---------------
</TABLE>
See Accompanying Notes to Financial Statements.
11
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS BALANCED FUND
STATEMENT OF NET ASSETS
August 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
--------- -----
<S> <C> <C>
COMMON STOCKS (60.1%)
U.S. COMMON STOCKS
Aerospace (0.2%)
Allied-Signal, Inc. 300 $ 13,313
-----------
Banking (2.5%)
Bank of Boston Corp. 2,200 96,800
First Interstate Bancorp 400 38,200
-----------
135,000
-----------
Business Services (1.2%)
Paging Network, Inc.** 1,600 63,200
-----------
Chemicals (0.2%)
PPG Industries, Inc. 300 12,825
-----------
Communications & Media (1.1%)
Infinity Broadcast Corp.** 1,600 57,400
-----------
Computer & Office Equipment (2.1%)
Shared Medical Systems Corp. 1,800 66,375
Synopsys, Inc.** 800 46,400
-----------
112,775
-----------
Construction (0.7%)
Stone & Webster, Inc. 1,000 37,000
-----------
Electronic Computers (7.4%)
Cabletron Systems, Inc.** 500 26,438
GRC International, Inc.** 2,100 51,450
Honeywell, Inc. 800 35,000
International Business Machines Corp. 300 31,013
Linear Technology Corp. 400 32,400
Netscape Communications Corp.** 1,500 74,250
Platinum Technology, Inc. 2,400 56,700
System Software Associates, Inc. 800 25,250
Xilinx, Inc.** 1,500 64,312
-----------
396,813
-----------
</TABLE>
See Accompanying Notes to Financial Statements.
12
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS BALANCED FUND
STATEMENT OF NET ASSETS (CONT'D)
August 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
--------- -----
<S> <C> <C>
COMMON STOCKS (CONT'D)
Electronics (1.5%)
Motorola, Inc. 200 $ 14,950
Thermospectra Corp.** 3,500 62,563
-----------
77,513
-----------
Entertainment (1.2%)
Acclaim Entertainment, Inc.** 1,500 37,875
Boardwalk Casino, Inc.** 3,000 25,875
-----------
63,750
-----------
Financial Services (5.2%)
BankAmerica Corp. 700 39,550
Citicorp Bank 800 53,100
Crestar Financial Corp. 500 28,188
Midlantic Corp. 300 15,450
Olympic Financial Ltd.** 3,300 75,488
United Companies Financial Corp. 1,100 68,475
-----------
280,251
-----------
Insurance (1.0%)
Chubb Corp. 300 27,375
USF&G Corp. 1,300 23,563
-----------
50,938
-----------
Manufacturing (3.8%)
Allied Products Corp. 1,500 32,438
Corning Glass, Inc. 800 26,100
Maxim Integrated Products, Inc. 1,000 76,250
Roper Industries, Inc. 1,500 51,000
Trinity Industries, Inc. 500 16,188
-----------
201,976
-----------
Medical & Medical Services (1.0%)
Foxmeyer Health Corp.** 2,000 51,500
-----------
</TABLE>
See Accompanying Notes to Financial Statements.
13
- ------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS BALANCED FUND
STATEMENT OF NET ASSETS (CONT'D)
August 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
--------- -----
<S> <C> <C>
COMMON STOCKS (CONT'D)
Metals & Mining (5.3%)
Coeur D'Alene Mines Corp. 2,100 $ 40,163
Hecla Mining Co.** 3,000 34,500
Homestake Mining Co. 2,100 34,650
Inco LTD. 1,000 35,000
Newmont Mining Corp. 1,000 43,500
Pegasus Gold, Inc.** 2,500 31,250
Placer Dome, Inc. 1,500 39,188
Prime Resources Group, Inc.** 3,000 24,022
-----------
282,273
-----------
Office Furniture (1.3%)
Viking Office Products, Inc.** 1,900 68,400
-----------
Oil (3.4%)
Barrett Resources Corp.** 2,500 53,750
Petroleum Geo Services** 2,500 64,063
Quaker State Corp. 500 7,500
Texas Meridian Resources Corp.** 5,000 55,000
-----------
180,313
-----------
Oil Services (0.8%)
Baker Hughes, Inc. 1,000 22,500
Halliburton Co. 500 21,188
-----------
43,688
-----------
Paper Mills (0.8%)
Champion International Corp. 800 45,300
-----------
Pharmaceuticals (1.8%)
Al Laboratories, Inc. Class A 2,000 42,000
Gilead Sciences, Inc.** 2,500 54,375
-----------
96,375
-----------
Retail--Retail Stores (1.1%)
Borders Group, Inc.** 3,000 60,750
-----------
Retail--Women's Clothing Stores (1.0%)
Talbots, Inc. 1,500 51,750
-----------
</TABLE>
See Accompanying Notes to Financial Statements.
14
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS BALANCED FUND
STATEMENT OF NET ASSETS (CONT'D)
August 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
--------- -----
<S> <C> <C>
COMMON STOCKS (CONT'D)
Steel (3.0%)
Bethlehem Steel Corp.** 2,000 $ 29,250
CBI Industries, Inc. 1,000 24,500
LTV Corp. 1,500 23,438
Republic Engineered Steels** 3,000 20,625
USX-US Steel Group 1,300 42,575
WHX Corp.** 1,600 20,200
-----------
160,588
-----------
Telecommunications (3.2%)
Airtouch Communications, Inc.** 300 9,750
Comcast Corp. Special Class A Non-Voting 1,000 21,375
Mobile Telecommunications Technologies Corp.** 1,900 58,425
Qualcomm, Inc.** 300 14,625
Tele-Communications, Inc. Series A Liberty Media Group** 2,000 53,125
Tele-Communications, Inc. Class A** 800 14,800
-----------
172,100
-----------
Textiles (0.6%)
Westpoint Stevens, Inc.** 1,500 33,562
-----------
FOREIGN COMMON STOCKS
Australia (0.4%)
BTR Nylex Limited 8,500 22,610
-----------
Austria (0.7%)
Va Technologie AG 330 36,446
-----------
Denmark (1.0%)
International Service System B 1,900 51,716
-----------
France (0.8%)
Bouygues 240 29,196
Compagnie Francaise de Petroleum Total 280 16,443
-----------
45,639
-----------
Hong Kong (0.6%)
Jardine Matheson Holdings LTD. 4,400 31,680
-----------
</TABLE>
See Accompanying Notes to Financial Statements.
15
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS BALANCED FUND
STATEMENT OF NET ASSETS (CONT'D)
August 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
--------- -----
<S> <C> <C>
COMMON STOCKS (CONT'D)
Israel (0.4%)
Clal Electronics Industries LTD.** 180 $ 21,505
-----------
Japan (1.9%)
Keyence Corp. 800 102,301
-----------
Malaysia (0.5%)
Westmont B. 6,000 25,496
-----------
Sweden (0.6%)
Astra B Free 960 31,180
-----------
United Kingdom (1.8%)
Central European Media Enterprises LTD.** ADR 2,700 67,837
Takare PLC 8,200 26,715
-----------
94,552
-----------
TOTAL COMMON STOCKS (Cost $2,772,251) 3,212,478
-----------
</TABLE>
<TABLE>
<CAPTION>
PAR
MATURITY (000) VALUE
-------- ----- -----
<S> <C> <C> <C>
AGENCY OBLIGATIONS (0.2%)
Government National Mortgage Association 6.50% (Cost $12,661) 08/15/03 $ 13 $ 12,858
----------
UNITED STATES TREASURY OBLIGATIONS (26.4%)
U.S. Treasury Notes
5.875% 05/31/96 300 300,390
6.875% 10/31/96 200 202,572
8.125% 02/15/98 20 21,007
8.50% 11/15/00 800 885,536
----------
TOTAL U.S. TREASURY OBLIGATIONS (Cost $1,384,454) 1,409,505
----------
</TABLE>
See Accompanying Notes to Financial Statements.
16
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS BALANCED FUND
STATEMENT OF NET ASSETS (CONT'D)
August 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAR
MATURITY (000) VALUE
-------- ----- -----
<S> <C> <C> <C>
REPURCHASE AGREEMENTS (8.8%)
State Street Bank & Trust Co. 5.78% 09/01/95 468 $ 468,000
(Agreement dated 08/31/95 to be repurchased at $468,081,
collateralized by $480,000 U.S Treasury Notes 6.25% due
08/31/96. Market value of collateral is $481,800.) (Cost
$468,000)
----------
TOTAL INVESTMENTS AT VALUE (Cost $4,637,366*) (95.5%) 5,102,841
OTHER ASSETS IN EXCESS OF LIABILITIES (4.5%) 239,008
----------
NET ASSETS (Applicable to 480,061 Common Shares and 110 Advisor Shares)
(100.0%) $5,341,849
----------
----------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER
COMMON SHARE ($5,340,625 : 480,061) $11.12
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER
ADVISOR SHARE ($1,224 : 110) $11.13
======
</TABLE>
* Cost for Federal income tax purposes at August 31, 1995 is $4,641,506. The
gross appreciation (depreciation) on a tax basis is as follows:
<TABLE>
<S> <C>
Gross Appreciation $487,617
Gross Depreciation (26,282)
---------
Net Appreciation $461,335
---------
---------
</TABLE>
** Non-income producing.
See Accompanying Notes to Financial Statements.
17
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS BALANCED FUND
STATEMENT OF OPERATIONS
For the Year Ended August 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $ 52,298
Dividends 11,828
Foreign taxes withheld (202)
--------
Total investment income 63,924
--------
EXPENSES:
Investment advisory fees 14,729
Administration fees 3,991
Distribution fees 4,155
Custodian fees 21,198
Transfer agent fees 27,158
Registration fees 15,075
Printing expense 10,393
Other expenses 4,330
--------
101,029
Less fees waived (17,123)
Less expense reimbursement by advisor (58,364)
--------
Total expenses 25,542
--------
Net investment income 38,382
--------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) from:
Investment transactions 115,816
Foreign currency related transactions (679)
--------
115,137
--------
Net change in unrealized appreciation (depreciation) on:
Investments 380,862
Foreign currency related transactions (7)
--------
380,855
--------
Net gain on investments and foreign currency transactions 495,992
--------
Net increase in net assets resulting from operations $534,374
========
</TABLE>
See Accompanying Notes to Financial Statements.
18
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS BALANCED FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the For the
Year Ended Year Ended
August 31, 1995 August 31, 1994
--------------- ---------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income $ 38,382 $ 29,100
Net gain on investments 495,992 23,057
--------------- ---------------
Net increase in net assets resulting from operations 534,374 52,157
--------------- ---------------
Distributions to shareholders:
Dividends to shareholders from net investment income:
Common shares ($.3136 and $.4586, respectively, per share) (38,909) (31,049)
Distributions to shareholders from net realized capital gains:
Common shares ($1.5069 and $.9794, respectively, per share) (111,945) (63,790)
--------------- ---------------
Total distributions to shareholders (150,854) (94,839)
--------------- ---------------
Net capital share transactions 4,150,301 88,893
--------------- ---------------
Total increase in net assets 4,533,821 46,211
Net Assets:
Beginning of year 808,028 761,817
--------------- ---------------
End of year $ 5,341,849 $ 808,028
=============== ===============
</TABLE>
See Accompanying Notes to Financial Statements.
19
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS TAX FREE FUND
STATEMENT OF NET ASSETS
August 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAR
RATE MATURITY (000) VALUE
----- -------- ----- ----------
<S> <C> <C> <C> <C>
MUNICIPAL BONDS (97.9%)
Arizona (2.5%)
Phoenix GO Bond (Aa, AA+) 6.375% 07/01/13 $ 100 $ 104,375
----------
California (2.4%)
Palm Springs Community Redevelopment Agency Certificates
VRDN + (AA-, A-1+) 3.70 09/06/95 100 100,000
----------
Georgia (10.0%)
Georgia Municipal Electric Authority/(FGIC Insurance)
(Aaa, AAA) 6.125 01/01/14 200 204,750
Gwinnett County GO Bonds (Aa1, AA) 6.00 01/01/10 200 210,000
----------
414,750
----------
Kansas (4.9%)
Kansas Department of Transportation Series A (Aa, AA) 6.00 09/01/12 200 202,500
----------
Kentucky (8.0%)
Jefferson County PCR RB (Louisville Gas and Electric
Co.) Project A (Aa2, AA) 7.45 06/15/15 300 329,625
----------
Maryland (27.4%)
Baltimore Maryland Consolidated Public Improvement MB
Series 1991C (Aaa, AAA) 7.50 10/15/09 400 485,500
Baltimore Maryland Port Facility RB Consolidated Coal
Sales Series 1984A (Aa2, AA) 6.50 10/01/11 300 321,000
Montgomery County Parking RB (Silver Spring Group)/
(FGIC Insurance) (Aaa, AAA) 6.25 06/01/07 300 322,500
----------
1,129,000
----------
Massachusetts (5.3%)
Massachusetts Bay Transportation Authority (General
Transportation Systems) Series A (A1, A+) 6.25 03/01/05 200 219,500
----------
Michigan (4.9%)
Michigan Underground Storage Tank Financial Assurance
Authority 1995 Revenue Bonds Series I VDRN (Canadian
Imperial Bank LOC)+ (P-1, A-1+) 3.60 09/06/95 200 200,000
----------
New Jersey (10.6%)
New Jersey State Turnpike Authority RB Refunding Series
1991 (MBIA Insurance) (Aaa, AAA) 6.50 01/01/16 400 439,000
----------
North Carolina (5.0%)
North Carolina Municipal Power Agency (Catawba Electric)
RB/(MBIA Insurance) (Aaa, AAA) 6.00 01/01/10 200 207,750
----------
</TABLE>
See Accompanying Notes to Financial Statements.
20
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS TAX FREE FUND
STATEMENT OF NET ASSETS (CONT'D)
August 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAR
RATE MATURITY (000) VALUE
----- -------- ----- ----------
<S> <C> <C> <C> <C>
MUNICIPAL BONDS (CONT'D)
Pennsylvania (5.2%)
Philadelphia Water & Waste Water Revenue Bonds (Aaa, AAA) 6.25% 08/01/09 $ 200 $ 214,250
----------
Puerto Rico (5.3%)
Puerto Rico Electric Power Authority Power Revenue Bonds
Series W (Aaa, AAA) 6.00 07/01/03 200 217,000
----------
South Carolina (5.1%)
Spartanburg Water Systems Improvement RB (A1, AA-) 6.20 06/01/09 200 208,500
----------
Utah (1.3%)
Intermountain Power Agency (Utah Power Supply) RB Series B
(Aa, AA) 7.625 07/01/08 50 54,375
----------
TOTAL INVESTMENTS AT VALUE (Cost $3,799,912*) (97.9%) 4,040,625
OTHER ASSETS IN EXCESS OF LIABILITIES 2.1% 86,488
----------
NET ASSETS (Applicable to 396,470 Shares) 100.0% $4,127,113
==========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER SHARE ($4,127,113 : 396,470) $10.41
==========
</TABLE>
+ Variable Rate Demand Notes--The interest rate shown is the rate as of August
31, 1995 and the maturity date shown is the longer of the next interest
readjustment date or the date the principal amount can be recovered through
demand.
* Also cost for Federal income tax purposes. The gross appreciation
(depreciation) on a tax basis is as follows:
Gross and Net Appreciation $240,713
========
The Moody's Investors Service, Inc. and Standard & Poor's Ratings Group's
ratings indicated are the most recent ratings available at August 31,1995. These
ratings have not been audited by the Independent Accountants and, therefore, are
not covered by the Report of Independent Accountants.
INVESTMENT ABBREVIATIONS
<TABLE>
<S> <C>
VRDN....................................... Variable Rate Demand Note
GO......................................... General Obligations
LOC........................................ Letter of Credit
MB......................................... Municipal Bond
PCR........................................ Pollution Control Revenue
RB......................................... Revenue Bond
</TABLE>
See Accompanying Notes to Financial Statements.
21
<PAGE>
<PAGE>
- ------------------------------------------------------------------------------
WARBURG PINCUS TAX FREE FUND
STATEMENT OF OPERATIONS
For the Year Ended August 31, 1995
- ------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest $274,436
--------
EXPENSES
Investment advisory fees 22,949
Administration fees 5,051
Distribution fees 14,565
Custodian fees 12,615
Transfer agent fees 17,862
Registration fees 11,966
Printing expense 8,636
Other expenses 2,961
--------
96,605
Less fees waived (32,249)
Less expense reimbursement by advisor (42,354)
--------
Total expenses 22,002
--------
Net investment income 252,434
--------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Amortized market discount 1,429
Net realized loss on investments (53,450)
Net change in unrealized appreciation of investments 159,794
--------
Net gain on investments 107,773
--------
Net increase in net assets resulting from operations $360,207
========
</TABLE>
See Accompanying Notes to Financial Statements.
22
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS TAX FREE FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FOR THE
YEAR ENDED YEAR ENDED
AUGUST 31, 1995 AUGUST 31, 1994
--------------- ---------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income $ 252,434 $ 328,396
Net gain (loss) on investments 107,773 (334,661)
--------------- ---------------
Net increase (decrease) in net assets resulting from
operations 360,207 (6,265)
--------------- ---------------
Distributions to shareholders:
Dividends to shareholders from net investment income:
Common shares ($.5426 and $.6092, respectively,
per share) (252,796) (332,187)
Distributions to shareholders in excess of net investment
income ($.0135 per share for 1994) -- (7,110)
Distributions to shareholders from net realized capital gains:
Common shares ($.2977 and $.4886, respectively, per share) (137,718) (276,466)
--------------- ---------------
Total distributions to shareholders (390,514) (615,763)
--------------- ---------------
Net capital share transactions (1,307,539) (544,098)
--------------- ---------------
Total decrease in net assets (1,337,846) (1,166,126)
Net Assets:
Beginning of year 5,464,959 6,631,085
--------------- ---------------
End of year $ 4,127,113 $ 5,464,959
=============== ===============
</TABLE>
See Accompanying Notes to Financial Statements.
23
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS GROWTH & INCOME FUND
FINANCIAL HIGHLIGHTS (B)
(For a Share Outstanding Throughout Each Year)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Years Ended August 31,
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
NET ASSET VALUE, BEGINNING OF YEAR $14.56 $16.72 $11.99 $12.11 $11.00
------ ------ ------ ------ ------
Income From Investment Operations:
Net Investment Income 0.2224 0.0785 0.0464 0.1912 0.3744
Net Gains on Securities (both
realized and unrealized) 1.9834 1.8151 4.8499 0.0402 1.6891
------ ------ ------ ------ ------
Total from Investment Operations 2.2058 1.8936 4.8963 0.2314 2.0635
------ ------ ------ ------ ------
Less Distributions:
Dividends (from net investment income) (0.1824) (0.0785) (0.0875) (0.1871) (0.4043)
Distributions (from capital gains) (0.1834) (3.9751) (0.0788) (0.1643) (0.5492)
-------- -------- -------- -------- --------
Total Distributions (0.3658) (4.0536) (0.1663) (0.3514) (0.9535)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF YEAR $16.40 $14.56 $16.72 $11.99 $12.11
====== ====== ====== ====== ======
Total Return 15.62% 14.41% 41.17% 1.99% 19.91%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Year (000) $1,038,193 $410,658 $60,689 $28,976 $24,726
Ratios of Expenses to Average Net Assets 1.22% 1.28%(a) 1.14%(a) 1.25%(a) 1.30%(a)
Ratios of Net Investment Income to
Average Net Assets 1.64% 0.41% 0.30% 1.66% 3.42%
Portfolio Turnover Rate 109% 150% 344% 175% 41%
</TABLE>
(a) Without the waiver of advisory and administration fees and without the
reimbursement of certain operating expenses, the ratios of expenses to
average net assets for the Warburg Pincus Growth & Income Fund would have
been 1.28%, 1.14%, 1.28% and 2.17% for the years ended August 31, 1994,
1993, 1992 and 1991, respectively.
(b) Financial Highlights relate solely to the Common Class of shares with the
Fund.
See Accompanying Notes to Financial Statements.
TAX STATUS OF 1995 DIVIDENDS (Unaudited)
Dividends paid by the Fund taxable as ordinary income amounted to $0.3658
per share; 49.48% of ordinary income dividends qualify for the dividends
received deduction available to corporate shareholders for U.S. income tax
purposes.
Because the Fund's fiscal year is not the calendar year, amounts to be used
by calendar year taxpayers on their Federal return will be reflected on Form
1099-DIV and will be mailed in January 1996.
24
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS BALANCED FUND
FINANCIAL HIGHLIGHTS (B)
(For a Share Outstanding Throughout Each Year)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Years Ended August 31,
---------------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $11.01 $11.71 $12.04 $12.05 $10.60
------ ------ ------ ------ ------
Income From Investment Operations:
Net Investment Income 0.2080 0.4132 0.5555 0.4408 0.4213
Net Gains on Securities (both realized
and unrealized) 1.7225 0.3248 1.1253 0.5155 1.7196
------ ------ ------ ------ ------
Total from Investment Operations 1.9305 0.7380 1.6808 0.9563 2.1409
------ ------ ------ ------ ------
Less Distributions:
Dividends (from net investment income) (0.3136) (0.4586) (0.5412) (0.3713) (0.4128)
Distributions (from capital gains) (1.5069) (0.9794) (1.4696) (0.5950) (0.2781)
-------- -------- -------- -------- --------
Total Distributions (1.8205) (1.4380) (2.0108) (0.9663) (0.6909)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF YEAR $11.12 $11.01 $11.71 $12.04 $12.05
====== ====== ====== ====== ======
Total Return 21.56% 6.86% 15.27% 8.07% 21.18%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Year (000) $5,342 $808 $762 $1,026 $1,290
Ratios of Expenses to Average Net Assets 1.53%(a) 0%(a) 0%(a) .67%(a) 1.40%(a)
Ratios of Net Investment Income to
Average Net Assets 2.27% 3.76% 4.13% 3.68% 3.58%
Portfolio Turnover Rate 107% 32% 30% 93% 76%
</TABLE>
(a) Without the waiver of advisory and administration fees and without the
reimbursement of certain operating expenses, the ratios of expenses to
average net assets for the Warburg Pincus Balanced Fund would have been
6.04%, 5.46%, 5.37%, 3.88% and 3.89% for the years ended August 31, 1995,
1994, 1993, 1992 and 1991, respectively.
(b) Financial Highlights relate solely to the Common Class of shares with the
Fund.
See Accompanying Notes to Financial Statements.
TAX STATUS OF 1995 DIVIDENDS (Unaudited)
Dividends paid by the Fund taxable as ordinary income amounted to $0.4755
per share; 18.60% of ordinary income dividends qualify for the dividend received
deduction available to corporate shareholders for U.S. income tax purposes.
Long-term capital gain dividends amounted to $1.3450 per share.
Because the Fund's fiscal year is not the calendar year, amounts to be used
by calendar year taxpayers on their Federal return will be reflected on Form
1099-DIV and will be mailed in January 1996.
25
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS TAX FREE FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout Each Year)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Years Ended August 31,
---------------------------------------------------------------
1995 1994 1993 1992 1991
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $10.40 $11.53 $11.04 $10.46 $10.05
------ ------ ------ ------ ------
Income From Investment Operations:
Net Investment Income 0.5426 0.6026 0.6385 0.6771 0.6027
Net Gains (Losses) on Securities (both
realized and unrealized) 0.3077 (0.6259) 0.8654 0.6145 0.4402
------ -------- ------ ------ ------
Total from Investment Operations 0.8503 (0.0233) 1.5039 1.2916 1.0429
------ -------- ------ ------ ------
Less Distributions:
Dividends (from net investment income) (0.5426) (0.6092) (0.6725) (0.6345) (0.6212)
Distributions (in excess of net
investment income) -- (0.0135) -- -- --
Distributions (from capital gains) (0.2979) (0.4886) (0.3414) (0.0771) (0.0117)
-------- -------- -------- -------- --------
Total Distributions (0.8403) (1.1113) (1.0139) (0.7116) (0.6329)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF YEAR $10.41 $10.40 $11.53 $11.04 $10.46
====== ====== ====== ====== ======
Total Return 8.89% (0.30%) 14.45% 12.77% 10.66%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Year (000) $4,127 $5,465 $6,631 $6,491 $8,840
Ratios of Expenses to Average Net Assets .48%(a) .15%(a) .17%(a) .33%(a) .83%(a)
Ratios of Net Investment Income to
Average Net Assets 5.53% 5.51% 5.71% 6.21% 6.02%
Portfolio Turnover Rate 38% 20% 70% 78% 63%
</TABLE>
(a) Without the waiver of advisory, administration and custody fees and without
the reimbursement of certain operating expenses, the ratios of expenses to
average net assets for the Warburg Pincus Tax Free Fund would have been
2.12%, 1.84%, 1.76%, 1.61% and 3.06% for the years ended August 31, 1995,
1994, 1993, 1992 and 1991, respectively.
See Accompanying Notes to Financial Statements.
TAX STATUS OF 1995 DIVIDENDS (Unaudited)
Long term capital gain dividends amounted to $0.2979 per share.
Because the Fund's fiscal year is not the calendar year, amounts to be used
by calendar year taxpayers on their Federal return will be reflected on Form
1099-DIV and will be mailed in January 1996.
26
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS FUNDS
NOTES TO FINANCIAL STATEMENTS
August 31, 1995
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
The RBB Fund, Inc. (the "Company") is registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
The Company was incorporated in Maryland on February 29, 1988, and currently has
seventeen investment Portfolios, three of which are included in these financial
statements.
The Company has authorized capital of thirty billion shares of common stock
of which 12.2 billion are currently classified into sixty-one classes. Each
class represents an interest in one of seventeen investment portfolios of the
Company, fifteen of which are currently in operation. The classes have been
grouped into fifteen separate "families", eight of which have begun investment
operations including the Warburg Pincus Family. The Warburg Pincus Family is
comprised of Warburg Pincus Growth & Income Fund (the "Growth & Income Fund"),
Warburg Pincus Balanced Fund (the "Balanced Fund") and Warburg Pincus Tax Free
Fund (the "Tax Free Fund"), which are covered in this report. The Growth &
Income Fund and the Balanced Fund each have two classes of shares: Common Class
and Advisor Class.
The net asset value of each Fund is determined daily as of the close of
regular trading on the New York Stock Exchange. Each Fund's securities are
valued at market value, which is currently determined using the last reported
sales price. If no sales are reported, as in the case of some securities traded
over-the-counter, portfolio securities are valued at the mean between the last
reported bid and asked prices. Corporate bonds, tax-exempt bonds and notes and
government securities are valued on the basis of quotations provided by an
independent pricing service which uses information with respect to transactions
on bonds, quotations from bond dealers, market transactions in comparable
securities and various relationships between securities in determining value.
Short-term obligations with maturities of 60 days or less are valued at
amortized cost which approximates market value.
Security transactions are accounted for on the trade date. The cost of
investments sold is determined by use of the specific identification method for
both financial reporting and income tax purposes. Interest income is recorded on
the accrual basis. Dividends are recorded on the ex-dividend date. Certain
expenses, principally distribution, transfer agent and printing, are class
specific expenses and vary by class. Expenses not directly attributable to a
specific portfolio or class are allocated based on relative net assets of each
Portfolio and class, respectively.
For the Growth & Income and the Balanced Funds, dividends from net
investment income, if any, are declared and paid at least quarterly. For the Tax
Free Fund, dividends from net investment income, if any, are declared daily and
paid monthly. For all Funds, any net realized capital gains will be distributed
at least annually. Income distributions and capital gain distributions are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principals.
27
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
August 31, 1995
- --------------------------------------------------------------------------------
No provision is made for Federal taxes as it is the Company's intention to
have each portfolio continue to qualify for and elect the tax treatment
applicable to regulated investment companies under the Internal Revenue Code and
make the requisite distributions to its shareholders which will be sufficient to
relieve it from Federal income and excise taxes.
Money market instruments may be purchased subject to the seller's agreement
to repurchase them at an agreed upon date and price. The seller will be required
on a daily basis to maintain the value of the securities subject to the
agreement at not less than the repurchase price. The agreements are conditioned
upon the collateral being deposited under the Federal Reserve book-entry system
or with the Fund's custodian or a third party sub-custodian.
2. INVESTMENT ADVISER, CO-ADMINISTRATORS AND DISTRIBUTOR
Warburg, Pincus Counsellors, Inc. ("Counsellors"), a wholly owned subsidiary
of Warburg, Pincus Counsellors G.P. ("Counsellors G.P.") serves as investment
advisor for the Growth & Income Fund. The advisory fee is computed daily and
payable monthly at the annual rate of .75% of the Growth & Income Fund's average
daily net assets.
Pursuant to a vote on September 30, 1994, shareholders approved a new
advisory contract between the Balanced Fund and Counsellors. Under the new
agreement, the Balanced Fund pays Counsellors an advisory fee at an annual rate
of .90% of the Fund's average daily net assets. The prior advisory agreement
between the Fund and PNC Institutional Management Corp. ("PIMC") was terminated
as of that date.
Pursuant to a vote on March 31, 1995, shareholders approved a new advisory
contract between Tax Free Fund and Counsellors. Under the new agreement, Tax
Free Fund pays Counsellors an advisory fee at an annual rate of .50% of the Fund
s average daily net assets. The prior agreement between the Fund and PIMC was
terminated as of that date.
Counsellors may, at its discretion, voluntarily waive all or any portion of
its advisory fees for any of the Funds. For the year ended August 31, 1995,
investment advisory fees and waivers were as follows:
<TABLE>
<CAPTION>
GROSS NET
ADVISORY FEE WAIVER ADVISORY FEE
------------ ------- ------------
<S> <C> <C> <C>
Growth & Income Fund $ 5,824,947 $ -- $ 5,824,947
Balanced Fund 14,729 (14,729) --
Tax Free Fund 22,949 (22,949) --
</TABLE>
PFPC Inc. ("PFPC"), an indirect wholly owned subsidiary of PNC Bank Corp.,
and Counsellors Fund Services, Inc. ("CFSI"), a wholly owned subsidiary of
Counsellors, serve as co-administrators for each of the Funds. For the Growth &
Income Fund, the co-administration fees are computed daily and payable monthly
at an annual rate of .20% of the first $125 million of average daily net assets
and .15%
28
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
August 31, 1995
- --------------------------------------------------------------------------------
of average daily net assets in excess of $125 million for PFPC and .05% of the
first $125 million of average daily net assets and .10% of average daily net
assets in excess of $125 million for CFSI.
For the Balanced and Tax Free Funds, the co-administration fees are computed
daily and payable monthly at an annual rate of .15% of average daily net assets
for PFPC and .10% of average daily net assets for CFSI.
CFSI and PFPC may, at their discretion, voluntarily waive all or any portion
of their co-administration fees for any of the Funds. For the year ended August
31, 1995, CFSI and PFPC's co-administration fees and waivers were as follows:
<TABLE>
<CAPTION>
GROSS NET
CO-ADMINISTRATION FEES WAIVERS CO-ADMINISTRATION FEES
---------------------- ------- ----------------------
<S> <C> <C> <C>
Growth & Income Fund $1,941,649 $ -- $1,941,649
Balanced Fund 3,991 (2,394) 1,597
Tax Free Fund 5,051 (3,239) 1,812
</TABLE>
The Company, on behalf of each class of shares within the investment
portfolios, has adopted Distribution Plans pursuant to Rule 12b-1 under the
Investment Company Act of 1940, as amended, and has entered into Distribution
Contracts with Counsellors Securities Inc. ("CSI"), also a wholly owned
subsidiary of Counsellors, which provide for each class to make monthly
payments, based on average daily net assets, to CSI. No compensation is payable
by the Growth & Income Fund's Common Shares. For distribution services with
respect to the Balanced and the Tax Free Funds' Common Shares, CSI receives a
fee at the annual rate of .25%, computed daily and payable monthly, on average
daily net assets. For distribution services with respect to the Growth & Income
and the Balanced Funds' Advisor Shares, CSI receives a fee of .25% and .50%,
respectively, computed daily and payable monthly, on average daily net assets.
For the year ended August 31, 1995, distribution fees were as follows:
<TABLE>
<CAPTION>
DISTRIBUTION FEES
-----------------
<S> <C>
Growth & Income Fund
Advisor Shares $71,233
=======
Balanced Fund
Common Shares $ 4,155
Advisor Shares --
-------
$ 4,155
=======
Tax Free Fund
Common Shares $14,565
=======
</TABLE>
29
- -----------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
August 31, 1995
- --------------------------------------------------------------------------------
3. INVESTMENT IN SECURITIES
For the year ended August 31, 1995, purchases and sales of investment
securities (other than short-term investments) were as follows:
<TABLE>
<CAPTION>
INVESTMENT SECURITIES
------------------------------
PURCHASES SALES
-------------- ------------
<S> <C> <C>
Growth & Income Fund $1,108,363,903 $617,767,292
Balanced Fund 5,047,134 1,602,287
Tax Free Fund 1,669,358 3,357,298
</TABLE>
4. CAPITAL SHARES
Transactions in capital shares for each year were as follows:
<TABLE>
<CAPTION>
GROWTH & INCOME FUND BALANCED FUND
-------------------------------------------------------- ------------------------------------------------------
For the Year Ended For the Year Ended For the Year Ended For the Year Ended
August 31, 1995 August 31, 1994 August 31, 1995 August 31, 1994
--------------------------- -------------------------- --------------------------- ------------------------
Shares Value Shares Value Shares Value Shares Value
----------- ------------- ----------- ------------ ----------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold
Common Shares 46,345,660 $ 670,088,619 29,256,806 $410,956,025 423,875 $ 4,348,625 609 $ 6,495
Advisor Shares 3,521,620 52,908,038 -- -- 110 1,180 -- --
Shares issued in
reinvestment of
dividends
Common Shares 6,891 96,291 67,788 894,152 16,171 148,491 8,690 93,303
Advisor Shares 9,051 137,213 -- -- -- -- -- --
Shares repurchased
Common Shares (11,270,725) (167,348,709) (4,741,678) (69,798,926) (33,364) (347,995) (982) (10,905)
Advisor Shares (57,795) (890,622) -- -- -- -- -- --
----------- ------------- ----------- ------------ ----------- ------------- ----------- -----------
Net increase 38,554,702 $ 554,990,830 24,582,916 $342,051,251 406,792 $ 4,150,301 8,317 88,893
=========== ============= =========== ============ =========== ============= =========== ===========
Common Shares
authorized 100,000,000 100,000,000 100,000,000 100,000,000
=========== =========== =========== ===========
</TABLE>
30
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
August 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TAX FREE FUND
--------------------------------------------------------
For the Year Ended For the Year Ended
August 31, 1995 August 31, 1994
-------------------------- --------------------------
Shares Value Shares Value
------ ----- ------ -----
<S> <C> <C> <C> <C>
Shares sold:
Common Shares 16,896 $ 172,004 4,183 $ 47,154
Shares issued in reinvestment
of dividends:
Common Shares 24,384 240,772 37,807 414,727
Shares repurchased:
Common Shares (170,342) (1,720,315) (91,398) (1,005,979)
----------- ----------- ----------- -----------
Net decrease (129,062) $(1,307,539) (49,408) $ (544,098)
=========== =========== =========== ===========
Common Shares authorized 100,000,000 100,000,000
=========== ===========
</TABLE>
5. NET ASSETS
At August 31, 1995, net assets consisted of the following:
<TABLE>
<CAPTION>
GROWTH & INCOME FUND BALANCED FUND TAX FREE FUND
-------------------- -------------- -------------
<S> <C> <C> <C>
Capital paid-in $ 943,960,297 $4,808,416 $ 3,935,026
Undistributed net
investment income (loss) 2,453,167 7,138 --
Amortized market discount -- -- 4,824
Accumulated net realized gain (loss) on
investments transactions, futures
contracts and foreign exchange
transactions 30,926,372 60,835 (53,450)
Unrealized appreciation on investments 117,755,410 465,460 240,713
--------------- -------------- -------------
$1,095,095,246 $5,341,849 $ 4,127,113
=============== ============== =============
</TABLE>
6. FUTURES CONTRACTS
The Growth & Income Fund may enter into futures contracts for hedging or
portfolio management strategy purposes to the extent permitted by its investment
policies and objectives. To enter into a futures contract, the Growth & Income
Fund must make a deposit of an initial margin with its custodian in a segregated
account. Subsequent payments, which are dependent on the daily fluctuations in
the value of the underlying instrument, are made or received by the Fund each
day (daily variation margin) and are recorded as unrealized gains or losses
until the contracts are closed. When the contract is closed, the Fund records a
realized gain or loss equal to the difference between the proceeds from (or
31
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
August 31, 1995
- --------------------------------------------------------------------------------
cost of) the closing transactions and the Fund's basis in the contract. Risks of
entering into futures contracts include the possibility that a change in the
value of the contract may not correlate with the changes in the value of the
underlying instruments. The Growth & Income Fund entered into futures
transactions during the year ended August 31, 1995. However, the Growth & Income
Fund had no futures contracts open at August 31, 1995.
7. CAPITAL LOSS CARRYOVER
At August 31, 1995, $53,450 capital loss carryover in the Tax Free Fund was
available to offset future realized gains which expires in 2003.
8. OTHER FINANCIAL HIGHLIGHTS
The Growth & Income and the Balanced Funds currently offer one other class
of shares, Advisor Shares, representing an additional interest in each of the
Funds. The financial highlights of each of the Advisor shares are as follows:
32
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
August 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ADVISOR SHARES
--------------------------------------
GROWTH & INCOME BALANCED
FUND FUND
----------------- -----------------
FOR THE PERIOD FOR THE PERIOD
MAY 15, 1995 JULY 31, 1995
(COMMENCEMENT (COMMENCEMENT
OF OPERATIONS) TO OF OPERATIONS) TO
AUGUST 31, 1995 AUGUST 31, 1995
----------------- -----------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.87 $ 10.72
------- ------
Income From Investment Operations:
Net Investment Income 0.0236 0.0170
Net Gains (Losses) on Securities (both realized and unrealized) 1.5323 0.3930
------- ------
Total from Investment Operations 1.5559 0.4100
------- ------
Less Distributions
Dividends (from net investment income) (0.0459) 0.0000
------- ------
Total Distributions (0.0459) 0.0000
------- ------
NET ASSET VALUE, END OF PERIOD $ 16.38 $11.13
======= ======
Total Returns 10.49%(c) 3.82%(c)
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $56,902 $ 1
Ratios of Expenses to Average Net Assets 1.92%(b) 1.76%(a)(b)
Ratios of Net Investment Income to Average Net Assets 0.43%(b) 2.00%(b)
Portfolio Turnover Rate 109%(b) 107%(b)
</TABLE>
(a) Without the waiver of advisory and administration fees and without the
reimbursement of certain operating expenses, the ratios of expenses to
average net assets for the Balanced Fund would have been 628.47% annualized
for the period ended August 31, 1995.
(b) Annualized.
(c) Not Annualized.
33
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Directors of The RBB Fund, Inc.:
We have audited the accompanying statements of net assets of Warburg Pincus
Growth & Income Fund, Warburg Pincus Balanced Fund and Warburg Pincus Tax Free
Fund of The RBB Fund, Inc., as of August 31, 1995, and the related statements of
operations for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended, and the financial highlights for
each of the periods presented. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments held as of
August 31, 1995, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Warburg Pincus Growth & Income Fund, Warburg Pincus Balanced Fund and Warburg
Pincus Tax Free Fund of The RBB Fund, Inc., as of August 31, 1995, and the
results of their operations for the year then ended, the changes in their net
assets for each of the two years in the period then ended, and their financial
highlights for each of the periods presented, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
October 16, 1995
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
WARBURG PINCUS FUNDS
[LOGO]
ANNUAL REPORT
AUGUST 31, 1995
/ / WARBURG PINCUS
GROWTH & INCOME FUND
Warburg Pincus Funds / / WARBURG PINCUS
P.O. Box 9030 BALANCED FUND
Boston, Massachusetts 02205-9030
Shareholder Services / / WARBURG PINCUS
1-800-888-6878 TAX FREE FUND
Prospectuses
1-800-257-5614 Counsellors Securities Inc.,
Distributor
WPGBT-2-0895
<PAGE>
<PAGE>
WARBURG PINCUS ADVISOR FUNDS
ANNUAL REPORT
August 31, 1995
Warburg Pincus Advisor
Growth & Income Fund
Warburg Pincus Advisor
Balanced Fund
A PROSPECTUS CONTAINING MORE COMPLETE
INFORMATION, INCLUDING MANAGEMENT FEES AND
EXPENSES, MAY BE OBTAINED BY CALLING 1-800-
369-2728 OR BY WRITING TO WARBURG PINCUS
ADVISOR FUNDS, P.O. BOX 9030, BOSTON, MA
02205-9030. INVESTORS SHOULD READ THE
PROSPECTUS CAREFULLY BEFORE INVESTING.
[WARBURG PINCUS ADVISOR FUNDS LOGO]
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS ADVISOR GROWTH & INCOME FUND
ANNUAL INVESTMENT ADVISER'S REPORT
- --------------------------------------------------------------------------------
The Warburg Pincus Advisor Growth & Income Fund (the "Fund") commenced
operations on May 15, 1995. Since the commencement of operations, the Fund
appreciated 10.49% vs. an increase of 7.27% in the S&P 500 Index.
For the 12 months ended August 31, 1995, the Common Shares of the Warburg
Pincus Growth & Income Fund appreciated 15.62% vs. an increase of 21.38% in the
S&P 500 Index. Much of the Fund's underperformance relative to the S&P 500
during the period is attributable to its underweighting in technology, the
sector that has led the market for the last several quarters. While we concur,
in general, with the market's assessment of the long-term earnings potential for
many of these companies, we differ in our views of what constitutes fair value
for the companies' securities. Many technology stocks, we believe, had been bid
up to levels unjustified by their fundamentals, hence our decision to exclude
them from the portfolio. We continue to monitor the sector closely, however, and
will use any periods of price weakness over the coming months to establish and
build positions that we think have particularly favorable prospects.
Among our top performers during the 12 months ended August 31, 1995 were
banking and financial-services stocks. We had established our position in these
issues last year, when rising interest rates and derivatives-related scandals
had driven their prices down to what we deemed to be attractive levels. This
year, though, the sector, particularly the banking area, has rebounded strongly,
buoyed by falling interest rates, merger activity and subsiding fears of the
industry's vulnerability to derivatives. We saw especially strong gains from
BankAmerica and First Interstate Bancorporation, two of our largest positions.
Industrial cyclical stocks, another heavily weighted area in our portfolio,
also performed well during the 12 months ended August 31, 1995. We took profits
in some of our top performers--e.g., Inco, whose share price jumped nearly 50%
from June through September. The company produces roughly 25% of the world's
nickel, in addition to copper and other metals and metal-related products. Less
impressive was the performance of our steel companies, which include Bethlehem
Steel, Inland Steel and USX-U.S. Steel Group. The steel group has significantly
underperformed the market thus far in 1995, but we believe shifts in the global
supply/demand balance will provide considerable support for steel prices, and
these companies' earnings, going forward. Hence we have viewed the stocks'
short-term price weakness as a buying opportunity.
Supply/demand factors argue strongly for higher prices in many of the
metals, but the case is particularly strong for precious metals. Accordingly, we
have maintained our exposure to gold- and silver-mining companies, including
Hecla Mining, Homestake Mining, Newmont Mining, Pegasus Gold and Placer Dome. We
believe these stocks have considerable upside potential, especially over the
intermediate and long term.
1
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS ADVISOR GROWTH & INCOME FUND
ANNUAL INVESTMENT ADVISER'S REPORT (CONT'D)
- --------------------------------------------------------------------------------
We remain similarly committed to the telecommunications sector, an area that
has done quite well for us in 1995. We expect these stocks to continue to excel
through the rest of this year and well into 1996, particularly after the new
telecommunications bill becomes law. Our holdings here include AirTouch
Communications, which provides cellular-telephone communication services and
related products, and Qualcomm, whose technology to multiply tenfold the number
of telephone calls that can be carried over a single channel stands to
revolutionize the industry.
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE
WARBURG PINCUS GROWTH & INCOME FUND AND THE S&P 500
FROM 5/15/95* AND THE FISCAL YEAR END
----------------------------------------------------------
<TABLE>
<CAPTION>
FUND S&P 500
--------------------------
--------------------------
<S> <C> <C>
$10,000 $10,000
5/15/95 - 08/31/95 $11,049 $10,727
</TABLE>
From 05/15/95 to 08/31/95 10.49%
----------------------------------------------------------
* Hypothetical illustration of $10,000 investment since May 15, 1995
(commencement of operations of the Advisor Class).
Note: All figures cited here represent past performance and do not guarantee
future results. Investment return and the principal value of an investment
will fluctuate so that an investor's shares upon redemption may be more or
less than original shares.
2
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS ADVISOR BALANCED FUND
ANNUAL INVESTMENT ADVISER'S REPORT
- --------------------------------------------------------------------------------
The Warburg Pincus Advisor Balanced Fund (the "Fund") commenced operations
on July 31, 1995. Since the commencement of operations, the Fund gained 3.82%,
vs. a gain of 0.78% for the Lipper Balanced Fund Index.
For the 12 months ended August 31, 1995, the Common Shares of the Warburg
Pincus Balanced Fund gained 21.56% vs. a gain of 13.11% for the Lipper Balanced
Fund Index. Falling interest rates, continued economic growth and the absence of
significant inflationary pressures provided an ideal backdrop for both stock and
bond markets through most of the period. Throughout, we attempted to maintain an
optimal mix of stocks and bonds, one intended to provide solid returns at a
relatively low level of volatility.
The Fund finished the reporting period with a 51.5% commitment to domestic
common stocks, with its heaviest weightings in, respectively, the technology,
financial services, metals and mining, manufacturing, and oil sectors. Good
stock selection within these sectors, especially in the technology and
financial-services groups, played a significant role in the Fund's relatively
strong performance during the period, and we believe the prospects of our
holdings in these categories remain positive going forward.
The Fund's foreign-equity exposure (8.7% of assets at the close of the
period) consists of a diversified mix of issues among Asian and European
countries, with the largest weightings in Japan (1.9%) and the United Kingdom
(1.8%). We continue to find attractive opportunities in Asian markets, broadly
speaking, and in European markets on a stock-by-stock basis.
The Fund's fixed-income weighting remains concentrated most heavily in
short-term U.S. Treasury obligations. We maintained a minimal exposure to the
fixed-income sector through much of the reporting period, reflecting our bullish
view on the relative prospects of stocks vs. bonds. Looking ahead, we believe
conditions remains favorable for both markets, but particularly so for stocks,
and we have allocated the Fund's assets accordingly.
3
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS ADVISOR BALANCED FUND
ANNUAL INVESTMENT ADVISER'S REPORT (CONT'D)
- --------------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE
WARBURG PINCUS BALANCED FUND, S&P 500, AND LIPPER BALANCED FUND INDEX
FROM 7/31/95* AND THE FISCAL YEAR END
----------------------------------------------------------
<TABLE>
<CAPTION>
FUND *LIPPER S&P 500
-------------------------------
-------------------------------
<S> <C> <C> <C>
$10,000 $10,000 $10,000
7/31/95 - 08/31/95 10,382 10,078 10,017
</TABLE>
TOTAL RETURN (07/31/95 - 08/31/95) 3.82%
* LIPPER BALANCED FUND INDEX
----------------------------------------------------------
* Hypothetical illustration of $10,000 investment since July 31, 1995
(commencement of operations of the Advisor Class).
Note: All figures cited here represent past performance and do not guarantee
future results. Investment return and the principal value of an investment
will fluctuate so that an investor's shares upon redemption may be more or
less than original shares.
4
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS GROWTH & INCOME FUND
STATEMENT OF NET ASSETS
August 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
--------- --------------
<S> <C> <C>
COMMON STOCKS AND WARRANTS (82.2%)
Aerospace (1.3%)
Allied-Signal, Inc. 325,000 $ 14,421,875
--------------
Agriculture Production Corporations (0.4%)
Terra Industries, Inc. 320,300 4,284,013
--------------
Air Conditioning & Heating (0.9%)
Management Systems Johnson Controls, Inc. 170,000 10,348,750
--------------
Automobiles (1.3%)
Navistar International** 1,130,000 14,690,000
--------------
Banking (3.2%)
First Interstate Bancorp 368,000 35,144,000
--------------
Chemicals (1.4%)
PPG Industries, Inc. 355,000 15,176,250
--------------
Construction (2.2%)
Stone & Webster, Inc. 655,000 24,235,000
--------------
Electronic Computers (6.2%)
GRC International, Inc.** 667,000 16,341,500
Honeywell, Inc. 655,000 28,656,250
International Business Machines Corp. 221,000 22,845,875
--------------
67,843,625
--------------
Electronics (1.2%)
Motorola, Inc. 175,000 13,081,250
--------------
Entertainment (3.8%)
Acclaim Entertainment, Inc.** 1,420,000 35,855,000
Boardwalk Casino, Inc.** 525,000 4,528,125
Boardwalk Casino, Inc. Warrants
(expire 02/14/98)** 375,000 1,453,125
--------------
41,836,250
--------------
Financial Services (7.0%)
BankAmerica Corp. 655,000 37,007,500
Crestar Financial Corp. 270,000 15,221,250
Loyola Capital Corp. 247,500 8,662,500
Midlantic Corp. 302,000 15,553,000
--------------
76,444,250
--------------
Insurance (3.3%)
Chubb Corp. 150,000 13,687,500
USF&G Corp. 1,234,000 22,366,250
--------------
36,053,750
--------------
</TABLE>
See Accompanying Notes to Financial Statements.
5
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS GROWTH & INCOME FUND
STATEMENT OF NET ASSETS (CONT'D)
August 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
--------- --------------
<S> <C> <C>
COMMON STOCKS AND WARRANTS (CONT'D)
Manufacturing (4.5%)
Corning Glass, Inc. 909,000 $ 29,656,125
Rauma OY Sponsored ADR** 102,900 2,443,875
Trinity Industries, Inc. 500,000 16,187,500
Whitman Corp. 50,000 1,006,250
--------------
49,293,750
--------------
Medical & Medical Services (1.9%)
Acuson Corp.** 210,000 2,756,250
Foxmeyer Health Corp.** 689,000 17,741,750
--------------
20,498,000
--------------
Metals & Mining (19.0%)
Echo Bay Mines Ltd. 500,000 5,187,500
Hecla Mining Co.** 1,940,000 22,310,000
Homestake Mining Co. 2,282,500 37,661,250
Inco Ltd. 985,000 34,475,000
Newmont Mining Corp. 903,000 39,280,500
Pegasus Gold, Inc.** 1,419,000 17,737,500
Placer Dome, Inc. 1,519,600 39,699,550
Prime Resources Group, Inc.** 1,400,000 11,210,360
--------------
207,561,660
--------------
Oil (1.0%)
Quaker State Corp. 715,000 10,725,000
--------------
Oil Services (4.4%)
Baker Hughes, Inc. 871,500 19,608,750
Halliburton Co. 521,000 22,077,375
Occidental Petroleum Corp. 280,000 6,090,000
--------------
47,776,125
--------------
Steel (13.0%)
AK Steel Holding Corp.** 454,000 14,471,250
Bethlehem Steel Corp.** 1,581,000 23,122,125
CBI Industries, Inc. 1,160,000 28,420,000
Inland Steel Industries, Inc. 585,000 16,014,375
LTV Corp.** 1,122,500 17,539,062
USX-US Steel Group 1,050,000 34,387,500
WHX Corp.** 623,000 7,865,376
--------------
141,819,688
--------------
Telecommunications (5.6%)
Airtouch Communications, Inc.** 363,400 11,810,500
Comcast Corp. Special Class A Non-Voting 1,000,000 21,375,000
Qualcomm, Inc.** 280,000 13,650,000
Tele-Communications, Inc. Class A** 800,000 14,800,000
--------------
61,635,500
--------------
</TABLE>
See Accompanying Notes to Financial Statements.
6
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS GROWTH & INCOME FUND
STATEMENT OF NET ASSETS (CONCLUDED)
August 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
--------- --------------
<S> <C> <C>
COMMON STOCKS AND WARRANTS (CONT'D)
Tire & Rubber (0.4%)
Cooper Tire & Rubber Co. 160,000 $ 4,160,000
--------------
Transportation (0.2%)
Consolidated Freightways, Inc. 100,000 2,587,500
--------------
TOTAL COMMON STOCKS AND WARRANTS (Cost $781,860,824) 899,616,236
--------------
</TABLE>
<TABLE>
<CAPTION>
MATURITY PAR (000)
-------- ---------
<S> <C> <C> <C>
UNITED STATES TREASURY OBLIGATIONS (2.7%)
U.S. Treasury Bills 5.40% (Cost $29,973,000) 09/07/95 $ 30,000 29,973,000
--------------
REPURCHASE AGREEMENTS (13.8%)
Greenwich Capital Markets Inc. 5.83% 09/01/95 151,138 151,138,000
(Agreement dated 08/31/95 to be repurchased at
$151,162,476, collateralized by $150,000,000 U.S.
Treasury Notes 7.50% due 01/31/97. Market value of
collateral is $154,312,500).
(Cost $151,138,000)
--------------
TOTAL INVESTMENTS AT VALUE (Cost $962,971,826*) (98.7%) 1,080,727,236
OTHER ASSETS IN EXCESS OF LIABILITIES (1.3%) 14,368,010
--------------
NET ASSETS (Applicable to 63,295,201 Common Shares and
3,472,875 Advisor Shares) (100.0%) $1,095,095,246
--------------
--------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER
COMMON SHARE ($1,038,193,292 : 63,295,201) $16.40
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER ======
ADVISOR SHARE ($56,901,954 : 3,472,875) $16.38
======
</TABLE>
* Cost for Federal income tax purposes at August 31, 1995, is $963,365,013. The
gross appreciation (depreciation) on a tax basis is as follows:
Gross Appreciation $126,262,394
Gross Depreciation (8,900,171)
------------
Net Appreciation $117,362,223
------------
------------
** Non-income producing.
See Accompanying Notes to Financial Statements.
7
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS GROWTH & INCOME FUND
STATEMENT OF OPERATIONS
For the Year Ended August 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends $ 10,389,100
Interest 11,731,546
------------
Total investment income 22,120,646
------------
EXPENSES:
Investment advisory fees 5,824,947
Administration fees 1,941,649
Distribution fees 71,233
Custodian fees 162,248
Transfer agent fees 1,060,279
Legal fees 63,384
Audit fees 55,268
Registration fees 264,509
Insurance expense 23,560
Printing expense 86,973
Other expenses 26,827
------------
Total expenses 9,580,877
------------
Net investment income 12,539,769
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) from:
Investment transactions 41,087,749
Futures contracts (2,798,582)
------------
38,289,167
------------
Net change in unrealized appreciation of investments 96,772,046
------------
Net gain on investments and future contracts 135,061,213
------------
Net increase in net assets resulting from operations $147,600,982
------------
------------
</TABLE>
See Accompanying Notes to Financial Statements.
8
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS GROWTH & INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the For the
Year Ended Year Ended
August 31, 1995 August 31, 1994
--------------- ---------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income $ 12,539,769 $ 572,031
Net gain on investments and future contracts 135,061,213 17,971,937
--------------- ---------------
Net increase in net assets resulting from operations 147,600,982 18,543,968
--------------- ---------------
Distributions to shareholders:
Dividends to shareholders from net investment income:
Common shares ($.1824 and $.0785, respectively,
per share) (9,949,389) (572,031)
Advisor shares ($.0459 per share for 1995) (137,213) --
Distributions to shareholders from net realized capital
gains:
Common shares ($.1834 and $3.9751, respectively,
per share) (8,067,592) (10,054,939)
--------------- ---------------
Total distributions to shareholders (18,154,194) (10,626,970)
--------------- ---------------
Net capital share transactions 554,990,830 342,051,251
--------------- ---------------
Total increase in net assets 684,437,618 349,968,249
Net assets:
Beginning of year 410,657,628 60,689,379
--------------- ---------------
End of year $ 1,095,095,246 $ 410,657,628
--------------- ---------------
--------------- ---------------
</TABLE>
See Accompanying Notes to Financial Statements.
9
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS BALANCED FUND
STATEMENT OF NET ASSETS
August 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
--------- -----------
<S> <C> <C>
COMMON STOCKS (60.1%)
U.S. COMMON STOCKS
Aerospace (0.2%)
Allied-Signal, Inc. 300 $ 13,313
-----------
Banking (2.5%)
Bank of Boston Corp. 2,200 96,800
First Interstate Bancorp 400 38,200
-----------
135,000
-----------
Business Services (1.2%)
Paging Network, Inc.** 1,600 63,200
-----------
Chemicals (0.2%)
PPG Industries, Inc. 300 12,825
-----------
Communications & Media (1.1%)
Infinity Broadcast Corp.** 1,600 57,400
-----------
Computer & Office Equipment (2.1%)
Shared Medical Systems Corp. 1,800 66,375
Synopsys, Inc.** 800 46,400
-----------
112,775
-----------
Construction (0.7%)
Stone & Webster, Inc. 1,000 37,000
-----------
Electronic Computers (7.4%)
Cabletron Systems, Inc.** 500 26,438
GRC International, Inc.** 2,100 51,450
Honeywell, Inc. 800 35,000
International Business Machines Corp. 300 31,013
Linear Technology Corp. 400 32,400
Netscape Communications Corp.** 1,500 74,250
Platinum Technology, Inc. 2,400 56,700
System Software Associates, Inc. 800 25,250
Xilinx, Inc.** 1,500 64,312
-----------
396,813
-----------
</TABLE>
See Accompanying Notes to Financial Statements.
10
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS BALANCED FUND
STATEMENT OF NET ASSETS (CONT'D)
August 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
--------- -----------
<S> <C> <C>
COMMON STOCKS (CONT'D)
Electronics (1.5%)
Motorola, Inc. 200 $ 14,950
Thermospectra Corp.** 3,500 62,563
-----------
77,513
-----------
Entertainment (1.2%)
Acclaim Entertainment, Inc.** 1,500 37,875
Boardwalk Casino, Inc.** 3,000 25,875
-----------
63,750
-----------
Financial Services (5.2%)
BankAmerica Corp. 700 39,550
Citicorp Bank 800 53,100
Crestar Financial Corp. 500 28,188
Midlantic Corp. 300 15,450
Olympic Financial Ltd.** 3,300 75,488
United Companies Financial Corp. 1,100 68,475
-----------
280,251
-----------
Insurance (1.0%)
Chubb Corp. 300 27,375
USF&G Corp. 1,300 23,563
-----------
50,938
-----------
Manufacturing (3.8%)
Allied Products Corp. 1,500 32,438
Corning Glass, Inc. 800 26,100
Maxim Integrated Products, Inc. 1,000 76,250
Roper Industries, Inc. 1,500 51,000
Trinity Industries, Inc. 500 16,188
-----------
201,976
-----------
Medical & Medical Services (1.0%)
Foxmeyer Health Corp.** 2,000 51,500
-----------
</TABLE>
See Accompanying Notes to Financial Statements.
11
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS BALANCED FUND
STATEMENT OF NET ASSETS (CONT'D)
August 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
--------- -----------
<S> <C> <C>
COMMON STOCKS (CONT'D)
Metals & Mining (5.3%)
Coeur D'Alene Mines Corp. 2,100 $ 40,163
Hecla Mining Co.** 3,000 34,500
Homestake Mining Co. 2,100 34,650
Inco LTD. 1,000 35,000
Newmont Mining Corp. 1,000 43,500
Pegasus Gold, Inc.** 2,500 31,250
Placer Dome, Inc. 1,500 39,188
Prime Resources Group, Inc.** 3,000 24,022
-----------
282,273
-----------
Office Furniture (1.3%)
Viking Office Products, Inc.** 1,900 68,400
-----------
Oil (3.4%)
Barrett Resources Corp.** 2,500 53,750
Petroleum Geo Services** 2,500 64,063
Quaker State Corp. 500 7,500
Texas Meridian Resources Corp.** 5,000 55,000
-----------
180,313
-----------
Oil Services (0.8%)
Baker Hughes, Inc. 1,000 22,500
Halliburton Co. 500 21,188
-----------
43,688
-----------
Paper Mills (0.8%)
Champion International Corp. 800 45,300
-----------
Pharmaceuticals (1.8%)
Al Laboratories, Inc. Class A 2,000 42,000
Gilead Sciences, Inc.** 2,500 54,375
-----------
96,375
-----------
Retail--Retail Stores (1.1%)
Borders Group, Inc.** 3,000 60,750
-----------
Retail--Women's Clothing Stores (1.0%)
Talbots, Inc. 1,500 51,750
-----------
</TABLE>
See Accompanying Notes to Financial Statements.
12
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS BALANCED FUND
STATEMENT OF NET ASSETS (CONT'D)
August 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
--------- -----------
<S> <C> <C>
COMMON STOCKS (CONT'D)
Steel (3.0%)
Bethlehem Steel Corp.** 2,000 $ 29,250
CBI Industries, Inc. 1,000 24,500
LTV Corp. 1,500 23,438
Republic Engineered Steels** 3,000 20,625
USX-US Steel Group 1,300 42,575
WHX Corp.** 1,600 20,200
-----------
160,588
-----------
Telecommunications (3.2%)
Airtouch Communications, Inc.** 300 9,750
Comcast Corp. Special Class A Non-Voting 1,000 21,375
Mobile Telecommunications Technologies Corp.** 1,900 58,425
Qualcomm, Inc.** 300 14,625
Tele-Communications, Inc. Series A Liberty
Media Group** 2,000 53,125
Tele-Communications, Inc. Class A** 800 14,800
-----------
172,100
-----------
Textiles (0.6%)
Westpoint Stevens, Inc.** 1,500 33,562
-----------
FOREIGN COMMON STOCKS
Australia (0.4%)
BTR Nylex Limited 8,500 22,610
-----------
Austria (0.7%)
Va Technologie AG 330 36,446
-----------
Denmark (1.0%)
International Service System B 1,900 51,716
-----------
France (0.8%)
Bouygues 240 29,196
Compagnie Francaise de Petroleum Total 280 16,443
-----------
45,639
-----------
Hong Kong (0.6%)
Jardine Matheson Holdings LTD. 4,400 31,680
-----------
</TABLE>
See Accompanying Notes to Financial Statements.
13
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS BALANCED FUND
STATEMENT OF NET ASSETS (CONT'D)
August 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
--------- -----------
<S> <C> <C>
COMMON STOCKS (CONT'D)
Israel (0.4%)
Clal Electronics Industries LTD.** 180 $ 21,505
-----------
Japan (1.9%)
Keyence Corp. 800 102,301
-----------
Malaysia (0.5%)
Westmont B. 6,000 25,496
-----------
Sweden (0.6%)
Astra B Free 960 31,180
-----------
United Kingdom (1.8%)
Central European Media Enterprises LTD.** ADR 2,700 67,837
Takare PLC 8,200 26,715
-----------
94,552
-----------
TOTAL COMMON STOCKS (Cost $2,772,251) 3,212,478
-----------
</TABLE>
<TABLE>
<CAPTION>
PAR
MATURITY (000) VALUE
-------- ----- ----------
<S> <C> <C> <C>
AGENCY OBLIGATIONS (0.2%)
Government National Mortgage Association 6.50% (Cost $12,661) 08/15/03 $ 13 $ 12,858
----------
UNITED STATES TREASURY OBLIGATIONS (26.4%)
U.S. Treasury Notes
5.875% 05/31/96 300 300,390
6.875% 10/31/96 200 202,572
8.125% 02/15/98 20 21,007
8.50% 11/15/00 800 885,536
----------
TOTAL U.S. TREASURY OBLIGATIONS (Cost $1,384,454) 1,409,505
----------
</TABLE>
See Accompanying Notes to Financial Statements.
14
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS BALANCED FUND
STATEMENT OF NET ASSETS (CONT'D)
August 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAR
MATURITY (000) VALUE
-------- ----- ----------
<S> <C> <C> <C>
REPURCHASE AGREEMENTS (8.8%)
State Street Bank & Trust Co. 5.78% 09/01/95 468 $ 468,000
(Agreement dated 08/31/95 to be repurchased at $468,081,
collateralized by $480,000 U.S Treasury Notes 6.25% due
08/31/96. Market value of collateral is $481,800.) (Cost
$468,000)
----------
TOTAL INVESTMENTS AT VALUE (Cost $4,637,366*) (95.6%) 5,102,841
OTHER ASSETS IN EXCESS OF LIABILITIES (4.4%) 239,008
----------
NET ASSETS (Applicable to 480,061 Common Shares and 110 Advisor Shares)
(100.0%) $5,341,849
----------
----------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER
COMMON SHARE ($5,340,625 : 480,061) $11.12
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER
ADVISOR SHARE ($1,224 : 110) $11.13
======
</TABLE>
* Cost for Federal income tax purposes at August 31, 1995 is $4,641,506. The
gross appreciation (depreciation) on a tax basis is as follows:
Gross Appreciation $487,617
Gross Depreciation (26,282)
--------
Net Appreciation $461,335
--------
--------
** Non-income producing.
See Accompanying Notes to Financial Statements.
15
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS BALANCED FUND
STATEMENT OF OPERATIONS
For the Year Ended August 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $ 52,298
Dividends 11,828
Foreign taxes withheld (202)
--------
Total investment income 63,924
--------
EXPENSES:
Investment advisory fees 14,729
Administration fees 3,991
Distribution fees 4,155
Custodian fees 21,198
Transfer agent fees 27,158
Registration fees 15,075
Printing expense 10,393
Other expenses 4,330
--------
101,029
Less fees waived (17,123)
Less expense reimbursement by advisor (58,364)
--------
Total expenses 25,542
--------
Net investment income 38,382
--------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) from:
Investment transactions 115,816
Foreign currency related transactions (679)
--------
115,137
--------
Net change in unrealized appreciation (depreciation) on:
Investments 380,862
Foreign currency related transactions (7)
--------
380,855
--------
Net gain on investments and foreign currency
transactions 495,992
--------
Net increase in net assets resulting from operations $534,374
--------
--------
</TABLE>
See Accompanying Notes to Financial Statements.
16
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS BALANCED FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the For the
Year Ended Year Ended
August 31, 1995 August 31, 1994
--------------- ---------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income $ 38,382 $ 29,100
Net gain on investments 495,992 23,057
--------------- ---------------
Net increase in net assets resulting from operations 534,374 52,157
--------------- ---------------
Distributions to shareholders:
Dividends to shareholders from net investment income:
Common shares ($.3136 and $.4586, respectively, per share) (38,909) (31,049)
Distributions to shareholders from net realized capital
gains:
Common shares ($1.5069 and $.9794, respectively, per
share) (111,945) (63,790)
--------------- ---------------
Total distributions to shareholders (150,854) (94,839)
--------------- ---------------
Net capital share transactions 4,150,301 88,893
--------------- ---------------
Total increase in net assets 4,533,821 46,211
Net Assets:
Beginning of year 808,028 761,817
--------------- ---------------
End of year $ 5,341,849 $ 808,028
--------------- ---------------
--------------- ---------------
</TABLE>
See Accompanying Notes to Financial Statements.
17
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS ADVISOR FUNDS
FINANCIAL HIGHLIGHTS (D)
(For a Share Outstanding Throughout Each Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Warburg Pincus Warburg Pincus
Growth & Income Balanced
Fund Fund
--------------- -----------------
For the Period
May 15, 1995 For the Period
(Commencement July 31, 1995
of Operations) (Commencement
to of Operations) to
August 31, 1995 August 31, 1995
--------------- -----------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $14.87 $10.72
Income From Investment Operations:
Net Investment Income 0.0236 0.0170
Net Gains (Losses) on Securities (both realized and
unrealized) 1.5323 0.3930
Total from Investment Operations 1.5559 0.4100
Less Distributions:
Dividends (from net investment income) (0.0459) 0.0000
------ -----
Total Distributions (0.0459) 0.0000
NET ASSET VALUE, END OF PERIOD $16.38 $11.13
Total Returns 10.49%(c) 3.82%(c)
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $56,902 $1
Ratios of Expenses to Average Net Assets 1.92%(b) 1.76%(a)(b)
Ratios of Net Investment Income to Average Net Assets 0.43%(b) 2.00%(b)
Portfolio Turnover Rate 109%(b) 107%(b)
</TABLE>
(a) Without the waiver of advisory and administration fees and without the
reimbursement of certain operating expenses, the ratios of expenses to
average net assets for the Balanced Fund would have been 628.47% annualized
for the period ended August 31, 1995.
(b) Annualized.
(c) Not Annualized.
(d) Financial Highlights relate solely to the Advisor Class of shares within the
Fund.
See Accompanying Notes to Financial Statements.
TAX STATUS OF 1995 DIVIDENDS (unaudited)
Dividends paid by the Warburg Pincus Growth & Income Fund Advisor shares
taxable as ordinary income amounted to $0.0459 per share. 100.0% of ordinary
income dividends qualify for the dividend received deduction available to
corporate shareholders for U.S. income tax purposes.
Because the Fund's fiscal year is not the calendar year, amounts to be used
by calendar year taxpayers on their Federal return will be reflected on Form
1099-DIV and will be mailed in January 1996.
18
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS ADVISOR FUNDS
NOTES TO FINANCIAL STATEMENTS
August 31, 1995
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
The RBB Fund, Inc. (the "Company") is registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
The Company was incorporated in Maryland on February 29, 1988, and currently has
seventeen investment Portfolios, two of which are included in these financial
statements.
The Company has authorized capital of thirty billion shares of common stock
of which 12.2 billion are currently classified into sixty-one classes. Each
class represents an interest in one of seventeen investment portfolios of the
Company, fifteen of which are currently in operation. The classes have been
grouped into fifteen separate "families", eight of which have begun investment
operations including the Warburg Pincus Family. The Warburg Pincus Family
represents interests in three funds, two of which, the Warburg Pincus Growth &
Income Fund (the "Growth & Income Fund") and the Warburg Pincus Balanced Fund
(the "Balanced Fund"), are covered in this report. The Growth & Income Fund and
Balanced Fund each have two classes of shares: Common Class and Advisor Class.
The Advisor Class (also referred to as Series 2 shares) are sold by financial
institutions and operate under the name Warburg Pincus Advisor Funds.
The net asset value of each Fund is determined daily as of the close of
regular trading on the New York Stock Exchange. Each Fund's securities are
valued at market value, which is currently determined using the last reported
sales price. If no sales are reported, as in the case of some securities traded
over-the-counter, portfolio securities are valued at the mean between the last
reported bid and asked prices. Corporate bonds and government securities are
valued on the basis of quotations provided by an independent pricing service
which uses information with respect to transactions on bonds, quotations from
bond dealers, market transactions in comparable securities and various
relationships between securities in determining value. Short-term obligations
with maturities of 60 days or less are valued at amortized cost which
approximates market value.
Security transactions are accounted for on the trade date. The cost of
investments sold is determined by use of the specific identification method for
both financial reporting and income tax purposes. Interest income is recorded on
the accrual basis. Dividends are recorded on the ex-dividend date. Certain
expenses, principally distribution, transfer agent and printing, are class
specific expenses and vary by class. Expenses not directly attributable to a
specific portfolio or class are allocated based on relative net assets of each
Portfolio and class, respectively.
Dividends from net investment income, if any, are declared and paid at least
quarterly. Any net realized capital gains will be distributed at least annually.
Income distributions and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted accounting
principals.
No provision is made for Federal taxes as it is the Company's intention to
have each portfolio continue to qualify for and elect the tax treatment
applicable to regulated investment companies under the Internal Revenue Code and
make the requisite distributions to its shareholders which will be sufficient to
relieve it from Federal income and excise taxes.
19
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS ADVISOR FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
August 31, 1995
- --------------------------------------------------------------------------------
Money market instruments may be purchased subject to the seller's agreement
to repurchase them at an agreed upon date and price. The seller will be required
on a daily basis to maintain the value of the securities subject to the
agreement at not less than the repurchase price. The agreements are conditioned
upon the collateral being deposited under the Federal Reserve book-entry system
or with the Fund's custodian or a third party sub-custodian.
2. INVESTMENT ADVISER, CO-ADMINISTRATORS AND DISTRIBUTOR
Warburg, Pincus Counsellors, Inc. ("Counsellors"), a wholly owned subsidiary
of Warburg, Pincus Counsellors G.P. ("Counsellors G.P.") serves as investment
advisor for the Growth & Income Fund. The advisory fee is computed daily and
payable monthly at the annual rate of .75% of the Growth & Income Fund's average
daily net assets.
Pursuant to a vote on September 30, 1994, shareholders approved a new
advisory contract between the Balanced Fund and Counsellors. Under the new
agreement, the Balanced Fund pays Counsellors an advisory fee at an annual rate
of .90% of the Fund's average daily net assets. The prior advisory agreement
between the Fund and PNC Institutional Management Corp. ("PIMC") was terminated
as of that date.
Counsellors may, at its discretion, voluntarily waive all or any portion of
its advisory fees for any of the Funds. For the year ended August 31, 1995,
investment advisory fees and waivers were as follows:
<TABLE>
<CAPTION>
GROSS NET
ADVISORY FEE WAIVER ADVISORY FEE
------------ ------- ------------
<S> <C> <C> <C>
Growth & Income Fund $ 5,824,947 $ -- $ 5,824,947
Balanced Fund 14,729 (14,729) --
</TABLE>
PFPC Inc. ("PFPC"), an indirect wholly owned subsidiary of PNC Bank Corp.,
and Counsellors Fund Services, Inc. ("CFSI"), a wholly owned subsidiary of
Counsellors, serve as co-administrators for each of the Funds. For the Growth &
Income Fund, the co-administration fees are computed daily and payable monthly
at an annual rate of .20% of the first $125 million of average daily net assets
and .15% of average daily net assets in excess of $125 million for PFPC and .05%
of the first $125 million of average daily net assets and .10% of average daily
net assets in excess of $125 million for CFSI.
For the Balanced Fund, the co-administration fees are computed daily and
payable monthly at an annual rate of .15% of average daily net assets for PFPC
and .10% of average daily net assets for CFSI.
20
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS ADVISOR FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
August 31, 1995
- --------------------------------------------------------------------------------
CFSI and PFPC may, at their discretion, voluntarily waive all or any portion
of their co-administration fees for any of the Funds. For the year ended August
31, 1995, CFSI and PFPC's co-administration fees and waivers were as follows:
<TABLE>
<CAPTION>
GROSS NET
CO-ADMINISTRATION FEES WAIVERS CO-ADMINISTRATION FEES
---------------------- ------- ----------------------
<S> <C> <C> <C>
Growth & Income Fund $1,941,649 $ -- $1,941,649
Balanced Fund 3,991 (2,394) 1,597
</TABLE>
The Company, on behalf of each class of shares within the investment
portfolios, has adopted Distribution Plans pursuant to Rule 12b-1 under the
Investment Company Act of 1940, as amended, and has entered into Distribution
contracts with Counsellors Securities Inc. ("CSI"), also a wholly owned
subsidiary of Counsellors, which provide for each class to make monthly
payments, based on average daily net assets to CSI. No compensation is payable
by the Growth & Income Fund's Common Shares. For distribution services with
respect to the Balanced Fund's Common Shares, CSI receives a fee at the annual
rate of .25%, computed daily and payable monthly, on average daily net assets.
For distribution services with respect to the Growth & Income and the Balanced
Funds' Advisor shares, CSI receives a fee of .25% and .50%, respectively,
computed daily and payable montly on average daily net assets. For the year
ended August 31, 1995, distribution fees and waivers were as follows:
<TABLE>
<CAPTION>
DISTRIBUTION FEES
-----------------
<S> <C>
Growth & Income Fund
Advisor Shares $71,233
--------
--------
Balanced Fund
Common Shares $ 4,155
Advisor Shares --
--------
$ 4,155
--------
--------
</TABLE>
3. INVESTMENT IN SECURITIES
For the year ended August 31, 1995, purchases and sales of investment
securities (other than short-term investments) were as follows:
<TABLE>
<CAPTION>
INVESTMENT SECURITIES
------------------------------
PURCHASES SALES
-------------- ------------
<S> <C> <C>
Growth & Income Fund $1,108,363,903 $617,767,292
Balanced Fund $ 5,047,134 $ 1,602,287
</TABLE>
21
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS ADVISOR FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
August 31, 1995
- --------------------------------------------------------------------------------
4. CAPITAL SHARES
Transactions in capital shares for each year were as follows:
<TABLE>
<CAPTION>
GROWTH & INCOME FUND BALANCED FUND
---------------------------------------------------- ---------------------------------------------
For the For the For the For the
Year Ended Year Ended Year Ended Year Ended
August 31, 1995 August 31, 1994 August 31, 1995 August 31, 1994
------------------------- ------------------------- ----------------------- --------------------
Shares Value Shares Value Shares Value Shares Value
----------- ------------ ----------- ------------ ----------- ---------- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares Sold
Common Shares 46,345,660 $670,088,619 29,256,806 $410,956,025 423,825 $4,348,625 609 $ 6,495
Advisor Shares 3,521,620 52,908,038 -- -- 110 1,180 -- --
Shares issued in
reinvestment of
dividends
Common Shares 6,891 96,291 67,788 894,152 16,171 148,491 8,690 93,303
Advisor Shares 9,051 137,213 -- -- -- -- -- --
Shares repurchased
Common Shares (11,270,725) (167,348,709) (4,741,678) (69,798,926) (33,364) (347,995) (982) (10,905)
Advisor Shares (57,795) (890,622) -- -- -- -- -- --
----------- ------------ ----------- ------------ ----------- ---------- ----------- -------
Net increase 38,554,702 $554,990,830 24,582,916 $342,051,251 406,792 $4,150,301 8,317 $88,893
----------- ------------ ----------- ------------ ----------- ---------- ----------- -------
----------- ------------ ----------- ------------ ----------- ---------- ----------- -------
Advisor shares
authorized 100,000,000 100,000,000 100,000,000 100,000,000
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
5. NET ASSETS
At August 31, 1995, net assets consisted of the following:
<TABLE>
<CAPTION>
GROWTH & INCOME FUND BALANCED FUND
-------------------- --------------
<S> <C> <C>
Capital paid-in.......................... $ 943,969,297 $4,808,416
Undistributed net investment income...... 2,435,167 7,138
Accumulated net realized gain (loss) on
investment transactions, futures
contracts and foreign exchange
transactions........................... 30,926,372 60,835
Unrealized appreciation on investments... 117,755,410 465,460
-------------------- --------------
$1,095,095,246 $5,341,849
-------------------- --------------
-------------------- --------------
</TABLE>
6. FUTURES CONTRACTS
The Growth & Income Fund may enter into futures contracts for hedging or
portfolio management strategy purposes to the extent permitted by its investment
policies and objectives. To enter into a futures contract, the Growth & Income
Fund must make a deposit of an initial margin with its custodian in a segregated
account. Subsequent payments, which are dependent on the daily fluctuations in
the value of the underlying instrument, are made or received by the Fund each
day (daily variation margin) and are recorded as unrealized gains or losses
until the contracts are closed. When the contract
22
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS ADVISOR FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
August 31, 1995
- --------------------------------------------------------------------------------
is closed, the Fund records a realized gain or loss equal to the difference
between the proceeds from (or cost of) the closing transactions and the Fund's
basis in the contract. Risks of entering into futures contracts include the
possibility that a change in the value of the contract may not correlate with
changes in the value of the underlying instruments. The Growth & Income Fund
entered into futures transactions during the year ended August 31, 1995.
However, the Warburg Pincus Growth & Income Fund had no futures contracts open
at August 31, 1995.
7. OTHER FINANCIAL HIGHLIGHTS
The Growth & Income and the Balanced Fund currently offer one other class of
shares, Common Shares, representing an additional interest in each of the Funds.
The financial highlights of each of the Common Shares are as follows:
23
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS ADVISOR FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
August 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Growth and Income Fund
Common Class of Shares
For the Years Ended August 31,
-------------------------------------------------------------------
1995 1994 1993 1992 1991
---------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $14.56 $16.72 $11.99 $12.11 $11.00
Income From Investment
Operations:
Net Investment Income 0.2224 0.0785 0.0464 0.1912 0.3744
Net Gains on Securities (both
realized and unrealized) 1.9834 1.8151 4.8499 0.0402 1.6891
Total from Investment
Operations 2.2058 1.8936 4.8963 0.2314 2.0635
Less Distributions:
Dividends (from net investment
income) (0.1824) (0.0785) (0.0875) (0.1871) (0.4043)
Distributions (from capital
gains) (0.1834) (3.9751) (0.0788) (0.1643) (0.5492)
Total Distributions (0.3658) (4.0536) (0.1663) (0.3514) (0.9535)
NET ASSET VALUE, END OF YEAR $16.40 $14.56 $16.72 $11.99 $12.11
Total Return 15.62% 14.41% 41.17% 1.99% 19.91%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Year (000) $1,038,193 $410,658 $60,689 $28,976 $24,726
Ratios of Expenses to Average Net
Assets 1.22% 1.28%(a) 1.14%(a) 1.25%(a) 1.30%(a)
Ratios of Net Investment Income to
Average Net Assets 1.64% 0.41% 0.30% 1.66% 3.42%
Portfolio Turnover Rate 109% 150% 344% 175% 41%
</TABLE>
(a) Without the waiver of advisory and administration fees and without the
reimbursement of certain operating expenses, the ratios of expenses to
average net assets for the Growth & Income Fund would have been 1.28%,
1.14%, 1.28% and 2.17% for the years ended August 31, 1994, 1993, 1992 and
1991, respectively.
24
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS ADVISOR FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
August 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Balanced Fund
Common Class of Shares
For the Years Ended August 31,
---------------------------------------------------------------
1995 1994 1993 1992 1991
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $11.01 $11.71 $12.04 $12.05 $10.60
Income From Investment Operations:
Net Investment Income 0.2080 0.4132 0.5555 0.4408 0.4213
Net Gains on Securities (both
realized and unrealized) 1.7225 0.3248 1.1253 0.5155 1.7196
Total from Investment Operations 1.9305 0.7380 1.6808 0.9563 2.1409
Less Distributions:
Dividends (from net investment
income) (0.3136) (0.4586) (0.5412) (0.3713) (0.4128)
Distributions (from capital gains) (1.5069) (0.9794) (1.4696) (0.5950) (0.2781)
Total Distributions (1.8205) (1.4380) (2.0108) (0.9663) (0.6909)
NET ASSET VALUE, END OF YEAR $11.12 $11.01 $11.71 $12.04 $12.05
Total Return 21.56% 6.86% 15.27% 8.07% 21.18%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Year (000) $5,342 $808 $762 $1,026 $1,290
Ratios of Expenses to Average Net Assets 1.53%(a) 0%(a) 0%(a) .67%(a) 1.40%(a)
Ratios of Net Investment Income to
Average Net Assets 2.27% 3.76% 4.13% 3.68% 3.58%
Portfolio Turnover Rate 107% 32% 30% 93% 76%
</TABLE>
(a) Without the waiver of advisory and administration fees and without the
reimbursement of certain operating expenses, the ratios of expenses to
average net assets for the Balanced Fund would have been 6.04%, 5.46%,
5.37%, 3.88% and 3.89% for the years ended August 31, 1995, 1994, 1993, 1992
and 1991, respectively.
25
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Directors of The RBB Fund, Inc.:
We have audited the accompanying statements of net assets of Warburg Pincus
Growth & Income Fund and Warburg Pincus Balanced Fund of The RBB Fund, Inc., as
of August 31, 1995, and the related statements of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the periods
presented. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments held as of
August 31, 1995, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Warburg Pincus Growth & Income Fund and Warburg Pincus Balanced Fund of The RBB
Fund, Inc., as of August 31, 1995, and the results of their operations for the
year then ended, the changes in their net assets for each of the two years in
the period then ended, and their financial highlights for each of the periods
presented, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
October 16, 1995
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
Warburg Pincus Advisor Funds
Counsellors Securities Inc., distributor
800-369-2728
[WARBURG PINCUS ADVISOR FUNDS LOGO]
<PAGE>
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
Exhibits:
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
- ----------- ----------------------
<S> <C>
1 Articles of Incorporation.(1)
2 By-Laws.(1)
3 Not applicable.
4 Forms of Share Certificates.(2)
5 Form of Investment Advisory Agreement.(3)
6 Form of Distribution Agreement.(3)
7 Not applicable.
8(a) Form of Custodian Agreement with PNC Bank, National Association.(2)
(b) Form of Custodian Agreement with State Street Bank and Trust Company.(4)
9(a) Form of Transfer Agency Agreement.(2)
(b) Form of Co-Administration Agreement with Counsellors Funds Service,
Inc.(2)
(c) Form of Co-Administration Agreement with PFPC Inc.(2)
(d) Forms of Services Agreements.(2)
10(a) Consent of Willkie Farr & Gallagher, counsel to
Registrant.(5)
(b) Opinion of Willkie Farr & Gallagher, counsel to the Fund.(3)
(c) Opinion and Consent of Venable, Baetjer and Howard, LLP, Maryland
counsel to the Fund.(3)
11 Consent of Coopers & Lybrand L.L.P., Independent Accountants.(5)
12 Not Applicable.
13 Form of Purchase Agreement.(3)
</TABLE>
C-1
<PAGE>
<PAGE>
<TABLE>
<S> <C>
14 Not applicable.
15(a) Form of Distribution Plan.(6)
(b Rule 18f-3 Plan.(7)
16 Schedule for Performance Information.(5)
17(a) Financial Data Schedule relating to Common Shares.(5)
(b) Financial Data Schedule relating to Advisor Shares.(5)
</TABLE>
- ---------------------
(1) Incorporated by reference to Registrant's Registration Statement on Form
N-1A, filed on January 30, 1996.
(2) 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).
(3) Incorporated by reference to Registrant's Pre-Effective Amendment No. 1 to
the Registration Statement on Form N-1A, filed March 1, 1996 (Securities
Act File No. 333-00527).
(4) 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
Warburg, Pincus Trust filed on June 14, 1995 (Securities Act File No.
33-58125).
(5) Filed herewith.
(6) Incorporated by reference; material provisions of this exhibit
substantially similar to the corresponding exhibit in Pre-Effective
Amendment No. 1 to the Registration Statement on Form N-1A of Warburg,
Pincus Japan Growth Fund, Inc., filed on December 18, 1995 (Securities Act
File No. 33-63655).
(7) Incorporated by reference; material provisions of this exhibit
substantially similar to those of the corresponding exhibit in
Post-Effective Amendment No. 13 to the Registration Statement on Form N-1A
of Warburg, Pincus International Equity Fund, Inc., filed on December 27,
1995 (Securities Act File No. 33-27031).
Item 25. Persons Controlled by or Under Common Control with Registrant
Not applicable.
C-2
<PAGE>
<PAGE>
Item 26. Number of Holders of Securities
There are currently no holders of shares of the Registrant. It is
anticipated that all holders of shares of the existing Warburg Pincus Growth &
Income Fund investment portfolio of shares of The RBB Fund, Inc. (the "Existing
Fund") will become holders of shares of the Registrant on the effective date of
this Post-Effective Amendment. On March 31, 1996, there were 34,591 holders of
Common Shares and 8 holders of Advisor Shares of the Existing Fund.
Item 27. Indemnification
Registrant, officers and directors of Warburg, of Counsellors
Securities Inc. ("Counsellors Securities") and of 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 the Registration Statement on Form N-1A of
Warburg, Pincus Small Company Value Fund, Inc. (Securities Act No. 33-63653;
Investment Company Act No. 811-07375), filed on October 25, 1995.
Item 28. Business and Other Connections of
Investment Adviser
Warburg is a wholly owned subsidiary of Warburg, Pincus
Counsellors G.P., 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 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 New York Intermediate Municipal Fund; Warburg
Pincus New York Tax Exempt Fund; Warburg Pincus Post-Venture Capital Fund;
Warburg Pincus Small Company Value Fund; Warburg Pincus Tax Free Fund and
Warburg Pincus Trust.
C-3
<PAGE>
<PAGE>
(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.
(c) None.
Item 30. Location of Accounts and Records
(1)Warburg, Pincus Growth & Income Fund, Inc.
466 Lexington Avenue
New York, New York 10017-3147
(Registrant's Articles of Incorporation, By-laws and
minute books)
(2)Warburg, Pincus Counsellors, Inc.
466 Lexington Avenue
New York, New York 10017-3147
(records relating to its functions as investment adviser)
(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)Counsellors Securities Inc.
466 Lexington Avenue
New York, New York 10017-3147
(records relating to its functions as distributor)
(6)PNC Bank, National Association
Broad & Chestnut Streets
Philadelphia, Pennsylvania 19101
(records relating to its functions as custodian)
(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)
Item 31. Management Services
Not applicable.
C-4
<PAGE>
<PAGE>
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>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, and the
Investment Company Act of 1940, as amended, the Registrant certifies that it
meets all the requirements for effectiveness of this Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused
this Amendment to the Registration Statement 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 3rd day of May, 1996.
WARBURG, PINCUS GROWTH & INCOME
FUND, INC.
By: /s/ Arnold M. Reichman
----------------------
Arnold M. Reichman
President
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Amendment 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 May 3, 1996
- --------------------------- Board of Directors
John L. Furth
/s/ Arnold M. Reichman President and May 3, 1996
- --------------------------- Director
Arnold M. Reichman
/s/ Stephen Distler Vice President and May 3, 1996
- --------------------------- Chief Financial Officer
Stephen Distler
/s/ Howard Conroy Vice President, May 3, 1996
- --------------------------- Treasurer and Chief
Howard Conroy Accounting Officer
/s/ Richard N. Cooper Director May 3, 1996
- ---------------------------
Richard N. Cooper
/s/ Donald J. Donahue Director May 3, 1996
- ---------------------------
Donald J. Donahue
/s/ Jack W. Fritz Director May 3, 1996
- ---------------------------
Jack W. Fritz
/s/ Thomas A. Melfe Director May 3, 1996
- ---------------------------
Thomas A. Melfe
/s/ Alexander B. Trowbridge Director May 3, 1996
- ---------------------------
Alexander B. Trowbridge
</TABLE>
<PAGE>
Statement of Difference
Mathematical powers normally expressed as superscript shall be preceded by 'PP'
<PAGE>
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
- ---------- -----------------------
<S> <C>
10(a) Consent of Willkie Farr & Gallagher, counsel to the Fund.
11 Consent of Coopers & Lybrand L.L.P., Independent
Accountants.
16 Schedule for Performance Information.
17(a) Financial Data Schedule relating to Common Shares.
(b) Financial Data Schedule relating to Advisor Shares.
</TABLE>
<PAGE>
<PAGE>
CONSENT OF COUNSEL
Warburg, Pincus Growth & Income Fund, Inc.
We hereby consent to being named in the Statement of Additional
Information included in Post-Effective Amendment No. 1 (the "Amendment")
to the Registration Statement on Form N-1A (Securities Act File No. 333-00527),
Investment Company Act File No. 811-07515 of Warburg, Pincus Growth & Income
Fund, Inc. (the "Fund") under the caption "Independent Accountants and Counsel"
and to the Fund's filing a copy of this Consent as an exhibit to the Amendment.
Willkie Farr & Gallagher
-----------------------------------
Willkie Farr & Gallagher
New York, New York
May 3, 1996
<PAGE>
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this Post-Effective Amendment No. 1 to the
Registration Statement under the Securities Act of 1933 on Form N-1A (File. No.
333-00527) of our report dated October 16, 1995 accompanying the financial
statements and financial highlights of the Warburg, Pincus Growth & Income Fund
(a portfolio of the RBB Fund, Inc.) in the Statement of Additional Information.
We also consent to the reference to our Firm under the captions "Financial
Highlights" in the prospectus and "Independent Accountants and Counsel" in the
Statement of Additional Information.
COOPERS AND LYBRAND L.L.P.
COOPERS AND LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
May 3, 1996
<PAGE>
<PAGE>
WARBURG PINCUS GROWTH & INCOME FUND (COMMON SHARES)
Schedule 16 Calculations
For the One Year Ended August 31, 1995
ANNUALIZED RETURN:
((11,562/10,000) 'PP' 1/1 -1) = 15.62%
AGGREGATE RETURN:
((11,562 - 10,000)/10,000) = 15.62%
Inception Thru August 31, 1995
ANNUALIZED RETURN WITH WAIVERS:
((27,448/10,000) 'PP' 1/6.90685 -1) = 15.74%
ANNUALIZED RETURN WITHOUT WAIVERS:
((25,896/10,000) 'PP' 1/6.90685 -1) = 14.77%
AGGREGATE RETURN WITH WAIVERS:
((27,448 - 10,000)/10,000) = 174.48%
AGGREGATE RETURN WITHOUT WAIVERS:
((25,896 - 10,000)/10,000) = 158.96%
<PAGE>
<PAGE>
WARBURG PINCUS GROWTH & INCOME FUND (ADVISOR SHARES)
Schedule 16 Calculations
Inception Thru August 31, 1995
AGGREGATE RETURN:
((11,049 - 10,000)/10,000) = 10.49%
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 011
<NAME> WARBURG PINCUS GROWTH & INCOME FUND - SERIES 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-END> FEB-29-1996
<INVESTMENTS-AT-COST> 1003423601
<INVESTMENTS-AT-VALUE> 1135010021
<RECEIVABLES> 6152851
<ASSETS-OTHER> 79230
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1141242102
<PAYABLE-FOR-SECURITIES> 8487136
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 9759393
<TOTAL-LIABILITIES> 18246529
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 984662324
<SHARES-COMMON-STOCK> 69141749
<SHARES-COMMON-PRIOR> 66768076
<ACCUMULATED-NII-CURRENT> 1241473
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 5505356
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 131586420
<NET-ASSETS> 1122995573
<DIVIDEND-INCOME> 6083186
<INTEREST-INCOME> 5495073
<OTHER-INCOME> 0
<EXPENSES-NET> 6597955
<NET-INVESTMENT-INCOME> 4980304
<REALIZED-GAINS-CURRENT> 27856945
<APPREC-INCREASE-CURRENT> 13831010
<NET-CHANGE-FROM-OPS> 46668259
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (6191998)
<DISTRIBUTIONS-OF-GAINS> (53277961)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 249968227
<NUMBER-OF-SHARES-REDEEMED> (265507816)
<SHARES-REINVESTED> 56241616
<NET-CHANGE-IN-ASSETS> 27900327
<ACCUMULATED-NII-PRIOR> 2453167
<ACCUMULATED-GAINS-PRIOR> 30926372
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4051011
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 6597955
<AVERAGE-NET-ASSETS> 506523999
<PER-SHARE-NAV-BEGIN> 16.40
<PER-SHARE-NII> 0.76
<PER-SHARE-GAIN-APPREC> .672
<PER-SHARE-DIVIDEND> (.094)
<PER-SHARE-DISTRIBUTIONS> (.813)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.24
<EXPENSE-RATIO> 1.14
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 012
<NAME> WARBURG PINCUS GROWTH & INCOME FUND - SERIES 2
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-END> FEB-29-1996
<INVESTMENTS-AT-COST> 1003423601
<INVESTMENTS-AT-VALUE> 1135010021
<RECEIVABLES> 6152851
<ASSETS-OTHER> 79230
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1141242102
<PAYABLE-FOR-SECURITIES> 8487136
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 9759393
<TOTAL-LIABILITIES> 18246529
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 984662324
<SHARES-COMMON-STOCK> 69141749
<SHARES-COMMON-PRIOR> 66768076
<ACCUMULATED-NII-CURRENT> 1241473
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 5505356
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 131586420
<NET-ASSETS> 1122995573
<DIVIDEND-INCOME> 6083186
<INTEREST-INCOME> 5495073
<OTHER-INCOME> 0
<EXPENSES-NET> 6597955
<NET-INVESTMENT-INCOME> 4980304
<REALIZED-GAINS-CURRENT> 27856945
<APPREC-INCREASE-CURRENT> 13831010
<NET-CHANGE-FROM-OPS> 46668259
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (6191998)
<DISTRIBUTIONS-OF-GAINS> (53277961)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 249968227
<NUMBER-OF-SHARES-REDEEMED> (265507816)
<SHARES-REINVESTED> 56241616
<NET-CHANGE-IN-ASSETS> 27900327
<ACCUMULATED-NII-PRIOR> 2453167
<ACCUMULATED-GAINS-PRIOR> 30926372
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4051011
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 6597955
<AVERAGE-NET-ASSETS> 33148396
<PER-SHARE-NAV-BEGIN> 16.38
<PER-SHARE-NII> .058
<PER-SHARE-GAIN-APPREC> .667
<PER-SHARE-DIVIDEND> (.062)
<PER-SHARE-DISTRIBUTIONS> (.813)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.23
<EXPENSE-RATIO> 1.37
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<PAGE>
