WARBURG PINCUS GROWTH & INCOME FUND INC, N-1A EL, 1996-01-30

WARBURG PINCUS GROWTH & INCOME FUND INC
N-1A EL, 1996-01-30

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As filed with the U.S. Securities and Exchange Commission
on January 30, 1996
Securities Act File No.
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. [ ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [x]
Amendment No. [ ]
(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

Approximate Date of Proposed Public Offering: May 6, 1996

CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933

<TABLE>
<CAPTION>
Proposed
Title of Proposed Maximum
Securities Maximum Aggregate Amount of
Being Amount Being Offering Price Offering Registration
Registered Registered Per Unit Price Fee
- ---------- ----------- -------------- --------- ------------

<S> <C> <C> <C> <C>
Shares of common
stock, $.001 par
value per share Indefinite* Indefinite* Indefinite* $500
</TABLE>

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

* An indefinite number of shares of common stock of the Registrant is
being registered by this Registration Statement pursuant to Rule 24f-2
under the Investment Company Act of 1940, as amended (the "1940 Act").

The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933, as amended (the "1933 Act"), or
until the Registration Statement shall become effective on such date as the
Commission, acting pursuant to said Section 8(a), may determine.

WARBURG, PINCUS GROWTH & INCOME FUND, INC.

FORM N-1A

CROSS REFERENCE SHEET

Part A
Item No. Heading for the Common Shares and 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
Item No. Heading for the Statement of 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"

13. Investment Objectives and Policies...... Investment Objectives; Investment Policies
</TABLE>

<TABLE>
<S> <C>
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.................... Not applicable

</TABLE>

<PAGE>

<PAGE>
[LOGO]

PROSPECTUS

, 1996

[ ] WARBURG PINCUS GROWTH & INCOME FUND
[ ] WARBURG PINCUS BALANCED FUND
[ ] WARBURG PINCUS TAX FREE FUND

<PAGE>
<PAGE>
SUBJECT TO COMPLETION, DATED JANUARY 30, 1996

WARBURG PINCUS FUNDS
P.O. BOX 9030
BOSTON, MASSACHUSETTS 02205-9030
TELEPHONE NUMBER: (800) 888-6878

, 1996

PROSPECTUS

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

Each Fund offers two classes of shares. A class of Common Shares that is 'no
load' is offered by this Prospectus (i) directly from the Funds' distributor,
Counsellors Securities Inc., and (ii) through various brokerage firms including
Charles Schwab & Company, Inc. Mutual Fund 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.

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) 888-6878. 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.
- --------------------------------------------------------------------------------

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.

<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>
<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.................................................................... .75% 0 0
12b-1 Fees......................................................................... 0 .25% .25%
Other Expenses..................................................................... [.47]% 1.35% .25%

Total Fund Operating Expenses (after fee waivers)`D'............................... [1.22]% 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............................................................................. $ [12] $ 16 $ 5
3 years............................................................................ $ [39] $ 50 $ 16
</TABLE>

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

`D' The Funds' investment adviser and co-administrator have undertaken to limit
Total Portfolio Operating Expenses of the Balanced Fund and the Tax Free
Fund to the limits shown above through May [ ], 1997. The same parties
have agreed to limit Total Fund Operating Expenses of the Growth & Income
Fund for the same period to that of the Warburg Pincus Growth & Income
Fund, a series of The RBB Fund, Inc., on the closing date of the
reorganization of that series; the resulting Total Fund Operating Expenses
limit may be greater or less than the estimate 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 [4.89]% and [1.37]%, respectively,
and Total Fund Operating Expenses would equal [6.04]% and [2.12]%,
respectively. Other Expenses for the Funds are based on annualized
estimates of expenses for the fiscal year ending August 31, 1996, net of
any fee waivers or 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').

<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 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
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 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, although Warburg will consider such event in its determination of
whether the Fund should continue to hold the securities.

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').

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 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, see
'Portfolio Investments' beginning at page 5 and 'Certain Investment Strategies'
beginning at page 9.

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.

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.

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 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 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.

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 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 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 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 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 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 November 30,
1995, Warburg managed approximately $11.9 billion of assets, including
approximately $6.2 billion of assets of twenty-three investment companies or
portfolios. 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 November 1991. Mr.
Orphanos has been with Warburg since 19 . 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 managing director of EMW, has been a
portfolio manager of Warburg since 1978. Mr. Lurito, also 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, 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 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 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 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)
888-6878 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.

CHANGES TO ACCOUNT. For information on how to make changes to an account, an
investor should telephone Warburg Pincus Funds at (800) 888-6878.

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) 888-6878. Federal 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.

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.

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) 888-6878 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 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) 888-6878 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.

If a redemption order is received 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)
888-6878.

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 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;

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
address set forth under 'How to Open an Account' or by calling Warburg Pincus
Funds at (800) 888-6878.

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.

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.

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 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.

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 [and others]; in the case of the Balanced Fund, with the
Lipper Balanced Fund Index and the S&P 500 Index [and others]; and in the case
of the Tax Free Fund, with Lipper General Municipal Debt Funds Average [and
others]; 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.

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.'

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 Advisor Shares from
their investment professional or by calling Counsellors Securities at (800)
888-6878.

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 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.

<PAGE>
<PAGE>
TABLE OF CONTENTS

THE FUNDS' EXPENSES ...................................................... 2
INVESTMENT OBJECTIVES AND POLICIES ....................................... 3
PORTFOLIO INVESTMENTS .................................................... 5
RISK FACTORS AND SPECIAL
CONSIDERATIONS ........................................................ 7
PORTFOLIO TRANSACTIONS AND TURNOVER
RATE .................................................................. 8
CERTAIN INVESTMENT STRATEGIES ............................................ 8
INVESTMENT GUIDELINES ................................................... 13
MANAGEMENT OF THE FUNDS ................................................. 14
HOW TO OPEN AN ACCOUNT .................................................. 16
HOW TO PURCHASE SHARES .................................................. 17
HOW TO REDEEM AND EXCHANGE
SHARES ............................................................... 19
DIVIDENDS, DISTRIBUTIONS AND TAXES ...................................... 22
NET ASSET VALUE ......................................................... 23
PERFORMANCE ............................................................. 24
GENERAL INFORMATION ..................................................... 25
SHAREHOLDER SERVICING ................................................... 26

WPRBB-1-0396

[LOGO]

[ ] WARBURG PINCUS
GROWTH & INCOME FUND

[ ] WARBURG PINCUS
BALANCED FUND

[ ] WARBURG PINCUS
TAX FREE FUND

PROSPECTUS

, 1996

<PAGE>

<PAGE>
[LOGO]

PROSPECTUS

, 1996

[ ] WARBURG PINCUS GROWTH & INCOME FUND

<PAGE>
<PAGE>
Subject to Completion, dated January 30, 1996

WARBURG PINCUS ADVISOR FUNDS
P.O. BOX 9030
BOSTON, MASSACHUSETTS 02205-9030
TELEPHONE NUMBER: (800) 888-6878

, 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:

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) 888-6878.
Information regarding the status of shareholder accounts may also be obtained by
calling Warburg Pincus Advisor Funds at (800) 888-6878. 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.

<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.......................................................................................... .75%
12b-1 Fees............................................................................................... .50
Other Expenses........................................................................................... [.67]%

Total Fund Operating Expenses (after fee waivers)`D'..................................................... [1.92]%
EXAMPLE
You would pay the following expenses
on a $1,000 investment, assuming (1) 5% annual return
and (2) redemption at the end of each time period:
1 year................................................................................................... $ [19]
3 years.................................................................................................. $ [60]
</TABLE>

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

`D' The Fund's investment adviser and co-administrator have agreed to limit
Total Portfolio Operating Expenses through May [ ], 1997 to that of the
Warburg Pincus Growth & Income Fund, a series of The RBB Fund, Inc., on the
closing date of the reorganization of that series. There is no obligation
to continue these waivers after that time; the resulting Total Fund
Operating Expenses limit may be greater or less than the estimate shown
above. Other Expenses are based on annualized estimates of expenses for the
fiscal year ending August 31, 1996 net of any fee waivers or 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').

<PAGE>
<PAGE>
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

TEMPORARY DEFENSIVE MEASURES. When Warburg, Pincus Counsellors, Inc., the Fund's
investment adviser ('Warburg'), believes that a defensive

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, although Warburg will consider such event in
its determination of whether the Fund should continue to hold the securities.

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 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, see
'Portfolio Investments' beginning at page 3 and 'Certain Investment Strategies'
beginning at page 6.

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, 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.

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. TRANSACTIONS THAT ARE NOT CONSIDERED HEDGING SHOULD
BE CONSIDERED SPECULATIVE AND MAY SERVE TO INCREASE THE FUND'S INVESTMENT RISK.
Transaction costs and any premiums associated with these strategies, and any
losses incurred, will affect the Fund's net asset value and performance.
Therefore, an investment in the Fund may involve a greater risk than an
investment in other mutual funds that do not utilize these strategies. The
Fund's use of these strategies may be limited by position and exercise limits
established by securities and commodities exchanges and 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 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 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 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.

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 emer-

gency 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.

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 19 . 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.

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) 888-6878 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 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) 888-6878 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 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) for such periods as are permitted under the 1940 Act.

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 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) 888-6878.

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) 888-6878.

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 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.

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) 888-6878.

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 [and others]; or
(iii) other appropriate indexes of investment securities or with data developed
by Warburg 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.'

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) 888-6878.

VOTING RIGHTS. Investors in the Fund are entitled to one vote for each full
share held and fractional votes for fractional shares held. Shareholders of the
Fund will vote in the aggregate except where otherwise required by law and
except that each class will vote separately on certain matters pertaining to its
distribution and shareholder servicing arrangements. There will normally be no
meetings of investors for the purpose of electing members of the Board unless
and until such time as less than a majority of the members holding office have
been elected by investors. Any 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) 888-6878. 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.

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.

<PAGE>
<PAGE>
TABLE OF CONTENTS

THE FUND'S EXPENSES ...................................................... 2
INVESTMENT OBJECTIVES AND POLICIES ....................................... 3
PORTFOLIO INVESTMENTS .................................................... 3
RISK FACTORS AND SPECIAL
CONSIDERATIONS ........................................................ 5
PORTFOLIO TRANSACTIONS AND TURNOVER
RATE .................................................................. 5
CERTAIN INVESTMENT STRATEGIES ............................................ 6
INVESTMENT GUIDELINES .................................................... 8
MANAGEMENT OF THE FUND ................................................... 9
HOW TO PURCHASE SHARES .................................................. 10
HOW TO REDEEM AND EXCHANGE
SHARES ............................................................... 12
DIVIDENDS, DISTRIBUTIONS AND TAXES ...................................... 13
NET ASSET VALUE ......................................................... 14
PERFORMANCE ............................................................. 14
GENERAL INFORMATION ..................................................... 16
SHAREHOLDER SERVICING ................................................... 17

ADGAI-1-0396

[LOGO]

[ ] WARBURG PINCUS
GROWTH & INCOME FUND

PROSPECTUS

, 1996

Subject to Completion, dated January 30, 1996

STATEMENT OF ADDITIONAL INFORMATION

____________, 1996

WARBURG PINCUS GROWTH & INCOME FUND

P.O. Box 9030, Boston, Massachusetts 02205-9030
For information, call (800) 888-6878

Contents

Investment Objective ...................................................... 2
Investment Policies ....................................................... 2
Management of the Fund .................................................... 24
Additional Purchase and Redemption Information ............................ 31
Exchange Privilege ........................................................ 32
Additional Information Concerning Taxes ................................... 33
Determination of Performance .............................................. 36
Accountants and Counsel ................................................... 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 ___________, 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) 888-6878 or by writing to the Fund, P.O.
Box 9030, Boston, Massachusetts 02205-9030.

INVESTMENT OBJECTIVE

The investment objectives of the Fund are long-term growth of
capital and income 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 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 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 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 stock 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 stock
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 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 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 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 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 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 contract, the Fund could purchase a put
option on the same futures 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 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-Related and Asset-Backed Debt Securities. The Fund
may invest in mortgage-related securities, such as those issued by GNMA, FNMA,
FHLMC or private organizations. Mortgage-related 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.
Certain mortgage-related securities issued by certain government- related
issuers are guaranteed by the U.S. government as to the timely payment of
principal and interest. Other mortgage-related securities, including those
issued by private organizations, and asset-backed securities are not guaranteed
by the U.S. government. However, certain mortgage loan and other asset pools may
be supported by various forms of insurance or guarantees. Although there may be
guarantees on the payment of interest and principal of these securities, 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. Some
mortgage-related securities, such as collateralized mortgage obligations
("CMCs"), make payments of both principal and interest at a variety of

10
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intervals; others make semiannual interest payments at a predetermined rate and
repay principal at maturity (like a typical bond). 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-related 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.

The rate of interest on mortgage-related 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-related
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-related securities, and this delay reduces the
effective yield to the holder of such 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. The Fund's investments in mortgage-related and asset- backed debt
securities are limited to 5% of its net assets.

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 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 affiliates of Warburg unless it has applied for and received
specific authority to do so from the SEC. Loans of portfolio securities will be
collateralized by cash, letters of credit or U.S. government securities, which
are maintained at all times in an amount equal to at least 100% of the current
market value of the loaned securities. Any gain or loss in the market price of
the securities loaned that might occur during the term of the loan would be for
the account of 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
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.

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 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
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.

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.

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.

Certain 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.

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.

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.
Short-term obligations with maturities of 60 days or less are valued at
amortized cost, which constitutes fair value as determined by the Board.
Amortized cost involves valuing a portfolio instrument at its initial cost and
thereafter assuming a constant amortization to maturity of an discount or
premium, regardless of the impact of fluctuating interest rates on the market
value of the instrument. The amortized cost method of valuation may also be used
with respect to other debt obligations with 60 days or less remaining to
maturity. In determining the market value of portfolio investments, 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 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 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
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. 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.

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.

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.

MANAGEMENT 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
Room 7E47OHB National Intelligence Counsel;
Central Intelligence Agency Professor at Harvard University;
930 Dolly Madison Blvd Director or Trustee of Circuit
McClain, Virginia 22107 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 (68) ........................................ Director

</TABLE>

<TABLE>

<S> <C>

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; Director and officer of
other investment companies advised by
Warburg.

Thomas A. Melfe (63) ...................................... 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.]

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.

[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
</TABLE>

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

Corp. (electronics and communications
equipment), The Gillette Co. (personal care
products) and Sun Company Inc. (petroleum
refining and marketing).

Eugene L. Podsiadlo (38) .................................. 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.]

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 and Chief
Compliance Officer of
Counsellors Securities;
Vice President and
Secretary of other
investment companies
advised by Warburg.

Howard Conroy (41) ......................................... 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.
</TABLE>

Karen Amato (32) ........................................... Assistant Secretary
466 Lexington Avenue Associated with EMW since 1987;
New York, New York 10017-3147 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.

[Directors' Compensation
<TABLE>
<CAPTION>
Total Total Compensation from
Compensation from all Investment Companies
Name of Director Fund`D' Managed by Warburg`D'*
- ------------------------------ ------------------------------ ------------------------------
<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 20 other
investment companies advised by Warburg.

** Mr. Furth and Mr. Reichman are considered to be interested persons of
the Fund and Warburg, as defined under Section 2(a)(19) of the 1940
Act, and, accordingly, receive no compensation from the Fund or any
other investment company managed by Warburg.]

Mr. Anthony G. Orphanos, portfolio manager of the Fund, is
also portfolio manager of Counsellors Tandem Securities Fund, Inc. and 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.

Investment Adviser and Co-Administrators

Warburg serves as investment adviser to the Fund, Counsellors
Funds Service, Inc. ("Counsellors Service") serves as a co-administrator to the
Fund and PFPC serves as a co-administrator to the Fund pursuant to separate
written agreements (the "Advisory Agreement," the "Counsellors Service
Co-Administration Agreement" and the "PFPC Co- Administration Agreement,"
respectively). The services provided by, and the fees payable by the Fund to,
Warburg under the Advisory Agreement, Counsellors Service under the Counsellors
Service Co-Administration Agreement and PFPC under the PFPC Co- Administration
Agreement are described in the Prospectuses. Each class of shares of the Fund
bears its proportionate share of fees payable to Warburg, Counsellors Service
and PFPC in the proportion that its assets bear to the aggregate assets of the
Fund at the time of calculation.

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, 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 also 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 - Series 1 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 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.

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 intends to 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 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 and futures 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 or options or futures 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 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 options and futures
contracts 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 option or 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.

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 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.

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. Proposed legislation would reduce the dividends received deduction
available to corporations (as discussed in the Prospectuses) from 70% to 50% of
dividends received.

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 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. Recently
proposed legislation would codify the mark-to-market election for regulated
investment companies.

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. 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)'pp'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.

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.

The Fund may also advertise its yield. Yield is calculated by
annualizing the net investment income generated by the Fund over a specified
thirty-day period according to the following formula:

YIELD = 2[(a-b +1)'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.

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.

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.

A-1

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

A-2

such grace period. The D rating also will be used upon the filing of a
bankruptcy petition if debt service payments are jeopardized.

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

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

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.

A-3

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

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

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

A-4

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.

PART C

OTHER INFORMATION

Item 24. Financial Statements and Exhibits

<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
<S> <C>
1 Articles of Incorporation.

2 By-Laws.

3 Not applicable.

4 Forms of Share Certificates.*

5 Form of Investment Advisory Agreement.*

6 Form of Distribution Agreement.*

7 Not applicable.

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

(b) Form of Custodian Agreement with State Street Bank and Trust Company.*

9(a) Form of Transfer Agency Agreement.*

(b) Forms of Co-Administration Agreements.*

</TABLE>

- -----------------
* To be filed by amendment.
C-1

10(a) Opinion and Consent of Willkie Farr & Gallagher,
counsel to the Fund.*

(b) Opinion and Consent of Venable, Baetjer and
Howard, LLP, Maryland counsel to the Fund.*

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

12 Not Applicable.

13 Form of Purchase Agreement.*

14 Not applicable.

15(a) Form of Distribution Plan.*

(b) Form of Distribution Agreement.*

16 Not applicable.

17 Not applicable.

- -----------------
* To be filed by amendment.

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

All of the outstanding shares of common stock of Registrant on
the date Registrant's Registration Statement becomes effective will be owned by
Warburg, Pincus Counsellors, Inc. ("Warburg"), a corporation formed under New
York law.

Item 26. Number of Holders of Securities

It is anticipated that Warburg will hold all Registrant's
shares of common stock, par value $.001 per share, on the date Registrant's
Registration Statement becomes effective.

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.

C-2

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 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
Short-Term Tax-Advantaged Bond Fund; Warburg, Pincus Small Company Value Fund
and Warburg, Pincus Trust.

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

Item 30. Location of Accounts and Records

(1) Warburg, Pincus 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

C-3

(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.

Item 32. Undertakings

(a) Registrant hereby undertakes not to offer its shares to
the public, except in connection with the reorganization of the Warburg Pincus
Growth & Income Fund, a series of The RBB Fund, Inc., until Registrant files a
post-effective amendment including financial statements.

(b) 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.

(c) 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-4

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as
amended, and the Investment Company Act of 1940, as amended, the Registrant has
duly caused this 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 29th day of January, 1996.

WARBURG, PINCUS GROWTH & INCOME FUND, INC.

By:/s/ Arnold M. Reichman
------------------
Arnold M. Reichman
President

ATTEST:

Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed below by the following
persons in the capacities and on the date indicated:

<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----

<S> <C> <C>
/s/ Arnold M. Reichman Director, President and January 29, 1996
- --------------------------- Secretary
Arnold M. Reichman

/s/ Stephen Distler Vice President, January 29, 1996
- ---------------------------- Chief Financial
Stephen Distler Officer, Treasurer
and Chief Accounting
Officer

C-5

STATEMENT OF DIFFERENCES
------------------------
The dagger symbol shall be expressed as `D'
Any superscript shall be preceded by 'pp'

INDEX TO EXHIBITS

Exhibit No. Description of Exhibit
- ---------- ----------------------

1 Articles of Incorporation.

2 By-Laws.

<PAGE>

</TABLE>

<PAGE>

ARTICLES OF INCORPORATION
OF
WARBURG, PINCUS GROWTH & INCOME FUND, INC.

ARTICLE I
INCORPORATOR

The undersigned, Alisa C. Jancu, whose post office address is
c/o Willkie Farr & Gallagher, One Citicorp Center, 153 East 53rd Street, New
York, New York 10022, being at least 18 years of age, does hereby act as an
incorporator and forms a corporation under the Maryland General Corporation Law.

ARTICLE II

NAME

The name of the corporation is Warburg, Pincus Growth & Income Fund,
Inc. (the "Corporation").

ARTICLE III

PURPOSES AND POWERS

The Corporation is formed for the following purposes:

(1) To conduct and carry on the business of an investment company.

(2) To hold, invest and reinvest its assets in securities and
other investments or to hold part or all of its assets in cash.

(3) To issue and sell shares of its capital stock in such
amounts, on such terms and conditions, for such purposes and for such amount or
kind of consideration as may now or hereafter be permitted by law.

(4) To redeem, purchase or acquire in any other manner, hold,
dispose of, resell, transfer, reissue or cancel (all without the vote or consent
of the stockholders of the Corporation) shares of its capital stock, in any
manner and to the extent now or hereafter permitted by law and by this Charter.

(5) To do any and all additional acts and to exercise any and
all additional powers or rights as may be necessary, incidental, appropriate or
desirable for the accomplishment of all or any of the foregoing purposes.

The Corporation shall be authorized to exercise and enjoy all
of the powers, rights and privileges granted to, or conferred upon, corporations
by the Maryland General Corporation Law now or hereafter in force, and the
enumeration of the foregoing shall not be deemed to exclude any powers, rights
or privileges so granted or conferred.

ARTICLE IV

PRINCIPAL OFFICE AND RESIDENT AGENT

The post office address of the principal office of the
Corporation in the State of Maryland is c/o The Corporation Trust Company
Incorporated, 32 South Street, Baltimore, Maryland 21202. The name and address
of the resident agent of the Corporation in the State of Maryland is The
Corporation Trust Company Incorporated, a Maryland corporation, 32 South Street,
Baltimore, Maryland 21202.

ARTICLE V

CAPITAL STOCK

(1) (A) The total number of shares of capital stock that the
Corporation shall have authority to issue is three billion (3,000,000,000)
shares, of the par value of one tenth of one cent ($.001) per share and of the
aggregate par value of three million dollars ($3,000,000), all of which three
billion (3,000,000,000) shares are designated Common Stock.

(B) (i) One billion (1,000,000,000) shares of Common
Stock have been divided into and classified initially as a series of
Common Stock, designated Common Stock - Series 1 ("Series 1 Shares").

(ii) One billion (1,000,000,000) shares of
Common Stock have been divided into and classified initially
as a series of Common Stock, designated Advisor Shares
("Advisor Shares").

(C) Each Series 1 Share will have the same
preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms and conditions of
redemption as every other share of Common Stock, except that, subject
to the provisions of any governing order, rule or regulation issued
pursuant to the Investment Company Act of 1940, as amended (the "1940
Act"):

(i) Series 1 Shares will share equally with
Common Stock other than Series 1 Shares ("Non-Series 1
Shares") in the income, earnings and profits derived from
investment and reinvestment of the assets belonging to the
Corporation and will be charged

equally with Non-Series 1 Shares with the liabilities and
expenses of the Corporation, except that Series 1 Shares will
bear the expense of payments made pursuant to any agreements
entered into by the Corporation pursuant to any shareholder
services plan and/or distribution plan adopted by the
Corporation with respect to Series 1 Shares;

(ii) On any matter submitted to a vote of
shareholders of the Corporation that pertains to the
agreements or expenses described in clause (C)(i) above (or to
any plan adopted by the Corporation relating to said
agreements or expenses), only Series 1 Shares will be entitled
to vote, except that if said matter affects Non-Series 1
Shares, Non-Series 1 Shares will also be entitled to vote, and
in such case Series 1 Shares will be voted in the aggregate
together with such Non-Series 1 Shares and not by series
except where otherwise required by law. Series 1 Shares will
not be entitled to vote on any matter that does not affect
Series 1 Shares (except where otherwise required by law) even
though the matter is submitted to a vote of the holders of
Non-Series 1 Shares; and

(iii) The Board of Directors of the
Corporation in its sole discretion may determine whether a
matter affects a particular class or series of Corporation
shares.

(D) Each Advisor Share will have the same
preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms and conditions of
redemption as every other share of Common Stock, except that, subject
to the provisions of any governing order, rule or regulation issued
pursuant to the 1940 Act:

(i) Advisor Shares will share equally with
Common Stock other than Advisor Shares ("Non-Advisor Shares")
in the income, earnings and profits derived from investment
and reinvestment of the assets belonging to the Corporation
and will be charged equally with Non-Advisor Shares with the
liabilities and expenses of the Corporation, except Advisor
Shares will bear the expense of payments made pursuant to any
agreements entered into by the Corporation pursuant to any
shareholder services plan and/or distribution plan adopted by
the Corporation with respect to Advisor Shares;

(ii) On any matter submitted to a vote of
shareholders of the Corporation that pertains to the
agreements or expenses described in clause (D)(i) above (or to
any plan adopted by the Corporation relating to

said agreements or expenses), only Advisor Shares will be
entitled to vote, except that if said matter affects
Non-Advisor Shares, Non-Advisor Shares will also be entitled
to vote, and in such case Advisor Shares will be voted in the
aggregate together with such Non-Advisor Shares and not by
series except where otherwise required by law. Advisor Shares
will not be entitled to vote on any matter that does not
affect Advisor Shares (except where otherwise required by
law) even though the matter is submitted to a vote of the
holders of Non-Advisor Shares; and

(iii) The Board of Directors of the
Corporation in its sole discretion may determine whether a
matter affects a particular class or series of Corporation
shares.

(2) Any fractional share shall carry proportionately the
rights of a whole share including, without limitation, the right to vote and the
right to receive dividends. A fractional share shall not, however, have the
right to receive a certificate evidencing it.

(3) All persons who shall acquire stock in the Corporation
shall acquire the same subject to the provisions of this Charter and the By-Laws
of the Corporation.

(4) No holder of stock of the Corporation by virtue of being
such a holder shall have any preemptive or other right to purchase or subscribe
for any shares of the Corporation's capital stock or any other security that the
Corporation may issue or sell (whether out of the number of shares authorized by
this Charter or out of any shares of the Corporation's capital stock that the
Corporation may acquire) other than a right that the Board of Directors in its
discretion may determine to grant.

(5) The Board of Directors shall have authority by resolution
to classify or to reclassify, as the case may be, any authorized but unissued
shares of capital stock from time to time by setting or changing in any one or
more respects the preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications or terms or conditions
of redemption of the capital stock.

(6) Notwithstanding any provision of law requiring any action
to be taken or authorized by the affirmative vote of a greater proportion of the
votes of all classes or of any class of stock of the Corporation, such action
shall be effective and valid if taken or authorized by the affirmative vote of a
majority of the total number of votes entitled to be cast thereon, except as
otherwise provided in this Charter.

(7) The presence in person or by proxy of the holders of
one-third of the shares of stock of the Corporation entitled

to vote (without regard to class) shall constitute a quorum at any meeting of
the stockholders, except with respect to any matter which, under applicable
statutes or regulatory requirements, requires approval by a separate vote of one
or more classes of stock, in which case the presence in person or by proxy of
the holders of one-third of the shares of stock of each class required to vote
as a class on the matter shall constitute a quorum.

ARTICLE VI

REDEMPTION

Each holder of shares of the Corporation's capital stock shall
be entitled to require the Corporation to redeem all or any part of the shares
of capital stock of the Corporation standing in the name of the holder on the
books of the Corporation, and all shares of capital stock issued by the
Corporation shall be subject to redemption by the Corporation, at the redemption
price of the shares as in effect from time to time as may be determined by or
pursuant to the direction of the Board of Directors of the Corporation in
accordance with the provisions of Article VII, subject to the right of the Board
of Directors of the Corporation to suspend the right of redemption or postpone
the date of payment of the redemption price in accordance with provisions of
applicable law. Without limiting the generality of the foregoing, the
Corporation shall, to the extent permitted by applicable law, have the right at
any time to redeem the shares owned by any holder of capital stock of the
Corporation (i) if the redemption is, in the opinion of the Board of Directors
of the Corporation, desirable in order to prevent the Corporation from being
deemed a "personal holding company" within the meaning of the Internal Revenue
Code of 1986 or (ii) if the value of the shares in the account maintained by the
Corporation or its transfer agent for any class of stock for the stockholder is
below an amount determined from time to time by the Board of Directors of the
Corporation (the "Minimum Account Balance") and the stockholder has been given
at least 60 (sixty) days' written notice of the redemption and has failed to
make additional purchases of shares in an amount sufficient to bring the value
in his account to at least the Minimum Account Balance before the redemption is
effected by the Corporation. Payment of the redemption price shall be made in
cash by the Corporation at the time and in the manner as may be determined from
time to time by the Board of Directors of the Corporation unless, in the opinion
of the Board of Directors, which shall be conclusive, conditions exist that make
payment wholly in cash unwise or undesirable; in such event the Corporation may
make payment wholly or partly by securities or other property included in the
assets belonging or allocable to the class of the shares for which redemption is
being sought, the value of which shall be determined as provided herein. The
Board of Directors may establish procedures for redemption of shares.

ARTICLE VII

BOARD OF DIRECTORS

(1) The number of directors constituting the Board of
Directors shall be one or such other number as may be set forth in the By-Laws
or determined by the Board of Directors pursuant to the By-Laws. The number of
Directors shall at no time be less than the minimum number required under the
Maryland General Corporation Law. Arnold M. Reichman has been appointed director
of the Corporation to hold office until the first annual meeting of stockholders
or until his successor is elected and qualified.

(2) In furtherance, and not in limitation, of the powers
conferred by the Maryland General Corporation Law, the Board of Directors is
expressly authorized:

(i) To make, alter or repeal the By-Laws of the
Corporation, except where such power is reserved by the By-Laws to the
stockholders, and except as otherwise required by the 1940 Act.

(ii) From time to time to determine whether and to
what extent and at what times and places and under what conditions and
regulations the books and accounts of the Corporation, or any of them
other than the stock ledger, shall be open to the inspection of the
stockholders. No stockholder shall have any right to inspect any
account or book or document of the Corporation, except as conferred by
law or authorized by resolution of the Board of Directors or of the
stockholders.

(iii) Without the assent or vote of the stockholders,
to authorize the issuance from time to time of shares of the stock of
any class of the Corporation, whether now or hereafter authorized, and
securities convertible into shares of stock of the Corporation of any
class or classes, whether now or hereafter authorized, for such
consideration as the Board of Directors may deem advisable.

(iv) Without the assent or vote of the stockholders,
to authorize and issue obligations of the Corporation, secured and
unsecured, as the Board of Directors may determine, and to authorize
and cause to be executed mortgages and liens upon the real or personal
property of the Corporation.

(v) Notwithstanding anything in this Charter to the
contrary, to establish in its absolute discretion the basis or method
for determining the value of the assets belonging to any class, the
value of the liabilities belonging to any class and the net asset value
of each share of any class of the Corporation's stock.

(vi) To determine in accordance with generally
accepted accounting principles and practices what constitutes net
profits, earnings, surplus or net assets in excess of capital, and to
determine what accounting periods shall be used by the Corporation for
any purpose; to set apart out of any funds of the Corporation reserves
for such purposes as it shall determine and to abolish the same; to
declare and pay any dividends and distributions in cash, securities or
other property from surplus or any other funds legally available
therefor, at such intervals as it shall determine; to declare dividends
or distributions by means of a formula or other method of
determination, at meetings held less frequently than the frequency of
the effectiveness of such declarations; and to establish payment dates
for dividends or any other distributions on any basis, including dates
occurring less frequently than the effectiveness of declarations
thereof.

(vii) In addition to the powers and authorities
granted herein and by statute expressly conferred upon it, the Board of
Directors is authorized to exercise all powers and do all acts that may
be exercised or done by the Corporation pursuant to the provisions of
the laws of the State of Maryland, this Charter and the By-Laws of the
Corporation.

(3) Any determination made in good faith, and in accordance
with applicable law and generally accepted accounting principles and practices,
if applicable, by or pursuant to the direction of the Board of Directors, with
respect to the amount of assets, obligations or liabilities of the Corporation,
as to the amount of net income of the Corporation from dividends and interest
for any period or amounts at any time legally available for the payment of
dividends, as to the amount of any reserves or charges set up and the propriety
thereof, as to the time of or purpose for creating reserves or as to the use,
alteration or cancellation of any reserves or charges (whether or not any
obligation or liability for which the reserves or charges have been created has
been paid or discharged or is then or thereafter required to be paid or
discharged), as to the value of any security owned by the Corporation, the
determination of the net asset value of shares of any class of the Corporation's
capital stock, or as to any other matters relating to the issuance, sale or
other acquisition or disposition of securities or shares of capital stock of the
Corporation, and any reasonable determination made in good faith by the Board of
Directors regarding whether any transaction constitutes a purchase of securities
on "margin," a sale of securities "short," or an underwriting of the sale of, or
a participation in any underwriting or selling group in connection with the
public distribution of, any securities, shall be final and conclusive, and shall
be binding upon the Corporation and all holders of its capital stock, past,
present and future, and shares of the capital stock of the Corporation are
issued and sold on the

condition and understanding, evidenced by the purchase of shares of capital
stock or acceptance of share certificates, that any and all such determinations
shall be binding as aforesaid. No provision of this Charter shall be effective
to (i) require a waiver of compliance with any provision of the Securities Act
of 1933, as amended, or the 1940 Act, or of any valid rule, regulation or order
of the Securities and Exchange Commission under those Acts or (ii) protect or
purport to protect any director or officer of the Corporation against any
liability to the Corporation or its security holders to which he would otherwise
be subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office.

ARTICLE VIII

INDEMNIFICATION AND LIMITATION OF LIABILITY

(1) To the fullest extent that limitations on the liability of
directors and officers are permitted by the Maryland General Corporation Law, no
director or officer of the Corporation shall have any liability to the
Corporation or its stockholders for money damages. This limitation on liability
applies to events occurring at the time a person serves as a director or officer
of the Corporation whether or not such person is a director or officer at the
time of any proceeding in which liability is asserted.

(2) The Corporation shall indemnify and advance expenses to
its currently acting and its former directors to the fullest extent that
indemnification of directors and advancement of expenses to directors is
permitted by the Maryland General Corporation Law. The Corporation shall
indemnify and advance expenses to its officers to the same extent as its
directors and to such further extent as is consistent with such law. The board
of directors may, through a by-law, resolution or agreement, make further
provisions for indemnification of directors, officers, employees and agents to
the fullest extent permitted by the Maryland General Corporation Law.

(3) No provision of this Article VIII shall be effective to
protect or purport to protect any director or officer of the Corporation against
any liability to the Corporation or its stockholders to which he would otherwise
be subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office.

(4) References to the Maryland General Corporation Law in this
Article VIII are to the law as from time to time amended. No amendment to this
Charter shall affect any right of any person under this Article VIII based on
any event, omission or proceeding prior to such amendment. The term "Charter" as
used herein shall have the meaning set forth in the Maryland

General Corporation Law and includes these Articles of Incorporation and all
amendments thereto.

ARTICLE IX

AMENDMENTS

The Corporation reserves the right from time to time to make
any amendment to its Charter, now or hereafter authorized by law, including any
amendment that alters the contract rights, as expressly set forth in this
Charter, of any outstanding stock, and all rights at any time conferred upon the
stockholders of the Corporation by its Charter are granted subject to the
provisions of this Article and the reservation of the right to amend the Charter
herein contained.

IN WITNESS WHEREOF, I have adopted and signed these Articles
of Incorporation and do hereby acknowledge that the adoption and signing are my
act.

/s/ Alisa C. Jancu
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Incorporator

Dated the 26th day of January, 1996

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BY-LAWS

WARBURG, PINCUS GROWTH & INCOME FUND, INC.

A Maryland Corporation

ARTICLE I

STOCKHOLDERS

SECTION 1. Annual Meetings. No annual meeting of the stockholders of
the Warburg, Pincus Growth & Income Fund, Inc. (the "Corporation") shall be held
in any year in which the election of directors is not required to be acted upon
under the Investment Company Act of 1940, as amended (the "1940 Act"), unless
otherwise determined by the Board of Directors. An annual meeting may be held at
any place within the United States as may be determined by the Board of
Directors and as shall be designated in the notice of the meeting, at the time
specified by the Board of Directors. Any business of the Corporation may be
transacted at an annual meeting without being specifically designated in the
notice unless otherwise provided by statute, the Corporation's Charter or these
By-Laws.

SECTION 2. Special Meetings. Special meetings of the stockholders for
any purpose or purposes, unless otherwise prescribed by statute or by the
Corporation's Charter, may be held at any place within the United States, and
may be called at any time by the Board of Directors or by the President, and
shall be called by the President or Secretary at the request in writing of a
majority of the Board of Directors or at the request in writing of stockholders
entitled to cast at least 10% (ten percent) of the votes entitled to be cast at
the meeting upon payment by such stockholders to the Corporation of the
reasonably estimated cost of preparing and mailing a notice of the meeting
(which estimated cost shall be provided to such stockholders by the Secretary of
the Corporation). Notwithstanding the foregoing, unless requested by
stockholders entitled to cast a majority of the votes entitled to be cast at the
meeting, a special meeting of the stockholders need not be called at the request
of stockholders to consider any matter which is substantially the same as a
matter voted on at any special meeting of the stockholders held during the
preceding 12 (twelve) months. A written request shall state the purpose or
purposes of the proposed meeting.

SECTION 3. Notice of Meetings. Written or printed notice of the purpose
or purposes and of the time and place of every meeting of the stockholders shall
be given by the

Secretary of the Corporation to each stockholder of record entitled to vote at
the meeting, by placing the notice in the mail at least 10 (ten) days, but not
more than 90 (ninety) days, prior to the date designated for the meeting
addressed to each stockholder at his address appearing on the books of the
Corporation or supplied by the stockholder to the Corporation for the purpose of
notice. The notice of any meeting of stockholders may be accompanied by a form
of proxy approved by the Board of Directors in favor of the actions or the
election of persons as the Board of Directors may select. Notice of any meeting
of stockholders shall be deemed waived by any stockholder who attends the
meeting in person or by proxy, or who before or after the meeting submits a
signed waiver of notice that is filed with the records of the meeting.

SECTION 4. Quorum. Except as otherwise provided by statute or by the
Corporation's Charter, the presence in person or by proxy of stockholders of the
Corporation entitled to cast at least one-third of the votes to be cast shall
constitute a quorum at each meeting of the stockholders and all questions shall
be decided by majority of the votes cast (except with respect to the election of
directors, which shall be by a plurality of votes cast). In the absence of a
quorum, the stockholders present in person or by proxy, by majority vote and
without notice other than by announcement, may adjourn the meeting from time to
time as provided in Section 5 of this Article I until a quorum shall attend. The
stockholders present at any duly organized meeting may continue to do business
until adjournment, notwithstanding the withdrawal of enough stockholders to
leave less than a quorum. The absence from any meeting in person or by proxy of
holders of the number of shares of stock of the Corporation in excess of a
majority that may be required by Maryland law, the 1940 Act, or any other
applicable statute, the Corporation's Charter or these By-Laws, for action upon
any given matter shall not prevent action at the meeting on any other matter or
matters that may properly come before the meeting, so long as there are present,
in person or by proxy, holders of the number of shares of stock of the
Corporation required for action upon such other matter or matters.

SECTION 5. Adjournment. Any meeting of the stockholders may be
adjourned from time to time, without notice other than by announcement at the
meeting at which the adjournment is taken. At any adjourned meeting at which a
quorum shall be present, any action may be taken that could have been taken at
the meeting originally called. A meeting of the stockholders may not be
adjourned without further notice to a date more than 120 (one hundred twenty)

days after the original record date determined pursuant to Section 9 of this
Article I.

SECTION 6. Organization. At every meeting of the stockholders, the
Chairman of the Board, or in his absence or inability to act (or if there is
none), the President, or in his absence or inability to act, a Vice President,
or in the absence or inability to act of the Chairman of the Board, the
President and all the Vice Presidents, a chairman chosen by the stockholders
shall act as chairman of the meeting. The Secretary, or in his absence or
inability to act, a person appointed by the chairman of the meeting, shall act
as secretary of the meeting and keep the minutes of the meeting.

SECTION 7. Order of Business. The order of business at all meetings
of the stockholders shall be as determined by the chairman of the meeting.

SECTION 8. Voting. Except as otherwise provided by statute or the
Corporation's Charter, each holder of record of shares of stock of the
Corporation having voting power shall be entitled at each meeting of the
stockholders to one vote for every share of stock standing in his name on the
records of the Corporation as of the record date determined pursuant to Section
9 of this Article I.

Each stockholder entitled to vote at any meeting of stockholders may
authorize another person or persons to act for him by a proxy signed by the
stockholder or his attorney-in-fact. No proxy shall be valid after the
expiration of 11 (eleven) months from the date thereof, unless otherwise
provided in the proxy. Every proxy shall be revocable at the pleasure of the
stockholder executing it, except in those cases in which the proxy states that
it is irrevocable and in which an irrevocable proxy is permitted by law.

If a vote shall be taken on any question other than the election of
directors, which shall be by written ballot, then unless required by statute or
these By-Laws, or determined by the chairman of the meeting to be advisable, any
such vote need not be by ballot. On a vote by ballot, each ballot shall be
signed by the stockholder voting, or by his proxy, and shall state the number of
shares voted.

SECTION 9. Fixing of Record Date. The Board of Directors may set a
record date for the purpose of determining stockholders entitled to vote at any
meeting of the stockholders. The record date for a particular meeting shall be
not more than 90 (ninety) nor fewer than 10 (ten)

days before the date of the meeting. All persons who were holders of record of
shares as of the record date of a meeting, and no others, shall be entitled to
vote at such meeting and any adjournment thereof.

SECTION 10. Inspectors. The Board of Directors may, in advance of any
meeting of stockholders, appoint one or more inspectors to act at the meeting or
at any adjournment of the meeting. If the inspectors shall not be so appointed
or if any of them shall fail to appear or act, the chairman of the meeting may,
and on the request of any stockholder entitled to vote at the meeting shall,
appoint inspectors. Each inspector, before entering upon the discharge of his
duties, shall take and sign an oath to execute faithfully the duties of
inspector at the meeting with strict impartiality and according to the best of
his ability. The inspectors shall determine the number of shares outstanding and
the voting power of each share, the number of shares represented at the meeting,
the existence of a quorum and the validity and effect of proxies, and shall
receive votes, ballots or consents, hear and determine all challenges and
questions arising in connection with the right to vote, count and tabulate all
votes, ballots or consents, determine the result, and do those acts as are
proper to conduct the election or vote with fairness to all stockholders. On
request of the chairman of the meeting or any stockholder entitled to vote at
the meeting, the inspectors shall make a report in writing of any challenge,
request or matter determined by them and shall execute a certificate of any fact
found by them. No director or candidate for the office of director shall act as
inspector of an election of directors. Inspectors need not be stockholders of
the Corporation.

SECTION 11. Consent of Stockholders in Lieu of Meeting. Except as
otherwise provided by statute or the Corporation's Charter, any action required
to be taken at any meeting of stockholders, or any action that may be taken at
any meeting of the stockholders, may be taken without a meeting, without prior
notice and without a vote, if the following are filed with the records of
stockholders' meetings: (a) a unanimous written consent that sets forth the
action and is signed by each stockholder entitled to vote on the matter and (b)
a written waiver of notice and any right to dissent signed by each stockholder
entitled to notice of the meeting but not entitled to vote at the meeting.

SECTION 12. Notice of Stockholder Business.

(a) At any annual or special meeting of the stockholders, only such
business shall be conducted as shall have been properly brought before the
meeting. To be properly brought before an annual or special meeting business
must be (i) (A) specified in the notice of meeting (or any supplement thereto)
given by or at the direction of the Board of Directors, (B) otherwise properly
brought before the meeting by or at the direction of the Board of Directors, or
(C) subject to the provisions of Section 13 of this Article I, otherwise
properly brought before the meeting by a stockholder and (ii) a proper subject
under applicable law for stockholder action.

(b) For business to be properly brought before an annual or special
meeting by a stockholder, the stockholder must have given timely notice thereof
in writing to the Secretary of the Corporation. To be timely, any such notice
must be delivered to or mailed and received at the principal executive offices
of the Corporation not later than 60 (sixty) days prior to the date of the
meeting; provided, however, that if less than 70 (seventy) days' notice or prior
public disclosure of the date of the meeting is given or made to stockholders,
any such notice by a stockholder to be timely must be so received not later than
the close of business on the tenth day following the day on which notice of the
date of the annual or special meeting was given or such public disclosure was
made.

(c) Any such notice by a stockholder shall set forth as to each matter
the stockholder proposes to bring before the annual or special meeting (i) a
brief description of the business desired to be brought before the annual or
special meeting and the reasons for conducting such business at the annual or
special meeting, (ii) the name and address, as they appear on the Corporation's
books, of the stockholder proposing such business, (iii) the class and number of
shares of the capital stock of the Corporation which are beneficially owned by
the stockholder, and (iv) any material interest of the stockholder in such
business.

(d) Notwithstanding anything in the By-Laws to the contrary, no
business shall be conducted at any annual or special meeting except in
accordance with the procedures set forth in this Section 12. The chairman of the
annual or special meeting shall, if the facts warrant, determine and declare to
the meeting that business was not properly brought before the meeting and in
accordance with the provisions of this Section 12, and if he should so
determine, he shall so declare to the meeting and any such

business not properly brought before the meeting shall not be considered or
transacted.

SECTION 13. Stockholder Business not Eligible for Consideration.

(a) Notwithstanding anything in these By-Laws to the contrary, any
proposal that is otherwise properly brought before an annual or special meeting
by a stockholder will not be eligible for consideration by the stockholders at
such annual or special meeting if such proposal is substantially the same as a
matter properly brought before such annual or special meeting by or at the
direction of the Board of Directors of the Corporation. The chairman of such
annual or special meeting shall, if the facts warrant, determine and declare
that a stockholder proposal is substantially the same as a matter properly
brought before the meeting by or at the direction of the Board of Directors,
and, if he should so determine, he shall so declare to the meeting and any such
stockholder proposal shall not be considered at the meeting.

(b) This Section 13 shall not be construed or applied to make
ineligible for consideration by the stockholders at any annual or special
meeting any stockholder proposal required to be included in the Corporation's
proxy statement relating to such meeting pursuant to Rule 14a-8 under the
Securities Exchange Act of 1934 (the "Exchange Act"), or any successor rule
thereto.

ARTICLE II

BOARD OF DIRECTORS

SECTION 1. General Powers. Except as otherwise provided in the
Corporation's Charter, the business and affairs of the Corporation shall be
managed under the direction of its Board of Directors. All powers of the
Corporation may be exercised by or under authority of the Board of Directors
except as conferred on or reserved to the stockholders by law, by the
Corporation's Charter or by these By-Laws.

SECTION 2. Number of Directors. The number of directors shall be fixed
from time to time by resolution of the Board of Directors adopted by a majority
of the entire Board of Directors; provided, however, that the number of
directors shall in no event be fewer than one nor more than fifteen. Any vacancy
created by an increase in directors may be filled in accordance with Section 7
of this Article
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II. No reduction in the number of directors shall have the
effect of removing any director from office prior to the expiration of his term
unless the director is specifically removed pursuant to Section 6 of this
Article II at the time of the decrease. A director need not be a stockholder of
the Corporation, a citizen of the United States or a resident of the State of
Maryland.

SECTION 3. Election and Term of Directors. The term of office of each
director shall be from the time of his election and qualification until his
successor shall have been elected and shall have qualified, or until his death,
or until his resignation or removal as provided in these By-Laws, or as
otherwise provided by statute or the Corporation's Charter.

SECTION 4. Director Nominations.

(a) Only persons who are nominated in accordance with the procedures
set forth in this Section 4 shall be eligible for election or re-election as
directors. Nominations of persons for election or re-election to the Board of
Directors of the Corporation may be made at a meeting of stockholders by or at
the direction of the Board of Directors or by any stockholder of the Corporation
who is entitled to vote for the election of such nominee at the meeting and who
complies with the notice procedures set forth in this Section 4.

(b) Such nominations, other than those made by or at the direction of
the Board of Directors, shall be made pursuant to timely notice delivered in
writing to the Secretary of the Corporation. To be timely, any such notice by a
stockholder must be delivered to or mailed and received at the principal
executive offices of the Corporation not later than 60 (sixty) days prior to the
meeting; provided, however, that if less than 70 (seventy) days' notice or prior
public disclosure of the date of the meeting is given or made to stockholders,
any such notice by a stockholder to be timely must be so received not later than
the close of business on the tenth day following the day on which notice of the
date of the meeting was given or such public disclosure was made.

(c) Any such notice by a stockholder shall set forth (i) as to each
person whom the stockholder proposes to nominate for election or re-election as
a director, (A) the name, age, business address and residence address of such
person, (B) the principal occupation or employment of such person, (C) the class
and number of shares of the capital stock of the Corporation which are
beneficially owned by

such person and (D) any other information relating to such person that is
required to be disclosed in solicitations of proxies for the election of
directors pursuant to Regulation 14A under the Exchange Act or any successor
regulation thereto (including without limitation such person's written consent
to being named in the proxy statement as a nominee and to serving as a director
if elected and whether any person intends to seek reimbursement from
the Corporation of the expenses of any solicitation of proxies should such
person be elected a director of the Corporation); and (ii) as to the stockholder
giving the notice (A) the name and address, as they appear on the Corporation's
books, of such stockholder and (B) the class and number of shares of the capital
stock of the Corporation which are beneficially owned by such stockholder. At
the request of the Board of Directors, any person nominated by the Board of
Directors for election as a director shall furnish to the Secretary of the
Corporation that information required to be set forth in a stockholder's notice
of nomination which pertains to the nominee.

(d) If a notice by a stockholder is required to be given pursuant to
this Section 4, no person shall be entitled to receive reimbursement from the
Corporation of the expenses of a solicitation of proxies for the election as a
director of a person named in such notice unless such notice states that such
reimbursement will be sought from the Corporation. No person shall be eligible
for election as a director of the Corporation unless nominated in accordance
with the procedures set forth in this Section 4. The chairman of the meeting
shall, if the facts warrant, determine and declare to the meeting that a
nomination was not made in accordance with the procedures prescribed by the
By-Laws, and if he should so determine, he shall so declare to the meeting and
the defective nomination shall be disregarded for all purposes.

SECTION 5. Resignation. A director of the Corporation may resign at any
time by giving written notice of his resignation to the Board of Directors or
the Chairman of the Board or to the President or the Secretary of the
Corporation. Any resignation shall take effect at the time specified in it or,
should the time when it is to become effective not be specified in it,
immediately upon its receipt. Acceptance of a resignation shall not be necessary
to make it effective unless the resignation states otherwise.

SECTION 6. Removal of Directors. Any director of the Corporation may be
removed by the stockholders with or

without cause at any time by a vote of a majority of the votes entitled to be
cast for the election of directors.

SECTION 7. Vacancies. Subject to the provisions of the 1940 Act, any
vacancies in the Board of Directors, whether arising from death, resignation,
removal or any other cause except an increase in the number of directors, shall
be filled by a vote of the majority of the Board of Directors then in office
even though that majority is less than a quorum, provided that no vacancy or
vacancies shall be filled by action of the remaining directors if, after the
filling of the vacancy or vacancies, fewer than two-thirds of the directors then
holding office shall have been elected by the stockholders of the Corporation. A
majority of the entire Board as calculated prior to Board expansion may fill a
vacancy which results from an increase in the number of directors. In the event
that at any time a vacancy exists in any office of a director that may not be
filled by the remaining directors, a special meeting of the stockholders shall
be held as promptly as possible and in any event within 60 (sixty) days, for the
purpose of filling the vacancy or vacancies. Any director elected or appointed
to fill a vacancy shall hold office until a successor has been chosen and
qualifies or until his earlier death, resignation or removal.

SECTION 8. Place of Meetings. Meetings of the Board may be held at any
place that the Board of Directors may from time to time determine or that is
specified in the notice of the meeting.

SECTION 9. Regular Meetings. Regular meetings of the Board of
Directors may be held without notice at the time and place determined by the
Board of Directors.

SECTION 10. Special Meetings. Special meetings of the Board of
Directors may be called by two or more directors of the Corporation or by the
Chairman of the Board or the President.

SECTION 11. Notice of Special Meetings. Notice of each special meeting
of the Board of Directors shall be given by the Secretary as hereinafter
provided. Each notice shall state the time and place of the meeting and shall be
delivered to each director, either personally or by telephone, facsimile
transmission or other standard form of telecommunication, at least 24
(twenty-four) hours before the time at which the meeting is to be held, or by
first-class mail, postage prepaid, addressed to the director at his residence or
usual place of business, and mailed at

least 3 (three) days before the day on which the meeting is to be held.

SECTION 12. Waiver of Notice of Meetings. Notice of any special meeting
need not be given to any director who shall, either before or after the meeting,
sign a written waiver of notice that is filed with the records of the meeting or
who shall attend the meeting.

SECTION 13. Quorum and Voting. One-third (but not fewer than two unless
there be only one director) of the members of the entire Board of Directors
shall be present in person at any meeting of the Board in order to constitute a
quorum for the transaction of business at the meeting, and except as otherwise
expressly required by statute, the Corporation's Charter, these By-Laws, the
1940 Act, or any other applicable statute, the act of a majority of the
directors present at any meeting at which a quorum is present shall be the act
of the Board. In the absence of a quorum at any meeting of the Board, a majority
of the directors present may adjourn the meeting to another time and place until
a quorum shall be present. Notice of the time and place of any adjourned meeting
shall be given to the directors who were not present at the time of the
adjournment and, unless the time and place were announced at the meeting at
which the adjournment was taken, to the other directors. At any adjourned
meeting at which a quorum is present, any business may be transacted that might
have been transacted at the meeting as originally called.

SECTION 14. Organization. The Board of Directors may, by resolution
adopted by a majority of the entire Board, designate a Chairman of the Board,
who shall preside at each meeting of the Board. In the absence or inability of
the Chairman of the Board to act or if there is none, the President, or, in his
absence or inability to act, another director chosen by a majority of the
directors present, shall act as chairman of the meeting and preside at the
meeting. The Secretary, or, in his absence or inability to act, any person
appointed by the chairman, shall act as secretary of the meeting and keep the
minutes thereof.

SECTION 15. Committees. The Board of Directors may designate one or
more committees of the Board of Directors, each consisting of 2 (two) or more
directors. To the extent provided in the resolution, and permitted by law, the
committee or committees shall have and may exercise the powers of the Board of
Directors in the management of the business and affairs of the Corporation and
may authorize the seal of the Corporation to be affixed to all papers that may
require it. Any committee or committees shall have the

name or names determined from time to time by resolution adopted by the Board of
Directors. Each committee shall keep regular minutes of its meetings and report
the same to the Board of Directors when required. The members of a committee
present at any meeting, whether or not they constitute a quorum, may appoint a
director to act in the place of an absent member.

SECTION 16. Written Consent of Directors in Lieu of a Meeting. Subject
to the provisions of the 1940 Act, any action required or permitted to be taken
at any meeting of the Board of Directors or of any committee of the Board may be
taken without a meeting if all members of the Board or committee, as the case
may be, consent thereto in writing, and the writing or writings are filed with
the records of the Board's or such committee's meetings.

SECTION 17. Telephone Conference. Members of the Board of Directors or
any committee of the Board may participate in any Board or committee meeting by
means of a conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other at the same
time. Participation by such means shall constitute presence in person at the
meeting.

SECTION 18. Compensation. Each director shall be entitled to receive
compensation, if any, as may from time to time be fixed by the Board of
Directors, including a fee for each meeting of the Board or any committee
thereof, regular or special, he attends. Directors may also be reimbursed by the
Corporation for all reasonable expenses incurred in traveling to and from the
place of a Board or committee meeting.

ARTICLE III

OFFICERS, AGENTS AND EMPLOYEES

SECTION 1. Number and Qualifications. The officers of the Corporation
shall be a President, a Secretary and a Treasurer, each of whom shall be elected
by the Board of Directors. The Board of Directors may elect or appoint one or
more Vice Presidents and may also appoint any other officers, agents and
employees it deems necessary or proper. Any two or more offices may be held by
the same person, except the offices of President and Vice President, but no
officer shall execute, acknowledge or verify any instrument in more than one
capacity. Officers shall be elected by the Board of Directors, each to hold
office until his successor shall have been duly elected and shall have
qualified, or until his death, or until his resignation or removal as

provided in these By-Laws. The Board of Directors may from time to time elect,
or designate to the President the power to appoint, such officers (including one
or more Assistant Vice Presidents, one or more Assistant Treasurers and one or
more Assistant Secretaries) and such agents as may be necessary or desirable for
the business of the Corporation. Such other officers and agents shall have such
duties and shall hold their offices for such terms as may be prescribed by the
Board or by the appointing authority.

SECTION 2. Resignations. Any officer of the Corporation may resign at
any time by giving written notice of his resignation to the Board of Directors,
the Chairman of the Board, the President or the Secretary. Any resignation shall
take effect at the time specified therein or, if the time when it shall become
effective is not specified therein, immediately upon its receipt. Acceptance of
a resignation shall not be necessary to make it effective unless the resignation
states otherwise.

SECTION 3. Removal of Officer, Agent or Employee. Any officer, agent or
employee of the Corporation may be removed by the Board of Directors with or
without cause at any time, and the Board may delegate the power of removal as to
agents and employees not elected or appointed by the Board of Directors. Removal
shall be without prejudice to the person's contract rights, if any, but the
appointment of any person as an officer, agent or employee of the Corporation
shall not of itself create contract rights.

SECTION 4. Vacancies. A vacancy in any office whether arising from
death, resignation, removal or any other cause, may be filled for the unexpired
portion of the term of the office that shall be vacant, in the manner prescribed
in these By-Laws for the regular election or appointment to the office.

SECTION 5. Compensation. The compensation of the officers of the
Corporation shall be fixed by the Board of Directors, but this power may be
delegated to any officer with respect to other officers under his control.

SECTION 6. Bonds or Other Security. If required by the Board, any
officer, agent or employee of the Corporation shall give a bond or other
security for the faithful performance of his duties, in an amount and with any
surety or sureties as the Board may require.

SECTION 7. President. The President shall be the chief executive
officer of the Corporation. In the absence or inability of the Chairman of the
Board to act (or if

there is none), the President shall preside at all meetings
of the stockholders and of the Board of Directors. The President shall have,
subject to the control of the Board of Directors, general charge of the business
and affairs of the Corporation, and may employ and discharge employees and
agents of the Corporation, except those elected or appointed by the Board, and
he may delegate these powers.

SECTION 8. Vice President. Each Vice President shall have the powers
and perform the duties that the Board of Directors or the President may from
time to time prescribe.

SECTION 9. Treasurer. Subject to the provisions of any contract that
may be entered into with any custodian pursuant to authority granted by the
Board of Directors, the Treasurer shall have charge of all receipts and
disbursements of the Corporation and shall have or provide for the custody of
the Corporation's funds and securities; he shall have full authority to receive
and give receipts for all money due and payable to the Corporation, and to
endorse checks, drafts and warrants, in its name and on its behalf and to give
full discharge for the same; he shall deposit all funds of the Corporation,
except those that may be required for current use, in such banks or other places
of deposit as the Board of Directors may from time to time designate; and, in
general, he shall perform all duties incident to the office of Treasurer and
such other duties as may from time to time be assigned to him by the Board of
Directors or the President.

SECTION 10. Secretary. The Secretary shall:

(a) keep or cause to be kept in one or more books provided for the
purpose, the minutes of all meetings of the Board of Directors, the committees
of the Board and the stockholders;

(b) see that all notices are duly given in accordance with the
provisions of these By-Laws and as required by law;

(c) be custodian of the records and the seal of the Corporation and
affix and attest the seal to all stock certificates of the Corporation (unless
the seal of the Corporation on such certificates shall be a facsimile, as
hereinafter provided) and affix and attest the seal to all other documents to be
executed on behalf of the Corporation under its seal;

(d) see that the books, reports, statements, certificates and other
documents and records required by law to be kept and filed are properly kept
and filed; and

(e) in general, perform all the duties incident to the office of
Secretary and such other duties as from time to time may be assigned to him by
the Board of Directors or the President.

SECTION 11. Delegation of Duties. In case of the absence of any officer
of the Corporation, or for any other reason that the Board of Directors may deem
sufficient, the Board may confer for the time being the powers or duties, or any
of them, of such officer upon any other officer or upon any director.

ARTICLE IV

STOCK

SECTION 1. Stock Certificates. Each holder of stock of the Corporation
shall be entitled upon specific written request to such person as may be
designated by the Corporation to have a certificate or certificates, in a form
approved by the Board, representing the number of shares of stock of the
Corporation owned by him; provided, however, that certificates for fractional
shares will not be delivered in any case. The certificates representing shares
of stock shall be signed by or in the name of the Corporation by the Chairman of
the Board, President or a Vice President and by the Secretary or an Assistant
Secretary or the Treasurer or an Assistant Treasurer and sealed with the seal of
the Corporation. Any or all of the signatures or the seal on the certificate may
be facsimiles. In case any officer, transfer agent or registrar who has signed
or whose facsimile signature has been placed upon a certificate shall have
ceased to be such officer, transfer agent or registrar before such certificate
shall be issued, it may be issued by the Corporation with the same effect as if
such officer, transfer agent or registrar were still in office at the date of
issue.

SECTION 2. Books of Account and Record of Stockholders. There shall be
kept at the principal executive office of the Corporation correct and complete
books and records of account of all the business and transactions of the
Corporation. There shall be made available upon request of any stockholder, in
accordance with Maryland law, a record containing the number of shares of stock
issued during a specified period not to exceed 12 (twelve) months and the
consideration received by the Corporation for each such share.

SECTION 3. Transfers of Shares. Transfers of shares of stock of the
Corporation shall be made on the stock

records of the Corporation only by the registered holder thereof, or by his
attorney thereunto authorized by power of attorney duly executed and filed with
the Secretary or with a transfer agent or transfer clerk, and on surrender of
the certificate or certificates, if issued, for the shares properly endorsed or
accompanied by a duly executed stock transfer power and the payment of all taxes
thereon. Except as otherwise provided by law, the Corporation shall be entitled
to recognize the exclusive right of a person in whose name any share or shares
stand on the record of stockholders as the owner of the share or shares for all
purposes, including, without limitation, the rights to receive dividends or
other distributions and to vote as the owner, and the Corporation shall not be
bound to recognize any equitable or legal claim to or interest in any such share
or shares on the part of any other person.

SECTION 4. Regulations. The Board of Directors may make any additional
rules and regulations, not inconsistent with these By-Laws, as it may deem
expedient concerning the issue, transfer and registration of certificates for
shares of stock of the Corporation. It may appoint, or authorize any officer or
officers to appoint, one or more transfer agents or one or more transfer clerks
and one or more registrars and may require all certificates for shares of stock
to bear the signature or signatures of any of them.

SECTION 5. Stolen, Lost, Destroyed or Mutilated Certificates. The
holder of any certificate representing shares of stock of the Corporation shall
immediately notify the Corporation of its theft, loss, destruction or mutilation
and the Corporation may issue a new certificate of stock in the place of any
certificate issued by it that has been alleged to have been stolen, lost or
destroyed or that shall have been mutilated. The Board may, in its discretion,
require the owner (or his legal representative) of a stolen, lost, destroyed or
mutilated certificate to give to the Corporation a bond in a sum, limited or
unlimited, and in a form and with any surety or sureties, as the Board in its
absolute discretion shall determine or to indemnify the Corporation against any
claim that may be made against it on account of the alleged theft, loss,
destruction or the mutilation of any such certificate, or issuance of a new
certificate. Anything herein to the contrary notwithstanding, the Board of
Directors, in its absolute discretion, may refuse to issue any such new
certificate, except pursuant to legal proceedings under the Maryland General
Corporation Law.

SECTION 6. Fixing of Record Date for Dividends, Distributions, etc. The
Board may fix, in advance, a date

not more than 90 (ninety) days preceding the date fixed for the payment of any
dividend or the making of any distribution or the allotment of rights to
subscribe for securities of the Corporation, or for the delivery of evidences of
rights or evidences of interests arising out of any change, conversion or
exchange of common stock or other securities, as the record date for the
determination of the stockholders entitled to receive any such dividend,
distribution, allotment, rights or interests, and in such case only the
stockholders of record at the time so fixed shall be entitled to receive such
dividend, distribution, allotment, rights or interests.

SECTION 7. Information to Stockholders and Others. Any stockholder of
the Corporation or his agent may inspect and copy during the Corporation's usual
business hours the Corporation's By-Laws, minutes of the proceedings of its
stockholders, annual statements of its affairs and voting trust agreements on
file at its principal office.

ARTICLE V

INDEMNIFICATION AND INSURANCE

SECTION 1. Indemnification of Directors and Officers. Any person who
was or is a party or is threatened to be made a party in any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative, by reason of the fact that such person is a current or former
director or officer of the Corporation, or is or was serving while a director or
officer of the Corporation at the request of the Corporation as a director,
officer, partner, trustee, employee, agent or fiduciary of another corporation,
partnership, joint venture, trust, enterprise or employee benefit plan, shall be
indemnified by the Corporation against judgments, penalties, fines, excise
taxes, settlements and reasonable expenses (including attorneys' fees) actually
incurred by such person in connection with such action, suit or proceeding to
the full extent permissible under the Maryland General Corporation Law, the
Securities Act of 1933, as amended (the "Securities Act"), and the 1940 Act, as
such statutes are now or hereafter in force, except that such indemnity shall
not protect any such person against any liability to the Corporation or any
stockholder thereof to which such person would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office ("disabling conduct").

SECTION 2. Advances. Any current or former director or officer of the
Corporation claiming indemnification within the scope of this Article V shall be
entitled to advances from the Corporation for payment of the reasonable expenses
incurred by him in connection with proceedings to which he is a party in the
manner and to the full extent permissible under the Maryland General Corporation
Law, the Securities Act and the 1940 Act, as such statutes are now or hereafter
in force; provided however, that the person seeking indemnification shall
provide to the Corporation a written affirmation of his good faith belief that
the standard of conduct necessary for indemnification by the Corporation has
been met and a written undertaking to repay any such advance unless it is
ultimately determined that he is entitled to indemnification, and provided
further that at least one of the following additional conditions is met: (a) the
person seeking indemnification shall provide a security in form and amount
acceptable to the Corporation for his undertaking; (b) the Corporation is
insured against losses arising by reason of the advance; or (c) a majority of a
quorum of directors of the Corporation who are neither "interested persons" as
defined in Section 2(a)(19) of the 1940 Act, nor parties to the proceeding
("disinterested non-party directors"), or independent legal counsel, in a
written opinion, shall determine, based on a review of facts readily available
to the Corporation at the time the advance is proposed to be made, that there is
reason to believe that the person seeking indemnification will ultimately be
found to be entitled to indemnification.

SECTION 3. Procedure. At the request of any current or former director
or officer, or any employee or agent whom the Corporation proposes to indemnify,
the Board of Directors shall determine, or cause to be determined, in a manner
consistent with the Maryland General Corporation Law, the Securities Act and the
1940 Act, as such statutes are now or hereafter in force, whether the standards
required by this Article V have been met; provided, however, that
indemnification shall be made only following: (a) a final decision on the merits
by a court or other body before whom the proceeding was brought that the person
to be indemnified was not liable by reason of disabling conduct or (b) in the
absence of such a decision, a reasonable determination, based upon a review of
the facts, that the person to be indemnified was not liable by reason of
disabling conduct, by (i) the vote of a majority of a quorum of disinterested
non-party directors or (ii) an independent legal counsel in a written opinion.

SECTION 4. Indemnification of Employees and Agents. Employees and
agents who are not officers or directors of

the Corporation may be indemnified, and reasonable expenses may be advanced to
such employees or agents, in accordance with the procedures set forth in this
Article V to the extent permissible under the 1940 Act, the Securities Act and
Maryland General Corporation Law, as such statutes are now or hereafter in
force, to the extent, consistent with the foregoing, as may be provided by
action of the Board of Directors or by contract.

SECTION 5. Other Rights. The indemnification provided by this Article V
shall not be deemed exclusive of any other right, in respect of indemnification
or otherwise, to which those seeking such indemnification may be entitled under
any insurance or other agreement, vote of stockholders or disinterested
directors or otherwise, both as to action by a director or officer of the
Corporation, in his official capacity and as to action by such person in another
capacity while holding such office or position, and shall continue as to a
person who has ceased to be a director or officer and shall inure to the benefit
of the heirs, executors and administrators of such a person.

SECTION 6. Insurance. The Corporation shall have the power to purchase
and maintain insurance on behalf of any person who is or was a director,
officer, employee or agent of the Corporation, or who, while a director,
officer, employee or agent of the Corporation, is or was serving at the request
of the Corporation as a director, officer, partner, trustee, employee, agent or
fiduciary of another corporation, partnership, joint venture, trust, enterprise
or employee benefit plan, against any liability asserted against and incurred by
him in any such capacity, or arising out of his status as such, provided that no
insurance may be obtained by the Corporation for liabilities against which it
would not have the power to indemnify him under this Article V or applicable
law.

SECTION 7. Constituent, Resulting or Surviving Corporations. For the
purposes of this Article V, references to the "Corporation" shall include all
constituent corporations absorbed in a consolidation or merger as well the
resulting or surviving corporation so that any person who is or was a director,
officer, employee or agent of a constituent corporation or is or was serving at
the request of a constituent corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise shall stand in the same position under this Article V with respect to
the resulting or surviving corporation as he would if he had served the
resulting or surviving corporation in the same capacity.

ARTICLE VI

SEAL

The seal of the Corporation shall be circular in form and shall bear
the name of the Corporation, the year of its incorporation, the words "Corporate
Seal" and "Maryland" and any emblem or device approved by the Board of
Directors. The seal may be used by causing it or a facsimile to be impressed or
affixed or in any other manner reproduced, or by placing the word "(seal)"
adjacent to the signature of the authorized officer of the Corporation.

ARTICLE VII

FISCAL YEAR

The Corporation's fiscal year shall be fixed by the Board of Directors.

ARTICLE VIII

AMENDMENTS

These By-Laws may be amended or repealed by the affirmative vote of a
majority of the Board of Directors at any regular or special meeting of the
Board of Directors, subject to the requirements of the 1940 Act.

As adopted, January 26, 1996

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