WARBURG PINCUS GLOBAL HEALTH SCIENCES FUND INC
497, 2001-01-09
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--------------------            PART OF CREDIT | ASSET
WARBURG PINCUS FUNDS                    SUISSE | MANAGEMENT
--------------------

                                   PROSPECTUS

                                  Common Class
                                 January 1, 2001

                                 WARBURG PINCUS
                           GLOBAL HEALTH SCIENCES FUND

                                 WARBURG PINCUS
                         GLOBAL TELECOMMUNICATIONS FUND

As with all mutual funds, the Securities and Exchange Commission has not
approved these funds, nor has it passed upon the adequacy or accuracy of this
Prospectus. It is a criminal offense to state otherwise.

Warburg Pincus Funds are advised by Credit Suisse Asset Management, LLC.

<PAGE>

                                    CONTENTS

KEY POINTS ................................................................    4
    Goals and Principal Strategies ........................................    4
    Investor Profile ......................................................    4
    A Word About Risk .....................................................    5

PERFORMANCE SUMMARY .......................................................    8
    Year-by-Year Total Returns ............................................    8
    Average Annual Total Returns ..........................................    9

INVESTOR EXPENSES .........................................................   10
    Fees and Fund Expenses ................................................   10
    Example ...............................................................   11

THE FUNDS IN DETAIL .......................................................   12
    The Management Firms ..................................................   12
    Multi-Class Structure .................................................   12
    Fund Information Key ..................................................   13

GLOBAL HEALTH SCIENCES FUND ...............................................   14

GLOBAL TELECOMMUNICATIONS FUND ............................................   16

MORE ABOUT RISK ...........................................................   18
    Introduction ..........................................................   18
    Types of Investment Risk ..............................................   18
    Certain Investment Practices ..........................................   20

MEET THE MANAGERS .........................................................   24

ABOUT YOUR ACCOUNT ........................................................   26
    Share Valuation .......................................................   26
    Buying and Selling Shares .............................................   26
    Account Statements ....................................................   27
    Distributions .........................................................   27
    Taxes .................................................................   27

OTHER INFORMATION .........................................................   29
    About the Distributor .................................................   29

FOR MORE INFORMATION .................................................back cover


                                       3
<PAGE>

                                   KEY POINTS

                         GOALS AND PRINCIPAL STRATEGIES

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------
FUND/RISK FACTORS                 GOAL                      STRATEGIES
-----------------------------------------------------------------------------------------------------
<S>                               <C>                       <C>
GLOBAL HEALTH                     Capital appreciation      o Invests mainly in equity securities of
SCIENCES FUND                                                 U.S. and foreign companies
    Risk factors:                                           o Emphasizes the health services,
    Foreign securities                                        pharmaceuticals, biotechnology and
    Legal risk                                                medical-devices industries
    Market risk                                             o Can invest in companies of any size
    Non-diversified status                                  o Focuses on individual stock-picking,
    Regulatory risk                                           assisted by a top-down approach to four
    Sector concentration                                      categories of health sciences companies
                                                              -- buyers, providers, suppliers and
                                                              innovators
-----------------------------------------------------------------------------------------------------
GLOBAL                            Long-term appreciation    o Invests in equity securities of U.S. and
TELECOMMUNICATIONS                of capital                  foreign telecommunications companies
FUND                                                        o May invest in companies of all sizes
    Risk factors:
    Foreign securities
    Market risk
    Non-diversified status
    Regulatory risk
    Sector concentration
-----------------------------------------------------------------------------------------------------
</TABLE>

--------------------------------------------------------------------------------
INVESTOR PROFILE
--------------------------------------------------------------------------------

      These funds are designed for investors who:

o     are investing for long-term goals

o     are willing to assume the risk of losing money in exchange for attractive
      potential long-term returns

o     are looking for capital appreciation

o     want to diversify their portfolios internationally

      They may NOT be appropriate if you:

o     are investing for a shorter time horizon

o     are uncomfortable with an investment that has a higher degree of
      volatility

o     want to limit your exposure to foreign securities

o     are looking for income

      You should base your selection of a fund on your own goals, risk
preferences and time horizon.


                                       4
<PAGE>

--------------------------------------------------------------------------------
A WORD ABOUT RISK
--------------------------------------------------------------------------------

      All investments involve some level of risk. Simply defined, risk is the
possibility that you will lose money or not make money.

      Principal risk factors for the funds are discussed below. Before you
invest, please make sure you understand the risks that apply to your fund. As
with any mutual fund, you could lose money over any period of time.

      Investments in the funds are not bank deposits and are not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.

FOREIGN SECURITIES

Both funds

      A fund that invests in foreign securities carries additional risks that
include:

o     Currency risk Fluctuations in exchange rates between the U.S. dollar and
      foreign currencies may negatively affect an investment. Adverse changes in
      exchange rates may erode or reverse any gains produced by
      foreign-currency-denominated investments and may widen any losses. The
      fund may, but is not required to, seek to reduce currency risk by hedging
      part or all of its exposure to various foreign currencies.

o     Information risk Key information about an issuer, security or market may
      be inaccurate or unavailable.

o     Political risk Foreign governments may expropriate assets, impose capital
      or currency controls, impose punitive taxes, or nationalize a company or
      industry. Any of these actions could have a severe effect on security
      prices and impair a fund's ability to bring its capital or income back to
      the U.S. Other political risks include economic policy changes, social and
      political instability, military action and war.

LEGAL RISK

Global Health Sciences Fund

      Lawsuits or other legal proceedings against the issuer of a security may
adversely affect the issuer, the market value of the security, or a fund's
performance.

MARKET RISK

Both funds

      The market value of a security may move up and down, sometimes rapidly and
unpredictably. These fluctuations, which are often referred to as "volatility,"
may cause a security to be worth less than it was worth at an earlier time.
Market risk may affect a single issuer, industry, sector of the economy, or the
market as a whole. Market risk is common to most investments--including stocks
and bonds, and the mutual funds that invest in them.

NON-DIVERSIFIED STATUS

Both funds

      A fund is considered a non-diversified investment company under the
Investment Company Act of 1940 and is permitted to invest a greater proportion
of its assets in the securities of a smaller number of issuers. As a result, the
fund may be subject


                                       5
<PAGE>

to greater volatility with respect to its portfolio securities than a fund that
is more broadly diversified.

REGULATORY RISK

Both funds

      Governments, agencies or other regulatory bodies may adopt or change laws
or regulations that could adversely affect the issuer or market value of a fund
security, or the fund's performance.

SECTOR CONCENTRATION

Both funds

      A fund that invests more than 25% of its net assets in a group of related
industries (market sector) is subject to increased risk.

o     Fund performance will largely depend upon the sector's performance, which
      may differ in direction and degree from that of the overall stock market.

o     Financial, economic, business, political and other developments affecting
      the sector will have a greater effect on the fund.


                                       6
<PAGE>

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                                       7
<PAGE>

                               PERFORMANCE SUMMARY

The bar chart below and the table on the next page provide an indication of the
risks of investing in the funds. The bar chart shows you how fund performance
has varied from year to year for up to 10 years. The table compares the fund's
performance over time to that of a broadly based securities market index. As
with all mutual funds, past performance is not a prediction of the future.

                           YEAR-BY-YEAR TOTAL RETURNS

   [The following table was depicted as a bar graph in the printed material.]

--------------------------------------------------------------------------------
YEAR ENDED 12/31:                                        1997     1998     1999
--------------------------------------------------------------------------------

GLOBAL HEALTH SCIENCES FUND
  Best quarter: 17.78% (Q2 97)
  Worst quarter: -6.36% (Q3 98)
  Inception Date: 12/31/96                              27.35%   33.19%    6.39%
  Total return for the period 1/1/00 - 9/30/00: 49.50%
--------------------------------------------------------------------------------

GLOBAL
TELECOMMUNICATIONS FUND*
  Best quarter: 68.82% (Q4 98)
  Worst quarter: -12.27% (Q3 98)
  Inception Date: 12/4/96                               32.32%   67.42%  156.16%
  Total return for the period 1/1/00 - 9/30/00: -14.37%
    (not annualized)
--------------------------------------------------------------------------------

*     The total returns shown include the total returns of the Global
      Telecommunications Fund's predecessor, the Advisor Shares of the Global
      Telecommunications portfolio of The RBB Fund, Inc.


                                       8
<PAGE>

                          AVERAGE ANNUAL TOTAL RETURNS

--------------------------------------------------------------------------------
                                    ONE YEAR    THREE YEARS  LIFE OF   INCEPTION
   PERIOD ENDED 12/31/99:             1999       1997-1999     FUND       DATE
--------------------------------------------------------------------------------
GLOBAL HEALTH SCIENCES FUND            6.39%       21.75%      21.73%   12/31/96
--------------------------------------------------------------------------------
S&P 500 INDEX(1)                      21.02%       27.54%      27.54%
--------------------------------------------------------------------------------
LIPPER HEALTH/BIOTECHNOLOGY
  FUNDS INDEX(2)                      10.35%       18.78%      13.93%
--------------------------------------------------------------------------------
GLOBAL TELECOMMUNICATIONS FUND(3)    156.16%       78.37%      75.74%    12/4/96
--------------------------------------------------------------------------------
MSCI TELECOMMUNICATIONS INDEX(4)      44.66%       40.49%      31.70%
--------------------------------------------------------------------------------

(1)   The S&P 500 Index is an unmanaged index (with no defined investment
      objective) of common stocks, includes reinvestment of dividends, and is a
      registered trademark of McGraw-Hill Co., Inc.
(2)   The Lipper Health/Biotechnology Funds Index is an equal-weighted
      performance index, adjusted for capital-gain distributions and income
      dividends, of the largest qualifying funds in this investment objective,
      and is compiled by Lipper Inc.
(3)   The total returns shown include the total returns of the Global
      Telecommunications Fund's predecessor, the Advisor Shares of the Global
      Telecommunications portfolio of The RBB Fund, Inc.
(4)   The Morgan Stanley Capital International Telecommunications Index is an
      unmanaged index (with no defined investment objective) of
      telecommunications equities that include reinvestment of dividends and is
      compiled by Morgan Stanley & Co., Incorporated.

                            UNDERSTANDING PERFORMANCE

o     Total return tells you how much an investment in a fund has changed in
      value over a given time period. It assumes that all dividends and capital
      gains (if any) were reinvested in additional shares. The change in value
      can be stated either as a cumulative return or as an average annual rate
      of return.

o     A cumulative total return is the actual return of an investment for a
      specified period. The year-by-year total returns in the bar chart are
      examples of one-year cumulative total returns.

o     An average annual total return applies to periods longer than one year. It
      smoothes out the variations in year-by-year performance to tell you what
      constant annual return would have produced the investment's actual
      cumulative return. This gives you an idea of an investment's annual
      contribution to your portfolio, assuming you held it for the entire
      period.

o     Because of compounding, the average annual total returns in the table
      cannot be computed by averaging the returns in the bar chart.


                                       9
<PAGE>

                                INVESTOR EXPENSES

                             FEES AND FUND EXPENSES

This table describes the fees and expenses you may bear as a shareholder. Annual
fund operating expense figures are for the fiscal year or period ended August
31, 2000.

--------------------------------------------------------------------------------
                                                                        GLOBAL
                                                         GLOBAL          TELE-
                                                         HEALTH         COMMUNI-
                                                        SCIENCES        CATIONS
                                                          FUND           FUND
--------------------------------------------------------------------------------
Shareholder fees
  (paid directly from your investment)
--------------------------------------------------------------------------------
Sales charge "load" on purchases                          NONE           NONE
--------------------------------------------------------------------------------
Deferred sales charge "load"                              NONE           NONE
--------------------------------------------------------------------------------
Sales charge "load" on reinvested distributions           NONE           NONE
--------------------------------------------------------------------------------
Redemption fees                                           NONE           NONE
--------------------------------------------------------------------------------
Exchange fees                                             NONE           NONE
--------------------------------------------------------------------------------
Annual fund operating expenses
  (deducted from fund assets)
--------------------------------------------------------------------------------
Management fee                                            1.00%          1.00%
--------------------------------------------------------------------------------
Distribution and service (12b-1) fee                       .25%           .25%
--------------------------------------------------------------------------------
Other expenses                                             .64%           .52%
--------------------------------------------------------------------------------
Total annual fund operating expenses*                     1.89%          1.77%
--------------------------------------------------------------------------------

* Fee waivers and expense reimbursements or credits reduced expenses for the
funds during 2000 but may be discontinued at any time. Actual fees and expenses
for the fiscal year or period ended August 31, 2000 are shown below:

                                                                        GLOBAL
                                                          GLOBAL         TELE-
EXPENSES AFTER                                            HEALTH        COMMUNI-
WAIVERS AND                                              SCIENCES       CATIONS
REIMBURSEMENTS                                             FUND           FUND

Management fee                                             .77%           .94%

Distribution and service (12b-1) fee                       .25%           .25%

Other expenses                                             .57%           .45%
                                                          ----           ----

Total annual fund operating expenses                      1.59%          1.64%


                                       10
<PAGE>

                                     EXAMPLE

This example may help you compare the cost of investing in these funds with the
cost of investing in other mutual funds. Because it uses hypothetical
conditions, your actual costs may be higher or lower.

Assume you invest $10,000, each fund returns 5% annually, expense ratios remain
as listed in the first table on the opposite page (before fee waivers and
expense reimbursements or credits), and you close your account at the end of
each of the time periods shown. Based on these assumptions, your cost would be:

--------------------------------------------------------------------------------
                                  ONE YEAR   THREE YEARS   FIVE YEARS   10 YEARS
--------------------------------------------------------------------------------
GLOBAL HEALTH SCIENCES FUND         $192         $594       $1,021       $2,212
--------------------------------------------------------------------------------
GLOBAL TELECOMMUNICATIONS FUND      $180         $557       $  959       $2,084
--------------------------------------------------------------------------------


                                       11
<PAGE>

                               THE FUNDS IN DETAIL

--------------------------------------------------------------------------------
THE MANAGEMENT FIRMS
--------------------------------------------------------------------------------

CREDIT SUISSE ASSET
MANAGEMENT, LLC
466 Lexington Avenue
New York, NY 10017

o     Investment adviser for the funds

o     Responsible for managing each fund's assets according to its goal and
      strategies and supervising the activities of the sub-investment adviser
      for the funds

o     A member of Credit Suisse Asset Management, the institutional asset
      management and mutual fund arm of Credit Suisse Group (Credit Suisse), one
      of the world's leading banks

o     Credit Suisse Asset Management companies manage approximately $104 billion
      in the U.S. and $296 billion globally

o     Credit Suisse Asset Management has offices in 14 countries, including
      SEC-registered offices in New York and London; other offices (such as
      those in Budapest, Frankfurt, Milan, Moscow, Paris, Prague, Sydney, Tokyo,
      Warsaw and Zurich) are not registered with the U.S. Securities and
      Exchange Commission

      For easier reading, Credit Suisse Asset Management, LLC will be referred
to as "CSAM" throughout this Prospectus.

CREDIT SUISSE ASSET MANAGEMENT
LIMITED
Beaufort House
15 St. Botolph Street
London, EC3A 7JJ

o     Sub-investment adviser for the funds

o     Responsible for assisting CSAM in the management of a fund's international
      assets according to its goal and strategies

o     Also a member of Credit Suisse Asset Management

      For easier reading, Credit Suisse Asset Management Limited will be
referred to as "CSAM U.K." throughout this Prospectus.

--------------------------------------------------------------------------------
MULTI-CLASS STRUCTURE
--------------------------------------------------------------------------------

      This Prospectus offers Common Class shares of the funds. Common Class
shares are no-load.


                                       12
<PAGE>

--------------------------------------------------------------------------------
FUND INFORMATION KEY
--------------------------------------------------------------------------------

      Concise fund-by-fund descriptions begin on the next page. The description
provides the following information:

GOAL AND STRATEGIES

      The fund's particular investment goal and the strategies it intends to use
in pursuing that goal. Percentages of fund assets are based on total assets
unless indicated otherwise.

PORTFOLIO INVESTMENTS

      The primary types of securities in which the fund invests. Secondary
investments are described in "More About Risk."

RISK FACTORS

      The major risk factors associated with the fund. Additional risk factors
are included in "More About Risk."

PORTFOLIO MANAGEMENT

      The individuals designated by the investment adviser to handle the fund's
day-to-day management.

INVESTOR EXPENSES

      Actual fund expenses for the 2000 fiscal year. Future expenses may be
higher or lower.

o     Management fee The fee paid to the investment adviser for providing
      investment advice to the fund and compensating the sub-investment adviser.
      Expressed as a percentage of average net assets after waivers.

o     Distribution and service (12b-1) fees Fees paid by the fund to the
      distributors for making shares of the fund available to you. Expressed as
      a percentage of average net assets.

o     Other Expenses Fees paid by the fund for items such as administration,
      transfer agency, custody, auditing, legal and registration fees and
      miscellaneous expenses. Expressed as a percentage of average net assets
      after waivers, credits and reimbursements.

FINANCIAL HIGHLIGHTS

      A table showing the fund's audited financial performance for up to five
years.

o     Total Return How much you would have earned on an investment in the fund,
      assuming you had reinvested all dividend and capital-gain distributions.

o     Portfolio Turnover An indication of trading frequency. The funds may sell
      securities without regard to the length of time they have been held. A
      high turnover rate may increase the fund's transaction costs and
      negatively affect its performance. Portfolio turnover may also result in
      capital-gain distributions that could raise your income-tax liability.

      The Annual Report includes the auditor's report, along with the fund's
financial statements. It is available free upon request.


                                       13
<PAGE>

                           GLOBAL HEALTH SCIENCES FUND

--------------------------------------------------------------------------------
GOAL AND STRATEGIES
--------------------------------------------------------------------------------

      The Global Health Sciences Fund seeks capital appreciation. To pursue this
goal, it invests in equity and debt securities of U.S. and foreign
health-sciences companies.

      The health sciences consist of health care, medicine and the life
sciences. Health-sciences companies are principally engaged in research and
development, production, or distribution of health-sciences products or
services. The fund may invest in companies of any size.

      Under normal market conditions, the fund will invest at least:

o     65% of assets in equity and debt securities of health-sciences companies,
      including small and medium-size companies

o     25% of assets in the health-services, pharmaceuticals and medical-devices
      industries combined

      The fund will invest in at least three countries, which may include the
U.S.

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

      This fund intends to invest at least 80% of assets in equity securities of
health-sciences companies. Equity holdings may consist of:

o     common and preferred stocks

o     rights and warrants

o     securities convertible into or exchangeable for common stocks

      This fund may invest up to 20% of assets in debt securities, including
those rated below investment grade (junk bonds), and may invest without limit in
foreign securities.

      To a limited extent, the fund may also engage in other investment
practices.

--------------------------------------------------------------------------------
RISK FACTORS
--------------------------------------------------------------------------------

      This fund's principal risk factors are:

o     foreign securities

o     market risk

o     non-diversified status

o     legal and regulatory risks

o     sector concentration

      The value of your investment generally will fluctuate in response to
stock-market movements. Fund performance will largely depend upon a limited
number of industries, which may perform differently from (or be more volatile
than) the overall stock market.

      Because this fund focuses on a single sector (health sciences), you should
expect it to be more volatile than a broadly diversified global equity fund.
Additionally, health sciences companies are often subject to regulatory risks
that could hurt the fund's performance. Non-diversification might cause the fund
to be more volatile than a diversified mutual fund.

      To the extent that the fund invests in smaller companies and foreign
securities, it takes on further risks that could hurt its performance. Start-up
and other small companies may have less-experienced management, limited product
lines, unproven track records or inadequate capital reserves. Their securities
may carry increased market, information and liquidity risks. Risks associated
with foreign securities include currency, information and political risks. These
risks are defined in "More About Risk." That section also details other
investment practices the fund


                                       14
<PAGE>

may use. Please read "More About Risk" carefully
before you invest.

--------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT
--------------------------------------------------------------------------------

      Susan L. Black and Peter T. Wen manage the fund's investment portfolio.
You can find out more about the fund's managers in "Meet the Managers."

--------------------------------------------------------------------------------
INVESTOR EXPENSES
--------------------------------------------------------------------------------

Management fee                          .77%
Distribution and service
    (12b-1) fee                         .25%
All other expenses                      .57%
                                       ----
Total expenses                         1.59%

                              FINANCIAL HIGHLIGHTS

The figures below have been audited by the fund's independent auditors,
PricewaterhouseCoopers LLP, whose report on the fund's financial statements is
included in the Annual Report.

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
PERIOD ENDED:                                                 8/00**         10/99          10/98          10/97*
----------------------------------------------------------------------------------------------------------------------
<S>                                                         <C>             <C>            <C>            <C>
Per-share data
----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period                        $ 14.92         $ 14.41        $ 12.22        $ 10.00
----------------------------------------------------------------------------------------------------------------------
Investment activities:
Net investment loss                                           (0.08)          (0.13)         (0.06)         (0.02)
Net gains on investments and foreign
  currency transactions (both realized and unrealized)         9.11            0.64           2.97           2.24
----------------------------------------------------------------------------------------------------------------------
  Total from investment activities                             9.03            0.51           2.91           2.22
----------------------------------------------------------------------------------------------------------------------
Less Dividends and Distributions:
Dividends from net investment income                             --              --          (0.04)            --
Distributions from net realized capital gains                    --              --          (0.68)            --
----------------------------------------------------------------------------------------------------------------------
  Total dividends and distributions                              --              --          (0.72)            --
----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period                              $ 23.95         $ 14.92        $ 14.41        $ 12.22
----------------------------------------------------------------------------------------------------------------------
Total return                                                  60.52%(1)        3.54%         25.25%         22.20%(1)
----------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data
----------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted)                    $90,801         $47,574        $64,336        $18,246
Ratio of expenses to average net assets(3,4)                   1.61%(2)        1.59%          1.59%          1.59%(2)
Ratio of net investment income/
  (loss) to average net assets                                (0.94)%(2)       0.62%         (0.58)%        (0.24)%(2)
Portfolio turnover rate                                         106%(1)         146%            63%           160%(1)
----------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)   Not Annualized.
(2)   Annualized.
(3)   Without the voluntary waiver of advisory fees and administration fees, the
      ratios of expenses to average net assets for the Common Class would have
      been 1.89% annualized for the period November 1, 1999 to August 31, 2000,
      1.88% and 1.97% for the years ended October 31, 1999 and 1998,
      respectively, and 3.42% annualized for the period December 31, 1996 to
      October 31, 1997.
(4)   Interest earned on uninvested cash balances is used to offset positions of
      the transfer agent expense. These arrangements resulted in a reduction to
      the Common Shares net expense ratio by .02% annualized for the period
      November 1, 1999 to August 31, 2000. These arrangements had no effect on
      the fund's expense ratio for the previous periods. The Common Shares
      operating expense ratio after reflecting these arrangements was 1.59%
      annualized for the period November 1, 1999 to August 31, 2000.
*     For the period December 31, 1996 (inception date) to October 31, 1997.
**    Effective May 1, 2000, Global Health Sciences changed its fiscal and tax
      year ends from October 31st to August 31st.


                                       15
<PAGE>

                         GLOBAL TELECOMMUNICATIONS FUND

--------------------------------------------------------------------------------
GOAL AND STRATEGIES
--------------------------------------------------------------------------------

      The Global Telecommunications Fund seeks long-term appreciation of
capital. To pursue this goal, it invests in equity securities of U.S. and
foreign telecommunications companies.

      Telecommunications includes:

o     communications equipment and service

o     electronic components and equipment

o     broadcast media

o     computer equipment, mobile telecommunications, and cellular radio and
      paging

o     electronic mail

o     local and wide area networking, and linkage of work and data processing
      systems

o     publishing and information systems

o     video and telex

o     internet and other emerging technologies combining telephone, television
      and/or computer systems

    Under normal market conditions, the fund will invest at least 65% of assets
in equity securities of telecommunications companies from at least three
countries, which may include the U.S. The fund may invest in companies of all
sizes.

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

      Equity holdings may include:

o     common and preferred stocks

o     convertible securities

o     warrants

To a limited extent, the fund may also engage in other investment practices.

--------------------------------------------------------------------------------
RISK FACTORS
--------------------------------------------------------------------------------

      This fund's principal risk factors are:

o     foreign securities

o     market risk

o     non-diversified status

o     regulatory risk

o     sector concentration

      The value of your investment will fluctuate in response to stock-market
movements. Because the fund invests internationally, it carries additional
risks, including currency, information and political risks. These risks are
defined in "More About Risk."

      Because this fund focuses on a single sector (telecommunications), you
should expect it to be more volatile than a broadly diversified global equity
fund. Additionally, telecommunications companies are often subject to regulatory
risks that could hurt the fund's performance.

      Non-diversification might cause the fund to be more volatile than a
diversified mutual fund. To the extent that the fund invests in emerging markets
and start-up and other small companies, it takes on additional risks that could
hurt its performance. "More About Risk" details these and certain other
investment practices the fund may use. Please read that section carefully before
you invest.


                                       16
<PAGE>

--------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT
--------------------------------------------------------------------------------

      Scott T. Lewis and Vincent J. McBride manage the fund's investment
portfolio. You can find out more about them in "Meet the Managers."

--------------------------------------------------------------------------------
INVESTOR EXPENSES
--------------------------------------------------------------------------------

Management fee                  .94%
Distribution and service
  (12b-1) fee                   .25%
All other expenses              .45%
                               ----
Total expenses                 1.64%

                              FINANCIAL HIGHLIGHTS

The figures below have been audited by the fund's independent auditors,
PricewaterhouseCoopers LLP, whose report on the fund's financial statements is
included in the Annual Report.

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------
PERIOD ENDED:                                     8/00           8/99          8/98         8/97(1)
-----------------------------------------------------------------------------------------------------
<S>                                             <C>             <C>           <C>          <C>
Per-share data
-----------------------------------------------------------------------------------------------------
Net asset value, beginning of period            $  41.22        $ 20.54       $17.30       $15.00
-----------------------------------------------------------------------------------------------------
Investment activities:
Net investment income/(loss)                       (0.44)         (0.04)       (0.01)        0.02
Net gains or losses on investments
  (both realized and unrealized)                   29.56          23.56         4.29         2.28
-----------------------------------------------------------------------------------------------------
  Total from investment activities                 29.12          23.52         4.28         2.30
-----------------------------------------------------------------------------------------------------
Distributions:
From net investment income                            --             --           --           --
From realized capital gains                        (1.23)         (2.84)       (1.04)          --
-----------------------------------------------------------------------------------------------------
  Total distributions                              (1.23)         (2.84)       (1.04)
-----------------------------------------------------------------------------------------------------
Net asset value, end of period                  $  69.11        $ 41.22       $20.54       $17.30
-----------------------------------------------------------------------------------------------------
Total return                                       70.99%        120.73%       25.38%       15.33%(2)
-----------------------------------------------------------------------------------------------------
Ratios and supplemental data
-----------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted)        $471,455        $65,165       $  718       $  569
Ratio of expenses to average net assets(3)          1.66%(4)       1.65%        1.65%        1.65%(5)
Ratio of net income to average net assets          (0.89)%        (0.35)%      (0.03)%       0.16%(5)
Portfolio turnover rate                              143%           203%         169%          43%(2)
-----------------------------------------------------------------------------------------------------
</TABLE>

(1)   For the period December 4, 1996 (commencement of operations) through
      August 31, 1997.
(2)   Not annualized.
(3)   Without the voluntary waiver of advisory fees and administration fees, the
      ratios of expenses to average net assets for the Common Class would have
      been 1.77%, 2.52% and 6.86% for the years ended August 31, 2000, 1999 and
      1998, respectively, and 8.38% annualized for the period ended August 31,
      1997.
(4)   Interest earned on uninvested cash balances is used to offset portions of
      the transfer agent expense. These arrangements resulted in a reduction to
      the net expense ratio by .02% for the year ended August 31, 2000. The
      operating expense ratio after reflecting these arrangements was 1.64% for
      the year ended August 31, 2000.
(5)   Annualized.


                                       17
<PAGE>

MORE ABOUT RISK

--------------------------------------------------------------------------------
INTRODUCTION
--------------------------------------------------------------------------------

      A fund's goal and principal strategies largely determine its risk profile.
You will find a concise description of each fund's risk profile in "Key Points."
The fund-by-fund discussions contain more detailed information. This section
discusses other risks that may affect the funds.

      The funds may use certain investment practices that have higher risks
associated with them. However, each fund has limitations and policies designed
to reduce many of the risks. The "Certain Investment Practices" table describes
these practices and the limitations on their use.

--------------------------------------------------------------------------------
TYPES OF INVESTMENT RISK
--------------------------------------------------------------------------------

      The following risks are referred to throughout this prospectus.

      Access risk Some countries may restrict a fund's access to investments or
offer terms that are less advantageous than those for local investors. This
could limit the attractive investment opportunities available to a fund.

      Correlation risk The risk that changes in the value of a hedging
instrument will not match those of the investment being hedged.

      Credit risk The issuer of a security or the counterparty to a contract may
default or otherwise become unable to honor a financial obligation.

      Currency risk Fluctuations in exchange rates between the U.S. dollar and
foreign currencies may negatively affect an investment. Adverse changes in
exchange rates may erode or reverse any gains produced by
foreign-currency-denominated investments and may widen any losses.

      Exposure risk The risk associated with investments (such as derivatives)
or practices (such as short selling) that increase the amount of money a fund
could gain or lose on an investment.

      o     Hedged Exposure risk could multiply losses generated by a derivative
            or practice used for hedging purposes. Such losses should be
            substantially offset by gains on the hedged investment. However,
            while hedging can reduce or eliminate losses, it can also reduce or
            eliminate gains.

      o     Speculative To the extent that a derivative or practice is not used
            as a hedge, the fund is directly exposed to its risks. Gains or
            losses from speculative positions in a derivative may be much
            greater than the derivative's original cost. For example, potential
            losses from writing uncovered call options and from speculative
            short sales are unlimited.

      Information risk Key information about an issuer, security or market may
be inaccurate or unavailable.


                                       18
<PAGE>

      Interest-rate risk Changes in interest rates may cause a decline in the
market value of an investment. With bonds and other fixed-income securities, a
rise in interest rates typically causes a fall in values, while a fall in
interest rates typically causes a rise in values.

      Legal risk Lawsuits or other legal proceedings against the issuer of a
security may adversely affect the issuer, the market value of the security, or a
fund's performance.

      Liquidity risk Certain fund securities may be difficult or impossible to
sell at the time and the price that the fund would like. A fund may have to
lower the price, sell other securities instead or forego an investment
opportunity. Any of these could have a negative effect on fund management or
performance.

      Market risk The market value of a security may move up and down, sometimes
rapidly and unpredictably. These fluctuations, which are often referred to as
"volatility," may cause a security to be worth less than it was worth at an
earlier time. Market risk may affect a single issuer, industry, sector of the
economy, or the market as a whole. Market risk is common to most
investments--including stocks and bonds, and the mutual funds that invest in
them.

      Operational risk Some countries have less-developed securities markets
(and related transaction, registration and custody practices) that could subject
a fund to losses from fraud, negligence, delay or other actions.

      Political risk Foreign governments may expropriate assets, impose capital
or currency controls, impose punitive taxes, or nationalize a company or
industry. Any of these actions could have a severe effect on security prices and
impair a fund's ability to bring its capital or income back to the U.S. Other
political risks include economic policy changes, social and political
instability, military action and war.

      Regulatory risk Governments, agencies or other regulatory bodies may adopt
or change laws or regulations that could adversely affect the issuer, the market
value of the security, or a fund's performance.

      Valuation risk The lack of an active trading market may make it difficult
to obtain an accurate price for a fund security.


                                       19
<PAGE>

                          CERTAIN INVESTMENT PRACTICES

For each of the following practices, this table shows the applicable investment
limitation. Risks are indicated for each practice.

KEY TO TABLE:

|X|    Permitted without limitation; does not indicate actual use

/20%I/ Italic type (e.g., 20%) represents an investment limitation as a
       percentage of net fund assets; does not indicate actual use

20%R   Roman type (e.g., 20%) represents an investment limitation as a
       percentage of total fund assets; does not indicate actual use

|_|    Permitted, but not expected to be used to a significant extent

--     Not permitted

--------------------------------------------------------------------------------
                                                                        GLOBAL
                                                           GLOBAL        TELE-
                                                           HEALTH       COMMUNI-
                                                          SCIENCES      CATIONS
                                                            FUND          FUND
--------------------------------------------------------------------------------
INVESTMENT PRACTICE                                               LIMIT
--------------------------------------------------------------------------------
Borrowing The borrowing of money from banks to
meet redemptions or for other temporary or
emergency purposes. Speculative exposure risk.               30%R       33 1/3%R
--------------------------------------------------------------------------------
Country/region focus Investing a significant
portion of fund assets in a single country or
region. Market swings in the targeted country or
region will be likely to have a greater effect on
fund performance than they would in a more
geographically diversified equity fund. Currency,
market, political risks.                                    |X|          |X|
--------------------------------------------------------------------------------
Currency hedging Instruments, such as options,
futures, forwards or swaps, intended to manage
fund exposure to currency risk. Options, futures
or forwards involve the right or obligation to buy
or sell a given amount of foreign currency at a
specified price and future date. Swaps involve the
right or obligation to receive or make payments
based on two different currency rates.(1)
Correlation, credit, currency, hedged exposure,
liquidity, political, valuation risks.(2)                   |_|          |_|
--------------------------------------------------------------------------------
Emerging markets Countries generally considered to
be relatively less developed or industrialized.
Emerging markets often face economic problems that
could subject a fund to increased volatility or
substantial declines in value. Deficiencies in
regulatory oversight, market infrastructure,
shareholder protections and company laws could
expose a fund to risks beyond those generally
encountered in developed countries. Access,
currency, information, liquidity, market,
operational, political, valuation risks.                    |_|          |X|
--------------------------------------------------------------------------------
Equity and equity-related securities Common stocks
and other securities representing or related to
ownership in a company. May also include warrants,
rights, options, preferred stocks and convertible
debt securities. These investments may go down in
value due to stock market movements or negative
company or industry events. Liquidity, market,
valuation risks.                                            |X|          |X|
--------------------------------------------------------------------------------
Foreign securities Securities of foreign issuers.
May include depositary receipts. Currency,
information, liquidity, market, political,
valuation risks.                                            |X|          |X|
--------------------------------------------------------------------------------


                                       20
<PAGE>

--------------------------------------------------------------------------------
                                                                        GLOBAL
                                                           GLOBAL        TELE-
                                                           HEALTH       COMMUNI-
                                                          SCIENCES      CATIONS
                                                            FUND          FUND
--------------------------------------------------------------------------------
INVESTMENT PRACTICE                                               LIMIT
--------------------------------------------------------------------------------
Futures and options on futures Exchange-traded
contracts that enable a fund to hedge against or
speculate on future changes in currency values,
interest rates, securities or stock indexes.
Futures obligate the fund (or give it the right,
in the case of options) to receive or make payment
at a specific future time based on those future
changes.(1) Correlation, currency, hedged exposure,
interest-rate, market, speculative exposure risks.(2)       |_|          |_|
--------------------------------------------------------------------------------
Options Instruments that provide a right to buy
(call) or sell (put) a particular security,
currency or index of securities at a fixed price
within a certain time period. A fund may purchase
or sell (write) both put and call options for
hedging or speculative purposes.(1) Correlation,
credit, hedged exposure, liquidity, market,
speculative exposure risks.                                 25%R         |_|
--------------------------------------------------------------------------------
Privatization programs Foreign governments may
sell all or part of their interests in enterprises
they own or control. Access, currency,
information, liquidity, operational, political,
valuation risks.                                            |X|          |X|
--------------------------------------------------------------------------------
Restricted and other illiquid securities
Securities with restrictions on trading, or those
not actively traded. May include private
placements. Liquidity, market, valuation risks.           /15%I/        /15%I/
--------------------------------------------------------------------------------
Sector concentration Investing more than 25% of a
fund's net assets in a group of related industries
(market sector). Performance will largely depend
upon the sector's performance, which may differ in
direction and degree from that of the overall
stock market. Financial, economic, business,
political and other developments affecting the
sector will have a greater effect on the fund.              |X|          |X|
--------------------------------------------------------------------------------
Securities lending Lending portfolio securities to
financial institutions; a fund receives cash, U.S.
government securities or bank letters of credit as
collateral. Credit, liquidity, market, operational
risks.                                                   33 1/3%R     33 1/3%R
--------------------------------------------------------------------------------


                                       21
<PAGE>

--------------------------------------------------------------------------------
                                                                        GLOBAL
                                                           GLOBAL        TELE-
                                                           HEALTH       COMMUNI-
                                                          SCIENCES      CATIONS
                                                            FUND          FUND
--------------------------------------------------------------------------------
INVESTMENT PRACTICE                                               LIMIT
--------------------------------------------------------------------------------
Start-up and other small companies Companies with
small relative market capitalizations, including
those with continuous operations of less than
three years. Information, liquidity, market,
valuation risks.                                            |X|          /5%I/
--------------------------------------------------------------------------------
Structured instruments Swaps, structured
securities and other instruments that allow a fund
to gain access to the performance of a benchmark
asset (such as an index or selected stocks) that
may be more attractive or accessible than the
fund's direct investment. Credit, currency,
information, interest-rate, liquidity, market,
political, speculative exposure, valuation risks.           |_|          |_|
--------------------------------------------------------------------------------
Temporary defensive tactics Placing some or all of
a fund's assets in investments such as
money-market obligations and investment-grade debt
securities for defensive purposes. Although
intended to avoid losses in adverse market,
economic, political or other conditions, defensive
tactics might be inconsistent with a fund's
principal investment strategies and might prevent
a fund from achieving its goal.                             |_|          |_|
--------------------------------------------------------------------------------
Warrants Options issued by a company granting the
holder the right to buy certain securities,
generally common stock, at a specified price and
usually for a limited time. Liquidity, market,
speculative exposure risks.                                /15%I/        |_|
--------------------------------------------------------------------------------

(1)   The funds are not obligated to pursue any hedging strategy. In addition,
      hedging practices may not be available, may be too costly to be used
      effectively or may be unable to be used for other reasons.
(2)   Each fund is limited to 5% of net assets for initial margin and premium
      amounts on futures positions considered to be speculative by the Commodity
      Futures Trading Commission.


                                       22
<PAGE>

                       This page intentionally left blank


                                       23
<PAGE>

                               MEET THE MANAGERS

The following individuals are responsible for the day-to-day portfolio
management of the Global Health Sciences Fund:

                                [PHOTO OMITTED]
                            Susan L. Black, CFA, CIC
                               Managing Director

o     Co-Portfolio Manager, Global Health Sciences Fund since fund inception

o     With CSAM since 1999 as a result of Credit Suisse's acquisition of Warburg
      Pincus Asset Management, Inc. (Warburg Pincus)

o     With Warburg Pincus since 1985

                                [PHOTO OMITTED]
                                  Peter T. Wen
                                 Vice President

o     Co-Portfolio Manager, Global Health Sciences Fund since 1999

o     With CSAM since 1999

o     Investment analyst at Lynch & Mayer, Inc., 1994 to 1999


                                       24
<PAGE>

      The day-to-day portfolio management of the Global Telecommunications Fund
is the responsibility of the Credit Suisse Asset Management Global
Telecommunications Management Team. The team consists of the following
individuals:


                                [PHOTO OMITTED]
                                 Scott T. Lewis
                               Managing Director

o     Team member since 1999

o     With CSAM since 1999 as a result of Credit Suisse's acquisition of Warburg
      Pincus

o     With Warburg Pincus since 1986

                                [PHOTO OMITTED]
                               Vincent J. McBride
                                Managing Director

o     Team member since 2000

o     With CSAM since 1999 as a result of Credit Suisse's acquisition of Warburg
      Pincus

o     With Warburg Pincus since 1994

o     International equity analyst at Smith Barney Inc., 1993 to 1994


                                       25
<PAGE>

                               ABOUT YOUR ACCOUNT

--------------------------------------------------------------------------------
SHARE VALUATION
--------------------------------------------------------------------------------

      The price of your shares is also referred to as their net asset value
(NAV).

      The NAV is determined at the close of regular trading on the New York
Stock Exchange (NYSE) (currently 4 p.m. Eastern Time) each day the NYSE is open
for business. It is calculated by dividing the Common Class's total assets, less
its liabilities, by the number of Common Class shares outstanding.

      Each fund values its securities based on market quotations when it
calculates its NAV. If market quotations are not readily available, securities
and other assets are valued by another method that the Board of Directors
believes accurately reflects fair value. Debt obligations that will mature in 60
days or less are valued on the basis of amortized cost, unless the Board of
Directors determines that using this method would not reflect an investment's
value.

      Some fund securities may be listed on foreign exchanges that are open on
days (such as U.S. holidays) when the funds do not compute their prices. This
could cause the value of a fund's portfolio investments to be affected by
trading on days when you cannot buy or sell shares.

--------------------------------------------------------------------------------
BUYING AND SELLING SHARES
--------------------------------------------------------------------------------

      The accompanying Shareholder Guide explains how to invest directly with
the funds. You will find information about purchases, redemptions, exchanges and
services.

      The funds are open on those days when the NYSE is open, typically Monday
through Friday. If we receive your request in proper form by the close of the
NYSE (usually 4 p.m. Eastern Time), your transaction will be priced at that
day's NAV. If we receive it after that time, it will be priced at the next
business day's NAV.

FINANCIAL-SERVICES FIRMS

      You can also buy and sell fund shares through a variety of
financial-services firms such as banks, brokers and financial advisors. The
funds have authorized these firms (and other intermediaries that the firms may
designate) to accept orders. When an authorized firm or its designee has
received your order, it is considered received by the fund and will be priced at
the next-computed NAV.

      Financial-services firms may charge transaction fees or other fees that
you could avoid by investing directly with the fund. Please read their program
materials for any special provisions or additional service features that may
apply to your investment. Certain features of the fund, such as the minimum
initial or subsequent investment amounts, may be modified.

      Some of the firms through which the funds are available include:

o     Charles Schwab & Co., Inc. Mutual Fund OneSource(R) service

o     Fidelity Brokerage Services, Inc. FundsNetwork(R) Funds

o     TD Waterhouse Mutual Fund Network


                                       26
<PAGE>

--------------------------------------------------------------------------------
ACCOUNT STATEMENTS
--------------------------------------------------------------------------------

      In general, you will receive account statements as follows:

o     after every transaction that affects your account balance (except for
      distribution reinvestments and automatic transactions)

o     after any changes of name or address of the registered owner(s)

o     otherwise, every calendar quarter

      You will receive annual and semiannual financial reports.

--------------------------------------------------------------------------------
DISTRIBUTIONS
--------------------------------------------------------------------------------

      As a fund investor, you will receive distributions.

      Each fund earns dividends from stocks and interest from bond, money-market
and other investments. These are passed along as dividend distributions. A fund
realizes capital gains whenever it sells securities for a higher price than it
paid for them. These are passed along as capital-gain distributions.

      The funds distribute dividends annually. The funds typically distribute
capital gains annually in December.

      Most investors have their distributions reinvested in additional shares of
the same fund. Distributions will be reinvested unless you choose on your
account application to have a check for your distributions mailed to you or sent
by electronic transfer.

      Estimated year-end distribution information, including record and payment
dates, will be available at www.warburg.com or by calling 800-WARBURG
(800-927-2874). Investors are encouraged to consider the potential tax
consequences of distributions prior to buying or selling shares of the funds.

--------------------------------------------------------------------------------
TAXES
--------------------------------------------------------------------------------

      As with any investment, you should consider how your investment in a fund
will be taxed. If your account is not a tax-advantaged account, you should be
especially aware of the following potential tax implications. Please consult
your tax professional concerning your own tax situation.

TAXES ON DISTRIBUTIONS

      As long as a fund continues to meet the requirements for being a
tax-qualified regulated investment company, the fund pays no federal income tax
on the earnings it distributes to shareholders.

      Distributions you receive from a fund, whether reinvested or taken in
cash, are generally considered taxable. Distributions from the fund's long-term
capital gains are taxed as long-term capital gains, regardless of how long you
have held fund shares. Distributions from other sources are generally taxed as
ordinary income. The funds will mostly make capital-gain distributions which
could be short-term or long-term.

      If you buy shares shortly before or on the "record date"--the date that
establishes you as the person to receive the upcoming distribution--you may
receive a portion of


                                       27
<PAGE>

the money you just invested in the form of a taxable distribution.

      The Form 1099 that is mailed to you every January details your
distributions and their federal tax category, including the portion taxable as
long-term capital gains.

TAXES ON TRANSACTIONS

      Any time you sell or exchange shares, it is considered a taxable event for
you. Depending on the purchase price and the sale price of the shares you sell
or exchange, you may have a gain or loss on the transaction. You are responsible
for any tax liabilities generated by your transactions.


                                       28
<PAGE>

                                OTHER INFORMATION

--------------------------------------------------------------------------------
ABOUT THE DISTRIBUTOR
--------------------------------------------------------------------------------

      Credit Suisse Asset Management Securities, Inc. (CSAMSI), an affiliate of
CSAM, is responsible for:

o     making the funds available to you

o     account servicing and maintenance

o     other administrative services related to sale of the Common Class

      As part of their business strategies, the funds each have adopted a Rule
12b-1 shareholder-servicing and distribution plan to compensate CSAMSI for
providing certain shareholder and other services related to the sale of the
Common Class. Under the plan, CSAMSI receives fees at an annual rate of 0.25% of
average daily net assets of the fund's Common Class. Because the fees are paid
out of a fund's assets on an ongoing basis, over time they will increase the
cost of your investment and may cost you more than paying other types of sales
charges. CSAMSI, CSAM or their affiliates may make additional payments out of
their own resources to firms offering Common Class shares for providing
administration, subaccounting, transfer agency and/or other services. Under
certain circumstances, the funds may reimburse a portion of these payments.


                                       29
<PAGE>

                              FOR MORE INFORMATION

      More information about these funds is available free upon request,
including the following:

--------------------------------------------------------------------------------
SHAREHOLDER GUIDE
--------------------------------------------------------------------------------

      Explains how to buy and sell shares. The Shareholder Guide is incorporated
by reference into (is legally part of) this Prospectus.

--------------------------------------------------------------------------------
ANNUAL/SEMIANNUAL
REPORTS TO SHAREHOLDERS
--------------------------------------------------------------------------------

      Includes financial statements, portfolio investments and detailed
performance information.

      The Annual Report also contains a letter from the funds' managers
discussing market conditions and investment strategies that significantly
affected fund performance during its past fiscal year.

--------------------------------------------------------------------------------
OTHER INFORMATION
--------------------------------------------------------------------------------

      A current Statement of Additional Information (SAI), which provides more
details about the funds, is on file with the Securities and Exchange Commission
(SEC) and is incorporated by reference.

      You may visit the SEC's Internet Web site (www.sec.gov) to view the SAI,
material incorporated by reference and other information. You can also obtain
copies by visiting the SEC's Public Reference Room in Washington, DC (phone
800-SEC-0330) or by sending your request and a duplicating fee to the SEC's
Public Reference Section, Washington, DC 20549-6009 or electronically at
[email protected].

      Please contact Warburg Pincus Funds to obtain, without charge, the SAI,
Annual and Semiannual Reports and portfolio holdings and other information and
to make shareholder inquiries:

BY TELEPHONE:
  800-WARBURG
  (800-927-2874)

BY MAIL:
  Warburg Pincus Funds
  P.O. Box 9030
  Boston, MA 02205-9030

BY OVERNIGHT OR COURIER SERVICE:
  Boston Financial
  Attn: Warburg Pincus Funds
  66 Brooks Drive
  Braintree, MA 02184

ON THE INTERNET:
  www.warburg.com

SEC file numbers:

Warburg Pincus Global
Health Sciences Fund                                                   811-07901

Warburg Pincus Global
Telecommunications Fund                                                811-08935

                              --------------------
                              WARBURG PINCUS FUNDS
                              --------------------

                              PART OF CREDIT | ASSET
                                      SUISSE | MANAGEMENT

                      P.O. BOX 9030, BOSTON, MA 02205-9030
                  800-WARBURG (800-927-2874) o www.warburg.com

CREDIT SUISSE ASSET MANAGEMENT SECURITIES, INC., DISTRIBUTOR        WPGHT-1-0101
<PAGE>

      [LOGO] WARBURG PINCUS FUNDS, PART OF CREDIT SUISSE | ASSET MANAGEMENT

                              WARBURG PINCUS FUNDS

                                   SHAREHOLDER
                                      GUIDE

                                  Common Class
                                 January 1, 2001

      This Shareholder Guide is incorporated into and legally part of each
                    Warburg Pincus (Common Class) prospectus.

     Warburg Pincus Funds are advised by Credit Suisse Asset Management, LLC
<PAGE>

                                  BUYING SHARES

o     OPENING AN ACCOUNT

      Your account application provides us with key information we need to set
up your account correctly. It also lets you authorize services that you may find
convenient in the future.

      If you need an application, call our Shareholder Service Center to receive
one by mail or fax. Or you can download it from our Internet Web site:
www.warburg.com.

      You can make your initial investment by check or wire. The "By Wire"
method in the table enables you to buy shares on a particular day at that day's
closing NAV.

o     ADDING TO AN ACCOUNT

      You can add to your account in a variety of ways, as shown in the table.
If you want to use ACH transfer, be sure to complete the "ACH on Demand" section
of the account application.

o     INVESTMENT CHECKS

      Please use either a personal or bank check payable in U.S. dollars to
Warburg Pincus Funds. Unfortunately, we cannot accept "starter" checks that do
not have your name preprinted on them. We also cannot accept checks payable to
you or to another party and endorsed to the order of Warburg Pincus Funds. These
types of checks may be returned to you and your purchase order may not be
processed. Limited exceptions include properly endorsed government checks.

--------------------------------------------------------------------------------
                                 MINIMUM INITIAL
                                   INVESTMENT

Cash Reserve Fund:                                                      $ 1,000
New York Tax Exempt Fund:                                               $ 1,000
Balanced Fund:                                                          $ 1,000
Value Fund:                                                             $ 1,000
WorldPerks(R) Funds:                                                    $ 5,000
Long-Short Fund:                                                        $25,000
All other funds:                                                        $ 2,500
IRAs:                                                                   $   500*
Transfers/Gifts to Minors:                                              $   500*
--------------------------------------------------------------------------------

* $25,000 minimum for Long-Short Fund.

--------------------------------------------------------------------------------
                                WIRE INSTRUCTIONS

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

                                 HOW TO REACH US

Shareholder Service Center
Toll free: 800-WARBURG
           (800-927-2874)
Fax:       212-370-9833

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

Overnight/Courier Service
Boston Financial
Attn: Warburg Pincus Funds
66 Brooks Drive
Braintree, MA 02184

Internet Web Site
www.warburg.com
--------------------------------------------------------------------------------


                                        2
<PAGE>

--------------------------------------------------------------------------------
OPENING AN ACCOUNT                       ADDING TO AN ACCOUNT
--------------------------------------------------------------------------------
BY CHECK
--------------------------------------------------------------------------------
o Complete the New Account               o Make your check payable to Warburg
  Application. For IRAs use the            Pincus Funds.
  Universal IRA Application.
                                         o Write the account number and the
o Make your check payable to Warburg       fund name on your check.
  Pincus Funds.
                                         o Mail to Warburg Pincus Funds.
o Mail to Warburg Pincus Funds.
                                         o Minimum amount is $100.
--------------------------------------------------------------------------------
BY EXCHANGE
--------------------------------------------------------------------------------
o Call our Shareholder Service Center    o Call our Shareholder Service Center
  to request an exchange. Be sure to       to request an exchange.
  read the current prospectus for the
  new fund. Also please observe the      o Minimum amount is $250.
  minimum initial investment.
                                         If you do not have telephone
  If you do not have telephone           privileges, mail or fax a signed
  privileges, mail or fax a signed       letter of instruction.
  letter of instruction.
--------------------------------------------------------------------------------
BY WIRE
--------------------------------------------------------------------------------
o Complete and sign the New Account      o Call our Shareholder Service Center
  Application.                             by 4 p.m. ET to inform us of the
                                           incoming wire. Please be sure to
o Call our Shareholder Service Center      specify your name, the account
  and fax the signed New Account           number and the fund name on your
  Application by 4 p.m. ET.                wire advice.

o Shareholder Services will telephone    o Wire the money for receipt that day.
  you with your account number. Please
  be sure to specify your name, the      o Minimum amount is $500.
  account number and the fund name on
  your wire advice.

o Wire your initial investment for
  receipt that day.

o Mail the original, signed
  application to Warburg Pincus Funds.
  This method is not available for
  IRAs.
--------------------------------------------------------------------------------
BY AUTOMATED CLEARING HOUSE (ACH) TRANSFER
--------------------------------------------------------------------------------
o Cannot be used to open an account.     o Call our Shareholder Service Center
                                           to request an ACH transfer from your
                                           bank.

                                         o Your purchase will be effective at
                                           the next NAV calculated after we
                                           receive your order in proper form.

                                         o Minimum amount is $50.

                                         Requires ACH on Demand privileges.
--------------------------------------------------------------------------------

                           800-WARBURG (800-927-2874)
           MONDAY-FRIDAY, 8 A.M.-8 P.M. ET SATURDAY, 8 A.M.-4 P.M. ET


                                        3
<PAGE>

                               SELLING SHARES(*)

--------------------------------------------------------------------------------
SELLING SOME OR ALL OF YOUR SHARES       CAN BE USED FOR
--------------------------------------------------------------------------------
BY MAIL
--------------------------------------------------------------------------------
Write us a letter of instruction that    o Accounts of any type.
includes:
                                         o Sales of any amount.
o your name(s) and signature(s)
                                         For IRAs please use the IRA
o the fund name and account number       Distribution Request Form.

o the dollar amount you want to sell

o how to send the proceeds

Obtain a signature guarantee or other
documentation, if required (see
"Selling Shares in Writing").

Mail the materials to Warburg Pincus
Funds.

If only a letter of instruction is
required, you can fax it to the
Shareholder Service Center.
--------------------------------------------------------------------------------
BY EXCHANGE
--------------------------------------------------------------------------------
o Call our Shareholder Service Center    o Accounts with telephone privileges.
  to request an exchange. Be sure to
  read the current prospectus for the    If you do not have telephone
  new fund. Also please observe the      privileges, mail or fax a letter of
  minimum initial investment.            instruction to exchange shares.
--------------------------------------------------------------------------------
BY PHONE
--------------------------------------------------------------------------------
Call our Shareholder Service Center to   o Non-IRA accounts with telephone
request a redemption. You can receive      privileges.
the proceeds as:

o a check mailed to the address of
  record

o an ACH transfer to your bank ($50
  minimum)

o a wire to your bank ($500 minimum)

See "By Wire or ACH Transfer" for
details.
--------------------------------------------------------------------------------
BY WIRE OR ACH TRANSFER
--------------------------------------------------------------------------------
o Complete the "Wire Instructions" or    o Non-IRA accounts with
  "ACH on Demand" section of your New      wire-redemption or ACH on Demand
  Account Application.                     privileges.

o For federal-funds wires, proceeds      o Requests by phone or mail.
  will be wired on the next business
  day. For ACH transfers, proceeds
  will be delivered within two
  business days.
--------------------------------------------------------------------------------

* For the Japan Growth Fund and Japan Small Company Fund only: Each fund imposes
a 2.00% redemption fee (short-term trading fee) on fund shares redeemed or
exchanged less than six months from purchase. This fee is calculated based on
the shares' net asset value at redemption and deducted from the redemption
proceeds. The fee is paid to the fund to offset costs associated with short-term
shareholder trading. It does not apply to shares acquired through reinvestment
of distributions. For purposes of computing the redemption fee, any shares
bought through reinvestment of distributions will be redeemed first without
charging the fee, followed by the shares held longest. The redemption fee
applies to fund shares purchased on or after May 30, 2000.


                                        4
<PAGE>

o     SELLING SHARES IN WRITING

      Some circumstances require a written sell order, along with a signature
guarantee. These include:

      o     accounts whose address of record has been changed within the past 30
            days

      o     redemption in certain large amounts (other than by exchange)

      o     requests to send the proceeds to a different payee or address

      o     shares represented by certificates, which must be returned with your
            sell order

      A signature guarantee helps protect against fraud. You can obtain one from
most banks or securities dealers, but not from a notary public.

o     RECENTLY PURCHASED SHARES

      For fund shares purchased other than by bank wire, bank check, U.S.
Treasury check, certified check or money order, the funds will delay payment of
your cash redemption proceeds until the check or other purchase payment clears,
which generally takes up to 10 calendar days from the day of purchase. At any
time during this period, you may exchange into another fund.

o     LOW-BALANCE ACCOUNTS

      If your account balance falls below the minimum required to keep it open
due to redemptions or exchanges, the fund may ask you to increase your balance.
If it is still below the minimum after 60 days, the fund may close your account
and mail you the proceeds.

--------------------------------------------------------------------------------
                         MINIMUM TO KEEP AN ACCOUNT OPEN

Cash Reserve Fund:                                                        $  750
New York Tax Exempt Fund:                                                 $  750
Balanced Fund:                                                            $  500
Value Fund:                                                               $  500
WorldPerks Funds:                                                         $  750
All other funds:                                                          $2,000
IRAs:                                                                     $  250
Transfers/Gifts to Minors:                                                $  250
--------------------------------------------------------------------------------


                           800-WARBURG (800-927-2874)
           MONDAY-FRIDAY, 8 A.M.-8 P.M. ET SATURDAY, 8 A.M.-4 P.M. ET


                                        5
<PAGE>

                              SHAREHOLDER SERVICES

o     AUTOMATIC SERVICES

      Buying or selling shares automatically is easy with the services described
below. You can set up most of these services with your account application or by
calling our Shareholder Service Center.

SAVEMYMONEY PROGRAM

      SaveMyMoney(SM) is a low minimum, automatic investing program that makes
it easy to build a mutual fund portfolio. For an initial investment of $250
along with a minimum $50 monthly investment, you can invest in certain Warburg
Pincus funds. The SaveMyMoney Program will automatically transfer the monthly
investment amount you designate from your bank account.

AUTOMATIC MONTHLY INVESTMENT PLAN

      For making automatic investments ($50 minimum) from a designated bank
account.

AUTOMATIC WITHDRAWAL PLAN

      For making automatic monthly, quarterly, semiannual or annual withdrawals
of $250 or more.

DISTRIBUTION SWEEP

      For automatically reinvesting your dividend and capital-gain distributions
into another identically registered Warburg Pincus fund. Not available for IRAs.

o     STATEMENTS AND REPORTS

      Each Fund produces financial reports, which include among other things a
list of the Fund's portfolio holdings, semiannually and updates its prospectus
annually. Each Fund generally does not hold shareholder meetings. To reduce
expenses by eliminating duplicate mailings to the same address, a Fund may
choose to mail only one report, prospectus or proxy statement, as applicable, to
your household, even if more than one person in the household has an account
with the same Fund. Please call 800-WARBURG if you would like to receive
additional reports, prospectuses or proxy statements.

o     RETIREMENT PLANS

      Warburg Pincus offers a range of tax-advantaged retirement accounts,
including:

o     Traditional IRAs

o     Roth IRAs

o     Roth Conversion IRAs

o     Spousal IRAs

o     Rollover IRAs

o     SEP IRAs

      To transfer your IRA to Warburg Pincus, use the IRA Transfer/Direct
Rollover Form. If you are opening a new IRA, you will also need to complete the
Universal IRA Application. Please consult your tax professional concerning your
IRA eligibility and tax situation.

o     TRANSFERS/GIFTS TO MINORS

      Depending on state laws, you can set up a custodial account under the
Uniform Transfers-to-Minors Act (UTMA) or the Uniform Gifts-to-Minors Act
(UGMA). Please consult your tax professional about these types of accounts.

o     ACCOUNT CHANGES

      Call our Shareholder Service Center to update your account records
whenever you change your address. Shareholder Services can also help you change
your account information or privileges.


                                        6
<PAGE>

                                 OTHER POLICIES

o     TRANSACTION DETAILS

      You are entitled to capital-gain and earned dividend distributions as soon
as your purchase order is executed. For the Intermediate Maturity Government,
New York Intermediate Municipal and Fixed Income Funds and the Money Market
Funds, you begin to earn dividend distributions the business day after your
purchase order is executed. However, if we receive your purchase order and
payment to purchase shares of a Money Market Fund before 12 p.m. (noon), you
begin to earn dividend distributions on that day.

      Your purchase order will be canceled and you may be liable for losses or
fees incurred by the fund if:

o     your investment check or ACH transfer does not clear

o     you place a telephone order by 4 p.m. ET and we do not receive your wire
      that day

      If you wire money without first calling Shareholder Services to place an
order, and your wire arrives after the close of regular trading on the NYSE,
then your order will not be executed until the end of the next business day. In
the meantime, your payment will be held uninvested. Your bank or other
financial-services firm may charge a fee to send or receive wire transfers.

      While we monitor telephone servicing resources carefully, during periods
of significant economic or market change it may be difficult to place orders by
telephone.

      Uncashed redemption or distribution checks do not earn interest.

o     SPECIAL SITUATIONS

      A fund reserves the right to:

o     refuse any purchase or exchange request, including those from any person
      or group who, in the fund's view, is likely to engage in excessive trading

o     change or discontinue its exchange privilege after 30 days' notice to
      current investors, or temporarily suspend this privilege during unusual
      market conditions

o     change its minimum investment amounts after 15 days' notice to current
      investors of any increases

o     charge a wire-redemption fee

o     make a "redemption in kind"--payment in portfolio securities rather than
      cash--for certain large redemption amounts that could hurt fund operations

o     suspend redemptions or postpone payment dates as permitted by the
      Investment Company Act of 1940 (such as during periods other than weekends
      or holidays when the NYSE is closed or trading on the NYSE is restricted,
      or any other time that the SEC permits)

o     modify or waive its minimum investment requirements for investments
      through certain financial-services firms and for employees and clients of
      its adviser, sub-adviser, distributor and their affiliates and, for the
      Long-Short Fund, investments through certain financial-services firms
      ($10,000 minimum) and through retirement plan programs (no minimum)

o     stop offering its shares for a period of time (such as when management
      believes that a substantial increase in assets could adversely affect it)

                           800-WARBURG (800-927-2874)
           MONDAY-FRIDAY, 8 A.M.-8 P.M. ET SATURDAY, 8 A.M.-4 P.M. ET


                                        7
<PAGE>

                              --------------------
                              WARBURG PINCUS FUNDS
                              --------------------

                             PART OF CREDIT | ASSET
                                     SUISSE | MANAGEMENT

                      P.O. BOX 9030, BOSTON, MA 02205-9030
                  800-WARBURG (800-927-2874) o www.warburg.com

CREDIT SUISSE ASSET MANAGEMENT SECURITIES, INC., DISTRIBUTOR       WPCOM-31-0101

<PAGE>

                       STATEMENT OF ADDITIONAL INFORMATION

                                 January 1, 2001

                   WARBURG PINCUS GLOBAL HEALTH SCIENCES FUND

This Statement of Additional Information provides information about Warburg
Pincus Global Health Sciences Fund (the "Global Health Sciences Fund" or the
"Fund") that supplements information contained in the combined Prospectus for
the Common Shares of the Fund dated January 1, 2001.

The Fund's audited annual report, dated August 31, 2000, which either
accompanies this Statement of Additional Information or has previously been
provided to the investor to whom this Statement of Additional Information is
being sent, is incorporated herein by reference.

This Statement of Additional Information is not a prospectus and should be read
in conjunction with the Prospectuses. Copies of the Prospectuses and the Annual
Report can be obtained by writing or telephoning:

                                  Common Shares
                              Warburg Pincus Funds
                                  P.O. Box 9030
                        Boston, Massachusetts 02205-9030
                                   800-WARBURG

<PAGE>

                                TABLE OF CONTENTS

INVESTMENT OBJECTIVES AND POLICIES.............................................1
      Options, Futures and Currency Exchange Transactions......................1
               Securities Options..............................................1
               Securities Index Options........................................4
               OTC Options.....................................................4
               Futures Activities..............................................5
                        Futures Contracts......................................5
                        Options on Futures Contracts...........................6
               Currency Exchange Transactions..................................7
                        Forward Currency Contracts.............................7
                        Currency Options.......................................8
                        Currency Hedging.......................................8
               Hedging Generally...............................................8
               Asset Coverage for Forward Contracts, Options, Futures and
                  Options on Futures..........................................10
ADDITIONAL INFORMATION ON OTHER INVESTMENT PRACTICES..........................10
               U.S. Government Securities.....................................10
               Money Market Obligations.......................................11
                        Money Market Mutual Funds.............................11
                        Repurchase Agreements.................................11
               Convertible Securities.........................................12
               Structured Securities..........................................12
                        Mortgage-Backed Securities............................12
                        Asset-Backed Securities...............................13
                        Structured Notes, Bonds or Debentures.................14
                        Assignments and Participations........................14
               Debt Securities................................................15
               Below Investment Grade Securities..............................16
               Zero Coupon Securities.........................................17
               Securities of Other Investment Companies.......................18
               Lending of Portfolio Securities................................18
               Foreign Investments............................................19
                        Depositary Receipts...................................19
                        Foreign Currency Exchange.............................19
                        Euro Conversion.......................................19
                        Information...........................................20
                        Political Instability.................................20
                        Foreign Markets.......................................20
                        Increased Expenses....................................20
                        Foreign Debt Securities...............................20
                        Privatizations........................................21
                        Brady Bonds...........................................21
               Short Sales "Against the Box"..................................21
               Warrants.......................................................22
               Non-Publicly Traded and Illiquid Securities....................22


                                      (i)
<PAGE>

                        Rule 144A Securities..................................23
               Borrowing......................................................24
               Reverse Repurchase Agreements..................................24
               When-Issued Securities and Delayed-Delivery Transactions.......24
               REITs..........................................................25
               Small Capitalization and Emerging Growth Companies;
                  Unseasoned Issuers..........................................25
               "Special Situation" Companies..................................25
               Dollar Rolls...................................................26
               Securities of Health Sciences Companies........................26
               Short Sales (excluding Short Sales "Against the Box")..........28
INVESTMENT RESTRICTIONS.......................................................28
               The Fund.......................................................28
PORTFOLIO VALUATION...........................................................30
PORTFOLIO TRANSACTIONS........................................................31
PORTFOLIO TURNOVER............................................................33
MANAGEMENT OF THE FUNDS.......................................................34
      Officers and Board of Directors.........................................34
      Portfolio Managers of the Fund..........................................38
      Investment Adviser and Co-Administrators................................39
      Code of Ethics..........................................................40
      Custodians and Transfer Agent...........................................41
      Organization of the Fund................................................41
      Distribution and Shareholder Servicing..................................42
               Common Shares..................................................42
               General........................................................44
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION................................45
               Automatic Cash Withdrawal Plan.................................45
EXCHANGE PRIVILEGE............................................................45
ADDITIONAL INFORMATION CONCERNING TAXES.......................................46
      The Fund and Its Investments............................................46
      Passive Foreign Investment Companies....................................48
      Dividends and Distributions.............................................49
      Sales of Shares.........................................................50
      Foreign Taxes...........................................................50
      Backup Withholding......................................................50
      Notices.................................................................51
      Special Tax Matters Relating to Zero Coupon Securities..................51
      Other Taxation..........................................................51
DETERMINATION OF PERFORMANCE..................................................51
INDEPENDENT ACCOUNTANTS AND COUNSEL...........................................54
MISCELLANEOUS.................................................................54
FINANCIAL STATEMENTS..........................................................55

APPENDIX  DESCRIPTION OF RATINGS                                             A-1


                                      (ii)
<PAGE>

                       INVESTMENT OBJECTIVES AND POLICIES

            The following information supplements the discussion of the Fund's
investment objective and policies in the Prospectus. There are no assurances
that the Fund will achieve its investment objectives.

            The investment objective of the Fund is capital appreciation.

            Unless otherwise indicated, the Fund is permitted to engage in the
following investment strategies, subject to any percentage limitations set forth
below. Any percentage limitation on the Fund's ability to invest in debt
securities will not be applicable during periods when the Fund pursues a
temporary defensive strategy as discussed below.

            The Fund is not obligated to pursue any of the following strategies
and do not represent that these techniques are available now or will be
available at any time in the future.

Options, Futures and Currency Exchange Transactions

            Securities Options. The Fund may purchase options and write (sell)
covered or collateralized options on securities, securities indices and, to the
extent the Fund is authorized to invest in foreign securities, currencies for
both hedging purposes and to increase total return. Up to 25% of the Fund's
assets may be at risk in connection with investing in options on securities,
securities indices and, if applicable, currencies. The amount of assets
considered to be "at risk" in these transactions is, in the case of purchasing
options, the amount of the premium paid, and, in the case of writing options,
the value of the underlying obligation. These options may be traded on an
exchange or 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 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.

            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). The Fund that
writes call options retains the risk of an increase in the price of the
underlying security. The size of the premiums

<PAGE>

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 decline, the put writer would expect to suffer a
loss. This loss may be less than the loss from purchasing the underlying
instrument directly to the extent that the premium received offsets 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 Credit Suisse Asset Management, LLC ("CSAM"), the Fund's investment
adviser, or Credit Suisse Asset Management Limited, the Fund's sub-investment
adviser ("CSAM Ltd." and collectively with CSAM, the "Adviser"), 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 the Adviser
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
the Adviser 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


                                      -2-
<PAGE>

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 OTC 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 (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 cannot 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 OTC market may be more limited
than for exchange-traded options and may also involve the risk that securities
dealers participating in OTC transactions would fail to meet their obligations
to the Fund. The Fund, however, intends to purchase OTC options only from
dealers whose debt securities, as determined by the Adviser, 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 and would continue to be at market risk on the
security.


                                      -3-
<PAGE>

            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 the Adviser 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.

            Securities Index Options. The Fund may purchase and write
exchange-listed and OTC put and call options on securities indexes. A securities
index measures the movement of a certain group of securities by assigning
relative values to the securities included in the index, fluctuating with
changes in the market values of the securities included in the index. Some
securities index options are based on a broad market index, such as the NYSE
Composite Index, or a narrower market index such as the Standard & Poor's 100.
Indexes may also be based on a particular industry or market segment.

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

            OTC Options. 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 securities to the clearing
organization if the option is exercised, and the clearing organization is then
obligated to pay the writer the exercise price of the option. If the Fund was 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.

                  Exchange-traded options generally have a continuous liquid
market while OTC or dealer options do not. 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.


                                      -4-
<PAGE>

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 or, with respect to currency options,
currencies at a time when such sale might be advantageous.

            Futures Activities. The Fund may enter into futures contracts and
options on futures contracts on securities, securities indices and, to the
extent the Fund is authorized to invest in foreign securities, currencies for
bona fide hedging and speculative purposes These futures contracts are
standardized contracts for the future delivery of a non-U.S. currency, an
interest rate sensitive security or, in the case of index futures contracts or
certain other futures contracts, a cash settlement with reference to a specified
multiplier times the change in the 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.

            These transactions may be entered into for "bona fide hedging"
purposes, as defined in regulations of the Commodity Futures Trading Commission
("CFTC"), and other permissible purposes including hedging against changes in
the value of portfolio securities due to anticipated changes in currency values,
interest rates and/or market conditions and increasing return. Aggregate initial
margin and premiums (discussed below) required to establish positions other than
those considered to be "bona fide hedging" by the CFTC will not 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. 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.

            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.

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


                                      -5-
<PAGE>

            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 liquid securities acceptable to
the broker, equal to approximately 1% to 10% of the contract amount (this amount
is subject to change by the exchange on which the contract is traded, and
brokers may charge a higher amount). This amount is known as "initial margin"
and is in the nature of a performance bond or good faith deposit on the contract
which is returned to 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 currency, financial instrument or securities
index underlying the futures contract fluctuates, making the long and short
positions in the futures contract more or less valuable, a process known as
"marking-to-market." 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 may 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 foreign currency, interest rate and stock index futures
contracts and may enter into closing transactions with respect to such options
to terminate existing positions. There is no guarantee that such closing
transactions can be effected; the ability to establish and close out positions
on such options will be subject to the existence of a liquid market.

            An option on a currency, interest rate or securities index futures
contract, as contrasted with the direct investment in such a contract, gives the
purchaser the right, in return for the premium paid, to assume a position in a
futures contract at a specified exercise price at any time prior to the
expiration date of the option. The writer of the option is required upon
exercise to assume an offsetting futures position (a short position if the
option is a call and a long position if the option is a put). Upon exercise of
an option, the delivery of the futures position by


                                      -6-
<PAGE>

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 a futures contract 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.

            Currency Exchange Transactions. The value in U.S. dollars of the
assets of the Fund that are invested in foreign securities may be affected
favorably or unfavorably by a variety of factors not applicable to investment in
U.S. securities, and the Fund may incur costs in connection with conversion
between various currencies. Currency exchange transactions may be from any
non-U.S. currency into U.S. dollars or into other appropriate currencies. The
Fund will conduct its currency exchange transactions (i) on a spot (i.e., cash)
basis at the rate prevailing in the currency exchange market, (ii) through
entering into futures contracts or options on such contracts (as described
above), (iii) through entering into forward contracts to purchase or sell
currency or (iv) by purchasing exchange-traded currency options. Risks
associated with currency forward contracts and purchasing currency options are
similar to those described herein for futures contracts and securities and stock
index options. In addition, the use of currency transactions could result in
losses from the imposition of foreign exchange controls, suspension of
settlement or other governmental actions or unexpected events. The Fund will
only engage in currency exchange transactions for hedging purposes.

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

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

            Forward currency contracts are highly volatile, and a relatively
small price movement in a forward currency contract may result in substantial
losses to the Fund. To the extent the Fund engages in forward currency contracts
to generate current income, the Fund will be subject to these risks which the
Fund might otherwise avoid (e.g., through the use of hedging transactions).


                                      -7-
<PAGE>

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

            Currency Hedging. The Fund's currency hedging will be limited to
hedging involving either specific transactions or portfolio positions.
Transaction hedging is the purchase or sale of forward currency with respect to
specific receivables or payables of the Fund generally accruing in connection
with the purchase or sale of its portfolio securities. Position hedging is the
sale of forward currency with respect to portfolio security positions. The Fund
may not position hedge to an extent greater than the aggregate market value (at
the time of entering into the hedge) of the hedged securities.

            A decline in the U.S. dollar value of a foreign currency in which
the Fund's securities are denominated will reduce the U.S. dollar value of the
securities, even if their value in the foreign currency remains constant. The
use of currency hedges does not eliminate fluctuations in the underlying prices
of the securities, but it does establish a rate of exchange that can be achieved
in the future. For example, in order to protect against diminutions in the U.S.
dollar value of non-dollar denominated securities it holds, the Fund may
purchase foreign currency put options. If the value of the foreign currency does
decline, the Fund will have the right to sell the currency for a fixed amount in
dollars and will thereby offset, in whole or in part, the adverse effect on the
U.S. dollar value of its securities that otherwise would have resulted.
Conversely, if a rise in the U.S. dollar value of a currency in which securities
to be acquired are denominated is projected, thereby potentially increasing the
cost of the securities, the Fund may purchase call options on the particular
currency. The purchase of these options could offset, at least partially, the
effects of the adverse movements in exchange rates. The benefit to the Fund
derived from purchases of currency options, like the benefit derived from other
types of options, will be reduced by premiums and other transaction costs.
Because transactions in currency exchange are generally conducted on a principal
basis, no fees or commissions are generally involved. Currency hedging involves
some of the same risks and considerations as other transactions with similar
instruments. Although currency hedges limit the risk of loss due to a decline in
the value of a hedged currency, at the same time, they also limit any potential
gain that might result should the value of the currency increase. If a
devaluation is generally anticipated, the Fund may not be able to contract to
sell a currency at a price above the devaluation level it anticipates.

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

            Hedging Generally. In addition to entering into options, futures and
currency exchange transactions for other purposes, including generating current
income to offset expenses


                                      -8-
<PAGE>

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, futures contracts and currency exchange transactions for
hedging purposes could limit any potential gain from an increase in the value of
the position hedged. In addition, the movement in the portfolio position hedged
may not be of the same magnitude as movement in the hedge. With respect to
futures contracts, since the value of portfolio securities will far exceed the
value of the futures contracts sold by 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 depends upon movements in the level of securities prices
in the stock market generally or, in the case of certain indexes, in an industry
or market segment, rather than movements in the price of a particular security.
The risk of imperfect correlation increases as the composition of 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. Securities index
futures transactions may be subject to additional correlation risks. First, all
participants in the futures market are subject to margin deposit and maintenance
requirements. Rather than meeting additional margin deposit requirements,
investors may close futures contracts through offsetting transactions which
would distort the normal relationship between the securities index and futures
markets. Secondly, from the point of view of speculators, the deposit
requirements in the futures market are less onerous than margin requirements in
the securities market. Therefore, increased participation by speculators in the
futures market also may cause temporary price distortions. Because of the
possibility of price distortions in the futures market and the imperfect
correlation between movements in the securities index and movements in the price
of securities index futures, a correct forecast of general market trends by the
Adviser still may not result in a successful hedging transaction.

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

            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


                                      -9-
<PAGE>

Fund may be unable to close out a position without incurring substantial losses,
if at all. The Fund is also subject to the risk of a default by a counterparty
to an off-exchange transaction.

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

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

              ADDITIONAL INFORMATION ON OTHER INVESTMENT PRACTICES

            U.S. Government Securities. The obligations issued or guaranteed by
the U.S. government in which the Fund may invest include direct obligations of
the U.S. Treasury and obligations issued by U.S. government agencies and
instrumentalities ("U.S. Government Securities"). Included among direct
obligations of the United States are Treasury Bills, Treasury Notes and Treasury
Bonds, which differ in terms of their interest rates, maturities and dates of
issuance. 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 ("GNMA"));
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


                                      -10-
<PAGE>

the instrumentality (such as Federal National Mortgage Association ("FNMA") and
Federal Home Loan Mortgage Corporation ("FHLMC") bonds).

            Other U.S. Government Securities the Fund may invest in include
securities issued or guaranteed by the Federal Housing Administration, Farmers
Home Loan Administration, Export-Import Bank of the United States, Small
Business Administration, General Services Administration, Central Bank for
Cooperatives, Federal Farm Credit Banks, Federal Intermediate Credit Banks,
Federal Land Banks, Maritime Administration, Tennessee Valley Authority,
District of Columbia Armory Board and Student Loan Marketing Association.
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 CSAM determines that the credit risk with respect to
the instrumentality does not make its securities unsuitable for investment by
the Fund.

            Money Market Obligations. The Fund is authorized to invest, under
normal market conditions, up to 20% of its total assets in domestic and foreign
short-term (one year or less remaining to maturity) and medium-term (five year
or less remaining to maturity) money market obligations and for temporary
defensive purposes may invest in these securities without limit. These
instruments consist of obligations issued or guaranteed by the U.S. government
or a foreign government, their agencies or instrumentalities; bank obligations
(including certificates of deposit, time deposits and bankers' acceptances of
domestic or foreign banks, domestic savings and loans and similar institutions)
that are high quality investments; commercial paper rated no lower than A-2 by
Standard & Poor's Ratings Services ("S&P") or Prime-2 by Moody's Investors
Service, Inc. ("Moody's") or the equivalent from another major rating service
or, if unrated, of an issuer having an outstanding, unsecured debt issue then
rated within the three highest rating categories; and repurchase agreements with
respect to the foregoing.

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

            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


                                      -11-
<PAGE>

decline in the value of the underlying securities during the period in which the
Fund seeks to assert this right. The Adviser 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. Subsequent to purchase by the Fund, convertible
securities may cease to be rated or a rating may be reduced below the minimum
required for purchase by the Fund. Neither event will require sale of such
securities, although the Adviser will consider such event in its determination
of whether the Fund should continue to hold the securities.

            Structured Securities. The Fund may purchase any type of publicly
traded or privately negotiated fixed income security, including mortgage-backed
securities; structured notes, bonds or debentures; and assignments of and
participations in loans.

            Mortgage-Backed Securities. The Fund may invest in mortgage-backed
securities, such as those issued by the Government National Mortgage Association
("GNMA"), Federal National Mortgage Association ("FNMA"), Federal Home Loan
Mortgage Corporation ("FHLMC") or certain foreign issuers. Mortgage-backed
securities represent direct or indirect participations in, or are secured by and
payable from, mortgage loans secured by real property. The mortgages backing
these securities include, among other mortgage instruments, conventional 30-year
fixed-rate mortgages, 15-year fixed-rate mortgages, graduated payment mortgages
and adjustable rate mortgages. The government or the issuing agency typically
guarantees the payment of interest and principal of these securities. However,
the guarantees do not extend to the securities' yield or value, which are likely
to vary inversely with fluctuations in interest rates, nor do the guarantees
extend to the yield or value of the Fund's shares. These securities generally
are "pass-through" instruments, through which the holders receive a share of all
interest and principal payments from the mortgages underlying the securities,
net of certain fees.

            Yields on pass-through securities are typically quoted by investment
dealers and vendors based on the maturity of the underlying instruments and the
associated average life assumption. The average life of pass-through pools
varies with the maturities of the underlying mortgage loans. A pool's term may
be shortened by unscheduled or early payments of principal on the underlying
mortgages. The occurrence of mortgage prepayments is affected by various
factors, including the level of interest rates, general economic conditions, the
location, scheduled maturity and age of the mortgage and other social and
demographic conditions. Because prepayment rates of individual pools vary
widely, it is not possible to predict accurately the average life of a
particular pool. For pools of fixed-rate 30-year mortgages in a stable interest


                                      -12-
<PAGE>

rate environment, a common industry practice in the U.S. has been to assume that
prepayments will result in a 12-year average life, although it may vary
depending on numerous factors. At present, pools, particularly those with loans
with other maturities or different characteristics, are priced on an assumption
of average life determined for each pool. In periods of falling interest rates,
the rate of prepayment tends to increase, thereby shortening the actual average
life of a pool of mortgage-related securities. Conversely, in periods of rising
rates the rate of prepayment tends to decrease, thereby lengthening the actual
average life of the pool. However, these effects may not be present, or may
differ in degree, if the mortgage loans in the pools have adjustable interest
rates or other special payment terms, such as a prepayment charge. Actual
prepayment experience may cause the yield of mortgage-backed securities to
differ from the assumed average life yield. Reinvestment of prepayments may
occur at higher or lower interest rates than the original investment, thus
affecting the Fund's yield.

            The rate of interest on mortgage-backed securities is lower than the
interest rates paid on the mortgages included in the underlying pool due to the
annual fees paid to the servicer of the mortgage pool for passing through
monthly payments to certificate holders and to any guarantor, such as GNMA, and
due to any yield retained by the issuer. Actual yield to the holder may vary
from the coupon rate, even if adjustable, if the mortgage-backed securities are
purchased or traded in the secondary market at a premium or discount. In
addition, there is normally some delay between the time the issuer receives
mortgage payments from the servicer and the time the issuer makes the payments
on the mortgage-backed securities, and this delay reduces the effective yield to
the holder of such securities.

            Asset-Backed Securities. The Fund may 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. In addition, there is no assurance that the security interest in
the collateral can be realized.


                                      -13-
<PAGE>

            Structured Notes, Bonds or Debentures. Typically, the value of the
principal and/or interest on these instruments is determined by reference to
changes in the value of specific currencies, interest rates, commodities,
indexes or other financial indicators (the "Reference") or the relevant change
in two or more References. The interest rate or the principal amount payable
upon maturity or redemption may be increased or decreased depending upon changes
in the applicable Reference. The terms of the structured securities may provide
that in certain circumstances no principal is due at maturity and, therefore,
may result in the loss of the Fund's entire investment. The value of structured
securities may move in the same or the opposite direction as the value of the
Reference, so that appreciation of the Reference may produce an increase or
decrease in the interest rate or value of the security at maturity. In addition,
the change in interest rate or the value of the security at maturity may be a
multiple of the change in the value of the Reference so that the security may be
more or less volatile than the Reference, depending on the multiple.
Consequently, structured securities may entail a greater degree of market risk
and volatility than other types of debt obligations.

            Assignments and Participations. The Fund may invest in assignments
of and participations in loans issued by banks and other financial institutions.

            When the Fund purchases assignments from lending financial
institutions, the Fund will acquire direct rights against the borrower on the
loan. However, since assignments are generally arranged through private
negotiations between potential assignees and potential assignors, the rights and
obligations acquired by the Fund as the purchaser of an assignment may differ
from, and be more limited than, those held by the assigning lender.

            Participations in loans will typically result in the Fund having a
contractual relationship with the lending financial institution, not the
borrower. The Fund would have the right to receive payments of principal,
interest and any fees to which it is entitled only from the lender of the
payments from the borrower. In connection with purchasing a participation, the
Fund generally will have no right to enforce compliance by the borrower with the
terms of the loan agreement relating to the loan, nor any rights of set-off
against the borrower, and the Fund may not benefit directly from any collateral
supporting the loan in which it has purchased a participation. As a result, the
Fund purchasing a participation will assume the credit risk of both the borrower
and the lender selling the participation. In the event of the insolvency of the
lender selling the participation, the Fund may be treated as a general creditor
of the lender and may not benefit from any set-off between the lender and the
borrower.

            The Fund may have difficulty disposing of assignments and
participations because there is no liquid market for such securities. The lack
of a liquid secondary market will have an adverse impact on the value of such
securities and on the Fund's ability to dispose of particular assignments or
participations 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 borrower. The lack of a liquid market for assignments and participations
also may make it more difficult for the Fund to assign a value to these
securities for purposes of valuing the Fund's portfolio and calculating its net
asset value.

            The Fund may invest in fixed and floating rate loans ("Loans")
arranged through private negotiations between a foreign government (a
"Borrower") and one or more financial


                                      -14-
<PAGE>

institutions ("Lenders"). The majority of the Fund's investments in Loans are
expected to be in the form of participations in Loans ("Participations") and
assignments of portions of Loans from third parties ("Assignments").
Participations typically will result in the Fund having a contractual
relationship only with the Lender, not with the Borrower. The Fund will have the
right to receive payments of principal, interest and any fees to which it is
entitled only from the Lender selling the Participation and only upon receipt by
the Lender of the payments from the Borrower. In connection with purchasing
Participations, the Fund generally will have no right to enforce compliance by
the Borrower with the terms of the loan agreement relating to the Loan, nor any
rights of set-off against the Borrower, and the Fund may not directly benefit
from any collateral supporting the Loan in which it has purchased the
Participation. As a result, the Fund will assume the credit risk of both the
Borrower and the Lender that is selling the Participation. In the event of the
insolvency of the Lender selling a Participation, the Fund may be treated as a
general creditor of the Lender and may not benefit from any set-off between the
Lender and the Borrower. The Fund will acquire Participations only if the Lender
interpositioned between the Fund and the Borrower is determined by the Adviser
to be creditworthy.

            When the Fund purchases Assignments from Lenders, the Fund will
acquire direct rights against the Borrower on the Loan. However, since
Assignments are generally arranged through private negotiations between
potential assignees and potential assignors, the rights and obligations acquired
by the Fund as the purchaser of an Assignment may differ from, and be more
limited than, those held by the assigning Lender.

            There are risks involved in investing in Participations and
Assignments. The Fund may have difficulty disposing of them because there is no
liquid market for such securities. The lack of a liquid secondary market will
have an adverse impact on the value of such securities and on the Fund's ability
to dispose of particular Participations or Assignments 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 Borrower. The lack of a liquid
market for Participations and Assignments also may make it more difficult for
the Fund to assign a value to these securities for purposes of valuing the
Fund's portfolio and calculating its net asset value.

            Debt Securities. The Fund may invest up to 20% of its total assets
in debt securities. Debt obligations of corporations in which the Fund may
invest include corporate bonds, debentures and notes. Debt securities
convertible into common stock and certain preferred stocks may have risks
similar to those described below. The interest income to be derived may be
considered as one factor in selecting debt securities for investment by the
Adviser. Because the market value of debt obligations can be expected to vary
inversely to changes in prevailing interest rates, investing in debt obligations
may provide an opportunity for capital appreciation when interest rates are
expected to decline. The success of such a strategy is dependent upon the
Adviser's ability to accurately forecast changes in interest rates. 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 or S&P or, if unrated, is determined
to be of comparable quality by the Adviser. Bonds rated in the fourth highest
grade may have speculative characteristics and


                                      -15-
<PAGE>

changes in economic conditions or other circumstances are more likely to lead to
a weakened capacity to make principal and interest payments than is the case
with higher grade bonds. The Fund's holdings of debt securities rated below
investment grade (commonly referred to as "junk bonds") may be rated as low as C
by Moody's or D by S&P at the time of purchase, or may be unrated securities
considered to be of equivalent quality. Securities that are rated C by Moody's
comprise the lowest rated class and can be regarded as having extremely poor
prospects of ever attaining any real investment standing. Debt rated D by S&P is
in default or is expected to default upon maturity or payment date. Subsequent
to its purchase by 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 the Adviser will
consider such event in its determination of whether the Fund should continue to
hold the securities. Any percentage limitation on the Fund's ability to invest
in debt securities will not be applicable during periods when the Fund pursues a
temporary defensive strategy as discussed below.

            When the Adviser believes that a defensive posture is warranted, the
Fund may invest temporarily without limit in investment grade debt obligations
and in domestic and foreign money market obligations, including repurchase
agreements.

            Below Investment Grade Securities. The Fund may invest up to 20% of
its total assets in securities rated below investment grade, including
convertible debt securities.

            Below investment grade debt securities may be rated as low as C by
Moody's or D by S&P, or be deemed by the Adviser to be of equivalent quality.
Securities that are rated C by Moody's are the lowest rated class and can be
regarded as having extremely poor prospects of ever attaining any real
investment standing. A security rated D by S&P is in default or is expected to
default upon maturity or payment date. Below investment grade securities
(commonly referred to as "junk bonds"), (i) will likely have some quality and
protective characteristics that, in the judgment of the rating organizations,
are outweighed by large uncertainties or major risk exposures to adverse
conditions and (ii) are predominantly speculative with respect to the issuer's
capacity to pay interest and repay principal in accordance with the terms of the
obligation. The market values of certain of these securities also tend to be
more sensitive to individual corporate developments and changes in economic
conditions than investment grade securities. In addition, these securities
generally present a higher degree of credit risk. The risk of loss due to
default is significantly greater because these securities generally are
unsecured and frequently are subordinated to the prior payment of senior
indebtedness. 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


                                      -16-
<PAGE>

medium- and lower-rated securities and unrated securities generally are
unsecured and frequently are subordinated to the prior payment of senior
indebtedness.

            An economic 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 anticipate 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 also 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
the Adviser in evaluating the creditworthiness of an issuer. In this evaluation,
in addition to relying on ratings assigned by Moody's or S&P, the Adviser 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. 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. Neither event will require sale
of such securities, although the Adviser will consider such event in its
determination of whether the Fund should continue to hold the securities.
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. At times,
adverse publicity regarding lower-rated securities has depressed the prices for
such securities to some extent.

            Zero Coupon Securities. The Fund may invest in "zero coupon" U.S.
Treasury, foreign government and U.S. and foreign corporate convertible and
nonconvertible debt securities, which are bills, notes and bonds that have been
stripped of their unmatured interest coupons and custodial receipts or
certificates of participation representing interests in such stripped debt
obligations and coupons. A zero coupon security pays no interest to its holder
prior to maturity. Accordingly, such securities usually trade at a deep discount
from their face or par value and will be subject to greater fluctuations of
market value in response to changing interest rates than debt obligations of
comparable maturities that make current distributions of interest. The Fund
anticipate that they will not normally hold zero coupon securities to maturity.
Redemption of shares of the Fund that require it to sell zero coupon securities
prior to maturity may result in capital gains or losses that may be substantial.
Federal tax law requires that a holder of a zero coupon security accrue a
portion of the discount at which the security was


                                      -17-
<PAGE>

purchased as income each year, even though the holder receives no interest
payment on the security during the year. Such accrued discount will be
includible in determining the amount of dividends the Fund must pay each year
and, in order to generate cash necessary to pay such dividends, the Fund may
liquidate portfolio securities at a time when it would not otherwise have done
so.

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

            Lending of Portfolio Securities. 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"). These loans, if and when made, may not
exceed 33 1/3% of the Fund's total assets taken at value (including the loan
collateral). The Fund will not lend portfolio securities to its investment
adviser, any sub-investment adviser or their affiliates unless it has applied
for and received specific authority to do so from the SEC. Loans of portfolio
securities will be collateralized by cash, letters of credit or U.S. 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. 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. Default
by or bankruptcy of a borrower would expose the Fund to possible loss because of
adverse market action, expenses and/or delays in connection with the disposition
of the underlying securities. Any loans of the Fund's securities will be fully
collateralized and marked to market daily.


                                      -18-
<PAGE>

            Foreign Investments. The Fund may invest without limit, in the
securities of foreign issuers. Investors should recognize that investing in
foreign companies involves certain risks, including those discussed below, which
are in addition to those associated with investing in U.S. issuers. 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.

            Depositary Receipts. The assets of the Fund may be invested in the
securities of foreign issuers in the form of American Depositary Receipts
("ADRs"), European Depositary Receipts ("EDRs") and International Depositary
Receipts ("IDRs"). 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. EDRs, which
are sometimes referred to as Continental Depositary Receipts ("CDRs"), are
receipts issued in Europe, and IDRs, which are sometimes referred to as Global
Depositary Receipts ("GDRs"), are issued outside the United States. EDRs (CDRs)
and IDRs (GDRs) are typically issued by non-U.S. banks and trust companies and
evidence ownership of either foreign or domestic securities. Generally, ADRs in
registered form are designed for use in U.S. securities markets, and EDRs (CDRs)
and IDRs (GDRs) in bearer form are designed for use in European and non-U.S.
securities markets, respectively.

            Foreign Currency Exchange. Since the Fund may be investing in
securities denominated in currencies of non-U.S. countries, and since the Fund
may temporarily hold funds in bank deposits or other money market investments
denominated in foreign currencies, the Fund may be affected favorably or
unfavorably by exchange control regulations or changes in the exchange rate
between such currencies and the dollar. A change in the value of a foreign
currency relative to the U.S. dollar will result in a corresponding change in
the dollar value of the Fund assets denominated in that foreign currency.
Changes in foreign currency exchange rates may also affect the value of
dividends and interest earned, gains and losses realized on the sale of
securities and net investment income and gains, if any, to be distributed to
shareholders by the Fund. Unless otherwise contracted, 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. 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.
The Fund may use hedging techniques with the objective of protecting against
loss through the fluctuation of the value of foreign currencies against the U.S.
dollar, particularly the forward market in foreign exchange, currency options
and currency futures.

            Euro Conversion. The introduction of a single European currency, the
euro, on January 1, 1999 for participating European nations in the Economic and
Monetary Union


                                      -19-
<PAGE>

presented unique risks and uncertainties for investors in those countries,
including (i) the functioning of the payment and operational systems of banks
and other financial institutions; (ii) the creation of suitable clearing and
settlement payment schemes for the euro; (iii) the fluctuation of the euro
relative to non-euro currencies during the transition period from January 1,
1999 to December 31, 2000 and beyond; and (iv) whether the interest rate, tax
and labor regimes of the European countries participating in the euro will
converge over time. Further, the conversion of the currencies of other Economic
Monetary Union countries, such as the United Kingdom, and the admission of other
countries, including Central and Eastern European countries, to the Economic
Monetary Union could adversely affect the euro. These or other factors may cause
market disruptions and could adversely affect the value of foreign securities
and currencies held by the Fund.

            Information. Many of the foreign securities held by the Fund will
not be registered with, nor will 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 subject to financial reporting standards,
practices and requirements that are either not uniform or less rigorous than
those applicable to U.S. companies.

            Political Instability. With respect to some foreign countries, there
is the possibility of expropriation or confiscatory taxation, limitations on the
removal of funds or other assets of the Fund, political or social instability,
or domestic developments which could affect U.S. investments in those and
neighboring countries.

            Foreign Markets. 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 which may result
in increased exposure to market and foreign exchange fluctuations and increased
illiquidity.

            Increased Expenses. The operating expenses of the Fund, to the
extent it invests in foreign securities, may be higher than that of an
investment company investing exclusively in U.S. securities, since the expenses
of the Fund, such as the cost of converting foreign currency into U.S. dollars,
the payment of fixed brokerage commissions on foreign exchanges, custodial
costs, valuation costs and communication costs, may be higher than those costs
incurred by other investment companies not investing in foreign securities. In
addition, foreign securities may be subject to foreign government taxes that
would reduce the net yield on such securities.

            Foreign Debt Securities. 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.


                                      -20-
<PAGE>

            The foreign government securities in which each of the Fund may
invest generally consist of obligations issued or backed by national, state or
provincial governments or similar political subdivisions or central banks in
foreign countries. Foreign government securities also include debt obligations
of supranational entities, which include international organizations designated
or backed by governmental entities to promote economic reconstruction or
development, international banking institutions and related government agencies.
Examples include the International Bank for Reconstruction and Development (the
"World Bank"), the European Coal and Steel Community, the Asian Development Bank
and the InterAmerican Development Bank.

            Privatizations. The Fund may invest in privatizations (i.e. foreign
government programs of selling interests in government-owned or controlled
enterprises). The ability of U.S. entities, such as the Fund, to participate in
privatizations may be limited by local law, or the terms for participation may
be less advantageous than for local investors. There can be no assurance that
privatization programs will be available or successful.

            Brady Bonds. The Fund may invest in so-called "Brady Bonds," which
have been issued by Costa Rica, Mexico, Uruguay and Venezuela and which may be
issued by other Latin American countries. Brady Bonds are issued as part of a
debt restructuring in which the bonds are issued in exchange for cash and
certain of the country's outstanding commercial bank loans. Investors should
recognize that Brady Bonds do not have a long payment history, and are subject
to, among other things, the risk of default. Brady Bonds may be collateralized
or uncollateralized, are issued in various currencies (primarily the U.S.
dollar) and are actively traded in the over-the-counter ("OTC") secondary market
for debt of Latin American issuers. In light of the history of commercial bank
loan defaults by Latin American public and private entities, investments in
Brady Bonds may be viewed as speculative.

            Short Sales (excluding Short Sales "Against the Box"). The Fund may
from time to time sell securities short. A short sale is a transaction in which
the Fund sells securities it does not own in anticipation of a decline in the
market price of the securities. The current market value of the securities sold
short (excluding short sales "against the box") will not exceed 10% of the
Fund's assets.

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

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

            Short Sales "Against the Box". 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.
The Fund may also engage in a short sale if at the time of the short sale the
Fund owns or has the right to obtain without additional cost an equal amount of
the security being sold short. This investment technique is known as a short
sale "against the box." It may be entered into by the Fund to, for example, lock
in a sale price for a security the Fund does not wish to sell immediately. If
the Fund engages in a short sale, the collateral for the short position will be
segregated in an account with the Fund's custodian or qualified sub-custodian.
No more than 10% of the Fund's net assets (taken at current value) may be held
as collateral for short sales against the box at any one time.

            The Fund may make a short sale as a hedge, when it believes that the
price of a security may decline, causing a decline in the value of a security
owned by the Fund (or a security convertible or exchangeable for such security).
In such case, any future losses in the Fund's long position should be offset by
a gain in the short position and, conversely, any gain in the long position
should be reduced by a loss in the short position. The extent to which such
gains or losses are reduced will depend upon the amount of the security sold
short relative to the amount the Fund owns. There will be certain additional
transaction costs associated with short


                                      -21-
<PAGE>

sales against the box, but the Fund will endeavor to offset these costs with the
income from the investment of the cash proceeds of short sales.

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

            Warrants. The Fund may invest up to 15% of its net assets in
warrants. The Fund may purchase warrants issued by domestic and foreign
companies to purchase newly created equity securities consisting of common and
preferred stock. Warrants are securities that give the holder the right, but not
the obligation to purchase equity issues of the company issuing the warrants, or
a related company, at a fixed price either on a date certain or during a set
period. The equity security underlying a warrant is authorized at the time the
warrant is issued or is issued together with the warrant.

            Investing in warrants can provide a greater potential for profit or
loss than an equivalent investment in the underlying security, and, thus, can be
a speculative investment. At the time of issue, the cost of a warrant is
substantially less than the cost of the underlying security itself, and price
movements in the underlying security are generally magnified in the price
movements of the warrant. This leveraging effect enables the investor to gain
exposure to the underlying security with a relatively low capital investment.
This leveraging increases an investor's risk, however, in the event of a decline
in the value of the underlying security and can result in a complete loss of the
amount invested in the warrant. In addition, the price of a warrant tends to be
more volatile than, and may not correlate exactly to, the price of the
underlying security. If the market price of the underlying security is below the
exercise price of the warrant on its expiration date, the warrant will generally
expire without value. The value of a warrant may decline because of a decline in
the value of the underlying security, the passage of time, changes in interest
rates or in the dividend or other policies of the company whose equity underlies
the warrant or a change in the perception as to the future price of the
underlying security, or any combination thereof. Warrants generally pay no
dividends and confer no voting or other rights other than to purchase the
underlying security.

            Non-Publicly Traded and Illiquid Securities. The Fund may invest up
to 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


                                      -22-
<PAGE>

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. 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. Limitations on resale may have an adverse effect on the marketability of
portfolio securities and a mutual fund might be unable to dispose of restricted
or other illiquid securities promptly or at reasonable prices and might thereby
experience difficulty satisfying redemptions within seven days without
borrowing. A mutual fund might also have to register such restricted securities
in order to dispose of them resulting in additional expense and delay. Adverse
market conditions could impede such a public offering of securities.

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

            Rule 144A Securities. Rule 144A under the Securities Act adopted by
the SEC allows for a broader institutional trading market for securities
otherwise subject to restriction on resale to the general public. Rule 144A
establishes a "safe harbor" from the registration requirements of the Securities
Act for resales of certain securities to qualified institutional buyers. CSAM
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).

            Investing in Rule 144A securities could have the effect of
increasing the level of illiquidity in the Fund to the extent that qualified
institutional buyers are unavailable or uninterested in purchasing such
securities from the Fund. The Board has adopted guidelines and delegated to CSAM
the daily function of determining and monitoring the liquidity of Rule 144A
Securities, although the Board will retain ultimate responsibility for liquidity
determinations.


                                      -23-
<PAGE>

            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. Additional investments
(including roll-overs) will not be made when borrowings exceed 5% of the Fund's
total 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 member banks of the Federal Reserve System and
certain non-bank dealers. 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 segregate with an approved
custodian cash or liquid high-grade debt securities having a value not less than
the repurchase price (including accrued interest). The segregated assets will be
marked-to-market daily and additional assets will be segregated on any day in
which the assets fall below the repurchase price (plus accrued interest). The
Fund's liquidity and ability to manage its assets might be affected when it sets
aside cash or portfolio securities to cover such commitments. Reverse repurchase
agreements involve the risk that the market value of the securities retained in
lieu of sale may decline below the price of the securities the Fund has sold but
is obligated to repurchase. In the event the buyer of securities under a reverse
repurchase agreement files for bankruptcy or becomes insolvent, such buyer or
its trustee or receiver may receive an extension of time to determine whether to
enforce the Fund's obligation to repurchase the securities, and the Fund's use
of the proceeds of the reverse repurchase agreement may effectively be
restricted pending such decision. Reverse repurchase agreements that are
accounted for as financings are considered to be borrowings under the 1940 Act.

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


                                      -24-
<PAGE>

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

            REITs. The Fund may invest in real estate investment trusts
("REITs"), which are pooled investment vehicles that invest primarily in
income-producing real estate or real estate related loans or interests. Like
regulated investment companies such as the Fund, REITs are not taxed on income
distributed to shareholders provided they comply with several requirements of
the Internal Revenue Code of 1986, as amended (the "Code"). By investing in a
REIT, the Fund will indirectly bear its proportionate share of any expenses paid
by the REIT in addition to the expenses of the Fund.

            Investing in REITs involves certain risks. A REIT may be affected by
changes in the value of the underlying property owned by such REIT or by the
quality of any credit extended by the REIT. REITs are dependent on management
skills, are not diversified (except to the extent the Code requires), and are
subject to the risks of financing projects. REITs are subject to heavy cash flow
dependency, default by borrowers, self-liquidation, the possibilities of failing
to qualify for the exemptions from the 1940 Act. REITs are also subject to
interest rate risks.

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

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


                                      -25-
<PAGE>

special situation that exists at the time of an investment will be consummated
under the terms and within the time period contemplated.

            Dollar Rolls. The Fund also may enter into "dollar rolls," in which
the Fund sells fixed-income securities for delivery in the current month and
simultaneously contracts to repurchase similar but not identical (same type,
coupon and maturity) securities on a specified future date. During the roll
period, the Fund would forego principal and interest paid on such securities.
The Fund would be compensated by the difference between the current sale price
and the forward price for the future purchase, as well as by the interest earned
on the cash proceeds of the initial sale. At the time the Fund enters into a
dollar roll transaction, it will segregate with an approved custodian cash or
liquid securities having a value not less than the repurchase price (including
accrued interest) and will subsequently monitor the segregated assets to ensure
that its value is maintained.

            Securities of Health Sciences Companies. The Fund intends to invest
at least 80% of its total assets in equity securities of health sciences
companies, and under normal market conditions will invest at least 65% of its
assets in equity and debt securities of health sciences companies. Equity
securities are common stocks, preferred stocks, warrants and securities
convertible into or exchangeable for common stocks. Health sciences companies
are companies that are principally engaged in the research, development,
production or distribution of products or services related to health care,
medicine or the life sciences (collectively termed "health sciences"). A company
is considered to be "principally engaged" in health sciences when at least 50%
of its assets are committed to, or at least 50% of its revenues or operating
profits are derived from, the activities described in the previous sentence. A
company will also be considered "principally engaged" in health sciences if, in
the judgment of the Adviser, the company has the potential for capital
appreciation primarily as a result of particular products, technology, patents
or other market advantages in a health sciences business and (a) the company
holds itself out to the public as being primarily engaged in a health sciences
business, and (b) a substantial percentage of the company's expenses are related
to a health sciences business and these expenses exceed revenues from non-health
sciences businesses.

            The Fund intends to concentrate its investments in health sciences
companies in three industries: services, pharmaceuticals and medical devices.
The Fund will, under normal market conditions, invest at least 25% of its total
assets in the aggregate in these three industries. This policy may expose the
Fund to greater risk than a health sciences fund that invests more broadly among
industries.

            Because the Fund will focus its investments in securities of
companies that are principally engaged in the health sciences, the value of its
shares will be especially affected by factors relating to the health sciences,
resulting in greater volatility in share price than may be the case with funds
that invest in a wider range of industries.

            Companies engaged in biotechnology, drugs and medical devices are
affected by, among other things, limited patent duration, intense competition,
obsolescence brought about by rapid technological change and regulatory
requirements. In addition, many health sciences companies are smaller and less
seasoned, suffer from inexperienced management, offer limited product lines (or
may not yet offer products), and may have persistent losses or erratic revenue


                                      -26-
<PAGE>

patterns. Securities of these smaller companies may have more limited
marketability and, thus, may be more volatile. Because small 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. There is also typically less publicly
available information concerning smaller companies than for larger, more
established ones.

            Other health sciences companies, including pharmaceutical companies,
companies undertaking research and development, and operators of health care
facilities and their suppliers are subject to government regulation, product or
service approval and, with respect to medical devices, the receipt of necessary
reimbursement codes, which could have a significant effect on the price and
availability of such products and services, and may adversely affect the
revenues of these companies. These companies are also susceptible to product
liability claims and competition from manufacturers and distributors of generic
products. Companies engaged in the ownership or management of health care
facilities receive a substantial portion of their revenues from federal and
state governments through Medicare and Medicaid payments. These sources of
revenue are subject to extensive regulation and government appropriations to
fund these expenditures are under intense scrutiny. Numerous federal and state
legislative initiatives are being considered that seek to control health care
costs and, consequently, could affect the profitability and stock prices of
companies engaged in the health sciences.

            Health sciences companies are generally subject to greater
governmental regulation than other industries at both the state and federal
levels. Changes in governmental policies may have a material effect on the
demand for or costs of certain products and services. A health sciences company
must receive government approval before introducing new drugs and medical
devices or procedures. This process may delay the introduction of these products
and services to the marketplace, resulting in increased development costs,
delayed cost-recovery and loss of competitive advantage to the extent that rival
companies have developed competing products or procedures, adversely affecting
the company's revenues and profitability. Expansion of facilities by health care
providers is subject to "determinations of need" by the appropriate government
authorities. This process not only increases the time and cost involved in these
expansions, but also makes expansion plans uncertain, limiting the revenue and
profitability growth potential of health care facilities operators, and
negatively affecting the price of their securities.

            Certain health sciences companies depend on the exclusive rights or
patents for the products they develop and distribute. Patents have a limited
duration and, upon expiration, other companies may market substantially similar
"generic" products which have cost less to develop and may cause the original
developer of the product to lose market share and/or reduce the price charged
for the product, resulting in lower profits for the original developer.

            Because the products and services of health sciences companies
affect the health and well-being of many individuals, these companies are
especially susceptible to product liability lawsuits. The share price of a
health sciences company can drop dramatically not only as a reaction to an
adverse judicial ruling, but also from the adverse publicity accompanying
threatened litigation.


                                      -27-
<PAGE>

                             INVESTMENT RESTRICTIONS

            The Fund. Certain investment limitations of the Fund may not be
changed without the affirmative vote of the holders of a majority of the Fund's
outstanding shares ("Fundamental Restrictions"). Such majority is defined as the
lesser of (i) 67% or more of the shares present at the meeting, if the holders
of more than 50% of the outstanding shares of the Fund are present or
represented by proxy, or (ii) more than 50% of the outstanding shares. If a
percentage restriction (other than the percentage limitation set forth in No. 1)
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. The investment limitations numbered 1 through 9 are
Fundamental Restrictions. Investment limitations 10 through 13 may be changed by
a vote of the Board at any time.

            The 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, dollar roll
transactions that are accounted for as financings and any other


                                      -28-
<PAGE>

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

            2. Purchase any securities which would cause 25% or more of the
value of the Fund's total assets at the time of purchase to be invested in the
securities of issuers conducting their principal business activities in the same
industry except that the Fund will invest at least 25% of its total assets in
the health services, pharmaceuticals and medical devices industries; provided
that there shall be no limit on the purchase of U.S. Government Securities.

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

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

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

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

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

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

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

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


                                      -29-
<PAGE>

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

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

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

                               PORTFOLIO VALUATION

            The following is a description of the procedures used by the Fund in
valuing their assets.

            Securities listed on an exchange or traded in an over-the-counter
market will be valued at the closing price on the exchange or market on which
the security is primarily traded (the "Primary Market") at the time of valuation
(the "Valuation Time"). If the security did not trade on the Primary Market, the
security will be valued at the closing price on another exchange or market where
it trades at the Valuation Time. If there are no such sales prices, the security
will be valued at the most recent bid quotation as of the Valuation Time or at
the lowest asked quotation in the case of a short sale of securities. If there
are no such quotations, the value of the security will be taken to be the most
recent bid quotation on the exchange or market. In determining the market value
of portfolio investments, the Fund may employ outside organizations (each, 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. If
a Pricing Service is not able to supply closing prices and bid/asked quotations,
and there are two or more dealers, brokers or market makers in the security, the
security will be valued at the mean between the highest bid and the lowest asked
quotations from at least two dealers, brokers or market makers or, if such
dealers, brokers or market makers only provide bid quotations, at the mean
between the highest and the lowest bid quotations provided. If a Pricing Service
is not able to supply closing prices and bid/asked quotations, and there is only
one dealer, broker or market maker in the security, the security will be valued
at the mean between the bid and the asked quotations provided, unless the
dealer, broker or market maker can only provide a bid quotation in which case
the security will be valued at such bid quotation. Options contracts will be
valued similarly. Futures contracts will be valued at the most recent settlement
price at the time of valuation. Short-term obligations with maturities of 60
days or less are valued at amortized cost, which constitutes fair value as
determined by the Board. Amortized cost involves valuing a portfolio instrument
at its initial cost and thereafter assuming a constant amortization to maturity
of any discount or premium, regardless of the impact of fluctuating interest
rates on the market value of the instrument. The amortized cost method of


                                      -30-
<PAGE>

valuation may also be used with respect to other debt obligations with 60 days
or less remaining to maturity. Securities, options, futures contracts and other
assets which cannot be valued pursuant to the foregoing will be valued at their
fair value as determined in good faith pursuant to consistently applied
procedures established by the Board. In addition, the Board or its delegates may
value a security at fair value if it determines that such security's value
determined by the methodology set forth above does not reflect its fair value.

            Trading in securities in certain foreign countries is completed at
various times prior to the close of business on each business day in New York
(i.e., a day on which the New York Stock Exchange, Inc. (the "NYSE") is open for
trading). In addition, securities trading in a particular country or countries
may not take place on all business days in New York. Furthermore, trading takes
place in various foreign markets on days which are not business days in New York
and days on which 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 foreign portfolio securities
used in such calculation. All assets and liabilities initially expressed in
foreign currency values will be converted into U.S. dollar values at the
prevailing rate as quoted by a Pricing Service as of 12:00 noon (Eastern time).
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

            CSAM is responsible for establishing, reviewing and, where
necessary, modifying the Fund's investment program to achieve its investment
objective and for supervising the activities of CSAM Ltd. 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.
No brokerage commissions are typically paid on purchases and sales of U.S.
Government Securities.

            In selecting broker-dealers, the Adviser does business exclusively
with those broker-dealers that, in the Adviser's judgment, can be expected to
provide the best service. The service has two main aspects: the execution of buy
and sell orders and the provision of research. In negotiating commissions with
broker-dealers, the Adviser will pay no more for execution and


                                      -31-
<PAGE>

research services than it considers either, or both together, to be worth. The
worth of execution service depends on the ability of the broker-dealer to
minimize costs of securities purchased and to maximize prices obtained for
securities sold. The worth of research depends on its usefulness in optimizing
portfolio composition and its changes over time. Commissions for the combination
of execution and research services that meet the Adviser's standards may be
higher than for execution services alone or for services that fall below the
Adviser's standards. The Adviser believes that these arrangements may benefit
all clients and not necessarily only the accounts in which the particular
investment transactions occur that are so executed. Further, the Adviser will
only receive brokerage or research service in connection with securities
transactions that are consistent with the "safe harbor" provisions of Section
28(e) of the Securities Exchange Act of 1934 when paying such higher
commissions. Research services may include research on specific industries or
companies, macroeconomic analyses, analyses of national and international events
and trends, evaluations of thinly traded securities, computerized trading
screening techniques and securities ranking services, and general research
services. For the fiscal period ended August 31, 2000, $11,400 of the Fund's
total brokerage commissions was paid to brokers and dealers who provided
research services. Research received from brokers or dealers is supplemental to
the Adviser's own research program.

            The following table details amounts paid by the Fund in commissions
to broker-dealers for execution of portfolio transactions during the indicated
fiscal years or periods.

     --------------------------------------------------------------------
                Fund                Year/Period Ended     Commissions
     --------------------------------------------------------------------
     Global Health Sciences Fund     October 31, 1998       $94,901
                                 ----------------------------------------
                                     October 31, 1999      $201,942
                                 ----------------------------------------
                                     August 31, 2000        $76,296
     --------------------------------------------------------------------

            For the fiscal period ended August 31, 2000, the decrease in the
amount paid by the Fund to broker-dealers was due to the shorter time period
(i.e., 10 months) in light of the change in the Fund's fiscal year end and a
decrease in the Fund's overall trade volume.

            All orders for transactions in securities or options on behalf of
the Fund is placed by the Adviser with broker-dealers that it selects, including
Credit Suisse Asset Management Securities, Inc., the Fund's distributor (and an
affiliate of CSAM) ("CSAMSI"), and affiliates of Credit Suisse Group ("Credit
Suisse"). The Fund may utilize CSAMSI or affiliates of Credit Suisse in
connection with a purchase or sale of securities when the Adviser 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.

            Investment decisions for the Fund concerning specific portfolio
securities are made independently from those for other clients advised by the
Adviser. 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 the Adviser
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


                                      -32-
<PAGE>

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

            In no instance will portfolio securities be purchased from or sold
to CSAM, CSAM Ltd., CSAMSI or Credit Suisse First Boston ("CS First Boston") 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.

            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 the Adviser,
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. Consequently, the
annual portfolio turnover rate of the Fund may be higher than mutual funds
having similar objectives that do not utilize these strategies.


                                      -33-
<PAGE>

            It is not possible to predict the Fund's portfolio turnover rates.
High portfolio turnover rates (100% or more) may result in higher brokerage
commissions, dealer mark-ups or underwriting commissions as well as other
transaction costs. In addition, gains realized from portfolio turnover may be
taxable to shareholders. For the fiscal period ended August 31, 2000 and the
fiscal year ended October 31, 1999, the Fund's portfolio turnover rate was 106%
and 146%, respectively.

                             MANAGEMENT OF THE FUNDS

Officers and Board of Directors

            The business and affairs of the Fund is managed by the Board of
Directors in accordance with the laws of the State of Maryland. The Board elects
officers who are responsible for the day-to-day operations of the Fund and who
execute policies authorized by the Board. Under the Fund's Charter, the Board
may 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.

            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.

Richard H. Francis (68)                Director
40 Grosvenor Road                      Currently retired; Executive Vice
Short Hills, New Jersey 07078          President and Chief Financial Officer of
                                       Pan Am Corporation and Pan American
                                       World Airways, Inc. from 1988 to 1991;
                                       Director/Trustee of other Warburg Pincus
                                       Funds and other CSAM-advised investment
                                       companies.

Jack W. Fritz (73)                     Director
2425 North Fish Creek Road             Private investor; Consultant and
P.O. Box 1287                          Director of Fritz Broadcasting, Inc. and
Wilson, Wyoming 83014                  Fritz Communications (developers and
                                       operators of radio stations) since 1987;
                                       Director/Trustee of other Warburg Pincus
                                       Funds.


                                      -34-
<PAGE>

Jeffrey E. Garten (53)                 Director
Yale School of Management              Dean of Yale School of Management and
56 Hillhouse Avenue                    William S. Beinecke Professor in the
New Haven, Connecticut 06520-8200      Practice of International Trade and
                                       Finance; Undersecretary of Commerce for
                                       International Trade from November 1993 to
                                       October 1995; Professor at Columbia
                                       University from September 1992 to
                                       November 1993; Director of Aetna, Inc.;
                                       Director of Calphine Energy Corporation;
                                       Director/Trustee of other Warburg Pincus
                                       Funds.

James S. Pasman, Jr. (70)              Director
29 The Trillium                        Currently retired; President and Chief
Pittsburgh, Pennsylvania 15238         Operating Officer of National
                                       InterGroup, Inc. (holding company of
                                       National Steel Corporation) from April
                                       1989 to March 1991; Chairman of Permian
                                       Oil Co. from April 1989 to March 1991;
                                       Director of Education Management Corp.,
                                       Tyco International Ltd. (diversified
                                       manufacturing and service company);
                                       Trustee, Deutsche Bank VIT Funds;
                                       Director/Trustee of other Warburg Pincus
                                       Funds and other CSAM-advised investment
                                       companies.

William W. Priest* (58)                Chairman of the Board
466 Lexington Avenue                   Chairman and Managing Director of CSAM;
New York, New York 10017-3147          Chief Executive Officer and Managing
                                       Director of CSAM from 1990 to 2000;
                                       Director/Trustee of other Warburg Pincus
                                       Funds and other CSAM-advised investment
                                       companies.

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


                                      -35-
<PAGE>

Steven N. Rappaport (52)               Director
40 East 52nd Street                    President of Loanet, Inc. (on-line
New York, New York 10022               accounting service) since 1997;
                                       Executive Vice President of Loanet, Inc.
                                       from 1994 to 1997; Director, President,
                                       North American Operations, and former
                                       Executive Vice President from 1992 to
                                       1993 of Worldwide Operations of Metallurg
                                       Inc. (international producer and seller
                                       of metal); Executive Vice President,
                                       Telerate, Inc. (a leading provider of
                                       real-time financial information) from
                                       1987 to 1992; Partner in the law firm of
                                       Hartman & Craven until 1987;
                                       Director/Trustee of other Warburg Pincus
                                       Funds and other CSAM-advised investment
                                       companies.

Alexander B. Trowbridge (70)           Director
1317 F Street, N.W., 5th Floor         Retired; President of Trowbridge
Washington, DC 20004                   Partners, Inc. (business consulting)
                                       from January 1990 to November 1996;
                                       Director or Trustee of ICOS Corporation
                                       (biopharmaceuticals), IRI International
                                       (energy services), The Rouse Company
                                       (real estate development), Harris Corp.
                                       (electronics and communications
                                       equipment), The Gillette Co. (personal
                                       care products) and Sunoco, Inc.
                                       (petroleum refining and marketing);
                                       Director/Trustee of other Warburg Pincus
                                       Funds.

Eugene L. Podsiadlo (43)               President
466 Lexington Avenue                   Managing Director of CSAM; Associated
New York, New York 10017-3147          with CSAM since Credit Suisse acquired
                                       the Funds' predecessor adviser in July
                                       1999; with the predecessor adviser since
                                       1991; Vice President of Citibank, N.A.
                                       from 1987 to 1991; Officer of other
                                       Warburg Pincus Funds.

Hal Liebes, Esq. (36)                  Vice President and Secretary
466 Lexington Avenue                   Managing Director and General Counsel of
New York, New York 10017-3147          CSAM; Associated with Lehman Brothers,
                                       Inc. from 1996 to 1997; Associated with
                                       CSAM from 1995 to 1996; Associated with
                                       CS First Boston Investment Management
                                       from 1994 to 1995; Associated with
                                       Division of Enforcement, U.S. Securities
                                       and Exchange Commission from 1991 to
                                       1994; Officer of CSAMSI, other Warburg
                                       Pincus Funds and other CSAM-advised
                                       investment companies.


                                      -36-
<PAGE>

Michael A. Pignataro (40)              Treasurer and Chief Financial Officer
466 Lexington Avenue                   Director of CSAM; Associated with CSAM
New York, New York 10017-3147          since 1984; Officer of other Warburg
                                       Pincus Funds and other CSAM-advised
                                       investment companies.

Gregory N. Bressler, Esq. (34)         Assistant Secretary
466 Lexington Avenue                   Vice President and Legal Counsel of CSAM
New York, New York 10017-3147          since January 2000; Associated with the
                                       law firm of Swidler Berlin Shereff
                                       Friedman LLP from 1996 to 2000.

Stuart J. Cohen, Esq. (31)             Assistant Secretary
466 Lexington Avenue                   Vice President and Legal Counsel of
New York, New York 10017-3147          CSAM; Associated with CSAM since Credit
                                       Suisse acquired the Fund's predecessor
                                       adviser in July 1999; with the
                                       predecessor adviser since 1997;
                                       Associated with the law firm of Gordon
                                       Altman Butowsky Weitzen Shalov & Wein
                                       from 1995 to 1997; Officer of other
                                       Warburg Pincus Funds.

Rocco A. Del Guercio (37)              Assistant Treasurer
466 Lexington Avenue                   Vice President and Administrative
New York, New York 10017-3147          Officer of CSAM; Associated with CSAM
                                       since June 1996; Assistant Treasurer,
                                       Bankers Trust Corp. -- Fund
                                       Administration from March 1994 to June
                                       1996; Mutual Fund Accounting Supervisor,
                                       Dreyfus Corporation from April 1987 to
                                       March 1994; Officer of other Warburg
                                       Pincus Funds and other CSAM-advised
                                       investment companies.

Joseph Parascondola (37)               Assistant Treasurer
466 Lexington Avenue                   Assistant Vice President - Fund
New York, New York 10017-3147          Administration of CSAM since April 2000;
                                       Assistant Vice President, Deutsche Asset
                                       Management from January 1999 to April
                                       2000; Assistant Vice President, Weiss,
                                       Peck & Greer LLC from November 1995 to
                                       December 1998.


                                      -37-
<PAGE>

            No employee of CSAM, CSAM Ltd., 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/trustee of the Fund. Each
Director who is not a director, trustee, officer or employee of CSAM, PFPC or
any of their affiliates receives the following annual and per-meeting fees:

-------------------------------------------------------------------------------
                                                                 Fee for Each
                                              Fee for Each      Audit Committee
Fund                          Annual Fee    Meeting Attended   Meeting Attended
-------------------------------------------------------------------------------
Global Health Sciences Fund      $750             $250               $250*
-------------------------------------------------------------------------------
*     Alexander B. Trowbridge receives $325 per fund for serving as chairman of
      the Audit Committee.

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

Directors' Total Compensation
(for the fiscal period ended August 31, 2000)

---------------------------------------------------------------------------
Name of Director/Trustee   Global Health Sciences       All Investment
                                                     Companies in Warburg
                                    Fund             Pincus Fund Complex(1)
---------------------------------------------------------------------------
William W. Priest(2)                None                     None
---------------------------------------------------------------------------
Richard H. Francis                  $2000                  $73,750
---------------------------------------------------------------------------
Jack W. Fritz                       $2000                  $73,750
---------------------------------------------------------------------------
Jeffrey E. Garten(3)                 $250                  $43,000
---------------------------------------------------------------------------
James S. Pasman, Jr.                $2000                  $73,750
---------------------------------------------------------------------------
Steven N. Rappaport                 $2000                  $73,750
---------------------------------------------------------------------------
Alexander B. Trowbridge            $1,250                  $46,450
---------------------------------------------------------------------------

(1)   Each Director serves as a Director or Trustee of 45 investment companies
      and portfolios for which CSAM serves as investment adviser ("Fund
      Complex").

(2)   Mr. Priest receives compensation as an affiliate of CSAM, and,
      accordingly, receives no compensation from any Fund or any other
      investment company advised by CSAM.

(3)   Mr. Garten became a Director of the Fund effective December 21, 2000.

As of December 1, 2000 Directors or officers of the Fund as a group owned less
than 1% of the outstanding shares of the Fund.

Portfolio Managers of the Fund

            Susan L. Black and Peter T. Wen are Co-Portfolio Managers of the
Fund. Ms. Black has been associated with CSAM since Credit Suisse acquired the
Fund's predecessor adviser in July 1999 and joined the predecessor adviser in
1985. From 1979 until 1985 Ms. Black was a partner at Century Capital
Associates. From 1977 until 1978 Ms. Black was a vice president of research at
Donaldson, Lufkin & Jenrette. From 1973 until 1977 and from 1978 until 1979 Ms.
Black was a vice president of research at Drexel Burnham Lambert. From 1961
until 1973, Ms. Black was employed by Argus Research, first as a securities
analyst, then as director of research. Ms. Black received a B.A. degree from
Mount Holyoke College.


                                      -38-
<PAGE>

Mr. Wen has been associated with CSAM since 1999. Previously, Mr. Wen was an
investment analyst with Lynch & Mayer, Inc. from 1994 to 1999. Mr. Wen earned a
B.A. degree from Harvard University and an M.B.A. from the University of
Pennsylvania.

Investment Adviser and Co-Administrators

            CSAM, located at 466 Lexington Avenue, New York, New York
10017-3147, serves as investment adviser to the Fund pursuant to a written
agreement (the "Advisory Agreement"). CSAM is an indirect wholly-owned U.S.
subsidiary of Credit Suisse ("Credit Suisse"). Credit Suisse is a global
financial services company, providing a comprehensive range of banking and
insurance products. Active on every continent and in all major financial
centers, Credit Suisse comprises five business units -- Credit Suisse Asset
Management (asset management); Credit Suisse First Boston (investment banking);
Credit Suisse Private Banking (private banking); Credit Suisse (retail banking);
and Winterthur (insurance). Credit Suisse has approximately $680 billion of
global assets under management and employs approximately 62,000 people
worldwide. The principal business address of Credit Suisse is Paradeplatz 8, CH
8070, Zurich, Switzerland. For its services, CSAM will be paid (before any
voluntary waivers or reimbursements) a monthly fee computed at an annual rate of
1.00% of the Fund's average daily net assets.

            CSAM Ltd., located at Beaufort House, 15 St. Botolph Street, London
EC3A 7JJ, England, serves as sub-investment adviser to the Fund. CSAM Ltd. is a
corporation organized under the laws of England in 1982 and is registered as an
investment adviser under the Advisers Act. CSAM Ltd. is a diversified asset
manager, handling global equity, balanced, fixed income and derivative
securities accounts for other investment companies, corporate pension and
profit-sharing plans, state pension funds, union funds, endowments and other
charitable institutions. CSAM Ltd. has been in the money management business for
over 15 years and currently manages approximately $37 billion in assets.

            CSAM Ltd. is a wholly owned subsidiary of Credit Suisse Asset
Management (UK) Holding Limited ("CSAM Holding"). CSAM Holding is a wholly owned
subsidiary of Credit Suisse, the parent company of the Funds' investment
adviser, CSAM. Like Credit Suisse, CSAM Holding is located at Paradeplatz 8,
8001 Zurich, Switzerland.

            Subject to the supervision of CSAM, CSAM Ltd., in the exercise of
its best judgment, will provide investment advisory assistance and portfolio
management advice to the Fund in accordance with the Articles of Incorporation,
as may be amended from time to time, the Prospectuses and Statement of
Additional Information, as from time to time in effect, and in such manner and
to such extent as may from time to time be approved by the Board.

            Under the Sub-Advisory Agreement between CSAM and CSAM Ltd. (the
"Sub-Advisory Agreement" and with the Advisory Agreement, each an "Advisory
Agreement"), CSAM pays CSAM Ltd. a portion of the net quarterly amount (after
fee waivers and reimbursements) received by CSAM for CSAM's services as the
Fund's investment adviser. Upon the termination of the Sub-Advisory Agreement
before the end of a quarter, the fee for such part of that quarter shall be
prorated according to the proportion that such period bears to the full
quarterly period.


                                      -39-
<PAGE>

            CSAMSI and PFPC both serve as co-administrators to the Fund pursuant
to separate written agreements (the "CSAMSI Co-Administration Agreement" and the
"PFPC Co-Administration Agreement," respectively). CSAMSI became
co-administrator to the Fund on November 1, 1999. Prior to that, Counsellors
Funds Service, Inc. ("Counsellors Service") served as co-administrator to the
Fund. For the services provided by CSAMSI under the CSAMSI Co-Administration
Agreement, the Fund pays CSAMSI a fee calculated at an annual rate of .10% of
the Fund's average daily net assets. For the services provided by PFPC under the
PFPC Co-Administration Agreement, the Fund pays PFPC a fee calculated at an
annual rate of .11% of the Fund's first $500 million in average daily net
assets, .09% of the next $1 billion in average daily net assets and .07% of
average daily net assets exceeding $1.5 billion, exclusive of out-of-pocket
expenses. Each class of shares of the Fund bears its proportionate share of fees
payable to CSAM, CSAMSI and PFPC in the proportion that its assets bear to the
aggregate assets of the Fund at the time of calculation. These fees are
calculated at an annual rate based on a percentage of the Fund's average daily
net assets.

            For the following fiscal period ended August 31, 2000 or fiscal
years ended October 31, 1999 and 1998, as applicable, investment advisory fees
earned by CSAM or its predecessor, Warburg, waivers and net advisory fees for
the Fund were as follows:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
                                 Year/Period       Gross                      Net
           Fund                     Ended       Advisory Fee    Waiver    Advisory Fee
--------------------------------------------------------------------------------------
<S>                           <C>                 <C>          <C>          <C>
Global Health Sciences Fund   October 31, 1998    $432,399     $120,371     $312,028
                              October 31, 1999    $645,438     $154,130     $491,308
                              August 31, 2000     $479,215     $108,512     $370,703
------------------------------------------------------------------------------------
</TABLE>

            PFPC, CSAMSI and Counsellors Service (the Fund's predecessor
co-administrator), as applicable, earned the following amounts in
co-administration fees.

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
                           Year/Period                         Counsellors
      Fund                    Ended                PFPC          Service         CSAMSI
----------------------------------------------------------------------------------------
<S>                      <C>                <C>                  <C>             <C>
  Global Health          October 31, 1998        $45,297         $43,240           N/A
  Sciences Fund                             ($37,985 waived)
                       -----------------------------------------------------------------
                         October 31, 1999        $67,601         $64,544           N/A
                                            ($22,278 waived)
                       -----------------------------------------------------------------
                         August 31, 2000         $48,581           N/A           $47,921
                                            ($25,417 waived)
----------------------------------------------------------------------------------------
</TABLE>

Code of Ethics

            The Fund, CSAM, CSAM Ltd. and CSAMSI have each adopted a written
Code of Ethics (the "Code of Ethics"), which permits personnel covered by the
Code of Ethics ("Covered Persons") to invest in securities, including securities
that may be purchased or held by the Fund. The Code of Ethics also contains
provisions designed to address the conflicts of interest that could arise from
personal trading by advisory personnel, including: (1) all Covered Persons must
report their personal securities transactions at the end of each quarter; (2)
with certain limited exceptions, all Covered Persons must obtain preclearance
before executing any personal securities transactions; (3) Covered Persons may
not execute personal trades in a security if there


                                      -40-
<PAGE>

are any pending orders in that security by the Fund; and (4) Covered Persons may
not invest in initial public offerings.

            The Board reviews the administration of the Code of Ethics at least
annually and may impose sanctions for violations of the Code of Ethics.

Custodians and Transfer Agent

            PFPC Trust Company ("PFPC Trust") and State Street Bank and Trust
Company serve as custodians of the Fund's U.S. and non-U.S. assets,
respectively, pursuant to separate custodian agreements (the "Custodian
Agreements"). Under the Custodian Agreements, PFPC Trust 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. PFPC Trust may delegate its duties
under its Custodian Agreement with the Fund to a wholly owned direct or indirect
subsidiary of PFPC Trust 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
and PFPC Trust is authorized to select one or more domestic banks or trust
companies to serve as sub-custodian on behalf of the Fund. PFPC Trust has
entered into a sub-custodian agreement with PNC Bank, National Association
("PNC"), pursuant to which PNC provides asset safekeeping and securities
clearing services. PFPC Trust and PNC are indirect, wholly owned subsidiaries of
PNC Bank Corp. and their principal business address is 8800 Tinicum Boulevard,
Philadelphia, Pennsylvania 19153. The principal business address of State Street
is 225 Franklin Street, Boston, Massachusetts 02110.

            State Street also serves as the shareholder servicing, transfer and
dividend disbursing agent of 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., an affiliate of
State Street ("BFDS"), responsibility for most shareholder servicing functions.
BFDS's principal business address is 2 Heritage Drive, North Quincy,
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, of which one
billion shares are designated "Common Shares" and one billion shares are
designated "Advisor Shares." 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


                                      -41-
<PAGE>

voting for the election of Directors can elect all Directors. Shares are
transferable but have no preemptive, conversion or subscription 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 governing Board
unless and until such time as less than a majority of the members holding office
have been elected by investors. Any Director of the 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 the Fund.

            The Fund is an open-end management investment companies within the
meaning of the 1940 Act. The Fund was incorporated on October 31, 1996 under the
laws of the State of Maryland under the name "Warburg, Pincus Health Sciences
Fund, Inc." and changed its name to "Warburg, Pincus Global Health Sciences
Fund, Inc." effective February 29, 2000. On July 14, 2000, the Fund changed its
classification from "diversified" to "non-diversified" pursuant to shareholder
approval. Although authorized to issue two classes of shares, Common Shares and
Advisor Shares, the Fund currently offers only Common Shares.

Distribution and Shareholder Servicing

            Common Shares. The Fund has adopted a Shareholder Servicing and
Distribution Plan (the "Common Shares 12b-1 Plan"), pursuant to Rule 12b-1 under
the 1940 Act, pursuant to which the Fund pays CSAMSI a fee calculated at an
annual rate of .25% of the average daily net assets of the Common Shares of the
Fund. The fee is intended to compensate CSAMSI, or to enable CSAMSI to
compensate other persons ("Service Providers"), for providing Services (as
defined below) to the Fund. Services performed by CSAMSI or Service Providers
include (i) services that are primarily intended to result in, or that are
primarily attributable to, the sale of the Common Shares, as set forth in the
Common Shares 12b-1 Plan ("Selling Services") and (ii) ongoing servicing and/or
maintenance of the accounts of Common Shareholders of the Fund, as set forth in
the Common Shares 12b-1 Plan ("Shareholder Services", together with Selling
Services, "Services"). Shareholder Services may include, without limitation,
responding to Fund shareholder inquiries and providing services to shareholders
not otherwise provided by the Fund's distributor or transfer agent. Selling
Services may include, without limitation, (a) the printing and distribution to
prospective investors in Common Shares of prospectuses and statements of
additional information describing the Fund; (b) the preparation, including
printing, and distribution of sales literature, advertisements and other
informational materials relating to the Common Shares; (c) providing telephone
services relating to the Fund, including responding to inquiries of prospective
Fund investors; (d) formulating and implementing marketing and promotional
activities, including, but not limited to, direct mail promotions and
television, radio, newspaper, magazine and other mass media advertising and
obtaining whatever information, analyses and reports with respect to marketing
and promotional activities that the Fund may, from time to time, deem advisable.
In providing compensation for Services in accordance with this Plan, CSAMSI is
expressly authorized (i) to make, or cause to be made, payments to Service


                                      -42-
<PAGE>

Providers reflecting an allocation of overhead and other office expenses related
to providing Services and (ii) to make, or cause to be made, payments to
compensate selected dealers or other authorized persons for providing any
Services.

            Payments under the 12b-1 Plan are not tied exclusively to the
distribution expenses actually incurred by CSamsi and the payments may exceed
distribution expenses actually incurred.

            Pursuant to the Common Shares 12b-1 Plan, CSAMSI provides the Board
with periodic reports of amounts expended under the Common Shares 12b-1 Plan and
the purpose for which the expenditures were made.

            The Common Shares 12b-1 Plan was adopted on November 1, 1999. Prior
to that date, a substantially similar plan was in place with respect to the
Common Shares (the "Prior Common Shares 12b-1 Plan"). For the period ended
August 31, 2000, the Fund's Common Shares paid the following amounts pursuant to
the Prior Common Shares 12b-1 Plan, all of which was spent on advertising,
marketing communications and public relations:

               ------------------------------------------------
               Fund                                 Payment
               ------------------------------------------------
               Global Health Sciences Fund         $119,804
               ------------------------------------------------

            The Fund has authorized certain broker-dealers, financial
institutions, recordkeeping organizations and other financial intermediaries
(collectively, "Service Organizations") or, if applicable, their designees to
enter confirmed purchase and redemption orders on behalf of their clients and
customers, with payment to follow no later than the Fund's pricing on the
following business day. If payment is not received by such time, the Service
Organization could be held liable for resulting fees or losses. The Fund may be
deemed to have received a purchase or redemption order when a Service
Organization, or, if applicable, its authorized designee, accepts the order.
Such orders received by the Fund in proper form will be priced at the Fund's net
asset value next computed after they are accepted by the Service Organization or
its authorized designee. Service Organizations may impose transaction or
administrative charges or other direct fees, which charges or fees would not be
imposed if Fund shares are purchased directly from the Fund.

            For administration, subaccounting, transfer agency and/or other
services, CSAM or its affiliates may pay Service Organizations a fee of up to
 .50% of the average annual value of accounts with the Fund maintained by such
Service Organizations. Service Organizations may also be reimbursed for
marketing costs. The Service Fee payable to any one Service Organization is
determined based upon a number of factors, including the nature and quality of
services provided, the operations processing requirements of the relationship
and the standardized fee schedule of the Service Organization or recordkeeper.
The Fund may reimburse part of the Service Fee at rates they would normally pay
to the transfer agent for providing the services.

            Advisor Shares. The Fund (which currently does not offer Advisor
Shares) has entered into agreements ("Agreements") with institutional
shareholders of record, broker-dealers, financial institutions, depository
institutions, retirement plans and financial intermediaries


                                      -43-
<PAGE>

("Institutions") to provide certain distribution, shareholder servicing,
administrative and/or accounting services for their clients or customers (or
participants in the case of retirement plans) ("Customers") who are beneficial
owners of Advisor Shares. Agreements will be governed by a distribution plan
(the "Advisor Share 12b-1 Plan") pursuant to Rule 12b-1 under the 1940 Act,
pursuant to which the Fund pays in consideration for services, a fee calculated
at an annual rate of .50% of the average daily net assets of the Advisor Shares
of the Fund. Such payments may be paid to Institutions directly by the Fund or
by CSAMSI on behalf of the Fund The Advisor Share 12b-1 Plan requires the Board,
at least quarterly, to receive and review written reports of amounts expended
under the Advisor Share 12b-1 Plan and the purposes for which such expenditures
were made. The Advisor Shares 12b-1 Plan was adopted on November 1, 1999. Prior
to that date, a substantially similar plan was in place with respect to the
Advisor Shares (the "Prior Advisor Shares 12b-1 Plan").

            Certain Institutions may receive additional fees from CSAMSI, CSAM
or their affiliates for providing supplemental services in connection with
investments in the Fund. Institutions may also be reimbursed for marketing and
other costs. Additional fees may be up to 0.25% per year of the value of Fund
accounts maintained by the firm and/or, in certain cases, may include a one-time
fee of up to 0.50% of the value of assets invested in the accounts. Fees payable
to any particular Institution are determined based upon a number of factors,
including the nature and quality of the services provided, the operations
processing requirements of the relationship and the standardized fee schedule of
the Institution. To the extent that CSAMSI, CSAM or their affiliates provide
additional compensation or reimbursements for marketing expenses, such payments
would not represent an additional expense to the Fund or their shareholders.

            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.

            General. The Advisor Share 12b-1 Plans and the Common Shares 12b-1
Plans will continue in effect for so long as their continuance is specifically
approved at least annually by the Fund's Board, including a majority of the
Directors who are not interested persons of the Fund and who have no direct or
indirect financial interest in the operation of the Advisor Shares 12b-1 Plans
or the Common Shares 12b-1 Plans, as the case may be ("Independent Directors").


                                      -44-
<PAGE>

Any material amendment of the Advisor Shares 12b-1 Plans or the Common Shares
12b-1 Plans would require the approval of the Board in the same manner. Neither
the Advisor Shares 12b-1 Plans nor the Common Shares 12b-1 Plans may be amended
to increase materially the amount to be spent thereunder without shareholder
approval of the relevant class of shares. Each Advisor Share 12b-1 Plan and the
Common Shares 12b-1 Plan may be terminated at any time, without penalty, by vote
of a majority of the Independent Directors or by a vote of a majority of the
outstanding voting securities of the relevant class of shares.

                 ADDITIONAL PURCHASE AND REDEMPTION INFORMATION

            The offering price of the Fund's shares is equal to the per share
net asset value of the relevant class of shares of the Fund.

            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 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 has elected,
however, to be governed by Rule 18f-1 under the 1940 Act as a result of which
the Fund is obligated to redeem shares, with respect to any one shareholder
during any 90 day period, solely in cash up to the lesser of $250,000 or 1% of
the net asset value of that Fund at the beginning of the period.

            Automatic Cash Withdrawal Plan. An automatic cash withdrawal plan
(the "Plan") is available to shareholders who wish to receive specific amounts
of cash periodically. Withdrawals may be made under the Plan by redeeming as
many shares of the relevant Fund as may be necessary to cover the stipulated
withdrawal payment. To the extent that withdrawals exceed dividends,
distributions and appreciation of a shareholder's investment in 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.

                               EXCHANGE PRIVILEGE

            An exchange privilege with certain other funds advised by CSAM is
available to investors in the Fund. A Common Shareholder may exchange Common
Shares of the Fund for Common Shares of another Warburg Pincus fund at their
respective net asset values. If and when offered, an Advisor Shareholder may
exchange Advisor Shares of the Fund for Advisor Shares of another Warburg Pincus
Fund at their respective net asset values. If an exchange


                                      -45-
<PAGE>

request is received by Warburg Pincus Funds or their agent prior to the close of
regular trading on the NYSE, the exchange will be made at the Fund's net asset
value determined at the end of that business day. Exchanges will be effected
without a sales charge but must satisfy the minimum dollar amount necessary for
new purchases. The Fund may refuse exchange purchases at any time without prior
notice.

            The exchange privilege is available to shareholders residing in any
state in which the 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 shares of
the Fund for 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.

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

                     ADDITIONAL INFORMATION CONCERNING TAXES

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

The Fund and Its Investments

            The Fund intends to continue to qualify as a regulated investment
company under the Code during each of its taxable years. To so qualify, the Fund
must, among other things: (a) derive at least 90% of its gross income in each
taxable year from dividends, interest, payments with respect to securities loans
and gains from the sale or other disposition of stock, securities or foreign
currencies, or other income (including, but not limited to, gains from options,
futures or forward contracts) derived with respect to its business of investing
in such stock, securities or currencies; and (b) diversify its holdings so that,
at the end of each quarter of the Fund's taxable year, (i) at least 50% of the
market value of the Fund's assets is represented by cash, securities of other
regulated investment companies, United States Government Securities and other
securities, with such other securities limited, in respect of any one issuer, to
an amount not greater than 5% of the Fund's assets and not greater than 10% of
the outstanding voting securities of such issuer and (ii) not more than 25% of
the value of its assets is invested in the securities (other than U.S.


                                      -46-
<PAGE>

Government Securities or securities of other regulated investment companies) of
any one issuer or any two or more issuers that the Fund controls and which are
determined to be engaged in the same or similar trades or businesses or related
trades or businesses.

            As a regulated investment company, the Fund will not be subject to
United States federal income tax on its net investment income (i.e., income
other than its net realized long-term and short-term capital gains) and on its
net realized long-term and short-term capital gains, if any, that it distributes
to its shareholders, provided that an amount equal to at least 90% of the sum of
its investment company taxable income (i.e., 90% of its taxable income minus the
excess, if any, of its net realized long-term capital gains over its net
realized short-term capital losses (including any capital loss carryovers), plus
or minus certain other adjustments as specified in the Code) and its net
tax-exempt income for the taxable year is distributed to its shareholders, but
will be subject to tax at regular corporate rates on any taxable income or gains
that it does not distribute. Any dividend declared by the Fund in October,
November or December of any calendar year and payable to shareholders of record
on a specified date in such a month shall be deemed to have been received by
each shareholder on December 31 of such calendar year and to have been paid by
the Fund not later than such December 31, provided that such dividend is
actually paid by the Fund during January of the following calendar year.

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

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


                                      -47-
<PAGE>

any underdistribution or overdistribution, as the case may be, from the previous
year. The Fund anticipates that it will pay such dividends and will make such
distributions as are necessary in order to avoid the application of this excise
tax.

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

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

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

Passive Foreign Investment Companies

            If the Fund purchases shares in certain foreign investment entities,
called "passive foreign investment companies" ("PFICs"), it may be subject to
United States federal income tax on a portion of any "excess distribution" or
gain from the disposition of such shares even if such


                                      -48-
<PAGE>

income is distributed as a taxable dividend by the Fund to its shareholders.
Additional charges in the nature of interest may be imposed on the Fund in
respect of deferred taxes arising from such distributions or gains. If the Fund
was to invest in a PFIC and elected to treat the PFIC as a "qualified electing
fund" under the Code, in lieu of the foregoing requirements, the Fund might be
required to include in income each year a portion of the ordinary earnings and
net capital gains of the qualified electing fund, even if not distributed to the
Fund, and such amounts would be subject to the 90% and excise tax distribution
requirements described above. In order to make this election, the Fund would be
required to obtain certain annual information from the PFICs in which it
invests, which may be difficult or impossible to obtain.

            Alternatively, the Fund may make a mark-to-market election that will
result in the Fund being treated as if it had sold and repurchased all of the
PFIC stock at the end of each year. In such case, the Fund would report any such
gains as ordinary income and would deduct any such losses as ordinary losses to
the extent of previously recognized gains. The election, once made, would be
effective for all subsequent taxable years of the Fund, unless revoked with the
consent of the IRS. By making the election, the Fund could potentially
ameliorate the adverse tax consequences with respect to its ownership of shares
in a PFIC, but in any particular year may be required to recognize income in
excess of the distributions it receives from PFICs and its proceeds from
dispositions of PFIC stock. The Fund may have to distribute this "phantom"
income and gain to satisfy the 90% distribution requirement and to avoid
imposition of the 4% excise tax. The Fund will make the appropriate tax
elections if possible, and take any additional steps that are necessary to
mitigate the effect of these rules.

Dividends and Distributions

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

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

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


                                      -49-
<PAGE>

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

Sales of Shares

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

Foreign Taxes

            Income received by the Fund from non-U.S. sources may be subject to
withholding and other taxes imposed by other countries. Because it is not
expected that more than 50 percent of the value of the Fund's total assets at
the close of its taxable year will consist of stock and securities of non-U.S.
corporations, it is not expected that the Fund will be eligible to elect to
"pass through" to the Fund's shareholders the amount of foreign income and
similar taxes paid by the Fund. In the absence of such an election, the foreign
taxes paid by the Fund will reduce its investment company taxable income, and
distributions of investment company taxable income received by the Fund from
non-US sources will be treated as United States source income.

Backup Withholding

            The Fund may be required to withhold, for United States federal
income tax purposes, 31% of the dividends and distributions payable to
shareholders who fail to provide the Fund with their correct taxpayer
identification number or to make required certifications, or who have been
notified by the IRS that they are subject to backup withholding. Certain
shareholders are exempt from backup withholding. Backup withholding is not an
additional tax and any amount withheld may be credited against a shareholder's
United States federal income tax liabilities.


                                      -50-
<PAGE>

Notices

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

Special Tax Matters Relating to Zero Coupon Securities

            Investment by the Fund in zero coupon securities may create special
tax consequences. Zero coupon securities do not make interest payments; however,
a portion of the difference between a zero coupon security's maturity value and
its purchase price is imputed as income to the Fund each year even though the
Fund receives no cash distribution until maturity. Under the U.S. federal tax
laws applicable to mutual funds, the Fund will not be subject to tax on this
income if it pays dividends to its shareholders substantially equal to all the
income received from, or imputed with respect to, its investments during the
year, including its zero coupon securities. These dividends will ordinarily
constitute taxable income to shareholders of the Fund.

Other Taxation

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

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

                          DETERMINATION OF PERFORMANCE

            From time to time, the Fund may quote the total return of its Common
Shares and/or, if and when offered, Advisor Shares in advertisements or in
reports and other communications to shareholders. The net asset value of Common
Shares is listed in The Wall Street Journal each business day under the heading
"Warburg Pincus Funds." Current total return figures may be obtained by calling
Warburg Pincus Funds at (800) 927-2874.

            With respect to the Fund's Common Shares, the Fund's average annual
total returns for the indicated periods ended August 31, 2000 were as follows
(performance figures calculated without waiver by the Fund's service
provider(s), if any, are noted in italics):


                                      -51-
<PAGE>

                                  TOTAL RETURN

                                  Common Shares

<TABLE>
<CAPTION>
                                                                          Period from the
                                                                           commencement
                       One-Year       Three-Year    Five-Year  Ten-Year    of operations
-----------------------------------------------------------------------------------------
<S>                 <C>    <C>       <C>    <C>        <C>       <C>       <C>    <C>
Global Health
Sciences Fund       54.02% 53.63%    31.21% 30.84%     N/A       N/A       28.96% 28.56%
(12/31/96)
</TABLE>

            These total return figures show the average percentage change in
value of an investment in the Fund from the beginning of the measurement period
to the end of the measurement period. The figures reflect changes in the price
of the Fund's shares assuming that any income dividends and/or capital gain
distributions made by the Fund during the period were reinvested in 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).

            These figures are calculated by finding the average annual
compounded rates of return for the one-, five- and ten- (or such shorter period
as the relevant class of shares has been offered) year periods that would equate
the initial amount invested to the ending redeemable value according to the
following formula: P (1 + T)^n = ERV. For purposes of this formula, "P" is a
hypothetical investment of $1,000; "T" is average annual total return; "n" is
number of years; and "ERV" is the ending redeemable value of a hypothetical
$1,000 payment made at the beginning of the one-, five- or ten-year periods (or
fractional portion thereof). Total return or "T" is computed by finding the
average annual change in the value of an initial $1,000 investment over the
period and assumes that all dividends and distributions are reinvested during
the period. Investors should note that this performance may not be
representative of the Fund's total return over longer market cycles.

            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 any Fund's return over a longer
market cycle. The Fund may also advertise aggregate total return figures for
various periods, representing the cumulative change in value of an investment in
the relevant Fund 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).

            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


                                      -52-
<PAGE>

elapsed in the current calendar year or most recent three months, as the case
may be. Investors should note that this performance may not be representative of
the Fund's total return in longer market cycles.

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

            In addition, reference may be made in advertising a class of Fund
shares to opinions of Wall Street economists and analysts regarding economic
cycles and their effects historically on the performance of small companies,
both as a class and relative to other investments. The Fund may also discuss its
beta, or volatility relative to the market, and make reference to its relative
performance in various market cycles in the United States.

            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) various unmanaged indexes,
developed and maintained by S&P, relating to the securities of health sciences
companies; or (iii) other appropriate indexes of investment securities or with
data developed by CSAM 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 Barron's,
Business Week, Financial Times, Forbes, Fortune, Inc., Institutional Investor,
Investor's Business Daily, Money, Morningstar, Mutual Fund Magazine, SmartMoney,
The Wall Street Journal and Worth. Morningstar, Inc. rates funds in broad
categories based on risk/reward analyses over various time periods. In addition,
the Fund may from time to time compare the expense ratio of its Common Shares to
that of any investment companies with similar objectives and policies, based on
data generated by Lipper Analytical Services, Inc. or similar investment
services that monitor mutual funds.

            In reports or other communications to investors or in advertising,
the Fund may also describe the general biography or work experience of the
portfolio managers of the Fund and may include quotations attributable to the
portfolio managers describing approaches taken in managing the Fund's
investments, research methodology underlying stock selection or the Fund's
investment objective. In addition, the Fund and its portfolio managers may
render periodic updates of Fund activity, which may include a discussion of
significant portfolio holdings; analysis of holdings by industry, country,
credit quality and other characteristics; and comparison and analysis of the
Fund with respect to relevant market industry benchmarks. The Fund may also
discuss measures of risk, the continuum of risk and return relating to different


                                      -53-
<PAGE>

investments and the potential impact of foreign stocks on a portfolio otherwise
composed of domestic securities.

                       INDEPENDENT ACCOUNTANTS AND COUNSEL

            PricewaterhouseCoopers LLP ("PwC"), with principal offices at Two
Commerce Square, Philadelphia, Pennsylvania 19103, serves as independent
accountants for the Fund. The financial statements that are incorporated by
reference into this Statement of Additional Information have been audited by PwC
and have been incorporated by reference herein in reliance upon the report of
such firm of independent accountants given upon their authority as experts in
accounting and auditing.

            Willkie Farr & Gallagher serves as counsel for the Fund and provides
legal services from time to time for CSAM and CSAMSI.

                                  MISCELLANEOUS

            The Fund is not sponsored, endorsed, sold or promoted by Warburg,
Pincus & Co. Warburg, Pincus & Co. makes no representation or warranty, express
or implied, to the owners of the Fund or any member of the public regarding the
advisability of investing in securities generally or in the Fund particularly.
Warburg, Pincus & Co. licenses certain trademarks and trade names of Warburg,
Pincus & Co., and is not responsible for and has not participated in the
calculation of the Fund's net asset value, nor is Warburg, Pincus & Co. a
distributor of the Fund. Warburg, Pincus & Co. has no obligation or liability in
connection with the administration, marketing or trading of the Fund.

            As of December 21, 2000, the name, address and percentage of
ownership of each person that owns of record 5% or more of the Fund's
outstanding shares were as follows:

                                                  Common Shares
                                                  -------------

          Charles Schwab & Co. Inc.*                 31.43%
          Special Custody Account for the
          Exclusive Benefit of Customers
          Attn Mutual Funds
          101 Montgomery St.
          San Francisco, CA  94104-4122

          National Financial Services Corp.*         17.51%
          FBO Customers
          PO Box 3908
          Church Street Station
          New York, NY  10008-3908

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


                                      -54-
<PAGE>

                              FINANCIAL STATEMENTS

            The Fund's audited annual report dated August 31, 2000, which either
accompanies this Statement of Additional Information or has previously been
provided to the investor to whom this Statement of Additional Information is
being sent, is incorporated herein by reference with respect to all information
regarding the relevant Fund included therein. The Fund will furnish without
charge a copy of its annual report upon request by calling the Warburg Pincus
Funds at 800-927-2874.


                                      -55-
<PAGE>

                                    APPENDIX

                             DESCRIPTION OF RATINGS

Commercial Paper Ratings

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

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

Short-Term Note Ratings

            The following summarizes the two highest ratings used by S&P for
short-term notes:

            SP-1 - Loans bearing this designation evidence a very strong or
strong capacity to pay principal and interest. Those issues determined to
possess overwhelming safety characteristics will be given a plus sign
designation.

            SP-2 - Loans bearing this designation evidence a satisfactory
capacity to pay principal and interest..

            The following summarizes the two highest ratings used by Moody's for
short-term notes and variable rate demand obligations:

            MIG-1/VMIG-1 - Obligations bearing these designations are of the
best quality, enjoying strong protection from established cash flows of funds
for their servicing or from established and broad-based access to the market for
refinancing, or both.

            MIG-2/VMIG-2 - Obligations bearing these designations are of high
quality with margins of protection ample although not so large as in the
preceding group.

Corporate Bond and Municipal Obligations Ratings

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


                                      A-1
<PAGE>

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

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

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

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

            BB, B and CCC - Debt rated BB and B 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, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions, which could
lead to inadequate capacity to meet timely interest and principal payments. The
BB rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB rating.

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

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

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

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


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

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

            D - Debt rated D is in payment default. The D rating category is
used when interest payments or principal payments are not made on the date due
even if the applicable grace period has not expired, unless S&P believes that
such payments will be made during such grace period. The D rating also will be
used upon the filing of a bankruptcy petition if debt service payments are
jeopardized.

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

            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.


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

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

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

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


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