<PAGE>
<PAGE>
SEMIANNUAL
REPORT
June 30, 1997
WARBURG PINCUS TRUST II
FIXED INCOME PORTFOLIO
GLOBAL FIXED INCOME PORTFOLIO
The Warburg Pincus Trust II (the 'Trust') Shares are not available
directly to individual investors but may be offered only through certain
insurance products and pension and retirement plans.
More complete information about the Trust, including charges and expenses
and, where applicable, the special considerations and risks associated
with international investing is provided in the Prospectus, which must
precede or accompany this document and which should be read carefully
before investing. You may obtain additional copies by calling
(800)369-2728or by writing to the Trust, P.O. Box 9030, Boston, MA
02205-9030.
[Logo]
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<PAGE>
From time to time, the Portfolios' investment adviser and co-administrator may
waive some fees and/or reimburse some expenses, without which performance would
be lower. Waivers and/or reimbursements are subject to change.
Returns are historical and include change in share price and reinvestment of
dividends and capital gains. Past performance cannot guarantee future results.
Returns and share price will fluctuate, and redemption value may be more or less
than original cost.
The views of the Portfolios' management are as of the date of the letters and
portfolio holdings described in this semiannual report are as of June 30, 1997;
these views and portfolio holdings may have changed subsequent to these dates.
Nothing in this semiannual report is a recommendation to purchase or sell
securities.
<PAGE>
<PAGE>
WARBURG PINCUS TRUST II -- FIXED INCOME PORTFOLIO
SEMIANNUAL ADVISER'S REPORT
- --------------------------------------------------------------------------------
Dear Shareholder: August 15, 1997
The objective of Warburg Pincus Trust II -- Fixed Income Portfolio (the
'Portfolio') is total return consistent with prudent investment management. The
Portfolio pursues its objective by investing in a wide range of corporate and
U.S. government fixed-income securities.
For the three months ended June 30, 1997 (the Portfolio's inception date was
March 31, 1997), the Portfolio had a total return of 3.30%, vs. a 2.95% gain in
the Lehman Intermediate Government/Corporate Bond Index.*
The April-through-June span was a positive one for fixed-income investing,
with virtually all major U.S. bond indexes posting at least modest gains. The
bond market struggled in the early part of the period, however, due to fears
that the Federal Reserve would continue to raise short-term interest rates as a
preemptive strike against inflation, given the strength of the economy (the Fed,
which has typically phased in higher rates over time, had just raised rates by a
quarter of a percentage point at its March 25 meeting). These concerns pushed up
the yield on the U.S. Treasury's 30-year bond to 7.17% by mid-April, from 7.09%
at the start of the period. But because inflation remained benign, continuing a
longer-term trend, and economic growth appeared to be slowing, the Fed decided
to hold rates steady at its May gathering. That, along with a growing consensus
that the Fed would not act to tighten again in July, helped the bond market
finish the period on a strong note, and the long bond's yield stood at 6.78% on
June 30.
Given the above, management of interest-rate exposure played an important
role in the performance of fixed-income portfolios. Our strategy over the three
months was to avoid making interest-rate bets per se, but instead to attempt to
optimally position the Portfolio on the yield curve, given our outlook on the
market from a risk-vs.-reward perspective. Overall, these efforts contributed
positively to the Portfolio's relative performance.
We also sought to enhance the Portfolio's return (while managing our
liquidity and credit risk) through sector allocation. We continued to find
Treasuries attractively valued on a risk-adjusted basis, and thus they comprised
the bulk of the Portfolio during the April-through-June span. One noteworthy
move we made during the period was to significantly increase the Portfolio's
stake in corporate bonds, adding a number of investment-grade securities that we
believed to be relatively inexpensive. We also continued to find value in the
mortgage-backed area, where the Portfolio's holdings included some commercial
mortgage-backed securities that we found to be particularly attractive.
Elsewhere, we held relatively small positions in real-estate investment
<PAGE>
<PAGE>
trusts preferred stocks, and these issues contributed positively to the
Portfolio's performance over the reporting period.
<TABLE>
<S> <C>
Dale C. Christensen M. Anthony E. van Daalen
Co-Portfolio Manager Co-Portfolio Manager
</TABLE>
- ------------
* The Lehman Intermediate Government/Corporate Bond Index is an unmanaged index
(with no investment objective) of intermediate-term government and corporate
bonds, and is calculated defined by Lehman Brothers Inc.
2
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<PAGE>
WARBURG PINCUS TRUST II -- GLOBAL FIXED INCOME PORTFOLIO
SEMIANNUAL ADVISER'S REPORT
- --------------------------------------------------------------------------------
Dear Shareholder: August 15, 1997
The objective of Warburg Pincus Trust II -- Global Fixed Income Portfolio
(the 'Portfolio') is total return -- consistent with prudent investment
management -- through a combination of interest income, currency gains and
capital appreciation. The Portfolio's holdings mainly include a wide range of
investment-grade, income-producing securities of corporate and government
issuers.
For the three months ended June 30, 1997 (the Portfolio's inception date was
March 31, 1997), the Portfolio had a total return of 2.90%, vs. gains of 3.22%
for the Salomon Brothers World Government Bond Index (Currency -- Hedged)* and
3.42% for the Lipper World Income Funds Average.**
The April-through-June span was a positive one for most global fixed-income
markets. Against a general backdrop of moderate economic growth and subdued
inflation, virtually all markets posted significant gains in local-currency
terms. Our geographic emphasis during the reporting period was on dollar-bloc
countries, most notably the U.S., where we saw particularly attractive yields on
an inflation-adjusted basis. Our holdings here consisted mostly of Treasuries
from the intermediate portion of the yield curve. We also found value in
Canadian and Australian bonds, and maintained significant positions in those
markets during the period.
Elsewhere, our most noteworthy area of concentration during the three months
was Continental Europe (most specifically, Germany), where bond markets have
generally benefited from progress toward European Monetary Union (most countries
here have been striving to lower their deficits and keep inflation under control
in order to eventually participate in EMU). We avoided the region's 'peripheral'
markets, such as Italy and Spain, as we viewed them as expensive from a
risk-vs.-reward perspective.
In terms of currency strategies, we hedged virtually all of the Portfolio's
foreign-currency exposure throughout, which is consistent with our broader
strategy of controlling overall risk. Given the dollar's strength against most
currencies over the April-through-June period, this clearly had a positive
impact on the Portfolio's performance.
<TABLE>
<S> <C>
Laxmi C. Bhandari Dale C. Christensen
Co-Portfolio Manager Co-Portfolio Manager
</TABLE>
- ------------
* The Salomon Brothers World Government Bond Index (Currency-Hedged) is a
market-capitalization-weighted index designed to track major government debt
markets and is currency-hedged into dollars.
** The Lipper World Income Funds Average is an arithmetic average of all world
income funds, tracked by Lipper Analytical Services, that invest in non-U.S.
dollar and U.S. dollar debt instruments with unspecified maturities and
durations, or other income-producing securities.
3
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WARBURG PINCUS TRUST II -- FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS
June 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
PAR (MOODY'S/S&P) MATURITY RATE % VALUE
- ---------- -------------- -------- ------ --------
<C> <S> <C> <C> <C> <C>
CORPORATE BOND/NOTES (16.8%)
$15,000 ABN-AMRO Bank N.V. New York Branch Subordinate
Deposit Notes (Callable 08/01/04 @ $100.00) (Aa2, NR) 08/01/09 8.250 $ 15,788
10,000 First Industrial Realty L.P.
(Putable 05/15/02 @ $100.00) (Baa2, BBB) 05/15/27 7.150 10,063
15,000 J.C. Penny & Co., Inc. Debentures (A2, A) 08/15/26 6.900 15,131
10,000 Lowes Companies Medium Term Note (Putable
05/15/07 @ $100.00) (A2, A) 05/15/37 7.110 10,100
10,000 Merck and Company, Inc. Medium Term Notes
(Putable 05/03/99 @ $100.00) (Aaa, AAA) 05/03/37 5.760 10,038
10,000 Midland Bank PLC Yankee Subordinate Notes
(Putable 05/01/07 @ $100.00) (A1, A) 05/01/25 7.650 10,450
10,000 Norfolk Southern Corp. (Putable 05/01/04 @
$100.00) (Baa1, BBB+) 05/01/37 7.050 10,150
10,000 Phillips Electronics N.V. Notes (Putable
06/01/06 @ $100.00) (A3, BBB+) 06/01/26 7.200 10,038
--------
TOTAL CORPORATE BONDS/NOTES (Cost $90,865) 91,758
--------
MORTGAGE-BACKED SECURITIES (5.7%)
30,194 Nomura Asset Securities Corp. Series 1994-4B,
Class 4A
(Cost $30,947) (Aaa, AAA) 09/25/24 8.300 31,080
--------
UNITED STATES TREASURY OBLIGATIONS (73.5%)
70,000 U.S. Treasury Note 07/15/98 8.250 71,679
145,000 U.S. Treasury Note 08/15/02 6.375 145,017
175,000 U.S. Treasury Note 02/15/05 7.500 185,148
--------
TOTAL UNITED STATES TREASURY OBLIGATIONS (Cost $398,225) 401,844
--------
<CAPTION>
NUMBER
OF SHARES
- ----------
<C> <S> <C> <C> <C> <C>
COMMON STOCK (3.1%)
300 Great Lakes REIT, Inc. 4,931
600 Ocwen Asset Investment Corp. 12,150
--------
TOTAL COMMON STOCK (Cost $14,250) 17,081
--------
PREFERRED STOCK (0.9%)
200 Equity Residential Properties Trust REIT (Cost
$5,000) 8.600 5,100
--------
$546,863
TOTAL INVESTMENTS AT VALUE (100.0%) (Cost $539,287*)
--------
--------
</TABLE>
INVESTMENT ABBREVIATIONS
REIT = Real Estate Investment Trust
- --------------------------------------------------------------------------------
* Also cost for federal income tax purposes.
See Accompanying Notes to Financial Statements.
4
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WARBURG PINCUS TRUST II -- GLOBAL FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS
June 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
PAR+ (MOODY'S/S&P) MATURITY RATE % VALUE
- ------------ ------------- -------- ------- ----------
<C> <S> <C> <C> <C> <C>
BONDS (48.4%)
Australia (2.8%)
45,000(A) Pacific Dunlop (Convertible) (NR, NR) 07/02/97 6.750 $ 45,113
----------
Canada (9.3%)
200,000 Canadian Government (Aaa, AAA) 08/01/99 6.500 149,318
----------
China (6.3%)
Shanghai Investment Holdings, Ltd.
100,000(A) (Convertible) (NR, NR) 06/12/02 1.000 101,500
----------
Germany (19.0%)
300,000 Bundesrepublic Deutschland (Aaa, AAA) 11/11/04 7.500 194,736
200,000 Bundesrepublic Deutschland (Aaa, AAA) 01/04/24 6.250 111,577
----------
306,313
----------
Moldova (6.3%)
100,000(A) Republic of Moldova (NR, NR) 06/13/02 9.875 101,875
----------
South Korea (4.7%)
75,000(A) Export - Import Bank Korea (A1, AA-) 06/25/01 7.250 75,272
----------
TOTAL BONDS (Cost $779,470) 779,391
----------
UNITED STATES TREASURY OBLIGATIONS (51.6%)
838,000 U.S. Treasury Note (Cost $825,454) 02/15/00 5.875 831,438
----------
TOTAL INVESTMENTS AT VALUE (100.0%) (Cost $1,604,924*) $1,610,829
----------
----------
</TABLE>
INVESTMENT ABBREVIATIONS
NR = Not Rated
- --------------------------------------------------------------------------------
* Also cost for federal income tax purposes.
+ Unless otherwise indicated below, all securities are denominated in the
currency of the issuer's country of origin.
(A) Denominated in U.S. Dollars
See Accompanying Notes to Financial Statements.
5
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WARBURG PINCUS TRUST II -- FIXED INCOME PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments at value (Cost $539,287) $546,863
Deferred offering/organizational costs 25,622
Cash 19,253
Dividends and interest receivable 12,850
--------
Total assets 604,588
--------
LIABILITIES:
Accrued expenses 36,396
--------
Total liabilities 36,396
--------
NET ASSETS applicable to 55,000 Shares outstanding $568,192
--------
--------
NET ASSET VALUE, offering and redemption price per Share ($568,192[div]55,000) $10.33
------
------
</TABLE>
See Accompanying Notes to Financial Statements.
6
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<PAGE>
WARBURG PINCUS TRUST II -- GLOBAL FIXED INCOME PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments at value (Cost $1,604,924) $1,610,829
Receivable for investment securities sold 49,824
Interest receivable (Cost $37,690) 37,322
Receivable for unrealized appreciation on forward contracts 5,451
Deferred offering/organizational costs 25,622
Cash 1,148
Other assets 1,475
----------
Total assets 1,731,671
----------
LIABILITIES:
Payable for investment securities purchased 98,466
Accrued expenses 37,933
----------
Total liabilities 136,399
----------
NET ASSETS applicable to 155,000 Shares outstanding $1,595,272
----------
----------
NET ASSET VALUE, offering and redemption price per Share
($1,595,272[div]155,000) $10.29
------
------
</TABLE>
See Accompanying Notes to Financial Statements.
7
<PAGE>
<PAGE>
WARBURG PINCUS TRUST II
STATEMENTS OF OPERATIONS
For the Period Ended June 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FIXED INCOME GLOBAL FIXED INCOME
PORTFOLIO(1) PORTFOLIO(1)
------------ -------------------
<S> <C> <C>
INVESTMENT INCOME:
Interest $ 8,458 $ 24,720
Dividends 139 0
------ ------
Total investment income 8,597 24,720
------ ------
EXPENSES:
Investment advisory 689 1,939
Administrative services 207 582
Audit 4,964 4,964
Custodian/Sub-custodian 335 2,730
Legal 1,654 1,654
Offering/Organizational costs 6,038 6,038
Printing 1,986 1,986
Registration 330 331
Transfer agent 2,984 2,990
Trustees 1,034 1,034
Miscellaneous 330 331
------ ------
20,551 24,579
Less fees waived and expenses reimbursed (19,187) (20,740)
------ ------
Total expenses 1,364 3,839
------ ------
Net investment income 7,233 20,881
------ ------
NET REALIZED AND UNREALIZED GAIN FROM
INVESTMENTS AND FOREIGN CURRENCY RELATED ITEMS:
Net realized gain from security transactions 3,383 3,467
Net realized gain from foreign currency related items 0 9,936
Net unrealized appreciation from investments and
foreign currency related items 7,576 10,988
------ ------
Net realized and unrealized gain from investments and
foreign currency related items 10,959 24,391
------ ------
Net increase in net assets resulting from operations $ 18,192 $ 45,272
------ ------
------ ------
</TABLE>
- --------------------------------------------------------------------------------
(1) For the period March 31, 1997 (Commencement of Operations) through June 30,
1997.
See Accompanying Notes to Financial Statements.
8
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WARBURG PINCUS TRUST II
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FIXED INCOME GLOBAL FIXED INCOME
PORTFOLIO PORTFOLIO
------------------- -------------------
FOR THE PERIOD FOR THE PERIOD
MARCH 31, 1997 MARCH 31, 1997
(COMMENCEMENT OF (COMMENCEMENT OF
OPERATIONS) THROUGH OPERATIONS) THROUGH
JUNE 30,1997 JUNE 30,1997
(UNAUDITED) (UNAUDITED)
------------------- -------------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income $ 7,233 $ 20,881
Net realized gain from security transactions 3,383 3,467
Net realized gain from foreign currency related
items 0 9,936
Net unrealized appreciation from investments and
foreign currency related items 7,576 10,988
------- --------
Net increase in net assets resulting from
operations 18,192 45,272
------- --------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from sale of shares 500,000 1,500,000
------- --------
Net increase in net assets from capital share
transactions 500,000 1,500,000
------- --------
Net increase in net assets 518,192 1,545,272
NET ASSETS:
Beginning of period 50,000 50,000
------- --------
End of period $ 568,192 $ 1,595,272
------- --------
------- --------
Undistributed net investment income $ 7,233 $ 20,881
------- --------
------- --------
</TABLE>
See Accompanying Notes to Financial Statements.
9
<PAGE>
<PAGE>
WARBURG PINCUS TRUST II -- FIXED INCOME PORTFOLIO
FINANCIAL HIGHLIGHTS
(For a Share of the Portfolio Outstanding Throughout the Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
MARCH 31, 1997
(COMMENCEMENT OF
OPERATIONS) THROUGH
JUNE 30, 1997
(UNAUDITED)
-------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
------
Income from Investment Operations:
Net Investment Income 0.13
Net Gain on Securities (both realized and unrealized) 0.20
------
Total from Investment Operations 0.33
------
NET ASSET VALUE, END OF PERIOD $10.33
------
------
Total Return 3.30%`D'
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000s) $568
Ratios to average daily net assets:
Operating expenses 0.99%*
Net investment income 5.25%*
Decrease reflected in above operating expense ratio due to
waivers/reimbursements 13.92%*
Portfolio Turnover Rate 101.74%`D'
</TABLE>
- --------------------------------------------------------------------------------
`D' Non-Annualized.
* Annualized.
See Accompanying Notes to Financial Statements.
10
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<PAGE>
WARBURG PINCUS TRUST II -- GLOBAL FIXED INCOME PORTFOLIO
FINANCIAL HIGHLIGHTS
(For a Share of the Portfolio Outstanding Throughout the Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
MARCH 31, 1997
(COMMENCEMENT OF
OPERATIONS) THROUGH
JUNE 30, 1997
(UNAUDITED)
-------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
-----
Income from Investment Operations:
Net Investment Income 0.13
Net Gain on Securities (both realized and unrealized) 0.16
-----
Total from Investment Operations 0.29
-----
NET ASSET VALUE, END OF PERIOD $ 10.29
-----
-----
Total Return 2.90%`D'
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000s) $ 1,595
Ratios to average daily net assets:
Operating expenses 0.99%*
Net investment income 5.39%*
Decrease reflected in above operating expense ratio due to
waivers/reimbursements 5.35%*
Portfolio Turnover Rate 36.75%`D'
</TABLE>
- --------------------------------------------------------------------------------
`D' Non-Annualized.
* Annualized.
See Accompanying Notes to Financial Statements.
11
<PAGE>
<PAGE>
WARBURG PINCUS TRUST II
NOTES TO FINANCIAL STATEMENTS
June 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Warburg Pincus Trust II (the 'Trust') is an open-end management investment
company registered under the Investment Company Act of 1940, as amended, and
currently offers two investment funds (the 'Portfolios'): Fixed Income Portfolio
is a non-diversified investment fund that seeks total return consistent with
prudent investment management; Global Fixed Income Portfolio is a
non-diversified investment fund that seeks total return consistent with prudent
investment management, consisting of a combination of interest income, currency
gains and capital appreciation. Shares of a Portfolio are not available directly
to individual investors but may be offered only to certain (a) life insurance
companies for allocation to certain of their separate accounts established for
the purpose of funding variable annuity contracts and variable life insurance
contracts and (b) tax-qualified pension and retirement plans ('Plans'),
including participant-directed Plans which elect to make a Portfolio an
investment option for Plan participants.
The net asset value of each Portfolio is determined daily as of the close of
regular trading on the New York Stock Exchange. Each Portfolio's investments are
valued at market value, which is generally determined using the last reported
sales price. If no sales are reported, investments are generally valued at the
last reported mean price. In the absence of market quotations, investments are
generally valued at fair value as determined by or under the direction of the
Trust's governing Board. Short-term investments that mature in 60 days or less
are valued on the basis of amortized cost, which approximates market value.
The books and records of the Portfolios are maintained in U.S. dollars.
Transactions denominated in foreign currencies are recorded at the current
prevailing exchange rates. All assets and liabilities denominated in foreign
currencies are translated into U.S. dollar amounts at the current exchange rate
at the end of the period. Translation gains or losses resulting from changes in
the exchange rate during the reporting period and realized gains and losses on
the settlement of foreign currency transactions are reported in the results of
operations for the current period. The Portfolios do not isolate that portion of
gains and losses on investments in equity securities which are due to changes in
the foreign exchange rate from that which are due to changes in market prices of
equity securities. The Global Fixed Income Portfolio isolates that portion of
gains and losses on investments in debt securities which are due to changes in
the foreign exchange rate from that which are due to changes in market prices of
debt securities.
Security transactions are accounted for on a trade date basis. Interest
income is recorded on the accrual basis. Dividends are recorded on the
ex-dividend date. The cost of investments sold is determined by use of the
specific identification method for both financial reporting and income tax
purposes.
12
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<PAGE>
WARBURG PINCUS TRUST II
NOTES TO FINANCIAL STATEMENTS (CONT'D)
June 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
Dividends from net investment income and distributions of net realized
capital gains, if any, are declared and paid annually. However, to the extent
that a net realized capital gain can be reduced by a capital loss carryover,
such gain will not be distributed. Income and capital gain distributions are
determined in accordance with federal income tax regulations which may differ
from generally accepted accounting principles.
No provision is made for federal income taxes as it is the Trust's intention
to have each Portfolio continue to qualify for and elect the tax treatment
applicable to regulated investment companies under the Internal Revenue Code and
make the requisite distributions to its shareholders which will be sufficient to
relieve it from federal income and excise taxes.
Costs incurred by the Portfolios in connection with their organization have
been deferred and are being amortized over a period of five years from the date
each Portfolio commenced its operations. Costs incurred by the Portfolios in
connection with the offering of their shares have been deferred and are being
amortized over a one year period from the date each Portfolio commenced its
operations.
The Portfolios may enter into repurchase agreement transactions. Under the
terms of a typical repurchase agreement, a Portfolio acquires an underlying
security subject to an obligation of the seller to repurchase. The value of the
underlying security collateral will be maintained at an amount at least equal to
the total amount of the purchase obligation, including interest. The collateral
is in the Portfolio's possession.
The Trust, together with other Warburg-advised funds (collectively the
'Warburg Funds'), has established committed and uncommitted line of credit
facilities with certain banks for temporary or emergency purposes primarily
relating to fund share redemptions and funding payments of dividend or capital
gain distributions. Under the terms of the committed line of credit, the Warburg
Funds with access to the facility pay a commitment fee at a rate of .10% per
annum on the amount of the line of credit. In addition, under the terms of both
the committed and uncommitted facilities, the Warburg Funds will pay interest on
borrowings at the bank's base rate plus .55%. Aggregate borrowings for each fund
under these credit facilities may not exceed the lower of (a) the maximum amount
permitted by such fund's investment policies and restrictions or (b)
thirty-three and one-third percent (33 1/3%) of such fund's total assets. At
June 30, 1997 there were no outstanding balances under these line of credit
facilities for any of the Portfolios.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statement and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
13
<PAGE>
<PAGE>
WARBURG PINCUS TRUST II
NOTES TO FINANCIAL STATEMENTS (CONT'D)
June 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
The Portfolios have an arrangement with their transfer agent whereby interest
earned on uninvested cash balances was used to offset a portion of the transfer
agent expense. For the period ended June 30, 1997, the Fixed Income Portfolio
and the Global Fixed Income Portfolio received credits or reimbursements of $6
and $12, respectively under this arrangement.
2. INVESTMENT ADVISER, CO-ADMINISTRATORS AND DISTRIBUTOR
Warburg, Pincus Counsellors, Inc. ('Warburg'), which is indirectly controlled
by Warburg, Pincus & Co., serves as each Portfolio's investment adviser. For its
investment advisory services, the Fixed Income Portfolio and the Global Fixed
Income Portfolio pay Warburg a fee calculated at an annual rate of .50% and
1.00%, respectively, of each Portfolio's average daily net assets. For the
period ended June 30, 1997, investment advisory fees, waivers and reimbursements
were as follows:
<TABLE>
<CAPTION>
GROSS NET EXPENSE
PORTFOLIO ADVISORY FEE WAIVER ADVISORY FEE REIMBURSEMENTS
- -------------------- ------------ ------- ------------ ----------------------
<S> <C> <C> <C> <C>
Fixed Income $ 689 $ (689) $0 $(18,423)
Global Fixed Income 1,939 (1,939) 0 (18,595)
</TABLE>
Counsellors Funds Service, Inc. ('CFSI'), a wholly owned subsidiary of
Warburg, and PFPC Inc. ('PFPC'), an indirect, wholly owned subsidiary of PNC
Bank Corp. ('PNC'), serve as each Portfolio's co-administrators. For its
administrative services, CFSI currently receives a fee calculated at an annual
rate of .10% of each Portfolio's average daily net assets. For the period ended
June 30, 1997, administrative services fees earned by CFSI were as follows:
<TABLE>
<CAPTION>
PORTFOLIO CO-ADMINISTRATION FEE
- ------------------------------------------------------ ---------------------
<S> <C>
Fixed Income $ 138
Global Fixed Income 388
</TABLE>
For its administrative services for the Fixed Income Portfolio and the Global
Fixed Income Portfolio, PFPC currently receives a fee calculated at an annual
rate of .05% of the Portfolios' average daily net assets. For the period ended
June 30, 1997, adminstrative service fees earned and waived by PFPC were as
follows:
<TABLE>
<CAPTION>
NET
PORTFOLIO CO-ADMINISTRATION FEE WAIVER CO-ADMINISTRATION FEE
- ----------------------------- --------------------- ------ ---------------------
<S> <C> <C> <C>
Fixed Income $ 69 $ (69) $ 0
Global Fixed Income 194 (194) 0
</TABLE>
Counsellors Securities Inc. ('CSI'), also a wholly owned subsidiary of
Warburg, serves as each Portfolio's distributor. No compensation is paid by the
Portfolios to CSI for its distribution services.
14
<PAGE>
<PAGE>
WARBURG PINCUS TRUST II
NOTES TO FINANCIAL STATEMENTS (CONT'D)
June 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
3. INVESTMENTS IN SECURITIES
For the period ended June 30, 1997, purchases and sales of investment
securities (excluding short-term investments) were as follows:
<TABLE>
<CAPTION>
INVESTMENT SECURITIES U.S. GOVERNMENT
---------------------- -----------------------
PORTFOLIO PURCHASES SALES PURCHASES SALES
- ------------------------------- --------- -------- ---------- --------
<S> <C> <C> <C> <C>
Fixed Income $141,065 $ 0 $ 794,173 $399,213
Global Fixed Income 956,879 222,232 1,007,128 184,668
</TABLE>
At June 30, 1997, the net unrealized appreciation from investments for those
securities having an excess of value over cost and net unrealized depreciation
from investments for those securities having an excess of cost over value (based
on cost for federal income tax purposes) was as follows:
<TABLE>
<CAPTION>
UNREALIZED UNREALIZED NET UNREALIZED
PORTFOLIO APPRECIATION DEPRECIATION APPRECIATION
- ------------------------------------- ------------ ------------ --------------
<S> <C> <C> <C>
Fixed Income $7,576 $ 0 $7,576
Global Fixed Income 6,278 (373) 5,905
</TABLE>
4. FORWARD FOREIGN CURRENCY CONTRACTS
The Portfolios may enter into forward currency contracts for the purchase or
sale of a specific foreign currency at a fixed price on a future date. Risks may
arise upon entering into these contracts from the potential inability of
counterparties to meet the terms of their contracts and from unanticipated
movements in the value of a foreign currency relative to the U.S. dollar. The
Portfolios will enter into forward contracts primarily for hedging purposes. The
forward currency contracts are adjusted daily by the daily exchange rate of the
underlying currency and any gains or losses are recorded for financial statement
purposes as unrealized until the contract settlement date.
At June 30, 1997, the Global Fixed Income Portfolio had the following open
forward currency contracts:
<TABLE>
<CAPTION>
FOREIGN UNREALIZED
FORWARD CURRENCY EXPIRATION CURRENCY CONTRACT CONTRACT FOREIGN EXCHANGE
CONTRACT DATE TO BE SOLD AMOUNT VALUE GAIN/(LOSS)
- ----------------- ---------- ---------- -------- -------- ----------------
<S> <C> <C> <C> <C> <C>
German Marks 07/21/97 532,000 $310,747 $305,536 $5,211
Canadian Dollars 08/01/97 207,000 150,425 150,185 240
-------- -------- -----
$461,173 $455,721 $5,451
-------- -------- -----
-------- -------- -----
</TABLE>
5. CAPITAL SHARE TRANSACTIONS
The Fixed Income Portfolio and the Global Fixed Income Portfolio are each
authorized to issue an unlimited number of full and fractional shares of
beneficial interest, par value of $.001 per share.
15
<PAGE>
<PAGE>
WARBURG PINCUS TRUST II
NOTES TO FINANCIAL STATEMENTS (CONT'D)
June 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
5. CAPITAL SHARE TRANSACTIONS (CONT'D)
Transactions in shares of each Portfolio were as follows:
<TABLE>
<CAPTION>
GLOBAL FIXED
FIXED INCOME PORTFOLIO INCOME PORTFOLIO
---------------------- -------------------
FOR THE PERIOD FOR THE PERIOD
MARCH 31, 1997 MARCH 31, 1997
(COMMENCEMENT OF (COMMENCEMENT OF
OPERATIONS) THROUGH OPERATIONS) THROUGH
JUNE 30, 1997 JUNE 30, 1997
---------------------- -------------------
<S> <C> <C>
Shares sold 50,000 150,000
----- ------
Net increase in shares outstanding 50,000 150,000
----- ------
----- ------
</TABLE>
6. NET ASSETS
Net assets at June 30, 1997, consisted of the following:
<TABLE>
<CAPTION>
FIXED INCOME GLOBAL FIXED INCOME
PORTFOLIO PORTFOLIO
------------ -------------------
<S> <C> <C>
Capital contributed, net $550,000 $ 1,550,000
Undistributed net investment income 7,233 20,881
Accumulated net realized gain from security transactions 3,383 13,403
Net unrealized appreciation from investments and foreign
currency related items 7,576 10,988
------------ --------
Net assets $568,192 $ 1,595,272
------------ --------
------------ --------
</TABLE>
16
<PAGE>
<PAGE>
[Logo]
P.O. Box 9030, BOSTON, MA 02205-9030
800-369-2728
COUNSELLORS SECURITIES INC., DISTRIBUTOR. TRBDF-3-0697
STATEMENT OF DIFFERENCES
------------------------
The dagger symbol shall be expressed as `D'
The division sign shall be expressed as [div]
