WARBURG PINCUS (LOGO) CREDIT | ASSET
[GRAPHIC OMITTED] SUISSE | MANAGEMENT (LOGO)
[GRAPHIC OMITTED]
ANNUAL
REPORT
DECEMBER 31, 1999
WARBURG PINCUS TRUST II
(BULLET) FIXED INCOME PORTFOLIO
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, 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 800-222-8977 or by writing to Warburg Pincus, P.O. Box 9030,
Boston, MA 02205-9030.
Provident Distributors, Inc., Distributor, located at Four Falls Corporate
Center, 6th floor, West Conshohocken, PA 19428-2961. Telephone: 800-927-2874, is
not an affiliate of Credit Suisse Asset Management, LLC. The Trust is advised by
Credit Suisse Asset Management, LLC.
<PAGE>
FROM TIME TO TIME, THE PORTFOLIO'S INVESTMENT ADVISER AND CO-ADMINISTRATORS MAY
WAIVE SOME FEES AND/OR REIMBURSE SOME EXPENSES, WITHOUT WHICH PERFORMANCE WOULD
BE LOWER. WAIVERS AND/OR REIMBURSEMENTS ARE SUBJECT TO CHANGE.
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 PORTFOLIO'S MANAGEMENT ARE AS OF THE DATE OF THE LETTER, AND
PORTFOLIO HOLDINGS DESCRIBED IN THIS DOCUMENT ARE AS OF DECEMBER 31, 1999; THESE
VIEWS AND PORTFOLIO HOLDINGS MAY HAVE CHANGED SUBSEQUENT TO THESE DATES. NOTHING
IN THIS DOCUMENT IS A RECOMMENDATION TO PURCHASE OR SELL SECURITIES.
PORTFOLIO SHARES ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF CREDIT SUISSE ASSET
MANAGEMENT, LLC ("CSAM") OR ANY AFFILIATE, ARE NOT FDIC INSURED AND ARE NOT
GUARANTEED BY CSAM OR ANY AFFILIATE. FUND INVESTMENTS ARE SUBJECT TO INVESTMENT
RISKS, INCLUDING LOSS OF YOUR INVESTMENT.
<PAGE>
WARBURG PINCUS TRUST II--FIXED INCOME PORTFOLIO
ANNUAL INVESTMENT ADVISER'S REPORT -- DECEMBER 31, 1999
- --------------------------------------------------------------------------------
February 4, 2000
Dear Shareholder:
For the 12 months ended December 31, 1999, Warburg Pincus Trust II--Fixed
Income Portfolio (the "Portfolio") had a return of 0.27%, vs. a return of 0.38%
for the Lehman Intermediate Government/Corporate Bond Index.*
The period was a difficult one for the U.S. bond market, reflecting
persistent strength in the economy. The economy's health prompted worries that
the Federal Reserve, which raised interest rates in June, August and November,
would continue to raise rates in order to contain potential inflation. While
actual inflation remained subdued, these worries (and the Fed's actions) weighed
on bond prices, and most major bond indexes had only slim gains at best in terms
of total return, i.e., bond-price changes plus coupon income.
Set against this backdrop, the Portfolio had a marginal gain, restrained by
the general weakness in the bond market. The Portfolio performed in line with
its benchmark, largely reflecting our decision to keep the Portfolio's duration
fairly close to that of its benchmark over much of the period. While we remained
optimistic regarding the longer-term outlook for inflation and interest rates,
we were reluctant to materially extend duration, given near-term uncertainties
regarding the Fed's monetary policy.
In terms of sector exposure, we maintained a bias in favor of U.S. Treasury
securities, which we continued to deem attractive from a risk-vs.-reward
perspective. We had smaller but still-meaningful weightings in the corporate,
mortgage-backed and asset-backed sectors, areas that we continued to view
favorably from a diversification standpoint.
Going forward, we plan to maintain a diversified mix of Treasury and
non-Treasury issues, adjusting our sector exposure as we deem appropriate on a
risk-vs.-reward basis. Overall, our focus will remain on high-quality,
intermediate-term bonds with what we deem to be attractive risk-adjusted yields
and potential for longer-term appreciation.
M. Anthony E. van Daalen
Portfolio Manager
1
<PAGE>
WARBURG PINCUS TRUST II--FIXED INCOME PORTFOLIO
ANNUAL INVESTMENT ADVISER'S REPORT (CONT'D) -- DECEMBER 31, 1999
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN SHARES OF WARBURG PINCUS
TRUST II-FIXED INCOME PORTFOLIO SINCE INCEPTION AS OF DECEMBER 31, 1999
The graph below illustrates the hypothetical investment of $10,000 in shares
of Warburg Pincus Trust II-Fixed Income Portfolio (the "Portfolio") from March
31, 1997 (inception) to December 31, 1999, compared to the Lehman Intermediate
Government/Corporation Bond Index ("LIGC")* for the same time period. Past
performance does not predict future results.
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Portfolio LIGC
Mar-97 $10,000 $10,000
Apr-97 10,110 10,117.5
May-97 10,200 10,201.5
Jun-97 10,329.5 10,294.6
Jul-97 10,629.1 10,504.1
Aug-97 10,529.2 10,451.4
Sep-97 10,649.2 10,572.9
Oct-97 10,769.5 10,690.1
Nov-97 10,790 10,713.6
Dec-97 10,895.7 10,799.3
Jan-98 11,070.1 10,940.8
Feb-98 11,026.9 10,932.6
Mar-98 11,049 10,967.7
Apr-98 11,093.1 11,022.6
May-98 11,169.7 11,103.1
Jun-98 11,256.8 11,174.4
Jul-98 11,256.8 11,213.8
Aug-98 11,475.2 11,390.1
Sep-98 11,770.1 11,676.2
Oct-98 11,747.7 11,664.8
Nov-98 11,737.2 11,663.8
Dec-98 11,775.9 11,710.7
Jan-99 11,844.2 11,775.1
Feb-99 11,696.2 11,602
Mar-99 11,775.7 11,689
Apr-99 11,832.2 11,725.3
May-99 11,718.6 11,635
Jun-99 11,706.9 11,643.1
Jul-99 11,695.2 11,632.7
Aug-99 11,671.8 11,642
Sep-99 11,774.5 11,750.2
Oct-99 11,796.9 11,780.8
Nov-99 11,831.1 11,795.3
Dec-99 11,806.2 11,756.7
- -----------------
* The Lehman Intermediate Government/Corporate Bond Index is an unmanaged index
(with no defined investment objective) of intermediate-term government and
corporate bonds, and is calculated by Lehman Brothers Inc.
2
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<TABLE>
<CAPTION>
WARBURG PINCUS TRUST II--FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS--DECEMBER 31, 1999
- --------------------------------------------------------------------------------------------------
RATINGS(DAGGER)
PAR (MOODY'S/S&P) MATURITY RATE% VALUE
---- --------------- -------- ----- -----
<S> <C> <C> <C> <C>
CORPORATE BONDS (13.9%)
$ 15,000 ABN-AMRO Bank N.V. New York Branch,
Subordinate Deposit Notes
(Callable 08/01/04 @ $100.00) (Aa3, AA-) 08/01/09 8.250 $ 15,319
50,000 AT&T Capital Corp. (A1, A+) 11/15/00 7.500 50,356
45,000 AT&T Capital Corp. (A1, A+) 05/15/05 6.600 42,862
40,000 AT&T Corp. (A1, AA-) 09/15/02 6.500 39,650
30,000 Conagra, Inc. Senior Notes
(Putable 08/01/09 @ $100.00) (Baa1, BBB+) 08/01/27 6.700 28,612
40,000 Countrywide Home Loan Co. (A3, A) 04/15/09 6.250 35,950
50,000 Delphi Auto Systems Corp. (Baa2, BBB) 05/01/04 6.125 47,250
30,000 Dime Bancorp, Inc. (Ba1, BBB-) 07/25/01 7.000 29,737
20,000 HMH Properties, Inc., Series B (NR, NR) 05/15/05 9.500 20,450
50,000 Household Finance Corp. (A2, A) 11/15/08 6.500 46,312
40,000 Ingersoll-Rand Co. Medium Term Note
(Putable 11/19/03 @ $100.00) (A3, A-) 11/19/27 6.230 38,350
30,000 Lowes Companies, Inc. Medium Term Note
(Putable 05/15/07 @ $100.00) (A2, A) 05/15/37 7.110 29,437
10,000 Nationwide Health Properties, Inc.
(Putable 07/07/03 @ $100.00) (Baa2, BBB) 07/07/38 6.590 9,087
38,000 Niagara Mohawk Power Corp., Series D
(Callable 4/01/99 to 12/31/00 @
Make Whole +50BP) (Baa3, BBB-) 10/01/02 7.250 37,616
40,000 Noble Drilling Corp. (Baa2, A-) 03/15/09 6.950 37,700
10,000 Philip Morris Cos., Inc.
(Putable 06/01/01 @ $100.00) (A2, A) 06/01/06 6.950 9,513
5,000 Potomac Electric Power Co.
(Callable 05/15/02 @ $103.21) (A1, A) 05/15/27 8.500 4,931
5,000 Riggs Capital Trust II, Series C
(Callable 03/15/07 @ $104.44) (Baa3, BB) 03/15/27 8.875 4,594
45,000 Safeway, Inc.
(Callable @ Make Whole +12.5Bp) (Baa2, BBB) 09/15/04 7.250 44,550
50,000 Union Electric Co. (Aa3, AA-) 12/01/21 8.750 50,563
----------
TOTAL CORPORATE BONDS (Cost $649,918) 622,839
----------
</TABLE>
See Accompanying Notes to Financial Statements.
3
<PAGE>
<TABLE>
<CAPTION>
WARBURG PINCUS TRUST II--FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (CONT'D)--DECEMBER 31, 1999
- --------------------------------------------------------------------------------------------------
RATINGS(DAGGER)
PAR (MOODY'S/S&P) MATURITY RATE% VALUE
---- --------------- -------- ----- -----
<S> <C> <C> <C> <C>
ASSET/MORTGAGE BACKED SECURITIES (22.2%)
$ 25,000 Asset Securitization Corp.
(Nomura Asset Securities Corp.),
Series 1996-D2, Class A2 (NR, AA) 02/14/29 7.357# $ 24,260
100,000 California Infrastructure PG & E,
Series 1997-1, Class A7 (Aaa, AAA) 09/25/08 6.420 96,792
70,000 Commonwealth Edison Transitional
Funding Trust, Series 1998-1 Class-A6 (Aaa, AAA) 06/25/09 5.630 64,898
59,000 Fannie Mae (Aaa, AAA) 12/01/08 5.690 53,259
86,000 Fannie Mae (Aaa, AAA) 04/01/29 6.500 81,024
100,000 Fannie Mae, Series 1993-50, Class PU (Aaa, AAA) 09/25/20 5.000 92,830
20,000 Fannie Mae, Series 1997-51, Class KB
Guaranteed REMIC Trust (Aaa, AAA) 03/20/08 7.000 19,684
25,000 Fannie Mae, Series 1998-M4, Class B (Aaa, AAA) 12/25/23 6.424 23,768
110,000 Freddie Mae, Series 2072, Class PK (Aaa, AAA) 07/15/24 6.000 106,087
86,000 Ginnie Mae (Aaa, AAA) 10/15/28 6.500 80,841
150,000 GMAC Commercial Mortgage Securities, Inc.,
Series 1997-C2, Class A3 (Aaa, NR) 11/15/07 6.566 139,551
90,000 MBNA Master Credit Card Trust,
Series 1998-J, Class A (Aaa, AAA) 02/15/06 5.250 85,210
12,000 Nomura Asset Securities Corp.,
Series 1994-4B, Class 4A (Aaa, AAA) 09/25/24 8.300 11,863
120,000 Standard Credit Card Master Trust,
Series 1995-9, Class A (Aaa, AAA) 10/07/07 6.550 118,525
----------
TOTAL ASSET/MORTGAGE BACKED SECURITIES
(Cost $1,056,806) 998,592
----------
U.S. AGENCY OBLIGATIONS (5.1%)
235,000 FMC Discount Note (Aaa, AAA) 08/04/00 5.710## 227,135
----------
TOTAL U.S. AGENCY OBLIGATIONS (Cost $227,297) 227,135
----------
U.S. TREASURY OBLIGATIONS (56.7%)
760,000 U.S. Treasury Notes (Aaa, AAA) 08/15/02 6.375 761,832
500,000 U.S. Treasury Notes (Aaa, AAA) 08/15/03 5.750 489,927
540,000 U.S. Treasury Notes (Aaa, AAA) 02/15/05 7.500 563,370
500,000 U.S. Treasury Notes (Aaa, AAA) 08/15/07 6.125 487,954
180,000 U.S. Treasury Notes (Aaa, AAA) 11/15/08 4.750 158,900
80,000 U.S. Treasury Notes Inflation Index (Aaa, AAA) 07/15/02 3.625 83,201
----------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $2,564,885) 2,545,184
----------
</TABLE>
See Accompanying Notes to Financial Statements.
4
<PAGE>
<TABLE>
<CAPTION>
WARBURG PINCUS TRUST II--FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (CONT'D)--DECEMBER 31, 1999
- --------------------------------------------------------------------------------------------------
NUMBER OF
SHARES RATE% VALUE
------ ----- -----
<S> <C> <C>
PREFERRED STOCK (0.1%)
REAL ESTATE (0.1%)
200 Equity Residential PropertiesTrust,
Series D REIT (Callable 07/15/07 @ $25.00) (Cost $5,000) 8.600 $ 3,938
----------
SHORT TERM INVESTMENTS (2.0%)
90,055 RBB Money Market Portfolio (Cost $90,055) 90,055
----------
TOTAL INVESTMENTS (100.0%) (Cost $4,593,961*) $4,487,743
==========
INVESTMENT ABBREVIATIONS
NR = Not Rated
REMIC = Real Estate Mortgage Investment Conduit
REIT = Real Estate Investment Trust
- --------------------------------------------------------------------------------------------------
<FN>
(DAGGER) Credit ratings given by Moody's Investors Services, Inc. and Standard and Poor's Ratings
Services are unaudited.
# On instruments with variable rates, the rate shown reflects the current rate as of
December 31, 1999.
## Rate shown reflects the yield to maturity on date of purchase.
* Cost for federal income tax purposes is $4,594,347.
</FN>
</TABLE>
See Accompanying Notes to Financial Statements.
5
<PAGE>
WARBURG PINCUS TRUST II--FIXED INCOME PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
- --------------------------------------------------------------------------------
ASSETS
Investments at value (Cost $4,593,961) $4,487,743
Interest receivable 76,399
Receivable from affiliate 7,441
Deferred organizational costs 3,707
Prepaid Insurance 238
Dividend Receivable 108
----------
TOTAL ASSETS 4,575,636
----------
LIABILITIES
Accrued expenses payable 22,709
Payable to affiliate 389
Payable for fund shares redeemed 174
----------
TOTAL LIABILITIES 23,272
----------
NET ASSETS
Capital contributed, net 4,703,081
Undistributed net investment income 15
Accumulated net realized
loss from security transactions (44,514)
Net unrealized depreciation from investments (106,218)
----------
Net Assets $4,552,364
----------
Shares outstanding 455,630
----------
NET ASSET VALUE, offering and redemption price per share $ 9.99
======
See Accompanying Notes to Financial Statements.
6
<PAGE>
WARBURG PINCUS TRUST II--FIXED INCOME PORTFOLIO
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1999
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends $ 3,587
Interest 184,686
---------
Total investment income 188,273
---------
EXPENSES:
Investment Advisory 15,523
Administrative services 10,782
Audit 10,353
Custodian/Sub-custodian 16,001
Trustees 6,233
Insurance 346
Legal 19,307
Organizational costs 1,646
Printing 14,853
Transfer Agent 4,340
Miscellaneous 1,003
---------
100,387
Less: fees waived, expenses reimbursed and transfer
agent fee offsets (69,652)
---------
Total expenses 30,735
---------
Net investment income 157,538
---------
NET REALIZED AND UNREALIZED LOSS FROM INVESTMENTS:
Net realized loss from security transactions (44,503)
Net change in unrealized appreciation (depreciation)
from investments (117,185)
---------
Net realized and unrealized loss from investments (161,688)
---------
Net decrease in net assets resulting from operations $ (4,150)
=========
See Accompanying Notes to Financial Statements.
7
<PAGE>
<TABLE>
<CAPTION>
WARBURG PINCUS TRUST II--FIXED INCOME PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
----------------- -----------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income $ 157,538 $ 62,035
Net realized gain (loss) from security transactions (44,503) 46,770
Net change in unrealized appreciation (depreciation)
from investments (117,185) (4,228)
----------- -----------
Net increase (decrease) in net assets resulting
from operations (4,150) 104,577
----------- -----------
FROM DIVIDENDS AND DISTRIBUTIONS:
Dividends from net investment income (157,946) (62,035)
Dividends in excess of net investment income 0 (9,850)
Distributions from realized gains 0 (46,781)
----------- -----------
Net decrease in net assets from dividends and
distributions (157,946) (118,666)
----------- -----------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from sale of shares 6,382,704 3,910,106
Reinvested dividends 157,946 118,666
Net asset value of shares redeemed (4,653,386) (1,786,826)
----------- -----------
Net increase in net assets from capital
share transactions 1,887,264 2,241,946
----------- -----------
Net increase in net assets 1,725,168 2,227,857
NET ASSETS:
Beginning of year 2,827,196 599,339
----------- -----------
End of year 4,552,364 2,827,196
=========== ===========
</TABLE>
See Accompanying Notes to Financial Statements.
8
<PAGE>
<TABLE>
<CAPTION>
WARBURG PINCUS TRUST II--FIXED INCOME PORTFOLIO
FINANCIAL HIGHLIGHTS
(For a Share of the Portfolio Outstanding Throughout Each Period)
- -------------------------------------------------------------------------------------------
FOR THE YEAR ENDED
December 31,
--------------------
PERIOD ENDED: 1999 1998 1997 1
------ ------ ------
<S> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of period $10.32 $ 9.97 $10.00
------ ------ ------
INVESTMENT ACTIVITIES:
Net investment income 0.36 0.24 0.44
Net gain (losses) on investments
(both realized and unrealized) (0.33) 0.57 0.45
------ ------ ------
Total from investment activities 0.03 0.81 0.89
------ ------ ------
LESS DIVIDENDS AND DISTRIBUTIONS:
Dividends from net investment income (0.36) (0.24) (0.41)
Dividends in excess of net investment income 0 (0.04) (0.31)
Distributions from realized capital gains 0 (0.18) (0.20)
------ ------ ------
Total dividends and distributions (0.36) (0.46) (0.92)
------ ------ ------
NET ASSET VALUE, END OF PERIOD $ 9.99 $10.32 $ 9.97
====== ====== ======
Total return 0.27% 8.08% 8.96% 2
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s omitted) $4,552 $2,827 $ 599
Ratio of expenses to average net assets 1.00% 3 .99% 3 .99% 3,4
Ratio of net income to average net assets 5.07% 4.69% 5.29% 4
Decrease reflected in above operating expense ratios
due to waivers/reimbursements 2.07% 4.33% 12.05% 4
Portfolio turnover rate 173.29% 318.95% 138.28% 2
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<FN>
1 For the period March 31, 1997 (commencement of operations) through December 31, 1997.
2 Non-annualized.
3 Interest earned on uninvested cash balances is used to offset portions of the transfer
agent expense. These arrangements resulted in a reduction to the expense ratio by .01%,
.00% and .00% for the years or period ended December 31, 1999, 1998 and 1997,
respectively. The operating expense ratio after reflecting these arrangements was .99%
for each of the years or period ended December 31, 1999, 1998 and 1997, respectively.
4 Annualized.
</FN>
</TABLE>
See Accompanying Notes to Financial Statements.
9
<PAGE>
WARBURG PINCUS TRUST II
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
- --------------------------------------------------------------------------------
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 (the
"1940 Act"), and currently offers one investment portfolio. The Fixed Income
Portfolio (the "Portfolio") is a non-diversified investment fund that seeks
total return consistent with prudent investment management. Shares of the
Portfolio are not available directly to individual investors but may be offered
only through (a) variable annuity contracts and variable life insurance
contracts and (b) tax-qualified pension and retirement plans. The Portfolio may
not be available in connection with a particular contract or plan.
The net asset value of the Portfolio is determined daily as of the close of
regular trading on the New York Stock Exchange. The Portfolio's investments are
valued at market value, which is currently determined using the last reported
sales price. If no sales are reported, investments are generally valued at the
mean between the last reported bid and ask prices. In the absence of market
quotations, investments are generally valued at fair value as determined by or
under the direction of the Trust's Board of Trustees. Debt investments that
mature in 60 days or less are valued on the basis of amortized cost, which
approximates market value, unless the Board determines that using this method
would not reflect an investment's value.
The books and records of the Portfolio 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 Portfolio does 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 Portfolio may invest in securities of foreign countries and governments
which involve certain risks in addition to those inherent in domestic
investments. Such risks generally include, among other things fluctuations in
currency exchange rates, revaluation of currencies, future adverse political and
economic developments and the imposition of foreign laws and restrictions.
Securities of foreign issuers are often subject to less
10
<PAGE>
WARBURG PINCUS TRUST II
NOTES TO FINANCIAL STATEMENTS (CONT'D)
December 31, 1999
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES -- (CONT'D)
rigorous regulatory practices and requirements than those applied in the United
States and may also be less liquid (and their prices more volatile) than
securities of comparable U.S companies. Moreover, individual foreign economies
may differ favorably or unfavorably from the U.S economy in many respects.
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.
Dividends from net investment income and distributions of net realized
capital gains, if any, are declared and paid at least 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 the 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 Trust in connection with its organization have been
deferred and are being amortized over a period of five years from the date the
Trust commenced its operations.
Pursuant to an exemptive order issued by the Securities and Exchange
Commission, the Portfolio, along with other Warburg Pincus Funds, can transfer
uninvested cash balances to a pooled cash account, which is invested in
repurchase agreements secured by U.S. government securities. Securities pledged
as collateral for repurchase agreements are held by the Portfolio's custodian
bank until the agreements mature. Each agreement requires that the market value
of the collateral be sufficient to cover payments of interest and principal;
however, in the event of default or bankruptcy by the other party to the
agreement, retention of the collateral may be subject to legal proceedings. At
December 31, 1999, the Portfolio had no investments in repurchase agreements.
11
<PAGE>
WARBURG PINCUS TRUST II
NOTES TO FINANCIAL STATEMENTS (CONT'D)
December 31, 1999
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES -- (CONT'D)
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.
The Portfolio has an arrangement with its transfer agent whereby interest
earned on uninvested cash balances is used to offset a portion of its transfer
agent expense. For the year ended December 31, 1999, the Portfolio received
credits or reimbursements of $372 under this arrangement.
2. INVESTMENT ADVISER, CO-ADMINISTRATORS AND DISTRIBUTOR
On July 6, 1999, Credit Suisse Asset Management, LLC ("CSAM") became the
Portfolio's investment adviser as a result of the previously announced
acquisition of Warburg Pincus Asset Management, Inc. ("Warburg Pincus") by
Credit Suisse Group ("Credit Suisse") and the combination of Warburg Pincus with
Credit Suisse's existing U.S. asset management business. CSAM is an indirect
wholly-owned subsidiary of Credit Suisse. For its investment advisory services,
CSAM receives a fee from the Portfolio at an annual rate of .50% of the
Portfolio's average daily net assets. For the year ended December 31, 1999,
investment advisory fees earned and voluntarily waived and reimbursements were
as follows:
GROSS NET EXPENSE
ADVISORY FEE WAIVER ADVISORY FEE REIMBURSEMENTS
------------ -------- ------------ --------------
$15,523 $(15,523) $ 0 $(52,205)
Counsellors Fund Services, Inc. ("CFSI"), a wholly-owned subsidiary of CSAM,
served as co-administrator of the Portfolio until November 1,1999. On November
1,1999, Credit Suisse Asset Management Securities, Inc.("CSAMSI") replaced CFSI
as co-administrator to the Portfolio. PFPC Inc. ("PFPC"), an indirect subsidiary
of PNC Bank Corp. ("PNC"), also serves as the Portfolio's co-administrator. For
its administrative services, CSAMSI currently receives a fee calculated at an
annual rate of .10% of the Portfolio's average daily net assets. For the year
ended December 31, 1999, the co-administration services fees earned by CFSI and
CSAMSI were $2,407 and $698 respectively.
12
<PAGE>
WARBURG PINCUS TRUST II
NOTES TO FINANCIAL STATEMENTS (CONT'D)
December 31, 1999
- --------------------------------------------------------------------------------
2. INVESTMENT ADVISER, CO-ADMINISTRATORS AND DISTRIBUTOR -- (CONT'D)
For administrative services, PFPC currently receives a fee from the Portfolio
calculated at an annual rate of .05% of the Portfolio's average daily net
assets. For the year ended December 31, 1999, administrative services fees
earned and voluntarily waived by PFPC were as follows:
NET
CO-ADMINISTRATION FEE WAIVER CO-ADMINISTRATION FEE
--------------------- -------- ---------------------
$7,677 $(1,552) $6,125
CSAMSI also serves as the Portfolio's distributor. No compensation is paid by
the Portfolio to CSAMSI for its distribution services. Provident Distributors,
Inc. will become the Portfolio's distributor effective January 1, 2000.
3. LINE OF CREDIT
The Portfolios together with other Funds advised by CSAM, have established a
$250 million committed line of credit facility ("Credit Facility") with Deutsche
Bank, AG as administrative agent, State Street Bank and Trust Company as
operations agent, Bank of Nova Scotia as syndication agent and certain other
lenders, for temporary or emergency purposes primarily relating to unanticipated
Fund share redemptions. Under the terms of the Credit Facility, the Funds with
access to the Credit Facility pay an aggregate commitment fee at a rate of .075%
per annum on the average daily balance of the Credit Facility that is
undisbursed and uncanceled during the preceding quarter allocated among the
participating Funds in such manner as is determined by the governing Boards of
the various Funds. In addition, the participating funds will pay interest on
borrowings at the Federal Funds rate plus .50%. For the year ended December 31,
1999, the Portfolio had no borrowings under the credit facility.
4. INVESTMENTS IN SECURITIES
For the year ended December 31, 1999, purchases and sales of investment
securities (excluding short-term investments) were as follows:
U.S. GOVERNMENT AND
INVESTMENT SECURITIES AGENCY OBLIGATIONS
----------------------- -----------------------
PURCHASES SALES PURCHASES SALES
---------- ---------- ---------- ----------
$1,459,155 $1,297,783 $5,354,602 $3,211,208
13
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WARBURG PINCUS TRUST II
NOTES TO FINANCIAL STATEMENTS (CONT'D)
December 31, 1999
- --------------------------------------------------------------------------------
4. INVESTMENTS IN SECURITIES -- (CONT'D)
At December 31, 1999, 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:
UNREALIZED UNREALIZED NET UNREALIZED
APPRECIATION DEPRECIATION DEPRECIATION
------------ ------------ --------------
$0 $ (106,604) $ (106,604)
5. FORWARD FOREIGN CURRENCY CONTRACTS
The Portfolio 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
Portfolio 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.
6. CAPITAL SHARE TRANSACTIONS
The Portfolio is authorized to issue an unlimited number of full and
fractional shares of beneficial interest, par value of $.001 per share.
Transactions in shares of the Portfolio were as follows:
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------
1999 1998
-------- --------
Shares sold 618,562 370,058
Shares issued to shareholders on
reinvestment of dividends 15,810 11,498
Shares Redeemed (452,618) (167,794)
-------- --------
Net increase in shares outstanding 181,754 213,762
======== ========
7. CAPITAL LOSS CARRYOVER
At December 31,1999, capital loss carryover available to offset possible
future capital gains of the Portfolio was $44,125, expiring in 2007.
14
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WARBURG PINCUS TRUST II
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Board of Trustees and Shareholders of
WARBURG PINCUS TRUST II:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Warburg Pincus Trust II--Fixed
Income Portfolio (the "Trust") at December 31, 1999, and the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended and the financial highlights for each of
the years (or periods) presented, in conformity with accounting principles
generally accepted in the United States. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Trust's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities at December
31, 1999 by correspondence with the custodians and brokers, provide a reasonable
basis for the opinion expressed above.
PricewaterhouseCoopers LLP
2400 Eleven Penn Center
Philadelphia, Pennsylvania
February 3, 2000
15
<PAGE>
WARBURG PINCUS TRUST II
RESULTS OF SPECIAL MEETING OF SHAREHOLDERS (UNAUDITED)
- --------------------------------------------------------------------------------
At a special meeting of shareholders held on May 21, 1999, the following
proposals were submitted for the vote of shareholders of the Trust. The
proposals and voting results were:
1. To approve a new investment advisory agreement between the Portfolio and
CSAM.
% OF SHARES TO TOTAL % OF SHARES TO TOTAL
SHARES OUTSTANDING SHARES SHARES VOTED
------ -------------------- --------------------
FOR 278,252.4320 99.9973% 100.0000%
Against 0.0000 0.0000% 0.0000%
Abstain 0.0000 0.0000% 0.0000%
2. To elect Trustees of the Trust.
TRUST II FIXED
INCOME PORTFOLIO FOR WITHHELD
---------------- ------------ --------
R.H. Francis 278,252.4320 0.0000
J.W. Fritz 278,252.4320 0.0000
J.E. Garten 278,252.4320 0.0000
J.S. Pasman 278,252.4320 0.0000
W.W. Priest 278,252.4320 0.0000
S.N. Rappaport 278,252.4320 0.0000
A.M. Reichman 278,252.4320 0.0000
A.B. Trowbridge 278,252.4320 0.0000
3. To ratify the selection of PricewaterhouseCoopers LLP as the independent
accountants for the Trust.
TRUST II FIXED % OF SHARES TO TOTAL % OF SHARES TO TOTAL
INCOME PORTFOLIO SHARES OUTSTANDING SHARES SHARES VOTED
---------------- ------------ -------------------- --------------------
For 278,252.4320 99.9973% 100.0000%
Against 0.0000 0.0000% 0.0000%
Abstain 0.0000 0.0000% 0.0000%
16
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WARBURG PINCUS (LOGO)
[GRAPHIC OMITTED]
P.O. BOX 9030, BOSTON, MA 02205-9030
800-222-8977 (BULLET) www.warburg.com
PROVIDENT DISTRIBUTORS, INC., DISTRIBUTOR. TRBDF-2-1299
