<PAGE>
As filed with the Securities and Exchange Commission
on November ___, 1997
- --------------------------------------------------------------------------------
Registration No.__________
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
[ ] Pre-Effective Amendment No. ___ [ ] Post-Effective Amendment No.___
Warburg, Pincus Managed EAFE Countries Fund, Inc.
(Exact Name of Registrant as Specified in Charter)
Area Code and Telephone Number: (212) 878-0600
466 Lexington Avenue
New York, New York 10017-3147
(Address of Principal Executive Offices) (Zip code)
Mr. Eugene P. Grace
Warburg Pincus Asset Management, Inc.
466 Lexington Avenue
New York, New York 10017-3147
(Name and Address of Agent for Service)
copy to:
Rose F. DiMartino, Esq.
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, NY 10022
Title of Securities Being Registered: Common Stock, $.001 par value
Registrant has registered an indefinite amount of securities pursuant to Rule
24f-2 under the Investment Company Act of 1940, as amended; accordingly, no fee
is payable herewith. Registrant's Rule 24f-2 Notice for the fiscal period ended
October 31, 1998 will be timely filed with the Securities and Exchange
Commission.
It is proposed that this filing will become effective on December 5,
1997 pursuant to Rule 488.
<PAGE>
WARBURG, PINCUS MANAGED EAFE(R) COUNTRIES FUND, INC.
CONTENTS OF
REGISTRATION STATEMENT
This Registration Statement contains the following pages and documents:
Front Cover
Contents Page
Cross Reference Sheet
Letter to Shareholders
Notice of Special Meeting
Part A - Prospectus/Proxy Statement
Part B - Statement of Additional Information
Part C - Other Information
Signature Page
Exhibits
<PAGE>
Warburg, Pincus Managed EAFE(R) Countries Fund, Inc.
FORM N-14 CROSS REFERENCE SHEET
Pursuant to Rule 481(a)
<TABLE>
<CAPTION>
Prospectus/Proxy
Part A Item No. and Caption Statement Caption
- --------------------------- -----------------
<S> <C>
Item 1. Beginning of Registration Statement Cover Page; Cross Reference Sheet
and Outside Front Cover Page of
Prospectus
Item 2. Beginning and Outside Back Cover Page Table of Contents
of Prospectus
Item 3. Fee Table, Synopsis Information, and Fee Table; Summary; Risk Factors; Comparison of
Risk Factors Investment Objective and Policies
Item 4. Information About the Transaction Summary; Reasons for the Reorganization; Information
About the Reorganization; Information on
Shareholders' Rights; Voting Information; Exhibit A
(Plan of Reorganization)
Item 5. Information About the Registrant Cover Page; Summary; Information About the
Reorganization; Comparison of Investment Objective
and Policies; Information on Shareholders' Rights;
Management of the Funds; Prospectus of Registrant
dated _________ ___, 1997.
Item 6. Information About the Company Being Summary; Information About the Reorganization;
Acquired Comparison of Investment Objective and Policies;
Information on Shareholders' Rights; Additional
Information About Warburg Funds
Item 7. Voting Information Summary; Information About the Reorganization;
Information on Shareholders' Rights; Voting
Information
Item 8. Interest of Certain Persons and Experts Financial Statements and Experts; Legal Matters
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Item 9. Additional Information Required for Not Applicable
Reoffering By Persons Deemed to be
Underwriters
Statement of Additional
Part B Item No. and Caption Information Caption
- --------------------------- -----------------------
Item 10. Cover Page Cover Page
Item 11. Table of Contents Cover Page
Item 12. Additional Information About the Cover Page; Statement of Additional Information of
Registrant Registrant dated __________ ___, 1997
Item 13. Additional Information About the Statement of Additional Information of Warburg
Company Being Acquired Pincus Institutional Fund, Inc. dated October 21,
1997.
Item 14. Financial Statements Semiannual Report of Warburg Pincus Institutional
Fund, Inc. for the period from March 31, 1997
(commencement of operations) to April 30, 1997
(unaudited).
Part C Item No. and Caption Other Information Caption
- --------------------------- -------------------------
Item 15. Indemnification Incorporated by reference to Part A caption
"Information on Shareholders' Rights -- Liability of
Directors."
Item 16. Exhibits Exhibits
Item 17. Undertakings Undertakings
</TABLE>
<PAGE>
MANAGED EAFE(R) COUNTRIES PORTFOLIO
OF
WARBURG, PINCUS INSTITUTIONAL FUND, INC.
Your Vote is Important
Dear Shareholder:
The Board of Directors of Warburg, Pincus Institutional Fund, Inc. (the
"Company") has recently reviewed and unanimously endorsed a proposal for the
reorganization of one of its investment series -- the Managed EAFE(R) Countries
Portfolio (the "Existing Fund"). Under the terms of the proposal, a newly-formed
investment company -- Warburg, Pincus Managed EAFE(R) Countries Fund, Inc. (the
"New Fund" and, together with the Existing Fund, the "Funds") -- would acquire
all or substantially all of the assets and liabilities of the Existing Fund. We
are pleased to invite you to attend a special meeting (the "Meeting") of the
shareholders of the Existing Fund to consider the approval of a Plan of
Reorganization (the "Plan") pursuant to which the reorganization of that Fund
(the "Reorganization") would be effected.
Your Board of Directors and Warburg Pincus Asset Management, Inc. ("Warburg"),
each Fund's investment adviser, believe that the Reorganization is in the best
interests of the Existing Fund and its shareholders. If the Fund's size were to
remain small ($5.3 million as of October 2, 1997), it would not be economically
viable in the long term. Warburg and the Company's Board believe that converting
the Existing Fund to a retail-oriented fund will enable it to be sold through a
greater number of distribution channels, providing greater opportunities to
increase the Fund's size.
The Reorganization will not result in any changes to the investment philosophy
or operations of your Fund, since the New Fund has the same investment objective
and virtually identical investment policies as the Existing Fund. The New Fund
will have the same investment adviser, co-administrators, distributor,
custodian, transfer agent and accountants as the Existing Fund. In addition, the
Fund's net annual expense ratio will be capped at .95% of assets, the same
expense limitation currently in effect for the Existing Fund.
If shareholders of the Existing Fund approve the Plan, upon consummation of the
Reorganization of the Fund, the Existing Fund will be liquidated. You will
become a shareholder of the New Fund, having received shares with an aggregate
value equal to the aggregate net asset value of your investment in the Existing
Fund at the time of the transaction. No sales charge will be imposed in the
transaction. The transaction will, in the opinion of counsel, be free from
federal income taxes to you, the Existing Fund and the New
<PAGE>
Fund. Warburg or its affiliates will bear all expenses incurred in connection
with the Reorganization.
The Meeting will be held on December 16, 1997 to consider the Reorganization. We
strongly invite your participation by asking you to review, complete and return
your proxy promptly. A proxy card is enclosed.
Detailed information about the proposed reorganization is described in the
attached combined prospectus/proxy statement. YOUR BOARD OF DIRECTORS HAS
UNANIMOUSLY APPROVED THE REORGANIZATION OF THE EXISTING FUND AND RECOMMENDS THAT
YOU VOTE TO APPROVE THE PLAN. On behalf of the Board of Directors, I thank you
for your participation as a shareholder and urge you to please exercise your
right to vote by completing, dating and signing the enclosed proxy card. A
self-addressed, postage-paid envelope has been enclosed for your convenience; if
you prefer, you can fax the proxy card to Warburg Pincus Asset Management c/o
Janna Manes at (212) 878-9555.
If you have any questions regarding the proposed reorganization, please call
(212) 878-9548, where an individual will be pleased to assist you.
IT IS VERY IMPORTANT THAT YOUR VOTING INSTRUCTIONS BE RECEIVED PROMPTLY.
Sincerely,
John L. Furth
Chairman of the Board
_______________ ___, 1997
<PAGE>
Managed EAFE(R) Countries Portfolio
of
Warburg, Pincus Institutional Fund, Inc.
466 Lexington Avenue
New York, New York 10017
-----------------------------------------------------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held on December 16, 1997
-----------------------------------------------------------------------
Notice is hereby given that a Special Meeting of Shareholders
(the "Meeting") of the Managed EAFE(R) Countries Portfolio, a series of Warburg,
Pincus Institutional Fund, Inc. (the "Company"), will be held at the offices of
the Company, 466 Lexington Avenue, New York, New York 10017-3147 on December 16,
1997 commencing at 3:00 p.m. for the following purposes:
1. To approve or disapprove the Plan of Reorganization dated as
of _________ ___, 1997 (the "Plan") providing (i) that the
Managed EAFE(R) Countries Portfolio (the "Existing Fund")
would be reorganized from a series of the Company into
Warburg, Pincus Managed EAFE(R) Countries Fund, Inc. (the "New
Fund"), (ii) the Existing Fund would transfer to the New Fund
all or substantially all of its assets in exchange for shares
of the New Fund and the assumption of liabilities, and (iii)
the distribution of such shares of the New Fund to
shareholders of the Existing Fund in liquidation of the
Existing Fund.
2. To transact such other business as may properly come before
the Meeting or any adjournment or adjournments thereof.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS
THAT SHAREHOLDERS OF THE EXISTING FUND VOTE TO APPROVE THE PLAN.
The Board of Directors of the Company has fixed the close of
business on December 1, 1997 as the record date (the "Record Date") for the
determination of shareholders of the Existing Fund entitled to notice of and to
vote at the Meeting and any adjournment or adjournments thereof.
<PAGE>
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY.
SHAREHOLDERS WHO DO NOT EXPECT TO ATTEND THE SPECIAL MEETING ARE URGED TO (A)
SIGN AND RETURN WITHOUT DELAY THE ENCLOSED PROXY CARD IN THE ENCLOSED ENVELOPE,
WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES, OR (B) FAX THE
ENCLOSED PROXY CARD TO WARBURG PINCUS ASSET MANAGEMENT C/O JANNA MANES AT (212)
878-9555, SO THAT THEIR SHARES MAY BE REPRESENTED AT THE MEETING. INSTRUCTIONS
FOR THE PROPER EXECUTION OF PROXY CARDS ARE SET FORTH ON THE FOLLOWING PAGE.
PROXIES MAY BE REVOKED AT ANY TIME BEFORE THEY ARE EXERCISED BY THE SUBSEQUENT
EXECUTION AND SUBMISSION OF A REVISED PROXY, BY GIVING WRITTEN NOTICE OF
REVOCATION TO THE COMPANY AT ANY TIME BEFORE THE PROXY IS EXERCISED OR BY VOTING
IN PERSON AT THE MEETING.
By Order of the Board of Directors
EUGENE P. GRACE
Secretary
____________ ___, 1997
YOUR PROMPT ATTENTION TO THE ENCLOSED PROXY WILL HELP TO AVOID
THE EXPENSE OF FURTHER SOLICITATION.
<PAGE>
INSTRUCTIONS FOR SIGNING PROXY CARDS
The following general rules for signing proxy cards may be of
assistance to you and avoid the time and expense involved in validating your
vote if you fail to sign your proxy card properly.
1. Individual Accounts: Sign your name exactly as it appears
in the registration on the proxy card.
2. Joint Accounts: Either party may sign, but the name of the
party signing should conform exactly to the name shown in the
registration on the proxy card.
3. All Other Accounts: The capacity of the individual signing the
proxy card should be indicated unless it is reflected in the
form of registration. For example:
Registration Valid Signatures
------------ ----------------
Corporate Accounts
(1) ABC Corp. ABC Corp.
(2) ABC Corp. John Doe, Treasurer
(3) ABC Corp.
c/o John Doe, Treasurer John Doe
(4) ABC Corp. Profit Sharing
Plan John Doe, Trustee
Trust Accounts
(1) ABC Trust Jane B. Doe, Trustee
(2) Jane B. Doe, Trustee
u/t/d 12/28/78 Jane B. Doe
Custodial or Estate Accounts
(1) John B. Smith, Cust.
f/b/o John B. Smith, Jr.
UGMA John B. Smith
(2) John B. Smith John B. Smith, Jr., Executor
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED November ___, 1997
COMBINED PROSPECTUS/PROXY STATEMENT DATED
_________________ ___, 1997
Acquisition Of The Assets Of
THE MANAGED EAFE(R) COUNTRIES PORTFOLIO,
a separate investment portfolio of
WARBURG, PINCUS INSTITUTIONAL FUND, INC.
466 Lexington Avenue
New York, New York 10017
1-800-369-2728
By And In Exchange For Shares Of
WARBURG, PINCUS MANAGED EAFE(R) COUNTRIES FUND, INC.
466 Lexington Avenue
New York, New York 10017
1-800-WARBURG (800-927-2874)
This Combined Prospectus/Proxy Statement is being furnished to
shareholders of the Managed EAFE(R) Countries Portfolio (the "Existing Fund"), a
separate series of Warburg, Pincus Institutional Fund, Inc. (the "Company"), in
connection with the proposed plan of reorganization (the "Plan") to be submitted
to shareholders of the Existing Fund for consideration at a Special Meeting of
Shareholders to be held on December 16, 1997 at 3:00 p.m. (the "Meeting"), at
the offices of Warburg, Pincus Institutional Fund, Inc. located at 466 Lexington
Avenue, New York, New York 10017, or any adjournment or adjournments thereof.
<PAGE>
Warburg, Pincus Managed EAFE(R) Countries Fund, Inc. (the "New
Fund")(1) is a newly organized registered investment company. The proposed
reorganization pursuant to the Plan will not result in any change in the
investment philosophy or operations of the Existing Fund. The investment
objective and policies of the New Fund are the same as those of the Existing
Fund except for minor investment policy differences described under "Comparison
of Investment Objective and Policies" in this Combined Prospectus/Proxy
Statement. The investment adviser, co- administrators, custodian, transfer agent
and accountant for the New Fund are the same as those of the Existing Fund.
The Plan provides for all or substantially all of the assets
of the Existing Fund to be acquired by the New Fund in exchange for shares of
the New Fund and the assumption by the New Fund of liabilities of the Existing
Fund (hereinafter referred to as the "Reorganization"). (The New Fund and the
Existing Fund are sometimes referred to hereinafter as the "Funds" and
individually as a "Fund.") Shares of the New Fund would be distributed to
shareholders of the Existing Fund in liquidation of the Existing Fund and
thereafter the Existing Fund would be terminated. As a result of the proposed
Reorganization, each shareholder of the Existing Fund will receive that number
of shares of the New Fund having an aggregate net asset value equal to the
aggregate value of such shareholder's shares of the Existing Fund immediately
prior to the Reorganization. All expenses of the Reorganization will be borne by
Warburg Pincus Asset Management, Inc. ("Warburg" or the "Adviser"), the
investment adviser of the Funds. No sales charge will be imposed on the shares
of the New Fund received by the shareholders of the Existing Fund. This
transaction is structured to be tax-free for federal income tax purposes to
shareholders of the Existing Fund and to both the New Fund and the Existing
Fund.
This Combined Prospectus/Proxy Statement, which should be
retained for future reference, sets forth concisely the information about the
New Fund that a prospective investor should know before voting. This Combined
Prospectus/Proxy Statement is expected to first be sent to shareholders on or
about December ___, 1997. A Statement of Additional Information dated December
___, 1997 relating to this Combined Prospectus/Proxy Statement and the
Reorganization, has been filed with the Securities and Exchange Commission (the
"SEC") and is incorporated by reference into this Combined Prospectus/Proxy
Statement. A copy of such Statement of Additional Information accompanies this
Prospectus.
The following documents, which have been filed with the SEC,
are incorporated herein in their entirety by reference.
1. The Prospectus of the Common class of shares offered by the
New Fund, dated December ___, 1997. The New Fund Common Share
Prospectus accompanies this Combined Prospectus/Proxy
Statement.
2. The current Prospectus of the Company on behalf the Existing
Fund, dated October 21, 1997. This may be obtained without
charge by writing to the address on the cover page of this
Combined Prospectus/Proxy Statement or by calling
1-800-369-2728.
- ------------------------
(1) The Morgan Stanley EAFE[R] Index is the exclusive property of Morgan
Stanley. Morgan Stanley EAFE[R] Index is a service mark of Morgan
Stanley Group Inc. and has been licensed for use by the Company on
behalf of the Existing Fund. Capital International S.A., an
international investment management company fully owned by The Capital
Group Companies, Inc. of Los Angeles, has full responsibility for the
management and maintenance of the Morgan Stanley EAFE[R] Index.
Morgan Stanley has no responsibility for, or influence over, the
decisions of inclusion or deletion within the Morgan Stanley EAFE[R]
Index. The New Fund will enter into a similar arrangement with Morgan
Stanley & Co. Incorporated with respect to use of the Service Mark by
the New Fund.
2
<PAGE>
3. The Semiannual Report of the Existing Fund for the period from
March 31, 1997 (commencement of operations) to April 30, 1997
(unaudited).
Accompanying this Combined Prospectus/Proxy Statement as
Exhibit A is a copy of the form of Agreement and Plan of Reorganization (the
"Plan") for the proposed Reorganization.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS COMBINED
PROSPECTUS/PROXY STATEMENT AND IN THE MATERIALS EXPRESSLY INCORPORATED HEREIN BY
REFERENCE AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUNDS.
3
<PAGE>
SUMMARY
THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
ADDITIONAL INFORMATION CONTAINED ELSEWHERE IN THIS COMBINED PROSPECTUS/PROXY
STATEMENT, THE PLAN, A COPY OF THE FORM OF WHICH IS ATTACHED TO THIS COMBINED
PROSPECTUS/PROXY STATEMENT AS EXHIBIT A, THE PROSPECTUS OF THE EXISTING FUND
DATED OCTOBER 21, 1997, THE STATEMENT OF ADDITIONAL INFORMATION OF THE EXISTING
FUND DATED OCTOBER 21, 1997, THE PROSPECTUS OF THE NEW FUND DATED DECEMBER ___,
1997. AND THE STATEMENT OF ADDITIONAL INFORMATION OF THE NEW FUND DATED DECEMBER
___, 1997.
PROPOSED REORGANIZATION. The Plan provides for the transfer of
all or substantially all of the assets and liabilities of the Existing Fund to
the New Fund in exchange for Common Shares of the New Fund. The Plan also calls
for the distribution of Common Shares of the New Fund to the Existing Fund's
shareholders in liquidation of the Existing Fund. (The foregoing proposed
transactions are referred to in this Combined Prospectus/Proxy Statement as the
"Reorganization"). As a result of the Reorganization, each shareholder of the
Existing Fund will become the owner of that number of full and fractional shares
of the Common Shares of the New Fund having an aggregate net asset value equal
to the aggregate value of the shareholder's shares of the Existing Fund as of
the close of business on the date that the Existing Fund's assets are exchanged
for shares of the New Fund. Holders of shares of the Existing Fund will become
holders of Common Shares of the New Fund. See "Information About the
Reorganization -- Plan of Reorganization."
For the reasons set forth below under "Reasons for the
Reorganization," the Board of Directors of the Company, including the Directors
of the Company who are not "interested persons" (the "Independent Directors"),
as that term is defined in the Investment Company Act of 1940, as amended (the
"1940 Act"), has unanimously concluded that the Reorganization would be in the
best interests of the shareholders of the Existing Fund and that the interests
of the Existing Fund's existing shareholders will not be diluted as a result of
the transactions contemplated by the Reorganization. The Board therefore has
submitted the Plan for approval by the Existing Fund's shareholders. The Board
of Directors of the New Fund has reached similar conclusions with respect to the
New Fund and has also approved the Reorganization with respect to the New Fund.
Approval of the Reorganization of the Existing Fund will
require the affirmative vote of the holders of a majority of the Existing Fund's
outstanding shares. See "Voting Information."
TAX CONSEQUENCES. Prior to completion of the Reorganization,
the Existing Fund and the New Fund will have received an opinion of counsel
that, upon the closing of the Reorganization and the transfer of the assets of
the Existing Fund, no gain or loss will be recognized by the Existing Fund or
its shareholders for federal income tax
4
<PAGE>
purposes. The holding period and aggregate tax basis of the New Fund's shares
received by the Existing Fund shareholder will be the same as the holding period
and aggregate tax basis of the shares of the Existing Fund previously held by
such shareholder. In addition, the holding period and tax basis of the assets of
the Existing Fund in the hands of the New Fund as a result of the Reorganization
will be the same as in the hands of the Existing Fund immediately prior to the
Reorganization.
INVESTMENT OBJECTIVE AND POLICIES. The New Fund was organized
for the purpose of acquiring the assets of the Existing Fund and the New Fund
will have the same investment objective, and, except as noted below under
"Comparison of Investment Objective and Policies", virtually identical
investment policies and limitations as the Existing Fund.
FEES. For the services provided by Warburg, the Existing Fund
pays Warburg a fee calculated at an annual rate equal to .80% of the Fund's
average daily net assets. Currently, the Existing Fund's total operating
expenses are capped at .95% of the Fund's average daily net assets. In addition,
no compensation is payable is payable by the Fund to the Fund's distributor,
Counsellors Securities Inc. ("CSI"), for distribution services.
By contrast, the New Fund will pay a management fee of 1.00%
of the Fund's average daily net assets to Warburg and, with respect to the New
Fund's Common Shares, an annual fee of .25% of the Fund's average daily net
assets to CSI for distribution services pursuant to a shareholder servicing and
distribution plan adopted by the Fund pursuant to Rule 12b-1 under the 1940 Act
(a "12b-1 fee"). However, Warburg and the New Fund's co-administrators have
undertaken to limit the New Fund's total operating expenses to .95% of the
Fund's average daily net assets through February 28, 1999.
PURCHASE AND REDEMPTION PROCEDURES. The Existing Fund is
designed for institutional investors although, in the discretion of the Company,
individuals, as well as institutions, who meet the Company's minimum investment
requirements may purchase shares in the Existing Fund. The minimum initial
investment in the Existing Fund is $3,000,000 and the minimum subsequent
investment is $50,000. Purchases of shares of the Existing Fund may be made
through CSI, by mail and by wire. Purchases of shares of the Existing Fund may
also be made through certain broker-dealers, financial institutions and other
industry professionals. Shares of the Existing Fund are sold at net asset value
per share and without a sales charge or any 12b-1 fee.
The New Fund is a retail investment vehicle. The New Fund's
minimum initial investment is $2,500, except that subsequent minimum investments
can be as low as $50 under the Fund's Automatic Monthly Investment Plan. For
retirement plans and Uniform Transfers to Minors Act and Uniform Gifts to Minors
Act accounts, the minimum initial investment is $500. Purchases of shares of the
New Fund may be made by mail, or with advance arrangements, by wire through CSI.
Shares of the New Fund are sold at net asset value per share and without a sales
charge. Common Shares of the New Fund are subject to a 12b-1 fee of .25% per
annum.
5
<PAGE>
EXCHANGE PRIVILEGES. With respect to both Funds, exchanges may
be effected by mail or by telephone. Exchanges will be effected without a sales
charge but must satisfy the minimum dollar amount necessary for new purchases.
Due to the costs involved in effecting exchanges, each Fund reserves the right
to refuse to honor more than three exchange requests by a shareholder in any
30-day period. The exchange privilege may be modified or terminated at any time
upon 30 days' notice to shareholders.
Shareholders of the Existing Fund may exchange at net asset
value all or a portion of their shares only for shares of any of the other eight
investment series offered by the Company. Shareholders of the New Fund may
exchange at net asset value all or a portion of their shares for shares of the
same class of certain other mutual funds advised by Warburg at their respective
net asset values. However, shareholders may not effect exchanges between Common
Shares and any other class of the New Fund's shares that may be offered in the
future.
The exchange privilege is available to shareholders residing
in any state in which the Fund's 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. No initial sales charge is
imposed on the shares being acquired in an exchange. See "How to Redeem and
Exchange Shares" in the accompanying Prospectus of the New Fund.
DIVIDENDS. Each of the New Fund and the Existing Fund will
distribute substantially all of the net investment income and net realized
capital gains, if any, of the Fund to the Fund's shareholders. All distributions
are reinvested in the form of additional full and fractional shares unless a
shareholder elects otherwise. Each of the Funds declares and pays dividends, if
any, from net investment income annually. Net realized capital gains (including
net short-term capital gains), if any, of the New Fund, like the Existing Fund,
will also be distributed at least annually. See "Dividends, Distributions and
Taxes" in the accompanying Prospectus of the New Fund.
SHAREHOLDER VOTING RIGHTS. The New Fund is registered with the
Securities and Exchange Commission as an open-end management investment company.
The Existing Fund is a separate series of Company, which is also registered as
an open-end management investment company. The Company and the New Fund are
Maryland corporations, each having a Board of Directors. Shareholders of both
the New Fund and the Existing Fund have similar voting rights. Neither the New
Fund nor the Company on behalf of the Existing Fund holds a meeting of
shareholders annually, except as required by the 1940 Act or other applicable
law. The New Fund's By-Laws provide that shareholders collectively owning at
least ten percent of the outstanding shares of all classes of stock of the Fund
have the right to call for a meeting of shareholders to consider the removal of
one or more directors. To the extent required by law, the New Fund will assist
in shareholder communication in such matters.
6
<PAGE>
In addition, under the laws of the State of Maryland,
shareholders of the New Fund and the Existing Fund do not have appraisal rights
in connection with a combination or acquisition of the assets of the Fund by
another entity. Shareholders of the Existing Fund may, however, redeem their
shares at net asset value prior to the date of the Reorganization. See
"Information on Shareholders' Rights -- Voting Rights."
RISK FACTORS
Due to the fact that the investment objective and policies of
the New Fund are virtually identical to those of the Existing Fund, the
investment risks are substantially similar. See the accompanying Prospectus of
the New Fund for a complete discussion of the risks of investing in that Fund.
REASONS FOR THE REORGANIZATION
The Board of Directors of the Company has determined that it
is in the best interest of the Existing Fund and its shareholders to effect the
Reorganization. In reaching this conclusion, the Board considered a number of
factors, including the following:
1. the terms and conditions of the Reorganization;
2. the identical investment objective and virtually identical
policies and restrictions of the New Fund as the Existing Fund;
3. that the investment adviser, co-administrators,
distributor, custodian, transfer agent and accountants for the New Fund
are the same as those of the Existing Fund;
4. the federal tax consequences of the Reorganization to the
Existing Fund, the New Fund and the shareholders of each, and that a
legal opinion will be rendered that no recognition of income, gain or
loss for federal income tax purposes will occur as a result of the
Reorganization to any of them;
5. that the interests of shareholders of the Existing Fund
will not be diluted as a result of the Reorganization;
6. that service providers to the New Fund have agreed to waive
fees and reimburse expenses until February 28, 1999 to the extent
necessary to maintain the net expense ratio of the New Fund at .95% of
average daily net assets, the same level as the current expense limit
for the Existing Fund;
7. that the expenses incurred in connection with the
Reorganization will be borne by Warburg;
7
<PAGE>
8. that no sales charge will be imposed in connection with the
Reorganization;
9. that the Existing Fund's current size is not economically
viable in the long term; and
10. that converting the Existing Fund to a retail-oriented
fund with lower investment minimums would enable it to be sold through
a greater number of distribution channels, which would provide greater
opportunities to increase the Fund's asset size to a level that would
be economically viable over the long term.
In light of the foregoing, the Board of Directors of the
Company, including the Independent Directors, has unanimously determined that it
is in the best interest of the Existing Fund and its shareholders to effect the
Reorganization. The Board of Directors has also determined that the
Reorganization of the Existing Fund into the New Fund would not result in a
dilution of the interests of the Existing Fund's shareholders.
The Board of Directors of the New Fund has also determined
that it is advantageous to the New Fund to effect the Reorganization. The Board
of Directors also considered the terms and conditions of the Reorganization and
representations that the Reorganization would be effected as a tax-free
reorganization. Accordingly, the Board of Directors of the New Fund, including
the Independent Directors, has unanimously determined that the Reorganization is
in the best interests of the New Fund's shareholders and that the interests of
the New Fund's shareholders would not be diluted as a result of the
Reorganization.
8
<PAGE>
FEE TABLE
The following table shows the current costs and expenses of
the Existing Fund and the costs and expenses expected to be incurred by the New
Fund after giving effect to the Reorganization. The table does not reflect
charges that institutions and financial intermediaries may impose on their
customers.
<TABLE>
<CAPTION>
Existing New
Warburg Fund Warburg Fund*
------------ -------------
<S> <C> <C>
None None
Annual Operating Expenses (after fee waivers and
expense reimbursements)
Management fees .30% .30%
12b-1 fees** 0% .25%
Other expenses .65% .40%
Total Operating Expenses (after waivers
and expense reimbursements) .95% .95%
</TABLE>
* Warburg and PFPC Inc. (or their affiliates) have agreed to waive fees and
reimburse expenses of the New Fund until February 28, 1999 so that the
expense ratio of the New Fund's Common Shares will be no higher than .95%
of net assets.
** Common Shares of the New Fund impose a 12b-1 fee of .25% per annum, which
is the economic equivalent of a sales charge. Long-term shareholders of the
Fund may pay more than the economic equivalent of the maximum front-end
sales charges permitted by the National Association of Securities Dealers,
Inc.
The expense figures for the Existing Fund are based on expenses for the
fiscal year ending October 31, 1997. In addition, the Fee Table reflects a
voluntary assumption of some of the additional expenses of the Existing Fund by
Warburg and PFPC, Inc. Absent such expense reimbursements, Management Fees for
the Existing Fund would have equaled .80%, Other Expenses would have equaled
6.15% and Total Operating Expenses would have equaled 6.95%.
The expense figures for the New Fund are based on annualized estimates
of expenses for the fiscal year ending October 31, 1998. In addition, the Fee
Table reflects a voluntary assumption of some of the additional expenses of the
New Fund by the Fund's service providers. Absent such expense reimbursements,
Management Fees for the Existing Fund would equal 1.00%, Other Expenses would
equal 5.90% and Total Operating Expenses would equal 7.15%.
9
<PAGE>
Example
The following example is intended to assist an investor in
understanding the various costs that an investor in the New Fund will bear
directly or indirectly. The example assumes payment of operating expenses at the
levels set forth in the table above.
<TABLE>
<CAPTION>
1 Year 3 Years
------ -------
<S> <C> <C>
An investor would pay the following expenses on a $1,000
investment, assuming (1) 5.00% annual return and (2) redemption
at the end of each time period:
Existing Fund...................................... $10 $30
New Fund........................................... $10 $30
</TABLE>
The example assumes that all dividends and distributions are
reinvested.
The examples provide a means for the investor to compare expense levels
of funds with different fee structures over varying investment periods. To
facilitate such comparison, all funds are required to utilize a 5.00% annual
return assumption. However, the Fund's actual return will vary and may be
greater or less than 5.00%. The example should not be considered a
representation of past or future expenses and actual expenses may be greater or
lesser than those shown.
10
<PAGE>
INFORMATION ABOUT THE REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION. The following summary of
the Plan is qualified in its entirety by reference to the form of Plan (Exhibit
A hereto). The Plan provides that the New Fund will acquire all or substantially
all of the assets of the Existing Fund in exchange for Common Shares of the New
Fund and the assumption by the New Fund of the liabilities of the Existing Fund
on _________ ___, 1997, or such date as may be agreed upon by the parties to the
Reorganization (the "Closing Date").
Prior to the Closing Date, the Company on behalf of the
Existing Fund will endeavor to discharge all of its known liabilities and
obligations. The New Fund shall assume all liabilities, expenses, costs, charges
and reserves reflected on an unaudited statement of assets and liabilities of
the Existing Fund prepared by PFPC as of the close of regular trading on the New
York Stock Exchange, Inc., currently 4:00 p.m. New York City time, on the
Closing Date, in accordance with generally accepted accounting principles
consistently applied from the prior audited period. The New Fund shall also
assume any liabilities of the Existing Fund arising from the operations and/or
transactions of the Existing Fund prior to and including the Closing Date. The
net asset value per share of each Fund will be determined by adding the value of
the Fund's securities, cash and other assets, deducting the value of the actual
and accrued liabilities, and dividing the result by the total number of
outstanding shares. Each of the Existing Fund and the New Fund will utilize the
procedures set forth in its respective current Prospectus or Statement of
Additional Information to determine the value of its respective portfolio
securities and to determine the aggregate value of each Fund's portfolio.
At or prior to the Closing Date, the Company on behalf of the
Existing Fund will declare a dividend or dividends which, together with all
previous such dividends, will have the effect of distributing to the Existing
Fund's shareholders all of the Fund's investment company taxable income for all
taxable periods through and including the Closing Date (computed without regard
to any deduction for dividends paid). In addition, the Existing Fund's dividend
will include its net capital gains realized in all taxable periods through and
including the Closing Date (after reductions for any capital loss carryforward).
As soon after the Closing Date as conveniently practicable,
the Existing Fund will liquidate and distribute pro rata to shareholders of
record as of the close of business on the Closing Date the Common Shares of the
New Fund received by the Existing Fund. Such liquidation and distribution will
be accomplished by the establishment of accounts in the names of the Existing
Fund's shareholders on the share records of the New Fund's transfer agent. Each
account will represent the respective pro rata number of shares of the New Fund
due to each Existing Fund shareholder. After such distribution and the winding
up of its affairs, the Existing Fund will be terminated as a series of the
Company.
11
<PAGE>
The consummation of the Reorganization is subject to the
conditions set forth in the Plan. Notwithstanding approval by the shareholders
of the Existing Fund, the Plan may be terminated at any time at or prior to the
Closing Date: (i) by mutual agreement of the Company, on behalf of the Existing
Fund, and the New Fund; (ii) by the Company, on behalf of the Existing Fund, in
the event the New Fund shall, or the New Fund, in the event the Company or the
Existing Fund shall, materially breach any representation, warranty or agreement
contained in the Plan to be performed at or prior to the Closing Date; or (iii)
if a condition to the Plan expressed to be precedent to the obligations of the
terminating party has not been met and it reasonably appears that it will not or
cannot be met.
Approval of the Plan with respect to the Existing Fund will
require the affirmative vote of a majority of the Existing Fund's outstanding
shares in the aggregate, in person or by proxy, if a quorum is present. The
approval of shareholders of any other series of the Company or of shareholders
of the New Fund is not required. Shareholders of the Existing Fund are entitled
to one vote for each share. If the Reorganization is not approved by
shareholders of the Existing Fund, the Board of Directors of the Company on
behalf of the Existing Fund will consider other possible courses of action
available to it, including resubmitting the Reorganization proposal to
shareholders.
DESCRIPTION OF THE NEW FUND'S SHARES. Common Shares of the New
Fund will be issued to the Existing Fund in accordance with the procedures
detailed in the Plan and as described in the New Fund's Prospectus. In the
interest of economy and convenience, physical certificates representing shares
in the New Fund will not normally be issued unless specifically requested by a
shareholder of the New Fund. See "Information on Shareholders' Rights" and the
Prospectus of the New Fund for additional information with respect to the shares
of the New Fund.
FEDERAL INCOME TAX CONSEQUENCES. The exchange of assets of the
Existing Fund for shares of the New Fund is intended to qualify for federal
income tax purposes as a tax-free reorganization under Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"). As a condition to the
closing of the Reorganization, the New Fund and the Company on behalf of the
Existing Fund will receive an opinion from Willkie Farr & Gallagher, counsel to
the Funds, to the effect that, on the basis of the existing provisions of the
Code, U.S. Treasury regulations issued thereunder, current administrative rules,
pronouncements and court decisions, for federal income tax purposes, upon
consummation of the Reorganization:
(1) the transfer of all or substantially all of the Existing Fund's
assets in exchange for the New Fund's shares and the assumption by the
New Fund of liabilities of the Existing Fund will constitute a
"reorganization" within the meaning of Section 368(a) of the Code, and
the New Fund and the Existing Fund are each a "party to a
reorganization" within the meaning of Section 368(b) of the Code;
(2) no gain or loss will be recognized by the New Fund upon the
receipt of the assets of the Existing Fund solely in exchange for the
New Fund's shares and the assumption by the New Fund of liabilities of
the Existing Fund;
12
<PAGE>
(3) no gain or loss will be recognized by the Existing Fund upon the
transfer of the Existing Fund's assets to the New Fund in exchange for
the New Fund's shares and the assumption by the New Fund of liabilities
of the Existing Fund or upon the distribution (whether actual or
constructive) of the New Fund's shares to the Existing Fund's
shareholders;
(4) no gain or loss will be recognized by shareholders of the Existing
Fund upon the exchange of their shares for shares of the New Fund and
the assumption by the New Fund of liabilities of the Existing Fund;
(5) the aggregate tax basis of the shares of the New Fund received by
each shareholder of the Existing Fund pursuant to the Reorganization
will be the same as the aggregate tax basis of shares of the Existing
Fund held by such shareholder immediately prior to the Reorganization,
and the holding period of shares of the New Fund to be received by each
shareholder of the Existing Fund will include the period during which
shares of the Existing Fund exchanged therefor were held by such
shareholder (provided shares of the Existing Fund were held as capital
assets on the date of the Reorganization); and
(6) the tax basis of the Existing Fund's assets acquired by the New
Fund will be the same as the tax basis of such assets to the Existing
Fund immediately prior to the Reorganization, and the holding period of
the assets of the Existing Fund in the hands of the New Fund will
include the period during which those assets were held by the Existing
Fund.
Shareholders of the Existing Fund should consult their tax
advisors regarding the effect, if any, of the proposed Reorganization in light
of their individual circumstances. Since the foregoing discussion only relates
to the federal income tax consequences of the Reorganization, shareholders of
the Existing Fund should also consult their tax advisors as to state and local
tax consequences, if any, of the Reorganization.
CAPITALIZATION. The following table shows the capitalization
of each Fund as of the close of business on October 2, 1997 and the combined
pro forma capitalization as if the Reorganization had occurred as of the close
of business on that date.
<TABLE>
<CAPTION>
Existing Fund New Fund Pro Forma
(Unaudited) (Unaudited) Combined
------------- ----------- ---------
<S> <C> <C> <C>
Net assets................................... $5,274,719 0 $5,274,719
Net asset value per share.................... $12.16 0 $12.16
Shares outstanding........................... 433,621 0 433,621
</TABLE>
13
<PAGE>
The New Fund will not commence operations until consummation
of the Reorganization and, accordingly, as of October 2, 1997 there were no
outstanding shares of the New Fund.
As of October 2, 1997, the officers and Directors of the
Company beneficially owned as a group less than 1% of the outstanding shares of
the Existing Fund. To the best knowledge of the Company, as of October 2, 1997,
no shareholder or "group" (as that term is used in Section 13(d) of the
Securities Exchange Act of 1934 (the "Exchange Act")), except as set forth in
the table below, owned beneficially or of record more than 5% of the outstanding
shares of a class of the Existing Fund.
<TABLE>
<CAPTION>
PERCENT OWNED AS
NAME AND ADDRESS OF OCTOBER 2, 1997
- ---------------- ---------------------
<S> <C> <C>
Warburg Pincus Asset Management, Inc. 466 Lexington Avenue 46.1%
New York, New York 10017-3147
Christian Children's Fund, Inc. C/O Wayne Ball 53.9%
PO Box 26484
2400 Emerywood Parkway
Richmond, Virginia 23261-6484
</TABLE>
Warburg intends to vote its shares of the Existing Fund in
proportion to the votes actually received from the other shareholders of the
Existing Fund.
14
<PAGE>
COMPARISON OF INVESTMENT OBJECTIVE AND POLICIES
The following discussion is based upon and qualified in its
entirety by the disclosures in the Prospectus and Statements of Additional
Information of the New Fund and the Existing Fund.
INVESTMENT OBJECTIVE. As stated above the Existing Fund and
the New Fund have the same investment objective. There can be no assurance that
any Fund will achieve its investment objective. The investment objective of the
New Fund, like that of the Existing Fund, may not be amended without first
obtaining the approval of a majority of the outstanding shares of the Fund (as
defined in the 1940 Act).
PRIMARY INVESTMENTS. The New Fund was organized for the
purpose of acquiring the assets of the Existing Fund. The New Fund will be
managed by the four individuals currently responsible for managing the Existing
Fund, with the addition of two more associate portfolio managers. See
"Management of the Fund" below. In addition, the investment policies and
investment restrictions of the New Fund were developed so that they would be
identical to those of the Existing Fund, except that (i) the New Fund may invest
up to 15% of its 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, while the Existing Fund may only invest up
to 10% of its net assets in such securities; (ii) the New Fund may invest
without limit in the securities of companies (including predecessors) that have
been in continuous operation for fewer than three years whereas the Existing
Fund can only invest up to 5% of its total assets in such companies; and (iii)
the limitation on the New Fund's investment in other investment companies is
classified as nonfundamental whereas the corresponding restriction for the
Existing Fund is fundamental. Warburg has no current intention of recommending
any change to any non-fundamental investment policy of the New Fund.
While the New Fund has the same investment restrictions as the
Existing Fund (except as previously stated), the New Fund's restrictions have
been modified to conform to policies currently employed by more recently
established Warburg Pincus Funds as follows:
(a) Borrowing. The New Fund may enter into reverse repurchase
agreements; provided that reverse repurchase agreements and
dollar rolls that are accounted for as financings and any
other transactions constituting borrowing may not exceed 30%
of the Fund's assets. In addition, short sales, currency
transactions, options, futures, options on futures, forward
commitments and dollar rolls that are not accounted for as
financings (and the segregation of assets related to the
foregoing) will not constitute borrowing.
(b) Lending. The New Fund's investment in loan participations,
assignments and structured securities will not constitute
lending.
15
<PAGE>
(c) Underwriting. The New Fund's sale of securities in accordance
with its investment objective, policies and limitations will
not be deemed to be underwriting.
(d) Commodities. The New Fund may invest in futures, including
those relating to securities, currencies and indexes; options
on futures, securities, currencies or indexes; forward or
delayed delivery currency transactions; and stand-by
commitments.
(e) Margin. The New Fund's deposit or payment of initial or
variation margin in connection with currency and options
transactions will not be deemed to be purchases of securities
on margin.
MANAGEMENT OF THE FUND
Warburg will provide investment advisory services to the New
Fund under an advisory agreement substantially identical to the advisory
agreement currently in effect between Warburg and the Company relating to the
Existing Fund, except that the advisory fee payable to Warburg would increase
from .80% to 1.00% of average daily net assets. In addition to Richard H. King,
P. Nicholas Edwards, Harold W. Ehrlich and Vincent J. McBride, who are currently
responsible for the day-to-day management of the Existing Fund and will continue
in that role after the Reorganization, Nancy Nierman and J.H. Cullum Clark, CFA
have been named Associate Portfolio Managers of the New Fund. Messrs. King,
Nicholas and Edwards will act as Co-Portfolio Managers of the New Fund and Mr.
McBride will act as Associate Portfolio Manager of the New Fund. In addition,
PFPC Inc. and Counsellors Funds Services Inc. would continue to provide
accounting and co-administrative services, as applicable, and CSI would continue
to provide distribution services, each under new agreements substantially
identical to those now in effect for the Existing Fund, except that CSI will be
paid an annual distribution fee equal to .25% of the average net assets of the
New Fund's Common Shares. The co-administration fees payable under the related
agreements would not be changed as a result of the Reorganization.
State Street Bank and Trust Company will continue its role as
shareholder servicing agent, transfer agent and dividend disbursing agent after
the Reorganization. PNC Bank will continue to serve as custodian for U.S. assets
and State Street Bank as custodian for foreign securities. The fees payable for
transfer agency and custodial services will be no higher after the
Reorganization than before. Coopers & Lybrand L.L.P., the independent
accountants for the Existing Fund, will also serve in that capacity for the New
Fund.
INTEREST OF WARBURG IN THE REORGANIZATION
Warburg may be deemed to have an interest in the Plan and the
Reorganization because it provides investment advisory services to the Existing
Fund. Warburg receives compensation from the Existing Fund for services it
provides pursuant to an advisory agreement. The terms and provisions of this
arrangement are described in the New Fund
16
<PAGE>
Prospectus under "Management of the Fund -- Investment Adviser." Future growth
of assets of the New Fund, if any, can be expected to increase the total amount
of fees payable to Warburg and its affiliates and to reduce the amount of fees
and expenses required to be waived to maintain total fees and expenses of the
New Fund at agreed upon levels. Warburg may also be deemed to have an interest
in the Plan and the Reorganization because, as of October 1, 1997, it owned
46.1% of the outstanding shares of the Existing Fund. See "Voting Information."
INFORMATION ON SHAREHOLDERS' RIGHTS
GENERAL. The Company and the New Fund are open-end diversified
management investment companies registered under the 1940 Act, which
continuously offer to sell shares at their current net asset values. The
Existing Fund is a series of the Company, which is a Maryland corporation that
was incorporated on May 13, 1992 and is governed by its Charter, By-Laws and
Board of Directors. The New Fund is a Maryland corporation organized on October
24, 1997 which was incorporated under the name "Warburg, Pincus Managed EAFE
Countries Fund, Inc." and is governed by its Charter, By-Laws and Board of
Directors. Each Fund is also governed by applicable state and federal law. The
Company has an authorized capital of thirty billion shares of common stock with
a par value of $.001 per share. The New Fund has an authorized capital of three
billion shares of common stock with a par value of $.001 per share. The Board of
Directors of the Company has authorized the issuance of nine series of shares,
each representing shares in one of nine separate portfolios, and may authorize
the issuance of additional series of shares in the future. The assets of each
portfolio are segregated and separately managed and a shareholder's interest is
in the assets of the portfolio in which he or she holds shares. In the New Fund
and the Existing Fund, shares represent interests in the assets of the relevant
Fund and have identical voting, dividend, liquidation and other rights on the
same terms and conditions, except that expenses related to the distribution of
each class of shares of the New Fund are borne solely by such class and each
class of shares has exclusive voting rights with respect to provisions of such
Fund's Rule 12b-1 distribution plan pertaining to a particular class.
MULTI-CLASS STRUCTURE. The Existing Fund has issued only one
class of shares. The New Fund has authorized two classes of shares: Common
Shares and Advisor Shares. The New Fund currently intends to offer only Common
Shares. Advisor Shares would be available to individual investors only through
institutional shareholders of record, broker-dealers, financial institutions,
depository institutions and other financial intermediaries ("Institutions").
The New Fund is authorized to offer Advisor Shares exclusively
to Institutions whose clients or customers (or participants in the case of
retirement plans) ("Customers") are beneficial owners of Advisor Shares. Either
those Institutions or companies providing certain services to them (together,
"Service Organizations") will enter into service agreements ("Agreements")
related to the sale of the Advisor Shares with CSI pursuant to a Distribution
Plan. Pursuant to the terms of an Agreement, the Service Organization agrees to
perform
17
<PAGE>
certain distribution, shareholder servicing, administrative and/or accounting
services for its Customers. Distribution services would be marketing or other
services in connection with the promotion and sale of Advisor Shares.
Shareholder services that may be provided include responding to Customer
inquiries, providing information on Customer investments and providing other
shareholder liaison services.
DIRECTORS. The By-Laws of the Company and of the New Fund
provide that the term of office of each Director shall be from the time of his
or her election and qualification until his or her successor shall have been
elected and shall have qualified. Any Director of the Company or the New Fund
may be removed by the vote of at least a majority of the shares of capital stock
then entitled to be cast for the election of Directors. Vacancies on the Boards
of the Company or the New Fund may be filled by the Directors remaining in
office. A meeting of shareholders will be required for the purpose of electing
additional Directors whenever fewer than a majority of the Directors then in
office were elected by shareholders.
VOTING RIGHTS. Neither the Company nor the New Fund holds a
meeting of shareholders annually, and there normally is no meeting of
shareholders for the purpose of electing Directors unless and until such time as
less than a majority of the Directors holding office have been elected by
shareholders.
LIQUIDATION OR TERMINATION. In the event of the liquidation or
termination of any of the investment funds of the Company or of the New Fund,
the shareholders of the Fund are entitled to receive, when and as declared by
the Directors, the excess of the assets over the liabilities belonging to the
Fund. In either case, the assets so distributed to shareholders will be
distributed among the shareholders in proportion to the number of shares of each
class held by them and recorded on the books of the fund.
LIABILITY OF DIRECTORS. The Articles of Incorporation of the
Company and of the New Fund provide that the Directors and officers shall not be
liable for monetary damages for breach of fiduciary duty as a Director or
officer, except to the extent such exemption is not permitted by law. The
Articles of Incorporation further provide that the Company and the New Fund
shall indemnify each Director and officer and provide advances for the payment
of expenses relating to the matter for which indemnification is sought, each to
the fullest extent permitted by Maryland General Corporation Law and other
applicable law.
RIGHTS OF INSPECTION. Maryland law permits any shareholder of
the Company and of the New Fund or any agent of such shareholder to inspect and
copy, during usual business hours, the By-Laws, minutes of shareholder
proceedings, annual statements of the affairs and voting trust agreements of the
Company and the New Fund on file at its principal offices.
SHAREHOLDER LIABILITY. Under Maryland law, shareholders of the
Company and of the New Fund do not have personal liability for corporate acts
and
18
<PAGE>
obligations. Shares of the New Fund issued to the shareholders of the Existing
Fund in the Reorganization will be fully paid and nonassessable when issued,
transferable without restrictions and will have no preemptive rights.
The foregoing is only a summary of certain characteristics of
the operations of the New Fund and the Company on behalf of the Existing Fund.
The foregoing is not a complete description of the documents cited. Shareholders
should refer to the provisions of the corporate documents and state laws
governing each Fund for a more thorough description.
ADDITIONAL INFORMATION
Both the Company and the New Fund are subject to the
informational requirements of the Exchange Act and the 1940 Act and in
accordance therewith file reports and other information including proxy
material, reports and charter documents, with the SEC. These materials can be
inspected and copies obtained at the Public Reference Facilities maintained by
the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549 and at the New York
Regional Office of the SEC at 7 World Trade Center, Suite 1300, New York, New
York 10048. Copies of such material can also be obtained from the Public
Reference Branch, Office of Consumer Affairs and Information Services, SEC,
Washington, D.C. 20549 at prescribed rates. In addition, the SEC maintains a Web
site (http://www.sec.gov) that contains each Fund's Statement of Additional
Information, material incorporated by reference and other information regarding
the Funds.
19
<PAGE>
VOTING INFORMATION
This Combined Prospectus/Proxy Statement is furnished in
connection with a solicitation of proxies by the Board of Directors of the
Company to be used at the Special Meeting of Shareholders of the Existing Fund
to be held at 3:00 p.m. on December 16, 1997, at the offices of the Fund, 466
Lexington Avenue, New York, New York 10017-3147 and at any adjournment or
adjournments thereof. This Combined Prospectus/Proxy Statement, along with a
Notice of the Meeting and proxy card(s), is first being mailed to shareholders
of the Existing Fund on or about December 5, 1997. Only shareholders of record
as of the close of business on the Record Date will be entitled to notice of,
and to vote at, the Meeting or any adjournment thereof. As of the Record Date,
the Existing Fund had the following shares outstanding and entitled to vote:
_______________________. The holders of a majority of the shares of the Existing
Fund outstanding at the close of business on the Record Date present in person
or represented by proxy will constitute a quorum for the Meeting of that Fund.
For purposes of determining a quorum for transacting business at the Meeting,
abstentions and broker "non-votes" (that is, proxies from brokers or nominees
indicating that such persons have not received instructions from the beneficial
owner or other persons entitled to vote shares on a particular matter with
respect to which the brokers or nominees do not have discretionary power) will
be treated as shares that are present but which have not been voted. For this
reason, abstentions and broker non-votes will have the effect of a "no" vote for
purposes of obtaining the requisite approval of the Plan. If the enclosed proxy
is properly executed and returned in time to be voted at the Meeting, the
proxies named therein will vote the shares represented by the proxy in
accordance with the instructions marked thereon. Unmarked proxies will be voted
FOR approval of the Plan and FOR approval of any other matters deemed
appropriate. A proxy may be revoked at any time on or before the Meeting by
written notice to the Secretary of Warburg Pincus Institutional Fund, Inc., 466
Lexington Avenue, New York, New York, 10017-3147.
Approval of the Plan with respect to the Existing Fund will
require the affirmative vote of a majority of the Existing Fund's outstanding
shares, in person or by proxy, if a quorum is present. The approval of
shareholders of any other investment series of the Company is not required.
Shareholders of the Existing Fund are entitled to one vote for each share.
Proxy solicitations will be made primarily by mail, but proxy
solicitations also may be made by telephone, telegraph or personal interviews
conducted by officers and employees of Warburg and/or by PFPC or their
respective affiliates. All expenses of the Reorganization, including the costs
of the proxy solicitation and the preparation of enclosures to the Combined
Prospectus/Proxy Statement, reimbursement of expenses of forwarding solicitation
material to beneficial owners of shares of the Existing Fund and expenses
incurred in connection with the preparation of this Combined Prospectus/Proxy
Statement will be borne by Warburg or its affiliates (excluding extraordinary
expenses not normally associated with transactions of this type).
20
<PAGE>
In the event that a quorum necessary for a shareholders'
meeting is not present or sufficient votes to approve the Reorganization of the
Existing Fund are not received by December ___, 1997, the persons named as
proxies may propose one or more adjournments of the Meeting to permit further
solicitation of proxies. In determining whether to adjourn the Meeting, the
following factors may be considered: the percentage of votes actually cast, the
percentage of negative votes actually cast, the nature of any further
solicitation and the information to be provided to shareholders with respect to
the reasons for the solicitation. Any such adjournment will require an
affirmative vote by the holders of a majority of the shares of the Existing Fund
present in person or by proxy and entitled to vote at the Meeting. The persons
named as proxies will vote upon a decision to adjourn the Meeting with respect
to the Existing Fund after consideration of the best interests of all
shareholders of that Fund.
OTHER BUSINESS
The Company's Board of Directors knows of no other business to
be brought before the Meeting. However, if any other matters come before the
Meeting, proxies that do not contain specific restrictions to the contrary will
be voted on such matters in accordance with the judgment of the persons named in
the enclosed Proxy Card.
The approval of shareholders of the New Fund is not required
in order to affect the Reorganization and, accordingly, the votes of the
shareholders of the New Fund are not being solicited by this Combined
Prospectus/Proxy Statement.
FINANCIAL STATEMENTS
The unaudited statement of assets and liabilities of the
Existing Fund, including the schedule of portfolio investments, as of April 30,
1997, the related statements of operations for the period from March 31, 1997
(commencement of operations) to April 30, 1997, the statement of changes in net
assets for the same period and the financial highlights for the same period,
have been incorporated by reference into this Combined Prospectus/Proxy
Statement. There is no financial information available at this time for the New
Fund, which has not yet commenced operations.
LEGAL MATTERS
Certain legal matters concerning the issuance of shares of the
New Fund will be passed upon by Willkie Farr & Gallagher, One Citicorp Center,
153 East 53rd Street, New York, New York 10022-4677, counsel to the Fund. In
rendering such opinion, Willkie Farr & Gallagher may rely on an opinion of
Venable, Baetjer and Howard, LLP as to certain matters under Maryland law.
21
<PAGE>
EXHIBIT A
FORM OF PLAN OF REORGANIZATION
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is
made as of this ___ th day of __________, 1997, between and among Warburg,
Pincus Managed EAFE[R] Countries Fund, Inc., a Maryland corporation (the "New
Warburg Fund"), and Warburg, Pincus Institutional Fund, Inc., a Maryland
corporation (the "Institutional Fund"), on behalf of the Managed EAFE[R]
Countries Portfolio, a series of shares of the Institutional Fund (the "Existing
Warburg Fund").
This Agreement is intended to be and is adopted as a plan of
reorganization and liquidation within the meaning of Section 368 (a) of the
United States Internal Revenue Code of 1986, as amended (the "Code"). The
reorganization of the Existing Warburg Fund (collectively, the "Reorganization")
will consist of the transfer of substantially all of the assets of the Existing
Warburg Fund in exchange solely for Common Shares (collectively, the "Shares")
of the New Warburg Fund and the assumption by the New Warburg Fund of
liabilities of the Existing Warburg Fund and the distribution, after the Closing
Date hereinafter referred to, of New Warburg Fund Shares to the shareholders of
the Existing Warburg Fund in liquidation of the Existing Warburg Fund as
provided herein, all upon the terms and conditions hereinafter set forth in this
Agreement.
WHEREAS, the Board of Directors of the Institutional Fund on behalf of
the Existing Warburg Fund, has determined that the exchange of all of the assets
and the liabilities of the Existing Warburg Fund for New Warburg Fund Shares and
the assumption of such liabilities by the New Warburg Fund is in the best
interests of the Institutional Fund and the Existing Warburg Fund and that the
interests of the existing shareholders of the Institutional Fund and the
Existing Warburg Fund would not be diluted as a result of this transaction; and
WHEREAS, the Board of Directors of the New Warburg Fund has determined
that the exchange of all of the assets of the Existing Warburg Fund for New
Warburg Fund Shares is in the best interests of the New Warburg Fund's
shareholders and that the interests of the existing shareholders of the New
Warburg Fund would not be diluted as a result of this transaction.
NOW, THEREFORE, in consideration of the premises and of the covenants
and agreements hereinafter set forth, the parties hereto covenant and agree as
follows:
<PAGE>
1. TRANSFER OF ASSETS OF THE EXISTING WARBURG FUND IN EXCHANGE FOR NEW
WARBURG FUND SHARES AND ASSUMPTION OF THE EXISTING WARBURG FUND'S
LIABILITIES AND LIQUIDATION OF THE EXISTING WARBURG FUND
1.1. Subject to the terms and conditions herein set forth and on the
basis of the representations and warranties contained herein, the Institutional
Fund agrees to transfer the Existing Warburg Fund's assets as set forth in
paragraph 1.2 to the New Warburg Fund, and the New Warburg Fund agrees in
exchange therefor: (i) to deliver to the Institutional Fund the number of New
Warburg Fund Shares, including fractional New Warburg Fund Shares, determined by
dividing the value of the Existing Warburg Fund's net assets, computed in the
manner and as of the time and date set forth in paragraph 2.1, by the net asset
value of one New Warburg Fund Share of the same class, computed in the manner
and as of the time and date set forth in paragraph 2.2; and (ii) to assume the
liabilities of the Existing Warburg Fund, as set forth in paragraph 1.3. Such
transactions shall take place at the closing provided for in paragraph 3.1 (the
"Closing").
1.2. (a) The assets of the Existing Warburg Fund to be acquired by the
New Warburg Fund shall consist of all property including, without limitation,
all cash, securities and dividend or interest receivables which are owned by the
Existing Warburg Fund and any deferred or prepaid expenses shown as an asset on
the books of the Existing Warburg Fund on the closing date provided in paragraph
3.1 (the "Closing Date").
(b) In the event that the Existing Warburg Fund holds any
investments which do not conform to the New Warburg Fund's investment
objectives, policies and restrictions, the Existing Warburg Fund will dispose of
such securities prior to the Closing Date. In addition, if it is determined that
the portfolios of the Existing Warburg Fund and the New Warburg Fund, when
aggregated, would contain investments exceeding certain percentage limitations
imposed upon the New Warburg Fund with respect to such investments, the Existing
Warburg Fund, if requested by the New Warburg Fund, will dispose of and/or
reinvest a sufficient amount of such investments as may be necessary to avoid
violating such limitations as of the Closing Date.
1.3. The Institutional Fund, on behalf of the Existing Warburg Fund,
will endeavor to discharge all the Existing Warburg Funds' known liabilities and
obligations prior to the Closing Date, other than those liabilities and
obligations which would otherwise be discharged at a later date in the ordinary
course of business. The New Warburg Fund shall assume all liabilities, expenses,
costs, charges and reserves, including those liabilities reflected on an
unaudited statement of assets and liabilities of the Existing Warburg Fund
prepared by PFPC Inc., as of the Valuation Date (as defined in paragraph 2.1),
in
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<PAGE>
accordance with generally accepted accounting principles consistently applied
from the prior audited period. The New Warburg Fund shall also assume any
liabilities, expenses, costs or charges incurred by or on behalf of the Existing
Warburg Fund specifically arising from or relating to the operations and/or
transactions of the Existing Warburg Fund prior to and including the Closing
Date but which are not reflected on the above-mentioned statement of assets and
liabilities, including any liabilities, expenses, costs or charges arising under
paragraph 5.10 hereof.
1.4. As provided in paragraph 3.4, as soon after the Closing Date as is
conveniently practicable (the "Liquidation Date"), the Existing Warburg Fund
will liquidate and distribute pro rata to the Existing Warburg Fund's
shareholders of record determined as of the close of business on the Closing
Date (the "Existing Warburg Fund Shareholders") the New Warburg Fund Shares it
receives pursuant to paragraph 1.1. Such liquidation and distribution will be
accomplished by the transfer of the New Warburg Fund Shares then credited to the
account of the Existing Warburg Fund on the books of the New Warburg Fund to
open accounts on the share records of the New Warburg Fund in the name of the
Existing Warburg Fund's shareholders representing the respective pro rata number
of the New Warburg Fund Shares of the particular class due such shareholders.
All issued and outstanding shares of the Existing Warburg Fund will
simultaneously be canceled on the books of the Institutional Fund, although
share certificates representing interests in the Existing Warburg Fund will
represent a number of New Warburg Fund Shares after the Closing Date as
determined in accordance with Section 2.3. The New Warburg Fund shall not issue
certificates representing the New Warburg Fund Shares in connection with such
exchange.
1.5. Ownership of New Warburg Fund Shares will be shown on the books of
the New Warburg Fund's transfer agent. Shares of the New Warburg Fund will be
issued in the manner described in the New Warburg Fund's current prospectus and
statement of additional information.
1.6. Any transfer taxes payable upon issuance of the New Warburg Fund
Shares in a name other than the registered holder of the Existing Warburg Fund
Shares on the books of the Existing Warburg Fund as of that time shall, as a
condition of such issuance and transfer, be paid by the person to whom such New
Warburg Fund shares are to be issued and transferred.
1.7. Any reporting responsibility of the Existing Warburg Fund is and
shall remain the responsibility of the Institutional Fund up to and including
the applicable Closing Date and such later dates on which the Existing Warburg
Fund is terminated.
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<PAGE>
2. VALUATION
2.1. The value of the Existing Warburg Fund's assets to be acquired
hereunder shall be the value of such assets computed as of the close of regular
trading on the New York Stock Exchange, Inc. (the "NYSE") on the applicable
Closing Date (such time and date being hereinafter called the "Valuation Date"),
using the valuation procedures set forth in the Existing Warburg Fund's then
current prospectus or statement of additional information.
2.2. The net asset value of New Warburg Fund Shares shall be the net
asset value per share computed as of the Valuation Date, using the valuation
procedures set forth in the New Warburg Fund's then current prospectus or
statement of additional information.
2.3. The number of Shares of the New Warburg Fund to be issued
(including fractional shares, if any) in exchange for the Existing Warburg
Fund's net assets shall be determined by dividing the value of the net assets of
the Existing Warburg Fund Shares determined using the same valuation procedures
referred to in paragraph 2.1 by the net asset value per Share of the New Warburg
Fund determined in accordance with paragraph 2.2.
2.4. All computations of value shall be made by PFPC Inc. in accordance
with its regular practice as pricing agent for the Existing Warburg Fund and New
Warburg Fund, respectively.
3. CLOSING AND CLOSING DATE
3.1. The Closing Date for the Reorganization shall be __________ ___,
1997, or such other date as the parties to such Reorganization may agree to in
writing. All acts taking place at the Closing shall be deemed to take place
simultaneously as of the close of business on the Closing Date unless otherwise
provided. The Closing shall be held as of ____:00 p.m., at the offices of
Willkie Farr & Gallagher, 153 East 53rd Street, New York, New York, 10022-4677,
or at such other time and/or place as the parties may agree.
3.2. At the Closing, a certificate of an authorized officer of the New
Warburg Fund shall be delivered stating that: (a) the Existing Warburg Fund's
portfolio securities, cash and any other assets shall have been delivered in
proper form to the New Warburg Fund prior to or on the Closing Date and (b) all
necessary taxes, including all applicable federal and state stock transfer
stamps, if any, shall have been paid, or provision for payment shall have been
made, in conjunction with the delivery of portfolio securities.
3.3. In the event that on the Valuation Date (a) the NYSE or another
primary trading market for portfolio securities of the New Warburg Fund or the
Existing Warburg Fund shall be closed to
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<PAGE>
trading or trading thereon shall be restricted or (b) trading or the reporting
of trading on the NYSE or elsewhere shall be disrupted so that accurate
appraisal of the value of the net assets of the New Warburg Fund or the Existing
Warburg Fund is impracticable, the applicable Closing Date shall be postponed
until the first business day after the day when trading shall have been fully
resumed and reporting shall have been restored.
3.4. The Institutional Fund, on behalf of the Existing Warburg Fund,
shall provide to the New Warburg Fund's transfer agent a list of the names and
addresses of the Existing Warburg Fund's shareholders and the number and class
of outstanding Shares owned by each such shareholder immediately prior to the
Closing. The New Warburg Fund shall issue and deliver a confirmation evidencing
the New Warburg Fund Shares to be credited to the Existing Warburg Fund's
account on the Closing Date to the Secretary of the Institutional Fund or
provide evidence satisfactory to the Institutional Fund that such New Warburg
Fund Shares have been credited to the Existing Warburg Fund's account on the
books of the New Warburg Fund. At the Closing, each party shall deliver to the
relevant other parties such bills of sale, checks, assignments, share
certificates, if any, receipts or other documents as such other party or its
counsel may reasonably request.
4. REPRESENTATIONS AND WARRANTIES
4.1. The Institutional Fund, on behalf of the Existing Warburg Fund,
represents and warrants to the New Warburg Fund as follows:
(a) The Institutional Fund is a Maryland corporation duly
organized, validly existing and in good standing under the laws of the State of
Maryland and the Existing Warburg Fund is a validly existing series of shares of
the Institutional Fund representing interests in the Existing Warburg Fund under
the laws of the State of Maryland;
(b) The Institutional Fund is a registered investment company
classified as a management company of the open-end type and its registration
with the Securities and Exchange Commission (the "Commission") as an investment
company under the Investment Company Act of 1940, as amended (the "1940 Act"),
is in full force and effect;
(c) The Institutional Fund is not, and the execution, delivery
and performance of this Agreement will not result, in a violation of its Charter
or By-Laws or any material agreement, indenture, instrument, contract, lease or
other undertaking to which the Institutional Fund or any Existing Warburg Fund
is a party or by which either of them or their property is bound;
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<PAGE>
(d) The Existing Warburg Fund has no contracts or other commitments
(other than this Agreement) which will be terminated with liability to the
Existing Warburg Fund prior to the Closing Date;
(e) Except as previously disclosed in writing to and accepted by
the New Warburg Fund, no litigation or administrative proceeding or
investigation of or before any court or governmental body is presently pending
or to its knowledge threatened against the Existing Warburg Fund or any of its
properties or assets which, if adversely determined, would materially and
adversely affect its financial condition or the conduct of its business. The
Institutional Fund knows of no facts which might form the basis for the
institution of such proceedings and is not party to or subject to the provisions
of any order, decree or judgment of any court or governmental body which
materially and adversely affects its business or the business of the Existing
Warburg Fund or its ability to consummate the transactions herein contemplated;
(f) The financial statements of the Existing Warburg Fund for the
period from March 31, 1997 (commencement of the Existing Warburg Fund's
operations) and ending October 31, 1997 have been audited by Coopers & Lybrand
L.L.P., certified public accountants, and are in accordance with generally
accepted accounting principles consistently applied, and such statements (copies
of which have been furnished to the New Warburg Fund) fairly reflect the
financial condition of the Existing Warburg Fund as of such dates, and there are
no known contingent liabilities of the Existing Warburg Fund as of such dates
not disclosed therein;
(g) Since October 31, 1997, there has not been any material adverse
change in the Existing Warburg Fund's financial condition, assets, liabilities
or business other than changes occurring in the ordinary course of business, or
any incurrence by the Existing Warburg Fund of indebtedness maturing more than
one year from the date that such indebtedness was incurred, except as otherwise
disclosed to and accepted by the New Warburg Fund. For the purposes of this
subparagraph (g), a decline in net asset value per share or the total assets of
the Existing Warburg Fund in the ordinary course of business shall not
constitute a material adverse change;
(h) At the Closing Date, all federal and other tax returns and
reports of each Existing Warburg Fund required by law to have been filed by such
dates shall have been filed, and all federal and other taxes shall have been
paid so far as due, or provision shall have been made for the payment thereof
and, to the best of the Institutional Fund's knowledge, no such return is
currently under audit and no assessment has been asserted with respect to such
returns;
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<PAGE>
(i) For the most recent fiscal year of its operation, the Existing
Warburg Fund has met the requirements of Subchapter M of the Code for
qualification and treatment as a regulated investment company; all of the
Existing Warburg Fund's issued and outstanding shares have been offered and sold
in compliance in all material respects with applicable federal and state
securities laws;
(j) All issued and outstanding shares of the Existing Warburg Fund
are, and at the applicable Closing Date will be, duly and validly issued and
outstanding, fully paid and non-assessable. All of the issued and outstanding
shares of the Existing Warburg Fund will, at the time of Closing, be held by the
persons and the amounts set forth in the records of the transfer agent as
provided in paragraph 3.4. The Existing Warburg Fund does not have outstanding
any options, warrants or other rights to subscribe for or purchase any of the
Existing Warburg Fund's shares, nor is there outstanding any security
convertible into any of the Existing Warburg Fund's shares;
(k) At the Closing Date, the Institutional Fund will have good and
marketable title to the Existing Warburg Fund's assets to be transferred to the
New Warburg Fund pursuant to paragraph 1.2 and full right, power and authority
to sell, assign, transfer and deliver such assets hereunder and, upon delivery
and payment for such assets, the New Warburg Fund will acquire good and
marketable title thereto, subject to no restrictions on the full transfer
thereof, including such restrictions as might arise under the Securities Act of
1933, as amended (the "Securities Act"), other than as disclosed to the New
Warburg Fund.
(l) The execution, delivery and performance of this Agreement has
been duly authorized by all necessary actions on the part of the Institutional
Fund's Board of Directors, and, subject to the approval of the Existing Warburg
Fund's shareholders, this Agreement will constitute a valid and binding
obligation of the Institutional Fund, enforceable in accordance with its terms,
subject to the effect of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other laws relating to or affecting creditors'
rights and to general equity principles;
(m) The information to be furnished by the Institutional Fund for
use in no-action letters, applications for exemptive orders, registration
statements, proxy materials and other documents which may be necessary in
connection with the transactions contemplated hereby shall be accurate and
complete in all material respects and shall comply in all material respects with
federal securities and other laws and regulations thereunder applicable thereto;
and
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<PAGE>
(n) The proxy statement of the Existing Warburg Fund (the "Proxy
Statement") to be included in the Registration Statement referred to in
paragraph 5.7 (other than information therein that relates to the New Warburg
Fund) will, on the effective date of the Registration Statement and on the
Closing Date, not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which such statements
were made, not materially misleading.
4.2. The New Warburg Fund represents and warrants to the Existing
Warburg Fund as follows:
(a) The New Warburg Fund is a Maryland corporation, duly organized,
validly existing and in good standing under the laws of the State of Maryland;
(b) The New Warburg Fund is a registered investment company
classified as a management company of the open-end type and its registration
with the Commission as an investment company under the 1940 Act is in full force
and effect;
(c) The current prospectus and statement of additional information
filed as part of the New Warburg Fund registration statement on Form N-1A (the
"New Warburg Fund Registration Statement") conform in all material respects to
the applicable requirements of the Securities Act and the 1940 Act and the rules
and regulations of the Commission thereunder and do not include any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not materially misleading;
(d) At the Closing Date, the New Warburg Fund will have good and
marketable title to its assets;
(e) The New Warburg Fund is not, and the execution, delivery and
performance of this Agreement will not result, in a violation of its Charter or
By-Laws or any material agreement, indenture, instrument, contract, lease or
other undertaking to which the New Warburg Fund is a party or by which it is
bound;
(f) Except as previously disclosed in writing to and accepted by
the Institutional Fund, no litigation or administrative proceeding or
investigation of or before any court or governmental body is presently pending
or to its knowledge threatened against the New Warburg Fund or any of its
properties or assets which, if adversely determined, would materially and
adversely affect its financial condition or the conduct of its business. The New
Warburg Fund knows of no facts which might form the basis for the institution of
such proceedings and is not a party to or subject to the provisions of any
order, decree or
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<PAGE>
judgment of any court or governmental body which materially and adversely
affects its business or its ability to consummate the transactions contemplated
herein;
(g) Since the inception of the New Warburg Fund there has not been
any material adverse change with respect to the New Warburg Fund's financial
condition, assets, liabilities or business other than changes occurring in the
ordinary course of business, or any incurrence by the New Warburg Fund of
indebtedness maturing more than one year from the date that such indebtedness
was incurred. For the purposes of this subparagraph (g), a decline in net asset
value per share or the total assets of the New Warburg Fund in the ordinary
course of business shall not constitute a material adverse change;
(h) At the Closing Date, all federal and other tax returns and
reports of the New Warburg Fund required by law then to be filed shall have been
filed, and all federal and other taxes shown as due on said returns and reports
shall have been paid or provision shall have been made for the payment thereof;
(i) The New Warburg Fund intends to meet the requirements of
Subchapter M of the Code for qualification and treatment as a regulated
investment company in the future;
(j) At the date hereof, all issued and outstanding New Warburg Fund
Shares are, and at the Closing Date will be, duly and validly issued and
outstanding, fully paid and non-assessable, with no personal liability attaching
to the ownership thereof. The New Warburg Fund does not have outstanding any
options, warrants or other rights to subscribe for or purchase any New Warburg
Fund Shares, nor is there outstanding any security convertible into any New
Warburg Fund Shares;
(k) The execution, delivery and performance of this Agreement shall
have been duly authorized prior to the Closing Date by all necessary actions, if
any, on the part of the New Warburg Fund's Board of Directors and the New
Warburg Fund's shareholders, and this Agreement will constitute a valid and
binding obligation of the New Warburg Fund enforceable in accordance with its
terms, subject to the effect of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other laws relating to or affecting creditors'
rights and to general equity principles;
(l) The New Warburg Fund Shares to be issued and delivered to the
Existing Warburg Fund, for the account of the Existing Warburg Fund's
shareholders, pursuant to the terms of this Agreement, will at the Closing Date
have been duly authorized and, when so issued and delivered, will be duly and
validly issued New Warburg Fund Shares, and will be fully paid and
non-assessable with no personal liability attaching to the ownership thereof;
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<PAGE>
(m) The information to be furnished by the New Warburg Fund for use
in no-action letters, applications for exemptive orders, registration
statements, proxy materials and other documents which may be necessary in
connection with the transactions contemplated hereby shall be accurate and
complete in all material respects and shall comply in all material respects with
federal securities and other laws and regulations applicable thereto;
(n) The Proxy Statement to be included in the Registration
Statement referred to in paragraph 5.7 (only insofar as it relates to the New
Warburg Fund) will, on the effective date of the Registration Statement and on
the Closing Date, not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which such statements
were made, not materially misleading; and
(o) The New Warburg Fund agrees to use all reasonable efforts to
obtain the approvals and authorizations required by the Securities Act, the 1940
Act and such of the state Blue Sky or securities laws as it may deem appropriate
in order to continue its operations after the Closing Date.
5. COVENANTS OF THE INSTITUTIONAL FUND, THE NEW WARBURG FUND AND THE
EXISTING WARBURG FUND
5.1. The New Warburg Fund and the Existing Warburg Fund each will
operate its business in the ordinary course between the date hereof and the
Closing Date. It is understood that such ordinary course of business will
include the declaration and payment of customary dividends and distributions.
5.2. The Institutional Fund, on behalf of the Existing Warburg Fund,
will call a meeting of its shareholders to consider and act upon this Agreement
and to take all other actions in coordination with the Existing Warburg Fund
necessary to obtain approval of the transactions contemplated herein.
5.3. The Institutional Fund, on behalf of the Existing Warburg Fund,
will call a meeting of its shareholders to consider and act upon this Agreement
and to take all other actions in co-ordination with the Existing Warburg Fund
necessary to obtain approval of the transactions contemplated herein.
5.4. The Institutional Fund, on behalf of the Existing Warburg Fund,
will assist the New Warburg Fund in obtaining such information as the New
Warburg Fund reasonably requests concerning the beneficial ownership of the
Existing Warburg Fund's Shares.
5.5. Subject to the provisions of this Agreement, the New Warburg Fund
and the Institutional Fund each will take, or cause
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<PAGE>
to be taken, all action, and do or cause to be done, all things reasonably
necessary, proper or advisable to consummate and make effective the transactions
contemplated by this Agreement.
5.6. As promptly as practicable, but in any case within sixty days after
the Closing Date, the Institutional Fund shall furnish the New Warburg Fund, in
such form as is reasonably satisfactory to the New Warburg Fund, a statement of
the earnings and profits of the Existing Warburg Fund for federal income tax
purposes which will be carried over to the New Warburg Fund as a result of
Section 381 of the Code.
5.7. The Institutional Fund, on behalf of the Existing Warburg Fund,
will provide the New Warburg Fund with information reasonably necessary for the
preparation of a prospectus (the "Prospectus") which will include the Proxy
Statement referred to in paragraph 4.1(n), all to be included in a registration
statement on Form N-14 of the New Warburg Fund (the "Registration Statement"),
in compliance with the Securities Act, the Securities Exchange Act of 1934 (the
"Exchange Act") and the 1940 Act in connection with the meeting of the
Institutional Fund's shareholders to consider approval of this Agreement and the
transactions contemplated herein.
5.8. The Institutional Fund, on behalf of the Existing Warburg Fund,
will provide the New Warburg Fund with information reasonably necessary for the
preparation of the New Warburg Registration Statement.
5.9. As promptly as practicable, but in any case within thirty days of
the Closing Date, the Institutional Fund shall furnish the New Warburg Fund with
a statement containing information required for purposes of complying with Rule
24f-2 under the 1940 Act. A notice pursuant to Rule 24f-2 will be filed by the
New Warburg Fund offsetting redemptions by the Existing Warburg Fund during the
fiscal year ending on or after the applicable Closing Date against sales of New
Warburg Fund Shares and the Institutional Fund agrees that it will not net
redemptions during such period by the Existing Warburg Fund against sales of
shares of any other series of the Institutional Fund.
5.10. The New Warburg Fund agrees to indemnify and advance expenses to
each person who at the time of the execution of this Agreement serves as a
Director or Officer ("Indemnified Person") of the Institutional Fund, against
money damages actually and reasonably incurred by such Indemnified Person in
connection with any claim that is asserted against such Indemnified Person
arising out of such person's service as a director or officer of the
Institutional Fund with respect to matters specifically relating to the Existing
Warburg Fund, provided that such indemnification and advancement of expenses
shall be permitted to the fullest extent that is available under the Maryland
General
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<PAGE>
Corporation law and other applicable law. This paragraph 5.10 shall not protect
any such Indemnified Person against any liability to the Existing Warburg Fund,
the New Warburg Fund or their shareholders to which he would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or from
reckless disregard of the duties involved in the conduct of his office. An
Indemnified Person seeking indemnification shall be entitled to advances from
the New Warburg Fund for payment of the reasonable expenses incurred by him in
connection with the matter as to which he is seeking indemnification in the
manner and to the fullest extent permissible under the Maryland General
Corporation law and other applicable law. Such Indemnified Person shall provide
to the New Warburg Fund a written affirmation of his good faith belief that the
standard of conduct necessary for indemnification by the New Warburg Fund has
been met and a written undertaking to repay any advance if it should ultimately
be determined that the standard of conduct has not been met. In addition, at
least one of the following additional conditions shall be met: (a) the
Indemnified Person shall provide security in form and amount acceptable to the
New Warburg Fund for its undertaking; (b) the New Warburg Fund is insured
against losses arising by reason of the advance; or (c) either a majority of a
quorum of disinterested non-party directors of the New Warburg Fund
(collectively, the "Disinterested Directors"), or independent legal counsel
selected by the New Warburg Fund, in a written opinion, shall have determined,
based on a review of facts readily available to the New Warburg Fund at the time
the advance is proposed to be made, that there is reason to believe that the
Director will ultimately be found to be entitled to indemnification.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE EXISTING WARBURG FUND
The obligations of the Institutional Fund to consummate the transactions
provided for herein with respect to the Existing Warburg Fund shall be subject,
at its election, to the performance by the New Warburg Fund of all of the
obligations to be performed by it hereunder on or before the Closing Date and,
in addition thereto, the following further conditions:
6.1. All representations and warranties of the New Warburg Fund
contained in this Agreement shall be true and correct in all material respects
as of the date hereof and, except as they may be affected by the actions
contemplated by this Agreement, as of the Closing Date with the same force and
effect as if made on and as of the Closing Date;
6.2. The New Warburg Fund shall have delivered to the Institutional Fund
a certificate executed in its name by its President or Vice President and its
Secretary, Treasurer or Assistant Treasurer, in a form reasonably satisfactory
to the
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Institutional Fund and dated as of the Closing Date, to the effect that the
representations and warranties of the New Warburg Fund made in this Agreement
are true and correct at and as of the Closing Date, except as they may be
affected by the transactions contemplated by this Agreement and as to such other
matters as the Existing Warburg Fund shall reasonably request;
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE NEW WARBURG FUND.
The obligations of the New Warburg Fund to complete the transactions
provided for herein shall be subject, at its election, to the performance by the
Existing Warburg Fund of all the obligations to be performed by it hereunder on
or before the Closing Date and, in addition thereto, the following conditions:
7.1. All representations and warranties of the Institutional Fund
contained in this Agreement shall be true and correct in all material respects
as of the date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same force and
effect as if made on and as of the Closing Date;
7.2. The Institutional Fund shall have delivered to the New Warburg Fund
a statement of the Existing Warburg Fund's assets and liabilities, together with
a list of the Existing Warburg Fund's portfolio securities showing the tax costs
of such securities by lot and the holding periods of such securities, as of the
Closing Date;
7.3. The Institutional Fund shall have delivered to the New Warburg
Fund, pursuant to paragraph 4.1(f), copies of financial statements of the
Existing Warburg Fund as of and for its most recently completed fiscal year.
7.4. The New Warburg Fund shall have received from Coopers & Lybrand
L.L.P. a letter addressed to the New Warburg Fund and dated as of the applicable
Closing Date stating that as of a date no more than three (3) business days
prior to the applicable Closing Date, Coopers & Lybrand L.L.P. performed limited
procedures in connection with the Institutional Fund's most recent unaudited
financial statements and that (a) nothing came to their attention in performing
such limited procedures or otherwise that led them to believe that there had
been any changes in the assets, liabilities, net assets, net investment income,
net increase (decrease) in net assets from operations or net increase (decrease)
in net assets as compared with amounts as of the Existing Warburg Fund's most
recent audited fiscal year end or the corresponding period in the Existing
Warburg Fund's most recent audited fiscal year, other than changes occurring in
the ordinary course of business, and (b) based on such limited procedures, there
is no change in their report on the most recent audited financial statements of
such Existing Warburg Fund.
-13-
<PAGE>
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE NEW WARBURG FUND AND
THE EXISTING WARBURG FUND.
If any of the conditions set forth below do not exist on or before the
Closing Date with respect to the New Warburg Fund, the Institutional Fund on
behalf of the Existing Warburg Fund shall, and if any of such conditions do not
exist on or before the Closing Date with respect to the Existing Warburg Fund,
the New Warburg Fund shall, at their respective option, not be required to
consummate the transactions contemplated by this Agreement:
8.1. The Agreement and the transactions contemplated herein shall have
been approved by the requisite vote of the holders of the outstanding Shares of
the Existing Warburg Fund in accordance with the provisions of the Institutional
Fund's Charter and applicable law and certified copies of the votes evidencing
such approval shall have been delivered to the New Warburg Fund.
8.2. On the Closing Date no action, suit or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection with, this
Agreement or the transactions contemplated herein.
8.3. All consents of other parties and all other consents, orders and
permits of federal, state and local regulatory authorities (including those of
the Commission and of state blue sky and securities authorities, including
"no-action" positions of and exemptive orders from such federal and state
authorities) deemed necessary by the New Warburg Fund or the Institutional Fund
to permit consummation, in all material respects, of the transactions
contemplated hereby shall have been obtained, except where failure to obtain any
such consent, order or permit would not involve a risk of a material adverse
effect on the assets or properties of the New Warburg Fund or the Existing
Warburg Fund, provided that either party hereto may for itself waive any of such
conditions.
8.4. The Registration Statement and the New Warburg Fund Registration
Statement shall each have become effective under the Securities Act and no stop
orders suspending the effectiveness thereof shall have been issued and, to the
best knowledge of the parties hereto, no investigation or proceeding for that
purpose shall have been instituted or be pending, threatened or contemplated
under the Securities Act.
8.5. The parties shall have received a favorable opinion of Willkie Farr
& Gallagher, addressed to, and in form and substance satisfactory to, the
Institutional Fund, on behalf of the Existing Warburg Fund, and the New Warburg
Fund, substantially to the effect that for federal income tax purposes:
-14-
<PAGE>
(a) The transfer of all or substantially all of the Existing
Warburg Fund's assets in exchange for the New Warburg Fund Shares and the
assumption by the New Warburg Fund of liabilities of the Existing Warburg Fund
will constitute a "reorganization" within the meaning of Section 368(a) of the
Code and the New Warburg Fund and the Existing Warburg Fund are each a "party to
a reorganization" within the meaning of Section 368(b) of the Code; (b) no gain
or loss will be recognized by the New Warburg Fund upon the receipt of the
assets of the Existing Warburg Fund solely in exchange for the New Warburg Fund
Shares and the assumption by the New Warburg Fund of liabilities of the Existing
Warburg Fund; (c) no gain or loss will be recognized by the Existing Warburg
Fund upon the transfer of the Existing Warburg Fund's assets to the New Warburg
Fund in exchange for the New Warburg Fund Shares and the assumption by the New
Warburg Fund of liabilities of the Existing Warburg Fund or upon the
distribution (whether actual or constructive) of the New Warburg Fund Shares to
the Existing Warburg Fund's shareholders in exchange for their shares of the
Existing Warburg Fund; (d) no gain or loss will be recognized by shareholders of
the Existing Warburg Fund upon the exchange of their Existing Warburg Fund
shares for the New Warburg Fund Shares and the assumption by the New Warburg
Fund of liabilities of the Existing Warburg Fund; (e) the aggregate tax basis
for the New Warburg Fund Shares received by each of the Existing Warburg Fund's
shareholders pursuant to the Reorganization will be the same as the aggregate
tax basis of the Existing Warburg Fund Shares held by such shareholder
immediately prior to the Reorganization, and the holding period of the New
Warburg Fund Shares to be received by each Existing Warburg Fund shareholder
will include the period during which the Existing Warburg Fund Shares exchanged
therefor were held by such shareholder (provided that the Existing Warburg Fund
Shares were held as capital assets on the date of the Reorganization); and (f)
the tax basis of the Existing Warburg Fund's assets acquired by the New Warburg
Fund will be the same as the tax basis of such assets to the Existing Warburg
Fund immediately prior to the Reorganization, and the holding period of the
assets of the Existing Warburg Fund in the hands of the New Warburg Fund will
include the period during which those assets were held by the Existing Warburg
Fund.
Notwithstanding anything herein to the contrary, neither the New Warburg
Fund nor the Institutional Fund may waive the conditions set forth in this
paragraph 8.5.
9. BROKERAGE FEES AND EXPENSES; OTHER AGREEMENTS
9.1. The New Warburg Fund represents and warrants to the Existing
Warburg Fund, and the Institutional Fund on behalf of the Existing Warburg Fund
represents and warrants to the New Warburg Fund, that there are no brokers or
finders or other entities to receive any payments in connection with the
transactions provided for herein.
-15-
<PAGE>
9.2. Warburg Pincus Asset Management, Inc. ("Warburg") or its affiliates
agrees to bear the expenses incurred in connection with the transactions
contemplated by this Agreement, whether or not consummated (excluding
extraordinary expenses such as litigation expenses, damages and other expenses
not normally associated with transactions of the type contemplated by this
Agreement). These expenses consist of: (i) expenses associated with preparing
this Agreement; (ii) preparing and filing the New Warburg Registration Statement
covering the Shares to be issued in the Reorganization; (iii) registration or
qualification fees and expenses of preparing and filing such forms, if any,
necessary under applicable state securities laws to qualify the New Warburg Fund
Shares to be issued in connection with the Reorganization; (iv) postage;
printing; accounting fees; and legal fees incurred in connection with the
transactions contemplated by this Agreement; (v) solicitation costs incurred in
connection with the shareholders meeting referred to in clause (i) above and
paragraph 5.2 hereof; and (vi) any other Reorganization expenses.
10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1. The New Warburg Fund and the Institutional Fund, itself and on
behalf of the Existing Warburg Fund, agree that neither party has made any
representation, warranty or covenant not set forth herein and that this
Agreement constitutes the entire agreement among the parties.
10.2. The representations, warranties and covenants contained in this
Agreement or in any document delivered pursuant hereto or in connection herewith
shall survive the consummation of the transactions contemplated hereunder.
11. TERMINATION
11.1. This Agreement may be terminated at any time at or prior to the
Closing Date by: (1) mutual agreement of the Institutional Fund, on behalf of
the Existing Warburg Fund, and the New Warburg Fund; (2) the Institutional Fund,
on behalf of the Existing Warburg Fund, in the event the New Warburg Fund shall,
or the New Warburg Fund in the event the Institutional Fund or the Existing
Warburg Fund shall, materially breach any representation, warranty or agreement
contained herein to be performed at or prior to the Closing Date; or (3) the
Institutional Fund, on behalf of the Existing Warburg Fund, or the New Warburg
Fund, or the New Warburg Fund in the event a condition herein expressed to be
precedent to the obligations of the terminating party or parties has not been
met and it reasonably appears that it will not or cannot be met.
11.2. In the event of any such termination, there shall be no liability
for damages on the part of either the New Warburg
-16-
<PAGE>
Fund or the Institutional Fund, or their respective directors or officers, to
the other party or parties.
12. AMENDMENTS
This Agreement may be amended, modified or supplemented in writing in
such manner as may be mutually agreed upon by the authorized officers of the New
Warburg Fund and the Institutional Fund; provided, however, that following the
meeting of the Existing Warburg Fund's shareholders called by the Institutional
Fund pursuant to paragraph 5.2 of this Agreement no such amendment may have the
effect of changing the provisions for determining the number of the New Warburg
Fund Shares to be issued to the Existing Warburg Fund's Shareholders under this
Agreement to the detriment of such shareholders without their further approval.
13. NOTICES
13.1. Any notice, report, statement or demand required or permitted by
any provisions of this Agreement shall be in writing and shall be given by
prepaid telegraph, telecopy or certified mail addressed to the Institutional
Fund and/or the Existing Warburg Fund at:
466 Lexington Avenue
New York, NY 10017
Attention: Eugene P. Grace
14. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT; LIMITATION OF
LIABILITY; USE OF TRADEMARK
14.1. The article and paragraph headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
14.2. This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original.
14.3. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York.
14.4. This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof or of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Nothing herein expressed
or implied is intended or shall be construed to confer upon or give any person,
firm or corporation, other than the parties hereto and their respective
successors and assigns, any rights or remedies under or by reason of this
Agreement.
14.5. The parties to this Agreement agree that the legend attached
hereto as Appendix A shall constitute part of the original agreement and shall
have the full force and effect and be binding upon the parties as if it were
originally included therein.
-17-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed by its Chairman of the Board, President or Vice President and
attested to by its Secretary or Assistant Secretary.
WARBURG, PINCUS MANAGED EAFE[R] COUNTRIES FUND, INC.
By: ___________________________
Name: _____________________
Title: ____________________
Attest: _______________________
WARBURG PINCUS INSTITUTIONAL FUND, INC., for itself and
on behalf of the Managed EAFE[R] Countries Portfolio
By: ___________________________
Name: _____________________
Title: ____________________
Attest: _______________________
-18-
<PAGE>
APPENDIX A
Warburg, Pincus Managed EAFE(R) Countries Fund, Inc. (the
"Fund") is not sponsored, endorsed, sold or promoted by Morgan Stanley. Morgan
Stanley 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 or the ability of the Morgan
Stanley EAFE Index to track general stock market performance. Morgan Stanley is
the licensor of certain trademarks, service marks and trade names of Morgan
Stanley and of the Morgan Stanley EAFE Index. Morgan Stanley has no obligation
to take the needs of the issuer of the Fund or the owners of the Fund into
consideration in determining, composing or calculating the Morgan Stanley EAFE
Index. Morgan Stanley is not responsible for and has not participated in the
determination of the timing of, prices at, or quantities of the Fund to be
issued or in the determination or calculation of the equation by which the Fund
is redeemable for cash. Morgan Stanley has no obligation or liability to owners
of the Fund in connection with the administration, marketing or trading of the
Fund.
MORGAN STANLEY MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND
HEREBY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE WITH RESPECT TO THE EAFE INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT
LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL MORGAN STANLEY HAVE ANY
LIABILITY FOR ANY DIRECT, INDIRECT, SPECIAL, PUNITIVE, CONSEQUENTIAL OR ANY
OTHER DAMAGES (INCLUDING LOST PROFITS) EVEN IF NOTIFIED OF THE POSSIBILITY OF
SUCH DAMAGES.
<PAGE>
TABLE OF CONTENTS
PAGE
----
SUMMARY.......................................................... 4
RISK FACTORS.......................................................7
REASONS FOR THE REORGANIZATION.....................................7
FEE TABLE..........................................................9
INFORMATION ABOUT THE REORGANIZATION...............................11
COMPARISON OF INVESTMENT OBJECTIVE AND POLICIES....................15
MANAGEMENT OF THE FUND.............................................17
INFORMATION ON SHAREHOLDERS' RIGHTS................................17
ADDITIONAL INFORMATION.............................................19
VOTING INFORMATION.................................................20
FINANCIAL STATEMENTS...............................................22
LEGAL MATTERS......................................................22
EXHIBIT A: FORM OF AGREEMENT AND PLAN OF REORGANIZATION...........A-1
<PAGE>
PROSPECTUS OF THE COMMON SHARES OF WARBURG, PINCUS
MANAGED EAFE(R) COUNTRIES FUND, INC.
DATED _____________ ___, 1997 IS INCORPORATED BY
REFERENCE TO THE N-1A REGISTRATION STATEMENT
(Securities Act File No. 333-39075; Investment Company Act File No. 811-08459)
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS STATEMENT OF ADDITIONAL INFORMATION DOES NOT CONSTITUTE A
PROSPECTUS.
SUBJECT TO COMPLETION, DATED NOVEMBER ___, 1997
STATEMENT OF ADDITIONAL INFORMATION
DATED DECEMBER ___, 1997
Acquisition Of The Assets Of
THE MANAGED EAFE(R) COUNTRIES PORTFOLIO
a separate investment portfolio of
WARBURG, PINCUS INSTITUTIONAL FUND, INC.
466 Lexington Avenue
New York, New York 10017-3147
1-800-369-2728
By And In Exchange For Shares Of
WARBURG, PINCUS MANAGED EAFE(R) COUNTRIES FUND, INC.
466 Lexington Avenue
New York, New York 10017-3147
1-800-WARBURG
This Statement of Additional Information, relating
specifically to the proposed transfer of all or substantially all of the assets
of the Managed EAFE(R) Countries Portfolio (the "Existing Fund") of Warburg
Pincus Institutional Fund, Inc. to Warburg, Pincus Managed EAFE(R) Countries
Fund, Inc. (the "New Fund") in exchange for shares of the New Fund and the
assumption by the New Fund of liabilities of the Existing Fund, consists of this
cover page and the following described documents, each of which accompanies this
Statement of Additional Information and is incorporated herein by reference.
1. Statement of Additional Information of the New Fund dated
December ___, 1997.
2. Semiannual Report of the Existing Fund for the period from
March 31, 1997 (commencement of operations) to April 30, 1997
(unaudited).
This Statement of Additional Information is not a prospectus.
A Combined Prospectus/Proxy Statement, dated December ___, 1997, relating to the
above-referenced matter may be obtained without charge by calling or writing the
New Fund at the telephone
<PAGE>
number or address set forth above. This Statement of Additional Information
should be read in conjunction with the Combined Prospectus/Proxy Statement.
* * * *
Neither the Existing Fund nor the New Fund is sponsored,
endorsed, sold or promoted by Morgan Stanley. Morgan Stanley makes no
representation or warranty, express or implied, to the owners of the Funds or
any member of the public regarding the advisability of investing in securities
generally or in the Funds particularly or the ability of the Morgan Stanley EAFE
Index to track general stock market performance. Morgan Stanley is the licensor
of certain trademarks, service marks and trade names of Morgan Stanley and of
the Morgan Stanley EAFE Index. Morgan Stanley has no obligation to take the
needs of the issuer of the Funds or the owners of the Funds into consideration
in determining, composing or calculating the Morgan Stanley EAFE Index. Morgan
Stanley is not responsible for and has not participated in the determination of
the timing of, prices at, or quantities of the Funds to be issued or in the
determination or calculation of the equation by which the Funds are redeemable
for cash. Morgan Stanley has no obligation or liability to owners of the Funds
in connection with the administration, marketing or trading of the Funds.
MORGAN STANLEY MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND
HEREBY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE WITH RESPECT TO THE EAFE INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT
LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL MORGAN STANLEY HAVE ANY
LIABILITY FOR ANY DIRECT, INDIRECT, SPECIAL, PUNITIVE, CONSEQUENTIAL OR ANY
OTHER DAMAGES (INCLUDING LOST PROFITS) EVEN IF NOTIFIED OF THE POSSIBILITY OF
SUCH DAMAGES.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
OF THE NEW FUND
DATED DECEMBER ___, 1997
IS INCORPORATED BY REFERENCE
TO THE N-1A REGISTRATION STATEMENT
<PAGE>
WARBURG PINCUS MANAGED EAFE(R) COUNTRIES FUND, INC.
PART C
OTHER INFORMATION
Item 15. Indemnification
- -------- ---------------
The response to this item is incorporated by
reference to the "Plan of Reorganization" under the
caption "Information About the Reorganization" and to
"Liability of Directors" under the caption
"Information on Shareholders' Rights" in Part A of
this Registration Statement.
Item 16. Exhibits
- -------- --------
(1) Registrant's Articles of Incorporation.*
(2) By-Laws of the Registrant.*
(3) Not applicable.
(4) Form of Plan of Reorganization (included as Exhibit A
to Registrant's Combined Prospectus/Proxy Statement
contained in Part A of this Registration Statement).
(5) Not applicable.
(6) Form of Investment Advisory Agreement with Warburg
Pincus Asset Management, Inc.
(7) Form of Distribution Agreement.
(8) Not applicable.
(9) (a) Form of Custodian Agreement with PNC, National
Association.
(9) (b) Form of Custodian Agreement with State Street
Bank & Trust Company.
(10) (a) Form of Shareholder Servicing and Distribution Plan.
(10) (b) Form of Distribution Plan.
(10) (c) Forms of Services Agreements.
<PAGE>
(10) (d) Rule 18f-3 Plan.
(11) (a) Opinion and Consent of Willkie Farr & Gallagher, counsel
to Registrant, with respect to validity of shares.
(11) (b) Opinion of Venable, Baetjer and Howard, LLP, Maryland
counsel to Registrant, with respect to validity of shares.
(12) Opinion and Consent of Willkie Farr & Gallagher with
respect to tax matters.
(13) (a) Form of Transfer Agency Agreement.
(13) (b) Form of Co-Administration Agreement with Counsellors Funds
Service, Inc.
(13) (c) Form of Co-Administration Agreement with PFPC Inc.
(14) Not applicable.
(15) Not applicable.
(16) Not applicable.
(17)(a) Form of Proxy Card.
(17)(b) Registrant's Declaration pursuant to Rule 24f-2.*
- ---------------------
* Incorporated by reference to the New Fund's Registration Statement on Form
N-1A filed with the SEC on October 30, 1997 (Securities Act File No.
333-39075, Investment Company Act File No. 811-08459).
Item 17. Undertakings
- -------- ------------
(1) The undersigned Registrant agrees that prior to any
public reoffering of the securities registered
through the use of a prospectus which is a part of
this Registration Statement by any person or party
who is deemed to be an underwriter within the meaning
of Rule 145(c) of the Securities Act [17 CFR
230.145c], the reoffering prospectus will contain the
information called for by the applicable registration
form for reofferings by persons who may be deemed
underwriters, in addition to the information called
for by the other items of the applicable form.
<PAGE>
(2) The undersigned Registrant agrees that every
prospectus that is filed under paragraph (1) above
will be filed as a part of an amendment to the
Registration Statement and will not be used until the
amendment is effective, and that, in determining any
liability under the Securities Act of 1933, each
post-effective amendment shall be deemed to be a new
registration statement for the securities offered
therein, and the offering of the securities at that
time shall be deemed to be the initial bona fide
offering of them.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933, this Registration
Statement has been signed on behalf of the registrant, in the City of New York
and State of New York, on the 5th day of November, 1997.
Warburg, Pincus Managed EAFE(R)
Countries Fund, Inc.
By: /s/ Eugene L. Podsiadlo
Eugene L. Podsiadlo
Title: President
As required by the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ John L. Furth Chairman of the Board November 5, 1997
John L. Furth of Directors
/s/ Arnold M. Reichman Director and November 5, 1997
Arnold M. Reichman Executive Vice President
/s/ Howard Conroy Vice President November 5, 1997
Howard Conroy and Chief Financial Officer
/s/ Richard N. Cooper Director November 5, 1997
Richard N. Cooper
/s/ Donald J. Donahue Director November 5, 1997
Donald J. Donahue
/s/ Jack W. Fritz Director November 5, 1997
Jack W. Fritz
/s/ Thomas A. Melfe Director November 5, 1997
Thomas A. Melfe
/s/ Alexander B. Trowbridge Director November 5, 1997
Alexander B. Trowbridge
/s/ Daniel S. Madden Treasurer and Chief November 5, 1997
Daniel S. Madden Accounting Officer
</TABLE>
<PAGE>
EXHIBIT INDEX
Exhibit Number Description
- -------------- -----------
(4) Form of Plan of Reorganization (included as Exhibit A
to Registrant's Prospectus/Proxy Statement contained
in Part A of this Registration Statement).
(6) Form of Investment Advisory Agreement with Warburg
Pincus Asset Management, Inc.
(7) Form of Distribution Agreement.
(9) (a) Form of Custodian Agreement with PNC, National
Association.
(9) (b) Form of Custodian Agreement with State Street
Bank & Trust Company.
(10) (a) Form of Shareholder Servicing and Distribution Plan.
(10) (b) Form of Distribution Plan.
(10) (c) Forms of Services Agreements.
(10) (d) Rule 18f-3 Plan.
(11) (a) Opinion and Consent of Willkie Farr & Gallagher, counsel
to Registrant, with respect to validity of shares.
(11) (b) Opinion of Venable, Baetjer and Howard, LLP, Maryland
counsel to Registrant, with respect to validity of shares.
(12) Opinion and Consent of Willkie Farr & Gallagher with
respect to tax matters.
(13) (a) Form of Transfer Agency Agreement.
(13) (b) Form of Co-Administration Agreement with Counsellors
Funds Service, Inc.
(13) (c) Form of Co-Administration Agreement with PFPC Inc.
(17)(a) Form of Proxy Card.
<PAGE>
THE SEMIANNUAL REPORT, PROSPECTUS AND STATEMENT
OF ADDITIONAL INFORMATION OF THE EXISTING
FUND ARE INCORPORATED BY REFERENCE TO
THE MOST RECENT FILINGS THEREOF BY THE COMPANY.
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as
of this ___ th day of __________, 1997, between and among Warburg, Pincus
Managed EAFE[R] Countries Fund, Inc., a Maryland corporation (the "New Warburg
Fund"), and Warburg, Pincus Institutional Fund, Inc., a Maryland corporation
(the "Institutional Fund"), on behalf of the Managed EAFE[R] Countries
Portfolio, a series of shares of the Institutional Fund (the "Existing Warburg
Fund").
This Agreement is intended to be and is adopted as a plan of
reorganization and liquidation within the meaning of Section 368 (a) of the
United States Internal Revenue Code of 1986, as amended (the "Code"). The
reorganization of the Existing Warburg Fund (collectively, the "Reorganization")
will consist of the transfer of substantially all of the assets of the Existing
Warburg Fund in exchange solely for Common Shares (collectively, the "Shares")
of the New Warburg Fund and the assumption by the New Warburg Fund of
liabilities of the Existing Warburg Fund and the distribution, after the Closing
Date hereinafter referred to, of New Warburg Fund Shares to the shareholders of
the Existing Warburg Fund in liquidation of the Existing Warburg Fund as
provided herein, all upon the terms and conditions hereinafter set forth in this
Agreement.
WHEREAS, the Board of Directors of the Institutional Fund on behalf of
the Existing Warburg Fund, has determined that the exchange of all of the assets
and the liabilities of the Existing Warburg Fund for New Warburg Fund Shares and
the assumption of such liabilities by the New Warburg Fund is in the best
interests of the Institutional Fund and the Existing Warburg Fund and that the
interests of the existing shareholders of the Institutional Fund and the
Existing Warburg Fund would not be diluted as a result of this transaction; and
WHEREAS, the Board of Directors of the New Warburg Fund has determined
that the exchange of all of the assets of the Existing Warburg Fund for New
Warburg Fund Shares is in the best interests of the New Warburg Fund's
shareholders and that the interests of the existing shareholders of the New
Warburg Fund would not be diluted as a result of this transaction.
NOW, THEREFORE, in consideration of the premises and of the covenants
and agreements hereinafter set forth, the parties hereto covenant and agree as
follows:
<PAGE>
1. TRANSFER OF ASSETS OF THE EXISTING WARBURG FUND IN EXCHANGE FOR NEW
WARBURG FUND SHARES AND ASSUMPTION OF THE EXISTING WARBURG FUND'S
LIABILITIES AND LIQUIDATION OF THE EXISTING WARBURG FUND
1.1. Subject to the terms and conditions herein set forth and on the
basis of the representations and warranties contained herein, the Institutional
Fund agrees to transfer the Existing Warburg Fund's assets as set forth in
paragraph 1.2 to the New Warburg Fund, and the New Warburg Fund agrees in
exchange therefor: (i) to deliver to the Institutional Fund the number of New
Warburg Fund Shares, including fractional New Warburg Fund Shares, determined by
dividing the value of the Existing Warburg Fund's net assets, computed in the
manner and as of the time and date set forth in paragraph 2.1, by the net asset
value of one New Warburg Fund Share of the same class, computed in the manner
and as of the time and date set forth in paragraph 2.2; and (ii) to assume the
liabilities of the Existing Warburg Fund, as set forth in paragraph 1.3. Such
transactions shall take place at the closing provided for in paragraph 3.1 (the
"Closing").
1.2. (a) The assets of the Existing Warburg Fund to be acquired by the
New Warburg Fund shall consist of all property including, without limitation,
all cash, securities and dividend or interest receivables which are owned by the
Existing Warburg Fund and any deferred or prepaid expenses shown as an asset on
the books of the Existing Warburg Fund on the closing date provided in paragraph
3.1 (the "Closing Date").
(b) In the event that the Existing Warburg Fund holds any
investments which do not conform to the New Warburg Fund's investment
objectives, policies and restrictions, the Existing Warburg Fund will dispose of
such securities prior to the Closing Date. In addition, if it is determined that
the portfolios of the Existing Warburg Fund and the New Warburg Fund, when
aggregated, would contain investments exceeding certain percentage limitations
imposed upon the New Warburg Fund with respect to such investments, the Existing
Warburg Fund, if requested by the New Warburg Fund, will dispose of and/or
reinvest a sufficient amount of such investments as may be necessary to avoid
violating such limitations as of the Closing Date.
1.3. The Institutional Fund, on behalf of the Existing Warburg Fund,
will endeavor to discharge all the Existing Warburg Funds' known liabilities and
obligations prior to the Closing Date, other than those liabilities and
obligations which would otherwise be discharged at a later date in the ordinary
course of business. The New Warburg Fund shall assume all liabilities, expenses,
costs, charges and reserves, including those liabilities reflected on an
unaudited statement of assets and liabilities of the Existing Warburg Fund
prepared by PFPC Inc., as of the Valuation Date (as defined in paragraph 2.1),
in
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accordance with generally accepted accounting principles consistently applied
from the prior audited period. The New Warburg Fund shall also assume any
liabilities, expenses, costs or charges incurred by or on behalf of the Existing
Warburg Fund specifically arising from or relating to the operations and/or
transactions of the Existing Warburg Fund prior to and including the Closing
Date but which are not reflected on the above-mentioned statement of assets and
liabilities, including any liabilities, expenses, costs or charges arising under
paragraph 5.10 hereof.
1.4. As provided in paragraph 3.4, as soon after the Closing Date as is
conveniently practicable (the "Liquidation Date"), the Existing Warburg Fund
will liquidate and distribute pro rata to the Existing Warburg Fund's
shareholders of record determined as of the close of business on the Closing
Date (the "Existing Warburg Fund Shareholders") the New Warburg Fund Shares it
receives pursuant to paragraph 1.1. Such liquidation and distribution will be
accomplished by the transfer of the New Warburg Fund Shares then credited to the
account of the Existing Warburg Fund on the books of the New Warburg Fund to
open accounts on the share records of the New Warburg Fund in the name of the
Existing Warburg Fund's shareholders representing the respective pro rata number
of the New Warburg Fund Shares of the particular class due such shareholders.
All issued and outstanding shares of the Existing Warburg Fund will
simultaneously be canceled on the books of the Institutional Fund, although
share certificates representing interests in the Existing Warburg Fund will
represent a number of New Warburg Fund Shares after the Closing Date as
determined in accordance with Section 2.3. The New Warburg Fund shall not issue
certificates representing the New Warburg Fund Shares in connection with such
exchange.
1.5. Ownership of New Warburg Fund Shares will be shown on the books of
the New Warburg Fund's transfer agent. Shares of the New Warburg Fund will be
issued in the manner described in the New Warburg Fund's current prospectus and
statement of additional information.
1.6. Any transfer taxes payable upon issuance of the New Warburg Fund
Shares in a name other than the registered holder of the Existing Warburg Fund
Shares on the books of the Existing Warburg Fund as of that time shall, as a
condition of such issuance and transfer, be paid by the person to whom such New
Warburg Fund shares are to be issued and transferred.
1.7. Any reporting responsibility of the Existing Warburg Fund is and
shall remain the responsibility of the Institutional Fund up to and including
the applicable Closing Date and such later dates on which the Existing Warburg
Fund is terminated.
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2. VALUATION
2.1. The value of the Existing Warburg Fund's assets to be acquired
hereunder shall be the value of such assets computed as of the close of regular
trading on the New York Stock Exchange, Inc. (the "NYSE") on the applicable
Closing Date (such time and date being hereinafter called the "Valuation Date"),
using the valuation procedures set forth in the Existing Warburg Fund's then
current prospectus or statement of additional information.
2.2. The net asset value of New Warburg Fund Shares shall be the net
asset value per share computed as of the Valuation Date, using the valuation
procedures set forth in the New Warburg Fund's then current prospectus or
statement of additional information.
2.3. The number of Shares of the New Warburg Fund to be issued
(including fractional shares, if any) in exchange for the Existing Warburg
Fund's net assets shall be determined by dividing the value of the net assets of
the Existing Warburg Fund Shares determined using the same valuation procedures
referred to in paragraph 2.1 by the net asset value per Share of the New Warburg
Fund determined in accordance with paragraph 2.2.
2.4. All computations of value shall be made by PFPC Inc. in accordance
with its regular practice as pricing agent for the Existing Warburg Fund and New
Warburg Fund, respectively.
3. CLOSING AND CLOSING DATE
3.1. The Closing Date for the Reorganization shall be __________ ___,
1997, or such other date as the parties to such Reorganization may agree to in
writing. All acts taking place at the Closing shall be deemed to take place
simultaneously as of the close of business on the Closing Date unless otherwise
provided. The Closing shall be held as of ____:00 p.m., at the offices of
Willkie Farr & Gallagher, 153 East 53rd Street, New York, New York, 10022-4677,
or at such other time and/or place as the parties may agree.
3.2. At the Closing, a certificate of an authorized officer of the New
Warburg Fund shall be delivered stating that: (a) the Existing Warburg Fund's
portfolio securities, cash and any other assets shall have been delivered in
proper form to the New Warburg Fund prior to or on the Closing Date and (b) all
necessary taxes, including all applicable federal and state stock transfer
stamps, if any, shall have been paid, or provision for payment shall have been
made, in conjunction with the delivery of portfolio securities.
3.3. In the event that on the Valuation Date (a) the NYSE or another
primary trading market for portfolio securities of the New Warburg Fund or the
Existing Warburg Fund shall be closed to
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trading or trading thereon shall be restricted or (b) trading or the reporting
of trading on the NYSE or elsewhere shall be disrupted so that accurate
appraisal of the value of the net assets of the New Warburg Fund or the Existing
Warburg Fund is impracticable, the applicable Closing Date shall be postponed
until the first business day after the day when trading shall have been fully
resumed and reporting shall have been restored.
3.4. The Institutional Fund, on behalf of the Existing Warburg Fund,
shall provide to the New Warburg Fund's transfer agent a list of the names and
addresses of the Existing Warburg Fund's shareholders and the number and class
of outstanding Shares owned by each such shareholder immediately prior to the
Closing. The New Warburg Fund shall issue and deliver a confirmation evidencing
the New Warburg Fund Shares to be credited to the Existing Warburg Fund's
account on the Closing Date to the Secretary of the Institutional Fund or
provide evidence satisfactory to the Institutional Fund that such New Warburg
Fund Shares have been credited to the Existing Warburg Fund's account on the
books of the New Warburg Fund. At the Closing, each party shall deliver to the
relevant other parties such bills of sale, checks, assignments, share
certificates, if any, receipts or other documents as such other party or its
counsel may reasonably request.
4. REPRESENTATIONS AND WARRANTIES
4.1. The Institutional Fund, on behalf of the Existing Warburg Fund,
represents and warrants to the New Warburg Fund as follows:
(a) The Institutional Fund is a Maryland corporation duly
organized, validly existing and in good standing under the laws of the State of
Maryland and the Existing Warburg Fund is a validly existing series of shares of
the Institutional Fund representing interests in the Existing Warburg Fund under
the laws of the State of Maryland;
(b) The Institutional Fund is a registered investment company
classified as a management company of the open-end type and its registration
with the Securities and Exchange Commission (the "Commission") as an investment
company under the Investment Company Act of 1940, as amended (the "1940 Act"),
is in full force and effect;
(c) The Institutional Fund is not, and the execution, delivery
and performance of this Agreement will not result, in a violation of its Charter
or By-Laws or any material agreement, indenture, instrument, contract, lease or
other undertaking to which the Institutional Fund or any Existing Warburg Fund
is a party or by which either of them or their property is bound;
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<PAGE>
(d) The Existing Warburg Fund has no contracts or other commitments
(other than this Agreement) which will be terminated with liability to the
Existing Warburg Fund prior to the Closing Date;
(e) Except as previously disclosed in writing to and accepted by
the New Warburg Fund, no litigation or administrative proceeding or
investigation of or before any court or governmental body is presently pending
or to its knowledge threatened against the Existing Warburg Fund or any of its
properties or assets which, if adversely determined, would materially and
adversely affect its financial condition or the conduct of its business. The
Institutional Fund knows of no facts which might form the basis for the
institution of such proceedings and is not party to or subject to the provisions
of any order, decree or judgment of any court or governmental body which
materially and adversely affects its business or the business of the Existing
Warburg Fund or its ability to consummate the transactions herein contemplated;
(f) The financial statements of the Existing Warburg Fund for the
period from March 31, 1997 (commencement of the Existing Warburg Fund's
operations) and ending October 31, 1997 have been audited by Coopers & Lybrand
L.L.P., certified public accountants, and are in accordance with generally
accepted accounting principles consistently applied, and such statements (copies
of which have been furnished to the New Warburg Fund) fairly reflect the
financial condition of the Existing Warburg Fund as of such dates, and there are
no known contingent liabilities of the Existing Warburg Fund as of such dates
not disclosed therein;
(g) Since October 31, 1997, there has not been any material adverse
change in the Existing Warburg Fund's financial condition, assets, liabilities
or business other than changes occurring in the ordinary course of business, or
any incurrence by the Existing Warburg Fund of indebtedness maturing more than
one year from the date that such indebtedness was incurred, except as otherwise
disclosed to and accepted by the New Warburg Fund. For the purposes of this
subparagraph (g), a decline in net asset value per share or the total assets of
the Existing Warburg Fund in the ordinary course of business shall not
constitute a material adverse change;
(h) At the Closing Date, all federal and other tax returns and
reports of each Existing Warburg Fund required by law to have been filed by such
dates shall have been filed, and all federal and other taxes shall have been
paid so far as due, or provision shall have been made for the payment thereof
and, to the best of the Institutional Fund's knowledge, no such return is
currently under audit and no assessment has been asserted with respect to such
returns;
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<PAGE>
(i) For the most recent fiscal year of its operation, the Existing
Warburg Fund has met the requirements of Subchapter M of the Code for
qualification and treatment as a regulated investment company; all of the
Existing Warburg Fund's issued and outstanding shares have been offered and sold
in compliance in all material respects with applicable federal and state
securities laws;
(j) All issued and outstanding shares of the Existing Warburg Fund
are, and at the applicable Closing Date will be, duly and validly issued and
outstanding, fully paid and non-assessable. All of the issued and outstanding
shares of the Existing Warburg Fund will, at the time of Closing, be held by the
persons and the amounts set forth in the records of the transfer agent as
provided in paragraph 3.4. The Existing Warburg Fund does not have outstanding
any options, warrants or other rights to subscribe for or purchase any of the
Existing Warburg Fund's shares, nor is there outstanding any security
convertible into any of the Existing Warburg Fund's shares;
(k) At the Closing Date, the Institutional Fund will have good and
marketable title to the Existing Warburg Fund's assets to be transferred to the
New Warburg Fund pursuant to paragraph 1.2 and full right, power and authority
to sell, assign, transfer and deliver such assets hereunder and, upon delivery
and payment for such assets, the New Warburg Fund will acquire good and
marketable title thereto, subject to no restrictions on the full transfer
thereof, including such restrictions as might arise under the Securities Act of
1933, as amended (the "Securities Act"), other than as disclosed to the New
Warburg Fund.
(l) The execution, delivery and performance of this Agreement has
been duly authorized by all necessary actions on the part of the Institutional
Fund's Board of Directors, and, subject to the approval of the Existing Warburg
Fund's shareholders, this Agreement will constitute a valid and binding
obligation of the Institutional Fund, enforceable in accordance with its terms,
subject to the effect of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other laws relating to or affecting creditors'
rights and to general equity principles;
(m) The information to be furnished by the Institutional Fund for
use in no-action letters, applications for exemptive orders, registration
statements, proxy materials and other documents which may be necessary in
connection with the transactions contemplated hereby shall be accurate and
complete in all material respects and shall comply in all material respects with
federal securities and other laws and regulations thereunder applicable thereto;
and
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<PAGE>
(n) The proxy statement of the Existing Warburg Fund (the "Proxy
Statement") to be included in the Registration Statement referred to in
paragraph 5.7 (other than information therein that relates to the New Warburg
Fund) will, on the effective date of the Registration Statement and on the
Closing Date, not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which such statements
were made, not materially misleading.
4.2. The New Warburg Fund represents and warrants to the Existing
Warburg Fund as follows:
(a) The New Warburg Fund is a Maryland corporation, duly organized,
validly existing and in good standing under the laws of the State of Maryland;
(b) The New Warburg Fund is a registered investment company
classified as a management company of the open-end type and its registration
with the Commission as an investment company under the 1940 Act is in full force
and effect;
(c) The current prospectus and statement of additional information
filed as part of the New Warburg Fund registration statement on Form N-1A (the
"New Warburg Fund Registration Statement") conform in all material respects to
the applicable requirements of the Securities Act and the 1940 Act and the rules
and regulations of the Commission thereunder and do not include any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not materially misleading;
(d) At the Closing Date, the New Warburg Fund will have good and
marketable title to its assets;
(e) The New Warburg Fund is not, and the execution, delivery and
performance of this Agreement will not result, in a violation of its Charter or
By-Laws or any material agreement, indenture, instrument, contract, lease or
other undertaking to which the New Warburg Fund is a party or by which it is
bound;
(f) Except as previously disclosed in writing to and accepted by
the Institutional Fund, no litigation or administrative proceeding or
investigation of or before any court or governmental body is presently pending
or to its knowledge threatened against the New Warburg Fund or any of its
properties or assets which, if adversely determined, would materially and
adversely affect its financial condition or the conduct of its business. The New
Warburg Fund knows of no facts which might form the basis for the institution of
such proceedings and is not a party to or subject to the provisions of any
order, decree or
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<PAGE>
judgment of any court or governmental body which materially and adversely
affects its business or its ability to consummate the transactions contemplated
herein;
(g) Since the inception of the New Warburg Fund there has not been
any material adverse change with respect to the New Warburg Fund's financial
condition, assets, liabilities or business other than changes occurring in the
ordinary course of business, or any incurrence by the New Warburg Fund of
indebtedness maturing more than one year from the date that such indebtedness
was incurred. For the purposes of this subparagraph (g), a decline in net asset
value per share or the total assets of the New Warburg Fund in the ordinary
course of business shall not constitute a material adverse change;
(h) At the Closing Date, all federal and other tax returns and
reports of the New Warburg Fund required by law then to be filed shall have been
filed, and all federal and other taxes shown as due on said returns and reports
shall have been paid or provision shall have been made for the payment thereof;
(i) The New Warburg Fund intends to meet the requirements of
Subchapter M of the Code for qualification and treatment as a regulated
investment company in the future;
(j) At the date hereof, all issued and outstanding New Warburg Fund
Shares are, and at the Closing Date will be, duly and validly issued and
outstanding, fully paid and non-assessable, with no personal liability attaching
to the ownership thereof. The New Warburg Fund does not have outstanding any
options, warrants or other rights to subscribe for or purchase any New Warburg
Fund Shares, nor is there outstanding any security convertible into any New
Warburg Fund Shares;
(k) The execution, delivery and performance of this Agreement shall
have been duly authorized prior to the Closing Date by all necessary actions, if
any, on the part of the New Warburg Fund's Board of Directors and the New
Warburg Fund's shareholders, and this Agreement will constitute a valid and
binding obligation of the New Warburg Fund enforceable in accordance with its
terms, subject to the effect of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other laws relating to or affecting creditors'
rights and to general equity principles;
(l) The New Warburg Fund Shares to be issued and delivered to the
Existing Warburg Fund, for the account of the Existing Warburg Fund's
shareholders, pursuant to the terms of this Agreement, will at the Closing Date
have been duly authorized and, when so issued and delivered, will be duly and
validly issued New Warburg Fund Shares, and will be fully paid and
non-assessable with no personal liability attaching to the ownership thereof;
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<PAGE>
(m) The information to be furnished by the New Warburg Fund for use
in no-action letters, applications for exemptive orders, registration
statements, proxy materials and other documents which may be necessary in
connection with the transactions contemplated hereby shall be accurate and
complete in all material respects and shall comply in all material respects with
federal securities and other laws and regulations applicable thereto;
(n) The Proxy Statement to be included in the Registration
Statement referred to in paragraph 5.7 (only insofar as it relates to the New
Warburg Fund) will, on the effective date of the Registration Statement and on
the Closing Date, not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which such statements
were made, not materially misleading; and
(o) The New Warburg Fund agrees to use all reasonable efforts to
obtain the approvals and authorizations required by the Securities Act, the 1940
Act and such of the state Blue Sky or securities laws as it may deem appropriate
in order to continue its operations after the Closing Date.
5. COVENANTS OF THE INSTITUTIONAL FUND, THE NEW WARBURG FUND AND THE
EXISTING WARBURG FUND
5.1. The New Warburg Fund and the Existing Warburg Fund each will
operate its business in the ordinary course between the date hereof and the
Closing Date. It is understood that such ordinary course of business will
include the declaration and payment of customary dividends and distributions.
5.2. The Institutional Fund, on behalf of the Existing Warburg Fund,
will call a meeting of its shareholders to consider and act upon this Agreement
and to take all other actions in coordination with the Existing Warburg Fund
necessary to obtain approval of the transactions contemplated herein.
5.3. The Institutional Fund, on behalf of the Existing Warburg Fund,
will call a meeting of its shareholders to consider and act upon this Agreement
and to take all other actions in co-ordination with the Existing Warburg Fund
necessary to obtain approval of the transactions contemplated herein.
5.4. The Institutional Fund, on behalf of the Existing Warburg Fund,
will assist the New Warburg Fund in obtaining such information as the New
Warburg Fund reasonably requests concerning the beneficial ownership of the
Existing Warburg Fund's Shares.
5.5. Subject to the provisions of this Agreement, the New Warburg Fund
and the Institutional Fund each will take, or cause
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to be taken, all action, and do or cause to be done, all things reasonably
necessary, proper or advisable to consummate and make effective the transactions
contemplated by this Agreement.
5.6. As promptly as practicable, but in any case within sixty days after
the Closing Date, the Institutional Fund shall furnish the New Warburg Fund, in
such form as is reasonably satisfactory to the New Warburg Fund, a statement of
the earnings and profits of the Existing Warburg Fund for federal income tax
purposes which will be carried over to the New Warburg Fund as a result of
Section 381 of the Code.
5.7. The Institutional Fund, on behalf of the Existing Warburg Fund,
will provide the New Warburg Fund with information reasonably necessary for the
preparation of a prospectus (the "Prospectus") which will include the Proxy
Statement referred to in paragraph 4.1(n), all to be included in a registration
statement on Form N-14 of the New Warburg Fund (the "Registration Statement"),
in compliance with the Securities Act, the Securities Exchange Act of 1934 (the
"Exchange Act") and the 1940 Act in connection with the meeting of the
Institutional Fund's shareholders to consider approval of this Agreement and the
transactions contemplated herein.
5.8. The Institutional Fund, on behalf of the Existing Warburg Fund,
will provide the New Warburg Fund with information reasonably necessary for the
preparation of the New Warburg Registration Statement.
5.9. As promptly as practicable, but in any case within thirty days of
the Closing Date, the Institutional Fund shall furnish the New Warburg Fund with
a statement containing information required for purposes of complying with Rule
24f-2 under the 1940 Act. A notice pursuant to Rule 24f-2 will be filed by the
New Warburg Fund offsetting redemptions by the Existing Warburg Fund during the
fiscal year ending on or after the applicable Closing Date against sales of New
Warburg Fund Shares and the Institutional Fund agrees that it will not net
redemptions during such period by the Existing Warburg Fund against sales of
shares of any other series of the Institutional Fund.
5.10. The New Warburg Fund agrees to indemnify and advance expenses to
each person who at the time of the execution of this Agreement serves as a
Director or Officer ("Indemnified Person") of the Institutional Fund, against
money damages actually and reasonably incurred by such Indemnified Person in
connection with any claim that is asserted against such Indemnified Person
arising out of such person's service as a director or officer of the
Institutional Fund with respect to matters specifically relating to the Existing
Warburg Fund, provided that such indemnification and advancement of expenses
shall be permitted to the fullest extent that is available under the Maryland
General
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<PAGE>
Corporation law and other applicable law. This paragraph 5.10 shall not protect
any such Indemnified Person against any liability to the Existing Warburg Fund,
the New Warburg Fund or their shareholders to which he would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or from
reckless disregard of the duties involved in the conduct of his office. An
Indemnified Person seeking indemnification shall be entitled to advances from
the New Warburg Fund for payment of the reasonable expenses incurred by him in
connection with the matter as to which he is seeking indemnification in the
manner and to the fullest extent permissible under the Maryland General
Corporation law and other applicable law. Such Indemnified Person shall provide
to the New Warburg Fund a written affirmation of his good faith belief that the
standard of conduct necessary for indemnification by the New Warburg Fund has
been met and a written undertaking to repay any advance if it should ultimately
be determined that the standard of conduct has not been met. In addition, at
least one of the following additional conditions shall be met: (a) the
Indemnified Person shall provide security in form and amount acceptable to the
New Warburg Fund for its undertaking; (b) the New Warburg Fund is insured
against losses arising by reason of the advance; or (c) either a majority of a
quorum of disinterested non-party directors of the New Warburg Fund
(collectively, the "Disinterested Directors"), or independent legal counsel
selected by the New Warburg Fund, in a written opinion, shall have determined,
based on a review of facts readily available to the New Warburg Fund at the time
the advance is proposed to be made, that there is reason to believe that the
Director will ultimately be found to be entitled to indemnification.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE EXISTING WARBURG FUND
The obligations of the Institutional Fund to consummate the transactions
provided for herein with respect to the Existing Warburg Fund shall be subject,
at its election, to the performance by the New Warburg Fund of all of the
obligations to be performed by it hereunder on or before the Closing Date and,
in addition thereto, the following further conditions:
6.1. All representations and warranties of the New Warburg Fund
contained in this Agreement shall be true and correct in all material respects
as of the date hereof and, except as they may be affected by the actions
contemplated by this Agreement, as of the Closing Date with the same force and
effect as if made on and as of the Closing Date;
6.2. The New Warburg Fund shall have delivered to the Institutional Fund
a certificate executed in its name by its President or Vice President and its
Secretary, Treasurer or Assistant Treasurer, in a form reasonably satisfactory
to the
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Institutional Fund and dated as of the Closing Date, to the effect that the
representations and warranties of the New Warburg Fund made in this Agreement
are true and correct at and as of the Closing Date, except as they may be
affected by the transactions contemplated by this Agreement and as to such other
matters as the Existing Warburg Fund shall reasonably request;
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE NEW WARBURG FUND.
The obligations of the New Warburg Fund to complete the transactions
provided for herein shall be subject, at its election, to the performance by the
Existing Warburg Fund of all the obligations to be performed by it hereunder on
or before the Closing Date and, in addition thereto, the following conditions:
7.1. All representations and warranties of the Institutional Fund
contained in this Agreement shall be true and correct in all material respects
as of the date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same force and
effect as if made on and as of the Closing Date;
7.2. The Institutional Fund shall have delivered to the New Warburg Fund
a statement of the Existing Warburg Fund's assets and liabilities, together with
a list of the Existing Warburg Fund's portfolio securities showing the tax costs
of such securities by lot and the holding periods of such securities, as of the
Closing Date;
7.3. The Institutional Fund shall have delivered to the New Warburg
Fund, pursuant to paragraph 4.1(f), copies of financial statements of the
Existing Warburg Fund as of and for its most recently completed fiscal year.
7.4. The New Warburg Fund shall have received from Coopers & Lybrand
L.L.P. a letter addressed to the New Warburg Fund and dated as of the applicable
Closing Date stating that as of a date no more than three (3) business days
prior to the applicable Closing Date, Coopers & Lybrand L.L.P. performed limited
procedures in connection with the Institutional Fund's most recent unaudited
financial statements and that (a) nothing came to their attention in performing
such limited procedures or otherwise that led them to believe that there had
been any changes in the assets, liabilities, net assets, net investment income,
net increase (decrease) in net assets from operations or net increase (decrease)
in net assets as compared with amounts as of the Existing Warburg Fund's most
recent audited fiscal year end or the corresponding period in the Existing
Warburg Fund's most recent audited fiscal year, other than changes occurring in
the ordinary course of business, and (b) based on such limited procedures, there
is no change in their report on the most recent audited financial statements of
such Existing Warburg Fund.
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8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE NEW WARBURG FUND AND
THE EXISTING WARBURG FUND.
If any of the conditions set forth below do not exist on or before the
Closing Date with respect to the New Warburg Fund, the Institutional Fund on
behalf of the Existing Warburg Fund shall, and if any of such conditions do not
exist on or before the Closing Date with respect to the Existing Warburg Fund,
the New Warburg Fund shall, at their respective option, not be required to
consummate the transactions contemplated by this Agreement:
8.1. The Agreement and the transactions contemplated herein shall have
been approved by the requisite vote of the holders of the outstanding Shares of
the Existing Warburg Fund in accordance with the provisions of the Institutional
Fund's Charter and applicable law and certified copies of the votes evidencing
such approval shall have been delivered to the New Warburg Fund.
8.2. On the Closing Date no action, suit or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection with, this
Agreement or the transactions contemplated herein.
8.3. All consents of other parties and all other consents, orders and
permits of federal, state and local regulatory authorities (including those of
the Commission and of state blue sky and securities authorities, including
"no-action" positions of and exemptive orders from such federal and state
authorities) deemed necessary by the New Warburg Fund or the Institutional Fund
to permit consummation, in all material respects, of the transactions
contemplated hereby shall have been obtained, except where failure to obtain any
such consent, order or permit would not involve a risk of a material adverse
effect on the assets or properties of the New Warburg Fund or the Existing
Warburg Fund, provided that either party hereto may for itself waive any of such
conditions.
8.4. The Registration Statement and the New Warburg Fund Registration
Statement shall each have become effective under the Securities Act and no stop
orders suspending the effectiveness thereof shall have been issued and, to the
best knowledge of the parties hereto, no investigation or proceeding for that
purpose shall have been instituted or be pending, threatened or contemplated
under the Securities Act.
8.5. The parties shall have received a favorable opinion of Willkie Farr
& Gallagher, addressed to, and in form and substance satisfactory to, the
Institutional Fund, on behalf of the Existing Warburg Fund, and the New Warburg
Fund, substantially to the effect that for federal income tax purposes:
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(a) The transfer of all or substantially all of the Existing
Warburg Fund's assets in exchange for the New Warburg Fund Shares and the
assumption by the New Warburg Fund of liabilities of the Existing Warburg Fund
will constitute a "reorganization" within the meaning of Section 368(a) of the
Code and the New Warburg Fund and the Existing Warburg Fund are each a "party to
a reorganization" within the meaning of Section 368(b) of the Code; (b) no gain
or loss will be recognized by the New Warburg Fund upon the receipt of the
assets of the Existing Warburg Fund solely in exchange for the New Warburg Fund
Shares and the assumption by the New Warburg Fund of liabilities of the Existing
Warburg Fund; (c) no gain or loss will be recognized by the Existing Warburg
Fund upon the transfer of the Existing Warburg Fund's assets to the New Warburg
Fund in exchange for the New Warburg Fund Shares and the assumption by the New
Warburg Fund of liabilities of the Existing Warburg Fund or upon the
distribution (whether actual or constructive) of the New Warburg Fund Shares to
the Existing Warburg Fund's shareholders in exchange for their shares of the
Existing Warburg Fund; (d) no gain or loss will be recognized by shareholders of
the Existing Warburg Fund upon the exchange of their Existing Warburg Fund
shares for the New Warburg Fund Shares and the assumption by the New Warburg
Fund of liabilities of the Existing Warburg Fund; (e) the aggregate tax basis
for the New Warburg Fund Shares received by each of the Existing Warburg Fund's
shareholders pursuant to the Reorganization will be the same as the aggregate
tax basis of the Existing Warburg Fund Shares held by such shareholder
immediately prior to the Reorganization, and the holding period of the New
Warburg Fund Shares to be received by each Existing Warburg Fund shareholder
will include the period during which the Existing Warburg Fund Shares exchanged
therefor were held by such shareholder (provided that the Existing Warburg Fund
Shares were held as capital assets on the date of the Reorganization); and (f)
the tax basis of the Existing Warburg Fund's assets acquired by the New Warburg
Fund will be the same as the tax basis of such assets to the Existing Warburg
Fund immediately prior to the Reorganization, and the holding period of the
assets of the Existing Warburg Fund in the hands of the New Warburg Fund will
include the period during which those assets were held by the Existing Warburg
Fund.
Notwithstanding anything herein to the contrary, neither the New Warburg
Fund nor the Institutional Fund may waive the conditions set forth in this
paragraph 8.5.
9. BROKERAGE FEES AND EXPENSES; OTHER AGREEMENTS
9.1. The New Warburg Fund represents and warrants to the Existing
Warburg Fund, and the Institutional Fund on behalf of the Existing Warburg Fund
represents and warrants to the New Warburg Fund, that there are no brokers or
finders or other entities to receive any payments in connection with the
transactions provided for herein.
-15-
<PAGE>
9.2. Warburg Pincus Asset Management, Inc. ("Warburg") or its affiliates
agrees to bear the expenses incurred in connection with the transactions
contemplated by this Agreement, whether or not consummated (excluding
extraordinary expenses such as litigation expenses, damages and other expenses
not normally associated with transactions of the type contemplated by this
Agreement). These expenses consist of: (i) expenses associated with preparing
this Agreement; (ii) preparing and filing the New Warburg Registration Statement
covering the Shares to be issued in the Reorganization; (iii) registration or
qualification fees and expenses of preparing and filing such forms, if any,
necessary under applicable state securities laws to qualify the New Warburg Fund
Shares to be issued in connection with the Reorganization; (iv) postage;
printing; accounting fees; and legal fees incurred in connection with the
transactions contemplated by this Agreement; (v) solicitation costs incurred in
connection with the shareholders meeting referred to in clause (i) above and
paragraph 5.2 hereof; and (vi) any other Reorganization expenses.
10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1. The New Warburg Fund and the Institutional Fund, itself and on
behalf of the Existing Warburg Fund, agree that neither party has made any
representation, warranty or covenant not set forth herein and that this
Agreement constitutes the entire agreement among the parties.
10.2. The representations, warranties and covenants contained in this
Agreement or in any document delivered pursuant hereto or in connection herewith
shall survive the consummation of the transactions contemplated hereunder.
11. TERMINATION
11.1. This Agreement may be terminated at any time at or prior to the
Closing Date by: (1) mutual agreement of the Institutional Fund, on behalf of
the Existing Warburg Fund, and the New Warburg Fund; (2) the Institutional Fund,
on behalf of the Existing Warburg Fund, in the event the New Warburg Fund shall,
or the New Warburg Fund in the event the Institutional Fund or the Existing
Warburg Fund shall, materially breach any representation, warranty or agreement
contained herein to be performed at or prior to the Closing Date; or (3) the
Institutional Fund, on behalf of the Existing Warburg Fund, or the New Warburg
Fund, or the New Warburg Fund in the event a condition herein expressed to be
precedent to the obligations of the terminating party or parties has not been
met and it reasonably appears that it will not or cannot be met.
11.2. In the event of any such termination, there shall be no liability
for damages on the part of either the New Warburg
-16-
<PAGE>
Fund or the Institutional Fund, or their respective directors or officers, to
the other party or parties.
12. AMENDMENTS
This Agreement may be amended, modified or supplemented in writing in
such manner as may be mutually agreed upon by the authorized officers of the New
Warburg Fund and the Institutional Fund; provided, however, that following the
meeting of the Existing Warburg Fund's shareholders called by the Institutional
Fund pursuant to paragraph 5.2 of this Agreement no such amendment may have the
effect of changing the provisions for determining the number of the New Warburg
Fund Shares to be issued to the Existing Warburg Fund's Shareholders under this
Agreement to the detriment of such shareholders without their further approval.
13. NOTICES
13.1. Any notice, report, statement or demand required or permitted by
any provisions of this Agreement shall be in writing and shall be given by
prepaid telegraph, telecopy or certified mail addressed to the Institutional
Fund and/or the Existing Warburg Fund at:
466 Lexington Avenue
New York, NY 10017
Attention: Eugene P. Grace
14. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT; LIMITATION OF
LIABILITY; USE OF TRADEMARK
14.1. The article and paragraph headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
14.2. This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original.
14.3. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York.
14.4. This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof or of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Nothing herein expressed
or implied is intended or shall be construed to confer upon or give any person,
firm or corporation, other than the parties hereto and their respective
successors and assigns, any rights or remedies under or by reason of this
Agreement.
14.5. The parties to this Agreement agree that the legend attached
hereto as Appendix A shall constitute part of the original agreement and shall
have the full force and effect and be binding upon the parties as if it were
originally included therein.
-17-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed by its Chairman of the Board, President or Vice President and
attested to by its Secretary or Assistant Secretary.
WARBURG, PINCUS MANAGED EAFE[R] COUNTRIES FUND, INC.
By: ___________________________
Name: _____________________
Title: ____________________
Attest: _______________________
WARBURG PINCUS INSTITUTIONAL FUND, INC., for itself and
on behalf of the Managed EAFE[R] Countries Portfolio
By: ___________________________
Name: _____________________
Title: ____________________
Attest: _______________________
-18-
<PAGE>
APPENDIX A
Warburg, Pincus Managed EAFE(R) Countries Fund, Inc. (the
"Fund") is not sponsored, endorsed, sold or promoted by Morgan Stanley. Morgan
Stanley 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 or the ability of the Morgan
Stanley EAFE Index to track general stock market performance. Morgan Stanley is
the licensor of certain trademarks, service marks and trade names of Morgan
Stanley and of the Morgan Stanley EAFE Index. Morgan Stanley has no obligation
to take the needs of the issuer of the Fund or the owners of the Fund into
consideration in determining, composing or calculating the Morgan Stanley EAFE
Index. Morgan Stanley is not responsible for and has not participated in the
determination of the timing of, prices at, or quantities of the Fund to be
issued or in the determination or calculation of the equation by which the Fund
is redeemable for cash. Morgan Stanley has no obligation or liability to owners
of the Fund in connection with the administration, marketing or trading of the
Fund.
MORGAN STANLEY MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND
HEREBY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE WITH RESPECT TO THE EAFE INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT
LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL MORGAN STANLEY HAVE ANY
LIABILITY FOR ANY DIRECT, INDIRECT, SPECIAL, PUNITIVE, CONSEQUENTIAL OR ANY
OTHER DAMAGES (INCLUDING LOST PROFITS) EVEN IF NOTIFIED OF THE POSSIBILITY OF
SUCH DAMAGES.
<PAGE>
INVESTMENT ADVISORY AGREEMENT
______________ ___, 1997
Warburg Pincus Asset Management, Inc.
466 Lexington Avenue
New York, New York 10017-3147
Dear Sirs:
Warburg, Pincus Managed EAFE[R] Countries Fund, Inc. (the
"Fund"), a corporation organized and existing under the laws of the State of
Maryland, herewith confirms its agreement with Warburg Pincus Asset Management,
Inc. (the "Adviser") as follows:
1. Investment Description; Appointment
-----------------------------------
The Fund desires to employ the capital of the Fund by investing
and reinvesting in investments of the kind and in accordance with the
limitations specified in its Articles of Incorporation, as may be amended from
time to time, and in its Prospectus 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 of Directors of the Fund. Copies of the
Fund's Prospectus and Statement of Additional Information, as each may be
amended from time to time, have been or will be submitted to the Adviser. The
Fund desires to employ and hereby appoints the Adviser to act as investment
adviser to the Fund. The Adviser accepts the appointment and agrees to furnish
the services for the compensation set forth below.
2. Services as Investment Adviser
------------------------------
Subject to the supervision and direction of the Board of
Directors of the Fund, the Adviser will (a) act in strict conformity with the
Fund's Articles of Incorporation, the Investment Company Act of 1940 and the
Investment Advisers Act of 1940, as the same may from time to time be amended,
(b) manage the Fund in accordance with the Fund's investment objective and
policies as stated in the Fund's Prospectus and Statement of Additional
Information relating to the Fund as from time to time in effect, (c) make
investment decisions for the Fund and (d) place purchase and sale orders for
securities on behalf of the Fund. In providing those services, the Adviser will
provide investment research and supervision of the Fund's investments and
conduct a continual program of investment, evaluation and, if appropriate, sale
and reinvestment of the Fund's assets. In addition, the Adviser will furnish the
Fund with whatever statistical information the Fund may reasonably request with
respect to the securities that the Fund may hold or contemplate purchasing.
<PAGE>
3. Brokerage
---------
In executing transactions for the Fund and selecting brokers or
dealers, the Adviser will use its best efforts to seek the best overall terms
available. In assessing the best overall terms available for any portfolio
transaction, the Adviser will consider all factors it deems relevant including,
but not limited to, breadth of the market in the security, the price of the
security, the financial condition and execution capability of the broker or
dealer and the reasonableness of any commission for the specific transaction and
for transactions executed through the broker or dealer in the aggregate. In
selecting brokers or dealers to execute a particular transaction and in
evaluating the best overall terms available, the Adviser may consider the
brokerage and research services (as those terms are defined in Section 28(e) of
the Securities Exchange Act of 1934, as the same may from time to time be
amended) provided to the Fund and/or other accounts over which the Adviser or an
affiliate exercises investment discretion.
4. Information Provided to the Fund
--------------------------------
The Adviser will keep the Fund informed of developments
materially affecting the Fund, and will, on its own initiative, furnish the Fund
from time to time with whatever information the Adviser believes is appropriate
for this purpose.
5. Standard of Care
----------------
The Adviser shall exercise its best judgment in rendering the
services listed in paragraphs 2, 3 and 4 above. The Adviser shall not be liable
for any error of judgment or mistake of law or for any loss suffered by the Fund
in connection with the matters to which this Agreement relates, provided that
nothing herein shall be deemed to protect or purport to protect the Adviser
against any liability to the Fund or to shareholders of the Fund to which the
Adviser would otherwise be subject by reason of willful misfeasance, bad faith
or gross negligence on its part in the performance of its duties or by reason of
the Adviser's reckless disregard of its obligations and duties under this
Agreement.
6. Compensation
------------
In consideration of the services rendered pursuant to this
Agreement, the Fund will pay the Adviser an annual fee calculated at an annual
rate of 1.00% of the Fund's average daily net assets. The fee for the period
from the date the Fund's initial registration statement is declared effective by
the Securities and Exchange Commission to the end of the year during which the
initial registration statement is declared effective shall be prorated according
to the proportion that such period bears to the full yearly period. Upon any
termination of this Agreement before the end of a year, the fee for such part of
that
2
<PAGE>
year shall be prorated according to the proportion that such period bears to the
full yearly period and shall be payable upon the date of termination of this
Agreement. For the purpose of determining fees payable to the Adviser, the value
of the Fund's net assets shall be computed at the times and in the manner
specified in the Fund's Prospectus or Statement of Additional Information as
from time to time in effect.
7. Expenses
--------
The Adviser will bear all expenses in connection with the
performance of its services under this Agreement. The Fund will bear its
proportionate share of certain other expenses to be incurred in its operation,
including: investment advisory and administration fees; taxes, interest,
brokerage fees and commissions, if any; fees of Directors of the Fund who are
not officers, directors, or employees of the Adviser or any of its affiliates;
fees of any pricing service employed to value shares of the Fund; Securities and
Exchange Commission fees and state blue sky qualification fees; charges of
custodians and transfer and dividend disbursing agents; the Fund's proportionate
share of insurance premiums; outside auditing and legal expenses; costs of
maintenance of the Fund's existence; costs attributable to investor services,
including, without limitation, telephone and personnel expenses; costs of
preparing and printing prospectuses and statements of additional information for
regulatory purposes and for distribution to existing shareholders; costs of
shareholders' reports and meetings of the shareholders of the Fund and of the
officers or Board of Directors of the Fund; and any extraordinary expenses.
The Fund will be responsible for nonrecurring expenses which may
arise, including costs of litigation to which the Fund is a party and of
indemnifying officers and Directors of the Fund with respect to such litigation
and other expenses as determined by the Directors.
8. Services to Other Companies or Accounts
---------------------------------------
The Fund understands that the Adviser now acts, will continue to
act and may act in the future as investment adviser to fiduciary and other
managed accounts and to one or more other investment companies or series of
investment companies, and the Fund has no objection to the Adviser so acting,
provided that whenever the Fund and one or more other accounts or investment
companies or portfolios advised by the Adviser have available funds for
investment, investments suitable and appropriate for each will be allocated in
accordance with a formula believed to be equitable to each entity. The Fund
recognizes that in some cases this procedure may adversely affect the size of
the position obtainable for the Fund. In addition, the Fund understands that the
persons employed by the Adviser to assist in the performance of the Adviser's
duties hereunder will not devote their full time to such service and nothing
contained herein
3
<PAGE>
shall be deemed to limit or restrict the right of the Adviser or any affiliate
of the Adviser to engage in and devote time and attention to other businesses or
to render services of whatever kind or nature.
9. Term of Agreement
-----------------
This Agreement shall continue until April 17, 1999 and thereafter
shall continue automatically for successive annual periods, provided such
continuance is specifically approved at least annually by (a) the Board of
Directors of the Fund or (b) a vote of a "majority" (as defined in the
Investment Company Act of 1940, as amended) of the Fund's outstanding voting
securities, provided that in either event the continuance is also approved by a
majority of the Board of Directors who are not "interested persons" (as defined
in said Act) of any party to this Agreement, by vote cast in person at a meeting
called for the purpose of voting on such approval. This Agreement is terminable,
without penalty, on 60 days' written notice, by the Board of Directors of the
Fund or by vote of holders of a majority of the Fund's shares, or upon 90 days'
written notice, by the Adviser. This Agreement will also terminate automatically
in the event of its assignment (as defined in said Act).
10. Representation by the Fund
--------------------------
The Fund represents that a copy of its Articles of Incorporation,
dated October 24, 1997, together with all amendments thereto, is on file in the
Department of Assessments and Taxation of the State of Maryland.
11. Miscellaneous
-------------
The Fund recognizes that directors, officers and employees of the
Adviser may from time to time serve as directors, trustees, officers and
employees of corporations and business trusts (including other investment
companies) and that such other corporations and trusts may include the name
"Warburg, Pincus" as part of their names, and that the Adviser or its affiliates
may enter into advisory or other agreements with such other corporations and
trusts. If the Adviser ceases to act as the investment adviser of the Fund's
shares, the Fund agrees that, at the Adviser's request, the Fund's license to
use the words "Warburg, Pincus" will terminate and that the Fund will take all
necessary action to change the name of the Fund to names not including the words
"Warburg, Pincus".
The parties to this agreement agree that the legend attached
hereto as Appendix A shall constitute part of the original agreement and shall
have the full force and effect and be binding upon the parties as if it were
originally included therein.
4
<PAGE>
Please confirm that the foregoing is in accordance with your
understanding by indicating your acceptance hereof at the place below indicated,
whereupon it shall become a binding agreement between us.
Very truly yours,
WARBURG, PINCUS MANAGED EAFE[R]
COUNTRIES FUND, INC.
By: ______________________________
Name: ________________________
Title: _______________________
Accepted:
WARBURG PINCUS ASSET MANAGEMENT, INC.
By: _______________________
Name: _________________
Title: ________________
5
<PAGE>
APPENDIX A
----------
Warburg, Pincus Managed EAFE[R] Countries Fund, Inc. (the "Fund")
is not sponsored, endorsed, sold or promoted by Morgan Stanley. Morgan Stanley
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 or the ability of the Morgan
Stanley EAFE Index to track general stock market performance. Morgan Stanley is
the licensor of certain trademarks, service marks and trade names of Morgan
Stanley and of the Morgan Stanley EAFE Index. Morgan Stanley has no obligation
to take the needs of the issuer of the Fund or the owners of the Fund into
consideration in determining, composing or calculating the Morgan Stanley EAFE
Index. Morgan Stanley is not responsible for and has not participated in the
determination of the timing of, prices at, or quantities of the Fund to be
issued or in the determination or calculation of the equation by which the Fund
is redeemable for cash. Morgan Stanley has no obligation or liability to owners
of the Fund in connection with the administration, marketing or trading of the
Fund.
MORGAN STANLEY MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND
HEREBY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE WITH RESPECT TO THE EAFE INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT
LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL MORGAN STANLEY HAVE ANY
LIABILITY FOR ANY DIRECT, INDIRECT, SPECIAL, PUNITIVE, CONSEQUENTIAL OR ANY
OTHER DAMAGES (INCLUDING LOST PROFITS) EVEN IF NOTIFIED OF THE POSSIBILITY OF
SUCH DAMAGES.
<PAGE>
DISTRIBUTION AGREEMENT
___________ ___, 1997
Counsellors Securities Inc.
466 Lexington Avenue
New York, New York 10017-3147
Ladies and Gentlemen:
This is to confirm that, in consideration of the agreements
hereinafter contained, the undersigned, Warburg Pincus Funds (the "Fund") has
agreed that Counsellors Securities Inc. ("Counsellors Securities") shall be, for
the period of this Agreement, the distributor of shares of common stock of the
Fund, par value $.001 per share. The common stock not designated Advisor Shares
shall be referred to as the "Common Shares."
1. Services as Distributor
-----------------------
1.1 Counsellors Securities will act as agent for the distribution
of the Common Shares and Advisor Shares covered by the Fund's registration
statement on Form N-1A, under the Securities Act of 1933, as amended (the "1933
Act"), and the Investment Company Act of 1940, as amended (the "1940 Act") (the
registration statement, together with the prospectuses (the "prospectus") and
statement of additional information (the "statement of additional information")
included as part of the registration statement, any amendments to the
registration statement, and any supplements to, or material incorporated by
reference into the prospectus or statement of additional information, being
referred to collectively in this Agreement as the "registration statement").
1.2 Counsellors Securities agrees to use appropriate efforts to
solicit orders for the sale of the Common Shares and Advisor Shares at such
prices and on the terms and conditions set forth in the registration statement
and will undertake such advertising and promotion as it believes is reasonable
in connection with such solicitation.
1.3 All activities by Counsellors Securities as distributor of
the Common Shares and Advisor Shares shall comply with all applicable laws,
rules and regulations, including, without limitation, all rules and regulations
made or adopted by the Securities and Exchange Commission (the "SEC") or by any
securities association registered under the Securities Exchange Act of 1934, as
amended.
1.4 Counsellors Securities agrees to (a) provide one or more
persons during normal business hours to respond to telephone questions
concerning the Fund and its performance,
<PAGE>
(b) provide prospectuses of other funds advised by Warburg Pincus Asset
Management, Inc. to shareholders considering exercising the exchange privilege
and (c) perform such other services as are described in the registration
statement and in the Shareholder Servicing and Distribution Plan (with respect
to Common Shares, the "12b-1 Plan") and in the Distribution Plan (with respect
to Advisor Shares, the "Distribution Plan"), each adopted by the Fund pursuant
to Rule 12b-1 under the 1940 Act ("Rule 12b-1") to be performed by Counsellors
Securities, without limitation, distributing and receiving subscription order
forms and receiving written redemption requests.
1.5 Pursuant to the 12b-1 Plan, the Fund will pay Counsellors
Securities on the first business day of each quarter a fee for the previous
quarter calculated at an annual rate of .25% of the average daily net assets of
the Common Shares of the Fund as compensation for the services provided by
Counsellors Securities to the Common Shares pursuant to this Agreement.
Counsellors Securities serves without compensation as distributor for the
Advisor Shares pursuant to this Agreement. Amounts paid to Counsellors
Securities under the 12b-1 Plan may be used by Counsellors Securities to cover
expenses that are primarily intended to result in, or that are primarily
attributable to, (a) the sale of the Common Shares, as set forth in the 12b-1
Plan ("Selling Services"), (b) ongoing servicing and/or maintenance of the
accounts of holders of Common Shares, as set forth in the 12b-1 Plan
("Shareholder Services"), and/or (c) sub-transfer agency services, subaccounting
services or administrative services with respect to the Common Shares, as set
forth in the 12b-1 Plan ("Administrative Services" and collectively with Selling
Services and Administrative Services, "Services") including, without limitation,
(i) payments reflecting an allocation of overhead and other office expenses of
Counsellors Securities related to providing Services; (ii) payments made to, and
reimbursement of expenses of, persons who provide support services in connection
with the distribution of the Common Shares including, but not limited to, office
space and equipment, telephone facilities, answering routine inquiries regarding
the Fund, and providing any other Shareholder Services; (iii) payments made to
compensate selected dealers or other authorized persons for providing any
Services; (iv) costs relating to the formulation and implementation of marketing
and promotional activities for the Common Shares, including, but not limited to,
direct mail promotions and television, radio, newspaper, magazine and other mass
media advertising, and related travel and entertainment expenses; (v) costs of
printing and distributing prospectuses, statements of additional information and
reports of the Fund to prospective holders of Common Shares; and (vi) costs
involved in obtaining whatever information, analyses and reports with respect to
marketing and promotional activities for the Common Shares that the Fund may,
from time to time, deem advisable.
2
<PAGE>
1.6 Counsellors Securities acknowledges that, whenever in the
judgment of the Fund's officers such action is warranted for any reason,
including, without limitation, market, economic or political conditions, those
officers may decline to accept any orders for, or make any sales of, the Common
Shares or Advisor Shares until such time as those officers deem it advisable to
accept such orders and to make such sales.
1.7 Counsellors Securities will act only on its own behalf as
principal should it choose to enter into selling agreements with selected
dealers or others.
1.8 Counsellors Securities will transmit any orders received by
it for purchase or redemption of the Common Shares and Advisor Shares to State
Street Bank and Trust Company ("State Street"), the Fund's transfer and dividend
disbursing agent, or its successor of which Counsellors Securities is notified
in writing. The Fund will promptly advise Counsellors Securities of the
determination to cease accepting orders or selling Common Shares or Advisor
Shares or to recommence accepting orders or selling Common Shares or Advisor
Shares. The Fund (or its agent) will confirm orders for Common Shares and
Advisor Shares placed through Counsellors Securities upon their receipt, or in
accordance with any exemptive order of the SEC, and will make appropriate book
entries pursuant to the instructions of Counsellors Securities. Counsellors
Securities agrees to cause payment for Common Shares and Advisor Shares and
instructions as to book entries to be delivered promptly to the Fund (or its
agent).
1.9 The outstanding Common Shares and Advisor Shares are subject
to redemption as set forth in the prospectus. The price to be paid to redeem the
Common Shares and Advisor Shares will be determined as set forth in the
prospectus.
1.10 Counsellors Securities will prepare and deliver reports to
the Treasurer of the Fund on a regular, at least quarterly, basis, showing the
distribution expenses incurred pursuant to this Agreement, the 12b-1 Plan and
the Distribution Plan adopted by the Fund pursuant to Rule 12b-1 and the
purposes therefor, as well as any supplemental reports as the Directors from
time to time may reasonably request.
2. Duties of the Fund
------------------
2.1 The Fund agrees at its own expense to execute any and all
documents, to furnish any and all information and to take any other actions that
may be reasonably necessary in connection with the sale of Common Shares and
Advisor Shares in those states that Counsellors Securities may designate.
2.2 The Fund shall furnish from time to time, for use in
connection with the sale of the Common Shares and Advisor Shares, such
informational reports with respect to the Fund and
3
<PAGE>
the Common Shares and Advisor Shares as Counsellors Securities may reasonably
request, all of which shall be signed by one or more of the Fund's duly
authorized officers; and the Fund warrants that the statements contained in any
such reports, when so signed by one or more of the Fund's officers, shall be
true and correct. The Fund shall also furnish Counsellors Securities upon
request with: (a) annual audits of the Fund's books and accounts made by
independent public accountants regularly retained by the Fund, (b) semiannual
unaudited financial statements pertaining to the Fund, (c) quarterly earnings
statements prepared by the Fund, (d) a monthly itemized list of the securities
held by the Fund, (e) monthly balance sheets as soon as practicable after the
end of each month and (f) from time to time such additional information
regarding the Fund's financial condition as Counsellors Securities may
reasonably request.
3. Representations and Warranties
------------------------------
The Fund represents to Counsellors Securities that all
registration statements, prospectuses and statements of additional information
filed by the Fund with the SEC under the 1933 Act and the 1940 Act with respect
to the Common Shares and/or Advisor Shares have been carefully prepared in
conformity with the requirements of the 1933 Act, the 1940 Act and the rules and
regulations of the SEC thereunder. As used in this Agreement the terms
"registration statement", "prospectus" and "statement of additional information"
shall mean any registration statement, prospectus and statement of additional
information filed by the Fund with respect to the Common Shares and/or Advisor
Shares with the SEC and any amendments and supplements thereto which at any time
shall have been filed with the SEC. The Fund represents and warrants to
Counsellors Securities that any registration statement with respect to the
Common Shares and/or Advisor Shares, or prospectus and statement of additional
information contained therein, when such registration statement becomes
effective, will include all statements required to be contained therein in
conformity with the 1933 Act, the 1940 Act and the rules and regulations of the
SEC; that all statements of fact contained in any registration statement with
respect to the Common Shares and/or Advisor Shares, prospectus or statement of
additional information will be true and correct when such registration statement
becomes effective; and that neither any registration statement nor any
prospectus or statement of additional information with respect to the Common
Shares and/or Advisor Shares when such registration statement becomes effective
will include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading to a purchaser of the Common Shares and/or Advisor Shares.
Counsellors Securities may, but shall not be obligated to, propose from time to
time such amendment or amendments to any registration statement and such
supplement or supplements to any prospectus or statement of additional
information as, in the light of future developments,
4
<PAGE>
may, in the opinion of Counsellors Securities' counsel, be necessary or
advisable. If the Fund shall not propose such amendment or amendments and/or
supplement or supplements within fifteen (15) days after receipt by the Fund of
a written request from Counsellors Securities to do so, Counsellors Securities
may, at its option, terminate this Agreement. The Fund shall not file any
amendment to any registration statement or supplement to any prospectus or
statement of additional information without giving Counsellors Securities
reasonable notice thereof in advance; provided, however, that nothing contained
in this Agreement shall in any way limit the Fund's right to file at any time
such amendments to any registration statement and/or supplements to any
prospectus or statement of additional information with respect to the Common
Shares and/or Advisor Shares, of whatever character, as the Fund may deem
advisable, such right being in all respects absolute and unconditional.
4. Indemnification
---------------
4.1 The Fund agrees to indemnify, defend and hold Counsellors
Securities, its several officers and directors, and any person who controls
Counsellors Securities within the meaning of Section 15 of the 1933 Act, free
and harmless from and against any and all claims, demands, liabilities and
expenses (including the cost of investigating or defending such claims, demands
or liabilities and any counsel fees incurred in connection therewith) which
Counsellors Securities, its officers and directors, or any such controlling
person, may incur under the 1933 Act, the 1940 Act or common law or otherwise,
arising out of or based upon any untrue statement or alleged untrue statement of
a material fact contained in any registration statement, any prospectus or any
statement of additional information with respect to the Common Shares and/or
Advisor Shares, or arising out of or based upon any omission or alleged omission
to state a material fact required to be stated in any registration statement,
any prospectus or any statement of additional information with respect to the
Common Shares and/or Advisor Shares, or necessary to make the statements in any
of them not misleading; provided, however, that the Fund's agreement to
indemnify Counsellors Securities, its officers or directors, and any such
controlling person shall not be deemed to cover any claims, demands, liabilities
or expenses arising out of or based upon any statements or representations made
by Counsellors Securities or its representatives or agents other than such
statements and representations as are contained in any registration statement,
prospectus or statement of additional information with respect to the Common
Shares and/or Advisor Shares and in such financial and other statements as are
furnished to Counsellors Securities pursuant to paragraph 2.2 hereof; and
further provided that the Fund's agreement to indemnify Counsellors Securities
and the Fund's representations and warranties hereinbefore set forth in
paragraph 3 shall not be deemed to cover any liability to the Fund or its
shareholders to which Counsellors Securities would otherwise be subject by
reason
5
<PAGE>
of willful misfeasance, bad faith or gross negligence in the performance of its
duties, or by reason of Counsellors Securities' reckless disregard of its
obligations and duties under this Agreement. The Fund's agreement to indemnify
Counsellors Securities, its officers and directors, and any such controlling
person, as aforesaid, is expressly conditioned upon the Fund's being notified of
any action brought against Counsellors Securities, its officers or directors, or
any such controlling person, such notification to be given by letter or by
telegram addressed to the Fund at its principal office in New York, New York and
sent to the Fund by the person against whom such action is brought, within ten
(10) days after the summons or other first legal process shall have been served.
The failure to so notify the Fund of any such action shall not relieve the Fund
from any liability that the Fund may have to the person against whom such action
is brought by reason of any such untrue or alleged untrue statement or omission
or alleged omission otherwise than on account of the Fund's indemnity agreement
contained in this paragraph 4.1. The Fund's indemnification agreement contained
in this paragraph 4.1 and the Fund's representations and warranties in this
Agreement shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of Counsellors Securities, its officers and
directors, or any controlling person, and shall survive the delivery of any of
the Fund's shares. This agreement of indemnity will inure exclusively to
Counsellors Securities' benefit, to the benefit of its several officers and
directors, and their respective estates, and to the benefit of the controlling
persons and their successors. The Fund agrees to notify Counsellors Securities
promptly of the commencement of any litigation or proceedings against the Fund
or any of its officers or directors in connection with the issuance and sale of
any of the Common Shares and/or Advisor Shares.
4.2 Counsellors Securities agrees to indemnify, defend and hold
the Fund, its several officers and directors, and any person who controls the
Fund within the meaning of Section 15 of the 1933 Act, free and harmless from
and against any and all claims, demands, liabilities and expenses (including the
costs of investigating or defending such claims, demands or liabilities and any
counsel fees incurred in connection therewith) that the Fund, its officers or
directors or any such controlling person may incur under the 1933 Act, the 1940
Act or common law or otherwise, but only to the extent that such liability or
expense incurred by the Fund, its officers or directors or such controlling
person resulting from such claims or demands shall arise out of or be based upon
(a) any unauthorized sales literature, advertisements, information, statements
or representations or (b) any untrue or alleged untrue statement of a material
fact contained in information furnished in writing by Counsellors Securities to
the Fund specifically for use in the registration statement and used in the
answers to any of the items of the registration statement or in the
corresponding statements made in the prospectus or statement of additional
6
<PAGE>
information, or shall arise out of or be based upon any omission or alleged
omission to state a material fact in connection with such information furnished
in writing by Counsellors Securities to the Fund and required to be stated in
such answers or necessary to make such information not misleading. Counsellors
Securities' agreement to indemnify the Fund, its officers and directors, and any
such controlling person, as aforesaid, is expressly conditioned upon Counsellors
Securities' being notified of any action brought against the Fund, its officers
or directors, or any such controlling person, such notification to be given by
letter or telegram addressed to Counsellors Securities at its principal office
in New York, New York and sent to Counsellors Securities by the person against
whom such action is brought, within ten (10) days after the summons or other
first legal process shall have been served. The failure to so notify Counsellors
Securities of any such action shall not relieve Counsellors Securities from any
liability that Counsellors Securities may have to the Fund, its officers or
directors, or to such controlling person by reason of any such untrue or alleged
untrue statement or omission or alleged omission otherwise than on account of
Counsellors Securities' indemnity agreement contained in this paragraph 4.2.
Counsellors Securities agrees to notify the Fund promptly of the commencement of
any litigation or proceedings against Counsellors Securities or any of its
officers or directors in connection with the issuance and sale of any of the
Common Shares and/or Advisor Shares.
4.3 In case any action shall be brought against any indemnified
party under paragraph 4.1 or 4.2, and it shall timely notify the indemnifying
party of the commencement thereof, the indemnifying party shall be entitled to
participate in, and, to the extent that it shall wish to do so, to assume the
defense thereof with counsel satisfactory to such indemnified party. If the
indemnifying party opts to assume the defense of such action, the indemnifying
party will not be liable to the indemnified party for any legal or other
expenses subsequently incurred by the indemnified party in connection with the
defense thereof other than (a) reasonable costs of investigation or the
furnishing of documents or witnesses and (b) all reasonable fees and expenses of
separate counsel to such indemnified party if (i) the indemnifying party and the
indemnified party shall have agreed to the retention of such counsel or (ii) the
indemnified party shall have concluded reasonably that representation of the
indemnifying party and the indemnified party by the same counsel would be
inappropriate due to actual or potential differing interests between them in the
conduct of the defense of such action.
5. Effectiveness of Registration
-----------------------------
None of the Common Shares or Advisor Shares shall be offered by
either Counsellors Securities or the Fund under any of the provisions of this
Agreement and no orders for the purchase or sale of the Common Shares or Advisor
Shares shall be accepted
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<PAGE>
by the Fund if and so long as the effectiveness of the registration statement
shall be suspended under any of the provisions of the 1933 Act or if and so long
as the prospectus is not on file with the SEC; provided, however, that nothing
contained in this paragraph 5 shall in any way restrict or have an application
to or bearing upon the Fund's obligation to repurchase its shares from any
shareholder in accordance with the provisions of the prospectus or statement of
additional information.
6. Notice to Counsellors Securities
--------------------------------
The Fund agrees to advise Counsellors Securities immediately in
writing:
(a) of any request by the SEC for amendments to the
registration statement, prospectus or statement of additional
information then in effect with respect to the Common Shares and/or
Advisor Shares or for additional information;
(b) in the event of the issuance by the SEC of any stop
order suspending the effectiveness of the registration statement,
prospectus or statement of additional information then in effect with
respect to the Common Shares and/or Advisor Shares or the initiation of
any proceeding for that purpose;
(c) of the happening of any event that makes untrue any
statement of a material fact made in the registration statement,
prospectus or statement of additional information then in effect with
respect to the Common Shares and/or Advisor Shares or that requires the
making of a change in such registration statement, prospectus or
statement of additional information in order to make the statements
therein not misleading; and
(d) of all actions of the SEC with respect to any
amendment to any registration statement, prospectus or statement of
additional information with respect to the Common Shares or Advisor
Shares which may from time to time be filed with the SEC.
7. Term of Agreement
-----------------
This Agreement shall continue until April 17, 1999 with respect
to each of the Common Shares and Advisor Shares, and thereafter shall continue
automatically for successive annual periods ending on April 17th of each year,
provided such continuance is specifically approved at least annually by (a) a
vote of a majority of the Fund's Board of Directors or (b) a vote of a majority
(as defined in the 1940 Act) of each of the outstanding Common Shares and
Advisor Shares, respectively, provided that the continuance is also approved by
a vote of a
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<PAGE>
majority of the Fund's Directors who are not interested persons (as defined in
the 1940 Act) of the Fund and who have no direct or indirect financial interest
in the operation of the 12b-1 Plan or the Distribution Plan, in this Agreement
or in any agreement related to the 12b-1 Plan or Distribution Plan ("Qualified
Directors"), by vote cast in person at a meeting called for the purpose of
voting on such approval. This Agreement is terminable with respect to the Common
Shares or the Advisor Shares without penalty (a) on sixty (60) days' written
notice, by a vote of a majority of the Fund's Qualified Directors or by vote of
a majority (as defined in the 1940 Act) of the outstanding Common Shares or
Advisor Shares, as applicable, or (b) on ninety (90) days' written notice by
Counsellors Securities. This Agreement will also terminate automatically in the
event of its assignment (as defined in the 1940 Act).
8. Amendments
----------
This Agreement may not be amended to increase materially the
amount of the fee with respect to the Common Shares described in Section 1.5
above without approval of at least a majority (as defined in the 1940 Act) of
the outstanding Common Shares. In addition, all material amendments to this
Agreement must be approved by vote of the Fund's Board of Directors, and by a
vote of a majority of the Qualified Directors, cast in person at a meeting
called for the purpose of voting on the approval.
Please confirm that the foregoing is in accordance with your
understanding by indicating your acceptance hereof at the place below indicated,
whereupon it shall become a binding agreement between us.
Very truly yours,
WARBURG, PINCUS MANAGED EAFE[R]
COUNTRIES FUND, INC.
By:_________________________________
Name: ___________________________
Title: __________________________
Accepted:
COUNSELLORS SECURITIES INC.
By:___________________________
Name: _____________________
Title: ____________________
9
<PAGE>
CUSTODIAN SERVICES AGREEMENT TERMS AND CONDITIONS
-------------------------------------------------
This Agreement is made as of _______ ___, 1997 by and between PNC BANK,
NATIONAL ASSOCIATION, a national banking association, and WARBURG, PINCUS
MANAGED EAFE[R] COUNTRIES FUND, INC., a Maryland corporation (the "Fund").
The Fund is registered as an open-end investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"). The Fund wishes to
retain PNC Bank to provide custodian services, and PNC Bank wishes to furnish
custodian services, either directly or through an affiliate or affiliates, as
more fully described herein.
In consideration of the premises and mutual covenants herein contained,
the parties agree as follows:
1. Definitions.
(a) "Authorized Person". The term "Authorized Person" shall mean any
officer of the Fund and any other person, who is duly authorized by the Fund's
Governing Board, to give Oral and Written Instructions on behalf of the Fund.
Such persons are listed in the Certificate attached hereto as the Authorized
Persons Appendix as such appendix may be amended in writing by the Fund's
Governing Board from time to time.
(b) "Book-Entry System". The term "Book-Entry System" means Federal
Reserve Treasury book-entry system for United States and federal agency
securities, its successor or successors, and its nominee or nominees and any
book-entry system maintained by an
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<PAGE>
exchange registered with the SEC under the 1934 Act.
(c) "CFTC". The term "CFTC" shall mean the Commodities Futures
Trading Commission.
(d) "Governing Board". The term "Governing Board" shall mean the
Fund's Board of Directors if the Fund is a corporation or the Fund's Board of
Trustees if the Fund is a trust, or, where duly authorized, a competent
committee thereof.
(e) "Oral Instructions". The term "Oral Instructions" shall mean
oral instructions received by PNC Bank from an Authorized Person or from a
person reasonably believed by PNC Bank to be an Authorized Person.
(f) "PNC Bank". The term "PNC Bank" shall mean PNC Bank, National
Association or a subsidiary or affiliate of PNC Bank, National Association.
(g) "SEC". The term "SEC" shall mean the Securities and Exchange
Commission.
(h) "Securities and Commodities Laws". The term shall mean the "1933
Act", the Securities Act of 1933, as amended, the "1934 Act", the Securities
Exchange Act of 1934, as amended, the "1940 Act", and the "CEA", the Commodities
Exchange Act, as amended.
(i) "Shares". The term "Shares" shall mean the shares of stock of
any series or class of the Fund, or, where appropriate, units of beneficial
interest in a trust where the Fund is organized as a Trust.
2
<PAGE>
(j) "Property". The term "Property" shall mean:
(i) any and all securities and other investment items
which the Fund may from time to time deposit, or
cause to be deposited, with PNC Bank or which PNC
Bank may from time to time hold for the Fund;
(ii) All income in respect of any of such securities or
other investment items;
(iii) all proceeds of the sale of any of such securities
or investment items; and
(iv) all proceeds of the sale of securities issued by
the Fund, which are received by PNC Bank from time
to time, from or on behalf of the Fund.
(k) "Written Instructions". The term "Written Instructions" shall
mean written instructions signed by two Authorized Persons and received by PNC
Bank. The instructions may be delivered by hand, mail, tested telegram, cable,
telex or facsimile sending device.
2. Appointment. The Fund hereby appoints PNC Bank to provide custodian
services, and PNC Bank accepts such appointment and agrees to furnish such
services.
3. Delivery of Documents. The Fund has provided or, where applicable,
will provide PNC Bank with the following:
(a) certified or authenticated copies of the resolutions of the
Fund's Governing Board, approving the appointment of PNC Bank or
its affiliates to provide services;
(b) a copy of the Fund's most recent effective registration
statement;
(c) a copy of the Fund's advisory agreement or agreements;
(d) a copy of the Fund's distribution agreement or
3
<PAGE>
agreements;
(e) a copy of the Fund's administration agreements if PFPC is not
providing the Fund with such services;
(f) copies of any shareholder servicing agreements made in respect
of the Fund; and
(g) certified or authenticated copies of any and all amendments or
supplements to the foregoing.
4. Compliance with Government Rules and Regulations. PNC Bank
undertakes to comply with all applicable requirements of the Securities and
Commodities Laws, and any laws, rules and regulations of governmental
authorities having jurisdiction with respect to all duties to be performed by
PNC Bank hereunder. Except as specifically set forth herein, PNC Bank assumes no
responsibility for such compliance by the Fund.
5. Instructions. Unless otherwise provided in this Agreement, PNC Bank
shall act only upon Oral and Written Instructions. PNC Bank shall be entitled to
rely upon any Oral and Written Instructions it receives from an Authorized
Person (or from a person reasonably believed by PNC Bank to be an Authorized
Person) pursuant to this Agreement. PNC Bank may assume that any Oral or Written
Instructions received hereunder are not in any way inconsistent with the
provisions of organizational documents of the Fund or of any vote, resolution or
proceeding of the Fund's Governing Board or of the Fund's shareholders.
The Fund agrees to forward to PNC Bank Written Instructions confirming
Oral Instructions so that PNC Bank receives the Written Instructions by the
close of business on the same day that such
4
<PAGE>
Oral Instructions are received. The fact that such confirming Written
Instructions are not received by PNC Bank shall in no way invalidate the
transactions or enforceability of the transactions authorized by the Oral
Instructions.
The Fund further agrees that PNC Bank shall incur no liability to the
Fund in acting upon Oral or Written Instructions provided such instructions
reasonably appear to have been received from an Authorized Person.
6. Right to Receive Advice.
(a) Advice of the Fund. If PNC Bank is in doubt as to any action it
should or should not take, PNC Bank may request directions or advice, including
Oral or Written Instructions, from the Fund.
(b) Advice of Counsel. If PNC Bank shall be in doubt as to any
questions of law pertaining to any action it should or should not take, PNC Bank
may request advice at its own cost from such counsel of its own choosing (who
may be counsel for the Fund, the Fund's advisor or PNC Bank, at the option of
PNC Bank).
(c) Conflicting Advice. In the event of a conflict between
directions, advice or Oral or Written Instructions PNC Bank receives from the
Fund, and the advice it receives from counsel, PNC Bank shall be entitled to
rely upon and follow the advice of counsel.
(d) Protection of PNC Bank. PNC Bank shall be protected in any
action it takes or does not take in reliance upon
5
<PAGE>
directions, advice or Oral or Written Instructions it receives from the Fund or
from counsel and which PNC Bank believes, in good faith, to be consistent with
those directions, advice or Oral or Written Instructions.
Nothing in this paragraph shall be construed so as to impose an
obligation upon PNC Bank (i) to seek such directions, advice or Oral or Written
Instructions, or (ii) to act in accordance with such directions, advice or Oral
or Written Instructions unless, under the terms of other provisions of this
Agreement, the same is a condition of PNC Bank's properly taking or not taking
such action.
7. Records. The books and records pertaining to the Fund, which are in
the possession of PNC Bank, shall be the property of the Fund. Such books and
records shall be prepared and maintained as required by the 1940 Act and other
applicable securities laws, rules and regulations. The Fund, or the Fund's
authorized representatives, shall have access to such books and records at all
times during PNC Bank's normal business hours. Upon the reasonable request of
the Fund, copies of any such books and records shall be provided by PNC Bank to
the Fund or to an authorized representative of the Fund, at the Fund's expense.
8. Confidentiality. PNC Bank agrees to keep confidential all records of
the Fund and information relative to the Fund and its Shareholders (past,
present and potential), unless the release of such records or information is
otherwise consented to, in
6
<PAGE>
writing, by the Fund. The Fund further agrees that, should PNC Bank be required
to provide such information or records to duly constituted authorities (who may
institute civil or criminal contempt proceedings for failure to comply), PNC
Bank shall not be required to seek the Fund's consent prior to disclosing such
information; provided that PNC Bank gives the Fund prior written notice of the
provision of such information and records.
9. Cooperation with Accountants. PNC Bank shall cooperate with the
Fund's independent public accountants and shall take all reasonable action in
the performance of its obligations under this Agreement to ensure that the
necessary information is made available to such accountants for the expression
of their opinion, as required by the Fund.
10. Disaster Recovery. PNC Bank shall enter into and shall maintain in
effect with appropriate parties one or more agreements making reasonable
provision for emergency use of electronic data processing equipment to the
extent appropriate equipment is available. In the event of equipment failures,
PNC Bank shall, at no additional expense to the Fund, take reasonable steps to
minimize service interruptions but shall have no liability with respect thereto.
11. Compensation. As compensation for custody services rendered by PNC
Bank during the term of this Agreement, the Fund will pay to PNC Bank a fee or
fees as may be agreed to in writing from time to time by the Fund and PNC Bank.
7
<PAGE>
12. Indemnification. The Fund agrees to indemnify and hold harmless PNC
Bank and its nominees from all taxes, charges, expenses, assessment, claims and
liabilities (including, without limitation, liabilities arising under the
Securities and Commodities Laws, and any state and foreign securities and blue
sky laws, and amendments thereto, and expenses, including (without limitation)
attorneys' fees and disbursements, arising directly or indirectly from any
action which PNC Bank takes or does not take (i) at the request or on the
direction of or in reliance on the advice of the Fund or (ii) upon Oral or
Written Instructions. Neither PNC Bank, nor any of its nominees, shall be
indemnified against any liability to the Fund or to its shareholders (or any
expenses incident to such liability) arising out of PNC Bank's or its nominees'
own willful misfeasance, bad faith, gross negligence or reckless disregard of
its duties and obligations under this Agreement or PNC Bank's own grossly
negligent failure to perform its duties under this Agreement.
13. Responsibility of PNC Bank. PNC Bank shall be under no duty to take
any action on behalf of the Fund except as specifically set forth herein or as
may be specifically agreed to by PNC Bank, in writing. PNC Bank shall be
obligated to exercise care and diligence in the performance of its duties
hereunder, to act in good faith and to use its best efforts, within reasonable
limits, in performing Services provided for under this Agreement. PNC Bank shall
be responsible for its own or its nominees' own
8
<PAGE>
willful misfeasance, bad faith, gross negligence or reckless disregard of its
duties and obligations under this Agreement or PNC Bank's own grossly negligent
failure to perform its duties under this Agreement.
Without limiting the generality of the foregoing or of any other
provision of this Agreement, PNC Bank, in connection with its duties under this
Agreement, shall not be under any duty or obligation to inquire into and shall
not be liable for (a) the validity or invalidity or authority or lack thereof of
any Oral or Written Instruction, notice or other instrument which conforms to
the applicable requirements of this Agreement, and which PNC Bank reasonably
believes to be genuine; or (b) delays or errors or loss of data occurring by
reason of circumstances beyond PNC Bank's control, including acts of civil or
military authority, national emergencies, fire, flood or catastrophe, acts of
God, insurrection, war, riots or failure of the mails, transportation,
communication or power supply.
Notwithstanding anything in this Agreement to the contrary, PNC Bank
shall have no liability to the Fund for any consequential, special or indirect
losses or damages which the Fund may incur or suffer by or as a consequence of
PNC Bank's performance of the services provided hereunder, whether or not the
likelihood of such losses or damages was known by PNC Bank.
14. Description of Services.
(a) Delivery of the Property. Notwithstanding anything
9
<PAGE>
in this Agreement to the contrary, PNC Bank shall be the custodian of all
securities, cash and other property of the Fund received by it for the account
of the Fund, including cash received as a result of the distribution of its
Shares, during the period that is set forth in this Agreement. PNC Bank will not
be responsible for such property until actual receipt.
(b) Receipt and Disbursement of Money. PNC Bank, acting upon Written
Instructions, shall open and maintain separate account(s) in the Fund's name
using all cash received from or for the account of the Fund, subject to the
terms of this Agreement. In addition, upon Written Instructions, PNC Bank shall
open separate custodial accounts for each separate series, portfolio or class of
the Fund and shall hold in such account(s) all cash received from or for the
accounts of the Fund specifically designated to each separate series, portfolio
or class.
PNC Bank shall make cash payments from or for the account of the Fund
only for:
(i) purchases of securities in the name of the Fund or
PNC Bank or PNC Bank's nominee as provided in
sub-paragraph j and for which PNC Bank has received
a copy of the broker's or dealer's confirmation or
payee's invoice, as appropriate;
(ii) purchase or redemption of Shares of the Fund
delivered to PNC Bank;
(iii) payment of, subject to Written Instructions,
interest, taxes, administration, accounting,
distribution, advisory, management fees or similar
expenses which are to be borne by the Fund;
10
<PAGE>
(iv) payment to, subject to receipt of Written
Instructions, the Fund's transfer agent, as agent
for the shareholders, an amount equal to the amount
of dividends and distributions stated in the
Written Instructions to be distributed in cash by
the transfer agent to shareholders, or, in lieu of
paying the Fund's transfer agent, PNC Bank may
arrange for the direct payment of cash dividends
and distributions to shareholders in accordance
with procedures mutually agreed upon from time to
time by and among the Fund, PNC Bank and the Fund's
transfer agent.
(v) payments, upon receipt Written Instructions, in
connection with the conversion, exchange or
surrender of securities owned or subscribed to by
the Fund and held by or delivered to PNC Bank;
(vi) payments of the amounts of dividends received with
respect to securities sold short;
(vii) payments made to a sub-custodian pursuant to
provisions in sub-paragraph c of this Paragraph 14;
and
(viii) payments, upon Written Instructions made for other
proper Fund purposes.
PNC Bank is hereby authorized to endorse and collect
all checks, drafts or other orders for the payment
of money received as custodian for the account of
the Fund.
(c) Receipt of Securities.
(i) PNC Bank shall hold all securities received by it
for the account of the Fund in a separate account
that physically segregates such securities from
those of any other persons, firms or corporations.
All such securities shall be held or disposed of
only upon Written Instructions of the Fund
11
<PAGE>
pursuant to the terms of this Agreement. PNC Bank shall
have no power or authority to assign, hypothecate,
pledge or otherwise dispose of any such securities or
investment, except upon the express terms of this
Agreement and upon Written Instructions, accompanied by
a certified resolution of the Fund's Governing Board,
authorizing the transaction. In no case may any member
of the Fund's Governing Board, or any officer, employee
or agent of the Fund withdraw any securities.
At PNC Bank's own expense and for its own convenience,
PNC Bank may enter into sub-custodian agreements with
other United States banks or trust companies to perform
duties described in this sub-paragraph c. Such bank or
trust company shall have an aggregate capital, surplus
and undivided profits, according to its last published
report, of at least one million dollars ($1,000,000), if
it is a subsidiary or affiliate of PNC Bank, or at least
twenty million dollars ($20,000,000) if such bank or
trust company is not a subsidiary or affiliate of PNC
Bank. In addition, such bank or trust company must be
qualified to act as custodian and agree to comply with
the relevant provisions of the 1940 Act and other
applicable rules and regulations. Any such arrangement
will not be entered into without prior written notice to
the Fund.
PNC Bank shall remain responsible for the performance of
all of its duties as described in this Agreement and
shall hold the Fund and the Money Market Series harmless
from its own acts or omissions, under the standards of
care provided for herein, or the acts and omissions of
any sub-custodian chosen by PNC Bank under the terms of
this sub-paragraph c.
(d) Transactions Requiring Instructions. Upon receipt of Oral or
Written Instructions and not otherwise, PNC Bank, directly or through the use of
the Book-Entry System, shall:
12
<PAGE>
(i) deliver any securities held for the Fund against
the receipt of payment for the sale of such
securities;
(ii) execute and deliver to such persons as may be
designated in such Oral or Written Instructions,
proxies, consents, authorizations, and any other
instruments whereby the authority of the Fund as
owner of any securities may be exercised;
(iii) deliver any securities to the issuer thereof, or
its agent, when such securities are called,
redeemed, retired or otherwise become payable;
provided that, in any such case, the cash or other
consideration is to be delivered to PNC Bank;
(iv) deliver any securities held for the Fund against
receipt of other securities or cash issued or paid
in connection with the liquidation, reorganization,
refinancing, tender offer, merger, consolidation or
recapitalization of any corporation, or the
exercise of any conversion privilege;
(v) deliver any securities held for the Fund to any
protective committee, reorganization committee or
other person in connection with the reorganization,
refinancing, merger, consolidation,
recapitalization or sale of assets of any
corporation, and receive and hold under the terms
of this Agreement such certificates of deposit,
interim receipts or other instruments or documents
as may be issued to it to evidence such delivery;
(vi) make such transfer or exchanges of the assets of
the Fund and take such other steps as shall be
stated in said Oral or Written Instructions to be
for the purpose of effectuating a duly authorized
plan of liquidation, reorganization, merger,
consolidation or recapitalization of the Fund;
(vii) release securities belonging to the Fund
13
<PAGE>
to any bank or trust company for the purpose of a
pledge or hypothecation to secure any loan incurred
by the Fund; provided, however, that securities
shall be released only upon payment to PNC Bank of
the monies borrowed, except that in cases where
additional collateral is required to secure a
borrowing already made subject to proper prior
authorization, further securities may be released
for that purpose; and repay such loan upon
redelivery to it of the securities pledged or
hypothecated therefor and upon surrender of the
note or notes evidencing the loan;
(viii) release and deliver securities owned by the Fund in
connection with any repurchase agreement entered
into on behalf of the Fund, but only on receipt of
payment therefor; and pay out moneys of the Fund in
connection with such repurchase agreements, but
only upon the delivery of the securities;
(ix) release and deliver or exchange securities owned by
the Fund in connection with any conversion of such
securities, pursuant to their terms, into other
securities;
(x) release and deliver securities owned by the fund
for the purpose of redeeming in kind shares of the
Fund upon delivery thereof to PNC Bank; and
(xi) release and deliver or exchange securities owned by
the Fund for other corporate purposes.
PNC Bank must also receive a certified resolution
describing the nature of the corporate purpose and
the name and address of the person(s) to whom
delivery shall be made when such action is pursuant
to sub-paragraph d.
(e) Use of Book-Entry System. The Fund shall deliver to PNC Bank
certified resolutions of the Fund's Governing Board
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<PAGE>
approving, authorizing and instructing PNC Bank on a continuous and on-going
basis, to deposit in the Book-Entry System all securities belonging to the Fund
eligible for deposit therein and to utilize the Book-Entry System to the extent
possible in connection with settlements of purchases and sales of securities by
the Fund, and deliveries and returns of securities loaned, subject to repurchase
agreements or used as collateral in connection with borrowings. PNC Bank shall
continue to perform such duties until it receives Written or Oral Instructions
authorizing contrary actions(s).
To administer the Book-Entry System properly, the following provisions
shall apply:
(i) With respect to securities of the Fund which are
maintained in the Book-Entry system, established
pursuant to this sub-paragraph e hereof, the
records of PNC Bank shall identify by Book-Entry or
otherwise those securities belonging to the Fund.
PNC Bank shall furnish the Fund a detailed
statement of the Property held for the Fund under
this Agreement at least monthly and from time to
time and upon written request.
(ii) Securities and any cash of the Fund deposited in
the Book-Entry System will at all times be
segregated from any assets and cash controlled by
PNC Bank in other than a fiduciary or custodian
capacity but may be commingled with other assets
held in such capacities. PNC Bank and its
sub-custodian, if any, will pay out money only upon
receipt of securities and will deliver securities
only upon the receipt of money.
(iii) All books and records maintained by PNC Bank which
relate to the Fund's participation in the
Book-Entry System will at all times during PNC
Bank's
15
<PAGE>
regular business hours be open to the inspection of
the Fund's duly authorized employees or agents, and
the Fund will be furnished with all information in
respect of the services rendered to it as it may
require.
(iv) PNC Bank will provide the Fund with copies of any
report obtained by PNC Bank on the system of
internal accounting control of the Book-Entry
System promptly after receipt of such a report by
PNC Bank.
PNC Bank will also provide the Fund with such reports
on its own system of internal control as the Fund
may reasonably request from time to time.
(f) Registration of Securities. All Securities held for the Fund
which are issued or issuable only in bearer form, except such securities held in
the Book-Entry System, shall be held by PNC Bank in bearer form; all other
securities held for the Fund may be registered in the name of the Fund; PNC
Bank; the Book-Entry System; a sub-custodian; or any duly appointed nominee(s)
of the Fund, PNC Bank, Book-Entry system or sub-custodian. The Fund reserves the
right to instruct PNC Bank as to the method of registration and safekeeping of
the securities of the Fund. The Fund agrees to furnish to PNC Bank appropriate
instruments to enable PNC Bank to hold or deliver in proper form for transfer,
or to register its registered nominee or in the name of the Book-Entry System,
any securities which it may hold for the account of the Fund and which may from
time to time be registered in the name of the Fund. PNC Bank shall hold all such
securities which are not
16
<PAGE>
held in the Book-Entry System in a separate account for the Fund in the name of
the Fund physically segregated at all times from those of any other person or
persons.
(g) Voting and Other Action. Neither PNC Bank nor its nominee shall
vote any of the securities held pursuant to this Agreement by or for the account
of the Fund, except in accordance with Written Instructions. PNC Bank, directly
or through the use of the Book-Entry System, shall execute in blank and promptly
deliver all notice, proxies, and proxy soliciting materials to the registered
holder of such securities. If the registered holder is not the Fund then Written
or Oral Instructions must designate the person(s) who owns such securities.
(h) Transactions Not Requiring Instructions. In the absence of
contrary Written Instructions, PNC Bank is authorized to take the following
actions:
(i) Collection of Income and Other Payments.
(A) collect and receive for the account of the
Fund, all income, dividends, distributions,
coupons, option premiums, other payments and
similar items, included or to be included in
the Property, and, in addition, promptly
advise the Fund of such receipt and credit
such income, as collected, to the Fund's
custodian
17
<PAGE>
account;
(B) endorse and deposit for collection, in the
name of the Fund, checks, drafts, or other
orders for the payment of money;
(C) receive and hold for the account of the Fund
all securities received as a distribution on
the Fund's portfolio securities as a result
of a stock dividend, share split-up or
reorganization, recapitalization,
readjustment or other rearrangement or
distribution of rights or similar securities
issued with respect to any portfolio
securities belonging to the Fund held by PNC
Bank hereunder;
(D) present for payment and collect the amount
payable upon all securities which may mature
or be called, redeemed, or retired, or
otherwise become payable on the date such
securities become payable; and
(E) take any action which may be necessary and
proper in connection with the collection and
receipt of such income and other payments and
the endorsement for collection of checks,
drafts, and other negotiable instruments.
(ii) Miscellaneous Transactions.
(A) PNC Bank is authorized to deliver or cause to
be delivered Property against payment or
other consideration or written receipt
therefor in the following cases:
(1) for examination by a broker or dealer
selling for the account of the Fund in
accordance with street delivery custom;
(2) for the exchange of interim receipts
18
<PAGE>
or temporary securities for definitive
securities; and
(3) for transfer of securities into the
name of the Fund or PNC Bank or nominee
of either, or for exchange of
securities for a different number of
bonds, certificates, or other evidence,
representing the same aggregate face
amount or number of units bearing the
same interest rate, maturity date and
call provisions, if any; provided that,
in any such case, the new securities
are to be delivered to PNC Bank.
(B) Unless and until PNC Bank receives Oral or Written
Instructions to the contrary, PNC Bank shall:
(1) pay all income items held by it which
call for payment upon presentation and
hold the cash received by it upon such
payment for the account of the Fund;
(2) collect interest and cash dividends
received, with notice to the Fund, to
the account of the Fund;
(3) hold for the account of the Fund all
stock dividends, rights and similar
securities issued with respect to any
securities held by us; and
(4) execute as agent on behalf of the Fund
all necessary ownership certificates
required by the Internal Revenue Code
or the Income Tax Regulations of the
United States Treasury Department or
under the laws of any State now or
hereafter in effect,
19
<PAGE>
inserting the Fund's name on such
certificate as the owner of the
securities covered thereby, to the
extent it may lawfully do so.
(i) Segregated Accounts.
(i) PNC Bank shall upon receipt of Written or
Oral Instructions establish and maintain a
segregated account(s) on its records for and
on behalf of the Fund. Such account(s) may be
used to transfer cash and securities,
including securities in the Book-Entry
System:
(A) for the purposes of compliance by the Fund
with the procedures required by a securities
or option exchange, providing such procedures
comply with the 1940 Act and any releases of
the SEC relating to the maintenance of
segregated accounts by registered investment
companies; and
(B) Upon receipt of Written Instructions, for
other proper corporate purposes.
(ii) PNC Bank shall arrange for the establishment
of IRA custodian accounts for such
shareholders holding shares through IRA
accounts, in accordance with the Prospectus,
the Internal Revenue Code (including
regulations), and with such other procedures
as are mutually agreed upon from time to time
by and among the Fund, PNC Bank and the
Fund's transfer agent.
(j) Purchases of Securities. PNC Bank shall settle purchased
securities upon receipt of Oral or Written Instructions from the fund or its
investment advisor(s) that specify:
(i) the name of the issuer and the title of the
securities, including CUSIP number if
applicable;
(ii) the number of shares or the principal
20
<PAGE>
amount purchased and accrued interest,
if any;
(iii) the date of purchase and settlement;
(iv) the purchase price per unit;
(v) the total amount payable upon such purchase; and
(vi) the name of the person from whom or the broker
through whom the purchase was made. PNC Bank shall
upon receipt of securities purchased by or for the
Fund pay out of the moneys held for the account of
the Fund the total amount payable to the person
from whom or the broker through whom the purchase
was made, provided that the same conforms to the
total amount payable as set forth in such Oral or
Written Instructions.
(k) Sales of Securities. PNC Bank shall sell securities upon receipt
of Oral Instructions from the Fund that specify:
(i) the name of the issuer and the title of the
security, including CUSIP number if applicable;
(ii) the number of shares or principal amount sold, and
accrued interest, if any;
(iii) the date of trade, settlement and sale;
(iv) the sale price per unit;
(v) the total amount payable to the Fund upon such
sale;
(vi) the name of the broker through whom or the person
to whom the sale was made; and
(vii) the location to which the security must be
delivered and delivery deadline, if any.
PNC Bank shall deliver the securities upon receipt of the
21
<PAGE>
total amount payable to the Fund upon such sale, provided that the total amount
payable is the same as was set forth in the Oral or Written Instructions.
Subject to the foregoing, PNC Bank may accept payment in such form as shall be
satisfactory to it, and may deliver securities and arrange for payment in
accordance with the customs prevailing among dealers in securities.
(l) Reports.
(i) PNC Bank shall furnish the Fund the following
reports:
(A) such periodic and special reports as the Fund may
reasonably request;
(B) a monthly statement summarizing all transactions
and entries for the account of the Fund, listing
the portfolio securities belonging to the fund
with the adjusted average cost of each issue and
the market value at the end of such month, and
stating the cash account of the Fund including
disbursement;
(C) the reports to be furnished to the Fund pursuant
to Rule 17f-4; and
(D) such other information as may be agreed upon from
time to time between the Fund and PNC Bank.
(ii) PNC Bank shall transmit promptly to the Fund any
proxy statement, proxy material, notice of a call
or conversion or similar communication received by
it as custodian of the Property. PNC Bank shall be
under no other obligation to inform the Fund as to
such actions or events.
(m) Collections. All collections of monies or other property in
respect, or which are to become part, of the Property
22
<PAGE>
(but not the safekeeping thereof upon receipt by PNC Bank) shall be at the sole
risk of the Fund. If payment is not received by PNC Bank within a reasonable
time after proper demands have been made, PNC Bank shall notify the Fund in
writing, including copies of all demand letters, any written responses,
memoranda of all oral responses and to telephonic demands thereto, and await
instructions from the Fund. PNC Bank shall not be obliged to take legal action
for collection unless and until reasonably indemnified to its satisfaction. PNC
Bank shall also notify the Fund as soon as reasonably practicable whenever
income due on securities is not collected in due course.
15. Duration and Termination. This Agreement shall continue until
terminated by the Fund or by PNC Bank on sixty (60) days' prior written notice
to the other party. In the event this Agreement is terminated (pending
appointment of a successor to PNC Bank or vote of the shareholders of the Fund
to dissolve or to function without a custodian of its cash, securities or other
property), PNC Bank shall not deliver cash, securities or other property of the
Fund to the Fund. It may deliver them to a bank or trust company of PNC Bank's,
having an aggregate capital, surplus and undivided profits, as shown by its last
published report, of not less than twenty million dollars ($20,000,000), as a
custodian for the Fund to be held under terms similar to those of this
Agreement. PNC Bank shall not be required to make any such delivery or payment
until full payment shall have been made to PNC
23
<PAGE>
Bank of all of its fees, compensation, costs and expenses. PNC Bank shall have a
security interest in and shall have a right of setoff against Property in the
Fund's possession as security for the payment of such fees, compensation, costs
and expenses.
16. Notices. All notices and other communications, including Written
Instructions, shall be in writing or by confirming telegram, cable, telex or
facsimile sending device. Notice shall be addressed (a) if to PNC Bank at PNC
Bank's address, Airport Business Center, International Court 2, 200 Stevens
Drive, Philadelphia, Pennsylvania 19113, marked for the attention of the
Custodian Services Department (or its successor) (b) if to the Fund, at the
address of the Fund; or (c) if to neither of the foregoing, at such other
address as shall have been notified to the sender of any such Notice or other
communication. If notice is sent by confirming telegram, cable, telex or
facsimile sending device, it shall be deemed to have been given immediately. If
notice is sent by first-class mail, it shall be deemed to have been given five
days after it has been mailed. If notice is sent by messenger, it shall be
deemed to have been given on the day it is delivered.
17. Amendments. This Agreement, or any term hereof, may be changed or
waived only by a written amendment, signed by the party against whom enforcement
of such change or waiver is sought.
18. Delegation. PNC Bank may assign its rights and delegate its duties
hereunder to any wholly-owned direct or indirect
24
<PAGE>
subsidiary of PNC Bank, National Association or PNC Bank Corp., provided that
(i) PNC Bank gives the Fund thirty (30) days prior written notice; (ii) the
delegate agrees with PNC Bank to comply with all relevant provisions of the 1940
Act; and (iii) PNC Bank and such delegate promptly provide such information as
the Fund may request, and respond to such questions as the Fund may ask,
relative to the delegation, including (without limitation) the capabilities of
the delegate.
19. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
20. Further Actions. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.
21. Miscellaneous. This Agreement embodies the entire agreement and
understanding between the parties and supersedes all prior agreements and
understandings relating to the subject matter hereof, provided that the parties
may embody in one more separate documents their agreement, if any, with respect
to delegated and/or Oral Instructions.
The captions in this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect.
This Agreement shall be deemed to be a contract made in
Pennsylvania and governed by Pennsylvania law. If any provision of
25
<PAGE>
this Agreement shall be held or made invalid by a court decision, statute, rule
or otherwise, the remainder of this Agreement shall not be affected thereby.
This Agreement shall be binding and shall inure to the benefit of the parties
hereto and their respective successors.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below on the day and year first above
written.
PNC BANK, NATIONAL ASSOCIATION
By: ____________________
Title:
WARBURG, PINCUS MANAGED EAFE[R]
COUNTRIES FUND, INC.
By: ____________________
Title:
26
<PAGE>
AUTHORIZED PERSONS APPENDIX
NAME (Type) SIGNATURE
- ---------------------- -------------------------
- ---------------------- -------------------------
- ---------------------- -------------------------
- ---------------------- -------------------------
- ---------------------- -------------------------
- ---------------------- -------------------------
- ---------------------- -------------------------
27
<PAGE>
CUSTODIAN CONTRACT
This Contract is between Warburg, Pincus *[name of Fund], a *[business
trust/corporation] organized and existing under the laws of *[The Commonwealth
of Massachusetts/the State of Maryland], having a Board of *[Trustees/Directors]
(the "Board") and its principal place of business at 466 Lexington Avenue, New
York, New York 10017 (the "Fund"), and State Street Bank and Trust Company, a
Massachusetts trust company having its principal place of business at 225
Franklin Street, Boston, Massachusetts 02110 (the "Custodian"),
WITNESSETH:
WHEREAS, the Fund intends to offer shares in one or more series as
listed on Schedule F hereto (such series, together with all other series
subsequently established by the Fund and made subject to this Contract in
accordance with Article 20 hereof, being herein referred to as the
"Portfolio(s)");
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto do hereby agree as follows:
1. Employment of Custodian and Property to be Held by It
The Fund hereby employs the Custodian as the custodian of the assets of
the Portfolio(s), including securities which the Fund, on behalf of the
applicable Portfolio, desires to be held in places within the United States of
America ("domestic securities") and securities it desires to be held outside the
United States of America ("foreign securities") pursuant to the provisions of
the Fund's *[declaration of trust on file with the Secretary of The Commonwealth
of Massachusetts /Articles of Incorporation], as amended from time to time (the
"Charter"). The Fund, on behalf of the Portfolio(s), agrees to deliver to the
Custodian all securities and cash of such Portfolios generally described in
Schedule F, and all payments of income, payments of principal or capital
distributions received by it with respect to all securities owned by the
Portfolio(s) from time to time, and the cash consideration received by it for
such new or treasury shares of *[capital stock/beneficial interest] ("Shares")
of the Fund representing interests in the Portfolios as may be issued or sold
from time to time. The Custodian shall not be responsible for any property of a
Portfolio held or received by the Fund on behalf of a Portfolio and not
delivered to (i) the Custodian to be held by it, (ii) a sub-custodian located in
the United States and employed pursuant to this Article 1 or (iii) a foreign
sub-custodian or a foreign securities system employed pursuant to Article 3.
Upon receipt of "Proper Instructions" (as such term is defined in
Article 5 of this Contract), the Custodian shall on behalf of the applicable
Portfolio(s) from time to time employ one or more sub-custodians located in the
United States of America, including any state or
1
<PAGE>
political subdivision thereof and any territory over which its political
sovereignty extends (the "United States" or "U.S."), but only in accordance with
an applicable vote by the Board. The Custodian may also employ as sub-custodians
for the Fund's foreign securities on behalf of the applicable Portfolio(s) the
foreign sub-custodians and foreign securities depositories designated in
Schedule A hereto but only in accordance with the terms hereof and an applicable
vote of the Board on behalf of the applicable Portfolio(s).
2. Duties of the Custodian with Respect to Property of the Fund Held by
the Custodian in the United States
2.1 Holding Securities. The Custodian shall hold and physically segregate
for the account of each Portfolio all non-cash property to be held by
it in the United States including all domestic securities owned by such
Portfolio other than (a) securities which are maintained in a "U.S.
Securities System" (as such term is defined in Section 2.10 of this
Contract) and (b) commercial paper of an issuer for which State Street
Bank and Trust Company acts as issuing and paying agent ("Direct Paper
System") which is deposited and/or maintained in the Custodian's Direct
Paper Book Entry System pursuant to Section 2.11.
2.2 Delivery of Securities. The Custodian shall release and deliver
domestic securities owned by a Portfolio and (i) held by the Custodian,
(ii) held in an account of the Custodian in a U.S. Securities System
(as defined in Section 2.10 hereof) or (iii) held in the Direct Paper
System Account (as defined in Section 2.11 hereof), only upon receipt
of Proper Instructions from the Fund on behalf of the applicable
Portfolio, which may be continuing instructions when deemed appropriate
by the parties, and only in the cases listed below. Any U.S. Securities
System account shall not include any assets of the Custodian other than
assets held as a fiduciary, custodian or otherwise for its customers
("U.S. Securities System Account"). The Custodian's Direct Paper
Book-Entry System account shall not include any assets of the Custodian
other than assets held as a fiduciary, custodian or otherwise for its
customers ("Direct Paper System Account").
1) Upon sale of such securities for the account of the Portfolio
and receipt of full payment therefor;
2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the
Portfolio;
3) In the case of a sale effected through a U.S. Securities
System, in accordance with the provisions of Section 2.10
hereof;
4) To the depository agent in connection with tender or other
similar offers for securities of the Portfolio; provided
that the Custodian shall have taken reasonable
2
<PAGE>
steps to ensure timely collection of the payment for, or the
return of, such securities by the depository agent;
5) To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable;
provided that, in any such case, the cash or other
consideration is to be delivered to the Custodian; and
provided further that the Custodian shall have taken
reasonable steps to ensure timely collection of such cash or
other consideration;
6) To the issuer thereof, or its agent, for transfer into the
name of the Portfolio or into the name of any nominee or
nominees of the Custodian or into the name or nominee name of
any agent appointed pursuant to Section 2.9 or into the name
or nominee name of any domestic sub-custodian appointed
pursuant to Article 1; or for exchange for a different number
of bonds, certificates or other evidence representing the same
aggregate face amount or number of units bearing the same
interest rate, maturity date and call provisions, if any;
provided that, in any such case, the new securities are to be
delivered to the Custodian;
7) In the case of delivery of physical certificates or
instruments representing securities, upon the sale of such
securities for the account of the Portfolio, to the broker or
its clearing agent, against a receipt, for examination in
accordance with "street delivery" custom; provided that, in
any such case, the Custodian shall have taken reasonable steps
to ensure prompt collection of the payment for, or the return
of, such securities by the broker or its clearing agent, the
Custodian shall have no responsibility or liability for any
loss arising from the delivery of such securities prior to
receiving payment for such securities except as may arise from
the Custodian's own negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or
readjustment of the securities of the issuer of such
securities, or pursuant to provisions for conversion contained
in such securities, or pursuant to any deposit agreement or
protective plan; provided that, in any such case, the new
securities and/or cash are to be delivered to the Custodian;
9) In the case of warrants, puts, calls, futures contracts,
options, rights or similar securities, the surrender thereof
in the exercise or sale of such warrants, puts, calls, futures
contracts, options, rights or similar securities; provided
that, in any such case, the securities and cash received in
exchange therefor are to be delivered to the Custodian;
10) For delivery in connection with any loans of securities made
by the Portfolio to the borrower thereof in accordance with
the terms of a written securities lending
3
<PAGE>
agreement to which a Portfolio is a party or is otherwise
approved by the Portfolio, but only against receipt of
adequate collateral as agreed upon from time to time by the
Custodian and the Fund on behalf of the Portfolio, which may
be in the form of cash or obligations issued by the United
States government, its agencies or instrumentalities, except
that in connection with any loans for which collateral is to
be credited to the Custodian's U.S. Securities System Account,
the Custodian will not be held liable or responsible for the
delivery of securities owned by the Portfolio prior to the
receipt of such collateral provided that, if Proper
Instructions require such delivery to be made through a U.S.
Securities System, such delivery is made in accordance with
the requirements of such U.S. Securities System;
11) For delivery as security in connection with any borrowings by
the Fund on behalf of the Portfolio requiring a pledge of
assets by the Fund on behalf of the Portfolio, but only
against receipt of amounts borrowed;
12) For delivery in accordance with the provisions of any
agreement among the Fund on behalf of the Portfolio, the
Custodian and a broker-dealer registered under the Securities
Exchange Act of 1934 (the "Exchange Act") and a member of The
National Association of Securities Dealers, Inc. ("NASD"),
relating to compliance with the rules of The Options Clearing
Corporation and of any registered national securities
exchange, or of any similar organization or organizations,
regarding escrow or other arrangements in connection with
transactions by the Portfolio;
13) For delivery in accordance with the provisions of any
agreement among the Fund on behalf of the Portfolio, the
Custodian, and a futures commission merchant registered under
the Commodity Exchange Act, relating to compliance with the
rules of the Commodity Futures Trading Commission and/or any
contract market, or of any similar organization or
organizations, regarding account deposits in connection with
transactions by the Portfolio;
14) Upon receipt of instructions from the transfer agent for the
Fund (the "Transfer Agent"), for delivery to such Transfer
Agent or to the holders of shares in connection with
distributions in kind, as may be described from time to time
in the Fund's currently effective prospectus and statement of
additional information related to the Portfolio (the
"Prospectus"), in satisfaction of requests by holders of
Shares for repurchase or redemption;
15) For any other proper corporate purpose, but only upon receipt
of, in addition to Proper Instructions from the Fund on behalf
of the applicable Portfolio, a copy of a resolution of the
Board or of any executive committee thereof signed by an
officer of the Fund and certified by the Fund's Secretary or
Assistant Secretary (a "Certified Resolution") specifying the
securities of the Portfolio to be delivered,
4
<PAGE>
setting forth the purpose for which such delivery is to be
made, declaring such purpose to be a proper corporate purpose,
and naming the person or persons to whom delivery of such
securities shall be made; and
16) Upon the termination of this Contract as hereinafter set
forth, in accordance with Article 16 hereof.
2.3 Registration of Securities. Domestic securities held by the Custodian
(other than bearer securities) shall be registered in the name of the
Portfolio or in the name of any nominee of the Fund on behalf of the
Portfolio or of any nominee of the Custodian which nominee shall be
assigned exclusively to the Portfolio, unless the Fund has authorized
in writing the appointment of a nominee to be used in common with other
registered investment companies having the same investment adviser as
the Portfolio, or in the name or nominee name of any agent appointed
pursuant to Section 2.9 or in the name or nominee name of any domestic
sub-custodian appointed pursuant to Article 1. The Portfolios reserve
the right to instruct the Custodian as to the method of registration
and safekeeping of the securities of the Portfolios. All securities
accepted by the Custodian on behalf of the Portfolio under the terms of
this Contract shall be in "street name" or other good delivery form at
the time of delivery on behalf of the Portfolio.
2.4 Bank Accounts. The Custodian shall open and maintain a separate bank
account or accounts in the United States in the name of each Portfolio
of the Fund, subject only to draft or order by the Custodian acting
pursuant to the terms of this Contract, and shall hold in such account
or accounts, subject to the provisions hereof, all cash received by it
from or for the account of the Portfolio, other than cash maintained by
the Portfolio in a bank account established and used in accordance with
Rule 17f-3 under the Investment Company Act of 1940, as amended (the
"1940 Act"). Funds held by the Custodian for a Portfolio may be
deposited by it to its credit as Custodian in the banking department of
the Custodian or in such other banks or trust companies (a "Banking
Institution") as it may in its discretion deem necessary or desirable;
provided, however, that every Banking Institution shall be qualified to
act as a custodian under the 1940 Act, and that each such Banking
Institution and the funds to be deposited with each Banking Institution
on behalf of each applicable Portfolio shall be approved by vote of a
majority of the Board. Such funds shall be deposited by the Custodian
in its capacity as Custodian and shall be withdrawable by the Custodian
only in that capacity.
2.5 Availability of Federal Funds. Upon agreement between the Fund on
behalf of each applicable Portfolio and the Custodian, the Custodian
shall, upon the receipt of Proper Instructions from the Fund on behalf
of a Portfolio, make federal funds available to such Portfolio as of
specified times agreed upon from time to time by the Fund and the
Custodian in the amount of checks received in payment for Shares of
such Portfolio which are deposited into the Portfolio's account.
5
<PAGE>
2.6 Collection of Income. Subject to the provisions of the last sentence of
the first paragraph of this Section 2.6, the Custodian shall collect on
a timely basis all income and other payments with respect to United
States-registered securities held hereunder to which each Portfolio
shall be entitled either by law or pursuant to custom in the securities
business, and shall collect on a timely basis all income and other
payments with respect to domestic bearer securities if, on the date of
payment by the issuer, such securities are held by the Custodian or its
agent thereof and shall credit such income, as collected, to such
Portfolio's account. Without limiting the generality of the foregoing,
the Custodian shall detach and present for payment all coupons and
other income items requiring presentation as and when they become due
and shall collect interest when due on securities held hereunder. If
payment is not received by the Custodian within a reasonable time after
proper demands have been made, the Custodian shall so notify the Fund
in writing and send copies of all demand letters, any written responses
and memoranda of all oral responses to telephonic demands therefor. If,
however, the Fund directs the Custodian to maintain securities in
"street name", the Custodian shall utilize its best efforts to timely
collect income due the Fund on such securities.
Collection of income due each Portfolio on domestic securities loaned
pursuant to the provisions of Section 2.2(10) shall be the
responsibility of the Fund; the Custodian will have no duty or
responsibility in connection therewith, other than to provide the Fund
with such information or data in its possession as may be necessary to
assist the Fund in arranging for the timely delivery to the Custodian
of the income to which the Portfolio is properly entitled.
2.7 Payment of Fund Monies. Upon receipt of Proper Instructions from the
Fund on behalf of the applicable Portfolio, which may be continuing
instructions when deemed appropriate by the parties, the Custodian
shall pay out monies of a Portfolio in the following cases only:
1) Upon the purchase of domestic securities, options, futures
contracts or options on futures contracts for the account of
the Portfolio but only (a) against the delivery of such
securities or evidence of title to such options, futures
contracts or options on futures contracts to the Custodian (or
any bank, banking firm or trust company doing business in the
United States or abroad which is qualified under the 1940 Act
to act as a custodian and has been designated by the Custodian
as its agent for this purpose) registered in the name of the
Portfolio or in the name of a nominee of the Custodian
referred to in Section 2.3 hereof or in proper form for
transfer; (b) in the case of a purchase effected through a
U.S. Securities System, in accordance with the conditions set
forth in Section 2.10 hereof; (c) in the case of a purchase
involving the Direct Paper System, in accordance with the
conditions set forth in Section 2.11; (d) in the case of
repurchase agreements entered into between the Fund on behalf
of the Portfolio and the Custodian, another bank, or a
broker-dealer which is a member of NASD, (i) against delivery
of the securities
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either in certificate form or through an entry crediting the
Custodian's account at the Federal Reserve Bank with such
securities or (ii) against delivery of the receipt evidencing
purchase by the Portfolio of securities owned by the Custodian
along with written evidence of the agreement by the Custodian
to repurchase such securities from the Portfolio or (e) for
transfer to a time deposit account of the Fund in any bank,
whether domestic or foreign; such transfer may be effected
prior to receipt of a confirmation from a broker and/or the
applicable bank pursuant to Proper Instructions from the Fund
as defined in Article 5;
2) In connection with conversion, exchange or surrender of
securities owned by the Portfolio as set forth in Section
2.2 (4), (5), (8) or (9) hereof;
3) For the redemption or repurchase of Shares issued by the
Portfolio as set forth in Article 4 hereof;
4) For the payment of any expense or liability incurred by the
Portfolio, including but not limited to the following payments
for the account of the Portfolio: interest, taxes, advisory
fees, administration fees, accounting fees, transfer agent
fees, legal fees and operating expenses of the Fund whether or
not such expenses are to be in whole or part capitalized or
treated as deferred expenses;
5) For the payment of any dividends and capital distributions on
Shares of the Portfolio declared pursuant to the governing
documents of the Fund;
6) For payment of the amount of dividends received in respect of
securities sold short;
7) For any other proper purpose, but only upon receipt of, in
addition to Proper Instructions from the Fund on behalf of the
Portfolio, a Certified Resolution, specifying the amount of
such payment, setting forth the purpose for which such payment
is to be made, declaring such purpose to be a proper purpose,
and naming the person or persons to whom such payment is to be
made; and
8) Upon the termination of this Contract as hereinafter set
forth, in accordance with Article 16.
2.8 Liability for Payment in Advance of Receipt of Securities Purchased. In
any and every case where payment for purchase of domestic securities
for the account of a Portfolio is (i) made by the Custodian in advance
of receipt of the securities purchased and (ii) such payment in advance
of receipt is not made with respect to a transaction settling via the
Depository Trust Company, in the absence of Proper Instructions from
the Fund on behalf of such Portfolio to so pay in advance the Custodian
shall be absolutely liable to the Fund for the non-receipt of such
securities purchased except as specifically stated
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otherwise in Sections 2.7(1)(e), 2.7(2) and 2.10(3) of this Contract,
in which case the Custodian will be subject to the standard of care set
forth in Article 13 hereof.
2.9 Appointment of Agents. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or trust
company which is itself qualified under the 1940 Act, as its agent to
carry out such of the provisions of this Article 2 as the Custodian may
from time to time direct; provided, however, that the appointment of
any agent shall not relieve the Custodian of its responsibilities or
liabilities hereunder.
2.10 Deposit of Securities in U.S. Securities Systems. The Custodian may
deposit and/or maintain domestic securities owned by a Portfolio in a
clearing agency registered with the Securities and Exchange Commission
(the "SEC") under Section 17A of the Exchange Act, which acts as a
securities depository, or in the book-entry system authorized by the
U.S. Department of the Treasury and certain federal agencies or its
successor or successors (each a "U.S. Securities System") in accordance
with applicable Federal Reserve Board and SEC rules and regulations, if
any, and subject to the following provisions:
1) The Custodian may keep eligible domestic securities of the
Portfolio in a U.S. Securities System provided that such
securities are held in a U.S. Securities System Account;
2) The records of the Custodian with respect to securities of the
Portfolio which are maintained in a U.S. Securities System
shall identify by book-entry those securities belonging to the
Portfolio;
3) The Custodian shall pay for domestic securities purchased for
the account of the Portfolio only upon (i) receipt of advice
from the U.S. Securities System that such securities have been
transferred to the U.S. Securities System Account and (ii) the
making of an entry on the records of the Custodian to reflect
such payment and transfer for the account of the Portfolio.
The Custodian shall transfer securities sold for the account
of the Portfolio only upon (x) receipt of advice from the U.S.
Securities System that payment for such securities has been
transferred to the U.S. Securities System Account and (y) the
making of an entry on the records of the Custodian to reflect
such transfer and payment for the account of the Portfolio.
Copies of all advices from the U.S. Securities System of
transfers of securities for the account of the Portfolio shall
identify the Portfolio, be maintained for the Portfolio by the
Custodian and be provided to the Fund at its request. Upon
request, the Custodian shall furnish the Fund on behalf of the
Portfolio confirmation of each transfer to or from the account
of the Portfolio in the form of a written advice or notice and
shall furnish to the Fund on behalf of the Portfolio copies of
daily transaction sheets reflecting each day's transactions in
the U.S. Securities System for the account of the Portfolio;
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4) The Custodian shall provide the Fund on behalf of the
Portfolio(s) with any report obtained by the Custodian on the
U.S. Securities System's accounting system, internal
accounting control and procedures for safeguarding securities
deposited in the U.S. Securities System;
5) The Custodian shall have received from the Fund on behalf of
the Portfolio the initial certificate required by Article 14
hereof; and
6) The Custodian, at the Fund's expense in the absence of
negligence or willful misconduct on the Custodian's part or on
the part of sub-custodians or agents appointed pursuant to
this Contract, shall enforce on behalf of the Fund such rights
as it may have against the U.S. Securities System. Anything to
the contrary in this Contract notwithstanding, the Custodian
shall be liable to the Fund for the benefit of the Portfolio
for any loss or damage to the Portfolio resulting from use of
the U.S. Securities System by reason of any negligence,
misfeasance, bad faith or misconduct of the Custodian or any
of its agents or of any of its or their employees or from
failure of the Custodian or any such agent to enforce
effectively such rights as it may have against the U.S.
Securities System. At the election of the Fund, it shall be
entitled to be subrogated to the rights of the Custodian with
respect to any claim against the U.S. Securities System or any
other person which the Custodian may have as a consequence of
any such loss or damage if and to the extent that the
Portfolio has not been made whole for any such loss or damage.
2.11 Fund Assets Held in the Custodian's Direct Paper System. The Custodian
may deposit and/or maintain securities owned by a Portfolio in the
Direct Paper System of the Custodian subject to the following
provisions:
1) No transaction relating to securities in the Direct Paper
System will be effected in the absence of Proper Instructions
from the Fund on behalf of the Portfolio;
2) The Custodian may keep securities of the Portfolio in the
Direct Paper System only if such securities are represented in
the Direct Paper Account;
3) The records of the Custodian with respect to securities of the
Portfolio which are maintained in the Direct Paper System
shall identify by book-entry those securities belonging to the
Portfolio;
4) The Custodian shall pay for securities purchased for the
account of the Portfolio upon the making of an entry on the
records of the Custodian to reflect such payment and transfer
of securities to the account of the Portfolio. The Custodian
shall transfer securities sold for the account of the
Portfolio upon the making of an
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entry on the records of the Custodian to reflect such
transfer and receipt of payment for the account of the
Portfolio;
5) The Custodian shall furnish the Fund on behalf of the
Portfolio confirmation of each transfer to or from the account
of the Portfolio, in the form of a written advice or notice,
of Direct Paper on the next business day following such
transfer and shall furnish to the Fund on behalf of the
Portfolio copies of daily transaction sheets reflecting each
day's transaction in the Direct Paper System for the account
of the Portfolio; and
6) The Custodian shall provide the Fund with any report on its
accounting system, internal accounting control and procedures
for safeguarding securities deposited in the Direct Paper
System which had been prepared as of the time of such request.
2.12 Segregated Account. The Custodian shall upon receipt of Proper
Instructions from the Fund on behalf of each applicable Portfolio
establish and maintain a segregated account or accounts for and on
behalf of each such Portfolio, into which account or accounts may be
transferred cash and/or securities, including securities maintained in
a U.S. Securities System Account by the Custodian pursuant to Section
2.10 hereof (i) in accordance with the provisions of any agreement
among the Fund on behalf of the Portfolio, the Custodian and a
broker-dealer registered under the Exchange Act and a member of the
NASD (or any futures commission merchant registered under the Commodity
Exchange Act), relating to compliance with the rules of The Options
Clearing Corporation or of any registered national securities exchange
(or the Commodity Futures Trading Commission and/or any contract
market), or of any similar organization or organizations, regarding
escrow or other arrangements in connection with transactions by the
Portfolio, (ii) for purposes of segregating cash and/or securities in
connection with (a) options purchased, sold or written by the
Portfolio, (b) commodity futures contracts or options thereon
purchased, sold or written by the Portfolio or (c) other transactions
requiring segregation as described in the Fund's registration statement
as in effect from time to time, (iii) for the purposes of compliance by
the Portfolio with the procedures required by Investment Company Act
Release No. 10666, or any subsequent release or releases of the SEC
relating to the maintenance of segregated accounts by registered
investment companies and (iv) for other proper corporate purposes, but
only, in the case of this clause (iv), upon receipt of, in addition to
Proper Instructions from the Fund on behalf of the applicable
Portfolio, a Certified Resolution setting forth the purpose or purposes
of such segregated account and declaring such purposes to be proper
corporate purposes.
2.13 Proxies. The Custodian or its sub-custodian shall, with respect to the
domestic securities held hereunder, cause to be promptly executed by
the registered holder of such securities, if the securities are
registered otherwise than in the name of the Portfolio or a nominee of
the Portfolio, all proxies, without indication of the manner in which
such proxies are to be
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voted, and shall promptly deliver to the Fund on behalf of the
Portfolio all proxies, including those for bearer securities, all proxy
soliciting materials and all notices relating to such securities.
2.14 Communications Relating to Portfolio Securities. The Custodian shall
transmit promptly to the Fund for each Portfolio all written notices,
announcements or information (including, without limitation, pendency
of calls and maturities of domestic securities and expirations of
rights in connection therewith, notices of exercise of call and put
options written by the Fund on behalf of the Portfolio and the maturity
of futures contracts and options thereon purchased or sold by the
Portfolio) received by the Custodian from issuers of the securities
being held for the Portfolio. With respect to tender or exchange offers
or other similar transactions, the Custodian shall transmit promptly to
the Portfolio all written notices, announcements or information
received by the Custodian from issuers of the securities whose tender
or exchange is sought and from the party (or its agents) making the
tender or exchange offer. If the Fund directs the Custodian to maintain
securities in "street name", the Custodian shall utilize its best
efforts to notify the Fund of relevant corporate actions including,
without limitation, pendency of calls, maturities, tender or exchange
offers. If the Portfolio desires to take action with respect to any
tender offer, exchange offer or any other similar transaction, the
Portfolio shall notify the Custodian at least two (2) business days
prior to the date on which the Custodian is to take such action; with
respect to notice given by the Portfolio to the Custodian subsequent
thereto, the Custodian shall use its best efforts under the
circumstances to take the requested action.
2.15 Reports to Fund by Independent Public Accountant. The Custodian shall
provide the Fund with reports by independent public accountants on
accounting system, internal accounting control and procedures for
safeguarding cash, securities, futures contracts and options on futures
contracts and other assets, including cash, securities and other assets
deposited and/or maintained in a U.S. Securities System (as defined in
Section 2.10) or with a sub-custodian, relating to the services
provided by the Custodian under this Contract; such reports shall be of
sufficient scope and in sufficient detail, as may reasonably be
required by the Fund to provide reasonable assurance that any material
inadequacies would be disclosed by such examination, and, if there are
no such inadequacies, the reports shall so state.
3. Duties of the Custodian with Respect to Property of the Fund Held
Outside the United States
3.1 Appointment of Foreign Sub-Custodians. The Fund hereby authorizes and
instructs the Custodian to employ as sub-custodians for the Portfolio's
securities and other assets maintained outside the United States
eligible foreign custodians as defined in Rule 17f-5 under the 1940 Act
("Rule 17f-5") designated on Schedule A hereto (the "foreign
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sub-custodians"). Upon receipt of Proper Instructions, together with a
Certified Resolution, the Custodian and the Fund on behalf of the
Portfolio(s) may agree to amend Schedule A hereto from time to time to
designate additional or different foreign sub-custodians. Upon receipt
of Proper Instructions, the Fund may instruct the Custodian to cease
the employment of any one or more such foreign sub-custodians for
maintaining custody of the Portfolio's assets.
3.2 Assets to be Held. The Custodian shall limit the securities and other
assets maintained in the custody of the foreign sub-custodians to: (a)
"foreign securities", as defined in paragraph (c)(1) of Rule 17f-5, (b)
cash and cash equivalents in such amounts as the Custodian may
determine to be reasonably necessary to effect the Portfolio's foreign
securities transactions and (c) such cash and securities as the Fund
shall give Proper Instructions to be held in segregated accounts
pursuant to Section 3.21 hereof. The Custodian shall identify on its
books as belonging to the Fund the foreign securities of the Fund held
by each foreign sub-custodian.
3.3 Foreign Securities Systems. Except as may otherwise be agreed upon in
writing by the Custodian and the Fund, assets of the Portfolio(s) shall
be maintained in a clearing agency or a securities depository within
the meaning of Rule 17f-5(c)(2)(iii) and (iv) listed on Schedule A
(each a "foreign securities system") only through arrangements
implemented by the foreign banking institutions (as defined in Section
3.5 below) serving as sub-custodians pursuant to the terms hereof
(foreign securities systems and U.S. Securities Systems are referred to
herein collectively as the "Securities Systems"). Where possible after
reasonable efforts, such arrangements shall include entry into
agreements containing the provisions set forth in Section 3.5 hereof.
3.4 Holding Securities. The Custodian may hold securities and other
non-cash property for all of its customers, including the Fund, with a
foreign sub-custodian in a single account that is identified as
belonging to the Custodian for the benefit of its customers; provided,
however, that (i) the records of the Custodian with respect to
securities and other non-cash property of the Fund which are maintained
in such account shall identify by book-entry those securities and other
non-cash property belonging to the Fund, (ii) the Custodian shall
require that the securities and other non-cash property so held by the
foreign sub-custodian be held separately from the assets of the foreign
sub-custodian or of others, (iii) the Custodian shall reconcile the
holdings of each customer in the single account daily, and (iv) such
holding shall be consistent with the terms of the SEC staff no-action
letter to the Custodian (NO. 95-35-CC) or subsequent SEC position or
Rule.
3.5 Agreements with Foreign Banking Institutions. Each agreement with a
foreign sub-custodian as defined in Rule 17f-5(c)(2)(i) or (ii) (each a
"foreign banking institution") shall provide that (a) the Fund's assets
will be indemnified or its assets insured in the event of loss; (b) the
assets of each Portfolio will not be subject to any right, charge,
security interest, lien or claim of any kind in favor of the foreign
banking institution or its
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creditors or agent, except a claim of payment for their safe custody or
administration; (c) beneficial ownership of the assets of each
Portfolio will be freely transferable without the payment of money or
value other than for custody or administration; (d) adequate records
will be maintained identifying the assets as held by the Custodian on
behalf of its customers; (e) officers of or auditors employed by or
other representatives of the Custodian, including to the extent
permitted under applicable law the independent public accountants for
the Fund, will be given access to the books and records of the foreign
banking institution relating to its actions under its agreement with
the Custodian; (f) assets of the Portfolios held by the foreign
sub-custodian will be subject only to the instructions of the Custodian
or its agents; and (g) such foreign banking institution shall notify
the Custodian in the event that it ceases to qualify as either a branch
of a "qualified U.S. bank" or an "eligible foreign custodian", as such
terms are defined in Rule 17f-5(c), as amended.
3.6 Access of Independent Accountants of the Fund. Upon request of the
Fund, the Custodian will use reasonable efforts to arrange for the
independent accountants of the Fund to be afforded access to the books
and records of the foreign banking institution employed as a foreign
sub-custodian insofar as such books and records relate to the
performance of such foreign banking institution under its agreement
with the Custodian.
3.7 Delivery of Securities. The Custodian (or its foreign sub-custodian)
shall release and deliver foreign securities of a Portfolio held by the
foreign sub-custodian, or in a foreign securities system account of the
Custodian (or its foreign sub-custodian), only upon receipt of Proper
Instructions from the Fund on behalf of the applicable Portfolio, which
may be continuing instructions when deemed appropriate by the parties,
and only in the following cases:
(a) Upon sale of such securities for the Portfolio in accordance
with reasonable market practice in the jurisdiction where such
securities are held or traded, including, without limitation:
(i) delivery against expectation of receiving later payment
where such delivery is the customarily established securities
trading practice generally accepted by Institutional Clients
(as hereinafter defined) in the jurisdiction or market where
the transaction occurs; or (ii) in the case of a sale effected
through a foreign securities system, in accordance with the
rules governing the operation of the foreign securities
system;
(b) In connection with any repurchase agreement related to such
securities;
(c) To the depository agent in connection with tender or other
similar offers for securities of the Portfolio; provided that
the Custodian (or its foreign sub-custodian) shall have taken
reasonable steps in accordance with procedures generally
accepted by Institutional Clients in the particular market to
ensure
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timely collection of the payment for, or the return of, such
securities by the depository agent;
(d) To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable;
provided that, in any such case, the cash or other
consideration is to be delivered to the Custodian (or its
foreign sub-custodian); and provided further that the
Custodian (or its foreign sub-custodian) shall have taken
reasonable steps in accordance with procedures generally
accepted by Institutional Clients in the particular market to
ensure timely collection of such cash or other consideration;
(e) To the issuer thereof, or its agent, for transfer into the
name of the Custodian (or its foreign sub-custodian) or of any
nominee of the Custodian (or its foreign sub-custodian) or for
exchange for a different number of bonds, certificates or
other evidence representing the same aggregate face amount or
number of units; provided that, in any such case, the new
securities are to be delivered to the Custodian (or its
foreign sub-custodian);
(f) To brokers, clearing banks or other clearing agents for
examination or trade execution in accordance with market
custom; provided that, in any such case, the Custodian (or its
foreign sub-custodian) shall have taken reasonable steps in
accordance with procedures generally accepted by Institutional
Clients in the particular market to ensure prompt collection
of the payment for, or the return of, such securities by the
broker, clearing bank or clearing agent, the Custodian (or its
foreign sub-custodian) shall have no responsibility or
liability for any loss arising from the delivery of such
securities prior to receiving payment for such securities
except as may arise from the negligence or willful misconduct
of the Custodian (or of its foreign sub-custodian);
(g) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or
readjustment of the securities of the issuer of such
securities, or pursuant to provisions for conversion contained
in such securities, or pursuant to any deposit agreement;
provided that, in any such case, the new securities and/or
cash are to be delivered to the Custodian (or its foreign
sub-custodian) in accordance with procedures generally
accepted by Institutional Clients in the particular market;
(h) In the case of warrants, puts, calls, futures contracts,
options, rights or similar securities, the surrender thereof
in the exercise or sale of such warrants, puts, calls, futures
contracts, options, rights or similar securities; provided
that, in any such case, the securities and cash received in
exchange therefor are to be delivered to the Custodian (or its
foreign sub-custodian) in accordance with procedures generally
accepted by Institutional Clients in the particular market;
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(i) For delivery as security in connection with any borrowings by
the Fund requiring a pledge of assets of the Portfolio by the
Fund, but only against receipt of amounts borrowed;
(j) In connection with trading in options and futures contracts,
including delivery as original margin and variation margin;
(k) In connection with the loan of securities made by the
Portfolio to the borrower thereof in accordance with (i) the
terms of a written securities lending agreement to which a
Portfolio and State Street Bank and Trust Company, as lending
agent, are parties or (ii) in accordance with the terms of
Proper Instructions;
(l) For any other purpose, but only upon receipt of a Certified
Resolution and Proper Instructions specifying the securities
to be delivered, setting forth the purpose for which delivery
is to be made, declaring such purpose to be a proper corporate
purpose and naming the person or persons to whom delivery of
such securities shall be made; and
(m) Upon termination of this Contract as hereinafter set forth, in
accordance with Article 16 hereof.
3.8 Payment of Fund Monies. Upon receipt of Proper Instructions from the
Fund on behalf of the applicable Portfolio, which may be continuing
instructions when deemed appropriate by the parties, the Custodian
shall pay out, or direct its foreign sub-custodians to pay out, monies
of a Portfolio in the following cases only:
(a) Upon the purchase of foreign securities, options, futures or
options on futures contracts for the Portfolio, unless
otherwise directed by Proper Instructions, by (i) delivering
money to the seller thereof or to a dealer therefor (or an
agent for such seller or dealer), against delivery of such
securities to the foreign sub-custodian; or (ii) in accordance
with the customarily established securities trading practices
generally accepted by Institutional Clients in the
jurisdiction or market in which the transaction occurs,
against expectation of receiving later delivery of such
securities; or (iii) in the case of a purchase effected
through a foreign securities system, in accordance with the
rules governing the operation of such foreign securities
system;
(b) In connection with the conversion, exchange or surrender of
securities of the Portfolio as set forth in Section 3.7
hereof;
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(c) For the payment of any expense or liability including but not
limited to the following payments for the account of the
Portfolio: interest, taxes, advisory, administration,
accounting, transfer agent and legal fees, and operating
expenses;
(d) For the purchase or sale of foreign exchange or foreign
exchange contracts for the Portfolio, including transactions
executed with or through the Custodian or its foreign
sub-custodians;
(e) In connection with trading in options and futures contracts,
including delivery as original margin and variation margin;
(f) In connection with the borrowing of securities;
(g) For any purpose, but only upon receipt of a Certified
Resolution and Proper Instructions specifying the amount of
such payment and naming the person or persons to whom such
payment is to be made; and
(h) Upon termination of this Contract as hereinafter set forth, in
accordance with Article 16 hereof.
3.9 Market Conditions. Notwithstanding any provision of this Contract to
the contrary, settlement and payment for securities received for the
account of each applicable Portfolio and delivery of securities
maintained for the account of each applicable Portfolio may be effected
in accordance with the customary securities trading or securities
processing practices and procedures generally accepted by Institutional
Clients in the jurisdiction or market in which the transaction occurs,
including, without limitation, delivering securities to the purchaser
thereof or to a dealer therefor (or an agent for such purchaser or
dealer) against a receipt with the expectation of receiving later
payment for such securities from such purchaser or dealer. For purposes
of this Contract, "Institutional Clients" means U.S. registered
investment companies, or major, U.S.-based commercial banks, insurance
companies, pension funds or substantially similar financial
institutions which as a part of their ordinary business operations,
purchase or sell securities and make use of non-U.S. custodial
services. For the purposes of this section, the "DVP/RVP Model" is a
settlement system which offers a simultaneous and irrevocable exchange
of securities (on the delivery side) and cash value (on the payment
side) to settle a transaction. The Custodian will provide the Fund (i)
with a copy of The Guide to Custody in World Markets, which at the time
of its printing shall contain the Custodian's best information with
respect to customary securities trading or securities processing
practices and procedures generally accepted by Institutional Clients in
the jurisdictions and markets set forth therein, (ii) a summary
extracted therefrom and dated the date hereof which shall set forth the
Custodian's best information with respect to the markets in which some
or all securities transactions do not settle in accordance with the
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DVP/RVP Model, and (iii) updates to The Guide to Custody in World
Markets as published and to the aforementioned summary as appropriate.
3.10 Registration of Securities. Securities maintained in the custody of a
foreign banking institution (other than bearer securities) shall be
registered in the name of the Portfolio or in the name of any nominee
of the Fund on behalf of the Portfolio or in the name of any nominee of
the Custodian or of such foreign banking institution, and the Fund
agrees to hold any such nominee harmless from any liability arising
solely as a result of its status as a holder of record of such
securities unless liability results from the negligence, bad faith or
willful misconduct on the part of such nominee, the Custodian or such
foreign banking institution. The Custodian and its foreign
sub-custodian shall not be obligated to accept securities on behalf of
a Portfolio under the terms of this Contract unless the form of such
securities and the manner in which they are delivered are in accordance
with reasonable market practice in the particular jurisdiction and
generally accepted by Institutional Clients.
3.11 Bank Accounts. The Custodian (or its foreign sub-custodian) may open
and maintain outside the United States a bank account or bank accounts
on behalf of the Fund or its applicable Portfolios in foreign banking
institutions designated on Schedule A, subject only to draft or order
by the Custodian or its foreign sub-custodian, acting pursuant to the
terms of this Contract to hold cash received by or from or for the
account of the Fund on behalf of its applicable Portfolios.
3.12 Collection of Income. The Custodian (or its foreign sub-custodian)
shall use reasonable efforts in accordance with market practice
generally accepted by Institutional Clients to collect all income and
other payments in due course with respect to the securities held
hereunder to which the applicable Portfolio shall be entitled and shall
credit such income, as collected, to the applicable Portfolio. With
respect to Portfolio securities held in an account with a foreign
banking institution as described in Section 3.4 hereof, income
collected with respect to such securities will be allocated to the
Portfolio pro-rata based on the Portfolio's settled and registered
position in such securities. In the event that extraordinary measures
are required to collect such income, the Fund and the Custodian shall
consult as to such measures and as to the compensation and expenses of
the Custodian attendant thereto.
Collection of income due each Portfolio on securities loaned shall be
the responsibility of the Fund; the Custodian will have no duty or
responsibility in connection therewith, other than to provide the Fund
with such information or data in its possession as may be necessary to
assist the Fund in arranging for the timely delivery to the Custodian
or its foreign sub-custodians of the income to which the Portfolio is
properly entitled.
3.13 Appointment of Agents. The Custodian (or its foreign sub-custodian) may
at any time or times in its discretion appoint (and may at any time
remove) agents to carry out such of
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the provisions of this Article 3 as the Custodian (or its foreign
sub-custodian) may from time to time direct; provided, however, that
any such agent shall be an "eligible foreign custodian" within the
meaning of Rule 17f-5 under the 1940 Act and that the appointment of
any agent shall not relieve the Custodian (or such foreign
sub-custodian) of its responsibilities or liabilities hereunder.
3.14 Proxies. The Custodian will generally, with respect to the foreign
securities held under this Article 3, use best efforts accepted by
Institutional Clients to facilitate the exercise of voting and other
shareholder proxy rights, subject always to the laws, regulations and
practical constraints that may obtain in the jurisdiction where such
securities are issued. The Fund acknowledges that local conditions may
have the effect of severely limiting the ability of the Fund to
exercise shareholder rights.
3.15 Communications Relating to Portfolio Securities. The Custodian shall
transmit promptly to the Fund written information (including, without
limitation, pendency of calls and maturities of securities and
expirations of rights in connection therewith) received by the
Custodian via its sub-custodians from issuers of the securities being
held for the account of the applicable Portfolio. With respect to
tender or exchange offers, the Custodian shall transmit promptly to the
Fund written information so received by the Custodian from issuers of
the securities whose tender or exchange is sought or from the party (or
his or its agents) making the tender or exchange offer. Provided the
Custodian has complied with the requirements in the previous sentence,
the Custodian shall not be liable for any untimely exercise of any
tender, exchange or other right or power in connection with securities
or other property of a Portfolio at any time held by it or its foreign
subcustodians unless (i) it or its foreign subcustodians are in actual
possession of such securities or property and (ii) it receives Proper
Instructions with regard to the exercise of any such right or power,
and both (i) and (ii) occur at least three business days prior to the
date on which such right or power is to be exercised. With respect to
Proper Instructions received by the Custodian thereafter, the Custodian
shall use its best efforts in the light of local conditions to take the
requested action.
3.16 Liability of Foreign Sub-Custodians. Each agreement pursuant to which
the Custodian employs a foreign banking institution as a foreign
sub-custodian shall require the institution (i) to exercise reasonable
care in the performance of its duties and (ii) to indemnify, and hold
harmless, the Custodian and the Fund from and against any loss, damage,
cost, expense, liability or claim arising out of or in connection with
the institution's performance of such obligations. The Custodian shall
take reasonable steps, which, in the absence of negligence or willful
misconduct on the Custodian's part or on the part of the relevant
foreign banking institution, shall be at the relevant Portfolio's
expense, to enforce effectively (i) the rights of the Custodian and the
Fund under such agreements and (ii), in the event of any loss, damage,
cost, expense, liability or claim arising out of or in connection with
the performance of a foreign securities system, the
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rights of the Custodian, the applicable foreign banking institution or
the Fund against such system.
3.17 Subrogation. If the Custodian shall be unsuccessful in enforcing its
and the Fund's rights as set forth in Section 3.16 hereof, it shall so
inform the Fund, noting the steps it has taken. Thereafter, at the
election of the Fund on behalf of the Portfolio, (a) the Fund shall be
entitled to be subrogated to the rights of the Custodian with respect
to any claims against a foreign banking institution as a consequence of
any such loss, damage, cost, expense, liability or claim if and to the
extent that the Portfolio has not been made whole for any such loss,
damage, cost, expense, liability or claim, (b) the Fund shall be
entitled to be subrogated to the rights of the Custodian with respect
to any claims against a foreign securities system which the Custodian
may have as a consequence of any loss, damage, cost, expense, liability
or claim arising out of or in connection with the performance by a
foreign securities system if and to the extent that the relevant
Portfolio(s) has not been made whole for any such loss, damage, cost,
expense, liability or claim, and (c) the Custodian shall to the extent
allowable under applicable law, take commercially reasonable steps to
procure the subrogation to the Fund of the foreign banking
institution's rights against the foreign securities system as a
consequence of any loss, damage, cost, expense, liability or claim
arising out of or in connection with the performance by a foreign
securities system if and to the extent that the relevant Portfolio(s)
has not been made whole for any such loss, damage, cost, expense,
liability or claim.
3.18 Monitoring Responsibilities. The Custodian shall furnish annually to
the Fund, during the month of June, information concerning each foreign
sub-custodian listed from time to time on Schedule A. Such information
shall be similar in kind and scope to that furnished to the Fund in
connection with the initial approval of this Contract, but shall also
include a report concerning any recommendations to consider change of a
foreign subcustodian (including the reason for said change). In
addition, the Custodian will provide the Portfolios with such
information as a Portfolio shall reasonably request in order to enable
the Fund to comply with Rule 17f-5. In addition, the Custodian will
promptly inform the Fund in writing in accordance with Article 17 in
the event that the Custodian learns of (i) a material adverse change in
the condition, financial or otherwise, of a foreign sub-custodian, (ii)
any loss of the assets of the Fund or (iii), in the case of any foreign
sub-custodian not the subject of an exemptive order from the SEC
modifying the shareholder equity requirement under Rule 17f-5, is
notified by such foreign sub-custodian that there appears to be a
substantial likelihood that its shareholders' equity will decline below
$200 million or that its shareholders' equity has declined below $200
million (in each case in terms of U.S. dollars or the local currency
equivalent thereof and computed in accordance with generally accepted
U.S. accounting principles).
3.19 State Street London. Cash held for each Portfolio of the Fund in the
United Kingdom shall be maintained in an interest bearing account
established for the Fund with the
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Custodian's London branch, which account shall be subject to the
direction of the Custodian, State Street London Ltd. or both.
3.20 Tax Law. It shall be the responsibility of the Custodian and the
foreign banking institutions to use reasonable efforts and due care to
perform such steps typical for persons acting as global custodian for
Institutional Clients as are required to collect any tax refund, to
ascertain the appropriate rate of tax withholding and to provide such
documents as may be required to enable the Fund to receive appropriate
tax treatment under applicable tax laws and any applicable treaty
provisions. Except to the extent that imposition of such item arises
from the Custodian's or the foreign banking institutions' failure to
perform in accordance with the terms of this Section, the Custodian
shall have no responsibility or liability for any obligations now or
hereafter imposed on the Fund, the Fund's custody account in the
relevant jurisdiction or the Custodian as custodian of the Fund by the
tax law of the domicile of the Fund's custody account in the
jurisdiction or of any jurisdiction in which the Fund is invested or
any political subdivision thereof. Unless otherwise informed by the
Fund in writing, the Custodian, in performance of its duties under this
Section, shall be entitled to apply treatment of the Fund according to
the nationality of the Fund, the particulars of its organization and
other relevant details that shall be supplied by the Fund. The
Custodian shall be entitled to rely on any information supplied in
writing by an authorized representative of the Fund. The Custodian may
engage reasonable professional advisors knowledgeable about the subject
matter, which may include attorneys, accountants or financial
institutions in the regular business of investment administration, and
may rely upon advice received therefrom. It shall be the duty of the
Fund to inform the Custodian of any change in the organization,
domicile or other relevant fact concerning tax treatment of the Fund,
and further to inform the Custodian if the Fund is or becomes the
beneficiary of any special ruling or treatment not applicable to the
general nationality and category of entity of which the Fund is a part
under general laws and treaty provisions.
3.21 Segregated Account. The Custodian shall upon receipt of Proper
Instructions from the Fund on behalf of each applicable Portfolio
establish and maintain, or cause the applicable foreign banking
institution to establish and maintain, a segregated account or accounts
for and on behalf of each such Portfolio, into which account or
accounts may be transferred cash and/or securities (i) in accordance
with the provisions of any agreement among the Fund on behalf of the
Portfolio, the Custodian (or such foreign banking institution) and a
broker-dealer registered under the Exchange Act and a member of the
NASD (or any futures commission merchant registered under the Commodity
Exchange Act), relating to compliance with the rules of The Options
Clearing Corporation or of any registered national securities exchange
(or the Commodity Futures Trading Commission and/or any contract
market), or of any similar organization or organizations, regarding
escrow or other arrangements in connection with transactions by the
Portfolio, (ii) for purposes of segregating cash and/or securities in
connection with (a) options purchased, sold or written by the
Portfolio, (b) commodity futures contracts or options thereon
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purchased, sold or written by the Portfolio or (c) other transactions
requiring segregation as described in the Fund's registration statement
as in effect from time to time, (iii) for the purposes of compliance by
the Portfolio with the procedures required by Investment Company Act
Release No. 10666, or any subsequent release or releases of the SEC
relating to the maintenance of segregated accounts by registered
investment companies and (iv) for other proper corporate purposes, but
only, in the case of this clause (iv), upon receipt of, in addition to
Proper Instructions from the Fund on behalf of the applicable
Portfolio, a Certified Resolution , setting forth the purpose or
purposes of such segregated account and declaring such purposes to be
proper corporate purposes.
4. Payments for Sales or Repurchases or Redemptions of Shares
The Custodian shall receive from the distributor for the Shares or from
the Transfer Agent and deposit into the account of the appropriate Portfolio
such payments as are received for Shares of that Portfolio issued or sold from
time to time by the Fund. The Custodian will provide timely notification to the
Fund on behalf of each Portfolio and the Transfer Agent of any receipt by it of
payments for Shares of such Portfolio.
From such funds as may be available for the purpose but subject to the
limitations of the Charter and any applicable votes of the Board pursuant
thereto, the Custodian shall, upon receipt of instructions from the Transfer
Agent, make funds available for payment to holders of Shares who have delivered
to the Transfer Agent a request for redemption or repurchase of their Shares.
5. Proper Instruction
Proper Instructions as used throughout this Contract means a writing
signed or initialed by two persons as the Board shall have from time to time
authorized. Each such writing shall set forth the specific transaction or type
of transaction involved, including a specific statement of the purpose for which
such action is requested. Oral instructions will be considered Proper
Instructions if the Custodian reasonably believes them to have been given by a
person authorized to give such instructions with respect to the transaction
involved. The Fund shall cause all oral instructions to be confirmed in writing,
provided that the fact that such confirming written instructions are not
received by the Custodian shall in no way invalidate the enforceability of
transactions authorized by oral instructions. For purposes of this Section,
Proper Instructions shall include instructions received by the Custodian
pursuant to any three - party agreement which requires a segregated asset
account in accordance with Sections 2.12, 3.7(j), 3.8(e) and 3.20.
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5A. Contractual Settlement
The Custodian shall credit or debit the appropriate cash account of the
applicable Portfolio in connection with the purchase, sale, maturity, redemption
or other disposition of securities and other assets held for the time being in
the Portfolio on an actual settlement basis. Notwithstanding the foregoing, with
respect to the markets set forth on Schedule E hereto the Custodian may, in its
sole discretion, from time to time agree to provide a Portfolio with an
arrangement whereby the Portfolio will be given the opportunity of settling the
purchase, sale, maturity, redemption or other disposition of securities to be
held in the Portfolio in the manner and subject to the terms and limitations
described in this Article 5A. A transaction to which these contractual
settlement provisions applies shall be called a "Covered Transaction."
(a) With respect to a Covered Transaction that represents a
purchase of securities, the Custodian shall debit the
applicable Portfolio's cash account in accordance with Proper
Instructions as of the time and date that monies would
ordinarily be required to settle such a transaction in the
applicable markets as set forth on Schedule E hereto. Such
amounts shall be re-credited to the appropriate cash account
on settlement date upon Proper Instructions to the Custodian
that the Portfolio has canceled the Covered Transaction.
(b) With respect to the settlement of a Covered Transaction which
is a sale, maturity, redemption or other disposition,
provisional credit of an amount equal to the net sale,
maturity, redemption or other disposition proceeds of the
transaction (the "Settlement Amount") shall be made to the
account of the applicable Portfolio as if the Settlement
Amount had been received as of the close of business on the
date that monies would ordinarily be required to settle such
transaction in the applicable markets as set forth on Schedule
E. Such provisional credit will be made if the Custodian has
received Proper Instructions with respect to, or reasonable
notice of, the Covered Transaction, as applicable, and if the
Custodian or its agents are in possession of the asset(s)
associated with the Covered Transaction in good deliverable
form and are not aware of any facts which would lead them to
reasonably believe that the Covered Transaction will not
settle in the time period ordinarily applicable to
transactions in the applicable market. In the event that the
Custodian determines not to provide a provisional credit with
respect to a particular transaction, the Custodian will
promptly notify the Fund of this determination.
(c) For each Covered Transaction with respect to which the
Custodian shall provide provisional credit in an amount up to
the Settlement Amount (the "Credited Amount"), simultaneously
with the making of such provisional credit, the Fund agrees
that the Custodian shall have, and hereby grants to the
Custodian, a firstpriority security interest in any property
at any time held for the account of the applicable Portfolio
to the full extent of the Credited Amount.
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(d) The Custodian shall have the right, upon sending notice to the
Fund, to reverse any provisional credit given in accordance
with subsection (b) hereof in the event that the actual
proceeds of the subject Covered Transaction have not been
received by the Custodian, its agents or its sub-custodians
within thirty (30) days of having made such provisional credit
or at any time when the Custodian believes for reasonable
cause that such Covered Transaction will not settle in
accordance with its terms or amounts due pursuant thereto will
not be collectable, as applicable (in which case the notice
required herein will contain a description of such cause),
whereupon (i) the Custodian shall promptly notify the Fund
with respect thereto and (ii) a sum equal to the Credited
Amount shall become immediately payable by the Fund to the
Custodian and may be debited from any cash account held for
benefit of the applicable Portfolio in accordance with the
terms of any notice given hereunder; the Custodian's right to
debit the account as set forth above shall not be contingent
on the giving of notice to the Fund. The amount of any accrued
dividends, interest and other distributions with respect to
assets associated with such Covered Transaction may be set off
against the Credited Amount.
(e) In the event that the Custodian is unable to debit an account
of the Fund, with respect to the applicable Portfolio, and the
Portfolio fails to pay any sums due to the Custodian at the
time the same becomes payable in accordance with subsection
(d), and such failure is not cured within one (1) business day
after notice of such failure to the Fund, or if any of the
following conditions occurs, the Custodian may charge the Fund
for reasonable costs and expenses associated with the
provisional credit, including without limitation the cost of
funds associated therewith at the then-prevailing Federal
Funds rate (or local market equivalent thereof where the
Credited Amount was advanced), and the provisions of
subsection (f) will apply:
(1) If a final judgment for the payment of money shall be
rendered against a Portfolio and such judgment shall
not have been discharged or its execution stayed
pending appeal within sixty (60) days of entry or
such judgment shall not have been discharged within
sixty (60) days of expiration of any such stay;
(2) the Fund passing a resolution for its voluntary
winding-up (otherwise than for the purpose of
corporate reconstruction or amalgamation);
(3) the presentation of a petition for the winding-up
of or the making of an administration order in
relation to the Fund;
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(4) the appointment of a receiver or administrator over
any of the assets of the Fund; or
(5) the Fund ceasing or threatening to cease to carry
on its business.
(f) If an event outlined in subsection (e) occurs, including to
the extent permitted by applicable law the events described in
(1) through (5) thereof, the Custodian shall have the right to
immediately execute and foreclose upon its security interest
in any of the assets of the applicable Portfolio.
(g) The Custodian shall not be obliged to transfer any sums
credited to a Portfolio in accordance with subsection (b) to
or to the order or benefit of the Portfolio while any amount
which is payable to the Custodian under this Article 5A
remains unpaid.
(h) The operation of the provisions of this Article 5A shall be
without prejudice to any other remedies provided the Custodian
in this Contract, including without limitation the remedies
set forth in Article 13 hereof, or under any applicable law.
The Fund agrees that the Custodian shall have a right of
set-off against cash held for the applicable Portfolio in any
currency for any amount provided to such Portfolio by the
Custodian hereunder or from time to time arising out of or in
connection with this Contract, as amended, and/or the
operation of any account hereunder and the Custodian shall
have the right to debit such Portfolio with all or part of
such sums and apply or appropriate the cash in or towards the
discharge of such amounts in such manner and order as is
commercially reasonable under the circumstances. For the
purposes of this right of set-off, the Custodian may make such
currency conversions or effect any transactions in such
currencies at the Custodian's then-prevailing rates at such
times as are commercially reasonable under the circumstances
and may effect any transfers between, or entries on, any
account of the applicable Portfolio as is commercially
reasonable under the circumstances.
6. Actions Permitted without Express Authority
The Custodian may in its discretion, without express authority from the
Fund on behalf of each applicable Portfolio:
1) make payments to itself or others for minor expenses of
handling securities or other similar items relating to the
Custodian's duties under this Contract as set forth in
Schedule B, provided that all such payments shall be accounted
for to the Fund on behalf of the Portfolio;
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2) surrender securities to the issuer or its agent in temporary
form for securities in definitive form;
3) endorse for collection, in the name of the Portfolio, checks,
drafts and other negotiable instruments; and
4) in general, attend to all non-discretionary details in
connection with the sale, exchange, substitution, purchase,
transfer and other dealings with the securities and property
of the Portfolio except as otherwise directed by the Board.
7. Evidence of Authority
The Custodian shall be protected in acting upon any instructions,
notice, request, consent, certificate or other instrument or paper reasonably
believed by it to be genuine and to have been properly executed by or on behalf
of the Fund. The Custodian may receive and accept a certified copy of a vote of
the Board as conclusive evidence (a) of the authority of any person to act in
accordance with such resolution or (b) of any determination or of any action by
the Board pursuant to the Charter as described in such resolution, and such
resolution may be considered as in full force and effect until receipt by the
Custodian of written notice to the contrary.
8. Duties of Custodian with Respect to the Books of Account and
Calculation of Net Asset Value and Net Income
The Custodian shall cooperate with and supply necessary information to
the entity or entities appointed by the Board to keep the books of account of
each Portfolio and/or compute the net asset value per share of the outstanding
Shares of each Portfolio or, if directed in writing to do so by the Fund on
behalf of the Portfolio(s), shall itself keep such books of account and/or
compute such net asset value per share for a fee to be agreed to by the
Custodian and the Fund. If so directed, for a fee to be agreed upon by the
parties at the time of such direction, the Custodian shall also calculate daily
the net income of the Portfolio as described in the Prospectus and shall advise
the Fund and the Transfer Agent daily of the total amount of such net income
and, if instructed in writing by an officer of the Fund to do so, shall advise
the Transfer Agent periodically of the division of such net income among its
various components. The calculations of the net asset value per share and the
daily income of each Portfolio shall be made at the time or times described from
time to time in the Prospectus.
9. Records and Reports
The Custodian shall with respect to each Portfolio create and maintain
all records relating to its activities and obligations under this Contract in
such manner as will meet the obligations of
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the Fund under the 1940 Act, with particular attention to Section 31 thereof and
Rules 31a-1 and 31a-2 thereunder. All such records shall be the property of the
Fund and, together with any insurance policies and fidelity or similar bonds
maintained by the Custodian, shall at all times during the regular business
hours of the Custodian be open for inspection by duly authorized officers,
employees or agents of the Fund (including counsel and independent accountants)
and employees and agents of the SEC and other governmental regulatory
authorities having jurisdiction. The Custodian shall, at the Fund's request,
supply the Fund with a tabulation of securities owned by each Portfolio and held
by the Custodian. When requested to do so by the Fund and for such compensation
as shall be agreed upon between the Fund and the Custodian, the Custodian shall
include certificate numbers in such tabulations.
None of the parties hereto shall, unless compelled to do so by any
court or entity of competent jurisdiction either before or after the termination
of this Contract, disclose to any person not authorized by the relevant party to
receive the same any confidential information relating to such party and to the
affairs of such party of which the party disclosing the same shall have become
possessed during the period of this Contract and each party shall use its best
endeavors to prevent any such disclosure as aforesaid.
The Custodian shall send to the Fund an advice or notification of any
transfers of securities to or from the custody accounts indicating, as to
securities acquired for the Fund, the identity of the entity having physical
possession of such securities.
In addition to reports required to be provided elsewhere herein, the
Custodian agrees to provide to the Fund (i) the reports set forth on Schedule D
hereto, as amended from time to time, at such times as set forth on such
Schedule and in substantially the forms provided to the Fund, and (ii) any other
special and periodic reports related to the services to be provided hereunder as
the Fund may reasonably request and as may be mutually agreed upon by the
parties.
The Custodian agrees to attend periodic meetings of the Board to
discuss the operations to be performed under this Contract at such times and at
such places as the Fund may reasonably request.
The Custodian shall provide GlobalQuest(R) software to the parties and
at the locations specified on attached Schedule C pursuant to the terms of the
Data Services Addendum to Custodian Contract at no additional charge other than
as provided therein.
10. Opinion by Fund's Independent Accountant
The Custodian shall take all reasonable action, as the Fund on behalf
of each applicable Portfolio may from time to time request, to obtain from year
to year favorable opinions from the Fund's independent accountants with respect
to the Custodian's activities hereunder in
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connection with the preparation of the Fund's Form N-1A, Form N-SAR and any
other special or periodic reports to the SEC and with respect to any other SEC
requirements.
11. Disaster Recovery; Banker's Blanket Bond
In the event of equipment failures beyond the Custodian's control, the
Custodian shall, at no additional expense to a Portfolio, take reasonable steps
to minimize service interruptions. The Custodian shall enter into and shall
maintain in effect with appropriate parties one or more agreements making
reasonable provision for (i) periodic back-up of the computer files and data
with respect to a Portfolio and (ii) emergency use of electronic data processing
equipment to provide services under this Contract and the Data Access Services
Addendum hereto.
The Custodian hereby warrants to the Fund that the Custodian is
maintaining a Bankers' Blanket Bond in a commercially reasonable amount, and the
Custodian hereby agrees to notify the Fund in the event its Bankers' Blanket
Bond is canceled or otherwise lapses.
12. Compensation of Custodian
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian as set forth on Schedule B hereto, as such
Schedule B may be amended in writing from time to time by the Fund, on behalf of
each applicable Portfolio, and the Custodian.
13. Responsibility of Custodian
The Custodian shall exercise reasonable care in carrying out the
provisions of this Contract and Proper Instructions.
The Custodian shall be responsible for the acts and omissions of (i)
sub-custodians located in the United States of America appointed pursuant to
Article 1 hereof, (ii) foreign banking institutions appointed pursuant to the
terms of Article 3 hereof as if such acts and omissions were those of the
Custodian, and (iii) Japan Securities Depository Center ("JASDEC"), Euroclear
and Cedel Bank S.A.
So long as and to the extent that it exercises reasonable care, the
Custodian shall not be responsible for the title, validity or genuineness of any
property or evidence of title thereto received by it or delivered by it pursuant
to this Contract and shall be held harmless in acting upon any notice, request,
consent, certificate or other instrument reasonably believed by it to be genuine
and to be signed by the proper party or parties, including any futures
commission merchant acting pursuant to the terms of a three-party futures or
options agreement. The Custodian shall be kept indemnified by (to the extent of
the assets in the applicable Portfolio(s))
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<PAGE>
and shall be without liability to the Fund for any action taken or omitted by it
in good faith without negligence or willful misconduct on its part or on the
part of its sub-custodians or agents. The Custodian shall be entitled reasonably
to rely on and may act upon advice of counsel experienced in the pertinent area
of law (who may be counsel for the Fund) on all matters, and shall be without
liability for any action reasonably taken or omitted pursuant to such advice.
Except as may arise from the Custodian's own negligence or willful
misconduct or the negligence or willful misconduct of a sub-custodian, agent or
nominee, the Custodian shall be without liability to the Fund for any loss,
liability, claim or expense resulting from or caused by (i) events or
circumstances beyond the reasonable control of the Custodian or any
sub-custodian or Securities System or any agent or nominee of any of the
foregoing, including, without limitation, (a) the interruption, suspension or
restriction of trading on or the closure of any securities markets, and (b)
power or other mechanical or technological failures or interruptions, computer
viruses or communications disruptions, recognizing in each such case the
obligation of the Custodian, its subcustodians, agents and nominees to take
reasonable steps as circumstances require to minimize the effect of such
failures, interruptions, viruses and disruptions; (ii) errors by the Fund or its
investment advisor in their instructions to the Custodian provided such
instructions have been given in accordance with this Contract; (iii) the
insolvency of or acts or omissions by a Securities System except to the extent
set forth in subparagraph (iii) in the second paragraph of this Section 13; (iv)
any delay or failure of any broker, agent or intermediary, central bank or other
commercially prevalent payment or clearing system to deliver to the Custodian's
sub-custodian or agent securities purchased or in the remittance of payment made
in connection with securities sold; (v) any delay or failure of any company,
corporation, or other body in charge of registering or transferring securities
in the name of the Custodian, the Fund, the Custodian's sub-custodians, nominees
or agents or any consequential losses arising out of such delay or failure to
transfer such securities including non-receipt of bonus, dividends and rights
and other accretions or benefits; (vi) delays or inability to perform its duties
due to any disorder in market infrastructure with respect to any particular
security or Securities System; (vii) any provision of any present or future law
or regulation or order of the United States, or any other country, or political
subdivision thereof or of any court of competent jurisdiction; and (viii) any
loss where the Custodian, its sub-custodian, its agent or its nominee has
otherwise exercised reasonable care. Regardless of whether assets are maintained
in the custody of a foreign banking institution or a foreign securities system,
the Custodian shall not be liable for "country risk", i.e., any loss, damage,
cost, expense, liability or claim resulting from, or caused by, the direction of
or authorization by the Fund to maintain custody of any securities or cash of
the Fund or of a Portfolio in a foreign country including, but not limited to,
losses resulting from nationalization, expropriation, imposition of currency
controls or restrictions, acts of war or terrorism, riots, revolutions, work
stoppages, natural disasters or other similar events or acts. Notwithstanding
the foregoing, in delegating custody duties to State Street London Ltd., the
Custodian shall not be relieved of any responsibility to the Fund for any loss
due to such delegation, except such loss as may result from (a) political risk
(including, but not limited to, exchange control restrictions, confiscation,
expropriation, nationalization, insurrection, civil strife or armed hostilities)
or (b) other losses (excluding a bankruptcy or insolvency of State Street London
Ltd. not caused by political risk) due to Acts of God, nuclear incident or other
losses, provided that the Custodian and State Street London Ltd. have exercised
reasonable care.
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If the Fund on behalf of a Portfolio requires the Custodian to take any
action with respect to securities, which action involves the payment of money or
which action may, in the opinion of the Custodian, result in the Custodian or
its nominee assigned to the Fund or the Portfolio being liable for the payment
of money or incurring liability of some other form, the Fund on behalf of the
Portfolio, as a prerequisite to requiring the Custodian to take such action,
shall provide indemnity to the Custodian in an amount and form satisfactory to
the Custodian.
If the Fund requires the Custodian, its affiliates, subsidiaries or
agents, to advance cash or securities for any purpose (including but not limited
to securities settlements, the purchase or sale of foreign exchange or of
contracts for foreign exchange, and assumed settlement) for the benefit of a
Portfolio, any property at any time held for the account of the applicable
Portfolio shall be security therefor and should the Fund fail to repay the
Custodian promptly, the Custodian shall (a) promptly notify the Fund with
respect thereto and (b) be entitled to utilize available cash and to dispose of
such Portfolio's assets to the extent necessary to obtain reimbursement,
provided that such utilization shall not be contingent on the giving of notice
to the Fund.
In the event that the Custodian or its nominee shall incur or be
assessed any taxes (except as are directly attributable to income, franchise or
similar taxes which may be imposed on or assessed against the Custodian, its
affiliates, subsidiaries, agents, or nominees) accruing to the Custodian, its
affiliates, subsidiaries or agents in the course of its or their performance of
this Contract, including without limitation taxes on dividends, interest and
capital gain earned with respect to Portfolio assets, except such as may arise
from its or its nominee's own negligent action, negligent failure to act or
willful misconduct, any property at any time held for the account of the
applicable Portfolio shall be security therefor and the Custodian shall (a)
provide the Fund with three (3) New York business days' notice with respect
thereto and (b), in the event such matter has not been resolved within such
time, be entitled to utilize available cash and to dispose of such Portfolio's
assets to the extent necessary to obtain reimbursement.
In the event that the Custodian or its nominee shall be subject to any
claims or liabilities accruing to the Custodian, its affiliates, subsidiaries or
agents in the course of its or their performance of this Contract, which claims
or liabilities either (i) are described on Schedule B hereto or (ii) could not
reasonably have been anticipated by the Custodian on the date hereof, except
such as may arise from its or its nominee's own negligent action, negligent
failure to act or willful misconduct, any property at any time held for the
account of the applicable Portfolio shall be security therefor and the Custodian
shall (a) provide the Fund with three (3) New York business days' notice with
respect thereto and (b), in the event such matter has not been resolved within
such time, be entitled to utilize available cash and to dispose of such
Portfolio's assets to the extent necessary to obtain reimbursement.
29
<PAGE>
Upon the Custodian becoming aware in the course of the performance of
its duties hereunder of the occurrence of any event with respect to the assets
of a Portfolio held by the Custodian or its sub-custodian or agent hereunder
which causes or may cause any loss, damage, cost, expense or other liability to
a Portfolio, the Custodian shall promptly notify an authorized person of the
Fund and, at the Fund's request, assist the Fund in using all commercially
reasonable key steps under the circumstances to mitigate the effects of such
event and to avoid continuing harm to the Portfolio. If the steps referred to in
the previous sentence would be, in the reasonable determination of the
Custodian, beyond the normal scope of the Custodian's services as a global
custodian of mutual fund assets, the taking of those steps shall be at the
Fund's expense.
In no event shall the Custodian be liable hereunder for indirect,
special or consequential damages.
14. Effective Period, Termination and Amendment
This Contract shall become effective as of the date set forth below,
shall continue in full force and effect until terminated as hereinafter
provided, may be amended at any time by mutual agreement of the parties hereto
in writing and may be terminated by either party by an instrument in writing
delivered or mailed, postage prepaid to the other party, such termination to
take effect (i) in the case of termination by a Portfolio not sooner than one
hundred eighty (180) days after the date of such delivery or mailing or (ii) in
the case of termination by the Custodian not sooner than one hundred twenty
(120) days after the date of such delivery or mailing, except that, in the event
of a breach of this Contract on the part of the Fund, such termination shall not
take effect sooner than sixty (60) days thereafter; provided, however that the
Custodian shall not, with respect to a Portfolio, act under Section 2.10 hereof
in the absence of receipt of an initial certificate of the Secretary or an
Assistant Secretary that the Board has approved the initial use of a particular
Securities System by such Portfolio, as required by Rule 17f-4 under the 1940
Act and that the Custodian shall not, with respect to a Portfolio, act under
Section 2.11 hereof in the absence of receipt of an initial certificate of the
Secretary or an Assistant Secretary that the Board has approved the initial use
of the Direct Paper System by such Portfolio; provided further, however, that
the Fund shall not amend or terminate this Contract in contravention of any
applicable federal or state regulations, or any provision of the Charter, and
further provided, that the Fund on behalf of one or more of the Portfolios may
at any time by action of the Board (i) substitute another bank or trust company
for the Custodian by giving notice as described above to the Custodian or (ii)
immediately terminate this Contract in the event of the appointment of a
conservator or receiver for the Custodian by the relevant Federal or State
agency or upon the happening of a like event at the direction of an appropriate
regulatory agency or court of competent jurisdiction.
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Upon termination of this Contract, the Fund on behalf of each
applicable Portfolio shall pay to the Custodian such compensation as may be due
as of the date of such termination and the Custodian's reasonable out-of-pocket
costs, expenses and disbursements in connection therewith, such termination to
be conducted in a professional and businesslike manner.
15. Ownership Certificates for Tax Purposes
The Custodian shall, in its capacity as the Fund's agent, execute
ownership and other certificates and affidavits for all governmental purposes in
connection with receipt of income or other payments with respect to securities
or other assets of each Portfolio held by it and in connection with transfers of
such securities or assets.
16. Successor Custodian
If a successor Custodian shall be appointed by the Board, the Custodian
shall, upon termination, deliver to such successor Custodian at the offices of
the Custodian, duly endorsed and in the form for transfer, all securities, funds
and other properties of each applicable Portfolio then held by it hereunder and
shall transfer to an account of the successor Custodian all of the securities of
each such Portfolio held in a Securities System. If no such successor Custodian
shall be appointed, the Custodian shall, in like manner, upon receipt of a
Certified Resolution, deliver at the offices of the Custodian and transfer such
securities, funds and other properties in accordance with such resolution. In
the event that no written order designating a successor Custodian or Certified
Resolution shall have been delivered to the Custodian on or before the date when
such termination shall become effective, then the Custodian shall have the right
to deliver to a bank or trust company, which is a "bank" as defined in the 1940
Act, doing business in Boston, Massachusetts, or New York, New York, of its own
selection, having an aggregate capital, surplus, and undivided profits, as shown
by its last published report, of not less than $200,000,000, all securities,
funds and other properties held by the Custodian on behalf of each applicable
Portfolio and all instruments held by the Custodian relative thereto and all
other property held by it under this Contract on behalf of each applicable
Portfolio and to transfer to an account of such successor Custodian all of the
securities of each such Portfolio held in any Securities System. Thereafter,
such bank or trust company shall be the successor of the Custodian under this
Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the Certified Resolution referred to or of the
Board to appoint a successor Custodian, the Custodian shall be entitled to fair
compensation for its services during such period as the Custodian retains
possession of such securities, funds and other properties and the provisions of
this Contract relating to the duties and obligations of the Custodian shall
remain in full force and effect.
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17. Notices.
Any notice, instruction or other instrument required to be given
hereunder may be delivered in person to the offices of the parties as set forth
herein during normal business hours or delivered prepaid registered mail or by
telex, cable or telecopy to the parties at the following addresses or such other
addresses as may be notified in writing by any party from time to time. If
notice is sent by confirming telegram, cable, telex, or facsimile sending
device, it shall be deemed to have been given immediately if confirmed in
writing by overnight delivery. If notice is sent by first-class mail, it shall
be deemed to have been given five days after it has been mailed. If notice is
sent by messenger, it shall be deemed to have been given on the day it is
delivered.
To the Company: *[NAME OF FUND]
466 Lexington Avenue
New York, NY 10017-3147, USA
Attention: Eugene P. Grace
Telephone: 212-878-0812
Telecopy: 212-878-9351
To the Custodian: STATE STREET BANK AND TRUST COMPANY
1776 Heritage Drive
North Quincy, Massachusetts 02171, USA
Attention: Neal J. Chansky
Telephone: 617-985-5127
Telecopy: 617-537-2626
18. Headings
The section headings in this Contract are for the convenience of
reference only and do not form a part of this Contract.
19. Counterparts
This Contract may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
20. Additional Funds
In the event that the Fund establishes additional series of Shares with
respect to which it desires to have the Custodian render services as custodian
under the terms hereof, it shall so
32
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notify the Custodian in writing and, if the Custodian agrees in writing to
provide such services, the parties hereto will amend Schedule F to so reflect
and such series of Shares shall become a Portfolio hereunder.
21. Massachusetts Law to Apply
This Contract shall be construed and the provisions thereof interpreted
under and in accordance with laws of The Commonwealth of Massachusetts.
22. Prior Contracts
This Contract supersedes and terminates, as of the date hereof, all
prior contracts between the Fund and the Custodian relating to the custody of
the assets of the Portfolio(s).
23. Recourse Against Shareholders, Officers and Trustees*
This Contract is executed by the officers of the Fund in their capacity
as such and not individually. Any responsibility or liability of the Fund (or a
particular Portfolio) under any provision of this Contract shall be satisfied
solely from the assets of the Fund or the particular Portfolio, tangible or
intangible, realized or unrealized, and in no event shall the Custodian, a
sub-custodian or agent have any recourse against the shareholders, officers or
Trustees of the Fund under this Contract or against any one Portfolio for the
obligations of any other Portfolio.
24. Reproduction of Documents.
This Contract and all schedules, exhibits, attachments and amendments
hereto may be reproduced by any photographic, photostatic, microfilm,
micro-card, miniature photographic or other similar process. The parties hereto
each agree that any such reproduction shall be admissible in evidence as the
original itself in any judicial or administrative proceeding, whether or not the
original is in existence and whether or not such reproduction was made by a
party in the regular course of business, and that any enlargement, facsimile or
further reproduction of such reproduction shall likewise be admissible in
evidence.
- -------------------
* To be included in contracts with business trusts only.
33
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25. Shareholder Communications Election
SEC Rule 14b-2 under the Securities Exchange Act of 1934, as amended,
requires banks which hold securities for the account of customers to respond to
requests by issuers of securities for the names, addresses and holdings of
beneficial owners of securities of that issuer held by the bank unless the
beneficial owner has expressly objected to disclosure of this information. In
order to comply with the rule, the Custodian needs the Fund to indicate whether
it authorizes the Custodian to provide the Fund's name, address, and share
position to requesting companies whose securities the Fund owns. If the Fund
tells the Custodian "no", the Custodian will not provide this information to
requesting companies. If the Fund tells the Custodian "yes" or does not check
either "yes" or "no" below, the Custodian is required by the rule to treat the
Fund as consenting to disclosure of this information for all securities owned by
the Fund or any funds or accounts established by the Fund. For the Fund's
protection, the Rule prohibits the requesting company from using the Fund's name
and address for any purpose other than corporate communications. Please indicate
below whether the Fund consents or objects by checking one of the alternatives
below.
YES [ ] The Custodian is authorized to release the Fund's
name, address and share positions.
NO [X] The Custodian is not authorized to release the
Fund's name, address and share positions.
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IN WITNESS WHEREOF, each of the parties has caused this instrument to
be executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of *[Date].
WARBURG, PINCUS *[complete name of Fund]
By:__________________________
Name:________________________
Title:_______________________
STATE STREET BANK AND TRUST COMPANY
By:_________________________
Name: Ronald E. Logue
Title: Executive Vice President
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SCHEDULE C
Pursuant to the terms of (i) the Custodian Contract dated *[date] between the
registered investment companies listed on Schedule F thereto, as such Schedule F
may be amended from time to time, and State Street Bank and Trust Company and
(ii) the Data Access Services Addendum thereto of even date therewith (the "Data
Access Services Addendum"), the following persons and/or entities may use the
Data Access Services (as such term is defined in the Data Access Services
Addendum):
36
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SCHEDULE D
Reports
Description of Report Period of Report
--------------------- ----------------
Open Trades* Daily
Cash Availability Daily (by 10:00 a.m.)
Cash Transaction Statement* Daily
Portfolio Holdings Report* Daily
Failed Trades Report Daily
Corporate Action Report - (Pre-Notification) Daily
Global Cash Statement* Daily
Currency Balance Report Daily
Cash Transaction Statement* Weekly
Corporate Action Report (Summary) Weekly
Out-for-Transfer Report Weekly
Sedol Holdings Report Weekly
Purchase/Sales Report* Monthly
Broker Top Ten Report* Monthly
Capital Stock Activity Report Monthly
Cash Transaction Statement* Monthly
Corporate Action Report Monthly
Global Cash Statement* Monthly
Failed Trades Monthly
Outstanding Receivables* Monthly
FX Activity Report Monthly
Base Equivalent Cash Statement* Monthly
Corporate Action Final Notification When Applicable
* Also Available Via GlobalQuest(R)
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SCHEDULE E
Countries/Settlement Systems with Respect to which
Contractual Settlement May be Provided
Australia
Austria
Belgium
Canada
Denmark
Euroclear
Finland
France
Germany
Hong Kong
Indonesia
Ireland
Italy
Japan
Luxembourg
Malaysia
Mexico
Netherlands
New Zealand
Norway
Philippines
Portugal
Singapore
South Africa
Spain
Sweden
Switzerland
Thailand
United States
United Kingdom
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SCHEDULE F
39
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DATA ACCESS SERVICES ADDENDUM TO CUSTODIAN CONTRACT
AGREEMENT between Warburg, Pincus *[Name of Fund] (the "Customer") and
State Street Bank and Trust Company ("State Street").
PREAMBLE
WHEREAS, State Street has been appointed as custodian of certain assets
of the Customer pursuant to a certain Custodian Contract (the "Custodian
Contract") dated as of *[Date];
WHEREAS, State Street has developed and utilizes proprietary accounting
and other systems, including State Street's proprietary Multicurrency HORIZON(R)
Accounting System, in its role as custodian of the Customer, and maintains
certain Customer-related data ("Customer Data") in databases which databases are
under the control and ownership of State Street (the "Data Access Services");
and
WHEREAS, State Street makes available to the Customer certain Data
Access Services solely for the benefit of the Customer, and intends to provide
additional services, consistent with the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, and for other good and valuable consideration, the parties
agree as follows:
1. SYSTEM AND DATA ACCESS SERVICES
a. System. Subject to the terms and conditions of this Agreement, State
Street hereby agrees to provide the Customer with access to State Street's
Multicurrency HORIZON(R) Accounting System and the other information systems
(collectively, the "System") as described in Attachment A, on a remote basis for
the purpose of obtaining reports, solely on computer hardware, system software
and telecommunication links of the Customer, or certain third parties approved
by State Street that provide services to the Customer (the "Service Provider")
as listed in Attachment B and solely with respect to the Customer (the
"Designated Configuration") or on any designated substitute or back-up equipment
configuration with State Street's written consent, such consent not to be
unreasonably withheld.
b. Data Access Services. State Street agrees to make available to the
Customer the Data Access Services subject to the terms and conditions of this
Agreement and data access operating standards and procedures as may be issued by
State Street from time to time. The
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ability of the Customer to originate electronic instructions to State Street on
behalf of the Customer in order to (i) effect the transfer or movement of cash
or securities held under custody by State Street, (ii) transmit accounting or
other information (such transactions are referred to herein as "Client
Originated Electronic Financial Instructions"), and (iii) access data for the
purpose of reporting and analysis, shall be deemed to be Data Access Services
for purposes of this Agreement.
c. Additional Services. State Street shall make available to the
Customer, on terms generally available to State Street's other custody clients
which are investment companies registered under the Investment Company Act of
1940, as amended, additional Systems that are not described in the attachments
to this Agreement that are made available to other U.S.-registered investment
company custody clients of State Street. In the absence of any other written
agreement concerning such additional systems, the term "System" shall include,
and this Agreement shall govern, the Customer's access to and use of any
additional System made available by State Street and/or accessed by the
Customer.
2. NO USE OF THIRD PARTY SOFTWARE
State Street and the Customer acknowledge that in connection with the
Data Access Services provided under this Agreement, the Customer will have
access, through the Data Access Services, to Customer Data and to functions of
State Street's proprietary systems; provided, however that in no event will the
Customer have direct access to any third party systems-level software that
retrieves data for, stores data from, or otherwise supports the System.
3. LIMITATION ON SCOPE OF USE
a. Designated Equipment; Designated Locations. The System and the Data
Access Services shall be used and accessed solely on and through the Designated
Configuration at the offices of the Customer or certain agents of the Customer
(the "Designated Agents") located in Delaware and New York ("Designated
Locations").
b. Designated Configuration; Trained Personnel. State Street shall be
responsible for supplying, installing and maintaining the Designated
Configuration at the
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<PAGE>
Designated Locations. State Street and the Customer agree that each will engage
or retain the services of trained personnel to enable both parties to perform
their respective obligations under this Agreement. State Street agrees to use
commercially reasonable efforts to maintain the System so that it remains
serviceable, provided, however, that State Street does not guarantee or assure
uninterrupted remote access use of the System.
c. Scope of Use. The Customer will use the System and the Data Access
Services only for (x) the processing of securities transactions and (y)
accessing data for informational purposes related to services provided pursuant
to the Custodian Contract or such other services as the Custodian may from time
to time agree in writing to provide. The Customer shall not, and shall cause its
employees and agents not to (i) permit any third party (other than a Service
Provider) to use the System or the Data Access Services, (ii) sell, rent,
license or otherwise use the System or the Data Access Services for any purpose
other than as expressly authorized under this Agreement, (iii) allow access to
the System or the Data Access Services through terminals or any other computer
or telecommunications facilities located outside the Designated Locations, (iv)
allow or cause any information (other than portfolio holdings, valuations of
portfolio holdings, and other information reasonably necessary for the
management or distribution of the assets of the Customer) transmitted from State
Street's databases, including data from third party sources, available through
use of the System or the Data Access Services to be redistributed or
retransmitted to another computer, terminal or other device for other than use
for or on behalf of the Customer or (v) modify the System in any way, including
without limitation, developing any software for or attaching any devices or
computer programs to any equipment, system, software or database which forms a
part of or is resident on the Designated Configuration.
d. Other Locations. Except in the event of an emergency or of a planned
System shutdown, the Customer's access to services performed by the System or to
Data Access Services at a Designated Location may be transferred to a different
location only upon the prior written consent of State Street. In the event of an
emergency or System shutdown, the Customer may use any back-up site included in
the Designated Configuration or any other back-up site agreed to by State
Street, which agreement will not be unreasonably withheld. The Customer may
secure from State Street the right to access the System or the Data Access
Services through computer and telecommunications facilities or devices complying
with the Designated Configuration at additional locations only upon the prior
written consent of State Street and on terms to be mutually agreed upon by the
parties.
e. Title. Title and all ownership and proprietary rights to the System,
including any enhancements or modifications thereto, whether or not made by
State Street, are and shall remain with State Street.
f. No Modification. Without the prior written consent of State Street,
the Customer shall not modify, enhance or otherwise create derivative works
based upon the System, nor shall the Customer reverse engineer, decompile or
otherwise attempt to secure the source code for all or any part of the System.
3
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g. Security Procedures. The Customer shall comply with data access
operating standards and procedures and with user identification or other
password control requirements and other security procedures as may be issued
from time to time by State Street for use of the System on a remote basis and to
access the Data Access Services. The Customer shall have access only to the
Customer Data and authorized transactions agreed upon from time to time by State
Street and, upon notice from State Street, the Customer shall discontinue remote
use of the System and access to Data Access Services for any security reasons
cited by State Street.
4. PROPRIETARY INFORMATION
a. Proprietary Information. The Customer acknowledges and State Street
represents that the System and the databases, computer programs, screen formats,
report formats, interactive design techniques, documentation and other
information (other than Customer Data) made available to the Customer by State
Street as part of the Data Access Services and through the use of the System
constitute copyrighted, trade secret, or other proprietary information of
substantial value to State Street. Any and all such proprietary information
provided by State Street to the Customer shall be deemed proprietary and
confidential information of State Street (hereinafter "Proprietary
Information"). The Customer agrees that it will hold such Proprietary
Information in confidence and secure and protect it in a manner consistent with
its own procedures for the protection of its own confidential information and to
take appropriate action by instruction or agreement with its employees who are
permitted access to the Proprietary Information to satisfy its obligations
hereunder. The Customer further acknowledges that State Street shall not be
required to provide the Service Provider with access to the System unless it has
first received from the Service Provider an undertaking with respect to State
Street's Proprietary Information in the form of Attachment C to this Agreement.
The Customer shall use all commercially reasonable efforts to assist State
Street in identifying and preventing any unauthorized use, copying or disclosure
of the Proprietary Information or any portions thereof or any of the logic,
formats or designs contained therein.
b. Cooperation. Without limitation of the foregoing, the Customer shall
advise State Street immediately in the event the Customer learns or has reason
to believe
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that any person to whom the Customer has given access to the Proprietary
Information, or any portion thereof, has violated or intends to violate the
terms of this Agreement, and the Customer will, at its expense, cooperate with
State Street in seeking injunctive or other equitable relief in the name of the
Customer or State Street against any such person.
c. Injunctive Relief. The Customer acknowledges that the disclosure of
any Proprietary Information, or of any information which at law or equity ought
to remain confidential, will immediately give rise to continuing irreparable
injury to State Street inadequately compensable in damages at law. In addition,
State Street shall be entitled to obtain immediate injunctive relief against the
breach or threatened breach of any of the foregoing undertakings, in addition to
any other legal remedies which may be available.
d. Survival. The provisions of this Section 4 shall survive the
termination of this Agreement.
5. LIMITATION ON LIABILITY
a. Limitation on Amount and Time for Bringing Action. The Customer
agrees that State Street's liability to the Customer arising out of contract,
strict liability in tort, or any other cause of action under this Agreement for
its provision of Data Access Services or the System shall be limited to (i)
U.S.$750,000.00 per such cause of action and (ii) a total of U.S.$2,000,000.00
during the term of this Agreement. The parties agree that in the event the
Customer purchases Data Access Services in addition to GlobalQuest(R), they will
negotiate in good faith with respect to the foregoing damages limitation. No
action, regardless of form, arising out of this Agreement may be brought by the
Customer more than two years after the Customer has knowledge that the cause of
action has arisen.
b. Warranty. State Street represents and warrants that it has the right
to provide the Customer with access to the System and, to the best of State
Street's knowledge, the System does not infringe upon the intellectual property
rights of third parties. NO OTHER WARRANTIES, WHETHER EXPRESS OR IMPLIED,
INCLUDING, WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE, ARE MADE BY STATE STREET. IN NO EVENT WILL
STATE STREET BE LIABLE TO THE CUSTOMER OR ANY OTHER PARTY FOR ANY CONSEQUENTIAL
OR INCIDENTAL DAMAGES WHICH MAY ARISE FROM THE CUSTOMER'S ACCESS TO THE SYSTEM
OR USE OF INFORMATION OBTAINED THEREBY.
c. Third-Party Data. Organizations from which State Street may obtain
certain data included in the System or the Data Access Services are solely
responsible for the contents of such data, and State Street shall have no
liability for claims arising out of the contents of such third-party data,
including, but not limited to, the accuracy thereof.
d. Regulatory Requirements. As between State Street and the Customer,
the Customer shall be solely responsible for the accuracy of any accounting
statements or reports produced using the Data Access Services and the System and
the conformity thereof with any requirements of law.
e. Force Majeure. Neither party shall be liable for any costs or
damages due to delay or nonperformance under this Agreement arising out of any
cause or event beyond such party's control, including without limitation,
cessation of services hereunder or any damages resulting therefrom to the other
party, or the Customer as a result of work stoppage, power or other mechanical
failure, computer virus, natural disaster, governmental action, or communication
disruption; provided that State Street shall take reasonable steps under the
facts and circumstances then prevailing to mitigate continuing harm to the
Customer resulting from State Street's nonperformance under this Agreement
arising out of such causes and events.
6. INDEMNIFICATION
The Customer agrees to indemnify and hold State Street harmless from
any loss, damage or expense including reasonable attorney's fees, (a "loss")
suffered by State Street arising from the negligence or willful misconduct in
the use by the Customer of the Data Access Services or the System, including any
loss incurred by State Street resulting from a security breach at a Designated
Location or committed by the Customer, the Service Provider(s), or either of
their employees or agents.
State Street agrees to defend, indemnify and hold Customer harmless
from and against any claims, suits or damages sustained (including reasonable
attorney's fees) if Customer is called upon to defend any claim that Customer's
use of the System directly infringes any United States patent, trade secret or
copyright, provided (a) Customer promptly notifies State Street in writing of
such claim, and (b) Customer agrees that State Street shall have sole control
over the defense or settlement of such claim.
7. FEES
Fees and charges for the use of the System and the Data Access Services
and related payment terms shall be as set forth in Schedule B of the Custodian
Contract, as such Schedule B may be revised from time to time by the parties
(the "Fee Schedule").
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8. TRAINING, IMPLEMENTATION AND CONVERSION
a. Training. State Street agrees to provide training, at a designated
State Street training facility or at a Designated Location, to the Customer's
personnel in connection with the use of the System on the Designated
Configuration. The Customer agrees that it will set aside, during regular
business hours or at other times agreed upon by both parties, sufficient time to
enable all operators of the System and the Data Access Services, designated by
the Customer, to receive the training offered by State Street pursuant to this
Agreement.
b. Installation and Conversion. State Street shall be responsible for
the technical installation and conversion ("Installation and Conversion") of the
Designated Configuration. The Customer shall have the following responsibilities
in connection with Installation and Conversion of the System:
(i) The Customer shall be solely responsible for the timely
acquisition and maintenance of the hardware and software that
attach to the Designated Configuration in order to use the
Data Access Services at the Designated Locations.
(ii) State Street and the Customer each agree that they will assign
qualified personnel to actively participate during the
Installation and Conversion phase of the System implementation
to enable both parties to perform their respective obligations
under this Agreement.
9. SUPPORT
During the term of this Agreement, State Street agrees to provide the
support services set out in Attachment D to this Agreement.
6
<PAGE>
10. TERM OF AGREEMENT
a. Term of Agreement. This Agreement shall become effective on the date
of its execution by State Street and shall remain in full force and effect until
terminated as herein provided.
b. Termination of Agreement. Either party may terminate this Agreement
(i) for any reason by giving the other party at least one-hundred and eighty
days' prior written notice in the case of notice of termination by State Street
to the Customer or thirty days' notice in the case of notice from the Customer
to State Street of termination; or (ii) immediately for failure of the other
party to comply with any material term and condition of the Agreement by giving
the other party written notice of termination. In the event the Customer shall
cease doing business, shall become subject to proceedings under the bankruptcy
laws (other than a petition for reorganization or similar proceeding) or shall
be adjudicated bankrupt, this Agreement and the rights granted hereunder shall,
at the option of State Street, immediately terminate with notice to the
Customer. This Agreement shall in any event terminate as to the Customer within
90 days after the termination of the Custodian Contract applicable to such
Customer.
c. Termination of the Right to Use. Upon termination of this Agreement
for any reason, any right to use the System and access to the Data Access
Services shall terminate and the Customer shall immediately cease use of the
System and the Data Access Services. Immediately upon termination of this
Agreement for any reason, the Customer shall return to State Street all copies
of documentation and other Proprietary Information in its possession and State
Street shall return to Customer all Customer Data in its possession; provided,
however, that in the event that either party terminates this Agreement or the
Custodian Contract for any reason other than the Customer's breach, State Street
shall provide the Data Access Services for a period of time and at a price to be
agreed upon by the parties. Should State Street be in possession of information
requested by regulatory agencies having jurisdiction over the
7
<PAGE>
Customer, State Street will cooperate with the Customer to make such information
available to such regulatory agencies for a commercially reasonable time
following termination of this Agreement.
11. MISCELLANEOUS
a. Assignment; Successors. This Agreement and the rights and
obligations of the Customer and State Street hereunder shall not be assigned by
either party without the prior written consent of the other party, except that
State Street may assign this Agreement to a successor of all or a substantial
portion of its business, or to a party controlling, controlled by, or under
common control with State Street.
b. Survival. All provisions regarding indemnification, warranty,
liability and limits thereon, and confidentiality and/or protection of
proprietary rights and trade secrets shall survive the termination of this
Agreement.
c. Entire Agreement. This Agreement and the attachments hereto
constitute the entire understanding of the parties hereto with respect to the
Data Access Services and the use of the System and supersedes any and all prior
or contemporaneous representations or agreements, whether oral or written,
between the parties as such may relate to the Data Access Services or the
System, and cannot be modified or altered except in a writing duly executed by
the parties. This Agreement is not intended to supersede or modify the duties
and liabilities of the parties hereto under the Custodian Contract or any other
agreement between the parties hereto except to the extent that any such
agreement specifically refers to the Data Access Services or the System. No
single waiver or any right hereunder shall be deemed to be a continuing waiver.
d. Severability. If any provision or provisions of this Agreement shall
be held to be invalid, unlawful, or unenforceable, the validity, legality, and
enforceability of the remaining provisions shall not in any way be affected or
impaired.
e. Governing Law. This Agreement shall be interpreted and construed in
accordance with the internal laws of The Commonwealth of Massachusetts without
regard to the conflict of laws provisions thereof.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement effective as of *[Date].
WARBURG, PINCUS *[Name of Fund]
By: __________________________________
Name: __________________________________
Title: __________________________________
STATE STREET BANK AND TRUST COMPANY
By: __________________________________
Name: Ronald E. Logue
Title: Executive Vice President
9
<PAGE>
ATTACHMENT A
System Product Description
I. Multicurrency HORIZON(R) Accounting System. The Multicurrency
HORIZON(R) Accounting System is designed to provide lot level portfolio and
general ledger accounting for SEC and ERISA type requirements and includes the
following services: 1) recording of general ledger entries; 2) calculation of
daily income and expense; 3) reconciliation of daily activity with the trial
balance, and 4) appropriate automated feeding mechanisms to (i) domestic and
international settlement systems, (ii) daily, weekly and monthly evaluation
services, (iii) portfolio performance and analytic services, (iv) customer's
internal computing systems and (v) various State Street provided information
services products.
II. GlobalQuest(R). GlobalQuest(R) is designed to provide customer
access to the following information maintained on The Multicurrency HORIZON(R)
Accounting System: 1) cash transactions and balances; 2) purchases and sales; 3)
income receivables; 4) tax refund; 5) daily-priced positions; 6) open trades; 7)
settlement status; 8) foreign exchange transactions; 9) trade history; and 10)
daily, weekly and monthly evaluation services.
<PAGE>
ATTACHMENT B
Designated Configuration
<PAGE>
ATTACHMENT C
Undertaking
The undersigned understands that in the course of its employment as an
agent of Warburg, Pincus *[Name of Fund] (the "Customer") it will have access to
State Street Bank and Trust Company's ("State Street") Multicurrency HORIZON(R)
Accounting System and other information systems (collectively, the "System").
The undersigned acknowledges that the System and the databases,
computer programs screen formats, report formats, interactive design techniques,
documentation and other information made available to the Undersigned by State
Street as part of the Data Access Services provided to the Customer and through
the use of the System constitute copyrighted, trade secret, or other proprietary
information of substantial value to State Street. Any and all such information
provided by State Street to the Undersigned shall be deemed proprietary and
confidential information of State Street ( hereinafter "Proprietary
Information"). The Undersigned agrees that it will hold such Proprietary
Information in confidence and secure and protect it in a manner consistent with
its own procedures for the protection of its own confidential information and to
take appropriate action by instruction or agreement with its employees who are
permitted access to the Proprietary Information to satisfy its obligations
hereunder.
The Undersigned will not attempt to intercept data, gain access to data
in transmission, or attempt entry into any system or files for which it is not
authorized. It will not intentionally adversely affect the integrity of the
System through the introduction of unauthorized code or data, or through
unauthorized deletion.
Upon notice by State Street for any reason, any right to use the System
and access to the Data Access Services shall terminate and the Undersigned shall
immediately cease use of the System and the Data Access Services. Immediately
upon notice by State Street for any reason, the Undersigned shall return to
State Street all copies of documentation and other Proprietary Information in
its possession. With respect to any dispute arising in connection with this
Undertaking, the Undersigned (i) understands that this Undertaking shall be
construed in accordance with the laws of The Commonwealth of Massachusetts and
(ii) consents to the jurisdiction of the courts of The Commonwealth of
Massachusetts.
*[Name of Designated Agent]
By: ______________________________
Name: ______________________________
Title: ______________________________
Date: ______________________________
<PAGE>
ATTACHMENT D
Support
During the term of this Agreement, State Street agrees to provide the
following on-going support services:
a. Telephone Support. The Customer Designated Persons may contact State
Street's HORIZON(R) Help Desk and Customer Assistance Center between the hours
of 8 a.m. and 6 p.m. (Eastern time) on all business days for the purpose of
obtaining answers to questions about the use of the System, or to report
apparent problems with the System. From time to time, the Customer shall provide
to State Street a list of persons, not to exceed five in number, who shall be
permitted to contact State Street for assistance (such persons being referred to
as the "Customer Designated Persons").
b. Technical Support. State Street will provide technical support to
assist the Customer in using the System and the Data Access Services. The total
amount of technical support provided by State Street shall not exceed 10
resource days per year. State Street shall provide such additional technical
support as is expressly set forth in the fee schedule in effect from time to
time between the parties (the "Fee Schedule"). Technical support, including
during installation and testing, is subject to the fees and other terms set
forth in the Fee Schedule.
c. Maintenance Support. State Street shall use commercially reasonable
efforts to correct system functions that do not work according to the System
Product Description as set forth on Attachment A in priority order in the next
scheduled delivery release or otherwise as soon as is practicable.
d. System Enhancements. State Street will provide to the Customer any
enhancements to the System developed by State Street and made a part of the
System; provided that, sixty (60) days prior to installing any such enhancement,
State Street shall notify the Customer and shall offer the Customer reasonable
training on the enhancement. Charges for system enhancements shall be as
provided in the Fee Schedule. State Street retains the right to charge for
related systems or products that may be developed and separately made available
for use other than through the System.
e. Custom Modifications. In the event the Customer desires custom
modifications in connection with its use of the System, the Customer shall make
a written request to State Street providing specifications for the desired
modification. Any custom modifications may be undertaken by State Street in its
sole discretion in accordance with the Fee Schedule.
f. Limitation on Support. State Street shall have no obligation to
support the Customer's use of the System: (1) for use on any computer equipment
or telecommunication facilities which does not conform to the Designated
Configuration or (ii) in the event the Customer has modified the System in
breach of this Agreement.
<PAGE>
SHAREHOLDER SERVICING AND DISTRIBUTION PLAN
-------------------------------------------
This Shareholder Servicing and Distribution Plan ("Plan") is
adopted by Warburg, Pincus Managed EAFE[R] Countries Fund, Inc., a corporation
organized under the laws of State of Maryland (the "Fund"), with respect to the
common stock, par value $.001 per share, of the Fund other than those designated
Advisor Shares (the "Shares") pursuant to Rule 12b-1 (the "Rule") under the
Investment Company Act of 1940, as amended (the "1940 Act"), subject to the
following terms and conditions:
Section 1. Amount of Payments.
The Fund will pay Counsellors Securities Inc. ("Counsellors
Securities"), a corporation organized under the laws of the State of New York,
for shareholder servicing and distribution services provided to the Shares, an
annual fee of up to .25% of the value of the average daily net assets of the
Shares. Fees to be paid with respect to the Fund under this Plan will be
calculated daily and paid monthly by the Fund.
Section 2. Services Payable under the Plan.
(a) The annual fees described above payable with respect to the
Fund are intended to compensate Counsellors Securities, or enable Counsellors
Securities to compensate other persons ("Service Providers"), including any
other distributor of Shares, for providing (i) ongoing servicing and/or
maintenance of the accounts of holders of Shares ("Shareholder Services"); (ii)
services that are primarily intended to result in, or that are primarily
attributable to, the sale of Shares ("Selling Services"); and/or (iii)
subtransfer agency services, subaccounting services or administrative services
with respect to Shares ("Administrative Services"). Shareholder Services may
include, among other things, responding to inquiries of prospective investors
regarding the Fund and services to shareholders not otherwise required to be
provided by the Fund's custodian or any co-administrator. Selling Services may
include, but are not limited to: the printing and distribution to prospective
investors in Shares of prospectuses and statements of additional information
describing the Fund; the preparation, including printing, and distribution of
sales literature, reports and media advertisements relating to the Shares;
providing telephone services relating to the Fund; distributing Shares; costs
relating to the formulation and implementation of marketing and promotional
activities, including, but not limited to, direct mail promotions and
television, radio, newspaper, magazine and other mass media advertising, and
related travel and entertainment expenses; and costs involved in obtaining
whatever information, analyses and reports with respect to marketing and
promotional activities that the Fund may, from time to time, deem
<PAGE>
advisable. In providing compensation for Selling Services in accordance with
this Plan, Counsellors Securities is expressly authorized (i) to make, or cause
to be made, payments reflecting an allocation of overhead and other office
expenses related to providing Services; (ii) to make, or cause to be made,
payments, or to provide for the reimbursement of expenses of, persons who
provide support services in connection with the distribution of Shares
including, but not limited to, office space and equipment, telephone facilities,
answering routine inquiries regarding the Fund, and providing any other Service;
and (iii) to make, or cause to be made, payments to compensate selected dealers
or other authorized persons for providing any Services. Administrative Services
may include, but are not limited to, establishing and maintaining accounts and
records on behalf of Fund shareholders; processing purchase, redemption and
exchange transactions in Shares; and other similar services not otherwise
required to be provided by the Fund's transfer agent or any co-administrator.
(b) Payments under this Plan are not tied exclusively to the
expenses for shareholder servicing, administration and distribution expenses
actually incurred by Counsellors Securities or any Service Provider, and the
payments may exceed expenses actually incurred by Counsellors Securities and/or
a Service Provider. Furthermore, any portion of any fee paid to Counsellors
Securities or to any of its affiliates by the Fund or any of their past profits
or other revenue may be used in their sole discretion to provide services to
shareholders of the Fund or to foster distribution of Shares.
Section 3. Approval of Plan.
Neither this Plan nor any related agreements will take effect
until approved by a majority of (a) the outstanding voting Shares, (b) the full
Board of Directors of the Fund and (c) those Directors who are not interested
persons of the Fund and who have no direct or indirect financial interest in the
operation of this Plan or in any agreements related to it (the "Independent
Directors"), cast in person at a meeting called for the purpose of voting on
this Plan and the related agreements.
Section 4. Continuance of Plan.
This Plan will continue in effect with respect to the Shares from
year to year so long as its continuance is specifically approved annually by
vote of the Fund's Board of Directors in the manner described in Section 3(b)
and 3(c) above. The Fund's Board of Directors will evaluate the appropriateness
of this Plan and its payment terms on a continuing basis and in doing so will
consider all relevant factors, including the types and extent of Shareholder
Services, Selling Services and Administrative Services provided by Counsellors
Securities and/or Service Providers and amounts Counsellors Securities and/or
Service Providers receive under this Plan.
2
<PAGE>
Section 5. Termination.
This Plan may be terminated at any time with respect to the
Shares by vote of a majority of the Independent Directors or by a vote of a
majority of the outstanding voting Shares.
Section 6. Amendments.
This Plan may not be amended to increase materially the amount of
the fees described in Section 1 above with respect to the Shares without
approval of at least a majority of the outstanding voting Shares. In addition,
all material amendments to this Plan must be approved in the manner described in
Section 3(b) and 3(c) above.
Section 7. Selection of Certain Directors.
While this Plan is in effect with respect to the Fund, the
selection and nomination of the Fund's Directors who are not interested persons
of the Fund will be committed to the discretion of the Directors then in office
who are not interested persons of the Fund.
Section 8. Written Reports.
In each year during which this Plan remains in effect with
respect to the Fund, any person authorized to direct the disposition of monies
paid or payable by the Fund pursuant to the Plan or any related agreement will
prepare and furnish to the Fund's Board of Directors, and the Board will review,
at least quarterly, written reports, complying with the requirements of the
Rule, which set out the amounts expended under this Plan and the purposes for
which those expenditures were made.
Section 9. Preservation of Materials.
The Fund will preserve copies of this Plan, any agreement
relating to this Plan and any report made pursuant to Section 8 above, for a
period of not less than six years (the first two years in an easily accessible
place) from the date of this Plan, the agreement or the report.
Section 10. Meaning of Certain Terms.
As used in this Plan, the terms "interested person" and "majority
of the outstanding voting securities" will be deemed to have the same meanings
that those terms have under the 1940 Act and the rules and regulations under the
1940 Act, subject to any exemption that may be granted to the Fund under the
1940 Act by the Securities and Exchange Commission.
3
<PAGE>
Section 11. Date of Effectiveness.
This Plan will become effective as of the date the Fund first
commences its investment operations.
IN WITNESS WHEREOF, the Fund has executed this Plan as of the
_____ day of _______, 1997.
WARBURG, PINCUS MANAGED EAFE[R] COUNTRIES
FUND, INC.
By:__________________________________
Name: _______________________________
Title: ______________________________
4
<PAGE>
DISTRIBUTION PLAN
This Distribution Plan (the "Plan") is adopted in accordance with
Rule 12b-1 under the Investment Company Act of 1940, as amended (the "1940
Act"), by Warburg, Pincus Managed EAFE[R] Countries Fund, Inc., a corporation
organized under the laws of the State of Maryland (the "Fund"), subject to the
following terms and conditions:
Section 1. Distribution Agreements; Annual Fee.
Any officer of the Fund or Counsellors Securities Inc., the
Fund's distributor ("Counsellors Securities"), is authorized to execute and
deliver written agreements in any form duly approved by the Board of Directors
of the Fund (the "Agreements") with institutional shareholders of record,
broker-dealers, financial institutions, depository institutions, retirement
plans and other financial intermediaries ("Service Organizations") relating to
shares of the Fund's common stock, par value $.001 per share, designated Advisor
Shares (the "Advisor Shares"). Pursuant to an Agreement, Service Organizations
will be paid an annual fee out of the assets of the Fund by the Fund directly or
by Counsellors Securities on behalf of the Fund for providing (a) services
primarily intended to result in the sale of Advisor Shares ("Distribution
Services"), (b) shareholder servicing to their customers or clients who are the
record and/or the beneficial owners of Advisor Shares ("Customers")
("Shareholder Services") and/or (c) administrative and accounting services to
Customers ("Administrative Services"). A Service Organization will be paid an
annual fee under the Plan calculated daily and paid quarterly at an annual rate
of up to .50% of the average daily net assets of the Advisor Shares held by or
on behalf of its Customers ("Customers' Shares") with respect to Distribution
Services and/or Administrative Services and may be paid an annual fee calculated
daily and paid quarterly at an annual rate of up to .25% of the average daily
net assets of Customers' Shares with respect to Shareholder Services.
Section 2. Services.
The annual fee paid to Service Organizations under Section 1 of
the Plan with respect to Distribution Services, if any, will compensate Service
Organizations to cover certain expenses primarily intended to result in the sale
of Advisor Shares, including, but not limited to: (a) costs of payments made to
employees that engage in the distribution of Advisor Shares; (b) payments made
to, and expenses of, persons who provide support services in connection with the
distribution of Advisor Shares, including, but not limited to, office space and
equipment, telephone facilities, processing shareholder transactions and
providing any other shareholder services not otherwise provided by the Fund's
transfer agent; (c) costs relating to the formulation and implementation of
marketing and
<PAGE>
promotional activities, including, but not limited to, direct mail promotions
and television, radio, newspaper, magazine and other mass media advertising; (d)
costs of printing and distributing prospectuses, statements of additional
information and reports of the Fund to prospective holders of Advisor Shares;
(e) costs involved in preparing, printing and distributing sales literature
pertaining to the Fund and (f) costs involved in obtaining whatever information,
analyses and reports with respect to marketing and promotional activities that
the Fund may, from time to time, deem advisable.
The annual fee paid to Service Organizations under Section 1 of
the Plan with respect to Shareholder Services, if any, will compensate Service
Organizations for personal service and/or the maintenance of Customer accounts,
including but not limited to (a) responding to Customer inquiries, (b) providing
information on Customer investments and (c) providing other shareholder liaison
services.
The annual fee paid to Service Organizations under Section 1 of
the Plan with respect to Administrative Services, if any, will compensate
Service Organizations for administrative and accounting services to their
Customers, including, but not limited to: (a) aggregating and processing
purchase and redemption requests from Customers and placing net purchase and
redemption orders with the Fund's distributor or transfer agent; (b) providing
Customers with a service that invests the assets of their accounts in Advisor
Shares; (c) processing dividend payments from the Fund on behalf of Customers;
(d) providing information periodically to Customers showing their positions in
Advisor Shares; (e) arranging for bank wires; (f) providing sub-accounting with
respect to Advisor Shares beneficially owned by Customers or the information to
the Fund necessary for sub-accounting; (g) forwarding shareholder communications
from the Fund (for example, proxies, shareholder reports, annual and semi-annual
financial statements and dividend, distribution and tax notices) to Customers,
if required by law and (h) providing other similar services to the extent
permitted under applicable statutes, rules and regulations.
Payments under this Plan are not tied exclusively to the expenses
for shareholder servicing, administration and distribution expenses actually
incurred by any Service Organization, and the payments may exceed expenses
actually incurred by any Service Organization.
Section 3. Additional Payments.
Counsellors Securities, Warburg Pincus Asset Management Inc., the
Fund's investment adviser ("Warburg"), Counsellors Funds Service, Inc., the
Fund's co-administrator ("Counsellors Service"), or any affiliate of any of the
foregoing may, from time to time, make payments to Service Organizations for
providing distribution, administrative, accounting and/or other
2
<PAGE>
services with respect to holders of Advisor Shares. Counsellors Securities,
Warburg, Counsellors Service or any affiliate thereof may, from time to time, at
their own expense, pay certain Fund transfer agent fees and expenses related to
accounts of Customers of Service Organizations that have entered into
Agreements. A Service Organization may use a portion of the fees paid pursuant
to the Plan to compensate the Fund's custodian or transfer agent for costs
related to accounts of Customers of the Service Organization that hold Advisor
Shares. Payments by the Fund under this Plan shall not be made to a Service
Organization with respect to services for which the Service Organization is
otherwise compensated by Counsellors Securities, Warburg, Counsellors Service or
any affiliate thereof.
Payments may be made to Service Organizations by Counsellors
Securities, Warburg, Counsellors Service or any affiliate thereof from any such
entity's own resources, which may include a fee it receives from the Fund.
Section 4. Monitoring.
Counsellors Securities shall monitor the arrangements pertaining
to the Fund's Agreements with Service Organizations.
Section 5. Approval by Shareholders.
The Plan is effective, and fees are payable in accordance with
Section 1 of the Plan pursuant to the approval of the Plan by a vote of at least
a majority of the outstanding voting Advisor Shares.
Section 6. Approval by Directors.
The Plan is effective, and payments under any related agreement
may be made pursuant to the approval of the Plan and such agreement by a
majority vote of both (a) the full Board of Directors of the Fund and (b) those
Directors who are not interested persons of the Fund and who have no direct or
indirect financial interest in the operation of the Plan or in any agreements
related to it (the "Qualified Directors"), cast in person at a meeting called
for the purpose of voting on the Plan and the related agreements.
Section 7. Continuance of the Plan.
The Plan will continue in effect for so long as its continuance
is specifically approved at least annually by the Fund's Board of Directors in
the manner described in Section 5 above.
3
<PAGE>
Section 8. Termination.
The Plan may be terminated at any time by a majority vote of the
Qualified Directors or by a majority of the outstanding voting Advisor Shares.
Section 9. Amendments.
The Plan may not be amended to increase materially the amount of
the fees described in Section 1 above with respect to the Advisor Shares without
approval of at least a majority of the outstanding voting Advisor Shares. In
addition, all material amendments to the Plan must be approved by the Fund's
Board of Directors in the manner described in Section 6 above.
Section 10. Selection of Certain Directors.
While the Plan is in effect, the selection and nomination of the
Fund's Directors who are not interested persons of the Fund will be committed to
the discretion of the Directors then in office who are not interested persons of
the Fund.
Section 11. Written Reports.
In each year during which the Plan remains in effect, Counsellors
Securities will furnish to the Fund's Board of Directors, and the Board will
review, at least quarterly, written reports, which set out the amounts expended
under the Plan and the purposes for which those expenditures were made.
Section 12. Preservation of Materials.
The Fund will preserve copies of the Plan, any agreement relating
to the Plan and any report made pursuant to Section 11 above, for a period of
not less than six years (the first two years in an easily accessible place) from
the date of the Plan, agreement or report.
Section 13. Meanings of Certain Terms.
As used in the Plan, the terms "interested person" and "majority
of the outstanding voting securities" will be deemed to have the same meanings
that those terms have under the 1940 Act and the rules and regulations
thereunder, subject to any exemption that may be granted to the Fund under the
1940 Act by the Securities and Exchange Commission.
4
<PAGE>
IN WITNESS WHEREOF, the Fund has executed the Plan as of ________
__, 1997.
WARBURG, PINCUS MANAGED EAFE[R]
COUNTRIES FUND, INC.
By:______________________________
Name: ____________________
Title: ___________________
Acknowledged this
_____ day of ________, 1997
COUNSELLORS SECURITIES INC.
By:_____________________________
Name: _______________________
Title: ______________________
5
<PAGE>
<PAGE>
[FIRM NAME]
SERVICES AGREEMENT
Ladies and Gentlemen:
We have an agreement (the "Distribution Agreement") with each of
several open-end investment companies, or series thereof, for which Warburg
Pincus Asset Management, Inc. ("Warburg") provides investment advisory services
(together with such other open-end investment companies, or series thereof, for
which Warburg may provide advisory services in the future, the "Funds").
Pursuant to the Distribution Agreements, we, Counsellors Securities Inc.
("CSI"), act as the distributor of shares of common stock of the Funds
designated "Common Shares" (collectively, the "Shares"). You provide
recordkeeping and administrative services to certain employee benefit plans and
retirement plans (together, the "Plans") that include or propose to include
certain of the Funds as an investment alternative or to other customers of yours
who from time to time beneficially own Shares ("Customers"). The terms
"Prospectus" and "Statement" as used herein refer respectively to the then
current prospectus and statement of additional information relating to the
Shares forming parts of the Registration Statement on Form N-1A of a Fund under
the Securities Act of 1933, as amended (the "1933 Act").
As used herein, unless the context otherwise requires, "we," "ours"
and/or "us" refer to CSI and "you," "your" and "yours" refer to the company that
is the counterparty to this Agreement (the "Service Organization").
1. Services. As applicable, you agree to provide the administrative,
shareholder and/or other services set forth on Schedule A hereto, as amended
from time to time. In providing such services, you shall not, except as
specifically provided herein, have any authority to act as agent for us or any
Fund, but shall act only as agent of the Plans, the Plan participants and
Customers who from time to time beneficially own Shares of one or more Funds and
as an independent contractor and not as an employee or agent of the Funds,
Warburg or us.
You will maintain all records required by law, including records
detailing the services you provide in return for the fees to which you are
entitled under this Agreement. Such records shall be preserved, maintained and
made available to the extent required and in accordance with the Investment
Company Act of 1940, as amended (the "1940 Act"), and the Securities Exchange
Act of 1934, as amended (the "1934 Act") and the rules thereunder. Upon request
by a Fund or us, you agree to promptly make copies or, if required, originals of
such of these records available to the Fund or us, as the case may be. You also
agree to promptly notify the Fund or us if you experience any difficulty in
maintaining the records described in the foregoing in an accurate and complete
manner. This provision shall survive the termination of this Agreement.
You agree to furnish the Funds, Warburg and us with such occasional and
periodic reports as we shall reasonably request from time to time to enable us
or the Funds to comply with applicable laws and regulations (including, without
limitation, providing reports relating to blue sky and other state securities
laws and regulations) and with such other information as we may reasonably
request (including, without limitation, periodic certifications confirming the
provision to Plans, Plan participants and Customers of the services described
herein). Moreover, you agree to provide to the Funds, Warburg and us access to
you and your personnel at our reasonable request during normal business hours to
confirm compliance with the provisions of this Agreement and applicable law. In
performing services hereunder, you agree that you will not engage in any
activities set forth in Schedule B.
You shall take all steps necessary to ensure that the arrangements
provided for in this
<PAGE>
Agreement are properly disclosed to the Plans. You agree to inform Plans and
Customers that they are transacting business with you and not with us, Warburg
or the Funds, and that they and Plan participants may look only to you for
resolution of problems or discrepancies in their accounts or between those
accounts and your omnibus accounts (the "Accounts") at the Funds.
Neither we, Warburg nor any Fund assumes any responsibility or
obligation as to your right to sell Shares in any state or jurisdiction. You
agree that you will not offer or sell any Shares to Plans, Customers or persons
(i) in any jurisdiction in which you are not properly licensed and authorized to
make such offers or sales or in which Shares are not qualified for sale, (ii)
with respect to whom such investment would not be suitable or appropriate under
applicable law or (iii) at any time after CSI or any Fund has provided you with
written notice that any Fund is not then currently offering Shares to the
public. We have full authority to take such action as we may deem advisable in
respect of all matters pertaining to the continuous offering of Shares. We
reserve the right in our sole discretion and without prior notice to you to
suspend sales or withdraw the offering of Shares.
You shall maintain at all times general liability and other insurance
coverage, including errors and omissions coverage, that is reasonable and
customary in light of your duties hereunder, with limits of not less than $5
million. Such insurance coverage shall be issued by a qualified insurance
carrier with a Best's rating of at least "A" or with the highest rating of a
nationally recognized statistical rating organization. In addition, you shall
promptly deliver to us such financial statements as we reasonably request
concerning your financial condition; such statements shall fairly represent your
financial condition as of the date thereof.
We may enter into other similar agreements with any other person or
persons without your consent.
2. Orders for Shares. Orders received from you for Shares of a Fund
will be accepted by us only at the public offering price applicable to each
order, as set forth in the relevant Prospectus and Statement. All orders by you
for a Fund's Shares will be held through the Accounts with the Fund; and you
agree to make available on a monthly basis to the Funds records necessary to
determine the number of Plans, Plan participants and/or Customers in each
Account (indicating the number of new accounts opened during the month, as well
as the number of ongoing accounts) and the times of receipt of Plan participant
and Customer orders. You agree to use your best efforts to assist us in
identifying "market timers" or investors who engage in a pattern of short-term
trading.
On each day on which a Fund calculates its net asset value (a "Business
Day"), you shall aggregate and calculate the net purchase and redemption orders
for each Account maintained by the Fund in which Plan participant and Customer
assets are invested. Net orders shall only reflect Plan participant and Customer
orders that you have received prior to the close of regular trading on the New
York Stock Exchange, Inc. (the "NYSE") (currently 4:00 p.m., Eastern time) on
that Business Day. Orders that you have received after the close of regular
trading on the NYSE shall be treated as though received on the next Business
Day. Each communication of orders by you shall constitute a representation that
such orders were received by you prior to the close of regular trading on the
NYSE on the Business Day on which the purchase or redemption order is priced in
accordance with Rule 22c-1 under the 1940 Act. Other procedures relating to the
Funds shall be in accordance with Schedule D, as amended from time to time, as
well as with the Prospectus and Statement of the relevant Fund and with oral or
written instructions that we or the relevant Fund shall forward to you from time
to time.
SUBJECT TO THE TERMS AND CONDITIONS OF THIS AGREEMENT AND THE
PROCEDURES REFERRED TO ABOVE, YOU ARE HEREBY APPOINTED TO ACT, AND YOU HEREBY
AGREE TO ACT, AS AGENT OF EACH FUND FOR THE PURPOSE SPECIFICALLY SET FORTH IN
2
<PAGE>
THIS PARAGRAPH. Provided that you comply with the foregoing, you shall be deemed
to be an agent of each Fund to the extent orders refer to such Fund for the sole
purpose of receiving instructions from yourself as Plan agent for the purchase
and redemption of Shares prior to the close of regular trading each Business Day
and communicating orders based on such instructions to the Fund's transfer
agent, all as specified herein, and the Business Day on which you receive such
instructions prior to the close of regular trading on the NYSE shall be the
Business Day on which such orders will be deemed to be received by us or the
Fund's transfer agent as a result of such instructions.
Payment for Shares of a Fund ordered from us must be received at the
time, and in the manner, set forth in Schedule D, as amended from time to time.
All orders are subject to acceptance or rejection by us or the relevant Fund in
the sole discretion of either, or by the relevant Fund's transfer agent acting
on our behalf, and orders shall be effective only upon receipt in proper form.
The Funds may, if necessary, delay redemption of Shares to the extent permitted
by the 1940 Act.
3. Fees. For the services and facilities provided by you hereunder, we
agree to pay you beginning on the effective date indicated next to our signature
below an amount calculated at the rate and in the manner set forth in Schedule
C, as amended from time to time.
You agree that during the term of this Agreement, you will not assess
against or collect from Plans, Plan participants or Customers any transaction
fee upon the purchase or redemption of any Fund's Shares that are considered in
calculating the fee due pursuant to this Agreement.
4. Counsellors Securities' Responsibilities; Limitation of Liability
for Claims. Any printed information that we furnish to you other than the
Prospectus, the Statement, information supplemental to the Prospectus and the
Statement, periodic reports and proxy solicitation materials are our sole
responsibility, and not the responsibility of any Fund, and you agree that the
Funds, the shareholders of the Funds and the officers and governing Boards of
the Funds shall have no liability or responsibility to you in these respects.
You also agree that the payment of compensation to you under this Agreement is
solely our responsibility and not that of any Fund, and you agree that the
Funds, the shareholders of the Funds and the officers and governing Boards of
the Funds shall have no liability or responsibility to you with respect to any
indebtedness, liability or obligation hereunder. Further, it is understood, in
the case of each Fund that is organized as a Massachusetts business trust or
series thereof, that the declarations of trust for each trust refers to the
trustees collectively as trustees and not as individuals personally, and that
the declaration of trust provides that no shareholder, trustee, officer,
employee or agent of the trust shall be subject to claims against or obligations
of the trust to any extent whatsoever, but that the trust estate only shall be
liable. No Fund shall be liable for the obligations or liabilities of any other
Fund. No series of any Fund, if any, shall be liable for obligations of any
other series.
5. Pricing Errors. In the event adjustments are required to correct any
error in the computation of the net asset value of a Fund's Shares, the Fund or
we shall notify you as soon as practicable after discovering the need for those
adjustments that result in an aggregate reimbursement of $150 or more to the
Accounts maintained by the Fund for Plan participants and/or Customers. Any such
notice shall state for each day for which an error occurred the incorrect price,
the correct price and, to the extent communicated to the Fund's shareholders,
the reason for the price change. You may send this notice or a derivation
thereof (so long as such derivation is approved in advance by Warburg) to Plan
participants and Customers whose accounts are affected by the price change.
If the Accounts maintained by the Fund for Plan participants and
Customers received amounts in excess of the amounts to which it otherwise would
have entitled prior to an adjustment
3
<PAGE>
for an error, you, at our request, will make a good faith attempt to collect
such excess amounts from Plan participants and Customers. In no event, however,
shall you be liable to the Funds or us for any such amounts.
If an adjustment is to be made in accordance with the first paragraph
of this section 5, the relevant Fund shall make all necessary adjustments
(within the parameters specified in that first paragraph) to the number of
Shares owned in the Accounts and distribute to you the amount of such
underpayment for credit to Plan participants' and Customers' accounts.
6. Termination; Assignment. This Agreement shall be terminable without
penalty upon 30 days' written notice to us by you and upon 10 days' written
notice to you by us; provided, however, that any termination of this Agreement
shall not affect any unpaid obligations under this Agreement and you shall be
entitled to receive all fees earned up to and including the effective date of
termination.
This Agreement shall not be assignable by either us or you without the
prior written consent of the Funds. Nothing in this Agreement is intended to
confer upon any person other than the Funds and the parties hereto and their
permitted assigns and successors any rights or remedies under or by reason of
this Agreement.
7. Publicity. CSI will provide you on a timely basis with investment
performance information for each Fund, including total return for the preceding
calendar month and calendar quarter, the calendar year to date, and the prior
one-year, five-year, and ten-year (or life of the Fund) periods. You may, based
on the Securities and Exchange Commission-mandated information supplied by CSI,
prepare communications for Plan participants ("Participant Materials"). You
shall provide copies of all Participant Materials to CSI concurrently with their
first use for CSI's internal recordkeeping purposes. It is understood that
neither CSI nor any Fund shall be responsible for errors or omissions in, or the
content of, Participant Materials.
8. Standard of Care; Indemnification. In carrying out your and our
obligations under this Agreement, you and we each agree to act in good faith and
without negligence.
You agree to and do release, indemnify and hold each Fund, its
investment adviser, CSI and their and our respective officers, trustees,
directors and controlling persons harmless from and against any and all direct
or indirect claims, liabilities, expenses or losses resulting from requests,
directions, actions or inactions of or by you or your officers, employees or
agents regarding your responsibilities hereunder. Without limiting the
generality of the foregoing, you agree that this provision will apply to claims,
liabilities, expenses or losses arising out of (a) your making any statement or
representation concerning the Shares that is not contained in the relevant
Prospectus or Statement or in such printed material issued by us or a Fund as
information supplemental to the Prospectus and Statement (including, without
limitation, any statement, representation or omission contained in Participant
Materials) and (b) a sale or offering of Shares (i) in any state or jurisdiction
in which such Shares are not qualified for sale or exempt from the requirements
of the relevant securities laws or in which you are not properly licensed or
authorized to make offers or sales, (ii) which is unsuitable or otherwise
inappropriate to any Plan, Plan participant or Customer or (iii) at any time
after CSI or any Fund provides written notice that any Fund is not then
currently offering Shares to the public. The Funds and CSI, in each case solely
to the extent of such parties' responsibilities hereunder, agree to and do
release, indemnify and hold you and your officers, directors and controlling
persons harmless from and against any and all direct or indirect claims,
liabilities, expenses or losses resulting from requests, directions, actions or
inactions of or by us, any Fund or our respective officers, employees or agents
regarding our responsibilities hereunder.
This provision shall survive the termination of this Agreement.
4
<PAGE>
9. Representations and Warranties. Each party hereby represents and
warrants to the other that it is duly authorized by all necessary action,
approval or authorization to enter into this Agreement and that it is duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is organized.
You further represent, warrant and agree that:
(i) you are fully authorized by applicable law and
regulation and by any agreement you may have with any Plan, Customer or
client for whom you may act pursuant to this Agreement to perform the
services and receive the compensation therefor described in this
Agreement;
(ii) in performing the services described in this
Agreement, you will comply with all applicable laws, rules and
regulations;
(iii) if you are not duly registered as a
broker-dealer under Section 15 of the 1934 Act or as a transfer agent
under Section 17A of the 1934 Act and, in each case, applicable state
securities laws and regulations, you are not required to be so
registered and will not be required to be so registered in order to
perform this Agreement;
(iv) neither you nor any of your "affiliates" (as
such term is defined in 29 C.F.R. Section 2510.3-21(e)) is a
"fiduciary" of any Plan as such term is defined in section 3(21) of the
Employment Retirement Income Security Act of 1974, as amended
("ERISA"), and section 4975 of the Internal Revenue Code of 1986, as
amended (the "Code"); and
(v) the receipt of fees hereunder will not constitute
a "prohibited transaction" as such term is defined in section 406 of
ERISA and section 4975 of the Code.
10. Transactions Subject to Fund/SERV. Upon the execution of the
Fund/SERV Amendment to this Agreement, trades may be made through Fund/SERV.
11. Governing Law; Complete Agreement. This Agreement shall be governed
by and construed in accordance with the laws (except the conflict of law rules)
of the State of New York.
This Agreement contains the full and complete understanding of the
parties and supersedes all prior representations, promises, statements,
arrangements, agreements, warranties and understandings between the parties with
respect to the subject matter hereof, whether oral or written, express or
implied.
12. Amendment. This Agreement, including the Schedules thereto, may be
modified or amended and the terms of this Agreement may be waived only by
writings signed by each of the parties.
5
<PAGE>
13. Notices. All notices and communications shall be mailed or
telecopied to you to the address set forth below and to us at 466 Lexington
Avenue, New York, New York 10017, Attention: Eugene P. Grace (Fax No.:
212-878-9351), or in any case to such other address as a party may request by
giving written notice to the other.
COUNSELLORS SECURITIES INC.
By:
Name:
Title:
Date:
WARBURG PINCUS BALANCED FUND WARBURG PINCUS CAPITAL
APPRECIATION FUND WARBURG PINCUS EMERGING GROWTH FUND
WARBURG PINCUS EMERGING MARKETS FUND WARBURG PINCUS
FIXED INCOME FUND WARBURG PINCUS GLOBAL FIXED INCOME
FUND WARBURG PINCUS GLOBAL POST-VENTURE CAPITAL FUND
WARBURG PINCUS GROWTH & INCOME FUND WARBURG PINCUS
HEALTH SCIENCES FUND WARBURG PINCUS INTERMEDIATE
MATURITY GOVERNMENT FUND WARBURG PINCUS INTERNATIONAL
EQUITY FUND WARBURG PINCUS JAPAN GROWTH FUND WARBURG
PINCUS JAPAN OTC FUND WARBURG PINCUS NEW YORK
INTERMEDIATE MUNICIPAL FUND WARBURG PINCUS
POST-VENTURE CAPITAL FUND WARBURG PINCUS SMALL
COMPANY GROWTH FUND WARBURG PINCUS SMALL COMPANY
VALUE FUND WARBURG PINCUS STRATEGIC VALUE FUND
By:
Name:
Title:
Please indicate your confirmation and acceptance of this Agreement as
of the date written above by signing below.
Accepted and Agreed:
Firm Name: [FIRM NAME]
By:
Name (Print):
Title:
Address:
Telephone No.:
Fax No.:
Date:
Effective Date:
6
<PAGE>
Capitalized terms used herein and not otherwise defined shall
have the meaning set forth in the body of the Services Agreement.
SCHEDULE A
Administrative Services
(i) receiving from the Plans, Plan participants and Customers, by the
close of regular trading on the New York Stock Exchange (currently 4:00 p.m.,
Eastern time) on any business day (i.e., a day on which the New York Stock
Exchange is open for trading), instructions for the purchase and redemption of
shares; aggregating and processing purchase and redemption requests for Shares
from Plan participants and Customers and placing net purchase and redemption
orders with CSI or its designee; payment for net purchase orders must be
received at the time the order is placed; communicating orders in a timely
manner to CSI or its designee and promptly delivering, or instructing the Plans
to deliver, appropriate documentation to CSI or its designee;
(ii) providing Plan participants and Customers with a service that
invests the assets of their accounts in Shares;
(iii) providing information periodically to Plans, Plan participants
and Customers showing their positions in Shares;
(iv) arranging for bank wires;
(v) providing sub-accounting with respect to Shares beneficially owned
by Plans, Plan participants and Customers;
(vi) if required by law, forwarding shareholder communications from
the relevant Fund (such as proxies, shareholder reports, annual and semi-annual
financial statements and dividend, distribution and tax notices) to Plans, Plan
participants and Customers at your expense, with such material to be provided to
you by CSI to the extent reasonably practicable upon ten Business Days' notice;
(vii) withholding taxes on non-resident alien accounts and otherwise
as appropriate;
(viii) maintaining records of dividends and distributions; and
disbursing dividends and distributions and reinvesting such in the relevant Fund
for Plans and Plan participants;
(ix) preparing and delivering to Plans, Plan participants and
Customers and state and federal regulatory authorities, including the U.S.
Internal Revenue Service, such information respecting dividends and
distributions paid by the relevant Fund as may be required by law;
(x) maintaining adequate records for each Plan and Customer reflecting
Shares purchased and redeemed, including dates and prices for all transactions,
and Share balances;
(xi) preparing and delivering to Plans and Customers periodic account
statements showing for each Plan and Customer, respectively, the total number of
Shares held as of the statement closing date, purchases and redemptions of
Shares during the statement period, and dividends and other distributions paid
during the statement period (whether paid in cash or reinvested in Shares),
including dates and prices for all transactions;
(xii) on behalf of and to the extent instructed by each Plan and
Customer and as required by law, at your expense deliver to Plan participants
(or deliver to the Plans for distribution to Plan
<PAGE>
participants) and Customers Prospectuses, Statements and other materials
provided to you by CSI to the extent reasonably practicable upon ten Business
Days' notice;
(xiii) maintain daily and monthly purchase summaries (expressed in
both Share and dollar amounts) for each Plan and Customer; and
(xiv) settle orders in accordance with the terms of the Prospectus and
Statement of the Funds.
Shareholder Services
(i) responding to Plans, Plan participant and Customer inquiries;
(ii) providing information on Plan, Plan participant and Customer
investments;
(iii) providing other shareholder liaison services;
(iv) providing office space and equipment, telephone facilities and
personnel (which may be any part of the space, equipment and facilities
currently used in your business, or any personnel employed by you) as may be
reasonably necessary or beneficial in order to provide services to Plans and
Customers under this Agreement;
(v) sending confirmations of orders to the Plans and Plan participants
and Customers to the extent required by law and paying any costs in connection
therewith;
(vi) using all reasonable efforts to ensure that taxpayer
identification numbers provided by you on behalf of the Plans, Plan participants
and Customers are correct; and
(vii) providing the Plans, Plan participants and Customers a confirming
Prospectus following an acquisition of Shares to the extent required by law.
Other Services
(i) providing all other services as may be incidental to the
Administrative Services and Shareholder Services enumerated above;
(ii) providing such other services as may be normal or customary for
service providers performing substantially similar services; and
(iii) providing such other services as may be mutually agreed by the
parties to the extent permitted under applicable statutes, rules and
regulations.
<PAGE>
SCHEDULE B
Prohibited Activities
(i) You shall not withhold placing orders for the Shares received from
Plan participants and Customers so as to profit yourself as a result of such
withholding.
(ii) You shall not place orders for Shares unless you have already
received purchase orders for Shares at the applicable public offering price and
subject to the terms hereof.
(iii) You agree that you will not offer or sell any Shares except under
circumstances that will result in compliance with applicable federal and state
securities laws and that in connection with sales and offers to sell Shares you
will furnish to each person to whom any such sale or offer is made, at or prior
to the time of offering or sale, a copy of the relevant Prospectus and, if
requested, the corresponding Statement (each as then amended or supplemented)
and will not furnish to any person any information relating to a Fund that is
inconsistent in any respect with the information contained in the Prospectus and
Statement (each as then amended or supplemented).
(iv) You shall not make any representations concerning the Shares
except those contained in the relevant Prospectus and Statement and in such
printed information subsequently issued by us or a Fund as information
supplemental to the Prospectus and Statement.
<PAGE>
SCHEDULE C
Fees
<TABLE>
<CAPTION>
Total Annual Fee as % of
Average Net Assets of
Name of Fund Customers' and Plans' Shares held in:
<S> <C>
Warburg Pincus
Balanced .25
Capital Appreciation .25
Emerging Growth .25
Emerging Markets .25
Fixed Income .15
Global Fixed Income .15
Global Post-Venture Capital .25
Growth & Income .25
Health Sciences .25
Intermediate Maturity Government .15
International Equity .25
Japan Growth .25
Japan OTC .25
New York Intermediate Municipal .15
Post-Venture Capital .25
Small Company Growth .25
Small Company Value .25
Strategic Value .25
Firm Name: [FIRM NAME]
By:
Name (Print):
Title:
Address:
Telephone No.:
Fax No.:
Date:
</TABLE>
Fees will be computed by CSI and paid quarterly. CSI or another of the
Funds' designees shall pay the Fee to you, and shall be reimbursed by each Fund
for a portion of the Fee due with respect to that Fund to be determined from
time to time ("Fund Portion"). The difference between the Fee due minus the Fund
Portion shall not be reimbursed by the Funds, but shall be borne by CSI or
another of the Funds' designees.
For purposes of determining the Fees payable hereunder, the average net
assets of the Plans' and Customers' Shares will be computed in the manner
specified in the relevant Fund's registration statement (as the same is in
effect from time to time) in connection with the computation of the net asset
value of Shares for purposes of purchases and redemptions. Fees payable
hereunder shall only be paid with respect to assets serviced by you and not by
any other financial institution and/or any of your affiliates. You will not at
any time include or permit to be included in the calculation of Customers' or
Plans' Shares or fees due from CSI or any affiliate
<PAGE>
thereof pursuant to this Agreement, Shares with respect to which a fee is being
paid by CSI to a party other than you or which are otherwise the subject of a
similar agreement, whether such agreement is in place on the date hereof or
entered into at some future date.
In computing your fee, the applicable fee rate set forth above (multiplied by
the actual number of days elapsed during each quarterly period and divided by
365) shall be applied to the average aggregate quarterly net asset value of
Shares of the applicable Funds in accounts for which you provide services for
the month in question. Each quarterly fee shall be determined independently of
every other quarterly fee. For the quarter in which this Agreement becomes
effective or terminates, there shall be an appropriate proration on the basis of
the number of days that the Agreement is in effect during such quarter. In
addition, if in any period the aggregate amount payable to you is less than
$200, we may, in our discretion, defer the payment of such amount until it,
together with a subsequent payment or payments, exceeds $200.
<PAGE>
SCHEDULE D
Operating Procedures
1. Each Fund will make available its net asset value per share on a
daily basis as soon as reasonably practicable after the net asset value is
calculated. The Fund will use its best efforts to make such determination
available by 6:00 p.m., Eastern time, but in no event later than 7:00 p.m.,
Eastern time, each Business Day.
2. Each Fund will furnish notice of the declaration of any income,
dividends or capital gains distributions payable by it. This information will
include the ex, record and payable dates along with the Fund's reinvestment
price. Typically, this notice will be given by fax transmission, but may be
given by other means as may be reasonable under the circumstances.
3. Dividends and capital gains distributions will be automatically
reinvested, unless otherwise indicated in writing by the Service Organization,
at net asset value in accordance with the Fund's Prospectus.
4. For trades placed with a Fund the Business Day after a trade date
("T+1") for investment at the prior Business Day's net asset value:
(i) trade orders must be communicated to the relevant Fund by 9:00
a.m., Eastern time on T + 1, and
(ii) payment for such orders must be in federal funds transmitted by
wire. This wire must be initiated by 12:00 p.m., Eastern time on T + 1 by either
the Service Organization or CSI, as the case may be.
5. Issuance and transfer of the Fund's shares will be by book entry
only. Stock certificates will not be issued by the Funds unless specifically
requested by the Service Organization and agreed to by the relevant Fund.
6. CSI will make available reports as to the states and jurisdictions
in which we believe the Funds are qualified for sale under, or are exempt from
the requirements of, the respective securities laws of such states and
jurisdictions. These reports will be updated periodically as changes arise.
7. The Funds will make available confirmation of executed trades the
next Business Day following receipt of the trade from the Service Organization.
Confirmation may be in written or verbal form. If verbal, Service Organization
must promptly inform CSI of any discrepancies; silence will be deemed to
indicate agreement.
8. The Funds will make available account statements on a calendar
quarter basis.
[FIRM NAME]
WARBURG PINCUS ADVISOR FUNDS SERVICES AGREEMENT
Ladies and Gentlemen:
We, Counsellors Securities Inc. ("CSI"), have an agreement (the
"Distribution Agreement") with the several open-end management investment
companies, or series thereof, for which Warburg Pincus Asset Management, Inc.
("Warburg") provides investment advisory services which are listed on Appendix A
hereto, as amended from time to time (the "Funds"). Pursuant to the Distribution
Agreements, we act as the distributor of shares of each Fund's common stock or
beneficial interest, as the case may be, par value $.001 per share, designated
Advisor Shares (collectively, "Advisor Shares"). This is to confirm that, in
consideration of the agreements hereinafter contained, we have agreed that the
company that is the counterparty to this Agreement (the "Service Organization")
shall provide certain services in connection with the Advisor Shares. We
acknowledge that Advisor Shares may be sold directly to certain employee benefit
and retirement plans ("Plans") that include or propose to include one or more
Funds as an investment alternative. The terms "Prospectus" and "Statement" as
used herein refer respectively to the then current prospectus and statement of
additional information relating to the Advisor Shares forming parts of the
Registration Statement on Form N-1A of a Fund under the Securities Act of 1933,
as amended (the "1933 Act").
1. Services. Service Organization agrees to provide to investors in the
Funds ("Customers"), Plans and Plan participants the administrative, shareholder
and/or other services set forth on Schedule A hereto, as amended from time to
time. If Service Organization is not a banking organization that is prohibited
from performing such services (a "Bank"), Service Organization also agrees to
provide the distribution and marketing services set forth on Schedule A hereto.
In providing such services, Service Organization shall not, except as
specifically provided herein, have any authority to act as agent for CSI or any
Fund, but shall act only as agent of the Plans, Plan participants and Customers
who from time to time beneficially own Advisor Shares and as an independent
contractor and not as an employee or agent of the Funds, Warburg or CSI.
Service Organization will maintain all records required by law,
including records detailing the services it provides in return for the fees to
which it is entitled under this Agreement. Such records shall be preserved,
maintained and made available to the extent required by law and in accordance
with the Investment Company Act of 1940, as amended (the "1940 Act"), the
Securities Exchange Act of 1934 (the "1934 Act") and the rules thereunder. Upon
request by a Fund or CSI, Service Organization agrees to promptly make copies
or, if required, originals of such of these records available to the Fund or
CSI, as the case may be. Service Organization also agrees to promptly notify the
Fund or CSI if it experiences any difficulty in maintaining these records in an
accurate and complete manner. This provision shall survive the termination of
this Agreement.
Service Organization agrees to furnish the Funds, Warburg and CSI with
such occasional and periodic reports as we shall reasonably request from time to
time to enable us or the Funds to comply with applicable laws and regulations
(including, without limitation, providing reports relating to blue sky and other
state securities laws and regulations) and with such other information as they
may reasonably request (including, without limitation, periodic certifications
confirming
<PAGE>
the provision to Plans, Plan participants and Customers of the services
described herein). Moreover, Service Organization agrees to provide to the
Funds, Warburg and CSI access to it, and its personnel at their reasonable
request during normal business hours to confirm compliance with the provisions
of this Agreement and applicable law. In performing services hereunder, Service
Organization agrees that it will not engage in any activities set forth in
Schedule B.
Service Organization shall take all steps necessary to ensure that the
arrangements provided for in this Agreement are properly disclosed to the Plans
and Customers. Service Organization agrees to inform Plans and Customers that
they are transacting business with Service Organization and not with CSI,
Warburg or the Funds, and that they and Plan participants may look only to
Service Organization for resolution of problems or discrepancies in their
accounts or between those accounts and Service Organization's omnibus accounts
(the "Accounts") at the Funds.
In the case of Service Organizations that are not banks, neither CSI,
Warburg nor any Fund assumes any responsibility or obligation as to Service
Organization's right to sell Advisor Shares in any state or jurisdiction. Any
such Service Organization agrees that it will not offer or sell any Advisor
Shares to Plans, Customers or persons (i) in any jurisdiction in which Service
Organization is not properly licensed and authorized to make such offers or
sales, or in which Advisor Shares are not qualified for sale, (ii) with respect
to whom such investment would not be suitable or appropriate under applicable
law or (iii) at any time after CSI or any Fund has provided you with written
notice that any Fund is not then currently offering Advisor Shares to the
public. CSI has full authority to take such action as it may deem advisable in
respect of all matters pertaining to the continuous offering of Advisor Shares.
CSI reserves the right in its sole discretion and without prior notice to
Service Organization to suspend sales or withdraw the offering of Advisor Shares
of each Fund.
Service Organization shall maintain at all times general liability and
other insurance coverage, including errors and omissions coverage, that is
reasonable and customary in light of its duties hereunder, with limits of not
less than $5 million. Such insurance coverage shall be issued by a qualified
insurance carrier with a Best's rating of at least "A" or with the highest
rating of a nationally recognized statistical rating organization. In addition,
Service Organization shall promptly deliver to CSI such financial statements as
CSI may reasonably request concerning Service Organization's financial
condition; such statements shall fairly represent Service Organization's
financial condition as of the date thereof.
Each Fund and CSI may enter into other similar agreements with any other
person or persons without Service Organization's consent.
2. Orders for Advisor Shares. Orders received from Service Organization
for Advisor Shares will be accepted by CSI only at the public offering price
applicable to each order, as set forth in the relevant Prospectus and Statement.
All orders by Service Organization for Advisor Shares will be held through the
Accounts with the Funds; and Service Organization agrees to make available on a
monthly basis to CSI records necessary to determine the number of Plans, Plan
participants and/or Customers in each Account and the times of receipt of Plan
participant and Customer orders. Service Organization agrees to use its best
efforts to assist CSI in identifying "market timers" or investors who engage in
a pattern of short-term trading.
-2-
<PAGE>
On each day on which a Fund calculates its net asset value (a "Business
Day"), Service Organization shall aggregate and calculate the net purchase and
redemption orders for each Account maintained by the Fund in which Plan
participant and Customer assets are invested. Net orders shall only reflect Plan
participant and Customer orders that Service Organization has received prior to
the close of regular trading on the New York Stock Exchange, Inc. (the "NYSE")
(currently 4:00 p.m., Eastern time) on that Business Day. Orders that Service
Organization has received after the close of regular trading on the NYSE shall
be treated as though received on the next Business Day. Each communication of
orders by Service Organization shall constitute a representation that such
orders were received by it prior to the close of regular trading on the NYSE on
the Business Day on which the purchase or redemption order is priced in
accordance with Rule 22c-1 under the 1940 Act. Other procedures relating to the
Funds shall be in accordance with Schedule C, as amended from time to time, as
well as with the Prospectus and Statement of the relevant Fund and with oral or
written instructions that CSI or a Fund shall forward to Service Organization
from time to time.
SUBJECT TO THE TERMS AND CONDITIONS OF THIS AGREEMENT AND THE PROCEDURES
REFERRED TO ABOVE, SERVICE ORGANIZATION HEREBY IS APPOINTED TO ACT, AND SERVICE
ORGANIZATION HEREBY AGREES TO ACT AS AGENT OF CSI FOR THE PURPOSE SPECIFICALLY
SET FORTH IN THIS PARAGRAPH. Provided that Service Organization complies with
the foregoing, it shall be deemed to be an agent of CSI for the sole purpose of
receiving instructions as Plan and Customer agent for the purchase and
redemption of Advisor Shares of that Fund prior to the close of regular trading
each Business Day and communicating orders based on such instructions to the
Fund's transfer agent, all as specified herein. The Business Day on which
Service Organization receives such instructions prior to the close of regular
trading on the NYSE shall be the Business Day on which such orders will be
deemed to be received by CSI or the Fund's transfer agent as a result of such
instructions.
Dividends and capital gains distributions will be automatically
reinvested at net asset value in accordance with the Fund's Prospectus.
Payment for Advisor Shares must be received at the time, and in the
manner, set forth in Schedule C, as amended from time to time. All orders are
subject to acceptance or rejection by CSI or the relevant Fund in the sole
discretion of either, or by the Fund's transfer agent acting on its behalf, and
orders shall be effective only upon receipt in proper form. Each Fund may, if
necessary, delay redemption of Advisor Shares to the extent permitted by the
1940 Act.
3. Fees. (a) Each Fund has adopted a plan pursuant to Rule 12b-1 under
the 1940 Act providing for payment of 12b-1 fees of up to .75% of the value of
the average daily net assets of the Advisor Shares held of record by the Service
Organization from time to time on behalf of Plan participants and Customers (the
"Customers' Advisor Shares"). In consideration of the services and facilities
provided by the Service Organization, CSI, on behalf of each Fund, may pay to
the Service Organization, and the Service Organization will accept as full
payment therefor, a fee in an amount obtained by multiplying the applicable
percentages set forth on Appendix A by the average daily net assets of the
Customers' Advisor Shares, which fee will be computed daily and payable
quarterly. The fee set forth above may include a service fee in the amount of
.25% of the average daily net assets of the Customers' Advisor Shares, which fee
will be computed daily and payable quarterly. Any such service fee shall be paid
to Service Organization solely
-3-
<PAGE>
for personal service and/or the maintenance of shareholder accounts.
(b) For purposes of determining the fees payable under this
Section 3, the average daily net assets of the Customers' Advisor Shares will be
computed in the manner specified in the relevant Fund's registration statement
(as the same is in effect from time to time) in connection with the computation
of the net asset value of Advisor Shares for purposes of purchases and
redemptions. If in any period the aggregate amount payable to Service
Organization is less than $200, CSI may, in its discretion, defer the payment of
such amount until it, together with a subsequent payment or payments, exceeds
$200.
(c) Service Organization will provide to Plans, Plan participants
and Customers a schedule of fees showing the compensation payable to the Service
Organization hereunder, along with any other fees charged by it to Plans, Plan
participants and Customers relating to their assets that are invested in Advisor
Shares.
(d) The fees paid pursuant to this Agreement shall be payable
only after, for so long as and to the extent that CSI has received an amount
equal to the fees payable to Service Organization from each Fund pursuant to
such Fund's Distribution Plan, as amended from time to time, adopted pursuant to
Rule 12b-1 under the 1940 Act.
-4-
<PAGE>
4. Counsellors Securities' Responsibilities; Limitation of Liability for
Claims. Any printed information that is furnished to Service Organization other
than each Fund's Prospectus, Statement, information supplemental to the
Prospectus and the Statement, periodic reports and proxy solicitation materials
is CSI's sole responsibility, and not the responsibility of any Fund, and
Service Organization agrees that the Funds, the shareholders of the Funds and
the officers and governing Boards of the Funds shall have no liability or
responsibility to Service Organization in these respects. Further, it is
understood, in the case of each Fund that is organized as a Massachusetts
business trust or series thereof, that the declarations of trust for each trust
refers to the trustees collectively as trustees and not as individuals
personally, and that the declaration of trust provides that no shareholder,
trustee, officer, employee or agent of the trust shall be subject to claims
against or obligations of the trust to any extent whatsoever, but that the trust
estate only shall be liable. No Fund shall be liable for the obligations or
liabilities of any other Fund. No series of any Fund, if any, shall be liable
for obligations of any other series.
5. Pricing Errors. In the event adjustments are required to correct any
error in the computation of the net asset value of a Fund's Advisor Shares, the
Fund or CSI shall notify Service Organization as soon as practicable after
discovering the need for those adjustments that result in an aggregate
reimbursement of $150 or more to any one Account. Any such notice shall state
for each day for which an error occurred the incorrect price, the correct price
and, to the extent communicated to the Fund's shareholders, the reason for the
price change. Service Organization may send this notice or a derivation thereof
(so long as such derivation is approved in advance by CSI or Warburg) to Plan
participants and Customers whose accounts are affected by the price change.
If an Account received amounts in excess of the amounts to which it
otherwise would have been entitled prior to an adjustment for an error, Service
Organization, at the Fund's request, will make a good faith attempt to collect
such excess amounts from Plan participants and Customers. In no event, however,
shall Service Organization be liable to a Fund or CSI for any such amounts.
If an adjustment is to be made in accordance with the first paragraph of
this Section 5, the relevant Fund shall make all necessary adjustments (within
the parameters specified in that first paragraph) to the number of Advisor
Shares owned in the Accounts and distribute to Service Organization the amount
of such underpayment for credit to Plan participants' and Customers' accounts.
6. Publicity. CSI will provide Service Organization on a timely basis
with investment performance information for each Fund in which Service
Organization maintains an Account, including total return for the preceding
calendar month and calendar quarter, the calendar year to date, and the prior
one-year, five-year, and ten-year (or life of the Fund) periods. Service
Organization may, based on the Securities and Exchange Commission-mandated
information supplied by CSI, prepare communications for Plan participants and
Customers ("Participant Materials"). Service Organization shall provide copies
of all Participant Materials to CSI concurrently with their first use for CSI's
internal recordkeeping purposes. It is understood that neither CSI nor any Fund
shall be responsible for errors or omissions in, or the content of, Participant
Materials.
7. Standard of Care; Indemnification. In carrying out Service
Organization's and CSI's obligations under this Agreement, Service Organization
and CSI each agree to act in good faith and without negligence.
-5-
<PAGE>
Service Organization agrees to and does release, indemnify and hold each
Fund, its investment adviser(s), CSI and their respective officers, trustees,
directors, employees, agents and controlling persons harmless from and against
any and all direct or indirect claims, liabilities, expenses or losses resulting
from requests, directions, actions or inactions of or by Service Organization or
its or their officers, employees or agents regarding Service Organization's
responsibilities hereunder. Without limiting the generality of the foregoing,
Service Organization agrees that this provision will apply to claims,
liabilities, expenses or losses arising out of (a) Service Organization making
any statement or representation concerning the Advisor Shares that is not
contained in the relevant Prospectus or Statement or in such printed material
issued by CSI or a Fund as information supplemental to the Prospectus and
Statement (including, without limitation, any statement, representation or
omission contained in Participant Materials), (b) a sale or offering of Advisor
Shares (i) in any state or jurisdiction in which such Advisor Shares are not
qualified for sale or exempt from the requirements of the relevant securities
laws or in which Service Organization is not properly licensed or authorized to
make offers or sales, (ii) which is unsuited or otherwise inappropriate for any
Plan, Plan participant or Customer or (iii) at any time after CSI or any Fund
provides written notice that any Fund is not then currently offering Advisor
Shares to the public. CSI agrees to and does release, indemnify and hold Service
Organization and its officers, directors and controlling persons harmless from
and against any and all direct or indirect claims, liabilities, expenses or
losses resulting from requests, directions, actions or inactions of or by CSI or
its respective officers, trustees, directors, employees, agents or controlling
persons.
This provision shall survive the termination of this Agreement.
8. Representations and Warranties. Each party hereby represents and
warrants to the other that it is duly authorized by all necessary action,
approval or authorization to enter into this Agreement and that it is duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is organized.
Service Organization further represents, warrants and agrees that:
(i) Service Organization is and, during the term of this
Agreement, will be fully authorized by applicable law and regulation and
by any agreement it may have with any Plan, Customer or client for whom
it may act in a manner covered by this Agreement to perform the services
and receive the compensation therefor described in this Agreement;
(ii) in performing the services and receiving the
compensation described in this Agreement, Service Organization will
comply with all applicable laws, rules and regulations;
-6-
<PAGE>
(iii) Service Organization is duly registered as a
broker-dealer under Section 15 of the 1934 Act and a transfer agent
under Section 17A of the 1934 Act and, in each case, applicable state
securities laws and regulations, and all such registrations are in full
force and effect and will remain in effect during the term of this
Agreement; if Service Organization is not so registered, it is not
required to be so registered and will not be required to be so
registered in order to perform the services described in this Agreement;
(iv) neither Service Organization, nor any of its
"affiliates" (as such term is defined in 29 C.F.R. Section 2510.3-21(e))
is or, during term of this Agreement, will become a "fiduciary" of any
Plan as such term is defined in section 3(21) of the Employment
Retirement Income Security Act of 1974, as amended ("ERISA"), and
section 4975 of the Internal Revenue Code of 1986, as amended (the
"Code");
(v) the receipt of fees hereunder will not constitute a
"prohibited transaction" as such term is defined in section 406 of ERISA
and section 4975 of the Code; and
(vi) the compensation payable to Service Organization
hereunder, together with any other compensation it receives from Plans,
Plan participants and Customers for services contemplated by this
Agreement, will not be excessive or unreasonable under the laws and
instruments governing its relationships with Plans, Plan participants
and Customers.
9. Reports. Service Organization will furnish CSI, each Fund or its
designees with such information as it or they may reasonably request (including,
without limitation, periodic certifications confirming the provision to Plans,
Plan participants and Customers of the services described herein), and will
otherwise cooperate with CSI, each Fund and its designees (including, without
limitation, any auditors designated by each Fund), in connection with the
preparation of reports to the Fund's governing Board concerning this Agreement
and the monies paid or payable by CSI, on behalf of the Fund, pursuant hereto,
as well as any other reports or filings that may be required by law. Service
Organization will promptly notify the Fund and CSI in the event it is no longer
able to make the representations and warranties set forth above.
10. Term. This Agreement will become effective on the date set forth
below. Unless sooner terminated, this Agreement will continue until one year
from the date hereof, and thereafter will continue automatically for successive
annual periods provided such continuance is specifically approved at least
annually by the Fund in the manner set forth in the next paragraph. This
Agreement is terminable with respect to each Fund, with or without cause,
without penalty (i) at any time by the Fund, which termination may be by vote of
a majority of (a) the Disinterested Trustees/Directors (as defined below) or (b)
the outstanding Advisor Shares of the Fund, or (ii) by CSI or Service
Organization upon 30 days' notice to the other party hereto.
Anything in this Agreement to the contrary notwithstanding, no
compensation may be paid under this Agreement with respect to any Fund until
this Agreement has been approved by vote of a majority of (i) the Fund's
governing Board and (ii) those Trustees/Directors who are not "interested
persons" (as defined in the 1940 Act) of the Fund and have no direct or indirect
financial interest in the
-7-
<PAGE>
operation of the Distribution Plan adopted by the Fund regarding the provision
of distribution and support services to the beneficial owners of the Advisor
Shares or in any agreements related thereto ("Disinterested
Trustees/Directors"), cast in person at a meeting for the purpose of voting on
such approval.
11. Transactions Subject to Fund/SERV. Upon the execution of a Fund/SERV
Amendment to this Agreement, transactions in Fund shares may be effected through
Fund/SERV.
12. Governing Law; Complete Agreement; Assignment. This Agreement shall
be governed by and construed in accordance with the laws (except the conflict of
law rules) of the State of New York.
This Agreement contains the full and complete understanding of the
parties and supersedes all prior representations, promises, statements,
arrangements, agreements, warranties and understandings between the parties with
respect to the subject matter hereof, whether oral or written, express or
implied.
This Agreement is non-assignable by the parties hereto and will
terminate automatically in the event of its assignment (as such term is defined
in the 1940 Act). Nothing in this Agreement is intended to confer upon any
person other than the Fund and the parties hereto and their permitted assigns
and successors any rights or remedies under or by reason of this Agreement.
13. Amendment. This Agreement, including the Schedules thereto, may be
modified or amended and the terms of this Agreement may be waived only by
writings signed by each of the parties.
-8-
<PAGE>
14. Notices. All notices and communications shall be mailed or
telecopied to Service Organization to the address set forth below and to the
Fund or CSI at 466 Lexington Avenue, New York, New York 10017, Attention: Eugene
P. Grace (Fax No.: 212-878-9351), or in any case to such other address as a
party may request by giving written notice to the other.
COUNSELLORS SECURITIES INC.
By:
Name:
Title:
Date:
Please indicate Service Organization's confirmation and acceptance of this
Agreement as of the date written above by signing below.
Accepted and Agreed:
Firm Name: [FIRM NAME]
By:
Name (Print):
Title:
Address:
Telephone No.:
Fax No.:
Date:
Effective Date:
-9-
<PAGE>
Capitalized terms used herein and not otherwise defined shall have the meaning
set forth in the body of the Advisor Funds Services Agreement.
APPENDIX A
Funds Fee Rate
----- --------
Warburg Pincus
Balanced Fund .50
Capital Appreciation .50
Emerging Growth .50
Emerging Markets Fund .50
Fixed Income .25
Global Fixed Income .25
Global Post-Venture Capital .50
Growth & Income .50
Health Sciences .50
Intermediate Maturity Government .25
International Equity .50
Japan Growth .50
Japan OTC .50
New York Intermediate Municipal .25
Post-Venture Capital .50
Small Company Growth .50
Small Company Value .50
Strategic Value .50
<PAGE>
SCHEDULE A
----------
Distribution and Marketing Services
-----------------------------------
(i) formulation and implementation of marketing and promotional
activities including, but not limited to, direct mail promotions and other
advertising, if appropriate;
(ii) distributing Prospectuses, Statements and reports of the Fund to
prospective Plans, Plan sponsors and Customers;
(iii) preparing, printing and distributing sales literature pertaining
to the Fund; and
(iv) obtaining information, analyses and reports with respect to
marketing and promotional activities relating to the Fund.
Administrative Services
-----------------------
(i) receiving from the Plans, Plan participants and Customers, by the
close of regular trading on the New York Stock Exchange (currently 4:00 p.m.,
Eastern time) on any business day (i.e., a day on which the New York Stock
Exchange is open for trading), instructions for the purchase and redemption of
shares; aggregating and processing purchase and redemption requests for Advisor
Shares from Plan participants and Customers and placing net purchase and
redemption orders with CSI or its designee; payment for net purchase orders must
be received at the time the order is placed; communicating orders in a timely
manner to CSI or its designee and promptly delivering, or instructing the Plans
to deliver, appropriate documentation to CSI or its designee;
(ii) providing Plan participants and Customers with a service that
invests the assets of their accounts in Advisor Shares;
I (iii) providing information periodically to Plans, Plan participants
and Customers showing their positions in Advisor Shares;
(iv) arranging for bank wires;
(v) providing sub-accounting with respect to Advisor Shares
beneficially owned by Plans, Plan participants and Customers;
(vi) if required by law, forwarding shareholder communications from the
relevant Fund (such as proxies, shareholder reports, annual and semi-annual
financial statements and dividend, distribution and tax notices) to Plans, Plan
participants and Customers at Service Organization's expense, with such material
to be provided to it by CSI to the extent reasonably practicable upon ten
Business Days' notice;
(vii) withholding taxes on non-resident alien accounts and otherwise as
appropriate;
(viii) maintaining records of dividends and distributions; and
disbursing dividends and distributions and reinvesting such in the relevant Fund
for Plans and Plan participants;
<PAGE>
(ix) preparing and delivering to Plans, Plan participants and Customers
and state and federal regulatory authorities, including the U.S. Internal
Revenue Service, such information respecting dividends and distributions paid by
the relevant Fund as may be required by law;
(x) maintaining adequate records for each Plan and Customer reflecting
Advisor Shares purchased and redeemed, including dates and prices for all
transactions, and Share balances;
(xi) preparing and delivering to Plans and Customers periodic account
statements showing for each Plan and Customer, respectively, the total number of
Advisor Shares held as of the statement closing date, purchases and redemptions
of Advisor Shares during the statement period, and dividends and other
distributions paid during the statement period (whether paid in cash or
reinvested in Advisor Shares), including dates and prices for all transactions;
(xii) on behalf of and to the extent instructed by each Plan and
Customer and as required by law, at Service Organization's expense, delivering
to Plan participants (or delivering to the Plans for distribution to Plan
participants) and Customers Prospectuses, Statements and other materials
provided to it by CSI to the extent reasonably practicable upon ten Business
Days' notice;
(xiii) maintain daily and monthly purchase summaries (expressed in both
Share and dollar amounts) for each Plan and Customer; and
(xiv) settle orders in accordance with the terms of the Prospectus and
Statement of the Fund.
Shareholder Services
--------------------
(i) responding to Plans, Plan participant and Customer inquiries;
(ii) providing information on Plan, Plan participant and Customer
investments;
(iii) providing other shareholder liaison services;
(iv) providing office space and equipment, telephone facilities and
personnel (which may be any part of the space, equipment and facilities
currently used in Service Organization's business, or any personnel employed by
Service Organization) as may be reasonably necessary or beneficial in order to
provide services to Plans and Customers under this Agreement;
(v) sending confirmations of orders to the Plans and Plan participants
and Customers to the extent required by law and paying any costs in connection
therewith;
(vi) using all reasonable efforts to ensure that taxpayer
identification numbers provided by Service Organization on behalf of the Plans,
Plan participants and Customers are correct; and
(vii) providing the Plans, Plan participants and Customers a confirming
Prospectus following an acquisition of Advisor Shares to the extent required by
law.
-2-
<PAGE>
Other Services
--------------
(i) providing all other services as may be incidental to the
Distribution and Marketing Services, Administrative Services and Shareholder
Services enumerated above;
(ii) providing such other services as may be normal or customary for
service providers performing substantially similar services; and
(iii) providing such other services as may be mutually agreed by the
parties to the extent permitted under applicable statutes, rules and
regulations.
-3-
<PAGE>
SCHEDULE B
- ----------
Prohibited Activities
---------------------
(i) Service Organization shall not withhold placing orders for the
Advisor Shares received from Plan participants and Customers so as to profit as
a result of such withholding.
(ii) Service Organization shall not place orders for Advisor Shares
unless it has already received purchase orders for Advisor Shares at the
applicable public offering price and subject to the terms hereof.
(iii) Service Organization agrees that it will not offer or sell any
Advisor Shares except under circumstances that will result in compliance with
applicable federal and state securities laws and that in connection with sales
and offers to sell Advisor Shares Service Organization will furnish to each
person to whom any such sale or offer is made, at or prior to the time of
offering or sale, a copy of the relevant Prospectus and, if requested, the
corresponding Statement (each as then amended or supplemented) and will not
furnish to any person any information relating to a Fund that is inconsistent in
any respect with the information contained in the Prospectus and Statement (each
as then amended or supplemented).
(iv) Service Organization shall not make any representations concerning
the Advisor Shares except those contained in the relevant Prospectus and
Statement and in such printed information subsequently issued by CSI or a Fund
as information supplemental to the Prospectus and Statement.
<PAGE>
SCHEDULE C
- ----------
Operating Procedures
--------------------
1. Each Fund will make available its net asset value per share on a
daily basis as soon as reasonably practicable after the net asset value is
calculated. The Fund will use its best efforts to make such determination
available by 6:00 p.m., Eastern time, but in no event later than 7:00 p.m.,
Eastern time, each Business Day.
2. Each Fund will furnish notice of the declaration of any income,
dividends or capital gains distributions payable by it. This information will
include the ex, record and payable dates along with the Fund's reinvestment
price. Typically, this notice will be given by fax transmission, but may be
given by other means as may be reasonable under the circumstances.
3. Dividends and capital gains distributions will be automatically
reinvested at net asset value in accordance with the Fund's Prospectus.
4. For trades placed with a Fund the Business Day after a trade date
("T+1") for investment at the prior Business Day's net asset value:
(i) trade orders must be received before 4:00 p.m., Eastern time, by the
Service Organization on the trade date ("T"):
(ii) trade orders must be communicated to the relevant Fund by 10:00
a.m., Eastern time on T + 1, and
(iii) payment for such orders must be in federal funds transmitted by
wire. This wire must be initiated by 12:00 p.m., Eastern time on T + 1 by either
the Service Organization or CSI, as the case may be.
5. Issuance and transfer of the Fund's shares will be by book entry
only. Stock certificates will not be issued by the Funds unless specifically
requested by the Service Organization and agreed to by the relevant Fund.
6. CSI will make available reports as to the states and jurisdictions in
which we believe the Funds are qualified for sale under, or are exempt from the
requirements of, the respective securities laws of such states and
jurisdictions. These reports will be updated periodically as changes arise.
7. The Funds will make available confirmation of executed trades the
next Business Day following receipt of the trade from the Service Organization.
Confirmation may be in written or verbal form. If verbal, Service Organization
must promptly inform CSI of any discrepancies; silence will be deemed to
indicate agreement.
8. The Funds will make available account statements on a calendar
quarter basis.
<PAGE>
WARBURG PINCUS FUNDS
Rule 18f-3 Plan
Rule 18f-3 (the "Rule") under the Investment Company Act of 1940, as
amended (the "1940 Act"), requires that the Board of an investment company
desiring to offer multiple classes pursuant to the Rule adopt a plan setting
forth the separate arrangement and expense allocation of each class (a "Class"),
and any related conversion features or exchange privileges. The differences in
distribution arrangements and expenses among these classes of shares, and the
exchange features of each class, are set forth below in this Plan, which is
subject to change, to the extent permitted by law and by the governing documents
of each fund that adopts this Plan (the "Fund" and together the "Funds"), by
action of the governing Board of the Fund.
The governing Board, including a majority of the non-interested Board
members, of each Fund, or series thereof, which desires to offer multiple
classes has determined that the following Plan is in the best interests of each
class individually and the Fund as a whole:
1. Class Designation. Shares of a Fund or series of a Fund
shall be divided into Common Shares and Advisor Shares.
2. Differences in Services. Counsellors Securities Inc.
("CSI") will provide shareholder servicing and distribution services to holders
of Common Shares and Advisor Shares. Institutional shareholders of record may
also provide distribution services, shareholder services and/or administrative
and accounting services to or on behalf of their clients or customers who
beneficially own Advisor Shares.
3. Differences in Distribution Arrangements.
Common Shares. Common Shares are sold to the general public and are not
subject to any annual distribution fee, except for Funds that have adopted a
Shareholder Servicing and Distribution Plan adopted pursuant to Rule 12b-1 under
the 1940 Act, which Funds pay CSI .25% per annum for services under that Plan.
Specified minimum initial and subsequent purchase amounts are applicable to the
Common Shares. Common Shares are available through certain organizations that
may or may not charge their customers administrative charges or other direct
fees in connection with investing in Common Shares. CSI may pay certain
<PAGE>
financial institutions, broker-dealers and recordkeeping organizations a fee
based on the value of accounts maintained by such organizations in Common Shares
of a Fund.
Advisor Shares. Advisor Shares are available for purchase by financial
institutions, retirement plans, broker-dealers, depository institutions and
other financial intermediaries (collectively, "Institutions"). Advisor Shares
may be charged a shareholder service fee (the "Shareholder Service Fee") payable
at an annual rate of up to .25%, and a distribution and/or administrative
services fee (the "Distribution Service Fee") payable at an annual rate of up to
.50%, of the average daily net assets of such Class under a Distribution Plan
adopted pursuant to Rule 12b-1 under the 1940 Act. Payments may be made directly
out of the assets of the Fund or by CSI on its behalf. Additional payments may
be made by CSI or an affiliate thereof from time to time to Institutions for
providing distribution, administrative, accounting and/or other services with
respect to Advisor Shares. Payments by the Fund shall not be made to an
Institution pursuant to the Plan with respect to services for which Institutions
are otherwise compensated by CSI or an affiliate thereof. There is no minimum
amount of initial or subsequent purchases of Advisor Shares imposed on
Institutions.
General. CSI or an affiliate thereof may pay certain Fund transfer
agent fees and expenses related to accounts of customers of organizations that
have entered into agreements with CSI or the Fund. An organization may use a
portion of the fees paid pursuant to the Plan to compensate the Fund's custodian
or transfer agent for costs related to accounts of customers of the organization
that hold Common Shares or Advisor Shares.
Payments may be made to organizations the customers or clients of which
invest in a Fund's Common Shares or Advisor Shares by CSI or an affiliate
thereof from such entity's own resources, which may include a fee it receives
from the Fund.
4. Expense Allocation. The following expenses shall be allocated, to
the extent practicable, on a Class-by-Class basis: (a) fees under the
Shareholder Servicing and Distribution Plan or Distribution Plan, as applicable;
(b) transfer agent fees identified by the Fund's transfer agent as being
attributable to a specific Class; and (c) expenses incurred in connection with
shareholders' meetings as a result of issues relating to a specific Class.
2
<PAGE>
The distribution, administrative and shareholder servicing fees and
other expenses listed above which are attributable to a particular Class are
charged directly to the net assets of the particular Class and, thus, are borne
on a pro rata basis by the outstanding shares of that Class; provided, however,
that money market funds and other funds making daily distributions of their net
investment income may allocate these items to each share regardless of class or
on the basis of relative net assets (settled shares), applied in each case
consistently.
5. Conversion Features. No Class shall be subject to any automatic
conversion feature.
6. Exchange Privileges. Shares of a Class shall be exchangeable only
for (a) shares of the same Class of other investment companies advised by
Warburg Pincus Asset Management, Inc. that are part of the same group of
investment companies and (b) shares of certain other investment companies
specified from time to time.
7. Additional Information. This Plan is qualified by and subject to the
terms of the then current prospectus for the applicable Class; provided,
however, that none of the terms set forth in any such prospectus shall be
inconsistent with the terms of the Classes contained in this Plan. The
prospectus for each Class contains additional information about that Class and
the applicable Fund's multiple class structure.
Dated: October 28, 1997
3
<PAGE>
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022-4677
November 5, 1997
Warburg, Pincus Managed EAFE[R] Countries Fund, Inc.
466 Lexington Avenue
New York, New York 10017-3174
Ladies and Gentlemen:
We have acted as counsel to Warburg, Pincus Managed EAFE[R] Countries Fund,
Inc., a Maryland corporation (the "Acquiring Fund"), in connection with the
proposed acquisition by the Acquiring Fund of all or substantially all of the
assets and liabilities of the Managed EAFE[R] Countries Portfolio (the "Acquired
Fund"), a series of Warburg, Pincus Institutional Fund, Inc., a Maryland
corporation (the Company"), in exchange for Common Shares of the Acquiring Fund,
pursuant to an Agreement and Plan of Reorganization to be executed by the
Acquiring Fund, and by the Company, on behalf of the Acquired Fund (the "Plan").
We have examined the Acquiring Fund's Registration Statement on Form N-14
substantially in the form in which it is to become effective (the "Registration
Statement"), the Acquiring Fund's Articles of Incorporation and Bylaws, and the
Plan.
We have also examined and relied upon other documents and certificates with
respect to factual matters as we have deemed necessary to render the opinion
expressed herein. We have assumed, without independent verification, the
genuineness of all signatures, the authenticity of all documents submitted to us
as originals and the conformity with originals of all documents submitted to us
as copies. We have further assumed that the Plan constitutes the legal, valid
and binding obligation of the Company, enforceable against the Company in
accordance with its terms. As to matters of Maryland law, we have relied solely
on the opinion of Venable, Baetjer and Howard, LLP with respect to the matters
addressed therein, which is satisfactory to us in form and scope and a copy of
which is annexed hereto.
Anything in this opinion to the contrary notwithstanding, we render or imply no
opinion with respect to compliance with any applicable securities or anti-fraud
statutes, rules, regulations or other similar laws of any state (including
Maryland) or the United States of America. In rendering the opinions herein, we
assume that there
<PAGE>
Warburg, Pincus Managed EAFE[R] Countries Fund, Inc.
November 5, 1997
Page 2
will be no material changes in the facts and conditions on which we base such
opinions between the date hereof and the time of issuance of the Acquiring Fund
Shares pursuant to the Agreement.
Based upon the foregoing, we are of the opinion that:
1. The Acquiring Fund is a corporation validly existing and in
good standing under the laws of the State of Maryland.
2. The Common Shares of the Acquiring Fund to be issued as
contemplated in the Plan have been, to the extent of the number of the shares
authorized in the Articles of Incorporation of the Acquiring Fund and then
unissued, duly authorized, and, subject to the receipt by the Acquiring Fund of
consideration equal to the net asset value thereof (but in no event less than
the par value thereof), when issued in accordance with the Plan, will be validly
issued, fully paid and nonassessable Common Shares of the Acquiring Fund under
the laws of the State of Maryland.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement, to the references to us in the Prospectus/Proxy
Statement included as part of the Registration Statement and to the filing of
this opinion as an exhibit to any application made by or on behalf of the
Acquiring Fund or any distributor or dealer in connection with the registration
or qualification of the Acquiring Fund or the Common Shares under the securities
laws of any state or other jurisdiction.
This opinion is furnished by us as counsel to the Acquiring Fund, is solely for
the benefit of the Acquiring Fund and its governing board in connection with the
above described acquisition of assets and may not be relied upon for any other
purpose or by any other person.
Very truly yours,
/s/ Willkie Farr & Gallagher
<PAGE>
VENABLE, BAETJER AND HOWARD, LLP
1800 MERCANTILE BANK AND TRUST BUILDING
TWO HOPKINS PLAZA
BALTIMORE, MARYLAND 21201
November 5, 1997
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022-4669
Re: Warburg, Pincus Managed EAFE Countries Fund, Inc.
Ladies and Gentlemen:
We have acted as special Maryland counsel to Warburg, Pincus Managed
EAFE Countries Fund, Inc., a Maryland corporation (the "Acquiring Fund"), in
connection with the proposed acquisition by the Acquiring Fund of all or
substantially all the assets and liabilities of the Managed EAFE Countries
Portfolio (the "Acquired Fund"), a portfolio of Warburg, Pincus Institutional
Fund, Inc. (the "Warburg, Pincus Institutional Fund"), a Maryland corporation,
in exchange for Common Shares of the Acquiring Fund (the "Common Shares"), par
value $.001 per share, pursuant to an Agreement and Plan of Reorganization to be
executed by the Acquiring Fund and by the Warburg, Pincus Institutional Fund on
behalf of the Acquired Fund (the "Agreement").
We have examined the Combined Proxy Statement and Prospectus contained
in the Acquiring Fund's Registration Statement on Form N-14 (the "Registration
Statement") substantially in the form in which it is to become effective, the
Acquiring Fund's Charter and Bylaws, and the form of the Agreement substantially
in the form in which it is to be included in the Registration Statement. We have
further examined and relied upon a certificate of the Maryland State Department
of Assessments and Taxation to the effect that the Acquiring Fund is duly
incorporated and existing under the laws of the State of Maryland and is in good
standing and duly authorized to transact business in the State of Maryland.
We have also examined and relied upon such corporate records of the
Acquiring Fund, a certificate of an officer of the Acquiring Fund with respect
to relevant actions of its Board of Directors and certain factual and other
matters, and such other documents as we have deemed necessary to render the
opinion expressed herein.
We have assumed, without independent verification, the genuineness of
all signatures on documents submitted to us, the
<PAGE>
authenticity of all documents submitted to us as originals, and the conformity
with originals of all documents submitted to us as copies. We have further
assumed that upon its execution and delivery by the Warburg, Pincus
Institutional Fund on behalf of the Acquired Fund, the Agreement will constitute
the legal, valid and binding obligation of the Warburg, Pincus Institutional
Fund, enforceable against the Warburg, Pincus Institutional Fund in accordance
with its terms, and, further, that the number of Common Shares to be issued by
the Acquiring Fund and then distributed to the shareholders of the Acquired Fund
pursuant to the Agreement will not exceed the number of then unissued Common
Shares of the Acquiring Fund authorized in the Acquiring Fund's Charter.
Based upon the foregoing and subject to the qualifications set forth
below, we are of the opinion that:
1. The Acquiring Fund is a corporation validly existing and in good
standing under the laws of the State of Maryland.
2. The Common Shares of the Acquiring Fund to be issued as contemplated
in the Agreement have been, to the extent of the number of shares of the class
authorized in the Charter of the Acquiring Fund and then unissued, duly
authorized, and, subject to the receipt by the Acquiring Fund of consideration
equal to the net asset value thereof (but in no event less than the par value
thereof), when issued pursuant to the Agreement and in the manner referred to in
the Registration Statement, will constitute validly issued shares, fully paid
and nonassessable, under the laws of the State of Maryland.
This letter expresses our opinion with respect to the Maryland General
Corporation Law governing matters such as the authorization and issuance of
stock. It does not extend to the securities of "blue sky" laws of Maryland, to
federal securities laws or to other laws.
You may rely on our foregoing opinion in rendering your opinion to the
Acquiring Fund that is to be filed as an exhibit to the Registration Statement.
We consent to the filing of this opinion as an exhibit to the Registration
Statement and to the reference to us under the caption "Legal Matters" in the
Registration Statement. We do not thereby admit that we are "experts" as that
term is used in the Securities Act of 1933, as amended, and the regulations
thereunder. This opinion may not be
-2-
<PAGE>
relied upon by any other person or used for any other purpose without our prior
written consent.
Very truly yours,
/s/ Venable, Baetjer and Howard, LLP
-3-
<PAGE>
WILLKIE FARR & GALLAGHER
ONE CITICORP CENTER
153 EAST 53RD STREET
NEW YORK, NEW YORK 10022-4677
November 5, 1997
Warburg, Pincus Managed EAFE Countries Fund, Inc.
466 Lexington Avenue
New York, New York 10017
Ladies and Gentlemen:
You have asked us for our opinion concerning certain federal income tax
consequences to (a) Warburg, Pincus Managed EAFE Countries Fund, Inc. (the "New
Fund"), (b) the Managed EAFE Countries Portfolio (the "Existing Fund"), a
separate investment portfolio of Warburg Pincus Institutional Fund, Inc., and
(c) holders of shares of beneficial interest in the Existing Fund (the "Existing
Fund Shareholders") when the holders of shares of the Existing Fund receive
shares in the New Fund (all such shares of the New Fund referred to hereinafter
as the "New Fund Shares"), in liquidation of their interests in the Existing
Fund pursuant to an acquisition by the New Fund of all or substantially all of
the assets of the Existing Fund in exchange for the New Fund Shares and the
assumption by the New Fund of liabilities of the Existing Fund and the
subsequent liquidation of the Existing Fund and distribution in liquidation of
the New Fund Shares to the Existing Fund Shareholders (the "Reorganization"),
all pursuant to an agreement and plan of reorganization (the "Plan of
Reorganization").
We have reviewed such documents and materials as we have considered
necessary for the purpose of rendering this opinion. In rendering this opinion,
we assume that such documents as yet unexecuted will, when executed, conform in
all material respects to the proposed forms of such documents that we have
examined. In addition, we assume the genuineness of all signatures, the capacity
of each party executing a document so to execute that document, the authenticity
of all documents submitted to us as originals and the conformity to original
documents of all documents submitted to us as certified or photostatic copies.
We have made inquiry as to the underlying facts which we considered to
be relevant to the conclusions set forth in this letter. The opinions expressed
in this letter are based upon certain factual statements relating to the
Existing Fund and the New Fund set forth in the Registration Statement on Form
N-14
<PAGE>
(the "Registration Statement") filed by the New Fund with the Securities and
Exchange Commission and representations that will be made in letters from the
Existing Fund and the New Fund addressed to us for our use in rendering a final
opinion. We have no reason to believe that these representations and facts will
not be valid, but we have not attempted and will not attempt to verify
independently any of these representations and facts, and this opinion is based
upon the assumption that each of them is accurate. Based on information received
from the Existing Fund and the New Fund, we have no reason to believe that we
will not be able to render this opinion as a final opinion on the Closing Date.
Capitalized terms used herein and not otherwise defined shall have the meaning
given them in the Registration Statement.
The conclusions expressed herein are based upon the Internal Revenue
Code of 1986 (the "Code"), Treasury regulations issued thereunder, published
rulings and procedures of the Internal Revenue Service and judicial decisions,
all as in effect on the date of this letter.
Based upon the foregoing, it is our opinion that:
(1) The transfer of all or substantially all of the Existing Fund's
assets in exchange for New Fund Shares and the assumption by the New Fund of
liabilities of the Existing Fund will constitute a "reorganization" within the
meaning of Section 368(a)(1)(F) of the Code, and each of the Existing Fund and
the New Fund is a "party to a reorganization" within the meaning of Section
368(b) of the Code.
(2) No gain or loss will be recognized by the New Fund upon the
receipt of the assets of the Existing Fund in exchange for New Fund Shares and
the assumption by the New Fund of liabilities of the Existing Fund.
(3) No gain or loss will be recognized by the Existing Fund upon the
transfer of its assets in exchange for shares of the New Fund and the assumption
by the New Fund of liabilities of the Existing Fund or upon the distribution
(whether actual or constructive) of New Fund Shares to Existing Fund
Shareholders.
(4) No gain or loss will be recognized by the Existing Fund
Shareholders upon the exchange of their shares of the Existing Fund for New Fund
Shares.
(5) The aggregate tax basis of New Fund Shares received by each
Existing Fund Shareholder pursuant to the Reorganization will be the same as the
aggregate tax basis of the shares of the Existing Fund surrendered therefor, and
the holding period of the
<PAGE>
New Fund Shares to be received by each Existing Fund Shareholder will include
the period during which the shares of the Existing Fund exchanged therefor were
held by such Existing Fund Shareholder (provided the shares of the Existing Fund
were held as capital assets on the date of the Reorganization).
(6) The tax basis to the New Fund of the Existing Fund's assets
acquired in the Reorganization will be the same as the tax basis of such assets
to the Existing Fund immediately prior to the Reorganization, and the holding
period of the assets of the Existing Fund acquired in the Reorganization will
include the period during which those assets were held by the Existing Fund.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name and any reference to our firm
in the Registration Statement or in the Prospectus/Proxy Statement constituting
a part thereof.
Very truly yours,
/s/ Willkie Farr & Gallagher
<PAGE>
TRANSFER AGENCY AND SERVICE AGREEMENT
between
WARBURG, PINCUS MANAGED EAFE[R] COUNTRIES FUND, INC.
and
STATE STREET BANK AND TRUST COMPANY
1A - Domestic/Corporation
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
1. Terms of Appointment; Duties of the Bank ................... 1
2. Fees and Expenses .......................................... 3
3. Representations and Warranties of the Bank ................. 4
4. Representations and Warranties of the Fund ................. 4
5. Data Access and Proprietary Information .................... 5
6. Indemnification ............................................ 6
7. Standard of Care ........................................... 7
8. Covenants of the Fund and the Bank ......................... 7
9. Termination of Agreement ................................... 8
10. Assignment ................................................. 8
11. Amendment .................................................. 9
12. Massachusetts Law to Apply ................................. 9
13. Force Majeure .............................................. 9
14. Consequential Damages ...................................... 9
15. Merger of Agreement ........................................ 9
16. Counterparts ............................................... 10
17. Reproduction of Documents .................................. 10
<PAGE>
TRANSFER AGENCY AND SERVICE AGREEMENT
-------------------------------------
AGREEMENT made as of the day of , 1997, by and between Warburg, Pincus Managed
EAFE[R] Countries Fund, Inc., a Maryland corporation, having its principal
office and place of business at 466 Lexington Avenue, New York, New York
10017-3147 (the "Fund"), and STATE STREET BANK AND TRUST COMPANY, a
Massachusetts trust company having its principal office and place of business at
225 Franklin Street, Boston, Massachusetts 02110 (the "Bank").
WHEREAS, the Fund desires to appoint the Bank as its transfer agent, dividend
disbursing agent, custodian of certain retirement plans and agent in connection
with certain other activities, and the Bank desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein contained, the
parties hereto agree as follows:
l. Terms of Appointment; Duties of the Bank
1.1 Subject to the terms and conditions set forth in this Agreement, the
Fund hereby employs and appoints the Bank to act as, and the Bank
agrees to act as its transfer agent for the Fund's authorized and
issued shares of its common stock, $.001 par value, ("Shares"),
dividend disbursing agent, custodian of certain retirement plans and
agent in connection with any accumulation, open-account or similar
plans provided to the shareholders of the Fund ("Shareholders") and
set out in the currently effective prospectus and statement of
additional information ("prospectus") of the Fund, including without
limitation any periodic investment plan or periodic withdrawal
program.
1.2 The Bank agrees that it will perform the following services:
(a) In accordance with procedures established from time to time
by agreement between the Fund and the Bank, the Bank shall:
(i) Receive for acceptance, orders for the purchase of
Shares, and promptly deliver payment and
appropriate documentation thereof to the Custodian
of the Fund authorized pursuant to the Articles of
Incorporation of the Fund (the "Custodian");
(ii) Pursuant to purchase orders, issue the appropriate
number of Shares and hold such Shares in the
appropriate Shareholder account;
(iii) Receive for acceptance redemption requests and
redemption directions and deliver the appropriate
documentation thereof to the Custodian;
<PAGE>
(iv) In respect to the transactions in items (i), (ii)
and (iii) above, the Bank shall execute
transactions directly with broker-dealers
authorized by the Fund who shall thereby be deemed
to be acting on behalf of the Fund;
(v) At the appropriate time as and when it receives
monies paid to it by the Custodian with respect to
any redemption, pay over or cause to be paid over
in the appropriate manner such monies as instructed
by the redeeming Shareholders;
(vi) Effect transfers of Shares by the registered
owners thereof upon receipt of appropriate
instructions;
(vii) Prepare and transmit payments for dividends and
distributions declared by the Fund;
(viii) Issue replacement certificates for those
certificates alleged to have been lost, stolen or
destroyed upon receipt by the Bank of
indemnification satisfactory to the Bank and
protecting the Bank and the Fund, and the Bank at
its option, may issue replacement certificates in
place of mutilated stock certificates upon
presentation thereof and without such indemnity;
(ix) Maintain records of account for and advise the
Fund and its Shareholders as to the foregoing; and
(x) Record the issuance of shares of the Fund and
maintain pursuant to SEC Rule 17Ad-10(e) a record
of the total number of shares of the Fund which
are authorized, based upon data provided to it by
the Fund, and issued and outstanding. The Bank
shall also provide the Fund on a regular basis
with the total number of shares which are
authorized and issued and outstanding and shall
have no obligation, when recording the issuance of
shares, to monitor the issuance of such shares or
to take cognizance of any laws relating to the
issue or sale of such shares, which functions
shall be the sole responsibility of the Fund.
(b) In addition to and neither in lieu nor in contravention of
the services set forth in the above paragraph (a), the Bank
shall: (i) perform the customary services of a transfer
agent, dividend disbursing agent, custodian of certain
retirement plans and, as relevant, agent in connection with
accumulation, open-account or similar plans (including
without limitation any periodic investment plan or periodic
withdrawal program), including but not limited to:
maintaining all Shareholder accounts, preparing Shareholder
meeting lists, mailing proxies, mailing Shareholder reports
and prospectuses to current Shareholders, withholding taxes
on U.S. resident and non-resident alien accounts, preparing
and filing U.S. Treasury Department Forms 1099 and other
appropriate forms required with respect to dividends and
distributions
2
<PAGE>
by federal authorities for all Shareholders, preparing and
mailing confirmation forms and statements of account to
Shareholders for all purchases and redemptions of Shares and
other confirmable transactions in Shareholder accounts,
preparing and mailing activity statements for Shareholders,
and providing Shareholder account information and (ii)
provide a system which will enable the Fund to monitor the
total number of Shares sold in each State.
(c) In addition, the Fund shall (i) identify to the Bank in
writing those transactions and assets to be treated as
exempt from blue sky reporting for each State and (ii)
verify the establishment of transactions for each State on
the system prior to activation and thereafter monitor the
daily activity for each State. The responsibility of the
Bank for the Fund's blue sky State registration status is
solely limited to the initial establishment of transactions
subject to blue sky compliance by the Fund and the reporting
of such transactions to the Fund as provided above.
(d) Procedures as to who shall provide certain of these services
in Section 1 may be established from time to time by
agreement between the Fund and the Bank per the attached
service responsibility schedule. The Bank may at times
perform only a portion of these services and the Fund or its
agent may perform these services on the Fund's behalf.
(e) The Bank shall provide additional services on behalf of the
Fund (i.e., escheatment services) which may be agreed upon
in writing between the Fund and the Bank.
2. Fees and Expenses
2.1 For the performance by the Bank pursuant to this Agreement, the Fund
agrees to pay the Bank an annual maintenance fee for each Shareholder
account as set out in the initial fee schedule attached hereto. Such
fees and out-of-pocket expenses and advances identified under Section
2.2 below may be changed from time to time subject to mutual written
agreement between the Fund and the Bank.
2.2 In addition to the fee paid under Section 2.1 above, the Fund agrees
to reimburse the Bank for out-of-pocket expenses, including but not
limited to confirmation production, postage, forms, telephone,
microfilm, microfiche, tabulating proxies, records storage, or
advances incurred by the Bank for the items set out in the fee
schedule attached hereto. In addition, any other expenses incurred by
the Bank at the request or with the consent of the Fund, will be
reimbursed by the Fund.
2.3 The Fund agrees to pay all fees and reimbursable expenses within five
days following the receipt of the respective billing notice. Postage
for mailing of dividends, proxies, Fund reports and other mailings to
all shareholder accounts shall be advanced to the Bank by the Fund at
least seven (7) days prior to the mailing date of such materials.
3
<PAGE>
3. Representations and Warranties of the Bank
The Bank represents and warrants to the Fund that:
3.1 It is a trust company duly organized and existing and in good
standing under the laws of The Commonwealth of Massachusetts.
3.2 It is duly qualified to carry on its business in The Commonwealth of
Massachusetts.
3.3 It is empowered under applicable laws and by its Charter and By-Laws
to enter into and perform this Agreement.
3.4 All requisite corporate proceedings have been taken to authorize it
to enter into and perform this Agreement.
3.5 It has and will continue to have access to the necessary facilities,
equipment and personnel to perform its duties and obligations under
this Agreement.
4. Representations and Warranties of the Fund
The Fund represents and warrants to the Bank that:
4.1 It is a corporation duly organized and existing and in good standing
under the laws of Maryland.
4.2 It is empowered under applicable laws and by its Articles of
Incorporation and By-Laws to enter into and perform this Agreement.
4.3 All corporate proceedings required by said Articles of Incorporation
and By-Laws have been taken to authorize it to enter into and perform
this Agreement.
4.4 It is an open-end and diversified management investment company
registered under the Investment Company Act of 1940, as amended.
4.5 A registration statement under the Securities Act of 1933, as amended
is currently effective and will remain effective, and appropriate
state securities law filings have been made and will continue to be
made, with respect to all Shares of the Fund being offered for sale.
5. Data Access and Proprietary Information
5.1 The Fund acknowledges that the data bases, computer programs, screen
formats, report formats, interactive design techniques, and
documentation manuals furnished to the Fund by the Bank as part of
the Fund's ability to access certain Fund-related data ("Customer
Data")
4
<PAGE>
maintained by the Bank on data bases under the control and ownership
of the Bank or other third party ("Data Access Services") constitute
copyrighted, trade secret, or other proprietary information
(collectively, "Proprietary Information") of substantial value to the
Bank or other third party. In no event shall Proprietary Information
be deemed Customer Data. The Fund agrees to treat all Proprietary
Information as proprietary to the Bank and further agrees that it
shall not divulge any Proprietary Information to any person or
organization except as may be provided hereunder. Without limiting
the foregoing, the Fund agrees for itself and its employees and
agents:
(a) to access Customer Data solely from locations as may be
designated in writing by the Bank and solely in accordance
with the Bank's applicable user documentation;
(b) to refrain from copying or duplicating in any way the
Proprietary Information;
(c) to refrain from obtaining unauthorized access to any portion
of the Proprietary Information, and if such access is
inadvertently obtained, to inform in a timely manner of such
fact and dispose of such information in accordance with the
Bank's instructions;
(d) to refrain from causing or allowing the data acquired
hereunder from being retransmitted to any other computer
facility or other location, except with the prior written
consent of the Bank;
(e) that the Fund shall have access only to those authorized
transactions agreed upon by the parties;
(f) to honor all reasonable written requests made by the Bank to
protect at the Bank's expense the rights of the Bank in
Proprietary Information at common law, under federal
copyright law and under other federal or state law.
Each party shall take reasonable efforts to advise its employees of their
obligations pursuant to this Section 5. The obligations of this Section shall
survive any earlier termination of this Agreement.
5.2 If the Fund notifies the Bank that any of the Data Access Services do
not operate in material compliance with the most recently issued user
documentation for such services, the Bank shall endeavor in a timely
manner to correct such failure. Organizations from which the Bank may
obtain certain data included in the Data Access Services are solely
responsible for the contents of such data and the Fund agrees to make
no claim against the Bank arising out of the contents of such
third-party data, including, but not limited to, the accuracy
thereof. DATA ACCESS SERVICES AND ALL COMPUTER PROGRAMS AND SOFTWARE
SPECIFICATIONS USED IN CONNECTION THEREWITH ARE PROVIDED ON AN AS IS,
AS AVAILABLE BASIS. THE BANK EXPRESSLY DISCLAIMS ALL WARRANTIES
EXCEPT THOSE EXPRESSLY STATED HEREIN INCLUDING, BUT NOT LIMITED TO,
THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE.
5
<PAGE>
5.3 If the transactions available to the Fund include the ability to
originate electronic instructions to the Bank in order to (i) effect
the transfer or movement of cash or Shares or (ii) transmit
Shareholder information or other information, then in such event the
Bank shall be entitled to rely on the validity and authenticity of
such instruction without undertaking any further inquiry as long as
such instruction is undertaken in conformity with security procedures
established by the Bank from time to time.
6. Indemnification
6.1 The Bank shall not be responsible for, and the Fund shall indemnify
and hold the Bank harmless from and against, any and all losses,
damages, costs, charges, counsel fees, payments, expenses and
liability arising out of or attributable to:
(a) All actions of the Bank or its agent or subcontractors
required to be taken pursuant to this Agreement, provided
that such actions are taken in good faith and without
negligence or willful misconduct.
(b) The Fund's lack of good faith, negligence or willful
misconduct which arise out of the breach of any
representation or warranty of the Fund hereunder.
(c) The reliance on or use by the Bank or its agents or
subcontractors of information, records, documents or
services which (i) are received by the Bank or its agents or
subcontractors, and (ii) have been prepared, maintained or
performed by the Fund or any other person or firm on behalf
of the Fund including but not limited to any previous
transfer agent or registrar.
(d) The reliance on, or the carrying out by the Bank or its
agents or subcontractors of any instructions or requests of
the Fund.
(e) The offer or sale of Shares in violation of any requirement
under the federal securities laws or regulations or the
securities laws or regulations of any state that such Shares
be registered in such state or in violation of any stop
order or other determination or ruling by any federal agency
or any state with respect to the offer or sale of such
Shares in such state.
6.2 At any time the Bank may apply to any officer of the Fund for
instructions, and may consult with legal counsel with respect to any
matter arising in connection with the services to be performed by the
Bank under this Agreement, and the Bank and its agents or
subcontractors shall not be liable and shall be indemnified by the
Fund for any action taken or omitted by it in reliance upon such
instructions or upon the opinion of such counsel. The Bank, its
agents and subcontractors shall be protected and indemnified in
acting upon any paper or document furnished by or on behalf of the
Fund, reasonably believed to be genuine and to have been signed by
the proper person or persons, or upon any instruction, information,
data, records or documents provided the Bank or its agents or
subcontractors by machine readable input, telex, CRT data entry or
other similar means authorized by the Fund, and shall not be held to
6
<PAGE>
have notice of any change of authority of any person, until receipt
of written notice thereof from the Fund. The Bank, its agents and
subcontractors shall also be protected and indemnified in recognizing
stock certificates which are reasonably believed to bear the proper
manual or facsimile signatures of the officers of the Fund, and the
proper countersignature of any former transfer agent or former
registrar, or of a co-transfer agent or co-registrar.
6.3 In order that the indemnification provisions contained in this
Section 6 shall apply, upon the assertion of a claim for which the
Fund may be required to indemnify the Bank, the Bank shall promptly
notify the Fund of such assertion, and shall keep the Fund advised
with respect to all developments concerning such claim. The Fund
shall have the option to participate with the Bank in the defense of
such claim or to defend against said claim in its own name or in the
name of the Bank. The Bank shall in no case confess any claim or make
any compromise in any case in which the Fund may be required to
indemnify the Bank except with the Fund's prior written consent.
7. Standard of Care
The Bank shall at all times act in good faith and agrees to use its
best efforts within reasonable limits to insure the accuracy of all
services performed under this Agreement, but assumes no
responsibility and shall not be liable for loss or damage due to
errors unless said errors are caused by its negligence, bad faith, or
willful misconduct or that of its employees.
8. Covenants of the Fund and the Bank
8.1 The Fund shall promptly furnish to the Bank the following:
(a) A certified copy of the resolution of the Board of Directors
of the Fund authorizing the appointment of the Bank and the
execution and delivery of this Agreement.
(b) A copy of the Articles of Incorporation and By-Laws of the
Fund and all amendments thereto.
8.2 The Bank hereby agrees to establish and maintain facilities and
procedures reasonably acceptable to the Fund for safekeeping of stock
certificates, check forms and facsimile signature imprinting devices,
if any; and for the preparation or use, and for keeping account of,
such certificates, forms and devices.
8.3 The Bank shall keep records relating to the services to be performed
hereunder, in the form and manner as it may deem advisable. To the
extent required by Section 31 of the Investment Company Act of 1940,
as amended, and the Rules thereunder, the Bank agrees that all such
records prepared or maintained by the Bank relating to the services
to be performed by the Bank hereunder are the property of the Fund
and will be preserved, maintained and made
7
<PAGE>
available in accordance with such Section and Rules, and will be
surrendered promptly to the Fund on and in accordance with its
request.
8.4 The Bank and the Fund agree that all books, records, information and
data pertaining to the business of the other party which are
exchanged or received pursuant to the negotiation or the carrying out
of this Agreement shall remain confidential, and shall not be
voluntarily disclosed to any other person, except as may be required
by law.
8.5 In case of any requests or demands for the inspection of the
Shareholder records of the Fund, the Bank will endeavor to notify the
Fund and to secure instructions from an authorized officer of the
Fund as to such inspection. The Bank reserves the right, however, to
exhibit the Shareholder records to any person whenever it is advised
by its counsel that it may be held liable for the failure to exhibit
the Shareholder records to such person.
9. Termination of Agreement
9.1 This Agreement may be terminated by either party upon one hundred
twenty (120) days written notice to the other.
9.2 Should the Fund exercise its right to terminate, all out-of-pocket
expenses associated with the movement of records and material will be
borne by the Fund. Additionally, the Bank reserves the right to
charge for any other reasonable expenses associated with such
termination and/or a charge equivalent to the average of three (3)
months' fees.
10. Assignment
10.1 Except as provided in Section 10.3 below, neither this Agreement nor
any rights or obligations hereunder may be assigned by either party
without the written consent of the other party.
10.2 This Agreement shall inure to the benefit of and be binding upon the
parties and their respective permitted successors and assigns.
10.3 The Bank may, without further consent on the part of the Fund,
subcontract for the performance hereof with (i) Boston Financial Data
Services, Inc., a Massachusetts corporation ("BFDS") which is duly
registered as a transfer agent pursuant to Section 17A(c)(2) of the
Securities Exchange Act of 1934, as amended ("Section 17A(c)(2)"),
(ii) a BFDS subsidiary duly registered as a transfer agent pursuant
to Section 17A(c)(2) or (iii) a BFDS affiliate; provided, however,
that the Bank shall be as fully responsible to the Fund for the acts
and omissions of any subcontractor as it is for its own acts and
omissions.
11. Amendment
This Agreement may be amended or modified by a written agreement
executed by both parties and authorized or approved by a resolution
of the Board of Directors of the Fund.
8
<PAGE>
12. Massachusetts Law to Apply
This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of the Commonwealth
of Massachusetts.
13. Force Majeure
In the event either party is unable to perform its obligations under
the terms of this Agreement because of acts of God, strikes,
equipment or transmission failure or damage reasonably beyond its
control, or other causes reasonably beyond its control, such party
shall not be liable for damages to the other for any damages
resulting from such failure to perform or otherwise from such causes.
14. Consequential Damages
Neither party to this Agreement shall be liable to the other party
for consequential damages under any provision of this Agreement or
for any consequential damages arising out of any act or failure to
act hereunder.
15. Merger of Agreement
This Agreement constitutes the entire agreement between the parties
hereto and supersedes any prior agreement with respect to the subject
matter hereof whether oral or written.
16. Counterparts
This Agreement may be executed by the parties hereto on any number of
counterparts, and all of said counterparts taken together shall be
deemed to constitute one and the same instrument.
17. Reproduction of Documents
This Agreement and all schedules, exhibits, attachments and
amendments hereto may be reproduced by any photographic, photostatic,
microfilm, micro-card, miniature photographic or other similar
process. The parties hereto all/each agree that any such reproduction
shall be admissible in evidence as the original itself in any
judicial or administrative proceeding, whether or not the original is
in existence and whether or not such reproduction was made by a party
in the regular course of business, and that any enlargement,
facsimile or further reproduction of such reproduction shall likewise
be admissible in evidence.
9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in their names and on their behalf by and through their duly authorized
officers, as of the day and year first above written.
WARBURG, PINCUS MANAGED EAFE[R]
COUNTRIES FUND, INC.
BY:-------------------------------
ATTEST:
- -------------------------------
STATE STREET BANK AND TRUST
COMPANY
BY:-------------------------------
Executive Vice President
ATTEST:
- -------------------------------
10
<PAGE>
STATE STREET BANK & TRUST COMPANY
FUND SERVICE RESPONSIBILITIES*
Service Performed Responsibility
- ----------------- --------------
Bank Fund
---- ----
1. Receives orders for the purchase
of Shares.
2. Issue Shares and hold Shares in
Shareholders accounts.
3. Receive redemption requests.
4. Effect transactions 1-3 above
directly with broker-dealers.
5. Pay over monies to redeeming
Shareholders.
6. Effect transfers of Shares.
7. Prepare and transmit dividends
and distributions.
8. Issue Replacement Certificates.
9. Reporting of abandoned property.
10. Maintain records of account.
11. Maintain and keep a current and
accurate control book for each
issue of securities.
12. Mail proxies.
13. Mail Shareholder reports.
14. Mail prospectuses to current
Shareholders.
15. Withhold taxes on U.S. resident
and non-resident alien accounts.
16. Prepare and file U.S. Treasury
Department forms.
<PAGE>
Service Performed Responsibility
- ----------------- --------------
Bank Fund
---- ----
17. Prepare and mail account and
confirmation statements for
Shareholders.
18. Provide Shareholder account
information.
19. Blue sky reporting.
* Such services are more fully described in Section 1.2 (a), (b) and (c) of the
Agreement.
WARBURG, PINCUS MANAGED EAFE[R] COUNTRIES FUND, INC.
BY:---------------------------------------
ATTEST:
- -------------------------------------------
STATE STREET BANK AND TRUST COMPANY
BY:----------------------------------------
Executive Vice President
ATTEST:
- -------------------------------------------
<PAGE>
CO-ADMINISTRATION AGREEMENT
_________ ___, 1997
Counsellors Funds Service, Inc.
466 Lexington Avenue
New York, New York 10017-3147
Dear Sirs:
Warburg, Pincus Managed EAFE[R] Countries Fund, Inc. (the
"Fund"), a corporation organized and existing under the laws of the State of
Maryland, confirms its agreement with Counsellors Funds Service, Inc.
("Counsellors Service") as follows:
1. Investment Description; Appointment
-----------------------------------
The Fund desires to employ its capital by investing and
reinvesting in investments of the kind and in accordance with the limitations
specified in its Articles of Incorporation, as amended from time to time (the
"Articles"), in its By-laws, as amended from time to time (the "By-laws"), in
the Fund's prospectus (the "Prospectus") and Statement of Additional Information
(the "Statement of Additional Information") as in effect from time to time, and
in such manner and to the extent as may from time to time be approved by the
Board of Directors of the Fund. Copies of the Prospectus, Statement of
Additional Information and the Articles and By-laws have been submitted to
Counsellors Service. The Fund employs Warburg Pincus Asset Management, Inc. (the
"Adviser") as its investment adviser and desires to employ and hereby appoints
Counsellors Service as its co-administrator. Counsellors Service accepts this
appointment and agrees to furnish the services for the compensation set forth
below.
2. Services as Co-Administrator
----------------------------
Subject to the supervision and direction of the Board of
Directors of the Fund, Counsellors Service will:
(a) assist in supervising all aspects of the Fund's operations,
except those performed by other parties pursuant to written agreements with the
Fund;
(b) provide various shareholder liaison services including, but
not limited to, responding to inquiries of shareholders regarding the Fund,
providing information on shareholder investments, assisting shareholders of the
Fund in changing dividend options, account designations and addresses, and other
similar services;
(c) provide certain administrative services including, but not
limited to, providing periodic statements showing the
<PAGE>
account balance of a Fund shareholder and integrating the statements with those
of other transactions and balances in the shareholder's other accounts serviced
by the Fund's custodian or transfer agent;
(d) supply the Fund with office facilities (which may be
Counsellors Service's own offices), data processing services, clerical, internal
executive and administrative services, and stationery and office supplies;
(e) furnish corporate secretarial services, including assisting
in the preparation of materials for Board of Directors' meetings and
distributing those materials and preparing minutes of meetings of the Fund's
Board of Directors and any committees thereof and of the Fund's shareholders;
(f) coordinate the preparation of reports to the Fund's
shareholders of record and filings with the Securities and Exchange Commission
(the "SEC") including, but not limited to, proxy statements; annual, semi-annual
and quarterly reports to shareholders; and post-effective amendments to the
Fund's Registration Statement on Form N-1A (the "Registration Statement");
(g) assist in the preparation of the Fund's tax returns and
assist in other regulatory filings as necessary;
(h) assist the Adviser, at the Adviser's request, in monitoring
and developing compliance procedures for the Fund which will include, among
other matters, procedures to assist the Adviser in monitoring compliance with
the Fund's investment objective, policies, restrictions, tax matters and
applicable laws and regulations; and
(i) acting as liaison between the Fund and the Fund's independent
public accountants, counsel, custodian or custodians, transfer agent and
co-administrator and taking all reasonable action in the performance of its
obligations under this Agreement to assure that all necessary information is
made available to each of them.
In performing all services under this Agreement, Counsellors
Service shall act in conformity with applicable law, the Articles and By-laws,
and the investment objective, investment policies and other practices and
policies set forth in the Registration Statement, as such Registration Statement
and practices and policies may be amended from time to time.
3. Compensation
------------
In consideration of services rendered pursuant to this Agreement,
the Fund will pay Counsellors Service on the first business day of each month a
fee for the previous month at an annual rate of .10% of the Fund's average daily
net assets. The
2
<PAGE>
fee for the period from the date the Fund commences its investment operations to
the end of the month during which the Fund commences its investment operations
shall be prorated according to the proportion that such period bears to the full
monthly period. Upon any termination of this Agreement before the end of any
month, the fee for such part of a month shall be prorated according to the
proportion which such period bears to the full monthly period and shall be
payable upon the date of termination of this Agreement. For the purpose of
determining fees payable to Counsellors Service, fees shall be calculated
monthly and the value of the Fund's net assets shall be computed at the times
and in the manner specified in the Prospectus and Statement of Additional
Information as from time to time in effect.
4. Expenses
--------
Counsellors Service will bear all expenses in connection with the
performance of its services under this Agreement; provided, however, that the
Fund will reimburse Counsellors Service for the out-of-pocket expenses incurred
by it on behalf of the Fund. Such reimbursable expenses shall include, but not
be limited to, postage, telephone, telex and FedEx charges. Counsellors Service
will bill the Fund as soon as practicable after the end of each calendar month
for the expenses it is entitled to have reimbursed.
The Fund will bear certain other expenses to be incurred in its
operation, including: taxes, interest, brokerage fees and commissions, if any;
fees of Directors of the Fund who are not officers, directors, or employees of
the Adviser or Counsellors Service; SEC fees and state blue sky qualification
fees; charges of custodians and transfer and dividend disbursing agents; certain
insurance premiums; outside auditing and legal expenses; costs of maintenance of
corporate existence; except as otherwise provided herein, costs attributable to
investor services, including without limitation, telephone and personnel
expenses; costs of preparing and printing prospectuses and statements of
additional information for regulatory purposes and for distribution to existing
shareholders; costs of shareholders' reports and meetings, and meetings of the
officers of the Board of Directors of the Fund; costs of any pricing services;
and any extraordinary expenses.
5. Standard of Care
----------------
Counsellors Service shall exercise its best judgment in rendering
the services listed in paragraph 2 above. Counsellors Service shall not be
liable for any error of judgment or mistake of law or for any loss suffered by
the Fund in connection with the matters to which this Agreement relates provided
that nothing in this Agreement shall be deemed to protect or purport to protect
Counsellors Service against liability to the Fund or its shareholders to which
Counsellors Service would otherwise be
3
<PAGE>
subject by reason of willful misfeasance, bad faith or negligence on its part in
the performance of its duties or by reason of Counsellors Service's reckless
disregard of its obligations and duties under this Agreement.
6. Term of Agreement
-----------------
This Agreement shall become effective as of the date the Fund
commences its investment operations and shall continue until April 17, 1999 and
shall continue automatically (unless terminated as provided herein) for
successive annual periods ending on April 17th of each year, provided that such
continuance is specifically approved at least annually by the Board of Directors
of the Fund, including a majority of the Board of Directors who are not
"interested persons" (as defined in the Investment Company Act of 1940, as
amended) of any party to this Agreement, by vote cast in person at a meeting
called for the purpose of voting on such approval. This Agreement is terminable,
without penalty, on sixty (60) days' written notice, by the Board of Directors
of the Fund or by vote of holders of a majority of the Fund's shares, or upon
sixty (60) days' written notice, by Counsellors Service.
7. Service to Other Companies or Accounts
--------------------------------------
The Fund understands that Counsellors Service now acts, will
continue to act and may act in the future as administrator, co-administrator or
administrative services agent to one or more other investment companies, and the
Fund has no objection to Counsellors Service's so acting. The Fund understands
that the persons employed by Counsellors Service to assist in the performance of
Counsellors Service's duties hereunder will not devote their full time to such
service and nothing contained in this Agreement shall be deemed to limit or
restrict the right of Counsellors Service or any affiliate of Counsellors
Service to engage in and devote time and attention to other businesses or to
render services of whatever kind or nature.
The parties to this agreement agree that the legend attached
hereto as Appendix A shall constitute part of the original agreement and shall
have the full force and effect and be binding upon the parties as if it were
originally included therein.
4
<PAGE>
If the foregoing is in accordance with your understanding, kindly
indicate your acceptance hereof by signing and returning to us the enclosed copy
hereof.
Very truly yours,
WARBURG, PINCUS MANAGED EAFE[R]
COUNTRIES FUND, INC.
By: ______________________________
Name: ________________________
Title: _______________________
Accepted:
COUNSELLORS FUNDS SERVICE, INC.
By: ___________________________
Name: _____________________
Title: ____________________
5
<PAGE>
APPENDIX A
----------
Warburg, Pincus Managed EAFE[R] Countries Fund, Inc. (the "Fund")
Fund is not sponsored, endorsed, sold or promoted by Morgan Stanley. Morgan
Stanley 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 or the ability of the Morgan
Stanley EAFE Index to track general stock market performance. Morgan Stanley is
the licensor of certain trademarks, service marks and trade names of Morgan
Stanley and of the Morgan Stanley EAFE Index. Morgan Stanley has no obligation
to take the needs of the issuer of the Fund or the owners of the Fund into
consideration in determining, composing or calculating the Morgan Stanley EAFE
Index. Morgan Stanley is not responsible for and has not participated in the
determination of the timing of, prices at, or quantities of the Fund to be
issued or in the determination or calculation of the equation by which the Fund
is redeemable for cash. Morgan Stanley has no obligation or liability to owners
of the Fund in connection with the administration, marketing or trading of the
Fund.
MORGAN STANLEY MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND
HEREBY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE WITH RESPECT TO THE EAFE INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT
LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL MORGAN STANLEY HAVE ANY
LIABILITY FOR ANY DIRECT, INDIRECT, SPECIAL, PUNITIVE, CONSEQUENTIAL OR ANY
OTHER DAMAGES (INCLUDING LOST PROFITS) EVEN IF NOTIFIED OF THE POSSIBILITY OF
SUCH DAMAGES.
<PAGE>
CO-ADMINISTRATION AGREEMENT
TERMS AND CONDITIONS
This Agreement is made as of ____________ ___, 1997 by and
between Warburg, Pincus Managed EAFE[R] Countries Fund, Inc. (the "Fund"), a
Maryland corporation, and PFPC Inc. ("PFPC"), a Delaware corporation, which is
an indirect, wholly owned subsidiary of PNC Bank Corp.
The Fund is registered as an open-end investment company under
the Investment Company Act of 1940, as amended (the "1940 Act"). The Fund wishes
to retain PFPC to provide certain administration and accounting services, and
PFPC wishes to furnish such services.
In consideration of the promises and mutual covenants herein
contained, the parties agree as follows:
1. Definitions.
(a) "Authorized Person." The term "Authorized Person" shall mean
any officer of the Fund and any other person, who is duly authorized by the
Fund's Board of Directors, to give Oral and Written Instructions on behalf of
the Fund. Such persons are listed in the Certificate attached hereto as the
Authorized Persons Appendix to each Services Attachment to this Agreement. If
PFPC provides more than one service hereunder, the Fund's designation of
Authorized Persons may vary by service.
(b) "Board of Directors." The term "Board of Directors" shall
mean the Fund's Board of Directors or, where duly authorized, a competent
committee thereof.
(c) "CFTC." The term "CFTC" shall mean the Commodities Futures
Trading Commission.
(d) "Oral Instructions." The term "Oral Instructions" shall mean
oral instructions received by PFPC from an Authorized Person or from a person
reasonably believed by PFPC to be an Authorized Person.
(e) "PNC." The term "PNC" shall mean PNC Bank or a subsidiary or
affiliate of PNC Bank.
(f) "SEC." The term "SEC" shall mean the Securities and Exchange
Commission.
(g) "Securities and Commodities Laws." The terms the "1933 Act"
shall mean the Securities Act of 1933, as amended, the
<PAGE>
"1934 Act" shall mean the Securities Exchange Act of 1934, as amended, the "1940
Act" shall mean the Investment Company Act 1940, as amended, and the "CEA" shall
mean the Commodities Exchange Act, as amended.
(h) "Services." The term "Services" shall mean the service
provided to the Fund by PFPC.
(i) "Shares." The term "Shares" shall mean the shares of any
class of common stock, par value $.001 per share, of the Fund.
(j) "Property." The term "Property" shall mean:
(i) any and all securities and other investment items
which the Fund may from time to time deposit, or
cause to be deposited, with PNC or which PNC may
from time to time hold for the Fund;
(ii) all income in respect of any of such securities or
other investment items;
(iii) all proceeds of the sale of any of such securities
or investment items; and
(iv) all proceeds of the sale of securities issued by the
Fund, which are received by PNC from time to time,
from or on behalf of the Fund.
(k) "Written Instructions." The term "Written Instructions" shall
mean written instructions signed by one Authorized Person and received by PFPC.
The instructions may be delivered by hand, mail, tested telegram, cable, telex
or facsimile sending device.
2. Appointment.
The Fund hereby appoints PFPC to provide administration and
accounting services, in accordance with the terms set forth in this Agreement.
PFPC accepts such appointment and agrees to furnish such services.
3. Delivery of Documents.
The Fund has provided or, where applicable, will provide PFPC
with the following:
2
<PAGE>
(a) certified or authenticated copies of the resolutions of the
Board of Directors, approving the appointment of PNC or its
affiliates to provide services to the Fund;
(b) a copy of the Fund's most recent effective registration
statement;
(c) a copy of the Fund's advisory agreement;
(d) a copy of the Fund's distribution agreements;
(e) a copy of the Fund's co-administration agreement if PFPC is
not providing the Fund with such services;
(f) copies of any shareholder servicing agreements made in
respect of the Fund; and
(g) certified or authenticated copies of any and all
amendments or supplements to the foregoing.
4. Compliance with Government Rules and Regulations. PFPC undertakes to
comply with all applicable requirements of the 1933 Act, the 1934 Act, the 1940
Act, and the CEA, and any laws, rules and regulations of governmental
authorities having jurisdiction with respect to all duties to be performed by
PFPC hereunder. Except as specifically set forth herein, PFPC assumes no
responsibility for such compliance by the Fund.
5. Instructions.
Unless otherwise provided in this Agreement, PFPC shall act only
upon Oral and Written Instructions.
PFPC shall be entitled to rely upon any Oral and Written
Instructions it receives from an Authorized Person (or from a person reasonably
believed by PFPC to be an Authorized Person) pursuant to this Agreement. PFPC
may assume that any Oral or Written Instruction received hereunder is not in any
way inconsistent with the provisions of organizational documents or this
Agreement or of any vote, resolution or proceeding of the Board of Directors or
of the Fund's shareholders.
The Fund agrees to forward to PFPC Written Instructions
confirming Oral Instructions so that PFPC receives the Written Instructions by
the close of business on the same day that such Oral Instructions are received.
The fact that such confirming Written Instructions are not received by PFPC
shall in no way
3
<PAGE>
invalidate the transactions or enforceability of the transactions authorized by
the Oral Instructions. The Fund further agrees that PFPC shall incur no
liability to the Fund in acting upon Oral or Written Instructions provided such
instructions reasonably appear to have been received from an Authorized Person.
6. Right to Receive Advice.
(a) Advice of the Fund. If PFPC is in doubt as to any action it
should or should not take, PFPC may request directions or advice, including Oral
or Written Instructions, from the Fund.
(b) Advice of Counsel. If PFPC shall be in doubt as to any
questions of law pertaining to any action it should or should not take, PFPC may
request advice at its own cost from such counsel of its own choosing (who may be
counsel for the Fund, the Fund's investment adviser (the "Adviser") or PFPC, at
the option of PFPC).
(c) Conflicting Advice. In the event of a conflict between
directions, advice or Oral or Written Instructions PNC receives from the Fund,
and the advice it receives from counsel, PFPC shall be entitled to rely upon and
follow the advice of counsel.
(d) Protection of PFPC. PFPC shall be protected in any action it
takes or does not take in reliance upon directions, advice or Oral or Written
Instructions it receives from the Fund or from counsel and which PFPC believes,
in good faith, to be consistent with those directions, advice and Oral or
Written Instructions.
Nothing in this paragraph shall be construed so as to impose an
obligation upon PFPC (i) to seek such directions, advice or Oral or Written
Instructions, or (ii) to act in accordance with such directions, advice or Oral
or Written Instructions unless, under the terms of other provisions of this
Agreement, the same is a condition of PFPC's properly taking or not taking such
action.
7. Records.
The books and records pertaining to the Fund, which are in the
possession of PFPC, shall be the property of the Fund. Such books and records
shall be prepared and maintained as required by the 1940 Act and other
applicable securities laws, rules and regulations. The Fund, or the Fund's
Authorized Persons, shall have access to such books and records at all times
4
<PAGE>
during PFPC's normal business hours. Upon the reasonable request of the Fund,
copies of any such books and records shall be provided by PFPC to the Fund or to
an Authorized Person of the Fund, at the Fund's expense.
PFPC shall keep the following records:
(a) all books and records with respect to the Fund's books of
account;
(b) records of the Fund's securities transactions; and
(c) all other books and records as PFPC is required to
maintain pursuant to Rule 31a-1 of the 1940 Act and as
specifically set forth in Appendix A hereto.
8. Confidentiality.
PFPC agrees to keep confidential all records of the Fund and
information relative to the Fund and its shareholders (past, present and
potential), unless the release of such records or information is otherwise
consented to, in writing, by the Fund. The Fund agrees that such consent shall
not be unreasonably withheld. The Fund further agrees that, should PFPC be
required to provide such information or records to duly constituted authorities
(who may institute civil or criminal contempt proceedings for failure to
comply), PFPC shall not be required to seek the Fund's consent prior to
disclosing such information.
9. Liaison with Accountants.
PFPC shall act as liaison with the Fund's independent public
accountants and shall provide account analyses, fiscal year summaries, and other
audit-related schedules. PFPC shall take all reasonable action in the
performance of its obligations under this Agreement to assure that the necessary
information is made available to such accountants for the expression of their
opinion, as such may be required by the Fund from time to time.
10. Disaster Recovery.
PFPC shall enter into and shall maintain in effect with
appropriate parties one or more agreements making reasonable provision of
emergency use of electronic data processing equipment to the extent appropriate
equipment is available. In the event of equipment failures, PFPC shall, at no
additional
5
<PAGE>
expense to the Fund, take reasonable steps to minimize service interruptions but
shall have no liability with respect thereto.
11. Compensation.
As compensation for services rendered by PFPC during the term of
this Agreement, the Fund will pay PFPC a fee or fees as may be agreed to in
writing by the Fund and PFPC.
12. Indemnification.
The Fund agrees to indemnify and hold harmless PFPC and its
nominees from all taxes, charges, expenses, assessments, claims and liabilities
(including, without limitation, liabilities arising under the 1933 Act, the 1934
Act, the 1940 Act, the CEA, and any state and foreign securities and blue sky
laws, and amendments thereto, and expenses, including (without limitation)
attorneys' fees and disbursements, arising directly or indirectly from any
action which PFPC takes or does not take (a) at the request or on the direction
of or in reliance on the advice of the Fund or (b) upon Oral or Written
Instructions. Neither PFPC, nor any of its nominees, shall be indemnified
against any liability to the Fund or to its shareholders (or any expenses
incident to such liability) arising out of PFPC's own willful misfeasance, bad
faith, negligence or reckless disregard of its duties and obligations under this
Agreement.
13. Responsibility of PFPC.
PFPC shall be under no duty to take any action on behalf of the
Fund except as specifically set forth herein or as may be specifically agreed to
by PFPC, in writing. PFPC shall be obligated to exercise care and diligence in
the performance of its duties hereunder, to act in good faith and to use its
best efforts, within reasonable limits, in performing services provided for
under this Agreement. PFPC shall be responsible for its own negligent failure to
perform its duties under this Agreement. Notwithstanding the foregoing, PFPC
shall not be responsible for losses beyond its control, provided that PFPC has
acted in accordance with the standard of care set forth above; and provided
further that PFPC shall only be responsible for that portion of losses or
damages suffered by the Fund that are attributable to the negligence of PFPC.
Without limiting the generality of the foregoing or of any other
provision of this Agreement, PFPC, in connection with its duties under this
Agreement, shall not be liable for (a) the validity or invalidity or authority
or lack thereof of any Oral or Written Instruction, notice or other instrument
which conforms
6
<PAGE>
to the applicable requirements of this Agreement, and which PFPC reasonably
believes to be genuine; or (b) delays or errors or loss of data occurring by
reason of circumstances beyond PFPC's control, including acts of civil or
military authority, national emergencies, labor difficulties, fire, flood or
catastrophe, acts of God, insurrection, war, riots or failure of the mails,
transportation, communication or power supply.
Notwithstanding anything in this Agreement to the contrary, PFPC
shall have no liability to the Fund for any consequential, special or indirect
losses or damages which the Fund may incur or suffer by or as a consequence of
PFPC's performance of the services provided hereunder, whether or not the
likelihood of such losses or damages was known by PFPC.
14. Description of Accounting Services.
(a) Services on a Continuing Basis. PFPC will perform the
following accounting functions if required:
(i) Journalize the Fund's investment, capital share and
income and expense activities;
(ii) Verify investment buy/sell trade tickets when
received from the Adviser and transmit trades to
the Fund's custodian for proper settlement;
(iii) Maintain individual ledgers for investment
securities;
(iv) Maintain historical tax lots for each security;
(v) Reconcile cash and investment balances of the Fund
with the custodian, and provide the Adviser with
the beginning cash balance available for investment
purposes;
(vi) Update the cash availability throughout the day as
required by the Adviser;
(vii) Post to and prepare the Fund's Statement of Assets
and Liabilities and the Statement of Operations;
7
<PAGE>
(viii) Calculate various contractual expenses (e.g.,
advisory and custody fees);
(ix) Monitor the expense accruals and notify the Fund's
management of any proposed adjustments;
(x) Control all disbursements from the Fund and
authorize such disbursements upon Written
Instructions;
(xi) Calculate capital gains and losses;
(xii) Determine the Fund's net income;
(xiii) Obtain security market quotes from independent
pricing services approved by the Adviser, or if
such quotes are unavailable, then obtain such
prices from the Adviser, and in either case
calculate the market value of the Fund's
investments;
(xiv) Transmit or mail a copy of the daily portfolio
valuation to the Adviser;
(xv) Compute the net asset value of the Fund;
(xvi) As appropriate, compute the Fund's yield, total
return, expense ratios, portfolio turnover rate,
and, if required, portfolio average dollar-weighted
maturity; and
(xvii) Prepare a monthly financial statement, which will
include the following items:
Schedule of Investments
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Cash Statement
Schedule of Capital Gains and Losses.
15. Description of Administration Services.
(a) Services on a Continuing Basis.
8
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(i) Prepare quarterly broker security transactions
summaries;
(ii) Prepare monthly security transaction listings;
(iii) Prepare for execution and file the Fund's federal
and state tax returns;
(iv) Prepare and file the Fund's semiannual reports with
the SEC on Form N-SAR;
(v) Prepare and file with the SEC the Fund's annual and
semiannual shareholder reports;
(vi) Assist with the preparation of registration
statements and other filings relating to the
registration of Shares; and
(vii) Monitor the Fund's status as a regulated investment
company under Sub-Chapter M of the Internal Revenue
Code of 1986, as amended.
16. Duration and Termination.
-------------------------
This Agreement shall continue until terminated by the Fund or by
PFPC on sixty (60) days' prior written notice to the other party.
17. Notices.
--------
All notices and other communications, including Written
Instructions, shall be in writing or by confirming telegram, cable, telex or
facsimile sending device. If notice is sent by confirming telegram, cable, telex
or facsimile sending device, it shall be deemed to have been given immediately.
If notice is sent by first-class mail, it shall be deemed to have been given
three days after it has been mailed. If notice is sent by messenger, it shall be
deemed to have been given on the day it is delivered. Notices shall be addressed
(a) if to PFPC, at PFPC's address, 400 Bellevue Parkway, Wilmington, Delaware
19809; (b) if to the Fund, at the address of the Fund; or (c) if to neither of
the foregoing, at such other address as shall have been notified to the sender
of any such notice or other communication.
9
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18. Amendments.
-----------
This Agreement, or any term thereof, may be changed or waived
only by written amendment, signed by the party against whom enforcement of such
change or waiver is sought.
19. Delegation.
-----------
PFPC may assign its rights and delegate its duties hereunder to
any wholly owned direct or indirect subsidiary of PNC Bank or PNC Bank Corp.,
provided that (a) PFPC gives the Fund thirty (30) days' prior written notice;
(b) the delegate agrees with PFPC to comply with all relevant provisions of the
1940 Act; and (c) PFPC and such delegate promptly provide such information as
the Fund may request, and respond to such questions as the Fund may ask,
relative to the delegation, including (without limitation) the capabilities of
the delegate.
20. Counterparts.
-------------
This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
21. Further Actions.
----------------
Each party agrees to perform such further acts and execute such
further documents as are necessary to effectuate the purposes hereof.
22. Miscellaneous.
--------------
This Agreement embodies the entire agreement and understanding
between the parties and supersedes all prior agreements and understandings
relating to the subject matter hereof, provided that the parties may embody in
one or more separate documents their agreement, if any, with respect to
delegated and/or Oral Instructions.
The captions in this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect.
This Agreement shall be deemed to be a contract made in Delaware
and governed by Delaware law. If any provision of this agreement shall be held
or made invalid by a court decision, statute, rule or otherwise, the remainder
of this Agreement shall not be affected thereby. This Agreement shall be binding
and
10
<PAGE>
shall inure to the benefit of the parties hereto and their respective
successors.
The parties to this agreement agree that the legend attached
hereto as Appendix B shall constitute part of the original agreement and shall
have the full force and effect and be binding upon the parties as if it were
originally included therein.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their officers designated below on the day and year first
above written.
PFPC INC.
By: ____________________________
Name: ______________________
Title: _____________________
WARBURG, PINCUS MANAGED EAFE[R]
COUNTRIES FUND, INC.
By: ____________________________
Name: ______________________
Title: _____________________
11
<PAGE>
APPENDIX A
None.
<PAGE>
APPENDIX B
----------
Warburg, Pincus Managed EAFE[R] Countries Fund, Inc. (the "Fund")
is not sponsored, endorsed, sold or promoted by Morgan Stanley. Morgan Stanley
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 or the ability of the Morgan
Stanley EAFE Index to track general stock market performance. Morgan Stanley is
the licensor of certain trademarks, service marks and trade names of Morgan
Stanley and of the Morgan Stanley EAFE Index. Morgan Stanley has no obligation
to take the needs of the issuer of the Fund or the owners of the Fund into
consideration in determining, composing or calculating the Morgan Stanley EAFE
Index. Morgan Stanley is not responsible for and has not participated in the
determination of the timing of, prices at, or quantities of the Fund to be
issued or in the determination or calculation of the equation by which the Fund
is redeemable for cash. Morgan Stanley has no obligation or liability to owners
of the Fund in connection with the administration, marketing or trading of the
Fund.
MORGAN STANLEY MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND
HEREBY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE WITH RESPECT TO THE EAFE INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT
LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL MORGAN STANLEY HAVE ANY
LIABILITY FOR ANY DIRECT, INDIRECT, SPECIAL, PUNITIVE, CONSEQUENTIAL OR ANY
OTHER DAMAGES (INCLUDING LOST PROFITS) EVEN IF NOTIFIED OF THE POSSIBILITY OF
SUCH DAMAGES.
<PAGE>
_______ ___, 1997
Warburg, Pincus Managed EAFE[R] Countries Fund, Inc.
466 Lexington Avenue
New York, New York 10017
RE: CO-ADMINISTRATION SERVICE FEES
------------------------------
Gentlemen:
This letter constitutes our agreement with respect to
compensation to be paid to PFPC Inc. ("PFPC") under the terms of a
Co-Administration Agreement dated _________ ___, 1997 between you (the "Fund")
and PFPC. Pursuant to Paragraph 11 of that Agreement, and in consideration of
the services to be provided to you, you will pay PFPC an annual
co-administration fee, to be calculated daily and paid monthly. You will also
reimburse PFPC for its out-of-pocket expenses incurred on behalf of the Fund,
including, but not limited to: postage and handling, telephone, telex, FedEx and
outside pricing service charges.
The annual administration and accounting fee shall be the
following percentages of the Fund's average daily net assets:
Percentage Net Assets
---------- ----------
0.12 First US$250,000,000
0.10 Next US$250,000,000
0.08 Next US$250,000,000
0.05 Over US$750,000,000
The fee for the period from the day of the year this agreement is
entered into until the end of that year shall be pro-rated according to the
proportion which such period bears to the full annual period.
<PAGE>
If the foregoing accurately sets forth our agreement, and you
intend to be legally bound thereby, please execute a copy of this letter and
return it to us.
Very truly yours,
PFPC INC.
By: ______________________________
Name: ________________________
Title: _______________________
Accepted: WARBURG, PINCUS MANAGED EAFE[R] COUNTRIES FUND, INC.
By:___________________________
Name: _____________________
Title: ____________________
2
<PAGE>
VOTE THIS VOTING INSTRUCTION CARD TODAY!
YOUR PROMPT RESPONSE WILL SAVE
THE EXPENSE OF ADDITIONAL MAILINGS
(Please Detach at Perforation Before Mailing)
................................................................................
................................................................................
WARBURG PINCUS INSTITUTIONAL FUND, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
The undersigned holder of shares of the Managed EAFE(R) Countries Portfolio (the
"Portfolio"), a series of Warburg Pincus Institutional Fund, Inc. (the
"Company"), hereby appoints Eugene L. Podsiadlo and Janna Manes, two attorneys
and proxies for the undersigned with full powers of substitution and revocation,
to represent the undersigned and to vote on behalf of the undersigned all shares
of the Portfolio that the undersigned is entitled to vote at the Special Meeting
of Shareholders of the Portfolio to be held at the offices of the Company at 466
Lexington Avenue, New York, New York, 10017-3147, on December 16, 1997 at 3:00
p.m., and any adjournment or adjournments thereof. The undersigned hereby
acknowledges receipt of the Notice of Special Meeting and Combined
Prospectus/Proxy Statement dated ___________ ___, 1997 and hereby instructs said
attorneys and proxies to vote said shares as indicated herein. In their
discretion, the proxies are authorized to vote upon such other business as may
properly come before the Meeting. A majority of the proxies present and acting
at the Meeting in person or by substitute (or, if only one shall be so present,
then that one) shall have and may exercise all of the power and authority of
said proxies hereunder. The undersigned hereby revokes any proxy previously
given.
PLEASE SIGN, DATE AND RETURN
PROMPTLY IN THE ENCLOSED ENVELOPE
Note: Please sign exactly as your name appears on this Proxy.
If joint owners, EITHER may sign this Proxy. When signing as
attorney, executor, administrator, trustee, guardian or
corporate officer, please give your full title.
Date:__________________________________
__________________________________
Signature(s) (Title(s), if applicable)
<PAGE>
VOTE THIS VOTING INSTRUCTION CARD TODAY!
YOUR PROMPT RESPONSE WILL SAVE
THE EXPENSE OF ADDITIONAL MAILINGS
(Please Detach at Perforation Before Mailing)
................................................................................
................................................................................
Please indicate your vote by an "X" in the appropriate box below. This proxy, if
properly executed, will be voted in the manner directed by the undersigned
shareholder. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED "FOR" APPROVAL OF
THE PROPOSALS. The Board of Directors unanimously recommends a vote "FOR"
approval of the proposals.
1. To approve or disapprove the FOR [ ] AGAINST [ ] ABSTAIN [ ]
Agreement and Plan of Reorganization
To approve or disapprove the Agreement and Plan of Reorganization dated as
of ____________ ___, 1997 (the "Plan") providing (i) that the Managed
EAFE(R) Countries Portfolio (the "Existing Fund"), be reorganized from a
series of Warburg Pincus Institutional Fund, Inc. into Warburg, Pincus
Managed EAFE(R) Countries Fund, Inc. (the "New Fund"), (ii) the Existing
Fund would transfer to the New Fund all or substantially all of its assets
in exchange for shares of the New Fund and the assumption of the Existing
Fund's liabilities, and (iii) the distribution of such shares of the New
Fund to shareholders of the Existing Fund in liquidation of the Existing
Fund.
2. To transact such other business as may properly come before the Meeting or
any adjournment or adjournments thereof.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
