WARBURG PINCUS MAJOR FOREIGN MARKETS FUND INC, 485BPOS, 1998-02-20

WARBURG PINCUS MAJOR FOREIGN MARKETS FUND INC
485BPOS, 1998-02-20

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<PAGE>

As filed with the U.S. Securities and Exchange Commission
on February 20, 1998

Securities Act File No. 333-39075
Investment Company Act File No. 811-08459

U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]

Pre-Effective Amendment No. [ ]

Post-Effective Amendment No. 2 [x]

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT
OF 1940 [ ]

Amendment No. 3 [x]
(Check appropriate box or boxes)

Warburg, Pincus Major Foreign Markets Fund, Inc.
(formerly, Warburg, Pincus Managed EAFE Countries Fund, Inc.)
.......................................
(Exact Name of Registrant as Specified in Charter)

466 Lexington Avenue
New York, New York 10017-3147
........................................................
(Address of Principal Executive Offices) (Zip Code)

Registrant's Telephone Number, including Area Code: (212) 878-0600

Mr. Eugene P. Grace
Warburg, Pincus Major Foreign Markets Fund, Inc.
466 Lexington Avenue
New York, New York 10017-3147
......................................
(Name and Address of Agent for Service)

Copy to:
Rose F. DiMartino, Esq.
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022-4677

<PAGE>

Approximate Date of Proposed Public Offering: February 20, 1998

It is proposed that this filing will become effective (check appropriate box):

[x] immediately upon filing pursuant to paragraph (b)

[ ] on [date] pursuant to paragraph (b)

[ ] 60 days after filing pursuant to paragraph (a)(1)

[ ] on [date] pursuant to paragraph (a)(1)

[ ] 75 days after filing pursuant to paragraph (a)(2)

[ ] on [date] pursuant to paragraph (a)(2) of Rule 485

If appropriate, check the following box:

[ ] This post-effective amendment designates a new effective
date for a previously filed post-effective amendment.

Title of Securities Being Registered:
Common stock, par value $.001

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

<PAGE>

WARBURG, PINCUS MAJOR FOREIGN MARKETS FUND, INC.

FORM N-1A

CROSS REFERENCE SHEET

Part A
Item No. Prospectus Heading
- -------- ------------------
<S> <C> <C>

1. Cover Page.................................................... Cover Page

2. Synopsis...................................................... The Fund's Expenses

3. Condensed Financial Information............................... Financial Highlights

4. General Description of
Registrant Cover Page, Investment Objective
and Policies; Risk Factors and Special
Considerations; Certain Investment
Strategies; Investment Guidelines

5. Management of the Fund........................................ Management of the Fund

6. Capital Stock and Other
Securities.................................................... General Information

7. Purchase of Securities Being
Offered....................................................... How to Open an Account in the
Fund; How to Purchase Shares;
Management of the Fund; Net Asset Value

8. Redemption or Repurchase...................................... How to Redeem and Exchange Shares.

9. Pending Legal Proceedings..................................... Not applicable

10. Cover Page.................................................... Cover Page

</TABLE>

<PAGE>

Part B
Item No.
- --------
<S> <C> <C>

11. Table of Contents............................................. Contents

12. General Information and History............................... Management of the Fund

13. Investment Objective
and Policies.................................................. Investment Objective; Investment
Policies

14. Management of the Registrant.................................. Management of the Fund

15. Control Persons and Principal
Holders of Securities......................................... Management of the Fund;
Miscellaneous See Prospectus --
"Management of the Fund"
16. Investment Advisory and
Other Services................................................ Management of the Fund; See
Prospectus - "Management of the Fund"
17. Brokerage Allocation
and Other Practices........................................... Investment Policies --
Portfolio Transactions See Prospectus
-- "Portfolio Transactions and
Turnover Rate"

18. Capital Stock and Other
Securities.................................................... Management of the
Fund--Organization of the Fund; See
Prospectus-"General Information"
19. Purchase, Redemption and Pricing
of Securities Being Offered................................... Additional Purchase and Redemption
Information; See Prospectus-"How to
Open an Account," "How to Purchase
Shares," "How to Redeem and
Exchange Shares," "Net Asset Value"
</TABLE>
2
<PAGE>

20. Tax Status.................................................... Additional Information Concerning
Taxes; See Prospectus --"Dividend,
Distributions and Taxes"

21. Underwriters.................................................. Investment Policies-- Portfolio
Transactions; See Prospectus--
"Management of the Fund"

22. Calculation of Performance Data............................... Determination of Performance

23. Financial Statements.......................................... Financial Statements

</TABLE>

Part C

Information required to be included in Part C is set forth after the appropriate
item, so numbered, in Part C to this Registration Statement.

3
<PAGE>

PROSPECTUS

February 20, 1998

WARBURG PINCUS

MAJOR FOREIGN MARKETS FUND

LOGO

<PAGE>

Prospectus February 20, 1998

Warburg Pincus Funds is a family of open-end mutual funds that offer investors a
variety of investment opportunities. One fund is described in this Prospectus:

WARBURG PINCUS MAJOR FOREIGN MARKETS FUND seeks long-term capital appreciation
by investing in equity securities of issuers consisting of companies in major
foreign securities markets.

International investment entails special risk considerations, including currency
fluctuations, lower liquidity, economic instability, political uncertainty and
differences in accounting methods. See "Risk Factors and Special
Considerations."

NO LOAD CLASS OF COMMON SHARES
- --------------------------------------------------------------------------------
Common Shares that are "no load" are offered by this Prospectus (i) directly
from the Fund's distributor, Counsellors Securities Inc., and (ii) through
various brokerage firms including Charles Schwab & Company, Inc. Mutual Fund
OneSource(TM) Program; Fidelity Brokerage Services, Inc. FundsNetwork(TM)
Program; Jack White & Company, Inc.; and Waterhouse Securities, Inc.

This Prospectus briefly sets forth certain information about the Fund that
investors should know before investing. Investors are advised to read this
Prospectus carefully and retain it for future reference. Additional information
about the Fund has been filed with the Securities and Exchange Commission (the
"SEC"). The SEC maintains a Web site (http://www.sec.gov) that contains the
Statement of Additional Information, material incorporated by reference and
other information regarding the Fund. The Statement of Additional Information is
also available upon request and without charge by calling Warburg Pincus Funds
at (800) 927-2874. Information regarding the status of shareholder accounts may
also be obtained by calling Warburg Pincus Funds at the same number. Warburg
Pincus Funds maintains a Web site at www.warburg.com. The Statement of
Additional Information relating to the Fund, as amended or supplemented from
time to time, bears the same date as this Prospectus and is incorporated by
reference in their entirety into this Prospectus.

LOW MINIMUM INVESTMENT
- --------------------------------------------------------------------------------
The minimum initial investment in the Fund is $2,500 ($500 for an IRA or Uniform
Transfers/Gifts to Minors Act account) and the minimum subsequent investment is
$100. Through the Automatic Monthly Investment Plan, subsequent investment
minimums may be as low as $50. See "How to Purchase Shares."

SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF OR GUARANTEED OR ENDORSED
BY ANY BANK, AND SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
INVESTMENTS IN SHARES OF THE FUND INVOLVE INVESTMENT RISKS, INCLUDING THE
POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
- --------------------------------------------------------------------------------

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.
- --------------------------------------------------------------------------------

<PAGE>

THE FUND'S EXPENSES
- --------------------------------------------------------------------------------

Warburg Pincus Major Foreign Markets Fund (the "Fund") is authorized to offer
two separate classes of shares: Common Shares and Advisor Shares. The Fund
currently offers only Common Shares. For a description of Advisor Shares see
"General Information." Common Shares pay the Fund's distributor a 12b-1 fee. See
"Management of the Funds -- Distributor."

<TABLE>
<S> <C>
Shareholder Transaction Expenses:
Maximum Sales Load Imposed on Purchases (as a percentage of offering price)..... 0
Annual Fund Operating Expenses: (as a percentage of average net assets)
Management Fees (after fee waivers)............................................. .30%+
12b-1 Fees...................................................................... .25%+
Other Expenses (after expense reimbursements)................................... .40%+
---
-
Total Fund Operating Expenses (after fee waivers and expense reimbursements).... .95%+
EXAMPLE
You would pay the following expense on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time period:
1 year.......................................................................... $10
3 years......................................................................... $30
</TABLE>

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

+ The Fund's investment adviser and co-administrator have undertaken to limit
Total Fund Operating Expenses to the limit shown above through February 28,
1999. Absent the anticipated waiver of fees by the Fund's investment adviser
and co-administrator, Management Fees for the Fund would equal 1.00%, Other
Expenses would equal 5.90% and Total Fund Operating Expenses would equal
7.15%. Annual Fund Operating Expenses for the Fund are based on annualized
estimates of expenses for the fiscal year ending October 31, 1998, net of any
fee waivers or expense reimbursements. The investment adviser and
co-administrator are under no obligation to continue these waivers.

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

The expense table shows the costs and expenses that an investor will bear
directly or indirectly as a Common Shareholder of the Fund. Certain broker-
dealers and financial institutions also may charge their clients fees in
connection with investments in the Fund's Common Shares, which fees are not
reflected in the table. The Example should not be considered a representation of
past or future expenses; actual Fund expenses may be greater or less than those
shown. Moreover, while the Example assumes a 5% annual return, the Fund's actual
performance will vary and may result in a return greater or less than 5%.
Long-term shareholders of the Fund may pay more than the economic equivalent of
the maximum sales charges permitted by the National Association of Securities
Dealers, Inc.

<PAGE>

FINANCIAL HIGHLIGHTS

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

The following information for the period from March 31, 1997 (commencement of
operations) to October 31, 1997 concerning the Managed EAFE(R) Countries
Portfolio (formerly an investment portfolio of Warburg Pincus Institutional
Fund, Inc. (the "Managed EAFE(R)Countries Portfolio"), the assets and
liabilities of which were acquired by the Fund, see "General Information"
below), has been audited by Coopers & Lybrand L.L.P., independent accountants,
whose report dated December 19, 1997 is incorporated by reference in the
Statement of Additional Information. Further information about the performance
of the Managed EAFE(R) Countries Portfolio is contained in the annual report of
Warburg Pincus Institutional Fund, Inc. dated October 31, 1997, copies of which
may be obtained without charge by calling the Fund at (800) 927-2874.

<TABLE>
<CAPTION>
March 31, 1997
(Commencement of
Operations) through
October 31, 1997
-------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD...................................... $ 10.00
Income from Investment Operations:
Net Investment Loss..................................................... 0.08
Net Gain (Loss) from Securities and Foreign Currency Related Items (both
realized and unrealized).............................................. 0.98
------
Total from Investment Operations........................................ 1.06
------
NET ASSET VALUE, END OF PERIOD............................................ $ 11.06
======
Total Return.............................................................. 10.60%+
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000's)......................................... $ 4,796
Ratios to Average Daily Net Assets:
Operating Expenses...................................................... .95%@*
Net Investment Income................................................... 1.18%*
Decrease reflected in above operating expense ratios due to
waivers/reimbursements................................................ 6.69%*
Portfolio Turnover Rate................................................... 30.29%+
Average Commission Rate#.................................................. $0.0251
</TABLE>

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

@Interest earned on uninvested cash balances is used to offset portions of the
transfer agent expense. These arrangements had no effect on the Managed EAFE(R)
Countries Portfolio's expense ratio.

+ Non-Annualized.

* Annualized.

#Calculated by dividing the total amount of commission paid by the number of
shares purchased and sold during the period for which there was a commission
charge.

<PAGE>

INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------
The Fund's investment objective is long-term capital appreciation. This
objective is a fundamental policy and may not be amended without first obtaining
the approval of a majority of the outstanding shares of the Fund. Any investment
involves risk and, therefore, there can be no assurance that the Fund will
achieve its investment objective. See "Portfolio Investments" and "Certain
Investment Strategies" for descriptions of certain types of investments the Fund
may make.

The Fund pursues its investment objective by investing, under normal market
conditions, at least 65% of its total assets in common stocks, warrants and
securities convertible into or exchangeable for common stocks of issuers,
wherever organized, having their principal business activities and interests in
countries considered to be major foreign securities markets ("Major Foreign
Markets"). Major Foreign Markets currently include the following 20 European and
Pacific Basin countries: Australia, Austria, Belgium, Denmark, Finland, France,
Germany, Hong Kong, Ireland, Italy, Japan, Malaysia, Netherlands, New Zealand,
Norway, Singapore, Spain, Sweden, Switzerland and United Kingdom. These
countries are currently represented in the Morgan Stanley Capital International
Europe, Australasia, Far East (EAFE(R)) Index (the "EAFE Index").* The Fund
currently intends to invest at least 90% of its assets in companies in Major
Foreign Markets.

Determinations as to whether an issuer has its principal business activities
and interests in a Major Foreign Market will be made by Warburg Pincus Asset
Management, Inc. ("Warburg"), the Fund's investment adviser, based on publicly
available information and inquiries made to the issuers. In making such
determinations, Warburg will consider the following factors: (i) whether the
issuer's principal securities trading market is in a Major Foreign Market; (ii)
whether the issuer derives at least 50% of its revenues or earnings, either
alone or on a consolidated basis, from goods produced or sold, investments made
or services performed in a Major Foreign Market or has at least 50% of its
assets situated in one or more Major Foreign Markets; or (iii) whether the
issuer is organized under the laws of, and has a principal office in, a Major
Foreign Market.

The Fund is not an index fund and will not seek to match the performance or
country or industry weightings of the EAFE Index. The Fund will not invest in
U.S. companies except for temporary defensive purposes, in which case the Fund
may invest without limit in equity and debt securities of U.S. issuers and money
market obligations (described below).
The Fund will invest, under normal circumstances, in at least three countries
other than the United States. The Fund, which is a diversified investment,
company, intends to hold securities of many corporations located in a number
- --------------------------------------------------------------------------------

* The Morgan Stanley EAFE(R) Index is the exclusive property of Morgan Stanley.
The Fund is not sponsored, sold, promoted or endorsed by Morgan Stanley, Dean
Witter, Discover & Co. which owns service mark rights to the EAFE Index.

<PAGE>

of foreign countries, although from time to time a significant portion of the
Fund's assets may be invested in a single country, such as Japan. The Fund
intends to invest principally in the securities of companies with opportunities
for growth within international economies and markets. Investments may be made
in equity securities of companies of any size, whether traded on or off a
national securities exchange.

PORTFOLIO INVESTMENTS
- --------------------------------------------------------------------------------
MONEY MARKET OBLIGATIONS. The Fund is authorized to invest, under normal
market conditions, up to 20% of its assets in domestic and foreign short-term
(one year or less remaining to maturity) money market obligations. Money market
instruments consist of obligations issued or guaranteed by the U.S. government
or a foreign government, their agencies or instrumentalities; bank obligations
(including certificates of deposit, time deposits and bankers' acceptances of
domestic or foreign banks, domestic savings and loans and similar institutions)
that are high quality investments; commercial paper rated no lower than A-2 by
Standard & Poor's Ratings Services ("S&P") or Prime-2 by Moody's Investors
Service, Inc. ("Moody's") or the equivalent from another major rating service
or, if unrated, of an issuer having an outstanding, unsecured debt issue then
rated within the three highest rating categories; and repurchase agreements with
respect to the foregoing.
Repurchase Agreements. The Fund may invest in repurchase agreement
transactions with member banks of the Federal Reserve System and certain
non-bank dealers. Repurchase agreements are contracts under which the buyer of a
security simultaneously commits to resell the security to the seller at an
agreed-upon price and date. Under the terms of a typical repurchase agreement,
the Fund would acquire any underlying security for a relatively short period
(usually not more than one week) subject to an obligation of the seller to
repurchase, and the Fund to resell, the obligation at an agreed-upon price and
time, thereby determining the yield during the Fund's holding period. This
arrangement results in a fixed rate of return that is not subject to market
fluctuations during the Fund's holding period. The value of the underlying
securities will at all times be at least equal to the total amount of the
purchase obligation, including interest. The Fund bears a risk of loss in the
event that the other party to a repurchase agreement defaults on its obligations
or becomes bankrupt and the Fund is delayed or prevented from exercising its
right to dispose of the collateral securities, including the risk of a possible
decline in the value of the underlying securities during the period while the
Fund seeks to assert this right. Warburg, acting under the supervision of the
Fund's Board of Directors (the "Board"), monitors the creditworthiness of those
bank and non-bank dealers with which the Fund enters into repurchase agreements
to evaluate this risk. A repurchase agreement is considered to be a loan under
the Investment Company Act of 1940, as amended (the "1940 Act").

<PAGE>

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

U.S. GOVERNMENT SECURITIES. U.S. government securities in which the Fund
may invest include: direct obligations of the U.S. Treasury (such as Treasury
bills, notes and bonds) and obligations issued by U.S. government agencies and
instrumentalities , including instruments that are supported by the full faith
and credit of the United States, instruments that are supported by the right of
the issuer to borrow from the U.S. Treasury and instruments that are supported
by the credit of the instrumentality.

DEBT SECURITIES. The Fund may invest up to 35% of its assets in investment
grade debt securities (other than money market obligations) and preferred stocks
that are not convertible into common stock for the purpose of seeking capital
appreciation. The interest income to be derived may be considered as one factor
in selecting debt securities for investment by Warburg. The market value of debt
obligations may be expected to vary depending upon, among other factors,
interest rates, the ability of the issuer to repay principal and interest, any
change in investment rating and general economic conditions.
A security will be deemed to be investment grade if it is rated within the
four highest grades by Moody's or S&P or, if unrated, is determined to be of
comparable quality by Warburg. Securities rated in the fourth highest grade may
have speculative characteristics and changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments than is the case with higher grade bonds. Subsequent to
its purchase by the Fund, an issue of securities may cease to be rated or its
rating may be reduced. Neither event will require sale of such securities,
although Warburg will consider such event in its determination of whether the
Fund should continue to hold the securities.
When Warburg believes that a defensive posture is warranted, the Fund may
invest temporarily without limit in investment grade debt obligations and in
domestic and foreign money market obligations, including repurchase agreements.
CONVERTIBLE SECURITIES. Convertible securities in which the Fund may invest,
including both convertible debt and convertible preferred stock, may be
converted at either a stated price or stated rate into underlying shares of
common stock. Because of this feature, convertible securities enable an investor
to benefit from increases in the market price of the underlying common stock.
Convertible securities provide higher yields than the underlying equity
securities, but generally offer lower yields than non-convertible securities of
similar quality. The value of convertible securities

<PAGE>

fluctuates in relation to changes in interest rates like bonds and, in addition,
fluctuates in relation to the underlying common stock. Subsequent to purchase by
the Fund, convertible securities may cease to be rated or a rating may be
reduced. Neither event will require sale of such securities, although Warburg
will consider such event in its determination of whether the Fund should
continue to hold the securities. Up to 5% of the Fund's net assets may be held
in convertible securities rated below investment grade.
WARRANTS. The Fund may invest up to 10% of its total assets in warrants.
Warrants are securities that give the holder the right, but not the obligation,
to purchase equity issues of the company issuing the warrants, or a related
company, at a fixed price either on a date certain or during a set period.

RISK FACTORS AND SPECIAL CONSIDERATIONS
- --------------------------------------------------------------------------------

Investing in securities is subject to the inherent risk of fluctuations in the
prices of such securities. For certain additional risks relating to the Fund's
investments, see "Portfolio Investments" and "Certain Investment Strategies" in
this Prospectus.

NON-PUBLICLY TRADED SECURITIES; RULE 144A SECURITIES. The Fund may purchase
securities that are not registered under the Securities Act of 1933, as amended
(the "Securities Act"), but that can be sold to "qualified institutional buyers"
in accordance with Rule 144A under the Securities Act ("Rule 144A Securities").
An investment in Rule 144A Securities will be considered illiquid and therefore
subject to the Fund's limitation on the purchase of illiquid securities, unless
the Board determines on an ongoing basis that an adequate trading market exists
for the security. In addition to an adequate trading market, the Board will also
consider factors such as trading activity, availability of reliable price
information and other relevant information in determining whether a Rule 144A
Security is liquid. This investment practice could have the effect of increasing
the level of illiquidity in the Fund to the extent that qualified institutional
buyers become uninterested for a time in purchasing Rule 144A Securities. The
Board will carefully monitor any investments by the Fund in Rule 144A
Securities. The Board may adopt guidelines and delegate to Warburg the daily
function of determining and monitoring the liquidity of Rule 144A Securities,
although the Board will retain ultimate responsibility for any determination
regarding liquidity.
Non-publicly traded securities (including Rule 144A Securities) may involve a
high degree of business and financial risk and may result in substantial losses.
These securities may be less liquid than publicly traded securities, and the
Fund may take longer to liquidate these positions than would be the case for
publicly traded securities. Although these securities may be resold in privately
negotiated transactions, the prices realized on such sales could be less than
those originally paid by the Fund. Further, companies whose securities are not
publicly traded may not be subject to the disclosure and other investor
protection requirements applicable to companies whose securities are publicly
traded. The Fund's investment in illiquid securities is

<PAGE>

subject to the risk that should the Fund desire to sell any of these securities
when a ready buyer is not available at a price that is deemed to be
representative of their value, the value of the Fund's net assets could be
adversely affected.
WARRANTS. At the time of issue, the cost of a warrant is substantially less
than the cost of the underlying security itself, and price movements in the
underlying security are generally magnified in the price movements of the
warrant. This leveraging effect enables the investor to gain exposure to the
underlying security with a relatively low capital investment. This leveraging
increases an investor's risk, however, in the event of a decline in the value of
the underlying security and can result in a complete loss of the amount invested
in the warrant. In addition, the price of a warrant tends to be more volatile
than, and may not correlate exactly to, the price of the underlying security. If
the market price of the underlying security is below the exercise price of the
warrant on its expiration date, the warrant will generally expire without value.

PORTFOLIO TRANSACTIONS AND TURNOVER RATE
- --------------------------------------------------------------------------------

The Fund will attempt to purchase securities with the intent of holding them
for investment but may purchase and sell portfolio securities whenever Warburg
believes it to be in the best interests of the Fund and will not consider
portfolio turnover rate a limiting factor in making investment decisions
consistent with its investment objective and policies. It is not possible to
predict the portfolio turnover rate for the Fund. However, the Fund's annual
turnover rate should not exceed 75%. High portfolio turnover rates (100% or
more) may result in dealer mark-ups or underwriting commissions as well as other
transaction costs, including correspondingly higher brokerage commissions. In
addition, short-term gains realized from portfolio turnover may be taxable to
shareholders as ordinary income. See "Dividends, Distributions and
Taxes -- Taxes" below and "Investment Policies -- Portfolio Transactions" in the
Statement of Additional Information.

All orders for transactions in securities or options on behalf of the Fund are
placed by Warburg with broker-dealers that it selects, including Counsellors
Securities Inc., the Fund's distributor ("Counsellors Securities"). The Fund may
utilize Counsellors Securities in connection with a purchase or sale of
securities when Warburg believes that the charge for the transaction does not
exceed usual and customary levels and when doing so is consistent with
guidelines adopted by the Fund's Board.

CERTAIN INVESTMENT STRATEGIES
- --------------------------------------------------------------------------------
In attempting to achieve its investment objective, the Fund may engage in one
or more of the strategies set forth below. Although there is no intention of
doing so during the coming year, the Fund is authorized to (i) lend portfolio
securities and (ii) enter into reverse repurchase agreements and dollar rolls.

<PAGE>

Detailed information concerning the Fund's strategies and related risks is
contained below and in the Statement of Additional Information.
FOREIGN SECURITIES. There are certain risks involved in investing in
securities of companies and governments of foreign nations which are in addition
to the usual risks inherent in U.S. investments. These risks include those
resulting from fluctuations in currency exchange rates, revaluation of
currencies, future adverse political and economic developments and the possible
imposition of currency exchange blockages or other foreign governmental laws or
restrictions, reduced availability of public information concerning issuers, the
lack of uniform accounting, auditing and financial reporting standards and other
regulatory practices and requirements that are often generally less rigorous
than those applied in the United States. Moreover, securities of many foreign
companies may be less liquid and their prices more volatile than those of
securities of comparable U.S. companies. Certain foreign countries are known to
experience long delays between the trade and settlement dates of securities
purchased or sold. In addition, with respect to certain foreign countries, there
is the possibility of expropriation, nationalization, confiscatory taxation and
limitations on the use or removal of funds or other assets of the Fund,
including the withholding of dividends. Foreign securities may be subject to
foreign government taxes that would reduce the net yield on such securities.
Moreover, individual foreign economies may differ favorably or unfavorably from
the U.S. economy in such respects as growth of gross national product, rate of
inflation, capital reinvestment, resource self-sufficiency and balance of
payments positions. Investment in foreign securities will also result in higher
operating expenses due to the cost of converting foreign currency into U.S.
dollars, the payment of fixed brokerage commissions on foreign exchanges, which
generally are higher than commissions on U.S. exchanges, higher valuation and
communications costs and the expense of maintaining securities with foreign
custodians.
DEPOSITARY RECEIPTS. Certain of the above risks may be involved with ADRs,
European Depositary Receipts ("EDRs") and International Depositary Receipts
("IDRs"), instruments that evidence ownership in underlying securities issued by
a foreign corporation. ADRs, EDRs and IDRs may not necessarily be denominated in
the same currency as the securities whose ownership they represent. ADRs are
typically issued by a U.S. bank or trust company. EDRs (sometimes referred to as
Continental Depositary Receipts) are issued in Europe, and IDRs (sometimes
referred to as Global Depositary Receipts) are issued outside the United States,
each typically by non-U.S. banks and trust companies.
JAPANESE INVESTMENTS. Because the Fund may from time to time have large
positions in Japanese securities, it may be subject to general economic and
political conditions in Japan.
Securities in Japan are denominated and quoted in "yen." Yen are fully
convertible and transferable based on floating exchange rates. In determining

<PAGE>

the net asset value of shares of the Fund, assets or liabilities initially
expressed in terms of Japanese yen will be translated into U.S. dollars at the
current selling rate of Japanese yen against U.S. dollars. As a result, the
value of the Fund's assets as measured in U.S. dollars may be affected favorably
or unfavorably by fluctuations in the value of Japanese yen relative to the U.S.
dollar.
The decline in the Japanese securities markets since 1989 has contributed to a
weakness in the Japanese economy, and the impact of a further decline cannot be
ascertained. The common stocks of many Japanese companies continue to trade at
high price-earnings ratios in comparison with those in the United States, even
after the recent market decline. Differences in accounting methods make it
difficult to compare the earnings of Japanese companies with those of companies
in other countries, especially the United States.
Japan is largely dependent upon foreign economies for raw materials.
International trade is important to Japan's economy, as exports provide the
means to pay for many of the raw materials it must import. Because of the
concentration of Japanese exports in highly visible products such as
automobiles, machine tools and semiconductors, and the large trade surpluses,
Japan has entered a difficult phase in its relations with its trading partners,
particularly with respect to the United States, with whom the trade imbalance is
the greatest.

Japan has a parliamentary form of government. In 1993, a coalition government
was formed which, for the first time since 1955, did not include the Liberal
Democratic Party. Since mid-1993, there have been several changes in leadership
in Japan. What, if any, effect the current political situation will have on
prospective regulatory reforms in the Japanese economy cannot be predicted.
Recent and future developments in Japan and neighboring Asian countries may lead
to changes in policy that might adversely affect the Fund's investments there.
For additional information, see "Investment Policies -- Japanese Investments" in
the Statement of Additional Information.

OPTIONS, FUTURES AND CURRENCY TRANSACTIONS. At the discretion of Warburg, the
Fund may, but is not required to, engage in a number of strategies involving
options, futures and forward currency contracts. These strategies, commonly
referred to as "derivatives," may be used (i) for the purpose of hedging against
a decline in value of the Fund's current or anticipated portfolio holdings, (ii)
as a substitute for purchasing or selling portfolio securities or (iii) except
with respect to currency exchange transactions, to seek to generate income to
offset expenses or increase return. TRANSACTIONS THAT ARE NOT CONSIDERED HEDGING
SHOULD BE CONSIDERED SPECULATIVE AND MAY SERVE TO INCREASE THE FUND'S INVESTMENT
RISK. Transaction costs and any premiums associated with these strategies, and
any losses incurred, will affect the Fund's net asset value and performance.
Therefore, an investment in the Fund may involve a greater risk than an
investment in other mutual funds that do not utilize these strategies. The
Fund's use of these strategies may be limited by position and exercise limits

<PAGE>

established by securities and commodities exchanges and other applicable
regulatory authorities.

Securities Options and Stock Index Options. The Fund may write covered call
options and put options and purchase put and call options on securities and
stock indexes and will realize fees (referred to as "premiums") for granting the
rights evidenced by the options. Such options may be traded on an exchange or
may trade over-the-counter ("OTC"). The purchaser of a put option on a security
has the right to compel the purchase by the writer of the underlying security,
while the purchaser of a call option on a security has the right to purchase the
underlying security from the writer. A stock index measures the movement of a
certain group of stocks by assigning relative values to the stocks included in
the index.

The potential loss associated with purchasing an option is limited to the
premium paid, and the premium would partially offset any gains achieved from its
use. However, for an option writer the exposure to adverse price movements in
the underlying security or index is potentially unlimited during the exercise
period. Writing securities options may result in substantial losses to the Fund,
force the sale or purchase of portfolio securities at inopportune times or at
less advantageous prices, limit the amount of appreciation the Fund could
realize on its investments or require the Fund to hold securities it would
otherwise sell.
Futures Contracts and Related Options. The Fund may enter into foreign
currency, interest rate and stock index futures contracts and purchase and write
(sell) related options that are traded on an exchange designated by the
Commodity Futures Trading Commission (the "CFTC") or, if consistent with CFTC
regulations, on foreign exchanges. These futures contracts are standardized
contracts for the future delivery of an interest rate sensitive security or, in
the case of index futures contracts, are settled in cash with reference to a
specified multiplier times the change in the specified interest rate or index.
An option on a futures contract gives the purchaser the right, in return for the
premium paid, to assume a position in a futures contract.
Aggregate initial margin and premiums required to establish positions other
than those considered by the CFTC to be "bona fide hedging" will not exceed 5%
of the Fund's net asset value, after taking into account unrealized profits and
unrealized losses on any such contracts. Although the Fund is limited in the
amount of assets that may be invested in futures transactions, there is no
overall limit on the percentage of Fund assets that may be at risk with respect
to futures activities.
Currency Exchange Transactions. The Fund will conduct its currency exchange
transactions either (i) on a spot (i.e., cash) basis at the rate prevailing in
the currency exchange market, (ii) through entering into futures contracts or
options on futures contracts (as described above), (iii) through entering into
forward contracts to purchase or sell currency or (iv) by purchasing exchange-
traded currency options. A forward currency contract involves an obligation to
purchase or sell a specific currency at a future date at a price set at the time

<PAGE>

of the contract. An option on a foreign currency operates similarly to an option
on a security. Risks associated with currency forward contracts and purchasing
currency options are similar to those described in this Prospectus for futures
contracts and securities and stock index options. In addition, the use of
currency transactions could result in losses from the imposition of foreign
exchange controls, suspension of settlement or other governmental actions or
unexpected events.

Hedging Considerations. A hedge is designed to offset a loss on a portfolio
position with a gain in the hedge position; at the same time, however, a
properly correlated hedge will result in a gain in the portfolio position being
offset by a loss in the hedge position. As a result, the use of options and
futures contracts and currency exchange transactions for hedging purposes could
limit any potential gain from an increase in value of the position hedged. In
addition, the movement in the portfolio position hedged may not be of the same
magnitude as movement in the hedge. The Fund will engage in hedging transactions
only when deemed advisable by Warburg, and successful use of hedging
transactions will depend on Warburg's ability to predict correctly movements in
the hedge and the hedged position and the correlation between them, which could
prove to be inaccurate. Even a well-conceived hedge may be unsuccessful to some
degree because of unexpected market behavior or trends.

Additional Considerations. To the extent that the Fund engages in the
strategies described above, the Fund may experience losses greater than if these
strategies had not been utilized. In addition to the risks described above,
these instruments may be illiquid and/or subject to trading limits, and the Fund
may be unable to close out a position without incurring substantial losses, if
at all. The Fund is also subject to the risk of a default by a counterparty to
an off-exchange transaction.

Asset Coverage. The Fund will comply with applicable regulatory requirements
designed to eliminate any potential for leverage with respect to options written
by the Fund on securities and indexes; currency, interest rate and stock index
futures contracts and options on these futures contracts; and forward currency
contracts. The use of these strategies may require that the Fund maintain cash
or liquid securities in a segregated account with its custodian or a designated
sub-custodian to the extent the Fund's obligations with respect to these
strategies are not otherwise "covered" through ownership of the underlying
security or financial instrument or by other portfolio positions or by other
means consistent with applicable regulatory policies. Segregated assets cannot
be sold or transferred unless equivalent assets are substituted in their place
or it is no longer necessary to segregate them. As a result, there is a
possibility that segregation of a large percentage of the Fund's assets could
impede portfolio management or the Fund's ability to meet redemption requests or
other current obligations.
SHORT SALES AGAINST THE BOX. The Fund may enter into a short sale of
securities such that when the short position is open the Fund owns an equal

<PAGE>

amount of the securities sold short or owns preferred stocks or debt securities,
convertible or exchangeable without payment of further consideration, into an
equal number of securities sold short. This kind of short sale, which is
referred to as one "against the box," may be entered into by the Fund to, for
example, lock in a sale price for a security the Fund does not wish to sell
immediately. The Fund will deposit, in a segregated account with its custodian
or a qualified subcustodian, the securities sold short or convertible or
exchangeable preferred stocks or debt securities in connection with short sales
against the box. Not more than 10% of the Fund's net assets (taken at current
value) may be held as collateral for short sales against the box at any one
time.

WHEN-ISSUED SECURITIES AND DELAYED-DELIVERY TRANSACTIONS. The Fund may utilize
up to 20% of its total assets to purchase securities on a when-issued or
delayed-delivery basis. In these transactions, payment for and delivery of the
securities occur beyond the regular settlement dates. The payment obligation and
the interest rate that will be received in when-issued and delayed-delivery
transactions are fixed at the time the buyer enters into the commitment. Due to
fluctuations in the value of securities purchased on a when-issued or
delayed-delivery basis, the prices of such securities may be higher or lower
than the prices available in the market on the dates when the investments are
actually delivered to the buyers. When-issued securities may include securities
purchased on a "when, as and if issued" basis, under which the issuance of the
security depends on the occurrence of a subsequent event, such as approval of a
merger, corporate reorganization or debt restructuring. The Fund is required to
segregate assets equal to the amount of its when-issued and delayed-delivery
purchase commitments.

INVESTMENT GUIDELINES
- --------------------------------------------------------------------------------
The Fund may invest up to 15% of its net assets in securities with contractual
or other restrictions on resale and other instruments that are not readily
marketable ("illiquid securities"), including (i) securities issued as part of a
privately negotiated transaction between an issuer and one or more purchasers;
(ii) repurchase agreements with maturities greater than seven days; and (iii)
time deposits maturing in more than seven calendar days. The Fund may borrow
from banks for temporary or emergency purposes, such as meeting anticipated
redemption requests, provided that reverse repurchase agreements and any other
borrowing by the Fund may not exceed 30% of its total assets at the time of
borrowing and may pledge its assets to the same extent in connection with these
borrowings. Whenever borrowings (including reverse repurchase agreements) exceed
5% of the value of the Fund's total assets, the Fund will not make any
additional investments (including roll-overs). Except for the limitations on
borrowing, the investment guidelines set forth in this paragraph may be changed
at any time without shareholder consent by vote of the Board, subject to the
limitations contained in the 1940 Act. A complete list of investment
restrictions that the Fund has adopted identifying additional restrictions that
cannot be changed without the

<PAGE>

approval of the majority of the Fund's outstanding shares is contained in the
Fund's Statement of Additional Information.

MANAGEMENT OF THE FUND
- --------------------------------------------------------------------------------
INVESTMENT ADVISER. The Fund employs Warburg as its investment adviser.
Warburg, subject to the control of the Fund's officers and the Board, manages
the investment and reinvestment of the assets of the Fund in accordance with the
Fund's investment objective and stated investment policies. Warburg makes
investment decisions for the Fund and places orders to purchase or sell
securities on behalf of the Fund. Warburg also employs a support staff of
management personnel to provide services to the Fund and furnishes the Fund with
office space, furnishings and equipment.
For the services provided by Warburg, the Fund pays Warburg a fee calculated
at an annual rate of 1.00% of the Fund's average daily net assets. Warburg and
the Fund's co-administrators may voluntarily waive a portion of their fees from
time to time and temporarily limit the expenses to be paid by the Fund.

Warburg is a professional investment advisory firm which provides investment
services to investment companies, employee benefit plans, endowment funds,
foundations and other institutions and individuals. As of December 31, 1997,
Warburg managed approximately $20 billion of assets, including approximately $11
billion of investment company assets. Incorporated in 1970, Warburg is
indirectly controlled by Warburg, Pincus & Co. ("WP&Co."), which has no business
other than being a holding company of Warburg and its affiliates. Lionel I.
Pincus, the managing partner of WP&Co., may be deemed to control both WP&Co. and
Warburg. Warburg's address is 466 Lexington Avenue, New York, New York
10017-3147.

PORTFOLIO MANAGERS. Richard H. King, P. Nicholas Edwards and Harold W. Ehrlich
have been Co-Portfolio Managers and Vincent J. McBride, Nancy Nierman and J.H.
Cullum Clark, CFA, have been Associate Portfolio Managers of the Fund since its
inception.

Mr. King, a Managing Director of Warburg, has been with Warburg since 1989,
before which time he was chief investment officer and a director at Fiduciary
Trust Company International S.A. in London. Mr. Edwards is a Managing Director
and has been with Warburg since August 1995, before which time he was a director
at Jardine Fleming Investment Advisers, Tokyo. Mr. Ehrlich is a Managing
Director of Warburg and has been with Warburg since February 1995, before which
time he was a senior vice president, portfolio manager and analyst at Templeton
Investment Counsel Inc. Mr. McBride is a Senior Vice President of Warburg and
has been with Warburg since 1994. Prior to joining Warburg, Mr. McBride was an
international equity analyst at Smith Barney Inc. Ms. Nierman is a Vice
President of Warburg and has been with Warburg since April 1996, before which
time she was an analyst with Fiduciary Trust Company International. Mr. Clark, a
Vice President of

<PAGE>

Warburg, has been with Warburg since 1996, before which time he was an analyst
and portfolio manager with Brown Brothers Harriman.

CO-ADMINISTRATORS. The Fund employs Counsellors Funds Service, Inc.
("Counsellors Service"), a wholly owned subsidiary of Warburg, as a co-
administrator. As co-administrator, Counsellors Service provides shareholder
liaison services to the Fund, including responding to shareholder inquiries and
providing information on shareholder investments. Counsellors Service also
performs a variety of other services, including furnishing certain executive and
administrative services, acting as liaison between the Fund and its various
service providers, furnishing corporate secretarial services, which include
preparing materials for meetings of the Fund's Board, preparing proxy statements
and annual and semiannual reports, assisting in the preparation of tax returns
and monitoring and developing compliance procedures for the Fund. As
compensation, the Fund pays Counsellors Service a fee calculated at an annual
rate of .10% of the Fund's average daily net assets.
The Fund employs PFPC Inc. ("PFPC"), an indirect, wholly owned subsidiary of
PNC Bank Corp., as a co-administrator. As a co-administrator, PFPC calculates
the Fund's net asset value, provides all accounting services for the Fund and
assists in related aspects of the Fund's operations. As compensation, the Fund
pays PFPC a fee calculated at an annual rate of .12% of the Fund's first $250
million in average daily net assets, .10% of the next $250 million in average
daily net assets, .08% of the next $250 million in average daily net assets, and
.05% of average daily net assets over $750 million. PFPC has its principal
offices at 400 Bellevue Parkway, Wilmington, Delaware 19809.
CUSTODIANS. PNC Bank, National Association ("PNC") serves as custodian of the
U.S. assets of the Fund and State Street Bank and Trust Company ("State Street")
serves as custodian of the Fund's non-U.S. assets. Like PFPC, PNC is a
subsidiary of PNC Bank Corp. and its principal business address is 1600 Market
Street, Philadelphia, Pennsylvania 19103. State Street's principal business
address is 225 Franklin Street, Boston, Massachusetts 02110.
TRANSFER AGENT. State Street also serves as shareholder servicing agent,
transfer agent and dividend disbursing agent for the Fund. State Street has
delegated to Boston Financial Data Services, Inc., a 50% owned subsidiary
("BFDS"), responsibility for most shareholder servicing functions. BFDS's
principal business address is 2 Heritage Drive, North Quincy, Massachusetts
02171.
DISTRIBUTOR. Counsellors Securities serves as distributor of the shares of the
Fund. Counsellors Securities is a wholly owned subsidiary of Warburg and is
located at 466 Lexington Avenue, New York, New York 10017-3147. Counsellors
Securities receives a fee at an annual rate equal to .25% of the average daily
net assets of the Fund's Common Shares for distribution services, pursuant to a
shareholder servicing and distribution plan (the "12b-1 Plan") adopted by the
Fund pursuant to Rule 12b-1 under the 1940 Act. Amounts paid to Counsellors
Securities under a 12b-1 Plan may be used by

<PAGE>

Counsellors Securities to cover expenses that are primarily intended to result
in, or that are primarily attributable to, (i) the sale of the Common Shares,
(ii) ongoing servicing and/or maintenance of the accounts of Common Shareholders
of the Fund and (iii) sub-transfer agency services, sub-accounting services or
administrative services related to the sale of the Common Shares, all as set
forth in the 12b-1 Plan. Payments under the 12b-1 Plan are not tied exclusively
to the distribution expenses actually incurred by Counsellors Securities and the
payments may exceed distribution expenses actually incurred. The Board of the
Fund evaluates the appropriateness of the 12b-1 Plan on a continuing basis and
in doing so considers all relevant factors, including expenses paid by
Counsellors Securities and amounts received under the 12b-1 Plan.

Warburg or its affiliates may, at their own expense, provide promotional
incentives for qualified recipients who support the sale of shares of the Fund,
consisting of securities dealers who have sold Fund shares or others, including
banks and other financial institutions, under special arrangements. Incentives
may include opportunities to attend business meetings, conferences, sales or
training programs for recipients' employees or clients and other programs or
events and may also include opportunities to participate in advertising or sales
campaigns and/or shareholder services and programs regarding one or more Warburg
Pincus Funds. Warburg or its affiliates may pay for travel, meals and lodging in
connection with these promotional activities. In some instances, these
incentives may be offered only to certain institutions whose representatives
provide services in connection with the sale or expected sale of Fund shares.

DIRECTORS AND OFFICERS. The officers of the Fund manage its day-to-day
operations and are directly responsible to the Board. The Board sets broad
policies for the Fund and chooses the Fund's officers. A list of the Directors
and officers of the Fund and a brief statement of their present positions and
principal occupations during the past five years is set forth in the Statement
of Additional Information.

HOW TO OPEN AN ACCOUNT
- --------------------------------------------------------------------------------
In order to invest in the Fund, an investor must first complete and sign an
account application. To obtain an application, an investor may telephone Warburg
Pincus Funds at (800) 927-2874. An investor may also obtain an account
application by writing to:
Warburg Pincus Funds
P.O. Box 9030
Boston, Massachusetts 02205-9030
Completed and signed account applications should be mailed to Warburg Pincus
Funds at the above address.

RETIREMENT PLANS AND UTMA/UGMA ACCOUNTS. For information (i) about investing
in the Fund through a tax-advantaged retirement plan, such as an Individual
Retirement Account ("IRA") or (ii) about opening a Uniform

<PAGE>

Transfers to Minors Act ("UTMA") account or Uniform Gifts to Minors Act ("UGMA")
account, an investor should telephone Warburg Pincus Funds at (800) 927-2874 or
write to Warburg Pincus Funds at the address set forth above. Investors should
consult their own tax advisers about the establishment of retirement plans and
UTMA or UGMA accounts.

CHANGES TO ACCOUNT. For information on how to make changes to an account,
including changes to account registration, address and/or privileges, an
investor should telephone Warburg Pincus Funds at (800) 927-2874. Shareholders
are responsible for maintaining current account registration and addresses with
the Fund. No interest will be paid on amounts represented by uncashed
distribution or redemption checks.

HOW TO PURCHASE SHARES
- --------------------------------------------------------------------------------

Common Shares of the Fund may be purchased either by mail or, with special
advance instructions, by wire and automated clearing house transactions ("ACH on
Demand"). The minimum initial investment in the Fund is $2,500 and the minimum
subsequent investment is $100, except that subsequent minimum investments can be
as low as $50 under the Automatic Monthly Investment Plan or by ACH on Demand,
as described below. For certain retirement plans (described above) and UTMA/UGMA
accounts, the minimum initial investment is $500. The Fund reserves the right to
change investment minimum requirements at any time. The investment minimums may
be waived for accounts in which employees of Warburg or its affiliates have an
interest or for investors maintaining advisory accounts with Warburg or
brokerage accounts with Counsellors Securities. Existing investors will be given
15 days' notice by mail of any increase in investment minimum requirements.

After an investor has made his initial investment, additional shares may be
purchased at any time by mail or by wire in the manner outlined below. Wire
payments for initial and subsequent investments should be preceded by an order
placed with the Fund and should clearly indicate the investor's account number
and the name of the Fund in which shares are being purchased. In the interest of
economy and convenience, physical certificates representing shares in the Fund
are not normally issued.

BY MAIL. If the investor desires to purchase Common Shares by mail, a check or
money order made payable to the Fund or Warburg Pincus Funds (in U.S. currency)
should be sent along with the completed account application to Warburg Pincus
Funds at the address set forth above. Checks payable to the investor and
endorsed to the order of the Fund or Warburg Pincus Funds will not be accepted
as payment and will be returned to the sender. If payment is received in proper
form prior to the close of regular trading on The New York Stock Exchange, Inc.
(the "NYSE") (currently 4:00 p.m., Eastern time) on a day that the Fund
calculates its net asset value (a "business day"), the purchase will be made at
the Fund's net asset value calculated at the end of that day. If payment is
received at or after the close of regular trading on the NYSE, the

<PAGE>

purchase will be effected at the Fund's net asset value determined for the next
business day after payment has been received. Checks or money orders that are
not in proper form or that are not accompanied or preceded by a complete account
application will be returned to the sender. Shares purchased by check or money
order are entitled to receive dividends and distributions beginning on the day
payment is received. Checks or money orders in payment for shares of more than
one Warburg Pincus Fund should be made payable to Warburg Pincus Funds and
should be accompanied by a breakdown of amounts to be invested in each fund. If
a check used for purchase does not clear, the Fund will cancel the purchase and
the investor may be liable for losses or fees incurred. For a description of the
manner of calculating the Fund's net asset value, see "Net Asset Value" below.

BY WIRE. Investors may also purchase Common Shares in the Fund by wiring funds
from their banks. Telephone orders by wire will not be accepted until a
completed account application in proper form has been received and an account
number has been established. Investors should place an order with the Fund prior
to wiring funds by telephoning (800) 927-2874. Federal funds may be wired using
the following wire address:

State Street Bank and Trust Company

ABA# 0110 000 28

Attn: Mutual Funds/Custody Department

Warburg Pincus Major Foreign Markets Fund

DDA# 9904-649-2

F/F/C: [Account Number and Account Registration]

If a telephone order is received prior to the close of regular trading on the
NYSE and payment by wire is received on the same day in proper form in
accordance with instructions set forth above, the shares will be priced
according to the net asset value of the Fund on that day and are entitled to
dividends and distributions beginning on that day. However, if a wire in proper
form that is not preceded by a telephone order is received at or after the close
of regular trading on the NYSE, the payment will be held uninvested until the
order is effected at the close of business on the next business day. Payment for
orders that are not accepted will be returned to the prospective investor after
prompt inquiry. If a telephone order is placed and payment by wire is not
received on the same day, the Fund will cancel the purchase and the investor may
be liable for losses or fees incurred.

AUTOMATIC MONTHLY INVESTMENT PLAN AND ACH ON DEMAND. The Automatic Monthly
Investment Plan allows shareholders to authorize the Fund or its agent to debit
their bank account monthly ($50 minimum) for the purchase of Fund shares on or
about either the tenth or twentieth calender day of each month. Shareholders may
also purchase shares by calling (800) 927-2874 on any business day to request
direct deposit or credit (for redemptions) of their bank account through an ACH
on Demand transaction.

To establish the Automatic Monthly Investment Plan and/or ACH on Demand
option, obtain a separate application or complete the relevant section

<PAGE>

of the account application. Only an account maintained at a financial
institution which is an automatic clearing house member may be used, and one
common name must appear on both the shareholder's Fund registration and bank
account registration. Shareholders using this service must satisfy the initial
investment minimum for the Fund prior to or concurrent with the start of any
Automatic Monthly Investment Plan or ACH on Demand transaction. Please contact
Warburg Pincus Funds at (800) 927-2874 for additional information. Investors
should allow a period of up to 30 days in order to implement an Automatic
Monthly Investment Plan or ACH on Demand transaction. The failure to provide
complete information could result in further delays.

If an ACH on Demand transaction request is received prior to regular trading
on the NYSE, the shares will be priced according to the net asset value of Fund
shares on that day and are entitled to dividends and distributions as described
above for wire purchases. If a request is received at or after the close of
regular trading on the NYSE, the shares will be priced at the relevant Fund's
net asset value on the following business day.

TELEPHONE TRANSACTIONS. Unless otherwise indicated on the account application
or if the ACH on Demand option is elected, transactions may be conducted by
telephone. Investors should realize that in conducting transactions by telephone
they may be giving up a measure of security that they may have if they were to
conduct such transactions in writing. Neither the Fund nor its agents will be
liable for following instructions communicated by telephone that it reasonably
believes to be genuine. Reasonable procedures will be employed on behalf of the
Fund designated to give reasonable assurance that instructions communicated by
telephone are genuine. Such procedures include providing written confirmation of
telephone transactions, tape recording telephone instructions and requiring
specific personal information prior to acting upon telephone instructions.

PURCHASES THROUGH INTERMEDIARIES. Common Shares of the Fund are available
through the Charles Schwab & Company, Inc. Mutual Fund OneSource(TM) Program;
Fidelity Brokerage Services, Inc. Funds Network(TM) Program; Jack White &
Company, Inc.; and Waterhouse Securities, Inc. Generally, these programs require
customers to pay either no or low transaction fees in connection with purchases,
exchanges or redemptions. The Fund is also available through certain
broker-dealers, financial institutions and other industry professionals
(including the brokerage firms offering the programs described above,
collectively, "Service Organizations"). Certain features of the Fund, such as
the initial and subsequent investment minimums, redemption fees and certain
trading restrictions, may be modified or waived by Service Organizations.
Service Organizations may impose transaction or administrative charges or other
direct fees, which charges or fees would not be imposed if Fund shares are
purchased directly from the Fund. Therefore, a client or customer should contact
the Service Organization acting on his behalf concerning the fees (if any)
charged in connection with a

<PAGE>

purchase, exchange or redemption of Fund shares and should read this Prospectus
in light of the terms governing his accounts with the Service Organization.
Service Organizations will be responsible for promptly transmitting client or
customer purchase and redemption orders to the Fund in accordance with their
agreements with clients or customers.

Service Organizations or, if applicable, their designees may enter confirmed
purchase or redemption orders on behalf of clients and customers, with payment
to follow no later than the Fund's pricing on the following business day. If
payment is not received by such time, the Service Organization could be held
liable for resulting fees or losses. The Fund may be deemed to have received a
purchase or redemption order when a Service Organization, or, if applicable, its
authorized designee, accepts the order. Such orders received by the Fund in
proper form will be priced at the Fund's net asset value next computed after
they are accepted by the Service Organization or its authorized designee.

For administration, subaccounting, transfer agency and/or other services,
Warburg, Counsellors Securities or their affiliates may pay Service
Organizations and certain recordkeeping organizations with whom they have
entered into agreements a fee of up to .40% (the "Service Fee") of the average
annual value of accounts with the Fund maintained by such Service Organizations
or recordkeepers. A portion of the Service Fee may be borne by the Fund as a
transfer agency fee. In addition, a Service Organization or recordkeeper may
directly or indirectly pay a portion of its Service Fee to the Fund's custodian
or transfer agent for costs related to accounts of its clients or customers. The
Service Fee payable to any one Service Organization or recordkeeper is
determined based upon a number of factors, including the nature and quality of
the services provided, the operations processing requirements of the
relationship and the standardized fee schedule of the Service Organization or
recordkeeper.

GENERAL. The Fund reserves the right to reject any specific purchase order,
including certain purchases made by exchange (see "How to Redeem and Exchange
Shares -- Exchange of Shares" below). Purchase orders may be refused if, in
Warburg's judgment, the Fund would be unable to invest the money effectively in
accordance with its investment objective and policies, or would otherwise
potentially be adversely affected. The Fund may discontinue sales of its shares
if management believes that a substantial further increase in assets may
adversely affect the Fund's ability to achieve its investment objective. In such
event, however, it is anticipated that existing shareholders would be permitted
to continue to authorize investment in the Fund and to reinvest any dividends or
capital gains distributions.

<PAGE>

HOW TO REDEEM AND EXCHANGE SHARES
- --------------------------------------------------------------------------------
REDEMPTION OF SHARES. An investor in the Fund may redeem (sell) his shares on
any day that the Fund's net asset value is calculated (see "Net Asset Value"
below).

Common Shares of the Fund may either be redeemed by mail or by telephone. If
an investor desires to redeem his shares by mail, a written request for
redemption should be sent to Warburg Pincus Funds at the address indicated above
under "How to Open an Account." An investor should be sure that the redemption
request identifies the Fund, the number of shares to be redeemed and the
investor's account number. Payment of redemption proceeds may be delayed in
connection with account changes. Each mail redemption request must be signed by
the registered owner(s) (or his legal representative(s)) exactly as the shares
are registered. If an investor has applied for the telephone redemption feature
on his account application, he may redeem his shares by calling Warburg Pincus
Funds at (800) 927-2874 between 9:00 a.m. and 4:00 p.m. (Eastern time) on any
business day. An investor making a telephone withdrawal should state (i) the
name of the Fund, (ii) the account number of the Fund, (iii) the name of the
investor(s) appearing on the Fund's records, (iv) the amount to be withdrawn and
(v) the name of the person requesting the redemption.

After receipt of the redemption request by mail or by telephone, the
redemption proceeds will, at the option of the investor, be paid by check and
mailed to the investor of record or be wired to the investor's bank as indicated
in the account application previously filled out by the investor. The Fund
currently does not impose a service charge for effecting wire transfers but the
Fund reserves the right to do so in the future. During periods of significant
economic or market change, telephone redemptions may be difficult to implement.
If an investor is unable to contact Warburg Pincus Funds by telephone, an
investor may deliver the redemption request to Warburg Pincus Funds by mail at
the address shown above under "How to Open an Account." Although the Fund will
redeem shares purchased by check, through the Automatic Monthly Investment Plan
or by ACH on Demand before the check or funds clear, payments of the redemption
proceeds will be delayed for up to five days (for funds received through the
Automatic Monthly Investment Plan or by ACH on Demand) or up to ten days (for
check purchases) from the date of purchase. Investors should consider purchasing
shares using a certified or bank check, money order or federal funds wire if
they anticipate an immediate need for redemption proceeds.

If a redemption order is received by the Fund or its agent prior to the close
of regular trading on the NYSE, the redemption order will be effected at the net
asset value per share as determined on that day. If a redemption order is
received at or after the close of regular trading on the NYSE, the redemption
order will be effected at the net asset value as next determined. Except as
noted above, redemption proceeds will normally be mailed or wired to an

<PAGE>

investor on the next business day following the date a redemption order is
effected. If, however, in the judgment of Warburg, immediate payment would
adversely affect the Fund, the Fund reserves the right to pay the redemption
proceeds within seven days after the redemption order is effected. Furthermore,
the Fund may suspend the right of redemption or postpone the date of payment
upon redemption (as well as suspend or postpone the recordation of an exchange
of shares) for such periods as are permitted under the 1940 Act.
The proceeds paid upon redemption may be more or less than the amount invested
depending upon a share's net asset value at the time of redemption. If an
investor redeems all the shares in his account, all dividends and distributions
declared up to and including the date of redemption are paid along with the
proceeds of the redemption.

If, due to redemptions, the value of an investor's account drops to less than
$2,000 ($250 in the case of a retirement plan or UTMA or UGMA account), the Fund
reserves the right to redeem the shares in that account at net asset value.
Prior to any redemption, the Fund will notify an investor in writing that this
account has a value of less than the minimum. The investor will then have 60
days to make an additional investment before a redemption will be processed by
the Fund.

AUTOMATIC CASH WITHDRAWAL PLAN. The Fund offers investors an automatic cash
withdrawal plan under which investors may elect to receive periodic cash
payments of at least $250 monthly or quarterly. To establish this service,
complete the "Automatic Withdrawal Plan" section of the account application and
attach a voided check from the bank account to be credited. For further
information regarding the automatic cash withdrawal plan or to modify or
terminate the plan, investors should contact Warburg Pincus Funds at (800)
927-2874.

EXCHANGE OF SHARES. An investor may exchange Common Shares of the Fund for
Common Shares of another Warburg Pincus Fund at their respective net asset
values. Exchanges may be effected by mail or by telephone in the manner
described under "Redemption of Shares" above. If an exchange request is received
by Warburg Pincus Funds or its agent prior to the close of regular trading on
the NYSE, the exchange will be made at the Fund's net asset value determined at
the end of that business day. Exchanges will be effected without a sales charge
but must satisfy the minimum dollar amount necessary for new purchases.
Currently, exchanges may be made with the following other funds:

- - WARBURG PINCUS CASH RESERVE FUND -- a money market fund investing in
short-term, high quality money market instruments;
- - WARBURG PINCUS NEW YORK TAX EXEMPT FUND -- a money market fund investing in
short-term, high quality municipal obligations designed for New York investors
seeking income exempt from federal, New York State and New York City income
tax;

<PAGE>

- - WARBURG PINCUS NEW YORK INTERMEDIATE MUNICIPAL FUND -- an intermediate-term
municipal bond fund designed for New York investors seeking income exempt from
federal, New York State and New York City income tax;
- - WARBURG PINCUS INTERMEDIATE MATURITY GOVERNMENT FUND -- an intermediate-term
bond fund investing in obligations issued or guaranteed by the U.S.
government, its agencies or instrumentalities;
- - WARBURG PINCUS FIXED INCOME FUND -- a bond fund seeking current income and,
secondarily, capital appreciation by investing in a diversified portfolio of
fixed-income securities;
- - WARBURG PINCUS GLOBAL FIXED INCOME FUND -- a bond fund investing in a
portfolio consisting of investment grade fixed-income securities of
governmental and corporate issuers denominated in various currencies,
including U.S. dollars;
- - WARBURG PINCUS BALANCED FUND -- a fund seeking maximum total return through a
combination of long-term growth of capital and current income consistent with
preservation of capital through diversified investments in equity and debt
securities;
- - WARBURG PINCUS GROWTH & INCOME FUND -- an equity fund seeking long-term growth
of capital and income and a reasonable current return;
- - WARBURG PINCUS CAPITAL APPRECIATION FUND -- an equity fund seeking long-term
capital appreciation by investing primarily in equity securities of domestic
companies;
- - WARBURG PINCUS STRATEGIC VALUE FUND -- an equity fund seeking capital
appreciation by investing in undervalued companies and market sectors;
- - WARBURG PINCUS EMERGING GROWTH FUND -- an equity fund seeking maximum capital
appreciation by investing in emerging growth companies;
- - WARBURG PINCUS SMALL COMPANY VALUE FUND -- an equity fund seeking long-term
capital appreciation by investing primarily in equity securities of small
companies;
- - WARBURG PINCUS SMALL COMPANY GROWTH FUND* -- an equity fund seeking capital
growth by investing in equity securities of small-sized domestic companies;
- - WARBURG PINCUS HEALTH SCIENCES FUND -- an equity fund seeking capital
appreciation by investing primarily in equity and debt securities of health
sciences companies;
- - WARBURG PINCUS POST-VENTURE CAPITAL FUND -- an equity fund seeking long-term
growth of capital by investing principally in equity securities of issuers in
their post-venture capital stage of development;
- - WARBURG PINCUS GLOBAL POST-VENTURE CAPITAL FUND -- an equity fund seeking
long-term growth of capital by investing principally in equity securities of
U.S. and foreign issuers in their post-venture capital stage of development;
- - WARBURG PINCUS INTERNATIONAL EQUITY FUND -- an equity fund seeking long-term
capital appreciation by investing primarily in equity securities of non-United
States issuers;

<PAGE>

- - WARBURG PINCUS EMERGING MARKETS FUND -- an equity fund seeking growth of
capital by investing primarily in securities of non-United States issuers
consisting of companies in emerging securities markets;
- - WARBURG PINCUS JAPAN GROWTH FUND -- an equity fund seeking long-term growth of
capital by investing primarily in equity securities of Japanese issuers; and
- - WARBURG PINCUS JAPAN OTC FUND -- an equity fund seeking long-term capital
appreciation by investing in a portfolio of securities traded in the Japanese
over-the-counter market.
--------------
* Warburg Pincus Small Company Growth Fund is currently closed to certain new
investors; the Small Company Growth Fund's prospectus describes the types of
investors that may purchase shares.
The exchange privilege is available to shareholders residing in any state in
which the Common Shares being acquired may legally be sold. When an investor
effects an exchange of shares, the exchange is treated for federal income tax
purposes as a redemption. Therefore, the investor may realize a taxable gain or
loss in connection with the exchange. Investors wishing to exchange Common
Shares of the Fund for Common Shares in another Warburg Pincus Fund should
review the prospectus of the other fund prior to making an exchange. For further
information regarding the exchange privilege or to obtain a current prospectus
for another Warburg Pincus Fund, an investor should contact Warburg Pincus Funds
at (800) 927-2874.

The Fund reserves the right to refuse exchange purchases by any person or
group if, in Warburg's judgment, the Fund would be unable to invest the money
effectively in accordance with its investment objective and policies, or would
otherwise potentially be adversely affected. Examples of when an exchange
purchase could be refused are when the Fund receives or anticipates receiving
large exchange orders at or about the same time and/or when a pattern of
exchanges within a short period of time (often associated with a "market timing"
strategy) is discerned. The Fund may refuse exchange purchases at any time
without prior notice. The Fund reserves the right to terminate or modify the
exchange privilege at any time upon 30 days' notice to shareholders.

DIVIDENDS, DISTRIBUTIONS AND TAXES

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

DIVIDENDS AND DISTRIBUTIONS. The Fund calculates its dividends from net
investment income. Net investment income includes interest accrued and dividends
earned on the Fund's portfolio securities for the applicable period less
applicable expenses. The Fund declares and pays its dividends from its net
investment income annually. The Fund declares distributions of its net realized
short-term and long-term capital gains annually and pays them in the calendar
year in which they are declared, generally in November or December. Net
investment income earned on weekends and when the NYSE is not open will be
computed as of the next business day. Unless an investor instructs the Fund to
pay dividends or distributions in cash, dividends and

<PAGE>

distributions will automatically be reinvested in additional Common Shares of
the Fund at net asset value. The election to receive dividends in cash may be
made on the account application or, subsequently, by writing to Warburg Pincus
Funds at the address set forth under "How to Open an Account" or by calling
Warburg Pincus Funds at (800) 927-2874.
The Fund may be required to withhold for U.S. federal income taxes 31% of all
distributions payable to shareholders who fail to provide the Fund with their
correct taxpayer identification number or to make required certifications, or
who have been notified by the U.S. Internal Revenue Service that they are
subject to backup withholding.
TAXES. The Fund intends to qualify each year as a "regulated investment
company" within the meaning of the Internal Revenue Code of 1986, as amended
(the "Code"). As a regulated investment company, the Fund will be subject to a
4% non-deductible excise tax measured with respect to certain undistributed
amounts of ordinary income and capital gain. The Fund expects to pay such
dividends and to make such distributions as are necessary to avoid the
application of this tax.
Dividends paid from net investment income and distributions of net realized
short-term capital gains are taxable to investors as ordinary income, and
distributions derived from net realized long-term capital gains are taxable to
investors as long-term capital gains, in each case regardless of how long the
shareholder has held Fund shares and whether received in cash or reinvested in
additional Fund shares. As a general rule, an investor's gain or loss on a sale
or redemption of his Fund shares will be long-term capital gain or loss if he
has held his shares for more than one year and will be short-term capital gain
or loss if he has held his shares for one year or less. However, any loss
realized upon the sale or redemption of shares within six months from the date
of their purchase will be treated as a long-term capital loss to the extent of
any amounts treated as distributions of long-term capital gain during such six-
month period with respect to such shares.

The Taxpayer Relief Act of 1997 made certain changes to the Code with respect
to taxation of long-term capital gains earned by taxpayers other than a
corporation. In general, the maximum tax rate for individual taxpayers on net
long-term capital gains is lowered to 20% for gains recognized on the sale of
assets held for more than 18 months at the time of disposition (including
long-term capital gains recognized by shareholders on the sale or redemption of
Fund shares that were held as capital assets). Capital gains on the disposition
of assets held for more than one year and up to 18 months at the time of
disposition will be taxed as "mid-term gain" at a maximum rate of 28%. A rate of
18% instead of 20% will apply after December 31, 2000 for assets held for more
than five years. However, the 18% rate applies only to assets acquired after
December 31, 2000 unless the taxpayer elects to treat an asset held prior to
such date as sold for fair market value on January 1, 2001.

In the case of individuals whose ordinary income is taxed at a 15% rate, the
20% rate is reduced to 10% and the 10% rate for assets held for more than five

<PAGE>

years is reduced to eight percent. The Fund will provide information relating to
that portion of a "capital gain dividend" that may be treated by investors as
eligible for the reduced capital gains rate for capital assets held for more
than 18 months.

Investors may be proportionately liable for taxes on income and gains of the
Fund, but investors not subject to tax on their income will not be required to
pay tax on amounts distributed to them. The Fund's investment activities,
including short sales of securities, will not result in unrelated business
taxable income to a tax-exempt investor. The Fund will designate that portion of
the Fund's dividends that will qualify for the federal dividends -- received
deduction for corporations. The Fund's investments in foreign securities may
subject them to certain withholding and other taxes imposed by foreign countries
with respect to dividends, interest, capital gains and other income. As more
fully discussed in the Statement of Additional Information, it is expected that
the payment of such taxes by the Fund will give rise to a direct credit or
deduction available to the Fund's shareholders.

GENERAL. Statements as to the tax status of each investor's dividends and
distributions are mailed annually. Each investor will also receive, if
applicable, various written notices after the close of the Fund's prior taxable
year with respect to certain dividends and distributions that were paid (or that
were treated as having been paid) by the Fund during the Fund's prior taxable
year. Investors should consult their own tax advisers with specific reference to
their own tax situations, including their state and local tax liabilities.

NET ASSET VALUE
- --------------------------------------------------------------------------------
The Fund's net asset value per share is calculated as of the close of regular
trading on the NYSE (currently 4:00 p.m., Eastern time) on each business day,
Monday through Friday, except on days when the NYSE is closed. The NYSE is
currently scheduled to be closed on New Year's Day, Dr. Martin Luther King, Jr.
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day, and on the preceding Friday or subsequent
Monday when one of these holidays falls on a Saturday or Sunday, respectively.
The net asset value per share of the Fund generally changes each day.
The net asset value per Common Share of the Fund is computed by adding the
Common Shares' pro rata share of the value of the Fund's assets, deducting the
Common Shares' pro rata share of the Fund's liabilities and the liabilities
specifically allocated to Common Shares and then dividing the result by the
total number of outstanding Common Shares.
Securities listed on a U.S. securities exchange (including securities traded
through the Nasdaq National Market System) or foreign securities exchange or
traded in an over-the-counter market will be valued at the most recent sale
price when the valuation is made. Options and futures contracts will be valued
similarly. Debt obligations that mature in 60 days or less from the valuation
date are valued on the basis of amortized cost, unless the Fund's

<PAGE>

Board determines that using this valuation method would not reflect the
investments' value. Securities, options and futures contracts for which market
quotations are not readily available and other assets will be valued at their
fair value as determined in good faith pursuant to consistently applied
procedures established by the Fund's Board. Further information regarding
valuation policies is contained in the Statement of Additional Information.

PERFORMANCE
- --------------------------------------------------------------------------------
The Fund quotes the performance of Common Shares separately from Advisor
Shares. The net asset value of Common Shares is listed in The Wall Street
Journal each business day under the heading "Warburg Pincus Funds." From time to
time, the Fund may advertise the average annual total return of its Common
Shares over various periods of time. Total return figures show the average
percentage change in value of an investment in the Common Shares from the
beginning of the measuring period to the end of the measuring period. The
figures reflect changes in the price of the Common Shares assuming that any
income dividends and/or capital gain distributions made by the Fund during the
period were reinvested in Common Shares of the Fund. Total return will be shown
for recent one-, five- and ten-year periods, and may be shown for other periods
as well (such as from commencement of the Fund's operations or on a
year-by-year, quarterly or current year-to-date basis). Performance quotations
of the Fund will include performance of a predecessor fund.
When considering average total return figures for periods longer than one
year, it is important to note that the annual total return for one year in the
period might have been greater or less than the average for the entire period.
When considering total return figures for periods shorter than one year,
investors should bear in mind that the Fund seeks long-term appreciation and
that such return may not be representative of the Fund's return over a longer
market cycle. The Fund may also advertise aggregate total return figures of its
Common Shares for various periods, representing the cumulative change in value
of an investment in the Common Shares for the specific period (again reflecting
changes in share prices and assuming reinvestment of dividends and
distributions). Aggregate and average total returns may be shown by means of
schedules, charts or graphs and may indicate various components of total return
(i.e., change in value of initial investment, income dividends and capital gain
distributions).

The Fund may compare its performance (i) with that of other mutual funds as
listed in the rankings prepared by Lipper Analytical Services, Inc. or similar
investment services that monitor the performance of mutual funds or as set forth
in the publications listed below; (ii) with the EAFE Index, the Salomon Russell
Global Equity Index, the FT-Actuaries World Indices (jointly compiled by The
Financial Times, Ltd., Goldman, Sachs & Co. and NatWest Securities Ltd.) and the
S&P 500 Index; or (iii) with other appropriate indexes of investment securities
or with data developed by Warburg derived from such

<PAGE>

indexes. The Fund may include evaluations of the Fund published by nationally
recognized ranking services and by financial publications that are nationally
recognized, such as Barron's, Business Week, Financial Times, Forbes, Fortune,
Inc., Institutional Investor, Investor's Business Daily, Money, Morningstar,
Inc., Mutual Fund Magazine, Smart Money, The Wall Street Journal and Worth.
Morningstar, Inc. rates funds in broad categories based on risk/reward analyses
over various time periods. In addition, the Fund may from time to time compare
the expense ratio of its Common Shares to that of investment companies with
similar objectives and policies, based on data generated by Lipper Analytical
Services, Inc. or similar investment services that monitor mutual funds.

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

GENERAL INFORMATION

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

ORGANIZATION. The Fund was incorporated on October 24, 1997 under the laws of
the State of Maryland under the name "Warburg, Pincus Managed EAFE Countries
Fund, Inc." On December 22, 1997, the Fund acquired all of the assets and
liabilities of the Managed EAFE(R) Countries Portfolio. On February 9, 1998, the
Fund changed its name to "Warburg, Pincus Major Foreign Markets Fund, Inc."

The charter of the Fund authorizes its Board to issue three billion full and
fractional shares of capital stock, $.001 par value per share, of which one
billion shares are designated Common Shares and two billion shares are
designated Advisor Shares. Under the Fund's charter documents, the Board has the
power to classify or reclassify any unissued shares of the Fund into one or more
additional classes by setting or changing in any one or more respects their
relative rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption. The Board may similarly
classify or reclassify any class of its shares into one or more series and,
without shareholder approval, may increase the number of authorized shares of
the Fund.
MULTI-CLASS STRUCTURE. Although it does not currently do so, the Fund offers a
separate class of shares, the Advisor Shares, pursuant to a separate

<PAGE>

prospectus. Individual investors would only purchase Advisor Shares through
institutional shareholders of record, broker-dealers, financial institutions,
depository institutions, retirement plans and financial intermediaries. Shares
of each class would represent equal pro rata interests in the Fund and accrue
dividends and calculate net asset value and performance quotations in the same
manner. Because of the higher fees paid by the Advisor Shares, the total return
on such shares can be expected to be lower than the total return on Common
Shares.

VOTING RIGHTS. Investors in the Fund are entitled to one vote for each full
share held and fractional votes for fractional shares held. Shareholders of the
Fund will vote in the aggregate except where otherwise required by law and
except that each class will vote separately on certain matters pertaining to its
distribution and shareholder servicing arrangements. There will normally be no
meetings of investors for the purpose of electing members of the Board unless
and until such time as less than a majority of the members holding office have
been elected by investors. Any Director of the Fund may be removed from office
upon the vote of shareholders holding at least a majority of the Fund's
outstanding shares, at a meeting called for that purpose. A meeting will be
called for the purpose of voting on the removal of a Board member at the written
request of holders of 10% of the outstanding shares of the Fund. Lionel I.
Pincus, the managing partner of WP&Co., may be deemed to be a controlling person
of the Fund because he may be deemed to posess or share investment power over
shares owned by clients of Warburg and by companies that WP&Co. may be deemed to
control.
SHAREHOLDER COMMUNICATIONS. Each investor will receive a quarterly statement
of his account, as well as a statement of his account after any transaction that
affects his share balance or share registration (other than the reinvestment of
dividends or distributions or investments made through the Automatic Investment
Program). The Fund will also send to its investors a semiannual report and an
audited annual report, each of which includes a list of the investment
securities held by the Fund and a statement of the performance of the Fund.
Periodic listings of the investment securities held by the Fund, as well as
certain statistical characteristics of the Fund, may be obtained by calling
Warburg Pincus Funds at (800) 927-2874 or on the Warburg Pincus Funds Web site
at www.warburg.com.

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

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, THE FUND'S
STATEMENT OF ADDITIONAL INFORMATION OR THE FUND'S OFFICIAL SALES LITERATURE IN
CONNECTION WITH THE OFFERING OF SHARES OF THE FUND, AND IF GIVEN OR MADE, SUCH
OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE FUND. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF THE
COMMON SHARES OF THE FUND IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM, SUCH
OFFER MAY NOT LAWFULLY BE MADE.

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<PAGE>

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<PAGE>

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<PAGE>

TABLE OF CONTENTS

<TABLE>
<S> <C>
The Fund's Expenses...................................... 2
Financial Highlights..................................... 3
Investment Objective and Policies........................ 4
Portfolio Investments.................................... 5
Risk Factors and Special Considerations.................. 7
Portfolio Transactions and Turnover Rate................. 8
Certain Investment Strategies............................ 8
Investment Guidelines.................................... 13
Management of the Fund................................... 14
How to Open an Account................................... 16
How to Purchase Shares................................... 17
How to Redeem and Exchange Shares........................ 21
Dividends, Distributions and Taxes....................... 24
Net Asset Value.......................................... 26
Performance.............................................. 27
General Information...................................... 28
</TABLE>

[Warburg Pincus Funds Logo]
P.O. BOX 9030, BOSTON, MA 02205-9030
800-WARBURG (800-927-2874)

www.warburg.com

COUNSELLORS SECURITIES INC., DISTRIBUTOR. WPMFM-1-0298

<PAGE>

STATEMENT OF ADDITIONAL INFORMATION

February 20, 1998

WARBURG PINCUS MAJOR FOREIGN MARKETS FUND

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

Contents

Page
----
Investment Objective......................................................2
Investment Policies.......................................................2
Management Of The Fund...................................................29
Additional Purchase And Redemption Information...........................36
Exchange Privilege.......................................................37
Additional Information Concerning Taxes..................................37
Determination Of Performance.............................................43
Independent Accountants And Counsel......................................45
Miscellaneous............................................................49
Financial Statements.....................................................49
Appendix - Description of Ratings........................................A-1

This Statement of Additional Information is meant to be read in
conjunction with the Prospectus for the Common Shares of Warburg Pincus Major
Foreign Markets Fund (the "Fund") dated February 20, 1998 as amended or
supplemented from time to time, and is incorporated by reference in its entirety
into that Prospectus. Because this Statement of Additional Information is not
itself a prospectus, no investment in shares of the Fund should be made solely
upon the information contained herein. Copies of the Fund's Prospectus and
information regarding the Fund's current performance may be obtained by calling
the Fund at (800) 927-2874. Information regarding the status of shareholder
accounts may be obtained by calling the Fund at (800) 927-2874 or by writing to
the Fund, P.O. Box 9030, Boston, Massachusetts 02205-9030.

1
<PAGE>

INVESTMENT OBJECTIVE

The investment objective of the Fund is long-term capital
appreciation.

INVESTMENT POLICIES

The following policies supplement the descriptions of the Fund's
investment objective and policies in the Prospectus.

Options, Futures and Currency Exchange Transactions
- ---------------------------------------------------

Securities Options. The Fund may write covered put and call options on
stock and debt securities and may purchase such options that are traded on
foreign and U.S. exchanges, as well as over-the-counter ("OTC").

The Fund realizes fees (referred to as "premiums") for granting the
rights evidenced by the options it has written. A put option embodies the right
of its purchaser to compel the writer of the option to purchase from the option
holder an underlying security at a specified price for a specified time period
or at a specified time. In contrast, a call option embodies the right of its
purchaser to compel the writer of the option to sell to the option holder an
underlying security at a specified price for a specified time period or at a
specified time.

The principal reason for writing covered options on a security is to
attempt to realize, through the receipt of premiums, a greater return than would
be realized on the securities alone. In return for a premium, the Fund as the
writer of a covered call option forfeits the right to any appreciation in the
value of the underlying security above the strike price for the life of the
option (or until a closing purchase transaction can be effected). Nevertheless,
the Fund as a put or call writer retains the risk of a decline in the price of
the underlying security. The size of the premiums that the Fund may receive may
be adversely affected as new or existing institutions, including other
investment companies, engage in or increase their option-writing activities.

If security prices rise, a put writer would generally expect to
profit, although its gain would be limited to the amount of the premium it
received. If security prices remain the same over time, it is likely that the
writer will also profit, because it should be able to close out the option at a
lower price. If security prices fall, the put writer would expect to suffer a
loss. This loss should be less than the loss from purchasing the underlying
instrument directly, however, because the premium received for writing the
option should mitigate the effects of the decline.

In the case of options written by the Fund that are deemed covered by
virtue of the Fund's holding convertible or exchangeable preferred stock or debt
securities, the time required to convert or exchange and obtain physical
delivery of the underlying common stock with respect to which the Fund has
written options may exceed the time within which the Fund must make delivery in
accordance with an exercise notice. In these instances, the Fund may

2
<PAGE>

purchase or temporarily borrow the underlying securities for purposes of
physical delivery. By so doing, the Fund will not bear any market risk, since
the Fund will have the absolute right to receive from the issuer of the
underlying security an equal number of shares to replace the borrowed
securities, but the Fund may incur additional transaction costs or interest
expenses in connection with any such purchase or borrowing.

Additional risks exist with respect to certain of the securities for
which the Fund may write covered call options. For example, if the Fund writes
covered call options on mortgage-backed securities, the mortgage-backed
securities that it holds as cover may, because of scheduled amortization or
unscheduled prepayments, cease to be sufficient cover. If this occurs, the Fund
will compensate for the decline in the value of the cover by purchasing an
appropriate additional amount of mortgage-backed securities.

Options written by the Fund will normally have expiration dates
between one and nine months from the date written. The exercise price of the
options may be below, equal to or above the market values of the underlying
securities at the times the options are written. In the case of call options,
these exercise prices are referred to as "in-the-money," "at-the-money" and
"out-of-the-money," respectively. The Fund may write (i) in-the-money call
options when Warburg Pincus Asset Management, Inc., the Fund's investment
adviser ("Warburg"), expects that the price of the underlying security will
remain flat or decline moderately during the option period, (ii) at-the-money
call options when Warburg expects that the price of the underlying security will
remain flat or advance moderately during the option period and (iii)
out-of-the-money call options when Warburg expects that the premiums received
from writing the call option plus the appreciation in market price of the
underlying security up to the exercise price will be greater than the
appreciation in the price of the underlying security alone. In any of the
preceding situations, if the market price of the underlying security declines
and the security is sold at this lower price, the amount of any realized loss
will be offset wholly or in part by the premium received. Out-of-the-money,
at-the-money and in-the-money put options (the reverse of call options as to the
relation of exercise price to market price) may be used in the same market
environments that such call options are used in equivalent transactions. To
secure its obligation to deliver the underlying security when it writes a call
option, the Fund will be required to deposit in escrow the underlying security
or other assets in accordance with the rules of the Options Clearing Corporation
(the "Clearing Corporation") and of the securities exchange on which the option
is written.

Prior to their expirations, put and call options may be sold in
closing sale or purchase transactions (sales or purchases by the Fund prior to
the exercise of options that it has purchased or written, respectively, of
options of the same series) in which the Fund may realize a profit or loss from
the sale. An option position may be closed out only where there exists a
secondary market for an option of the same series on a recognized securities
exchange or in the over-the-counter market. When the Fund has purchased an
option and engages in a closing sale transaction, whether the Fund realizes a
profit or loss will depend upon whether the amount received in the closing sale
transaction is more or less than the premium the Fund initially paid for the
original option plus the related transaction costs. Similarly, in cases

3
<PAGE>

where the Fund has written an option, it will realize a profit if the cost of
the closing purchase transaction is less than the premium received upon writing
the original option and will incur a loss if the cost of the closing purchase
transaction exceeds the premium received upon writing the original option. The
Fund may engage in a closing purchase transaction to realize a profit, to
prevent an underlying security with respect to which it has written an option
from being called or put or, in the case of a call option, to unfreeze an
underlying security (thereby permitting its sale or the writing of a new option
on the security prior to the outstanding option's expiration). The obligation of
the Fund under an option it has written would be terminated by a closing
purchase transaction, but the Fund would not be deemed to own an option as a
result of the transaction. So long as the obligation of the Fund as the writer
of an option continues, the Fund may be assigned an exercise notice by the
broker-dealer through which the option was sold, requiring the Fund to deliver
the underlying security against payment of the exercise price. This obligation
terminates when the option expires or the Fund effects a closing purchase
transaction. The Fund can no longer effect a closing purchase transaction with
respect to an option once it has been assigned an exercise notice.

There is no assurance that sufficient trading interest will exist to
create a liquid secondary market on a securities exchange for any particular
option or at any particular time, and for some options no such secondary market
may exist. A liquid secondary market in an option may cease to exist for a
variety of reasons. In the past, for example, higher than anticipated trading
activity or order flow or other unforeseen events have at times rendered certain
of the facilities of the Clearing Corporation and various securities exchanges
inadequate and resulted in the institution of special procedures, such as
trading rotations, restrictions on certain types of orders or trading halts or
suspensions in one or more options. There can be no assurance that similar
events, or events that may otherwise interfere with the timely execution of
customers' orders, will not recur. In such event, it might not be possible to
effect closing transactions in particular options. Moreover, the Fund's ability
to terminate options positions established in the over-the-counter market may be
more limited than for exchange-traded options and may also involve the risk that
securities dealers participating in over-the-counter transactions would fail to
meet their obligations to the Fund. The Fund, however, intends to purchase
over-the-counter options only from dealers whose debt securities, as determined
by Warburg, are considered to be investment grade. If, as a covered call option
writer, the Fund is unable to effect a closing purchase transaction in a
secondary market, it will not be able to sell the underlying security until the
option expires or it delivers the underlying security upon exercise. In either
case, the Fund would continue to be at market risk on the security and could
face higher transaction costs, including brokerage commissions.

Securities exchanges generally have established limitations governing
the maximum number of calls and puts of each class which may be held or written,
or exercised within certain time periods by an investor or group of investors
acting in concert (regardless of whether the options are written on the same or
different securities exchanges or are held, written or exercised in one or more
accounts or through one or more brokers). It is possible that the Fund and other
clients of Warburg and certain of its affiliates may be considered to be such a
group. A securities exchange may order the liquidation of positions found to be
in

4
<PAGE>

violation of these limits and it may impose certain other sanctions. These
limits may restrict the number of options the Fund will be able to purchase on a
particular security.

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

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

OTC Options. The Fund may purchase OTC or dealer options or sell
covered OTC options. Unlike exchange-listed options where an intermediary or
clearing corporation, such as the Clearing Corporation, assures that all
transactions in such options are properly executed, the responsibility for
performing all transactions with respect to OTC options rests solely with the
writer and the holder of those options. A listed call option writer, for
example, is obligated to deliver the underlying securities to the clearing
organization if the option is exercised, and the clearing organization is then
obligated to pay the writer the exercise price of the option. If the Fund were
to purchase a dealer option, however, it would rely on the dealer from whom it
purchased the option to perform if the option were exercised. If the dealer
fails to honor the exercise of the option by the Fund, the Fund would lose the
premium it paid for the option and the expected benefit of the transaction.

Listed options generally have a continuous liquid market while dealer
options have none. Consequently, the Fund will generally be able to realize the
value of a dealer option it has purchased only by exercising it or reselling it
to the dealer who issued it. Similarly, when the Fund writes a dealer option, it
generally will be able to close out the option prior to its expiration only by
entering into a closing purchase transaction with the dealer to which the Fund
originally wrote the option. Although the Fund will seek to enter into dealer
options only with dealers who will agree to and that are expected to be capable
of

5
<PAGE>

entering into closing transactions with the Fund, there can be no assurance that
the Fund will be able to liquidate a dealer option at a favorable price at any
time prior to expiration. The inability to enter into a closing transaction may
result in material losses to the Fund. Until the Fund, as a covered OTC call
option writer, is able to effect a closing purchase transaction, it will not be
able to liquidate securities (or other assets) used to cover the written option
until the option expires or is exercised. This requirement may impair the Fund's
ability to sell portfolio securities at a time when such sale might be
advantageous. In the event of insolvency of the other party, the Fund may be
unable to liquidate a dealer option.

Futures Activities. The Fund may enter into foreign currency, interest
rate and securities index futures contracts and purchase and write (sell)
related options traded on exchanges designated by the Commodity Futures Trading
Commission (the "CFTC") or consistent with CFTC regulations on foreign
exchanges. These transactions may be entered into for "bona fide hedging"
purposes as defined in CFTC regulations and other permissible purposes including
hedging against changes in the value of portfolio securities due to anticipated
changes in currency values, interest rates and/or market conditions and
increasing return.

The Fund will not enter into futures contracts and related options for
which the aggregate initial margin and premiums (discussed below) required to
establish positions other than those considered to be "bona fide hedging" by the
CFTC exceed 5% of the Fund's net asset value after taking into account
unrealized profits and unrealized losses on any such contracts it has entered
into. The Fund reserves the right to engage in transactions involving futures
contracts and options on futures contracts to the extent allowed by CFTC
regulations in effect from time to time and in accordance with the Fund's
policies. There is no overall limit on the percentage of Fund assets that may be
at risk with respect to futures activities.

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

No consideration is paid or received by the Fund upon entering into a
futures contract. Instead, the Fund is required to deposit in a segregated
account with its custodian an amount of cash or cash equivalents, such as U.S.
government securities or other liquid high-grade debt obligations, equal to
approximately 1% to 10% of the contract amount (this amount is subject to change
by the exchange on which the contract is traded, and brokers may charge a higher
amount). This amount is known as "initial margin" and is in the nature of a
performance bond or good faith deposit on the contract which is returned to the
Fund upon

6
<PAGE>

termination of the futures contract, assuming all contractual obligations have
been satisfied. The broker will have access to amounts in the margin account if
the Fund fails to meet its contractual obligations. Subsequent payments, known
as "variation margin," to and from the broker, will be made daily as the
currency, financial instrument or securities index underlying the futures
contract fluctuates, making the long and short positions in the futures contract
more or less valuable, a process known as "marking-to-market." The Fund will
also incur brokerage costs in connection with entering into futures
transactions.

At any time prior to the expiration of a futures contract, the Fund
may elect to close the position by taking an opposite position, which will
operate to terminate the Fund's existing position in the contract. Positions in
futures contracts and options on futures contracts (described below) may be
closed out only on the exchange on which they were entered into (or through a
linked exchange). No secondary market for such contracts exists. Although the
Fund intends to enter into futures contracts only if there is an active market
for such contracts, there is no assurance that an active market will exist at
any particular time. Most futures exchanges limit the amount of fluctuation
permitted in futures contract prices during a single trading day. Once the daily
limit has been reached in a particular contract, no trades may be made that day
at a price beyond that limit or trading may be suspended for specified periods
during the day. It is possible that futures contract prices could move to the
daily limit for several consecutive trading days with little or no trading,
thereby preventing prompt liquidation of futures positions at an advantageous
price and subjecting the Fund to substantial losses. In such event, and in the
event of adverse price movements, the Fund would be required to make daily cash
payments of variation margin. In such situations, if the fund had insufficient
cash, it might have to sell securities to meet daily variation margin
requirements at a time when it would be disadvantageous to do so. In addition,
if the transaction is entered into for hedging purposes, in such circumstances
the Fund may realize a loss on a futures contract or option that is not offset
by an increase in the value of the hedged position. Losses incurred in futures
transactions and the costs of these transactions will affect the Fund's
performance.

Options on Futures Contracts. The Fund may purchase and write put and
call options on foreign currency, interest rate and index futures contracts and
may enter into closing transactions with respect to such options to terminate
existing positions. There is no guarantee that such closing transactions can be
effected; the ability to establish and close out positions on such options will
be subject to the existence of a liquid market.

An option on a currency, interest rate or securities index futures
contract, as contrasted with the direct investment in such a contract, gives the
purchaser the right, in return for the premium paid, to assume a position in a
futures contract at a specified exercise price at any time prior to the
expiration date of the option. The writer of the option is required upon
exercise to assume an offsetting futures position (a short position if the
option is a call and a long position if the option is a put). Upon exercise of
an option, the delivery of the futures position by the writer of the option to
the holder of the option will be accompanied by delivery of the accumulated
balance in the writer's futures margin account, which represents the amount by
which the market price of the futures contract exceeds, in the case of a call,
or is

7
<PAGE>

less than, in the case of a put, the exercise price of the option on the futures
contract. The potential loss related to the purchase of an option on futures
contracts is limited to the premium paid for the option (plus transaction
costs). Because the value of the option is fixed at the point of sale, there are
no daily cash payments by the purchaser to reflect changes in the value of the
underlying contract; however, the value of the option does change daily and that
change would be reflected in the net asset value of the Fund.

Currency Exchange Transactions. The value in U.S. dollars of the
assets of the Fund that are invested in foreign securities may be affected
favorably or unfavorably by changes in exchange control regulations, and the
Fund may incur costs in connection with conversion between various currencies.
Currency exchange transactions may be from any non-U.S. currency into U.S.
dollars or into other appropriate currencies. The Fund will conduct its currency
exchange transactions (i) on a spot (i.e., cash) basis at the rate prevailing in
the currency exchange market, (ii) through entering into futures contracts or
options on such contracts (as described above), (iii) through entering into
forward contracts to purchase or sell currency or (iv) by purchasing
exchange-traded currency options.

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

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

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

Currency Hedging. The Fund's currency hedging will be limited to
hedging involving either specific transactions or portfolio positions.
Transaction hedging is the purchase or sale of forward currency with respect to
specific receivables or payables of the Fund generally accruing in connection
with the purchase or sale of its portfolio securities. Position hedging is the
sale of forward currency with respect to portfolio security positions.

8
<PAGE>

The Fund may not position hedge to an extent greater than the aggregate market
value (at the time of entering into the hedge) of the hedged securities.

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

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

Hedging. In addition to entering into options, futures and currency
exchange transactions for other purposes, including generating current income to
offset expenses or increase return, the Fund may enter into these transactions
as hedges to reduce investment risk, generally by making an investment expected
to move in the opposite direction of a portfolio position. A hedge is designed
to offset a loss in a portfolio position with a gain in the hedged position; at
the same time, however, a properly correlated hedge will result in a gain in the
portfolio position being offset by a loss in the hedged position. As a result,
the use of options, futures and currency exchange transactions for hedging
purposes could limit any potential gain from an increase in the value of the
position hedged. In addition, the movement in the portfolio position hedged may
not be of the same magnitude as movement in the hedge. With respect to futures
contracts, since the value of portfolio securities will far exceed the

9
<PAGE>

value of the futures contracts sold by the Fund, an increase in the value of the
futures contracts could only mitigate, but not totally offset, the decline in
the value of the Fund's assets.

In hedging transactions based on an index, whether the Fund will
realize a gain or loss from the purchase or writing of options on an index
depends upon movements in the level of securities prices in the stock market
generally or, in the case of certain indexes, in an industry or market segment,
rather than movements in the price of a particular security. The risk of
imperfect correlation increases as the composition of the Fund's portfolio
varies from the composition of the index. In an effort to compensate for
imperfect correlation of relative movements in the hedged position and the
hedge, the Fund's hedge positions may be in a greater or lesser dollar amount
than the dollar amount of the hedged position. Such "over hedging" or "under
hedging" may adversely affect the Fund's net investment results if market
movements are not as anticipated when the hedge is established. Securities index
futures transactions may be subject to additional correlation risks. First, all
participants in the futures market are subject to margin deposit and maintenance
requirements. Rather than meeting additional margin deposit requirements,
investors may close futures contracts through offsetting transactions which
would distort the normal relationship between the securities index and futures
markets. Secondly, from the point of view of speculators, the deposit
requirements in the futures market are less onerous than margin requirements in
the securities market. Therefore, increased participation by speculators in the
futures market also may cause temporary price distortions. Because of the
possibility of price distortions in the futures market and the imperfect
correlation between movements in a securities index and movements in the price
of securities index futures, a correct forecast of general market trends by
Warburg still may not result in a successful hedging transaction.

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

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

10
<PAGE>

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

Additional Information on Other Investment Practices
- ----------------------------------------------------

Foreign Investments. Investors should recognize that investing in
foreign companies involves certain risks, including those discussed below, which
are not typically associated with investing in U.S. issuers.

Foreign Currency Exchange. Since the Fund will be investing in
securities denominated in currencies other than the U.S. dollar, and since the
Fund may temporarily hold funds in bank deposits or other money market
investments denominated in foreign currencies, the Fund may be affected
favorably or unfavorably by exchange control regulations or changes in the
exchange rate between such currencies and the dollar. A change in the value of a
foreign currency relative to the U.S. dollar will result in a corresponding
change in the dollar value of the Fund's assets denominated in that foreign
currency. Changes in foreign currency exchange rates may also affect the value
of dividends and interest earned, gains and losses realized on the sale of
securities and net investment income and gains, if any, to be distributed to
shareholders by the Fund with respect to its foreign investments. The rate of
exchange between the U.S. dollar and other currencies is determined by the
forces of supply and demand in the foreign exchange markets. Changes in the
exchange rate may result over time from the interaction of many factors directly
or indirectly affecting economic and political conditions in the United States
and a particular foreign country, including economic and political developments
in other countries. Of particular importance are rates of inflation, interest
rate levels, the balance of payments and the extent of government surpluses or
deficits in the United States and the particular foreign country, all of which
are in turn sensitive to the monetary, fiscal and trade policies pursued by the
governments of the United States and foreign countries important to
international trade and finance. Governmental intervention may also play a
significant role. National governments rarely voluntarily allow their currencies
to float freely in response to economic forces. Sovereign governments use a
variety of techniques, such as intervention by a country's central bank or
imposition of regulatory controls or taxes, to affect the exchange rates of
their currencies. The Fund may use hedging

11
<PAGE>

techniques with the objective of protecting against loss through the fluctuation
of the value of foreign currencies against the U.S. dollar, particularly the
forward market in foreign exchange, currency options and currency futures. See
"Currency Transactions" and "Futures Activities" above.

Information. The majority of the foreign securities held by the Fund
will not be registered with, nor the issuers thereof be subject to reporting
requirements of, the SEC. Accordingly, there may be less publicly available
information about the securities and about the foreign company or government
issuing them than is available about a domestic company or government entity.
Foreign companies are generally not subject to uniform financial reporting
standards, practices and requirements comparable to those applicable to U.S.
companies.

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

Delays. Securities of some foreign companies are less liquid and their
prices are more volatile than securities of comparable U.S. companies. Certain
foreign countries are known to experience long delays between the trade and
settlement dates of securities purchased or sold. Due to the increased exposure
of the Fund to market and foreign exchange fluctuations brought about by such
delays, and due to the corresponding negative impact on the Fund's liquidity,
the Fund will avoid investing in countries which are known to experience
settlement delays which may expose the Fund to unreasonable risk of loss.

Increased Expenses. The operating expenses of the Fund can be expected
to be higher than that of an investment company investing exclusively in U.S.
securities, since the expenses of the Fund, such as custodial costs, valuation
costs and communication costs, as well as, the rate of the investment advisory
fees, though similar to such expenses of some other funds investing
internationally, are higher than those costs incurred by other investment
companies.

Dollar-Denominated Debt Securities of Foreign Issuers. The returns on
foreign debt securities reflect interest rates and other market conditions
prevailing in those countries. The relative performance of various countries'
fixed income markets historically has reflected wide variations relating to the
unique characteristics of each country's economy. Year-to-year fluctuations in
certain markets have been significant, and negative returns have been
experienced in various markets from time to time.

General. Individual foreign economies may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross national
product, rate of inflation, capital reinvestment, resource self-sufficiency and
balance of payments positions. The Fund may invest in securities of foreign
governments (or agencies or instrumentalities thereof), and many, if not all, of
the foregoing considerations apply to such investments as well.

12
<PAGE>

Japanese Investments. From time to time depending on current market
conditions, the Fund may invest a significant portion of its assets in Japanese
securities. Like any investor in Japan, the Fund will be subject to general
economic and political conditions in the country. In addition to the
considerations discussed above, these include future political and economic
developments, the possible imposition of, or changes in, exchange controls or
other Japanese governmental laws or restrictions applicable to such investments,
diplomatic developments, political or social unrest and natural disasters.

The information set forth in this section has been extracted from
various governmental publications and other sources. The Fund makes no
representation as to the accuracy of the information, nor has the Fund attempted
to verify it. Furthermore, no representation is made that any correlation exists
between Japan or its economy in general and the performance of the Fund.

Domestic Politics
- -----------------

Japan has a parliamentary form of government. The legislative power is
vested in the Japanese Diet, which consists of a House of Representatives (lower
house) and a House of Councillors (upper house). Various political parties are
represented in the Diet, including the conservative Liberal Democratic Party
("LDP"), which until August 1993, had been in power nationally since its
formation in 1955. The LDP ceased to have a majority of the lower house in June
1993, when certain members of the lower house left the LDP and formed two new
political parties. After an election for the lower house was held on July 18,
1993 and the LDP failed to secure a majority, seven parties formed a coalition
to control the lower house and chose Morihiro Hosokawa, the Representative of
the Japan New Party, to head their coalition. In April 1994, amid accusations of
financial improprieties, Prime Minister Hosokawa announced that he would resign.
Tsutomu Hata succeeded Mr. Hosokawa as prime minister and formed a new cabinet
as a minority coalition government. In June 1994, Mr. Hata yielded to political
pressure from opposition parties and resigned. He was succeeded by Social
Democratic Party ("SDP") leader Tomiichi Murayama, Japan's first Socialist prime
minister since 1948, who was chosen by a new and unstable alliance between
left-wing and conservative parties, including the LDP. On September 18, 1994,
187 opposition politicians founded a new party, the Reform Party, led by Ichiro
Ozawa, to oppose the government of Prime Minister Murayama in the next
elections. Political realignment continued in 1995, as the Social Democrats
incurred significant losses in the July elections. In August 1995, the LDP
elected Ryutaro Hashimoto, the minister for international trade and industry, as
its new leader, and in January 1996, he became prime minister. Mr. Hashimoto
dissolved the Diet and called a general election in October 1996, in which the
LDP won 239 of the 500 lower-house seats. As a result, LDP members filled all
the new cabinet seats for the first time in three years. The LDP, along with its
former coalition partners (the SDP and Shinto Sakigake) agreed to continue to
work together, but only in loose alliance. Meanwhile, many dissatisfied Diet
members from the main opposition party have left the party to join the LDP. By
September 1997, enough Diet members from the main opposition party and other
parties had defected to the LDP for the LDP to regain its simple majority in the
lower house. Japan's continuing political instability may hamper its ability to
establish and maintain effective

13
<PAGE>

economic and fiscal policies, and recent and future political developments may
lead to changes in policy that might adversely affect the Fund's investments.

Economic Background
- -------------------

Generally. Since the end of World War II, Japan has experienced
significant economic development. During the era of high economic growth in the
1960's and early 1970's, the expansion was based on the development of heavy
industries such as steel and shipbuilding. In the 1970's Japan moved into
assembly industries which employ high levels of technology and consume
relatively low quantities of resources, and since then has become a major
producer of electrical and electronic products and automobiles. Since the
mid-1980's, Japan has become a major creditor nation. With the exception of the
periods associated with the oil crises of the 1970's, Japan has generally
experienced very low levels of inflation. There is no guarantee, however, that
these favorable trends will continue.

The Japanese government has called for a transformation of the economy
away from its high dependency on export-led growth towards greater stimulation
of the domestic economy. In addition, there has been a move toward more economic
liberalization and discounting in the consumer sector. These shifts have already
begun to take place and may cause disruption in the Japanese economy.

Strains in the system have also been one of the major causes of
Japan's economic weakness. The non-performing loans of financial institutions
have hampered their ability to take on risk, thus obstructing the flow of funds
into capital outlays as well as equities. The large commercial banks are having
to bear a heavy burden of the bad-debt problem (e.g., in accepting write-offs of
loans they have extended to distressed smaller institutions, in recapitalizing
failed institutions and in stepping up contributions to the Deposit Insurance
Corporation, an organization jointly established in 1971 by the government and
private financial institutions to protect depositors). While the banking system
appears to be making some progress in its attempt to deal with non-performing
assets, it is extremely difficult to gauge the true extent of the bad-debt
problem which could lead to a crisis in the banking system.

Japan's economy is a market economy in which industry and commerce are
predominantly privately owned and operated. However, the Japanese government is
involved in establishing and meeting objectives for developing the economy and
improving the standard of living of the Japanese people.

Japan is largely dependent upon foreign economies for raw materials.
For instance, almost all of its oil is imported, the majority from the Middle
East. In the past, oil prices have had a major impact on the domestic economy,
but more recently Japan has worked to reduce its dependence on oil by
encouraging energy conservation and use of alternative fuels. In addition, a
restructuring of industry, with emphasis shifting from basic industries to
processing and assembly-type industries, has contributed to the reduction of oil
consumption. However, there is no guarantee this favorable trend will continue.

14
<PAGE>

Economic Trends. The following tables set forth Japan's gross domestic
product and certain other economic indicators for the years shown.

GROSS DOMESTIC PRODUCT (GDP)
(yen in billions)
1997* 1996 1995 1994 1993 1992 1991 1990
----- ---- ---- ---- ---- ---- ---- ----
Consumption Expenditures
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Private..........(Y)308,472 (Y)299,440 (Y)290,515 (Y)286,154 (Y)278,703 (Y)272,294 (Y)261,891 (Y)249,288
Government....... 50,239 48,969 47,555 45,743 44,771 43,262 41,356 38,807
Gross Fixed
Capital Formation.. 143,217 148,190 136,792 137,291 140,433 143,525 143,998 136,467
Increase(Decrease) in
Stocks............. 828 1,058 947 50 620 1,489 3,453 2,430
Exports of Goods and
Services........... 55,979 49,598 45,393 44,410 44,197 47,384 46,723 45,920
Imports of Goods and
Services........... 51,331 46,900 38,272 34,387 33,343 36,891 39,121 42,872
GDP (Expenditures)... 507,403 500,356 482,930 479,260 475,381 471,064 458,299 430,040
Change in GDP from
Preceding Year....... 1.4% 3.6% 0.8% 0.8% 0.9% 2.8% 6.6% --

Source: International Monetary Fund, International Financial Statistics
</TABLE>

- ------------------
* Average of the first and second quarters of 1997.

WHOLESALE PRICE INDEX CONSUMER PRICE INDEX
(Base Year: 1990) (Base Year: 1990)

All Change from Change from
Year Commodities Preceding Year General Preceding Year
---- ----------- -------------- ------- --------------
<S> <C> <C> <C> <C>

1990 100.0 -- 100.0 --
1991 100.2 0.2 103.3 3.3
1992 98.7 (1.5) 105.1 1.8
1993 95.0 (3.7) 106.4 1.3
1994 93.0 (2.0) 107.1 0.7
1995 92.2 (0.8) 107.0 (0.1)
1996 92.8 0.6 107.2 0.2
1997 94.5* 1.7 108.9** 1.7

Source: International Monetary Fund, Source: International Monetary Fund,
International Financial Statistics International Financial Statistics
</TABLE>
- -----------------------
* Average of the first eleven months of 1997.
** Average of the first ten months of 1997.

Currency Fluctuation. Investments by the Fund in Japanese securities
will be denominated in yen and most income received by the Fund from such
investments will be in yen. However, the Fund's net asset value will be
reported, and distributions will be made, in U.S. dollars. Therefore, a decline
in the value of the yen relative to the U.S. dollar could have an adverse effect
on the value of the Fund's Japanese investments. The following table presents
the average exchange rates of Japanese yen for U.S. dollars for the years shown:

15
<PAGE>

AVERAGE CURRENCY EXCHANGE RATES

Year Yen Per U.S. Dollar
---- -------------------
1990 144.79
1991 134.71
1992 126.65
1993 111.20
1994 102.21
1995 94.06
1996 108.78
1997 120.99

Source: International Monetary Fund, International Financial Statistics

Securities Markets
- ------------------

The Exchange Market. The Japanese exchange market is a highly
systemized, government regulated market currently consisting of eight stock
exchanges. The three main Japanese Exchanges (Tokyo, Osaka and Nagoya) are
comprised of First and Second Sections. The First Sections have more stringent
listing standards with respect to a company's number of years in existence,
number of outstanding shares and trading volume and, accordingly, list larger,
more established companies than the Second Sections. The Tokyo Stock Exchange
("TSE") is the largest exchange and, as of December 31, 1997, the First Section
of the TSE listed 1,324 companies with market capitalization in excess of 273.9
trillion yen (approximately $2.1 trillion as of such date). The Second Sections
of the main Japanese Exchanges generally list smaller, less capitalized
companies than those traded on the First Sections. As of December 31, 1997, the
Second Section of the TSE listed 478 companies with market capitalization in
excess of 7 trillion yen (approximately $53.6 billion as of such date).

The OTC Market. The Japanese OTC market ("JASDAQ") is less systemized
than the stock exchanges. Trading of equity securities through the JASDAQ market
is conducted by securities firms in Japan, primarily through an organization
which acts as a "matching agent," as opposed to a recognized stock exchange.
Consequently, securities traded through JASDAQ may, from time to time, and
especially in falling markets, become illiquid and experience short-term price
volatility and wide spreads between bid and offer prices. This combination of
limited liquidity and price volatility may have an adverse effect on the
investment performance of a Fund. In periods of rapid price increases, the
limited liquidity of JASDAQ restricts a Fund's ability to adjust its portfolio
quickly in order to take full advantage of a significant market increase, and
conversely, during periods of rapid price declines, it restricts the ability of
a Fund to dispose of securities quickly in order to realize gains previously
made or to limit losses on securities held in its portfolio. In addition,
although JASDAQ has generally experienced sustained growth in aggregate market
capitalization and trading volume, there have been periods in which aggregate
market capitalization and trading volume have declined. The Frontier Market is
expected to present greater liquidity and volatility considerations than JASDAQ.

16
<PAGE>

As of December 31, 1997, 831 issues were traded through JASDAQ, having
an aggregate market capitalization in excess of 9.2 trillion yen (approximately
$70.5 billion as of such date). The entry requirements for JASDAQ generally
require a minimum of two million shares outstanding at the time of registration,
a minimum of 200 shareholders (if less than 20 million shares outstanding on the
day of registration) or 400 shareholders (if 20 million or more shares
outstanding on the day of registration), minimum pre-tax profits of 10 yen per
share (approximately $.08 per share as of January 30, 1998) for the prior fiscal
year, and net assets of 200 million yen (approximately $1.6 million as of
January 30, 1998) at the end of the prior fiscal year. JASDAQ has generally
attracted small growth companies or companies whose major shareholders wish to
sell only a small portion of the company's equity.

The Frontier Market is a second over-the-counter market and is under
the jurisdiction of JASDAQ, which is overseen by the Japanese Securities and
Exchange Commission. The Frontier Market has less stringent entry requirements
than those described above for JASDAQ and is designed to enable early stage
companies access to capital markets. Frontier Market companies need not have a
history of earnings, provided their spending on research and development equals
at least 3% of net sales. In addition, companies traded through the Frontier
Market are not required to have two million shares outstanding at the time of
registration. As a result, investments in companies traded through the Frontier
Market may involve a greater degree of risk than investments in companies traded
through JASDAQ. The Frontier Market was created in July 1995, and as of the date
of this Statement of Additional Information, a limited number of issues were
traded through this market.

Market Risks. Although the market for Japanese equities traded on the
First Section of the TSE is substantial in terms of trading volume and
liquidity, the TSE has nonetheless exhibited significant market volatility in
the past several years. With respect to the OTC market, trades of certain stocks
may not be effected on days when the matching of buy and sell orders for such
stocks does not occur. The liquidity of the Japanese OTC market, as well as that
of the Second Sections of the exchanges, although increasing in recent years, is
limited by the small number of publicly held shares which trade on a regular
basis. Overall, Japanese securities markets have declined significantly since
1989 which has contributed to a weakness in the Japanese economy and the impact
of a further decline cannot be ascertained.

Other Factors
- -------------

The islands of Japan lie in the western Pacific Ocean, off the eastern
coast of the continent of Asia. Japan has in the past experienced earthquakes
and tidal waves of varying degrees of severity, and the risks of such phenomena,
and the damage resulting therefrom, continue to exist. The long-term economic
effects of such geological factors on the Japanese economy as a whole, and on
the Fund's investments, cannot be predicted. In addition, Japan has one of the
world's highest population densities. A significant percentage of the total
population of Japan is concentrated in the metropolitan areas of Tokyo,
Yokohama, Osaka and Nagoya.

17
<PAGE>

U.S. Government Securities. The Fund may invest in debt obligations of
varying maturities issued or guaranteed by the United States government, its
agencies or instrumentalities ("U.S. Government Securities"). Direct obligations
of the U.S. Treasury include a variety of securities that differ in their
interest rates, maturities and dates of issuance. U.S. Government Securities
also include securities issued or guaranteed by the Federal Housing
Administration, Farmers Home Loan Administration, Export-Import Bank of the
United States, Small Business Administration, Government National Mortgage
Association, General Services Administration, Central Bank for Cooperatives,
Federal Farm Credit Banks, Federal Home Loan Banks, Federal Home Loan Mortgage
Corporation, Federal Intermediate Credit Banks, Federal Land Banks, Federal
National Mortgage Association, Maritime Administration, Tennessee Valley
Authority, District of Columbia Armory Board and Student Loan Marketing
Association. The Fund may also invest in instruments that are supported by the
right of the issuer to borrow from the U.S. Treasury and instruments that are
supported by the credit of the instrumentality. Because the U.S. government is
not obligated by law to provide support to an instrumentality it sponsors, the
Fund will invest in obligations issued by such an instrumentality only if
Warburg determines that the credit risk with respect to the instrumentality does
not make its securities unsuitable for investment by the Fund.

Below Investment Grade Securities. The Fund may invest in convertible
securities rated investment grade and it is not required to dispose of
securities downgraded below investment grade subsequent to acquisition by the
Fund. The market values of below investment grade securities tend to react less
to fluctuations in interest rate levels than do those of investment grade
securities and the market values of certain of these securities also tend to be
more sensitive to individual corporate developments and changes in economic
conditions than investment grade securities. In addition, these securities
generally present a higher degree of credit risk. Issuers of these securities
are often highly leveraged and may not have more traditional methods of
financing available to them so that their ability to service their obligations
during an economic downturn or during sustained periods of rising interest rates
may be impaired. The risk of loss due to default by such issuers is
significantly greater because below investment grade securities generally are
unsecured and frequently are subordinated to the prior payment of senior
indebtedness.

The market for below investment grade securities is relatively new and
has not weathered a major economic recession. Any such recession could disrupt
severely the market for such securities and may adversely affect the value of
such securities and the ability of the issuers of such securities to repay
principal and pay interest thereon.

The Fund may have difficulty disposing of certain of these securities
because there may be a thin trading market. Because there is no established
retail secondary market for many of these securities, the Fund anticipates that
these securities could be sold only to a limited number of dealers or
institutional investors. To the extent a secondary trading market for these
securities does exist, it generally is not as liquid as the secondary market for
investment grade securities. The lack of a liquid secondary market, as well as
adverse publicity and investor perception with respect to these securities, may
have an adverse impact on market price and the Fund's ability to dispose of
particular issues when necessary to meet

18
<PAGE>

the Fund's liquidity needs or in response to a specific economic event such as a
deterioration in the creditworthiness of the issuer. The lack of a liquid
secondary market for certain securities also may make it more difficult for the
Fund to obtain accurate market quotations for purposes of valuing the Fund and
calculating its net asset value.

The market value of below investment grade securities is more volatile
than that of investment grade securities. Factors adversely impacting the market
value of these securities will adversely impact the Fund's net asset value. The
Fund will rely on the judgment, analysis and experience of Warburg in evaluating
the creditworthiness of an issuer. In this evaluation, Warburg will take into
consideration, among other things, the issuer's financial resources, its
sensitivity to economic conditions and trends, its operating history, the
quality of the issuer's management and regulatory matters. Normally, below
investment grade securities are not intended for short-term investment. The Fund
may incur additional expenses to the extent it is required to seek recovery upon
a default in the payment of principal or interest on its portfolio holdings of
such securities.

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

Lending of Portfolio Securities. The Fund may lend portfolio
securities to brokers, dealers and other financial organizations that meet
capital and other credit requirements or other criteria established by the
Fund's Board of Directors (the "Board"). The Fund will not lend portfolio
securities to Warburg or its affiliates unless it has applied for and received
specific authority to do so from the SEC. Loans of portfolio securities will be
collateralized by cash, letters of credit or U.S. Government Securities, which
are maintained at all times in an amount equal to at least 100% of the current
market value of the loaned securities. Any gain or loss in the market price of
the securities loaned that might occur during the term of the loan would be for
the account of the Fund. From time to time, the Fund may return a part of the
interest earned from the investment of collateral received for securities loaned
to the borrower and/or a third party that is unaffiliated with the Fund and that
is acting as a "finder."

By lending its securities, the Fund can increase its income by
continuing to receive interest and any dividends on the loaned securities as
well as by either investing the collateral received for securities loaned in
short-term instruments or obtaining yield in the form of interest paid by the
borrower when U.S. government securities are used as collateral. Although the
generation of income is not an investment objective of the Fund, income received
could be used to pay the Fund's expenses and would increase an investor's total
return. The Fund will adhere to the following conditions whenever its portfolio
securities are loaned: (i) the Fund must receive at least 100% cash collateral
or equivalent securities of the type

19
<PAGE>

discussed in the preceding paragraph from the borrower; (ii) the borrower must
increase such collateral whenever the market value of the securities rises above
the level of such collateral; (iii) the Fund must be able to terminate the loan
at any time; (iv) the Fund must receive reasonable interest on the loan, as well
as any dividends, interest or other distributions on the loaned securities and
any increase in market value; (v) the Fund may pay only reasonable custodian
fees in connection with the loan; and (vi) voting rights on the loaned
securities may pass to the borrower, provided, however, that if a material event
adversely affecting the investment occurs, the Board must terminate the loan and
regain the right to vote the securities. Loan agreements involve certain risks
in the event of default or insolvency of the other party including possible
delays or restrictions upon the Fund's ability to recover the loaned securities
or dispose of the collateral for the loan.

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

Short Sales "Against the Box." In a short sale, the Fund sells a
borrowed security and has a corresponding obligation to the lender to return the
identical security. The seller does not immediately deliver the securities sold
and is said to have a short position in those securities until delivery occurs.
While a short sale is made by selling a security the Fund does not own, a short
sale is "against the box" to the extent that the Fund contemporaneously owns or
has the right to obtain, at no added cost, securities identical to those sold
short. If the Fund engages in a short sale, the collateral for the short
position will be maintained by the Fund's custodian or qualified sub-custodian.
While the short sale is open, the Fund will maintain in a segregated account an
amount of securities equal in kind and amount to the securities sold short or
securities convertible into or exchangeable for such equivalent securities.
These securities constitute the Fund's long position.

The Fund does not intend to engage in short sales against the box for
investment purposes. The Fund may, however, make a short sale as a hedge when it
believes that the price of a security may decline, causing a decline in the
value of a security owned by the Fund (or a security convertible or exchangeable
for such security). In such case, any future losses in the Fund's long position
should be offset by a gain in the short position and, conversely, any gain in
the long position should be reduced by a loss in the short position. The extent
to which such gains or losses are reduced will depend upon the amount of the
security sold short relative to the amount the Fund owns. There will be certain
additional transaction costs

20
<PAGE>

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

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

Depositary Receipts. The assets of the Fund may be invested in the
securities of foreign issuers in the form of American Depositary Receipts
("ADRs"), European Depositary Receipts ("EDRs") and International Depositary
Receipts ("IDRs"). These securities may not necessarily be denominated in the
same currency as the securities into which they may be converted. ADRs are
receipts typically issued by a U.S. bank or trust company which evidence
ownership of underlying securities issued by a foreign corporation. EDRs, which
are sometimes referred to as Continental Depositary Receipts, are receipts
issued in Europe, and IDRs, which are sometimes referred to as Global Depositary
Receipts, are receipts issued outside the United States. EDRs and IDRs are
typically issued by non-U.S. banks and trust companies that evidence ownership
of either foreign or domestic securities. Generally, ADRs in registered form are
designed for use in U.S. securities markets, and EDRs and IDRs in bearer form
are designed for use in European securities markets and non-U.S. securities
markets, respectively.

Convertible Securities. Convertible securities in which the Fund may
invest, including both convertible debt and convertible preferred stock, may be
converted at either a stated price or stated rate into underlying shares of
common stock. Because of this feature, convertible securities enable an investor
to benefit from increases in the market price of the underlying common stock.
Convertible securities provide higher yields than the underlying equity
securities, but generally offer lower yields than non-convertible securities of
similar quality. Like bonds, the value of convertible securities fluctuates in
relation to changes in interest rates and, in addition, also fluctuates in
relation to the underlying common stock.

Warrants. The Fund may purchase warrants issued by domestic and
foreign companies to purchase newly created equity securities consisting of
common and preferred stock. The equity security underlying a warrant is
outstanding at the time the warrant is issued or is issued together with the
warrant.

Investing in warrants can provide a greater potential for profit or
loss than an equivalent investment in the underlying security, and, thus, can be
a speculative investment. The value of a warrant may decline because of a
decline in the value of the underlying security, the passage of time, changes in
interest rates or in the dividend or other policies of the company whose equity
underlies the warrant or a change in the perception as to the future

21
<PAGE>

price of the underlying security, or any combination thereof. Warrants generally
pay no dividends and confer no voting or other rights other than to purchase the
underlying security.

Non-Publicly Traded and Illiquid Securities. The Fund may not invest
more than 15% of its net assets in non-publicly traded and illiquid securities,
including securities that are illiquid by virtue of the absence of a readily
available market, time deposits maturing in more than seven days, and repurchase
agreements which have a maturity of longer than seven days. Securities that have
legal or contractual restrictions on resale but have a readily available market
are not considered illiquid for purposes of this limitation. Repurchase
agreements subject to demand are deemed to have a maturity equal to the notice
period.

Historically, illiquid securities have included securities subject to
contractual or legal restrictions on resale because they have not been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
securities which are otherwise not readily marketable and repurchase agreements
having a maturity of longer than seven days. Securities which have not been
registered under the Securities Act are referred to as private placements or
restricted securities and are purchased directly from the issuer or in the
secondary market. Limitations on resale may have an adverse effect on the
marketability of portfolio securities and a mutual fund might be unable to
dispose of restricted or other illiquid securities promptly or at reasonable
prices and might thereby experience difficulty satisfying redemptions within
seven days without borrowing. A mutual fund might also have to register such
restricted securities in order to dispose of them resulting in additional
expense and delay. Adverse market conditions could impede such a public offering
of securities.

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

Rule 144A Securities. Rule 144A under the Securities Act adopted by
the SEC allows for a broader institutional trading market for securities
otherwise subject to restriction on resale to the general public. Rule 144A
establishes a "safe harbor" from the registration requirements of the Securities
Act for resales of certain securities to qualified institutional buyers. Warburg
anticipates that the market for certain restricted securities such as
institutional commercial paper will expand further as a result of this
regulation and use of automated systems for the trading, clearance and
settlement of unregistered securities of domestic and foreign issuers, such as
the PORTAL System sponsored by the National Association of Securities Dealers,
Inc.

Warburg will monitor the liquidity of restricted securities in the
Fund under the supervision of the Board. In reaching liquidity decisions,
Warburg may consider, inter alia, the following factors: (i) the unregistered
nature of the security; (ii) the frequency of trades

22
<PAGE>

and quotes for the security; (iii) the number of dealers wishing to purchase or
sell the security and the number of other potential purchasers; (iv) dealer
undertakings to make a market in the security and (v) the nature of the security
and the nature of the marketplace trades (e.g., the time needed to dispose of
the security, the method of soliciting offers and the mechanics of the
transfer).

Borrowing. The Fund may borrow up to 30% of its total assets for
temporary or emergency purposes, including to meet portfolio redemption requests
so as to permit the orderly disposition of portfolio securities or to facilitate
settlement transactions on portfolio securities. Investments (including
roll-overs) will not be made when borrowings exceed 5% of the Fund's net assets.
Although the principal of such borrowings will be fixed, the Fund's assets may
change in value during the time the borrowing is outstanding. The Fund expects
that some of its borrowings may be made on a secured basis. In such situations,
either the custodian will segregate the pledged assets for the benefit of the
lender or arrangements will be made with a suitable subcustodian, which may
include the lender.

Reverse Repurchase Agreements and Dollar Rolls. The Fund may enter
into reverse repurchase agreements with the same parties with whom it may enter
into repurchase agreements. Reverse repurchase agreements involve the sale of
securities held by the Fund pursuant to its agreement to repurchase them at a
mutually agreed upon date, price and rate of interest. At the time the Fund
enters into a reverse repurchase agreement, it will establish and maintain a
segregated account with an approved custodian containing cash or liquid
securities having a value not less than the repurchase price (including accrued
interest). The assets contained in the segregated account will be
marked-to-market daily and additional assets will be placed in such account on
any day in which the assets fall below the repurchase price (plus accrued
interest). The Fund's liquidity and ability to manage its assets might be
affected when it sets aside cash or portfolio securities to cover such
commitments. Reverse repurchase agreements involve the risk that the market
value of the securities retained in lieu of sale may decline below the price of
the securities the Fund has sold but is obligated to repurchase. In the event
the buyer of securities under a reverse repurchase agreement files for
bankruptcy or becomes insolvent, such buyer or its trustee or receiver may
receive an extension of time to determine whether to enforce the Fund's
obligation to repurchase the securities, and the Fund's use of the proceeds of
the reverse repurchase agreement may effectively be restricted pending such
decision.

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

23
<PAGE>

dollar rolls that are accounted for as financings are considered to be
borrowings under the 1940 Act.

Other Investment Limitations
----------------------------

The investment limitations numbered 1 through 9 may not be changed
without the affirmative vote of the holders of a majority of the Fund's
outstanding shares. Such majority is defined as the lesser of (i) 67% or more of
the shares present at the meeting, if the holders of more than 50% of the
outstanding shares of the Fund are present or represented by proxy, or (ii) more
than 50% of the outstanding shares. Investment limitations 10 through 14 may be
changed by a vote of the Board at any time.

The Fund may not:

1. Borrow money except that the Fund may (a) borrow from banks for
temporary or emergency purposes and (b) enter into reverse repurchase
agreements; provided that reverse repurchase agreements, dollar roll
transactions that are accounted for as financings and any other transactions
constituting borrowing by the Fund may not exceed 30% of the value of the Fund's
total assets at the time of such borrowing. For purposes of this restriction,
short sales, the entry into currency transactions, options, futures contracts,
options on futures contracts, forward commitment transactions and dollar roll
transactions that are not accounted for as financings (and the segregation of
assets in connection with any of the foregoing) shall not constitute borrowing.

2. Purchase any securities which would cause 25% or more of the value
of the Fund's total assets at the time of purchase to be invested in the
securities of issuers conducting their principal business activities in the same
industry; provided that there shall be no limit on the purchase of U.S.
Government Securities.

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

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

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

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

24
<PAGE>

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

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

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

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

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

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

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

14. Make short sales of securities or maintain a short position,
except that the Fund may maintain short positions in forward currency contracts,
options and futures contracts and make short sales "against the box."

If a percentage restriction (other than the percentage limitation set
forth in No. 1 above) is adhered to at the time of an investment, a later
increase or decrease in the percentage of assets resulting from a change in the
values of portfolio securities or in the amount of the Fund's assets will not
constitute a violation of such restriction.

Portfolio Valuation
- -------------------

The Prospectus discusses the time at which the net asset value of the
Fund is determined for purposes of sales and redemptions. The following is a
description of the procedures used by the Fund in valuing its assets.

25
<PAGE>

Securities listed on a U.S. securities exchange (including securities
traded through the Nasdaq National Market System) or foreign securities exchange
or traded in an over-the-counter market will be valued at the most recent sale
as of the time the valuation is made or, in the absence of sales, at the mean
between the bid and asked quotations. If there are no such quotations, the value
of the securities will be taken to be the highest bid quotation on the exchange
or market. Options and futures contracts will be valued similarly. A security
which is listed or traded on more than one exchange is valued at the quotation
on the exchange determined to be the primary market for such security. The
valuation of short sales of securities, which are not traded on a national
exchange, will be at the mean of bid and asked prices. Amortized cost involves
valuing a portfolio instrument at its initial cost and thereafter assuming a
constant amortization to maturity of an discount or premium, regardless of the
impact of fluctuating interest rates on the market value of the instrument.
Short-term obligations with maturities of 60 days or less are valued at
amortized cost, which constitutes fair value as determined by the Board.
Amortized cost involves valuing a portfolio instrument at its initial cost and
thereafter assuming a constant amortization to maturity of any discount or
premium, regardless of the impact of fluctuating interest rates on the market
value of the instrument. The amortized cost method of valuation may also be used
with respect to other debt obligations with 60 days or less remaining to
maturity. Notwithstanding the foregoing, in determining the market value of
portfolio investments, the Fund may employ outside organizations (a "Pricing
Service") which may use a matrix, formula or other objective method that takes
into consideration market indexes, matrices, yield curves and other specific
adjustments. The procedures of Pricing Services are reviewed periodically by the
officers of the Fund under the general supervision and responsibility of the
Board, which may replace a Pricing Service at any time. Securities, options and
futures contracts for which market quotations are not available and certain
other assets of the Fund will be valued at their fair value as determined in
good faith pursuant to consistently applied procedures established by the Board.
In addition, the Board or its delegates may value a security at fair value if it
determines that such security's value determined by the methodology set forth
above does not reflect its fair value.

Trading in securities in certain foreign countries is completed at
various times prior to the close of business on each business day in New York
(i.e., a day on which the New York Stock Exchange, Inc. (the "NYSE") is open for
trading). In addition, securities trading in a particular country or countries
may not take place on all business days in New York. Furthermore, trading takes
place in various foreign markets on days which are not business days in New York
and days on which the Fund's net asset value is not calculated. As a result,
calculation of the Fund's net asset value may not take place contemporaneously
with the determination of the prices of certain portfolio securities used in
such calculation. All assets and liabilities initially expressed in foreign
currency values will be converted into U.S. dollar values at the prevailing rate
as quoted by a Pricing Service. If such quotations are not available, the rate
of exchange will be determined in good faith pursuant to consistently applied
procedures established by the Board.

26
<PAGE>

Portfolio Transactions
- ----------------------

Warburg is responsible for establishing, reviewing and, where
necessary, modifying the Fund's investment program to achieve its investment
objective. Purchases and sales of newly issued portfolio securities are usually
principal transactions without brokerage commissions effected directly with the
issuer or with an underwriter acting as principal. Other purchases and sales may
be effected on a securities exchange or over-the-counter, depending on where it
appears that the best price or execution will be obtained. The purchase price
paid by the Fund to underwriters of newly issued securities usually includes a
concession paid by the issuer to the underwriter, and purchases of securities
from dealers, acting as either principals or agents in the after market, are
normally executed at a price between the bid and asked price, which includes a
dealer's mark-up or mark-down. Transactions on U.S. stock exchanges and some
foreign stock exchanges involve the payment of negotiated brokerage commissions.
On exchanges on which commissions are negotiated, the cost of transactions may
vary among different brokers. On most foreign exchanges, commissions are
generally fixed. There is generally no stated commission in the case of
securities traded in domestic or foreign over-the-counter markets, but the price
of securities traded in over-the-counter markets includes an undisclosed
commission or mark-up. U.S. Government Securities are generally purchased from
underwriters or dealers, although certain newly issued U.S. Government
Securities may be purchased directly from the U.S. Treasury or from the issuing
agency or instrumentality.

Warburg will select specific portfolio investments and effect
transactions for the Fund and in doing so seeks to obtain the overall best
execution of portfolio transactions. In evaluating prices and executions,
Warburg will consider the factors it deems relevant, which may include the
breadth of the market in the security, the price of the security, the financial
condition and execution capability of a broker or dealer and the reasonableness
of the commission, if any, for the specific transaction and on a continuing
basis. Warburg may, in its discretion, effect transactions in portfolio
securities with dealers who provide brokerage and research services (as those
terms are defined in Section 28(e) of the Securities Exchange Act of 1934) to
the Fund and/or other accounts over which Warburg exercises investment
discretion. Warburg may place portfolio transactions with a broker or dealer
with whom it has negotiated a commission that is in excess of the commission
another broker or dealer would have charged for effecting the transaction if
Warburg determines in good faith that such amount of commission was reasonable
in relation to the value of such brokerage and research services provided by
such broker or dealer viewed in terms of either that particular transaction or
of the overall responsibilities of Warburg. Research and other services received
may be useful to Warburg in serving both the Fund and its other clients and,
conversely, research or other services obtained by the placement of business of
other clients may be useful to Warburg in carrying out its obligations to the
Fund. Research may include furnishing advice, either directly or through
publications or writings, as to the value of securities, the advisability of
purchasing or selling specific securities and the availability of securities or
purchasers or sellers of securities; furnishing seminars, information, analyses
and reports concerning issuers, industries, securities, trading markets and
methods, legislative developments, changes in accounting practices, economic
factors and trends and portfolio strategy; access to research

27
<PAGE>

analysts, corporate management personnel, industry experts, economists and
government officials; comparative performance evaluation and technical
measurement services and quotation services; and products and other services
(such as third party publications, reports and analyses, and computer and
electronic access, equipment, software, information and accessories that
deliver, process or otherwise utilize information, including the research
described above) that assist Warburg in carrying out its responsibilities.
Research received from brokers or dealers is supplemental to Warburg's own
research program. The fees to Warburg under its advisory agreement with the Fund
are not reduced by reason of its receiving any brokerage and research services.

During the fiscal period from March 31, 1997 (commencement of
operations) through October 31, 1997, Warburg Pincus Institutional Fund, Inc.,
(the "Institutional Fund"), on behalf of the Managed EAFE(R) Countries Portfolio
(the "Managed EAFE(R) Portfolio"), paid an aggregate of approximately $19,273 in
commissions to broker-dealers for execution of portfolio transactions. (The Fund
acquired the assets and liabilities of the Managed EAFE(R) Portfolio of the
Institutional Fund on December 22, 1997). As of December 10, 1997, the Managed
EAFE(R) Portfolio had outstanding a repurchase agreement in the amount of
$411,000 with Goldman Sachs, one of the Fund's regular broker-dealers.

Investment decisions for the Fund concerning specific portfolio
securities are made independently from those for other clients advised by
Warburg. Such other investment clients may invest in the same securities as the
Fund. When purchases or sales of the same security are made at substantially the
same time on behalf of such other clients, transactions are averaged as to price
and available investments allocated as to amount, in a manner which Warburg
believes to be equitable to each client, including the Fund. In some instances,
this investment procedure may adversely affect the price paid or received by the
Fund or the size of the position obtained or sold for the Fund. To the extent
permitted by law, Warburg may aggregate the securities to be sold or purchased
for the Fund with those to be sold or purchased for such other investment
clients in order to obtain best execution.

Any portfolio transaction for the Fund may be executed through
Counsellors Securities Inc., the Fund's distributor ("Counsellors Securities"),
if, in Warburg's judgment, the use of Counsellors Securities is likely to result
in price and execution at least as favorable as those of other qualified
brokers, and if, in the transaction, Counsellors Securities charges the Fund a
commission rate consistent with those charged by Counsellors Securities to
comparable unaffiliated customers in similar transactions. All transactions with
affiliated brokers will comply with Rule 17e-1 under the 1940 Act.

In no instance will portfolio securities be purchased from or sold to
Warburg or Counsellors Securities or any affiliated person of such companies.

Transactions for the Fund may be effected on foreign securities
exchanges. In transactions for securities not actively traded on a foreign
securities exchange, the Fund will deal directly with the dealers who make a
market in the securities involved, except in those circumstances where better
prices and execution are available elsewhere. Such dealers usually

28
<PAGE>

are acting as principal for their own account. On occasion, securities may be
purchased directly from the issuer. Such portfolio securities are generally
traded on a net basis and do not normally involve brokerage commissions.
Securities firms may receive brokerage commissions on certain portfolio
transactions, including options, futures and options on futures transactions and
the purchase and sale of underlying securities upon exercise of options.

The Fund may participate, if and when practicable, in bidding for the
purchase of securities for the Fund's portfolio directly from an issuer in order
to take advantage of the lower purchase price available to members of such a
group. The Fund will engage in this practice, however, only when Warburg, in its
sole discretion, believes such practice to be otherwise in the Fund's interest.

Portfolio Turnover
- ------------------

The Fund does not intend to seek profits through short-term trading,
but the rate of turnover will not be a limiting factor when the Fund deems it
desirable to sell or purchase securities. The Fund's portfolio turnover rate is
calculated by dividing the lesser of purchases or sales of its portfolio
securities for the year by the monthly average value of the portfolio
securities. Securities with remaining maturities of one year or less at the date
of acquisition are excluded from the calculation.

Certain practices that may be employed by the Fund could result in
high portfolio turnover. For example, options on securities may be sold in
anticipation of a decline in the price of the underlying security (market
decline) or purchased in anticipation of a rise in the price of the underlying
security (market rise) and later sold. To the extent that its portfolio is
traded for the short-term, the Fund will be engaged essentially in trading
activities based on short-term considerations affecting the value of an issuer's
stock instead of long-term investments based on fundamental valuation of
securities. Because of this policy, portfolio securities may be sold without
regard to the length of time for which they have been held. Consequently, the
annual portfolio turnover rate of the Fund may be higher than mutual funds
having a similar objective that do not utilize these strategies.

29
<PAGE>

MANAGEMENT OF THE FUND

Officers and Board of Directors
- -------------------------------

The names (and ages) of the Fund's Directors and officers, their
addresses, present positions and principal occupations during the past five
years and other affiliations are set forth below.

Richard N. Cooper* (63) Director
Harvard University Professor at Harvard University;
1737 Cambridge Street National Intelligence Council from
Cambridge, MA 02138 June 1995 until January 1997;
Director or Trustee of Circuit City
Stores, Inc. (retail electronics
and appliances) and Phoenix Home
Mutual Life Insurance Company;
Director/Trustee of other
investment companies advised by
Warburg.

Jack W. Fritz (70) Director
2425 North Fish Creek Road Private investor; Consultant and
P.O. Box 483 Director of Fritz Broadcasting,
Wilson, Wyoming 83014 Inc. and Fritz Communications
(developers and operators of radio
stations); Director of Advo, Inc.
(direct mail advertising);
Director/Trustee of other
investment companies advised by
Warburg.

John L. Furth* (67) Chairman of the Board
466 Lexington Avenue Vice Chairman, Director and
New York, New York 10017-3147 Managing Director of Warburg;
Associated with Warburg since 1970;
Director of Counsellors Securities;
Chairman of the Board of other
investment companies advised by
Warburg.

Jeffrey E. Garten (51) Director
Box 208200 Dean of Yale School of Management
New Haven, Connecticut 06520-8200 and William S. Beinecke Professor
in the Practice of International
Trade and Finance; Undersecretary
of Commerce for International Trade
from November 1993 to October 1995;
Professor at Columbia University
from September 1992 to November
1993; Director/Trustee of other
investment companies advised by
Warburg.

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

30
<PAGE>

Thomas A. Melfe (66) Director
30 Rockefeller Plaza Partner in the law firm of Donovan
New York, New York 10112 Leisure Newton & Irvine; Chairman
of the Board of Municipal Fund for
New York Investors, Inc.;
Director/Trustee of other
investment companies advised by
Warburg.

Arnold M. Reichman* (49) Director
466 Lexington Avenue Managing Director, Chief Operating
New York, New York 10017-3147 Officer and Assistant Secretary of
Warburg; Associated with Warburg
since 1984; Director of The RBB
Fund, Inc.; Director and officer of
Counsellors Securities;
Director/Trustee of other
investment companies advised by
Warburg.

Alexander B. Trowbridge (68) Director
1317 F Street, N.W., 5th Floor President of Trowbridge Partners,
Washington, DC 20004 Inc. (business consulting) from
January 1990 to November 1996;
Director or Trustee of New England
Mutual Life Insurance Co., ICOS
Corporation (biopharmaceuticals),
WMX Technologies Inc. (solid and
hazardous waste collection and
disposal), The Rouse Company (real
estate development), Harris Corp.
(electronics and communications
equipment), The Gillette Co.
(personal care products) and Sun
Company Inc. (petroleum refining
and marketing); Director/Trustee of
other investment companies advised
by Warburg.

Eugene L. Podsiadlo (41) President
466 Lexington Avenue Managing Director of Warburg;
New York, New York 10017-3147 Associated with Warburg since 1991;
Officer of Counsellors Securities
and of other investment companies
advised by Warburg.

Stephen Distler (44) Vice President
466 Lexington Avenue Managing Director, Controller and
New York, New York 10017-3147 Assistant Secretary of Warburg;
Associated with Warburg since 1984;
Officer of Counsellors Securities
and of other investment companies
advised by Warburg.

31
<PAGE>

Eugene P. Grace (46) Vice President and Secretary
466 Lexington Avenue Senior Vice President of Warburg;
New York, New York 10017-3147 Associated with Warburg since April
1994; Attorney-at-law from
September 1989-April 1994; life
insurance agent, New York Life
Insurance Company from 1993-1994;
Officer of Counsellors Securities
and of other investment companies
advised by Warburg.

Howard Conroy, CPA (44) Vice President and Chief Financial
466 Lexington Avenue Officer Vice President of Warburg;
New York, New York 10017-3147 Associated with Warburg since 1992;
Officer of other investment
companies advised by Warburg.

Daniel S. Madden, CPA (32) Treasurer and Chief Accounting
466 Lexington Avenue Officer Vice President of Warburg;
New York, New York 10017-3147 Associated with Warburg since 1995;
Associated with BlackRock Financial
Management, Inc. from September
1994 to October 1996; Associated
with BEA Associates from April 1993
to September 1994; Officer of other
investment companies advised by
Warburg.

Janna Manes, Esq. (30) Assistant Secretary Vice President
466 Lexington Avenue of Warburg; Associated with Warburg
New York, New York 10017-3147 since March 1996; Associated with
the law firm of Willkie Farr &
Gallagher from 1993 to 1996;
Officer of other investment
companies advised by Warburg.

No employee of Warburg, PFPC Inc., the Fund's co-administrator
("PFPC"), or any of their affiliates receives any compensation from the Fund for
acting as an officer or Director of the Fund. Each Director who is not a
director, trustee, officer or employee of Warburg, PFPC or any of their
affiliates receives an annual fee of $500, and $250 for each meeting of the
Board attended by him for his services as Director and is reimbursed for
expenses incurred in connection with his attendance at Board meetings.

Directors' Compensation
- -----------------------

Total Total Compensation from
Compensation from all Investment Companies
Name of Director Fund+ Managed by Warburg*
---------------- ----------------- ------------------------

John L. Furth None** None**

Arnold M. Reichman None** None**

32
<PAGE>

Richard N. Cooper $1,500 $44,500

Donald J. Donahue*** $1,500 $44,500

Jeffrey E. Garten**** N/A N/A

Jack W. Fritz $1,500 $44,500

Thomas A. Melfe $1,500 $44,500

Alexander B. Trowbridge $1,500 $44,500

_____________________
+ Amounts shown are estimates of payments to be made in the fiscal year
ending October 31, 1998 pursuant to existing arrangements.

* Each Director serves as a Director or Trustee of 24 investment
companies advised by Warburg.

** Mr. Furth and Mr. Reichman receive compensation as associates of
Warburg, and, accordingly, receive no compensation from the Fund or
any other investment company advised by Warburg.

*** Mr. Donohue resigned as a Director of the Fund effective February 6,
1998.

**** Mr. Garten became a Director of the Fund effective February 6, 1998
and, accordingly, received no compensation from the Fund for the
fiscal year ended October 31, 1997.

As of January 30, 1998 Directors or officers of the Fund as a group
owned less than 1% of the outstanding shares of the Fund.

Portfolio Managers
- ------------------

Mr. Richard H. King, Co-Portfolio Manager of the Fund, earned a B.A.
degree from Durham University in England. Mr. King also manages other Warburg
Pincus Funds. From 1968 to 1982, he worked at Carr Sons & Company (Overseas), a
leading international brokerage firm. He resided in the Far East as an
investment analyst from 1970 to 1977, became director, and later relocated to
the U.S. where he became founder and president of W.I. Carr (America), based in
New York. From 1982 to 1984 Mr. King was a director in charge of the Far East
equity investments at N.M. Rothschild International Asset Management, a London
merchant bank. In 1984 Mr. King became chief investment officer and director for
all international investment strategy with Fiduciary Trust Company International
S.A., in London. He managed an EAFE mutual fund (FTIT) 1985-1986 which grew from
$3 million to over $100 million during this two-year period.

Mr. P. Nicholas Edwards, Co-Portfolio Manager of the Fund, also
manages other Warburg Funds. Prior to joining Warburg in August 1995, Mr.
Edwards was a director at Jardine Fleming Investment Advisers, Tokyo. He was a
vice president of Robert Fleming Inc. in New York City from 1988 to 1991. Mr.
Edwards earned M.A. degrees from Oxford University and Hiroshima University in
Japan.

Mr. Harold W. Ehrlich, Co-Portfolio Manager of the Fund, also manages
other Warburg Pincus Funds. Prior to joining Warburg, Mr. Ehrlich was a senior
vice president, portfolio manager and analyst at Templeton Investment Counsel
Inc. from 1987 to 1995. He was a research analyst and assistant portfolio
manager at Fundamental Management

33
<PAGE>

Corporation from 1985 to 1986 and a research analyst at First Equity Corporation
of Florida from 1983 to 1985. Mr. Ehrlich earned a B.S.B.A. degree from
University of Florida and earned his Chartered Financial Analyst designation in
1990.

Mr. Vincent J. McBride, Associate Portfolio Manager of the Fund, also
manages other Warburg Pincus Funds. Prior to joining Warburg in 1994, Mr.
McBride was an international equity analyst at Smith Barney Inc. from 1993 to
1994 and at General Electric Investment Corporation from 1992 to 1993. He was
also a portfolio manager/analyst at United Jersey Bank from 1989 to 1992 and a
portfolio manager at First Fidelity Bank from 1987 to 1989. Mr. McBride earned a
B.S. degree from the University of Delaware and an M.B.A. degree from Rutgers
University.

Ms. Nancy Nierman, Associate Portfolio Manager of the Fund, is a Vice
President of Warburg and is a European equity analyst there. She has been with
Warburg since April 1996, before which time she was a vice president at
Fiduciary Trust Company International from 1990 to 1996 and an international
equity trader at TIAA-CREF from 1985 to 1990. She received her B.B.A. degree
from Baruch College in 1985.

Mr. J.H. Cullum Clark, CFA, Associate Portfolio Manager of the Fund,
is a Vice President of Warburg and is an analyst at Warburg. Prior to joining
Warburg, Mr. Clark was an analyst and portfolio manager at Brown Brothers
Harriman from 1993 to 1996 and a research assistant at the U.S. Senate Select
Committee on Intelligence from 1992 to 1993. Mr. Clark received an A.M. degree
from Harvard University and a B.A. degree from Yale University. Mr. Clark also
studied at the Stanford Inter-University Center for Japanese Language Studies in
1990.

Investment Adviser and Co-Administrators
- ----------------------------------------

Warburg serves as investment adviser to the Fund and Counsellors Funds
Service, Inc. ("Counsellors Service") and PFPC serve as co-administrators to the
Fund, each pursuant to separate written agreements (the "Advisory Agreement,"
"Counsellors Service Co-Administration Agreement" and the "PFPC
Co-Administration Agreement," respectively). The services provided by, and the
fees payable by the Fund to, Warburg under the Advisory Agreement, Counsellors
Service under the Counsellors Service Co-Administration Agreement and PFPC under
the PFPC Co-Administration Agreement are described in the Prospectus. Each class
of shares of the Fund bears its proportionate share of fees payable to Warburg,
Counsellors Service and PFPC in the proportion that its assets bear to the
aggregate assets of the Fund at the time of calculation. These fees are
calculated at an annual rate based on a percentage of a Fund's average daily net
assets. See the Prospectus, "Management of the Fund."

With respect to the Managed EAFE(R) Portfolio of the Institutional
Fund, during the fiscal period from March 31, 1997 (commencement of operations)
to October 31, 1997, Warburg earned $12,662, and voluntarily waived all of this
amount, in investment advisory fees; Counsellors Service earned $1,583; and PFPC
received $1,899 in administration fees and voluntarily waived all of these fees.

34
<PAGE>

Custodians and Transfer Agent
- -----------------------------

PNC Bank, National Association ("PNC") and State Street serve as
custodians of the Fund's U.S. and non-U.S. assets, respectively, pursuant to
separate custodian agreements (the "Custodian Agreements"). Under the Custodian
Agreements, PNC and State Street each (i) maintains a separate account or
accounts in the name of the Fund, (ii) holds and transfers portfolio securities
on account of the Fund, (iii) makes receipts and disbursements of money on
behalf of the Fund, (iv) collects and receives all income and other payments and
distributions for the account of the Fund's portfolio securities held by it and
(v) makes periodic reports to the Board concerning the Fund's custodial
arrangements. State Street is authorized to select one or more foreign banking
institutions and foreign securities depositories to serve as sub-custodian on
behalf of the Fund, and PNC is authorized to select one or more domestic banks
or trust companies to serve as sub-custodian on behalf of the Fund. PNC may
delegate its duties under its Custodian Agreement with the Fund to a wholly
owned direct or indirect subsidiary of PNC or PNC Bank Corp. upon notice to the
Fund and upon the satisfaction of certain other conditions. PNC is an indirect,
wholly owned subsidiary of PNC Bank Corp. and its principal business address is
1600 Market Street, Philadelphia, Pennsylvania 19103. The principal business
address of State Street is 225 Franklin Street, Boston, Massachusetts 02110.

State Street also serves as the shareholder servicing, transfer and
dividend disbursing agent of the Fund pursuant to a Transfer Agency and Service
Agreement, under which State Street (i) issues and redeems shares of the Fund,
(ii) addresses and mails all communications by the Fund to record owners of Fund
shares, including reports to shareholders, dividend and distribution notices and
proxy material for its meetings of shareholders, (iii) maintains shareholder
accounts and, if requested, sub-accounts and (iv) makes periodic reports to the
Board concerning the transfer agent's operations with respect to the Fund. State
Street has delegated to Boston Financial Data Services, Inc., a 50% owned
subsidiary ("BFDS"), responsibility for most shareholder servicing functions.
BFDS's principal business address is 2 Heritage Drive, Boston, Massachusetts
02171.

Organization of the Fund
- ------------------------

All shareholders of the Fund in each class, upon liquidation, will
participate ratably in the Fund's net assets. Shares do not have cumulative
voting rights, which means that holders of more than 50% of the shares voting
for the election of Directors can elect all Directors. Shares are transferable
but have no preemptive, conversion or subscription rights.

Distribution and Shareholder Servicing
- --------------------------------------

Common Shares. The Fund has entered into a Shareholder Servicing and
Distribution Plan (the "12b-1 Plan"), pursuant to Rule 12b-1 under the 1940 Act,
pursuant to which the Fund will pay Counsellors Securities, in consideration for
Services (as defined below), a fee calculated at an annual rate of .25% of the
average daily net assets of the Common Shares of the Fund. Services performed by
Counsellors Securities include (i) the sale of the Common Shares, as set forth
in the 12b-1 Plan ("Selling Services"), (ii) ongoing

35
<PAGE>

servicing and/or maintenance of the accounts of Common Shareholders of the Fund,
as set forth in the 12b-1 Plan ("Shareholder Services"), and (iii) sub-transfer
agency services, subaccounting services or administrative services related to
the sale of the Common Shares, as set forth in the 12b-1 Plan ("Administrative
Services" and collectively with Selling Services, "Services") including, without
limitation, (a) payments reflecting an allocation of overhead and other office
expenses of Counsellors Securities related to providing Services; (b) 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; (c)
payments made to compensate selected dealers or other authorized persons for
providing any Services; (d) 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; (e) costs of printing and distributing prospectuses, statements of
additional information and reports of the Fund to prospective shareholders of
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. Pursuant to the 12b-1 Plan, Counsellors
Securities provides the Board with periodic reports of amounts expended under
the 12b-1 Plan and the purpose for which the expenditures were made.

Advisor Shares. The Fund has entered into agreements ("Agreements")
with institutional shareholders of record, broker-dealers, financial
institutions, depository institutions, retirement plans and financial
intermediaries ("Institutions") to provide certain distribution, shareholder
servicing, administrative and/or accounting services for their clients or
customers (or participants in the case of retirement plans) ("Customers") who
are beneficial owners of Advisor Shares. Agreements will be governed by a
distribution plan (the "Distribution Plan") pursuant to Rule 12b-1 under the
1940 Act. The Distribution Plan requires the Board, at least quarterly, to
receive and review written reports of amounts expended under the Distribution
Plan and the purposes for which such expenditures were made.

An Institution with which the Fund has entered into an Agreement with
respect to its Advisor Shares may charge a Customer one or more of the following
types of fees, as agreed upon by the Institution and the Customer, with respect
to the cash management or other services provided by the Institution: (i)
account fees (a fixed amount per month or per year); (ii) transaction fees (a
fixed amount per transaction processed); (iii) compensation balance requirements
(a minimum dollar amount a Customer must maintain in order to obtain the
services offered); or (iv) account maintenance fees (a periodic charge based
upon the percentage of assets in the account or of the dividend paid on those
assets). Services provided by an Institution to Customers are in addition to,
and not duplicative of, the services to be provided under the Fund's
co-administration and distribution and shareholder servicing arrangements. A
Customer of an Institution should read the relevant Prospectus and this
Statement of Additional Information in conjunction with the Agreement and other
literature describing the services and related fees that would be provided by
the Institution to its

36
<PAGE>

Customers prior to any purchase of Fund shares. Prospectuses are available from
the Fund's distributor upon request. No preference will be shown in the
selection of Fund portfolio investments for the instruments of Institutions.

General. The Distribution Plan and the 12b-1 Plan will continue in
effect for so long as their continuance is specifically approved at least
annually by the Board, including a majority of the Directors who are not
interested persons of the Fund and who have no direct or indirect financial
interest in the operation of the Distribution Plan or the 12b-1 Plan, as the
case may be ("Independent Directors"). Any material amendment of the
Distribution Plan or the 12b-1 Plan would require the approval of the Board in
the same manner. Neither the Distribution Plan nor the 12b-1 Plan may be amended
to increase materially the amount to be spent thereunder without shareholder
approval of the relevant class of shares. Each Distribution Plan or 12b-1 Plan
may be terminated at any time, without penalty, by vote of a majority of the
Independent Directors or by a vote of a majority of the outstanding voting
securities of the relevant class of shares.

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION

The offering price of the Fund's shares is equal to the per share net
asset value of the relevant class of shares of the Fund. Information on how to
purchase and redeem Fund shares and how such shares are priced is included in
the Prospectus under "Net Asset Value."

Under the 1940 Act, the Fund may suspend the right of redemption or
postpone the date of payment upon redemption for any period during which the
NYSE is closed, other than customary weekend and holiday closings, or during
which trading on the NYSE is restricted, or during which (as determined by the
SEC) an emergency exists as a result of which disposal or fair valuation of
portfolio securities is not reasonably practicable, or for such other periods as
the SEC may permit. (The Fund may also suspend or postpone the recordation of an
exchange of its shares upon the occurrence of any of the foregoing conditions.)

If the Board determines that conditions exist which make payment of
redemption proceeds wholly in cash unwise or undesirable, the Fund may make
payment wholly or partly in securities or other investment instruments which may
not constitute securities as such term is defined in the applicable securities
laws. If a redemption is paid wholly or partly in securities or other property,
a shareholder would incur transaction costs in disposing of the redemption
proceeds. The Fund will comply with Rule 18f-1 promulgated under the 1940 Act
with respect to redemptions in kind.

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

37
<PAGE>

may reduce the shareholder's investment and ultimately exhaust it. Withdrawal
payments should not be considered as income from investment in the Fund.

EXCHANGE PRIVILEGE

An exchange privilege with certain other funds advised by Warburg is
available to investors in the Fund. The funds into which exchanges of Common
Shares currently can be made are listed in the Common Share Prospectus.
Exchanges may also be made between certain Warburg Pincus Advisor Funds.

The exchange privilege enables shareholders to acquire shares in a
fund with a different investment objective when they believe that a shift
between funds is an appropriate investment decision. Subject to the restrictions
on exchange purchases contained in the Common Share Prospectus and any other
applicable restrictions, this privilege is available to shareholders residing in
any state in which the Common Shares or Advisor Shares being acquired, as
relevant, may legally be sold. Prior to any exchange, the investor should obtain
and review a copy of the current prospectus of the relevant class of each fund
into which an exchange is being considered. Shareholders may obtain a prospectus
of the relevant class of the fund into which they are contemplating an exchange
from Counsellors Securities.

Subject to the restrictions described above, upon receipt of proper
instructions and all necessary supporting documents, shares submitted for
exchange are redeemed at the then-current net asset value of the relevant class
and the proceeds are invested on the same day, at a price as described above, in
shares of the relevant class of the fund being acquired. The exchange privilege
may be modified or terminated at any time upon 30 days' notice to shareholders.

ADDITIONAL INFORMATION CONCERNING TAXES

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

The Fund and Its Investments
- ----------------------------

The Fund and Its Investments. The Fund intends to continue to qualify
to be treated as a regulated investment company each taxable year under the
Internal Revenue Code of 1986, as amended (the "Code"). To so qualify, the Fund
must, among other things: (a) derive at least 90% of its gross income in each
taxable year from dividends, interest, payments with respect to securities,
loans and gains from the sale or other disposition of stock or securities or
foreign currencies, or other income (including, but not limited to, gains from
options, futures or forward contracts) derived with respect to its business of
investing in such stock, securities or currencies; and (b) diversify its
holdings so that, at the end of each quarter

38
<PAGE>

of the Fund's taxable year, (i) at least 50% of the market value of the Fund's
assets is represented by cash, securities of other regulated investment
companies, United States government securities and other securities, with such
other securities limited, in respect of any one issuer, to an amount not greater
than 5% of the Fund's assets and not greater than 10% of the outstanding voting
securities of such issuer and (ii) not more than 25% of the value of its assets
is invested in the securities (other than United States government securities or
securities of other regulated investment companies) of any one issuer or any two
or more issuers that the Fund controls and are determined to be engaged in the
same or similar trades or businesses or related trades or businesses. The Fund
expects that all of its foreign currency gains will be directly related to its
principal business of investing in stocks and securities.

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

The Fund intends to distribute annually to its shareholders
substantially all of its investment company taxable income. The Board will
determine annually whether to distribute any net realized long-term capital
gains in excess of net realized short-term capital losses (including any capital
loss carryovers). The Fund currently expects to distribute any excess annually
to its shareholders. However, if the Fund retains for investment an amount equal
to all or a portion of its net long-term capital gains in excess of its net
short-term capital losses and capital loss carryovers, it will be subject to a
corporate tax (currently at a rate of 35%) on the amount retained. In that
event, the Fund will designate such retained amounts as undistributed capital
gains in a notice to its shareholders who (a) will be required to include in
income for United Stares federal income tax purposes, as long-term capital
gains, their proportionate shares of the undistributed amount, (b) will be
entitled to credit their proportionate shares of the 35% tax paid by the Fund on
the undistributed amount against their United States federal income tax
liabilities, if any, and to claim refunds to the extent their credits exceed
their liabilities, if any, and (c) will be entitled to increase their tax basis,
for United States federal income tax purposes, in their shares by an amount
equal to 65% of the amount of undistributed capital gains included in the
shareholder's income. Organizations or

39
<PAGE>

persons not subject to federal income tax on such capital gains will be entitled
to a refund of their pro rata share of such taxes paid by the Fund upon filing
appropriate returns or claims for refund with the Internal Revenue Service (the
"IRS").

The Code imposes a 4% nondeductible excise tax on the Fund to the
extent the Fund does not distribute by the end of any calendar year at least 98%
of its net investment income for that year and 98% of the net amount of its
capital gains (both long-and short-term) for the one-year period ending, as a
general rule, on October 31 of that year. For this purpose, however, any income
or gain retained by the Fund that is subject to corporate income tax will be
considered to have been distributed by year-end. In addition, the minimum
amounts that must be distributed in any year to avoid the excise tax will be
increased or decreased to reflect any underdistribution or overdistribution, as
the case may be, from the previous year. The Fund anticipates that it will pay
such dividends and will make such distributions as are necessary in order to
avoid the application of this tax.

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

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

The Fund's short sales against the box, if any, and transactions in
foreign currencies, forward contracts, options and futures contracts (including
options and futures contracts on foreign currencies) will be subject to special
provisions of the Code that, among other things, may affect the character of
gains and losses realized by the Fund (i.e., may affect whether gains or losses
are ordinary or capital), accelerate recognition of income to the Fund and defer
Fund losses. These rules could therefore affect the character, amount and timing
of distributions to shareholders. These provisions also (a) will require the
Fund to mark-to-market certain types of the positions in its portfolio (i.e.,
treat them as if they were closed out)

40
<PAGE>

and (b) may cause the Fund to recognize income without receiving cash with which
to pay dividends or make distributions in amounts necessary to satisfy the
distribution requirements for avoiding income and excise taxes. The Fund will
monitor its transactions, will make the appropriate tax elections and will make
the appropriate entries in its books and records when it acquires any foreign
currency, forward contract, option, futures contract or hedged investment in
order to mitigate the effect of these rules and prevent disqualification of the
Fund as a regulated investment company.

Passive Foreign Investment Companies. If the Fund purchases shares in
certain foreign investment entities, called "passive foreign investment
companies" (a "PFIC"), it may be subject to United States federal income tax on
a portion of any "excess distribution" or gain from the disposition of such
shares even if such income is distributed as a taxable dividend by the Fund to
its shareholders. Additional charges in the nature of interest may be imposed on
the Fund in respect of deferred taxes arising from such distributions or gains.
Any tax paid by the Fund as a result of its ownership of shares in a PFIC will
not give rise to any deduction or credit to the Fund or any shareholder. If the
Fund were to invest in a PFIC and elected to treat the PFIC as a "qualified
electing fund" under the Code, in lieu of the foregoing requirements, the Fund
might be required to include in income each year a portion of the ordinary
earnings and net capital gains of the qualified election fund, even if not
distributed to the Fund, and such amounts would be subject to the 90% and excise
tax distribution requirements described above. In order to make this election,
the Fund would be required to obtain certain annual information from the passive
foreign investment companies in which it invests, which may be difficult or not
possible to obtain. On October 9, 1997, the Ways and Means Committee of the U.S.
Congress approved technical corrections legislation that would treat PFICs as
pass-through entities for purposes of applying the 20% rate to the portion of a
PFIC's long-term gain attributable to assets held more than 18 months.

Recently, legislation was enacted that provides a mark-to-market
election for regulated investment companies effective for taxable years
beginning after December 31, 1997. This election would result in the Fund being
treated as if it had sold and repurchased all of the PFIC stock at the end of
each year. In this case, the Fund would report gains as ordinary income and
would deduct losses as ordinary losses to the extent of previously recognized
gains. The election, once made, would be effective for all subsequent taxable
years of the Fund, unless revoked with the consent of the IRS. By making the
election, the Fund could potentially ameliorate the adverse tax consequences
with respect to its ownership of shares in a PFIC, but in any particular year
may be required to recognize income in excess of the distributions it receives
from PFICs and its proceeds from dispositions of PFIC company stock. The Fund
may have to distribute this "phantom" income and gain to satisfy its
distribution requirement and to avoid imposition of the 4% excise tax. The Fund
will make the appropriate tax elections, if possible, and take any additional
steps that are necessary to mitigate the effect of these rules.

Dividends and Distributions. Dividends of net investment income and
distributions of net realized short-term capital gains are taxable to a United
States shareholder as ordinary income, whether paid in cash or in shares.
Distributions of net-long-term capital

41
<PAGE>

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

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

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

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

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

42
<PAGE>

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

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

The Fund may be subject to certain taxes imposed by foreign countries
with respect to dividends, interest, capital gains and other income. If the Fund
qualifies as a regulated investment company, if certain distribution
requirements are satisfied and if more than 50% in value of the Fund's assets at
the close of any taxable year consists of stocks or securities of foreign
corporations, which for this purpose should include obligations issued by
foreign governmental issuers, the Fund may elect to treat any foreign income
taxes paid by it (if such taxes are treated as income taxes under U.S. income
tax principles) as paid by its shareholders. The Fund expects to qualify for and
may make this election. For any year that the Fund makes such an election, the
Fund will report to its shareholders, in writing, the amount per share of such
foreign income taxes that must be included in each shareholder's gross income
and the amount that the shareholder may deduct from his or her taxable income or
credit against his or her U.S. tax liabilities. In general, a shareholder may
elect each year whether to claim deductions or credits for foreign taxes,
although noncorporate shareholders may not claim the deduction if they do not
itemize deductions.

Other Taxation
- --------------

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

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

43
<PAGE>

DETERMINATION OF PERFORMANCE

From time to time, the Fund may quote the total return of its Common
Shares and/or Advisor Shares in advertisements or in reports and other
communications to shareholders. Average annual total return is calculated by
finding the average annual compounded rates of return for the one-, five- and
ten- (or such shorter period as the relevant class of shares has been offered)
year periods that would equate the initial amount invested to the ending
redeemable value according to the following formula: P (1 + T)n* = ERV. For
purposes of this formula, "P" is a hypothetical investment of $1,000; "T" is
average annual total return; "n" is number of years; and "ERV" is the ending
redeemable value of a hypothetical $1,000 payment made at the beginning of the
one-, five- or ten-year periods (or fractional portion thereof). Total return or
"T" is computed by finding the average annual change in the value of an initial
$1,000 investment over the period and assumes that all dividends and
distributions are reinvested during the period. For the period from March 31,
1997 (commencement of operations) through October 31, 1997, the aggregate total
return of the Managed EAFE(R) Portfolio was 10.60%, with waivers. Without
waivers, for the same time period, the aggregate total return for the Managed
EAFE(R) Portfolio would have been 8.60%.

The Fund may advertise, from time to time, comparisons of the
performance of its Common Shares and/or Advisor Shares with that of one or more
other mutual funds with similar investment objectives. The Fund may advertise
average annual calendar year-to-date and calendar quarter returns, which are
calculated according to the formula set forth in the preceding paragraph, except
that the relevant measuring period would be the number of months that have
elapsed in the current calendar year or most recent three months, as the case
may be. Investors should note that this performance may not be representative of
the Fund's total return in longer market cycles.

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

Warburg believes that a diversified portfolio of international equity
securities, when combined with a similarly diversified portfolio of domestic
equity securities, tends to have a lower volatility than a portfolio composed
entirely of domestic securities. Furthermore, international equities have been
shown to reduce volatility in single asset portfolios regardless of whether the
investments are in all domestic equities or all domestic

- -------------------
* As used here, "n" is an exponent.
44
<PAGE>

fixed-income instruments, and research indicates that volatility can be
significantly decreased when international equities are added.

To illustrate this point, the performance of international equity
securities, as measured by the Morgan Stanley Capital International Europe,
Australasia, Far East (EAFE(R)) Index (the "EAFE Index"), has equaled or
exceeded that of domestic equity securities, as measured by the Standard &
Poor's 500 Composite Stock Index (the "S&P 500 Index") in 14 of the last 26
years. The following table compares annual total returns of the EAFE Index and
the S&P 500 Index for the calendar years shown.

EAFE Index vs. S&P 500 Index
1972-1997
Annual Total Return+
Year EAFE Index S&P 500 Index
---- ---------- -------------

1972* 33.28 15.63
1973* -16.82 -17.37
1974* -25.60 -29.72
1975* 31.21 31.55
1976 -.36 19.15
1977* 14.61 -11.50
1978* 28.91 1.06
1979 1.82 12.31
1980 19.01 25.77
1981* -4.85 -9.73
1982 -4.63 14.76
1983* 20.91 17.27
1984* 5.02 1.40
1985* 52.97 26.33
1986* 66.80 14.62
1987* 23.18 2.03
1988* 26.66 12.40
1989 9.22 27.25
1990 -24.71 -6.56
1991 10.19 26.31
1992 -13.89 4.46
1993* 30.49 7.06
1994* 6.24 -1.54
1995 9.42 34.11
1996 4.40 20.26
1997 0.24 31.01
- -------------------------
+ Without reinvestment of dividends.
* The EAFE Index has outperformed the S&P 500 Index 14 out of the last
26 years.

Source: Morgan Stanley Capital International; Bloomberg Financial Markets

45
<PAGE>

The quoted performance information shown above is not intended to
indicate the future performance of the Fund. Advertising or supplemental sales
literature relating to the Fund may describe the percentage decline from
all-time high levels for certain foreign stock markets. It may also describe how
the Fund differs from the EAFE Index in composition.

INDEPENDENT ACCOUNTANTS AND COUNSEL

Coopers & Lybrand L.L.P. ("Coopers & Lybrand"), with principal offices
at 2400 Eleven Penn Center, Philadelphia, Pennsylvania 19103, serves as
independent accountants for the Fund. The financial statements for the Managed
EAFE(R) Portfolio that are incorporated by reference in this Statement of
Additional Information have been audited by Coopers & Lybrand, and have been
included herein by reference in reliance upon the report of such firm of
independent accountants given upon their authority as experts in accounting and
auditing.

Willkie Farr & Gallagher serves as counsel for the Fund as well as
counsel to Warburg, Counsellors Service and Counsellors Securities.

MISCELLANEOUS

As of February 17, 1998, the names, addresses and percentage ownership
of each person that owned 5% or more of the outstanding shares of the Fund are
as follows:

Michael N. Alper, Pamela J. Alper, Jt.Ten.
7263 Fisher Island Drive 19.80%
Fisher Island, Florida 53107-0255

Christian Children's Fund, Inc.
C/O Wayne Ball 17.94%
PO Box 26484
2400 Emerywood Parkway
Richmond, Virginia 23261-6484

Warburg Pincus Asset Management, Inc.
466 Lexington Avenue 15.35%
New York, New York 10017-3147

As of February 17, 1998, Mr. Lionel I. Pincus, the managing
partner of Warburg Pincus & Co., may be deemed to have beneficially owned 50.35%
of the outstanding shares of the Fund, including shares owned by clients for
which Warburg has investment discretion and by companies that Warburg Pincus &
Co. may be deemed to control. Mr. Pincus disclaims ownership of these shares and
does not intend to exercise voting rights with respect to these shares.

FINANCIAL STATEMENTS

The audited financial report dated October 31, 1997 for the period
from March 31, 1997 (commencement of operations) through October 31, 1997 for
the Managed EAFE(R) Portfolio, which either accompanies this Statement of
Additional Information or has previously been provided to the investor to whom
this Statement of Additional Information is being sent, is incorporated herein
by reference with respect to all information included therein. The Fund will
furnish without charge a copy of this financial report upon request by calling
the Fund at (800) 927-2874.

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<PAGE>

APPENDIX

DESCRIPTION OF RATINGS

Commercial Paper Ratings
- ------------------------

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

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

Corporate Bond Ratings
- ----------------------

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

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

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

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

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

BB, B, CCC, CC and C - Debt rated BB and B are regarded, on balance,
as predominately speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB represents a lower
degree of speculation than B, and CCC the highest degree of speculation. While
such bonds will likely have some

<PAGE>

quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.

BB - Debt rated BB has less near-term vulnerability to default than
other speculative issues. However, they face major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions, which could
lead to inadequate capacity to meet timely interest and principal payments. The
BB rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB rating.

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

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

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

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

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

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

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

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

Aaa - Bonds that are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edged." Interest

A-2
<PAGE>

payments are protected by a large or exceptionally stable margin and principal
is secure. While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the fundamentally
strong position of such issues.

Aa - Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.

A - Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper-medium-grade obligations. Factors
giving security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in the
future.

Baa - Bonds which are rated Baa are considered as medium-grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.

Ba - Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.

B - Bonds which are rated B generally lack characteristics of
desirable investments. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.

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

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

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

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

A-3

<PAGE>

PART C

OTHER INFORMATION

Item 24. Financial Statements and Exhibits

Financial Statements:

(1) Financial Statements included in Part A:

Financial Highlights of the Managed EAFE(R) Countries
Portfolio of Warburg, Pincus Institutional Fund, Inc.
(all of whose assets and liabilities were acquired by
the Fund on December 22, 1997), for the period from
March 31, 1997 (commencement of operations of the
Managed EAFE(R) Countries Portfolio) to October 31,
1997.

(2) Financial Statements included in Part B:

(incorporated by reference to the annual report for
Warburg, Pincus Institutional Fund, Inc., dated
October 31, 1997, with respect to the Managed EAFE(R)
Countries Portfolio, for the period from March 31,
1997 (commencement of operations of the Managed
EAFE(R) Countries Portfolio) to October 31, 1997):

(a) Report of Coopers & Lybrand L.L.P.,
Independent Accountants
(b) Statement of Net Assets
(c) Statement of Operations
(d) Statement of Changes in Net Assets
(e) Financial Highlights
(f) Notes to Financial Statements

(b) Exhibits:

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

1(a) Articles of Incorporation.(1)

(b) Articles of Amendment.

2(a) By-Laws.(1)

- --------------------
(1) Incorporated by reference to the 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).

C-1
<PAGE>

(b) Amendment to By-Laws.(2)

3 Not applicable.

4 Forms of Stock Certificates.(3)

5(a) Investment Advisory Agreement.(4)

6(a) Form of Distribution Agreement.(4)

7 Not applicable.

8(a) Form of Custodian Agreement with PNC Bank,
National Association.(4)

(b) Form of Custodian Contract with State
Street Bank and Trust Company.(4)

9(a) Form of Transfer Agency Agreement.(4)

(b)(1) Form of Co-Administration Agreement
with Counsellors Funds Service, Inc.(4)

(b)(2) Form of Co-Administration Agreement
with PFPC Inc.(4)

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

(b) Opinion of Venable, Baetjer and Howard,
LLP, Maryland counsel to the Fund.(3)

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

12 Not applicable.

- ---------------------
(2) Incorporated by reference; material provisions of this exhibit
substantially similar to those of the corresponding exhibit to
Post-Effective Amendment No. 8 to Registration Statement on Form N-1A
of Warburg, Pincus Global Fixed Income Fund, Inc. filed on February 17,
1998 (Securities Act File No. 33-36066; Investment Company Act
File No. 811-06143).

(3) Incorporated by reference to Pre-Effective Amendment No. 1 to the
Fund's Registration Statement on Form N-1A filed with the SEC on
December 3, 1997.

(4) Incorporated by reference to the Fund's Registration Statement on Form
N-14 filed with the SEC on November 5, 1997 (Securities Act File No.
333-39611).

C-2

<PAGE>

13 Purchase Agreement.(3)

14 Not applicable.

15(a) Form of Shareholder Servicing and
Distribution Plan.(4)

(b) Form of Distribution Plan.(4)

16 Schedule of Computation of Total Return
Performance Quotation for the Managed
EAFE(R) Countries Portfolio of Warburg,
Pincus Institutional Fund, Inc.

17 Financial Data Schedule for the Managed
EAFE(R)Countries Portfolio of Warburg,
Pincus Institutional Fund, Inc.

18 Rule 18f-3 Plan.(4)

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

From time to time, Warburg Pincus Asset Management, Inc.
("Warburg"), Registrant's investment adviser, may be deemed to control
Registrant and other registered investment companies it advises through its
beneficial ownership of more than 25% of the relevant fund's shares on behalf of
discretionary advisory clients. Warburg has five wholly-owned subsidiaries:
Counsellors Securities Inc., a Delaware corporation; Counsellors Funds Service
Inc., a Delaware corporation; Counsellors Agency Inc., a New York corporation;
Warburg, Pincus Investments International (Bermuda), Ltd., a Bermuda
corporation; and Warburg Pincus Asset Management International, Inc., a Delaware
corporation.

Item 26. Number of Holders of Securities

Number of Record Holders
Title of Class as of February 17, 1998:
-------------- ------------------------

Common Shares, par value
$.001 per share 134

Item 27. Indemnification

Registrant and officers and directors of Warburg, Counsellors
Securities Inc. ("Counsellors Securities") and Registrant are covered by
insurance policies indemnifying them for liability incurred in connection with
the operation of Registrant. Discussion of this coverage is incorporated by
reference to Item 27 of Part C of the Registration Statement of

C-3
<PAGE>

Warburg, Pincus Post-Venture Capital Fund, Inc., filed on June 21, 1995.

Item 28. Business and Other Connections of
Investment Adviser

Warburg, a wholly owned subsidiary of Warburg, Pincus Asset
Management Holdings, Inc., acts as investment adviser to the Registrant. Warburg
renders investment advice to a wide variety of individual and institutional
clients. The list required by this Item 28 of officers and directors of Warburg,
together with information as to their other business, profession, vocation or
employment of a substantial nature during the past two years, is incorporated by
reference to Schedules A and D of Form ADV filed by Warburg (SEC File No.
801-07321).

Item 29. Principal Underwriter

(a) Counsellors Securities will act as distributor for
Registrant. Counsellors Securities currently acts as distributor for The RBB
Fund, Inc.; Warburg Pincus Balanced Fund; Warburg Pincus Capital Appreciation
Fund; Warburg Pincus Cash Reserve Fund; Warburg Pincus Emerging Growth Fund;
Warburg Pincus Emerging Markets Fund; Warburg Pincus Fixed Income Fund; Warburg
Pincus Global Fixed Income Fund; Warburg Pincus Global Post-Venture Capital
Fund; Warburg Pincus Growth & Income Fund; Warburg Pincus Health Sciences Fund;
Warburg Pincus Institutional Fund, Inc.; Warburg Pincus Intermediate Maturity
Government Fund; Warburg Pincus International Equity Fund; Warburg Pincus Japan
Growth Fund; Warburg Pincus Japan OTC Fund; Warburg Pincus Major Foreign Markets
Fund; Warburg Pincus New York Intermediate Municipal Fund; Warburg Pincus New
York Tax Exempt Fund; Warburg Pincus Post-Venture Capital Fund; Warburg, Pincus
Small Company Growth Fund; Warburg Pincus Small Company Value Fund; Warburg
Pincus Strategic Value Fund; Warburg Pincus Trust; and Warburg Pincus Trust II.

(b) For information relating to each director, officer or
partner of Counsellors Securities, reference is made to Form BD (SEC File No.
8-32482) filed by Counsellors Securities under the Securities Exchange Act of
1934.

Item 30. Location of Accounts and Records

(1) Warburg, Pincus Major Foreign Markets Fund, Inc.
466 Lexington Avenue
New York, New York 10017-3147

C-4
<PAGE>

(Fund's Articles of Incorporation, By-Laws
and minute books)

(2) Warburg Pincus Asset Management, Inc.
466 Lexington Avenue
New York, New York 10017-3147
(records relating to its functions as
investment adviser)

(3) PFPC Inc.
400 Bellevue Parkway
Wilmington, Delaware 19809
(records relating to its functions as
co-administrator)

(4) Counsellors Funds Service, Inc.
466 Lexington Avenue
New York, New York 10017-3147
(records relating to its functions as
co-administrator)

(5) State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
(records relating to its functions as
custodian, shareholder servicing agent, transfer
agent and dividend disbursing agent)

(6) Boston Financial Data Services, Inc.
2 Heritage Drive
North Quincy, Massachusetts 02171
(records relating to its functions as
shareholder servicing agent)

(7) PNC Bank, National Association
1600 Broad Street
Philadelphia, Pennsylvania 19103
(records relating to its functions as custodian)

(8) Counsellors Securities Inc.
466 Lexington Avenue
New York, New York 10017-3147
(records relating to its functions as distributor)

Item 31. Management Services

Not applicable.

Item 32. Undertakings.

C-5

<PAGE>

(a) Registrant hereby undertakes to call a meeting of its shareholders
for the purpose of voting upon the question of removal of a director or
directors of Registrant when requested in writing to do so by the holders of at
least 10% of Registrant's outstanding shares. Registrant undertakes further, in
connection with the meeting, to comply with the provisions of Section 16(c) of
the 1940 Act relating to communications with the shareholders of certain
common-law trusts.

(b) Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of its latest annual report to shareholders
for the relevant class of shares, upon request and without charge.

C-6
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended
(the "Securities Act"), and the Investment Company Act of 1940, as amended, the
Registrant certifies that it meets all of the requirements for effectiveness of
this Amendment to the Registration Statement pursuant to Rule 485(b) under the
Securities Act, and has duly caused this Amendment to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of New York and the
State of New York, on the 20th day of February, 1998.

WARBURG, PINCUS MAJOR FOREIGN
MARKETS FUND, INC.

By:/s/Eugene L. Podsiadlo
Eugene L. Podsiadlo
President

Pursuant to the requirements of the Securities Act, this Amendment has
been signed below by the following persons in the capacities and on the date
indicated:

Signature Title Date
- --------- ----- ----
/s/John L. Furth Chairman of the February 20, 1998
John L. Furth Board of Directors

/s/Howard Conroy Vice President February 20, 1998
Howard Conroy and Chief Financial
Officer

/s/Daniel S. Madden Treasurer and February 20, 1998
Daniel S. Madden Chief Accounting
Officer

/s/Richard N. Cooper Director February 20, 1998
Richard N. Cooper

/s/Jack W. Fritz Director February 20, 1998
Jack W. Fritz

/s/Jeffrey E. Garten Director February 20, 1998
Jeffrey E. Garten

/s/Thomas A. Melfe Director February 20, 1998
Thomas A. Melfe

/s/Arnold M. Reichman Director February 20, 1998
Arnold M. Reichman

/s/Alexander B. Trowbridge Director February 20, 1998
Alexander B. Trowbridge

C-7

<PAGE>

INDEX TO EXHIBITS

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

1(b) Articles of Amendment.

10(a)(1) Opinion and Consent of Willkie Farr & Gallagher,
counsel to the Fund.

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

16 Schedule of Computation of Total Return
Performance Quotation for the Managed
EAFE(R) Countries Portfolio of Warburg,
Pincus Institutional Fund, Inc.

17 Financial Data Schedule for the Managed
EAFE(R)Countries Portfolio of Warburg,
Pincus Institutional Fund, Inc.

<PAGE>

ARTICLES OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
WARBURG, PINCUS MANAGED EAFE COUNTRIES FUND, INC.

EUGENE P. GRACE and JANNA MANES, being Vice President and
Secretary and Assistant Secretary, respectively, of WARBURG, PINCUS MANAGED EAFE
COUNTRIES FUND, INC. (the "Corporation"), a corporation organized and existing
under and by virtue of the Maryland Corporation Law, DO HEREBY CERTIFY:

FIRST: That the Board of Directors of the Corporation at a
meeting on February 6, 1998 at which a quorum was present and acting throughout,
adopted a resolution proposing and declaring advisable the following amendment
to the Articles of Incorporation of the Corporation:

RESOLVED, that the name of the Corporation listed below be,
and hereby is, changed as follows:

Current Name: Proposed Name:
- ------------- --------------
WARBURG, PINCUS MANAGED EAFE WARBURG, PINCUS MAJOR FOREIGN
COUNTRIES FUND, INC. MARKETS FUND, INC.

and that the officers of the Corporation, or their designees, be, and hereby
are, authorized and directed to execute and file Articles of Amendment to the
Corporation's Articles of Incorporation and to do any and all such other lawful
acts as may be necessary or appropriate to perform and carry out the name
change.

SECOND: That the amendment is limited to a change expressly
permitted by ss. 2-605 of the Maryland General Corporation Law to be made
without action by the stockholders and that the Corporation is registered as an
open-end company under the Investment Company Act of 1940, as amended.

IN WITNESS WHEREOF, the undersigned have executed these
Articles of Amendment and do hereby acknowledge that it is the act and deed of
each of them and, under penalty of perjury, to the best of the knowledge,
information and belief of each of them, the matters and facts contained herein
are true in all material respects.

DATE: February 6, 1998 /s/ Eugene P. Grace
Eugene P. Grace
Vice President and Secretary
ATTEST:

/s/ Janna Manes
Janna Manes
Assistant Secretary

<PAGE>

Willkie Farr & Gallagher
One Citicorp Center
153 Esat 53rd Street
New York, New York 10022-4677

February 19, 1998

Warburg, Pincus Major Foreign Markets Fund, Inc.
466 Lexington Avenue
New York, New York 10017-3147

Re: Post-Effective Amendment No. 2 to Registration Statement
(Securities Act File No. 333-39075; Investment Company Act
File No. 811-08459) (the "Registration Statement")

Ladies and Gentlemen:

You have requested us, as counsel to Warburg, Pincus Major Foreign Markets Fund,
Inc. (formerly, Warburg, Pincus Managed EAFE(R) Countries Fund, Inc., the
"Fund"), a corporation organized under the laws of the State of Maryland, to
furnish you with this opinion in connection with the Fund's filing of
Post-Effective Amendment No. 2 to its Registration Statement on Form N-1A (the
"Amendment").

We have examined copies of the Fund's Articles of Incorporation, as amended or
supplemented (the "Articles"), the Fund's By-Laws, as amended (the "By-Laws"),
and the Amendment. We have also examined such other records, documents, papers,
statutes and authorities as we have deemed necessary to form a basis for the
opinion hereinafter expressed.

In our examination of material, we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as originals and
the conformity to original documents of all copies submitted to us. As to
various questions of fact material to our opinion, we have relied upon
statements and certificates of officers and representatives of the Fund and
others.

Based upon the foregoing, we are of the opinion that the shares of common stock
of the Fund, par value $.001 per share (the "Shares"), when duly sold, issued
and paid for in accordance with the laws of applicable jurisdictions and the
terms of the Articles, the By-Laws and the Prospectus and Statement of
Additional Information ("SAI") included as part of the Amendment, and assuming
that at the time of sale such Shares will be sold at a sales price in each case
in excess of the par value, will be valid, legally issued, fully paid and
non-assessable.

<PAGE>
Securities and Exchange Commission
February 19, 1998
Page 2

We hereby consent to the filing of this opinion as an exhibit to the Amendment,
to the reference to our name under the heading "Independent Accountants and
Counsel" in the SAI included as part of the Amendment, and to the filing of this
opinion as an exhibit to any application made by or on behalf of the Fund or any
distributor or dealer in connection with the registration or qualification of
the Fund or the Shares under the securities laws of any state or other
jurisdiction.

We are members of the Bar of the State of New York only and do not opine as to
the laws of any jurisdiction other than the laws of the State of New York and
the laws of the United States, and the opinions set forth above are,
accordingly, limited to the laws of those jurisdictions.

Very truly yours,

/s/ Willkie Farr & Gallagher

<PAGE>

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the incorporation by reference in this Post-Effective Amendment
No. 2 to the Registration Statement under the Securities Act of 1933 on Form
N-1A (File No. 333-39075) of our report dated December 19, 1997 of our audit of
the financial statements and financial highlights of Warburg, Pincus Major
Foreign Markets Fund, Inc. (formerly, Warburg Pincus Institutional Fund, Inc. -
Managed EAFE(R) Countries Portfolio), which report is included in the Annual
Report to Shareholders for the year ended October 31, 1997. We also consent to
the reference to our Firm under the caption "Financial Highlights" in the
Prospectus and under the caption "Independent Accountants and Counsel" in the
Statement of Additional Information.

/s/ Coopers & Lybrand L.L.P.

Coopers & Lybrand L.L.P.

2400 Eleven Penn Center
Philadelphia, Pennsylvania
February 18, 1998

<PAGE>

Warburg Pincus Instititional Fund

Schedule 16 Calculations

Managed EAFE Countries Portfolio

From Inception (March 31, 1997) to October 31, 1997

Return Without Waiver:

((10,860-10,000/10,000) = 8.60%

<ARTICLE>6
<CIK> 0001048664
<NAME> WARBURG PINCUS MANAGED EAFE COUNTRIES FUND, INC.

<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 4884022
<INVESTMENTS-AT-VALUE> 4723892
<RECEIVABLES> 150095
<ASSETS-OTHER> 57415
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 4931402
<PAYABLE-FOR-SECURITIES> 111628
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<OTHER-ITEMS-LIABILITIES> 23921
<TOTAL-LIABILITIES> 135549
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4832000
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<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
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<ACCUMULATED-NII-PRIOR> 0
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<GROSS-ADVISORY-FEES> 12662
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<AVERAGE-NET-ASSETS> 2699512
<PER-SHARE-NAV-BEGIN> 10.00
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<PER-SHARE-NAV-END> 11.06
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</TABLE>