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LOGO
PROSPECTUS
October 1, 1998
WARBURG PINCUS
WORLDPERKS MONEY MARKET FUND
B
WARBURG PINCUS
WORLDPERKS TAX FREE MONEY MARKET FUND
()SM
LOGO
LOGO
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PROSPECTUS October 1, 1998
This Prospectus offers two money market funds (the "Funds") that are available
through the WorldPerks(R) InvestorMiles(SM) Program:
WARBURG PINCUS WORLDPERKS MONEY MARKET FUND (the "Money Market Fund") is
designed to provide investors with high current income consistent with
preservation of capital and liquidity.
WARBURG PINCUS WORLDPERKS TAX FREE MONEY MARKET FUND (the "Tax Free Fund") is
designed to provide investors with high current income exempt from federal
personal income taxes consistent with preservation of capital and liquidity.
IF YOU ARE NOT INTERESTED IN OBTAINING WORLDPERKS MILES, THE FUNDS MAY NOT BE AN
APPROPRIATE INVESTMENT FOR YOU.
AN INVESTMENT IN A FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. ALTHOUGH EACH FUND SEEKS TO MAINTAIN A CONSTANT NET ASSET VALUE OF
$1.00 PER SHARE, THERE CAN BE NO ASSURANCE THAT IT CAN DO SO ON A CONTINUING
BASIS.
NORTHWEST AIRLINES WORLDPERKS(+) BONUS MILES
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Investments in each Fund are eligible to accrue WorldPerks Bonus Miles in
Northwest Airlines' WorldPerks Program, based on amount and length of time of
investment. The WorldPerks Program offers free and discounted award travel on
Northwest Airlines, KLM Royal Dutch Airlines and other WorldPerks partner
airlines. If you are not a member of the WorldPerks Program, you can call
Northwest Airlines at 800-44-PERKS to enroll before you make an investment in a
Fund.
This Prospectus briefly sets forth certain information about the Funds that
investors should know before investing. Investors are advised to read this
Prospectus and retain it for future reference. Additional information about the
Funds has been filed with the Securities and Exchange Commission (the "SEC").
The SEC maintains a Web site (www.sec.gov) that contains the Statement of
Additional Information, material incorporated by reference and other information
regarding the Funds. The Statement of Additional Information is also available
upon request and without charge by calling Warburg Pincus Funds at 800-WARBURG
(800-927-2874). Information regarding the status of shareholder accounts may
also be obtained by calling a Fund at the same number. Warburg Pincus Funds
maintains a Web site at www.warburg.com. The Statement of Additional Information
bears the same date as this Prospectus and is incorporated by reference in its
entirety into this Prospectus.
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.
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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.
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(+) WorldPerks is a registered trademark of Northwest Airlines, Inc.
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THE FUNDS' EXPENSES
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<TABLE>
<CAPTION>
Money Tax
Market Free
Fund Fund
---- ----
<S> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases (as a percentage
of offering price).................................... 0 0
Annual Fund Operating Expenses
(as a percentage of average net assets) (after fee
waivers)
Management Fee.......................................... .25% .25%
12b-1 Fees*............................................. .25% .25%
Other Expenses.......................................... .26% .26%
---- ----
Total Fund Operating Expenses (after fee waivers and
expense reimbursements)+.............................. .76% .76%
==== ====
EXAMPLE
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and (2)
redemption at the end of each time period:
1 Year................................................... $ 8 $ 8
3 Years.................................................. $24 $24
</TABLE>
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* The Funds anticipate that the 12b-1 Fees charged for the coming fiscal period
will be used primarily to pay for Northwest Airlines WorldPerks miles.
+ The Funds' investment adviser and co-administrator have undertaken to limit
Total Fund Operating Expenses to the limit shown above. Absent the waiver of
fees by the Funds' investment adviser and co-administrator, Management Fees
would equal .40%, Other Expenses would equal .38% and Total Fund Operating
Expenses would equal 1.03%. Other Expenses for the Fund are based on
annualized estimates of expenses for the fiscal period ending December 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 an investor in each Fund. 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, each Fund's actual performance will vary and may result in a
return greater or less than 5%. Long term shareholders of the Funds may pay more
than the economic equivalent of the maximum sales charges permitted by the
National Association of Securities Dealers, Inc.
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INVESTMENT OBJECTIVES AND POLICIES
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The Warburg Pincus WorldPerks Money Market Fund (the "Money Market Fund") is a
diversified money market mutual fund whose investment objective is high current
income consistent with preservation of capital and liquidity. The Warburg Pincus
WorldPerks Tax Free Money Market Fund (the "Tax Free Fund") is a diversified
money market mutual fund whose investment objective is high current income
exempt from federal personal income taxes consistent with preservation of
capital and liquidity. Each objective may be changed only with the approval of
the investors in that Fund. There can be, of course, no assurance that a Fund
will achieve its investment objective. Investors should be aware that the market
value of the obligations in each Fund's portfolio can be expected to vary
inversely to changes in prevailing interest rates. See "Certain Investment
Strategies" for descriptions of certain types of investments the Funds may make.
MONEY MARKET FUND
The Money Market Fund will attempt to achieve its investment objective by
investing in a portfolio of high-quality "money market" instruments consisting
of United States Treasury Bills, other obligations issued or guaranteed by the
United States government, its agencies or instrumentalities ("Government
Securities"); bank and bank holding company obligations such as certificates of
deposit, bankers' acceptances, time deposits, commercial paper and debt
obligations; commercial paper and notes of other corporate issuers, including
those with floating or variable rates of interest (including variable rate
master demand notes); and repurchase agreements with respect to the foregoing.
Except during temporary defensive periods, the Fund will concentrate its
investments in the financial services sector, which means that it will invest
more than 25% of its assets in the aggregate in money market instruments issued
by financial services companies. These companies consist of commercial and
industrial banks and savings and loan associations and their holding companies;
consumer and industrial finance companies; diversified financial service
companies; investment banking, securities brokerage and investment advisory
companies; leasing companies; insurance companies; and other companies in the
financial services sector. The Fund will not invest more than 25% of its assets
in any industry within the financial services sector, except that it reserves
the right to invest more than 25% of its assets in instruments issued by U.S.
banks. To the extent that the Fund invests a significant portion of its assets
in the banking industry and the financial services sector it is subject to the
risks associated with investing in banking and financial services issuers. In
addition, the Fund may invest up to 25% of its assets in the debt obligations of
a single issuer for a period of up to three business days. Securities issued by
the United States or its agencies or instrumentalities may be purchased without
regard to the percentage limits in this paragraph.
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TAX FREE FUND
The Tax Free Fund expects that, except during temporary defensive periods, at
least 80% of the Fund's assets will be invested in short-term, high-quality
tax-exempt debt obligations issued by or on behalf of the states, territories
and possessions of the United States, the District of Columbia and their
respective authorities, agencies, instrumentalities and political subdivisions
("Municipal Securities"). Dividends paid by the Fund which are derived from
interest on Municipal Securities will be excluded from gross income for federal
income tax purposes, but will be subject to state and local personal income
taxes.
Municipal Securities in which the Fund may invest include commercial paper,
notes and bonds. Interest on certain bonds issued after August 7, 1986 to
finance certain non-governmental activities ("Alternative Minimum Tax
Securities") is a preference item for purposes of the federal individual and
corporate alternative minimum taxes, but is exempt from regular federal income
tax. The Fund is authorized to invest up to 20% of its assets in Alternative
Minimum Tax Securities. The alternative minimum tax is a special tax that
applies to a limited number of taxpayers who have certain adjustments or tax
preference items. Available returns on Alternative Minimum Tax Securities
acquired by the Fund may be lower than those from newly issued Municipal
Securities acquired by the Fund due to the possibility of federal, state and
local alternative minimum or minimum income tax liability on interest from
Alternative Minimum Tax Securities.
The Fund may for defensive purposes invest without limit in certain short-
term taxable securities when the Fund's investment adviser or sub-investment
adviser believes that it would be in the best interests of the Fund's investors.
Taxable securities in which the Fund may invest on a short-term basis are
Government Securities, including repurchase agreements with banks or securities
dealers involving such securities, time deposits maturing in not more than seven
days, other debt securities, commercial paper and certificates of deposit issued
by United States branches of United States banks with assets of $1 billion or
more. At no time will more than 20% of the Fund's total assets be invested in
taxable short-term securities unless the Fund's investment adviser has
determined to temporarily adopt a defensive investment policy in the face of an
anticipated softening in the market for Municipal Securities in general.
GENERAL
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PRICE AND PORTFOLIO MATURITY. Each Fund invests only in securities which are
purchased with and payable in U.S. dollars and which have (or, pursuant to
regulations adopted by the SEC, are deemed to have) remaining maturities of 397
calendar days or less at the date of purchase by a Fund. For this purpose,
variable rate master demand notes (as described below), which are payable on
demand, or, under certain conditions, at specified periodic intervals not
exceeding 397 calendar days, in either case on not more than
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30 days' notice, will be deemed to have remaining maturities of 397 calendar
days or less. The Fund maintains a dollar-weighted average portfolio maturity of
90 days or less. The Fund follows these policies to maintain a constant net
asset value of $1.00 per share, although there is no assurance that it can do so
on a continuing basis.
PORTFOLIO QUALITY AND DIVERSIFICATION. Each Fund will limit its portfolio
investments to securities that its Board determines present minimal credit risks
and which are "Eligible Securities" at the time of acquisition by a Fund. The
term Eligible Securities includes securities rated by the "Requisite NRSROs" in
one of the two highest short-term rating categories, securities of issuers that
have received such ratings with respect to other short-term debt securities and
comparable unrated securities. "Requisite NRSROs" means (i) any two nationally
recognized statistical rating organizations ("NRSROs") that have issued a rating
with respect to a security or class of debt obligations of an issuer, or (ii)
one NRSRO, if only one NRSRO has issued a rating with respect to such security
or issuer at the time that the Fund acquires the security. The Funds may
purchase securities that are unrated at the time of purchase that a Fund's
investment adviser and sub-investment adviser deem to be of comparable quality
to rated securities that the Fund may purchase. The NRSROs currently designated
as such by the SEC are Standard & Poor's Ratings Services ("S&P"), Moody's
Investors Service, Inc. ("Moody's"), FitchIBCA, Inc. and Duff and Phelps, Inc. A
discussion of the ratings categories of the NRSROs is contained in the Appendix
to the Fund's Statement of Additional Information.
The Funds have adopted certain credit quality, maturity and diversification
requirements under Rule 2a-7 under the Investment Company Act of 1940, as
amended (the "1940 Act"), as operating policies. Under these policies, there are
two tiers of Eligible Securities, first and second tier, based on their ratings
by NRSROs or, if the securities are unrated, on determinations by a Fund's
investment adviser and sub-investment adviser. These policies generally restrict
a Fund from investing more than 5% of its assets in second tier securities and
limit to 5% of assets the portion that may be invested in any one issuer. In
addition, the credit quality and diversification policies vary to some extent
between the Money Market and the Tax Free Funds because the Tax Free Fund is a
tax exempt fund.
YEAR 2000 COMPLIANCE. Many services provided to the Funds and their
shareholders by Warburg Pincus Asset Management, Inc., each Fund's investment
adviser ("Warburg"), and BlackRock Institutional Management Corporation, each
Fund's sub-investment adviser ("BIMC"), and certain of their affiliates
(collectively, the "Service Providers") and a Fund's other service providers
rely on the functioning of their respective computer systems. Many computer
systems cannot distinguish the year 2000 from the year 1900, with resulting
potential difficulty in performing various calculations (the "Year 2000 Issue").
The Year 2000 Issue could potentially have an adverse
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impact on the handling of security trades, the payment of interest and
dividends, pricing, account services and other Fund operations.
The Service Providers recognize the importance of the Year 2000 Issue and are
taking appropriate steps necessary in preparation for the year 2000. At this
time, there can be no assurance that these steps will be sufficient to avoid any
adverse impact on the Funds nor can there be any assurance that the Year 2000
Issue will not have an adverse effect on a Fund's investments or on global
markets or economies, generally.
The Service Providers anticipate that their systems and those of the Funds'
other service providers will be adapted in time for the year 2000. To further
this goal, the Service Providers have coordinated a plan to repair, adapt or
replace systems that are not year 2000 compliant, and are seeking to obtain
similar representations from the Funds' other major service providers. The
Service Providers will be monitoring the Year 2000 Issue in an effort to ensure
appropriate preparation.
PORTFOLIO INVESTMENTS
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Set forth below are descriptions of investments the Funds may make. More
detailed information concerning these investments and their related risks is
contained in the Funds' Statement of Additional Information.
BANK OBLIGATIONS. The Money Market Fund may purchase bank obligations,
including United States dollar-denominated instruments issued or supported by
the credit of the United States or foreign banks or savings institutions having
total assets at the time of purchase in excess of $1 billion. While the Fund
will invest in obligations of foreign banks or foreign branches of United States
banks only if the Fund's investment adviser and sub-investment adviser deem the
instrument to present minimal credit risks, such investments may nevertheless
entail risks that are different from those of investments in domestic
obligations of United States banks due to differences in political, regulatory
and economic systems and conditions. Such risks include future political and
economic developments, the possible imposition of withholding taxes on interest
income, possible establishment of exchange controls or the adoption of other
foreign governmental restrictions which might adversely affect the payment of
principal and interest on such obligations. The Fund may also make
interest-bearing savings deposits in commercial and savings banks in amounts not
in excess of 5% of its assets.
VARIABLE RATE MASTER DEMAND NOTES. Each Fund may also purchase variable rate
master demand notes, which are unsecured instruments that permit the
indebtedness thereunder to vary and provide for periodic adjustments in the
interest rate. Although the notes are not normally traded and there may be no
secondary market in the notes, a Fund may demand payment of principal and
accrued interest at any time and may resell the note at any time to a third
party. In the event an issuer of a variable rate master demand note defaulted on
its payment obligation, the Fund might be unable
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to dispose of the note because of the absence of a secondary market and might,
for this or other reasons, suffer a loss to the extent of the default.
GOVERNMENT SECURITIES. Government Securities in which the Funds may invest
include Treasury Bills, Treasury Notes and Treasury Bonds; other obligations
that are supported by the full faith and credit of the United States Treasury,
such as Government National Mortgage Association pass-through certificates;
obligations that are supported by the right of the issuer to borrow from the
Treasury, such as securities of Federal Home Loan Banks; and obligations that
are supported only by the credit of the instrumentality, such as Federal
National Mortgage Association bonds.
REPURCHASE AGREEMENTS. Each Fund may agree to purchase money market
instruments from financial institutions such as banks and broker-dealers subject
to the seller's agreement to repurchase them at an agreed-upon date and price
("repurchase agreements"). The repurchase price generally equals the price paid
by a Fund plus interest negotiated on the basis of current short-term rates
(which may be more or less than the rate on the securities underlying the
repurchase agreement). Default by a seller, if the Fund is delayed or prevented
from exercising its rights to dispose of the collateral securities, could expose
the Fund to possible loss, including the risk of a possible decline in the value
of the underlying securities during the period while the Fund seeks to assert
its rights thereto. Repurchase agreements are considered to be loans by the Fund
under the 1940 Act.
WHEN-ISSUED SECURITIES. Each Fund may purchase portfolio securities on a
"when-issued" basis. When-issued securities are securities purchased for
delivery beyond the normal settlement date at a stated price and yield. A Fund
will generally not pay for such securities or start earning interest on them
until they are received. Securities purchased on a when-issued basis are
recorded as an asset and are subject to changes in value based upon changes in
the general level of interest rates. The Fund expects that commitments to
purchase when-issued securities will not exceed 25% of the value of its total
assets absent unusual market conditions, and that a commitment by the Fund to
purchase when-issued securities will generally not exceed 45 days. The Fund does
not intend to purchase when-issued securities for speculative purposes but only
in furtherance of its investment objectives.
STAND-BY COMMITMENTS. The Tax Free Fund may acquire "stand-by commitments"
with respect to Municipal Securities held in its portfolio. Under a stand-by
commitment, a dealer agrees to purchase, at the Fund's option, specified
Municipal Securities at a specified price. The principal risk of a stand-by
commitment is that the writer of a commitment may default on its obligation to
repurchase the securities acquired by it. The Fund intends to enter into
stand-by commitments only with brokers, dealers and banks that, in the opinion
of its advisers, present minimal credit risks. In evaluating the
creditworthiness of the issuer of a stand-by commitment, the investment adviser
and sub-investment adviser will review periodically relevant financial
information concerning the issuer's assets, liabilities and contingent claims.
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The Fund will acquire stand-by commitments solely to facilitate portfolio
liquidity and does not intend to exercise its rights thereunder for trading
purposes.
THIRD PARTY PUTS. The Tax Free Fund may purchase long-term fixed rate bonds
that have been coupled with an option granted by a third party financial
institution allowing the Fund at specified intervals to tender (or "put") the
bonds to the institution and receive the face value thereof (plus accrued
interest). The Fund receives a short-term rate of interest (which is
periodically reset), and the interest rate differential between that rate and
the fixed rate on the bond is retained by the financial institution. The
financial institution does not provide credit enhancement, and in the event that
there is a default in the payment of principal or interest, or downgrading of a
bond to below investment grade, or a loss of the bond's tax-exempt status, the
put option will terminate automatically, the risk to the Fund will be that of
holding such a long-term bond and the dollar-weighted average maturity of its
portfolio would be adversely affected. See the Fund's Statement of Additional
Information, "Investment Policies -- Additional Information and Policies."
SPECIAL CONSIDERATIONS AND RISK FACTORS RELATING TO THE MONEY MARKET FUND. To
the extent that the Money Market Fund invests a significant portion of its
assets in money market instruments issued by companies in the banking industry
and the financial services sector, the Fund is subject to the risks associated
with investing in banking and financial services issuers. The companies within
the banking industry and the financial services sector are subject to extensive
regulation, rapid business changes, volatile performance dependent upon the
availability and cost of capital and prevailing interest rates, and significant
competition. General economic conditions also significantly affect these
companies. Credit and other losses resulting from the financial difficulty of
borrowers or other third parties have a potentially adverse effect on companies
in this industry. Investment banking, securities brokerage and investment
advisory companies are particularly subject to government regulation and the
risks inherent in securities trading and underwriting activities. Insurance
companies are particularly subject to government regulation and rate setting,
potential antitrust and tax law changes, and industry-wide pricing and
competition cycles. Property and casualty insurance companies may also be
affected by weather and other catastrophes. Life and health insurance companies
may be affected by mortality and morbidity rates, including the effects of
epidemics. Individual insurance companies may be exposed to reserve
inadequacies, problems in investment portfolios and failures by reinsurance
carriers.
SPECIAL CONSIDERATIONS AND RISK FACTORS RELATING TO THE TAX FREE FUND. In
seeking to achieve its investment objective the Tax Free Fund may invest all or
any part of its assets in Municipal Securities which are industrial development
bonds. Moreover, although the Fund does not currently intend to do so on a
regular basis, it may invest more than 25% of its assets in Municipal Securities
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the interest on which is paid solely from revenues of economically related
projects, if such investment is deemed necessary or appropriate by the Fund's
investment adviser and sub-investment adviser. To the extent that the Fund's
assets are concentrated in Municipal Securities payable from revenues on
economically related projects and facilities, the Fund will be subject to the
peculiar risks presented by such projects to a greater extent than it would be
if the Fund's assets were not so concentrated.
The Tax Free Fund also invests in securities backed by guarantees from banks
and other financial institutions. The Fund's ability to maintain a stable share
price is largely dependent upon such guarantees, which are not supported by
federal deposit insurance. Consequently, changes in the credit quality of these
institutions could have an adverse impact on securities they have guaranteed or
backed, which could cause losses to the Fund and affect its share price.
Other considerations affecting the Tax Free Fund's investments in Municipal
Securities are summarized in the Statement of Additional Information.
INVESTMENT GUIDELINES
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Each Fund may invest up to an aggregate of 10% of its net assets in illiquid
securities with contractual or other restrictions on resale and other
instruments which are not readily marketable. Each Fund is also authorized to
borrow and to enter into reverse repurchase agreements in an amount of up to 10%
of its total assets for temporary or emergency purposes, but not for leverage,
and to pledge its assets to the same extent in connection with such borrowings.
Whenever borrowings exceed 5% of the value of a Fund's total assets, the Fund
will not make any additional investments (including roll-overs). A more detailed
description of these policies, together with an enumeration of additional
investment restrictions that each Fund has adopted and that cannot be changed
without the approval of the holders of a majority of the Fund's outstanding
shares, is contained in the Funds' Statement of Additional Information.
MANAGEMENT OF THE FUNDS
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INVESTMENT ADVISER. Each Fund employs Warburg as investment adviser and BIMC
as sub-investment adviser. In its Advisory Agreement with each Fund, Warburg has
agreed to be responsible, subject to the supervision and direction of the Board,
for the Fund's investment program, including decisions concerning: (i) the
specific types of securities to be held by the Fund and the proportion of the
Fund's assets that should be allocated to such investments during particular
market cycles, (ii) the specific issuers whose securities will be purchased or
sold by the Fund, (iii) the maximum maturity (under one year) of its portfolio
investments, (iv) the appropriate average weighted maturity of its portfolio in
light of current market conditions and (v) with respect to the Tax Free Fund,
the extent to which taxable securities will be purchased for and held by the Tax
Free Fund and the extent to which
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securities other than Municipal Securities will be purchased for and held by the
Tax Free Fund. In addition, Warburg has each agreed to supervise the performance
by the sub-investment adviser of the functions described below.
For the services provided pursuant to the Advisory Agreement, Warburg is
entitled to receive a fee, computed daily and payable monthly, at the annual
rate of .40% of the value of each Fund's average daily net assets, out of which
Warburg pays BIMC for sub-investment advisory services. Warburg, BIMC and each
Fund's administrators may voluntarily waive a portion of their fees from time to
time and temporarily limit the expenses to be paid by a 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 August 31, 1998,
Warburg managed approximately $18.4 billion of assets, including approximately
$10.2 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, NY 10017-3147.
SUB-INVESTMENT ADVISER. BIMC, formerly PNC Institutional Management
Corporation, a wholly owned indirect subsidiary of PNC Bank, National
Association ("PNC"), serves as each Fund's sub-investment adviser. BIMC was
organized in 1977 by PNC to perform advisory services for investment companies
and has its principal offices at 400 Bellevue Parkway, Wilmington, DE 19809. As
of July 31, 1998, BIMC served as investment adviser to 20 mutual fund portfolios
and as sub-investment adviser to 15 mutual funds, having total assets exceeding
$42 billion.
As sub-investment adviser, BIMC has agreed to implement each Fund's investment
program as determined by the Board and Warburg. BIMC will supervise the
day-to-day operations of the relevant Fund and perform the following services:
(i) providing investment research and credit analysis concerning the Fund's
investments, (ii) placing orders for all purchases and sales of the Fund's
portfolio investments and (iii) maintaining the books and records required to
support the Fund's operations. BIMC also calculates the Fund's net asset value,
provides accounting services for the Fund and assists in related aspects of the
Fund's operations.
CO-ADMINISTRATORS. The Funds employ Credit Suisse Asset Management Ltd., a
wholly-owned subsidiary of Credit Suisse Group ("CSAM"), as a co-administrator.
As co-administrator, CSAM provides shareholder liaison services to the Fund
including responding to shareholder inquiries and providing information on
shareholder investments. CSAM also performs a variety of other services,
including furnishing certain executive and administrative services, acting as
liaison between a Fund and its various service providers, furnishing corporate
secretarial services, which include preparing materials for meetings of the
Board, assisting in the preparation of
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proxy statements, annual and semiannual reports, tax returns and monitoring and
developing compliance procedures for the Fund. As compensation, each Fund pays
to CSAM a fee calculated at an annual rate of .10% of the Fund's average daily
net assets, exclusive of out-of-pocket expenses. CSAM may delegate to
Counsellors Funds Service, Inc., a wholly-owned subsidiary of Warburg,
responsibility for most of its co-administrative services. CSAM's principal
offices are located at Beaufort House, 15 St. Botolph Street, GB-London EC3A
7JJ.
The Funds also employ PFPC Inc. ("PFPC"), an indirect, wholly owned subsidiary
of PNC Bank Corp., as a co-administrator. As a co-administrator, PFPC calculates
a 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 to PFPC a fee calculated at an annual rate of .10% of the Fund's first $500
million in average daily net assets, .075% of the next $1 billion in average
daily net assets, and .05% of average daily net assets over $1.5 billion,
subject to a minimum annual fee and exclusive of out-of-pocket expenses. PFPC
has its principal offices at 400 Bellevue Parkway, Wilmington, DE 19809.
CUSTODIAN. PNC serves as the custodian of each Fund's assets. PNC is a
subsidiary of PNC Bank Corp. and its principal business address is 1600 Market
Street, Philadelphia, PA 19103.
TRANSFER AGENT. State Street Bank and Trust Company ("State Street") serves as
shareholder servicing agent, transfer agent and dividend disbursing agent for
the Funds. State Street has delegated to Boston Financial Data Services, Inc.,
an affiliated company ("BFDS"), responsibility for most shareholder servicing
functions. State Street's principal business address is 225 Franklin Street,
Boston, MA 02110. BFDS's principal business address is 2 Heritage Drive, North
Quincy, MA 02171.
DISTRIBUTOR. Counsellors Securities Inc. ("Counsellors Securities") serves as
distributor of the shares of the Funds. Counsellors Securities is a wholly owned
subsidiary of Warburg and is located at 466 Lexington Avenue, New York, NY
10017-3147. Counsellors Securities receives a fee at an annual rate equal to
.25% of the average daily net assets of each Fund's Common Shares for
distribution services, pursuant to a shareholder servicing and distribution plan
(the "12b-1 Plan") adopted by each Fund pursuant to Rule 12b-1 under the 1940
Act. Amounts paid to Counsellors Securities under a 12b-1 Plan may be used by
Counsellors Securities to cover expenses that are primarily intended to result
in, or that are primarily attributable to, (i) the sale of the Common Shares,
including payments in connection with the Funds' participation in the Northwest
Airlines WorldPerks program, (ii) ongoing servicing and/or maintenance of the
accounts of Common Shareholders of a Fund and (iii) sub-transfer agency
services, subaccounting services or administrative services related to the sale
of the Common Shares, all as set forth in the 12b-1 Plans. Payments under the
12b-1 Plans are not tied exclusively to the distribution expenses actually
incurred by Counsellors
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Securities and the payments may exceed distribution expenses actually incurred.
The Board of the Funds evaluate the appropriateness of the 12b-1 Plans on a
continuing basis and in doing so consider all relevant factors, including
expenses borne by Counsellors Securities and amounts received under the 12b-1
Plans. Warburg or its affiliates may also bear a portion of the expense for the
Funds' participation in the WorldPerks program.
DIRECTORS AND OFFICERS. The officers of each Fund manage its day-to-day
operations and are directly responsible to its Board. The Board of a Fund sets
broad policies for each Fund and chooses the Fund's officers. A list of the
Directors and officers of each 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.
NORTHWEST AIRLINES WORLDPERKS(R) BONUS MILES
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Investments in each Fund are eligible to accrue WorldPerks Bonus Miles in
Northwest Airlines' WorldPerks Program, based on the amount and length of time
of investment. The WorldPerks Program offers free and discounted award travel on
Northwest Airlines, KLM Royal Dutch Airlines and other WorldPerks partner
airlines. If you are not a member of the WorldPerks Program, you can call
Northwest Airlines at 800-44-PERKS to enroll over the phone before you make an
investment in a Fund. Northwest Airlines WorldPerks Bonus Miles accrue daily at
an annual rate of one mile per $4 invested in a Fund. Miles will be posted
monthly in arrears to each shareholder's WorldPerks account based on the
shareholder's average daily Fund account balance during the previous month. In
addition, from November 1998 through April 1999, investors will earn 200
additional Bonus Miles for each month they have an open account at month end.
Accordingly, investors can receive up to 1,200 additional Bonus Miles by
investing in a Fund by November 30, 1998.
The average daily balance is calculated by adding each day's balance and
dividing by the number of days in the month. For example, the average daily
balance on a $10,000 account funded on the 16th day of a month having 30 days
(and maintained at that balance through the end of the month) would be $5,000.
Mileage received for that month would be 105 miles. If the same balance were
maintained through the next 30-day month, the average daily balance would be
$10,000, and the mileage would be 209 miles that month and every month the
$10,000 investment was maintained in a Fund. All mileage credits of less than
one mile will be rounded up to the nearest whole mile when credited. These miles
would appear on subsequent Northwest WorldPerks Program statements. Investors
should telephone Warburg Pincus Funds at 800-WARBURG (800-927-2874) for
information or assistance regarding the WorldPerks InvestorMiles Program.
The posting of WorldPerks Bonus Miles in connection with Fund investments may
be terminated or the amount of miles awarded in relation to the dollars invested
may be limited or changed. Investors should refer to
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Northwest WorldPerks member materials for information about program features.
Northwest Airlines may change the WorldPerks Program rules, program partners,
regulations, benefits, conditions of participation or mileage levels, in whole
or in part, at any time, without notice to shareholders or Warburg, even though
changes may affect the value of mileage or FlyWrite(SM) certificates already
accumulated. Award travel is subject to seat availability. Northwest Airlines
WorldPerks travel awards, mileage accrual and special offers are subject to
governmental regulations.
HOW TO OPEN AN ACCOUNT
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Accounts in the Funds should only be opened by WorldPerks members. If you are
not a member of the WorldPerks Program, you can call Northwest Airlines at
800-44-PERKS to enroll over the phone before you make an investment in a Fund.
In order to invest in a 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 WorldPerks Funds
P.O. Box 9030
Boston, MA 02205-9030
OR
Overnight to:
Boston Financial
Attn: Warburg Pincus WorldPerks Funds
2 Heritage Drive
North Quincy, MA 02171
Completed and signed account applications should be sent to the above.
UTMA/UGMA ACCOUNTS. For information about opening a Uniform Transfers to
Minors Act ("UTMA") or Uniform Gifts to Minors Act ("UGMA") account in a Fund,
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 UTMA or UGMA accounts.
Retirement plans, trusts, corporations, partnerships and certain other legal
entities cannot invest in the Funds.
ACCOUNT REGISTRATION AND MILEAGE AWARDS. Because of limitations applicable to
the Northwest Airlines WorldPerks Program, airline miles will be credited
exclusively to the WorldPerks account of the minor child on an UTMA/UGMA
account. In addition, the Funds reserve the right to limit the number of
accounts in a Fund having the same account registration.
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 registrations and
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<PAGE> 15
addresses with the Fund. No interest will be paid on amounts represented by
uncashed distribution or redemption checks.
HOW TO PURCHASE SHARES
- --------------------------------------------------------------------------------
Shares of each 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 each Fund is $5,000 and the minimum
subsequent investment is $100. For UTMA/UGMA accounts in the Money Market Fund,
the minimum initial investment is $500. Subsequent minimum investments are $50
under the Automatic Monthly Investing Plan or by ACH on Demand, as described
below. Each Fund reserves the right to change the initial and subsequent
investment minimum requirements at any time and to charge investors a fee if
their account balance falls below the initial investment minimum due to
redemptions. In addition, a Fund may, in its sole discretion, waive the initial
and subsequent investment minimum requirements with respect to investors who are
employees of Warburg or its affiliates or persons with whom Warburg has entered
into an investment advisory agreement. Existing investors will be given 15 days'
notice by mail of any increase in minimum investment requirements or any
imposition of a fee for small accounts.
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 above. 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 shares by mail, a check or money
order made payable to a Fund or Warburg Pincus Funds (in U.S. currency) should
be sent along with the completed account application to 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 a Fund calculates its net asset value (a "business
day"), the purchase will be made at the relevant 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 purchase will be effected at the relevant
Fund's net asset value next determined 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 business day after payment is received. Checks or
money orders in payment for shares of more than one Warburg Pincus Fund should
be made
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<PAGE> 16
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 shares in a 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 accepted 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 Fund Name]
DDA# 9904-649-2
F/F/C: [Account Number and Account Registration]
If a telephone order is received before 12:00 p.m. (Eastern time) and payment
by wire is received on the same day in proper form in accordance with
instructions set forth above, the purchase will be executed at noon and shares
are entitled to dividends and distributions beginning on that day. If payment by
wire is received in proper form before 12:00 p.m. without a prior telephone
order, that purchase and any telephone orders placed after 12:00 p.m. for which
payment by wire is received on the same day in proper form, will be priced at
the net asset value of the Fund as of the close of regular trading on the NYSE
on that day and is entitled to dividends and distributions beginning 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 a 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 calendar day of each month. Shareholders may
also purchase shares by calling 800-927-2874 on any business day to request
direct debit 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 of the
account application. Only an account maintained at a financial institution which
is an automated 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
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<PAGE> 17
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 the close of
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 an investor may request transactions
by telephone. Investors should realize that in conducting transactions by
telephone they may be giving up a measure of security that they might have if
they were to conduct these 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 designed 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.
GENERAL. Each Fund reserves the right to reject an account application or any
specific purchase order, including certain purchases made by exchange (see "How
to Redeem and Exchange Shares -- Exchange of Shares" below). For example,
purchase orders may be refused if, in Warburg's opinion, a Fund would be unable
to invest the money effectively in accordance with its investment objective and
policies, or would otherwise potentially be adversely affected. A 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.
HOW TO REDEEM AND EXCHANGE SHARES
- --------------------------------------------------------------------------------
REDEMPTION OF SHARES. An investor in a Fund may redeem (sell) his shares on
any day that the Fund's net asset value is calculated (see "Net Asset Value"
below).
Shares of the Fund may either be redeemed by mail or by telephone. Investors
should realize that in using the telephone redemption and exchange option, they
may be giving up a measure of security that they may have if they were to redeem
or exchange their shares in writing. If an investor desires to redeem his shares
by mail, a written request for redemption should be sent to
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<PAGE> 18
the address indicated above under "How to Open an Account." An investor should
be sure that the redemption request identifies the relevant 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. 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 Funds
currently do not impose a service charge for effecting wire transfers but each
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 by mail at the address shown above
under "How to Open an Account." Although each Fund will redeem shares purchased
by check, through the Automatic Monthly Investment Plan or by ACH on Demand
before the funds or check 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 10 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.
Shares are redeemed at the net asset value per share next determined after
receipt of a redemption order by a Fund or its agent. Except as noted above,
redemption proceeds will normally be mailed or wired to an 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 a Fund, each
Fund reserves the right to pay the redemption proceeds within seven days after
the redemption order is effected. Furthermore, each 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.
Although each Fund intends to use its best efforts to maintain its net asset
value per share at $1.00, 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
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<PAGE> 19
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
$750 ($250 in the case of an UTMA/UGMA account), each Fund reserves the right to
redeem the shares in that account at net asset value. Prior to any redemption, a
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.
Redemption By Check. An individual investor who is the record owner of Fund
shares may request a supply of checks. Checks may be made payable to the order
of any person in any amount not less than $500. When a check is presented to
State Street for payment, State Street, as agent for the investor, causes the
relevant Fund to redeem a sufficient number of shares in the investor's account
to cover the amount of the check. A Fund may, in its discretion, waive the
checkwriting minimum requirements with respect to investors who are employees of
Warburg or its affiliates or persons with whom Warburg has entered into an
investment advisory agreement.
Investors are entitled to receive dividends on the shares to be redeemed
through the day the check is presented to State Street for payment. If an
investor owns insufficient shares to cover a check, the check will be returned
to the investor marked "insufficient funds." Canceled checks will be returned to
the investor. Neither Fund currently assesses a charge for checks written in
amounts greater than the minimum. However each Fund reserves the right at any
time to terminate or modify the check redemption procedure, to limit the number
of checks that may be presented for payment within any given time period, to
impose a service charge or to charge for checks. A Fund may also charge an
investor's account for returned checks and for effecting stop orders.
AUTOMATIC CASH WITHDRAWAL PLAN. Each 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 shares of a Fund for shares of
the other Fund or for Common Shares of any other Warburg Pincus Fund at their
respective net asset values. AN INVESTOR CANNOT CURRENTLY EARN NORTHWEST
AIRLINES WORLDPERKS MILEAGE CREDIT FOR ANY INVESTMENTS IN ANY WARBURG PINCUS
FUND OTHER THAN THE FUNDS DESCRIBED IN THIS PROSPECTUS. 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
their agent prior to the close of regular trading on the NYSE, the exchange will
be made at each 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
18
<PAGE> 20
minimum dollar amount necessary for new purchases. A Fund may refuse exchange
purchases at any time without prior notice.
The exchange privilege is available to shareholders residing in any state in
which the shares being acquired may legally be sold. When an investor effects an
exchange of shares, the exchange is treated for federal income tax purposes as a
redemption. Therefore, the investor may realize a taxable gain or loss in
connection with the exchange. Investors wishing to exchange shares of a Fund for
shares in another Warburg Pincus Fund should review the prospectus of the other
fund prior to making an exchange. For further information regarding the exchange
privilege or to obtain a current prospectus for another Warburg Pincus Fund, an
investor should contact Warburg Pincus Funds at 800-927-2874.
The Funds reserve the right to refuse exchange purchases by any person or
group if, in an adviser's judgment, a 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. Each 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. Each Fund calculates its dividends from net
investment income. Net investment income is declared daily and paid monthly. Net
investment income earned on weekends and when the NYSE is not open will be
computed on the previous business day. Distributions of long-term capital gains,
if any, generally are declared and paid annually at the end of the Fund's fiscal
year in which they are earned. Distributions of short-term capital gains, if
any, are declared and paid annually, at the end of the fiscal year in the case
of the Tax Free Fund, and periodically, as the Board determines, in the case of
the Money Market Fund. Unless an investor instructs a Fund to pay dividends or
capital gains distributions in cash, dividends and distributions will
automatically be reinvested in additional shares of the relevant Fund at net
asset value. The election to receive dividends in cash may be made on the
account application or, subsequently, by writing to the address set forth under
"How to Open an Account" or by calling Warburg Pincus Funds at 800-927-2874.
A 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.
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<PAGE> 21
TAXES. Each Fund intends to qualify each year as a "regulated investment
company" within the meaning of the Code. A Fund, if it qualifies as a regulated
investment company, will be subject to a 4% non-deductible excise tax measured
with respect to certain undistributed amounts of ordinary income and capital
gain. Each Fund expects to pay such additional dividends and to make such
additional distributions as are necessary to avoid the application of this tax.
As long as the Tax Free Fund qualifies as a regulated investment company and
meets certain other Code requirements (including the requirement that at least
50% of its assets are invested in tax-exempt obligations at the close of each
quarter of its taxable year), distributions of tax-exempt interest income will
be excluded from an investor's income for federal income tax purposes.
Such exempt interest dividends paid by the Tax Free Fund may be excluded by
investors from their gross incomes for federal income tax purposes, although (i)
such exempt interest dividends will be a tax preference item for purposes of the
federal individual and corporate alternative minimum taxes to the extent they
are derived from Alternative Minimum Tax Securities and (ii) all exempt interest
dividends will be a component of the "current earnings" adjustment item for
purposes of the federal corporate alternative minimum tax. In addition,
corporate investors may incur a greater federal environmental tax liability
through the receipt of Fund dividends and distributions if the tax is reinstated
as currently proposed. Investors who are "substantial users" (or "related
persons" of substantial users) within the meaning of the Code of facilities
financed by Alternative Minimum Tax Securities should consult their tax advisers
as to whether the Tax Free Fund is a desirable investment.
Dividends paid by a Fund from its taxable net investment income (if any, in
the case of the Tax Free Fund) and distributions of any net short-term capital
gains (whether from tax-exempt or taxable obligations) are taxable to investors
as ordinary income, whether received in cash or reinvested in additional shares
of the Fund. As a general rule, an investor's gain or loss on a sale or
redemption of his Fund shares will be a 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. Each Fund does not expect
to realize long-term capital gains and, therefore, it is unlikely that any
portion of the dividends or distributions paid by a Fund will be taxable to
investors as long-term capital gains. An investor in the Tax Free Fund who
redeems his shares prior to the declaration of a dividend may lose tax exempt
status on accrued income attributable to tax exempt Municipal Securities.
Investors may be proportionately liable for taxes on income and gains of a Fund,
but investors not subject to tax on their income will not be required to pay tax
on amounts distributed to them. Each Fund's dividends and distributions will not
qualify for the dividends-received deduction allowed to corporations. The Funds'
investment activities should not result in unrelated business taxable income to
a tax exempt investor.
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<PAGE> 22
GENERAL. Statements as to the tax status of each investor's dividends and
distributions are mailed annually. In the case of the Tax Free Fund, these
statements set forth the dollar amount of income excluded or exempt from federal
income taxes, and the dollar amount, if any, subject to taxation. These
statements also designate the amount of exempt-interest dividends that is a
specific preference item for purposes of the federal individual and corporate
alternative minimum taxes. Each investor in the Money Market Fund 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 which
were received from 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 the tax consequences, if any, relating to the receipt of
Northwest Airlines WorldPerks mileage credit, and their state and local taxes
that may apply to dividends and distributions received from the Funds. In this
regard, investors should be aware that if a portion of any dividend is derived
from interest on United States government obligations, that portion may be
subject to tax by certain states, even though such interest, if received
directly by an investor, would be exempt from state income tax.
NET ASSET VALUE
- --------------------------------------------------------------------------------
Each Fund's net asset value per share is calculated at noon and 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 each Fund is computed by adding the value of
the Fund's assets, deducting liabilities and dividing the result by the number
of outstanding shares. Fund securities are valued on the basis of amortized
cost, which involves valuing a portfolio instrument at its cost initially 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.
PERFORMANCE
- --------------------------------------------------------------------------------
From time to time, a Fund may advertise its yield and effective yield and, in
the case of the Tax Free Fund, its tax equivalent yield. The yield of a Fund
refers to the income generated by an investment in the shares over a seven-day
period, which is then annualized. That is, the amount of income generated by the
investment during that week is assumed to be generated each week over a 52-week
period and is shown as a percentage of the investment. The effective yield is
calculated similarly but, when annualized, assumes that income earned by an
investment in the Fund is reinvested. The effective yield
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<PAGE> 23
will be slightly higher than the yield because of the compounding effect of this
assumed reinvestment. The tax equivalent yield shows the taxable yield an
investor in the highest applicable tax bracket would have to earn to equal the
Tax Free Fund's tax-free yield after the imposition of federal, state and local
personal income taxes. The Tax Free Fund's tax equivalent yield is calculated by
dividing the Fund's tax-exempt yield by one minus the highest level of the
combined federal, state and local tax rates. Yield, effective yield and tax
equivalent yield may be shown by means of schedules, charts or graphs.
Investors should note that yield, effective yield and tax equivalent yield
figures are based on historical earnings and are not intended to indicate future
performance. The Fund's Statement of Additional Information describes the method
used to determine the Fund's yield. Current yield figures may be obtained by
calling Warburg Pincus Funds at 800-927-2874.
A Fund may compare its performance with (i) that of other mutual funds as
listed in the rankings prepared by Lipper Analytical Services, Inc. or similar
investment services that monitor the performance of mutual funds or (ii) in the
case of the Tax Free Fund, an average of the yields of similar tax-exempt money
market funds based on information contained in Donoghue's Money Market Fund
Report, which is published weekly by the Donoghue Organization or (iii) in the
case of the Money Market Fund, the Donoghue's Money Market Fund Average, which
is an average of all major taxable money market fund yields published weekly by
the Donoghue Organization or (iv) in each case, other appropriate indexes of
investment securities. Each Fund may also include evaluations of the Fund
published by nationally recognized ranking services and by financial
publications that are nationally recognized, such as Barron's, Business Week,
Financial Times, Forbes, Fortune, Inc., Institutional Investor, Investor's
Business Daily, Money, Morningstar, Mutual Funds Magazine, SmartMoney, The Wall
Street Journal and Worth. Morningstar, Inc. rates funds in broad categories
based on risk/reward analyses over various time periods. In addition, the Fund
may from time to time compare its expense ratio 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, a Fund may
discuss relevant economic and market conditions affecting the Fund. In addition,
the Fund may render periodic updates of Fund investment activity, which may
include, among other things, discussion or quantitative statistical or
comparative analysis of portfolio composition and significant portfolio
holdings. The Fund may also describe the Fund's investment objective, approaches
taken in managing the Fund's investments or the methodology underlined in the
Fund's portfolios. The Fund may also discuss measures of risk and the continuum
of risk and return relating to different investments.
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GENERAL INFORMATION
- --------------------------------------------------------------------------------
ORGANIZATION. The Money Market Fund and the Tax Free Fund were incorporated on
July 24, 1998 under the laws of the State of Maryland as "Warburg, Pincus Money
Market Fund, Inc." and "Warburg, Pincus Tax Free Money Market Fund, Inc.,"
respectively. On September 25, 1998, the Money Market Fund and the Tax Free Fund
amended their respective charters and changed the Funds' names to "Warburg,
Pincus WorldPerks Money Market Fund, Inc." and "Warburg, Pincus WorldPerks Tax
Free Money Market Fund, Inc.," respectively. Each Fund's charter authorizes the
Board to issue three billion full and fractional shares of capital stock, $.001
par value per share, of which two billion shares are designated Advisor Shares.
Under a 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 shares into one or more series and, without shareholder approval, may
increase the number of authorized shares of the Fund. Since no Advisor Shares
are outstanding for the Fund, references to "shares" in this prospectus refer
solely to the common shares of the Fund unless the context otherwise requires.
MULTI-CLASS STRUCTURE. Although neither Fund currently does so, each Fund is
authorized to offer a separate class of shares, the Advisor Shares, pursuant to
a separate prospectus. Individual investors could only purchase Advisor Shares
through institutional shareholders of record, broker-dealers, financial
institutions, depository institutions, retirement plans and other financial
intermediaries. Shares of each class would represent equal pro rata interests in
the relevant 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 a Fund are entitled to one vote for each full
share held and fractional votes for fractional shares held. Shareholders of a
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 a Fund may be removed from office
upon the vote of shareholders holding at least a majority of the relevant Fund's
outstanding shares at a meeting called for that purpose. A meeting will be
called for the purpose of voting on the removal of a Board member at the written
request of holders of 10% of the outstanding shares of the Fund.
23
<PAGE> 25
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 investment made through the Automatic Investment
Program). Each 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 a 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 FUNDS, 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 IN ANY
STATE IN WHICH, OR TO ANY PERSON TO WHOM, SUCH OFFER MAY NOT LAWFULLY BE MADE.
24
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TABLE OF CONTENTS
<TABLE>
<S> <C>
The Funds' Expenses...................................... 2
Investment Objectives and Policies....................... 3
General.................................................. 4
Portfolio Investments.................................... 6
Investment Guidelines.................................... 9
Management of the Funds.................................. 9
Northwest Airlines WorldPerks(R) Bonus Miles............. 12
How to Open an Account................................... 13
How to Purchase Shares................................... 14
How to Redeem and Exchange Shares........................ 16
Dividends, Distributions and Taxes....................... 19
Net Asset Value.......................................... 21
Performance.............................................. 21
General Information...................................... 23
</TABLE>
[WARBURG PINCUS FUNDS LOGO]
WARBURG PINCUS WORLDPERKS FUNDS
P.O. BOX 9030, BOSTON, MA 02205-9030
800-WARBURG (800-927-2874) B www.warburg.com
COUNSELLORS SECURITIES INC., DISTRIBUTOR. FFNWF-1-1098C
