[GRAPHIC OMITTED] [GRAPHIC OMITTED]
ANNUAL
REPORT
AUGUST 31, 1999
WARBURG PINCUS
LONG-SHORT MARKET NEUTRAL FUND
[ ]
WARBURG PINCUS
LONG-SHORT EQUITY FUND
More complete information about the funds, including charges and expenses, is
provided in the PROSPECTUS, which must precede or accompany this document and
which should be read carefully before investing. You may obtain additional
copies by calling 800-WARBURG (800-927-2874) or by writing to Warburg Pincus
Funds, P.O. Box 9030, Boston, MA 02205-9030.
Credit Suisse Asset Management Securities, Inc., Distributor, 466 Lexington
Avenue,New York, NY 10017. Telephone: 800-888-6878. Warburg Pincus Funds is a
division of Credit Suisse Asset Management Securities, LLC.
<PAGE>
FROM TIME TO TIME, THE FUNDS' INVESTMENT ADVISER AND CO-ADMINISTRATORS MAY
WAIVE SOME FEES AND/OR REIMBURSE SOME EXPENSES, WITHOUT WHICH PERFORMANCE WOULD
BE LOWER. WAIVERS AND/OR REIMBURSEMENTS ARE SUBJECT TO CHANGE.
RETURNS ARE HISTORICAL AND INCLUDE CHANGE IN SHARE PRICE AND REINVESTMENT OF
DIVIDENDS AND CAPITAL GAINS. PAST PERFORMANCE CANNOT GUARANTEE FUTURE RESULTS.
RETURNS AND SHARE PRICE WILL FLUCTUATE, AND REDEMPTION VALUE MAY BE MORE OR LESS
THAN ORIGINAL COST.
INVESTMENT IN SHARES OF THE FUNDS CAN BE MORE VOLATILE AND RISKY THAN SOME
OTHER FORMS OF INVESTMENT. IN ADDITION, IF THE ADVISER TAKES LONG POSITIONS IN
STOCKS THAT DECLINE OR SHORT POSITIONS IN STOCKS THAT INCREASE IN VALUE, THEN
THE LOSSES OF THE FUNDS MAY EXCEED THOSE OF OTHER STOCK MUTUAL FUNDS THAT HOLD
LONG POSITIONS ONLY.
THE VIEWS OF THE FUNDS' MANAGEMENT ARE AS OF THE DATE OF THE LETTERS AND
PORTFOLIO HOLDINGS DESCRIBED IN THIS DOCUMENT ARE AS OF AUGUST 31, 1999; THESE
VIEWS AND PORTFOLIO HOLDINGS MAY HAVE CHANGED SUBSEQUENT TO THESE DATES. NOTHING
IN THIS DOCUMENT IS A RECOMMENDATION TO PURCHASE OR SELL SECURITIES.
FUND SHARES ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF CREDIT SUISSE ASSET
MANAGEMENT, LLC (CSAM)OR ANY AFFILIATE, ARE NOT FDICINSURED AND ARE NOT
GUARANTEED BY CSAM OR ANY AFFILIATE. FUND INVESTMENTS ARE SUBJECT TO INVESTMENT
RISKS, INCLUDING LOSS OF YOUR INVESTMENT.
<PAGE>
WARBURG PINCUS LONG-SHORT MARKET NEUTRAL FUND
PORTFOLIO MANAGERS' LETTER -- AUGUST 31, 1999
- --------------------------------------------------------------------------------
September 15, 1999
Dear Shareholders:
We are writing to report on the results of the Warburg Pincus Long-Short
Market Neutral Fund (the "Fund") for the fiscal year ended August 31, 1999.
At August 31, 1999, the net asset value ("NAV") of the Fund's institutional
shares was $14.21, compared to an NAV of $15.27 on August 31, 1998. As a result,
the institutional shares' total return was down 5.7% (assuming the reinvestment
of dividends and distributions totaling $0.20 per share). By comparison, the
Salomon Smith Barney U.S. One-Month Treasury Bill Index benchmark (the "Index")
returned 4.3% during the same period.
At August 31, 1999, the NAV of the Fund's common shares was $14.19, compared
to an NAV of $15.19 at their inception of investment operations on September 8,
1998. Including the effect of linkage to the institutional shares, the common
shares' total return between August 31, 1998 and August 31, 1999 thus was down
5.8% (assuming the reinvestment of dividends and distributions totaling $0.20
per share). By comparison, the Index returned 4.3% during the same period.
We attribute the Fund's underperformance of its benchmark during the fiscal
year to a combination of broad-based and sector-specific factors that prevailed
in 1999 through the end of August.
Broad market volatility was unusually high, as investors often were
preoccupied with concerns about U.S. interest rates and inflation. As a result,
two aspects of market activity worked against our particular investment
discipline, which focuses on stock selection rather than macro-level or
sector-related issues.
First, there was a general unwillingness to commit to relatively long-term
positions, which caused a choppier-than-usual trading environment. Second, there
was an emphasis on positioning portfolios to benefit from expectations about
interest rates by betting on industry sectors rather than individual stocks. In
the latter trend, stocks within many sectors performed similarly, which negated
the normal benefit we derive by highlighting companies with especially strong or
weak fundamentals.
1
<PAGE>
WARBURG PINCUS LONG-SHORT MARKET NEUTRAL FUND
PORTFOLIO MANAGERS' LETTER -- AUGUST 31, 1999 (CONT'D)
- --------------------------------------------------------------------------------
As developments occur that we believe would be of interest to you, we will
keep you informed. Meanwhile, if you have any questions about your portfolio or
the capital markets generally, please feel free to call upon us at any time.
Sincerely yours,
Credit Suisse Asset Management Structured Equities Management Team
William W. Priest, Jr., Managing Director
Eric N. Remole, Managing Director
Marc E. Bothwell, Vice President
Michael A. Welhoelter, Vice President
INVESTING IN SHARES OF THE FUND CAN BE MORE VOLATILE AND RISKY THAN SOME OTHER
FORMS OF INVESTMENTS. IN ADDITION, IF THE ADVISER TAKES LONG POSITIONS IN STOCKS
THAT DECLINE OR SHORT POSITIONS IN STOCKS THAT INCREASE IN VALUE, THEN LOSSES OF
THE FUND MAY EXCEED THOSE OF OTHER STOCK MUTUAL FUNDS THAT HOLD LONG POSITIONS
ONLY.
2
<PAGE>
WARBURG PINCUS LONG-SHORT MARKET NEUTRAL FUND
PORTFOLIO MANAGERS' LETTER -- AUGUST 31, 1999 (CONT'D)
- --------------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE WARBURG PINCUS
LONG-SHORT MARKET NEUTRAL INSTITUTIONAL SHARES AND THE 30-DAY U.S. TREASURY
BILL INDEX1 FROM INCEPTION (7/31/98) AND AT EACH QUARTER END. (UNAUDITED)
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
WARBURG PINCUS 30 DAY
LONG-SHORT U.S. TREASURY
MARKET NEUTRAL FUND BILL INDEX
7/31/98 $10,000 $10,000
8/31/98 $10,180 $10,040
11/30/98 $9,927 $10,133
2/28/99 $10,061 $10,241
5/31/99 $9,804 $10,353
8/31/99 $9,601 $10,465
Average Annual Total Returns for the periods ended 8/31/99
(Institutional Shares)(Unaudited)
1 year Since Inception
(5.68%) (7/31/98)
(3.67%)
Note:Past performance is not predictive of future performance. Investment return
and principle value of an investment will fluctuate so that an investor's shares
upon redemption may be worth more or less than their original cost.
1 Monthly return equivalents of yield averages which are not marked to market.
The 1 month T-Bill index consists of the last 1 month T-Bill issues.
3
<PAGE>
WARBURG PINCUS LONG-SHORT EQUITY FUND
PORTFOLIO MANAGERS' LETTER -- AUGUST 31, 1999
- --------------------------------------------------------------------------------
September 15, 1999
Dear Shareholders:
We are writing to report on the results of the Warburg Pincus Long-Short
Equity Fund (the "Fund") for the fiscal year ended August 31, 1999.
At August 31, 1999, the net asset value ("NAV") of the Fund's institutional
shares was $16.57, compared to an NAV of $15.00 at their inception of investment
operations on September 11, 1998. As a result, the institutional shares' total
return between September 11, 1998 and August 31, 1999 was 13.4% (assuming the
reinvestment of dividends and distributions totaling $0.45 per share). By
comparison, the Standard & Poor's 500 Index1 (the "Index") returned 36.5% during
the same period.
At August 31, 1999, the NAV of the Fund's common shares was $16.51, compared
to an NAV of $15.72 at their inception of investment operations on October 30,
1998. The common shares' total return thus was 7.8% between October 30, 1998 and
August 31, 1999 (assuming the reinvestment of dividends and distributions
totaling $0.45 per share). By comparison, the Index returned 21.6% during the
same period.
We attribute the Fund's modest underperformance of its S&P 500 benchmark
during the fiscal year to a combination of broad-based and sector-specific
factors that prevailed in 1999 through the end of August.
Broad market volatility was unusually high, as investors often were
preoccupied with concerns about U.S. interest rates and inflation. As a result,
two aspects of market activity worked against our particular investment
discipline, which focuses on stock selection rather than macro-level or
sector-related issues.
First, there was a general unwillingness to commit to relatively long-term
positions, which caused a choppier-than-usual trading environment. Second, there
was an emphasis on positioning portfolios to benefit from expectations about
interest rates by betting on industry sectors rather than individual stocks. In
the latter trend, stocks within many sectors performed similarly, which negated
the normal benefit we derive by highlighting companies with especially strong or
weak fundamentals.
An additional contributor to underperformance was the simple fact that, as a
fairly new portfolio that was (and is) small and growing, the Fund periodically
experienced disproportionate volatility in response to relatively large cash
flows. We fully expect that the Fund's relative performance will more closely
track that of the Warburg Pincus Long-Short Market Neutral
4
<PAGE>
WARBURG PINCUS LONG-SHORT EQUITY FUND
PORTFOLIO MANAGERS' LETTER -- AUGUST 31, 1999 (CONT'D)
- --------------------------------------------------------------------------------
Fund, whose shares form its primary asset, as the Fund continues to grow larger.
As developments occur that we believe would be of interest to you, we will
keep you informed. Meanwhile, if you have any questions about your portfolio or
the capital markets generally, please feel free to call upon us at any time.
Sincerely yours,
Credit Suisse Asset Management Structured Equities Management Team
William W. Priest, Jr., Managing Director
Eric N. Remole, Managing Director
Marc E. Bothwell, Vice President
Michael A. Welhoelter, Vice President
INVESTING IN SHARES OF THE FUND CAN BE MORE VOLATILE AND RISKY THAN SOME OTHER
FORMS OF INVESTMENTS. IN ADDITION, IF THE ADVISER TAKES LONG POSITIONS IN STOCKS
THAT DECLINE OR SHORT POSITIONS IN STOCKS THAT INCREASE IN VALUE, THEN THE
LOSSES OF THE FUND MAY EXCEED THOSE OF OTHER STOCK MUTUAL FUNDS THAT HOLD LONG
POSITIONS ONLY.
1 The S&P Index is an unmanaged index (with no defined investment objective) of
common stocks, includes reinvestments of dividends, and is a registered
trademark of Standard & Poor's Corporation.
5
<PAGE>
WARBURG PINCUS LONG-SHORT MARKET NEUTRAL FUND
SCHEDULE OF INVESTMENTS
August 31, 1999
- --------------------------------------------------------------------------------
NUMBER
OF
SHARES VALUE
-------- -------
COMMON STOCKS 87.0%
AEROSPACE/DEFENSE 2.1%
Textron, Inc. 2,000 $ 161,500
----------
AIR TRANSPORT-FREIGHT 1.7%
Southwest Airlines Co. 7,800 130,162
----------
AUTOMOTIVE -- 13.5%
Delphi Automotive Systems Corp. 1,300 24,375
Ford Motor Co. 6,000 312,750
General Motors Corp. 1,900 125,638
Johnson Controls, Inc. 5,700 389,738
Navistar International Corp. 4,100 199,363
----------
1,051,864
----------
BEVERAGES & TOBACCO 0.3%
Anheuser-Busch Cos., Inc. 300 23,100
----------
CABLE 2.9
At Home Corp. Series A** 5,600 224,700
----------
CHEMICALS 3.1%
Air Products & Chemicals, Inc. 4,200 142,800
Lyondell Petrochemical Co. 6,700 97,569
----------
240,369
----------
COMMUNICATIONS & MEDIA 1.3%
A. H. Belo Corp. Cl. A 5,400 102,263
----------
COMPUTERS, SOFTWARE & SERVICING 0.9%
GTECH Holdings 1,200 30,300
RealNetworks, Inc.** 500 40,875
----------
71,175
----------
CONSTRUCTION & BUILDING MATERIALS 4.0%
Ingersoll-Rand Co. 2,500 159,063
Lafarge Corp. 2,500 68,750
Masco Corp. 3,000 84,938
----------
312,751
----------
CONSUMER PRODUCTS & SERVICES 1.8%
Avon Products 2,400 105,300
Nu Skin Enterprises, Inc.** 3,200 34,200
----------
139,500
----------
See Accompanying Notes to Financial Statements.
6
<PAGE>
WARBURG PINCUS LONG-SHORT MARKET NEUTRAL FUND
SCHEDULE OF INVESTMENTS
August 31, 1999
- -----------------------------------------------------------------------------
NUMBER
OF
SHARES VALUE
-------- ------
COMMON STOCKS (CONT'D)
ELECTRIC UTILITIES 1.6%
Niagara Mohawk Power 5,700 $ 86,213
Pinnacle West Capital 1,100 41,800
----------
128,013
----------
ELECTRONICS 7.4%
Circuit City Stores 5,000 215,000
Cisco Systems, Inc.** 2,200 149,188
Halliburton Co. 400 18,550
Linear Technology Corp. 1,800 113,288
Teradyne, Inc.** 500 34,031
UtiliCorp United, Inc. 1,900 44,056
----------
574,113
----------
ENERGY & OIL EXPLORATION 0.8%
Tidewater Inc. 1,900 61,750
----------
FINANCIAL SERVICES 15.5%
20th Century Industries 1,700 31,875
Fannie Mae 300 18,638
Hartford Financial Services, Inc. 6,200 281,713
J.P. Morgan & Co. Inc. 2,400 310,050
Jefferson-Pilot Corp. 1,500 100,125
Lehman Brothers Holdings Inc. 3,700 198,875
Regions Financial Corp. 2,100 74,156
T. Rowe Price Associates, Inc. 1,400 43,313
UnionBanCal Corp. 3,000 115,125
Merrill Lynch & Co., Inc. 400 29,850
----------
1,203,720
----------
FOOD & BEVERAGE 4.9%
Coors, (Adolph) Cl. B 1,900 108,419
Fleming Companies, Inc. 12,800 154,400
U.S. Foodservice** 5,800 120,713
----------
383,532
----------
FOREST PRODUCTS & PAPER 1.3%
Weyerhaeuser Co. 1,800 101,250
----------
GAS UTILITIES 0.6%
Boise Cascade Corp. 500 18,188
Peoples Energy 700 25,506
----------
43,694
----------
See Accompanying Notes to Financial Statements.
7
<PAGE>
WARBURG PINCUS LONG-SHORT MARKET NEUTRAL FUND
SCHEDULE OF INVESTMENTS (CONT'D)
August 31, 1999
- -----------------------------------------------------------------------------
NUMBER
OF
SHARES VALUE
-------- ------
COMMON STOCKS (CONT'D)
HEALTH CARE 2.7%
Aetna Inc. 700 $ 54,425
Wellpoint Health Networks, Inc.** 2,100 153,038
----------
207,463
----------
METALS & MINING 1.7%
Bethlehem Steel Corp.** 3,200 24,600
Freeport-McMoran Copper & Gold, Inc. Cl. B 4,300 69,069
Ryerson Tull, Inc. 2,200 41,663
----------
135,332
----------
OIL SERVICES 4.8%
Enron Corp. 7,000 293,125
Pennzoil-Quaker State Co. 5,700 79,088
----------
372,213
----------
PHARMACEUTICALS 0.2%
Bergen Brunswig Corp. 1,000 15,438
----------
PUBLISHING & INFORMATION SERVICES 0.4%
Donnelley (R.R.) & Sons Co. 1,000 31,375
----------
REAL ESTATE 0.7%
Host Marriott Corp. 1,700 15,725
Simon Debartolo Group 1,600 40,800
----------
56,525
----------
RENTALS 0.6%
Hertz Corp. 1,100 44,344
----------
RETAIL-SPECIALTY APPAREL STORES 2.5%
Dayton Hudson Corp. 1,000 58,000
Dollar Tree Stores** 1,500 49,500
Office Depot.** 5,900 61,581
Safeway, Inc.** 600 27,938
----------
197,019
----------
TELECOMMUNICATIONS 9.7%
AT&T Corp. 2,700 121,500
Galileo International, Inc. 1,600 77,600
General Instrument Corp.** 4,300 211,506
NEXTLINK Communications, Inc.** 2,400 120,900
SBC Communications, Inc. 800 38,400
Tellabs, Inc. 3,100 184,644
----------
754,550
----------
TOTAL COMMON STOCKS (Cost $7,156,349) $6,767,715
----------
See Accompanying Notes to Financial Statements.
8
<PAGE>
WARBURG PINCUS LONG-SHORT MARKET NEUTRAL FUND
SCHEDULE OF INVESTMENTS (CONT'D)
August 31, 1999
- -----------------------------------------------------------------------------
NUMBER
OF
SHARES VALUE
-------- ------
SECURITIES SOLD SHORT (91.0%)
AEROSPACE & DEFENSE (3.1%)
Lear Corp** (500) $ (20,094)
Lockheed Martin Corp. (6,000) (222,000)
-----------
(242,094)
-----------
AGRICULTURE (0.6%)
IMC Global, Inc. (3,000) (47,813)
-----------
AUTOMOTIVE PARTS & EQUIPMENT (12.4%)
Autonation, Inc.** (12,800) (165,600)
General Motors Corp. Cl-H (6,900) (355,350)
Genuine Parts Co. (1,100) (31,763)
Goodyear Tire & Rubber Co. (7,400) (415,325)
-----------
(968,038)
-----------
BUILDING & BUILDING MATERIALS (2.7%)
Armstrong World Industries (3,400) (165,113)
Johns Manville Corp. (3,000) (43,125)
-----------
(208,238)
-----------
BUSINESS SERVICES (2.4%)
ACNielsen Corp.** (1,300) (32,500)
Catalina Marketing Corp.** (1,700) (154,275)
-----------
(186,775)
-----------
COMMUNICATIONS & MEDIA (4.5%)
America Online (2,100) (191,756)
Chris-Craft Industries, Inc.** (1,600) (81,000)
USA Networks, Inc. (1,700) (76,288)
-----------
(349,044)
-----------
COMPUTERS, SOFTWARE & SERVICING (1.2%)
Tandy Corp. (2,000) (94,500)
-----------
CONGLOMERATES (0.3%)
General Electric Co. (200) (22,463)
-----------
CONSUMER PRODUCTS & SERVICES (6.4%)
Colgate-Palmolive Co. (2,900) (155,150)
Fruit of The Loom, Inc. Cl. A (2,400) (16,800)
Gillette Co. (3,300) (153,863)
Newell Rubbermaid, Inc. (2,200) (90,200)
Whitman Corp. (5,000) (83,438)
-----------
(499,451)
-----------
ELECTRIC UTILITIES (1.2%)
Unicom Corp. (2,500) (96,563)
-----------
See Accompanying Notes to Financial Statements.
9
<PAGE>
WARBURG PINCUS LONG-SHORT MARKET NEUTRAL FUND
SCHEDULE OF INVESTMENTS (CONT'D)
August 31, 1999
- -----------------------------------------------------------------------------
NUMBER
OF
SHARES VALUE
-------- ------
SECURITIES SOLD SHORT (CONT'D)
ELECTRONICS (6.6%)
Atmel Corp.** (11,700) $ (459,956)
Vishay Intertechnology** (2,450) (52,522)
-----------
(512,478)
-----------
ENERGY & OIL EXPLORATION (4.6%)
Baker Hughes, Inc. (2,500) (85,000)
USX - Marathon Group (2,000) (62,250)
Weatherford International, Inc.** (6,000) (213,750)
-----------
(361,000)
-----------
ENVIRONMENTAL SERVICES (0.2%)
Waste Management, Inc. (600) (13,088)
-----------
FINANCIAL SERVICES (15.6%)
American Financial Group (3,900) (115,050)
American International Group Inc. (750) (69,516)
Bank of America Corp. (5,100) (308,550)
CCB Financial Corp. (1,100) (51,975)
Charles Schwab Corp. (2,000) (79,000)
Cincinnati Financial Corp. (1,100) (43,588)
MBIA, Inc. (3,200) (166,000)
MGIC Investment Corp. (2,400) (104,250)
People's Bank/Connecticut (2,100) (55,125)
PMI Group, Inc. (750) (31,875)
Union Planters Corporation (2,300) (97,031)
Wachovia Corp. (1,200) (94,050)
-----------
(1,216,010)
-----------
FOOD & BEVERAGE (0.9%)
Coca-Cola Co. (1,100) (65,794)
-----------
HEALTH CARE (1.1%)
PE Corp.-PE Biosystems Group (1,200) (82,575)
-----------
INDUSTRIAL GOODS & MATERIALS (0.7%)
Owens-Illinois, Inc.** (600) (14,850)
Southdown, Inc. (700) (35,350)
-----------
(50,200)
-----------
MEDICAL EQUIPMENT (2.3%)
Beckman Coulter, Inc. (3,800) (180,025)
-----------
OFFICE EQUIPMENT & SUPPLIES (2.8%)
Harland ( John H. ) Co. (10,900) (216,638)
-----------
See Accompanying Notes to Financial Statements.
10
<PAGE>
WARBURG PINCUS LONG-SHORT MARKET NEUTRAL FUND
SCHEDULE OF INVESTMENTS (CONT'D)
August 31, 1999
- -----------------------------------------------------------------------------
NUMBER
OF
SHARES VALUE
-------- ------
SECURITIES SOLD SHORT (CONT'D)
OIL SERVICES (2.8%)
Amerada Hess Corp. (3,500) $ (217,219)
-----------
PAPER & FORESTRY PRODUCTS (4.8%)
Bowater Inc. (7,000) (375,375)
-----------
PHARMACEUTICALS (1.5%)
Dura Pharmaceuticals** (2,000) (26,625)
Forest Laboratories, Inc.** (1,300) (62,969)
Monsanto Co. (600) (24,638)
-----------
(114,232)
-----------
REAL ESTATE (2.4%)
Archstone Communities Trust (1,600) (34,200)
Starwood Hotels & Resorts Worldwide, Inc. (700) (16,669)
Vornado Realty Trust (4,000) (136,500)
-----------
(187,369)
-----------
RETAIL-SPECIALTY APPAREL STORES (2.9%)
Gap, Inc. (1,500) (58,688)
Ikon Office Solutions (7,300) (81,213)
Kohls Corp.** (1,200) (85,500)
-----------
(225,401)
-----------
TELECOMMUNICATIONS (6.5%)
AT&T Corp.-Liberty Media Group Cl. A** (1,100) (35,200)
Cabletron Systems, Inc.** (4,700) (79,019)
Citizens Utilities Co. Cl. B (2,700) (29,700)
McLeodUSA, Inc. Class A** (10,800) (360,450)
-----------
(504,369)
-----------
TRANSPORTATION (0.5%)
Wisconsin Central Transportation Corp (2,600) (41,438)
-----------
TOTAL SECURITIES SOLD SHORT (Cost $6,989,392) $(7,078,190)
-----------
REPURCHASE AGREEMENT--3.4% Par
Bear Stearns (Agreement dated (000)
08/31/99, to be repurchased at ----
$266,930, collateralized by
$235,000 U.S. Treasury Bond
9.375% due 02/15/06. Market
Value of collateral is $275,526.)
5.430% 09/01/99 $267 $ 266,889
(Cost $266,889) -----------
See Accompanying Notes to Financial Statements.
11
<PAGE>
WARBURG PINCUS LONG-SHORT MARKET NEUTRAL FUND
SCHEDULE OF INVESTMENTS (CONT'D)
August 31, 1999
- -----------------------------------------------------------------------------
VALUE
------
TOTAL INVESTMENTS--0.6% (Cost $433,846*) $ (43,586)
OTHER ASSETS IN EXCESS OF LIABILITIES--100.6% 7,829,167
-----------
TOTAL NETASSETS-- 100.0% $ 7,785,581
===========
* Cost for Federal income tax purposes at August 31, 1999 is $1,638,288. The
gross appreciation (depreciation) on a tax basis is as follows:
Gross Appreciation - Investments $ 133,371
Gross Depreciation - Investments (833,185)
Gross Appreciation - Short Sales 48,770
Gross Depreciation - Short Sales (1,030,830)
------------
Net Depreciation $(1,681,874)
===========
** Non-income producing securities.
See Accompanying Notes to Financial Statements.
12
<PAGE>
WARBURG PINCUS LONG-SHORT EQUITY FUND
SCHEDULE OF INVESTMENTS
August 31, 1999
- -----------------------------------------------------------------------------
NUMBER
OF
SHARES VALUE
-------- ------
INVESTMENT COMPANY 90.1%
Warburg Pincus Long-Short
Market Neutral Fund,
Institutional Shares
(Cost $1,128,538) 75,910 $1,078,687
----------
TOTAL INVESTMENTS 90.1% (Cost $1,128,538*) $1,078,687
----------
OTHER ASSETS IN EXCESS OF LIABILITIES 9.9% 118,837
----------
TOTAL NET ASSETS 100.0% $1,197,524
==========
* Cost for Federal income tax purposes at August 31, 1999 is $1,155,006. The
gross appreciation (depreciation) on a tax basis is as follows:
Gross and Net Depreciation $ (76,319)
===========
See Accompanying Notes to Financial Statements.
13
<PAGE>
WARBURG PINCUS FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
August 31, 1999
- --------------------------------------------------------------------------------
LONG-SHORT
MARKET NEUTRAL LONG-SHORT
FUND EQUITY FUND
-------------- ------------
ASSETS
Investments, at value (cost - $7,423,238 and
$1,128,538, respectively) $ 7,034,604 $1,078,687
Deposits with brokers and custodian bank
for securities sold short or futures contracts 7,870,099 64
Cash -- 50,726
Receivable for investments sold -- 55,415
Receivable from investment adviser -- 65,537
Receivable on open futures contracts -- 6,570
Dividends and interest receivable 25,016 202
Prepaid expenses and other assets 16,531 --
----------- ----------
Total Assets 14,946,250 1,257,201
----------- ----------
LIABILITIES
Securities sold short (proceeds $6,989,392 for
Long-Short Market Neutral Fund) 7,078,190 --
Payable for Fund shares repurchased 55,415 --
Advisory fee payable 6,982 --
Distribution fee payable (Common shares) 6,341 513
Accrued expenses payable 13,741 59,164
----------- ----------
Total Liabilities 7,160,669 59,677
----------- ----------
NET ASSETS
Capital stock, $0.001 par value 548 72
Paid-in capital 9,323,000 1,877,605
Undistributed net investment income 385,836 --
Accumulated net realized loss from investments,
securities sold short and futures, if any (1,446,371) (636,904)
Net unrealized depreciation on
investments and other, if any (477,432) (43,249)
----------- ----------
Net Assets $ 7,785,581 $1,197,524
----------- ----------
INSTITUTIONAL SHARES
Net assets $ 5,900,706 $ 109,237
----------- ----------
Shares outstanding 415,181 6,592
----------- ----------
Net asset value, offering price and redemption price
per share $ 14.21 $ 16.57
=========== ==========
COMMON SHARES
Net assets $ 1,884,875 $1,088,287
----------- ----------
Shares outstanding 132,798 65,910
----------- ----------
Net asset value, offering price and redemption price
per share $ 14.19 $ 16.51
=========== ==========
See Accompanying Notes to Financial Statements.
14
<PAGE>
WARBURG PINCUS FUND
STATEMENTS OF OPERATIONS
For the Year Ended August 31, 1999
- --------------------------------------------------------------------------------
LONG-SHORT
MARKET NEUTRAL LONG-SHORT
FUND EQUITY FUND
-------------- -----------
INVESTMENT INCOME
Dividends $ 267,060 $ 178
Interest 897,074 33,753
Foreign taxes withheld (38) --
----------- ----------
Total Investment Income 1,164,096 33,931
----------- ----------
Expenses
Investment advisory fees 291,148 4,332
Administration fees 31,235 7,383
Custodian fees 66,711 8,742
Audit fees 12,567 3,619
Printing fees 2,629 38,520
Registration fees 42,670 48,439
Legal fees 20,857 31,651
Transfer agent fees 11,042 19,289
Insurance expense 10,287 1,822
Directors fees 13,001 12,467
Dividend expense 244,307 --
Interest expense 2,475 --
Distribution fees 25,941 9,838
Miscellaneous fees 4,242 4,416
----------- ----------
779,112 190,518
Less fees waived and reimbursed (114,610) (70,941)
----------- ----------
Total Expenses 664,502 119,577
----------- ----------
Net Investment Income/(Loss) 499,594 (85,646)
----------- ----------
Realized and Unrealized Gain/(Loss) on Investments,
Futures and Securities Sold Short
Net realized gain/(loss) from:
Security transactions 4,455,545 (973,466)
Futures tranactions -- 360,202
Securities sold short (5,585,519) --
----------- ----------
(1,129,974) (613,264)
----------- ----------
Net change in unrealized appreciation/(depreciation):
Investments (685,565) (49,851)
Futures -- 6,602
----------- ----------
(685,565) (43,249)
----------- ----------
Net Loss On Investments, Futures and Securities
Sold Short (1,815,539) (656,513)
----------- ----------
Net Decrease In Net Assets
Resulting From Operations $(1,315,945) $ (742,159)
=========== ==========
- ---------------------
* Inception Date September 11, 1998.
See Accompanying Notes to Financial Statements.
15
<PAGE>
WARBURG PINCUS FUNDS
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LONG-SHORT
LONG-SHORT MARKET NEUTRAL FUND EQUITY FUND
---------------------------------- --------------------
FOR THE YEAR FOR THE PERIOD FOR THE PERIOD
ENDED JULY 31, 1998* SEPTEMBER 11, 1998*
AUGUST 31, 1999 TO AUGUST 31, 1998 TO AUGUST 31, 1999
--------------- ------------------ -------------------
<S> <C> <C> <C>
INCREASE/(DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income/(loss) $ 499,594 $ 21,200 $ (85,646)
Net gain/(loss) on investments,
futures and securities
sold short (1,815,539) 89,659 (656,513)
---------- ---------- ----------
Net increase/(decrease) in net
assets resultingfrom operations (1,315,945) 110,859 (742,159)
---------- ---------- ----------
Dividends and Distributions to
shareholders:
From net investment income:
Institutional shares (30,279) -- --
Common shares (90,662) -- --
From net realized capital gains:
Institutional shares (52,082) -- (13,656)
Common shares (159,858) -- (338)
From capital:
Institutional shares -- -- (15,857)
Common shares -- -- (388)
---------- ---------- ----------
Total distributions to
shareholders (332,881) -- (30,239)
---------- ---------- ----------
Net capital share transactions 3,132,125 6,191,423 1,969,922
---------- ---------- ----------
Total increase in net assets 1,483,299 6,302,282 1,197,524
NET ASSETS:
Beginning of period 6,302,282 -- --
---------- ---------- ----------
End of period $7,785,581 $6,302,282 $1,197,524
========== ========== ==========
<FN>
- ----------------------
* Inception Date.
</FN>
</TABLE>
See Accompanying Notes to Financial Statements.
16
<PAGE>
WARBURG PINCUS FUNDS
LONG-SHORT MARKET NEUTRAL FUND FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout Each Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INSTITUTIONAL COMMON
----------------------------- ------------------
FOR THE YEAR FOR THE PERIOD
ENDED JULY 31, 1998* FOR THE PERIOD
AUGUST 31, TO AUGUST 31, SEPTEMBER 8, 1998*
1999 1998 TO AUGUST 31, 1999
------------ -------------- ------------------
<S> <C> <C> <C>
Net asset value, beginning of period $15.27 $15.00 $15.19
------ ------ ------
Income from investment operations
Net investment income 0.39(DAGGER) 0.05 0.32(DAGGER)
Net gain/(loss) on investments and
securities sold short
(both realized and unrealized) (1.25) 0.22 (1.12)
------ ------ ------
Total from investment operations (0.86) 0.27 (0.80)
------ ------ ------
Less Distributions
Dividends from net investment income (0.07) -- (0.07)
Distributions from capital gains (0.13) -- (0.13)
------ ------ ------
Total distributions (0.20) -- (0.20)
------ ------ ------
Net asset value, end of period $14.21 $15.27 $14.19
====== ====== ======
Total return (5.68)% 1.80%(c) (5.33)%(c)
Ratios/Supplemental Data:
Net assets, end of period
(000s omitted) $5,901 $6,302 $1,885
Ratio of expenses to average net
assets (including dividend
expense) 3.33%(a) 4.32%(a)(b) 3.40%(a)(b)
Ratio of expenses to average
net assets (excluding dividend
expense) 2.00%(a) 2.00%(a)(b) 2.24%(a)(b)
Ratio of net investment income (loss)
to average net assets 2.65% 1.96%(b) 2.46%(b)
Fund turnover rate 705% 130%(c) 705%
<FN>
- ------------------
(a) Without the voluntary waiver of advisory fees and administration fees, the
ratios of expenses to average net assets for the Institutional Class would
have been 2.56% (excluding dividend expense) and 3.93% (including dividend
expense) for the year ended August 31, 1999 and 5.12% (excluding dividend
expense) and 7.44% (including dividend expense) annualized for the period
ended August 31, 1998. Without the voluntary waiver of advisory fees and
administration fees, the ratios of expenses to average net assets for the
Common Class would have been 2.84% (excluding dividend expense) and 4.00%
(including dividend expense) annualized for the period ended August 31,
1999.
(b) Annualized.
(c) Not Annualized.
* Inception Date.
(DAGGER) Per share information is calculated using the average share outstanding
method.
</FN>
</TABLE>
See Accompanying Notes to Financial Statements.
17
<PAGE>
WARBURG PINCUS FUNDS
LONG-SHORT EQUITY FUND FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout Each Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INSTITUTIONAL COMMON
-------------------- -----------------
FOR THE PERIOD FOR THE PERIOD
SEPTEMBER 11, 1998* OCTOBER 30, 1998*
TO AUGUST 31, 1999 TO AUGUST 31, 1999
-------------------- ------------------
<S> <C> <C>
Net asset value, beginning of period $15.00 $15.72
------ ------
Income from investment operations
Net investment loss (0.09)(DAGGER) (0.07)(DAGGER)
Net gain on investments and futures
(both realized and unrealized) 2.11 1.31
------ ------
Total from investment operations 2.02 1.24
------ ------
Less Distributions
Distributions from capital gains (0.21) (0.21)
Return of capital (0.24) (0.24)
------ ------
Total distributions (0.45) (0.45)
------ ------
Net asset value, end of period $16.57 $16.51
====== ======
Total return 13.42%(c) 7.82%(c)
Ratios/Supplemental Data:
Net assets, end of period (000s omitted) $109 $1,088
Ratio of expenses to average net assets 2.48%(a)(b) 2.79%(a)(b)
Ratio of net investment income (loss) to average
net assets 0.76%(b) (2.26)%(b)
Fund turnover rate 951%(c) 951%(c)
<FN>
- --------------------------------------------------------------------------------
(a) Without the voluntary waiver of advisory fees and administration fees, the
ratios of expenses to average net assets for the Institutional Class would
have been 4.12% annualized for the period ended August 31, 1999. Without the
voluntary waiver of advisory fees and administration fees, the ratios of
expenses to average net assets for the Common Class would have been 4.43%
annualized for the period ended August 31, 1999.
(b) Annualized.
(c) Not Annualized.
* Inception Date.
(DAGGER) Per share information is calculated using the average share outstanding
method.
</FN>
</TABLE>
See Accompanying Notes to Financial Statements.
18
<PAGE>
WARBURG PINCUS FUNDS
NOTES TO FINANCIAL STATEMENTS
August 31, 1999
- --------------------------------------------------------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Warburg Pincus Funds covered in this report are comprised of Warburg,
Pincus Long-Short Market Neutral Fund, Inc. ("Long-Short Neutral") and Warburg,
Pincus Long-Short Equity Fund, Inc. ("Long-Short Equity"), (each, a "Fund" and
collectively, the "Funds"), which are registered under the Investment Company
Act of 1940 , as amended (the "1940 Act"), as non-diversified open-end
management investment companies. Each Fund is authorized to offer three classes
of shares: Common, Advisor and Institutional, although only Common shares and
Institutional shares of each Fund are currently offered. Common shares for each
Fund bear expenses paid pursuant to a shareholder servicing and distribution at
an annual rate not to exceed .25% of the average daily net asset value of the
Fund's outstanding Common shares. In addition, the Common shares bear a
co-administrative fee.
On October 23, 1998, pursuant to an Agreement and Plan of Reorganization,
each Fund acquired all of the assets and liabilities of a corresponding
investment series of The RBB Fund, Inc. (each an "Acquired Fund" and
collectively, the "Acquired Funds"). The acquisitions were accomplished by a
tax-free exchange of the following shares of each Fund in each case for the same
amount of shares of the corresponding class of the applicable Acquired Fund.
Shares were reissued to shareholders at the time of the reorganization.
FUND COMMON SHARES INSTITUTIONAL SHARES
-------------------------- ------------- --------------------
Long-Short Neutral -- $310,521
Long-Short Equity -- 7,168
The net assets of each Fund directly after the reorganization were the same
as the corresponding Acquired Fund as described in the table below. Each Fund
assumed the prior operating history of the corresponding Acquired Fund.
UNREALIZED
FUND NET ASSETS APPRECIATION/(DEPRECIATION)*
------ ------------ -----------------------------
Long-Short Neutral $4,693,517 $26,972
Long-Short Equity 109,073 (2,142)
Certain of the Funds are permitted to engage in the investment strategies
described in the Notes to Financial Statements. The Funds are not obligated to
pursue any of the following strategies and do not represent that these
techniques are available now or will be available at any time in the future.
Please refer to each Fund's prospectus(es) and statements of additional
information for a description of its investment strategies.
- --------------------
* The amount of each Fund's net assets includes the amount of unrealized
appreciation/(depreciation) listed above.
19
<PAGE>
WARBURG PINCUS FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
August 31, 1999
- --------------------------------------------------------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
A) SECURITY VALUATION -- The net asset value of each Fund is
determined daily as of the close of regular trading on The New York Stock
Exchange Inc. Each Fund's securities for which market quotations are
readily available are valued at market value, which is currently determined
using the last reported sales price. If no sales are reported, as in the
case of some securities traded over-the-counter, the securities are valued
at the mean between the last reported bid and asked prices. All other
securities and assets are valued as determined in good faith by the Fund's
Board of Directors. Short-term obligations with a remaining maturity of 60
days or less are valued at amortized cost, which approximates market value.
B) FOREIGN CURRENCY TRANSACTIONS -- Transactions denominated in
foreign currencies are recorded in each Fund's records at the current
prevailing exchange rates. Asset and liability accounts that are
denominated in a foreign currency are adjusted daily to reflect current
exchange rates. Transaction gains or losses resulting from changes in
exchange rates during the reporting period or upon settlement of the
foreign currency transaction are reported in operations for the current
period. It is not practical to isolate that portion of both realized and
unrealized gains and losses on investments in the statement of operations
that result from fluctuations in foreign currency exchange rates. Each Fund
reports certain foreign currency related transactions as components of
realized gains for financial reporting purposes, whereas such components
are treated as ordinary income (loss) for Federal income tax purposes.
C) SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security
transactions are accounted for on the trade date. The cost of investments
sold is determined by use of the specific identification method for both
financial reporting and income tax purposes. Interest income is recorded on
the accrual basis. Dividends are recorded on the ex-dividend date. Certain
expenses are class specific expenses and vary by class. Expenses not
directly attributable to a specific Fund or class are allocated based on
relative net assets of each Fund and class, respectively.
D) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- Each 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 expense.
20
<PAGE>
WARBURG PINCUS FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
August 31, 1999
- --------------------------------------------------------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Long-Short Neutral and Long-Short Equity will distribute substantially all
of its net realized capital gains and all net investment income, if any, to
its shareholders at least annually.
The character of distributions made during the year for net
investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes due to generally accepted
accounting principles (GAAP) and tax differences in the character of income
and expense recognition. These differences are primarily due to differing
treatments for net operating losses, paydowns on mortgage-backed
securities, passive foreign investment companies, and forward foreign
currency contracts. To the extent these differences are permanent in
nature, such amounts are reclassified within capital accounts based on
their U.S. federal tax-basis treatment. Temporary differences do not
require reclassification. At August 31, 1999, Long-Short Neutral and
Long-Short Equity reclassified $(2,533) and $9,644, respectively, from
accumulated net realized gain/(loss) to undistributed net investment
income. Long-Short Equity reclassified $(82,601) from accumulated net
investment income/(loss) to capital contributions. Long-Short Equity
reclassified $(9,644) from accumulated net realized gain/(loss) to capital
contributions.
E) FEDERAL INCOME TAXES -- No provision is made for Federal taxes
as it is each Fund's intention to qualify for and elect the tax treatment
applicable to regulated investment companies under the Internal Revenue
Code of 1986, as amended, and make the requisite distributions to its
shareholders which will be sufficient to relieve it from Federal income and
excise taxes.
F) USE OF ESTIMATES -- The preparation of financial statements in
conformity with GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
21
<PAGE>
WARBURG PINCUS FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
August 31, 1999
- --------------------------------------------------------------------------------
Note 1. Summary of Significant Accounting Policies (Continued)
G) REPURCHASE AGREEMENTS -- Money market instruments may be
purchased from banks and non-bank dealers subject to the seller's agreement
to repurchase them at an agreed upon date and price. Collateral for
repurchase agreements may have longer maturities than the maximum
permissible remaining maturity of portfolio investments. The seller will be
required on a daily basis to maintain the value of the securities subject
to the agreement at not less than the repurchase price. The agreements are
conditional upon the collateral being deposited under the Federal Reserve
book-entry system or held in a separate account by each Fund's custodian or
an authorized securities depository. Long-Short Neutral had an open
repurchase agreement at August 31, 1999.
H) FUTURES TRANSACTIONS -- A Fund invests in futures contracts for
the purpose of hedging its existing portfolio securities, or securities
that the Fund intends to purchase, against fluctuations in fair value
caused by changes in prevailing market interest rates or securities prices,
or for other purposes. Certain Fund's may enter into futures contracts
subject to certain limitations. Upon entering into a futures contract, each
Fund is required to deposit cash or pledge U.S. Government securities of an
initial margin. Subsequent payments, which are dependent on the daily
fluctuations in the value of the underlying instrument, are made or
received by the Fund each day (daily variations margin) and are recorded as
unrealized gains or losses until the contracts are closed. When the
contracts are closed, the Fund records a realized gain or loss equal to the
difference between the proceeds from (or cost of) the closing transaction
and the Fund's basis in the contracts. Risks of entering into futures
contracts include the possibility that there will be an imperfect price
correlation between the futures contracts and the underlying securities.
Second, it is possible that a lack of liquidity for futures contracts could
exist in the secondary market, resulting in an inability to close a futures
position prior to its maturity date. Third, the purchase of a futures
contract involves the risk that a Fund could lose more than the original
margin deposit required to initiate a futures transaction.
22
<PAGE>
WARBURG PINCUS FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
August 31, 1999
- --------------------------------------------------------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
As of August 31, 1999, Long-Short Equity held the following
futures contracts:
FUTURES EXPIRATION CONTRACT CONTRACT UNREALIZED
CONTRACTS DATE AMOUNT VALUE GAIN/LOSS
--------- ---------- -------- -------- ----------
S&P 500 Index Futures 09/16/99 $ 983,475 $ 989,850 $ 6,375
S&P 500 Mini Futures 09/17/99 197,775 197,970 195
I) OPTION TRANSACTIONS -- When a Fund writes or purchases a call
or a put option, an amount equal to the premium received or paid by the
Fund is recorded as a liability or asset, the value of which is
marked-to-market daily to reflect the current market value of the option.
When the option expires, the Fund realizes a gain or loss equal to the
amount of the premium received or paid. When the Fund exercises an option
or enters into a closing transaction by purchasing or selling an offsetting
option, it realizes a gain or loss without regard to any unrealized gain or
loss to underlying security. 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.
J) TBA PURCHASE COMMITMENTS -- The Funds may enter into "TBA" (to
be announced) purchases commitments to purchase securities for a fixed
price at a future date, typically not exceeding 45 days. TBA purchase
commitments may be considered securities in themselves, and involve a risk
of loss if the value of the security to be purchased declines prior to
settlement date. This risk is in addition to the risk of decline in each
Fund's other assets. Unsettled TBA purchase commitments are valued at the
current market value of the underlying securities, according to the
procedures described under "Security Valuation" above.
K) SECURITIES LENDING -- Loans of securities are required at all
times to be secured by collateral at least equal to 102% of the market
value of domestic securities on loan including any accrued interest thereon
and 105% of the market value of foreign securities on loan including any
accrued interest thereon. Cash collateral received by the Funds in
connection with securities lending activity is invested in the Boston
Global Investment Trust. However, in the event of default or bankruptcy by
the other party to the agreement, realization and/or retention of the
collateral may be subject to legal proceedings. Neither of the Funds had
securities on loan to brokers at August 31, 1999.
23
<PAGE>
WARBURG PINCUS FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
August 31, 1999
- --------------------------------------------------------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
L) SHORT SALES -- When a Fund's investment adviser believes that a
security is overvalued, it may sell the security short by borrowing the
same security from a broker or other institution and selling the security.
A Fund will incur a loss as a result of the short sale if the price of the
borrowed security increases between the date of the short sale and the date
on which the Fund replaces such security. A Fund will realize a gain if
there is a decline in price of the security between those dates, which
decline exceeds the cost of the borrowing the security and other
transaction costs. There can be no assurance that a Fund will be able to
close out a short position at any particular time or at an acceptable
price. Although a Fund's gain is limited to the amount at which it has sold
a security short, its potential loss is limited only by the maximum
attainable price of the security less the price at which the security was
sold. Until a Fund replaces a borrowed security, it will maintain at all
times cash or liquid securities in an amount which, when added to any
amount deposited with a broker as collateral will at least equal the
current market value of the security sold short. Depending on arrangements
made with brokers, a Fund may not receive any payments (including interest)
on collateral deposited with them. Long-Short Neutral and Long-Short Equity
will not make a short sale if, after giving effect to such sale, the market
value of all securities sold short exceeds 100% of the value of its net
assets.
M) OTHER -- Securities denominated in currencies other than U.S.
dollars are subject to changes in value due to fluctuations in exchange
rates. Some countries in which the Funds invest require governmental
approval for the repatriation of investment income, capital or the proceeds
of sales of securities by foreign investors. In addition, if there is a
deterioration in a country's balance of payments or for other reasons, a
country may impose temporary restrictions on foreign capital remittances
abroad.
The securities exchanges of certain foreign markets are
substantially smaller, less liquid and more volatile than the major
securities markets in the United States. Consequently, acquisition and
disposition of securities by each Fund may be inhibited. In addition, a
significant proportion of the aggregate market value of equity securities
listed on the major securities exchanges in emerging markets are held by a
smaller number of investors. This may limit the number of shares available
for acquisition or disposition by a Fund.
24
<PAGE>
WARBURG PINCUS FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
August 31, 1999
- --------------------------------------------------------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Lower-rated debt securities (commonly known as "junk bonds")
possess speculative characteristics and are subject to greater market
fluctuations and risk of lost income and principal than higher-rated debt
securities for a variety of reasons. Also, during an economic downturn or
substantial period of rising interest rates, highly leveraged issuers may
experience financial stress which would adversely affect their ability to
service their principal and interest payment obligations, to meet projected
business goals and to obtain additional financing.
In addition, periods of economic uncertainty and change can be
expected to result in increased volatility of market prices of lower-rated
debt securities and (to the extent a Fund invest in junk bonds) the Fund's
net asset value.
NOTE 2. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
Effective July 6, 1999, the Funds' investment adviser, Credit Suisse Asset
Management became Credit Suisse Asset Management, LLC. In addition, in
connection with the closing of the acquisition of Warburg Pincus Asset
Management, Inc. by Credit Suisse Group, Warburg Pincus Asset Management, Inc.
was merged into Credit Suisse Asset Management, LLC. Credit Suisse Asset
Management had previously changed its name from BEA Associates effective January
1, 1999.
Pursuant to Investment Advisory Agreements, Credit Suisse Asset Management,
LLC ("CSAM") an indirect, wholly-owned subsidiary of Credit Suisse Group, serves
as investment advisor for each of the two Funds described herein.
For its advisory services, CSAM is entitled to receive from Long-Short Equity
a monthly fee equal to an annual rate of 0.10% of the Fund's average daily net
assets.
25
<PAGE>
WARBURG PINCUS FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
August 31, 1999
- --------------------------------------------------------------------------------
NOTE 2. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES (CONTINUED)
For Long-Short Neutral, CSAM is entitled to receive from the Fund a monthly
fee equal to an annual rate of 1.50% of the Fund's average daily net assets. In
addition, starting in the thirteenth month of operation, CSAM is entitled to a
monthly performance adjustment fee which may increase or decrease the total
advisory fee by up to 0.50% per year. The performance adjustment fee decreased
the total advisory fee by $3,395 or .50% of average daily net assets due to
lower performance in comparison to the Salomon Smith Barney U.S. 1-Month
Treasury Bill Index plus 5 percentage points for the twelve months ended August
31, 1999.
CSAM may, at its discretion, voluntarily waive all or any portion of its
advisory fee for any of the Funds. For the year ended August 31, 1999 advisory
fees and waivers for each of the two investment Funds were as follows:
GROSS NET
FUND ADVISORY FEE WAIVER ADVISORY FEE
------ ------------ ---------- ------------
Long-Short Neutral $291,148 $(97,341) $193,807
Long-Short Equity 4,332 (4,332) --
CSAM reimbursed expenses of Long-Short Equity in the amount of $66,605 for
the year ended August 31, 1999.
State Street Bank and Trust Company ("State Street"), serves as each Fund's
transfer and dividend disbursement agent. State Street has delegated most of its
Fund service obligations to Boston Financial Data Services, Inc. (BFDS), a 50%
owned subsidiary of State Street.
Counsellors Funds Service, Inc. ("CFSI"), a wholly-owned subsidiary of Credit
Suisse Asset Management, LLC, and PFPC, Inc. ("PFPC"), an indirect, wholly-owned
subsidiary of PNC Bank Corp., serve as each Fund's co-administrator. For
administration services, each Fund, pays CFSI a fee calculated at an annual rate
.05% of the Fund's first $125 million in average daily nets assets of the Common
shares and .10% of average daily net assets of the Common shares over $125
million. No compensation is payable by the Funds to CFSI for co-administration
services for the Institutional shares. CFSI may, at its discretion, voluntarily
waive all or any portion of its co-administration fees for any of the Funds. For
the period October 24, 1998 to August 31, 1999, co-administration fees earned by
CFSI on the Common shares were as follows:
26
<PAGE>
WARBURG PINCUS FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
August 31, 1999
- --------------------------------------------------------------------------------
NOTE 2. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES (CONTINUED)
GROSS NET
FUND ADMINISTRATION FEE WAIVER ADMINISTRATION FEE
------ ------------------ ---------- ------------------
Long-Short Neutral $5,180 $(4,144) $1,036
Long-Short Equity 1,968 -- 1,968
Prior to October 23, 1998, Provident Distributors, Inc. ("PDI") served as
administrative service agent. An administrative service fee was computed daily
and payable quarterly at an annual rate of .15% of the average daily net assets
of each Fund's corresponding portfolio of The RBB Fund.
The administrative agent may at its discretion voluntarily waive all or any
portion of its administrative fee for any of the Funds. For the period September
1, 1998 through October 23, 1998, administrative service fees earned and waived
by PDI were as follows:
GROSS ADMINISTRATIVE NET ADMINISTRATIVE
FUND SERVICE FEE WAIVER SERVICE FEE
------ -------------------- --------- ------------------
Long-Short Neutral $1,510 $(1,224) $286
Long-Short Equity 3 (3) --
For administration services, PFPC currently receives a fee calculated at
annual rate of .125% on each Fund's average daily net assets, subject to a
minimum annual fee and exclusive of out-of-pocket expenses. PFPC may, at its
discretion, voluntarily waive all or any portion of its administration fee for
any of the Funds. For the year ended August 31, 1999, the co-administration fees
earned and waived by PFPC were as follows:
GROSS ADMINISTRATIVE NET ADMINISTRATIVE
FUND SERVICE FEE WAIVER SERVICE FEE
------ -------------------- --------- ------------------
Long-Short Neutral $24,545 $(11,902) $12,643
Long-Short Equity 5,412 -- 5,412
Credit Suisse Asset Management Securities Inc. ("CSI"), also a wholly-owned
subsidiary of Credit Suisse Asset Management, LLC, serves as each Fund's
distributor. No compensation is payable by any Fund to CSI for its distribution
services for Institutional shares. For its distribution services for the Common
shares, CSI receives a fee calculated at an annual rate .25% of the average
daily net assets of the Common shares of each Fund. For the year ended August
31, 1999, distribution fees earned by CSI were as follows:
FUND DISTRIBUTION FEE
------ ----------------
Long-Short Neutral $25,941
Long-Short Equity 9,838
27
<PAGE>
WARBURG PINCUS FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
August 31, 1999
- --------------------------------------------------------------------------------
NOTE 3. PURCHASES AND SALES OF SECURITIES
For the period ended August 31, 1999, purchases and sales of investment
securities (other than short-term investments) were as follows:
INVESTMENT SECURITIES SHORT SECURITIES
-------------------------- ------------------
FUND PURCHASES SALES SALES
------ ------------ ----------- -----------
Long-Short Neutral $121,662,548 $59,668,602 $60,494,767
Long-Short Equity 34,374,838 32,274,697 --
NOTE 4. CAPITAL SHARES
Transactions in capital shares for each period were as follows:
<TABLE>
<CAPTION>
LONG-SHORT MARKET NEUTRAL FUND
-------------------------------------------------------------------------------------------
INSTITUTIONAL COMMON
--------------------------------------------------------- ----------------------------------
FOR THE YEAR ENDED FOR THE PERIOD JULY 31, 1998* FOR THE PERIOD SEPTEMBER 8, 1998*
AUGUST 31, 1999 THROUGH AUGUST 31, 1998 THROUGH AUGUST 31, 1999
------------------------ ----------------------------- ----------------------------------
SHARES VALUE SHARES VALUE SHARES VALUE
---------- ----------- ----------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 2,702,645 $40,468,228 412,744 $6,191,423 3,454,318 $ 51,387,127
Shares issued in
reinvestment of
dividends 5,561 82,361 -- -- 16,915 250,336
Shares repurchased (2,705,769) (39,525,343) -- -- (3,338,435) (49,530,584)
---------- ----------- ------- ---------- ---------- ------------
Net increase 2,437 $ 1,025,246 412,744 $6,191,423 132,798 $ 2,106,879
========== =========== ======= ========== ========== ============
<FN>
*Inception Date.
</FN>
</TABLE>
<TABLE>
<CAPTION>
LONG-SHORT EQUITY FUND
-----------------------------------------------------------
INSTITUTIONAL COMMON
---------------------------------- --------------------------------
FOR THE PERIOD SEPTEMBER 11, 1998* FOR THE PERIOD OCTOBER 30, 1998*
THROUGH AUGUST 31, 1999 THROUGH AUGUST 31, 1999
---------------------------------- --------------------------------
SHARES VALUE SHARES VALUE
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Shares sold 65,686 $ 1,009,786 2,009,319 $ 35,443,765
shares issued in
reinvestment of
dividends 1,757 29,512 43 720
Shares repurchased (60,851) (1,011,801) (1,943,452) (33,502,061)
------- ----------- ---------- ------------
Net increase 6,592 $ 27,497 65,910 $ 1,942,424
===== =========== ========== ============
</TABLE>
28
<PAGE>
WARBURG PINCUS FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
August 31, 1999
- --------------------------------------------------------------------------------
NOTE 4. CAPITAL SHARES (CONTINUED)
On August 31, 1999, the number of shareholders that held 5% or more of the
outstanding shares are as follows:
Number of Approximate Percentage
Shareholders of Outstanding Shares
------------ ----------------------
Long-Short Market Neutral
Institutional shares 7 81.02
Long-Short Market Neutral Common shares 4 94.94
Long-Short Equity Institutional shares 1 100.00
Long-Short Equity Common shares 1 91.44
NOTE 5. FORWARD FOREIGN CURRENCY CONTRACTS
The Funds will generally enter into forward foreign currency exchange
contracts as a way of managing foreign exchange rate risk or to enhance total
return. Each Fund may enter into these contracts to fix the U.S. dollar value of
a security that it has agreed to buy or sell for the period between the date the
trade was entered into and the date the security is delivered and paid for. Each
Fund may also use these contracts to hedge the U.S. dollar value of securities
denominated in foreign currencies that it already owns. The Fund may enter into
these contracts for the purchase or sale of a specific foreign currency at a
fixed price on a future date as a hedge or cross-hedge against either
transactions or portfolio positions.
Forward foreign currency contracts are valued at the forward rate, and are
marked-to-market daily. The change in market value is recorded by each Fund as
an unrealized gain or loss. When the contract is closed, each Fund records a
realized gain or loss equal to the difference between the value of the contract
at the time it was opened and the value at the time it was closed.
29
<PAGE>
WARBURG PINCUS FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
August 31, 1999
- --------------------------------------------------------------------------------
NOTE 5. FORWARD FOREIGN CURRENCY CONTRACTS (CONTINUED)
Each Fund's policy is to include this portion of realized and unrealized gains
and losses on investments that result from foreign currency changes with other
foreign currency gains and losses on the Statement of Operations.
The use of forward foreign currency contracts does not eliminate fluctuations
in the underlying prices of each Fund's portfolio securities, but it does
establish a rate of exchange that can be achieved in the future. Although
forward foreign currency contracts limit the risk of loss due to a decline in
the value of the hedged currency, they also limit any potential gain that might
result should the value of the currency increase. In addition, the Fund could be
exposed to risks if the counterparty to the contract is unable to meet the terms
of their contract. During the year ended August 31, 1999 neither Fund entered
into forward foreign currency contracts.
NOTE 6. LINE OF CREDIT
The Funds, together with other funds advised by CSAM, have established a $250
million committed line of credit facility ("Credit Facility") with Deutche Bank,
AG as administrative agent, State Street Bank and Trust Company as operations
agent, Bank of Nova Scotia as syndication agent and certain other lenders, for
temporary or emergency purposes primarily relating to unanticipated portfolio
share redemptions. Under the terms of the Credit Facility, the funds with access
to the Credit Facility pay an aggregate commitment fee at a rate of .075% per
annum on the average daily balance of the Credit Facility that is undisbursed
and uncanceled during the preceding quarter allocated among the participating
funds in such manner as is determined by the governing Boards of the various
funds. In addition, the participating funds will pay interest on borrowing at
the Federal funds rate plus .50%. During the year ended August 31, 1999, neither
Fund had borrowings under the line of credit agreement.
30
<PAGE>
WARBURG PINCUS FUNDS
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Board of Directors and Shareholders Of
Warburg Pincus Long-Short Market Neutral Fund and
Warburg Pincus Long-Short Equity Fund:
In our opinion, the accompanying statements of assets and liabilities,
including the schedules of investments of Warburg Pincus Long-Short Market
Neutral Fund and Warburg Pincus Long-Short Equity Fund (all funds collectively
referred to as the "Funds ), and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Funds at August 31, 1999, and
the results of each of their operations for the year (or period) then ended, the
changes in each of their net assets for each of the two years (or periods) in
the period then ended and their financial highlights for each of the years (or
periods) presented, in conformity with generally accepted accounting principles.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Funds' management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards, which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at August
31, 1999 by correspondence with the custodians, provide a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
2400 Eleven Penn Center
Philadelphia, PA
October 7, 1999
31
<PAGE>
WARBURG PINCUS FUNDS
TAX INFORMATION LETTERS
August 31, 1999
- --------------------------------------------------------------------------------
IMPORTANT TAX INFORMATION FOR CORPORATE SHAREHOLDERS (UNAUDITED)
Corporate shareholders should note that for the fiscal year ended August 31,
1999, the percentage of Fund's investment income (i.e., net investment income
plus short-term capital gains) that qualifies for the intercorporate dividends
received deductions is as follows:
PERCENTAGE
-----------
Warburg Pincus Long-Short Market Neutral Fund 20.78%
IMPORTANT TAX INFORMATION FOR SHAREHOLDERS (UNAUDITED)
During the year ended August 31, 1999, the Funds declared the following
dividends from realized capital gains:
SHORT-TERM LONG-TERM
CAPITAL GAIN CAPITAL GAIN
PER SHARE PER SHARE
---------- ----------
Warburg Pincus Long Short Market Neutral Fund 0.1266 --
Warburg Pincus Long-Short Equity Fund 0.1433 0.2079
32
<PAGE>
WARBURG PINCUS FUNDS
YEAR 2000 COMPLIANCE
NOT COVERED BY INDEPENDENT ACCOUNTANTS REPORT
Many services provided to the Fund's and their shareholders by CSAM and
certain of its affiliates ("CSAMService Providers") and the 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, resulting
in potential difficulty in performing various calculations ("Year 2000 Issue").
The Year 2000 could potentially have an adverse impact on the handling of
security trades, the payment of interest and dividends, pricing, account
services and other Fund operations. It has been reported that foreign
institutions have made less progress in addressing the Year 2000 Issue than
major U.S. entities, which could adversely affect the portfolios' foreign
investments.
The CSAM Service Providers recognize the importance of the Year 2000 Issue
and are taking appropriate steps necessary in preparation for the year 2000. The
CSAM Service Providers anticipate that their systems and those of the Fund's
other service providers will be adapted in time for the Year 2000. The CSAM
Service Providers have completed mission critical systems testing and have
participated in industry-wide testing programs. In addition, the CSAM Service
Providers are formulating a contingency plan to address the Year 2000 Issue and
anticipate completion of the plan by the end of the third quarter of 1999. The
CSAM Service Providers have also completed investigations of material operations
of the Fund's other major service providers. The CSAM Service Providers continue
to monitor the Year 2000 Issue and its potential impact on the Funds. However,
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 the Fund's investments or on global
markets or economics, generally.
33
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[GRAPHIC OMITTED]
P.O. BOX 9030, BOSTON, MA 02205-9030
800-WARBURG (800-927-2874) (BOX) www.warburg.com
CREDIT SUISSE ASSET MANAGEMENT SECURITIES, INC., DISTRIBUTOR. WPLSF-2-0899
