<PAGE> 1
As Filed with the Securities and Exchange Commission
on July 24, 1998
Securities Act File No. 333-
Investment Company Act File No. 811-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [x]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No [ ]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [x]
Amendment No. [ ]
(check appropriate box or boxes)
Warburg, Pincus Money Market Fund, Inc.
. . . . . . . . . . . . . . . . . . . . . . . . .
(Exact Name of Registrant as Specified in Charter)
466 Lexington Avenue
New York, New York 10017-3147
. . . . . . . . . . . . . . . . . . . .
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (212) 878-0600
Mr. Eugene P. Grace
Warburg, Pincus Money Market Fund, Inc.
466 Lexington Avenue
New York, New York 10017-3147
. . . . . . . . . . . . . . . . . .
(Name and Address of Agent for Services)
Copy to:
Rose F. DiMartino, Esq.
Willkie Farr & Gallagher
787 Seventh Avenue
New York, New York 10019-6099
<PAGE> 2
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of this Registration Statement.
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
<TABLE>
Proposed Maximum
Title of Securities Proposed Maximum Aggregate
Being Registered Amount Being Offering Price per Offering Price Amount of
Registered Unit Registration Fee
------------------------ ------------------------ --------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Shares of common
stock, $.001 par value
per share Indefinite* Indefinite* Indefinite* $None
</TABLE>
- ----------------------------------------------------------------
* An indefinite number of shares of common stock of the Registrant is
being registered by this Registration Statement pursuant to Rule 24f-2
under the Investment Company Act of 1940, as amended (the "1940 Act").
The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933, as amended (the "1933 Act"), or
until the Registration Statement shall become effective on such date as the
Commission, acting pursuant to said Section 8(a), may determine.
<PAGE> 3
WARBURG, PINCUS MONEY MARKET FUND, INC.
FORM N-1A
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
Part A
Item No. Prospectus Heading
- -------- ------------------
<S> <C> <C>
1. Cover Page ............................................ Cover Page
2. Synopsis .............................................. The Funds' Expenses
3. Condensed Financial
Information ...................................... Financial Highlights; Performance
4. General Description of Registrant .....................
Cover Page;
Investment Objective and Policies; Portfolio
Investments; Risk Factors and Special
Considerations; Certain Investment
Strategies; Investment Guidelines; General
Information
5. Management of the Fund ................................ Management of the Funds
6. Capital Stock and Other Securities ....................
General Information
7. Purchase of Securities Being Offered ..................
How to Open an Account; How to Purchase
Shares; Management of the Funds; Net Asset
Value
8. Redemption or Repurchase .............................. How to Redeem and Exchange Shares
9. Pending Legal Proceedings ............................. Not applicable
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
Part B
Item
No. Statement of Additional Information Heading
- -------- -------------------------------------------
<S> <C> <C>
10. Cover Page ............................................ Cover Page
11. Table of Contents ..................................... Contents
12. General Information and
History .......................................... Management of the Funds; Notes to Financial
Statements; See Prospectus--"General
Information"
13. Investment Objectives and Policies ....................
Investment Objective; Investment Policies
14. Management of the Fund ................................ Management of the Funds; See Prospectus --
"Management of the Funds"
15. Control Persons and Principal Holders of Securities....
Management of the Funds; Miscellaneous; See
Prospectus--"Management of the Funds"
16. Investment Advisory and Other Services ................
Management of the Funds; See Prospectus--
"Management of the Funds" and "Shareholder
Servicing"
17. Brokerage Allocation and Other Practices ..............
Investment Policies; See Prospectus--
"Portfolio Transactions"
18. Capital Stock and Other Securities ....................
Management of the Funds;-- Organization of
the Funds See Prospectus-- "General
Information"
19. Purchase, Redemption and Pricing of Securities Being
Offered .......................................... Additional Purchase and Redemption
Information; See Prospectus--"How to Purchase
Shares," "How to Redeem and Exchange Shares"
and "Net Asset Value"
</TABLE>
<PAGE> 5
<TABLE>
<S> <C> <C>
20. Tax Status ............................................ Additional Information Concerning Taxes; See
Prospectus--"Dividends, Distributions and
Taxes"
21. Underwriters .......................................... Investment Policies; Portfolio Transactions;
See Prospectus--"Management of the Funds" and
"Shareholder Servicing"
22. Calculation of Performance Data ....................... Determination of Yield
23. Financial Statements .................................. Report of PricewaterhouseCoopers LLP,
Independent Accountants;
Financial Statements
</TABLE>
Information required to be included in Part C is set forth after the appropriate
item, so numbered, in Part C to this registration statement amendment.
<PAGE> 6
SUBJECT TO COMPLETION, DATED JULY 24, 1998
PROSPECTUS
August __, 1998
WARBURG PINCUS
MONEY MARKET FUND
---------------
WARBURG PINCUS
TAX FREE MONEY MARKET FUND
[WARBURG PINCUS LOGO]
<PAGE> 7
SUBJECT TO COMPLETION, DATED JULY 24, 1998
PROSPECTUS August __, 1998
Warburg Pincus Funds are a family of open-end management investment companies
that offer investors a variety of investment opportunities. Two money market
funds are offered pursuant to this Prospectus (the "Funds"):
WARBURG PINCUS MONEY MARKET FUND (the "Money Market Fund") is designed to
provide investors with high current income consistent with liquidity and
stability of principal.
WARBURG PINCUS TAX FREE MONEY MARKET FUND (the "Tax Free Fund") is designed to
provide investors with as high a level of current income that is exempt from
federal personal income taxes as is consistent with preservation of capital and
liquidity.
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.
NO LOAD SHARES
- --------------------------------------------------------------------------------
Each Fund offers two classes of shares, one of which, the Common Shares, is
offered by this Prospectus (i) directly from the Fund's distributor, Counsellors
Securities Inc., and (ii) through various brokerage firms including Charles
Schwab & Company, Inc. Mutual Fund OneSource(TM) Program; Fidelity Brokerage
Services, Inc. FundsNetwork(TM) Program; Jack White & Company, Inc.; and
Waterhouse Securities, Inc. The Advisor Shares of each Fund are not currently
offered.
LOW MINIMUM INVESTMENT
- --------------------------------------------------------------------------------
The minimum initial investment in each Fund is $5,000 ($500 for an IRA or
Uniform Transfers/Gifts to Minors Act account) and the minimum subsequent
investment is $100. Through the Automatic Monthly Investment Plan, subsequent
investment minimums may be as low as $50. See "How to Purchase Shares."
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 (http://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)
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.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<PAGE> 8
THE FUNDS' EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY MARKET TAX FREE
FUND FUND
<S> <C> <C>
-----------------------------------------------------------
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases (as a
percentage of 0 0
offering price) ......................................
-----------------------------------------------------------
Annual Fund Operating Expenses
(as a percentage of average net assets) (after fee
waivers) .38% .38%
Management Fee .......................................
-----------------------------------------------------------
12b-1 Fees ........................................... .25% .25%
-----------------------------------------------------------
Other Expenses ....................................... .17% .17%
----- -----
-----------------------------------------------------------
Total Fund Operating Expenses (after fee waivers and
expense reimbursements)+ ............................. .80% .80%
=== ===
-----------------------------------------------------------
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 .............................................. $ 26 $ 26
- -------------------------------------------------------------------------------------------------
</TABLE>
+ Absent the waiver of fees by the Money Market Fund's and the Tax Free Fund's
investment adviser and co-administrator, Management Fees would equal .40%
and .40%, respectively and Total Fund Operating Expenses would equal
[INSERT%] and [INSERT%], respectively. Other Expenses for the Fund are based
on annualized estimates of expenses for the fiscal year 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. Certain broker-dealers and
financial institutions also may charge their clients fees in connection with
investments in Fund shares, which fees are not reflected in the table. The
Example should not be considered a representation of past or future expenses;
actual Fund expenses may be greater or less than those shown. Moreover, while
the Example assumes a 5% annual return, 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.
2
<PAGE> 9
INVESTMENT OBJECTIVES AND POLICIES
- --------------------------------------------------------------------------------
The Warburg Pincus Money Market Fund (the "Money Market Fund") is a
diversified money market mutual fund whose investment objective is high current
income consistent with liquidity and stability of principal. The Warburg Pincus
Tax Free Money Market Fund (the "Tax Free Fund") is a diversified money market
mutual fund whose objective is to provide investors with as high a level of
current interest income that is exempt from federal personal income taxes as is
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 "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.
The Fund will concentrate its investments in the banking industry except
during temporary defensive periods. Up to 25% of the assets of the Fund may be
invested at any time in the debt obligations of issuers conducting their
principal business activities in any industry other than banking. 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 these limits.
TAX FREE FUND
At least 80% of the Tax Free Fund's assets will be invested in short-term
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. The Fund expects that, except during temporary defensive periods or when
acceptable securities are unavailable for investment by the Fund, at least 65%
of the Fund's assets will be invested in Municipal Securities.
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 or other purposes invest 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
[or sub-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.
3
<PAGE> 10
GENERAL
- --------------------------------------------------------------------------------
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 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"), Fitch Investors Services, Inc., Duff and
Phelps, Inc. and IBCA Limited and its affiliate, IBCA, 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 certain of its affiliates (collectively, the "Warburg
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 impact on the handling of security trades, the
payment of interest and dividends, pricing, account services and other Fund
operations.
The Warburg 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 Warburg 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 Warburg 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 Warburg Service Providers will be monitoring the Year 2000 Issue
in an effort to ensure appropriate preparation.
PORTFOLIO INVESTMENTS
- --------------------------------------------------------------------------------
Set forth below are descriptions of investments the Fund may make. More
detailed information concerning these investments and their related risks is
contained in the Fund's Statement of Additional Information.
4
<PAGE> 11
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 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 Fund 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.
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
5
<PAGE> 12
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 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
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
- --------------------------------------------------------------------------------
Each Fund may invest up to an aggregate of 10% of its total 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 Fund's Statement of Additional Information.
MANAGEMENT OF THE FUNDS
- --------------------------------------------------------------------------------
INVESTMENT ADVISER. Each Fund employs Warburg as investment adviser and BIMC
as sub-investment adviser to each Fund. 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, with respect to the Tax
Free Fund, (v) the extent to which taxable securities will be purchased for and
held by the Tax Free Fund and (vi) the extent to which 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 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 June 30, 1998,
Warburg managed approximately $22 billion of assets, including approximately
$12.3 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
6
<PAGE> 13
of Warburg and its affiliates. Lionel I. Pincus, the managing partner of WP&Co.,
may be deemed to control both WP&Co. and Warburg. Warburg's address is 466
Lexington Avenue, New York, New York 10017-3147.
SUB-INVESTMENT ADVISER. BlackRock Institutional Management Corporation
("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, Delaware 19809. As of March 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 Counsellors Funds Service, Inc.
("Counsellors Service"), a wholly owned subsidiary of Warburg, as a
co-administrator. As co-administrator, Counsellors Service provides shareholder
liaison services to the Fund including responding to shareholder inquiries and
providing information on shareholder investments. Counsellors Service also
performs a variety of other services, including furnishing certain executive and
administrative services, acting as liaison between a Fund and its various
service providers, furnishing corporate secretarial services, which include
preparing materials for meetings of the Board, preparing proxy statements and
annual and semiannual reports, assisting in the preparation of tax returns and
monitoring and developing compliance procedures for the Fund. As compensation,
each Fund pays to Counsellors Service a fee calculated at an annual rate of .10%
of the Fund's average daily net assets.
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 .12% of the Fund's
first $250 million in average daily net assets, .10% of the next $250 million in
average daily net assets, .08% of the next $250 million in average daily net
assets, and .05% of average daily net assets over $750 million, subject to a
minimum annual fee and exclusive out-of-pocket expenses. PFPC has its principal
offices at 400 Bellevue Parkway, Wilmington, Delaware 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, Pennsylvania 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, Massachusetts 02110. BFDS's principal business address is 2 Heritage
Drive, North Quincy, Massachusetts 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,
New York 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,
(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
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.
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<PAGE> 14
Warburg or its affiliates may, at their own expense, provide promotional
incentives for qualified recipients who support the sale of shares of the Fund,
consisting of securities dealers who have sold Fund shares or others, including
banks and other financial institutions, under special arrangements. Incentives
may include opportunities to attend business meetings, conferences, sales or
training programs for recipients' employees or clients and other programs or
events and may also include opportunities to participate in advertising or sales
campaigns and/or shareholder services and programs regarding one or more Warburg
Pincus Funds. Warburg or its affiliates may pay for travel, meals and lodging in
connection with these promotional activities. In some instances, these
incentives may be offered only to certain institutions whose representatives
provide services in connection with the sale or expected sale of Fund shares.
DIRECTORS AND OFFICERS. The officers of 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.
HOW TO OPEN AN ACCOUNT
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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 Funds
P.O. Box 9030
Boston, Massachusetts 02205-9030
OR
Overnight to:
BFDS
Attn.: Warburg Pincus Funds
2 Heritage Drive
North Quincy, Massachusetts 02171
Completed and signed account applications should be sent to the above.
RETIREMENT PLANS AND UTMA/UGMA ACCOUNTS. For information (i) about investing
in the Money Market Fund through a tax-advantaged retirement plan, such as an
Individual Retirement Account ("IRA") or (ii) about opening a Uniform Gifts to
Minors Act ("UGMA") or Uniform Transfers to Minors Act ("UTMA") account in the
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 retirement plans and
UGMA or UTMA accounts.
CHANGES TO ACCOUNT. For information on how to make changes to an account,
including changes to account registration, address and/or privileges, an
investor should telephone Warburg Pincus Funds at (800) 927-2874. Shareholders
are responsible for maintaining current account registrations and 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 $1,000 and the minimum
subsequent investment is $100. For retirement plans and UTMA accounts in the
Money Market Fund, the minimum initial investment is $500. Subsequent minimum
investments can be as low as $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. 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.
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<PAGE> 15
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 the Fund or Warburg Pincus Funds (in U.S. currency)
should be sent along with the completed account application to Warburg Pincus
Funds through its distributor, Counsellors Securities, at the address set forth
above. Checks payable to the investor and endorsed to the order of the Fund or
Warburg Pincus Funds will not be accepted as payment and will be returned to the
sender. If payment is received in proper form prior to the close of regular
trading on The New York Stock Exchange, Inc. (the "NYSE") (currently 4:00 p.m.,
Eastern time) on a day that 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 day payment is received. Checks or money orders
in payment for shares of more than one Warburg Pincus Fund should be made
payable to Warburg Pincus Funds and should be accompanied by a breakdown of
amounts to be invested in each fund. If a check used for purchase does not
clear, the Fund will cancel the purchase and the investor may be liable for
losses or fees incurred. For a description of the manner of calculating the
Fund's net asset value, see "Net Asset Value" below.
BY WIRE. Investors may also purchase 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 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
[Insert Warburg Pincus Fund name(s) here]
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 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.
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<PAGE> 16
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 any specific purchase order,
including certain purchases made by exchange (see "How to Redeem and Exchange
Shares -- Exchange of Shares" below). Purchase orders may be refused if, in
Warburg's 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 Warburg Pincus Funds
at the address indicated above under "How to Open an Account." An investor
should be sure that the redemption request identifies the 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 to Warburg Pincus Funds 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,
10
<PAGE> 17
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 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 IRA or UTMA 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 by making the appropriate election on his
account application. 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. Each Fund reserves the right to terminate or modify the check
redemption procedure at any time, 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 another Warburg Pincus Fund at their
respective net asset values. Exchanges may be effected by mail or by telephone
in the manner described under "Redemption of Shares" above. If an exchange
request is received by Warburg Pincus Funds or 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 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.
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<PAGE> 18
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 Warburg Pincus Funds at 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.
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 proposed by President Clinton. 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.
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, and their state and local taxes that may apply to dividends and
distributions received from the Money Market Fund. In this regard, investors
should be aware that if a portion of any dividend is
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<PAGE> 19
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 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 New York
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 Fund 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.
13
<PAGE> 20
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. 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. [Lionel I.
Pincus may be deemed to be a controlling person of each Fund because he may be
deemed to possess or share investment power over shares owned by clients of
Warburg and certain other entities.]
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.
14
<PAGE> 21
\
TABLE OF CONTENTS
The Funds' Expenses .................................2
Investment Objectives and Policies...................3
General .............................................4
Portfolio Investments ...............................4
Investment Guidelines ...............................6
Management of the Funds .............................6
How to Open an Account ..............................8
How to Purchase Shares ..............................8
How to Redeem and Exchange Shares ..................10
Dividends, Distributions and Taxes .................12
Net Asset Value ....................................13
Performance ........................................13
General Information ................................14
[WARBURG PINCUS LOGO]
P.O. BOX 9030, BOSTON, MA 02205-9030
800-WARBURG (800-927-2874)
www.warburg.com
COUNSELLORS SECURITIES INC., DISTRIBUTOR. WP__-1-0898
-15-
<PAGE> 22
SUBJECT TO COMPLETION, DATED JULY 24, 1998
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed
with the Securities and Exchange Commission. These securities
may not be sold nor may any offers to buy be accepted prior
to the time the registration statement becomes effective.
This Statement of Additional Information does not
constitute a prospectus.
STATEMENT OF ADDITIONAL INFORMATION
[INSERT], 1998
------------------------------
WARBURG PINCUS MONEY MARKET FUND
WARBURG PINCUS TAX FREE MONEY MARKET FUND
P.O. Box 9030, Boston, Massachusetts 02205-9030
For information call: (800) WARBURG
------------------------------
Contents
Page
----
Investment Objectives ................................................... 2
Municipal Securities .................................................... 2
Investment Policies ..................................................... 3
Management of the Funds ................................................. 11
Additional Purchase and Redemption Information .......................... 18
Exchange Privilege ...................................................... 18
Additional Information Concerning Taxes ................................. 19
Determination of Yield .................................................. 22
Independent Accountants and Counsel ..................................... 22
Financial Statements .................................................... 23
Appendix
Description of Commercial Paper and Municipal Securities Ratings..... A-1
This Statement of Additional Information is meant to be read
in conjunction with the combined Prospectus of Warburg Pincus Money Market Fund
(the "Money Market Fund") and Warburg Pincus Tax Free Money Market Fund (the
"Tax Free Fund"), dated [INSERT], 1998, as amended or supplemented from time to
time (the "Prospectus"), and is incorporated by reference in its entirety into
that Prospectus. Because this Statement of Additional Information is not itself
a prospectus, no investment in shares of the Funds should be made solely upon
the information contained herein. Copies of the Funds' Prospectus and
information regarding each Fund's current yield may be obtained by calling the
Fund at (800) 927-2874. Information regarding the status of shareholder accounts
may also be obtained by calling the Fund at the same number or by writing to the
Fund, P.O. Box 9030, Boston, Massachusetts 02205-9030.
<PAGE> 23
INVESTMENT OBJECTIVES
The investment objective of the Money Market Fund is to
provide investors with high current income consistent with liquidity and
stability of principal.
The investment objective of the Tax Exempt Fund is to provide
investors with as high a level of current income that is exempt from federal
personal income taxes as is consistent with preservation of capital and
liquidity.
MUNICIPAL SECURITIES
Under normal circumstances, substantially all of the Tax
Exempt Fund's assets will be invested in Municipal Securities. Municipal
Securities include short-term debt obligations issued by governmental entities
to obtain funds for various public purposes, including the construction of a
wide range of public facilities, the refunding of outstanding obligations, the
payment of general operating expenses and the extension of loans to public
institutions and facilities. Private activity securities that are issued by or
on behalf of public authorities to finance various privately-operated facilities
are included within the term Municipal Securities if the interest paid thereon
is exempt from federal income tax.
The two principal types of Municipal Securities consist of
"general obligation" and "revenue" issues, and the Tax Exempt Fund's portfolio
may include "moral obligation" issues, which are normally issued by special
purpose authorities. General obligation bonds are secured by the issuer's pledge
of its full faith, credit and taxing power for the payment of principal and
interest. Revenue bonds are payable only from the revenues derived from a
particular facility or class of facilities or in some cases, from the proceeds
of a special excise tax or other specific revenue source such as the user of the
facility being financed. Private activity securities held by the Fund are in
most cases revenue bonds and are not payable from the unrestricted revenues of
the issuer. Consequently, the credit quality of such private activity securities
is usually directly related to the credit standing of the corporate user of the
facility involved.
There are, of course, variations in the quality of Municipal
Securities, both within a particular classification and between classifications,
and the yields on Municipal Securities depend upon a variety of factors,
including general money market conditions, the financial condition of the
issuer, general conditions of the municipal bond market, the size of a
particular offering, the maturity of the obligation and the rating of the issue.
The ratings of rating agencies represent their opinions as to the quality of
Municipal Securities. It should be emphasized, however, that ratings are general
and are not absolute standards of quality, and Municipal Securities with the
same maturity, interest rate and rating may have different yields while
Municipal Securities of the same maturity and interest rate with different
ratings may have the same yield. Subsequent to its purchase by the Tax Exempt
Fund, an issue of Municipal Securities may cease to be rated or its rating may
be reduced below the minimum rating required for purchase by the Fund. The
Fund's investment adviser and sub-investment adviser will consider such an event
in determining whether the Fund should continue to hold
2
<PAGE> 24
the obligation. See the Appendix attached hereto for further information
concerning ratings and their significance.
An issuer's obligations under its Municipal Securities are
subject to the provisions of bankruptcy, insolvency and other laws affecting the
rights and remedies of creditors, such as the Federal Bankruptcy Code, and laws,
if any, which may be enacted by federal or state legislatures extending the time
for payment of principal or interest, or both, or imposing other constraints
upon enforcement of such obligations or upon the ability of municipalities to
levy taxes. There is also the possibility that as a result of litigation or
other conditions, the power or ability of any one or more issuers to pay, when
due, principal of and interest on its, or their, Municipal Securities may be
materially adversely affected.
Among other instruments, the Tax Exempt Fund may purchase
short-term Tax Anticipation Notes, Bond Anticipation Notes, Revenue Anticipation
Notes and other forms of short-term loans. Such notes are issued with a
short-term maturity in anticipation of the receipt of tax funds, the proceeds of
bond placements or other revenues.
INVESTMENT POLICIES
The following policies supplement the descriptions of each
Fund's investment objective and policies in the Prospectus.
Additional Information on Investment Practices
Variable Rate Master Demand Notes. Variable rate master demand
notes held by a Fund may have maturities of more than thirteen months, provided:
(i) the Fund is entitled to payment of principal and accrued interest upon not
more than seven days' notice and (ii) the rate of interest on such notes is
adjusted automatically at periodic intervals which may extend up to thirteen
months. In determining the Fund's average weighted portfolio maturity and
whether a variable rate master demand note has a remaining maturity of thirteen
months or less, each note will be deemed by the Fund to have a maturity equal to
the longer of the period remaining until its next interest rate adjustment or
the period remaining until the principal amount owed can be recovered through
demand. In determining whether an unrated variable rate master demand note is of
comparable quality at the time of purchase to instruments rated "high quality"
by any major rating service or when purchasing variable rate master demand
notes, the Fund's investment adviser and sub-investment adviser will consider
the earning power, cash flow and other liquidity ratios of the issuer of the
note and will continuously monitor its financial condition. In addition, when
necessary to ensure that a note is of "high quality," the Fund will require that
the issuer's obligation to pay the principal of the note be backed by an
unconditional bank letter of line of credit, guarantee or commitment to lend.
In the event an issuer of a variable rate master demand note
defaults on its payment obligation, a Fund might be unable 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. However, the Fund will
invest in such instruments only where its investment adviser and
3
<PAGE> 25
sub-investment adviser believe that the risk of such loss is minimal. In
determining average weighted portfolio maturity, a variable rate master demand
note will be deemed to have a maturity equal to the longer of the period
remaining to the next interest rate adjustment or the demand note period.
When-Issued Securities. As stated in the Prospectus, a Fund
may purchase Municipal Securities or portfolio securities, as the case may be,
on a "when-issued" basis (i.e., for delivery beyond the normal settlement date
at a stated price and yield). When the Fund agrees to purchase when-issued
securities, its custodian will set aside cash or liquid securities in a
segregated account equal to the amount of the commitment. Normally, the
custodian will set aside portfolio securities to satisfy a purchase commitment,
and in such a case the Fund may be required subsequently to place additional
assets in the segregated account in order to ensure that the value of the
account remains equal to the amount of the Fund's commitment. It may be expected
that the Fund's net assets will fluctuate to a greater degree when it sets aside
portfolio securities to cover such purchase commitments than when it sets aside
cash. Because the Fund will set aside cash and liquid assets to satisfy its
purchase commitments in the manner described, the Fund's liquidity and ability
to manage its portfolio might be affected in the event its commitments to
purchase when-issued securities ever exceeded 25% of the value of its assets.
When a Fund engages in when-issued transactions, it relies on
the seller to consummate the trade. Failure of the seller to do so may result in
the Fund's incurring a loss or missing an opportunity to obtain a price
considered to be advantageous.
Reverse Repurchase Agreements and Borrowings. A Fund may
borrow funds for temporary purposes and not for leverage by agreeing to sell
portfolio securities to financial institutions such as banks and broker-dealers
and to repurchase them at a mutually agreed-upon date and price. At the time the
Fund enters into such an arrangement (a "reverse repurchase agreement"), it will
place in a segregated custodial account cash or liquid securities having a value
equal to the repurchase price (including accrued interest) and will subsequently
monitor the account to ensure that such equivalent value is maintained. Reverse
repurchase agreements involve the risk that the market value of the securities
sold by the Fund may decline below the repurchase price of those securities.
Reverse repurchase agreements are considered to be borrowings by the Fund under
the Investment Company Act of 1940, as amended (the "1940 Act").
Repurchase Agreements (Money Market Fund only). The seller
under a repurchase agreement will be required to maintain the value of the
securities subject to the agreement at not less than the repurchase price
(including accrued interest). Securities subject to repurchase agreements will
be held by the Fund's custodian or in the Federal Reserve/Treasury book-entry
system or another authorized securities depository.
Stand-By Commitment Agreements (Tax Exempt Fund only). The
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
4
<PAGE> 26
Municipal Securities at a specified price. Stand-by commitments acquired by the
Fund may also be referred to as "put" options. The Fund's right to exercise
stand-by commitments is unconditional and unqualified. A stand-by commitment is
not transferable by the Fund, although the Fund can sell the underlying
securities to a third party at any time.
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 with it. The Fund intends to enter into stand-by commitments only with
brokers, dealers and banks that, in the opinion of Warburg Pincus Asset
Management, Inc., each Fund's investment adviser ("Warburg"), present minimal
credit risks. In evaluating the creditworthiness of the issuer of a stand-by
commitment, Warburg will periodically review relevant financial information
concerning the issuer's assets, liabilities and contingent claims.
The amount payable to the Fund upon its exercise of a stand-by
commitment is normally (i) the Fund's acquisition cost of the Municipal
Securities (excluding any accrued interest which the Fund paid on their
acquisition), less any amortized market premium or plus any amortized market or
original issue discount during the period the Fund owned the securities, plus
(ii) all interest accrued on the securities since the last interest payment date
during that period.
The Fund expects that stand-by commitments will generally be
available without the payment of any direct or indirect consideration. However,
if necessary or advisable, the Fund may pay for a stand-by commitment either
separately in cash or by paying a higher price for portfolio securities which
are acquired subject to the commitment (thus reducing the yield to maturity
otherwise available for the same securities). The total amount paid in either
manner for outstanding stand-by commitments held by the Fund will not exceed 1/2
of 1% of the value of its total assets calculated immediately after each
stand-by commitment is acquired.
The Fund would acquire stand-by commitments solely to
facilitate portfolio liquidity and does not intend to exercise its rights
thereunder for trading purposes. The acquisition of a stand-by commitment would
not affect the valuation or assumed maturity of the underlying Municipal
Securities which, as noted, would continue to be valued in accordance with the
amortized cost method. Stand-by commitments acquired by the Fund would be valued
at zero in determining net asset value. Where the Fund paid any consideration
directly or indirectly for a stand-by commitment, its cost would be reflected as
unrealized depreciation for the period during which the commitment was held by
the Fund. Stand-by commitments would not affect the average weighted maturity of
the Fund's portfolio.
The Internal Revenue Service has issued a revenue ruling to
the effect that a registered investment company will be treated for federal
income tax purposes as the owner of the Municipal Securities acquired subject to
a stand-by commitment and the interest on the Municipal Securities will be
tax-exempt to the Fund.
Third Party Puts (Tax Exempt Fund only). The 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
5
<PAGE> 27
institution and receive the face value thereof (plus accrued interest). These
third party puts are available in several different forms, may be represented by
custodial receipts or trust certificates and may be combined with other features
such as interest rate swaps. 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 granting the option 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 the Fund's portfolio would be
adversely affected.
These bonds coupled with puts may present the same tax issues
as are associated with stand-by commitments. As with any stand-by commitment,
the Fund intends to take the position that it is the owner of any municipal
obligation acquired subject to a third party put, and that tax-exempt interest
earned with respect to such municipal obligations will be tax-exempt in its
hands. There is no assurance that the Internal Revenue Service will agree with
such position in any particular case. Additionally, the federal income tax
treatment of certain other aspects of these investments, including the treatment
of tender fees and swap payments, in relation to various regulated investment
company tax provisions is unclear. However, Warburg intends to manage the Fund
in a manner designed to minimize any adverse impact from these investments.
Taxable Investments (Tax Exempt Fund only). Because the Fund's
purpose is to provide income excluded from gross income for federal income tax
purposes, the Fund generally will invest in taxable obligations only if and when
the investment adviser believes it would be in the best interests of the Fund's
investors to do so. Situations in which the Fund may invest up to 20% of its
total assets in taxable securities include: (i) pending investment of proceeds
of sales of Fund shares or the sale of its portfolio securities or (ii) when the
Fund requires highly liquid securities in order to meet anticipated redemptions.
The Fund may temporarily invest more than 20% of its total assets in taxable
securities to maintain a "defensive" posture when the Fund's investment adviser
determines that it is advisable to do so because of adverse market conditions
affecting the market for Municipal Securities generally.
Among the taxable investments in which the Fund may invest are
repurchase agreements and time deposits maturing in not more than seven days.
The 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 seller under a repurchase agreement will be required to maintain the value
of the securities subject to the agreement at not less than the repurchase price
(including accrued interest). Securities subject to repurchase agreements will
be held by the Fund's custodian or in the Federal Reserve/Treasury book-entry
system or another authorized securities depository.
6
<PAGE> 28
Other Investment Limitations
Money Market Fund. The investment limitations numbered 1
through 6 may not be changed without the affirmative vote of the holders of a
majority of the Money Market Fund's outstanding shares. Such majority is defined
as the lesser of (i) 67% or more of the shares present at a meeting, if the
holders of more than 50% of the outstanding shares of the Fund are present or
represented by proxy, or (ii) more than 50% of the outstanding shares.
Investment limitations 7 and 12 may be changed by a vote of the Fund's Board of
Directors (the "Board") at any time.
The Money Market Fund may not:
1. Borrow money, issue senior securities or enter into
reverse repurchase agreements except for temporary or emergency purposes and not
for leveraging, and then in amounts not in excess of 10% of the value of the
Fund's assets at the time of such borrowing; or mortgage, pledge or hypothecate
any assets except in connection with any such borrowing and in amounts not in
excess of the lesser of the dollar amounts borrowed or 10% of the value of the
Fund's assets at the time of such borrowing. The Fund does not currently intend
to enter into reverse repurchase agreements in amounts in excess of 5% of its
assets at the time the agreement is entered into. Whenever borrowings exceed 5%
of the value of the Fund's total assets, the Fund will not make any additional
investments.
2. Purchase or sell real estate, real estate investment
trust securities, commodities or commodity contracts, or invest in oil, gas or
mineral exploration or development programs, except that the Fund may purchase
commercial paper issued by companies that invest in real estate or interests
therein.
3. Purchase the securities of any issuer if as a result
more than 5% of the value of the Fund's assets would be invested in the
securities of such issuer, except that this 5% limitation does not apply to
securities issued or guaranteed by the United States government, its agencies or
instrumentalities, and except that up to 25% of the value of the Fund's assets
may be invested without regard to this 5% limitation.
4. Purchase any securities which would cause more than
25% of the value of the Fund's total assets at the time of purchase to be
invested in the securities of issuers conducting their principal business
activities in the same industry; provided that there shall be no limit on the
purchase of obligations issued or guaranteed by the United States, any state,
territory or possession of the United States, the District of Columbia or any of
their authorities, agencies, instrumentalities or political sub-divisions or
certificates of deposit, time deposits, savings deposits and bankers'
acceptances.
5. Make loans except that the Fund may purchase or hold
debt obligations in accordance with its investment objective, policies and
limitations and enter into repurchase agreements.
7
<PAGE> 29
6. Underwrite any issue of securities except to the
extent that the purchase of debt obligations directly from the issuer thereof in
accordance with the Fund's investment objective, policies and limitations may be
deemed to be underwriting.
7. Purchase securities on margin, make short sales of
securities or maintain a short position.
8. Write or sell puts, calls, straddles, spreads or
combinations thereof.
9. Invest in common stocks, preferred stocks, warrants,
other equity securities, corporate bonds or indentures, state bonds, municipal
bonds or industrial revenue bonds.
10. Purchase securities of other investment companies
except in connection with a merger, consolidation, acquisition or
reorganization.
11. Invest more than 10% of the value of the Fund's total
assets in securities which may be illiquid because of legal or contractual
restrictions on resale or securities for which there are no readily available
market quotations. For purposes of this limitation, repurchase agreements with
maturities greater than seven days after notice by the Fund, variable rate
master demand notes providing for settlement upon maturities longer than seven
days and savings accounts which require more than seven days' notice prior to
withdrawal shall be considered illiquid securities.
12. Invest in oil, gas or mineral leases.
If a percentage restriction (other than the percentage
limitation set forth in No. 1 above) is adhered to at the time of an investment,
a later increase or decrease in the percentage of assets resulting from a change
in the values of portfolio securities or in the amount of the Fund's assets will
not constitute a violation of such restriction.
Tax Exempt Fund. The investment limitations numbered 1 through
6 may not be changed without the affirmative vote of the holders of a majority
of the Tax Exempt Fund's outstanding shares. Such majority is defined as the
lesser of (i) 67% or more of the shares present at a meeting, if the holders of
more than 50% of the outstanding shares of the Fund are present or represented
by proxy, or (ii) more than 50% of the outstanding shares. Investment
limitations 7 and 11 may be changed by a vote of the Fund's Board of Directors
at any time.
The Tax Exempt Fund may not:
1. Invest less than 80% of its assets in securities the
interest on which is exempt from federal income tax, except during temporary
defensive periods or under unusual market conditions, as determined by the
Fund's investment adviser.
2. Borrow money, issue senior securities or enter into
reverse repurchase agreements except for temporary or emergency purposes, and
not for leveraging, and then in
8
<PAGE> 30
amounts not in excess of 10% of the value of the Fund's assets at the time of
such borrowing; or mortgage, pledge or hypothecate any assets except in
connection with any such borrowing and in amounts not in excess of the lesser of
the dollar amounts borrowed or 10% of the value of the Fund's assets at the time
of such borrowing. The Fund does not currently intend to enter into reverse
repurchase agreements in amounts in excess of 5% of its assets at the time the
agreement is entered into. Whenever borrowings exceed 5% of the value of the
Fund's total assets, the Fund will not make any additional investments.
3. Purchase any securities which would cause more than
25% of the value of the Fund's total assets at the time of purchase to be
invested in the securities of issuers conducting their principal business
activities in the same industry; provided that there shall be no limit on the
purchase of (i) obligations issued by the United States, any state, territory or
possession of the United States, the District of Columbia or any of their
authorities, agencies, instrumentalities or political sub-divisions, (ii)
certificates of deposit issued by United States branches of United States banks
or (iii) Municipal Securities the interest on which is paid solely from revenues
of economically related projects. For purposes of this restriction, private
activity securities ultimately payable by companies within the same industry are
treated as if they were issued by issuers in the same industry.
4. Make loans except that the Fund may purchase or hold
debt obligations and enter into repurchase agreements in accordance with its
investment objective, policies and limitations.
5. Underwrite any issue of securities except to the
extent that the purchase of debt obligations directly from the issuer thereof in
accordance with the Fund's investment objective, policies and limitations may be
deemed to be underwriting.
6. Purchase or sell real estate, real estate investment
trust securities, commodities or commodity contracts, or invest in oil, gas or
mineral exploration or development programs, except that the Fund may invest in
debt obligations secured by real estate, mortgages or interests therein.
7. Purchase securities on margin, make short sales of
securities or maintain short positions.
8. Write or sell puts, calls, straddles, spreads or
combinations thereof, except that the Fund may acquire stand-by commitments.
9. Purchase securities of other investment companies
except in connection with a merger, consolidation, acquisition or
reorganization.
10. Invest more than 10% of the value of the Fund's
total assets in securities which may be illiquid because of legal or contractual
restrictions on resale or securities for which there are not readily available
market quotations. For purposes of this limitation, repurchase agreements with
maturities greater than seven days and variable rate master demand
9
<PAGE> 31
notes providing for settlement upon more than seven days notice by the Fund and
time deposits maturing in more than seven calendar days shall be considered
illiquid securities.
11. Invest in oil, gas or mineral leases.
If a percentage restriction (other than the percentage
limitation set forth in No. 2 above) is adhered to at the time of an investment,
a later increase or decrease in the percentage of assets resulting from a change
in the values of portfolio securities or in the amount of the Fund's assets will
not constitute a violation of such restriction.
Portfolio Valuation
Each Fund's securities are valued on the basis of amortized
cost. Under this method, a Fund values a portfolio security at cost on the date
of purchase and thereafter assumes a constant value of the security for purposes
of determining net asset value, which normally does not change in response to
fluctuating interest rates. Although the amortized cost method seems to provide
certainty in portfolio valuation, it may result in periods during which values,
as determined by amortized cost, are higher or lower than the amount the Fund
would receive if it sold the securities. In connection with amortized cost
valuation, the Board has established procedures that are intended to stabilize
the Fund's net asset value per share for purposes of sales and redemptions at
$1.00. These procedures include review by the Board, at such intervals as it
deems appropriate, to determine the extent, if any, to which the Fund's net
asset value per share calculated by using available market quotations deviates
from $1.00 per share. In the event such deviation exceeds 1/2 of 1%, the Board
will promptly consider what action, if any, should be initiated. If the Board
believes that the amount of any deviations from the Fund's $1.00 amortized cost
price per share may result in material dilution or other unfair results to
investors or existing shareholders, it will take such steps as it considers
appropriate to eliminate or reduce to the extent reasonably practicable any such
dilution or unfair results. These steps may include selling portfolio
instruments prior to maturity; shortening the Fund's average portfolio maturity;
withholding or reducing dividends; redeeming shares in kind; reducing the number
of the Fund's outstanding shares without monetary consideration; or utilizing a
net asset value per share determined by using available market quotations.
Portfolio Transactions
Warburg is responsible for establishing, reviewing, and, where
necessary, modifying a Fund's investment program to achieve its investment
objective. BlackRock Institutional Management Corporation ("BIMC") generally
will select specific portfolio investments and effect transactions for each
Fund. Purchases and sales of portfolio securities are usually principal
transactions without brokerage commissions effected directly with the issuer or
with dealers who specialize in money market instruments. BIMC seeks to obtain
the best net price and the most favorable execution of orders. To the extent
that the execution and price offered by more than one dealer are comparable,
BIMC may, in its discretion, effect
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<PAGE> 32
transactions in portfolio securities with dealers who provide the relevant Fund
with research advice or other services.
Investment decisions for a Fund concerning specific portfolio
securities are made independently from those for other clients advised by BIMC.
Such other investment clients may invest in the same securities as the Fund.
When purchases or sales of the same security are made at substantially the same
time on behalf of such other clients, transactions are averaged as to price, and
available investments allocated as to amount, in a manner which BIMC believes to
be equitable to each client, including the Fund. In some instances, this
investment procedure may adversely affect the price paid or received by the Fund
or the size of the position obtained or sold for the Fund. To the extent
permitted by law, BIMC may aggregate the securities to be sold or purchased for
each Fund with those to be sold or purchased for such other investment clients
in order to obtain best execution.
In no instance will portfolio securities be purchased from or
sold to Warburg, BIMC, PNC Bank, National Association ("PNC") or Counsellors
Securities Inc. ("Counsellors Securities") or any affiliated person of such
companies, except pursuant to an exemption received from the Securities and
Exchange Commission (the "SEC").
The Tax Exempt Fund may participate, if and when practicable,
in bidding for the purchase of Municipal Securities directly from an issuer for
its portfolio in order to take advantage of the lower purchase price available
to members of such a group. The Fund will engage in this practice, however, only
when Warburg or BIMC, in their sole discretion, believes such practice to be
otherwise in the Fund's interest.
Each Fund does not intend to seek profits through short-term
trading. A Fund's annual portfolio turnover will be relatively high but is not
expected to have a material effect on its net income. Each Fund's turnover is
expected to be zero for regulatory reporting purposes.
MANAGEMENT OF THE FUNDS
Officers and Board of Directors
The names (and ages) of the Fund's Directors and officers,
their addresses, present positions and principal occupations during the past
five years and other affiliations are set forth below.
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<PAGE> 33
Richard N. Cooper* (63) ............... Director
Harvard University Professor at Harvard University;
1737 Cambridge Street National Intelligence Council from
Cambridge, Massachusetts 02138 June 1995 until January 1997; Director
or Trustee of Circuit City Stores,
Inc. (retail electronics and
appliances) and Phoenix Home Life
Insurance Company; Director/Trustee of
other investment companies advised by
Warburg.
Jack W. Fritz (71) .................... Director
2425 North Fish Creek Road Private investor; Consultant and
P.O. Box 483 Director of Fritz Broadcasting, Inc.
Wilson, Wyoming 83014 and Fritz Communications (developers
and operators of radio stations);
Director of Advo, Inc. (direct mail
advertising); Director/Trustee of
other investment companies advised by
Warburg.
John L. Furth* (67) ................... Chairman of the Board
466 Lexington Avenue Vice Chairman, Managing Director and
New York, New York 10017-3147 Director of Warburg; Associated with
Warburg since 1970; Director of
Counsellors Securities; Chairman of
the Board of other investment
companies advised by Warburg.
Jeffrey E. Garten (51) ................ Director
Box 208200 Dean of Yale School of Management and
New Haven, Connecticut 06520-8200 William S. Beinecke Professor in the
Practice of International Trade and
Finance; Undersecretary of Commerce
for International Trade from November
1993 to October 1995; Professor at
Columbia University from September
1992 to November 1993;
Director/Trustee of other investment
companies advised by Warburg.
Arnold M. Reichman* (50) .............. Director
466 Lexington Avenue Managing Director, Chief Operating
New York, New York 10017-3147 Officer and Assistant Secretary of
Warburg; Director of The RBB Fund,
Inc.; Associated with Warburg since
1984; Director and officer of
Counsellors Securities;
Director/Trustee of other investment
companies advised by Warburg.
- ---------------------
* Indicates a Director who is an "interested person" of the Fund as defined in
the 1940 Act.
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<PAGE> 34
Alexander B. Trowbridge (68) .......... Director
1317 F Street, N.W., 5th Floor President of Trowbridge Partners, Inc.
Washington, DC 20004 (business consulting) from January
1990 to November 1996; Director or
Trustee of New England Mutual Life
Insurance Co., ICOS Corporation
(biopharmaceuticals), Waste
Management, Inc. (solid and hazardous
waste collection and disposal), IRI
International (energy services), The
Rouse Company (real estate
development), Harris Corp.
(electronics and communications
equipment), The Gillette Co. (personal
care products) and Sun Company Inc.
(petroleum refining and marketing);
Director/Trustee of other investment
companies advised by Warburg.
Eugene L. Podsiadlo (41) .............. President
466 Lexington Avenue Managing Director of Warburg;
New York 10017-3147 Associated with Warburg since 1991;
Vice President of Citibank, N.A. from
1987-1991; Officer of Counsellors
Securities and other investment
companies advised by Warburg.
Eugene P. Grace (46) .................. Vice President and Secretary
466 Lexington Avenue Senior Vice President of Warburg;
New York, New York 10017-3147 Associated with Warburg since April
1994; Attorney-at-law from September
1989-April 1994; life insurance agent,
New York Life Insurance Company from
1993-1994; Officer of Counsellors
Securities and other investment
companies advised by Warburg.
Stephen Distler (45) .................. Vice President
466 Lexington Avenue Managing Director of Warburg;
New York, New York 10017-3147 Associated with Warburg since 1984;
Treasurer of Counsellors Securities;
Officer of other investment companies
advised by Warburg.
Howard Conroy, CPA (44) ............... Vice President and Chief Financial
466 Lexington Avenue Officer Vice President of Warburg;
New York, New York 10017-3147 Associated with Warburg since 1992;
Officer of other investment companies
advised by Warburg.
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<PAGE> 35
Daniel S. Madden, CPA (32) ............ Treasurer and Chief Accounting Officer
466 Lexington Avenue Vice President of Warburg; Associated
New York, New York 10017-3147 with Warburg since 1995; Associated
with BlackRock Financial Management,
Inc. from September 1994 to October
1995; Associated with BEA Associates
from April 1993 to September 1994;
Associated with Ernst & Young LLP from
1990 to 1993; Officer of other
investment companies advised by
Warburg.
Janna Manes, Esq. (30) ................ Assistant Secretary
466 Lexington Avenue Vice President of Warburg; Associated
New York, New York 10017 with Warburg since 1996; Associated
with the law firm of Willkie Farr &
Gallagher from 1993-1996; Officer of
other investment companies advised by
Warburg.
No employee of Warburg, BIMC, PNC or PFPC Inc., the Fund's
co-administrator ("PFPC"), or any of their affiliates receives any compensation
from the Fund for acting as an officer or Director of the Fund. Each Director
who is not a director, officer or employee of Warburg, PFPC or any of their
affiliates receives an annual fee of $500, and $250 for each meeting of the
Board attended by him for his services as Director and is reimbursed for
expenses incurred in connection with his attendance at Board meetings. Each
member of the Audit Committee receives an annual fee of $250, and the chairman
of the Audit Committee receives an annual fee of $325.
Directors' Total Compensation
Total Compensation from
Compensation from all Investment Companies
Name of Director each Fund+ Managed by Warburg*
- ---------------- --------------- ------------------
John L. Furth None** None**
Richard N. Cooper $2,000 $44,500
Jack W. Fritz $2,000 $44,500
Jeffrey E. Garten N/A N/A
Arnold M. Reichman None** None**
Alexander B. Trowbridge $2,000 $44,500
- --------------------
+ Amounts shown are estimates of payments to be made for the remaining
period of the fiscal year ending December 31, 1998 pursuant to existing
arrangements.
* Each Director also serves as a Director or Trustee of [__] other
investment companies advised by Warburg.
** Mr. Furth and Mr. Reichman receive compensation as affiliates of Warburg
and, accordingly, receive no compensation from a Fund or any other
investment company advised by Warburg.
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<PAGE> 36
Investment Advisers, Sub-Investment Adviser and Administrator
and Co-Administrator
Warburg serves as investment to the Money Market Fund and Tax
Exempt Fund, BIMC serves as sub-investment adviser and administrator to each
Fund, and Counsellors Funds Service, Inc. ("Counsellors Service") serves as
co-administrator to the Funds pursuant to written agreements (the "Advisory
Agreement," the "Sub-Advisory Agreements" and the "Co-Administration Agreement,"
respectively, and collectively, the "Agreements"). The services provided by and
the fees payable by a Fund to Warburg, BIMC and Counsellors Service under the
respective Agreements are described in the Prospectus.
Banking Laws
Banking laws and regulations presently (i) prohibit a bank
holding company registered under the Federal Bank Holding Company Act of 1956
(the "Holding Company Act") or any bank or non-bank affiliate thereof from
sponsoring, organizing, controlling, or distributing the shares of a registered,
open-end investment company continuously engaged in the issuance of its shares,
but (ii) do not prohibit such a holding company or affiliate from acting as
investment adviser, transfer agent or custodian to such an investment company.
PNC and BIMC are subject to such banking laws and regulations.
BIMC, PNC and the Funds have been advised by Messrs. Ballard,
Spahr, Andrews & Ingersoll that BIMC and PNC may perform the services for the
Fund contemplated by their respective agreements with the Fund and the
Prospectus without violation of applicable banking laws or regulations. Such
counsel have pointed out, however, that future changes in legal requirements
relating to the permissible activities of banks and their affiliates, as well as
future interpretations of present requirements, could prevent one or more of
them from continuing to perform services for the Fund. If BIMC or PNC were
prohibited from providing services to the Fund, the Board would select another
qualified firm. Any new investment or sub-investment advisory agreement would be
subject to shareholder approval.
Custodian and Transfer Agent
PNC is custodian of each Fund's assets pursuant to a custodian
agreement (the "Custodian Agreement"). Under the Custodian Agreement, PNC (i)
maintains a separate account or accounts in the name of the Fund, (ii) holds and
transfers portfolio securities on account of the Fund, (iii) makes receipts and
disbursements of money on behalf of the Fund, (iv) collects and receives all
income and other payments and distributions on account of the Fund's portfolio
securities and (v) makes periodic reports to the Board concerning the Fund's
custodial arrangements. PNC is authorized to select one or more banks or trust
companies to serve as sub-custodian on behalf of a Fund, provided that PNC
remains responsible for the performance of all its duties under the Custodian
Agreement and holds the Fund harmless from the acts and omissions of any
sub-custodian. PNC is an indirect wholly owned subsidiary of PNC Bank Corp., and
its principal business address is 1600 Market Street, Philadelphia, Pennsylvania
19103.
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<PAGE> 37
State Street Bank and Trust Company ("State Street") has
agreed to serve as each Fund's shareholder servicing, transfer and dividend
disbursing agent pursuant to a Transfer Agency and Service Agreement, under
which State Street (i) issues and redeems shares of the Fund, (ii) addresses and
mails all communications by the Fund to record owners of the Fund shares,
including reports to shareholders, dividend and distribution notices and proxy
material for its meetings of shareholders, (iii) maintains shareholder accounts
and, if requested, sub-accounts, and (iv) makes periodic reports to the Board
concerning the transfer agent's operations with respect to the Fund. State
Street has delegated to Boston Financial Data Services, Inc. ("BFDS"), an
affiliated company, responsibility for most shareholder servicing functions. The
principal business address of State Street is 225 Franklin Street, Boston,
Massachusetts 02110. BFDS's principal business address is 2 Heritage Drive,
Boston, Massachusetts 02171.
Organization of the Funds
The Funds are incorporated in Maryland. See the Prospectus,
"General Information." All shareholders of a Fund, upon liquidation, will
participate ratably in the Fund's net assets. Shares do not have cumulative
voting rights, which means that holders of more than 50% of the shares voting
for the election of Directors can elect all Directors. Shares are transferable
but have no preemptive, conversion or subscription rights.
Distribution and Shareholder Servicing
Common Shares. Each Fund has entered into a Shareholder
Servicing and Distribution Plan (the "12b-1 Plan"), pursuant to Rule 12b-1 under
the 1940 Act, pursuant to which a Fund will pay Counsellors Securities, in
consideration for Services (as defined below), a fee calculated at an annual
rate of .25% of the average daily net assets of the Common Shares of the Fund.
Services performed by Counsellors Securities include (i) the sale of the Common
Shares, as set forth in the 12b-1 Plan ("Selling Services"), (ii) ongoing
servicing and/or maintenance of the accounts of Common Shareholders of the Fund,
as set forth in the 12b-1 Plan ("Shareholder Services"), and (iii) sub-transfer
agency services, subaccounting services or administrative services related to
the sale of the Common Shares, as set forth in the 12b-1 Plan ("Administrative
Services" and collectively with Selling Services and Administrative Services,
"Services") including, without limitation, (a) payments reflecting an allocation
of overhead and other office expenses of Counsellors Securities related to
providing Services; (b) payments made to, and reimbursement of expenses of,
persons who provide support services in connection with the distribution of the
Common Shares including, but not limited to, office space and equipment,
telephone facilities, answering routine inquiries regarding the Fund, and
providing any other Shareholder Services; (c) payments made to compensate
selected dealers or other authorized persons for providing any Services; (d)
costs relating to the formulation and implementation of marketing and
promotional activities for the Common Shares, including, but not limited to,
direct mail promotions and television, radio, newspaper, magazine and other mass
media advertising, and related travel and entertainment expenses; (e) costs of
printing and distributing prospectuses, statements of additional information and
reports of the Fund to prospective shareholders of the Fund; and (f) costs
16
<PAGE> 38
involved in obtaining whatever information, analyses and reports with respect to
marketing and promotional activities that the Fund may, from time to time, deem
advisable.
Pursuant to the 12b-1 Plan, Counsellors Securities will
provide the Fund's Board with periodic reports of amounts expended under the
12b-1 Plan and the purpose for which the expenditures were made.
Advisor Shares. Each Fund may, in the future, enter into
agreements ("Agreements") with institutional shareholders of record,
broker-dealers, financial institutions, depository institutions, retirement
plans and financial intermediaries ("Institutions") to provide certain
distribution, shareholder servicing, administrative and/or accounting services
for their clients or customers (or participants in the case of retirement plans)
("Customers") who are beneficial owners of Advisor Shares. Agreements will be
governed by a distribution plan (the "Distribution Plan") pursuant to Rule 12b-1
under the 1940 Act. The Distribution Plan requires the Board, at least
quarterly, to receive and review written reports of amounts expended under the
Distribution Plan and the purpose for which such expenditures were made.
An Institution with which a Fund has entered into an Agreement
with respect to its Advisor Shares may charge a Customer one or more of the
following types of fees, as agreed upon by the Institution and the Customer,
with respect to the cash management or other services provided by the
Institution: (i) account fees (a fixed amount per month or per year); (ii)
transaction fees (a fixed amount per transaction processed); (iii) compensation
balance requirements (a minimum dollar amount a Customer must maintain in order
to obtain the services offered); or (iv) account maintenance fees (a periodic
charge based upon the percentage of assets in the account or of the dividend
paid on those assets). Services provided by an Institution to Customers are in
addition to, and not duplicative of, the services to be provided under the
Fund's co-administration and distribution and shareholder servicing
arrangements. A Customer of an Institution should read the Prospectus and this
Statement of Additional Information in conjunction with the Agreement and other
literature describing the services and related fees that would be provided by
the Institution to its Customers prior to any purchase of Fund shares.
Prospectuses are available from the Fund's distributor upon request. No
preference will be shown in the selection of Fund investments for the
instruments of Institutions.
General. The Distribution Plan and the 12b-1 Plan will
continue in effect for so long as their continuance is specifically approved at
least annually by the Board, including a majority of the Directors who are not
interested persons of the Fund and who have no direct or indirect financial
interest in the operation of the Distribution Plans or the 12b-1 Plans, as the
case may be ("Independent Directors"). Any material amendment of the
Distribution Plan or 12b-1 Plan would require the approval of the Board in the
same manner. Neither the Distribution Plan nor the 12b-1 Plan may be amended to
increase materially the amount to be spent thereunder without shareholder
approval of the relevant class of shares. The Distribution Plan or 12b-1 Plan
may be terminated at any time, without penalty, by vote of a majority of the
Independent Directors or by a vote of a majority of the outstanding voting
securities of the relevant class of shares of the Fund.
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<PAGE> 39
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Information on how to purchase and redeem Fund shares and how
such shares are priced is included in the Prospectus.
Under the 1940 Act, each Fund may suspend the right of
redemption or postpone the date of payment upon redemption for any period during
which The New York Stock Exchange, Inc. (the "NYSE") is closed, other than
customary weekend and holiday closings, or during which trading on the NYSE is
restricted, or during which (as determined by the SEC by rule or regulation) an
emergency exists as a result of which disposal or fair valuation of portfolio
securities is not reasonably practicable, or for such other periods as the SEC
may permit. (A Fund may also suspend or postpone the recordation of an exchange
of its shares upon the occurrence of any of the foregoing conditions.)
If the Board determines that conditions exist which make
payment of redemption proceeds wholly in cash unwise or undesirable, a Fund may
make payment wholly or partly in securities or other investment instruments
which may not constitute securities as such term is defined in the applicable
securities laws. If a redemption is paid wholly or partly in securities or other
property, a shareholder would incur transaction costs in disposing of the
redemption proceeds. The Fund will comply with Rule 18f-1 promulgated under the
1940 Act with respect to redemptions in kind.
Automatic Cash Withdrawal Plan. An automatic cash withdrawal
plan (the "Plan") is available to shareholders who wish to receive specific
amounts of cash periodically. Withdrawals may be made under the Plan by
redeeming as many shares of a Fund as may be necessary to cover the stipulated
withdrawal payment. To the extent that withdrawals exceed dividends,
distributions and appreciation of a shareholder's investment in the Fund, there
will be a reduction in the value of the shareholder's investment and continued
withdrawal payments may reduce the shareholder's investment and ultimately
exhaust it. Withdrawal payments should not be considered as income from
investment in the Fund. All dividends and distributions on shares in the Plan
are automatically reinvested at net asset value in additional shares of the
Fund.
EXCHANGE PRIVILEGE
An exchange privilege with certain other funds advised by
Warburg is available to investors in a Fund. The funds into which exchanges of
Common Shares currently can be made are listed in the Common Share Prospectus.
Exchanges may also be made between certain Warburg Pincus Advisor Funds.
The exchange privilege enables shareholders to acquire shares
in a fund with a different investment objective when they believe that a shift
between funds is an appropriate investment decision. Subject to the restrictions
on exchange purchases contained in the Prospectus and any other applicable
restrictions, this privilege is available to shareholders residing in any state
in which the Common Shares or Advisor Shares being acquired, as relevant, may
legally be sold. Prior to any exchange, the investor should obtain and review a
18
<PAGE> 40
copy of the current prospectus of the relevant class of each fund into which an
exchange is being considered. Shareholders may obtain a prospectus of the
relevant class of the fund into which they are contemplating an exchange from
Counsellors Securities.
Subject to the restrictions described above, upon receipt of
proper instructions and all necessary supporting documents, shares submitted for
exchange are redeemed at the then-current net asset value of the relevant class
and the proceeds are invested on the same day, at a price as described above, in
shares of the relevant class of the fund being acquired. The exchange privilege
may be modified or terminated at any time upon 30 days' notice to shareholders.
ADDITIONAL INFORMATION CONCERNING TAXES
The discussion set out below of tax considerations generally
affecting the Fund and its shareholders is intended to be only a summary and is
not intended as a substitute for careful tax planning by prospective
shareholders. Shareholders are advised to consult their own tax advisers with
respect to the particular tax consequences to them of an investment in the Fund.
As described above and in the Fund's Prospectus, the Tax
Exempt Fund is designed to provide investors with current income which is
excluded from gross income for federal income tax purposes. The Fund is not
intended to constitute a balanced investment program and is not designed for
investors seeking capital gains or maximum tax-exempt income irrespective of
fluctuations in principal. Investment in the Fund would not be suitable for
tax-exempt institutions, individual retirement plans, employee benefit plans and
individual retirement accounts since such investors would not gain any
additional tax benefit from the receipt of tax-exempt income.
Each Fund intends to continue to qualify as a "regulated
investment company" under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"). If it qualifies as a regulated investment company, a Fund
will pay no federal income taxes on its taxable net investment income (that is,
taxable income other than net realized capital gains) and its net realized
capital gains that are distributed to shareholders. To qualify under Subchapter
M, each Fund must, among other things: (i) distribute to its shareholders at
least the sum of 90% of its taxable net investment income (for this purpose
consisting of taxable net investment income and net realized short-term capital
gains) plus 90% of its net tax-exempt interest income; (ii) derive at least 90%
of its gross income from dividends, interest, payments with respect to loans of
securities, gains from the sale or other disposition of securities, or other
income (including, but not limited to, gains from options, futures, and forward
contracts) derived with respect to the Fund's business of investing in
securities; and (iii) diversify its holdings so that, at the end of each fiscal
quarter of the Fund (a) at least 50% of the market value of the Fund's assets is
represented by cash, U.S. government securities and other securities, with those
other securities limited, with respect to any one issuer, to an amount no
greater in value than 5% of the Fund's total assets and to not more than 10% of
the outstanding voting securities of the issuer, and (b) not more than 25% of
the market value of
19
<PAGE> 41
the Fund's assets is invested in the securities of any one issuer (other than
U.S. government securities or securities of other regulated investment
companies) or of two or more issuers that the Fund controls and that are
determined to be in the same or similar trades or businesses or related trades
or businesses. As a regulated investment company, the Fund will be subject to a
4% non-deductible excise tax measured with respect to certain undistributed
amounts of ordinary income and capital gain required to be but not distributed
under a prescribed formula. The formula requires payment to shareholders during
a calendar year of distributions representing at least 98% of the Fund's taxable
ordinary income for the calendar year and at least 98% of the excess of its
capital gains over capital losses realized during the one-year period ending
December 31 during such year, together with any undistributed, untaxed amounts
of ordinary income and capital gains from the previous calendar year. The Funds
expect to pay the dividends and make the distributions necessary to avoid the
application of this excise tax.
Although each Fund expects to be relieved of all or
substantially all federal income taxes, depending upon the extent of its
activities in states and localities in which its offices are maintained, in
which its agents or independent contractors are located or in which it is
otherwise deemed to be conducting business, that portion of a Fund's income
which is treated as earned in any such state or locality could be subject to
state and local tax. Any taxes paid by the Fund would reduce the amount of
income and gains available for distribution to shareholders.
Investors in the Money Market Fund should be aware that it is
possible that some portion of the Fund's income from investments in obligations
of foreign banks could become subject to foreign taxes.
Because the Tax Exempt Fund will distribute exempt interest
dividends, interest on indebtedness incurred by a shareholder to purchase or
carry Fund shares is not deductible for federal income tax purposes. In
addition, the Code may require a shareholder, if he or she receives exempt
interest dividends, to treat as taxable income a portion of certain otherwise
non-taxable social security and railroad retirement benefit payments.
Furthermore, that portion of any dividend paid by the Fund which represents
income derived from private activity securities held by the Fund may not retain
its tax-exempt status in the hands of a shareholder who is a "substantial user"
of a facility financed by such bonds, or a "related person" thereof. Moreover,
as noted in the Prospectus, (i) some of the Fund's dividends may be a tax
preference item, or a component of an adjustment item, for purposes of the
federal individual and corporate alternative minimum taxes and (ii) the receipt
of Fund dividends and distributions may affect a corporate shareholder's federal
"environmental" tax liability if that tax is reinstated as proposed by President
Clinton. In addition, the receipt of Fund dividends and distributions may affect
a foreign corporate shareholder's federal "branch profits" tax liability and a
Subchapter S corporation shareholder's federal "excess net passive income" tax
liability. Shareholders should consult their own tax advisers as to whether they
(i) may be "substantial users" with respect to a facility or "related" to such
users within the meaning of the Code and (ii) are subject to a federal
alternative minimum tax, the federal environmental tax, the federal "branch
profits" tax, or the federal "excess net passive income" tax.
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<PAGE> 42
While each Fund does not expect to realize net long-term
capital gains, any such realized gains will be distributed as described in the
Prospectus. Such distributions ("capital gain dividends") will be taxable to
shareholders as long-term capital gains, regardless of how long a shareholder
has held Fund shares, and will be designated as capital gain dividends in a
written notice mailed by a Fund to shareholders after the close of the Fund's
taxable year. Gain or loss, if any, recognized on the sale or other disposition
of shares of the Fund will be taxed as capital gain or loss if the shares are
capital assets in the shareholder's hands. Generally, a shareholder's gain or
loss will be a long-term gain or loss if the shares have been held for more than
one year. If a shareholder sells or otherwise disposes of a share of the Fund
before holding it for more than six months, any loss on the sale or other
disposition of such share shall be treated as a long-term capital loss to the
extent of any capital gain dividends received by the shareholder with respect to
such share.
A shareholder of a Fund receiving dividends or distributions
in additional shares should be treated for federal income tax purposes as
receiving a distribution in an amount equal to the amount of money that a
shareholder receiving cash dividends or distributions receives, and should have
a cost basis in the shares received equal to that amount.
Each shareholder of the Money Market Fund will receive an
annual statement as to the federal income tax status of his dividends and
distributions from the Fund for the prior calendar year. Furthermore,
shareholders will also receive, if appropriate, various written notices after
the close of the Fund's taxable year regarding the federal income tax status of
certain dividends and distributions that were paid (or that are treated as
having been paid) by the Fund to its shareholders during the preceding year.
Each shareholder of the Tax Exempt Fund will receive an annual
statement as to the federal personal income tax status of his dividends and
distributions from the Fund for the prior calendar year. Furthermore,
shareholders will also receive, if appropriate, various written notices after
the close of the Fund's taxable year regarding the federal income tax status of
certain dividends and distributions that were paid (or that are treated as
having been paid) by the Fund to its shareholders during the preceding year.
Shareholders should consult their tax advisers as to any other state and local
taxes that may apply to the Fund's dividends and distributions. The dollar
amount of dividends excluded from federal income taxation and the dollar amounts
subject to federal income taxation, if any, will vary for each shareholder
depending upon the size and duration of each shareholder's investment in the
Fund. In the event that the Fund derives taxable net investment income, it
intends to designate as taxable dividends the same percentage of each day's
dividend as its actual taxable net investment income bears to its total net
investment income earned on that day. Therefore, the percentage of each day's
dividend designated as taxable, if any, may vary from day to day.
If a shareholder fails to furnish a correct taxpayer
identification number, fails to report fully dividend or interest income, or
fails to certify that he has provided a correct taxpayer identification number
and that he is not subject to withholding, then the shareholder may be subject
to a 31% "backup withholding" tax with respect to (a) taxable dividends and
distributions and (b) the proceeds of any redemptions of Fund shares. An
individual's
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<PAGE> 43
taxpayer identification number is his social security number. Corporate
shareholders and other shareholders specified in the Code are or may be exempt
from backup withholding. The backup withholding tax is not an additional tax and
may be credited against a taxpayer's federal income tax liability.
THE FOREGOING IS ONLY A SUMMARY OF CERTAIN MATERIAL TAX CONSEQUENCES
AFFECTING A FUND AND ITS SHAREHOLDERS. SHAREHOLDERS ARE ADVISED TO
CONSULT THEIR OWN TAX ADVISERS WITH RESPECT TO THE
PARTICULAR TAX CONSEQUENCES TO THEM OF AN INVESTMENT
IN THE FUND.
DETERMINATION OF YIELD
From time to time, each Fund may quote its yield, effective
yield and tax equivalent yield, as applicable, in advertisements or in reports
and other communications to shareholders. A Fund's seven-day yield is calculated
by (i) determining the net change in the value of a hypothetical pre-existing
account in the Fund having a balance of one share at the beginning of a seven
calendar day period for which yield is to be quoted, (ii) dividing the net
change by the value of the account at the beginning of the period to obtain the
base period return and (iii) annualizing the results (i.e., multiplying the base
period return by 365/7). The net change in the value of the account reflects the
value of additional shares purchased with dividends declared on the original
share and any such additional shares, but does not include realized gains and
losses or unrealized appreciation and depreciation. The Fund's seven-day
compound effective annualized yield is calculated by adding 1 to the base period
return (calculated as described above), raising the sum to a power equal to
365/7 and subtracting 1. The Tax Exempt Fund's tax equivalent yield is
calculated by dividing that portion of the base period return which is exempt
from federal personal income taxes by 1 minus the highest marginal federal
individual income tax rate and adding the quotient to that portion, if any, of
the yield which is not exempt from those taxes.
Each Fund's yield will vary from time to time depending upon
market conditions, the composition of its portfolio and operating expenses
allocable to it. Yield information may be useful in reviewing a Fund's
performance and for providing a basis for comparison with other investment
alternatives. However, the Fund's yield will fluctuate, unlike certain bank
deposits or other investments which pay a fixed yield for a stated period of
time. In comparing the Fund's yield with that of other money market funds,
investors should give consideration to the quality and maturity of the portfolio
securities of the respective funds.
INDEPENDENT ACCOUNTANTS AND COUNSEL
PricewaterhouseCoopers LLP ("PWC"), with principal offices at
2400 Eleven Penn Center, Philadelphia, Pennsylvania 19103, serves as independent
accountants for each Fund. The statement of assets and liabilities of each Fund,
as of [INSERT], 1998, that appears in this Statement of Additional Information
has been audited by PWC, whose report thereon appears elsewhere herein and has
been included herein by reference in reliance upon
22
<PAGE> 44
the report of such firm of independent accountants given upon their authority as
experts in accounting and auditing.
Willkie Farr & Gallagher serves as counsel for the Fund as
well as counsel to Warburg, Counsellors Service and Counsellors Securities.
FINANCIAL STATEMENTS
The Fund's financial statement follows the Report of Independent Accountants.
23
<PAGE> 45
APPENDIX
DESCRIPTION OF COMMERCIAL PAPER RATINGS
Commercial paper rated A-1 by Standard & Poor's Ratings Services
("S&P") indicates that the degree of safety regarding timely payment is strong.
Those issues determined to possess extremely strong safety characteristics are
denoted with a plus sign designation. Capacity for timely payment on commercial
paper rated A-2 is satisfactory, but the relative degree of safety is not as
high as for issues designated A-1.
The rating Prime-1 is the highest commercial paper rating assigned
by Moody's Investor Services, Inc. ("Moody's"). Issuers rated Prime-1 (or
related supporting institutions) are considered to have a superior capacity for
repayment of short-term promissory obligations. Issuers rated Prime-2 (or
related supporting institutions) are considered to have a strong capacity for
repayment of short-term promissory obligations. This will normally be evidenced
by many of the characteristics of issuers rated Prime-1 but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternative liquidity is maintained.
Short term obligations, including commercial paper, rated A1 + by
IBCA are obligations supported by the highest capacity for timely repayment.
Obligations rated A1 have a very strong capacity for timely repayment.
Obligations rated A2 have a strong capacity for timely repayment, although such
capacity may be susceptible to adverse changes in business, economic or
financial conditions.
Fitch Investors Services, Inc. employs the rating F-1+ to indicate
issues regarded as having the strongest degree of assurance for timely payment.
The rating F-1 reflects an assurance of timely payment only slightly less in
degree than issues rated F-1+, while the rating F-2 indicates a satisfactory
degree of assurance for timely payment, although the margin of safety is not as
great as indicated by the F-1+ and F-1 categories.
Duff & Phelps, Inc. employs the designation of Duff 1 with
respect to top grade commercial paper and bank money instruments. Duff 1+
indicates the highest certainty of timely payment: short-term liquidity is
clearly outstanding and safety is just below risk-free U.S. Treasury
short-term obligations. Duff 1- indicates high certainty of timely payment.
Duff 2 indicates good certainty of timely payment: liquidity factors and
company fundamentals are sound.
DESCRIPTION OF MUNICIPAL SECURITIES RATINGS
The following summarizes the highest two ratings used by S&P for
Municipal Securities:
AAA - This is the highest rating assigned by S&P to a debt
obligation and indicates an extremely strong capacity to pay interest and repay
principal.
<PAGE> 46
AA - Debt rated AA has a very strong capacity to pay interest and
repay principal and differs from AAA issues only in small degree.
To provide more detailed indications of credit quality, the "AA"
rating may be modified by the addition of a plus or minus sign to show relative
standing within this major rating category.
The following summarizes the highest two ratings used by Moody's for
bonds:
Aaa - Bonds that are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa - Bonds that are rated As are judged to be of high quality by all
standards. Together with the Aaa group they are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may be
other elements present which make the long-term risks appear somewhat larger
than in Aaa securities.
Moody's applies numerical modifiers (1,2 and 3) with respect to the
bonds rated Aa. The modifier 1 indicates that the bond being rated ranks in the
higher end of its generic rating category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates that the bond ranks in the lower end of
its generic rating category.
The following summarizes the two highest ratings used by S&P for
short-term notes:
SP-1 - Loans bearing this designation evidence a very strong or
strong capacity to pay principal and interest. Those issues determined to
possess overwhelming safety characteristics will be given a (+) designation.
SP-2 - Loans bearing this designation evidence a satisfactory
capacity to pay principal and interest.
The following summarizes the two highest ratings used by Moody's for
short-term notes and variable rate demand obligations:
MIG-1/VMIG-1 - Obligations bearing these designations are of the
best quality, enjoying strong protection from established cash flows of funds
for their servicing or from established and broad-based access to the market for
refinancing, or both.
MIG-2/VMIG-2 - Obligations bearing these designations are of high
quality with margins of protection ample although not so large as in the
preceding group.
A-2
<PAGE> 47
Commercial paper rated A-1 by S&P indicates that the degree of
safety regarding timely payment is strong. Those issues determined to possess
extremely strong safety characteristics are denoted with a plus sign
designation. Capacity for timely payment on commercial paper rated A-2 is
satisfactory, but the relative degree of safety is not as high as for issues
designated A-1.
The rating Prime-1 is the highest commercial paper rating assigned
by Moody's Investors Services, Inc. Issuers rated Prime-1 (or related supporting
institutions) are considered to have a superior capacity for repayment of
short-term promissory obligations. Issuers rated Prime-2 (or related supporting
institutions) are considered to have a strong capacity for repayment of
short-term promissory obligations. This will normally be evidenced by many of
the characteristics of issuers rated Prime-1 but to a lesser degree. Earnings
trends and coverage ratios, while sound, will be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample alternative liquidity is maintained.
Short term obligations, including commercial paper, rated A1 + by
IBCA are obligations supported by the highest capacity for timely repayment.
Obligations rated A1 have a very strong capacity for timely repayment.
Obligations rated A2 have a strong capacity for timely repayment, although such
capacity may be susceptible to adverse changes in business, economic or
financial conditions.
Fitch Investors Services, Inc. employs the rating F-1+ to indicate
issues regarded as having the strongest degree of assurance for timely payment.
The rating F-1 reflects an assurance of timely payment only slightly less in
degree than issues rated F-1+, while the rating F-2 indicates a satisfactory
degree of assurance for timely payment, although the margin of safety is not as
great as indicated by the F-1+ and F-1 categories.
Duff & Phelps, Inc. employs the designation of Duff 1 with
respect to top grade commercial paper and bank money instruments. Duff 1+
indicates the highest certainty of timely payment: short-term liquidity is
clearly outstanding and safety is just below risk-free U.S. Treasury
short-term obligations. Duff 1- indicates high certainty of timely payment.
Duff 2 indicates good certainty of timely payment: liquidity factors and
company fundamentals are sound.
A-3
<PAGE> 48
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
(1) Financial Statements included in Part B:*
(a) Report of PricewaterhouseCoopers LLP,
Independent Accountants.
(b) Statement of Net Assets and Liabilities.*
(b) Exhibits:
1 Articles of Incorporation.
2 By-Laws.
3 Not applicable.
4 Registrant's Forms of Stock Certificates.*
5 Form of Investment Advisory Agreement.*
6 Form of Distribution Agreement.*
7 Not applicable.
8 Custodian Agreement with PNC Bank, National Association.*
9(a) Transfer Agency and Service Agreement.*
(b) Form of Co-Administration Agreement with Counsellors Funds
Service, Inc.*
(c) Form of Co-Administration Agreement with PFPC Inc.*
10(a) Opinion and Consent of Willkie Farr & Gallagher.*
(b) Opinion and Consent of Venable, Baetjer and Howard, LLP, Maryland
counsel to the Fund.*
11 Consent of PricewaterhouseCoopers LLP*
12 Not applicable.
- ---------------------------
* To be filed by amendment.
<PAGE> 49
13 Form of Purchase Agreement.*
14 Not applicable.
15(a) Form of Shareholder Servicing and Distribution Plan.*
(b) Form of Distribution Plan.*
16 Not applicable.
17 Not applicable.
18 Form of 18f-3 Plan.*
Item 25. Persons Controlled by or Under Common Control with Registrant
All of the outstanding shares of common stock of Registrant on the
date Registrant's Registration Statement becomes effective will be owned by
Warburg Pincus Asset Management, Inc. ("Warburg"), a corporation formed under
New York Law.
Item 26. Number of Holders of Securities
It is anticipated that Warburg will hold all Registrant's shares of common
stock, par value $.001 per share, on the date Registrant's Registration
Statement becomes effective.
Item 27. Indemnification
Registrant, officers and directors of Warburg, of Counsellors
Securities Inc. ("Counsellors Securities") and of Registrant are covered by
insurance policies indemnifying them for liability incurred in connection with
the operation of Registrant. These policies provide insurance for any "Wrongful
Act" of an officer, director or trustee. Wrongful Act is defined as breach of
duty, neglect, error, misstatement, misleading statement, omission or other act
done or wrongfully attempted by an officer, director or trustee in connection
with the operation of Registrant. Insurance coverage does not extend to (a)
conflicts of interest or gain in fact any profit or advantage to which one is
not legally entitled, (b) intentional non-compliance with any statute or
regulation or (c) commission of dishonest, fraudulent acts or omissions. Insofar
as it related to Registrant, the coverage is limited in amount and, in certain
circumstances, is subject to a deductible.
Under Article VIII of the Articles of Incorporation (the
"Articles"), the Directors and officers of Registrant shall not have any
liability to Registrant or its stockholders for money damages, to the fullest
extent permitted by Maryland law.
<PAGE> 50
This limitation on liability applies to events occurring at the time a person
serves as a Director or officer of Registrant whether or not such person is a
Director or officer at the time of any proceeding in which liability is
asserted. No provision of Article VIII shall protect or purport to protect any
Director or officer of Registrant against any liability to Registrant or its
stockholders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office. Registrant shall indemnify and advance
expenses to its currently acting and its former Director to the fullest extent
that indemnification of Directors and advancement of expenses to Directors is
permitted by the Maryland General Corporation Law.
Registrant shall indemnify and advance expenses to its officers
to the same extent as its Directors and to such further extent as is consistent
with such law. The Board of Directors may, through a by-law, resolution or
agreement, make further provisions for indemnification of directors, officers,
employees and agents to the fullest extent permitted by the Maryland General
Corporation Law.
Article V of the By-Laws further limits the liability of the
Directors by providing that any person who was or is a party or is threatened to
be made a party in any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, by reason
of the fact that such person is a current or former director or officer of
Registrant, or is or was serving while a director or officer of Registrant at
the request of Registrant as a director, officer, partner, trustee, employee,
agent or fiduciary of another corporation, partnership, joint venture, trust,
enterprise or employee benefit plan, shall be indemnified by Registrant against
judgments, penalties, fines, excise taxes, settlements and reasonable expenses
(including attorneys' fees)actually incurred by such person in connection with
such action, suit or proceeding to the full extent permissible under the
Maryland General Corporation Law, the 1993 Act and the 1940 Act, as such
statutes are now or hereafter in force, except that such indemnity shall not
protect any such person against any liability to Registrant or any stockholder
thereof to which such person would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of this office.
Item 28. (a) Business and Other Connections of
Investment Adviser
Warburg, a wholly owned subsidiary of Warburg, Pincus Asset
Management Holdings, Inc., acts as investment adviser to Registrant. Warburg
renders investment advice to a wide variety of individual and institutional
clients. The list required by this Item 28 of officers and directors of Warburg,
together with information as to their other business, profession, vocation or
<PAGE> 51
employment of a substantial nature during the past two years, is incorporated by
reference to Schedules A and D of Form ADV filed by Warburg (SEC File No.
801-28-496).
(b) Business and Other Connections of
Sub-Investment Adviser and Administrator
Blackrock Institutional Management Corporation ("BIMC"), a wholly
owned indirect subsidiary of PNC Bank, National Association ("PNC"), performs
sub-investment advisory services for Registrant and advisory services for
certain other investment companies. PNC and its predecessors have been in the
business of managing the investments of fiduciary and other accounts in the
Philadelphia area since 1847. In addition to its trust business, PNC provides
commercial banking services. The list required by this Item 28 of officers and
directors of BIMC, together with information as to their other business,
profession, vocation or employment of a substantial nature during the past two
years, is by BIMC (SEC File No. 801-13-304).
Item 29. Principal Underwriter
(a) Counsellors Securities will act as distributor for Registrant,
as well as for The RBB Fund, Inc.; Warburg Pincus Balanced Fund; Warburg Pincus
Capital Appreciation Fund; Warburg Pincus Cash Reserve Fund; Warburg Pincus
Central and Eastern Europe Fund; Warburg Pincus Emerging Growth Fund; Warburg
Pincus Emerging Markets Fund; Warburg Pincus Emerging Markets II Fund; Warburg
Pincus European Equity Fund; Warburg Pincus Fixed Income Fund; Warburg Pincus
Global Fixed Income Fund; Warburg Pincus Global Post-Venture Capital Fund;
Warburg Pincus Global Telecommunications Fund; Warburg Pincus Growth & Income
Fund; Warburg Pincus Health Sciences Fund; Warburg Pincus High Yield Fund;
Warburg Pincus Institutional Fund; Warburg Pincus Intermediate Maturity
Government Fund; Warburg Pincus International Equity Fund; Warburg Pincus
International Growth Fund; Warburg Pincus International Small Company Fund;
Warburg Pincus Japan Growth Fund; Warburg Pincus Japan OTC Fund; Warburg Pincus
Long-Short Equity Fund; Warburg Pincus Long-Short Market Neutral Fund; Warburg
Pincus Major Foreign Markets Fund; Warburg Pincus Municipal Bond Fund; Warburg
Pincus Municipal Money Market Mileage Fund; Warburg Pincus New York
Intermediate Municipal Fund; Warburg Pincus New York Tax Exempt Fund; Warburg
Pincus Post-Venture Capital Fund; Warburg Pincus Select Economic Value Equity
Fund; Warburg Pincus Small Company Growth Fund; Warburg Pincus Small Company
Value Fund; Warburg Pincus Strategic Global Fixed Income Fund; Warburg Pincus
Strategic Value Fund; Warburg Pincus Trust; Warburg Pincus Trust II; Warburg
Pincus U.S. Core Fixed Income Fund and Warburg Pincus U.S. Structured Core
Equity Fund.
(b) For information relating to each director, officer or partner of
Counsellors Securities, reference is made to Form
<PAGE> 52
BD (SEC File No. 15-654) filed by Counsellors Securities under the Securities
Exchange Act of 1934.
(c) None.
Item 30. Location of Accounts and Records
(1) Warburg, Pincus Money Market Fund
466 Lexington Avenue
New York, New York 10017-3147
(Fund's articles of incorporation, by-laws and minute books)
(2) Blackrock Institutional Management Corporation 400 Bellevue
Parkway Wilmington, Delaware 19809 (records relating to its
functions as sub-investment adviser and administrator)
(3) Counsellors Funds Service, Inc.
466 Lexington Avenue
New York, New York 10017-3147
(records relating to its functions as co-administrator)
(4) PFPC Inc.
400 Bellevue Parkway
Wilmington, Delaware 19809
(records relating to its functions as transfer and dividend
disbursing agent)
(5) PNC Bank, National Association
1600 Market Street
Philadelphia, Pennsylvania 19103
(records relating to its functions as custodian)
(6) Counsellors Securities Inc.
466 Lexington Avenue
New York, New York 10017-3147
(records relating to its functions as distributor)
(7) Warburg Pincus Asset Management, Inc.
466 Lexington Avenue
New York, New York 10017-3147
(records relating to its functions as investment adviser)
(8) State Street Bank and Trust Co.
225 Franklin Street
Boston, Massachusetts 02110
(records relating to its functions as transfer agent and
dividend disbursing agent)
<PAGE> 53
(9) Boston Financial Data Services, Inc.
2 Heritage Drive
North Quincy, Massachusetts 02177
(records relating to its functions as transfer agent and
dividend disbursing agent)
Item 31. Management Services
Not applicable.
Item 32. Undertakings
Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of Registrant's latest annual report to
shareholders, upon request and without charge.
<PAGE> 54
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
and the Investment Company Act of 1940, as amended, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York and the State of
New York, on the 20th day of July, 1998.
WARBURG, PINCUS MONEY MARKET FUND, INC.
By:/s/Eugene L. Podsiadlo
----------------------------
Eugene L. Podsiadlo
President
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment has been signed below by the following persons in the capacities
and on the date indicated:
Signature Title Date
/s/John L. Furth Chairman of the July 20, 1998
- --------------------------- Board of Directors
John L. Furth
/s/Eugene L. Podsiadlo President July 20, 1998
- ---------------------------
Eugene L. Podsiadlo
/s/Howard Conroy Vice President and July 20, 1998
- --------------------------- Chief Financial
Howard Conroy Officer
/s/Daniel S. Madden Treasurer and July 20, 1998
- --------------------------- Chief Accounting
Daniel S. Madden Officer
/s/Richard N. Cooper Director July 20, 1998
- ---------------------------
Richard N. Cooper
/s/Jack W. Fritz Director July 20, 1998
- ---------------------------
Jack W. Fritz
/s/Jeffrey E. Garten Director July 20, 1998
- ---------------------------
Jeffrey E. Garten
/s/Arnold M. Reichman Director July 20, 1998
- ---------------------------
Arnold M. Reichman
/s/Alexander B. Trowbridge Director July 20, 1998
- --------------------------
Alexander B. Trowbridge
<PAGE> 55
INDEX TO EXHIBITS
Exhibit
No. Description
1 Articles of Incorporation
2 By-Laws
<PAGE> 1
ARTICLES OF INCORPORATION
OF
WARBURG, PINCUS MONEY MARKET FUND, INC.
ARTICLE I
INCORPORATOR
The undersigned, John H. Kim, whose post office address is c/o
Willkie Farr & Gallagher, 787 Seventh Avenue, New York, New York 10019-6099,
being at least 18 years of age, does hereby act as an incorporator and forms a
corporation under the Maryland General Corporation Law.
ARTICLE II
NAME
The name of the corporation is Warburg, Pincus Money Market Fund,
Inc. (the "Corporation").
ARTICLE III
PURPOSES AND POWERS
To conduct and carry on the business of an investment company.
<PAGE> 2
(1) To hold, invest and reinvest its assets in securities and other
investments or to hold part or all of its assets in cash.
(2) To issue and sell shares of its capital stock in such amounts, on such
terms and conditions, for such purposes and for such amount or kind of
consideration as may now or hereafter be permitted by law.
(3) To redeem, purchase or acquire in any other manner, hold, dispose of,
resell, transfer, reissue or cancel (all without the vote or consent of
the stockholders of the Corporation) shares of its capital stock, in any
manner and to the extent now or hereafter permitted by law and by this
Charter.
(4) To do any and all additional acts and to exercise any and all additional
powers or rights as may be necessary, incidental, appropriate or desirable
for the accomplishment of all or any of the foregoing purposes.
(5) The Corporation shall be authorized to exercise and enjoy all of the
powers, rights and privileges granted to, or conferred upon, corporations
by the Maryland General Corporation Law now or hereafter in force, and the
enumeration of the foregoing shall not be deemed to exclude any powers,
rights or privileges so granted or conferred.
ARTICLE IV
PRINCIPAL OFFICE AND RESIDENT AGENT
The post office address of the principal office of the Corporation
in the State of Maryland is c/o The Corporation Trust Company Incorporated, 32
South Street, Baltimore, Maryland 21202. The name and address of the resident
agent of the Corporation in the State of Maryland is The Corporation Trust
Company Incorporated, a Maryland corporation, 32 South Street, Baltimore,
Maryland 21202.
ARTICLE V
CAPITAL STOCK
(1)
(A) The total number of shares of capital stock that the Corporation
shall have authority to issue is three billion (3,000,000,000)
shares, of the par value of one tenth of one cent ($.001) per share
and of the aggregate par value of three million dollars
-2-
<PAGE> 3
($3,000,000), all of which three billion (3,000,000,000) shares are
designated Common Stock.
(B)
(i) One billion (1,000,000,000) shares of Common Stock have been
divided into and classified initially as a series of Common
Stock, designated "Common Shares."
(ii) Two billion (2,000,000,000) shares of Common Stock have been
divided into and classified initially as a series of Common
Stock, designated "Advisor Shares."
(C) Each Common Share will have the same preferences, conversion and
other rights, voting powers, restrictions, limitations as to
dividends, qualifications and terms and conditions of redemption as
every other share of Common Stock, except that, subject to the
provisions of any governing order, rule or regulation issued
pursuant to the Investment Company Act of 1940, as amended (the
"1940 Act"):
(i) Common Shares will share equally with Common Stock
other than Common Shares ("Non-Common Shares") in the
income, earnings and profits derived from investment
and reinvestment of the assets belonging to the
Corporation and will be charged equally with
Non-Common Shares with the liabilities and expenses
of the Corporation, except that Common Shares will
bear the expense of payments made pursuant to any
agreements entered into by the Corporation pursuant
to any shareholder services plan and/or distribution
plan adopted by the Corporation with respect to
Common Shares;
(ii) On any matter submitted to a vote of shareholders of
the Corporation that pertains to the agreements or
expenses described in clause (C)(i) above (or to any
plan adopted by the Corporation relating to said
agreements or expenses), only Common Shares will be
entitled to vote, except that if said matter affects
Non-Common Shares, Non-Common Shares will also be
entitled to vote, and in such case Common Shares will
be voted in the aggregate together with such
Non-Common Shares and not by series except where
-3-
<PAGE> 4
otherwise required by law. Common Shares will not be
entitled to vote on any matter that does not affect
Common Shares (except where otherwise required by
law) even though the matter is submitted to a vote of
the holders of Non-Common Shares; and
(iii) The Board of Directors of the Corporation in its sole
discretion may determine whether a matter affects a
particular class or series of Corporation shares.
(D) Each Advisor Share will have the same preferences, conversion and
other rights, voting powers, restrictions, limitations as to
dividends, qualifications and terms and conditions of redemption as
every other share of Common Stock, except that, subject to the
provisions of any governing order, rule or regulation issued
pursuant to the 1940 Act:
(i) Advisor Shares will share equally with Common Stock
other than Advisor Shares ("Non-Advisor Shares") in
the income, earnings and profits derived from
investment and reinvestment of the assets belonging
to the Corporation and will be charged equally with
Non-Advisor Shares with the liabilities and expenses
of the Corporation, except that Advisor Shares will
bear the expense of payments made pursuant to any
agreements entered into by the Corporation pursuant
to any shareholder services plan and/or distribution
plan adopted by the Corporation with respect to
Advisor Shares;
(ii) On any matter submitted to a vote of shareholders of
the Corporation that pertains to the agreements or
expenses described in clause (D)(i) above (or to any
plan adopted by the Corporation relating to said
agreements or expenses), only Advisor Shares will be
entitled to vote, except that if said matter affects
Non-Advisor Shares, Non-Advisor Shares will also be
entitled to vote, and in such case Advisor Shares
will be voted in the aggregate together with such
Non-Advisor Shares and not by series except where
otherwise required by law. Advisor Shares will not
be entitled to vote on any matter that does not
affect Advisor Shares (except where otherwise
required by law) even though
-4-
<PAGE> 5
the matter is submitted to a vote of the holders of
Non-Advisor Shares; and
(iii) The Board of Directors of the Corporation in its sole
discretion may determine whether a matter affects a
particular class or series of Corporation shares.
(2) Any fractional share shall carry proportionately the rights of a whole
share including, without limitation, the right to vote and the right to
receive dividends. A fractional share shall not, however, have the right
to receive a certificate evidencing it.
(3) All persons who shall acquire stock in the Corporation shall acquire the
same subject to the provisions of this Charter and the By-Laws of the
Corporation.
(4) No holder of stock of the Corporation by virtue of being such a holder
shall have any preemptive or other right to purchase or subscribe for any
shares of the Corporation's capital stock or any other security that the
Corporation may issue or sell (whether out of the number of shares
authorized by this Charter or out of any shares of the Corporation's
capital stock that the Corporation may acquire) other than a right that
the Board of Directors in its discretion may determine to grant.
(5) The Board of Directors shall have authority by resolution to classify or
to reclassify, as the case may be, any authorized but unissued shares of
capital stock from time to time by setting or changing in any one or more
respects the preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications or terms or
conditions of redemption of the capital stock.
(6) Notwithstanding any provision of law requiring any action to be taken or
authorized by the affirmative vote of a greater proportion of the votes of
all classes or of any class of stock of the Corporation, such action shall
be effective and valid if taken or authorized by the affirmative vote of a
majority of the total number of votes entitled to be cast thereon, except
as otherwise provided in this Charter.
(7) The presence in person or by proxy of the holders of one-third of the
shares of stock of the Corporation entitled to vote (without regard to
class) shall constitute a quorum at any meeting of the stockholders,
except with respect to any matter which, under applicable statutes or
regulatory requirements, requires approval by a separate vote of one or
more classes of stock, in which case the presence in person
-5-
<PAGE> 6
or by proxy of the holders of one-third of the shares of stock of each
class required to vote as a class on the matter shall constitute a
quorum.
ARTICLE VI
REDEMPTION
Each holder of shares of the Corporation's capital stock shall be
entitled to require the Corporation to redeem all or any part of the shares of
capital stock of the Corporation standing in the name of the holder on the books
of the Corporation, and all shares of capital stock issued by the Corporation
shall be subject to redemption by the Corporation, at the redemption price of
the shares as in effect from time to time as may be determined by or pursuant to
the direction of the Board of Directors of the Corporation in accordance with
the provisions of Article VII, subject to the right of the Board of Directors of
the Corporation to suspend the right of redemption or postpone the date of
payment of the redemption price in accordance with provisions of applicable law.
Without limiting the generality of the foregoing, the Corporation shall, to the
extent permitted by applicable law, have the right at any time to redeem the
shares owned by any holder of capital stock of the Corporation (i) if the
redemption is, in the opinion of the Board of Directors of the Corporation,
desirable in order to prevent the Corporation from being deemed a "personal
holding company" within the meaning of the Internal Revenue Code of 1986, as
amended, or (ii) if the value of the shares in the account maintained by the
Corporation or its transfer agent for any class of stock for the stockholder is
below an amount determined from time to time by the Board of Directors of the
Corporation (the "Minimum Account Balance") and the stockholder has been given
notice of the redemption and has failed to make additional purchases of shares
in an amount sufficient to bring the value in his account to at least the
Minimum Account Balance before the redemption is effected by the Corporation.
Payment of the redemption price shall be made in cash by the Corporation at the
time and in the manner as may be determined from time to time by the Board of
Directors of the Corporation unless, in the opinion of the Board of Directors,
which shall be conclusive, conditions exist that make payment wholly in cash
unwise or undesirable; in such event the Corporation may make payment wholly or
partly by securities or other property included in the assets belonging or
allocable to the class of the shares for which redemption is being sought, the
value of which shall be determined as provided herein. The Board of Directors
may establish procedures for redemption of shares.
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ARTICLE VII
BOARD OF DIRECTORS
(1) The number of directors constituting the Board of Directors shall be one
or such other number as may be set forth in the By-Laws or determined by
the Board of Directors pursuant to the By-Laws. The number of Directors
shall at no time be less than the minimum number required under the
Maryland General Corporation Law. Arnold M. Reichman has been appointed
director of the Corporation to hold office until the first annual meeting
of stockholders or until his successor is elected and qualified.
(2) In furtherance, and not in limitation, of the powers conferred by the
Maryland General Corporation Law, the Board of Directors is expressly
authorized:
(i) To make, alter or repeal the By-Laws of the Corporation,
except where such power is reserved by the By-Laws to
the stockholders, and except as otherwise required by
the 1940 Act.
(ii) From time to time to determine whether and to what
extent and at what times and places and under what
conditions and regulations the books and accounts of
the Corporation, or any of them other than the stock
ledger, shall be open to the inspection of the
stockholders. No stockholder shall have any right to
inspect any account or book or document of the
Corporation, except as conferred by law or authorized
by resolution of the Board of Directors or of the
stockholders.
(iii) Without the assent or vote of the stockholders, to
authorize the issuance from time to time of shares of
the stock of any class of the Corporation, whether
now or hereafter authorized, and securities
convertible into shares of stock of the Corporation
of any class or classes, whether now or hereafter
authorized, for such consideration as the Board of
Directors may deem advisable.
(iv) Without the assent or vote of the stockholders, to
authorize and issue obligations of the Corporation,
secured and unsecured, as the Board of Directors may
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determine, and to authorize and cause to be executed
mortgages and liens upon the real or personal property
of the Corporation.
(v) Notwithstanding anything in this Charter to the
contrary, to establish in its absolute discretion the
basis or method for determining the value of the assets
belonging to any class, the value of the liabilities
belonging to any class and the net asset value of each
share of any class of the Corporation's stock.
(vi) To determine in accordance with generally accepted
accounting principles and practices what constitutes
net profits, earnings, surplus or net assets in
excess of capital, and to determine what accounting
periods shall be used by the Corporation for any
purpose; to set apart out of any funds of the
Corporation reserves for such purposes as it shall
determine and to abolish the same; to declare and pay
any dividends and distributions in cash, securities
or other property from surplus or any other funds
legally available therefor, at such intervals as it
shall determine; to declare dividends or
distributions by means of a formula or other method
of determination, at meetings held less frequently
than the frequency of the effectiveness of such
declarations; and to establish payment dates for
dividends or any other distributions on any basis,
including dates occurring less frequently than the
effectiveness of declarations thereof.
(vii) In addition to the powers and authorities granted herein
and by statute expressly conferred upon it, the Board of
Directors is authorized to exercise all powers and do
all acts that may be exercised or done by the
Corporation pursuant to the provisions of the laws of
the State of Maryland, this Charter and the By-Laws of
the Corporation.
(3) Any determination made in good faith, and in accordance with applicable
law and generally accepted accounting principles and practices, if
applicable, by or pursuant to the direction of the Board of Directors,
with respect to the amount of assets, obligations or liabilities of the
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Corporation, as to the amount of net income of the Corporation from
dividends and interest for any period or amounts at any time legally
available for the payment of dividends, as to the amount of any reserves
or charges set up and the propriety thereof, as to the time of or purpose
for creating reserves or as to the use, alteration or cancellation of any
reserves or charges (whether or not any obligation or liability for which
the reserves or charges have been created has been paid or discharged or
is then or thereafter required to be paid or discharged), as to the value
of any security owned by the Corporation, the determination of the net
asset value of shares of any class of the Corporation's capital stock, or
as to any other matters relating to the issuance, sale or other
acquisition or disposition of securities or shares of capital stock of the
Corporation, and any reasonable determination made in good faith by the
Board of Directors regarding whether any transaction constitutes a
purchase of securities on "margin," a sale of securities "short," or an
underwriting of the sale of, or a participation in any underwriting or
selling group in connection with the public distribution of, any
securities, shall be final and conclusive, and shall be binding upon the
Corporation and all holders of its capital stock, past, present and
future, and shares of the capital stock of the Corporation are issued and
sold on the condition and understanding, evidenced by the purchase of
shares of capital stock or acceptance of share certificates, that any and
all such determinations shall be binding as aforesaid. No provision of
this Charter shall be effective to (i) require a waiver of compliance with
any provision of the Securities Act of 1933, as amended, or the 1940 Act,
or of any valid rule, regulation or order of the Securities and Exchange
Commission under those Acts or (ii) protect or purport to protect any
director or officer of the Corporation against any liability to the
Corporation or its security holders to which he would otherwise be subject
by reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office.
ARTICLE VIII
INDEMNIFICATION AND LIMITATION OF LIABILITY
(1) To the fullest extent that limitations on the liability of directors and
officers are permitted by the Maryland General Corporation Law, no
director or officer of the Corporation shall have any liability to the
Corporation or its stockholders for money damages. This limitation on
liability applies to events occurring at the time a person serves as a
director or officer of the Corporation whether
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or not such person is a director or officer at the time of any
proceeding in which liability is asserted.
(2) The Corporation shall indemnify and advance expenses to its currently
acting and its former directors to the fullest extent that indemnification
of directors and advancement of expenses to directors is permitted by the
Maryland General Corporation Law. The Corporation shall indemnify and
advance expenses to its officers to the same extent as its directors and
to such further extent as is consistent with such law. The Board of
Directors may, through a by-law, resolution or agreement, make further
provisions for indemnification of directors, officers, employees and
agents to the fullest extent permitted by the Maryland General Corporation
Law.
(3) No provision of this Article VIII shall be effective to protect or purport
to protect any director or officer of the Corporation against any
liability to the Corporation or its stockholders to which he would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of
his office.
(4) References to the Maryland General Corporation Law in this Article VIII
are to the law as from time to time amended. No amendment to this Charter
shall affect any right of any person under this Article VIII based on any
event, omission or proceeding prior to such amendment. The term "Charter"
as used herein shall have the meaning set forth in the Maryland General
Corporation Law and includes these Articles of Incorporation and all
amendments thereto.
ARTICLE IX
AMENDMENTS
The Corporation reserves the right from time to time to make any
amendment to its Charter, now or hereafter authorized by law, including any
amendment that alters the contract rights, as expressly set forth in this
Charter, of any outstanding stock, and all rights at any time conferred upon the
stockholders of the Corporation by its Charter are granted subject to the
provisions of this Article and the reservation of the right to amend the Charter
herein contained.
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IN WITNESS WHEREOF, I have adopted and signed these Articles of
Incorporation and do hereby acknowledge that the adoption and signing are my
act.
/s/ JOHN H. KIM
-----------------------------
Incorporator
Dated the 23rd day of July, 1998
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BY-LAWS
OF
WARBURG, PINCUS MONEY MARKET FUND, INC.
A Maryland Corporation
ARTICLE I
STOCKHOLDERS
SECTION 1. Annual Meetings. No annual meeting of the stockholders of
the Warburg, Pincus Money Market Fund, Inc. (the "Corporation") shall be held in
any year in which the election of directors is not required to be acted upon
under the Investment Company Act of 1940, as amended (the "1940 Act"), unless
otherwise determined by the Board of Directors. An annual meeting may be held at
any place within the United States as may be determined by the Board of
Directors and as shall be designated in the notice of the meeting, at the time
specified by the Board of Directors. Any business of the Corporation may be
transacted at an annual meeting without being specifically designated in the
notice unless otherwise provided by statute, the Corporation's Charter or these
By-Laws.
SECTION 2. Special Meetings. Special meetings of the stockholders
for any purpose or purposes, unless otherwise prescribed by statute or by the
Corporation's Charter, may be held at any place within the United States, and
may be called at any time by the Board of Directors or by the President, and
shall be called by the President or Secretary at the request in writing of a
majority of the Board of Directors or at the request in writing of stockholders
entitled to cast at least 10% (ten percent) of the votes entitled to be cast at
the meeting upon payment by such stockholders to the Corporation of the
reasonably estimated cost of preparing and mailing a notice of the meeting
(which estimated cost shall be provided to such stockholders by the Secretary of
the Corporation). Notwithstanding the foregoing, unless requested by
stockholders entitled to cast a majority of the votes entitled to be cast at the
meeting, a special meeting of the stockholders need not be called at the request
of stockholders to consider any matter which is substantially the same as a
matter voted on at any special meeting of the stockholders held during the
preceding 12 (twelve) months. A written request shall state the purpose or
purposes of the proposed meeting.
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SECTION 3. Notice of Meetings. Written or printed notice of the
purpose or purposes and of the time and place of every meeting of the
stockholders shall be given by the Secretary of the Corporation to each
stockholder of record entitled to vote at the meeting, by placing the notice in
the mail at least 10 (ten) days, but not more than 90 (ninety) days, prior to
the date designated for the meeting addressed to each stockholder at his address
appearing on the books of the Corporation or supplied by the stockholder to the
Corporation for the purpose of notice. The notice of any meeting of stockholders
may be accompanied by a form of proxy approved by the Board of Directors in
favor of the actions or the election of persons as the Board of Directors may
select. Notice of any meeting of stockholders shall be deemed waived by any
stockholder who attends the meeting in person or by proxy, or who before or
after the meeting submits a signed waiver of notice that is filed with the
records of the meeting.
SECTION 4. Quorum. Except as otherwise provided by statute or by the
Corporation's Charter, the presence in person or by proxy of stockholders of the
Corporation entitled to cast at least one-third of the votes to be cast shall
constitute a quorum at each meeting of the stockholders and all questions shall
be decided by majority of the votes cast (except with respect to the election of
directors, which shall be by a plurality of votes cast). In the absence of a
quorum, the stockholders present in person or by proxy, by majority vote and
without notice other than by announcement, may adjourn the meeting from time to
time as provided in Section 5 of this Article I until a quorum shall attend. The
stockholders present at any duly organized meeting may continue to do business
until adjournment, notwithstanding the withdrawal of enough stockholders to
leave less than a quorum. The absence from any meeting in person or by proxy of
holders of the number of shares of stock of the Corporation in excess of a
majority that may be required by Maryland law, the 1940 Act, or any other
applicable statute, the Corporation's Charter or these By-Laws, for action upon
any given matter shall not prevent action at the meeting on any other matter or
matters that may properly come before the meeting, so long as there are present,
in person or by proxy, holders of the number of shares of stock of the
Corporation required for action upon such other matter or matters.
SECTION 5. Adjournment. Any meeting of the stockholders may be
adjourned from time to time, without notice other than by announcement at the
meeting at which the adjournment is taken. At any adjourned meeting at which a
quorum shall be present, any action may be taken that could have been taken at
the meeting originally called. A meeting of the stockholders may not be
adjourned without further notice to a date more than 120 (one hundred twenty)
days after the original record date determined pursuant to Section 9 of this
Article I.
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SECTION 6. Organization. At every meeting of the stockholders, the
Chairman of the Board, or in his absence or inability to act (or if there is
none), the President, or in his absence or inability to act, a Vice President,
or in the absence or inability to act of the Chairman of the Board, the
President and all the Vice Presidents, a chairman chosen by the stockholders
shall act as chairman of the meeting. The Secretary, or in his absence or
inability to act, a person appointed by the chairman of the meeting, shall act
as secretary of the meeting and keep the minutes of the meeting.
SECTION 7. Order of Business. The order of business at all
meetings of the stockholders shall be as determined by the chairman of the
meeting.
SECTION 8. Voting. Except as otherwise provided by statute or the
Corporation's Charter, each holder of record of shares of stock of the
Corporation having voting power shall be entitled at each meeting of the
stockholders to one vote for every share of stock standing in his name on the
records of the Corporation as of the record date determined pursuant to Section
9 of this Article I.
Each stockholder entitled to vote at any meeting of stockholders may
authorize another person to act as proxy for the stockholder by, (a) signing a
writing authorizing another person to act as proxy, or (b) any other means
permitted by law. Signing may be accomplished by the stockholder or the
stockholder's authorized agent signing the writing or causing the stockholder's
signature to be affixed to the writing by any reasonable means, including
facsimile signature.
If a vote shall be taken on any question other than the election of
directors, which shall be by written ballot, then unless required by statute or
these By-Laws, or determined by the chairman of the meeting to be advisable, any
such vote need not be by ballot. On a vote by ballot, each ballot shall be
signed by the stockholder voting, or by his proxy, and shall state the number of
shares voted.
SECTION 9. Fixing of Record Date. The Board of Directors may set a
record date for the purpose of determining stockholders entitled to vote at any
meeting of the stockholders. The record date for a particular meeting shall be
not more than 90 (ninety) nor fewer than 10 (ten) days before the date of the
meeting. All persons who were holders of record of shares as of the record date
of a meeting, and no others, shall be entitled to vote at such meeting and any
adjournment thereof.
SECTION 10. Inspectors. The Board of Directors may, in advance of
any meeting of stockholders, appoint one or more
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inspectors to act at the meeting or at any adjournment of the meeting. If the
inspectors shall not be so appointed or if any of them shall fail to appear or
act, the chairman of the meeting may, and on the request of any stockholder
entitled to vote at the meeting shall, appoint inspectors. Each inspector,
before entering upon the discharge of his duties, shall take and sign an oath to
execute faithfully the duties of inspector at the meeting with strict
impartiality and according to the best of his ability. The inspectors shall
determine the number of shares outstanding and the voting power of each share,
the number of shares represented at the meeting, the existence of a quorum and
the validity and effect of proxies, and shall receive votes, ballots or
consents, hear and determine all challenges and questions arising in connection
with the right to vote, count and tabulate all votes, ballots or consents,
determine the result, and do those acts as are proper to conduct the election or
vote with fairness to all stockholders. On request of the chairman of the
meeting or any stockholder entitled to vote at the meeting, the inspectors shall
make a report in writing of any challenge, request or matter determined by them
and shall execute a certificate of any fact found by them. No director or
candidate for the office of director shall act as inspector of an election of
directors. Inspectors need not be stockholders of the Corporation.
SECTION 11. Consent of Stockholders in Lieu of Meeting. Except as
otherwise provided by statute or the Corporation's Charter, any action required
to be taken at any meeting of stockholders, or any action that may be taken at
any meeting of the stockholders, may be taken without a meeting, without prior
notice and without a vote, if the following are filed with the records of
stockholders' meetings: (a) a unanimous written consent that sets forth the
action and is signed by each stockholder entitled to vote on the matter; and (b)
a written waiver of notice and any right to dissent signed by each stockholder
entitled to notice of the meeting but not entitled to vote at the meeting.
SECTION 12. Notice of Stockholder Business.
(a) At any annual or special meeting of the stockholders, only such
business shall be conducted as shall have been properly brought before the
meeting. To be properly brought before an annual or special meeting business
must be, (i), (A) specified in the notice of meeting (or any supplement thereto)
given by or at the direction of the Board of Directors, (B) otherwise properly
brought before the meeting by or at the direction of the Board of Directors, or
(C) subject to the provisions of Section 13 of this Article I, otherwise
properly brought before the meeting by a stockholder, and (ii) a proper subject
under applicable law for stockholder action.
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(b) For business to be properly brought before an annual or special
meeting by a stockholder, the stockholder must have given timely notice thereof
in writing to the Secretary of the Corporation. To be timely, any such notice
must be delivered to or mailed and received at the principal executive offices
of the Corporation not later than 60 (sixty) days prior to the date of the
meeting; provided, however, that if less than 70 (seventy) days' notice or prior
public disclosure of the date of the meeting is given or made to stockholders,
any such notice by a stockholder to be timely must be so received not later than
the close of business on the tenth day following the day on which notice of the
date of the annual or special meeting was given or such public disclosure was
made.
(c) Any such notice by a stockholder shall set forth as to each
matter the stockholder proposes to bring before the annual or special meeting,
(i) a brief description of the business desired to be brought before the annual
or special meeting and the reasons for conducting such business at the annual or
special meeting, (ii) the name and address, as they appear on the Corporation's
books, of the stockholder proposing such business, (iii) the class and number of
shares of the capital stock of the Corporation which are beneficially owned by
the stockholder, and (iv) any material interest of the stockholder in such
business.
(d) Notwithstanding anything in the By-Laws to the contrary, no
business shall be conducted at any annual or special meeting except in
accordance with the procedures set forth in this Section 12. The chairman of the
annual or special meeting shall, if the facts warrant, determine and declare to
the meeting that business was not properly brought before the meeting and in
accordance with the provisions of this Section 12, and if he should so
determine, he shall so declare to the meeting and any such business not properly
brought before the meeting shall not be considered or transacted.
SECTION 13. Stockholder Business not Eligible for Consideration.
(a) Notwithstanding anything in these By-Laws to the contrary, any
proposal that is otherwise properly brought before an annual or special meeting
by a stockholder will not be eligible for consideration by the stockholders at
such annual or special meeting if such proposal is substantially the same as a
matter properly brought before such annual or special meeting by or at the
direction of the Board of Directors of the Corporation. The chairman of such
annual or special meeting shall, if the facts warrant, determine and declare
that a stockholder proposal is substantially the same as a matter properly
brought before the meeting by or at the direction of the Board of Directors,
and, if
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he should so determine, he shall so declare to the meeting and any such
stockholder proposal shall not be considered at the meeting.
(b) This Section 13 shall not be construed or applied to make
ineligible for consideration by the stockholders at any annual or special
meeting any stockholder proposal required to be included in the Corporation's
proxy statement relating to such meeting pursuant to Rule 14a-8 under the
Securities Exchange Act of 1934 (the "Exchange Act"), or any successor rule
thereto.
ARTICLE II
BOARD OF DIRECTORS
SECTION 1. General Powers. Except as otherwise provided in the
Corporation's Charter, the business and affairs of the Corporation shall be
managed under the direction of its Board of Directors. All powers of the
Corporation may be exercised by or under authority of the Board of Directors
except as conferred on or reserved to the stockholders by law, by the
Corporation's Charter or by these By-Laws.
SECTION 2. Number of Directors. The number of directors shall be
fixed from time to time by resolution of the Board of Directors adopted by a
majority of the entire Board of Directors; provided, however, that the number of
directors shall in no event be fewer than one nor more than fifteen. Any vacancy
created by an increase in directors may be filled in accordance with Section 7
of this Article II. No reduction in the number of directors shall have the
effect of removing any director from office prior to the expiration of his term
unless the director is specifically removed pursuant to Section 6 of this
Article II at the time of the decrease. A director need not be a stockholder of
the Corporation, a citizen of the United States or a resident of the State of
Maryland.
SECTION 3. Election and Term of Directors. The term of office of
each director shall be from the time of his election and qualification until his
successor shall have been elected and shall have qualified, or until his death,
or until his resignation or removal as provided in these By-Laws, or as
otherwise provided by statute or the Corporation's Charter.
SECTION 4. Director Nominations.
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(a) Only persons who are nominated in accordance with the procedures
set forth in this Section 4 shall be eligible for election or re-election as
directors. Nominations of persons for election or re-election to the Board of
Directors of the Corporation may be made at a meeting of stockholders by or at
the direction of the Board of Directors or by any stockholder of the Corporation
who is entitled to vote for the election of such nominee at the meeting and who
complies with the notice procedures set forth in this Section 4.
(b) Such nominations, other than those made by or at the direction
of the Board of Directors, shall be made pursuant to timely notice delivered in
writing to the Secretary of the Corporation. To be timely, any such notice by a
stockholder must be delivered to or mailed and received at the principal
executive offices of the Corporation not later than 60 (sixty) days prior to the
meeting; provided, however, that if less than 70 (seventy) days' notice or prior
public disclosure of the date of the meeting is given or made to stockholders,
any such notice by a stockholder to be timely must be so received not later than
the close of business on the tenth day following the day on which notice of the
date of the meeting was given or such public disclosure was made.
(c) Any such notice by a stockholder shall set forth, (i) as to each
person whom the stockholder proposes to nominate for election or re-election as
a director, (A) the name, age, business address and residence address of such
person, (B) the principal occupation or employment of such person, (C) the class
and number of shares of the capital stock of the Corporation which are
beneficially owned by such person, and (D) any other information relating to
such person that is required to be disclosed in solicitations of proxies for the
election of directors pursuant to Regulation 14A under the Exchange Act or any
successor regulation thereto (including without limitation such person's written
consent to being named in the proxy statement as a nominee and to serving as a
director if elected and whether any person intends to seek reimbursement from
the Corporation of the expenses of any solicitation of proxies should such
person be elected a director of the Corporation); and (ii) as to the stockholder
giving the notice, (A) the name and address, as they appear on the Corporation's
books, of such stockholder, and (B) the class and number of shares of the
capital stock of the Corporation which are beneficially owned by such
stockholder. At the request of the Board of Directors, any person nominated by
the Board of Directors for election as a director shall furnish to the Secretary
of the Corporation that information required to be set forth in a stockholder's
notice of nomination which pertains to the nominee.
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(d) If a notice by a stockholder is required to be given pursuant to
this Section 4, no person shall be entitled to receive reimbursement from the
Corporation of the expenses of a solicitation of proxies for the election as a
director of a person named in such notice unless such notice states that such
reimbursement will be sought from the Corporation. No person shall be eligible
for election as a director of the Corporation unless nominated in accordance
with the procedures set forth in this Section 4. The chairman of the meeting
shall, if the facts warrant, determine and declare to the meeting that a
nomination was not made in accordance with the procedures prescribed by the
By-Laws, and if he should so determine, he shall so declare to the meeting and
the defective nomination shall be disregarded for all purposes.
SECTION 5. Resignation. A director of the Corporation may resign at
any time by giving written notice of his resignation to the Board of Directors
or the Chairman of the Board or to the President or the Secretary of the
Corporation. Any resignation shall take effect at the time specified in it or,
should the time when it is to become effective not be specified in it,
immediately upon its receipt. Acceptance of a resignation shall not be necessary
to make it effective unless the resignation states otherwise.
SECTION 6. Removal of Directors. Any director of the Corporation may
be removed by the stockholders with or without cause at any time by a vote of a
majority of the votes entitled to be cast for the election of directors.
SECTION 7. Vacancies. Subject to the provisions of the 1940 Act, any
vacancies in the Board of Directors, whether arising from death, resignation,
removal or any other cause except an increase in the number of directors, shall
be filled by a vote of the majority of the Board of Directors then in office
even though that majority is less than a quorum, provided that no vacancy or
vacancies shall be filled by action of the remaining directors if, after the
filling of the vacancy or vacancies, fewer than two-thirds of the directors then
holding office shall have been elected by the stockholders of the Corporation. A
majority of the entire Board as calculated prior to Board expansion may fill a
vacancy which results from an increase in the number of directors. In the event
that at any time a vacancy exists in any office of a director that may not be
filled by the remaining directors, a special meeting of the stockholders shall
be held as promptly as possible and in any event within 60 (sixty) days, for the
purpose of filling the vacancy or vacancies. Any director elected or appointed
to fill a vacancy shall hold office until a successor has been chosen and
qualifies or until his earlier death, resignation or removal.
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SECTION 8. Place of Meetings. Meetings of the Board may be held at
any place that the Board of Directors may from time to time determine or that is
specified in the notice of the meeting.
SECTION 9. Regular Meetings. Regular meetings of the Board of
Directors may be held without notice at the time and place determined by the
Board of Directors.
SECTION 10. Special Meetings. Special meetings of the Board of
Directors may be called by two or more directors of the Corporation or by the
Chairman of the Board or the President.
SECTION 11. Notice of Special Meetings. Notice of each special
meeting of the Board of Directors shall be given by the Secretary as hereinafter
provided. Each notice shall state the time and place of the meeting and shall be
delivered to each director, either personally or by telephone, facsimile
transmission or other standard form of telecommunication, at least 24
(twenty-four) hours before the time at which the meeting is to be held, or by
first-class mail, postage prepaid, addressed to the director at his residence or
usual place of business, and mailed at least 3 (three) days before the day on
which the meeting is to be held.
SECTION 12. Waiver of Notice of Meetings. Notice of any special
meeting need not be given to any director who shall, either before or after the
meeting, sign a written waiver of notice that is filed with the records of the
meeting or who shall attend the meeting.
SECTION 13. Quorum and Voting. One-third (but not fewer than two
unless there be only one director) of the members of the entire Board of
Directors shall be present in person at any meeting of the Board in order to
constitute a quorum for the transaction of business at the meeting, and except
as otherwise expressly required by statute, the Corporation's Charter, these
By-Laws, the 1940 Act, or any other applicable statute, the act of a majority of
the directors present at any meeting at which a quorum is present shall be the
act of the Board. In the absence of a quorum at any meeting of the Board, a
majority of the directors present may adjourn the meeting to another time and
place until a quorum shall be present. Notice of the time and place of any
adjourned meeting shall be given to the directors who were not present at the
time of the adjournment and, unless the time and place were announced at the
meeting at which the adjournment was taken, to the other directors. At any
adjourned meeting at which a quorum is present, any business may be transacted
that might have been transacted at the meeting as originally called.
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SECTION 14. Organization. The Board of Directors may, by resolution
adopted by a majority of the entire Board, designate a Chairman of the Board,
who shall preside at each meeting of the Board. In the absence or inability of
the Chairman of the Board to act or if there is none, the President, or, in his
absence or inability to act, another director chosen by a majority of the
directors present, shall act as chairman of the meeting and preside at the
meeting. The Secretary, or, in his absence or inability to act, any person
appointed by the chairman, shall act as secretary of the meeting and keep the
minutes thereof.
SECTION 15. Committees. The Board of Directors may designate one or
more committees of the Board of Directors, each consisting of 2 (two) or more
directors. To the extent provided in the resolution, and permitted by law, the
committee or committees shall have and may exercise the powers of the Board of
Directors in the management of the business and affairs of the Corporation and
may authorize the seal of the Corporation to be affixed to all papers that may
require it. Any committee or committees shall have the name or names determined
from time to time by resolution adopted by the Board of Directors. Each
committee shall keep regular minutes of its meetings and report the same to the
Board of Directors when required. The members of a committee present at any
meeting, whether or not they constitute a quorum, may appoint a director to act
in the place of an absent member.
SECTION 16. Written Consent of Directors in Lieu of a Meeting.
Subject to the provisions of the 1940 Act, any action required or permitted to
be taken at any meeting of the Board of Directors or of any committee of the
Board may be taken without a meeting if all members of the Board or committee,
as the case may be, consent thereto in writing, and the writing or writings are
filed with the records of the Board's or such committee's meetings.
SECTION 17. Telephone Conference. Members of the Board of Directors
or any committee of the Board may participate in any Board or committee meeting
by means of a conference telephone or similar communications equipment by means
of which all persons participating in the meeting can hear each other at the
same time. Participation by such means shall constitute presence in person at
the meeting.
SECTION 18. Compensation. Each director shall be entitled to receive
compensation, if any, as may from time to time be fixed by the Board of
Directors, including a fee for each meeting of the Board or any committee
thereof, regular or special, he attends. Directors may also be reimbursed by the
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Corporation for all reasonable expenses incurred in traveling to and from the
place of a Board or committee meeting.
ARTICLE III
OFFICERS, AGENTS AND EMPLOYEES
SECTION 1. Number and Qualifications. The officers of the
Corporation shall be a President, a Secretary and a Treasurer, each of whom
shall be elected by the Board of Directors. The Board of Directors may elect or
appoint one or more Vice Presidents and may also appoint any other officers,
agents and employees it deems necessary or proper. Any two or more offices may
be held by the same person, except the offices of President and Vice President,
but no officer shall execute, acknowledge or verify any instrument in more than
one capacity. Officers shall be elected by the Board of Directors, each to hold
office until his successor shall have been duly elected and shall have
qualified, or until his death, or until his resignation or removal as provided
in these By-Laws. The Board of Directors may from time to time elect, or
designate to the President the power to appoint, such officers (including one or
more Assistant Vice Presidents, one or more Assistant Treasurers and one or more
Assistant Secretaries) and such agents as may be necessary or desirable for the
business of the Corporation. Such other officers and agents shall have such
duties and shall hold their offices for such terms as may be prescribed by the
Board or by the appointing authority.
SECTION 2. Resignations. Any officer of the Corporation may resign
at any time by giving written notice of his resignation to the Board of
Directors, the Chairman of the Board, the President or the Secretary. Any
resignation shall take effect at the time specified therein or, if the time when
it shall become effective is not specified therein, immediately upon its
receipt. Acceptance of a resignation shall not be necessary to make it effective
unless the resignation states otherwise.
SECTION 3. Removal of Officer, Agent or Employee. Any officer, agent
or employee of the Corporation may be removed by the Board of Directors with or
without cause at any time, and the Board may delegate the power of removal as to
agents and employees not elected or appointed by the Board of Directors. Removal
shall be without prejudice to the person's contract rights, if any, but the
appointment of any person as an officer, agent or employee of the Corporation
shall not of itself create contract rights.
SECTION 4. Vacancies. A vacancy in any office whether arising from
death, resignation, removal or any other cause, may be filled for the unexpired
portion of the term of the office
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that shall be vacant, in the manner prescribed in these By-Laws for the regular
election or appointment to the office.
SECTION 5. Compensation. The compensation of the officers of
the Corporation shall be fixed by the Board of Directors, but this power may
be delegated to any officer with respect to other officers under his control.
SECTION 6. Bonds or Other Security. If required by the Board, any
officer, agent or employee of the Corporation shall give a bond or other
security for the faithful performance of his duties, in an amount and with any
surety or sureties as the Board may require.
SECTION 7. President. The President shall be the chief executive
officer of the Corporation. In the absence or inability of the Chairman of the
Board to act (or if there is none), the President shall preside at all meetings
of the stockholders and of the Board of Directors. The President shall have,
subject to the control of the Board of Directors, general charge of the business
and affairs of the Corporation, and may employ and discharge employees and
agents of the Corporation, except those elected or appointed by the Board, and
he may delegate these powers.
SECTION 8. Vice President. Each Vice President shall have the
powers and perform the duties that the Board of Directors or the President
may from time to time prescribe.
SECTION 9. Treasurer. Subject to the provisions of any contract that
may be entered into with any custodian pursuant to authority granted by the
Board of Directors, the Treasurer shall have charge of all receipts and
disbursements of the Corporation and shall have or provide for the custody of
the Corporation's funds and securities; he shall have full authority to receive
and give receipts for all money due and payable to the Corporation, and to
endorse checks, drafts and warrants, in its name and on its behalf and to give
full discharge for the same; he shall deposit all funds of the Corporation,
except those that may be required for current use, in such banks or other places
of deposit as the Board of Directors may from time to time designate; and, in
general, he shall perform all duties incident to the office of Treasurer and
such other duties as may from time to time be assigned to him by the Board of
Directors or the President.
SECTION 10. Secretary. The Secretary shall:
(a) keep or cause to be kept in one or more books provided for the
purpose, the minutes of all meetings of the
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Board of Directors, the committees of the Board and the stockholders;
(b) see that all notices are duly given in accordance with the
provisions of these By-Laws and as required by law;
(c) be custodian of the records and the seal of the Corporation and
affix and attest the seal to all stock certificates of the Corporation (unless
the seal of the Corporation on such certificates shall be a facsimile, as
hereinafter provided) and affix and attest the seal to all other documents to be
executed on behalf of the Corporation under its seal;
(d) see that the books, reports, statements, certificates and other
documents and records required by law to be kept and filed are properly kept and
filed; and
(e) in general, perform all the duties incident to the office of
Secretary and such other duties as from time to time may be assigned to him by
the Board of Directors or the President.
SECTION 11. Delegation of Duties. In case of the absence of any
officer of the Corporation, or for any other reason that the Board of Directors
may deem sufficient, the Board may confer for the time being the powers or
duties, or any of them, of such officer upon any other officer or upon any
director.
ARTICLE IV
STOCK
SECTION 1. Stock Certificates. Each holder of stock of the
Corporation shall be entitled upon specific written request to such person as
may be designated by the Corporation to have a certificate or certificates, in a
form approved by the Board, representing the number of shares of stock of the
Corporation owned by him; provided, however, that certificates for fractional
shares will not be delivered in any case. The certificates representing shares
of stock shall be signed by or in the name of the Corporation by the Chairman of
the Board, President or a Vice President and by the Secretary or an Assistant
Secretary or the Treasurer or an Assistant Treasurer and sealed with the seal of
the Corporation. Any or all of the signatures or the seal on the certificate may
be facsimiles. In case any officer, transfer agent or registrar who has signed
or whose facsimile signature has been placed upon a certificate shall have
ceased to be such officer, transfer agent or registrar before such certificate
shall be issued, it may be issued by the
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Corporation with the same effect as if such officer, transfer agent or registrar
were still in office at the date of issue.
SECTION 2. Books of Account and Record of Stockholders. There shall
be kept at the principal executive office of the Corporation correct and
complete books and records of account of all the business and transactions of
the Corporation. There shall be made available upon request of any stockholder,
in accordance with Maryland law, a record containing the number of shares of
stock issued during a specified period not to exceed 12 (twelve) months and the
consideration received by the Corporation for each such share.
SECTION 3. Transfers of Shares. Transfers of shares of stock of the
Corporation shall be made on the stock records of the Corporation only by the
registered holder thereof, or by his attorney thereunto authorized by power of
attorney duly executed and filed with the Secretary or with a transfer agent or
transfer clerk, and on surrender of the certificate or certificates, if issued,
for the shares properly endorsed or accompanied by a duly executed stock
transfer power and the payment of all taxes thereon. Except as otherwise
provided by law, the Corporation shall be entitled to recognize the exclusive
right of a person in whose name any share or shares stand on the record of
stockholders as the owner of the share or shares for all purposes, including,
without limitation, the rights to receive dividends or other distributions and
to vote as the owner, and the Corporation shall not be bound to recognize any
equitable or legal claim to or interest in any such share or shares on the part
of any other person.
SECTION 4. Regulations. The Board of Directors may make any
additional rules and regulations, not inconsistent with these By-Laws, as it may
deem expedient concerning the issue, transfer and registration of certificates
for shares of stock of the Corporation. It may appoint, or authorize any officer
or officers to appoint, one or more transfer agents or one or more transfer
clerks and one or more registrars and may require all certificates for shares of
stock to bear the signature or signatures of any of them.
SECTION 5. Stolen, Lost, Destroyed or Mutilated Certificates. The
holder of any certificate representing shares of stock of the Corporation shall
immediately notify the Corporation of its theft, loss, destruction or mutilation
and the Corporation may issue a new certificate of stock in the place of any
certificate issued by it that has been alleged to have been stolen, lost or
destroyed or that shall have been mutilated. The Board may, in its discretion,
require the owner (or his legal representative) of a stolen, lost, destroyed or
mutilated certificate to give to the Corporation a bond in a sum, limited
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or unlimited, and in a form and with any surety or sureties, as the Board in its
absolute discretion shall determine or to indemnify the Corporation against any
claim that may be made against it on account of the alleged theft, loss,
destruction or the mutilation of any such certificate, or issuance of a new
certificate. Anything herein to the contrary notwithstanding, the Board of
Directors, in its absolute discretion, may refuse to issue any such new
certificate, except pursuant to legal proceedings under the Maryland General
Corporation Law.
SECTION 6. Fixing of Record Date for Dividends, Distributions, etc.
The Board may fix, in advance, a date not more than 90 (ninety) days preceding
the date fixed for the payment of any dividend or the making of any distribution
or the allotment of rights to subscribe for securities of the Corporation, or
for the delivery of evidences of rights or evidences of interests arising out of
any change, conversion or exchange of common stock or other securities, as the
record date for the determination of the stockholders entitled to receive any
such dividend, distribution, allotment, rights or interests, and in such case
only the stockholders of record at the time so fixed shall be entitled to
receive such dividend, distribution, allotment, rights or interests.
SECTION 7. Information to Stockholders and Others. Any stockholder
of the Corporation or his agent may inspect and copy during the Corporation's
usual business hours the Corporation's By-Laws, minutes of the proceedings of
its stockholders, annual statements of its affairs and voting trust agreements
on file at its principal office.
ARTICLE V
INDEMNIFICATION AND INSURANCE
SECTION 1. Indemnification of Directors and Officers. Any person who
was or is a party or is threatened to be made a party in any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative, by reason of the fact that such person is a current or former
director or officer of the Corporation, or is or was serving while a director or
officer of the Corporation at the request of the Corporation as a director,
officer, partner, trustee, employee, agent or fiduciary of another corporation,
partnership, joint venture, trust, enterprise or employee benefit plan, shall be
indemnified by the Corporation against judgments, penalties, fines, excise
taxes, settlements and reasonable expenses (including attorneys' fees) actually
incurred by such person in connection with such action, suit or proceeding to
the full extent permissible under the Maryland General Corporation Law, the
Securities Act of 1933, as amended (the "Securities
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Act"), and the 1940 Act, as such statutes are now or hereafter in force, except
that such indemnity shall not protect any such person against any liability to
the Corporation or any stockholder thereof to which such person would otherwise
be subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office
("disabling conduct").
SECTION 2. Advances. Any current or former director or officer of
the Corporation claiming indemnification within the scope of this Article V
shall be entitled to advances from the Corporation for payment of the reasonable
expenses incurred by him in connection with proceedings to which he is a party
in the manner and to the full extent permissible under the Maryland General
Corporation Law, the Securities Act and the 1940 Act, as such statutes are now
or hereafter in force; provided however, that the person seeking indemnification
shall provide to the Corporation a written affirmation of his good faith belief
that the standard of conduct necessary for indemnification by the Corporation
has been met and a written undertaking to repay any such advance unless it is
ultimately determined that he is entitled to indemnification, and provided
further that at least one of the following additional conditions is met: (a) the
person seeking indemnification shall provide a security in form and amount
acceptable to the Corporation for his undertaking; (b) the Corporation is
insured against losses arising by reason of the advance; or (c) a majority of a
quorum of directors of the Corporation who are neither "interested persons" as
defined in Section 2(a)(19) of the 1940 Act, nor parties to the proceeding
("disinterested non-party directors"), or independent legal counsel, in a
written opinion, shall determine, based on a review of facts readily available
to the Corporation at the time the advance is proposed to be made, that there is
reason to believe that the person seeking indemnification will ultimately be
found to be entitled to indemnification.
SECTION 3. Procedure. At the request of any current or former
director or officer, or any employee or agent whom the Corporation proposes to
indemnify, the Board of Directors shall determine, or cause to be determined, in
a manner consistent with the Maryland General Corporation Law, the Securities
Act and the 1940 Act, as such statutes are now or hereafter in force, whether
the standards required by this Article V have been met; provided, however, that
indemnification shall be made only following: (a) a final decision on the merits
by a court or other body before whom the proceeding was brought that the person
to be indemnified was not liable by reason of disabling conduct; or (b) in the
absence of such a decision, a reasonable determination, based upon a review of
the facts, that the person to be indemnified was not liable by reason of
disabling conduct by, (i) the vote of a
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majority of a quorum of disinterested non-party directors, or (ii) an
independent legal counsel in a written opinion.
SECTION 4. Indemnification of Employees and Agents. Employees and
agents who are not officers or directors of the Corporation may be indemnified,
and reasonable expenses may be advanced to such employees or agents, in
accordance with the procedures set forth in this Article V to the extent
permissible under the 1940 Act, the Securities Act and Maryland General
Corporation Law, as such statutes are now or hereafter in force, to the extent,
consistent with the foregoing, as may be provided by action of the Board of
Directors or by contract.
SECTION 5. Other Rights. The indemnification provided by this
Article V shall not be deemed exclusive of any other right, in respect of
indemnification or otherwise, to which those seeking such indemnification may be
entitled under any insurance or other agreement, vote of stockholders or
disinterested directors or otherwise, both as to action by a director or officer
of the Corporation in his official capacity and as to action by such person in
another capacity while holding such office or position, and shall continue as to
a person who has ceased to be a director or officer and shall inure to the
benefit of the heirs, executors and administrators of such a person.
SECTION 6. Insurance. The Corporation shall have the power to
purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Corporation, or who, while a
director, officer, employee or agent of the Corporation, is or was serving at
the request of the Corporation as a director, officer, partner, trustee,
employee, agent or fiduciary of another corporation, partnership, joint venture,
trust, enterprise or employee benefit plan, against any liability asserted
against and incurred by him in any such capacity, or arising out of his status
as such, provided that no insurance may be obtained by the Corporation for
liabilities against which it would not have the power to indemnify him under
this Article V or applicable law.
SECTION 7. Constituent, Resulting or Surviving Corporations. For the
purposes of this Article V, references to the "Corporation" shall include all
constituent corporations absorbed in a consolidation or merger as well the
resulting or surviving corporation so that any person who is or was a director,
officer, employee or agent of a constituent corporation or is or was serving at
the request of a constituent corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise shall stand in the same position under this Article V with respect to
the resulting or surviving corporation as he would if he had served the
resulting or surviving corporation in the same capacity.
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ARTICLE VI
SEAL
The seal of the Corporation shall be circular in form and shall bear
the name of the Corporation, the year of its incorporation, the words "Corporate
Seal" and "Maryland" and any emblem or device approved by the Board of
Directors. The seal may be used by causing it or a facsimile to be impressed or
affixed or in any other manner reproduced, or by placing the word "(seal)"
adjacent to the signature of the authorized officer of the Corporation.
ARTICLE VII
FISCAL YEAR
The Corporation's fiscal year shall be fixed by the Board of
Directors.
ARTICLE VIII
AMENDMENTS
These By-Laws may be amended or repealed by the affirmative vote of
a majority of the Board of Directors at any regular or special meeting of the
Board of Directors, subject to the requirements of the 1940 Act.
As adopted, July 20, 1998
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