WARBURG PINCUS INTERNATIONAL GROWTH FUND INC, 485APOS, 1999-11-02

WARBURG PINCUS INTERNATIONAL GROWTH FUND INC
485APOS, 1999-11-02

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<PAGE>

As filed with the U.S. Securities and Exchange Commission
on November 2, 1999

Securities Act File No. 333-60689
Investment Company Act File No. 811-08933

U.S. 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._2_ [X]

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT
OF 1940 [X]

Amendment No._3_ [X]
(Check appropriate box or boxes)

Warburg, Pincus International Growth 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

Hal Liebes, Esq.
Warburg, Pincus International Growth Fund, Inc.
466 Lexington Avenue
New York, New York 10017-3147
......................................
(Name and Address of Agent for Service)

Copy to:
Rose F. DiMartino, Esq.
Willkie Farr & Gallagher
787 Seventh Avenue
New York, New York 10019-6099

<PAGE>

Approximate Date of Proposed Public Offering: December 31, 1999

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

[ ] immediately upon filing pursuant to paragraph (b)

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

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

[X] on December 31, 1999 pursuant to paragraph (a)(1)

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

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

If appropriate, check the following box:

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

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

<PAGE>

JANUARY 1, 2000 PROSPECTUS

[CSAM] A member of CREDIT SUISSE/ASSET MANAGEMENT

INTERNATIONAL GROWTH FUND
EUROPEAN EQUITY FUND
U.S. CORE EQUITY FUND
FOCUS FUND
LONG-SHORT MARKET NEUTRAL FUND
U.S. CORE FIXED INCOME FUND
HIGH YIELD FUND
MUNICIPAL BOND FUND
STRATEGIC GLOBAL FIXED INCOME FUND

CREDIT SUISSE ASSET MANAGEMENT SECURITIES, INC., DISTRIBUTOR

As with all mutual funds, the Securities and Exchange Commission
has not approved these funds, nor has it passed upon the adequacy or
accuracy of this PROSPECTUS. It is a criminal offense to state otherwise.

INSTITUTIONAL SHARES

<PAGE>

CONTENTS

<TABLE>
<S> <C>
KEY POINTS.................................................. 1
PERFORMANCE SUMMARY......................................... 7
Year-by-Year Total Returns ............................... 7
Average Annual Total Returns.............................. 8
INVESTOR EXPENSES........................................... 10
THE FUNDS IN DETAIL......................................... 14
The Management Firms...................................... 14
Multi-Class Structure..................................... 14
Fund Information Key...................................... 15
INTERNATIONAL GROWTH FUND................................... 16
EUROPEAN EQUITY FUND........................................ 18
U.S. CORE EQUITY FUND....................................... 20
FOCUS FUND.................................................. 22
LONG-SHORT MARKET NEUTRAL FUND.............................. 24
U.S. CORE FIXED INCOME FUND................................. 26
HIGH YIELD FUND............................................. 28
MUNICIPAL BOND FUND......................................... 31
STRATEGIC GLOBAL FIXED INCOME FUND.......................... 33
MORE ABOUT RISK............................................. 35
Introduction.............................................. 35
Types of Investment Risk.................................. 35
CERTAIN INVESTMENT PRACTICES ............................... 37
MEET THE MANAGERS........................................... 41
ABOUT YOUR ACCOUNT.......................................... 48
Share Valuation........................................... 48
Buying and Selling Shares................................. 48
Buying Fund Shares........................................ 48
Selling Fund Shares....................................... 49
Exchanging Fund Shares.................................... 49
Other Policies............................................ 50
Account Statements........................................ 50
Distributions............................................. 50
Taxes .................................................... 51
OTHER INFORMATION........................................... 52
About the Distributor..................................... 52
FOR MORE INFORMATION........................................ back cover
</TABLE>

<PAGE>

KEY POINTS

GOAL AND PRINCIPAL STRATEGIES

<TABLE>
<CAPTION>
FUND/RISK FACTORS GOAL STRATEGIES
<S> <C> <C>
INTERNATIONAL GROWTH FUND Long-term appreciation of capital / / Invests in foreign equity securities
Risk factors: / / Emphasizes developed countries, but
FOREIGN SECURITIES may also invest in emerging markets
MARKET RISK / / Combines top-down regional analysis with
NON-DIVERSIFIED STATUS bottom-up company research
/ / Seeks countries, sectors and companies with
solid growth prospects and attractive market
valuations
EUROPEAN EQUITY FUND Capital appreciation / / Invests in European equity securities
Risk factors: / / Targets Western European countries
FOREIGN SECURITIES / / Uses both growth and value criteria (seeks
MARKET RISK "growth at a resonable price")
REGION FOCUS / / Portfolio managers look at factors such as
earnings growth, stock price, relative
valuation and merger-and-acquisition trends
</TABLE>

- --- INVESTOR PROFILE
- ---------------------------

THESE FUNDS ARE DESIGNED FOR INVESTORS WHO:
- are investing for long-term goals
- are willing to assume the risk of losing money in exchange for attractive
potential long-term returns
- are looking for capital appreciation
- want to diversify their portfolios internationally

THEY MAY NOT BE APPROPRIATE IF YOU:
- are investing for a shorter time horizon
- are uncomfortable with an investment that has a higher degree of
volatility
- want to limit your exposure to foreign securities
- are looking for income

You should base your selection of a fund on your own goals, risk preferences and
time horizon.

<PAGE>

GOAL AND PRINCIPAL STRATEGIES

<TABLE>
<CAPTION>
FUND/RISK FACTORS GOAL STRATEGIES
<S> <C> <C>
U.S. CORE EQUITY FUND Long-term appreciation of capital / / Invests primarily in U.S. equity securities
Risk factors: / / Focuses on large companies
MARKET RISK / / Stock-selection process uses quantitative
NON-DIVERSIFIED STATUS techniques to seek to identify companies with
improving momentum and reasonable relative
valuations
FOCUS FUND Long-term appreciation of capital / / Invests in securities of 40-60 U.S.
Risk factors: companies
MARKET RISK / / Focuses on industry sectors with favorable
NON-DIVERSIFIED STATUS economic profit trends
/ / Uses both traditional value-based analyses
(such as price/book ratio), as well as the
economic profit of a company
</TABLE>

- --- INVESTOR PROFILE
- ---------------------------

THEY MAY NOT BE APPROPRIATE IF YOU:
- are investing for a shorter time horizon
- are uncomfortable with an investment that will fluctuate in value
- are looking for income

You should base your selection of a fund on your own goals, risk preferences and
time horizon.

<PAGE>

GOAL AND PRINCIPAL STRATEGIES

<TABLE>
<CAPTION>
FUND/RISK FACTORS GOAL STRATEGIES
<S> <C> <C>
LONG-SHORT MARKET NEUTRAL FUND Long-term capital appreciation / / Seeks a total return greater than the return
Risk factors: while minimizing exposure to of the Salomon Smith Barney 1-Month Treasury
MARKET RISK general equity market risk Bill Index-TM-
NON-DIVERSIFIED STATUS / / Takes long positions in stocks that the
SHORT POSITIONS portfolio manager has identified as attractive
/ / Takes short positions in stocks that the
manager has identified as unattractive
/ / Seeks minimal net exposure to the general
U.S. equity market and low to neutral exposure
to any particular industry or specific
capitalization range
</TABLE>

- --- INVESTOR PROFILE
- ---------------------------

THIS FUND IS DESIGNED FOR INVESTORS WHO:
- are investing for long-term goals
- are willing to assume the risk of losing money in exchange for attractive
potential long-term returns
- are investing for total return or capital appreciation

IT MAY NOT BE APPROPRIATE IF YOU:
- are investing for a shorter time horizon
- are uncomfortable with an investment that will fluctuate in value
- are looking primarily for income

You should base your selection of a fund on your own goals, risk preferences and
time horizon.

<PAGE>

GOAL AND PRINCIPAL STRATEGIES

<TABLE>
<CAPTION>
FUND/RISK FACTORS GOAL STRATEGIES
<S> <C> <C>
U.S. CORE FIXED High total return / / Invests primarily in fixed-income securities
INCOME FUND of U.S. issuers
Risk factors: / / Typically maintains a weighted-average
CREDIT RISK portfolio maturity of between five and
INTEREST-RATE RISK 15 years
MARKET RISK / / Focuses on high-grade securities (average
NON-DIVERSIFIED STATUS credit rating AA)
HIGH YIELD FUND High total return / / Invests primarily in high-yield, higher-risk
Risk factors: fixed-income securities (junk bonds)
CREDIT RISK / / Typically maintains a weighted-average
INTEREST-RATE RISK portfolio maturity of between five and
MARKET RISK 15 years
NON-DIVERSIFIED STATUS / / Emphasizes top-down analysis of industry
sectors and themes
/ / Seeks to allocate risk by investing among a
variety of industry sectors
MUNICIPAL BOND FUND High total return / / Invests primarily in municipal securities
Risk factors: / / Typically maintains a weighted-average
CREDIT RISK portfolio maturity of between 10 and 15 years
INTEREST-RATE RISK / / Focuses on high-grade securities (average
MARKET RISK credit rating AA)
NON-DIVERSIFIED STATUS
STRATEGIC GLOBAL FIXED INCOME FUND High total return / / Invests in U.S. and foreign fixed-income
Risk factors: securities denominated in various currencies
CREDIT RISK / / Seeks to maintain an average credit rating
FOREIGN SECURITIES of BBB or higher
INTEREST-RATE RISK / / Seeks to invest in countries exhibiting an
MARKET RISK attractive combination of fixed-income returns
NON-DIVERSIFIED STATUS and currency exchange rates
/ / Focuses on high-grade securities (average
credit rating AA)
</TABLE>

- --- INVESTOR PROFILE
- ---------------------------

THESE FUNDS ARE DESIGNED FOR INVESTORS WHO:
- are seeking investment income
- want to diversify their portfolios with fixed-income funds
- are willing to accept risk and volatility

THEY MAY NOT BE APPROPRIATE IF YOU:
- are investing for maximum return over a long time horizon
- require stability of your principal

You should base your selection of a fund on your own goals, risk preferences and
time horizon.

BECAUSE THE HIGH YIELD FUND AND THE STRATEGIC GLOBAL FIXED INCOME FUND INVOLVE A
HIGH LEVEL OF RISK, YOU SHOULD CONSIDER THEM ONLY FOR THE AGGRESSIVE PORTION OF
YOUR PORTFOLIO. THE HIGH YIELD FUND AND THE STRATEGIC GLOBAL FIXED INCOME FUND
MAY NOT BE APPROPRIATE FOR EVERYONE.

<PAGE>

- --- A WORD ABOUT RISK
- -----------------------------

All investments involve some level of risk. Simply defined, risk is the
possibility that you will lose money or not make money.

Principal risk factors for the funds are discussed below. Before you invest,
please make sure you understand the risks that apply to the funds. As with any
mutual fund, you could lose money over any period of time.

Investments in the funds are not bank deposits and are not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.

CREDIT RISK

U.S. CORE FIXED INCOME, HIGH YIELD, MUNICIPAL BOND AND STRATEGIC GLOBAL FIXED
INCOME FUNDS

The issuer of a security or the counterparty to a contract may default or
otherwise become unable to honor a financial obligation.

FOREIGN SECURITIES

INTERNATIONAL GROWTH, EUROPEAN EQUITY AND STRATEGIC GLOBAL FIXED INCOME FUNDS

A fund that invests outside the U.S. carries additional risks that include:

- CURRENCY RISK Fluctuations in exchange rates between the U.S. dollar and
foreign currencies may negatively affect an investment. Adverse changes in
exchange rates may erode or reverse any gains produced by foreign-currency
denominated investments and may widen any losses. A fund may, but is not
required to, seek to reduce currency risk by hedging part or all of its
exposure to various foreign currencies.

- INFORMATION RISK Key information about an issuer, security or market may
be inaccurate or unavailable.

- POLITICAL RISK Foreign governments may expropriate assets, impose capital
or currency controls, impose punitive taxes, or nationalize a company or
industry. Any of these actions could have a severe effect on security
prices and impair a fund's ability to bring its capital or income back to
the U.S. Other political risks include economic policy changes, social and
political instability, military action and war.

INTEREST-RATE RISK

U.S. CORE FIXED INCOME, HIGH YIELD, MUNICIPAL BOND AND STRATEGIC GLOBAL FIXED
INCOME FUNDS

Changes in interest rates may cause a decline in the market value of an
investment. With bonds and other fixed-income securities, a rise in interest
rates typically causes a fall in values, while a fall in interest rates
typically causes a rise in values.

MARKET RISK

ALL FUNDS

The market value of a security may move up and down, sometimes rapidly and
unpredictably. These fluctuations, which are often referred to as "volatility,"
may cause a security to be worth less than it was worth at an earlier time.
Market risk may affect a single issuer, industry, sector of the economy, or the
market as a whole. Market risk is common to most investments -- including stocks
and bonds, and the mutual funds that invest in them.

NON-DIVERSIFIED STATUS

ALL FUNDS EXCEPT EUROPEAN EQUITY FUND

The funds are considered non-diversified investment companies under the
Investment Company Act of 1940 and are permitted to invest a greater proportion
of their assets in the securities of a smaller number of

<PAGE>

issuers. As a result, the funds may be subject to greater volatility with
respect to their respective portfolio securities than a fund that is more
broadly diversified.

SHORT POSITIONS

LONG-SHORT MARKET NEUTRAL FUND

The fund takes short positions by selling borrowed securities that it does
not currently own, with the intention of repurchasing them later for a profit on
the expectation that the market price will drop.

Because they expose the fund to risks associated with securities it does not
own, short positions involve speculative exposure risk. As a result, if the fund
takes short positions in stocks that increase in value, then it will be likely
to underperform similar stock mutual funds that do not take short positions. In
addition, short positions typically involve increased liquidity risk and
transaction costs.

REGION FOCUS

EUROPEAN EQUITY FUND

Focusing on a single region involves increased currency, political,
regulatory and other risks. Market swings in the targeted region (Western
Europe) will be likely to have a greater effect on fund performance than they
would in a more geographically diversified equity fund.

<PAGE>

PERFORMANCE SUMMARY

The bar chart below and the table on the next page provide an indication of the
risks of investing in these funds. The bar chart shows you how fund performance
has varied from year to year for up to 10 years. The table compares each fund's
performance over time to that of a broadly based securities market index. As
with all mutual funds, past performance is not a prediction of the future.

YEAR-BY-YEAR TOTAL RETURNS

<TABLE>
<CAPTION>
YEAR ENDED 12/31: 1995 1996 1997 1998
<S> <C> <C> <C> <C>
INTERNATIONAL GROWTH FUND
Best quarter: % (Q )
Worst quarter: % (Q )
Inception date: 9/30/92
Total return for the period 1/1/99 -
9/30/99: % (not annualized)
</TABLE>

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<S> <C> <C> <C> <C>
U.S. CORE EQUITY FUND
Best quarter: % (Q )
Worst quarter: % (Q )
Inception date: 8/31/94
Total return for the period 1/1/99 -
9/30/99: % (not annualized)
</TABLE>

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<S> <C> <C> <C> <C>
FOCUS FUND
Best quarter: % (Q )
Worst quarter: % (Q )
Inception date: 7/31/98
Total return for the period 1/1/99 -
9/30/99: % (not annualized)
</TABLE>

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<S> <C> <C> <C> <C>
U.S. CORE FIXED INCOME FUND
Best quarter: % (Q )
Worst quarter: % (Q )
Inception date: 3/31/94
Total return for the period 1/1/99 -
9/30/99: % (not annualized)
</TABLE>

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<S> <C> <C> <C> <C>
HIGH YIELD FUND
Best quarter: % (Q )
Worst quarter: % (Q )
Inception date: 11/1/96
Total return for the period 1/1/99 -
9/30/99: % (not annualized)
</TABLE>

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<S> <C> <C> <C> <C>
MUNICIPAL BOND FUND
Best quarter: % (Q )
Worst quarter: % (Q )
Inception date: 6/20/94
Total return for the period 1/1/99 -
9/30/99: % (not annualized)
</TABLE>

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<S> <C> <C> <C> <C>
STRATEGIC GLOBAL FIXED INCOME FUND
Best quarter: % (Q )
Worst quarter: % (Q )
Inception date: 6/27/94
Total return for the period 1/1/99 -
9/30/99: % (not annualized)
</TABLE>

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<PAGE>

AVERAGE ANNUAL TOTAL RETURNS

<TABLE>
<CAPTION>
ONE YEAR THREE YEARS FIVE YEARS LIFE OF INCEPTION
PERIOD ENDED 12/31/98: 1998 1996-1998 1994-1998 FUND DATE
<S> <C> <C> <C> <C> <C>
INTERNATIONAL GROWTH FUND 13.88% 15.51% 8.64% 11.76% 9/30/92
MSCI EUROPE, AUSTRALASIA AND
FAR EAST INDEX(1) % % % %
U.S. CORE EQUITY FUND 38.07% 25.37% 22.64% 22.62% 9/1/94
STANDARD & POOR'S 500
INDEX(2) % % % %
FOCUS FUND 53.21% N/A N/A N/A 7/31/98
STANDARD & POOR'S 500
INDEX(2) % N/A N/A N/A
U.S. CORE FIXED INCOME FUND 2.37% 7.15% 7.44% 6.88% 3/31/94
LEHMAN BROTHERS AGGREGATE
BOND INDEX(3) % N/A %
HIGH YIELD FUND 0.39% N/A N/A 5.96% 11/1/96
CS FIRST BOSTON DOMESTIC +
HIGH YIELD INDEX(4) % % %
MUNICIPAL BOND DOMESTIC FUND 0.36% 5.83% 5.62% 5.47% 6/20/94
LEHMAN BROTHERS MUNICIPAL
BOND INDEX(5) % N/A %
STRATEGIC GLOBAL FIXED
INCOME FUND 2.78% 2.81% 6.31% 6.08% 6/27/94
JP MORGAN GLOBAL GOVERNMENT
BOND INDEX UNHEDGED(6) % N/A %
</TABLE>

(1) The Morgan Stanley Capital International Europe, Australasia and Far East
Index is an unmanaged index (with no defined investment objective) of
international equities that includes reinvestments of dividends, and is the
exclusive property of Morgan Stanley Capital International & Co.,
Incorporated.
(2) The S&P 500 Index is an unmanaged index (with no defined investment
objective) of common stocks, includes reinvestment of dividends, and is a
registered trademark of McGraw-Hill Co., Inc.
(3) The Lehman Brothers Aggregate Bond Index is composed of the Lehman
Government/Corporate Index and the Mortgage-Backed Securities Index. The
Aggregate Bond Index includes U.S. Treasury and agency issues, corporate
bond issues and mortgage-backed securities rated investment-grade or higher
by Moody's Investors Service, Standard & Poor's Corporation or Fitch
Investors' Service.
(4) The Credit Suisse First Boston Domestic + High Yield Index is an unmanaged
index (with no defined investment objective) of high yield bonds and is
compiled by Credit Suisse First Boston, an affiliate of the fund's adviser.
(5) The Lehman Brothers Municipal Bond Index is an unmanaged index of
municipal bonds (with no defined investment objective) and is calculated by
Lehman Brothers Inc.

<PAGE>

(6) The JP Morgan Global Government Bond Index Unhedged (including U.S. $) is
a market-capitalization index consisting of the government bond markets of
the following countries: Australia, Belgium, Canada, Denmark, France,
Germany, Italy, Japan, Netherlands, Spain, Sweden, the U.K. and the U.S. All
issues have a remaining maturity of at least one year and the index is
rebalanced monthly.

UNDERSTANDING PERFORMANCE

/ / TOTAL RETURN tells you how much an investment in a fund has changed in
value over a given time period. It assumes that all dividends and
capital gains (if any) were reinvested in additional shares. The change
in value can be stated either as a CUMULATIVE RETURN or as an AVERAGE
ANNUAL RATE OF RETURN.

/ / A CUMULATIVE TOTAL RETURN is the actual return of an investment for a
specified period. The YEAR-BY-YEAR TOTAL RETURNS in the bar chart are
examples of one-year cumulative total returns.

/ / An AVERAGE ANNUAL TOTAL RETURN applies to periods longer than one year.
It smoothes out the variations in year-by-year performance to tell you
what CONSTANT annual return would have produced the investment's actual
cumulative return. This gives you an idea of an investment's annual
contribution to your portfolio, ASSUMING you held it for the entire
period.

/ / Because of compounding, the average annual total returns in the table
cannot be computed by averaging the returns in the bar chart.

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

<PAGE>

INVESTOR EXPENSES

FEES AND FUND EXPENSES

This table describes the fees and expenses you may bear as a shareholder. Annual
fund operating expense figures are for the fiscal period ending August 31, 1999.

<TABLE>
<CAPTION>
EUROPEAN
INTERNATIONAL EQUITY
GROWTH FUND FUND
<S> <C> <C>
SHAREHOLDER FEES
(PAID DIRECTLY FROM YOUR INVESTMENT)
Sales charge "load" on purchases NONE NONE
Deferred sales charge "load" NONE NONE
Sales charge "load" on reinvested distributions NONE NONE
Redemption fees NONE NONE
Exchange fees NONE NONE
ANNUAL FUND OPERATING EXPENSES
(DEDUCTED FROM FUND ASSETS)
Management fee .80% 1.00%
Distribution and service (12b-1) fee NONE NONE
Other expenses .42% 1.29%
TOTAL ANNUAL FUND OPERATING EXPENSES* 1.22% 2.29%
</TABLE>

* Actual fees and expenses for the fiscal year ended August 31, 1999 are shown
below. Fee waivers and expense reimbursements or credits reduced expenses
for some funds during 1999 but may be discontinued at any time.

<TABLE>
<CAPTION>
EUROPEAN
INTERNATIONAL EQUITY
EXPENSES AFTER WAIVERS AND REIMBURSEMENTS GROWTH FUND FUND
<S> <C> <C>
Management fee .80% .00%
Distribution and service (12b-1) fee NONE NONE
Other expenses .41% 1.16%
TOTAL ANNUAL FUND OPERATING EXPENSES 1.21% 1.16%
</TABLE>

EXAMPLE

This example may help you compare the cost of investing in these funds with the
cost of investing in other mutual funds. Because it uses hypothetical
conditions, your actual costs may be higher or lower.

Assume you invest $10,000, each fund returns 5% annually, expense ratios remain
as listed in the first table above (before fee waivers and expense
reimbursements and credits), and you close your account at the end of each of
the time periods shown. Based on these assumptions, your cost would be:

<TABLE>
<CAPTION>
ONE YEAR THREE YEARS FIVE YEARS 10 YEARS
<S> <C> <C> <C> <C>
INTERNATIONAL GROWTH FUND $ 124 $ 387 $ 670 $1,477
EUROPEAN EQUITY FUND $ 232 $ 715 $1,225 $2,626
</TABLE>

<PAGE>

FEES AND FUND EXPENSES

This table describes the fees and expenses you may bear as a shareholder. Annual
fund operating expense figures are for the fiscal year ended August 31, 1999.

<TABLE>
<CAPTION>
U.S. CORE
EQUITY FOCUS
FUND FUND
<S> <C> <C>
SHAREHOLDER FEES
(PAID DIRECTLY FROM YOUR INVESTMENT)
Sales charge "load" on purchases NONE NONE
Deferred sales charge "load" NONE NONE
Sales charge "load" on reinvested distributions NONE NONE
Redemption fees NONE NONE
Exchange fees NONE NONE
ANNUAL FUND OPERATING EXPENSES
(DEDUCTED FROM FUND ASSETS)
Management fee .75% .75%
Distribution and service (12b-1) fee NONE NONE
Other expenses .47% .67%
TOTAL ANNUAL FUND OPERATING EXPENSES* 1.22% 1.42%
</TABLE>

<TABLE>
<CAPTION>
U.S. CORE
EQUITY FOCUS
EXPENSES AFTER WAIVERS AND REIMBURSEMENTS FUND FUND
<S> <C> <C>
Management fee .53% .33%
Distribution and service (12b-1) fee NONE NONE
Other expenses .46% .66%
TOTAL ANNUAL FUND OPERATING EXPENSES .99% .99%
</TABLE>

EXAMPLE

Assume you invest $10,000, each fund returns 5% annually, expense ratios remain
as listed in the first table above (before fee waivers and expense
reimbursements or credits), and you close your account at the end of each of the
time periods shown. Based on these assumptions, your cost would be:

<TABLE>
<CAPTION>
ONE YEAR THREE YEARS FIVE YEARS 10 YEARS
<S> <C> <C> <C> <C>
U.S. CORE EQUITY FUND $ 124 $ 387 $ 670 $1,477
FOCUS FUND $ 145 $ 449 $ 776 $1,702
</TABLE>

<PAGE>

FEES AND FUND EXPENSES

This table describes the fees and expenses you may bear as a shareholder. Annual
fund operating expense figures are for the fiscal year ended August 31, 1999.

<TABLE>
<CAPTION>
LONG-SHORT
MARKET
NEUTRAL
FUND
<S> <C>
SHAREHOLDER FEES
(PAID DIRECTLY FROM YOUR INVESTMENT)
Sales charge "load" on purchases NONE
Deferred sales charge "load" NONE
Sales charge "load" on reinvested distributions NONE
Redemption fees NONE
Exchange fees NONE
ANNUAL FUND OPERATING EXPENSES
(DEDUCTED FROM FUND ASSETS)
Management fee 1.50%(1)
Distribution and service (12b-1) fee NONE
Other expenses(2) 2.43%
TOTAL ANNUAL FUND OPERATING EXPENSES(3) 3.93%
</TABLE>

(1) The basic management fee is 1.50%. The management fee of the fund may be
increased or decreased pursuant to the application of an adjustment formula
based upon the fund's investment performance as compared to the Salomon
Smith Barney 1-Month U.S. Treasury Bill Index-TM-. The management fee, as
adjusted, may range from 1.00% to 2.00%. The management fee as adjusted and
effective August 1, 1999, was 1.00%.
(2) "Other expenses" and "Total annual fund operating expenses" include
dividend and interest expenses incured in connection with short sales, which
are included in and reduce the investment return of the fund.
(3) Actual fees and expenses for the fiscal year ended August 31, 1999 are
shown below. Fee waivers and expense reimbursements or credits reduced
expenses for the fund during 1999 but may be discontinued at any time.

<TABLE>
<CAPTION>
LONG-SHORT
MARKET
NEUTRAL
EXPENSES AFTER WAIVERS AND REIMBURSEMENTS FUND
<S> <C>
Management fee .99%
Distribution and service (12b-1) fee NONE
Other expenses 2.34%
TOTAL ANNUAL FUND OPERATING EXPENSES 3.33%
</TABLE>

EXAMPLE

Assume you invest $10,000, the fund returns 5% annually, expense ratios remain
as listed in the first table above (before fee waivers and expense
reimbursements or credits), and you close your account at the end of each of the
time periods shown. Based on these assumptions, your cost would be:

<TABLE>
<CAPTION>
ONE YEAR THREE YEARS FIVE YEARS 10 YEARS
<S> <C> <C> <C> <C>
LONG-SHORT MARKET
NEUTRAL FUND $ 395 $1,198 $2,018 $4,147
</TABLE>

<PAGE>

FEES AND FUND EXPENSES

This table describes the fees and expenses you may bear as a shareholder. Annual
fund operating expense figures are for the fiscal year ended August 31, 1999.

<TABLE>
<CAPTION>
STRATEGIC
U.S. CORE GLOBAL
FIXED MUNICIPAL FIXED
INCOME HIGH YIELD BOND INCOME
FUND FUND FUND FUND
<S> <C> <C> <C> <C>
SHAREHOLDER FEES
(PAID DIRECTLY FROM YOUR INVESTMENT)
Sales charge "load" on purchases NONE NONE NONE NONE
Deferred sales charge "load" NONE NONE NONE NONE
Sales charge "load" on reinvested
distributions NONE NONE NONE NONE
Redemption fees NONE NONE NONE NONE
Exchange fees NONE NONE NONE NONE
ANNUAL FUND OPERATING EXPENSES
(DEDUCTED FROM FUND ASSETS)
Management fee .37% .70% .70% .50%
Distribution and service (12b-1) fee NONE NONE NONE NONE
Other expenses .25% .34% .73% .77%
TOTAL ANNUAL FUND OPERATING EXPENSES* .62% 1.04% 1.43% 1.27%
</TABLE>

<TABLE>
<CAPTION>
STRATEGIC
U.S. CORE GLOBAL
FIXED MUNICIPAL FIXED
EXPENSES AFTER WAIVERS AND INCOME HIGH YIELD BOND INCOME
REIMBURSEMENTS FUND FUND FUND FUND
<S> <C> <C> <C> <C>
Management fee .21% .39% .28% .00%
Distribution and service (12b-1) fee NONE NONE NONE NONE
Other expenses .23% .30% .71% .74%
TOTAL ANNUAL FUND OPERATING EXPENSES .44% .69% .99% .74%
</TABLE>

EXAMPLE

<TABLE>
<CAPTION>
ONE YEAR THREE YEARS FIVE YEARS 10 YEARS
<S> <C> <C> <C> <C>
U.S. CORE FIXED INCOME FUND $ 63 $ 199 $ 346 $ 774
HIGH YIELD FUND $ 106 $ 331 $ 574 $1,271
MUNICIPAL BOND FUND $ 146 $ 452 $ 782 $1,713
STRATEGIC GLOBAL FIXED
INCOME FUND $ 129 $ 403 $ 697 $1,544
</TABLE>

<PAGE>

THE FUNDS IN DETAIL

- --- THE MANAGEMENT FIRMS
- ----------------------------------

CREDIT SUISSE ASSET MANAGEMENT, LLC
One Citicorp Center
153 East 53rd Street
New York, NY 10022

- - Investment adviser for the funds

- - Responsible for managing each fund's assets according to its goal and strategy
and supervising the activities of the sub-investment adviser for the European
Equity and Strategic Global Fixed Income Funds

- - A member of Credit Suisse Asset Management (CSAM), the institutional asset
management and mutual fund arm of Credit Suisse Group, one of the world's
leading banks

- - CSAM companies manage more than $57 billion in the U.S. and $175 billion
globally

- - CSAM has offices in 14 countries, including SEC-registered offices in New York
and London; other offices (such as those in Budapest, Frankfurt, Milan,
Moscow, Paris, Prague, Sydney, Tokyo, Warsaw and Zurich) are not registered
with the U.S. Securities and Exchange Commission

CREDIT SUISSE ASSET MANAGEMENT LIMITED
Beaufort House
15 St. Botolph Street
London, EC 3A 7JJ

- - Sub-investment adviser for the European Equity and Strategic Global Fixed
Income Funds

- - A member of CSAM

- --- MULTI-CLASS STRUCTURE
- ----------------------------------

The Institutional Shares are the Institutional Classes of certain Warburg
Pincus Funds. This PROSPECTUS describes the Institutional Classes of the funds.
The Common Classes of the funds, if offered, are described in separate
prospectuses.

<PAGE>

- --- FUND INFORMATION KEY
- ---------------------------------

Concise fund-by-fund descriptions begin on the next page. Each description
provides the following information:

GOAL AND STRATEGIES

The fund's particular investment goal and the strategies it intends to use
in pursuing that goal. Percentages of fund assets are based on total assets
unless indicated otherwise.

PORTFOLIO INVESTMENTS

The primary types of securities in which the fund invests. Secondary
investments are described in "More About Risk."

RISK FACTORS

The major risk factors associated with the fund. Additional risk factors are
included in "More About Risk."

PORTFOLIO MANAGEMENT

The individuals designated by the investment adviser or sub-adviser to
handle the fund's day-to-day management.

INVESTOR EXPENSES

Expected expenses for the 1999 fiscal period. Actual expenses may be higher
or lower.

- MANAGEMENT FEE The fee paid to the investment adviser and sub-adviser for
providing investment advice to the fund. Expressed as a percentage of
average net assets after waivers.

- OTHER EXPENSES Fees paid by the fund for items such as administration,
transfer agency, custody, auditing, legal, registration fees and
miscellaneous expenses. Expressed as a percentage of average net assets
after waivers, credits and reimbursements.

FINANCIAL HIGHLIGHTS

A table showing each fund's audited financial performance for up to five
years.

- TOTAL RETURN How much you would have earned on an investment in the fund,
assuming you had reinvested all dividend and capital-gain distributions.

- PORTFOLIO TURNOVER An indication of trading frequency. The funds may sell
securities without regard to the length of time they have been held. A
high turnover rate may increase a fund's transaction costs and negatively
affect its performance. Portfolio turnover may also result in capital-gain
distributions that could raise your income-tax liability.

The ANNUAL REPORT includes the auditor's report, along with each fund's
financial statements. It is available free upon request.

<PAGE>

INTERNATIONAL GROWTH FUND

- --- GOAL AND STRATEGIES
- -------------------------------

The International Growth Fund seeks long-term appreciation of capital. To
pursue this goal, it invests in equity securities of companies located or
conducting a majority of their business outside the U.S.

Although it is not an index fund and does not seek to replicate the
performance of any index, this fund expects to focus primarily, but not
exclusively, on countries represented in the Morgan Stanley Capital
International Europe Australasia and Far East (MSCI-EAFE) Index. Although the
fund may invest in emerging markets, it does not expect to invest more than 30%
of assets in securities of emerging-markets issuers.

Under normal market conditions, the fund will invest at least 80% of assets
in equity securities of issuers from at least three foreign countries. The fund
may invest in companies of all sizes.

In managing the fund's investments, the portfolio managers:

- combine top-down regional analysis with bottom-up company research

- look for countries, sectors and companies with solid growth prospects and
attractive market valuations

- focus research efforts on early identification of new investment
opportunities while seeking to manage risk

- --- PORTFOLIO INVESTMENTS
- ----------------------------------

Equity holdings may include:

- common and preferred stocks

- securities convertible into common or preferred stock

- rights and warrants

- depositary receipts

To a limited extent, the fund may also engage in other investment practices.

- --- RISK FACTORS
- ---------------------

This fund's principal risk factors are:

- foreign securities

- market risk

- non-diversified risk

The value of your investment will fluctuate in response to stock-market
movements. Because the fund invests internationally, it carries additional
risks, including currency, information and political risks. These risks are
defined in "More About Risk."

Although the portfolio managers typically have diversified the fund's
investments, the fund's non-diversified status allows the fund to invest a
greater share of its assets in the securities of fewer companies. Non-
diversification might cause the fund to be more volatile than a diversified
fund.

To the extent that the fund invests in emerging markets or focuses on a
single country or region, it takes on additional risks that could hurt its
performance. Investing in emerging markets involves access, operational and
other risks not generally encountered in developed countries. "More About Risk"
details these and certain other investment practices the fund may use. Please
read that section carefully before you invest.

<PAGE>

- --- PORTFOLIO MANAGEMENT
- -----------------------------------

Steven D. Bleiberg, Richard Watt, Emily Alejos, Robert B. Hrabchak and Alan
Zlatar manage the fund's investment portfolio. You can find out more about them
in "Meet the Managers."

- --- INVESTOR EXPENSES
- ----------------------------

<TABLE>
<S> <C>
Management fee .80%
All other expenses .41%
----
Total expenses 1.21%
</TABLE>

- --- FINANCIAL HIGHLIGHTS
- --------------------------------

The figures below have been audited by the fund's independent auditors,
PricewaterhouseCoopers LLP, whose report on the fund's financial statements is
included in the ANNUAL REPORT.

<TABLE>
<CAPTION>
8/99 8/98 8/97 8/96 8/95
PERIOD ENDED: ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA
Net asset value, beginning of year............. $ 22.70 $ 22.22 $ 19.41 $ 18.24 $ 20.73
-------- -------- -------- -------- --------
Income from investment operations:
Net investment income (loss)............... 0.14 0.15 0.18 0.19 0.06
Net gain (loss) on investments and foreign
currency transactions (both realized and
unrealized).............................. 2.90 3.26 2.89 1.05 (1.75)
-------- -------- -------- -------- --------
Total from investment operations........... 3.04 3.41 3.07 1.24 (1.69)
-------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income....... (0.28) -- (0.26) (0.07) --
Distributions from capital gains........... (1.99) (2.93) -- -- (0.80)
-------- -------- -------- -------- --------
Total distributions........................ (2.27) (2.93) (0.26) (0.07) (0.80)
-------- -------- -------- -------- --------
Net asset value, end of year................... $ 23.47 $ 22.70 $ 22.22 $ 19.41 $ 18.24
======== ======== ======== ======== ========
Total return................................... 13.88% 16.74% 15.93% 6.81%(1) (8.06)%(1)
Ratios/supplemental data:
Net assets, end of year (000s omitted)....... $675,118 $623,482 $568,510 $682,271 $773,255
Ratio of expenses to average net assets...... 1.21%(2) 1.14%(2) 1.16%(2) 1.19%(2) 1.25%(2)
Ratio of net investment income (loss) to
average net assets......................... 0.60% 0.72% 0.71% 0.84% 0.35%
Fund turnover rate........................... 182% 141% 126% 86% 78%
</TABLE>

(1) Redemption fees not reflected in total return.

(2) Without the voluntary waiver of advisory fees and administration fees, the
ratios of expenses to average net assets for the Institutional Class would
have been 1.22%, 1.23%, 1.25%, 1.22% and 1.26% for the years ended August
31, 1999, 1998, 1997, 1996 and 1995, respectively.

<PAGE>

EUROPEAN EQUITY FUND

- --- GOAL AND STRATEGIES
- -------------------------------

The European Equity Fund seeks capital appreciation. To pursue this goal,
the fund invests primarily in equity securities of Western European companies.

The fund considers Western Europe to include the European Union, Norway and
Switzerland. The European Union currently consists of: Austria, Belgium,
Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the
Netherlands, Portugal, Spain, Sweden and the United Kingdom.

Under normal market conditions, the fund invests at least 65% of assets in
equity securities of companies located in or conducting a majority of their
business in Western Europe or companies whose securities trade primarily in
Western European markets. To enhance return potential, the fund may also pursue
opportunities in other European countries.

The fund intends to diversify its investments across different countries.
However, at times the fund may invest a significant part of its assets in a
single country. The fund may invest in companies of any size, although most of
the fund's investments will be in medium to larger capitalization companies.

In choosing stocks, the portfolio managers consider a number of factors
including:

- stock price relative to the company's rate of earnings growth

- valuation relative to other European companies and market averages

- merger-and-acquisition trends, particularly trends related to the impact
of the introduction of the new single European currency, the euro, on
companies' business strategies

- --- PORTFOLIO INVESTMENTS
- ----------------------------------

This fund currently intends to invest at least 80% of assets in equity
securities of Western European companies. These equity securities include:

- common and preferred stocks

- securities convertible into common stocks

- securities such as rights and warrants, whose values are based on common
stocks

To a limited extent, the fund may engage in other investment practices.

- --- RISK FACTORS
- ---------------------

This fund's principal risk factors are:

- market risk

- foreign securities

- region focus

The value of your investment will fluctuate in response to Western European
stock markets. Because the fund invests internationally, it carries additional
risks, including currency, information and political risks. These risks are
defined in "More About Risk."

Targeting a single region could hurt the fund's performance or may cause the
fund to be more volatile than a more geographically diversified equity fund.
Fund performance is closely tied to economic and political conditions within
Europe.

"More About Risk" details certain other investment practices the fund may
use. Please read that section carefully before you invest.

<PAGE>

- --- PORTFOLIO MANAGEMENT
- -----------------------------------

Harold W. Ehrlich, J.H. Cullum Clark and Nancy Nierman manage the fund's
investment portfolio. You can find out more about them in "Meet the Managers."

- --- INVESTOR EXPENSES
- ----------------------------

<TABLE>
<S> <C>
Management fee 0.00%
All other expenses 1.16%
----
Total expenses 1.16%
</TABLE>

- --- FINANCIAL HIGHLIGHTS
- --------------------------------

The figures below have been audited by the fund's independent auditors,
PricewaterhouseCoopers LLP, whose report on the fund's financial statements is
included in the ANNUAL REPORT.

<TABLE>
<CAPTION>
8/99(1)
PERIOD ENDED: ---------------
<S> <C>
PER-SHARE DATA
Net asset value, beginning of period........................ $10.00
------
Income from investment operations:
Net investment income (loss)............................ 0.09
Net gain (loss) on investments and foreign currency
transactions (both realized and unrealized)............ (0.29)
------
Total from investment operations........................ (0.20)
------
Less distributions:
Dividends from net investment income.................... --
Distributions from capital gains........................ --
------
Total distributions..................................... --
------
Net asset value, end of period.............................. $ 9.80
======
Total return................................................ (2.00)%(2)
Ratios/supplemental data:
Net assets, end of period (000s omitted).................. $98
Ratio of expenses to average net assets................... 1.16%(3,4)
Ratio of net income (loss) to average net assets.......... 1.67%(4)
Fund turnover rate........................................ 1.61%(2)
</TABLE>

(1) For the period January 29, 1999 (commencement of operations) through
August 31, 1999.

(2) Not annualized.

(3) Without the voluntary waiver of advisory fees and administration fees, the
ratios of expenses to average net assets for the Institutional Class would
have been 2.29% annualized for the period ended August 31, 1999.

(4) Annualized.

<PAGE>

U.S. CORE EQUITY FUND

- --- GOAL AND STRATEGIES
- -------------------------------

The U.S. Core Equity Fund seeks long-term appreciation of capital. To pursue
this goal, it invests in equity securities of large U.S. companies.

In choosing stocks, the fund's portfolio managers use quantitative
techniques to seek to identify companies with improving momentum and reasonable
relative valuations. They emphasize the following five factors:

- earnings

- valuation

- stability/consistency

- relative price strength/sentiment

- financial strength

The managers seek to maintain characteristics that roughly mirror the S&P
500 Index with respect to:

- market capitalization

- industry/sector weightings

- style exposure

- --- PORTFOLIO INVESTMENTS
- ----------------------------------

Under normal market conditions, this fund invests at least 65% of assets in
U.S. equity securities. Equity holdings may consist of:

- common stocks

- preferred stocks

- securities convertible into common stocks

- securities such as rights and warrants, whose values are based on common
stocks

The fund may invest up to 35% of its assets in dollar-denominated American
Depositary Receipts (ADRs) and similar securities of foreign issuers. To a
limited extent, the fund may also engage in other investment practices.

- --- RISK FACTORS
- ---------------------

This fund's principal risk factors are:

- market risk

- non-diversified risk

The value of your investment will fluctuate in response to stock market
movements.

Although the portfolio managers typically have diversified the fund's
investments, the fund's non-diversified status allows the fund to invest a
greater share of its assets in the securities of fewer companies.
Non-diversification might cause the fund to be more volatile than a diversified
fund.

"More About Risk" details certain other investment practices the fund may
use. Please read that section carefully before you invest.

<PAGE>

- --- PORTFOLIO MANAGEMENT
- -----------------------------------

William W. Priest, Jr., Eric N. Remole, Marc Bothwell, Michael Welhoelter
and John B. Hurford manage the fund's investment portfolio. You can find out
more about them in "Meet the Managers."

- --- INVESTOR EXPENSES
- ----------------------------

<TABLE>
<S> <C>
Management fee .53%
All other expenses .46%
----
Total expenses .99%
</TABLE>

- --- FINANCIAL HIGHLIGHTS
- --------------------------------

The figures below have been audited by the fund's independent auditors,
PricewaterhouseCoopers LLP, whose report on the fund's financial statements is
included in the ANNUAL REPORT.

<TABLE>
<CAPTION>
8/99 8/98 8/97 8/96 8/95(1)
PERIOD ENDED: ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA
Net asset value, beginning of
period............................. $ 21.73 $ 24.40 $ 19.05 $ 17.86 $ 15.00
-------- -------- -------- -------- --------
Income from investment operations:
Net investment income (loss)..... 0.07 0.01 0.14 0.20 0.22
Net gain (loss) on investments
(both realized and
unrealized).................... 7.56 0.88 6.82 2.81 2.72
-------- -------- -------- -------- --------
Total from investment
operations..................... 7.63 0.89 6.96 3.01 2.94
-------- -------- -------- -------- --------
Less distributions:
Dividends from net investment
income......................... (0.04) (0.13) (0.20) (0.21) (0.08)
Distributions from realized
capital gains.................. (9.74) (3.43) (1.41) (1.61) --
-------- -------- -------- -------- --------
Total distributions.............. (9.78) (3.56) (1.61) (1.82) (0.08)
-------- -------- -------- -------- --------
Net asset value, end of period....... $ 19.58 $ 21.73 $ 24.40 $ 19.05 $ 17.86
======== ======== ======== ======== ========
Total return......................... 38.07% 3.18% 38.32% 17.59% 19.75%
Ratios/supplemental data:
Net assets, end of period (000s
omitted)......................... $70,081 $63,514 $86,182 $59,015 $31,644
Ratio of expenses to average net
assets........................... 0.99%(2) 1.00%(2) 1.00%(2) 1.00%(2) 1.00%(2)
Ratio of net investment income
(loss) to average net assets..... 0.32% 0.23% 0.67% 1.25% 1.59%
Fund turnover rate................. 110% 164% 93% 127% 123%
</TABLE>

(1) For the period September 1, 1994 (commencement of operations) to
August 31, 1995.

(2) Without the voluntary waiver of advisory fees and administration fees, the
ratios of expenses to average net assets for the Institutional Class would
have been 1.22%, 1.18%, 1.18% and 1.34% for the years ended August 31, 1999,
1998, 1997 and 1996, respectively, and 1.51% annualized for the period ended
August 31, 1999.

<PAGE>

FOCUS FUND

- --- GOAL AND STRATEGIES
- -------------------------------

The Focus Fund seeks long-term appreciation of capital. To pursue this goal,
the fund invests in securities of 40-60 U.S. companies. The "top ten" (largest
company holdings) in the fund's portfolio may account for 40% or more of the
fund's assets. The fund's portfolio managers search for industry sectors with
favorable economic profit trends and may focus the portfolio in these sectors.

In choosing stocks, the fund's portfolio managers use both traditional
value-based analyses (such as
price/book ratio), as well as the economic profit of a company measured by its
cash flow relative to its capital assets. The managers look for companies that:

- earn rates of return exceeding their risk-adjusted costs of capital, as
opposed to earning more than they have spent (accounting profits)

- create shareholder value by gaining the most from their investment
spending, or use their cost of capital as a competitive advantage

- have current market valuations that do not fully recognize future
economically profitable growth

The managers believe this approach allows them to identify companies with
low disappointment risk, as well as those with potential restructuring
opportunities. The portfolio managers construct the fund's portfolio by
weighting selected securities based on results of a proprietary analysis and
risk-scoring system.

- --- PORTFOLIO INVESTMENTS
- ----------------------------------

Under normal market conditions, this fund invests at least 65% of assets in
U.S. equity securities. Equity holdings may consist of:

- common stocks

- preferred stocks

- securities convertible into common stocks

- securities such as rights and warrants, whose values are based on common
stocks

The fund may invest without limit in foreign securities, including
dollar-denominated ADRs of foreign issuers. To a limited extent, the fund may
also engage in other investment practices.

- --- RISK FACTORS
- ---------------------

This fund's principal risk factors are:

- market risk

- non-diversified risk

The value of your investment will vary with changes in interest rates and
other factors.

Although the portfolio managers typically have diversified the fund's
investments, the fund's non-diversified status allows the fund to invest a
greater share of its assets in the securities of fewer companies.
Non-diversification might cause the fund to be more volatile than a diversified
fund.

"More About Risk" details certain other investment practices the fund may
use. Please read that section carefully before you invest.

- --- PORTFOLIO MANAGEMENT
- -----------------------------------

James A. Abate and Susan Everley manage the fund's investment portfolio. You
can find out more about them in "Meet the Managers."

<PAGE>

- --- INVESTOR EXPENSES
- ----------------------------

<TABLE>
<S> <C>
Management fee .33%
All other expenses .66%
----
Total expenses .99%
</TABLE>

- --- FINANCIAL HIGHLIGHTS
- --------------------------------

The figures below have been audited by the fund's independent auditors,
PricewaterhouseCoopers LLP, whose report on the fund's financial statements is
included in the ANNUAL REPORT.

<TABLE>
<CAPTION>
8/99 8/98(1)
PERIOD ENDED: ----------- -----------
<S> <C> <C>
PER-SHARE DATA
Net asset value, beginning of period........................ $ 13.17 $15.00
------- ------
Income from investment operations:
Net investment income (loss)............................ 0.08 0.01
Net gain (loss) on investments (both realized and
unrealized)........................................... 6.92 (1.84)
------- ------
Total from investment operations........................ 7.00 (1.83)
------- ------
Less distributions:
Dividends from net investment income.................... (0.02) --
Distributions from capital gains........................ -- --
------- ------
Total distributions..................................... (0.02) --
------- ------
Net asset value, end of period.............................. $ 20.15 $13.17
======= ======
Total return................................................ 53.21% (12.20)%(2)
Ratios/supplemental data:
Net assets, end of period (000s omitted).................. $35,394 $22,659
Ratio of expenses to average net assets................... 0.99%(3) 1.00%(3,4)
Ratio of net investment income (loss) to average net
assets.................................................. 0.47% 0.92%(4)
Fund turnover rate........................................ 209% 52%(2)
</TABLE>

(1) For the period August 3, 1998 (commencement of operations) through August
31, 1998.

(2) Not annualized.

(3) Without the voluntary waiver of advisory fees and administration fees, the
ratios of expenses to average net assets for the Institutional Class would
have been 1.42% for the year ended August 31, 1999 and 1.30% annualized for
the period ended August 31, 1998.

(4) Annualized.

<PAGE>

LONG-SHORT MARKET NEUTRAL FUND

- --- GOAL AND STRATEGIES
- -------------------------------

The Long-Short Market Neutral Fund seeks long-term capital appreciation
while minimizing exposure to general equity market risk. This fund seeks a total
return greater than the return of the Salomon Smith Barney 1-Month Treasury Bill
Index-TM-.

To pursue its goal, the fund takes long positions in stocks that the
portfolio manager has identified as attractive and short positions in stocks
that the manager has identified as unattractive. In doing so, the fund attempts
to minimize directional market risks associated with investing in the equity
market by neutralizing the effects of general stock market movements on its
performance.

In choosing long and short positions for the fund, the portfolio managers
use quantitative techniques to analyze the tradeoff between the attractiveness
of each position and its impact on the risk of the overall portfolio. The
managers seek to construct a portfolio that has:

- minimal net exposure to the general U.S. equity market

- low to neutral exposure to any particular industry or specific
capitalization range (e.g., large cap, mid cap and small cap)

- --- PORTFOLIO INVESTMENTS
- ----------------------------------

Under normal market conditions, this fund takes long and short positions in
equity securities that are principally traded in U.S. markets. These securities
may include:

- common stocks of U.S. issuers

- American depositary receipts of foreign issuers

To a limited extent, the fund may also engage in other investment practices.

- --- RISK FACTORS
- ---------------------

This fund's principal risk factors are:

- market risk

- non-diversified risk

- short positions

The value of your investment will fluctuate in response to stock market
movements.

Although all mutual funds are subject to the risk that the fund's portfolio
managers will not make good investments, the fund's strategy of taking both long
and short positions increases this risk because long positions could decline in
value at the same time short positions increase. As with other mutual funds,
taking long positions in stocks that decline in value would hurt the fund's
performance. Additionally, however, if the fund were to take short positions in
stocks that increase in value, then it would be likely to underperform similar
stock mutual funds that do not take short positions. Short sales also involve
expenses that will decrease the fund's return.

An investment in the fund involves greater volatility and significantly more
risks than investing in one-month U.S. Treasury bills. Unlike Treasury bills:

- an investment in the fund is not guaranteed by the U.S. government

- the fund does not provide a fixed rate of return

- you can lose money by investing in the fund

<PAGE>

Although the portfolio managers typically have diversified the fund's
investments, the fund's non-diversified status allows the fund to invest a
greater share of its assets in the securities of fewer companies.
Non-diversification might cause the fund to be more volatile than a diversified
fund.

"More About Risk" details certain other investment practices the fund may
use. Please read that section carefully before you invest.

- --- PORTFOLIO MANAGEMENT
- -----------------------------------

William W. Priest, Jr., Eric N. Remole, Marc Bothwell and Michael Welhoelter
manage the fund's investment portfolio. You can find out more about them in
"Meet the Managers."

- --- INVESTOR EXPENSES
- ----------------------------

<TABLE>
<S> <C>
Management fee .99%*
All other expenses 2.34%
----
Total expenses 3.33%
</TABLE>

* The management fee of the fund may be increased or decreased pursuant to the
application of an adjustment formula based upon the fund's investment
performance as compared to the Salomon Smith Barney 1-Month U.S. Treasury
Bill Index-TM-. The basic management fee is 1.50%. The management fee, as
adjusted, may range from 1.00% to 2.00%. The management fee as adjusted and
effective August 1, 1999, was 1.00%.

- --- FINANCIAL HIGHLIGHTS
- --------------------------------

The figures below have been audited by the fund's independent auditors,
PricewaterhouseCoopers LLP, whose report on the fund's financial statements is
included in the ANNUAL REPORT.

<TABLE>
<CAPTION>
8/99 8/98(1)
PERIOD ENDED: --------- ----------------
<S> <C> <C>
PER-SHARE DATA
Net asset value, beginning of period........................ $15.27 $15.00
------ ------
Income from investment operations:
Net investment income (loss)............................ 0.39(5) 0.05
Net gain (loss) on investments and securities sold short
(both realized and unrealized)........................ (1.25) 0.22
------ ------
Total from investment operations........................ (0.86) 0.27
------ ------
Less distributions:
Dividends from net investment income.................... (0.07) --
Distributions from capital gains........................ (0.13) --
------ ------
Total distributions..................................... (0.20) --
------ ------
Net asset value, end of period.............................. $14.21 $15.27
====== ======
Total return................................................ (5.68)% 1.80%(2)
Ratios/supplemental data:
Net assets, end of period (000s omitted).................. $5,901 $6,302
Ratio of expenses to average net assets (including
dividend expenses)...................................... 3.33%(3) 4.32%(3,4)
Ratio of expenses to average net assets (excluding
dividend expenses)...................................... 2.00%(3) 2.00%(3,4)
Ratio of net investment income (loss) to average net
assets.................................................. 2.65% 1.96%(4)
Fund turnover rate........................................ 705% 130%(2)
</TABLE>

(1) For the period August 3, 1998 (commencement of operations) through August
31, 1998.

(2) Not annualized.

(3) Without the voluntary waiver of advisory fees and administration fees, the
ratios of expenses to average net assets for the Institutional Class would
have been 2.56% (excluding dividend expense) and 3.93% (including dividend
expense) for the year ended August 31, 1999 and 5.12% (excluding dividend
expense) and 7.44% (including dividend expense) annualized for the period
ended August 31, 1998.

(4) Annualized.

(5) Per share information is calculated using the average share outstanding
method.

<PAGE>

U.S. CORE FIXED INCOME FUND

- --- GOAL AND STRATEGIES
- -------------------------------
The U.S. Core Fixed Income Fund seeks high total return. To pursue this
goal, it invests primarily in fixed-income securities of U.S. issuers.
The fund seeks to maintain a weighted-average credit rating comparable to
the AA rating of Standard & Poor's Ratings Services. The fund's weighted-average
maturity will typically be between five and 15 years.

- --- PORTFOLIO INVESTMENTS
- ----------------------------------
Under normal market conditions, this fund invests at least 65% of assets in
U.S. fixed-income securities such as:
- corporate bonds, debentures and notes
- government and agency securities
- mortgage-backed securities
The fund may invest:
- up to 35% of assets in debt securities of foreign issuers
- up to 20% of assets in securities denominated in foreign currency
- up to 10% of assets in non-investment-grade debt securities (junk bonds)
of issuers located in emerging markets
- up to 10% of assets in bonds convertible into equity securities
- up to 10% of assets in preferred stocks
To a limited extent, the fund may also engage in other investment practices.

- --- RISK FACTORS
- ---------------------
This fund's principal risk factors are:
- credit risk
- interest-rate risk
- market risk
- non-diversified risk
You should expect fluctuations in share price, yield and total return,
particularly with changes in interest rates. Typically, a rise in interest rates
causes a decline in the market value of fixed-income securities. There is also
the risk that an issuer of a debt security will fail to make timely payments of
principal or interest to the fund.
Although the portfolio managers typically have diversified the fund's
investments, the fund's non-diversified status allows the fund to invest a
greater share of its assets in the securities of fewer companies.
Non-diversification might cause the fund to be more volatile than a diversified
fund.
To the extent that it invests in certain securities, the fund may be
affected by additional risks:
- mortgage-backed securities: extension and prepayment risks
- junk bonds: above-average credit, information, market and other risks
- foreign securities: currency, information and political risks

- equity securities (including convertible bonds and preferred stocks):
information, market and other risks

<PAGE>

These risks are defined in "More About Risk." That section also details
certain other investment practices the fund may use. Please read "More About
Risk" carefully before you invest.

- --- PORTFOLIO MANAGEMENT
- -----------------------------------

Gregg M. Diliberto, Mark K. Silverstein, Jo Ann Corkran, Jose A. Rodriguez
and Dilip K. Rasgotra manage the fund's investment portfolio. You can find out
more about them in "Meet the Managers."

- --- INVESTOR EXPENSES
- ----------------------------

<TABLE>
<S> <C>
Management fee .21%
All other expenses .23%
----
Total expenses .44%
</TABLE>

- --- FINANCIAL HIGHLIGHTS
- --------------------------------

The figures below have been audited by the fund's independent auditors,
PricewaterhouseCoopers LLP, whose report on the fund's financial statements is
included in the ANNUAL REPORT.

<TABLE>
<CAPTION>
8/99 8/98 8/97 8/96 8/95
PERIOD ENDED: --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA
Net asset value, beginning of year...... $ 15.72 $ 15.65 $ 15.06 $ 15.42 $ 14.77
-------- -------- -------- -------- -------
Income from investment operations:
Net investment income (loss)........ 0.93 0.84 0.92 0.95 0.88
Net gain (loss) on investments,
futures and foreign currency
transactions (both realized and
unrealized)....................... (0.56) 0.33 0.76 (0.16) 0.61
-------- -------- -------- -------- -------
Total from investment operations.... 0.37 1.17 1.68 0.79 1.49
-------- -------- -------- -------- -------
Less distributions:
Dividends from net investment
income............................ (0.91) (0.87) (0.97) (0.93) (0.84)
Distributions from capital gains.... (0.17) (0.23) (0.12) (0.22) --
-------- -------- -------- -------- -------
Total distributions................. (1.08) (1.10) (1.09) (1.15) (0.84)
-------- -------- -------- -------- -------
Net asset value, end of year............ $ 15.01 $ 15.72 $ 15.65 $ 15.06 $ 15.42
======== ======== ======== ======== =======
Total return............................ 2.37% 7.77% 11.53% 5.23% 10.60%
Ratios/supplemental data:
Net assets, end of year (000s
omitted)............................ $350,844 $393,533 $177,219 $118,596 $99,250
Ratio of expenses to average net
assets.............................. 0.44%* 0.47%* 0.50%* 0.50%* 0.50%*
Ratio of net investment income (loss)
to average net assets............... 5.90% 5.87% 6.31% 6.43% 6.47%
Fund turnover rate.................... 569% 372% 372% 201% 304%
</TABLE>

* Without the voluntary waiver of advisory fees and administration fees, the
ratios of expenses to average net assets for the Institutional Class would
have been .62%, .74%, .78%, .78% and .84% for the years ended August 31,
1999, 1998, 1997, 1996 and 1995, respectively.

<PAGE>

HIGH YIELD FUND

- --- GOAL AND STRATEGIES
- -------------------------------
The High Yield Fund seeks high total return. To pursue this goal, it invests
primarily in fixed-income securities rated below investment grade by primary
ratings services such as Standard & Poor's Ratings Service and Moody's Investor
Service. These high-yield, higher-risk securities are commonly known as "junk
bonds."
In choosing investments for the fund, the portfolio managers:
- emphasize top-down analysis of industry sectors and themes to determine
which sectors may benefit from current and future changes in the economy
- seek to allocate risk by investing among a variety of industry sectors
- look at the financial condition of the issuers (including debt/equity
ratios), as well as features of the securities themselves

- --- PORTFOLIO INVESTMENTS
- ----------------------------------
Under normal market conditions, this fund invests at least 65% of assets in
high-yield, higher-risk fixed-income securities issued by U.S. and foreign
corporations, governments and agencies.
The fund may invest:
- without limit in junk bonds, including their unrated equivalents
- up to 35% of assets in equity and equity-related securities, including
preferred stocks, securities convertible into equity securities, warrants,
rights and options
To a limited extent, the fund may also engage in other investment practices.

- --- RISK FACTORS
- ---------------------
This fund's principal risk factors are:
- credit risk
- interest-rate risk
- market risk
- non-diversified risk
The value of your investment will vary with changes in interest rates and
other factors. Typically, a rise in interest rates causes a decline in the
market value of fixed-income securities. You should expect greater fluctuations
in share price, yield and total return compared with less aggressive bond funds.
These fluctuations, whether positive or negative, may be sharp and
unanticipated. Like equity markets, junk-bond markets may react strongly to
adverse news about an issuer or the economy, or to the expectation of adverse
news.
Junk bonds generally provide higher yields than higher-rated debt securities
of similar maturity, but are subject to greater credit, liquidity and valuation
risks. These risks are defined in "More About Risk."
Junk bonds are considered speculative with respect to the issuer's
continuing ability to meet principal and interest payments. In the event of a
payment problem by an issuer of junk bonds, more senior debt (such as bank loans
and investment-grade bonds) will likely be paid a greater portion of payments
owed to it. Because investing in junk bonds involves greater investment risk,
achieving the fund's investment objective will depend more on the portfolio
managers' analysis than would be the case if the fund were investing in
higher-quality bonds.

Although the portfolio managers typically have diversified the fund's
investments, the fund's non-diversified status allows it to invest a greater
share of its assets in the securities of fewer companies. Non-diversification
might cause the fund to be more volatile than a diversified fund.

<PAGE>

To the extent that the fund invests in foreign securities and securities of
start-up and other small companies, it takes on further risks that could hurt
its performance. "More About Risk" details these and certain other investment
practices the fund may use. Please read that section carefully before you
invest.

- --- PORTFOLIO MANAGEMENT
- -----------------------------------

Richard Lindquist, Marianne Rossi, Misia Dudley, John Tobin and Mary Ann
Thomas manage the fund's investment portfolio. You can find out more about them
in "Meet the Managers."

- --- INVESTOR EXPENSES
- ----------------------------

<TABLE>
<S> <C>
Management fee .39%
All other expenses .30%
----
Total expenses .69%
</TABLE>

ANALYSIS OF CREDIT QUALITY

During the fiscal period ended August 31, 1999, the percentage of fund
securities holdings by rating category based upon a weighted monthly average
was:

<TABLE>
<CAPTION>
BONDS-S&P RATING:
<S> <C>
AAA......................................................... %
AA.......................................................... %
A........................................................... %
BBB......................................................... 2.57%
BB.......................................................... 10.81%
B........................................................... 59.17%
CCC......................................................... %
CC.......................................................... %
C........................................................... %
Below C or unrated.......................................... 22.32%
Cash/Governments/Agencies................................... 5.13%
-----
TOTAL....................................................... 100%
</TABLE>

<PAGE>

- --- FINANCIAL HIGHLIGHTS
- --------------------------------

The figures below have been audited by the fund's independent auditors,
PricewaterhouseCoopers LLP, whose report on the fund's financial statements is
included in the ANNUAL REPORT.

<TABLE>
<CAPTION>
8/99 8/98 8/97 8/96 8/95
PERIOD ENDED --------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA
Net asset value, beginning of year...... $ 16.60 $ 17.08 $ 16.09 $ 15.72 $ 15.94
------- ------- ------- ------- --------
Income from investment operations:
Net investment income (loss)........ 1.42 1.43 1.37 1.47 1.42
Net gain (loss) on investments (both
realized and unrealized).......... (1.33) (0.49) 0.96 0.40 (0.30)
------- ------- ------- ------- --------
Total from investment operations.... 0.09 0.94 2.33 1.87 1.12
------- ------- ------- ------- --------
Less distributions:
Dividends from net investment
income............................ (1.37) (1.42) (1.34) (1.50) (1.34)
Distributions from realized capital
gains............................. -- -- -- -- --
------- ------- ------- ------- --------
Total distributions................. (1.37) (1.42) (1.34) (1.50) (1.34)
------- ------- ------- ------- --------
Net asset value, end of year............ $ 15.32 $ 16.60 $ 17.08 $ 16.09 $ 15.72
======= ======= ======= ======= ========
Total return............................ 0.67% 5.48% 15.17% 12.42% 7.79%(2)
Ratios/supplemental data:
Net assets, end of year (000s
omitted)............................ $95,129 $94,044 $92,630 $75,849 $153,621
Ratio of expenses to average net
assets.............................. 0.69%(1) 0.70%(1) 0.70%(1) 0.88%(1) 1.00%(1)
Ratio of net investment income (loss)
to average net assets............... 9.10% 8.12% 8.44% 8.92% 9.37%
Fund turnover rate.................... 40% 60% 84% 143% 70%
</TABLE>

(1) Without the voluntary waiver of advisory fees and administration fees, the
ratios of expenses to average net assets for the Institutional Class would
have been 1.04%, 1.14%, 1.13%, 1.11% and 1.08% for the years ended
August 31, 1999, 1998, 1997, 1996 and 1995, respectively.

(2) Redemption fees not reflected in total return.

<PAGE>

MUNICIPAL BOND FUND

- --- GOAL AND STRATEGIES
- -------------------------------

The Municipal Bond Fund seeks high total return. To pursue this goal, it
invests in municipal securities -- debt obligations issued by state and local
governments within the U.S.

The fund seeks to maintain a weighted-average credit rating comparable to
the AA rating of Standard & Poor's Ratings Services. The fund's weighted average
maturity will typically be between 10 and 15 years.

Holdings may include both general-obligation and revenue securities. General
obligation securities are secured by the issuing government's full faith and
credit, as well as its taxing power. Revenue securities are payable only from
specific revenue sources related to the project being financed.

- --- PORTFOLIO INVESTMENTS
- ----------------------------------

Under normal market conditions, this fund invests at least 80% of assets in
municipal securities.

The fund may invest:

- up to 40% of assets in municipal securities issued to finance private
activities

- without limit in securities rated below investment grade (junk bonds),
including their unrated equivalents

To a limited extent, the fund may also engage in other investment practices.

- --- RISK FACTORS
- ---------------------

This fund's principal risk factors are:

- credit risk

- interest-rate risk

- market risk

- non-diversified status

You should expect fluctuations in share price, yield and total return,
particularly with changes in interest rates. Typically, a rise in interest rates
causes a decline in the market value of fixed-income securities. There is also
the risk that an issuer of a debt security will fail to make timely payments of
principal or interest to the fund.

Compared to a diversified mutual fund, a non-diversified fund may invest a
greater portion of its assets in the securities of fewer issuers. Because the
fund is non-diversified, its share price and yield might fluctuate more than
they would for a diversified fund.

A portion of the fund's assets may generate income that could be taxable to
you. "More About Risk" details certain other investment practices the fund may
use. Please read that section carefully before you invest.

- --- PORTFOLIO MANAGEMENT
- -----------------------------------

Gregg M. Diliberto, Mark K. Silverstein, Jo Ann Corkran, Jose A. Rodriguez
and Dilip K. Rasgotra manage the fund's investment portfolio. You can find out
more about them in "Meet the Managers."

- --- INVESTOR EXPENSES
- ----------------------------

<TABLE>
<S> <C>
Management fee .28%
All other expenses .71%
----
Total expenses .99%
</TABLE>

<PAGE>

- --- FINANCIAL HIGHLIGHTS
- --------------------------------

The figures below have been audited by the fund's independent auditors,
PricewaterhouseCoopers LLP, whose report on the fund's financial statements is
included in the ANNUAL REPORT.

<TABLE>
<CAPTION>
8/99 8/98 8/97 8/96 8/95
PERIOD ENDED: --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA
Net asset value, beginning of year...... $ 15.12 $ 14.84 $ 14.65 $ 15.46 $ 15.06
------- ------- ------- ------- -------
Income from investment operations:
Net investment income (loss)........ 0.67 0.70 0.72 0.73 0.71
Net gain (loss) on investments (both
realized and unrealized).......... (0.60) 0.40 0.65 (0.37) 0.50
------- ------- ------- ------- -------
Total from investment operations.... 0.07 1.10 1.37 0.36 1.21
------- ------- ------- ------- -------
Less distributions:
Dividends from net investment
income............................ (0.68) (0.71) (0.72) (0.74) (0.76)
Distributions from capital gains.... (0.21) (0.11) (0.46) (0.43) (0.05)
------- ------- ------- ------- -------
Total distributions................. (0.89) (0.82) (1.18) (1.17) (0.81)
------- ------- ------- ------- -------
Net asset value, end of year............ $ 14.30 $ 15.12 $ 14.84 $ 14.65 $ 15.46
======= ======= ======= ======= =======
Total return............................ 0.36% 7.62% 9.74% 2.27% 8.42%
Ratios/supplemental data
Net assets, end of year (000s
omitted)............................ $22,423 $22,229 $19,810 $19,581 $48,978
Ratio of expenses to average net
assets.............................. 0.99%* 1.00%* 1.00%* 1.00%* 1.00%*
Ratio of net investment income (loss)
to average net assets............... 4.49% 4.72% 4.88% 4.62% 4.76%
Fund turnover rate.................... 26% 57% 43% 34% 25%
</TABLE>

* Without the voluntary waiver of advisory fees and administration fees, the
ratios of expenses to average net assets for the Institutional Class would
have been 1.43%, 1.39%, 1.37%, 1.42% and 1.19% for the years ended
August 31, 1999, 1998, 1997, 1996 and 1995, respectively.

<PAGE>

STRATEGIC GLOBAL FIXED INCOME FUND

- --- GOAL AND STRATEGIES
- -------------------------------

The Strategic Global Fixed Income Fund seeks high total return. To pursue
this goal, it invests in fixed-income securities of U.S. and foreign issuers
denominated in various currencies.

This fund may invest in any country or region, including emerging markets.
The portfolio managers generally seek to invest in countries exhibiting an
attractive combination of fixed-income returns and currency exchange rates. If
the currency trend is unfavorable, the managers may seek to reduce the currency
risk through hedging. In addition, the portfolio managers may also engage in
currency transactions to seek to generate income.

The fund seeks to maintain a weighted-average credit rating comparable to at
least the BBB rating of Standard & Poor's Ratings Services.

- --- PORTFOLIO INVESTMENTS
- ----------------------------------

Under normal market conditions, this fund invests at least 65% of assets in
fixed-income securities of corporate, government and agency issuers located in
at least three countries, including the U.S.

Fixed-income holdings may include:

- corporate bonds, debentures and notes

- U.S. and foreign government and agency securities

- securities of supranational organizations

- preferred stocks

- securities convertible into equity securities

- mortgage-backed and asset-backed securities

The fund may:

- concentrate its investments in a single country or region

- invest without limit in fixed-income securities rated below
investment-grade (junk bonds)

To a limited extent, the fund may also engage in other investment practices.

- --- RISK FACTORS
- ---------------------

This fund's principal risk factors are:

- credit risk

- foreign securities

- interest-rate risk

- market risk

- non-diversified status

International investing, particularly in emerging markets, carries
additional risks, including currency, information and political risks. These
risks are defined in "More About Risk."

<PAGE>

Although the portfolio managers typically have diversified the fund's
investments, the fund's non-diversified status allows the fund to invest a
greater share of its assets in the securities of fewer companies.
Non-diversification might cause the fund to be more volatile than a diversified
fund.

To the extent that the fund invests in junk bonds and securities of start-up
and other small companies, it takes on further risks that could hurt its
performance. "More About Risk" details these and certain other investment
practices the fund may use. Please read that section carefully before you
invest.

- --- PORTFOLIO MANAGEMENT
- -----------------------------------

Gregg M. Diliberto, Mark K. Silverstein, Jo Ann Corkran, Jose A. Rodriguez
and Dilip K. Rasgotra manage the fund's investment portfolio. You can find out
more about them in "Meet the Managers."

- --- INVESTOR EXPENSES
- ----------------------------

<TABLE>
<S> <C>
Management fee .00%
All other expenses .74%
----
Total expenses .74%
</TABLE>

- --- FINANCIAL HIGHLIGHTS
- --------------------------------

The figures below have been audited by the fund's independent auditors,
PricewaterhouseCoopers LLP, whose report on the fund's financial statements is
included in the ANNUAL REPORT.

<TABLE>
<CAPTION>
8/99 8/98 8/97 8/96 8/95
PERIOD ENDED: --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA
Net asset value, beginning of year...... $ 15.10 $ 15.41 $ 15.75 $ 15.67 $ 15.00
------- ------- ------- ------- -------
Income from investment operations:
Net investment income (loss)........ 0.79 0.87 0.85 0.87 1.06
Net gain (loss) on investments,
futures and foreign currency
transactions (both realized and
unrealized)....................... (0.35) (0.25) (0.16) 0.58 0.49
------- ------- ------- ------- -------
Total from investment operations.... 0.44 0.62 0.69 1.45 1.55
------- ------- ------- ------- -------
Less distributions:
Dividends from net investment
income............................ (0.29) (0.45) (0.71) (1.22) (0.88)
Distributions from realized capital
gains............................. (0.28) (0.48) (0.32) (0.15) --
------- ------- ------- ------- -------
Total distributions................. (0.57) (0.93) (1.03) (1.37) (0.88)
------- ------- ------- ------- -------
Net asset value, end of year............ $ 14.97 $ 15.10 $ 15.41 $ 15.75 $ 15.67
======= ======= ======= ======= =======
Total return............................ 2.78% 4.19% 4.48% 9.65% 10.72%
Ratios/supplemental data
Net assets, end of year (000s
omitted)............................ $27,342 $28,483 $44,285 $38,348 $19,565
Ratio of expenses to average net
assets.............................. 0.74%* 0.75%* 0.75%* 0.75%* 0.75%*
Ratio of net investment income (loss)
to average net assets............... 4.96% 5.30% 5.31% 7.37% 7.26%
Fund turnover rate.................... 305% 283% 98% 87% 91%
</TABLE>

* Without the voluntary waiver of advisory fees and administration fees, the
ratios of expenses to average net assets for the Institutional Class would
have been 1.27%, 1.17%, 0.98%, 1.07% and 1.29% for the years ended
August 31, 1999, 1998, 1997, 1996 and 1995, respectively.

<PAGE>

MORE ABOUT RISK

- --- INTRODUCTION
- ----------------------
A fund's goal and principal strategies largely determine its risk profile.
You will find a concise description of each fund's risk profile in "Key Points."
The fund-by-fund discussions contain more detailed information. This section
discusses other risks that may affect the funds.
The funds may use certain investment practices that have higher risks
associated with them. However, each fund has limitations and policies designed
to reduce many of the risks. The "Certain Investment Practices" table describes
these practices and the limitations on their use.

- --- TYPES OF INVESTMENT RISK
- -------------------------------------
The following risks are referred to throughout this PROSPECTUS.
ACCESS RISK Some countries may restrict a fund's access to investments or
offer terms that are less advantageous than those for local investors. This
could limit the attractive investment opportunities available to the fund.
CORRELATION RISK The risk that changes in the value of a hedging instrument
will not match those of the investment being hedged.
CREDIT RISK The issuer of a security or the counterparty to a contract may
default or otherwise become unable to honor a financial obligation.
CURRENCY RISK Fluctuations in exchange rates between the U.S. dollar and
foreign currencies may negatively affect an investment. Adverse changes in
exchange rates may erode or reverse any gains produced by foreign-currency
denominated investments and may widen any losses.
EXPOSURE RISK The risk associated with investments (such as derivatives) or
practices (such as short selling) that increase the amount of money a fund could
gain or lose on an investment.
- HEDGED Exposure risk could multiply losses generated by a derivative or
practice used for hedging purposes. Such losses should be substantially
offset by gains on the hedged investment. However, while hedging can
reduce or eliminate losses, it can also reduce or eliminate gains.
- SPECULATIVE To the extent that a derivative or practice is not used as a
hedge, a fund is directly exposed to its risks. Gains or losses from
speculative positions in a derivative may be much greater than the
derivative's original cost. For example, potential losses from writing
uncovered call options and from speculative short sales are unlimited.
EXTENSION RISK An unexpected rise in interest rates may extend the life of
a mortgage-backed security beyond the expected prepayment time, typically
reducing the security's value.
INFORMATION RISK Key information about an issuer, security or market may be
inaccurate or unavailable.
INTEREST-RATE RISK Changes in interest rates may cause a decline in the
market value of an investment. With bonds and other fixed-income securities, a
rise in interest rates typically causes a fall in values, while a fall in
interest rates typically causes a rise in values.
LIQUIDITY RISK Certain fund securities may be difficult or impossible to
sell at the time and the price that the fund would like. A fund may have to
lower the price, sell other securities instead or forego an investment
opportunity. Any of these could have a negative effect on fund management or
performance.

MARKET RISK The market value of a security may move up and down, sometimes
rapidly and unpredictably. These fluctuations, which are often referred to as
"volatility," may cause a security to be worth less than it was worth at an
earlier time. Market risk may affect a single issuer, industry, sector of the
economy, or the market as a whole. Market risk is common to most investments --
including stocks and bonds, and the mutual funds that invest in them.

<PAGE>

OPERATIONAL RISK Some countries have less-developed securities markets (and
related transaction, registration and custody practices) that could subject a
fund to losses from fraud, negligence, delay or other actions.

POLITICAL RISK Foreign governments may expropriate assets, impose capital
or currency controls, impose punitive taxes, or nationalize a company or
industry. Any of these actions could have a severe effect on security prices and
impair a fund's ability to bring its capital or income back to the U.S. Other
political risks include economic policy changes, social and political
instability, military action and war.

PREPAYMENT RISK Securities with high stated interest rates may be prepaid
prior to maturity. During periods of falling interest rates, a fund would
generally have to reinvest the proceeds at lower rates.

REGULATORY RISK Governments, agencies or other regulatory bodies may adopt
or change laws or regulations that could adversely affect the issuer, the market
value of the security, or a fund's performance.

VALUATION RISK The lack of an active trading market may make it difficult
to obtain an accurate price for a fund security.

YEAR 2000 PROCESSING RISK Many services provided to the funds and their
shareholders by CSAM and certain of its affiliates (CSAM Service Providers) and
the funds' other service providers rely on the functioning of their respective
computer systems. Many computer systems cannot distinguish the year 2000 from
the year 1900, resulting in potential difficulty in performing various
calculations (Year 2000 Issue). The Year 2000 Issue affects practically all
companies, organizations, governments, markets and economies throughout the
world -- including companies or governmental entities in which the funds invest
and markets in which they trade. The funds' operations are dependent upon
interactions among many participants in the financial-services and other related
industries, and 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. It has been reported that foreign
institutions have made less progress in addressing the Year 2000 Issue than
major U.S. entities, which could adversely affect the funds' foreign
investments. The CSAM Service Providers are monitoring this progress with the
assistance of the funds' custodian and are evaluating appropriate actions.

The CSAM Service Providers recognize the importance of the Year 2000 Issue
and are taking appropriate steps in preparation for the year 2000. The CSAM
Service Providers anticipate that their systems and those of the funds' other
major service providers will be adapted in time for the year 2000. The CSAM
Service Providers have completed mission critical systems testing and have
participated in industry-wide testing programs. In addition, the CSAM Service
Providers have formulated a contingency plan to address the Year 2000 Issue.

The CSAM Service Providers continue to monitor the Year 2000 Issue and its
potential impact on the funds. However, at this time no one knows precisely what
the degree of impact will be, and there can be no assurance that these steps
will be sufficient to avoid any adverse impact on the funds nor can there be any
assurance that the Year 2000 Issue will not have an adverse effect on the funds'
investments or on global markets or economies, generally. To the extent that the
impact on a fund holding or on markets or economies is negative, it could
seriously affect a fund's performance.

<PAGE>

CERTAIN INVESTMENT PRACTICES

For each of the following practices, this table shows the applicable
investment limitation. Risks are indicated for each practice.

KEY TO TABLE:

/x/ Permitted without limitation; does not indicate actual use

20% ITALIC TYPE (E.G., 20%) represents an investment limitation as a
percentage of NET fund assets; does not indicate actual use

20% Roman type (e.g., 20%) represents an investment limitation as a
percentage of TOTAL fund assets; does not indicate actual use

/ / Permitted, but not expected to be used to a significant extent

- -- Not permitted

INTERNATIONAL
GROWTH FUND

INVESTMENT PRACTICE LIMIT
- ---------------------------------------------------------------------------------------------------
<S> <C>

BORROWING The borrowing of money from banks to meet redemptions or for other
temporary or emergency purposes. SPECULATIVE EXPOSURE RISK. 33 1/3%

COUNTRY/REGION FOCUS Investing a significant portion of fund assets in a
single country or region. Market swings in the targeted country or region will
be likely to have a greater effect on fund performance than they would in a
more geographically diversified equity fund. CURRENCY, MARKET, POLITICAL RISKS. /x/

CURRENCY HEDGING Instruments, such as options, futures, forwards or swaps,
intended to manage fund exposure to currency risk. Options, futures or
forwards involve the right or obligation to buy or sell a given amount of
foreign currency at a specified price and future date. Swaps involve the right
or obligation to receive or make payments based on two different currency
rates.(1) CORRELATION, CREDIT, CURRENCY, HEDGED EXPOSURE, LIQUIDITY, POLITICAL,
VALUATION RISKS. /x/

EMERGING MARKETS Countries generally considered to be relatively less
developed or industrialized. Emerging markets often face economic problems
that could subject the fund to increased volatility or substantial declines in
value. Deficiencies in regulatory oversight, market infrastructure,
shareholder protections and company laws could expose the fund to risks beyond
those generally encountered in developed countries. ACCESS, CURRENCY, INFORMATION,
LIQUIDITY, MARKET, OPERATIONAL, POLITICAL, VALUATION RISKS. 30%

EQUITY AND EQUITY-RELATED SECURITIES Common stocks and other securities
representing or related to ownership in a company. May also include warrants,
rights, options, preferred stocks and convertible debt securities. These
investments may go down in value due to stock market movements or negative
company or industry events. LIQUIDITY, MARKET, VALUATION RISKS. /x/

FOREIGN SECURITIES Securities of foreign issuers. May include depositary
receipts. CURRENCY, INFORMATION, LIQUIDITY, MARKET, POLITICAL, VALUATION RISKS. /x/

FUTURES AND OPTIONS ON FUTURES Exchange-traded contracts that enable the fund to
hedge against or speculate on future changes in currency values, interest
rates or stock indexes. Futures obligate the fund (or give it the right, in the
case of options) to receive or make payment at a specific future time based
on those future changes.(1) CORRELATION, CURRENCY, HEDGED EXPOSURE, INTEREST-RATE,
MARKET, SPECULATIVE EXPOSURE RISKS.(2) / /

INVESTMENT-GRADE DEBT SECURITIES Debt securities rated within the four highest
grades (AAA/Aaa through BBB/Baa) by Standard & Poor's or Moody's rating
service, and unrated securities of comparable quality. CREDIT, INTEREST-
RATE, MARKET RISKS. / /

MORTGAGE-BACKED AND ASSET-BACKED (3) SECURITIES Debt securities backed by
pools of mortgages, including passthrough certificates and other
senior classes of collateralized mortgage obligations (CMOs), or other
receivables. CREDIT, EXTENSION, INTEREST-RATE, LIQUIDITY, PREPAYMENT RISKS. / /

MUNICIPAL SECURITIES Debt obligations issued by or on behalf of states,
territories and possessions of the U.S. and the District of Columbia and their
political subdivisions, agencies and instrumentalities. Municipal securities
may be affected by uncertainties regarding their tax status, legislative
changes or rights of municipal-securities holders. CREDIT, INTEREST-RATE, MARKET,
REGULATORY RISKS. [/ /]

NON-INVESTMENT-GRADE DEBT SECURITIES Debt securities and convertible
securities rated below the fourth-highest grade (BBB/Baa) by Standard & Poor's or
Moody's rating service, and unrated securities of comparable quality.
Commonly referred to as junk bonds. CREDIT, INFORMATION, INTEREST-RATE,
LIQUIDITY, MARKET, VALUATION RISKS. / /

OPTIONS Instruments that provide a right to buy (call) or sell (put) a particular
security, currency or index of securities at a fixed price within a certain time
period. The fund may purchase or sell (write) both put and call options for
hedging or speculative purposes.(1) CORRELATION, CREDIT, HEDGED EXPOSURE,
LIQUIDITY, MARKET, SPECULATIVE EXPOSURE RISKS. / /

</TABLE>

<PAGE>

STRATE-
LONG- U.S. GIC
EURO- U.S. SHORT- CORE MUNICI- GLOBAL
PEAN CORE MARKET FIXED HIGH PAL FIXED
EQUITY EQUITY FOCUS NEUTRAL INCOME YIELD BOND INCOME
FUND FUND FUND FUND FUND FUND FUND FUND

INVESTMENT PRACTICE LIMIT
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>

BORROWING The borrowing of money from
banks to meet redemptions or for other
temporary or emergency purposes.
SPECULATIVE EXPOSURE RISK. 30% 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3%

COUNTRY/REGION FOCUS Investing a
significant portion of fund assets in a
single country or region. Market swings
in the targeted country or region will
be likely to have a greater effect on
fund performance than they would in a
more geographically diversified equity
fund. CURRENCY, MARKET, POLITICAL RISKS. /x/ / / / / / / /x/ / / -- /x/

CURRENCY HEDGING Instruments, such as
options, futures, forwards or swaps,
intended to manage fund exposure to
currency risk. Options, futures or
forwards involve the right or obligation
to buy or sell a given amount of foreign
currency at a specified price and future
date. Swaps involve the right or
obligation to receive or make payments
based on two different currency rates.(1)
CORRELATION, CREDIT, CURRENCY, HEDGED
EXPOSURE, LIQUIDITY, POLITICAL,
VALUATION RISKS. /x/ / / / / / / /x/ / / -- /x/

EMERGING MARKETS Countries generally
considered to be relatively less
developed or industrialized. Emerging
markets often face economic problems
that could subject the fund to increased
volatility or substantial declines in
value. Deficiencies in regulatory
oversight, market infra-structure,
shareholder protections and company laws
could expose the fund to risks beyond
those generally encountered in developed
countries. ACCESS, CURRENCY, INFORMATION,
LIQUIDITY, MARKET, OPERATIONAL,
POLITICAL, VALUATION RISKS. 20% / / / / / / / / / / / / /x/

EQUITY AND EQUITY-RELATED SECURITIES
Common stocks and other securities
representing or related to ownership in
a company. May also include warrants,
rights, options, preferred stocks and
convertible debt securities. These
investments may go down in value due
to stock market movements or negative
company or industry events. LIQUIDITY,
MARKET, VALUATION RISKS. /x/ /x/ /x/ /x/ / / / / / / / /

FOREIGN SECURITIES Securities of foreign
issuers. May include depositary receipts.
CURRENCY, INFORMATION, LIQUIDITY, MARKET,
POLITICAL, VALUATION RISKS. /x/ / / 35% / / 35% / / -- /x/

FUTURES AND OPTIONS ON FUTURES Exchange-
traded contracts that enable the fund to
hedge against or speculate on future
changes in currency values, interest
rates or stock indexes. Futures obligate
the fund (or give it the right, in the
case of options) to receive or make
payment at a specific future time based
on those future changes.(1) CORRELATION,
CURRENCY, HEDGED EXPOSURE, INTEREST-RATE,
MARKET, SPECULATIVE EXPOSURE RISKS.(2) / / / / / / / / / / / / -- / /

INVESTMENT-GRADE DEBT SECURITIES Debt
securities rated within the four highest
grades (AAA/Aaa through BBB/Baa) by
Standard & Poor's or Moody's rating
service, and unrated securities of
comparable quality. CREDIT, INTEREST-
RATE, MARKET RISKS. / / / / / / / / / / / / / / / /

MORTGAGE-BACKED AND ASSET-BACKED (3)
SECURITIES Debt securities backed by
pools of mortgages, including
passthrough certificates and other
senior classes of collateralized
mortgage obligations (CMOs), or other
receivables. CREDIT, EXTENSION, INTEREST-
RATE, LIQUIDITY, PREPAYMENT RISKS. / / / / / / / / /x/ / / -- /x/

MUNICIPAL SECURITIES Debt obligations
issued by or on behalf of states,
territories and possessions of the U.S.
and the District of Columbia and their
political subdivisions, agencies and
instrumentalities. Municipal securities
may be affected by uncertainties
regarding their tax status, legislative
changes or rights of municipal-securities
holders. CREDIT, INTEREST-RATE, MARKET,
REGULATORY RISKS. / / / / / / / / / / / / /x/ / /

NON-INVESTMENT-GRADE DEBT SECURITIES
Debt securities and convertible
securities rated below the fourth-highest
grade (BBB/Baa) by Standard & Poor's or
Moody's rating service, and unrated
securities of comparable quality.
Commonly referred to as junk bonds.
CREDIT, INFORMATION, INTEREST-RATE,
LIQUIDITY, MARKET, VALUATION RISKS. 20% / / / / / / / / /x/ -- / /

OPTIONS Instruments that provide a right
to buy (call) or sell (put) a particular
security, currency or index of securities
at a fixed price within a certain time
period. The fund may purchase or sell
(write) both put and call options for
hedging or speculative purposes.(1)
CORRELATION, CREDIT, HEDGED EXPOSURE,
LIQUIDITY, MARKET, SPECULATIVE EXPOSURE
RISKS. / / / / / / / / / / / / / / / /

</TABLE>

<PAGE>

INTER-
NATIONAL
GROWTH
FUND

INVESTMENT PRACTICE LIMIT
- ------------------------------------------------------------------------------------------------
<S> <C>

PRIVATIZATION PROGRAMS Foreign governments may sell all or part of their
interests in enterprises they own or control. ACCESS, CURRENCY, INFORMATION,
LIQUIDITY, OPERATIONAL, POLITICAL, VALUATION RISKS. /x/

RESTRICTED AND OTHER ILLIQUID SECURITIES Securities with restrictions on trading,
or those not actively traded. May include private placements. LIQUIDITY, MARKET,
VALUATION RISKS. 15%

SECURITIES LENDING Lending portfolio securities to financial institutions;
the fund receives cash, U.S. government securities or bank letters of credit as
collateral. CREDIT, LIQUIDITY, MARKET, OPERATIONAL RISKS. 33 1/3%

SHORT POSITIONS Selling borrowed securities with the intention of
repurchasing them for a profit on the expectation that the market price will
drop. If a fund were to take short positions in stocks that increase in
value, then it would be likely to underperform similar mutual funds
that do not take short positions. LIQUIDITY, MARKET, SPECULATIVE EXPOSURE
RISKS. [/ /]

SHORT SALES "AGAINST THE BOX" A short sale when the fund owns enough shares
of the security involved to cover the borrowed securities, if necessary.
LIQUIDITY, MARKET, SPECULATIVE EXPOSURE RISKS. / /

SHORT-TERM TRADING Selling a security shortly after purchase. A fund engaging
in short-term trading will have higher turnover and transaction expenses.
Increased short-term capital gains distributions could raise shareholders'
income tax liability. [/ /]

START-UP AND OTHER SMALL COMPANIES Companies with small relative market
capitalizations, including those with continuous operations of less than
three years. INFORMATION, LIQUIDITY, MARKET, VALUATION RISKS. 5%

STRUCTURED INSTRUMENTS Swaps, structured securities and other
instruments that allow the fund to gain access to the performance of a benchmark
asset (such as an index or selected stocks) where the fund's direct invest-
ment is restricted. CREDIT, CURRENCY, INFORMATION,
INTEREST-RATE, LIQUIDITY, MARKET, POLITICAL, SPECULATIVE EXPOSURE,
VALUATION RISKS. / /

TEMPORARY DEFENSIVE TACTICS Placing some or all of the fund's assets in
investments such as money-market obligations and investment-grade debt
securities for defensive purposes. Although intended to avoid losses in
adverse market, economic, political or other conditions, defensive tactics
might be inconsistent with the fund's principal investment strategies and
might prevent the fund from achieving its goal. / /

WARRANTS Options issued by a company granting the holder the right to buy
certain securities, generally common stock, at a specified price and usually
for a limited time. LIQUIDITY, MARKET, SPECULATIVE EXPOSURE RISKS. / /

WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS The purchase or sale of
securities for delivery at a future date; market value may change before
delivery. LIQUIDITY, MARKET, SPECULATIVE EXPOSURE RISKS. 25%

ZERO-COUPON BONDS Debt securities that pay no cash income to holders
for either an intial period or until maturity and are issued at a discount
from maturity value. At maturity, return comes from the difference between
purchase price and maturity value. INTEREST-RATE, MARKET RISKS. / /

</TABLE>

1 The fund is not obligated to pursue any hedging strategy. In addition,
hedging practices may not be available, may be too costly to be used
effectively or may be unable to be used for other reasons.
2 The Fund is limited to 5% of net assets for initial margin and premium
amounts on futures positions considered to be speculative by the
Commodity Futures Trading Commission.
3 Although there is no stated investment limitation with respect to
mortgage-backed securities, each fund will limit its investments in
asset-backed securities to 25% of total assets.

<PAGE>

STRATE-
LONG- U.S. GIC
EURO- U.S. SHORT- CORE MUNICI- GLOBAL
PEAN CORE MARKET FIXED HIGH PAL FIXED
EQUITY EQUITY FOCUS NEUTRAL INCOME YIELD BOND INCOME
FUND FUND FUND FUND FUND FUND FUND FUND

INVESTMENT PRACTICE LIMIT
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>

PRIVATIZATION PROGRAMS Foreign govern-
ments may sell all or part of their
interests in enterprises they own or
control. ACCESS, CURRENCY, INFORMATION,
LIQUIDITY, OPERATIONAL, POLITICAL,
VALUATION RISKS. /x/ / / / / / / / / / / -- / /

RESTRICTED AND OTHER ILLIQUID SECURITIES
Securities with restrictions on trading,
or those not actively traded. May include
private placements. LIQUIDITY, MARKET,
VALUATION RISKS. 15% 15% 15% 15% 15% 15% 15% 15%

SECURITIES LENDING Lending portfolio
securities to financial institutions;
the fund receives cash, U.S. government
securities or bank letters of credit as
collateral. CREDIT, LIQUIDITY, MARKET,
OPERATIONAL RISKS. 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3%

SHORT POSITIONS Selling borrowed
securities with the intention of
repurchasing them for a profit on the
expectation that the market price will
drop. If a fund were to take short
positions in stocks that increase in
value, then it would be likely to
underperform similar mutual funds
that do not take short positions.
LIQUIDITY, MARKET, SPECULATIVE EXPOSURE
RISKS. / / / / / / /x/ / / / / -- / /

SHORT SALES "AGAINST THE BOX" A short
sale when the fund owns enough shares
of the security involved to cover the
borrowed securities, if necessary.
LIQUIDITY, MARKET, SPECULATIVE EXPOSURE
RISKS. / / / / / / / / / / / / -- / /

SHORT-TERM TRADING Selling a security
shortly after purchase. A fund engaging
in short-term trading will have higher
turnover and transaction expenses.
Increased short-term capital gains
distributions could raise shareholders'
income tax liability. /x/ / / / / / / / / / / / / / /

START-UP AND OTHER SMALL COMPANIES
Companies with small relative market
capitalizations, including those with
continuous operations of less than
three years. INFORMATION, LIQUIDITY,
MARKET, VALUATION RISKS. 5% 5% 5% / / 5% 5% 5% 5%

STRUCTURED INSTRUMENTS Swaps,
structured securities and other
instruments that allow the fund to gain
access to the performance of a benchmark
asset (such as an index or selected
stocks) where the fund's direct invest-
ment is restricted. CREDIT, CURRENCY,
INFORMATION,
INTEREST-RATE, LIQUIDITY, MARKET,
POLITICAL, SPECULATIVE EXPOSURE,
VALUATION RISKS. / / / / / / / / / / / / -- / /

TEMPORARY DEFENSIVE TACTICS Placing
some or all of the fund's assets in
investments such as money-market
obligations and investment-grade debt
securities for defensive purposes.
Although intended to avoid losses in
adverse market, economic, political or
other conditions, defensive tactics
might be inconsistent with the fund's
principal investment strategies and
might prevent the fund from achieving
its goal. / / / / / / / / / / / / / / / /

WARRANTS Options issued by a company
granting the holder the right to buy
certain securities, generally common
stock, at a specified price and usually
for a limited time. LIQUIDITY, MARKET,
SPECULATIVE EXPOSURE RISKS. 15% / / /x/ / / / / / / / / / /

WHEN-ISSUED SECURITIES AND FORWARD
COMMITMENTS The purchase or sale of
securities for delivery at a future
date; market value may change before
delivery. LIQUIDITY, MARKET, SPECULATIVE
EXPOSURE RISKS. 20% 25% 25% / / 25% 25% 25% 25%

ZERO-COUPON BONDS Debt securities
that pay no cash income to holders
for either an intial period or until
maturity and are issued at a discount
from maturity value. At maturity, return
comes from the difference between
purchase price and maturity value.
INTEREST-RATE, MARKET RISKS. / / / / / / / / / / / / -- / /

</TABLE>

<PAGE>

MEET THE MANAGERS

The Credit Suisse Asset Management International Equity Management Team is
responsible for the day-to-day management of the International Growth Fund. The
team consists of the following individuals:

[PHOTO]
STEVEN D. BLEIBERG
MANAGING DIRECTOR
/ / Team member since 1991
/ / With Credit Suisse Asset Management since 1991

[PHOTO]
RICHARD WATT
MANAGING DIRECTOR
/ / Team member since 1995
/ / With Credit Suisse Asset Management since 1995
/ / Director and head of emerging markets investments and research at Gartmore
Investment Limited in London, 1992 to 1995

[PHOTO]
EMILY ALEJOS
DIRECTOR
/ / Team member since 1997
/ / With Credit Suisse Asset Management since 1997
/ / Vice president and emerging markets portfolio manager with Bankers Trust,
1993 to 1997

[PHOTO]
ROBERT B. HRABCHAK
DIRECTOR
/ / Team member since 1997
/ / With Credit Suisse Asset Management since 1997
/ / Senior portfolio manager at Merrill Lynch Asset Management, 1995 to 1997

/ / Salomon Brothers, 1993 to 1995
[PHOTO]
ALAN ZLATAR
VICE PRESIDENT
/ / Team member since 1997
/ / With Credit Suisse Asset Management since 1997
/ / European equity analyst at Credit Suisse Group in Zurich, 1994 to 1997

<PAGE>

The following individuals manage the European Equity Fund:

[PHOTO]
HAROLD W. EHRLICH
MANAGING DIRECTOR
/ / Co-Portfolio Manager, European Equity Fund since 1999
/ / Joined Credit Suisse Asset Management in 1999 as a result of CSAM's
acquisition of Warburg Pincus Asset Management
/ / With Warburg Pincus Asset Management since 1995
/ / Senior vice president, portfolio manager and analyst at Templeton
Investment Counsel Inc., 1987 to 1995

[PHOTO]
NANCY NIERMAN
DIRECTOR
/ / Co-Portfolio Manager, European Equity Fund since 1999
/ / Joined Credit Suisse Asset Management in 1999 as a result of CSAM's
acquisition of Warburg Pincus Asset Management
/ / With Warburg Pincus Asset Management since 1996

/ / Vice president at Fiduciary Trust Company International, 1990 to 1996
[PHOTO]
J.H. CULLUM CLARK
DIRECTOR

/ / Co-Portfolio Manager, European Equity Fund since 1999

/ / Joined Credit Suisse Asset Management in 1999 as a result of CSAM's
acquisition of Warburg Pincus Asset Management

/ / With Warburg Pincus Asset Management since 1996

/ / Analyst and portfolio manager at Brown Brothers Harriman, 1993 to 1996

<PAGE>

The Credit Suisse Asset Management Equity Management Team is responsible for
the day-to-day management of the U.S. Core Equity Fund. The team consists of the
following individuals:

[PHOTO]
WILLIAM W. PRIEST, JR.
CEO, MANAGING DIRECTOR

/ / Team member since 1972

/ / With Credit Suisse Asset Management for more than 25 years

[PHOTO]
ERIC N. REMOLE
MANAGING DIRECTOR

/ / Team member since 1983

/ / With Credit Suisse Asset Management since 1997

/ / Managing director and portfolio manager of Chancellor/LGT Asset Management,
Inc., 1983 to 1997

[PHOTO]
MARC BOTHWELL
VICE PRESIDENT

/ / Team member since 1997

/ / With Credit Suisse Asset Management since 1997

/ / Vice president and portfolio manager at Chancellor/LGT Asset Management,
Inc., 1994 to 1997

[PHOTO]
MICHAEL WELHOELTER
VICE PRESIDENT

/ / Team member since 1993

/ / With Credit Suisse Asset Management since 1997

/ / Vice president and portfolio manager at Chancellor/LGT Asset Management,
Inc., 1986 to 1997

<PAGE>

The day-to-day portfolio management of the Focus Fund is the responsibility
of the Credit Suisse Asset Management Value Equity Management Team. The Value
Equity Team consists of the following investment professionals:

[PHOTO]
JAMES A. ABATE
DIRECTOR

/ / Team member since 1995

/ / With Credit Suisse Asset Management since 1995

/ / Managing director at VERT Independent Capital Research, [ ] to 1995

[PHOTO]
D. SUSAN EVERLEY
VICE PRESIDENT

/ / Team member since 1998

/ / With Credit Suisse Asset Management since 1998

/ / Securities analyst at Goldman Sachs, 1996 to 1998

<PAGE>

The Credit Suisse Asset Management Structured Equity Team is responsible for
the day-to-day management of the Long-Short Market Neutral Fund. The Structured
Equity Team consists of the following individuals:

[PHOTO]
WILLIAM W. PRIEST, JR.
CEO, MANAGING DIRECTOR

/ / Team member since 1972

/ / With Credit Suisse Asset Management for more than 25 years

[PHOTO]
ERIC N. REMOLE
MANAGING DIRECTOR

/ / Team member since 1997

/ / With Credit Suisse Asset Management since 1997

/ / Managing director and portfolio manager of Chancellor/LGT Asset Management,
Inc., 1983 to 1997

[PHOTO]
MARC BOTHWELL
VICE PRESIDENT

/ / Team member since 1997

/ / With Credit Suisse Asset Management since 1997

/ / Vice president and portfolio manager at Chancellor/LGT Asset Management,
Inc., 1994 to 1997

[PHOTO]
MICHAEL WELHOELTER
VICE PRESIDENT

/ / Team member since 1997

/ / With Credit Suisse Asset Management since 1997

/ / Vice president and portfolio manager at Chancellor/LGT Asset Management,
Inc., 1986 to 1997

<PAGE>

The Credit Suisse Asset Management Fixed Income Management Team is
responsible for the day-to-day management of the Municipal Bond Fund and the
U.S. Core Fixed Income Fund and supervising the activities of Credit Suisse
Asset Management Limited, the sub-investment adviser for the Strategic Global
Fixed Income Fund. The team consists of the following individuals:

[PHOTO]
GREGG M. DILIBERTO
MANAGING DIRECTOR
/ / Team member since 1984
/ / Joined Credit Suisse Asset Management in 1995 as a result of CSAM's
acquisition of CS First Boston
/ / With CS First Boston since 1984

[PHOTO]
MARK K. SILVERSTEIN
MANAGING DIRECTOR
/ / Team member since 1991
/ / Joined Credit Suisse Asset Management in 1995 as a result of CSAM's
acquisition of CS First Boston
/ / With CS First Boston since 1991

[PHOTO]
JO ANN CORKRAN
DIRECTOR
/ / Team member since 1997
/ / With Credit Suisse Asset Management since 1997
/ / Director of mortgage- and asset-backed research at Morgan Stanley, 1994 to
1997

[PHOTO]
JOSE A. RODRIGUEZ
DIRECTOR
/ / Team member since 1999
/ / With Credit Suisse Asset Management since 1999
/ / Managing director and senior portfolio manager at Prudential Investments,
1988 to 1999

SUB-INVESTMENT ADVISER
PORTFOLIO MANAGER
STRATEGIC GLOBAL FIXED INCOME FUND

DILIP K. RASGOTRA manages the Strategic Global Fixed Income Fund's
investments. Mr. Rasgotra is a Managing Director of Credit Suisse Asset
Management Limited, the fund's sub-investment adviser. Mr. Rasgotra has
been with Credit Suisse Asset Management Limited since 1983.

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

<PAGE>

The day-to-day portfolio management of the High Yield Fund is the
responsibility of the Credit Suisse Asset Management High Yield Management Team.
The team consists of the following investment professionals:

[PHOTO]
RICHARD LINDQUIST
MANAGING DIRECTOR
/ / Team member since 1989
/ / Joined Credit Suisse Asset Management in 1995 as a result of CSAM's
acquisition of CS First Boston
/ / With CS First Boston since 1989

[PHOTO]
MISIA DUDLEY
DIRECTOR
/ / Team member since 1989
/ / Joined Credit Suisse Asset Management in 1995 as a result of CSAM's
acquisition of CS First Boston
/ / With CS First Boston since 1989

[PHOTO]
MARIANNE ROSSI
DIRECTOR
/ / Team member since 1991
/ / Joined Credit Suisse Asset Management in 1995 as a result of CSAM's
acquisition of CS First Boston
/ / With CS First Boston since 1991

[PHOTO]
MARYANN THOMAS
DIRECTOR
/ / Team member since 1997
/ / With Credit Suisse Asset Management since 1997
/ / Vice president and high yield bond analyst at Prudential Insurance Company
of America, 1994 to 1997

[PHOTO]
JOHN TOBIN
DIRECTOR
/ / Team member since 1990
/ / Joined Credit Suisse Asset Management in 1995 as a result of CSAM's
acquisition of CS First Boston
/ / With CS First Boston since 1990

[PHOTO]
JOHN DESSAUER
ASSISTANT VICE PRESIDENT
/ / Team member since 1999
/ / With Credit Suisse Asset Management since 1999
/ / Senior analyst at SEI Investments, 1994 to 1997

<PAGE>

ABOUT YOUR ACCOUNT

- --- SHARE VALUATION
- --------------------------

The price of your shares is also referred to as their net asset value (NAV).

The NAV is determined at the close of regular trading on the New York Stock
Exchange (NYSE) (usually 4 p.m. Eastern Time) each day the NYSE is open for
business. It is calculated by dividing the Institutional Class's total assets,
less its liabilities, by the number of Institutional Class shares outstanding.

The funds value their securities based on market quotations when it
calculates its NAV. If market quotations are not readily available, securities
and other assets are valued by another method that the Board believes accurately
reflects fair value. Debt obligations that will mature in 60 days or less are
valued on the basis of amortized cost, unless the Board determines that using
this method would not reflect an investment's value.

Some fund securities may be listed on foreign exchanges that are open on
days (such as U.S. holidays) when a fund does not compute its price. This could
cause the value of the fund's portfolio investments to be affected by trading on
days when you cannot buy or sell shares.

- --- BUYING AND SELLING SHARES
- ---------------------------------------

The funds are open on those days when the NYSE is open, typically Monday
through Friday. If we receive your request in proper form by the close of the
NYSE (usually 4 p.m. ET), your transaction will be priced at that day's NAV. If
we receive it after that time, it will be priced at the next business day's NAV.
You are entitled to dividend and capital-gain distributions (described below) as
soon as your purchase order is executed.

The funds have authorized financial-services firms, such as banks, brokers
and financial advisors (and other intermediaries that the firms may designate)
to accept orders. When an authorized firm or its designee has received your
order, it is considered received by a fund and will be priced at the
next-computed NAV.

- --- BUYING FUND SHARES
- ------------------------------

INVEST BY WIRE

Institutional Class shares are generally available only to investors who
have entered into an investment management agreement with the adviser. Investors
should complete an account application and forward it to CSAM Institutional
Shares. After calling a fund to place an order, you may wire funds to:

State Street Bank and Trust Company
ABA# 0110 000 28
Attn: Mutual Funds/Custody Department
CSAM Institutional Shares
DDA# 9905-227-6
F/F/C: [ACCOUNT NUMBER AND REGISTRATION]

You can also purchase shares by mailing a check or Federal Reserve draft to:

CSAM Institutional Shares
P.O. Box 8500
Boston, Massachusetts 02266-8500
or overnight to:
Boston Financial
Attn: CSAM Institutional Shares
66 Brooks Drive
Braintree, Massachusetts 02184

Please use either a personal, company or bank check payable in U.S. dollars.
Unfortunately, we cannot accept checks that are not pre-printed or checks that
are payable to you or another party. These types of checks may be returned to
you and your purchase order may not be processed. Limited exceptions include IRA
Rollover and government checks. Federal Reserve drafts are available at national
banks and at state Federal Reserve member banks. Please indicate the fund's name
on any check or Federal Reserve draft. The application contains further
instructions.

<PAGE>

INVEST BY PURCHASES IN KIND

With the adviser's permission, investors may acquire Institutional
Class shares in exchange for fund portfolio securities. The portfolio securities
must meet the following requirements:

- - Match the investment objectives and policies of the fund to be purchased

- - Be considered by the fund's adviser or sub-adviser to be an appropriate fund
investment

- - Be easily valued, liquid and not subject to restrictions on transfer

You may have to pay administrative or custody costs if you make purchases in
kind and the execution of your purchase order may be delayed.

MINIMUM INVESTMENTS

Minimum investments for Institutional Class shares are the following,
including investment by purchases in-kind and by exchange (described below):

<TABLE>
<S> <C>
Initial investment $3,000,000
Subsequent investment $ 100,000
</TABLE>

Clients of the adviser, along with the adviser's affiliates, client officers
and certain other related persons, may purchase shares without entering into an
investment management agreement with the adviser subject to a minimum initial
investment of $100,000 and a minimum subsequent investment of $1,000. The
minimum investments for Institutional Shares of certain funds may be waived or
modified by the fund's Board of Directors for former holders of the fund's
Common Shares who have exchanged such shares for Institutional Shares at the
request of the Board.

You must maintain an account balance in the fund of at least $500. If your
account balance falls below the minimum required to keep it open due to
redemptions or exchanges, the fund may ask you to increase your balance. If it
is still below the minimum after 30 days, the fund may close your account and
mail you the proceeds.

- --- SELLING FUND SHARES
- -------------------------------

SELL FUND SHARES IN WRITING

You can sell (redeem) your shares on any day the funds are open by writing
to CSAM Institutional Shares. The request must be signed by all record owners
(exactly as registered) or by an authorized person such as an investment adviser
or other agent. Additional documents may be required for redemption by a
corporation, partnership, trust, fiduciary, executor or administrator or in
certain other cases.

REDEMPTION PROCEEDS

After selling fund shares you will receive the proceeds by either wire or
check, mailed within seven days of the redemption. For shares purchased by
check, if the fund has not yet collected payment for the shares you are selling
it will delay sending you the proceeds until your purchase payment clears. This
may take up to 10 calendar days after the purchase.

- --- EXCHANGING FUND SHARES
- ------------------------------------

You may exchange Institutional Class shares for Institutional shares in any
other CSAM Fund by writing to CSAM Institutional Shares. If you are purchasing
shares in a new fund by exchange, the new fund account will be registered
exactly as the fund from which you are exchanging. If you want to change account
information or privileges you must specify this in the redemption request and
have all signatures guaranteed. You can obtain a signature guarantee from most
banks or securities dealers, but not from a notary public.

<PAGE>

- --- OTHER POLICIES
- ------------------------

TRANSACTION DETAILS

Your purchase order will be canceled and you may be liable for losses or
fees incurred by a fund if:

- your investment check or Federal Reserve draft does not clear

- you place a telephone order by 4 p.m. ET and we do not receive your wire
that day

If you wire money without first calling the fund to place an order, and your
wire arrives after the close of regular trading on the NYSE, then your order
will not be executed until the end of the next business day. In the meantime,
your payment will be held uninvested. Your bank or other financial-services firm
may charge a fee to send or receive wire transfers.

While we monitor telephone servicing resources carefully, during periods of
significant economic or market change it may be difficult to place orders by
telephone.

Uncashed redemption or distribution checks do not earn interest.

SPECIAL SITUATIONS

Each fund reserves the right to:

- refuse any purchase or exchange request, including those from any person
or group who, in the fund's view, is likely to engage in excessive trading

- change or discontinue its exchange privilege after 60 days' notice to
current investors, or temporarily suspend this privilege during unusual
market conditions

- change its minimum investment amounts after 15 days' notice to current
investors of any increases

- charge a wire-redemption fee

- make a "redemption in kind" -- payment in portfolio securities rather than
cash -- for certain large redemptions that could hurt fund operations

- suspend redemptions or postpone payment dates as permitted by the
Investment Company Act of 1940 (such as during periods other than weekends
or holidays when the NYSE is closed, or when trading on the NYSE is
restricted, or any other time that the SEC permits)

- stop offering its shares for a period of time (such as when management
believes that a substantial increase in assets could adversely affect it)

ACCOUNT CHANGES

You should update your account records whenever you change your address. You
can call 800-401-2230 to change your account information or privileges.

- --- ACCOUNT STATEMENTS
- -------------------------------

In general, you will receive account statements as follows:

- after every transaction that affects your account balance (except for
distribution reinvestments and automatic transactions)

- after any changes of name or address of the registered owner(s)

- otherwise, every quarter

You will receive annual and semiannual financial reports.

- --- DISTRIBUTIONS
- ----------------------

As a fund investor, you will receive distributions.

<PAGE>

Each fund earns dividends from stocks and interest from bond, money-market
and other investments. These are passed along as dividend distributions. A fund
realizes capital gains whenever it sells securities for a higher price than it
paid for them. These are passed along as capital-gain distributions.

The U.S. Core Fixed Income, High Yield and Strategic Global Fixed Income
Funds declare and pay dividend distributions quarterly. The Municipal Bond Fund
declares and pays dividend distributions monthly. The other funds typically
distribute dividends annually, usually in December. Each of the funds typically
distribute capital gains annually in December.

Most investors have their distributions reinvested in additional shares of
the same fund. Distributions will be reinvested unless you choose on your
account application to have a check for your distributions mailed to you or sent
by electronic transfer.

- --- TAXES
- ------------

As with any investment, you should consider how your investment in a fund
will be taxed. If your account is not a tax-advantaged account, you should be
especially aware of the following potential tax implications. Please consult
your tax professional concerning your own tax situation.

TAXES ON DISTRIBUTIONS

As long as a fund continues to meet the requirements for being a
tax-qualified regulated investment company, the fund pays no federal income tax
on the earnings it distributes to shareholders.

Distributions you receive from a fund, whether reinvested or taken in cash,
are generally considered taxable. Distributions from a fund's long-term capital
gains are taxed as long-term capital gains, regardless of how long you have held
fund shares. Distributions from other sources are generally taxed as ordinary
income. The funds will mostly make capital-gain distributions, which could be
short-term or long-term.

If you buy shares shortly before or on the "record date" -- the date that
establishes you as the person to receive the upcoming distribution -- you may
receive a portion of the money you just invested in the form of a taxable
distribution.

The Form 1099 that is mailed to you every January details your distributions
and their federal tax category, including the portion taxable as long-term
capital gains.

Any gain or loss from a fund's short positions will be short-term gain or
loss, regardless of the length of time the short positions remain open. Thus,
net gain from short positions will potentially increase the amount of the fund's
ordinary income dividends, while net losses would potentially reduce the amount
of the fund's long-term gain distributions.

MUNICIPAL BOND FUND -- SPECIAL TAX MATTERS

The Municipal Bond Fund intends to pay federally tax-exempt distributions
derived from qualifying municipal securities.

Some income from the fund that is exempt from federal tax may be subject to
state and local income taxes. In addition, the fund may invest a portion of its
assets in securities that generate income that is not exempt from federal or
state income tax. The interest earned by the fund from its investments in
private entities is a tax-preference item for purposes of the federal
alternative-minimum tax.

TAXES ON TRANSACTIONS

Any time you sell or exchange shares, it is considered a taxable event for
you. Depending on the purchase price and the sale price of the shares you sell
or exchange, you may have a gain or loss on the transaction. In addition, you
may have a gain or loss when you purchase shares in exchange for fund portfolio
securities. You are responsible for any tax liabilities generated by your
transactions.

<PAGE>

OTHER INFORMATION

- --- ABOUT THE DISTRIBUTOR
- ----------------------------------

Credit Suisse Asset Management Securities, Inc., at no cost, is responsible
for:

- making the funds available to you

- account servicing and maintenance

- other administrative services related to the sale of the Institutional
Class

<PAGE>

FOR MORE INFORMATION

More information about these funds is available free upon request, including
the following:

- --- ANNUAL/SEMIANNUAL REPORTS TO SHAREHOLDERS
- ---------------------------------------------------------------

Includes financial statements, portfolio investments and detailed
performance information.

The ANNUAL REPORT also contains a letter from the funds' managers discussing
market conditions and investment strategies that significantly affected fund
performance during their past fiscal year.

- --- OTHER INFORMATION
- ------------------------------

A current STATEMENT OF ADDITIONAL INFORMATION (SAI) which provides more
details about the funds is on file with the Securities and Exchange Commission
(SEC) and is incorporated by reference.

You may visit the SEC's Internet website (www.sec.gov) to view the SAI,
material incorporated by reference and other information. You can also obtain
copies by visiting the SEC's Public Reference Room in Washington, DC (phone
800-SEC-0330) or by sending your request and a duplicating fee to the SEC's
Public Reference Section, Washington, DC 20549-6009.

Please contact CSAM Institutional Shares to obtain, without charge, the SAI
and ANNUAL AND SEMIANNUAL REPORTS and to make shareholder inquiries:

<TABLE>
<S> <C>
BY TELEPHONE:
800-275-4232
BY MAIL:
CSAM Institutional Shares
P.O. Box 8500
Boston, MA 02266-8500
BY OVERNIGHT OR COURIER SERVICE:
Boston Financial
Attn: CSAM Institutional Shares
66 Brooks Drive
Braintree, MA 02171
SEC FILE NUMBER:
CSAM Institutional Shares/Warburg Pincus
International Growth Fund 811-08933
European Equity Fund 811-08903
U.S. Core Equity Fund 811-08919
Focus Fund 811-08921
Long-Short Market Neutral Fund 811-08925
U.S. Core Fixed Income Fund 811-08917
High Yield Fund 811-08927
Municipal Bond Fund 811-08923
Strategic Global Fixed Income Fund 811-08931
</TABLE>

<TABLE>
<C> <S>
[C S A M] A member of [LOGO]
P.O. BOX 8500, BOSTON, MA 02266-8500
800-401-2230
</TABLE>

CREDIT SUISSE ASSET MANAGEMENT SECURITIES, INC., DISTRIBUTOR CSISB-1-0100

<PAGE>

SUBJECT TO COMPLETION, DATED NOVEMBER 2, 1999

STATEMENT OF ADDITIONAL INFORMATION

January 1, 2000

Institutional Shares of the

Warburg, Pincus International Growth Fund, Inc.
Warburg, Pincus U.S. Core Equity Fund, Inc.
Warburg, Pincus U.S. Core Fixed Income Fund, Inc.
Warburg, Pincus Strategic Global Fixed Income Fund, Inc.
Warburg Pincus High Yield Fund
Warburg Pincus Municipal Bond Fund
Warburg Pincus Focus Fund
Warburg Pincus Long-Short Market Neutral Fund

P.O. Box 9030, Boston, Massachusetts 02205-9030

For information, call 800-WARBURG

This combined Statement of Additional Information provides
information about Warburg Pincus International Growth Fund ("International
Growth Fund"), Warburg Pincus U.S. Core Equity Fund ("U.S. Equity Fund"),
Warburg Pincus U.S. Core Fixed Income Fund ("U.S. Fixed Income Fund"), Warburg
Pincus Strategic Global Fixed Income Fund ("Global Income Fund"), Warburg Pincus
Global Telecommunications Fund ("Global Telecommunications Fund"), Warburg
Pincus High Yield Fund ("High Yield Fund"), Warburg Pincus Municipal Bond Fund
("Municipal Bond Fund"), Warburg Pincus Focus Fund ("Focus Fund") and Warburg
Pincus Long-Short Market Neutral Fund ("Long-Short Neutral Fund") (each a "Fund"
and collectively, the "Funds") that supplements information contained in the
combined Prospectus for the Institutional Shares of the Funds, dated January 1,
2000, as amended or supplemented from time to time, and is incorporated by
reference in its entirety into that Prospectus.

Each Fund's audited Annual Report dated August 31, 1999, which
either accompanies this Statement of Additional Information or has previously
been provided to the investor to whom this Statement of Additional Information
is being sent, is incorporated herein by reference.

This Statement of Additional Information is not itself a prospectus
and no investment in shares of the Funds should be made solely upon the
information contained herein. Copies of the Prospectus, Annual Report and
information regarding each Fund's current performance may be obtained by writing
or telephoning:

CSAM Institutional Shares
P.O. Box 8500
Boston, Massachusetts 02266-8500
800-WARBURG

<PAGE>

CONTENTS

Page
----

INVESTMENT OBJECTIVES AND POLICIES ......................................... 1
Common Investment Objectives and Policies -- All Funds ..................... 1
Non-Diversified Status ................................................ 1
Temporary Investments ................................................. 1
Repurchase Agreements ................................................. 2
Reverse Repurchase Agreements and Dollar Rolls ........................ 2
Illiquid Securities ................................................... 3
Rule 144A Securities .............................................. 4
Emerging Growth and Smaller Capitalization Companies;
Unseasoned Issuers ................................................ 5
Lending of Portfolio Securities ....................................... 5
Borrowing ............................................................. 6
Securities of Other Investment Companies .............................. 6
Options Generally ..................................................... 6
Securities Options ................................................ 6
Securities Index Options .......................................... 9
Common Investment Objectives and Policies -- International
Growth, U.S. Equity, U.S. Fixed Income, Global Income,
High Yield, Municipal Bond and Focus Funds ............................ 10
When-Issued Securities, Delayed Delivery Transactions And
Forward Commitments ............................................... 10
Stand-By Commitment Agreements ........................................ 11
Common Investment Objectives and Policies -- International
Growth, U.S. Equity, U.S. Fixed Income, Global Income,
High Yield, Focus and Long-Short Neutral Funds ........................ 12
U.S. Government Securities ............................................ 12
Foreign Investments ................................................... 12
Foreign Debt Securities ........................................... 13
Foreign Currency Exchange ......................................... 14
Information ....................................................... 14
Political Instability ............................................. 14
Foreign Markets ................................................... 14
Increased Expenses ................................................ 14
Dollar-Denominated Debt Securities of Foreign Issuers ............. 15
Depositary Receipts ............................................... 15
Brady Bonds ....................................................... 15
Emerging Markets .................................................. 15
Sovereign Debt .................................................... 16
Convertible Securities ................................................ 17
Debt Securities ....................................................... 17

i
<PAGE>

Below Investment Grade Securities ................................. 18
Mortgage-Backed Securities ........................................ 20
Asset-Backed Securities ........................................... 21
Loan Participations and Assignments ............................... 21
Structured Notes, Bonds or Debentures ............................. 22
Collateralized Mortgage Obligations ............................... 22
Zero Coupon Securities ............................................ 23
Futures Activities .................................................... 24
Futures Contracts ................................................. 24
Options on Futures Contracts ...................................... 25
Currency Exchange Transactions ........................................ 26
Forward Currency Contracts ........................................ 26
Currency Options .................................................. 27
Currency Hedging .................................................. 27
Hedging Generally ..................................................... 28
Short Sales "Against the Box .......................................... 29
Section 4(2) Paper .................................................... 30
Supplemental Investment Objectives and Policies --
International Growth, U.S. Equity and Focus Funds ..................... 30
Rights Offerings and Purchase Warrants ................................ 30
Supplemental Investment Objectives and Policies -- Municipal Bond Fund ..... 31
Supplemental Investment Objectives And Policies -- Long-Short
Neutral Fund .......................................................... 31
Short Sales ........................................................... 31
INVESTMENT RESTRICTIONS .................................................... 32
PORTFOLIO VALUATION ........................................................ 34
PORTFOLIO TRANSACTIONS ..................................................... 36
PORTFOLIO TURNOVER ......................................................... 39
MANAGEMENT OF THE FUNDS .................................................... 40
Officers and Board of Directors ....................................... 40
Directors' Total Compensation for Fiscal Year Ended August 31, 1999 ... 43
Investment Adviser and Co-Administrators .............................. 44
Custodian and Transfer Agent .......................................... 50
Organization of the Funds ............................................. 50
Distribution and Shareholder Servicing ................................ 52
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION ............................. 52
Automatic Cash Withdrawal Plan ........................................ 52
EXCHANGE PRIVILEGE ......................................................... 53
ADDITIONAL INFORMATION CONCERNING TAXES .................................... 53
The Funds and Their Investments ....................................... 54
Special Tax Considerations ............................................ 58

ii
<PAGE>

Straddles ......................................................... 58
Options And Section 1256 Contracts ................................ 59
Foreign Currency Transactions ..................................... 59
Passive Foreign Investment Companies .............................. 60
Asset Diversification Requirement ................................. 60
Foreign Taxes ..................................................... 61
Fund Taxes on Swaps ............................................... 61
Dividends and Distributions ....................................... 61
Sales of Shares ................................................... 62
Backup Withholding ................................................ 62
Notices ........................................................... 63
Other Taxation .................................................... 63
DETERMINATION OF PERFORMANCE ............................................... 63
Total Return .......................................................... 63
Yield ................................................................. 66
INDEPENDENT ACCOUNTANTS AND COUNSEL ........................................ 67
MISCELLANEOUS .............................................................. 68
FINANCIAL STATEMENTS ....................................................... 72

APPENDIX A ---- DESCRIPTION OF RATINGS .....................................A-1

iii
<PAGE>

INVESTMENT OBJECTIVES AND POLICIES

The following policies supplement the descriptions of each Fund's
investment objectives and policies in the Prospectus. There are no assurances
that the Funds will achieve their investment objectives.

The investment objective of the International Growth Fund, Focus
Fund (formerly, the Warburg Pincus Select Economic Value Equity Fund) and U.S.
Equity Fund is to provide long-term appreciation of capital.

The investment objective of the High Yield, Municipal Bond, Global
Income and U.S. Fixed Income Funds is to provide high total return.

The investment objective of the Long-Short Neutral Fund is to seek
long-term capital appreciation while minimizing exposure to general equity
market risk.

Unless otherwise indicated, all of the Funds are permitted, but not
obligated, to engage in the following investment strategies, subject to any
percentage limitations set forth below. The Funds do not represent that these
techniques are available now or will be available at any time in the future.

Common Investment Objectives and Policies -- All Funds

Non-Diversified Status. Each Fund is classified as non-diversified
within the meaning of the Investment Company Act of 1940, as amended (the "1940
Act"), which means that each Fund is not limited by such Act in the proportion
of its assets that it may invest in securities of a single issuer. As a
non-diversified fund, each Fund may invest a greater proportion of its assets in
the obligations of a smaller number of issuers and, as a result, may be subject
to greater risk with respect to portfolio securities. The investments of these
Funds will be limited, however, in order to qualify as a "regulated investment
company" for purposes of the Internal Revenue Code of 1986, as amended (the
"Code"). See "Additional Information Concerning Taxes." To qualify, a Fund will
comply with certain requirements, including limiting its investments so that at
the close of each quarter of the taxable year (i) not more than 25% of the
market value of its total assets will be invested in the securities of a single
issuer, and (ii) with respect to 50% of the market value of its total assets,
not more than 5% of the market value of its total assets will be invested in the
securities of a single issuer and the Fund will not own more than 10% of the
outstanding voting securities of a single issuer.

Temporary Investments. To the extent permitted by its investment
objectives and policies, each of the Funds may hold cash or cash equivalents
pending investment or to meet redemption requests. In addition, for defensive
purposes due to abnormal market conditions or economic situations as determined
by the Credit Suisse Asset Management, LLC, the Fund's adviser ("CSAM"), or, if
applicable, Credit Suisse Asset Management Limited ("CSAM Ltd"), the Fund's
sub-investment adviser, as the

1
<PAGE>

case may be (each, an "Adviser"), each Fund may reduce its holdings in other
securities and invest up to 100% of its assets in cash or certain short-term
(less than twelve months to maturity) and medium-term (not greater than five
years to maturity) interest-bearing instruments or deposits of the United States
and foreign issuers. The short-term and medium-term debt securities in which a
Fund may invest for temporary defensive purposes consist of: (a) obligations of
the United States or foreign governments, their respective agencies or
instrumentalities; (b) bank deposits and bank obligations (including
certificates of deposit, time deposits and bankers' acceptances) of U.S. or
foreign banks denominated in any currency; (c) floating rate securities and
other instruments denominated in any currency issued by international
development agencies; (d) finance company and corporate commercial paper and
other short-term corporate debt obligations of U.S. and foreign corporations;
and (e) repurchase agreements with banks and broker-dealers with respect to such
securities.

Repurchase Agreements. The Funds may invest in repurchase agreement
transactions with member banks of the Federal Reserve System and certain
non-bank dealers. Repurchase agreements are contracts under which the buyer of a
security simultaneously commits to resell the security to the seller at an
agreed-upon price and date. Under the terms of a typical repurchase agreement, a
Fund would acquire any underlying security for a relatively short period
(usually not more than one week) subject to an obligation of the seller to
repurchase, and the Fund to resell, the obligation at an agreed-upon price and
time, thereby determining the yield during the Fund's holding period. This
arrangement results in a fixed rate of return that is not subject to market
fluctuations during the Fund's holding period. The value of the underlying
securities will at all times be at least equal to the total amount of the
purchase obligation, including interest. The Fund bears a risk of loss in the
event that the other party to a repurchase agreement defaults on its obligations
or becomes bankrupt and the Fund is delayed or prevented from exercising its
right to dispose of the collateral securities, including the risk of a possible
decline in the value of the underlying securities during the period in which the
Fund seeks to assert this right. The Adviser, acting under the supervision of
the Fund's Board of Directors (the "Board"), monitors the creditworthiness of
those bank and non-bank dealers with which each Fund enters into repurchase
agreements to evaluate this risk. A repurchase agreement is considered to be a
loan under the 1940 Act.

Reverse Repurchase Agreements and Dollar Rolls. Each Fund may enter
into reverse repurchase agreements with member banks of the Federal Reserve
System with respect to portfolio securities for temporary purposes (such as to
obtain cash to meet redemption requests when the liquidation of portfolio
securities is deemed disadvantageous or inconvenient by the Adviser) and "dollar
rolls." The Funds do not presently intend to invest more than 5% of net assets
in reverse repurchase agreements or dollar rolls during the coming year.

Reverse repurchase agreements involve the sale of securities held by
a Fund pursuant to such Fund's agreement to repurchase them at a mutually agreed
upon date, price

2
<PAGE>

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

Each Fund also may enter into "dollar rolls," in which it sells
fixed income securities for delivery in the current month and simultaneously
contracts to repurchase substantially similar (same type, coupon and maturity)
securities on a specified future date. During the roll period, a Fund would
forgo principal and interest paid on such securities. A Fund would be
compensated by the difference between the current sales price and the forward
price for the future purchase, as well as by the interest earned on the cash
proceeds of the initial sale. At the time a Fund enters into a dollar roll
transaction, it will segregate with an approved custodian, cash or liquid
securities having a value not less than the repurchase price (including accrued
interest) and will subsequently monitor the segregated assets to ensure that its
value is maintained. Reverse repurchase agreements and dollar rolls that are
accounted for as financings are considered to be borrowings under the 1940 Act.

Illiquid Securities. Each Fund is authorized, but does not presently
intend to, invest 15% of its net assets in illiquid securities, including
securities that are illiquid by virtue of the absence of a readily available
market, repurchase agreements which have a maturity of longer than seven days,
certain Rule 144A Securities (as defined below), and time deposits maturing in
more than seven days. Securities that have legal or contractual restrictions on
resale but have a readily available market are not considered illiquid for
purposes of this limitation. Repurchase agreements subject to demand are deemed
to have a maturity equal to the notice period.

Historically, illiquid securities have included securities subject
to contractual or legal restrictions on resale because they have not been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
securities which are otherwise not readily marketable and repurchase agreements
having a maturity of longer than seven days. Securities which have not been
registered under the Securities Act are

3
<PAGE>

referred to as private placements or restricted securities and are purchased
directly from the issuer or in the secondary market. Companies whose securities
are not publicly traded may not be subject to the disclosure and other investor
protection requirements applicable to companies whose securities are publicly
traded. Limitations on resale may have an adverse effect on the marketability of
portfolio securities and a mutual fund might be unable to dispose of restricted
or other illiquid securities promptly or at reasonable prices and might thereby
experience difficulty satisfying redemptions within seven days without
borrowing. A mutual fund might also have to register such restricted securities
in order to dispose of them resulting in additional expense and delay. Adverse
market conditions could impede such a public offering of securities.

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

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

An investment in Rule 144A Securities will be considered illiquid
and therefore subject to the Funds' limit on the purchase of illiquid securities
unless the Board or its delegates determines that the Rule 144A Securities are
liquid. In reaching liquidity decisions, the Board or its delegates may
consider, inter alia, the following factors: (i) the unregistered nature of the
security; (ii) the frequency of trades and quotes for the security; (iii) the
number of dealers wishing to purchase or sell the security and the number of
other potential purchasers; (iv) dealer undertakings to make a market in the
security and (v) the nature of the security and the nature of the marketplace
trades (e.g., the time needed to dispose of the security, the method of
soliciting offers and the mechanics of the transfer).

Investing in Rule 144A securities could have the effect of
increasing the level of illiquidity in the Funds to the extent that qualified
institutional buyers are unavailable or uninterested in purchasing such
securities from the Funds. The Boards

4
<PAGE>

may adopt guidelines and delegate to the Adviser the daily function of
determining and monitoring the liquidity of Rule 144A Securities, although each
Board will retain ultimate responsibility for liquidity determinations.

Emerging Growth and Smaller Capitalization Companies; Unseasoned Issuers. Each
Fund will not invest in securities of unseasoned issuers, including equity
securities of unseasoned issuers which are not readily marketable, if the
aggregate investment in such securities would exceed 5% of such Fund's net
assets. The term "unseasoned" refers to issuers which, together with their
predecessors, have been in operation for less than three years.

Such investments involve considerations that are not applicable to
investing in securities of established, larger-capitalization issuers, including
reduced and less reliable information about issuers and markets, less stringent
financial disclosure requirements, illiquidity of securities and markets, higher
brokerage commissions and fees and greater market risk in general. In addition,
securities of these companies may involve greater risks since these securities
may have limited marketability and, thus, may be more volatile.

Although investing in securities of unseasoned issuers offers
potential for above-average returns if the companies are successful, the risk
exists that the companies will not succeed and the prices of the companies'
shares could significantly decline in value. Therefore, an investment in a Fund
may involve a greater degree of risk than an investment in other mutual funds
that seek growth of capital or capital appreciation by investing in
better-known, larger companies.

Lending of Portfolio Securities. Each Fund may lend portfolio
securities to brokers, dealers and other financial organizations that meet
capital and other credit requirements or other criteria established by the
Fund's Board of Directors (the "Board"). These loans, if and when made, may not
exceed 331/3% of the Funds' total assets (including the loan collateral). The
Funds will not lend portfolio securities to the Adviser or its affiliates unless
it has applied for and received specific authority to do so from the SEC. Loans
of portfolio securities will be collateralized by cash, letters of credit or
U.S. government securities, which are maintained at all times in an amount equal
to at least 100% of the current market value of the loaned securities. Any gain
or loss in the market price of the securities loaned that might occur during the
term of the loan would be for the account of the Funds. From time to time, the
Funds may return a part of the interest earned from the investment of collateral
received for securities loaned to the borrower and/or a third party that is
unaffiliated with the Funds and that is acting as a "finder."

By lending its securities, each Fund can increase its income by
continuing to receive interest and any dividends on the loaned securities as
well as by either investing the collateral received for securities loaned in
short-term instruments or obtaining yield

5
<PAGE>

in the form of interest paid by the borrower when U.S. government securities are
used as collateral. Each Fund will adhere to the following conditions whenever
its portfolio securities are loaned: (i) the Fund must receive at least 100%
cash collateral or equivalent securities of the type discussed in the preceding
paragraph from the borrower; (ii) the borrower must increase such collateral
whenever the market value of the securities rises above the level of such
collateral; (iii) the Fund must be able to terminate the loan at any time; (iv)
the Fund must receive reasonable interest on the loan, as well as any dividends,
interest or other distributions on the loaned securities and any increase in
market value; (v) the Fund may pay only reasonable custodian fees in connection
with the loan; and (vi) voting rights on the loaned securities may pass to the
borrower, provided, however, that if a material event adversely affecting the
investment occurs, the Board must terminate the loan and regain the right to
vote the securities. Loan agreements involve certain risks in the event of
default or insolvency of the other party including possible delays or
restrictions upon a Fund's ability to recover the loaned securities or dispose
of the collateral for the loan.

Borrowing. Each Fund may borrow up to 331/3 percent of its total
assets for temporary or emergency purposes, including to meet portfolio
redemption requests so as to permit the orderly disposition of portfolio
securities or to facilitate settlement transactions on portfolio securities.
Additional investments (including roll-overs) will not be made when borrowings
exceed 5% of a Fund's net assets. Although the principal of such borrowings will
be fixed, a Fund's assets may change in value during the time the borrowing is
outstanding. Each Fund expects that some of its borrowings may be made on a
secured basis. In such situations, either the custodian will segregate the
pledged assets for the benefit of the lender or arrangements will be made with a
suitable subcustodian, which may include the lender.

Securities of Other Investment Companies. Each Fund may invest in
securities issued by other investment companies to the extent permitted by the
1940 Act. As a shareholder of another investment company, each Fund would bear,
along with other shareholders, its pro rata portion of the other investment
company's expenses, including advisory fees. These expenses would be in addition
to the advisory and other expenses that a Fund bears directly in connection with
its own operations.

Options Generally. The Funds may purchase and write (sell)
securities, securities indices and currencies for both hedging purposes and to
increase total return.

Securities Options. Each Fund may write covered put and call options
on stock and debt securities and each Fund may purchase such options that are
traded on foreign and U.S. exchanges, as well as OTC options. A Fund realizes
fees (referred to as "premiums") for granting the rights evidenced by the
options it has written. A put option embodies the right of its purchaser to
compel the writer of the option to purchase from the option holder an underlying
security at a specified price for a specified time period or at a specified
time. In contrast, a call option embodies the right of its

6
<PAGE>

purchaser to compel the writer of the option to sell to the option holder an
underlying security at a specified price for a specified time period or at a
specified time.

The potential loss associated with purchasing an option is limited
to the premium paid, and the premium would partially offset any gains achieved
from its use. However, for an option writer the exposure to adverse price
movements in the underlying security or index is potentially unlimited during
the exercise period. Writing securities options may result in substantial losses
to a Fund, force the sale or purchase of portfolio securities at inopportune
times or at less advantageous prices, limit the amount of appreciation the Fund
could realize on its investments or require the Fund to hold securities its
would otherwise sell.

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

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

In the case of options written by a Fund that are deemed covered by
virtue of the Fund's holding convertible or exchangeable preferred stock or debt
securities, the time required to convert or exchange and obtain physical
delivery of the underlying common stock with respect to which the Fund has
written options may exceed the time within which the Fund must make delivery in
accordance with an exercise notice. In these instances, a Fund may purchase or
temporarily borrow the underlying securities for purposes of physical delivery.
By so doing, the Fund will not bear any market risk, since the Fund will have
the absolute right to receive from the issuer of the underlying security an
equal number of shares to replace the borrowed securities, but the Fund may
incur additional transaction costs or interest expenses in connection with any
such purchase or borrowing.

Additional risks exist with respect to certain of the securities for
which a Fund may write covered call options. For example, if the Fund writes
covered call options on mortgage-backed securities, the mortgage-backed
securities that it holds as

7
<PAGE>

cover may, because of scheduled amortization or unscheduled prepayments, cease
to be sufficient cover. If this occurs, the Fund will compensate for the decline
in the value of the cover by purchasing an appropriate additional amount of
mortgage-backed securities.

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

Prior to their expirations, put and call options may be sold in
closing sale or purchase transactions (sales or purchases by a Fund prior to the
exercise of options that it has purchased or written, respectively, of options
of the same series) in which a Fund may realize a profit or loss from the sale.
An option position may be closed out only where there exists a secondary market
for an option of the same series on a recognized securities exchange or in the
OTC market. When a Fund has purchased an option and engages in a closing sale
transaction, whether the Fund realizes a profit or loss will depend upon whether
the amount received in the closing sale transaction is more or less than the
premium the Fund initially paid for the original option plus the related
transaction costs. Similarly, in cases where a Fund has written an option, it
will realize a profit if the cost of the closing purchase transaction is less
than the premium received upon writing the original option and will incur a loss
if the cost of the closing purchase transaction exceeds the premium received
upon writing the original option. A Fund may engage in a closing purchase
transaction to realize a profit, to prevent an underlying security with respect
to which it has written an option from being called or put or, in the case of a
call option, to unfreeze an underlying security (thereby permitting its sale or
the writing of a new option on the security prior to the outstanding option's
expiration). The

8
<PAGE>

obligation of a Fund under an option it has written would be terminated by a
closing purchase transaction (the Fund would not be deemed to own an option as a
result of the transaction). So long as the obligation of a Fund as the writer of
an option continues, the Fund may be assigned an exercise notice by the
broker-dealer through which the option was sold, requiring the Fund to deliver
the underlying security against payment of the exercise price. This obligation
terminates when the option expires or the Fund effects a closing purchase
transaction. A Fund cannot effect a closing purchase transaction with respect to
an option once it has been assigned an exercise notice.

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

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

Securities Index Options. A securities index measures the movement
of a certain group of securities by assigning relative values to the securities
included in the index, fluctuating with changes in the market values of the
securities included in the

9
<PAGE>

index. Some securities index options are based on a broad market index, such as
the NYSE Composite Index, or a narrower market index such as the Standard &
Poor's 100. Indexes may also be based on a particular industry or market
segment.

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

Common Investment Objectives and Policies -- International Growth, U.S. Equity,
U.S. Fixed Income, Global Income, High Yield, Municipal Bond and Focus Funds

When-Issued Securities, Delayed Delivery Transactions And Forward
Commitments. Each Fund may purchase securities on a when-issued basis or on a
forward commitment basis, and it may purchase or sell securities for delayed
delivery (i.e., payment or delivery occur beyond the normal settlement date at a
stated price and yield). Each Fund currently anticipates that when-issued
securities will not exceed 25% of its net assets. Each Fund does not intend to
engage in when-issued purchases and forward commitments for speculative purposes
but only in furtherance of its investment objectives.

In these transactions, payment for and delivery of the securities
occur beyond the regular settlement dates, normally within 30-45 days after the
transaction. The Funds will not enter into a when-issued or delayed-delivery
transaction for the purpose of leverage, but may sell the right to acquire a
when-issued security prior to its acquisition or dispose of its right to deliver
or receive securities in a delayed-delivery transaction before the settlement
date if the Adviser deems it advantageous to do so. The payment obligation and
the interest rate that will be received on when-issued and delayed-delivery
transactions are fixed at the time the buyer enters into the commitment. Due to
fluctuations in the value of securities purchased or sold on a when-issued or
delayed-delivery basis, the prices obtained on such securities may be higher or
lower than the prices available in the market on the dates when the investments
are actually delivered to the buyers. Each Fund will establish a segregated
account with its custodian consisting of cash or liquid securities in an amount
equal to its when-issued and delayed-

10
<PAGE>

delivery purchase commitments and will segregate the securities underlying
commitments to sell securities for delayed delivery.

When a Fund agrees to purchase when-issued or delayed-delivery
securities, its custodian will set aside cash or liquid securities that are
acceptable as collateral to the appropriate regulatory authority equal to the
amount of the commitment in a segregated account. Normally, the custodian will
set aside portfolio securities to satisfy a purchase commitment, and in such a
case a 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 a Fund's
net assets will fluctuate to a greater degree when it sets aside portfolio
securities to cover such purchase commitments than when it sets aside cash. When
a Fund engages in when-issued or delayed-delivery transactions, it relies on the
other party to consummate the trade. Failure of the seller to do so may result
in the Funds' incurring a loss or missing an opportunity to obtain a price
considered to be advantageous.

Stand-By Commitment Agreements. Each Fund may from time to time
enter into stand-by commitment agreements. The Funds do not presently intend to
invest more than 5% of net assets in stand-by commitment agreements during the
coming year.

Such agreements commit a Fund, for a stated period of time, to
purchase a stated amount of a fixed income securities which may be issued and
sold to the Fund at the option of the issuer. The price and coupon of the
security is fixed at the time of the commitment. At the time of entering into
the agreement, a Fund is paid a commitment fee, regardless of whether or not the
security is ultimately issued. A Fund will enter into such agreements only for
the purpose of investing in the security underlying the commitment at a yield
and price that is considered advantageous to a Fund. Each Fund will not enter
into a stand-by commitment with a remaining term in excess of 45 days and it
will limit its investment in such commitments so that the aggregate purchase
price of the securities subject to such commitments, together with the value of
portfolio securities subject to legal restrictions on resale, will not exceed
10% of its assets taken at the time of acquisition of such commitment or
security.

Each Fund will at all times maintain a segregated account with its
custodian consisting of cash or liquid securities denominated in U.S. dollars or
non-U.S. currencies in an aggregate amount equal to the purchase price of the
securities underlying the commitment. The assets contained in the segregated
account will be marked-to-market daily and additional assets will be placed in
such account on any day in which assets fall below the amount of the purchase
price. A Fund's liquidity and ability to manage its assets might be affected
when it sets aside cash or portfolio securities to cover such commitments.

There can be no assurance that the securities subject to a stand-by
commitment will be issued and the value of the security, if issued, on the
delivery date may be more or less than its purchase price. Because the issuance
of the security underlying the

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<PAGE>

commitment is at the option of the issuer, a Fund may bear the risk of a decline
in the value of such security and may not benefit from an appreciation in the
value of the security during the commitment period.

The purchase of a security subject to a stand-by commitment
agreement and the related commitment fee will be recorded on the date on which
the security can reasonably be expected to be issued, and the value of the
security will be adjusted by the amount of the commitment fee. In the event the
security is not issued, the commitment fee will be recorded as income on the
expiration date of the stand-by commitment.

Common Investment Objectives and Policies -- International Growth, U.S. Equity,
U.S. Fixed Income, Global Income, High Yield, Focus and Long-Short Neutral Funds

U.S. Government Securities. The obligations issued or guaranteed by
the U.S. government in which a Fund may invest include direct obligations of the
U.S. Treasury and obligations issued by U.S. government agencies and
instrumentalities. Included among direct obligations of the United States are
Treasury Bills, Treasury Notes and Treasury Bonds, which differ in terms of
their interest rates, maturities and dates of issuance. Treasury Bills have
maturities of less than one year, Treasury Notes have maturities of one to 10
years and Treasury Bonds generally have maturities of greater than 10 years at
the date of issuance. Included among the obligations issued by agencies and
instrumentalities of the United States are instruments that are supported by the
full faith and credit of the United States (such as certificates issued by the
Government National Mortgage Association ("GNMA")); instruments that are
supported by the right of the issuer to borrow from the U.S. Treasury (such as
securities of Federal Home Loan Banks); and instruments that are supported by
the credit of the instrumentality (such as Federal National Mortgage Association
("FNMA") and Federal Home Loan Mortgage Corporation ("FHLMC") bonds).

Other U.S. government securities the Funds may invest in include
securities issued or guaranteed by the Federal Housing Administration, Farmers
Home Loan Administration, Export-Import Bank of the United States, Small
Business Administration, General Services Administration, Central Bank for
Cooperatives, Federal Farm Credit Banks, Federal Intermediate Credit Banks,
Federal Land Banks, Maritime Administration, Tennessee Valley Authority,
District of Columbia Armory Board and Student Loan Marketing Association.
Because the U.S. government is not obligated by law to provide support to an
instrumentality it sponsors, a Fund will invest in obligations issued by such an
instrumentality only if the Adviser determines that the credit risk with respect
to the instrumentality does not make its securities unsuitable for investment by
the Fund.

Foreign Investments. Investors should recognize that investing in
foreign companies involves certain risks, including those discussed below, which
are in addition to those associated with investing in U.S. issuers. Individual
foreign economies may differ favorably or unfavorably from the U.S. economy in
such respects as growth of

12
<PAGE>

gross national product, rate of inflation, capital reinvestment, resource
self-sufficiency, and balance of payments positions. In addition, foreign
investments by the Funds are subject to the risk that natural disasters (such as
an earthquake) will weaken a country's economy and cause investments in that
country to lose money. Natural disaster risks are, of course, not limited to
foreign investments and may apply to a Fund's domestic investments as well. The
Funds may invest in securities of foreign governments (or agencies or
instrumentalities thereof), and many, if not all, of the foregoing
considerations apply to such investments.

For the purposes of this investment policy, foreign investments
include investments in companies located or conducting a majority of their
business outside of the U.S., companies which have issued securities traded
principally outside of the U.S., or non-U.S. governments, governmental entities
or political subdivisions.

Foreign Debt Securities. The returns on foreign debt securities
reflect interest rates and other market conditions prevailing in those countries
and the effect of gains and losses in the denominated currencies against the
U.S. dollar, which have had a substantial impact on investment in foreign
fixed-income securities. The relative performance of various countries'
fixed-income markets historically has reflected wide variations relating to the
unique characteristics of each country's economy. Year-to-year fluctuations in
certain markets have been significant, and negative returns have been
experienced in various markets from time to time.

The foreign government securities in which the Funds may invest
generally consist of obligations issued or backed by national, state or
provincial governments or similar political subdivisions or central banks in
foreign countries. Foreign government securities also include debt obligations
of supranational entities, which include international organizations designated,
or backed by governmental entities to promote economic reconstruction or
development, international banking institutions and related government agencies.
Examples include the International Bank for Reconstruction and Development (the
"World Bank"), the European Coal and Steel Community, the Asian Development Bank
and the InterAmerican Development Bank.

Foreign government securities also include debt securities of
"quasi-governmental agencies" and debt securities denominated in multinational
currency units of an issuer (including supranational issuers). Debt securities
of quasi-governmental agencies are issued by entities owned by either a
national, state or equivalent government or are obligations of a political unit
that is not backed by the national government's full faith and credit and
general taxing powers. An example of a multinational currency unit is the euro,
the new single currency for eleven Economic and Monetary Union member states.
The euro represents specified amounts of the currencies of certain member states
of the Economic and Monetary Union and was introduced on January 1, 1999.
National currencies of the eleven member states participating in the euro will
become subdivisions of the euro, but will continue to circulate as legal tender
until January 1, 2002, when they will be withdrawn permanently.

13
<PAGE>

Foreign Currency Exchange. Since the Funds may invest in securities
denominated in currencies of non-U.S. countries, the Funds may be affected
favorably or unfavorably by exchange control regulations or changes in the
exchange rate between such currencies and the dollar. A change in the value of a
foreign currency relative to the U.S. dollar will result in a corresponding
change in the dollar value of the Fund assets denominated in that foreign
currency. Changes in foreign currency exchange rates may also affect the value
of dividends and interest earned, gains and losses realized on the sale of
securities and net investment income and gains, if any, to be distributed to
shareholders by a Fund. Unless otherwise contracted, the rate of exchange
between the U.S. dollar and other currencies is determined by the forces of
supply and demand in the foreign exchange markets. Changes in the exchange rate
may result over time from the interaction of many factors directly or indirectly
affecting economic and political conditions in the United States and a
particular foreign country, including economic and political developments in
other countries. Governmental intervention may also play a significant role.
National governments rarely voluntarily allow their currencies to float freely
in response to economic forces. Sovereign governments use a variety of
techniques, such as intervention by a country's central bank or imposition of
regulatory controls or taxes, to affect the exchange rates of their currencies.
The Funds may use hedging techniques with the objective of protecting against
loss through the fluctuation of the value of the yen against the U.S. dollar,
particularly the forward market in foreign exchange, currency options and
currency futures.

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

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

Foreign Markets. Securities of some foreign companies are less
liquid and their prices are more volatile than securities of comparable U.S.
companies. Certain foreign countries are known to experience long delays between
the trade and settlement dates of securities purchased or sold which may result
in increased exposure to market and foreign exchange fluctuations and increased
illiquidity.

Increased Expenses. The operating expenses of the Funds can be
expected to be higher than that of an investment company investing exclusively
in U.S. securities, since the expenses of the Funds, such as cost of converting
foreign currency into U.S. dollars, the payment of fixed brokerage commissions
on foreign exchanges, custodial

14
<PAGE>

costs, valuation costs and communication costs, as well as the rate of the
investment advisory fees, though similar to such expenses of some other
international funds, are higher than those costs incurred by other investment
companies not investing in foreign securities. In addition, foreign securities
may be subject to foreign government taxes that would reduce the net yield on
such securities.

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

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

Brady Bonds. Each Fund may invest in so-called "Brady Bonds," which
are securities created through the exchange of existing commercial bank loans to
public and private entities for new bonds in connection with debt restructurings
under a debt restructuring plan announced by former U.S. Secretary of the
Treasury Nicholas F. Brady. Brady Bonds may be collateralized or
uncollateralized, are issued in various currencies (primarily the U.S. dollar)
and are currently actively traded in the OTC secondary market for debt
instruments. Brady Bonds have been issued only recently and therefore do not
have a long payment history. In light of the history of commercial bank loan
defaults by Latin American public and private entities, investments in Brady
Bonds may be viewed as speculative.

Emerging Markets. Each Fund may invest in securities of issuers
located in "emerging markets" (less developed countries located outside of the
U.S.). Investing in emerging markets involves not only the risks described above
with respect to investing in foreign securities, but also other risks, including
exposure to economic structures that are generally less diverse and mature than,
and to political systems that can be expected to have less stability than, those
of developed countries. For example, many investments in

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<PAGE>

emerging markets experienced significant declines in value due to political and
currency volatility in emerging markets countries during the latter part of 1997
and the first half of 1998. Other characteristics of emerging markets that may
affect investment include certain national policies that may restrict investment
by foreigners in issuers or industries deemed sensitive to relevant national
interests and the absence of developed structures governing private and foreign
investments and private property. The typically small size of the markets of
securities of issuers located in emerging markets and the possibility of a low
or nonexistent volume of trading in those securities may also result in a lack
of liquidity and in price volatility of those securities.

Sovereign Debt. Investments in sovereign debt involve special risks.
The issuer of the debt or the governmental authorities that control the
repayment of the debt may be unable or unwilling to repay principal or interest
when due in accordance with the terms of such debt, and a Fund may have limited
legal recourse in the event of a default.

Sovereign debt differs from debt obligations issued by private
entities in that, generally, remedies for defaults must be pursued in the courts
of the defaulting party. Legal recourse is therefore somewhat limited. Political
conditions, especially a sovereign entity's willingness to meet the terms of its
debt obligations, are of considerable significance. Also, there can be no
assurance that the holders of commercial bank loans to the same sovereign entity
may not contest payments to the holders of sovereign debt in the event of
default under commercial bank loan agreements.

A sovereign debtor's willingness or ability to repay principal and
pay interest in a timely manner may be affected by, among other factors, its
cash flow situation, the extent of its foreign reserves, the availability of
sufficient foreign exchange on the date a payment is due, the relative size of
the debt service burden to the economy as a whole, the sovereign debtor's policy
toward principal international lenders and the political constraints to which a
sovereign debtor may be subject. Increased protectionism on the part of a
country's trading partners, or political changes in those countries, could also
adversely affect its exports. Such events could diminish a country's trade
account surplus, if any, or the credit standing of a particular local government
or agency.

The occurrence of political, social or diplomatic changes in one or
more of the countries issuing sovereign debt could adversely affect a Fund's
investments. Political changes or a deterioration of a country's domestic
economy or balance of trade may affect the willingness of countries to service
their sovereign debt. While the Adviser intends to manage the Funds in a manner
that will minimize the exposure to such risks, there can be no assurance that
adverse political changes will not cause a Fund to suffer a loss of interest or
principal on any of its holdings.

Investors should also be aware that certain sovereign debt
instruments in which a Fund may invest involve great risk. Sovereign debt issued
by issuers in many emerging markets generally is deemed to be the equivalent in
terms of quality to securities rated below investment grade by Moody's Investors
Service, Inc. ("Moody's") and

16
<PAGE>

Standard & Poor's Ratings Services ("S&P"). Such securities are regarded as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligations and involve
major risk exposure to adverse conditions. Some of such sovereign debt, which
may not be paying interest currently or may be in payment default, may be
comparable to securities rated "D" by S&P or "C" by Moody's. A Fund may have
difficulty disposing of certain sovereign debt obligations because there may be
a limited trading market for such securities. Because there is no liquid
secondary market for many of these securities, the Funds anticipate that such
securities could be sold only to a limited number of dealers or institutional
investors. The lack of a liquid secondary market may have an adverse impact on
the market price of such securities and a Fund's ability to dispose of
particular issues when necessary to meet a Fund's liquidity needs or in response
to a specific economic event, such as a deterioration in the creditworthiness of
the issuer. The lack of a liquid secondary market for certain securities also
may make it more difficult for a Fund to obtain accurate market quotations for
purposes of valuing a Fund's portfolio and calculating its net asset value. When
and if available, fixed income securities may be purchased by a Fund at a
discount from face value. However, the Funds do not intend to hold such
securities to maturity for the purpose of achieving potential capital gains,
unless current yields on these securities remain attractive. From time to time,
a Fund may purchase securities not paying interest at the time acquired if, in
the opinion of the "Adviser," such securities have the potential for future
income or capital appreciation.

Convertible Securities. Convertible securities in which a fund may
invest, including both convertible debt and convertible preferred stock, may be
converted at either a stated price or stated rate into underlying shares of
common stock. Because of this feature, convertible securities enable an investor
to benefit from increases in the market price of the underlying common stock.
Convertible securities provide higher yields than the underlying equity
securities, but generally offer lower yields than non-convertible securities of
similar quality. The value of convertible securities fluctuates in relation to
changes in interest rates like bonds and, in addition, fluctuates in relation to
the underlying common stock. Subsequent to purchase by a Fund, convertible
securities may cease to be rated or a rating may be reduced below the minimum
required for purchase by the Fund. Neither event will require sale of such
securities, although the "Adviser" will consider such event in its determination
of whether a Fund should continue to hold the securities.

Debt Securities. Each Fund may invest in investment grade debt
securities (other than money market obligations) for the purpose of seeking
capital appreciation. Any percentage limitation on a Fund's ability to invest in
debt securities will not be applicable during periods when the Fund pursues a
temporary defensive strategy as discussed below. Each Fund may invest to a
limited extent in zero coupon securities and government zero coupon securities.
See "Additional Information Concerning Taxes" for a discussion of the tax
consequences to shareholders of a Fund that invests in zero coupon securities.

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<PAGE>

The interest income to be derived may be considered as one factor in
selecting debt securities for investment by the "Adviser." Because the market
value of debt obligations can be expected to vary inversely to changes in
prevailing interest rates, investing in debt obligations may provide an
opportunity for capital appreciation when interest rates are expected to
decline. The success of such a strategy is dependent upon the "Adviser's ability
to forecast accurately changes in interest rates. The market value of debt
obligations may also be expected to vary depending upon, among other factors,
the ability of the issuer to repay principal and interest, any change in
investment rating and general economic conditions.

A security will be deemed to be investment grade if it is rated
within the four highest grades by Moody's or S&P or, if unrated, is determined
to be of comparable quality by the "Adviser." Securities rated in the fourth
highest grade may have speculative characteristics and changes in economic
conditions or other circumstances are more likely to lead to a weakened capacity
to make principal and interest payments than is the case with higher grade
bonds. Subsequent to its purchase by a Fund, an issue of securities may cease to
be rated or its rating may be reduced below the minimum required for purchase by
the Fund. Neither event will require sale of such securities, although the
Adviser will consider such event in its determination of whether the Fund should
continue to hold the securities.

Below Investment Grade Securities. The High Yield and Municipal Bond
Funds have established no rating criteria for the debt securities in which they
may invest.

Below investment grade debt securities may be rated as low as C by
Moody's or D by S&P, or be deemed by the Adviser to be of equivalent quality.
Securities that are rated C by Moody's are the lowest rated class and can be
regarded as having extremely poor prospects of ever attaining any real
investment standing. A security rated D by S&P is in default or is expected to
default upon maturity or payment date. Investors should be aware that ratings
are relative and subjective and are not absolute standards of quality.

Below investment grade securities (commonly referred to as "junk
bonds"), (i) will likely have some quality and protective characteristics that,
in the judgment of the rating organizations, are outweighed by large
uncertainties or major risk exposures to adverse conditions and (ii) are
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligation. The market
values of certain of these securities also tend to be more sensitive to
individual corporate developments and changes in economic conditions than
investment grade securities. In addition, these securities generally present a
higher degree of credit risk. The risk of loss due to default is significantly
greater because these securities generally are unsecured and frequently are
subordinated to the prior payment of senior indebtedness.

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<PAGE>

While the market values of medium- and lower-rated securities and
unrated securities of comparable quality tend to react less to fluctuations in
interest rate levels than do those of higher-rated securities, the market values
of certain of these securities also tend to be more sensitive to individual
corporate developments and changes in economic conditions than higher-quality
securities. In addition, medium- and lower-rated securities and comparable
unrated securities generally present a higher degree of credit risk. Issuers of
medium- and lower-rated securities and unrated securities are often highly
leveraged and may not have more traditional methods of financing available to
them so that their ability to service their obligations during an economic
downturn or during sustained periods of rising interest rates may be impaired.
The risk of loss due to default by such issuers is significantly greater because
medium- and lower-rated securities and unrated securities generally are
unsecured and frequently are subordinated to the prior payment of senior
indebtedness.

An economic recession could disrupt severely the market for such
securities and may adversely affect the value of such securities and the ability
of the issuers of such securities to repay principal and pay interest thereon. A
Fund may have difficulty disposing of certain of these securities because there
may be a thin trading market. Because there is no established retail secondary
market for many of these securities, the Funds anticipate that these securities
could be sold only to a limited number of dealers or institutional investors. To
the extent a secondary trading market for these securities does exist, it
generally is not as liquid as the secondary market for higher-rated securities.
The lack of a liquid secondary market, as well as adverse publicity and investor
perception with respect to these securities, may have an adverse impact on
market price and a Fund's ability to dispose of particular issues when necessary
to meet the Fund's liquidity needs or in response to a specific economic event
such as a deterioration in the creditworthiness of the issuer. The lack of a
liquid secondary market for certain securities also may make it more difficult
for a Fund to obtain accurate market quotations for purposes of valuing the Fund
and calculating its net asset value.

The market value of securities in medium- and lower-rated categories
is also more volatile than that of higher quality securities. Factors adversely
impacting the market value of these securities will adversely impact a Fund's
net asset value. A Fund will rely on the judgment, analysis and experience of
the Adviser in evaluating the creditworthiness of an issuer. In this evaluation,
in addition to relying on ratings assigned by Moody's or S&P, the Adviser will
take into consideration, among other things, the issuer's financial resources,
its sensitivity to economic conditions and trends, its operating history, the
quality of the issuer's management and regulatory matters. Interest rate trends
and specific developments which may affect individual issuers will also be
analyzed. Subsequent to its purchase by a Fund, an issue of securities may cease
to be rated or its rating may be reduced. Neither event will require sale of
such securities, although the Adviser will consider such event in its
determination of whether a Fund should continue to hold the securities.
Normally, medium- and lower-rated and comparable unrated securities are not
intended for short-term investment. A Fund may

19
<PAGE>

incur additional expenses to the extent it is required to seek recovery upon a
default in the payment of principal or interest on its portfolio holdings of
such securities. At times, adverse publicity regarding lower-rated securities
has depressed the prices for such securities to some extent.

Mortgage-Backed Securities. Mortgage-backed securities issued or
guaranteed by the U.S. government, its agencies or instrumentalities include
those issued by GNMA, FNMA and FHLMC. Non-government issued mortgage-backed
securities may offer higher yields than those issued by government entities, but
may be subject to greater price fluctuations. Mortgage-backed securities
represent direct or indirect participations in, or are secured by and payable
from, mortgage loans secured by real property. The mortgages backing these
securities include, among other mortgage instruments, conventional 30-year
fixed-rate mortgages, 15-year fixed-rate mortgages, graduated payment mortgages
and adjustable rate mortgages. Although there may be government or private
guarantees on the payment of interest and principal of these securities, the
guarantees do not extend to the securities' yield or value, which are likely to
vary inversely with fluctuations in interest rates, nor do the guarantees extend
to the yield or value of the Fund's shares. These securities generally are
"pass-through" instruments, through which the holders receive a share of all
interest and principal payments from the mortgages underlying the securities,
net of certain fees. Some mortgage-backed securities, such as collateralized
mortgage obligations ("CMOs"), make payments of both principal and interest at a
variety of intervals; others make semiannual interest payments at a
predetermined rate and repay principal at maturity (like a typical bond).

Yields on pass-through securities are typically quoted by investment
dealers and vendors based on the maturity of the underlying instruments and the
associated average life assumption. The average life of pass-through pools
varies with the maturities of the underlying mortgage loans. A pool's term may
be shortened by unscheduled or early payments of principal on the underlying
mortgages. The occurrence of mortgage prepayments is affected by various
factors, including the level of interest rates, general economic conditions, the
location, scheduled maturity and age of the mortgage and other social and
demographic conditions. Because prepayment rates of individual pools vary
widely, it is not possible to predict accurately the average life of a
particular pool. At present, pools, particularly those with loans with other
maturities or different characteristics, are priced on an assumption of average
life determined for each pool. In periods of falling interest rates, the rate of
prepayment tends to increase, thereby shortening the actual average life of a
pool of mortgage-related securities. Conversely, in periods of rising rates the
rate of prepayment tends to decrease, thereby lengthening the actual average
life of the pool. However, these effects may not be present, or may differ in
degree, if the mortgage loans in the pools have adjustable interest rates or
other special payment terms, such as a prepayment charge. Actual prepayment
experience may cause the yield of mortgage-backed securities to differ from the
assumed average life yield. Reinvestment of prepayments may occur at higher or
lower interest rates than the

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<PAGE>

original investment, thus affecting the Funds' yield. In addition,
mortgage-backed securities issued by certain non-government entities and
collateralized mortgage obligations may be less marketable than other
securities.

The rate of interest on mortgage-backed securities is lower than the
interest rates paid on the mortgages included in the underlying pool due to the
annual fees paid to the servicer of the mortgage pool for passing through
monthly payments to certificate holders and to any guarantor, such as GNMA, and
due to any yield retained by the issuer. Actual yield to the holder may vary
from the coupon rate, even if adjustable, if the mortgage-backed securities are
purchased or traded in the secondary market at a premium or discount. In
addition, there is normally some delay between the time the issuer receives
mortgage payments from the servicer and the time the issuer makes the payments
on the mortgage-backed securities, and this delay reduces the effective yield to
the holder of such securities.

Asset-Backed Securities. Asset-backed securities issued or
guaranteed by the U.S. government, its agencies or instrumentalities include
those issued by the Student Loan Marketing Association. Asset-backed securities
represent participations in, or are secured by and payable from, assets such as
motor vehicle installment sales, installment loan contracts, leases of various
types of real and personal property and receivables from revolving credit
(credit card) agreements. Such assets are securitized through the use of trusts
and special purpose corporations. Payments or distributions of principal and
interest may be guaranteed up to certain amounts and for a certain time period
by a letter of credit or a pool insurance policy issued by a financial
institution unaffiliated with the trust or corporation.

Asset-backed securities present certain risks that are not presented
by other securities in which the Funds may invest. Automobile receivables
generally are secured by automobiles. Most issuers of automobile receivables
permit the loan servicers to retain possession of the underlying obligations. If
the servicer were to sell these obligations to another party, there is a risk
that the purchaser would acquire an interest superior to that of the holders of
the asset-backed securities. In addition, because of the large number of
vehicles involved in a typical issuance and technical requirements under state
laws, the trustee for the holders of the automobile receivables may not have a
proper security interest in the underlying automobiles. Therefore, there is the
possibility that recoveries on repossessed collateral may not, in some cases, be
available to support payments on these securities. Credit card receivables are
generally unsecured, and the debtors are entitled to the protection of a number
of state and federal consumer credit laws, many of which give such debtors the
right to set off certain amounts owed on the credit cards, thereby reducing the
balance due. In addition, there is no assurance that the security interest in
the collateral can be realized. The remaining maturity of any asset-backed
security a Fund invests in will be 397 days or less. A Fund may purchase
asset-backed securities that are unrated.

Loan Participations and Assignments. Each Fund may invest in fixed
and floating rate loans ("Loans") arranged through private negotiations between
a foreign government (a "Borrower") and one or more financial institutions
("Lenders"). The

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<PAGE>

majority of each Fund's investments in Loans are expected to be in the form of
participations in Loans ("Participations") and assignments of portions of Loans
from third parties ("Assignments"). Each Fund currently anticipates that it will
not invest more than 5% of its net assets in Loan Participations and
Assignments.

Participations typically will result in the Fund having a
contractual relationship only with the Lender, not with the Borrower. The Fund
will have the right to receive payments of principal, interest and any fees to
which it is entitled only from the Lender selling the Participation and only
upon receipt by the Lender of the payments from the Borrower. In connection with
purchasing Participations, the Fund generally will have no right to enforce
compliance by the Borrower with the terms of the loan agreement relating to the
Loan, nor any rights of set-off against the Borrower, and the Fund may not
directly benefit from any collateral supporting the Loan in which it has
purchased the Participation. As a result, the Fund will assume the credit risk
of both the Borrower and the Lender that is selling the Participation. In the
event of the insolvency of the Lender selling a Participation, the Fund may be
treated as a general creditor of the Lender and may not benefit from any set-off
between the Lender and the Borrower. The Fund will acquire Participations only
if the Lender interpositioned between the Fund and the Borrower is determined by
the Adviser to be creditworthy.

Structured Notes, Bonds or Debentures. Typically, the value of the
principal and/or interest on these instruments is determined by reference to
changes in the value of specific currencies, interest rates, commodities,
indexes or other financial indicators (the "Reference") or the relevant change
in two or more References. The interest rate or the principal amount payable
upon maturity or redemption may be increased or decreased depending upon changes
in the applicable Reference. The terms of the structured securities may provide
that in certain circumstances no principal is due at maturity and, therefore,
may result in the loss of a Fund's entire investment. The value of structured
securities may move in the same or the opposite direction as the value of the
Reference, so that appreciation of the Reference may produce an increase or
decrease in the interest rate or value of the security at maturity. In addition,
the change in interest rate or the value of the security at maturity may be a
multiple of the change in the value of the Reference so that the security may be
more or less volatile than the Reference, depending on the multiple.
Consequently, structured securities may entail a greater degree of market risk
and volatility than other types of debt obligations.

Collateralized Mortgage Obligations. The Funds may also purchase
collateralized mortgage obligations CMOs issued by a U.S. Government
instrumentality which are backed by a portfolio of mortgages or mortgage-backed
securities. The issuer's obligations to make interest and principal payments is
secured by the underlying portfolio of mortgages or mortgage-backed securities.
Generally, CMOs are partitioned into several classes with a ranked priority by
which the classes of obligations are redeemed. These securities may be
considered mortgage derivatives. The Funds may only invest in CMOs

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<PAGE>

issued by FHLMC, FNMA or other agencies of the U.S. Government or
instrumentalities established or sponsored by the U.S. Government.

CMOs provide an investor with a specified interest in the cash flow
of a pool of underlying mortgages or other mortgage-related securities. Issuers
of CMOs frequently elect to be taxed as pass-through entities known as real
estate mortgage investment conduits ("REMICs"). CMOs are issued in multiple
classes, each with a specified fixed or floating interest rate and a final
distribution date. Coupons can be fixed or variable. If variable, they can move
with or in the reverse direction of interest rates. The coupon changes could be
a multiple of the actual rate change and there may be limitations on what the
coupon can be. Cash flows of pools can also be divided into a principal only
class and an interest only class. In this case the principal only class will
only receive principal cash flows from the pool. All interest cash flows go to
the interest only class. The relative payment rights of the various CMO classes
may be structured in many ways, either sequentially or by other rules of
priority. Generally, payments of principal are applied to the CMO classes in the
order of their respective stated maturities, so that no principal payments will
be made on a CMO class until all other classes having an earlier stated maturity
date are paid in full. Sometimes, however, CMO classes are "parallel pay," i.e.
payments of principal are made to two or more classes concurrently. CMOs may
exhibit more or less price volatility and interest rate risk than other types of
mortgaged-related obligations.

The CMO structure returns principal to investors sequentially,
rather than according to the pro rata method of a pass-through. In the
traditional CMO structure, all classes (called tranches) receive interest at a
stated rate, but only one class at a time receives principal. All principal
payments received on the underlying mortgages or securities are first paid to
the "fastest pay" tranche. After this tranche is retired, the next tranche in
the sequence becomes the exclusive recipient of principal payments. This
sequential process continues until the last tranche is retired. In the event of
sufficient early repayments on the underlying mortgages, the "fastest-pay"
tranche generally will be retired prior to its maturity. Thus the early
retirement of a particular tranche of a CMO held by a Fund would have the same
effect as the prepayment of mortgages underlying a mortgage-backed pass-through
security as described above.

Zero Coupon Securities. Each Fund may invest in "zero coupon" U.S.
Treasury, foreign government and U.S. and foreign corporate debt securities,
which are bills, notes and bonds that have been stripped of their unmatured
interest coupons and receipts or certificates representing interests in such
stripped debt obligations and coupons. Each Fund currently anticipates that zero
coupon securities will not exceed 5% of its net assets.

A zero coupon security pays no interest to its holder prior to
maturity. Accordingly, such securities usually trade at a deep discount from
their face or par value and will be subject to greater fluctuations of market
value in response to changing interest rates than debt obligations of comparable
maturities that make current distributions of interest. The Funds anticipate
that they will not normally hold zero

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<PAGE>

coupon securities to maturity. Federal tax law requires that a holder of a zero
coupon security accrue a portion of the discount at which the security was
purchased as income each year, even though the holder receives no interest
payment on the security during the year.

Futures Activities. Each Fund may enter into futures contracts (and
related options) on securities, securities indices, foreign currencies and
interest rates, and purchase and write (sell) related options traded on
exchanges designated by the Commodity Futures Trading Commission (the "CFTC") or
consistent with CFTC regulations, on foreign exchanges. These futures contracts
are standardized contracts for the future delivery of a non-U.S. currency, an
interest rate sensitive security or, in the case of index futures contracts or
certain other futures contracts, a cash settlement with reference to a specified
multiplier times the change in the index. An option on a futures contract gives
the purchaser the right, in return for the premium paid, to assume a position in
a futures contract.

These transactions may be entered into for "bona fide hedging"
purposes as defined in CFTC regulations and other permissible purposes including
hedging against changes in the value of portfolio securities due to anticipated
changes in currency values, interest rates and/or market conditions and
increasing return. Aggregate initial margin and premiums (discussed below)
required to establish positions other than those considered to be "bona fide
hedging" by the CFTC will not exceed 5% of the Fund's net asset value after
taking into account unrealized profits and unrealized losses on any such
contracts it has entered into Each Fund reserves the right to engage in
transactions involving futures contracts and options on futures contracts to the
extent allowed by CFTC regulations in effect from time to time and in accordance
with the Fund's policies. There is no overall limit on the percentage of Fund
assets that may be at risk with respect to futures activities.

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

No consideration is paid or received by a Fund upon entering into a
futures contract. Instead, the Fund is required to deposit in a segregated
account with its custodian an amount of cash or liquid securities acceptable to
the broker, equal to approximately 1% to 10% of the contract amount (this amount
is subject to change by the

24
<PAGE>

exchange on which the contract is traded, and brokers may charge a higher
amount). This amount is known as "initial margin" and is in the nature of a
performance bond or good faith deposit on the contract which is returned to the
Fund upon termination of the futures contract, assuming all contractual
obligations have been satisfied. The broker will have access to amounts in the
margin account if the Fund fails to meet its contractual obligations. Subsequent
payments, known as "variation margin," to and from the broker, will be made
daily as the currency, financial instrument or securities index underlying the
futures contract fluctuates, making the long and short positions in the futures
contract more or less valuable, a process known as "marking-to-market." A Fund
will also incur brokerage costs in connection with entering into futures
transactions.

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

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

An option on a currency, interest rate or securities index futures
contract, as contrasted with the direct investment in such a contract, gives the
purchaser the right,

25
<PAGE>

in return for the premium paid, to assume a position in a futures contract at a
specified exercise price at any time prior to the expiration date of the option.
The writer of the option is required upon exercise to assume an offsetting
futures position (a short position if the option is a call and a long position
if the option is a put). Upon exercise of an option, the delivery of the futures
position by the writer of the option to the holder of the option will be
accompanied by delivery of the accumulated balance in the writer's futures
margin account, which represents the amount by which the market price of the
futures contract exceeds, in the case of a call, or is less than, in the case of
a put, the exercise price of the option on the futures contract. The potential
loss related to the purchase of an option on a futures contract is limited to
the premium paid for the option (plus transaction costs). Because the value of
the option is fixed at the point of sale, there are no daily cash payments by
the purchaser to reflect changes in the value of the underlying contract;
however, the value of the option does change daily and that change would be
reflected in the net asset value of each Fund.

Currency Exchange Transactions. The value in U.S. dollars of the
assets of the Funds that are invested in foreign securities may be affected
favorably or unfavorably by a variety of factors not applicable to investment in
U.S. securities, and the Funds may incur costs in connection with conversion
between various currencies. Currency exchange transactions may be from any
non-U.S. currency into U.S. dollars or into other appropriate currencies. Each
Fund will conduct its currency exchange transactions (i) on a spot (i.e., cash)
basis at the rate prevailing in the currency exchange market, (ii) through
entering into futures contracts or options on such contracts (as described
above), (iii) through entering into forward contracts to purchase or sell
currency or (iv) by purchasing exchange-traded currency options. The funds may
engage in currency exchange transactions for both hedging payable and to reverse
total return, which may involve speculation.

Forward Currency Contracts. Each Fund may use forward currency
contracts to protect against uncertainty in the level of future exchange rates
and to enhance total return. The Funds will not invest more than 50% of their
respective total assets in such contracts for the purpose of enhancing total
return. There is no limit on the amount of assets that the Funds may invest in
such transactions for hedging purposes.

The Funds may also enter into forward currency contracts with respect to
specific transactions. For example, when a Fund anticipates the receipt in a
foreign currency of interest payments on a security that it holds, a Fund may
desire to "lock-in" the U.S. dollar price of the security or the U.S. dollar
equivalent of such payment, as the case may be, by entering into a forward
contract for the purchase or sale, for a fixed amount of U.S. dollars, of the
amount of foreign currency involved in the underlying transaction. A Fund will
thereby be able to protect itself against a possible loss resulting from an
adverse change in the relationship

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<PAGE>

between the currency exchange rates during the period between the date on which
the security is purchased or sold, or on which the payment is declared, and the
date on which such payments are made or received.

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

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

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

Currency Hedging. Each Fund's currency hedging will be limited to
hedging involving either specific transactions or portfolio positions.
Transaction hedging is the purchase or sale of forward currency with respect to
specific receivables or payables of a Fund generally accruing in connection with
the purchase or sale of its portfolio securities. Position hedging is the sale
of forward currency with respect to portfolio security positions. No Fund may
position hedge to an extent greater than the aggregate market value (at the time
of entering into the hedge) of the hedged securities.

A decline in the U.S. dollar value of a foreign currency in which a
Fund's securities are denominated will reduce the U.S. dollar value of the
securities, even if their value in the foreign currency remains constant. The
use of currency hedges does not eliminate fluctuations in the underlying prices
of the securities, but it does establish a rate of exchange that can be achieved
in the future. For example, in order to protect against diminutions in the U.S.
dollar value of non-dollar denominated securities it holds, a Fund may purchase
foreign currency put options. If the value of the foreign currency does decline,
the Fund will have the right to sell the currency for a fixed amount in dollars
and will thereby offset, in whole or in part, the adverse effect on the U.S.
dollar

27
<PAGE>

value of its securities that otherwise would have resulted. Conversely, if a
rise in the U.S. dollar value of a currency in which securities to be acquired
are denominated is projected, thereby potentially increasing the cost of the
securities, the Fund may purchase call options on the particular currency. The
purchase of these options could offset, at least partially, the effects of the
adverse movements in exchange rates. The benefit to a Fund derived from
purchases of currency options, like the benefit derived from other types of
options, will be reduced by premiums and other transaction costs. Because
transactions in currency exchange are generally conducted on a principal basis,
no fees or commissions are generally involved. Currency hedging involves some of
the same risks and considerations as other transactions with similar
instruments. Although currency hedges limit the risk of loss due to a decline in
the value of a hedged currency, at the same time, they also limit any potential
gain that might result should the value of the currency increase. If a
devaluation is generally anticipated, a Fund may not be able to contract to sell
a currency at a price above the devaluation level it anticipates.

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

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

In hedging transactions based on an index, whether a Fund will
realize a gain or loss depends upon movements in the level of securities prices
in the stock market generally or, in the case of certain indexes, in an industry
or market segment, rather than movements in the price of a particular security.
The risk of imperfect correlation

28
<PAGE>

increases as the composition of a Fund's portfolio varies from the composition
of the index. In an effort to compensate for imperfect correlation of relative
movements in the hedged position and the hedge, a Fund's hedge positions may be
in a greater or lesser dollar amount than the dollar amount of the hedged
position. Such "over hedging" or "under hedging" may adversely affect the Fund's
net investment results if market movements are not as anticipated when the hedge
is established. Securities index futures transactions may be subject to
additional correlation risks. First, all participants in the futures market are
subject to margin deposit and maintenance requirements. Rather than meeting
additional margin deposit requirements, investors may close futures contracts
through offsetting transactions which would distort the normal relationship
between the securities index and futures markets. Secondly, from the point of
view of speculators, the deposit requirements in the futures market are less
onerous than margin requirements in the securities market. Therefore, increased
participation by speculators in the futures market also may cause temporary
price distortions. Because of the possibility of price distortions in the
futures market and the imperfect correlation between movements in the securities
index and movements in the price of securities index futures, a correct forecast
of general market trends by the Adviser still may not result in a successful
hedging transaction.

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

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

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<PAGE>

A Fund may make a short sale as a hedge when it believes that the
price of a security may decline, causing a decline in the value of a security
owned by the Fund (or a security convertible or exchangeable for such security).
In such case, any future losses in a Fund's long position should be offset by a
gain in the short position and, conversely, any gain in the long position should
be reduced by a loss in the short position. The extent to which such gains or
losses are reduced will depend upon the amount of the security sold short
relative to the amount a Fund owns. There will be certain additional
transactions costs associated with short sales against the box, but a Fund will
endeavor to offset these costs with the income from the investment of the cash
proceeds of short sales.

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

The Funds do not presently intend to invest more than 5% of net
assets in short sales against the box.

Section 4(2) Paper. "Section 4(2) paper" is commercial paper which
is issued in reliance on the "private placement" exemption from registration
which is afforded by Section 4(2) of the Securities Act of 1933. Section 4(2)
paper is restricted as to disposition under the federal securities laws and is
generally sold to institutional investors such as the Funds which agree that
they are purchasing the paper for investment and not with a view to public
distribution. Any resale by the purchaser must be in an exempt transaction.
Section 4(2) paper normally is resold to other institutional investors through
or with the assistance of investment dealers who make a market in the Section
4(2) paper, thereby providing liquidity. See "Illiquid Securities" above. See
Appendix "A" for a list of commercial paper ratings.

Supplemental Investment Objectives and Policies -- International Growth, U.S.
Equity and Focus Funds

Rights Offerings and Purchase Warrants. Rights offerings and
purchase warrants are privileges issued by a corporation which enable the owner
to subscribe to and purchase a specified number of shares of the corporation at
a specified price during a specified period of time. Subscription rights
normally have a short lifespan to expiration. The purchase of rights or warrants
involves the risk that a Fund could lose the purchase value of a right or
warrant if the right to subscribe to additional shares is not executed prior to
the rights and warrants expiration. Also, the purchase of rights and/or warrants
involves the risk that the effective price paid for the right and/or warrant
added to the subscription price of the related security may exceed the value of
the subscribed security's market price such as when there is no movement in the
level of the underlying security.

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<PAGE>

Supplemental Investment Objectives and Policies -- Municipal Bond Fund

Opinions relating to the validity of Municipal Obligations and to the
exemption of interest thereon from federal income tax are rendered by bond
counsel to the respective issuers at the time of issuance, and opinions relating
to the validity of and the tax-exempt status of payments received by the Fund
from tax-exempt derivative securities are rendered by counsel to the respective
sponsors of such securities. The Fund and the Adviser will rely on such opinions
and will not review independently the underlying proceedings relating to the
issuance of Municipal Obligations, the creation of any tax-exempt derivative
securities, or the basis for such opinions.

Certain Municipal Obligations are classified as private activity
bonds. Interest on private activity bonds is tax-exempt only if the bonds fall
within certain defined categories of qualified private activity bonds and meet
the requirements specified in those respective categories. In addition, interest
on certain private activity bonds ("Alternative Minimum Tax Securities") is a
specific preference item under the federal alternative minimum tax. Investors
should also be aware of the possibility of state and local alternative minimum
or minimum income tax liability on interest from Alternative Minimum Tax
Securities.

Although the Municipal Bond Fund may invest 25% or more of its net
assets in Municipal Obligations the interest on which is paid solely from
revenues of similar projects, and may invest up to 40% of its total assets in
private activity bonds when added together with any taxable investments held by
the Municipal Bond Fund, it will not do so unless in the opinion of the Adviser
the investment is warranted. To the extent the Municipal Bond Fund's assets are
invested in Municipal Obligations payable from the revenues of similar projects
or are invested in private activity bonds, the Municipal Bond Fund will be
subject to the peculiar risks presented by the laws and economic conditions
relating to such projects and bonds to a greater extent than it would be if its
assets were not so invested.

Supplemental Investment Objectives And Policies -- Long-Short Neutral Fund

Short Sales. The Long-Short Neutral Fund will seek to realize
additional gains through short sales. Short sales are transactions in which the
Fund sells a security it does not own, in anticipation of a decline in the value
of that security relative to the long positions held by the Fund. To complete
such a transaction, the Fund must borrow the security from a broker or other
institution to make delivery to the buyer. The Fund then is obligated to replace
the security borrowed by purchasing it at the market price at or prior to the
time of replacement. The price at such time may be more or less than the price
at which the security was sold by the Fund. Until the security is replaced, the
Fund is required to repay the lender any dividends or interest that accrue
during the period of the loan. To borrow the security, the Fund also may be
required to pay a premium, which would increase the cost of the security sold.
The net proceeds of the short sale will be retained by the broker (or by the
Fund's custodian in a special custody account), to

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<PAGE>

the extent necessary to meet margin requirements, until the short position is
closed out. The Fund also will incur transaction costs in effecting short sales.

The Fund will incur a loss as a result of the short sale if the
price of the security increases between the date of the short sale and the date
on which the Fund replaces the borrowed security. The Fund will realize a gain
if the security declines in price between those dates. The amount of any gain
will be decreased, and the amount of any loss increased, by the amount of the
premium, dividends, interest or expenses the Fund may be required to pay in
connection with a short sale. An increase in the value of a security sold short
by the Fund over the price at which it was sold short will result in a loss to
the Fund, and there can be no assurance that the Fund will be able to close out
the position at any particular time or at an acceptable price. Although the
Fund's gain is limited to the amount at which it sold a security short, its
potential loss is limited only by the maximum attainable price of the security
less the price at which the security was sold. Until the Fund replaces a
borrowed security, it will maintain in a segregated account at all times cash,
U.S. Government Securities, or other liquid securities in an amount which, when
added to any amount deposited with a broker as collateral will at least equal
the current market value of the security sold short. Depending on arrangements
made with brokers, the Fund may not receive any payments (including interest) on
collateral deposited with them. The Fund will not make a short sale if, after
giving effect to such sale, the market value of all securities sold short
exceeds 100% of the value of the Fund's net assets.

INVESTMENT RESTRICTIONS

The following investment limitations of each Fund may not be changed
without the affirmative vote of the holders of a majority of a Fund's
outstanding shares ("Fundamental Restrictions"). Such majority is defined as the
lesser of (i) 67% or more of the shares present at the meeting, if the holders
of more than 50% of the outstanding shares of the Fund are present or
represented by proxy, or (ii) more than 50% of the outstanding shares.

If a percentage restriction (other than the percentage limitation
set forth in No. 1 of each of the Funds) 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
Funds' assets will not constitute a violation of such restriction.

1. Borrow money, except from banks, and only if after such borrowing
there is asset coverage of at least 300% for all borrowings of the Fund; or
mortgage, pledge or hypothecate any of its assets except in connection with any
such borrowing and in amounts not in excess of the lesser of the dollar amounts
borrowed or 33 1/3% of the value of the Fund's total assets at the time of such
borrowing (for the Long-Short Neutral Fund only, provided that: (a) short sales
and related borrowings of securities are not subject to this

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<PAGE>

restriction; and, (b) for the purposes of this restriction, collateral
arrangements with respect to options, short sales, stock index, interest rate,
currency or other futures, options on futures contracts, collateral arrangements
with respect to initial and variation margin and collateral arrangements with
respect to swaps and other derivatives are not deemed to be a pledge or other
encumbrance of assets).

2. Issue any senior securities, except as permitted under the 1940
Act;

3. Act as an underwriter of securities within the meaning of the
Securities Act, except insofar as it might be deemed to be an underwriter upon
disposition of certain portfolio securities acquired within the limitation on
purchases of restricted securities;

4. Purchase or sell real estate (including real estate limited
partnership interests), provided that a Fund may invest in securities secured by
real estate or interests therein or issued by companies that invest in real
estate or interests therein;

5. Purchase or sell commodities or commodity contracts, except that
a Fund may deal in forward foreign exchange transactions between currencies of
the different countries in which it may invest and purchase and sell stock index
and currency options, stock index futures, financial futures and currency
futures contracts and related options on such futures;

6. Make loans, except through loans of portfolio instruments and
repurchase agreements, provided that for purposes of this restriction the
acquisition of bonds, debentures or other debt instruments or interests therein
and investment in government obligations, Loan Participations and Assignments,
short-term commercial paper, certificates of deposit and bankers' acceptances
shall not be deemed to be the making of a loan; and

7. Purchase any securities, which would cause 25% or more of the
value of the Fund's total assets at the time of purchase to be invested in the
securities of one or more issuers conducting their principal business activities
in the same industry, provided that (a) there is no limitation with respect to
(i) instruments 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 subdivisions, and (ii)
repurchase agreements secured by the instruments described in clause (i); (b)
wholly-owned finance companies will be considered to be in the industries of
their parents if their activities are primarily related to financing the
activities of the parents; and (c) utilities will be divided according to their
services, for example, gas, gas transmission, electric and gas, electric and
telephone will each be considered a separate industry.

For purposes of Investment Limitation No. 1, collateral arrangements
with respect to, if applicable, the writing of options, futures contracts,
options on futures contracts, forward currency contracts and collateral
arrangements with respect to initial and variation margin are not deemed to be a
pledge of assets and neither such arrangements nor the purchase

33
<PAGE>

or sale of futures or related options are deemed to be the issuance of a senior
security for purposes of Investment Limitation No. 2.

In addition to the fundamental investment limitations specified
above, a Fund may not:

1. Make investments for the purpose of exercising control or
management, but investments by a Fund in wholly-owned investment entities
created under the laws of certain countries will not be deemed the making
of investments for the purpose of exercising control or management;

2. Purchase securities on margin, except for short-term credits
necessary for clearance of portfolio transactions, and except that a Fund
may make margin deposits in connection with its use of options, futures
contracts, options on futures contracts and forward contracts;

3. Purchase or sell interests in mineral leases, oil, gas or other
mineral exploration or development programs, except that a Fund may invest
in securities issued by companies that engage in oil, gas or other mineral
exploration or development activities;

4. (Long-Short Neutral Fund only) Purchase or retain the securities
of any issuer, if those individual officers and directors of the Fund, the
Adviser or any subsidiary thereof each owning beneficially more than 1/2
of 1% of the securities of such issuer own in the aggregate more than 5%
of the securities of such issuer; and

5. (Long-Short Neutral Fund only) Acquire any securities registered
open-end investment companies or registered unit investment trusts in
reliance on Section 12(d)(1)(F) or (G) of the 1940 Act.

The policies set forth above are not fundamental and thus may be
changed by the Funds' Board of Directors without a vote of the shareholders.

Securities held by a Fund generally may not be purchased from, sold
or loaned to the Adviser or its affiliates or any of their directors, officers
or employees, acting as principal, unless pursuant to a rule or exemptive order
under the 1940 Act.

PORTFOLIO VALUATION

The following is a description of the procedures used by the Funds
in valuing their assets.

Securities listed on a U.S. securities exchange (including
securities traded through the Nasdaq National Market System) or foreign
securities exchange or traded in

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<PAGE>

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

Trading in certain foreign countries is completed at various times
prior to the close of business on each business day in New York (i.e., a day on
which The New York Stock Exchange, Inc. (the "NYSE") is open for trading). In
addition, securities trading in a particular country or countries may not take
place on all business days in New York. Furthermore, trading takes place in
various foreign markets on days which are not business days in New York and days
on which the Funds' net asset value is not calculated. As a result, calculation
of the Funds' net asset value does not take place contemporaneously with the
determination of the prices of the majority of the Funds' securities. All assets
and liabilities initially expressed in foreign currency values will be converted
into U.S. dollar values at the prevailing exchange rate as quoted by a Pricing
Service as of noon (Eastern time). If such quotations are not available, the
rate of exchange will be determined in good faith pursuant to consistently
applied procedures established by the Boards. Although the Long-Short Neutral
Fund does not invest directly in foreign securities, it invests in American
Depositary Receipts, the value of which depends on the underlying foreign
security.

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<PAGE>

PORTFOLIO TRANSACTIONS

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

In selecting broker-dealers, the Adviser does business exclusively
with those broker-dealers that, in the Adviser's judgment, can be expected to
provide the best service. The service has two main aspects: the execution of buy
and sell orders and the provision of research. In negotiating commissions with
broker-dealers, the Adviser will pay no more for execution and research services
that it considers either, or both together, to be worth. The worth of execution
service depends on the ability of the broker-dealer to minimize costs of
securities purchased and to maximize prices obtained for securities sold. The
worth of research depends on its usefulness in optimizing portfolio composition
and its changes over time. Commissions for the combination of execution and
research services that meet the Adviser's standards may be higher than for
execution services alone or for services that fall below the Adviser's
standards. The Adviser believes that these arrangements may benefit all clients
and not necessarily only the accounts in which the particular investment
transactions occur that are so executed. Further, the Adviser will only receive
brokerage or research service in connection with securities transactions that
are consistent with the "safe harbor" provisions of Section 28(e) of the
Securities Exchange Act of 1934 when paying such higher commissions.

All orders for transactions in securities or options on behalf of a
Fund are placed by the Adviser with broker-dealers that it selects, including
Credit Suisse Asset Management Securities and affiliates of Credit Suisse Group
("Credit Suisse"). A Fund

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<PAGE>

may utilize Credit Suisse Asset Management Securities, Inc. ("CSAMSI") or
affiliates of Credit Suisse in connection with a purchase or sale of securities
when the Adviser believes that the charge for the transaction does not exceed
usual and customary levels and when doing so is consistent with guidelines
adopted by the Board.

Investment decisions for the Funds concerning specific portfolio
securities are made independently from those for other clients advised by the
Adviser. Such other investment clients may invest in the same securities as the
Funds. 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 the
Adviser believes to be equitable to each client, including the Funds. In some
instances, this investment procedure may adversely affect the price paid or
received by the Funds or the size of the position obtained or sold for the
Funds. To the extent permitted by law, the Adviser 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.

Transactions for each of the Funds may be effected on foreign
securities exchanges. In transactions for securities not actively traded on a
foreign securities exchange, the Funds will deal directly with the dealers who
make a market in the securities involved, except in those circumstances where
better prices and execution are available elsewhere. Such dealers usually are
acting as principal for their own account. On occasion, securities may be
purchased directly from the issuer. Such portfolio securities are generally
traded on a net basis and do not normally involve brokerage commissions.
Securities firms may receive brokerage commissions on certain portfolio
transactions, including options, futures and options on futures transactions and
the purchase and sale of underlying securities upon exercise of options.

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

For the fiscal years ended August 31, the Funds have paid brokerage
commissions as follows:

37
<PAGE>

August 31, 1999

Fund Brokerage Commission
- ---- --------------------

International Growth $5,207,753
U.S. Equity $ 84,295
U.S. Fixed Income $ 62,630
Global Income $ 4,476
High Yield $ 112,134
Municipal Bond N/A
Focus $ 142,853
Long-Short Neutral $ 214,482

August 31, 1998

BEA Fund Brokerage Commission
- -------- --------------------

International Equity $3,481,661
U.S. Core Equity $ 352,567
U.S. Core Fixed Income $ 12,023
Strategic Global Fixed Income $ 678
High Yield $ 250
Municipal Bond N/A
Focus $ 17,675
Long-Short Neutral $ 3,790

38
<PAGE>

August 31, 1997

BEA Fund Brokerage Commission
- -------- --------------------

International Equity $5,041,204
U.S. Core Equity $ 181,354
U.S. Core Fixed Income $ 0
Strategic Global Fixed Income $ 0
High Yield $ 0
Municipal Bond N/A
Focus N/A
Long-Short Neutral N/A

In no instance will portfolio securities be purchased from or sold
to CSAM, CSAMSI or Credit Suisse First Boston ("CS First Boston") or any
affiliated person of such companies except as permitted by the SEC exemptive
order or by applicable law. In addition, the Funds will not give preference to
any institutions with whom the Funds enter into distribution or shareholder
servicing agreements concerning the provision of distribution services or
support services.

PORTFOLIO TURNOVER

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

Certain practices that may be employed by the Funds could result in
high portfolio turnover. For example, options on securities may be sold in
anticipation of a decline in the price of the underlying security (market
decline) or purchased in anticipation of a rise in the price of the underlying
security (market rise) and later sold. To the extent that its portfolio is
traded for the short-term, a Fund will be engaged essentially in trading
activities based on short-term considerations affecting the value of an issuer's
stock instead of long-term investments based on fundamental valuation of
securities. Because of this policy, portfolio securities may be sold without
regard to the length of time for which they have been held.

It is not possible to predict the Funds' portfolio turnover rates.
High portfolio turnover rates (100% or more) may result in higher brokerage
commissions, dealer markups or underwriting commissions as well as other
transaction costs. In addition, gains realized from portfolio turnover may be
taxable to shareholders.

<PAGE>

MANAGEMENT OF THE FUNDS

Officers and Board of Directors. The business and affairs of each
Fund are managed by the Board of Directors in accordance with the laws of the
State of Maryland. Each Board elects officers who are responsible for the
day-to-day operations of a Fund and who execute policies authorized by the
Board. Under each Fund's charter, a Board may classify or reclassify any
unissued shares of the Funds 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. A Board may similarly classify or reclassify any class
of its shares into one or more series and, without shareholder approval, may
increase the number of authorized shares of the Funds.

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

Richard H. Francis (67) Director
40 Grosvenor Road Currently retired; Executive Vice
Short Hills, New Jersey 07078 President and Chief Financial Officer
of Pan Am Corporation and Pan American
World Airways, Inc. from 1988 to 1991;
Director of The Infinity Mutual Funds,
BISYS Group Incorporated;
Director/Trustee of other Warburg
Pincus Funds and other CSAM-advised
investment companies.

Jack W. Fritz (72) 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
Warburg Pincus Funds. Director Dean of
Yale School of Management and William
S. Beinecke Professor in the Practice
of International Trade and Finance;
Undersecretary of Commerce for
International Warburg Pincus Funds.

Jeffrey E. Garten (53) Director
Box 208200 Director Dean of Yale School of
Connecticut 06520-8200 Management and William S. Beinecke
Professor in the Practice of
International Trade and Finance;
Undersecretary of Commerce for
International Trade from November 1993
to October 1995; Professor at Columbia
University from September 1992 to
November 1993; New Haven,
Director/Trustee of other Warburg
Pincus Funds.

<PAGE>

James S. Pasman, Jr. (68) Director
29 The Trillium Currently retired; President and Chief
Pittsburgh, Pennsylvania 15238 Operating Officer of National
InterGroup, Inc. from April 1989 to
March 1991; Chairman of Permian Oil Co.
from April 1989 to March 1991; Director
of Education Management Corp., Tyco
International Ltd.; Trustee, BT
Insurance Funds Trust; Director/Trustee
of other Warburg Pincus Funds and other
CSAM-advised investment companies.

William W. Priest* (58) Chairman of the Board
153 East 53rd Street Chairman- Management Committee, Chief
New York, New York 10022 Executive Officer and Managing Director
of CSAM (U.S.) since 1990; Director of
TIG Holdings, Inc.; Director/Trustee of
other Warburg Pincus Funds and other
CSAM-advised investment companies.

Steven N. Rappaport (51) Director
153 East 53rd Street, President of Loanet, Inc. since 1997;
Suite 5500 Executive Vice President of Loanet,
New York, New York 10022 Inc. from 1994 to 1997; Director,
President, North American Operations,
and former Executive Vice President
from 1992 to 1993 of Worldwide
Operations of Metallurg Inc.; Executive
Vice President, Telerate, Inc. from
1987 to 1992; Partner in the law firm
of Hartman & Craven until 1987;
Director/Trustee of other Warburg
Pincus Funds and other CSAM-advised
investment companies.*

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

41
<PAGE>

Alexander B. Trowbridge (69) Director
1317 F Street, N.W., Currently retired; President of
5th Floor Trowbridge Partners, Inc. (business
Washington, DC 20004 consulting) from January 1990 to
November 1996; Director or Trustee of
New England Mutual Life Insurance Co.,
ICOS Corporation (biopharmaceuticals),
IRI International (energy services),
The Rouse Company (real estate
development), Harris Corp. (electronics
and communications equipment), The
Gillette Co. (personal care products)
and Sunoco, Inc. (petroleum refining
and marketing); Director/Trustee of
other Warburg Pincus Funds.

Eugene L. Podsiadlo (42) President
466 Lexington Avenue Managing Director of CSAM; Associated
New York, New York 10017-3147 with CSAM since CSAM acquired the
Funds' predecessor adviser in July
1999; with the predecessor adviser
since 1991; Vice President of Citibank,
N.A. from 1987 to 1991; Officer of
CSAMSI and of other Warburg Pincus
Funds.

Hal Liebes, Esq. (35) Vice President and Secretary
153 East 53rd Street Director and General Counsel of CSAM;
New York, New York 10022 Associated with CSAM since 1995;
Associated with CS First Boston
Investment Management from 1994 to
1995; Associated with Division of
Enforcement, U.S. Securities and
Exchange Commission from 1991 to 1994;
Officer of CSAMSI, other Warburg Pincus
Funds and other CSAM-advised investment
companies.

Michael A. Pignataro (40) Treasurer and Chief Financial Officer
153 East 53rd Street Vice President and Director of Fund
New York, New York 10022 Administration of CSAM; Associated with
CSAM since 1984; Officer of other
Warburg Pincus Funds and other
CSAM-advised investment companies.

42
<PAGE>

Stuart J. Cohen, Esq. (30) Assistant Secretary
466 Lexington Avenue Vice President and Legal Counsel of
New York, New York 10017-3147 CSAM; Associated with CSAM since CSAM
acquired the Funds' predecessor adviser
in July 1999; with the predecessor
adviser since 1997; Associated with the
law firm of Gordon Altman Butowsky
Weitzen Shalov & Wein from 1995 to
1997; Officer of other Warburg Pincus
Funds.

Rocco A. DelGuercio (36) Assistant Treasurer
153 East 53rd Street Assistant Vice President and
New York, New York 10022 Administrative Officer of CSAM;
Associated with CSAM since June 1996;
Assistant Treasurer, Bankers Trust
Corp. -- Fund Administration from March
1994 to June 1996; Mutual Fund
Accounting Supervisor, Dreyfus
Corporation from April 1987 to March
1994; Officer of other Warburg Pincus
Funds and other CSAM-advised investment
companies.

No employee of CSAM, PFPC Inc. ("PFPC") and CSAMSI, the Funds'
co-administrators, or any of their affiliates, receives any compensation from
the Funds for acting as an officer or director of a Fund. Each Director who is
not a director, trustee, officer or employee of CSAM, PFPC, CSAMSI or any of
their affiliates receives an annual fee of $500 and $250 for each meeting of the
Boards 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 for Fiscal Year Ended August 31, 1999

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
All
Investment
High Long-Short Companies in
Name of International U.S. U.S. Fixed Global Yield Municipal Focus Neutral the [CSAM]
Director Growth Fund Equity Fund Income Fund Income Fund Fund Bond Fund Fund Fund Fund Complex*
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
William W. Priest** None None None None None None None None None
- ------------------------------------------------------------------------------------------------------------------------------------
Arnold M. Reichman*** None None None None None None None None None
- ------------------------------------------------------------------------------------------------------------------------------------
Richard N. Cooper**** 1,125 1,125 1,125 1,125 1,125 1,125 1,125 1,125 $73,250
- ------------------------------------------------------------------------------------------------------------------------------------
Richard H. Francis***** 750 750 750 750 750 750 750 750 $16,500
- ------------------------------------------------------------------------------------------------------------------------------------
Jack W. Fritz 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 $73,250
- ------------------------------------------------------------------------------------------------------------------------------------
Jeffrey E. Garten 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 $73,250
- ------------------------------------------------------------------------------------------------------------------------------------
James S. Pasman, Jr.***** 750 750 750 750 750 750 750 750 $16,500
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

43
<PAGE>

* Each Director serves as a Director or Trustee of 51 investment companies
and portfolios in the [Credit Suisse Asset Management Fund Complex].

** Mr. Priest receives compensation as an affiliate of CSAM, and,
accordingly, receives no compensation from any Fund or any other
investment company advised by CSAM.

*** Mr. Reichman resigned as a Director of each Fund effective August 18,
1999.

**** Mr. Cooper resigned as a Director of each Fund effective July 6, 1999.

***** Messrs. Francis, Pasman and Rappaport became Directors of the Funds
effective July 6, 1999.

As of September 30, 1999, Directors and officers as a group, owned
of record less than 1% of each Fund's outstanding Institutional Shares. No
Director or officer owned any of the Funds' outstanding Institutional Shares.

Investment Adviser and Co-Administrators. CSAM, located at 153 East
53rd Street, New York, New York 10022, serves as investment adviser to each Fund
pursuant to a written agreement (the "Advisory Agreement"). CSAM Ltd serves as
sub-investment adviser to the Global Income Fund. CSAM is an indirect
wholly-owned U.S. subsidiary of Credit Suisse. Credit Suisse is a global
financial services company, providing a comprehensive range of banking and
insurance products. Active on every continent and in all major financial
centers, Credit Suisse comprises five business units -- Credit Suisse Asset
Management (asset management); Credit Suisse First Boston (investment banking);
Credit Suisse Private Banking (private banking); Credit Suisse (retail banking);
and Winterthur (insurance). Credit Suisse has approximately $680 billion of
global assets under management and employs approximately 62,000 people
worldwide. The principal business address of Credit Suisse is Paradeplatz 8, CH
8070, Zurich, Switzerland.

CSAM's predecessor, BEA Associates, had rendered advisory services
to the predecessor to the Funds, each a series of The RBB Fund, Inc. (the "BEA
Funds"), pursuant to Investment Advisory Agreements (the "BEA Advisory
Agreements"). CSAM Ltd had not provided sub-investment advisory services to the
BEA Funds. CSAM, together with its predecessor firms, has been engaged in the
investment advisory business for over 60 years.

CSAM has investment discretion for the Funds and will make all
decisions affecting assets in the Funds under the supervision of the Funds'
Board of Directors and in accordance with each Fund's stated policies. The
Adviser will select investments for the Funds and will place purchase and sale
orders on behalf of the Funds. For its services to the International Growth,
U.S. Equity, U.S. Fixed Income, Global Income, High Yield, Municipal Bond and
Focus Funds, CSAM will be paid (before any voluntary waivers or

44
<PAGE>

reimbursements) a monthly fee computed at an annual rate of .80%, .75%, .375%,
.50%, .70%, .70% and, .75% of average daily net assets, respectively. CSAM pays
CSAM Ltd a sub-investment advisory fee out of the fees CSAM receives from the
Global Income Fund.

The Long-Short Neutral Fund pays CSAM a basic management fee,
computed daily and payable monthly, at the annual rate of 1.50% of the average
net assets of the Fund. After the first year of operations, this basic
management fee may be increased or decreased by applying an adjustment formula
(the "Performance Adjustment"). The Performance Adjustment is calculated monthly
by comparing the Fund's investment performance to a Target (as defined below)
during the most recent twelve-month period. The "Target" is the investment
record of the Salomon Smith Barney 1-Month U.S. Treasury Bill Index-TM- plus 5
percentage points. The Performance Adjustment is added to or subtracted from the
basic fee.

The Performance Adjustment may increase or decrease the basic fee in
five steps. The first step would occur if the Fund's performance during the most
recent 12-month period differed from that of the Target by more than one but not
more than two percentage points. In this event, the Performance Adjustment would
be 0.10%, and the annual rate of the total management fee would be either 1.40%
or 1.60%. The second step would occur if the Fund's performance during the most
recent 12-month period differed from that of the Target by more than two but not
more than three percentage points. In this event, the Performance Adjustment
would be 0.20%, and the annual rate of the total management fee would be either
1.30% or 1.70%. The third step would occur if the Fund's performance during the
most recent 12-month period differed from that of the Target by more than three
but not more than four percentage points. In this event, the Performance
Adjustment would be 0.30%, and the annual rate of the total management fee would
be either 1.20% or 1.80%. The fourth step would occur if the Fund's performance
during the most recent 12-month period differed from that of the Target by more
than four but not more than five percentage points. In this event, the
Performance Adjustment would be 0.40%, and the annual rate of the total
management fee would be either 1.10% or 1.90%. The fifth step would occur if the
Fund's performance during the most recent 12-month period differed from that of
the Target by five percentage points or more. In this event, the Performance
Adjustment would be 0.50%, and the annual rate of the total management fee would
be either 1.00% or 2.00%. Thus:

45
<PAGE>

Performance lags Target by more than
1 but not more than 2 percent
points 1.50 (.10) 1.40
- ----------------------------------------------------------------------------------------------------------------
Second Step:
Performance exceeds Target by
more than 2 but not more than 3
percentage points 1.50 .20 1.70

Performance lags Target by more than
1 but not more than 3 percent
points 1.50 (.20) 1.30
- ----------------------------------------------------------------------------------------------------------------
Third Step:
Performance exceeds Target by
more than 3 but not more than 4
percentage points 1.50 .30 1.80

Performance lags Target by more than
3 but not more than 4 percent
points 1.50 (.30) 1.20
- ----------------------------------------------------------------------------------------------------------------
Fourth Step:
Performance exceeds Target by
more than 4 but not more than 5
percentage points 1.50 .40 1.90
</TABLE>

46
<PAGE>

<TABLE>
<CAPTION>
TOTAL MANAGEMENT BASIC RATE PERFORMANCE ADJUSTMENT FEE RATE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
No adjustment 1.50% N/A 1.50%
- ----------------------------------------------------------------------------------------------------------------
Performance lags Target
by more than 4 but
not more than 5
percent points 1.50 (.40) 1.10
- ----------------------------------------------------------------------------------------------------------------
Fifth Step:
Performance exceeds
Target by more than 5
percentage points 1.50 .50 2.00

Performance lags Target
by more than 5
percent points 1.50 (.50) 1.00
- ----------------------------------------------------------------------------------------------------------------
</TABLE>

CSAMSI and PFPC, an indirect, wholly owned subsidiary of PNC Bank
Corp., both serve as co-administrators to the Funds pursuant to separate written
agreements (the "CSAMSI Co-Administration Agreements" and the "PFPC
Co-Administration Agreements," respectively). CSAMSI became co-administrator to
each Fund on October 26, 1999. Prior to that, Counsellors Funds Service, Inc.
("Counsellors Service") served as co-administrator to the Funds. Provident
Distributors, Inc. ("Provident Distributors") and PFPC had served as
co-administrators to the Advisor Class of the BEA Funds. For the services
provided by CSAMSI under the CSAMSI Co-Administration Agreements, each Fund pays
CSAMSI a fee calculated at an annual rate of .05% of each Fund's first $125
million in average daily net assets of the Institutional Shares and .10% of
average daily net assets of the Institutional Shares over $125 million. For the
services provided by PFPC under the PFPC Co-Administration Agreements, each Fund
pays PFPC a fee calculated at an annual rate of .125% of each Fund's average
daily net assets, subject in each case to a minimum annual fee and exclusive of
out-of-pocket expenses. Each class of shares of the Funds bears its
proportionate share of fees payable to CSAMSI and PFPC in the proportion that
its assets bear to the aggregate assets of the Funds at the time of calculation.

For the fiscal years ended August 31, the Funds have paid csaM or
BEA Associates advisory fees and csaM or BEA Associates has waived fees and/or
reimbursed expenses of the Funds under the Advisory Agreements or BEA Advisory
Agreements as follows:

47
<PAGE>

<TABLE>
<CAPTION>
August 31, 1999

Fees Paid
Fund (after waivers) Waivers Reimbursements
---- --------------- ------- --------------
<S> <C> <C> <C>
International Growth $ 5,508,687 $ 0 $ 0
U.S. Equity $ 369,195 $ 148,230 $ 0
U.S. Fixed Income $ 827,811 $ 608,214 $ 0
Global Income $ 0 $ 144,265 $ 3,649
Global Telecommunications $ 93,200 $ 101,660 $ 33,124
High Yield $ 497,661 $ 405,408 $ 0
Municipal Bond $ 64,918 $ 95,749 $ 0
Focus $ 111,197 $ 139,116 $ 0
Long-Short Neutral $ 193,807 $ 97,341 $ 0

<CAPTION>
August 31, 1998

Fees Paid
BEA Fund (after waivers) Waivers Reimbursements
-------- --------------- ------- --------------
<S> <C> <C> <C>
International Equity $ 4,943,773 $ 27,976 $ 0
U.S. Core Equity $ 703,273 $ 36,437 $ 0
U.S. Core Fixed Income $ 579,143 $ 288,699 $ 0
Strategic Global Fixed Income $ 81,321 $ 89,310 $ 0
High Yield $ 422,069 $ 271,277 $ 0
Municipal Bond $ 93,618 $ 51,669 $ 0
Focus $ 14,224 $ 643 $ 0
Long-Short Neutral $ 4,661 $ 2,758 $ 0

<CAPTION>
August 31, 1997

Fees Paid
BEA Fund (after waivers) Waivers Reimbursements
-------- --------------- ------- --------------
<S> <C> <C> <C>
International Equity $ 5,300,316 $ 0 $ 0
U.S. Core Equity $ 537,237 $ 27,626 $ 0
U.S. Core Fixed Income $ 357,196 $ 177,539 $ 0
Strategic Global Fixed Income $ 180,945 $ 27,305 $ 0
High Yield $ 393,841 $ 233,336 $ 0
Municipal Bond $ 91,093 $ 44,791 $ 0
Focus N/A N/A N/A
Long-Short Neutral N/A N/A N/A
</TABLE>

From August 31, 1997 to August 31, 1999, the Funds paid Provident
Distributors or Counsellors Service and PFPC administration fees and Provident
Distributors or Counsellors Service and PFPC have waived fees and/or reimbursed
expenses as follows:

48
<PAGE>

<TABLE>
<CAPTION>
August 31, 1999
PFPC Counsellors Service
Fees Paid Fees Paid
(after Reimburse- (after Reimburse-
Fund Waivers) Waivers ments Fund Waivers) Waivers ments
---- -------- ------- ----------- ---- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
International Growth $860,732 $ 0 $0 International Growth $9,292 $ 0 $0
U.S. Equity $ 86,237 $ 0 $0 U.S. Equity $ 6 $ 25 $0
U.S. Fixed Income $286,470 $ 0 $0 U.S. Fixed Income $ 4 $ 18 $0
Global Income $ 50,059 $ 0 $0 Global Income $ 1 $ 4 $0
High Yield $129,010 $32,252 $0 High Yield $2,733 $9,930 $0
Municipal Bond $ 37,500 $ 0 $0 Municipal Bond $ 9 $ 40 $0
Focus $ 41,719 $ 0 $0 Focus $ 2 $ 7 $0
Long-Short Neutral $ 12,643 $11,902 $0 Long-Short Neutral $1,036 $4,144 $0

August 31, 1998

PFPC Provident Distributors
Fees Paid Fees Paid
(after Reimburse- (after Reimburse-
BEA Fund Waivers) Waivers ments BEA Fund Waivers) Waivers ments
- -------- -------- ------- -------------------- -------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
International Equity $769,622 $ 7,213 $0 International Equity $435,028 $497,175 $0
U.S. Core Equity $123,285 $ 0 $0 U.S. Core Equity $ 9,863 $138,079 $0
U.S. Core Fixed Income $235,924 $ 0 $0 U.S. Core Fixed Income $ 23,143 $323,994 $0
Strategic Global Fixed Strategic Global Fixed
Income $42,937 $ 5,494 $0 Income $ 3,412 $ 47,777 $0
High Yield $99,050 $24,762 $0 High Yield $ 9,905 $138,669 $0
Municipal Bond $30,402 $ 0 $0 Municipal Bond $ 2,076 $ 29,057 $0
Focus $ 0 $ 2,478 $0 Focus $ 198 $ 2,775 $0
Long-Short Neutral $ 0 $ 618 $0 Long-Short Neutral $ 148 $ 594 $0

<CAPTION>
August 31, 1997

PFPC Counsellors Service
Fees Paid Fees Paid
(after Reimburse- (after Reimburse-
BEA Fund Waivers) Waivers ments BEA Fund Waivers) Waivers ments
- -------- -------- ------- -------------------- -------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
International Equity $785,014 $43,161 $0 International Equity $463,778 $530,031 $0
U.S. Core Equity $ 94,144 $ 0 $0 U.S. Core Equity $ 7,532 $105,441 $0
U.S. Core Fixed Income $159,177 $19,068 $0 U.S. Core Fixed Income $ 14,258 $199,636 $0
Strategic Global Fixed Strategic Global Fixed
Income $ 41,650 $10,412 $0 Income $ 4,165 $ 58,310 $0
High Yield $ 89,597 $22,399 $0 High Yield $ 8,959 $125,436 $0
Municipal Bond $ 24,265 $ 0 $0 Municipal Bond $ 1,941 $ 27,177 $0
Focus N/A N/A N/A Focus N/A N/A N/A
Long-Short Neutral N/A N/A N/A Long-Short Neutral N/A N/A N/A
</TABLE>

Each class of a Fund bears all of its own expenses not specifically
assumed by the Adviser or another service provider to the Fund. General expenses
of the Funds

49
<PAGE>

not readily identifiable as belonging to a particular Fund are allocated among
all investment funds by or under the direction of the Funds' Board of Directors
in such manner as the Board determines fair and accurate. Each class of the
Funds pays its own administration fees, and may pay a different share than the
other classes of the Funds of other expenses (excluding advisory and custodial
fees) if those expenses are actually incurred in a different amount by such
class or if a class receives different services.

Custodian and Transfer Agent. Except for the Long-Short Neutral
Fund, Brown Brothers Harriman & Co. ("BBH") acts as the custodian for the Funds
and also acts as the custodian for the Funds' foreign securities pursuant to a
Custodian Agreement (the "BBH Custodian Agreement"). Custodial Trust Company
("CTC") acts as the custodian for the Long-Short Neutral Fund and also acts as
the custodian for the Long-Short Neutral Fund's foreign securities pursuant to a
Custodian Agreement (the "CTC Custodian Agreement", together with the BBH
Custodian Agreement, the "Custodian Agreements"). Under the Custodian
Agreements, BBH and CTC (a) maintain a separate account or accounts in the name
of each Fund, (b) hold and transfer portfolio securities on account of each
Fund, (c) accept receipts and make disbursements of money on behalf of each
Fund, (d) collect and receive all income and other payments and distributions on
account of each Fund's portfolio securities, and (e) make periodic reports to
the Funds' Board of Directors concerning each Fund's operations. BBH and CTC are
authorized to select one or more banks or trust companies to serve as
sub-custodian on behalf of the Funds, provided that BBH and CTC remain
responsible for the performance of all their duties under the Custodian
Agreements and hold the Funds harmless from the negligent acts and omissions of
any sub-custodian. For their services to the Funds under the Custodian
Agreements, BBH and CTC receive a fee which is calculated based upon each Fund's
average daily gross assets, exclusive of transaction charges and out-of-pocket
expenses, which are also charged to the Funds.

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

Organization of the Funds . Each of the Funds is a non-diversified,
open-end management investment company. Each Fund was organized as a Maryland
corporation on July 31, 1998.

50
<PAGE>

Each Fund's charter authorizes its Board to issue three billion full
and fractional shares of capital stock, $.001 par value per share, of which one
billion shares are designated Common Shares, one billion shares are designated
Institutional Shares and one billion shares are designated Advisor Shares. Under
each 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. A Board may similarly classify or reclassify any class
of its shares into one or more series and, without shareholder approval, may
increase the number of authorized shares of the Fund.

The High Yield, Municipal Bond, Focus and Long-Short Neutral Funds
currently offer two separate classes of shares: Common Shares and Institutional
Shares. The International Growth, U.S. Core Equity, U.S. Core Fixed Income and
Global Income Funds currently offer only Common Shares.

Shares of each class represent equal pro rata interests in the
respective Fund and accrue dividends and calculate net asset value and
performance quotations in the same manner. Because of the lower fees paid by
Institutional Shares, the total return on Institutional Shares can be expected
to be higher than the total return on Common Shares and Advisor Shares.
Investors may obtain information concerning the Common Shares and, if and when
offered, the Advisor Shares from their investment professional or by calling
CSAMSI at 800-369-2728. Unless the context clearly suggests otherwise,
references to a Fund in this prospectus are to the Fund as a whole and not to
any particular class of the Fund's shares.

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 a Fund.

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 Monthly Investment Plan).
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 the Fund, as well as certain

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statistical characteristics of the Fund, may be obtained by calling Warburg
Pincus Funds at 800-WARBURG or on the Warburg Pincus Funds web site at
www.warburg.com.

Distribution and Shareholder Servicing. In addition to serving as
each Fund's co-administrator, CSAMSI serves as distributor of each Fund's
shares. CSAMSI offers each Fund's shares on a continuous basis. No compensation
is payable by any of the Funds to CSAMSI for distribution services under the
Distribution Agreement, but CSAMSI receives compensation from each Fund under
the CSAMSI Co-Administration Agreement. CSAMSI's principal business address is
466 Lexington Avenue, New York, New York 10017.

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION

The offering price of each Fund's shares is equal to the per share
net asset value of the relevant class of shares of the Fund.

Under the 1940 Act, a Fund may suspend the right to 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 said Exchange is restricted,
or during which (as determined by the SEC by rule or regulation) an emergency
exists as a result of which disposal or valuation of Fund 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 the transfer of its shares upon
the occurrence of any of the foregoing conditions.)

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

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shareholder's investment in a 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 a Fund.

EXCHANGE PRIVILEGE

An exchange privilege with certain other funds advised by CSAM is
available to investors in each Fund. An Institutional Shareholder may exchange
Institutional Shares of a Fund for Institutional Shares of another Fund or for
Institutional Shares of another Warburg Pincus Fund at their respective net
asset values.

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. The 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 1-800-401-2230.

The Funds reserve the right to refuse exchange purchases by any
person or group if, in CSAM'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. The Funds reserve the right to terminate or modify the
exchange privilege at any time upon 30 days' notice to shareholders.

ADDITIONAL INFORMATION CONCERNING TAXES

The following is a summary of the material United States federal
income tax considerations regarding the purchase, ownership and disposition of
shares in the Funds. Each prospective shareholder is urged to consult his own
tax adviser with respect

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to the specific federal, state, local and foreign tax consequences of investing
in the Funds. The summary is based on the laws in effect on the date of this
Statement of Additional Information, which are subject to change.

The Funds and Their Investments. Each Fund intends to continue to
qualify to be treated as a regulated investment company each taxable year under
the Code. To so qualify, a Fund must, among other things: (a) derive at least
90% of its gross income in each taxable year from dividends, interest, payments
with respect to securities, loans and gains from the sale or other disposition
of stock or securities or foreign currencies, or other income (including, but
not limited to, gains from options, futures or forward contracts) derived with
respect to its business of investing in such stock, securities or currencies;
and (b) diversify its holdings so that, at the end of each quarter of the Fund's
taxable year, (i) at least 50% of the market value of the Fund's assets is
represented by cash, securities of other regulated investment companies, United
States government securities and other securities, with such other securities
limited, in respect of any one issuer, to an amount not greater than 5% of the
Fund's assets and not greater than 10% of the outstanding voting securities of
such issuer and (ii) not more than 25% of the value of its assets is invested in
the securities (other than United States government securities or securities of
other regulated investment companies) of any one issuer or any two or more
issuers that the Fund controls and are determined to be engaged in the same or
similar trades or businesses or related trades or businesses.

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

Each Fund intends to distribute annually to its shareholders
substantially all of its investment company taxable income. The Board of
Directors of the Fund will determine annually whether to distribute any net
realized long-term capital gains in excess of net realized short-term capital
losses (including any capital loss carryovers). Each Fund currently expects to
distribute any excess annually to its shareholders. However, if a Fund retains
for investment an amount equal to all or a portion of its net

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<PAGE>

long-term capital gains in excess of its net short-term capital losses and
capital loss carryovers, it will be subject to a corporate tax (currently at a
rate of 35%) on the amount retained. In that event, the Fund will designate such
retained amounts as undistributed capital gains in a notice to its shareholders
who (a) will be required to include in income for United Stares federal income
tax purposes, as long-term capital gains, their proportionate shares of the
undistributed amount, (b) will be entitled to credit their proportionate shares
of the 35% tax paid by the Fund on the undistributed amount against their United
States federal income tax liabilities, if any, and to claim refunds to the
extent their credits exceed their liabilities, if any, and (c) will be entitled
to increase their tax basis, for United States federal income tax purposes, in
their shares by an amount equal to 65% of the amount of undistributed capital
gains included in the shareholder's income. Organizations or persons not subject
to federal income tax on such capital gains will be entitled to a refund of
their pro rata share of such taxes paid by the Fund upon filing appropriate
returns or claims for refund with the Internal Revenue Service (the "IRS").

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

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

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<PAGE>

A Fund's short sales against the box, if any, and transactions in
foreign currencies, forward contracts, options and futures contracts (including
options and futures contracts on foreign currencies) will be subject to special
provisions of the Code that, among other things, may affect the character of
gains and losses realized by the Fund (i.e., may affect whether gains or losses
are ordinary or capital), accelerate recognition of income to the Fund and defer
Fund losses. These rules could therefore affect the character, amount and timing
of distributions to shareholders. These provisions also (a) will require the
Fund to mark-to-market certain types of the positions in its portfolio (i.e.,
treat them as if they were closed out) and (b) may cause the Fund to recognize
income without receiving cash with which to pay dividends or make distributions
in amounts necessary to satisfy the distribution requirements for avoiding
income and excise taxes. Each Fund will monitor its transactions, will make the
appropriate tax elections and will make the appropriate entries in its books and
records when it engages in short sales or acquires any foreign currency, forward
contract, option, futures contract or hedged investment in order to mitigate the
effect of these rules and prevent disqualification of the Fund as a regulated
investment company.

A Fund's investments in zero coupon securities, if any, may create
special tax consequences. Zero coupon securities do not make interest payments,
although a portion of the difference between a zero coupon security's face value
and its purchase price is imputed as income to the Fund each year even though
the Fund receives no cash distribution until maturity. Under the U.S. federal
tax laws, the Fund will not be subject to tax on this income if it pays
dividends to its shareholders substantially equal to all the income received
from, or imputed with respect to, its investments during the year, including its
zero coupon securities. These dividends ordinarily will constitute taxable
income to the shareholders of the Fund.

"Constructive sale" provisions apply to activities by the Fund which
lock in gain on an "appreciated financial position." Generally, a "position" is
defined to include stock, a debt instrument, or partnership interest, or an
interest in any of the foregoing, including through a short sale, a swap
contract, or a future or forward contract. The entry into a short sale, a swap
contract or a future or forward contract relating to an appreciated direct
position in any stock or debt instrument, or the acquisition of a stock or debt
instrument at a time when the Fund occupies an offsetting (short) appreciated
position in the stock or debt instrument, is treated as a "constructive sale"
that gives rise to the immediate recognition of gain (but not loss). The
application of these rules may cause the Fund to recognize taxable income from
these offsetting transactions in excess of the cash generated by such
activities.

The Municipal Bond Fund is designed to provide investors with
current tax-exempt interest income. Exempt interest dividends distributed to
shareholders by this Fund are not included in the shareholder's gross income for
regular federal income tax purpose. In order for the Municipal Bond Fund to pay
exempt interest dividends during any taxable year,

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<PAGE>

at the close of each fiscal quarter at least 50% of the value of the Fund must
consist of exempt interest obligations.

In addition, the Municipal Bond Fund may not be an appropriate
investment for entities which are "substantial users" of facilities financed by
private activity bonds or "related persons" thereof. "Substantial user" is
defined under U.S. Treasury Regulations to include a nonexempt person who
regularly uses a part of such facilities in his trade or business and (a) whose
gross revenues are more than 5% of the total revenue derived by all users of
such facilities, (b) who occupies more than 5% of the entire usable area of such
facilities, or (c) for whom such facilities or a part thereof were specifically
constructed, reconstructed or acquired. "Related persons" include certain
related natural persons, affiliated corporations, a partnership and its partners
and an S corporation and its shareholder.

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 Bonds acquired by a Fund may
be lower than those from other municipal obligations acquired by the Municipal
Bond Fund due to the possibility of federal, state and local alternative minimum
or minimum income tax liability on Alternative Minimum Tax Bonds.

Under the Code, interest on specified private activity bonds issued
after August 7, 1986, although otherwise exempt from federal income tax, is
treated as an item of tax preference for purposes of the alternative minimum tax
on individuals and corporations. If the Municipal Bond Fund invests in such
specified "private activity bonds," it will report a portion of the
"exempt-interest dividends" paid to its shareholders as interest on specified
private activity bonds, and hence as a tax preference item. Exempt interest
dividends are included in adjusted current earnings. The amount of the
alternative minimum tax imposed by the Code is the excess, if any, of the
taxpayer's "tentative minimum tax" over the taxpayer's regular tax liability for
the taxable year. The "tentative minimum tax" is equal to (i) 26% of the first
$175,000, and 28% of any amount over $175,000 (for corporations, 20% of the
whole), of the taxpayer's alternative minimum taxable income (defined as regular
taxable income modified by certain adjustments and increased by the taxpayer's
"items of tax preference," including the adjustment for corporate current
earnings and the tax preference for tax-exempt interest on private activity
bonds described above) for the taxable year in excess of the exemption amount,
less (ii) the alternative minimum tax foreign tax credit for the taxable year.
The exemption amount is $40,000 for corporations, $45,000 for those filing joint
returns, lesser amounts for others, and is phased out over certain income
levels. Prospective investors should consult their own tax advisers with respect
to the possible application of the alternative minimum tax to their tax
situations.

In addition, the receipt of Municipal Bond 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

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they are (i) substantial users with respect to a facility or related to such
users within the meaning of the Code or (ii) subject to a federal alternative
minimum tax, any applicable state alternative minimum tax, the federal branch
profits tax, or the federal excess net passive income tax.

A Fund may acquire standby commitments with respect to Municipal
Obligations held in its portfolio and will treat any interest received on
Municipal Obligations subject to such stand-by commitments as tax-exempt income.
In Rev. Rul. 82-144, 1982-2 C.B. 34, the Internal Revenue Service held that a
mutual fund acquired ownership of municipal obligations for federal income tax
purposes, even though the fund simultaneously purchased "put" agreements with
respect to the same municipal obligations from the seller of the obligations.
The Funds will not engage in transactions involving the use of stand-by
commitments that differ materially from the transaction described in Rev. Rul.
82-144 without first obtaining a private letter ruling from the Internal Revenue
Service or the opinion of counsel.

Interest on indebtedness incurred by a shareholder to purchase or
carry shares if the Municipal Bond Fund is not deductible for income tax
purposes of (as expected) the Municipal Bond Fund distributes exempt interest
dividends during the shareholder's taxable year. Receipt of exempt interest
dividends may result in collateral federal income tax consequences to certain
other taxpayers, including persons subject to alternative minimum tax (see
Prospectus and discussion below), financial institutions, property and casualty
insurance companies, individual recipients of Social Security or Railroad
Retirement benefits, and foreign corporations engaged in a trade or business in
the United States. Prospective investors should consult their own tax advisers
as to such consequences.

Special Tax Considerations. The following discussion relates to the
particular federal income tax consequences of the investment policies of the
Funds.

Straddles. The options transactions that the Funds enter into may
result in "straddles" for federal income tax purposes. The straddle rules of the
Code may affect the character of gains and losses realized by the Funds. In
addition, losses realized by the Funds on positions that are part of a straddle
may be deferred under the straddle rules, rather than being taken into account
in calculating the investment company taxable income and net capital gain of the
Funds for the taxable year in which such losses are realized. Losses realized
prior to October 31 of any year may be similarly deferred under the straddle
rules in determining the "required distribution" that the Funds must make in
order to avoid federal excise tax. Furthermore, in determining their investment
company taxable income and ordinary income, the Funds may be required to
capitalize, rather than deduct currently, any interest expense on indebtedness
incurred or continued to purchase or carry any positions that are part of a
straddle. The tax consequences to the Funds of holding straddle positions may be
further affected by various elections provided under the Code and Treasury
regulations, but at the present time the Funds are uncertain which (if any) of
these elections they will make.

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Options And Section 1256 Contracts. The writer of a covered put or
call option generally does not recognize income upon receipt of the option
premium. If the option expires unexercised or is closed on an exchange, the
writer generally recognizes short-term capital gain. If the option is exercised,
the premium is included in the consideration received by the writer in
determining the capital gain or loss recognized in the resultant sale. However,
certain options transactions as well as futures transactions and transactions in
forward foreign currency contracts that are traded in the interbank market, will
be subject to special tax treatment as "Section 1256 contracts." Section 1256
contracts are treated as if they are sold for their fair market value on the
last business day of the taxable year (i.e., marked-to-market), regardless of
whether a taxpayer's obligations (or rights) under such contracts have
terminated (by delivery, exercise, entering into a closing transaction or
otherwise) as of such date. Any gain or loss recognized as a consequence of the
year-end marking-to-market of Section 1256 contracts is combined (after
application of the straddle rules that are described above) with any other gain
or loss that was previously recognized upon the termination of Section 1256
contracts during that taxable year. The net amount of such gain or loss for the
entire taxable year is generally treated as 60% long-term capital gain or loss
and 40% short-term capital gain or loss, except in the case of marked-to-market
forward foreign currency contracts for which such gain or loss is treated as
ordinary income or loss. Such short-term capital gain (and, in the case of
marked-to-market forward foreign currency contracts, such ordinary income) would
be included in determining the investment company taxable income of the relevant
Fund for purposes of the Distribution Requirement, even if it were wholly
attributable to the year-end marking-to-market of Section 1256 contracts that
the relevant Fund continued to hold. Investors should also note that Section
1256 contracts will be treated as having been sold on October 31 in calculating
the "required distribution" that a Fund must make to avoid federal excise tax
liability.

Each of the Funds may elect not to have the year-end mark-to-market
rule apply to Section 1256 contracts that are part of a "mixed straddle" with
other investments of such Fund that are not Section 1256 contracts (the "Mixed
Straddle Election").

Foreign Currency Transactions. In general, gains from "foreign
currencies" and from foreign currency options, foreign currency futures and
forward foreign exchange contracts relating to investments in stock, securities
or foreign currencies will be qualifying income for purposes of determining
whether the Fund qualifies as a RIC. It is currently unclear, however, who will
be treated as the issuer of a foreign currency instrument or how foreign
currency options, futures or forward foreign currency contracts will be valued
for purposes of the Asset Diversification Requirement.

Under Code Section 988 special rules are provided for certain
transactions in a foreign currency other than the taxpayer's functional currency
(i.e., unless certain special rules apply, currencies other than the U.S.
dollar). In general, foreign currency gains or losses from certain forward
contracts, from futures contracts that are not "regulated futures contracts",
and from unlisted options will be treated as ordinary income or loss. In certain
circumstances where the transaction is not undertaken as part of a straddle, a
Fund may elect

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capital gain or loss treatment for such transactions. Alternatively, a Fund may
elect ordinary income or loss treatment for transactions in futures contracts
and options on foreign currency that would otherwise produce capital gain or
loss. In general gains or losses from a foreign currency transaction subject to
Code Section 988 will increase or decrease the amount of the Fund's investment
company taxable income available to be distributed to shareholders as ordinary
income, rather than increasing or decreasing the amount of the Fund's net
capital gain. Additionally, if losses from a foreign currency transaction
subject to Code Section 988 exceed other investment company taxable income
during a taxable year, a Fund will not be able to make any ordinary dividend
distributions, and any distributions made before the losses were realized but in
the same taxable year would be recharacterized as a return of capital to
shareholders, thereby reducing each shareholder's basis in his Shares.

Passive Foreign Investment Companies. If a Fund acquires shares in
certain foreign investment entities, called "passive foreign investment
companies" ("PFIC"), such Fund may be subject to federal income tax and a
deferral interest charge on a portion of any "excess distribution" received with
respect to such shares or on a portion of any gain recognized upon a disposition
of such shares, notwithstanding the distribution of such income to the
shareholders of such Fund. Additional charges in the nature of interest may also
be imposed on a Fund in respect of such deferred taxes. However, in lieu of
sustaining the foregoing tax consequences, a Fund may elect to have its
investment in any PFIC taxed as an investment in a "qualified electing fund"
("QEF"). A Fund making a QEF election would be required to include in its income
each year a ratable portion, whether or not distributed, of the ordinary
earnings and net capital gain of the QEF. Any such QEF inclusions would have to
be taken into account by a Fund for purposes of satisfying the Distribution
Requirement and the excise tax distribution requirement.

A Fund may elect (in lieu of paying deferred tax or making a QEF
election) to mark-to-market annually any PFIC shares that it owns and to include
any gains (but not losses) that it was deemed to realize as ordinary income. A
Fund generally will not be subject to deferred federal income tax on any gains
that it is deemed to realize as a consequence of making a mark-to-market
election, but such gains will be taken into account by the Fund for purposes of
satisfying the Distribution Requirement and the excise tax distribution
requirement.

Asset Diversification Requirement. For purposes of the Asset
Diversification Requirement, the issuer of a call option on a security
(including an option written on an exchange) will be deemed to be the issuer of
the underlying security. The Internal Revenue Service has informally ruled,
however, that a call option that is written by a fund need not be counted for
purposes of the Asset Diversification Requirement where the fund holds the
underlying security. However, the Internal Revenue Service has also informally
ruled that a put option written by a fund must be treated as a separate asset
and its value measured by "the value of the underlying security" for purposes of
the Asset Diversification Requirement, regardless (apparently) of whether it is
"covered" under the rules of the exchange. The Internal Revenue Service has not
explained whether in valuing a written

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put option in this manner a fund should use the current value of the underlying
security (its prospective future investment); the cash consideration that must
be paid by the fund if the put option is exercised (its liability); or some
other measure that would take into account the fund's unrealized profit or loss
in writing the option. Under the Code, a fund may not rely on informal rulings
of the Internal Revenue Service issued to other taxpayers. Consequently, a Fund
may find it necessary to seek a ruling from the Internal Revenue Service on this
issue or to curtail its writing of options in order to stay within the limits of
the Asset Diversification Requirement.

Foreign Taxes. Dividends and interest received by the Funds on
investments in foreign securities may be subject to withholding and other taxes
imposed by foreign countries. However, tax conventions between certain countries
and the United States may reduce or eliminate such taxes. If a Fund qualifies as
a regulated investment company, if certain asset and distribution requirements
are satisfied and if more than 50% of the Fund's total assets at the close of
its fiscal year consists of stock or securities of foreign corporations, the
Fund may elect for U.S. income tax purposes to treat foreign income taxes paid
by it as paid by its shareholders. A Fund may qualify for and make this election
in some, but not necessarily all, of its taxable years. If a Fund were to make
an election, shareholders of the Fund would be required to take into account an
amount equal to their pro rata portions of such foreign taxes in computing their
taxable income and then treat an amount equal to those foreign taxes as a U.S.
federal income tax deduction or as a foreign tax credit against their U.S.
federal income taxes. Shortly after any year for which it makes such an
election, each Fund will report to its shareholders the amount per share of such
foreign income tax that must be included in each shareholder's gross income and
the amount which will be available for the deduction or credit. No deduction for
foreign taxes may be claimed by a shareholder who does not itemize deductions.
Certain limitations will be imposed on the extent to which the credit (but not
the deduction) for foreign taxes may be claimed.

Fund Taxes on Swaps. As a result of entering into index swaps, the
funds may make or receive periodic net payments. They may also make or receive a
payment when a swap is terminated prior to maturity through an assignment of the
swap or other closing transaction. Periodic net payments will constitute
ordinary income or deductions, while termination of a swap will result in
capital gain or loss (which will be a long-term capital gain or loss if a fund
has been a party to the swap for more than one year).

Dividends and Distributions. Dividends of net investment income and
distributions of net realized short-term capital gains are taxable to a United
States shareholder as ordinary income, whether paid in cash or in shares.
Distributions of net-long-term capital gains, if any, that the Fund designates
as capital gains dividends are taxable as long-term capital gains, whether paid
in cash or in shares and regardless of how long a shareholder has held shares of
the Fund. Dividends and distributions paid by the Fund (except for the portion
thereof, if any, attributable to dividends on stock of U.S. corporations
received by the Fund) will not qualify for the deduction for dividends

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received by corporations. Distributions in excess of the Fund's current and
accumulated earnings and profits will, as to each shareholder, be treated as a
tax-free return of capital, to the extent of a shareholder's basis in his shares
of the Fund, and as a capital gain thereafter (if the shareholder holds his
shares of the Fund as capital assets).

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

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

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

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

Backup Withholding. A Fund may be required to withhold, for United
States federal income tax purposes, 31% of the dividends, distributions and
redemption proceeds payable to shareholders who fail to provide the Fund with
their correct

62
<PAGE>

taxpayer identification number or to make required certifications, or who have
been notified by the IRS that they are subject to backup withholding. Certain
shareholders are exempt from backup withholding. Backup withholding is not an
additional tax and any amount withheld may be credited against a shareholder's
United States federal income tax liabilities.

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

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

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

DETERMINATION OF PERFORMANCE

Total Return. From time to time, a Fund may quote the total return
of its Institutional Shares in advertisements or in reports and other
communications to shareholders. The net asset value of Institutional Shares is
listed in The Wall Street Journal each business day under the heading "Warburg
Pincus Funds." Current total return figures may be obtained by calling Warburg
Pincus Funds at 800-927-2874.

Each Fund that advertises its "average annual total return" computes
such return separately for each class of shares by determining the average
annual compounded rate of return during specified periods that equates the
initial amount invested to the ending redeemable value of such investment
according to the following formula:

P(1+T)n = ERV

Where: T = average annual total return;

ERV = ending redeemable value of a
hypothetical $1,000 payment made at the
beginning of the l, 5 or 10 year (or
other) periods at the end of the
applicable period (or a fractional portion
thereof);

63
<PAGE>

P = hypothetical initial payment of $1,000; and

n = period covered by the computation, expressed
in years.

Each Fund that advertises its "aggregate total return" computes such
returns separately for each class of shares by determining the aggregate
compounded rates of return during specified periods that likewise equate the
initial amount invested to the ending redeemable value of such investment. The
formula for calculating aggregate total return is as follows:

Aggregate Total Return = [(ERV) - l]
P

The calculations are made assuming that (1) all dividends and
capital gain distributions are reinvested on the reinvestment dates at the price
per share existing on the reinvestment date, (2) all recurring fees charged to
all shareholder accounts are included, and (3) for any account fees that vary
with the size of the account, a mean (or median) account size in the Fund during
the periods is reflected. The ending redeemable value (variable "ERV" in the
formula) is determined by assuming complete redemption of the hypothetical
investment after deduction of all nonrecurring charges at the end of the
measuring period.

Although total return is calculated in a separate manner for each
class of shares, under certain circumstances, performance information for a
class may include performance information of another class with an earlier
inception date.

The average annual total returns for the Institutional Shares of the
following Funds for the year ended August 31, 1999 were as follows:

<TABLE>
<CAPTION>
Since
Inception
Fund 1 year 3 year (ann.) 5 year (ann.) (ann.)
- ---- ------ ------------- ------------- --------
<S> <C> <C> <C> <C> <C>
International Growth 13.88% 15.51% 8.64% 11.76% (9/30/92)
U.S. Equity 38.07% 25.37% 22.64% 22.62% (08/31/94)
U.S. Fixed Income 2.37% 7.15% 7.44% 6.88% (03/31/94)
Global Income 2.78% 3.81% 6.31% 6.08% (06/27/94)
High Yield 0.67% 6.94% 8.18% 8.59% (02/26/93)
Municipal Bond 0.36% 5.83% 5.62% 5.47% (06/17/94)
Focus N/A N/A N/A N/A (07/31/98)
Long-Short Neutral (5.68)% N/A N/A (3.67)% (07/31/98)
</TABLE>

The aggregate total returns for the Institutional Shares of the
following Funds for the period ended August 31, 1999 since inception were as
follows:

64
<PAGE>

Fund Inception Date Aggregate Return
- ---- -------------- ----------------
International Growth 09/30/92 115.88%
U.S. Equity 08/31/94 117.48%
U.S. Fixed Income 03/31/94 43.43%
Global Income 06/27/94 35.82%
High Yield 02/26/93 71.10%
Municipal Bond 06/17/94 31.95%
Focus 07/31/98 34.52%
Long-Short Neutral 07/31/98 (3.99)%

Performance information provided above reflects the performance of
the Institutional Shares of the corresponding BEA Funds to the extent applicable
(which are the predecessors of the Funds) for the periods noted.

Performance information provided above for each Fund (except for the
Long-Short Neutral Fund) also reflects the performance of the Institutional
Shares of the corresponding predecessor BEA Fund since inception (as noted
below). The BEA Funds' Institutional Shares performance was favorably affected
by expense waivers and/or reimbursements. The performance information provided
above has not been restated to adjust for the BEA Funds' Institutional Shares
expense waivers and/or reimbursements. Had these expense adjustments been made,
the performance information shown above would have been lower.

The Funds may also from time to time include in such advertising an
aggregate total return figure or a total return figure that is not calculated
according to the formula set forth above in order to compare more accurately a
Fund's performance with other measures of investment return. For example, in
comparing a Fund's total return with data published by Lipper Analytical
Services, Inc., CDA Investment Technologies, Inc. or Weisenberger Investment
Company Service, or with the performance of the Standard & Poor's 500 Stock
Index or the Dow Jones Industrial Average, as appropriate, a Fund may calculate
its aggregate and/or average annual total return for the specified periods of
time by assuming the investment of $10,000 in Fund shares and assuming the
reinvestment of each dividend or other distribution at net asset value on the
reinvestment date. The Funds do not, for these purposes, deduct from the initial
value invested any amount representing sales charges. The Funds will, however,
disclose the maximum sales charge and will also disclose that the performance
data do not reflect sales charges and that inclusion of sales charges would
reduce the performance quoted. Such alternative total return information will be
given no greater prominence in such advertising than the information prescribed
under SEC rules, and all advertisements containing performance data will include
a legend disclosing that such performance data represent past performance and
that the investment return and principal value of an investment will fluctuate
so that an investor's shares, when redeemed, may be worth more or less than
their original cost.

65
<PAGE>

Yield. Certain Funds may advertise a 30-day (or one month) standard
yield as described in the Prospectus. Such yields are calculated separately for
each class of shares in each Fund in accordance with the method prescribed by
the SEC for mutual funds:

YIELD = 2[(a - b +1)6 - 1)
----- ^
cd

Where: a = dividends and interest earned by a Fund during the period;

b = expenses accrued for the period (net of reimbursements);

c = average daily number of shares outstanding during the period,
entitled to receive dividends; and

d = maximum offering price per share on the last day of the
period.

For the purpose of determining net investment income earned during the period
(variable "a" in the formula), dividend income on equity securities held by a
Fund is recognized by accruing 1/360 of the stated dividend rate of the security
each day that the security is in the Fund. Except as noted below, interest
earned on debt obligations held by a Fund is calculated by computing the yield
to maturity of each obligation based on the market value of the obligation
(including actual accrued interest) at the close of business on the last
business day of each month, or, with respect to obligations purchased during the
month, the purchase price (plus actual accrued interest) and dividing the result
by 360 and multiplying the quotient by the market value of the obligation
(including actual accrued interest) in order to determine the interest income on
the obligation for each day of the subsequent month that the obligation is held
by the Fund. For purposes of this calculation, it is assumed that each month
contains 30 days. The maturity of an obligation with a call provision is the
next call date on which the obligation reasonably may be expected to be called
or, if none, the maturity date. With respect to debt obligations purchased at a
discount or premium, the formula generally calls for amortization of the
discount or premium. The amortization schedule will be adjusted monthly to
reflect changes in the market value of such debt obligations. Expenses accrued
for the period (variable "b" in the formula) include all recurring fees charged
by a Fund to all shareholder accounts in proportion to the length of the base
period and the Fund's mean (or median) account size. Undeclared earned income
will be subtracted from the offering price per share (variable "d" in the
formula).

With respect to receivables-backed obligations that are expected to
be subject to monthly payments of principal and interest ("pay-downs"), (i) gain
or loss attributable to actual monthly pay downs are accounted for as an
increase or decrease to interest income during the period, and (ii) each Fund
may elect either (a) to amortize the discount and premium on the remaining
security, based on the cost of the security, to the weighted average

66
<PAGE>

maturity date, if such information is available, or to the remaining term of the
security, if any, if the weighted average date is not available or (b) not to
amortize discount or premium on the remaining security.

Based on the foregoing calculation, the Standard Yield for the
Institutional Shares of the following funds for the 30-day period ended August
31, 1999 were as follows:

Fund 30-Day Yield
---- ------------
U.S. Fixed Income 6.02%
Global Income 4.96%
High Yield 10.00%
Municipal Bond 4.66%
Select Equity --
U.S. Core Equity --

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 financial statements that are incorporated by
reference in this Statement of Additional Information have been audited by PwC,
and have been included herein in reliance upon the report of such firm of
independent accountants given upon their authority as experts in accounting and
auditing.

Willkie Farr & Gallagher serves as counsel for each Fund and
provides legal services from time to time for CSAM, CSAMSI, and Counsellors
Service.

67
<PAGE>

MISCELLANEOUS

The Funds are not sponsored, endorsed, sold or promoted by Warburg,
Pincus & Co. Warburg, Pincus & Co. makes no representation or warranty, express
or implied, to the owners of the Funds or any member of the public regarding the
advisability of investing in securities generally or in the Funds particularly.
Warburg, Pincus & Co. licenses certain trademarks and trade names of Warburg,
Pincus & Co., and is not responsible for and has not participated in the
calculation of the Funds' net asset value, nor is Warburg, Pincus & Co. a
distributor of the Funds. Warburg, Pincus & Co. has no obligation or liability
in connection with the administration, marketing or trading of the Funds.

As of October 29, 1999, the names, address and percentage of
ownership of each person that owns of record 5% or more of a class of each
Fund's outstanding shares were as follows:

<TABLE>
<CAPTION>
PERCENT
OWNED AS OF
FUND NAME AND ADDRESS OCTOBER 29, 1999
- ---- ---------------- ----------------
<S> <C> <C>
International Growth Fund Employees Ret Plan Marshfield 8.94%
- -- Institutional 1000 N. Oak Ave
Marshfield, WI 54449

MAC & Co. 7.33%
A/C# TYCF8754542
Mutual Funds Operations
P.O. Box 3198
Pittsburgh, PA 15210-3198

Indiana University Foundation 6.18%
Attn: Walter L. Koon, Jr.
PO Box 500
Bloomington, IN 47402

State Street Bank & Trust 5.27%
FBO Consumers Energy Company
DTD 3-1-1997
P.O. Box 1992
Boston, MA 02105-1992

U.S. Equity Fund-- Institutional First Union National Bank 40.33%
FBO Buckeye BEA Eqt
A/C 1541048836
1525 W WT Harris Blvd. CMG NC 1151
Charlotte, NC 28262-8522

Washington Hebrew Congregation 12.80%
3935 Macomb St. NW
Washington, DC 20016
</TABLE>

68
<PAGE>

<TABLE>
<CAPTION>
PERCENT
OWNED AS OF
FUND NAME AND ADDRESS OCTOBER 29, 1999
- ---- ---------------- ---------------
<S> <C> <C>
Pension Plan for the Employees of 11.36%
Krupp Werner & Pfleiderer Corp.
663 E. Crescent Ave.
Ramsey, NJ 07446-1220

Fleet National Bank Trust 7.65%
Hospital ST Raphael
PO Box 92800
Rochester, NY 14692-8900

U.S. Fixed Income Fund-- Institutional The Northern Trust Company TTEE 15.18%
Uniroyal Holdings Bond Fund
c/o Uniroyal Holding Inc.
70 Great Hill Road
Naugatuck, CT 06770-2224

Patterson & Co. 6.76%
A/C 9888880836
1525 West WT Harris Blvd. CMG 1151
Charlotte, NC 28862-8522

Huntington Hospital Pension Plan 6.74%
270 Park Ave.
Huntington, NY 11743-2799

Local 239 Pension Fund 5.68%
RJ Waldbauer Jr., A Evarieto,
I Stockel TTEES DTD 04/01/1960
2380 Hempstead Tpke.
East Meadow, NY 11554-2030

</TABLE>

69
<PAGE>

<TABLE>
<CAPTION>
PERCENT
OWNED AS OF
FUND NAME AND ADDRESS OCTOBER 29, 1999
- ---- ---------------- ----------------
<S> <C> <C>
Fidelity Investments Institutional 5.31%
Operations Co Inc (FIIOC) as
Agent for Credit Suisse First
Boston Employee's Savings PSP
100 Magellan Way #KWIC
Covington, KY 41015-1987

DCA Food Industries Inc. 5.23%
100 East Grand Ave.
Beloit, WI 53511-6255

Focus Fund-- Institutional BEA Associates 51.37%
Pension Trust
153 East 53rd Street
New York, NY 10022

Chase Manhattan Bank 16.24%
DCA/MMP Hourly Pension Plan
Plan No. 006
Kerry Ingredients
352 E. Grand Ave.
Beloit, WI 53511-6227

FTC & Co. 12.30%
Attn. Datalynx # House Acct.
P.O. Box 173736
Denver, CO 80217-3736

State Sreet Bank & Trust 6.06%
Cust for the IRA of
Joan B Erle MD
524 E. 72nd St. 46DE
New York, NY 10021-9807

Global Income Fund-- Institutional Sunkist Master Trust 56.39%
14130 Riverside Drive
Sherman Oaks, CA 91423-2392

Patterson & Co. 33.45%
PO Box 7829
Philadelphia, PA 19101-7829

State Street Bank & Trustee TTEE 6.52%
Fenway Holdings LLC Master Trust
PO Box 470
Boston, MA 02102-0470

High Yield Fund-- Institutional Advantus Capital Mgmt. Inc. 31.50%
400 Robert Stn.
Saint Paul, MN 55101-2015

Carl F. Besenbach 15.38%
TRST Michelin North America Inc.
Master Trust
PO Box 19001
Greenville, SC 29602-9001

Fidelity Investments Institutional 14.56%
Operations Co. Inc. as Agent for
Certain Employees Benefits Plan
100 Magellan Way # KWIC
Covington, KY 41015-1999

</TABLE>

70
<PAGE>

<TABLE>
<CAPTION>
PERCENT
OWNED AS OF
FUND NAME AND ADDRESS OCTOBER 29, 1999
- ---- ---------------- ----------------
<S> <C> <C>
Municipal Bond Fund-- William A. Marquard 42.53%
Institutional 2199 Maysville Rd.
Carlisle, KY 40311-9716

Howard Isermann 16.37%
9 Tulane Dr.
Livingston, NJ 07039-6212

Howard T. Hallowell III 10.15%
P.O. Box 18298
Rochester, NY 14518-0298

S. Finkelstein Family Fund 5.14%
1755 York Ave. Apt. 35BC
New York, NY 10128-6827

</TABLE>

71
<PAGE>

<TABLE>
<CAPTION>
PERCENT
OWNED AS OF
FUND NAME AND ADDRESS OCTOBER 29, 1999
- ---- ---------------- ----------------
<S> <C> <C>
Long-Short Neutral Fund -- Warburg Pincus Long-Short Equity Fund 26.38%
Institutional 400 Bellevue Pkwy.
Wilmington, DE 19809-3706

BEA Associates 20.78%
153 E. 53rd Street
New York, NY 10022-4611

Andrew M. Jarmel TTEE 13.83%
AAM Alpha Fund LP
Asset Allocation & Management Co.
30 N. LaSalle St. Fl. 35
Chicago, IL 60602-2590

EALSA & Co. 9.83%
P.O. Box 1768
Grand Central Station
New York, NY 10163-1768

BEA Associates 6.45%
FAO Pension Trust
153 E. 53rd Street
New York, NY 10022-4611

</TABLE>

FINANCIAL STATEMENTS

Each Fund's audited financial report dated August 31, 1999, which
either accompanies this Statement of Additional Information or has previously
been provided to the investor to whom this Statement of Additional Information
is being sent, is incorporated herein by reference with respect to all
information regarding the relevant Fund included therein. Each Fund will furnish
without charge a copy of the annual reports upon request by calling Warburg
Pincus Funds at 800-927-2874.

72
<PAGE>

APPENDIX A

DESCRIPTION OF RATINGS

Commercial Paper Ratings

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

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

Corporate Bond Ratings

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

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

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

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

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

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

1
<PAGE>

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

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

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

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

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

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

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

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

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

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

B-2
<PAGE>

Aaa - Bonds that are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edged." Interest payments are protected by a large or exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.

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

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

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

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

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

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

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

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

B-3
<PAGE>

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

Municipal Note Ratings

A Standard and Poor's rating reflects the liquidity concerns and
market access risks unique to notes due in three years or less. The following
summarizes the ratings used by Standard & Poor's Ratings Group for municipal
notes:

"SP-1" - The issuers of these municipal notes exhibit a strong
capacity to pay principal and interest. Those issues determined to possess very
strong characteristics are given a plus (+) designation.

"SP-2" - The issuers of these municipal notes exhibit satisfactory
capacity to pay principal and interest, with some vulnerability to adverse
financial and economic changes over the term of the notes.

"SP-3" - The issuers of these municipal notes exhibit speculative
capacity to pay principal and interest.

Moody's ratings for state and municipal notes and other short-term
loans are designated Moody's Investment Grade ("MIG") and variable rate demand
obligations are designated Variable Moody's Investment Grade ("VMIG"). Such
ratings recognize the differences between short-term credit risk and long-term
risk. The following summarizes the ratings by Moody's Investors Service, Inc.
for short-term notes:

"MIG-1"/"VMIG-1" - This designation denotes best quality, enjoying
strong protection by established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.

"MIG-2"/"VMIG-2" - This designation denotes high quality, with
margins of protection ample although not so large as in the preceding group.

"MIG-3"/"VMIG-3" - This designation denotes favorable quality, with
all security elements accounted for but lacking the undeniable strength of the
preceding grades. Liquidity and cash flow protection may be narrow and market
access for refinancing is likely to be less well established.

"MIG-4"/"VMIG-4" - This designation denotes adequate quality,
carrying specific risk but having protection commonly regarded as required of an
investment security and not distinctly or predominantly speculative.

"SG" - This designation denotes speculative quality and lack of
margins of protection.

B-4
<PAGE>

Fitch and Duff & Phelps use the short-term ratings described under
Commercial Paper Ratings for municipal notes.

B-5

<PAGE>

PART C
OTHER INFORMATION

Item 23. EXHIBITS

EXHIBIT NO. DESCRIPTION OF EXHIBIT

a Articles of Incorporation. (1)

b By-Laws. (1)

c Registrant's Forms of Stock Certificates.(2)

d Form of Investment Advisory Agreement. (3)

e Form of Distribution Agreement. (4)

f Not applicable.

g Custodian Agreement with Brown Brothers Harriman & Co. (3)

h(1) Transfer Agency and Service Agreement. (3)

(2) Form of Co-Administration Agreement with
Credit Suisse Asset Management Securities,
Inc.(4)

- --------

(1) Incorporated by reference to Registrant's Registration Statement on Form
N-1A filed on August 5, 1998 (Securities Act File No. 333-60689).

(2) Incorporated by reference to Pre-Effective Amendment No. 1 to Registrant's
Registration Statement on Form N-1A filed on August 14, 1998 (Securities
Act File No. 333-60689).

(3) Incorporated by reference; material provisions of this exhibit
substantially similar to those of the corresponding exhibit in
Pre-Effective Amendment No. 1 to the Registration Statement on Form N-1A of
Warburg, Pincus Emerging Markets II Fund, Inc., filed on August 14, 1998
(Securities Act File No. 333-60677).

(4) Incorporated by reference; material provisions of this exhibit
substantially similar to those of the corresponding exhibit in
Post-Effective Amendment No. 2 to the Registration Statement on Form N-1A
of Warburg, Pincus Long-Short Market Neutral Fund, Inc., filed November 2,
1999 (Securities Act File No. 333-60687).

<PAGE>

(3) Form of Co-Administration Agreement with PFPC
Inc. (3)

i(1) Opinion and Consent of Willkie Farr &
Gallagher, counsel to the Fund.
(2) Opinion and Consent of Venable, Baetjer and
Howard, LLP, Maryland counsel to the Fund. (2)

j(1) Consent of PricewaterhouseCoopers LLP,
Independent Accountants.
(2) Powers of Attorney. (4)

k Not applicable.

l Form of Purchase Agreement. (3)

m(1) Form of Shareholder Servicing and
Distribution Plan. (4)
(2) Form of Distribution Plan. (4)

n Not Applicable.

o Form of 18f-3 Plan.(4)

Item 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL
WITH REGISTRANT

From time to time, Credit Suisse Asset Management, LLC ("CSAM, LLC") may be
deemed to control the Fund and other registered investment companies it advises
through it beneficial ownership of more than 25% of the relevant fund's shares
on behalf of discretionary advisory clients. CSAM, LLC has three wholly-owned
subsidiaries: Warburg, Pincus Asset Management International, Inc. a Delaware
corporation; Warburg, Pincus Asset Management (Japan), Inc., a Japanese
corporation; and Warburg Pincus Asset Management (Dublin) Limited, an Irish
corporation.

Item 25. INDEMNIFICATION

Registrant, officers and directors of Credit Suisse Asset Management, LLC
("CSAM, LLC"), of Credit Suisse Asset Management Securities, Inc. ("CSAM
Securities") and of Registrant are covered by insurance policies indemnifying
them for liability incurred in connection with the operation of Registrant.
Discussion of this coverage is incorporated by reference to Item 27 of Part C of
the Fund's initial Registration Statement on Form N-1A filed on August 5, 1998.

<PAGE>

Item 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER

CSAM, LLC acts as investment adviser to the Registrant. CSAM, LLC renders
investment advice to a wide variety of individual and institutional clients. The
list required by this Item 26 of officers and directors of CSAM, LLC, together
with information as to their other business, profession, vocation or employment
of a substantial nature during the past two years, is incorporated by reference
to Schedules A and D of Form ADV filed by CSAM, LLC (SEC File No. 801-37170).

Item 27. PRINCIPAL UNDERWRITER

(a) CSAM Securities will act as distributor for Registrant, as well as
for Warburg Pincus Balanced Fund; Warburg Pincus Capital Appreciation Fund;
Warburg Pincus Cash Reserve Fund; Warburg Pincus Central & 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 Small
Company Fund; Warburg Pincus Japan Growth Fund; Warburg Pincus Japan Small
Company 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 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 Trust; Warburg Pincus Trust
II; Warburg Pincus U.S. Core Equity Fund; Warburg Pincus U.S. Core Fixed Income
Fund; Warburg Pincus WorldPerks Money Market Fund; and Warburg Pincus WorldPerks
Tax Free Money Market Fund.

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

Item 28. LOCATION OF ACCOUNTS AND RECORDS

(1) Warburg, Pincus International Growth Fund, Inc.

<PAGE>

466 Lexington Avenue
New York, New York 10017-3147
(Fund's Articles of Incorporation, By-Laws and
minute books)

(2) Credit Suisse Asset Management, LLC
One Citicorp Center
153 East 53rd Street
New York, NY 10022
(records relating to its functions as
investment adviser)

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

(4) Credit Suisse Asset Management Securities, Inc.
466 Lexington Avenue
New York, New York 10017-3147
(records relating to its functions as
co-administrator and distributor)

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

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

(7) Brown Brothers Harriman & Co.
40 Water Street
Boston, Massachusetts 02109
(records relating to its functions as custodian)

Item 29. MANAGEMENT SERVICES

Not applicable.

Item 30. UNDERTAKINGS.

Not applicable.

<PAGE>

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 Amendment to the 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 2nd day of November, 1999.

WARBURG, PINCUS INTERNATIONAL GROWTH 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/William W. Priest* Chairman of the November 2, 1999
- --------------------- Board ofDirectors
William W. Priest

/s/Eugene L. Podsiadlo President November 2, 1999
- -----------------------
Eugene L. Podsiadlo

/s/Michael A. Pignataro Treasurer and Chief November 2, 1999
- -----------------------
Michael A. Pignataro Financial Officer

/s/Richard H. Francis* Director November 2, 1999
- -----------------------
Richard H. Francis

/s/Jack W. Fritz* Director November 2, 1999
- -----------------------
Jack W. Fritz

/s/Jeffrey E. Garten* Director November 2, 1999
- -----------------------
Jeffrey E. Garten

/s/James S. Pasman, Jr.* Director November 2, 1999
- ------------------------
James S. Pasman, Jr.

/s/Steven N. Rappaport* Director November 2, 1999
- -----------------------
Steven N. Rappaport

/s/Alexander B. Trowbridge* Director November 2, 1999
- -----------------------
Alexander B. Trowbridge

*By:/s/ Michael A. Pignataro
- -----------------------
Michael A. Pignataro as Attorney-in-Fact

<PAGE>

INDEX TO EXHIBITS

EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- ----------------------

i(1) Opinion and Consent of Willkie Farr & Gallagher,
counsel to the Fund.
j(1) Consent of PricewaterhouseCoopers LLP.

<PAGE>

November 2, 1999

Warburg, Pincus International Growth Fund, Inc.
466 Lexington Avenue
New York, New York 10017-3147

Re: Post-Effective Amendment No. 2 to Registration Statement
(Securities Act File No. 333-60689; Investment Company Act
File No. 811-08933) (the "Registration Statement")
---------------------------------------------------------

Ladies and Gentlemen:

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

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

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

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

<PAGE>
Warburg, Pincus International Growth Fund, Inc.
November 2, 1999
Page 2

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

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

Very truly yours,

/s/ Willkie Farr & Gallagher

<PAGE>

EXHIBIT 99.J

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in this Post-Effective
Amendment No. 2 to the Registration Statement under the Securities Act of
1933 and Post-Effective Amendment No. 3 to the Registration Statement under
the Investment Company Act of 1940 on Form N-1A (File Nos. 333-60689 and
811-08933, respectively) of our report dated October 7, 1999 on our audit of
the financial statements and financial highlights of Warburg, Pincus
International Growth Fund, Inc., which report is included in the Annual
Report to Shareholders for the year ended August 31, 1999 and for the
respective periods then ended. We also consent to the reference of our firm
under the headings "Financial Highlights" in the Prospectus and under the
headings "Independent Accountants and Counsel" and "Financial Statements" in
the Statement of Additional Information.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP

2400 Eleven Penn Center
Philadelphia, Pennsylvania
October 29, 1999