SEMIANNUAL
REPORT
February 28, 1999
WARBURG PINCUS
U.S. CORE EQUITY FUND
O
WARBURG PINCUS
SELECT ECONOMIC VALUE EQUITY FUND
More complete information about the funds, including charges and expenses, is
provided in the Prospectus, which must precede or accompany this document and
which should be read carefully before investing. You may obtain additional
copies by calling 800-WARBURG (800-927-2874) or by writing to Warburg Pincus
Funds, P.O. Box 9030, Boston, MA 02205-9030.
[WARBURG PINCUS FUNDS LOGO]
<PAGE>
From time to time, the funds' investment adviser and co-administrators may
waive some fees and/or reimburse some expenses, without which performance would
be lower. Waivers and/or reimbursements are subject to change.
Returns are historical and include change in share price and reinvestment
of dividends and capital gains. Past performance cannot guarantee future
results. Returns and share price will fluctuate, and redemption value may be
more or less than original cost.
The views of the funds' management are as of the date of the letters and
portfolio holdings described in this document are as of February 28, 1999; these
views and portfolio holdings may have changed subsequent to these days. Nothing
in this document is a recommendation to purchase or sell securities.
<PAGE>
Warburg Pincus U.S. Core Equity Fund
Portfolio Managers' Letter -- February 28, 1999
- --------------------------------------------------------------------------------
April 20, 1999
Dear Shareholders:
We are writing to report on the results of the Warburg Pincus U.S. Core
Equity Fund (the "Fund") for the fiscal half-year ended February 28, 1999.
At February 28, 1999, the net asset value ("NAV") of the Fund's
Institutional shares was $18.46, compared to an NAV of $21.73 on August 31,
1998. As a result, the Institutional shares' total return was thus 30.2%
(assuming the reinvestment of dividends and distributions totaling $9.78 per
share). By comparison, the Standard & Poor's 500 Index (the "Index") returned
30.3% during the same period.
At February 28, 1999, the NAV of the Fund's Common shares was $18.44,
compared to an NAV of $25.22 at their inception of investment operations on
October 30, 1998. The Common shares' total return between October 30, 1998 and
February 28, 1999 thus was 12.1% (assuming the reinvestment of dividends and
distributions totaling $9.78 per share). By comparison, the Index returned 13.2%
during the same period.
Overall, the Fund performed in line with the Index benchmark. In the first
half of the fiscal half-year, the Fund outperformed, as investors returned to a
more rational, value-based approach after months of aggressive buying and the
harsh sell-off of August and September 1998. Our emphasis on valuation and
earnings strength proved particularly effective.
In the second half, however, the Fund underperformed, as the market became
heavily momentum-oriented and the technology sector -- notably gravity-defying
Internet companies -- led stocks to new highs. In this type of environment,
stocks not favored by momentum buyers tended to generate returns lower than the
market. Our ongoing bias toward companies offering attractive valuations and
earnings strength performed accordingly.
Among the Fund's top-performing holdings during the period were Microsoft
Corporation, which was reasonably valued compared to its technology peers and
produced better-than-expected earnings; Kroger Co., a major supermarket operator
whose above-average earnings growth reflected its focus on controlling costs;
and Ford Motor, which carried a reasonable valuation and benefited from
operating efficiencies and strong truck sales.
<PAGE>
Warburg Pincus U.S. Core Equity Fund
Portfolio Managers' Letter -- February 28, 1999 (cont'd)
- --------------------------------------------------------------------------------
As developments occur that we believe would be of interest to you, we will
keep you informed. Meanwhile, if you have any questions about your portfolio or
the capital markets generally, please feel free to call upon us at any time.
Sincerely yours,
Credit Suisse Asset Management Structured Equity Management Team
William W. Priest, Jr., CEO and Managing Director
Eric N. Remole, Managing Director
Marc E. Bothwell, Vice President
Michael A. Welhoelter, Vice President
2
<PAGE>
Warburg Pincus U.S. Core Equity Fund
Portfolio Managers' Letter -- February 28, 1999 (cont'd)
- --------------------------------------------------------------------------------
Comparison of Change in Value of $10,000 Investment in the
Warburg Pincus U.S. Core Equity Institutional Shares and the S&P 500
Index(1) from Inception (9/1/94) and at each Quarter End. (Unaudited)
[GRAPHIC]
In the printed version of the document, a line graph appears which depicts
the following plot points:
Date Warburg S&P
- -------- ------- ----- Average Annual
09/01/94 10000 10000 Total Returns
11/30/94 9553 9615 for the period ending
02/28/95 10251 10398 2/28/99
05/31/95 11103 11455 (Institutional Shares)
08/31/95 11975 12149 (Unaudited)
11/30/95 12746 13168
02/29/96 13940 14007 1 year
5/31/96 14383 14720 14.25%
8/31/96 14080 14421
11/30/96 16150 16837 5 years
2/28/97 16786 17672 23.35%
5/31/97 17943 19049
8/31/97 19476 20275 Since Inception
11/30/97 20466 21625 (9/1/94)
2/28/98 22899 23838 23.83%
5/31/98 23112 24880
8/31/98 20097 21917
11/30/98 24804 26754
2/28/99 26161 28560
Note: Past performance is not predictive of future performance. Investment
return and principle value of an investment will fluctuate so that an investor's
shares upon redemption may be worth more or less than their original cost.
(1) 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 Standard & Poor's Corporation.
3
<PAGE>
Warburg Pincus Select Economic Value Equity Fund
Portfolio Managers' Letter -- February 28, 1999
- --------------------------------------------------------------------------------
April 20, 1999
Dear Shareholders:
We are writing to report on the results of the Warburg Pincus Select
Economic Value Equity Fund (the "Fund") for the fiscal half-year ended February
28, 1999.
At February 28, 1999, the net asset value ("NAV") of the Fund's
Institutional shares was $17.63, compared to an NAV of $13.17 on August 31,
1998. As a result, the Institutional shares' total return was 34.1% (assuming
the reinvestment of dividends and distributions totaling $0.02 per share). By
comparison, the Standard & Poor's 500 Index(1) (the "Index") returned 30.3%
during the same period.
At February 28, 1999, the NAV of the Fund's Common shares was $17.62,
compared to an NAV of $15.95 at their inception of investment operations on
October 30, 1998. The Common shares' total return between October 30, 1998 and
February 28, 1999 thus was 10.6% (assuming the reinvestment of dividends and
distributions totaling $0.02 per share). By comparison, the Index returned 13.2%
during the same period.
The Fund outperformed the Index benchmark due to effective stock selection,
notably in technology, basic materials and health care:
o Technology. We built a large overweight position in semiconductor
manufacturers and equipment makers that were selling at overly depressed
valuations and would benefit from falling interest rates and improved
economic conditions (particularly technology spending). This strategy paid
off, as semiconductor stocks enjoyed an extraordinary rally during 1998's
fourth quarter and well into 1999.
o Basic materials. We heavily overweighted cyclical companies such as
producers of metals and paper, based on such companies' historically low
relative valuations; our belief that their prices already reflected
considerable negative expectations; and their tremendous earnings leverage
if commodity prices go up. Fortunately, we were right, and our favorable
stock selection enhanced the positive effect of the overweighting.
o Health care. We maintained the Fund's largest single sector exposure during
the period in health care, primarily makers of pharmaceuticals and medical
equipment. Many of these stable-growth companies performed especially well
in late 1998.
4
<PAGE>
Warburg Pincus Select Economic Value Equity Fund
Portfolio Managers' Letter -- February 28, 1999 (cont'd)
- --------------------------------------------------------------------------------
As developments occur that we believe would be of interest to you, we will
keep you informed. Meanwhile, if you have any questions about your portfolio or
the capital markets generally, please feel free to call upon us at any time.
Sincerely yours,
Credit Suisse Asset Management Select Economic Value Equity Management Team
William W. Priest, Jr., CEO and Managing Director
John B. Hurford, Managing Director
James A. Abate, Director and Portfolio Manager
D. Susan Everly, Vice President
James J. Mecca, Vice President
(1) The S&P 500 Index is an unmanaged index (with no defined investment
objective) of common stocks, includes reinvestments of dividends, and is a
registered trademark of Standard & Poor's Corporation.
5
<PAGE>
Warburg Pincus U.S. Core Equity Fund
Schedule of Investments
February 28, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Number
of
Shares Value
------ -----------
COMMON STOCKS (98.7%)
Agriculture (1.2%)
Archer-Daniels-Midland 53,300 $ 806,162
-----------
Automotive (3.8%)
Ford Motor 43,400 2,574,162
-----------
Computers, Software & Servicing (12.3%)
BMC Software, Inc.** 46,300 1,892,512
Cisco Systems, Inc.** 12,800 1,252,000
Dell Computer Corp.** 10,400 833,300
EMC Corp.** 11,800 1,208,025
Microsoft Corporation** 21,200 3,182,650
-----------
8,368,487
-----------
Conglomerates (5.1%)
General Electric Co. 34,400 3,450,750
-----------
Construction & Building Materials (3.5%)
Fluor Corp.# 27,300 960,619
Sherwin Williams Co. 59,900 1,441,344
-----------
2,401,963
-----------
Consumer Products & Services (3.4%)
Clorox Company 9,600 1,135,800
Newell Co. 27,000 1,147,500
-----------
2,283,300
-----------
Electronics (4.7%)
Intel Corp. 26,500 3,178,344
-----------
Energy & Oil Exploration (8.1%)
Apache Corp. 69,700 1,389,644
DTE Energy 43,400 1,714,300
Edison International 24,300 619,650
Exxon Corporation 13,200 878,625
Unocal Corp. 31,500 887,906
-----------
5,490,125
-----------
Financial Services (17.3%)
Allstate Corporation 19,500 731,250
Chase Manhattan Corp. (The) 11,000 875,875
Lehman Brothers Holdings Inc. 41,100 2,178,300
Merrill Lynch 22,100 1,696,175
National City Corp. 29,500 2,061,312
SLM Holding Corp. 37,300 1,599,238
Transamerica Corp. 36,400 2,641,275
-----------
11,783,425
-----------
See Accompanying Notes to Financial Statements.
6
<PAGE>
Warburg Pincus U.S. Core Equity Fund
Schedule of Investments (cont'd)
February 28, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Number
of
Shares Value
------ -----------
COMMON STOCKS (Cont'd)
Food & Beverage (1.5%)
McDonald's Corp. 11,900 $ 1,011,500
-----------
Health Care (2.8%)
Medtronic, Inc. 27,400 1,935,125
-----------
Industrial Goods & Materials (5.2%)
Dover Corporation 42,500 1,445,000
Illinois Tool Works, Inc. 30,100 2,069,375
-----------
3,514,375
-----------
Metals & Mining (1.8%)
Aluminum Company of America# 31,000 1,255,500
-----------
Pharmaceuticals (9.6%)
Bristol-Myers Squibb 14,800 1,863,875
Merck & Co. 28,500 2,329,875
Schering-Plough 28,000 1,566,250
Warner Lambert Co. 10,700 738,969
-----------
6,498,969
-----------
Publishing & Information Services (2.9%)
Gannett Company, Inc. 31,200 1,981,200
-----------
Retail (8.3%)
Kroger Co. 34,700 2,244,656
Wal-Mart Stores# 39,200 3,385,900
-----------
5,630,556
-----------
Telecommunications (7.2%)
Ameritech Corp. 40,700 2,660,763
BellSouth Corp. 18,000 832,500
Sprint Corp. 16,300 1,398,744
-----------
4,892,007
-----------
TOTAL COMMON STOCKS (Cost $59,266,950) $67,055,950
-----------
See Accompanying Notes to Financial Statements.
7
<PAGE>
Warburg Pincus U.S. Core Equity Fund
Schedule of Investments (cont'd)
February 28, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Par
(000) Value
----- -----------
SHORT-TERM INVESTMENT (1.4%)
BBH Grand Cayman U.S. Dollar Time Deposit
4.250% 03/01/99 $969 $ 969,000
-----------
(Cost $969,000)
TOTAL INVESTMENTS (100.1%) (Cost $60,235,950*) $68,024,950
LIABILITIES IN EXCESS OF OTHER ASSETS (0.1%) (66,643)
-----------
TOTAL NET ASSETS (100.0%) $67,958,307
===========
* Cost for Federal income tax purposes at February 28, 1999 is
$60,242,867. The gross appreciation (depreciation) on a tax basis is
as follows:
Gross Appreciation $ 9,813,128
Gross Depreciation (2,031,045)
-----------
Net Appreciation $ 7,782,083
===========
** Non-income producing securities.
# Security or a portion thereof is out on loan.
See Accompanying Notes to Financial Statements.
8
<PAGE>
Warburg Pincus Select Economic Value Equity Fund
Schedule of Investments
February 28, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Number
of
Shares Value
------ ----------
COMMON STOCKS (99.6%)
Agriculture (5.5%)
Archer-Daniels-Midland 67,475 $1,020,559
Monsanto Co. 18,300 833,794
----------
1,854,353
----------
Chemicals (2.1%)
E. I. du Pont de Nemours and Co. 14,100 723,506
----------
Computers, Software & Servicing (1.8%)
I2 Technologies** 22,680 565,582
Metacreations Corp.** 8,740 56,264
----------
621,846
----------
Consumer Products & Services (3.4%)
Fruit of the Loom, Inc.** 23,990 304,373
Gillette Co. (The) 15,900 852,637
----------
1,157,010
----------
Electronics (6.1%)
Atmel Corp.** 17,300 297,344
Motorola, Inc. 20,400 1,433,100
National Semiconductor Corp.** 30,850 323,925
----------
2,054,369
----------
Energy & Oil Exploration (13.9%)
Anadarko Petroleum 6,200 170,500
Apache Corp. 15,200 303,050
Chevron Corp. 13,580 1,043,962
Exxon Corporation 18,340 1,220,756
Noble Affiliates, Inc. 11,400 257,925
Talisman Energy** 9,985 156,640
Texaco, Inc. 9,320 433,962
Union Pacific Resources Group, Inc. 42,420 379,129
Unocal Corp. 8,180 230,574
USX-Marathon Group 25,300 523,394
----------
4,719,892
----------
Financial Services (7.7%)
American International Group, Inc. 9,000 1,025,437
Bank of Montreal 7,600 314,450
BankAmerica Corporation 5,600 365,750
Royal Bank of Canada 11,100 538,350
Toronto Dominion Bank (The) 8,700 358,875
----------
2,602,862
----------
See Accompanying Notes to Financial Statements.
9
<PAGE>
Warburg Pincus Select Economic Value Equity Fund
Schedule of Investments (cont'd)
February 28, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Number
of
Shares Value
------ ----------
COMMON STOCKS (Cont'd)
Food & Beverage (2.6%)
Coca-Cola Co. (The) 13,900 $ 888,731
----------
Health Care (14.0%)
Boston Scientific Corp.** 27,980 741,470
Centocor, Inc.** 4,600 191,187
Columbia/HCA Healthcare Corp. 43,500 777,562
Guidant Corp. 7,400 421,800
Health Management Associates, Inc.** 43,800 566,663
Medtronic, Inc. 12,300 868,688
Merck & Co., Inc. 14,460 1,182,105
----------
4,749,475
----------
Metals & Mining (8.1%)
Aluminum Company of America 11,940 483,570
Barrick Gold 33,090 585,279
Cominco Ltd. 12,600 170,888
Homestake Mining 34,500 316,969
Inco, Ltd. 29,850 376,856
Newmont Mining 46,480 801,780
----------
2,735,342
----------
Paper & Forest Products (1.1%)
Champion International 3,980 147,260
Georgia Pacific Corporation 2,900 212,425
----------
359,685
----------
Pharmaceuticals (14.1%)
American Home Products Corp. 5,800 345,100
Bristol-Meyers Squibb 4,000 503,750
Coulter Pharmaceutical, Inc.** 3,540 72,128
Eli Lilly and Company 6,700 634,406
Mylan Laboratories Inc. 25,000 682,813
Pfizer Inc. 8,270 1,091,123
Schering-Plough Corp. 13,760 769,700
Watson Pharmaceuticals, Inc.** 14,130 682,656
----------
4,781,676
----------
See Accompanying Notes to Financial Statements.
10
<PAGE>
Warburg Pincus Select Economic Value Equity Fund
Schedule of Investments (cont'd)
February 28, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Number
of
Shares Value
------ -----------
COMMON STOCKS (Cont'd)
Retail (10.0%)
Home Depot, Inc. 13,800 $ 823,688
J.C. Penney Company, Inc. 15,980 577,278
Sears, Roebuck & Co. 19,000 771,875
Wal-Mart Stores 14,110 1,218,751
-----------
3,391,592
-----------
Telecommunications (9.2%)
AT&T Corp. 9,800 804,825
Bell Atlantic Corp. 11,900 683,506
BellSouth Corp. 7,600 351,500
MCI WorldCom, Inc.** 9,300 767,250
SBC Communications, Inc. 10,000 528,750
-----------
3,135,831
-----------
TOTAL COMMON STOCKS (Cost $33,126,722) $33,776,170
-----------
TOTAL INVESTMENTS (99.6%) (Cost $33,126,722*) $33,776,170
OTHER ASSETS IN EXCESS OF LIABILITIES (0.4%) 125,006
-----------
TOTAL NET ASSETS (100.0%) $33,901,176
===========
* Cost for Federal income tax purposes at February 28, 1999 is
$33,140,769. The gross appreciation (depreciation) on a tax basis is
as follows:
Gross Appreciation $ 2,594,577
Gross Depreciation (1,959,176
-----------
Net Appreciation $ 635,401
===========
** Non-income producing securities.
See Accompanying Notes to Financial Statements.
11
<PAGE>
Warburg Pincus Funds
Statements of Assets and Liabilities
February 28, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Select
U.S. Core Economic Value
Equity Fund Equity Fund
----------- --------------
<S> <C> <C>
Assets
Investments, at value (cost - $60,235,950 and
$33,126,722, respectively) $68,024,950 $33,776,170
Collateral received for securities loaned 4,835,500 --
Receivable for investments sold -- 700,755
Dividends and interest receivable 60,784 48,691
Prepaid expenses and other assets 546 76,244
----------- -----------
Total Assets 72,921,780 34,601,860
----------- -----------
Liabilities
Payable upon return of securities loaned 4,835,500 --
Payable for investments purchased -- 375,732
Payable for Fund shares repurchased 80,000 --
Overdraft liability -- 294,749
Advisory fee payable 29,021 11,197
Distribution fee payable (Common shares) -- 3
Accrued expenses payable 18,952 19,003
----------- -----------
Total Liabilities 4,963,473 700,684
----------- -----------
Net Assets
Capital stock, $0.001 par value 3,682 1,923
Paid-in capital 56,804,066 29,188,862
Undistributed net investment income/(loss) 17,400 23,874
Accumulated net realized gain/(loss)
from investments, securities sold short,
futures and foreign currency related
transactions, if any 3,344,159 4,037,069
Net unrealized appreciation/(depreciation)
on investments and other, if any 7,789,000 649,448
----------- -----------
Net Assets $67,958,307 $33,901,176
=========== ===========
Institutional Shares
Net assets $67,873,191 $33,893,809
----------- -----------
Shares outstanding 3,677,407 1,922,241
----------- -----------
Net asset value, offering price and redemption
price per share $ 18.46 $ 17.63
=========== ===========
Common Shares
Net assets $ 85,116 $ 7,367
----------- -----------
Shares outstanding 4,616 418
----------- -----------
Net asset value, offering price and redemption
price per share $ 18.44 $ 17.62
=========== ===========
</TABLE>
See Accompanying Notes to Financial Statements.
12
<PAGE>
Warburg Pincus Funds
Statements of Operations
For the six months ended February 28, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Select
U.S. Core Economic Value
Equity Fund Equity Fund
------------ --------------
<S> <C> <C>
Investment Income
Dividends $ 383,662 $ 200,994
Interest 38,924 3,956
Securities lending 6,075 772
------------ -----------
Total Investment Income 428,661 205,722
------------ -----------
Expenses
Investment advisory fees 245,268 114,020
Administration fees 54,443 24,343
Custodian fees 28,179 14,598
Audit fees 3,472 1,372
Miscellaneous fees 6,231 2,628
Printing fees 17,457 4,033
Registration fees 8,985 7,439
Legal fees 8,406 4,996
Transfer agent fees 14,640 3,225
Insurance expense 1,167 322
Directors fees 6,447 6,447
Organization expense (5,373) --
Distribution fees 23 3
------------ -----------
389,345 183,426
Less fees waived and reimbursed (65,652) (32,996)
------------ -----------
Total Expenses 323,693 150,430
------------ -----------
Net Investment Income/(Loss) 104,968 55,292
------------ -----------
Realized and Unrealized Gain/(Loss) on Investments
and Foreign Currency Transactions
Net realized gain/(loss) from:
Security transactions 3,311,650 4,074,753
------------ -----------
3,311,650 4,074,753
------------ -----------
Net change in unrealized appreciation/(depreciation):
Investments 13,535,148 3,784,191
------------ -----------
13,535,148 3,784,191
------------ -----------
Net Gain/(Loss) On Investments And
Foreign Currency Transactions 16,846,798 7,858,944
------------ -----------
Net Increase/(Decrease) In Net Assets
Resulting From Operations $ 16,951,766 $ 7,914,236
============ ===========
</TABLE>
- ----------
* Commenced operations on January 29, 1999.
See Accompanying Notes to Financial Statements.
13
<PAGE>
Warburg Pincus Funds
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. Core Equity Fund Select Economic Value Equity Fund
------------------------------------- ------------------------------------------
For the For the For the For the Period
Six Months Ended Year Ended Six Months Ended August 3, 1998*
February 28, 1999 August 31, 1998 February 28, 1999 to August 31, 1998
----------------- --------------- ----------------- ------------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Increase/(decrease) in net assets:
Operations:
Net investment income/(loss) $ 104,968 $ 231,556 $ 55,292 $ 18,161
Net gain on investments
and foreign currency
transactions 16,846,798 7,098,025 7,858,944 (3,172,426)
------------ ------------ ------------ ------------
Net increase in net assets resulting
from operations 16,951,766 7,329,581 7,914,236 (3,154,265)
------------ ------------ ------------ ------------
Dividends and Distributions to
shareholders:
Dividends to shareholders from
net investment income:
Institutional shares (104,261) (472,680) (49,578) --
Common shares (22) -- (1) --
Distributions to shareholders
from net realized capital gains:
Institutional shares (24,127,328) (12,679,702) -- --
Common shares (5,552) -- -- --
------------ ------------ ------------ ------------
Total distributions to shareholders (24,237,163) (13,152,382) (49,579) --
------------ ------------ ------------ ------------
Net capital share transactions 11,729,739 (16,844,975) 3,377,079 25,813,705
------------ ------------ ------------ ------------
Total increase/(decrease)
in net assets 4,444,342 (22,667,776) 11,241,736 22,659,440
Net Assets:
Beginning of period 63,513,965 86,181,741 22,659,440 --
------------ ------------ ------------ ------------
End of period $ 67,958,307 $ 63,513,965 $ 33,901,176 $ 22,659,440
------------ ------------ ------------ ------------
</TABLE>
- ----------
*Commencement of operations.
See Accompanying Notes to Financial Statements.
14
<PAGE>
Warburg Pincus Funds
U.S. Core Equity Fund Financial Highlights
(For a Share Outstanding Throughout Each Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Institutional Common
-------------------------------------------------------------------- ------------
For the
For the Period
For the Six Period November 2,
Months Ended September 1, 1998* to
February 28, For the Year Ended August 31, 1994* February 28,
1999 --------------------------------- to August 31, 1999
(Unaudited) 1998 1997 1996 1995 (Unaudited)
----------- ------- ------- ------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 21.73 $ 24.40 $ 19.05 $ 17.86 $ 15.00 $25.22
------- ------- ------- ------- ------- ------
Income from investment
operations
Net investment income (loss) 0.04 0.01 0.14 0.20 0.22 0.03
Net gain (loss) on investments
and foreign currency
transactions (both realized
and unrealized) 6.47 0.88 6.82 2.81 2.72 2.97
------- ------- ------- ------- ------- ------
Total from investment
operations 6.51 0.89 6.96 3.01 2.94 3.00
------- ------- ------- ------- ------- ------
Less Distributions
Dividends from net investment
income (0.04) (0.13) (0.20) (0.21) (0.08) (0.04)
Distributions from capital gains (9.74) (3.43) (1.41) (1.61) -- (9.74)
------- ------- ------- ------- ------- ------
Total distributions (9.78) (3.56) (1.61) (1.82) (0.08) (9.78)
------- ------- ------- ------- ------- ------
Net asset value, end of period $ 18.46 $ 21.73 $ 24.40 $ 19.05 $ 17.86 $18.44
======= ======= ======= ======= ======= ======
Total return 30.18%(c) 3.18% 38.32% 17.59% 19.75% 12.05%(c)
Ratios/Supplemental Data:
Net assets, end of period
(000s omitted) $67,873 $63,514 $86,182 $59,015 $31,644 $ 85
Ratio of expenses to
average net assets 0.99%(a)(b) 1.00%(a) 1.00%(a) 1.00%(a) 1.00%(a) 1.25%(a)(b)
Ratio of net investment
income (loss)
to average net assets 0.32%(b) 0.23% 0.67% 1.25% 1.59% 0.02%(b)
Fund turnover rate 63%(c) 164% 93% 127% 123% 63%(c)
</TABLE>
- ----------
(a) Without the voluntary waiver of advisory fees and administration fees, the
ratios of expenses to average net assets for the Institutional Class would
have been 1.19% annualized for the six months ended February 28, 1999 and
1.18%, 1.18% and 1.34% for the years ended August 31, 1998, 1997 and 1996,
respectively and 1.51% annualized for the period ended August 31, 1995.
Without the voluntary waiver of advisory fees and administration fees, the
ratios of expenses to average net assets for the Common Class would have
been 1.38% annualized for the period ended February 28, 1999.
(b) Annualized.
(c) Not Annualized.
* Commencement of operations.
See Accompanying Notes to Financial Statements.
15
<PAGE>
Warburg Pincus Funds
Select Economic Value Equity Financial Highlights
(For a Share Outstanding Throughout Each Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Institutional Common
----------------------------- --------------
For the For the Period
For the Six Period November 2,
Months Ended August 3, 1998* to
February 28, 1998* February 28,
1999 to August 31, 1999
(Unaudited) 1998 (Unaudited)
------------ ------------- --------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 13.17 $ 15.00 $15.95
------- ------- ------
Income from investment operations
Net investment income (loss) 0.03 0.01 0.02
Net gain (loss) on investments and
foreign currency transactions
(both realized and unrealized) 4.45 (1.84) 1.67
------- ------- ------
Total from investment operations 4.48 (1.83) 1.69
------- ------- ------
Less distributions
Dividends from net investment income (0.02) -- (0.02)
Distributions from capital gains -- -- --
------- ------- ------
Total distributions (0.02) -- (0.02)
Net asset value, end of period $ 17.63 $ 13.17 $17.62
======= ======= ======
Total return 34.05%(c) (12.20)%(c) 10.56%(c)
Ratios/Supplemental Data:
Net assets, end of period (000s omitted) $33,894 $22,659 $ 7
Ratio of expenses to average net assets 0.99%(a)(b) 1.00%(a)(b) 1.25%(a)(b)
Ratio of net investment income (loss)
to average net assets 0.36%(b) 0.92%(b) 0.38%(b)
Fund turnover rate 131%(c) 52%(c) 131%(c)
</TABLE>
- ----------
(a) Without the voluntary waiver of advisory fees and administration fees, the
ratios of expenses to average net assets for the Institutional Class would
have been 1.21% annualized for the six months ended February 28, 1999 and
1.30% annualized for the period ended August 31, 1998. Without the
voluntary waiver of advisory fees and administration fees, the ratios of
expenses to average net assets for the Common Class would have been 1.52%
annualized for the period ended February 28, 1999.
(b) Annualized.
(c) Not Annualized.
*Commencement of operations.
See Accompanying Notes to Financial Statements.
16
<PAGE>
Warburg Pincus Funds
Notes to Financial Statements
February 28, 1999 (Unaudited)
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Note 1. Summary of Significant Accounting Policies
The Warburg Pincus Funds covered in this report are comprised of Warburg
Pincus U.S. Core Equity Fund ("Core Equity") and Warburg Pincus Select Economic
Value Equity Fund ("Select Economic") (each, a "Fund" and together the "Funds"),
which are registered under the Investment Company Act of 1940, as amended (the
"1940 Act"), as non-diversified, open end management investment companies. Each
Fund is authorized to offer three classes of shares: Common, Advisor and
Institutional, although only Common shares and Institutional shares of each Fund
are currently offered. Common shares for each Fund bear expenses paid pursuant
to a shareholder servicing and distribution plan at an annual rate of .25% of
the average daily net asset value of the Fund's outstanding Common shares.
On October 23, 1998, pursuant to an Agreement and Plan of Reorganization,
each Fund acquired all of the assets and liabilities of a corresponding
investment series of The RBB Fund, Inc. (collectively, the "Acquired Funds").
The acquisitions were accomplished by a tax-free exchange of the following
shares of each Fund, in each case for the same amount of shares of the
corresponding class of the applicable Acquired Fund. Shares were reissued to
shareholders at the time of the reorganizations.
Fund Common Shares Institutional Shares
------ ------------- --------------------
Core Equity -- $2,578,272
Select Economic -- 1,755,874
The net assets of each Fund directly after the reorganization were the same
as the corresponding Acquired Fund as described in the table below. Each Fund
assumed the prior operating history of the corresponding Acquired Fund.
Unrealized
Fund Net Assets Appreciation/(Depreciation)*
------ ----------- ----------------------------
Core Equity $62,977,054 $1,772,191
Select Economic 27,207,148 994,655
The Funds may be permitted to engage in the investment strategies described
in the Notes to Financial Statements. The Funds are not obligated to pursue any
of the following strategies and do not represent that these techniques are
available now or will be available at any time in the future. Please refer to
each Fund's prospectuses and statement of additional information for a
description of its investment strategies.
- ----------
*The amount of each Fund's net assets includes the amount of unrealized
appreciation/(depreciation) listed above.
17
<PAGE>
Warburg Pincus Funds
Notes to Financial Statements (cont'd)
February 28, 1999 (Unaudited)
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Note 1. Summary of Significant Accounting Policies -- (cont'd)
A) SECURITY VALUATION -- The net asset value of each Fund is
determined daily as of the close of regular trading on the New York Stock
Exchange. Each Fund's securities for which market quotations are readily
available are valued at market value, which is currently determined using
the last reported sales price. If no sales are reported, as in the case of
some securities traded over-the-counter, the securities are valued at the
mean between the last reported bid and asked prices. All other securities
and assets are valued as determined in good faith by the Fund's Board of
Directors. Short-term obligations with maturities of 60 days or less are
valued at amortized cost which approximates market value.
B) FOREIGN CURRENCY TRANSACTIONS -- Transactions denominated in
foreign currencies are recorded in each Fund's records at the current
prevailing exchange rates. Asset and liability accounts that are
denominated in a foreign currency are adjusted daily to reflect current
exchange rates. Transaction gains or losses resulting from changes in
exchange rates during the reporting period or upon settlement of the
foreign currency transaction are reported in operations for the current
period. It is not practical to isolate that portion of both realized and
unrealized gains and losses on investments in the statement of operations
that result from fluctuations in foreign currency exchange rates. Each Fund
reports certain foreign currency related transactions as components of
realized gains for financial reporting purposes, whereas such components
are treated as ordinary income (loss) for Federal income tax purposes.
C) SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security
transactions are accounted for on the trade date. The cost of investments
sold is determined by use of the specific identification method for both
financial reporting and income tax purposes. Interest income is recorded on
the accrual basis. Dividends are recorded on the ex-dividend date. Certain
expenses are class specific expenses and vary by class. Expenses not
directly attributable to a specific Fund or class are allocated based on
relative net assets of each Fund and class, respectively.
18
<PAGE>
Warburg Pincus Funds
Notes to Financial Statements (cont'd)
February 28, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Note 1. Summary of Significant Accounting Policies -- (cont'd)
D) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- Each Fund calculates
its dividends from net investment income. Net investment income includes
interest accrued and dividends earned on the Fund's portfolio securites for
the applicable period less applicable expenses. Each of the Select Economic
and Core Equity will distribute substantially all of its net realized
capital gains and all net investment income, if any, to its shareholders
annually. The character of distributions made during the year for net
investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes due to generally accepted
accounting principles (GAAP) and tax differences in the character of income
and expense recognition. These differences are primarily due to differing
treatments for net operating losses, mortgage-backed securities, passive
foreign investment companies, and forward foreign currency contracts.
E) FEDERAL INCOME TAXES -- No provision is made for Federal taxes as
it is each Fund's intention to qualify for and elect the tax treatment
applicable to regulated investment companies under the Internal Revenue
Code of 1986, as amended and make the requisite distributions to its
shareholders which will be sufficient to relieve it from Federal income and
excise taxes.
F) USE OF ESTIMATES -- The preparation of financial statements in
conformity with GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
19
<PAGE>
Warburg Pincus Funds
Notes to Financial Statements (cont'd)
February 28, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Note 1. Summary of Significant Accounting Policies -- (cont'd)
G) REPURCHASE AGREEMENTS -- Money market instruments may be purchased
from banks and non-bank dealers subject to the seller's agreement to
repurchase them at an agreed upon date and price. Collateral for repurchase
agreements may have longer maturities than the maximum permissible
remaining maturity of portfolio investments. The seller will be required on
a daily basis to maintain the value of the securities subject to the
agreement at not less than the repurchase price. The agreements are
conditional upon the collateral being deposited under the Federal Reserve
book-entry system or held in a separate account by each Fund's custodian or
an authorized securities depository. Neither of the Funds had open
repurchase agreements at February 28, 1999.
H) FUTURES TRANSACTIONS -- A Fund invests in futures contracts for the
purpose of hedging its existing portfolio securities, or securities that
the Fund intends to purchase, against fluctuations in value caused by
changes in prevailing market interest rates or securities prices, or for
other purposes. Certain Funds' may enter into futures contracts subject to
certain limitations. Upon entering into a futures contract, each Fund is
required to deposit cash or pledge U.S. Government securities of an initial
margin. Subsequent payments, which are dependent on the daily fluctuations
in the value of the underlying instrument, are made or received by the Fund
each day (daily variations margin) and are recorded as unrealized gains or
losses until the contracts are closed. When the contracts are closed, the
Fund records a realized gain or loss equal to the difference between the
proceeds from (or cost of) the closing transaction and the Fund's basis in
the contracts. Risks of entering into futures contracts include the
possibility that there will be an imperfect price correlation between the
futures contracts and the underlying securities. Second, it is possible
that a lack of liquidity for futures contracts could exist in the secondary
market, resulting in an inability to close a futures position prior to its
maturity date. Third, the purchase of a futures contract involves the risk
that a Fund could lose more than the original margin deposit required to
initiate a futures transaction. Neither of the Funds had open future
transactions at February 28, 1999.
20
<PAGE>
Warburg Pincus Funds
Notes to Financial Statements (cont'd)
February 28, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Note 1. Summary of Significant Accounting Policies -- (cont'd)
I) TBA PURCHASE COMMITMENTS -- The Funds may enter into "TBA" (to be
announced) purchases commitments to purchase securities for a fixed price
at a future date, typically not exceeding 45 days. TBA purchase commitments
may be considered securities in themselves, and involve a risk of loss if
the value of the security to be purchased declines prior to settlement
date, which risk is in addition to the risk of decline in each Fund's other
assets. Unsettled TBA purchase commitments are valued at the current market
value of the underlying securities, according to the procedures described
under "Security Valuation" above.
J) SECURITIES LENDING -- Loans of the securities are required at all
times to be secured by collateral at least equal to 102% of the market
value of domestic securities on loan including any accrued interest thereon
and 105% of the market value of foreign securities on loan including any
accrued interest thereon. However, in the event of default or bankruptcy by
the other party to the agreement, realization and/or retention of the
collateral may be subject to legal proceedings. The market value of
securities on loan to brokers and the value of collateral held by each Fund
with respect to such loans (including the right to draw on a letter of
credit) at February 28, 1999 is as follows:
Markets Value of Value of
Fund Securities Loaned Collateral Recorded
---- ----------------- -------------------
Core Equity $4,700,578 $4,835,500
K) SHORT SALES -- When a Fund's investment adviser believes that a
security is overvalued, it may sell the security short by borrowing the
same security from a broker or other institution and selling the security.
A Fund will incur a loss as a result of the short sale if the price of the
borrowed security increases between the date of the short sale and the date
on which the Fund replaces such security. A Fund will realize a gain if
there is a decline in price of the security between those dates, which
decline exceeds the cost of borrowing the security and other transaction
costs. There can be no assurance that a Fund will be able to close out a
short position at any particular time or at an acceptable price. Although a
Fund's gain is limited to the amount at which it sold a security short, its
potential loss is limited only by the maximum attainable price of the
security (which at least theoretically is unlimited) less the price at
which the security was sold. Until a Fund replaces a borrowed security, it
will maintain at all times cash, or liquid
21
<PAGE>
Warburg Pincus Funds
Notes to Financial Statements (cont'd)
February 28, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Note 1. Summary of Significant Accounting Policies -- (cont'd)
securities in an amount which, when added to any amount deposited with a
broker as collateral will at least equal the current market value of the
security sold short. Depending on arrangements made with brokers, a Fund
may not receive any payments (including interest) on collateral deposited
with them.
L) OTHER -- Securities denominated in currencies other than the U.S.
dollar are subject to changes in value due to fluctuations in exchange
rates.
Some countries in which the Funds invest require governmental approval
for the repatriation of investment income, capital or the proceeds of sales
of securities by foreign investors. In addition, if there is a
deterioration in a country's balance of payments or for other reasons, a
country may impose temporary restrictions on foreign capital remittances
abroad.
The securities exchanges of certain foreign markets are substantially
smaller, less liquid and more volatile than the major securities markets in
the United States. Consequently, acquisition and disposition of securities
by each Fund may be inhibited. In addition, a significant proportion of the
aggregate market value of equity securities listed on the major securities
exchanges in emerging markets are held by a smaller number of investors.
This may limit the number of shares available for acquisition or
disposition by a Fund.
Lower-rated debt securities (commonly known as "junk bonds") possess
speculative characteristics and are subject to greater market fluctuations
and risk of lost income and principal than higher-rated debt securities for
a variety of reasons. Also, during an economic downturn or substantial
period of rising interest rates, highly leveraged issuers may experience
financial stress which would adversely affect their ability to service
their principal and interest payment obligations, to meet projected
business goals and to obtain additional financing.
In addition, periods of economic uncertainty and changes can be
expected to result in increased volatility of market prices of lower-rated
debt securities and (to the extent a Fund invests in junk bonds) the Fund's
net asset value.
22
<PAGE>
Warburg Pincus Funds
Notes to Financial Statements (cont'd)
February 28, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Note 2. Transactions with Affiliates and Related Parties
Pursuant to Investment Advisory Agreements, Credit Suisse Asset Management
("CSAM") an indirect, wholly-owned subsidiary of Credit Suisse Group, serves as
investment adviser for the two Funds described herein.
For its advisory services, CSAM is entitled to receive the following fees,
computed daily and payable monthly on each Fund's average daily net assets:
Fund Annual Rate
---- ---------------------------------
Select Economic 0.75% of average daily net assets
Core Equity 0.75% of average daily net assets
CSAM may, at its discretion, voluntarily waive all or any portion of its
advisory fee for any of the Funds. For the six months ended February 28, 1999,
advisory fees and waivers for each of the twelve investment Funds were as
follows:
Gross Net
Fund Advisory Fee Waiver Advisory Fee
---- ------------ --------- ------------
Core Equity $245,268 $(52,992) $192,276
Select Economic 114,020 (28,012) 86,008
State Street Bank and Trust Company ("State Street"), serves as each Fund's
transfer and dividend disbursing agent. State Street has delegated most of its
Fund service obligations to Boston Financial Data Services, Inc.
(BFDS), a 50% owned subsidiary of State Street.
Counsellors Funds Service, Inc. ("CFSI"), a wholly-owned subsidiary of
Warburg Pincus Asset Management, Inc., and PFPC Inc. ("PFPC"), an indirect,
wholly-owned subsidiary of PNC Bank Corp., serve as each Fund's
co-administrators. For administration services, each Fund pays CFSI a fee
calculated at an annual rate of .05% of the Fund's first $125 million in average
daily net assets of the Common shares and .10% of average daily net assets of
the Common shares over $125 million. No compensation is payable by the Funds to
CFSI for co-administration services for the Institutional shares. CSFI may, at
its discretion, voluntarily waive all or any portion of its co-administration
fees for any of the Funds. For the period October 23, 1998 to February 28, 1999,
co-administration fees earned and waived by CFSI were as follows:
Gross Net
Fund Administration Fee Waiver Administration Fee
---- ------------------ ------ ------------------
Core Equity $5 $(4) $1
Select Economic 1 -- 1
23
<PAGE>
Warburg Pincus Funds
Notes to Financial Statements (cont'd)
February 28, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Note 2. Transactions with Affiliates and Related Parties -- (cont'd)
Prior to October 23, 1998, Provident Distributors, Inc. ("PDI") served as
administrative service agent. An administrative service fee was computed daily
and payable quarterly at an annual rate of .15% of the average daily net assets
of the corresponding portfolios of the RBB Fund.
The administrative service agent may at its discretion voluntarily waive
all or any portion of its administrative fee for either of the Funds. For the
period ended October 23, 1998, administrative service fees earned and waived by
PDI were as follows:
Gross Administrative Net Administrative
Fund Service Fee Waiver Service Fee
---- ------------------- --------- ------------------
Core Equity 13,560 $(12,656) $904
Select Economic 5,339 (4,984) 355
For administration services, PFPC currently receives a fee calculated at
annual rate of .125% on each Fund's average daily net assets, subject to a
minimum annual fee and exclusive of out-of-pocket expenses. PFPC may, at its
discretion, voluntarily waive all or any portion of it administration fee for
any of the Funds. For the six months ended February 28, 1999, co-administration
fees earned and waived by PFPC were as follows:
Gross Administrative Net Administrative
Fund Fee Waiver Fee
---- -------------------- ------ ------------------
Core Equity $40,878 -- $40,878
Select Economic 19,003 -- 19,003
Counsellors Securities Inc. ("CSI"), also a wholly-owned subsidiary of
Warburg Pincus Asset Management, Inc., serves as each Fund's distributor. No
compensation is payable by any Fund to CSI for its distribution services for
Institutional shares. For its distribution services for the Common shares, CSI
receives a fee calculated at an annual rate of .25% of the average daily net
assets of the Common shares of each Fund. For the six months ended February 28,
1999, distribution fees earned by CSI were as follows:
Fund Distribution Fee
---- ----------------
Core Equity $23
Select Economic 3
24
<PAGE>
Warburg Pincus Funds
Notes to Financial Statements (cont'd)
February 28, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Note 3. Purchases and Sales of Securities
For the six months ended February 28, 1999, purchases and sales of
investment securities (other than short-term investments) were as follows:
Investment Securities Short Securities
-------------------------- ----------------
Fund Purchases Sales Sales
---- ----------- ----------- ----------------
Core Equity $40,018,407 $43,042,918 --
Select Economic 43,351,827 39,338,689 --
Note 4. Capital Shares
Transactions in capital shares for each period were as follows:
<TABLE>
<CAPTION>
U.S. Core Equity Fund
------------------------------------------------------------------------------------------
Institutional Common
----------------------------------------------------------- --------------------------
For the Period
For the Six Months Ended November 2, 1998*
February 28, 1999 For the Year Ended Through February 28, 1999
(Unaudited) August 31, 1998 (Unaudited)
--------------------------- --------------------------- --------------------------
Shares Value Shares Value Shares Value
--------- ----------- ---------- ------------ ------ -------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 82,118 $ 1,771,766 682,212 $ 16,949,211 4,942 $95,732
Shares issued in
reinvestment of
dividends 1,230,677 22,619,858 568,713 12,778,985 155 2,861
Shares repurchased (558,922) (12,751,646) (1,859,405) (46,573,171) (481) (8,832)
--------- ----------- ---------- ------------ ----- -------
Net increase/(decrease) 753,873 $11,639,978 (608,480) $(16,844,975) 4,616 $89,761
========= =========== ========== ============ ===== =======
</TABLE>
<TABLE>
<CAPTION>
Select Economic Value Equity Fund
------------------------------------------------------------------------------------------
Institutional Common
----------------------------------------------------------- --------------------------
For the Period
For the Six Months Ended For the Period November 2, 1998*
February 28, 1999 August 3, 1998* Through February 28, 1999
(Unaudited) Through August 31, 1998 (Unaudited)
--------------------------- -------------------------- --------------------------
Shares Value Shares Value Shares Value
--------- ----------- --------- ------------ ------ -------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 330,916 $ 5,679,987 1,721,030 $25,813,705 868 $14,991
Shares issued in
reinvestment of
dividends 2,776 49,578 -- -- -- --
Shares repurchased (132,481) (2,359,699) -- -- (450) (7,778)
-------- ----------- --------- ---------- ---- -------
Net increase 201,211 $ 3,369,866 1,721,030 $25,813,705 418 $ 7,213
======== =========== ========= =========== ==== =======
</TABLE>
- ------------------
* Commencement of operations.
25
<PAGE>
Warburg Pincus Funds
Notes to Financial Statements (cont'd)
February 28, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Note 4. Capital Shares -- (cont'd)
On February 28, 1999, seven shareholders held approximately 81% of the Core
Equity Common shares.
Note 5. Forward Foreign Currency Contracts
The Funds will generally enter into forward foreign currency exchange
contracts as a way of managing foreign exchange rate risk and to enhance total
return. Each Fund may enter into these contracts to fix the U.S. dollar value of
a security that it has agreed to buy or sell for the period between the date the
trade was entered into and the date the security is delivered and paid for. Each
Fund may also use these contracts to hedge the U.S. dollar value of securities
denominated in foreign currencies that it already owns. The Fund may enter into
these contracts for the purchase or sale of a specific foreign currency at a
fixed price on a future date as a hedge or cross-hedge against either
transactions or portfolio positions.
Forward foreign currency contracts are valued at the forward rate, and are
marked-to-market daily. The change in market value is recorded by each Fund as
an unrealized gain or loss. When the contract is closed, each Fund records a
realized gain or loss equal to the difference between the value of the contract
at the time it was opened and the value at the time it was closed. Each Fund's
policy is to include this portion of realized and unrealized gains and losses on
investments that result from foreign currency changes with other foreign
currency gains and losses on the Statement of Operations.
The use of forward foreign currency contracts does not eliminate
fluctuations in the underlying prices of each Fund's portfolio securities, but
it does establish a rate of exchange that can be achieved in the future.
Although forward foreign currency contracts limit the risk of loss due to a
decline in the value of the hedged currency, they also limit any potential gain
that might result should the value of the currency increase. In addition, a Fund
could be exposed to risks if the counterparty to the contract is unable to meet
the terms of the contract. During the six months ended February 28, 1999,
neither Fund entered into forward foreign currency contracts.
26
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