--------------------------------------------------------------------------------
[WARBURG PINCUS FUNDS logo omitted][CREDIT SUISSE ASSET MANAGEMENT logo omitted]
ANNUAL
REPORT
AUGUST 31, 2000
WARBURG PINCUS
LONG-SHORT MARKET NEUTRAL FUND
More complete information about the Fund, including charges and expenses, is
provided in the PROSPECTUS, which must precede or accompany this document and
which should be read carefully before investing. You may obtain additional
copies by calling 800-WARBURG (800-927-2874) or by writing to Warburg Pincus
Funds, P.O. Box 9030, Boston, MA 02205-9030.
Credit Suisse Asset Management Securities, Inc., Distributor, is located at 466
Lexington Ave., New York, NY 10017-3147. Warburg Pincus Funds are advised by
Credit Suisse Asset Management, LLC.
--------------------------------------------------------------------------------
<PAGE>
FROM TIME TO TIME, THE FUND'S INVESTMENT ADVISER AND CO-ADMINISTRATORS MAY
WAIVE SOME FEES AND/OR REIMBURSE SOME EXPENSES, WITHOUT WHICH PERFORMANCE WOULD
BE LOWER. WAIVERS AND/OR REIMBURSEMENTS ARE SUBJECT TO CHANGE.
RETURNS ARE HISTORICAL AND INCLUDE CHANGE IN SHARE PRICE AND REINVESTMENT OF
DIVIDENDS AND CAPITAL GAINS. PAST PERFORMANCE CANNOT GUARANTEE FUTURE RESULTS.
RETURNS AND SHARE PRICE WILL FLUCTUATE, AND REDEMPTION VALUE MAY BE MORE OR LESS
THAN ORIGINAL COST.
INVESTMENT IN SHARES OF THE FUND CAN BE MORE VOLATILE AND RISKY THAN SOME
OTHER FORMS OF INVESTMENT. IN ADDITION, IF THE ADVISER TAKES LONG POSITIONS IN
STOCKS THAT DECLINEOR SHORT POSITIONS IN STOCKS THAT INCREASE IN VALUE, THEN THE
LOSSES OF THE FUND MAYEXCEED THOSE OF OTHER STOCK MUTUAL FUNDS THAT HOLD LONG
POSITIONS ONLY.
THE VIEWS OF THE FUND'S MANAGEMENT ARE AS OF THE DATE OF THE LETTERS AND
PORTFOLIO HOLDINGS DESCRIBED IN THIS DOCUMENT ARE AS OF AUGUST 31, 2000; THESE
VIEWS AND PORTFOLIO HOLDINGS MAY HAVE CHANGED SUBSEQUENT TO THESE DATES. NOTHING
IN THIS DOCUMENT IS A RECOMMENDATION TO PURCHASE OR SELL SECURITIES.
FUND SHARES ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF CREDIT SUISSE ASSET
MANAGEMENT, LLC ("CSAM")OR ANY AFFILIATE, ARE NOT FDICINSURED AND ARE NOT
GUARANTEED BY CSAM OR ANY AFFILIATE. FUND INVESTMENTS ARE SUBJECT TO INVESTMENT
RISKS, INCLUDING LOSS OF YOUR INVESTMENT.
<PAGE>
WARBURG PINCUS LONG-SHORT MARKET NEUTRAL FUND
PORTFOLIO MANAGERS' LETTER -- AUGUST 31, 2000
--------------------------------------------------------------------------------
September 25, 2000
Dear Shareholders:
We are writing to report on the results of the Warburg Pincus Long-Short
Market Neutral Fund (the "Fund") for the fiscal year ended August 31, 2000.
At August 31, 2000, the net asset value ("NAV") of the Fund's Common shares
was $14.92, compared to an NAV of $14.19 on August 31, 1999. As a result, the
Common shares' total return was 12.0%, assuming the reinvestment of dividends
and distributions totaling $0.93 per share. By comparison, the Salomon Smith
Barney U.S. One-Month Treasury Bill Index1 benchmark (the "Index") returned 5.1%
during the same period.
The Fund outperformed the Index benchmark during the fiscal year due to a
positive combination of market conditions and our emphasis on stock selection
using fundamental factors that our research concluded would be most effective.
Long positions had most, if not all, of the characteristics we favored, while
the converse was true for desirable short stocks. These factors included:
o FINANCIAL CONDITION. Our analysis projected that companies whose financial
condition was strong and improving would perform well. Among numerous
criteria of financial condition, we successfully focused on companies with
the best net profit margins within their competitive universe and
relatively low debt levels.
o RELATIVE STRENGTH. Our indicators of relative strength -- in other words,
the strength of a stock's price momentum compared to that of the market as
a whole -- performed at historically high levels late in 1999. This was
especially noteworthy in the context of the late 1999-early 2000 market
environment, when traders were piling into stocks that had recently
performed well. Emphasizing this factor proved beneficial to the Fund's
overall performance accordingly.
o EARNINGS MOMENTUM. In an environment in which U.S. macroeconomic growth was
slowing, we correctly highlighted companies whose earnings growth not only
was showing above-average momentum, but also was driven by solid underlying
fundamentals rather than questionable accounting treatments. In addition,
we continued to focus on companies whose earnings estimates were being
revised upward.
Top-performing long positions during the fiscal year included Hartford
Insurance, J.P. Morgan and Southwest Airlines, while our most successful shorts
were Goodyear Tire, Atmel, Charles Schwab, Gillette and Bowater.
1
<PAGE>
WARBURG PINCUS LONG-SHORT MARKET NEUTRAL FUND
PORTFOLIO MANAGERS' LETTER -- AUGUST 31, 2000 (CONT'D)
--------------------------------------------------------------------------------
On the negative side of the ledger, long stock selection was least effective
among names like At Home Corp., Beckman Coulter, Niagara Mohawk and Circuit
City. Our worst-performing shorts included Coca-Cola, Cardinal Health and SPX
Corp.
As developments occur that we believe would be of interest to you, we will
keep you informed. Meanwhile, if you have any questions about your portfolio or
the capital markets generally, please feel free to call upon us at any time.
Sincerely yours,
Credit Suisse Asset Management Structured Equities Management Team
William W. Priest, Jr., Chairman/Americas and Managing Director
Eric N. Remole, Managing Director
Marc E. Bothwell, Vice President
Michael A. Welhoelter, Vice President
INVESTING IN SHARES OF THE FUND CAN BE MORE VOLATILE AND RISKY THAN SOME
OTHER FORMS OF INVESTMENTS. IN ADDITION, IF THE ADVISER TAKES LONG POSITIONS IN
STOCKS THAT DECLINE OR SHORT POSITIONS IN STOCKS THAT INCREASE IN VALUE, THEN
LOSSES OF THE FUND MAY EXCEED THOSE OF OTHER STOCK MUTUAL FUNDS THAT HOLD LONG
POSITIONS ONLY.
2
<PAGE>
WARBURG PINCUS LONG-SHORT MARKET NEUTRAL FUND
PORTFOLIO MANAGERS' LETTER -- AUGUST 31, 2000 (CONT'D)
--------------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE WARBURG PINCUS
LONG-SHORT MARKET NEUTRAL FUND COMMON SHARES AND THE SALOMON SMITH BARNEY U.S.
ONE-MONTH TREASURY INDEX1 FROM INCEPTION (9/8/98) AND AT EACH QUARTER END.
(UNAUDITED)
[line graph omitted]
plot points as follows:
Warburg Pincus Long-Short 30 Day U.S.
Market Neutral Institutional Shares Treasury Bill Index
09/08/98 10000 10000
11/30/98 9803 10029
02/28/99 9927 10137
05/31/99 9674 10249
08/31/99 9467 10360
11/30/99 10288 10474
02/29/00 11136 10601
05/31/00 10638 10748
08/31/00 10603 10893
Average Annual
Total Returns
for the periods ended
8/31/00
(Common Shares)
1 year
12.00%
Since Inception
(9/8/98)
3.00%
Note: Past performance is not predictive of future performance. Investment
return and principle value of an investment will fluctuate so that an investor's
shares upon redemption may be worth more or less than their original cost.
1 Monthly return equivalents of yield averages which are not marked to market.
The Salomon Smith Barney U.S. One-Month Treasury Index consists of the last
one-month Treasury bill issues.
3
<PAGE>
WARBURG PINCUS LONG-SHORT MARKET NEUTRAL FUND
SCHEDULE OF INVESTMENTS
August 31, 2000
--------------------------------------------------------------------------------
NUMBER
OF
SHARES VALUE
-------- -----
COMMON STOCKS 87.6%
AEROSPACE & DEFENSE 1.3%
Textron, Inc. 1,500 $ 84,094
----------
AIR TRANSPORT-FREIGHT 1.7%
Southwest Airlines Co. 4,900 110,862
----------
AUTOMOBILES 4.6%
AutoNation, Inc.** 4,900 31,850
Ford Motor Co. 5,600 135,450
General Motors Corp. 1,300 93,844
General Motors Corp. Class H** 1,300 43,063
Visteon Corp. 1 11
----------
304,218
----------
BEVERAGES & TOBACCO 0.5%
Philip Morris Cos., Inc. 1,200 35,550
----------
BUILDING & BUILDING MATERIALS 2.5%
Armstrong Holdings, Inc. 10,400 165,750
----------
BUSINESS SERVICES 2.4%
Cendant Corp.** 1,300 17,144
Iron Mountain, Inc.** 1,000 34,125
Lamar Advertising Co.** 2,300 106,806
----------
158,075
----------
CHEMICALS 1.8%
Air Products & Chemicals, Inc. 1,300 47,206
Occidental Petroleum Corp. 3,500 75,688
----------
122,894
----------
COMPUTERS, SOFTWARE & SERVICES 0.2%
Earthlink, Inc.** 1,000 11,250
----------
CONSTRUCTION & BUILDING MATERIALS 1.1%
Ingersoll-Rand Co. 1,600 72,900
----------
CONSUMER PRODUCTS & SERVICES 2.3%
Nu Skin Enterprises, Inc.** 1,300 8,531
Unilever N.V. ADR 3,000 141,750
----------
150,281
----------
ELECTRIC UTILITIES 6.0%
FirstEnergy Corp. 3,300 81,675
Niagara Mohawk Power** 17,400 224,025
Pinnacle West Capital 2,400 98,850
----------
404,550
----------
See Accompanying Notes to Financial Statements.
4
<PAGE>
WARBURG PINCUS LONG-SHORT MARKET NEUTRAL FUND
SCHEDULE OF INVESTMENTS (CONT'D)
August 31, 2000
--------------------------------------------------------------------------------
NUMBER
OF
SHARES VALUE
-------- -----
COMMON STOCKS (CONT'D)
ELECTRONICS 6.0%
Circuit City Stores 1,800 $ 46,688
Intel Corp. 1,400 104,825
Linear Technology Corp. 2,200 158,263
Motorola, Inc. 1,600 57,700
Teradyne, Inc.** 400 25,925
Xilinx, Inc.** 100 8,888
----------
402,289
----------
ENERGY & OIL EXPLORATION 4.8%
Apache Corp. 1,000 63,000
Burlington Resources, Inc. 2,900 114,006
Exxon Mobil Corp. 800 65,300
Tidewater, Inc. 2,000 80,750
----------
323,056
----------
FINANCIAL SERVICES 10.3%
AMBAC Financial Group, Inc. 200 12,925
Hartford Financial Services, Inc. 3,200 213,200
J.P. Morgan & Co., Inc. 1,300 217,344
Legg Mason, Inc. 1,600 84,400
Merrill Lynch & Co., Inc. 500 72,500
UnionBanCal Corp. 3,500 86,844
----------
687,213
----------
FOOD & BEVERAGE 4.3%
Anheuser-Busch Cos., Inc. 1,200 94,575
Coors, (Adolph) Class B 1,200 71,475
Darden Restaurants, Inc. 2,200 38,913
Tootsie Roll Industries 2,100 84,525
----------
289,488
----------
HEALTH CARE 4.2%
Abbott Laboratories 2,600 113,750
Cigna Corp. 1,200 116,700
Tenet Healthcare Corp. 1,600 49,600
----------
280,050
----------
INSURANCE 2.1%
CNA Financial Corp.** 2,400 95,250
Wesco Financial Corp. 200 48,000
----------
143,250
----------
See Accompanying Notes to Financial Statements.
5
<PAGE>
WARBURG PINCUS LONG-SHORT MARKET NEUTRAL FUND
SCHEDULE OF INVESTMENTS (CONT'D)
August 31, 2000
--------------------------------------------------------------------------------
NUMBER
OF
SHARES VALUE
------- -----
COMMON STOCKS (CONT'D)
INTERNET CONTENT 2.1%
Internet Capital Group, Inc.** 4,100 $ 142,988
----------
INTERNET SOFTWARE 0.2%
New Era of Networks, Inc.** 400 14,025
----------
METALS & MINING 5.5%
Barrick Gold Corp. 2,900 46,219
Bethlehem Steel Corp.** 3,500 12,250
Inco, Ltd.** 12,900 230,588
Newmont Mining Corp. 4,100 76,106
----------
365,163
----------
PAPER & FOREST PRODUCTS 1.0%
Weyerhaeuser Co. 1,400 64,838
----------
PHARMACEUTICALS 2.8%
Chiron Corp.** 900 48,656
ICOS Corp.** 2,400 140,850
----------
189,506
----------
REAL ESTATE 7.1%
Apartment Investment & Management
Company Class A 3,500 157,063
CarrAmerica Realty Corp. 3,400 98,813
Equity Residential Properties Trust 1,100 52,800
General Growth Properties, Inc. 4,300 138,138
Simon Debartolo Group 1,300 29,656
----------
476,470
----------
RETAIL 1.8%
Best Buy Co., Inc.** 1,200 74,100
Ticketmaster Online-CitySearch, Inc.** 1,900 45,719
----------
119,819
----------
RETAIL - SPECIALTY APPAREL STORES 0.6%
Intimate Brands, Inc. Class A 2,600 41,925
----------
SEMICONDUCTORS 0.7%
National Semiconductor Corp.** 1,100 48,950
----------
See Accompanying Notes to Financial Statements.
6
<PAGE>
WARBURG PINCUS LONG-SHORT MARKET NEUTRAL FUND
SCHEDULE OF INVESTMENTS (CONT'D)
August 31, 2000
--------------------------------------------------------------------------------
NUMBER
OF
SHARES VALUE
------- -----
COMMON STOCKS (CONT'D)
TELECOMMUNICATIONS 9.6%
A. H. Belo Corp. Class A 3,500 $ 66,938
American Tower Corp. Class A** 200 7,263
Copper Mountain Networks, Inc.** 400 23,975
Cox Communications, Inc.** 3,900 138,694
QUALCOMM, Inc.** 700 41,913
Telephone and Data Systems, Inc. 2,900 336,400
WorldCom, Inc.** 800 29,200
----------
644,383
----------
WASTE MANAGEMENT 0.1%
Allied Waste Industries, Inc.** 400 3,675
----------
TOTAL COMMON STOCKS (Cost $5,436,039) 5,857,512
----------
SECURITIES SOLD SHORT (86.6%)
AEROSPACE & DEFENSE (5.5%)
AMR Corp.** (1,400) (45,938)
General Dynamics Corp. (700) (44,056)
Lear Corp.** (1,900) (40,969)
Lockheed Martin Corp. (2,900) (82,288)
T.R.W., Inc. (3,400) (155,338)
----------
(368,589)
----------
ARRANGEMENT OF TRANSPORTATION OF
FREIGHT & CARGO (0.7%)
Ryder System, Inc. (2,400) (46,050)
----------
AUTOMOBILE PARTS & EQUIPMENT (2.3%)
Dana Corp. (2,700) (66,656)
Goodyear Tire & Rubber Co. (3,800) (88,825)
----------
(155,481)
----------
BANKS & SAVINGS & LOANS (4.2%)
FirstMerit Corp. (12,100) (282,081)
----------
BEVERAGES & TOBACCO (0.7%)
UST, Inc. (2,100) (45,413)
----------
BUILDING & BUILDING MATERIALS (2.9%)
Fluor Corp. (4,700) (140,706)
Vulcan Materials Co. (1,200) (53,175)
----------
(193,881)
----------
See Accompanying Notes to Financial Statements.
7
<PAGE>
WARBURG PINCUS LONG-SHORT MARKET NEUTRAL FUND
SCHEDULE OF INVESTMENTS (CONT'D)
August 31, 2000
--------------------------------------------------------------------------------
NUMBER
OF
SHARES VALUE
------- -----
SECURITIES SOLD SHORT (CONT'D)
BUSINESS SERVICES (2.0%)
Catalina Marketing Corp.** (2,400) $ (102,450)
Keane, Inc.** (1,700) (29,431)
----------
(131,881)
----------
COMMUNICATIONS & MEDIA (0.2%)
Ariba, Inc.** (100) (15,738)
----------
CONGLOMERATES (0.9%)
General Electric Co. (1,000) (58,688)
----------
CONSUMER PRODUCTS & SERVICES (4.1%)
American Standard Cos.** (2,400) (111,150)
Colgate-Palmolive Co. (1,200) (61,125)
Gillette Co. (2,100) (63,000)
Whitman Corp. (3,100) (40,881)
----------
(276,156)
----------
CONTAINERS (0.3%)
Crown Cork & Seal Co., Inc. (1,300) (16,819)
----------
ELECTRONICS (4.2%)
Arrow Electronics, Inc.** (2,100) (76,388)
Atmel Corp.** (1,800) (36,000)
Cisco Systems** (500) (34,313)
UtiliCorp United, Inc. (5,700) (135,731)
----------
(282,432)
----------
ENERGY (2.0%)
Texas Utilities Co. (3,800) (132,763)
----------
ENERGY & OIL EXPLORATION (6.7%)
Edison International (6,400) (132,400)
National Fuel Gas Co. (1,200) (62,925)
R & B Falcon Corp.** (3,800) (108,300)
Texaco, Inc. (2,600) (133,900)
Tosco Corp. (300) (9,150)
----------
(446,675)
----------
See Accompanying Notes to Financial Statements.
8
<PAGE>
WARBURG PINCUS LONG-SHORT MARKET NEUTRAL FUND
SCHEDULE OF INVESTMENTS (CONT'D)
August 31, 2000
--------------------------------------------------------------------------------
NUMBER
OF
SHARES VALUE
------- -----
SECURITIES SOLD SHORT (CONT'D)
FINANCIAL SERVICES (10.7%)
American Financial Group (2,700) $ (66,994)
Bank One Corp. (900) (31,725)
Charles Schwab Corp. (1,800) (68,738)
Cincinnati Financial Corp. (800) (31,100)
Franklin Resources (4,300) (163,400)
Freddie Mac (1,000) (42,125)
H&R Block, Inc. (4,600) (165,025)
People's Bank (1,300) (27,463)
T. Rowe Price Associates, Inc. (1,700) (76,925)
Union Planters Corp. (1,400) (42,438)
----------
(715,933)
----------
FOOD & BEVERAGE (4.7%)
Campbell Soup Co. (2,700) (68,513)
Coca-Cola Co. (2,900) (152,613)
Dole Food Co., Inc. (4,400) (62,150)
Tricon Global Restaurants, Inc.** (1,000) (29,125)
----------
(312,401)
----------
HEALTH CARE (6.6%)
Beckman Coulter, Inc. (2,600) (197,925)
Cardinal Health, Inc. (1,700) (139,081)
United Healthcare Corp. (1,100) (103,950)
----------
(440,956)
----------
INDUSTRIAL GOODS & MATERIALS (2.2%)
SPX Corp.** (900) (147,600)
----------
INDUSTRIAL MANUFACTURING & PROCESSING (0.4%)
Cummins Engine Company, Inc. (700) (24,850)
----------
INTERNET CONTENT (0.5%)
InfoSpace.com, Inc.** (800) (31,200)
----------
LEISURE (0.9%)
International Game Technology** (2,100) (60,900)
----------
OFFICE EQUIPMENT & SUPPLIES (0.4%)
Pitney Bowes, Inc. (800) (29,250)
----------
PAPER & FOREST PRODUCTS (1.7%)
Bowater, Inc. (800) (41,100)
Georgia-Pacific Group (2,600) (69,550)
----------
(110,650)
----------
See Accompanying Notes to Financial Statements.
9
<PAGE>
WARBURG PINCUS LONG-SHORT MARKET NEUTRAL FUND
SCHEDULE OF INVESTMENTS (CONT'D)
August 31, 2000
--------------------------------------------------------------------------------
NUMBER
OF
SHARES VALUE
------- -----
SECURITIES SOLD SHORT (CONT'D)
PHARMACEUTICALS (3.4%)
FMC Corp.** (2,000) $ (135,625)
PE Corp. - Celera Genomics Group** (200 (21,688)
Pharmacia Corp. (1,200) (70,275)
-----------
(227,588)
-----------
PUBLISHING (1.2%)
Investment Technology Group, Inc.** (1,700) (81,600)
-----------
REAL ESTATE (4.4%)
Spieker Properties, Inc. (5,400) (294,975)
-----------
RETAIL (1.2%)
RadioShack Corp. (1,300) (76,700)
-----------
RETAIL - SPECIALTY APPAREL STORES (2.4%)
Dillard's, Inc. Class A (3,300) (42,281)
Payless ShoeSource, Inc.** (700) (37,363)
J.C. Penney Co., Inc.. (5,800) (81,200)
-----------
(160,844)
-----------
TELECOMMUNICATIONS (9.0%)
ALLTEL Corp. (1,400) (70,788)
AT&T Corp. - Liberty Media Group Class A** (2,700) (57,713)
Lucent Technologies (600) (25,088)
Metromedia Fiber Network, Inc.** (4,700) (187,706)
Nextel Communications, Inc. Cl. A** (100) (5,544)
Qwest Communications International, Inc.** (3,600) (185,850)
RCN Corp.** (1,500) (36,375)
Vitesse Semiconductor Corp.** (400) (35,525)
-----------
(604,589)
-----------
TRANSPORTATION (0.2%)
UAL Corp. (300) (14,325)
-----------
TOTAL SECURITIES SOLD SHORT (Cost $5,362,784) $(5,787,008)
-----------
See Accompanying Notes to Financial Statements.
10
<PAGE>
WARBURG PINCUS LONG-SHORT MARKET NEUTRAL FUND
SCHEDULE OF INVESTMENTS (CON'D)
August 31, 2000
-------------------------------------------------------------------------------
PAR
(000) VALUE
------- -----
REPURCHASE AGREEMENT--11.0%
Bear Stearns (Agreement dated
08/31/00, to be repurchased at
$735,042, collaterized by $775,000
U.S. Treasury Note 3.375% due
01/15/07. Market Value of
collateral is $747,147.)
6.620% 09/01/00 $735 $ 734,907
----------
(Cost $734,907)
TOTAL INVESTMENTS--12.0% (Cost $808,162*) 805,411
OTHER ASSETS IN EXCESS OF LIABILITIES--88.0% 5,883,851
-----------
TOTAL NET ASSET 100.0% $6,689,262
==========
* Cost for Federal income tax purposes at August 31, 2000 is $1,196,150. The
gross appreciation (depreciation) on a tax basis is as follows:
Gross Appreciation - Investments $ 725,075
Gross Depreciation - Investments (406,879)
Gross Appreciation - Short Sales 233,406
Gross Depreciation - Short Sales (942,341)
---------
Net Depreciation $ (390,739)
=========
** Non-income producing securities.
INVESTMENT ABBREVIATIONS
ADR American Depository Receipt
See Accompanying Notes to Financial Statements.
11
<PAGE>
WARBURG PINCUS LONG-SHORT MARKET NEUTRAL FUND
STATEMENT OF ASSETS AND LIABILITIES
August 31, 2000
--------------------------------------------------------------------------------
ASSETS
Investments, at value (cost - $6,170,946) $ 6,592,419
Deposits with brokers and custodian bank for
securities sold short 6,030,718
Receivable from investment adviser 5,450
Dividends and interest receivable 23,991
Prepaid expenses and other assets 30,655
-----------
Total Assets 12,683,233
-----------
LIABILITIES
Securities sold short (proceeds - $5,362,784) 5,787,008
Due to custodian 163,415
Distribution fee payable (Common shares) 438
Accrued expenses payable 43,110
-----------
Total Liabilities 5,993,971
-----------
NET ASSETS
Capital stock, $0.001 par value 451
Paid-in capital 7,933,246
Undistributed net investment income 164,310
Accumulated net realized loss from
investments and securities sold short (1,405,994)
Net unrealized depreciation on
investments and other, if any (2,751)
-----------
Net Assets $ 6,689,262
===========
INSTITUTIONAL SHARES
Net assets $ 4,588,015
-----------
Shares outstanding 310,455
-----------
Net asset value, offering price and redemption price
per share $ 14.78
===========
COMMON SHARES
Net assets $ 2,101,247
-----------
Shares outstanding 140,862
-----------
Net asset value, offering price and redemption price
per share $ 14.92
===========
See Accompanying Notes to Financial Statements.
12
<PAGE>
WARBURG PINCUS LONG-SHORT MARKET NEUTRAL FUND
STATEMENT OF OPERATIONS
For the Year Ended August 31, 2000
--------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends $ 107,668
Interest 393,082
Foreign taxes withheld (422)
---------
Total Investment Income 500,328
---------
EXPENSES:
Investment advisory fees 89,315
Administration fees 9,884
Dividend expense 102,788
Printing fees 76,634
Registration fees 33,317
Transfer agent fees 21,304
Legal fees 19,785
Audit fees 19,455
Custodian fees 15,816
Directors fees 10,149
Distribution fees 6,625
---------
405,072
Less fees waived, expenses reimbursed and
transfer agent offsets (156,335)
---------
Total Expenses 248,737
---------
Net Investment Income 251,591
---------
REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS:
Net realized gain/(loss) from:
Security transactions 409,585
Securities sold short (369,208)
---------
40,377
---------
Net change in unrealized appreciation from investments 474,681
---------
Net gain on investments 515,058
---------
Net increase in net assets resulting
from operations $ 766,649
=========
See Accompanying Notes to Financial Statements.
13
<PAGE>
WARBURG PINCUS LONG-SHORT MARKET NEUTRAL FUND
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
AUGUST 31, 2000 AUGUST 31, 1999
--------------- ---------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income $ 251,591 $ 499,594
Net gain/(loss) on investments 515,058 (1,815,539)
----------- -----------
Net increase/(decrease) in net assets resulting
from operations 766,649 (1,315,945)
----------- -----------
FROM DIVIDENDS AND DISTRIBUTIONS
TO SHAREHOLDERS:
Net investment income:
Institutional shares (345,792) (30,279)
Common shares (127,325) (90,662)
Net realized capital gains:
Institutional shares -- (52,082)
Common shares -- (159,858)
----------- -----------
Net decrease in net assets from
dividends and distributions (473,117) (332,881)
----------- -----------
NET CAPITAL SHARE TRANSACTIONS (1,389,851) 3,132,125
----------- -----------
Total increase/(decrease) in net assets (1,096,319) 1,483,299
NET ASSETS:
Beginning of year 7,785,581 6,302,282
----------- -----------
End of year $ 6,689,262 $ 7,785,581
=========== ===========
Undistributed net investment income $ 164,310 $ 385,836
=========== ===========
</TABLE>
See Accompanying Notes to Financial Statements.
14
<PAGE>
WARBURG PINCUS LONG-SHORT MARKET NEUTRAL FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout Each Period)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INSTITUTIONAL COMMON
------------------------------------------------ ---------------------------------
FOR THE YEAR FOR THE YEAR FOR THE PERIOD FOR THE YEAR
ENDED ENDED JULY 31, 1998* ENDED FOR THE PERIOD
AUGUST 31, AUGUST 31, TO AUGUST 31, AUGUST 31, SEPTEMBER 8, 1998*
2000 1999 1998 2000 TO AUGUST 31, 1999
------------ ------------ -------------- ------------ ------------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period $14.21 $15.27 $15.00 $14.19 $15.19
------ ------ ------ ------ ------
INVESTMENT ACTIVITIES:
Net investment income 0.70 0.39+ 0.05 0.61 0.32+
Net gain/(loss) on investments and
securities sold short (both realized
and unrealized) 0.99 (1.25) 0.22 1.05 (1.12)
------ ------ ------ ------ ------
Total from investment operations 1.69 (0.86) 0.27 1.66 (0.80)
------ ------ ------ ------ ------
LESS DIVIDENDS AND DISTRIBUTIONS:
Dividends from net investment income (1.12) (0.07) -- (0.93) (0.07)
Distributions from net realized
capital gains -- (0.13) -- -- (0.13)
------ ------ ------ ------ ------
Total dividends and distributions (1.12) (0.20) -- (0.93) (0.20)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $14.78 $14.21 $15.27 $14.92 $14.19
====== ====== ====== ====== ======
Total return 12.29% (5.68)% 1.80%3 12.00% (5.33)%3
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s omitted)$4,588 $5,901 $6,302 $2,101 $1,885
Ratio of expenses to average net assets
(including dividend expense) 3.44%1,2 3.33%1 4.32%1,4 3.80%1,2 3.40%1,4
Ratio of expenses to average net assets
(excluding dividend expense) 2.00%1 2.00%1 2.00%1,4 2.26%1 2.24%1,4
Ratio of net investment income to
average net assets 3.69% 2.65% 1.96%4 3.49% 2.46%4
Fund turnover rate 313% 705% 130%3 313% 705%3
<FN>
------------------
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 4.15% (excluding dividend expense) and 5.59% (including dividend
expense) for the year ended August 31, 2000, 2.56% (excluding dividend
expense) and 3.93% (including dividend expense) for the year ended August 31,
1999 and 5.12% (excluding dividend expense) and 7.44% (including dividend
expense) annualized for the period ended August 31, 1998. Without the
voluntary waiver of advisory fees and administration fees, the ratios of
expenses to average net assets for the Common Class would have been 4.65%
(excluding dividend expense) and 6.19% (including dividend expense) for the
year ended August 31, 2000 and 2.84% (exclucing dividend expense) and 4.00%
(including dividend expense) annualized for the period ended August 31, 1999.
2 Interest earned on uninvested cash balances is used to offset portions of the
transfer agent expense. These arrangements had no effect on the fund's expense
ratio.
3 Not Annualized.
4 Annualized.
* Inception Date.
+ Per share information is calculated using the average share outstanding
method.
</FN>
</TABLE>
See Accompanying Notes to Financial Statements.
15
<PAGE>
WARBURG PINCUS LONG-SHORT MARKET NEUTRAL FUND
NOTES TO FINANCIAL STATEMENTS
August 31, 2000
--------------------------------------------------------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Warburg, Pincus Long-Short Market Neutral Fund, Inc. (the "Fund"), is
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as a non-diversified, open-end management investment company. The Fund is
authorized to offer three classes of shares: Common, Advisor and Institutional,
although only Common shares and Institutional shares of the Fund are currently
offered. Common shares for the Fund bear expenses paid pursuant to a shareholder
servicing and distribution agreement at an annual rate not to exceed .25% of the
average daily net asset value of the Fund's outstanding Common shares. In
addition, the Common shares bear co-administration fees.
A) SECURITY VALUATION -- The net asset value of the Fund is
determined daily as of the close of regular trading on The New York Stock
Exchange Inc. The 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) 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 class are allocated based on relative
net assets of the class.
C) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund
calculates its dividends from net investment income. Net investment income
includes interest accrued and dividends earned on the Fund's portfolio
securities for the applicable period less applicable expense. The Fund will
distribute substantially all of its net realized capital gains and all net
investment income, if any, to its shareholders at least annually.
16
<PAGE>
WARBURG PINCUS LONG-SHORT MARKET NEUTRAL FUND
NOTES TO FINANCIAL STATEMENTS (CONT'D)
August 31, 2000
--------------------------------------------------------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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. To the extent these
differences are permanent in nature, such amounts are reclassified within
capital accounts based on U.S. tax-basis treatment. Temporary differences
do not require reclassification.
D) FEDERAL INCOME TAXES -- No provision is made for Federal taxes
as it is the 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.
E) 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.
F) 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 the Fund's custodian or
an authorized securities depository. The Fund had an open repurchase
agreement at August 31, 2000.
17
<PAGE>
WARBURG PINCUS LONG-SHORT MARKET NEUTRAL FUND
NOTES TO FINANCIAL STATEMENTS (CONT'D)
August 31, 2000
--------------------------------------------------------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
G) FUTURES TRANSACTIONS -- A Fund invests in futures contracts for
the purpose of hedging its existing portfolio securities, or securities
that the Fund intends to purchase, against fluctuations in fair value
caused by changes in prevailing market interest rates or securities prices,
or for other purposes. The Fund may enter into futures contracts subject to
certain limitations. Upon entering into a futures contract, the 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 the Fund could lose more than the original margin deposit required to
initiate a futures transaction. At August 31, 2000, the Fund did not have
any open futures contracts.
H) 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. Cash collateral received by the Fund in
connection with securities lending activity is invested in the Boston
Global Investment Trust. However, in the event of default or bankruptcy by
the other party to the agreement, realization and/or retention of the
collateral may be subject to legal proceedings. The Fund did not have any
securities on loan to brokers at August 31, 2000.
I) SHORT SALES -- When the 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.
The 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. The Fund will realize a gain
if there is a decline in price of the security
18
<PAGE>
WARBURG PINCUS LONG-SHORT MARKET NEUTRAL FUND
NOTES TO FINANCIAL STATEMENTS (CONT'D)
August 31, 2000
--------------------------------------------------------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
between those dates, if the decline exceeds the cost of borrowing the
security and other transaction costs. There can be no assurance that the
Fund will be able to close out a short position at any particular time or
at an acceptable price. Although the Fund's gain is limited to the amount
at which it has sold a security short, its potential loss is limited only
by the maximum attainable price of the security less the price at which the
security was sold. Until the Fund replaces a borrowed security, it will
maintain at all times cash 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 its net assets.
NOTE 2. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
Pursuant to an Investment Advisory Agreement, Credit Suisse Asset Management,
LLC ("CSAM"), an indirect, wholly-owned subsidiary of Credit Suisse Group,
serves as investment adviser for the Fund described herein.
For its advisory services, CSAM is entitled to receive from the Fund a
monthly fee equal to an annual rate of 1.50% of the Fund's average daily net
assets. In addition, CSAM is entitled to a monthly performance adjustment fee,
which may increase or decrease the total advisory fee by up to 0.50% per year.
The performance adjustment fee decreased the total advisory fee by $15,069 or
0.21% of average daily net assets due to lower performance in comparison to the
Salomon Smith Barney U.S. 1-Month Treasury Bill Index plus 5 percentage points
for the year ended August 31, 2000.
CSAM may, at its discretion, voluntarily waive all or any portion of its
advisory fee for the Fund. For the year ended August 31, 2000, the advisory fee
earned and waived by CSAM was as follows:
GROSS NET
ADVISORY FEE WAIVER ADVISORY FEE
------------ --------- ------------
$89,315 $(88,716) $599
CSAM reimbursed expenses of the Fund in the amount of $59,965 for the year
ended August 31, 2000.
19
<PAGE>
WARBURG PINCUS LONG-SHORT MARKET NEUTRAL FUND
NOTES TO FINANCIAL STATEMENTS (CONT'D)
August 31, 2000
--------------------------------------------------------------------------------
NOTE 2. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES (CONTINUED)
State Street Bank and Trust Company ("State Street"), serves as the Fund's
transfer and dividend disbursement agent. State Street has delegated most of its
Fund service obligations to Boston Financial Data Services, Inc. (BFDS), a 50%
owned subsidiary of State Street.
The Fund has an arrangement with its transfer agent whereby interest earned
on uninvested cash balances is used to offset a portion of its transfer agent
expense. For the year ended August 31, 2000, the Fund received credits or
reimbursements under this arrangement in the amount of $257.
Counsellors Fund Services, Inc. ("CFSI"), a wholly-owned subsidiary of Credit
Suisse Asset Management, LLC served as co-administrator of the Fund until
November 1, 1999. On November 1, 1999 Credit Suisse Asset Management Securities,
Inc. ("CSAMSI") replaced CFSI as co-administrator to the Fund. PFPC Inc.
("PFPC"), an indirect, wholly-owned subsidiary of PNC Financial Services Group,
Inc., also serves as the Fund's co-administrator. For administration services,
the Fund pays CSAMSI a fee calculated at an annual rate .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 Fund to CSAMSI for co-administration services for the
Institutional shares.
CFSI, at its discretion, voluntarily waived a portion of its
co-administration fees for the Fund. For the period September 1, 1999 to October
31, 1999, the co-administration fee earned and waived by CFSI on the Common
shares was as follows:
GROSS NET
CO-ADMINISTRATION FEE WAIVER CO-ADMINISTRATION FEE
------------------- ----------- -------------------
$163 $(131) $32
CSAMSI may, at its discretion, voluntarily waive all or any portion of its
administrative fee for the Fund. For the period November 1, 1999 to August 31,
2000, the co-administrative service fee earned and waived by CSAMSI on the
Common shares was as follows:
GROSS CO-ADMINISTRATIVE NET CO-ADMINISTRATIVE
FEE WAIVER FEE
------------------- ----------- -------------------
$1,162 $(929) $233
20
<PAGE>
WARBURG PINCUS LONG-SHORT MARKET NEUTRAL FUND
NOTES TO FINANCIAL STATEMENTS (CONT'D)
August 31, 2000
--------------------------------------------------------------------------------
NOTE 2. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES (CONTINUED)
For administration services, PFPC received a fee, for the period September 1,
1999 to July 31, 2000, calculated at an annual rate of .125% on the Fund's
average daily net assets subject to a minimum annual fee and exclusive of
out-of-pocket expenses. As of August 1, 2000, PFPC receives a fee calculated at
an annual rate of .10% of the Fund's first $500 million in average daily net
assets, .08% of the next $1 billion in average daily net assets and .06% of
average daily net assets over $1.5 billion, subject to a minimum annual fee and
exclusive of out of pocket expenses.
PFPC may, at its discretion, voluntarily waive all or any portion of its
administration fee for the Fund. For the year ended August 31, 2000, the
co-administration fee earned and waived by PFPC was as follows:
GROSS NET
CO-ADMINISTRATION FEE WAIVER CO-ADMINISTRATION FEE
--------------------- ----------- ---------------------
$8,559 $(6,336) $2,223
In addition to serving as the Fund's co-administrator, CSAMSI served as
distributor of the Fund's shares until January 1, 2000. On January 1, 2000,
Provident Distributors, Inc. ("PDI") replaced CSAMSI as distributor to the Fund.
On August 1, 2000, CSAMSI replaced PDI as distributor to the Fund. No
compensation is payable by the Fund to PDI or CSAMSI for distribution services,
but CSAMSI receives compensation from the Fund's Common shares under the
co-administration agreement for shareholder servicing and distribution. For the
Shareholder Servicing and Distribution Plan on the Common shares, CSAMSI
receives a fee calculated at an annual rate of .25% of the average daily net
assets of the Common shares of the Fund. For the year ended August 31, 2000, the
shareholder services fee earned by CSAMSI was $6,625.
NOTE 3. PURCHASES AND SALES OF SECURITIES
For the year ended August 31, 2000, purchases and sales of investment
securities (other than short-term investments) were as follows:
INVESTMENT SECURITIES SHORT SECURITIES
--------------------- ----------------
PURCHASES SALES SALES
----------- ----------- ----------
$19,281,005 $10,514,280 $8,900,802
21
<PAGE>
WARBURG PINCUS LONG-SHORT MARKET NEUTRAL FUND
NOTES TO FINANCIAL STATEMENTS (CONT'D)
August 31, 2000
--------------------------------------------------------------------------------
NOTE 4. CAPITAL SHARES
Transactions in capital shares for each period were as follows:
<TABLE>
<CAPTION>
INSTITUTIONAL COMMON
--------------------------------------------- ----------------------------------------------
FOR THE PERIOD
FOR THE YEAR ENDED FOR THE YEAR ENDED FOR THE YEAR ENDED SEPTEMBER 8,1998*
AUGUST 31, 2000 AUGUST 31, 1999 AUGUST 31, 2000 THROUGH AUGUST 31, 1999
------------------ ------------------ --------------- -----------------------
SHARES VALUE SHARES VALUE SHARES VALUE SHARES VALUE
-------- ------- -------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold 141,588 $ 2,105,343 2,702,645 $ 40,468,228 190,472 $ 2,886,336 3,454,318 $ 51,387,127
Shares issued in
reinvestment of
dividends 21,825 307,514 5,561 82,361 8,769 124,965 16,915 250,336
Shares
repurchased (268,139) (3,928,705) (2,705,769) (39,525,343) (191,177) (2,885,304) (3,338,435) (49,530,584)
-------- ---------- ---------- ------------ -------- ----------- ---------- ------------
Net increase/
(decrease) (104,726) $(1,515,848) 2,437 $ 1,025,246 8,064 $ 125,997 132,798 $ 2,106,879
======== =========== ========== ============ ======== =========== ========== ============
*Inception Date.
</TABLE>
On August 31, 2000, the number of shareholders that held 5% or more of the
outstanding shares are as follows:
NUMBER OF APPROXIMATE PERCENTAGE
SHAREHOLDERS OF OUTSTANDING SHARES
-------------- --------------------------
Institutional shares 5 92.83%
Common shares 3 90.48
NOTE 5. LINE OF CREDIT
The Fund, together with other funds advised by CSAM, has established a $350
million committed and a $75 million uncommitted, unsecured, line of credit
facility ("Credit Facility") with Deutche Bank, AG as administrative agent,
State Street Bank and Trust Company as operations agents, Bank of Nova Scotia as
syndication agent and certain other lender, for temporary or emergency purposes
primarily relating to unanticipated Fund share redemption. Under the terms of
the Credit Facility, the funds with access to the Credit Facility pay an
aggregate commitment fee at a rate of .075% per annum on the entire amount of
the Credit Facility, which is allocated among the participating funds in such
manner as is determined by the governing Boards of the various funds. In
addition the participating funds will pay interest on borrowing at the Federal
funds rate plus .50%. For the year ended August 31, 2000, the Fund had no
borrowings under the credit facility.
NOTE 6. CAPITAL LOSS CARRYOVER
At August 31, 2000, capital loss carryovers were available to offset future
realized gains in the amount of $483,438, which expires in 2008.
<PAGE>
WARBURG PINCUS LONG-SHORT MARKET NEUTRAL FUND
REPORT OF INDEPENDENT ACCOUNTANTS
--------------------------------------------------------------------------------
To the Board of Directors and Shareholders of
Warburg, Pincus Long-Short Market Neutral Fund, Inc.:
In our opinion, the accompanying statement of assets and liabilities
including the schedule of investments of Warburg, Pincus Long-Short Market
Neutral Fund, Inc., (the "Fund") as of August 31, 2000, and the related
statement of operations and of changes in net assets and the financial
highlights present fairly, in all material respects the financial position of
the Fund at August 31, 2000, the results of its operations for the year then
ended, the changes in its net assets for each of the two years (or periods) in
the period then ended and the financial highlights for each of the years (or
periods) presented, in conformity with accounting principles generally accepted
in the United States of America. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our audit
of these financial statements in accordance with auditing standards generally
accepted in the United States of America, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities at August 31,
2000 by correspondence with the custodian and brokers, provide a reasonable
basis for our opinion.
PricewaterhouseCoopers LLP
Two Commerce Square
2001 Market Street
Philadelphia, Pennsylvania
October 13, 2000
23
<PAGE>
WARBURG PINCUS LONG-SHORT MARKET NEUTRAL FUND
TAX INFORMATION LETTER
August 31, 2000
--------------------------------------------------------------------------------
IMPORTANT TAX INFORMATION FOR CORPORATE SHAREHOLDERS (UNAUDITED)
Corporate shareholders should note for the year ended August 31, 2000, the
percentage of the Fund's investment income (I.E., net investment income plus
short-term capital gains) that qualifies for the intercorporate dividends
received deductions is 50.39%.
24
<PAGE>
<PAGE>
--------------------------------------------------------------------------------
[WARBURG PINCUS FUNDS logo omitted]
P.O. BOX 9030, BOSTON, MA 02205-9030
800-WARBURG (800-927-2874) (TM) www.warburg.com
CREDIT SUISSE ASSET MANAGEMENT SECURITIES, INC., DISTRIBUTOR. WPLSN-2-0800
--------------------------------------------------------------------------------
