--------------------------------------------------------------------------------
[Warburg Pincus Funds logo omitted][Credit Suisse Asset Management logo omitted]
ANNUAL
REPORT
AUGUST 31, 2000
WARBURG PINCUS
FOCUS FUND
(FORMERLY WARBURG PINCUS SELECT
ECONOMIC VALUE EQUITY 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.
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 FDIC INSURED AND ARE NOT
GUARANTEED BY CSAM OR ANY AFFILIATE. FUND INVESTMENTS ARE SUBJECT TO INVESTMENT
RISKS, INCLUDING LOSS OF YOUR INVESTMENT.
<PAGE>
WARBURG PINCUS FOCUS FUND
PORTFOLIO MANAGERS' LETTER -- AUGUST 31, 2000
--------------------------------------------------------------------------------
September 25, 2000
Dear Shareholders:
We are writing to report on the results of the Warburg Pincus Focus Fund1
(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 $19.13, compared to an NAV of $20.11 at August 31, 1999. As a result, the
Common shares' total return was 33.4% (assuming the reinvestment of
distributions totaling $5.77 per share). By comparison, the Standard & Poor's
500 Index2 (the "Index") returned 16.3% during the same period.
We attribute the Fund's meaningful outperformance of its Index benchmark in
the fiscal year to our adoption of a "barbell" approach to the portfolio. This
approach was designed to enable the Fund to weather the periods of high market
volatility that we anticipated, and to do so better than the U.S. equity market
as a whole.
On one end of the barbell, we emphasized the shares of companies that stood
to benefit from global macroeconomic growth while possessing a somewhat
defensive profile. Many of these were in the health care and consumer
noncyclical sectors. On the other end, we focused on higher-growth companies,
I.E., select technology names that combined a reasonable valuation with clear
market leadership, proprietary products and/or strong pricing power.
Stock selection was effective on both ends of the barbell. Among the first
group, we fared best with pharmaceutical-related companies such as Mylan Labs
(which accounted for 2.1% of the portfolio at August 31) and Pfizer (2.9% at
August 31), as well as the medical technology producer Guidant (3.2% at August
31). We also owned Nabisco Group Holdings (2.6% at August 31), the food
manufacturer whose stock soared on the news that it was being acquired.
In technology, most of our largest positions generated solidly above-market
returns. The top performers in this group included leading business-to-business
software providers i2 Technologies (3.5% at August 31) and Siebel Systems (2.3%
at August 31), and the Internet hardware giant Cisco Systems (4.2% at August
31).
1
<PAGE>
WARBURG PINCUS FOCUS FUND
PORTFOLIO MANAGERS' LETTER -- AUGUST 31, 2000 (CONT'D)
--------------------------------------------------------------------------------
Our underweight position in financial services (I.E., relative to the Index
benchmark) was a detriment to performance, as the sector rallied late in the
fiscal year. We maintained this stance due to financial service companies' poor
fundamentals, which included limited revenue growth for many companies,
deteriorating credit quality and increased competition. Stock selection in
energy also negatively impacted performance, as we took losses on our positions
in leading oil companies like Exxon, Chevron and Marathon.
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,
D. Susan Everly, Director
2
<PAGE>
WARBURG PINCUS FOCUS FUND
PORTFOLIO MANAGERS' LETTER -- AUGUST 31, 2000 (CONT'D)
--------------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE WARBURG PINCUS FOCUS
FUND COMMON SHARES AND THE S&P 500 INDEX2 FROM INCEPTION (10/30/98) AND AT EACH
QUARTER END. (UNAUDITED)
[line graph omitted]
plot points as follows:
Warburg Pincus Focus Fund S&P 500
Common Shares Index2
10/30/98 $10000 $10000
11/30/98 10765 10606
02/28/99 11056 11322
05/31/99 11960 11942
08/31/99 12619 12151
11/30/99 13844 12821
02/29/00 14310 12650
05/31/00 15780 13193
08/31/00 16836 14134
Average Annual
Total Returns
for the periods ended
8/31/00
(Common Shares)
1 year
33.42%
Since Inception
(10/30/98)
32.70%
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 Name changed from Warburg Pincus Select Economic Value Equity Fund effective
January 1, 2000.
2 The Standard & Poor's 500 Index is an unmanaged index (with no defined
investment objective) of common stocks, includes reinvestment of dividends,
and is a registered trademark of McGraw-Hill Co., Inc.
3
<PAGE>
WARBURG PINCUS FOCUS FUND
SCHEDULE OF INVESTMENTS
August 31, 2000
--------------------------------------------------------------------------------
NUMBER
OF
SHARES VALUE
-------- -------
COMMON STOCKS (96.9%)
AEROSPACE & DEFENSE (7.3%)
Boeing Co. 8,700 $ 466,537
Lockheed Martin Corp. 18,200 516,425
----------
982,962
----------
AGRICULTURE (2.7%)
Archer-Daniels-Midland 41,265 363,648
----------
AUTOMOBILES (2.2%)
Ford Motor Co. 12,237 295,982
----------
BEVERAGES & TOBACCO (3.6%)
Philip Morris Cos., Inc. 16,400 485,850
----------
CHEMICALS (3.3%)
Du Pont (E.I.) De Nemours & Co. 7,700 345,537
IMC Global, Inc. 7,000 102,812
----------
448,349
----------
COMPUTERS, SOFTWARE & SERVICES (18.3%)
America Online** 6,800 398,650
Compaq Computer Corp. 8,600 292,937
EMC Corp.** 1,400 137,200
i2 Technologies** 2,700 456,806
Inktomi Corp.** 2,300 299,863
Microsoft Corp.** 7,400 516,613
Siebel Systems, Inc.** 1,500 296,719
Yahoo, Inc.** 500 60,750
----------
2,459,538
----------
CONGLOMERATES (2.6%)
General Electric Co. 6,000 352,125
----------
CONSUMER PRODUCTS & SERVICES (4.6%)
Unilever N.V. ADR 8,000 378,000
Wrigley (Wm.) Jr. Co. 3,300 244,406
----------
622,406
----------
ELECTRONICS (6.0%)
Atmel Corp.** 8,000 160,000
Cisco Systems** 8,100 555,863
Motorola, Inc. 2,500 90,156
----------
806,019
----------
See Accompanying Notes to Financial Statements.
4
<PAGE>
WARBURG PINCUS FOCUS FUND
SCHEDULE OF INVESTMENTS (CONT'D)
August 31, 2000
--------------------------------------------------------------------------------
NUMBER
OF
SHARES VALUE
-------- -------
COMMON STOCKS (CONT'D)
ENERGY & OIL EXPLORATION (3.7%)
Burlington Resources, Inc. 3,300 $ 129,731
Texaco, Inc. 7,000 360,500
-----------
490,231
-----------
FINANCIAL SERVICES (1.6%)
Freddie Mac 5,000 210,625
-----------
FOOD & BEVERAGE (5.9%)
Coca-Cola Co. 8,400 442,050
Nabisco Group Holdings Corp. 12,300 345,169
-----------
787,219
-----------
HEALTH CARE (5.8%)
Cardinal Health, Inc. 2,500 204,531
Gilead Sciences, Inc.** 1,400 151,200
Guidant Corp.** 6,200 417,338
-----------
773,069
-----------
MISCELLANEOUS (3.0%)
Standard & Poor's Depositary Receipts 2,600 396,094
-----------
PHARMACEUTICALS (12.5%)
Eli Lilly & Co. 4,500 328,500
Mylan Laboratories, Inc. 10,200 270,938
Pfizer, Inc. 8,900 384,925
Pharmacia Corp. 8,800 515,350
Watson Pharmaceuticals, Inc. 2,800 172,725
-----------
1,672,438
-----------
RETAIL (2.3%)
Costco Wholesale Corp.** 4,000 137,750
Wal-Mart Stores, Inc. 3,700 175,519
-----------
313,269
-----------
TELECOMMUNICATIONS (11.5%)
JDS Uniphase Corp.** 1,800 224,072
Lucent Technologies 11,100 464,119
SBC Communications, Inc. 12,900 538,575
WorldCom, Inc.** 8,600 313,900
-----------
1,540,666
-----------
TOTAL COMMON STOCKS (Cost $11,342,773) $13,000,490
-----------
See Accompanying Notes to Financial Statements.
5
<PAGE>
WARBURG PINCUS FOCUS FUND
SCHEDULE OF INVESTMENTS (CONT'D)
August 31, 2000
--------------------------------------------------------------------------------
PAR
(000) VALUE
-------- -------
SHORT-TERM INVESTMENT (1.8%)
BBH Grand Cayman U.S. Dollar Time Deposit
5.710% 09/01/00
(Cost $240,569) $241 $ 240,569
-----------
TOTAL INVESTMENTS (98.7%) (Cost $11,583,342*) 13,241,059
OTHER ASSETS IN EXCESS OF LIABILITIES (1.3%) 174,587
-----------
TOTAL NET ASSETS (100.0%) $13,415,646
===========
* Cost for Federal income tax purposes at August 31, 2000 is $11,998,700. The
gross appreciation (depreciation) on a tax basis is as follows:
Gross Appreciation $1,910,237
Gross Depreciation (667,878)
----------
Net Appreciation $1,242,359
==========
** Non-income producing securities.
INVESTMENT ABBREVIATIONS
ADR = American Depository Receipts
See Accompanying Notes to Financial Statements.
6
<PAGE>
WARBURG PINCUS FOCUS FUND
STATEMENT OF ASSETS AND LIABILITIES
August 31, 2000
--------------------------------------------------------------------------------
ASSETS
Investments, at value (cost - $11,583,342) $13,241,059
Cash 14,183
Receivable for investments sold 145,793
Receivable for Fund shares sold 220,412
Receivable from investment adviser 2,050
Dividends and interest receivable 16,220
Prepaid expenses and other assets 31,728
-----------
Total Assets 13,671,445
-----------
LIABILITIES
Payable for investments purchased 226,283
Distribution fee payable (Common shares) 526
Accrued expenses payable 28,990
-----------
Total Liabilities 255,799
-----------
NET ASSETS
Capital stock, $0.001 par value 698
Paid-in capital 11,244,838
Undistributed net investment loss 25,921
Accumulated net realized gain from investments 486,471
Net unrealized appreciation on investments 1,657,718
-----------
Net Assets $13,415,646
===========
INSTITUTIONAL SHARES
Net assets $10,657,970
-----------
Shares outstanding 553,587
-----------
Net asset value, offering price and redemption price
per share $ 19.25
===========
COMMON SHARES
Net assets $ 2,757,676
-----------
Shares outstanding 144,126
-----------
Net asset value, offering price and redemption price
per share $ 19.13
===========
See Accompanying Notes to Financial Statements.
7
<PAGE>
WARBURG PINCUS FOCUS FUND
STATEMENT OF OPERATIONS
For the Year Ended August 31, 2000
--------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends $ 148,039
Interest 21,203
Securities lending 1,590
Foreign taxes withheld (1,728)
----------
Total Investment Income 169,104
----------
EXPENSES:
Investment advisory fees 104,634
Administration fees 17,754
Custodian fees 59,188
Registration fees 39,002
Printing fees 37,667
Transfer agent fees 24,114
Audit fees 15,948
Legal fees 10,348
Directors fees 9,965
Distribution fees 2,919
Interest expense 1,257
Insurance expense 712
Miscellaneous fees 1,145
----------
324,653
Less fees waived, expenses reimbursed and
transfer agent offsets (181,426)
----------
Total Expenses 143,227
----------
Net Investment Income 25,877
----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from security transactions 1,589,430
Net change in unrealized appreciation from Investments 357,028
----------
Net gain on investments 1,946,458
----------
Net increase in net assets resulting
from operations $1,972,335
==========
See Accompanying Notes to Financial Statements.
8
<PAGE>
WARBURG PINCUS FOCUS 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 $ 25,877 $ 156,770
Net gain on investments 1,946,458 12,468,793
------------ -----------
Net increase in net assets resulting from operations 1,972,335 12,625,563
------------ -----------
FROM DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Institutional shares (124,682) (49,578)
Common shares (623) (1)
Net realized capital gains:
Institutional shares (9,020,862) --
Common shares (77,776) --
------------ -----------
Net decrease in net assets from
dividends and distributions (9,223,943) (49,579)
------------ -----------
NET CAPITAL SHARE TRANSACTIONS (14,822,032) 253,862
------------ -----------
Total increase/(decrease) in net assets (22,073,640) 12,829,846
NET ASSETS:
Beginning of year 35,489,286 22,659,440
------------ -----------
End of year $ 13,415,646 $35,489,286
============ ===========
Undistributed net investment income $ 25,921 $ 125,352
============ ===========
</TABLE>
See Accompanying Notes to Financial Statements.
9
<PAGE>
WARBURG PINCUS FOCUS 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, OCTOBER 30, 1998*
2000 1999 1998 2000 TO AUGUST 31, 1999
------------ ------------ -------------- ------------- ------------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period $ 20.15 $ 13.17 $ 15.00 $20.11 $15.95
------- ------- ------- ------ ------
INVESTMENT ACTIVITIES:
Net investment income 0.04 0.08 0.01 0.03+ 0.02
Net gain (loss) on investments
(both realized and unrealized) 4.83 6.92 (1.84) 4.76 4.16
------- ------- ------- ------ ------
Total from investment operations 4.87 7.00 (1.83) 4.79 4.18
------- ------- ------- ------ ------
LESS DIVIDENDS AND DISTRIBUTIONS:
Dividends from net investment
income (0.07) (0.02) -- (0.07) (0.02)
Distributions from net realized
capital gains (5.70) -- -- (5.70) --
------- ------- ------- ------ ------
Total dividends and
distributions (5.77) (0.02) -- (5.77) (0.02)
------- ------- ------- ------ ------
NET ASSET VALUE, END OF PERIOD $ 19.25 $ 20.15 $ 13.17 $19.13 $20.11
======= ======= ======= ====== ======
Total return 33.88% 53.21% (12.20)%3 33.42% 26.19%3
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000s omitted) $10,658 $35,394 $22,659 $2,758 $ 95
Ratio of expenses to average
net assets 1.00%1,2 0.99%1 1.00%1,4 1.29%1,2 1.29%1,4
Ratio of net investment income/
(loss) to average net assets 0.19% 0.47% 0.92%4 0.18% 0.17%4
Fund turnover rate 235% 209% 52%3 235% 209%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 2.25% and 1.42% for the years ended August 31, 2000 and 1999,
respectively, 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 3.12% for the year ended August 31, 2000 and 1.74% annualized for the
period ended August 31, 1999.
2 Interest earned on univested 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.
10
<PAGE>
WARBURG PINCUS FOCUS FUND
NOTES TO FINANCIAL STATEMENTS
August 31, 2000
--------------------------------------------------------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Warburg, Pincus Focus Fund, Inc. (formerly, Warburg, Pincus Select Economic
Value Equity 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 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.
11
<PAGE>
WARBURG PINCUS FOCUS FUND
NOTES TO FINANCIAL STATEMENTS (CONT'D)
August 31, 2000
--------------------------------------------------------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONT'D)
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. At August 31, 2000, the Fund did not
have any open repurchase agreements.
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
12
<PAGE>
WARBURG PINCUS FOCUS FUND
NOTES TO FINANCIAL STATEMENTS (CONT'D)
August 31, 2000
--------------------------------------------------------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONT'D)
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.
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 0.75% of the Fund's average daily net
assets.
13
<PAGE>
WARBURG PINCUS FOCUS FUND
NOTES TO FINANCIAL STATEMENTS (CONT'D)
August 31, 2000
--------------------------------------------------------------------------------
NOTE 2. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES -- (CONT'D)
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
-------------- ----------- --------------
$104,634 $(85,919) $18,715
CSAM reimbursed expenses of the Fund in the amount of $93,867 for the year
ended August 31, 2000.
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 $97.
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
--------------------- ------ ---------------------
$10 $(8) $2
14
<PAGE>
WARBURG PINCUS FOCUS FUND
NOTES TO FINANCIAL STATEMENTS (CONT'D)
August 31, 2000
--------------------------------------------------------------------------------
NOTE 2. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES -- (CONT'D)
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
----------------------- --------- ---------------------
$574 $(459) $115
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% at 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 CO-ADMINISTRATIVE NET CO-ADMINISTRATIVE
FEE WAIVER FEE
----------------------- -------- ---------------------
$17,170 $(1,076) $16,094
In addition to serving as the Fund's co-administrator, CSAMSI served as
distributor of each 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 $2,919.
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 $30,667,670 and $54,972,822,
respectively.
15
<PAGE>
WARBURG PINCUS FOCUS 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 OCTOBER 30, 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 492,615 $ 8,749,735 420,175 $ 7,478,114 176,045 $3,150,183 5,210 $102,064
Shares issued in
reinvestment of
dividends 86,539 1,293,067 2,776 49,578 4,960 75,842 -- --
Shares repurchased (1,782,034) (27,333,275) (387,514) (7,367,592) (41,610) (757,584) (479) (8,302)
---------- ------------ -------- ----------- ------- ---------- ----- --------
Net increase/
(decrease) (1,202,880) $(17,290,473) 35,437 $ 160,100 139,395 $2,468,441 4,731 $ 93,762
========== ============ ======== ========== ======= ========== ===== ========
<FN>
*Inception Date
</FN>
</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 4 87.89
Common shares 2 34.33
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.
16
<PAGE>
WARBURG PINCUS FUNDS
REPORT OF INDEPENDENT ACCOUNTANTS
--------------------------------------------------------------------------------
To the Board of Directors and Shareholders Of
Warburg, Pincus Focus Fund, Inc.:
In our opinion, the accompanying statement of assets and liabilities
including the schedule of investments of Warburg, Pincus Focus 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 its
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 audit, 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
17
<PAGE>
WARBURG PINCUS FUNDS
TAX INFORMATION LETTER
--------------------------------------------------------------------------------
IMPORTANT TAX INFORMATION FOR CORPORATE SHAREHOLDERS (UNAUDITED)
Corporate shareholders should note for the year ended August 31, 2000, the
percentage of Fund's investment income (i.e., net investment income plus
short-term capital gains) that qualifies for the intercorporate dividends
received deductions is 3.43%.
IMPORTANT TAX INFORMATION FOR SHAREHOLDERS (UNAUDITED)
During the year ended August 31, 2000, the Fund declared the following
dividends from realized capital gains:
SHORT-TERM LONG-TERM
CAPITAL GAIN CAPITAL GAIN
PER SHARE PER SHARE
---------- ----------
$4.6041 $1.0982
18
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[Warburg Pincus Funds logo omitted]
WARBURG PINCUS FUNDS
P.O. BOX 9030, BOSTON, MA 02205-9030
800-WARBURG (800-927-2874) (TM) www.warburg.com
CREDIT SUISSE ASSET MANAGEMENT SECURITIES, INC., DISTRIBUTOR WPFOC-2-0800
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