SEMIANNUAL
REPORT
June 30, 1998
WARBURG PINCUS
CASH RESERVE FUND
/ /
WARBURG PINCUS
NEW YORK TAX EXEMPT 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-administrator may waive
some fees and/or reimburse some expenses, without which performance would be
lower. Waivers and/or reimbursements are subject to change.
Performance data represent past performance and are not a guarantee of future
performance. The Funds' yield will fluctuate. Each Fund seeks to maintain a
constant net asset value of $1.00 per share; there can be no assurance that it
can do so on a continuing basis. An investment in each Fund is neither insured
nor guaranteed by the U.S. government. For Warburg Pincus New York Tax Exempt
Fund, a portion of income may be subject to state and city taxes or the federal
tax.
The views of the Funds' management are as of the date of the letters and
portfolio holdings described in this document are as of June 30, 1998; these
views and portfolio holdings may have changed subsequent to these dates. Nothing
in this document is a recommendation to purchase or sell securities.
<PAGE>
WARBURG PINCUS CASH RESERVE FUND
SEMIANNUAL INVESTMENT ADVISER'S REPORT -- JUNE 30, 1998
- --------------------------------------------------------------------------------
Dear Shareholder: August 10, 1998
Throughout the first half of 1998, the Federal Reserve was preoccupied with
Asia's financial problems and their possible effects on the U.S. economy.
Despite the rapid growth of gross domestic product in the first quarter, Fed
Chairman Alan Greenspan remained reluctant to raise interest rates. The Fed
seems to believe that the Asian crisis will increasingly weigh on the domestic
economy and, therefore, a rise in rates to contain potential inflation was not
appropriate. In addition, actual inflation during the first half of the year
remained low. As a result of the Fed's stable monetary policy and the favorable
inflation picture, money market rates were relatively steady during the first
half of the year, trading very close to the federal-funds target of 5.50%.
The annualized current yield for Warburg Pincus Cash Reserve Fund (the
"Fund") for the seven-day period ended June 30, 1998 was 5.17% (5.06% without
waivers and/or reimbursements), down from 5.26% for the period ended December
31, 1997. Net assets declined to $463.2 million, down slightly from $472.7
million six months ago. The Fund's average weighted maturity on June 30, 1998
was 67.22 days, up from 51.40 days on December 31, 1997.
The Fund will continue to emphasize the highest-quality securities in order
to provide competitive returns without compromising safety and stability of
principal. We appreciate your continued support and investment in the Fund.
Eugene L. Podsiadlo Blackrock Institutional
President Management Corp.
Warburg Pincus Funds Sub-Investment Adviser
1
<PAGE>
WARBURG PINCUS NEW YORK TAX EXEMPT FUND
SEMIANNUAL INVESTMENT ADVISER'S REPORT -- JUNE 30, 1998
- --------------------------------------------------------------------------------
Dear Shareholder: August 10, 1998
New York state closed its 1998 fiscal year in March with a record budget
surplus of $2.0 billion. The state's good fiscal health largely reflects its
improved economy, falling unemployment rate and the continued rally in financial
markets.
New York City also closed fiscal 1998 with a large surplus, a record $2.1
billion. The City continued to benefit from the administration's fiscal
restraint and Wall Street's strong performance. In the first calendar quarter of
1998, the City's economy grew 4.1% and added 27,600 jobs. For the first three
quarters of fiscal 1998, tax revenues were $1.0 billion above fiscal 1997
collections for the same period, reflecting a growth of 6.8%. The City's
improved cash position is reflected in its reduced need for short-term borrowing
and Standard and Poor's recent upgrade of the City's debt, from BBB+ to A-. Like
the State, the City has made substantial strides, but continues to face
formidable budgetary hurdles in both its operating and capital plans.
The tax-free market experienced typical seasonal cash inflows in January
and early April. Assets reached $168 billion in early January, a $17 billion
jump from December 31, 1997, and continued to grow to an all-time high of $176
billion in early April. Due to tax-related redemptions, however, assets fell
$11.2 billion through mid-May.
The Fund experienced a similar cash flow pattern, hitting $162.1 million in
mid-January and, after experiencing redemptions, reaching $151 million by
mid-April. Due to tax payments, assets fell to $123.7 million in May. The Fund
took advantage of small windows of opportunity to lock in the attractive yields,
ranging from 3.70% to 3.80%, that were available as the market experienced cash
outflows. Consequently, the Fund's average weighted maturity was extended to
about 53 days in mid-period, but ended the second quarter at approximately 44
days. The Fund's seven day annualized current yield as of June 30 was 3.01%
(2.87% without waivers and/or reimbursements).
The Fund seeks to provide investors with a high level of current income
that is exempt from federal, New York state and New York City personal income
taxes as is consistent with the preservation of capital and liquidity. We
appreciate your continued support and investment in the Fund.
Eugene L. Podsiadlo Blackrock Institutional
President Management Corp.
Warburg Pincus Funds Sub-Investment Advisor
2
<PAGE>
WARBURG PINCUS CASH RESERVE FUND
STATEMENT OF NET ASSETS
June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
PAR (MOODY'S/S&P) MATURITY RATE% VALUE
- --- ------------- -------- ----- -----
<S> <C> <C> <C> <C>
CERTIFICATES OF DEPOSIT (19.9%)
Domestic Certificates of Deposit (4.3%)
$ 5,000,000 Bankers Trust Co. (A-1, P-1) 07/07/98 6.000 $ 5,000,053
5,000,000 Bankers Trust Co. (A-1, P-1) 07/14/98 5.900 4,999,834
10,000,000 Wilmington Trust Co. (NR, P-1) 02/19/99 5.730 10,000,000
------------
19,999,887
------------
Yankee Dollar Certificates of Deposit (15.6%)
10,000,000 Bank Austria (A-1+, P-1) 04/26/99 5.740 9,996,863
20,000,000 Banque Paribas (A-2, P-1) 08/20/98 5.600 20,000,274
7,000,000 Deutsche Bank (A-1+, P-1) 03/05/99 5.700 6,997,731
15,000,000 Skandinaviska Enskilda Banken (A-2, P-1) 07/29/98 5.630 15,000,000
10,000,000 Swedbank (A-2, P-1) 10/05/98 5.790 9,999,843
10,000,000 Swiss Bank (A-1+, P-1) 04/05/99 5.720 9,995,624
------------
71,990,335
------------
TOTAL CERTIFICATES OF DEPOSIT
(Cost $91,990,222) 91,990,222
------------
COMMERCIAL PAPER (55.5%)
Asset Backed Securities (19.2%)
9,343,000 Barton Capital Corp. (A-1+, P-1) 07/08/98 5.515 9,332,981
20,000,000 CC (USA) Inc. (A-1+, P-1) 10/16/98 5.495 19,673,353
20,000,000 Corporate Asset Funding, Inc. (A-1+, P-1) 07/23/98 5.510 19,932,656
20,000,000 Delaware Funding Corp. (A-1+, P-1) 07/15/98 5.540 19,956,911
20,000,000 Trident Capital Finance, Inc. (A-1+, P-1) 07/13/98 5.600 19,962,667
------------
88,858,568
------------
Banks (10.6%)
10,000,000 AB Spintab Swedmortgage (A-2, P-1) 08/17/98 5.550 9,927,542
20,000,000 Svenska Handelsbanken Inc. (A-1, P-1) 11/06/98 5.510 19,608,178
20,000,000 Unifunding Inc. (A-1, P-1) 09/29/98 5.470 19,726,500
------------
49,262,220
------------
Motor Vehicles & Car Bodies (4.3%)
20,000,000 BMW US Capital Corp. (A-1, NR) 07/01/98 6.250 20,000,000
------------
Petroleum Refining (4.3%)
20,000,000 Koch Industries, Inc. (A-1+, P-1) 07/01/98 6.250 20,000,000
------------
Pharmaceutical Preparations (4.3%)
20,000,000 American Home Products Corp. (A-1, P-1) 07/01/98 6.050 20,000,000
------------
Security Brokers & Dealers (8.5%)
20,000,000 Lehman Brothers Holdings, Inc. (A-1, P-2) 07/06/98 5.550 19,984,583
20,000,000 Merrill Lynch & Co. Canadian DCP (A-1+, P-1) 03/09/99 5.480 19,235,844
------------
39,220,427
------------
Short-Term Business Credit Institutions (4.3%)
20,000,000 General Electric Capital Corp. (A-1+, P-1) 09/30/98 5.500 19,721,944
------------
TOTAL COMMERCIAL PAPER
(Cost $257,063,159) 257,063,159
------------
</TABLE>
See Accompanying Notes to Financial Statements.
3
<PAGE>
WARBURG PINCUS CASH RESERVE FUND
STATEMENT OF NET ASSETS (CONT'D)
June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
PAR (MOODY'S/S&P) MATURITY RATE% VALUE
- --- ------------- -------- ----- -----
<S> <C> <C> <C> <C>
VARIABLE RATE OBLIGATIONS (11.0%)
Asset Backed Securities (4.4%)
$15,100,000 SMM Trust 1997-X+ (A-1+, P-1) 07/13/98 5.656 $ 15,100,000
5,000,000 SMM Trust 1998-B+ (A-1+, P-1) 07/06/98 5.656 5,000,000
------------
20,100,000
------------
Domestic Certificates of Deposit (1.7%)
8,000,000 Bankers Trust Co.+ (A-1, P-1) 07/01/98 5.820 7,999,943
------------
Personal Credit Institutions (1.7%)
8,000,000 Dean Witter, Discover & Co.+ (A-1, P-1) 07/15/98 5.692 8,000,606
------------
Security Brokers & Dealers (3.2%)
15,000,000 Bear Stearns Companies, Inc.+ (A-1, P-1) 07/07/98 5.626 15,000,000
------------
TOTAL VARIABLE RATE OBLIGATIONS
(Cost $51,100,549) 51,100,549
------------
TIME DEPOSITS (9.7%)
15,000,000 Bank of Montreal (A-1+, P-1) 07/01/98 5.750 15,000,000
9,900,000 Wachovia Bank North Carolina (A-1+, P-1) 07/01/98 5.938 9,900,000
20,000,000 Westdeutsche Landesbank
Gironzentrale (A-1+, P-1) 07/01/98 6.000 20,000,000
------------
TOTAL TIME DEPOSITS
(Cost $44,900,000) 44,900,000
------------
MEDIUM TERM NOTES (3.9%)
18,000,000 NationsBank Corp.
(Cost $18,018,293) (A-1+, P-1) 12/15/98 6.020 18,018,293
------------
TOTAL INVESTMENTS AT VALUE (100.0%) (Cost $463,072,223*) 463,072,223
------------
OTHER ASSETS IN EXCESS OF LIABILITIES (0.0%) 138,720
NET ASSETS (100.0%) (applicable to 463,252,913
shares) $463,210,943
============
NET ASSET VALUE, offering and redemption price
per share
($463,210,943 divided by 463,252,913) $ 1.00
============
</TABLE>
INVESTMENT ABBREVIATIONS
NR = Not Rated
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
+ The interest rate shown is as of June 30, 1998 and the
maturity date is the next interest readjustment date.
* Also cost for federal income tax purposes.
</TABLE>
See Accompanying Notes to Financial Statements.
4
<PAGE>
WARBURG PINCUS CASH RESERVE FUND
MATURITY SCHEDULE OF PORTFOLIO
June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
MATURITY SCHEDULE
(DAYS) PAR PERCENTAGE OF PORTFOLIO
----------------- ------------ ------------------------
(CUMULATIVE)
1-7 $142,900,000 30.8% 30.8%
8-14 49,443,000 10.6 41.4
15-30 78,000,000 16.8 58.2
31-60 30,000,000 6.4 64.6
61-90 0 0.0 64.6
91-120 70,000,000 15.0 79.6
121-150 20,000,000 4.3 83.9
Over 150 75,000,000 16.1 100.0
------------ -----
$465,343,000 100.0%
============ =====
Average Weighted Maturity -- 67.22 days
See Accompanying Notes to Financial Statements.
5
<PAGE>
WARBURG PINCUS NEW YORK TAX EXEMPT FUND
STATEMENT OF NET ASSETS
June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
PAR (MOODY'S/S&P) MATURITY RATE% VALUE
--- ------------- -------- ----- -----
MUNICIPAL BONDS (99.8%)
NEW YORK (94.2%)
<S> <C> <C> <C> <C> <C>
$1,070,000 Auburn Industrial Development Authority RB
Series 1997 (Fat Tire, LIC Project) (Key
Corp. Bank N.A. LOC) VRDN+ (NR, NR) 07/07/98 3.800 $ 1,070,000
3,000,000 Babylon, New York IDA Resource Recovery
(Ogden Martin Project) Series 1998 (FSA
Insurance) VRDN+ (A-1+, VMIG-1) 07/07/98 3.250 3,000,000
1,000,000 Chautauqua County IDA Series 1985 (The Red
Wing Company, Inc.) (Wachovia Bank of GA
LOC) VRDN+ (NR, NR) 07/07/98 3.500 1,000,000
2,240,000 Erie County, New York IDA VRDN+ (NR, VMIG-1) 07/07/98 3.600 2,240,000
2,560,000 Kenmore -- Town of Tonawanda, New York
Union Free School District BANS (NR, NR) 05/06/99 4.125 2,567,823
2,390,000 Lancaster, Town of, IDA RB (1997
Jiffy-Tite Co., Inc. Project) (Key Corp.
Bank N.A. LOC) VRDN+ (NR, NR) 07/07/98 3.800 2,390,000
1,000,000 Monroe County IDA (Ajl Manufacturing, Inc.
Facility) (Marine Midland LOC) VRDN+ (A-1, NR) 07/07/98 3.600 1,000,000
1,000,000 Monroe County IDA Electronic Navigational
Industries Inc. Facility Series 1984 RB (NR, NR) 07/01/98 3.780 1,000,000
1,400,000 Montgomery Town IDA (Ind. Bank of Japan
LOC) VRDN+ (A-1+, NR) 07/15/98 3.650 1,400,000
1,000,000 New York City Eagle Tax Exempt (Escrowed
to Maturity in U.S. Treasuries) VRDN+ (NR, VMIG-1) 07/07/98 3.630 1,000,000
2,000,000 New York City GO VRDN+ (A-1+, VMIG-1) 07/01/98 3.650 2,000,000
7,000,000 New York City GO (Bayerische Landesbank
LOC) VRDN+ (A-1+, VMIG-1) 07/07/98 3.350 7,000,000
1,200,000 New York City GO (FGIC Insurance LOC)
VRDN+ (A-1+, VMIG-1) 07/07/98 3.400 1,200,000
1,000,000 New York City GO (Union Bank of
Switzerland LOC) VRDN+ (A-1+, VMIG-1) 07/01/98 4.100 1,000,000
100,000 New York City GO 1993 Series Subseries
A-10 (Morgan Guaranty LOC) VRDN+ (A-1+, VMIG-1) 07/01/98 4.100 100,000
800,000 New York City GO 1994B Series VRDN+ (A-1+, VMIG-1) 07/01/98 4.100 800,000
3,800,000 New York City GO 1994 Series H-3
(Financial Service Assurance LOC) (A-1+, VMIG-1) 07/24/98 3.550 3,800,000
5,500,000 New York City GO 1994 Series H-3 TECP
(Financial Service Assurance LOC) (A-1+, VMIG-1) 07/28/98 3.550 5,500,000
3,000,000 New York City GO 1994 Series H-5
(Landesbank Hessen LOC) (A-1+, VMIG-1) 07/27/98 3.800 3,000,000
3,100,000 New York City GO 1995 Series B-9 TECP
(Chemical Bank LOC) (A-1, VMIG-1) 08/20/98 3.700 3,100,000
6,200,000 New York City GO Fiscal 1995 Series F-3
(Morgan Guaranty LOC) VRDN+ (A-1+, VMIG-1) 07/07/98 3.450 6,200,000
200,000 New York City GO Fiscal 1995 Series F-7
(Union Bank of Switzerland LOC) VRDN+ (A-1+, VMIG-1) 07/07/98 3.350 200,000
</TABLE>
See Accompanying Notes to Financial Statements.
6
<PAGE>
WARBURG PINCUS NEW YORK TAX EXEMPT FUND
STATEMENT OF NET ASSETS (CONT'D)
June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
PAR (MOODY'S/S&P) MATURITY RATE% VALUE
--- ------------- -------- ----- -----
MUNICIPAL BONDS (CONT'D)
NEW YORK (CONT'D)
<S> <C> <C> <C> <C> <C>
$4,000,000 New York City GO Series J-2 (Commerzbank
LOC) (A-1+, VMIG-1) 08/13/98 3.750 $ 4,000,000
2,100,000 New York City GO Series H-3 (FSA
Insurance) (Financial Service Assurance
LOC) (A-1+,VMIG-1) 07/29/98 3.750 2,100,000
2,500,000 New York City Health and Hospitals Health
System Bonds, 1997 Series A (Morgan
Guaranty LOC) VRDN+ (A-1+, VMIG-1) 07/07/98 3.200 2,500,000
200,000 New York City Housing Development Corp.
Multi-Family Rental Housing RB (Columbus
Green) 1997 Series A (Federal National
Mortgage Assoc. LOC) VRDN+ (A-1+, NR) 07/07/98 3.200 200,000
1,200,000 New York City IDA RB (Field Hotel Project)
(JFK Airport) (Banque Indosuez LOC) VRDN+ (A-2, NR) 07/07/98 3.300 1,200,000
400,000 New York City IDA (Nippon Cargo Airlines
Company) (Ind. Bank of Japan LOC) VRDN+ (A-1, NR) 07/01/98 4.300 400,000
5,800,000 New York City IDA Laguardia Airport
(Banque Indosuez LOC) VRDN+ (A-2, NR) 07/07/98 3.300 5,800,000
3,500,000 New York City Municipal Water Finance
Authority Water and Sewer System RB
Series 1995A VRDN+ (A-1+, VMIG-1) 07/01/98 3.800 3,500,000
3,340,000 New York State Dormitory Authority RB MB
(Beverwyck Inc.) (Banque Paribas LOC)
VRDN+ (A-2, VMIG-1) 07/07/98 3.350 3,340,000
2,000,000 New York State Energy Research &
Development Authority Electric Facilities
RB 1995 Series A (Long Island Lighting
Company Project) (Union Bank of
Switzerland LOC) VRDN+ (NR, VMIG-1) 07/07/98 3.550 2,000,000
1,500,000 New York State Energy Research &
Development Authority Pollution Control
Refunding RB (Central Hudson Gas &
Electric) Series 1985A (Bankers Trust
LOC) VRDN+ (NR, P-1) 07/07/98 3.400 1,500,000
1,300,000 New York State Energy Research &
Development Authority Series 1987 B
Pollution Control RB (Niagara Mohawk)
(Morgan Guaranty LOC) VRDN+ (A-1+, NR) 07/01/98 3.800 1,300,000
2,200,000 New York State Energy Research &
Development Electric Facilities RB 1993
Series B (Long Island Lighting Co.
Project) (Toronto Dominion LOC) VRDN+ (NR, NR) 07/07/98 3.600 2,200,000
5,000,000 New York State Energy Research and
Development Authority New York State
Electric & Gas Series 1985-A (LOC Morgan
Guaranty) MB+ (NR, P-1) 09/15/98 3.580 5,000,000
</TABLE>
See Accompanying Notes to Financial Statements.
7
<PAGE>
WARBURG PINCUS NEW YORK TAX EXEMPT FUND
STATEMENT OF NET ASSETS (CONT'D)
June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
PAR (MOODY'S/S&P) MATURITY RATE% VALUE
--- ------------- -------- ----- -----
MUNICIPAL BONDS (CONT'D)
NEW YORK (CONT'D)
<S> <C> <C> <C> <C> <C>
$4,500,000 New York State Energy Research And
Development Authority Pollution Control
RB MB (Deutsche Bank LOC)+ (NR, VMIG-1) 09/01/98 3.580 $ 4,500,000
2,400,000 New York State Housing Finance Agency
Series A (Mount Sinai School of Medicine)
(Sanwa Bank LOC) VRDN+ (NR, VMIG-1) 07/07/98 3.400 2,400,000
2,125,000 New York State Job Development Authority
Special Purpose Series 1986 A1 to A14
(Sumitomo Bank LOC) VRDN+ (A-1, VMIG-1) 07/30/98 3.850 2,125,000
695,000 New York State Job Development Authority
Special Purpose Series C (Sumitomo Bank
LOC) VRDN+ (A-1, VMIG-1) 07/30/98 3.750 695,000
470,000 New York State Job Development Authority
Special Purpose Bonds Series 1984 G1 to
G55 (Sumitomo Bank LOC) VRDN+ (A-1+, VMIG-1) 07/01/98 3.750 470,000
180,000 New York State Job Development Authority
State Guaranteed Variable Rate Special
Purpose Bonds Series 1984c (Sumitomo Bank
LOC) VRDN+ (A-1, VMIG-1) 07/01/98 3.750 180,000
75,000 New York State Job Development Authority
State Guaranteed Variable Rate Special
Purpose Bonds Series 1984f (Sumitomo Bank
LOC) VRDN+ (A-1+, VMIG-1) 07/01/98 3.750 75,000
495,000 New York State Job Development Authority
State Guaranteed Variable Rate Special
Purpose Bonds Series 1984h (Sumitomo Bank
LOC) VRDN+ (A-1+, VMIG-1) 07/01/98 3.750 495,000
5,000,000 New York State Power Authority TECP (Bank
of Nova Scotia LOC) (A-1, P-1) 08/17/98 3.750 5,000,000
3,300,000 New York State Power Authority TECP (A-1, P-1) 07/30/98 3.800 3,300,000
2,000,000 New York State Power MB (A-1, VMIG-1) 09/01/98 3.600 2,000,000
2,700,000 Niagara County IDA Solid Waste Disposal
Facility RB (American Ref-Fuel Co. of
Niagara) (Wachovia LOC) VRDN+ (A-1+, P-1) 07/07/98 3.600 2,700,000
1,400,000 Niagara County IDA Solid Waste Disposal
Facility RB Weekly Mode Only (American
Ref-Fuel Co. of Niagara, L.P.) (Wachovia
LOC) VRDN+ (A-1+, P-1) 07/07/98 3.500 1,400,000
3,000,000 Oneonta, City Of, City School District
Otsego County, New York RANS 1998 (NR, NR) 06/18/99 4.000 3,006,944
</TABLE>
See Accompanying Notes to Financial Statements.
8
<PAGE>
WARBURG PINCUS NEW YORK TAX EXEMPT FUND
STATEMENT OF NET ASSETS (CONT'D)
June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
PAR (MOODY'S/S&P) MATURITY RATE% VALUE
--- ------------- -------- ----- -----
MUNICIPAL BONDS (CONT'D)
NEW YORK (CONT'D)
<S> <C> <C> <C> <C> <C>
$1,530,000 Onondaga County IDA RB (Plainville Turkey
Farm, Inc. Project) Series 1998 (Key
Corp. Bank N.A. LOC) VRDN+ (NR, NR) 07/07/98 3.800 $ 1,530,000
1,560,000 Penfield NY BANS (NR, NR) 12/23/98 4.125 1,561,975
3,800,000 Penfield Perinton New York Fire District (NR, NR) 05/07/99 4.125 3,809,950
1,600,000 Saint Lawrence County IDA Environmental
Improvement RB (Reynolds Metals Co.)
(Royal Bank of Canada LOC) VRDN+ (A-1+, VMIG-1) 07/07/98 3.500 1,600,000
500,000 State of New York Power Authority
Adjustable Tender Notes (A-1, VMIG-1) 09/01/98 3.600 500,000
4,000,000 Suffolk County, New York IDA (Episcopal
Health Services) 1998 Series A (Banque
Paribas LOC) VRDN+ (A-1, VMIG-1) 07/07/98 3.400 4,000,000
1,700,000 Town of Babylon IDA (J. D'addario &
Company, Inc. Proj.) Series 1994
(National Westminster LOC) VRDN+ (NR, VMIG-1) 07/07/98 3.550 1,700,000
1,576,000 Williamson, Town of, New York BANS (NR, NR) 12/23/98 4.250 1,578,909
------------
TOTAL NEW YORK (Cost $130,235,601) 130,235,601
------------
PUERTO RICO (5.6%)
$7,500,000 Puerto Rico Government Development Bank 85
(Credit Suisse LOC) VRDN+ (A-1+, VMIG-1) 07/07/98 3.150 $ 7,500,000
200,000 Puerto Rico Industrial Medical Health
Education and Environmental Pollution
Control RB (Anna G. Mendez Project) (Bank
of Tokyo LOC) VRDN+ (A-1, NR) 07/07/98 3.650 200,000
------------
TOTAL PUERTO RICO (Cost $7,700,000) 7,700,000
------------
</TABLE>
<TABLE>
<S> <C>
TOTAL MUNICIPAL BONDS (Cost $137,935,601) 137,935,601
------------
</TABLE>
See Accompanying Notes to Financial Statements.
9
<PAGE>
WARBURG PINCUS NEW YORK TAX EXEMPT FUND
STATEMENT OF NET ASSETS (CONT'D)
June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
PAR (MOODY'S/S&P) MATURITY RATE% VALUE
--- ------------- -------- ----- -----
<S> <C> <C> <C> <C>
TOTAL INVESTMENTS AT VALUE (99.8%)(Cost $137,935,601*) 137,935,601
------------
OTHER ASSETS IN EXCESS OF LIABILITIES (0.2%) 329,620
NET ASSETS (100.0%) (APPLICABLE TO 138,278,340 shares) $138,265,221
============
NET ASSET VALUE, offering and redemption price per
share($138,265,221 divided by 138,278,340) $ 1.00
============
</TABLE>
INVESTMENT ABBREVIATIONS
BANS = Bond Anticipation Notes
FGIC = Financial Guaranty Insurance Company
FSA = Financial Security Assurance Corporation
GO = General Obligation
IDA = Industrial Development Agency
LOC = Letter of Credit
MB = Municipal Bond
NR = Not Rated
RANS = Revenue Anticipation Notes
RB = Revenue Bonds
TECP = Tax Exempt Commercial Paper
VRDN = Variable Rate Demand Notes
- --------------------------------------------------------------------------------
+ The interest rate shown is the rate as of June 30, 1998 and the maturity date
shown is the longer of the next interest readjustment date or the date the
principal amount owed can be recovered through demand.
* Also cost for federal income tax purposes.
See Accompanying Notes to Financial Statements.
10
<PAGE>
WARBURG PINCUS NEW YORK TAX EXEMPT FUND
MATURITY SCHEDULE OF PORTFOLIO
June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
MATURITY SCHEDULE
(DAYS) PAR PERCENTAGE OF PORTFOLIO
----------------- ------------ ------------------------
(CUMULATIVE)
1-7 $ 79,390,000 57.6% 57.6%
8-14 0 0.0 57.6
15-30 21,920,000 15.9 73.5
31-60 12,100,000 8.8 82.3
61-90 12,000,000 8.7 91.0
91-120 0 0.0 91.0
121-150 0 0.0 91.0
Over 150 12,496,000 9.0 100.0
------------ -----
$137,906,000 100.0%
============ =====
Average Weighted Maturity -- 44.09 days
See Accompanying Notes to Financial Statements.
11
<PAGE>
WARBURG PINCUS CASH RESERVE AND NEW YORK TAX EXEMPT FUNDS
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CASH RESERVE NEW YORK
FUND TAX EXEMPT FUND
------------ ---------------
<S> <C> <C>
INTEREST INCOME $14,388,767 $ 2,429,139
----------- -----------
EXPENSES:
Investment advisory 1,267,998 343,222
Administrative services 253,600 68,644
Audit 10,447 10,399
Custodian 38,306 10,274
Directors 10,149 10,179
Insurance 3,036 865
Legal 9,246 8,434
Printing 6,980 4,202
Registration 18,089 8,521
Transfer agent 57,314 6,527
Miscellaneous 9,764 4,118
----------- -----------
1,684,929 475,385
Less: fees waived and transfer agent offsets (290,131) (97,841)
----------- -----------
Total expenses 1,394,798 377,544
----------- -----------
Net investment income 12,993,969 2,051,595
----------- -----------
NET REALIZED LOSS FROM INVESTMENTS
Net realized loss from security transactions (21,138) 0
----------- -----------
Net increase in net assets resulting from operations $12,972,831 $ 2,051,595
=========== ===========
</TABLE>
See Accompanying Notes to Financial Statements.
12
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
See Accompanying Notes to Financial Statements.
13
<PAGE>
WARBURG PINCUS CASH RESERVE AND NEW YORK TAX EXEMPT FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CASH RESERVE FUND
------------------------------------------------------
FOR THE SIX
MONTHS ENDED FOR THE TEN FOR THE
JUNE 30, 1998 MONTHS ENDED YEAR ENDED
(UNAUDITED) DECEMBER 31, 1997 FEBRUARY 28, 1997
-------------- ----------------- -----------------
<S> <C> <C> <C>
FROM OPERATIONS:
Net investment income $ 12,993,969 $ 20,526,496 $ 21,525,922
Net realized loss from security
transactions (21,138) (17,990) (2,226)
-------------- -------------- --------------
Net increase in net assets resulting
from operations 12,972,831 20,508,506 21,523,696
-------------- -------------- --------------
FROM DISTRIBUTIONS:
Dividends from net investment income (12,993,969) (20,526,496) (21,525,922)
-------------- -------------- --------------
FROM CAPITAL SHARE TRANSACTIONS (AT $1 PER
SHARE):
Proceeds from sale of shares 1,440,115,653 2,356,390,501 2,207,941,180
Reinvested dividends 7,142,056 13,364,994 14,490,731
Net asset value of shares redeemed (1,456,700,189) (2,313,798,174) (2,189,302,165)
-------------- -------------- --------------
Net increase (decrease) in net assets
from capital share transactions (9,442,480) 55,957,321 33,129,746
-------------- -------------- --------------
Net increase (decrease) in net assets (9,463,618) 55,939,331 33,127,520
NET ASSETS:
Beginning of period 472,674,561 416,735,230 383,607,710
-------------- -------------- --------------
End of period $ 463,210,943 $ 472,674,561 $ 416,735,230
============== ============== ==============
</TABLE>
See Accompanying Notes to Financial Statements.
14
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NEW YORK TAX EXEMPT FUND
- -----------------------------------------------------
FOR THE SIX
MONTHS ENDED FOR THE TEN FOR THE
JUNE 30, 1998 MONTHS ENDED YEAR ENDED
(UNAUDITED) DECEMBER 31, 1997 FEBRUARY 28, 1997
- ------------- ----------------- -----------------
<S> <C> <C>
$ 2,051,595 $ 3,673,641 $ 3,306,940
0 0 0
- ------------ ------------ ------------
2,051,595 3,673,641 3,306,940
- ------------ ------------ ------------
(2,051,595) (3,673,641) (3,306,940)
- ------------ ------------ ------------
178,471,749 347,174,918 375,730,772
773,566 1,663,509 1,179,911
(192,152,897) (321,856,450) (349,303,606)
- ------------ ------------ ------------
(12,907,582) 26,981,977 27,607,077
- ------------ ------------ ------------
(12,907,582) 26,981,977 27,607,077
151,172,803 124,190,826 96,583,749
- ------------ ------------ ------------
$138,265,221 $151,172,803 $124,190,826
============ ============ ============
</TABLE>
See Accompanying Notes to Financial Statements.
15
<PAGE>
WARBURG PINCUS CASH RESERVE FUND
FINANCIAL HIGHLIGHTS
(For a Share of the Fund Outstanding Throughout Each Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE TEN
JUNE 30, 1998 MONTHS ENDED
(UNAUDITED) DECEMBER 31, 1997
------------- -----------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00
-------- --------
Income from Investment Operations:
Net Investment Income 0.0253 0.0428
Less Distributions:
Dividends from net Investment Income (0.0253) (0.0428)
-------- --------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00
======== ========
Total Return 2.53%+ 4.28%+
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000s) $463,211 $472,675
Ratios to average daily net assets:
Operating expenses .55%@* .55%@*
Net investment income 5.12%* 5.11%*
Decrease reflected in above operating expense ratios due
to waivers/reimbursements .11%* .12%*
</TABLE>
- --------------------------------------------------------------------------------
@ Interest earned on uninvested cash balances is used to offset portions of the
transfer agent expense. These arrangements resulted in a reduction to the
Fund's expenses by .00%, .00%, .00% and .01% for the periods ended June 30,
1998 and December 31, 1997 and the years ended February 28 or 29, 1997 and
1996, respectively. The operating expense ratio after reflecting these
arrangements was .55%, .55%, .55% and .55% for the periods ended June 30, 1998
and December 31, 1997 and the years ended February 28 or 29, 1997 and 1996,
respectively.
* Annualized.
+ Non annualized.
See Accompanying Notes to Financial Statements.
16
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FEBRUARY 28 OR 29,
- ------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -------- -------- -------- -------- --------
0.0492 0.0543 0.0426 0.0273 0.0322
(0.0492) (0.0543) (0.0426) (0.0273) (0.0322)
- -------- -------- -------- -------- --------
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
5.03% 5.57% 4.35% 2.76% 3.27%
$416,735 $383,607 $403,211 $277,557 $287,723
.55%@ .56%@ .55% .54% .50%
4.93% 5.43% 4.41% 2.73% 3.22%
.14% .16% .19% .13% .17%
</TABLE>
- --------------------------------------------------------------------------------
See Accompanying Notes to Financial Statements.
17
<PAGE>
WARBURG PINCUS NEW YORK TAX EXEMPT FUND
FINANCIAL HIGHLIGHTS
(For a Share of the Fund Outstanding Throughout Each Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE TEN
JUNE 30, 1998 MONTHS ENDED
(UNAUDITED) DECEMBER 31, 1997
------------- -----------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00
-------- --------
Income from Investment Operations:
Net Investment Income 0.0149 0.0261
Less Distributions:
Dividends from Net Investment Income (0.0149) (0.0261)
-------- --------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00
======== ========
Total Return 1.49%+ 2.64%+
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000s) $138,265 $151,173
Ratios to average daily net assets:
Operating expenses .55%@* .55%@*
Net investment income 2.99%* 3.12%*
Decrease reflected in above operating expense ratios due
to waivers/reimbursements .14%* .12%*
</TABLE>
- --------------------------------------------------------------------------------
@ Interest earned on uninvested cash balances is used to offset portions of the
transfer agent expense. These arrangements resulted in a reduction to the
Fund's expenses by .00%, .00%, 00%, and .01% for the periods ended June 30,
1998 and December 31, 1997 and the years ended February 28 or 29, 1997 and
1996, respectively. The operating expense ratio after reflecting these
arrangements was .55%, .55%, .55%, and .55% for the periods ended June 30,
1998 and December 31, 1997 and the years ended February 28 or 29, 1997 and
1996, respectively.
* Annualized.
+ Non annualized.
See Accompanying Notes to Financial Statements.
18
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FEBRUARY 28 OR 29,
- --------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -------- ------- ------- ------- -------
0.0288 0.0326 0.0246 0.0175 0.0224
(0.0288) (0.0326) (0.0246) (0.0175) (0.0224)
- -------- ------- ------- ------- -------
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======= ======= ======= =======
2.92% 3.31% 2.48% 1.77% 2.26%
$124,191 $96,584 $77,111 $65,984 $76,995
.55%@ .56%@ .55% .54% .50%
2.88% 3.24% 2.46% 1.75% 2.23%
.17% .27% .27% .19% .28%
</TABLE>
- --------------------------------------------------------------------------------
See Accompanying Notes to Financial Statements.
19
<PAGE>
WARBURG PINCUS CASH RESERVE AND NEW YORK TAX EXEMPT FUNDS
NOTES TO FINANCIAL STATEMENTS
June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
The Warburg Pincus Cash Reserve Fund (the "Cash Reserve Fund") and the
Warburg Pincus New York Tax Exempt Fund (the "New York Tax Exempt Fund") are
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as diversified and non-diversified, open-end management investment
companies, respectively.
Investment objectives for each Fund are as follows: the Cash Reserve Fund
is designed to provide investors with high current income consistent with
liquidity and stability of principal; the New York Tax Exempt Fund is designed
to provide investors with as high a level of current income that is exempt from
federal, New York state and New York City personal income taxes as is consistent
with preservation of capital and liquidity.
Certain New York state and New York City municipal obligations in the New
York Tax Exempt Fund may be obligations of issuers which rely in whole or in
part on New York state or New York City revenues, real property taxes, revenues
from health care institutions, or obligations secured by mortgages on real
property. Consequently, the possible effect of economic conditions in New York
or of changes in New York regulations on these obligations must be considered.
The net asset value of each Fund is determined as of noon and the close of
regular trading on the New York Stock Exchange. Each Fund's investments are
valued under the amortized cost method, which approximates market value.
Amortized cost involves valuing a portfolio instrument at its cost initially and
thereafter assuming a constant amortization to maturity of any discount or
premium, regardless of the impact of fluctuating interest rates on the market
value of the instrument.
Security transactions are accounted for on a trade date basis. Interest
income is recorded on the accrual basis. The cost of investments sold is
determined by use of the specific identification method for both financial
reporting and income tax purposes.
Dividends from net investment income are declared daily and paid monthly.
Distributions of net capital gains, if any, are declared and paid annually,
although the Cash Reserve Fund may declare and pay short-term capital gains, if
any, periodically as the Board of Directors determines. To the extent that a net
realized capital gain can be reduced by a capital loss carryover, such gain will
not be distributed. Income and capital gain
20
<PAGE>
WARBURG PINCUS CASH RESERVE AND NEW YORK TAX EXEMPT FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES -- (CONT'D)
distributions are determined in accordance with federal income tax regulations
which may differ from generally accepted accounting principles.
No provision is made for federal taxes as it is each Fund's intention to
continue 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.
Each Fund may enter into repurchase agreement transactions. Under the terms
of a typical repurchase agreement, a Fund acquires an underlying security
subject to an obligation of the seller to repurchase. The value of the
underlying security collateral will be maintained at an amount at least equal to
the total amount of the purchase obligation, including interest. The collateral
is in the Fund's possession through its custodian.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount 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.
The Cash Reserve Fund and the New York Tax Exempt Fund have, effective
March 1, 1997, each changed their fiscal and tax year-ends from February 28th to
December 31st, which was approved by the Funds' Boards of Directors on January
15, 1997.
The Funds have an arrangement with their transfer agent whereby interest
earned on uninvested cash balances was used to offset a portion of their
transfer agent expense. For the period ended June 30, 1998, each Fund received
credits or reimbursements under this arrangement as follows:
FUND AMOUNT
---- -------
Cash Reserve $10,800
New York Tax Exempt 3,207
2. INVESTMENT ADVISER AND SUB-ADVISER, CO-ADMINISTRATORS AND DISTRIBUTOR
Warburg Pincus Asset Management, Inc. ("Warburg"), which is indirectly
controlled by Warburg, Pincus & Co., serves as each Fund's investment adviser.
For its investment advisory services, Warburg receives a fee
21
<PAGE>
WARBURG PINCUS CASH RESERVE AND NEW YORK TAX EXEMPT FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
2. INVESTMENT ADVISER AND SUB-ADVISER, CO-ADMINISTRATORS AND
DISTRIBUTOR -- (CONT'D)
calculated at an annual rate of .25% of each Fund's average daily net assets.
For the period ended June 30, 1998, investment advisory fees and voluntary
waivers were as follows:
GROSS NET
FUND ADVISORY FEE WAIVER ADVISORY FEE
- ---- ------------ --------- ------------
Cash Reserve $633,999 $(111,732) $522,267
New York Tax Exempt 171,611 (37,854) 133,757
Blackrock Institutional Management Corporation, formerly PNC Institutional
Management Corporation ("BIMC"), a wholly owned subsidiary of PNC Bank, N.A.,
serves as each Fund's sub-investment adviser and administrator. For its
sub-investment advisory and administrative services, BIMC receives a fee
calculated at an annual rate of .25% of each Fund's average daily net assets.
For the period ended June 30, 1998, sub-investment advisory and administration
fees and voluntary waivers were as follows:
GROSS SUB-ADVISORY NET SUB-ADVISORY
AND AND
FUND ADMINISTRATION FEE WAIVER ADMINISTRATION FEE
- ---- -------------------- --------- ------------------
Cash Reserve $633,999 $(167,599) $466,400
New York Tax Exempt 171,611 (56,780) 114,831
Counsellors Funds Service, Inc. ("CFSI"), a wholly owned subsidiary of
Warburg, serves as each Fund's co-administrator. For its administrative
services, CFSI currently receives a fee calculated at an annual rate of .10% of
each Fund's average daily net assets. For the period ended June 30, 1998,
administrative services fees earned by CFSI were as follows:
FUND CO-ADMINISTRATION FEE
- ---- ---------------------
Cash Reserve $253,600
New York Tax Exempt 68,644
Counsellors Securities Inc. ("CSI"), also a wholly owned subsidiary of
Warburg, serves as each Fund's distributor. No compensation is payable by the
Funds to CSI for distribution services.
3. CAPITAL SHARE TRANSACTIONS
Each Fund is authorized to issue three billion full and fractional shares
of capital stock, $.001 par value per share, of which two billion shares are
designated Advisor Shares. Neither Fund currently offers Advisor Shares.
22
<PAGE>
WARBURG PINCUS CASH RESERVE AND NEW YORK TAX EXEMPT FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
3. CAPITAL SHARE TRANSACTIONS -- (CONT'D)
Transactions in shares of each Fund were as follows:
<TABLE>
<CAPTION>
CASH RESERVE FUND NEW YORK TAX EXEMPT FUND
---------------------------------- ---------------------------------
FOR THE SIX FOR THE SIX
MONTHS ENDED FOR THE TEN MONTHS ENDED FOR THE TEN
JUNE 30, 1998 MONTHS ENDED JUNE 30, 1998 MONTHS ENDED
(UNAUDITED) DECEMBER 31, 1997 (UNAUDITED) DECEMBER 31, 1997
-------------- ----------------- ------------- -----------------
<S> <C> <C> <C> <C>
Shares sold 1,440,115,621 2,356,390,501 178,471,749 347,174,918
Shares issued to shareholders on
reinvestment of dividends 7,142,056 13,364,994 773,566 1,663,509
Shares redeemed (1,456,700,189) (2,313,798,174) (192,152,898) (321,856,449)
-------------- -------------- ------------ ------------
Net increase (decrease) in shares (9,442,512) 55,957,321 (12,907,583) 26,981,978
============== ============== ============ ============
</TABLE>
4. LIABILITIES
At June 30, 1998 the Funds had the following liabilities:
NEW YORK
CASH RESERVE FUND TAX EXEMPT FUND
----------------- ---------------
Dividends Payable $2,100,342 $338,810
Investment advisory fee payable 85,509 21,420
Administrative services fee payable 41,526 11,119
5. NET ASSETS
At June 30, 1998, capital contributions and accumulated net realized loss
from security transactions have been adjusted for permanent book/tax
differences. The Cash Reserve Fund reclassified $436 from accumulated net
realized loss from security transactions to capital contributions.
Net Assets at June 30, 1998, consisted of the following:
<TABLE>
<CAPTION>
NEW YORK
CASH RESERVE FUND TAX EXEMPT FUND
----------------- ---------------
<S> <C> <C>
Capital contributed, net $463,252,297 $138,273,524
Accumulated net realized loss from security
transactions (41,354) (8,303)
------------ ------------
Net assets $463,210,943 $138,265,221
============ ============
</TABLE>
6. CAPITAL LOSS CARRYOVER
For the Fiscal year ended December 31, 1997, the Cash Reserve Fund and the
New York Tax Exempt Fund have capital loss carryovers of $20,216 and $8,303,
respectively, to offset possible future capital gains of each Fund. These
carryovers expire as follows:
23
<PAGE>
WARBURG PINCUS CASH RESERVE AND NEW YORK TAX EXEMPT FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
6. CAPITAL LOSS CARRYOVER -- (CONT'D)
FUND YEAR AMOUNT
- ---- ---- -------
Cash Reserve 2004 $ 2,226
2005 17,990
New York Tax Exempt 1998 4,026
2000 4,089
2002 188
7. YEAR 2000 COMPLIANCE
Many services provided to the Funds and their shareholders by Warburg and
certain of its affiliates (the "Warburg Service Providers") and the Funds' other
service providers rely on the functioning of their respective computer systems.
Many computer systems cannot distinguish the year 2000 from the year 1900,
resulting in potential difficulty in performing various calculations (the "Year
2000 Issue"). The Year 2000 Issue could potentially have an adverse impact on
the handling of security trades, the payment of interest and dividends, pricing,
account services and other Fund operations.
The Warburg Service Providers recognize the importance of the Year 2000
Issue and are taking appropriate steps necessary in preparation for the year
2000. At this time, there can be no assurance that these steps will be
sufficient to avoid any adverse impact on the Funds nor can there be any
assurance that the Year 2000 Issue will not have an adverse effect on the Funds'
investments or on global markets or economies, generally. In addition, it has
been reported that foreign institutions have made less progress in addressing
the Year 2000 Issue than major U.S. entities, which could adversely effect the
Funds' foreign investments.
The Warburg Service Providers anticipate that their systems and those of
the Funds' other service providers will be adapted in time for the year 2000. To
further this goal, the Warburg Service Providers have coordinated a plan to
repair, adapt or replace systems that are not year 2000 compliant, and are
seeking to obtain similar representations from the Funds' other major service
providers. The Warburg Service Providers will be monitoring the Year 2000 Issue
in an effort to ensure appropriate preparation.
24
<PAGE>
WARBURG PINCUS FUNDS [LOGO]
P.O. BOX 9030, BOSTON, MA 02205-9030
800-WARBURG (800-927-2874)
www.warburg.com
COUNSELLORS SECURITIES INC., DISTRIBUTOR. WPMMF-3-0698
