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[LOGO]
PROSPECTUS
JUNE 29, 1994
[ ] WARBURG PINCUS CASH RESERVE FUND
[ ] WARBURG PINCUS NEW YORK TAX EXEMPT FUND
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WARBURG PINCUS NEW YORK TAX EXEMPT FUND
SUPPLEMENT TO PROSPECTUS DATED JUNE 29, 1994
As of June 9, 1995, Series 2 Shares of Warburg Pincus New York Tax Exempt
Fund will cease being offered. Consequently, all references in the Prospectus to
an outstanding class of Series 2 Shares should be disregarded after June 9,
1995. Holders of Series 2 Shares should contact the financial institution
through whom they hold the Shares for additional information.
Dated: May 30, 1995
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WARBURG PINCUS FUNDS
P.O. BOX 9030
BOSTON, MASSACHUSETTS 02205-9030
TELEPHONE NUMBER (800) 888-6878
PROSPECTUS June 29, 1994
Warburg Pincus Funds are a family of open-end mutual funds that offer investors
a variety of investment opportunities. Two money market funds are described in
this Prospectus:
WARBURG, PINCUS CASH RESERVE FUND is designed to provide investors with high
current income consistent with liquidity and stability of principal.
WARBURG, PINCUS 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.
AN INVESTMENT IN A FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. ALTHOUGH 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.
NO LOAD SHARES. Fund shares are sold and redeemed at net asset value
without the imposition of a sales or redemption charge by the Fund. Each Fund
offers a class of shares that is 'no-load,' which means that there are no sales
charges, commissions, 12b-1 plan or other deferred sales charges applicable to
the class. See 'Shareholder Servicing' for a discussion of a second class of
shares of the Tax Exempt Fund offered through certain service organizations that
are paid a fee by their customers.
LOW MINIMUM INVESTMENT. The minimum initial investment in each
Fund is $1,000 ($500 for an IRA in the case of the Cash Reserve Fund) and the
minimum subsequent investment is $500. Through the Automatic Monthly Investment
Plan (see 'How to Purchase Shares'), subsequent investment minimums may be as
low as $50.
This Prospectus briefly sets forth certain information about the Funds that
investors should know before investing. Investors are advised to read this
Prospectus and retain it for future reference. Additional information about each
Fund, contained in a Statement of Additional Information, has been filed with
the Securities and Exchange Commission and is available to investors without
charge by calling Warburg Pincus Funds at (800) 257-5614. Information regarding
the status of shareholder accounts may be obtained by calling Warburg Pincus
Funds at (800) 888-6878. The Statements of Additional Information bear the same
date as this Prospectus and are incorporated by reference in their entirety into
this Prospectus.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
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THE FUNDS' EXPENSES
Warburg, Pincus Cash Reserve Fund (the 'Cash Reserve Fund') currently
offers one class of Common Stock. Warburg, Pincus New York Tax Exempt Fund (the
'Tax Exempt Fund' and, with the Cash Reserve Fund, the 'Funds'; each may also be
referred to as a 'Fund') currently offers two separate classes of
shares -- Common Stock ('Common Shares') and shares designated Common
Stock -- Series 2 ('Series 2 Shares'). Shares of each class represent equal pro
rata interests in the Tax Exempt Fund and accrue dividends in the same manner,
except that Series 2 Shares bear fees payable by the Fund (at the rate of .35%
per annum) to institutional investors ('Service Organizations') for services
they provide to the beneficial owners of such shares and enjoy certain exclusive
voting rights on matters relating to these fees. See 'Shareholder Servicing.'
Because of the additional fees borne by Series 2 Shares, the net yield on such
shares can be expected, at any given time, to be approximately .35% lower than
the net yield on Common Shares of the Tax Exempt Fund.
<TABLE>
<CAPTION>
CASH RESERVE TAX EXEMPT
FUND* FUND
------------ ------------------
COMMON COMMON SERIES 2
SHARES SHARES SHARES
------------ ------ --------
<S> <C> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases (as a percentage of offering
price)................................................................... -0- -0- -0-
Annual Fund Operating Expenses (after expense reimbursements) (as a percentage
of average net assets)
Management Fees............................................................. .37% .31% .31%
12b-1 fees.................................................................. -0- -0- .35
Other expenses.............................................................. .17 .23 .23
---- ---- ----
Total Fund Operating Expenses............................................... .54% .54% .89%
---- ---- ----
---- ---- ----
EXAMPLE
You would pay the following expenses
on a $1,000 investment, assuming (1) 5% annual return
and (2) redemption at the end of each time period:
1 Year.......................................................... $ 6 $ 6 $ 9
3 Years......................................................... $ 17 $ 17 $ 28
5 Years......................................................... $ 30 $ 30 $ 49
10 Years........................................................ $ 68 $ 68 $110
</TABLE>
The expense table shows the costs and expenses that an investor will bear
directly or indirectly as an investor in each Fund. Absent the waiver of certain
fees payable to the Funds' investment adviser and sub-investment adviser and
administrator, the investment management fees for the Cash Reserve Fund and the
Tax Exempt Fund would have equalled .50% and the total Fund operating expenses
would have been .67% and .73%, respectively, of average net assets with respect
to the Common Shares offered by each Fund and 1.08% with respect to the Series 2
Shares. The Example should not be considered a representation of past or future
expenses; actual Fund expenses may be greater or less than those shown.
Moreover, while the Example assumes a 5% annual return, each Fund's actual
performance will vary and may result in a return greater or less than 5%. Long-
term shareholders of Series 2 Shares may pay more than the economic equivalent
of the maximum front-end sales charges permitted by the National Association of
Securities Dealers, Inc.
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* The Cash Reserve Fund's Board of Directors has approved a Distribution Plan
and a Shareholder Services Plan pursuant to which the Fund is authorized to
pay each participating Service Organization a negotiated fee on an annual
basis not to exceed .75% in the case of distribution agreements and .50% in
the case of shareholder servicing agreements, in each case of the value of the
average daily net assets of its Customers (as defined herein). See
'Shareholder Servicing.'
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FINANCIAL HIGHLIGHTS
The following information has been derived from the financial statements of
the Cash Reserve Fund and Tax Exempt Fund, respectively, which have been audited
(for the fiscal year ended February 28, 1994 and the four prior fiscal years) by
Coopers & Lybrand, independent accountants, whose most recent report for each
Fund, dated February 28, 1994, accompanies the financial statements included in
the relevant Fund's Statement of Additional Information, copies of which may be
obtained without charge by calling Warburg Pincus Funds at (800) 257-5614.
CASH RESERVE FUND (for a share outstanding throughout each period)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
2/28/94 2/28/93 2/29/92 2/28/91 2/28/90 2/28/89
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period............................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------------ ------------ ------------ ------------ ------------ ------------
Income from Investment Operations
Net Investment Income.............. .0273 .0322 .0542 .0760 .0870 .0747
Net Gains or Losses on Securities
(both realized and unrealized)... 0 0 .0010 0 0 0
------------ ------------ ------------ ------------ ------------ ------------
Total from Investment Operations... .0273 .0322 .0552 .0760 .0870 .0747
------------ ------------ ------------ ------------ ------------ ------------
Less Distributions
Dividends (from net investment
income).......................... (.0273) (.0322) (.0542) (.0760) (.0870) (.0747)
Distributions (from capital
gains)........................... 0 0 (.0010) 0 0 0
------------ ------------ ------------ ------------ ------------ ------------
Total Distributions................ (.0273) (.0322) (.0552) (.0760) (.0870) (.0747)
------------ ------------ ------------ ------------ ------------ ------------
Net Asset Value, End of Period........ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------
Total Return.......................... 2.76% 3.27% 5.66% 7.87% 9.05% 7.73%
Ratios/Supplemental Data
Net Assets, End of Period (000s)... $277,557 $287,723 $426,479 $361,428 $365,008 $209,538
Ratios to average daily net assets
Operating expenses............. .54% .50% .50% .50% .50% .50%
Net investment income.......... 2.73% 3.22% 5.45% 7.59% 8.59% 7.51%
Decrease reflected in above
expense ratios due to
waivers/reimbursements........ .13% .17% .16% .13% .12% .16%
<CAPTION>
4/16/85
(COMMENCEMENT
OF
OPERATIONS)
YEAR ENDED YEAR ENDED TO
2/29/88 2/28/87 2/28/86
------------ ------------ -------------
<S> <C> <C> <C>
Net Asset Value, Beginning of
Period............................... $ 1.00 $ 1.00 $ 1.00
------------ ------------ -------------
Income from Investment Operations
Net Investment Income.............. .0651 .0614 .0662
Net Gains or Losses on Securities
(both realized and unrealized)... 0 0 0
------------ ------------ -------------
Total from Investment Operations... .0651 .0614 .0662
------------ ------------ -------------
Less Distributions
Dividends (from net investment
income).......................... (.0651) (.0614) (.0662)
Distributions (from capital
gains)........................... 0 0 0
------------ ------------ -------------
Total Distributions................ (.0651) (.0614) (.0662)
------------ ------------ -------------
Net Asset Value, End of Period........ $ 1.00 $ 1.00 $ 1.00
------------ ------------ -------------
------------ ------------ -------------
Total Return.......................... 6.70% 6.39% 6.82%*
Ratios/Supplemental Data
Net Assets, End of Period (000s)... $259,398 $193,669 $ 78,228
Ratios to average daily net assets
Operating expenses............. .46% .45% .36%*
Net investment income.......... 6.54% 5.92% 7.59%*
Decrease reflected in above
expense ratios due to
waivers/reimbursements........ .19% .19% .35%*
</TABLE>
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* Annualized.
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TAX EXEMPT FUND (for a share outstanding throughout each period)
<TABLE>
<CAPTION>
COMMON SHARES
----------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
2/28/94 2/28/93 2/29/92 2/28/91 2/28/90 2/28/89 2/29/88 2/28/87
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
----- ----- ----- ----- ----- ----- ----- ----------
Total Income from
Investment Operations
Net Investment Income... .0175 .0224 .0329 .0486 .0527 .0461 .0404 .0376
----- ----- ----- ----- ----- ----- ----- ----------
Less Distributions
Dividends (from net
investment income)..... (.0175) (.0224) (.0329) (.0486) (.0527) (.0461) (.0404) (.0376)
----- ----- ----- ----- ----- ----- ----- ----------
Net Asset Value, End of
Period.................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
----- ----- ----- ----- ----- ----- ----- ----------
----- ----- ----- ----- ----- ----- ----- ----------
Total Return............... 1.77% 2.26% 3.34% 4.97% 5.40% 4.70% 4.10% 3.83%
Ratios/Supplemental Data
Net Assets, End of Period
(000s).................... $ 65,984 $ 76,995 $ 65,438 $ 85,783 $ 87,283 $ 58,112 $ 87,721 $112,413
Ratios to average daily
net assets
Operating expenses...... .54% .50% .50% .50% .50% .50% .46% .45%
Net investment income... 1.75% 2.23% 3.27% 4.84% 5.38% 4.57% 4.03% 3.72%
Decrease reflected in
above expense ratios
due to waivers/
reimbursements......... .19% .28% .23% .21% .21% .25% .23% .20%
<CAPTION>
COMMON
SHARES
------------- SERIES 2 SHARES
4/18/85 ---------------------------------------------
(COMMENCEMENT 4/30/90
OF (INITIAL
OPERATIONS) ISSUANCE
TO YEAR ENDED YEAR ENDED YEAR ENDED THROUGH
2/28/86 2/28/94 2/28/93 2/29/92 2/28/91)
------------- ---------- ---------- ---------- ---------
<S> <<C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
----- ----- ----- ----- ---------
Total Income from
Investment Operations
Net Investment Income... .0413 .0140 .0189 .0295 .0391
----- ----- ----- ----- ---------
Less Distributions
Dividends (from net
investment income)..... (.0413) (.0140) (.0189) (.0295) (.0391)
----- ----- ----- ----- ---------
Net Asset Value, End of
Period.................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
----- ----- ----- ----- ---------
----- ----- ----- ----- ---------
Total Return............... 4.20%* 1.41% 1.90% 2.99% 4.78%*
Ratios/Supplemental Data
Net Assets, End of Period
(000s).................... $69,583 $ 12,123 $ 10,165 $ 9,307 $15,151
Ratios to average daily
net assets
Operating expenses...... .37% * .89% .85% .85% .65%*
Net investment income... 4.86%* 1.40% 1.87% 2.95% 4.63%*
Decrease reflected in
above expense ratios
due to waivers/
reimbursements......... .33%* .19% .28% .23% .42%*
</TABLE>
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* Annualized.
4
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INVESTMENT OBJECTIVES AND POLICIES
The CASH RESERVE FUND is a diversified money market mutual fund whose investment
objective is high current income consistent with liquidity and stability of
principal. The TAX EXEMPT FUND is a non-diversified money market mutual fund
whose objective is to provide investors with as high a level of current interest
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. Each
objective may be changed only with the approval of the investors in that Fund.
There can be, of course, no assurance that a Fund will achieve its investment
objective. Investors should be aware that the market value of the obligations in
each Fund's portfolio can be expected to vary inversely to changes in prevailing
interest rates.
CASH RESERVE FUND
The Cash Reserve Fund will attempt to achieve its investment objective by
investing in a portfolio of 'money market' instruments consisting of United
States Treasury Bills, other obligations issued or guaranteed by the United
States government, its agencies or instrumentalities ('Government Securities');
bank and bank holding company obligations such as certificates of deposit,
bankers' acceptances, time deposits, commercial paper and debt obligations;
commercial paper and notes of other corporate issuers, including those with
floating or variable rates of interest (including variable rate master demand
notes) and repurchase agreements with respect to the foregoing.
The Cash Reserve Fund will concentrate its investments in the banking
industry except during temporary defensive periods. Up to 25% of the assets of
the Cash Reserve Fund may be invested at any time in the debt obligations of
issuers conducting their principal business activities in any industry other
than banking. In addition, the Cash Reserve Fund may invest up to 25% of its
assets in the debt obligations of a single issuer for a period of up to three
business days. Securities issued by the United States or its agencies or
instrumentalities may be purchased without regard to these limits.
TAX EXEMPT FUND
At least 80% of the Tax Exempt Fund's assets will be invested in short-term
tax-exempt debt obligations issued by or on behalf of the State of New York and
other states, territories and possessions of the United States, the District of
Columbia and their respective authorities, agencies, instrumentalities and
political subdivisions ('Municipal Securities'). Dividends paid by the Tax
Exempt Fund which are derived from interest attributable to tax-exempt
obligations of the State of New York and its political subdivisions, as well as
of certain other governmental issuers such as Puerto Rico ('New York Municipal
Securities'), will be excluded from gross income for federal income tax purposes
and exempt from New York State and New York City personal income taxes.
Dividends derived from interest on tax-exempt obligations of other governmental
issuers will be excluded from gross income for federal income tax purposes, but
will be subject to New York State and New York City personal income taxes. The
Tax Exempt Fund expects that, except during temporary defensive periods or when
acceptable securities are unavailable for investment by the Fund, at least 65%
of the Tax Exempt Fund's assets will be invested in New York Municipal
Securities.
Municipal Securities in which the Tax Exempt Fund may invest include
commercial paper, notes and bonds. Interest on certain bonds issued after August
7, 1986 to finance certain non-governmental activities ('Alternative Minimum Tax
Securities') is a preference item for purposes of the federal individual and
corporate alternative minimum taxes. The Fund is authorized to invest up to 20%
of its assets in Alternative Minimum Tax Securities. While the income from
Alternative Minimum Tax Securi
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ties is exempt from regular federal income tax, it is a tax preference item for
purposes of the 'alternative minimum tax.' The alternative minimum tax is a
special tax that applies to a limited number of taxpayers who have certain
adjustments or tax preference items. Available returns on Alternative Minimum
Tax Securities acquired by the Fund may be lower than those from newly issued
Municipal Securities acquired by the Fund due to the possibility of federal,
state and local alternative minimum or minimum income tax liability on interest
from Alternative Minimum Tax Securities.
The Tax Exempt Fund may for defensive or other purposes invest in certain
short-term taxable securities when the Fund's investment adviser believes that
it would be in the best interests of the Fund's investors. Taxable securities in
which the Fund may invest on a short-term basis are Government Securities,
including repurchase agreements with banks or securities dealers involving such
securities, time deposits maturing in not more than seven days, other debt
securities, commercial paper and certificates of deposit issued by United States
branches of United States banks with assets of $1 billion or more. At no time
will more than 20% of the Fund's total assets be invested in taxable short-term
securities unless the Fund's investment adviser has determined to temporarily
adopt a defensive investment policy in the face of an anticipated softening in
the market for Municipal Securities in general.
GENERAL
PRICE AND PORTFOLIO MATURITY. Each Fund invests only in securities which are
purchased with and payable in U.S. dollars and which have (or, pursuant to
regulations adopted by the Securities and Exchange Commission (the 'SEC'), are
deemed to have) remaining maturities of thirteen months or less at the date of
purchase by the Fund. For this purpose, variable rate master demand notes (as
described below), which are payable on demand, or, under certain conditions, at
specified periodic intervals not exceeding thirteen months, in either case on
not more than 30 days' notice, will be deemed to have remaining maturities of
thirteen months or less. Each Fund maintains a dollar-weighted average portfolio
maturity of 90 days or less. Each Fund follows these policies to maintain a
constant net asset value of $1.00 per share, although there is no assurance that
it can do so on a continuing basis.
PORTFOLIO QUALITY AND DIVERSIFICATION. Each Fund will limit its portfolio
investments to securities that its Board of Directors determines present minimal
credit risks and which are 'Eligible Securities' at the time of acquisition by
the Fund. The term Eligible Securities includes securities rated by the
'Requisite NRSROs' in one of the two highest short-term rating categories,
securities of issuers that have received such ratings with respect to other
short-term debt securities and comparable unrated securities. 'Requisite NRSROs'
means (i) any two nationally recognized statistical rating organizations
('NRSROs') that have issued a rating with respect to a security or class of debt
obligations of an issuer, or (ii) one NRSRO, if only one NRSRO has issued a
rating with respect to such security or issuer at the time that the Fund
acquires the security. If the Cash Reserve Fund acquires securities that are
unrated or that have been rated by a single NRSRO, the acquisition must be
approved or ratified by the Board of Directors. The Tax Exempt Fund may purchase
securities that are unrated at the time of purchase that the Fund's investment
adviser and sub-investment adviser deem to be of comparable quality to rated
securities that the Fund may purchase. The NRSROs currently designated as such
by the SEC are Standard & Poor's Ratings Group ('S&P'), Moody's Investors
Service, Inc. ('Moody's'), Fitch Investors Services, Inc., Duff and Phelps, Inc.
and IBCA Limited and its affiliate, IBCA, Inc. A discussion of the ratings
categories of the NRSROs is contained in the Appendix to each Fund's Statement
of Additional Information.
6
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CASH RESERVE FUND. The Fund has adopted certain diversification requirements
under Rule 2a-7 under the Investment Company Act of 1940, as amended (the '1940
Act'), as operating policies. Under these policies the Cash Reserve Fund may not
invest more than 5% of its total assets in Eligible Securities that have not
received the highest rating from the Requisite NRSROs and comparable unrated
securities ('Second Tier Securities') and may not invest more than 1% of its
total assets in the Second Tier Securities of any one issuer. In addition, the
Cash Reserve Fund may invest up to 5% of the then-current value of the Fund's
total assets in the securities of a single issuer, provided that the Fund may
invest more than 5% in an issuer for a period of up to three business days,
provided that (i) the securities either are rated by the Requisite NRSROs in the
highest short-term rating category or are securities of issuers that have
received such rating with respect to other short-term debt securities or are
comparable unrated securities, and (ii) the Fund does not make more than one
such investment at any one time. However, if Rule 2a-7 is amended to permit it,
the Fund may invest, with respect to 25% of its assets, more than 5% of its
assets in any one issuer.
PORTFOLIO INVESTMENTS
BANK OBLIGATIONS. The Cash Reserve Fund may purchase bank obligations, including
United States dollar-denominated instruments issued or supported by the credit
of the United States or foreign banks or savings institutions having total
assets at the time of purchase in excess of $1 billion. While the Cash Reserve
Fund will invest in obligations of foreign banks or foreign branches of United
States banks only if the Fund's investment adviser and sub-investment adviser
deem the instrument to present minimal credit risks, such investments may
nevertheless entail risks that are different from those of investments in
domestic obligations of United States banks due to differences in political,
regulatory and economic systems and conditions. Such risks include future
political and economic developments, the possible imposition of withholding
taxes on interest income, possible establishment of exchange controls or the
adoption of other foreign governmental restrictions which might adversely affect
the payment of principal and interest on such obligations. The Cash Reserve Fund
may also make interest-bearing savings deposits in commercial and savings banks
in amounts not in excess of 5% of its assets.
VARIABLE RATE MASTER DEMAND NOTES. Each Fund may also purchase variable rate
master demand notes, which are unsecured instruments that permit the
indebtedness thereunder to vary and provide for periodic adjustments in the
interest rate. Although the notes are not normally traded and there may be no
secondary market in the notes, the Fund may demand payment of principal and
accrued interest at any time and may resell the note at any time to a third
party. In the event an issuer of a variable rate master demand note defaulted on
its payment obligation, the Fund might be unable to dispose of the note because
of the absence of a secondary market and might, for this or other reasons,
suffer a loss to the extent of the default.
GOVERNMENT SECURITIES. Government Securities in which the Funds may invest
include Treasury Bills, Treasury Notes and Treasury Bonds; other obligations
that are supported by the full faith and credit of the United States Treasury,
such as Government National Mortgage Association pass-through certificates;
obligations that are supported by the right of the issuer to borrow from the
Treasury, such as securities of Federal Home Loan Banks; and obligations that
are supported only by the credit of the instrumentality, such as Federal
National Mortgage Association bonds.
REPURCHASE AGREEMENTS. The Funds may agree to purchase money market instruments
from
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financial institutions such as banks and broker-dealers subject to the seller's
agreement to repurchase them at an agreed-upon date and price ('repurchase
agreements'). The repurchase price generally equals the price paid by the Fund
plus interest negotiated on the basis of current short-term rates (which may be
more or less than the rate on the securities underlying the repurchase
agreement). Default by a seller, if the Fund is delayed or prevented from
exercising its rights to dispose of the collateral securities, could expose the
Fund to possible loss, including the risk of a possible decline in the value of
the underlying securities during the period while the Fund seeks to assert its
rights thereto. Repurchase agreements are considered to be loans by the Fund
under the 1940 Act.
WHEN-ISSUED SECURITIES. Each Fund may purchase portfolio securities on a
'when-issued' basis. When-issued securities are securities purchased for
delivery beyond the normal settlement date at a stated price and yield. A Fund
will generally not pay for such securities or start earning interest on them
until they are received. Securities purchased on a when-issued basis are
recorded as an asset and are subject to changes in value based upon changes in
the general level of interest rates. Each Fund expects that commitments to
purchase when-issued securities will not exceed 25% of the value of its total
assets absent unusual market conditions, and that a commitment by the Fund to
purchase when-issued securities will generally not exceed 45 days. The Funds do
not intend to purchase when-issued securities for speculative purposes but only
in furtherance of their investment objectives.
STAND-BY COMMITMENTS. The Tax Exempt Fund may acquire 'stand-by commitments'
with respect to Municipal Securities held in its portfolio. Under a stand-by
commitment, a dealer agrees to purchase, at the Fund's option, specified
Municipal Securities at a specified price. In evaluating the creditworthiness of
the issuer of a stand-by commitment, the investment adviser and sub-investment
adviser will review periodically relevant financial information concerning the
issuer's assets, liabilities and contingent claims. The Fund will acquire
stand-by commitments solely to facilitate portfolio liquidity and does not
intend to exercise its rights thereunder for trading purposes.
SPECIAL CONSIDERATIONS AND RISK FACTORS RELATING TO THE TAX EXEMPT FUND. In
seeking to achieve its investment objective the Tax Exempt Fund may invest all
or any part of its assets in Municipal Securities which are industrial
development bonds. Moreover, although the Tax Exempt Fund does not currently
intend to do so on a regular basis, it may invest more than 25% of its assets in
Municipal Securities the interest on which is paid solely from revenues of
economically related projects, if such investment is deemed necessary or
appropriate by the Fund's investment adviser and sub-investment adviser. To the
extent that the Fund's assets are concentrated in Municipal Securities payable
from revenues on economically related projects and facilities, the Fund will be
subject to the peculiar risks presented by such projects to a greater extent
than it would be if the Fund's assets were not so concentrated.
As a non-diversified mutual fund, the Tax Exempt Fund may invest a greater
proportion of its assets in the obligations of a smaller number of issuers and,
as a result, will be subject to greater credit risk with respect to its
portfolio securities. In the opinion of the Fund's adviser, any risk to the Fund
should be limited by its intention to continue to conduct its operations so as
to qualify as a 'regulated investment company' for purposes of the Internal
Revenue Code of 1986 (the 'Code') and by its policies restricting investments to
obligations with short-term maturities and high quality credit ratings.
The Fund's ability to achieve its investment objective is dependent upon
the ability of the issuers of New York Municipal Obligations to meet their
continuing obligations for the payment of principal and interest. New York State
and New York City face long-term economic
8
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problems that could seriously affect their ability and that of other issuers of
New York Municipal Obligations to meet their financial obligations.
Certain substantial issuers of New York Municipal Obligations (including
issuers whose obligations may be acquired by the Fund) have experienced serious
financial difficulties in recent years. These difficulties have at times
jeopardized the credit standing and impaired the borrowing abilities of all New
York issuers and have generally contributed to higher interest costs for their
borrowings and fewer markets for their outstanding debt obligations. In recent
years, several different issues of municipal securities of New York State and
its agencies and instrumentalities and of New York City have been downgraded by
S&P and Moody's. On the other hand, strong demand for New York Municipal
Obligations has more recently had the effect of permitting New York Municipal
Obligations to be issued with yields relatively lower, and after issuance, to
trade in the market at prices relatively higher, than comparably rated municipal
obligations issued by other jurisdictions. A recurrence of the financial
difficulties previously experienced by certain issuers of New York Municipal
Obligations could result in defaults or declines in the market values of those
issuers' existing obligations and, possibly, in the obligations of other issuers
of New York Municipal Obligations. Although as of the date of this Prospectus,
no issuers of New York Municipal Obligations are in default with respect to the
payment of their municipal obligations, the occurrence of any such default could
affect adversely the market values and marketability of all New York Municipal
Obligations and, consequently, the net asset value of the Fund's portfolio.
Other considerations affecting the Fund's investments in New York Municipal
Obligations are summarized in the Statement of Additional Information of the Tax
Exempt Fund.
INVESTMENT GUIDELINES
Each Fund may invest up to an aggregate of 10% of its total assets in
illiquid securities with contractual or other restrictions on resale and other
instruments which are not readily marketable. Each Fund is also authorized to
borrow and to enter into reverse repurchase agreements in an amount of up to 10%
of its total assets for temporary or emergency purposes, but not for leverage,
and to pledge its assets to the same extent in connection with such borrowings.
A more detailed description of these policies, together with an enumeration of
additional investment restrictions that each Fund has adopted and that cannot be
changed without the approval of the holders of a majority of the Fund's
outstanding shares, is contained in each Fund's Statement of Additional
Information.
MANAGEMENT OF THE FUNDS
INVESTMENT ADVISER. Each Fund employs Warburg, Pincus Counsellors, Inc.
('Counsellors') as investment adviser to the Fund. Incorporated in 1970 as a
successor to the investment counselling business previously conducted by E.M.
Warburg & Co., Inc., Counsellors is a wholly owned subsidiary of Warburg, Pincus
Counsellors G.P. ('Counsellors G.P.'), a New York general partnership. E.M.
Warburg, Pincus & Co., Inc. ('EMW') controls Counsellors through its ownership
of a class of voting preferred stock of Counsellors G.P. Counsellors G.P. has no
business other than being a holding company of Counsellors and its subsidiaries.
Counsellors is a professional investment counselling firm which provides
investment services to investment companies, employee benefit plans, endowment
funds, foundations and other institutions and individuals. As of May 31, 1994,
Counsellors had more than $7.8 billion of assets under management and provided
investment advice to thirteen investment companies which had total assets of
approximately $2.8 billion.
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Counsellors' address is 466 Lexington Avenue, New York, New York 10017-3147.
In its Advisory Agreement with each Fund, Counsellors has agreed to be
responsible, subject to the supervision and direction of each Fund's Board of
Directors, for the Fund's investment program, including decisions concerning:
(i) the specific types of securities to be held by the Fund and the proportion
of the Fund's assets that should be allocated to such investments during
particular market cycles, (ii) the specific issuers whose securities will be
purchased or sold by the Fund, (iii) the maximum maturity (under one year) of
its portfolio investments, (iv) the appropriate average weighted maturity of its
portfolio in light of current market conditions and, with respect to the Tax
Exempt Fund, (v) the extent to which taxable securities will be purchased for
and held by the Tax Exempt Fund and (vi) the extent to which securities other
than New York Municipal Securities will be purchased for and held by the Tax
Exempt Fund. In addition, Counsellors has agreed to supervise the performance by
the sub-investment adviser of the functions described below. For the services
provided pursuant to the Advisory Agreement, Counsellors is entitled to receive
a fee, computed daily and payable monthly, at the annual rate of .25 of 1.00% of
the value of each Fund's average daily net assets. For the year ended February
28, 1994, the Cash Reserve Fund and the Tax Exempt Fund paid Counsellors a fee
after waivers at the rate of .23% and .20%, respectively, of each Fund's net
assets.
SUB-INVESTMENT ADVISER AND ADMINISTRATOR. PNC Institutional Management
Corporation ('PIMC'), a wholly owned subsidiary of PNC Bank, National
Association ('PNC'), serves as each Fund's sub-investment adviser and
administrator. PIMC was organized in 1977 by PNC to perform advisory services
for investment companies and has its principal offices at 103 Bellevue Parkway,
Wilmington, Delaware 19809. As of May 31, 1994, PIMC served as investment
adviser to 49 mutual fund portfolios and as sub-investment adviser to 10 mutual
funds, having total assets exceeding $23.0 billion.
As sub-investment adviser and administrator, PIMC has agreed to implement
each Fund's investment program as determined by the Fund's Board of Directors
and Counsellors. PIMC will supervise the day-to-day operations of the Fund and
perform the following services: (i) providing investment research and credit
analysis concerning the Fund's investments, (ii) placing orders for all
purchases and sales of the Fund's portfolio investments and (iii) maintaining
the books and records required to support the Fund's operations. As compensation
therefor, each Fund has agreed to pay PIMC a fee computed daily and payable
monthly at an annual rate of .25 of 1.00% of the value of each Fund's average
daily net assets. For the year ended February 28, 1994, the Cash Reserve Fund
and the Tax Exempt Fund paid PIMC a fee after waivers at the rate of .14% and
.11%, respectively, of each Fund's net assets.
CO-ADMINISTRATOR. The Funds employ Counsellors Funds Service, Inc. ('Counsellors
Service'), a wholly owned subsidiary of Counsellors, as a co-administrator. As
co-administrator, Counsellors Service provides shareholder liaison services to
the Funds including responding to shareholder inquiries and providing
information on shareholder investments. Counsellors Service will also perform a
variety of other services, including supplying office facilities and furnishing
certain executive and administrative services, acting as liaison between the
Funds and their various service providers, furnishing corporate secretarial
services, which include preparing materials for meetings of the Board, preparing
proxy statements and annual, semiannual and quarterly reports, assisting in
other regulatory filings as necessary and monitoring and developing compliance
procedures for the Funds. As compensation, each Fund pays to Counsellors Service
a fee calculated at an annual rate of .10% of that Fund's average daily net
assets.
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Counsellors and Counsellors Service may from time to time, at their own
expense, provide compensation to certain banks, financial institutions,
securities dealers and other industry professionals for performing
administrative services for their customers that invest in the Funds. These
services include maintaining account records, processing orders to purchase,
redeem and exchange Fund shares and responding to certain customer inquiries.
Such compensation does not represent an additional expense to a Fund or its
shareholders, since it will be paid from the assets of Counsellors, Counsellors
Service or their affiliates.
DISTRIBUTOR. Counsellors Securities Inc. ('Counsellors Securities') acts as
distributor of each Fund's shares. Counsellors Securities is a wholly owned
subsidiary of Counsellors. Counsellors Securities' address is 466 Lexington
Avenue, New York, New York 10017-3147. No compensation is payable by each Fund
to Counsellors Securities for its distribution services.
TRANSFER AGENT. State Street Bank and Trust Company ('State Street') acts as
shareholder servicing agent, transfer agent and dividend disbursing agent for
the Funds. It has delegated to Boston Financial Data Services, Inc., a 50% owned
subsidiary, responsibility for most shareholder servicing functions. State
Street's principal business address is 225 Franklin Street, Boston,
Massachusetts 02110.
CUSTODIAN. PNC serves as the custodian of each Fund's assets. PNC and its
predecessors have been in the business of managing the investments of fiduciary
and other accounts in the Philadelphia area since 1847. PNC is a subsidiary of
PNC Bank Corp. and its principal business address is Broad and Chestnut Streets,
Philadelphia, Pennsylvania 19101. PNC Bank Corp. is a multi-bank holding company
with its principal offices in Pittsburgh, Pennsylvania.
DIRECTORS AND OFFICERS. The officers of each Fund manage its day-to-day
operations and are directly responsible to the Board of Directors. The Directors
set broad policies for each Fund and choose its officers. A list of the
Directors and Officers of each Fund and a brief statement of their present
positions and principal occupations during the past five years is set forth in
the Statement of Additional Information of each Fund.
HOW TO PURCHASE SHARES
Each Fund's shares are sold without a sales charge at the net asset value
per share next determined after receipt of a purchase order and payment. For a
description of the manner of calculating each Fund's net asset value, see 'How
To Redeem and Exchange Shares -- Net Asset Value.'
The minimum initial investment is $1,000 and the minimum for subsequent
investments is $500, except that subsequent minimum investments can be as low as
$50 under the Automatic Monthly Investment Plan described in the next section.
With respect to the Cash Reserve Fund, for a tax-deferred retirement plan, such
as an Individual Retirement Account ('IRA'), the minimum initial and subsequent
investment is $500. Purchase orders for shares will be accepted by each Fund
only on a day on which a Fund's net asset value is calculated. See 'How to
Redeem and Exchange Shares -- Net Asset Value' below. Share certificates are
issued upon written request to the Fund's transfer agent and are not issued for
fractional shares. Each Fund may in its discretion reject any order for the
purchase of shares.
After an investor has made his initial investment, additional shares may be
purchased at any time by mail or by telephone in the manner outlined below.
Payments for initial and subsequent investments should clearly indicate the
investor's account number. In the interest of economy and convenience,
certificates representing shares in the Funds are not physically issued.
Investors who purchase shares of a Fund through a program of services
offered or admin-
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istered by a securities dealer or financial institution should read the program
materials in conjunction with this Prospectus. Certain features of the Funds,
such as the minimum initial or subsequent investment, may be modified in these
programs, and administrative charges may be imposed for the services rendered.
Each Fund reserves the right to vary further the initial and subsequent
investment minimum requirements at any time. Existing investors will be given 15
days' notice by mail of any increase in subsequent investment minimum
requirements.
Warburg Pincus Funds understands that some broker-dealers (other than
Counsellors Securities), financial institutions, securities dealers and other
industry professionals ('Service Agents') may impose certain conditions on their
clients which are in addition to or different than those described in this
Prospectus, and, to the extent permitted by applicable regulatory authority, may
charge their clients direct fees. Therefore, a client or customer should contact
the organization acting on his behalf concerning the fees (if any) charged in
connection with a purchase or redemption of Fund shares. Service Agents will be
responsible for promptly transmitting client or customer purchase and redemption
orders to the Funds in accordance with their agreements with clients or
customers. Certain Service Agents may receive compensation from the respective
Fund's or Counsellors' or Counsellors Service's own resources. Certain Service
Agents that have entered into agreements with Counsellors Securities may enter
confirmed purchase orders on behalf of customers by phone, with payment to
follow no later than the Fund's pricing on the following business day. If
payment is not received by such time, the Service Agent could be held liable for
resulting fees or losses.
Shares may be purchased by mail or by telephone:
BY MAIL. Investors should send a check made payable to the Fund in United States
currency along with a completed account application to:
Warburg Pincus Funds
P.O. Box 9030
Boston, Massachusetts 02205-9030
Completed and signed account applications should be mailed to Warburg
Pincus Funds at the above address.
If payment is received by check before 4:00 P.M. (Eastern time) on a day
that the Fund calculates its net asset value, the purchase will be made at the
Fund's net asset value calculated at the end of that day. If payment is received
after 4:00 P.M., the purchase will be effected at the Fund's net asset value
determined for the next business day. Shares purchased by check are entitled to
receive dividends and distributions beginning on the day after the investor's
check has been received by Warburg Pincus Funds. If the check used for the
purchase does not clear, the Fund will cancel the purchase and the investor may
be liable for losses or fees incurred. Investors may obtain an account
application necessary to open an account by telephoning Warburg Pincus Funds at
(800) 257-5614 or by writing to Warburg Pincus Funds at the above address.
BY TELEPHONE. Purchase orders for shares may be transmitted by telephoning
Warburg Pincus Funds at (800) 888-6878 and then wiring federal funds to:
State Street Bank and Trust Co.
225 Franklin St.
Boston, MA 02101
ABA #0110 000 28
Attn: Mutual Funds/Custody Dept.
Warburg Pincus Fund Name
DDA #9904-649-2
Shareowner name
Shareowner account number
The investor will then be sent and should promptly complete and mail an
account application. Telephone orders received before noon, Eastern time, for
which State Street has received payment in the form of a bank wire will be
executed at noon and are entitled to dividends
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and distributions beginning on that day. Telephone orders received before noon,
Eastern time, for which payment by wire has not been received by noon and orders
received after noon will be executed at 4:00 P.M. if payment has been received
by that time. Orders for which payment has not been received until after 4:00
P.M. will not be accepted by the Fund and notice thereof will be given to the
prospective investor. Payment for orders which are not received or accepted will
be returned after prompt inquiry to the prospective investor.
RETIREMENT PLANS. For information about investing in a Fund through a
tax-deferred retirement plan, such as an IRA, a Simplified Employee Pension IRA
('SEP-IRA') or a profit sharing and money purchase plan, an investor should
telephone Warburg Pincus Funds at (800) 888-6878 or write to Warburg Pincus
Funds at the address set forth above. Investors should consult their own tax
advisers about the establishment of retirement plans.
SUBSEQUENT PURCHASES OF SHARES. Investors may purchase additional shares at any
time by mail or by telephone in the manner outlined above. All payments should
clearly indicate the investor's account number.
AUTOMATIC MONTHLY INVESTING. Automatic monthly investing allows shareholders to
authorize a Fund to debit their bank account monthly ($50 minimum) for the
purchase of Fund shares on either the tenth or twentieth business day of each
month. To establish the automatic monthly investing option, obtain a separate
application or complete the 'Automatic Investment Program' section of the
account application and include a voided, unsigned check from the bank account
to be debited. Only an account maintained at a domestic financial institution
which is an automated clearing house member may be used. Shareholders using this
service must satisfy the initial investment minimum for the Fund prior to or
concurrent with the start of any Automatic Investment Program. Please refer to
an account application for further information or contact Warburg Pincus Funds
at (800) 888-6878.
HOW TO REDEEM AND EXCHANGE SHARES
REDEMPTION PROCEDURES IN GENERAL. Shares are redeemed at the net asset value per
share next determined after receipt of a redemption order by Warburg Pincus
Funds and, if the shares to be redeemed are represented by share certificates,
upon receipt of all such certificates in proper form by Warburg Pincus Funds at
its principal office. All such certificates must be endorsed by the redeeming
investor or accompanied by a signed stock power, in each instance with the
signature guaranteed by a commercial bank or a member of a major stock exchange,
unless other arrangements satisfactory to the Fund have previously been made.
Each Fund may require any additional information reasonably necessary to
evidence that a redemption has been duly authorized. Shares purchased by check
will not be redeemed until the check used for investment has cleared. Although
each Fund intends to use its best efforts to maintain its net asset value per
share at $1.00, the proceeds paid upon redemption may be more or less than the
amount invested depending upon a share's net asset value at the time of
redemption. For a description of the manner of calculating each Fund's net asset
value, see 'Net Asset Value' below.
Payment for redeemed shares for which a redemption order (and any
supporting documentation required) is received prior to noon, Eastern time, on a
day that State Street is open for business is normally made on the same business
day. Payment for redeemed shares for which a redemption order is received after
noon, Eastern time, on such a business day or on a day that State Street is
closed is normally made on the next business day that State Street is open. Each
Fund reserves the right to pay redemption proceeds within seven days after
receiving the redemption order in proper form if, in the judgment of the Fund's
sub-investment adviser and administrator, an earlier payment could adversely
affect the Fund. Each Fund also reserves the right to redeem shares in any
account at their net asset value if the value of the
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account is less than $750. The investor having the account will first be
notified in writing that its account has a value of less than $750 and will be
allowed 60 days to make an additional investment before the redemption is
processed by the Fund.
Each Fund may suspend the right of redemption or postpone the date of
payment upon redemption (as well as suspend or postpone the recordation of the
transfer of its shares) for such periods as are permitted under the 1940 Act.
SPECIFIC REDEMPTION PROCEDURES. Shares may be redeemed by mail and, if the
investor makes the appropriate election on his account application, by telephone
or by check:
BY MAIL. Shares may be redeemed by submitting a written request for redemption
to Warburg Pincus Funds at the address indicated above under 'How to Purchase
Shares in the Fund.'
A written redemption request must (i) state the number of shares to be
redeemed, (ii) identify the investor's account number and (iii) be signed by
each registered owner exactly as the shares are registered. The redemption
proceeds will be paid by check mailed to the investor of record.
BY TELEPHONE. Investors who elect this option may transmit requests for
redemption to Warburg Pincus Funds by telephone at (800) 888-6878. Shares sold
before noon, Eastern time, do not receive dividends on the day of their
redemption. Shares sold between noon and 4:00 P.M., Eastern time, earn dividends
through and including the day of their redemption. Investors should realize that
by electing the telephone redemption and exchange option, an investor may be
giving up a measure of security that an investor may have if the investor were
to redeem or exchange shares in writing. An investor making a telephone
withdrawal should state (i) the name of the Fund, (ii) the account number of the
investor, (iii) the name of the investor appearing on the Fund's records, (iv)
the amount to be withdrawn and (v) the name of the person requesting the
redemption. Although it is conceivable that an investor's ability to effect
telephone exchanges or redemptions may be impaired by an exceptionally large
volume of telephone transactions, each Fund believes that it has made ample
provisions to meet the requirements of investors even during the periods of
extreme market volatility. If, however, the investor is unable to reach Warburg
Pincus Funds by telephone, the investor should submit a written redemption
request as explained above. Proceeds of a telephone redemption will be wired to
the investor's bank as set forth in the account application. Each Fund reserves
the right to impose a service charge for effecting wire transfers.
BY CHECK. An individual investor who is the record owner of Fund shares may
request a supply of checks by making the appropriate election on his account
application. Checks may be made payable to the order of any person in any amount
not less than $500. When a check is presented to State Street for payment, State
Street, as agent for the investor, causes the Fund to redeem a sufficient number
of shares in the investor's account to cover the amount of the check.
Investors are entitled to receive dividends on the shares to be redeemed
through the day the check is presented to State Street for payment. If an
investor owns insufficient shares to cover a check, the check will be returned
to the investor marked 'insufficient funds.' Cancelled checks will be returned
to the investor. The Fund reserves the right to terminate or modify the check
redemption procedure at any time, to impose a service charge or to charge for
checks. Each Fund may also charge an investor's account for returned checks and
for effecting stop orders.
AUTOMATIC CASH WITHDRAWAL PLAN. Each Fund offers investors an automatic cash
withdrawal plan under which investors may elect to receive periodic cash
payments of at least $1,000 monthly or quarterly. To establish this service,
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complete the 'Automatic Withdrawal Plan' section of the account application and
attach a voided check from the bank account to be credited. For further
information regarding the automatic cash withdrawal plan, investors should
contact Warburg Pincus Funds at (800) 888-6878.
TELEPHONE TRANSACTIONS. In order to request redemptions and exchanges by
telephone, investors must have completed and returned to Warburg Pincus Funds an
account application containing a telephone election. Neither a Fund nor its
agents will be liable for following instructions communicated by telephone that
it reasonably believes to be genuine. Reasonable procedures will be employed on
behalf of each Fund to confirm that instructions communicated by telephone are
genuine. Such procedures include providing written confirmation of telephone
transactions, tape recording telephone instructions and requiring specific
personal information prior to acting upon telephone instructions. If these or
other reasonable procedures are not followed, a Fund may be liable for any
losses due to unauthorized or fraudulent instructions.
EXCHANGE OF SHARES. An investor may exchange shares of a Fund for shares of
another Fund or for shares of the other mutual funds advised by Counsellors at
their respective net asset values. Exchanges may be effected by mail or by
telephone in the manner described under 'Specific Redemption Procedures' above.
If an exchange request is received by Warburg Pincus Funds prior to 4:00 P.M.,
Eastern time, the exchange will be made at each fund's net asset value
determined on the day the exchange request is received. If the exchange request
is received after 4:00 P.M., the exchange will be effected at each fund's net
asset value determined on the next business day. Exchanges may be effected
without a sales charge but must satisfy the minimum dollar amount necessary for
new purchases. The exchange privilege may be modified or terminated at any time
upon 60 days' notice to shareholders. Currently, exchanges may be made between
the Funds and with the following other funds:
WARBURG PINCUS NEW YORK MUNICIPAL BOND FUND -- an intermediate-term
municipal bond fund designed for New York investors seeking income exempt
from federal, New York State and New York City income tax;
WARBURG PINCUS INTERMEDIATE MATURITY GOVERNMENT FUND -- an
intermediate-term bond fund investing in U.S. Treasury Bonds and Notes and
other obligations that are backed by the full faith and credit of the
United States government;
WARBURG PINCUS FIXED INCOME FUND -- a bond fund investing in a diversified
portfolio of fixed-income securities;
WARBURG PINCUS GLOBAL FIXED INCOME FUND -- a bond fund investing in a
portfolio consisting of investment grade fixed-income securities of
governmental and corporate issuers denominated in various currencies,
including U.S. dollars;
WARBURG PINCUS CAPITAL APPRECIATION FUND -- an equity fund seeking
long-term capital appreciation by investing in equity securities of
financially strong domestic companies;
WARBURG PINCUS EMERGING GROWTH FUND -- an equity fund seeking maximum
capital appreciation by investing in emerging growth companies;
WARBURG PINCUS INTERNATIONAL EQUITY FUND -- an international equity fund
seeking long-term capital appreciation; and
WARBURG PINCUS GROWTH & INCOME FUND -- an equity fund seeking long-term
growth of capital and income and a reasonable current return.
The exchange privilege is available to shareholders residing in any state
in which the fund shares being acquired may legally be sold. When
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<PAGE>
an investor effects an exchange of shares, the exchange is treated for federal
income tax purposes as a redemption. Therefore, the investor may realize a
taxable gain or loss in connection with the exchange. Investors wishing to
exchange shares of the Fund for shares in another Warburg Pincus fund should
review the prospectus of the other fund prior to making an exchange. For
information regarding the exchange privilege or to obtain a current prospectus
for another Warburg Pincus fund, an investor should contact Warburg Pincus Funds
at (800) 257-5614.
NET ASSET VALUE. Each Fund's net asset value per share for purposes of pricing
purchase and redemption orders is determined by PIMC as of noon and the close of
regular trading on the New York Stock Exchange (the 'NYSE'), currently 4:00
P.M., Eastern time, on each day, Monday through Friday, except on days when the
NYSE is closed. The NYSE is currently scheduled to be closed on New Year's Day,
Washington's Birthday, Good Friday, Memorial Day (observed), Independence Day,
Labor Day, Thanksgiving Day and Christmas Day, and on the preceding Friday or
subsequent Monday when one of these holidays falls on a Saturday or Sunday,
respectively. Net asset value per share is calculated by adding the value of all
portfolio securities and other assets, subtracting liabilities and dividing the
result by the number of shares outstanding. Portfolio securities are valued on
the basis of amortized cost.
The net asset value per Common Share and Series 2 Share will be the same
and will be calculated in the same manner as described in this Prospectus.
Service Organizations, as defined below -- see 'Shareholder Servicing,' may
charge their clients and customers for cash management or other services;
therefore, a client or customer should contact the organization acting on his
behalf concerning the fees (if any) charged in connection with a purchase or
redemption of Fund shares and should read this Prospectus in light of the terms
governing their accounts with Service Organizations. Service Organizations will
be responsible for promptly transmitting client or customer purchase and
redemption orders to the Fund in accordance with their agreements with clients
or customers.
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS. Each Fund's net investment income (i.e., income
other than its net realized long-term and short-term capital gains) is declared
daily and paid monthly as a dividend to investors of record at the close of
business on the day of declaration.
Distributions of long-term capital gains, if any, generally are declared
and paid annually at the end of the Fund's fiscal year in which they are earned.
Distributions of short-term capital gains, if any, are declared and paid
annually, at the end of the fiscal year in the case of the Tax Exempt Fund, and
periodically, as the Board of Directors determines, in the case of the Cash
Reserve Fund. Unless an investor, prior to the date of distribution, instructs
the Fund to pay dividends or capital gains distributions in cash, by calling or
writing Warburg Pincus Funds, dividends and distributions will automatically be
reinvested in additional shares of the relevant Fund at net asset value. Net
investment income earned on weekends and when the NYSE is not open will be
computed as of the next business day. The election to receive dividends in cash
may be made on the account application or, subsequently, by writing to Warburg
Pincus Funds at the address set forth under 'How to Purchase Shares.'
Dividends are determined in the same manner and are paid in the same amount
for each Fund share, except that, in the case of the Tax Exempt Fund, Series 2
Shares bear all the expense of fees paid to Service Organizations. As a result,
at any given time, the net yield on Series 2 Shares will be approximately .35%
lower than the net yield on Common Shares.
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TAXES. Each Fund has qualified and intends to continue to qualify each year as a
'regulated investment company' under the Code. Each Fund, if it qualifies as a
regulated investment company, will be subject to a 4% non-deductible excise tax
measured with respect to certain undistributed amounts of ordinary income and
capital gains. Each Fund expects to pay any additional dividends and
distributions as are necessary to avoid the application of this tax. As long as
the Tax Exempt Fund qualifies as a regulated investment company and meets
certain other Code requirements (including the requirement that at least 50% of
its assets are invested in tax-exempt obligations at the close of each quarter
of its taxable year), distributions of tax-exempt interest income will be
excluded from an investor's income for federal income tax purposes.
Such exempt interest dividends paid by the Tax Exempt Fund may be excluded
by investors from their gross incomes for federal income tax purposes, although
(i) such exempt interest dividends will be a tax preference item for purposes of
the federal individual and corporate alternative minimum taxes to the extent
they are derived from Alternative Minimum Tax Securities and (ii) all exempt
interest dividends will be a component of the 'current earnings' adjustment item
for purposes of the federal corporate alternative minimum tax. In addition,
corporate investors may incur a greater federal environmental tax liability
through the receipt of Fund dividends and distributions. Investors who are
'substantial users' (or 'related persons' of substantial users) within the
meaning of the Code of facilities financed by Alternative Minimum Tax Securities
should consult their tax advisers as to whether the Tax Exempt Fund is a
desirable investment.
Dividends paid by a Fund from its taxable net investment income (if any, in
the case of the Tax Exempt Fund) and distributions of any net short-term capital
gains (whether from tax-exempt or taxable obligations) are taxable to investors
as ordinary income, whether received in cash or reinvested in additional shares
of the Fund. Each Fund does not expect to realize long-term capital gains and,
therefore, it is unlikely that any portion of the dividends or distributions
paid by a Fund will be taxable to investors as long-term capital gains. As a
general rule, an investor's gain or loss on a sale or redemption of his Fund
shares will be a long-term capital gain or loss if he has held his shares for
one year or less. An investor in the Tax Exempt Fund who redeems his Fund shares
prior to the declaration of a dividend may lose tax-exempt status on accrued
income attributable to tax-exempt Municipal Securities. Each Fund's dividends
and distributions will not qualify for the dividends-received deduction allowed
to corporations.
Exempt interest dividends derived from interest on qualifying New York
Municipal Securities will also be exempt from New York State and New York City
personal (but not corporate franchise) income taxes.
The exclusion or exemption of interest income for federal income tax
purposes, or New York State or New York City personal income tax purposes, in
most cases does not result in an exemption under the tax laws of any other state
or local authority. Investors who are subject to tax in other states or
localities should consult their own tax advisers about the taxation of dividends
and distributions from the Tax Exempt Fund by such states and localities.
Statements as to the tax status of each investor's dividends and
distributions will be mailed annually by Warburg Pincus Funds. These statements,
in the case of investments in the Tax Exempt Fund, will set forth or indicate
the dollar amounts of income excluded from federal income taxes and exempt from
New York State and New York City personal income taxes, and the amounts, if any,
subject to such taxes. Moreover, these statements will also designate the amount
of exempt interest dividends which are a tax preference item for purposes of the
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federal individual and corporate alternative minimum taxes.
Each investor in the Cash Reserve Fund will also receive, if appropriate,
various written notices after the close of the Fund's prior taxable year with
respect to certain dividends and distributions which were received from the Fund
during the Fund's prior taxable year. Investors should consult their tax
advisers about any state and local taxes that may apply to dividends and
distributions received from the Cash Reserve Fund. In this regard, investors
should be aware that if a portion of any dividend is derived from interest on
United States government obligations, that portion may be subject to tax by
certain states, even though such interest, if received directly by an investor,
would be exempt from state income tax.
PERFORMANCE
From time to time, a Fund may advertise its yield and effective yield and,
in the case of the Tax Exempt Fund, its tax equivalent yield. The yield of the
Fund refers to the income generated by an investment in the Fund over a
seven-day period. This income is then annualized. That is, the amount of income
generated by the investment during that week is assumed to be generated each
week over a 52-week period and is shown as a percentage of the investment. The
effective yield is calculated similarly but, when annualized, assumes that
income earned by an investment in the Fund is reinvested. The effective yield
will be slightly higher than the yield because of the compounding effect of this
assumed reinvestment. The tax equivalent yield shows the taxable yield an
investor in the highest applicable tax bracket would have to earn to equal the
Tax Exempt Fund's tax-free yield after the imposition of federal, New York State
and New York City personal income taxes. The Tax Exempt Fund's tax equivalent
yield is calculated by dividing the Fund's tax-exempt yield by one minus the
highest level of the combined federal, New York State and New York City tax
rates. Yield, effective yield and tax equivalent yield may be shown by means of
schedules, charts or graphs and are quoted separately for Common Shares and
Series 2 Shares.
Investors should note that yield, effective yield and tax equivalent yield
figures are based on historical earnings and are not intended to indicate future
performance. The Statement of Additional Information describes the method used
to determine a Fund's yield. Current yield figures may be obtained by calling
Warburg Pincus Funds at (800) 257-5614.
In reports or other communications to investors or in advertising material,
a Fund may describe general economic and market conditions affecting the Fund.
The Fund may compare its performance with (i) that of other mutual funds as
listed in the rankings prepared by Lipper Analytical Services, Inc. or similar
investment services that monitor the performance of mutual funds or (ii) in the
case of the Tax Exempt Fund, an average of the yields of similar New York
tax-exempt money market funds based on information contained in Donoghue's Money
Market Fund Report, which is published weekly by the Donoghue Organization, or,
in the case of the Cash Reserve Fund, the Donoghue's Money Market Fund Average,
which is an average of all major taxable money market fund yields published
weekly by the Donoghue Organization, or, in each case, other appropriate indices
of investment securities. Each Fund may also include evaluations of the Fund
published by nationally recognized ranking services and by financial
publications that are nationally recognized, such as The Wall Street Journal,
Investor's Daily, Money, Inc., Institutional Investor, Barron's, Fortune,
Forbes, Morningstar, Inc. and Business Week.
GENERAL INFORMATION
Each Fund is a no-load, open-end management investment company that was
incorporated
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on November 15, 1984 under the laws of the State of Maryland. Although the
Funds' names as set forth in their respective charters are 'Counsellors Cash
Reserve Fund, Inc.' and 'Counsellors New York Tax Exempt Fund, Inc.', they do
business under the name 'Warburg, Pincus Cash Reserve Fund' and 'Warburg, Pincus
New York Tax Exempt Fund', respectively. Each Fund's charter authorizes the
Board of Directors to issue up to 3,000,000,000 full and fractional shares of
capital stock, $.001 par value per share, and to classify or reclassify any
unissued shares of the Fund into one or more additional classes by setting or
changing in any one or more respects their relative rights, voting powers,
restrictions, limitations as to dividends, qualifications and terms and
conditions of redemption. The Directors may similarly classify or reclassify any
class of shares into one or more series. One billion shares of the Tax Exempt
Fund are designated Series 2 Shares.
Investors are entitled to one vote for each full share held and fractional
votes for fractional shares held. Messrs. John L. Furth and Lionel I. Pincus,
two of the Funds' Directors, may be deemed to be controlling persons of each
Fund as of May 31, 1994 because they may be deemed to possess or share
investment power over shares owned by clients of Counsellors and certain other
entities.
There will be no meetings of investors for the purpose of electing
Directors until less than a majority of the Directors holding office have been
elected by investors.
Investors of record of no less than a majority of the outstanding shares of
a Fund may remove a Director. A meeting will be called for the purpose of voting
on the removal of the Director at the written request of holders of 10% or more
of the Fund's outstanding shares.
The prospectuses of the Funds are combined in this Prospectus. Each Fund
offers only its own shares, yet it is possible that a Fund might become liable
for a misstatement, inaccuracy or omission in this Prospectus with regard to
another Fund.
SHAREHOLDER SERVICING
Each Fund is authorized to offer series of shares exclusively to clients
and customers of certain financial institutions ('Service Organizations') that
enter into distribution or shareholder servicing agreements ('Service
Agreements') with the Fund. These series of shares of Cash Reserve Fund are not
currently being offered by the Cash Reserve Fund, but, if offered, would have
the characteristics of the 'Series 2 Shares' described below.
In 1990, the Tax Exempt Fund entered into a selected dealer agreement (as
amended, the 'Dealer Agreement') with a Servicing Organization pursuant to which
Series 2 Shares are being offered by the Tax Exempt Fund. The Series 2 Shares
represent equal pro rata interests in the Fund with the Tax Exempt Fund's Common
Shares and are identical to Common Shares in all respects, except that the
Series 2 Shares bear service fees and enjoy certain exclusive voting rights on
matters relating to these fees. Pursuant to the terms of the Dealer Agreement,
the Service Organization agreed to perform certain distribution, shareholder
servicing, administrative and accounting services for its clients and customers
('Customers') who are beneficial owners of Series 2 Shares. These shareholder
services include responding to customer inquiries and providing information on
their investments; administrative and accounting services may include (i)
aggregating and processing purchase and redemption requests from Customers and
placing net purchase and redemption orders with the Fund's transfer agent; (ii)
processing dividend payments from the Fund on behalf of Customers; and (iii)
providing subaccounting with respect to Fund shares beneficially owned by
Customers or the information to the Fund necessary for subaccounting.
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Each Fund's Board of Directors has approved a Shareholder Services Plan and
a Distribution Plan (together, the 'Plans') pursuant to which the Fund would pay
participating Service Organizations a negotiated fee on an annual basis not to
exceed .50 of 1.00% (up to a .25% annual service fee and a .25% annual
administrative fee) and .75 of 1.00% (up to .25% annual service fee and a .50%
annual distribution fee) respectively, of the value of the average daily net
assets of their respective Customers. The services to be provided under the
Plans are substantially the same, except that under the Distribution Plan, the
Service Organization provides distribution services in connection with the
promotion or sale of Series 2 Shares (or New Shares, in the case of the Cash
Reserve Fund), while no such services are provided under the Shareholder
Services Plan.
The Cash Reserve Fund may in the future enter into servicing agreements and
the Tax Exempt Fund may enter into additional servicing agreements with Service
Organizations, pursuant to which Service Organizations would agree to perform
certain distribution, shareholder servicing, administrative and accounting
services for their Customers who are beneficial owners of Fund shares, as
described above.
------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, EACH FUND'S
STATEMENT OF ADDITIONAL INFORMATION OR EACH FUND'S OFFICIAL SALES LITERATURE IN
CONNECTION WITH THE OFFERING OF THE FUND'S SHARES, AND IF GIVEN OR MADE, SUCH
OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY A FUND. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER IN ANY STATE
IN WHICH, OR TO ANY PERSON TO WHOM, SUCH OFFER MAY NOT LAWFULLY BE MADE.
------------------------------------
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TABLE OF CONTENTS
THE FUNDS' EXPENSES ...................................................... 2
FINANCIAL HIGHLIGHTS ..................................................... 3
INVESTMENT OBJECTIVES AND POLICIES ....................................... 5
GENERAL .................................................................. 6
PORTFOLIO INVESTMENTS .................................................... 7
INVESTMENT GUIDELINES .................................................... 9
MANAGEMENT OF THE FUNDS .................................................. 9
HOW TO PURCHASE SHARES .................................................. 11
HOW TO REDEEM AND EXCHANGE SHARES ....................................... 13
DIVIDENDS, DISTRIBUTIONS AND TAXES ...................................... 16
PERFORMANCE ............................................................. 18
GENERAL INFORMATION ..................................................... 18
SHAREHOLDER SERVICING ................................................... 19
WPCRNY-1-0694
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[LOGO]
[ ] WARBURG PINCUS
CASH RESERVE FUND
[ ] WARBURG PINCUS
NEW YORK TAX EXEMPT FUND
PROSPECTUS
JUNE 29, 1994
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