<PAGE>1
As filed with the U.S. Securities and Exchange Commission
on January 16, 1996
Securities Act File No. 33-11075
Investment Company Act File No. 811-4964
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 12 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 14 [X]
(Check appropriate box or boxes)
Warburg, Pincus New York Intermediate Municipal Fund
(formerly Warburg, Pincus New York Municipal Bond Fund)
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Exact Name of Registrant as Specified in Charter)
466 Lexington Avenue
New York, New York 10017-3147 10017-3147
. . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . .
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (212) 878-0600
Mr. Eugene P. Grace
Warburg, Pincus New York Intermediate Municipal Fund
466 Lexington Avenue
New York, New York 10017-3147
. . . . . . . . . . . . . . . . . . . . .
(Name and Address of Agent for Service)
Copy to:
Rose F. DiMartino, Esq.
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022-4677
<PAGE>2
It is proposed that this filing will become effective (check appropriate box):
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[X] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
DECLARATION PURSUANT TO RULE 24f-2
Registrant has registered an indefinite number or amount of securities under
the Securities Act of 1933, as amended (the "1933 Act"), pursuant to Section
(a)(1) of Rule 24f-2 under the Investment Company Act of 1940, as amended (the
"1940 Act"), and to the number or amount presently registered is added an
indefinite number or amount of such securities. The Rule 24f-2 Notice for
Registrant's fiscal year ended October 31, 1995 was filed on December 18,
1995.
<PAGE>3
WARBURG, PINCUS NEW YORK INTERMEDIATE MUNICIPAL FUND
Calculation of Registration Fee under the Securities Act of 1933
Title of Proposed Proposed
Securities Amount Maximum Maximum Amount of
Being Being Offering Price Aggregate Registration
Registered Registered Per Share (1) Offering Price (1,2) Fee (2)
- ---------- ---------- -------------- -------------------- ------------
Shares of
Beneficial
Interest
$.001
par value
per share 504,487 $10.38 $289,996 $100
This Post-Effective Amendment No. 12 seeks to register 504,487
additional shares under the Securities Act of 1933, as amended.
(1) Computed under Rule 457(c) on the basis of the net asset value per
share of the Registrant's shares at the close of business on January
5, 1996. The above calculation shall not be deemed a representation
of the actual offering price.
(2) Calculated pursuant to Rule 24e-2 under the 1940 Act.
(a) Total number of shares
redeemed during previous 3,957,382
fiscal year
(b) Total number of shares
included in (a) previously 0
used under Rule 24e-2 this
fiscal year
(c) Total number of shares
included in (a) previously 3,480,833
used under Rule 24f-2(c)
this fiscal year
(d) Total number of shares
included in (a) being used
to reduce maximum aggregate 496,549
offering price in this Post-
Effective Amendment
<PAGE>4
WARBURG, PINCUS NEW YORK INTERMEDIATE MUNICIPAL FUND
FORM N-1A
CROSS REFERENCE SHEET
_______________________________
Part A
Item No. Prospectus Heading*
-------- -------------------
1. Cover Page . . . . Cover Page
2. Synopsis . . . . . The Funds' Expenses
3. Condensed Financial
Information . . . Financial Highlights
4. General Description
of Registrant . . Cover Page; Investment
Objective and
Policies; Portfolio
Investments; Risk
Factors and Special
Considerations;
Certain Investment
Strategies;
Investment
Guidelines; General
Information
5. Management of the
Fund . . . . . Management of the Funds
6. Capital Stock and
Other Securities General Information
7. Purchase of
Securities Being Offered How to Open an Account; How to
Purchase Shares; Net
Asset Value
8. Redemption or How to Redeem and Exchange
Repurchase . . . . Shares
9. Legal Proceedings . . Not applicable
_______________
* Relates to Registrant's Common Share prospectus, which is substantially
similar to Registrant's Advisor Share prospectus.
<PAGE>5
Part B Heading in Statement of
Item No. Additional Information
-------- -----------------------
10. Cover Page . . . . Cover Page
11. Table of Contents . Contents
12. General Information
and History . . . Management of the Fund; Notes
to Financial
Statements; See
Prospectus--"General
Information"
13. Investment
Objectives and Investment Objective;
Policies . . . . Investment Policies
14. Management of the Management of the Fund; See
Registrant . . . . Prospectus--"Management of the
Funds"
15. Control Persons and
Principal Holders
of Securities . . Management of the Fund;
Miscellaneous; See
Prospectus--"General
Information"
16. Investment Advisory
and Other Services Management of the Fund; See
Prospectus--"Managem
ent of the Funds"
and "Shareholder
Servicing"
17. Brokerage Allocation Investment Policies; See
Prospectus--
"Portfolio
Transactions and
Turnover Rate"
18. Capital Stock and
Other Securities Management of the Fund;
Organization of the
Fund; See
Prospectus--
"General
Information"
19. Purchase, Redemption
and Pricing of
Securities Being Additional Purchase and
Offered . . . . . . Redemption
Information; See
Prospectus--"How to
Open an Account,"
"How to Purchase
Shares," "How to
Redeem and Exchange
Shares" and "Net
Asset Value"
<PAGE>6
Part B Heading in Statement of
Item No. Additional Information
-------- -----------------------
20. Tax Status . . . . Additional Information
Concerning Taxes;
See
Prospectus--"Dividen
ds, Distributions
and Taxes"
21. Underwriters . . . Investment Policies; Portfolio
Transactions; See
Prospectus ---
"Management of the
Funds" and
"Shareholder
Servicing"
22. Calculation of
Performance Data . Determination of Performance
23. Financial Report of Independent
Statements . . . Auditors; Financial
Statements
Part C
- ------
Information required to be included in Part C is set forth after the
appropriate item, so numbered, in Part C to this Registration Statement.
<PAGE>
PROSPECTUS
The Fund's Common Share and Advisor Prospectuses are incorporated
by reference to the Prospectuses that form a part of Post-Effective Amendment
No. 13 to the Registration Statement on Form N-1A of Warburg, Pincus Fixed
Income Fund filed on January 16, 1996 (Securities Act File No. 33-12343;
Investment Co. Act File No. 811-5039).
<PAGE>1
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS STATEMENT OF ADDITIONAL INFORMATION DOES NOT CONSTITUTE A
PROSPECTUS.
<PAGE>1
Subject to Completion, dated January 16, 1996
STATEMENT OF ADDITIONAL INFORMATION
____________, 1996
WARBURG PINCUS NEW YORK INTERMEDIATE MUNICIPAL FUND
P.O. Box 9030, Boston, Massachusetts 02205-9030
For information, call (800) 888-6878
Contents
Page
----
Investment Objective . . . . . . . . . . . . . . . . 2
Municipal Obligations . . . . . . . . . . . . . . . . 2
Investment Policies . . . . . . . . . . . . . . . . . 3
Special Considerations Relating to New York
Municipal Obligations . . . . . . . . . . . . . . . 24
Management of the Fund . . . . . . . . . . . . . . . 36
Additional Purchase and Redemption Information . . . 43
Exchange Privilege . . . . . . . . . . . . . . . . . 44
Additional Information Concerning Taxes . . . . . . . 44
Determination of Performance . . . . . . . . . . . . 49
Auditors and Counsel . . . . . . . . . . . . . . . . 50
Miscellaneous . . . . . . . . . . . . . . . . . . . . 51
Financial Statements . . . . . . . . . . . . . . . . 51
Appendix - Description of Municipal Obligations Ratings A-1
Report of Coopers & Lybrand L.L.P., Independent
Accountants . . . . . . . . . . . . . . . . . . . . A-4
This Statement of Additional Information is meant to be read in
conjunction with the combined Prospectus for the Common Shares of Warburg
Pincus New York Intermediate Municipal Fund (the "Fund"), Warburg Pincus Fixed
Income Fund, Warburg Pincus Global Fixed Income Fund and Warburg Pincus
Intermediate Maturity Government Fund and with the Prospectus for the Advisor
Shares of the Fund, each dated ______, 1996, as amended or supplemented from
time to time, and is incorporated by reference in its entirety into those
Prospectuses. Because this Statement of Additional Information is not itself
a prospectus, no investment in shares of the Fund should be made solely upon
the information contained herein. Copies of the Fund's Prospectuses and
information regarding the Fund's current performance may be obtained by
calling the Fund at (800) 927-2874. Information regarding the status of
shareholder accounts may be obtained by calling the Fund at (800) 888-6878 or
by writing to the Fund, P.O. Box 9030, Boston, Massachusetts 02205-9030.
<PAGE>2
INVESTMENT OBJECTIVE
The investment objective of the Fund is to maximize current interest
income exempt from federal income tax and New York State and New York City
personal income tax to the extent consistent with prudent investment
management and the preservation of capital.
MUNICIPAL OBLIGATIONS
Under normal circumstances, at least 80% of the Fund's assets will
be invested in "Municipal Obligations." Municipal Obligations are debt
obligations issued by or on behalf of states (including the state of New
York), territories and possessions of the United States and the District of
Columbia and their political subdivisions, agencies and instrumentalities.
Except for temporary defensive purposes, the Fund will invest no
less than 65% of its assets in intermediate and long term obligations with
interest which is excluded from gross income for federal income tax purposes
and which is exempt from New York State and New York City personal income
taxes ("New York Municipal Obligations") and intends to invest substantially
all of its assets in those obligations. New York Municipal Obligations
include obligations issued by or on the behalf of the State of New York, its
political subdivisions, agencies and instrumentalities.
Municipal Obligations are issued by governmental entities to obtain
funds for various public purposes, including the construction of a wide range
of public facilities, the refunding of outstanding obligations, the payment of
general operating expenses and the extension of loans to public institutions
and facilities. Private activity bonds that are issued by or on behalf of
public authorities to finance various privately-operated facilities are
included within the term Municipal Obligations if the interest paid thereon is
exempt from federal income tax.
The two principal types of Municipal Obligations, in terms of the
source of payment of debt service on the obligations, consist of "general
obligation" and "revenue" issues. General obligation bonds are secured by the
issuer's pledge of its full faith, credit and taxing power for the payment of
principal and interest. Revenue bonds are payable from the revenues derived
from a particular facility or class of facilities or in some cases, from the
proceeds of a special excise tax or other specific revenue source such as the
user of the facility being financed. Consequently, the credit quality of
revenue bonds is usually directly related to the credit standing of the user
of the facility involved.
There are, of course, variations in the quality of Municipal
Obligations, both within a particular classification and between
classifications, and the yields on Municipal Obligations depend upon a variety
of factors, including general money market conditions, the
<PAGE>3
financial condition of the issuer, general conditions of the municipal
obligations market, the size of a particular offering, the maturity of the
obligation and the rating of the issue. The ratings of Moody's Investors
Service, Inc. ("Moody's") and Standard & Poor's Ratings Group ("S&P")
represent their opinions as to the quality of Municipal Obligations. It
should be emphasized, however, that ratings are general and are not absolute
standards of quality, and Municipal Obligations with the same maturity,
interest rate and rating may have different yields while Municipal Obligations
of the same maturity and interest rate with different ratings may have the
same yield. Subsequent to its purchase by the Fund, an issue of Municipal
Obligations may cease to be rated or its rating may be reduced below the
minimum rating required for purchase by the Fund. The Fund's investment
adviser will consider such an event in determining whether the Fund should
continue to hold the obligation. See the Appendix attached hereto for further
information concerning the ratings of Moody's and S&P and their significance.
Among other instruments, the Fund may purchase short term Tax
Anticipation Notes, Bond Anticipation Notes, Revenue Anticipation Notes and
other forms of short term loans. Such notes are issued with a short term
maturity in anticipation of the receipt of tax funds, the proceeds of bond
placements or other revenues.
The yields on Municipal Obligations are dependent upon a variety of
factors, including general economic and monetary conditions, money market
factors, conditions of the municipal obligations market, size of a particular
offering, maturity of the obligation offered and rating of the issue.
Municipal Obligations are also subject to the provisions of
bankruptcy, insolvency and other laws affecting the rights and remedies of
creditors, such as the Federal Bankruptcy Code, and laws, if any, which may be
enacted by Congress or state legislatures extending the time for payment of
principal or interest, or both, or imposing other constraints upon enforcement
of such obligations or upon the ability of municipalities to levy taxes.
There is also the possibility that as a result of litigation or other
conditions, the power or ability of any one or more issuers to pay, when due,
principal of and interest on its, or their, Municipal Obligations may be
materially affected.
INVESTMENT POLICIES
The following policies supplement the descriptions of the Fund's
investment objective and policies in the Prospectuses.
Options and Futures Transactions
Securities Options. The Fund may write covered put and call options
on stock and debt securities and may purchase such options that are traded on
foreign and U.S. exchanges, as well as over-the-counter ("OTC").
<PAGE>4
The Fund realizes fees (referred to as "premiums") for granting the
rights evidenced by the options it has written. A put option embodies the
right of its purchaser to compel the writer of the option to purchase from the
option holder an underlying security at a specified price for a specified time
period or at a specified time. In contrast, a call option embodies the right
of its purchaser to compel the writer of the option to sell to the option
holder an underlying security at a specified price for a specified time period
or at a specified time.
The principal reason for writing covered options on a security is to
attempt to realize, through the receipt of premiums, a greater return than
would be realized on the securities alone. In return for a premium, the Fund
as the writer of a covered call option forfeits the right to any appreciation
in the value of the underlying security above the strike price for the life of
the option (or until a closing purchase transaction can be effected).
Nevertheless, the Fund as a put or call writer retains the risk of a decline
in the price of the underlying security. The size of the premiums that the
Fund may receive may be adversely affected as new or existing institutions,
including other investment companies, engage in or increase their
option-writing activities.
If security prices rise, a put writer would generally expect to
profit, although its gain would be limited to the amount of the premium it
received. If security prices remain the same over time, it is likely that the
writer will also profit, because it should be able to close out the option at
a lower price. If security prices fall, the put writer would expect to suffer
a loss. This loss should be less than the loss from purchasing the underlying
instrument directly, however, because the premium received for writing the
option should mitigate the effects of the decline.
In the case of options written by the Fund that are deemed covered
by virtue of the Fund's holding convertible or exchangeable preferred stock or
debt securities, the time required to convert or exchange and obtain physical
delivery of the underlying securities with respect to which the Fund has
written options may exceed the time within which the Fund must make delivery
in accordance with an exercise notice. In these instances, the Fund may
purchase or temporarily borrow the underlying securities for purposes of
physical delivery. By so doing, the Fund will not bear any market risk, since
the Fund will have the absolute right to receive from the issuer of the
underlying security an equal number of shares to replace the borrowed
securities, but the Fund may incur additional transaction costs or interest
expenses in connection with any such purchase or borrowing.
Additional risks exist with respect to certain of the securities for
which the Fund may write covered call options. For example, if the Fund
writes covered call options on mortgage-backed securities, the mortgage-backed
securities that it holds as cover may, because of scheduled amortization or
unscheduled prepayments, cease to be sufficient cover. If this occurs, the
Fund will compensate for the decline in the value of the cover by purchasing
an appropriate additional amount of mortgage-backed securities.
<PAGE>5
Options written by the Fund will normally have expiration dates
between one and nine months from the date written. The exercise price of the
options may be below, equal to or above the market values of the underlying
securities at the times the options are written. In the case of call options,
these exercise prices are referred to as "in-the-money," "at-the-money" and
"out-of-the-money," respectively. The Fund may write (i) in-the-money call
options when Warburg, Pincus Counsellors, Inc., the Fund's investment adviser
("Warburg"), expects that the price of the underlying security will remain
flat or decline moderately during the option period, (ii) at-the-money call
options when Warburg expects that the price of the underlying security will
remain flat or advance moderately during the option period and
(iii) out-of-the-money call options when Warburg expects that the premiums
received from writing the call option plus the appreciation in market price of
the underlying security up to the exercise price will be greater than the
appreciation in the price of the underlying security alone. In any of the
preceding situations, if the market price of the underlying security declines
and the security is sold at this lower price, the amount of any realized loss
will be offset wholly or in part by the premium received. Out-of-the-money,
at-the-money and in-the-money put options (the reverse of call options as to
the relation of exercise price to market price) may be used in the same market
environments that such call options are used in equivalent transactions. To
secure its obligation to deliver the underlying security when it writes a call
option, the Fund will be required to deposit in escrow the underlying security
or other assets in accordance with the rules of the Options Clearing
Corporation (the "Clearing Corporation") and of the securities exchange on
which the option is written.
Prior to their expirations, put and call options may be sold in
closing sale or purchase transactions (sales or purchases by the Fund prior to
the exercise of options that it has purchased or written, respectively, of
options of the same series) in which the Fund may realize a profit or loss
from the sale. An option position may be closed out only where there exists a
secondary market for an option of the same series on a recognized securities
exchange or in the over-the-counter market. When the Fund has purchased an
option and engages in a closing sale transaction, whether the Fund realizes a
profit or loss will depend upon whether the amount received in the closing
sale transaction is more or less than the premium the Fund initially paid for
the original option plus the related transaction costs. Similarly, in cases
where the Fund has written an option, it will realize a profit if the cost of
the closing purchase transaction is less than the premium received upon
writing the original option and will incur a loss if the cost of the closing
purchase transaction exceeds the premium received upon writing the original
option. The Fund may engage in a closing purchase transaction to realize a
profit, to prevent an underlying security with respect to which it has written
an option from being called or put or, in the case of a call option, to
unfreeze an underlying security (thereby permitting its sale or the writing of
a new option on the security prior to the outstanding option's expiration).
The obligation of the Fund under an option it has written would be terminated
by a closing purchase transaction, but the Fund would not be deemed to own an
option as a result of the transaction. So long as the obligation of the Fund
as the writer of an option continues, the Fund may be assigned an exercise
notice by the broker-dealer through which the option was sold, requiring the
Fund to
<PAGE>6
deliver the underlying security against payment of the exercise price. This
obligation terminates when the option expires or the Fund effects a closing
purchase transaction. The Fund can no longer effect a closing purchase
transaction with respect to an option once it has been assigned an exercise
notice.
There is no assurance that sufficient trading interest will exist to
create a liquid secondary market on a securities exchange for any particular
option or at any particular time, and for some options no such secondary
market may exist. A liquid secondary market in an option may cease to exist
for a variety of reasons. In the past, for example, higher than anticipated
trading activity or order flow or other unforeseen events have at times
rendered certain of the facilities of the Clearing Corporation and various
securities exchanges inadequate and resulted in the institution of special
procedures, such as trading rotations, restrictions on certain types of orders
or trading halts or suspensions in one or more options. There can be no
assurance that similar events, or events that may otherwise interfere with the
timely execution of customers' orders, will not recur. In such event, it
might not be possible to effect closing transactions in particular options.
Moreover, the Fund's ability to terminate options positions established in the
over-the-counter market may be more limited than for exchange-traded options
and may also involve the risk that securities dealers participating in
over-the-counter transactions would fail to meet their obligations to the
Fund. The Fund, however, intends to purchase over-the-counter options only
from dealers whose debt securities, as determined by Warburg, are considered
to be investment grade. If, as a covered call option writer, the Fund is
unable to effect a closing purchase transaction in a secondary market, it will
not be able to sell the underlying security until the option expires or it
delivers the underlying security upon exercise. In either case, the Fund
would continue to be at market risk on the security and could face higher
transaction costs, including brokerage commissions.
Securities exchanges generally have established limitations
governing the maximum number of calls and puts of each class which may be held
or written, or exercised within certain time periods by an investor or group
of investors acting in concert (regardless of whether the options are written
on the same or different securities exchanges or are held, written or
exercised in one or more accounts or through one or more brokers). It is
possible that the Fund and other clients of Warburg and certain of its
affiliates may be considered to be such a group. A securities exchange may
order the liquidation of positions found to be in violation of these limits
and it may impose certain other sanctions. These limits may restrict the
number of options the Fund will be able to purchase on a particular security.
Securities Index Options. The Fund may purchase and write
exchange-listed and OTC put and call options on securities indexes. A
securities index measures the movement of a certain group of securities by
assigning relative values to the securities included in the index, fluctuating
with changes in the market values of the securities included in the index.
Securities index options may be based on a broad or narrow market index or on
a particular industry or market segment.
<PAGE>7
Options on securities indexes are similar to options on securities
except that (i) the expiration cycles of securities index options are monthly,
while those of securities options are currently quarterly, and (ii) the
delivery requirements are different. Instead of giving the right to take or
make delivery of securities at a specified price, an option on a securities
index gives the holder the right to receive a cash "exercise settlement
amount" equal to (a) the amount, if any, by which the fixed exercise price of
the option exceeds (in the case of a put) or is less than (in the case of a
call) the closing value of the underlying index on the date of exercise,
multiplied by (b) a fixed "index multiplier." Receipt of this cash amount
will depend upon the closing level of the index upon which the option is based
being greater than, in the case of a call, or less than, in the case of a put,
the exercise price of the index and the exercise price of the option times a
specified multiple. The writer of the option is obligated, in return for the
premium received, to make delivery of this amount. Index options may be
offset by entering into closing transactions as described above for securities
options.
OTC Options. The Fund may purchase OTC or dealer options or sell
covered OTC options. Unlike exchange-listed options where an intermediary or
clearing corporation, such as the Clearing Corporation, assures that all
transactions in such options are properly executed, the responsibility for
performing all transactions with respect to OTC options rests solely with the
writer and the holder of those options. A listed call option writer, for
example, is obligated to deliver the underlying securities to the clearing
organization if the option is exercised, and the clearing organization is then
obligated to pay the writer the exercise price of the option. If the Fund
were to purchase a dealer option, however, it would rely on the dealer from
whom it purchased the option to perform if the option were exercised. If the
dealer fails to honor the exercise of the option by the Fund, the Fund would
lose the premium it paid for the option and the expected benefit of the
transaction.
Listed options generally have a continuous liquid market while
dealer options have none. Consequently, the Fund will generally be able to
realize the value of a dealer option it has purchased only by exercising it or
reselling it to the dealer who issued it. Similarly, when the Fund writes a
dealer option, it generally will be able to close out the option prior to its
expiration only by entering into a closing purchase transaction with the
dealer to which the Fund originally wrote the option. Although the Fund will
seek to enter into dealer options only with dealers who will agree to and that
are expected to be capable of entering into closing transactions with the
Fund, there can be no assurance that the Fund will be able to liquidate a
dealer option at a favorable price at any time prior to expiration. The
inability to enter into a closing transaction may result in material losses to
the Fund. Until the Fund, as a covered OTC call option writer, is able to
effect a closing purchase transaction, it will not be able to liquidate
securities (or other assets) used to cover the written option until the option
expires or is exercised. This requirement may impair the Fund's ability to
sell portfolio securities at a time when such sale might be advantageous. In
the event of insolvency of the other party, the Fund may be unable to
liquidate a dealer option.
<PAGE>8
Futures Activities. The Fund may enter into interest rate and
securities index futures contracts and purchase and write (sell) related
options traded on exchanges designated by the Commodity Futures Trading
Commission (the "CFTC") or consistent with CFTC regulations on foreign
exchanges. These transactions may be entered into for "bona fide hedging"
purposes as defined in CFTC regulations and other permissible purposes
including hedging against changes in the value of portfolio securities due to
anticipated changes in interest rates and/or market conditions and increasing
return.
The Fund will not enter into futures contracts and related options
for which the aggregate initial margin and premiums (discussed below) required
to establish positions other than those considered to be "bona fide hedging"
by the CFTC exceed 5% of the Fund's net asset value after taking into account
unrealized profits and unrealized losses on any such contracts it has entered
into. The Fund reserves the right to engage in transactions involving futures
contracts and options on futures contracts to the extent allowed by CFTC
regulations in effect from time to time and in accordance with the Fund's
policies. There is no overall limit on the percentage of Fund assets that may
be at risk with respect to futures activities. The ability of the Fund to
trade in futures contracts and options on futures contracts may be limited by
the requirements of the Internal Revenue Code of 1986, as amended (the
"Code"), applicable to a regulated investment company.
Futures Contracts. An interest rate futures contract provides for
the future sale by one party and the purchase by the other party of a certain
amount of a specific interest rate sensitive financial instrument (debt
security) at a specified price, date, time and place. Securities indexes are
capitalization weighted indexes which reflect the market value of the
securities listed on the indexes. A securities index futures contract is an
agreement to be settled by delivery of an amount of cash equal to a specified
multiplier times the difference between the value of the index at the close of
the last trading day on the contract and the price at which the agreement is
made.
No consideration is paid or received by the Fund upon entering into
a futures contract. Instead, the Fund is required to deposit in a segregated
account with its custodian an amount of cash or cash equivalents, such as U.S.
government securities or other liquid high-grade debt obligations, equal to
approximately 1% to 10% of the contract amount (this amount is subject to
change by the exchange on which the contract is traded, and brokers may charge
a higher amount). This amount is known as "initial margin" and is in the
nature of a performance bond or good faith deposit on the contract which is
returned to the Fund upon termination of the futures contract, assuming all
contractual obligations have been satisfied. The broker will have access to
amounts in the margin account if the Fund fails to meet its contractual
obligations. Subsequent payments, known as "variation margin," to and from
the broker, will be made daily as the financial instrument or index underlying
the futures contract fluctuates, making the long and short positions in the
futures contract more or less valuable, a process known as
"marking-to-market." The Fund will also incur brokerage costs in connection
with entering into futures transactions.
<PAGE>9
At any time prior to the expiration of a futures contract, the Fund
may elect to close the position by taking an opposite position, which will
operate to terminate the Fund's existing position in the contract. Positions
in futures contracts and options on futures contracts (described below) may be
closed out only on the exchange on which they were entered into (or through a
linked exchange). No secondary market for such contracts exists. Although
the Fund intends to enter into futures contracts only if there is an active
market for such contracts, there is no assurance that an active market will
exist at any particular time. Most futures exchanges limit the amount of
fluctuation permitted in futures contract prices during a single trading day.
Once the daily limit has been reached in a particular contract, no trades may
be made that day at a price beyond that limit or trading may be suspended for
specified periods during the day. It is possible that futures contract prices
could move to the daily limit for several consecutive trading days with little
or no trading, thereby preventing prompt liquidation of futures positions at
an advantageous price and subjecting the Fund to substantial losses. In such
event, and in the event of adverse price movements, the Fund would be required
to make daily cash payments of variation margin. In such situations, if the
fund had insufficient cash, it might have to sell securities to meet daily
variation margin requirements at a time when it would be disadvantageous to do
so. In addition, if the transaction is entered into for hedging purposes, in
such circumstances the Fund may realize a loss on a futures contract or option
that is not offset by an increase in the value of the hedged position. Losses
incurred in futures transactions and the costs of these transactions will
affect the Fund's performance.
Options on Futures Contracts. The Fund may purchase and write put
and call options on interest rate and securities index futures contracts and
may enter into closing transactions with respect to such options to terminate
existing positions. There is no guarantee that such closing transactions can
be effected; the ability to establish and close out positions on such options
will be subject to the existence of a liquid market.
An option on an interest rate or securities index futures contract,
as contrasted with the direct investment in such a contract, gives the
purchaser the right, in return for the premium paid, to assume a position in a
futures contract at a specified exercise price at any time prior to the
expiration date of the option. The writer of the option is required upon
exercise to assume an offsetting futures position (a short position if the
option is a call and a long position if the option is a put). Upon exercise
of an option, the delivery of the futures position by the writer of the option
to the holder of the option will be accompanied by delivery of the accumulated
balance in the writer's futures margin account, which represents the amount by
which the market price of the futures contract exceeds, in the case of a call,
or is less than, in the case of a put, the exercise price of the option on the
futures contract. The potential loss related to the purchase of an option on
futures contracts is limited to the premium paid for the option (plus
transaction costs). Because the value of the option is fixed at the point of
sale, there are no daily cash payments by the purchaser to reflect changes in
the value of the underlying contract; however, the value of the option does
change daily and that change would be reflected in the net asset value of the
Fund.
<PAGE>10
Hedging. In addition to entering into options and futures
transactions for other purposes, including generating current income to offset
expenses or increase return, the Fund may enter into these transactions as
hedges to reduce investment risk, generally by making an investment expected
to move in the opposite direction of a portfolio position. A hedge is
designed to offset a loss in a portfolio position with a gain in the hedged
position; at the same time, however, a properly correlated hedge will result
in a gain in the portfolio position being offset by a loss in the hedged
position. As a result, the use of options and futures transactions for
hedging purposes could limit any potential gain from an increase in the value
of the position hedged. In addition, the movement in the portfolio position
hedged may not be of the same magnitude as movement in the hedge. With
respect to futures contracts, since the value of portfolio securities will far
exceed the value of the futures contracts sold by the Fund, an increase in the
value of the futures contracts could only mitigate, but not totally offset,
the decline in the value of the Fund's assets.
In hedging transactions based on an index, whether the Fund will
realize a gain or loss from the purchase or writing of options on an index
depends upon movements in the level of securities prices in the market
generally or, in the case of certain indexes, in an industry or market
segment, rather than movements in the price of a particular security. The
risk of imperfect correlation increases as the composition of the Fund's
portfolio varies from the composition of the index. In an effort to
compensate for imperfect correlation of relative movements in the hedged
position and the hedge, the Fund's hedge positions may be in a greater or
lesser dollar amount than the dollar amount of the hedged position. Such
"over hedging" or "under hedging" may adversely affect the Fund's net
investment results if market movements are not as anticipated when the hedge
is established. Securities index futures transactions may be subject to
additional correlation risks. First, all participants in the futures market
are subject to margin deposit and maintenance requirements. Rather than
meeting additional margin deposit requirements, investors may close futures
contracts through offsetting transactions which would distort the normal
relationship between the index and futures markets. Secondly, from the point
of view of speculators, the deposit requirements in the futures market are
less onerous than margin requirements in the securities market. Therefore,
increased participation by speculators in the futures market also may cause
temporary price distortions. Because of the possibility of price distortions
in the futures market and the imperfect correlation between movements in an
index and movements in the price of index futures, a correct forecast of
general market trends by Warburg still may not result in a successful hedging
transaction.
The Fund will engage in hedging transactions only when deemed
advisable by Warburg, and successful use by the Fund of hedging transactions
will be subject to Warburg's ability to predict trends in interest rate or
securities markets, as the case may be, and to correctly predict movements in
the directions of the hedge and the hedged position and the correlation
between them, which predictions could prove to be inaccurate. This requires
different skills and techniques than predicting changes in the price of
individual securities, and there can be no assurance that the use of these
strategies will be successful. Even a well-conceived hedge may be
unsuccessful to some degree because of unexpected
<PAGE>11
market behavior or trends. Losses incurred in hedging transactions and the
costs of these transactions will affect the Fund's performance.
Asset Coverage for Forward Contracts, Options, Futures and Options
on Futures. As described in the Prospectuses, the Fund will comply with
guidelines established by the U.S. Securities and Exchange Commission (the
"SEC") with respect to coverage of options written by the Fund on securities
and indexes; and interest rate and index futures contracts and options on
these futures contracts. These guidelines may, in certain instances, require
segregation by the Fund of cash or liquid high-grade debt securities or other
securities that are acceptable as collateral to the appropriate regulatory
authority.
For example, a call option written by the Fund on securities may
require the Fund to hold the securities subject to the call (or securities
convertible into the securities without additional consideration) or to
segregate assets (as described above) sufficient to purchase and deliver the
securities if the call is exercised. A call option written by the Fund on an
index may require the Fund to own portfolio securities that correlate with the
index or to segregate assets (as described above) equal to the excess of the
index value over the exercise price on a current basis. A put option written
by the Fund may require the Fund to segregate assets (as described above)
equal to the exercise price. The Fund could purchase a put option if the
strike price of that option is the same or higher than the strike price of a
put option sold by the Fund. If the Fund holds a futures or forward contract,
the Fund could purchase a put option on the same futures or forward contract
with a strike price as high or higher than the price of the contract held.
The Fund may enter into fully or partially offsetting transactions so that its
net position, coupled with any segregated assets (equal to any remaining
obligation), equals its net obligation. Asset coverage may be achieved by
other means when consistent with applicable regulatory policies.
Additional Information on Investment Practices
Variable Rate Notes. Variable rate demand notes ("VRDN's") are
tax-exempt obligations which contain a floating or variable interest rate
adjustment formula and an unconditional right of demand to receive payment of
the unpaid principal balance plus accrued interest upon a short notice period.
The interest rates are adjustable at intervals ranging from daily to up to
every six months to some prevailing market rate for similar investments, such
adjustment formula being calculated to maintain the market value of the VRDN
at approximately the par value of the VRDN upon the adjustment date. The
adjustments are typically based upon the prime rate of a bank or some other
appropriate interest rate adjustment index.
Securities of Other Investment Companies. The Fund may invest in
securities of other investment companies to the extent permitted under the
Investment Company Act of 1940, as amended (the "1940 Act"). Presently, under
the 1940 Act, the Fund may hold securities of another investment company in
amounts which (i) do not exceed 3% of the total outstanding voting stock of
such company, (ii) do not exceed 5% of the value of the Fund's
<PAGE>12
total assets and (iii) when added to all other investment company securities
held by the Fund, do not exceed 10% of the value of the Fund's total assets.
When-Issued Securities. As stated in the Prospectus, the Fund may
purchase Municipal Obligations on a "when-issued" basis (i.e., for delivery
beyond the normal settlement date at a stated price and yield). When-issued
transactions normally settle within 30-45 days. The Fund will enter into a
when-issued transaction for the purpose of acquiring portfolio securities and
not for the purpose of leverage, but may sell the securities before the
settlement date if Warburg deems it advantageous to do so. The payment
obligation and the interest rate that will be received on when-issued
securities are fixed at the time the buyer enters into the commitment. Due to
fluctuations in the value of securities purchased on a when-issued basis, the
yields obtained on such securities may be higher or lower than the yields
available in the market on the dates when the investments are actually
delivered to the buyers.
When the Fund agrees to purchase when-issued securities, its
custodian will set aside cash, debt obligations of varying maturities issued
or guaranteed by the U.S. government or its agencies or instrumentalities
("U.S. government securities") or other liquid high-grade debt obligations
equal to the amount of the commitment in a segregated account. Normally, the
custodian will set aside portfolio securities to satisfy a purchase
commitment, and in such a case, the Fund may be required subsequently to place
additional assets in the segregated account in order to ensure that the value
of the account remains equal to the amount of the Fund's commitment. It may
be expected that the Fund's net assets will fluctuate to a greater degree when
it sets aside portfolio securities to cover such purchase commitments than
when it sets aside cash. Because the Fund will set aside cash and liquid
assets to satisfy its purchase commitments in the manner described, the Fund's
liquidity and ability to manage its portfolio might be affected in the event
its commitments to purchase when-issued securities ever exceeded 25% of the
value of its assets. When the Fund engages in when-issued transactions, it
relies on the seller to consummate the trade. Failure of the seller to do so
may result in the Fund's incurring a loss or missing an opportunity to obtain
a price considered to be advantageous.
Stand-By Commitments. The Fund may acquire "stand-by commitments"
with respect to Municipal Obligations held in its portfolio. Under a stand-by
commitment, a dealer agrees to purchase at the Fund's option specified
Municipal Obligations at a specified price. The Fund's right to exercise
stand-by commitments is unconditional and unqualified. Stand-by commitments
acquired by the Fund may also be referred to as "put" options. A stand-by
commitment is not transferable by the Fund, although the Fund can sell the
underlying securities to a third party at any time.
The principal risk of stand-by commitments is that the writer of a
commitment may default on its obligation to repurchase the securities acquired
with it. The Fund intends to enter into stand-by commitments only with
brokers, dealers and banks that, in the opinion of Warburg, present minimal
credit risks. In evaluating the creditworthiness of the issuer of
<PAGE>13
a stand-by commitment, Warburg will periodically review relevant financial
information concerning the issuer's assets, liabilities and contingent claims.
The amount payable to the Fund upon its exercise of a stand-by
commitment is normally (i) the Fund's acquisition cost of the Municipal
Obligations (excluding any accrued interest which the Fund paid on their
acquisition), less any amortized market premium or plus any amortized market
or original issue discount during the period the Fund owned the securities,
plus (ii) all interest accrued on the securities since the last interest
payment date during that period.
The Fund expects that stand-by commitments will generally be
available without the payment of any direct or indirect consideration.
However, if necessary or advisable, the Fund may pay for a stand-by commitment
either separately in cash or by paying a higher price for portfolio securities
which are acquired subject to the commitment (thus reducing the yield to
maturity otherwise available for the same securities). The total amount paid
in either manner for outstanding stand-by commitments held in the Fund's
portfolio will not exceed 1/2 of 1% of the value of the Fund's total assets
calculated immediately after each stand-by commitment is acquired.
The Fund would acquire stand-by commitments solely to facilitate
portfolio liquidity and does not intend to exercise its rights thereunder for
trading purposes. The acquisition of a stand-by commitment would not affect
the valuation or assumed maturity of the underlying Municipal Obligations.
Where the Fund paid any consideration directly or indirectly for a stand-by
commitment, its cost would be reflected as unrealized depreciation for the
period during which the commitment was held by the Fund. Stand-by commitments
would not affect the average weighted maturity of the Fund's portfolio.
The Internal Revenue Service has issued a revenue ruling to the
effect that a registered investment company will be treated for federal income
tax purposes as the owner of the Municipal Obligations acquired subject to a
stand-by commitment and the interest on the Municipal Obligations will be tax
exempt to the Fund.
Zero Coupon Securities. The Fund may invest in "zero coupon" U.S.
Treasury, foreign government and U.S. and foreign corporate convertible and
nonconvertible debt securities, which are bills, notes and bonds that have
been stripped of their unmatured interest coupons and custodial receipts or
certificates of participation representing interests in such stripped debt
obligations and coupons. A zero coupon security pays no interest to its
holder prior to maturity. Accordingly, such securities usually trade at a
deep discount from their face or par value and will be subject to greater
fluctuations of market value in response to changing interest rates than debt
obligations of comparable maturities that make current distributions of
interest. The Fund anticipates that it will not normally hold zero coupon
securities to maturity. Federal tax law requires that a holder of a zero
coupon security accrue a portion of the discount at which the security was
purchased as income each year, even though the holder receives no interest
payment on the security during the year. Such
<PAGE>14
accrued discount will be includible in determining the amount of dividends the
Fund must pay each year and, in order to generate cash necessary to pay such
dividends, the Fund may liquidate portfolio securities at a time when it would
not otherwise have done so.
U.S. Government Securities. The Fund may invest in U.S. government
securities. Direct obligations of the U.S. Treasury include a variety of
securities that differ in their interest rates, maturities and dates of
issuance. U.S. government securities also include securities issued or
guaranteed by the Federal Housing Administration, Farmers Home Loan
Administration, Export-Import Bank of the United States, Small Business
Administration, GNMA, General Services Administration, Central Bank for
Cooperatives, Federal Farm Credit Banks, Federal Home Loan Banks, Federal Home
Loan Mortgage Corporation ("FHLMC"), Federal Intermediate Credit Banks,
Federal Land Banks, Federal National Mortgage Association ("FNMA"), Maritime
Administration, Tennessee Valley Authority, District of Columbia Armory Board
and Student Loan Marketing Association. The Fund may also invest in
instruments that are supported by the right of the issuer to borrow from the
U.S. Treasury and instruments that are supported by the credit of the
instrumentality. Because the U.S. government is not obligated by law to
provide support to an instrumentality it sponsors, the Fund will invest in
obligations issued by such an instrumentality only if Warburg, determines that
the credit risk with respect to the instrumentality does not make its
securities unsuitable for investment by the Fund.
Loan Participations and Assignments. The Fund may invest in fixed
and floating rate loans ("Loans") arranged through private negotiations
between a foreign government (a "Borrower") and one or more financial
institutions ("Lenders"). The majority of the Fund's investments in Loans are
expected to be in the form of participations in Loans ("Participations") and
assignments of portions of Loans from third parties ("Assignments").
Participations typically will result in the Fund having a contractual
relationship only with the Lender, not with the Borrower. The Fund will have
the right to receive payments of principal, interest and any fees to which it
is entitled only from the Lender selling the Participation and only upon
receipt by the Lender of the payments from the Borrower. In connection with
purchasing Participations, the Fund generally will have no right to enforce
compliance by the Borrower with the terms of the loan agreement relating to
the Loan, nor any rights of set-off against the Borrower, and the Fund may not
directly benefit from any collateral supporting the Loan in which it has
purchased the Participation. As a result, the Fund will assume the credit
risk of both the Borrower and the Lender that is selling the Participation.
In the event of the insolvency of the Lender selling a Participation, the Fund
may be treated as a general creditor of the Lender and may not benefit from
any set-off between the Lender and the Borrower. The Fund will acquire
Participations only if the Lender interpositioned between the Fund and the
Borrower is determined by Warburg to be creditworthy.
When the Fund purchases Assignments from Lenders, the Fund will
acquire direct rights against the Borrower on the Loan. However, since
Assignments are generally arranged through private negotiations between
potential assignees and potential assignors, the
<PAGE>15
rights and obligations acquired by the Fund as the purchaser of an Assignment
may differ from, and be more limited than, those held by the assigning Lender.
There are risks involved in investing in Participations and
Assignments. The Fund may have difficulty disposing of them because there is
no liquid market for such securities. The lack of a liquid secondary market
will have an adverse impact on the value of such securities and on the Fund's
ability to dispose of particular Participations or Assignments when necessary
to meet the Fund's liquidity needs or in response to a specific economic
event, such as a deterioration in the creditworthiness of the Borrower. The
lack of a liquid market for Participations and Assignments also may make it
more difficult for the Fund to assign a value to these securities for purposes
of valuing the Fund's portfolio and calculating its net asset value.
Reverse Repurchase Agreements and Dollar Rolls. The Fund may enter
into reverse repurchase agreements with the same parties with whom it may
enter into repurchase agreements. Reverse repurchase agreements involve the
sale of securities held by the Fund pursuant to its agreement to repurchase
them at a mutually agreed upon date, price and rate of interest. At the time
the Fund enters into a reverse repurchase agreement, it will establish and
maintain a segregated account with an approved custodian containing cash or
liquid high-grade debt securities having a value not less than the repurchase
price (including accrued interest). The assets contained in the segregated
account will be marked-to-market daily and additional assets will be placed in
such account on any day in which the assets fall below the repurchase price
(plus accrued interest). The Fund's liquidity and ability to manage its
assets might be affected when it sets aside cash or portfolio securities to
cover such commitments. Reverse repurchase agreements involve the risk that
the market value of the securities retained in lieu of sale may decline below
the price of the securities the Fund has sold but is obligated to repurchase.
In the event the buyer of securities under a reverse repurchase agreement
files for bankruptcy or becomes insolvent, such buyer or its trustee or
receiver may receive an extension of time to determine whether to enforce a
Fund's obligation to repurchase the securities, and the Fund's use of the
proceeds of the reverse repurchase agreement may effectively be restricted
pending such decision.
The Fund also may enter into "dollar rolls," in which the Fund sells
fixed-income securities for delivery in the current month and simultaneously
contracts to repurchase similar but not identical (same type, coupon and
maturity) securities on a specified future date. During the roll period, the
Fund would forego principal and interest paid on such securities. The Fund
would be compensated by the difference between the current sales price and the
forward price for the future purchase, as well as by the interest earned on
the cash proceeds of the initial sale. At the time the Fund enters into a
dollar roll transaction, it will place in a segregated account maintained with
an approved custodian cash or other liquid high-grade debt obligations having
a value not less than the repurchase price (including accrued interest) and
will subsequently monitor the account to ensure that its value is maintained.
Reverse repurchase agreements are considered to be borrowings under the 1940
Act.
<PAGE>16
Non-Publicly Traded and Illiquid Securities. The Fund may not
invest more than 15% of its net assets in non-publicly traded and illiquid
securities, including securities that are illiquid by virtue of the absence of
a readily available market, repurchase agreements which have a maturity of
longer than seven days, variable rate and master demand notes providing for
settlement upon more than seven days' notice by the Fund and time deposits
maturing in more than seven calendar days. Securities that have legal or
contractual restrictions on resale but have a readily available market are not
considered illiquid for purposes of this limitation. Repurchase agreements
subject to demand are deemed to have a maturity equal to the notice period.
Historically, illiquid securities have included securities subject
to contractual or legal restrictions on resale because they have not been
registered under the Securities Act of 1933, as amended (the "Securities
Act"), securities which are otherwise not readily marketable and repurchase
agreements having a maturity of longer than seven days. Securities which have
not been registered under the Securities Act are referred to as private
placements or restricted securities and are purchased directly from the issuer
or in the secondary market. Mutual funds do not typically hold a significant
amount of these restricted or other illiquid securities because of the
potential for delays on resale and uncertainty in valuation. Limitations on
resale may have an adverse effect on the marketability of portfolio securities
and a mutual fund might be unable to dispose of restricted or other illiquid
securities promptly or at reasonable prices and might thereby experience
difficulty satisfying redemptions within seven days. A mutual fund might also
have to register such restricted securities in order to dispose of them
resulting in additional expense and delay. Adverse market conditions could
impede such a public offering of securities.
In recent years, however, a large institutional market has developed
for certain securities that are not registered under the Securities Act
including repurchase agreements, commercial paper, foreign securities,
municipal securities and corporate bonds and notes. Institutional investors
depend on an efficient institutional market in which the unregistered security
can be readily resold or on an issuer's ability to honor a demand for
repayment. The fact that there are contractual or legal restrictions on
resale to the general public or to certain institutions may not be indicative
of the liquidity of such investments.
Rule 144A Securities. The SEC has adopted Rule 144A which allows
for a broader institutional trading market for securities otherwise subject to
restriction on resale to the general public. Rule 144A establishes a "safe
harbor" from the registration requirements of the Securities Act for resales
of certain securities to qualified institutional buyers. Warburg anticipates
that the market for certain restricted securities such as institutional
commercial paper will expand further as a result of this new regulation and
the development of automated systems for the trading, clearance and settlement
of unregistered securities of domestic and foreign issuers, such as the PORTAL
System sponsored by the National Association of Securities Dealers, Inc.
<PAGE>17
An investment in Rule 144A Securities will be considered illiquid
and therefore subject to the Fund's limit on the purchase of illiquid
securities unless the Fund's Board of Trustees (the "Board") or its delegates
determine that the Rule 144A Securities are liquid. In reaching liquidity
decisions, Warburg may consider, inter alia, the following factors: (i) the
unregistered nature of the security; (ii) the frequency of trades and quotes
for the security; (iii) the number of dealers wishing to purchase or sell the
security and the number of other potential purchasers; (iv) dealer
undertakings to make a market in the security and (v) the nature of the
security and the nature of the marketplace trades (e.g., the time needed to
dispose of the security, the method of soliciting offers and the mechanics of
the transfer).
Borrowing. The Fund may borrow up to 30% of its total assets for
temporary or emergency purposes, including to meet portfolio redemption
requests so as to permit the orderly disposition of portfolio securities or to
facilitate settlement transactions on portfolio securities. Investments
(including roll-overs) will not be made when borrowings exceed 5% of the
Fund's net assets. Although the principal of such borrowings will be fixed,
the Fund's assets may change in value during the time the borrowing is
outstanding. The Fund expects that some of its borrowings may be made on a
secured basis. In such situations, either the custodian will segregate the
pledged assets for the benefit of the lender or arrangements will be made with
a suitable subcustodian, which may include the lender.
Other Investment Policies and Practices of the Fund
Non-Diversified Status. The Fund is classified as non-diversified
within the meaning of the 1940 Act, which means that it is not limited by such
Act in the proportion of its assets that it may invest in securities of a
single issuer. The Fund's investments will be limited, however, in order to
qualify as a "regulated investment company" for purposes of the Code. See
"Additional Information Concerning Taxes." To qualify, the Fund will comply
with certain requirements, including limiting its investments so that at the
close of each quarter of the taxable year (i) not more than 25% of the market
value of its total assets will be invested in the securities of a single
issuer, and (ii) with respect to 50% of the market value of its total assets,
not more than 5% of the market value of its total assets will be invested in
the securities of a single issuer and the Fund will not own more than 10% of
the outstanding voting securities of a single issuer.
Taxable Investments. Because the Fund's purpose is to provide
income exempt from federal income tax and New York State and New York City
personal income tax, the Fund generally will invest in taxable obligations
only if and when the Fund's investment adviser believes it would be in the
best interests of the Fund's investors to do so. Situations in which the Fund
may invest up to 20% of its total assets in taxable securities include:
(i) pending investment of proceeds of sales of Fund shares or portfolio
securities or (ii) when the Fund requires highly liquid securities in order to
meet anticipated redemptions. The Fund may temporarily invest more than 20%
of its total assets in taxable securities to maintain a "defensive" posture
when the Fund's investment adviser determines that it is
<PAGE>18
advisable to do so because of adverse market conditions affecting the market
for Municipal Obligations generally.
Among the taxable investments in which the Fund may invest are
repurchase agreements and time deposits maturing in not more than seven days.
The Fund may engage in repurchase agreement transactions on U.S. government
securities with member banks of the Federal Reserve System or with certain
dealers listed on the Federal Reserve Bank of New York's list of reporting
dealers. Under the terms of a typical repurchase agreement, the Fund would
acquire an underlying debt obligation for a relatively short period (usually
not more than one week) subject to an obligation of the seller to repurchase,
and the Fund to resell, the obligation at an agreed-upon price and time,
thereby determining the yield during the Fund's holding period. A repurchase
agreement is considered to be a loan under the 1940 Act. The value of the
underlying securities will be at least equal at all times to the total amount
of the repurchase obligation, including interest. The Fund bears a risk of
loss in the event that the other party to a repurchase agreement defaults on
its obligations and the Fund is delayed or prevented from exercising its
rights to dispose of the collateral securities, including the risk of a
possible decline in the value of the underlying securities during the period
while the Fund seeks to assert these rights. The Fund's investment adviser,
acting under the supervision of the Board, reviews on an ongoing basis, the
creditworthiness and the values of the collateral of those banks and dealers
with which the Fund enters into repurchase agreements to evaluate potential
risks.
Other Investment Limitations
The investment limitations numbered 1 through 10 may not be changed
without the affirmative vote of the holders of a majority of the Fund's
outstanding shares. Such majority is defined as the lesser of (i) 67% or more
of the shares present at the meeting, if the holders of more than 50% of the
outstanding shares of the Fund are present or represented by proxy, or (ii)
more than 50% of the outstanding shares. Investment limitations 11 and 14 may
be changed by a vote of the Board at any time.
The Fund may not:
1. Borrow money except that the Fund may (a) borrow from banks for
temporary or emergency purposes and (b) enter into reverse repurchase
agreements; provided that reverse repurchase agreements, dollar roll
transactions that are accounted for as financings and any other transactions
constituting borrowing by the Fund may not exceed 30% of the value of the
Fund's total assets. For purposes of this restriction, short sales, the entry
into currency transactions, options, futures contracts, options on futures
contracts, forward commitment transactions and dollar roll transactions that
are not accounted for as financings (and the segregation of assets in
connection with any of the foregoing) shall not constitute borrowing.
<PAGE>19
2. Purchase any securities which would cause more than 25% of the
value of the Fund's total assets at the time of purchase to be invested in the
securities of issuers conducting their principal business activities in the
same industry; provided that there shall be no limit on the purchase of (a)
U.S. government securities, (b) certificates of deposit issued by United
States branches of United States banks or (c) Municipal Obligations. For
purposes of this restriction, private purpose bonds ultimately payable by
companies within the same industry are treated as if they were issued by
issuers in the same industry.
3. Make loans except that the Fund may purchase or hold fixed-
income securities, including loan participations, assignments and structured
securities, and enter into repurchase agreements in accordance with its
investment objective, policies and limitations.
4. Underwrite any securities issued by others except to the extent
that the investment in restricted securities and the sale of securities in
accordance with the Fund's investment objective, policies and limitations may
be deemed to be underwriting.
5. Purchase or sell real estate, real estate investment trust
securities or invest in oil, gas or mineral exploration or development
programs, except that the Fund may invest in securities secured by real
estate, mortgages or interests therein.
6. Make short sales of securities or maintain a short position,
except the Fund may maintain short positions in forward currency contracts,
options, futures contracts and options on futures contracts.
7. Purchase securities on margin, except that the Fund may obtain
any short-term credits necessary for the clearance of purchases and sales of
securities. For purposes of this restriction, the deposit or payment of
initial or variation margin in connection with transactions in currencies,
options, futures contracts or related options will not be deemed to be a
purchase of securities on margin.
8. Invest in commodities, except that the Fund may purchase and
sell futures contracts, including those relating to securities, currencies and
indexes, and options on futures contracts, securities or indexes, and purchase
and sell currencies or securities on a forward commitment or delayed-delivery
basis.
9. Issue any senior security except as permitted in these
Investment Restrictions.
10. Purchase securities of other investment companies except (a) in
connection with a merger, consolidation, acquisition or reorganization or (b)
as permitted under the 1940 Act.
<PAGE>20
11. Invest less than 80% of its assets in securities the interest
on which is exempt from federal income tax, except during temporary defensive
periods or under unusual market conditions, as determined by the Fund's
investment adviser.
12. Pledge, mortgage or hypothecate its assets, except to the
extent necessary to secure permitted borrowings and to the extent related to
the deposit of assets in escrow in connection with the writing of covered put
and call options and purchased securities on a forward commitment or delayed-
delivery basis and collateral and initial or variation margin arrangements
with respect to currency transactions, options, futures contracts, and options
on futures contracts.
13. Invest more than 15% of the value of the Fund's net assets in
securities which may be illiquid because of legal or contractual restrictions
on resale or securities for which there are no readily available market
quotations. For purposes of this limitation, (a) repurchase agreements with
maturities greater than seven days, (b) variable rate and master demand notes
providing for settlement upon more than seven days' notice by the Fund and (c)
time deposits maturing in more than seven calendar days shall be considered
illiquid securities.
14. Make additional investments (including roll-overs) if the
Fund's borrowings exceed 5% of its net assets.
The aggregate of all 144A Securities, non-publicly traded and
illiquid securities and securities of companies (including predecessors) that
have been in continuous operation for less than three years is limited to 15%
of total assets. These and other non-fundamental investment limitations are
currently required by one or more states in which shares of the Fund are sold.
These are more restrictive than the limitations set forth above. Should the
Fund determine that any such commitment is no longer in the best interest of
the Fund and its shareholders, the Fund will revoke the commitment by
terminating the sale of Fund shares in the state involved. In addition, the
relevant state may change or eliminate its policy regarding such investments.
If a percentage restriction (other than the percentage limitation
set forth in No. 1 above) is adhered to at the time of an investment, a later
increase or decrease in the percentage of assets resulting from a change in
the values of portfolio securities or in the amount of the Fund's assets will
not constitute a violation of such restriction.
Portfolio Valuation
The Prospectuses discuss the time at which the net asset value of
the Fund is determined for purposes of sales and redemptions. The following
is a description of the procedures used by the Fund in valuing its assets.
<PAGE>21
Securities listed on a U.S. securities exchange (including
securities traded through the NASDAQ National Market System) or foreign
securities exchange or traded in an over-the-counter market will be valued at
the most recent sale as of the time the valuation is made or, in the absence
of sales, at the mean between the bid and asked quotations. If there are no
such quotations, the value of the securities will be taken to be the highest
bid quotation on the exchange or market. Options or futures contracts will be
valued similarly. A security which is listed or traded on more than one
exchange is valued at the quotation on the exchange determined to be the
primary market for such security.
Notwithstanding the foregoing, in determining the market value of
portfolio investments, the Fund may employ outside organizations (a "Pricing
Service") which may use a matrix or formula method that takes into
consideration market indexes, matrices, yield curves and other specific
adjustments. The procedures of Pricing Services are reviewed periodically by
the officers of the Fund under the general supervision and responsibility of
the Board, which may replace any such Pricing Service at any time. Short-term
obligations with maturities of 60 days or less are valued at amortized cost,
which constitutes fair value as determined by the Board. Amortized cost
involves valuing a portfolio instrument at its initial cost and thereafter
assuming a constant amortization to maturity of any discount or premium. The
amortized cost method of valuation may also be used with respect to other debt
obligations with 60 days or less remaining to maturity. The valuation of
short sales of securities, which are not traded on a national exchange, will
be at the mean of bid and asked prices. All other securities and other assets
of the Fund will be valued at their fair value as determined in good faith
pursuant to consistently applied procedures established by the Board. In
addition, the Board or its delegates may value a security at fair value if it
determines that such security's value determined by the methodology set forth
above does not reflect its fair value.
Portfolio Transactions
Warburg is responsible for establishing, reviewing and, where
necessary, modifying the Fund's investment program to achieve its investment
objective. Purchases and sales of newly issued portfolio securities are
usually principal transactions without brokerage commissions effected directly
with the issuer or with an underwriter acting as principal. Other purchases
and sales are usually placed with those dealers from which it appears that the
best price or execution will be obtained; those dealers may be acting as
either agents or principals. The purchase price paid by the Fund to
underwriters of newly issued securities usually includes a concession paid by
the issuer to the underwriter, and purchases of securities from dealers,
acting as either principals or agents in the after market, are normally
executed at a price between the bid and asked price, which includes a dealer's
mark-up or mark-down. U.S. government securities are generally purchased from
underwriters or dealers, although certain newly issued U.S. government
securities may be purchased directly from the U.S. Treasury or from the
issuing agency or instrumentality.
<PAGE>22
Warburg will select specific portfolio investments and effect
transactions for the Fund and in doing so seeks to obtain the overall best
execution of portfolio transactions. In evaluating prices and executions,
Warburg will consider the factors it deems relevant, which may include the
breadth of the market in the security, the price of the security, the
financial condition and execution capability of a broker or dealer and the
reasonableness of the commission, if any, for the specific transaction and on
a continuing basis. Warburg may, in its discretion, effect transactions in
portfolio securities with dealers who provide brokerage and research services
(as those terms are defined in Section 28(e) of the Securities Exchange Act of
1934) to the Fund and/or other accounts over which Warburg exercises
investment discretion. Warburg may place portfolio transactions with a broker
or dealer with whom it has negotiated a commission that is in excess of the
commission another broker or dealer would have charged for effecting the
transaction if Warburg determines in good faith that such amount of commission
was reasonable in relation to the value of such brokerage and research
services provided by such broker or dealer viewed in terms of either that
particular transaction or of the overall responsibilities of Warburg.
Research and other services received may be useful to Warburg in serving both
the Fund and its other clients and, conversely, research or other services
obtained by the placement of business of other clients may be useful to
Warburg in carrying out its obligations to the Fund. Research may include
furnishing advice, either directly or through publications or writings, as to
the value of securities, the advisability of purchasing or selling specific
securities and the availability of securities or purchasers or sellers of
securities; furnishing seminars, information, analyses and reports concerning
issuers, industries, securities, trading markets and methods, legislative
developments, changes in accounting practices, economic factors and trends and
portfolio strategy; access to research analysts, corporate management
personnel, industry experts, economists and government officials; comparative
performance evaluation and technical measurement services and quotation
services; and products and other services (such as third party publications,
reports and analyses, and computer and electronic access, equipment, software,
information and accessories that deliver, process or otherwise utilize
information, including the research described above) that assist Warburg in
carrying out its responsibilities. Research received from brokers or dealers
is supplemental to Warburg's own research program. The fees to Warburg under
its advisory agreement with the Fund are not reduced by reason of its
receiving any brokerage and research services.
Investment decisions for the Fund concerning specific portfolio
securities are made independently from those for other clients advised by
Warburg. Such other investment clients may invest in the same securities as
the Fund. When purchases or sales of the same security are made at
substantially the same time on behalf of such other clients, transactions are
averaged as to price and available investments allocated as to amount, in a
manner which Warburg believes to be equitable to each client, including the
Fund. In some instances, this investment procedure may adversely affect the
price paid or received by the Fund or the size of the position obtained or
sold for the Fund. To the extent permitted by law, Warburg may aggregate the
securities to be sold or purchased for the Fund with those to be sold or
purchased for such other investment clients in order to obtain best execution.
<PAGE>23
Any portfolio transaction for the Fund may be executed through
Counsellors Securities Inc., the Fund's distributor ("Counsellors
Securities"), if, in Warburg's judgment, the use of Counsellors Securities is
likely to result in price and execution at least as favorable as those of
other qualified brokers, and if, in the transaction, Counsellors Securities
charges the Fund a commission rate consistent with those charged by
Counsellors Securities to comparable unaffiliated customers in similar
transactions. All transactions with affiliated brokers will comply with Rule
17e-1 under the 1940 Act. No portfolio transactions have been executed
through Counsellors Securities since the commencement of the Fund's
operations.
In no instance will portfolio securities be purchased from or sold
to Warburg or Counsellors Securities or any affiliated person of such
companies. In addition, the Fund will not give preference to any institutions
with whom the Fund enters into distribution or shareholder servicing
agreements concerning the provision of distribution services or support
services. See the Prospectuses, "Shareholder Servicing."
The Fund may participate, if and when practicable, in bidding for
the purchase of Municipal Obligations for the Fund's portfolio directly from
an issuer in order to take advantage of the lower purchase price available to
members of such a group. The Fund will engage in this practice, however, only
when Warburg, in its sole discretion, believes such practice to be otherwise
in the Fund's interest.
Portfolio Turnover
The Fund's portfolio turnover rate is calculated by dividing the
lesser of purchases or sales of its portfolio securities for the year by the
monthly average value of the portfolio securities. Securities with remaining
maturities of one year or less at the date of acquisition are excluded from
the calculation.
The Fund does not intend to seek profits through short-term trading,
but the rate of turnover will not be a limiting factor when the Fund deems it
desirable to sell or purchase securities. Certain practices that may be
employed by the Fund could result in high portfolio turnover. For example,
portfolio securities may be sold in anticipation of a rise in interest rates
(market decline) or purchased in anticipation of a decline in interest rates
(market rise) and later sold. In addition, a security may be sold and another
of comparable quality purchased at approximately the same time to take
advantage of what Warburg believes to be a temporary disparity in the normal
yield relationship between the two securities. These yield disparities may
occur for reasons not directly related to the investment quality of particular
issues or the general movement of interest rates, such as changes in the
overall demand for, or supply of, various types of securities.
<PAGE>24
SPECIAL CONSIDERATIONS RELATING TO NEW YORK MUNICIPAL
OBLIGATIONS
Some of the significant financial considerations relating to the
Fund's investment in New York Municipal Obligations are summarized below.
This summary information is not intended to be a complete description and is
principally derived from official statements relating to issues of New York
Municipal Obligations that were available prior to the date of this Statement
of Additional Information. The accuracy and completeness of the information
contained in those official statements have not been independently verified.
State Economy
New York is the third most populous state in the nation and has a
relatively high level of personal wealth. The State's economy is diverse with
a comparatively large share of the nation's finance, insurance,
transportation, communications and services employment, and a very small share
of the nation's farming and mining activity. The State has a declining
proportion of its workforce engaged in manufacturing, and an increasing
proportion engaged in service industries. New York City (the "City"), which
is the most populous city in the State and nation and is the center of the
nation's largest metropolitan area, accounts for a large portion of the
State's population and personal income.
The State has historically been one of the wealthiest states in the
nation. For decades, however, the State has grown more slowly than the nation
as a whole, gradually eroding its relative economic position. The recession
has been more severe in the State, owing to a significant retrenchment in the
financial services industry, cutbacks in defense spending, and an overbuilt
real estate market. There can be no assurance that the State economy will not
experience worse-than-predicted results in the 1995-96 fiscal year, with
corresponding material and adverse effects on the State's projections of
receipts and disbursements.
The unemployment rate in the State dipped below the national rate in
the second half of 1981 and remained lower until 1991. It stood at 6.9% in
1994. The total employment growth rate in the State has been below the
national average since 1984 and is expected to slow to less than 0.5% in 1995.
State per capita personal income remains above the national average. State
per capita income for 1994 was estimated at $25,999, which was 19.2% above the
1994 estimated national average of $21,809. During the past ten years, total
personal income in the State rose slightly faster than the national average
only in 1986 through 1989.
State Budget
The State Constitution requires the governor (the "Governor") to
submit to the State legislature (the "Legislature") a balanced executive
budget which contains a complete plan of expenditures for the ensuing fiscal
year and all moneys and revenues estimated to be
<PAGE>25
available therefor, accompanied by bills containing all proposed appro-
priations or reappropriations and any new or modified revenue measures to be
enacted in connection with the executive budget. The entire plan constitutes
the proposed State financial plan for that fiscal year. The Governor is
required to submit to the Legislature quarterly budget updates which include a
revised cash-basis state financial plan, and an explanation of any changes
from the previous state financial plan.
The State s budget for the 1995-96 fiscal year was enacted by the
Legislature on June 7, 1995, more than two months after the start of the
fiscal year. Prior to adoption of the budget, the Legislature enacted
appropriations for disbursements considered to be necessary for State
operations and other purposes, including all necessary appropriations for debt
service. The State financial plan for the 1995-96 fiscal year was formulated
on June 20, 1995 and was based upon the State s budget as enacted by the
Legislature and signed into law by the Governor (the "1995-96 State Financial
Plan").
The 1995-96 State Financial Plan was the first to be enacted in the
administration of the Governor, who assumed office on January 1. It was the
first budget in over half a century which proposed and, as enacted, projected
an absolute year-over-year decline in disbursements in the General Fund, the
State's principal operating fund. Spending for State operations was projected
to drop even more sharply, by 4.6%. Nominal spending from all State spending
sources (i.e., excluding Federal aid) was proposed to increase by only 2.5%
from the prior fiscal year, in contrast to the prior decade when such spending
growth averaged more than 6.0% annually.
In his executive budget, the Governor indicated that in the 1995-96
fiscal year, the state financial plan, based on then-current law governing
spending and revenues, would be out of balance by almost $4.7 billion, as a
result of the projected structural deficit resulting from the ongoing
disparity between sluggish growth in receipts, the effect of prior-year tax
changes, and the rapid acceleration of spending growth; the impact of unfunded
1994-95 initiatives, primarily for local aid programs; and the use of one-time
solutions, primarily surplus funds from the prior year, to fund recurring
spending in the 1994-95 budget. The Governor proposed additional tax cuts to
spur economic growth and provide relief for low and middle-income tax payers,
which were larger than those ultimately adopted, and which added $240 million
to the then projected imbalance or budget gap, bringing the total to
approximately $5 billion.
This gap was projected to be closed in the 1995-96 State Financial
Plan through a series of actions, mainly spending reductions and cost
containment measures and certain reestimates that are expected to be
recurring, but also through the use of one-time solutions. The 1995-96 State
Financial Plan projected (i) nearly $1.6 billion in savings from cost
containment, disbursement reestimates, and other savings in social welfare
programs, including Medicaid, income maintenance and various child and family
care programs; (ii) $2.2 billion in savings from State agency actions to
reduce spending on the State workforce, SUNY and CUNY, mental hygiene
programs, capital projects, the prison system and fringe
<PAGE>26
benefits; (iii) $300 million in savings from local assistance reforms,
including actions affecting school aid and revenue sharing while proposing
program legislation to provide relief from certain mandates that increase
local spending; (iv) over $400 million in revenue measures, primarily through
a new Quick Draw Lottery game, changes to tax payments schedules, and the sale
of assets; and (v) $300 million from reestimates in receipts.
The 1995-96 State Financial Plan included actions that will have an
effect on the budget outlook for State fiscal year 1996-97 and beyond. The
Division of the Budget estimated that the 1995-96 State Financial Plan
contained actions that provide nonrecurring resources or savings totaling
approximately $900 million while the State comptroller (the "Comptroller")
believed that such amount exceeded $1 billion. In addition to this use of
nonrecurring resources, the 1995-96 State Financial Plan reflected actions
that will directly affect the State s 1996-97 fiscal year baseline receipts
and disbursements. The three-year plan to reduce State personal income taxes
will decrease State tax receipts by an estimated $1.7 billion in State fiscal
year 1996-97 in addition to the amount of reduction in State fiscal year
1995-96. Further significant reductions in the personal income tax are
scheduled for the 1997-98 State fiscal year. Other tax reductions enacted in
1994 and 1995 are estimated to cause an additional reduction in receipts of
over $500 million in 1996-97, as compared to the level of receipts in 1995-96.
Similarly, many actions taken to reduce disbursements in the State s 1995-96
fiscal year are expected to provide greater reductions in the State's fiscal
year 1996-97. These include actions to reduce the State workforce, reduce
Medicaid and welfare expenditures and slow community mental hygiene program
development.
The State issued the first of the three required quarterly updates
(the "First Quarter Update") to the 1995-96 State Financial Plan on July 28,
1995. The First Quarter Update projected continued balance in the State's
1995-96 State Financial Plan. Actual cash receipts and disbursements during
the first quarter of the fiscal year were impacted by the late adoption of the
budget, and fell somewhat short of original monthly cashflow estimates.
Receipt variances were mainly related to timing issues rather than changes in
the forecast. Disbursement variances were also ascribed to timing factors.
On October 2, 1995, the State Comptroller released a report on the
State's financial condition. The report identified several risks to the 1995-
96 State Financial Plan and also estimated a potential imbalance in receipts
and disbursements in the 1996-97 fiscal year of at least $2.7 billion and in
the 1997-98 fiscal year of at least $3.9 billion. The Governor is required to
submit a balanced budget to the State Legislature and has indicated that he
will close any potential imbalance primarily through General Fund expenditure
reductions and without increases in taxes or deferrals of scheduled tax
reductions.
The State issued its second quarterly update to the 1995-96 State
Financial Plan on October 26, 1995 (the "Mid-Year Update" and together with
the First Quarter Update, the "Financial Plan Updates"). The Mid-Year Update
projected continued balance in the 1995-96 State Financial Plan, with
estimated receipts reduced by a net $71 million and estimated disbursements
reduced by a net $30 million as compared to the First Quarter
<PAGE>27
Update. The resulting General Fund balance decreased from $213 million in the
First Quarter Update to $172 million in the Mid-Year Update, reflecting the
use of $41 million from the contingency reserve fund for payments of
litigation and disallowance expenses.
The 1995-96 State Financial Plan and the Financial Plan Updates were
based on a number of assumptions and projections. Because it is not possible
to predict accurately the occurrence of all factors that may affect the 1995-
96 State Financial Plan or the Financial Plan Updates, actual results could
differ materially and adversely from projections made at the outset of a
fiscal year. There can be no assurance that the State will not face
substantial potential budget gaps in future years resulting from a significant
disparity between tax revenues projected from a lower recurring receipts base
and the spending required to maintain State programs at current levels. To
address any potential budgetary imbalance, the State may need to take
significant actions to align recurring receipts and disbursements in future
fiscal years.
A significant risk to the 1995-96 State Financial Plan arises from
tax legislation pending in Congress. Changes to federal tax treatment of
capital gains are likely to flow through automatically to the State personal
income tax. Such changes, depending upon their precise character and timing,
and upon taxpayer response, could produce either revenue gains or losses
during the balance of the State's fiscal year.
Recent Financial Results
The General Fund is the principal operating fund of the State and is
used to account for all financial transactions, except those required to be
accounted for in another fund. It is the State's largest fund and receives
almost all State taxes and other resources not dedicated to particular
purposes.
The State reported a General Fund operating deficit of $1.426
billion for the 1994-95 fiscal year, as compared to an operating surplus of
$914 million for the prior fiscal year. The 1994-95 fiscal year deficit was
caused by several factors, including the use of $1.026 billion of the 1993-94
cash-based surplus to fund operating expenses in 1994-95 and the adoption of
changes in accounting methodologies by the State Comptroller. These factors
were offset by net proceeds of $315 million in bonds issued by the Local
Government Assistance Corporation. The General Fund is projected to be
balanced on a cash basis for the 1995-96 fiscal year.
Total revenues for 1994-95 were $31.455 billion. Revenues decreased
by $173 million over the prior fiscal year, a decrease of less than one
percent. Total expenditures for 1994-95 totaled $33.079 billion, an increase
of $2.083 billion, or 6.7 percent over the prior fiscal year.
The State's financial position on a GAAP (generally accepted
accounting principles) basis as of March 31, 1995 showed an accumulated
deficit in its combined
<PAGE>28
governmental funds of $1.666 billion, reflecting liabilities of $14.778
billion and assets of $13.112 billion.
Debt Limits and Outstanding Debt
There are a number of methods by which the State of New York may
incur debt. Under the State Constitution, the State may not, with limited
exceptions for emergencies, undertake long-term general obligation borrowing
(i.e., borrowing for more than one year) unless the borrowing is authorized in
a specific amount for a single work or purpose by the Legislature and approved
by the voters. There is no limitation on the amount of long-term general
obligation debt that may be so authorized and subsequently incurred by the
State.
The State may undertake short-term borrowings without voter approval
(i) in anticipation of the receipt of taxes and revenues, by issuing tax and
revenue anticipation notes, and (ii) in anticipation of the receipt of
proceeds from the sale of duly authorized but unissued general obligation
bonds, by issuing bond anticipation notes. The State may also, pursuant to
specific constitutional authorization, directly guarantee certain obligations
of the State of New York's authorities and public benefit corporations
("Authorities"). Payments of debt service on New York State general
obligation and New York State-guaranteed bonds and notes are legally
enforceable obligations of the State of New York.
The State employs additional long-term financing mechanisms,
lease-purchase and contractual-obligation financings, which involve
obligations of public authorities or municipalities that are State-supported
but are not general obligations of the State. Under these financing
arrangements, certain public authorities and municipalities have issued
obligations to finance the construction and rehabilitation of facilities or
the acquisition and rehabilitation of equipment, and expect to meet their debt
service requirements through the receipt of rental or other contractual
payments made by the State. Although these financing arrangements involve a
contractual agreement by the State to make payments to a public authority,
municipality or other entity, the State s obligation to make such payments is
generally expressly made subject to appropriation by the Legislature and the
actual availability of money to the State for making the payments. The State
has also entered into a contractual-obligation financing arrangement with the
Local Government Assistance Corporation ("LGAC") in an effort to restructure
the way the State makes certain local aid payments.
In 1990, as part of a State fiscal reform program, legislation was
enacted creating LGAC, a public benefit corporation empowered to issue
long-term obligations to fund certain payments to local governments
traditionally funded through New York State's annual seasonal borrowing. The
legislation empowered LGAC to issue its bonds and notes in an amount not in
excess of $4.7 billion (exclusive of certain refunding bonds) plus certain
other amounts. Over a period of years, the issuance of these long-term
obligations, which are to be amortized over no more than 30 years, was
expected to eliminate the need for
<PAGE>29
continued short-term seasonal borrowing. The legislation also dedicated
revenues equal to one-quarter of the four cent State sales and use tax to pay
debt service on these bonds. The legislation also imposed a cap on the annual
seasonal borrowing of the State at $4.7 billion, less net proceeds of bonds
issued by LGAC and bonds issued to provide for capitalized interest, except in
cases where the Governor and the legislative leaders have certified the need
for additional borrowing and provided a schedule for reducing it to the cap.
If borrowing above the cap is thus permitted in any fiscal year, it is
required by law to be reduced to the cap by the fourth fiscal year after the
limit was first exceeded. As of June 1995, LGAC had issued bonds to provide
net proceeds of $4.7 billion, completing the program. The impact of LGAC's
borrowing is that the State is able to meet its cash flow needs in the first
quarter of the fiscal year without relying on short-term seasonal borrowings.
The 1995-96 State Financial Plan includes no spring borrowing nor did the
1994-95 State Financial Plan, which was the first time in 35 years there was
no short-term seasonal borrowing.
In June 1994, the Legislature passed a proposed constitutional
amendment that would significantly change the long-term financing practices of
the State and its public authorities. The proposed amendment would permit the
State, within a formula-based cap, to issue revenue bonds, which would be debt
of the State secured solely by a pledge of certain State tax receipts
(including those allocated to State funds dedicated for transportation
purposes), and not by the full faith and credit of the State. In addition,
the proposed amendment would (i) permit multiple purpose general obligation
bond proposals to be proposed on the same ballot, (ii) require that State debt
be incurred only for capital projects included in a multi-year capital
financing plan, and (iii) prohibit, after its effective date, lease-purchase
and contractual-obligation financing mechanisms for State facilities.
Before the approved constitutional amendment can be presented to the
voters for their consideration, it must be passed by a separately elected
legislature. The amendment must therefore be passed by the newly elected
Legislature in 1995 prior to presentation to the voters in November 1995. The
amendment was passed by the Senate in June 1995, and the Assembly is expected
to pass the amendment shortly. If approved by the voters, the amendment would
become effective January 1, 1996.
On January 13, 1992, Standard & Poor's Corporation ("Standard &
Poor's") reduced its ratings on the State's general obligation bonds from A to
A- and, in addition, reduced its ratings on the State's moral obligation,
lease purchase, guaranteed and contractual obligation debt. Standard & Poor's
also continued its negative rating outlook assessment on State general
obligation debt. On April 26, 1993, Standard & Poor's revised the rating
outlook assessment to stable. On February 14, 1994, Standard & Poor's raised
its outlook to positive and, on February 28, 1994, confirmed its A- rating.
On January 6, 1992, Moody's Investors Service, Inc. ("Moody's") reduced its
ratings on outstanding limited-liability State lease purchase and contractual
obligations from A to Baa1. On February 28, 1994, Moody's reconfirmed its A
rating on the State's general obligation long-term indebtedness.
<PAGE>30
The State anticipates that its capital programs will be financed, in
part, by State and public authorities borrowings in 1995-96. The State
expects to issue $248 million in general obligation bonds (including $170
million for purposes of redeeming outstanding bond anticipation notes) and
$186 million in general obligation commercial paper. The Legislature has also
authorized the issuance of up to $33 million in certificates of participation
during the State s 1995-96 fiscal year for equipment purchases and $14 million
for capital purposes. These projections are subject to change if
circumstances require.
Principal and interest payments on general obligation bonds and
interest payments on bond anticipation notes and on tax and revenue
anticipation notes were $793.3 million for the 1994-95 fiscal year, and are
estimated to be $774.4 million for the 1995-96 fiscal year. These figures do
not include interest payable on State General Obligation Refunding Bonds
issued in July 1992 ("Refunding Bonds") to the extent that such interest was
paid from an escrow fund established with the proceeds of such Refunding
Bonds. Principal and interest payments on fixed rate and variable rate bonds
issued by LGAC were $239.4 million for the 1994-95 fiscal year, and are
estimated to be $328.2 million for 1995-96. State lease-purchase rental and
contractual obligation payments for 1994-95, including State installment
payments relating to certificates of participation, were $1.607 billion and
are estimated to be $1.641 billion in 1995-96.
New York State has never defaulted on any of its general obligation
indebtedness or its obligations under lease-purchase or contractual-obligation
financing arrangements and has never been called upon to make any direct
payments pursuant to its guarantees.
Litigation
Certain litigation pending against New York State or its officers or
employees could have a substantial or long-term adverse effect on New York
State finances. Among the more significant of these cases are those that
involve (1) the validity of agreements and treaties by which various Indian
tribes transferred title to New York State of certain land in central and
upstate New York; (2) certain aspects of New York State's Medicaid policies,
including its rates, regulations and procedures; (3) action against New York
State and New York City officials alleging inadequate shelter allowances to
maintain proper housing; (4) challenges to the practice of reimbursing certain
Office of Mental Health patient care expenses from the client's Social
Security benefits; (5) alleged responsibility of New York State officials to
assist in remedying racial segregation in the City of Yonkers; (6) challenges
by commercial insurers, employee welfare benefit plans, and health maintenance
organizations to the imposition of 13%, 11% and 9% surcharges on inpatient
hospital bills; (7) challenges to certain aspects of petroleum business taxes;
(8) action alleging damages resulting from the failure by the State's
Department of Environmental Conservation to timely provide certain data; (9) a
challenge to the constitutionality of the treatment of certain moneys held in
a Supplemental Reserve Fund; and (10) a challenge to the constitutionality of
a State lottery game.
<PAGE>31
Several actions challenging the constitutionality of legislation
enacted during the 1990 legislative session which changed actuarial funding
methods for determining state and local contributions to state employee
retirement systems have been decided against the State. As a result, the
Comptroller has developed a plan to restore the State's retirement systems to
prior funding levels. Such funding is expected to exceed prior levels by $30
million in fiscal 1994-95, $63 million in fiscal 1995-96, $116 million in
fiscal 1996-97, $193 million in fiscal 1997-98, peaking at $241 million in
fiscal 1998-99. Beginning in fiscal 2001-02, State contributions required
under the Comptroller's plan are projected to be less than that required under
the prior funding method. As a result of the United States Supreme Court
decision in the case of State of Delaware v. State of New York, on January 21,
1994, the State entered into a settlement agreement with various parties.
Pursuant to all agreements executed in connection with the action, the State
is required to make aggregate payments of $351.4 million, of which $90.3
million have been made. Annual payments to the various parties will continue
through the State's 2002-03 fiscal year in amounts which will not exceed $48.4
million in any fiscal year subsequent to the State's 1994-95 fiscal year.
The legal proceedings noted above involve State finances, State
programs and miscellaneous tort, real property and contract claims in which
the State is a defendant and the monetary damages sought are substantial.
These proceedings could affect adversely the financial condition of the State.
Adverse developments in these proceedings or the initiation of new proceedings
could affect the ability of the State to maintain a balanced 1995-96 State
Financial Plan. An adverse decision in any of these proceedings could exceed
the amount of the 1995-96 State Financial Plan reserve for the payment of
judgments and, therefore, could affect the ability of the State to maintain a
balanced 1995-96 State Financial Plan. In its audited financial statements
for the fiscal year ended March 31, 1995, the State reported its estimated
liability for awarded and anticipated unfavorable judgments to be $676
million.
Although other litigation is pending against New York State, except
as described above, no current litigation involves New York State's authority,
as a matter of law, to contract indebtedness, issue its obligations, or pay
such indebtedness when it matures, or affects New York State's power or
ability, as a matter of law, to impose or collect significant amounts of taxes
and revenues.
Authorities
The fiscal stability of New York State is related, in part, to the
fiscal stability of its Authorities, which generally have responsibility for
financing, constructing and operating revenue-producing public benefit
facilities. Authorities are not subject to the constitutional restrictions on
the incurrence of debt which apply to the State itself, and may issue bonds
and notes within the amounts of, and as otherwise restricted by, their
legislative authorization. The State s access to the public credit markets
could be impaired, and the market price of its outstanding debt may be
materially and adversely affected, if any of the Authorities were to default
on their respective obligations, particularly with respect to debt that are
State-supported or State-related. As of September 30, 1994, date of the
latest data
<PAGE>32
available, there were 18 Authorities that had outstanding debt of $100 million
or more. The aggregate outstanding debt, including refunding bonds, of these
18 Authorities was $70.3 billion. As of March 31, 1995, aggregate public
authority debt outstanding as State-supported debt was $27.9 billion and as
State-related debt was $36.1 billion.
Authorities are generally supported by revenues generated by the
projects financed or operated, such as fares, user fees on bridges, highway
tolls and rentals for dormitory rooms and housing. In recent years, however,
New York State has provided financial assistance through appropriations, in
some cases of a recurring nature, to certain of the 18 Authorities for
operating and other expenses and, in fulfillment of its commitments on moral
obligation indebtedness or otherwise, for debt service. This operating
assistance is expected to continue to be required in future years. In
addition, certain statutory arrangements provide for State local assistance
payments otherwise payable to localities to be made under certain
circumstances to certain Authorities. The State has no obligation to provide
additional assistance to localities whose local assistance payments have been
paid to Authorities under these arrangements. However, in the event that such
local assistance payments are so diverted, the affected localities could seek
additional State funds.
New York City and Other Localities
The fiscal health of the State of New York may also be impacted by
the fiscal health of its localities, particularly the City of New York, which
has required and continues to require significant financial assistance from
New York State. The City depends on State aid both to enable the City to
balance its budget and to meet its cash requirements. The City has achieved
balanced operating results for each of its fiscal years since 1981 as reported
in accordance with the then-applicable GAAP.
In 1975, New York City suffered a fiscal crisis that impaired the
borrowing ability of both the City and New York State. In that year the City
lost access to public credit markets. The City was not able to sell
short-term notes to the public again until 1979.
In 1975, Standard & Poor's suspended its A rating of City bonds.
This suspension remained in effect until March 1981, at which time the City
received an investment grade rating of BBB from Standard & Poor's. On July 2,
1985, Standard & Poor's revised its rating of City bonds upward to BBB+ and on
November 19, 1987, to A-. On July 2, 1993, Standard & Poor's reconfirmed its A-
rating of City bonds, continued its negative rating outlook assessment and
stated that maintenance of such rating depended upon the City's making further
progress towards reducing budget gaps in the outlying years. Moody's ratings
of City bonds were revised in November 1981 from B (in effect since 1977) to
Ba1, in November 1983 to Baa, in December 1985 to Baa1, in May 1988 to A and
again in February 1991 to Baa1. On July 10, 1995, Standard & Poor's
downgraded its rating on the City's $23 billion of outstanding general
obligation bonds to "BBB+" from "A-", citing to the City's chronic structural
budget problems and weak economic outlook. Standard & Poor's stated that New
York City's reliance on one-time revenue measures to close annual
<PAGE>33
budget gaps, a dependence on unrealized labor savings, overly optimistic
estimates of revenues and state and federal aid and the City's continued high
debt levels also contributed to its decision to lower the rating.
New York City is heavily dependent on New York State and federal
assistance to cover insufficiencies in its revenues. There can be no
assurance that in the future federal and State assistance will enable the City
to make up its budget deficits. To help alleviate the City's financial
difficulties, the Legislature created the Municipal Assistance Corporation
("MAC") in 1975. MAC is authorized to issue bonds and notes payable from
certain stock transfer tax revenues, from the City's portion of the State
sales tax derived in the City and, subject to certain prior claims, from State
per capita aid otherwise payable by the State to the City. Failure by the
State to continue the imposition of such taxes, the reduction of the rate of
such taxes to rates less than those in effect on July 2, 1975, failure by the
State to pay such aid revenues and the reduction of such aid revenues below a
specified level are included among the events of default in the resolutions
authorizing MAC's long-term debt. The occurrence of an event of default may
result in the acceleration of the maturity of all or a portion of MAC's debt.
MAC bonds and notes constitute general obligations of MAC and do not
constitute an enforceable obligation or debt of either the State or the City.
As of June 30, 1995, MAC had outstanding an aggregate of approximately $4.882
billion of its bonds. MAC is authorized to issue bonds and notes to refunds
its outstanding bonds and notes and to fund certain reserves, without
limitation as to principal amount, and to finance certain capital commitments
to certain authorities in the event the City fails to provide such financing.
Since 1975, the City's financial condition has been subject to
oversight and review by the New York State Financial Control Board (the
"Control Board") and since 1978 the City's financial statements have been
audited by independent accounting firms. To be eligible for guarantees and
assistance, the City is required during a "control period" to submit annually
for Control Board approval, and when a control period is not in effect for
Control Board review, a financial plan for the next four fiscal years covering
the City and certain agencies showing balanced budgets determined in
accordance with GAAP. New York State also established the Office of the State
Deputy Comptroller for New York City ("OSDC") to assist the Control Board in
exercising its powers and responsibilities. On June 30, 1986, the City
satisfied the statutory requirements for termination of the control period.
This means that the Control Board's powers of approval are suspended, but the
Board continues to have oversight responsibilities.
From time to time, the Control Board staff, OSDC, the City
comptroller and others issue reports and make public statements regarding the
City's financial condition, commenting on, among other matters, the City's
financial plans, projected revenues and expenditures and actions by the City
to eliminate projected operating deficits. Some of these reports and
statements have warned that the City may have underestimated certain
expenditures and overestimated certain revenues and have suggested that the
City may not have adequately provided for future contingencies. Certain of
these reports have analyzed the City's future economic and social conditions
and have questioned whether the City has
<PAGE>34
the capacity to generate sufficient revenues in the future to meet the costs
of its expenditure increases and to provide necessary services.
The City submitted to the Control Board on July 21, 1995 a fourth
quarter modification to the City's financial plan for the 1995 fiscal year
(the "1995 Modification"), which projects a balanced budget in accordance with
GAAP for the 1995 fiscal year, after taking into account a discretionary
transfer of $75 million. On July 11, 1995, the City submitted to the Control
Board the Financial Plan for the 1996 through 1999 fiscal years (the "1996-
1999 Financial Plan").
The 1996-1999 Financial Plan projected revenues and expenditures for
the 1996 fiscal year balanced in accordance with GAAP. The projections for
the 1996 fiscal year reflected proposed actions to close a previously
projected gap of approximately $3.1 billion for the 1996 fiscal year. The
proposed actions in the 1996-1999 Financial Plan for the 1996 fiscal year
included (i) a reduction in spending of $400 million, primarily affecting
public assistance and Medicaid payment to the City; (ii) expenditure
reductions in agencies, totaling $1.2 billion; (iii) transitional labor
savings, totaling $600 million; and (iv) the phase-in of the increased annual
pension funding cost due to revisions resulting from an actuarial audit of the
City's pension systems, which would reduce such costs in the 1996 fiscal year.
The proposed agency spending reductions included the reduction of
City personnel through attrition, government efficiency initiatives,
procurement initiatives and labor productivity initiatives. The substantial
agency expenditure reductions proposed in the 1996-1999 Financial Plan may be
difficult to implement, and the 1996-1999 Financial Plan is subject to the
ability of the City to implement proposed reductions in City personnel and
other cost reduction initiatives. In addition, certain initiatives are
subject to negotiation with the City's municipal unions, and various actions,
including proposed anticipated State aid totaling $50 million are subject to
approval by the Governor and the Legislature.
The 1996-1999 Financial Plan also set forth projections for the 1997
through 1999 fiscal years and outlined a proposed gap-closing program to
eliminate projected gaps of $888 million, $1.5 billion and $1.4 billion for
the 1997, 1998 and 1999 fiscal years, respectively, after successful
implementation of the $3.1 billion gap-closing program for the 1996 fiscal
year. These actions, a substantial number of which were not specified in
detail, include additional agency spending reductions, reduction in
entitlements, government procurement initiatives, revenue initiatives and the
availability of the general reserve.
Contracts with all of the City's municipal unions either expired in
the 1995 fiscal year or will expire in the 1996 fiscal years. The 1996-1999
Financial Plan provided no additional wage increases for City employees after
the 1995 fiscal year. Each 1% wage increase for all union contracts
commencing in the 1995 or 1996 fiscal year would cost the City an additional
$141 million for the 1996 fiscal year and $161 million each year thereafter
above the amounts provided for in the 1996-1999 Financial Plan.
<PAGE>35
Although the City has balanced its budget since 1981, estimates of
the City's revenues and expenditures, which are based on numerous assumptions,
are subject to various uncertainties. If expected federal or State aid is not
forthcoming, if unforeseen developments in the economy significantly reduce
revenues derived from economically sensitive taxes or necessitate increased
expenditures for public assistance, if the City should negotiate wage
increases for its employees greater than the amounts provided for in the
City's financial plan or if other uncertainties materialize that reduce
expected revenues or increase projected expenditures, then, to avoid operating
deficits, the City may be required to implement additional actions, including
increases in taxes and reductions in essential City services. The City might
also seek additional assistance from New York State.
The City requires certain amounts of financing for seasonal and
capital spending purposes. The City's current monthly cash flow forecast for
the 1996 fiscal year shows a need of $2.4 billion of seasonal financing for
the 1996 fiscal year. Seasonal financing requirements for the 1995 fiscal
year increased to $2.2 billion from $1.75 billion and $1.4 billion in the 1994
and 1993 fiscal years, respectively.
Certain localities, in addition to the City, could have financial
problems leading to requests for additional New York State assistance. The
potential impact on the State of such requests by localities was not included
in the projections of the State's receipts and disbursements in the State's
1995-96 fiscal year.
Fiscal difficulties experienced by the City of Yonkers ("Yonkers")
resulted in the creation of the Financial Control Board for the City of
Yonkers (the "Yonkers Board") by New York State in 1984. The Yonkers Board is
charged with oversight of the fiscal affairs of Yonkers. Future actions taken
by the Governor or the Legislature to assist Yonkers could result in
allocation of New York State resources in amounts that cannot yet be
determined.
Municipalities and school districts have engaged in substantial
short-term and long-term borrowings. In 1993, the total indebtedness of all
localities in New York State other than New York City was approximately $17.7
billion. A small portion (approximately $105 million) of that indebtedness
represented borrowing to finance budgetary deficits and was issued pursuant to
enabling New York State legislation. State law requires the comptroller to
review and make recommendations concerning the budgets of those local
government units other than New York City authorized by State law to issue
debt to finance deficits during the period that such deficit financing is
outstanding. Fifteen localities had outstanding indebtedness for deficit
financing at the close of their fiscal year ending in 1993.
From time to time, federal expenditure reductions could reduce, or
in some cases eliminate, federal funding of some local programs and
accordingly might impose substantial increased expenditure requirements on
affected localities. If New York State, New York City or any of the
Authorities were to suffer serious financial difficulties
<PAGE>36
jeopardizing their respective access to the public credit markets, the
marketability of notes and bonds issued by localities within New York State
could be adversely affected. Localities also face anticipated and potential
problems resulting from certain pending litigation, judicial decisions and
long-range economic trends. Long-range potential problems of declining urban
population, increasing expenditures and other economic trends could adversely
affect localities and require increasing New York State assistance in the
future.
MANAGEMENT OF THE FUND
Officers and Board of Trustees
The names (and ages) of the Fund's Trustees and officers, their
addresses, present positions and principal occupations during the past five
years and other affiliations are set forth below.
Richard N. Cooper* (61) . . . . Trustee
Room 7E470HB Professor at Harvard University;
Central Intelligence Agency Director or Trustee of Circuit
930 Dolly Madison Blvd. City Stores, Inc. (retail electronics
McClain, Virginia 22107 and appliances) and Phoenix Home Life
Insurance Co.
Donald J. Donahue (71) . . . . Trustee
99 Indian Field Road Chairman of Magma Copper Company
Greenwich, Connecticut 06830 since January 1987; Director or Trustee of
GEV Corporation and Signet Star Reinsurance
Company; Chairman and Director of NAC
Holdings from September 1990-June 1993.
Jack W. Fritz (68) . . . . . . Trustee
2425 North Fish Creek Road Private investor; Consultant and
P.O. Box 483 Director of Fritz Broadcasting, Inc. and
Wilson, Wyoming 83014 Fritz Communications (developers and
operators of radio stations); Director of
Advo, Inc. (direct mail advertising).
- ------------------------
* Indicates a Trustee who is an "interested person" of the Fund as defined
in the 1940 Act.
<PAGE>37
John L. Furth* (65) . . . . . . Chief Executive Officer and Trustee
466 Lexington Avenue Vice Chairman and Director of E.M.
New York, New York 10017-3147 Warburg, Pincus & Co., Inc. ("EMW");
Associated with EMW since 1970; Director and
officer of other investment companies
advised by Warburg.
Thomas A. Melfe (63) . . . . . Trustee
30 Rockefeller Plaza Partner in the law firm of Donovan Leisure
New York, New York 10112 Newton & Irvine; Director of Municipal Fund
for New York Investors, Inc.
Alexander B. Trowbridge (66) . Trustee
1155 Connecticut Avenue, N.W. President of Trowbridge Partners, Inc.
Suite 700 (business consulting) from January 1990-
Washington, DC 20036 January 1994; President of the National
Association of Manufacturers from 1980-1990;
Director or Trustee of New England Mutual
Life Insurance Co., ICOS Corporation
(biopharmaceuticals), P.H.H. Corporation
(fleet auto management; housing and plant
relocation service), WMX Technologies Inc.
(solid and hazardous waste collection and
disposal), The Rouse Company (real estate
development), SunResorts International Ltd.
(hotel and real estate management), Harris
Corp. (electronics and communications
equipment), The Gillette Co. (personal care
products) and Sun Company Inc. (petroleum
refining and marketing).
Dale C. Christensen (48) . . . President and Co-Portfolio
466 Lexington Avenue Manager of the Fund
New York, New York 10017-3147 Portfolio Manager of other Warburg Pincus
Funds; Managing Director of EMW; Associated
with EMW since 1989; Vice President at
Citibank, N.A. from 1985-1989; Vice
President of Counsellors
- ------------------------
* Indicates a Trustee who is an "interested person" of the Fund as defined
in the 1940 Act.
<PAGE>38
Securities; President of other investment
companies advised by Warburg.
Arnold M. Reichman (47) . . . . Executive Vice President
466 Lexington Avenue Managing Director and Assistant
New York, New York 10017-3147 Secretary of EMW; Associated with EMW since
1984; Senior Vice President, Secretary and
Chief Operating Officer of Counsellors
Securities; Officer of other investment
companies advised by Warburg.
Eugene L. Podsiadlo (38) . . . Senior Vice President
466 Lexington Avenue Managing Director of EMW;
New York, New York 10017-3147 Associated with EMW since 1991; Vice
President of Citibank, N.A. from 1987-1991;
Senior Vice President of Counsellors
Securities and officer of other investment
companies advised by Warburg.
Stephen Distler (42) . . . . . Vice President and Chief Financial
466 Lexington Avenue Officer
New York, New York 10017-3147 Managing Director, Controller and Assistant
Secretary of EMW; Associated with EMW since
1984; Treasurer of Counsellors Securities;
Officer of other investment companies
advised by Warburg.
Eugene P. Grace (44) . . . . . Vice President and Secretary
466 Lexington Avenue Associated with EMW since April 1994;
New York, New York 10017-3147 Attorney-at-law from September 1989-
April 1994; life insurance agent, New York
Life Insurance Company from 1993-1994;
General Counsel and Secretary, Home Unity
Savings Bank from 1991-1992; Vice President
and Chief Compliance Officer of Counsellors
Securities; Vice President and Secretary of
other investment companies advised by
Warburg.
Howard Conroy (41) . . . . . . Vice President, Treasurer and Chief
466 Lexington Avenue Accounting Officer
New York, New York 10017-3147 Associated with EMW since 1992; Associated
with Martin Geller, C.P.A. from 1990-1992;
Vice President, Finance with
<PAGE>39
Gabelli/Rosenthal & Partners, L.P. until
1990; Vice President, Treasurer and Chief
Accounting Officer of other investment
companies advised by Warburg.
Karen Amato (32) . . . . . . . Assistant Secretary
466 Lexington Avenue Associated with EMW since 1987;
New York, New York 10017-3147 Assistant Secretary of other investment
companies advised by Warburg.
No employee of Warburg or PFPC Inc., the Fund's co-administrator
("PFPC"), or any of their affiliates receives any compensation from the Fund
for acting as an officer or Trustee of the Fund. Each Trustee who is not a
director, officer or employee of Warburg, PFPC or any of their affiliates
receives an annual fee of $1,000, and $250 for each meeting of the Board
attended by him for his services as Trustee and is reimbursed for expenses
incurred in connection with his attendance at Board meetings.
Trustees' Compensation
(for the fiscal year ended October 31, 1995)
<TABLE>
<CAPTION>
Total Total Compensation from
Compensation from all Investment Companies
Name of Trustee Fund Managed by Warburg*
--------------- ----------------- ------------------------
<S> <C> <C>
John L. Furth None** None**
Richard N. Cooper $2,000 $41,083
Donald J. Donahue $2,250 $43,833
Jack W. Fritz $1,750 $35,333
Thomas A. Melfe $2,250 $43,583
Alexander B. Trowbridge $2,250 $43,833
</TABLE>
- ------------------------
* Each Trustee also serves as a Director or Trustee of 15 other investment
companies advised by Warburg.
** Mr. Furth is considered to be an interested person of the Fund and
Warburg, as defined under Section 2(a)(19) of the 1940 Act, and,
accordingly, receives no compensation from the Fund or any other
investment company managed by Warburg.
Dale C. Christensen, president and co-portfolio manager of the Fund,
earned a B.S. in Agriculture from the University of Alberta and a B.Ed. in
Mathematics from the
<PAGE>40
University of Calgary, both located in Canada. Mr. Christensen is also co-
portfolio manager of Warburg Pincus Fixed Income Fund, Warburg Pincus Global
Fixed Income Fund and Warburg Pincus Intermediate Maturity Government Fund.
Mr. Christensen directs the fixed income group at Warburg, which he joined in
1989, providing portfolio management for Warburg Pincus Funds and
institutional clients around the world. Mr. Christensen was a vice president
in the International Private Banking division and the domestic pension fund
management division at Citicorp from 1984 to 1989. Prior to that, Mr.
Christensen was a Fixed Income Portfolio Manager at CIC Asset Management from
1982 to 1984.
Sharon B. Parente, co-portfolio manager of the Fund, earned a B.S.
degree from the University of Virginia. Ms. Parente has been with the Fund
since joining Warburg in 1992, specializing in municipal bonds and corporate
cash. Ms. Parente was a vice president at Citibank, N.A. in the Private
Banking Group from 1985 to 1992. Prior to that, Ms. Parente was a fixed
income portfolio manager at Calvert Group from 1981 to 1985 and a municipal
trader's assistant at Prescott, Ball & Turben from 1979 to 1981.
As of December 28, 1995, Trustees and officers of the Fund as a
group owned of record less than 1% of the Fund's outstanding Common Shares.
As of the same date Mr. Furth may be deemed to have beneficially owned 56.05%
of the Fund's outstanding Common Shares, including shares owned by clients for
which Warburg has investment discretion. Mr. Furth disclaims ownership of
these shares and does not intend to exercise voting rights with respect to
these shares. No Trustees or officers owned of record any Advisor Shares.
Investment Adviser and Co-Administrators
Warburg serves as investment adviser to the Fund, PFPC serves as co-
administrator to the Fund and Counsellors Funds Service, Inc. ("Counsellors
Service") serves as co-administrator to the Fund pursuant to separate written
agreements (the "Advisory Agreement," the "PFPC Co-Administration Agreement"
and the "Counsellors Service Co-Administration Agreement," respectively). The
services provided by, and the fees payable by the Fund to, Warburg under the
Advisory Agreement, PFPC under the PFPC Co-Administration Agreement and
Counsellors Service under the Counsellors Service Co-Administration Agreement
are described in the Prospectuses. Prior to March 1, 1994, PFPC served as
administrator to the Fund and Counsellors Service served as administrative
services agent to the Fund pursuant to separate written agreements.
Warburg agrees that if, in any fiscal year, the expenses borne by
the Fund exceed the applicable expense limitations imposed by the securities
regulations of any state in which shares of the Fund are registered or
qualified for sale to the public, it will reimburse the Fund to the extent
required by such regulations. Unless otherwise required by law, such
reimbursement would be accrued and paid on a monthly basis. At present, no
state expense limitation is applicable to the Fund.
<PAGE>41
During the fiscal years ended October 31, 1993, October 31, 1994 and
October 31, 1995, Warburg earned $246,889, $291,721 and $316,050,
respectively, under the Advisory Agreement. For the same periods, Warburg
voluntarily waived $114,965, $123,901 and $168,856, respectively, of such
fees. During the fiscal years ended October 31, 1993, October 31, 1994 and
October 31, 1995, PFPC voluntarily waived $8,932, $22,930 and $33,063,
respectively, of the $61,875, $72,930 and $79,012 in administration fees or,
in the case of the two most recent fiscal years, co-administration fees,
earned in such fiscal year. Counsellors Service earned $34,214, $57,946 and
$79,012 in administration fees or, in the case of the two most recent fiscal
years, co-administration fees during the fiscal years ended October 31, 1993,
October 31, 1994 and October 31, 1995, respectively.
Custodian and Transfer Agent
PNC Bank, National Association ("PNC") is custodian of the Fund's
assets pursuant to a custodian agreement (the "Custodian Agreement"). Under
the Custodian Agreement, PNC (i) maintains a separate account or accounts in
the name of the Fund, (ii) holds and transfers portfolio securities on account
of the Fund, (iii) makes receipts and disbursements of money on behalf of the
Fund, (iv) collects and receives all income and other payments and
distributions on account of the Fund's portfolio securities and (v) makes
periodic reports to the Board concerning the Fund's custodial arrangements.
PNC is authorized to select one or more banks or trust companies to serve as
sub-custodian on behalf of the Fund, provided that PNC remains responsible for
the performance of all its duties under the Custodian Agreement and holds the
Fund harmless from the acts and omissions of any sub-custodian. PNC is an
indirect wholly owned subsidiary of PNC Bank Corp., and its principal business
address is Broad and Chestnut Streets, Philadelphia, Pennsylvania 19101.
State Street Bank and Trust Company ("State Street") serves as the
shareholder servicing, transfer and dividend disbursing agent of the Fund
pursuant to a Transfer Agency and Service Agreement, under which State Street
(i) issues and redeems shares of the Fund, (ii) addresses and mails all
communications by the Fund to record owners of Fund shares, including reports
to shareholders, dividend and distribution notices and proxy material for its
meetings of shareholders, (iii) maintains shareholder accounts and, if
requested, sub-accounts, and (iv) makes periodic reports to the Board
concerning the transfer agent's operations with respect to the Fund. State
Street has delegated to Boston Financial Data Services, Inc., a 50% owned
subsidiary ("BFDS"), responsibility for most shareholder servicing functions.
BFDS's principal business address is 2 Heritage Drive, Boston, Massachusetts
02171. The principal business address of State Street is 225 Franklin Street,
Boston, Massachusetts 02110.
Organization of the Fund
The Fund's Agreement and Declaration of Trust (the "Trust
Agreement") authorizes the Board to issue three billion full and fractional
shares of common stock, $.001 par value per share ("Common Shares"), of which
one billion shares are designated Common
<PAGE>42
Stock-Series 1 billion shares are designated Common Stock-Series 2 (the
"Advisor Shares"). Only Common Shares and Advisor Shares have been issued by
the Fund.
Massachusetts law provides that shareholders could, under certain
circumstances, be held personally liable for the obligations of the Fund.
However, the Trust Agreement disclaims shareholder liability for acts or
obligations of the Fund and requires that notice of such disclaimer be given
in each agreement, obligation or instrument entered into or executed by the
Fund or a Trustee. The Trust Agreement provides for indemnification from the
Fund's property for all losses and expenses of any shareholder held personally
liable for the obligations of the Fund. Thus, the risk of a shareholder's
incurring financial loss on account of shareholder liability is limited to
circumstances in which the Fund would be unable to meet its obligations, a
possibility that Warburg believes is remote. Upon payment of any liability
incurred by the Fund, the shareholder paying the liability will be entitled to
reimbursement from the general assets of the Fund. The Trustees intend to
conduct the operations of the Fund in such a way so as to avoid, as far as
possible, ultimate liability of the shareholders for liabilities of the Fund.
All shareholders of the Fund in each class, upon liquidation, will
participate ratably in the Fund's net assets. Shares do not have cumulative
voting rights, which means that holders of more than 50% of the shares voting
for the election of Trustees can elect all Trustees. Shares are transferable
but have no preemptive, conversion or subscription rights.
Distribution and Shareholder Servicing
The Fund may, in the future, enter into agreements ("Agreements")
with institutional shareholders of record, broker-dealers, financial
institutions, depository institutions, retirement plans and financial
intermediaries ("Institutions") to provide certain distribution, shareholder
servicing, administrative and/or accounting services for their clients or
customers (or participants in the case of retirement plans) ("Customers") who
are beneficial owners of Advisor Shares. See the Advisor Prospectus,
"Shareholder Servicing." Agreements will be governed by a distribution plan
(the "Distribution Plan") pursuant to Rule 12b-1 under the 1940 Act. The
Distribution Plan requires the Board, at least quarterly, to receive and
review written reports of amounts expended under the Distribution Plan and the
purposes for which such expenditures were made.
An Institution with which the Fund has entered into an Agreement may
charge a Customer one or more of the following types of fees, as agreed upon
by the Institution and the Customer, with respect to the cash management or
other services provided by the Institution: (i) account fees (a fixed amount
per month or per year); (ii) transaction fees (a fixed amount per transaction
processed); (iii) compensation balance requirements (a minimum dollar amount a
Customer must maintain in order to obtain the services offered); or (iv)
account maintenance fees (a periodic charge based upon the percentage of
assets in the account or of the dividend paid on those assets). Services
provided by an Institution to Customers are in addition to, and not
duplicative of, the services to be provided under the
<PAGE>43
Fund's co-administration and distribution arrangements. A Customer of an
Institution should read the relevant Prospectus and Statement of Additional
Information in conjunction with the Agreement and other literature describing
the services and related fees that would be provided by the Institution to its
Customers prior to any purchase of Fund shares. Prospectuses are available
from the Fund's distributor upon request. No preference will be shown in the
selection of Fund portfolio investments for the instruments of Institutions.
The Distribution Plan will continue in effect for so long as its
continuance is specifically approved at least annually by the Board, including
a majority of the Trustees who are not interested persons of the Fund and who
have no direct or indirect financial interest in the operation of the
Distribution Plan ("Independent Trustees"). Any material amendment of the
Distribution Plan would require the approval of the Board in the same manner.
The Distribution Plan may not be amended to increase materially the amount to
be spent under it without shareholder approval of the Advisor Shares. The
Distribution Plan may be terminated at any time, without penalty, by vote of a
majority of the Independent Trustees or by a vote of a majority of the
outstanding voting securities of the Advisor Shares of the Fund.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
The offering price of the Fund's shares is equal to the per share
net asset value of the relevant class of shares of the Fund. Information on
how to purchase and redeem Fund shares and how such shares are priced is
included in the Prospectuses under "Net Asset Value."
Under the 1940 Act, the Fund may suspend the right of redemption or
postpone the date of payment upon redemption for any period during which the
New York Stock Exchange (the "NYSE") is closed, other than customary weekend
and holiday closings, or during which trading on the NYSE is restricted, or
during which (as determined by the SEC) an emergency exists as a result of
which disposal or fair valuation of portfolio securities is not reasonably
practicable, or for such other periods as the SEC may permit. (The Fund may
also suspend or postpone the recordation of an exchange of its shares upon the
occurrence of any of the foregoing conditions.)
If the Board determines that conditions exist which make payment of
redemption proceeds wholly in cash unwise or undesirable, the Fund may make
payment wholly or partly in securities or other investment instruments which
may not constitute securities as such term is defined in the applicable
securities laws. If a redemption is paid wholly or partly in securities or
other property, a shareholder would incur transaction costs in disposing of
the redemption proceeds. The Fund intends to comply with Rule 18f-1
promulgated under the 1940 Act with respect to redemptions in kind.
<PAGE>44
Automatic Cash Withdrawal Plan. An automatic cash withdrawal plan
(the "Plan") is available to shareholders who wish to receive specific amounts
of cash periodically. Withdrawals may be made under the Plan by redeeming as
many shares of the Fund as may be necessary to cover the stipulated withdrawal
payment. To the extent that withdrawals exceed dividends, distributions and
appreciation of a shareholder's investment in the Fund, there will be a
reduction in the value of the shareholder's investment and continued
withdrawal payments may reduce the shareholder's investment and ultimately
exhaust it. Withdrawal payments should not be considered as income from
investment in the Fund. All dividends and distributions on shares in the Plan
are automatically reinvested at net asset value in additional shares of the
Fund.
EXCHANGE PRIVILEGE
An exchange privilege with certain other funds advised by Warburg is
available to investors in the Fund. The funds into which exchanges of Common
Shares currently can be made are listed in the Common Share Prospectus.
Exchanges may also be made between certain Warburg Pincus Advisor Funds.
The exchange privilege enables shareholders to acquire shares in a
fund with a different investment objective when they believe that a shift
between funds is an appropriate investment decision. This privilege is
available to shareholders residing in any state in which the Common Shares or
Advisor Shares being acquired, as relevant, may legally be sold. Prior to any
exchange, the investor should obtain and review a copy of the current
prospectus of the relevant class of each fund into which an exchange is being
considered. Shareholders may obtain a prospectus of the relevant class of the
fund into which they are contemplating an exchange from Counsellors
Securities.
Upon receipt of proper instructions and all necessary supporting
documents, shares submitted for exchange are redeemed at the then-current net
asset value of the relevant class and the proceeds are invested on the same
day, at a price as described above, in shares of the relevant class of the
fund being acquired. Warburg reserves the right to reject more than three
exchange requests by a shareholder in any 30-day period. The exchange
privilege may be modified or terminated at any time upon 60 days' notice to
shareholders.
ADDITIONAL INFORMATION CONCERNING TAXES
The discussion set out below of tax considerations generally
affecting the Fund and its shareholders is intended to be only a summary and
is not intended as a substitute for careful tax planning by prospective
shareholders. Individuals are often exempt from state and local personal
income taxes on distributions of tax-exempt interest income derived from
obligations of issuers located in the state in which they reside when these
distributions are received directly from these issuers, but are usually
subject to such taxes on income derived
<PAGE>45
from obligations of issuers located in other jurisdictions. Shareholders are
advised to consult their own tax advisers with respect to the particular tax
consequences to them of an investment in the Fund.
As described above and in the Fund's Prospectuses, the Fund is
designed to provide investors with current income which is excluded from gross
income for federal income tax purposes and which is exempt from New York State
and New York City personal income taxes. The Fund is not intended to
constitute a balanced investment program and is not designed for investors
seeking capital gains or maximum tax-exempt income irrespective of
fluctuations in principal. Investment in the Fund would not be suitable for
tax-exempt institutions, individual retirement plans, employee benefit plans
and individual retirement accounts since such investors would not gain any
additional tax benefit from the receipt of tax-exempt income.
The Fund has qualified and intends to continue to qualify each year
as a "regulated investment company" under Subchapter M of the Code. If it
qualifies as a regulated investment company, the Fund will pay no federal
income taxes on its taxable net investment income (that is, taxable income
other than net realized capital gains) and its net realized capital gains that
are distributed to shareholders. To qualify under Subchapter M, the Fund
must, among other things: (i) distribute to its shareholders at least 90% of
its taxable net investment income (for this purpose consisting of taxable net
investment income and net realized short-term capital gains); (ii) derive at
least 90% of its gross income from dividends, interest, payments with respect
to loans of securities, gains from the sale or other disposition of
securities, or other income (including, but not limited to, gains from
options, futures, and forward contracts) derived with respect to the Fund's
business of investing in securities; (iii) derive less than 30% of its annual
gross income from the sale or other disposition of securities, options,
futures or forward contracts held for less than three months; and (iv)
diversify its holdings so that, at the end of each fiscal quarter of the Fund
(a) at least 50% of the market value of the Fund's assets is represented by
cash, U.S. government securities and other securities, with those other
securities limited, with respect to any one issuer, to an amount no greater in
value than 5% of the Fund's total assets and to not more than 10% of the
outstanding voting securities of the issuer, and (b) not more than 25% of the
market value of the Fund's assets is invested in the securities of any one
issuer (other than U.S. government securities or securities of other regulated
investment companies) or of two or more issuers that the Fund controls and
that are determined to be in the same or similar trades or businesses or
related trades or businesses. In meeting these requirements, the Fund may be
restricted in the selling of securities held by the Fund for less than three
months and in the utilization of certain of the investment techniques
described above and in the Fund's Prospectuses. As a regulated investment
company, the Fund will be subject to a 4% non-deductible excise tax measured
with respect to certain undistributed amounts of ordinary income and capital
gain required to be but not distributed under a prescribed formula. The
formula requires payment to shareholders during a calendar year of
distributions representing at least 98% of the Fund's taxable ordinary income
for the calendar year and at least 98% of the excess of its capital gains over
capital losses realized during the
<PAGE>46
one-year period ending October 31 during such year, together with any
undistributed, untaxed amounts of ordinary income and capital gains from the
previous calendar year. The Fund expects to pay the dividends and make the
distributions necessary to avoid the application of this excise tax.
The Fund's transactions, if any, in options and futures contracts
will be subject to special provisions of the Code that, among other things,
may affect the character of gains and losses recognized by the Fund (i.e., may
affect whether gains or losses are ordinary or capital), accelerate
recognition of income to the Fund and defer Fund losses. These rules could
therefore affect the character, amount and timing of distributions to
shareholders. These provisions also (i) will require the Fund to mark-to-
market certain types of its positions (i.e., treat them as if they were closed
out) and (ii) may cause the Fund to recognize income without receiving cash
with which to pay dividends or make distributions in amounts necessary to
satisfy the distribution requirements for avoiding income and excise taxes.
The Fund will monitor its transactions, will make the appropriate tax
elections and will make the appropriate entries in its books and records when
it acquires any option, futures contract or hedged investment so that (a)
neither the Fund nor its shareholders will be treated as receiving a
materially greater amount of capital gains or distributions than actually
realized or received, (b) the Fund will be able to use substantially all of
its losses for the fiscal years in which the losses actually occur and (c) the
Fund will continue to qualify as a regulated investment company.
Because the Fund will distribute exempt-interest dividends, interest
on indebtedness incurred by a shareholder to purchase or carry Fund shares is
not deductible for federal income, New York State and New York City personal
income tax purposes. If a shareholder receives an exempt-interest dividend
with respect to any share of the Fund and if such share is held by the
shareholder for six months or less, then any loss on the sale or exchange of
such share, to the extent of such exempt-interest dividend, shall be
disallowed. In addition, the Code may require a shareholder, if he or she
receives exempt-interest dividends, to treat as taxable income a portion of
certain otherwise non-taxable social security and railroad retirement benefit
payments. Furthermore, that portion of any exempt interest dividend paid by
the Fund which represents income from private activity bonds may not retain
its tax-exempt status in the hands of a shareholder who is a "substantial
user" (or persons related thereto) of a facility financed by such bonds.
Similar rules apply for purposes of New York State and New York City personal
income tax.
Under the Code, interest on specified private activity bonds issued
after August 7, 1986, although otherwise exempt from federal income tax, is
treated as an item of tax preference for purposes of the alternative minimum
tax. If the Fund invests in such specified "private activity bonds," it will
report a portion of the "exempt-interest dividends" paid to its shareholders
as interest on specified private activity bonds, and hence as a tax preference
item. Corporate investors should note that the "adjusted current earnings" of
a corporation are treated as a tax preference item subject to the alternative
minimum tax. Exempt interest dividends are included in adjusted current
earnings. The amount of the
<PAGE>47
alternative minimum tax imposed by the Code is the excess, if any, of the
taxpayer's "tentative minimum tax" over the taxpayer's regular tax liability
for the taxable year. The "tentative minimum tax" is equal to (i) 26% of the
first $175,000, and 28% of any amount over $175,000, (for corporations, 20% of
the whole) of the taxpayer's alternative minimum taxable income (defined as
regular taxable income modified by certain adjustments and increased by the
taxpayer's "items of tax preference," including the adjustment for corporate
current earnings and the tax preference for tax-exempt interest on private
activity bonds described above) for the taxable year as exceeds the exemption
amount, less (ii) the alternative minimum tax foreign tax credit for the
taxable year. The exemption amount is $40,000 for corporations, $45,000 for
those filing joint returns, lesser amounts for others, and is phased out over
certain income levels. Prospective investors should consult their own tax
advisers with respect to the possible application of the alternative minimum
tax to their tax situations.
In addition, the receipt of Fund dividends and distributions may
affect a foreign corporate shareholder's federal "branch profits" tax
liability and a Subchapter S corporation shareholder's federal "excess net
passive income" tax liability. Shareholders should consult their own tax
advisers as to whether they are (i) substantial users with respect to a
facility or related to such users within the meaning of the Code or (ii)
subject to a federal alternative minimum tax, any applicable state alternative
minimum tax, the federal environmental tax, the federal branch profit tax, or
the federal excess net passive income tax. Shareholders who are recipients of
Social Security benefits should be aware that tax-exempt interest dividends
received from the Fund are included in their "modified adjusted gross income"
for purposes of determining the amount of such Social Security benefits, if
any, that are required to be included in their gross income.
While the Fund does not expect to realize a significant amount of
net capital gains, any such gains realized will be distributed annually as
described in the Fund's Prospectus. Such distributions ("capital gain
dividends"), if any, will be taxable to the shareholders as long-term capital
gains, regardless of how long a shareholder has held the Fund's shares, and
will be designated as capital gain dividends in a written notice mailed by the
Fund to the shareholders after the close of the Fund's prior taxable year. If
a shareholder receives a capital gain dividend with respect to any share and
if such share is held by the shareholder for six months or less, then any loss
(to the extent not disallowed pursuant to the other six month rule described
above) on the sale or exchange of such share, to the extent of the capital
gain dividend, shall be treated as a long-term capital loss. The maximum tax
rate for individuals imposed on net capital gains is 28% whereas the maximum
marginal income tax rate is 39.6%. Up to the 28% maximum, all capital gains,
whether long-term or short-term, are taxed as ordinary income.
Capital gain distributions by the Fund result in a reduction in the
net asset value of the Fund's shares. Should a distribution reduce the net
asset value below a shareholder's cost basis, such distribution would
nevertheless be taxable to the shareholder as ordinary income or capital gain
as described above, even though, from an investment
<PAGE>48
standpoint, it may constitute a partial return of capital. In particular,
investors should consider the tax implications of buying shares just prior to
a distribution. The price of shares purchased at that time includes the
amount of the forthcoming distribution. Those purchasing just prior to a
distribution will then receive a partial return of capital upon the
distribution, which will nevertheless be taxable to them.
If, for any full fiscal year, the Fund's total distributions exceed
net investment income and net realized capital gains, the excess distributions
may be treated as a taxable dividend or as a tax-free return of capital (up to
the amount of the shareholder's tax basis in his or her shares). The amount
treated as a tax-free return of capital will reduce a shareholder's adjusted
basis in his or her shares. Pursuant to the requirements of the 1940 Act and
other applicable laws, a notice will accompany any distribution paid from
sources other than net investment income. In the event the Fund distributes
amounts in excess of its net investment income and net realized capital gains,
such distributions may have the effect of decreasing the Fund's total assets,
which may increase the Fund's expense ratio.
Dividends derived by the Fund from tax-exempt interest are
designated as tax-exempt in the same percentage of the day's dividend as the
actual tax-exempt income earned on that day. Thus, the percentage of the
dividend designated as tax-exempt may vary from day to day. Similarly,
dividends derived by the Fund from interest on New York State Municipal
Obligations will be designated as exempt from New York's personal income
taxation in the same percentage of the day's dividend as the actual interest
on New York's Municipal Obligations earned on that day.
It should be noted that the portion of any Fund dividends
constituting New York exempt-interest dividends is excludable from income for
New York State and New York City personal income tax purposes only. Any
dividends paid to the Fund's shareholders subject to state or city franchise
or corporate income tax therefore may be taxed as ordinary dividends to such
shareholders, notwithstanding that all or a portion of such dividends is
exempt from state or city personal income tax.
Potential shareholders in the Fund, including, in particular,
corporate shareholders which may be subject to either New York franchise tax
or New York corporate income tax, should consult their tax advisers with
respect to (i) the application of corporate and franchise taxes to the receipt
of Fund dividends and as to their own state tax situation in general, and (ii)
the application of other state and local taxes to the receipt of the Fund's
dividends and distributions.
Although the Fund expects to be relieved of all or substantially all
federal, New York State and New York City income or franchise taxes, depending
upon the extent of its activities in other states and localities in which its
offices are maintained, in which its agents or independent contractors are
located or in which it is otherwise deemed to be conducting business, that
portion of the Fund's income which is treated as earned in any such
<PAGE>49
state or locality could be subject to state and local tax. Any such taxes
paid by the Fund would reduce the amount of income and gains available for
distribution to shareholders.
If a shareholder fails to furnish a correct taxpayer identification
number, fails to report fully dividend or interest income, or fails to certify
that he has provided a correct taxpayer identification number and that he is
not subject to "backup withholding," the shareholder may be subject to a 31%
"backup withholding" tax with respect to (i) taxable dividends and
distributions and (ii) the proceeds of any sales or repurchases of shares of
the Fund. An individual's taxpayer identification number is his social
security number. Corporate shareholders and other shareholders specified in
the Code are or may be exempt from backup withholding. The backup withholding
tax is not an additional tax and may be credited against a taxpayer's federal
income tax liability. Dividends and distributions also may be subject to
state and local taxes depending on each shareholder's particular situation.
DETERMINATION OF PERFORMANCE
From time to time, the Fund may quote the total return, of its
Common Shares and/or Advisor Shares in advertisements or in reports and other
communications to shareholders. With respect to the Fund's Common Shares, the
Fund's average annual total return for the one-year period ended October 31,
1995 was 8.31% (8.03% without waivers), the average annual total return for
the five-year period ended October 31, 1995 was 7.14% (6.78% without waivers)
and the average annual total return for the period commenced April 1, 1987
(commencement of operations) and ended October 31, 1995 was 6.13% (5.46%
without waivers). These figures are calculated by finding the average annual
compounded rates of return for the one-, five- and ten- (or such shorter
period as the relevant class of shares has been offered) year periods that
would equate the initial amount invested to the ending redeemable value
according to the following formula: P (1 + T)[*GRAPHIC OMITTED-SEE FOOTNOTE
BELOW] = ERV. For purposes of this formula, "P" is a hypothetical investment
of $1,000; "T" is average annual total return; "n" is number of years; and
"ERV" is the ending redeemable value of a hypothetical $1,000 payment made at
the beginning of the one-, five- or ten-year periods (or fractional portion
thereof). Total return or "T" is computed by finding the average annual
change in the value of an initial $1,000 investment over the period and
assumes that all dividends and distributions are reinvested during the
period.
The Fund may advertise, from time to time, comparisons of the
performance of its Common Shares and/or Advisor Shares with that of one or
more other mutual funds with similar investment objectives. The Fund may
advertise average annual calendar year-to-date and calendar quarter returns,
which are calculated according to the formula set forth in the preceding
paragraph, except that the relevant measuring period would be the number of
months that have elapsed in the current calendar year or most recent three
months, as the case may be. Investors should note that this performance may
not be representative of the Fund's total return in longer market cycles.
- ------------------------
* The expression (1 + T) is being raised to the nth power.
<PAGE>50
Yield is calculated by annualizing the net investment income
generated by the Fund over a specified thirty-day period according to the
following formula:
YIELD = 2[( a-b +1)[*GRAPHIC OMITTED-SEE FOOTNOTE BELOW]-1]
---
cd
For purposes of this formula: "a" is dividends and interest earned during the
period; "b" is expenses accrued for the period (net of reimbursements); "c" is
the average daily number of shares outstanding during the period that were
entitled to receive dividends; and "d" is the maximum offering price per share
on the last day of the period. The Fund's yield for the thirty-day period
ending October 31, 1995 was 3.79%.
Tax equivalent yield is calculated over a specified thirty-day
period by dividing that portion of the Fund's yield which is tax-exempt by one
minus a stated income tax rate and adding the product to that portion, if any,
of the yield of the Fund that is not tax-exempt. The Fund's tax-equivalent
yield for the thirty-day period ending October 31, 1995 was 7.09%.
The performance of a class of Fund shares will vary from time to
time depending upon market conditions, the composition of the Fund's portfolio
and operating expenses allocable to it. As described above, total return,
yield and tax equivalent yield are based on historical earnings and are not
intended to indicate future performance. Consequently, any given performance
quotation should not be considered as representative of performance for any
specified period in the future. Performance information may be useful as a
basis for comparison with other investment alternatives. However, the Fund's
performance will fluctuate, unlike certain bank deposits or other investments
which pay a fixed yield for a stated period of time. Any fees charged by
Institutions or other institutional investors directly to their customers in
connection with investments in Fund shares are not reflected in the Fund's
performance figures and such fees, if charged, will reduce the actual return
received by customers on their investments.
AUDITORS AND COUNSEL
Coopers & Lybrand L.L.P. ("Coopers & Lybrand"), with principal
offices at 2400 Eleven Penn Center, Philadelphia, Pennsylvania 19103, serves
as independent accountants for the Fund. The financial statements for the
fiscal years ended October 31, 1994 and October 31, 1995 that appear in this
Statement of Additional Information have been audited by Coopers & Lybrand,
whose report thereon appears elsewhere herein and have been included herein in
reliance upon the report of such firm of independent accountants given upon
their authority as experts in accounting and auditing.
The financial statements for the periods beginning with commencement
of the Fund through October 31, 1992 have been audited by Ernst & Young LLP
("Ernst &
- ------------------------
* The expression (a-b + 1) is being raised to the 6th power.
<PAGE>51
Young"), independent accountants, as set forth in their report, and have been
included in reliance on such report and upon the authority of such firm as
experts in accounting and auditing. Ernst & Young's address is 787 7th
Avenue, New York, New York 10019.
Willkie Farr & Gallagher serves as counsel for the Fund as well as
counsel to Warburg, Counsellors Service and Counsellors Securities.
MISCELLANEOUS
As of December 28, 1995, there were no persons (other than Mr.
Furth, see "Management of the Fund") that owned of record 5% or more of the
Fund's outstanding shares. Mr. Lionel I. Pincus, Chairman of the Board and
Chief Executive Officer of EMW, may be deemed to have beneficially owned
56.28% of the Common Shares outstanding, including shares owned by clients for
which Warburg has investment discretion and by companies that EMW may be
deemed to control. Mr. Pincus disclaims ownership of these shares and does
not intend to exercise voting rights with respect to these shares.
FINANCIAL STATEMENTS
The Fund's audited financial statements for the fiscal year ended
October 31, 1995 follow the Report of Independent Accountants.
<PAGE>A-1
APPENDIX
DESCRIPTION
OF RATINGS
Municipal Obligations
The following summarizes the highest four ratings used by Standard &
Poor's Ratings Group ("S&P") for Municipal Obligations:
AAA - This is the highest rating assigned by S&P to a debt obligation and
indicates an extremely strong capacity to pay interest and repay principal.
AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from AAA issues only in small degree.
A - Debt rated A has a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than debt in higher-rated
categories.
BBB - This is the lowest investment grade. Debt rated BBB has an
adequate capacity to pay interest and repay principal. Although it normally
exhibits adequate protection parameters, adverse economic conditions or
changing circumstances are more likely lead to a weakened capacity to pay
interest and repay principal for bonds in this category than for bonds in
higher rated categories.
To provide more detailed indications of credit quality, the ratings from
"AA" to "BBB" may be modified by the addition of a plus or minus sign to show
relative standing within this major rating category.
The following summarizes the highest four municipal ratings used by
Moody's Investors Service, Inc. ("Moody's"):
Aaa - Obligations that are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a large or
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such issues.
Aa - Obligations that are rated Aa are judged to be of high quality by
all standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or fluctuation
of protective elements may be of greater amplitude or
<PAGE>A-2
there may be other elements present which make the long-term risks appear
somewhat larger than in Aaa securities.
A - Obligations which are rated A possess many favorable investment
attributes and are to be considered as upper-medium-grade obligations.
Factors giving security to principal and interest are considered adequate, but
elements may be present which suggest a susceptibility to impairment sometime
in the future.
Baa - Obligations which are rated Baa are considered as medium-grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as
well.
Moody's applies numerical modifiers (1, 2 and 3) with respect to the
bonds rated "Aa" through "Baa". The modifier 1 indicates that the bond being
rated ranks in the higher end of its generic rating category; the modifier 2
indicates a mid-range ranking; and the modifier 3 indicates that the bond
ranks in the lower end of its generic rating category.
Short Term Note Ratings
The following summarizes the two highest ratings used by S&P for short
term notes:
SP-1 - Loans bearing this designation evidence a very strong or strong
capacity to pay principal and interest. Those issues determined to possess
overwhelming safety characteristics will be given a plus sign designation.
SP-2 - Loans bearing this designation evidence a satisfactory capacity to
pay principal and interest.
The following summarizes the two highest ratings used by Moody's for
short term notes and variable rate demand obligations:
MIG-1/VMIG-1 - Obligations bearing these designations are of the best
quality, enjoying strong protection from established cash flows of funds for
their servicing or from established and broad-based access to the market for
refinancing, or both.
MIG-2/VMIG-2 - Obligations bearing these designations are of high quality
with margins of protection ample although not so large as in the preceding
group.
Commercial Paper Ratings
The following summarizes the two highest ratings for commercial paper
used by S&P and Moody's, respectively:
<PAGE>A-3
Commercial paper rated A-1 by S&P indicates that the degree of safety
regarding timely payment is strong. Those issues determined to possess
extremely strong safety characteristics are denoted with a plus sign
designation. Capacity for timely payment on commercial paper rated A-2 is
satisfactory, but the relative degree of safety is not as high as for issues
designated A-1.
The rating Prime-1 is the highest commercial paper rating assigned by
Moody's. Issuers rated Prime-1 (or related supporting institutions) are
considered to have a superior capacity for repayment of short-term promissory
obligations. Issuers rated Prime-2 (or related supporting institutions) are
considered to have a strong capacity for repayment of short-term promissory
obligations. This will normally be evidenced by many of the characteristics
of issuers rated Prime-1 but to a lesser degree. Earnings trends and coverage
ratios, while sound, will be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by external
conditions. Ample alternative liquidity is maintained.
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS FIXED INCOME FUNDS
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Boards of Directors, Trustees and Shareholders of
Warburg Pincus Fixed Income Funds:
We have audited the accompanying statement of assets and liabilities including
the schedule of investments of the Warburg Pincus Intermediate Maturity
Government Fund and the statements of net assets of the Warburg Pincus Fixed
Income Fund, Warburg Pincus Global Fixed Income Fund and Warburg Pincus New York
Intermediate Municipal Fund (all Funds collectively referred to as the 'Warburg
Pincus Fixed Income Funds') as of October 31, 1995, and the related statements
of operations for the year then ended and the statements of changes in net
assets for each of the two years and the financial highlights for each of the
three years in the period then ended. These financial statements and financial
highlights are the responsibility of the Funds' management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits. The financial highlights of each of the Warburg Pincus
Fixed Income Funds for each of the two years in the period ended October 31,
1992, were audited by other auditors, whose report dated December 15, 1992,
expressed an unqualified opinion.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1995, by correspondence with the custodians and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the Warburg Pincus Fixed Income Funds as of October 31, 1995, and the results
of their operations for the year then ended, and the changes in their net assets
for each of the two years and the financial highlights for each of the three
years in the period then ended, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, PA
December 14, 1995
34
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS NEW YORK INTERMEDIATE MUNICIPAL FUND
- --------------------------------------------------------------------------------
December 8, 1995
Dear Shareholder:
The objective of Warburg Pincus New York Intermediate Municipal Fund (the
'Fund') is maximum current income-exempt from federal, New York state and New
York City taxes-consistent with capital preservation and prudent management. The
Fund's assets consist primarily of investment-grade municipal securities with an
average maturity of between three and 10 years.
For the 12 months ended October 31, 1995, the Fund gained 8.31%, vs. a
10.91% gain in the Lipper Intermediate Municipal Debt Funds Average. The Fund's
30-day annualized SEC yield as of October 31, 1995 was 3.79%. Its total net
assets were $73,361,477.
Municipal bonds rose during most of the reporting period along with the
broader fixed-income market, driven by falling interest rates, slower economic
growth and tame data on inflation. By mid-summer 1995, declining municipal
yields were temporarily interrupted by tax-reform initiatives, especially
concerns regarding passage of the so-called flat tax. These concerns pushed down
prices on both high- and low-quality municipal bonds, and the resulting
attractive valuations on high-grade municipal issues made it possible for us to
boost the Fund's credit quality with little sacrifice in yield. Currently,
approximately 90% of the portfolio is held in issues rated A or higher by
Moody's or S&P, with the vast majority in AAA-rated securities.
Tax-related fears during the period prompted municipal investors to focus
most heavily on short-and intermediate-term securities (those with maturities of
10 years or less), since these stand to suffer proportionately less than
longer-term bonds if unfavorable tax reform is enacted. This, coupled with a
significant decrease in new issuance relative to 1994-municipal new issuance in
New York state was down by approximately 25% from year-earlier levels-boosted
sharply the prices of shorter-term issues. We responded by taking a proactive
stance with regard to buying and selling securities, selling bonds prior to
maturity in order to be in position to take advantage of attractive deals as
they came to market.
We expect the supply of new issues to pick up somewhat in the months ahead,
as New York municipalities attempt to take advantage of the current
low-interest-rate environment to call and refinance outstanding issues. This
could result in temporary short-term upward pressure on yields. We will use the
opportunity to selectively add high-quality New York bonds to the portfolio at
attractive yields.
<TABLE>
<S> <C>
Dale C. Christensen Sharon B. Parente
Co-Portfolio Manager Co-Portfolio Manager
</TABLE>
8
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS NEW YORK INTERMEDIATE MUNICIPAL FUND
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN WARBURG PINCUS NEW YORK INTERMEDIATE MUNICIPAL
FUND
SINCE INCEPTION AS OF OCTOBER 31, 1995
The graph below illustrates the hypothetical investment of $10,000 in
Warburg Pincus New York Intermediate Municipal Fund (the 'Fund') from April 1,
1987 (inception) to October 31, 1995, with the reinvestment of dividends and
capital gains at net asset value, compared to the Lipper Intermediate Municipal
Debt Funds Average ('LIPIMUNI')* for the same time period.
<TABLE>
<CAPTION>
[PERFORMANCE GRAPH]
Average Annual
Total Returns
for periods ending
FUND LIPIMUNI 10/31/95
<S> <C> <C> <C>
4/1/87 10,000.0 10,000.0 1 year
10/31/87 9,687.0 9,627.0 8.31%
10/31/88 10,601.0 10,670.0 5 year
10/31/89 11,122.0 11,346.0 7.14%
10/31/90 11,810.0 12,088.0 Since Inception
10/31/91 12,923.0 13,314.0 (4/01/87)
10/31/92 13,780.0 14,288.0 6.13%
10/31/93 15,389.0 16,024.0
10/31/94 15,395.0 15,637.0
10/31/95 16,675.0 17,343.0
</TABLE>
<TABLE>
<CAPTION>
FUND
-----
<S> <C>
1 Year Total Return (9/30/94-9/30/95).................................................................... 6.93%
5 Year Average Annual Total Return (9/30/90-9/30/95)..................................................... 7.18%
Average Annual Total Return Since Inception (4/01/87-9/30/95)............................................ 6.10%
</TABLE>
All figures cited here represent past performance and do not guarantee
future results. Investment return and principal value of an investment will
fluctuate so that an investor's shares upon redemption may be worth more or less
than original cost. For periods ending 9/30/95 and 10/31/95, respectively,
without waivers or reimbursement of Fund expenses, average annual total returns
would have been 6.69% and 8.03% for 1-year, 6.82% and 6.78% for 5-year, and
5.42% and 5.46% since inception.
- ------------
* The Lipper Intermediate Municipal Debt Funds Average is an arithmetic average
of intermediate municipal debt funds' rates of returns on a monthly basis.
Lipper classifies intermediate municipal debt funds as those that invest in
municipal debt issues with dollar weighted average maturities of 5 to 10
years. The Lipper Average is unmanaged with no defined investment objective.
9
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS NEW YORK INTERMEDIATE MUNICIPAL FUND
STATEMENT OF NET ASSETS
October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS'D'
PAR SECURITY DESCRIPTION (MOODY'S/S&P) MATURITY RATE VALUE
- ---------- ------------------------------------------------------ -------------- --------- -------- -----------
<S> <C> <C> <C> <C>
NEW YORK (78.3%)
$1,000,000 Albany New York Parking Authority Revenue Bond (LOC
Key Trust) [Pre-refunded 11/01/98 @ $100] (NR/AAA) 11/01/98 6.875% $1,076,250
750,000 Canandaigua New York City School District (FGIC
Insured) (Aaa/AAA) 06/01/99 7.125 821,250
1,000,000 Municipal Assistance Corporation Series #59 (MBIA
Insured) [Callable 07/01/97 @ $102] (Aaa/AAA) 07/01/01 7.750 1,078,750
225,000 Municipal Assistance Corporation Series #67 [Callable
07/01/99 @ $102] (Aa/AA-) 07/01/01 7.400 251,438
1,000,000 Municipal Assistance Corporation Series #67 [Callable
07/01/99 @ $102] (Aa/AA-) 07/01/04 7.600 1,127,500
640,000 Municipal Assistance Corporation Series #68 [Callable
07/01/99 @ $102] (Aa/AA-) 07/01/03 7.200 713,600
1,045,000 Nassau County General Obligation Series L (FGIC
Insured) [Escrowed to Maturity] (Aaa/AAA) 11/15/01 6.300 1,140,356
2,000,000 Nassau County General Obligation Series O (FGIC
Insured) (Aaa/AAA) 08/01/98 5.625 2,080,000
2,000,000 New York City Housing Development Corporation Variable
Rate Demand Bond Columbus Green Project Series 1985A (NR/AAA) 03/15/25 3.700 2,000,000
3,000,000 New York State Dormitory Authority Revenue Bond City
University Series A (Baa1/BBB) 07/01/05 5.700 3,056,250
1,515,000 New York State Dormitory Authority Revenue Bond City
University Series B (FGIC Insured) (Aaa/AAA) 07/01/99 6.900 1,657,031
1,000,000 New York State Dormitory Authority Revenue Bond
Cornell University [Callable 07/01/96 @ $102] (Aa/AA) 07/01/98 6.250 1,034,350
1,750,000 New York State Dormitory Authority Revenue Bond
Fordham University [Pre-refunded 07/01/00 @ $102] (Aaa/AAA) 07/01/00 7.200 1,986,250
2,000,000 New York State Dormitory Authority Revenue Bond State
University Educational Facilities Series A (Baa1/BBB+) 05/15/02 5.400 2,022,500
250,000 New York State Dormitory Authority Revenue Bond State
University Educational Facilities Series A (Baa1/BBB+) 05/15/04 6.500 268,750
3,000,000 New York State Dormitory Authority Revenue Bond State
University Educational Facilities Series B [Pre-
refunded 05/15/00 @ $102] (Aaa/BBB+) 05/15/00 7.250 3,405,000
1,000,000 New York State Dormitory Authority Revenue Bond
Upstate Community Colleges Series A [Pre-refunded
07/01/00 @ 102] (Baa1/NR) 07/01/00 7.600 1,150,000
750,000 New York State Dormitory Authority Revenue Bond
Upstate Community Colleges Series A (Baa1/BBB-) 07/01/01 5.200 750,000
680,000 New York State Dormitory Authority Revenue Bond
Upstate Community Colleges Series A (Baa1/BBB-) 07/01/02 5.300 680,000
1,000,000 New York State Dormitory Authority Revenue Bond State
University Educational Facilities [Callable 05/15/99 @
$102] (Baa1/BBB+) 05/15/02 7.000 1,083,750
2,000,000 New York State General Obligation Series C (A/A-) 10/01/03 6.000 2,150,000
1,200,000 New York State General Obligation Series C (A/A-) 10/01/04 6.000 1,294,500
2,500,000 New York State Housing Finance Agency Service Contract
Obligation Revenue Bond Series C
[Pre-refunded 09/15/01 @ $102] (Aaa/AAA) 09/15/01 7.300 2,903,125
</TABLE>
See Accompanying Notes to Financial Statements.
15
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS NEW YORK INTERMEDIATE MUNICIPAL FUND
STATEMENT OF NET ASSETS (CONT'D)
October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS'D'
PAR SECURITY DESCRIPTION (MOODY'S/S&P) MATURITY RATE VALUE
- ---------- ------------------------------------------------------ -------------- --------- -------- -----------
<S> <C> <C> <C> <C>
NEW YORK (CONT'D)
$1,000,000 New York State Local Government Assistance Corp.
Series A (A/A) 04/01/99 6.000% $ 1,050,000
2,000,000 New York State Medicare Facilities Finance Agency
Revenue Bond [Pre-refunded 02/15/99 @ $102] (Aaa/AAA) 02/15/99 7.800 2,252,500
750,000 New York State Power Authority Revenue and General
Purpose Bond Series V [Callable 01/01/98 @ $102] (Aa/AA-) 01/01/03 7.600 814,688
1,800,000 New York State Thruway Authority General Series
[Callable 01/01/04 @ $102] (Aaa/AAA) 01/01/14 5.000 1,685,250
3,000,000 New York State Thruway Authority Service Contract
Revenue Bond Highway & Bridge Series A (Aaa/AAA) 01/01/04 6.000 3,262,500
2,500,000 New York State Urban Development Corporation
Correctional Facility Series 1 [Pre-refunded 01/01/00
@ $102] (Aaa/AAA) 01/01/00 7.500 2,837,500
1,000,000 New York State Urban Development Corporation
Correctional Facility Series 2 [Pre-refunded 01/01/01
@ $100] (Aaa/NR) 01/01/01 6.500 1,093,750
2,500,000 New York State Urban Development Corporation
Correctional Facility Series C [Pre-refunded 01/01/98
@ $102] (Aaa/AAA) 01/01/98 7.500 2,721,875
880,000 Suffolk County New York Water Authority Water Works
Revenue Bond [Pre-refunded 06/01/00 @ $102] (Aaa/AAA) 06/01/00 6.875 985,600
1,350,000 Syracuse New York General Obligation Public
Improvement Onondaga County [Escrowed to Maturity] (NR/NR) 02/15/98 6.600 1,422,563
1,000,000 Triborough Bridge & Tunnel Authority New York Revenue
Bond Series N [Pre-refunded 01/01/98
@ $101.50] (Aaa/AAA) 01/01/98 7.875 1,092,500
1,000,000 Triborough Bridge & Tunnel Authority New York Revenue
Bond Series O [Pre-refunded 01/01/99
@ $101.50] (Aaa/A+) 01/01/99 7.300 1,103,750
1,000,000 Triborough Bridge & Tunnel Authority New York Revenue
Bond Series O [Pre-refunded 01/01/99
@ $101.50] (Aaa/AAA) 01/01/99 7.700 1,116,250
2,000,000 Triborough Bridge & Tunnel Authority New York Revenue
Bond Series T (Pre-refunded 01/01/01 @ $102) (Aaa/A+) 01/01/01 7.000 2,265,000
-----------
TOTAL NEW YORK (Cost $55,688,530) 57,434,376
-----------
PUERTO RICO (16.4%)
335,000 Puerto Rico Commonwealth Aqueduct & Sewer Authority
[Escrowed To Maturity] [Callable 12/14/95
@ $100] (Aaa/AAA) 07/01/99 7.875 358,450
3,000,000 Puerto Rico Commonwealth General Obligation (MBIA
Insured) (Aaa/AAA) 07/01/01 5.500 3,176,250
185,000 Puerto Rico Commonwealth Public Improvement [Callable
07/01/97 @ $102] (NR/A) 07/01/02 7.125 196,562
40,000 Puerto Rico Commonwealth Public Improvement
[Pre-refunded 07/01/97 @ $102] (Baa1/AAA) 07/01/97 7.125 42,850
1,000,000 Puerto Rico Electric Power Authority Revenue Bond
Series L [Pre-refunded 07/01/97 @ $102] (Aaa/AAA) 07/01/97 7.600 1,078,750
</TABLE>
See Accompanying Notes to Financial Statements.
16
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS NEW YORK INTERMEDIATE MUNICIPAL FUND
STATEMENT OF NET ASSETS (CONT'D)
October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS'D'
PAR SECURITY DESCRIPTION (MOODY'S/S&P) MATURITY RATE VALUE
- ---------- ------------------------------------------------------ -------------- --------- -------- -----------
PUERTO RICO (CONT'D)
<C> <S> <C> <C> <C> <C>
$1,000,000 Puerto Rico Electric Power Authority Revenue Bond
Series M [Pre-refunded 07/01/98 @ $102] (NR/AAA) 07/01/98 8.000% $ 1,117,500
500,000 Puerto Rico Electric Power Authority Revenue Bond
Series N [Callable 07/01/99 @ $101.50] (Baa1/A-) 07/01/00 6.800 546,250
2,000,000 Puerto Rico Electric Power Authority Revenue Bond
Series O (MBIA Insured) (Aaa/AAA) 07/01/99 6.400 2,155,000
1,000,000 Puerto Rico Electric Power Authority Revenue Bond
Series Z [Callable 07/01/05 @ $102] (Baa1/A-) 07/01/12 5.500 981,250
500,000 Puerto Rico Public Building Authority Guaranteed
Public Education and Health Facilities Series H
[Pre-refunded 07/01/97 @ $102] (Aaa/AAA) 07/01/97 7.875 541,250
1,700,000 Puerto Rico Public Building Authority Revenue Bond
Series I (FGIC Insured) (Aaa/AAA) 07/01/99 6.850 1,859,374
-----------
TOTAL PUERTO RICO (Cost $11,839,347) 12,053,486
-----------
</TABLE>
<TABLE>
<CAPTION>
MONEY MARKET FUNDS (2.1%)
SHARES
- ----------
<C> <S> <C>
1,539,426 Nuveen Tax Exempt Money Fund (Cost $1,539,426) 1,539,426
-----------
TOTAL INVESTMENTS AT VALUE (96.8%)(Cost $69,067,303*) 71,027,288
OTHER ASSETS IN EXCESS OF LIABILITIES (3.2%) 2,334,189
-----------
NET ASSETS (100.0%) (applicable to 7,041,901 shares) $73,361,477
-----------
-----------
NET ASSET VALUE, offering and redemption price per share ($73,361,477[div]7,041,901) $10.42
------
------
</TABLE>
INVESTMENT ABBREVIATIONS
<TABLE>
<S> <C>
FGIC = Financial Guaranty Insurance Company
LOC = Letter of Credit
MBIA = Municipal Bond Insurance Association
</TABLE>
'D' Credit ratings given by Moody's Investors Service, Inc. and Standard &
Poor's Ratings Group are unaudited.
* Also cost for Federal income tax purposes.
See Accompanying Notes to Financial Statements.
17
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS FIXED INCOME FUNDS
STATEMENTS OF OPERATIONS
For the Year Ended October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Warburg
Warburg Pincus Warburg Pincus
Warburg Pincus Intermediate New York
Pincus Global Maturity Intermediate
Fixed Income Fixed Income Government Municipal
Fund Fund Fund Fund
------------ ------------ ---------- --------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 8,376,182 $6,507,144 $3,252,179 $3,982,642
Dividends 470,438 552,228 98,083 45,198
------------ ------------ ---------- --------------
Total investment income 8,846,620 7,059,372 3,350,262 4,027,840
------------ ------------ ---------- --------------
EXPENSES:
Investment advisory 555,483 773,318 253,734 316,050
Administrative services 222,194 170,130 102,661 158,024
Audit 15,674 16,985 16,975 15,975
Custodian/Sub-custodian 48,401 44,270 17,340 23,471
Directors/Trustees 10,500 10,500 10,500 10,500
Insurance 6,127 5,754 3,692 4,479
Legal 73,175 72,631 58,060 70,563
Printing 11,861 4,525 5,236 12,489
Registration 31,178 31,790 26,398 16,631
Transfer agent 48,503 51,309 43,347 33,447
Miscellaneous 14,281 38,611 14,726 14,365
------------ ------------ ---------- --------------
1,037,377 1,219,823 552,669 675,994
Less: fees waived (204,153) (485,160) (248,192) (201,919)
------------ ------------ ---------- --------------
Total expenses 833,224 734,663 304,477 474,075
------------ ------------ ---------- --------------
Net investment income 8,013,396 6,324,709 3,045,785 3,553,765
------------ ------------ ---------- --------------
NET REALIZED AND UNREALIZED GAIN FROM INVESTMENTS
AND FOREIGN CURRENCY RELATED ITEMS:
Net realized gain from security transactions 1,132,052 508,655 514,443 818,720
Net realized loss from futures contracts (606,653) (849,500) 0 0
Net realized gain (loss) from foreign currency
related items 49,446 (961,036) 0 0
Net decrease in unrealized depreciation from
investments and foreign currency related
items 4,869,743 2,015,972 2,406,718 1,979,229
------------ ------------ ---------- --------------
Net realized and unrealized gain from
investments and foreign currency
related items 5,444,588 714,091 2,921,161 2,797,949
------------ ------------ ---------- --------------
Net increase in net assets resulting
from operations $ 13,457,984 $7,038,800 $5,966,946 $6,351,714
------------ ------------ ---------- --------------
------------ ------------ ---------- --------------
</TABLE>
See Accompanying Notes to Financial Statements.
19
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS FIXED INCOME FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Warburg Pincus Warburg Pincus
Fixed Income Global Fixed
Fund Income Fund
----------------------------- -----------------------------
For the Year Ended October For the Year Ended October
31, 31,
1995 1994 1995 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income $ 8,013,396 $ 5,867,260 $ 6,324,709 $ 5,807,634
Net realized gain (loss) from security
transactions 1,132,052 (1,660,108) 508,655 (1,869,553)
Net realized gain (loss) from futures
contracts (606,653) 117,484 (849,500) 269,845
Net realized gain (loss) from foreign
currency related items 49,446 18,246 (961,036) (2,237,413)
Net change in unrealized appreciation
(depreciation) from investments and
foreign currency related items 4,869,743 (4,804,661) 2,015,972 (4,227,712)
------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations 13,457,984 (461,779) 7,038,800 (2,257,199)
------------ ------------ ------------ ------------
FROM DISTRIBUTIONS:
Dividends from net investment income (8,013,396) (5,926,356) (3,445,878) (3,215,939)
Distributions from capital gains 0 (732,704) 0 (827,403)
Return of capital 0 0 0 (366,074)
------------ ------------ ------------ ------------
Net decrease from distributions (8,013,396) (6,659,060) (3,445,878) (4,409,416)
------------ ------------ ------------ ------------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from sale of shares 47,678,747 58,018,967 42,488,917 61,614,112
Reinvested dividends 6,555,741 5,623,287 2,941,954 3,798,759
Net asset value of shares redeemed (44,942,286) (35,456,760) (75,776,818) (30,346,474)
------------ ------------ ------------ ------------
Net increase (decrease) in net assets
from capital share transactions 9,292,202 28,185,494 (30,345,947) 35,066,397
------------ ------------ ------------ ------------
Net increase (decrease) in net assets 14,736,790 21,064,655 (26,753,025) 28,399,782
NET ASSETS:
Beginning of year 102,246,118 81,181,463 90,394,069 61,994,287
------------ ------------ ------------ ------------
End of year $116,982,908 $102,246,118 $ 63,641,044 $ 90,394,069
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
20
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<CAPTION>
Warburg Pincus Warburg Pincus
Intermediate Maturity New York Intermediate
Government Fund Municipal Fund
--------------------------------- ---------------------------------
For the Year Ended October 31, For the Year Ended October 31,
1995 1994 1995 1994
------------ ------------ ------------ ------------
<C> <C> <C> <C>
$ 3,045,785 $ 2,827,703 $ 3,553,765 $ 3,215,210
514,443 (58,020) 818,720 47,719
0 0 0 0
0 0 0 0
2,406,718 (3,492,181) 1,979,229 (3,387,003)
------------ ------------ ------------ ------------
5,966,946 (722,498) 6,351,714 (124,074)
------------ ------------ ------------ ------------
(3,045,785) (2,827,703) (3,553,765) (3,222,899)
0 (3,937,754) (47,531) (912,745)
0 0 0 0
------------ ------------ ------------ ------------
(3,045,785) (6,765,457) (3,601,296) (4,135,644)
------------ ------------ ------------ ------------
26,773,501 24,310,135 32,441,402 50,293,197
2,288,064 5,552,546 3,073,742 3,404,096
(22,818,476) (53,205,957) (40,620,180) (43,299,063)
------------ ------------ ------------ ------------
6,243,089 (23,343,276) (5,105,036) 10,398,230
------------ ------------ ------------ ------------
9,164,250 (30,831,231) (2,354,618) 6,138,512
46,733,653 77,564,884 75,716,095 69,577,583
------------ ------------ ------------ ------------
$ 55,897,903 $ 46,733,653 $ 73,361,477 $ 75,716,095
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
See Accompanying Notes to Financial Statements.
21
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS NEW YORK INTERMEDIATE MUNICIPAL FUND
FINANCIAL HIGHLIGHTS
(For a Share of the Fund Outstanding Throughout Each Year)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended October 31,
-----------------------------------------------
1995 1994 1993 1992 1991
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $ 10.07 $ 10.65 $ 10.02 $ 9.88 $ 9.57
------- ------- ------- ------- -------
Income from Investment Operations:
Net Investment Income .47 .46 .47 .50 .53
Net Gain (Loss) on Securities (both realized and
unrealized) .36 (.45) .68 .14 .31
------- ------- ------- ------- -------
Total from Investment Operations .83 .01 1.15 .64 .84
------- ------- ------- ------- -------
Less Distributions:
Dividends from Net Investment Income (.47) (.46) (.47) (.50) (.53)
Distributions from Capital Gains (.01) (.13) (.05) .00 .00
------- ------- ------- ------- -------
Total Distributions (.48) (.59) (.52) (.50) (.53)
------- ------- ------- ------- -------
NET ASSET VALUE, END OF YEAR $ 10.42 $ 10.07 $ 10.65 $ 10.02 $ 9.88
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Total Return 8.31% .04% 11.67% 6.63% 9.43%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Year (000s) $73,361 $75,716 $69,578 $54,012 $29,016
Ratios to average daily net assets:
Operating expenses .60% .60% .58% .55% .55%
Net investment income 4.50% 4.41% 4.50% 4.99% 5.84%
Decrease reflected in above operating expense ratios due to
waivers/reimbursements .26% .20% .20% .40% .65%
Portfolio Turnover Rate 105.17% 167.09% 115.98% 47.79% 66.53%
</TABLE>
See Accompanying Notes to Financial Statements.
TAX STATUS OF 1995 DIVIDENDS (Unaudited)
Long-term capital gain dividends paid by the Fund amounted to $.01 per share.
Because the Fund's fiscal year is not the calendar year, amounts to be used by
calendar year taxpayers on their Federal return will be reflected on Form
1099-DIV and will be mailed in January 1996.
25
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS FIXED INCOME FUNDS
NOTES TO FINANCIAL STATEMENTS
October 31, 1995
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
The Warburg Pincus Fixed Income Funds are comprised of the Warburg Pincus
Fixed Income Fund (the 'Fixed Income Fund') and the Warburg Pincus Intermediate
Maturity Government Fund (the 'Intermediate Government Fund') which are
registered under the Investment Company Act of 1940, as amended (the '1940
Act'), as diversified, open-end management investment companies and the Warburg
Pincus Global Fixed Income Fund (the 'Global Fixed Income Fund') and the Warburg
Pincus New York Intermediate Municipal Fund (the 'New York Municipal Fund')
which are registered under the 1940 Act as non-diversified, open-end management
investment companies.
Investment objectives for each Fund are as follows: the Fixed Income Fund
seeks to generate high current income consistent with reasonable risk with
capital appreciation a secondary objective; the Global Fixed Income Fund seeks
to maximize total investment return consistent with prudent investment
management, consisting of a combination of interest income, currency gains and
capital appreciation; the Intermediate Government Fund seeks to achieve as high
a level of current income as is consistent with preservation of capital; and the
New York Municipal Fund seeks to maximize current interest income exempt from
Federal income tax and New York State and New York City personal income tax to
the extent consistent with prudent investment and preservation of capital.
The net asset value of each Fund is determined daily as of the close of
regular trading on the New York Stock Exchange. Each Fund's investments are
valued at market value, which is currently determined using the last reported
sales price. If no sales are reported, investments are generally valued at the
last reported bid price. In the absence of market quotations, investments are
generally valued at fair value as determined by or under the direction of the
Fund's governing Board. Short-term investments that mature in 60 days or less
are valued on the basis of amortized cost, which approximates market value.
The books and records of the Funds are maintained in U.S. dollars.
Transactions denominated in foreign currencies are recorded at the current
prevailing exchange rates. All assets and liabilities denominated in foreign
currencies are translated into U.S. dollar amounts at the current exchange rate
at the end of the period. Translation gains or losses resulting from changes in
the exchange rate during the reporting period and realized gains and losses on
the settlement of foreign currency transactions are reported in the results of
operations for the current period. The Global Fixed Income Fund isolates that
portion of gains and losses on investments in debt securities which are due to
changes in the foreign exchange rate from that which are due to changes in
market prices of debt securities.
Security transactions are accounted for on trade date. Interest income is
recorded on the accrual basis. Dividends are recorded on the ex-dividend date.
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
for the Fixed Income Fund, the Intermediate Government Fund and the New York
Municipal Fund. Dividends from net investment income are declared and paid
quarterly for the Global Fixed Income Fund. Distributions for all Funds of net
realized capital gains, if any, are declared and paid annually. However, to the
extent that a net realized capital gain can be reduced by a capital loss
carryover, such gain will not be distributed.
26
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS FIXED INCOME FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1995
- --------------------------------------------------------------------------------
Income and capital gain distributions are determined in accordance with Federal
income tax regulations which may differ from generally accepted accounting
principles.
Certain amounts in the Statements of Changes in Net Assets have been
reclassified to conform to current year presentation.
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 and make the requisite
distributions to its shareholders which will be sufficient to relieve it from
Federal income and excise taxes.
Costs incurred by the Global Fixed Income Fund in connection with its
organization have been deferred and are being amortized over a period of five
years from the date the Global Fixed Income Fund commenced its operations.
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.
2. INVESTMENT ADVISER, CO-ADMINISTRATORS AND DISTRIBUTOR
Warburg, Pincus Counsellors, Inc. ('Warburg'), a wholly owned subsidiary of
Warburg, Pincus Counsellors G.P. ('Counsellors G.P.'), serves as each Fund's
investment adviser. For its investment advisory services, Warburg receives the
following fees based on each Fund's average daily net assets:
<TABLE>
<CAPTION>
FUND ANNUAL RATE
- --------------------------------- ----------------------------------
<S> <C>
Fixed Income .50% of average daily net assets
Global Fixed Income 1.00% of average daily net assets
Intermediate Government .50% of average daily net assets
New York Municipal .40% of average daily net assets
</TABLE>
For the year ended October 31, 1995, investment advisory fees and waivers
were as follows:
<TABLE>
<CAPTION>
GROSS NET
FUND ADVISORY FEE WAIVER ADVISORY FEE
- --------------------------------------------------- ------------ --------- ------------
<S> <C> <C> <C>
Fixed Income $555,483 $(162,585) $392,898
Global Fixed Income 773,318 (435,848) 337,470
Intermediate Government 253,734 (226,320) 27,414
New York Municipal 316,050 (168,856) 147,194
</TABLE>
Counsellors Funds Service, Inc. ('CFSI'), a wholly owned subsidiary of
Warburg, and PFPC Inc. ('PFPC'), an indirect, wholly owned subsidiary of PNC
Bank Corp. ('PNC'), serve as each Fund's co-administrators. For administrative
services, CFSI currently receives a fee calculated at an annual rate of
27
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS FIXED INCOME FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1995
- --------------------------------------------------------------------------------
.10% of each Fund's average daily net assets. For the year ended October 31,
1995, administrative services fees earned by CFSI were as follows:
<TABLE>
<CAPTION>
FUND CO-ADMINISTRATION FEE
- ----------------------------------------------------------------------- ---------------------
<S> <C>
Fixed Income $ 111,097
Global Fixed Income 77,332
Intermediate Government 50,747
New York Municipal 79,012
</TABLE>
For its administrative services, PFPC currently receives a fee calculated
at an annual rate of .10% of the average daily net assets of the Fixed Income
Fund, the Intermediate Government Fund and the New York Municipal Fund. For the
Global Fixed Income Fund, PFPC currently receives a fee calculated at an annual
rate of .12% of the first $250 million in average daily net assets, .10% of the
next $250 million in average daily net assets, .08% of the next $250 million in
average daily net assets and .05% of average daily net assets over $750 million.
For the year ended October 31, 1995, administrative services fees earned
and voluntarily waived by PFPC were as follows:
<TABLE>
<CAPTION>
FUND GROSS FEE WAIVER NET
- ----------------------------------------------------------- --------- -------- -------
<S> <C> <C> <C>
Fixed Income $ 111,097 $(41,568) $69,529
Global Fixed 92,798 (49,312) 43,486
Intermediate Government 51,914 (21,872) 30,042
New York Municipal 79,012 (33,063) 45,949
</TABLE>
Counsellors Securities Inc. ('CSI'), also a wholly owned subsidiary of
Warburg, serves as each Fund's distributor. No compensation is paid by the Funds
to CSI for distribution services.
3. INVESTMENTS IN SECURITIES
For the year ended October 31, 1995, purchases and sales of investment
securities (excluding short-term investments) and United States government and
agency obligations were as follows:
<TABLE>
<CAPTION>
U.S. GOVERNMENT AND
INVESTMENT SECURITIES AGENCY OBLIGATIONS
--------------------------- ----------------------------
FUND PURCHASES SALES PURCHASES SALES
- --------------------------------------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Fixed Income $69,506,438 $ 59,600,888 $144,593,744 $131,853,246
Global Fixed Income 79,097,036 108,742,015 9,808,921 11,805,050
Intermediate Government 0 0 61,570,880 50,413,561
New York Municipal 79,189,466 87,267,702 0 0
</TABLE>
28
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS FIXED INCOME FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1995
- --------------------------------------------------------------------------------
At October 31, 1995, the net unrealized appreciation from investments for
those securities having an excess of value over cost and net unrealized
depreciation from investments for those securities having an excess of cost over
value (based on cost for Federal income tax purposes) was as follows:
<TABLE>
<CAPTION>
NET UNREALIZED
UNREALIZED UNREALIZED APPRECIATION
FUND APPRECIATION DEPRECIATION (DEPRECIATION)
- ------------------------------------------------ ------------ ------------ --------------
<S> <C> <C> <C>
Fixed Income $2,550,123 $ (1,273,784) $1,276,339
Global Fixed Income 1,658,696 (1,472,059) 186,637
Intermediate Government 1,299,887 (263,103) 1,036,784
New York Municipal 1,976,753 (16,768) 1,959,985
</TABLE>
4. FORWARD FOREIGN CURRENCY CONTRACTS
The Fixed Income Fund and the Global Fixed Income Fund may enter into
forward currency contracts for the purchase or sale of a specific foreign
currency at a fixed price on a future date. Risks may arise upon entering into
these contracts from the potential inability of counterparties to meet the terms
of their contracts and from unanticipated movements in the value of a foreign
currency relative to the U.S. dollar. The Funds will enter into forward
contracts primarily for hedging purposes. The forward currency contracts are
adjusted by the daily exchange rate of the underlying currency and any gains or
losses are recorded for financial statement purposes as unrealized until the
contract settlement date.
At October 31, 1995, the Global Fixed Income Fund had the following open
forward foreign currency contracts:
<TABLE>
<CAPTION>
FOREIGN UNREALIZED
FORWARD CURRENCY EXPIRATION CURRENCY CONTRACT CONTRACT FOREIGN EXCHANGE
CONTRACT DATE TO BE SOLD AMOUNT VALUE GAIN (LOSS)
- ------------------------ ---------- ---------- ----------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
Australian Dollars 12/18/95 914,990 $ 690,818 $ 695,209 $ (4,391)
British Pounds 12/27/95 3,510,984 5,435,003 5,541,737 (106,734)
Danish Krone 12/18/95 29,059,448 5,281,904 5,319,710 (37,806)
German Marks 11/29/95 14,200,000 9,588,116 10,109,640 (521,524)
German Marks 11/29/95 375,092 255,164 267,045 (11,881)
German Marks 12/18/95 10,514,444 1,918,694 1,924,806 (6,112)
German Marks 12/18/95 10,513,889 1,934,834 1,924,704 10,130
German Marks 12/18/95 6,013,700 4,243,966 4,285,704 (41,738)
Irish Punt 12/18/95 2,881,250 4,639,677 4,671,371 (31,694)
Netherlands Guilder 11/29/95 4,577,075 2,760,600 2,896,883 (136,283)
Netherlands Guilder 11/29/95 79,014 49,138 50,009 (871)
----------- ----------- ----------------
$36,797,914 $37,686,818 $ (888,904)
----------- ----------- ----------------
----------- ----------- ----------------
</TABLE>
5. FUTURES CONTRACTS
Each Fund may enter into futures contracts for hedging purposes to the
extent permitted by its investment policies and objectives. To enter into a
futures contract, a Fund must make a deposit of an initial margin with its
custodian in a segregated account. Subsequent payments, which are dependent on
29
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS FIXED INCOME FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1995
- --------------------------------------------------------------------------------
the daily fluctuations in the value of the underlying instrument, are made or
received by a Fund each day (daily variation margin) and are recorded as
unrealized gains or losses until the contracts are closed. When the contract is
closed, a Fund records a realized gain or loss equal to the difference between
the proceeds from (or cost of) the closing transactions and a Fund's basis in
the contract. Risks of entering into futures contracts include the possibility
that a change in the value of the contract may not correlate with the changes in
the value of the underlying instruments. The Fixed Income Fund and the Global
Fixed Income Fund entered into futures contracts during the year ended October
31, 1995. However, the Fixed Income Fund and Global Fixed Income Fund had no
futures contracts open at October 31, 1995.
6. CAPITAL SHARE TRANSACTIONS
The Global Fixed Income Fund and the Intermediate Government Fund are each
authorized to issue three billion full and fractional shares of capital stock,
$.001 par value per share, of which one billion shares are designated Series 2
Shares (the Advisor Shares). The Fixed Income Fund and the New York Municipal
Fund are each authorized to issue an unlimited number of full and fractional
shares of beneficial interest, $.001 par value per share, of which one billion
shares are designated Series 2 Shares (the Advisor Shares). At October 31, 1995,
no Advisor Shares were outstanding.
30
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
[THIS PAGE INTENTIONALLY LEFT BLANK]
31
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS FIXED INCOME FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1995
- --------------------------------------------------------------------------------
6. CAPITAL SHARE TRANSACTIONS (cont'd)
Transactions in shares of each Fund were as follows:
<TABLE>
<CAPTION>
FIXED INCOME FUND GLOBAL FIXED INCOME FUND
For the Year Ended October 31, For the Year Ended October 31,
---------------------------------------- ----------------------------------
1995 1994 1995 1994
------------------- ------------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Shares sold 4,918,036 5,837,372 4,066,768 5,678,256
Shares issued to
shareholders on
reinvestment of
dividends 672,751 566,407 281,288 350,063
Shares redeemed (4,609,035) (3,561,347) (7,231,335) (2,829,142)
------------------- ------------------- ---------------- ----------------
Net increase (decrease)
in shares outstanding 981,752 2,842,432 (2,883,279) 3,199,177
------------------- ------------------- ---------------- ----------------
------------------- ------------------- ---------------- ----------------
</TABLE>
7. NET ASSETS
Net assets at October 31, 1995, consisted of the following:
<TABLE>
<CAPTION>
FIXED INCOME FUND GLOBAL FIXED INCOME FUND
---------------------------- ------------------------
<S> <C> <C>
Capital contributed, net $116,808,286 $ 63,963,915
Accumulated net investment income
(loss) (66,850) 1,917,795
Accumulated net realized gain
(loss) from security transactions (1,034,867) (1,533,335)
Net unrealized appreciation
(depreciation) from investments
and foreign currency related
items 1,276,339 (707,331)
---------------- ------------------------
Net assets $116,982,908 $ 63,641,044
---------------- ------------------------
---------------- ------------------------
</TABLE>
8. CAPITAL LOSS CARRYOVER
At October 31, 1995, capital loss carryovers available to offset possible
future capital gains of each Fund were as follows:
<TABLE>
<CAPTION>
Capital Loss Carryover Total Capital
Expiring In Loss Carryover
-------------------------- --------------
2002 2003
---------- ----------
<S> <C> <C> <C>
Fixed Income $1,034,867 $1,034,867
Global Fixed Income 653,329 1,284,612 1,937,941
32
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<CAPTION>
INTERMEDIATE GOVERNMENT FUND NEW YORK MUNICIPAL FUND
For the Year Ended October 31, For the Year Ended October 31,
---------------------------------------- ----------------------------------
1995 1994 1995 1994
------------------- ------------------- ---------------- ----------------
<C> <C> <C> <C>
2,723,498 2,426,890 3,181,012 4,835,896
230,993 538,360 299,821 328,635
(2,323,291) (5,159,908) (3,957,382) (4,178,180)
------------------- ------------------- ---------------- ----------------
631,200 (2,194,658) (476,549) 986,351
------------------- ------------------- ---------------- ----------------
------------------- ------------------- ---------------- ----------------
<CAPTION>
INTERMEDIATE GOVERNMENT FUND NEW YORK MUNICIPAL FUND
------------------------------------------ ---------------------------------
<C> <C>
$ 54,407,628 $ 70,580,636
(5,346) 0
458,837 818,908
1,036,784 1,961,933
--------------- ---------------
$ 55,897,903 $ 73,361,477
--------------- ---------------
--------------- ---------------
</TABLE>
33
- --------------------------------------------------------------------------------
<PAGE>C-1
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
(1) Financial Statements included in Part A:
(a) Financial Highlights
(2) Financial Statements included in Part B:
(a) Report of Coopers & Lybrand L.L.P., Independent
Accountants
(b) Statement of Net Assets
(c) Statement of Operations
(d) Statement of Changes in Net Assets
(e) Financial Highlights
(f) Notes to Financial Statements
(b) Exhibits:
Exhibit No. Description of Exhibit
- ----------- ----------------------
1(a) Agreement and Declaration of Trust.
(b) Amendments to Agreement and Declaration of Trust.
2 Second Amended and Restated By-Laws.
3 Not applicable.
4 Form of Stock Certificates.(1)
5 Investment Advisory Agreement.
6 Form of Distribution Agreement.(2)
7 Not applicable.
- ------------------------
(1) Incorporated by reference; material provisions of this exhibit
substantially similar to those of the corresponding exhibit in Pre-
Effective Amendment No. 1 to the Registration Statement on Form N-1A
of Warburg, Pincus Trust filed on June 14, 1995 (Securities Act File
No. 33-58125).
(2) Incorporated by reference; material provisions of this exhibit
substantially similar to those of the corresponding exhibit in Post-
Effective Amendment No. 10 to the Registration Statement on Form N-1A
of Warburg, Pincus International Equity Fund, Inc. filed on September
22, 1995 (Securities Act File No. 33-27031).
<PAGE>C-2
8 Form of Custodian Agreement with PNC Bank,
as amended. (1)
9(a) Form of Transfer Agency Agreement. (1)
(b) Form of Co-Administration Agreement with Counsellors
Funds Service, Inc. (1)
(b-1) Form of Co-Administration Agreement with PFPC Inc. (1)
(c) Forms of Services Agreements. (3)
10(a) Opinion and Consent of Willkie Farr & Gallagher, counsel
to the Fund.
(b) Opinion and Consent of Sullivan & Worcester,
Massachusetts counsel to the Fund.
11(a) Consent of Coopers & Lybrand L.L.P., Independent
Accountants.
(b) Consent of Ernst & Young LLP, Independent Accountants.
12 Not applicable.
13 Form of Purchase Agreement. (2)
14 Form of Retirement Plans. (4)
15(a) Shareholder Services Plan. (5)
(b) Amended and Restated Distribution Plan. (3)
(c) Form of Rule 18f-3 Plan. (2)
- ------------------------
(3) Incorporated by reference; material provisions of this exhibit
substantially similar to those of the corresponding exhibit in Pre-
Effective Amendment No. 1 to the Registration Statement on Form N-1A
of Warburg, Pincus Japan Growth Fund, Inc. filed on December 18, 1995
(Securities Act File No. 33-63653).
(4) Incorporated by reference to Post-Effective Amendment No. 1 to the
Registration Statement of Warburg, Pincus Managed Bond Trust, filed
on February 28, 1995 (Securities Act File No. 33-73672).
(5) Incorporated by reference; material provisions of this exhibit
substantially similar to those of the corresponding exhibit in Post-
Effective Amendment No. 12 to the Registration Statement on Form N-1A
of Counsellors Cash Reserve Fund, Inc. filed on June 28, 1995
(Securities Act File No. 2-94840).
<PAGE>C-3
16 Schedule for Computation of Total Return and Yield
Quotations relating to Common Shares.
17 Financial Data Schedule relating to Common Shares.
____________________
(6) Incorporated by reference; material provisions of this exhibit
substantially similar to those of the corresponding exhibit in Post-
Effective Amendment No. 13 to the Registration Statement on Form N-1A of
Warburg, Pincus International Equity Fund, Inc. filed on December 28,
1995 (Securities Act File No. 33-27031).
<PAGE>C-4
Item 25. Persons Controlled by or Under Common Control
with Registrant
Warburg, Pincus Counsellors, Inc. ("Warburg"), Registrant's
investment adviser, may be deemed a controlling person of Registrant because
it possesses or shares investment or voting power with respect to more than
25% of the outstanding securities of Registrant. E.M. Warburg, Pincus & Co.,
Inc. ("EMW") controls Warburg through its ownership of a class of voting
preferred stock of Warburg. John L. Furth, Director of the Fund, and Lionel
I. Pincus, Chairman of the Board and Chief Executive Officer of EMW, may be
deemed to be controlling persons of the Fund because they may be deemed to
possess or share investment power over shares owned by clients of Warburg and
certain other entities.
Item 26. Number of Holders of Securities
<TABLE>
<CAPTION>
Number of Record Holders
Title of Class As of December 28, 1995
-------------- ------------------------
<S> <C>
Shares of beneficial interest, par value $.001 per share 523
Shares of beneficial interest - Series 1, par value $.001 per 0
share
Shares of beneficial interest - Series 2 (Advisor Shares), 0
par value $.001 per share
</TABLE>
Item 27. Limitation of Liability and Indemnification
Registrant, officers and directors or trustees of Warburg, of
Counsellors Securities Inc. ("Counsellors Securities") and of Registrant are
covered by insurance policies indemnifying them for liability incurred in
connection with the operation of Registrant. These policies provide insurance
for any "Wrongful Act" of an officer, director or trustee. Wrongful Act is
defined as breach of duty, neglect, error, misstatement, misleading statement,
omission or other act done or wrongfully attempted by an officer, director or
trustee in connection with the operation of Registrant. Insurance coverage
does not extend to (a) conflicts of interest or gaining in fact any profit or
advantage to which one is not legally entitled, (b) intentional noncompliance
with any statute or regulation or (c) commission of dishonest, fraudulent acts
or omissions. The coverage is limited in amount and, in certain
circumstances, is subject to a deductible.
Under Section 8.1 of the Agreement and Declaration of Trust (the
"Agreement"), the Trustees and officers of Registrant, in incurring any debts,
liabilities or obligations, or in limiting or omitting any other actions for
or in connection with the Trust, are or shall be deemed to be acting as
Trustees or officers of Registrant and not in their own capacities. No
Trustee, officer, employee or agent of the Trust shall be
<PAGE>C-5
subject to any personal liability whatsoever in tort, contract, or otherwise,
to any other person or persons in connection with the assets or affairs of
Registrant save only that arising from his own willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct
of his office or the discharge of his functions. Registrant shall be solely
liable for any and all debts, claims, demands, judgments, decrees, liabilities
or obligations of any and every kind, against or with respect to Registrant in
tort, contract or otherwise in connection with the assets or the affairs of
Registrant and all persons dealing with Registrant shall be deemed to have
agreed that resort shall be had solely to the Trust Property (as defined in
the Agreement) of Registrant for the payment or performance thereof.
Section 8.2 of the Agreement further limits the liability of the
Trustees by providing that a Trustee shall not be liable for errors of
judgment or mistakes of fact or law. Furthermore, (i) the Trustees shall not
be responsible or liable in any event for any neglect or wrongdoing of any
officer, agent, employee, consultant, Investment Advisor, Administrator,
Distributor or Principal Underwriter, Custodian or Transfer Agent, Dividend
Disbursing Agent, Shareholder Servicing Agent or Accounting Agent (as such
terms are defined in the Agreement) of Registrant, nor shall any Trustee be
responsible for the act or omission of any other Trustee; (ii) the Trustees
may take advice of counsel or other experts with respect to the meaning and
operation of the Agreement and their duties as Trustees, and shall be under no
liability for any act or omission in accordance with such advice or for
failing to follow such advice; and (iii) in discharging their duties, the
Trustees, when acting in good faith, shall be entitled to rely upon the books
of account of Registrant and upon written reports made to the Trustees by any
officer appointed by them, any independent public accountant, and (with
respect to the subject matter of the contract involved) any officer, partner
or responsible employee of a Contracting Party (as defined in the Agreement)
appointed by the Trustees pursuant to Section 5.2 of the Agreement. The
Trustees are not required to give any bond or surety or any other security for
the performance of their duties.
Under Section 8.4 of the Agreement any past or present Trustee
or officer of Registrant (including persons who serve at Registrant's request
as directors, officers or trustees of another organization in which Registrant
has any interest as a shareholder, creditor or otherwise (hereinafter referred
to as a "Covered Person")) is indemnified to the fullest extent permitted by
law against liability and all expenses reasonably incurred by him in
connection with any action, suit or proceeding to which he may be a party or
otherwise involved by reason of his being or having been a Covered Person.
This provision does not authorize indemnification when it is determined, in
the manner specified in the Agreement that such Covered Person has not acted
in good faith in the reasonable belief that his actions were in or not opposed
to the best interests of Registrant. Moreover, this provision does not
authorize indemnification when it is determined, in the manner specified in
the Agreement that such Covered Person would otherwise be liable to Registrant
or its shareholders by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of his duties. Expenses may be paid by
<PAGE>C-6
Registrant in advance of the final disposition of any action, suit or
proceeding upon receipt of an undertaking by such Covered Person to repay such
expenses to Registrant in the event that it is ultimately determined that
indemnification of such expenses is not authorized under the Agreement and
either (i) the Covered Person provides security for such undertaking,
(ii) Registrant is insured against losses from such advances or (iii) the
disinterested Trustees or independent legal counsel determines, in the manner
specified in the Agreement that there is reason to believe the Covered Person
will be found to be entitled to indemnification.
Insofar as indemnification for liability arising under the 1933 Act,
may be permitted to Trustees, officers and controlling persons of Registrant
pursuant to the foregoing provisions, or otherwise, Registrant has been
advised that in the opinion of the Securities and Exchange Commission ("SEC")
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by Registrant of expenses
incurred or paid by a Trustee, officer or controlling person of Registrant in
the successful defense of any action, suit or proceeding) is asserted by such
Trustee, officer or controlling person in connection with the securities being
registered, Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication
of such issue.
Item 28. Business and Other Connections of
Investment Adviser
Warburg, a wholly owned subsidiary of Warburg, Pincus Counsellors
G.P., acts as investment adviser to Registrant. Warburg renders investment
advice to a wide variety of individual and institutional clients. The list
required by this Item 28 of officers and directors of Warburg together with
information as to their other business, profession, vocation or employment of
a substantial nature during the past two years, is incorporated by reference
to Schedules A and D of Form ADV filed by Warburg (SEC File No. 801-07321).
Item 29. Principal Underwriter
(a) Counsellors Securities acts as distributor for Registrant, as
well as for The RBB Fund, Inc., Warburg Pincus Capital Appreciation Fund,
Warburg Pincus Cash Reserve Fund, Warburg Pincus Emerging Growth Fund, Warburg
Pincus Emerging Markets Fund, Warburg Pincus Fixed Income Fund, Warburg Pincus
Global Fixed Income Fund, Warburg Pincus Institutional Fund, Inc., Warburg
Pincus Intermediate Maturity Government Fund, Warburg Pincus International
Equity Fund, Warburg Pincus Japan Growth Fund, Warburg Pincus Japan OTC Fund,
Warburg Pincus Post-Venture Capital Fund, Warburg Pincus New York Tax Exempt
Fund, Warburg Pincus Short-Term Tax-Advantaged Bond Fund, Warburg Pincus Small
Company Value Fund and Warburg Pincus Trust.
<PAGE>C-7
(b) For information relating to each director, officer or partner
of Counsellors Securities, reference is made to Form BD (SEC File No. 8-32482)
filed by Counsellors Securities under the Securities Exchange Act of 1934.
Item 30. Location of Accounts and Records
(1) Warburg, Pincus New York
Intermediate Municipal Fund
466 Lexington Avenue
New York, New York 10017-3147
(Fund's Agreement and Declaration of Trust,
by-laws and minute books)
(2) State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
(records relating to its functions as transfer
agent and dividend disbursing agent)
(3) PFPC Inc.
103 Bellevue Parkway
Wilmington, Delaware 19809
(records relating to its functions as co-administrator)
(4) Counsellors Funds Service, Inc.
466 Lexington Avenue
New York, New York 10017-3147
(records relating to its functions as co-administrator)
(5) PNC Bank, National Association
Broad and Chestnut Streets
Philadelphia, Pennsylvania 19101
(records relating to its functions as custodian)
(6) Counsellors Securities Inc.
466 Lexington Avenue
New York, New York 10017-3147
(records relating to its functions as distributor)
(7) Warburg, Pincus Counsellors, Inc.
466 Lexington Avenue
New York, New York 10017-3147
(records relating to its functions as investment adviser)
Item 31. Management Services
Not applicable.
Item 32. Undertakings
<PAGE>C-8
(a) Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of Registrant's latest annual report to
shareholders, upon request and without charge.
(b) Registrant hereby undertakes to call a meeting of its shareholders
for the purpose of voting upon the question of removal of a director or
directors of Registrant when requested in writing to do so by the holders of
at least 10% of Registrant's outstanding shares. Registrant undertakes
further, in connection with the meeting, to comply with the provisions of
Section 16(c) of the 1940 Act relating to communications with the shareholders
of certain common-law trusts.
<PAGE>C-9
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Amendment
to the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York and the State of New York,
on the 11th day of January, 1996.
WARBURG, PINCUS NEW YORK
INTERMEDIATE MUNICIPAL FUND
By:/s/ Dale C. Christensen
Dale C. Christensen
President
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Amendment has been signed below by the following persons in the
capacities and on the date indicated.
Signature Title Date
--------- ----- ----
/s/ Lionel I. Pincus Chairman of the Board January 11, 1996
Lionel I. Pincus and Trustee
/s/ John L. Furth Chief Executive January 11, 1996
John L. Furth Officer and Trustee
/s/ Dale C. Christensen President January 11, 1996
Dale C. Christensen
/s/ Reuben S. Leibowitz Chief Financial January 11, 1996
Reuben S. Leibowitz Officer and Vice
President
/s/ Stephen Distler Treasurer and January 11, 1996
Stephen Distler Principal Accounting
Officer
/s/ Richard N. Cooper Trustee January 11, 1996
Richard N. Cooper
/s/ Donald J. Donahue Trustee January 11, 1996
Donald J. Donahue
/s/ Jack W. Fritz Trustee January 11, 1996
Jack W. Fritz
/s/ Thomas A. Melfe Trustee January 11, 1996
Thomas A. Melfe
/s/ Alexander B. Trowbridge Trustee January 11, 1996
Alexander B. Trowbridge
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description of Exhibit
- ----------- ----------------------
1(a) Agreement and Declaration of Trust.
(b) Amendments to Agreement and
Declaration of Trust.
2 Second Amended and Restated By-Laws.
3 Not applicable.
4 Form of Stock Certificates.(1)
5 Investment Advisory Agreement.
6 Form of Distribution Agreement. (2)
7 Not applicable.
8 Form of Custodian Agreement with
PNC Bank, as amended. (1)
9(a) Form of Transfer Agency Agreement. (1)
(b) Form of Co-Administration Agreement
with Counsellors Funds Service, Inc. (1)
(b-1) Form of Co-Administration Agreement
with PFPC Inc. (1)
(c) Forms of Services Agreements. (3)
- ------------------------
(1)Incorporated by reference; material provisions of this exhibit
substantially similar to those of the corresponding exhibit in Pre-
Effective Amendment No. 1 to the Registration Statement on Form N-1A of
Warburg, Pincus Trust filed on June 14, 1995 (Securities Act File No. 33-
58125).
(2)Incorporated by reference; material provisions of this exhibit
substantially similar to those of the corresponding exhibit in Post-
Effective Amendment No. 10 to the Registration Statement on Form N-1A of
Warburg, Pincus International Equity Fund, Inc. filed on September 22,
1995 (Securities Act File No. 33-27031).
(3)Incorporated by reference; material provisions of this exhibit
substantially similar to those of the corresponding exhibit in
Pre-Effective Amendment No. 1 to the Registration Statement on
Form N-1A of Warburg, Pincus Japan Growth Fund, Inc. filed on
December 18, 1995 (Securities Act File No. 33-63653).
<PAGE>
10(a) Opinion and Consent of Willkie Farr
& Gallagher, counsel to the Fund.
(b) Opinion and Consent of Sullivan & Worcester, Massachusetts
counsel to the Fund.
11(a) Consent of Coopers & Lybrand L.L.P.,
Independent Accountants.
(b) Consent of Ernst & Young LLP, Independent
Accountants.
12 Not applicable.
13 Form of Purchase Agreement. (2)
14 Form of Retirement Plans.(4)
15(a) Shareholder Services Plan. (5)
(b) Amended and Restated Distribution Plan. (3)
(c) Form of Rule 18f-3 Plan. (6)
16 Schedule for Computation of Total
Return and Yield Quotations relating
to Common Shares.
17 Financial Data Schedule relating
to Common Shares.
- ------------------------
(4)Incorporated by reference to Post-Effective Amendment No. 1 to the
Registration Statement of Warburg, Pincus Managed Bond Trust, filed on
February 28, 1995 (Securities Act File No. 33-73672).
(5)Incorporated by reference; material provisions of this exhibit
substantially similar to those of the corresponding exhibit in Post-
Effective Amendment No. 12 to the Registration Statement on Form N-1A of
Counsellors Cash Reserve Fund, Inc. filed on June 28, 1995 (Securities
Act File No. 2-94840).
(6)Incorporated by reference; material provisions of this exhibit
substantially similar tothose ofthe corresponding exhibit in
Post-Effective Amendment No. 13 to the Registration Statement
on Form N-1A of Warburg, Pincus International Equity Fund,
Inc. filed on December 28, 1995 (Securities Act File No. 33-
27031).
<PAGE>1
AGREEMENT AND DECLARATION OF TRUST
OF
COUNSELLORS NEW YORK TAX EXEMPT BOND FUND
This AGREEMENT AND DECLARATION OF TRUST, made at Boston, Massachusetts
this 23rd day of December, 1986, by and between the Settlor and the Trustee
whose signature is set forth below (the "Initial Trustee"),
W I T N E S S E T H T H A T:
WHEREAS, Virginia Spencer, an individual residing in Boston,
Massachusetts (the "Settlor"), proposes to deliver to the Initial Trustee the
sum of one hundred dollars ($100.00) lawful money of the United States of
America in trust hereunder and to authorize the Initial Trustee and all other
Persons acting as Trustees hereunder to employ such funds, and any other funds
coming into their hands or the hands of their successor or successors as such
Trustees, to carry on the business of an investment company, and as such of
buying, selling, investing in or otherwise dealing in and with stocks, bonds,
debentures, warrants, options, futures contracts and other securities and
interests therein, or calls or puts with respect to any of the same, or such
other and further investment media and other property as the Trustees may deem
advisable, which are not prohibited by law or the terms of this Declaration;
and
WHEREAS, the Initial Trustee is willing to accept such sum, together with
any and all additions thereto and the income or increments thereof, upon the
terms, conditions and trusts hereinafter set forth; and
WHEREAS, it is proposed that the assets held by the Trustees be divided
into separate funds, each with its own separate investment portfolio,
investment objectives, policies and purposes, and that the beneficial interest
in each such fund shall be divided into transferable Shares of Beneficial
Interest, a separate Series of Shares for each fund, all in accordance with
the provisions hereinafter set forth; and
WHEREAS, it is desired that the trust established hereby (the "Trust") be
managed and operated as a trust with transferable shares under the laws of
Massachusetts, of the type commonly known as and referred to as a
Massachusetts business trust, in accordance with the provisions hereinafter
set forth,
NOW, THEREFORE, the Initial Trustee, for himself and his successors as
Trustees, hereby declares, and agrees with the
<PAGE>2
Settlor, for himself and for all Persons who shall hereafter become holders of
Shares of Beneficial Interest of the Trust, of any Series, that the Trustees
will hold the sum delivered to them upon the execution hereof, and all other
and further cash, securities and other property of every type and description
which they may in any way acquire in their capacity as such Trustees, together
with the income therefrom and the proceeds thereof, IN TRUST NEVERTHELESS, to
manage and dispose of the same for the benefit of the holders from time to
time of the Shares of Beneficial Interest of the several Series being issued
and to be issued hereunder and in the manner and subject to the provisions
hereof, to wit:
ARTICLE 1
THE TRUST
SECTION 1.1. Name. The name of the Trust shall be
"Counsellors New York Tax Exempt Bond Fund",
and so far as may be practicable the Trustees shall conduct the Trust's
activities, execute all documents and sue or be sued under that name, which
name (and the word "Trust" wherever used in this Agreement and Declaration of
Trust, except where the context otherwise requires) shall refer to the
Trustees in their capacity as Trustees, and not individually or personally,
and shall not refer to the officers, agents or employees of the Trust or of
such Trustees, or to the holders of the Shares of Beneficial Interest of the
Trust, or of any Series. If the Trustees determine that the use of such name
is not practicable, legal or convenient at any time or in any jurisdiction or
if the Trust is required to discontinue the use of such name pursuant to
Section 10.5 hereof, then subject to that section, the Trustees may use such
other designation, or they may adopt such other name for the Trust as they
deem proper, and the Trust may hold property and conduct its activities under
such designation or name.
SECTION 1.2. Location. The Trust shall have an office in Boston,
Massachusetts, unless changed by the Trustees to another location in
Massachusetts or elsewhere, but such office need not be the sole or principal
office of the Trust. The Trust may have such other offices or places of
business as the Trustees may from time to time determine to be necessary or
expedient.
SECTION 1.3. Nature of Trust. The Trust shall be a trust with
transferable shares under the laws of The Commonwealth of Massachusetts, of
the type referred to in Section 1 of Chapter
<PAGE>3
182 of the Massachusetts General Laws and commonly termed a Massachusetts
business trust. The Trust is not intended to be, shall not be deemed to be,
and shall not be treated as, a general partnership, limited partnership, joint
venture, corporation or joint stock company. The Shareholders shall be
beneficiaries and their relationship to the Trustees shall be solely in that
capacity in accordance with the rights conferred upon them hereunder.
SECTION 1.4. Definitions. As used in this Agreement and Declaration of
Trust, the following terms shall have the meanings set forth below unless the
context thereof otherwise requires:
"Accounting Agent" shall have the meaning designated in Section 5.2(g)
hereof.
"Administrator" shall have the meaning designated in Section 5.2(b)
hereof.
"Affiliated Person" shall have the meaning assigned to it in the 1940
Act.
"By-Laws" shall mean the By-Laws of the Trust, as amended from time to
time.
"Certificate of Designation" shall have the meaning designated in Section
6.1 hereof.
"Certificate of Termination" shall have the meaning designated in Section
6.1 hereof.
"Commission" shall have the same meaning as in the 1940 Act.
"Contracting Party" shall have the meaning designated in the preamble to
Section 5.2 hereof.
"Covered Person" shall have the meaning designated in Section 8.4 hereof.
"Custodian" shall have the meaning designated in Section 5.2(d) hereof.
"Declaration" and "Declaration of Trust" shall mean this Agreement and
Declaration of Trust and all amendments or modifications thereof as from time
to time in effect. References in this Agreement and Declaration of Trust to
"hereof", "herein" and "hereunder" shall be deemed to refer to the Declaration
of Trust generally, and shall not be limited to the particular text, Article
or Section in which such words appear.
<PAGE>4
"Disabling Conduct" shall have the meaning designated in Section 8.4
hereof.
"Distributor" shall have the meaning designated in Section 5.2(c) hereof.
"Dividend Disbursing Agent" shall have the meaning designated in Section
5.2(e) hereof.
"General Items" shall have the meaning defined in Section 6.2(a) hereof.
"Initial Trustee" shall have the meaning defined in the preamble hereto.
"Investment Advisor" shall have the meaning stated in Section 5.2(a)
hereof.
"Majority of the Trustees" shall mean a majority of the Trustees in
office at the time in question. At any time at which there shall be only one
(1) Trustee in office, such term shall mean such Trustee.
"Majority Shareholder Vote," as used with respect to the election of any
Trustee at a meeting of Shareholders, shall mean the vote for the election of
such Trustee of a plurality of all outstanding Shares of the Trust, without
regard to Series, represented in person or by proxy and entitled to vote
thereon, provided that a quorum (as determined in accordance with the ByLaws)
is present, and as used with respect to any other action required or permitted
to be taken by Shareholders, shall mean the vote for such action of the
holders of that majority of all outstanding Shares (or, where a separate vote
of Shares of any particular Series is to be taken, the affirmative vote of
that majority of the outstanding Shares of that Series) of the Trust which
consists of: (i) a majority of all Shares (or of Shares of the particular
Series) represented in person or by proxy and entitled to vote on such action
at the meeting of Shareholders at which such action is to be taken, provided
that a quorum (as determined in accordance with the By-Laws) is present; or
(ii) if such action is to be taken by written consent of Shareholders, a
majority of all Shares (or of Shares of the particular Series) issued and
outstanding and entitled to vote on such action; provided, that (iii) as used
with respect to any action requiring the affirmative vote of "a majority of
the outstanding voting securities", as the quoted phrase is defined in the
1940 Act, of the Trust or of any Portfolio, "Majority Shareholder Vote" means
the vote for such action at a meeting of Shareholders of the smallest majority
of all outstanding Shares of the Trust (or of
<PAGE>5
Shares of the particular Portfolio) entitled to vote on such action which
satisfies such 1940 Act voting requirement.
"1940 Act" shall mean the provisions of the Investment Company Act of
1940 and the rules and regulations thereunder, both as amended from time to
time, and any order or orders thereunder which may from time to time be
applicable to the Trust.
"Person" shall mean and include individuals, as well as corporations,
limited partnerships, general partnerships, joint stock companies, joint
ventures, associations, banks, trust companies, land trusts, business trusts
or other organizations established under the laws of any jurisdiction, whether
or not considered to be legal entities, and governments and agencies and
political subdivisions thereof.
"Portfolio" or "Portfolios" shall mean one or more of the separate
components of the assets of the Trust which are now or hereafter established
and designated under or in accordance with the provisions of Article 6 hereof.
"Portfolio Assets" shall have the meaning defined in Section 6.2(a)
hereof.
"Principal Underwriter" shall have the meaning designated in Section
5.2(c) hereof.
"Prospectus," as used with respect to any Portfolio or Series of Shares,
shall mean the prospectus relating to such Portfolio or Series which
constitutes part of the currently effective Registration Statement of the
Trust under the Securities Act of 1933, as such prospectus may be amended or
supplemented from time to time.
"Securities" shall mean any and all bills, notes, bonds, debentures or
other obligations or evidences of indebtedness, certificates of deposit,
bankers' acceptances, commercial paper, repurchase agreements or other money
market instruments; stocks, shares or other equity ownership interests; and
warrants, options or other instruments representing rights to subscribe for,
purchase, receive or otherwise acquire or to sell, transfer, assign or
otherwise dispose of, and scrip, certificates, receipts or other instruments
evidencing any ownership rights or interests in, any of the foregoing and
"when issued" and "delayed delivery" contracts for securities, issued,
guaranteed or sponsored by any governments, political subdivisions or
governmental authorities, agencies or instrumentalities, by any individuals,
firms, companies, corporations, syndicates, associations or trusts, or by any
other organizations or entities whatsoever, irrespective
<PAGE>6
of their forms or the names by which they may be described, whether or not
they be organized and operated for profit, and whether they be domestic or
foreign with respect to The Commonwealth of Massachusetts or the United States
of America.
"Securities of the Trust" shall mean any Securities issued by the Trust.
"Series" shall mean one or more of the series of Shares authorized by the
Trustees to represent the beneficial interest in one or more of the
Portfolios.
"Settlor" shall have the meaning stated in the first
"Whereas" clause set forth above.
"Shareholder" shall mean as of any particular time any Person shown of
record at such time on the books of the Trust as a holder of outstanding
Shares of any Series, and shall include a pledgee into whose name any such
Shares are transferred in pledge.
"Shareholder Servicing Agent" shall have the meaning
designated in Section 5.2(f) hereof.
"Shares" shall mean the transferable units into which the beneficial
interest in the Trust and each Portfolio of the Trust (as the context may
require) shall be divided from time to time, and includes fractions of Shares
as well as whole Shares. All references herein to "Shares" which are not
accompanied by a reference to any particular Series or Portfolio shall be
deemed to apply to outstanding Shares without regard to Series.
"Single Class Voting," as used with respect to any matter to be acted
upon at a meeting or by written consent of Shareholders, shall mean a style of
voting in which each holder of one or more Shares shall be entitled to one
vote on the matter in question for each Share standing in his name on the
records of the Trust, irrespective of Series, and all outstanding Shares of
all Series vote as a single class.
"Statement of Additional Information," as used with respect to any
Portfolio or Series of Shares, shall mean the statement of additional
information relating to such Portfolio or Series, which constitutes part of
the currently effective Registration Statement of the Trust under the
Securities Act of 1933, as such statement of additional information may be
amended or supplemented from time to time.
"Transfer Agent" shall have the meaning defined in Section 5.2(e) hereof.
<PAGE>7
"Trust" shall have the meaning stated in the fourth "Whereas" clause set
forth above.
"Trust Property" shall mean, as of any particular time, any and all
property which shall have been transferred, conveyed or paid to the Trust or
the Trustees, and all interest, dividends, income, earnings, profits and gains
therefrom, and proceeds thereof, including any proceeds derived from the sale,
exchange or liquidation thereof, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, and which at
such time is owned or held by, or for the account of, the Trust or the
Trustees, without regard to the Portfolio to which such property is allocated.
"Trustees" shall mean, collectively, the Initial Trustee, so long as he
shall continue in office, and all other individuals who at the time in
question have been duly elected or appointed as Trustees of the Trust in
accordance with the provisions hereof and who have qualified and are then in
office. At any time at which there shall be only one (1) Trustee in office,
such term shall mean such single Trustee.
SECTION 1.5. Real Property to be Converted into Personal Property.
Notwithstanding any other provision hereof, any real property at any time
forming part of the Trust Property shall be held in trust for sale and
conversion into personal property at such time or times and in such manner and
upon such terms as the Trustees shall approve, but the Trustees shall have
power until the termination of this Trust to postpone such conversion as long
as they in their uncontrolled discretion shall think fit, and for the purpose
of determining the nature of the interest of the Shareholders therein, all
such real property shall at all times be considered as personal property.
ARTICLE 2
PURPOSE OF THE TRUST
The purpose of the Trust shall be to engage in the business of being an
investment company, and as such of subscribing for, purchasing or otherwise
acquiring, holding for investment or trading in, borrowing, lending and
selling short, selling, assigning, negotiating or exchanging and otherwise
disposing of, and turning to account, realizing upon and generally dealing in
and with, in any manner, (a) Securities of all kinds, (b) precious metals and
other minerals, contracts to purchase and sell, and other interests of every
nature and kind in, such metals or minerals, and (c) rare coins and other
numismatic items, and all as the Trustees in their discretion shall
<PAGE>8
determine to be necessary, desirable or appropriate, and to exercise and
perform any and every act, thing or power necessary, suitable or desirable for
the accomplishment of such purpose, the attainment of any of the objects or
the furtherance of any of the powers given hereby which are lawful purposes,
objects or powers of a trust with transferable shares of the type commonly
termed a Massachusetts business trust; and to do every other act or acts or
thing or things incidental or appurtenant to or growing out of or in
connection with the aforesaid objects, purposes or powers, or any of them,
which a trust of the type commonly termed a Massachusetts business trust is
not now or hereafter prohibited from doing, exercising or performing.
ARTICLE 3
POWERS OF THE TRUSTEES
SECTION 3.1. Powers in General. The Trustees shall have, without other
or further authorization, full, entire, exclusive and absolute power, control
and authority over, and management of, the business of the Trust and over the
Trust Property, to the same extent as if the Trustees were the sole owners of
the business and property of the Trust in their own right, and with such
powers of delegation as may be permitted by this Declaration, subject only to
such limitations as may be expressly imposed by this Declaration of Trust or
by applicable law. The enumeration of any specific power or authority herein
shall not be construed as limiting the aforesaid power or authority or any
specific power or authority. Without limiting the foregoing, the Trustees may
adopt By-Laws not inconsistent with this Declaration of Trust providing for
the conduct of the business and affairs of the Trust and may amend and repeal
them to the extent that such By-Laws do not reserve that right to the
Shareholders; they may select, and from time to time change, the fiscal year
of the Trust; they may adopt and use a seal for the Trust, provided, that
unless otherwise required by the Trustees, it shall not be necessary to place
the seal upon, and its absence shall not impair the validity of, any document,
instrument or other paper executed and delivered by or on behalf of the Trust;
they may from time to time in accordance with the provisions of Section 6.1
hereof establish one or more Portfolios to which they may allocate such of the
Trust Property, subject to such liabilities, as they shall deem appropriate,
each such Portfolio to be operated by the Trustees as a separate and distinct
investment medium and with separately defined investment objectives and
policies and distinct investment purposes, all as established by the Trustees,
or from time to time changed by them; they may as they consider appropriate
elect and remove officers and appoint and terminate agents and consultants and
hire and terminate
<PAGE>9
employees, any one or more of the foregoing of whom may be a Trustee; they may
appoint from their own number, and terminate, any one or more committees
consisting of one or more Trustees, including without implied limitation an
Executive Committee, which may, when the Trustees are not in session and
subject to the 1940 Act, exercise some or all of the power and authority of
the Trustees as the Trustees may determine; in accordance with Section 5.2
they may employ one or more Investment Advisors, Administrators and Custodians
and may authorize any Custodian to employ subcustodians or agents and to
deposit all or any part of such assets in a system or systems for the central
handling of Securities, retain Transfer, Dividend Disbursing, Accounting or
Shareholder Servicing Agents or any of the foregoing, provide for the
distribution of Shares by the Trust through one or more Distributors,
Principal Underwriters or otherwise, set record dates or times for the
determination of Shareholders entitled to participate in, benefit from or act
with respect to various matters; and in general they may delegate to any
officer of the Trust, to any Committee of the Trustees and to any employee,
Investment Advisor, Administrator, Distributor, Custodian, Transfer Agent,
Dividend Disbursing Agent, or any other agent or consultant of the Trust, such
authority, powers, functions and duties as they consider desirable or
appropriate for the conduct of the business and affairs of the Trust,
including without implied limitation the power and authority to act in the
name of the Trust and of the Trustees, to sign documents and to act as
attorney-in-fact for the Trustees. Without limiting the foregoing and to the
extent not inconsistent with the 1940 Act or other applicable law, the
Trustees shall have power and authority:
(a) Investments. To invest and reinvest cash and other property;
to buy, for cash or on margin, and otherwise acquire and hold, Securities
created or issued by any Persons, including Securities maturing after the
possible termination of the Trust; to make payment therefor in any lawful
manner in exchange for any of the Trust Property; and to hold cash or
other property uninvested without in any event being bound or limited by
any present or future law or custom in regard to investments by Trustees;
(b) Disposition of Assets. Upon such terms and conditions as they
deem best, to lend, sell, exchange, mortgage, pledge, hypothecate, grant
security interests in, encumber, negotiate, convey, transfer or otherwise
dispose of, and to trade in, any and all of the Trust Property, free and
clear of all trusts, for cash or on terms, with or without advertisement,
and on such terms as to payment, security or otherwise, all as they shall
deem necessary or expedient;
<PAGE>10
(c) Ownership Powers. To vote or give assent, or exercise any and
all other rights, powers and privileges of ownership with respect to, and
to perform any and all duties and obligations as owners of, any
Securities or other property forming part of the Trust Property, the same
as any individual might do; to exercise powers and rights of subscription
or otherwise which in any manner arise out of ownership of Securities,
and to receive powers of attorney from, and to execute and deliver
proxies or powers of attorney to, such Person or Persons as the Trustees
shall deem proper, receiving from or granting to such Person or Persons
such power and discretion with relation to Securities or other property
of the Trust, all as the Trustees shall deem proper;
(d) Form of Holding. To hold any Security or other property in a
form not indicating any trust, whether in bearer, unregistered or other
negotiable form, or in the name of the Trustees or of the Trust, or of
the Portfolio to which such Securities or property belong, or in the name
of a Custodian, subcustodian or other nominee or nominees, or otherwise,
upon such terms, in such manner or with such powers, as the Trustees may
determine, and with or without indicating any trust or the interest of
the Trustees therein;
(e) Reorganization, etc. To consent to or participate in any plan
for the reorganization, consolidation or merger of any corporation or
issuer, any Security of which is or was held in the Trust or any
Portfolio; to consent to any contract, lease, mortgage, purchase or sale
of property by such corporation or issuer, and to pay calls or subscrip-
tions with respect to any Security forming part of the Trust Property;
(f) Voting Trusts, etc. To join with other holders of any
Securities in acting through a committee, depository, voting trustee or
otherwise, and in that connection to deposit any Security with, or
transfer any Security to, any such committee, depository or trustee, and
to delegate to them such power and authority with relation to any
Security (whether or not so deposited or transferred) as the Trustees
shall deem proper, and to agree to pay, and to pay, such portion of the
expenses and compensation of such committee, depository or trustee as the
Trustees shall deem proper;
(g) Contracts, etc. To enter into, make and perform all such
obligations, contracts, agreements and undertakings of every kind and
description, with any Person or Persons, as the Trustees shall in their
discretion deem expedient in
<PAGE>11
the conduct of the business of the Trust, for such terms as they shall see
fit, whether or not extending beyond the term of office of the Trustees, or
beyond the possible expiration of the Trust; to amend, extend, release or
cancel any such obligations, contracts, agreements or understandings; and to
execute, acknowledge, deliver and record all written instruments which they
may deem necessary or expedient in the exercise of their powers;
(h) Guarantees, etc. To endorse or guarantee the payment of any
notes or other obligations of any Person; to make contracts of guaranty
or suretyship, or otherwise assume liability for payment thereof; and to
mortgage and pledge the Trust Property or any part thereof to secure any
of or all such obligations;
(i) Partnerships, etc. To enter into joint ventures, general or
limited partnerships and any other combinations or associations;
(j) Insurance. To purchase and pay for entirely out of Trust
Property such insurance as they may deem necessary or appropriate for the
conduct of the business, including, without limitation, insurance
policies insuring the assets of the Trust and payment of distributions
and principal on its portfolio investments, and insurance policies
insuring the Shareholders, Trustees, officers, employees, agents,
consultants, Investment Advisors, managers, Administrators, Distributors,
Principal Underwriters, or other independent contractors, or any thereof
(or any Person connected therewith), of the Trust, individually, against
all claims and liabilities of every nature arising by reason of holding,
being or having held any such office or position, or by reason of any
action alleged to have been taken or omitted by any such Person in any
such capacity, including any action taken or omitted that may be
determined to constitute negligence, whether or not the Trust would have
the power to indemnify such Person against such liability;
(k) Pensions, etc. To pay pensions for faithful service, as deemed
appropriate by the Trustees, and to adopt, establish and carry out
pension, profit-sharing, share bonus, share purchase, savings, thrift and
other retirement, incentive and benefit plans, trusts and provisions,
including the purchasing of life insurance and annuity contracts as a
means of providing such retirement and other benefits, for any or all of
the Trustees, officers, employees and agents of the Trust;
<PAGE>12
(l) Power of Collection and Litigation. To collect, sue for and
receive all sums of money coming due to the Trust, to employ counsel, and
to commence, engage in, prosecute, intervene in, join, defend, compound,
compromise, adjust or abandon, in the name of the Trust, any and all ac-
tions, suits, proceedings, disputes, claims, controversies, demands or
other litigation or legal proceedings relating to the Trust, the business
of the Trust, the Trust Property, or the Trustees, officers, employees,
agents and other independent contractors of the Trust, in their capacity
as such, at law or in equity, or before any other bodies or tribunals,
and to compromise, arbitrate or otherwise adjust any dispute to which the
Trust may be a party, whether or not any suit is commenced or any claim
shall have been made or asserted;
(m) Issuance and Repurchase of Shares. To issue, sell, repurchase,
redeem, retire, cancel, acquire, hold, resell, reissue, dispose of,
transfer, and otherwise deal in Shares of any Series, and, subject to
Article 6 hereof, to apply to any such repurchase, redemption,
retirement, cancellation or acquisition of Shares of any Series, any of
the Portfolio Assets belonging to the Portfolio to which such Series
relates, whether constituting capital or surplus or otherwise, to the
full extent now or hereafter permitted by applicable law; provided, that
any Shares belonging to the Trust shall not be voted, directly or
indirectly;
(n) Offices. To have one or more offices, and to carry on all or
any of the operations and business of the Trust, in any of the States,
Districts or Territories of the United States, and in any and all foreign
countries, subject to the laws of such State, District, Territory or
country;
(o) Expenses. To incur and pay any and all such expenses and
charges as they may deem advisable (including without limitation
appropriate fees to themselves as Trustees), and to pay all such sums of
money for which they may be held liable by way of damages, penalty, fine
or otherwise;
(p) Agents, etc. To retain and employ any and all such servants,
agents, employees, attorneys, brokers, investment advisers, accountants,
architects, engineers, builders, escrow agents, depositories,
consultants, ancillary trustees, custodians, agents for collection,
insurers, banks and officers, as they think best for the business of the
Trust or any Portfolio, to supervise and direct the acts of any of the
same, and to fix and pay their compensation and define their duties;
<PAGE>13
(q) Accounts. To determine, and from time to time change, the
method or form in which the accounts of the Trust shall be kept;
(r) Valuation. Subject to the requirements of the 1940 Act, to
determine from time to time the value of all or any part of the Trust
Property and of any services, Securities, property or other consideration
to be furnished to or acquired by the Trust, and from time to time to
revalue all or any part of the Trust Property in accordance with such
appraisals or other information as is, in the Trustees' sole judgment,
necessary and satisfactory;
(s) Indemnification. In addition to the mandatory indemnification
provided for in Article 8 hereof and to the extent permitted by law, to
indemnify or enter into agreements with respect to indemnification with
any Person with whom this Trust has dealings, including, without
limitation, any independent contractor, to such extent as the Trustees
shall determine; and
(t) General. To do all such other acts and things and to conduct,
operate, carry on and engage in such other lawful businesses or business
activities as they shall in their sole and absolute discretion consider
to be incidental to the business of the Trust or any Portfolio as an
investment company, and to exercise all powers which they shall in their
discretion consider necessary, useful or appropriate to carry on the
business of the Trust or any Portfolio, to promote any of the purposes
for which the Trust is formed, whether or not such things are
specifically mentioned herein, in order,to protect or promote the
interests of the Trust or any Portfolio, or otherwise to carry out the
provisions of this Declaration.
SECTION 3.2. Borrowings; Financings; Issuance of Securities. The
Trustees have power to borrow or in any other manner raise such sum or sums of
money, and to incur such other indebtedness for goods or services, or for or
in connection with the purchase or other acquisition of property, as they
shall deem advisable for the purposes of the Trust, in any manner and on any
terms, and to evidence the same by negotiable or non-negotiable Securities
which may mature at any time or times, even beyond the possible date of
termination of the Trust; to issue Securities of any type for such cash,
property, services or other considerations, and at such time or times and upon
such terms, as they may deem advisable; and to reacquire any such Securities.
Any such Securities of the Trust may, at the discretion of the Trustees, be
made convertible into Shares of any Series, or may evidence the right to
purchase, subscribe for or otherwise
<PAGE>14
acquire Shares of any Series, at such times and on such terms as the Trustees
may prescribe.
SECTION 3.3. Deposits. Subject to the requirements of the 1940 Act, the
Trustees shall have power to deposit any moneys or Securities included in the
Trust Property with any one or more banks, trust companies or other banking
institutions, whether or not such deposits will draw interest. Such deposits
are to be subject to withdrawal in such manner as the Trustees may determine,
and the Trustees shall have no responsibility for any loss which may occur by
reason of the failure of the bank, trust company or other banking institution
with which any such moneys or Securities have been deposited, other than
liability based on their gross negligence or willful fault.
SECTION 3.4. Allocations. The Trustees shall have power to determine
whether moneys or other assets received by the Trust shall be charged or
credited to income or capital, or allocated between income and capital,
including the power to amortize or fail to amortize any part or all of any
premium or discount, to treat any part or all of the profit resulting from the
maturity or sale of any asset, whether purchased at a premium or at a
discount, as income or capital, or to apportion the same between income and
capital, to apportion the sale price of any asset between income and capital,
and to determine in what manner any expenses or disbursements are to be borne
as between income and capital, whether or not in the absence of the power and
authority conferred by this Section 3.4 such assets would be regarded as
income or as capital or such expense or disbursement would be charged to
income or to capital; to treat any dividend or other distribution on any
investment as income or capital, or to apportion the same between income and
capital; to provide or fail to provide reserves, including reserves for
depreciation, amortization or obsolescence in respect of any Trust Property in
such amounts and by such methods as they shall determine; to allocate less
than all of the consideration paid for Shares of any Series to the shares of
beneficial interest account of the Portfolio to which such Shares relate and
to allocate the balance thereof to paid-in capital of that Portfolio, and to
reallocate such amounts from time to time; all as the Trustees may reasonably
deem proper.
SECTION 3.5. Further Powers; Limitations. The Trustees shall have power
to do all such other matters and things, and to execute all such instruments,
as they deem necessary, proper or desirable in order to carry out, promote or
advance the interests of the Trust, although such matters or things are not
herein specifically mentioned. Any determination as to what is in the
interests of the Trust made by the Trustees in good faith shall be conclusive.
In construing the provisions of this Declaration
<PAGE>15
of Trust, the presumption shall be in favor of a grant of power to the
Trustees. The Trustees shall not be required to obtain any court order to
deal with the Trust Property. The Trustees may limit their right to exercise
any of their powers through express restrictive provisions in the instruments
evidencing or providing the terms for any Securities of the Trust or in other
contractual instruments adopted on behalf of the Trust.
ARTICLE 4
TRUSTEES AND OFFICERS
SECTION 4.1. Number, Designation, Election, Term, etc.
(a) Initial Trustee. Upon his execution of this Declaration of
Trust or a counterpart hereof or some other writing in which he accepts
such Trusteeship and agrees to the provisions hereof, the individual
whose signature is affixed hereto as Initial Trustee shall become the
Initial Trustee hereof.
(b) Number. The Trustees serving as such, whether named above or
hereafter becoming Trustees, may increase (to not more than twenty (20))
or decrease the number of Trustees to a number other than the number
theretofore determined by a written instrument signed by a Majority of
the Trustees (or by an officer of the Trust pursuant to the vote of a
Majority of the Trustees). No decrease in the number of Trustees shall
have the effect of removing any Trustee from office prior to the
expiration of his term, but the number of Trustees may be decreased in
conjunction with the removal of a Trustee pursuant to subsection (e) of
this Section 4.1.
(c) Election and Term. The Trustees shall be elected by the
Shareholders of the Trust at the first meeting of Shareholders
immediately prior to the initial public offering of Shares of the Trust,
and the term of office of any Trustees in office before such election
shall terminate at the time of such election. Subject to Section 16(a)
of the 1940 Act and to the preceding sentence of this subsection (c), the
Trustees shall have the power to set and alter the terms of office of the
Trustees, and at any time to lengthen or shorten their own terms or make
their terms of unlimited duration, to elect their own successors and,
pursuant to subsection (f) of this Section 4.1, to appoint Trustees to
fill vacancies; provided, that Trustees shall be elected by a Majority
Shareholder Vote at any such time or times as the Trustees shall
determine that such action is
<PAGE>16
required under Section 16(a) of the 1940 Act or, if not so required, that such
action is advisable; and further provided, that, after the initial election of
Trustees by the Shareholders, the term of office of any incumbent Trustee
shall continue until the termination of this Trust or his earlier death,
resignation, retirement, bankruptcy, adjudicated incompetency or other
incapacity or removal, or if not so terminated, until the election of such
Trustee's successor in office has become effective in accordance with this
subsection (c).
(d) Resignation and Retirement. Any Trustee may resign his trust
or retire as a Trustee, by a written instrument signed by him and
delivered to the other Trustees or to any officer of the Trust, and such
resignation or retirement shall take effect upon such delivery or upon
such later date as is specified in such instrument.
(e) Removal. Any Trustee may be removed with or without cause at
any time: (i) by written instrument, signed by at least two-thirds (2/3)
of the number of Trustees prior to such removal, specifying the date upon
which such removal shall become effective; or (ii) by vote of
Shareholders holding not less than two-thirds (2/3) of the Shares of each
Series then outstanding, cast in person or by proxy at any meeting called
for the purpose; or (iii) by a written declaration signed by Shareholders
holding not less than two-thirds (2/3) of the Shares of each Series then
outstanding and filed with the Trust's Custodian.
(f) Vacancies. Any vacancy or anticipated vacancy resulting from
any reason, including an increase in the number of Trustees, may (but
need not unless required by the 1940 Act) be filled by a Majority of the
Trustees, subject to the provisions of Section 16(a) of the 1940 Act,
through the appointment in writing of such other individual as such
remaining Trustees in their discretion shall determine; provided, that if
there shall be no Trustees in office, such vacancy or vacancies shall be
filled by vote of the Shareholders. Any such appointment or election
shall be effective upon such individual's written acceptance of his
appointment as a Trustee and his agreement to be bound by the provisions
of this Declaration of Trust, except that any such appointment in
anticipation of a vacancy to occur by reason of retirement, resignation
or increase in the number of Trustees to be effective at a later date
shall become effective only at or after the effective date of said
retirement, resignation or increase in the number of Trustees.
<PAGE>17
(g) Acceptance of Trusts. Any individual appointed as a Trustee
under subsection (f), and any individual elected as a Trustee under
subsection (c), of this Section 4.1 who was not, immediately prior to
such election, acting as a Trustee, shall accept such appointment or
election in writing and agree in such writing to be bound by the
provisions hereof, and whenever such individual shall have executed such
writing and any conditions to such appointment or election shall have
been satisfied, such individual shall become a Trustee and the Trust
Property shall vest in the new Trustee, together with the continuing
Trustees, without any further act or conveyance.
(h) Effect of Death, Resignation, etc. No vacancy, whether
resulting from the death, resignation, retirement, removal or incapacity
of any Trustee, an increase in the number of Trustees or otherwise, shall
operate to annul or terminate the Trust hereunder or to revoke or
terminate any existing agency or contract created or entered into
pursuant to the terms of this Declaration of Trust. Until such vacancy
is filled as provided in this Section 4.1, the Trustees in office (if
any), regardless of their number, shall have all the powers granted to
the Trustees and shall discharge all the duties imposed upon the Trustees
by this Declaration. A written instrument certifying the existence of
such vacancy signed by a Majority of the Trustees shall be conclusive
evidence of the existence of such vacancy.
(i) Conveyance. In the event of the resignation or removal of a
Trustee or his otherwise ceasing to be a Trustee, such former Trustee or
his legal representative shall, upon request of the continuing Trustees,
execute and deliver such documents as may be required for the purpose of
consummating or evidencing the conveyance to the Trust or the remaining
Trustees of any Trust Property held in such former Trustee's name, but
the execution and delivery of such documents shall not be requisite to
the vesting of title to the Trust Property in the remaining Trustees, as
provided in subsection (g) of this Section 4.1 and in Section 4.13
hereof.
(j) No Accounting. Except to the extent required by the 1940 Act
or under circumstances which would justify his removal for cause, no
Person ceasing to be a Trustee (nor the estate of any such Person) shall
be required to make an accounting to the Shareholders or remaining
Trustees upon such cessation.
(k) Filings. Whenever there shall be a change in the composition
of the Trustees, the Trust shall cause to be
<PAGE>18
filed in the office of the Secretary of State of The Commonwealth of
Massachusetts and in each other place where the Trust is required to file
amendments to this Declaration a copy of (i) the instrument by which (in the
case of the appointment of a new Trustee, or the election of an individual who
was not theretofore a Trustee) the new Trustee accepted his appointment or
election and agreed to be bound by the terms of this Declaration, or (in the
case of a resignation) by which the former Trustee resigned as such, together
in either case with a certificate of one of the other Trustees as to the
circumstances of such election, appointment or resignation, or (ii) in the
case of the removal or death of a Trustee, a certificate of one of the
Trustees as to the circumstances of such removal or resignation.
SECTION 4.2. Trustees' Meetings; Participation by Telephone, etc. An
annual meeting of Trustees shall be held not later than the last day of the
fourth month after the end of each fiscal year of the Trust and special
meetings may be held from time to time, in each case, upon the call of such
officers as may be thereunto authorized by the By-Laws or vote of the
Trustees, or by any two (2) Trustees, or pursuant to a vote of the Trustees
adopted at a duly constituted meeting of the Trustees, and upon such notice as
shall be provided in the By-Laws. The Trustees may act with or without a
meeting, and a written consent to any matter, signed by a Majority of the
Trustees, shall be equivalent to action duly taken at a meeting of the
Trustees, duly called and held. Except as otherwise provided by the 1940 Act
or other applicable law, or by this Declaration of Trust or the By-Laws, any
action to be taken by the Trustees may be taken by a majority of the Trustees
present at a meeting of Trustees (a quorum, consisting of at least a Majority
of the Trustees, being present), within or without Massachusetts. If
authorized by the By-Laws, all or any one or more Trustees may participate in
a meeting of the Trustees or any Committee thereof by means of conference
telephone or similar means of communication by means of which all Persons
participating in the meeting can hear each other, and participation in a
meeting pursuant to such means of communication shall constitute presence in
person at such meeting. The minutes of any meeting thus held shall be
prepared in the same manner as a meeting at which all participants were
present in person.
SECTION 4.3. Committees; Delegation. The Trustees shall have power,
consistent with their ultimate responsibility to supervise the affairs of the
Trust, to delegate from time to time to an Executive Committee, and to one or
more other Committees, or to any single Trustee, the doing of such things and
the execution of such deeds or other instruments, either in the name of the
Trust or the names of the Trustees or as their attorney or
<PAGE>19
attorneys in fact, or otherwise as the Trustees may from time to time deem
expedient, and any agreement, deed, mortgage, lease or other instrument or
writing executed by the Trustee or Trustees or other Person to whom such
delegation was made shall be valid and binding upon the Trustees and upon the
Trust.
SECTION 4.4. Officers. The Trustees shall annually elect such officers
or agents, who shall have such powers, duties and responsibilities as the
Trustees may deem to be advisable, and as they shall specify by resolution or
in the By-Laws. Except as may be provided in the By-Laws, any officer elected
by the Trustees may be removed at any time with or without cause. Any two (2)
or more offices may be held by the same individual.
SECTION 4.5. Compensation of Trustees and Officers. The Trustees shall
fix the compensation of all officers and Trustees. Without limiting the
generality of any of the provisions hereof, the Trustees shall be entitled to
receive reasonable compensation for their general services as such, and to fix
the amount of such compensation, and to pay themselves or any one or more of
themselves such compensation for special services, including legal,
accounting, or other professional services, as they in good faith may deem
reasonable. No Trustee or officer resigning and (except where a right to
receive compensation for a definite future period shall be expressly provided
in a written agreement with the Trust, duly approved by the Trustees) no
Trustee or officer removed shall have any right to any compensation as such
Trustee or officer for any period following his resignation or removal, or any
right to damages on account of his removal, whether his compensation be by the
month, by the year or otherwise.
SECTION 4.6. Ownership of Shares and Securities of the Trust. Any
Trustee, and any officer, employee or agent of the Trust, and any organization
in which any such Person is interested, may acquire, own, hold and dispose of
Shares of any Series and other Securities of the Trust for his or its
individual account, and may exercise all rights of a holder of such Shares or
Securities to the same extent and in the same manner as if such Person were
not such a Trustee, officer, employee or agent of the Trust; subject, in the
case of Trustees and officers, to the same limitations as directors or
officers (as the case may be) of a Massachusetts business corporation; and the
Trust may issue and sell or cause to be issued and sold and may purchase any
such Shares or other Securities from any such Person or any such organization,
subject only to the general limitations, restrictions or other provisions
applicable to the sale or purchase of Shares of such Series or other
Securities of the Trust generally.
<PAGE>20
SECTION 4.7. Right of Trustees and Officers to Own Property or to Engage
in Business; Authority of Trustees to Permit Others
to Do Likewise. The Trustees, in their capacity as Trustees, and (unless
otherwise specifically directed by vote of the Trustees) the officers of the
Trust in their capacity as such, shall not be required to devote their entire
time to the business and affairs of the Trust. Except as otherwise
specifically provided by vote of the Trustees, or by agreement in any
particular case, any Trustee or officer of the Trust may acquire, own, hold
and dispose of, for his own individual account, any property, and acquire,
own, hold, carry on and dispose of, for his own individual account, any
business entity or business activity, whether similar or dissimilar to any
property or business entity or business activity invested in or carried on by
the Trust, and without first offering the same as an investment opportunity to
the Trust, and may exercise all rights in respect thereof as if he were not a
Trustee or officer of the Trust. The Trustees shall also have power,
generally or in specific cases, to permit employees or agents of the Trust to
have the same rights (or lesser rights) to acquire, hold, own and dispose of
property and businesses, to carry on businesses, and to accept investment
opportunities without offering them to the Trust, as the Trustees have by
virtue of this Section 4.7.
SECTION 4.8. Reliance on Experts. The Trustees and officers may consult
with counsel, engineers, brokers, appraisers, auctioneers, accountants,
investment bankers, securities analysts or other Persons (any of which may be
a firm in which one or more of the Trustees or officers is or are members or
otherwise interested) whose profession gives authority to a statement made by
them on the subject in question, and who are reasonably deemed by the Trustees
or officers in question to be competent, and the advice or opinion of such
Persons shall be full and complete personal protection to all of the Trustees
and officers in respect of any action taken or suffered by them in good faith
and in reliance on or in accordance with such advice or opinion. In discharg-
ing their duties, Trustees and officers, when acting in good faith, may rely
upon financial statements of the Trust represented to them to be correct by
any officer of the Trust having charge of its books of account, or stated in a
written report by an independent certified public accountant fairly to present
the financial position of the Trust. The Trustees and officers may rely, and
shall be personally protected in acting, upon any instrument or other document
believed by them to be genuine.
SECTION 4.9. Surety Bonds. No Trustee, officer, employee or agent of
the Trust shall, as such, be obligated to give any bond or surety or other
security for the performance of any of his duties, unless required by
applicable law or regulation, or
<PAGE>21
unless the Trustees shall otherwise determine in any particular case.
SECTION 4.10. Apparent Authority of Trustees and Officers.
No purchaser, lender, transfer agent or other Person dealing with the Trustees
or any officer of the Trust shall be bound to make any inquiry concerning the
validity of any transaction purporting to be made by the Trustees or by such
officer, or to make inquiry concerning or be liable for the application of
money or property paid, loaned or delivered to or on the order of the Trustees
or of such officer.
SECTION 4.11. Other Relationships Not Prohibited. The fact that:
(a) any of the Shareholders, Trustees or officers of the Trust is a
shareholder, director, officer, partner, trustee, employee, manager,
adviser, principal underwriter or distributor or agent of or for any
Contracting Party (as defined in Section 5.2 hereof), or any Affiliated
Person of any Contracting Party, or that the Contracting Party or any
parent or affiliate thereof is a Shareholder or has an interest in the
Trust or any Portfolio, or that
(b) any Contracting Party may have a contract providing for the
rendering of any similar services to one or more other corporations,
trusts, associations, partnerships, limited partnerships or other
organizations, or have other business or interests,
shall not affect the validity of any contract for the performance and
assumption of services, duties and responsibilities to, for or of the Trust
and/or the Trustees or disqualify any Shareholder, Trustee or officer of the
Trust from voting upon or executing the same or create any liability or
accountability to the Trust or to the holders of Shares of any Series;
provided that, in the case of any relationship or interest referred to in the
preceding clause (a) on the part of any Trustee or officer of the Trust,
either (x) the material facts as to such relationship or interest have been
disclosed to or are known by the Trustees not having any such relationship or
interest and the contract involved is approved in good faith by a majority of
such Trustees not having any such relationship or interest (even though such
unrelated or disinterested Trustees are less than a quorum of all of the
Trustees), (y) the material facts as to such relationship or interest and as
to the contract have been disclosed to or are known by the Shareholders
entitled to vote thereon and the contract involved is specifically approved in
good faith by vote of the Shareholders, or (z) the specific contract involved
is
<PAGE>22
fair to the Trust as of the time it is authorized, approved or ratified by the
Trustees or by the Shareholders.
SECTION 4.12. Payment of Trust Expenses. The Trustees are authorized to
pay or to cause to be paid out of the principal or income of the Trust, or
partly out of principal and partly out of income, and according to any
allocation to particular Portfolios made by them pursuant to Section 6.2(b)
hereof, all expenses, fees, charges, taxes and liabilities incurred or arising
in connection with the business and affairs of the Trust or in connection with
the management thereof, including, but not limited to, the Trustees'
compensation and such expenses and charges for the services of the Trust's
officers, employees, Investment Advisor, Administrator, Distributor, Principal
Underwriter, auditor, counsel, Custodian, Transfer Agent, Dividend Disbursing
Agent, Accounting Agent, Shareholder Servicing Agent, and such other agents,
consultants, and independent contractors and such other expenses and charges
as the Trustees may deem necessary or proper to incur.
SECTION 4.13. Ownership of the Trust Property. Legal title to all the
Trust Property shall be vested in the Trustees as joint tenants, except that
the Trustees shall have power to cause legal title to any Trust Property to be
held by or in the name of one or more of the Trustees, or in the name of the
Trust, or of any particular Portfolio, or in the name of any other Person as
nominee, on such terms as the Trustees may determine; provided, that the
interest of the Trust and of the respective Portfolio therein is appropriately
protected. The right, title and interest of the Trustees in the Trust
Property shall vest automatically in each Person who may hereafter become a
Trustee. Upon the termination of the term of office of a Trustee as provided
in Section 4.1(c), (d) or (e) hereof, such Trustee shall automatically cease
to have any right, title or interest in any of the Trust Property, and the
right, title and interest of such Trustee in the Trust Property shall vest
automatically in the remaining Trustees. Such vesting and cessation of title
shall be effective whether or not conveyancing documents have been executed
and delivered pursuant to Section 4.1(i) hereof.
ARTICLE 5
DELEGATION OF MANAGERIAL RESPONSIBILITIES
SECTION 5.1. Appointment; Action by Less than All Trustees. The
Trustees shall be responsible for the general operating policy of the Trust
and for the general supervision of the business of the Trust conducted by
officers, agents, employees or advisers of the Trust or by independent
contractors, but the Trustees shall not be required personally to conduct all
the
<PAGE>23
business of the Trust and, consistent with their ultimate responsibility as
stated herein, the Trustees may appoint, employ or contract with one or more
officers, employees and agents to conduct, manage and/or supervise the
operations of the Trust, and may grant or delegate such authority to such
officers, employees and/or agents as the Trustees may, in their sole
discretion, deem to be necessary or desirable, without regard to whether such
authority is normally granted or delegated by trustees. With respect to those
matters of the operation and business of the Trust which they shall elect to
conduct themselves, except as otherwise provided by this Declaration or the
By-Laws, if any, the Trustees may authorize any single Trustee or defined
group of Trustees, or any committee consisting of a number of Trustees less
than the whole number of Trustees then in office without specification of the
particular Trustees required to be included therein, to act for and to bind
the Trust, to the same extent as the whole number of Trustees could do, either
with respect to one or more particular matters or classes of matters, or
generally.
SECTION 5.2. Certain Contracts. Subject to compliance with the
provisions of the 1940 Act, but notwithstanding any limitations of present and
future law or custom in regard to delegation of powers by trustees generally,
the Trustees may, at any time and from time to time in their discretion and
without limiting the generality of their powers and authority otherwise set
forth herein, enter into one or more contracts with any one or more
corporations, trusts, associations, partnerships, limited partnerships or
other types of organizations, or individuals ("Contracting Party"), to provide
for the performance and assumption of some or all of the following services,
duties and responsibilities to, for or on behalf of the Trust and/or any
Portfolio, and/or the Trustees, and to provide for the performance and
assumption of such other services, duties and responsibilities in addition to
those set forth below, as the Trustees may deem appropriate:
(a) Advisory. An investment advisory or management agreement
whereby the Investment Advisor shall undertake to furnish the Trust such
management, investment advisory or supervisory, administrative,
accounting, legal, statistical and research facilities and services, and
such other facilities and services, if any, as the Trustees shall from
time to time consider desirable, all upon such terms and conditions as
the Trustees may in their discretion determine to be not inconsistent
with this Declaration, the applicable provisions of the 1940 Act or any
applicable provisions of the By-Laws. Any such advisory or management
agreement shall be subject to approval by a Majority Shareholder Vote at
a meeting of the Shareholders of the Trust, as required by the 1940 Act.
Notwithstanding any provisions of this
<PAGE>24
Declaration, the Trustees may authorize the Investment Advisor (subject to
such general or specific instructions as the Trustees may from time to time
adopt) to effect purchases, sales, loans or exchanges of portfolio securities
of the Trust on behalf of the Trustees or may authorize any officer or
employee of the Trust or any Trustee to effect such purchases, sales, loans or
exchanges pursuant to recommendations of the Investment Advisor (and all
without further action by the Trustees). Any such purchases, sales, loans and
exchanges shall be deemed to have been authorized by all of the Trustees. The
Trustees may, in their sole discretion, call a meeting of Shareholders in
order to submit to a vote of Shareholders at such meeting the approval of
continuance of any such investment advisory or management agreement. If the
Shareholders of any Portfolio should fail to approve any such investment
advisory or management agreement, the Investment Advisor may nonetheless serve
as Investment Advisor with respect to any other Portfolio whose Shareholders
shall have approved such contract.
(b) Administration. An agreement whereby the agent, subject to the
general supervision of the Trustees and in conformity with any policies
of the Trustees with respect to the operations of the Trust and each
Portfolio, will supervise all or any part of the operations of the Trust
and each Portfolio, and will provide all or any part of the
administrative and clerical personnel, office space and office equipment
and services appropriate for the efficient administration and operations
of the Trust and each Portfolio (any such agent being herein referred to
as an "Administrator").
(c) Distribution. An agreement providing for the sale of Shares of
any one or more Series to net the Trust not less than the net asset value
per Share (as described in Section 6.2(h) hereof) and pursuant to which
the Trust may appoint the other party to such agreement as its principal
underwriter or sales agent for the distribution of such Shares. The
agreement shall contain such terms and conditions as the Trustees may in
their discretion determine to be not inconsistent with this Declaration,
the applicable provisions of the 1940 Act and any applicable provisions
of the By-Laws (any such agent being herein referred to as a
"Distributor" or a "Principal Underwriter", as the case may be).
(d) Custodian. The appointment of a bank or trust company having
an aggregate capital, surplus and undivided profits (as shown in its last
published report) of at least
<PAGE>25
two million dollars ($2,000,000) as custodian of the Securities and cash of
the Trust and of each Portfolio and of the accounting records in connection
therewith (any such agent being herein referred to as a "Custodian").
(e) Transfer and Dividend Disbursing Agency. An agreement with an
agent to maintain records of the ownership of outstanding Shares, the
issuance and redemption and the transfer thereof (any such agent being
herein referred to as a "Transfer Agent"), and to disburse any dividends
declared by the Trustees and in accordance with the policies of the
Trustees and/or the instructions of any particular Shareholder to
reinvest any such dividends (any such agent being herein referred to as a
"Dividend Disbursing Agent").
(f) Shareholder Servicing. An agreement with an agent to provide
service with respect to the relationship of the Trust and its
Shareholders, records with respect to Shareholders and their Shares, and
similar matters (any such agent being herein referred to as a
"Shareholder Servicing Agent").
(g) Accounting. An agreement with an agent to handle all or any
part of the accounting responsibilities, whether with respect to the
Trust's properties, Shareholders or otherwise (any such agent being
herein referred to as an "Accounting Agent").
The same Person may be the Contracting Party for some or all of the services,
duties and responsibilities to, for and of the Trust and/or the Trustees, and
the contracts with respect thereto may contain such terms interpretive of or
in addition to the delineation of the services, duties and responsibilities
provided for, including provisions that are not inconsistent with the 1940 Act
relating to the standard of duty of and the rights to indemnification of the
Contracting Party and others, as the Trustees may determine. Nothing herein
shall preclude, prevent or limit the Trust or a Contracting Party from
entering into sub- contractual arrangements relative to any of the matters
referred to in subsections (a) through (g) of this Section 5.2.
<PAGE>26
ARTICLE 6
PORTFOLIOS AND SHARES
SECTION 6.1. Description of Portfolios and Shares.
(a) Shares; Portfolios; Series of Shares. The beneficial interest
in the Trust shall be divided into Shares having a nominal or par value
of one cent ($.001) per Share, and all of one class, of which an
unlimited number may be issued. The Trustees shall have the authority
from time to time to establish and designate one or more separate,
distinct and independent Portfolios into which the assets of the Trust
shall be divided, and to authorize a separate Series of Shares for each
such Portfolio (each of which Series, including without limitation each
Series authorized in Section 6.2 hereof, shall represent interests only
in the Portfolio with respect to which such Series was authorized), as
they deem necessary or desirable. Except as otherwise provided as to a
particular Portfolio herein, or in the Certificate of Designation
therefor, the Trustees shall have all the rights and powers, and be
subject to all the duties and obligations, with respect to each such
Portfolio and the assets and affairs thereof as they have under this
Declaration with respect to the Trust and the Trust Property in general.
(b) Establishment, etc. of Portfolios; Authorization of Shares.
The establishment and designation of any Portfolio in addition to the
Portfolios established and designated in Section 6.2 hereof and the
authorization of the Shares thereof shall be effective upon the execution
by a Majority of the Trustees (or by an officer of the Trust pursuant to
the vote of a Majority of the Trustees) of an instrument setting forth
such establishment and designation and the relative rights and
preferences of the Shares of such Portfolio and the manner in which the
same may be amended (a "Certificate of Designation"), and may provide
that the number of Shares of such Series which may be issued is un-
limited, or may limit the number issuable. At any time that there are no
Shares outstanding of any particular Portfolio previously established and
designated, including any Portfolio established and designated in Section
6.2 hereof, the Trustees may by an instrument executed by a Majority of
the Trustees (or by an officer of the Trust pursuant to the vote of a
Majority of the Trustees) terminate such Portfolio and the establishment
and designation thereof and the authorization of its Shares (a
"Certificate of Termination"). Each Certificate of Designation,
Certificate of Termination and any instrument
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amending a Certificate of Designation shall have the status of an amendment to
this Declaration of Trust, and shall be filed and become effective as provided
in Section 9.4 hereof.
(c) Character of Separate Portfolios and Shares Thereof. Each
Portfolio established hereunder shall be a separate component of the
assets of the Trust, and the holders of Shares of the Series representing
the beneficial interest in the assets of that Portfolio shall be
considered Shareholders of such Portfolio, but such Shareholders shall
also be considered Shareholders of the Trust for purposes of receiving
reports and notices and, except as otherwise provided herein or in the
Certificate of Designation of a particular Portfolio as to such
Portfolio, or as required by the 1940 Act or other applicable law, the
right to vote, all without distinction by Series. The Trustees shall
have exclusive power without the requirement of Shareholder approval to
establish and designate such separate and distinct Portfolios, and to fix
and determine the relative rights and preferences as between the shares
of the respective Portfolios as to rights of redemption and the price,
terms and manner of redemption, special and relative rights as to
dividends and other distributions and on liquidation, sinking or purchase
fund provisions, conversion rights, and conditions under which the
Shareholders of the several Portfolios shall have separate voting rights
or no voting rights.
(d) Consideration for Shares. The Trustees may issue Shares of any
Series for such consideration (which may include property subject to, or
acquired in connection with the assumption of, liabilities) and on such
terms as they may determine (or for no consideration if pursuant to a
Share dividend or split), all without action or approval of the
Shareholders. All Shares when so issued on the terms determined by the
Trustees shall be fully paid and nonassessable (but may be subject to
mandatory contribution back to the Trust as provided in Section 6.2(h)
hereof). The Trustees may classify or reclassify any unissued Shares, or
any Shares of any Series previously issued and reacquired by the Trust,
into Shares of one or more other Portfolios that may be established and
designated from time to time.
SECTION 6.2. Establishment and Designation of Certain Portfolios;
General Provisions for All Portfolios. Without limiting the authority of the
Trustees set forth in Section 6.1(a) hereof to establish and designate further
Portfolios, there is hereby established and designated Counsellors New York
Tax Exempt Bond Portfolio. The Shares of such Portfolio, and the
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Shares of any further Portfolio that may from time to time be established and
designated by the Trustees shall (unless the Trustees otherwise determine with
respect to some further Portfolio at the time of establishing and designating
the same) have the following relative rights and preferences:
(a) Assets Belonging to Portfolios. Any portion of the Trust
Property allocated to a particular Portfolio, and all consideration
received by the Trust for the issue or sale of Shares of such Portfolio,
together with all assets in which such consideration is invested or
reinvested, all interest, dividends, income, earnings, profits and gains
therefrom, and proceeds thereof, including any proceeds derived from the
sale, exchange or liquidation of such assets, and any funds or payments
derived from any reinvestment of such proceeds in whatever form the same
may be, shall be held by the Trustees in trust for the benefit of the
holders of Shares of that Portfolio and shall irrevocably belong to that
Portfolio for all purposes, and shall be so recorded upon the books of
account of the Trust, and the Shareholders of such Portfolio shall not
have, and shall be conclusively deemed to have waived, any claims to the
assets of any Portfolio of which they are not Shareholders. Such
consideration, assets, interest, dividends, income, earnings, profits,
gains and proceeds, together with any General Items allocated to that
Portfolio as provided in the following sentence, are herein referred to
collectively as "Portfolio Assets" of such Portfolio, and as assets
"belonging to" that Portfolio. In the event that there are any assets,
income, earnings, profits, and proceeds thereof, funds, or payments which
are not readily identifiable as belonging to any particular Portfolio
(collectively "General Items"), the Trustees shall allocate such General
Items to and among any one or more of the Portfolios established and
designated from time to time in such manner and on such basis as they, in
their sole discretion, deem fair and equitable; and any General Items so
allocated to a particular Portfolio shall belong to and be part of the
Portfolio Assets of that Portfolio. Each such allocation by the Trustees
shall be conclusive and binding upon the Shareholders of all Portfolios
for all purposes.
(b) Liabilities of Portfolios. The assets belonging to each
particular Portfolio shall be charged with the liabilities in respect of
that Portfolio and all expenses, costs, charges and reserves attributable
to that Portfolio, and any general liabilities, expenses, costs, charges
or reserves of the Trust which are not readily identifiable as pertaining
to any particular Portfolio shall be allocated
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and charged by the Trustees to and among any one or more of the Portfolios
established and designated from time to time in such manner and on such basis
as the Trustees in their sole discretion deem fair and equitable. The
indebtedness, expenses, costs, charges and reserves allocated and so charged
to a particular Portfolio are herein referred to as "liabilities of" that
Portfolio. Each allocation of liabilities, expenses, costs, charges and
reserves by the Trustees shall be conclusive and binding upon the Shareholders
of all Portfolios for all purposes. Any creditor of any Portfolio may look
only to the assets of that Portfolio to satisfy such creditor's debt.
(c) Dividends. Dividends and distributions on Shares of a
particular Portfolio may be paid with such frequency as the Trustees may
determine, which may be daily or otherwise pursuant to a standing
resolution or resolutions adopted only once or with such frequency as the
Trustees may determine, to the Shareholders of that Portfolio, from such
of the income, accrued or realized, and capital gains, realized or
unrealized, and out of the assets belonging to that Portfolio, as the
Trustees may determine, after providing for actual and accrued
liabilities of that Portfolio. All dividends and distributions on Shares
of a particular Portfolio shall be distributed pro rata to the
Shareholders of that Portfolio in proportion to the number of such Shares
held by such holders at the date and time of record established for the
payment of such dividends or distributions, except that in connection
with any dividend or distribution program or procedure the Trustees may
determine that no dividend or distribution shall be payable on Shares as
to which the Shareholder's purchase order and/or payment have not been
received by the time or times established by the Trustees under such
program or procedure, or that dividends or distributions shall be payable
on Shares which have been tendered by the holder thereof for redemption
or repurchase, but the redemption or repurchase proceeds of which have
not yet been paid to such Shareholder. Such dividends and distributions
may be made in cash or Shares of that Portfolio or a combination thereof
as determined by the Trustees, or pursuant to any program that the
Trustees may have in effect at the time for the election by each
Shareholder of the mode of the making of such dividend or distribution to
that Shareholder. Any such dividend or distribution paid in Shares will
be paid at the net asset value thereof as determined in accordance with
subsection (h) of this Section 6.2.
(d) Liquidation. In the event of the liquidation or dissolution of
the Trust, the Shareholders of each Portfolio
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of which Shares are outstanding shall be entitled to receive, when and as
declared by the Trustees, the excess of the Portfolio Assets over the
liabilities of such Portfolio. The assets so distributable to the
Shareholders of any particular Portfolio shall be distributed among such
Shareholders in proportion to the number of Shares of that Portfolio held by
them and recorded on the books of the Trust. The liquidation of any
particular Portfolio may be authorized by vote of a Majority of the Trustees,
subject to the affirmative vote of "a majority of the outstanding voting
securities" of that Portfolio, as the quoted phrase is defined in the 1940
Act, determined in accordance with clause (iii) of the definition of "Majority
Shareholder Vote" in Section 1.4 hereof.
(e) Voting. The Shareholders shall have the voting rights set
forth in or determined under Article VII hereof.
(f) Redemption by Shareholder. Each holder of Shares of a
particular Portfolio shall have the right at such times as may be
permitted by the Trust, but no less frequently than once each week, to
require the Trust to redeem all or any part of his Shares of that
Portfolio at a redemption price equal to the net asset value per Share of
that Portfolio next determined in accordance with subsection (h) of this
Section 6.2 after the Shares are properly tendered for redemption;
provided, that the Trustees may from time to time, in their discretion,
determine and impose a fee for such redemption. Payment of the
redemption price shall be in cash; provided, however, that if the
Trustees determine, which determination shall be conclusive, that
conditions exist which make payment wholly in cash unwise or undesirable,
the Trust may make payment wholly or partly in Securities or other assets
belonging to such Portfolio at the value of such Securities or assets
used in such determination of net asset value. Notwithstanding the
foregoing, the Trust may postpone payment of the redemption price and may
suspend the right of the holders of Shares of any Portfolio to require
the Trust to redeem Shares of that Portfolio during any period or at any
time when and to the extent permissible under the 1940 Act.
(g) Redemption at the Option of the Trust. Each Share of any
Portfolio shall be subject to redemption at the option of the Trust at
the redemption price which would be applicable if such Share were then
being redeemed by the Shareholder pursuant to subsection (f) of this
Section 6.2: (i) at any time, if the Trustees determine in their sole
discretion that failure to so redeem may have materially adverse
consequences to the holders of the Shares of the
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Trust or of any Portfolio, or (ii) upon such other conditions with respect to
maintenance of Shareholder accounts of a minimum amount as may from time to
time be determined by the Trustees and set forth in the then current
Prospectus of such Portfolio. Upon such redemption the holders of the Shares
so redeemed shall have no further right with respect thereto other than to
receive payment of such redemption price.
(h) Net Asset Value. The net asset value per Share of any
Portfolio at any time shall be the quotient obtained by dividing the
value of the net assets of such Portfolio at such time (being the current
value of the assets belonging to such Portfolio, less its then existing
liabilities) by the total number of Shares of that Portfolio then
outstanding, all determined in accordance with the methods and
procedures, including without limitation those with respect to rounding,
established by the Trustees from time to time. The Trustees may
determine to maintain the net asset value per Share of any Portfolio at a
designated constant dollar amount and in connection therewith may adopt
procedures not inconsistent with the 1940 Act for the continuing
declaration of income attributable to that Portfolio as dividends payable
in additional Shares of that Portfolio at the designated constant dollar
amount and for the handling of any losses attributable to that Portfolio.
Such procedures may provide that in the event of any loss each
Shareholder shall be deemed to have contributed to the shares of
beneficial interest account of that Portfolio his pro rata portion of the
total number of Shares required to be canceled in order to permit the net
asset value per Share of that Portfolio to be maintained, after
reflecting such loss, at the designated constant dollar amount. Each
Shareholder of the Trust shall be deemed to have expressly agreed, by his
investment in any Portfolio with respect to which the Trustees shall have
adopted any such procedure, to make the contribution referred to in the
preceding sentence in the event of any such loss.
(i) Transfer. All Shares of each particular Portfolio shall be
transferable, but transfers of Shares of a particular Portfolio will be
recorded on the Share transfer records of the Trust applicable to that
Portfolio only at such times as Shareholders shall have the right to
require the Trust to redeem Shares of that Portfolio and at such other
times as may be permitted by the Trustees.
(j) Equality. All Shares of each particular Portfolio shall
represent an equal proportionate interest in the assets belonging to that
Portfolio (subject to the
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liabilities of that Portfolio), and each Share of any particular Portfolio
shall be equal to each other Share thereof; but the provisions of this
sentence shall not restrict any distinctions permissible under subsection (c)
of this Section 6.2 that may exist with respect to dividends and distributions
on Shares of the same Portfolio. The Trustees may from time to time divide or
combine the Shares of any particular Portfolio into a greater or lesser number
of Shares of that Portfolio without thereby changing the proportionate
beneficial interest in the assets belonging to that Portfolio or in any way
affecting the rights of the holders of Shares of any other Portfolio.
(k) Rights of Fractional Shares. Any fractional Share of any
Series shall carry proportionately all the rights and obligations of a
whole Share of that Series, including rights and obligations with respect
to voting, receipt of dividends and distributions, redemption of Shares,
and liquidation of the Trust or of the Portfolio to which they pertain.
(l) Conversion Rights. Subject to compliance with the requirements
of the 1940 Act, the Trustees shall have the authority to provide that
holders of Shares of any Portfolio shall have the right to convert said
Shares into Shares of one or more other Portfolios in accordance with
such requirements and procedures as the Trustees may establish.
SECTION 6.3. Ownership of Shares. The ownership of Shares shall be
recorded on the books of the Trust or of a Transfer Agent or similar agent for
the Trust, which books shall be maintained separately for the Shares of each
Series that has been authorized. Certificates evidencing the ownership of
Shares need not be issued except as the Trustees may otherwise determine from
time to time, and the Trustees shall have power to call outstanding Share
certificates and to replace them with book entries. The Trustees may make
such rules as they consider appropriate for the issuance of Share
certificates, the use of facsimile signatures, the transfer of Shares and
similar matters. The record books of the Trust as kept by the Trust or any
Transfer Agent or similar agent, as the case may be, shall be conclusive as to
who are the Shareholders and as to the number of Shares of each Portfolio held
from time to time by each such Shareholder.
The holders of Shares of each Portfolio shall upon demand disclose to the
Trustees in writing such information with respect to their direct and indirect
ownership of Shares of such Portfolio as the Trustees deem necessary to comply
with the
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provisions of the Internal Revenue Code, or to comply with the requirements of
any other authority.
SECTION 6.4. Investments in the Trust. The Trustees may accept
investments in any Portfolio of the Trust from such Persons and on such terms
and for such consideration, not inconsistent with the provisions of the 1940
Act, as they from time to time authorize. The Trustees may authorize any
Distributor, Principal Underwriter, Custodian, Transfer Agent or other Person
to accept orders for the purchase of Shares that conform to such authorized
terms and to reject any purchase orders for Shares, whether or not conforming
to such authorized terms.
SECTION 6.5. No Pre-emptive Rights. No Shareholder, by virtue of
holding Shares of any Portfolio, shall have any preemptive or other right to
subscribe to any additional Shares of that Portfolio, or to any shares of any
other Portfolio, or any other Securities issued by the Trust.
SECTION 6.6. Status of Shares. Every Shareholder, by virtue of having
become a Shareholder, shall be held to have expressly assented and agreed to
the terms hereof and to have become a party hereto. Shares shall be deemed to
be personal property, giving only the rights provided herein. Ownership of
Shares shall not entitle the Shareholder to any title in or to the whole or
any part of the Trust Property or right to call for a partition or division of
the same or for an accounting, nor shall the ownership of Shares constitute
the Shareholders partners. The death of a Shareholder during the continuance
of the Trust shall not operate to terminate the Trust or any Portfolio, nor
entitle the representative of any deceased Shareholder to an accounting or to
take any action in court or elsewhere against the Trust or the Trustees, but
only to the rights of said decedent under this Declaration of Trust.
ARTICLE 7
SHAREHOLDERS' VOTING POWERS AND MEETINGS
SECTION 7.1. Voting Powers. The Shareholders shall have power to vote
only (i) for the election or removal of Trustees as provided in Sections
4.1(c) and (e) hereof, (ii) with respect to the approval or termination in
accordance with the 1940 Act of any contract with a Contracting Party as
provided in Section 5.2 hereof as to which Shareholder approval is as required
by the 1940 Act, (iii) with respect to any termination or reorganization of
the Trust or any Portfolio to the extent and as provided in Sections 9.1 and
9.2 hereof, (iv) with respect to any amendment
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of this Declaration of Trust to the extent and as provided in Section 9.3
hereof, (v) to the same extent as the stockholders of a Massachusetts business
corporation as to whether or not a court action, proceeding or claim should or
should not be brought or maintained derivatively or as a class action on
behalf of the Trust or any Portfolio, or the Shareholders of any of them
(provided, however, that a Shareholder of a particular Portfolio shall not in
any event be entitled to maintain a derivative or class action on behalf of
any other Portfolio or the Shareholders thereof), and (vi) with respect to
such additional matters relating to the Trust as may be required by the 1940
Act, this Declaration of Trust, the By-Laws or any registration of the Trust
with the Commission (or any successor agency) or any State, or as the Trustees
may consider necessary or desirable. If and to the extent that the Trustees
shall determine that such action is required by law, they shall cause each
matter required or permitted to be voted upon at a meeting or by written
consent of Shareholders to be submitted to a separate vote of the outstanding
Shares of each Portfolio entitled to vote thereon; provided that (i) when
expressly required by this Declaration or by the 1940 Act, actions of
Shareholders shall be taken by Single Class Voting of all outstanding Shares
of each Series whose holders are entitled to vote thereon; and (ii) when the
Trustees determine that any matter to be submitted to a vote of Shareholders
affects only the rights or interests of Shareholders of one or more but not
all Portfolios, then only the Shareholders of the Portfolios so affected shall
be entitled to vote thereon.
SECTION 7.2. Number of Votes and Manner of Voting; Proxies. On each
matter submitted to a vote of the Shareholders, each holder of Shares of any
Series shall be entitled to a number of votes equal to the number of Shares of
such Series standing in his name on the books of the Trust. There shall be no
cumulative voting in the election of Trustees. Shares may be voted in person
or by proxy. A proxy with respect to Shares held in the name of two (2) or
more Persons shall be valid if executed by any one of them unless at or prior
to exercise of the proxy the Trust receives a specific written notice to the
contrary from any one of them. A proxy purporting to be executed by or on
behalf of a Shareholder shall be deemed valid unless challenged at or prior to
its exercise and the burden of proving invalidity shall rest on the
challenger. Until Shares are issued, the Trustees may exercise all rights of
Shareholders and may take any action required by law, this Declaration of
Trust or the By-Laws to be taken by Shareholders.
SECTION 7.3. Meetings. Meetings of Shareholders may be called by the
Trustees from time to time for the purpose of taking action upon any matter
requiring the vote or authority of the Shareholders as herein provided, or
upon any other matter
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deemed by the Trustees to be necessary or desirable. Written notice of any
meeting of Shareholders shall be given or caused to be given by the Trustees
by mailing such notice at least seven (7) days before such meeting, postage
prepaid, stating the time, place and purpose of the meeting, to each
Shareholder at the Shareholder's address as it appears on the records of the
Trust. The Trustees shall promptly call and give notice of a meeting of
Shareholders for the purpose of voting upon removal of any Trustee of the
Trust when requested to do so in writing by Shareholders holding not less than
ten percent (10%) of the Shares then outstanding. If the Trustees shall fail
to call or give notice of any meeting of Shareholders for a period of thirty
(30) days after written application by Shareholders holding at least ten
percent (10%) of the Shares then outstanding requesting that a meeting be
called for any other purpose requiring action by the Shareholders as provided
herein or in the By-Laws, then Shareholders holding at least ten percent (10%)
of the Shares then outstanding may call and give notice of such meeting, and
thereupon the meeting shall be held in the manner provided for herein in case
of call thereof by the Trustees.
SECTION 7.4. Record Dates. For the purpose of determining the
Shareholders who are entitled to vote or act at any meeting or any adjournment
thereof, or who are entitled to participate in any dividend or distribution,
or for the purpose of any other action, the Trustees may from time to time
close the transfer books for such period, not exceeding thirty (30) days
(except at or in connection with the termination of the Trust), as the
Trustees may determine; or without closing the transfer books the Trustees may
fix a date and time not more than sixty (60) days prior to the date of any
meeting of Shareholders or other action as the date and time of record for the
determination of Shareholders entitled to vote at such meeting or any
adjournment thereof or to be treated as Shareholders of record for purposes of
such other action, and any Shareholder who was a Shareholder at the date and
time so fixed shall be entitled to vote at such meeting or any adjournment
thereof or to be treated as a Shareholder of record for purposes of such other
action, even though he has since that date and time disposed of his Shares,
and no Shareholder becoming such after that date and time shall be so entitled
to vote at such meeting or any adjournment thereof or to be treated as a
Shareholder of record for purposes of such other action.
SECTION 7.5. Quorum and Required Vote. A majority of the Shares
entitled to vote shall be a quorum for the transaction of business at a
Shareholders' meeting, but any lesser number shall be sufficient for
adjournments. Any adjourned session or sessions may be held within a
reasonable time after the date set for the original meeting without the
necessity of further notice.
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A Majority Shareholder Vote at a meeting of which a quorum is present shall
decide any question, except when a different vote is required or permitted by
any provision of the 1940 Act or other applicable law or by this Declaration
of Trust or the By-Laws, or when the Trustees shall in their discretion
require a larger vote or the vote of a majority or larger fraction of the
Shares of one or more particular Series.
SECTION 7.6. Action by Written Consent. Subject to the provisions of
the 1940 Act and other applicable law, any action taken by Shareholders may be
taken without a meeting if a majority of Shareholders entitled to vote on the
matter (or such larger proportion thereof or of the Shares of any particular
Series as shall be required by the 1940 Act or by any express provision of
this Declaration of Trust or the By-Laws or as shall be permitted by the
Trustees) consent to the action in writing and if the writings in which such
consent is given are filed with the records of the meetings of Shareholders,
to the same extent and for the same period as proxies given in connection with
a Shareholders' meeting. Such consent shall be treated for all purposes as a
vote taken at a meeting of Shareholders.
SECTION 7.7. Inspection of Records. The records of the Trust shall be
open to inspection by Shareholders to the same extent as is permitted
stockholders of a Massachusetts business corporation under the Massachusetts
Business Corporation Law.
SECTION 7.8. Additional Provisions. The By-Laws may include further
provisions for Shareholders' votes and meetings and related matters not
inconsistent with the provisions hereof.
ARTICLE 8
LIMITATION OF LIABILITY; INDEMNIFICATION
SECTION 8.1. Trustees, Shareholders, etc. Not Personally Liable; Notice.
The Trustees and officers of the Trust, in incurring any debts, liabilities or
obligations, or in limiting or omitting any other actions for or in connection
with the Trust, are or shall be deemed to be acting as Trustees or officers of
the Trust and not in their own capacities. No Shareholder shall be subject to
any personal liability whatsoever in tort, contract or otherwise to any other
Person or Persons in connection with the assets or the affairs of the Trust or
of any Portfolio, and subject to Section 8.4 hereof, no Trustee, officer,
employee or agent of the Trust shall be subject to any personal liability
whatsoever in tort, contract, or otherwise, to any other Person or Persons in
connection with the assets or affairs of the Trust or of any Portfolio, save
only that arising
<PAGE>37
from his own willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office or the discharge
of his functions. The Trust (or if the matter relates only to a particular
Portfolio, that Portfolio) shall be solely liable for any and all debts,
claims, demands, judgments, decrees, liabilities or obligations of any and
every kind, against or with respect to the Trust or such Portfolio in tort,
contract or otherwise in connection with the assets or the affairs of the
Trust or such Portfolio, and all Persons dealing with the Trust or any
Portfolio shall be deemed to have agreed that resort shall be had solely to
the Trust Property of the Trust or the Portfolio Assets of such Portfolio, as
the case may be, for the payment or performance thereof.
The Trustees shall use their best efforts to ensure that every note,
bond, contract, instrument, certificate or undertaking made or issued by the
Trustees or by any officers or officer shall give notice that this Declaration
of Trust is on file with the Secretary of The Commonwealth of Massachusetts
and shall recite to the effect that the same was executed or made by or on
behalf of the Trust or by them as Trustees or Trustee or as officers or
officer, and not individually, and that the obligations of such instrument are
not binding upon any of them or the Shareholders individually but are binding
only upon the assets and property of the Trust, or the particular Portfolio in
question, as the case may be, but the omission thereof shall not operate to
bind any Trustees or Trustee or officers or officer or Shareholders or
Shareholder individually, or to subject the Portfolio Assets of any Portfolio
to the obligations of any other Portfolio.
SECTION 8.2. Trustees' Good Faith Action; Expert Advice; No Bond or
Surety. The exercise by the Trustees of their powers and discretions
hereunder shall be binding upon everyone interested. Subject to Section 8.4
hereof, a Trustee shall be liable for his own willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct
of the office of Trustee, and for nothing else, and shall not be liable for
errors of judgment or mistakes of fact or law. Subject to the foregoing, (i)
the Trustees shall not be responsible or liable in any event for any neglect
or wrongdoing of any officer, agent, employee, consultant, Investment Advisor,
Administrator, Distributor or Principal Underwriter, Custodian or Transfer
Agent, Dividend Disbursing Agent, Shareholder Servicing Agent or Accounting
Agent of the Trust, nor shall any Trustee be responsible for the act or
omission of any other Trustee; (ii) the Trustees may take advice of counsel or
other experts with respect to the meaning and operation of this Declaration of
Trust and their duties as Trustees, and shall be under no liability for any
act or omission in accordance with such advice or for failing
<PAGE>38
to follow such advice; and (iii) in discharging their duties, the Trustees,
when acting in good faith, shall be entitled to rely upon the books of account
of the Trust and upon written reports made to the Trustees by any officer
appointed by them, any independent public accountant, and (with respect to the
subject matter of the contract involved) any officer, partner or responsible
employee of a Contracting Party appointed by the Trustees pursuant to Section
5.2 hereof. The Trustees as such shall not be required to give any bond or
surety or any other security for the performance of their duties.
SECTION 8.3. Indemnification of Shareholders. If any
Shareholder (or former Shareholder) of the Trust shall be charged or held to
be personally liable for any obligation or liability of the Trust solely by
reason of being or having been a Shareholder and not because of such
Shareholder's acts or omissions or for some other reason, the Trust (upon
proper and timely request by the Shareholder) shall assume the defense against
such charge and satisfy any judgment thereon, and the Shareholder or former
Shareholder (or the heirs, executors, administrators or other legal
representatives thereof, or in the case of a corporation or other entity, its
corporate or other general successor) shall be entitled (but solely out of the
assets of the Portfolio of which such Shareholder or former Shareholder is or
was the holder of Shares) to be held harmless from and indemnified against all
loss and expense arising from such liability.
SECTION 8.4. Indemnification of Trustees, Officers, etc. Subject to the
limitations set forth hereinafter in this Section 8.4, the Trust shall
indemnify (from the assets of the Portfolio or Portfolios to which the conduct
in question relates) each of its Trustees and officers (including Persons who
serve at the Trust's request as directors, officers or trustees of another
organization in which the Trust has any interest as a shareholder, creditor or
otherwise [hereinafter, together with such Person's heirs, executors,
administrators or personal representative, referred to as a "Covered Person"])
against all liabilities, including but not limited to amounts paid in
satisfaction of judgments, in compromise or as fines and penalties, and
expenses, including reasonable accountants' and counsel fees, incurred by any
Covered Person in connection with the defense or disposition of any action,
suit or other proceeding, whether civil or criminal, before any court or
administrative or legislative body, in which such Covered Person may be or may
have been involved as a party or otherwise or with which such Covered Person
may be or may have been threatened, while in office or thereafter, by reason
of being or having been such a Trustee or officer, director or trustee, except
with respect to any matter as to which it has been determined that
<PAGE>39
such Covered Person (i) did not act in good faith in the reasonable belief
that such Covered Person's action was in or not opposed to the best interests
of the Trust or (ii) had acted with willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of such
Covered Person's office (either and both of the conduct described in (i) and
(ii) being referred to hereafter as "Disabling Conduct"). A determination
that the Covered Person is entitled to indemnification may be made by (i) a
final decision on the merits by a court or other body before whom the
proceeding was brought that the Covered Person to be indemnified was not
liable by reason of Disabling Conduct, (ii) dismissal of a court action or an
administrative proceeding against a Covered Person for insufficiency of
evidence of Disabling Conduct, or (iii) a reasonable determination, based upon
a review of the facts, that the indemnitee was not liable by reason of
Disabling Conduct by (a) a vote of a majority of a quorum of Trustees who are
neither "interested persons" of the Trust as defined in Section 2(a)(19) of
the 1940 Act nor parties to the proceeding, or (b) an independent legal
counsel in a written opinion. Expenses, including accountants' and counsel
fees so incurred by any such Covered Person (but excluding amounts paid in
satisfaction of judgments, in compromise or as fines or penalties), may be
paid from time to time by the Portfolio or Portfolios to which the conduct in
question related in advance of the final disposition of any such action, suit
or proceeding; provided, that the Covered Person shall have undertaken to
repay the amounts so paid to such Portfolio or Portfolios if it is ultimately
determined that indemnification of such expenses is not authorized under this
Article 8 and (i) the Covered Person shall have provided security for such
undertaking, (ii) the Trust shall be insured against losses arising by reason
of any lawful advances, or (iii) a majority of a quorum of the disinterested
Trustees, or an independent legal counsel in a written opinion, shall have
determined, based on a review of readily available facts (as opposed to a full
trial-type inquiry), that there is reason to believe that the Covered Person
ultimately will be found entitled to indemnification.
SECTION 8.5. Compromise Payment. As to any matter disposed of by a
compromise payment by any such Covered Person referred to in Section 8.4
hereof, pursuant to a consent decree or otherwise, no such indemnification
either for said payment or for any other expenses shall be provided unless
such indemnification shall be approved (i) by a majority of a quorum of the
disinterested Trustees or (ii) by an independent legal counsel in a written
opinion. Approval by the Trustees pursuant to clause (i) or by independent
legal counsel pursuant to clause (ii) shall not prevent the recovery from any
Covered Person of any amount paid to such Covered Person in accordance with
either of such clauses
<PAGE>40
as indemnification if such Covered Person is subsequently adjudicated by a
court of competent jurisdiction not to have acted in good faith in the
reasonable belief that such Covered Person's action was in or not opposed to
the best interests of the Trust or to have been liable to the Trust or its
Shareholders by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of such Covered
Person's office.
SECTION 8.6. Indemnification Not Exclusive, etc. The right
of indemnification provided by this Article 8 shall not be exclusive of or
affect any other rights to which any such Covered Person may be entitled. As
used in this Article 8, a "disinterested" Person is one against whom none of
the actions, suits or other proceedings in question, and no other action, suit
or other proceeding on the same or similar grounds is then or has been pending
or threatened. Nothing contained in this Article 8 shall affect any rights to
indemnification to which personnel of the Trust, other than Trustees and
officers, and other Persons may be entitled by contract or otherwise under
law, nor the power of the Trust to purchase and maintain liability insurance
on behalf of any such Person.
SECTION 8.7. Liability of Third Persons Dealing with Trustees. No
person dealing with the Trustees shall be bound to make any inquiry concerning
the validity of any transaction made or to be made by the Trustees or to see
to the application of any payments made or property transferred to the Trust
or upon its order.
ARTICLE 9
DURATION; REORGANIZATION; AMENDMENTS
SECTION 9.1. Duration and Termination of Trust. Unless terminated as
provided herein, the Trust shall continue without limitation of time and,
without limiting the generality of the foregoing, no change, alteration or
modification with respect to any Portfolio or Series of Shares shall operate
to terminate the Trust. The Trust may be terminated at any time by a Majority
of the Trustees, subject to the favorable vote of the holders of not less than
a majority of the Shares outstanding and entitled to vote of each Portfolio of
the Trust, or by an instrument or instruments in writing without a meeting,
consented to by the holders of not less than a majority of such Shares, or by
such greater or different vote of Shareholders of any Series as may be
established by the Certificate of Designation by which such Series was
authorized. Upon termination, after paying or otherwise providing for all
charges, taxes, expenses and
<PAGE>41
liabilities, whether due or accrued or anticipated as may be determined by the
Trustees, the Trust shall in accordance with such procedures as the Trustees
consider appropriate reduce the remaining assets to distributable form in
cash, Securities or other property, or any combination thereof, and distribute
the proceeds to the Shareholders, in conformity with the provisions of Section
6.2(d) hereof.
SECTION 9.2. Reorganization. The Trustees may sell, convey and transfer
all or substantially all of the assets of the Trust, or the assets belonging
to any one or more Portfolios, to another trust, partnership, association or
corporation organized under the laws of any state of the United States, or may
transfer such assets to another Portfolio of the Trust, in exchange for cash,
Shares or other Securities (including, in the case of a transfer to another
Portfolio of the Trust, Shares of such other Portfolio), or to the extent
permitted by law then in effect may merge or consolidate the Trust or any
Portfolio with any other Trust or any corporation, partnership, or association
organized under the laws of any state of the United States, all upon such
terms and conditions and for such consideration when and as authorized by vote
or written consent of a Majority of the Trustees and approved by the
affirmative vote of the holders of not less than a majority of the Shares
outstanding and entitled to vote of each Portfolio whose assets are affected
by such transaction, or by an instrument or instruments in writing without a
meeting, consented to by the holders of not less than a majority of such
Shares, and/or by such other vote of any Series as may be established by the
Certificate of Designation with respect to such Series. Following such
transfer, the Trustees shall distribute the cash, Shares or other Securities
or other consideration received in such transaction (giving due effect to the
assets belonging to and indebtedness of, and any other differences among, the
various Portfolios of which the assets have so been transferred) among the
Shareholders of the Portfolio of which the assets have been so transferred;
and if all of the assets of the Trust have been so transferred, the Trust
shall be terminated. Nothing in this Section 9.2 shall be construed as
requiring approval of Shareholders for the Trustees to organize or assist in
organizing one or more corporations, trusts, partnerships, associations or
other organizations, and to sell, convey or transfer less than substantially
all of the Trust Property or the assets belonging to any Portfolio to such
organizations or entities.
SECTION 9.3. Amendments; etc. All rights granted to the Shareholders
under this Declaration of Trust are granted subject to the reservation of the
right to amend this Declaration of Trust as herein provided, except that no
amendment shall repeal the limitations on personal liability of any
Shareholder or
<PAGE>42
Trustee or the prohibition of assessment upon the Shareholders (otherwise than
as permitted under Section 6.2(h)) without the express consent of each
Shareholder or Trustee involved. Subject to the foregoing, the provisions of
this Declaration of Trust (whether or not related to the rights of
Shareholders) may be amended at any time, so long as such amendment does not
adversely affect the rights of any Shareholder with respect to which such
amendment is or purports to be applicable and so long as such amendment is not
in contravention of applicable law, including the 1940 Act, by an instrument
in writing signed by a Majority of the Trustees (or by an officer of the Trust
pursuant to the vote of a Majority of the Trustees). Any amendment to this
Declaration of Trust that adversely affects the rights of all Shareholders may
be adopted at any time by an instrument in writing signed by a Majority of the
Trustees (or by an officer of the Trust pursuant to a vote of a Majority of
the Trustees) when authorized to do so by the vote in accordance with Section
7.1 hereof of Shareholders holding a majority of all the Shares outstanding
and entitled to vote, without regard to Series, or if said amendment adversely
affects the rights of the Shareholders of less than all of the Portfolios, by
the vote of the holders of a majority of all the Shares entitled to vote of
each Portfolio so affected. Subject to the foregoing, any such amendment
shall be effective when the instrument containing the terms thereof and a
certificate (which may be a part of such instrument) to the effect that such
amendment has been duly adopted, and setting forth the circumstances thereof,
shall have been executed and acknowledged by a Trustee or officer of the Trust
and filed as provided in Section 9.4 hereof.
SECTION 9.4. Filing of Copies of Declaration and Amendments. The
original or a copy of this Declaration and of each amendment hereto (including
each Certificate of Designation and Certificate of Termination), as well as
the certificates called for by Section 4.1(k) hereof as to changes in the
Trustees, shall be kept at the office of the Trust where it may be inspected
by any Shareholder, and one copy of each such instrument shall be filed with
the Secretary of The Commonwealth of Massachusetts, as well as with any other
governmental office where such filing may from time to time be required by the
laws of Massachusetts. A restated Declaration, integrating into a single
instrument all of the provisions of this Declaration which are then in effect
and operative, may be executed from time to time by a Majority of the Trustees
and shall, upon filing with the Secretary of The Commonwealth of
Massachusetts, be conclusive evidence of all amendments contained therein and
may thereafter be referred to in lieu of the original Declaration and the
various amendments thereto.
<PAGE>43
ARTICLE 10
MISCELLANEOUS
SECTION 10.1. Governing Law. This Declaration of Trust is executed and
delivered in The Commonwealth of Massachusetts and with reference to the laws
thereof, and the rights of all parties and the construction and effect of
every provision hereof shall be subject to and construed according to the laws
of said Commonwealth.
SECTION 10.2. Counterparts. This Declaration of Trust and any amendment
thereto may be simultaneously executed in several counterparts, each of which
so executed shall be deemed to be an original, and such counterparts,
together, shall constitute but one and the same instrument, which shall be
sufficiently evidenced by any such original counterpart.
SECTION 10.3. Reliance by Third Parties. Any certificate executed by an
individual who, according to the records in the office of the Secretary of The
Commonwealth of Massachusetts appears to be a Trustee hereunder, certifying
to: (a) the number or identity of Trustees or Shareholders, (b) the due
authorization of the execution of any instrument or writing, (c) the form of
any vote passed as a meeting of Trustees or Shareholders, (d) the fact that
the number of Trustees or Shareholders present at any meeting or executing any
written instrument satisfies the requirements of this Declaration of Trust,
(e) the form of any By-Law adopted, or the identity of any officers elected,
by the Trustees, or (f) the existence or non-existence of any fact or facts
which in any manner relate to the affairs of the Trust, shall be conclusive
evidence as to the matters so certified in favor of any Person dealing with
the Trustees, or any of them, and the successors of such Person.
SECTION 10.4. References; Headings. The masculine gender shall include
the feminine and neuter genders. Headings are placed herein for convenience
of reference only and shall not be taken as a part of this Declaration or
control or affect the meaning, construction or effect hereof.
SECTION 10.5. Use of the Name "Counsellors".
Warburg, Pincus Counsellors, Inc. ("Warburg") has consented to the use by
the Trust of the identifying name "Counsellors", which is a property right of
Warburg. The Trust will only use the name "Counsellors" as a component of its
name and for no other purpose and will not purport to grant to any third party
the right to use the name "Counsellors" for any purpose. Warburg or any
corporate affiliate of Warburg may use or grant to others
<PAGE>44
the right to use the name "Counsellors", as all or a portion of a corporate or
business name or for any commercial purpose, including a grant of such right
to any other investment company. At the request of Warburg, the Trust will
take such action as may be required to provide its consent to the use of such
name by Warburg, or any corporate affiliate of Warburg, or by any Person to
whom Warburg or an affiliate of Warburg shall have granted the right to the
use of the name "Counsellors". Upon the termination of any investment
advisory or management agreement into which Warburg and the Trust may enter,
the Trust shall, upon request by Warburg, cease to use the name "Counsellors"
as a component of its name, and shall not use such name or initials as a part
of its name or for any other commercial purpose, and shall cause its officers
and Trustees to take any and all actions which Warburg may request to effect
the foregoing and to reconvey to Warburg or such corporate affiliate any and
all rights to such name.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal,
for himself and his assigns, and has thereby accepted the Trusteeship as the
Initial Trustee of Counsellors New York Tax Exempt Bond Fund hereby granted
and agreed to the provisions hereof, all as of the day and year first above
written.
/s/ W. Lee H. Dunham
_________________________
W. Lee H. Dunham
The undersigned Settlor of Counsellors New York Tax Exempt Bond Fund,
hereby accepts, approves and authorizes the foregoing Agreement and
Declaration of Trust of Counsellors New York Tax Exempt Bond Fund.
Dated: December 23, 1986
/s/ Virginia Spencer
_________________________
Virginia Spencer
<PAGE>45
ACKNOWLEDGMENTS
M A S S A C H U S E T T S
Suffolk, ss.: December 23, 1986
Then personally appeared the above named W. Lee H. Dunham and
acknowledged the foregoing instrument to be his free act and deed.
Before me,
________________________
Notary Public
M A S S A C H U S E T T S
Suffolk, ss.: December 23, 1986
Then personally appeared the above named Virginia Spencer and
acknowledged the foregoing instrument to be her free act and deed.
Before me,
________________________
Notary Public
<PAGE>1
WARBURG, PINCUS NEW YORK MUNICIPAL BOND FUND
AMENDMENT TO AGREEMENT AND DECLARATION OF TRUST
(Change of Name to Warburg, Pincus
New York Intermediate Municipal Fund)
The undersigned, Vice President and Secretary of the Warburg, Pincus New
York Municipal Bond Fund (the "Fund"), does hereby certify that pursuant to
Article 4, Section 4.2 and Article 9, Section 9.3 of the Agreement and
Declaration of Trust of the Fund, dated December 23, 1986, as amended or
supplemented, the following proposal was duly adopted by a vote of a majority
of the Trustees at a meeting duly called and held on October 27, 1994:
RESOLVED, that the name of the Warburg, Pincus New York Municipal
Bond Fund be changed to Warburg, Pincus New York Intermediate
Municipal Fund and that the officers of the Fund, or their
designees, be, and hereby are, authorized and directed to do any and
all such lawful acts as may be necessary or appropriate to perform
and carry out the name change.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 6th
day of February, 1995.
/s/ Eugene P. Grace
Eugene P. Grace
Vice President and Secretary
Sworn to before me this
6th day of February, 1995
/s/ Frank J. Anastasi
Notary Public
<PAGE>2
WARBURG, PINCUS NEW YORK MUNICIPAL BOND FUND
(hereafter "Warburg, Pincus
New York Intermediate Municipal Fund")
Certificate of Amendment
The undersigned, being the Vice President and Secretary of the Warburg,
Pincus New York Municipal Bond Fund (hereinafter referred to as the "Trust"),
a trust with transferable shares of the type commonly called a Massachusetts
business trust, DOES HEREBY CERTIFY that, pursuant to the authority conferred
upon the Trustees of the Trust by Section 9.3 of the Agreement and Declaration
of Trust, dated December 23, 1986, as amended or supplemented (the
"Declaration of Trust"), and by the affirmative vote of a majority of the
Trustees at a meeting duly called and held on October 27, 1994, the
Declaration of Trust is hereby amended as follows:
Section 1.1 of the Declaration of Trust is hereby amended to change
the name of the Trust to be "Warburg, Pincus New York Intermediate
Municipal Fund."
IN WITNESS WHEREOF, the undersigned has set his hand and seal this 6th
day of February, 1995.
/s/ Eugene P. Grace
Eugene P. Grace
Vice President and Secretary
ACKNOWLEDGEMENT
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK ) February 6, 1995
Then personally appeared the above-named Eugene P. Grace and acknowledged
the foregoing instrument to be his free act and deed.
Before me
/s/ Frank J. Anastasi
Notary Public
Commission expires: 1/26/97
<PAGE>1
WARBURG, PINCUS COUNSELLORS NEW YORK MUNICIPAL BOND FUND
AMENDMENT TO AGREEMENT AND DECLARATION OF TRUST
(Change of Name to Warburg, Pincus
New York Municipal Bond Fund)
The undersigned, Assistant Secretary of Warburg, Pincus Counsellors
New York Municipal Bond Fund (the "Fund"), does hereby certify that pursuant
to Article I, Section 1 and Article IX, Section 9.3 of the Agreement and
Declaration of Trust of the Fund dated December 23, 1986, the following
resolutions were duly adopted by a vote of a Majority of the Trustees (as
defined in the Agreement and Declaration of Trust) at a meeting of the Board
of Trustees of the Fund held on January 29, 1991.
RESOLVED, that the change of the name of the New York Municipal Bond
Fund to the name set forth opposite its current name below
commencing on or about February 28, 1992 be, and hereby is,
approved, and the Amendment to the Agreement and Declaration of
Trust of such Fund substituting the new name set forth below for the
current name wherever it appears in the existing Agreement and
Declaration of Trust be, and hereby is, approved and the proper
officers of such Fund be, and they hereby are, authorized and
directed to execute such Amendment with such modifications as the
officer executing the same shall deem appropriate or as may be
required to conform to the requirements of any applicable statute,
regulation or regulatory body.
Current Name New Name
Warburg, Pincus Waburg, Pincus New York
Counsellors New Municipal Bond Fund
York Municipal
Bond Fund
; and further
RESOLVED, that the proper officers of the Fund be, and each of them
hereby is, authorized and directed to file the above-referenced
Amendment to the Agreement and Declaration of Trust and to do any
and all such lawful acts as may be necessary or appropriate to
effectuate the purposes of the foregoing resolutions, including
without limitation, the execution and filing of a
<PAGE>2
supplement to the Funds' prospectuses and/or statements of additional
information or amendments to the Funds' registration statements on Form N-1A.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
19th day of February 1992.
/s/ Jamie Stockel Paley
Jamie Stockel Paley
Sworn to before me this
19th day of February, 1992
/s/ Rosemary Boyle
Notary Public
<PAGE>1
COUNSELLORS NEW YORK MUNICIPAL BOND FUND
AMENDMENT TO AGREEMENT AND DECLARATION OF TRUST
(Change of Name to Warburg, Pincus Counsellors
New York Municipal Bond Fund)
The undersigned, Assistant Secretary of Counsellors New York
Municipal Bond Fund (the "Fund"), does hereby certify that pursuant to Article
I, Section 1 and Article IX, Section 9.3 of the Agreement and Declaration of
Trust of the Fund dated December 23, 1986, the following resolutions were duly
adopted by a vote of a Majority of the Trustees (as defined in the Agreement
and Declaration of Trust) at a meeting of the Board of Trustees of the Fund
held on January 29, 1991.
RESOLVED, that the change of the name of the New York Municipal Bond
Fund to the name set forth opposite its current name below
commencing on or about February 28, 1992 be, and hereby is,
approved, and the Amendment to the Agreement and Declaration of
Trust of such Fund substituting the new name set forth below for the
current name wherever it appears in the existing Agreement and
Declaration of Trust be, and hereby is, approved and the proper
officers of such Fund be, and they hereby are, authorized and
directed to execute such Amendment with such modifications as the
officer executing the same shall deem appropriate or as may be
required to conform to the requirements of any applicable statute,
regulation or regulatory body.
Current Name New Name
Counsellors New York Warburg, Pincus Counsellors
Municipal Bond Fund New York Municipal Bond
Fund
; and further
RESOLVED, that the proper officers of the Fund be, and each of them
hereby is, authorized and directed to file the above-referenced
Amendment to the Agreement and Declaration of Trust and to do any
and all such lawful acts as may be necessary or appropriate to
effectuate
<PAGE>2
the purposes of the foregoing resolutions, including without limitation, the
execution and filing of a supplement to the Funds' prospectuses and/or
statements of additional information or amendments to the Funds' registration
statements on Form N-1A.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 3
day of February 1992.
/s/ Jamie Stockel Paley
Jamie Stockel Paley
Sworn to before me this
3 day of February, 1992
/s/ Rosemary Boyle
Notary Public
<PAGE>1
Certificate of Designation
COUNSELLORS NEW YORK MUNICIPAL BOND FUND
The undersigned, being the Secretary of Counsellors New York
Municipal Bond Fund (hereinafter referred to as the "Trust"), a trust with
transferable shares of the type commonly called a Massachusetts business
trust, DOES HEREBY CERTIFY that, pursuant to the authority conferred upon the
Trustees of the Trust by Section 6.1 and Section 9.4 of the Agreement and
Declaration of Trust, dated December 23, 1986 as amended February 18, 1987
(hereinafter, as so amended, referred to as the "Declaration of Trust"), and
by the affirmative vote of a majority of the Trustees at a meeting duly called
and held on April 19, 1990, the Declaration of Trust is amended as follows:
1. One billion shares of the Trust's shares of beneficial interest,
par value $.001 per share ("Shares"), are hereby divided into and classified
as a series of Shares, designated Shares - Series 1 Shares ("Series 1
Shares"), and one billion Shares are hereby divided into and classified as a
series of Shares, designated Shares- Series 2 Shares ("Series 2 Shares";
Series 1 Shares and Series 2 Shares are collectively referred to as "Series
Shares").
2. Each Series Share has the same preferences, conversion and other
rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption as every other Share,
irrespective of series, except that:
(a) Series Shares will share equally with Shares other than
Series Shares ("Existing Shares") in the income, earnings and
profits derived from investment and reinvestment of the assets
belonging to the Trust and will be charged equally with Existing
Shares with the liabilities belonging to the Trust, except that:
(1) Series 1 Shares will bear the expense of payments made pursuant
to any shareholder services plan adopted by the Trust to
institutions under any agreements entered into between the Trust and
institutions providing for services to the customers of the
institutions who beneficially own Series 1 Shares; (2) Series 2
Shares will bear the expense of payments made
<PAGE>2
pursuant to any distribution plan adopted by the Trust under Rule 12b-1 under
the Investment Company Act of 1940, as amended, to institutions under any
agreements entered into between the Trust and the institutions providing for
services to the customers of the institutions who beneficially own Series 2
Shares; (3) Series 1 Shares will not bear the expense of payments to
institutions which hold of record Series 2 Shares; (4) Series 2 Shares will
not bear the expense of payments to institutions which hold of record Series 1
shares; and (5) Existing Shares shall not bear the expense of payments to
institutions which hold of record Series Shares; and
(b) On any matter submitted to a vote of shareholders of the
Trust that pertains to (i) the agreements or expenses described in
clause (a)(1) above (or to any plan adopted by the Trust relating to
said agreements or expenses), only Series 1 Shares will be entitled
to vote, and (ii) the agreements or expenses described in clause
(a)(2) above (or to any plan adopted by the Trust relating to said
agreements or expenses), only Series 2 Shares will be entitled to
vote, except that: (1) if said matter affects Existing Shares,
Existing Shares will also be entitled to vote, and in such case
Series Shares will be voted in the aggregate together with such
Existing Shares and not by series except where otherwise required by
law or permitted by the governing Board of the Trust acting in its
sole discretion; and (2) if said matter does not affect Series
Shares, said Shares will not be entitled to vote (except where
otherwise required by law or permitted by the governing Board of the
Trust acting in its sole discretion) even though the matter is
submitted to a vote of the holders of Existing Shares.
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Designation on behalf of Counsellors New York Municipal Bond Fund this 9th day
of May, 1990.
/s/ Arnold M. Reichman
Secretary
<PAGE>3
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On the 9th day of May, 1990, before me personally came Arnold M.
Reichman, to me known to be the Secretary of Counsellors New York Municipal
Bond Fund and the individual described in and who executed the attached
Certificate of Designation of Counsellors New York Municipal Bond Fund (the
"Certificate") and he duly acknowledged to me that he executed the
Certificate.
(Notarial Seal) /s/ Rosemary Boyle
Notary Public
<PAGE>1
COUNSELLORS NEW YORK TAX EXEMPT BOND FUND
AMENDMENT NO. 1 TO AGREEMENT AND DECLARATION OF TRUST
(Change of Name to Counsellors New York Municipal Bond Fund)
The undersigned, Secretary of Counsellors New York Tax Exempt bond
Fund (the "Trust"), does hereby certify that pursuant to Article I, Section 1
and Article IX, Section 9.3 of the Agreement and Declaration of Trust of the
Trust dated December 23, 1986, the following votes were duly adopted by the
unanimous written consent of the Trustees of the Trust executed as of February
12, 1987.
VOTED: That the name of the Trust be changed, effective February 12,
1987, from its current name of "Counsellors New York Tax Exempt
bond Fund" to "Counsellors New York Municipal Bond Fund"; and
FURTHER
VOTED: That the Agreement and Declaration of Trust be, and it hereby
is, amended, effective February 12, 1986, by substituting the
name "Counsellors New York Municipal Bond Fund" for
"Counsellors New York Tax Exempt Bond fund" wherever the latter
name therein appears; and
FURTHER
VOTED: That the proper officers of the Trust be, and each of them
hereby is, authorized and empowered to execute all instruments
and documents and to take all actions as they or any one of
them in his sole discretion deems necessary and appropriate to
carry out the intents and purposes of the foregoing votes.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
18th day of February, 1987.
/s/ Arnold M. Reichman
Arnold M. Reichman
Sworn to before me this
18th day of February, 1987
/s/ Lillian Kirby
__________________________
Notary Public
<PAGE>1
Second Amended and Restated By-Laws
<PAGE>2
WARBURG, PINCUS NEW YORK INTERMEDIATE MUNICIPAL FUND
Second Amended and Restated By-Laws
Index
Page No.
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 1 - SHAREHOLDERS AND SHAREHOLDERS' MEETINGS . . . . . . . . . . . 1
SECTION 1.1. Meetings . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.2. Presiding Officer; Secretary . . . . . . . . . . . . . 1
SECTION 1.3. Authority of Chairman of Meeting to
Interpret Declaration and By-Laws . . . . . . . . . . . . . . . 2
SECTION 1.4. Voting; Quorum . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.5. Inspectors . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.6. Notice of Shareholder Business . . . . . . . . . . . . 2
SECTION 1.7. Shareholders' Action in Writing . . . . . . . . . . . 3
SECTION 1.8. Shareholder Business not Eligible for
Consideration . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE 2 - TRUSTEES AND TRUSTEES' MEETINGS . . . . . . . . . . . . . . . 4
SECTION 2.1. Number of Trustees . . . . . . . . . . . . . . . . . . 4
SECTION 2.2. Regular Meetings of Trustees . . . . . . . . . . . . . 4
SECTION 2.3. Special Meetings of Trustees . . . . . . . . . . . . . 4
SECTION 2.4. Notice of Meetings . . . . . . . . . . . . . . . . . . 4
SECTION 2.5. Quorum; Presiding Officer . . . . . . . . . . . . . . 5
SECTION 2.6. Participation by Telephone . . . . . . . . . . . . . . 5
SECTION 2.7. Location of Meetings . . . . . . . . . . . . . . . . . 5
SECTION 2.8. Votes . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 2.9. Rulings of Chairman . . . . . . . . . . . . . . . . . 5
SECTION 2.10. Trustees' Action in Writing . . . . . . . . . . . . . 6
SECTION 2.11. Resignations . . . . . . . . . . . . . . . . . . . . . 6
SECTION 2.12. Trustee Nominations . . . . . . . . . . . . . . . . . 6
ARTICLE 3 - OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 3.1. Officers of the Trust . . . . . . . . . . . . . . . . 7
SECTION 3.2. Time and Terms of Election . . . . . . . . . . . . . . 7
SECTION 3.3. Resignation and Removal . . . . . . . . . . . . . . . 8
SECTION 3.4. Fidelity Bond . . . . . . . . . . . . . . . . . . . . 8
SECTION 3.5. Chairman of the Trustees . . . . . . . . . . . . . . . 8
SECTION 3.6. Vice Chairmen . . . . . . . . . . . . . . . . . . . . 8
SECTION 3.7. President . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 3.8. Vice Presidents . . . . . . . . . . . . . . . . . . . 9
SECTION 3.9. Treasurer and Assistant Treasurers . . . . . . . . . . 9
SECTION 3.10. Controller and Assistant Controllers . . . . . . . . . 9
SECTION 3.11. Secretary and Assistant Secretaries . . . . . . . . . 10
<PAGE>3
SECTION 3.12. Substitutions . . . . . . . . . . . . . . . . . . . . 10
SECTION 3.13. Execution of Deeds, etc. . . . . . . . . . . . . . . . 10
SECTION 3.14. Power to Vote Securities . . . . . . . . . . . . . . . 10
ARTICLE 4 - COMMITTEES . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 4.1. Power of Trustees to Designate
Committees . . . . . . . . . . . . . . . . . . . . . 11
SECTION 4.2. Rules for Conduct of Committee Affairs. . . . . . . . 11
SECTION 4.3. Trustees May Alter, Abolish, etc. . . . . . . . . . . 11
SECTION 4.4. Minutes; Review by Trustees . . . . . . . . . . . . . 11
ARTICLE 5 - SEAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE 6 - SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 6.1. Issuance of Shares . . . . . . . . . . . . . . . . . . 12
SECTION 6.2. Uncertificated Shares . . . . . . . . . . . . . . . . 12
SECTION 6.3. Share Certificates . . . . . . . . . . . . . . . . . . 12
SECTION 6.4. Lost, Stolen, etc., Certificates . . . . . . . . . . . 13
SECTION 6.5. Record Transfer of Pledged Shares . . . . . . . . . . 13
ARTICLE 7 - CUSTODIAN . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE 8 - AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 8.1. By-Laws Subject to Amendment . . . . . . . . . . . . . 14
SECTION 8.2. Notice of Proposal to Amend By-Laws
Required . . . . . . . . . . . . . . . . . . . . . . 14
<PAGE>4
SECOND AMENDED AND RESTATED
BY-LAWS
OF
WARBURG, PINCUS NEW YORK INTERMEDIATE MUNICIPAL FUND
These Articles are the Second Amended and Restated By-Laws of
Warburg, Pincus New York Intermediate Municipal Fund, a trust with
transferable shares established under the laws of The Commonwealth of
Massachusetts (the "Trust"), pursuant to an Agreement and Declaration of Trust
of the Trust made the 23rd day of December, 1986, and filed in the office of
the Secretary of The Commonwealth (as amended from time to time, the
"Declaration"). These By-Laws have been adopted by the Trustees pursuant to
the authority granted by Section 3.1 of the Declaration.
All words and terms capitalized in these By-Laws, unless otherwise
defined herein, shall have the same meanings as they have in the Declaration.
ARTICLE 1
SHAREHOLDERS AND SHAREHOLDERS' MEETINGS
SECTION 1.1. Meetings. A meeting of the Shareholders of the Trust
shall be held whenever called by the Trustees and whenever election of a
Trustee or Trustees by Shareholders is required by the provisions of the 1940
Act. Meetings of Shareholders shall also be called by the Trustees when
requested in writing by Shareholders holding at least ten percent (10%) of the
Shares then outstanding for the purpose of voting upon removal of any Trustee,
or if the Trustees shall fail to call or give notice of any such meeting of
Shareholders for a period of thirty (30) days after such application, then
Shareholders holding at least ten percent (10%) of the Shares then outstanding
may call and give notice of such meeting. Notice of Shareholders' meetings
shall be given as provided in the Declaration.
SECTION 1.2. Presiding Officer; Secretary. The Chairman of the
Trustees, if any, or in his absence the Vice Chairman or Chairmen, if any, in
the order of their seniority or as the Trustees shall otherwise determine, and
in the absence of the Chairman and all Vice Chairmen, if any (or if there are
none), the President, shall preside at each Shareholders' meeting as chairman
of the meeting, or in the absence of the Chairman, all Vice-Chairmen and the
President, the Trustees present at the meeting shall elect one of their number
as chairman of the meeting. Unless otherwise provided for by the Trustees,
the
<PAGE>5
Secretary of the Trust shall be the secretary of all meetings of Shareholders
and shall record the minutes thereof.
SECTION 1.3. Authority of Chairman of Meeting to Interpret
Declaration and By-Laws. At any Shareholders' meeting the chairman of the
meeting shall be empowered to determine the construction or interpretation of
the Declaration or these By-Laws, or any part thereof or hereof, and his
ruling shall be final.
SECTION 1.4. Voting; Quorum. At each meeting of Shareholders,
except as otherwise provided by the Declaration, every, holder of record of
Shares entitled to vote shall be entitled to a number of votes equal to the
number of Shares standing in his name on the Share register of the Trust.
Shareholders may vote by proxy and the form of any such proxy may be
prescribed from time to time by the Trustees. A quorum shall exist if the
holders of a majority of the outstanding Shares of the Trust entitled to vote
without regard to Series are present in person or by proxy, but any lesser
number shall be sufficient for adjournments. At all meetings of the
Shareholders, votes shall be taken by ballot for all matters which may be
binding upon the Trustees pursuant to Section 7.1 of the Declaration. On
other matters, votes of Shareholders need not be taken by ballot unless
otherwise provided for by the Declaration or by vote of the Trustees, or as
required by the Act or the Regulations, but the chairman of the meeting may in
his discretion authorize any matter to be voted upon by ballot.
SECTION 1.5. Inspectors. At any meeting of Shareholders, the
chairman of the meeting may appoint one or more Inspectors of Election or
Balloting to supervise the voting at such meeting or any adjournment thereof.
If Inspectors are not so appointed, the chairman of the meeting may, and on
the request of any Shareholder present or represented and entitled to vote
shall, appoint one or more Inspectors for such purpose. Each Inspector,
before entering upon the discharge of his duties, shall take and sign an oath
faithfully to execute the duties of Inspector of Election or Balloting, as the
case may be, at such meeting with strict impartiality and according to the
best of his ability. If appointed, Inspectors shall take charge of the polls
and, when the vote is completed, shall make a certificate of the result of the
vote taken and of such other facts as may be required by law.
SECTION 1.6. Notice of Shareholder Business. (a) At any Annual or
Special Meeting of the Shareholders, only such business shall be conducted as
shall have been properly brought before the meeting. To be properly brought
before an Annual or Special Meeting business must be (A) (i) specified in the
notice of meeting (or any supplement thereto) given by or at the
<PAGE>6
direction of the Board of Trustees, (ii) otherwise properly brought before the
meeting by or at the direction of the Board of Trustees, or (iii) subject to
the provisions of Section 1.6 of this Article 1, otherwise properly brought
before the meeting by a Shareholder and (B) a proper subject under applicable
law for Shareholder action.
(b) For business to be properly brought before an Annual or Special
Meeting by a Shareholder, the Shareholder must have given timely notice
thereof in writing to the Secretary of the Trust. To be timely, any such
notice must be delivered to or mailed and received at the principal executive
offices of the Trust not later than 60 days prior to the date of the meeting;
provided, however, that if less than 70 days' notice or prior public
disclosure of the date of the meeting is given or made to Shareholders, any
such notice by a Shareholder to be timely must be so received not later than
the close of business on the 10th day following the day on which notice of the
date of the Annual or Special Meeting was given or such public disclosure was
made.
(c) Any such notice by a Shareholder shall set forth as to each
matter the Shareholder proposes to bring before the Annual or Special Meeting
(i) a brief description of the business desired to be brought before the
Annual or Special Meeting and the reasons for conducting such business at the
Annual or Special Meeting, (ii) the name and address, as they appear on the
Trust's books, of the Shareholder proposing such business, (iii) the class and
number of shares of the capital stock of the Trust which are beneficially
owned by the Shareholder, and (iv) any material interest of the Shareholder in
such business.
(d) Notwithstanding anything in the By-Laws to the contrary, no
business shall be conducted at any Annual or Special Meeting except in
accordance with the procedures set forth in this Section 1.6. The chairman of
the Annual or Special Meeting shall, if the facts warrant, determine and
declare to the meeting that business was not properly brought before the
meeting in accordance with the provisions of this Section 1.6, and if he
should so determine, he shall so declare to the meeting, and any such business
not properly brought before the meeting shall not be considered or transacted.
SECTION 1.7. Shareholders' Action in Writing. Nothing in this
Article 1 shall limit the power of the Shareholders to take any action by
means of written instruments without a meeting, as permitted by Section 7.6 of
the Declaration.
SECTION 1.8. Shareholder Business not Eligible for Consideration.
(a) Notwithstanding anything in these By-Laws to the contrary, any proposal
that is otherwise properly brought before an Annual or Special Meeting by a
Shareholder will not be
<PAGE>7
eligible for consideration by the Shareholders at such Annual or Special
Meeting if such proposal is substantially the same as a matter properly
brought before such Annual or Special Meeting by or at the direction of the
Board of Trustees of the Trust. The chairman of such Annual or Special
Meeting shall, if the facts warrant, determine and declare that a Shareholder
proposal is substantially the same as a matter properly brought before the
meeting by or at the direction of the Board of Trustees, and, if he should so
determine, he shall so declare to the meeting, and any such Shareholder
proposal shall not be considered at the meeting.
(b) This Section 1.8 shall not be construed or applied to make
ineligible for consideration by the Shareholders at any Annual or Special
Meeting any Shareholder proposal required to be included in the Trust's proxy
statement relating to such meeting pursuant to Rule 14a-8 under the Securities
Exchange Act of 1934, or any successor rule thereto.
ARTICLE 2
TRUSTEES AND TRUSTEES' MEETINGS
SECTION 2.1. Number of Trustees. There shall initially be one (1)
Trustee, and the number of Trustees shall thereafter be such number,
authorized by the Declaration, as from time to time shall be fixed by a vote
adopted by a Majority of the Trustees.
SECTION 2.2. Regular Meetings of Trustees. Regular meetings of the
Trustees may be held without call or notice at such places and at such times
as the Trustees may from time to time determine; provided, that notice of such
determination, and of the time, place and purposes of the first regular
meeting thereafter, shall be given to each absent Trustee in accordance with
Section 2.4 hereof.
SECTION 2.3. Special Meetings of Trustees. Special meetings of the
Trustees may be held at any time and at any place when called by the Chairman
of the Trustees, if any, any Vice Chairman, if any, the President or the
Treasurer or by two (2) or more Trustees, or if there shall be fewer than
three (3) Trustees, by any Trustee; provided, that notice of the time, place
and purposes thereof is given to each Trustee in accordance with Section 2.4
hereof by the Secretary or an Assistant Secretary or by the officer or the
Trustees calling the meeting.
SECTION 2.4. Notice of Meetings. Notice of any regular or special
meeting of the Trustees shall be sufficient if given in writing to each
Trustee, and if sent by mail at least five (5) days, or by telegram, Federal
Express or other similar delivery
<PAGE>8
service at least twenty-four (24) hours, before the meeting, addressed to his
usual or last known business or residence address, or if delivered to him in
person at least twenty-four (24) hours before the meeting. Notice of a
special meeting need not be given to any Trustee who was present at an earlier
meeting, not more than thirty-one (31) days prior to the subsequent meeting,
at which the subsequent meeting was called. Notice of a meeting may be waived
by any Trustee by written waiver of notice, executed by him before or after
the meeting, and such waiver shall be filed with the records of the meeting
Attendance by a Trustee at a meeting shall constitute a waiver of notice,
except where a Trustee attends a meeting for the purpose of protesting prior
thereto or at its commencement the lack of notice.
SECTION 2.5. Quorum; Presiding Officer. At any meeting of the
Trustees, a Majority of the Trustees shall constitute a quorum. Any meeting
may be adjourned from time to time by a majority of the votes cast upon the
question, whether or not a quorum is present, and the meeting may be held as
adjourned without further notice. Unless the Trustees shall otherwise elect,
generally or in a particular case, the Chairman of the Trustees, or in his
absence (or if there is none), the Vice Chairman or Vice Chairmen, if any, in
the order of their seniority or as the Trustees shall otherwise determine, or
in the absence of the Chairman and all Vice Chairmen, if any, the President,
shall preside at each meeting of the Trustees as chairman of the meeting.
SECTION 2.6. Participation by Telephone. One or more of the
Trustees may participate in a meeting thereof or of any Committee of the
Trustees by means of a conference telephone or similar communications
equipment allowing all persons participating in the meeting to hear each other
at the same time. Participation by such means shall constitute presence in
person at a meeting.
SECTION 2.7. Location of Meetings. Trustees' meetings may be held
at any place, within or without Massachusetts.
SECTION 2.8. Votes. Voting at Trustees' meetings may be conducted
orally, by show of hands or, if requested by any Trustee, by written ballot.
The results of all voting shall be recorded by the Secretary in the minute
book.
SECTION 2.9. Rulings of Chairman. All other rules of conduct
adopted and used at any Trustees' meeting shall be determined by the chairman
of such meeting, whose ruling on all procedural matters shall be final.
<PAGE>9
SECTION 2.10. Trustees' Action in Writing. Nothing in this Article
2 shall limit the power of the Trustees to take action by means of a written
instrument without a meeting, as provided in Section 4.2 of the Declaration.
SECTION 2.11. Resignations. Any Trustee may resign at any time by
written instrument signed by him and delivered to the Chairman, if any, the
President or the Secretary or to a meeting of the Trustees. Such resignation
shall be effective upon receipt unless specified to be effective at some other
time.
SECTION 2.12. Trustee Nominations. (a) Only persons who are
nominated in accordance with the procedures set forth in this Section 2.12
shall be eligible for election or re-election as Trustees. Nominations of
persons for election or re-election to the Board of Trustees as Trustees of
the Trust may be made at a meeting of Shareholders by or at the direction of
the Board of Trustees or by any Shareholder of the Trust who is entitled to
vote for the election of such nominee at the meeting and who complies with the
notice procedures set forth in this Section 2.12.
(b) Such nominations, other than those made by or at the direction
of the Board of Trustees, shall be made pursuant to timely notice delivered in
writing to the Secretary of the Trust. To be timely, any such notice by a
Shareholder must be delivered to or mailed and received at the principal
executive offices of the Trust not later than 60 days prior to the meeting;
provided, however, that if less than 70 days' notice or prior public
disclosure of the date of the meeting is given or made to Shareholders, any
such notice by a Shareholder to be timely must be so received not later than
the close of business on the 10th day following the day on which notice of the
date of the meeting was given or such public disclosure was made.
(c) Any such notice by a Shareholder shall set forth (i) as to each
person whom the Shareholder proposes to nominate for election or re-election
as a Trustee, (A) the name, age, business address and residence address of
such person, (B) the principal occupation or employment of such person, (C)
the class and number of shares of beneficial interest in the Trust which are
beneficially owned by such person and (D) any other information relating to
such person that is required to be disclosed in solicitations of proxies for
the election of Trustees pursuant to Regulation 14A under the Securities
Exchange Act of 1934 or any successor regulation thereto (including without
limitation such persons' written consent to being named in the proxy statement
as a nominee and to serving as a Trustee if elected and whether any person
intends to seek reimbursement from the Trust of the expenses of any
solicitation of proxies should such person be elected a Trustee of the Trust);
and (ii)
<PAGE>10
as to the Shareholder giving the notice (A) the name and address, as they
appear on the Trust's books, of such Shareholder and (B) the class and number
of shares of beneficial interest in the Trust which are beneficially owned by
such Shareholder. At the request of the Board of Trustees any person
nominated by the Board of Trustees for election as a Trustee shall furnish to
the Secretary of the Trust that information required to be set forth in a
Shareholder's notice of nomination which pertains to the nominee.
(d) If a notice by a Shareholder is required to be given pursuant to
this Section 2.12, no person shall be entitled to receive reimbursement from
the Trust of the expenses of a solicitation of proxies for the election as a
Trustee of a person named in such notice unless such notice states that such
reimbursement will be sought from the Trust. No person shall be eligible for
election as a Trustee of the Trust unless nominated in accordance with the
procedures set forth in this Section 2.12. The chairman of the meeting shall,
if the facts warrant, determine and declare to the meeting that a nomination
was not made in accordance with the procedures prescribed by the By-Laws, and
if he should so determine, he shall so declare to the meeting and the
defective nomination shall be disregarded for all purposes.
ARTICLE 3
OFFICERS
SECTION 3.1. Officers of the Trust. The officers of the Trust shall
consist of a President, a Treasurer and a Secretary, and may include a
Chairman of the Trustees, one or more Vice Chairmen, Vice Presidents,
Assistant Treasurers and Assistant Secretaries, and such other officers as the
Trustees may designate. Any person may hold more than one office. Except for
the Chairman of the Trustees, if any, and any Vice Chairmen, if any, no
officer need be a Trustee.
SECTION 3.2. Time and Terms of Election. The Chairman, if any, the
President, the Treasurer and the Secretary shall be elected by the Trustees at
their first meeting and thereafter at the annual meeting of the Trustees, as
provided in Section 4.2 of the Declaration. Such officers shall hold office
until the next annual meeting of the Trustees and until their successors shall
have been duly elected and qualified, and may be removed at any meeting by the
affirmative vote of a Majority of the Trustees. All other officers of the
Trust may be elected or appointed at any meeting of the Trustees. Such
officers shall hold office for any term, or indefinitely, as determined by the
Trustees, and shall be subject to removal, with or without cause, at any time
by the Trustees.
<PAGE>11
SECTION 3.3. Resignation and Removal. Any officer may resign at any
time by giving written notice to the Trustees. Such resignation shall take
effect at the time specified therein, and, unless otherwise specified therein,
the acceptance of such resignation shall not be necessary to make it
effective. If the office of any officer or agent becomes vacant by reason of
death, resignation, retirement, disqualification, removal from office or
otherwise, the Trustees may choose a successor, who shall hold office for the
unexpired term in respect of which such vacancy occurred. Except to the
extent expressly provided in a written agreement with the Trust, no officer
resigning or removed shall have any right to any compensation for any period
following such resignation or removal, or any right to damage on account of
such removal.
SECTION 3.4. Fidelity Bond. The Trustees may, in their discretion,
direct any officer appointed by them to furnish at the expense of the Trust a
fidelity bond approved by the Trustees, in such amount as the Trustees may
prescribe.
SECTION 3.5. Chairman of the Trustees. The Board of Trustees may,
by resolution adopted by a majority of the entire Board, designate a Chairman
of the Trustees, who shall preside at each meeting of the Trustees. If so
designated, such Chairman of the Trustees shall also preside at all meetings
of the Shareholders and, subject to the supervision of the Trustees, shall
have general charge and supervision of the business, property and affairs of
the Trust and such other powers and duties as the Trustees may prescribe, and
unless otherwise provided by law, the Declaration, these By-Laws or specific
vote of the Trustees, shall have and may exercise all of the powers given to
the Trustees by the Declaration and by these By-Laws.
SECTION 3.6. Vice Chairmen. If the Trustees shall elect one or more
Vice Chairmen, the Vice Chairman or if there shall be more than one, such Vice
Chairmen in the order of their seniority or as otherwise designated by the
Trustees, shall preside at meetings of the Shareholders and of the Trustees,
and shall exercise such other powers and duties of the Chairman as the
Trustees shall determine.
SECTION 3.7. President. The President shall be the chief
administrative officer of the Trust and, subject to the supervision of the
Chairman, if any, shall have general charge of the operations of the Trust and
general supervision of the personnel of the Trust, and such other powers and
duties as the Trustees or the Chairman, if any, shall prescribe. In the
absence or disability of the Chairman (or if there is none), the President
shall exercise the powers and duties of the Chairman, except to the extent
that the Trustees shall have delegated such
<PAGE>12
powers and duties to the Vice Chairman or Chairmen, if any, and except that he
shall not preside at meetings of the Trustees if he is not himself a Trustee.
SECTION 3.8. Vice Presidents. In the absence or disability of the
President, the Vice President or, if there shall be more than one, the Vice
Presidents in the order of their seniority or as otherwise designated by the
Trustees, shall exercise all of the powers and duties of the President. The
Vice Presidents shall have the power to execute bonds, notes, mortgages and
other contracts, agreements and instruments in the name of the Trust, and
shall do and perform such other duties as the Trustees, the Chairman, if any,
or the President shall direct.
SECTION 3.9. Treasurer and Assistant Treasurers. The Treasurer
shall be the chief financial officer of the Trust, and shall have the custody
of the Trust's funds and Securities, and shall keep full and accurate accounts
of receipts and disbursements in books belonging to the Trust and shall
deposit all moneys, and other valuable effects in the name and to the credit
of the Trust, in such depositories as may be designated by the Trustees,
taking proper vouchers for such disbursements, shall have such other duties
and powers as may be prescribed from time to time by the Trustees or the
Chairman, if any, and shall render to the Trustees, whenever they may require
it, an account of all his transactions as Treasurer and of the financial
condition of the Trust. If no Controller is elected, the Treasurer shall also
have the duties and powers of the Controller, as provided in these By-Laws.
Any Assistant Treasurer shall have such duties and powers as shall be
prescribed from time to time by the Trustees or the Treasurer, and shall be
responsible to and shall report to the Treasurer. In the absence or
disability of the Treasurer, the Assistant Treasurer or, if there shall be
more than one, the Assistant Treasurers in the order of their seniority or as
otherwise designated by the Trustees or the Chairman, if any, shall have the
powers and duties of the Treasurer.
SECTION 3.10. Controller and Assistant Controllers. If a Controller
is elected, he shall be the chief accounting officer of the Trust and shall be
in charge of its books of account and accounting records and of its accounting
procedures, and shall have such duties and powers as are commonly incident to
the office of a controller, and such other duties and powers as may be
prescribed from time to time by the Trustees. The Controller shall be
responsible to and shall report to the Trustees, but in the ordinary conduct
of the Trust's business, shall be under the supervision of the Treasurer. Any
Assistant Controller shall have such duties and powers as shall be prescribed
from time to time by the Trustees or the Controller, and shall be responsible
<PAGE>13
to and shall report to the Controller. In the absence or disability of the
Controller, the Assistant Controller or, there shall be more than one, the
Assistant Controllers in the order of their seniority or as otherwise
designated by the Trustees or the Chairman, if any, shall have the powers and
duties of the Controller.
SECTION 3.11. Secretary and Assistant Secretaries. The Secretary
shall, if and to the extent requested by the Trustees, attend all meetings of
the Trustees, any Committee of the Trustees and/or the Shareholders and record
all votes and the minutes of proceedings in a book to be kept for that
purpose, shall give or cause to be given notice of all meetings of the
Trustees, any Committee of the Trustees, and of the Shareholders and shall
perform such other duties as may be prescribed by the Trustees. The
Secretary, or in his absence any Assistant Secretary, shall affix the Trust's
seal to any instrument requiring it, and when so affixed, it shall be attested
by the signature of the Secretary or an Assistant Secretary. The Secretary
shall be the custodian of the Share records and all other books, records and
papers of the Trust (other than financial) and shall see that all books,
reports, statements, certificates and other documents and records required by
law are properly kept and filed. In the absence or disability of the
Secretary, the Assistant Secretary or, if there shall be more than one, the
Assistant Secretaries in the order of their seniority or as otherwise
designated by the Trustees or the Chairman, if any, shall have the powers and
duties of the Secretary.
SECTION 3.12. Substitutions. In case of the absence or disability
of any officer of the Trust, or for any other reason that the Trustees may
deem sufficient, the Trustees may delegate for the time being the powers or
duties, or any of them, of such officer to any other officer, or to any
Trustee.
SECTION 3.13. Execution of Deeds, etc. Except as the Trustees may
generally or in particular cases otherwise authorize or direct, all deeds,
leases, transfers, contracts, proposals, bonds, notes, checks, drafts and
other obligations made, accepted or endorsed by the Trust shall be signed or
endorsed on behalf of the Trust by the Chairman, if any, the President, one of
the Vice Presidents or the Treasurer.
SECTION 3.14. Power to Vote Securities. Unless otherwise ordered by
the Trustees, the Treasurer and the Secretary each shall have full power and
authority on behalf of the Trust to give proxies for and/or to attend and to
act and to vote at any meeting of stockholders of any corporation in which the
Trust may hold stock, and at any such meeting the Treasurer or the Secretary,
as the case may be, his proxy shall possess and
<PAGE>14
may exercise any and all rights and powers incident to the ownership of such
stock which, as the owner thereof, the Trust might have possessed and
exercised if present. The Trustees, by resolution from time to time, or, in
the absence thereof, either the Treasurer or the Secretary, may confer like
powers upon any other person or persons as attorneys and proxies of the Trust.
ARTICLE 4
COMMITTEES
SECTION 4.1. Power of Trustees to Designate Committees. The
Trustees, by vote of a Majority of the Trustees, may elect from their number
an Executive Committee and any other Committees and may delegate thereto some
or all of their powers except those which by law, by the Declaration or by
these By-Laws may not be delegated; provided, that the Executive Committee
shall not be empowered to elect the Chairman of the Trustees, if any, the
President, the Treasurer or the Secretary, to amend the By-Laws, to exercise
the powers of the Trustees under this Section 4.1 or under Section 4.3 hereof,
or to perform any act for which the action of a Majority of the Trustees is
required by law, by the Declaration or by these By-Laws. The members of any
such Committee shall serve at the pleasure of the Trustees.
SECTION 4.2. Rules for Conduct of Committee Affairs. Except as
otherwise provided by the Trustees, each Committee elected or appointed
pursuant to this Article 4 may adopt such standing rules and regulations for
the conduct of its affairs as it may deem desirable, subject to review and
approval of such rules and regulations by the Trustees at the next succeeding
meeting of the Trustees, but in the absence of any such action or any contrary
provisions by the Trustees, the business of each Committee shall be conducted,
so far as practicable, in the same manner as provided herein and in the
Declaration for the Trustees.
SECTION 4.3. Trustees May Alter, Abolish, etc., Committees. The
Trustees may at any time alter or abolish any Committee, change the membership
of any Committee, or revoke, rescind or modify any action of any Committee or
the authority of any Committee with respect to any matter or class of
matters; provided, that no such action shall impair the rights of any third
parties.
SECTION 4.4. Minutes; Review by Trustees. Any Committee to which
the Trustees delegate any of their powers or duties shall keep records of its
meetings and shall report its actions to the Trustees.
<PAGE>15
ARTICLE 5
SEAL
The seal of the Trust shall consist of a flat-faced circular die with
the word "Massachusetts", together with the name of the Trust, the words
"Trust Seal", and the year of its organization cut or engraved thereon, but,
unless otherwise required by the Trustees, the seal shall not be necessary to
be placed on, and its absence shall not impair the validity of, any document,
instrument or other paper executed and delivered by or on behalf of the Trust.
ARTICLE 6
SHARES
SECTION 6.1. Issuance of Shares. The Trustees may issue Shares of
any or all Series either in certificated or uncertificated form, they may
issue certificates to the holders of shares of a Series which was originally
issued in uncertificated form, and if they have issued Shares of any Series in
certificated form, they may at any time discontinue the issuance of Share
certificates for such Series and may, by written notice to such Shareholders
of such Series require the surrender of their Share certificates to the Trust
for cancellation, which surrender and cancellation shall not affect the
ownership of Shares for such Series.
SECTION 6.2. Uncertificated Shares. For any Series of Shares for
which the Trustees issue Shares without certificates, the Trust or the
Transfer Agent may either issue receipts therefor or may keep accounts upon
the books of the Trust for the record holders of such Shares, who shall in
either case be deemed, for all purposes hereunder, to be the holders of such
Shares as if they had received certificates therefor and shall be held to have
expressly assented and agreed to the terms hereof and of the Declaration.
SECTION 6.3. Share Certificates. For any Series of Shares for which
the Trustees shall issue Share certificates, each Shareholder of such Series
shall be entitled to a certificate stating the number of Shares owned by him
in such form as shall be prescribed from time to time by the Trustees. Such
certificate shall be signed by the Chairman, if any, or a Vice Chairman, if
any, or the President or a Vice-President, and by the Treasurer or an
Assistant Treasurer or the Secretary or an Assistant Secretary of the Trust.
Such signatures may be facsimiles if the certificate is countersigned by a
Transfer Agent, or by a Registrar, other than a Trustee, officer or employee
of the Trust. In case any officer who has signed or
<PAGE>16
whose facsimile signature has been placed on such certificate shall cease to
be such officer before such certificate is issued, it may be issued by the
Trust with the same effect as if he were such officer at the time of its
issue.
SECTION 6.4. Lost, Stolen, etc., Certificates. If any certificate
for certificated Shares shall be lost, stolen, destroyed or mutilated, the
Trustees may authorize the issuance of a new certificate of the same tenor and
for the same number of Shares in lieu thereof. The Trustees shall require the
surrender of any mutilated certificate in respect of which a new certificate
is issued, and may, in their discretion, before the issuance of a new
certificate, require the owner of a lost, stolen or destroyed certificate, or
the owner's legal representative, to make an affidavit or affirmation setting
forth such facts as to the loss, theft or destruction as they deem necessary,
and to give the Trust a bond in such reasonable sum as the Trustees direct, in
order to indemnify the Trust.
SECTION 6.5. Record Transfer of Pledged Shares. A pledgee of Shares
pledged as collateral security shall be entitled to a new certificate in his
name as pledgee, in the case of certificated Shares, or to be registered as
the holder in pledge of such Shares in the case of uncertificated Shares;
provided, that the instrument of pledge substantially describes the debt or
duty that is intended to be secured thereby. Any such new certificate shall
express on its face that it is held as collateral security, and the name of
the pledgor shall be stated thereon, and any such registration of
uncertificated Shares shall be in a form which indicates that the registered
holder holds such Shares in pledge. After such issue or registration, and
unless and until such pledge is released, such pledgee and his successors and
assigns shall alone be entitled to the rights of a Shareholder, and entitled
to vote such Shares.
ARTICLE 7
CUSTODIAN
The Trust shall at all times employ a bank or trust company having a
capital, surplus and undivided profits of at least Two Million Dollars
($2,000,000) as Custodian of the capital assets of the Trust. The Custodian
shall be compensated for its services by the Trust upon such basis as shall be
agreed upon from time to time between the Trust and the Custodian.
<PAGE>17
ARTICLE 8
AMENDMENTS
SECTION 8.1. By-Laws Subject to Amendment. These By-Laws may be
altered, amended or repealed, in whole or in part, at any time by vote of the
holders of a majority of the Shares (or whenever there shall be more than one
Series of Shares, of the holders of a majority of the Shares of each Series)
issued, outstanding and entitled to vote. The Trustees, by vote of a majority
of the Trustees, may alter, amend or repeal these By-Laws, in whole or in
part, including By-Laws adopted by the Shareholders, except with respect to
any provision hereof which by law, the Declaration or these By-Laws requires
action by the Shareholders. By-Laws adopted by the Trustees may be altered,
amended or repealed by the Shareholders.
SECTION 8.2. Notice of Proposal to Amend By-Laws Required. No
proposal to amend or repeal these By-Laws or to adopt new By-Laws shall be
acted upon at a meeting unless either (i) such proposal is stated in the
notice or in the waiver of notice, as the case may be, of the meeting of the
Trustees or Shareholders at which such action is taken, or (ii) all of the
Trustees or Shareholders, as the case may be, are present at such meeting and
all agree to consider such proposal without protesting the lack of notice.
As adopted, April 5, 1995
<PAGE>1
INVESTMENT ADVISORY AGREEMENT
April 1, 1987
Warburg, Pincus Counsellors, Inc.
466 Lexington Avenue
New York, New York 10017-3147
Dear Sirs:
Counsellors New York Municipal Bond Fund (the "Fund"), a business
trust organized under the laws of the Commonwealth of Massachusetts, herewith
confirms its agreement with Warburg, Pincus Counsellors, Inc. (the "Adviser")
as follows:
1. Investment Description; Appointment
The Fund desires to employ its capital by investing and reinvesting
in investments of the kind and in accordance with the limitations specified in
its Agreement and Declaration or Trust, as may be amended from time to time,
and in its Prospectus and Statement of Additional Information as from time to
time in effect, and in such manner and to such extent as may from time to time
be approved by the Board of Trustees of the Fund. Copies of the Fund's
Prospectus, Statement of Additional Information and Agreement and Declaration
of Trust, as may be amended from time to time, have been or will be submitted
to the Adviser. The Fund desires to employ and hereby appoints the Adviser to
act as investment adviser to its sole portfolio, the Counsellors New York
Municipal Bond Portfolio (hereinafter also referred to as the "Fund"). The
Adviser accepts the appointment and agrees to furnish the services for the
compensation set forth below.
2. Services as Investment Adviser
Subject to the supervision and direction of the Board of Trustees of
the Fund, the Adviser will (a) act in strict conformity with the Fund's
Agreement and Declaration of Trust, the Investment Company Act of 1940 and the
Investment Advisers Act of 1940, as the same may from time to time be amended,
(b) manage the Fund in accordance with the Fund's investment objective and
policies as stated in the Fund's Prospectus and Statement of Additional
Information as from time to time in effect, (c) make investment decisions for
the Fund and (d) place purchase and sale orders for securities on behalf of
the Fund. In providing those services, the Adviser will provide investment
research and supervision of the Fund's investments and conduct a
<PAGE>2
continual program of investment, evaluation and, if appropriate, sale and
reinvestment of the Fund's assets. In addition, the Adviser will furnish the
Fund with whatever statistical information the Fund may reasonably request
with respect to the securities that the Fund may hold or contemplate
purchasing.
3. Brokerage
In executing transactions for the Fund and selecting brokers or
dealers, the Adviser will use its best efforts to seek the best overall terms
available. In assessing the best overall terms available for any portfolio
transaction, the Adviser will consider all factors it deems relevant
including, but not limited to, breadth of the market in the security, the
price of the security, the financial condition and execution capability of the
broker or dealer and the reasonableness of any commission for the specific
transaction and for transactions executed through the broker or dealer in
aggregate. In selecting brokers or dealers to execute a particular
transaction and in evaluating the best overall terms available, the Adviser
may consider the brokerage and research services (as those terms are defined
in Section 28(e) of the Securities Exchange Act of 1934) provided to the Fund
and/or other accounts over which the Adviser or an affiliate exercises
investment discretion.
4. Information Provided to the Fund
The Adviser will keep the Fund informed of developments materially
affecting the Fund, and will, on its own initiative, furnish the Fund from
time to time with whatever information the Adviser believes is appropriate for
this purpose.
5. Standard of Care
The Adviser shall exercise its best judgment in rendering the
services listed in paragraphs 2, 3 and 4 above. The Adviser shall not be
liable for any error of judgment or mistake of law or for any loss suffered by
the Fund in connection with the matters to which this Agreement relates,
provided that nothing herein shall be deemed to protect or purport to protect
the Adviser against any liability to the Fund or to shareholders of the Fund
to which the Adviser would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence on its part in the performance of
its duties or by reason of the Adviser's reckless disregard of its obligations
and duties under this Agreement.
6. Compensation
In consideration of the services rendered pursuant to this Agreement,
the Fund will pay the Adviser an annual fee
<PAGE>3
calculated at an annual rate of .40 of 1.00% of the Fund's average daily net
assets. The fee for the period from the date the Fund's initial registration
statement is declared effective by the Securities and Exchange Commission to
the end of the year during which the initial registration statement is
declared effective shall be prorated according to the proportion that such
period bears to the full yearly period. Upon any termination of this
Agreement before the end of a year, the fee for such part of that year shall
be prorated according to the proportion that such period bears to the full
yearly period and shall be payable upon the date of termination of this
Agreement. For the purpose of determining fees payable to the Adviser, the
value of the Fund's net assets shall be computed at the times and in the
manner specified in the Fund's Prospectus or Statement of Additional
Information as from time to time in effect.
7. Expenses
The Adviser will bear all expenses in connection with the performance
of its services under this Agreement. The Fund will bear certain other
expenses to be incurred in its operation, including: investment advisory and
administration fees; taxes, interest, brokerage fees and commissions, if any;
fees of trustees of the Fund who are not officers, directors, or employees of
the Adviser, Provident National Bank or any of their affiliates; fees of any
pricing service employed to value shares of the Fund; Securities and Exchange
Commission fees and state Blue Sky qualification fees; charges of custodians
and transfer and dividend disbursing agents; the Fund's proportionate share of
insurance premiums; outside auditing and legal expenses; costs of maintenance
of the Fund's existence; costs attributable to investor services, including,
without limitation, telephone and personnel expenses; costs of preparing and
printing prospectuses and statements of additional information for regulatory
purposes and for distribution to existing shareholders; costs of shareholders'
reports and meetings of the shareholders of the Fund and of the officers or
Board of Trustees of the Fund; and any extraordinary expenses.
The Fund, will be responsible for nonrecurring expenses which may
arise, including costs of litigation to which the Fund is a party and of
indemnifying officers and Trustees of the Fund with respect to such litigation
and other expenses as determined by the Trustees.
8. Reimbursement to the Fund
If in any fiscal year the aggregate expenses of the Fund (including
fees pursuant to this Agreement and the Fund's administration agreement, but
excluding interest, taxes, brokerage and, if permitted by state securities
commissions, extraordinary
<PAGE>4
expenses) exceed the expense limitation of any state having jurisdiction over
the Fund, the Adviser will reimburse the Fund for such excess expense. The
Adviser's expense reimbursement obligation will be limited to the amount of
its fees received pursuant to this Agreement. Such expense reimbursement, if
any, will be estimated, reconciled and paid on an annual basis.
9. Services to Other Companies or Accounts
The Fund understands that the Adviser now acts, will continue to act
and may act in the future as investment adviser to fiduciary and other managed
accounts and to one or more other investment companies or series of investment
companies, and the Fund has no objection to the Adviser so acting, provided
that whenever the Fund and one or more other accounts or investment companies
or portfolios advised by the Adviser have available funds for investment,
investments suitable and appropriate for each will be allocated in accordance
with a formula believed to be equitable to each entity. The Fund recognizes
that in some cases this procedure may adversely affect the size of the
position obtainable for the Fund. In addition, the Fund understands that the
persons employed by the Adviser to assist in the performance of the Adviser's
duties hereunder will not devote their full time to such service and nothing
contained herein shall be deemed to limit or restrict the right of the Adviser
or any affiliate of the Adviser to engage in and devote time and attention to
other businesses or to render services of whatever kind or nature.
10. Term of Agreement
This Agreement shall continue until April 17, 1989 and thereafter
shall continue automatically for successive annual periods ending on April
17th of each year, provided such continuance is specifically approved at least
annually by (a) the Board of Trustees of the Fund or (b) a vote of a
"majority" (as defined in the Investment Company Act of 1940) of the Fund's
outstanding voting securities, provided that in either event the continuance
is also approved by a majority of the Board of Trustees who are not
"interested persons" (as defined in said Act) of any party to this Agreement,
by vote cast in person at a meeting called for the purpose of voting on such
approval. This Agreement is terminable, without penalty, on 60 days' written
notice, by the Board of Trustees of the Fund or by vote of holders of a
majority of the Fund's shares, or upon 90 days' written notice, by the
Adviser. This Agreement will also terminate automatically in the event of
its assignment (as defined in said Act).
11. Representation by the Fund
The Fund represents that a copy of its Agreement and
<PAGE>5
Declaration of Trust, dated December 23, 1986, together with all amendments
thereto, is on file in the office of the Secretary of State of the
Commonwealth of Massachusetts.
12. Limitation of Liability
It is expressly agreed that this Agreement was executed by or on
behalf of the Fund and not by the Trustees of the Fund or its officers
individually, and the obligations of the Fund hereunder shall not be binding
upon any of the Trustees, shareholders, nominees, officers, agents or
employees of the Fund individually, but bind only the assets and property of
the Fund, as provided in the Agreement and Declaration of Trust of the Fund.
The execution and delivery of this Agreement have been authorized by the
Trustees and the sole shareholder of the Fund and signed by an authorized
officer of the Fund, acting as such, and neither such authorization by such
Trustees and shareholder nor such execution and delivery by such officer shall
be deemed to have been made by any of them individually or to impose any
liability on any of them personally, but shall bind only the trust property of
the Fund as provided in its Agreement and Declaration of Trust.
13. Miscellaneous
The Fund recognizes that directors, officers and employees of the
Adviser may from time to time serve as directors, trustees, officers and
employees of corporations and business trusts (including other investment
companies) and that such other corporations and trusts may include the name
"Counsellors" or "Counsellors Securities" as part of their names, and that the
Adviser or its affiliates may enter into advisory or other agreements with
such other corporations and trusts. If the Adviser ceases to act as the
investment adviser of the Fund's shares, the Fund agrees that, at the
Adviser's request, the Fund's license to use the word "Counsellors" will
terminate and that the Fund will take all necessary action to change the name
of the Fund to a name not including the word "Counsellors."
Please confirm that the foregoing is in accordance with your
understanding by indicating your acceptance hereof at the place below
indicated, whereupon it shall become a binding agreement between us.
Very truly yours,
COUNSELLORS NEW YORK MUNICIPAL
BOND FUND
By: /s/ Stuart M. Goode
President
<PAGE>6
Accepted:
WARBURG, PINCUS COUNSELLORS, INC.
By: /s/ Arnold M. Reichman
Authorized Officer
<PAGE>1
[LETTERHEAD OF WILLKIE FARR & GALLAGHER]
January 16, 1996
Warburg, Pincus New York Intermediate Municipal Fund
466 Lexington Avenue
New York, New York 10017
Re: Post-Effective Amendment No. 12 to Registration
Statement (Securities Act File No. 33-11075; Investment Company Act File
No. 811-4964 (the "Registration Statement")
Ladies and Gentlemen:
You have requested that we, as counsel to the Warburg, Pincus New York
Intermediate Municipal Fund (the "Fund"), render an opinion in connection with
the filing by the Fund of Post-Effective Amendment No. 12 to the Registration
Statement (the "Amendment") in which you intend to register under the
Securities Act of 1933, as amended (the "1933 Act"), 504,487 shares of
beneficial interest of the Fund, par value $.001 per share (the "Shares").
We have examined the Fund's Declaration of Trust, its By-Laws, resolutions
adopted by its Board of Trustees, and other records, documents, papers,
statutes and authorities as we have deemed necessary to form a basis for the
opinion hereinafter expressed. With respect to matters of Massachusetts law
we have relied on the opinion of Messrs. Sullivan and Worcester, a copy of
which is attached hereto.
On the basis of the foregoing, and assuming compliance with the 1933 Act,
the Investment Company Act of 1940, as amended, and applicable state laws
regulating the sale of securities, and assuming further that all of the Shares
will be sold at a sales price in each case in excess of the par value of the
Shares, we are of the opinion that such Shares, when duly sold, issued and
paid for as contemplated by the Prospectus and Statement of Additional
Information included in the Amendment, will be validly and legally issued,
fully paid and non-assessable by the Fund. We note, however, that
shareholders of a Massachusetts business trust may under certain circumstances
be subject to assessment at the instance of creditors to pay the
<PAGE>2
obligations of such trust in the event that its assets are insufficient for
that purpose.
We consent to your filing this opinion with the Securities and Exchange
Commission as an exhibit to the Amendment.
Very truly yours,
WILLKIE FARR & GALLAGHER
By: ________________________
A Member of the Firm
[LETTERHEAD OF SULLIVAN & WORCESTER]
Boston
January 16, 1996
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022
Re: Warburg, Pincus New York Intermediate Municipal Fund
Post-Effective Amendment on Form N-1A
Ladies and Gentlemen:
You have requested our opinion as to certain matters of Massachusetts
law in connection with the filing by Warburg, Pincus New York Intermediate
Municipal Fund, a Massachusetts trust with transferable shares (the "Trust"),
pursuant to Section 24(e) of the Investment Company Act of 1940, as amended,
and the rules and regulations thereunder, of Post-Effective Amendment No. 12
to the Trust's Registration Statement on Form N-1A (the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities
Act"), Registration No. 33-11075, and Post-Effective Amendment No. 14 to the
Trust's Registration Statement under the Investment Company Act of 1940, as
amended, Registration No. 811-4964 (collectively, the "Amendment").
We have acted as Massachusetts counsel to the Trust in connection
with the preparation of the Amendment and the authorization by the Trustees
of the Trust of the issuance and sale of the shares of beneficial interest,
$.001 par value, of the Trust (the "Shares") which are to be registered
pursuant to the Amendment. In this connection we have examined and are
familiar with the Trust's Declaration of Trust dated December 23, 1986 (the
"Original Declaration"), as amended on February 18, 1987, February 3, 1992,
February 19, 1992 and February 6, 1995, and as supplemented by a Certificate
of Designation of Series dated May 9, 1990 (the Original Declaration, as so
amended and supplemented, the "Declaration"), the Bylaws of the Trust, the
Amendment, substantially in the form in which it is to be filed with the
Securities and Exchange Commission (the "SEC"), the most recent forms of the
Prospectus (the "Prospectus") and the Statement of Additional Information
(the "SAI") included in the Fund's Registration Statement on Form N-1A, the
actions of the Trustees to organize the Trust and to authorize the issuance
of the Shares, certificates of Trustees and officers of the Trust and of
public officials as to matters of fact, and such other documents and
instruments, certified or otherwise identified to our satisfaction, and such
questions of law and fact, as we have considered necessary or appropriate for
purposes of the opinions expressed herein. We have assumed the genuineness
of the signatures on, and the authenticity of, all documents furnished to us,
and the conformity to the originals of documents submitted to us as certified
copies, which facts we have not independently verified.
Based upon and subject to the foregoing, we hereby advise you that,
in our opinion, under the laws of The Commonwealth of Massachusetts:
1. The Trust has been duly organized and is validly existing as
a trust with transferable shares of the type commonly called a Massachusetts
business trust.
2. The Trust is authorized to issue an unlimited number of
Shares; the Shares to be registered pursuant to the Amendment have been duly
and validly authorized by all requisite action of the Trustees of the Trust,
and no action of the shareholders of the Trust is required in such
connection.
3. The Shares, when duly sold, issued and paid for as
contemplated by the Prospectus and the SAI, will be validly and legally
issued, fully paid and nonassessable by the Trust.
With respect to the opinion stated in paragraph 3 above, we
wish to point out that the shareholders of a Massachusetts business trust may
under some circumstances be subject to assessment at the instance of
creditors to pay the obligations of such trust in the event that its assets
are insufficient for the purpose.
This letter expresses our opinions as to the provisions of the
Declaration and the laws of Massachusetts applying to business trusts
generally, but does not extend to the Massachusetts Securities Act, or to
federal securities or other laws.
You may rely upon the foregoing opinions in rendering your opinion
letter on the same matters which is to be filed with the Amendment as an
exhibit to the Registration Statement, and we hereby consent to the reference
to us in the Prospectus, and to the filing of this letter with the SEC as an
exhibit to the Registration Statement. In giving such consent, we do not
thereby concede that we come within the category of persons whose consent is
required under Section 7 of the Securities Act.
Very truly yours,
/s/ Sullivan & Worcester, L.L.P.
SULLIVAN & WORCESTER
(A REGISTERED LIMITED
LIABILITY PARTNERSHIP)
A:\24EOP01.WP:01/16/96
<PAGE>1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this Post-Effective Amendment No. 12 to
the Registration Statement under the Securities Act of 1933 on Form N-1A
(File No. 33-11075) of our report dated December 14, 1995 on our audit of
the financial statements and financial highlights of Warburg, Pincus New
York Intermediate Municipal Fund. We also consent to the
reference to our Firm under the captions "Financial Highlights"
and "Auditors and Counsel."
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
January 16, 1996
<PAGE>1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Financial
Highlights" and "Auditors and Counsel" and to the use of our report
dated December 15, 1992 in this Registration Statement (Form N-1A No.
33-11075) of Warburg, Pincus New York Intermediate Municipal Fund (formerly
Warburg, Pincus New York Municipal Bond Fund).
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
New York, New York
January 16, 1996
<PAGE>1
Warburg Pincus Intermediate Municipal
For the One Year Ended October 31, 1995
Total Return With Waivers:
((10,831-10,000)/10,000) = 8.31%
Total Return Without Waivers:
((10,803-10,000)/10,000) = 8.03%
For the Five Years Ended October 31, 1995
Total Return With Waivers:
(14,119/10,000)[*GRAPHIC OMITTED-SEE FOOTNOTE BELOW] -1) = 7.14%
Total Return Without Waivers:
((13,884/10,000)[*GRAPHIC OMITTED-SEE FOOTNOTE BELOW] -1) = 6.78%
- --------------------------
* - The preceding expression is being raised to the power 1/5.00274
Inception Thru October 31, 1995
Total Return With Waivers:
((16,674/10,000)[*GRAPHIC OMITTED-SEE FOOTNOTE BELOW] -1) = 6.13%
Total Return Without Waivers:
((15,785/10,000)[*GRAPHIC OMITTED-SEE FOOTNOTE BELOW] -1) = 5.46%
- --------------------------
* - The preceding expression is being raised to the power 1/8.59178
New York Intermediate Municipal Fund
Tax Equivalent Yield at 10/31/95
Taxable 30 Day SEC Yield: 3.79%
Fund's Yield
Tax-Equivalent Yield = --------------------------
(1-F) (1-S-C)
Where:
F = Federal Income Tax Rate .3960
S = State Income Tax Rate .0759
C = City Income Tax Rate .0391
3.79
Tax Equivalent Yield = ------------------------- = 7.09%
(1-.3960) (1-.0759-.0391)
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000808433
<NAME> WARBURG PINCUS INTERMEDIATE MUNICIPAL FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 69067303
<INVESTMENTS-AT-VALUE> 71027288
<RECEIVABLES> 2609930
<ASSETS-OTHER> 32955
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 73670173
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 308696
<TOTAL-LIABILITIES> 308696
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 70580636
<SHARES-COMMON-STOCK> 7041901
<SHARES-COMMON-PRIOR> 7518450
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 818908
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1961933
<NET-ASSETS> 73361477
<DIVIDEND-INCOME> 45198
<INTEREST-INCOME> 3982642
<OTHER-INCOME> 0
<EXPENSES-NET> 474075
<NET-INVESTMENT-INCOME> 3553765
<REALIZED-GAINS-CURRENT> 818720
<APPREC-INCREASE-CURRENT> 1979229
<NET-CHANGE-FROM-OPS> 6351714
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3553765
<DISTRIBUTIONS-OF-GAINS> 47531
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3181012
<NUMBER-OF-SHARES-REDEEMED> 3957382
<SHARES-REINVESTED> 299821
<NET-CHANGE-IN-ASSETS> (2354618)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 47719
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 316050
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 675994
<AVERAGE-NET-ASSETS> 79012518
<PER-SHARE-NAV-BEGIN> 10.07
<PER-SHARE-NII> .47
<PER-SHARE-GAIN-APPREC> .36
<PER-SHARE-DIVIDEND> .47
<PER-SHARE-DISTRIBUTIONS> .01
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.42
<EXPENSE-RATIO> .60
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
