Annual
Report
October 31, 1998
Warburg Pincus
Intermediate Maturity Government Fund
Warburg Pincus
New York Intermediate Municipal Fund
Warburg Pincus
Fixed Income Fund
Warburg Pincus
Global Fixed Income Fund
More complete information about the funds, including charges and expenses, is
provided in the Prospectus, which must precede or accompany this document and
which should be read carefully before investing. You may obtain additional
copies by calling 800-WARBURG (800-927-2874) or by writing to Warburg Pincus
Funds, P.O. Box 9030, Boston, MA 02205-9030.
[LOGO]
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From time to time, the funds' investment adviser and co-administrators may waive
some fees and/or reimburse some expenses, without which performance would be
lower. Waivers and/or reimbursements are subject to change.
Returns are historical and include change in share price and reinvestment of
dividends and capital gains. Past performance cannot guarantee future results.
Returns and share price will fluctuate, and redemption value may be more or less
than original cost.
International investing entails special risk considerations, including currency
fluctuations, lower liquidity, economic and political risks, and differences in
accounting methods.
The views of the funds' management are as of the date of the letters and
portfolio holdings described in this document are as of October 31, 1998; these
views and holdings may have changed subsequent to these dates. Nothing in this
document is a recommendation to purchase or sell securities.
<PAGE>
WARBURG PINCUS INTERMEDIATE MATURITY GOVERNMENT FUND
ANNUAL INVESTMENT ADVISER'S REPORT -- OCTOBER 31, 1998
- --------------------------------------------------------------------------------
December 11, 1998
Dear Shareholder:
The objective of Warburg Pincus Intermediate Maturity Government Fund (the
"Fund") is a high level of current income consistent with capital preservation.
The Fund invests primarily in obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities. Under normal market conditions,
the Fund will maintain a weighted average portfolio maturity of between three
and 10 years.
For the 12 months ended October 31, 1998, the Fund had a return of 9.35%, vs.
a return of 9.52% for the Lehman Intermediate Government Bond Index*.
The period was a positive one for domestic bonds, supported by a continued
favorable backdrop of low inflation and declining interest rates. Showing
particularly good performance were Treasury bonds, prime beneficiaries of a
"flight to quality" spurred by financial and economic turmoil abroad. Also
contributing to a more-favorable supply/demand environment for Treasuries were
projected budget surpluses. As a result of these trends, the yield on the
30-year Treasury fell by nearly a full percentage point during the 12 months,
ending the period at 5.15%.
Against this backdrop, the Fund had a solid return in absolute terms,
performing roughly in line with its benchmark. The Fund's return reflected both
its duration and its sector exposure. In terms of duration, we maintained a
longer-than-neutral stance throughout, since we continued to have a favorable
view of inflation and interest rates. This proved beneficial to the Fund's
performance, given the bond market's rally.
With regard to sectors, we kept the bulk of the Fund in Treasuries through the
period, since we continued to view them as attractive from a risk/reward
perspective. That said, we significantly increased our weighting in
government-agency bonds, adding both mortgage-backed and conventional agency
bonds. Our decision to allocate more of the Fund's assets to agencies was based
on widening yield spreads between these issues and Treasuries. Though our
increased weighting in agencies proved premature, since agencies trailed
Treasuries in terms of total return, the allocation reflected our ongoing desire
to provide attractive levels of risk-adjusted yield.
1
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WARBURG PINCUS INTERMEDIATE MATURITY GOVERNMENT FUND
ANNUAL INVESTMENT ADVISER'S REPORT -- OCTOBER 31, 1998 (CONT'D)
- --------------------------------------------------------------------------------
Going forward, our efforts will remain devoted to providing what we deem to be
attractive levels of yield while maintaining a high-quality portfolio. In this
context, we will continue to make duration and sector adjustments to the Fund
based strictly on risk-vs.-reward considerations.
Dale C. Christensen M. Anthony E. van Daalen
Co-Portfolio Manager Co-Portfolio Manager
2
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WARBURG PINCUS INTERMEDIATE MATURITY GOVERNMENT FUND
ANNUAL INVESTMENT ADVISER'S REPORT -- OCTOBER 31, 1998 (CONT'D)
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN WARBURG PINCUS INTERMEDIATE MATURITY
GOVERNMENT FUND SINCE INCEPTION AS OF OCTOBER 31, 1998
The graph below illustrates the hypothetical investment of $10,000 in Warburg
Pincus Intermediate Maturity Government Fund (the "Fund") from August 22, 1988
(inception) to October 31, 1998, compared to the Lehman Intermediate Government
Bond Index ("LIG")* for the same time period.
[GRAPHIC]
In the printed version of this document, a line graph appears depicting the
following plot points:
Fund LIG
-------- --------
Sep-88 10000.00 10000.00
Sep-88 10133.76 10172.80
Oct-88 10250.17 10312.98
Nov-88 10136.06 10224.39
Dec-88 10154.42 10234.21
Jan-89 10245.06 10336.24
Feb-89 10208.10 10292.11
Mar-89 10239.74 10340.38
Apr-89 10424.93 10549.05
May-89 10591.76 10752.64
Jun-89 10814.40 11026.73
Jul-89 11023.45 11250.79
Aug-89 10884.03 11098.79
Sep-89 10943.89 11151.84
Oct-89 11177.60 11385.81
Nov-89 11269.40 11498.53
Dec-89 11322.28 11532.34
Jan-90 11230.62 11460.72
Feb-90 11253.57 11503.12
Mar-90 11239.30 11516.81
Apr-90 11178.17 11478.23
May-90 11445.16 11724.10
Jun-90 11597.68 11878.27
Jul-90 11776.63 12044.80
Aug-90 11703.86 12001.44
Sep-90 11800.80 12108.61
Oct-90 11970.54 12277.41
Nov-90 12161.88 12462.30
Dec-90 12332.78 12634.91
Jan-91 12445.91 12764.79
Feb-91 12516.43 12842.15
Mar-91 12570.96 12913.17
Apr-91 12693.82 13046.56
May-91 12758.32 13120.14
Jun-91 12737.69 13131.03
Jul-91 12903.05 13273.24
Aug-91 13180.41 13525.17
Sep-91 13432.12 13755.09
Oct-91 13611.94 13912.45
Nov-91 13777.10 14075.65
Dec-91 14185.21 14417.68
Jan-92 13957.51 14279.13
Feb-92 13977.98 14323.54
Mar-92 13873.48 14266.53
Apr-92 14012.21 14394.64
May-92 14241.94 14609.41
Jun-92 14508.91 14819.93
Jul-92 14841.87 15104.18
Aug-92 15016.51 15258.54
Sep-92 15269.90 15468.81
Oct-92 15020.10 15283.18
Nov-92 14901.42 15221.13
Dec-92 15129.43 15417.18
Jan-93 15441.35 15703.63
Feb-93 15692.00 15935.10
Mar-93 15750.02 15993.74
Apr-93 15892.12 16118.81
May-93 15819.06 16074.97
Jun-93 16034.46 16307.74
Jul-93 16046.00 16340.52
Aug-93 16261.70 16583.83
Sep-93 16329.44 16651.32
Oct-93 16340.62 16690.79
Nov-93 16244.94 16608.33
Dec-93 16320.22 16677.09
Jan-94 16502.65 16841.86
Feb-94 16299.93 16610.79
Mar-94 16100.17 16368.61
Apr-94 15948.30 16262.86
May-94 15944.74 16274.41
Jun-94 15939.84 16277.67
Jul-94 16130.77 16491.39
Aug-94 16175.17 16539.38
Sep-94 16069.35 16402.93
Oct-94 16049.64 16406.21
Nov-94 15979.65 16333.37
Dec-94 16029.18 16386.62
Jan-95 16298.63 16653.23
Feb-95 16563.63 16974.47
Mar-95 16649.60 17068.00
Apr-95 16801.76 17265.81
May-95 17352.83 17752.71
Jun-95 17437.48 17865.62
Jul-95 17419.98 17874.19
Aug-95 17646.05 18021.83
Sep-95 17782.33 18142.58
Oct-95 18027.47 18341.42
Nov-95 18360.24 18565.00
Dec-95 18635.23 18748.24
Jan-96 18721.26 18906.48
Feb-96 18458.32 18706.82
Mar-96 18271.42 18621.52
Apr-96 18173.80 18567.33
May-96 18152.82 18557.86
Jun-96 18350.55 18746.41
Jul-96 18385.80 18804.52
Aug-96 18402.44 18825.96
Sep-96 18621.65 19069.38
Oct-96 18958.06 19381.93
Nov-96 19180.47 19615.87
Dec-96 19057.72 19510.53
Jan-97 19114.55 19585.65
Feb-97 19163.69 19617.57
Mar-97 19044.58 19506.14
Apr-97 19233.76 19726.17
May-97 19368.22 19879.84
Jun-97 19540.93 20049.81
Jul-97 19933.98 20419.53
Aug-97 19810.39 20341.73
Sep-97 20044.16 20562.85
Oct-97 20280.68 20802.40
Nov-97 20315.15 20848.17
Dec-97 20495.96 21019.12
Jan-98 20778.80 21293.42
Feb-98 20726.86 21271.07
Mar-98 20805.62 21337.22
Apr-98 20861.79 21439.00
May-98 21024.52 21586.93
Jun-98 21186.40 21731.77
Jul-98 21203.35 21815.44
Aug-98 21640.14 22228.19
Sep-98 22181.15 22746.77
Oct-98 22125.69 22784.53
FUND
----
1 Year Total Return (9/30/97-9/30/98)....................... 10.64%
5 Year Average Annual Total Return (9/30/93-9/30/98)........ 6.31%
10 Year Average Annual Total Return (9/30/88-9/30/98)....... 8.21%
- ------------------
* The Lehman Intermediate Government Bond Index is an unmanaged index (with no
defined investment objective) of intermediate-term government bonds, and is
calculated by Lehman Brothers Inc.
3
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WARBURG PINCUS NEW YORK INTERMEDIATE MUNICIPAL FUND
ANNUAL INVESTMENT ADVISER'S REPORT -- OCTOBER 31, 1998
- --------------------------------------------------------------------------------
December 11, 1998
Dear Shareholder:
The objective of Warburg Pincus New York Intermediate Municipal Fund (the
"Fund") is to maximize current interest income -- exempt from federal income tax
and New York state and New York City personal income taxes -- to the extent
consistent with prudent investment and the preservation of capital. A portion of
the Fund's income may be subject to state and city taxes or the federal
alternative minimum tax. Effective October 22, 1998, Dale C. Christensen is no
longer a Co-Portfolio Manager of the Fund. Patrick A. Bittner and Sharon B.
Parente continue to serve as Co-Portfolio Managers of the Fund.
MANAGER COMMENTARY
For the 12 months ended October 31, 1998, the Fund had a return of 6.24%, vs.
a return of 6.51% for the Lehman 5-year Municipal Bond Index*.
The period was a positive one for municipal bonds, supported by a continued
favorable inflation and interest-rate backdrop and by improving federal and
state fiscal profiles. Municipal bonds also benefited from increased demand,
late in the period, from investors seeking refuge from global financial-market
volatility. Despite the group's advance, yield spreads between municipal bonds
and Treasuries widened significantly during the period, since Treasuries had
even stronger performance. As a result, yields on municipal bonds relative to
Treasuries were at their most attractive levels in over a decade by the end of
the period.
We made few noteworthy changes in broad strategies during the period. We did,
however, extend the Fund's duration, reflecting our increasingly positive view
on inflation and interest rates. As a result, the Fund's duration was modestly
longer than that of its benchmark at the end of the period.
In terms of sector exposure, we remained well-diversified by revenue source,
holding a mix of general-obligation, education and essential-services bonds. We
continued to largely avoid, however, hospital and utility bonds, which we
generally deemed expensive relative to these bonds' underlying credit risk.
With respect to credit quality, we maintained a high-quality portfolio
throughout (about 80% of the Fund was rated AA or AAA at the end of the period).
We continued to avoid below-investment-grade, or high-yield, debt. Unlike in the
taxable market, yield spreads between higher- and lower-quality bonds remained
remarkably narrow during the period. We therefore
4
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WARBURG PINCUS NEW YORK INTERMEDIATE MUNICIPAL FUND
ANNUAL INVESTMENT ADVISER'S REPORT -- OCTOBER 31, 1998 (CONT'D)
- --------------------------------------------------------------------------------
continued to see little incentive to assume more credit risk for the sake of
slim additional yield.
Looking ahead, we remain optimistic regarding the fundamentals of New York's
municipal-bond market. Demand for tax-free bonds at both the state and local
level has shown no signs of ebbing. Supply, meanwhile, stands to decrease from
extraordinarily high issuance over the past year. The dramatic decline in
interest rates witnessed during the reporting period, which triggered a rash of
new issuance, is unlikely to repeat (though we believe rates could certainly
trend lower). Set within this environment, we will continue to devote our
efforts to provide what we deem to be attractive levels of after-tax
risk-adjusted yields.
Sharon B. Parente Patrick A. Bittner
Co-Portfolio Manager Co-Portfolio Manager
5
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WARBURG PINCUS NEW YORK INTERMEDIATE MUNICIPAL FUND
ANNUAL INVESTMENT ADVISER'S REPORT -- OCTOBER 31, 1998 (CONT'D)
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN WARBURG PINCUS NEW YORK INTERMEDIATE
MUNICIPAL FUND SINCE INCEPTION AS OF OCTOBER 31, 1998
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, 1998, compared to the Lehman 5-year Municipal Bond
Index ("LBMUNI")* for the same time period.
[GRAPHIC]
In the printed version of this document, a line graph appears depicting the
following plot points:
Fund LBMUNI
-------- ---------
Apr-87 10000.00 10000.00
Apr-87 9675.84 10000.00
May-87 9700.40 10000.00
Jun-87 9853.24 10000.00
Jul-87 9969.78 10000.00
Aug-87 9975.30 10000.00
Sep-87 9733.56 10000.00
Oct-87 9687.35 10000.00
Nov-87 9846.04 10000.00
Dec-87 9976.44 10000.00
Jan-88 10265.95 10255.00
Feb-88 10322.09 10360.01
Mar-88 10203.09 10326.13
Apr-88 10259.70 10387.16
May-88 10256.61 10341.25
Jun-88 10325.32 10420.26
Jul-88 10353.63 10462.25
Aug-88 10349.45 10438.40
Sep-88 10495.72 10569.40
Oct-88 10600.67 10681.43
Nov-88 10563.49 10611.58
Dec-88 10616.41 10638.53
Jan-89 10693.32 10791.51
Feb-89 10643.08 10700.65
Mar-89 10597.90 10637.73
Apr-89 10741.07 10830.80
May-89 10877.29 11011.79
Jun-89 10989.70 11147.78
Jul-89 11080.42 11301.84
Aug-89 11045.07 11241.94
Sep-89 11019.28 11249.93
Oct-89 11121.77 11357.93
Nov-89 11246.54 11506.94
Dec-89 11339.77 11603.95
Jan-90 11281.93 11601.04
Feb-90 11382.56 11693.04
Mar-90 11382.59 11713.04
Apr-90 11286.73 11665.13
May-90 11453.46 11868.22
Jun-90 11550.92 11969.22
Jul-90 11721.73 12125.30
Aug-90 11650.78 12074.37
Sep-90 11699.23 12119.41
Oct-90 11809.84 12307.50
Nov-90 11992.29 12484.48
Dec-90 12016.59 12536.54
Jan-91 12141.61 12714.56
Feb-91 12260.18 12844.63
Mar-91 12284.69 12816.76
Apr-91 12394.69 12975.81
May-91 12455.89 13055.88
Jun-91 12462.97 13043.99
Jul-91 12588.63 13203.00
Aug-91 12700.94 13379.00
Sep-91 12811.63 13542.09
Oct-91 12923.00 13646.09
Nov-91 12941.30 13707.09
Dec-91 13158.41 14004.12
Jan-92 13216.29 14045.15
Feb-92 13242.98 14051.19
Mar-92 13220.91 14012.27
Apr-92 13302.64 14132.36
May-92 13454.81 14269.44
Jun-92 13646.12 14483.48
Jul-92 13986.16 14859.62
Aug-92 13837.95 14713.70
Sep-92 13930.64 14832.73
Oct-92 13780.17 14687.81
Nov-92 14026.87 14858.93
Dec-92 14148.20 14973.94
Jan-93 14316.77 15153.92
Feb-93 14815.92 15533.07
Mar-93 14645.34 15368.11
Apr-93 14739.19 15459.09
May-93 14793.69 15506.09
Jun-93 15003.35 15728.13
Jul-93 15004.19 15741.19
Aug-93 15261.47 15968.18
Sep-93 15374.11 16089.21
Oct-93 15388.96 16129.28
Nov-93 15285.29 16047.34
Dec-93 15547.83 16284.36
Jan-94 15710.01 16429.45
Feb-94 15449.04 16161.49
Mar-94 15101.52 15824.52
Apr-94 15231.26 15923.58
May-94 15335.86 16003.68
Jun-94 15350.50 15994.88
Jul-94 15500.31 16180.90
Aug-94 15572.75 16258.89
Sep-94 15475.61 16149.95
Oct-94 15395.38 16043.04
Nov-94 15283.37 15897.21
Dec-94 15462.35 16077.33
Jan-95 15649.78 16277.33
Feb-95 15891.37 16562.34
Mar-95 15966.07 16731.45
Apr-95 16008.00 16795.53
May-95 16272.24 17148.57
Jun-95 16316.15 17178.58
Jul-95 16425.52 17388.67
Aug-95 16535.52 17546.74
Sep-95 16548.09 17590.78
Oct-95 16674.07 17697.73
Nov-95 16846.22 17858.78
Dec-95 16953.65 17951.82
Jan-96 17081.84 18131.88
Feb-96 17026.17 18081.11
Mar-96 16939.70 17954.18
Apr-96 16917.97 17952.39
May-96 16948.35 17945.56
Jun-96 17043.25 18051.62
Jul-96 17224.02 18183.76
Aug-96 17238.67 18199.76
Sep-96 17385.62 18349.73
Oct-96 17485.30 18509.74
Nov-96 17684.42 18750.73
Dec-96 17686.19 18714.92
Jan-97 17752.45 18778.93
Feb-97 17863.52 18916.01
Mar-97 17755.25 18710.21
Apr-97 17785.93 18790.29
May-97 18011.97 19021.41
Jun-97 18113.02 19176.43
Jul-97 18374.89 19513.55
Aug-97 18317.93 19413.64
Sep-97 18435.16 19585.65
Oct-97 18503.37 19687.69
Nov-97 18551.48 19748.72
Dec-97 18725.86 19918.56
Jan-98 18885.03 20100.62
Feb-98 18892.59 20131.57
Mar-98 18907.70 20148.48
Apr-98 18792.36 20064.66
May-98 19061.09 20305.84
Jun-98 19146.87 20374.88
Jul-98 19160.27 20447.01
Aug-98 19432.35 20697.07
Sep-98 19646.10 20910.25
Oct-98 19657.89 20971.31
FUND
----
1 Year Total Return (9/30/97-9/30/98)....................... 6.57%
5 Year Average Annual Total Return (9/30/93-9/30/98)........ 5.03%
10 Year Average Annual Total Return (9/30/88-9/30/98)....... 6.47%
- ------------------
* The Lehman 5-year Municipal Bond Index is an unmanaged index of municipal
bonds that is compiled by Lehman Brothers Inc. and has no defined investment
objective. The inception date of this index was 01/01/88. The Average Annual
Total Return for the period 01/01/88-10/31/98 for the Fund was 6.46% and for
the Lehman 5-year Municipal Bond Index was 7.07%.
6
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WARBURG PINCUS FIXED INCOME FUND
ANNUAL INVESTMENT ADVISER'S REPORT -- OCTOBER 31, 1998
- --------------------------------------------------------------------------------
December 11, 1998
Dear Shareholder:
The objective of Warburg Pincus Fixed Income Fund (the "Fund") is high current
income consistent with reasonable risk and, secondarily, capital appreciation.
The Fund pursues its objective by investing in a diversified portfolio of
fixed-income securities, including both corporate and U.S. government issues.
For the 12 months ended October 31, 1998, the Fund had a return of 6.48%, vs.
a return of 9.12% for the Lehman Intermediate Government/Corporate Bond Index*.
The period was a favorable one for the domestic bond market as a whole,
supported by continued benign inflation and declining interest rates. Treasuries
saw particularly impressive performance. These issues were the prime
beneficiaries of a worldwide "flight to quality" driven by an ever-lengthening
list of negative developments (e.g., Russia's currency devaluation in August).
In addition, this rising demand for Treasuries met with declining supply, a
reflection of the government's improving fiscal profile and reduced borrowing
needs. As a result of these forces, the yield on the 30-year Treasury dropped
nearly a full percentage point from its 6.16% level at the start of the period.
The Fund's performance for the 12 months reflected both its sector allocation
and its duration. Regarding the latter, we maintained a longer-than-neutral
duration throughout, since we continued to have a positive view on inflation and
interest rates. This stance helped the Fund's return, given the rally in bonds
over the period.
In terms of sectors, the Fund was hampered by its underweighting in Treasuries
over the latter half of the period. We began to scale back our Treasury position
in April -- from a roughly 50% weighting -- when we saw increasingly attractive
buying opportunities elsewhere, particularly among mortgage-backed bonds. Though
this hurt the Fund in terms of total return, it reflected our ongoing effort to
provide what we believe are attractive levels of risk-adjusted yield.
We raised, as noted, our weighting in mortgage-backed bonds, adding both
government-agency issues (backed by residential mortgages) and bonds backed by
commercial mortgages. Our bias was toward the latter, which often feature
"lockout" provisions that prevent early repayments of principal. As
7
<PAGE>
WARBURG PINCUS FIXED INCOME FUND
ANNUAL INVESTMENT ADVISER'S REPORT -- OCTOBER 31, 1998 (CONT'D)
- --------------------------------------------------------------------------------
such, these bonds tend to outperform agency mortgage-backed bonds during periods
of declining interest rates. Our mortgage-backed holdings, mostly high-quality
(AAA- and AA-rated) issues, were good performers in absolute terms and continued
to generate cash flows in line with our expectations. They lagged Treasuries,
however, in large part due to heavy issuance of mortgage-backed bonds during the
period.
Elsewhere, we maintained a significant weighting in corporate bonds. These,
too, trailed Treasuries for the 12 months, restrained in part by increased
corporate issuance over the period. Corporate bonds were also sold heavily by
hedge funds, a number of which faced liquidity difficulties late in the period.
These factors caused yield spreads between corporate bonds and Treasuries to
widen significantly. We took advantage of the wider yield spreads to selectively
add high-quality bonds we deemed to be attractively priced (we are currently
seeking opportunities to continue to add such bonds). We largely avoided, it
should be noted, high-yield, or below investment-grade, corporate bonds, which
we generally viewed as expensive relative to these bonds' underlying credit
risk. This proved beneficial to the Fund's return, since high-yield bonds were
lackluster performers for the 12 months.
Going forward, we will continue to make sector and duration adjustments to the
Fund based on risk-vs.-reward considerations. Our specific emphasis will remain
on high-quality, intermediate-term bonds we deem to have attractive yields and
prospects for capital appreciation.
Dale C. Christensen M. Anthony E. van Daalen
Co-Portfolio Manager Co-Portfolio Manager
8
<PAGE>
WARBURG PINCUS FIXED INCOME FUND
ANNUAL INVESTMENT ADVISER'S REPORT -- OCTOBER 31, 1998 (CONT'D)
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN WARBURG PINCUS FIXED INCOME FUND
SINCE INCEPTION AS OF OCTOBER 31, 1998
The graph below illustrates the hypothetical investment of $10,000 in Warburg
Pincus Fixed Income Fund (the "Fund") from August 17, 1987 (inception) to
October 31, 1998, compared to the Lehman Intermediate Government/Corporation
Bond Index ("LIGC")* for the same time period.
[GRAPHIC]
In the printed version of this document, a line graph appears depicting the
following plot points:
Fund LIGC
-------- --------
Sep-87 10000.00 10000.00
Sep-87 9865.38 9865.00
Oct-87 9776.10 10152.37
Nov-87 9989.00 10216.94
Dec-87 10116.53 10324.32
Jan-88 10463.24 10588.52
Feb-88 10628.93 10706.37
Mar-88 10632.49 10665.04
Apr-88 10633.41 10647.44
May-88 10604.46 10600.70
Jun-88 10784.31 10769.67
Jul-88 10798.14 10746.95
Aug-88 10779.71 10763.07
Sep-88 10922.50 10949.81
Oct-88 11014.66 11098.62
Nov-88 10972.79 11004.06
Dec-88 10991.59 11013.74
Jan-89 11147.25 11129.94
Feb-89 11144.67 11084.08
Mar-89 11119.59 11131.96
Apr-89 11298.05 11354.49
May-89 11507.40 11579.99
Jun-89 11758.94 11871.92
Jul-89 11895.26 12115.66
Aug-89 11825.87 11959.24
Sep-89 11817.96 12015.69
Oct-89 11872.06 12269.70
Nov-89 11921.97 12387.00
Dec-89 12002.93 12420.94
Jan-90 11857.97 12341.45
Feb-90 11789.54 12386.37
Mar-90 11886.57 12402.47
Apr-90 11897.56 12359.56
May-90 12098.50 12631.35
Jun-90 12282.21 12800.35
Jul-90 12490.45 12977.89
Aug-90 12277.55 12924.68
Sep-90 12188.91 13024.46
Oct-90 11976.61 13175.68
Nov-90 12188.23 13375.82
Dec-90 12356.47 13558.53
Jan-91 12550.14 13696.01
Feb-91 12692.48 13805.03
Mar-91 12772.88 13899.46
Apr-91 12935.49 14050.96
May-91 13031.93 14137.38
Jun-91 13071.18 14147.27
Jul-91 13226.75 14305.02
Aug-91 13510.71 14578.10
Sep-91 13763.71 14828.84
Oct-91 13902.22 14997.74
Nov-91 14011.37 15170.22
Dec-91 14438.62 15540.67
Jan-92 14286.00 15400.03
Feb-92 14318.70 15460.86
Mar-92 14264.93 15400.25
Apr-92 14417.38 15535.62
May-92 14648.13 15776.42
Jun-92 14847.78 16009.91
Jul-92 15215.67 16328.19
Aug-92 15339.05 16491.47
Sep-92 15539.43 16715.26
Oct-92 15331.28 16498.63
Nov-92 15263.08 16436.10
Dec-92 15406.05 16656.18
Jan-93 15753.84 16980.14
Feb-93 16060.42 17247.92
Mar-93 16195.74 17316.57
Apr-93 16345.13 17455.97
May-93 16340.73 17417.39
Jun-93 16586.35 17690.84
Jul-93 16640.51 17734.18
Aug-93 16868.91 18015.45
Sep-93 16972.61 18090.21
Oct-93 17114.54 18138.69
Nov-93 17037.09 18037.66
Dec-93 17136.58 18120.27
Jan-94 17397.46 18321.59
Feb-94 17257.84 18050.80
Mar-94 16964.18 17753.14
Apr-94 16779.62 17632.42
May-94 16734.80 17644.23
Jun-94 16739.82 17646.70
Jul-94 16935.16 17900.64
Aug-94 17060.48 17956.67
Sep-94 16954.43 17791.65
Oct-94 17011.37 17789.33
Nov-94 16949.66 17708.75
Dec-94 17021.73 17771.44
Jan-95 17158.56 18070.89
Feb-95 17455.58 18445.68
Mar-95 17402.51 18551.18
Apr-95 17669.32 18780.11
May-95 18268.98 19347.83
Jun-95 18414.20 19477.46
Jul-95 18485.74 19480.19
Aug-95 18739.40 19657.46
Sep-95 18938.30 19799.78
Oct-95 19153.02 20020.35
Nov-95 19318.47 20283.61
Dec-95 19596.60 20496.19
Jan-96 19785.46 20673.07
Feb-96 19603.99 20430.57
Mar-96 19515.12 20325.56
Apr-96 19415.60 20254.01
May-96 19504.91 20238.82
Jun-96 19618.04 20453.76
Jul-96 19683.69 20514.51
Aug-96 19778.52 20530.71
Sep-96 20092.45 20816.71
Oct-96 20454.11 21184.54
Nov-96 20812.82 21464.17
Dec-96 20802.41 21326.80
Jan-97 20929.39 21409.76
Feb-97 21081.97 21450.66
Mar-97 20913.02 21302.86
Apr-97 21102.30 21553.17
May-97 21311.06 21732.06
Jun-97 21564.23 21930.47
Jul-97 22103.07 22376.76
Aug-97 21948.35 22264.43
Sep-97 22257.82 22523.36
Oct-97 22455.92 22772.92
Nov-97 22496.34 22823.02
Dec-97 22635.82 23005.61
Jan-98 22982.14 23306.98
Feb-98 22899.41 23289.50
Mar-98 22968.11 23364.26
Apr-98 23073.76 23481.31
May-98 23246.81 23652.73
Jun-98 23435.11 23804.58
Jul-98 23432.77 23888.61
Aug-98 23697.56 24264.14
Sep-98 24057.76 24873.65
Oct-98 23913.41 24849.28
FUND
----
1 Year Total Return (9/30/97-9/30/98)....................... 8.08%
5 Year Average Annual Total Return (9/30/93-9/30/98)........ 7.22%
10 Average Annual Total Return (9/30/88-9/30/98)............ 8.21%
- ------------------
* The Lehman Intermediate Government/Corporate Bond Index is an unmanaged index
(with no defined investment objective) of intermediate-term government and
corporate bonds, and is calculated by Lehman Brothers Inc.
9
<PAGE>
WARBURG PINCUS GLOBAL FIXED INCOME FUND
ANNUAL INVESTMENT ADVISER'S REPORT -- OCTOBER 31, 1998
- --------------------------------------------------------------------------------
December 11, 1998
Dear Shareholder:
The objective of Warburg Pincus Global Fixed Income Fund (the "Fund") is to
maximize total return -- consistent with prudent management -- through a
combination of interest income, currency gains and capital appreciation. The
Fund's holdings primarily include a wide range of fixed-income obligations of
government and corporate issuers denominated in various currencies.
For the 12 months ended October 31, 1998, the Fund had a return of 4.10%, vs.
returns of 12.48% for the Salomon Brothers World Government Bond Index*
(Currency-Hedged), 9.34% for the Lehman Aggregate Bond Index** and 9.16% for a
Composite Benchmark*** composed of: 50% Lehman Aggregate Index, 35% Salomon
Brothers World Government Bond Index Excluding the U.S. (Currency-Hedged) and
15% Merrill Lynch High Yield Master II Index.
In broad terms, the period was positive for developed bond markets and
difficult for emerging bond markets. The best performances belonged to Europe,
where bonds benefited from continued low inflation and from optimism regarding
the coming launch of the European Monetary Union. The U.S. bond market also
rallied, reflecting a favorable domestic inflation and interest-rate backdrop.
Other developed bond markets enjoying good performances were Japan, Australia
and Canada. Most emerging bond markets, by contrast, had significant losses.
These were hurt by continued weakness in emerging market economies and by
concerns related to Russia's dramatic currency devaluation in August.
Against this backdrop, the Fund was hampered by its weighting, early in the
period, in Eastern European and Central Asian sovereign bonds. Helping the
Fund's performance was its broad exposure to North American and European bond
markets throughout the 12 months.
We made several noteworthy changes to the Fund's regional allocation during
the period. We substantially added to our position in Europe, adding French and
U.K. government bonds we deemed to be attractively priced. Elsewhere in Europe,
which accounted for the majority of the Fund's investments at the end of the
period, we maintained a sizable weighting in Germany and a modest position in
Denmark.
We also increased our weighting in the U.S. during the period. Our focus here
was initially on Treasuries, though we shifted in favor of U.S. corporate and
mortgage-backed bonds beginning in July. Yield spreads between these last two
groups and Treasuries widened significantly over the latter part of the
10
<PAGE>
WARBURG PINCUS GLOBAL FIXED INCOME FUND
ANNUAL INVESTMENT ADVISER'S REPORT -- OCTOBER 31, 1998 (CONT'D)
- --------------------------------------------------------------------------------
period. This largely reflected surging demand for Treasuries (sparked by a
worldwide "flight to quality") and heavy selling of corporate and mortgage-
backed bonds by hedge funds. The resulting wider yield spreads prompted us to
add several high-quality corporate and mortgage-backed bonds we believed to
represent good value.
Elsewhere, we reduced our exposure to emerging markets and high-yield debt in
general over the course of the period. We eliminated our position in Latin
America and substantially lowered our weighting in Asia, given the increasingly
fragile financial condition of emerging markets. We did, though, have some
exposure to emerging markets at the end of the period, mostly via
dollar-denominated South Korean sovereign debt.
In terms of currency management, we continued to hedge the bulk of the Fund's
foreign currency exposure (as of October 31, 1998, 81% of the Fund's assets were
dollar-denominated or hedged into U.S. dollars). We did, however, increase our
exposure to the mark, reflecting our more-positive view of the German currency.
All told, our currency strategies had a positive impact on the Fund's return.
Looking ahead, we will continue to attempt to identify attractive buying
opportunities in global bond markets. Areas we are currently monitoring include
commodity-sensitive sovereign debt (e.g., Australian bonds) and high-yield U.S.
debt. Our overall emphasis, it should be stressed, will remain on high-quality
bonds denominated in (or hedged into) U.S. dollars.
Charles C. Van Vleet Dale C. Christensen
Co-Portfolio Manager Co-Portfolio Manager
International investing entails special risk considerations, including
currency fluctuations, lower liquidity, economic and political risks, and
differences in accounting methods.
11
<PAGE>
WARBURG PINCUS GLOBAL FIXED INCOME FUND
ANNUAL INVESTMENT ADVISER'S REPORT -- OCTOBER 31, 1998 (CONT'D)
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN WARBURG PINCUS GLOBAL FIXED INCOME FUND
SINCE INCEPTION AS OF OCTOBER 31, 1998
The graph below illustrates the hypothetical investment of $10,000 in Warburg
Pincus Global Fixed Income Fund (the "Fund") from November 1, 1990 (inception)
to October 31, 1998, compared to the Salomon Brothers World Government Bond
Index (Currency-Hedged) ("Salomon"),* the Lehman Aggregate Bond Index
("Lehman"),** and a Composite Benchmark ("Composite")*** for the same time
period.
[GRAPHIC]
In the printed version of this document, a line graph appears depicting the
following plot points:
<TABLE>
<CAPTION>
Fund Salomon Lehman Composite
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
10000.00 10000.00 10000.00 10000.00
Nov-90 10040.00 10188.00 10215.30 10180.80
Dec-90 10092.40 10318.41 10374.45 10318.14
Jan-91 10415.03 10471.94 10374.45 10418.95
Feb-91 10394.87 10571.01 10502.68 10671.92
Mar-91 9840.34 10602.40 10592.38 10799.34
Apr-91 9931.08 10690.72 10665.25 10911.01
May-91 9890.75 10740.54 10843.79 11030.59
Jun-91 9647.67 10707.46 10838.37 11045.37
Jul-91 9906.46 10823.64 10988.69 11201.44
Aug-91 10134.19 11013.38 11226.49 11411.92
Sep-91 10631.07 11223.29 11453.94 11616.42
Oct-91 10765.64 11307.46 11581.42 11769.53
Nov-91 10910.56 11384.58 11687.62 11855.44
Dec-91 11579.38 11680.47 12034.74 12125.15
Jan-92 11429.83 11640.87 11871.19 12139.95
Feb-92 11312.32 11683.59 11948.35 12239.74
Mar-92 11109.36 11614.31 11881.09 12206.20
Apr-92 11162.78 11674.24 11966.87 12273.33
May-92 11568.69 11836.74 12192.68 12463.08
Jun-92 11812.46 11946.47 12360.45 12587.59
Jul-92 11868.44 12132.60 12612.61 12784.20
Aug-92 12125.97 12213.28 12740.37 12886.99
Sep-92 12237.93 12400.63 12891.60 13057.87
Oct-92 11958.02 12449.24 12720.53 13025.23
Nov-92 11767.67 12441.65 12723.45 13057.79
Dec-92 11822.87 12599.41 12925.76 13229.76
Jan-93 12104.93 12796.84 13173.67 13453.08
Feb-93 12375.23 13037.04 13404.34 13693.22
Mar-93 12821.82 13031.30 13460.24 13743.61
Apr-93 12998.11 13075.21 13553.92 13802.84
May-93 13162.64 13103.06 13571.14 13862.19
Jun-93 13189.55 13366.96 13817.05 14117.12
Jul-93 13285.92 13487.40 13895.25 14232.74
Aug-93 13695.45 13766.05 14138.83 14474.84
Sep-93 13809.76 13846.72 14177.72 14539.11
Oct-93 13956.94 13968.29 14230.74 14674.47
Nov-93 13871.09 13977.79 14109.78 14666.54
Dec-93 14142.05 14161.60 14186.25 14825.67
Jan-94 14256.40 14171.65 14377.77 14934.35
Feb-94 14027.69 13887.23 14128.17 14686.29
Mar-94 13680.05 13710.72 13780.05 14402.69
Apr-94 13565.09 13623.66 13670.09 14290.06
May-94 13424.59 13553.77 13668.31 14245.62
Jun-94 13361.61 13451.30 13638.24 14185.36
Jul-94 13489.72 13594.83 13909.10 14374.03
Aug-94 13476.91 13516.66 13926.34 14351.32
Sep-94 13450.26 13471.78 13721.49 14260.47
Oct-94 13567.11 13496.70 13709.41 14276.30
Nov-94 13645.01 13597.52 13679.11 14307.85
Dec-94 13367.42 13634.24 13773.64 14381.97
Jan-95 13327.95 13822.25 14046.22 14607.19
Feb-95 13433.20 14038.16 14380.24 14915.55
Mar-95 13367.42 14267.12 14468.53 15107.21
Apr-95 13686.32 14479.98 14670.66 15356.18
May-95 14111.53 14985.19 15238.41 15895.64
Jun-95 14191.25 15008.27 15350.11 15961.77
Jul-95 14553.41 15109.72 15316.03 16041.74
Aug-95 14741.20 15237.25 15500.90 16190.92
Sep-95 14861.92 15447.83 15651.72 16391.53
Oct-95 15011.49 15636.45 15855.19 16577.25
Nov-95 15269.84 15932.91 16092.70 16844.97
Dec-95 15507.93 16096.54 16318.48 17054.52
Jan-96 15721.34 16250.11 16426.84 17220.46
Feb-96 15465.25 16019.52 16141.50 17011.92
Mar-96 15436.79 16073.50 16120.52 17048.50
Apr-96 15711.57 16135.71 15939.49 17014.91
May-96 15812.12 16215.74 15907.29 17060.34
Jun-96 15913.32 16371.74 16120.92 17236.23
Jul-96 16031.96 16456.54 16165.09 17315.35
Aug-96 16195.10 16599.38 16138.10 17417.16
Sep-96 16506.55 16914.27 16419.39 17753.14
Oct-96 16716.18 17224.99 16783.07 18074.29
Nov-96 17000.52 17535.21 17070.57 18401.44
Dec-96 17054.92 17495.58 16911.98 18350.10
Jan-97 17132.37 17647.44 16963.73 18476.53
Feb-97 17302.77 17724.56 17005.97 18583.32
Mar-97 17209.83 17621.58 16817.72 18418.30
Apr-97 17304.04 17815.42 17069.48 18653.51
May-97 17429.66 17923.38 17230.79 18830.34
Jun-97 17618.09 18189.72 17435.31 19096.23
Jul-97 17793.16 18549.15 17905.55 19531.05
Aug-97 17729.10 18509.09 17752.99 19458.98
Sep-97 17888.66 18808.56 18014.85 19768.18
Oct-97 17677.58 19005.49 18276.24 19974.76
Nov-97 17628.08 19125.79 18360.31 20097.20
Dec-97 17423.59 19348.23 18545.20 20311.64
Jan-98 17390.49 19606.72 18783.32 20578.33
Feb-98 17574.83 19699.26 18769.42 20647.47
Mar-98 17592.40 19836.76 18833.99 20776.93
Apr-98 17747.22 19935.15 18932.30 20884.56
May-98 17816.43 20186.54 19112.16 21101.97
Jun-98 17816.43 20317.55 19274.04 21236.39
Jul-98 17919.76 20449.20 19315.09 21345.97
Aug-98 18005.78 20894.59 19629.35 21502.01
Sep-98 18437.92 21409.85 20089.07 21935.70
Oct-98 18402.89 21379.02 19982.80 21803.21
</TABLE>
FUND
----
1 Year Total Return (9/30/97-9/30/98)....................... 3.07%
5 Year Average Annual Total Return (9/30/93-9/30/98)........ 5.95%
Average Annual Total Return Since Inception
(11/01/90-9/30/98)........................................ 8.03%
- ------------------
* The Salomon Brothers World Government Bond Index (Currency-Hedged) is a
market capitalization-weighted index designed to track major government
debt markets and is currency-hedged into U.S. dollars.
** The Lehman Aggregate Bond Index is composed of the Lehman
Government/Corporate Bond Index and the Lehman Mortgage-Backed Securities
Index. The Aggregate Index includes U.S. Treasury and agency issues,
corporate bond issues and mortgage-backed securities rated investment-grade
or higher by Moody's Investors Service, Standard & Poor's Corporation or
Fitch Investors' Service.
*** The Composite Benchmark measures the weighted performance of three
component indexes. The weights of the component indexes -- 50% Lehman
Aggregate Bond Index, 35% Salomon Brothers World Government Bond Index
excluding the U.S. (Currency-Hedged), and 15% Merrill Lynch High Yield
Master II Index -- correspond to the investment strategy of the Fund's
managers. The Merrill Lynch High Yield Master II Index provides a
broad-based measure of the performance of the non-investment-grade U.S.
domestic bond market.
12
<PAGE>
WARBURG PINCUS INTERMEDIATE MATURITY GOVERNMENT FUND
STATEMENT OF NET ASSETS
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS+
PAR (MOODY'S/S&P) MATURITY RATE% VALUE
--- ------------- -------- ------ -----
<C> <S> <C> <C> <C> <C>
AGENCY OBLIGATIONS (11.1%)
$ 409,917 AID Israel Government Loan Trusts Ctfs
Series 1-B (Aaa, AAA) 04/01/06 8.500 $ 470,892
7,200,000 Federal Farm Credit Bank, Zero Coupon
Discount Note (Aaa, AAA) 09/13/99 4.797 6,922,825
571,293 Small Business Administration
Guaranteed Development Participation
Certificate Series 1992-10B (Aaa, AAA) 04/01/02 7.450 585,754
667,882 Small Business Administration
Guaranteed Development Participation
Certificate Series 1992-10C (Aaa, AAA) 07/01/02 6.600 695,432
------------
TOTAL AGENCY OBLIGATIONS
(Cost $8,605,632) 8,674,903
------------
MORTGAGE-BACKED SECURITIES (46.6%)
1,500,000 Fannie Mae G97-1 Class J (Aaa, AAA) 02/18/04 6.750 1,512,432
2,913,830 Fannie Mae (Aaa, AAA) 12/01/05 6.625 3,077,733
1,978,564 Fannie Mae (Aaa, AAA) 08/01/07 6.750 2,083,057
1,675,000 Fannie Mae Series MTN (Aaa, AAA) 12/10/07 6.560 1,775,253
2,000,000 Fannie Mae 1997-51, Class KB (Aaa, AAA) 03/20/08 7.000 2,056,481
5,000,000 Fannie Mae (Aaa, AAA) 05/15/08 6.000 5,301,493
2,400,000 Fannie Mae REMIC 98-M4 (Aaa, AAA) 12/25/23 6.424 2,450,676
2,300,000 Federal Home Loan Bank Senior
Unsubordinated (Aaa, AAA) 07/14/00 5.500 2,332,932
2,250,000 Federal Home Loan Bank (Aaa, AAA) 03/06/03 5.720 2,320,362
3,000,000 Federal Home Loan Bank (Aaa, AAA) 09/02/03 5.575 3,084,692
2,315,000 Federal Home Loan Bank (Aaa, AAA) 09/15/03 5.125 2,341,182
2,000,000 Federal Home Loan Bank Series El-04
Class 1 (Aaa, AAA) 04/23/04 7.130 2,020,717
2,000,000 Freddie Mac Series 1275 Class VN (Aaa, AAA) 02/15/05 7.000 2,022,878
2,000,000 Freddie Mac Series 1490 Class CA (Aaa, AAA) 04/15/08 6.500 2,041,443
973,826 GE Capital Mortgage Services, Inc.
Series 1994-7 Class A10 (Aaa, AAA) 02/25/09 6.000 987,231
1,000,000 Morgan Stanley Mortgage Trust
Series 40 Class 8 (NR, AAA) 07/20/21 7.000 1,012,500
------------
TOTAL MORTGAGE-BACKED SECURITIES
(Cost $35,575,772) 36,421,062
------------
UNITED STATES TREASURY OBLIGATIONS (39.6%)
U.S. Treasury Bonds/Notes (39.3%)
2,000,000 U.S. Treasury Bond (Aaa, AAA) 11/15/11 14.000 3,211,151
4,000,000 U.S. Treasury Bond (Aaa, AAA) 11/15/12 10.375 5,590,428
6,300,000 U.S. Treasury Note (Aaa, AAA) 02/29/00 5.500 6,394,392
4,670,000 U.S. Treasury Note (Aaa, AAA) 05/15/01 8.000 5,079,577
4,200,000 U.S. Treasury Note (Aaa, AAA) 08/15/02 6.375 4,487,521
1,700,000 U.S. Treasury Note (Aaa, AAA) 02/15/05 7.500 1,975,342
</TABLE>
See Accompanying Notes to Financial Statements.
13
<PAGE>
WARBURG PINCUS INTERMEDIATE MATURITY GOVERNMENT FUND
STATEMENT OF NET ASSETS (CONT'D)
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS+
PAR (MOODY'S/S&P) MATURITY RATE% VALUE
--- ------------- -------- ------ -----
<S> <C> <C> <C> <C>
3,600,000 U.S. Treasury Note (Aaa, AAA) 08/15/07 6.125 $ 3,976,365
U.S. Treasury Principal Strip Notes (0.3%)
$ 295,000 U.S. Treasury Principal Strip (Aaa, AAA) 05/15/02 5.840# 253,104
-----------
TOTAL UNITED STATES TREASURY OBLIGATIONS
(Cost $29,773,423) 30,967,880
------------
SHORT TERM INVESTMENTS (3.7%)
2,909,000 Repurchase agreement with State
Street Bank & Trust Co. dated
10/30/98 at 5.400% to be repurchased
at $2,910,309 on 11/02/98. (Collateralized
by a pro rata amount of U.S. Treasury
Notes ranging in par values from
$21,390,000-$50,000,000, 3.375%-5.500%,
02/28/03-04/15/28. Market value of
collateral is $2,967,196.)
(Cost $2,909,000) 2,909,000
------------
TOTAL INVESTMENTS AT VALUE (101.0%) (Cost $76,863,827*) 78,972,845
LIABILITIES IN EXCESS OF OTHER ASSETS (1.0%) (761,121)
------------
NET ASSETS (100.0%) (applicable to 7,540,501 Common Shares
and 1,102 Advisor Shares) $ 78,211,724
============
NET ASSET VALUE, offering and redemption price per Common
Share ($78,200,283 divided by 7,540,501) $10.37
======
NET ASSET VALUE, offering and redemption price per Advisor
Share ($11,441 divided by 1,102) $10.38
======
</TABLE>
INVESTMENT ABBREVIATIONS
NR = Not Rated
REMIC = Real Estate Mortgage Investment Conduit.
- --------------------------------------------------------------------------------
+ Credit ratings given by Moody's Investor's Service, Inc. and Standard & Poor's
Ratings Group are unaudited.
# Rate shown reflects yield to maturity on date of purchase.
* Cost for federal income tax purposes is $77,059,545.
See Accompanying Notes to Financial Statements.
14
<PAGE>
WARBURG PINCUS NEW YORK INTERMEDIATE MUNICIPAL FUND
STATEMENT OF NET ASSETS
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS+
PAR (MOODY'S/S&P) MATURITY RATE% VALUE
- ---------- ------------- -------- ----- ------------
MUNICIPAL BONDS (98.6%)
NEW YORK (88.2%)
<C> <S> <C> <C> <C> <C>
$1,000,000 Housing N Y Corp. Revenue Bond (A1, AA) 11/01/03 6.000 $ 1,077,500
1,750,000 Metropolitan Transportation
Authority Commuter Facilities
Revenue Bond Series C-1 (Aaa, AAA) 07/01/05 6.000 1,960,000
2,000,000 Metropolitan Transportation
Authority Commuter Facilities
Revenue Bond Series C-2 (Aaa, AAA) 07/01/05 6.000 2,240,000
1,000,000 Metropolitan Transportation
Authority Commuter Facilities
Revenue Bond Series E (Aaa, AAA) 07/01/14 5.000 1,008,750
3,000,000 Municipal Assistance Corp. for
New York City Revenue Bond
Series L (Aa2, AA) 07/01/04 6.000 3,318,750
1,500,000 Municipal Assistance Corp. for
New York City Revenue Bond
Series M (Aa2, AA) 07/01/03 5.250 1,591,875
1,045,000 Nassau County New York General
Obligation Bond Series L (FGIC
Insured)) (Escrowed To Maturity) (Aaa, AAA) 11/15/01 6.300 1,127,294
1,350,000 Nassau County New York General
Obligation Bond General
Improvements Series R
(FGIC Insured) (Aaa, AAA) 11/01/02 5.125 1,419,187
1,100,000 Nassau County New York General
Obligation Bond General
Improvements Series S (Aaa, AAA) 03/01/06 5.000 1,163,250
3,000,000 New York City General Obligation
Bond Series A (A3, A-) 08/01/06 7.000 3,525,000
1,000,000 New York City General Obligation
Bond Series C-Subseries C-1
(Pre-Refunded 08/01/02 @
$101.50) (Aaa, AAA) 08/01/02 6.375 1,106,250
60,000 New York City General Obligation
Bond Series L (A3, NR) 08/01/02 5.500 63,600
2,000,000 New York City Municipal Water
Finance Authority Water & Sewer
System Revenue Bond Series C
(Pre-Refunded 06/15/01 @
$101.50) (Aaa, A) 06/15/01 7.750 2,235,000
1,000,000 New York City Municipal Water
Finance Authority Water & Sewer
System Revenue Bond Series A
(Pre-Refunded 06/15/05 @
$101.00) (Aaa, AAA) 06/15/05 6.000 1,126,250
1,000,000 New York City Transitional
Finance Authority Revenue Bond
Series A
(Callable 08/15/07 @ $101.00) (A3, AA) 08/15/15 5.000 1,008,750
</TABLE>
See Accompanying Notes to Financial Statements.
15
<PAGE>
WARBURG PINCUS NEW YORK INTERMEDIATE MUNICIPAL FUND
STATEMENT OF NET ASSETS (CONT'D)
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS+
PAR (MOODY'S/S&P) MATURITY RATE% VALUE
- ---------- ------------- -------- ----- ------------
MUNICIPAL BONDS (CONT'D)
NEW YORK (CONT'D)
<C> <S> <C> <C> <C> <C>
$1,000,000 New York State Dormitory
Authority Jewish Medical Center
Revenue Bond Series L (Aaa, AAA) 07/01/05 5.000 $ 1,058,750
1,500,000 New York State Dormitory
Authority Revenue Bond City
University Series B
(AMBAC Insured) (Aaa, AAA) 07/01/03 6.000 1,644,375
3,000,000 New York State Dormitory
Authority Revenue Bond City
University Series A (Baa1, BBB+) 07/01/05 5.700 3,273,750
2,000,000 New York State Dormitory
Authority Revenue Bond Education
Facilities Improvement (A3, A-) 05/15/07 6.000 2,260,000
1,000,000 New York State Dormitory
Authority Revenue Bond Hospital
Insd Mortgage Series A (Aaa, AAA) 02/15/08 5.250 1,076,250
1,000,000 New York State Dormitory
Authority Revenue Bond New York
University Series A (Aaa, AAA) 07/01/07 5.000 1,070,000
1,000,000 New York State Dormitory
Authority Revenue Bond
Rockefeller University
(Callable 07/01/08 @ $101) (Aaa, AAA) 07/01/16 5.000 1,023,750
1,000,000 New York State Dormitory
Authority Revenue Bond Sloan
Kettering Memorial Cancer Center (Aaa, AAA) 07/01/19 5.750 1,116,250
2,000,000 New York State Dormitory
Authority Revenue Bond State
University Educational
Facilities Series A (A3, A-) 05/15/02 5.400 2,100,000
2,495,000 New York State Dormitory
Authority Revenue Bond State
University Facilities Lease
Revenue Series A (Aaa, AAA) 07/01/06 5.750 2,781,925
1,000,000 New York State Dormitory
Authority Revenue Bond Upstate
Community Colleges Series A
(Pre-Refunded 07/01/00 @
$102.00) (Baa1, NR) 07/01/00 7.600 1,083,750
750,000 New York State Dormitory
Authority Revenue Bond Upstate
Community Colleges Series A (Baa1, BBB+) 07/01/01 5.200 777,187
1,000,000 New York State Dormitory
Authority Revenue Bond Upstate
Community Colleges Series A (Baa1, BBB+) 07/01/02 5.300 1,048,750
1,000,000 New York State Environmental
Facility Corp. Revenue Bond
Series A (Aa2, AA-) 06/15/14 5.250 1,036,250
2,000,000 New York State General Obligation
Bond Series C (A2, A) 10/01/03 6.000 2,195,000
1,200,000 New York State General Obligation
Bond Series C (A2, A) 10/01/04 6.000 1,329,000
</TABLE>
See Accompanying Notes to Financial Statements.
16
<PAGE>
WARBURG PINCUS NEW YORK INTERMEDIATE MUNICIPAL FUND
STATEMENT OF NET ASSETS (CONT'D)
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS+
PAR (MOODY'S/S&P) MATURITY RATE% VALUE
- ---------- ------------- -------- ----- ------------
MUNICIPAL BONDS (CONT'D)
NEW YORK (CONT'D)
<C> <S> <C> <C> <C> <C>
$2,500,000 New York State Housing Finance
Agency Service Contract
Obligation Revenue Bond Series C
(Pre-Refunded 09/15/01 @
$102.00) (Aaa, AAA) 09/15/01 7.300 $ 2,793,750
1,000,000 New York State Local Government
Assistance Corp. Revenue Bond
Series A (Pre-Refunded 04/01/02
@ $102.00) (Aaa, AAA) 04/01/02 7.125 1,127,500
3,415,000 New York State Local Government
Assistance Corp. Revenue Bond
Series A (FGIC Insured) (Aaa, AAA) 04/01/04 5.000 3,594,288
1,000,000 New York State Local Government
Assistance Corp. Revenue Bond
Series A (Aaa, AAA) 04/01/05 5.000 1,058,750
1,000,000 New York State Local Government
Assistance Corp. Revenue Bond
Series A (A3, A+) 04/01/05 5.400 1,075,000
600,000 New York State Local Government
Assistance Corp. Revenue Bond
Series A (A3, A+) 04/01/06 6.000 672,000
1,000,000 New York State Local Government
Assistance Corp. Revenue Bond
Series A (A3, A+) 04/01/07 6.000 1,130,000
1,730,000 New York State Local Government
Assistance Corp. Revenue Bond
Series B (Pre-Refunded 04/01/01
@ $102.00) (Aaa, AAA) 04/01/01 7.500 1,918,137
3,000,000 New York State Local Government
Assistance Corp. Revenue Bond
Series B (Aaa, AAA) 04/01/21 5.000 2,966,250
1,000,000 New York State Power Authority
Revenue Bond Series C (A3, A+) 02/15/04 5.000 1,050,000
2,000,000 New York State Thruway Authority
General Revenue Bond Series D (Aa3, AA-) 01/01/01 4.700 2,047,500
2,000,000 New York State Thruway Authority
General Revenue Bond Series E (Aa3, AA-) 01/01/15 5.250 2,070,000
1,000,000 New York State Thruway Authority
Service Contract Revenue Bond
(Pre-Refunded 01/01/01 @
$102.00) (Baa1, BBB+) 01/01/01 7.250 1,095,000
850,000 New York State Thruway Authority
Service Contract Revenue Bond
Local Highway & Bridges Series A (Baa1, BBB+) 04/01/01 5.500 880,813
3,000,000 New York State Thruway Authority
Service Contract Revenue Bond
Local Highway & Bridges Series A (Aaa, AAA) 01/01/04 6.000 3,307,500
1,000,000 New York State Thruway Authority
Service Contract Revenue Bond
Local Highway & Bridges Series A
Class 2 (MBIA Insured) (Aaa, AAA) 04/01/07 5.250 1,085,000
</TABLE>
See Accompanying Notes to Financial Statements.
17
<PAGE>
WARBURG PINCUS NEW YORK INTERMEDIATE MUNICIPAL FUND
STATEMENT OF NET ASSETS (CONT'D)
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS+
PAR (MOODY'S/S&P) MATURITY RATE% VALUE
- ---------- ------------- -------- ----- ------------
MUNICIPAL BONDS (CONT'D)
NEW YORK (CONT'D)
<C> <S> <C> <C> <C> <C>
$1,000,000 New York State Thruway Authority
Service Contract Revenue Bond
Local Highway & Bridges Series A
Class 2 (Aaa, AAA) 04/01/15 5.250 $ 1,036,250
1,500,000 New York State Urban Development
Corp. Revenue Bond Correctional
Capital Facilities Series 1
(Pre-Refunded 01/01/00 @
$102.00) (Aaa, Aaa) 01/01/00 7.500 1,599,375
1,000,000 New York State Urban Development
Corp. Revenue Bond Correctional
Capital A (AMBAC Insured) (Aaa, AAA) 01/01/06 5.400 1,087,500
1,190,000 New York State Urban Development
Corp. Revenue Bond (MBIA
Insured) (Aaa, AAA) 04/01/06 6.500 1,368,500
1,770,000 Onondaga County New York General
Obligation Bond (Aa2, AA) 05/01/17 5.125 1,805,400
3,000,000 Port Authority of New York & New
Jersey Revenue Bond Consolidated
72nd Series (Pre-Refunded
10/01/02 @ $101.00) (A1, AA-) 10/01/02 7.350 3,416,250
1,000,000 Port Authority of New York & New
Jersey General Obligation Bond (A1, AA-) 10/01/05 4.250 1,015,000
1,000,000 Suffolk County New York Revenue
Bond (Aaa, AAA) 06/01/07 5.100 1,076,250
1,000,000 Triborough Bridge & Tunnel
Authority General Purpose
Revenue Bond Series A (Aa3, A+) 01/01/07 5.500 1,092,500
2,000,000 Triborough Bridge & Tunnel
Authority New York Revenue Bond
Series T (Pre-Refunded 01/01/01 @
$102.00) (Aaa, A+) 01/01/01 7.000 2,180,000
1,790,000 Triborough Bridge & Tunnel
Authority New York Revenue Bond
Series A (MBIA Insured)
(Callable 01/01/09 @ $101.00) (Aaa, AAA) 01/01/12 5.125 1,875,025
------------
TOTAL NEW YORK (Cost $91,288,455) 94,269,981
------------
PUERTO RICO (10.4%)
100,000 Puerto Rico Commonwealth Aqueduct
& Sewer Authority Revenue Bond
(Escrowed To Maturity) (Aaa, AAA) 07/01/99 7.875 101,530
1,000,000 Puerto Rico Commonwealth Aqueduct
& Sewer Authority Revenue Bond
(MBIA Insured) (Aaa, AAA) 07/01/07 6.000 1,148,750
1,000,000 Puerto Rico Commonwealth General
Obligation Bond (Baa1, A) 07/01/00 5.500 1,030,000
3,000,000 Puerto Rico Commonwealth General
Obligation Bond (MBIA Insured) (Aaa, AAA) 07/01/01 5.500 3,150,000
</TABLE>
See Accompanying Notes to Financial Statements.
18
<PAGE>
WARBURG PINCUS NEW YORK INTERMEDIATE MUNICIPAL FUND
STATEMENT OF NET ASSETS (CONT'D)
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS+
PAR (MOODY'S/S&P) MATURITY RATE% VALUE
- ---------- ------------- -------- ----- ------------
MUNICIPAL BONDS (CONT'D)
PUERTO RICO (CONT'D)
<C> <S> <C> <C> <C> <C>
$2,000,000 Puerto Rico Commonwealth
Infrastructure Finance Authority
Revenue Bond Series 1997 Class A (Aaa, BAA1) 07/01/11 5.000 $ 2,102,500
2,000,000 Puerto Rico Electric Power
Authority Power Revenue Bond
Series EE
(Callable 07/01/08 @ $101.50) (Aaa, AAA) 07/01/16 5.250 2,097,500
1,000,000 Puerto Rico Electric Power
Authority Series G (Callable
01/01/99 @ $101.50) (Baa1, BBB+) 07/01/17 4.750 978,750
500,000 Puerto Rico Electric Power
Authority Series N (Callable
07/01/99 @ $101.50) (Baa1, BBB+) 07/01/00 6.800 517,475
------------
TOTAL PUERTO RICO (Cost $10,751,768) 11,126,505
------------
TOTAL MUNICIPAL BONDS (Cost $102,040,223) $105,396,486
============
</TABLE>
<TABLE>
<CAPTION>
SHARES
- ----------
MONEY MARKET FUNDS (1.4%)
<C> <S> <C>
1,529,743 Federated Investments New York Municipal Cash Trust $ 1,529,743
5,142 Nuveen Tax Exempt Money Fund 5,142
------------
TOTAL MONEY MARKET FUNDS (Cost $1,534,885) 1,534,885
------------
TOTAL INVESTMENTS AT VALUE (100.0%) (Cost $103,575,108*) 106,931,371
LIABILITIES IN EXCESS OF OTHER ASSETS (0.0%) (8,974)
------------
NET ASSETS (100.0%) (applicable to 10,140,617 Common Shares and 15.665
Advisor Shares) $106,922,397
============
NET ASSET VALUE, offering and redemption price per Common Share ($106,922,232
divided by 10,140,617) $ 10.54
=========
NET ASSET VALUE, offering and redemption price per Advisor Share ($164.91
divided by 15.665) $ 10.53
=========
</TABLE>
INVESTMENT ABBREVIATIONS
AMBAC = American Municipal Bond Assurance Corporation
FGIC = Financial Guaranty Insurance Company
FSA = Financial Security Assurance Inc.
MBIA = Municipal Bonds Investors Assurance, Inc.
- --------------------------------------------------------------------------------
+ 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.
19
<PAGE>
WARBURG PINCUS FIXED INCOME FUND
STATEMENT OF NET ASSETS
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS+
PAR (MOODY'S/S&P) MATURITY RATE% VALUE
--- ------------- -------- ------ -----
<S> <C> <C> <C> <C> <C>
CORPORATE BONDS (27.1%)
$2,000,000 ABN-AMRO Bank NV New York Branch
Subordinate Deposit Notes
(Callable 08/01/04 @ $100.00) (Aa2, AA-) 08/01/09 8.250 $ 2,217,500
4,140,000 Aetna Services, Inc. (A3, A) 08/15/06 7.125 4,424,625
7,400,000 Associates Corp. (Aa3, AA-) 11/01/08 6.250 7,474,000
500,000 Belco Oil & Gas Corp.
(Callable 09/15/02 @ $104.44) (B1, B) 09/15/07 8.875 430,000
2,980,000 CBS Corp.
(Callable @ Make Whole + 25BP) (Ba1, BB+) 05/20/05 7.150 3,095,475
526,300 CBS Radio, Inc.
(Callable 01/15/02 @ $105.68) (NA, NA) 01/15/09 11.375 607,876
2,270,000 Conagra, Inc. Senior Notes
(Putable 08/01/00) (Baa1, BBB+) 08/01/27 6.700 2,346,612
5,000,000 Countrywide Home Loan, Inc.
Medium Term Notes (A3, A) 10/08/02 6.380 5,043,750
4,015,000 Deutsche Bank Financial Notes (Aa2, AA+) 04/25/09 7.500 4,311,106
4,890,000 First Industrial LP
(Putable 05/15/02 @ $100.00) (Baa2, BBB) 05/15/27 7.150 5,189,512
9,155,000 First Union Corp.
Subordinate Debentures
(Putable 10/15/05 @ $100.00) (A2, A-) 10/15/35 6.550 9,452,537
3,200,000 Glenborough Realty Trust (Ba1, NR) 03/15/05 7.625 3,252,000
1,000,000 Globalstar Capital Corp.
Senior Notes
(Callable 02/15/02 @ $105.69) (CAA1, B) 02/15/04 11.375 667,500
5,355,000 Ingersoll-Rand Co.
Medium Term Note (A3, A-) 11/19/27 6.230 5,662,913
1,000,000 Kingdom of Thailand Yankee Notes (Ba1, BBB-) 08/15/01 7.840 977,500
1,500,000 Leucadia Capital Trust I
(Callable 01/15/07 @ $104.28) (Ba1, BBB) 01/15/27 8.650 1,548,750
8,000,000 LKB Baden Wuerttemberg Subordinate
Note (Aaa, AAA) 02/01/23 7.625 9,130,000
3,000,000 Lowe's Companies
(Putable 5/15/07 @ $100.00) (A2, A) 05/15/37 7.110 3,330,000
2,985,000 National Semiconductor (Convertible,
Sub Deb) (Callable 10/03/98 @
$103.71) (Ba2, BB) 10/01/02 6.500 2,421,581
4,940,000 Nationwide Health Properties
(Putable 07/01/03 @ $100.00) (Baa2, BBB) 07/07/38 6.590 5,131,425
3,315,000 Niagara Mohawk Power Corp. Series D
(Callable 04/01/99 to 12/31/00 @ Make
Whole + 50BP) (Ba3, BB-) 10/01/02 7.250 3,385,444
4,760,000 Phillip Morris Cos., Inc.
(Putable 06/01/01 @ $100.00) (A2, A) 06/01/06 6.950 4,998,000
2,750,000 Philips Electronics NV Notes
(Putable 06/01/06 @ $100.00) (A3, BBB+) 06/01/26 7.200 2,894,375
2,000,000 Potomac Electric Power Co.
(Callable 05/15/02 @ $103.21) (A1, A) 05/15/27 8.500 2,180,000
3,400,000 Riggs Capital Trust II Preferred
Securities Series C (Callable
03/15/07 @ $104.44) (Baa3, BB-) 03/15/27 8.875 3,684,750
1,560,000 Rose Hills Acquisition Senior
Subordinate Notes (Callable 11/15/00
@ $100.00)++ (B2, B) 11/15/04 9.500 1,372,800
</TABLE>
See Accompanying Notes to Financial Statements.
20
<PAGE>
WARBURG PINCUS FIXED INCOME FUND
STATEMENT OF NET ASSETS (CONT'D)
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS+
PAR (MOODY'S/S&P) MATURITY RATE% VALUE
--- ------------- -------- ------ -----
<S> <C> <C> <C> <C> <C>
$4,750,000 Southtrust Bank Birmingham (A1, A) 02/06/06 5.580 $ 4,821,250
1,000,000 State Street Boston Corp. Debentures
(Putable 06/15/06 @ $100.00) (A1, AA-) 06/15/26 7.350 1,071,250
5,000,000 Terra Nova Insurance (UK) Holdings
(Callable @ Make Whole + 20BP) (Baa1, BBB) 05/15/08 7.000 5,231,250
1,000,000 TIG Capital Trust I Debentures
(Callable 1/15/07 @ $100.00) (Baa2, BBB) 01/15/27 8.597 1,127,500
3,200,000 Times Mirror Co. Notes
(Putable 9/15/04 @ $100.00) (A2, A+) 09/15/27 6.610 3,452,000
2,090,000 Unova, Inc. (Baa2, BBB-) 03/15/05 6.875 2,199,725
2,500,000 Viacom, Inc. (Callable 7/07/99 @
$103.00) (Ba2, BB+) 07/07/06 8.000 2,587,500
------------
TOTAL CORPORATE BONDS
(Cost $113,238,193) 115,720,506
------------
MORTGAGE-BACKED SECURITIES (44.2%)
11,000,000 Amresco Commercial Mortgage Funding I
Series 1997-C1, Class B (NR, AA) 06/17/29 7.240 11,620,675
2,350,000 Asset Securitization Corp. (Nomura
Asset Securities Corp.) Series
1996-D2, Class A2++ (NR, AA) 02/14/29 7.327+ 2,474,609
250,424 Bankers Trust Co. Pass-Through CTFS
Series 1988-1, Class 1D (NR, AAA) 04/01/18 8.625 256,007
5,000,000 Credit Suisse First Boston Series
1998-FL (A2, NA) 12/01/00 5.840 4,962,500
326,993 Donaldson, Lufkin, & Jenrette, Inc.
Acceptance Trust Series 1989-1,
Class F (Aaa, AAA) 08/01/19 11.000 376,339
4,920,000 Fannie Mae, Series 1997-51, Class KB
Guaranteed REMIC TR (Aaa, AAA) 03/20/08 7.000 5,058,943
11,000,000 Fannie Mae, Series 1997-79, Class KB (Aaa, AAA) 07/18/26 6.000 10,703,427
4,700,000 Fannie Mae, Series 1998-M4, Class B (NR, NR) 12/25/23 6.424 4,799,241
10,400,000 Fannie Mae, Medium Term Note Series B (Aaa, NR) 12/10/07 6.560 11,022,466
18,185,000 Federal Home Loan Bank (Aaa, NR) 07/14/00 5.500 18,445,376
18,185,000 Federal Home Loan Bank (Aaa, NR) 09/15/03 5.125 12,499,787
3,040,000 Federal Home Loan Bank Zero Coupon (Aaa, NR) 11/30/99 5.867# 2,884,855
101,742 Federal Home Loan Mortgage Corp.
PC Pool #220014 (Aaa, AAA) 10/01/01 8.750 104,433
5,000,000 First Chicago/Lennar Trust, Series
1997-CHl1, Class B (NR, NR) 04/29/06 8.035+ 5,303,125
557,456 First Street NB Commercial Mortgage
Pass-Through CTFS Series FSI, Class B (NR, NR) 10/20/23 7.607 555,889
15,000,000 First USA Credit Card Master Trust
Series 1998-4, Class A (Aaa, AAA) 03/18/08 5.528 14,747,025
1,500,000 General Motors Acceptance Corp.
Series 96C-2B (NR, A) 10/15/11 7.530 1,597,643
1,000,000 General Motors Acceptance Corp.
Series 98-C1, Class E (Baa2, NR) 06/03/09 7.153 983,125
4,875,475 General Motors Acceptance Corp.
Series 1996-C2, Class A (NR, AA) 10/15/11 7.350 5,093,348
9,000,000 LB Commercial Conduit Mortgage Trust
Series 1996-C2, Class C (A2, NR) 10/25/26 7.738 9,493,245
10,740,000 MBNA Master Credit Card Trust Series
1996-K, Class A (Aaa, AAA) 03/15/06 5.540 10,722,816
</TABLE>
See Accompanying Notes to Financial Statements.
21
<PAGE>
WARBURG PINCUS FIXED INCOME FUND
STATEMENT OF NET ASSETS (CONT'D)
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS+
PAR (MOODY'S/S&P) MATURITY RATE% VALUE
--- ------------- -------- ------ -----
<S> <C> <C> <C> <C> <C>
$5,000,000 Morgan Stanley Mortgage Trust
Series 40, Class 8 (NR, AAA) 07/20/21 7.000 $ 5,062,502
4,970,000 Mortgage Capital Funding, Inc.
Series 1998-MC1, Class E (NR, BBB+) 01/19/08 7.060 4,980,114
10,000,000 Nomura Asset Securities Corp.
Series 1998-D6, Class A3 (A2, NR) 03/16/13 7.224 10,248,950
4,000,000 Nomura Asset Securities Corp.
Series 1993-1, Class B1 (NR, A) 12/15/01 6.680 4,096,500
882,091 Nomura Asset Securities Corp.
Series 1994-4B, Class 4A (Aaa, AAA) 09/25/24 8.300 902,210
10,280,246 Nomura Depository Trust (Aaa, AAA) 01/15/03 5.936+ 10,103,554
4,577,968 Residential Funding Mortgage
Securities I Series 96-S2, Class A1 (NR, AAA) 01/25/11 6.750 4,580,682
4,000,000 Resolution Trust Corp. 1994-C1,
Class B (NR, AA) 06/25/26 8.000 4,180,820
919,182 Resolution Trust Corp. Pass-Through
CTFS Series-95 C1, Class A-2C (Aaa, NR) 02/25/27 6.900 960,853
2,500,000 Shurgard Pass-Through CTFS Trust
(Nomura Asset Securities Corp.)
Series 1, Class 1 (NR, NR) 06/15/04 8.240 2,638,672
6,790,000 Standard Credit Card Master Trust
Series 1995-9, Class A (Aaa, AAA) 10/07/07 6.550 7,141,953
------------
TOTAL MORTGAGE-BACKED SECURITIES
(Cost $186,898,874) 188,601,684
------------
UNITED STATES TREASURY OBLIGATIONS (23.9%)
U.S. Treasury Notes (21.1%)
47,100,000 U.S. Treasury Note (Aaa, AAA) 02/29/00 5.500 47,805,690
13,650,000 U.S. Treasury Note (Aaa, AAA) 05/15/01 8.000 14,847,157
8,315,000 U.S. Treasury Note (Aaa, AAA) 08/15/02 6.375 8,884,223
3,765,000 U.S. Treasury Note (Aaa, AAA) 02/15/05 7.500 4,374,802
12,910,000 U.S. Treasury Note (Aaa, AAA) 08/15/07 6.125 14,259,685
------------
90,171,557
------------
U.S. Treasury Principal Strip Notes (2.8%)
10,900,000 U.S. Treasury Principal Strip (Aaa, AAA) 08/15/99 5.534# 10,528,072
1,320,000 U.S. Treasury Principal Strip (Aaa, AAA) 05/15/02 5,745# 1,132,532
------------
11,660,604
------------
TOTAL UNITED STATES TREASURY
OBLIGATIONS (Cost $99,644,262) 101,832,161
------------
AGENCY OBLIGATIONS (0.4%)
1,347,122 Small Business Administration
Guaranteed-Development Participation
Certificate Debenture Series 1992-20D
(Callable 04/01/12 @ $100.00) (Cost
$1,347,122) (NR, NR) 04/01/12 8.200 1,566,029
------------
PREFERRED STOCK (2.7%)
</TABLE>
<TABLE>
<CAPTION>
NUMBER
OF SHARES
- ---------
<S> <C> <C> <C>
Banks & Savings & Loans (1.4%)
36,800 Banco Totta & Acores Financial Corp.
Series A (Callable 10/11/06 @ $25.00) 8.875 963,700
49,900 Natexis Bank Series A
(Callable 03/31/99 @ $100.00) 8.440 4,940,100
------------
5,903,800
------------
</TABLE>
See Accompanying Notes to Financial Statements.
22
<PAGE>
WARBURG PINCUS FIXED INCOME FUND
STATEMENT OF NET ASSETS (CONT'D)
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF SHARES RATE% VALUE
- --------- ------ -----
<S> <C> <C> <C>
Real Estate (1.3%)
72,000 Equity Residential Properties Series D
REIT 8.600 $ 1,800,000
30,000 Glenborough Realty Trust 7.750 575,625
58,200 Loewen Group Capital Series A REIT 9.450 508,300
76,650 Prime Retail, Inc. Series B
(Convertible) REIT (Callable 03/31/99
@ $27.125) 8.500 1,360,538
26,250 Prologis Trust Series C REIT (Callable
11/13/26 @ $50) 8.540 1,200,938
15,000 Walden Residential Properties, Inc.
REIT (Callable 12/31/06)++ 9.200 337,500
------------
5,782,901
------------
TOTAL PREFERRED STOCK
(Cost $12,727,858) 11,686,701
------------
SHORT-TERM INVESTMENTS (0.8%)
</TABLE>
<TABLE>
<CAPTION>
Par
---
<S> <C> <C>
3,345,000 Repurchase agreement with State Street
Bank & Trust Co. dated 10/30/98 at
5.400% to be repurchased at $3,346,505
on 11/02/98. (Collateralized by a pro
rata amount of U.S. Treasury Notes
ranging in par values from $21,390,000
to $50,000,000, 3.375%-5.500%,
02/28/03-04/15/28. Pro rata market
value of collateral is $3,411,900.)
(Cost $3,345,000) 3,345,000
------------
</TABLE>
<TABLE>
<S> <C>
TOTAL INVESTMENTS AT VALUE (99.1%) (Cost $417,201,309*) 422,752,081
OTHER ASSETS IN EXCESS OF LIABILITIES (0.9%) 3,842,120
------------
NET ASSETS (100.0%) (applicable to 40,685,149 Common Shares
and 293,883 Advisor Shares) $426,594,201
============
NET ASSET VALUE, offering and redemption price per Common
Share ($423,536,204 divided by 40,685,149) $10.41
======
NET ASSET VALUE, offering and redemption price per Advisor
Share ($3,057,997 divided by 293,883) $10.41
======
</TABLE>
INVESTMENT ABBREVIATIONS
CTFS = Certificates
NR = Not Rated
REIT = Real Estate Investment Trust
REMIC = Real Estate Mortgage Investment Conduit
- --------------------------------------------------------------------------------
+ Credit ratings given by Moody's Investors Service, Inc. and
Standard & Poor's Ratings Group are unaudited.
+ On instruments with variable rates, the interest rate shown
reflects the current rate as of October 31, 1998.
++ Illiquid security.
# Rate shown reflects yield to maturity on date of purchase.
* Cost for federal income tax purposes is $417,313,528.
See Accompanying Notes to Financial Statements.
23
<PAGE>
WARBURG PINCUS GLOBAL FIXED INCOME FUND
SCHEDULE OF INVESTMENTS
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS+
PAR+ (MOODY'S/S&P) MATURITY RATE% VALUE
- ----------- ------------- -------- ------ ------------
<S> <C> <C> <C> <C> <C>
BONDS (96.8%)
Cayman Islands (1.1%)
1,000,000(A) Ayala Corp. International
Finance (Convertible) (BBB, BBB) 07/30/02 0.500 $ 982,500
450,000(A) Ayala Corp. International
Finance, Zero Coupon
(Convertible) (BBB, BBB) 12/08/00 8.280## 363,375
1,000,000(A) JG Summit (Cayman), Ltd.
(Convertible) (Callable after
12/23/96 @ $100.00) (BB, BB) 12/23/03 3.500 477,500
------------
1,823,375
------------
China (0.2%)
1,000,000(A) Guangdong Enterprises (B2, CCC+) 05/22/07 8.875 350,000
------------
Denmark (4.1%)
35,000,000 Kingdom of Denmark (Aaa, AAA) 11/15/07 7.000 6,484,189
------------
France (10.0%)
12,000,000 French Government (Aaa, NR) 04/25/09 4.000 2,116,296
71,000,000 French Government (Aaa, NR) 04/25/08 5.250 13,760,779
------------
15,877,075
------------
Germany (19.6%)
8,400,000 Bundesrepublic Deutschland (Aaa, AAA) 10/14/05 6.500 5,825,092
6,500,000 DSL Finance NV (Aaa, NR) 02/21/06 6.000 4,324,522
5,000,000 Land Hessen Step Up Coupon
(Putable 11/29/03 @ 100.00
DMK) (Aaa, AAA) 11/29/13 6.000 3,484,223
7,000,000 Landesbank Rheinland Finance (Aa1, AA+) 04/20/05 7.250 4,926,623
8,500,000 Treuhandanstalt (Aaa, AAA) 07/09/03 6.625 5,759,459
9,500,000 Treuhandanstalt (Aaa, AAA) 09/09/04 7.500 6,804,725
------------
31,124,644
------------
Hong Kong (0.8%)
2,000,000(A) Hong Kong Chinese Bank FRN
(Callable 03/27/99 @ $100.00) (Baa3, BBB-) 03/27/07 6.742# 1,200,000
------------
Japan (7.0%)
5,000,000(A) Fuji Bank, Ltd. FRN
(Callable 08/08/02 @ $100.00) (Ba1, NR) 08/29/49 6.550 2,800,000
895,000,000 International Bank For
Reconstruction and Development (Aaa, NR) 06/20/00 4.500 8,212,201
------------
11,012,201
------------
</TABLE>
See Accompanying Notes to Financial Statements.
24
<PAGE>
WARBURG PINCUS GLOBAL FIXED INCOME FUND
SCHEDULE OF INVESTMENTS (CONT'D)
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS+
PAR+ (MOODY'S/S&P) MATURITY RATE% VALUE
- ----------- ------------- -------- ------ ------------
<S> <C> <C> <C> <C> <C>
BONDS (CONT'D)
Korea (3.0%)
2,400,000(A) Korean Development Bank (Ba2, BB+) 03/15/01 9.500 $ 2,286,000
2,600,000(A) Korean Development Bank (Ba2, BB+) 03/30/01 9.500 2,476,500
------------
4,762,500
------------
Netherlands (4.1%)
11,000,000 Netherlands Government (Aaa, AAA) 01/15/01 9.000 6,563,437
------------
South Africa (1.3%)
3,000,000(A) South African Government (Baa3, BB+) 06/23/17 8.500 2,066,250
------------
United Kingdom (16.5%)
3,500,000 European Investment Bank (Aaa, AAA) 11/26/04 6.000 5,978,715
10,750,000 United Kingdom Treasury (Aaa, NR) 06/10/03 8.000 20,156,307
------------
26,135,022
------------
United States (29.1%)
1,475,000 Associates Corp. of North
America (Aa3, AA-) 11/01/08 6.250 1,489,750
25,000,000 Bayerische Landesbank NY, Zero
Coupon (Callable 08/04/00
@ $12.028) (Aaa, AAA) 08/04/27 7.967## 2,656,250
6,000,000 Chase Commercial Mortgage
Securities Corp., Series
1996-1, Class C (NR, A) 05/18/06 7.600 6,411,210
6,725,310 Fannie Mae (Aaa, AAA) 09/01/13 6.000 6,754,733
7,000,000 GMAC Commercial Mortgage
Securities, Inc., Series 1996
- C1, Class C, Collateralized
Mortgage Obligation (Aa3, A) 05/15/06 7.430 7,164,063
3,000,000 MBNA Master Credit Card Trust,
Series 1998-J, Class A (Aaa, AAA) 02/15/06 5.250 2,988,281
1,040,000 MBNA Master Credit Card Trust,
Series 1995-C, Class A (Aaa, AAA) 02/15/08 6.450 1,090,748
5,000,000 Merrill Lynch Mortgage
Investors, Inc., Series 1996 -
C2, Class C, Collateralized
Mortgage Obligation (NR, A) 11/21/28 6.960 5,141,925
5,350,000 U.S. Treasury Bond (Aaa, AAA) 08/15/28 5.500 5,633,176
6,400,000 U.S. Treasury Note (Aaa, AAA) 02/15/08 5.500 6,840,808
------------
46,170,944
------------
TOTAL BONDS (Cost $155,974,625) 153,569,637
------------
</TABLE>
See Accompanying Notes to Financial Statements.
25
<PAGE>
WARBURG PINCUS GLOBAL FIXED INCOME FUND
SCHEDULE OF INVESTMENTS (CONT'D)
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES RATE% VALUE
- ---------- ------ ------------
<S> <C> <C> <C>
PREFERRED STOCK (1.3%)
United States (1.3%)
19,900 Natexis AMBS Co. Series A
(Callable 06/30/08 @ $100.00) (Cost $1,990,000) 8.440 $ 1,970,100
------------
</TABLE>
<TABLE>
<CAPTION>
PAR
- ----------
<S> <C> <C>
SHORT TERM INVESTMENTS (1.9%)
3,065,000 Repurchase agreement with State Street Bank & Trust Co.
dated 10/30/98 at 5.400% to be repurchased at
$3,066,379 on 11/02/98. (Collateralized by a pro rata
amount of U.S. Treasury Notes ranging in par values
from $21,390,000 - $50,000,000, 3.375%-5.500%,
02/28/03-04/15/28. Pro rata market value of collateral
is $3,155,533.) (Cost $3,065,000) $ 3,065,000
------------
TOTAL INVESTMENTS AT VALUE (100.0%) (Cost $161,029,625*) $158,604,737
============
</TABLE>
INVESTMENT ABBREVIATIONS
DMK = German Marks
FRN = Floating Rate Note
NR = Not Rated
- --------------------------------------------------------------------------------
+ Unless otherwise indicated below, all securities are denominated in the
currency of the issuers' country of origin.
+ Credit ratings given by Moody's investors Service, Inc. and Standard &
Poor's Ratings Group are unaudited.
(A) Denominated in U.S. Dollars.
# Illiquid security.
## Rate shown reflects yield to maturity on date of purchase.
* Cost for federal income tax purposes is $161,067,727.
See Accompanying Notes to Financial Statements.
26
<PAGE>
WARBURG PINCUS GLOBAL FIXED INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at value (Cost $161,029,625) $158,604,737
Receivable for investments sold (Cost $14,169,907) 14,173,463
Interest receivable (Cost $3,407,293) 3,491,055
Receivable for fund shares sold 188,760
Receivable for unrealized gains on forward contracts 86,797
Other assets 2,048
------------
TOTAL ASSETS 176,546,860
------------
LIABILITIES
Payable for investments purchased (Cost $14,093,115) 14,104,202
Payable for realized losses on forward contracts 967,252
Payable for fund shares redeemed 599,497
Accrued expenses payable 222,901
Other liabilities 4,563
------------
TOTAL LIABILITIES 15,898,415
------------
NET ASSETS, applicable to 14,516,513 Common Shares and
616,648 Advisor Shares $160,648,445
============
NET ASSET VALUE, offering and redemption price per Common
Share ($154,130,725 divided by 14,516,513) $10.62
======
NET ASSET VALUE, offering and redemption price per Advisor
Share ($6,517,720 divided by 616,648) $10.57
======
</TABLE>
See Accompanying Notes to Financial Statements.
27
<PAGE>
WARBURG PINCUS FIXED INCOME FUNDS
STATEMENTS OF OPERATIONS
For the Year Ended October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
WARBURG PINCUS WARBURG PINCUS
INTERMEDIATE NEW YORK WARBURG PINCUS
MATURITY INTERMEDIATE WARBURG PINCUS GLOBAL
GOVERNMENT MUNICIPAL FIXED INCOME FIXED INCOME
FUND FUND FUND FUND
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 0 $ 43,533 $ 1,288,809 $ 23,513
Interest 3,366,435 4,634,911 21,720,118 11,129,088
----------- ---------- ----------- -----------
Total investment income 3,366,435 4,678,444 23,008,927 11,152,601
----------- ---------- ----------- -----------
EXPENSES:
Investment advisory 274,007 386,531 1,799,237 1,811,063
Administrative services 85,367 155,157 549,631 278,183
Audit 12,006 12,223 14,032 16,234
Custodian/Sub-custodian 15,053 15,524 61,563 121,864
Directors/Trustees 12,855 13,411 13,300 13,258
Insurance 916 1,684 5,113 3,351
Interest 445 300 250 1,779
Legal 10,817 17,836 26,962 18,085
Printing 6,039 11,202 42,427 32,095
Registration 51,721 18,644 108,397 59,239
Shareholder
servicing/distribution 17 0 8,768 38,716
Transfer agent 42,376 21,061 223,648 183,531
Miscellaneous 5,816 (2,900) 6,753 9,907
----------- ---------- ----------- -----------
517,435 650,673 2,860,081 2,587,305
Less: fees waived, expenses
reimbursed and transfer agent
offsets (188,610) (70,877) (152,457) (828,079)
----------- ---------- ----------- -----------
Total expenses 328,825 579,796 2,707,624 1,759,226
----------- ---------- ----------- -----------
Net investment income 3,037,610 4,098,648 20,301,303 9,393,375
----------- ---------- ----------- -----------
NET REALIZED AND UNREALIZED GAIN
(LOSS) FROM INVESTMENTS AND
FOREIGN CURRENCY RELATED ITEMS:
Net realized gain (loss) from
security transactions 484,032 771,345 1,801,417 (6,983,874)
Net realized loss from futures
contracts 0 (129,543) 0
Net realized loss from foreign
currency related items 0 0 0 (523,167)
Net change in unrealized
appreciation (depreciation)
from investments and foreign
currency related items 1,403,224 1,158,201 323,605 4,632,353
----------- ---------- ----------- -----------
Net realized and unrealized
gain (loss) from
investments and foreign
currency related items 1,887,256 1,800,003 2,125,022 (2,874,688)
----------- ---------- ----------- -----------
Net increase in net assets
resulting from operations $ 4,924,866 $5,898,651 $22,426,325 $ 6,518,687
=========== ========== =========== ===========
</TABLE>
See Accompanying Notes to Financial Statements.
28
<PAGE>
WARBURG PINCUS FIXED INCOME FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
WARBURG PINCUS WARBURG PINCUS
INTERMEDIATE MATURITY NEW YORK INTERMEDIATE
GOVERNMENT FUND MUNICIPAL FUND
------------------------- --------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED
OCTOBER 31, OCTOBER 31,
1998 1997 1998 1997
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income $ 3,037,610 $ 2,729,091 $ 4,098,648 $ 3,661,370
Net realized gain (loss) from security
transactions 484,032 90,816 771,345 36,485
Net realized loss from futures contracts 0 0 (129,543) (200,642)
Net realized loss from foreign currency
related items 0 0 0 0
Net change in unrealized appreciation
(depreciation) from investments and
foreign currency related items 1,403,224 353,152 1,158,201 1,078,145
----------- ----------- ------------ -----------
Net increase in net assets resulting
from operations 4,924,866 3,173,059 5,898,651 4,575,358
----------- ----------- ------------ -----------
FROM DISTRIBUTIONS:
Dividends from net investment income:
Common Shares (3,037,272) (2,729,076) (4,098,642) (3,661,362)
Advisor Shares (338) (15) (6) (8)
Distributions from realized gains:
Common Shares 0 (348,504) 0 (950,202)
Advisor Shares 0 0 0 (2)
Distributions in excess of realized gains:
Common Shares 0 (197,030) 0 0
Advisor Shares 0 0 0 0
----------- ----------- ------------ -----------
Net decrease in net assets from
distributions (3,037,610) (3,274,625) (4,098,648) (4,611,574)
----------- ----------- ------------ -----------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from sale of shares 79,574,872 22,575,023 49,747,129 48,740,584
Reinvested dividends 2,564,065 2,608,543 3,489,604 4,063,047
Net asset value of shares redeemed (54,238,174) (24,347,987) (37,058,061) (41,384,144)
----------- ----------- ------------ -----------
Net increase in net assets from
capital share transactions 27,900,763 835,579 16,178,672 11,419,487
----------- ----------- ------------ -----------
Net increase in net assets 29,788,019 734,013 17,978,675 11,383,271
NET ASSETS:
Beginning of year 48,423,705 47,689,692 88,943,722 77,560,451
----------- ----------- ------------ -----------
End of year $78,211,724 $48,423,705 $106,922,397 $88,943,722
=========== =========== ============ ===========
Undistributed net investment income $ 0 $ 0 $ 0 $ 0
=========== =========== ============ ===========
</TABLE>
See Accompanying Notes to Financial Statements.
29
<PAGE>
WARBURG PINCUS FIXED INCOME FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
WARBURG PINCUS WARBURG PINCUS
FIXED INCOME FUND GLOBAL FIXED INCOME FUND
--------------------------- ---------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED
OCTOBER 31, OCTOBER 31,
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income $ 20,301,303 $ 11,763,370 $ 9,393,375 $ 9,571,069
Net realized gain (loss) from security
transactions 1,801,417 2,567,404 (6,983,874) 997,045
Net realized loss from futures
contracts 0 0 0 0
Net realized gain (loss) from foreign
currency related items 0 0 (523,167) 5,666,273
Net change in unrealized appreciation
(depreciation) from investments and
foreign currency related items 323,605 4,335,965 4,632,353 (7,300,971)
------------ ------------ ------------ ------------
Net increase in net assets
resulting from operations 22,426,325 18,666,739 6,518,687 8,933,416
------------ ------------ ------------ ------------
FROM DISTRIBUTIONS:
Dividends from net investment income:
Common Shares (20,111,834) (11,629,029) (11,720,477) (5,284,076)
Advisor Shares (189,469) (134,341) (562,512) (138,557)
Distributions in excess of net
investment income:
Common Shares 0 (43,878) 0 0
Advisor Shares 0 (507) 0 0
Distributions from realized gains:
Common Shares (2,591,321) (48,275) 0 (8,015,321)
Advisor Shares (32,099) (295) 0 (217,278)
------------ ------------ ------------ ------------
Net decrease in net assets from
distributions (22,924,723) (11,856,325) (12,282,989) (13,655,232)
------------ ------------ ------------ ------------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from sale of shares 275,617,900 162,592,301 105,148,731 143,481,964
Reinvested dividends 20,421,111 10,208,471 11,252,140 11,976,799
Net asset value of shares redeemed (138,361,653) (62,291,323) (153,653,681) (78,182,283)
------------ ------------ ------------ ------------
Net increase (decrease) in net
assets from capital share
transactions 157,677,358 110,509,449 (37,252,810) 77,276,480
------------ ------------ ------------ ------------
Net increase (decrease) in net
assets 157,178,960 117,319,863 (43,017,112) 72,554,664
NET ASSETS:
Beginning of year 269,415,241 152,095,378 203,665,557 131,110,893
------------ ------------ ------------ ------------
End of year $426,594,201 $269,415,241 $160,648,445 $203,665,557
============ ============ ============ ============
Undistributed net investment income $ 0 $ 0 $ 846,745 $ 4,259,525
============ ============ ============ ============
</TABLE>
See Accompanying Notes to Financial Statements.
30
<PAGE>
WARBURG PINCUS INTERMEDIATE MATURITY GOVERNMENT FUND
FINANCIAL HIGHLIGHTS
(For a Common Share of the Fund Outstanding Throughout Each Year)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
PERIOD ENDED: ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA
Net asset value, beginning of period $ 10.05 $ 10.07 $ 10.22 $ 9.66 $ 11.03
------- ------- ------- ------- -------
INVESTMENT ACTIVITIES:
Net investment income 0.56 0.58 0.58 0.59 0.54
Net gains or losses on investments
(both realized and unrealized) 0.32 0.10 (0.06) 0.56 (0.73)
------- ------- ------- ------- -------
Total from investment activities 0.88 0.68 0.52 1.15 (0.19)
------- ------- ------- ------- -------
DISTRIBUTIONS:
From net investment income (0.56) (0.58) (0.58) (0.59) (0.55)
From realized capital gains 0.00 (0.08) (0.09) 0.00 (0.63)
In excess of realized gains 0.00 (0.04) 0.00 0.00 0.00
------- ------- ------- ------- -------
Total distributions (0.56) (0.70) (0.67) (0.59) (1.18)
------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 10.37 $ 10.05 $ 10.07 $ 10.22 $ 9.66
======= ======= ======= ======= =======
Total return 9.35% 6.99% 5.16% 12.32% (1.78%)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s omitted) $78,200 $48,421 $47,690 $55,898 $46,734
Ratio of expenses to average net assets 0.60%@ 0.61%@ 0.61%@ 0.60% 0.60%
Ratio of net income to average net
assets 5.54% 5.81% 5.68% 6.00% 5.43%
Decrease reflected in above operating
ratios due to waivers/reimbursements 0.34% 0.33% 0.46% 0.49% 0.42%
Portfolio turnover rate 133.98% 104.34% 163.59% 105.79% 115.37%
</TABLE>
- --------------------------------------------------------------------------------
@ Interest earned on uninvested cash balances is used to offset portions of the
transfer agent expense. These arrangements resulted in a reduction to the
Common Shares' expense ratio by .00%, .01% and .01% for the years ended
October 31, 1998, 1997 and 1996, respectively. The Common Shares' operating
expense ratio after reflecting these arrangements was .60% for each of the
years ended October 31, 1998, 1997 and 1996, espectively.
See Accompanying Notes to Financial Statements.
31
<PAGE>
WARBURG PINCUS NEW YORK INTERMEDIATE MUNICIPAL FUND
FINANCIAL HIGHLIGHTS
(For a Common Share of the Fund Outstanding Throughout Each Year)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
PERIOD ENDED: ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA
Net asset value, beginning of period $ 10.35 $ 10.34 $ 10.42 $ 10.07 $ 10.65
-------- ------- ------- ------- -------
INVESTMENT ACTIVITIES:
Net investment income 0.44 0.45 0.45 0.47 0.46
Net gains or losses on investments
(both realized and unrealized) 0.19 0.13 0.04 0.36 (0.45)
-------- ------- ------- ------- -------
Total from investment activities 0.63 0.58 0.49 0.83 0.01
-------- ------- ------- ------- -------
DISTRIBUTIONS:
From net investment income (0.44) (0.45) (0.45) (0.47) (0.46)
From realized capital gains 0.00 (0.12) (0.12) (0.01) (0.13)
-------- ------- ------- ------- -------
Total distributions (0.44) (0.57) (0.57) (0.48) (0.59)
-------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 10.54 $ 10.35 $ 10.34 $ 10.42 $ 10.07
======== ======= ======= ======= =======
Total return 6.24% 5.83% 4.87% 8.31% 0.04%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s omitted) $106,922 $88,944 $77,559 $73,361 $75,716
Ratio of expenses to average net assets 0.60%@ 0.60%@ 0.61%@ 0.60% 0.60%
Ratio of net income to average net
assets 4.24% 4.40% 4.41% 4.50% 4.41%
Decrease reflected in above operating
ratios due to waivers/reimbursements 0.07% 0.08% 0.17% 0.26% 0.20%
Portfolio turnover rate 37.25% 69.84% 69.23% 105.17% 167.09%
</TABLE>
- --------------------------------------------------------------------------------
@ Interest earned on uninvested cash balances is used to offset portions of the
transfer agent expense. These arrangements resulted in a reduction to the
Common Shares' expense ratio by .00%, .00% and .01% for the years ended
October 31, 1998, 1997 and 1996, respectively. The Common Shares' operating
expense ratio after reflecting these arrangements was .60% for each of the
years ended October 31, 1998, 1997 and 1996, respectively.
See Accompanying Notes to Financial Statements.
32
<PAGE>
WARBURG PINCUS FIXED INCOME FUND
FINANCIAL HIGHLIGHTS
(For a Common Share of the Fund Outstanding Throughout Each Year)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
PERIOD ENDED: -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA
Net asset value, beginning of
period $ 10.43 $ 10.10 $ 10.07 $ 9.61 $ 10.42
-------- -------- -------- -------- --------
INVESTMENT ACTIVITIES:
Net investment income 0.59 0.62 0.63 0.70 0.63
Net gains or losses on investments
and foreign currency related
items (both realized and
unrealized) 0.07 0.33 0.03 0.46 (0.70)
-------- -------- -------- -------- --------
Total from investment activities 0.66 0.95 0.66 1.16 (0.07)
-------- -------- -------- -------- --------
DISTRIBUTIONS:
From net investment income (0.59) (0.62) (0.63) (0.70) (0.65)
From realized capital gains (0.09) 0.00 0.00 0.00 (0.09)
-------- -------- -------- -------- --------
Total distributions (0.68) (0.62) (0.63) (0.70) (0.74)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 10.41 $ 10.43 $ 10.10 $ 10.07 $ 9.61
======== ======== ======== ======== ========
Total return 6.48% 9.78% 6.80% 12.59% (0.60%)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s
omitted) $423,536 $265,453 $151,184 $116,983 $102,246
Ratio of expenses to average net
assets 0.75%@ 0.75%@ 0.76%@ 0.75% 0.75%
Ratio of net income to average net
assets 5.64% 6.05% 6.30% 7.25% 6.53%
Decrease reflected in above
operating ratios due to
waivers/reimbursements 0.04% 0.08% 0.15% 0.18% 0.18%
Portfolio turnover rate 124.04% 129.06% 194.23% 182.93% 179.44%
</TABLE>
- --------------------------------------------------------------------------------
@ Interest earned on uninvested cash balances is used to offset portions of the
transfer agent expense. These arrangements resulted in a reduction to the
Common Shares' expense ratio by .00%, .00% and .01% for the years ended
October 31, 1998, 1997 and 1996, respectively. The Common Shares' operating
expense ratio after reflecting these arrangements was .75% for each of the
years ended October 31, 1998, 1997 and 1996, respectively.
See Accompanying Notes to Financial Statements.
33
<PAGE>
WARBURG PINCUS GLOBAL FIXED INCOME FUND
FINANCIAL HIGHLIGHTS
(For a Common Share of the Fund Outstanding Throughout Each Year)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
PERIOD ENDED: ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA
Net asset value, beginning of period $ 10.91 $ 11.17 $ 11.04 $ 10.45 $ 11.38
-------- -------- -------- -------- --------
INVESTMENT ACTIVITIES:
Net investment income 0.58 0.54 0.62 0.99 0.34
Net gains or losses on investments and
foreign currency related items (both
realized and unrealized) (0.16) 0.08 0.57 0.09 (0.64)
-------- -------- -------- -------- --------
Total from investment activities 0.42 0.62 1.19 1.08 (0.30)
-------- -------- -------- -------- --------
DISTRIBUTIONS:
From net investment income (0.71) (0.34) (1.06) (0.49) (0.45)
From realized capital gains 0.00 (0.54) 0.00 0.00 (0.14)
Return of Capital 0.00 0.00 0.00 0.00 (0.04)
-------- -------- -------- -------- --------
Total distributions (0.71) (0.88) (1.06) (0.49) (0.63)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 10.62 $ 10.91 $ 11.17 $ 11.04 $ 10.45
======== ======== ======== ======== ========
Total return 4.10% 5.76% 11.35% 10.65% (2.79%)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s omitted) $154,131 $194,731 $131,072 $ 63,641 $ 90,394
Ratio of expenses to average net assets 0.95%@ 0.96%@ 0.95%@ 0.95% 0.95%
Ratio of net income to average net
assets 5.21% 5.40% 6.78% 8.18% 6.96%
Decrease reflected in above operating
ratios due to waivers/reimbursements 0.46% 0.39% 0.56% 0.63% 0.65%
Portfolio turnover rate 233.73% 202.92% 123.90% 128.70% 178.11%
</TABLE>
- --------------------------------------------------------------------------------
@ Interest earned on uninvested cash balances is used to offset portions of the
transfer agent expense. These arrangements resulted in a reduction to the
Common Shares' expense ratio by .00% and .01% and .00% for the years ended
October 31, 1998, 1997 and 1996, respectively. The Common Shares operating
expense ratio after reflecting these arrangements was .95% for each of the
years ended October 31, 1998, 1997 and 1996, respectively.
See Accompanying Notes to Financial Statements.
34
<PAGE>
WARBURG PINCUS FIXED INCOME FUNDS
NOTES TO FINANCIAL STATEMENTS
October 31, 1998
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
The Warburg Pincus Fixed Income Funds (the "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 as 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.
Each Fund offers two classes of shares, one class being referred to as
Common Shares and one class being referred to as Advisor Shares. Common and
Advisor Shares in each Fund represent an equal pro rata interest in each Fund,
except that they bear different expenses which reflect the difference in the
range of services provided to them. Advisor Shares for each Fund bear expenses
paid pursuant to a distribution plan adopted by each Fund at an annual rate not
to exceed .75% of the average daily net asset value of each Fund's outstanding
Advisor Shares. The Advisor Shares for the Fixed Income Fund, the Intermediate
Government Fund and the New York Municipal Fund currently bear expenses of .25%
of average daily net assets. The Advisor Shares of the Global Fixed Income Fund
currently bear expenses of .50% of average daily net assets. Effective October
30, 1998, the New York Intermediate Municipal Fund ceased offering its Advisor
Shares.
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 generally determined using the last reported
sales price. If no sales are reported, investments are generally valued at the
mean between the last reported bid and asked price. In the absence of
35
<PAGE>
WARBURG PINCUS FIXED INCOME FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1998
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES -- (CONT'D)
market quotations, investments are generally valued at fair value as determined
by or under the direction of the Fund's Board. Short-term investments that
mature in 60 days or less are valued on the basis of amortized cost, which
approximates market value.
When a Fund writes or purchases a call or a put option, an amount equal to
the premium received or paid by the Fund is recorded as a liability or asset,
the value of which is marked-to-market daily to reflect the current market value
of the option. When the option expires, the Fund realizes a gain or loss equal
to the amount of the premium received or paid. When the Fund exercises an option
or enters into a closing transaction by purchasing or selling an offsetting
option, it realizes a gain or loss without regard to any unrealized gain or loss
on the underlying security. The potential loss associated with purchasing an
option is limited to the premium paid, and the premium would partially offset
any gains achieved from its use.
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 realized 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.
The Fixed Income and Global Fixed Income Funds may invest in securities of
foreign issuers, which involve certain risks in addition to those inherent in
domestic investments. Such risks generally include, among other things,
fluctuations in currency exchange rates, revaluation of currencies, adverse
political and economic developments and the imposition of other laws and
restrictions. Securities of foreign issuers are often subject to less rigorous
regulatory practices and requirements than those applied in the United States
and may also be less liquid (and their prices more volatile) than securities of
comparable U.S companies. Moreover, individual foreign economies may differ
favorably or unfavorably from the U.S. economy in many respects.
The Fixed Income and Global Fixed Income Funds' investments in securities
of issuers located in less developed countries considered to be "emerging
markets" involve risks in addition to those generally applicable to foreign
36
<PAGE>
WARBURG PINCUS FIXED INCOME FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1998
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES -- (CONT'D)
securities. Investments in the securities of issuers located in emerging markets
expose the Fund to economic structures that are generally less diverse and
mature than, and to political systems that can be expected to have less
stability than, those of developed countries. The typically small size of the
markets for securities of issuers located in emerging markets may also result in
a lack of liquidity and greater price volatility.
The Funds may each invest up to 15% of its assets in non-publicly traded
securities. Non-publicly traded securities may be less liquid than publicly-
traded securities, and the Fund may take longer to liquidate these positions
than would be the case for publicly traded securities. Consequently, these
securities may involve a high degree of business and financial risk and may
result in substantial losses.
Security transactions are accounted for on a trade date basis. Interest
income is recorded on the accrual basis. Dividends are recorded on the
ex-dividend date. Income, expenses (excluding class-specific expenses,
principally distribution, shareholder servicing fees and transfer agency) and
realized/unrealized gains/losses are allocated proportionately to each class of
shares based upon the relative net asset value of the outstanding shares.
Effective November 1, 1998, class-specific expenses no longer include transfer
agent fees; accordingly these fees will be allocated proportionately based upon
the relative net asset value of outstanding shares. 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. Income and capital gain
distributions are determined in accordance with federal income tax regulations
which may differ from generally accepted accounting principles.
No provision is made for federal taxes as it is each Fund's intention to
continue to qualify for and elect the tax treatment applicable to regulated
investment companies under the Internal Revenue Code of 1986, as amended, and
make the requisite distributions to its shareholders which will be sufficient to
relieve it from Federal income and excise taxes.
37
<PAGE>
WARBURG PINCUS FIXED INCOME FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1998
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES -- (CONT'D)
Pursuant to an exemptive order issued by the Securities and Exchange
Commission, each Fund, along with other Warburg Funds, transfers uninvested cash
balances to a pooled cash account, which is invested in repurchase agreements
secured by U.S. government securities. Securities pledged as collateral for
repurchase agreements are held by the Funds' custodian bank until the agreements
mature. Each agreement requires that the market value of the collateral be
sufficient to cover payments of interest and principal; however, in the event of
default or bankruptcy by the other party to the agreement, retention of the
collateral may be subject to legal proceedings.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from these
estimates.
The Funds have an arrangement with their transfer agent whereby interest
earned on uninvested cash balances was used to offset a portion of the transfer
agent expense. For the year ended October 31, 1998, the Funds received credits
or reimbursements under this arrangement as follows:
FUND AMOUNT
- ---- -------
Intermediate Government $ 2,116
New York Municipal 3,736
Fixed Income 13,577
Global Fixed Income 7,059
2. INVESTMENT ADVISER, CO-ADMINISTRATORS AND DISTRIBUTOR
Warburg, which is indirectly controlled by Warburg, Pincus & Co., 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:
FUND ANNUAL RATE
- ---- ---------------------------------
Intermediate Government .50% of average daily net assets
New York Municipal .40% of average daily net assets
Fixed Income .50% of average daily net assets
Global Fixed Income 1.00% of average daily net assets
38
<PAGE>
WARBURG PINCUS FIXED INCOME FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1998
- --------------------------------------------------------------------------------
2. INVESTMENT ADVISER, CO-ADMINISTRATORS AND DISTRIBUTOR -- (CONT'D)
For the year ended October 31, 1998, investment advisory fees and voluntary
waivers were as follows:
GROSS NET
FUND ADVISORY FEE WAIVER ADVISORY FEE
- ---- ------------ --------- ------------
Intermediate Government $ 274,007 $(165,038) $ 108,969
New York Municipal 386,531 (67,141) 319,390
Fixed Income 1,799,237 (138,880) 1,660,357
Global Fixed Income 1,811,063 (821,020) 990,043
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 .10% of
each Fund's average daily net assets. For the year ended October 31, 1998,
administrative services fees earned by CFSI were as follows:
FUND CO-ADMINISTRATION FEE
- ---- ---------------------
Intermediate Government $ 54,802
New York Municipal 96,633
Fixed Income 359,847
Global Fixed Income 181,107
The Funds each pay PFPC a fee calculated at an annual rate of .05% of each
Fund's average daily net assets. For the year ended October 31, 1998,
administrative services fees earned and voluntarily waived by PFPC (including
out-of-pocket expenses) were as follows:
<TABLE>
<CAPTION>
FUND CO-ADMINISTRATION FEE WAIVER NET CO-ADMINISTRATION FEE
- ---- --------------------- -------- -------------------------
<S> <C> <C> <C>
Intermediate Government $ 30,565 $(21,456) $ 9,109
New York Municipal 58,524 0 58,524
Fixed Income 189,784 0 189,784
Global Fixed Income 97,076 0 97,076
</TABLE>
Counsellors Securities Inc. ("CSI"), also a wholly-owned subsidiary of
Warburg, serves as each Fund's distributor. For its Shareholder servicing and
distribution services, CSI receives a fee calculated at an annual rate of .25%
of the average daily net assets of the Advisor Shares of the Fixed Income Fund,
the Intermediate Government Fund and the New York Municipal Fund and .50% of the
average daily net assets of the Advisor shares of the Global Fixed Income Fund
pursuant to Rule 12b-1 under the 1940 Act. For the year ended October 31, 1998,
shareholder servicing and distribution fees earned by CSI were as follows:
SHAREHOLDER SERVICING/
FUND DISTRIBUTION FEE
- ---- ----------------------
Intermediate Government $ 17
Fixed Income 8,768
Global Fixed Income 38,716
39
<PAGE>
WARBURG PINCUS FIXED INCOME FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1998
- --------------------------------------------------------------------------------
3. LINE OF CREDIT
The Funds, together with other funds advised by Warburg Pincus Asset
Management, Inc., the Funds' investment adviser ("Warburg") (collectively the
"Warburg Funds"), have established committed and uncommitted lines of credit
facilities with PNC Bank, National Association ("PNC") and an uncommitted line
of credit facility with Deutsche Bank, AG, ("Deutsche Bank") for temporary or
emergency purposes primarily relating to unanticipated fund share redemptions.
Effective December 31, 1997, the terms of the committed line of credit with PNC
was amended. Under the terms of the committed line of credit, the Warburg Funds
with access to the facility pay a commitment fee at a rate of.07% per annum on
the average daily balance of the line of credit, which is undisbursed and
uncanceled during the preceding quarter. In addition, the Warburg Funds will pay
interest on borrowings at the bank's base rate plus .45%. Under the terms of the
Uncommitted lines of credit, the Warburg Funds will pay interest on borrowings
at the banks base rate plus .55%. Aggregate borrowings for each fund under the
committed and uncommitted lines of credit with PNC may not exceed the lowest of
(a) thirty-three and one-third percent (33 1/3%) of the assets of such fund, for
any fund that does not invest at least sixty-five percent(65%) of its assets in
international equity or fixed income securities (an "International Fund") and
twenty-five percent (25%) of the assets of any fund that is an International
Fund or (b) the maximum amount permitted by such fund's investment policies and
restrictions. Aggregate borrowings for each fund under the uncommitted line of
credit facility with Deutsche Bank may not exceed thirty-three and one-third
percent (33 1/3%) of the net assets of such fund. At October 31, 1998, there
were no outstanding balances under these line of credit facilities for any of
the Funds.
4. INVESTMENTS IN SECURITIES
For the year ended October 31, 1998, purchases and sales of investment
securities (excluding short-term investments) and U.S. 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>
Intermediate Government $ 0 $ 0 $ 99,808,697 $ 72,495,009
New York Municipal 52,015,210 35,520,487 0 0
Fixed Income 252,593,729 100,864,863 340,341,980 337,908,460
Global Fixed Income 177,461,381 188,618,075 219,993,465 203,116,659
</TABLE>
40
<PAGE>
WARBURG PINCUS FIXED INCOME FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1998
- --------------------------------------------------------------------------------
4. INVESTMENTS IN SECURITIES -- (CONT'D)
At October 31, 1998, 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:
NET UNREALIZED
UNREALIZED UNREALIZED APPRECIATION
FUND APPRECIATION DEPRECIATION (DEPRECIATION)
- ---- ------------ ------------ --------------
Intermediate Government $1,926,365 $ (13,065) $ 1,913,300
New York Municipal 3,438,682 (82,419) 3,356,263
Fixed Income 8,412,135 (2,973,582) 5,438,553
Global Fixed Income 7,623,368 (10,086,358) (2,462,990)
5. 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. Each Fund will enter into forward
contracts primarily for hedging purposes. However, on occasion the Funds may
enter into forward contracts for speculative purposes, which may increase the
Fund's investment risk. 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, 1998, the Global Fixed Income Fund had the following open
forward foreign currency contracts:
<TABLE>
<CAPTION>
FOREIGN UNREALIZED
EXPIRATION CURRENCY CONTRACT CONTRACT FOREIGN EXCHANGE
FORWARD CURRENCY CONTRACT DATE TO BE SOLD AMOUNT VALUE GAIN (LOSS)
- ------------------------- ---------- ----------- ----------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
British Pounds 12/16/98 16,021,000 $26,765,450 $26,766,285 $ (835)
German Marks 12/16/98 28,123,621 17,396,267 17,016,773 379,494
French Francs 12/16/98 90,837,000 16,181,029 16,382,376 (201,347)
Danish Krone 12/16/98 43,700,000 7,040,779 6,948,309 92,470
Netherlands Guilders 12/16/98 12,241,000 6,402,197 6,570,938 (168,741)
Japanese Yen 12/16/98 396,600,000 3,413,081 3,427,324 (14,243)
----------- ----------- ------------
$77,198,803 $77,112,005 $ 86,798
=========== =========== ============
</TABLE>
41
<PAGE>
WARBURG PINCUS FIXED INCOME FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1998
- --------------------------------------------------------------------------------
6. FUTURE CONTRACTS
Each Fund may enter into futures contracts to the extent permitted by its
investment policies and objectives. Upon entering into a futures contract, a
Fund is required to make a deposit of an initial margin with its custodian in a
segregated account. Subsequent payments, which are dependent on 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 for hedging purposes 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. Second, it is possible
that a lack of liquidity for futures contracts could exist in the secondary
market, resulting in an inability to close a futures position prior to its
maturity date. Third, the purchase of a futures contract involves the risk that
a Fund could lose more than the original margin deposit required to initiate a
futures transaction. During the year ended October 31, 1998, the New York
Municipal Fund entered into futures contracts which resulted in net realized
losses of $129,543. At October 31, 1998, the New York Municipal Fund did not
have any open futures contracts.
7. 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 two billion shares are designated 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 as Common Shares and two billion shares are designated Advisor
Shares.
42
<PAGE>
WARBURG PINCUS FIXED INCOME FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1998
- --------------------------------------------------------------------------------
7. CAPITAL SHARE TRANSACTIONS -- (CONT'D)
<TABLE>
<CAPTION>
INTERMEDIATE GOVERNMENT FUND
----------------------------------------------------------
COMMON SHARES ADVISOR SHARES
------------------------- ------------------------------
FOR THE PERIOD
AUGUST 15, 1997
(COMMENCEMENT
FOR THE YEAR ENDED FOR THE YEAR OF OPERATIONS)
OCTOBER 31, ENDED THROUGH
------------------------- OCTOBER 31, OCTOBER 31,
1998 1997 1998 1997
----------- ----------- ------------ ---------------
<S> <C> <C> <C> <C>
Shares sold 7,804,541 2,276,846 861 227
Shares issued to shareholders on reinvestment
of dividends 252,353 263,058 33 1
Shares redeemed (5,334,372) (2,460,001) (20) 0
----------- ----------- --------- ----------
Net increase in shares outstanding 2,722,522 79,903 874 228
=========== =========== ========= ==========
Proceeds from sale of shares $79,566,141 $22,572,753 $ 8,731 $ 2,270
Reinvested dividends 2,563,729 2,608,528 336 15
Net asset value of shares redeemed (54,237,972) (24,347,987) (202) 0
----------- ----------- --------- ----------
Net increase from capital share transactions $27,891,898 $ 833,294 $ 8,865 $ 2,285
=========== =========== ========= ==========
</TABLE>
<TABLE>
<CAPTION>
NEW YORK MUNICIPAL FUND
------------------------------------------------------
COMMON SHARES ADVISOR SHARES
------------------------- --------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED
OCTOBER 31, OCTOBER 31,
------------------------- --------------------------
1998 1997 1998 1997
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Shares sold 4,761,389 4,731,647 0 0
Shares issued to shareholders on reinvestment
of dividends 334,796 394,988 0 0
Shares redeemed (3,553,241) (4,029,651) 0 (97)
----------- ----------- ----------- ------------
Net increase (decrease) in shares outstanding 1,542,944 1,096,984 0 (97)
=========== =========== =========== ============
Proceeds from sale of shares $49,747,129 $48,740,584 $ 0 $ 0
Reinvested dividends 3,489,600 4,063,047 4 0
Net asset value of shares redeemed (37,058,061) (41,383,138) 0 (1,006)
----------- ----------- ----------- ------------
Net increase (decrease) from capital share
transactions $16,178,668 $11,420,493 $ 4 $ (1,006)
=========== =========== =========== ============
</TABLE>
43
<PAGE>
WARBURG PINCUS FIXED INCOME FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1998
- --------------------------------------------------------------------------------
7. CAPITAL SHARE TRANSACTIONS -- (CONT'D)
<TABLE>
<CAPTION>
FIXED INCOME FUND
-------------------------------------------------------
COMMON SHARES ADVISOR SHARES
--------------------------- -------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED
OCTOBER 31, OCTOBER 31,
--------------------------- -------------------------
1998 1997 1998 1997
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
Shares sold 26,398,769 15,469,113 100,566 412,064
Shares issued to shareholders on reinvestment
of dividends 1,946,842 983,594 21,378 13,154
Shares redeemed (13,107,841) (5,971,763) (208,103) (135,350)
------------ ------------ ----------- -----------
Net increase (decrease) in shares outstanding 15,237,770 10,480,944 (86,159) 289,868
============ ============ =========== ===========
Proceeds from sale of shares $274,574,003 $158,412,176 $ 1,043,897 $ 4,180,125
Reinvested dividends 20,199,526 10,073,335 221,585 135,136
Net asset value of shares redeemed (136,202,146) (60,912,911) (2,159,507) (1,378,412)
------------ ------------ ----------- -----------
Net increase (decrease) from capital share
transactions $158,571,383 $107,572,600 $ (894,025) $ 2,936,849
============ ============ =========== ===========
</TABLE>
<TABLE>
<CAPTION>
GLOBAL FIXED INCOME FUND
-------------------------------------------------------
COMMON SHARES ADVISOR SHARES
--------------------------- -------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED
OCTOBER 31, OCTOBER 31,
--------------------------- -------------------------
1998 1997 1998 1997
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
Shares sold 9,874,066 12,111,016 157,868 797,711
Shares issued to shareholders on reinvestment
of dividends 1,031,287 1,058,355 52,605 31,874
Shares redeemed (14,237,226) (7,051,623) (413,879) (12,987)
------------ ------------ ----------- -----------
Net increase (decrease) in shares outstanding (3,331,873) 6,117,748 (203,406) 816,598
============ ============ =========== ===========
Proceeds from sale of shares $103,490,118 $134,607,066 $ 1,658,613 $ 8,874,898
Reinvested dividends 10,706,804 11,625,183 545,336 351,616
Net asset value of shares redeemed (149,374,012) (78,037,370) (4,279,669) (144,913)
------------ ------------ ----------- -----------
Net increase (decrease) from capital share
transactions $(35,177,090) $ 68,194,879 $(2,075,720) $ 9,081,601
============ ============ =========== ===========
</TABLE>
44
<PAGE>
WARBURG PINCUS FIXED INCOME FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1998
- --------------------------------------------------------------------------------
8. LIABILITIES
At October 31, 1998 each Fund had the following liabilities:
<TABLE>
<CAPTION>
INTERMEDIATE NEW YORK FIXED
GOVERNMENT MUNICIPAL INCOME
FUND FUND FUND
------------ ---------- -----------
<S> <C> <C> <C>
Payable for securities purchased (at value) $2,370,066 $ 0 $12,654,001
Investment advisory fee payable 23,913 24,569 111,095
Administrative services fees payable 6,473 9,124 36,089
Payable for fund shares redeemed 100,797 1,461,771 1,317,103
Distributions payable 30,223 82,604 224,486
</TABLE>
9. NET ASSETS
At October 31, 1998, capital contributions, undistributed net investment
income, accumulated net realized gain (loss) from security transactions and
current period distributions have been adjusted for current period permanent
book/tax differences which arose principally from differing book/tax treatments
of foreign currency transactions. The Intermediate Government Fund, New York
Municipal Fund and the Fixed Income Fund reclassified ($2,671), $114 and
$43,602, respectively from accumulated net realized gain (loss) from security
transactions to capital contributed. The Global Fixed Income Fund reclassified
($523,167) from accumulated net realized gain (loss) on foreign currency related
items to undistributed net investment income.
Net Assets at October 31, 1998 consisted of the following:
<TABLE>
<CAPTION>
GLOBAL
INTERMEDIATE NEW YORK FIXED FIXED
GOVERNMENT FUND MUNICIPAL FUND INCOME FUND INCOME FUND
--------------- -------------- ------------ ------------
<S> <C> <C> <C> <C>
Capital contributed, net $75,815,632 $102,942,168 $419,404,808 $169,895,161
Undistributed net investment income 0 0 0 846,744
Accumulated net realized gain (loss) from
security transactions 287,074 623,895 1,638,621 (7,831,600)
Net unrealized appreciation (depreciation)
from investments and foreign currency related
items 2,109,018 3,356,334 5,550,772 (2,261,860)
----------- ------------ ------------ ------------
Net assets $78,211,724 $106,922,397 $426,594,201 $160,648,445
=========== ============ ============ ============
</TABLE>
10. CAPITAL LOSS CARRYOVER
At October 31, 1998, capital loss carryovers available to offset possible
future capital gains of the Global Fixed Income Fund were as follows:
<TABLE>
<CAPTION>
CAPITAL LOSS CARRYOVER EXPIRES IN
---------------------------------------- TOTAL CAPITAL
2002 2003 2006 LOSS CARRYOVER
-------- -------- ---------- --------------
<S> <C> <C> <C> <C>
$517,856 $329,870 $6,945,772 $7,793,498
</TABLE>
45
<PAGE>
WARBURG PINCUS FIXED INCOME FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1998
- --------------------------------------------------------------------------------
11. OTHER FINANCIAL HIGHLIGHTS
Each Fund currently offers one other class of shares, Advisor Shares,
representing equal pro rata interests in each of the respective Warburg Pincus
Fixed Income Funds. The financial highlights for an Advisor Share of each Fund
are as follows:
<TABLE>
<CAPTION>
INTERMEDIATE GOVERNMENT
FUND
-----------------------
ADVISOR SHARES
-----------------------
1998 1997**
PERIOD ENDED: ------- -------
<S> <C> <C>
PER-SHARE DATA
Net asset value, beginning of period $10.06 $ 9.95
------ ------
INVESTMENT ACTIVITIES:
Net investment income 0.53 0.11
Net gains or losses on investments (both realized
and unrealized) 0.32 0.11
------ ------
Total from investment activities 0.85 0.22
------ ------
DISTRIBUTIONS:
From net investment income (0.53) (0.11)
------ ------
Total distributions (0.53) (0.11)
------ ------
NET ASSET VALUE, END OF PERIOD $10.38 $10.06
====== ======
Total return 8.99% 2.22%+
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s omitted) $12 $2
Ratio of expenses to average net assets 0.85%@ 0.85%*@
Ratio of net income to average net assets 5.28% 5.62%*
Decrease reflected in above operating ratios due to
waivers/reimbursements 3.30% 0.00%*
Portfolio turnover rate 133.98% 104.34%+
</TABLE>
- --------------------------------------------------------------------------------
+ Nonannualized.
* Annualized.
** For the period August 15, 1997 (commencement of operations) through October
31, 1997.
@ Interest earned on uninvested cash balances is used to offset portions of the
transfer agent expense. These arrangements had no effect on the Advisor
Shares' net expense ratio.
46
<PAGE>
WARBURG PINCUS FIXED INCOME FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1998
- --------------------------------------------------------------------------------
11. OTHER FINANCIAL HIGHLIGHTS -- (CONT'D)
<TABLE>
<CAPTION>
NEW YORK INTERMEDIATE
MUNICIPAL FUND
--------------------------------
ADVISOR SHARES
--------------------------------
1998 1997 1996**
PERIOD ENDED: ------ ------ ------
<S> <C> <C> <C>
PER-SHARE DATA
Net asset value, beginning of period $10.33 $10.34 $10.34
------ ------ ------
INVESTMENT ACTIVITIES:
Net investment income 0.39 0.41 0.09
Net gains or losses on investments (both realized
and unrealized) 0.20 0.11 0.00
------ ------ ------
Total from investment activities 0.59 0.52 0.09
------ ------ ------
DISTRIBUTIONS:
From net investment income (0.39) (0.41) (0.09)
From realized capital gains 0.00 (0.12) 0.00
------ ------ ------
Total distributions (0.39) (0.53) (0.09)
------ ------ ------
NET ASSET VALUE, END OF PERIOD $10.53 $10.33 $10.34
====== ====== ======
Total return 5.84% 5.19% 0.88%+
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s omitted) $0 $0 $1
Ratio of expenses to average net assets 0.85%@ 35.75%@ 0.63%*@
Ratio of net income to average net assets 3.74% 3.93% 3.88%*
Decrease reflected in above operating ratios due to
waivers/reimbursements 226.88% 450.88% 0.01%*
Portfolio turnover rate 37.25% 69.84% 69.23%+
</TABLE>
- --------------------------------------------------------------------------------
+ Nonannualized.
* Annualized.
** For the period August 5, 1996 (commencement of operations) through October
31, 1996.
@ Interest earned on uninvested cash balances is used to offset portions of the
transfer agent expense. These arrangements resulted in a reduction to the
Advisor Shares' expense ratio by .00%, 34.92% and .00% for the years or
period ended October 31, 1998, 1997 and 1996, respectively. The Advisor
Shares' operating expense ratios after reflecting these arrangements were
.85%, .83% and .63% for years or period ended October 31, 1998, 1997 and
1996, respectively.
47
<PAGE>
WARBURG PINCUS FIXED INCOME FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1998
- --------------------------------------------------------------------------------
11. OTHER FINANCIAL HIGHLIGHTS -- (CONT'D)
<TABLE>
<CAPTION>
FIXED INCOME FUND
--------------------------------
ADVISOR SHARES
--------------------------------
1998 1997 1996**
PERIOD ENDED: ------ ------ ------
<S> <C> <C> <C>
PER-SHARE DATA
Net asset value, beginning of period $10.43 $10.10 $ 9.90
------ ------ ------
INVESTMENT ACTIVITIES:
Net investment income 0.56 0.60 0.19
Net gains or losses on investments and foreign currency
related items (both realized and unrealized) 0.07 0.33 0.20
------ ------ ------
Total from investment activities 0.63 0.93 0.39
------ ------ ------
DISTRIBUTIONS:
From net investment income (0.56) (0.60) (0.19)
From realized capital gains (0.09) 0.00 0.00
------ ------ ------
Total distributions (0.65) (0.60) (0.19)
------ ------ ------
NET ASSET VALUE, END OF PERIOD $10.41 $10.43 $10.10
====== ====== ======
Total return 6.21% 9.51% 3.93%+
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s omitted) $3,058 $3,963 $911
Ratio of expenses to average net assets 1.00%@ 1.00%@ 1.00%*@
Ratio of net income to average net assets 5.40% 5.62% 5.85%*
Decrease reflected in above operating ratios due to
waivers/reimbursements 0.04% 0.08% 0.11%*
Portfolio turnover rate 124.04% 129.06% 194.23%+
</TABLE>
- --------------------------------------------------------------------------------
+ Nonannualized.
* Annualized.
** For the period July 3, 1996 (commencement of operations) through October 31,
1996.
@ Interest earned on uninvested cash balances is used to offset portions of the
transfer agent expense. These arrangements had no effect on the Advisor
Shares' net expense ratio.
48
<PAGE>
WARBURG PINCUS FIXED INCOME FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1998
- --------------------------------------------------------------------------------
11. OTHER FINANCIAL HIGHLIGHTS -- (CONT'D)
<TABLE>
<CAPTION>
GLOBAL FIXED INCOME FUND
--------------------------------
ADVISOR SHARES
--------------------------------
1998 1997 1996**
PERIOD ENDED: ------ ------ ------
<S> <C> <C> <C>
PER-SHARE DATA
Net asset value, beginning of period $10.90 $11.17 $10.90
------ ------ ------
INVESTMENT ACTIVITIES:
Net investment income 0.37 0.41 0.10
Net gains or losses on investments and foreign currency
related items (both realized and unrealized) (0.02) 0.15 0.27
------ ------ ------
Total from investment activities 0.35 0.56 0.37
------ ------ ------
DISTRIBUTIONS:
From net investment income (0.68) (0.29) (0.10)
From realized capital gains 0.00 (0.54) 0.00
------ ------ ------
Total distributions (0.68) (0.83) (0.10)
------ ------ ------
NET ASSET VALUE, END OF PERIOD $10.57 $10.90 $11.17
====== ====== ======
Total return 3.51% 5.18% 3.41%+
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s omitted) $6,518 $8,935 $ 39
Ratio of expenses to average net assets 1.45%@ 1.45%@ 1.45%*@
Ratio of net income to average net assets 4.75% 4.76% 5.69%*
Decrease reflected in above operating ratios due to
waivers/reimbursements 0.37% 0.33% 0.21%*
Portfolio turnover rate 233.73% 202.92% 123.90%+
</TABLE>
- --------------------------------------------------------------------------------
+ Nonannualized.
* Annualized.
** For the period August 12, 1996 (commencement of operations) through October
31, 1996.
@ Interest earned on uninvested cash balances is used to offset portions of the
transfer agent expense. These arrangements had no effect on the Advisor
Shares' net expense ratio.
49
<PAGE>
WARBURG PINCUS FIXED INCOME FUNDS
SHAREHOLDER TAX INFORMATION (UNAUDITED)
- --------------------------------------------------------------------------------
Each Fund is required by Subchapter M of the Internal Revenue Code of 1986,
as amended, to advise its shareholders within 60 days of each Fund's fiscal year
end as to the U.S. federal tax status of distributions received by the Fund's
shareholders in respect of such fiscal year. During the fiscal year ended
October 31, 1998, the following dividends and distributions per share were paid
by each of the Funds:
<TABLE>
<CAPTION>
ORDINARY MID-TERM LONG-TERM % OF ORDINARY INCOME DIVIDEND
INCOME CAPITAL GAINS CAPITAL GAINS QUALIFYING FOR
FUND PER SHARE PER SHARE PER SHARE DIVIDENDS RECEIVED DEDUCTION*
- ---- ----------- ------------- ------------- -----------------------------
1997
----
<S> <C> <C> <C> <C>
PAYMENT DATES MONTH END 12/31/97 12/31/97
- ------------- ----------- -------- --------
Intermediate Maturity Government 0.00
Common Shares $0.0962 $0.0000 $0.0000
Advisor Shares 0.0928 0.0000 0.0000
New York Intermediate Municipal** 0.00
Common Shares 0.0738 0.0000 0.0000
Advisor Shares 0.0694 0.0000 0.0000
Fixed Income 5.83
Common Shares 0.1905 0.0022 0.0000
Advisor Shares 0.1860 0.0022 0.0000
PAYMENT DATE 12/19/97 12/19/97 12/19/97
- ------------ ----------- -------- --------
Global Fixed Income 0.00
Common Shares 0.3866 0.0000 0.0000
Advisor Shares 0.3647 0.0000 0.0000
</TABLE>
The above information was provided to calendar year taxpayers via Form
1099-DIV mailed in January of 1998.
<TABLE>
<CAPTION>
ORDINARY % OF ORDINARY INCOME DIVIDEND
INCOME QUALIFYING FOR
FUND PER SHARE DIVIDENDS RECEIVED DEDUCTION*
- ---- --------- -----------------------------
1998
----
<S> <C> <C>
PAYMENT DATES MONTH END
- ------------- -----------
Intermediate Maturity Government 0.00
Common Shares $0.4413
Advisor Shares 0.4584
New York Intermediate Municipal** 0.00
Common Shares 0.3680
Advisor Shares 0.3218
Fixed Income 5.27
Common Shares 0.4806
Advisor Shares 0.4584
PAYMENT DATES 03/31/98, 06/30/98, 09/30/98
- ------------- ------------------------------
Global Fixed Income 0.00
Common Shares 0.3200
Advisor Shares 0.3200
</TABLE>
Because the fiscal year of the Funds is not a calendar year, another
notification will be sent with respect to calendar year 1998. The second
notification, which will reflect the amount to be used by calendar year
taxpayers on their U.S. federal income tax returns, will be made in conjunction
with Form 1099-DIV and will be mailed in January 1999.
- --------------------------------------------------------------------------------
* Available to Corporate Shareholders only.
** 100% of the dividends paid by this Fund were exempt-interest dividends for
the purposes of federal income tax.
50
<PAGE>
WARBURG PINCUS FIXED INCOME FUNDS
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Board of Directors and Shareholders of
WARBURG, PINCUS INTERMEDIATE MATURITY GOVERNMENT FUND, INC.;
WARBURG, PINCUS NEW YORK INTERMEDIATE MUNICIPAL FUND, INC.;
WARBURG, PINCUS FIXED INCOME FUND, INC. AND
WARBURG, PINCUS GLOBAL FIXED INCOME FUND, INC.:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments of Warburg, Pincus Global Fixed Income Fund, Inc.
and the statements of net assets of Warburg, Pincus Intermediate Maturity
Government Fund, Inc., Warburg, Pincus New York Intermediate Municipal Fund,
Inc. and Warburg, Pincus Fixed Income Fund, Inc. (all Funds collectively
referred to as the "Funds"), as of October 31, 1998 and the related statements
of operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of each fund at October
31, 1998, the results of their operations for the year then ended, changes in
their net assets for each of the two years presented and their financial
highlights for each of the years presented, in conformity with generally
accepted accounting principles. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Funds' management, our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation, of securities owned at October 31, 1998 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
2400 Eleven Penn Center
Philadelphia, Pennsylvania
December 11, 1998
51
<PAGE>
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P.O. Box 9030, Boston, MA 02205-9030
800-WARBURG (800-927-2874) - www.warburg.com
COUNSELLORS SECURITIES INC., DISTRIBUTOR. WPBDF-2-1098
