WARBURG PINCUS FIXED INCOME FUND /NY/, 497, 1996-03-27

WARBURG PINCUS FIXED INCOME FUND /NY/
497, 1996-03-27

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Rule 497(c)
Securities Act File No. 33-12343
Investment Company Act File No. 811-5039

<PAGE>
[Logo]

PROSPECTUS

FEBRUARY 28, 1996

[ ] WARBURG PINCUS FIXED INCOME FUND
[ ] WARBURG PINCUS GLOBAL FIXED INCOME FUND
[ ] WARBURG PINCUS INTERMEDIATE MATURITY GOVERNMENT FUND
[ ] WARBURG PINCUS NEW YORK INTERMEDIATE MUNICIPAL FUND

<PAGE>
<PAGE>
WARBURG PINCUS FUNDS
P.O. BOX 9030
BOSTON, MASSACHUSETTS 02205-9030
TELEPHONE NUMBER: (800) 888-6878

February 28, 1996
PROSPECTUS

Warburg Pincus Funds are a family of open-end mutual funds that offer investors
a variety of investment opportunities. Four funds are described in this
Prospectus:

WARBURG PINCUS FIXED INCOME FUND is a bond fund seeking current income and,
secondarily, capital appreciation by investing in a diversified portfolio of
fixed income securities.

WARBURG PINCUS GLOBAL FIXED INCOME FUND is a bond fund investing in a portfolio
principally consisting of investment grade fixed income securities of
governmental and corporate issuers denominated in various currencies, including
U.S. dollars.

WARBURG PINCUS INTERMEDIATE MATURITY GOVERNMENT FUND is an intermediate-term
bond fund investing in obligations issued or guaranteed by the U.S. government,
its agencies or instrumentalities.

WARBURG PINCUS NEW YORK INTERMEDIATE MUNICIPAL FUND is an intermediate-term
municipal bond fund designed for New York investors seeking income that is
exempt from federal, New York State and New York City income taxes.

NO LOAD CLASS OF COMMON SHARES

Each Fund offers two classes of shares. A class of Common Shares that is 'no
load' is offered by this Prospectus (i) directly from the
Funds' distributor, Counsellors Securities Inc., and (ii) through various
brokerage firms including Charles Schwab & Company, Inc. Mutual Fund
OneSource'tm' Program; Fidelity Brokerage Services, Inc. FundsNetwork'tm'
Program; Jack White & Company, Inc.; and Waterhouse Securities, Inc.

LOW MINIMUM INVESTMENT

The minimum initial investment in each Fund is $2,500 ($500 for an IRA or
Uniform Gifts to Minors Act account) and the minimum subsequent investment is
$100. Through the Automatic Monthly Investment Plan, subsequent investment
minimums may be as low as $50. See 'How to Purchase Shares.'

This Prospectus briefly sets forth certain information about the Funds that
investors should know before investing. Investors are advised to read this
Prospectus and retain it for future reference. Additional information about each
Fund, contained in a Statement of Additional Information, has been filed with
the Securities and Exchange Commission (the 'SEC') and is available to investors
without charge by calling Warburg Pincus Funds at (800) 927-2874. Information
regarding the status of shareholder accounts may be obtained by calling Warburg
Pincus Funds at (800) 888-6878. The Statements of Additional Information, as
amended or supplemented from time to time, bear the same date as this Prospectus
and are incorporated by reference in their entirety into this Prospectus.

- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------

THE FUNDS' EXPENSES

Each of Warburg Pincus Fixed Income Fund, Global Fixed Income Fund,
Intermediate Government Fund and New York Municipal Fund (the 'Funds') currently
offers two separate classes of shares: Common Shares and Advisor Shares. For a
description of Advisor Shares see 'General Information.'

<TABLE>
<CAPTION>
GLOBAL INTERMEDIATE NEW YORK
FIXED INCOME FIXED INCOME GOVERNMENT MUNICIPAL
FUND FUND FUND FUND
------------ ------------ ------------ ---------
<S> <C> <C> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases (as a
percentage of offering price)...................... 0 0 0 0
Annual Fund Operating Expenses (as a percentage of average
net assets)
Management Fees...................................... .35% .44% .05% .19%
12b-1 Fees........................................... 0 0 0 0
Other Expenses....................................... .40% .51% .55% .41%
--- ----- --- ---
Total Fund Operating Expenses (after fee
waivers)`D'........................................ .75% .95% .60% .60%
EXAMPLE
You would pay the following expenses
on a $1,000 investment, assuming (1) 5% annual return and
(2) redemption at the end of each time period:
1 year.............................................. $ 7 $ 10 $ 6 $ 6
3 years............................................. $24 $ 30 $19 $19
5 years............................................. $42 $ 53 $33 $33
10 years............................................. $93 $117 $75 $75
</TABLE>

- ------------

`D' Management Fees, Other Expenses and Total Fund Operating Expenses are based
on actual expenses for the fiscal year ended October 31, 1995, net of any
fee waivers or expense reimbursements. Without such waivers or
reimbursements, Management Fees for the Fixed Income, Global Fixed Income,
Intermediate Government and New York Municipal Funds would have equalled
.50%, 1.00%, .50% and .40%, respectively; Other Expenses would have equalled
.43%, .58%, .59% and .46%, respectively; and Total Fund Operating Expenses
would have equalled .93%, 1.58%, 1.09% and .86%, respectively. The Funds'
investment adviser and co-administrator are under no obligation to continue
these waivers.

------------------------

The expense table shows the costs and expenses that an investor will bear
directly or indirectly as a shareholder of each Fund. Certain broker-dealers and
financial institutions also may charge their clients fees in connection with
investments in Fund shares, which fees are not reflected in the table. The
Example should not be considered a representation of past or future expenses;
actual Fund expenses may be greater or less than those shown. Moreover, while
the Example assumes a 5% annual return, each Fund's actual performance will vary
and may result in a return greater or less than 5%.

FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The information regarding each Fund for the three fiscal years ended
October 31, 1995 has been derived from information audited by Coopers & Lybrand
L.L.P., independent auditors, whose report dated December 14, 1995 appears in
the relevant Fund's Statement of Additional Information. The information for the
two prior fiscal years ended October 31, 1992 has been audited by Ernst & Young
LLP, whose report was unqualified. Further information about the performance of
the Funds is contained in the Funds' annual report, dated October 31, 1995,
copies of which appear in the Funds' Statements of Additional Information or may
be obtained without charge by calling Warburg Pincus Funds at (800) 927-2874.

FIXED INCOME FUND
<TABLE>
<CAPTION>
FOR THE YEAR ENDED OCTOBER 31,
----------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988
-------- -------- ------- -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........ $ 9.61 $ 10.42 $ 9.90 $ 9.61 $ 8.95 $ 9.74 $ 9.93 $ 9.62
-------- -------- ------- -------- ------- ------- ------- -------
Income from Investment Operations
Net Investment Income.................... .70 .63 .56 .67 .73 .88 .91 .88
Net Gains (Losses) from Securities and
Foreign Currency Related Items (both
realized and unrealized)............... .46 (.70) .52 .29 .66 (.79) (.18) .31
-------- -------- ------- -------- ------- ------- ------- -------
Total from Investment Operations......... 1.16 (.07) 1.08 .96 1.39 .09 .73 1.19
-------- -------- ------- -------- ------- ------- ------- -------
Less Distributions
Dividends (from net investment income)... (.70) (.65) (.56) (.67) (.73) (.88) (.91) (.88)
Distributions (from capital gains)....... .00 (.09) .00 .00 .00 .00 (.01) .00
-------- -------- ------- -------- ------- ------- ------- -------
Total Distributions...................... (.70) (.74) (.56) (.67) (.73) (.88) (.92) (.88)
-------- -------- ------- -------- ------- ------- ------- -------
Net Asset Value, End of Period.............. $ 10.07 $ 9.61 $ 10.42 $ 9.90 $ 9.61 $ 8.95 $ 9.74 $ 9.93
-------- -------- ------- -------- ------- ------- ------- -------
-------- -------- ------- -------- ------- ------- ------- -------
Total Return................................ 12.59% (.60%) 11.63% 10.28% 16.08% .88% 7.78% 12.67%
Ratios/Supplemental Data
Net Assets, End of Period (000s)............ $116,983 $102,246 $81,181 $ 65,095 $61,908 $60,815 $87,258 $75,499
Ratios to Average Daily Net Assets:
Operating expenses....................... .75% .75% .75% .75% .75% .75% .75% .74%
Net investment income.................... 7.25% 6.53% 5.99% 6.82% 7.85% 9.35% 9.34% 8.80%
Decrease reflected in above expense
ratios due to waivers/reimbursements... .18% .18% .09% .27% .24% .06% .08% .26%
Portfolio Turnover Rate..................... 182.93% 179.44% 227.37% 122.04% 150.61% 132.01% 78.25% 55.80%

<CAPTION>
FOR THE PERIOD
AUGUST 17, 1987
(COMMENCEMENT OF
OPERATIONS)
THROUGH OCTOBER
31, 1987
----------------
<S> <C>
Net Asset Value, Beginning of Period........ $ 10.00
------
Income from Investment Operations
Net Investment Income.................... .19
Net Gains (Losses) from Securities and
Foreign Currency Related Items (both
realized and unrealized)............... (.38)
------
Total from Investment Operations......... (.19)
------
Less Distributions
Dividends (from net investment income)... (.19)
Distributions (from capital gains)....... .00
------
Total Distributions...................... (.19)
------
Net Asset Value, End of Period.............. $ 9.62
------
------
Total Return................................ (9.17%)*
Ratios/Supplemental Data
Net Assets, End of Period (000s)............ $ 26,291
Ratios to Average Daily Net Assets:
Operating expenses....................... .70%*
Net investment income.................... 9.10%*
Decrease reflected in above expense
ratios due to waivers/reimbursements... .80%*
Portfolio Turnover Rate..................... 30.00%*
</TABLE>

- ------------
* Annualized.
GLOBAL FIXED INCOME FUND
<TABLE>
<CAPTION>
FOR THE YEAR ENDED OCTOBER 31,
--------------------------------------------
1995 1994 1993 1992
------- ------- -------- -------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........................................... $ 10.45 $ 11.38 $ 10.68 $ 10.40
------- ------- -------- -------
Income from Investment Operations
Net Investment Income....................................................... .99 .34 .54 .86
Net Gains from Securities and Foreign Currency Related Items (both realized
and unrealized)........................................................... .09 (.64) 1.13 .28
------- ------- -------- -------
Total from Investment Operations............................................ 1.08 (.30) 1.67 1.14
------- ------- -------- -------
Less Distributions
Dividends (from net investment income)...................................... (.49) (.45) (.85) (.67)
Distributions (from capital gains).......................................... .00 (.14) (.12) (.19)
Return of Capital........................................................... .00 (.04) .00 .00
------- ------- -------- -------
Total Distributions......................................................... (.49) (.63) (.97) (.86)
------- ------- -------- -------
Net Asset Value, End of Period................................................. $ 11.04 $ 10.45 $ 11.38 $ 10.68
------- ------- -------- -------
------- ------- -------- -------
Total Return................................................................... 10.65% (2.79%) 16.72% 11.08%
Ratios/Supplemental Data
Net Assets, End of Period (000s)............................................... $63,641 $90,394 $ 61,994 $17,092
Ratios to Average Daily Net Assets:
Operating expenses.......................................................... .95% .95% .49% .45%
Net investment income....................................................... 8.18% 6.96% 8.60% 8.66%
Decrease reflected in above expense ratios due to waivers/reimbursements.... .63% .65% 1.44% 2.42%
Portfolio Turnover Rate........................................................ 128.70% 178.11% 109.54% 93.14%

1991*
-------
<S> <C>
Net Asset Value, Beginning of Period........................................... $ 10.00
-------
Income from Investment Operations
Net Investment Income....................................................... .59
Net Gains from Securities and Foreign Currency Related Items (both realized
and unrealized)........................................................... .14
-------
Total from Investment Operations............................................ .73
-------
Less Distributions
Dividends (from net investment income)...................................... (.33)
Distributions (from capital gains).......................................... .00
Return of Capital........................................................... .00
-------
Total Distributions......................................................... (.33)
-------
Net Asset Value, End of Period................................................. $ 10.40
-------
-------
Total Return................................................................... 7.66%
Ratios/Supplemental Data
Net Assets, End of Period (000s)............................................... $12,160
Ratios to Average Daily Net Assets:
Operating expenses.......................................................... 1.09%
Net investment income....................................................... 7.45%
Decrease reflected in above expense ratios due to waivers/reimbursements.... 2.73%
Portfolio Turnover Rate........................................................ 185.74%
</TABLE>

- ------------
* The Fund commenced operations on November 1, 1990.

<PAGE>
<PAGE>
INTERMEDIATE GOVERNMENT FUND
<TABLE>
<CAPTION>
FOR THE YEAR ENDED OCTOBER 31,
---------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989
------- ------- -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.......... $ 9.66 $ 11.03 $ 11.23 $ 10.83 $ 10.24 $ 10.33 $ 10.27
------- ------- -------- -------- ------- ------- -------
Income from Investment Operations
Net Investment Income..................... .59 .54 .59 .68 .76 .79 .82
Net Gains (Losses) from Securities (both
realized and unrealized)................ .56 (.73) .34 .41 .59 (.09) .06
------- ------- -------- -------- ------- ------- -------
Total from Investment Operations.......... 1.15 (.19) .93 1.09 1.35 .70 .88
------- ------- -------- -------- ------- ------- -------
Less Distributions
Dividends (from net investment income).... (.59) (.55) (.59) (.68) (.76) (.79) (.82)
Distributions (from capital gains)........ .00 (.63) (.54) (.01) .00 .00 .00
------- ------- -------- -------- ------- ------- -------
Total Distributions....................... (.59) (1.18) (1.13) (.69) (.76) (.79) (.82)
------- ------- -------- -------- ------- ------- -------
Net Asset Value, End of Period................ $ 10.22 $ 9.66 $ 11.03 $ 11.23 $ 10.83 $ 10.24 $ 10.33
------- ------- -------- -------- ------- ------- -------
------- ------- -------- -------- ------- ------- -------
Total Return.................................. 12.32% (1.78%) 8.79% 10.34% 13.71% 7.10% 9.05%
Ratios/Supplemental Data
Net Assets, End of Period (000s).............. $55,898 $46,734 $ 77,565 $113,336 $89,006 $63,663 $26,861
Ratios to Average Daily Net Assets:
Operating expenses........................ .60% .60% .60% .60% .57% .50% .50%
Net investment income..................... 6.00% 5.43% 5.34% 6.10% 7.29% 7.78% 8.07%
Decrease reflected in above expense ratios
due to waivers/reimbursements........... .49% .42% .21% .25% .30% .44% 1.53%
Portfolio Turnover Rate....................... 105.79% 115.37% 108.00% 165.70% 39.13% 112.69% 22.55%

<CAPTION>
FOR THE PERIOD
AUGUST 22, 1988
(COMMENCEMENT OF
OPERATIONS)
THROUGH
OCTOBER 31, 1988
----------------
<S> <C>
Net Asset Value, Beginning of Period.......... $ 10.00
-------
Income from Investment Operations
Net Investment Income..................... .16
Net Gains (Losses) from Securities (both
realized and unrealized)................ .27
-------
Total from Investment Operations.......... .43
-------
Less Distributions
Dividends (from net investment income).... (.16)
Distributions (from capital gains)........ .00
-------
Total Distributions....................... (.16)
-------
Net Asset Value, End of Period................ $ 10.27
-------
-------
Total Return.................................. 24.36%*
Ratios/Supplemental Data
Net Assets, End of Period (000s).............. $ 6,640
Ratios to Average Daily Net Assets:
Operating expenses........................ .50%*
Net investment income..................... 8.22%*
Decrease reflected in above expense ratios
due to waivers/reimbursements........... 3.64%*
Portfolio Turnover Rate....................... 27.97%
</TABLE>

- ------------
* Annualized.

NEW YORK MUNICIPAL FUND
<TABLE>
<CAPTION>
FOR THE YEAR ENDED OCTOBER 31,
------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988
------- -------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period.............................. $ 10.07 $ 10.65 $ 10.02 $ 9.88 $ 9.57 $ 9.59 $ 9.71 $ 9.39
------- -------- ------- ------- ------- ------- ------- -------
Income from Investment Operations
Net Investment Income............. .47 .46 .47 .50 .53 .60 .58 .55
Net Gains (Losses) from Securities
(both realized and
unrealized)..................... .36 (.45) .68 .14 .31 (.02) (.12) .32
------- -------- ------- ------- ------- ------- ------- -------
Total from Investment
Operations...................... .83 .01 1.15 .64 .84 .58 .46 .87
------- -------- ------- ------- ------- ------- ------- -------
Less Distributions
Dividends (from net investment
income)......................... (.47) (.46) (.47) (.50) (.53) (.60) (.58) (.55)
Distributions (from capital
gains).......................... (.01) (.13) (.05) .00 .00 .00 .00 .00
------- -------- ------- ------- ------- ------- ------- -------
Total Distributions............... (.48) (.59) (.52) (.50) (.53) (.60) (.58) (.55)
------- -------- ------- ------- ------- ------- ------- -------
Net Asset Value, End of Period........ $ 10.42 $ 10.07 $ 10.65 $ 10.02 $ 9.88 $ 9.57 $ 9.59 $ 9.71
------- -------- ------- ------- ------- ------- ------- -------
------- -------- ------- ------- ------- ------- ------- -------
Total Return.......................... 8.31% .04% 11.67% 6.63% 9.43% 6.18% 4.91% 9.43%
Ratios/Supplemental Data
Net Assets, End of Period (000s)...... $73,361 $ 75,716 $69,578 $54,012 $29,016 $21,916 $20,048 $27,596
Ratios to Average Daily Net Assets:
Operating expenses................ .60% .60% .58% .55% .55% .55% .56% .54%
Net investment income............. 4.50% 4.41% 4.50% 4.99% 5.84% 6.21% 6.14% 5.70%
Decrease reflected in above
expense ratios due to
waivers/reimbursements.......... .26% .20% .20% .40% .65% .76% .72% 1.01%
Portfolio Turnover Rate............... 105.17 167.09% 115.98% 47.79% 66.53% 70.45% 74.03% 145.20%

<CAPTION>
FOR THE PERIOD
APRIL 1, 1987
(COMMENCEMENT OF
OPERATIONS)
THROUGH OCTOBER
31, 1987
----------------
<S> <C>
Net Asset Value, Beginning of
Period.............................. $ 10.00
-------
Income from Investment Operations
Net Investment Income............. .30
Net Gains (Losses) from Securities
(both realized and
unrealized)..................... (.61)
-------
Total from Investment
Operations...................... (.31)
-------
Less Distributions
Dividends (from net investment
income)......................... (.30)
Distributions (from capital
gains).......................... .00
-------
Total Distributions............... (.30)
-------
Net Asset Value, End of Period........ $ 9.39
-------
-------
Total Return.......................... (5.30%)*
Ratios/Supplemental Data
Net Assets, End of Period (000s)...... $ 10,410
Ratios to Average Daily Net Assets:
Operating expenses................ .50%*
Net investment income............. 5.50%*
Decrease reflected in above
expense ratios due to
waivers/reimbursements.......... 2.10%*
Portfolio Turnover Rate............... 28.00%
</TABLE>

- ------------
* Annualized.

INVESTMENT OBJECTIVES AND POLICIES

Each Fund's objective is a fundamental policy and may not be amended
without first obtaining the approval of a majority of the outstanding shares of
that Fund. Any investment involves risk and, therefore, there can be no
assurance that any Fund will achieve its investment objective. See 'Portfolio
Investments' and 'Certain Investment Strategies' for descriptions of certain
types of investments the Funds may make.

FIXED INCOME FUND

The Fixed Income Fund seeks to generate high current income consistent with
reasonable risk; capital appreciation is a secondary objective. The Fund is a
diversified management investment company which pursues its investment
objectives by investing, under normal market conditions, at least 65% of its
total assets in fixed income securities, such as corporate bonds, debentures and
notes, convertible debt securities, preferred stocks, government obligations,
Municipal Obligations (as described below under 'New York Municipal Fund') and
repurchase agreements with respect to portfolio securities. Under normal market
conditions, the Fund intends that its portfolio of fixed income securities will
have a weighted average remaining maturity not exceeding 10 years. The Fund may
invest without limit in U.S. dollar-denominated, investment grade foreign
securities, but limits to 35% of its assets the portion that may be invested in
securities of foreign issuers that either are rated below investment grade or
are denominated in a currency other than U.S. dollars.

Under normal market conditions, at least 65% of all of the fixed income
securities in the Fund will be rated investment grade. A security will be
considered investment grade if it is rated at the time of purchase within the
four highest grades assigned by Moody's Investors Service, Inc. ('Moody's') or
Standard & Poor's Ratings Group ('S&P'). The Fund may hold up to 35% of its net
assets in fixed income securities rated below investment grade and as low as C
by Moody's or D by S&P and may invest in unrated issues that are believed by
Warburg to have financial characteristics that are comparable and that are
otherwise similar in quality to the rated issues it purchases.

GLOBAL FIXED INCOME FUND

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 Fund is a non-
diversified management investment company which seeks to achieve its objective
by investing, under normal market conditions, at least 65% of its total assets
in fixed income obligations of governmental and corporate issuers denominated in
various currencies (including U.S. dollars, or in multinational currency units
such as European Currency Units ('ECUs')), including convertible debt securities
and preferred stock. Issuers of these securities will be located in at least
three countries and issuers located in any one country (other than the United
States) will not represent more than 40% of the Fund's total assets. In
addition, the Fund will not invest 25% or more of its assets in the securities
issued by any one foreign government, its agencies, instrumentalities or
political subdivisions. The Fund may invest up to 20% of its total assets in
equity securities, including common stock, warrants and rights. For temporary
defensive purposes or during times of international political or economic
uncertainty, all of the Fund's investments may be made temporarily in the United
States or denominated in U.S. dollars.

<PAGE>
<PAGE>
organized or supported by several national governments, such as the
International Bank for Reconstruction and Development (the 'World Bank') or the
European Investment Bank. The Fund may also purchase fixed income obligations of
foreign corporations that are issued in a currency other than U.S. dollars.
Because of fluctuating currency values, the Fund may engage in certain currency
transactions, as described under 'Certain Investment Strategies -- Options,
Futures and Currency Transactions' below.

Under normal economic and market conditions, the dollar-weighted average
maturity of the Fund's portfolio of fixed income securities will be between 3
and 10 years, using for purposes of this calculation the maturity of a security
on its date of purchase. Individual issues may have maturities shorter or longer
than 3 to 10 years.

Warburg will allocate investments among securities of particular issuers on
the basis of its views as to the best values then currently available in the
marketplace. Such values are a function of yield, maturity, issue classification
and quality characteristics, coupled with expectations regarding the economy,
movements in the general level and term of interest rates, currency values,
political developments and variations in the supply of funds available for
investment in the world bond market relative to the demands placed upon it.
Fixed income securities denominated in currencies other than the U.S. dollar or
in multinational currency units are evaluated on the strength of the particular
currency against the U.S. dollar as well as on the current and expected levels
of interest rates in the country or countries. Currencies generally are
evaluated on the basis of fundamental economic criteria (e.g., relative
inflation and interest rate levels and trends, growth rate forecasts, balance of
payments status and economic policies) as well as technical and political data.
In addition to the foregoing, the Fund may seek to take advantage of differences
in relative values of fixed income securities among various countries.

The Fund may hold up to 35% of its net assets in fixed income securities
rated below investment grade, or in unrated securities considered to be of
equivalent quality.

INTERMEDIATE GOVERNMENT FUND

The Intermediate Government Fund seeks to achieve as high a level of
current income as is consistent with the preservation of capital. The Fund is a
diversified management investment company which pursues its investment objective
by investing, under normal market conditions, at least 65% of its total assets
in obligations issued or guaranteed by the United States government, its
agencies or instrumentalities ('Government Securities'). Under normal market
conditions, the Fund will maintain a weighted average portfolio maturity of
between 3 and 10 years. Investments by the Fund in repurchase agreements on
Government Securities are not included in determining the percentage of assets
invested in Government Securities.

The Fund may invest in Government Trust Certificates. Each Certificate
evidences an undivided fractional interest in a Government Trust (each, a
'Trust'). The assets of each Trust consist of a promissory note, payable in U.S.
Dollars (the 'Loan Note'), representing a loan made by the Trust to the
government of Israel (the 'Borrower'), backed by a full faith and credit
guaranty issued by the United States of America, acting through the Defense
Security Assistance Agency of the Department of Defense (the 'Guaranty'), of the
due and punctual payment of 90% of payments of principal and interest due on the
Loan Note and a security interest in collateral, consisting of non-callable
securities issued or guaranteed by the United States government, or derivatives
thereof, such as trust receipts or other securities evidencing an interest in
such United States government securities, sufficient to pay the remaining 10% of
all payments of principal and interest due on the Loan Notes. Each Certificate
issued by a Trust represents the right to receive a

portion of the payments due on the Loan Note held by that Trust. The
Certificates are not subject to prepayment or acceleration. Each Guaranty is
entitled to the full faith and credit of the United States of America. A
Certificateholder's right to receive any payments with respect to the Guaranty
will be subject to termination if such holder breaches the terms of its
Certificate.

Certificates are not considered by the Fund to be Government Securities.
The Certificates represent undivided fractional interests in the Loan Notes, but
the Certificates are not direct obligations of, and are not guaranteed by, the
Borrower. Thus, in the event of a failure to pay principal and/or interest when
due, the Fund may be subject to delays, expenses and risks that are greater than
those that would have been involved if the Fund had purchased a direct
obligation of the Borrower.

NEW YORK MUNICIPAL FUND

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 the preservation
of capital. The Fund is a non-diversified management investment company which
pursues its investment objective by investing, under normal market conditions,
at least 65% of its total assets in investment grade 'New York Municipal
Obligations.' New York Municipal Obligations are debt obligations (other than
short-term securities), the interest on which is excluded from gross income for
federal income tax purposes and exempt from New York State and New York City
personal income tax. Under normal market conditions, the Fund will maintain a
weighted average portfolio maturity of between 3 and 10 years. If Warburg,
Pincus Counsellors, Inc., each Fund's investment adviser ('Warburg'), believes
that suitable New York Municipal Obligations are not available, the Fund may for
temporary defensive reasons invest without limit in (i) municipal obligations
that pay interest which is excluded from gross income for federal income tax
purposes but which is not exempt from New York State and New York City personal
income taxes and (ii) taxable or tax-exempt money market obligations. It is a
fundamental policy of the Fund that, except during temporary defensive periods,
the Fund will have at least 80% of its assets invested in obligations issued by
or on behalf of states (including the State of New York), territories and
possessions of the United States and the District of Columbia and their
political subdivisions, agencies and instrumentalities ('Municipal
Obligations'). This fundamental policy may not be amended without first
obtaining the approval of holders of a majority of the outstanding shares of the
Fund. The Fund may invest up to 20% of its total assets in debt obligations
other than Municipal Obligations. The Fund may invest in unrated issues that are
believed by Warburg to have financial characteristics that are comparable and
that are otherwise similar in quality to the rated issues it purchases.
Investors should be aware that ratings are relative and subjective and are not
absolute standards of quality.

PORTFOLIO INVESTMENTS

MONEY MARKET OBLIGATIONS. Each Fund is authorized to invest, under normal
conditions, up to 35% of its total assets in short-term money market obligations
having remaining maturities of less than one year at the time of purchase. These
short-term instruments consist of Government Securities; bank obligations
(including certificates of deposit, time deposits and bankers' acceptances of
domestic or foreign banks, domestic savings and loans and similar institutions)
that are high quality investments or, if unrated, deemed by Warburg to be high
quality investments; commercial paper rated no lower than A-2 by S&P or Prime-2
by Moody's or the equivalent from another major rating service or, if unrated,
of an issuer having an outstanding, unsecured debt issue then rated within the
three

highest rating categories; in the case of the Fixed Income Fund and the Global
Fixed Income Fund, obligations of foreign governments, their agencies or
instrumentalities; and repurchase agreements with respect to portfolio
securities. The short-term money market obligations in which the New York
Municipal Fund is authorized to invest generally will be tax-exempt obligations;
however, the Fund may invest in taxable obligations when suitable tax-exempt
obligations are unavailable or to maintain liquidity for meeting anticipated
redemptions and paying operating expenses. Tax-exempt money market obligations
in which the New York Municipal Fund may invest consist of investment grade
tax-exempt notes and tax-exempt commercial paper rated no lower than A-2 by S&P
or Prime-2 by Moody's or the equivalent from another major rating service or, if
not rated, of municipal issuers having an issue of outstanding Municipal
Obligations rated within the three highest grades by Moody's or S&P.

For temporary defensive purposes or, in the case of the Global Fixed Income
Fund, during times of international political or economic uncertainty, each Fund
other than the Intermediate Government Fund may invest without limit in
short-term money market obligations, and the Intermediate Government Fund may
invest without limit in short-term Government Securities.

Repurchase Agreements. Under normal market conditions, each Fund may invest
up to 20% of its total assets in repurchase agreement transactions with member
banks of the Federal Reserve System and certain non-bank dealers. Repurchase
agreements are contracts under which the buyer of a security simultaneously
commits to resell the security to the seller at an agreed-upon price and date.
Under the terms of a typical repurchase agreement, a Fund would acquire any
underlying security for a relatively short period (usually not more than one
week) subject to an obligation of the seller to repurchase, and the Fund to
resell, the obligation at an agreed-upon price and time, thereby determining the
yield during the Fund's holding period. This arrangement results in a fixed rate
of return that is not subject to market fluctuations during the Fund's holding
period. The value of the underlying securities will at all times be at least
equal to the total amount of the purchase obligation, including interest. The
Fund bears a risk of loss in the event that the other party to a repurchase
agreement defaults on its obligations or becomes bankrupt and the Fund is
delayed or prevented from exercising its right to dispose of the collateral
securities, including the risk of a possible decline in the value of the
underlying securities during the period while the Fund seeks to assert this
right. Warburg, acting under the supervision of the governing Board of each Fund
(the 'governing Board' or 'Board'), monitors the creditworthiness of those bank
and non-bank dealers with which each Fund enters into repurchase agreements to
evaluate this risk. A repurchase agreement is considered to be a loan under the
Investment Company Act of 1940, as amended (the '1940 Act').

Money Market Mutual Funds. Where Warburg believes that it would be
beneficial to the Fund and appropriate considering the factors of return and
liquidity, each Fund may invest up to 5% of its assets in securities of money
market mutual funds that are unaffiliated with the Fund, Warburg or the Funds'
co-administrator, PFPC Inc. ('PFPC'). A money market mutual fund is an
investment company that invests in short-term high quality money market
instruments. A money market mutual fund generally does not purchase securities
with a remaining maturity of more than one year. The Intermediate Government
Fund and the New York Municipal Fund would invest in money market mutual funds
that invest in Government Securities and tax-exempt securities, respectively. As
a shareholder in any mutual fund, a Fund will bear its ratable share of the
mutual fund's expenses, including management fees, and will remain subject to
payment of

the Fund's administration fees and other expenses with respect to assets so
invested.

U.S GOVERNMENT SECURITIES. The obligations issued or guaranteed by the U.S.
government in which a Fund may invest include direct obligations of the U.S.
Treasury and obligations issued by U.S. government agencies and
instrumentalities. Included among direct obligations of the United States are
Treasury Bills, Treasury Notes and Treasury Bonds, which differ principally in
terms of their maturities. Treasury Bills have maturities of less than one year,
Treasury Notes have maturities of one to 10 years and Treasury Bonds generally
have maturities of greater than 10 years at the date of issuance. Included among
the obligations issued by agencies and instrumentalities of the United States
are: instruments that are supported by the full faith and credit of the United
States (such as certificates issued by the Government National Mortgage
Association ('GNMA')); instruments that are supported by the right of the issuer
to borrow from the U.S. Treasury (such as securities of Federal Home Loan
Banks); and instruments that are supported by the credit of the instrumentality
(such as Federal National Mortgage Association ('FNMA') and Federal Home Loan
Mortgage Corporation ('FHLMC') bonds).

CONVERTIBLE SECURITIES. Convertible securities in which the Fixed Income and
Global Fixed Income Funds may invest, including both convertible debt and
convertible preferred stock, may be converted at either a stated price or stated
rate into underlying shares of common stock. Because of this feature,
convertible securities enable an investor to benefit from increases in the
market price of the underlying common stock. Convertible securities provide
higher yields than the underlying equity securities, but generally offer lower
yields than non-convertible securities of similar quality. The value of
convertible securities fluctuates in relation to changes in interest rates like
bonds and, in addition, fluctuates in relation to the underlying common stock.

STRUCTURED SECURITIES. The Funds may purchase any type of publicly traded or
privately negotiated fixed income security, including mortgage-backed
securities; structured notes, bonds or debentures; and assignments of and
participations in loans.

Mortgage-Backed Securities. Mortgage-backed securities are collateralized
by mortgages or interests in mortgages and may be issued by government or
non-government entities. Mortgage-backed securities issued by GNMA, FNMA or
FHLMC provide a monthly payment consisting of interest and principal payments,
and additional payments will be made out of unscheduled prepayments of
principal. Neither the value of nor the yield on these mortgage-backed
securities or shares of the Funds is guaranteed by the U.S. government.
Non-government issued mortgage-backed securities may offer higher yields than
those issued by government entities, but may be subject to greater price
fluctuations. The value of mortgaged-backed securities may change due to shifts
in the market's perceptions of issuers, and regulatory or tax changes may
adversely affect the mortgage securities market as a whole. Foreclosures and
prepayments, which occur when unscheduled or early payments are made on the
underlying mortgages, may shorten the effective maturities on these securities.
The Funds' yield may be affected by reinvestment of prepayments at higher or
lower rates than the original investment. Prepayments may tend to increase due
to refinancing of mortgages as interest rates decline. In addition, like other
debt securities, the values of mortgage-backed securities will generally
fluctuate in response to interest rates.

upon maturity or redemption may be increased or decreased depending upon changes
in the applicable Reference. The terms of the structured securities may provide
that in certain circumstances no principal is due at maturity and, therefore,
may result in the loss of a Fund's entire investment. The value of structured
securities may move in the same or the opposite direction as the value of the
Reference, so that appreciation of the Reference may produce an increase or
decrease in the interest rate or value of the security at maturity. In addition,
the change in interest rate or the value of the security at maturity may be a
multiple of the change in the value of the Reference so that the security may be
more or less volatile than the Reference, depending on the multiple.
Consequently, structured securities may entail a greater degree of market risk
and volatility than other types of debt obligations.

Assignments and Participations. Each Fund may invest in assignments of and
participations in loans issued by banks and other financial institutions.

When a Fund purchases assignments from lending financial institutions, the
Fund will acquire direct rights against the borrower on the loan. However, since
assignments are generally arranged through private negotiations between
potential assignees and potential assignors, the rights and obligations acquired
by a Fund as the purchaser of an assignment may differ from, and be more limited
than, those held by the assigning lender.
Participations in loans will typically result in a Fund having a
contractual relationship with the lending financial institution, not the
borrower. A Fund would have the right to receive payments of principal, interest
and any fees to which it is entitled only from the lender of the payments from
the borrower. In connection with purchasing a participation, a Fund generally
will have no right to enforce compliance by the borrower with the terms of the
loan agreement relating to the loan, nor any rights of set-off against the
borrower, and the Fund may not benefit directly from any collateral supporting
the loan in which it has purchased a participation. As a result, a Fund
purchasing a participation will assume the credit risk of both the borrower and
the lender selling the participation. In the event of the insolvency of the
lender selling the participation, the Fund may be treated as a general creditor
of the lender and may not benefit from any set-off between the lender and the
borrower.

A Fund may have difficulty disposing of assignments and participations
because there is no liquid market for such securities. The lack of a liquid
secondary market will have an adverse impact on the value of such securities and
on a Fund's ability to dispose of particular assignments or participations when
necessary to meet the Fund's liquidity needs or in response to a specific
economic event, such as a deterioration in the creditworthiness of the borrower.
The lack of a liquid market for assignments and participations also may make it
more difficult for a Fund to assign a value to these securities for purposes of
valuing the Fund's portfolio and calculating its net asset value.

With respect to the New York Municipal Fund, income derived from
participations or assignments may not be tax-exempt, depending on the structure
of the particular securities. To the extent such income is not tax-exempt it
will be subject to the New York Municipal Fund's 20% limit on investing in
non-municipal securities.

RISK FACTORS AND SPECIAL
CONSIDERATIONS

For certain additional risks related to each Fund's investments, see
'Portfolio Investments' beginning at page 7 and 'Certain Investment Strategies'
beginning at page 13.

Among the factors that may be considered in deciding whether to invest in a
security are the issuer's financial resources, its sensitivity to eco-

nomic conditions and trends, its operating history and the ability of the
issuer's management. Bond prices generally vary inversely in relation to changes
in the level of interest rates, as well as in response to other market factors
and changes in the creditworthiness of the issuers of the securities. Government
Securities are considered to be of the highest credit quality available.
Government Securities, however, will be affected by general changes in interest
rates. The price volatility of a Fund's shares where the Fund invests in
intermediate maturity bonds will be substantially less than that of long-term
bonds. An intermediate maturity bond will generally have a lower yield than that
of a long-term bond. Longer-term securities in which the Funds may invest
generally offer a higher current yield than is offered by shorter-term
securities, but also generally involve greater volatility of price and risk of
capital than shorter-term securities.

NEW YORK MUNICIPAL OBLIGATIONS. The New York Municipal Fund's ability to achieve
its investment objective is dependent upon the ability of the issuers of New
York Municipal Obligations to meet their continuing obligations for the payment
of principal and interest. New York State and New York City face long-term
economic problems that could seriously affect their ability and that of other
issuers of New York Municipal Obligations to meet their financial obligations.
Certain substantial issuers of New York Municipal Obligations (including issuers
whose obligations may be acquired by the Fund) have experienced serious
financial difficulties in recent years. These difficulties have at times
jeopardized the credit standing and impaired the borrowing abilities of all New
York issuers and have generally contributed to higher interest costs for their
borrowings and fewer markets for their outstanding debt obligations. In recent
years, several different issues of municipal securities of New York State and
its agencies and instrumentalities and of New York City have been downgraded by
S&P and Moody's. On the other hand, strong demand for New York Municipal
Obligations has at times had the effect of permitting New York Municipal
Obligations to be issued with yields relatively lower, and after issuance, to
trade in the market at prices relatively higher than comparably rated municipal
obligations issued by other jurisdictions. A recurrence of the financial
difficulties previously experienced by certain issuers of New York Municipal
Obligations could result in defaults or declines in the market values of those
issuers' existing obligations and, possibly, in the obligations of other issuers
of New York Municipal Obligations. Although as of the date of this Prospectus,
no issuers of New York Municipal Obligations are in default with respect to the
payment of their municipal obligations, the occurrence of any such default could
affect adversely the market values and marketability of all New York Municipal
Obligations and, consequently, the net asset value of the New York Municipal
Fund's portfolio. Other considerations affecting the New York Municipal Fund's
investments in New York Municipal Obligations are summarized in the Fund's
Statement of Additional Information.

NON-DIVERSIFIED STATUS. The Global Fixed Income Fund and the New York Municipal
Fund are each classified as a non-diversified investment company under the 1940
Act, which means that the Funds are not limited by the 1940 Act in the
proportion of their assets that they may invest in the obligations of a single
issuer. The Funds will, however, comply with diversification requirements
imposed by the Internal Revenue Code of 1986, as amended (the 'Code'), for
qualification as a regulated investment company. As non-diversified investment
companies, the Funds may invest a greater proportion of their assets in the
obligations of a small number of issuers and, as a result, may be subject to
greater risk with respect to portfolio securities. To the extent that the Funds
assume large positions in the securities of a small number of issuers, their
return may fluctuate to a greater extent than that of a diversified company as a
result of changes in

the financial condition or in the market's assessment of the issuers.

LOWER-RATED SECURITIES. There are certain risk factors associated with
lower-rated securities. Securities rated in the fourth highest grade have
speculative characteristics, and securities rated B have speculative elements
and a greater vulnerability to default than higher-rated securities. Investors
should be aware that ratings are relative and subjective and are not absolute
standards of quality. Subsequent to its purchase by a Fund, an issue of
securities may cease to be rated or its rating may be reduced below the minimum
required for purchase by the Fund. Neither event will require sale of such
securities by the Fund, although Warburg will consider such event in its
determination of whether the Fund should continue to hold the securities.

The Fixed Income Fund and the Global Fixed Income Fund may invest in
securities rated as low as C by Moody's or D by S&P. Each Fund may invest in
unrated securities considered to be of equivalent quality. Securities that are
rated C by Moody's are the lowest rated class and can be regarded as having
extremely poor prospects of ever attaining any real investment standing. Debt
rated D by S&P is in default or is expected to default upon maturity or payment
date.

Lower-rated and comparable unrated securities (commonly referred to as
'junk bonds') (i) will likely have some quality and protective characteristics
that, in the judgment of the rating organization, are outweighed by large
uncertainties or major risk exposures to adverse conditions and (ii) are
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligation. The market
values of certain of these securities also tend to be more sensitive to
individual corporate developments and changes in economic conditions than
higher-quality securities. In addition, medium- and lower-rated securities and
comparable unrated securities generally present a higher degree of credit risk.
The risk of loss due to default by such issuers is significantly greater because
medium- and lower-rated securities and unrated securities generally are
unsecured and frequently are subordinated to the prior payment of senior
indebtedness.

The market value of securities in lower-rated categories is more volatile
than that of higher quality securities. In addition, the Fixed Income Fund and
the Global Fixed Income Fund may have difficulty disposing of certain of these
securities because there may be a thin trading market. The lack of a liquid
secondary market for certain securities may have an adverse impact on the Funds'
ability to dispose of particular issues and may make it more difficult for the
Fixed Income Fund and the Global Fixed Income Fund to obtain accurate market
quotations for purposes of valuing the Funds and calculating their respective
net asset values.

For a complete description of the rating systems of Moody's and S&P, see
the Appendix to the Statement of Additional Information of the Fixed Income and
Global Fixed Income Funds.

NON-PUBLICLY TRADED SECURITIES; RULE 144A SECURITIES. The Funds may purchase
securities that are not registered under the Securities Act of 1933, as amended
(the '1933 Act'), but that can be sold to 'qualified institutional buyers' in
accordance with Rule 144A under the 1933 Act ('Rule 144A Securities'). A Rule
144A Security will be considered illiquid and therefore subject to each Fund's
limitation on the purchase of illiquid securities, unless the Fund's governing
Board determines on an ongoing basis that an adequate trading market exists for
the security. In addition to an adequate trading market, the Board will also
consider factors such as trading activity, availability of reliable price
information and other relevant information in determining whether a Rule 144A
Security is liquid. This investment practice could have the effect of increasing
the level of illiquidity in the Funds to the extent that qualified institutional
buyers

become uninterested for a time in purchasing Rule 144A Securities. The Board of
each Fund will carefully monitor any investments by the Fund in Rule 144A
Securities. The Boards may adopt guidelines and delegate to Warburg the daily
function of determining and monitoring the liquidity of Rule 144A Securities,
although each Board will retain ultimate responsibility for any determination
regarding liquidity.

Non-publicly traded securities (including Rule 144A Securities) may involve
a high degree of business and financial risk and may result in substantial
losses. These securities may be less liquid than publicly traded securities, and
a Fund may take longer to liquidate these positions than would be the case for
publicly traded securities. Although these securities may be resold in privately
negotiated transactions, the prices realized from these sales could be less than
those originally paid by the Fund. Further, companies whose securities are not
publicly traded may not be subject to the disclosure and other investor
protection requirements that would be applicable if their securities were
publicly traded. A Fund's investment in illiquid securities is subject to the
risk that should the Fund desire to sell any of these securities when a ready
buyer is not available at a price that is deemed to be representative of their
value, the value of the Fund's net assets could be adversely affected.

PORTFOLIO TRANSACTIONS AND
TURNOVER RATE

A Fund will attempt to purchase securities with the intent of holding them
for investment but may purchase and sell portfolio securities whenever Warburg
believes it to be in the best interests of the relevant Fund. In addition, to
the extent it is consistent with a Fund's investment objective, the Fund also
may engage in short-term trading. A Fund will not consider portfolio turnover
rate a limiting factor in making investment decisions consistent with its
investment objective and policies. This investment approach and use of certain
of the investment strategies described below may result in a high portfolio
turnover rate. High portfolio turnover rates (100% or more) may result in dealer
mark ups or underwriting commissions as well as other transaction costs,
including correspondingly higher brokerage commissions. In addition, short-term
gains realized from portfolio transactions are taxable to shareholders as
ordinary income. See 'Dividends, Distributions and Taxes -- Taxes' below and
'Investment Policies -- Portfolio Transactions' in each Fund's Statement of
Additional Information.

Newly issued Government Securities normally are purchased by a Fund
directly from the issuer or from an underwriter acting as a principal. Other
purchases and sales usually are placed by the Fund with those dealers which
Warburg determines offer the best price and execution. The purchase price paid
by the Fund to underwriters of newly issued securities usually includes a
concession paid by the issuer to the underwriter, and purchases of securities
from a dealer in the after market normally are executed at a price between the
bid and asked prices.

All orders for transactions in securities or options on behalf of a Fund
are placed by Warburg with broker-dealers that it selects, including Counsellors
Securities Inc., the Funds' distributor ('Counsellors Securities'). A Fund may
utilize Counsellors Securities in connection with a purchase or sale of
securities when Warburg believes that the charge for the transaction does not
exceed usual and customary levels and when doing so is consistent with
guidelines adopted by the Board.

CERTAIN INVESTMENT STRATEGIES

Although there is no intention of doing so during the coming year, each
Fund may enter into reverse repurchase agreements and dollar rolls. Detailed
information concerning each Fund's strategies and related risks is contained

below and in the Fund's Statement of Additional Information.

STRATEGIES AVAILABLE TO ALL FUNDS

OPTIONS, FUTURES AND CURRENCY TRANSACTIONS. At the discretion of Warburg, each
Fund may, but is not required to, engage in a number of strategies involving
options, futures and forward currency contracts. These strategies, commonly
referred to as 'derivatives,' may be used (i) for the purpose of hedging against
a decline in value of the Fund's current or anticipated portfolio holdings, (ii)
as a substitute for purchasing or selling portfolio securities or (iii) to seek
to generate income to offset expenses or increase return. TRANSACTIONS THAT ARE
NOT CONSIDERED HEDGING SHOULD BE CONSIDERED SPECULATIVE AND MAY SERVE TO
INCREASE A FUND'S INVESTMENT RISK. Transaction costs and any premiums associated
with these strategies, and any losses incurred, will affect a Fund's net asset
value and performance. Therefore, an investment in a Fund may involve a greater
risk than an investment in other mutual funds that do not utilize these
strategies. The Funds' use of these strategies may be limited by position and
exercise limits established by securities and commodities exchanges and the
National Association of Securities Dealers, Inc. and by the Code.

Securities and Index Options. The Funds may purchase and write covered put
and call options traded on U.S. and foreign exchanges as well as
over-the-counter ('OTC') without limit on the net asset value of the stock and
debt securities in its portfolio and will realize fees (referred to as
'premiums') for granting the rights evidenced by the options. The purchaser of a
put option on a security has the right to compel the purchase by the writer of
the underlying security, while the purchaser of a call option has the right to
purchase the underlying security from the writer. In addition to purchasing and
writing options on securities, each Fund may also purchase and write without
limit exchange-listed and OTC put and call options on securities indexes. A
securities index measures the movement of a certain group of securities by
assigning relative values to the securities included in the index.

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. However, for an option writer the exposure to adverse price movements in
the underlying security or index is potentially unlimited during the exercise
period. Writing securities options may result in substantial losses to the Fund,
force the sale or purchase of portfolio securities at inopportune times or at
less advantageous prices, limit the amount of appreciation the Fund could
realize on its investments or require the Fund to hold securities it would
otherwise sell.

Futures Contracts and Related Options. Each Fund may enter into interest
rate, securities index and, in the case of the Fixed Income and Global Fixed
Income Funds, currency futures contracts and purchase and write (sell) related
options that are traded on an exchange designated by the Commodity Futures
Trading Commission (the 'CFTC') or, if consistent with CFTC regulations, on
foreign exchanges. These futures contracts are standardized contracts for the
future delivery of foreign currency or an interest rate sensitive security or,
in the case of securities index and certain other futures contracts, are settled
in cash with reference to a specified multiplier times the change in the
specified interest rate, index or exchange rate. An option on a futures contract
gives the purchaser the right, in return for the premium paid, to assume a
position in a futures contract.

tracts. Although the Funds are limited in the amount of assets that may be
invested in futures transactions, there is no overall limit on the percentage of
Fund assets that may be at risk with respect to futures activities.

Currency Exchange Transactions. The Fixed Income and Global Fixed Income
Funds may conduct currency exchange transactions either (i) on a spot (i.e.,
cash) basis at the rate prevailing in the currency exchange market, (ii) through
entering into futures contracts or options on futures contracts (as described
above), (iii) through entering into forward contracts to purchase or sell
currency or (iv) by purchasing and writing exchange-traded and OTC currency
options. A forward currency contract involves an obligation to purchase or sell
a specific currency at a future date at a price set at the time of the contract.
An option on a foreign currency operates similarly to an option on a security.
Risks associated with currency forward contracts and purchasing currency options
are similar to those described in this Prospectus for futures contracts and
securities index options. In addition, the use of currency transactions could
result in losses from the imposition of foreign exchange controls, suspension of
settlement or other governmental actions or unexpected events.

Hedging Considerations. The Funds may engage in options, futures and
currency transactions for, among other reasons, hedging purposes. A hedge is
designed to offset a loss on a portfolio position with a gain in the hedge
position; at the same time, however, a properly correlated hedge will result in
a gain in the portfolio position being offset by a loss in the hedge position.
As a result, the use of options, futures contracts and currency exchange
transactions for hedging purposes could limit any potential gain from an
increase in value of the position hedged. In addition, the movement in the
portfolio position hedged may not be of the same magnitude as movement in the
hedge. A Fund will engage in hedging transactions only when deemed advisable by
Warburg, and successful use of hedging transactions will depend on Warburg's
ability to correctly predict movements in the hedge and the hedged position and
the correlation between them, which could prove to be inaccurate. Even a
well-conceived hedge may be unsuccessful to some degree because of unexpected
market behavior or trends.

Additional Considerations. To the extent that a Fund engages in the
strategies described above, the Fund may experience losses greater than if these
strategies had not been utilized. In addition to the risks described above,
these instruments may be illiquid and/or subject to trading limits, and the Fund
may be unable to close out an option or futures position without incurring
substantial losses, if at all. The Fund is also subject to the risk of a default
by a counterparty to an off-exchange transaction.

Asset Coverage. Each Fund will comply with applicable regulatory
requirements designed to eliminate any potential for leverage with respect to
options written by the Fund on securities, indexes and currencies; interest
rate, index and currency futures contracts and options on these futures
contracts; and forward currency contracts. The use of these strategies may
require that the Fund maintain cash or certain liquid high-grade debt
obligations or other assets that are acceptable as collateral to the appropriate
regulatory authority in a segregated account with its custodian or a designated
sub-custodian to the extent the Fund's obligations with respect to these
strategies are not otherwise 'covered' through ownership of the underlying
security, financial instrument or currency or by other portfolio positions or by
other means consistent with applicable regulatory policies. Segregated assets
cannot be sold or transferred unless equivalent assets are substituted in their
place or it is no longer necessary to segregate them. As a result, there is a
possibility that segregation of a large percentage of the Fund's assets could
impede portfolio management or the Fund's

ability to meet redemption requests or other current obligations.

ZERO COUPON SECURITIES. Each Fund may invest without limit in 'zero coupon
securities.' Zero coupon securities pay no cash income to their holders until
they mature and are issued at substantial discounts from their value at
maturity. When held to maturity, their entire return comes from the difference
between their purchase price and their maturity value. Because interest on zero
coupon securities is not paid on a current basis, the values of securities of
this type are subject to greater fluctuations than are the values of securities
that distribute income regularly and may be more speculative than such other
securities. Accordingly, the values of these securities may be highly volatile
as interest rates rise or fall. Redemption of shares of a Fund that require it
to sell zero coupon securities prior to maturity may result in capital gains or
losses that may be substantial. In addition, a Fund's investments in zero coupon
securities will result in special tax consequences, which are described below
under 'Dividends, Distributions and Taxes -- Taxes.'

WHEN-ISSUED SECURITIES AND DELAYED-DELIVERY TRANSACTIONS. The Fixed Income Fund,
the Global Fixed Income Fund and the Intermediate Government Fund may each
utilize up to 20% of its total assets to purchase securities on a when-issued
basis and purchase or sell securities on a delayed-delivery basis. The New York
Municipal Fund may without limit purchase Municipal Obligations on a when-issued
basis. In these transactions, payment for and delivery of the securities occur
beyond the regular settlement dates, normally within 30-45 days after the
transaction. A Fund will not enter into a when-issued or delayed-delivery
transaction for the purpose of leverage, but may sell the right to acquire a
when-issued security prior to its acquisition or dispose of its right to deliver
or receive securities in a delayed-delivery transaction if Warburg deems it
advantageous to do so. The payment obligation and the interest rate that will be
received in when-issued and delayed-delivery transactions are fixed at the time
the buyer enters into the commitment. Due to fluctuations in the value of
securities purchased or sold on a when-issued or delayed-delivery basis, the
yields obtained on such securities may be higher or lower than the yields
available in the market on the dates when the investments are actually delivered
to the buyers. When-issued securities may include securities purchased on a
'when, as and if issued' basis under which the issuance of the security depends
on the occurrence of a subsequent event, such as approval of a merger, corporate
reorganization or debt restructuring. A Fund will establish a segregated account
with its custodian consisting of cash, Government Securities or other liquid
high-grade debt obligations in an amount equal to the amount of its when-issued
and delayed-delivery purchase commitments, and will segregate the securities
underlying commitments to sell securities for delayed delivery.

INTEREST RATE, INDEX, MORTGAGE AND CURRENCY SWAPS; INTEREST RATE CAPS, FLOORS
AND COLLARS. Each Fund may enter into interest rate, index and mortgage swaps
and interest rate caps, floors and collars for hedging purposes or to seek to
increase total return; the Fixed Income and Global Fixed Income Funds may enter
into currency swaps for hedging purposes. Interest rate swaps involve the
exchange by the Fund with another party of their respective commitments to pay
or receive interest, such as an exchange of fixed rate payments for floating
rate payments. Index swaps involve the exchange by the Fund with another party
of the respective amounts payable with respect to a notional principal amount at
interest rates equal to two specified indexes. Mortgage swaps are similar to
interest rate swaps in that they represent commitments to pay and receive
interest. The notional principal amount, however, is tied to a reference pool or
pools of mortgages. Currency swaps involve the exchange of their respective

rights to make or receive payments in specified currencies. The purchase of an
interest rate cap entitles the purchaser, to the extent that a specified index
exceeds a predetermined interest rate, to receive payment of interest on a
notional principal amount from the party selling such interest rate cap. The
purchase of an interest rate floor entitles the purchaser, to the extent that a
specified index falls below a predetermined interest rate, to receive payments
of interest on a notional principal amount from the party selling the interest
rate floor. An interest rate collar is the combination of a cap and a floor that
preserves a certain return within a predetermined range of interest rates.

A Fund will enter into interest rate, index and mortgage swaps only on a
net basis, which means that the two payment streams are netted out, with the
Fund receiving or paying, as the case may be, only the net amount of the two
payments. Interest rate, index and mortgage swaps do not involve the delivery of
securities, other underlying assets or principal. Accordingly, the risk of loss
with respect to interest rate, index and mortgage swaps is limited to the net
amount of interest payments that the Fund is contractually obligated to make. If
the other party to an interest rate, index or mortgage swap defaults, the Fund's
risk of loss consists of the net amount of interest payments that the Fund is
contractually entitled to receive. In contrast, currency swaps usually involve
the delivery of a gross payment stream in one designated currency in exchange
for the gross payment stream in another designated currency. Therefore, the
entire payment stream under a currency swap is subject to the risk that the
other party to the swap will default on its contractual delivery obligations. To
the extent that the net amount payable by the Fund under an interest rate, index
or mortgage swap and the entire amount of the payment stream payable by the Fund
under a currency swap or an interest rate cap, floor or collar are held in a
segregated account consisting of cash, Government Securities or high-grade
liquid debt securities, the Funds and Warburg believe that swaps do not
constitute senior securities under the 1940 Act and, accordingly, will not treat
them as being subject to each Fund's borrowing restriction.

The Fund will not enter into interest rate, index, mortgage or currency
swaps, or interest rate cap, floor or collar transactions unless the unsecured
commercial paper, senior debt or claims paying ability of the other party is
rated either AA or A-1 or better by S&P or Aa or P-1 or better by Moody's or, if
unrated by such rating organizations, determined to be of comparable quality by
Warburg.

STRATEGIES AVAILABLE TO THE FIXED INCOME FUND, THE GLOBAL FIXED INCOME FUND AND
THE INTERMEDIATE GOVERNMENT FUND

SHORT SALES AGAINST THE BOX. The Fixed Income Fund, the Global Fixed Income Fund
and the Intermediate Government Fund may each enter into a short sale of
securities such that when the short position is open the Fund owns an equal
amount of the securities sold short or owns preferred stocks or debt securities,
convertible or exchangeable without payment of further consideration, into an
equal number of securities sold short. This kind of short sale, which is
referred to as one 'against the box,' will be entered into by a Fund for the
purpose of receiving a portion of the interest earned by the executing broker
from the proceeds of the sale. The proceeds of the sale will generally be held
by the broker until the settlement date when the Fund delivers securities to
close out its short position. Although prior to delivery the Fund will have to
pay an amount equal to any dividends paid on the securities sold short, the Fund
will receive the dividends from the securities sold short or the dividends from
the preferred stock or interest from the debt securities convertible or
exchangeable into the securities sold short, plus a portion of the interest
earned from the proceeds of the short sale. The Fund will deposit, in a
segregated account with its custodian or a qualified subcus

todian, the securities sold short or convertible or exchangeable preferred
stocks or debt securities in connection with short sales against the box. Each
Fund will endeavor to offset transaction costs associated with short sales
against the box with the income from the investment of the cash proceeds. Not
more than 10% of a Fund's net assets (taken at current value) may be held as
collateral for short sales against the box at any one time. The extent to which
the Fund may make short sales may be limited by the requirement contained in the
Code.

STRATEGIES AVAILABLE TO THE FIXED INCOME FUND AND THE GLOBAL FIXED INCOME FUND

FOREIGN SECURITIES. The Fixed Income and Global Fixed Income Funds may invest in
the securities of foreign issuers. There are certain risks involved in investing
in securities of companies and governments of foreign nations which are in
addition to the usual risks inherent in domestic investments. These risks
include those resulting from fluctuations in currency exchange rates,
revaluation of currencies, future adverse political and economic developments
and the possible imposition of currency exchange blockages or other foreign
governmental laws or restrictions, reduced availability of public information
concerning issuers, the lack of uniform accounting, auditing and financial
reporting standards and other regulatory practices and requirements that are
often less rigorous than those applied in the United States. The yield of the
Funds may be adversely affected by fluctuations in the value of one or more
currencies relative to the U.S. dollar. Moreover, securities of many foreign
companies may be less liquid and their prices more volatile than those of
securities of comparable U.S. companies. Certain foreign countries are known to
experience long delays between the trade and settlement dates of securities
purchased or sold. Due to the increased exposure of the Funds to market and
foreign exchange fluctuations brought about by such delays and due to the
corresponding negative impact on the Funds' liquidity, the Funds will avoid
investing in countries that are known to experience settlement delays which may
expose the Funds to unreasonable risk of loss. In addition, with respect to
certain foreign countries, there is the possibility of expropriation,
nationalization, confiscatory taxation and limitations on the use or removal of
funds or other assets of the Funds, including the withholding of dividends.
Moreover, individual foreign economies may differ favorably or unfavorably from
the U.S. economy in such respects as growth of gross national product, rate of
inflation, capital reinvestment, resource self-sufficiency and balance of
payments positions. Investment in foreign securities may also result in higher
operating expenses due to the cost of converting foreign currency into U.S.
dollars, the payment of fixed brokerage commissions on foreign exchanges, which
generally are higher than commissions on U.S. exchanges, higher valuation and
communications costs and the expense of maintaining securities with foreign
custodians.

REITS. The Fixed Income Fund and the Global Fixed Income Fund may invest in real
estate investment trusts ('REITs'), which are pooled investment vehicles that
invest primarily in income-producing real estate or real estate related loans or
interests. Like regulated investment companies such as the Funds, REITs are not
taxed on income distributed to shareholders provided they comply with several
requirements of the Code. A Fund investing in a REIT will indirectly bear its
proportionate share of any expenses paid by the REIT in addition to the expenses
of the Fund.

liquidation, the possibilities of failing to qualify for the exemption from tax
for distributed income under the Code and failing to maintain their exemptions
from the 1940 Act. REITs are also subject to interest rate risks.

STRATEGY AVAILABLE TO THE FIXED INCOME FUND AND THE INTERMEDIATE GOVERNMENT FUND

LENDING OF PORTFOLIO SECURITIES. The Fixed Income Fund and the Intermediate
Government Fund may lend portfolio securities to brokers, dealers and other
financial organizations. By lending its securities, a Fund can increase its
income by continuing to receive interest and any dividends on the loaned
securities as well as by either investing the cash collateral in short-term
instruments or obtaining yield in the form of interest paid by the borrower when
Government Securities are used as collateral. These loans, if and when made, may
not exceed 20% and 30%, respectively, of the total assets of the Fixed Income
Fund and the Intermediate Government Fund, respectively, taken at value and will
be collateralized by cash, letters of credit or Government Securities, which are
maintained at all times in an amount at least equal to the current market value
of the loaned securities. Any gain or loss in the market price of the securities
loaned that might occur during the term of the loan would be for the account of
the Fund. From time to time, the Fund may pay a part of the interest earned from
the investment collateral received for securities loaned to the borrower and/or
a third party that is unaffiliated with the Fund and that is acting as a
'finder.' The Fund bears a risk of loss in the event that the other party to the
loan agreement defaults on its obligations or becomes bankrupt and the Fund is
delayed or prevented from exercising its right to retrieve and dispose of the
loaned securities, including the risk of a possible decline in the value of the
loaned securities during the period in which the Fund seeks to assert its
rights.

STRATEGIES AVAILABLE TO THE FIXED INCOME FUND AND THE NEW YORK MUNICIPAL FUND

NEW YORK MUNICIPAL OBLIGATIONS. New York Municipal Obligations include debt
obligations of the State of New York and its political subdivisions, agencies
and public authorities issued to obtain funds for various public purposes and
debt obligations issued by other governmental entities (such as Puerto Rico) if
such debt obligations generate interest income which is excluded from gross
income for federal taxable income purposes and exempt from New York State and
New York City personal income taxes.

MUNICIPAL OBLIGATIONS. The two principal types of Municipal Obligations, in
terms of the source of payment of debt service on the bonds, are general
obligation bonds and revenue bonds and a Fund may hold both in any proportion.
General obligation bonds are secured by the issuer's pledge of its full faith,
credit and taxing power for the payment of principal and interest. Revenue bonds
are payable only from the revenues derived from a particular facility or class
of facilities or, in some cases, from the proceeds of a special excise or other
specific revenue source but not from the general taxing power. There are, of
course, variations in the security of Municipal Obligations, both within a
particular classification and between classifications.

A Fund may invest without limit in Municipal Obligations that are repayable
out of revenue streams generated from economically related projects or
facilities or Municipal Obligations whose issuers are located in the same state.
Sizeable investments in such obligations could involve an increased risk to the
Fund should any of such related projects or facilities experience financial
difficulties. Each Fund intends during the coming year to limit investments in
such obligations to less than 25% of its assets.

ALTERNATIVE MINIMUM TAX BONDS. The Funds may invest without limit in
'Alternative Minimum Tax Bonds,' which are certain bonds issued after August 7,
1986 to finance certain non-

governmental activities. While the income from Alternative Minimum Tax Bonds is
exempt from regular federal income tax, it is a tax preference item for purposes
of the federal individual and corporate 'alternative minimum tax.' The
alternative minimum tax is a special tax that applies to a limited number of
taxpayers who have certain adjustments or tax preference items. Available
returns on Alternative Minimum Tax Bonds acquired by a Fund may be lower than
those from other Municipal Obligations acquired by a Fund due to the possibility
of federal, state and local alternative minimum or minimum income tax liability
on Alternative Minimum Tax Bonds. At present, the Fixed Income Fund does not
intend to purchase Alternative Minimum Tax Bonds.

VARIABLE RATE AND MASTER DEMAND NOTES. Municipal Obligations purchased by a Fund
may include variable rate and master demand notes issued by industrial
development authorities and other governmental entities. Variable rate demand
notes are tax-exempt Municipal Obligations that provide for a periodic
adjustment in the interest rate paid on the notes. Master demand notes are
tax-exempt Municipal Obligations that provide for a periodic adjustment in the
interest rate paid (usually tied to the Treasury Bill auction rate) and permit
daily changes in the amount borrowed. While there may be no active secondary
market with respect to a particular variable rate or master demand note
purchased by a Fund, the Fund may, upon the notice specified in the note, demand
payment of the principal of and accrued interest on the note at any time and may
resell the note at any time to a third party. The absence of such an active
secondary market, however, could make it difficult for the Fund to dispose of
the variable rate or master demand note involved in the event the issuer of the
note defaulted on its payment obligations, and a Fund could, for this or other
reasons, suffer a loss to the extent of the default plus any expenses involved
in an attempt to recover the investment.

STAND-BY COMMITMENTS. The Fixed Income Fund and the New York Municipal Fund may
acquire stand-by commitments with respect to Municipal Obligations held in their
respective portfolios. Under a stand-by commitment, which is commonly known as a
'put', a dealer agrees to purchase, at a Fund's option, specified Municipal
Obligations at a specified price. A Fund may pay for stand-by commitments either
separately in cash or by paying a higher price for the securities acquired with
the commitment, thus increasing the cost of the securities and reducing the
yield otherwise available from them, and will be valued at zero in determining
the Fund's net asset value. A stand-by commitment is not transferable by a Fund,
although the Fund can sell the underlying Municipal Obligations to a third party
at any time. The principal risk of stand-by commitments is that the writer of a
commitment may default on its obligation to repurchase the securities acquired
with it. The Funds intend to enter into stand-by commitments only with brokers,
dealers and banks that, in the opinion of Warburg, present minimal credit risks.
In evaluating the creditworthiness of the issuer of a stand-by commitment,
Warburg will periodically review relevant financial information concerning the
issuer's assets, liabilities and contingent claims. The Funds will acquire
stand-by commitments only in order to facilitate portfolio liquidity and do not
intend to exercise their rights under stand-by commitments for trading purposes.

STRATEGY AVAILABLE TO THE INTERMEDIATE GOVERNMENT FUND

coupon securities that are considered Government Securities is used for purposes
of determining whether at least 65% of the Intermediate Government Fund's total
assets is invested in Government Securities. However, receipts or certificates
which are underwritten by securities dealers or banks that evidence ownership of
future interest payments, principal payments or both on certain notes or bonds
issued by the U.S. government, its agencies, authorities or instrumentalities
will not be considered Government Securities for purposes of the 65% test. For a
description of zero coupon securities and the tax and other considerations
associated with investing in them, see 'Zero Coupon Securities' above and
'Dividends, Distributions and Taxes -- Taxes' below. INVESTMENT GUIDELINES

Each Fund may each invest up to 15% of its net assets in securities with
contractual or other restrictions on resale and other instruments that are not
readily marketable ('illiquid securities'), including (i) securities issued as
part of a privately negotiated transaction between an issuer and one or more
purchasers; (ii) repurchase agreements with maturities greater than seven days;
(iii) with respect to each Fund other than the Intermediate Government Fund,
time deposits maturing in more than seven calendar days; and (iv) certain Rule
144A Securities. In addition, up to 5% of the Fixed Income Fund's, the Global
Fixed Income Fund's and the Government Fund's total assets may be invested in
the securities of issuers which have been in continuous operation for less than
three years. The Fixed Income Fund and the Global Fixed Income Fund may each
invest up to 5% of its net assets in warrants. Each Fund may borrow from banks
for temporary or emergency purposes, such as meeting anticipated redemption
requests, in an amount up to 30% of its total assets and may pledge assets to
the extent necessary to secure permitted borrowings. Whenever borrowings
(including reverse repurchase agreements) exceed 5% of the value of a Fund's
total assets, the Fund will not make any investments (including roll-overs).
Except for the limitations on borrowing, the investment guidelines set forth in
this paragraph may be changed at any time without shareholder consent by vote of
the governing Board of each Fund, subject to the limitations contained in the
1940 Act. A complete list of investment restrictions that each Fund has adopted
identifying additional restrictions that cannot be changed without the approval
of the majority of the Fund's outstanding shares is contained in each Fund's
Statement of Additional Information.

MANAGEMENT OF THE FUNDS

INVESTMENT ADVISER. Each Fund employs Warburg as its investment adviser.
Warburg, subject to the control of each Fund's officers and the Board, manages
the investment and reinvestment of the assets of the Funds in accordance with
each Fund's investment objective and stated investment policies. Warburg makes
investment decisions for each Fund and places orders to purchase or sell
securities on behalf of each such Fund. Warburg also employs a support staff of
management personnel to provide services to the Funds and furnishes the Funds
with office space, furnishings and equipment.

For the services provided by Warburg, the Fixed Income Fund, the Global
Fixed Income Fund, the Intermediate Government Fund and the New York Municipal
Fund pay Warburg a fee calculated at an annual rate of .50%, 1.00%, .50% and
.40%, respectively, of the Fund's average daily net assets. Although the Global
Fixed Income Fund's advisory fee is higher than that paid by most other
investment companies, including money market and fixed income funds, Warburg
believes that it is comparable to fees charged by other mutual funds with
similar policies and strategies. The advisory agreement between each Fund and
Warburg provides that Warburg will reimburse the Fund to the extent

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certain expenses that are described in the Statement of Additional Information
exceed applicable state expense limitations. Warburg and each Fund's
co-administrators may voluntarily waive a portion of their fees from time to
time and temporarily limit the expenses to be paid by the Fund.

Warburg is a professional investment counselling firm which provides
investment services to investment companies, employee benefit plans, endowment
funds, foundations and other institutions and individuals. As of January 31,
1996, Warburg managed approximately $12.9 billion of assets, including
approximately $7.1 billion of assets of twenty-seven investment companies or
portfolios. Incorporated in 1970, Warburg is a wholly owned subsidiary of
Warburg, Pincus Counsellors G.P. ('Warburg G.P.'), a New York general
partnership. E.M. Warburg, Pincus & Co., Inc. ('EMW') controls Warburg through
its ownership of a class of voting preferred stock of Warburg. Warburg G.P. has
no business other than being a holding company of Warburg and its subsidiaries.
Warburg's address is 466 Lexington Avenue, New York, New York 10017-3147.

PORTFOLIO MANAGERS. Dale C. Christensen is a co-portfolio manager and president
of each of the Funds. Mr. Christensen is a managing director of EMW and has been
associated with EMW since 1989, before which time he was a senior vice president
at Citibank, N.A. He has been with each Fund since January 1992. M. Anthony E.
van Daalen is a co-portfolio manager of the Fixed Income and Intermediate
Government Funds. Mr. van Daalen has been a vice president and co-portfolio
manager at Warburg since 1992, prior to which time he was an assistant vice
president at Citibank, N.A. Laxmi C. Bhandari, also a vice president of Warburg,
is a co-portfolio manager of the Global Fixed Income Fund. Mr. Bhandari has been
a co-portfolio manager of the Global Fixed Income Fund since joining Warburg in
1993, before which time he was a vice president at the Paribas Corporation.
Sharon B. Parente is a co-portfolio manager of the New York Municipal Fund. Ms.
Parente is a senior vice president of Warburg and has been a co-portfolio
manager of the New York Municipal Fund since joining Warburg in 1992, before
which time she was a vice president at Citibank, N.A.

CO-ADMINISTRATORS. Each Fund employs Counsellors Funds Service, Inc.
('Counsellors Service'), a wholly owned subsidiary of Warburg, as a co-
administrator. As co-administrator, Counsellors Service provides shareholder
liaison services to the Funds, including responding to shareholder inquiries and
providing information on shareholder investments. Counsellors Service also
performs a variety of other services, including furnishing certain executive and
administrative services, acting as liaison between each Fund and its various
service providers, furnishing corporate secretarial services, which include
preparing materials for meetings of the governing Board, preparing proxy
statements and annual, semiannual and quarterly reports, assisting in other
regulatory filings as necessary and monitoring and developing compliance
procedures for the Funds. As compensation, each Fund pays Counsellors Service a
fee calculated at an annual rate of .10% of the Fund's average daily net assets.

Each Fund employs PFPC, an indirect, wholly owned subsidiary of PNC Bank
Corp., as a co-administrator. As a co-administrator, PFPC calculates the Fund's
net asset value, provides all accounting services for each Fund and assists in
related aspects of the Fund's operations. As compensation each Fund pays PFPC a
fee calculated at an annual rate of .10% of its average daily net assets,
subject to a minimum annual fee and exclusive of out-of-pocket expenses. PFPC
has its principal offices at 400 Bellevue Parkway, Wilmington, Delaware 19809.

CUSTODIANS. PNC Bank, National Association ('PNC') serves as custodian of the
assets of each of the Funds. Fiduciary Trust Company International ('Fiduciary')
also serves as custodian of

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the Global Fixed Income Fund's assets. Like PFPC, PNC is a subsidiary of PNC
Bank Corp. and its principal business address is Broad and Chestnut Streets,
Philadelphia, Pennsylvania 19101. Fiduciary's principal business address is Two
World Trade Center, New York, New York 10048.

TRANSFER AGENT. State Street Bank and Trust Company ('State Street') acts as
shareholder servicing agent, transfer agent and dividend disbursing agent for
the Funds. It has delegated to Boston Financial Data Services, Inc. ('BFDS'), a
50%-owned subsidiary, responsibility for most shareholder servicing functions.
State Street's principal business address is 225 Franklin Street, Boston,
Massachusetts 02110. BFDS's principal business address is 2 Heritage Drive,
North Quincy, Massachusetts 02171.

DISTRIBUTOR. Counsellors Securities serves without compensation as distributor
of the shares of the Funds. Counsellors Securities is a wholly owned subsidiary
of Warburg and is located at 466 Lexington Avenue, New York, New York
10017-3147.

Warburg or its affiliates may, at their own expense, provide promotional
incentives to parties who support the sale of shares of the Funds, consisting of
securities dealers who have sold Fund shares or others, including banks and
other financial institutions, under special arrangements. In some instances,
these incentives may be offered only to certain institutions whose
representatives provide services in connection with the sale or expected sale of
significant amounts of Fund shares.
DIRECTORS AND OFFICERS. The officers of each Fund manage its day-to-day
operations and are directly responsible to the Board. The Boards set broad
policies for each Fund and choose its officers. A list of the Directors/Trustees
and officers of each Fund and a brief statement of their present positions and
principal occupations during the past five years is set forth in the Statement
of Additional Information of each Fund.

HOW TO OPEN AN ACCOUNT

In order to invest in a Fund, an investor must first complete and sign an
account application. To obtain an application, an investor may telephone Warburg
Pincus Funds at (800) 927-2874. An investor may also obtain an account
application by writing to:

Warburg Pincus Funds
P.O. Box 9030
Boston, Massachusetts 02205-9030

Completed and signed account applications should be mailed to Warburg
Pincus Funds at the above address.

RETIREMENT PLANS AND UGMA ACCOUNTS. For information about (i) investing in the
Funds through a tax-deferred retirement plan, such as an Individual Retirement
Account ('IRA') or a Simplified Employee Pension IRA ('SEP-IRA'), or (ii) about
opening a Uniform Gifts to Minors Act or Uniform Transfers to Minors Act
('UGMA') account, an investor should telephone Warburg Pincus Funds at (800)
888-6878 or write to Warburg Pincus Funds at the address set forth above.
Investors should consult their own tax advisers about the establishment of
retirement plans and UGMA accounts.

CHANGES TO ACCOUNT. For information on how to make changes to an account, an
investor should telephone Warburg Pincus Funds at (800) 888-6878.

HOW TO PURCHASE SHARES

Common Shares of each Fund may be purchased either by mail or, with special
advance instructions, by wire.

BY MAIL. If the investor desires to purchase Common Shares by mail, a check or
money order made payable to the Fund or Warburg Pincus Funds (in U.S. currency)
should be sent

along with a completed account application to Warburg Pincus Funds through its
distributor, Counsellors Securities Inc., at the address set forth above. Checks
payable to the investor and endorsed to the order of the Fund or Warburg Pincus
Funds will not be accepted as payment and will be returned to the sender. If
payment is received in proper form by the close of regular trading on the New
York Stock Exchange (the 'NYSE') (currently 4:00 p.m., Eastern time) on a day
that the Fund calculates its net asset value (a 'business day'), the purchase
will be made at the Fund's net asset value calculated at the end of that day. If
payment is received after the close of regular trading on the NYSE, the purchase
will be effected at the Fund's net asset value determined for the next business
day after payment has been received. Checks or money orders that are not in
proper form or that are not accompanied or preceded by a complete application
will be returned to the sender. Shares purchased by check or money order are
entitled to receive dividends and distributions beginning on the day after
payment has been received. Checks or money orders in payment for more than one
Warburg Pincus Fund should be made payable to Warburg Pincus Funds and should be
accompanied by a breakdown of amounts to be invested in each fund. If a check
used for purchase does not clear, the Fund will cancel the purchase and the
investor may be liable for losses or fees incurred. For a description of the
manner of calculating the Fund's net asset value, see 'Net Asset Value' below.

BY WIRE. Investors may also purchase Common Shares in a Fund by wiring funds
from their banks. Telephone orders will not be accepted until a completed
account application in proper form has been received and an account number has
been established. Investors should place an order with the Fund prior to wiring
funds by telephoning (800) 888-6878. Federal funds may be wired to Counsellors
Securities Inc. using the following wire address:

State Street Bank and Trust Co.
225 Franklin St.
Boston, MA 02101
ABA# 0110 000 28
Attn: Mutual Funds/Custody Dept.
[Insert Warburg Pincus Fund name(s) here]
DDA# 9904-649-2
[Shareowner name]
[Shareowner account number]

If a telephone order is received by the close of regular trading on the
NYSE and payment by wire is received on the same day in proper form in
accordance with instructions set forth above, the shares will be priced
according to the net asset value of the Fund on that day and are entitled to
dividends and distributions beginning on that day. If payment by wire is
received in proper form by the close of the NYSE without a prior telephone
order, the purchase will be priced according to the net asset value of the Fund
on that day and is entitled to dividends and distributions beginning on that
day. However, if a wire in proper form that is not preceded by a telephone order
is received after the close of regular trading on the NYSE, the payment will be
held uninvested until the order is effected at the close of business on the next
business day. Payment for orders that are not accepted will be returned to the
prospective investor after prompt inquiry. If a telephone order is placed and
payment by wire is not received on the same day, the Fund will cancel the
purchase and the investor may be liable for losses or fees incurred.

The minimum initial investment in each Fund is $2,500 and the minimum
subsequent investment is $100, except that subsequent minimum investments can be
as low as $50 under the Automatic Monthly Investment Plan described in the next
section. For retirement plans and UGMA accounts, the minimum initial and
subsequent investment is $500. The Fund reserves the right to vary further the
initial and subsequent investment minimum requirements at any time.

In addition, the Fund may, in its sole discretion, waive the initial and
subsequent investment minimum requirements with respect to investors who are
employees of EMW or its affiliates or persons with whom Warburg has entered into
an investment advisory agreement. Existing investors will be given 15 days'
notice by mail of any increase in investment minimum requirements.

After an investor has made his initial investment, additional shares may be
purchased at any time by mail or by wire in the manner outlined above. Wire
payments for initial and subsequent investments should be preceded by an order
placed with the Fund and should clearly indicate the investor's account number
and the name of the Fund in which shares are being purchased. In the interest of
economy and convenience, physical certificates representing shares in the Funds
are not normally issued.

PURCHASES THROUGH INTERMEDIARIES. The Funds understand that some broker-dealers
(other than Counsellors Securities), financial institutions, securities dealers
and other industry professionals, including certain of the programs discussed
below, may impose certain conditions on their clients or customers that invest
in the Funds, which are in addition to or different than those described in this
Prospectus, and may charge their clients or customers direct fees. Certain
features of the Funds, such as the minimum initial and subsequent investments,
redemption fees and certain trading restrictions, may be modified or waived in
these programs, and administrative charges may be imposed for the services
rendered. Therefore, a client or customer should contact the organization acting
on his behalf concerning the fees (if any) charged in connection with a purchase
or redemption of Fund shares and should read this Prospectus in light of the
terms governing his accounts with the organization. These organizations will be
responsible for promptly transmitting client or customer purchase and redemption
orders to the Fund in accordance with their agreements with clients or
customers.

Common Shares of each Fund are available through the Charles Schwab &
Company, Inc. Mutual Fund OneSourceTM Program; Fidelity Brokerage Services, Inc.
FundsNetworkTM Program; Jack White & Company, Inc.; and Waterhouse Securities
Inc. Generally, these programs do not require customers to pay a transaction fee
in connection with purchases. These and other organizations that have entered
into agreements with a Fund or its agent may enter confirmed purchase orders on
behalf of clients and customers by phone, with payment to follow no later than
the Fund's pricing on the following business day. If payment is not received by
such time, the organization could be held liable for resulting fees or losses.

AUTOMATIC MONTHLY INVESTING. Automatic monthly investing allows shareholders to
authorize a Fund to debit their bank account monthly ($50 minimum) for the
purchase of Fund shares on or about either the tenth or twentieth business day
of each month. To establish the automatic monthly investing option, obtain a
separate application or complete the 'Automatic Investment Program' section of
the account applications and include a voided, unsigned check from the bank
account to be debited. Only an account maintained at a domestic financial
institution which is an automatic clearing house member may be used.
Shareholders using this service must satisfy the initial investment minimum for
the Fund prior to or concurrent with the start of any Automatic Investment
Program. Please refer to an account application for further information, or
contact Warburg Pincus Funds at (800) 888-6878 for information or to modify or
terminate the program. Investors should allow a period of up to 30 days in order
to implement an automatic investment program. The failure to provide complete
information could result in further delays.

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HOW TO REDEEM AND EXCHANGE
SHARES

REDEMPTION OF SHARES. An investor in a Fund may redeem (sell) his shares on any
day that the Fund's net asset value is calculated (see 'Net Asset Value' below).

Common Shares of the Funds may either be redeemed by mail or by telephone.
Investors should realize that in using the telephone redemption and exchange
option, you may be giving up a measure of security that you may have if you were
to redeem or exchange your shares in writing. If an investor desires to redeem
his shares by mail, a written request for redemption should be sent to Warburg
Pincus Funds at the address indicated above under 'How to Open an Account.' An
investor should be sure that the redemption request identifies the Fund, the
number of shares to be redeemed and the investor's account number. In order to
change the bank account designated to receive the redemption proceeds, the
investor must send a written request (with signature guarantee of all investors
listed on the account when such a change is made in conjunction with a
redemption request) to Warburg Pincus Funds. Each mail redemption request must
be signed by the registered owner(s) (or his legal representative(s)) exactly as
the shares are registered. If an investor has applied for the telephone
redemption feature on his account application, he may redeem his shares by
calling Warburg Pincus Funds at (800) 888-6878 between 9:00 a.m. and 4:00 p.m.
(Eastern time) on any business day. An investor making a telephone withdrawal
should state (i) the name of the Fund, (ii) the account number of the Fund,
(iii) the name of the investor(s) appearing on the Fund's records, (iv) the
amount to be withdrawn and (v) the name of the person requesting the redemption.

After receipt of the redemption request by mail or by telephone, the
redemption proceeds will, at the option of the investor, be paid by check and
mailed to the investor of record or be wired to the investor's bank as indicated
in the account application previously filled out by the investor. No Fund
currently imposes a service charge for effecting wire transfers but each Fund
reserves the right to do so in the future. During periods of significant
economic or market change, telephone redemptions may be difficult to implement.
If an investor is unable to contact Warburg Pincus Funds by telephone, an
investor may deliver the redemption request to Warburg Pincus Funds by mail at
the address shown above under 'How to Open an Account.' Although each Fund will
redeem shares purchased by check before the check clears, payments of the
redemption proceeds will be delayed until such check has cleared, which may take
up to 15 days from the purchase date. Investors should consider purchasing
shares using a certified or bank check or money order if they anticipate an
immediate need for redemption proceeds.

If a redemption order is received prior to the close of regular trading on
the NYSE, the redemption order will be effected at the net asset value per share
as determined on that day. If a redemption order is received after the close of
regular trading on the NYSE, the redemption order will be effected at the net
asset value as next determined. Except as noted above, redemption proceeds will
normally be mailed or wired to an investor on the next business day following
the date a redemption order is effected. If, however, in the judgment of
Warburg, immediate payment would adversely affect a Fund, each Fund reserves the
right to pay the redemption proceeds within seven days after the redemption
order is effected. Furthermore, each Fund may suspend the right of redemption or
postpone the date of payment upon redemption (as well as suspend or postpone the
recordation of an exchange of shares) for such periods as are permitted under
the 1940 Act.

The proceeds paid upon redemption may be more or less than the amount
invested depending

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upon a share's net asset value at the time of redemption. If an investor redeems
all the shares in his account, all dividends and distributions declared up to
and including the date of redemption are paid along with the proceeds of the
redemption.

If, due to redemptions, the value of an investor's account drops to less
than $2,000 ($250 in the case of a retirement plan or UGMA account), each Fund
reserves the right to redeem the shares in that account at net asset value.
Prior to any redemption, the Fund will notify an investor in writing that this
account has a value of less than the minimum. The investor will then have 60
days to make an additional investment before a redemption will be processed by
the Fund.

TELEPHONE TRANSACTIONS. In order to request redemptions by telephone, investors
must have completed and returned to Warburg Pincus Funds an account application
containing a telephone election. Unless contrary instructions are elected an
investor will be entitled to make exchanges by telephone. Neither a Fund nor its
agents will be liable for following instructions communicated by telephone that
it reasonably believes to be genuine. Reasonable procedures will be employed on
behalf of each Fund to confirm that instructions communicated by telephone are
genuine. Such procedures include providing written confirmation of telephone
transactions, tape recording telephone instructions and requiring specific
personal information prior to acting upon telephone instructions.

AUTOMATIC CASH WITHDRAWAL PLAN. Each Fund offers investors an automatic cash
withdrawal plan under which investors may elect to receive periodic cash
payments of at least $250 monthly or quarterly. To establish this service,
complete the 'Automatic Withdrawal Plan' section of the account application and
attach a voided check from the bank account to be credited. For further
information regarding the automatic cash withdrawal plan or to modify or
terminate the plan, investors should contact Warburg Pincus Funds at (800)
888-6878.

EXCHANGE OF SHARES. An investor may exchange Common Shares of a Fund for Common
Shares of another Fund or for Common Shares of another Warburg Pincus Fund at
their respective net asset values. Exchanges may be effected by mail or by
telephone in the manner described under 'Redemption of Shares' above. If an
exchange request is received by Warburg Pincus Funds prior to the close of
regular trading on the NYSE, the exchange will be made at each Fund's net asset
value determined at the end of that business day. Exchanges may be effected
without a sales charge but must satisfy the minimum dollar amount necessary for
new purchases. Due to the costs involved in effecting exchanges, each Fund
reserves the right to refuse to honor more than three exchange requests by a
shareholder in any 30-day period. The exchange privilege may be modified or
terminated at any time upon 60 days' notice to shareholders. Currently,
exchanges may be made among the Funds and with the following other funds:

WARBURG PINCUS CASH RESERVE FUND -- a money market fund investing in
short-term, high quality money market instruments;

WARBURG PINCUS NEW YORK TAX EXEMPT FUND -- a money market fund investing
in short-term, high quality municipal obligations designed for New York
investors seeking income exempt from federal, New York State and New York
City income tax;

WARBURG PINCUS TAX FREE FUND -- a bond fund seeking maximum current income
exempt from federal income taxes, consistent with preservation of capital;

WARBURG PINCUS BALANCED FUND -- a fund seeking maximum total return
through a combination of long-term growth of capital and current income
consistent with

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preservation of capital through diversified investments in equity and debt
securities;

WARBURG PINCUS GROWTH & INCOME FUND -- an equity fund seeking long-term
growth of capital and income and a reasonable current return;

WARBURG PINCUS CAPITAL APPRECIATION FUND -- an equity fund seeking
long-term capital appreciation by investing principally in equity
securities of medium-sized domestic companies;

WARBURG PINCUS SMALL COMPANY VALUE FUND -- an equity fund seeking
long-term capital appreciation by investing primarily in equity securities
of small companies;

WARBURG PINCUS EMERGING GROWTH FUND -- an equity fund seeking maximum
capital appreciation by investing in emerging growth companies;
WARBURG PINCUS POST-VENTURE CAPITAL FUND -- a fund seeking long-term
growth of capital by investing primarily in equity securities of issuers
in their post-venture capital stage of development and pursuing an
aggressive investment strategy;

WARBURG PINCUS INTERNATIONAL EQUITY FUND -- an equity fund seeking
long-term capital appreciation by investing primarily in equity securities
of non-United States issuers;

WARBURG PINCUS EMERGING MARKETS FUND -- an equity fund seeking growth of
capital by investing primarily in securities of non-United States issuers
consisting of companies in emerging securities markets;

WARBURG PINCUS JAPAN GROWTH FUND -- an equity fund seeking long-term
growth of capital by investing primarily in equity securities of Japanese
issuers; and

WARBURG PINCUS JAPAN OTC FUND -- an equity fund seeking long-term capital
appreciation by investing in a portfolio of securities traded in the
Japanese over-the-counter market.

The exchange privilege is available to shareholders residing in any state
in which the Common Shares being acquired may legally be sold. When an investor
effects an exchange of shares, the exchange is treated for federal income tax
purposes as a redemption. Therefore, the investor may realize a taxable gain or
loss in connection with the exchange. Investors wishing to exchange Common
Shares of a Fund for Common Shares in another Warburg Pincus Fund should review
the prospectus of the other fund prior to making an exchange. For further
information regarding the exchange privilege or to obtain a current prospectus
for another Warburg Pincus Fund, an investor should contact Warburg Pincus Funds
at (800) 927-2874.

DIVIDENDS, DISTRIBUTIONS AND TAXES

DIVIDENDS AND DISTRIBUTIONS. Each Fund calculates its dividends from net
investment income. Net investment income includes interest accrued and dividends
earned on the Fund's portfolio securities for the applicable period (which
includes amortization of market discount) less amortization of market premium
and applicable expenses. The Fixed Income Fund, the Intermediate Government Fund
and the New York Municipal Fund each declares its dividends from its net
investment income daily and pays those dividends monthly in the calendar year in
which they are declared. The Global Fixed Income Fund declares dividends from
its net investment income quarterly. Net investment income earned on weekends
and when the NYSE is not opened will be computed as of the next business day.
Distributions of net realized long-term and short-term capital gains are
declared annually and will be paid in the calendar year in which they are
declared, generally in November or December. Unless an investor instructs a Fund
to pay dividends or distributions in cash, dividends and

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distributions will automatically be reinvested in additional Common Shares of
the relevant Fund at net asset value. The election to receive dividends in cash
may be made on the account application or, subsequently, by writing to Warburg
Pincus Funds at the address set forth under 'How to Open an Account' or by
calling Warburg Pincus Funds at (800) 888-6878.

A Fund may be required to withhold for U.S. federal income taxes 31% of all
distributions payable to shareholders who fail to provide the Fund with their
correct taxpayer identification number or to make required certifications, or
who have been notified by the U.S. Internal Revenue Service that they are
subject to backup withholding.

Special Distribution Matters Relating to the New York Municipal Fund. If,
for any full fiscal year, the New York Municipal Fund's total distributions
exceed net investment income and net realized capital gains, the excess
distributions may be treated as a taxable dividend or a tax-free return of
capital (up to the amount of the shareholder's tax basis in his shares). The
amount treated as a tax-free return of capital will reduce a shareholder's
adjusted basis in his shares. Pursuant to the requirements of the 1940 Act and
other applicable laws, a notice will accompany any distribution paid from
sources other than net investment income. In the event the Fund distributes
amounts in excess of its net investment income and net realized capital gains,
such distributions may have the effect of decreasing the Fund's total assets,
which may increase the Fund's expense ratio.

TAXES. Each Fund intends to continue to qualify each year as a 'regulated
investment company' within the meaning of the Code. Each Fund, if it qualifies
as a regulated investment company, will be subject to a 4% non-deductible excise
tax measured with respect to certain undistributed amounts of ordinary income
and capital gain. Each Fund expects to pay such additional dividends and to make
such additional distributions as are necessary to avoid the application of this
tax.

The investments by the Funds in zero coupon securities may create special
tax consequences. Zero coupon securities do not make interest payments, although
a portion of the difference between a zero coupon security's maturity value and
its purchase price is imputed as income to the Funds each year even though the
Funds receive no cash distribution until maturity. Under the U.S. federal tax
laws applicable to mutual funds, the Funds will not be subject to tax on this
income if they pay dividends to their shareholders substantially equal to all
the income received from, or imputed with respect to, their investments during
the year, including their zero coupon securities. These dividends ordinarily
will constitute taxable income to the shareholders of the Funds.

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received by the shareholder with respect to such share. The portion of such loss
not disallowed as described in the preceding sentence shall be treated for
federal income tax purposes as a long-term capital loss to the extent of any
distributions or deemed distributions of long-term capital gains received by the
shareholder with respect to such share. An investor in the New York Municipal
Fund who redeems his shares prior to the declaration of a dividend may lose
tax-exempt status on accrued income attributable to tax-exempt Municipal
Obligations. Investors may be proportionately liable for taxes on income and
gains of the Funds, but investors not subject to tax on their income will not be
required to pay tax on amounts distributed to them. The Fund's investment
activities, including short sales of securities, will not result in unrelated
business taxable income to a tax-exempt investor. A Fund's dividends, to the
extent not derived from dividends attributable to certain types of stock issued
by U.S. domestic corporations, generally will not qualify for the dividends
received deduction for corporations.

Dividends and interest received by a Fund with respect to its foreign
investments may be subject to withholding and other taxes imposed by foreign
countries. However, tax conventions between certain countries and the United
States may reduce or eliminate such taxes. If a Fund qualifies as a regulated
investment company, if certain asset and distribution requirements are satisfied
and if more than 50% of the Fund's total assets at the close of its fiscal year
consists of stock or securities of foreign corporations, the Fund may elect for
U.S. income tax purposes to treat foreign income taxes paid by it as paid by its
shareholders. A Fund may qualify for and make this election in some, but not
necessarily all, of its taxable years. As a result, shareholders of the Fund
would be required to include their pro rata portions of such foreign taxes in
computing their taxable incomes and then treat an amount equal to those foreign
taxes as a U.S. federal income tax deduction or as foreign tax credits against
their U.S. federal income taxes. Shortly after any year for which it makes such
an election, each Fund will report to its shareholders the amount per share of
such foreign tax that must be included in each shareholder's gross income and
the amount which will be available for the deduction or credit. No deduction for
foreign taxes may be claimed by a shareholder who does not itemize deductions.
Certain limitations will be imposed on the extent to which the credit (but not
the deduction) for foreign taxes may be claimed.

Special Tax Matters Relating to the Intermediate Government Fund. Investors
in the Intermediate Government Fund do not have to pay state and local income
taxes with respect to interest income on most types of Government Securities if
the investors are the tax owners of these Government Securities. Furthermore,
some states, if certain requirements are satisfied, permit investors to treat
the portion of their regulated investment company dividends that is attributable
to interest income on these Government Securities as tax-exempt income for state
or local income tax purposes. Other states treat all of these dividends as
subject to state and local income taxation. Investors in the Fund should consult
their own tax advisers to assess the consequences of investing in the Fund under
state and local laws generally and to determine whether dividends paid by the
Fund that represent interest derived from Government Securities are exempt from
any applicable state or local taxes.

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federal individual and corporate alternative minimum taxes to the extent they
are derived from certain types of private activity bonds issued after August 7,
1986 and (ii) all exempt-interest dividends will be a component of the 'current
earnings' adjustment item for purposes of the federal corporate alternative
minimum tax. Furthermore, exempt-interest dividends paid by the Fund will
constitute a component of the 'current earnings' adjustment item for purposes of
the .12% corporate environmental tax. Moreover, dividends paid by the Fund will
be subject to a branch profits tax of up to 30% when received by certain foreign
corporate investors. Dividends derived from interest on qualifying New York
Municipal Obligations will be exempt from New York State and New York City
personal income (but not corporate franchise) taxes.

The Fixed Income Fund does not expect to meet the tax requirements that
would enable it to pay exempt-interest dividends with respect to income derived
from its holdings of Municipal Obligations.

GENERAL. Statements as to the tax status of each investor's dividends and
distributions are mailed annually. In the case of the New York Municipal Fund,
these statements set forth the dollar amount of income excluded or exempt from
federal income or New York State and New York City personal income taxes and the
dollar amount, if any, subject to federal taxation. These statements also
designate the amount of exempt-interest dividends that is a specific preference
item for purposes of the federal individual and corporate alternative minimum
taxes. Each investor will also receive, if applicable, various written notices
after the close of a Fund's prior taxable year with respect to certain dividends
and distributions which were received from the Fund during the Fund's prior
taxable year. Investors should consult their own tax advisers with specific
reference to their own tax situations, including their state and local tax
liabilities.

NET ASSET VALUE

Each Fund's net asset value per share is calculated as of the close of
regular trading on the NYSE (currently 4:00 p.m., Eastern time) on each business
day, Monday through Friday, except on days when the NYSE is closed. The NYSE is
currently scheduled to be closed on New Year's Day, Washington's Birthday, Good
Friday, Memorial Day (observed), Independence Day, Labor Day, Thanksgiving Day
and Christmas Day, and on the preceding Friday or subsequent Monday when one of
these holidays falls on a Saturday or Sunday, respectively. The net asset value
per share of each Fund generally changes each day.

The net asset value per Common Share of each Fund is computed by adding the
Common Shares' pro rata share of the value of the Fund's assets, deducting the
Common Shares' pro rata share of the Fund's liabilities and the liabilities
specifically allocated to the Common Shares and then dividing the result by the
total number of outstanding Common Shares.

Securities listed on a U.S. securities exchange (including securities
traded through the NASDAQ National Market System) or foreign securities exchange
or traded in an over-the-counter market will be valued at the most recent sale
price when the valuation is made. Options and futures contracts will be valued
similarly. Debt obligations that mature in 60 days or less from the valuation
date are valued on the basis of amortized cost, unless the Board determines that
using this valuation method would not reflect the investments' value.
Securities, options and futures contracts for which market quotations are not
readily available and other assets will be valued at their fair value as
determined in good faith pursuant to consistently applied procedures established
by the Board. Further information regarding valuation policies is contained in
the Statement of Additional Information.

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PERFORMANCE

The Funds quote the performance of Common Shares separately from Advisor
Shares. The net asset value of Common Shares is listed in The Wall Street
Journal each business day under the heading 'Warburg Pincus Funds.' From time to
time, each Fund may advertise yield and average annual total return of its
Common Shares over various periods of time. The yield refers to net investment
income generated by the Common Shares over a specified thirty-day period, which
is then annualized. That is, the amount of net investment income generated by
the Common Shares during that thirty-day period is assumed to be generated over
a 12-month period and is shown as a percentage of the investment. In addition,
advertisements concerning the Intermediate Government Fund and the New York
Municipal Fund may describe a tax equivalent yield. The tax equivalent yield
demonstrates the yield on a taxable investment necessary to produce an after-tax
yield equal to the Common Shares' tax-free yield. It is calculated by increasing
the yield shown for the Common Shares to the extent necessary to reflect the
payment of specified tax rates. Thus, the tax equivalent yield will always
exceed a Fund's Common Shares' yield. Total return figures show the average
percentage change in value of an investment in the Common Shares from the
beginning of the measuring period to the end of the measuring period. The
figures reflect changes in the price of the Common Shares assuming that any
income dividends and/or capital gain distributions made by the Fund during the
period were reinvested in Common Shares of the Fund. Total return will be shown
for recent one-, five- and ten-year periods, and may be shown for other periods
as well (such as from commencement of the Fund's operations or on a
year-by-year, quarterly or current year-to-date basis).

When considering average total return figures for periods longer than one
year, it is important to note that a Fund's annual total return for one year in
the period might have been greater or less than the average for the entire
period. When considering total return figures for periods shorter than one year,
investors should bear in mind that each Fund seeks long-term appreciation and
that such return may not be representative of any Fund's return over a longer
market cycle. Each Fund may also advertise aggregate total return figures of its
Common Shares for various periods, representing the cumulative change in value
of an investment in the Common Shares for the specific period (again reflecting
changes in the Fund's share prices and assuming reinvestment of dividends and
distributions). Aggregate and average total returns may be shown by means of
schedules, charts or graphs and may indicate various components of total return
(i.e., change in value of initial investment, income dividends and capital gain
distributions).

Investors should note that yield, tax-equivalent yield and total return
figures are based on historical earnings and are not intended to indicate future
performance. Each Fund's Statement of Additional Information describes the
method used to determine the yield and total return. Current performance figures
may be obtained by calling Warburg Pincus Funds at (800) 927-2874.

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dollar bonds of ten countries with active bond markets), the Salomon Brothers
World Government Bond Index (a hedged, market-capitalization weighted index
designed to track major government debt markets) and the Lipper General World
Income Average (an average of funds that invest primarily in non-U.S. dollar and
U.S. dollar debt instruments); in the case of the Intermediate Government Fund,
with the Lehman Intermediate Government Bond Index (an unmanaged index of
government bonds calculated by Lehman Brothers); and in the case of the New York
Municipal Fund, with the Bond Buyer Index (the 'BBI') (an unmanaged index of 20
General Obligation issues of 20-year maturity from various municipalities across
the nation published by the American Banker) and the Lipper New York
Intermediate Municipal Debt Funds Average (an unmanaged index of 61 Intermediate
Municipal Debt Funds calculated by Lipper Analytical Services); or (iii) other
appropriate indexes of investment securities or with data developed by Warburg
derived from such indexes. The Fund may also include evaluations of each Fund
published by nationally recognized ranking services and by financial
publications that are nationally recognized, such as The Wall Street Journal,
Investor's Daily, Money, Inc., Institutional Investor, Barron's, Fortune,
Forbes, Business Week, Mutual Fund Magazine, Morningstar, Inc. and Financial
Times.

In reports or other communications to investors or in advertising, each
Fund may also describe the general biography or work experience of the portfolio
managers of the Fund and may include quotations attributable to the portfolio
managers describing approaches taken in managing the Fund's investments,
research methodology underlying stock selection or the Fund's investment
objective. In addition, a Fund and its portfolio managers may render periodic
updates of Fund activity, which may include a discussion of significant
portfolio holdings and analysis of holdings by industry, country, credit quality
and other characteristics. Each Fund may also discuss measures of risk, the
continuum of risk and return relating to different investments, and the
potential impact of foreign securities of a portfolio otherwise composed of
domestic securities. Morningstar, Inc. rates funds in broad categories based on
risk/reward analyses over various periods of time. In addition, each Fund may
from time to time compare its expense ratio to that of investment companies with
similar objectives and policies, based on data generated by Lipper Analytical
Services, Inc. or similar investment services that monitor mutual funds.

GENERAL INFORMATION

ORGANIZATION. The Fixed Income Fund and the New York Municipal Fund were
organized under the laws of The Commonwealth of Massachusetts as Massachusetts
business trusts in 1987 and 1986, respectively. In 1992, these Funds changed
their names from 'Counsellors Fixed Income Fund' and 'Counsellors New York
Municipal Bond Fund' to 'Warburg, Pincus Fixed Income Fund' and 'Warburg, Pincus
New York Municipal Bond Fund,' respectively. On February 28, 1995, the New York
Municipal Fund changed its name to 'Warburg, Pincus New York Intermediate
Municipal Fund.' The Global Fixed Income Fund and the Intermediate Government
Fund were incorporated under the laws of the State of Maryland in 1990 and 1988,
respectively, under the names 'Counsellors Global Fixed Income Fund, Inc.' and
'Counsellors Intermediate Maturity Government Fund, Inc.,' respectively. On
October 27, 1995 and February 16, 1996, the Funds amended their respective
charters to change their names to 'Warburg, Pincus Global Fixed Income Fund,
Inc.' and 'Warburg, Pincus Intermediate Maturity Government Fund, Inc.'

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value per share, of which one billion shares are classified as Advisor Shares.
The charters of the Global Fixed Income Fund and the Intermediate Government
Fund authorize each Fund's Board to issue three billion full and fractional
shares of capital stock, $.001 par value per share, of which one billion shares
are designated Advisor Shares. Under each Fund's charter documents, the Board
has the power to classify or reclassify any unissued shares of the Fund into one
or more additional classes by setting or changing in any one or more respects
their relative rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption. The Board of a Fund may
similarly classify or reclassify any class of its shares into one or more series
and, without shareholder approval, may increase the number of authorized shares
of the Fund.

MULTI-CLASS STRUCTURE. Each Fund offers a separate class of shares, the Advisor
Shares, pursuant to a separate prospectus. Individual investors may only
purchase Advisor Shares through institutional shareholders of record,
broker-dealers, financial institutions, depository institutions, retirement
plans and financial intermediaries. Shares of each class represent equal pro
rata interests in the respective Fund and accrue dividends and calculate net
asset value and performance quotations in the same manner. Because of the higher
fees paid by the Advisor Shares, the total return on such shares can be expected
to be lower than the total return on Common Shares. Investors may obtain
information concerning the Advisor Shares from their investment professional or
by calling Counsellors Securities at (800) 888-6878.

VOTING RIGHTS. Investors in a Fund are entitled to one vote for each full share
held and fractional votes for fractional shares held. Shareholders of a Fund
will vote in the aggregate except where otherwise required by law and except
that each class will vote separately on certain matters pertaining to its
distribution and shareholder servicing arrangements. There will normally be no
meetings of investors for the purpose of electing members of the Board unless
and until such time as less than a majority of the members holding office have
been elected by investors. Any Director of the Global Fixed Income Fund or the
Intermediate Government Fund may be removed by the shareholders at any time by a
vote of a majority of the votes entitled to be cast for the election of
Directors. Investors of record of no less than two-thirds of the outstanding
shares of the Fixed Income Fund or the New York Municipal Fund may remove a
Trustee through a declaration in writing or by vote cast in person or by proxy
at a meeting called for that purpose. A meeting will be called for the purpose
of voting on the removal of a governing Board member at the written request of
holders of 10% of the outstanding shares of a Fund. John L. Furth, a Director
and Trustee of the Funds, and Lionel I. Pincus, Chairman of the Board and Chief
Executive Officer of EMW, may be deemed to be controlling persons of each Fund
as of December 28, 1995 because they may be deemed to possess or share
investment power over shares owned by clients of Warburg and certain other
entities.

The prospectuses of the Funds are combined in this Prospectus. Each Fund
offers only its own shares, yet it is possible that a Fund might become liable
for a misstatement, inaccuracy or

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omission in this Prospectus with regard to another Fund.

SHAREHOLDER SERVICING

Common Shares may be sold to or through institutions, including insurance
companies, financial institutions and broker-dealers, that will not be paid by a
Fund a distribution fee pursuant to Rule 12b-1 under the 1940 Act for services
to their clients or customers who are beneficial owners of Common Shares. These
institutions may be paid fees by a Fund, Warburg, Counsellors Securities or any
of their affiliates for transfer agency, administrative, accounting, shareholder
liaison and/or other services provided to their customers that invest in the
Fund's Common Shares. Organizations that provide recordkeeping or other services
to certain employee benefit plans and qualified and other retirement plans that
include a Fund as an investment alternative and registered representatives
(including retirement plan consultants) that facilitate the administration and
servicing of shareholder accounts may also be paid a fee. Fees paid vary
depending on the arrangements and the amount of Fund assets held by an
institution's clients or customers and/or the number of plan participants
investing in the Fund. Warburg, Counsellors Securities or any of their
affiliates may, from time to time, at their own expense, pay certain Fund
transfer agent fees and expenses related to clients and customers of these
institutions and organizations. In addition, these institutions and
organizations may use a portion of their compensation to compensate the Fund's
custodian or transfer agent for costs related to accounts of their clients or
customers.

------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, EACH FUND'S
STATEMENT OF ADDITIONAL INFORMATION OR THE FUNDS' OFFICIAL SALES LITERATURE IN
CONNECTION WITH THE OFFERING OF SHARES OF THE FUNDS, AND IF GIVEN OR MADE, SUCH
OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY ANY FUND. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF THE
COMMON SHARES OF THE FUNDS IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM, SUCH
OFFER MAY NOT LAWFULLY BE MADE.

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TABLE OF CONTENTS

THE FUNDS' EXPENSES ...................................................... 2
FINANCIAL HIGHLIGHTS ..................................................... 3
INVESTMENT OBJECTIVES AND
POLICIES .............................................................. 5
PORTFOLIO INVESTMENTS .................................................... 7
RISK FACTORS AND SPECIAL CONSIDERATIONS .............................. 10
PORTFOLIO TRANSACTIONS AND
TURNOVER RATE ........................................................ 13
CERTAIN INVESTMENT STRATEGIES ........................................... 13
INVESTMENT GUIDELINES ................................................... 21
MANAGEMENT OF THE FUNDS ................................................. 21
HOW TO OPEN AN ACCOUNT .................................................. 23
HOW TO PURCHASE SHARES .................................................. 23
HOW TO REDEEM AND EXCHANGE
SHARES ............................................................... 26
DIVIDENDS, DISTRIBUTIONS AND
TAXES ................................................................ 28
NET ASSET VALUE ......................................................... 31
PERFORMANCE ............................................................. 32
GENERAL INFORMATION ..................................................... 33
SHAREHOLDER SERVICING ................................................... 35

WPBDF-1-0396

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[LOGO]

[ ] WARBURG PINCUS
FIXED INCOME FUND

[ ] WARBURG PINCUS
GLOBAL FIXED INCOME FUND

[ ] WARBURG PINCUS INTERMEDIATE
MATURITY GOVERNMENT FUND

[ ] WARBURG PINCUS NEW YORK
INTERMEDIATE MUNICIPAL FUND

PROSPECTUS

FEBRUARY 28, 1996

STATEMENT OF DIFFERENCES

The dagger footnote symbol shall be expressed as............. 'D'
The trademark symbol shall be expressed as............. 'tm'

<PAGE>
Rule 497(c)
Securities Act File No. 33-12343
Investment Company Act File No. 811-5039

[Logo]

PROSPECTUS

MARCH 1, 1996

[ ] WARBURG PINCUS FIXED INCOME FUND
[ ] WARBURG PINCUS GLOBAL FIXED INCOME FUND
[ ] WARBURG PINCUS INTERMEDIATE MATURITY GOVERNMENT FUND
[ ] WARBURG PINCUS NEW YORK INTERMEDIATE MUNICIPAL FUND

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WARBURG PINCUS ADVISOR FUNDS
P.O. BOX 9030
BOSTON, MASSACHUSETTS 02205-9030
TELEPHONE NUMBER: (800) 888-6878

March 1, 1996
PROSPECTUS

Warburg Pincus Advisor Funds are a family of open-end mutual funds that are
offered to investors who wish to buy shares through an investment professional,
to financial institutions investing on behalf of their customers and to
retirement plans that elect to make one or more Advisor Funds an investment
option for participants in the plans. Four Advisor Funds are described in this
Prospectus:

WARBURG PINCUS FIXED INCOME FUND is a bond fund seeking current income and,
secondarily, capital appreciation by investing in a diversified portfolio of
fixed income securities.

WARBURG PINCUS INTERMEDIATE MATURITY GOVERNMENT FUND is an intermediate-term
bond fund investing in obligations issued or guaranteed by the U.S. government,
its agencies or instrumentalities.

The Funds currently offer two classes of shares, one of which, the Advisor
Shares, is offered pursuant to this Prospectus. The Advisor Shares of the Funds,
as well as Advisor Shares of certain other Warburg Pincus-advised funds, are
sold under the name 'Warburg Pincus Advisor Funds.' Individual investors may
purchase Advisor Shares only through institutional shareholders of record,
broker-dealers, financial institutions, depository institutions, retirement
plans and other financial intermediaries ('Institutions'). The Advisor Shares
impose a 12b-1 fee of up to .75% per annum, which is the economic equivalent of
a sales charge. The Funds' Common Shares are available for purchase by
individuals directly and are offered by a separate prospectus.

NO MINIMUM INVESTMENT
There is no minimum amount of initial or subsequent purchases of shares imposed
on Institutions. See 'How to Purchase Shares.'

This Prospectus briefly sets forth certain information about the Funds that
investors should know before investing. Investors are advised to read this
Prospectus and retain it for future reference. Additional information about each
Fund, contained in a Statement of Additional Information, has been filed with
the Securities and Exchange Commission (the 'SEC') and is available to investors
without charge by calling Warburg Pincus Advisor Funds at (800) 888-6878.
Information regarding the status of shareholder accounts may be obtained by
calling Warburg Pincus Advisor Funds at (800) 888-6878. The Statements of
Additional Information, as amended or supplemented from time to time, bear the
same date as this Prospectus and are incorporated by reference in their entirety
into this Prospectus.

SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF OR GUARANTEED OR ENDORSED
BY ANY BANK, AND SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
INVESTMENTS IN SHARES OF THE FUNDS INVOLVE INVESTMENT RISKS, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL.

- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------

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THE FUNDS' EXPENSES

Each of Warburg Pincus Fixed Income Fund (the 'Fixed Income Fund'), Warburg
Pincus Global Fixed Income Fund (the 'Global Fixed Income Fund'), Warburg Pincus
Intermediate Maturity Government Fund (the 'Intermediate Government Fund') and
Warburg Pincus New York Intermediate Municipal Fund (the 'New York Municipal
Fund') (collectively, the 'Funds') currently offers two separate classes of
shares: Common Shares and Advisor Shares. See 'General Information.' Because of
the higher fees paid by Advisor Shares, the total return on such shares can be
expected to be lower than the total return on Common Shares.

<TABLE>
<CAPTION>
GLOBAL INTERMEDIATE NEW YORK
FIXED INCOME FIXED INCOME GOVERNMENT MUNICIPAL
FUND FUND FUND FUND
------------ ------------ ------------ --------
<S> <C> <C> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases (as a
percentage of offering price)..................... 0 0 0 0
Annual Fund Operating Expenses (as a percentage of
average net assets)
Management Fees..................................... .35% .44% .05% .19%
12b-1 Fees.......................................... .75%* .75%* .75%* .75%*
Other Expenses...................................... .40% .51% .55% .41%
----- ------ ----- --------
Total Fund Operating Expenses (after fee
waivers)`D'....................................... 1.50% 1.70% 1.35% 1.35%
EXAMPLE
You would pay the following expenses
on a $1,000 investment, assuming (1) 5% annual return and
(2) redemption at the end of each time period:
1 year.............................................. $15 $17 $14 $14
3 years............................................. $47 $54 $43 $43
</TABLE>

- ------------

* Current 12b-1 fees are .25% per annum for the Fixed Income, Intermediate
Government and New York Municipal Funds and .50% per annum for the Global
Fixed Income Fund, in each case out of a maximum .75% authorized under the
Advisor Shares' Distribution Plans. At least a portion of these fees should be
considered by the investor to be the economic equivalent of a sales charge.

`D' Absent the anticipated waiver of fees by the Funds' investment adviser and
co-administrator, Management Fees for the Fixed Income, Global Fixed Income,
Intermediate Government and New York Municipal Funds would equal .50%,
1.00%, .50%, and .40%, respectively; Other Expenses would equal .43%, .58%,
.59% and .46%, respectively; and Total Fund Operating Expenses would equal
1.68%, 2.33%, 1.84% and 1.61%, respectively. Other Expenses are based on
actual expenses of the Common Shares of the Funds for the fiscal year ended
October 31, 1995, net of any fee waivers or expense reimbursements. The
investment adviser and co-administrator are under no obligation to continue
these waivers.
------------------------

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FINANCIAL HIGHLIGHTS

Advisor Shares of the Fund had not been issued as of October 31, 1995 and,
accordingly, no financial information is provided with respect to such shares.
Financial information with respect to Common Shares of the Funds are contained
in the Funds' annual report, dated October 31, 1995, copies of which appear in
the Funds' Statements of Additional Information or may be obtained without
charge by calling Warburg Pincus Advisor Funds at (800) 888-6878.

INVESTMENT OBJECTIVES AND POLICIES

FIXED INCOME FUND

GLOBAL FIXED INCOME FUND

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rights. For temporary defensive purposes or during times of international
political or economic uncertainty, all of the Fund's investments may be made
temporarily in the United States or denominated in U.S. dollars.

The Fund may invest in a wide variety of fixed income obligations issued
anywhere in the world, including the United States. The Fund may purchase debt
obligations issued or guaranteed by the United States or foreign governments,
their agencies, instrumentalities or political subdivisions, as well as
supranational entities organized or supported by several national governments,
such as the International Bank for Reconstruction and Development (the 'World
Bank') or the European Investment Bank. The Fund may also purchase fixed income
obligations of foreign corporations that are issued in a currency other than
U.S. dollars. Because of fluctuating currency values, the Fund may engage in
certain currency transactions, as described under 'Certain Investment
Strategies -- Options, Futures and Currency Transactions' below.

The Fund may hold up to 35% of its net assets in fixed income securities
rated below investment grade, or in unrated securities considered to be of
equivalent quality.

INTERMEDIATE GOVERNMENT FUND

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Assistance Agency of the Department of Defense (the 'Guaranty'), of the due and
punctual payment of 90% of payments of principal and interest due on the Loan
Note and a security interest in collateral, consisting of non-callable
securities issued or guaranteed by the United States government, or derivatives
thereof, such as trust receipts or other securities evidencing an interest in
such United States government securities, sufficient to pay the remaining 10% of
all payments of principal and interest due on the Loan Notes. Each Certificate
issued by a Trust represents the right to receive a portion of the payments due
on the Loan Note held by that Trust. The Certificates are not subject to
prepayment or acceleration. Each Guaranty is entitled to the full faith and
credit of the United States of America. A Certificateholder's right to receive
any payments with respect to the Guaranty will be subject to termination if such
holder breaches the terms of its Certificate.

NEW YORK MUNICIPAL FUND

PORTFOLIO INVESTMENTS

MONEY MARKET OBLIGATIONS. Each Fund is authorized to invest, under normal
conditions, up to 35% of its total assets in short-term money market obligations
having remaining maturities

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<PAGE>
of less than one year at the time of purchase. These short-term instruments
consist of Government Securities; bank obligations (including certificates of
deposit, time deposits and bankers' acceptances of domestic or foreign banks,
domestic savings and loans and similar institutions) that are high quality
investments or, if unrated, deemed by Warburg to be high quality investments;
commercial paper rated no lower than A-2 by S&P or Prime-2 by Moody's or the
equivalent from another major rating service or, if unrated, of an issuer having
an outstanding, unsecured debt issue then rated within the three highest rating
categories; in the case of the Fixed Income Fund and the Global Fixed Income
Fund, obligations of foreign governments, their agencies or instrumentalities;
and repurchase agreements with respect to portfolio securities. The short-term
money market obligations in which the New York Municipal Fund is authorized to
invest generally will be tax-exempt obligations; however, the Fund may invest in
taxable obligations when suitable tax-exempt obligations are unavailable or to
maintain liquidity for meeting anticipated redemptions and paying operating
expenses. Tax-exempt money market obligations in which the New York Municipal
Fund may invest consist of investment grade tax-exempt notes and tax-exempt
commercial paper rated no lower than A-2 by S&P or Prime-2 by Moody's or the
equivalent from another major rating service or, if not rated, of municipal
issuers having an issue of outstanding Municipal Obligations rated within the
three highest grades by Moody's or S&P.

Repurchase Agreements. Under normal market conditions, each Fund may invest
up to 20% of its total assets in repurchase agreement transactions with member
banks of the Federal Reserve System and certain non-bank dealers. Repurchase
agreements are contracts under which the buyer of a security simultaneously
commits to resell the security to the seller at an agreed-upon price and date.
Under the terms of a typical repurchase agreement, a Fund would acquire any
underlying security for a relatively short period (usually not more than one
week) subject to an obligation of the seller to repurchase, and the Fund to
resell, the obligation at an
agreed-upon price and time, thereby determining the yield during the Fund's
holding period. This arrangement results in a fixed rate of return that is not
subject to market fluctuations during the Fund's holding period. The value of
the underlying securities will at all times be at least equal to the total
amount of the purchase obligation, including interest. The Fund bears a risk of
loss in the event that the other party to a repurchase agreement defaults on its
obligations or becomes bankrupt and the Fund is delayed or prevented from
exercising its right to dispose of the collateral securities, including the risk
of a possible decline in the value of the underlying securities during the
period while the Fund seeks to assert this right. Warburg, acting under the
supervision of the governing Board of each Fund (the 'governing Board' or
'Board'), monitors the creditworthiness of those bank and non-bank dealers with
which each Fund enters into repurchase agreements to evaluate this risk. A
repurchase agreement is considered to be a loan under the Investment Company Act
of 1940, as amended (the '1940 Act').

<PAGE>
<PAGE>
Inc. ('PFPC'). A money market mutual fund is an investment company that invests
in short-term high quality money market instruments. A money market mutual fund
generally does not purchase securities with a remaining maturity of more than
one year. The Intermediate Government Fund and the New York Municipal Fund would
invest in money market mutual funds that invest in Government Securities and
tax-exempt securities, respectively. As a shareholder in any mutual fund, a Fund
will bear its ratable share of the mutual fund's expenses, including management
fees, and will remain subject to payment of the Fund's administration fees and
other expenses with respect to assets so invested.

Mortgage-Backed Securities. Mortgage-backed securities are collateralized
by mortgages or interests in mortgages and may be issued by government or
non-government entities. Mortgage-backed securities issued by GNMA, FNMA or
FHLMC provide a monthly payment consisting of interest and principal payments,
and additional payments will be made out of unscheduled prepayments of
principal. Neither the value of nor the yield on these mortgage-backed
securities or shares of the Funds is guaranteed by the U.S. government.
Non-government issued mortgage-backed securities may offer higher yields than
those issued by government entities, but may be subject to greater price
fluctuations. The value of mortgaged-backed securities may change due to shifts
in the market's perceptions of issuers, and regulatory or tax changes may
adversely affect the mortgage securities market as a whole. Foreclosures and
prepayments, which occur when unscheduled or early payments are made on the
underlying mortgages, may shorten the effective maturities on these securities.
The Funds' yield may be affected by reinvestment of prepayments at
higher or lower rates than the original investment. Prepayments may tend to
increase due to
7

<PAGE>
<PAGE>
refinancing of mortgages as interest rates decline. In addition, like other debt
securities, the values of mortgage-backed securities will generally fluctuate in
response to interest rates.

Structured Notes, Bonds or Debentures. Typically, the value of the
principal and/or interest on these instruments is determined by reference to
changes in the value of specific currencies, interest rates, commodities,
indexes or other financial indicators (the 'Reference') or the relevant change
in two or more References. The interest rate or the principal amount payable
upon maturity or redemption may be increased or decreased depending upon changes
in the applicable Reference. The terms of the structured securities may provide
that in certain circumstances no principal is due at maturity and, therefore,
may result in the loss of a Fund's entire investment. The value of structured
securities may move in the same or the opposite direction as the value of the
Reference, so that appreciation of the Reference may produce an increase or
decrease in the interest rate or value of the security at maturity. In addition,
the change in interest rate or the value of the security at maturity may be a
multiple of the change in the value of the Reference so that the security may be
more or less volatile than the Reference, depending on the multiple.
Consequently, structured securities may entail a greater degree of market risk
and volatility than other types of debt obligations.

Assignments and Participations. Each Fund may invest in assignments of and
participations in loans issued by banks and other financial institutions.

Participations in loans will typically result in a Fund having a
contractual relationship with the lending financial institution, not the
borrower. A Fund would have the right to receive payments of principal, interest
and any fees to which it is entitled only from the lender of the payments from
the borrower. In connection with purchasing a participation, a Fund generally
will have no right to enforce compliance by the borrower with the terms of the
loan agreement relating to the loan, nor any rights of set-off against the
borrower, and the Fund may not benefit directly from any collateral supporting
the loan in which it has purchased a participation. As a result, a Fund
purchasing a participation will assume the credit risk of both the borrower and
the lender selling the participation. In the event of the insolvency of the
lender selling the participation, the Fund may be treated as a general creditor
of the lender and may not benefit from any set-off between the lender and the
borrower.

<PAGE>
<PAGE>
20% limit on investing in non-municipal securities.

RISK FACTORS AND SPECIAL
CONSIDERATIONS

For certain additional risks related to each Fund's investments, see
'Portfolio Investments' beginning at page 5 and 'Certain Investment Strategies'
beginning at page 12.

Among the factors that may be considered in deciding whether to invest in a
security are the issuer's financial resources, its sensitivity to economic
conditions and trends, its operating history and the ability of the issuer's
management. Bond prices generally vary inversely in relation to changes in the
level of interest rates, as well as in response to other market factors and
changes in the creditworthiness of the issuers of the securities. Government
Securities are considered to be of the highest credit quality available.
Government Securities, however, will be affected by general changes in interest
rates. The price volatility of a Fund's shares where the Fund invests in
intermediate maturity bonds will be substantially less than that of long-term
bonds. An intermediate maturity bond will generally have a lower yield than that
of a long-term bond. Longer-term securities in which the Funds may invest
generally offer a higher current yield than is offered by shorter-term
securities, but also generally involve greater volatility of price and risk of
capital than shorter-term securities.

<PAGE>
<PAGE>
requirements imposed by the Internal Revenue Code of 1986, as amended (the
'Code'), for qualification as a regulated investment company. As non-diversified
investment companies, the Funds may invest a greater proportion of their assets
in the obligations of a small number of issuers and, as a result, may be subject
to greater risk with respect to portfolio securities. To the extent that the
Funds assume large positions in the securities of a small number of issuers,
their return may fluctuate to a greater extent than that of a diversified
company as a result of changes in the financial condition or in the market's
assessment of the issuers.

For a complete description of the rating systems of Moody's and S&P, see
the Appendix to the Statement of Additional Information of the Fixed Income and
Global Fixed Income Funds.

<PAGE>
<PAGE>
to each Fund's limitation on the purchase of illiquid securities, unless the
Fund's governing Board determines on an ongoing basis that an adequate trading
market exists for the security. In addition to an adequate trading market, the
Board will also consider factors such as trading activity, availability of
reliable price information and other relevant information in determining whether
a Rule 144A Security is liquid. This investment practice could have the effect
of increasing the level of illiquidity in the Funds to the extent that qualified
institutional buyers become uninterested for a time in purchasing Rule 144A
Securities. The Board of each Fund will carefully monitor any investments by the
Fund in Rule 144A Securities. The Boards may adopt guidelines and delegate to
Warburg the daily function of determining and monitoring the liquidity of Rule
144A Securities, although each Board will retain ultimate responsibility for any
determination regarding liquidity.

PORTFOLIO TRANSACTIONS AND
TURNOVER RATE

with a purchase or sale of securities when Warburg believes that the charge for
the transaction does not exceed usual and customary levels and when doing so is
consistent with guidelines adopted by the Board.

CERTAIN INVESTMENT STRATEGIES

STRATEGIES AVAILABLE TO ALL FUNDS

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<PAGE>
specified multiplier times the change in the specified interest rate, index or
exchange rate. An option on a futures contract gives the purchaser the right, in
return for the premium paid, to assume a position in a futures contract.

Aggregate initial margin and premiums required to establish positions other
than those considered by the CFTC to be 'bona fide hedging' will not exceed 5%
of a Fund's net asset value, after taking into account unrealized profits and
unrealized losses on any such contracts. Although the Funds are limited in the
amount of assets that may be invested in futures transactions, there is no
overall limit on the percentage of Fund assets that may be at risk with respect
to futures activities.

<PAGE>
<PAGE>
these strategies are not otherwise 'covered' through ownership of the underlying
security, financial instrument or currency or by other portfolio positions or by
other means consistent with applicable regulatory policies. Segregated assets
cannot be sold or transferred unless equivalent assets are substituted in their
place or it is no longer necessary to segregate them. As a result, there is a
possibility that segregation of a large percentage of the Fund's assets could
impede portfolio management or the Fund's ability to meet redemption requests or
other current obligations.

INTEREST RATE, INDEX, MORTGAGE AND CURRENCY SWAPS; INTEREST RATE CAPS, FLOORS
AND COLLARS. Each Fund may enter into interest rate index and mortgage swaps and
interest rate caps, floors and collars for hedging purposes or to seek to
increase total return; the Fixed Income and Global Fixed Income Funds may enter
into currency swaps for hedging purposes. Interest rate swaps involve the
exchange by the Fund with another party of their respective commitments to pay
or receive interest, such as an

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<PAGE>
exchange of fixed rate payments for floating rate payments. Index swaps involve
the exchange by the Fund with another party of the respective amounts payable
with respect to a notional principal amount at interest rates equal to two
specified indexes. Mortgage swaps are similar to interest rate swaps in that
they represent commitments to pay and receive interest. The notional principal
amount, however, is tied to a reference pool or pools of mortgages. Currency
swaps involve the exchange of their respective rights to make or receive
payments in specified currencies. The purchase of an interest rate cap entitles
the purchaser, to the extent that a specified index exceeds a predetermined
interest rate, to receive payment of interest on a notional principal amount
from the party selling such interest rate cap. The purchase of an interest rate
floor entitles the purchaser, to the extent that a specified index falls below a
predetermined interest rate, to receive payments of interest on a notional
principal amount from the party selling the interest rate floor. An interest
rate collar is the combination of a cap and a floor that preserves a certain
return within a predetermined range of interest rates.

A Fund will enter into interest rate, index and mortgage swaps only on a
net basis, which means that the two payment streams are netted out, with the
Fund receiving or paying, as the case may be, only the net amount of the two
payments. Interest rate, index and mortgage swaps do not involve the delivery of
securities, other underlying assets or principal. Accordingly, the risk of loss
with respect to interest rate, index and mortgage swaps is limited to the net
amount of interest payments that the Fund is contractually obligated to make. If
the other party to an interest rate, index or mortgage swap defaults, the Fund's
risk of loss consists of the net amount of interest payments that the Fund is
contractually entitled to receive. In contrast, currency swaps usually involve
the delivery of a gross payment stream in one designated currency in exchange
for the gross payment stream in another designated currency. Therefore, the
entire payment stream under a currency swap is subject to the risk that the
other party to the swap will default on its contractual delivery obligations. To
the extent that the net amount payable by the Fund under an interest rate, index
or mortgage swap and the entire amount of the payment stream payable by the Fund
under a currency swap or an interest rate cap, floor cap or collar are held in a
segregated account consisting of cash, Government Securities or high-grade
liquid debt securities, the Funds and Warburg believe that swaps do not
constitute senior securities under the 1940 Act and, accordingly, will not treat
them as being subject to each Fund's borrowing restriction.

STRATEGIES AVAILABLE TO THE FIXED INCOME FUND, THE GLOBAL FIXED INCOME FUND AND
THE INTERMEDIATE GOVERNMENT FUND

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<PAGE>
to close out its short position. Although prior to delivery the Fund will have
to pay an amount equal to any dividends paid on the securities sold short, the
Fund will receive the dividends from the securities sold short or the dividends
from the preferred stock or interest from the debt securities convertible or
exchangeable into the securities sold short, plus a portion of the interest
earned from the proceeds of the short sale. The Fund will deposit, in a
segregated account with its custodian or a qualified subcustodian, the
securities sold short or convertible or exchangeable preferred stocks or debt
securities in connection with short sales against the box. Each Fund will
endeavor to offset transaction costs associated with short sales against the box
with the income from the investment of the cash proceeds. Not more than 10% of a
Fund's net assets (taken at current value) may be held as collateral for short
sales against the box at any one time. The extent to which the Fund may make
short sales may be limited by the requirement contained in the Code.

STRATEGIES AVAILABLE TO THE FIXED INCOME FUND AND THE GLOBAL FIXED INCOME FUND

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<PAGE>
expenses paid by the REIT in addition to the expenses of the Fund.

Investing in REITs involves certain risks. A REIT may be affected by
changes in the value of the underlying property owned by such REIT or by the
quality of any credit extended by the REIT. REITs are dependent on management
skills, are not diversified (except to the extent the Code requires), and are
subject to the risks of financing projects. REITs are subject to heavy cash flow
dependency, default by borrowers, self-liquidation, the possibilities of failing
to qualify for the exemption from tax for distributed income under the Code and
failing to maintain their exemptions from the 1940 Act. REITs are also subject
to interest rate risks.

STRATEGY AVAILABLE TO THE FIXED INCOME FUND AND THE INTERMEDIATE GOVERNMENT FUND

STRATEGIES AVAILABLE TO THE FIXED INCOME FUND AND THE NEW YORK MUNICIPAL FUND

MUNICIPAL OBLIGATIONS. The two principal types of Municipal Obligations, in
terms of the source of payment of debt service on the bonds, are general
obligation bonds and revenue bonds and a Fund may hold both in any proportion.
General obligation bonds are secured by the issuer's pledge of its full faith,
credit and taxing power for the payment of principal and interest. Revenue bonds
are payable only from the revenues derived from a particular facility or class
of facilities or, in some cases, from the proceeds of a special excise or other
specific revenue source but not from the general taxing power. There are, of
course, variations in the security of Municipal Obligations, both within
a particular classification and between classifications.

<PAGE>
<PAGE>
Sizeable investments in such obligations could involve an increased risk to the
Fund should any of such related projects or facilities experience financial
difficulties. Each Fund intends during the coming year to limit investments in
such obligations to less than 25% of its assets.

ALTERNATIVE MINIMUM TAX BONDS. The Funds may invest without limit in
'Alternative Minimum Tax Bonds,' which are certain bonds issued after August 7,
1986 to finance certain non-governmental activities. While the income from
Alternative Minimum Tax Bonds is exempt from regular federal income tax, it is a
tax preference item for purposes of the federal individual and corporate
'alternative minimum tax.' The alternative minimum tax is a special tax that
applies to a limited number of taxpayers who have certain adjustments or tax
preference items. Available returns on Alternative Minimum Tax Bonds acquired by
a Fund may be lower than those from other Municipal Obligations acquired by a
Fund due to the possibility of federal, state and local alternative minimum or
minimum income tax liability on Alternative Minimum Tax Bonds. At present, the
Fixed Income Fund does not intend to purchase Alternative Minimum Tax Bonds.

STRATEGY AVAILABLE TO THE INTERMEDIATE GOVERNMENT FUND

GOVERNMENT ZERO COUPON SECURITIES. The Intermediate Government Fund may invest
in (i) Government Securities that have been stripped of their unmatured interest
coupons, (ii) the coupons themselves and (iii) receipts or certificates
representing interests in stripped Government Securities and coupons
(collectively referred to as 'Government zero coupon securities'). The market
value of Government zero coupon securities that are considered Government
Securities is used for purposes of determining whether at least 65% of the
Intermediate Government Fund's total assets is invested in Government
Securities. However, receipts or certificates which are underwritten by
securities dealers or banks that evidence ownership of future interest payments,
principal payments or both on certain notes or bonds issued by the U.S.
government, its agencies, authorities or instrumentalities will not be
considered Government Securities for purposes of the 65% test. For a description
of zero coupon securities and the tax and other considerations associated with
investing in them, see 'Zero Coupon Securities' above and 'Dividends,
Distributions and Taxes -- Taxes' below.

INVESTMENT GUIDELINES

Each Fund may each invest up to 15% of its net assets in securities with
contractual or other restrictions on resale and other instruments that are not
readily marketable ('illiquid securities'), including (i) securities issued as
part of a privately negotiated transaction between an issuer and one or more
purchasers; (ii) repurchase agreements with maturities greater than seven days;
(iii) with respect to each Fund other than the Intermediate Government Fund,
time deposits maturing in more than seven calendar days; and (iv) certain Rule
144A Securities. In addition, up to 5% of the Fixed Income Fund's, the Global
Fixed Income Fund's and the Intermediate Government Fund's total assets may be
invested in the securities of issuers which have been in continuous operation
for less than three years. The Fixed Income Fund and the Global Fixed Income
Fund may each invest up to 5% of its net assets in warrants. Each Fund may
borrow from banks for temporary or emergency purposes, such as meeting
anticipated redemption requests, in an amount up to 30% of its total assets and
may pledge assets to the extent necessary to secure permitted borrowings.
Whenever borrowings (including reverse repurchase agreements) exceed 5% of the
value of a Fund's total assets, the Fund will not make any investments
(including roll-overs). Except for the limitations on borrowing, the investment
guidelines set forth in this paragraph may be changed at any time without
shareholder consent by vote of the governing Board of each Fund, subject to the
limitations contained in the 1940 Act. A complete list of investment
restrictions that each Fund has adopted identifying additional restrictions that
cannot be changed without the approval of the majority of the Fund's outstanding
shares is contained in each Fund's Statement of Additional Information.

MANAGEMENT OF THE FUNDS

INVESTMENT ADVISER. Each Fund employs Warburg as its investment adviser.
Warburg, subject to the control of each Fund's officers and the Board, manages
the investment and reinvestment of the assets of the Funds in accordance with
each Fund's investment objective and stated investment policies. Warburg makes
investment decisions for each Fund and places orders to purchase or sell
securities on behalf of each such Fund. Warburg also employs a support staff of
management personnel to provide services to the Funds and also furnishes the
Funds with office space, furnishings and equipment.

For the services provided by Warburg, the Fixed Income Fund, the Global
Fixed Income Fund, the Intermediate Government Fund and

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<PAGE>
the New York Municipal Fund pay Warburg a fee calculated at an annual rate of
.50%, 1.00%, .50% and .40%, respectively, of the Fund's average daily net
assets. Although the Global Fixed Income Fund's advisory fee is higher than that
paid by most other investment companies, including money market and fixed income
funds, Warburg believes that it is comparable to fees charged by other mutual
funds with similar policies and strategies. The advisory agreement between each
Fund and Warburg provides that Warburg will reimburse the Fund to the extent
certain expenses that are described in the Statement of Additional Information
exceed applicable state expense limitations. Warburg and each Fund's
co-administrators may voluntarily waive a portion of their fees from time to
time and temporarily limit the expenses to be paid by the Fund.

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<PAGE>
compensation each Fund pays PFPC a fee calculated at an annual rate of .10% of
its average daily net assets, subject to a minimum annual fee and exclusive of
out-of-pocket expenses. PFPC has its principal offices at 400 Bellevue Parkway,
Wilmington, Delaware 19809.

CUSTODIANS. PNC Bank, National Association ('PNC') serves as custodian of the
assets of each of the Funds. Fiduciary Trust Company International ('Fiduciary')
also serves as custodian of the Global Fixed Income Fund's assets. Like PFPC,
PNC is a subsidiary of PNC Bank Corp. and its principal business address is
Broad and Chestnut Streets, Philadelphia, Pennsylvania 19101. Fiduciary's
principal business address is Two World Trade Center, New York, New York 10048.

DIRECTORS AND OFFICERS. The officers of each Fund manage its day-to-day
operations and are directly responsible to the Board. The Boards set broad
policies for each Fund and choose its officers. A list of the Directors/Trustees
and officers of each Fund and a brief statement of their present positions and
principal occupations during the past five years is set forth in the Statement
of Additional Information of each Fund.

HOW TO PURCHASE SHARES

Individual investors may only purchase Warburg Pincus Advisor Fund shares
through Institutions. The Funds reserve the right to make Advisor Shares
available to other investors in the future. References in this Prospectus to
shareholders or investors also include Institutions which may act as the record
holders of the Advisor Shares.

Each Institution separately determines the rules applicable to its
customers investing in a Fund, including minimum initial and subsequent
investment requirements and the procedures to be followed to effect purchases,
redemptions and exchanges of Advisor Shares. There is no minimum amount of
initial or subsequent purchases of Advisor Shares imposed on Institutions,
although the Funds reserve the right to impose minimums in the future.

Orders for the purchase of Advisor Shares are placed with an Institution by
its customers. The Institution is responsible for the prompt transmission of the
order to the Fund or its agent.

Institutions may purchase Advisor Shares by telephoning the Fund and
sending payment by wire. After telephoning (800) 888-6878 for instructions, an
Institution should then wire

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<PAGE>
federal funds to Counsellors Securities Inc. using the following wire address:

State Street Bank and Trust Co.
225 Franklin St.
Boston, MA 02101
ABA# 0110 000 28
Attn: Mutual Funds/Custody Dept.
[Insert Warburg Pincus Advisor
Fund name(s) here]
DDA# 9904-649-2
[Shareowner name]
[Shareowner account number]

Orders by wire will not be accepted until a completed account application
has been received in proper form, and an account number has been established. If
a telephone order is received by the close of regular trading on the New York
Stock Exchange ('NYSE') (currently 4:00 p.m., Eastern time) and payment by wire
is received on the same day in proper form in accordance with instructions set
forth above, the shares will be priced according to the net asset value of the
Fund on that day and are entitled to dividends and distributions beginning on
that day. If payment by wire is received in proper form by the close of the NYSE
without a prior telephone order, the purchase will be priced according to the
net asset value of the relevant Fund on that day and is entitled to dividends
and distributions beginning on that day. However, if a wire in proper form that
is not preceded by a telephone order is received after the close of regular
trading on the NYSE, the payment will be held uninvested until the order is
effected at the close of business on the next business day. Payment for orders
that are not accepted will be returned after prompt inquiry. Certain
organizations or Institutions that have entered into agreements with a Fund or
its agent may enter confirmed purchase orders on behalf of customers, with
payment to follow no later than three business days following the day the order
is effected. If payment is not received by such time, the organization could be
held liable for resulting fees or losses.

After an investor has made his initial investment, additional shares may be
purchased at any time by mail or by wire in the manner outlined above. Wire
payments for initial and subsequent investments should be preceded by an order
placed with the relevant Fund or its agent and should clearly indicate the
investor's account number. In the interest of economy and convenience, physical
certificates representing shares in the Fund are not normally issued.

The Funds understand that some broker-dealers (other than Counsellors
Securities), financial institutions, securities dealers and other industry
professionals may impose certain conditions on their clients or customers that
invest in a Fund, which are in addition to or different than those described in
this Prospectus, and may charge their clients or customers direct fees. Certain
features of a Fund, such as the initial and subsequent investment minimums,
redemption fees and certain trading restrictions, may be modified or waived in
these programs, and administrative charges may be imposed for the services
rendered. Therefore, a client or customer should contact the organization acting
on his behalf concerning the fees (if any) charged in connection with a purchase
or redemption of Fund shares and should read this Prospectus in light of the
terms governing his account with the organization.

HOW TO REDEEM AND EXCHANGE
SHARES

REDEMPTION OF SHARES. An investor of a Fund may redeem (sell) shares on any day
that the Fund's net asset value is calculated (see 'Net Asset Value' below).
Requests for the redemption (or exchange) of Advisor Shares are placed with an
Institution by its customers, which is then responsible for the prompt
transmission of this request to the Fund or its agent.

Institutions may redeem Advisor Shares by calling Warburg Pincus Advisor
Funds at (800) 888-6878 between 9:00 a.m. and 4:00 p.m.
(East-

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<PAGE>
ern time) on any business day. An investor making a telephone withdrawal should
state (i) the name of the Fund, (ii) the account number of the Fund, (iii) the
name of the investor(s) appearing on the Fund's records, (iv) the amount to be
withdrawn and (v) the name of the person requesting the redemption.

After receipt of the redemption request the redemption proceeds will be
wired to the investor's bank as indicated in the account application previously
filled out by the investor. The Funds do not currently impose a service charge
for effecting wire transfers but reserve the right to do so in the future.
During periods of significant economic or market change, telephone redemptions
may be difficult to implement. If an investor is unable to contact Warburg
Pincus Advisor Funds by telephone, an investor may deliver the redemption
request to Warburg Pincus Advisor Funds by mail at Warburg Pincus Advisor Funds,
P.O. Box 9030, Boston, Massachusetts 02205-9030.

If a redemption order is received prior to the close of regular trading on
the NYSE, the redemption order will be effected at the net asset value per share
as determined on that day. If a redemption order is received after the close of
regular trading on the NYSE, the redemption order will be effected at the net
asset value as next determined. Except as noted above, redemption proceeds will
normally be wired to an investor on the next business day following the date a
redemption order is effected. If, however, in the judgment of Warburg, immediate
payment would adversely affect a Fund, it reserves the right to pay the
redemption proceeds within seven days after the redemption order is effected.
Furthermore, a Fund may suspend the right of redemption or postpone the date of
payment upon redemption (as well as suspend or postpone the recordation of an
exchange of shares) for such periods as are permitted under the 1940 Act.

The proceeds paid upon redemption may be more or less than the amount
invested depending upon a share's net asset value at the time of redemption. If
an investor redeems all the shares in his account, all dividends and
distributions declared up to and including the date of redemption are paid along
with the proceeds of the redemption.

EXCHANGE OF SHARES. An Institution may exchange Advisor Shares of a Fund for
Advisor Shares of the other Warburg Pincus Advisor Funds at their respective net
asset values. Exchanges may be effected in the manner described under
'Redemption of Shares' above. If an exchange request is received by Warburg
Pincus Advisor Funds prior to the close of regular trading on the NYSE, the
exchange will be made at each fund's net asset value determined at the end of
that business day. Exchanges may be effected without a sales charge. The
exchange privilege may be modified or terminated at any time upon 60 days'
notice to shareholders.

The exchange privilege is available to shareholders residing in any state
in which Advisor Shares being acquired may legally be sold. When an investor
effects an exchange of shares, the exchange is treated for federal income tax
purposes as a redemption. Therefore, the investor may realize a taxable gain or
loss in connection with the exchange. Investors wishing to exchange Advisor
Shares of a Fund for Advisor Shares in another Warburg Pincus Advisor Fund
should review the prospectus of the other fund prior to making an exchange. For
further information regarding the exchange privilege or to obtain a current
prospectus for another Warburg Pincus Advisor Fund, an investor should contact
Warburg Pincus Advisor Funds at (800) 888-6878.

DIVIDENDS, DISTRIBUTIONS AND TAXES

DIVIDENDS AND DISTRIBUTIONS. Each Fund calculates its dividends from net
investment income. Net investment income includes interest accrued and dividends
earned on the Fund's portfolio

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<PAGE>
securities for the applicable period (which includes amortization of market
discount) less amortization of market premium and applicable expenses. The Fixed
Income Fund, the Intermediate Government Fund and the New York Municipal Fund
each declares its dividends from its net investment income daily and pays those
dividends monthly in the calendar year in which they are declared. The Global
Fixed Income Fund declares dividends from its net investment income quarterly.
Net investment income earned on weekends and when the NYSE is not opened will be
computed as of the next business day. Distributions of net realized long-term
and short-term capital gains are declared annually and will be paid in the
calendar year in which they are declared, generally in November or December.
Unless an investor instructs a Fund to pay dividends or distributions in cash,
dividends and distributions will automatically be reinvested in additional
Advisor Shares of the relevant Fund at net asset value. The election to receive
dividends in cash may be made on the account application or, subsequently, by
writing to Warburg Pincus Advisor Funds at the address set forth under 'How to
Open an Account' or by calling Warburg Pincus Advisor Funds at (800) 888-6878.
Dividends are determined in the same manner and are paid in the same amount for
each Fund share, except that Advisor Shares bear all the expense of fees paid to
certain service organizations. See 'Shareholder Servicing.' As a result, at any
given time, the average annual total return on Advisor Shares will be lower than
the average annual total return on Common Shares.

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<PAGE>
These dividends ordinarily will constitute taxable income to the shareholders of
the Funds.

Dividends paid from net investment income and distributions of net realized
short-term capital gains are taxable to investors as ordinary income, and
distributions derived from net realized long-term capital gains will be taxable
to investors as long-term capital gains, in each case regardless of how long
investors have held Fund shares and whether received in cash or reinvested in
additional Fund shares. As a general rule, an investor's gain or loss on a sale
or redemption of his Fund shares will be a long-term capital gain or loss if he
has held his shares for more than one year and will be a short-term capital gain
or loss if he has held his shares for one year or less. However, any loss
realized upon the sale or redemption of shares within six months from the date
of their purchase will be treated as a long-term capital loss to the extent of
any amounts treated as distributions of long-term capital gain during such
six-month period with respect to such shares. In the case of the New York
Municipal Fund, any loss realized by a shareholder on the sale or redemption of
a Fund share held by the shareholder for six months or less will be disallowed
to the extent of the amount of any exempt-interest dividend received by the
shareholder with respect to such share. The portion of such loss not disallowed
as described in the preceding sentence shall be treated for federal income tax
purposes as a long-term capital loss to the extent of any distributions or
deemed distributions of long-term capital gains received by the shareholder with
respect to such share. An investor in the New York Municipal Fund who redeems
his shares prior to the declaration of a dividend may lose tax-exempt status on
accrued income attributable to tax-exempt Municipal Obligations. Investors may
be proportionately liable for taxes on income and gains of the Funds, but
investors not subject to tax on their income will not be required to pay tax on
amounts distributed to them. The Fund's investment activities, including short
sales of securities, will not result in unrelated business taxable income to a
tax-exempt investor. A Fund's dividends, to the extent not derived from
dividends attributable to certain types of stock issued by U.S. domestic
corporations, generally will not qualify for the dividends received deduction
for corporations.

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<PAGE>
Securities if the investors are the tax owners of these Government Securities.
Furthermore, some states, if certain requirements are satisfied, permit
investors to treat the portion of their regulated investment company dividends
that is attributable to interest income on these Government Securities as
tax-exempt income for state or local income tax purposes. Other states treat all
of these dividends as subject to state and local income taxation. Investors in
the Fund should consult their own tax advisers to assess the consequences of
investing in the Fund under state and local laws generally and to determine
whether dividends paid by the Fund that represent interest derived from
Government Securities are exempt from any applicable state or local taxes.

Special Tax Matters Relating to the New York Municipal Fund and the Fixed
Income Fund. As a regulated investment company, the New York Municipal Fund will
designate and pay exempt-interest dividends derived from interest earned on
qualifying Municipal Obligations. Such exempt-interest dividends may be excluded
by investors of the Fund from their gross income for federal income tax purposes
although (i) all or a portion of such exempt-interest dividends will be a
specific tax-preference item for purposes of the federal individual and
corporate alternative minimum taxes to the extent they are derived from certain
types of private activity bonds issued after August 7, 1986 and (ii) all
exempt-interest dividends will be a component of the 'current earnings'
adjustment item for purposes of the federal corporate alternative minimum tax.
Furthermore, exempt-interest dividends paid by the Fund will constitute a
component of the 'current earnings' adjustment item for purposes of the .12%
corporate environmental tax. Moreover, dividends paid by the Fund will be
subject to a branch profits tax of up to 30% when received by certain foreign
corporate investors. Dividends derived from interest on qualifying New York
Municipal Obligations will be exempt from New York State and New York City
personal income (but not corporate franchise) taxes.

The Fixed Income Fund does not expect to meet the tax requirements that
would enable it to pay exempt-interest dividends with respect to income derived
from its holdings of Municipal Obligations.

NET ASSET VALUE

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<PAGE>
The net asset value per Advisor Share of each Fund is computed by adding
the Advisor Shares' pro rata share of the value of the Fund's assets, deducting
the Advisor Shares' pro rata share of the Fund's liabilities and the liabilities
specifically allocated to Advisor Shares and then dividing the result by the
number of outstanding Advisor Shares.

PERFORMANCE

Each Fund quotes the performance of Advisor Shares separately from Common
Shares. The net asset value of the Advisor Shares is listed in The Wall Street
Journal each business day under the heading Warburg Pincus Advisor Funds. From
time to time, each Fund may advertise yield and average annual total return of
its Advisor Shares over various periods of time. The yield of a Fund refers to
net investment income generated by the Advisor Shares over a specified
thirty-day period, which is then annualized. That is, the amount of net
investment income generated by the Advisor Shares during that thirty-day period
is assumed to be generated over a 12-month period and is shown as a percentage
of the investment. In addition, advertisements concerning the Intermediate
Government Fund and the New York Municipal Fund may describe a tax equivalent
yield. The tax equivalent yield demonstrates the yield on a taxable investment
necessary to produce an after-tax yield equal to the Advisor Shares' tax-free
yield. It is calculated by increasing the yield shown for the Advisor Shares to
the extent necessary to reflect the payment of specified tax rates. Thus, the
tax equivalent yield will always exceed a Fund's yield. Total return figures
show the average percentage change in value of an investment in the Advisor
Shares from the beginning of the measuring period to the end of the measuring
period. The figures reflect changes in the price of the Advisor Shares assuming
that any income dividends and/or capital gain distributions made by the Fund
during the period were reinvested in Advisor Shares of the Fund. Total return
will be shown for recent one-, five- and ten-year periods, and may be shown for
other periods as well (such as from commencement of the Fund's operations or on
a year-by-year, quarterly or current year-to-date basis).

When considering average total return figures for periods longer than one
year, it is important to note that a Fund's annual total return for one year in
the period might have been greater or less than the average for the entire
period. When considering total return figures for periods shorter than one year,
investors should bear in mind that each Fund seeks long-term appreciation and
that such return may not be representative of any Fund's return over a longer
market cycle. Each Fund may also advertise aggregate total return figures of its
Advisor Shares for various periods, representing the cumulative change in value
of an investment in the Advisor Shares for the specific period (again reflecting
changes in the Fund's share prices and assuming reinvestment of dividends and
distributions). Aggregate and average total returns may be shown by means of
schedules, charts or graphs and may indicate various components of

<PAGE>
<PAGE>
total return (i.e., change in value of initial investment, income dividends and
capital gain distributions).

In reports or other communications to investors or in advertising material,
a Fund may describe general economic and market conditions affecting the Fund. A
Fund may compare its performance with (i) that of other mutual funds as listed
in the rankings prepared by Lipper Analytical Services, Inc. or similar
investment services that monitor the performance of mutual funds or as set forth
in the publications listed below; (ii) in the case of the Fixed Income Fund,
with the Lehman Bond Index (an unmanaged index of government and corporate bonds
calculated by Lehman Brothers); in the case of the Global Fixed Income Fund,
with the J.P. Morgan Traded Index (an index of non-U.S. dollar bonds of ten
countries with active bond markets), the Salomon Brothers World Government Bond
Index (a hedged, market-capitalization weighted index designed to track major
government debt markets) and the Lipper General World Income Average (an average
of funds that invest primarily in non-U.S. dollar and U.S. dollar debt
instruments); in the case of the Intermediate Government Fund, with the Lehman
Intermediate Government Bond Index (an unmanaged index of government bonds
calculated by Lehman Brothers); and in the case of the New York Municipal Fund,
with the Bond Buyer Index (the 'BBI') (an unmanaged index of 20 General
Obligation issues of 20-year maturity from various municipalities across the
nation published by the American Banker) and the Lipper New York Intermediate
Municipal Debt Funds Average (an unmanaged index of 61 Intermediate Municipal
Debt Funds calculated by Lipper Analytical Services); or (iii) other appropriate
indexes of investment securities or with data developed by Warburg derived from
such indexes. The Fund may also include evaluations of each Fund published by
nationally recognized ranking services and by financial publications that are
nationally recognized, such as The Wall Street Journal, Investor's Daily, Money,
Inc., Institutional Investor, Barron's, Fortune, Forbes, Business Week, Mutual
Fund Magazine, Morningstar, Inc. and Financial Times.

GENERAL INFORMATION

ORGANIZATION. The Fixed Income Fund and the New York Municipal Fund were
organized under the laws of The Commonwealth of Massachu-

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<PAGE>
setts as Massachusetts business trusts in 1987 and 1986, respectively. In 1992,
these Funds changed their names from 'Counsellors Fixed Income Fund' and
'Counsellors New York Municipal Bond Fund' to 'Warburg, Pincus Fixed Income
Fund' and 'Warburg, Pincus New York Municipal Bond Fund,' respectively. On
February 28, 1995, the New York Municipal Fund changed its name to 'Warburg,
Pincus New York Intermediate Municipal Fund.' The Global Fixed Income Fund and
the Intermediate Government Fund were incorporated under the laws of the State
of Maryland in 1990 and 1988, respectively, under the names 'Counsellors Global
Fixed Income Fund, Inc.' and 'Counsellors Intermediate Maturity Government Fund,
Inc.,' respectively. On October 27, 1995 and February 16, 1996, the Funds
amended their respective charters to change their names to 'Warburg, Pincus
Global Fixed Income Fund, Inc.' and 'Warburg, Pincus Intermediate Maturity
Government Fund, Inc.'

The Agreement and Declaration of Trust of each of the Fixed Income Fund and
the New York Municipal Fund authorizes each Fund's Board to issue an unlimited
number of full and fractional shares of beneficial interest, $.001 par value per
share, of which one billion shares are classified as Advisor Shares. The
charters of the Global Fixed Income Fund and the Intermediate Government Fund
authorize each Fund's Board to issue three billion full and fractional shares of
capital stock, $.001 par value per share, of which one billion shares are
designated Advisor Shares. Under each Fund's charter documents, the Board has
the power to classify or reclassify any unissued shares of the Fund into one or
more additional classes by setting or changing in any one or more respects their
relative rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption. The Board of a Fund may
similarly classify or reclassify any class of its shares into one or more series
and, without shareholder approval, may increase the number of authorized shares
of the Fund.

MULTI-CLASS STRUCTURE. Each Fund offers a separate class of shares, the Common
Shares, directly to individuals pursuant to a separate prospectus. Shares of
each class represent equal pro rata interests in the respective Fund and accrue
dividends and calculate net asset value and performance quotations in the same
manner, except that Advisor Shares bear fees payable by the Fund to Institutions
for services they provide to the beneficial owners of such shares and enjoy
certain exclusive voting rights on matters relating to these fees. Because of
the higher fees paid by the Advisor Shares, the total return on such shares can
be expected to be lower than the total return on Common Shares. Investors may
obtain information concerning the Common Shares from their investment
professional or by calling Counsellors Securities at (800) 888-6878.

<PAGE>
<PAGE>
Board member at the written request of holders of 10% of the outstanding shares
of a Fund. John L. Furth, a Director and Trustee of the Funds, and Lionel I.
Pincus, Chairman of the Board and Chief Executive Officer of EMW, may be deemed
to be controlling persons of each Fund as of December 28, 1995 because they may
be deemed to possess or share investment power over shares owned by clients of
Warburg and certain other entities.

SHAREHOLDER COMMUNICATIONS. Each investor will receive a quarterly statement of
his account, as well as a statement of his account after any transaction that
affects his share balance or share registration (other than the reinvestment of
dividends or distributions or investment made through the Automatic Investment
Program). Each Fund will also send to its investors a semiannual report and an
audited annual report, each of which includes a list of the investment
securities held by the Fund and a statement of the performance of the Fund.
Periodic listings of the investment securities held by a Fund may be obtained by
calling Warburg Pincus Advisor Funds at (800) 888-6878. Each Institution that is
the record owner of Advisor Shares on behalf of its customers will send a
statement to those customers periodically showing their indirect interest in
Advisor Shares, as well as providing other information about the Fund. See
'Shareholder Servicing.'

The prospectuses of the Funds are combined in this Prospectus. Each Fund
offers only its own shares, yet it is possible that a Fund might become liable
for a misstatement, inaccuracy or omission in this Prospectus with regard to
another Fund.

SHAREHOLDER SERVICING

Each Fund is authorized to offer Advisor Shares exclusively through
Institutions whose clients or customers (or participants in the case of
retirement plans) ('Customers') are owners of Advisor Shares. Either those
Institutions or companies providing certain services to them (together, 'Service
Organizations') will enter into agreements ('Agreements') with a Fund and/or
Counsellors Securities pursuant to a Distribution Plan as described below. Such
entities may provide certain distribution, shareholder servicing, administrative
and/or accounting services for its Customers. Distribution services would be
marketing or other services in connection with the promotion and sale of Advisor
Shares. Shareholder services that may be provided include responding to Customer
inquiries, providing information on Customer investments and providing other
shareholder liaison services. Administrative and accounting services related to
the sale of Advisor Shares may include (i) aggregating and processing purchase
and redemption requests from Customers and placing net purchase and redemption
orders with the Fund's transfer agent, (ii) processing dividend payments from
the Fund on behalf of Customers and (iii) providing sub-accounting related to
the sale of Advisor Shares beneficially owned by Customers or the information to
the Fund necessary for sub-accounting. Each Board has approved a Distribution
Plan (the 'Plan') pursuant to Rule 12b-1 under the 1940 Act under which each
participating Service Organization will be paid, out of the assets of the Fund
(either directly or by Counsellors Securities on behalf of the Fund), a
negotiated fee on an annual basis not to exceed .75% (up to a .25% annual
service fee and a .50% annual distribution fee) of the value of the average
daily net assets of its Customers invested in Advisor Shares. The current 12b-1
fee is .25% per annum for the Fixed Income, Intermediate Government and New York
Municipal Funds and .50% per annum for the Global Fixed Income Fund. The Boards
evaluate the appropriateness of the Plans on a continuing basis and in doing so
consider all relevant factors.

Warburg, Counsellors Securities or any of their affiliates may, from time
to time, at their own expense, provide compensation to Service

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<PAGE>
Organizations. To the extent they do so, such compensation does not represent an
additional expense to the Fund or its shareholders. In addition, Warburg,
Counsellors Securities or any of their affiliates may, from time to time, at
their own expense, pay certain Fund transfer agent fees and expenses related to
accounts of Customers. A Service Organization may use a portion of the fees paid
pursuant to a Plan to compensate the Fund's custodian or transfer agent for
costs related to accounts of Customers.

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, EACH FUND'S
STATEMENT OF ADDITIONAL INFORMATION OR THE FUNDS' OFFICIAL SALES LITERATURE IN
CONNECTION WITH THE OFFERING OF SHARES OF THE FUNDS, AND IF GIVEN OR MADE, SUCH
OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY ANY FUND. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF THE
ADVISOR SHARES OF THE FUNDS IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM,
SUCH OFFER MAY NOT LAWFULLY BE MADE.

TABLE OF CONTENTS

THE FUNDS' EXPENSES ...................................................... 2
FINANCIAL HIGHLIGHTS ..................................................... 3
INVESTMENT OBJECTIVES AND
POLICIES .............................................................. 3
PORTFOLIO INVESTMENTS .................................................... 5
RISK FACTORS AND SPECIAL CONSIDERATIONS ............................... 9
PORTFOLIO TRANSACTIONS AND
TURNOVER RATE ........................................................ 11
CERTAIN INVESTMENT STRATEGIES ........................................... 12
INVESTMENT GUIDELINES ................................................... 19
MANAGEMENT OF THE FUNDS ................................................. 19
HOW TO PURCHASE SHARES .................................................. 21
HOW TO REDEEM AND EXCHANGE
SHARES ............................................................... 22
DIVIDENDS, DISTRIBUTIONS AND
TAXES ................................................................ 23
NET ASSET VALUE ......................................................... 26
PERFORMANCE ............................................................. 27
GENERAL INFORMATION ..................................................... 28
SHAREHOLDER SERVICING ................................................... 30

WPBDF-1-0396

[LOGO]

[ ] WARBURG PINCUS
FIXED INCOME FUND

[ ] WARBURG PINCUS
GLOBAL FIXED INCOME FUND

[ ] WARBURG PINCUS INTERMEDIATE
MATURITY GOVERNMENT FUND

[ ] WARBURG PINCUS NEW YORK
INTERMEDIATE MUNICIPAL FUND

PROSPECTUS

MARCH 1, 1996

STATEMENT OF DIFFERENCES
------------------------

The dagger symbol shall be expressed as `D'

<PAGE>1
Rule 497(c)
Securities Act File No. 33-12343
Investment Company Act File No. 811-5039

STATEMENT OF ADDITIONAL INFORMATION

March 1, 1996

WARBURG PINCUS FIXED INCOME FUND

P.O. Box 9030, Boston, Massachusetts 02205-9030
For information, call (800) 888-6878

Contents
Page

Investment Objectives . . . . . . . . . . . . . . . . 2
Investment Policies . . . . . . . . . . . . . . . . . 2
Management of the Fund . . . . . . . . . . . . . . . 31
Additional Purchase and Redemption Information . . . 38
Exchange Privilege . . . . . . . . . . . . . . . . . 39
Additional Information Concerning Taxes . . . . . . . 39
Determination of Performance . . . . . . . . . . . . 42
Auditors and Counsel . . . . . . . . . . . . . . . . 44
Miscellaneous . . . . . . . . . . . . . . . . . . . . 44
Financial Statements . . . . . . . . . . . . . . . . 44
Appendix - Description of Ratings . . . . . . . . . . A-1
Annual Report and Report of Independent Accountants . A-8

This Statement of Additional Information is meant to be read in
conjunction with the combined Prospectus for the Common Shares of Warburg
Pincus Fixed Income Fund (the "Fund"), Warburg Pincus Intermediate Maturity
Government Fund, Warburg Pincus New York Intermediate Municipal Fund and
Warburg Pincus Global Fixed Income Fund, and with the Prospectus for the
Advisor Shares of the Fund, each dated March 1, 1996, as amended or
supplemented from time to time, and is incorporated by reference in its
entirety into those Prospectuses. Because this Statement of Additional
Information is not itself a prospectus, no investment in shares of the Fund
should be made solely upon the information contained herein. Copies of the
Fund's Prospectuses and information regarding the Fund's current performance
may be obtained by calling the Fund at (800) 927-2874. Information regarding
the status of shareholder accounts may be obtained by calling the Fund at
(800) 888-6878 or by writing to the Fund, P.O. Box 9030, Boston, Massachusetts
02205-9030.

<PAGE>2

INVESTMENT OBJECTIVES

The investment objectives of the Fund are to generate high current
income consistent with reasonable risk and, secondarily, capital appreciation.

INVESTMENT POLICIES

The following policies supplement the descriptions of the Fund's
investment objectives and policies in the Prospectuses.

Options, Futures and Currency Exchange Transactions

Securities Options. The Fund may write covered put and call options
on stock and debt securities and may purchase such options that are traded on
foreign and U.S. exchanges, as well as over-the-counter ("OTC").

The Fund realizes fees (referred to as "premiums") for granting the
rights evidenced by the options it has written. A put option embodies the
right of its purchaser to compel the writer of the option to purchase from the
option holder an underlying security at a specified price for a specified time
period or at a specified time. In contrast, a call option embodies the right
of its purchaser to compel the writer of the option to sell to the option
holder an underlying security at a specified price for a specified time period
or at a specified time.

The principal reason for writing covered options on a security is to
attempt to realize, through the receipt of premiums, a greater return than
would be realized on the securities alone. In return for a premium, the Fund
as the writer of a covered call option forfeits the right to any appreciation
in the value of the underlying security above the strike price for the life of
the option (or until a closing purchase transaction can be effected).
Nevertheless, the Fund as a put or call writer retains the risk of a decline
in the price of the underlying security. The size of the premiums that the
Fund may receive may be adversely affected as new or existing institutions,
including other investment companies, engage in or increase their
option-writing activities.

If security prices rise, a put writer would generally expect to
profit, although its gain would be limited to the amount of the premium it
received. If security prices remain the same over time, it is likely that the
writer will also profit, because it should be able to close out the option at
a lower price. If security prices fall, the put writer would expect to suffer
a loss. This loss should be less than the loss from purchasing the underlying
instrument directly, however, because the premium received for writing the
option should mitigate the effects of the decline.

<PAGE>3

In the case of options written by the Fund that are deemed covered
by virtue of the Fund's holding convertible or exchangeable preferred stock or
debt securities, the time required to convert or exchange and obtain physical
delivery of the underlying securities with respect to which the Fund has
written options may exceed the time within which the Fund must make delivery
in accordance with an exercise notice. In these instances, the Fund may
purchase or temporarily borrow the underlying securities for purposes of
physical delivery. By so doing, the Fund will not bear any market risk, since
the Fund will have the absolute right to receive from the issuer of the
underlying security an equal number of shares to replace the borrowed
securities, but the Fund may incur additional transaction costs or interest
expenses in connection with any such purchase or borrowing.

Additional risks exist with respect to certain of the securities for
which the Fund may write covered call options. For example, if the Fund
writes covered call options on mortgage-backed securities, the mortgage-backed
securities that it holds as cover may, because of scheduled amortization or
unscheduled prepayments, cease to be sufficient cover. If this occurs, the
Fund will compensate for the decline in the value of the cover by purchasing
an appropriate additional amount of mortgage-backed securities.

Options written by the Fund will normally have expiration dates
between one and nine months from the date written. The exercise price of the
options may be below, equal to or above the market values of the underlying
securities at the times the options are written. In the case of call options,
these exercise prices are referred to as "in-the-money," "at-the-money" and
"out-of-the-money," respectively. The Fund may write (i) in-the-money call
options when Warburg, Pincus Counsellors, Inc., the Fund's investment adviser
("Warburg"), expects that the price of the underlying security will remain
flat or decline moderately during the option period, (ii) at-the-money call
options when Warburg expects that the price of the underlying security will
remain flat or advance moderately during the option period and
(iii) out-of-the-money call options when Warburg expects that the premiums
received from writing the call option plus the appreciation in market price of
the underlying security up to the exercise price will be greater than the
appreciation in the price of the underlying security alone. In any of the
preceding situations, if the market price of the underlying security declines
and the security is sold at this lower price, the amount of any realized loss
will be offset wholly or in part by the premium received. Out-of-the-money,
at-the-money and in-the-money put options (the reverse of call options as to
the relation of exercise price to market price) may be used in the same market
environments that such call options are used in equivalent transactions. To
secure its obligation to deliver the underlying security when it writes a call
option, the Fund will be required to deposit in escrow the underlying security
or other assets in accordance with the rules of the Options Clearing
Corporation (the "Clearing Corporation") and of the securities exchange on
which the option is written.

Prior to their expirations, put and call options may be sold in
closing sale or purchase transactions (sales or purchases by the Fund prior to
the exercise of options that it has purchased or written, respectively, of
options of the same series) in which the Fund may

<PAGE>4

realize a profit or loss from the sale. An option position may be closed out
only where there exists a secondary market for an option of the same series on
a recognized securities exchange or in the over-the-counter market. When the
Fund has purchased an option and engages in a closing sale transaction,
whether the Fund realizes a profit or loss will depend upon whether the amount
received in the closing sale transaction is more or less than the premium the
Fund initially paid for the original option plus the related transaction
costs. Similarly, in cases where the Fund has written an option, it will
realize a profit if the cost of the closing purchase transaction is less than
the premium received upon writing the original option and will incur a loss if
the cost of the closing purchase transaction exceeds the premium received upon
writing the original option. The Fund may engage in a closing purchase
transaction to realize a profit, to prevent an underlying security with
respect to which it has written an option from being called or put or, in the
case of a call option, to unfreeze an underlying security (thereby permitting
its sale or the writing of a new option on the security prior to the
outstanding option's expiration). The obligation of the Fund under an option
it has written would be terminated by a closing purchase transaction, but the
Fund would not be deemed to own an option as a result of the transaction. So
long as the obligation of the Fund as the writer of an option continues, the
Fund may be assigned an exercise notice by the broker-dealer through which the
option was sold, requiring the Fund to deliver the underlying security against
payment of the exercise price. This obligation terminates when the option
expires or the Fund effects a closing purchase transaction. The Fund can no
longer effect a closing purchase transaction with respect to an option once it
has been assigned an exercise notice.

There is no assurance that sufficient trading interest will exist to
create a liquid secondary market on a securities exchange for any particular
option or at any particular time, and for some options no such secondary
market may exist. A liquid secondary market in an option may cease to exist
for a variety of reasons. In the past, for example, higher than anticipated
trading activity or order flow or other unforeseen events have at times
rendered certain of the facilities of the Clearing Corporation and various
securities exchanges inadequate and resulted in the institution of special
procedures, such as trading rotations, restrictions on certain types of orders
or trading halts or suspensions in one or more options. There can be no
assurance that similar events, or events that may otherwise interfere with the
timely execution of customers' orders, will not recur. In such event, it
might not be possible to effect closing transactions in particular options.
Moreover, the Fund's ability to terminate options positions established in the
over-the-counter market may be more limited than for exchange-traded options
and may also involve the risk that securities dealers participating in
over-the-counter transactions would fail to meet their obligations to the
Fund. The Fund, however, intends to purchase over-the-counter options only
from dealers whose debt securities, as determined by Warburg, are considered
to be investment grade. If, as a covered call option writer, the Fund is
unable to effect a closing purchase transaction in a secondary market, it will
not be able to sell the underlying security until the option expires or it
delivers the underlying security upon exercise. In either case, the Fund
would continue to be at market risk on the security and could face higher
transaction costs, including brokerage commissions.

<PAGE>5

Securities exchanges generally have established limitations
governing the maximum number of calls and puts of each class which may be held
or written, or exercised within certain time periods by an investor or group
of investors acting in concert (regardless of whether the options are written
on the same or different securities exchanges or are held, written or
exercised in one or more accounts or through one or more brokers). It is
possible that the Fund and other clients of Warburg and certain of its
affiliates may be considered to be such a group. A securities exchange may
order the liquidation of positions found to be in violation of these limits
and it may impose certain other sanctions. These limits may restrict the
number of options the Fund will be able to purchase on a particular security.

Securities Index Options. The Fund may purchase and write
exchange-listed and OTC put and call options on securities indexes. A
securities index measures the movement of a certain group of securities by
assigning relative values to the securities included in the index, fluctuating
with changes in the market values of the securities included in the index.
Securities index options may be based on a broad or narrow market index or on
a particular industry or market segment.

Options on securities indexes are similar to options on securities
except that (i) the expiration cycles of securities index options are monthly,
while those of securities options are currently quarterly, and (ii) the
delivery requirements are different. Instead of giving the right to take or
make delivery of securities at a specified price, an option on a securities
index gives the holder the right to receive a cash "exercise settlement
amount" equal to (a) the amount, if any, by which the fixed exercise price of
the option exceeds (in the case of a put) or is less than (in the case of a
call) the closing value of the underlying index on the date of exercise,
multiplied by (b) a fixed "index multiplier." Receipt of this cash amount
will depend upon the closing level of the index upon which the option is based
being greater than, in the case of a call, or less than, in the case of a put,
the exercise price of the index and the exercise price of the option times a
specified multiple. The writer of the option is obligated, in return for the
premium received, to make delivery of this amount. Index options may be
offset by entering into closing transactions as described above for securities
options.

OTC Options. The Fund may purchase OTC or dealer options or sell
covered OTC options. Unlike exchange-listed options where an intermediary or
clearing corporation, such as the Clearing Corporation, assures that all
transactions in such options are properly executed, the responsibility for
performing all transactions with respect to OTC options rests solely with the
writer and the holder of those options. A listed call option writer, for
example, is obligated to deliver the underlying securities to the clearing
organization if the option is exercised, and the clearing organization is then
obligated to pay the writer the exercise price of the option. If the Fund
were to purchase a dealer option, however, it would rely on the dealer from
whom it purchased the option to perform if the option were exercised. If the
dealer fails to honor the exercise of the option by the Fund, the Fund would
lose the premium it paid for the option and the expected benefit of the
transaction.

<PAGE>6

Listed options generally have a continuous liquid market while
dealer options have none. Consequently, the Fund will generally be able to
realize the value of a dealer option it has purchased only by exercising it or
reselling it to the dealer who issued it. Similarly, when the Fund writes a
dealer option, it generally will be able to close out the option prior to its
expiration only by entering into a closing purchase transaction with the
dealer to which the Fund originally wrote the option. Although the Fund will
seek to enter into dealer options only with dealers who will agree to and that
are expected to be capable of entering into closing transactions with the
Fund, there can be no assurance that the Fund will be able to liquidate a
dealer option at a favorable price at any time prior to expiration. The
inability to enter into a closing transaction may result in material losses to
the Fund. Until the Fund, as a covered OTC call option writer, is able to
effect a closing purchase transaction, it will not be able to liquidate
securities (or other assets) used to cover the written option until the option
expires or is exercised. This requirement may impair the Fund's ability to
sell portfolio securities or, with respect to currency options, currencies at
a time when such sale might be advantageous. In the event of insolvency of
the other party, the Fund may be unable to liquidate a dealer option.

Futures Activities. The Fund may enter into foreign currency,
interest rate and securities index futures contracts and purchase and write
(sell) related options traded on exchanges designated by the Commodity Futures
Trading Commission (the "CFTC") or consistent with CFTC regulations on foreign
exchanges. These transactions may be entered into for "bona fide hedging"
purposes as defined in CFTC regulations and other permissible purposes
including hedging against changes in the value of portfolio securities due to
anticipated changes in currency values, interest rates and/or market
conditions and increasing return.

The Fund will not enter into futures contracts and related options
for which the aggregate initial margin and premiums (discussed below) required
to establish positions other than those considered to be "bona fide hedging"
by the CFTC exceed 5% of the Fund's net asset value after taking into account
unrealized profits and unrealized losses on any such contracts it has entered
into. The Fund reserves the right to engage in transactions involving futures
contracts and options on futures contracts to the extent allowed by CFTC
regulations in effect from time to time and in accordance with the Fund's
policies. Although the Fund is limited in the amount of assets it may invest
in futures transactions (as described above and in the Prospectus), there is
no overall limit on the percentage of Fund assets that may be at risk with
respect to futures activities. The ability of the Fund to trade in futures
contracts and options on futures contracts may be limited by the requirements
of the Internal Revenue Code of 1986, as amended (the "Code"), applicable to a
regulated investment company.

Futures Contracts. A foreign currency futures contract provides for
the future sale by one party and the purchase by the other party of a certain
amount of a specified non-U.S. currency at a specified price, date, time and
place. An interest rate futures contract provides for the future sale by one
party and the purchase by the other party of a certain amount of a specific
interest rate sensitive financial instrument (debt security) at a specified

<PAGE>7

price, date, time and place. Securities indexes are capitalization weighted
indexes which reflect the market value of the securities listed on the
indexes. A securities index futures contract is an agreement to be settled by
delivery of an amount of cash equal to a specified multiplier times the
difference between the value of the index at the close of the last trading day
on the contract and the price at which the agreement is made.

No consideration is paid or received by the Fund upon entering into
a futures contract. Instead, the Fund is required to deposit in a segregated
account with its custodian an amount of cash or cash equivalents, such as U.S.
government securities or other liquid high-grade debt obligations, equal to
approximately 1% to 10% of the contract amount (this amount is subject to
change by the exchange on which the contract is traded, and brokers may charge
a higher amount). This amount is known as "initial margin" and is in the
nature of a performance bond or good faith deposit on the contract which is
returned to the Fund upon termination of the futures contract, assuming all
contractual obligations have been satisfied. The broker will have access to
amounts in the margin account if the Fund fails to meet its contractual
obligations. Subsequent payments, known as "variation margin," to and from
the broker, will be made daily as the currency, financial instrument or index
underlying the futures contract fluctuates, making the long and short
positions in the futures contract more or less valuable, a process known as
"marking-to-market." The Fund will also incur brokerage costs in connection
with entering into futures transactions.

At any time prior to the expiration of a futures contract, the Fund
may elect to close the position by taking an opposite position, which will
operate to terminate the Fund's existing position in the contract. Positions
in futures contracts and options on futures contracts (described below) may be
closed out only on the exchange on which they were entered into (or through a
linked exchange). No secondary market for such contracts exists. Although
the Fund intends to enter into futures contracts only if there is an active
market for such contracts, there is no assurance that an active market will
exist at any particular time. Most futures exchanges limit the amount of
fluctuation permitted in futures contract prices during a single trading day.
Once the daily limit has been reached in a particular contract, no trades may
be made that day at a price beyond that limit or trading may be suspended for
specified periods during the day. It is possible that futures contract prices
could move to the daily limit for several consecutive trading days with little
or no trading, thereby preventing prompt liquidation of futures positions at
an advantageous price and subjecting the Fund to substantial losses. In such
event, and in the event of adverse price movements, the Fund would be required
to make daily cash payments of variation margin. In such situations, if the
fund had insufficient cash, it might have to sell securities to meet daily
variation margin requirements at a time when it would be disadvantageous to do
so. In addition, if the transaction is entered into for hedging purposes, in
such circumstances the Fund may realize a loss on a futures contract or option
that is not offset by an increase in the value of the hedged position. Losses
incurred in futures transactions and the costs of these transactions will
affect the Fund's performance.

<PAGE>8

Options on Futures Contracts. The Fund may purchase and write put
and call options on foreign currency, interest rate and securities index
futures contracts and may enter into closing transactions with respect to such
options to terminate existing positions. There is no guarantee that such
closing transactions can be effected; the ability to establish and close out
positions on such options will be subject to the existence of a liquid market.

An option on a currency, interest rate or securities index futures
contract, as contrasted with the direct investment in such a contract, gives
the purchaser the right, in return for the premium paid, to assume a position
in a futures contract at a specified exercise price at any time prior to the
expiration date of the option. The writer of the option is required upon
exercise to assume an offsetting futures position (a short position if the
option is a call and a long position if the option is a put). Upon exercise
of an option, the delivery of the futures position by the writer of the option
to the holder of the option will be accompanied by delivery of the accumulated
balance in the writer's futures margin account, which represents the amount by
which the market price of the futures contract exceeds, in the case of a call,
or is less than, in the case of a put, the exercise price of the option on the
futures contract. The potential loss related to the purchase of an option on
futures contracts is limited to the premium paid for the option (plus
transaction costs). Because the value of the option is fixed at the point of
sale, there are no daily cash payments by the purchaser to reflect changes in
the value of the underlying contract; however, the value of the option does
change daily and that change would be reflected in the net asset value of the
Fund.

Currency Exchange Transactions. The value in U.S. dollars of the
assets of the Fund that are invested in foreign securities may be affected
favorably or unfavorably by changes in exchange control regulations, and the
Fund may incur costs in connection with conversion between various currencies.
Currency exchange transactions may be from any non-U.S. currency into U.S.
dollars or into other appropriate currencies. The Fund will conduct its
currency exchange transactions (i) on a spot (i.e., cash) basis at the rate
prevailing in the currency exchange market, (ii) through entering into futures
contracts or options on such contracts (as described above), (iii) through
entering into forward contracts to purchase or sell currency or (iv) by
purchasing and writing exchange-traded currency options.

Forward Currency Contracts. A forward currency contract involves
an obligation to purchase or sell a specific currency at a future date, which
may be any fixed number of days from the date of the contract as agreed upon
by the parties, at a price set at the time of the contract. These contracts
are entered into in the interbank market conducted directly between currency
traders (usually large commercial banks and brokers) and their customers.
Forward currency contracts are similar to currency futures contracts, except
that futures contracts are traded on commodities exchanges and are
standardized as to contract size and delivery date.

At or before the maturity of a forward contract, the Fund may either
sell a portfolio security and make delivery of the currency, or retain the
security and fully or

<PAGE>9

partially offset its contractual obligation to deliver the currency by
negotiating with its trading partner to purchase a second, offsetting
contract. If the Fund retains the portfolio security and engages in an
offsetting transaction, the Fund, at the time of execution of the offsetting
transaction, will incur a gain or a loss to the extent that movement has
occurred in forward contract prices.

Currency Options. The Fund may purchase and write exchange-traded
put and call options on foreign currencies. Put options convey the right to
sell the underlying currency at a price which is anticipated to be higher than
the spot price of the currency at the time the option is exercised. Call
options convey the right to buy the underlying currency at a price which is
expected to be lower than the spot price of the currency at the time the
option is exercised.

Currency Hedging. The Fund's currency hedging will be limited to
hedging involving either specific transactions or portfolio positions.
Transaction hedging is the purchase or sale of forward currency with respect
to specific receivables or payables of the Fund generally accruing in
connection with the purchase or sale of its portfolio securities. Position
hedging is the sale of forward currency with respect to portfolio security
positions. The Fund may not position hedge to an extent greater than the
aggregate market value (at the time of entering into the hedge) of the hedged
securities.

A decline in the U.S. dollar value of a foreign currency in which
the Fund's securities are denominated will reduce the U.S. dollar value of the
securities, even if their value in the foreign currency remains constant. The
use of currency hedges does not eliminate fluctuations in the underlying
prices of the securities, but it does establish a rate of exchange that can be
achieved in the future. For example, in order to protect against diminutions
in the U.S. dollar value of securities it holds, the Fund may purchase
currency put options. If the value of the currency does decline, the Fund
will have the right to sell the currency for a fixed amount in dollars and
will thereby offset, in whole or in part, the adverse effect on the U.S.
dollar value of its securities that otherwise would have resulted.
Conversely, if a rise in the U.S. dollar value of a currency in which
securities to be acquired are denominated is projected, thereby potentially
increasing the cost of the securities, the Fund may purchase call options on
the particular currency. The purchase of these options could offset, at least
partially, the effects of the adverse movements in exchange rates. The
benefit to the Fund derived from purchases of currency options, like the
benefit derived from other types of options, will be reduced by premiums and
other transaction costs. Because transactions in currency exchange are
generally conducted on a principal basis, no fees or commissions are generally
involved. Currency hedging involves some of the same risks and considerations
as other transactions with similar instruments. Although currency hedges
limit the risk of loss due to a decline in the value of a hedged currency, at
the same time, they also limit any potential gain that might result should the
value of the currency increase. If a devaluation is generally anticipated,
the Fund may not be able to contract to sell a currency at a price above the
devaluation level it anticipates.

<PAGE>10

While the values of currency futures and options on futures, forward
currency contracts and currency options may be expected to correlate with
exchange rates, they will not reflect other factors that may affect the value
of the Fund's investments and a currency hedge may not be entirely successful
in mitigating changes in the value of the Fund's investments denominated in
that currency. A currency hedge, for example, should protect a Yen-
denominated bond against a decline in the Yen, but will not protect the Fund
against a price decline if the issuer's creditworthiness deteriorates.

Hedging. In addition to entering into options, futures and currency
exchange transactions for other purposes, including generating current income
to offset expenses or increase return, the Fund may enter into these
transactions as hedges to reduce investment risk, generally by making an
investment expected to move in the opposite direction of its portfolio
position. A hedge is designed to offset a loss in a portfolio position with a
gain in the hedged position; at the same time, however, a properly correlated
hedge will result in a gain in the portfolio position being offset by a loss
in the hedged position. As a result, the use of options, futures, contracts
and currency exchange transactions for hedging purposes could limit any
potential gain from an increase in the value of the position hedged. In
addition, the movement in the portfolio position hedged may not be of the same
magnitude as movement in the hedge. With respect to futures contracts, since
the value of portfolio securities will far exceed the value of the futures
contracts sold by the Fund, an increase in the value of the futures contracts
could only mitigate, but not totally offset, the decline in the value of the
Fund's assets.

In hedging transactions based on an index, whether the Fund will
realize a gain or loss from the purchase or writing of options on an index
depends upon movements in the level of securities prices in the market
generally or, in the case of certain indexes, in an industry or market
segment, rather than movements in the price of a particular security. The
risk of imperfect correlation increases as the composition of the Fund's
portfolio varies from the composition of the index. In an effort to
compensate for imperfect correlation of relative movements in the hedged
position and the hedge, the Fund's hedge positions may be in a greater or
lesser dollar amount than the dollar amount of the hedged position. Such
"over hedging" or "under hedging" may adversely affect the Fund's net
investment results if market movements are not as anticipated when the hedge
is established. Securities index futures transactions may be subject to
additional correlation risks. First, all participants in the futures market
are subject to margin deposit and maintenance requirements. Rather than
meeting additional margin deposit requirements, investors may close futures
contracts through offsetting transactions which would distort the normal
relationship between the index and futures markets. Secondly, from the point
of view of speculators, the deposit requirements in the futures market are
less onerous than margin requirements in the securities market. Therefore,
increased participation by speculators in the futures market also may cause
temporary price distortions. Because of the possibility of price distortions
in the futures market and the imperfect correlation between movements in an
index and movements in the price of index futures, a correct forecast of
general market trends by Warburg still may not result in a successful hedging
transaction.

<PAGE>11

The Fund will engage in hedging transactions only when deemed
advisable by Warburg, and successful use by the Fund of hedging transactions
will be subject to Warburg's ability to predict trends in currency, interest
rate or securities markets, as the case may be, and to correctly predict
movements in the directions of the hedge and the hedged position and the
correlation between them, which predictions could prove to be inaccurate.
This requires different skills and techniques than predicting changes in the
price of individual securities, and there can be no assurance that the use of
these strategies will be successful. Even a well-conceived hedge may be
unsuccessful to some degree because of unexpected market behavior or trends.
Losses incurred in hedging transactions and the costs of these transactions
will affect the Fund's performance.

Asset Coverage for Forward Contracts, Options, Futures and Options
on Futures. As described in the Prospectuses, the Fund will comply with
guidelines established by the U.S. Securities and Exchange Commission (the
"SEC") with respect to coverage of forward currency contracts; options written
by the Fund on securities, indexes and currencies; and currency, interest rate
and index futures contracts and options on these futures contracts. These
guidelines may, in certain instances, require segregation by the Fund of cash
or liquid high-grade debt securities or other securities that are acceptable
as collateral to the appropriate regulatory authority.

For example, a call option written by the Fund on securities may
require the Fund to hold the securities subject to the call (or securities
convertible into the securities without additional consideration) or to
segregate assets (as described above) sufficient to purchase and deliver the
securities if the call is exercised. A call option written by the Fund on an
index may require the Fund to own portfolio securities that correlate with the
index or to segregate assets (as described above) equal to the excess of the
index value over the exercise price on a current basis. A put option written
by the Fund may require the Fund to segregate assets (as described above)
equal to the exercise price. The Fund could purchase a put option if the
strike price of that option is the same or higher than the strike price of a
put option sold by the Fund. If the Fund holds a futures or forward contract,
the Fund could purchase a put option on the same futures or forward contract
with a strike price as high or higher than the price of the contract held.
The Fund may enter into fully or partially offsetting transactions so that its
net position, coupled with any segregated assets (equal to any remaining
obligation), equals its net obligation. Asset coverage may be achieved by
other means when consistent with applicable regulatory policies.

Additional Information on Investment Practices

Foreign Investments. The Fund may not invest more than 35% of its
assets in securities denominated in a currency other than U.S. dollars.
Investors should recognize that investing in foreign companies involves
certain risks, including those discussed below, which are not typically
associated with investing in United States issuers. Since the Fund may invest
in securities denominated in currencies other than the U.S. dollar, and since
the Fund

<PAGE>12

may temporarily hold funds in bank deposits or other money market investments
denominated in foreign currencies, the Fund may be affected favorably or
unfavorably by exchange control regulations or changes in the exchange rate
between such currencies and the dollar. A change in the value of a foreign
currency relative to the U.S. dollar will result in a corresponding change in
the dollar value of the Fund assets denominated in that foreign currency.
Changes in foreign currency exchange rates may also affect the value of
dividends and interest earned, gains and losses realized on the sale of
securities and net investment income and gains, if any, to be distributed to
shareholder by the Fund. The rate of exchange between the U.S. dollar and
other currencies is determined by the forces of supply and demand in the
foreign exchange markets. Changes in the exchange rate may result over time
from the interaction of many factors directly or indirectly affecting economic
and political conditions in the United States and a particular foreign
country, including economic and political developments in other countries. If
particular importance are rates of inflation, interest rate levels, the
balance of payments and the extent of government surpluses or deficits in the
United States and the particular foreign country, all of which are in turn
sensitive to the monetary, fiscal and trade policies pursued by the
governments of the United States and other foreign countries important to
international trade and finance. Governmental intervention may also play a
significant role. National governments rarely voluntarily allow their
currencies to float freely in response to economic forces. Sovereign
governments use a variety of techniques, such as intervention by a country's
central bank or imposition of regulatory controls or taxes, to affect the
exchange rates of their currencies. The Fund may use hedging techniques with
the objective of protecting against loss through the fluctuation of the value
of foreign currencies against the U.S. dollar, particularly the forward market
in foreign exchange, currency options and currency futures. See "Currency
Transactions" and "Futures Transactions" above.

Many of the foreign securities held by the Fund will not be
registered with, nor the issuers thereof be subject to reporting requirements
of, the SEC. Accordingly, there may be less publicly available information
about such securities and about the foreign company or government issuing them
than is available about a domestic company or government entity. Foreign
companies are generally not subject to uniform financial reporting standards,
practices and requirements comparable to those applicable to U.S. companies.
In addition, with respect to some foreign countries, there is the possibility
of expropriation or confiscatory taxation, limitations on the removal of funds
or other assets of the Fund, political or social instability, or domestic
developments which could affect U.S. investments in those countries.

Moreover, individual foreign economies may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross national
product, rate of inflation, capital reinvestment, resource self-sufficiency,
and balance of payments positions. The Fund may invest in securities of
foreign governments (or agencies or instrumentalities thereof), and many, if
not all, of the foregoing considerations apply to such investments as well.

<PAGE>13

Delays. Securities of some foreign companies are less liquid and
their prices more volatile than securities of comparable U.S. companies.
Certain foreign countries are known to experience long delays between the
trade and settlement dates of securities purchased or sold. Due to the
increased exposure of the Fund to market and foreign exchange fluctuations
brought about by such delays, and due to the corresponding negative impact on
Fund liquidity, the Fund will avoid investing in countries which are known to
experience settlement delays which may expose the Fund to unreasonable risk of
loss.

Increased Expenses. The operating expenses of the Fund, to the
extent it invests in foreign securities, may be higher than that of an
investment company investing exclusively in U.S. securities, since the
expenses of the Fund, such as custodial costs, valuation costs and
communication costs, may be higher than those costs incurred by investment
companies not investing in foreign securities.

Foreign Debt Securities. The returns on foreign debt securities
reflect interest rates and other market conditions prevailing in those
countries and the effect of gains and losses in the denominated currencies
against the U.S. dollar, which have had a substantial impact on investment in
foreign fixed income securities. The relative performance of various
countries' fixed income markets historically has reflected wide variations
relating to the unique characteristics of each country's economy. Year-to-
year fluctuations in certain markets have been significant, and negative
returns have been experienced in various markets from time to time.

The foreign government securities in which the Fund may invest
generally consist of obligations issued or backed by national, state or
provincial governments or similar political subdivisions or central banks in
foreign countries. Foreign government securities also include debt
obligations of supranational entities, which include international
organizations designated, or backed by governmental entities to promote
economic reconstruction or development, international banking institutions and
related government agencies. Examples include the International Bank for
Reconstruction and Development (the "World Bank"), the European Coal and Steel
Community, the Asian Development Bank and the InterAmerican Development Bank.

Foreign government securities also include debt securities "quasi-
governmental agencies" and debt securities denominated in multinational
currency units of an issuer (including supranational issuers). Debt
securities of quasi-governmental agencies are issued by entities owned by
either a national, state or equivalent government or are obligations of a
political unit that is not backed by the national government's full faith and
credit and general taxing powers. An example of a multinational currency unit
is the European Currency Unit ("ECU"). An ECU represents specified amounts of
the currencies of certain member states of the European Economic Community.
The specific amounts of currencies comprising the ECU may be adjusted by the
Council of Ministers of the European Community to reflect changes in relative
values of the underlying currencies.

<PAGE>14

U.S. Government Securities. The Fund may invest in debt obligations
of varying maturities issued or guaranteed by the United States government,
its agencies or instrumentalities ("U.S. government securities"). Direct
obligations of the U.S. Treasury include a variety of securities that differ
in their interest rates, maturities and dates of issuance. U.S. government
securities also include securities issued or guaranteed by the Federal Housing
Administration, Farmers Home Loan Administration, Export-Import Bank of the
United States, Small Business Administration, Government National Mortgage
Association, General Services Administration, Central Bank for Cooperatives,
Federal Farm Credit Banks, Federal Home Loan Banks, Federal Home Loan Mortgage
Corporation, Federal Intermediate Credit Banks, Federal Land Banks, Federal
National Mortgage Association, Maritime Administration, Tennessee Valley
Authority, District of Columbia Armory Board and Student Loan Marketing
Association. The Fund may also invest in instruments that are supported by
the right of the issuer to borrow from the U.S. Treasury and instruments that
are supported by the credit of the instrumentality. Because the U.S.
government is not obligated by law to provide support to an instrumentality it
sponsors, the Fund will invest in obligations issued by such an
instrumentality only if Warburg, Pincus Counsellors, Inc., the Fund's
investment adviser ("Counsellors"), determines that the credit risk with
respect to the instrumentality does not make its securities unsuitable for
investment by the Fund.

Loan Participations and Assignments. The Fund may invest in fixed
and floating rate loans ("Loans") arranged through private negotiations
between a foreign government (a "Borrower") and one or more financial
institutions ("Lenders"). The majority of the Fund's investments in Loans are
expected to be in the form of participations in Loans ("Participations") and
assignments of portions of Loans from third parties ("Assignments").
Participations typically will result in the Fund having a contractual
relationship only with the Lender, not with the Borrower. The Fund will have
the right to receive payments of principal, interest and any fees to which it
is entitled only from the Lender selling the Participation and only upon
receipt by the Lender of the payments from the Borrower. In connection with
purchasing Participations, the Fund generally will have no right to enforce
compliance by the Borrower with the terms of the loan agreement relating to
the Loan, nor any rights of set-off against the Borrower, and the Fund may not
directly benefit from any collateral supporting the Loan in which it has
purchased the Participation. As a result, the Fund will assume the credit
risk of both the Borrower and the Lender that is selling the Participation.
In the event of the insolvency of the Lender selling a Participation, the Fund
may be treated as a general creditor of the Lender and may not benefit from
any set-off between the Lender and the Borrower. The Fund will acquire
Participations only if the Lender interpositioned between the Fund and the
Borrower is determined by Counsellors to be creditworthy.

When the Fund purchases Assignments from Lenders, the Fund will
acquire direct rights against the Borrower on the Loan. However, since
Assignments are generally arranged through private negotiations between
potential assignees and potential assignors, the

<PAGE>15

rights and obligations acquired by the Fund as the purchaser of an Assignment
may differ from, and be more limited than, those held by the assigning Lender.

There are risks involved in investing in Participations and
Assignments. The Fund may have difficulty disposing of them because there is
no liquid market for such securities. The lack of a liquid secondary market
will have an adverse impact on the value of such securities and on the Fund's
ability to dispose of particular Participations or Assignments when necessary
to meet the Fund's liquidity needs or in response to a specific economic
event, such as a deterioration in the creditworthiness of the Borrower. The
lack of a liquid market for Participations and Assignments also may make it
more difficult for the Fund to assign a value to these securities for purposes
of valuing the Fund's portfolio and calculating its net asset value.

Municipal Obligations. Municipal Obligations are debt obligations
issued by or on behalf of states (including the state of New York),
territories and possessions of the United States and the District of Columbia
and their political subdivisions, agencies and instrumentalities. Municipal
Obligations are issued by governmental entities to obtain funds for various
public purposes, including the construction of a wide range of public
facilities, the refunding of outstanding obligations, the payment of general
operating expenses and the extension of loans to public institutions and
facilities. Private activity bonds that are issued by or on behalf of public
authorities to finance various privately-operated facilities are included
within the term Municipal Obligations if the interest paid thereon is exempt
from federal income tax.

The two principal types of Municipal Obligations, in terms of the
source of payment of debt service on the bonds, consist of "general
obligation" and "revenue" issues. General obligation bonds are secured by the
issuer's pledge of its full faith, credit and taxing power for the payment of
principal and interest. Revenue bonds are payable from the revenues derived
from a particular facility or class of facilities or in some cases, from the
proceeds of a special excise tax or other specific revenue source such as the
user of the facility being financed. Consequently, the credit quality of
revenue bonds is usually directly related to the credit standing of the user
of the facility involved.

There are, of course, variations in the quality of Municipal
Obligations, both within a particular classification and between
classifications, and the yields on Municipal Obligations depend upon a variety
of factors, including general money market conditions, the financial condition
of the issuer, general conditions of the municipal bond market, the size of a
particular offering, the maturity of the obligation and the rating of the
issue. The ratings of Moody's Investors Service, Inc. ("Moody's") and
Standard & Poor's Ratings Group ("S&P") represent their opinions as to the
quality of Municipal Obligations. It should be emphasized, however, that
ratings are general and are not absolute standards of quality, and Municipal
Obligations with the same maturity, interest rate and rating may have
different yields while Municipal Obligations of the same maturity and interest
rate with different ratings may have the same yield. Subsequent to its
purchase by the Fund, an issue of

<PAGE>16

Municipal Obligations may cease to be rated or its rating may be reduced below
the minimum rating required for purchase by the Fund. The Fund's investment
adviser will consider such an event in determining whether the Fund should
continue to hold the obligation. See the Appendix attached hereto for further
information concerning the ratings of Moody's and S&P and their significance.

Among other instruments, the Fund may purchase short term Tax
Anticipation Notes, Bond Anticipation Notes, Revenue Anticipation Notes and
other forms of short term loans. Such notes are issued with a short term
maturity in anticipation of the receipt of tax funds, the proceeds of bond
placements or other revenues.

The yields on Municipal Obligations are dependent upon a variety of
factors, including general economic and monetary conditions, money market
factors, conditions of the municipal bond market, size of a particular
offering, maturity of the obligation offered and rating of the issue.

Municipal Obligations are also subject to the provisions of
bankruptcy, insolvency and other laws affecting the rights and remedies of
creditors, such as the Federal Bankruptcy Code, and laws, if any, which may be
enacted by Congress or state legislatures extending the time for payment of
principal or interest, or both, or imposing other constraints upon enforcement
of such obligations or upon the ability of municipalities to levy taxes.
There is also the possibility that as a result of litigation or other
conditions, the power or ability of any one or more issuers to pay, when due,
principal of and interest on its, or their, Municipal Obligations may be
materially affected.

Securities of Other Investment Companies. The Fund may invest in
securities of other investment companies to the extent permitted under the
Investment Company Act of 1940, as amended (the "1940 Act"). Presently, under
the 1940 Act, the Fund may hold securities of another investment company in
amounts which (i) do not exceed 3% of the total outstanding voting stock of
such company, (ii) do not exceed 5% of the value of the Fund's total assets
and (iii) when added to all other investment company securities held by the
Fund, do not exceed 10% of the value of the Fund's total assets.

Below Investment Grade Securities. The Fund may hold up to 35% of
its net assets in fixed income securities rated below investment grade and as
low as C by Moody's or D by S&P, and in comparable unrated securities. While
the market values of medium and lower-rated securities and unrated securities
of comparable quality tend to react less to fluctuations in interest rate
levels than do those of higher-rated securities, the market values of certain
of these securities also tend to be more sensitive to individual corporate
developments and changes in economic conditions than higher-quality
securities. In addition, medium and lower-rated securities and comparable
unrated securities generally present a higher degree of credit risk. Issuers
of medium and lower-rated securities and unrated securities are often highly
leveraged and may not have more traditional methods of financing available to
them so that their ability to service their debt obligations during an
economic

<PAGE>17

downturn or during sustained periods of rising interest rates may be impaired.
The risk of loss due to default by such issuers is significantly greater
because medium and lower-rated securities and unrated securities generally are
unsecured and frequently are subordinated to the prior payment of senior
indebtedness.

The market for medium and lower-rated and unrated securities is
relatively new and has not weathered a major economic recession. Any such
recession could disrupt severely the market for such securities and may
adversely affect the value of such securities and the ability of the issuers
of such securities to repay principal and pay interest thereon.

The Fund may have difficulty disposing of certain of these
securities because there may be a thin trading market. Because there is no
established retail secondary market for many of these securities, the Fund
anticipates that these securities could be sold only to a limited number of
dealers or institutional investors. To the extent a secondary trading market
for these securities does exist, it generally is not as liquid as the
secondary market for higher-rated securities. The lack of a liquid secondary
market, as well as adverse publicity and investor perception with respect to
these securities, may have an adverse impact on market price and the Fund's
ability to dispose of particular issues when necessary to meet the Fund's
liquidity needs or in response to a specific economic event such as a
deterioration in the creditworthiness of the issuer. The lack of a liquid
secondary market for certain securities also may make it more difficult for
the Fund to obtain accurate market quotations for purposes of valuing the Fund
and calculating its net asset value.

The market value of securities in lower-rated categories is more
volatile than that of higher quality securities. Factors adversely impacting
the market value of these securities will adversely impact the Fund's net
asset value. The Fund will rely on the judgment, analysis and experience of
Warburg in evaluating the creditworthiness of an issuer. In this evaluation,
Warburg will take into consideration, among other things, the issuer's
financial resources, its sensitivity to economic conditions and trends, its
operating history, the quality of the issuer's management and regulatory
matters. Normally, medium- and lower-rated and comparable unrated securities
are not intended for short-term investment. The Fund may incur additional
expenses to the extent it is required to seek recovery upon a default in the
payment of principal or interest on its portfolio holdings of such securities.
Recent adverse publicity regarding lower-rated bonds may have depressed the
prices for such securities to some extent. Whether investor perceptions will
continue to have a negative effect on the price of such securities is uncertain.

Lending of Portfolio Securities. The Fund may lend portfolio
securities to brokers, dealers and other financial organizations that meet
capital and other credit requirements or other criteria established by the
Fund's Board of Trustees (the "Board"). These loans, if and when made, may
not exceed 20% of the Fund's total assets taken at value. The Fund will not
lend portfolio securities to E.M. Warburg, Pincus & Co., Inc. ("EMW") or its
affiliates unless it has applied for and received specific authority to do so
from the SEC. Loans of portfolio securities will be collateralized by cash,
letters of credit or

<PAGE>18

U.S. government securities, which are maintained at all times in an amount
equal to at least 100% of the current market value of the loaned securities.
Any gain or loss in the market price of the securities loaned that might occur
during the term of the loan would be for the account of the Fund. From time
to time, the Fund may return a part of the interest earned from the investment
of collateral received for securities loaned to the borrower and/or a third
party that is unaffiliated with the Fund and that is acting as a "finder."

By lending its securities, the Fund can increase its income by
continuing to receive interest and any dividends on the loaned securities as
well as by either investing the collateral received for securities loaned
in short-term instruments or obtaining yield in the form of interest paid by
the borrower when U.S. government securities are used as collateral. The Fund
will adhere to the following conditions whenever its portfolio securities are
loaned: (i) the Fund must receive at least 100% cash collateral or equivalent
securities of the type discussed in the preceding paragraph from the borrower;
(ii) the borrower must increase such collateral whenever the market value of
the securities rises above the level of such collateral; (iii) the Fund must
be able to terminate the loan at any time; (iv) the Fund must receive
reasonable interest on the loan, as well as any dividends, interest or other
distributions on the loaned securities and any increase in market value; (v)
the Fund may pay only reasonable custodian fees in connection with the loan;
and (vi) voting rights on the loaned securities may pass to the borrower,
provided, however, that if a material event adversely affecting the investment
occurs, the Board of Trustees must terminate the loan and regain the right to
vote the securities. Loan agreements involve certain risks in the event of
default or insolvency of the other party including possible delays or
restrictions upon the Fund's ability to recover the loaned securities or
dispose of the collateral for the loan.

Reverse Repurchase Agreements and Dollar Rolls. The Fund may enter
into reverse repurchase agreements with the same parties with whom it may
enter into repurchase agreements. Reverse repurchase agreements involve the
sale of securities held by the Fund pursuant to its agreement to repurchase
them at a mutually agreed upon date, price and rate of interest. At the time
the Fund enters into a reverse repurchase agreement, it will establish and
maintain a segregated account with an approved custodian containing cash or
liquid high-grade debt securities having a value not less than the repurchase
price (including accrued interest). The assets contained in the segregated
account will be marked-to-market daily and additional assets will be placed in
such account on any day in which the assets fall below the repurchase price
(plus accrued interest). The Fund's liquidity and ability to manage its
assets might be affected when it sets aside cash or portfolio securities to
cover such commitments. Reverse repurchase agreements involve the risk that
the market value of the securities retained in lieu of sale may decline below
the price of the securities the Fund has sold but is obligated to repurchase.
In the event the buyer of securities under a reverse repurchase agreement
files for bankruptcy or becomes insolvent, such buyer or its trustee or
receiver may receive an extension of time to determine whether to enforce a
Fund's obligation to repurchase the securities, and the Fund's use of the
proceeds of the reverse repurchase agreement may effectively be restricted
pending such decision.

<PAGE>19

The Fund also may enter into "dollar rolls," in which the Fund sells
fixed-income securities for delivery in the current month and simultaneously
contracts to repurchase similar but not identical (same type, coupon and
maturity) securities on a specified future date. During the roll period, the
Fund would forego principal and interest paid on such securities. The Fund
would be compensated by the difference between the current sales price and the
forward price for the future purchase, as well as by the interest earned on
the cash proceeds of the initial sale. At the time the Fund enters into a
dollar roll transaction, it will place in a segregated account maintained with
an approved custodian cash or other liquid high-grade debt obligations having
a value not less than the repurchase price (including accrued interest) and
will subsequently monitor the account to ensure that its value is maintained.
Reverse repurchase agreements are considered to be borrowings under the 1940
Act.

Zero Coupon Securities. The Fund may invest in "zero coupon" U.S.
Treasury, foreign government and U.S. and foreign corporate convertible and
nonconvertible debt securities, which are bills, notes and bonds that have
been stripped of their unmatured interest coupons and custodial receipts or
certificates of participation representation interests in such stripped debt
obligations and coupons. A zero coupon security pays no interest to its
holder prior to maturity. Accordingly, such securities usually trade at a
deep discount from their face or par value and will be subject to greater
fluctuations of market value in response to changing interest rates than debt
obligations of comparable maturities that make current distributions of
interest. The Fund anticipates that it will not normally hold zero coupon
securities to maturity. Federal tax law requires that a holder of a zero
coupon security accrue a portion of the discount at which the security was
purchased as income each year, even though the holder receives no interest
payment on the security during the year. Such accrued discount will be
includible in determining the amount of dividends the Fund must pay each year
and, in order to generate cash necessary to pay such dividends, the Fund may
liquidate portfolio securities at a time when it would not otherwise have done
so.

Short Sales "Against the Box." In a short sale, the Fund sells a
borrowed security and has a corresponding obligation to the lender to return
the identical security. The seller does not immediately deliver the
securities sold and is said to have a short position in those securities until
delivery occurs. If the Fund engages in a short sale, the collateral for the
short position will be maintained by the Fund's custodian or qualified
sub-custodian. While the short sale is open, the Fund will maintain in a
segregated account an amount of securities equal in kind and amount to the
securities sold short or securities convertible into or exchangeable for such
equivalent securities. These securities constitute the Fund's long position.

The Fund does not intend to engage in short sales against the box
for investment purposes. The Fund may, however, make a short sale as a hedge,
when it believes that the price of a security may decline, causing a decline
in the value of a security owned by the Fund (or a security convertible or
exchangeable for such security), or when the Fund wants to sell the security
at an attractive current price, but also wishes to defer

<PAGE>20

recognition of gain or loss for U.S. federal income tax purposes and for
purposes of satisfying certain tests applicable to regulated investment
companies under the Code. In such case, any future losses in the Fund's long
position should be offset by a gain in the short position and, conversely, any
gain in the long position should be reduced by a loss in the short position.
The extent to which such gains or losses are reduced will depend upon the
amount of the security sold short relative to the amount the Fund owns. There
will be certain additional transaction costs associated with short sales
against the box, but the Fund will endeavor to offset these costs with the
income from the investment of the cash proceeds of short sales.

Variable Rate and Master Demand Notes. Variable rate demand notes
("VRDNs") are obligations issued by corporate or governmental entities which
contain a floating or variable interest rate adjustment formula and an
unconditional right of demand to receive payment of the unpaid principal
balance plus accrued interest upon a short notice period not to exceed seven
days. The interest rates are adjustable at intervals ranging from daily to up
to every six months to some prevailing market rate for similar investments,
such adjustment formula being calculated to maintain the market value of the
VRDN at approximately the par value of the VRDN upon the adjustment date. The
adjustments are typically based upon the prime rate of a bank or some other
appropriate interest rate adjustment index.

Master demand notes are notes which provide for a periodic
adjustment in the interest rate paid (usually tied to the Treasury Bill
auction rate) and permit daily changes in the principal amount borrowed.
While there may be no active secondary market with respect to a particular
VRDN purchased by the Fund, the Fund may, upon the notice specified in the
note, demand payment of the principal of and accrued interest on the note at
any time and may resell the note at any time to a third party. The absence of
such an active secondary market, however, could make it difficult for the Fund
to dispose of the VRDN involved in the event the issuer of the note defaulted
on its payment obligations, and the Fund could, for this or other reasons,
suffer a loss to the extent of the default.

When-Issued Securities and Delayed-Delivery Transactions. The Fund
may utilize its assets to purchase securities on a "when-issued" basis or
purchase or sell securities for delayed delivery (i.e., payment or delivery
occur beyond the normal settlement date at a stated price and yield).
When-issued transactions normally settle within 30-45 days. The Fund will
enter into a when-issued transaction for the purpose of acquiring portfolio
securities and not for the purpose of leverage, but may sell the securities
before the settlement date if Warburg deems it advantageous to do so. The
payment obligation and the interest rate that will be received on when-issued
securities are fixed at the time the buyer enters into the commitment. Due to
fluctuations in the value of securities purchased or sold on a when-issued or
delayed-delivery basis, the yields obtained on such securities may be higher
or lower than the yields available in the market on the dates when the
investments are actually delivered to the buyers.

<PAGE>21

When the Fund agrees to purchase when-issued or delayed-delivery
securities, its custodian will set aside cash, U.S. government securities or
other liquid high-grade debt obligations or securities that are acceptable as
collateral to the appropriate regulatory authority equal to the amount of the
commitment in a segregated account. Normally, the custodian will set aside
portfolio securities to satisfy a purchase commitment, and in such a case the
Fund may be required subsequently to place additional assets in the segregated
account in order to ensure that the value of the account remains equal to the
amount of the Fund's commitment. It may be expected that the Fund's net
assets will fluctuate to a greater degree when it sets aside portfolio
securities to cover such purchase commitments than when it sets aside cash.
When the Fund engages in when-issued or delayed-delivery transactions, it
relies on the other party to consummate the trade. Failure of the seller to
do so may result in the Fund's incurring a loss or missing an opportunity to
obtain a price considered to be advantageous.

Stand-By Commitment Agreements. The Fund may acquire "stand-by
commitments" with respect to securities held in its portfolio. Under a
stand-by commitment, a dealer agrees to purchase at the Fund's option
specified securities at a specified price. The Fund's right to exercise
stand-by commitments is unconditional and unqualified. Stand-by commitments
acquired by the Fund may also be referred to as "put" options. A stand-by
commitment is not transferrable by the Fund, although the Fund can sell the
underlying securities to a third party at any time.

The principal risk of stand-by commitments is that the writer of a
commitment may default on its obligation to repurchase the securities acquired
with it. The Fund intends to enter into stand-by commitments only with
brokers, dealers and banks that, in the opinion of Counsellors, present
minimal credit risks. In evaluating the creditworthiness of the issuer of a
stand-by commitment, Counsellors will periodically review relevant financial
information concerning the issuer's assets, liabilities and contingent claims.
The Fund will acquire stand-by commitments only in order to facilitate
portfolio liquidity and does not intend to exercise its rights under stand-by
commitments for trading purposes.

The amount payable to the Fund upon its exercise of a stand-by
commitment is normally (i) the Fund's acquisition cost of the securities
(excluding any accrued interest which the Fund paid on their acquisition),
less any amortized market premium or plus any amortized market or original
issue discount during the period the Fund owned the securities, plus (ii) all
interest accrued on the securities since the last interest payment date during
that period.

The Fund expects that stand-by commitments will generally be
available without the payment of any direct or indirect consideration.
However, if necessary or advisable, the Fund may pay for a stand-by commitment
either separately in cash or by paying a higher price for portfolio securities
which are acquired subject to the commitment (thus reducing the yield to
maturity otherwise available for the same securities). The total amount paid
in either manner for outstanding stand-by commitments held in the Fund's

<PAGE>22

portfolio will not exceed 1/2 of 1% of the value of the Fund's total assets
calculated immediately after each stand-by commitment is acquired.

The Fund would acquire stand-by commitments solely to facilitate
portfolio liquidity and does not intend to exercise its rights thereunder for
trading purposes. The acquisition of a stand-by commitment would not affect
the valuation or assumed maturity of the underlying securities. Stand-by
commitments acquired by the Fund would be valued at zero in determining net
asset value. Where the Fund paid any consideration directly or indirectly for
a stand-by commitment, its cost would be reflected as unrealized depreciation
for the period during which the commitment was held by the Fund. Stand-by
commitments would not affect the average weighted maturity of the Fund's
portfolio.

American, European and Continental Depositary Receipts. The assets
of the Fund may be invested in the securities of foreign issuers in the form
of American Depositary Receipts ("ADRs") and European Depositary Receipts
("EDRs"). These securities may not necessarily be denominated in the same
currency as the securities into which they may be converted. ADRs are
receipts typically issued by a U.S. bank or trust company which evidence
ownership of underlying securities issued by a foreign corporation. EDRs,
which are sometimes referred to as Continental Depositary Receipts ("CDRs"),
are receipts issued in Europe typically by non-U.S. banks and trust companies
that evidence ownership of either foreign or domestic securities. Generally,
ADRs in registered form are designed for use in U.S. securities markets and
EDRs and CDRs in bearer form are designed for use in European securities
markets.

Warrants. The Fund may invest up to 5% of its net assets in
warrants (valued at the lower of cost or market) (other than warrants acquired
by the Fund as part of a unit or attached to securities at the time of
purchase), provided that not more than 2% of net assets may be invested in
warrants not listed on a recognized U.S. or foreign stock exchange. Because a
warrant does not carry with it the right to dividends or voting rights with
respect to the securities which it entitles a holder to purchase, and because
it does not represent any rights in the assets of the issuer, warrants may be
considered more speculative than certain other types of investments. Also,
the value of a warrant does not necessarily change with the value of the
underlying securities and a warrant ceases to have value if it is not
exercised prior to its expiration date.

Non-Publicly Traded and Illiquid Securities. The Fund may not
invest more than 15% of its net assets in non-publicly traded and illiquid
securities, including securities that are illiquid by virtue of the absence of
a readily available market, repurchase agreements which have a maturity of
longer than seven days, VRDNs and master demand notes providing for settlement
upon more than seven days notice by the Fund, and time deposits maturing in
more than seven calendar days. Securities that have legal or contractual
restrictions on resale but have a readily available market are not considered
illiquid for purposes of this limitation. Repurchase agreements subject to
demand are deemed to have a maturity equal to the notice period.

<PAGE>23

Historically, illiquid securities have included securities subject
to contractual or legal restrictions on resale because they have not been
registered under the Securities Act of 1933, as amended (the "Securities
Act"), securities which are otherwise not readily marketable and repurchase
agreements having a maturity of longer than seven days. Securities which have
not been registered under the Securities Act are referred to as private
placements or restricted securities and are purchased directly from the issuer
or in the secondary market. Mutual funds do not typically hold a significant
amount of these restricted or other illiquid securities because of the
potential for delays on resale and uncertainty in valuation. Limitations on
resale may have an adverse effect on the marketability of portfolio securities
and a mutual fund might be unable to dispose of restricted or other illiquid
securities promptly or at reasonable prices and might thereby experience
difficulty satisfying redemptions within seven days. A mutual fund might also
have to register such restricted securities in order to dispose of them
resulting in additional expense and delay. Adverse market conditions could
impede such a public offering of securities.

In recent years, however, a large institutional market has developed
for certain securities that are not registered under the Securities Act
including repurchase agreements, commercial paper, foreign securities,
municipal securities and corporate bonds and notes. Institutional investors
depend on an efficient institutional market in which the unregistered security
can be readily resold or on an issuer's ability to honor a demand for
repayment. The fact that there are contractual or legal restrictions on
resale to the general public or to certain institutions may not be indicative
of the liquidity of such investments.

Rule 144A Securities. Rule 144A under the Securities Act adopted by
the SEC allows for a broader institutional trading market for securities
otherwise subject to restriction on resale to the general public. Rule 144A
establishes a "safe harbor" from the registration requirements of the
Securities Act for resales of certain securities to qualified institutional
buyers. Warburg anticipates that the market for certain restricted securities
such as institutional commercial paper will expand further as a result of this
regulation and use of automated systems for the trading, clearance and
settlement of unregistered securities of domestic and foreign issuers, such as
the PORTAL System sponsored by the National Association of Securities Dealers,
Inc.

An investment in Rule 144A Securities will be considered illiquid
and therefore subject to the Fund's limit on the purchase of illiquid
securities unless the Fund's Board of Trustees (the "Board") or its delegates
determines that the Rule 144A Securities are liquid. In reaching liquidity
decisions, Warburg may consider, inter alia, the following factors: (i) the
unregistered nature of the security; (ii) the frequency of trades and quotes
for the security; (iii) the number of dealers wishing to purchase or sell the
security and the number of other potential purchasers; (iv) dealer
undertakings to make a market in the security; and (v) the nature of the
security and the nature of the marketplace trades (e.g., the time needed to
dispose of the security, the method of soliciting offers and the mechanics of
the transfer).

<PAGE>24

Borrowing. The Fund may borrow up to 30% of its total assets for
temporary or emergency purposes, including to meet portfolio redemption
requests so as to permit the orderly disposition of portfolio securities or to
facilitate settlement transactions on portfolio securities. Investments
(including roll-overs) will not be made when borrowings exceed 5% of the
Fund's net assets. Although the principal of such borrowings will be fixed,
the Fund's assets may change in value during the time the borrowing is
outstanding. The Fund expects that some of its borrowings may be made on a
secured basis. In such situations, either the custodian will segregate the
pledged assets for the benefit of the lender or arrangements will be made with
a suitable subcustodian, which may include the lender.

Other Investment Limitations

The investment limitations numbered 1 through 12 may not be changed
without the affirmative vote of the holders of a majority of the Fund's
outstanding shares. Such majority is defined as the lesser of (i) 67% or more
of the shares present at the meeting, if the holders of more than 50% of the
outstanding shares of the Fund are present or represented by proxy, or (ii)
more than 50% of the outstanding shares. Investment limitations 13 through 18
may be changed by a vote of the Board at any time.

The Fund may not:

1. Borrow money except that the Fund may (i) borrow from banks for
temporary or emergency purposes, and (ii) enter into reverse repurchase
agreements; provided that reverse repurchase agreements, dollar roll
transactions that are accounted for as financings and any other transactions
constituting borrowing by the Fund may not exceed 30% of the value of the
Fund's total assets. For purposes of this restriction, short sales, the entry
into currency transactions, options, futures contracts, options on futures
contracts, forward commitment transactions and dollar roll transactions that
are not accounted for as financings (and the segregation of assets in
connection with any of the foregoing) shall not constitute borrowing.

2. Purchase any securities which would cause 25% or more of the
value of the Fund's total assets at the time of purchase to be invested in the
securities of issuers conducting their principal business activities in the
same industry; provided that there shall be no limit on the purchase of U.S.
government securities.

3. Make loans except that the Fund may purchase or hold
fixed-income securities, including loan participations, assignments and
structured securities; lend portfolio securities; and enter into repurchase
agreements.

4. Underwrite any securities issued by others except to the extent
that the investment in restricted securities and the sale of securities in
accordance with the Fund's investment objective, policies and limitations may
be deemed to be underwriting.

<PAGE>25

5. Purchase or sell real estate or invest in oil, gas or mineral
exploration or development programs or oil, gas and mineral leases, except
that the Fund may invest in (a) securities secured by real estate, mortgages
or interests therein and (b) securities of companies that invest in or sponsor
oil, gas or mineral exploration or development programs.

6. Make short sales of securities or maintain a short position,
except the Fund may maintain short positions in forward currency contracts,
options, futures contracts and options on futures contracts and make short
sales "against the box."

7. Purchase more than 10% of the voting securities of any one
issuer; provided that this limitation shall not apply to investments in U.S.
government securities.

8. Purchase securities on margin, except that the Fund may obtain
any short-term credits necessary for the clearance of purchases and sales of
securities. For purposes of this restriction, the deposit or payment of
initial or variation margin in connection with transactions in currencies,
options, futures contracts or related options will not be deemed to be a
purchase of securities on margin.

9. Invest in commodities, except that the Fund may purchase and
sell futures contracts, including those relating to securities, currencies and
indexes, and options on futures contracts, securities, currencies or indexes,
and purchase and sell currencies or securities on a forward commitment or
delayed-delivery basis.

10. Issue any senior security except as permitted in these
Investment Restrictions.

11. Purchase the securities of any issuer if as a result more than
5% of the value of the Fund's total assets would be invested in the securities
of such issuer, except that this 5% limitation does not apply to U.S.
government securities and except that up to 25% of the value of the Fund's
total assets may be invested without regard to this 5% limitation.

12. Purchase securities of other investment companies except in
connection with a merger, consolidation, acquisition, reorganization or offer
of exchange or as otherwise permitted under the 1940 Act.

13. Pledge, mortgage or hypothecate its assets, except to the
extent necessary to secure permitted borrowings and to the extent related to
the deposit of assets in escrow in connection with the writing of covered put
and call options and purchase of securities on a forward commitment or
delayed-delivery basis and collateral and initial or variation margin
arrangements with respect to currency transactions, options, futures
contracts, and options on futures contracts.

14. Invest more than 15% of the value of the Fund's net assets in
securities which may be illiquid because of legal or contractual restrictions
on resale or securities for

<PAGE>26

which there are no readily available market quotations. For purposes of this
limitation, (a) repurchase agreements with maturities greater than seven days,
(b) VRDNs and master demand notes providing for settlement upon more than
seven days notice by the Fund and (c) time deposits maturing in more than
seven calendar days shall be considered illiquid securities.

15. Purchase any security if as a result the Fund would then have
more than 5% of its total assets invested in securities of companies
(including predecessors) that have been in continuous operation for fewer than
three years.

16. Purchase or retain securities of any company if, to the
knowledge of the Fund, any of the Fund's officers or Trustees or any officer
or director of Counsellors individually owns more than 1/2 of 1% of the
outstanding securities of such company and together they own beneficially more
than 5% of the securities.

17. Invest in warrants (other than warrants acquired by the Fund as
part of a unit or attached to securities at the time of purchase) if, as a
result, the investments (valued at the lower of cost or market) would exceed
5% of the value of the Fund's net assets of which not more than 2% of the
Fund's net assets may be invested in warrants not listed on a recognized U.S.
or foreign stock exchange.

18. Make additional investments (including roll-overs) if the
Fund's borrowings exceed 5% of its net assets.

Certain non-fundamental investment limitations are currently
required by one or more states in which shares of the Fund are sold. These
may be more restrictive than the limitations set forth above. Should the Fund
determine that any such commitment is no longer in the best interest of the
Fund and its shareholders, the Fund will revoke the commitment by terminating
the sale of Fund shares in the state involved. In addition, the relevant
state may change or eliminate its policy regarding such investments.

If a percentage restriction (other than the percentage limitation
set forth in No. 1 above) is adhered to at the time of an investment, a later
increase or decrease in the percentage of assets resulting from a change in
the values of portfolio securities or in the amount of the Fund's assets will
not constitute a violation of such restriction.

Portfolio Valuation

The Prospectuses discuss the time at which the net asset value of
the Fund is determined for purposes of sales and redemptions. The following
is a description of the procedures used by the Fund in valuing its assets.

Securities listed on a U.S. securities exchange (including
securities traded through the NASDAQ National Market System) or foreign
securities exchange or traded in

<PAGE>27

an over-the-counter market will be valued at the most recent sale as of the
time the valuation is made or, in the absence of sales, at the mean between
the bid and asked quotations. If there are no such quotations, the value of
the securities will be taken to be the highest bid quotation on the exchange
or market. Options or futures contracts will be valued similarly. A security
which is listed or traded on more than one exchange is valued at the quotation
on the exchange determined to be the primary market for such security.
Short-term obligations with maturities of 60 days or less are valued at
amortized cost, which constitutes fair value as determined by the Board.
Amortized cost involves valuing a portfolio instrument at its initial cost and
thereafter assuming a constant amortization to maturity of any discount or
premium. The amortized cost method of valuation may also be used with respect
to other debt obligations with 60 days or less remaining to maturity.
Notwithstanding the foregoing, in determining the market value of portfolio
investments, the Fund may employ outside organizations (a "Pricing Service")
which may use a matrix or formula method that takes into consideration market
indexes, matrices, yield curves and other specific adjustments. The
procedures of Pricing Services are reviewed periodically by the officers of
the Fund under the general supervision and responsibility of the Board, which
may replace any such Pricing Service at any time. Securities, options and
futures contracts for which market quotations are not available and certain
other assets will be valued at their fair value as determined in good faith
pursuant to consistently applied procedures established by the Board. In
addition, the Board or its delegates may value a security at fair value if it
determines that such security's value determined by the methodology set forth
above does not reflect its fair value.

Trading in securities in certain foreign countries is completed at
various times prior to the close of business on each business day in New York
(i.e., a day on which the New York Stock Exchange (the "NYSE") is open for
trading). In addition, securities trading in a particular country or
countries may not take place on all business days in New York. Furthermore,
trading takes place in various foreign markets on days which are not business
days in New York and days on which the Fund's net asset value is not
calculated. As a result, calculation of the Fund's net asset value may not
take place contemporaneously with the determination of the prices of certain
portfolio securities used in such calculation. Events affecting the values of
portfolio securities that occur between the time their prices are determined
and the close of regular trading on the NYSE will not be reflected in the
Fund's calculation of net asset value unless the Board of its delegates deems
that the event would materially affect net asset value, in which case an
adjustment may be made. All assets and liabilities initially expressed in
foreign currency values will be converted into U.S. dollar values at the
prevailing rate as quoted by a Pricing Service. If such quotations are not
available, the rate of exchange will be determined in good faith pursuant to
consistently applied procedures established by the Board.

Portfolio Transactions

Warburg is responsible for establishing, reviewing and, where
necessary, modifying the Fund's investment program to achieve its investment
objectives. Purchases and sales of newly issued portfolio securities are
usually principal transactions without

<PAGE>28

brokerage commissions effected directly with the issuer or with an underwriter
acting as principal. Other purchases and sales may be effected on a
securities exchange or over-the- counter, depending on where it appears that
the best price or execution will be obtained. The purchase price paid by the
Fund to underwriters of newly issued securities usually includes a concession
paid by the issuer to the underwriter, and purchases of securities from
dealers, acting as either principals or agents in the after market, are
normally executed at a price between the bid and asked price, which includes a
dealer's mark-up or mark-down. Transactions on U.S. stock exchanges and some
foreign stock exchanges involve the payment of negotiated brokerage com-
missions. On exchanges on which commissions are negotiated, the cost of
transactions may vary among different brokers. On most foreign exchanges,
commissions are generally fixed. There is generally no stated commission in
the case of securities traded in domestic or foreign over-the-counter markets,
but the price of securities traded in over-the-counter markets includes an
undisclosed commission or mark-up. U.S. government securities are generally
purchased from underwriters or dealers, although certain newly issued U.S.
government securities may be purchased directly from the U.S. Treasury or from
the issuing agency or instrumentality.

Warburg will select specific portfolio investments and effect
transactions for the Fund and in doing so seeks to obtain the overall best
execution of portfolio transactions. In evaluating prices and executions,
Warburg will consider the factors it deems relevant, which may include the
breadth of the market in the security, the price of the security, the
financial condition and execution capability of a broker or dealer and the
reasonableness of the commission, if any, for the specific transaction and on
a continuing basis. Warburg may, in its discretion, effect transactions in
portfolio securities with dealers who provide brokerage and research services
(as those terms are defined in Section 28(e) of the Securities Exchange Act of
1934) to the Fund and/or other accounts over which Warburg exercises
investment discretion. Warburg may place portfolio transactions with a broker
or dealer with whom it has negotiated a commission that is in excess of the
commission another broker or dealer would have charged for effecting the
transaction if Warburg determines in good faith that such amount of commission
was reasonable in relation to the value of such brokerage and research
services provided by such broker or dealer viewed in terms of either that
particular transaction or of the overall responsibilities of Warburg.
Research and other services received may be useful to Warburg in serving both
the Fund and its other clients and, conversely, research or other services
obtained by the placement of business of other clients may be useful to
Warburg in carrying out its obligations to the Fund. Research may include
furnishing advice, either directly or through publications or writings, as to
the value of securities, the advisability of purchasing or selling specific
securities and the availability of securities or purchasers or sellers of
securities; furnishing seminars, information, analyses and reports concerning
issuers, industries, securities, trading markets and methods, legislative
developments, changes in accounting practices, economic factors and trends and
portfolio strategy; access to research analysts, corporate management
personnel, industry experts, economists and government officials; comparative
performance evaluation and technical measurement services and quotation
services; and products and other services (such as third party publications,
reports and analyses, and computer and electronic access,

<PAGE>29

equipment, software, information and accessories that deliver, process or
otherwise utilize information, including the research described above) that
assist Warburg in carrying out its responsibilities. Research received from
brokers or dealers is supplemental to Warburg's own research program. The
fees to Warburg under its advisory agreement with the Fund are not reduced by
reason of its receiving any brokerage and research services.

During the fiscal years ended October 31, 1993, October 31, 1994 and
October 31, 1995, the Fund paid an aggregate of approximately $2,000, $17,350
and $14,573, respectively, in such commissions. The increase in brokerage
commissions paid in the most recent fiscal year was due to an increase in
overall assets of the Fund and increased equity investments.

Investment decisions for the Fund concerning specific portfolio
securities are made independently from those for other clients advised by
Warburg. Such other investment clients may invest in the same securities as
the Fund. When purchases or sales of the same security are made at
substantially the same time on behalf of such other clients, transactions are
averaged as to price and available investments allocated as to amount, in a
manner which Warburg believes to be equitable to each client, including the
Fund. In some instances, this investment procedure may adversely affect the
price paid or received by the Fund or the size of the position obtained or
sold for the Fund. To the extent permitted by law, Warburg may aggregate the
securities to be sold or purchased for the Fund with those to be sold or
purchased for such other investment clients in order to obtain best execution.

Any portfolio transaction for the Fund may be executed through
Counsellors Securities, Inc., the Fund's distributor ("Counsellors
Securities"), if, in Warburg's judgment, the use of Counsellors Securities is
likely to result in price and execution at least as favorable as those of
other qualified brokers, and if, in the transaction, Counsellors Securities
charges the Fund a commission rate consistent with those charged by Counsel-
lors Securities to comparable unaffiliated customers in similar transactions.
All transactions with affiliated brokers will comply with Rule 17e-1 under the
1940 Act. No portfolio securities have been executed through Counsellors
Securities since the commencement of the Fund's operations.

In no instance will portfolio securities be purchased from or sold
to Warburg or Counsellors Securities or any affiliated person of such
companies. In addition, the Fund will not give preference to any institutions
with whom the Fund enters into distribution or shareholder servicing
agreements concerning the provision of distribution services or support
services. See the Prospectuses, "Shareholder Servicing."

Transactions for the Fund may be effected on foreign securities
exchanges. In transactions for securities not actively traded on a foreign
securities exchange, the Fund will deal directly with the dealers who make a
market in the securities involved, except in those circumstances where better
prices and execution are available elsewhere. Such dealers usually are acting
as principal for their own account. On occasion, securities may be purchased
directly from the issuer. Such portfolio securities are generally traded on a
net

<PAGE>30

basis and do not normally involve brokerage commissions. Securities firms may
receive brokerage commissions on certain portfolio transactions, including
options, futures and options on futures transactions and the purchase and sale
of underlying securities upon exercise of options.

The Fund may participate, if and when practicable, in bidding for
the purchase of securities for the Fund's portfolio directly from an issuer in
order to take advantage of the lower purchase price available to members of
such a group. The Fund will engage in this practice, however, only when
Warburg, in its sole discretion, believes such practice to be otherwise in the
Fund's interest.

Portfolio Turnover

The Fund's portfolio turnover rate is calculated by dividing the
lesser of purchases or sales of its portfolio securities for the year by the
monthly average value of the portfolio securities. Securities with remaining
maturities of one year or less at the date of acquisition are excluded from
the calculation.

The Fund does not intend to seek profits through short-term trading,
but the rate of turnover will not be a limiting factor when the Fund deems it
desirable to sell or purchase securities. Certain practices that may be
employed by the Fund could result in high portfolio turnover. For example,
portfolio securities may be sold in anticipation of a rise in interest rates
(market decline) or purchased in anticipation of a decline in interest rates
(market rise) and later sold. In addition, a security may be sold and another
of comparable quality purchased at approximately the same time to take
advantage of what Warburg believes to be a temporary disparity in the normal
yield relationship between the two securities. These yield disparities may
occur for reasons not directly related to the investment quality of particular
issues or the general movement of interest rates, such as changes in the
overall demand for, or supply of, various types of securities. In addition,
options on securities may be sold in anticipation of a decline in the price of
the underlying security (market decline) or purchased in anticipation of a
rise in the price of the underlying security (market rise) and later sold.

<PAGE>31

MANAGEMENT OF THE FUND

Officers and Board of Trustees

The names (and ages) of the Fund's Trustees and officers, their
addresses, present positions and principal occupations during the past five
years and other affiliations are set forth below.

Richard N. Cooper (61) . . . . Trustee
Room 7E47OHB National Intelligence Counsel;
Central Intelligence Agency Professor at Harvard
930 Dolly Madison Blvd. University; Director or Trustee of
McLean, Virginia 22107 Circuit City Stores, Inc. (retail
electronics and appliances) and Phoenix Home
Life Insurance Co.

Donald J. Donahue (71) . . . . Trustee
99 Indian Field Road Chairman of Magma Copper Company
Greenwich, Connecticut 06830 since January 1987; Director or Trustee of
GEV Corporation and Signet Star Reinsurance
Company; Chairman and Director of NAC
Holdings from September 1990-June 1993.

Jack W. Fritz (68) . . . . . . Trustee
2425 North Fish Creek Road Private investor; Consultant and
P.O. Box 483 Director of Fritz Broadcasting, Inc. and
Wilson, Wyoming 83014 Fritz Communications (developers and
operators of radio stations); Director of
Advo, Inc. (direct mail advertising).

John L. Furth* (65) . . . . . . Chief Executive Officer and Trustee
466 Lexington Avenue Vice Chairman and Director of EMW;
New York, New York 10017-3147 Associated with EMW since 1970; Director and
officer of other investment companies
advised by Warburg.

* Indicates a Trustee who is an "interested person" of the Fund as
defined in the 1940 Act.

<PAGE>32

Thomas A. Melfe (63) . . . . . Trustee
30 Rockefeller Plaza Partner in the law firm of Donovan
New York, New York 10112 Leisure Newton & Irvine; Director of
Municipal Fund for New York Investors, Inc.

Arnold M. Reichman* (47) . . . Director and Executive Vice President
466 Lexington Avenue Managing Director and Assistant
New York, New York 10017-3147 Secretary of EMW; Associated with EMW since
1984; Senior Vice President, Secretary and
Chief Operating Officer of Counsellors
Securities; Officer of other investment
companies advised by Warburg.

Alexander B. Trowbridge (66) . Trustee
1155 Connecticut Avenue, N.W. President of Trowbridge Partners, Inc.
Suite 700 (business consulting) from January 1990-
Washington, DC 20036 January 1994; President of the National
Association of Manufacturers from 1980-1990;
Director or Trustee of New England Mutual
Life Insurance Co., ICOS Corporation
(biopharmaceuticals), P.H.H. Corporation
(fleet auto management; housing and plant
relocation service), WMX Technologies Inc.
(solid and hazardous waste collection and
disposal), The Rouse Company (real estate
development), SunResorts International Ltd.
(hotel and real estate management), Harris
Corp. (electronics and communications
equipment), The Gillette Co. (personal care
products) and Sun Company Inc. (petroleum
refining and marketing).

Dale C. Christensen (48) . . . President and Co-Portfolio Manager
466 Lexington Avenue of the Fund
New York, New York 10017 Portfolio Manager or Co-Portfolio Manager of
other Warburg Pincus Funds; Managing
Director of EMW; Associated with EMW since
1989; Vice President at Citibank,

- --------------------
* Indicates a Trustee who is an "interested person" of the Fund as defined
in the 1940 Act.

<PAGE>33

N.A. from 1985-1989; President of other
investment companies advised by Warburg.

Eugene L. Podsiadlo (38) . . . Senior Vice President
466 Lexington Avenue Managing Director of EMW;
New York, New York 10017-3147 Associated with EMW since 1991; Vice
President of Citibank, N.A. from 1987-1991;
Senior Vice President of Counsellors
Securities and officer of other investment
companies advised by Warburg.

Stephen Distler (42) . . . . . Vice President and Chief Financial
466 Lexington Avenue Officer
New York, New York 10017-3147 Managing Director, Controller and Assistant
Secretary of EMW; Associated with EMW since
1984; Treasurer of Counsellors Securities;
Vice President, Treasurer and Chief
Accounting Officer or Vice President and
Chief Financial Officer of other investment
companies advised by Warburg.

Eugene P. Grace (44) . . . . . Vice President and Secretary
466 Lexington Avenue Associated with EMW since April 1994;
New York, New York 10017-3147 Attorney-at-law from September 1989-
April 1994; Life insurance agent, New York
Life Insurance Company from 1993-1994;
General Counsel and Secretary, Home Unity
Savings Bank from 1991-1992; Vice President
and Chief Compliance Officer of Counsellors
Securities; Vice President and Secretary of
other investment companies advised by
Warburg.

Howard Conroy (41) . . . . . . Vice President, Treasurer
466 Lexington Avenue and Chief Accounting Officer
New York, New York 10017-3147 Associated with EMW since 1992; Associated
with Martin Geller, C.P.A. from 1990-1992;
Vice President, Finance with
Gabelli/Rosenthal & Partners, L.P. until
1990; Vice President, Treasurer and Chief
Accounting Officer of other investment
companies advised by Warburg.

<PAGE>34

Karen Amato (32) . . . . . . . Assistant Secretary
466 Lexington Avenue Associated with EMW since 1987;
New York, New York 10017-3147 Assistant Secretary of other investment
companies advised by Warburg.

No employee of Warburg or PFPC Inc., the Fund's co-administrator
("PFPC"), or any of their affiliates receives any compensation from the Fund
for acting as an officer or Trustee of the Fund. Each Trustee who is not a
director, officer or employee of Warburg, PFPC or any of their affiliates
receives an annual fee of $1,000 and $250 for each meeting of the Board
attended by him for his services as Trustee and is reimbursed for expenses
incurred in connection with his attendance at Board meetings.

Trustees' Compensation
(for the fiscal year ended October 31, 1995)

Total Total Compensation from
Compensation from all Investment Companies
Name of Trustee Fund Managed by Warburg*
--------------- ----------------- ------------------------
<S> <C> <C>

John L. Furth None** None**
Arnold M. Reichman None** None**
Richard N. Cooper $2,000 $41,083
Donald J. Donahue $2,250 $43,833
Jack W. Fritz $1,750 $35,333
Thomas A. Melfe $2,250 $43,583
Alexander B. Trowbridge $2,250 $43,833

</TABLE>

_______________

* Each Trustee also serves as a Director or Trustee of 20 other investment
companies advised by Warburg.

** Mr. Furth and Mr. Reichman are considered to be interested persons of the
Fund and Warburg, as defined under Section 2(a)(19) of the 1940 Act, and,
accordingly, receive no compensation from the Fund or any other
investment company managed by Warburg.

Mr. Dale C. Christensen, president and co-portfolio manager of the
Fund, earned a B.S. in Agriculture from the University of Alberta and a B.Ed.
in Mathematics from the University of Calgary, both located in Canada. Mr.
Christensen is also co-portfolio manager of Warburg Pincus Global Fixed Income
Fund, Warburg Pincus Intermediate

<PAGE>35

Maturity Government Fund and Warburg Pincus New York Intermediate Municipal
Fund. Mr. Christensen directs the fixed income group at Warburg, which he
joined in 1989, providing portfolio management for Warburg Pincus Funds and
institutional clients around the world. Mr. Christensen was a Vice President
in the International Private Banking division and the domestic pension fund
management division at Citicorp from 1984 to 1989. Prior to that, Mr.
Christensen was a fixed income portfolio manager at CIC Asset Management from
1982 to 1984.

Mr. M. Anthony E. van Daalen, co-portfolio manager of the Fund,
earned a B.A. degree from Wesleyan University and a M.B.A. degree from New
York University. Mr. van Daalen is also co-portfolio manager of Warburg
Pincus Intermediate Maturity Government Fund. He has been with the Fund since
joining Warburg in 1992, specializing in government and high yield bonds. Mr.
van Daalen was an Assistant Vice President, Portfolio Manager at Citibank in
the Private Banking Group from 1985 to 1991. Prior to that Mr. van Daalen was
a Retail Banking Manager at The Connecticut Bank and Trust Co. from 1983 to
1985 and an Analyst at Goldstein/Krall Market Research from 1982 to 1983.

As of December 28, 1995, Trustees and officers of the Fund as a
group owned of record less than 1% of the Fund's outstanding Common Shares.
As of the same date, Mr. Furth may be deemed to have beneficially owned 55.06%
of the Fund's outstanding Common Shares, including shares owned by clients for
which Warburg has investment discretion. Mr. Furth disclaims ownership of
these shares and does not intend to exercise voting rights with respect to
these shares. No Trustees or officers owned of record any Advisor Shares.

Investment Adviser and Co-Administrators

Warburg serves as investment adviser to the Fund, PFPC as co-
administrator to the Fund and Counsellors Funds Service, Inc. ("Counsellors
Service") serves as co-administrator to the Fund pursuant to separate written
agreements (the "Advisory Agreement," the "PFPC Co-Administration Agreement"
and the "Counsellors Service Co-Administration Agreement," respectively). The
services provided by, and the fees payable by the Fund to, Warburg under the
Advisory Agreement, PFPC under the PFPC Co-Administration Agreement and
Counsellors Service under the Counsellors Service Co-Administration Agreement
are described in the Prospectuses. See the Prospectuses, "Management of the
Fund." Each class of shares of the Fund bears its proportionate share of fees
payable to Warburg, PFPC and Counsellors Service in the proportion that its
assets bear to the aggregate assets of the Fund at the time of calculation.
Prior to March 1, 1994, PFPC served as administrator to the Fund and
Counsellors Service served as administrative services agent to the Fund
pursuant to separate written agreements.

Warburg agrees that if, in any fiscal year, the expenses borne by
the Fund exceed the applicable expense limitations imposed by the securities
regulations of any state in which shares of the Fund are registered or
qualified for sale to the public, it will reimburse the Fund to the extent
required by such regulations. Unless otherwise required by law, such

<PAGE>36

reimbursement would be accrued and paid on a monthly basis. At the date of
this Statement of Additional Information, the most restrictive annual expense
limitation applicable to the Fund is 2.5% of the first $30 million of the
average net assets of the Fund, 2% of the next $70 million of the average net
assets of the Fund and 1.5% of the remaining average net assets of the Fund.

During the fiscal years ended October 31, 1993, October 31, 1994 and
October 31, 1995, Warburg earned $381,803, $449,070 and $555,483,
respectively, under the Advisory Agreement. For the same periods, Warburg
voluntarily waived $67,719, $125,203 and $162,585, respectively, of such fees.
During the fiscal years ended October 31, 1993, October 31, 1994 and October
31, 1995, PFPC voluntarily waived $0, $36,132 and $41,568, respectively, of
the $62,305, $90,330 and $111,097 in administration fees or, in the case of
the two most recent fiscal years, co-administration fees, earned in such
fiscal year. Counsellors Service earned $42,338, $72,277 and $111,097 in
administration fees or, in the case of the two most recent fiscal years, co-
administration fees during the fiscal years ended October 31, 1993, October
31, 1994 and October 31, 1995, respectively.

Custodian and Transfer Agent

PNC Bank, National Association ("PNC") is custodian of the Fund's
assets pursuant to a custodian agreement (the "Custodian Agreement"). Under
the Custodian Agreement, PNC (i) maintains a separate account or accounts in
the name of the Fund, (ii) holds and transfers portfolio securities on account
of the Fund, (iii) makes receipts and disbursements of money on behalf of the
Fund, (iv) collects and receives all income and other payments and
distributions on account of the Fund's portfolio securities and (v) makes
periodic reports to the Board concerning the Fund's custodial arrangements.
PNC is authorized to select one or more banks or trust companies to serve as
sub-custodian on behalf of the Fund, provided that PNC remains responsible for
the performance of all its duties under the Custodian Agreement and holds the
Fund harmless from the acts and omissions of any sub-custodian. PNC is an
indirect wholly owned subsidiary of PNC Bank Corp., and its principal business
address is Broad and Chestnut Streets, Philadelphia, Pennsylvania 19101.

State Street Bank and Trust Company ("State Street") serves as the
shareholder servicing, transfer and dividend disbursing agent of the Fund
pursuant to a Transfer Agency and Service Agreement, under which State Street
(i) issues and redeems shares of the Fund, (ii) addresses and mails all
communications by the Fund to record owners of Fund shares, including reports
to shareholders, dividend and distribution notices and proxy material for its
meetings of shareholders, (iii) maintains shareholder accounts and, if
requested, sub-accounts and (iv) makes periodic reports to the Fund's Board of
Trustees concerning the transfer agent's operations with respect to the Fund.
State Street has delegated to Boston Financial Data Services, Inc., a 50%
owned subsidiary ("BFDS"), responsibility for most shareholder servicing
functions. BFDS's principal business address is 2 Heritage Drive, Boston,
Massachusetts 02171. The principal business address of State Street is 225
Franklin Street, Boston, Massachusetts 02110.

<PAGE>37

Organization of the Fund

The Fund's Agreement and Declaration of Trust (the "Trust
Agreement") authorizes the Board to issue three billion full and fractional
shares of common stock, $.001 par value per share ("Common Shares"), of which
one billion shares are designated Common Stock-Series 1 and one billion shares
are designated Common Stock-Series 2 (the "Advisor Shares"). Only Common
Shares and Advisor Shares have been issued by the Fund.

Massachusetts law provides that shareholders could, under certain
circumstances, be held personally liable for the obligations of the Fund.
However, the Trust Agreement disclaims shareholder liability for acts or
obligations of the Fund and requires that notice of such disclaimer be given
in each agreement, obligation or instrument entered into or executed by the
Fund or a Trustee. The Trust Agreement provides for indemnification from the
Fund's property for all losses and expenses of any shareholder held personally
liable for the obligations of the Fund. Thus, the risk of a shareholder's
incurring financial loss on account of shareholder liability is limited to
circumstances in which the Fund would be unable to meet its obligations, a
possibility that Warburg believes is remote and immaterial. Upon payment of
any liability incurred by the Fund, the shareholder paying the liability will
be entitled to reimbursement from the general assets of the Fund. The
Trustees intend to conduct the operations of the Fund in such a way so as to
avoid, as far as possible, ultimate liability of the shareholders for
liabilities of the Fund.

All shareholders of the Fund in each class, upon liquidation, will
participate ratably in the Fund's net assets. Shares do not have cumulative
voting rights, which means that holders of more than 50% of the shares voting
for the election of Trustees can elect all Trustees. Shares are transferable
but have no preemptive, conversion or subscription rights.

Distribution and Shareholder Servicing

The Fund may, in the future, enter into agreements ("Agreements")
with institutional shareholders of record, broker-dealers, financial
institutions, depository institutions, retirement plans and financial
intermediaries ("Institutions") to provide certain distribution, shareholder
servicing, administrative and/or accounting services for their clients or
customers (or participants in the case of retirement plans) ("Customers") who
are beneficial owners of Advisor Shares. See the Advisor Prospectus,
"Shareholder Servicing." Agreements will be governed by a distribution plan
(the "Distribution Plan") pursuant to Rule 12b-1 under the 1940 Act. The
Distribution Plan requires the Board, at least quarterly, to receive and
review written reports of amounts expended under the Distribution Plan and the
purposes for which such expenditures were made.

An Institution with which the Fund has entered into an Agreement may
charge a Customer one or more of the following types of fees, as agreed upon
by the Institution and the Customer, with respect to the cash management or
other services provided by the Institution: (i) account fees (a fixed amount
per month or per year); (ii) transaction fees (a

<PAGE>38

fixed amount per transaction processed); (iii) compensation balance
requirements (a minimum dollar amount a Customer must maintain in order to
obtain the services offered); or (iv) account maintenance fees (a periodic
charge based upon the percentage of assets in the account or of the dividend
paid on those assets). Services provided by an Institution to Customers are
in addition to, and not duplicative of, the services to be provided under the
Fund's co-administration and distribution arrangements. A Customer of an
Institution should read the relevant Prospectus and Statement of Additional
Information in conjunction with the Agreement and other literature describing
the services and related fees that would be provided by the Institution to its
Customers prior to any purchase of Fund shares. Prospectuses are available
from the Fund's distributor upon request. No preference will be shown in the
selection of Fund portfolio investments for the instruments of Institutions.

The Distribution Plan will continue in effect for so long as its
continuance is specifically approved at least annually by the Board, including
a majority of the Trustees who are not interested persons of the Fund and who
have no direct or indirect financial interest in the operation of the
Distribution Plan ("Independent Trustees"). Any material amendment of the
Distribution Plan would require the approval of the Board in the same manner.
The Distribution Plan may not be amended to increase materially the amount to
be spent under it without shareholder approval of the Advisor Shares. The
Distribution Plan may be terminated at any time, without penalty, by vote of a
majority of the Independent Trustees or by a vote of a majority of the
outstanding voting securities of the Advisor Shares of the Fund.

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION

The offering price of the Fund's shares is equal to the per share
net asset value of the relevant class of shares of the Fund. Information on
how to purchase and redeem Fund shares and how such shares are priced is
included in the Prospectuses under "Net Asset Value."

Under the 1940 Act, the Fund may suspend the right of redemption or
postpone the date of payment upon redemption for any period during which the
NYSE is closed, other than customary weekend and holiday closings, or during
which trading on the NYSE is restricted, or during which (as determined by the
SEC) an emergency exists as a result of which disposal or fair valuation of
portfolio securities is not reasonably practicable, or for such other periods
as the SEC may permit. (The Fund may also suspend or postpone the recordation
of an exchange of its shares upon the occurrence of any of the foregoing
conditions.)

If the Board determines that conditions exist which make payment of
redemption proceeds wholly in cash unwise or undesirable, the Fund may make
payment wholly or partly in securities or other investment instruments which
may not constitute securities as such term is defined in the applicable
securities laws. If a redemption is paid

<PAGE>39

wholly or partly in securities or other property, a shareholder would incur
transaction costs in disposing of the redemption proceeds. The Fund intends
to comply with Rule 18f-1 promulgated under the 1940 Act with respect to
redemptions in kind.

Automatic Cash Withdrawal Plan. An automatic cash withdrawal plan
(the "Plan") is available to shareholders who wish to receive specific amounts
of cash periodically. Withdrawals may be made under the Plan by redeeming as
many shares of the Fund as may be necessary to cover the stipulated withdrawal
payment. To the extent that withdrawals exceed dividends, distributions and
appreciation of a shareholder's investment in the Fund, there will be a
reduction in the value of the shareholder's investment and continued
withdrawal payments may reduce the shareholder's investment and ultimately
exhaust it. Withdrawal payments should not be considered as income from
investment in the Fund. All dividends and distributions on shares in the Plan
are automatically reinvested at net asset value in additional shares of the
Fund.

EXCHANGE PRIVILEGE

An exchange privilege with certain other funds advised by Warburg is
available to investors in the Fund. The funds into which exchanges of Common
Shares currently can be made are listed in the Common Share Prospectus.
Exchanges may also be made between certain Warburg Pincus Advisor Funds.

The exchange privilege enables shareholders to acquire shares in a
fund with a different investment objective when they believe that a shift
between funds is an appropriate investment decision. This privilege is
available to shareholders residing in any state in which the Common Shares or
Advisor Shares being acquired, as relevant, may legally be sold. Prior to any
exchange, the investor should obtain and review a copy of the current
prospectus of the relevant class of each fund into which an exchange is being
considered. Shareholders may obtain a prospectus of the relevant class of the
fund into which they are contemplating an exchange from Counsellors
Securities.

Upon receipt of proper instructions and all necessary supporting
documents, shares submitted for exchange are redeemed at the then-current net
asset value of the relevant class and the proceeds are invested on the same
day, at a price as described above, in shares of the relevant class of the
fund being acquired. Warburg reserves the right to reject more than three
exchange requests by a shareholder in any 30-day period. The exchange
privilege may be modified or terminated at any time upon 60 days' notice to
shareholders.

ADDITIONAL INFORMATION CONCERNING TAXES

The discussion set out below of tax considerations generally
affecting the Fund and its shareholders is intended to be only a summary and
is not intended as a substitute for

<PAGE>40

careful tax planning by prospective shareholders. Shareholders are advised to
consult their own tax advisers with respect to the particular tax consequences
to them of an investment in the Fund.

The Fund has qualified and intends to continue to qualify each year
as a "regulated investment company" under Subchapter M of the Code. If it
qualifies as a regulated investment company, the Fund will pay no federal
income taxes on its taxable net investment income (that is, taxable income
other than net realized capital gains) and its net realized capital gains that
are distributed to shareholders. To qualify under Subchapter M, the Fund
must, among other things: (i) distribute to its shareholders at least 90% of
its taxable net investment income (for this purpose consisting of taxable net
investment income and net realized short-term capital gains); (ii) derive at
least 90% of its gross income from dividends, interest, payments with respect
to loans of securities, gains from the sale or other disposition of
securities, or other income (including, but not limited to, gains from
options, futures, and forward contracts) derived with respect to the Fund's
business of investing in securities; (iii) derive less than 30% of its annual
gross income from the sale or other disposition of securities, options,
futures or forward contracts held for less than three months; and (iv)
diversify its holdings so that, at the end of each fiscal quarter of the Fund
(a) at least 50% of the market value of the Fund's assets is represented by
cash, U.S. government securities and other securities, with those other
securities limited, with respect to any one issuer, to an amount no greater in
value than 5% of the Fund's total assets and to not more than 10% of the
outstanding voting securities of the issuer, and (b) not more than 25% of the
market value of the Fund's assets is invested in the securities of any one
issuer (other than U.S. government securities or securities of other regulated
investment companies) or of two or more issuers that the Fund controls and
that are determined to be in the same or similar trades or businesses or
related trades or businesses. In meeting these requirements, the Fund may be
restricted in the selling of securities held by the Fund for less than three
months and in the utilization of certain of the investment techniques
described above and in the Fund's Prospectuses. As a regulated investment
company, the Fund will be subject to a 4% non-deductible excise tax measured
with respect to certain undistributed amounts of ordinary income and capital
gain required to be but not distributed under a prescribed formula. The
formula requires payment to shareholders during a calendar year of
distributions representing at least 98% of the Fund's taxable ordinary income
for the calendar year and at least 98% of the excess of its capital gains over
capital losses realized during the one-year period ending October 31 during
such year, together with any undistributed, untaxed amounts of ordinary income
and capital gains from the previous calendar year. The Fund expects to pay
the dividends and make the distributions necessary to avoid the application of
this excise tax.

The Fund's transactions, if any, in foreign currencies, forward
contracts, options and futures contracts (including options and forward
contracts on foreign currencies) will be subject to special provisions of the
Code that, among other things, may affect the character of gains and losses
recognized by the Fund (i.e., may affect whether gains or losses are ordinary
or capital), accelerate recognition of income to the Fund, defer Fund

<PAGE>41

losses and cause the Fund to be subject to hyperinflationary currency rules.
These rules could therefore affect the character, amount and timing of
distributions to shareholders. These provisions also (i) will require the
Fund to mark-to-market certain types of its positions (i.e., treat them as if
they were closed out) and (ii) may cause the Fund to recognize income without
receiving cash with which to pay dividends or make distributions in amounts
necessary to satisfy the distribution requirements for avoiding income and
excise taxes. The Fund will monitor its transactions, will make the
appropriate tax elections and will make the appropriate entries in its books
and records when it acquires any foreign currency, forward contract, option,
futures contract or hedged investment so that (a) neither the Fund nor its
shareholders will be treated as receiving a materially greater amount of
capital gains or distributions than actually realized or received, (b) the
Fund will be able to use substantially all of its losses for the fiscal years
in which the losses actually occur and (c) the Fund will continue to qualify
as a regulated investment company.

A shareholder of the Fund receiving dividends or distributions in
additional shares should be treated for federal income tax purposes as
receiving a distribution in an amount equal to the amount of money that a
shareholder receiving cash dividends or distributions receives, and should
have a cost basis in the shares received equal to that amount.

Investors considering buying shares just prior to a dividend or
capital gain distribution should be aware that, although the price of shares
purchased at that time may reflect the amount of the forthcoming distribution,
those who purchase just prior to a distribution will receive a distribution
that will nevertheless be taxable to them. Upon the sale or exchange of
shares, a shareholder will realize a taxable gain or loss depending upon the
amount realized and the basis in the shares. Such gain or loss will be
treated as capital gain or loss if the shares are capital assets in the
shareholder's hands, and, as described in the Prospectuses, will be long-term
or short-term depending upon the shareholder's holding period for the shares.
Any loss realized on a sale or exchange will be disallowed to the extent the
shares disposed of are replaced, including replacement through the
reinvestment of dividends and capital gains distributions in the Fund, within
a period of 61 days beginning 30 days before and ending 30 days after the
disposition of the shares. In such a case, the basis of the shares acquired
will be increased to reflect the disallowed loss.

Each shareholder will receive an annual statement as to the federal
income tax status of his dividends and distributions from the Fund for the
prior calendar year. Furthermore, shareholders will also receive, if
appropriate, various written notices after the close of the Fund's taxable
year regarding the federal income tax status of certain dividends and
distributions that were paid (or that are treated as having been paid) by the
Fund to its shareholders during the preceding year.

If a shareholder fails to furnish a correct taxpayer identification
number, fails to report fully dividend or interest income, or fails to certify
that he has provided a correct taxpayer identification number and that he is
not subject to "backup withholding," the

<PAGE>42

shareholder may be subject to a 31% "backup withholding" tax with respect to
(i) taxable dividends and distributions and (ii) the proceeds of any sales or
repurchases of shares of the Fund. An individual's taxpayer identification
number is his social security number. Corporate shareholders and other
shareholders specified in the Code are or may be exempt from backup
withholding. The backup withholding tax is not an additional tax and may be
credited against a taxpayer's federal income tax liability. Dividends and
distributions also may be subject to state and local taxes depending on each
shareholder's particular situation.

Investment in Passive Foreign Investment Companies

If the Fund purchases shares in certain foreign entities classified
under the Code as "passive foreign investment companies" ("PFICs"), the Fund
may be subject to federal income tax on a portion of an "excess distribution"
or gain from the disposition of the shares, even though the income may have to
be distributed as a taxable dividend by the Fund to its shareholders. In
addition, gain on the disposition of shares in a PFIC generally is treated as
ordinary income even though the shares are capital assets in the hands of the
Fund. Certain interest charges may be imposed on either the Fund or its
shareholders with respect to any taxes arising from excess distributions or
gains on the disposition of shares in a PFIC.

The Fund may be eligible to elect to include in its gross income its
share of earnings of a PFIC on a current basis. Generally, the election would
eliminate the interest charge and the ordinary income treatment on the
disposition of stock, but such an election may have the effect of accelerating
the recognition of income and gains by the Fund compared to a fund that did
not make the election. In addition, information required to make such an
election may not be available to the Fund.

On April 1, 1992 proposed regulations of the Internal Revenue
Service (the "IRS") were published providing a mark-to-market election for
regulated investment companies. The IRS subsequently issued a notice
indicating that final regulations will provide that regulated investment
companies may elect the mark-to-market election for tax years ending after
March 31, 1992 and before April 1, 1993. Whether and to what extent the
notice will apply to taxable years of the Fund is unclear. If the Fund is not
able to make the foregoing election, it may be able to avoid the interest
charge (but not the ordinary income treatment) on disposition of the stock by
electing, under proposed regulations, each year to mark-to-market the stock
(that is, treat it as if it were sold for fair market value). Such an
election could result in acceleration of income to the Fund.

DETERMINATION OF PERFORMANCE

From time to time, the Fund may quote the total return of its Common
Shares and/or Advisor Shares in advertisements or in reports and other
communications to shareholders. With respect to the Fund's Common Shares, the
Fund's average annual total return for the one-year period ended October 31,
1995 was 12.59% (12.39% without

<PAGE>43

waivers), the average annual total return for the five-year period ended
October 31, 1995 was 9.84% (9.64% without waivers) and the average annual
total return for the period commenced August 17, 1987 (commencement of
operations) and ended October 31, 1995 was 8.27% (8.09% without waivers).
These figures are calculated by finding the average annual compounded rates of
return for the one-, five- and ten- (or such shorter period as the relevant
class of shares has been offered) year periods that would equate the initial
amount invested to the ending redeemable value according to the following
formula: P (1 + T)[*GRAPHIC OMITTED-SEE FOOTNOTE BELOW] = ERV. For purposes
of this formula, "P" is a hypothetical investment of $1,000; "T" is average
annual total return; "n" is number of years; and "ERV" is the ending
redeemable value of a hypothetical $1,000 payment made at the beginning of the
one-, five- or ten-year periods (or fractional portion thereof). Total return
or "T" is computed by finding the average annual change in the value of an
initial $1,000 investment over the period and assumes that all dividends and
distributions are reinvested during the period.

The Fund may advertise, from time to time, comparisons of the
performance of its Common Shares and/or Advisor Shares with that of one or
more other mutual funds with similar investment objectives. The Fund may
advertise average annual calendar year-to-date and calendar quarter returns,
which are calculated according to the formula set forth in the preceding
paragraph except that the relevant measuring period would be the number of
months that have elapsed in the current calendar year or most recent three
months, as the case may be.

Yield is calculated by annualizing the net investment income
generated by the Fund over a specified thirty-day period according to the
following formula:

YIELD = 2[( a-b +1)[**GRAPHIC OMITTED-SEE FOOTNOTE BELOW] -1]
---
cd

For purposes of this formula: "a" is dividends and interest earned during the
period; "b" is expenses accrued for the period (net of reimbursements); "c" is
the average daily number of shares outstanding during the period that were
entitled to receive dividends; and "d" is the maximum offering price per share
on the last day of the period. The Fund's yield for the 30-day period ended
October 31, 1995 was 6.50%.

The performance of a class of Fund shares will vary from time to
time depending upon market conditions, the composition of the Fund's portfolio
and operating expenses allocable to it. As described above, total return and
yield are based on historical earnings and are not intended to indicate future
performance. Consequently, any given performance quotation should not be
considered as representative of performance for any specified period in the
future. Performance information may be useful as a basis for comparison with
other investment alternatives. However, the Fund's performance will
fluctuate, unlike certain bank deposits or other investments which pay a fixed
yield for a stated period of time. Any fees charged by Institutions or other
institutional investors

- -------------------
* The expression (1 + T) is being raised to the nth power.

** The expression (a-b +1) is being raised to the 6th power.

<PAGE>44

directly to their customers in connection with investments in Fund shares are
not reflected in the Fund's performance figures and such fees, if charged,
will reduce the actual return received by customers on their investments.

AUDITORS AND COUNSEL

Coopers & Lybrand L.L.P. ("Coopers & Lybrand"), with principal
offices at 2400 Eleven Penn Center, Philadelphia, Pennsylvania 19103, serves
as independent accountants for the Fund. The financial statements for the
fiscal years ended October 31, 1993, October 31, 1994 and October 31, 1995
that appear in this Statement of Additional Information have been audited by
Coopers & Lybrand, whose report thereon appears elsewhere herein and have been
included herein in reliance upon the report of such firm of independent
accountants given upon their authority as experts in accounting and auditing.

The financial statements for the periods beginning with commencement
of the Fund through October 31, 1992 have been audited by Ernst & Young LLP
("Ernst & Young"), independent accountants, as set forth in their report, and
have been included in reliance on such report and upon the authority of such
firm as experts in accounting and auditing. Ernst & Young's address is
787 7th Avenue, New York, New York 10019.

Willkie Farr & Gallagher serves as counsel for the Fund as well as
counsel to Warburg, Counsellors Service and Counsellors Securities.

MISCELLANEOUS

As of December 28, 1995, there were no persons (other than Mr.
Furth, see "Management of the Fund") that owned of record 5% or more of the
Fund's outstanding shares.

Common Shares

Nat'l Financial Svsc Corp. ("Fidelity"), FBO Customers, P.O. Box
3908, Church Street Station, New York, New York 10008-3908 -- 6.04%. The Fund
believes that Fidelity is not the beneficial owner of shares held of record by
it. Mr. Lionel I. Pincus, Chairman of the Board and Chief Executive Officer
of EMW, may be deemed to have beneficially owned 55.15% of the Common Shares
outstanding, including shares owned by clients for which Warburg has
investment discretion and by companies that EMW may be deemed to control. Mr.
Pincus disclaims ownership of these shares and does not intend to exercise
voting rights with respect to these shares.

FINANCIAL STATEMENTS

The Fund's audited financial statements for the fiscal year ended
October 31, 1995 follow the Report of Independent Accountants.

<PAGE>A-1

APPENDIX

DESCRIPTION OF RATINGS

Corporate Bond Ratings

The following summarizes the ratings used by Standard & Poor's
Ratings Group ("S&P") for corporate bonds:

AAA - This is the highest rating assigned by S&P to a debt
obligation and indicates an extremely strong capacity to pay interest and
repay principal.

AA - Debt rated AA has a very strong capacity to pay interest and
repay principal and differs from AAA issues only in small degree.

A - Debt rated A has a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than debt in higher-rated
categories.

BBB - This is the lowest investment grade. Debt rated BBB has an
adequate capacity to pay interest and repay principal. Although it normally
exhibits adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for bonds in this category than for bonds in
higher rated categories.

BB, B, CCC, CC, C - Debt rated BB, B, CCC, CC and C is regarded, on
balance, as predominately speculative with respect to capacity to pay interest
and repay principal in accordance with the terms of the obligation. BB
represents a lower degree of speculation than B and C the highest degree of
speculation. While such bonds will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.

BB - Debt rated BB has less near-term vulnerability to default than
other speculative issues. However, they face major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions, which could
lead to inadequate capacity to meet timely interest and principal payments.
The BB rating category is also used for debt subordinated to senior debt that
is assigned an actual or implied BBB rating.

B - Debt rated B has a greater vulnerability to default but
currently have the capacity to meet interest payments and principal
repayments. Adverse business, financial, or economic conditions will likely
impair capacity or willingness to pay interest and repay principal. The B
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BB or BB- rating.

<PAGE>A-2

CCC - Debt rated CCC has a currently identifiable vulnerability to
default and is dependent upon favorable business, financial and economic
conditions to meet timely payment of interest and repayment of principal. In
the event of adverse business, financial or economic conditions, it is not
likely to have the capacity to pay interest and repay principal. The CCC
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied B or B- rating.

CC - This rating is typically applied to debt subordinated to senior
debt that is assigned an actual or implied CCC rating.

C - This rating is typically applied to debt subordinated to senior
debt which is assigned an actual or implied CCC- debt rating. The C rating
may be used to cover a situation where a bankruptcy petition has been filed,
but debt service payments are continued.

Additionally, the rating CI is reserved for income bonds on which no
interest is being paid. Such debt is rated between debt rated C and debt
rated D.

To provide more detailed indications of credit quality, the ratings
from "AA" to "CCC" may be modified by the addition of a plus or minus sign to
show relative standing within this major rating category.

D - Debt rated D is in payment default. The D rating category is
used when interest payments or principal payments are not made on the date due
even if the applicable grace period has not expired, unless S&P believes that
such payments will be made during such grace period. The D rating also will
be used upon the filing of a bankruptcy petition if debt service payments are
jeopardized.

The following summarizes the ratings used by Moody's Investors
Service, Inc. ("Moody's") for corporate bonds:

Aaa - Bonds that are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred
to as "gilt edged." Interest payments are protected by a large or
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such issues.

Aa - Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.

<PAGE>A-3

A - Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper-medium-grade obligations.
Factors giving security to principal and interest are considered adequate, but
elements may be present which suggest a susceptibility to impairment sometime
in the future.

Baa - Bonds which are rated Baa are considered as medium-grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics
as well.

Ba - Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well assured. Often the
protection of interest and principal payments may be very moderate and thereby
not well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.

B - Bonds which are rated B generally lack characteristics of
desirable investments. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.

Moody's applies numerical modifiers (1, 2 and 3) with respect to the
bonds rated "Aa" through "B". The modifier 1 indicates that the bond being
rated ranks in the higher end of its generic rating category; the modifier 2
indicates a mid-range ranking; and the modifier 3 indicates that the bond
ranks in the lower end of its generic rating category.

Caa - Bonds that are rated Caa are of poor standing. These issues
may be in default or present elements of danger may exist with respect to
principal or interest.

Ca - Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.

C - Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.

Short-Term Note Ratings

The following summarizes the two highest ratings used by S&P for
short-term notes:

SP-1 - Loans bearing this designation evidence a very strong or
strong capacity to pay principal and interest. Those issues determined to
possess overwhelming safety characteristics will be given a plus sign
designation.

<PAGE>A-4

SP-2 - Loans bearing this designation evidence a satisfactory
capacity to pay principal and interest.

The following summarizes the two highest ratings used by Moody's for
short-term notes and variable rate demand obligations:

MIG-1/VMIG-1 - Obligations bearing these designations are of the
best quality, enjoying strong protection from established cash flows of funds
for their servicing or from established and broad-based access to the market
for refinancing, or both.

MIG-2/VMIG-2 - Obligations bearing these designations are of high
quality with margins of protection ample although not so large as in the
preceding group.

Commercial Paper Ratings

The following summarizes the two highest ratings for commercial
paper used by S&P and Moody's, respectively:

Commercial paper rated A-1 by S&P's indicates that the degree of
safety regarding timely payment is strong. Those issues determined to possess
extremely strong safety characteristics are denoted with a plus sign
designation. Capacity for timely payment on commercial paper rated A-2 is
satisfactory, but the relative degree of safety is not as high as for issues
designated A-1.

The rating Prime-1 is the highest commercial paper rating assigned
by Moody's. Issuers rated Prime-1 (or related supporting institutions) are
considered to have a superior capacity for repayment of short-term promissory
obligations. Issuers rated Prime-2 (or related supporting institutions) are
considered to have a strong capacity for repayment of short-term promissory
obligations. This will normally be evidenced by many of the characteristics
of issuers rated Prime-1 but to a lesser degree. Earnings trends and coverage
ratios, while sound, will be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by external
conditions. Ample alternative liquidity is maintained.

Municipal Obligations Ratings

The following summarizes the ratings used by S&P for Municipal
Obligations:

AAA - This is the highest rating assigned by S&P to a debt
obligation and indicates an extremely strong capacity to pay interest and
repay principal.

AA - Debt rated AA has a very strong capacity to pay interest and
repay principal and differs from AAA issues only in small degree.

<PAGE>A-5

BBB - This is the lowest investment grade. Debt rated BBB has an
adequate capacity to pay interest and repay principal. Although adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity to pay interest and repay principal for debt in this
category than in higher rated categories.

BB - Bonds rated BB have less near-term vulnerability to default
than other speculative issues. However, they face major ongoing uncertainties
or exposure to adverse business, financial, or economic conditions, which
could lead to inadequate capacity to meet timely interest and principal
payments. The BB rating category is also used for debt subordinated to senior
debt that is assigned an actual or implied BBB rating.

B - Bonds rated B have a greater vulnerability to default but
currently have the capacity to meet interest payments and principal
repayments. Adverse business, financial, or economic conditions will likely
impair capacity or willingness to pay interest and repay principal. The B
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BB or BB- rating.

CC - This rating is typically applied to debt subordinated to senior
debt that is assigned an actual or implied CCC rating.

<PAGE>A-6

Additionally, the rating CI is reserved for income bonds on which no
interest is being paid. Such debt is rated between debt rated C and debt
rated D.

The following summarizes the highest four municipal ratings used by
Moody's:

Aaa - Bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a large or
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such issues.

Aa - Bonds which are rated as are judged to be of high quality by
all standards. Together with the Aaa group they comprise what are generally
known as high-grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or fluctuation
of protective elements may be of greater amplitude or there may be other
elements present which make the long-term risks appear somewhat larger than in
Aaa securities.

Ba - Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well assured. Often the
protection of interest and principal

<PAGE>A-7

payments may be very moderate and thereby not well safeguarded during both
good and bad times over the future. Uncertainty of position characterizes
bonds in this class.

Note: Those bonds in the Aa, A, Baa, Ba and B groups which Moody's
believes possess the strongest investment attributes are designated by the
symbols Aa1, A1, Baa1, Ba1, and B1.

Caa - Bonds that are rated Caa are of poor standing. These issues
may be in default or present elements of danger may exist with respect to
principal or interest.

Ca - Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.

C - Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.

<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS FIXED INCOME FUNDS
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------

To the Boards of Directors, Trustees and Shareholders of
Warburg Pincus Fixed Income Funds:

We have audited the accompanying statement of assets and liabilities including
the schedule of investments of the Warburg Pincus Intermediate Maturity
Government Fund and the statements of net assets of the Warburg Pincus Fixed
Income Fund, Warburg Pincus Global Fixed Income Fund and Warburg Pincus New York
Intermediate Municipal Fund (all Funds collectively referred to as the 'Warburg
Pincus Fixed Income Funds') as of October 31, 1995, and the related statements
of operations for the year then ended and the statements of changes in net
assets for each of the two years and the financial highlights for each of the
three years in the period then ended. These financial statements and financial
highlights are the responsibility of the Funds' management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits. The financial highlights of each of the Warburg Pincus
Fixed Income Funds for each of the two years in the period ended October 31,
1992, were audited by other auditors, whose report dated December 15, 1992,
expressed an unqualified opinion.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1995, by correspondence with the custodians and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the Warburg Pincus Fixed Income Funds as of October 31, 1995, and the results
of their operations for the year then ended, and the changes in their net assets
for each of the two years and the financial highlights for each of the three
years in the period then ended, in conformity with generally accepted accounting
principles.

COOPERS & LYBRAND L.L.P.

2400 Eleven Penn Center
Philadelphia, PA
December 14, 1995

<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS FIXED INCOME FUND
- --------------------------------------------------------------------------------

December 8, 1995

Dear Shareholder:

The objective of Warburg Pincus Fixed Income Fund (the 'Fund') is high
current income consistent with reasonable risk. Capital appreciation is a
secondary objective. The Fund invests in a broadly diversified portfolio of
securities, including both corporate and U.S. government issues.

For the 12 months ended October 31, 1995, the Fund gained 12.59%, vs. a
12.54% gain in the Lehman Brothers Intermediate Government/Corporate Bond Index.
The Fund's 30-day annualized SEC yield was 6.50% as of October 31, 1995. Its
total net assets were $116,982,908.

Falling interest rates and controlled inflation provided an ideal backdrop
for bond prices during the period, and the Fund participated fully in the
market's advance. Throughout, we maintained our emphasis on high-quality bonds
(approximately 83% of the portfolio was held in issues rated A or above by
Moody's or S&P as of October 31, 1995 with the majority in AAA-rated issues). We
also maintained our focus on intermediate-term issues in an effort to mitigate
risk while pursuing a high level of current income and, secondarily, capital
appreciation. At the end of the reporting period, the Fund's average maturity
and duration were 6.31 and 4.88 years, respectively.

Currently, the Fund's heaviest sector weighting is in U.S. Treasury
obligations, which we believe represent the most attractive values. We also hold
a position in mortgage-backed issues. Our preference in this sector is
commercial mortgage-backed bonds, which hold little of the prepayment risk
associated with standard GNMA or FNMA issues. We remain underweighted in
corporate bonds, which we think are generally fully valued relative to
Treasuries.

Looking ahead, we believe the environment remains a positive one for
fixed-income securities. Inflation remains subdued, which arguably gives the
Federal Reserve room to lower interest rates in the months ahead. Also arguing
for lower rates is the possibility of congressional passage of a credible
deficit-reduction plan. We believe the Fund is well-positioned to capitalize on
these positive developments in the market.

<TABLE>
<S> <C>
Dale C. Christensen M. Anthony E. van Daalen
Co-Portfolio Manager Co-Portfolio Manager
</TABLE>

2
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS FIXED INCOME FUND
- --------------------------------------------------------------------------------

GROWTH OF $10,000 INVESTED IN WARBURG PINCUS FIXED INCOME FUND
SINCE INCEPTION AS OF OCTOBER 31, 1995

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, 1995, assuming the reinvestment of dividends and capital gains at
net asset value, compared to the Lehman Brothers Intermediate
Government/Corporate Index ('LIGC')* for the same time period.

<TABLE>
<CAPTION>
[PERFORMANCE GRAPH]
Average Annual
Total Returns
for periods ending
FUND LIGC 10/31/95
<S> <C> <C> <C>
8/17/87 10,000.0 10,000.0 1 year
10/31/87 9,804.0 10,152.0 12.59%
10/31/88 11,046.0 11,098.0 5 year
10/31/89 11,906.0 12,269.0 9.84%
10/31/90 12,011.0 13,174.0 Since Inception
10/31/91 13,942.0 14,995.0 (08/17/87)
10/31/92 15,375.0 16,493.0 8.27%
10/31/93 17,164.0 18,129.0
10/31/94 17,060.0 17,778.0
10/31/95 19,208.0 20,005.0
</TABLE>

<TABLE>
<CAPTION>
FUND
------

<S> <C>
1 Year Total Return (9/30/94-9/30/95).................................................................. 11.70%
5 Year Average Annual Total Return (9/30/90-9/30/95)................................................... 9.21%
Average Annual Total Return Since Inception (8/17/87-9/30/95).......................................... 8.21%
</TABLE>

All figures cited here represent past performance and do not guarantee
future results. Investment return and principal value of an investment will
fluctuate so that an investor's shares upon redemption may be worth more or less
than original cost. For periods ending 9/30/95 and 10/31/95, respectively,
without waivers or reimbursement of Fund expenses, average annual total returns
would have been 11.51% and 12.39% for 1-year, 9.01% and 9.64% for 5-year, and
8.03% and 8.09% since inception.

- ------------
* The LIGC Index is an unmanaged index of intermediate government and corporate
bonds calculated by Lehman Brothers Inc. and has no defined investment
objective.

3
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS FIXED INCOME FUND
STATEMENT OF NET ASSETS
October 31, 1995
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
RATINGS'D'
PAR SECURITY DESCRIPTION (MOODY'S/S&P) MATURITY RATE VALUE
- ----------- ------------------------------------------------------ ------------- --------- ------ ------------
<C> <S> <C> <C> <C> <C>
CORPORATE BONDS (16.0%)
$ 5,000,000 Banque Paribas Subordinate Notes (A2/A-) 06/15/07 8.350% $ 5,468,750
1,500,000 Benedek Broadcast Corporation Senior Secured Note
[Callable 03/01/00 @ $105.938] (B2/NR) 03/01/05 11.875 1,582,500
1,500,000 Continental Homes Holdings Corporation Senior Note
[Callable 08/01/97 @ $104] (Ba3/B) 08/01/99 12.000 1,588,125
500,000 Grancare, Inc. [Callable 9/15/00 @ $104.69] (B2/B) 09/15/05 9.375 498,750
3,500,000 J.C. Penney & Co. [Callable 06/15/01 @ $104.57] (A1/A+) 06/15/21 9.750 4,195,625
2,000,000 Mediq, Inc. Subordinated Debenture [Callable 07/15/96
@ $105] (B3/CCC+) 07/15/03 7.500 1,630,000
1,500,000 Peregrine Investment Holdings Convertible Bond (Euro)
[Callable 12/18/95 @ $100] (NR/NR) 12/01/00 4.500 1,224,375
1,000,000 Pueblo Xtra International, Inc. Senior Note [Callable
08/01/98 @ $104.75] (B2/B-) 08/01/03 9.500 952,500
2,000,000 Seventh Mexican Acceptance Bond (Grupo Sidek) (Euro) (NR/NR) 08/15/99 10.000 1,110,000
500,000 Telewest PLC [Callable 10/01/00 @ $104.81] (B1/BB) 10/01/06 9.625 502,500
------------
TOTAL CORPORATE BONDS (Cost $19,250,406) 18,753,125
------------

MORTGAGE-BACKED SECURITIES (25.7%)
667,012 Bankers Trust Company Multi-Class Pass Through CTSF
Series 1988-1 Class D (NR/AAA) 04/01/18 8.625 692,296
770,138 Donaldson, Lufkin, & Jenrette Acceptance Trust Series
1989-1 Class F (Aaa/AAA) 08/01/19 11.000 829,135
4,000,000 Federal Home Loan Bank Structured Note [Callable
01/27/96 @ $100] (Aaa/AAA) 07/27/00 5.000 3,951,200
414,520 Federal Home Loan Mortgage Corp. Pool #220014 (Aaa/AAA) 10/01/01 8.750 425,501
5,828,014 Federal National Mortgage Association Conventional
Loan Pool #250322 (Aaa/AAA) 08/01/25 7.500 5,891,702
281,147 Goldman Sachs Trust 2 Series F Class 3 (Aaa/AAA) 10/20/18 9.250 297,302
590,152 Guaranteed Mortgage Corp. Series M Class M1 (Aaa/NR) 04/01/03 8.500 607,102
3,771,954 Mortgage Capital Funding, Inc. Class 1995-MC1 (NR/AAA) 05/25/27 7.700 3,892,185
2,000,000 Nomura Asset Capital Corp. Series 1993-M1 Class A1 (NR/NR) 11/25/03 7.640 2,052,500
2,098,481 Nomura Asset Securities Corp. Series 1994-4B Class 4A (Aaa/AAA) 09/25/24 8.300 2,130,614
4,000,000 Resolution Trust Corp. Series 94-C1 Class B (Aa/AA+) 06/25/26 8.000 4,160,000
2,000,000 Resolution Trust Corporation Mortgage Pass Through
Series-95 C1 Class A-2C (Aaa/NR) 02/25/27 6.900 1,963,750
1,000,000 Security Pacific Home Equity ABS Series 1991 Class B (Aaa/AAA) 05/15/98 8.850 1,051,600
2,000,000 Shurgard CMO Asset Backed Pass Through Certificates
Series 1 Class 1 (NR/NR) 06/15/04 8.240 2,120,625
------------
TOTAL MORTGAGE-BACKED SECURITIES (Cost $29,313,859) 30,065,512
------------
</TABLE>

See Accompanying Notes to Financial Statements.
10
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS FIXED INCOME FUND
STATEMENT OF NET ASSETS (CONT'D)
October 31, 1995
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
RATINGS'D'
PAR SECURITY DESCRIPTION (MOODY'S/S&P) MATURITY RATE VALUE
- ----------- ------------------------------------------------------ ------------- --------- ------ ------------
<C> <S> <C> <C> <C> <C>
MUNICIPAL BONDS (0.9%)
$ 1,000,000 Los Angeles County, California Pension Obligation,
Series D RB (Cost $1,000,000) (Aaa/AAA) 06/30/05 6.770% $ 1,002,500
------------
UNITED STATES TREASURY OBLIGATIONS (45.2%)
4,000,000 U.S. Treasury Note 07/15/98 8.250 4,251,840
13,500,000 U.S. Treasury Note 04/15/99 7.000 14,012,999
14,700,000 U.S. Treasury Note 05/15/01 8.000 16,174,408
16,750,000 U.S. Treasury Note 02/15/05 7.500 18,469,052
------------
TOTAL UNITED STATES TREASURY OBLIGATIONS (Cost $52,194,817) 52,908,299
------------
AGENCY OBLIGATIONS (1.5%)
1,677,798 Small Business Administration Guaranteed Development
Participation Certificate Debenture Series 1992-20D (Cost $1,677,798) 04/01/12 8.200 1,759,591
------------

</TABLE>

COMMON STOCK (2.2%)
SHARES
- -----------
<C> <S> <C> <C>
50,000 American Health Properties, Inc. 1,031,250
50,000 Healthcare Realty Trust, Inc. 1,006,250
30,000 Universal Health Realty Income Trust 498,750
------------
TOTAL COMMON STOCK (Cost $2,579,398) 2,536,250
------------
PREFERRED STOCK (6.8%)
40,000 American Re Capital Corp. 8.500 1,005,000
40,000 Banesto Holdings Limited Series A 10.500 1,186,000
161,000 Indosuez Holdings SCA ADR 10.375 4,326,875
50,000 Credit Lyonnaise Capital SCA ADR # 9.500 1,212,500
2,320 Ohio Edison Corp. 7.360 234,320
------------
TOTAL PREFERRED STOCK (Cost $7,697,355) 7,964,695
------------

</TABLE>

SHORT-TERM INVESTMENTS (1.1%)
PAR
- -----------
<C> <S> <C>
$ 1,254,000 Repurchase agreement with State Street Bank and Trust
Co. dated 10/31/95 at 5.83% to be repurchased at
$1,254,203 on 11/01/95. (Collateralized by $1,265,000
U.S. Treasury Note at 6.875% due 10/31/96, with a
market value of $1,280,813.) (Cost $1,254,000) 1,254,000
------------
TOTAL INVESTMENTS AT VALUE (99.4%) (Cost $114,967,633*) 116,243,972

OTHER ASSETS IN EXCESS OF LIABILITIES (0.6%) 738,936
------------
NET ASSETS (100.0%) (applicable to 11,618,046 shares) $116,982,908
------------
------------
NET ASSETS VALUE, offering and redemption price per share ($116,982,908[div]11,618,046) $10.07
------
------

</TABLE>

INVESTMENT ABBREVIATIONS

<TABLE>
<S> <C>
ADR = American Depository Receipt
CMO = Collateralized Mortgage Obligation
RB = Revenue Bond
</TABLE>

'D' Credit ratings given by Moody's Investors Service, Inc. and Standard &
Poor's Ratings Group are unaudited.
# Restricted security.
* Also cost for Federal income tax purposes.

See Accompanying Notes to Financial Statements.
11
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS FIXED INCOME FUNDS
STATEMENTS OF OPERATIONS
For the Year Ended October 31, 1995
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Warburg
Warburg Pincus Warburg Pincus
Warburg Pincus Intermediate New York
Pincus Global Maturity Intermediate
Fixed Income Fixed Income Government Municipal
Fund Fund Fund Fund
------------ ------------ ---------- --------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 8,376,182 $6,507,144 $3,252,179 $3,982,642
Dividends 470,438 552,228 98,083 45,198
------------ ------------ ---------- --------------
Total investment income 8,846,620 7,059,372 3,350,262 4,027,840
------------ ------------ ---------- --------------
EXPENSES:
Investment advisory 555,483 773,318 253,734 316,050
Administrative services 222,194 170,130 102,661 158,024
Audit 15,674 16,985 16,975 15,975
Custodian/Sub-custodian 48,401 44,270 17,340 23,471
Directors/Trustees 10,500 10,500 10,500 10,500
Insurance 6,127 5,754 3,692 4,479
Legal 73,175 72,631 58,060 70,563
Printing 11,861 4,525 5,236 12,489
Registration 31,178 31,790 26,398 16,631
Transfer agent 48,503 51,309 43,347 33,447
Miscellaneous 14,281 38,611 14,726 14,365
------------ ------------ ---------- --------------
1,037,377 1,219,823 552,669 675,994
Less: fees waived (204,153) (485,160) (248,192) (201,919)
------------ ------------ ---------- --------------
Total expenses 833,224 734,663 304,477 474,075
------------ ------------ ---------- --------------
Net investment income 8,013,396 6,324,709 3,045,785 3,553,765
------------ ------------ ---------- --------------
NET REALIZED AND UNREALIZED GAIN FROM INVESTMENTS
AND FOREIGN CURRENCY RELATED ITEMS:
Net realized gain from security transactions 1,132,052 508,655 514,443 818,720
Net realized loss from futures contracts (606,653) (849,500) 0 0
Net realized gain (loss) from foreign currency
related items 49,446 (961,036) 0 0
Net decrease in unrealized depreciation from
investments and foreign currency related
items 4,869,743 2,015,972 2,406,718 1,979,229
------------ ------------ ---------- --------------
Net realized and unrealized gain from
investments and foreign currency
related items 5,444,588 714,091 2,921,161 2,797,949
------------ ------------ ---------- --------------

Net increase in net assets resulting
from operations $ 13,457,984 $7,038,800 $5,966,946 $6,351,714
------------ ------------ ---------- --------------
------------ ------------ ---------- --------------
</TABLE>

See Accompanying Notes to Financial Statements.
19
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS FIXED INCOME FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Warburg Pincus Warburg Pincus
Fixed Income Global Fixed
Fund Income Fund
----------------------------- -----------------------------
For the Year Ended October For the Year Ended October
31, 31,
1995 1994 1995 1994
------------ ------------ ------------ ------------

<S> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income $ 8,013,396 $ 5,867,260 $ 6,324,709 $ 5,807,634
Net realized gain (loss) from security
transactions 1,132,052 (1,660,108) 508,655 (1,869,553)
Net realized gain (loss) from futures
contracts (606,653) 117,484 (849,500) 269,845
Net realized gain (loss) from foreign
currency related items 49,446 18,246 (961,036) (2,237,413)
Net change in unrealized appreciation
(depreciation) from investments and
foreign currency related items 4,869,743 (4,804,661) 2,015,972 (4,227,712)
------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations 13,457,984 (461,779) 7,038,800 (2,257,199)
------------ ------------ ------------ ------------
FROM DISTRIBUTIONS:
Dividends from net investment income (8,013,396) (5,926,356) (3,445,878) (3,215,939)
Distributions from capital gains 0 (732,704) 0 (827,403)
Return of capital 0 0 0 (366,074)
------------ ------------ ------------ ------------
Net decrease from distributions (8,013,396) (6,659,060) (3,445,878) (4,409,416)
------------ ------------ ------------ ------------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from sale of shares 47,678,747 58,018,967 42,488,917 61,614,112
Reinvested dividends 6,555,741 5,623,287 2,941,954 3,798,759
Net asset value of shares redeemed (44,942,286) (35,456,760) (75,776,818) (30,346,474)
------------ ------------ ------------ ------------
Net increase (decrease) in net assets
from capital share transactions 9,292,202 28,185,494 (30,345,947) 35,066,397
------------ ------------ ------------ ------------
Net increase (decrease) in net assets 14,736,790 21,064,655 (26,753,025) 28,399,782
NET ASSETS:
Beginning of year 102,246,118 81,181,463 90,394,069 61,994,287
------------ ------------ ------------ ------------
End of year $116,982,908 $102,246,118 $ 63,641,044 $ 90,394,069
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------

20
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------

<CAPTION>
Warburg Pincus Warburg Pincus
Intermediate Maturity New York Intermediate
Government Fund Municipal Fund
--------------------------------- ---------------------------------
For the Year Ended October 31, For the Year Ended October 31,
1995 1994 1995 1994
------------ ------------ ------------ ------------

<C> <C> <C> <C>
$ 3,045,785 $ 2,827,703 $ 3,553,765 $ 3,215,210

514,443 (58,020) 818,720 47,719
0 0 0 0

0 0 0 0
2,406,718 (3,492,181) 1,979,229 (3,387,003)
------------ ------------ ------------ ------------
5,966,946 (722,498) 6,351,714 (124,074)
------------ ------------ ------------ ------------
(3,045,785) (2,827,703) (3,553,765) (3,222,899)
0 (3,937,754) (47,531) (912,745)
0 0 0 0
------------ ------------ ------------ ------------
(3,045,785) (6,765,457) (3,601,296) (4,135,644)
------------ ------------ ------------ ------------
26,773,501 24,310,135 32,441,402 50,293,197
2,288,064 5,552,546 3,073,742 3,404,096
(22,818,476) (53,205,957) (40,620,180) (43,299,063)
------------ ------------ ------------ ------------
6,243,089 (23,343,276) (5,105,036) 10,398,230
------------ ------------ ------------ ------------
9,164,250 (30,831,231) (2,354,618) 6,138,512
46,733,653 77,564,884 75,716,095 69,577,583
------------ ------------ ------------ ------------
$ 55,897,903 $ 46,733,653 $ 73,361,477 $ 75,716,095
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>

See Accompanying Notes to Financial Statements.

21
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<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS FIXED INCOME FUND
FINANCIAL HIGHLIGHTS
(For a Share of the Fund Outstanding Throughout Each Year)
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
For the Year Ended October 31,
------------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $ 9.61 $ 10.42 $ 9.90 $ 9.61 $ 8.95
-------- -------- -------- ------- -------
Income from Investment Operations:

Net Investment Income .70 .63 .56 .67 .73
Net Gain (Loss) on Securities and Foreign Currency
Related Items (both realized and unrealized) .46 (.70) .52 .29 .66
-------- -------- -------- ------- -------

Total from Investment Operations 1.16 (.07) 1.08 .96 1.39
-------- -------- -------- ------- -------
Less Distributions:

Dividends from Net Investment Income (.70) (.65) (.56) (.67) (.73)
Distributions from Capital Gains .00 (.09) .00 .00 .00
-------- -------- -------- ------- -------

Total Distributions (.70) (.74) (.56) (.67) (.73)
-------- -------- -------- ------- -------

NET ASSET VALUE, END OF YEAR $ 10.07 $ 9.61 $ 10.42 $ 9.90 $ 9.61
-------- -------- -------- ------- -------
-------- -------- -------- ------- -------

Total Return 12.59% (.60%) 11.63% 10.28% 16.08%

RATIOS/SUPPLEMENTAL DATA:

Net Assets, End of Year (000s) $116,983 $102,246 $81,181 $65,095 $61,908

Ratios to average daily net assets:
Operating expenses .75% .75% .75% .75% .75%
Net investment income 7.25% 6.53% 5.99% 6.82% 7.85%
Decrease reflected in above operating expense ratios
due to waivers/reimbursements .18% .18% .09% .27% .24%

Portfolio Turnover Rate 182.93% 179.44% 227.37% 122.04% 150.61%
</TABLE>

See Accompanying Notes to Financial Statements.

TAX STATUS OF 1995 DIVIDENDS (Unaudited)

Dividends paid by the Fund taxable as ordinary income amounted to $.70 per
share.

Because the Fund's fiscal year is not the calendar year, amounts to be used by
calendar year taxpayers on their Federal return will be reflected on Form
1099-DIV and will be mailed in January 1996.

22
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS FIXED INCOME FUNDS
NOTES TO FINANCIAL STATEMENTS
October 31, 1995
- --------------------------------------------------------------------------------

1. SIGNIFICANT ACCOUNTING POLICIES

The Warburg Pincus Fixed Income Funds are comprised of the Warburg Pincus
Fixed Income Fund (the 'Fixed Income Fund') and the Warburg Pincus Intermediate
Maturity Government Fund (the 'Intermediate Government Fund') which are
registered under the Investment Company Act of 1940, as amended (the '1940
Act'), as diversified, open-end management investment companies and the Warburg
Pincus Global Fixed Income Fund (the 'Global Fixed Income Fund') and the Warburg
Pincus New York Intermediate Municipal Fund (the 'New York Municipal Fund')
which are registered under the 1940 Act as non-diversified, open-end management
investment companies.

Investment objectives for each Fund are as follows: the Fixed Income Fund
seeks to generate high current income consistent with reasonable risk with
capital appreciation a secondary objective; the Global Fixed Income Fund seeks
to maximize total investment return consistent with prudent investment
management, consisting of a combination of interest income, currency gains and
capital appreciation; the Intermediate Government Fund seeks to achieve as high
a level of current income as is consistent with preservation of capital; and the
New York Municipal Fund seeks to maximize current interest income exempt from
Federal income tax and New York State and New York City personal income tax to
the extent consistent with prudent investment and preservation of capital.

The net asset value of each Fund is determined daily as of the close of
regular trading on the New York Stock Exchange. Each Fund's investments are
valued at market value, which is currently determined using the last reported
sales price. If no sales are reported, investments are generally valued at the
last reported bid price. In the absence of market quotations, investments are
generally valued at fair value as determined by or under the direction of the
Fund's governing Board. Short-term investments that mature in 60 days or less
are valued on the basis of amortized cost, which approximates market value.

The books and records of the Funds are maintained in U.S. dollars.
Transactions denominated in foreign currencies are recorded at the current
prevailing exchange rates. All assets and liabilities denominated in foreign
currencies are translated into U.S. dollar amounts at the current exchange rate
at the end of the period. Translation gains or losses resulting from changes in
the exchange rate during the reporting period and realized gains and losses on
the settlement of foreign currency transactions are reported in the results of
operations for the current period. The Global Fixed Income Fund isolates that
portion of gains and losses on investments in debt securities which are due to
changes in the foreign exchange rate from that which are due to changes in
market prices of debt securities.

Security transactions are accounted for on trade date. Interest income is
recorded on the accrual basis. Dividends are recorded on the ex-dividend date.
The cost of investments sold is determined by use of the specific identification
method for both financial reporting and income tax purposes.

Dividends from net investment income are declared daily and paid monthly
for the Fixed Income Fund, the Intermediate Government Fund and the New York
Municipal Fund. Dividends from net investment income are declared and paid
quarterly for the Global Fixed Income Fund. Distributions for all Funds of net
realized capital gains, if any, are declared and paid annually. However, to the
extent that a net realized capital gain can be reduced by a capital loss
carryover, such gain will not be distributed.

26
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS FIXED INCOME FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1995
- --------------------------------------------------------------------------------
Income and capital gain distributions are determined in accordance with Federal
income tax regulations which may differ from generally accepted accounting
principles.

Certain amounts in the Statements of Changes in Net Assets have been
reclassified to conform to current year presentation.

No provision is made for Federal taxes as it is each Fund's intention to
continue to qualify for and elect the tax treatment applicable to regulated
investment companies under the Internal Revenue Code and make the requisite
distributions to its shareholders which will be sufficient to relieve it from
Federal income and excise taxes.

Costs incurred by the Global Fixed Income Fund in connection with its
organization have been deferred and are being amortized over a period of five
years from the date the Global Fixed Income Fund commenced its operations.

Each Fund may enter into repurchase agreement transactions. Under the terms
of a typical repurchase agreement, a Fund acquires an underlying security
subject to an obligation of the seller to repurchase. The value of the
underlying security collateral will be maintained at an amount at least equal to
the total amount of the purchase obligation, including interest. The collateral
is in the Fund's possession.

2. INVESTMENT ADVISER, CO-ADMINISTRATORS AND DISTRIBUTOR

Warburg, Pincus Counsellors, Inc. ('Warburg'), a wholly owned subsidiary of
Warburg, Pincus Counsellors G.P. ('Counsellors G.P.'), serves as each Fund's
investment adviser. For its investment advisory services, Warburg receives the
following fees based on each Fund's average daily net assets:

<TABLE>
<CAPTION>
FUND ANNUAL RATE
- --------------------------------- ----------------------------------

<S> <C>
Fixed Income .50% of average daily net assets
Global Fixed Income 1.00% of average daily net assets
Intermediate Government .50% of average daily net assets
New York Municipal .40% of average daily net assets
</TABLE>

For the year ended October 31, 1995, investment advisory fees and waivers
were as follows:

<TABLE>
<CAPTION>
GROSS NET
FUND ADVISORY FEE WAIVER ADVISORY FEE
- --------------------------------------------------- ------------ --------- ------------

<S> <C> <C> <C>
Fixed Income $555,483 $(162,585) $392,898
Global Fixed Income 773,318 (435,848) 337,470
Intermediate Government 253,734 (226,320) 27,414
New York Municipal 316,050 (168,856) 147,194
</TABLE>

Counsellors Funds Service, Inc. ('CFSI'), a wholly owned subsidiary of
Warburg, and PFPC Inc. ('PFPC'), an indirect, wholly owned subsidiary of PNC
Bank Corp. ('PNC'), serve as each Fund's co-administrators. For administrative
services, CFSI currently receives a fee calculated at an annual rate of

27
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS FIXED INCOME FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1995
- --------------------------------------------------------------------------------
.10% of each Fund's average daily net assets. For the year ended October 31,
1995, administrative services fees earned by CFSI were as follows:

<TABLE>
<CAPTION>
FUND CO-ADMINISTRATION FEE
- ----------------------------------------------------------------------- ---------------------

<S> <C>
Fixed Income $ 111,097
Global Fixed Income 77,332
Intermediate Government 50,747
New York Municipal 79,012
</TABLE>

For its administrative services, PFPC currently receives a fee calculated
at an annual rate of .10% of the average daily net assets of the Fixed Income
Fund, the Intermediate Government Fund and the New York Municipal Fund. For the
Global Fixed Income Fund, PFPC currently receives a fee calculated at an annual
rate of .12% of the first $250 million in average daily net assets, .10% of the
next $250 million in average daily net assets, .08% of the next $250 million in
average daily net assets and .05% of average daily net assets over $750 million.

For the year ended October 31, 1995, administrative services fees earned
and voluntarily waived by PFPC were as follows:

<TABLE>
<CAPTION>
FUND GROSS FEE WAIVER NET
- ----------------------------------------------------------- --------- -------- -------

<S> <C> <C> <C>
Fixed Income $ 111,097 $(41,568) $69,529
Global Fixed 92,798 (49,312) 43,486
Intermediate Government 51,914 (21,872) 30,042
New York Municipal 79,012 (33,063) 45,949
</TABLE>

Counsellors Securities Inc. ('CSI'), also a wholly owned subsidiary of
Warburg, serves as each Fund's distributor. No compensation is paid by the Funds
to CSI for distribution services.

3. INVESTMENTS IN SECURITIES

For the year ended October 31, 1995, purchases and sales of investment
securities (excluding short-term investments) and United States government and
agency obligations were as follows:

<TABLE>
<CAPTION>
U.S. GOVERNMENT AND
INVESTMENT SECURITIES AGENCY OBLIGATIONS
--------------------------- ----------------------------
FUND PURCHASES SALES PURCHASES SALES
- --------------------------------------- ----------- ------------ ------------ ------------

<S> <C> <C> <C> <C>
Fixed Income $69,506,438 $ 59,600,888 $144,593,744 $131,853,246
Global Fixed Income 79,097,036 108,742,015 9,808,921 11,805,050
Intermediate Government 0 0 61,570,880 50,413,561
New York Municipal 79,189,466 87,267,702 0 0
</TABLE>

28
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<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS FIXED INCOME FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1995
- --------------------------------------------------------------------------------

At October 31, 1995, the net unrealized appreciation from investments for
those securities having an excess of value over cost and net unrealized
depreciation from investments for those securities having an excess of cost over
value (based on cost for Federal income tax purposes) was as follows:

<TABLE>
<CAPTION>
NET UNREALIZED
UNREALIZED UNREALIZED APPRECIATION
FUND APPRECIATION DEPRECIATION (DEPRECIATION)
- ------------------------------------------------ ------------ ------------ --------------

<S> <C> <C> <C>
Fixed Income $2,550,123 $ (1,273,784) $1,276,339
Global Fixed Income 1,658,696 (1,472,059) 186,637
Intermediate Government 1,299,887 (263,103) 1,036,784
New York Municipal 1,976,753 (16,768) 1,959,985
</TABLE>

4. FORWARD FOREIGN CURRENCY CONTRACTS

The Fixed Income Fund and the Global Fixed Income Fund may enter into
forward currency contracts for the purchase or sale of a specific foreign
currency at a fixed price on a future date. Risks may arise upon entering into
these contracts from the potential inability of counterparties to meet the terms
of their contracts and from unanticipated movements in the value of a foreign
currency relative to the U.S. dollar. The Funds will enter into forward
contracts primarily for hedging purposes. The forward currency contracts are
adjusted by the daily exchange rate of the underlying currency and any gains or
losses are recorded for financial statement purposes as unrealized until the
contract settlement date.

At October 31, 1995, the Global Fixed Income Fund had the following open
forward foreign currency contracts:

<TABLE>
<CAPTION>
FOREIGN UNREALIZED
FORWARD CURRENCY EXPIRATION CURRENCY CONTRACT CONTRACT FOREIGN EXCHANGE
CONTRACT DATE TO BE SOLD AMOUNT VALUE GAIN (LOSS)
- ------------------------ ---------- ---------- ----------- ----------- ----------------

<S> <C> <C> <C> <C> <C>
Australian Dollars 12/18/95 914,990 $ 690,818 $ 695,209 $ (4,391)
British Pounds 12/27/95 3,510,984 5,435,003 5,541,737 (106,734)
Danish Krone 12/18/95 29,059,448 5,281,904 5,319,710 (37,806)
German Marks 11/29/95 14,200,000 9,588,116 10,109,640 (521,524)
German Marks 11/29/95 375,092 255,164 267,045 (11,881)
German Marks 12/18/95 10,514,444 1,918,694 1,924,806 (6,112)
German Marks 12/18/95 10,513,889 1,934,834 1,924,704 10,130
German Marks 12/18/95 6,013,700 4,243,966 4,285,704 (41,738)
Irish Punt 12/18/95 2,881,250 4,639,677 4,671,371 (31,694)
Netherlands Guilder 11/29/95 4,577,075 2,760,600 2,896,883 (136,283)
Netherlands Guilder 11/29/95 79,014 49,138 50,009 (871)
----------- ----------- ----------------
$36,797,914 $37,686,818 $ (888,904)
----------- ----------- ----------------
----------- ----------- ----------------
</TABLE>

5. FUTURES CONTRACTS

Each Fund may enter into futures contracts for hedging purposes to the
extent permitted by its investment policies and objectives. To enter into a
futures contract, a Fund must make a deposit of an initial margin with its
custodian in a segregated account. Subsequent payments, which are dependent on

29
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS FIXED INCOME FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1995
- --------------------------------------------------------------------------------
the daily fluctuations in the value of the underlying instrument, are made or
received by a Fund each day (daily variation margin) and are recorded as
unrealized gains or losses until the contracts are closed. When the contract is
closed, a Fund records a realized gain or loss equal to the difference between
the proceeds from (or cost of) the closing transactions and a Fund's basis in
the contract. Risks of entering into futures contracts include the possibility
that a change in the value of the contract may not correlate with the changes in
the value of the underlying instruments. The Fixed Income Fund and the Global
Fixed Income Fund entered into futures contracts during the year ended October
31, 1995. However, the Fixed Income Fund and Global Fixed Income Fund had no
futures contracts open at October 31, 1995.

6. CAPITAL SHARE TRANSACTIONS

The Global Fixed Income Fund and the Intermediate Government Fund are each
authorized to issue three billion full and fractional shares of capital stock,
$.001 par value per share, of which one billion shares are designated Series 2
Shares (the Advisor Shares). The Fixed Income Fund and the New York Municipal
Fund are each authorized to issue an unlimited number of full and fractional
shares of beneficial interest, $.001 par value per share, of which one billion
shares are designated Series 2 Shares (the Advisor Shares). At October 31, 1995,
no Advisor Shares were outstanding.

30
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<PAGE>
- --------------------------------------------------------------------------------

[THIS PAGE INTENTIONALLY LEFT BLANK]

31
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<PAGE>
<PAGE>
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WARBURG PINCUS FIXED INCOME FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1995
- --------------------------------------------------------------------------------

6. CAPITAL SHARE TRANSACTIONS (cont'd)

Transactions in shares of each Fund were as follows:

<TABLE>
<CAPTION>
FIXED INCOME FUND GLOBAL FIXED INCOME FUND
For the Year Ended October 31, For the Year Ended October 31,
---------------------------------------- ----------------------------------
1995 1994 1995 1994
------------------- ------------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Shares sold 4,918,036 5,837,372 4,066,768 5,678,256
Shares issued to
shareholders on
reinvestment of
dividends 672,751 566,407 281,288 350,063
Shares redeemed (4,609,035) (3,561,347) (7,231,335) (2,829,142)
------------------- ------------------- ---------------- ----------------
Net increase (decrease)
in shares outstanding 981,752 2,842,432 (2,883,279) 3,199,177
------------------- ------------------- ---------------- ----------------
------------------- ------------------- ---------------- ----------------
</TABLE>

7. NET ASSETS

Net assets at October 31, 1995, consisted of the following:

<TABLE>
<CAPTION>
FIXED INCOME FUND GLOBAL FIXED INCOME FUND
---------------------------- ------------------------
<S> <C> <C>
Capital contributed, net $116,808,286 $ 63,963,915
Accumulated net investment income
(loss) (66,850) 1,917,795
Accumulated net realized gain
(loss) from security transactions (1,034,867) (1,533,335)
Net unrealized appreciation
(depreciation) from investments
and foreign currency related
items 1,276,339 (707,331)
---------------- ------------------------
Net assets $116,982,908 $ 63,641,044
---------------- ------------------------
---------------- ------------------------
</TABLE>

8. CAPITAL LOSS CARRYOVER

At October 31, 1995, capital loss carryovers available to offset possible
future capital gains of each Fund were as follows:

<TABLE>
<CAPTION>
Capital Loss Carryover Total Capital
Expiring In Loss Carryover
-------------------------- --------------
2002 2003
---------- ----------
<S> <C> <C> <C>
Fixed Income $1,034,867 $1,034,867
Global Fixed Income 653,329 1,284,612 1,937,941

32
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------

<CAPTION>
INTERMEDIATE GOVERNMENT FUND NEW YORK MUNICIPAL FUND
For the Year Ended October 31, For the Year Ended October 31,
---------------------------------------- ----------------------------------
1995 1994 1995 1994
------------------- ------------------- ---------------- ----------------
<C> <C> <C> <C>
2,723,498 2,426,890 3,181,012 4,835,896
230,993 538,360 299,821 328,635
(2,323,291) (5,159,908) (3,957,382) (4,178,180)
------------------- ------------------- ---------------- ----------------
631,200 (2,194,658) (476,549) 986,351
------------------- ------------------- ---------------- ----------------
------------------- ------------------- ---------------- ----------------

<CAPTION>
INTERMEDIATE GOVERNMENT FUND NEW YORK MUNICIPAL FUND
------------------------------------------ ---------------------------------
<C> <C>
$ 54,407,628 $ 70,580,636
(5,346) 0
458,837 818,908
1,036,784 1,961,933
--------------- ---------------
$ 55,897,903 $ 73,361,477
--------------- ---------------
--------------- ---------------
</TABLE>

33
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