WARBURG PINCUS ADVISOR FUNDS OCTOBER 31, 1999
BALANCED FUND
GROWTH & INCOME FUND
CAPITAL APPRECIATION FUND
A
ANNUAL REPORT
More complete information about the Funds, including charges and expenses, is
provided in the Prospectus, which must precede or accompany this document and
which should be read carefully before investing. You may obtain additional
copies by calling 800-222-8977 or by writing to Warburg Pincus Advisor Funds,
P.O. Box 9030, Boston, MA 02205-9030.
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WARBURG PINCUS
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CREDIT SUISSE
ASSET MANAGEMENT
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From time to time, the Funds' investment adviser and co-administrators may waive
some fees and/or reimburse some expenses, without which performance would be
lower. Waivers and/or reimbursements are subject to change.
Returns are historical and include change in share price and reinvestment of
dividends and capital gains. Past performance cannot guarantee future results.
Returns and share price will fluctuate, and redemption value may be more or less
than original cost.
The views of the Funds' management are as of the date of the letters and
portfolio holdings described in this document are as of October 31, 1999; these
views and portfolio holdings may have changed subsequent to these dates. Nothing
in this document is a recommendation to purchase or sell securities.
Fund shares are not deposits or other obligations of Credit Suisse Asset
Management, LLC ("CSAM LLC") or any affiliate, are not FDIC insured and are not
guaranteed by CSAM LLC or any affiliate. Fund investments are subject to
investment risks, including loss of your investment.
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Warburg Pincus Balanced Fund
Annual Investment Adviser's Report -- October 31, 1999
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December 9, 1999
Dear Shareholder:
For the 12 months ended October 31, 1999, the Advisor Class shares of Warburg
Pincus Balanced Fund had a return of 13.37%, vs. returns of 12.55% for the
Lipper Balanced Funds Index, 25.65% for the S&P 500 Index and 0.98% for the
Lehman Brothers Intermediate Government/Corporate Bond Index. Note: Effective
June 16, 1999, Brian S. Posner no longer serves as Co-Portfolio Manager of the
fund. Scott T. Lewis, M. Anthony E. van Daalen and Charles Van Vleet continue to
serve as Co-Portfolio Managers.
Manager Commentary
The reporting period was, in general, a strong one for stocks and a
lackluster one for bonds, reflecting investors' vastly increased tolerance for
risk against an improving global economic and financial backdrop. This sentiment
supported stocks broadly, with most major domestic equity indexes posting
impressive gains for the period (growth-oriented stocks, such as technology
stocks, were especially buoyant). Most bond indexes, on the other hand, had slim
gains at best (though high-yield bonds performed relatively well), hampered by
investors' decreased emphasis on safety and stability. Bonds were also
restrained by fears that the Federal Reserve, which raised interest rates in
June and August, would take rates yet higher (the Fed in fact raised rates again
in November), given the Fed's continued stated concerns over potential
inflation. To be sure, inflation and interest-rate worries had an impact on the
stock market, in the form of elevated market volatility, especially late in the
period.
Set against this backdrop, the Fund had a solid return in absolute terms, and
modestly outperformed its Lipper benchmark. The fund's performance was
consistent with our desire to provide competitive returns while limiting overall
portfolio volatility. We maintained an asset allocation of roughly 60% stocks
and 40% bonds through the period, a relatively conservative mix but one that we
continued to view as appropriate, given our goals.
With respect to the Fund's equity component, we remained well-diversified in
terms of sector and industry, seeing little incentive to aggressively overweight
particular areas. We did, however, maintain a modest overweighting in
financial-services stocks (including bank stocks), reflecting our generally
favorable view of these stocks' valuations and their underlying companies'
earnings prospects. Other noteworthy weightings for the fund at the end of the
period included the telecommunications & equipment, capital-equipment and energy
sectors.
1
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Warburg Pincus Balanced Fund
Annual Investment Adviser's Report -- October 31, 1999 (cont'd)
- --------------------------------------------------------------------------------
Our bond holdings continued to consist primarily of high-quality,
intermediate-term securities, since we view the Fund's fixed-income component
mostly as a provider of income and stability, rather than as a potential source
of capital appreciation. We maintained a bias here in favor of mortgage-backed
bonds, which we generally deemed to be attractive from a risk-adjusted-yield
perspective.
Going forward, we plan to maintain a relatively conservative asset
allocation, barring extraordinary market conditions, while striving to add value
to the portfolio via careful stock selection. Our specific equity focus will
remain on mid- and large-capitalization stocks that we believe have the best
expected returns, based on their earnings prospects and current valuations.
Within the Fund's bond component, our emphasis will remain on high-quality,
intermediate-term issues that have what we deem to be attractive risk-adjusted
yields.
Scott T. Lewis M. Anthony E. van Daalen Charles C. Van Vleet
Co-Portfolio Manager Co-Portfolio Manager Co-Portfolio Manager
2
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Warburg Pincus Balanced Fund
Annual Investment Adviser's Report -- October 31, 1999 (cont'd)
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Growth of $10,000 Invested in Warburg Pincus Advisor
Balanced Fund from July 31, 1995 as of October 31, 1999
The graph below illustrates the hypothetical investment of $10,000 in Warburg
Pincus Advisor Class shares of Balanced Fund (the "Fund") from July 31, 1995 to
October 31, 1999, compared to the S&P 500 Index,* the Lipper Balanced Funds
Index** and the Lehman Intermediate Government/Corporate Bond Index*** for the
same time period. Past performance does not predict future results.
[GRAPHIC]
In the printed version there appears a line graph with the following
plot points depicted:
Fund Lipper Lehman Intermediate
(Advisor Shares) S&P 500 Balanced Govt. Corp.
7/31/95 10000 10000 10000 10000
Aug-95 10382.5 10017.4 10078 10091
Sep-95 10493.6 10439.5 10318.7 10164.1
Oct-95 10241.3 10408.6 10292.7 10277.3
Nov-95 10727.2 10856.4 10612.6 10412.4
Dec-95 10902.2 11066.8 10779.6 10521.6
Jan-96 11215 11448.8 10974.2 10612.4
Feb-96 11234 11549.7 10979.4 10487.9
Mar-96 11242.2 11662.7 11020.8 10434
Apr-96 11546.3 11834.3 11093.9 10397.2
May-96 11802.9 12138.6 11207.3 10389.4
Jun-96 11517.5 12184.8 11244.3 10499.8
Jul-96 11012.6 11647.4 10955 10531
Aug-96 11374.6 11893.2 11127.8 10539.3
Sep-96 11721.5 12561.3 11539.4 10686.1
Oct-96 11865.1 12907.3 11784.2 10874.9
Nov-96 12248.2 13881.1 12333.4 11018.5
Dec-96 12280.5 13606.4 12182.2 10948
Jan-97 12522.8 14455.6 12555.1 10990.5
Feb-97 12435.6 14568.9 12601.6 11011.5
Mar-97 12153.4 13972.1 12235.5 10935.7
Apr-97 12338.9 14805 12603.2 11064.2
May-97 12973.4 15704.7 13119.2 11156
Jun-97 13373.3 16407.3 13545.9 11257.8
Jul-97 14138.6 17711.2 14317 11486.9
Aug-97 13952.2 16720.7 13863 11429.3
Sep-97 14713.9 17635.1 14415.8 11562.2
Oct-97 14133.6 17047.8 14153 11690.3
Nov-97 14054.5 17835.5 14412 11716
Dec-97 14244.2 18142.2 14625.3 11809.8
Jan-98 14190.1 18342.5 14729.2 11964.5
Feb-98 14831.5 19663.6 15313.9 11955.5
Mar-98 15159.3 20670.5 15782.2 11993.9
Apr-98 15398.8 20878.5 15892.8 12054
May-98 15246.3 20520.4 15732.3 12141.9
Jun-98 15513.2 21353.9 16022.4 12219.9
Jul-98 15403 21127.2 15834.6 12263
Aug-98 13989 18073 14470.5 12455.8
Sep-98 14398.9 19230.9 15095 12768.7
Oct-98 14828 20795 15659.8 12756.2
Nov-98 15323.2 22055.2 16232.9 12755.2
Dec-98 15661.9 23325.3 16831.7 12806.4
Jan-99 15853 24300.3 17100.9 12876.7
Feb-99 15290.2 23545.3 16689.8 12687.5
Mar-99 15537.9 24487.1 17101.7 12782.1
Apr-99 16476.4 25435.3 17661.7 12821.3
May-99 16621.3 24834.8 17389.4 12722.8
Jun-99 17221.4 26213.1 17870.2 12731.5
Jul-99 16870.1 25395.2 17536 12720.1
Aug-99 16628.8 25267.5 17351.9 12729.7
Sep-99 16484.2 24575.2 17129.8 12848.1
Oct-99 16812.2 26130.8 17626.6 12881.3
Fund
-----
1 Year Total Return (9/30/98 to 9/30/99) 14.47%
3 Year Average Annual Total Return (9/30/96 to 9/30/99) 12.04%
Average Annual Total Return Since Inception (7/31/95 to 9/30/99) 12.73%
- -------------------------------------------------------------------------------
* The S&P 500 Index is an unmanaged index (with no defined investment
objective) of common stocks, includes reinvestment of dividends, and is a
registered trademark of MCGraw-Hill Co., Inc.
** The Lipper Balanced Funds Index is an equal-weighted performance index,
adjusted for capital-gains distributions and income dividends, of the
largest qualifying funds in this investment objective, and is compiled by
Lipper Analytical Services Inc.
*** The Lehman Intermediate Government/Corporate Bond Index is an unmanaged
index (with no defined investment objective) of intermediate-term
government and corporate bonds, and is calculated by Lehman Brothers Inc.
3
<PAGE>
Warburg Pincus Growth & Income Fund
Annual Investment Adviser's Report -- October 31, 1999
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December 9, 1999
Dear Shareholder:
For the 12 months ended October 31, 1999 the Advisor Class shares of Warburg
Pincus Growth & Income Fund had a return of 15.20%, vs. a return of 25.65% for
the S&P 500 Index. Note: Effective June 16, 1999, Stacy Dutton serves as
Co-Portfolio Manager of the Fund. Brian S. Posner, formerly Portfolio Manager,
continued to serve as Co-Portfolio Manager through the period, but will be
replaced by Scott T. Lewis effective December 31, 1999.
Manager Commentary
The U.S. stock market saw impressive performance for the 12 months, with
almost all major equity indexes advancing significantly. A positive tone was set
early on. Most of the world's central banks lowered interest rates late in 1998,
stabilizing global financial markets and placing the global economy on surer
footing. This encouraged investors to embrace risk, a sentiment that benefited
stocks generally and growth stocks (especially aggressive-growth stocks) in
particular. Stocks were, however, highly, and increasingly, volatile. The market
was also subjected to some dramatic shifts in investor sentiment with respect to
"style." For example, economically-sensitive stocks had a strong surge in April,
but then surrendered market leadership to growth stocks, partly on worries that
rising interest rates could hamper economic growth.
Against this backdrop, the Fund had positive performance, yet trailed its
benchmark. Hindering the Fund's relative return was the market's ultimate
preference for growth stocks, as we continued to adhere to a value-based
stock-selection approach. That notwithstanding, we believe our efforts to
identify undervalued stocks stand to generate attractive longer-term returns in
both absolute and relative terms.
We made few noteworthy changes to the fund during the period in terms of
sector emphasis, remaining broadly diversified. We did, however, increase our
exposure to certain economically-sensitive industries, based on our view that
the global economy will, in fact, continue to grow, if not accelerate. We
significantly increased our exposure to the banking area, reflecting our
favorable view of the group's valuations, combined with these companies'
improving fundamentals. We added a number of bank stocks, focusing on regional
companies whose loan portfolios include commercial as well as residential loans.
4
<PAGE>
Warburg Pincus Growth & Income Fund
Annual Investment Adviser's Report -- October 31, 1999 (cont'd)
- --------------------------------------------------------------------------------
We also raised our weighting in the energy sector. Our noteworthy moves here
included adding to our position in integrated multinational oil companies,
focusing on those that stand to realize significant costs savings over time. In
the oil-services area, our exposure at the end of period consisted of two
drilling companies that we believe have good longer-term prospects. In general,
fundamentals here are beginning to improve after 18 months of very difficult
operating conditions.
Other notable sector weightings for the Fund continued to include capital
equipment, a weighting we raised during the period, focusing on companies with
the potential for a significant improvement in cash flows. We also had a
noteworthy weighting in the retail sector, where companies are generally
benefiting from ongoing improvements in inventory management and where stocks
are, on the whole, reasonably priced.
We modestly lowered our exposure to technology companies during the period,
eliminating a few positions based on valuation considerations. Elsewhere, we
remained underweighted in the health-care and pharmaceutical sectors, though we
added a few drug stocks late in the period, and could increase our overall
exposure to health care further during the next few months. Health-care stocks
have struggled over the past year, hampered by regulatory uncertainties, and we
believe potentially lucrative investment opportunities exist in specific stocks.
Our approach to the group will remain highly selective.
Looking ahead, we believe that there will remain a number of attractive
investment opportunities, the U.S. equity market's generally elevated valuations
notwithstanding. As ever, we will continue to strive to identify reasonably
valued stocks of companies with strong revenue and earnings growth, good free
cash flow and improving financial returns.
Brian S. Posner Stacy Dutton
Co-Portfolio Manager Co-Portfolio Manager
5
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Warburg Pincus Growth & Income Fund
Annual Investment Adviser's Report -- October 31, 1999 (cont'd)
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Growth of $10,000 Invested in Warburg Pincus Advisor
Growth & Income Fund from May 15, 1995 as of October 31, 1999
The graph below illustrates the hypothetical investment of $10,000 in Warburg
Pincus Advisor Class shares of Growth & Income Fund (the "Fund") from May 15,
1995 (inception) to October 31, 1999, compared to the S&P 500 Index* for the
same period.
[GRAPHIC]
In the printed version there appears a line graph with the following
plot points depicted:
Fund
(Advisor Shares) S&P 500
5/15/95 10000 10000
May-95 10033.6 10384.9
Jun-95 10199 10628
Jul-95 10704.9 10988
Aug-95 11048.9 11007.1
Sep-95 10905.5 11470.9
Oct-95 10457.3 11437
Nov-95 11129.6 11929
Dec-95 10971.6 12160.2
Jan-96 11648.8 12580
Feb-96 11570.4 12690.8
Mar-96 11653.7 12814.9
Apr-96 11832 13003.5
May-96 11910.4 13337.9
Jun-96 11051 13388.7
Jul-96 10216.2 12798.1
Aug-96 10615.8 13068.3
Sep-96 10468 13802.3
Oct-96 10560.8 14182.6
Nov-96 11195.8 15252.5
Dec-96 10796.2 14950.7
Jan-97 11245.8 15883.7
Feb-97 11409.9 16008.2
Mar-97 10974.7 15352.6
Apr-97 11324.3 16267.7
May-97 12109.2 17256.3
Jun-97 12550.1 18028.4
Jul-97 13532.1 19461.1
Aug-97 13202.4 18372.6
Sep-97 13889.9 19377.4
Oct-97 13308.8 18732.2
Nov-97 13653.5 19597.6
Dec-97 14016.7 19934.7
Jan-98 14102.2 20154.7
Feb-98 15045.6 21606.3
Mar-98 15632.4 22712.7
Apr-98 15709 22941.2
May-98 15649.3 22547.8
Jun-98 15791.7 23463.7
Jul-98 15374.8 23214.5
Aug-98 13099.3 19858.6
Sep-98 13504.1 21130.9
Oct-98 14468.3 22849.5
Nov-98 15321.9 24234.2
Dec-98 15732.6 25629.8
Jan-99 15811.2 26701.2
Feb-99 15406.4 25871.6
Mar-99 15546.6 26906.4
Apr-99 17323.6 27948.2
May-99 17526.3 27288.4
Jun-99 18078.4 28802.9
Jul-99 17443.8 27904.2
Aug-99 17082.8 27763.9
Sep-99 16585.6 27003.1
Oct-99 16665.3 28712.4
Fund
-----
1 Year Total Return (9/30/98 to 9/30/99) 22.84%
3 Year Average Annual Total Return (9/30/96 to 9/30/99) 16.58%
Average Annual Total Return (05/15/95 to 9/30/99) 12.24%
- --------------------------------------------------------------------------------
* The S&P 500 Index is an unmanaged index (with no defined investment
objective) of common stocks, includes reinvestment of dividends, and is
registered trademark of MCGraw-Hill Co., Inc
6
<PAGE>
Warburg Pincus Capital Appreciation Fund
Annual Investment Adviser's Report -- October 31, 1999
- --------------------------------------------------------------------------------
December 9, 1999
Dear Shareholder:
For the 12 months ended October 31, 1999, the Advisor Class shares of Warburg
Pincus Capital Appreciation Fund had a return of 37.62%, vs. a return of 25.65%
for the S&P 500 Index.
The reporting period was a positive one for the U.S. stock market, supported
by an improving global economy and optimism over corporate earnings. Stocks were
subjected to frequent bouts of volatility, however, particularly late in the
period, reflecting worries that a strong U.S. economy could put upward pressure
on inflation and/or interest rates. Indeed, the Federal Reserve raised interest
rates in June and August as a preemptive strike against inflation, and left the
door open for at least one more rate hike in the not-too-distant future (the Fed
in fact raised rates again shortly after the close of the period).
Against this backdrop, the Fund had a solid gain, both in absolute terms and
compared to that of its benchmark. The Fund's return was driven by good showings
from a number of its holdings as well as by its sector exposure. Most notably,
the Fund had sizable weightings in the technology and communications areas,
which paced the market's continued advance. The Fund also benefited from being
underweighted in the financial segment, which had a good showing on an absolute
basis yet which lagged the broader market due partly to interest-rate
uncertainties.
We made no major change to the Fund during the period in terms of general
strategy. We remained focused on growth-oriented, as opposed to cyclical, or
economically-sensitive, sectors of the market. The improving global economy
notwithstanding, we generally continued to view growth stocks as the most
compelling, given such factors as rapid technological innovation and ongoing
global deregulation.
In terms of sector and industry emphasis, we had a large weighting in the
communications area, broadly defined, one we increased over the course of the 12
months. Our favorable view on the group's collective prospects is based on a
confluence of factors, not the least of which are a rapidly expanding Internet
and the growing popularity of wireless communications. Within the communications
& media sector, our holdings included cable companies offering ultrafast, or
"broadband," Internet access. These companies are competing aggressively with
telephone companies for demand for high-speed connectivity, a potentially
explosive-growth area. Other media-type holdings included cable "content"
companies as well as radio broadcasters.
7
<PAGE>
Warburg Pincus Capital Appreciation Fund
Annual Investment Adviser's Report -- October 31, 1999 (cont'd)
- --------------------------------------------------------------------------------
Another noteworthy sector weighting for the fund was telecommunications &
equipment, where we held a mix of service operators and equipment/infrastructure
providers. Noteworthy holdings included the leading provider of networking
equipment (for example, switching and routing devices) and a designer,
manufacturer and operator of digital wireless products and services.
We also had significant exposure to the technology area, a weighting we
raised during the period. We added a number of electronics stocks that we deemed
to be attractive against an improving supply/demand backdrop for semiconductors
and other electronic devices. In the computer sector, our holdings continued to
include manufacturers of networking hardware and software products used by
Internet service providers and companies building electronic-commerce
infrastructures.
Elsewhere of note, we were modestly underweighted in the pharmaceutical
sector at the end of the period, reflecting our concerns regarding the near-term
regulatory backdrop for these stocks (though we believe specific drug stocks
have solid longer-term prospects). We were also underweighted in the financial
area, in general because we saw more-compelling growth stories in other sectors.
Our continued focus on growth stocks notwithstanding, we modestly increased
our exposure to certain economically-sensitive areas during the period. Most
specifically, we added a few energy stocks late in the period, focusing on
companies that stand to benefit from higher demand for their products and
services, as opposed to having their fortunes depend primarily on rising energy
prices.
Looking ahead to 2000, we believe the backdrop for stocks broadly will remain
supportive, given a likely continued favorable combination of global economic
growth and low inflation. We also believe, however, that careful stock selection
will remain paramount, and our efforts will remain devoted to identifying those
stocks we deem to have the best longer-term growth potential.
Susan L. Black
Portfolio Manager
8
<PAGE>
Warburg Pincus Capital Appreciation Fund
Annual Investment Adviser's Report -- October 31, 1999 (cont'd)
- --------------------------------------------------------------------------------
Growth of $10,000 Invested in Warburg Pincus Advisor
Capital Appreciation Fund since Inception as of October 31, 1999
The graph below illustrates the hypothetical investment of $10,000
in Warburg Pincus Advisor Class shares of Capital Appreciation Fund (the "Fund")
from April 4, 1991 (inception) to October 31, 1999, compared to the S&P 500
Index* for the same time period. Past performance does not predict future
results.
[GRAPHIC]
In the printed version there appears a line graph with the following
plot points depicted:
Fund
(Advisor Shares) S&P 500
4/4/91 10000 10000
Apr-91 9842.19 10030.4
May-91 10191 10444
Jun-91 9626.83 9971.98
Jul-91 10061 10445.8
Aug-91 10311.5 10678.1
Sep-91 9977.5 10501.3
Oct-91 10152.8 10653.1
Nov-91 9727.02 10213.2
Dec-91 10980.1 11379
Jan-92 10837.4 11180.5
Feb-92 10862.6 11314.9
Mar-92 10602.3 11096.3
Apr-92 10610.7 11433.4
May-92 10871 11472.5
Jun-92 10638.7 11302.5
Jul-92 10974.6 11775.7
Aug-92 10722.7 11522.4
Sep-92 10890.6 11656.4
Oct-92 11150.9 11710.3
Nov-92 11562.3 12093.5
Dec-92 11761.7 12245.1
Jan-93 11974.7 12360.8
Feb-93 12063.5 12519.8
Mar-93 12551.7 12783.2
Apr-93 12019.1 12488.5
May-93 12436.3 12801.4
Jun-93 12649.3 12840.9
Jul-93 12640.5 12802.7
Aug-93 13350.6 13273
Sep-93 13457.1 13170.8
Oct-93 13563.6 13456.1
Nov-93 13057.7 13312.9
Dec-93 13565.8 13477.3
Jan-94 13961.7 13945.5
Feb-94 13633.4 13558.1
Mar-94 12783.7 12969.8
Apr-94 12745.1 13150.7
May-94 13121.6 13345.3
Jun-94 12725.8 13019.9
Jul-94 13102.3 13460.8
Aug-94 13729.9 13998
Sep-94 13565.8 13653.8
Oct-94 13729.9 13970.7
Nov-94 13131.3 13452.1
Dec-94 13109.4 13650.2
Jan-95 13036.5 14014.6
Feb-95 13672.2 14553.2
Mar-95 14339.1 14984.2
Apr-95 14568.3 15436.6
May-95 14891.4 16030.7
Jun-95 15547.9 16406
Jul-95 16371.2 16961.7
Aug-95 16537.9 16991.2
Sep-95 16913 17707.2
Oct-95 16944.3 17654.8
Nov-95 17694.6 18414.3
Dec-95 18023.1 18771.2
Jan-96 18628.2 19419.2
Feb-96 19126.5 19590.2
Mar-96 19494.3 19781.8
Apr-96 19719.8 20073
May-96 20087.6 20589.1
Jun-96 19838.4 20667.6
Jul-96 18948.5 19755.9
Aug-96 19660.4 20172.9
Sep-96 20882.5 21306.1
Oct-96 21036.8 21893.1
Nov-96 22306.3 23544.7
Dec-96 22116.7 23078.7
Jan-97 22959.8 24519.1
Feb-97 23144.2 24711.3
Mar-97 22274.8 23699.1
Apr-97 23289.1 25111.8
May-97 24527.3 26637.9
Jun-97 25436.2 27829.6
Jul-97 27741.4 30041.3
Aug-97 26542.7 28361
Sep-97 28307.8 29912.1
Oct-97 27425.2 28916
Nov-97 28149.3 30252
Dec-97 28920.6 30772.3
Jan-98 28744.1 31112
Feb-98 30586.6 33352.7
Mar-98 32109.8 35060.7
Apr-98 32848.4 35413.4
May-98 32046.9 34806.1
Jun-98 33729.3 36219.9
Jul-98 33793.4 35835.2
Aug-98 27896.5 30654.9
Sep-98 29852 32619
Oct-98 30780.4 35271.9
Nov-98 32784.2 37409.3
Dec-98 36177.4 39563.7
Jan-99 38420.4 41217.5
Feb-99 36879.7 39936.9
Mar-99 38720 41534.4
Apr-99 39087.9 43142.6
May-99 38032.5 42124
Jun-99 40409.5 44461.8
Jul-99 39791.3 43074.6
Aug-99 39775.3 42858
Sep-99 40193 41683.7
Oct-99 42319.2 44322.2
Fund
-----
1 Year Total Return (9/30/98 to 9/30/99) 34.78%
3 Year Average Annual Total Return (9/30/96 to 9/30/99) 24.43%
5 Year Average Annual Total Return (9/30/94 to 9/30/99) 24.29%
Average Annual Total Return Since Inception (4/4/91 to 9/30/99) 17.80%
- --------------------------------------------------------------------------------
* The S&P 500 Index is an unmanaged index (with no defined investment
objective) of common stocks, includes reinvestment of dividends, and is a
registered trademark of MCGraw-Hill Co., Inc.
9
<PAGE>
Warburg Pincus Balanced Fund
Statement of Net Assets -- October 31, 1999
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Number
of
Shares Value
-------- ------
COMMON STOCKS (55.7%)
Aerospace & Defense (0.7%)
General Dynamics Corp. 4,400 $ 243,925
----------
Agriculture (0.5%)
Seminis, Inc. Class A+ 20,000 156,250
----------
Banks & Savings & Loans (3.7%)
Chase Manhattan Corp. 2,600 227,175
Comerica, Inc. 4,000 237,750
Compass Bancshares, Inc. 7,550 201,491
Golden West Financial Corp. 2,000 223,500
SunTrust Banks, Inc. 2,700 197,606
UnionBanCal Corp. 3,000 130,312
----------
1,217,834
----------
Building & Building Materials (0.8%)
USG Corp.+ 5,300 262,681
----------
Business Services (0.3%)
Dun & Bradstreet Corp. 4,000 117,500
----------
Capital Equipment (3.7%)
American Standard Cos., Inc.+ 5,700 217,669
Case Corp. 5,000 265,000
Ingersoll-Rand Co. 4,100 214,225
ITT Industries, Inc. 6,000 205,125
Navistar International Corp.+ 5,400 225,112
Parker-Hannifin Corp. 2,200 100,787
----------
1,227,918
----------
Chemicals (1.9%)
C.K. Witco Corp. 27,500 257,812
Ferro Corp. 4,300 87,612
MacDermid, Inc. 8,100 274,387
----------
619,811
----------
Communications & Media (2.7%)
AMFM, Inc.+ 2,000 140,000
Clear Channel Communications, Inc.+ 1,300 104,487
Comcast Corp. Class A 7,300 277,400
Outdoor Systems, Inc.+ 7,000 296,625
Williams Communications Group+ 2,900 92,437
----------
910,949
----------
Computers (4.5%)
Hewlett-Packard Co. 1,100 81,469
International Business Machines Corp. 3,100 304,962
Microsoft Corp.+ 1,200 111,075
Novell, Inc.+ 5,000 100,312
Sun Microsystems, Inc.+ 5,400 571,387
Tech Data Corp.+ 4,100 77,131
Unisys Corp.+ 10,000 242,500
----------
1,488,836
----------
See Accompanying Notes to Financial Statements.
10
<PAGE>
Warburg Pincus Balanced Fund
Statement of Net Assets (cont'd) -- October 31, 1999
- --------------------------------------------------------------------------------
Number
of
Shares Value
-------- ------
COMMON STOCKS (cont'd)
Conglomerates (0.9%)
United Technologies Corp. 4,900 $ 296,450
----------
Consumer Durables (1.7%)
Ford Motor Co. 4,500 246,937
Gentex Corp.+ 18,200 312,812
----------
559,749
----------
Consumer Non-Durables (1.6%)
Clorox Co. 4,400 180,125
Procter & Gamble Co. 3,400 356,575
----------
536,700
----------
Distribution (1.1%)
CDW Computer Centers, Inc.+ 3,300 203,775
Wesco International, Inc.+ 22,000 173,250
----------
377,025
----------
Electric-Utilities (0.2%)
Allegheny Energy, Inc. 2,600 82,712
----------
Electronics (2.0%)
Intel Corp. 6,000 464,625
Maxim Integrated Products, Inc.+ 2,600 205,238
----------
669,863
----------
Energy (1.7%)
Amerada Hess Corp. 2,000 114,750
Exxon Corp. 4,300 318,469
Union Pacific Resources Group Inc. 8,000 116,000
----------
549,219
----------
Financial Services (6.6%)
AFLAC, Inc. 2,400 122,700
Countrywide Credit Industries, Inc. 13,200 447,975
Household International, Inc. 8,200 365,925
Labranche & Co., Inc.+ 14,000 187,250
Lehman Brothers Holdings, Inc. 4,200 309,488
Merrill Lynch & Co., Inc. 1,100 86,350
PMI Group, Inc. 9,000 466,875
Republic New York Corp. 3,300 208,519
----------
2,195,082
----------
Food, Beverages & Tobacco (2.3%)
Anheuser-Busch Co., Inc. 1,300 93,356
General Mills, Inc. 3,100 270,281
Keebler Foods Co.+ 12,000 383,250
----------
746,887
----------
See Accompanying Notes to Financial Statements.
11
<PAGE>
Warburg Pincus Balanced Fund
Statement of Net Assets (cont'd) -- October 31, 1999
- --------------------------------------------------------------------------------
Number
of
Shares Value
-------- ------
Healthcare (1.3%)
Becton, Dickinson & Co. 9,800 $ 248,675
Trigon Healthcare, Inc.+ 6,200 175,925
----------
424,600
----------
Industrial Mfg. & Processing (2.2%)
Eaton Corp. 1,200 90,300
SPX Corp. 3,700 313,575
Tyco International Ltd. 8,200 327,488
----------
731,363
----------
Lodging & Restaurants (0.7%)
Promus Hotel Corp.+ 6,500 222,625
----------
Office Equipment & Supplies (0.3%)
Pitney Bowes, Inc. 2,000 91,125
----------
Oil Services (0.8%)
R & B Falcon Corp.+ 20,000 248,750
----------
Pharmaceuticals (2.9%)
Bristol-Myers Squibb Co. 5,000 384,063
Eli Lilly & Co. 3,000 206,625
Pharmacia & Upjohn, Inc. 2,100 113,269
Warner-Lambert Co. 3,100 247,419
----------
951,376
----------
Retail (2.7%)
Federated Department Stores, Inc.+ 3,500 149,406
Gap, Inc. 6,800 252,450
Home Depot, Inc. 1,700 128,350
May Department Stores Co. 7,350 254,953
Ross Stores, Inc. 5,300 109,313
----------
894,472
----------
Telecommunications & Equipment (7.5%)
Bell Atlantic Corp. 7,200 467,550
BellSouth Corp. 2,000 90,000
Globalstar Telecommunications, LTD.+ 7,000 154,438
MCI WorldCom, Inc.+ 2,800 240,275
Nextel Communications, Inc., Class A+ 2,500 215,469
NEXTLINK Communications, Inc. Class A+ 2,000 119,625
QUALCOMM, Inc.+ 1,000 222,750
Qwest Communications International, Inc.+ 9,000 324,000
SBC Communications, Inc. 4,400 224,125
Time Warner Telecom, Inc. Class A+ 15,000 377,813
U S West, Inc. 700 42,744
----------
2,478,789
----------
See Accompanying Notes to Financial Statements.
12
<PAGE>
Warburg Pincus Balanced Fund
Statement of Net Assets (cont'd) -- October 31, 1999
- --------------------------------------------------------------------------------
Number
of
Shares Value
-------- ------
Transportation (0.4%)
Landstar Systems, Inc.+ 2,900 $ 117,450
-----------
TOTAL COMMON STOCKS (Cost $15,283,523) 18,419,941
-----------
PREFERRED STOCKS (0.9%)
Emmis Communications Corp.
Series A (Convertible)+
8.54% 4,000 224,000
Prologis Trust, Series C
(Callable 11/13/26 @ $50.00)
6.25% 2,000 80,250
-----------
TOTAL PREFERRED STOCKS (Cost $300,000) 304,250
-----------
FOREIGN STOCKS (4.5%)
Finland (0.6%)
Sonera Corp-Spon ADR 6,500 201,500
-----------
France (1.4%)
Rhone-Poulenc SA ADR 2,350 130,425
Total SA ADR 4,810 320,767
-----------
451,192
-----------
Netherlands (1.1%)
Royal Dutch Petroleum Co. ADR 6,100 365,619
-----------
United Kingdom (1.4%)
BP Amoco PLC ADR 4,384 253,176
WPP Group PLC ADR 1,900 208,763
-----------
461,939
-----------
TOTAL FOREIGN STOCKS (Cost $1,106,436) 1,480,250
-----------
See Accompanying Notes to Financial Statements.
13
<PAGE>
Warburg Pincus Balanced Fund
Statement of Net Assets (cont'd) -- October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratings+
(Moody's/S&P) Rate% Maturity Date Par Value
------------- ----- ------------- --- ------
(000)
<S> <C> <C> <C> <C> <C>
CORPORATE BONDS (10.6%)
African Development Bank Debentures
(Yankee Bond 6.37) (Aa1, AA-) 9.300 07/01/00 $370 $ 377,400
Allied Waste North America, Inc.
Series 144A
(Callable 08/01/04 @ $105.00) (B2, B+) 10.000 08/01/09 100 85,500
AT&T Capital Corp., Series MTNF (Baa3, BBB) 6.600 05/15/05 210 203,175
AT&T Corp. (A1, AA-) 6.500 09/15/02 270 268,988
Bayerische Landesbank Deposit
Note Series O
(Callable 02/09/03 @ $100.00) (Aaa, AAA) 6.200 02/09/06 350 333,375
Countrywide Home Loan Co.
Series H (A3, A) 6.250 04/15/09 200 182,250
Dime Bancorp, Inc. (Ba1, BBB-) 7.000 07/25/01 125 124,531
El Paso Energy Corp. (Baa3, BBB) 6.750 05/15/09 200 189,500
Federal-Mogul Corp. (Ba2, BB+) 7.375 01/15/06 150 138,000
First Union Corp.
(Callable 04/15/08 @ $100.00,
Putable 04/15/08 @ $100.00) (A2, A-) 6.300 04/15/08 260 239,850
Household Finance Corp. (A2, A) 6.300 11/15/08 345 324,731
Lowe's Companies (A2, A) 7.110 05/15/37 160 162,600
Niagara Mohawk Power Corp.
Series D (Callable
4/01/99 to 12/31/00
@ Make Whole +50BP) (Baa3, BBB-) 7.250 10/01/02 144 143,838
Philip Morris Cos., Inc.
(Putable 06/01/01 @ $100.00) (A2, A) 6.950 06/01/06 200 195,750
Potomac Electric Power (A1, A) 8.500 05/15/27 150 152,438
Qwest Communications
International, Inc.
Senior Notes, 144A Series B (Ba1, BB+) 7.500 11/01/08 190 189,288
Safeway Inc. Senior Notes
(Callable @ Make
Whole +12.5BP (Baa2, BBB) 7.250 09/15/04 200 199,750
-----------
TOTAL CORPORATE BONDS
(Cost $3,642,884) 3,510,964
-----------
MORTGAGE & ASSET
BACKED SECURITIES (11.0%)
Amresco Commercial Mortgage
Funding I,
Series 1997-C1, Class A1 (Aaa, AAA) 6.730 06/17/29 442 436,944
California Infrastructure
Pacific Gas and Electric,
Series 97-1, Class A7 (NR, NR) 6.420 09/25/08 70 68,362
Commonwealth Edison
Transitional Funding Trust,
Series 1998-1, Cl-A6 (Aaa, AAA) 5.630 06/25/09 200 188,073
Freddie Mac, Series 2072,
Class Pk (Aaa, AAA) 6.000 07/15/24 580 565,097
GE Capital Mortgage
Services, Inc.,
Series 1994-7, Class A10 (NR, NR) 6.000 02/25/09 484 468,947
General Motors Acceptance
Corp. Class A2-98 (Aaa, AAA) 6.700 03/15/08 500 482,348
Ginnie Mae Pass Through
Pool# 002217X (Aaa, AAA) 6.500 08/15/03 5 4,334
MBNA Master Credit Card Trust,
Series 1997-I, Class A (NR, NR) 6.550 01/15/07 300 297,653
Mellon Residential Funding (NR, NR) 5.610 10/25/28 720 676,884
Morgan Stanley Mortgage
Trust Series 40, Class 8 (NR, AAA) 7.000 07/20/21 449 449,762
-----------
TOTAL MORTGAGE & ASSET
BACKED SECURITIES
(Cost $3,750,227) 3,638,404
-----------
</TABLE>
See Accompanying Notes to Financial Statements.
14
<PAGE>
Warburg Pincus Balanced Fund
Statement of Net Assets (cont'd) -- October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratings+
(Moody's/S&P) Rate% Maturity Date Par Value
------------- ----- ------------- --- ------
(000)
<S> <C> <C> <C> <C> <C>
AGENCY OBLIGATIONS (9.7%)
Fannie Mae (Aaa, AAA) 6.560 12/10/07 $480 $ 466,477
Fannie Mae (Aaa, AAA) 5.690 12/01/08 346 316,147
Fannie Mae (Aaa, AAA) 6.000 08/01/06 496 481,570
Fannie Mae, Series 1998-M4,
Class B REMIC 98-M4 (Aaa, AAA) 6.427 12/25/23 600 591,645
Federal Home Loan Bank (Aaa, AAA) 6.375 08/15/06 450 443,751
Freddie Mac (Aaa, AAA) 5.500 05/15/02 335 328,945
Government National Mortgage
Association Pool #505682 (Aaa, AAA) 6.500 06/15/29 598 571,325
-----------
TOTAL AGENCY OBLIGATIONS (Cost $3,276,722) 3,199,860
-----------
U.S. TREASURY OBLIGATIONS (6.4%)
U.S. Treasury Bond (Aaa, AAA) 9.250 02/15/16 755 961,598
U.S. Treasury Notes (Aaa, AAA) 6.375 08/15/02 160 162,032
U.S. Treasury Notes (Aaa, AAA) 6.125 08/15/07 155 154,367
U.S. Treasury Notes (Aaa, AAA) 4.750 11/15/08 940 850,370
-----------
TOTAL U.S. TREASURY OBLIGATIONS (Cost $2,176,912) 2,128,367
-----------
Number
of
Shares
------
SHORT TERM INVESTMENTS (1.4%)
RBB Money Market Portfolio (Cost $449,845) 449,845 449,845
-----------
TOTAL INVESTMENTS AT VALUE (100.2%)
(Cost $29,986,549*) 33,131,881
LIABILITIES IN EXCESS OF OTHER ASSETS (0.2%) (60,943)
-----------
NET ASSETS (applicable to 2,363,449 Common Class
shares and 19,166 Advisor Class shares) (100.0%) $33,070,938
===========
NET ASSET VALUE, offering and redemption price per Common Class shares
($32,805,492 (divided by) 2,363,449) $ 13.88
===========
NET ASSET VALUE, offering and redemption price per Advisor Class shares
($265,446 (divided by) 19,166) $ 13.85
===========
</TABLE>
INVESTMENT ABBREVIATIONS
ADR = American Depository Receipt
NR = Not Rated
REMIC = Real Estate Mortgage Investment Conduit
- --------------------------------------------------------------------------------
+ Non-income producing security.
* Cost for federal income tax purposes is $30,009,305.
+ Credit Ratings by Moody's Investors Services Inc. and Standard & Poors
Ratings Group are unaudited.
See Accompanying Notes to Financial Statements.
15
<PAGE>
Warburg Pincus Growth & Income Fund
Statement of Net Assets -- October 31, 1999
- --------------------------------------------------------------------------------
Number
of
Shares Value
-------- ------
COMMON STOCKS (93.4%)
Aerospace & Defense (0.8%)
General Dynamics Corp. 58,100 $ 3,220,919
Litton Industries, Inc.+ 50,700 2,379,731
-----------
5,600,650
-----------
Banks & Savings & Loans (9.4%)
AmSouth Bancorp. 211,152 5,437,164
Comerica Inc.+ 411,900 24,482,306
Compass Bancshares, Inc. 119,900 3,199,831
Golden West Financial Corp. 87,900 9,822,825
SunTrust Banks, Inc. 61,200 4,479,075
UnionBanCal Corp. 117,700 5,112,594
Wachovia Corp. 123,600 10,660,500
-----------
63,194,295
-----------
Building & Building Materials (1.4%)
USG Corp. 194,400 9,634,950
-----------
Business Services (1.0%)
WPP Group PLC 585,100 6,341,398
-----------
Capital Equipment (8.9%)
AlliedSignal, Inc.+ 106,700 6,075,231
American Standard Companies+ 208,100 7,946,819
Case Corp. 130,450 6,913,850
Caterpillar, Inc. 99,350 5,489,087
Emerson Electric Co. 58,300 3,501,644
Ingersoll-Rand Co. 223,900 11,698,775
ITT Industries, Inc. 161,900 5,534,956
Navistar International Corp.+ 169,200 7,053,525
Parker-Hannifin Corp. 126,900 5,813,606
-----------
60,027,493
-----------
Chemicals (2.1%)
Ferro Corp. 225,100 4,586,412
Rhone-Poulenc SA ADR 166,086 9,217,773
-----------
13,804,185
-----------
Communications & Media (1.0%)
New York Times Co. Class A 167,300 6,733,825
-----------
Computers (4.6%)
Hewlett-Packard Co. 54,800 4,058,625
International Business Machines Corp. 69,600 6,846,900
Tech Data Corp. 110,900 2,086,306
Teradyne, Inc. 110,300 4,246,550
Unisys Corp.+ 571,700 13,863,725
-----------
31,102,106
-----------
See Accompanying Notes to Financial Statements.
16
<PAGE>
Warburg Pincus Growth & Income Fund
Statement of Net Assets -- October 31, 1999
- --------------------------------------------------------------------------------
Number
of
Shares Value
------ -----
COMMON STOCKS (cont'd)
Conglomerates (1.1%)
Harsco Corp. 254,350 $ 7,487,428
-----------
Consumer Durables (2.7%)
Ford Motor Co. 275,900 15,140,012
Meritor Automotive, Inc. 192,400 3,258,775
-----------
18,398,787
-----------
Distribution (0.4%)
CDW Computer Centers, Inc. 47,300 2,920,775
-----------
Energy (11.4%)
Amerada Hess Corp. 151,600 8,698,050
BP Amoco PLC Sponsored ADR 424,794 24,531,853
Devon Energy Corp. 145,900 5,671,862
Exxon Corp. 203,800 15,093,938
Royal Dutch Petroleum Co. ADR 161,600 9,685,900
Total SA ADR 138,000 9,202,875
Union Pacific Resources Group, Inc. 284,100 4,119,450
-----------
77,003,928
-----------
Financial Services (13.0%)
Allstate Corp. 75,000 2,156,250
Countrywide Credit Industries, Inc. 287,400 9,753,638
Fannie Mae 92,000 6,509,000
Household International, Inc. 246,600 11,004,525
Labranche & Co., Inc.+ 180,000 2,407,500
Lehman Brothers Holdings, Inc. 171,000 12,600,563
MBIA, Inc. 80,800 4,610,650
MGIC Investment Corp. 194,200 11,603,450
PMI Group, Inc. 298,650 15,492,469
Terra Nova Bermuda Holdings, Ltd. Class A 237,700 7,502,406
XL Capital Ltd., Class A 71,700 3,849,394
-----------
87,489,845
-----------
Food, Beverages & Tobacco (3.7%)
Anheuser-Busch Companies, Inc. 34,900 2,506,256
General Mills, Inc. 125,900 10,976,906
Keebler Foods Co. 358,900 11,462,369
-----------
24,945,531
-----------
Healthcare (3.1%)
Baxter International, Inc. 111,200 7,214,100
Becton, Dickinson & Co. 275,000 6,978,125
Trigon Healthcare, Inc.+ 229,550 6,513,481
-----------
20,705,706
-----------
See Accompanying Notes to Financial Statements.
17
<PAGE>
Warburg Pincus Growth & Income Fund
Statement of Net Assets -- (cont'd) October 31, 1999
- --------------------------------------------------------------------------------
Number
of
Shares Value
------ -----
COMMON STOCKS (cont'd)
Industrial Mfg. & Processing (2.6%)
Dana Corp. 88,100 $ 2,604,456
Eaton Corp. 68,200 5,132,050
Minnesota Mining & Manufacturing Co. 104,800 9,962,550
-----------
17,699,056
-----------
Metals & Mining (2.0%)
Alcoa, Inc. 222,108 13,493,061
-----------
Office Equipment & Supplies (0.6%)
Pitney Bowes, Inc. 89,100 4,059,619
-----------
Oil Services (1.5%)
Pride International, Inc. 279,200 3,839,000
R & B Falcon Corp. 496,300 6,172,731
-----------
10,011,731
-----------
Pharmaceuticals (2.9%)
American Home Products Corp. 95,900 5,010,775
Lilly (Eli) & Co. 141,300 9,732,038
Pharmacia & Upjohn, Inc. 89,500 4,827,406
-----------
19,570,219
-----------
Retail (9.2%)
Federated Department Stores, Inc.+ 181,300 7,739,244
Gap, Inc. 145,100 5,386,838
May Department Stores Co. 363,900 12,622,781
Payless ShoeSource, Inc.+ 74,512 3,413,581
Ross Stores, Inc. 522,400 10,774,500
Safeway, Inc. 146,200 5,162,688
TJX Companies, Inc. 382,300 10,369,888
Toys R Us, Inc.+ 478,900 6,764,463
-----------
62,233,983
-----------
Telecommunications & Equipment (7.2%)
AT&T Corp. 231,200 10,808,600
Bell Atlantic Corp. 268,640 17,444,810
SBC Communications, Inc. 398,349 20,290,902
-----------
48,544,312
-----------
Transportation (0.6%)
Burlington Northern Santa Fe Corp. 117,700 3,751,688
-----------
Utilities- Electric (2.2%)
Allegheny Energy, Inc. 178,700 5,684,894
American Electric Power Co., Inc. 79,400 2,739,300
Illinova Corp. 118,500 3,769,781
Wisconsin Energy Corp. 115,200 2,577,600
-----------
14,771,575
-----------
TOTAL COMMON STOCKS (Cost $539,298,696) 629,526,146
-----------
See Accompanying Notes to Financial Statements.
18
<PAGE>
Warburg Pincus Growth & Income Fund
Statement of Net Assets -- (cont'd) October 31, 1999
- --------------------------------------------------------------------------------
Number
of
Shares Value
------ -----
CONVERTIBLE PREFERRED STOCK (0.4%)
Real Estate (0.4%)
Equity Residential Properties
Series G 7.25%,
Perpetual Convertible
(Callable 09/15/02 @$25.91)
(Cost $3,649,429) 146,000 $ 2,956,500
-----------
SHORT TERM INVESTMENTS (7.8%)
Institutional Money Market Trust 19,585,073 19,585,073
RBB Money Market Portfolio 32,685,254 32,685,254
-----------
TOTAL SHORT TERM INVESTMENTS (Cost $52,270,327) 52,270,327
-----------
TOTAL INVESTMENTS (101.6%) (Cost $595,218,452*) 684,752,973
LIABILITIES IN EXCESS OF OTHER ASSETS (1.6%) (10,898,773)
-----------
NET ASSETS (applicable to 31,814,335
Common Class shares and 3,782,145
Advisor Class shares) (100.0%) $673,854,200
============
NET ASSET VALUE, offering and redemption
price per Common Class shares
($602,282,005 (divided by) 31,814,335) $ 18.93
============
NET ASSET VALUE, offering and redemption
price per Advisor Class shares
($71,572,195 (divided by) 3,782,145) $ 18.92
============
INVESTMENT ABBREVIATIONS
ADR = American Depository Receipt
- --------------------------------------------------------------------------------
+ Non-income producing security.
* Cost for federal income tax purposes is $595,588,532
See Accompanying Notes to Financial Statements.
19
<PAGE>
Warburg Pincus Capital Appreciation Fund
Statement of Net Assets -- October 31, 1999
- --------------------------------------------------------------------------------
Number
of
Shares Value
------ -----
COMMON STOCKS (93.6%)
Aerospace & Defense (0.7%)
Boeing Co. 111,100 $ 5,117,544
General Motors Corp. Class H 32,300 2,351,844
------------
7,469,388
------------
Banks & Savings & Loans (2.9%)
Chase Manhattan Corp. 63,000 5,504,625
Citigroup, Inc. 252,200 13,650,325
Northern Trust Corp. 111,700 10,786,031
------------
29,940,981
------------
Business Services (1.3%)
Omnicom Group, Inc. 155,000 13,640,000
------------
Capital Equipment (1.3%)
AlliedSignal, Inc. 80,800 4,600,550
Ingersoll-Rand Co. 80,800 4,221,800
Navistar International Corp.+ 99,900 4,164,581
------------
12,986,931
------------
Communications & Media (14.0%)
AMFM Inc. 177,100 12,397,000
AT&T Corp. - Liberty Media-A+ 797,600 31,654,750
CBS Corp. 503,680 24,585,880
Clear Channel Communications, Inc.+ 68,600 5,513,725
CMGI, Inc.+ 44,300 4,848,081
Comcast Corp. Class A 73,700 2,800,600
Comcast Corp. Special Class A Non-Voting 168,300 7,089,637
Infinity Broadcasting Inc. Class A+ 150,900 5,215,481
Inktomi Corp.+ 34,900 3,540,169
Media One Group, Inc.+ 138,800 9,863,475
News Corp ADR 138,300 4,097,137
Seagram Co. Ltd. 115,200 5,688,000
Time Warner, Inc. 220,400 15,359,125
USA Networks, Inc. 156,300 7,043,269
Westwood One, Inc.+ 119,500 5,511,937
------------
145,208,266
------------
Computers (11.9%)
BMC Software, Inc.+ 117,800 7,561,287
Citrix Systems, Inc. 135,700 8,701,762
EMC Corp.+ 295,800 21,593,400
International Business Machines Corp. 139,700 13,742,987
Microsoft Corp.+ 293,400 27,157,837
Oracle Systems Corp.+ 195,600 9,303,225
Parametric Technology Corp.+ 376,100 7,169,406
Sun Microsystems, Inc.+ 220,100 23,289,331
VeriSign, Inc.+ 39,000 4,816,500
------------
123,335,735
------------
See Accompanying Notes to Financial Statements.
20
<PAGE>
Warburg Pincus Capital Appreciation Fund
Statement of Net Assets (cont'd) -- October 31, 1999
- --------------------------------------------------------------------------------
Number
of
Shares Value
------ -----
COMMON STOCKS (cont'd)
Conglomerates (3.2%)
General Electric Co. 244,600 $ 33,158,587
------------
Consumer Durables (0.0%)
Gentex Corp.+ 200 3,437
------------
Consumer Non-Durables (0.4%)
NIKE, Inc. Class B 69,300 3,911,119
------------
Consumer Services (0.4%)
Apollo Group, Inc. Class A+ 171,400 4,509,962
------------
Electronics (11.8%)
Applied Materials, Inc.+ 107,600 9,663,825
Flextronics International Ltd. 64,400 4,572,400
Intel Corp. 300,500 23,269,969
JDS Uniphase Corp. 83,400 13,917,375
KLA-Tencor Corp.+ 41,400 3,278,362
Lexmark International Group,
Inc. Class A+ 77,800 6,073,263
LSI Logic Corp.+ 212,400 11,297,025
Maxim Integrated Products, Inc.+ 134,800 10,640,775
Motorola, Inc. 48,800 4,754,950
Sanmina Corp.+ 74,700 6,727,669
Solectron Corp.+ 71,500 5,380,375
Texas Instruments, Inc. 140,100 12,573,975
Xilinx, Inc.+ 124,200 9,765,225
------------
121,915,188
------------
Energy (5.1%)
Alberta Energy Co., Ltd. 127,500 3,888,750
Bonneville Pacific Corp.+ 16,883 184,658
BP Amoco PLC ADR 159,800 9,228,450
Devon Energy Corp. 125,700 4,886,588
EOG Resources, Inc. 218,100 4,539,206
Exxon Corp. 179,700 13,309,031
Royal Dutch Petroleum Co. ADR 283,900 17,016,256
------------
53,052,939
------------
Financial Services (3.4%)
American International Group, Inc. 147,625 15,196,148
CIGNA Corp. 56,900 4,253,275
Jefferson-Pilot Corp. 63,100 4,736,444
MGIC Investment Corp. 174,800 10,444,300
------------
34,630,167
------------
Healthcare (1.9%)
Johnson & Johnson 96,200 10,076,950
PE Corp. - PE Biosystems Group 138,600 8,991,675
------------
19,068,625
------------
See Accompanying Notes to Financial Statements.
21
<PAGE>
Warburg Pincus Capital Appreciation Fund
Statement of Net Assets (cont'd) -- October 31, 1999
- --------------------------------------------------------------------------------
Number
of
Shares Value
------ -----
COMMON STOCKS (cont'd)
Industrial Manufacturing & Processing (4.2%)
Corning Glass, Inc. 170,200 $ 13,381,975
Nortel Networks Corp. 155,300 9,618,894
Tyco International Ltd. 506,200 20,216,363
------------
43,217,232
------------
Lodging & Restaurants (0.4%)
McDonald's Corp. 103,300 4,261,125
------------
Oil Services (1.9%)
Cooper Cameron Corp.+ 190,400 7,366,100
Noble Drilling Corp.+ 174,200 3,865,063
Transocean Offshore, Inc. 317,800 8,640,188
------------
19,871,351
------------
Pharmaceuticals (9.7%)
Biogen, Inc.+ 204,900 15,188,213
Bristol-Myers Squibb Co. 262,500 20,163,281
Genentech, Inc. 61,000 8,890,750
Eli Lilly & Co. 128,200 8,829,775
Merck & Co., Inc. 159,000 12,650,438
Pfizer, Inc. 317,500 12,541,250
Warner Lambert Co. 273,000 21,788,813
------------
100,052,520
------------
Publishing (1.4%)
Reader's Digest Assn., Inc. Class A 243,300 7,846,425
Wiley (John) & Sons, Inc. Class A 408,300 6,890,063
------------
14,736,488
------------
Retail (1.4%)
Home Depot, Inc. 195,900 14,790,450
------------
Telecommunications & Equipment (15.5%)
Bell Atlantic Corp. 240,900 15,643,444
Cisco Systems, Inc.+ 416,000 30,784,000
GTE Corp. 60,600 4,545,000
Lucent Technologies, Inc. 145,800 9,367,650
MCI Worldcom, Inc.+ 152,700 13,103,569
Nextel Communications, Inc. Class A+ 287,600 24,787,525
Omnipoint Corp.+ 156,900 12,963,863
QUALCOMM Inc.+ 68,200 15,191,550
Qwest Communications International, Inc. 319,800 11,512,800
SBC Communications, Inc. 83,800 4,268,563
Vodafone Airtouch Group PLC - ADR
(United Kingdom) 117,500 5,632,656
VoiceStream Wireless Corp.+ 130,400 12,877,000
------------
160,677,620
------------
See Accompanying Notes to Financial Statements.
22
<PAGE>
Warburg Pincus Capital Appreciation Fund
Statement of Net Assets (cont'd) -- October 31, 1999
- --------------------------------------------------------------------------------
Number
of
Shares Value
------ -----
COMMON STOCKS (cont'd)
Utilities-Electric (0.8%)
AES Corp.+ 154,700 $ 8,730,881
--------------
TOTAL COMMON STOCK (Cost $683,364,497) 969,168,992
--------------
PREFERRED (0.0%)
Healthcare (0.0%)
Fresenius National Medical, Inc. Class D +
(Cost $18,552) 90,000 1,620
--------------
SHORT TERM INVESTMENTS (7.7%)
Institutional Money Market Trust 31,278,569 31,278,570
RBB Money Market Portfolio 48,822,428 48,822,428
--------------
TOTAL SHORT TERM INVESTMENTS (Cost $80,100,998) 80,100,998
--------------
TOTAL INVESTMENTS AT VALUE (101.3%)
(Cost $763,484,047*) 1,049,271,610
LIABILITIES IN EXCESS OF OTHER ASSETS (1.3%) (14,303,053)
--------------
NET ASSETS (applicable to 39,948,941
Common Class shares and 1,159,193
Advisor Class shares) (100.0%) $1,034,968,557
==============
NET ASSET VALUE, offering and redemption
price per Common Class shares
($1,005,669,916 divided by 38,948,941) $ 25.82
==============
NET ASSET VALUE, offering and redemption
price per Advisor Class shares
($29,298,641 divided by 1,159,193) $ 25.28
==============
INVESTMENT ABBREVIATIONS
ADR = American Depository Receipt
- --------------------------------------------------------------------------------
+ Non-income producing security.
* Costs for federal income tax purposes is $765,241,361.
See Accompanying Notes to Financial Statements.
23
<PAGE>
Warburg Pincus Domestic Equity Funds
Statements of Operations
For the Year Ended October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Warburg Pincus Warburg Pincus
Balanced Growth & Income
Fund Fund
-------------- ---------------
<S> <C> <C>
Investment Income:
Dividends $ 255,133 $ 10,727,468
Interest 880,373 2,972,639
Foriegn taxes withheld (3,151) (175,401)
------------- -------------
Total investment income 1,132,355 13,524,706
------------- -------------
Expenses:
Investment advisory 309,584 5,661,576
Administrative services 95,381 1,772,719
Audit 10,114 29,340
Custodian/Sub-custodian 23,144 132,730
Directors/Trustees 12,755 14,550
Insurance 1,715 15,289
Interest 336 7,945
Legal 9,905 50,580
Printing 31,451 208,408
Registration 33,047 8,295
Shareholder servicing/distribution 86,585 429,220
Transfer agent 51,834 667,793
Miscellaneous 11,935 35,575
------------- -------------
677,135 9,034,020
Less: fees waived, expenses reimbursed
and transfer agent offsets (212,820) (14,336)
------------- -------------
Total expenses 464,966 9,019,684
------------- -------------
Net investment income 667,389 4,505,022
------------- -------------
Net Realized and Unrealized Gain (Loss)
from Investments and
Foreign Currency Related Items:
Net realized gain from security transactions and foreign currency
related items 4,039,161 119,379,070
Net change in unrealized appreciation (depreciation) from
investments and foriegn currency related items (264,449) (7,555,427)
------------- -------------
Net realized and unrealized gain from investments and
foreign currency related items 3,774,712 111,823,643
------------- -------------
Net increase in net assets resulting from operations $ 4,442,101 $ 116,328,665
============= =============
</TABLE>
See Accompanying Notes to Financial Statements.
24
<PAGE>
Warburg Pincus Domestic Equity Funds
Statements of Operations
For the Year Ended October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Warburg Pincus
Capital Appreciation
Fund
--------------------
<S> <C>
Investment Income:
Dividends $ 4,735,167
Interest 2,172,127
Foriegn taxes withheld (73,752)
-------------
Total investment income 6,833,542
-------------
Expenses:
Investment advisory 6,198,244
Administrative services 1,678,417
Audit 33,354
Custodian/Sub-custodian 147,270
Directors/Trustees 15,517
Insurance 12,574
Interest 8,978
Legal 64,935
Offering/Organizational costs 0
Printing 128,864
Registration 104,349
Shareholder servicing/distribution 148,878
Transfer agent 454,077
Miscellaneous 36,178
-------------
9,031,635
Less: fees waived, expenses reimbursed and transfer agent offsets (16,234)
-------------
Total expenses 9,015,401
-------------
Net investment (loss) (2,181,859)
-------------
Net Realized and Unrealized Gain from Investments and
Foreign Currency Related Items:
Net realized gain from security transactions 120,985,252
Net change in unrealized appreciation (depreciation) from
investments and foreign currency related items 146,455,307
-------------
Net realized and unrealized gain from investments 267,440,559
-------------
Net increase in net assets resulting from operations $ 265,258,700
=============
</TABLE>
See Accompanying Notes to Financial Statements.
25
<PAGE>
Warburg Pincus Domestic Equity Funds
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Warburg Pincus
Balanced Fund
----------------------------------
For the Year For the Year
Ended Ended
October 31, October 31,
1999 1998
--------------- ---------------
<S> <C> <C>
From Operations:
Net investment income (loss) $ 667,389 $ 683,836
Net realized gain (loss) from security transactions 4,039,738 2,812,164
Net realized (loss) from foreign currency related items (577) (135)
Net change in unrealized appreciation (depreciation) from
investments and foreign currency related items (264,449) (1,287,911)
--------------- ---------------
Net increase in net assets resulting from operations 4,442,101 2,207,954
--------------- ---------------
Net Decrease From Dividends and Distributions:
Dividends from net investment income:
Common Class shares (693,463) (719,467)
Advisor Class shares (3,960) (2,872)
Distributions from realized gains:
Common Class shares (2,782,788) (3,441,034)
Advisor Class shares (16,488) (14,992)
--------------- ---------------
Net decrease in net assets from dividends and distributions (3,496,699) (4,178,365)
--------------- ---------------
From Capital Share Transactions:
Proceeds from sale of shares 7,292,072 11,352,063
Reinvested dividends and distributions 3,342,592 4,064,531
Net asset value of shares redeemed (14,218,841) (16,188,224)
--------------- ---------------
Net increase (decrease) in net assets from capital share
transactions (3,584,177) (771,630)
--------------- ---------------
Net increase (decrease) in net assets (2,638,755) (2,742,041)
Net Assets:
Beginning of year 35,709,713 38,451,754
--------------- ---------------
End of year $ 33,070,938 $ 35,709,713
=============== ===============
Undistributed net investment income $ 50,302 $ 74,933
=============== ===============
</TABLE>
See Accompanying Notes to Financial Statements.
26
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Warburg Pincus Warburg Pincus
Growth & Income Fund Capital Appreciation Fund
---------------------------------- ---------------------------------
For the Year For the Year For the Year For the Year
Ended Ended Ended Ended
October 31, October 31, October 31, October 31,
1999 1998 1999 1998
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
From Operations:
Net investment income (loss) $ 4,505,022 $ 6,380,894 $ (2,181,859) $ 210,812
Net realized gain (loss) from security transactions 119,380,196 24,894,866 120,985,252 29,522,830
Net realized (loss) from foreign currency related items (1,126) (3,613) 0 0
Net change in unrealized appreciation (depreciation) from
investments and foreign currency related items (7,555,427) 24,414,986 146,455,307 48,854,862
--------------- --------------- --------------- ---------------
Net increase in net assets resulting from operations 116,328,665 55,687,133 265,258,700 78,588,504
--------------- --------------- --------------- ---------------
Net Decrease From Dividends and Distributions:
Dividends from net investment income:
Common Class shares (4,530,686) (5,674,968) (220,220) (2,188,710)
Advisor Class shares (156,348) (427,925) 0 0
Distributions from realized gains:
Common Class shares (21,637,029) (96,860,727) (29,615,988) (106,778,405)
Advisor Class shares (2,951,282) (14,171,470) (1,286,536) (6,058,534)
--------------- --------------- --------------- ---------------
Net decrease in net assets from dividends and distributions (29,275,345) (117,135,090) (31,122,744) (115,025,649)
--------------- --------------- --------------- ---------------
From Capital Share Transactions:
Proceeds from sale of shares 205,453,087 386,958,954 366,818,755 232,010,450
Reinvested dividends and distributions 28,469,978 113,559,285 29,488,316 111,165,032
Net asset value of shares redeemed (447,327,821) (334,997,984) (268,968,150) (254,936,850)
--------------- --------------- --------------- ---------------
Net increase (decrease) in net assets from capital share
transactions (213,404,756) 165,520,255 127,338,921 88,238,632
--------------- --------------- --------------- ---------------
Net increase (decrease) in net assets (126,351,436) 104,072,298 361,474,877 51,801,488
Net Assets:
Beginning of year 800,205,636 696,133,338 673,493,680 621,692,192
--------------- --------------- --------------- ---------------
End of year $ 673,854,200 $ 800,205,636 $ 1,034,968,557 $ 673,493,680
=============== =============== =============== ===============
Undistributed net investment income $ 94,711 $ 277,849 $ 0 $ 99,693
=============== =============== =============== ===============
</TABLE>
See Accompanying Notes to Financial Statements.
27
<PAGE>
Warburg Pincus Balanced Fund
Financial Highlights
(For an Advisor Class share of the Fund Outstanding Throughout Each Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998 1997** 1997# 1996 1995##
------ ------ ------ ------ ------- -------
<S> <C> <C> <C> <C> <C> <C>
PERIOD ENDED:
Per-share data
Net asset value, beginning of period $13.47 $14.37 $14.22 $11.94 $ 11.13 $ 10.72
------ ------ ------ ------ ------- -------
Investment activities:
Net investment income/(loss) 0.26 0.21 0.03 (0.02) 0.37 0.01
Net gains on investment securities
(both realized and unrealized) 1.43 0.41 0.16 2.67 0.68 0.40
------ ------ ------ ------ ------- -------
Total from investment activities 1.69 0.62 0.19 2.65 1.05 0.41
------ ------ ------ ------ ------- -------
Less dividends and distributions:
Dividends from net investment income (0.25) (0.23) (0.04) (0.22) (0.09) 0.00
Distributions from realized capital gains (1.06) (1.29) 0.00 (0.15) (0.15) 0.00
------ ------ ------ ------ ------- -------
Total dividends and distributions (1.31) (1.52) (0.04) (0.37) (0.24) 0.00
------ ------ ------ ------ ------- -------
Net asset value, end of period $13.85 $13.47 $14.37 $14.22 $ 11.94 $ 11.13
====== ====== ====== ====== ======= =======
Total return 13.37% 4.93% 1.30%+ 22.66% 9.56% 3.82%+
Ratios and supplemental data:
Net Assets, End of Period (000s omitted) $ 265 $ 168 $ 158 $ 149 $ 12 $ 1
Ratio of expenses to average net assets 1.60%@ 1.60%@ 1.60%@ 1.60%@ 1.71% 1.76%
Ratio of net income to average net assets 1.69% 1.52% 1.13%* 1.53% (4.11)% 2.00%
Decrease reflected in above operating
expense ratios due to
waivers/reimbursements. 0.63%* 1.19%* 1.35%* 1.21% 203.35% 626.71%
Portfolio turnover rate 117% 132% 15%+ 120% 108% 107%
</TABLE>
- --------------------------------------------------------------------------------
@ Interest earned on uninvested cash balances is used to offset portions of
transfer agent expense. These arrangements had no effect on the Fund's
expense ratio.
+ Non-Annualized.
* Annualized.
** For the two months ended October 31, 1997.
# For the year ended August 31.
## For the period July 31, 1995 (Commencement of Operations) to August 31, 1995.
See Accompanying Notes to Financial Statements.
28
<PAGE>
Warburg Pincus Growth & Income Fund
Financial Highlights
(For an Advisor Class share of the Fund Outstanding Throughout Each Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998 1997** 1997# 1996# 1995##
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
PERIOD ENDED:
Per-share data
Net asset value, beginning of period $ 16.96 $ 18.55 $ 18.42 $ 14.88 $ 16.38 $ 14.87
------- ------- ------- ------- ------- -------
Investment activities:
Net investment income 0.03 0.10 0.01 0.07 0.08 0.02
Net gains (losses) on investment securities
(both realized and unrealized) 2.49 1.35 0.14 3.55 (0.70) 1.54
------- ------- ------- ------- ------- -------
Total from investment activities 2.52 1.45 0.15 3.62 (0.62) 1.56
------- ------- ------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income (0.03) (0.09) (0.02) (0.08) (0.07) (0.05)
Distributions from realized capital gains (0.53) (2.95) 0.00 0.00 (0.81) 0.00
------- ------- ------- ------- ------- -------
Total dividends and distributions (0.56) (3.04) (0.02) (0.08) (0.88) (0.05)
------- ------- ------- ------- ------- -------
Net asset value, end of period $ 18.92 $ 16.96 $ 18.55 $ 18.42 $ 14.88 $ 16.38
======= ======= ======= ======= ======= =======
Total return 15.20% 8.70% 0.81%+ 24.37% (3.92)% 10.49%+
Ratios and supplemental data:
Net Assets, End of Period (000s omitted) $71,572 $96,397 $87,929 $84,867 $79,565 $56,902
Ratio of expenses to average net assets 1.64%@ 1.55%@ 1.58%*@ 1.54%@ 1.59%@ 1.92%*
Ratio of net income to average net assets 0.15% 0.47% 0.35%* 0.43% 0.28% 0.43%*
Portfolio turnover rate 78.29% 78.33%* 19.00%+ 148.00% 94.00% 109.00%
</TABLE>
- --------------------------------------------------------------------------------
@ Interest earned on uninvested cash balances is used to offset portions of
transfer agent expense. These arrangements resulted in a reduction to the
Advisor Class shares expense ratio by .01% for the year ended October 31,
1999 and .00%, for the year or period ended 1998, 1997, 1996 and 1995. The
Advisor Class shares operating expense ratio after reflecting these
arrangements was 1.63% for the year ended October 31, 1999.
+ Non-Annualized.
* Annualized.
** For the two months ended October 31, 1997.
# For the years ended August 31.
## For the period May 15, 1995 (Commencement of Operations) to August 31, 1995.
See Accompanying Notes to Financial Statements.
29
<PAGE>
Warburg Pincus Capital Appreciation Fund
Financial Highlights
(For an Advisor Class share of the Fund Outstanding Throughout Each Year)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
YEAR ENDED:
Per-share data
Net asset value, beginning of year $ 19.21 $ 20.82 $ 17.73 $ 16.26 $ 14.22
------- ------- ------- ------- -------
Investment activities:
Net investment income/(loss) (0.20) (0.09) 0.02 0.02 0.00
Net gain on investments securities
(both realized and unrealized) 7.18 2.29 4.89 3.49 3.02
------- ------- ------- ------- -------
Total from investment activities 6.98 2.20 4.91 3.51 3.02
------- ------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income 0.00 0.00 (0.01) 0.00 0.00
Distributions from net realized capital gains (0.91) (3.81) (1.81) (2.04) (0.98)
------- ------- ------- ------- -------
Total dividends and distributions (0.91) (3.81) (1.82) (2.04) (0.98)
------- ------- ------- ------- -------
Net asset value, end of year $ 25.28 $ 19.21 $ 20.82 $ 17.73 $ 16.26
======= ======= ======= ======= =======
Total return 37.62%+ 12.23% 30.37% 24.15% 23.41%
Ratios/Supplemental Data:
Net assets, end of period (000s omitted) $29,299 $26,836 $34,601 $23,440 $11,594
Ratio to average daily net assets
Ratio of expenses to average net assets 1.51%@ 1.43%@ 1.48%@ 1.53%@ 1.62%
Ratio of net income or loss to average net assets (0.73)% 0.39% 0.08% (0.09)% (0.18)%
Portfolio turnover rate 143.58%* 168.67% 238.11% 170.69% 146.09%
</TABLE>
- --------------------------------------------------------------------------------
@ Interest earned on uninvested cash balances is used to offset portions of
transfer agent expense. These arrangements resulted in a deduction to the
Advisor Class shares net expense ratio by .00%, .01%, 0.00% and .01% for the
years ended October 31, 1999, 1998, 1997 and 1996 respectively. The Advisor
Class shares operating expense ratio after reflecting these arrangements were
1.51%, 1.43%, 1.48% and 1.53% for each of the years ended October 31, 1999,
1998, 1997 and 1996 respectively.
See Accompanying Notes to Financial Statements.
30
<PAGE>
Warburg Pincus Domestic Equity Funds
Notes to Financial Statements
October 31, 1999
- --------------------------------------------------------------------------------
1. Significant Accounting Policies
The Warburg Pincus Balanced Fund (the "Balanced Fund"), Warburg Pincus Growth
& Income Fund (the "Growth & Income Fund"), and Warburg Pincus Capital
Appreciation Fund (the "Capital Appreciation Fund") are registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as diversified,
open-end management investment companies (each a "Fund" and collectively, the
"Funds").
Investment objectives for each fund are as follows: the Balanced Fund seeks
maximum total return through a combination of long-term growth of capital, and
current income consistent with preservation of capital; the Growth & Income Fund
seeks long-term growth of capital, income and a reasonable current return; and
the Capital Appreciation Fund seeks long-term capital appreciation.
Each Fund may invest up to 15% of its assets in non-publicly traded
securities. Non-publicly traded securities may be less liquid than publicly
traded securities, and they may be difficult or impossible to sell at the time
and the price the Fund would like. In addition, the lack of an active market may
make it difficult to obtain an accurate price for a Fund security.
Each Fund offers two classes of shares, one class being referred to as the
Common Class shares and one class being referred to as Advisor Class shares.
Common and Advisor Class shares in each Fund represent an equal pro rata
interest in such Fund, except that they bear different expenses which reflect
the difference in the range of services provided to them. Common Class shares
for the Balanced Fund bear expenses paid pursuant to a shareholder servicing and
distribution plan at an annual rate not to exceed .25% of the average daily net
asset value of each Fund's Common Class share. Advisor Class shares for each
Fund bear expenses paid pursuant to a distribution plan adopted by each Fund at
an annual rate not to exceed .75% of the average daily net asset value of each
Fund's Advisor Class shares. Advisor Class shares are currently bearing expenses
of .50% of average daily net assets.
The net asset value of each Fund is determined daily as of the close of
regular trading on the New York Stock Exchange. Each Fund's investments are
valued at market value, which is generally determined using the last reported
sales price. If no sales are reported, investments are generally valued at the
mean between the last reported bid and asked price. In the absence of market
quotations, investments are generally valued at fair value as determined by or
under the direction of the Fund's Board. Short-term investments that mature in
60 days or less are valued on the basis of
31
<PAGE>
Warburg Pincus Domestic Equity Funds
Notes to Financial Statements (cont'd)
October 31, 1999
- --------------------------------------------------------------------------------
1. Significant Accounting Policies -- (cont'd)
amortized cost, which approximates market value, unless the Board determines
that using this method would not reflect an investment's 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 Funds do not isolate that portion of
realized gains and losses on investments in equity securities which are due to
changes in the foreign exchange rate from that which are due to changes in
market prices of equity securities. The Funds isolate that portion of realized
gains and losses on investments in debt securities which are due to changes in
the foreign exchange rate from that which are due to changes in market prices of
debt securities.
Security transactions are accounted for on a trade date basis. Interest
income is recorded on the accrual basis. Dividends are recorded on the
ex-dividend date. Income, expenses (excluding class-specific expenses,
principally distribution and shareholder servicing fees and transfer agent fees)
and realized/unrealized gains/losses are allocated proportionately to each class
of shares based upon the relative net asset value of outstanding shares.
Effective November 1, 1998, class-specific expenses no longer include transfer
agent fees; accordingly these fees will be allocated proportionately based upon
the relative net asset value of outstanding shares. The cost of investments sold
is determined by use of the specific identification method for both financial
reporting and income tax purposes.
Dividends from net investment income and net realized capital gains, if any,
are declared and paid at least annually (except with respect to the Growth &
Income Fund and the Balanced Fund for which dividends, if any, are paid
quarterly). However, to the extent that a net realized capital gain can be
reduced by a capital loss carryover, such gain will not be distributed. Income
and capital gain distributions are determined in accordance with federal income
tax regulations which may differ from generally accepted accounting principles.
No provision is made for federal taxes as it is each Fund's intention to
continue to qualify for and elect the tax treatment applicable to regulated
investment companies under the Internal Revenue Code of 1986, as
32
<PAGE>
Warburg Pincus Domestic Equity Funds
Notes to Financial Statements (cont'd)
October 31, 1999
- --------------------------------------------------------------------------------
1. Significant Accounting Policies -- (cont'd)
amended, and make the requisite distributions to its shareholders which will be
sufficient to relieve it from federal income and excise taxes.
Pursuant to an exemptive order issued by the Securities and Exchange
Commission, each Fund, along with other Funds advised by Credit Suisse Asset
Management LLC, ("CSAM LLC"), can transfer uninvested cash balances to a pooled
cash account, which is invested in repurchase agreements secured by U.S.
government securities. Securities, pledged as collateral for repurchase
agreements, are held by the Funds' custodian bank until the agreements mature.
Each agreement requires that the market value of the collateral be sufficient to
cover payments of interest and principal; however, in the event of default or
bankruptcy by the counterparty to the agreement, retention of the collateral may
be subject to legal proceedings. At October 31, 1999 the Funds had no
investments in repurchase agreements.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from these estimates.
The Funds have an arrangement with their transfer agent whereby interest
earned on uninvested cash balances was used to offset a portion of their
transfer agent expense. For the year ended October 31, 1999, the Funds received
credits or reimbursements under this arrangement as follows:
Fund Amount
---- ------
Balanced $ 651
Growth & Income 14,336
Capital Appreciation 16,234
2. Investment Adviser, Co-Administrators and Distributor
On July 6, 1999, CSAM LLC became each Funds' investment adviser as a result
of the previously announced acquisition of Warburg Pincus Asset Management, Inc.
("Warburg Pincus") by Credit Suisse Group ("Credit Suisse"). Warburg Pincus was
combined with CSAM LLC, which is an indirect wholly-owned U.S. subsidiary of
Credit Suisse. For its investment advisory services, CSAM LLC receives the
following fees based on each Fund's average daily net assets:
Fund Annual Rate
---- --------------------------------
Balanced .90% of average daily net assets
Growth & Income .75% of average daily net assets
Capital Appreciation .70% of average daily net assets
33
<PAGE>
Warburg Pincus Domestic Equity Funds
Notes to Financial Statements (cont'd)
October 31, 1999
- --------------------------------------------------------------------------------
2. Investment Adviser, Co-Administrators and Distributor -- (cont'd)
For the year ended October 31, 1999, investment advisory fees, voluntary
waivers and reimbursements were as follows:
<TABLE>
<CAPTION>
Gross Net Expense
Fund Advisory Fee Waiver Advisory Fee Reimbursements
---- ------------ ---------- ------------ --------------
<S> <C> <C> <C> <C>
Balanced $ 309,584 $(160,572) $ 149,012 $ 0
Growth & Income 5,661,576 0 5,661,576 0
Capital Appreciation 6,198,244 0 6,198,244 0
</TABLE>
Counsellors Funds Service, Inc. ("CFSI"), a wholly-owned subsidiary of CSAM
LLC served as co-administrator of each Fund until November 1, 1999. On November
1, 1999, Credit Suisse Asset Management Securities, Inc. ("CSAMSI") replaced
CFSI as co-administrator to each Fund. PFPC Inc. ("PFPC"), an indirect,
wholly-owned subsidiary of PNC Bank Corp. ("PNC"), also serves as each Fund's
co-administrator. For administrative services, CSAM LLC currently receives a fee
calculated at an annual rate of .10% of each Fund's average daily net assets.
For the year ended October 31, 1999, administrative services fees were as
follows:
Fund Co-Administration Fee
---- ---------------------
Balanced $ 34,398
Growth & Income 758,552
Capital Appreciation 885,463
For administrative services, PFPC currently receives a fee, exclusive of
out-of-pocket expenses, calculated as follows:
Average Daily
Fund Net Assets Annual Rate
---- ------------------ -----------
Balanced Fund & Growth & First $500 million 0.15%
Income Fund Next $1 Billion 0.10%
Over $1.5 Billion 0.05%
Capital Appreciation Fund First $500 million 0.10%
Next $1 Billion 0.075%
Over $1.5 Billion 0.05%
For the year ended October 31, 1999, administrative service fees earned and
voluntarily waived by PFPC (including out-of-pocket expenses) were as follows:
<TABLE>
<CAPTION>
Gross Net
Fund Co-Administration Fee Waiver Co-Administration Fee
---- --------------------- --------- ---------------------
<S> <C> <C> <C>
Balanced $ 60,983 $(51,597) $ 9,386
Growth & Income 1,014,167 0 1,014,167
Capital Appreciation 792,954 0 792,954
</TABLE>
34
<PAGE>
Warburg Pincus Domestic Equity Funds
Notes to Financial Statements (cont'd)
October 31, 1999
- --------------------------------------------------------------------------------
2. Investment Adviser, Co-Administrators and Distributor -- (cont'd)
CSAMSI serves as each Fund's distributor. No compensation is paid by the
Common Class shares of Capital Appreciation Fund or the Growth & Income Fund to
CSAMSI for distribution services. Provident Distributors, Inc. will become each
Fund's distributor effective January 3, 2000. For its selling services, CSAMSI
receives a fee calculated at an annual rate of .25% of the average daily net
assets of the Common Class shares of the Balanced Fund pursuant to a shareholder
servicing and distribution plan adopted by each Fund pursuant to Rule 12b-1
under the 1940 Act. For its shareholder servicing and distribution services,
CSAMSI receives a fee at an annual rate of .50%, of the average daily net assets
of each Funds' Advisor Shares pursuant to a distribution plan adopted by each
Fund pursuant to Rule 12b-1 under the 1940 Act which CSAMSI may use to
compensate service organizations for shareholder servicing and distribution
services. For the year ended October 31, 1999, shareholder servicing and
distribution fees were as follows:
Shareholder Servicing/
Fund Distribution Fee
---- ----------------------
Balanced
Common shares $ 85,406
Advisor shares 1,179
--------
$ 86,585
========
Growth & Income
Advisor shares $429,220
========
Capital Appreciation
Advisor shares $148,878
========
3. Line of Credit
The Funds, together with other Funds advised by CSAM LLC, have established a
$250 million committed, unsecured, line of credit facility ("Credit Facility")
with Deutsche Bank AG as administrative agent, State Street Bank and Trust
Company as operations agent, Bank of Nova Scotia as syndication agent as well as
certain other lenders, for temporary or emergency purposes primarily relating to
unanticipated fund share redemptions. Under the terms of the Credit Facility,
the Funds with access to the Credit Facility pay an aggregate commitment fee at
a rate of .075% per annum on the average daily balance of the Credit Facility
that is undisbursed and uncanceled during the preceding quarter allocated among
the participating funds in such manner as is determined by the governing Boards
of the various Funds. In addition, the participating Funds will pay interest on
borrowing at the Federal Funds rate plus .50%. At October 31, 1999 and during
the year ended October 31, 1999, none of these Funds had borrowings under the
Credit Facility.
35
<PAGE>
Warburg Pincus Domestic Equity Funds
Notes to Financial Statements (cont'd)
October 31, 1999
- --------------------------------------------------------------------------------
4. Investments in Securities
For the year ended October 31, 1999, purchases and sales of investment
securities (excluding short-term investments) were as follows:
Fund Purchases Sales
---- -------------- --------------
Balanced $ 38,295,810 $ 41,698,571
Growth & Income 550,275,978 754,668,888
Capital Appreciation 1,275,213,797 1,209,258,203
At October 31, 1999, 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>
Balanced $ 4,102,031 $ (979,455) $ 3,122,576
Growth & Income 108,676,800 (19,512,359) 89,164,441
Capital Appreciation 292,550,792 (8,520,543) 284,030,249
</TABLE>
5. Forward Foreign Currency Contracts
Each 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 foreign currency relative to the U.S. dollar. Each
Fund will enter into forward contracts primarily for hedging purposes. 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 or the date on which an
offsetting position is entered into. At October 31, 1999, there were no open
forward foreign currency contracts.
6. Futures Contracts
Each Fund may enter into futures contracts to the extent permitted by its
investment policies and objectives. Upon entering into a futures contract, a
Fund is required to make a deposit of an initial margin with its custodian in a
segregated account. Subsequent payments, which are dependent on the daily
fluctuations in the value of the underlying instrument, are made or received by
a Fund each day (daily variation margin) and are recorded as unrealized gains or
losses until the contracts are closed. When the contract is closed, a
36
<PAGE>
Warburg Pincus Domestic Equity Funds
Notes to Financial Statements (cont'd)
October 31, 1999
- --------------------------------------------------------------------------------
6. Futures Contracts -- (cont'd)
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. Second, it is possible that a lack of
liquidity for futures contracts could exist in the secondary market, resulting
in an inability to close a futures position prior to its maturity date. Third,
the purchase of a futures contract involves the risk that a Fund could lose more
than the original margin deposit required to initiate a futures transaction. At
October 31, 1999, there were no open futures contracts for any of the Funds.
7. Capital Share Transactions
The Balanced Fund and the Growth & Income 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 of each Fund (two billion shares for the
Balanced Fund and the Growth & Income Fund) are designated as the Advisor Class
shares. The Capital Appreciation Fund is authorized to issue an unlimited number
of full and fractional shares of beneficial interest, $.001 par value per share,
of which an unlimited number of shares are classified as the Common Class shares
and an unlimited number are classified as the Advisor Class shares.
Transactions in shares of each Fund were as follows:
<TABLE>
<CAPTION>
Balanced Fund
---------------------------------------------------------------------
Common Class shares Advisor Class shares
------------------------------- -------------------------------
For the For the For the For the
Year Ended Year Ended Year Ended Year Ended
October 31, October 31, October 31, October 31,
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Shares sold 524,219 827,546 11,886 7,713
Shares issued to shareholders on reinvestment
of dividends 257,288 313,898 1,599 1,373
Shares redeemed (1,050,316) (1,172,690) (6,792) (7,587)
------------ ------------ ------------ ------------
Net increase (decrease) in shares outstanding (268,809) (31,246) 6,693 1,499
============ ============ ============ ============
Proceeds from sale of shares $ 7,131,433 $ 11,246,690 $ 160,639 $ 105,373
Reinvested dividends and distributions 3,321,981 4,046,855 20,611 17,676
Net asset value of shares redeemed (14,129,108) (16,087,173) (89,733) (101,051)
------------ ------------ ------------ ------------
Net increase (decrease) from capital share
transactions $ (3,675,694) $ (793,628) $ 91,517 $ 21,998
============ ============ ============ ============
</TABLE>
37
<PAGE>
Warburg Pincus Domestic Equity Funds
Notes to Financial Statements (cont'd)
October 31, 1999
- --------------------------------------------------------------------------------
7. Capital Share Transactions -- (cont'd)
<TABLE>
<CAPTION>
Growth & Income Fund
----------------------------------------------------------------------
Common Class shares Advisor Class shares
-------------------------------- --------------------------------
For the For the For the For the
Year Ended Year Ended Year Ended Year Ended
October 31, October 31, October 31, October 31,
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Shares sold 9,715,085 20,772,224 1,320,026 1,286,304
Shares issued to shareholders on reinvestment
of dividends 1,448,225 6,140,028 178,885 907,279
Shares redeemed (20,825,196) (18,200,978) (3,400,047) (1,249,695)
------------- ------------- ------------- -------------
Net increase (decrease) in shares outstanding (9,661,886) 8,711,274 (1,901,136) 943,888
============= ============= ============= =============
Proceeds from sale of shares $ 180,951,663 $ 364,404,734 $ 24,501,424 $ 22,554,220
Reinvested dividends and distributions 25,362,924 98,961,339 3,107,054 14,597,946
Net asset value of shares
redeemed (384,878,733) (313,659,176) (62,449,088) (21,338,807)
------------- ------------- ------------- -------------
Net increase (decrease) from capital share
transactions $(178,564,146) $ 149,706,897 $ (34,840,610) $ 15,813,359
============= ============= ============= =============
<CAPTION>
Capital Appreciation Fund
----------------------------------------------------------------------
Common Class shares Advisor Class shares
-------------------------------- --------------------------------
For the For the For the For the
Year Ended Year Ended Year Ended Year Ended
October 31, October 31, October 31, October 31,
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Shares sold 15,338,565 11,397,212 344,236 213,912
Shares issued to shareholders on reinvestment
of dividends 1,395,652 5,891,863 64,497 343,403
Shares redeemed (10,915,776) (12,000,823) (646,495) (822,591)
------------- ------------- ------------- -------------
Net increase (decrease) in shares outstanding 5,818,441 5,288,252 (237,760) (265,277)
============= ============= ============= =============
Proceeds from sale of shares $ 358,830,227 $ 227,847,570 $ 7,988,528 $ 4,162,880
Reinvested dividends and distributions 28,206,125 105,110,845 1,282,191 6,054,187
Net asset value of shares
redeemed (253,908,501) (238,511,569) (15,059,649) (16,425,281)
------------- ------------- ------------- -------------
Net increase (decrease) from capital share
transactions $ 133,127,851 $ 94,446,846 $ (5,788,930) $ (6,208,214)
============= ============= ============= =============
</TABLE>
8. Liabilities
At October 31, 1999, each Fund had the following liabilities:
<TABLE>
<CAPTION>
Capital
Balanced Growth & Income Appreciation
Fund Fund Fund
-------- --------------- ------------
<S> <C> <C> <C>
Payable for securities purchased $661,427 $13,228,045 $23,772,710
Investment advisory fee payable 8,925 427,920 583,364
Administration services fee payable 2,768 57,056 83,338
Distribution fees payable 7,948 130,605 47,928
Fund shares redeemed payable 4,894 4,613,544 1,352,793
</TABLE>
38
<PAGE>
Warburg Pincus Domestic Equity Funds
Notes to Financial Statements (cont'd)
October 31, 1999
- --------------------------------------------------------------------------------
9. Net Assets
At October 31, 1999, capital contributions, undistributed net investment
income (loss) and accumulated net realized gain (loss) on security transactions
have been adjusted for current year permanent book/tax differences. The Balanced
Fund and the Growth and Income Fund reclassified $(577) and $(1,126),
respectively, from accumulated net realized gain/(loss) from foreign currency
related items to undistributed net investment income. The Balanced Fund
reclassified $107 in paydown gains from accumulated net realized gain from
security transactions to undistributed net investment income. The Balanced Fund
and the Capital Appreciation Fund reclassified distributions of $(5,872) and
$(156,197) respectively, from undistributed net investment income to accumulated
net realized gain from security transactions. The Capital Appreciation Fund
reclassified current year net investment loss of $(2,146,188) from undistributed
net investment income to accumulated net realized gain from security
transactions.
Net Assets at October 31, 1999 consisted of the following:
<TABLE>
<CAPTION>
Capital
Balanced Growth & Income Appreciation
Fund Fund Fund
-------------- --------------- --------------
<S> <C> <C> <C>
Capital contributed, net $ 25,876,261 $ 465,680,122 $ 633,634,558
Undistributed net investment income 50,302 94,711 0
Accumulated net realized gain (loss) from security
transactions 3,999,066 118,544,189 115,546,436
Net unrealized appreciation from investments and
foreign currency related items 3,145,309 89,535,178 285,787,563
-------------- -------------- --------------
Net assets $ 33,070,938 $ 673,854,200 $1,034,968,557
============== ============== ==============
</TABLE>
39
<PAGE>
Warburg Pincus Domestic Equity Funds
Notes to Financial Statements (cont'd)
October 31, 1999
- --------------------------------------------------------------------------------
10. Other Financial Highlights
Each Fund currently offers one other class of shares, Common Class shares,
representing equal pro rata interest in each of the respective Warburg Pincus
Equity Funds. The financial highlights for a Common Class share of each fund are
as follows:
<TABLE>
<CAPTION>
Warburg Pincus Balanced Fund
---------------------------------------------------------------------
Common Class shares
---------------------------------------------------------------------
For the Year Ended October 31,
---------------------------------------------------------------------
PERIOD ENDED: 1999 1998 1997** 1997+ 1996+ 1995+
------- ------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Per-share data
Net asset value,
beginning of period $ 13.50 $ 14.38 $ 14.24 $ 11.94 $ 11.12 $11.01
------- ------- ------- ------- ------- ------
Investment activities:
Net investment income 0.27 0.25 0.03 0.23 0.16 0.21
Net gains on investments
(both realized and
unrealized) 1.45 0.42 0.16 2.46 0.94 1.72
------- ------- ------- ------- ------- ------
Total from investment
activities 1.72 0.67 0.19 2.69 1.10 1.93
------- ------- ------- ------- ------- ------
Less Dividends and Distributions:
Dividends from net investment income (0.28) (0.26) (0.05) (0.24) (0.13) (0.31)
Distributions from realized capital gains (1.06) (1.29) -- (0.15) (1.51)
------- ------- ------- ------- ------- ------
Total dividends and distributions (1.34) (1.55) (0.05) (0.39) (0.28) (1.82)
------- ------- ------- ------- ------- ------
Net asset value, end of period $ 13.88 $ 13.50 $ 14.38 $ 14.24 $ 11.94 $11.12
======= ======= ======= ======= ======= ======
Total return 13.61% 5.33% 1.30%+ 23.03% 9.99% 21.56%
Ratios/Supplemental Data:
Net assets, end of period
(000s omitted) $32,805 $35,542 $38,294 $38,926 $30,853 $5,342
Ratio of expenses to
average net assets 1.35%@ 1.35%@ 1.35%*@ 1.35%@ 1.53%@ 1.53%@
Ratio of net income to
average net assets 1.94% 1.76% 1.38%* 1.76% 1.66% 2.30%
Decrease reflected in above
operating expense ratios
due to waviers/
reimbursements .62% .62% .68%* .55% .90% 4.51%
Portfolio turnover rate 116% 132% 15%+ 120% 108% 107%
</TABLE>
- --------------------------------------------------------------------------------
** For the two months ended October 31, 1997.
@ Interest earned on uninvested cash balances is used to offset portions of the
transfer agent expense. These arrangements had no effect on the fund's
expense ratio.
+ For the year ended August 31.
+ Non-annualized.
* Annualized.
40
<PAGE>
Warburg Pincus Domestic Equity Funds
Notes to Financial Statements (cont'd)
October 31, 1999
- --------------------------------------------------------------------------------
10. Other Financial Highlights -- (cont'd)
<TABLE>
<CAPTION>
Warburg Pincus Growth & Income
---------------------------------------------------------------------------
Common Class shares
---------------------------------------------------------------------------
For the Year Ended October 31,
---------------------------------------------------------------------------
PERIOD ENDED: 1999 1998 1997** 1997+ 1996+ 1995+
-------- -------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Per-share data
Net asset value,
beginning of period $ 16.97 $ 18.56 $ 18.44 $ 14.90 $ 16.40 $ 14.56
-------- -------- -------- -------- -------- ----------
Investment activities:
Net investment income 0.13 0.14 0.02 0.14 0.11 0.22
Net gains (losses) on
investments (both realized
and unrealized) 2.49 1.36 0.14 3.53 (0.66) 1.98
-------- -------- -------- -------- -------- ----------
Total from investment
activities 2.62 1.50 0.16 3.67 (0.55) 2.20
-------- -------- -------- -------- -------- ----------
Less Dividends and Distributions:
Dividends from net
investment income (0.13) (0.14) (0.04) (0.13) (0.14) (0.18)
Distributions from realized
capital gains (0.53) (2.95) -- -- (0.81) (0.18)
-------- -------- -------- -------- -------- ----------
Total dividends and
distributions (0.66) (3.09) (0.04) (0.13) (0.95) (0.36)
-------- -------- -------- -------- -------- ----------
Net asset value, end of period $ 18.93 $ 16.97 $ 18.56 $ 18.44 $ 14.90 $ 16.40
======== ======== ======== ======== ======== ==========
Total return 15.77% 9.11% 0.85%+ 24.78% (3.54)% 15.62%
Ratios/Supplemental Data:
Net assets, end of period
(000s omitted) $602,282 $703,808 $608,205 $601,159 $727,627 $1,038,193
Ratio of expenses to
average net assets 1.14%@ 1.19%@ 1.18%*@ 1.15%@ 1.21%@ 1.22%
Ratio of net income to
average net assets .65% .83% .75%* .80% .69% 1.64%
Portfolio turnover rate 78.29% 78.33% 19%+ 148% 94% 109%
</TABLE>
- --------------------------------------------------------------------------------
** For the two months ended October 31, 1997.
@ Interest earned on uninvested cash balances is used to offset portions of the
transfer agent expense. These arrangements had no effect on the fund's
expense ratio.
+ For the year ended August 31.
+ Non-annualized.
* Annualized.
41
<PAGE>
Warburg Pincus Domestic Equity Funds
Notes to Financial Statements (cont'd)
October 31, 1999
- --------------------------------------------------------------------------------
10. Other Financial Highlights -- (cont'd)
<TABLE>
<CAPTION>
Warburg Pincus Capital Appreciation Fund
--------------------------------------------------------------
Common Class shares
--------------------------------------------------------------
YEAR ENDED: 1999 1998 1997 1996 1995
---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Per-share data
Net asset value,
beginning of year $ 19.52 $ 21.09 $ 17.95 $ 16.39 $ 14.29
---------- -------- -------- -------- --------
Investment activities:
Net investment income (loss) (0.05) 0.01 0.11 0.08 0.04
Net gains on investments
(both realized and unrealized) 7.27 2.31 4.93 3.53 3.08
---------- -------- -------- -------- --------
Total from investment
activities 7.22 2.32 5.04 3.61 3.12
---------- -------- -------- -------- --------
Less Dividends and Distributions:
Dividends from net investment income (0.01) (0.08) (0.10) (0.01) (0.04)
Distributions from realized capital gains (0.91) (3.81) (1.80) (2.04) (0.98)
---------- -------- -------- -------- --------
Total dividends and distributions (0.92) (3.89) (1.90) (2.05) (1.02)
---------- -------- -------- -------- --------
Net asset value, end of year $ 25.82 $ 19.52 $ 21.09 $ 17.95 $ 16.39
========== ======== ======== ======== ========
Total return 38.28% 12.75% 30.98% 24.67% 24.05%
Ratios/Supplemental Data:
Net assets, end of year
(000s omitted) $1,005,670 $646,657 $587,091 $407,707 $235,712
Ratio of expenses to average net assets 1.01%@ 1.00%@ 1.01%@ 1.04%@ 1.12%@
Ratio of net income (loss) to
average net assets (.23)% .05% .54% .59% .31%
Portfolio turnover rate 144% 169% 238% 171% 146%
</TABLE>
- --------------------------------------------------------------------------------
@ Interest earned on uninvested cash balances is used to offset portions of the
transfer agent expense. These arrangements resulted in a reduction to the
Common Shares net expense ratio by .01%, .00%, .01% and .01% for the year or
period ended October 31, 1999, 1998, 1997, and 1996 respectively. The Common
Shares' operating expense ratio after reflecting these arrangements were
1.00% for the years ended October 31, 1999, 1998, 1997 and 1.03% for the year
ended October 31, 1996.
42
<PAGE>
Warburg Pincus Funds
Report of Independent Accountants
- --------------------------------------------------------------------------------
To the Board of Directors and Shareholders of
Warburg, Pincus Balanced Fund, Inc.;
Warburg, Pincus Growth & Income Fund, Inc.;
Warburg, Pincus Capital Appreciation Fund, Inc. and
In our opinion, the accompanying statements of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
Warburg, Pincus Balanced Fund, Inc., Warburg, Pincus Growth & Income Fund, Inc.
and Warburg, Pincus Capital Appreciation Fund, Inc. (all funds collectively
referred to as the "Funds") at October 31, 1999, and the results of each of
their operations for the year then ended, the changes in each of their net
assets for each of the two years in the period then ended and the financial
highlights for each of the years (or periods) presented, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Funds' management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at October 31, 1999 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
2400 Eleven Penn Center
Philadelphia, Pennsylvania
December 10, 1999
43
<PAGE>
ANNUAL REPORT
October 31, 1999
WARBURG PINCUS BALANCED FUND
WARBURG PINCUS GROWTH & INCOME FUND
WARBURG PINCUS CAPITAL APPRECIATION FUND
WARBURG PINCUS HEALTH SCIENCES FUND
Shareholder Meeting Results
A special meeting of shareholders of each Fund was held on May 21, 1999. At the
special meeting, the following persons were elected as directors of each Fund,
constituting the entire Board of Directors: Richard H. Francis, Jack W. Fritz,
Jeffrey E. Garten, James S. Pasman, Jr., William W. Priest, Steven N. Rappaport,
Arnold M. Reichman and Alexander B. Trowbridge.
In addition, shareholders of each Fund voted on the following matters:
<TABLE>
<S> <C>
Proposal 1: Approval of a new investment advisory agreement
between each Fund and Credit Suisse Asset
Management, LLC.
Proposal 2: Ratification of the selection of
PricewaterhouseCoopers
LLP as the independent accountants for each of
the Funds for the fiscal year ending October 31,
1999.
</TABLE>
The voting results for each Fund were as follows:
Election of Directors:
<TABLE>
<S> <C> <C>
|BALANCED FOR | WITHHELD |
|Richard H. Francis 1,544,311.5703 | 17,748.6157 |
|Jack W. Fritz 1,544,210.5703 | 17,849.6157 |
|Jeffrey E. Garten 1,548,093.7033 | 13,966.4827 |
|James S. Pasman, Jr. 1,544,320.7033 | 17,739.4827 |
|William W. Priest 1,545,518.7033 | 16,541.4827 |
|Steven N. Rappaport 1,548,093.7033 | 13,966.4827 |
|Arnold M. Reichman 1,547,992.7033 | 14,067.4827 |
|Alexander B. Trowbridge 1,544,311.5703 | 17,748.6157 |
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
|GROWTH & INCOME FOR | WITHHELD |
|Richard H. Francis 28,903,054.2077 | 627,294.4283 |
|Jack W. Fritz 28,889,291.1287 | 641,057.5073 |
|Jeffrey E. Garten 28,917,084.2537 | 613,264.3823 |
|James S. Pasman, Jr. 28,894,060.3787 | 636,288.2573 |
|William W. Priest 28,954,636.9707 | 575,711.6653 |
|Steven N. Rappaport 28,903,851.2967 | 626,497.3393 |
|Arnold M. Reichman 28,910,017.3467 | 620,331.2893 |
|Alexander B. Trowbridge 28,893,206.5337 | 637,142.1023 |
|CAPITAL APPRECIATION FOR | WITHHELD |
|Richard H. Francis 20,660,334.2201 | 478,342.2066 |
|Jack W. Fritz 20,659,992.6291 | 478,683.7976 |
|Jeffrey E. Garten 20,660,657.1481 | 478,019.2786 |
|James S. Pasman, Jr. 20,657,493.9960 | 481,181.9376 |
|William W. Priest 20,657,242.5561 | 481,433.8706 |
|Steven N. Rappaport 20,658,210.0711 | 480,466.3556 |
|Arnold M. Reichman 20,660,525.0221 | 478,151.4046 |
|Alexander B. Trowbridge 20,630,978.6351 | 507,697.7916 |
|HEALTH SCIENCES FOR | WITHHELD |
|Richard H. Francis 3,197,183.5839 | 63,930.1981 |
|Jack W. Fritz 3,197,645.0939 | 63,468.6881 |
|Jeffrey E. Garten 3,195,681.2239 | 65,432.5581 |
|James S. Pasman, Jr. 3,198,882.1809 | 62,231.6011 |
|William W. Priest 3,196,710.4169 | 64,403.3651 |
|Steven N. Rappaport 3,196,539.3119 | 64,574.4701 |
|Arnold M. Reichman 3,195,742.6259 | 65,371.1561 |
|Alexander B. Trowbridge 3,194,014.7829 | 67,098.9991 |
</TABLE>
<PAGE>
Proposal 1:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
| | GROWTH & | CAPITAL | HEALTH |
| BALANCED | INCOME | APPRECIATION | SCIENCES |
-------------- --------------- --------------- --------------
| TOTAL NUMBER | TOTAL NUMBER | TOTAL NUMBER | TOTAL NUMBER |
| OF VOTES | OF VOTES | OF VOTES | OF VOTES |
Approve | 1,348,866.7727 | 23,846,929.1325 | 20,258,155.9861 | 3,095,756.3937 |
Disapprove | 35,932.0798 | 505,633.2185 | 251,592.5034 | 101,707.0210 |
Abstain | 177,261.3335 | 677,786.2850 | 628,927.9372 | 63,650.1779 |
</TABLE>
Proposal 2:
<TABLE>
<S> <C> <C> <C> <C> <C>
| | GROWTH & | CAPITAL | HEALTH |
| BALANCED FUND | INCOME | APPRECIATION | SCIENCES |
-------------- --------------- --------------- --------------
| TOTAL NUMBER | TOTAL NUMBER | TOTAL NUMBER | TOTAL NUMBER |
| OF VOTES | OF VOTES | OF VOTES | OF VOTES |
Approve | 1,544,326.5711 | 24,333,703.8919 | 20,547,035.6656 | 3,195,444.5350 |
Disapprove | 7,593.8940 | 242,597.9786 | 72,601.3216 | 35,923.6468 |
Abstain | 10,319.7209 | 454,046.7655 | 519,039.4395 | 29,745.6002 |
</TABLE>
<PAGE>
Warburg Pincus Domestic Equity Funds
Shareholder Tax Information (Unaudited)
- --------------------------------------------------------------------------------
Each Fund is required by Subchapter M of the Code to advise its shareholders
within 60 days of each Fund's fiscal year end as to the U.S. federal tax status
distributions received by the Fund's shareholders in respect of such fiscal
year. During the fiscal year ended October 31, 1999, the following dividends and
distributions per share were paid by each of the Funds:
<TABLE>
<CAPTION>
Ordinary Long-term % of ordinary income
income capital gains dividends qualifying for
Fund per share per share dividends received deduction*
- ---- --------- ------------- -----------------------------
<S> <C> <C> <C>
Payment Date 12/04/98 12/04/98 1998
Balanced 30.15
Common Shares $0.0783 $1.0601
Advisor Shares 0.0712 1.0601
Growth & Income 100.00
Common Shares 0.0293 0.5322
Advisor Shares 0.0104 0.5322
Capital Appreciation 100.00
Common Shares 0.0067 0.9103
Advisor Shares 0.0000 0.9103
</TABLE>
The above information was provided to calendar year taxpayers on Form
1099-DIV mailed in January of 1999.
<TABLE>
<CAPTION>
% of ordinary income
dividends qualifying for
Fund Ordinary income dividends received deduction*
- ---- ---------------------------- -----------------------------
<S> <C> <C>
Payment dates 03/31/99, 06/30/99, 09/30/99 1999
Balanced 35.50
Common Shares 0.2007
Advisor Shares 0.1747
Growth & Income 100.00
Common Shares 0.0992
Advisor Shares 0.0245
</TABLE>
Because the fiscal year of the Funds is not a calendar year, another
notification will be sent with respect to calendar year 1999. The second
notification, which will reflect the amount to be used by calendar year
taxpayers on their U.S. federal income tax returns, will be made in conjunction
with Form 1099-DIV and will be mailed in January 2000.
- -----------
* Available to Corporate Shareholders only.
44
